Anheuser-Busch Cos. Reports Improved Sales And Earnings For The Fourth Quarter And Full Year 2004

Feb. 2, 2005

Reported Earnings Per Share Increases 11.7 Percent for the Full Year

Earnings Per Share Excluding One-Time Items Increases 10.1 Percent for the Full Year

ST. LOUIS, February 2, 2005 – Anheuser-Busch Cos., Inc. achieved increased sales and earnings for the fourth quarter and full year 2004, it was announced today by Patrick Stokes, president and chief executive officer of the company. Consolidated net sales increased 4.7 percent in the fourth quarter, while reported earnings per share increased 16.7 percent. Net sales and reported earnings per share increased 5.6 percent and 11.7 percent, respectively, for the full year. All major business segments contributed to the sales and profit growth for the year.

Earnings per share for 2004 benefited from certain one-time items --- a $.015 per share gain in the first quarter from the sale of commodity hedges; a $.018 per share gain in the fourth-quarter on sale of the company’s equity investment in Compañía Cervecerías Unidas S.A. (CCU); and a fourth-quarter deferred income tax benefit of $.012 per share related to the company’s Modelo investment due to a reduction in Mexican corporate income tax rates. None of these one-time items impacts sales, gross profit or operating income. Excluding these items, earnings per share for the full year and fourth quarter increased 10.1 percent 1/ and 8.3 percent 1/ vs. 2003, respectively.

As a result of the continuing favorable pricing environment, domestic beer revenue per barrel 2 / increased 2.3 percent in the fourth quarter and grew 2.5 percent for the full year 2004 vs. the same periods in 2003.

Consistent with the company’s practice of implementing moderate annual price increases in two phases, Anheuser-Busch completed the first stage of its pricing plan for 2005 in October 2004. The success of these pricing actions is reflected in the company’s fourth quarter revenue per barrel results. As planned, the second phase of the 2005 pricing initiatives is being implemented this week. As in the past, the revenue enhancement initiatives have been tailored to specific markets, brands and packages.

Gross profit margin declined 110 basis points in the fourth quarter 2004, to 34.2 percent, while operating margin decreased 10 basis points to 13.9 percent. For the full year 2004, gross margin was down 40 basis points, to 39.9 percent and operating margin was down 10 basis points vs. 2003, to 22.5 percent. The declines in margins are primarily due to the impact of higher sales and higher costs from the company’s commodity-based can manufacturing and aluminum recycling operations. Domestic beer gross profit margin decreased 30 basis points for the fourth quarter and increased 20 basis points in the full year.

BEER SALES RESULTS

The company’s reported beer volume is summarized in the following table:

Reported Beer Volume (millions of barrels)
	Fourth Quarter			Full Year Ended December 31
		vs. 2003				vs. 2003
	2004	Barrels	%	2004	Barrels		%
Domestic	22.9	Dn 0.3	Dn 1.5%	103.0	Up 0.4		Up 0.4%
International	4.7	Up 2.5	Up 120.5%	13.8	Up 5.4		Up 64.8%
Worldwide Brands	27.6	Up 2.2	Up 8.8%	116.8	Up 5.8		Up 5.3%
Int’l Equity Partner Brands	4.6	Dn 0.01	Dn 0.2%	19.3	Up 0.5		Up 2.7%
Total Brands	32.2	Up 2.2	Up 7.4%	136.1	Up 6.3		Up 4.9%

The increase in domestic beer sales-to-wholesalers for the year is due primarily to continued growth of the Michelob ULTRA and Bud Light brands. Wholesaler sales-to-retailers were down 3.2 percent in the fourth quarter and declined 0.3 percent for the full year vs. 2003 levels. Both sales-to-retailers and sales-to-wholesalers were adversely impacted during the year by abnormally wet weather in many key markets, especially during the key summer selling season. This was coupled with the general slowdown in consumer spending during the year, particularly among lower income consumers.

The company’s domestic market share (excluding exports) for the full year 2004 was 49.6 percent, compared to 2003 market share of 49.7 percent. Domestic market share is based on estimated U.S. beer industry sales using information provided by the Beer Institute and the U.S. Department of Commerce.

