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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 1-7823
ANHEUSER-BUSCH COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 43-1162835
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE BUSCH PLACE, ST. LOUIS, MISSOURI 63118
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 314-577-2000
________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
COMMON STOCK--$1 PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
6 1/2% SINKING FUND DEBENTURES, DUE JANUARY 1, 2028 NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant.
$36,101,922,686 AS OF FEBRUARY 26, 1999
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
$1 PAR VALUE COMMON STOCK 475,927,117 SHARES AS OF MARCH 8, 1999
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DOCUMENTS INCORPORATED BY REFERENCE
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Portions of Annual Report to Shareholders for the Year
Ended December 31, 1998............................... PART I, PART II, and PART IV
Portions of Definitive Proxy Statement for Annual
Meeting of Shareholders on April 28, 1999............. PART III
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PART I
ITEM 1. BUSINESS
Anheuser-Busch Companies, Inc. (the "Company") is a Delaware corporation
that was organized in 1979 as the holding company parent of Anheuser-Busch,
Incorporated ("ABI"), a Missouri corporation whose origins date back to 1875. In
addition to ABI, which is the world's largest brewer of beer, the Company is
also the parent corporation to a number of subsidiaries that conduct various
other business operations. The Company's operations are comprised of the
following business segments: domestic beer, international beer, packaging, and
entertainment. Financial information with respect to the Company's business
segments appears in Note 5, "Business Segments," on pages 60-61 of the 1998
Annual Report to Shareholders, which Note hereby is incorporated by reference.
Domestic beer volume was 92.7 million barrels in 1998 as compared with 89.6
million barrels in 1997. Worldwide sales of the Company's beer brands aggregated
99.8 million barrels in 1998 as compared with 96.6 million barrels in 1997 and
accounted for approximately 82% of the Company's consolidated net sales dollars
in 1998, 1997 and 1996, respectively. Worldwide beer volume is comprised of
domestic and international volume. Domestic volume represents Anheuser-Busch
beer produced and shipped within the United States. International volume
represents Anheuser-Busch brands produced overseas by Company-owned breweries
and under license and contract brewing agreements, plus exports from the
Company's U.S. breweries to markets around the world. Total volume includes the
Company's pro rata share of the volume of international equity partners, Grupo
Modelo, S.A. de C.V. and Companhia Antarctica Paulista, combined with worldwide
Anheuser-Busch brand volume. Total beer volume was 111.0 million barrels and
103.4 million barrels in 1998 and 1997, respectively.
In 1996, the Company distributed all of the outstanding shares of stock of
The Earthgrains Company, which was formerly named Campbell Taggart, Inc.
("Earthgrains") as a special dividend to the Company's shareholders. Earthgrains
represented substantially all of the Company's food products business. During
1996, the Company also sold the majority of the assets of its Eagle Snacks, Inc.
operation to Frito-Lay, Inc. The remaining assets of Eagle Snacks, Inc. and the
Eagle brand were also sold in 1996.
DOMESTIC BEER OPERATIONS
The Company's principal product is beer, produced and distributed by its
subsidiary, ABI, in a variety of containers primarily under the brand names
Budweiser, Bud Light, Bud Dry, Bud Ice, Bud Ice Light, Michelob, Michelob Light,
Michelob Dry, Michelob Golden Draft, Michelob Golden Draft Light, Michelob
Classic Dark, Michelob Malt, Michelob Amber Bock, Michelob Pale Ale, Michelob
Honey Lager, Michelob Porter, Michelob Hefe-Weizen, Busch, Busch Light, Busch
Ice, Natural Light, Natural Ice, King Cobra, Red Wolf Lager, ZiegenBock Amber,
Hurricane Malt Liquor, Hurricane Ice, Pacific Ridge Ale, Catalina Blonde,
Tequiza, and Safari Lager. ABI's products also include three non-alcohol malt
beverages, O'Doul's, Busch NA, and O'Doul's Amber. Pacific Ridge Ale and
Michelob Malt were introduced during 1998. During 1998, ABI discontinued
Michelob Amber Lager, Michelob Centennial, Michelob Maple Brown, Michelob Spiced
Ale, Faust Golden Lager, Black & Tan Porter, Muenchener Munich Style Amber,
Natural Pilsner, Elk Mountain Red Lager, Michelob Golden Pilsner, American Hop
Ale, Michelob Pilsner, O'Doul's Caffeine, and Meridian Blonde. The Company
imports Azteca from Cevercia Mexicana in Tecate, Mexico. ABI owns a 25% equity
interest in Seattle-based Redhook Ale Brewery, Inc. Through this alliance,
Redhook products are distributed exclusively by ABI wholesalers in all new U.S.
markets entered by Redhook since 1994. ABI also owns a 31% interest in
Portland-based Widmer Brothers Brewing Company. Widmer products are distributed
exclusively by ABI wholesalers in all new U.S. markets entered by Widmer since
1997. The Company also brews Kirin Light, Kirin Lager, and Kirin-Ichiban through
a joint venture agreement with Kirin Brewery Company, Ltd., of Japan for sale in
the United States.
Budweiser, Bud Light, Bud Dry, Bud Ice, Bud Ice Light, Michelob, Michelob
Light, Michelob Dry, Michelob Golden Draft, Michelob Golden Draft Light,
Michelob Classic Dark, Michelob Amber Bock, Michelob Honey Lager, Michelob Pale
Ale, Michelob Porter, Michelob Hefe-Weizen, Busch, Busch Light, Natural Light,
Natural Ice, Red Wolf Lager, ZiegenBock Amber, Pacific Ridge Ale, Azteca, Widmer
Biers products, Redhook Ales, O'Doul's, and O'Doul's Amber are sold in both
draught and packaged form. Busch Ice, King Cobra, Hurricane Malt Liquor,
Michelob Malt, Catalina Blonde, Hurricane Ice, Kirin Lager, Kirin Light,
Kirin-Ichiban, Tequiza, and Busch NA are sold only in packaged form. Safari
Lager is sold only in draught form.
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Budweiser, Bud Light, Bud Ice, Bud Ice Light, Michelob, Michelob Light,
Natural Light, Natural Ice, Red Wolf Lager, Michelob Honey Lager, Michelob
Hefe-Weizen, O'Doul's Amber, and O'Doul's are distributed and sold on a
nationwide basis. Busch, Busch Light, Bud Dry, and Michelob Amber Bock are sold
in 49 states; King Cobra in 48 states; Michelob Pale Ale and Busch NA in 47
states; Michelob Dry in 46 states; Michelob Classic Dark in 45 states; Hurricane
Malt Liquor in 44 states; Tequiza in 42 states; Redhook Ale in 41 states; Kirin
Lager in 24 states; Kirin-Ichiban and Busch Ice in 22 states; Kirin Light in 15
states; Michelob Golden Draft and Michelob Golden Draft Light in 14 states;
Catalina Blonde in 10 states; Michelob Porter and Michelob Malt in 6 states;
Widmer Biers products in 4 states; ZiegenBock Amber in 3 states; Pacific Ridge
Ale and Safari Lager in 2 states; and Hurricane Ice and Azteca in 1 state.
ABI has developed a system of twelve breweries, strategically located across
the country, to economically serve its distribution system. (See Item 2 of Part
I--Properties.) Ongoing modernization programs are part of ABI's overall
strategic initiatives. By using controlled environment warehouses and stringent
inventory monitoring policies, the quality and freshness of the product are
protected, thus providing Anheuser-Busch a significant competitive advantage.
During 1998 approximately 95% of the beer sold by ABI, measured in barrels,
reached retail channels through approximately 700 independent wholesalers. ABI
utilizes its regional vice-presidents, sales directors, key account and market
managers, as well as certain other field sales personnel, to provide
merchandising and sales assistance to its wholesalers. In addition, ABI provides
national and local media advertising, point-of-sale advertising, and sales
promotion programs to help stimulate sales. The remainder of ABI's domestic beer
sales in 1998 were made through twelve ABI owned and operated branches, which
perform similar sales, merchandising, and delivery services as wholesalers in
their respective areas.
There are more than 100 companies engaged in the highly competitive brewing
industry in the United States. ABI's domestic beers are distributed and sold in
competition with other nationally distributed beers, with locally and
regionally distributed beers and, to a lesser extent, with imported beers.
Although the methods of competition in the industry vary widely, in part due to
differences in applicable state laws, the principal methods of competition are
product quality, taste and freshness, packaging, price, advertising (including
television, radio, sponsorships, billboards, stadium signs, and print media),
point-of-sale materials, and service to retail customers (including the
replacement of over-age products with retailer). ABI's beers compete in
different price categories. Although all brands compete against the total
market, Budweiser, Bud Light, Bud Dry, Bud Ice, Bud Ice Light, Michelob Golden
Draft, and Michelob Golden Draft Light compete primarily with premium priced
beers. Michelob, Michelob Light, Michelob Dry, Michelob Classic Dark, and
Michelob Amber Bock compete in the super-premium price category. Busch, Busch
Light, Natural Light, Busch Ice, and Natural Ice compete with the sub-premium
or popular priced beers. King Cobra, Hurricane Malt Liquor, Hurricane Ice, and
Michelob Malt compete against other brands in the malt liquor segment. Kirin
Lager, Kirin Light, Kirin-Ichiban, and Azteca compete primarily with imported
malt beverages. Catalina Blonde, Michelob Honey Lager, Michelob Pale Ale,
Michelob Porter, Tequiza, Red Wolf Lager, ZiegenBock Amber, Michelob
Hefe-Weizen, Pacific Ridge Ale, Safari Lager, the Redhook products, and Widmer
Biers products compete primarily in the specialty beers segment of the malt
beverage market. O'Doul's and O'Doul's Amber (premium priced) and Busch NA
(sub-premium priced) compete in the non-alcohol malt beverage category. Since
1957, ABI has led the United States brewing industry in total sales volume. In
1998, its sales exceeded those of its nearest competitor by more than 51 million
barrels. ABI's domestic market share (excluding exports) for 1998 was 46.4%.
Including exports, ABI's share of U.S. shipments for 1998 was 46.2%. Major
competitors in the United States brewing industry during 1998 included Philip
Morris, Inc. (through its subsidiary Miller Brewing Co.), Adolph Coors Co., and
Stroh Brewery Co.
The Company's wholly-owned subsidiary, Busch Agricultural Resources, Inc.
("BARI"), operates rice milling and research facilities in Arkansas and
California; twelve grain elevators in the western and midwestern United States;
barley seed processing plants in Moorhead, Minnesota, Fairfield, Montana, Idaho
Falls, Idaho, and Powell, Wyoming; a barley research facility in Ft. Collins,
Colorado; and a wild rice processing facility in Clearbrook, Minnesota. BARI
also owns and operates malt plants in Manitowoc, Wisconsin, Moorhead, Minnesota,
and Idaho Falls, Idaho. Through wholly-owned subsidiaries, BARI operates land
application farms in Jacksonville, Florida and Fort Collins, Colorado; hop farms
in northern Idaho and Germany; and an international office in Mar del Plata,
Argentina.
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Another wholly-owned subsidiary, Wholesaler Equity Development Corporation,
shares equity positions with qualified partners in independent beer
wholesalerships and is currently invested in 8 wholesalerships.
INTERNATIONAL BEER OPERATIONS
International beer volume was 7.1 million barrels in 1998, compared with 7.0
million barrels in 1997. Anheuser-Busch International, Inc. ("ABII"), a
wholly-owned subsidiary of the Company, negotiates and administers license and
contract brewing agreements on behalf of ABI with various foreign brewers.
Labatt Brewing Co. brews Budweiser and Bud Light for sale in Canada. ABI,
through ABII, participates with Kirin Brewery Company, Ltd. in a joint venture
in Japan, Budweiser Japan Company, Ltd., of which the Company is a 90%
shareholder, for marketing, distribution and sale of Budweiser. Through
Anheuser-Busch European Trade Ltd. ("ABET"), an indirect, wholly-owned
subsidiary of the Company, certain ABI beer brands are marketed, distributed and
sold in twenty-nine European countries. In the United Kingdom (U.K.), ABET sells
Budweiser, Bud Ice, Michelob, and Michelob Golden Draft brands to selected
on-premise accounts, brewers, wholesalers and directly to the off-premise
accounts. In 1995, ABET and Scottish Courage Ltd. entered into a joint venture,
Stag Brewing Company Ltd., which brews and packages Budweiser at the Stag
Brewery near London, England. In 1997, ABET purchased Scottish Courage's 50%
interest in the joint venture company giving ABET full control over the
management and operation of the brewery. Michelob, Bud Ice and Michelob Golden
Draft continue to be imported into the U.K. by ABET. Budweiser is also brewed
under license and sold by brewers in Korea (Oriental Brewery Ltd.), the Republic
of Ireland and Northern Ireland (Guinness Ireland Ltd.), and Italy (Birra Peroni
Industriale). In 1995, ABII entered into a contract brewing agreement with
Sociedad Anonima Damm, one of the largest brewers in Spain, that gives the
Spanish brewer rights to contract brew and package beer under the brand name
Budweiser in Spain and supplements the brand's existing distribution. In 1996,
ABII purchased a 5% equity interest in Antarctica Empreendimentos e
Participacoes Ltda. ("ANEP"), the principal operating subsidiary of Companhia
Antarctica Paulista ("Antarctica"), one of Brazil's leading brewers, and formed
a strategic partnership with Antarctica. A component of the partnership is a
joint venture company named Budweiser Brasil Ltda. that markets and distributes
locally-produced Budweiser in Brazil. In 1995, the Company formed a three-way
alliance with Compania Cervecerias Unidas S.A. ("CCU"), the leading Chilean
brewer, and Buenos Aires Embotelladora S.A. ("BAESA"), a major soft drink
bottler. Under the terms of the alliance, a wholly-owned subsidiary of CCU in
Argentina ("CCU-Argentina") brews Budweiser under license in Argentina and BAESA
distributes Budweiser and CCU-Argentina brands in certain geographic regions in
Argentina. CCU also distributes Budweiser in Chile. The Company initially
purchased a small minority stake in CCU-Argentina, and then increased its
ownership to 8.2% in 1998. In 1998, the Company formed a new partnership with
Brasseries Kronenbourg, the leading brewer in France, for sale and distribution
of Bud in France. In 1996, ABI through ABII entered into a licensing agreement
with Asia Brewery, Inc. for the production, sale and distribution of Budweiser
in the Philippines. ABI's beer products are being sold under import-distribution
agreements in more than 80 countries and U.S. territories and to the U.S.
military and diplomatic corps outside the continental United States.
ABII also negotiates and oversees the Company's investments in international
brewing companies. In 1993, Anheuser-Busch purchased a 17.7% direct and indirect
equity interest in Grupo Modelo's operating subsidiary, Diblo, for $477 million.
In May 1997, the Company increased its direct and indirect equity ownership in
Diblo to 37% for an additional $605 million. In September 1998 the Company
completed the purchase of an additional 13.25% of Diblo for $556.5 million,
bringing the Company's total investment to $1.6 billion. The Company now owns a
50.2% direct and indirect interest in Diblo. However, the Company does not have
voting control in either Grupo Modelo or Diblo. The Company also owns a 5%
equity interest in Tsingtao Brewery Company Ltd., a leading Chinese brewer. In
1995, the Company purchased an initial 80% equity interest in a joint venture,
renamed the Budweiser Wuhan International Brewing Company, Ltd., that owns and
operates a brewery in Wuhan, the fifth-largest city in China. This ownership
interest was subsequently increased to 86.6%.
PACKAGING OPERATIONS
The Company's wholly-owned subsidiary, Metal Container Corporation ("MCC"),
manufactures beverage cans at eight plants and beverage can lids at three plants
for sale to ABI and to soft drink customers. (See Item 2 of Part 1--Properties).
Another wholly-owned subsidiary of the Company, Anheuser-Busch Recycling
Corporation ("ABRC"), recycles aluminum cans at its plant in Hayward,
California, for conversion into new can sheet. During 1998, ABRC's plant in
Marion, Ohio was closed. The Company's wholly-owned subsidiary, Precision
Printing and
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Packaging, Inc. ("PPPI"), manufactures metalized and paper labels at its plant
in Clarksville, Tennessee. PPPI sold its plant in Paris, Texas, which
manufactured folding cartons, during 1998. Packaging Business Services, Inc.,
another wholly-owned subsidiary of the Company, provides administrative services
and develops existing and new businesses for MCC, ABRC and PPPI.
FAMILY ENTERTAINMENT
The Company is active in the family entertainment field, primarily through
its wholly-owned subsidiary, Busch Entertainment Corporation ("BEC"), which
currently owns, directly and through subsidiaries, nine theme parks.
BEC operates Busch Gardens theme parks in Tampa, Florida and Williamsburg,
Virginia, and Sea World theme parks in Orlando, Florida, San Antonio, Texas,
Aurora, Ohio, and San Diego, California. BEC operates water park attractions in
Tampa, Florida (Adventure Island) and Williamsburg, Virginia (Water Country,
U.S.A.), and an educational play park for children near Philadelphia,
Pennsylvania (Sesame Place). BEC also operates the Baseball City Sports Complex
near Orlando, Florida. Due to the seasonality of the theme park business, BEC
experiences higher revenues in the second and third quarters than in the first
and fourth quarters.
Through a Spanish affiliate, the Company also owns a 19.9% equity interest
in Port Aventura, S.A., which is a theme park near Barcelona, Spain.
The Company faces competition in the family entertainment field from other
theme and amusement parks, public zoos, public parks, and other family
entertainment events and attractions.
OTHER
Through its wholly-owned subsidiary, Busch Properties, Inc. ("BPI"), the
Company is engaged in the business of real estate development. BPI also owns and
operates a resort and conference center in Williamsburg, Virginia (The Kingsmill
Resort and Conference Center).
Through other wholly-owned subsidiaries, the Company owns and operates a
marketing communications business (Busch Creative Services Corporation) and
transportation service businesses (Manufacturers Railway Co. and St. Louis
Refrigerator Car Co.).
SOURCES AND AVAILABILITY OF RAW MATERIALS
The products manufactured by the Company require a large volume of various
agricultural products, including barley for malt; hops, malt, rice, and corn
grits for beer; and rice for the rice milling and processing operations of BARI.
The Company fulfills its commodities requirements through purchases from various
sources, including purchases from its subsidiaries, through contractual
arrangements, and through purchases on the open market. The Company believes
that adequate supplies of the aforementioned agricultural products are available
at the present time, but cannot predict future availability or prices of such
products and materials. The commodity markets have experienced and will continue
to experience major price fluctuations. The price and supply of raw materials
will be determined by, among other factors, the level of crop production,
weather conditions, export demand, and government regulations and legislation
affecting agriculture. The Company requires aluminum can sheet for manufacture
of cans and lids. Can sheet prices are impacted by supply and demand for
aluminum ingot and fabrication.
ENERGY MATTERS
The Company uses natural gas, fuel oil, and coal as its primary fuel
materials. Supplies of fuels in quantities sufficient to meet ABI's total
requirements are expected to be available on a year-round basis during 1999. The
supply of natural gas, fuel oil, and coal is normally covered by yearly
contracts and no difficulty has been experienced in entering into these
contracts. The cost of fuel used by ABI decreased in 1998 and is expected to be
at comparable levels in 1999. Based upon information presently available, there
can be no assurance that adequate supplies of fuel will always be available to
the Company and, should such supplies not be available, the Company's sales and
earnings would be adversely affected.
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BRAND NAMES AND TRADEMARKS
Some of the Company's major brand names used in its principal business
segments are mentioned in the discussion above. The Company regards consumer
recognition of and loyalty to all of its brand names and trademarks as extremely
important to the long-term success of its principal business segments.
RESEARCH AND DEVELOPMENT
The Company is involved in a number of research activities relating to the
development of new products or services or the improvement of existing products
or services. The dollar amounts expended by the Company during the past three
years on such research activities and the number of employees engaged full time
therein during such period, however, are not considered to be material in
relation to the total business of the Company.
ENVIRONMENTAL PROTECTION
All of the Company's plants are subject to federal, state, and local
environmental protection laws and regulations, and the Company is operating
within existing laws and regulations or is taking action aimed at assuring
compliance therewith. Various proactive strategies are utilized to help assure
this compliance. Compliance with such laws and regulations is not expected to
materially affect the Company's capital expenditures, earnings, or competitive
position. The Company has devoted considerable effort to research, development
and engineering of cost effective innovative systems to minimize effects on the
environment from its operating facilities. A major portion of pollution
prevention and pollution control expenditures in 1998 and projected for 1999 was
or will be justified on the basis of cost reduction.
These projects, coupled with the Company's environmental management system
and an overall Company emphasis on pollution prevention and resource
conservation initiatives, are improving efficiencies and creating saleable
by-products from residuals. They have generally resulted in low cost operating
systems while reducing impact to air, water, and land.
ENVIRONMENTAL PACKAGING LAWS AND REGULATIONS
The states of California, Connecticut, Delaware, Iowa, Maine, Massachusetts,
Michigan, New York, Oregon, and Vermont have adopted certain restrictive
packaging laws and regulations for beverages that require deposits on packages.
ABI continues to do business in these states. Such laws have not had a
significant effect on ABI's sales, but have had a significant adverse impact on
beer industry growth and are considered by the Company to be inflationary,
costly, and inefficient for recycling packaging materials. Congress and a number
of additional states continue to consider similar legislation, the adoption of
which by Congress or a substantial number of states or additional local
jurisdictions might require the Company to incur significant capital
expenditures.
NUMBER OF EMPLOYEES
As of December 31, 1998, the Company had 23,344 full-time employees.
As of December 31, 1998, approximately 8,120 employees were represented by
the International Brotherhood of Teamsters. Seventeen other unions represented
approximately 1,316 employees. The current labor agreement between ABI and the
Brewery and Soft Drink Workers Conference of the International Brotherhood of
Teamsters, which represents the majority of brewery workers, was scheduled to
expire on February 28, 1998; it was extended to March 29, 1998 while the parties
continued to negotiate a new agreement. Talks with the Teamsters are at an
impasse, and as a result, the Company began implementing its final contract
offer on September 21, 1998.
The Company considers its employee relations to be good.
ITEM 2. PROPERTIES
ABI has twelve breweries in operation at the present time, located in St.
Louis, Missouri; Newark, New Jersey; Los Angeles and Fairfield, California;
Jacksonville, Florida; Houston, Texas; Columbus, Ohio; Merrimack, New Hampshire;
Williamsburg, Virginia; Baldwinsville, New York; Fort Collins, Colorado; and
Cartersville, Georgia. Title to the Baldwinsville, New York brewery is held by
the Onondaga County Industrial Development Agency
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("OCIDA") pursuant to a Sale and Agency Agreement with ABI, which enabled OCIDA
to issue tax exempt pollution control and industrial development revenue notes
and bonds to finance a portion of the cost of the purchase and modification of
the brewery. The brewery is not pledged or mortgaged to secure any of the notes
or bonds, and the Sale and Agency Agreement with OCIDA gives ABI the
unconditional right to require at any time that title to the brewery be
transferred to ABI. ABI's breweries operated at approximately 97% of capacity in
1998; during the peak selling periods (second and third quarters), they operated
at maximum capacity. The Company also owns an 86.6% equity interest in a joint
venture that owns and operates a brewery in Wuhan, China. The Company also
leases and operates the Stag Brewery near London, England.
The Company, through wholly-owned subsidiaries, operates malt plants in
Manitowoc, Wisconsin, Moorhead, Minnesota, and Idaho Falls, Idaho; rice mills in
Jonesboro, Arkansas and Woodland, California; a wild rice processing facility in
Clearbrook, Minnesota; can manufacturing plants in Jacksonville, Florida,
Columbus, Ohio, Arnold, Missouri, Windsor, Colorado, Newburgh, New York, Ft.
Atkinson, Wisconsin, Rome, Georgia, and Mira Loma, California; and can lid
manufacturing plants in Gainesville, Florida, Oklahoma City, Oklahoma, and
Riverside, California.
BEC operates its principal family entertainment facilities in Tampa,
Florida; Williamsburg, Virginia; San Diego, California; Aurora, Ohio; Orlando,
Florida; and San Antonio, Texas. The Tampa facility is 265 acres, Williamsburg
is 364 acres, San Diego is 182 acres, Aurora is 90 acres, Orlando is 224 acres,
and the San Antonio facility is 496 acres.
Except for the Baldwinsville brewery, the can manufacturing plants in
Newburgh, New York and Rome, Georgia, the Sea World park in San Diego,
California, the Stag Brewery, and the brewery in Wuhan, China, all of the
Company's principal properties are owned in fee. The lease for the land used by
the Sea World park in San Diego, California expires in 2048. The Company leases
the Stag Brewery from Scottish Courage, Ltd. In 1995, the joint venture that
operates the brewery in Wuhan was granted the right to use the property for a
period of 50 years from the appropriate governmental authorities. The Company
also leases a bottling line at its brewery in Cartersville, Georgia and a can
manufacturing plant in Rome, Georgia. The Company considers its buildings,
improvements, and equipment to be well maintained and in good condition,
irrespective of dates of initial construction, and adequate to meet the
operating demands placed upon them. The production capacity of each of the
manufacturing facilities is adequate for current needs and, except as described
above, substantially all of each facility's capacity is utilized.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending or threatened litigation, the
outcome of which would be expected to have a material adverse effect upon its
financial condition or its operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter ended December
31, 1998.
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EXECUTIVE OFFICERS OF THE REGISTRANT
AUGUST A. BUSCH III (age 61) is presently Chairman of the Board and
President, and a Director of the Company and has served in such capacities since
1977, 1974, and 1963, respectively. Since 1979 he has also served as Chairman of
the Board and Chief Executive Officer of the Company's subsidiary,
Anheuser-Busch, Incorporated.
PATRICK T. STOKES (age 56) is presently Vice President and Group Executive
of the Company and has served in such capacity since 1981. He is also presently
President of the Company's subsidiary, Anheuser-Busch, Incorporated, and has
served in such capacity since 1990.
JOHN H. PURNELL (age 57) is presently Executive Vice President of the
Company and has served in such capacity since January 1999. He previously served
as Vice President and Group Executive of the Company (1991-1998). He is also
Chairman of the Board of the Company's subsidiary, Anheuser-Busch International,
Inc., and has served as Chairman since 1980 and had also served as Chief
Executive Officer (1991-1998).
W. RANDOLPH BAKER (age 52) is presently Vice President and Chief Financial
Officer of the Company and has served in such capacity since 1996. He previously
served as Vice President and Group Executive of the Company (1982-1996).
STEPHEN K. LAMBRIGHT (age 56) is presently Group Vice President and General
Counsel of the Company and has served in such capacity since 1997. He previously
served as Vice President and Group Executive of the Company (1984-1997).
ALOYS H. LITTEKEN (age 58) is presently Vice President-Corporate Engineering
of the Company and has served in such capacity since 1981.
