Business News

Anheuser-Busch Cos. Reports Increased Sales and Earnings for the Third Quarter and Nine Months of 2008

Friday 07. November 2008 - Anheuser-Busch Cos. Inc. (NYSE:BUD) today reported that third quarter 2008 net sales increased 6.5 percent and diluted earnings per share (excluding one-time items in both 2008 and 2007) increased 10.5 percent (1). For the nine months of 2008, net sales increased 5.7 percent and diluted earnings per share (excluding the one-time items) improved 8.9 percent (1).

“Anheuser-Busch had an outstanding summer selling season, with record sales in the third quarter,” said August A. Busch IV, president and chief executive officer of the company. “Driven by the national introduction of Bud Light Lime, U.S. beer shipments-to-wholesalers increased 2.3 percent while sales-to-retailers were up 3.6 percent, on a selling day adjusted basis. The Bud Light brand and super-premium Michelob Ultra family also made important contributions to growth, as did recent new products like Chelada and Landshark. According to IRI supermarket data, Anheuser-Busch gained 0.9 share points at the consumer level during the third quarter,” said Mr. Busch IV.

The U.S. beer pricing environment remained favorable throughout the key summer selling season. The company implemented price increases on the majority of its U.S. beer volume in September and October. These pricing initiatives cover approximately 85 percent of the company’s domestic volume and are tailored to selected markets, brands and packages. Overall, the company expects to achieve revenue per barrel (2) growth of 4 percent for 2008, including favorable brand mix. Commodity cost pressures continued but are being mitigated by cost savings initiatives and the company was able to expand U.S. beer gross margins in the quarter.

BEER SALES RESULTS

The company’s reported beer volume for the third quarter and nine months of 2008 is summarized in the following table:

Reported Beer Volume (millions of barrels) for Periods Ended Sept 30
Third Quarter Nine Months
Versus 2007 Versus 2007
2008 Barrels % 2008 Barrels %
U.S. 28.6 Up 0.65 Up 2.3% 82.0 Up 0.85 Up 1.1%
International 7.6 Up 0.45 Up 6.0% 19.2 Up 0.85 Up 4.8%
Worldwide A-B Brands 36.2 Up 1.1 Up 3.0% 101.2 Up 1.7 Up 1.8%
Equity Partner Brands 10.3 Up 0.3 Up 3.7% 26.8 Up 1.2 Up 4.6%
Total Brands 46.5 Up 1.4 Up 3.2% 128.0 Up 2.9 Up 2.3%





U.S. beer shipments-to-wholesalers increased 2.3 percent for the third quarter while sales-to-retailers for the quarter (selling day adjusted) increased 3.6 percent. Import brands contributed 20 basis points of growth to beer shipments. For the nine months of 2008, shipments-to-wholesalers increased 1.1 percent and sales-to-retailers (selling day adjusted) increased 1.3 percent, with import brands contributing 30 basis points of growth to each. Wholesaler inventories for Anheuser-Busch produced brands at the end of the third quarter were one day lower compared with inventories at the end of the third quarter 2007.

The company’s estimated U.S. beer market share for the nine months of 2008 was 49.2 percent compared to prior year market share of 49.0 percent. 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, increased 6 percent for the third quarter and 4.8 percent for the nine months of 2008. These increases are primarily due to increased volume in China, Canada, Mexico and Argentina, partially offset by lower volume in the United Kingdom and Ireland.

Worldwide Anheuser-Busch brands volume, comprised of domestic volume and international volume, increased 3 percent for the third quarter and 1.8 percent for the nine months of 2008 to 36.2 million and 101.2 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 46.5 million barrels in the third quarter 2008, up 1.4 million barrels, or 3.2 percent. Total brands volume was up 2.3 percent, to 128.0 million barrels for the nine months of 2008.

Equity partner brands volume grew 3.7 percent and 4.6 percent, respectively, for the third quarter and nine months of 2008 due to Tsingtao and Modelo volume growth.

THIRD QUARTER 2008 FINANCIAL RESULTS

Key operating results and a discussion of financial highlights for the third quarter 2008 versus 2007 follow.

($ in millions, except per share)
Third Quarter 2008 vs. 2007
2008 2007 $ %
Gross Sales $5,549 $5,237 Up $312 Up 5.9%
Net Sales $4,917 $4,618 Up $299 Up 6.5%
Income Before Income Taxes $829 $872 Down $43 Down 4.8%
Equity Income $174 $185 Down $11 Down 5.9%
Net Income $666 $707 Down $41 Down 5.7%
Diluted Earnings per Share $.90 $.95 Down $.05 Down 5.3%



— Net sales increased 6.5 percent driven by sales increases from U.S.
beer, international beer and entertainment operations. U.S. beer sales
increased 6.6 percent due primarily to 2.3 percent higher beer
shipments volume, and a 3.7 percent increase in revenue per barrel
resulting from price increases and favorable brand mix. International
beer sales were up 19 percent primarily on higher sales volume,
increased pricing and favorable brand mix. Entertainment revenues
increased 4.1 percent primarily due to increased attendance driven by
the successful opening of the Aquatica water park near SeaWorld
Orlando. Packaging segment sales declined 2.5 percent on lower aluminum
can revenues partially offset by higher recycling sales.