International beer 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 120.5 percent for the fourth quarter and 64.8 percent for full year 2004. International beer volume includes 2.5 million barrels in the fourth quarter and 5.2 million barrels for the full year related to Harbin, which the company acquired in the third quarter. Excluding Harbin, international beer volume grew 2.7 percent in the fourth quarter and 3.2 percent for the full year. These increases are primarily due to higher sales volume in China, Canada and the United Kingdom.

Worldwide Anheuser-Busch beer sales volume for the fourth quarter and full year 2004 rose 8.8 percent and 5.3 percent, to 27.6 million and 116.8 million barrels, respectively, vs. 2003. Worldwide Anheuser-Busch beer brand volume is comprised of domestic volume and international volume.

International equity partner brands volume, representing the company’s share of its foreign equity partners’ volume reported on a one-month lag, decreased 0.2 percent for the fourth quarter due to the sale of CCU and increased 2.7 percent for the full year 2004 vs. 2003. Total brands volume increased 7.4 percent and 4.9 percent for the fourth quarter and full year, respectively, vs. comparable 2003 periods.

“Anheuser-Busch has achieved another year of solid growth in earnings per share and we expect earnings per share growth in the 6 percent to 9 percent ^3/ range for 2005 compared with 2004, excluding the one-time items in 2004 and including the impact of expensing stock options in 2005 and 2004,” said Stokes. Anheuser-Busch will begin expensing stock options when it adopts FAS 123R, “Share-Based Payment,” expected in the first quarter 2005, and will retrospectively apply the standard to all prior periods. “We continue to target double-digit earnings per share growth over the longer-term,” said Stokes.

FOURTH QUARTER 2004 FINANCIAL RESULTS

Key operating results for the fourth quarter 2004 vs. 2003 are summarized below:

	($ in millions, except per share)
	Fourth Quarter		2004 vs. 2003
	2004	2003	$	%
Gross Sales	$3,880	$3,720	Up $160	Up 4.3%
Net Sales	$3,367	$3,215	Up $152	Up 4.7 %
Income Before Income Taxes	$370	$355	Up $15	Up 4.4%
Equity Income	$105	$77	Up $28	Up 36.0%
Net Income	$332	$294	Up $38	Up 13.0%
Diluted Earnings Per Share	$.42	$.36	Up $.06	Up 16.7%

A discussion of financial highlights for the fourth quarter 2004 follows:

• Net sales increased 4.7 percent compared with the fourth quarter 2003, due to increased domestic beer segment net sales (higher revenue per barrel partially offset by reduced volume), higher international beer sales and increased sales from the company’s commodity-based can manufacturing and aluminum recycling operations.
  
  
• Income before income taxes for the fourth quarter increased 4.4 percent vs. 2003, primarily reflecting improved results for international beer. Pretax income for the fourth quarter 2004 includes the $13.4 million gain on the sale of CCU, which is reported in the international beer segment.
  
  Pretax income for the domestic beer segment was down 1.9 percent for the quarter, primarily reflecting lower volume and higher costs, partially offset by higher revenue per barrel due to the favorable pricing environment.
  
  International beer segment pretax income improved $25 million or 169 percent in the fourth quarter vs. 2003, primarily due to profit growth in China, Canada and the United Kingdom and a $13.4 million gain on the sale of the company’s CCU investment. Excluding the CCU gain, pretax income increased 80 percent ^4/. Packaging segment pretax profits were up 7 percent in the fourth quarter 2004 compared with prior year, due to improved results from the label manufacturing and aluminum recycling operations.
  
  Entertainment segment pretax results declined $6 million compared with the fourth quarter 2003, primarily due to higher operating costs.
  
  
• Equity income was up 36 percent in the fourth quarter 2004 vs. 2003, reflecting the benefit of price and volume growth from Grupo Modelo, plus the one-time $18 million deferred income tax benefit due to the reduction in Mexican tax rates. Excluding the deferred income tax benefit, equity income increased 13 percent ^5/. The tax rate benefit is partially offset by $8 million of higher U.S. deferred income taxes in the consolidated tax provision.
  
  
• Net income increased 13 percent compared with fourth quarter 2003. Diluted earnings per share were $.42, an increase of 16.7 percent compared with 2003. Earnings per share excluding the gain on sale of CCU and the Mexican tax rate benefit increased 8.3 percent. Earnings per share continue to benefit from the company’s ongoing share repurchase program.
  
