Anheuser-Busch Announces Third Quarter Earnings; Anheuser-Busch Announces Higher Sales And Earnings For The Third Quarter And Nine Months Of 1998.ST. LOUIS--(BUSINESS WIRE)--Oct. 28, 1998--Led by higher beer sales volume, Anheuser-Busch Companies, Inc. achieved higher sales and earnings for the third quarter and nine months ended September September: see month. 30, 1998, it was announced today by August A. Busch Busch , Adolf Georg Wilhelm 1891-1952. German-born Swiss violinist and conductor best known for his work as leader of the Busch Quartet, an internationally acclaimed chamber group formed in 1919. III, Chairman of the Board and President. "The strong beer volume sales momentum achieved during the first half of 1998 continued in the third quarter with domestic shipment growth up 3.3 percent compared to last year," stated Mr. Busch. "The third quarter included the single highest sales-to-retailer month in Anheuser-Busch and industry history --- with 9.1 million barrels of beer sold in July July: see month. ." Domestic beer shipments grew 3.3 percent for the nine months, to 70.9 million barrels, while international volume for Anheuser-Busch brands increased 1.8 percent to 5.2 million barrels. Total volume, which includes volume associated with Anheuser-Busch's share of foreign equity partner barrelage, increased 5.7 million barrels, or 7.3 percent, to 84.0 million barrels. The company's beer volume for the third quarter and nine months is summarized in the following table: -0-
Beer Volume (millions of barrels)
Third Quarter Nine Months Ended
September 30
vs. 1997 vs. 1997
1998 Barrels % 1998 Barrels %
Domestic 25.3 Up 0.8 Up 3.3% 70.9 Up 2.3 Up 3.3%
International 1.9 --- Up 1.3% 5.2 Up 0.1 Up 1.8%
Worldwide -
A-B Brands 27.2 Up 0.8 Up 3.1% 76.1 Up 2.4 Up 3.2%
International Equity
Partner Brands 2.9 Up 0.3 Up 12.0% 7.9 Up 3.3 Up 74.3%
Total Brands 30.1 Up 1.1 Up 3.9% 84.0 Up 5.7 Up 7.3%
Earnings per share for the third quarter 1998 were $.84, an increase of 6.3 percent vs. third quarter 1997. This increase reflects the company's higher domestic beer sales volume, improved brewery A brewery can be a building or place that produces beer, or a business (brewing company) whose trade is the production and sale of beer. Breweries can take up multiple city blocks, or be a collection of equipment in a homebrewer's kitchen. operating efficiencies and increased operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. from can manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. . "Anheuser-Busch's reduction in price discounting is generating positive results," stated Mr. Busch. "Domestic revenue per barrel was level in the third quarter 1998 compared to the same period last year, and up 1.4 percent compared to the end of last year." "We initiated our planned revenue enhancement revenue enhancement An increase in revenues, especially by way of increased taxes. Revenue enhancement includes reducing taxpayer deductions and eliminating tax credits. strategy in approximately 70 percent of the country, representing about 50 percent of our volume, at the beginning of this month and although in the early stages, preliminary results are encouraging. We anticipate domestic revenue per barrel growth will resume in the fourth quarter 1998 compared to the same period last year. This improved pricing environment is expected to support accelerated profit growth as we enter 1999." -0-
THIRD QUARTER 1998 FINANCIAL RESULTS
Key operating results for the third quarter of 1998 compared to
1997 are summarized below.
Third Quarter (in millions, except per share)
1998 1997 1998 vs. 1997
$ %
Gross Sales $3,651 $3,585 Up $66 Up 1.8%
Excise Taxes $529 $483 Up $46 Up 9.5%
Net Sales $3,122 $3,102 Up $20 Up 0.7%
Operating Income $692 $659 Up $33 Up 5.0%
Equity Income, Net of Tax $20 $23 Dn $3 Dn 11.5%
Net Income $408 $393 Up $15 Up 3.8%
Diluted Earnings per Share $.84 $.79 Up $.05 Up 6.3%
A discussion of financial highlights for the third quarter 1998 follows: -- Gross sales Gross Sales A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge. increased $66 million, or 1.8 percent, and net sales increased $20 million, or 0.7 percent, compared to the same period in 1997. These increases are due to higher domestic beer sales volume, partially offset by lower sales from international beer and theme park operations. Gross sales and excise taxes excise taxes, governmental levies on specific goods produced and consumed inside a country. They differ from tariffs, which usually apply only to foreign-made goods, and from sales taxes, which typically apply to all commodities other than those specifically exempted. in 1998 include the impact of consolidating the Stag Brewery operations in the United Kingdom. -- Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased $33 million, or 5.0 percent, over the comparable period last year. The increase in operating income was primarily due to increased domestic beer sales volume, continued brewery operating efficiencies and improved performance by can manufacturing, partially offset by lower entertainment profits and lower results from international beer primarily due to weakness in Japan. -- Equity income, net of tax, declined $3 million, or 11.5 percent, to $20 million. For the third quarter of both 1997 and 1998, equity income reflects the company's 37% share of the net earnings of Grupo Modelo Grupo Modelo is a large brewery in Mexico. It maintains a large part of the Mexican beer export market and produces top-selling imported beer in the United Kingdom, United States and Canada. . The decline in equity income is entirely due to depreciation in the value of the Mexican