Anheuser-Busch Cos. Reports Increased Sales and Earnings for the Third Quarter
and Nine Months of 2006
ST. LOUIS, Oct. 26 -- Led by strong domestic beer revenues and earnings,
Anheuser-Busch Cos. Inc. (NYSE: BUD) today reported that third quarter 2006 net
sales increased 4.7 percent and diluted earnings per share (excluding a one-time
litigation settlement in 2005) increased 7.9 percent (1). For the nine months of
2006, net sales increased 5.3 percent and diluted earnings per share (excluding
one-time items in both years) improved 7.1 percent (1).
"We are pleased with our earnings results to date," said Patrick Stokes,
president and chief executive officer of the company. "Earnings growth for the
company's domestic beer business accelerated in the quarter, with pretax
income up 7 percent. Beer shipments to wholesalers increased 1.1 percent in
the third quarter while revenue per barrel (2) was up 2.8 percent versus last
year. Productivity improvement initiatives, along with somewhat lesser energy
cost increases, have helped mitigate continuing cost pressures. In addition,
our international beer segment, led by Grupo Modelo, and our entertainment
segment are having outstanding years. We expect Anheuser-Busch's positive
performance to continue through the end of the year and our earnings to
continue to improve in 2007."
Consistent with the pattern for 2006 pricing actions, the company plans to
implement increases on the majority of its beer volume in early 2007, with a
few selective increases occurring in the fourth quarter 2006. As in the past,
pricing initiatives will be tailored to selected markets, brands and packages.
BEER SALES RESULTS
The company's reported beer volume for the third quarter and nine months
of 2006 is summarized in the following table:
Reported Beer Volume (millions of barrels)
For Periods Ended September 30
Third Quarter Nine Months
Versus 2005 Versus 2005
2006 Barrels % 2006 Barrels %
Domestic 27.5 Up 0.3 Up 1.1% 80.0 Up 2.0 Up 2.6%
International 6.5 Up 0.4 Up 5.9% 17.1 Up 1.7 Up 10.9%
Worldwide A-B Brands 34.0 Up 0.7 Up 2.0% 97.1 Up 3.7 Up 4.0%
Equity Partner Brands 9.2 Up 0.5 Up 6.6% 24.1 Up 4.3 Up 22.0%
Total Brands 43.2 Up 1.2 Up 2.9% 121.2 Up 8.0 Up 7.1%
Domestic beer shipments-to-wholesalers increased 1.1 percent for the third
quarter while sales-to-retailers decreased 0.4 percent (on a selling day
adjusted basis), with Rolling Rock, Grolsch and Tiger contributing 0.8 points
of growth to both shipments and sales-to-retailers.
Year-to-date, shipments-to-wholesalers increased 2.6 percent and sales-to-
retailers increased 0.9 percent, with Rolling Rock, Grolsch and Tiger
contributing 0.4 points of growth to shipments and sales-to-retailers. The
increase in year-to-date sales-to-retailers was led by Bud Light, which grew
over 4 percent. Wholesaler inventories at the end of the third quarter were
just under two days higher than at the end of the third quarter 2005.
The company's estimated domestic market share (excluding exports) for the
nine months of 2006 was 49.0 percent, compared with 2005 market share of 48.9
percent. Domestic market share is based on estimated U.S. beer industry
shipment volume using information provided by the Beer Institute and the U.S.
Department of Commerce.
International volume, consisting of 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, increased 6 percent for the third quarter and 11 percent for the
nine months of 2006. These increases are primarily due to increased volume in
China and Canada in both periods plus an increase in Mexico year-to-date.
Worldwide Anheuser-Busch brands volume, comprised of domestic volume and
international volume, increased 2 percent and 4 percent, respectively, for the
third quarter and nine months of 2006 versus 2005, to 34 million and 97
million barrels, respectively.
