This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of Anheuser-Busch Companies, Inc. for the firstsecond quarter and six months ended March 31,June 30, 2006, compared to the second quarter and first quartersix months ended March 31,June 30, 2005, and the year ended December 31, 2005. This discussion should be read in conjunction with the consolidated financial statements and notes included in the company’s annual report to shareholders for the year ended December 31, 2005.

This discussion 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. Please refer to the company’s most recent SEC Form 10-K for a description of risk factors that could cause actual results to differ (favorably or unfavorably) from the expectations stated in this discussion. Anheuser-Busch disclaims any obligation to update any of these forward-looking statements.

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, Anheuser-Busch elected to apply the modified retrospective method of adopting FAS 123R. The company has therefore recast comparative 2005 results to incorporate the impact of previously disclosed pro forma

ComingAnheuser-Busch is off to a difficultgood start this year in 2005, Anheuser-Busch achieved encouraging first quarter 2006 results. Through a number of sales initiatives the company has restored itswith favorable performances by all business segments. The company’s domestic beer volume growth momentum continues to be positive into the key summer selling season, with the largest sales-to-retailers volume in June of any month in the company’s history. The domestic beer pricing environment is favorable and successfully implemented a moderate price increase in earlyproductivity improvement initiatives are helping mitigate continuing cost pressures. In addition, the international beer segment, led by Grupo Modelo, and the entertainment segment are having outstanding years. Based on these positive factors Anheuser-Busch is optimistic concerning its sales and earnings outlook for 2006. The cost pressures the company experienced last year continue, but at a lesser rate, and a number of initiatives to reduce costs and enhance productivity have been implemented.

Consolidated net sales for the second quarter and first six months increased 5.4%5.9% and 5.7%, respectively, versus prior year, while diluted earnings per share of $.64 were levelincreased 7.9% and 5%. Both domestic beer sales volume and revenue per barrel showed good, balanced growth in the second quarter, with revenue per barrel growing 0.9% and domestic beer shipments-to-wholesalers increasing 2.2% versus the second quarter 2005.

Domestic volume represents Anheuser-Busch beer produced and shipped within the United States. Domestic beer shipments-to-wholesalers increased 4.6%2.2% for the firstsecond quarter, 2006, and actual wholesaler sales-to-retailers were up 3.3%. Onincreased 2%, with the new Rolling Rock, Grolsch and Tiger brands contributing 0.4 points of growth to both shipments and sales-to-retailers. Year-to-date shipments-to-wholesalers increased 3.4%, and sales-to-retailers increased 1.8% (on a selling day adjusted basis, sales-to-retailersbasis) with Rolling Rock, Grolsch and Tiger contributing 0.2 points of growth to shipments and sales-to-retailers. Sales-to-retailers increases were up 1.7%. Shipments to wholesalers are not selling day adjusted. Our sales-to-retailers increase was led by Bud Light, which grew mid-single digitsapproximately 6% for both the second quarter and year-to-date (selling day adjusted). Wholesaler inventories at the endThe acquisition of the first quarter 2006 were about one day lower than atRolling Rock brands, plus the endnew arrangements with Grolsch, Tiger and the Hansen’s energy brands leverage the strength of the first quarter 2005.company’s distribution system and provide opportunities for earnings enhancements for Anheuser-Busch and its wholesalers.

The company’s estimated domestic market share (excluding exports) for the first quartersix months of 2006 was 51.2%48.9%, compared to prior year market share of 51.1%48.7%. 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 9%

Equity partner brands volume, representingwhich includes the company’s share of its foreign equity partners’ volume reported on a one-month lag, increased 48%25% for the firstsecond quarter of 2006, to 6.48.5 million barrels due to the strong volume performance of Grupo Modelo

Total brands volume, which combines worldwide Anheuser-Busch brand volume with equity partner brands volume was 36.841 million barrels in the firstsecond quarter up 3.7and 78 million barrels or 11%.

Anheuser-Busch reported gross sales of $4.3$4.9 billion during the firstsecond quarter 2006, an increase of $211$257 million, or 6%. Gross sales increased 5%., or $468 million, to $9.2 billion for the first six months. Net sales were $3.8$4.3 billion an increaseand $8.0 billion, increases of $192$238 million and $430 million, respectively, or 5%.6% for both periods. The differencedifferences between gross and net sales in 2006 reflectsare due to beer excise taxes of $540 million.$598 million and $1.1 billion, respectively.

The increases in both gross and net sales were due todriven by sales increases for domestic beer, international beerall operating segments. For the second quarter and packaging operations. Domesticsix months, respectively, domestic beer segment net sales increased 4.5%3% and 4% on higher volume. Internationalvolume and increased revenue per barrel; international beer net sales increased 5.5%13% and 10% primarily due to strong salesvolume gains in China. PackagingChina, Canada and the United Kingdom; packaging operations net sales increased 13%12% in both periods due to higher aluminum can volume. Entertainmentand recycling revenues; and entertainment segment sales declined 2.5%increased 15% and 9%, respectively, due primarily to higher attendance and, for the second quarter, in part to the Easter holiday occurring in the second quarter this yearin 2006 versus in the first quarter in 2005.

Domestic beer revenue per barrel was essentially levelup 0.9% in the second quarter 2006 versus the first quarter 2005. However, revenue per barreland grew 4.3%0.4% compared to the fourth quarterfirst half of

CostThe cost of sales for the firstsecond quarter 2006 was $2.4$2.7 billion, an increase of $187$181 million, or 7%, and was up $368 million, or 8%. to $5.1 billion for the first six months. The increaseincreases in cost of sales isare primarily attributable to the costs associated with higher beer volume worldwide, increased costs for beer packaging materials, higher energy costs and increased costs for packaging materials and energy.entertainment operations. Gross profit as a percentage of net sales was 35.6%37.5% for the firstsecond quarter and 36.6% year-to-date, down 18080 basis points and 130 basis points, respectively, due primarily to increased beer volume being offset by increased costs.

