UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

x 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 2006
2007
   
o 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROMTO

COMMISSION FILE NUMBER:   1-7823

ANHEUSER-BUSCH COMPANIES, INC. 
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE
43-1162835
(State of Incorporation)(I.R.S. Employer Identification No.)

One Busch Place, St. Louis, Missouri 63118
(Address of principal executive offices) (Zip Code)

(314) 577-2000
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.
Yes    x
No    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer    x
Accelerated Filer    o
Non-Accelerated Filer    o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes    o
No    x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

$1 Par Value Common Stock - 768,714,803– 749,568,124 shares as of June 30, 2006.2007.




1
Anheuser-Busch Companies, Inc. and Subsidiaries
Consolidated Balance Sheet (Unaudited)

      
 (in millions, except per share)June 30, Dec. 31, 
  2006 2005 
 Assets    
 Current Assets:    
 Cash$222.5 $225.8 
 Accounts receivable967.1 681.4 
 Inventories655.7 654.5 
 Other current assets214.3 197.0 
 Total current assets2,059.6 1,758.7 
 Investments in affiliated companies3,250.0 3,448.2 
 Plant and equipment, net8,913.3 9,041.6 
 Intangible assets, including goodwill of $1,050.7 and $1,034.51,329.9 1,232.6 
 Other assets1,229.7 1,073.9 
 Total assets$16,782.5 $16,555.0 
      
      
 Liabilities and Shareholders Equity    
 Current Liabilities:    
 Accounts payable$1,250.6 $1,249.5 
 Accrued salaries, wages and benefits276.4 250.9 
 Accrued taxes277.6 156.7 
 Accrued interest129.1 123.7 
 Other current liabilities291.1 201.8 
 Total current liabilities2,224.8 1,982.6 
 Postretirement benefits439.5 444.3 
 Debt7,836.5 7,972.1 
 Deferred income taxes1,316.6 1,345.9 
 Other long-term liabilities1,144.0 1,130.3 
 Shareholders Equity:    
 Common stock, $1.00 par, authorized 1.6 billion shares1,470.5 1,468.6 
 Capital in excess of par value2,778.5 2,685.9 
 Retained earnings16,417.2 15,698.0 
 Treasury stock, at cost(15,726.8)(15,258.9)
 Accumulated non-owner changes in equity(1,118.3)(913.8)
 Total Shareholders Equity3,821.1 3,679.8 
 Commitments and contingencies-    -    
 Total Liabilities and Shareholders Equity$16,782.5 $16,555.0 
      

In millions, except per share
 
June 30,
2007
  
Dec. 31,
2006
 
Assets      
Current Assets:      
Cash
  $303.1   $219.2 
Accounts receivable
  1,046.7   720.2 
Inventories
  699.6   694.9 
Other current assets
  203.6   195.2 
Total current assets
  2,253.0   1,829.5 
Investments in affiliated companies  3,721.2   3,680.3 
Plant and equipment, net  8,830.2   8,916.1 
Intangible assets, including goodwill of $1,094.4 and $1,077.8  1,451.3   1,367.2 
Other assets  610.4   584.1 
Total Assets
  $16,866.1   $16,377.2 
         
         
Liabilities and Shareholders Equity        
Current Liabilities:        
Accounts payable
  $1,400.8   $1,426.3 
Accrued salaries, wages and benefits
  301.2   342.8 
Accrued taxes
  309.6   133.9 
Accrued interest
  131.6   124.2 
Other current liabilities
  282.0   218.9 
Total current liabilities
  2,425.2   2,246.1 
Retirement benefits  1,153.4   1,191.5 
Debt  7,953.9   7,653.5 
Deferred income taxes  1,187.0   1,194.5 
Other long-term liabilities  238.0   152.9 
Shareholders Equity:        
Common stock, $1.00 par value, authorized 1.6 billion shares
  1,479.7   1,473.7 
Capital in excess of par value
  3,178.4   2,962.5 
Retained earnings
  17,487.4   16,741.0 
Treasury stock, at cost
  (17,138.9)  (16,007.7)
Accumulated non-owner changes in equity
  (1,098.0)  (1,230.8)
Total Shareholders Equity
  3,908.6   3,938.7 
Commitments and contingencies  --      --    
Total Liabilities and Shareholders Equity
  $16,866.1   $16,377.2 
         
See the accompanying footnotes on pages 5 to 13.