Mexican named after or originating in Mexico. Mexican axolotl see ambystomamexicanum. Mexican beaded lizard (Heloderma horridum peso during the third quarter 1998 and the impact of hyperinflation Hyperinflation Extremely rapid or out of control inflation. Notes: There is no precise numerical definition to hyperinflation. This is a situation where price increases are so out of control that the concept of inflation is meaningless. accounting, which more than offset Modelo's strong underlying sales volume and profit performance. -- Net income for the third quarter increased $15 million, or 3.8 percent, over the comparable period in 1997. -- Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of were $.84, an increase of $.05, or 6.3 percent, compared to the third quarter 1997. Earnings per share growth continues to benefit from fewer shares outstanding due to the company's ongoing share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program. -0-
NINE MONTHS OF 1998 FINANCIAL HIGHLIGHTS
Key operating results for the nine months of 1998 compared to
1997 are summarized below:
Nine Months Ended September 30
(in millions, except per share)
1998 1997 1998 vs. 1997
$ %
Gross Sales $10,124 $9,912 Up $212 Up 2.1%
Excise Taxes $1,488 $1,353 Up $135 Up 10.0%
Net Sales $8,636 $8,559 Up $77 Up 0.9%
Operating Income $1,819 $1,773 Up $46 Up 2.6%
Equity Income, Net of Tax $59 $35 Up $24 Up 67.0%
Net Income $1,065 $1,032 Up $33 Up 3.1%
Diluted Earnings per Share $2.18 $2.06 Up $.12 Up 5.8%
A discussion of financial highlights for the nine months of 1998 follows: -- Gross sales increased $212 million, or 2.1 percent, and net sales increased $77 million, or 0.9 percent. The primary factor responsible for these increases was higher domestic beer sales volume, partially offset by lower sales from international beer. Gross sales and excise taxes in 1998 include the impact of consolidating the Stag Brewery operations in the United Kingdom. -- Operating income grew $46 million, or 2.6 percent, vs. the comparable period in 1997. This increase is due to higher domestic beer volume and higher operating results from can manufacturing, partially offset by weaker results from international beer operations. -- Equity income, net of tax, increased $24 million, to $59 million, compared to the nine months of 1997. The increase is principally due to the company's larger equity stake in Grupo Modelo (37% for the nine months 1998 vs. 17.7% for the first six months and 37% for the third quarter 1997) and the strong underlying results of Modelo operations, partially offset by peso depreciation and hyperinflation accounting. -- Net income increased $33 million, or 3.1 percent, for the nine months of 1998. -- Diluted earnings per share increased $.12, or 5.8 percent. Earnings per share for the nine months benefited from the company's ongoing share repurchase program. The company has repurchased over 11.5 million shares through the nine months of 1998. BEER SALES RESULTS Worldwide Beer Volume Worldwide Anheuser-Busch beer brands were up 3.1 percent in the third quarter and 3.2 percent for the nine months of 1998. Total volume, which combines equity volume (representing the company's share of its foreign equity partner barrelage) with worldwide volume, was up 1.1 million barrels, or 3.9 percent, in the third quarter and up 5.7 million barrels, or 7.3 percent, for the nine months of 1998. Domestic Beer Volume Anheuser-Busch domestic beer shipments grew 3.3 percent in both the third quarter and for the nine months of 1998. The increase in domestic beer shipments reflects strong retail demand, with sales-to- retailers up more than 4 percent for the third quarter and up approximately 4 percent for the nine months. A portion of the sales- to-retailers increase is due to pre-buying in advance of the October October: see month. price increase. Bud Family sales-to-retailers increased over 3 percent for the nine months compared to last year, led by Bud Light which continues to grow at a double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. pace. Beer Market Share The company's domestic market share (excluding exports) for the nine months of 1998 was 45.9 percent, an increase of 0.7 percentage points over 1997 market share of 45.2 percent. Including exports, the company's share of U.S. shipments was 45.7 percent vs. 44.9 percent for the nine months of 1997. Domestic market share and share of U.S. shipments are determined based on industry sales estimates provided by the Beer Institute. International Beer International beer volume (excluding equity partner brands) was up 1.3 percent in the third quarter and 1.8 percent for the nine months of 1998 compared to the same periods last year. Positive sales performances for the nine months in the U.K., Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. , Continental Europe Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands and, at times, peninsulas. and Canada were partially offset by sales declines in Asia. Operating profits declined for the nine months due to the weakness in Japan. 