USA: Anheuser-Busch reports financial results for the fourth quarter and full year 2005

Anheuser-Busch Cos. Inc. reported on February 2 that consolidated net sales increased 0.7 percentfor the full year 2005, while diluted earnings per share (excluding one-timegains in both 2005 and 2004 plus a legal settlement in 2005) declined 11percent (1).

Fourth quarter 2005 net sales were essentially level and earnings per share decreased 33 percent (1). "We've had a challenging year in the domestic beer business and our 2005 sales and earnings per share were disappointing," said Patrick Stokes, president and chief executive officer of the company. "However, as we move into 2006 we are encouraged with the progress of the company's initiatives to enhance beer volume and market share growth.

Wholesaler sales-to-retailers were up (selling day adjusted) 0.8 percent in the second half of 2005 and were up 1.8 percent from Labor Day through the end of 2005. Additionally, IRI data shows Anheuser-Busch increased its market share in supermarkets in the second half of the year.

We are pleased with this progress and anticipate sales and earnings growth in 2006 (2). "The domestic beer business is currently implementing previously announced revenue enhancement initiatives. Moderate price increases and discount reductions will cover the majority of the company's domestic volume. As in the past, pricing initiatives are tailored to specific markets, brands and packages."

During the fourth quarter 2005, domestic beer sales-to-wholesalers increased 0.8 percent, while wholesaler sales-to-retailers increased 2.7 percent (selling day adjusted). For full year 2005, domestic beer sales-to- wholesalers declined 1.8 percent while wholesaler sales-to-retailers increased 0.2 percent (selling day adjusted). Sales-to-retailers results have been led by the Budweiser Family, benefiting from the February introduction of Budweiser Select. Wholesaler inventories were reduced significantly during 2005, ending the year over two days lower than the end of 2004.

The company's estimated domestic market share (excluding exports) for 2005 was 48.7 percent, compared with 2004 market share of 49.6 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. Anheuser-Busch's shipment-based market share performance was adversely impacted by the company's wholesaler inventory reduction. As noted, the company gained market share at the consumer level in supermarkets in the second half of 2005, according to IRI data.

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 13.3 percent for the fourth quarter and 50.8 percent for the full year 2005. These increases were primarily due to increased volume for China Budweiser operations, Canada and Mexico, and the impact of the Harbin Brewery acquisition in mid-2004. International volume excluding the impact of Harbin increased 3.8 percent for the full year.

Worldwide Anheuser-Busch brands volume, comprised of domestic volume and international volume, increased 2.9 percent and 4.4 percent, respectively, for the fourth quarter and full year 2005 to 28.5 million and 121.9 million barrels. International equity partners' brands volume (representing the company's share of its foreign equity partners' volume on a one-month lag basis) grew 46.3 percent and 36.6 percent, respectively, for the fourth quarter and full year 2005 due to Modelo volume growth and the addition of Tsingtao equity volume beginning in May 2005, partially offset by the sale of the company's equity investment in Compania Cervecerias Unidas S.A. (CCU) in the fourth quarter 2004.

Total brands volume, which combines worldwide Anheuser-Busch brand volume with international equity partners volume was 35.2 million barrels in the fourth quarter 2005, up 2.9 million barrels, or 9.1 percent over fourth quarter 2004. Total brands volume was up 9.0 percent, to 148.3 million barrels for the full year 2005.



A discussion of financial highlights for the fourth quarter 2005 follows:

-- Net sales were essentially level with prior year due to lower domestic beer sales revenue mostly offset by sales increases for international beer, packaging operations and entertainment operations.

Domestic beer segment sales revenue declined 2.3 percent on lower revenue per barrel partially offset by higher beer sales volume. Domestic revenue per barrel (3) decreased 2.7 percent in the fourth quarter 2005 vs. prior year primarily due to the deferral of price increases in a number of markets until early 2006 and higher promotional activities. Reported income before income taxes decreased 55 percent vs. the fourth quarter 2004, reflecting lower profits in the domestic beer, international beer and packaging segments. Excluding the $13.4 million gain from the CCU sale in 2004, pretax income for 2005 decreased 53 percent (1).