12.
2
Anheuser-Busch Companies, Inc. and Subsidiaries
Consolidated Statement of Income (Unaudited)
  
Second Quarter
Ended June 30,
  
Six Months
Ended June 30,
 
In millions, except per share
 2007  2006  2007  2006 
Gross sales  $5,126.2   $4,854.0   $9,531.8   $9,150.3 
Excise taxes
  (610.8)  (598.0)  (1,158.0)  (1,138.7)
Net Sales  4,515.4   4,256.0   8,373.8   8,011.6 
Cost of sales
  (2,857.9)  (2,660.7)  (5,332.6)  (5,078.4)
Gross profit  1,657.5   1,595.3   3,041.2   2,933.2 
Marketing, distribution and
administrative expenses
  (756.2)  (714.3)  (1,421.9)  (1,330.0)
Operating income  901.3   881.0   1,619.3   1,603.2 
Interest expense
  (119.7)  (115.2)  (239.6)  (230.3)
Interest capitalized
  4.2   5.0   7.7   9.0 
Interest income
  1.5   0.2   2.0   0.8 
Other income/(expense), net
  9.6   (6.8)  3.7   (3.1)
Income before income taxes  796.9   764.2   1,393.1   1,379.6 
Provision for income taxes
  (314.6)  (296.8)  (552.7)  (535.4)
Equity income, net of tax  194.7   170.4   354.1   292.8 
Net income  $677.0   $637.8   $1,194.5   $1,137.0 
                 
Basic earnings per share  $.90   $.83   $1.57   $1.47 
Diluted earnings per share  $.88   $.82   $1.55   $1.46 
                 
                 
Weighted average shares outstanding                
Basic
  754.8   769.8   759.2   773.0 
Diluted
  765.1   777.0   770.3   778.8 
                 
See the accompanying footnotes on pages 5 to 12.


Anheuser-Busch Companies, Inc. and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
           
 (in millions, except per share)Second Quarter  Six Months 
  Ended June 30  Ended June 30 
  2006 2005  2006 2005 
 Gross sales$4,854.0 $4,597.3  $9,150.3 $8,682.4 
 Excise taxes(598.0)(579.2)  (1,138.7) (1,100.6)
 Net sales4,256.0 4,018.1  8,011.6 7,581.8 
 Cost of sales(2,660.7) (2,479.8)  (5,078.4) (4,710.8)
 Gross profit1,595.3 1,538.3  2,933.2 2,871.0 
 Marketing, distribution and         
 administrative expenses(714.3)(712.2)  (1,330.0) (1,331.5)
 Operating income881.0 826.1  1,603.2 1,539.5 
 Interest expense(115.2) (115.9)  (230.3) (230.7) 
 Interest capitalized5.0 5.5  9.0 10.7 
 Interest income0.2 0.2  0.8 2.2 
 Other income/(expense), net(6.8) 1.2  (3.1) 20.7 
 Income before income taxes764.2 717.1  1,379.6 1,342.4 
 Provision for income taxes(296.8) (260.7)  (535.4) (491.5)
 Equity income, net of tax170.4 137.2  292.8 243.1 
 Net income$637.8 $593.6  $1,137.0 $1,094.0 
 Basic earnings per share$.83 $.76  $1.47 $1.41 
 Diluted earnings per share$.82 $.76  $1.46 $1.39 
           
  Six Months 
In millions
 Ended June 30, 
  2007  2006 
Cash flow from operating activities:      
Net income
  $1,194.5   $1,137.0 
Adjustments to reconcile net income to cash provided by
operating activities:
        
Depreciation and amortization
  494.2   490.0 
Decrease in deferred income taxes
  (39.2)  (34.7)
Stock-based compensation expense
  31.3   35.1 
Undistributed earnings of affiliated companies
  49.0   (52.8)
Gain on sale of business
  (16.0)  --     
Other, net
  16.8   (139.3)
Operating cash flow before the change in working capital
  1,730.6   1,435.3 
        Increase in working capital
  (117.5)  (55.8)
Cash provided by operating activities
  1,613.1   1,379.5 
         
Cash flow from investing activities:        
Capital expenditures
  (346.2)  (318.1)
Acquisitions
  (84.6)  (82.3)
Proceeds from sale of business
  16.2   --    
Cash used for investing activities
  (414.6)  (400.4)
         
Cash flow from financing activities:        
Increase in debt
  333.2   300.9 
Decrease in debt
  (71.5)  (437.9)
Dividends paid to shareholders
  (448.1)  (417.8)
Acquisition of treasury stock
  (1,131.4)  (467.8)
Shares issued under stock plans
  203.2   40.2 
Cash used for financing activities
  (1,114.6)  (982.4)
Net increase / (decrease) in cash during the period  83.9   (3.3)
Cash, beginning of period  219.2   225.8 
Cash, end of period  $303.1   $222.5 
         


See the accompanying footnotes on pages 5 to 13.