— The comparability of income before income taxes for the third quarter
is impacted by normalization items in both years. In 2008, the company
sold the U.S. distribution rights to Grolsch and recognized a pretax
gain of $15.3 million. Additionally, the company recognized a combined
$166.2 million in pretax corporate charges for outside professional
services related to the InBev transaction and for costs associated with
the previously announced enhanced retirement program. In 2007, the
company sold certain beer distribution rights in southern California
which resulted in a $26.5 million pretax gain. The gains from the sales
of distribution rights are shown in a separate line item in the income
statement and are included in U.S. beer operations for business
segments reporting. The combined outside professional services and
enhanced retirement program expenses are also shown separately in the
income statement, and are classified in corporate for segments
reporting. Excluding the normalization items to better portray
underlying results, income before income taxes increased 16 percent (1)
due to improved results for the U.S. beer, international beer and
packaging segments. Reported pretax income was down 4.8 percent for the
third quarter 2008.

Excluding the distribution rights gains from both periods (3), pretax
profits for U.S. beer increased $96 million due to increased revenue
per barrel and higher beer sales volume, partially offset by higher
production and distribution costs.

International beer pretax income was up $12 million versus prior year,
primarily on improved results in China, the United Kingdom, Canada and
Mexico.

Packaging segment pretax profits increased $17 million due to higher
earnings from recycling operations driven by hedge gains.

Entertainment segment pretax income decreased $5 million primarily due
to higher operating and marketing costs partially offset by increased
attendance and higher ticket pricing.


— Equity income decreased $11 million reflecting a combination of higher
materials and operating costs at Grupo Modelo partially offset by
volume growth. Third quarter 2007 equity income included a $16 million
charge by Modelo for restructuring related to its domestic distribution
system and C-store closings. Excluding the restructuring charge, equity
income for 2008 was down $27 million (1).


— Net income and earnings per share comparisons for the third quarter
also include the impacts of the gains on the distribution rights sales,
the corporate charges and the Modelo restructuring. Excluding these
normalization items, underlying third quarter 2008 net income and
diluted earnings per share increased 10.7 percent and 10.5 percent,
respectively, versus 2007 (1). On a reported basis, net income
decreased 5.7 percent and diluted earnings per share decreased
5.3 percent, to $.90.


NINE MONTHS OF 2008 FINANCIAL RESULTS


Key operating results and a discussion of financial highlights for the nine months of 2008 versus 2007 follow.

($ in millions, except per share)
Nine Months 2008 vs. 2007
2008 2007 $ %
Gross Sales $15,539 $14,769 Up $770 Up 5.2%
Net Sales $13,737 $12,992 Up $745 Up 5.7%
Income Before Income Taxes $2,281 $2,265 Up $16 Up 0.7%
Equity Income $467 $539 Down $72 Down 13.4%
Net Income $1,866 $1,901 Down $35 Down 1.8%
Diluted Earnings per Share $2.55 $2.49 Up $.06 Up 2.4%



— Net sales increased 5.7 percent on increased sales from all business
segments. U.S. beer segment sales were up 5 percent on increased volume
and higher revenue per barrel. U.S. beer volume was up 1.1 percent
while revenue per barrel (2) was up 3.1 percent primarily due to price
increases on a majority of the company’s U.S. volume. International
beer net sales increased 18.6 percent primarily on higher sales volume,
increased pricing and favorable brand mix. Packaging segment sales
were up 0.4 percent due to increased recycling revenues partially
offset by lower aluminum can sales and entertainment sales increased
6.8 percent primarily from higher attendance and increased ticket
pricing.


— In addition to the third quarter items previously discussed,
comparisons of income before income taxes for the nine months include
the impact of the $16 million gain on disposal of the company’s
remaining Spanish theme park interest in the second quarter 2007, which
is included in corporate for segments reporting. Excluding all
normalization items, income before income taxes increased
9.4 percent (1) due primarily to higher profits for the U.S. beer,
international beer and packaging segments. On a reported basis, pretax
income increased 0.7 percent.

Excluding the distribution rights sales gains, income before income
taxes for U.S. beer increased $131 million, reflecting higher volume
and pricing, partially offset by increased operating costs and
marketing expense.

International beer pretax income was up $48 million, primarily due to
profit improvement in the United Kingdom, China and Canada.

Entertainment segment pretax results were essentially level with prior
year due to increased attendance and higher ticket pricing being offset
by higher operating and marketing expenses.

Packaging segment pretax income was up $7 million primarily due to
increased earnings from aluminum recycling and can manufacturing
operations.


— Equity income decreased $72 million for the nine months of 2008,
primarily due to higher materials and operating costs for Modelo
partially offset by higher beer volume. Additionally, equity income for
the nine months of 2007 includes both the $16 million Modelo
restructuring charge and a $29 million benefit from the return of an
advertising fund that was part of Modelo’s former beer import contract.
Tsingtao equity results for the nine months of 2008 include a
$7 million charge due to higher Chinese income tax rates mandated by
the government retroactively for 2007.

— Excluding the normalization items, the year-to-date effective tax rate
declined 220 basis points compared with prior year, to 37.7 percent,
primarily due to lower taxes on foreign earnings largely due to lower
Modelo equity earnings and tax benefits related to the exercise of
employee incentive stock options. The reported effective tax rate was
38.7 percent.

— Excluding the impacts of all normalization items, net income for the
nine months of 2008 increased 4.8 percent and diluted earnings per
share were up 8.9 percent versus prior year (1). The company
repurchased over 14 million shares through September 2008. Reported net
income decreased 1.8 percent and diluted earnings per share increased
2.4 percent, to $2.55.