WILLIAM L. RAMMES (age 57) is presently Vice President-Corporate Human
Resources of the Company and has served in such capacity since 1992. He is also
Chairman of the Board and President of the Company's subsidiary, Busch
Properties, Inc., and has served in such capacities since 1995.
JOHN B. ROBERTS (age 54) is presently Chairman of the Board and President of
the Company's subsidiary, Busch Entertainment Corporation, and has served in
such capacities since 1992 and 1991, respectively.
JOSEPH L. GOLTZMAN (age 57) is presently Vice President and Group Executive
of the Company and has served in such capacity since 1993. He is also presently
Chairman, Chief Executive Officer and President of the Company's subsidiary,
Anheuser-Busch Recycling Corporation, Chairman (since 1995), President and Chief
Executive Officer (since 1993) of the Company's subsidiary, Metal Container
Corporation, and Chairman (since 1993), President (since January 1999), and
Chief Executive Officer (since 1993) of the Company's indirect subsidiary,
Precision Printing and Packaging, Inc.
DONALD W. KLOTH (age 57) is presently Vice President and Group Executive of
the Company and has served in such capacity since 1994. He is also Chairman of
the Board and Chief Executive Officer of the Company's subsidiary, Busch
Agricultural Resources, Inc., and has served in such capacity since 1994. During
the past five years, he also served as Vice President-Materials Acquisition of
the Company (1983-1994) and President of Busch Agricultural Resources, Inc.
(1983-1994).
JOHN E. JACOB (age 64) is presently Executive Vice President and Chief
Communications Officer, and a Director of the Company and has served in such
capacities since 1994 and 1990, respectively. He also served as President and
Chief Executive Officer of the National Urban League, Inc. (1982-1994).
GERHARDT A. KRAEMER (age 66) is presently Senior Vice President-World
Brewing and Technology and has served in such capacity since 1996. During the
past five years, he also served as Vice President-Brewing of the Company's
subsidiary, Anheuser-Busch, Incorporated (1985-1996).
THOMAS W. SANTEL (age 40) is presently Vice President-Corporate Development
of the Company and has served in such capacity since 1996. During the past five
years, he also served as Director of Corporate Development (1994-1996) and
Associate Director, Corporate Development (1993-1994).
7
<PAGE> 9
STEPHEN J. BURROWS (age 47) is presently Vice President-International
Operations of the Company and has served in such capacity since January 1999. He
previously served as Vice President-International Marketing of the Company
(1992-1998). He is also presently Chief Executive Officer and President of the
Company's subsidiary, Anheuser-Busch International, Inc. and has served as Chief
Executive Officer since January 1999 and as President since 1994. During the
past five years, he also served as Chief Operating Officer of Anheuser-Busch
International, Inc. (1994-1998).
PART II
The information required by Items 5, (except as set forth below), 6, 7, and
8 of this Part II are hereby incorporated by reference from pages 34 through 77
of the Company's 1998 Annual Report to Shareholders.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
On December 2, 1998, the Company issued out of treasury shares a total of 27
shares of the Company's common stock ($1 par value) to one member of the Board
of Directors of the Company in lieu of cash for a portion of her 1998 annual
retainer fee for the month of December, 1998 pursuant to the Company's
Non-Employee Director Elective Stock Acquisition Plan. The transaction was
exempt from registration and prospectus delivery requirements of the Securities
Act of 1933 pursuant to Section 4(2) of the Act.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with PricewaterhouseCoopers LLP, the
Company's independent accountants since 1961, on accounting principles or
practices or financial statement disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to Directors is hereby
incorporated by reference from pages 4 through 6 of the Company's Proxy
Statement for the Annual Meeting of Shareholders on April 28, 1999. The
information required by this Item with respect to Executive Officers is
presented on pages 7 and 8 of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated by reference
from page 8 and pages 17 through 23 of the Company's Proxy Statement for the
Annual Meeting of Shareholders on April 28, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is hereby incorporated by reference
from page 7 of the Company's Proxy Statement for the Annual Meeting of
Shareholders on April 28, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is hereby incorporated by reference
from pages 24 through 26 of the Company's Proxy Statement for the Annual Meeting
of Shareholders on April 28, 1999.
8
<PAGE> 10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. FINANCIAL STATEMENTS:
Consolidated Balance Sheet at December 31, 1998 and 1997 50<F*>
Consolidated Statement of Income for the three years ended
December 31, 1998 51<F*>
Consolidated Statement of Changes in Shareholders Equity for the
three years ended December 31, 1998 52<F*>
Consolidated Statement of Cash Flows for the three years ended
December 31, 1998 53<F*>
Notes to Consolidated Financial Statements 54-73<F*>
Report of Independent Accountants 49<F*>
<FN>
<F*>Incorporated herein by reference from the indicated pages of the 1998
Annual Report to Shareholders.
2. FINANCIAL STATEMENT SCHEDULE:
Report of Independent Accountants on Financial Statement Schedule F-1
For the three years ended December 31, 1998:
Schedule VIII -- Valuation and Qualifying Accounts and Reserves F-2
</TABLE>
3. EXHIBITS:
Exhibit 3.1 -- Restated Certificate of Incorporation with
amendments. (Incorporated by reference to
Exhibit 3.1 to Form 10-K for the fiscal year
ended December 31, 1994.)
Exhibit 3.2 -- By-Laws of the Company (as amended and restated
December 16, 1998).
Exhibit 4.1 -- Form of Rights Agreement, dated as of October
26, 1994 between Anheuser-Busch Companies, Inc.
and Boatmen's Trust Company. (Incorporated by
reference to Exhibit 4 to Form 8-K filed
November 7, 1994.)
Exhibit 4.2 -- Letter Agreement dated March 19, 1998 between
Anheuser-Busch Companies, Inc., Boatmen's Trust
Company, and ChaseMellon Shareholder Services,
L.L.C. amending the Form of Rights Agreement
filed as Exhibit 4.1 of this report.
Exhibit 4.3 -- Indenture dated as of August 1, 1995 between
the Company and The Chase Manhattan Bank, as
Trustee (Incorporated by reference to Exhibit
4.1 in the Form S-3 of the Company,
Registration Statement No. 33-60885.) (Other
indentures are not filed, but the Company
agrees to furnish copies of such instruments
to the Securities and Exchange Commission upon
request.)
Exhibit 10.1 -- Anheuser-Busch Companies, Inc. Deferred
Compensation Plan for Non-Employee Directors
(Amended and Restated as of January 1, 1997.)
(Incorporated by reference to Exhibit 10.1 to
Form 10-K for the fiscal year ended December
31, 1996.)<F*>
Exhibit 10.2 -- Anheuser-Busch Companies, Inc. Non-Employee
Director Elective Stock Acquisition Plan
effective January 1, 1996. (Incorporated by
reference to Exhibit 10.6 to Form 10-K for
the fiscal year ended December 31, 1995.)<F*>
9
<PAGE> 11
Exhibit 10.3 -- Anheuser-Busch Companies, Inc. 1981 Incentive
Stock Option/Non-Qualified Stock Option Plan
(As amended December 18, 1985, December 16,
1987, December 20, 1988, July 22, 1992,
September 22, 1993, December 20, 1995, and
November 26, 1997.) (Incorporated by reference
to Exhibit 10.3 to Form 10-K for the fiscal
year ended December 31, 1997.)<F*>
Exhibit 10.4 -- Anheuser-Busch Companies, Inc. 1981
Non-Qualified Stock Option Plan (As amended
December 18, 1985, June 24, 1987, December 20,
1988, July 22, 1992, December 20, 1995, and
November 26, 1997.) (Incorporated by reference
to Exhibit 10.4 to Form 10-K for the fiscal
year ended December 31, 1997.)<F*>
Exhibit 10.5 -- Anheuser-Busch Companies, Inc. 1989 Incentive
Stock Plan (As amended December 20, 1989,
December 19, 1990, December 15, 1993, December
20, 1995, and November 26, 1997.) (Incorporated
by reference to Exhibit 10.5 to Form 10-K for
the fiscal year ended December 31, 1997.)<F*>
Exhibit 10.6 -- Anheuser-Busch Companies, Inc. 1998 Incentive
Stock Plan (Incorporated by reference to
Exhibit A to the Definitive Proxy Statement for
Annual Meeting of Shareholders on April 22,
1998.)<F*>
Exhibit 10.7 -- Anheuser-Busch Companies, Inc. Excess Benefit
Plan amended and restated effective as of
October 1, 1993. (Incorporated by reference to
Exhibit 10.9 to Form 10-K for the fiscal year
ended December 31, 1994.)<F*>
Exhibit 10.8 -- Anheuser-Busch Companies, Inc. Supplemental
Executive Retirement Plan amended and restated
as of October 1, 1993. (Incorporated by
reference to Exhibit 10.10 to Form 10-K for the
fiscal year ended December 31, 1994.)<F*>
Exhibit 10.9 -- First Amendment to the Anheuser-Busch Companies,
Inc. Supplemental Executive Retirement Plan as
amended and restated October 1, 1993 effective
as of December 14, 1994. (Incorporated by
reference to Exhibit 10.11 to Form 10-K for the
fiscal year ended December 31, 1994.)<F*>
Exhibit 10.10-- Second Amendment to the Anheuser-Busch
Companies, Inc. Supplemental Executive
Retirement Plan as amended and restated October
1, 1993 effective as of January 1, 1996.
(Incorporated by reference to Exhibit 10.13
to Form 10-K for the fiscal year ended December
31, 1995).<F*>
Exhibit 10.11-- Third Amendment to the Anheuser-Busch Companies,
Inc. Supplemental Executive Retirement Plan as
amended and restated October 1, 1993, effective
as of July 1, 1996. (Incorporated by reference
to Exhibit 10.10 to Form 10-K for the fiscal
year ended December 31, 1997.)<F*>
Exhibit 10.12-- Anheuser-Busch Executive Deferred Compensation
Plan effective January 1, 1994. (Incorporated
by reference to Exhibit 10.16 to Form 10-K
for the fiscal year ended December 31,
1993.)<F*>
Exhibit 10.13-- First Amendment to Anheuser-Busch Executive
Deferred Compensation Plan effective April 1,
1994. (Incorporated by reference to Exhibit
10.13 to Form 10-K for the fiscal year ended
December 31, 1994.)<F*>
Exhibit 10.14-- Anheuser-Busch 401(k) Restoration Plan effective
January 1, 1994 (true and correct as of
February 6, 1995). (Incorporated by reference
to Exhibit 10.14 to Form 10-K for the fiscal
year ended December 31, 1994.)<F*>
Exhibit 10.15-- Form of Indemnification Agreement with Directors
and Executive Officers. (Incorporated by
reference to Exhibit 10.18 to Form 10-K for
the fiscal year ended December 31, 1993.)<F*>
10
<PAGE> 12
Exhibit 10.16-- Anheuser-Busch Officer Bonus Plan effective
January 1, 1995. (Incorporated by reference to
Exhibit A to the Definitive Proxy Statement
for Annual Meeting of Shareholders on April 26,
1995.)<F*>
Exhibit 10.17-- Investment Agreement By and Among Anheuser-Busch
Companies, Inc., Anheuser-Busch International,
Inc. and Anheuser-Busch International Holdings,
Inc. and Grupo Modelo, S.A. de C.V., Diblo,
S.A. de C.V. and certain shareholders thereof,
dated as of June 16, 1993. (Incorporated by
reference to Exhibit 10.19 to Form 10-K for
the fiscal year ended December 31, 1993.)
Exhibit 10.18-- Letter agreement between Anheuser-Busch
Companies, Inc. and the Controlling
Shareholders regarding Section 5.5 of the
Investment Agreement filed as Exhibit 10.17
of this report. (Incorporated by reference to
Exhibit 10.20 to Form 10-K for the fiscal
year ended December 31, 1993.)
Exhibit 12 -- Ratio of Earnings to Fixed Charges.
Exhibit 13 -- Pages 33 through 77 of the Anheuser-Busch
Companies, Inc. 1998 Annual Report to
Shareholders, a copy of which is furnished for
the information of the Securities and Exchange
Commission. Portions of the Annual Report not
incorporated herein by reference are not deemed
"filed" with the Commission.
Exhibit 21 -- Subsidiaries of the Company
Exhibit 23 -- Consent of Independent Accountants, filed as
page F-1 of this report.
Exhibit 27 -- Financial Data Schedule
[FN]
- ------------
<F*>A management contract or compensatory plan or arrangement required to be
filed by Item 14(c) of this report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of 1998.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ANHEUSER-BUSCH COMPANIES, INC.
-------------------------------------------
(Registrant)
By /s/ AUGUST A. BUSCH III
-------------------------------------------
August A. Busch III
Chairman of the
Board and President
Date: March 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ AUGUST A. BUSCH III Chairman of the Board and President and March 24, 1999
-------------------------------------------------- Director (Principal Executive
(August A. Busch III) Officer)
/s/ W. RANDOLPH BAKER Vice President and Chief Financial March 24, 1999
-------------------------------------------------- Officer (Principal Financial Officer)
(W. Randolph Baker)
/s/ JOHN F. KELLY Vice President and Controller March 24, 1999
-------------------------------------------------- (Principal Accounting Officer)
(John F. Kelly)
/s/ BERNARD A. EDISON Director March 24, 1999
--------------------------------------------------
(Bernard A. Edison)
/s/ CARLOS FERNANDEZ G. Director March 24, 1999
--------------------------------------------------
(Carlos Fernandez G.)
/s/ JOHN E. JACOB Director March 24, 1999
--------------------------------------------------
(John E. Jacob)
/s/ JAMES R. JONES Director March 24, 1999
--------------------------------------------------
(James R. Jones)
/s/ CHARLES F. KNIGHT Director March 24, 1999
--------------------------------------------------
(Charles F. Knight)
/s/ VERNON R. LOUCKS, JR. Director March 24, 1999
--------------------------------------------------
(Vernon R. Loucks, Jr.)
12
<PAGE> 14
/s/ VILMA S. MARTINEZ Director March 24, 1999
--------------------------------------------------
(Vilma S. Martinez)
/s/ SYBIL C. MOBLEY Director March 24, 1999
--------------------------------------------------
(Sybil C. Mobley)
/s/ JAMES B. ORTHWEIN Director March 24, 1999
--------------------------------------------------
(James B. Orthwein)
/s/ WILLIAM PORTER PAYNE Director March 24, 1999
--------------------------------------------------
(William Porter Payne)
/s/ JOYCE M. ROCHE Director March 24, 1999
--------------------------------------------------
(Joyce M. Roche)
/s/ ANDREW C. TAYLOR Director March 24, 1999
--------------------------------------------------
(Andrew C. Taylor)
/s/ DOUGLAS A. WARNER III Director March 24, 1999
--------------------------------------------------
(Douglas A. Warner III)
/s/ WILLIAM H. WEBSTER Director March 24, 1999
--------------------------------------------------
(William H. Webster)
/s/ EDWARD E. WHITACRE, JR. Director March 24, 1999
--------------------------------------------------
(Edward E. Whitacre, Jr.)
</TABLE>
13
<PAGE> 15
<TABLE>
ANHEUSER-BUSCH COMPANIES, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULE
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants on Financial Statement Schedule................. F-1
Consent of Independent Accountants................................................ F-1
Financial Statement Schedule for the Years 1998, 1997 and 1996:
Valuation and Qualifying Accounts and Reserves (Schedule VIII)................ F-2
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or Notes
thereto.
Separate financial statements of subsidiaries not consolidated have been
omitted because, in the aggregate, the proportionate shares of their profit
before income taxes and total assets are less than 20% of the respective
consolidated amounts, and investments in such companies are less than 20% of
consolidated total assets.
14
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Anheuser-Busch Companies, Inc.
Our audits of the Consolidated Financial Statements referred to in our report
dated February 2, 1999 appearing on page 49 of the 1998 Annual Report to
Shareholders of Anheuser-Busch Companies, Inc. (which report and Consolidated
Financial Statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a) of this Form 10-K. In our opinion, the Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related Consolidated Financial Statements.
PricewaterhouseCoopers LLP
St. Louis, Missouri
February 2, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Forms S-3 (No. 333-31477 and
No. 333-71105) and in the Registration Statements on Forms S-8 (No. 2-77829, No.
33-4664, No. 33-36132, No. 33-39714, No. 33-39715, No. 33-46846, No. 33-53333,
No. 33-58221, No. 33-58241, No. 333-67027, No. 333-71309, and No. 333-71311) of
Anheuser-Busch Companies, Inc. of our report dated February 2, 1999 appearing on
page 49 of the Annual Report to Shareholders which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation by reference of
our report on the Financial Statement Schedule, which appears on page F-1 of
this Form 10-K.
PricewaterhouseCoopers LLP
St. Louis, Missouri
March 24, 1999
F-1
<PAGE> 17
<TABLE>
ANHEUSER-BUSCH COMPANIES, INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(CONTINUING OPERATIONS BASIS, IN MILLIONS)
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Reserve for doubtful accounts (deducted from related
assets):
Balance at beginning of period.......................... $ 4.9 $ 3.1 $ 1.9
Additions charged to costs and expenses................. 1.3 2.0 1.8
Additions (recoveries of uncollectible accounts
previously written off)............................... .3 .1 .4
Deductions (uncollectible accounts written off)......... (1.0) (.3) (1.0)
------ ------ ------
Balance at end of period................................ $ 5.5 $ 4.9 $ 3.1
====== ====== ======
Deferred income tax asset valuation allowance under FAS 109:
Balance at beginning of period.......................... $ 92.5 $ 81.7 $ 66.7
Additions to valuation allowance charged to costs and
expenses.............................................. 28.1 13.2 16.6
Deductions from valuation allowance (utilizations and
expirations).......................................... (3.6) (2.4) (1.6)
------ ------ ------
Balance at end of period................................ $117.0 $ 92.5 $ 81.7
====== ====== ======
</TABLE>
F-2
BY-LAWS
OF
ANHEUSER-BUSCH COMPANIES, INC.
(As Amended and Restated December 16, 1998)
INCORPORATED UNDER THE LAWS OF DELAWARE
<TABLE>
TABLE OF CONTENTS
BY-LAWS
OF
ANHEUSER-BUSCH COMPANIES, INC.
<S> Page <C> Page
ARTICLE I: Section 4:3 Executive Committee -
LOCATION AND OFFICES Notice of Meetings.......8
<C> Section 4:4 Executive Committee-
Section 1:1 Principal Office............1 Quorum and Powers
Section 1:2 Other Offices...............1 of Majority..............8
Section 4:5 Executive Committee-
ARTICLE II: Reporting................9
STOCKHOLDERS Section 4:6 Other Committees..........9
Section 2:1 Annual Meeting..............1 ARTICLE V:
Section 2:2 Business to be Conducted OFFICERS
at Annual Meeting..........1
Section 2:3 Special Meetings............2 Section 5:1 Appointment...............9
Section 2:4 Place of Meetings...........2 Section 5:2 Tenure....................9
Section 2:5 Notice of Meetings..........2 Section 5:3 Salaries..................9
Section 2:6 Quorum and Voting...........2 Section 5:4 Chief Executive Officer...9
Section 2:7 Voting; Proxy...............3 Section 5:5 Chairman of the Board....10
Section 2:8 Voting by Fiduciaries, Section 5:6 President................10
Pledgee and Pledgors.......3 Section 5:7 Other Officers...........10
Section 2:9 Nomination of Directors.....4
Section 2:10 List of Stockholders........5 ARTICLE VI:
Section 2:11 Appointment of Inspectors CAPITAL STOCK AND DIVIDENDS
of Election and Resolution
of Questions Concerning Section 6:1 Certificates for Shares..10
Right to Vote..............5 Section 6:2 Stock Records............10
Section 6:3 Transfers................10
ARTICLE III: Section 6:4 Regulations Governing
DIRECTORS Issuance and
Transfers of Shares.....11
Section 6:5 Transfer Agents and
Section 3:1 General Powers..............5 Registrars..............11
Section 3:2 Number and Qualifications...5 Section 6:6 Lost or Destroyed
Section 3:3 Election....................5 Certificates............11
Section 3:4 Place of Meetings...........5 Section 6:7 Fractions of Shares......11
Section 3:5 Regular Meetings............6 Section 6:8 Determination of
Section 3:6 Special Meetings............6 Stockholders............11
Section 3:7 Quorum......................6 Section 6:9 Record Date..............11
Section 3:8 Waiver of Notice............7
Section 3:9 Consent.....................7 ARTICLE VII:
Section 3:10 Notice to Members of the MISCELLANEOUS
Board of Directors.........7
Section 3:11 Presiding Officer...........7 Section 7:1 Voting Shares in Other
Corporations............12
Section 7:2 Execution of Other Papers
ARTICLE IV: and Documents...........12
COMMITTEES Section 7:3 Corporate Seal...........12
Section 7:4 Amendments...............12
Section 4:1 Executive Committee - Section 7:5 Books and Records .......12
Appointment and Tenure.....8
Section 4:2 Executive Committee -
Powers.....................8
</TABLE>
BY-LAWS
OF
ANHEUSER-BUSCH COMPANIES, INC.
(AS AMENDED AND RESTATED DECEMBER 16, 1998)
ARTICLE I: LOCATION AND OFFICES
Principal Office.
SECTION 1:1. The principal office of the corporation
shall be at such place as the Board of Directors may from
time to time determine, but until a change is effected
such principal office shall be at One Busch Place, in the
City of St. Louis, Missouri.
Other Offices.
SECTION 1:2. The corporation may also have other
offices, in such places (within or without the State of
Delaware) as the Board of Directors may from time to time
determine.
ARTICLE II: STOCKHOLDERS
Annual Meeting.
SECTION 2:1. An annual meeting of the stockholders of
the corporation shall be held at 10:00 o'clock a.m. on the
fourth Wednesday in April of each year if not a legal
holiday, and if a legal holiday then on the next
succeeding day not a legal holiday. The purpose of the
meeting shall be to elect directors and to transact such
other business as properly may be brought before the
meeting. If the corporation shall fail to hold said
meeting for the election of directors on the date
aforesaid, the Board of Directors shall cause the election
to be held by the stockholders as soon thereafter as
convenient.
Business to be Conducted at Annual Meeting.
SECTION 2:2.1 At an annual meeting of stockholders, only
such business shall be conducted as shall have been
brought before the meeting (i) pursuant to the
corporation's notice of the meeting, (ii) by or at the
direction of the Board of Directors (or any duly organized
committee thereof), or (iii) by any stockholder of the
corporation who is a stockholder of record on the date of
giving of the notice provided for in this By-Law and on
the record date for the determination of stockholders
entitled to vote at such meeting and who has complied with
the notice procedures set forth in this By-Law.
SECTION 2:2.2 In addition to any other applicable
requirements, for business to be properly brought before
an annual meeting by a stockholder, such stockholder must
have given timely notice in proper written form to the
Secretary which notice is not withdrawn by such
stockholder at or prior to such annual meeting.
SECTION 2:2.3 To be timely, a stockholder's notice to
the Secretary must be delivered or mailed to and received
by the Secretary at the principal executive offices of the
corporation, not less than ninety days nor more than one
hundred twenty days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that
in the event that the date of the meeting is changed by
more than thirty days from such anniversary date, notice
by the stockholder must be received not later than the
close of business on the tenth day following the earlier
of the day on which notice of the date of the annual
meeting was mailed or public disclosure was made.
SECTION 2:2.4 To be in proper written form, such
stockholder's notice must set forth as to each matter the
stockholder proposes to bring before the annual meeting
(i) a brief description of the business to be brought
before the annual meeting and the reasons for conducting
such business at such meeting; (ii) the name and address,
as they appear on the corporation's books, of the
stockholder proposing such business, and the name and
address of the beneficial owner, if any, on whose behalf
the proposal is made; (iii) the class and the number of
shares of the corporation's stock which are beneficially
owned by the stockholder, and the beneficial owner, if
any, on whose behalf the proposal is made; (iv) any
material interest of the stockholder, and of the beneficial
owner, if any, on whose behalf the proposal is made,
in such business; and (v) a representation that such
stockholder intends to appear in person or by proxy at
the annual meeting to bring such business before the
meeting.
SECTION 2:2.5 Notwithstanding anything in these By-Laws
to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures
set forth in this By-Law. The chairman of the meeting may,
if the facts warrant, determine that the business was not
properly brought before the meeting in accordance with the
provisions of this By-Law; and if the chairman should so
determine, the chairman shall so declare to the meeting,
and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the
foregoing provisions of this By-Law, a stockholder shall
also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder with
respect to the matters set forth in this By-Law.
Special Meetings.
SECTION 2:3. At any time the Chief Executive Officer
may, and either the Chief Executive Officer or the
Secretary at the written request of any five members of
the Board of Directors shall, issue a call for a special
meeting of the stockholders. Such request shall state the
purpose or purposes of the proposed meeting, and at such
special meeting only such matters as may be specified in
the call therefor shall be considered.
Place of Meetings.
SECTION 2:4. All meetings of the stockholders shall be
held at the principal office of the corporation, or at
such other place, within or without the State of Delaware,
as may be determined by the Board of Directors and stated
in the notice of the meeting.
Notice of Meetings.
SECTION 2:5. Written notice of each meeting of the
stockholders stating the place, date, and hour of the
meeting, and, in case of a special meeting or where
otherwise required by statute, the purpose or purposes for
which the meeting is called, shall be delivered by mail
not less than ten nor more than sixty days before the date
of the meeting, by or at the direction of the person
calling the meeting, to each stockholder entitled to vote
at such meeting. The notice of a stockholders' meeting
shall be deemed to be delivered when deposited in the
United States mail with postage prepaid, addressed to each
stockholder at such stockholder's address as it appears on
the records of the corporation.
Quorum and Voting.
SECTION 2:6.1 The holders of a majority of the
outstanding shares (exclusive of treasury stock) entitled
to vote at any meeting of the stockholders, when present
in person or by proxy, shall constitute a quorum for the
transaction of business, except as otherwise provided by
statute, the Certificate of Incorporation, or these
By-Laws; but in the absence of such a quorum the holders
of a majority of the shares represented at the meeting
shall have the right successively to adjourn the meeting
to a specified date. When a meeting is adjourned to
another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may
transact any business which might have been transacted at
the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
SECTION 2:6.2 The absence from any meeting of the number
of shares required by statute, the Certificate of
Incorporation or these By-Laws for action upon one matter
shall not prevent action at such meeting upon any other
matter or matters which may properly come before the
meeting, if the number of shares required in respect of
such other matters shall be present.
SECTION 2:6.3 When a quorum is present at any meeting of
the stockholders, the vote of the holders (present in
person or represented by proxy) of a majority of the
shares of stock which are actually voted (and have the
power to vote) on any proposition or question properly
brought to a vote at such meeting shall decide any such
proposition or question, unless the proposition or
question is one upon which by express provision of statute
or of the Certificate of Incorporation, or of these
By-Laws, a different vote is required, in which case such
express provision shall govern and establish the number of
votes required to determine such proposition or question.
Voting; Proxy.