12.


3
Anheuser-Busch Companies, Inc. and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)

    
 (in millions)Six Months 
  Ended June 30 
  2006 2005 
 Cash flow from operating activities:    
 Net income$1,137.0 $1,094.0 
 Adjustments to reconcile net income to cash    
 provided by operating activities:    
 Depreciation and amortization490.0 481.0 
 Decrease in deferred income taxes(34.7) (67.1)
 Stock compensation expense35.1 37.9 
 Undistributed earnings of affiliated companies(52.8) (39.5)
 Gain on sale of business-    (15.4)
 Other, net(139.3) 83.0 
 Operating cash flow before change in working capital1,435.3 1,573.9 
 Increase in working capital(55.8)(244.7)
 Cash provided by operating activities1,379.5 1,329.2 
      
 Cash flow from investing activities:    
 Capital expenditures(318.1) (565.4)
 Acquisitions(82.3)-    
 Proceeds from sale of business-    48.3 
 Cash used for investing activities(400.4) (517.1)
      
 Cash flow from financing activities:    
 Increase in debt300.9 3.7 
 Decrease in debt(437.9) (57.9)
 Dividends paid to shareholders(417.8)(381.3)
 Acquisition of treasury stock(467.8) (575.5)
 Shares issued under stock plans40.2 107.9 
 Cash used for financing activities(982.4) (903.1)
 Net decrease in cash during the period(3.3)(91.0)
 Cash, beginning of period225.8 228.1 
 Cash, end of period$222.5 $137.1 
      


See the accompanying footnotes on pages 5 to 13.



4


Anheuser-Busch Companies, Inc. and Subsidiaries
 
Notes to Unaudited Consolidated Financial Statements

1.
1. Unaudited Financial Statements
The unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles and applicable SEC guidelines pertaining to quarterly financial reporting, and include all adjustments necessary for a fair presentation.  These statements should be read in combination with the consolidated financial statements and notes included in the company’s annual report on Form 10-K for the year ended December 31, 2005.2006.

2.
2. Business Segments Information
Comparative business segmentsegments information for the second quarter and first six months ended June 30 (in millions):

2nd Quarter
 
 
U.S. Beer
 
International
Beer
 
 
Packaging
 
 
Entertainment
 
Corporate
& Elims
 
 
Consolidated
2007
 
Gross Sales$3,749.1349.3744.9400.6(117.7)$5,126.2
Net Sales: 
- Intersegment$0.90.2249.7-(250.8)$ -
- External$3,208.1278.4495.2400.6133.1$4,515.4
Income Before
Income Taxes
$795.828.655.0113.9(196.4)$796.9
Equity Income$1.5193.2-$194.7
Net Income$494.9210.934.170.6(133.5)$677.0
             
Domestic Int'l     Corporate   
Second QuarterBeer Beer Packaging Entertainment and Elims Consolidated 
2006
             
Gross Sales$3,528.5 339.9 714.7 369.4 (98.5)$4,854.0 $3,528.5339.9714.7369.4(98.5)$4,854.0
Net Sales:                 
- Intersegment$0.8 -     243.3 -     (244.1)$ -        $0.8-243.3-(244.1) $ -
- External$3,001.8 267.7 471.4 369.4 145.7 $4,256.0 $3,001.8267.7471.4369.4145.7$4,256.0
Income Before            
Income Taxes$794.4 26.0 45.2 108.5 (209.9)$764.2 
Income Before
Income Taxes
$783.326.045.2108.5(198.8)$764.2
Equity Income$1.1 169.3 -     -     -     $170.4 $1.1169.3-$170.4
Net Income$493.6 185.4 28.0 67.3 (136.5)$637.8 $486.8185.428.067.3(129.7)$637.8
            
            
2005
            
Gross Sales$3,432.1 296.8 648.9 320.9 (101.4)$4,597.3 
Net Sales:            
- Intersegment$0.7 -     227.5 -     (228.2)$ -        
- External$2,912.7 236.3 421.4 320.9 126.8 $4,018.1 
Income Before            
Income Taxes$773.3 26.0 44.5 78.0 (204.7)$717.1 
Equity Income-     $137.2 -     -     -     $137.2 
Net Income$479.5 153.3 27.6 48.4 (115.2)$593.6 
            