Total brands volume, which combines worldwide Anheuser-Busch brand volume
with equity partner volume (representing the company's share of its equity
partners' volume on a one-month lag basis) was 43 million barrels in the third
quarter 2006, up 1 million barrels, or 3 percent. Total brands volume was up 7
percent, to 121 million barrels for the nine months of 2006.
Equity partner brands volume grew 7 percent and 22 percent, respectively,
for the third quarter and nine months of 2006 due to Modelo and Tsingtao
volume growth. The company began equity accounting for Tsingtao in May 2005.
THIRD QUARTER 2006 FINANCIAL RESULTS
Effective in the first quarter 2006, Anheuser-Busch adopted FAS 123R,
"Share-Based Payment." FAS 123R requires the recognition of stock
compensation expense for stock options and other forms of equity compensation,
based on the fair value of the instruments on the date of grant. In order to
enhance the comparability of all periods presented and provide the fullest
understanding of the impact that expensing stock compensation has on the
company's financial results, Anheuser-Busch elected to apply the modified
retrospective method of adopting FAS 123R. The company has therefore recast
2005 results to incorporate the impact of previously disclosed pro forma stock
compensation expense. For financial reporting purposes, stock compensation
expense is included in cost of sales and marketing, distribution and
administrative expenses, depending on where the recipient's cash compensation
is reported. Stock compensation expense is classified as a corporate item for
segment reporting. Stock compensation expense was $.02 per share in the third
quarters of both 2006 and 2005, and was $.05 per share for the nine months of
both years.
Key operating results and a discussion of financial highlights for the
third quarter 2006 versus 2005 follow.
($ in millions, except per share)
Third Quarter 2006 vs. 2005
2006 2005 $ %
Gross Sales $4,877 $4,689 Up $188 Up 4.0%
Net Sales $4,281 $4,089 Up $192 Up 4.7%
Income Before Income Taxes $793 $624 Up $169 Up 26.9%
Equity Income $157 $147 Up $10 Up 6.4%
Net Income $638 $505 Up $133 Up 26.3%
Diluted Earnings per Share $.82 $.65 Up $.17 Up 26.2%
- Net sales increased 4.7 percent driven by increases from all operating
segments. Domestic beer segment sales increased 3.9 percent due to 1.1
percent higher beer sales volume combined with a 2.8 percent increase
in revenue per barrel, while international beer sales were up 4 percent
on volume increases. Packaging segment sales increased 6 percent due to
higher recycling sales. Entertainment revenues increased 9 percent due
to higher attendance.
- Income before income taxes (1), excluding the 2005 litigation
settlement discussed below, increased 8.7 percent versus the prior
year, primarily due to increased profits from domestic and
international beer and entertainment operations. Reported income before
income taxes increased 27 percent compared to 2005.
In the third quarter 2005, Anheuser-Busch settled litigation involving
one of its former independent wholesalers and incurred a one-time
pretax charge of $105 million, or $.12 per share, which is reported as
a separate line item in the consolidated income statement.
Pretax profits for the domestic beer segment increased 7 percent,
primarily due to higher beer sales volume, increased revenue per barrel
and lower marketing costs, partially offset by higher beer production
costs.
International beer pretax income was up 22 percent versus prior year,
primarily from increased earnings in China partially offset by lower
profits in the United Kingdom.
Packaging segment pretax profits were down 3 percent, primarily from
lower can manufacturing profits, partially offset by higher earnings in
bottle manufacturing and recycling operations.
Entertainment segment pretax income improved 10 percent due to higher
attendance and increased in-park spending, partially offset by higher
operating costs.
- Equity income increased 6.4 percent reflecting Grupo Modelo volume
growth, price increases taken in Mexico at the beginning of the year,
and a lower Mexican income tax rate.
- Excluding the impact of the 2005 litigation settlement, the effective
income tax rate of 39.3 percent for the third quarter 2006 increased
100 basis points due to higher taxes on foreign earnings, while net
income and diluted earnings per share increased 6.7 percent and 7.9
percent, respectively. (1) On a reported basis, net income increased
26.3 percent, diluted earnings per share increased 26.2 percent, to
$.82, and the effective income tax rate decreased 340 basis points.