SECTION 2:7.1 Whenever the law requires or the chairman
orders that a vote be taken by ballot, each stockholder
entitled to vote on a particular question at a meeting of
stockholders, pursuant to law or the Certificate of
Incorporation, shall be entitled to one vote for each
share of voting stock held by such stockholder. The date
for determining the stockholders entitled to vote at a
meeting of the stockholders shall be determined pursuant
to Section 6:9.
SECTION 2:7.2 Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent
in writing without a meeting may authorize another person
or persons to act for such stockholder by proxy; but no
such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer
period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to
support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which
it is coupled is an interest in the stock itself or an
interest in the corporation generally.
Voting by Fiduciaries, Pledgee and Pledgors.
SECTION 2:8. Persons holding stock in a fiduciary
capacity shall be entitled to vote the shares so held.
Persons whose stock is pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the
corporation the pledgor has expressly empowered the
pledgee to vote thereon, in which case only the pledgee or
the pledgee's proxy may represent such stock and vote
thereon.
If shares or other securities having voting power stand
of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety or otherwise,
or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the
Secretary is given written notice to the contrary and is
furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have
the following effect:
(a) If only one votes, that person's act binds
all;
(b) If more than one vote, the act of the majority
so voting binds all;
(c) If more than one vote, but the vote is evenly
split on any particular matter, each faction may vote the
securities in question proportionally, or any person
voting the shares, or a beneficiary, if any, may apply to
the Court of Chancery or such other court as may have
jurisdiction to appoint an additional person to act with
the persons so voting the shares, which shall then be
voted as determined by a majority of such persons and the
person appointed by the Court. If the instrument so filed
shows that any such tenancy is held in unequal interest, a
majority or even-split for the purpose of this subsection
shall be a majority or even-split in interest.
Nomination of Directors.
SECTION 2:9.1 Only persons who are nominated in
accordance with the following procedures shall be eligible
for election as directors of the corporation, except as
may be otherwise provided in the Certificate of
Incorporation of the corporation with respect to the right
of holders of preferred stock of the corporation to
nominate and elect a specified number of directors in
certain circumstances. Nominations of persons for election
to the Board of Directors may be made at any annual
meeting of stockholders, or at any special meeting of
stockholders called for the purpose of electing directors,
(i) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (ii) by any
stockholder of the corporation who is a stockholder of
record on the date of the giving of the notice provided
for in this By-Law and on the record date for the
determination of stockholders entitled to vote at such
meeting and who complies with the notice procedures set
forth in this By-Law.
SECTION 2:9.2 In addition to any other applicable
requirements, for a nomination to be made by a
stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of
the corporation.
SECTION 2:9.3 To be timely, a stockholder's notice to
the Secretary must be delivered or mailed to and received
by the Secretary at the principal executive offices of the
corporation (i) in the case of an annual meeting, not less
than ninety days nor more than one hundred twenty days
prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in
the event that the annual meeting is called for a date
that is not within thirty days before or after such
anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of
business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting
was made, whichever occurs first, and (ii) in the case of
a special meeting of stockholders called for the purpose
of electing directors, not later than the close of
business on the tenth day following the day on which
notice of the date of the special meeting was mailed or
public disclosure of the date of the special meeting was
made, whichever occurs first.
SECTION 2:9.4 To be in proper written form, a
stockholder's notice to the Secretary must set forth (i)
as to each person whom the stockholder proposes to
nominate for election as a director (A) the name, age,
business address and residence address of the person, (B)
the principal occupation or employment of the person, (C)
the class or series and the number of shares of capital
stock of the corporation which are owned beneficially or
of record by the person and (D) any other information
relating to the person that would be required to be
disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the
Exchange Act, and the rules and regulations promulgated
thereunder; and (ii) as to the stockholder giving the
notice or the beneficial owner on whose behalf the
nomination is made, (A) the name and address of such
stockholder as they appear on the corporation's books, (B)
the class or series and the number of shares of capital
stock of the corporation beneficially owned by such
stockholder or beneficial owner, (C) a description of all
arrangements or understandings between such stockholder or
beneficial owner and each proposed nominee and any other
person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder
or beneficial owner, (D) a representation that such
stockholder or beneficial owner intends to appear in
person or by proxy at the meeting to nominate the persons
named in its notice and (E) any other information relating
to such stockholder or beneficial owner that would be
required to be disclosed in a proxy statement or other
filings required to be made in connection with
solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules
and regulations promulgated thereunder. Such notice must
be accompanied by a written consent of each proposed
nominee to being named as a nominee and to serve as a
director if elected.
SECTION 2:9.5 No person shall be eligible for election
as a director of the corporation, at any annual meeting of
stockholders or at any special meeting of stockholders
called for the purpose of electing directors, unless
nominated in accordance with the procedures set forth in
this By-Law. If the chairman of the meeting determines
that a nomination was not made in accordance with the
foregoing procedures, the chairman shall declare to
the meeting that the nomination was defective and such
defective nomination shall be disregarded.
List of Stockholders.
SECTION 2:10. The Secretary shall prepare and make, or
cause to be made, at least ten days before every meeting
of stockholders, a complete list of the stockholders
entitled to vote at said meeting, arranged in alphabetical
order, showing the address of and the number of shares
registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to
the election, either at a place within the city where the
election is to be held and which place shall be specified
in the notice of the meeting, or, if not so specified, at
the place where said meeting is to be held, and the list
shall be produced and kept at the time and place of
election during the whole time thereof and subject to the
inspection of any stockholder who may be present. The
stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the
list required by this By-Law or the books of the
corporation, or to vote in person or by proxy at any
meeting of the stockholders.
Appointment of Inspectors of Election and Resolution of
Questions Concerning Right to Vote.
SECTION 2:11. The Board of Directors, in advance of the
meeting of stockholders or, if it does not act, the
chairman of the meeting, shall appoint not less than two
persons who are not directors to serve as inspectors of
election. It shall be their duty to receive and canvass
the votes for election of directors and on any proposal
voted on by ballot and to certify the results to the
chairman. In all cases where the right to vote upon any
share of the corporation shall be questioned, it shall be
the duty of the inspectors to examine the stock ledger of
the corporation as evidence of the shares held, and all
shares that appear standing thereon in the name of any
person or persons may be voted upon by such person or
persons. Each inspector of election before entering upon
the duties of such office shall take and subscribe the
following oath before an officer authorized by law to
administer oaths: "I do solemnly swear that I will execute
the duties of an inspector of the election now to be held
with strict impartiality and according to the best of my
ability."
ARTICLE III: DIRECTORS
General Powers.
SECTION 3:1. The Board of Directors shall control and
manage the business and property of the corporation. The
Board may exercise all such powers of the corporation and
do all lawful acts and things as are not by law, the
Certificate of Incorporation, or these By-Laws directed or
required to be exercised or done by the stockholders or
some particular officer of the corporation.
Number and Qualifications.
SECTION 3:2. The number of directors shall be determined
from time to time by resolution of the Board of Directors
in accordance with the terms of Article FIFTH of the
Certificate of Incorporation. From and after the first
public distribution of the Common Stock of the
corporation, each director shall be a stockholder of the
corporation, except in such specific case or cases as
shall be otherwise authorized by the Board of Directors
upon a showing of reasonable cause therefor.
Election.
SECTION 3:3. The directors who are to be elected at the
annual meeting of the stockholders shall be elected by
ballot by the holders of shares entitled to vote.
Place of Meetings.
SECTION 3:4. The place where meetings of the Board of
Directors are held shall be as follows:
(a) The annual meeting shall be held in the city of
the principal office of the corporation in Missouri,
provided that in the event the annual meeting of
shareholders is held in a metropolitan area other than
St. Louis, Missouri, the annual meeting of the Board of
Directors shall be held in the metropolitan area where
the annual meeting of stockholders is held.
(b) Regular meetings shall be held at such place
within the City or County of St. Louis, Missouri as may
be prescribed in the call, provided that any regular
meeting may be held elsewhere, either within or without
the State of Delaware, pursuant to resolution of the
Board of Directors or pursuant to the call of the Chief
Executive Officer acting with the consent of a majority
of the directors.
(c) Special meetings shall be held at such place as
may be prescribed in the notice, provided that if a
special meeting is held on less than three days' notice,
it shall be held at the principal office of the
corporation unless all directors agree upon a different
location.
(d) Members of the Board of Directors may
participate in a meeting of the Board by means of
conference telephone or similar communications equipment
by means of which all persons participating in the
meeting can hear each other, and participating in the
meeting in this manner shall constitute presence in
person at such meeting.
Regular Meetings.
SECTION 3:5. Regular meetings shall be held at such
place or places, on such date or dates, and at such times
as shall be established by the Board of Directors. A
notice of each regular meeting shall not be required,
except any meeting at which an amendment to or repeal of
these By-Laws is to be considered.
Special Meetings.
SECTION 3:6. Special meetings of the Board of Directors
may be held at the call of the Chief Executive Officer or
five members of the Board at such time as may be
prescribed in the call of the meeting. The purpose of the
special meeting need not be stated in the notice of the
meeting. Notice of a special meeting may be given by any
one or more of the following methods and the method used
need not be the same for each director being notified:
(a) Written notice sent by mail at least three days
prior to the meeting;
(b) Personal service at least twenty-four (24) hours
prior to the date of the meeting;
(c) Telegraphic notice at least twenty-four (24)
hours prior to the date of the meeting, said notice
to be sent as a straight full-rate telegram;
(d) Telephonic notice at least twenty-four (24) hours
prior to the date of the meeting.
(e) Facsimile transmission at least twenty-four (24)
hours prior to the date of the meeting.
Quorum.
SECTION 3:7. A majority of the persons serving as
directors of the corporation at the time of a meeting of
the Board of Directors shall constitute a quorum for the
transaction of any business by the Board at such meeting.
At any meeting of the Board, no action shall be taken
(except adjournment, in the manner provided below) until
after a quorum has been established.
The act of a majority of directors who are present at a
meeting at which a quorum previously has been established
(or at any adjournment of such meeting, provided that a
quorum previously shall have been established at such
adjourned meeting) shall be the act of the Board of
Directors, regardless of whether or not a quorum is
present at the time such action is taken. In determining
the number of directors who are present at the time any
such action is taken (for the purpose of establishing the
number of votes required to take action on any proposition
or question submitted to the Board), any director who
is in attendance at such meeting but who, for just cause,
is disqualified to vote on such proposition or question,
shall not be considered as being present at the time of
such action.
In the event a quorum cannot be established at the
beginning of a meeting, a majority of the directors
present at the meeting, or the director, if there be only
one person, or the Secretary of the corporation, if there
be no director present, may adjourn the meeting from time
to time until a quorum be present. Only such notice of
such adjournment need be given as the Board may from time
to time prescribe.
Waiver of Notice.
SECTION 3:8. Any notice which is required by law or by
the Certificate of Incorporation or by these By-Laws to be
given to any director may be waived in writing, signed by
such director, whether before or after the time stated
therein. Attendance of a director at any meeting shall
constitute waiver of notice of such meeting, except where
a director attends a meeting for the express purpose of
objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Consent.
SECTION 3:9. Any action required or permitted to be
taken at any meeting of the Board of Directors (or of any
committee thereof) may be taken without a meeting if all
members of the Board (or committee) consent thereto in
writing, and the writing or writings are filed with the
minutes of the proceedings of the Board (or committee).
Notice to Members of the Board of Directors.
SECTION 3:10. Each member of the Board of Directors
shall file with the Secretary of the corporation an
address to which mail or telegraphic notices shall be sent
and a telephone number to which a telephonic or facsimile
notice may be transmitted. A notice mailed, telegraphed,
telephoned or transmitted by facsimile in accordance with
the instructions provided by the director shall be deemed
sufficient notice. Such address or telephone number may be
changed at any time and from time to time by a director by
giving written notice of such change to the Secretary.
Failure on the part of any director to keep an address and
telephone number on file with the Secretary shall
automatically constitute a waiver of notice of any regular
or special meeting of the Board which might be held during
the period of time that such address and telephone number
are not on file with the Secretary. A notice shall be
deemed to be mailed when deposited in the United States
mail, postage prepaid. A notice shall be deemed to be
telegraphed when the notice is delivered to the
transmitter of the telegram and either payment or
provision for payment is made by the corporation. Notice
shall be deemed to be given by telephone if the notice is
transmitted over the telephone to some person (whether or
not such person is the director) answering the telephone
at the number which the director has placed on file with
the Secretary. Notice shall be deemed to be given by
facsimile transmission when sent to the telephone number
which the director has placed on file with the Secretary.
Presiding Officer.
SECTION 3:11. The Chairman of the Board shall preside at
all meetings of the Board of Directors at which the
Chairman is present. In the Chairman's absence, the Vice
Chairman (if any) shall preside. In the absence of the
Chairman and the Vice Chairman, the Board shall select a
chairman of the meeting from among the directors present.
ARTICLE IV: COMMITTEES
Executive Committee--Appointment and Tenure.
SECTION 4:1. The Board of Directors, by resolution
adopted by a majority of the whole Board, may designate
six directors, including the Chief Executive Officer, to
constitute an Executive Committee, provided that a
majority of said committee shall at all times be made up
of members of the Board who are neither officers nor
employees of the corporation and who shall serve at the
pleasure of the Board. In the case of the death,
resignation or removal of any member of the Executive
Committee or in case any such member shall cease to be a
member of the Board, the vacancy shall be filled by the
Board. The Board shall designate the chairman of the
Executive Committee.
Executive Committee--Powers.
SECTION 4:2. The Executive Committee, to the extent
provided in the resolution of the Board of Directors
appointing such committee or in any subsequent resolution,
shall have and may exercise all the powers and authority
of the Board in the management of the business and affairs
of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require
it, but shall not have the power or authority with respect
to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, or recommending to
the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and
assets; nor shall the Executive Committee have the power
or authority to declare a dividend or to authorize the
issuance of stock; but the designation of such Executive
Committee and the delegation of authority thereto shall
not operate to relieve the Board, or any member thereof,
of any responsibility imposed upon it or them by the
provisions of the Delaware General Corporation Law, as
amended.
Executive Committee--Notice of Meetings.
SECTION 4:3. A meeting of the Executive Committee may be
held on call by the Chief Executive Officer or on the call
of any three of the other members of the Committee.
Meetings of the Executive Committee may be held, upon
notice as short as twenty-four (24) hours, at such place
or places as shall be determined by resolution of the
Committee, or in the absence of a resolution of the
Executive Committee with respect thereto, at such place or
places as may be determined by the Chief Executive
Officer. If notice is given at least three days prior to
the meeting of the Committee, notice may be given in any
of the ways set forth in Section 3:7, dealing with special
meetings of the Board of Directors. If less than three
days' notice is given, notice shall not be given by mail
but shall be given by one of the other methods described
in Section 3:7. With respect to any such notice, all the
provisions of Section 3:11 shall be equally applicable in
the case of notice of an Executive Committee meeting as
they are in the case of a notice of a meeting of the Board
of Directors. Meetings of the Executive Committee shall be
held at such place either within or without the States of
Missouri or Delaware as may be designated by a resolution
of the Board; or in the absence of such resolution, at
such place within the metropolitan St. Louis, Missouri
area as may be designated in the notice. Any such notice
may be waived in the same manner provided in Section 3:9
with respect to waiver of notice of a directors' meeting.
Executive Committee--Quorum and Powers of Majority.
SECTION 4:4. A majority of the members of the Executive
Committee shall constitute a quorum for the transaction of
business at any meeting of the Executive Committee. Unless
otherwise provided by the Board of Directors, a majority
of the members of the Executive Committee shall constitute
a quorum, and the acts of a majority of the members
present at a meeting at which a quorum is present shall be
the acts of the Executive Committee.
Executive Committee--Reporting.
SECTION 4:5. At each regular meeting of the Board of
Directors all actions taken by the Executive Committee
since the last prior meeting of the Board shall be
reported, and the Board shall take such action to approve
or rescind such action of the Executive Committee as the
Board may deem appropriate, but no rescission of such
action shall affect any rights which have attached
pursuant to such Executive Committee action.
If no regular meeting of the Board is scheduled within
seven days after the date of a meeting of the Executive
Committee, then no later than five days after such meeting
of the Executive Committee, the minutes thereof (even
though they may not as yet have been approved by the
Executive Committee) shall be deposited in the mail by the
Secretary addressed to each member of the Board at the
address on file with the Secretary pursuant to the
provisions of Section 3:11, provided that if any member of
the Board shall have failed to place an address on file
with the Secretary, such member shall be deemed to have
waived the right to receive a copy of the minutes of the
Executive Committee meeting.
Other Committees.
SECTION 4.6. Other Committees may be established, and
their members appointed, from time to time by the Board of
Directors. Such other committees shall have such
purpose(s) and such power(s) as the Board by resolution
may confer. Unless otherwise provided by the Board, a
majority of the members of such other Committee shall
constitute a quorum, and the acts of a majority of the
members present at a meeting at which a quorum is present
shall be the act of such other Committee.
ARTICLE V: OFFICERS
Appointment.
SECTION 5:1. The Board of Directors shall appoint from
its membership a Chairman of the Board and a President.
The Board shall appoint such number of Vice Presidents as
the Board may from time to time determine, a Controller, a
Secretary, a Treasurer, one or more Assistant Controllers,
one or more Assistant Secretaries, one or more Assistant
Treasurers and such other officers, as the Board may from
time to time deem necessary or appropriate. The Board of
Directors may appoint a Vice Chairman of the Board, but
the person holding that position shall not be considered
an officer of the corporation.
Tenure.
SECTION 5:2. Officers appointed by the Board of
Directors shall hold their respective offices for the term
of one year and until their respective successors shall
have been duly appointed and qualified; provided, however,
that any officer appointed by the Board may be removed by
the Board with or without a hearing and with or without
cause whenever in its judgment the best interests of the
corporation will be served thereby.
Salaries.
SECTION 5:3. The salaries of all officers of the
corporation shall be fixed by the Board of Directors.
Chief Executive Officer.
SECTION 5:4. So long as the offices of Chairman of the
Board and President are held by the same person, that
person shall be the Chief Executive Officer of the
corporation. Otherwise, the Chief Executive Officer shall
be the Chairman of the Board or the President, as
designated by the Board of Directors. The Chief Executive
Officer shall have general supervision and control over
all the business and property of the corporation and shall
be responsible at all times to the Board of Directors and
the Executive Committee. The Chief Executive Officer shall
also preside at all meetings of the stockholders. In the
event the Chief Executive Officer shall fail or for any
reason be unable to serve as such, the Board of Directors
shall promptly act to fill such vacancy.
Chairman of the Board.
SECTION 5:5. The Chairman of the Board shall preside as
chairman of all meetings of the Board of Directors at
which the Chairman shall be present and shall have such
other powers, responsibilities and duties as shall be
assigned by the Board.
President.
SECTION 5:6. The President shall have such powers,
responsibilities and duties as shall be assigned by the
Board of Directors.
Other Officers.
SECTION 5:7. Subject to the ultimate authority of the
Board of Directors, all other officers of the corporation
shall have such powers, responsibilities and duties as
shall be assigned to them from time to time by the Chief
Executive Officer.
ARTICLE VI: CAPITAL STOCK AND DIVIDENDS
Certificates for Shares.
SECTION 6:1. Certificates for shares of the capital
stock of the Company shall be in such form, not
inconsistent with the Certificate of Incorporation, as
shall be approved by the Board of Directors, and shall be
signed by the Chairman or Vice Chairman of the Board of
Directors or by the President or a Vice-President, and by
the Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer, provided that the signatures of
any such officers thereon may be facsimiles. The seal of
the corporation shall be impressed, by original or by
facsimile, printed or engraved, on all such certificates.
The certificate shall also be signed by the transfer agent
and a registrar and the signature of either the transfer
agent or the registrar may also be facsimile, engraved or
printed. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been
placed upon any such certificate shall have ceased to be
such officer, transfer agent or registrar before such
certificate is issued, such certificate may nevertheless
be issued by the corporation with the same effect as if
such officer, transfer agent, or registrar had not ceased
to be such officer, transfer agent, or registrar at the
date of its issue.
Stock Records.
SECTION 6:2. The corporation shall keep at its principal
office stock books in which shall be recorded the number
of shares issued, the names of the owners of the shares,
the number owned by them respectively, and the transfer of
such shares with the date of transfer.
Transfers.
SECTION 6:3. Certificates representing shares of stock
of the corporation shall be transferable only on the books
of the corporation by the person or persons named in the
certificate or by the attorney lawfully constituted in
writing representing such person or persons and upon
surrender of the certificate or certificates being
transferred which certificate shall be properly endorsed
for transfer or accompanied by a duly executed stock
power. Whenever a certificate is endorsed by or
accompanied by a stock power executed by someone other
than the person or persons named in the certificate,
evidence of authority to transfer shall also be submitted
with the certificate. All certificates surrendered to the
corporation for transfer shall be cancelled.
Regulations Governing Issuance and Transfers of Shares.
SECTION 6:4. The Board of Directors shall have the power
and authority to make all such rules and regulations as it
shall deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the
corporation.
Transfer Agents and Registrars.
SECTION 6:5. Transfer agents and registrars for the
corporation's stock shall be banks, trust companies or
other financial institutions located within or without the
State of Delaware as shall be appointed by the Board of
Directors. The Board shall also define the authority of
such transfer agents and registrars.
Lost or Destroyed Certificates.
SECTION 6:6. Where a certificate for shares of the
corporation has been lost or destroyed, the Board of
Directors may authorize the issuance of a new certificate
in lieu thereof upon satisfactory proof of such loss or
destruction, and upon the giving of an open penalty bond
with surety satisfactory to the corporation's General
Counsel and Treasurer, to protect the corporation or any
person injured by the issuance of the new certificate from
any liability or expense which it or they may incur by
reason of the original certificate's remaining outstanding,
and upon payment of the corporation's reasonable costs
incident thereto.
Fractions of Shares.
SECTION 6:7. The corporation shall not issue fractions
of a share. It shall, however, (1) arrange for the
disposition of fractional interests by those entitled
thereto, and (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive
such fractions are determined, or (3) issue scrip or
warrants in registered or bearer form which shall entitle
the holder to receive a certificate for a full share upon
the surrender of such scrip or warrants aggregating a full
share. Scrip or warrants shall not, unless otherwise
provided therein, entitle the holder to exercise voting
rights, to receive dividends thereon, or to participate in
any of the assets of the corporation in the event of
liquidation. The Board of Directors may cause scrip or
warrants to be issued subject to the conditions that the
shares for which scrip or warrants are exchangeable may be
sold by the corporation and the proceeds thereof
distributed to the holders of scrip or warrants, or
subject to any other conditions which the Board may impose.
Determination of Stockholders.
SECTION 6:8. The corporation shall be entitled to treat
the holder of record of any share or shares of stock as
the holder in fact thereof, and shall not be bound to
recognize any equitable or other claim to or interest in
such share or shares on the part of any other person,
whether or not it shall have express or other notice
thereof, save as expressly provided by the laws of the
State of Delaware.
Record Date.
SECTION 6:9. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or to
express consent in writing without a meeting, or entitled
to receive payment of any dividend or other distribution
or allotment or any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the
Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days
prior to any other action. If no record date is fixed:
(1) The record date for determining stockholders
entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the
day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting
is held.
(2) The record date for determining stockholders
for any other purpose shall be at the close of
business on the day on which the Board adopts the
resolution relating thereto.
A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the
adjourned meeting.
ARTICLE VII: MISCELLANEOUS
Voting Shares in Other Corporations.
SECTION 7:1. The corporation may vote any and all shares
of stock and other securities having voting rights which
may at any time and from time to time be held by it in any
other corporation or corporations and such vote may be
cast either in person or by proxy by such officer of the
corporation as the Board of Directors may appoint or, in
default of such appointment, the Chief Executive Officer,
the President or a Vice President.
Execution of Other Papers and Documents.
SECTION 7:2. All checks, bills, notes, drafts,
vouchers, warehouse receipts, bonds, mortgages, contracts,
registration certificates and all other papers and
documents of the corporation shall be signed or endorsed
for the corporation by such of its officers, other
employees and agents as the Board of Directors may from
time to time determine, or in the absence of such
determination, by the Chief Executive Officer, the
President or a Vice President, provided that instruments
requiring execution with the formality of deeds shall
be signed by the Chief Executive Officer, the President or
a Vice President and impressed with the Seal of the
corporation, duly attested by the Secretary or an Assistant
Secretary.
Corporate Seal.
SECTION 7:3. The Board of Directors shall provide a
suitable seal, containing the name of the corporation,
which seal shall be in the custody of the Secretary of the
corporation, and may provide for one or more duplicates
thereof to be kept in the custody of such other officer of
the corporation as the Board may prescribe.
Amendments.
SECTION 7:4. These By-Laws may be amended or repealed,
or new By-Laws may be adopted (a) by the affirmative vote
of a majority of the shares issued and outstanding and
entitled to vote at any annual or special meeting of
stockholders, or (b) by the affirmative vote of the
majority of the Board of Directors at any regular or
special meeting; provided that the notice of such meeting
of stockholders or directors, whether regular or special,
shall specify as one of the purposes thereof the making of
such amendment or repeal, and provided further that any
amendment of the By-Laws made by the Board may be further
amended or repealed by the stockholders.
Books and Records.
SECTION 7:5. Except as the Board of Directors may from
time to time direct or as may be required by law, the
corporation shall keep its books and records at its
principal office.
March 19, 1998
Boatmen's Trust Company, as Rights Agent
510 Locust Street
St. Louis, Missouri 63101
ChaseMellon Shareholder Services, L.L.C. as Successor Rights Agent,
200 North Broadway, Suite 1722
St. Louis, Missouri 63102
Re: Successor Rights Agent
Ladies and Gentlemen:
Pursuant to Section 21 of the Rights Agreement by and between
Anheuser-Busch Companies, Inc. and Boatmen's Trust Company dated
October 26, 1994 (the "Agreement") by execution and delivery of
this letter agreement, Boatmen's Trust Company hereby resigns as
Rights Agent under the Agreement, ChaseMellon Shareholder
Services, L.L.C. (the "Successor Agent") is hereby appointed
successor rights agent under the Agreement and the Successor
Agent hereby accepts such appointment.
Furthermore, the Agreement is amended as follows:
(a) Section 2 hereby modified and amended by deleting: "as
agent for the Company and the holders of the Rights (who, in
accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock)"
and replacing it with: "as rights agent hereunder."
(b) The second sentence in Section 3(b) is hereby modified and
amended by deleting: "and shall bear the following legend"
and replacing it with: "and shall bear a legend
substantially to the following effect."
(c) Section 21 of the Rights Agreement is hereby modified and
amended by deleting the fifth sentence in its entirety and
replacing it with: "Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be either
(a) a corporation organized and doing business under the
laws of the United States or of any state of the United
States, in good standing, which is authorized under such
laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100,000,000 or (b)
an Affiliate of such a corporation."