5



First Six
Months
 
 
U.S. Beer
 
International
Beer
 
 
Packaging
 
 
Entertainment
 
Corporate
& Elims
 
 
Consolidated
2007
 
Gross Sales$7,212.6628.81,349.4585.6(244.6)$9,531.8
Net Sales: 
- Intersegment$1.70.5481.7-(483.9)$-
- External$6,167.5513.7867.7585.6239.3$8,373.8
Income Before
Income Taxes
$1,557.946.299.595.4(405.9)$1,393.1
Equity Income$1.6352.5-$354.1
Net Income$967.5381.161.759.1(274.9)$1,194.5
             
Domestic Int'l     Corporate   
First Six MonthsBeer Beer Packaging Entertainment and Elims Consolidated 
2006
             
Gross Sales$6,886.2 597.0 1,344.1 540.1 (217.1)$9,150.3 $6,886.2597.01,344.1540.1(217.1)$9,150.3
Net Sales:                 
- Intersegment$1.5 -     469.2 -     (470.7)$ -        $1.5-469.2-(470.7)$ -
- External$5,858.3 484.6 874.9 540.1 253.7 $8,011.6 $5,858.3484.6874.9540.1253.7$8,011.6
Income Before            
Income Taxes$1,576.9 48.1 83.9 90.9 (420.2)$1,379.6 
Income Before
Income Taxes
$1,557.548.183.990.9(400.8)$1,379.6
Equity Income$1.7 291.1 -     -     -     $292.8 $1.7291.1-$292.8
Net Income$979.4 320.9 52.0 56.4 (271.7)$1,137.0 $967.4320.952.056.4(259.7)$1,137.0
            
            
2005
            
Gross Sales$6,645.8 545.1 1,215.4 496.0 (219.9)$8,682.4 
Net Sales:            
- Intersegment$1.4 -     436.1 -     (437.5)$ -        
- External$5,647.1 441.8 779.3 496.0 217.6 $7,581.8 
Income Before            
Income Taxes$1,554.6 47.8 80.1 71.6 (411.7)$1,342.4 
Equity Income-     $243.1 -     -     -     $243.1 
Net Income$963.9 272.7 49.7 44.4 (236.7)$1,094.0 
            

3.In 2007, the company changed reporting responsibility for certain administrative and technology support costs from Corporate to the U.S. beer segment. 2006 segment results have been updated to conform to this reporting convention.
3. Stock Compensation
Under the terms of the company’s stock option plans, officers, certain other employees and non-employee directors may be granted options to purchase the company’s common stock at a price equal to the average of the high and low market pricesNew York Stock Exchange closing composite tape on the date the option is granted.  Options generally vest over three years and have a maximum term of 10 years. At June 30, 2006,2007, existing stock plans authorized issuance of 118140 million shares of common stock. The company issueshas the choice of issuing either new shares or from treasury stock when options are exercised under employee stock compensation plans. Under the plan for the board of directors, shares are issued from treasury stock.



6


Following is a summary of stock option activity and related prices for the first six months of 2006 (options in millions). Options granted in 2006 had a grant date fair value of $9.39 each and were expensed when awarded.
 
 
Options
Outstanding
 
Wtd. Avg.
Exercise
Price
 
Options
Exercisable
Wtd. Avg.
Exercise
Price
 
Balance, Dec. 31, 2005
 
96.5
 
 
$45.01
 
71.5
 
$44.06
 
Granted
 
0.1
 
 
$43.65
  
 
Exercised
 
(1.4
)
 
$27.07
  
 
Cancelled
 
(0.6
)
 
$48.59
  
 
Balance, June 30, 2006
 
94.6
 
 
$45.25
 
70.1
 
$44.40

The following table provides additional information regarding options outstanding and options that were exercisable as of June 30, 2006 (options and in-the-money value in millions).
  Options OutstandingOptions Exercisable
 
Range of
Exercise
Prices
 
 
 
 
Number
 
Wtd. Avg.
Remaining
Life
 
Wtd. Avg.
Exercise
Price
 
Pretax
In-The-
Money
Value
 
 
 