NINE MONTHS OF 2006 FINANCIAL RESULTS
Key operating results and a discussion of financial highlights for the
nine months of 2006 vs. 2005 follow.
($ in millions, except per share)
Nine Months 2006 vs. 2005
2006 2005 $ %
Gross Sales $14,027 $13,372 Up $655 Up 4.9%
Net Sales $12,292 $11,670 Up $622 Up 5.3%
Income Before Income Taxes $2,172 $1,967 Up $205 Up 10.4%
Equity Income $449 $390 Up $59 Up 15.1%
Net Income $1,775 $1,599 Up $176 Up 11.0%
Diluted Earnings per Share $2.28 $2.04 Up $.24 Up 11.8%
- Net sales increased 5 percent due to contributions from all of the
company's business segments. Domestic beer net sales increased 3.8
percent due to 2.6 percent higher beer sales volume and 1.2 percent
higher revenue per barrel. International beer segment net sales grew 8
percent on volume increases, packaging segment sales increased 10
percent due to higher recycling revenues, and entertainment sales
increased 9 percent primarily from increased attendance.
- Income before income taxes increased 5.6 percent, (1) excluding both
the litigation settlement previously discussed and the $15.4 million
pretax gain in 2005 from the sale of the company's equity interest in
its Spanish theme park investment, Port Aventura. On a reported basis,
pretax income increased 10.4 percent, due to higher profits in all
business segments.
Income before income taxes for domestic beer was up 3 percent due to
higher volume, increased revenue per barrel and lower marketing costs,
partially offset by higher beer production costs.
International beer pretax income increased 8 percent primarily due to
increased profits in China, Canada and Mexico, partially offset by
lower earnings in the United Kingdom.
Packaging segment pretax income increased 2 percent primarily due to
higher can and bottle manufacturing profits, partially offset by higher
costs for label manufacturing.
Entertainment segment pretax results improved 15 percent due to
increased attendance and in-park spending, partially offset by higher
park operating expenses.
- Equity income increased 15 percent due to Grupo Modelo volume
increases, pricing growth and a lower Mexican income tax rate.
- Comparisons of net income, earnings per share and the effective income
tax rate are all impacted by one-time income tax events in both years,
as well as the 2005 litigation settlement and gain on the sale of the
Spanish theme park investment. In 2006, Anheuser-Busch recognized a
gain of $7.8 million from the reduction of deferred income taxes
resulting from state income tax reform legislation in Texas, while in
2005 the company recognized a similar gain of $7.2 million due to tax
reform legislation in Ohio and also reported a $6.8 million favorable
settlement of certain Chilean taxes associated with the 2004 sale of
the company's equity stake in Compania Cervecerias Unidas S.A. (CCU).
Excluding these one-time items from both years, net income and diluted
earnings per share for the nine months of 2006 would have increased 6.5
percent and 7.1 percent, respectively, (1) and the 2006 effective
income tax rate would have been 39.3 percent, an increase of 100 basis
points versus 2005 due to higher taxes on foreign earnings. On a
reported basis net income increased 11.0 percent, diluted earnings per
share were up 11.8 percent, to $2.28 and the 2006 effective income tax
rate was up 50 basis points to 39.0 percent.
Earnings per share benefited from the company's repurchase of over 13
million shares during the nine months of 2006.
Other Matters
Anheuser-Busch will conduct a conference call with investors to discuss
results for the third quarter and nine months at 3 p.m. CDT today. The company
will broadcast the conference call live via the Internet. For details visit
the company's site on the Internet at http://www.anheuser-busch.com .