(d) All provisions of the Agreement not amended hereby shall
remain in full force and effect.
(e) This letter agreement shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the
laws of such State applicable to contracts made and to be
performed entirely within such State.
(f) This letter agreement may be executed in any number of
counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
In executing this letter agreement, the Successor Agent shall be
entitled to all the privileges and immunities afforded to the
Rights Agent and assumes all obligations of the Rights Agent
under the terms and conditions of the Agreement.
ANHEUSER-BUSCH COMPANIES, INC.
By: /s/ Stephen K. Lambright
-------------------------------------
Title: Group Vice President and General
Counsel
BOATMEN'S TRUST COMPANY,
as Rights Agent
By: /s/ Jerry L. Rector
--------------------------------------
Title: Vice President
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
as Successor Rights Agent
By: /s/ H. Eugene Bradford
--------------------------------------
Title: Vice President
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
(CONTINUING OPERATIONS)
The following table sets forth the Company's ratio of earnings to
fixed charges, on a consolidated basis, for the periods indicated:
Year Ended December 31,
- -----------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
6.8X 7.3X 8.1X 1/ 6.6x 2/ 7.7X 5.8X 3/
For purposes of this ratio, earnings have been calculated by adding
to income before income taxes the distributed earnings of investees
accounted for under the equity method and the amount of fixed charges.
Fixed charges consist of interest on all indebtedness, amortization
of debt discount and that portion of rental expense deemed to represent
interest.
1/ The ratio for 1996 includes the gain from the sale of the St. Louis
Cardinals, which increased income before income taxes by $54.7 million.
Excluding the one-time gain, the ratio would have been 7.9X.
2/ The ratio for 1995 includes the impact of the Tampa Brewery
shutdown and the reduction of beer wholesaler inventories. Excluding
these non-recurring items, the ratio would have been 7.6X.
3/ Includes the impact of the one-time, pretax restructuring charge
of $401.3 million for the company's Profitability Enhancement Program.
Excluding the non-recurring special charge, the ratio would have been 7.5X.
<PAGE>
[PHOTO]
INVESTING IN OUR FUTURE:
--------------------
> FINANCIAL REVIEW
--------------------
OUR OBJECTIVES TO ENHANCE SHAREHOLDER VALUE ARE TO INCREASE OUR SHARE OF
DOMESTIC BREWING INDUSTRY PROFITABILITY, CONTINUE THE GLOBALIZATION OF BEER
OPERATIONS, AND SUPPORT PROFIT GROWTH IN ENTERTAINMENT AND PACKAGING
OPERATIONS.
[A-B STOCK CUMULATIVE TOTAL RETURN GRAPH]
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Management's Discussion and Analysis
of Operations and Financial Condition 34
Responsibility for Financial Statements 49
Report of Independent Accountants 49
Consolidated Balance Sheet 50
Consolidated Statement of Income 51
Consolidated Statement of Changes
in Shareholders Equity 52
Consolidated Statement of Cash Flows 53
Notes To Consolidated
Financial Statements 54
Financial Summary--Operations 74
Financial Summary--Balance Sheet
and Other Information 76
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 33
<PAGE> 2
MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS & FINANCIAL CONDITION
INTRODUCTION
This discussion summarizes the significant factors affecting the consolidated
operating results, financial condition and liquidity/cash flows of
Anheuser-Busch Companies, Inc. for the three-year period ended December 31,
1998. This discussion should be read in conjunction with the Letter to
Shareholders, Consolidated Financial Statements and Notes to the Consolidated
Financial Statements included in this annual report.
This discussion contains statements regarding the company's
expectations concerning its operations, earnings and prospects. These
statements are forward-looking statements that involve significant risks and
uncertainties, and accordingly, no assurances can be given that such
expectations will be correct. These expectations are based upon many
assumptions that the company believes to be reasonable, but such assumptions
may ultimately prove to be inaccurate or incomplete, in whole or in part.
Important factors that could cause actual results to differ from the
expectations stated in this discussion include, among others, changes in the
pricing environment for the company's products; factors that may affect
domestic demand for malt beverage products; changes in customer preference
for the company's malt beverage products; regulatory or legislative changes;
changes in raw materials prices; changes in interest rates; changes in
foreign currency exchange rates; changes in attendance and consumer spending
patterns for the company's theme park operations; changes in demand for
aluminum beverage containers; changes in the company's international beer
business or in the beer business of the company's international equity
partners; and the effect of stock market conditions on the company's share
repurchase program.
OBJECTIVES
Anheuser-Busch remains focused on achieving three major objectives in future
years in order to enhance shareholder value:
1. Gaining an increased share of brewing industry profits in the United
States by increasing unit profitability and market share in the longer term.
2. Continued globalization of beer operations by building the Budweiser
brand worldwide and making selected investments in leading brewers in key
international beer growth markets. The company has made significant marketing
investments to build Budweiser brand recognition outside the United States
and owns overseas breweries in China and the United Kingdom. In September
1998, the company increased its equity stake in Grupo Modelo's operating
subsidiary, Diblo, to 50.2%. The company's total investment in Grupo Modelo
is $1.6 billion at December 31, 1998.
3. Continued support of profit growth in existing packaging and
entertainment operations. Metal Container Corporation, the company's can
manufacturing subsidiary, provides significant efficiencies, cost savings and
quality assurance for domestic beer operations. The company continues to
invest in packaging technology, capacity improvements and quality driven cost
reductions. The company's Busch Entertainment adventure park subsidiary is a
significant contributor to corporate earnings and provides Anheuser-Busch
with a unique opportunity to showcase its heritage, values and commitment to
quality and social responsibility to over 20 million visitors annually.
CONTINUING OPERATIONS
Financial results for 1997 and 1996 were impacted by certain nonrecurring
events which make meaningful comparisons among 1998, 1997 and 1996 more
difficult. Those events are discussed below:
1. In March 1996, the company completed the sale of the St. Louis
Cardinals which included Busch Memorial Stadium and several nearby parking
garages and other properties in downtown St. Louis. The sale price was $150
million, resulting in a $54.7 million pretax gain ($.06 per share after-tax)
which is shown as a separate line item in the income statement.
2. In June 1996, Anheuser-Busch completed the sale of most of its Eagle
Snacks production facilities to Frito-Lay, a subsidiary of PepsiCo.
Accordingly, the company adjusted its previously estimated loss provision for
the disposition of its food products segment and recognized a $33.8 million
after-tax gain ($.07 per share) in the second quarter 1996. This gain is
reported entirely in discontinued operations and has no impact on financial
results from continuing operations.
34 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 3
3. In the fourth quarter 1997, the company expensed all previously
capitalized and unamortized business reengineering costs associated with the
development and installation of computer software, in accordance with the
change in accounting practice mandated by EITF No. 97-13. The total write-off
was $10 million after-tax ($.02 per share), is shown as a separate
"cumulative effect of accounting change" line item in the income statement
and had no impact on the company's results from operations.
In order to facilitate a more complete and meaningful understanding of
company operating results, key financial comparisons are presented in the
following summaries and throughout this discussion on a "normalized"
continuing operations basis only, which excludes the nonrecurring
transactions discussed above.
Key financial comparisons from normalized continuing operations are
summarized in the following tables.
<TABLE>
COMPARISON OF OPERATING RESULTS
<CAPTION>
1998 VS. 1997 (IN MILLIONS, EXCEPT PER SHARE)
- -----------------------------------------------------------------------------------------------------------
1998 VS. 1997
----------------------------------------------------------
1998 1997 $ %
----------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Sales $13,208 $12,832 Up $376 Up 2.9%
Excise Taxes $1,962 $1,766 Up $196 Up 11.1%
Net Sales $11,246 $11,066 Up $180 Up 1.6%
Operating Income $2,125 $2,053 Up $72 Up 3.5%
Equity Income, Net of Tax $85 $50 Up $35 Up 68.7%
Income from Continuing Operations $1,233 $1,179 Up $54 Up 4.6%
Diluted Earnings Per Share from
Continuing Operations $2.53 $2.36 Up $.17 Up 7.2%
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
1997 VS. 1996 (IN MILLIONS, EXCEPT PER SHARE)
- -----------------------------------------------------------------------------------------------------------
1997 1996 1997 VS. 1996
----------------------------------------------------------
NORMALIZED
OPERATIONS $ %
----------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Sales $12,832 $12,622 Up $210 Up 1.7%
Excise Taxes $1,766 $1,738 Up $28 Up 1.6%
Net Sales $11,066 $10,884 Up $182 Up 1.7%
Operating Income $2,053 $2,029 Up $24 Up 1.2%
Equity Income, Net of Tax $50 -- Up $50 N/M
Income from Continuing Operations $1,179 $1,123 Up $56 Up 5.0%
Diluted Earnings Per Share from
Continuing Operations $2.36 $2.21 Up $.15 Up 6.8%
- -----------------------------------------------------------------------------------------------------------
N/M--Not Meaningful
<CAPTION>
1996 VS. 1995 (IN MILLIONS, EXCEPT PER SHARE)
- -----------------------------------------------------------------------------------------------------------
1996 1995 1996 VS. 1995
----------------------------------------------------------
NORMALIZED NORMALIZED
OPERATIONS OPERATIONS $ %
----------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Sales $12,622 $12,131 Up $491 Up 4.0%
Excise Taxes $1,738 $1,683 Up $55 Up 3.3%
Net Sales $10,884 $10,448 Up $436 Up 4.2%
Operating Income $2,029 $1,867 Up $162 Up 8.7%
Income from Continuing Operations $1,123 $1,032 Up $91 Up 8.8%
Diluted Earnings Per Share from
Continuing Operations $2.21 $1.99 Up $.22 Up 11.1%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 35
<PAGE> 4
> MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS & FINANCIAL CONDITION
SALES AND BEER VOLUME
Total worldwide beer sales volume results are summarized in the following
table:
<TABLE>
<CAPTION>
WORLDWIDE BEER SALES VOLUME (BARRELS IN MILLIONS)
- -----------------------------------------------------------------------------------------------------------------------
1998 1997 CHANGE 1997 1996 CHANGE 1996 1995 CHANGE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic 92.7 89.6 Up 3.5% 89.6 88.9 Up 0.7% 88.9 85.5 Up 4.0%
International 7.1 7.0 Up 0.6% 7.0 6.2 Up 13.4% 6.2 5.4 Up 15.5%
---------------------------------------------------------------------------------------------
Worldwide
A-B Brands 99.8 96.6 Up 3.3% 96.6 95.1 Up 1.6% 95.1 90.9 Up 4.7%
International
Equity Partner
Brands 11.2 6.8 Up 64.9% 6.8 4.0 Up 70.7% 4.0 3.7 Up 8.1%
---------------------------------------------------------------------------------------------
Total Brands 111.0 103.4 Up 7.3% 103.4 99.1 Up 4.3% 99.1 94.6 Up 4.8%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
[SALES GRAPH]
WORLDWIDE BEER VOLUME
Worldwide Anheuser-Busch beer volume is comprised of domestic volume
and international volume of Anheuser-Busch brands. Domestic volume represents
A-B brands produced and shipped within the United States. International
volume represents exports from the company's U.S. breweries to markets around
the world, plus Anheuser-Busch brands produced overseas by company-owned
breweries in China and the United Kingdom and under license and contract
brewing agreements. Budweiser and other Anheuser-Busch beer brands are sold
in more than 80 countries worldwide. Total volume includes the company's pro
rata share of volume in international equity partners Grupo Modelo and
Antarctica combined with worldwide Anheuser-Busch brand volume.
1998 VS. 1997
Anheuser-Busch achieved record gross sales of $13.2 billion and record net
sales of $11.2 billion in 1998. These results represent a gross sales
increase over 1997 of $376 million, or 2.9%, and a net sales increase over
1997 of $180 million, or 1.6%. The increases are primarily due to higher
domestic beer volume. For 1998, sales and excise taxes include the impact of
accounting for the Stag Brewery operations in the United Kingdom on a
consolidated basis vs. equity accounting in 1997. The difference between
gross and net sales for 1998 represents beer excise taxes of $2.0 billion.
Worldwide volume for Anheuser-Busch beer brands was up 3.3% for 1998,
compared to the prior year. Total volume, which combines equity volume
(representing the company's share of its foreign equity partner barrelage)
with worldwide Anheuser-Busch brand volume, was up 7.6 million barrels, or
7.3%, for the year. International equity partner brands reflects the
company's 37% ownership interest in Grupo Modelo brands for the first nine
months of 1998 and 50.2% for the fourth quarter, compared to a combination of
17.7% ownership interest for the first five months of 1997 and 37%
thereafter.
Anheuser-Busch's strategy to reduce domestic price discounting
initiated at the beginning of 1998 was successful. This strategy was designed
to increase revenues, reduce the spread between front-line and discounted
prices to consumers, and protect the company's brand equities. In October
1998, the company initiated a revenue enhancement strategy of selective price
increases and additional discount reductions based on a market-by-market
assessment of competitive conditions. As a result of these and other actions,
domestic revenue per barrel was up nearly 3% in the fourth quarter 1998
compared to the same period last year, and was level for the full year
compared to 1997. This improved pricing environment, along with good volume
growth trends, are expected to support accelerated revenue and profit growth
in 1999.
36 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 5
Anheuser-Busch domestic beer shipments grew 3.5% during 1998,
reflecting strong retail demand. Overall, sales-to-retailers were up 4% for
the year. Combined Bud and Bud Light sales-to-retailers increased 3.4% for
1998 compared to 1997, the best performance this decade. This growth was led
by Bud Light, which had its seventh consecutive double-digit growth year.
The company's domestic market share (excluding exports) for 1998 was
46.4%, an increase of 0.8 market share points over 1997 market share of 45.6%.
Including exports, the company's share of U.S. shipments was 46.2% vs. 45.4%
for 1997. Domestic market share and share of U.S. shipments are determined
based on industry sales estimates provided by the Beer Institute.
Anheuser-Busch has led the U.S. brewing industry in sales volume and market
share since 1957.
International Anheuser-Busch brand volume (excluding equity partner
brands) was up 0.6% in 1998 compared to last year. Strong Budweiser sales
performances in the United Kingdom, Ireland, Continental Europe and Canada
were mostly offset by sales declines in Asia.
In Japan, Anheuser-Busch performance has been impacted by lower
industry sales due to the current economic recession and introduction of a
tax-advantaged "happoshu" beer category. Anheuser-Busch has introduced its
own happoshu beer to participate in this growing segment and completed a
significant restructuring of its sales force. The restructuring resulted in a
one-time pretax charge of $8.6 million, or $.01 per share after-tax, in the
fourth quarter 1998. The restructuring will result in significantly lower
costs and should lead to improved performance in 1999.
In June 1998, the company restructured its alliance granting Labatt
Brewing Company perpetual rights to brew and sell the Budweiser and Bud Light
brands in Canada. In return, Labatt will significantly increase marketing
support behind the two brands and provide Anheuser-Busch with
a greater share of associated profits. Budweiser is currently the
third-largest-selling beer in Canada.
During the second quarter of 1998, the company completed its expansion
of the Wuhan brewery in China. The expansion doubles Wuhan's capacity,
bringing it to 2.1 million barrels. The company is also expanding its brewery
in London which will increase capacity to 1.9 million barrels when completed
in 1999.
1997 VS. 1996
Gross sales were $12.8 billion and net sales were $11.1 billion in 1997,
representing increases of $210 million and $182 million, respectively, or
1.7%, compared to 1996. The difference between gross and net sales for 1997
represents $1.77 billion of beer excise taxes.
The primary factors responsible for the sales increases were higher
domestic and international beer sales volume, partially offset by increased
price discounting in the domestic beer market, and increased sales from the
company's theme park operations. Theme park operations experienced an
attendance increase of approximately 7% in 1997 vs. 1996, to nearly 21
million visitors, and also attained higher in-park per capita revenues.
The increase in domestic volume during 1997 was driven by Bud Light,
which was up approx-imately 10%, and improved Budweiser trends. Total Bud
Family sales-to-retailers were up almost 2% in 1997 compared to 1996.
Anheuser-Busch's domestic market share (excluding exports) for 1997 was
45.6%, compared to 45.5% in 1996.
Anheuser-Busch's domestic market share (excluding exports) for 1997
was 45.6%, compared to 45.5% in 1996. Anheuser-Busch's share of shipments
(including exports) for 1997 was 45.4%, up slightly compared with 1996 share.
Operating performance for 1997 was significantly impacted by aggressive
price discounting initiated by competition, which began in the first quarter
and became progressively deeper throughout the year. Anheuser-Busch responded
with comparable levels of discounting to keep its brands price-competitive
and protect its market share, and the pricing environment had stabilized by
the end of the year.
Volume trends were favorable for the company's core premium brands in
1997 as consumers traded up to premium and higher-priced brands. Bud Light
continued its double-digit growth. The company's quality initiatives,
including a freshness advertising campaign and a renewed focus on
Anheuser-Busch's 145 year heritage of quality and excellence, enhanced the
company's quality perception among consumers.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 37
<PAGE> 6
> MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS & FINANCIAL CONDITION
Total international beer volume growth was strong for 1997, led by
combined Budweiser sales volume increases in China and the United Kingdom of
44% for the full year. Significant gains in volume produced overseas in 1997
were partially offset by reduced exports from the company's U.S. facilities
due in part to discontinuing Kirin Ice shipments to Japan and lower shipments
of Michelob Classic Dark to Taiwan.
Total international volume, excluding equity partner volume, was up
13.4% for the year. Budweiser volume outside the United States was up 18.3%
for 1997 vs. 1996.
1996 VS. 1995
Anheuser-Busch had gross sales during 1996 of $12.6 billion, an increase of
$491 million, or 4.0%, over 1995 gross sales of $12.1 billion. Gross sales
include $1.74 billion in federal and state beer excise taxes for 1996. Net
sales for 1996 were $10.9 billion, an increase of $436 million, or 4.2%, over
1995 net sales of $10.4 billion.
The increase in gross and net sales in 1996 was driven primarily by
increased beer sales volume, higher net revenue per barrel and higher theme
park revenues.
Beer volume in 1995 was negatively impacted by a reduction in beer
wholesaler inventory levels. Excluding the inventory reduction, 1996 beer
volume would have increased 2.3 million barrels, or 2.7%, over 1995. During
1996, Anheuser-Busch's core premium and super-premium brands (the Budweiser
and Michelob Families) gained momentum, with Bud Light growing at an
annualized double-digit pace. Overall, Bud Family sales were up almost 4%.
Domestic market share (excluding exports) was 45.5% in 1996, compared
to 44.7% in 1995, an increase of 0.8 market share points. Including exports,
the company's share of U.S. shipments in 1996 was 45.3%, an increase of 1.2
share points compared to 1995 share of 44.1%. Excluding the impact of the
wholesaler inventory reduction, Anheuser-Busch's share of 1995 U.S. shipments
would have been 44.4%.
The company's international beer volume was up 15.5% in 1996 compared
to 1995, led by Budweiser sales expansion in the United Kingdom, Ireland and
Japan. However, profit contribution was down slightly in 1996 compared to
1995 due to substantially higher investment spending on marketing for global
Budweiser brand building and having a full year of operating results (losses)
for the Wuhan brewery included in 1996 vs. only partial year results in 1995.
COST OF PRODUCTS AND SERVICES
The company strives to continuously drive operating costs out of its system.
Brewery modernizations yield long-term savings through reduced beer packaging
and shipping costs and reduced maintenance and equipment replacement costs.
The company's focused production initiative and wholesaler support centers
concentrate small-volume brand and package production at three breweries to
create production efficiencies, reduce costs and enhance responsiveness to
changing consumer brand/ package preferences. Also, the company is working
with its network of wholesalers to reduce distribution costs through
systemwide coordination.
Cost of products and services was $7.16 billion in 1998, an increase of
$66 million, or 0.9%, compared to 1997. The change in costs of products and
services in 1998 is primarily due to increased beer volume, the change in the
method of accounting for the Stag Brewery operation (consolidation in 1998
vs. equity accounting in 1997) and improved brewery operating efficiencies.
In 1997, before the Stag Brewing Company Ltd. was 100% owned by
Anheuser-Busch, the company accounted for its 50% share of the operations
under the equity method and excise taxes paid on beer sold were included in
the cost of beer purchased from Stag. In 1998, under full consolidation
accounting, excise taxes are shown as a deduction from gross sales.
38 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 7
Gross profit as a percentage of net sales was 36.3% for 1998, an
increase of 0.4 percentage points vs. 1997, primarily reflecting productivity
improvements.
Cost of products and services in 1997 was $7.10 billion, an increase of
1.9% compared to 1996. The increase in cost of products and services in 1997
is attributable to slightly higher materials costs plus costs associated with
increased beer sales volume and theme park attendance. Gross profit as a
percentage of net sales was 35.9% for 1997, a decrease of 0.1 percentage
points compared to 36.0% for 1996, due to slightly lower revenue per barrel
in 1997.
Cost of products and services for 1996 was $6.96 billion, a 2.1%
increase over the $6.82 billion reported for 1995. The increase in the cost
of products and services in 1996 is attributable to increased beer sales
volume and increased raw materials costs, particularly brewing materials,
partially offset by increased production efficiency savings and lower scrap
aluminum prices related to recycling operations. Gross profit as a percentage
of net sales in 1996 increased 1.3 percentage points, compared to 34.7% for
1995.
MARKETING, DISTRIBUTION AND ADMINISTRATIVE EXPENSES
Marketing, distribution and administrative expenses for 1998 were $1.96
billion, an increase of $42 million, or 2.2% compared to 1997. The increase
is primarily due to higher domestic and international marketing expense in
support of premium brands, primarily the Bud Family, partially offset by
reduced general and administrative costs.
Marketing, distribution and administrative expenses for 1997 were $1.92
billion, compared with $1.89 billion for 1996, an increase of $26 million, or
1.4%. The increase for 1997 is principally due to marketing costs related to
the company's international beer activity, costs related to increased theme
park attendance, additional costs due to an increase in the number of
company-owned beer wholesale operations and increased administrative
expenses, partially offset by lower promotional spending compared to 1996
when the Summer Olympic Games were held in Atlanta. Marketing, distribution
and administrative expenses for 1996 increased 7.6% compared to 1995,
due primarily to sponsorship of the Olympics, increased spending to support
accelerated volume growth for premium brands and global Budweiser
brand-building initiatives.
OPERATING INCOME
Operating income represents the measure of the company's financial
performance before net interest cost, other nonoperating items and equity
income.
Operating income for 1998 was $2.13 billion, an increase of $72
million, or 3.5%, over last year. The increase in operating income for the
year is primarily due to higher domestic beer sales volume and higher
operating results from can manufacturing and entertainment, partially offset
by weaker results from international beer operations.
Packaging operations generated approximately $150 million in operating
income in 1998, a significant improvement vs. the prior year, due to higher
soft drink can volume and reduced costs. Despite weakness in Florida tourism,
entertainment operations had a slight improvement in operating income
compared to 1997, due to higher in-park spending. International beer
operating income declined vs. 1997 primarily due to weakness in Japan.
Operating income for 1997 was $2.05 billion, an increase of $24
million, or 1.2%, compared to 1996. The increase was primarily due to
increased beer sales volume, continued brewery operating efficiencies and
improved performance by the company's theme park operations. Domestic revenue
per barrel for 1997 was down slightly vs. the 1996 level. Entertainment
operations had strong attendance and profitability and contributed $115
million in operating income in 1997. Total attendance at Busch Entertainment
facilities was up approximately 7% compared to 1996, to nearly 21 million
visitors. International beer profitability was down in 1997 compared to 1996
primarily due to continued significant marketing expenditures for Budweiser.
Packaging operations contributed $121 million in operating profits in 1997,
down slightly when compared with 1996 performance.
[OPERATING INCOME GRAPH]
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 39
<PAGE> 8
> MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS & FINANCIAL CONDITION
Operating income for 1996 was $2.03 billion, an increase of $162
million, or 8.7%, compared to 1995. The increase in 1996 operating income was
due primarily to higher beer sales volume and higher beer margins due to
increased revenue per barrel and productivity improvements, which generated
nearly $100 million in cost savings vs. 1995. Metal Container Corporation
reported flat profits during 1996 vs. 1995 primarily due to weaker soft drink
can pricing. Profit contribution from international beer operations was down
somewhat in 1996 compared to 1995 due to substantially higher investment
spending on marketing for global Budweiser brand building and having a full
year of operating results (losses) for the Wuhan brewery included in 1996 vs.
only partial year results in 1995.
NET INTEREST COST
Net interest cost (interest expense less interest income) was $285.7 million
for 1998, $253.3 million for 1997 and $223.4 million in 1996, representing
increases of 12.8%, 13.4% and 3.4% compared to prior years. The increases in
1998 and 1997 reflect higher average outstanding debt balances during the
years, primarily due to increasing the company's Grupo Modelo investment. The
increase in 1996 was due to higher average debt balances outstanding during
the period, primarily as a result of financing capital expenditures and share
repurchases, partially offset by lower average interest rates.
INTEREST CAPITALIZED
Interest capitalized declined $16.1 million in 1998, to $26.0 million, due to
lower construction-in-progress balances resulting from reduced capital
expenditures as the company completes its brewery modernization projects.
Interest capitalized increased $6.6 million in 1997 compared to 1996, to
$42.1 million, after an increase of $11.2 million, to $35.5 million in 1996.
The increases in 1997 and 1996 were due primarily to higher construction-in-
progress levels resulting from ongoing brewery modernization projects.
OTHER INCOME/EXPENSE, NET
Other income/expense, net includes numerous items of a nonoperating nature
that do not have a material impact on the company's consolidated results of
operations, either individually or in total.
The company had net other expense of $13.0 million in 1998, compared to
expense of $9.3 million in 1997. Other expense, net for 1997 represented an
increase of $6.3 million compared to 1996, primarily attributable to the
elimination of dividend income reporting for the Grupo Modelo investment due
to the adoption of equity accounting in the second quarter 1997. Other
expense, net was $3.0 million in 1996, a decline of $23.5 million vs. 1995.
This change was primarily due to the reclassification of certain purchase
discounts from other income/expense, net to cost of products and services.
EQUITY INCOME, NET
In 1997, the company began recognizing its pro rata equity interest in the
net earnings of Grupo Modelo and Antarctica under the equity method of
accounting, as a separate line item in the income statement. The company
recognized equity income, net of tax, of $85.0 million during 1998, compared
to $50.3 million in 1997. The increase in equity income is due to the
company's larger equity stake in Grupo Modelo and the strong underlying sales
volume and operating results for Modelo, partially offset by hyperinflation
accounting.
For 1998, equity income reflects the company's 37% share of net
earnings of Modelo for the first nine months (December 1997 through August
1998 reported on a one-month-delay basis) and its 50.2% ownership in the
fourth quarter. This compares with 17.7% ownership for the first five months
of 1997 (January through May 1997, consistent with the initial adoption of
the equity method of accounting) and a 37% ownership interest thereafter.