Marketing, distribution and administrative expenses were $616$714 million a decrease of $4 million, or 0.6% for the first quarter. Thissecond quarter and $1.3 billion year-to-date, representing a $2 million increase for the quarter and a $2 million decrease isyear-to-date. These changes versus prior year periods are due to lower corporate administrative expense, primarily from reduced personnel relatedfavorable marketing expenses, especially for domestic beer, and level distribution costs for company-owned beer wholesale operations due to having one less location, partially offset by slightly higher overall marketingincreased general and administrative costs.

Operating income was $722$881 million, an increase of $9$55 million, or 1%7% for the firstsecond quarter 2006. Operating margin for the quarter decreased 80increased 10 basis points, to 19.2%20.7% due primarily to higher costs.increased sales and essentially stable marketing, distribution and administrative expenses. For the first six months of 2006, operating income was $1.6 billion, an increase of $64 million, or 4%, while operating margin was 20.0%, or 30 basis points lower than 2005.

Interest expense less interest income was $115 million for the second quarter and $230 million for the first quartersix months of 2006, an increase of $2 million, or 1.5%both amounts essentially level with comparable 2005 periods, due to slightly lower average outstanding debt balances

Other income/expense, net reflects the impact of numerous items not directly related to the company’s operations. For the firstsecond quarter of 2006, and 2005, the company had other expense of $7 million versus other income of $4$1 million and $20in 2005. Year-to-date the company recognized expense of $3 million respectively.in 2006 compared to income of $21 million in 2005. Other income for the first six months of 2005 includes the $15.4 million pretax gain from the sale of the company’s equity interest in the Spanish theme park. For business segment reporting purposes, the gain is reported as a corporate item. Excluding this gain, other income was essentially level.

Income before income taxes for the firstsecond quarter 2006 was $615$764 million, a decreasean increase of $10$47 million, or 2%7%, due primarily to slightly higher profits in the domestic beer international beer and packaging operations and lower corporate costs,entertainment segments, partially offset by lower entertainment results dueone-time items. These same factors led to year-to-date pretax income of $1.4 billion, and increase of $38 million or 3%. For the timing of the Easter holiday, slightly higher net interest expensesecond quarter and

Equity income increased $33 million in the second quarter in 2006 versus the first quarter of 2005.

Anheuser-Busch’s effective tax rate was 38.8% infor both the second quarter 2006 and the first six months, representing increases of 240 and 220 basis points,

Net income of $499$638 million in the firstsecond quarter of 2006 represented a decreasean increase of $1.2$44 million, or 0.2% versus7%. Net income grew 4%, to $1.1 billion for the first quarter 2005.six months of 2006. Diluted earnings per share were $.64, unchanged from prior year. Earnings$.82 and $1.46, respectively, for the second quarter and first six months of 2006, representing increases of 8% and 5%, respectively. Diluted earnings per share benefited from the company’s repurchase of 610.9 million shares in the first quartersix months under the company’s on-going share repurchase program.

As shown in the following table, excluding the favorable income tax events in 2006 and 2005 and the one-time gain from the sale of the Spanish theme park in 2005, which the company believes provides a more meaningful comparisoncomparisons between years, income before income taxes,periods, net income and diluted earnings per share increased 1%, 4%9% and 5%9.5%, respectively for the second quarter, while the effective income tax rate increased 40160 basis points. For the first six months, income before income taxes, net income, diluted earnings per share and the effective income tax rate increased 4%, 6%, 7% and 100 basis points, respectively.

Cash at March 31,June 30, 2006 was $213$223 million, a decrease of $13$3 million from the December 31, 2005 balance. See the consolidated statement of cash flows for detailed information. The primary source of the company’s cash flow is cash generated by operations. Principal uses of cash are capital expenditures, share repurchase, dividends and business investments. Cash generated by the company’s business segments is projected to exceed funding requirements for each segment’s anticipated capital spending. The net issuance of debt provides an additional source of cash as necessary for share repurchase, dividends and business investments. The nature, extent and timing of debt financing vary depending on the company’s evaluation of existing market conditions and other factors.

The company generated operating cash flow before the change in working capital of $441 million$1.4 billion for the first quartersix months of 2006, a decline of $204$139 million due primarily to the discretionary contribution of $214 million discretionary defined benefit pension contribution in January 2006 to the company’s defined benefit pension

There have been only normal and recurring changes in the company’s cash commitments since December 31, 2005.

Capital expenditures during the firstsecond quarter 2006 were $159 million, compared to $277$288 million for the second quarter 2005. Capital expenditures totaled $318 million and $565 million, respectively, for the first quartersix months of 2006 and 2005. Full year 2006 capital expenditures are expected to be approximately $900approximate $850 million.

At its AprilJuly 2006 meeting, the Board of Directors declared aincreased the company’s regular quarterly dividend of9.3%, to $.295 per share from $.27 per share on outstanding shares of the company’s common stock, payable June 9,September 11, 2006, to shareholders of

The company’s debt balance increaseddecreased a net $155$136 million since December 31, 2005, compared to a net increase of $307 million duringin the first quarter 2005.half of 2006. The details of the quarterly changes in debt for the first half of 2006 and 2005 are outlined below.