Domestic beer pretax income decreased 28 percent due to lower revenue per barrel and higher costs, partially offset by higher beer sales volume. Higher costs resulted from commodity cost pressures for aluminum, glass and energy, plus costs for new packaging initiatives such as applied plastic labels and aluminum bottles.

International beer pretax income decreased $24 million in 2005 primarily due to lower results in China and the impact of the CCU sale gain in 2004. Excluding the CCU gain, international beer 2005 pretax profits decreased 39 percent (4) vs. prior year.

Packaging segment pretax profits were down $5 million primarily due to higher energy and material costs for glass and can manufacturing operations and lower profits for the label manufacturing operation. Entertainment segment pretax results increased $2 million due primarily to increased attendance. Equity income increased $3 million in the fourth quarter 2005 vs.

2004 reflecting the benefit of Grupo Modelo volume growth, a lower Mexican income tax rate and the inclusion of Tsingtao equity earnings in 2005. Equity income for 2004 includes a one-time $18 million deferred income tax benefit from a reduction in Mexican tax rates.

Excluding this benefit from 2004 results, equity income increased 24 percent (1) in 2005. This tax rate benefit was partially offset in 2004 by $8 million in higher U.S. deferred income taxes in the consolidated tax provision.

Net income and diluted earnings per share decreased 39.5 percentand 38 percent, respectively, for the fourth quarter to $201 million and $.26, respectively. Excluding the CCU salegain and the Mexican deferred income tax benefit from 2004 results, net income and diluted earnings per share for the fourth quarter 2005 decreased 35 percent and 33 percent, respectively (1).The effective income tax rate of 44.4 percent for the fourth quarter 2005 increased 580 basis points compared to 2004 due to the disproportionate impact of U.S. income taxes related to equity subsidiaries in the fourth quarter and higher current and deferred foreign taxes.

A discussion of financial highlights for the full year 2005 follows:

- Net sales increased 0.7 percent vs. 2004, due primarily to higher international beer sales in China, Canada and Mexico, increased packaging operations sales and higher entertainment segment sales, partially offset by lower domestic beer sales revenue. Domestic beer segment sales revenue decreased 2.5 percent primarily due to lower beer sales volume and slightly lower revenue per barrel. Domestic revenue per barrel decreased 0.5 percent for the year.

Reported income before income taxes decreased 27 percent vs. 2004, primarily reflecting lower profits in domestic beer, international beer and packaging operations, partially offset by improved results from entertainment operations. Income before income taxes includes the impact of previously disclosed one-time gains in both 2005 and 2004 plus the 2005 litigation settlement. Excluding these one-time items from both years, income before income taxes decreased 23 percent (1).

Pretax income for international beer decreased $44 million for the full year primarily due to lower profits in China and the United Kingdom and the impact of the CCU sale gain in 2004, partially offset by improved results in Canada. Excluding the CCU sale gain, pretax income for international beer decreased 26 percent (4).

Packaging segment pretax profits were down $22 million during the full year 2005 due to higher energy and materials costs for can and glass manufacturing operations and lower profits for the company's aluminum recycling and label manufacturing operations. Entertainment segment pretax results improved $33 million due to increased attendance, admissions pricing and in-park spending, partially offset by higher park operating expenses. Results in 2004 were adversely impacted by four hurricanes in Florida. Equity income increased 23 percent for the full year, reflecting the benefit of Grupo Modelo volume growth, lower Mexican income taxes and the impact of reporting Tsingtao equity income, partially offset by the reduction in equity income due to the sale of the company's investment in CCU and the 2004 one-time Mexican deferred income tax benefit. Excluding the tax benefit from 2004 results, equity income for full year 2005 increased 29 percent (1).

Net income decreased 18 percent compared with the full year 2004, while reported diluted earnings per share decreased 15 percent, to $2.35. Excluding one-time items, net income and diluted earnings per share decreased by 14 percent and 11 percent, respectively (1).Earnings per share for 2005 benefited from the company's repurchase of nearly 13 million shares. Other Matters Anheuser-Busch will conduct a conference call with investors to discuss results for the fourth quarter and full year at 3 p.m. Central Time today. The company will broadcast the conference call via the Internet.

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