Number
 
Wtd. Avg.
Exercise
Price
 
Pretax
In-The-
Money
Value
 
$20-29
 
 
9.1
 
1.8 years
 
$26.24
 
 
$175.2
 
9.1
 
$26.24
 
 
$175.2
 
$30-39
 
 
7.8
 
3.2 years
 
$37.84
 
 
59.0
 
7.8
 
$37.84
 
 
59.0
 
$40-49
 
 
49.7
 
6.1 years
 
$46.47
 
 
54.1
 
38.5
 
$47.25
 
 
34.2
 
$50-53
 
 
28.0
 
7.7 years
 
$51.29
 
 
--
 
14.7
 
$51.60
 
 
--
 
$20-53
 
 
94.6
 
6.0 years
 
$45.25
 
 
$288.3
 
70.1
 
$44.40
 
 
$268.4

Prior to 2006, Anheuser-Busch accounted for employee stock compensation in accordance with FAS 123, “Accounting for Stock-Based Compensation,” and elected to recognize no expense related to employee stock compensation, since options were always granted with an exercise price equal to the market price of the company’s stock on the day of grant. In December 2004, the Financial Accounting Standards Board issued a revised and renamed standard regarding stock compensation - FAS 123R, “Share-Based Payment.” The revised standard, which was adopted by Anheuser-Busch in the first quarter of 2006, eliminates the disclosure-only election under FAS 123 and requires the recognition of compensation expense for stock options and all other forms of equity compensation generally based on the fair value of the instruments on the date of grant. In order to enhance comparability among all years presented and to provide the fullest understanding of

7

the impact that expensing stock compensation has on the company, Anheuser-Busch has retrospectively applied the new standard to prior period results.
The fair value of stock compensation is recognized in expense over the vesting period, and is determined on the date of grant using a binomial (lattice method) option-pricing model. The company recognizes the entire fair value associated with non-forfeitable stock options (approximately 60% of the total) in stock compensation expense when options are granted. The remaining expense associated with forfeitable options is recognized ratably over the three-year option vesting period. For financial reporting purposes, stock compensation expense is included in cost of sales and marketing, distribution and administrative expenses, depending on where the recipient’s cash compensation is reported, and is classified as a corporate item for business segments reporting.
The following table shows the fair value of stock options granted for 2005, 2004 and 2003 (in millions, except per option).
 
 200520042003
 
Fair value of each option granted
 
$8.81
 
$10.49
 
$13.58
 
Total number of options granted
 
11.4
 
14.1
 
14.4
 
 
Total fair value of options granted
 
$100.4
 
$147.9
 
$195.6

Anheuser-Busch uses the binomial option-pricing model for the valuation of stock options because it accommodates several inputs in order to take into account multiple option exercise patterns, and essentially computes an overall value based on a weighting of the various patterns. The Black-Scholes pricing model was used to determine the fair value of stock options granted in 2003. The assumptions used in developing the fair value of stock options granted for the years 2005, 2004 and 2003 follow. For illustrative purposes, the expected life, risk-free rate, and fair value per option shown above are weighted averages.
 200520042003
 
Expected life of option
 
5.5 yrs.
 
5.5 yrs.
 
7.0 yrs.
 
Risk-free interest rate
 
4.4%
 
3.7%
 
4.0%
 
Expected volatility of Anheuser-Busch stock
 
21%
 
22%
 
22%
 
Expected dividend yield on Anheuser-Busch stock
 
2.5%
 
1.8%
 
1.7%



8


The following illustrates the impact of stock option activity on earnings and cash flows for the second quarter and first six months of 2006 compared to 2005 (in millions, except per share). Unrecognized pretax stock compensation costexpense as of June 30, 2006 was $922007 totaled $87 million, which is expected towill be recognized over a weighted average lifeperiod of approximately 1.5 years.
 
 
Second Quarter
  
 
First Six Months
 
 
2006
 
 
2005
  
 
2006
 
 
2005
 
Pretax stock compensation expense
 
$18.0
 
 
$18.9
  
 
$35.1
 
 
$37.9
 
After-tax stock compensation expense
 
$12.6
 
 
$13.4
  
 
$24.6
 
 
$25.8
 
Diluted earnings per share impact
 
$.016
 
 
$.017
  
 
$.032
 
 
$.033
 
Cash proceeds from stock option exercises
 
$25.4
 
 
$54.7
  
 
$35.3
 
 
$87.5
 
In-the-money value of stock options exercised
 
$15.0
 
 
$56.0
  
 
$24.0
 
 
$87.0
 
Income tax benefit of stock options exercised (reduction of current taxes payable)
 
$5.2
 
 
$19.8
  
 
$8.2
 
 
$29.0

Following are figures pertinent to operations for the second quarterThe following table provides additional information regarding options outstanding and first six months of 2005, and the balance sheetoptions that were exercisable as of December 31, 2005 as they were previously reportedJune 30, 2007 (options and for the retrospective adoption of FAS 123R.in-the-money values in millions).
 