Notes
(1) Reconciliation of Comparative Third Quarter and Nine Months Results
($ in millions, except per share)
Income
Before Provision
Income for Income Net Earnings Effective
Third Quarter Taxes Taxes Income Per Share Tax Rate
2006
Reported $792.5 ($311.5) $637.5 $0.82 39.3%
2005
As Reported $643.3 ($272.2) $518.2 $0.66
FAS 123R Impact (19.0) 5.6 (13.4) (0.017)
Including FAS 123R 624.3 (266.6) 504.8 0.65 42.7%
Litigation Settlement 105.0 (12.6) 92.4 0.118
Excluding One-Time
Items $729.3 ($279.2) $597.2 $0.76 38.3%
Percentage Change -
2006 vs. 2005
Including FAS 123R 26.9% 26.3% 26.2% -3.4%
Excluding One-Time
Items 8.7% 6.7% 7.9% 1.0%
Nine Months
2006
Reported $2,172.1 ($846.9) $1,774.5 $2.28 39.0%
Texas Income Tax
Legislation Benefit (7.8) (7.8) (0.01)
Excluding One-Time
Item $2,172.1 ($854.7) $1,766.7 $2.27 39.3%
2005
As Reported $2,023.6 ($775.8) $1,638.0 $2.09
FAS 123R Impact (56.9) 17.7 (39.2) (.05)
Including FAS 123R 1,966.7 (758.1) 1,598.8 2.04 38.5%
Gain on Sale of
Spanish Theme Park (15.4) (3.5) (18.9) (.024)
Chile Income Tax
Settlement Benefit (6.8) (6.8) (.009)
Ohio Income Tax
Legislation Benefit (7.2) (7.2) (.009)
Litigation Settlement 105.0 (12.6) 92.4 .118
Excluding One-Time
Items $2,056.3 ($788.2) $1,658.3 $2.12 38.3%
Percentage Change -
2006 vs. 2005
Including FAS 123R 10.4% 11.0% 11.8% 0.5%
Excluding One-Time
Items 5.6% 6.5% 7.1% 1.0%
(2) Domestic revenue per barrel is calculated as net sales generated by
the company's domestic beer operations on barrels of beer sold,
determined on a U.S. GAAP basis, divided by the volume of beer
shipped to U.S. wholesalers.
This release contains forward-looking statements regarding the company's
expectations concerning its future operations, earnings and prospects. On the
date the forward-looking statements are made, the statements represent the
company's expectations, but the company's expectations concerning its future
operations, earnings and prospects may change. The company's expectations
involve risks and uncertainties (both favorable and unfavorable) and are based
on 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. Accordingly, there can be no assurances that the company's
expectations and the forward-looking statements will be correct. Important
factors that could cause actual results to differ (favorably or unfavorably)
from the expectations stated in this release include, among others, changes in
the pricing environment for the company's products; changes in U.S. demand for
malt beverage products, including changes in U.S. demand for other alcohol
beverages; changes in consumer preference for the company's malt beverage
products; changes in the cost of marketing the company's malt beverage
products; regulatory or legislative changes, including changes in beer excise
taxes at either the federal or state level and changes in income taxes;
changes in the litigation to which the company is a party; changes in raw
materials prices; changes in packaging materials costs; changes in energy
costs; changes in the financial condition of the company's suppliers; changes
in interest rates; changes in foreign currency exchange rates; unusual weather
conditions that could impact beer consumption in the U.S.; 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; changes in the economies of the countries in
which the company's international beer business or its international equity
partners operate; changes in the company's credit rating resulting from future
acquisitions or divestitures; and the effect of stock market conditions on the
company's share repurchase program. Anheuser-Busch disclaims any obligation to
update or revise any of these forward-looking statements. Additional risk
factors concerning the company can be found in the company's most recent Form
10-K.
Anheuser-Busch Companies, Inc.