  

FULL YEAR 2004 FINANCIAL RESULTS

Key operating results for the full year 2004 vs. 2003 are summarized below:

	($ in millions, except per share)
	Full Year		2004 vs. 2003
	2004	2003	$	%
Gross Sales	$17,160	$16,320	Up $840	Up 5.1%
Net Sales	$14,934	$14,147	Up $787	Up 5.6%
Income Before Income Taxes	$2,999	$2,824	Up $175	Up 6.2%
Equity Income	$404	$345	Up $59	Up 17.2%
Net Income	$2,240	$2,076	Up $164	Up 7.9%
Diluted Earnings Per Share	$2.77	$2.48	Up $.29	Up 11.7%

A discussion of financial highlights for the full year 2004 follows:

• Net sales increased 5.6 percent compared with the full year 2003, driven primarily by a 3 percent increase in domestic beer segment net sales (due to higher revenue per barrel and higher volume) along with increased sales for the international beer, packaging and entertainment operating segments.
  
  
• Income before income taxes increased 6.2 percent vs. the full year 2003, reflecting improved results for all of the company’s operating segments.
  
  Income before income taxes for the full year 2004 includes a $19.5 million pretax gain from the first quarter sale of commodity hedges and the $13.4 million pretax gain on the sale of CCU in the fourth quarter. The commodity hedges were originally placed using estimates for costs to be contained in the renewal of a supply contract. During the first quarter, the company lowered its cost estimates resulting in significant hedge ineffectiveness in compliance with FAS 133. Due to the hedge ineffectiveness, the company sold the hedges and realized the $19.5 million pretax gain, which is included as a corporate item for business segment reporting purposes.
  
  Pretax income for the domestic beer segment was up 5 percent for the full year, reflecting higher revenue per barrel and higher beer sales volume. International beer segment pretax income improved 44 percent for the full year vs. 2003, primarily due to volume and profit growth in China, Canada and the United Kingdom, the impact of Harbin in the second half of the year and the fourth quarter gain on the sale of CCU. Excluding the gain on sale of CCU, pretax income increased 29 percent ^4/.
  
  Packaging segment pretax profits were up 5 percent for the full year 2004 vs. 2003. This increase is primarily due to higher soft drink can volume and pricing and improved results from the company’s aluminum recycling operation.
  
  Entertainment segment pretax income increased 6 percent compared with the full year 2003, primarily due to higher admissions pricing and increased in-park spending. Full year 2004 entertainment results include the impact of the series of hurricanes in Florida during the third quarter.
  
  
• Equity income increased $59 million, or 17 percent, for the full year 2004 vs. 2003, reflecting the benefit of price increases implemented by Grupo Modelo, volume growth and the $18 million one-time benefit from the reduction in Mexican tax rates. The benefit is partially offset by increased U.S. deferred income taxes in the consolidated tax provision. Results in 2003 included a $5.5 million after-tax gain representing Anheuser-Busch’s equity share of CCU earnings from the sale of a brewery in Croatia. Excluding this gain and the Mexican tax rate benefit in 2004, equity income for the full year 2004 increased 14 percent ^5/ vs. 2003.
  
  
• Net income increased 7.9 percent over the full year 2003. Diluted earnings per share were $2.77, an increase of 11.7 percent, compared with the prior year. Earnings per share excluding the gain on commodity hedges, the gain on the sale of CCU and the Mexican tax rate benefit increased 10.1 percent. The company repurchased over 6 million common shares in the fourth quarter 2004 and over 33 million through the full year 2004.
  
  

Other Matters

Anheuser-Busch will conduct a conference call with investors to discuss earnings results for the fourth quarter and full year 2004 at 3:00 p.m. Central Time today. The company will broadcast the conference call live via the Internet. For details visit the company’s site on the Internet at www.anheuser-busch.com.