 
Operating Results for Second Quarter 2005
 
Including
FAS 123R
 
As
Previously
Reported
    
Cost of sales$2,479.8 $2,476.0
Gross profit$1,538.3 $1,542.1
Marketing, distribution and administrative expenses$712.2 $697.1
Operating income$826.1 $845.0
Income before income taxes$717.1 $736.0
Provision for income taxes$260.7 $266.2
Net income$593.6 $607.0
Basic earnings per share$.76 $.78
Diluted earnings per share$.76 $.78
    
Operating Results and Cash Flows for the First Six Months of 2005
   
Cost of sales$4,710.8 $4,703.2
Gross profit$2,871.0 $2,878.6
Marketing, distribution and administrative expenses$1,331.5 $1,301.2
Operating income$1,539.5 $1,577.4
Income before income taxes$1,342.4 $1,380.3
Provision for income taxes$491.5 $503.6
Net income$1,094.0 $1,119.8
Basic earnings per share$1.41 $1.44
Diluted earnings per share$1.39 $1.43
Operating cash flow before change in working capital$1,573.9 $1,593.8
Cash provided by operating activities$1,329.2 $1,349.1
Shares issued under stock plans$107.9 $88.0
Cash used for financing activities$903.1 $923.0
    
Balance Sheet as of December 31, 2005
   
Deferred income taxes$1,345.9 $1,682.4
Capital in excess of par value$2,685.9 $1,601.8
Retained earnings$15,698.0 $16,445.6
Shareholders equity$3,679.8 $3,343.3
 Options OutstandingOptions Exercisable
 
Range of
Exercise
Prices
 
 
 
Number
 
Wtd. Avg.
Remaining
Life
 
Wtd. Avg.
Exercise
Price
Pretax
In-The-
Money
Value
 
 
 
Number
 
Wtd. Avg.
Exercise
Price
Pretax
In-The-
Money
Value
$20 - $293.51.3 years$28.78$80.63.5$28.78$80.6
$30 - $396.72.3 years$37.8494.16.7$37.8494.1
$40 - $4956.25.9 years$46.49332.140.3$46.95171.9
$50 - $5327.76.3 years$51.2925.624.0$51.4425.6
$20 - $5394.15.6 years$46.64$532.474.5$46.74$372.2

4. Derivatives
9
4.
Derivatives
Anheuser-Busch accounts for its derivatives in accordance with FAS 133, “Accounting for Derivatives and Other Hedging Instruments,” and therefore defers in accumulated non-owner changes in shareholders equity the portion of cash flow hedging gains and losses that equal the change in cost of the underlying hedged transactions. As the underlying hedged transactions occur, the associated deferred hedging gains and losses are reclassified into earnings to match the change in cost of the transaction. For fair value hedges, the changes in value for both the derivative and the underlying hedged exposure are recognized in earnings each quarter.
Following are pretax gains and losses from derivatives which were recognized in earnings during the second quarter and first six months (in millions). These gains and losses effectively offset changes in the cost or value of the company’s hedged exposures.
Second Quarter
Second Quarter
 
 
First Six Months
Second Quarter First Six Months
2006 2005 2006 2005
20072007 2006 2007 2006
GainsLosses GainsLosses GainsLosses GainsLossesLosses GainsLosses GainsLosses GainsLosses
---$14.2 $1.8$0.8 $0.5$40.9 $2.4$5.3
$2.8$4.3 --$14.2 $6.5$9.4 $0.5$40.9

The company immediately recognizes in earnings any portion of derivative gains or losses that are not 100% effective at offsetting price changes in the underlying transactions.  Anheuser-Busch recognized net pretax losses due to this hedge ineffectiveness of $2.3 million for the second quarter of 2007 compared to net ineffective pretax losses of $0.7 million for the second quarter of 2006 compared to net ineffective pretax losses of $0.1 million for the second quarter of 2005.2006.  For the first six months, the company recognized net ineffective losses of $1.4 million in both 2007 and $0.4 million, respectively, in 2006 and 2005.2006.