Consolidated Statement of Income (Unaudited)
(In Millions, Except Per Share)
Third Quarter Nine Months
Ended September 30 Ended September 30
2006 2005 2006 2005
Gross sales $4,876.5 $4,689.4 $14,026.8 $13,371.8
Excise taxes (595.8) (600.9) (1,734.5) (1,701.5)
Net sales 4,280.7 4,088.5 12,292.3 11,670.3
Cost of sales (2,644.6) (2,517.6) (7,723.0) (7,228.4)
Marketing, distribution
and administrative
expenses (738.2) (723.6) (2,068.2) (2,055.1)
Litigation Settlement - (105.0) - (105.0)
Operating income 897.9 742.3 2,501.1 2,281.8
Interest expense (111.3) (112.5) (341.6) (343.2)
Interest capitalized 4.4 4.1 13.4 14.8
Interest income 0.6 0.2 1.4 2.4
Other income/(expense), net 0.9 (9.8) (2.2) 10.9
Income before income taxes 792.5 624.3 2,172.1 1,966.7
Provision for income taxes (311.5) (266.6) (846.9) (758.1)
Equity income, net of tax 156.5 147.1 449.3 390.2
Net income $637.5 $504.8 $1,774.5 $1,598.8
Basic earnings per share $.83 $.65 $2.30 $2.06
Diluted earnings per share $.82 $.65 $2.28 $2.04
Weighted Average Shares
Outstanding:
Basic 769.0 776.5 771.6 777.6
Diluted 775.9 780.8 778.0 783.2
Anheuser-Busch Companies, Inc.
Comparative Business Segments (Unaudited)
Third Quarter Ended September 30
(In Millions)
Inter- Enter- Corporate
Domestic national Pack- tain- and
Third Quarter Beer Beer aging ment Elims Consol.
2006
Gross Sales $3,594.2 319.1 641.8 444.4 (123.0) $4,876.5
Net Sales:
- Intersegment $0.7 - 240.4 - (241.1) $0.0
- External $3,054.9 262.0 401.4 444.4 118.0 $4,280.7
Income Before
Income Taxes $789.7 27.3 39.0 157.3 (220.8) $792.5
Equity Income $1.4 155.1 - - - $156.5
Net Income $491.0 172.0 24.2 97.5 (147.2) $637.5
2005
Gross Sales $3,475.2 318.9 616.1 408.4 (129.2) $4,689.4
Net Sales:
- Intersegment $0.7 - 238.6 - (239.3) $0.0
- External $2,940.2 252.3 377.5 408.4 110.1 $4,088.5
Income Before
Income Taxes $738.8 22.3 40.3 143.5 (320.6) $624.3
Equity Income $0.0 147.1 - - - $147.1
Net Income $458.0 161.0 24.9 89.0 (228.1) $504.8
The company adopted FAS 123R, "Share-Based Payment," effective in the
first quarter 2006 and has elected to apply the modified retrospective method
of adoption. Pursuant to the modified retrospective approach, 2005 corporate
information has therefore been updated to include the impact of previously
disclosed pro forma stock compensation expense. Stock compensation expense is
classified as a corporate item for segment reporting purposes.
Anheuser-Busch Companies, Inc.
Comparative Business Segments (Unaudited)
Nine Months Ended September 30
(In Millions)
Inter- Enter- Corporate
Domestic national Pack- tain- and
Nine Months Beer Beer aging ment Elims Consol.
2006
Gross Sales $10,480.4 916.1 1,985.9 984.5 (340.1) $14,026.8
Net Sales:
- Intersegment $2.2 - 709.6 - (711.8) $0.0
- External $8,913.2 746.6 1,276.3 984.5 371.7 $12,292.3
Income Before
Income Taxes $2,366.6 75.4 122.9 248.2 (641.0) $2,172.1
Equity Income $3.1 446.2 - - - $449.3
Net Income $1,470.4 492.9 76.2 153.9 (418.9) $1,774.5
2005
Gross Sales $10,121.0 864.0 1,831.5 904.4 (349.1) $13,371.8
Net Sales:
- Intersegment $2.1 - 674.7 - (676.8) $0.0
- External $8,587.3 694.1 1,156.8 904.4 327.7 $11,670.3
Income Before
Income Taxes $2,293.4 70.1 120.4 215.1 (732.3 ) $1,966.7
Equity Income $0.0 390.2 - - - $390.2
Net Income $1,421.9 433.7 74.6 133.4 (464.8) $1,598.8
The company adopted FAS 123R, "Share-Based Payment," effective in the
first quarter 2006 and has elected to apply the modified retrospective method
of adoption. Pursuant to the modified retrospective approach, 2005 corporate
information has therefore been updated to include the impact of previously
disclosed pro forma stock compensation expense. Stock compensation expense is
classified as a corporate item for segment reporting purposes.