40 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 9
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations was $1.23 billion in 1998, an increase of
$54 million or 4.6% vs. 1997. Income from continuing operations was $1.18
billion for 1997, an increase of $56 million, or 5.0%, compared to 1996
income from continuing operations of $1.12 billion, which was an increase of
8.8% compared to 1995.
The company's effective tax rate was 38.0%, 38.4% and 38.9% in 1998,
1997 and 1996, respectively. The declines in 1998 and 1997 are principally
due to lower state and foreign taxes and lower nondeductible costs. The
effective rate in 1996 declined from a normalized 1995 rate of 39.1% due to
lower state taxes and lower nondeductible costs.
DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Diluted earnings per share from continuing operations were $2.53 for 1998, an
increase of 7.2% vs. 1997. Diluted earnings per share for 1997 were $2.36, an
increase of $.15, or 6.8%, compared to $2.21 in 1996. Diluted earnings per
share for 1996 increased $.22, or 11.1%, compared to 1995. Diluted earnings
per share benefit from the company's ongoing share repurchase program.
See Note 8 for additional information regarding share repurchases.
[DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS GRAPH]
EMPLOYEE-RELATED COSTS
Employee-related costs totaled $1.84 billion in 1998, an increase of $46
million, or 2.6%, vs. 1997 costs of $1.79 billion. Employee-related costs
during 1997 increased $10 million, or 0.5%, vs. 1996 costs of $1.78 billion.
These costs increased $46 million, or 2.6%, in 1996 compared to 1995. The
changes in employee-related costs reflect normal increases in salaries, wages
and benefit levels, partially offset by lower combined pension and retiree
medical expenses.
Salaries and wages paid comprise the majority of employee-related costs
and totaled $1.52 billion in 1998, an increase of $40 million, or 2.7% vs.
1997. Salaries and wages totaled $1.48 billion in 1997, an increase of $31
million, or 2.1%, compared to $1.45 billion paid in 1996. The 1996 amount
represents an increase of 5.0% vs. 1995. The remainder of employee-related
costs consists of pension, life insurance, and health care benefits and
payroll taxes.
Full-time employees numbered 24,344, 24,326 and 25,123 at December 31,
1998, 1997 and 1996, respectively.
[TOTAL EMPLOYEE-RELATED COSTS GRAPH]
TAXES
The company is significantly impacted by federal, state and local taxes,
including beer excise taxes. Taxes applicable to 1998 operations (not
including the many indirect taxes included in materials and services
purchased) totaled $2.89 billion, an increase of $216 million, or 8.1%, vs.
1997 total taxes of $2.67 billion, and highlight the burden of taxation on
the company and the brewing industry in general. Taxes in 1997 decreased 0.3%
compared to 1996 total taxes of $2.68 billion, which increased $241 million,
or 9.9%, compared to 1995. Total taxes include the impact of all nonrecurring
events and transactions.
The increase in taxes in 1998 is due to higher excise taxes on
increased beer volume and the full consolidation of Stag operations. The
decrease in 1997 compared to 1996 is primarily attributable to reduced income
taxes due to lower pretax income and a lower effective tax rate. The increase
for 1996 compared to 1995 is primarily due to higher beer excise taxes from
increased beer volume and higher income taxes on higher pretax earnings.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 41
<PAGE> 10
> MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS & FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The company's primary sources of liquidity are cash provided from operations
and financing acti-vities. Information on the company's consolidated cash
flows (categorized by operating activities, financing activities and
investing activities) for the years 1998, 1997 and 1996 is presented in the
statement of cash flows and Note 12.
OPERATING CASH FLOW
Anheuser-Busch's strong financial profile allows it to pursue growth while
providing substantial direct returns to shareholders. Accordingly, the
company has established well-defined priorities for its operating cash flow:
* Reinvesting in core businesses to achieve profitable growth. To
enhance shareholder value, the company will continue to make investments in
its existing operations and make selected investments in international
brewers.
* Making substantial cash payments directly to shareholders. The
company's objective is to return cash to shareholders through consistent
dividend growth and the repurchase of approximately 3% to 4% of outstanding
common shares each year. The company has paid cash dividends each of the last
65 years.
Net working capital at December 31, 1998 was $(89.9) million compared
to working capital of $83.2 million at December 31, 1997 and $34.9 million at
December 31, 1996. Cash and marketable securities were $224.8 million at
December 31, 1998, $147.3 million at December 31, 1997 and $93.6 million at
December 31, 1996.
Changes in cash and marketable securities for 1998 and 1997 were
primarily due to cash generated from operations and debt issuance, partially
offset by cash used for capital expenditures, share repurchases, dividends
and business investments. Cash flow for 1996 is attributable to these same
factors plus one-time proceeds from the sale of the assets of Eagle Snacks,
Inc., the sale of the Cardinals and a spin-off-related dividend from
Earthgrains.
[CASH FLOW FROM CONTINUING OPERATIONS GRAPH]
CAPITAL EXPENDITURES
During the next five years, the company will continue capital
expenditure programs designed to take advantage of growth and productivity
improvement opportunities for its beer, packaging and entertainment
operations. Due to approaching completion of the company's long-term brewery
modernization program, domestic beer capital expenditures for the next few
years are expected to be below the levels experienced during the
modernization effort. The company has a formal and intensive review procedure
for the authorization of capital expenditures. The most important measure of
acceptability of a capital project is its projected discounted cash flow return
on investment (DCFROI).
Cash flow from operating activities is projected to exceed the funding
requirements for anticipated capital expenditures. However, the combination
of the company's capital spending, dividends and share repurchases, plus
possible additional investments in international brewers, may require
external financing from time to time. The nature, extent and timing of
external financing will vary depending upon the company's evaluation of
existing market conditions and other economic factors.
Total capital expenditures in 1998 amounted to $817.5 million, a
decrease of $382 million, or 31.8%, compared to 1997 capital spending of $1.2
billion. Capital expenditures over the past five years totaled $4.7 billion.
The company expects its capital expenditures in 1999 to approximate $900
million. Capital expenditures during the five-year period 1999 - 2003 are
expected to approximate $4.5 billion.
[CAPITAL EXPENDITURES/DEPRECIATION & AMORTIZATION GRAPH]
42 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 11
SHARE REPURCHASE
See Note 8 for a discussion of share repurchase activity.
DIVIDENDS
Cash dividends paid to common shareholders were $521.0 million in 1998
and $492.6 million in 1997. Dividends on common stock are paid in the months
of March, June, September and December of each year. In the third quarter
1998, effective with the September dividend, the Board of Directors increased
the quarterly dividend rate by 7.7%, from $.26 to $.28 per share. This
increased annual dividends per common share 8.0%, to $1.08 in 1998, compared
with $1.00 per common share in 1997. In 1997, dividends were $.24 per share
for the first two quarters and $.26 per share for the last two quarters.
FINANCING ACTIVITIES
The company utilizes Securities and Exchange Commission "shelf" registration
statements to provide flexibility and efficiency when obtaining long-term
financing. At December 31, 1998, a total of $240 million of debt was
available for issuance under an existing registration. The company filed a
new $750 million shelf registration with the SEC and also issued $150 million
in long-term notes in early 1999, bringing total registered debt available
for issuance to $840 million.
Long-term debt increased a net $353.0 million in 1998, compared to an
increase of $1.09 billion in 1997. The change in debt during these years is
detailed below, by key component.
DEBT ISSUANCE --
$451.5 million in 1998 compared to $1.27 billion in 1997, as follows:
<TABLE>
<CAPTION>
YEAR DESCRIPTION AMOUNT (MILLIONS) INTEREST RATE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 Long-term notes $300.0 $100.0 MILLION EACH AT 5.125%,
5.375% AND 5.65%, FIXED
Debentures $100.0 6.5%, FIXED
Commercial paper $23.3 5.5%, WEIGHTED AVERAGE
Industrial revenue bonds $13.8 VARIOUS FIXED RATES
Miscellaneous $14.4 VARIOUS FIXED RATES
- -----------------------------------------------------------------------------------------------
1997 Long-term notes $500.0 $250.0 million each at 7.1%
and 7.125%, fixed
Debentures $100.0 6.75%, fixed
Dual-currency notes $162.8 Quarterly, floating
Commercial paper $436.4 5.5%, weighted average
Industrial revenue bonds $41.0 Various fixed rates
Miscellaneous $29.4 Various fixed rates
- -----------------------------------------------------------------------------------------------
</TABLE>
DEBT REDUCTION --
$98.5 million in 1998 versus $174.9 million in 1997, as follows:
<TABLE>
<CAPTION>
YEAR DESCRIPTION AMOUNT (MILLIONS) INTEREST RATE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 Debentures $45.0 $22.5 MILLION EACH AT 8.5%
AND 8.625%, FIXED
Medium-term notes $15.0 6.3%, WEIGHTED AVERAGE
ESOP debt guarantee $34.9 8.3%, FIXED
Miscellaneous $3.6 VARIOUS FIXED RATES
- -----------------------------------------------------------------------------------------------
1997 Debentures $83.3 8.625%, fixed
Medium-term notes $32.5 7.4%, weighted average
ESOP debt guarantee $33.3 8.3%, fixed
Miscellaneous $25.8 Various fixed rates
- -----------------------------------------------------------------------------------------------
</TABLE>
[INCOME FROM CONTINUING OPERATIONS/DIVIDENDS ON COMMON STOCK GRAPH]
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 43
<PAGE> 12
> MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS & FINANCIAL CONDITION
In addition to its long-term debt financing, the company has access to
the short-term capital market through the utilization of commercial paper and
its $1 billion revolving bank credit agreement that expires August 2001. The
credit agreement provides the company with an immediate and continuing source
of liquidity. No borrowings have been made under the credit agreement since
its inception. Fee information on the credit agreement can be found in
Note 4.
The company's ratio of total debt to total capitalization was 52.8% and
51.9% at December 31, 1998 and 1997, respectively. The company's fixed charge
coverage ratio was 6.8x, 7.3x and 7.9x for the years ended December 31, 1998,
1997 and 1996, respectively.
[SHAREHOLDERS EQUITY/LONG-TERM DEBT GRAPH]
COMMON STOCK
At December 31, 1998, common stock shareholders of record numbered 62,110
compared with 64,815 at the end of 1997. See Note 8 for a summary of common
stock activity.
PRICE RANGE OF COMMON STOCK
The company's common stock is listed on the New York Stock Exchange under the
symbol "BUD." The following table summarizes 1998 quarterly high and low
closing prices for BUD.
<TABLE>
<CAPTION>
PRICE RANGE OF ANHEUSER-BUSCH COMMON STOCK (BUD)
- -----------------------------------------------------------------
1998 1997
--------------------------------------------------
QUARTER HIGH LOW HIGH LOW
--------------------------------------------------
<S> <C> <C> <C> <C>
First 47 1/2 43 7/16 44 7/8 40 5/8
Second 49 1/4 45 7/16 44 1/4 41
Third 57 3/8 46 3/4 47 7/8 41 13/16
Fourth 68 1/4 52 1/2 45 39 1/2
- -----------------------------------------------------------------
</TABLE>
The closing price of the company's common stock at December 31, 1998
and 1997 was $65 5-8 and $44, respectively. The book value of each common
share of stock at December 31, 1998 was $8.84, compared to $8.30 at December
31, 1997.
SYSTEMS-RELATED YEAR 2000 COSTS
Anheuser-Busch has identified its significant systems, facilities and
equipment issues related to Year 2000 date recognition for key accounting and
operating systems. The company is working to resolve the Year 2000 matter
through either the replacement of existing systems with new Year 2000 ready
systems or by reprogramming existing systems. Completion of the majority of
reprogramming, hardware replacement and appropriate testing is expected prior
to June 30, 1999.
All costs related to the assessment, reprogramming and testing of
existing systems for the Year 2000 effort are expensed as incurred. Costs
associated with replacement of hardware that is not Year 2000 ready will be
capitalized in accordance with the company's existing fixed asset accounting
policies. The company incurred Year 2000-related reprogramming costs of $15.5
million in 1998, compared to costs of $6.6 million for 1997 and nominal costs
in 1996. The company estimates incurring approximately $21 million in
additional costs to complete the Year 2000 reprogramming effort. Hardware
replacement costs are not expected to be significant.
Although the company expects to be Year 2000 ready when necessary,
failure of the company or significant key suppliers or customers to be fully
Year 2000 ready could potentially have a material adverse impact on the
results of the company's operations. However, due to the many factors
involved, including factors impacting third parties which the company cannot
readily ascertain, Anheuser-Busch is currently unable to estimate the
potential impact. The company is currently assessing important third party
Year 2000 preparedness and is working with its key suppliers and customers to
ensure Year 2000 issues are adequately addressed to the extent possible. In
that regard, the company is developing a methodology to monitor those third
party remediation efforts.
44 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 13
The company considers the likelihood of Year 2000 nonreadiness by
Anheuser-Busch to be remote, but is currently unable to determine the
likelihood of Year 2000 nonreadiness by key suppliers or customers.
Contingency plans are being developed to ensure critical operations continue
uninterrupted in the event either Anheuser-Busch or key suppliers orcustomers
fails to resolve their respective Year 2000 issues in a timely manner. Such
plans will be in place prior to December 31, 1999.
RISK MANAGEMENT
In the ordinary course of business, Anheuser-Busch is exposed to foreign
currency exchange, interest rate and commodity price risks. These exposures
primarily relate to the sale of product to foreign customers, purchases from
foreign suppliers, acquisition of raw materials from both domestic and
foreign suppliers, and changes in interest rates. The company utilizes
derivative financial instruments, including forward exchange contracts,
futures contracts, swaps and options to manage certain of these exposures
that it considers practical to do so. Anheuser-Busch has well-established
policies and procedures governing the use of derivatives. The company hedges
only firm commitments or anticipated transactions in the normal course of
business and corporate policy prohibits the use of derivatives for
speculation, including the sale of free-standing instruments. The company
neither holds nor issues financial instruments for trading purposes.
Specific hedging strategies depend on several factors, including the
magnitude and volatility of the exposure, offset through contract terms, cost
and availability of appropriate instruments, the anticipated time horizon,
basis, opportunity cost and the nature of the item being hedged. The
company's overall risk management goal is to strike a balance between
managing its exposure to market volatility and obtaining the most favorable
transaction costs possible within the constraints of its financial
objectives. Exposures the company currently is unable to hedge, or has
elected not to hedge, primarily relate to its floating rate debt, net
investments in foreign-currency-denominated operations and translated
earnings of foreign subsidiaries.
Derivatives are either exchange-traded instruments which are highly
liquid, or over-the-counter instruments transacted with highly rated
financial institutions. No credit loss is anticipated as the counterparties
to over-the-counter instruments have long-term debt ratings from Standard and
Poor's or Moody's no lower than A+ or A1, respectively, or the counterparty
position is secured by a letter of credit from a bank having such a rating.
The fair value of derivative financial instruments is monitored based on the
estimated amounts the company would receive or have to pay when terminating
the contracts. The company also monitors the effectiveness of its hedging
structures on an ongoing basis.
Following is a volatility analysis of the company's derivatives
portfolio that indicates potential changes in the fair value of the company's
derivative holdings under certain market movements. The company applies
sensitivity analysis for commodity price exposures and value-at-risk (VAR)
analysis for foreign currency and interest rate exposures.
<TABLE>
<CAPTION>
ESTIMATED FAIR VALUE VOLATILITY AT DECEMBER 31, 1998 (IN MILLIONS)
- -------------------------------------------------------------------------------
<S> <C>
Foreign Currency Risk (VAR): Forwards, Options $(0.8)
Interest Rate Risk (VAR): Swaps $(2.0)
Commodity Price Risk (Sensitivity): Futures, Swaps, Options $(6.8)
- -------------------------------------------------------------------------------
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 45
<PAGE> 14
> MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS & FINANCIAL CONDITION
VAR forecasts fair value changes using a statistical model (Monte Carlo
simulation method for currencies and covariance method for interest rates)
which incorporates historical correlations among various currencies and
interest rates. The VAR model assumes the company could liquidate its
currency and interest rate positions in a single day (one-day holding
period). The volatility figures provided represent the maximum one-day loss
each portfolio could experience for 19 out of every 20 trading days (95%
confidence level), based on history. The sensitivity analysis for commodities
reflects the impact of a hypothetical 10% adverse change in the market price
for the company's principal commodities. The volatility of foreign
currencies, interest rates and commodity prices are dependent on many factors
that cannot be forecast with reliable accuracy. Therefore, changes in fair
value over time could differ substantially from the illustration.
The preceding volatility analysis ignores changes in the exposures
inherent in the underlying hedged transactions. Because the company does not
hold or trade derivatives for speculation or profit, all changes in
derivative values are effectively offset by corresponding changes in pricing
of an underlying exposure. See Note 3 for additional information.
INTRODUCTION OF THE EURO
The initial phase of the three-year phase-in of the new common currency of
the European Economic and Monetary Union, the "euro," began on January 1,
1999. The company has made appropriate arrangements with key financial
institutions to ensure smooth handling of euro receipts and disbursements.
The company's financial systems can accommodate the initial euro introduction
but additional updates and adaptation of computer systems will be necessary
prior to the end of the euro transition period in 2001. Computer equipment
and programming costs are not expected to be material and will be complete
before the end of transition.
The company's existing European contracts and currency hedges remain in
force under the original terms. Prospectively, the company will denominate
agreements and hedges in euros as necessary. The company cannot readily
predict what impact, if any, single currency pricing will have on its
European operations.
SIGNIFICANT NON-U.S. EQUITY INVESTMENTS
GRUPO MODELO
In September 1998, the company completed the purchase of an additional 13.25%
of Diblo, S.A. de C.V., the operating subsidiary of Grupo Modelo, S.A. de
C.V., Mexico's largest brewer and leading exporter of beer. The purchase
price was $556.5 million, bringing Anheuser-Busch's total investment in
Modelo to $1.6 billion. The additional investment increased Anheuser-Busch's
total direct and indirect holdings in Diblo to 50.2%. The increase in
ownership does not give Anheuser-Busch voting control of either Grupo Modelo
or Diblo and, accordingly, the company continues to account for its Modelo
investment on the equity basis.
The economic benefit of the company's Modelo investment can be measured
in two ways--Anheuser-Busch's pro rata share in the earnings of Modelo
(equity income) and the excess of the fair value of the investment over its
carrying value. The excess of fair value over carrying value, based on Grupo
Modelo's closing stock price at December 31, 1998, was $2.8 billion. Although
this amount is appropriately not reflected in the company's income statement
or balance sheet, it represents an economic benefit to Anheuser-Busch.
Due to the structure and composition of Anheuser-Busch's initial
investment, the company was not required to adjust its Grupo Modelo
investment to fair market value while on the cost basis of accounting from
1993 to 1996. Additionally, the initial investment was configured such that
the company's return was largely protected against a decline in the value of
the Mexican peso.
46 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 15
The company adopted the equity method of accounting when ownership was
increased to 37% in May 1997, which gave Anheuser-Busch additional minority
rights and increased representation on the Grupo Modelo Board of Directors.
At that time, the company adjusted the carrying value of its Modelo
investment by $189.4 million to reflect the impact of cumulative peso
depreciation from 1993 to 1996, the period for which the investment was
accounted for under the cost method of accounting. The offset to this
translation adjustment was the "foreign currency translation adjustment"
account in shareholders equity.
Throughout 1997 and 1998, Mexico was considered hyperinflationary for
accounting purposes and the company effectively recognized the relative
impact of Mexican peso depreciation on its investment in earnings during
those periods. As of January 1, 1999, the Mexican economy ceased to be
hyperinflationary for accounting purposes and translation adjustments will be
reflected in equity rather than earnings. The change to nonhyperinflation
accounting is expected to be favorable to Anheuser-Busch compared to
hyperinflation accounting, due to the strong net monetary asset position of
Modelo.
ANTARCTICA
In April 1996, the company purchased a 5% equity stake in a subsidiary of
Companhia Antarctica Paulista (Antarctica), one of Brazil's leading brewers.
The subsidiary, ANEP, controls 75% of Anarctica's operations. The investment
agreement provided the company with options allowing it to increase its
investment to approximately 30% of ANEP beginning April 22, 1996 and
generally expiring on April 21, 2002.
In December 1997, the Brazilian trade commission (CADE), ruled
Anheuser-Busch's partnership with Antarctica was a restraint of trade and
called for the company to divest its investment in ANEP, subject to review.
The company and Antarctica appealed the ruling and on April 8, 1998,
announced the successful conclusion of an agreement with CADE that approved
the continuation of the two brewers' partnership in Brazil.
CORPORATE MATTERS
JUSTICE DEPARTMENT INQUIRY
In October 1997, the company received notification from the U.S. Justice
Department that the Department had begun a civil investigation into the
distribution and sale of beer, including Anheuser-Busch's policies and
practices in marketing and distribution. In September 1998, the Justice
Department informed the company that it had discontinued its investigation.
LABOR NEGOTIATIONS
Talks with the Teamsters union regarding a new labor agreement covering U.S.
brewery employees represented by the union are at impasse and as a result,
the company began implementing its final contract offer September 21, 1998.
The company's final offer includes an 11.5% pay increase over five years and
enhanced pension benefits. Also included in the offer are provisions to
support productivity improvement, promote workplace flexibility, reduce
absenteeism, improve the grievance procedure and institute a more effective
drug-testing program.
The most recent contract vote, the second by Teamsters-represented
employees, occurred in July 1998 with results showing that 46% of those
voting favored ratification. On September 18, 1998, the National Labor
Relations Board (NLRB) notified the company that charges brought by the
Teamsters against the company relating to national bargaining issues had been
dismissed, validating Anheuser-Busch's position that the company bargained in
good faith throughout the negotiations. Charges brought by the union
challenging the implementation of the company's final offer were also found
by the NLRB to have no merit and were dismissed in February 1999.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 47
<PAGE> 16
> MANAGEMENT'S DISCUSSION & ANALYSIS OF OPERATIONS & FINANCIAL CONDITION
On October 22, 1998, members of St. Louis Teamsters Local 367,
representing about 68 Firemen and Oilers, walked off the job at the St. Louis
brewery. Other local St. Louis unions representing approximately 1,700
employees at the brewery honored the picket lines. On October 23, 1998, Local
367 offered to end the strike, with no change in the implemented offer.
Striking employees and other employees reported back to work the week of
October 26. The St. Louis brewery was operated by salaried and other
employees during the strike. There was no disruption in the production or
distribution of the company's products. Operations at the company's other 11
breweries were unaffected.
The company anticipates eventually reaching an agreement with the union
but remains fully prepared to operate in the event of additional work
stoppages.
ENVIRONMENTAL MATTERS
The company is subject to federal, state and local environmental protection
laws and regulations and is operating within such laws or is taking action
aimed at assuring compliance with such laws and regulations. Compliance with
these laws and regulations is not expected to materially affect the company's
competitive position. None of the Environmental Protection Agency (EPA)
designated clean-up sites for which Anheuser-Busch has been identified as a
Potentially Responsible Party (PRP) would have a material impact on the
company's consolidated financial statements.
The company is strongly committed to environmental protection. Its
Environmental Management System provides specific guidance for how the
environment must be factored into business decisions and mandates special
consideration of environmental issues in conjunction with other business
issues when any of the company's facilities or business units plans capital
projects or changes in processes.
48 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS
The management of Anheuser-Busch Companies, Inc. is responsible for the
financial statements and other information included in this annual report.
These statements are prepared in accordance with generally accepted
accounting principles.
The company maintains accounting and reporting systems, supported by a
system of internal accounting control, which management believes are adequate
to provide reasonable assurances that assets are safeguarded against loss
from unauthorized use or disposition and financial records are reliable for
preparing financial statements. During 1998, the company's internal auditors,
in conjunction with PricewaterhouseCoopers LLP, the company's independent
accountants, performed a comprehensive review of the adequacy of the
company's internal accounting control system. Based on that comprehensive
review, it is management's opinion that the company has an effective system
of internal accounting control.
The Audit Committee of the Board of Directors, which consists of eight
nonmanagement directors, oversees the company's financial reporting and
internal control systems, recommends selection of the company's independent
accountants and meets with the independent accountants and internal auditors
to review the overall scope and specific plans for their respective audits.
The Committee held four meetings during 1998. A more complete description of
the functions performed by the Audit Committee can be found in the company's
proxy statement.
The report of PricewaterhouseCoopers LLP appears below.
- ------------------------------------------------------------------------------
800 Market Street
PRICEWATERHOUSECOOPERS [LOGO] St. Louis, MO 63101
February 2, 1999
To the Shareholders and Board of Directors
of Anheuser-Busch Companies, Inc.
We have audited the accompanying Consolidated Balance Sheet of
Anheuser-Busch Companies, Inc. and its subsidiaries as of December 31, 1998
and 1997, and the related Consolidated Statements of Income, Changes in
Shareholders Equity and Cash Flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the Consolidated Financial Statements audited by us
present fairly, in all material respects, the financial position of
Anheuser-Busch Companies, Inc. and its subsidiaries at December 31, 1998 and
1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
As discussed in Note 2 and Note 13 to the Consolidated Financial
Statements, in 1997 the company adopted the equity method of accounting for
its investments in Grupo Modelo, S.A. de C.V. and its operating subsidiary,
Diblo, S.A. de C.V. and changed its method of accounting for business process
reengineering costs incurred in connection with information technology
transformation projects, respectively.
/s/ PRICEWATERHOUSECOOPERS LLP
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 49
<PAGE> 18
<TABLE>
CONSOLIDATED BALANCE SHEET
Anheuser-Busch Companies and Subsidiaries
(In millions)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and marketable securities $ 224.8 $ 147.3
Accounts and notes receivable, less allowance for
doubtful accounts of $5.5 in 1998 and $4.9 in 1997 610.1 713.4
Inventories:
Raw materials and supplies 362.9 328.7
Work in process 90.7 87.8
Finished goods 169.8 133.7
Total inventories 623.4 550.2
Other current assets 182.1 173.0
-------------------------------------
Total current assets 1,640.4 1,583.9
Investments in affiliated companies 1,880.6 1,296.8
Other assets 1,114.3 1,095.8
Plant and equipment, net 7,849.0 7,750.6
-------------------------------------
TOTAL ASSETS $12,484.3 $11,727.1
=====================================
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities:
Accounts payable $ 905.7 $ 791.8
Accrued salaries, wages and benefits 256.3 224.3
Accrued taxes 193.6 183.9
Other current liabilities 374.7 300.7
-------------------------------------
Total current liabilities 1,730.3 1,500.7
-------------------------------------
Postretirement benefits 515.8 525.4
-------------------------------------
Long-term debt 4,718.6 4,365.6
-------------------------------------
Deferred income taxes 1,303.6 1,293.6
-------------------------------------
Common Stock and Other Shareholders Equity:
Common stock, $1.00 par value, authorized 800,000,000 shares 712.7 709.3
Capital in excess of par value 1,117.5 1,017.0
Retained earnings 8,320.7 7,604.9
Accumulated other comprehensive income:
Foreign currency translation adjustment (205.6) (214.0)
-------------------------------------
9,945.3 9,117.2
Treasury stock, at cost (5,482.1) (4,793.3)
ESOP debt guarantee (247.2) (282.1)
-------------------------------------
4,216.0 4,041.8
-------------------------------------
Commitments and contingencies -- --
-------------------------------------
TOTAL LIABILITIES AND EQUITY $12,484.3 $11,727.1
=====================================
</TABLE>
The Notes to Consolidated Financial Statements appearing on pages 54-73 of
this report are an integral component of the company's financial statements
and should be read in conjunction with the statements.