10


5.
5. Earnings Per Share
Earnings per share are calculated by dividing net income by weighted-average common shares outstanding for the period.  The difference between basic and diluted weighted-average common shares is the dilutive impact of unexercised in-the-money stock options.  There were no adjustments to net income for any period shown for purposes of calculating earnings per share.
Weighted-average common shares outstanding for the second quarter and first six months ended June 30 are shown below (millions of shares):
 
 
Second Quarter
 
 
First Six Months
 2006 2005 2006 2005
Basic weighted average shares outstanding769.8 777.1 773.0 778.2
        
Diluted weighted average shares outstanding777.0 782.4 778.8 784.4

 Second Quarter First Six Months
 2007 2006 2007 2006
Basic weighted average shares754.8 769.8 759.2 773.0
Diluted weighted average shares765.1 777.0 770.3 778.8
6.
6. Non-Owner Changes in Shareholders Equity
The components of accumulated non-owner changes in shareholders equity, net of applicable taxes, as of June 30, 20062007 and December 31, 20052006 follow (in millions):
 
June 30, 2006
 
 
Dec. 31, 2005
June 30, 2007 Dec. 31, 2006
Foreign currency translation loss$(584.1) $(382.0)$(346.3) $(452.2)
Deferred hedging losses(5.8) (2.4)
Deferred hedging gains / (losses)(1.8) 2.1
Deferred securities valuation gains1.3 0.31.1 1.3
Minimum pension liability(529.7) (529.7)
Deferred retirement benefits costs(751.0) (782.0)
Accumulated non-owner changes in shareholders equity$(1,118.3) $(913.8)$(1,098.0) $(1,230.8)

NetCombined net income plusand non-owner changes in shareholders equity, net of applicable taxes, for the second quarter and first six months ended June 30 follows (in millions):
 
Second Quarter
 
 
First Six Months
 Second Quarter First Six Months
 
2006
 
 
2005
 
 
2006
 
 
2005
 2007 2006 2007 2006
Net income
Net income
 
$637.8
 
 
$593.6
 
 
$1,137.0
 
 
$1,094.0
Net income$677.0 $637.8 $1,194.5 $1,137.0
Foreign currency translation gains / (losses)
Foreign currency translation gains / (losses)
 
(236.6)
 
 
43.0
 
 
(202.1)
 
 
73.4
Foreign currency translation gains / (losses)147.0 (236.6) 105.9 (202.1)
Net change in deferred hedging gains / (losses)
 
(2.8)
 
 
(1.9)
 
 
(3.4)
 
 
3.2
Deferred securities valuation gains / (losses)
 
0.6
 
 
(104.2)
 
 
1.0
 
 
(96.3)
Net change in deferred hedging lossesNet change in deferred hedging losses(7.0) (2.8) (3.9) (3.4)
Net change in deferred securities valuationNet change in deferred securities valuation0.2 0.6 (0.2) 1.0
Change in deferred retirement benefits costsChange in deferred retirement benefits costs31.0 -- 31.0 --
 
Net income plus non-owner changes in shareholders equity
 
$399.0
 
 
$530.5
 
 
$932.5
 
 
$1,074.3
Combined net income and non-owner
changes in shareholders equity
 
$848.2
 
 
$399.0
 
 
$1,327.3
 
 
$932.5


11


7.In its 2006 annual report on Form 10-K, the company disclosed combined net income and non-owner changes in shareholders equity of $1,648.2 million, which included the impact of recognizing certain deferred retirement benefits costs in accordance with FAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.”  Excluding these costs, combined net income and non-owner changes in shareholders equity for the year ended December 31, 2006 would have been $2,060.2 million.  The company plans to report combined net income and non-owner changes in shareholders equity for 2006 excluding the impact of FAS 158 adoption when it publishes its 2007 annual report on Form 10-K.
7. Inventories
The company’s inventories were comprised of the following as of June 30, 2007 and December 31, 2006 (in millions).
 June 30, 2007 Dec. 31, 2006
Raw Materials$295.3 $385.6
Work-in-Process120.1 110.8
Finished Goods284.2 198.5
  Total Inventories$699.6 $694.9
8. Goodwill
Following is goodwill by business segment, as of June 30, 20062007 and December 31, 20052006 (in millions). Goodwill is included in either other assets or investment in affiliated companies, as appropriate, in the consolidated balance sheet. The change in goodwill during the first six months 20062007 is primarily due to fluctuations in foreign currency exchange rates.
 