NOTES:

($ in millions, except per share)

1 Reconciliation of 2004 Reported Results to Results Excluding One-Time Items


² Domestic Revenue per Barrel

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 from the company’s breweries to U.S. wholesalers. ³

Reconciliation of Projected 2005 Earnings per Share Growth



4 Reconciliation of 2004 International Beer Pretax Income Growth


5Reconciliation of 2004 Equity Income Growth



### This release contains forward-looking statements regarding the company’s expectations concerning its future operations, earnings and prospects. On the date the 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 disclaims any obligation to update any of these statements. The company’s expectations involve significant risks and uncertainties and 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. Accordingly, there can be no assurances that the company’s expectations and the forward-looking statements will be correct. Further information on factors that could affect the company’s future operations, earnings and prospects is included in the company’s Forms 10-Q and 10-K.

Anheuser-Busch Companies, Inc. Consolidated Income Statement (Unaudited) Fourth Quarter and Full Year Ended December 31 (In Millions, Except Per Share)
	Fourth Quarter		Year-to-Date
	2004	2003	2004	2003
Gross Sales	$3,880.4	$3,720.2	$17,160.2	$16,320.2
Excise Taxes	(513.3)	(504.8)	(2,226.0)	(2,173.5)
Net Sales	3,367.1	3,215.4	14,934.2	14,146.7
Cost of Sales	(2,216.7)	(2,080.7)	(8,982.5)	(8,449.1)
Marketing, Distribution and       Administrative Expenses	(681.6)	(685.4)	(2,590.7)	(2,498.3)
Operating Income	468.8	449.3	3,361.0	3,199.3
Interest Expense	(112.1)	(101.8)	(426.9)	(401.5)
Interest Capitalized	6.2	6.7	21.9	24.4
Interest Income	1.3	1.1	4.7	1.7
Other Income/(Expense), Net	6.2	(0.7)	38.7	0.4
Income Before Income Taxes	370.4	354.6	2,999.4	2,824.3
Provision for Income Taxes	(142.9)	(137.6)	(1,163.2)	(1,093.3)
Equity Income, Net of Tax	105.0	77.2	404.1	344.9
Net Income	$332.5	$294.2	$2,240.3	$2,075.9
Basic Earnings Per Share	$.42	$.36	$2.80	$2.51
Diluted Earnings Per Share	$.42	$.36	$2.77	$2.48
Capital Expenditures	$363.1	$273.5	$1,089.6	$993.0
Depreciation and Amortization	$240.7	$227.3	$932.7	$877.2
Weighted Average Shares:
Basic	786.9	813.3	798.9	826.2
Diluted	795.0	823.7	808.5	837.0

 

Anheuser-Busch Companies, Inc. Business Segments Fourth Quarter Ended December 31 (In Millions)
	Domestic Beer	Int’l Beer	Packaging	Entertain.	Other	Corporate & Elims.	Consol.
2004
Gross Sales	$2,998.3	299.9	518.0	162.1	22.3	(120.2)	$3,880.4
Net Sales:
- Intersegment	---	---	$192.0	---	1.0	(193.0)	$ ---
- External	$2,549.3	235.6	326.0	162.1	21.3	72.8	$3,367.1
Income Before Income Taxes	$531.9	40.4	25.7	(11.0)	1.3	(217.9)	$370.4
Equity Income	---	$105.0	---	---	---	---	$105.0
Net Income	$329.7	130.1	15.9	(6.8)	0.8	(137.2)	$332.5
2003
Gross Sales	$2,978.1	213.5	464.8	161.8	21.1	(119.1)	$3,720.2
Net Sales:
- Intersegment	---	---	$190.4	---	1.0	(191.4)	$ ---
- External	$2,520.9	165.9	274.4	161.8	20.1	72.3	$3,215.4
Income Before Income Taxes	$542.4	15.0	24.0	(4.6)	(11.8)	(210.4)	$354.6
Equity Income	---	$77.2	---	---	---	---	$77.2
Net Income	$336.3	86.5	14.9	(2.9)	(7.3)	(133.3)	$294.2

 