50 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 19
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
Anheuser-Busch Companies and Subsidiaries
(In millions, except per share)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $13,207.9 $12,832.4 $12,621.5
Less excise taxes (1,962.1) (1,766.2) (1,737.8)
-------------------------------------------------------
Net sales 11,245.8 11,066.2 10,883.7
Cost of products and services (7,162.5) (7,096.9) (6,964.6)
-------------------------------------------------------
Gross profit 4,083.3 3,969.3 3,919.1
Marketing, distribution and administrative expenses (1,958.0) (1,916.3) (1,890.0)
Gain on sale of St. Louis Cardinals -- -- 54.7
-------------------------------------------------------
Operating income 2,125.3 2,053.0 2,083.8
Interest expense (291.5) (261.2) (232.8)
Interest capitalized 26.0 42.1 35.5
Interest income 5.8 7.9 9.4
Other expense, net (13.0) (9.3) (3.0)
-------------------------------------------------------
Income before income taxes 1,852.6 1,832.5 1,892.9
-------------------------------------------------------
Provision for income taxes:
Current (669.8) (612.2) (643.0)
Deferred (34.5) (91.4) (93.8)
-------------------------------------------------------
(704.3) (703.6) (736.8)
Equity income, net of tax 85.0 50.3 --
-------------------------------------------------------
Income from continuing operations 1,233.3 1,179.2 1,156.1
Income from discontinued operations -- -- 33.8
-------------------------------------------------------
Income before cumulative effect of accounting change 1,233.3 1,179.2 1,189.9
Cumulative effect of accounting change, net of tax of $6.2 -- (10.0) --
-------------------------------------------------------
Net income $ 1,233.3 $ 1,169.2 $ 1,189.9
=======================================================
Basic earnings per share:
Continuing operations $ 2.56 $ 2.39 $ 2.31
Discontinued operations -- -- .07
-------------------------------------------------------
Income before cumulative effect of accounting change 2.56 2.39 2.38
Cumulative effect of accounting change -- (.02) --
-------------------------------------------------------
Net income $ 2.56 $ 2.37 $ 2.38
=======================================================
Diluted earnings per share:
Continuing operations $ 2.53 $ 2.36 $ 2.27
Discontinued operations -- -- .07
-------------------------------------------------------
Income before cumulative effect of accounting change 2.53 2.36 2.34
Cumulative effect of accounting change -- (.02) --
-------------------------------------------------------
Net income $ 2.53 $ 2.34 $ 2.34
=======================================================
</TABLE>
The Notes to Consolidated Financial Statements appearing on pages 54-73 of
this report are an integral component of the company's financial statements
and should be read in conjunction with the statements.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 51
<PAGE> 20
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
Anheuser-Busch Companies and Subsidiaries
(In millions, except per share)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of period $ 709.3 $ 705.8 $ 347.3
Shares issued under stock plans 3.4 3.5 2.6
Conversion of convertible debentures -- -- 6.4
Two-for-one stock split -- -- 349.5
-------------------------------------------------------
Balance, end of period $ 712.7 $ 709.3 $ 705.8
=======================================================
CAPITAL IN EXCESS OF PAR VALUE
Balance, beginning of period $ 1,017.0 $ 929.2 $ 1,012.2
Shares issued under stock plans 100.5 87.8 106.9
Conversion of convertible debentures -- -- 159.6
Two-for-one stock split -- -- (349.5)
-------------------------------------------------------
Balance, end of period $ 1,117.5 $ 1,017.0 $ 929.2
=======================================================
RETAINED EARNINGS
Balance, beginning of period $ 7,604.9 $ 6,924.5 $ 6,869.6
Income from continuing operations 1,233.3 1,169.2 1,189.9
Common dividends paid (per share:
1998 - $1.08; 1997 - $1.00; 1996 - $.92) (521.0) (492.6) (458.9)
Shares issued under stock plans 3.5 3.8 3.9
Spin-off of the Earthgrains Company -- -- (680.0)
-------------------------------------------------------
Balance, end of period $ 8,320.7 $ 7,604.9 $ 6,924.5
=======================================================
TREASURY STOCK
Balance, beginning of period $(4,793.3) $(4,206.2) $(3,436.0)
Treasury stock acquired (688.8) (587.1) (770.2)
-------------------------------------------------------
Balance, end of period $(5,482.1) $(4,793.3) $(4,206.2)
=======================================================
ESOP DEBT GUARANTEE
Balance, beginning of period $ (282.1) $ (315.4) $ (347.1)
Annual debt service 34.9 33.3 31.7
-------------------------------------------------------
Balance, end of period $ (247.2) $ (282.1) $ (315.4)
=======================================================
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of period $ (214.0) $ (8.8) $ (12.1)
Foreign currency translation adjustment 8.4 (205.2) 3.3
-------------------------------------------------------
Balance, end of period $ (205.6) $ (214.0) $ (8.8)
=======================================================
TOTAL SHAREHOLDERS EQUITY $ 4,216.0 $ 4,041.8 $ 4,029.1
=======================================================
COMPREHENSIVE INCOME
Net income $ 1,233.3 $ 1,169.2 $ 1,189.9
Foreign currency translation adjustment 8.4 (205.2) 3.3
-------------------------------------------------------
TOTAL COMPREHENSIVE INCOME $ 1,241.7 $ 964.0 $ 1,193.2
=======================================================
</TABLE>
The Notes to Consolidated Financial Statements appearing on pages 54-73 of
this report are an integral component of the company's financial statements
and should be read in conjunction with the statements.
52 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 21
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Anheuser-Busch Companies and Subsidiaries
(In millions)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,233.3 $ 1,169.2 $ 1,189.9
Income from discontinued operations -- -- (33.8)
Cumulative effect of accounting change -- 10.0 --
-------------------------------------------------------
Income from continuing operations 1,233.3 1,179.2 1,156.1
Adjustments to reconcile income from
continuing operations to cash provided by operating activities:
Depreciation and amortization 738.4 683.7 611.5
Deferred income taxes 34.5 91.4 93.8
Undistributed earnings of affiliated companies (53.7) (49.9) --
After-tax gain on sale of St. Louis Cardinals -- -- (33.4)
Decrease in noncash working capital 250.6 5.4 233.7
Other, net (27.1) (93.2) (92.8)
-------------------------------------------------------
Cash provided by operating activities 2,176.0 1,816.6 1,968.9
Net cash provided by discontinued operations -- -- 52.0
-------------------------------------------------------
Total cash provided by operating activities 2,176.0 1,816.6 2,020.9
-------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (817.5) (1,199.3) (1,084.6)
New business acquisitions (566.5) (683.3) (135.7)
Proceeds from sale of St. Louis Cardinals -- -- 116.6
Cash used for investing activities (1,384.0) (1,882.6) (1,103.7)
-------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in long-term debt 451.5 1,245.9 773.6
Decrease in long-term debt (63.6) (141.6) (575.1)
Dividends paid to shareholders (521.0) (492.6) (458.9)
Acquisition of treasury stock (688.8) (587.1) (770.2)
Shares issued under stock plans 107.4 95.1 113.4
-------------------------------------------------------
Cash provided by/(used for) financing activities (714.5) 119.7 (917.2)
-------------------------------------------------------
Net increase in cash and marketable
securities during the year 77.5 53.7 --
Cash and marketable securities, beginning of year 147.3 93.6 93.6
-------------------------------------------------------
Cash and marketable securities, end of year $ 224.8 $ 147.3 $ 93.6
=======================================================
</TABLE>
The Notes to Consolidated Financial Statements appearing on pages 54-73 of
this report are an integral component of the company's financial statements
and should be read in conjunction with the statements.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 53
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
This summary of the significant accounting principles and policies of
Anheuser-Busch Companies, Inc. and its subsidiaries is presented to assist in
evaluating the company's Consolidated Financial Statements included in this
annual report. These principles and policies conform to generally accepted
accounting principles. The preparation of financial statements in conformity
with generally accepted accounting principles requires that management make
estimates and assumptions which impact the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the period. Actual results could differ from
those estimates and assumptions.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the company and all its
subsidiaries. The company generally consolidates all majority-owned and
controlled subsidiaries, accounts for equity investments below the 20% level
under the cost method, and applies the equity method of accounting for equity
investments between 20% and 50%. All significant intercompany transactions
have been eliminated. Minority interests in consolidated subsidiaries are not
material. See Note 2 for additional discussion.
FOREIGN CURRENCY TRANSLATION
Financial statements of foreign operations where the local currency is
the functional currency are translated using period-end exchange rates for
assets and liabilities, and weighted average exchange rates during the period
for the results of operations. Translation adjustments are reported as a
separate component of other comprehensive income within shareholders equity.
Translation practice differs for foreign operations in hyperinflationary
economies. See Note 2 for additional discussion.
Exchange rate adjustments related to foreign currency transactions are
recognized in income as incurred.
CASH AND MARKETABLE SECURITIES
Cash and marketable securities include cash on hand, demand deposits
and short-term investments with initial maturities generally of 90 days or
less.
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESSES (GOODWILL)
The excess of the cost over the net assets of acquired businesses,
which is included in other assets on the balance sheet, is amortized on a
straight-line basis over a period of 40 years. Accumulated amortization at
December 31, 1998 and 1997 was $116.3 million and $106.6 million,
respectively. The ongoing recoverability of goodwill is monitored based on
appropriate operating unit performance and consideration of significant
events or changes in the overall business environment.
INVENTORIES AND PRODUCTION COSTS
Inventories are valued at the lower of cost or market. Cost is
determined under the last-in, first-out method (LIFO) for approximately 73%
and 75%, respectively, of total inventories at December 31, 1998 and 1997.
Had the average-cost method (which approximates replacement cost) been used
with respect to such inventories at December 31, 1998 and 1997, total
inventories would have been $100.3 million and $117.5 million higher,
respectively.
PLANT AND EQUIPMENT
Plant and equipment is carried at cost and includes expenditures for
new facilities and expenditures which substantially increase the useful lives
of existing facilities. The cost of maintenance, repairs and minor renewals
is expensed as incurred. When plant and equipment is retired or otherwise
disposed, the related cost and accumulated depreciation are eliminated and
any gain or loss on disposition is recognized in earnings.
Depreciation is provided on the straight-line method over the estimated
useful lives of the assets, resulting in annual depreciation rates on
buildings ranging from 2% to 10% and on machinery and equipment ranging from
4% to 25%.
54 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 23
INCOME TAXES
The provision for income taxes is based on income and expense amounts
as reported in the Consolidated Statement of Income. The company utilizes
certain provisions of federal and state income tax laws and regulations to
reduce current taxes payable. Deferred income taxes are recognized for the
effect of temporary differences between financial and tax reporting in
accordance with the requirements of FAS No. 109, "Accounting for Income
Taxes."
DERIVATIVE FINANCIAL INSTRUMENTS
All derivative instruments held by the company are designated as
hedges, have high correlation with the underlying exposure and are highly
effective in offsetting underlying price movements. Accordingly, gains and
losses from changes in derivative fair values are deferred. Gains or losses
upon settlement of derivative positions when the underlying transaction
occurs are recognized in the income statement or recorded as part of the
underlying asset or liability, as appropriate depending on the circumstances.
Derivative positions are settled if the underlying transaction is no longer
expected to occur, with related gains and losses recognized in earnings
in the period settlement occurs. Option premiums paid are recorded as assets
and amortized over the life of the option. Derivatives generally have initial
terms of less than three years, and all currently hedged transactions are
expected to occur within the next three years. See Note 3 for additional
information regarding the company's derivatives portfolio.
RESEARCH AND DEVELOPMENT COSTS, ADVERTISING AND PROMOTIONAL COSTS, AND
INITIAL PLANT COSTS
Research and development costs, advertising and promotional costs, and
initial plant costs are expensed in the year in which these costs are
incurred. Advertising and promotional expenses were $642.1 million, $603.6
million and $701.3 million in 1998, 1997 and 1996, respectively.
SYSTEMS DEVELOPMENT COSTS
The company capitalizes certain systems development costs that meet
established criteria. Amounts capitalized are amortized to expense over a
five-year period. In 1998, 1997 and 1996, the company capitalized systems
development costs of $50.8 million, $32.6 million, and $83.0 million,
respectively. Accumulated amortization related to capitalized systems costs
was $95.4 million and $59.4 million at December 31, 1998 and 1997,
respectively.
Effective January 1, 1999, the company adopted AICPA Statement of
Position No. 98-1, "Accounting for the Costs of Computer Systems Developed or
Obtained for Internal Use" (SOP 98-1). Adoption of SOP 98-1 will require no
significant changes to the company's systems development accounting methodology
and will not have a material impact on the results of operations.
STOCK-BASED COMPENSATION
The company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock
Issued to Employees." Under APB 25, the company recognizes no compensation
expense related to employee stock options, as no options are granted at a
price below the market price on the day of grant.
In 1996, FAS No. 123, "Accounting for Stock-Based Compensation," became
effective for the company. FAS 123, which prescribes the recognition of
compensation expense based on the fair value of options on the grant date,
allows companies to continue applying APB 25 if certain pro forma disclosures
are made assuming hypothetical fair value method application. See Note 6 for
pro forma disclosures required by FAS 123 plus additional information on the
company's stock options.
START-UP COSTS
Effective January 1, 1999, the company adopted AICPA Statement of
Position No. 98-5, "Reporting on the Costs of Start-Up Activities" (SOP
98-5), which requires the costs of start-up activities to be expensed as
incurred. Adoption of SOP 98-5 will require no significant changes
to the company's current accounting methodology and will not have a material
impact on the results of operations.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 55
<PAGE> 24
> Notes to Consolidated Financial Statements
2. INTERNATIONAL INVESTMENTS
GRUPO MODELO
In 1993, Anheuser-Busch purchased a 17.7% direct and indirect equity
interest in Diblo S.A. de C.V. (Diblo), the operating subsidiary of Grupo
Modelo S.A. de C.V. (Modelo), Mexico's largest brewer and producer of the
Corona brand, for $477 million. In May 1997, the company increased its direct
and indirect equity ownership in Diblo to 37% for an additional $605 million.
Effective with the increase in equity ownership to 37%, the company received
expanded minority rights, increased its representation on Modelo's Board of
Directors to 10 of 21 members and adopted the equity method of accounting for
the investment. In September 1998, the company completed its purchase of an
additional 13.25% equity interest in Diblo for $557 million, and now owns a
50.2% direct and indirect interest in Diblo. Anheuser-Busch does not have
voting or other effective control of either Diblo or Modelo and will
therefore continue to account for its investment on the equity basis.
Equity income recognized in 1997 reflected the company's 17.7%
ownership from January through May and its 37% ownership thereafter. The
difference between income recognized on the cost basis prior to 1997 and what
would have been recognized had the company applied equity accounting in those
years is not material. The company recorded a $189.4 million adjustment to
the carrying value of the investment for cumulative Mexican peso depreciation
between 1993 and 1996 prior to the adoption of equity accounting in 1997. The
offset for the adjustment was to "foreign currency translation," a component
of shareholders equity.
Included in the carrying amount of the Modelo investment is goodwill of
$553.6 million and $246.3 million, respectively, at December 31, 1998 and
1997 which is being amortized over 40 years. Accumulated amortization was $15
million and $6.9 million, respectively, at December 31, 1998 and 1997.
Dividends received from Grupo Modelo in 1998 totaled $50.3 million, compared
to $16.4 million in 1997 and $15.5 million in 1996.
For foreign operations in countries whose economies are considered
highly inflationary, the U.S. dollar is deemed the functional currency for
financial reporting purposes. Foreign currency translation practice for
highly inflationary economies under Financial Accounting Standard No. 52,
"Foreign Currency Translation," requires that property, other long-lived
assets, long-term liabilities and related profit and loss accounts be
translated at historical rates of exchange. Additionally, net monetary asset
and liability related translation adjustments are included in earnings in the
current period.
Effective January 1, 1997, Mexico's economy was deemed highly
inflationary for accounting purposes and, accordingly, all monetary
translation gains and losses related to the Modelo investment were recognized
in equity income during 1997 and 1998. In November 1998, the International
Accounting Task Force of the American Institute of Certified Public
Accountants, in conjunction with the Securities and Exchange Commission,
concluded that the Mexican economy ceased to be highly inflationary for
accounting purposes as of January 1, 1999.
Summary financial information for Grupo Modelo as of, and for the two
years ended December 31, is presented in the following table, (in millions).
The amounts presented are implied consolidated Grupo Modelo operating results
and financial position after adjustment to account for differences between
Mexican and U.S. generally accepted accounting principles, and reflect
Anheuser-Busch's appropriate pro rata equity interest during the year.
56 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 25
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1998 1997
------------------------------------
<S> <C> <C>
Current assets $ 859.8 $ 856.7
Noncurrent assets 3,008.4 2,297.5
Current liabilities 200.6 176.0
Noncurrent liabilities 172.0 58.2
Gross sales 1,748.3 1,353.6
Net sales 1,632.0 1,268.2
Gross profit 809.2 594.6
Minority interest 32.8 26.6
Income from continuing operations 180.3 138.0
Net income 180.3 138.0
- -----------------------------------------------------------------------------
</TABLE>
OTHER INTERNATIONAL INVESTMENTS
In April 1996, the company invested $52.5 million to purchase a 5%
equity stake in Antarctica Empreendimentos e Participacoes (ANEP), a
subsidiary controlling approximately 75% of the operations of Companhia
Antarctica Paulista (Antarctica), one of Brazil's leading brewers.
Anheuser-Busch holds options to increase its equity interest in ANEP to
approximately 30%. These options essentially expire in April 2002.
As a result of holding certain minority rights and having gained
representation on the ANEP Board of Directors in late 1996, the company
changed its accounting method for the investment in ANEP from the cost to the
equity method effective January 1, 1997. The difference between income
recognized on the cost basis in 1996 and what would have been recognized had
the company applied equity accounting is not material.
Anheuser-Busch also owns a 51% interest in a joint venture it operates
with Antarctica for the marketing, sales and distribution of Budweiser in
Brazil. The joint venture, Budweiser Brasil Ltda., is consolidated.
In 1996, Anheuser-Busch purchased a 4.4% interest in the Argentine
subsidiary of Compania Cervecerias Unidas S.A. (CCU), CCU-Argentina. The
purchase agreement provided the company with options to increase its
investment to 20% of CCU-Argentina. In December 1998, the company exercised a
portion of its options and purchased an additional 3.8% in CCU-Argentina for
$10 million, bringing the company's ownership in CCU-Argentina to 8.2%. The
company's remaining options expire in December 2002. The investment is
accounted for on the cost basis. CCU-Argentina brews and sells Budweiser in
Buenos Aires and other major Argentine markets.
In the fourth quarter 1998, the company restructured the sales force
and made other organizational changes at its Japanese subsidiary. Total
pretax cost of the restructuring was $8.6 million, primarily for wage and
severance benefits due to workforce reductions.
The company owns an 86.6% interest in a joint venture which owns the
Wuhan brewery located in the People's Republic of China. The joint venture
brews and distributes Budweiser primarily in the northern, eastern and
central regions of China. The joint venture is consolidated.
In 1997, the company purchased the remaining 50% of the Stag Brewing
Company Ltd. from its partner, Scottish Courage. Budweiser is brewed and
packaged at the Stag Brewery primarily for distribution in the United
Kingdom. Scottish Courage owns and leases the brewery site to the company.
The Stag Brewery operations are consolidated.
3. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
The company currently uses the following derivative financial instruments:
purchased options and forward contracts for foreign currency risk; swaps for
interest rate risk; and futures, swaps and purchased options for commodity
price risk. All derivatives are off-balance-sheet and therefore have no
recorded carrying value. Because the company hedges only with instruments
that have high correlation with the underlying transaction pricing, changes
in derivatives fair values are expected to be offset by changes in pricing.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 57
<PAGE> 26
> Notes to Consolidated Financial Statements
The following table summarizes the notional transaction amounts and
fair values for outstanding derivatives, by risk category and instrument
type, at December 31, (in millions):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1998 1997
----------------------------------------------------
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE AMOUNT VALUE
----------------------------------------------------
<S> <C> <C> <C> <C>
Foreign Currency:
Forwards $ 76.8 $ 1.5 $ 75.7 $ (1.1)
Options 323.1 6.5 265.5 15.3
----------------------------------------------------
399.9 8.0 341.2 14.2
----------------------------------------------------
Interest Rate:
Swaps 425.2 (53.4) 425.2 (49.8)
----------------------------------------------------
Commodity Price:
Swaps 14.1 (.3) 140.5 (2.9)
Futures 46.1 (3.6) 22.9 (.4)
Options 94.4 (2.8) 5.6 --
----------------------------------------------------
154.6 (6.7) 169.0 (3.3)
----------------------------------------------------
Total of outstanding derivatives $979.7 $(52.1) $935.4 $(38.9)
====================================================
- ----------------------------------------------------------------------------------------
</TABLE>
The interest rate swap and currency exchange agreements related to the
dual-currency notes discussed in Note 4 are included as interest rate swaps
in the preceding table. These agreements are integral parts of dual-currency
note structures which provide the company with floating-rate financing at
below-market rates.
The company has "long" exposure to the British pound sterling, Irish
punt, Japanese yen, Mexican peso and Canadian dollar. The company's exposures
to other currencies are essentially "short," primarily for German
mark-denominated purchases of hops. Long exposure indicates the company has
foreign currency in excess of its needs while a short exposure indicates the
company requires additional foreign currency to meet its needs. For commodity
derivatives, as a net user of raw materials, the company's underlying
exposure is short, indicating additional quantities must be obtained to meet
anticipated production requirements.
CONCENTRATION OF CREDIT RISK
The company does not have a material concentration of accounts
receivable or other credit risk.
NONDERIVATIVE FINANCIAL INSTRUMENTS
Nonderivative financial instruments included in the balance sheet are
cash, commercial paper and long-term debt. The fair value of long-term debt,
based on future cash flows discounted at interest rates currently available
to the company for debt with similar maturities and characteristics, was $5.0
billion and $4.5 billion at December 31, 1998 and 1997, respectively.
NEW DERIVATIVES AND HEDGING ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). The Standard requires all
derivative financial instruments to be reflected on an entity's balance sheet
at fair value, with changes in fair value recognized quarterly in either
earnings or equity, depending on the nature of the underlying exposure being
hedged. FAS 133 is required to be adopted no later than January 1, 2000.
Adoption of FAS 133 requires a one-time recognition on the balance
sheet of the fair value of the company's derivatives portfolio plus a
cumulative effect adjustment to earnings and/or equity. The company uses only
derivative instruments that are highly correlated to the underlying exposure
and therefore does not anticipate a material earnings impact from the initial
adoption of FAS 133. The company plans no substantive changes to its risk
management policies or approach as a result of adopting the new Standard. The
company has not yet determined when it will adopt FAS 133.
58 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 27
4. LONG-TERM DEBT
Long-term debt at December 31, consisted of the following (in millions):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1998 1997
------------------------------------
<S> <C> <C>
Commercial Paper (weighted average interest rate
of 5.5% in 1998 and 1997) $ 615.2 $ 591.9
Medium-term Notes Due 1999 to 2001
(interest rates from 5.1% to 8.0%) 47.5 62.5
8.625% Sinking Fund Debentures Maturing 1999 to 2016 -- 22.5
8.5% Sinking Fund Debentures Maturing 1999 to 2017 23.0 45.5
8.75% Notes Due 1999 250.0 250.0
5.1% Japanese yen/Australian dollar Notes Due 1999 262.4 262.4
4.1% Japanese yen/U.S. dollar Notes Due 2001 162.8 162.8
6.9% Notes Due 2002 200.0 200.0
6.75% Notes Due 2003 200.0 200.0
6.75% Notes Due 2005 200.0 200.0
7% Notes Due 2005 100.0 100.0
6.75% Notes Due 2006 250.0 250.0
7.1% Notes Due 2007 250.0 250.0
5.125% Notes Due 2008 100.0 --
5.375% Notes Due 2008 100.0 --
5.65% Notes Due 2008 100.0 --
9% Debentures Due 2009 350.0 350.0
7.25% Debentures Due 2015 150.0 150.0
7.125% Notes Due 2017 250.0 250.0
7.375% Debentures Due 2023 200.0 200.0
7% Debentures Due 2025 200.0 200.0
6.75% Debentures Due 2027 100.0 100.0
6.5% Debentures Due 2028 100.0 --
Industrial Revenue Bonds (interest rates from 5.625% to 7.4%) 212.2 198.4
8.25% ESOP Debt 247.2 282.1
Other Long-term Debt 48.3 37.5
------------------------------------
$4,718.6 $4,365.6
====================================
- -----------------------------------------------------------------------------------------------------
</TABLE>
In early 1999, the company registered $750 million in long-term debt
with the Securities and Exchange Commission and also issued $150 million in
long-term debt, bringing its total amount of registered debt available for
issuance to $840 million.
Gains/losses on debt redemptions (either individually or in the
aggregate) are not material for any year presented.
In December 1998, the company redeemed all outstanding 8.625% sinking
fund debentures due December 1, 2016. The redemption price was 100% of the
principal amount plus accrued interest.
In December 1996, simultaneous with the issuance of the 5.1% Japanese
yen/Australian dollar notes, the company entered into a $262.4 million
notional amount interest rate swap and currency exchange agreement. In
October 1997, the company entered into a similar swap and exchange agreement
for the $162.8 million notional amount of the 4.1% Japanese yen/U.S. dollar
notes. Under the agreements, the counterparties fund the semi-annual
yen-denominated fixed-rate coupon payments and Anheuser-Busch makes quarterly
U.S. dollar-denominated LIBOR-based floating-rate payments to the
counterparties. The Australian dollar agreement also requires Anheuser-Busch
to pay the counterparty $262.4 million at maturity in exchange for the
counterparty funding the Australian dollar redemption liability. The 4.1%
dual-currency notes mature in U.S. dollars.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 59
<PAGE> 28
> Notes to Consolidated Financial Statements
The impact of the Australian dollar exchange agreement on the company's
5.1% dual-currency notes at December 31, is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1998 1997
----------------------------
<S> <C> <C>
5.1% Japanese yen/Australian dollar Notes Due 1999 $196.2 $209.1
Effect of U.S. dollar/Australian dollar exchange agreement 66.2 53.3
----------------------------
$262.4 $262.4
============================
- -----------------------------------------------------------------------------------------------
</TABLE>
Under the terms of the agreements, the U.S. dollar floating-rate
interest payments and the dollar-denominated redemptions are the only
obligations the company has relating to the dual-currency notes. All currency
exchange risk between the U.S. dollar, the Australian dollar and the Japanese
yen is borne by the applicable counterparty. Only in the event of
counterparty default, the risk of which the company considers remote, would
Anheuser-Busch be exposed to currency exchange risk.