Anheuser-Busch Companies, Inc.
Consolidated Balance Sheet (Unaudited)
(In Millions)
September 30, December 31,
2006 2005
Assets
Current Assets:
Cash $191.2 $225.8
Accounts receivable 903.4 681.4
Inventories 655.8 654.5
Other current assets 197.6 197.0
Total current assets 1,948.0 1,758.7
Investments in affiliated companies 3,525.7 3,448.2
Plant and equipment, net 8,836.0 9,041.6
Intangible assets, including goodwill
of $1,061.5 and $1,034.5 1,349.2 1,232.6
Other assets 1,218.9 1,073.9
Total assets $16,877.8 $16,555.0
Liabilities and Shareholders Equity
Current Liabilities:
Accounts payable $1,314.9 $1,249.5
Accrued salaries, wages and benefits 313.8 250.9
Accrued taxes 263.2 156.7
Accrued interest 118.4 123.7
Other current liabilities 235.1 201.8
Total current liabilities 2,245.4 1,982.6
Postretirement benefits 441.1 444.3
Debt 7,392.5 7,972.1
Deferred income taxes 1,317.0 1,345.9
Other long-term liabilities 1,137.6 1,130.3
Shareholders Equity:
Common stock 1,473.0 1,468.6
Capital in excess of par value 2,870.3 2,685.9
Retained earnings 16,827.5 15,698.0
Treasury stock, at cost (15,838.5) (15,258.9)
Accumulated non-owner changes in equity (988.1) (913.8)
Total Shareholders Equity 4,344.2 3,679.8
Commitments and contingencies - -
Total Liabilities and
Shareholders Equity $16,877.8 $16,555.0
Anheuser-Busch Companies, Inc.
Consolidated Statement of Cash Flows (Unaudited)
(In Millions)
Nine Months
Ended September 30,
2006 2005
Cash flow from operating activities:
Net income $1,774.5 $1,598.8
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 740.3 732.3
Decrease in deferred income taxes (38.8) (73.3)
Stock-based compensation expense 52.1 56.9
Undistributed earnings of
affiliated companies (202.2) (180.2)
Gain on sale of business - (15.4)
Other, net (131.2) 125.6
Operating cash flow before the change
in working capital 2,194.7 2,244.7
Decrease / (Increase)
in working capital 30.8 (98.4)
Cash provided by operating activities 2,225.5 2,146.3
Cash flow from investing activities:
Capital expenditures (486.5) (823.1)
Acquisitions (82.3) -
Proceeds from sale of business - 48.3
Cash used for investing activities (568.8) (774.8)
Cash flow from financing activities:
Increase in debt 317.3 -
Decrease in debt (902.8) (320.2)
Dividends paid to shareholders (645.0) (591.1)
Acquisition of treasury stock (580.2) (620.4)
Shares issued under stock plans 119.4 124.0
Cash used for financing activities (1,691.3) (1,407.7)
Net decrease in cash during the period (34.6) (36.2)
Cash, beginning of period 225.8 228.1
Cash, end of period $191.2 $191.9
SOURCE Anheuser-Busch Cos. Inc.
-0- 10/26/2006
/CONTACT: Kelli Powers of Anheuser-Busch Cos. Inc., +1-314-577-9618 /
/Web site: http://www.anheuser-busch.com /
(BUD)
END
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