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 announced a significant restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of the sales force. Although the restructuring will result in a one-time charge in the fourth quarter 1998, the initiatives should lead to lower costs and improved performance in 1999. OTHER MATTERS Labor Negotiations Talks with the Teamsters union Teamsters Union, U.S. labor union formed in 1903 by the amalgamation of the Team Drivers International Union and the Teamsters National Union. Its full name is the International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America (IBT). regarding a new labor agreement covering U.S. brewery employees represented by the union are at impasse im·passe n. 1. A road or passage having no exit; a cul-de-sac. 2. A situation that is so difficult that no progress can be made; a deadlock or a stalemate: reached an impasse in the negotiations. and, as a result, the company is implementing its final contract offer. Implementation began September 21, 1998. The company's final offer includes an 11.5 percent pay increase over the five-year life of the contract and enhanced pension benefits. Also included in the offer are provisions to support productivity improvement, promote workplace flexibility, reduce absenteeism ab·sen·tee·ism n. 1. Habitual failure to appear, especially for work or other regular duty. 2. The rate of occurrence of habitual absence from work or duty. , improve the grievance procedure A term used in Labor Law to describe an orderly, established way of dealing with problems between employers and employees. Through the grievance procedure system, workers' complaints are usually communicated through their union to management for consideration by the employer. and institute a random drug-testing program. In late July, results of a second vote on the company's final offer showed that 46 percent of those voting favored ratification The confirmation or adoption of an act that has already been performed. A principal can, for example, ratify something that has been done on his or her behalf by another individual who assumed the authority to act in the capacity of an agent. . On September 18, 1998, the National Labor Relations Board National Labor Relations Board (NLRB), independent agency of the U.S. government created under the National Labor Relations Act of 1935 (Wagner Act), and amended by the acts of 1947 (Taft-Hartley Labor Act) and 1959 (Landrum-Griffin Act), which affirmed labor's right notified the company that all charges made by the Teamsters Teamsters large, powerful union of U. S. truckers. [Am. Hist.: NCE, 2703] See : Labor against the company relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc national bargaining issues had been dismissed, validating val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. Anheuser-Busch's position that the company bargained in good faith throughout the negotiations. 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 indicated they would honor As a verb, to accept a bill of exchange, or to pay a note, check, or accepted bill, at maturity. To pay or to accept and pay, or, where a credit so engages, to purchase or discount a draft complying with the terms of the draft. the picket lines. The strike ended on October 23 with no change in the implemented offer and employees represented by the Teamsters reported back to work the week of October 26. The St. Louis brewery was operated by salaried personnel during the strike and there was no disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. in the production or distribution of the company's products. Operations at the company's other 11 breweries See for an up to date listing of all the breweries detailed on Wikipedia, sorted into regions. Africa
Asia
Grupo Modelo Purchase On September 14, 1998, the company completed the purchase of an additional 13.25 percent of Diblo, S.A. de C.V., the operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. of Grupo Modelo, S.A. de C.V., Mexico's largest brewer and leading exporter of beer in Mexico. The purchase price was $556 million, bringing Anheuser-Busch's total investment to $1.6 billion. The additional investment will increase Anheuser-Busch's total direct and indirect holdings in Grupo Modelo's operating subsidiary, Diblo, to 50.2 percent. Justice Department Inquiry In September 1998, the U.S. Justice Department informed Anheuser- Busch that it has discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: its investigation into the distribution and sale of beer in the U.S., including the marketing and distribution policies and practices of Anheuser-Busch and its major competitors. This release contains statements regarding the company's expectations concerning its future operations, earnings and prospects. These statements are forward-looking and 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. Further information on factors that could affect the company's future operations and earnings is included in the company's Forms 10-Q and 10-K. -0-
Comparative Statement of Earnings
Third Quarter and Nine Months Ended September 30, 1998 and 1997
(In Millions, Except Per Share)
Third Quarter Year-to-Date
1998 1997 1998 1997
Gross Sales $3,651.1 $3,584.9 $10,123.9 $9,912.1
Excise Taxes (529.1) (483.3) (1,488.1) (1,353.3)
Net Sales 3,122.0 3,101.6 8,635.8 8,558.8
Cost of Products & Services (1,895.6) (1,923.6) (5,397.8) (5,390.2)
Marketing, Distribution and
Administrative Expenses (534.5) (519.2) (1,418.6) (1,395.5)
Operating Income 691.9 658.8 1,819.4 1,773.1
Interest Expense (70.7) (69.6) (218.4) (192.1)
Interest Capitalized 2.6 10.3 19.7 30.1
Interest Income 1.3 1.4 4.4 5.3
Other Income / (Expense), Net 1.1 1.0 (3.0) 2.1
Income Before Income Taxes 626.2 601.9 1,622.1 1,618.5
Income Taxes (237.9) (231.1) (616.6) (621.6)
Equity Income, Net of Tax 20.0 22.7 59.2 35.5
Net Income $408.3 $393.5 $1,064.7 $1,032.4
Basic Earnings Per Share $.85 $.80 $2.20 $2.09
Diluted Earnings Per Share $.84 $.79 $2.18 $2.06
Capital Expenditures $159.7 $283.5 $603.8 $880.4
Depreciation and Amortization $188.3 $171.1 $548.4 $501.1
Weighted Average Shares:
Basic 480.0 490.7 483.6 494.0
Diluted 485.1 497.7 488.4 501.2
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