The company has in place a single committed revolving credit agreement
totaling $1 billion, which expires in August 2001. The agreement provides
that under certain circumstances the company may select among various loan
arrangements with differing maturities and among a variety of interest rates,
including a negotiated rate. At December 31, 1998 and 1997, the company had
no outstanding borrowings under the agreement. Fees under the agreement were
$.6 million, $.6 million and $.7 million in 1998, 1997 and 1996,
respectively.
At December 31, 1998 and 1997, outstanding commercial paper borrowings
are classified as long-term debt because commercial paper is maintained on a
long-term basis with ongoing credit support provided by the revolving credit
agreement. The company may also choose to refinance some or all of its
commercial paper debt with long-term notes or debentures.
In 1989, the company issued $241.7 million of 8% debentures maturing in
1996 and convertible into preferred stock at a price of $23.39 each (adjusted
for the September 1996 stock split and the Earthgrains spin-off). Each share
of preferred stock was convertible into one share of common stock. In
September 1996, the company completed the conversion of all outstanding
convertible debentures. In 1996, the company issued 7.5 million common shares
in conjunction with conversions. No preferred shares are outstanding as a
result of any conversions.
The aggregate maturities on long-term debt are $586 million,
$15 million, $180 million, $200 million and $200 million, respectively, for
each of the years ending December 31, 1999 through 2003. These aggregate
maturities do not include the future maturities of the ESOP debt or commercial
paper.
5. BUSINESS SEGMENTS
In 1998, the company adopted FAS 131, "Disclosures about Segments of an
Enterprise and Related Information," which expanded the company's previously
reported operating segments from Beer/beer-related and Entertainment, to
Domestic Beer, International Beer, Packaging, Entertainment and Other.
The Domestic Beer segment consists of the company's U.S. beer
production, marketing, distribution, raw materials acquisition and malting
operations.
The International Beer segment consists of the company's export sales
and overseas beer production and marketing operations, which include
company-owned operations, administration of contract and license brewing
arrangements and equity investment oversight. The company sells beer in more
than 80 countries, with principal markets in Canada, the United Kingdom,
Ireland, Japan, and China.
The Packaging segment is comprised of the company's aluminum beverage can
manufacturing, aluminum can recycling and label printing operations. Cans are
produced for both the company's domestic beer operations and U.S. soft drink
industry customers.
The Entertainment segment consists of the company's SeaWorld, Busch
Gardens and other theme park operations.
The Other segment is comprised of the company's real estate
development, transportation and communications businesses.
60 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 29
Summarized below is the company's business segment information for
1998, 1997 and 1996 (in millions). Intersegment sales are fully eliminated in
consolidation. No single customer accounted for more than 10% of sales.
Corporate expenses, including net interest expense, are not allocated to
operating segments. Prior years' information has been restated for the
adoption of FAS 131.
<TABLE>
--------- REPORTABLE SEGMENTS ---------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
DOMESTIC INT'L CORP. &
1998 BEER BEER PKG. ENTER. OTHER ELIMS <F1> CONSOL.
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Gross Sales $10,391.6 809.1 1,842.0 760.8 147.0 (742.6) $13,207.9
Net Sales - External $ 8,569.9 668.7 1,127.4 760.8 119.0 -- $11,245.8
Net Sales - Intersegment $ -- -- 714.6 -- 28.0 (742.6) $ --
Depreciation & Amortization $ 498.9 14.6 102.6 90.3 6.1 25.9 $ 738.4
Income Before Income Taxes $ 2,018.0 10.1 148.2 116.6 9.9 (450.2) $ 1,852.6
Equity Income, Net of Tax $ -- 85.0 -- -- -- -- $ 85.0
Income from
Continuing Operations $ 1,251.2 91.3 91.9 72.3 6.1 (279.5) $ 1,233.3
BALANCE SHEET INFORMATION:
Total Assets $ 7,078.5 2,340.9 874.1 1,283.1 211.0 696.7 $12,484.3
Equity Method Investments $ -- 1,662.6 -- -- -- -- $ 1,662.6
Foreign-Located Fixed Assets $ -- 202.1 -- -- -- -- $ 202.1
Capital Expenditures $ 514.1 82.9 81.4 97.2 9.9 32.0 $ 817.5
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
DOMESTIC INT'L CORP. &
1997 BEER BEER PKG. ENTER. OTHER ELIMS <F1> CONSOL.
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Gross Sales $10,023.9 784.8 1,867.2 756.2 151.7 (751.4) $12,832.4
Net Sales - External $ 8,257.7 784.8 1,150.8 756.2 116.7 -- $11,066.2
Net Sales - Intersegment $ -- -- 716.4 -- 35.0 (751.4) $ --
Depreciation & Amortization $ 459.8 7.7 100.5 83.5 6.3 25.9 $ 683.7
Income Before Income Taxes $ 1,984.8 18.2 115.0 115.3 8.8 (409.6) $ 1,832.5
Equity Income, Net of Tax $ -- 50.3 -- -- -- -- $ 50.3
Income from
Continuing Operations $ 1,230.6 61.6 71.3 71.5 5.5 (261.3) $ 1,179.2
BALANCE SHEET INFORMATION:
Total Assets $ 7,121.1 1,636.9 863.9 1,291.7 220.1 593.4 $11,727.1
Equity Method Investments $ -- 1,045.6 -- -- -- -- $ 1,045.6
Foreign-Located Fixed Assets $ -- 128.7 -- -- -- -- $ 128.7
Capital Expenditures $ 888.5 36.8 98.1 140.1 15.0 20.8 $ 1,199.3
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
DOMESTIC INT'L CORP. &
1996 BEER BEER PKG. ENTER. <F2> OTHER ELIMS <F1> CONSOL.
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION:
Gross Sales $ 9,971.3 724.4 1,828.4 681.4 167.9 (751.9) $12,621.5
Net Sales - External $ 8,233.5 724.4 1,122.8 681.4 121.6 -- $10,883.7
Net Sales - Intersegment $ -- -- 705.6 -- 46.3 (751.9) $ --
Depreciation & Amortization $ 407.9 5.5 91.9 75.9 6.1 24.2 $ 611.5
Income Before Income Taxes $ 1,948.8 50.0 118.2 147.4 3.9 (375.4) $ 1,892.9
Income from
Continuing Operations $ 1,190.7 30.6 72.2 90.1 2.4 (229.9) $ 1,156.1
BALANCE SHEET INFORMATION:
Total Assets $ 6,488.9 1,061.8 871.1 1,283.9 229.9 528.0 $10,463.6
Foreign-Located Fixed Assets $ -- 75.0 -- -- -- -- $ 75.0
Capital Expenditures $ 775.2 35.1 90.3 136.9 16.6 30.5 $ 1,084.6
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
<FNote 1:> Corporate assets principally include cash, marketable securities,
deferred charges and certain fixed assets. Eliminations impact
only gross and intersegment sales.
<FNote 2:> Entertainment segment results for 1996 include the gain on the
sale of the St. Louis Cardinals ($54.7 million pretax,
$33.4 million after-tax).
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 61
<PAGE> 30
> Notes to Consolidated Financial Statements
6. STOCK OPTION PLANS
Under terms of the company's incentive stock option plans, officers and
certain other employees may be granted options to purchase the company's
common stock at no less than 100% of the market price on the date the option
is granted. Options generally vest over three years and have a maximum term
of 10 years. At December 31, 1998, 1997 and 1996, a total of 44 million, 27
million and 31 million shares, respectively, were reserved for future
issuance under the plans. Certain of the plans also provide for the granting
of stock appreciation rights (SARs) in tandem with stock options. The
exercise of an SAR cancels the related option and the exercise of an option
cancels the related SAR. There were no SARs outstanding under the plans at
December 31, 1998 and 1997.
Presented below is a summary of stock option plans activity for the
years shown:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
WTD. AVG. WTD. AVG.
OPTIONS EXERCISE PRICE OPTIONS EXERCISABLE EXERCISE PRICE
------- -------------- ------------------- --------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 25,292,878 $25.36
Granted 4,149,588 40.59
Exercised (4,945,152) 22.37
Cancelled (176,650) 28.22
-----------------
BALANCE, DECEMBER 31, 1996 24,320,664 $28.55 15,230,871 $24.67
Granted 5,558,073 43.37
Exercised (3,971,384) 22.48
Cancelled (185,377) 35.11
-----------------
BALANCE, DECEMBER 31, 1997 25,721,976 $32.64 15,908,186 $27.69
Granted 5,043,905 59.82
Exercised (4,084,369) 24.70
Cancelled (139,691) 40.81
-----------------
BALANCE, DECEMBER 31, 1998 26,541,821 $38.98 16,712,205 $31.79
==========================================================================
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information for options outstanding and
exercisable at December 31, 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------- ----------------------------
RANGE OF WTD. AVG. WTD. AVG. WTD. AVG.
PRICES NUMBER REMAINING LIFE EXERCISE PRICE NUMBER EXERCISE PRICE
-------- ------ -------------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
$15-26 5,246,849 4 yrs $23.36 5,246,849 $23.36
27-37 6,962,821 6 yrs 31.29 6,944,575 31.29
38-48 9,297,246 8 yrs 42.26 4,388,004 41.80
49-60 5,034,905 10 yrs 59.85 132,777 59.93
--------- ---------
$15-60 26,541,821 7 yrs $38.98 16,712,205 $31.79
==============================================================================================
- ----------------------------------------------------------------------------------------------------
</TABLE>
Option quantities and prices have been adjusted for the impact of the
Earthgrains spin-off and the two-for-one stock split in September 1996.
The company's stock option plans provide for acceleration of
exercisability of the options upon the occurrence of certain events relating
to a change of control, merger, sale of assets or liquidation of the company
(Acceleration Events). Certain of the plans also provide that optionees may
be granted Limited Stock Appreciation Rights (LSARs). LSARs become
exercisable, in lieu of an option, upon the occurrence, at least six months
following the date of grant, of an Acceleration Event. The LSARs entitle the
holder to a cash payment per share equivalent to the excess of the share
value (under terms of the LSAR) over the grant price. As of December 31, 1998
and 1997, there were .1 million and .4 million, respectively, of LSARs
outstanding.
62 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 31
PRO FORMA FAIR VALUE DISCLOSURES
Had compensation expense for the company's stock options been
recognized based on the fair value on the grant date under the methodology
prescribed by FAS 123, the company's income from continuing operations and
earnings per share for the three years ended December 31, would have been
impacted as shown in the following table (in millions, except per share).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
Reported income from continuing operations $1,233.3 $1,179.2 $1,156.1
Pro forma income from continuing operations 1,209.3 1,165.0 1,149.0
Reported diluted earnings per share
from continuing operations 2.53 2.36 2.27
Pro forma diluted earnings per share
from continuing operations 2.48 2.33 2.26
- -----------------------------------------------------------------------------------------------------
</TABLE>
The fair value of options granted, which is amortized to expense over
the option vesting period in determining the pro forma impact, is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
Expected life of option 5 yrs. 5 yrs. 5 yrs.
Risk-free interest rate 4.7% 5.7% 6.2%
Expected volatility of Anheuser-Busch stock 16% 15% 15%
Expected dividend yield on Anheuser-Busch stock 1.7% 2.3% 2.3%
- -----------------------------------------------------------------------------------------------------
</TABLE>
The weighted average fair value of options granted during 1998, 1997
and 1996 is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
Fair value of each option granted $11.72 $8.37 $8.30
Total number of options granted (in millions) 5.0 5.6 4.1
----------------------------------------------
Total fair value of all options granted (in millions) $ 58.6 $46.9 $34.0
==============================================
- -----------------------------------------------------------------------------------------------------
</TABLE>
In accordance with FAS 123, the weighted average fair value of stock
options granted is required to be based on a theoretical statistical model
using the preceding Black-Scholes assumptions. In actuality, because the
company's incentive stock options are not traded on any exchange, employees
can receive no value nor derive any benefit from holding stock options under
these plans without an increase in the market price of Anheuser-Busch stock.
Such an increase in stock price would benefit all stockholders
commensurately.
7. EMPLOYEE STOCK OWNERSHIP PLANS
In 1989, the company added Employee Stock Ownership Plans (ESOPs) to its
existing Deferred Income Stock Purchase and Savings Plans. Most regular
employees are eligible for participation in the ESOPs. The ESOPs initially
borrowed $500 million for a term of 15 years at an interest rate of 8.25% and
used the proceeds to buy approximately 22.7 million shares of common stock
from the company at market price. The debt is guaranteed by the company and
the shares are being allocated to participants over the 15 year period as
contributions are made to the plans. The ESOP purchased an additional .2
million shares from the company using proceeds from the sale of
spin-off-related Earthgrains shares in 1996. Of the 22.9 million total shares
purchased, 15.5 million shares have been allocated to plan participants.
ESOP cash contributions and expense accrued during the calendar year
are determined by several factors, including the market price and number of
shares allocated to participants, debt service, dividends on unallocated
shares and the company's matching contribution. Over the 15-year life of the
ESOPs, total expense recognized will equal total cash contributions made by
the company for ESOP debt service.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 63
<PAGE> 32
> Notes to Consolidated Financial Statements
ESOP cash contributions are made in March and September in accordance
with debt service requirements. A summary of cash contributions and dividends
on unallocated ESOP shares for the three years ended December 31, is
presented below (in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Cash contributions $14.2 $15.2 $21.8
=========================================
Dividends $ 8.9 $ 9.9 $10.4
=========================================
- ---------------------------------------------------------------------------------------------------
</TABLE>
ESOP expense is allocated to operating expense and interest expense based
on the ratio of principal and interest payments on the debt. Total ESOP expense
for the three years ended December 31, is presented below (in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Operating expense $ 7.4 $ 8.6 $14.3
Interest expense 4.5 6.7 11.6
-----------------------------------------
Total ESOP expense $11.9 $15.3 $25.9
=========================================
- ---------------------------------------------------------------------------------------------------
</TABLE>
8. PREFERRED AND COMMON STOCK
COMMON STOCK ACTIVITY
Activity for the company's common stock for the three years ended
December 31, is summarized below (in millions of shares):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
COMMON STOCK ISSUED
Beginning common stock issued 709.3 705.8 694.5
Shares issued under stock plans 3.4 3.5 3.7
Conversion of convertible debentures -- -- 7.6
-----------------------------------------
Total common stock issued 712.7 709.3 705.8
-----------------------------------------
TREASURY STOCK HELD
Beginning treasury stock held (222.2) (208.4) (186.5)
Treasury stock acquired, net of issuances of .4 in 1996 (13.9) (13.8) (21.9)
-----------------------------------------
Cumulative treasury stock held (236.1) (222.2) (208.4)
-----------------------------------------
COMMON STOCK OUTSTANDING 476.6 487.1 497.4
=========================================
- ---------------------------------------------------------------------------------------------------
</TABLE>
PREFERRED STOCK
At December 31, 1998 and 1997, 40,000,000 shares of $1.00 par value
preferred stock were authorized and unissued.
COMMON STOCK SPLIT
In July 1996, the Board of Directors authorized a two-for-one stock
split, effective for shareholders of record August 15, 1996. Certificates for
one additional share of Anheuser-Busch common stock for each share held at
the record date were distributed to shareholders on September 12, 1996. All
share and per share information has been adjusted to reflect the impact of
the split.
STOCK REPURCHASE PROGRAMS
The Board of Directors has approved various resolutions authorizing the
company to purchase shares of its common stock to return cash to shareholders
and to meet the requirements of the company's various stock purchase and
incentive plans. The most recent resolution was approved by the Board in July
1996 and authorized the repurchase of 50 million shares. The company acquired
13.9 million, 13.8 million and 22.3 million shares of common stock in 1998,
1997 and 1996 for
64 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 33
$688.8 million, $587.1 million and $770.2 million, respectively. At December
31, 1998, approximately 25 million shares were available for repurchase under
the 1996 authorization.
STOCKHOLDER RIGHTS PLAN
The Board of Directors adopted a Stockholder Rights Plan in 1985
(extended in 1994) which would permit shareholders to purchase common stock
at prices substantially below market value under certain change in control
scenarios.
9. RETIREMENT BENEFITS
PENSION PLANS
The company has pension plans covering substantially all of its regular
employees. Total pension expense for the three years ended December 31, is
presented below (in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Single-employer defined benefit plans $ 3.3 $12.0 $18.6
Multi-employer plans 14.4 13.2 20.2
Defined contribution plans 18.2 15.9 18.3
-----------------------------------------
Total pension expense $35.9 $41.1 $57.1
=========================================
- ---------------------------------------------------------------------------------------------------
</TABLE>
Contributions to multi-employer plans in which the company and its
subsidiaries participate are determined in accordance with the provisions of
negotiated labor contracts and are based on employee hours or weeks worked.
Expense recognized for multi-employer and defined contribution plans equals
cash contributions for all years shown.
Net annual pension expense for single-employer defined benefit plans
was comprised of the following for the three years ended December 31, (in
millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Service cost (benefits earned during the year) $ 53.4 $ 51.5 $ 49.3
Interest cost on projected benefit obligation 106.4 100.7 76.3
Assumed return on assets (156.8) (141.0) (107.9)
Amortization of prior service cost, actuarial gains/losses
and the excess of market value of plan assets over
projected benefit obligation at January 1, 1986 .3 .8 .9
--------------------------------------------
Net annual pension expense $ 3.3 $ 12.0 $ 18.6
===========================================
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The key actuarial assumptions used in determining annual pension
expense for single-employer defined benefit plans were as follows for the
three years ended December 31,:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.75% 7.5%
Long-term rate of return on plan assets 10.0% 10.0% 10.0%
Weighted average rate of compensation increase 4.75% 5.5% 5.5%
- ---------------------------------------------------------------------------------------------------
</TABLE>
The following table provides a reconciliation of funded status to
prepaid pension cost for the two years ended December 31, (in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997
----------------------------
<S> <C> <C>
Funded status -- plan assets in excess of projected
benefit obligation (PBO) $120.2 $ 393.0
Unamortized excess of market value of plan assets over PBO
at January 1, 1986, being amortized over 15 years (23.0) (33.3)
Unrecognized net actuarial (gain) (61.8) (240.8)
Unamortized prior service cost 167.9 66.2
----------------------------
Prepaid pension cost $203.3 $ 185.1
============================
- ---------------------------------------------------------------------------------------------------
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 65
<PAGE> 34
> Notes to Consolidated Financial Statements
The assumptions used in determining the funded status of the plans as
of December 31, were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1998 1997
--------------------------
<S> <C> <C>
Discount rate 7.0% 7.5%
Weighted average rate of compensation increase 4.75% 4.75%
- ------------------------------------------------------------------------------------
</TABLE>
The following tables summarize the changes in the projected benefit
obligation and the change in fair market value of plan assets for all company
single-employer defined benefit pension plans for the two years ended
December 31, (in millions).
<TABLE>
CHANGE IN PROJECTED BENEFIT OBLIGATION (PBO):
<CAPTION>
- -----------------------------------------------------------------------------------
1998 1997
-----------------------------
<S> <C> <C>
PBO, beginning of year $1,428.4 $1,327.3
Service cost 53.4 51.5
Interest cost 106.4 100.7
Plan amendments 111.9 2.9
Actuarial loss 92.0 9.5
Benefits paid (88.1) (63.5)
-----------------------------
PBO, end of year $1,704.0 $1,428.4
=============================
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
CHANGE IN PLAN ASSETS (CONSISTING PRIMARILY OF CORPORATE EQUITY SECURITIES
AND PUBLICLY TRADED BONDS):
<CAPTION>
- -----------------------------------------------------------------------------------
1998 1997
-----------------------------
<S> <C> <C>
Fair market value, beginning of year $1,821.4 $1,458.9
Actual return on plan assets 68.7 396.1
Employer contributions 22.2 29.9
Benefits paid (88.1) (63.5)
-----------------------------
Fair market value, end of year $1,824.2 $1,821.4
=============================
- -----------------------------------------------------------------------------------
</TABLE>
POSTRETIREMENT HEALTH CARE AND INSURANCE BENEFITS
The company provides certain health care and life insurance benefits to
eligible retired employees. Most current participants become eligible for
retiree health care benefits if they accrue 10 years of continuous service
after age 45.
The following table sets forth the accumulated postretirement benefit
obligation (APBO) and the total postretirement benefit liability for all
company single-employer defined benefit health care and life insurance plans
at December 31 (in millions). Postretirement benefit obligations are not
prefunded and there are no assets associated with the plans.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1998 1997
--------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO) $348.1 $318.4
Unrecognized prior service benefits 87.9 99.6
Unrecognized net actuarial gains 98.7 119.4
--------------------------
Total postretirement benefit liability $534.7 $537.4
==========================
- -----------------------------------------------------------------------------------
</TABLE>
As of December 31, 1998 and 1997, $18.9 million and $12.0 million of
these obligations were classified as current liabilities and $515.8 million
and $525.4 million were classified as long-term liabilities, respectively.
66 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 35
Net periodic postretirement benefits expense for company
single-employer defined benefit health care and life insurance plans was
comprised of the following for the three years ended December 31, (in
millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996
-------------------------------------------
<S> <C> <C> <C>
Service cost (benefits attributed to service during the year) $ 13.6 $ 12.0 $ 17.1
Interest cost on APBO 23.3 23.2 22.9
Amortization of prior service benefit (11.7) (11.7) (11.7)
Amortization of actuarial gains (8.9) (10.1) (7.4)
-------------------------------------------
Net periodic postretirement benefits expense $ 16.3 $ 13.4 $ 20.9
===========================================
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes the change in the APBO for the two years
ended December 31, (in millions):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1998 1997
----------------------------
<S> <C> <C>
APBO, beginning of year $318.4 $296.6
Service cost 13.6 12.0
Interest cost 23.3 23.2
Actuarial loss/(gain) 11.8 (.8)
Benefits paid (19.0) (12.6)
----------------------------
APBO, end of year $348.1 $318.4
============================
- ------------------------------------------------------------------------------------
</TABLE>
In measuring the APBO, annual trend rates for health care costs of
8.7%, 8.3% and 9.0% were assumed for 1998, 1997 and 1996, respectively. These
rates were assumed to decline ratably over the subsequent 9-12 years to 5.95%
for 1998, 5.3% for 1997 and 6.5% for 1996, and remain at that level
thereafter. The weighted average discount rate used in determining the APBO
was 7.5% and 8.0% at December 31, 1998 and 1997, respectively.
If the assumed health care cost trend rate changed by 1%, the APBO as
of December 31, 1998 would change by 14%. A 1% change in the health care cost
trend rate would result in a corresponding change of 15% in net periodic
postretirement benefits expense.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 67
<PAGE> 36
> Notes to Consolidated Financial Statements
10. EARNINGS PER SHARE OF COMMON STOCK
Basic earnings per share are based on the weighted average number of shares
of common stock outstanding during the year. Diluted earnings per share are
based on the weighted average number of shares of common stock and common
stock equivalents outstanding during the year.
Reconciliations of income available to common shareholders and weighted
average shares outstanding between basic and diluted earnings per share for
the three years ended December 31, follow (in millions):
<TABLE>
WEIGHTED AVERAGE SHARES OUTSTANDING
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Basic weighted average shares outstanding 482.1 492.6 499.1
Stock option shares 5.4 7.1 6.7
Shares related to convertible debentures -- -- 4.8
--------------------------------------------
Diluted weighted average shares outstanding 487.5 499.7 510.6
============================================
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
INCOME AVAILABLE TO COMMON SHAREHOLDERS
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Basic income from continuing operations $1,233.3 $1,179.2 $1,156.1
After-tax interest on convertible debentures -- -- 5.3
--------------------------------------------
Diluted income from continuing operations $1,233.3 $1,179.2 $1,161.4
============================================
- ---------------------------------------------------------------------------------------------------
</TABLE>
68 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 37
11. INCOME TAXES
The provision for income taxes consists of the following for the three years
ended December 31, (in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Current tax provision:
Federal $564.3 $510.9 $490.9
State and foreign 105.5 101.3 106.8
------------------------------------------
669.8 612.2 597.7
------------------------------------------
Deferred tax provision:
Federal 31.6 78.2 139.2
State and foreign 2.9 13.2 19.9
------------------------------------------
34.5 91.4 159.1
------------------------------------------
Total tax provision $704.3 $703.6 $756.8
==========================================
- ---------------------------------------------------------------------------------------------------
</TABLE>
The provision for income taxes for 1996 includes $20.0 million for
discontinued operations.
The deferred tax provision results from differences in the recognition
of income and expense for tax and financial reporting purposes. The primary
differences for continuing operations are related to fixed assets (tax effect
of $51.5 million in 1998, $67.8 million in 1997 and $56.9 million in 1996).
At December 31, 1998 and 1997, the company had deferred tax liabilities
of $1,841.3 million and $1,784.1 million, and deferred tax assets of $537.7
million and $490.5 million, respectively. The deferred tax liabilities are
primarily related to fixed assets of $1,601.1 million and $1,549.6 million,
respectively. The deferred tax assets are related to accrued postretirement
benefits ($202.1 million and $203.7 million, respectively) and other accruals
and temporary differences ($335.6 million and $286.8 million, respectively)
which are not deductible for tax purposes until paid or utilized. Foreign
deferred tax assets and liabilities were not material at December 31, 1998.
A reconciliation between the statutory tax rate and the effective tax
rate for continuing operations for the three years ended December 31, is
presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 3.4 3.5 3.6
Other taxes (.4) (.1) .3
-----------------------------------------
Effective tax rate 38.0% 38.4% 38.9%
=========================================
- ---------------------------------------------------------------------------------------------------
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 69
<PAGE> 38
> Notes to Consolidated Financial Statements
12. SUPPLEMENTAL INFORMATION
Accounts payable include $135.0 million and $123.9 million, respectively, of
outstanding checks at December 31, 1998 and 1997.