Anheuser-Busch Companies, Inc. Business Segments Full Year Ended December 31 (In Millions)
	Domestic Beer	Int’l Beer	Packaging	Entertain.	Other	Corporate & Elims.	Consol.
2004
Gross Sales	$13,371.6	1,015.1	2,276.8	989.3	75.4	(568.0)	$17,160.2
Net Sales:
- Intersegment	---	---	$880.1	---	4.0	(884.1)	$ ---
- External	$11,350.8	809.9	1,396.7	989.3	71.4	316.1	$14,934.2
Income Before Income Taxes	$3,279.4	130.9	163.9	172.7	(2.0)	(745.5)	$2,999.4
Equity Income	---	$404.1	---	---	---	---	$404.1
Net Income	$2,033.2	485.3	101.6	107.1	(1.2)	(485.7)	$2,240.3
2003
Gross Sales	$12,997.5	797.0	2,093.6	923.9	74.4	(566.2)	$16,320.2
Net Sales:
- Intersegment	---	---	$869.2	---	4.3	(873.5)	$ ---
- External	$10,984.4	636.6	1,224.4	923.9	70.1	307.3	$14,146.7
Income Before Income Taxes	$3,118.7	90.8	155.5	162.8	(12.0)	(691.5)	$2,824.3
Equity Income	---	$344.9	---	---	---	---	$344.9
Net Income	$1,933.6	401.2	96.4	100.9	(7.4)	(448.8)	$2,075.9

 

Anheuser-Busch Companies, Inc. Consolidated Balance Sheet (Unaudited) (In Millions)
	December 31, 2004	December 31, 2003
Assets
Current Assets:
Cash	$228.1	$191.1
Accounts receivable	696.1	669.4
Inventories:
Raw materials and supplies	405.0	320.3
Work in progress	80.0	81.9
Finished goods	205.3	185.3
Total inventories	690.3	587.5
Other current assets	203.9	182.3
Total current assets	1,818.4	1,630.3
Investments in affiliated companies	3,150.2	3,052.0
Plant and equipment, net	8,847.4	8,498.9
Intangible assets, including goodwill of $984.1 million and $349.0 million, respectively	1,191.9	486.6
Other assets	1,165.5	1,021.7
Total Assets	$16,173.4	$14,689.5
Liabilities and Shareholders Equity
Current Liabilities:
Accounts payable	$1,194.8	$1,093.7
Accrued salaries, wages and benefits	291.4	288.9
Accrued taxes	152.9	163.1
Accrued interest	125.2	110.4
Other current liabilities	204.7	201.1
Total current liabilities	1,969.0	1,857.2
Postretirement benefits	454.2	470.4
Debt	8,278.6	7,285.4
Deferred income taxes	1,727.2	1,462.1
Other long-term liabilities	1,076.3	902.7
Shareholders Equity:
Common stock	1,463.0	1,457.9
Capital in excess of par value	1,425.3	1,194.0
Retained earnings	15,407.2	13,935.4
Treasury stock, at cost	(14,638.5)	(12,939.0)
Accumulated non-owner changes in equity	(988.9)	(890.3)
ESOP debt guarantee	--	(46.3)
Total Shareholders Equity	2,668.1	2,711.7
Commitments and contingencies	--	--
Total Liabilities and Shareholders Equity	$16,173.4	$14,689.5

 

Anheuser-Busch Companies, Inc. Consolidated Statement of Cash Flows (Unaudited) (In Millions)
	Year Ended December 31,
	2004		2003
Cash flow from operating activities:
Net Income	$2,240.3		$2,075.9
Adjustments to reconcile net income to       cash provided by operating activities:
Depreciation and amortization	932.7		877.2
Deferred income taxes	187.1		129.5
Gain on sale of CCU investment	(13.4)		--
Undistributed earnings of affiliated companies	(225.1)		(175.7)
Other, net	0.3		31.4
Operating cash flow before change in working capital	3,121.9		2,938.3
(Increase)/Decrease in working capital	(181.6)		32.6
Cash provided by operating activities	2,940.3		2,970.9
Cash flow from investing activities:
Capital expenditures	(1,089.6)		(993.0)
Acquisitions	(727.9)		(156.9)
Proceeds from sale of CCU investment	302.5		--
Cash used for investing activities	(1,515.0)		(1,149.9)
Cash flow from financing activities:
Increase in long-term debt	1,443.8		1,389.0
Decrease in long-term debt	(510.6)		(652.1)
Dividends paid to shareholders	(742.8)		(685.4)
Acquisition of treasury stock	(1,699.5)		(1,958.9)
Issuance of shares under stock plans	120.8		88.6
Cash used for financing activities	(1,388.3)		(1,818.8)
Net increase in cash during the period	37.0		2.2
Cash, beginning of period	191.1		188.9
Cash, end of period	$228.1		$191.1

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