Supplemental information with respect to cash flows for the three years
ended December 31, is presented below (in millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
CASH PAID DURING THE YEAR: 1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Interest, net of interest capitalized $ 263.3 $ 205.1 $ 208.0
Income taxes 644.3 609.5 533.6
Excise taxes 1,966.6 1,760.6 1,720.1
NONCASH FINANCING ACTIVITIES:
Conversions of 8% convertible debentures $ -- $ -- $ 166.0
CHANGES IN NONCASH WORKING CAPITAL:
Decrease/(increase) in noncash current assets:
Accounts receivable $ 103.3 $ (80.7) $ (88.4)
Inventories (73.2) (19.1) 51.6
Other current assets (9.1) 35.4 81.6
Increase/(decrease) in current liabilities:
Accounts payable 113.9 65.0 44.0
Accrued salaries, wages and benefits 32.0 (3.3) (19.4)
Accrued taxes 9.7 (49.1) 146.7
Other current liabilities 74.0 57.2 17.6
--------------------------------------------
Decrease in noncash working capital $ 250.6 $ 5.4 $ 233.7
============================================
- --------------------------------------------------------------------------------------------------
</TABLE>
The components of plant and equipment, net, at December 31, are
summarized below (in millions):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1998 1997
------------------------------
<S> <C> <C>
Land $ 250.9 $ 243.9
Buildings 3,569.9 3,355.5
Machinery and equipment 9,570.4 8,806.8
Construction in progress 446.5 821.4
------------------------------
13,837.7 13,227.6
Accumulated depreciation (5,988.7) (5,477.0)
------------------------------
Total plant and equipment, net $ 7,849.0 $ 7,750.6
==============================
- -----------------------------------------------------------------------------------
</TABLE>
The components of other assets at December 31, are summarized below (in
millions):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1998 1997
----------------------------
<S> <C> <C>
Investment properties $ 116.4 $ 128.1
Deferred charges 555.7 515.8
Goodwill 442.2 451.9
----------------------------
Total other assets $1,114.3 $1,095.8
============================
- -----------------------------------------------------------------------------------
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 70
<PAGE> 39
Summarized below is selected legal entity financial information for
Anheuser-Busch, Inc., a wholly-owned subsidiary of Anheuser-Busch Companies,
as of and for the years ended December 31, (in millions). This information is
provided to satisfy certain reporting requirements necessitated by
Anheuser-Busch, Inc. being co-obligor on substantially all Anheuser-Busch
Companies debt.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Income Statement Information:
Net sales $ 8,408.0 $ 8,116.3 $8,100.3
Gross profit 3,197.1 3,141.2 3,172.4
Income from continuing operations <F1> 969.7 906.8 907.1
Balance Sheet Information:
Current assets $ 581.4 $ 623.9
Noncurrent assets 17,086.7 15,619.0
Current liabilities 733.9 677.7
Noncurrent liabilities <F1> 4,998.6 4,599.4
- ---------------------------------------------------------------------------------------------------
<FN>
<F1> All guaranteed debt for which Anheuser-Busch, Inc. is co-obligor is
included as an element of noncurrent liabilities, with related interest
included in the determination of income from continuing operations.
</TABLE>
13. CHANGE IN ACCOUNTING PRINCIPLE
In November 1997, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board released consensus No. 97-13, "Accounting for
Costs Incurred in Connection with a Consulting Project or an Internal Project
That Combines Business Process Reengineering and Information Technology
Transformation." The EITF consensus specifically defined systems reengineering
costs and mandated such costs be expensed as incurred. Additionally, any systems
reengineering costs previously capitalized and unamortized were to be
immediately charged against earnings.
In accordance with the EITF consensus, the company recorded a $10 million
after-tax charge ($.02 per share) to expense capitalized systems reengineering
costs in the fourth quarter 1997. The charge is shown as a separate cumulative
effect of accounting change line item in the income statement. Prospectively,
the company will expense all such costs as incurred.
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 71
<PAGE> 40
> Notes to Consolidated Financial Statements
14. DIVESTITURE OF FOOD PRODUCTS SEGMENT
In the fourth quarter 1995, the company announced its intention to divest its
food products segment through a tax-free spin off of its Earthgrains baking
subsidiary and the sale of the assets of Eagle Snacks, Inc. The Earthgrains
spin-off was completed March 26, 1996, and in June 1996 the company sold most
of its Eagle Snacks production facilities, which effectively completed the
divestiture. Accordingly, the company revised its estimated loss provision
for the disposition of the food products segment and recorded a $33.8 million
after-tax gain ($.07 per share) in the second quarter 1996, which is reported
as income from discontinued operations. The pretax gain on the sale of the
Eagle Snacks assets was $53.8 million, with a related income tax provision of
$20.0 million.
15. SALE OF THE ST. LOUIS CARDINALS
During the first quarter 1996, the company completed the sale of its Major
League Baseball team, the St. Louis Cardinals. The sale included Busch
Memorial Stadium, nearby parking garages and other properties in downtown St.
Louis. The sale price was $150 million and resulted in a pretax gain of $54.7
million ($.06 per share after-tax) which is presented as a separate line item
in the income statement.
16. COMMITMENTS AND CONTINGENCIES
In connection with plant expansion and improvement programs, the company had
commitments for capital expenditures of approximately $118 million at
December 31, 1998. Obligations under capital and operating leases are not
material.
The company and certain of its subsidiaries are involved in certain
claims and legal proceedings in which monetary damages and other relief are
sought. The company is vigorously contesting these claims. However,
resolution of these claims is not expected to occur quickly, and their
ultimate outcome cannot presently be predicted. It is the opinion of
management that the ultimate resolution of all existing claims, legal
proceedings and other contingencies, either individually or in the aggregate,
will not materially affect either the company's financial position, liquidity
or results of operations.
72 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 41
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER ANNUAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $2,507.5 $3,006.3 $3,122.0 $2,610.0 $11,245.8
Gross Profit 868.7 1,142.9 1,226.4 845.3 4,083.3
Income from
Continuing Operations 265.2 391.2 408.3 168.6 1,233.3
Diluted Earnings per Share .54 .80 .84 .35 2.53
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER ANNUAL
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $2,462.9 $2,994.3 $3,101.6 $2,507.4 $11,066.2
Gross Profit 865.9 1,124.7 1,178.0 800.7 3,969.3
Income from
Continuing Operations $ 257.7 $ 381.2 $ 393.5 $ 146.8 $ 1,179.2
Cumulative Effect of
Accounting Change -- -- -- (10.0) (10.0)
------------------------------------------------------------------------------------
Net Income $ 257.7 $ 381.2 $ 393.5 $ 136.8 $ 1,169.2
- -------------------------------------------------------------------------------------------------------------------------
Diluted Earnings per Share:
Income from
Continuing Operations $ .51 $ .76 $ .79 $ .30 $ 2.36
Cumulative Effect of
Accounting Change -- -- -- (.02) (.02)
------------------------------------------------------------------------------------
Net Income $ .51 $ .76 $ .79 $ .28 $ 2.34
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 73
<PAGE> 42
<TABLE>
FINANCIAL SUMMARY -- OPERATIONS
Anheuser-Busch Companies and Subsidiaries
(In millions, except per share data)
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Consolidated Summary of Operations:
Barrels of A-B beer brands sold worldwide 99.8 96.6 95.1
=============================================
Sales $13,207.9 $12,832.4 $12,621.5
Beer excise taxes 1,962.1 1,766.2 1,737.8
---------------------------------------------
Net sales 11,245.8 11,066.2 10,883.7
Cost of products and services 7,162.5 7,096.9 6,964.6
---------------------------------------------
Gross profit 4,083.3 3,969.3 3,919.1
Marketing, distribution and administrative expenses 1,958.0 1,916.3 1,890.0
Gain on sale of St. Louis Cardinals -- -- 54.7
Shutdown of Tampa brewery -- -- --
Restructuring charge -- -- --
---------------------------------------------
Operating income 2,125.3 2,053.0 2,083.8<F2>
Interest expense (291.5) (261.2) (232.8)
Interest capitalized 26.0 42.1 35.5
Interest income 5.8 7.9 9.4
Other income/(expense), net (13.0) (9.3) (3.0)
---------------------------------------------
Income before income taxes 1,852.6 1,832.5 1,892.9<F2>
Provision for income taxes (current and deferred) 704.3 703.6 736.8
Revaluation of deferred tax liability under FAS 109 -- -- --
Equity income, net of tax 85.0 50.3 --
---------------------------------------------
Income from continuing operations 1,233.3 1,179.2 1,156.1<F2>
Income/(loss) from discontinued operations -- -- 33.8
---------------------------------------------
Income before accounting changes 1,233.3 1,179.2 1,189.9
Cumulative effect of accounting changes -- (10.0)<F1> --
---------------------------------------------
Net Income $ 1,233.3 $ 1,169.2 $ 1,189.9
=============================================
Basic Earnings Per Share:
Continuing operations $ 2.56 $ 2.39 $ 2.31
Discontinued operations -- -- .07
---------------------------------------------
Income before accounting changes 2.56 2.39 2.38
Cumulative effect of accounting changes -- (.02)<F1> --
---------------------------------------------
Net income $ 2.56 $ 2.37 $ 2.38
=============================================
Diluted Earnings Per Share:
Continuing operations $ 2.53 $ 2.36 $ 2.27<F2>
Discontinued operations -- -- .07
---------------------------------------------
Income before accounting changes 2.53 2.36 2.34
Cumulative effect of accounting changes -- (.02)<F1> --
---------------------------------------------
Net income $ 2.53 $ 2.34 $ 2.34
=============================================
Cash dividends paid on common stock $ 521.0 $ 492.6 $ 458.9
Per share 1.08 1.00 .92
Weighted average number of common shares:
Basic 482.1 492.6 499.1
Diluted 487.5 499.7 510.6
- --------------------------------------------------------------------------------------------------------
<FN>
Note: All per share information and average number of common shares data
reflect the September 12, 1996 two-for-one stock split and the 1997 adoption
of FAS 128, "Earnings per Share," as applicable. All financial information
has been restated to recognize the 1995 divestiture of the food products
segment. All amounts include the acquisition of SeaWorld as of December 1,
1989.
<FNote 1:> 1997 change in accounting for deferred systems reengineering costs,
net of tax of $6.2 million. 1992 change in accounting for income
taxes and postretirement benefits, net of tax benefit of $186.4
million.
<FNote 2:> 1996 results include the impact of the gain on the sale of the St.
Louis Cardinals. Excluding the Cardinal gain, operating income,
pretax income, income from continuing operations and diluted
earnings per share would have been $2,029.1 million, $1,838.2
million, $1,122.7 million and $2.21, respectively.
74 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 43
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated Summary of Operations:
Barrels of A-B beer brands sold worldwide 90.9 91.3 89.7 88.9
===========================================================
Sales $12,004.5 $11,705.0 $11,147.3 $11,008.6
Beer excise taxes 1,664.0 1,679.7 1,679.8 1,668.6
-----------------------------------------------------------
Net Sales 10,340.5 10,025.3 9,467.5 9,340.0
Cost of products and services 6,791.0 6,492.1 6,167.6 6,051.8
-----------------------------------------------------------
Gross profit 3,549.5 3,533.2 3,299.9 3,288.2
Marketing, distribution and administrative expenses 1,756.6 1,679.9 1,612.1 1,583.7
Gain on sale of St. Louis Cardinals -- -- -- --
Shutdown of Tampa brewery 160.0 -- -- --
Restructuring -- -- 401.3 --
-----------------------------------------------------------
Operating income 1,632.9<F3> 1,853.3 1,286.5<F4> 1,704.5
Interest expense (225.9) (219.3) (205.1) (194.6)
Interest capitalized 24.3 21.8 35.2 46.9
Interest income 9.9 2.6 3.4 4.4
Other income/(expense), net 20.5 17.6 21.0 (2.5)
-----------------------------------------------------------
Income before income taxes 1,461.7<F3> 1,676.0 1,141.0<F4> 1,558.7
Provision for income taxes (current and deferred) 575.1 661.5 452.6 594.6
Revaluation of deferred tax liability under FAS 109 -- -- 31.2 --
Equity income, net of tax -- -- -- --
-----------------------------------------------------------
Income from continuing operations 886.6<F3> 1,014.5 657.2<F4> 964.1
Income/loss from discontinued operations (244.3) 17.6 (62.7) 30.1
-----------------------------------------------------------
Income before accounting changes 642.3 1,032.1 594.5 994.2
Cumulative effect of accounting changes -- -- -- (76.7)<F1>
-----------------------------------------------------------
Net income $ 642.3 $ 1,032.1 $ 594.5 $ 917.5
===========================================================
Basic Earnings Per Share:
Continuing operations $ 1.73 $ 1.93 $ 1.20 $ 1.71
Discontinued operations (.47) .04 (.11) .05
-----------------------------------------------------------
Income before accounting changes 1.26 1.97 1.09 1.76
Cumulative effect of accounting changes -- -- -- (.13)<F1>
-----------------------------------------------------------
Net income $ 1.26 $ 1.97 $ 1.09 $ 1.63
===========================================================
Diluted Earnings Per Share:
Continuing operations $ 1.71<F3> $ 1.90 $ 1.20<F4> $ 1.68
Discontinued operations (.47) .04 (.11) .05
-----------------------------------------------------------
Income before accounting changes 1.24 1.94 1.09 1.73
Cumulative effect of accounting changes -- -- -- (.13)<F1>
-----------------------------------------------------------
Net income $ 1.24 $ 1.94 $ 1.09 $ 1.60
===========================================================
Cash dividends paid on common stock $ 429.5 $ 398.8 $ 370.0 $ 338.3
Per share .84 .76 .68 .60
Weighted average number of common shares:
Basic 510.9 524.6 544.3 563.7
Diluted 524.4 538.0 558.6 581.6
-----------------------------------------------------------
1991 1990 1989 1988
-----------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated Summary of Operations:
Barrels of A-B beer brands sold worldwide 87.9 88.1 82.2 79.9
===========================================================
Sales $10,631.9 $9,716.1 $8,553.7 $8,120.5
Beer excise taxes 1,637.9 868.1 802.3 781.0
-----------------------------------------------------------
Net sales 8,994.0 8,848.0 7,751.4 7,339.5
Cost of products and services 5,953.5 5,963.4 5,226.5 4,878.1
-----------------------------------------------------------
Gross profit 3,040.5 2,884.6 2,524.9 2,461.4
Marketing, distribution and administrative expenses 1,409.5 1,364.9 1,244.3 1,245.2
Gain on sale of St. Louis Cardinals -- -- -- --
Shutdown of Tampa brewery -- -- -- --
Restructuring charge -- -- -- --
-----------------------------------------------------------
Operating income 1,631.0 1,519.7 1,280.6 1,216.2
Interest expense (234.0) (277.2) (172.9) (134.6)
Interest capitalized 45.6 52.5 49.8 42.9
Interest income 6.6 4.3 7.9 9.8
Other income/(expense), net 1.3 (16.5) 17.7 (15.5)
-----------------------------------------------------------
Income before income taxes 1,450.5 1,282.8 1,183.1 1,118.8
Provision for income taxes (current and deferred) 549.6 481.4 438.2 422.0
Revaluation of deferred tax liability under FAS 109 -- -- -- --
Equity income, net of tax -- -- -- --
-----------------------------------------------------------
Income from continuing operations 900.9 801.4 744.9 696.8
Income/(loss) from discontinued operations 38.9 41.0 22.3 19.1
-----------------------------------------------------------
Income before accounting changes 939.8 842.4 767.2 715.9
Cumulative effect of accounting changes -- -- -- --
-----------------------------------------------------------
Net income $ 939.8 $ 842.4 $ 767.2 $ 715.9
===========================================================
Basic Earnings Per Share:
Continuing operations $ 1.59 $ 1.42 $ 1.32 $ 1.20
Discontinued operations .06 .07 .04 .04
-----------------------------------------------------------
Income before accounting changes 1.65 1.49 1.36 1.24
Cumulative effect of accounting changes -- -- -- --
-----------------------------------------------------------
Net income $ 1.65 $ 1.49 $ 1.36 $ 1.24
===========================================================
Diluted Earnings Per Share:
Continuing operations $ 1.56 $ 1.40 $ 1.30 $ 1.19
Discontinued operations .06 .07 .04 .04
-----------------------------------------------------------
Income before accounting changes 1.62 1.47 1.34 1.23
Cumulative effect of accounting changes -- -- -- --
-----------------------------------------------------------
Net income $ 1.62 $ 1.47 $ 1.34 $ 1.23
===========================================================
Cash dividends paid on common stock $ 301.1 $ 265.0 $ 226.2 $ 188.6
Per share .53 .47 .40 .33
Weighted average number of common shares:
Basic 568.0 563.7 565.5 577.1
Diluted 585.8 579.4 572.4 584.4
- ----------------------------------------------------------------------------------------------------------------------
<FN>
<FNote 3:> 1995 results include the impact of the one-time pretax charge of
$160 million for the closure of the Tampa brewery, and the $74.5
million pretax impact of the beer wholesaler inventory reduction.
Excluding these nonrecurring special items, operating income,
pretax income, income from continuing operations and diluted
earnings per share would have been $1,867.4 million, $1,696.2
million, $1,032.3 million and $1.99, respectively.
<FNote 4:> 1993 results include the impact of two nonrecurring special
charges. These charges are (1) a restructuring charge ($401.3
million, pretax) and (2) a revaluation of the deferred tax
liability due to the 1% increase in federal tax rates ($31.2
million, after-tax). Excluding these nonrecurring special charges,
operating income, pretax income, income from continuing operations
and diluted earnings per share would have been $1,687.8 million,
$1,542.3 million, $935.2 million and $1.69, respectively.
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 75
<PAGE> 44
<TABLE>
FINANCIAL SUMMARY -- BALANCE SHEET AND OTHER INFORMATION
Anheuser-Busch Companies and Subsidiaries
(In millions, except per share and statistical data)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance Sheet Information:
Working capital (deficit) $ (89.9) $ 83.2 $ 34.9
Current ratio 0.9 1.1 1.0
Plant and equipment, net 7,849.0 7,750.6 7,208.2
Long-term debt 4,718.6 4,365.6 3,270.9
Total debt to total capitalization ratio 52.8% 51.9% 44.8%
Deferred income taxes 1,303.6 1,293.6 1,208.1
Shareholders equity 4,216.0 4,041.8 4,029.1
Return on shareholders equity 29.9% 29.2%<F1> 30.0%<F2>
Book value per share 8.84 8.30 8.10
Total assets 12,484.3 11,727.1 10,463.6
Other Information:
Capital expenditures $ 817.5 $ 1,199.3 $ 1,084.6
Depreciation and amortization 738.4 683.7 611.5
Effective tax rate 38.0% 38.4% 38.9%
Price/earnings ratio 25.9 18.6 <F1> 17.6 <F2>
Percent of pretax profit on net sales 16.5% 16.6% 17.4%
Market price range of common stock (high and low closing) 68 1/4-43 7/16 47 7/8-39 1/2 42 7/8-32 1/2
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
Note: All share and per share information reflects the September 12, 1996
two-for-one stock split. All financial information has been restated to
recognize the 1995 divestiture of the food products segment. All amounts
include the acquisition of SeaWorld as of December 1, 1989.
<FNote 1:> These ratios have been calculated based on income from continuing
operations before the cumulative effect of accounting changes.
<FNote 2:> These ratios have been calculated based on reported income from
continuing operations, which includes the $54.7 million pretax gain
on the sale of the St. Louis Cardinals. Excluding the Cardinal
gain, return on shareholders equity would have been 29.2% and the
price/earnings ratio would have been 18.1.
<FNote 3:> These ratios have been calculated based on reported income from
continuing operations. Excluding the two nonrecurring 1995 items
($160 million pretax charge for closure of the Tampa brewery and
$74.5 million impact of the beer wholesaler inventory reduction),
return on shareholders equity would have been 29.1% and the
price/earnings ratio would have been 16.8.
<FNote 4:> These ratios have been calculated based on reported income from
continuing operations. Excluding the two nonrecurring 1993 charges
($401.3 million pretax restructuring charge and $31.2 million
after-tax FAS 109 charge), return on shareholders equity would have
been 26.7% and the price/earnings ratio would have been 13.8.
76 ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT
<PAGE> 45
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance Sheet Information:
Working capital (deficit) $ 268.6 $ 57.0 $ (41.3) $ 247.8
Current ratio 1.2 1.0 1.0 1.2
Plant and equipment, net 6,763.0 6,494.6 6,454.7 6,424.7
Long-term debt 3,270.1 3,066.4 3,019.7 2,630.3
Total debt to total capitalization ratio 47.1% 47.3% 47.3% 42.0%
Deferred income taxes 1,132.8 1,081.5 1,013.1 1,065.5
Shareholders equity 4,433.9 4,415.5 4,255.5 4,620.4
Return on shareholders equity 25.0%<F3> 29.9% 18.8%<F4> 27.6%<F1>
Book value per share 7.22 6.64 6.31 6.51
Total assets 10,590.9 10,547.4 10,267.7 9,954.9
Other Information:
Capital expenditures $ 952.5 $ 662.8 $ 656.3 $ 628.8
Depreciation and amortization 573.9 517.0 492.7 453.3
Effective tax rate 39.3% 39.5% 42.4% 38.1%
Price/earnings ratio 19.6 <F3> 13.1 22.6 <F4> 16.9 <F1>
Percent of pretax profit on net sales 14.1% 16.7% 12.1% 16.7%
Market price range of common stock (high and low closing) 34-25 3/8 27 5/8-23 1/2 30-22 30 1/4-26
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance Sheet Information:
Working capital (deficit) $ 107.9 $ (62.8) $ (82.8) $ (23.7)
Current ratio 1.1 0.9 0.9 1.0
Plant and equipment, net 6,260.6 6,102.2 5,768.0 4,624.2
Long-term debt 2,627.9 3,115.8 3,268.9 1,570.0
Total debt to total capitalization ratio 43.9% 54.5% 60.7% 41.7%
Deferred income taxes 1,401.0 1,309.3 1,241.9 1,155.8
Shareholders equity 4,438.1 3,679.1 3,099.9 3,102.9
Return on shareholders equity 30.2% 34.0% 34.6% 33.3%
Book value per share 5.90 4.60 3.74 3.87
Total assets 9,642.5 9,274.2 8,690.1 6,788.9
Other Information:
Capital expenditures $ 625.5 $ 805.3 $ 979.0 $ 858.1
Depreciation and amortization 437.0 404.3 333.1 306.5
Effective tax rate 37.9% 37.5% 37.0% 37.7%
Price/earnings ratio 18.9 14.6 14.4 12.9
Percent of pretax profit on net sales 16.1% 14.5% 15.3% 15.2%
Market price range of common stock (high and low closing) 30 3/4-19 3/4 22 1/2-17 1/8 22 7/8-15 1/4 17-14 1/2
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANHEUSER-BUSCH COMPANIES 1998 ANNUAL REPORT 77
APPENDIX
In Exhibit 13 to the printed Form 10-K, certain data is depicted
by the following graphs:
On page 33, graph "A-B Stock Cumulative Total Return" depicting
compounded annual growth rate of 25.2%, 1993 to 1998 at $308.20
(assumes $100 invested in A-B stock on December 31, 1993; all
dividends reinvested quarterly)
On page 36, bar graph "Sales" depicting gross sales in billions
(1994-$11.7; 1995-$12.1(normalized results); 1996-$12.6; 1997-
$12.8; 1998-$13.2) and net sales in billions (1994-$10.0; 1995-
$10.4(normalized results); 1996-$10.9; 1997-$11.1; 1998-$11.2)
On page 39, bar graph "Operating Income" depicting operating
income in millions (1994-$1,853.3; 1995-$1,867.4(normalized
results); 1996-$2,029.1(normalized results); 1997-$2,053.0; 1998-
$2,125.3)
On page 41, bar graph "Diluted Earnings Per Share From Continuing
Operations" with 1994 at $1.90; 1995 at $1.99(normalized
results); 1996 at $2.21(normalized results); 1997 at $2.36(before
cumulative effect of accounting change); 1998 at $2.53
On page 41, bar graph "Total Employee-Related Costs" depicting
such costs in millions (1994-$1,714.1; 1995-$1,735.9; 1996-
$1,781.6; 1997-$1,791.1; 1998-$1,836.8)
On page 42, bar graph "Cash Flow From Continuing Operations"
depicting cash flow from continuing operations in millions (1994-
$1,663.0; 1995-$1,425.9; 1996-$1,968.9; 1997-$1,816.6; 1998-
$2,176.0)
On page 42, bar graph "Capital Expenditures/Depreciation &
Amortization" depicting capital expenditures in millions (1994-
$662.8; 1995-$952.5; 1996-$1,084.6; 1997-$1,199.3; 1998-$817.5)
and Depreciation & Amortization in millions (1994-$517.0; 1995-
$573.9; 1996-$611.5; 1997-$683.7; 1998-$738.4)
On page 43, bar graph "Income From Continuing
Operations/Dividends on Common Stock" depicting income from
continuing operations in millions (1994-$1,014.5; 1995-
$1,032.3(normalized results); 1996-$1,122.7(normalized results);
1997-$1,179.2(before cumulative effect of accounting change);
1998-$1,233.3) and Dividends in millions (1994-$398.8; 1995-
$429.5; 1996-$458.9; 1997-$492.6; 1998-$521.0)
On page 44, bar graph "Shareholders Equity/Long-Term Debt"
depicting shareholders equity in millions (1994-$4,415.5; 1995-
$4,433.9; 1996-$4,029.1; 1997-$4,041.8; 1998-$4,216.0) and long-
term debt in millions (1994-$3,066.4; 1995-$3,270.1; 1996-
$3,270.9; 1997-$4,365.6; 1998-$4,718.6).
EX-21
<TABLE>
SUBSIDIARIES OF ANHEUSER-BUSCH COMPANIES,INC.
---------------------------------------------
<C> <C>
<S> STATE OF DOING BUSINESS
NAME OF COMPANY INCORPORATION UNDER NAME OF
- --------------- -------------- -------------
Anheuser-Busch, Incorporated Missouri Anheuser-Busch,Incorporated
Anheuser-Busch International, Delaware Anheuser-Busch International,
Incorporated Incorporated
Busch Entertainment Corporation Delaware Busch Entertainment Corporation
Metal Container Corporation Delaware Metal Container Corporation
Busch Agricultural Resources, Inc. Delaware Busch Agricultural Resources, Inc
</TABLE>
All other subsidiaries of the Company, considered in the aggregate as a
single subsidiary, would not constitute a significant subsidiary as of
December 31, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 224,800
<SECURITIES> 0
<RECEIVABLES> 610,100
<ALLOWANCES> 0
<INVENTORY> 623,400
<CURRENT-ASSETS> 1,640,400
<PP&E> 13,837,700
<DEPRECIATION> 5,988,700
<TOTAL-ASSETS> 12,484,300
<CURRENT-LIABILITIES> 1,730,300
<BONDS> 4,718,600
0
0
<COMMON> 712,700
<OTHER-SE> 3,503,300
<TOTAL-LIABILITY-AND-EQUITY> 12,484,300
<SALES> 11,245,800
<TOTAL-REVENUES> 11,245,800
<CGS> 7,162,500
<TOTAL-COSTS> 9,120,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 291,500
<INCOME-PRETAX> 1,852,600
<INCOME-TAX> 704,300
<INCOME-CONTINUING> 1,233,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,233,300
<EPS-PRIMARY> 2.56
<EPS-DILUTED> 2.53
</TABLE>