June 30, 2006
 
 
Dec. 31, 2005
June 30, 2007 Dec. 31, 2006
Domestic Beer
 
$21.2
 
 
$21.2
$21.2 $21.2
International Beer
 
1,239.3
 
 
1,261.1
1,311.6 1,283.0
Packaging
 
21.9
 
 
21.9
21.9 21.9
Entertainment
 
288.3
 
 
288.3
288.3 288.3
Total goodwill
 
$1,570.7
 
 
$1,592.5
$1,643.0 $1,614.4

8.
9. Pension and Postretirement Health Care Expense
The components of quarterly expense for pensions and postretirement health care benefits are shown below for the second quarter and first six months of 20062007 and 20052006 (in millions). In order to enhance the funded status of its defined benefit pension plans, the company made a discretionary pension contributioncontributions of $85 million and $214 million in January 2006. This contribution is2007 and 2006, respectively. These contributions are in addition to the company’s required pension funding for those years.
In the first quarter, the company recognized previously deferred actuarial losses resulting from the retirement of certain executive officers in the fourth quarter 2006, in accordance with FAS 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans.” The company recognized the FAS 88 impact in the first quarter of 2007 because these individuals retired subsequent to the company’s pension accounting measurement date of October 1, 2006.
Pensions Pensions
Second QuarterFirst Six Months Second QuarterFirst Six Months
2006200520062005 2007200620072006
Service cost (benefits earned during the period)
 
$26.5
 
$24.2
 
$53.1
 
$48.5
Service cost (benefits earned during the period)$25.0$26.5$50.1$53.1
Interest cost on benefit obligation
 
42.5
 
42.2
 
85.0
 
84.4
Interest cost on benefit obligation44.742.589.385.0
Assumed return on plan assets
 
(49.6)
 
(49.0)
 
(99.2)
 
(98.0)
Assumed return on plan assets(52.2)(49.6)(104.3)(99.2)
Amortization of prior service cost and net actuarial losses
 
28.5
 
22.0
 
57.0
 
44.0
Amortization of prior service cost and net actuarial
losses
 
21.4
 
28.5
 
42.7
 
57.0
Expense for defined benefit plans
 
47.9
 
39.4
 
95.9
 
78.9
FAS 88 SettlementFAS 88 Settlement--19.0--
Expense for defined benefit plans38.947.996.895.9
Cash contributed to multi-employer plans
 
4.0
 
4.2
 
7.9
 
8.1
Cash contributed to multi-employer plans4.08.27.9
Cash contributed to defined contribution plans
 
5.0
 
4.0
 
9.7
 
8.7
Cash contributed to defined contribution plans5.15.010.39.7
Total expense
 
$56.9
 
$47.6
 
$113.5
 
$95.7
Total expense$48.0$56.9$115.3$113.5


 Postretirement Health Care
 Second QuarterFirst Six Months
 2007200620072006
Service cost (benefits earned during the period)$6.9$6.1$13.4$12.3
Interest cost on benefit obligation11.78.722.617.4
Amortization of prior service cost and net actuarial
losses
 
4.1
 
1.4
 
8.2
 
2.7
 Total expense$22.7$16.2$44.2$32.4


12



 Postretirement Health Care
 Second QuarterFirst Six Months
 2006200520062005
 
Service cost (benefits earned during the period)
 
$6.1
 
$6.6
 
$12.3
 
$12.8
 
Interest cost on benefit obligation
 
8.7
 
10.1
 
17.4
 
19.7
 
Amortization of prior service cost and net actuarial losses
 
1.4
 
3.0
 
2.7
 
1.3
 
Total expense
 
$16.2
 
$19.7
 
$32.4
 
$33.8

9.
10. Equity Investment in Grupo Modelo
Summary financial information for Anheuser-Busch’s equity investee Grupo Modelo for the second quarter and first six months of 20062007 and 20052006 is presented below (in millions). The amounts shown represent 100% of Modelo’s consolidated operating results and financial position based on U.S. generally accepted accounting principles on a one-month lag basis, and include the impact of the company’s purchase accounting adjustments.
 
Results of Operations
Results of Operations
Second Quarter First Six MonthsSecond Quarter First Six Months
2006 2005 2006 20052007 2006 2007 2006
Gross sales$1,473.5
 
$1,256.6
 
$2,706.5
 
$2,267.4$1,843.8 $1,473.5 $3,274.8 $2,706.5
Net sales$1,374.3
 
$1,171.6
 
$2,516.7
 
$2,102.0$1,743.6 $1,374.3 $3,076.0 $2,516.7
Gross profit$733.5
 
$616.3
 
$1,338.9
 
$1,134.4$947.1 $733.5 $1,663.4 $1,338.9
Minority interest expense$0.5
 
$0.5
 
$0.8
 
$0.8$67.0 $0.5 $110.4 $0.8
Net income$331.8
 
$263.4
 
$573.7
 
$474.4$380.1 $331.8 $692.8 $573.7
              
 
At June 30
  As of June 30  
2006 2005    2007 2006    
Cash / marketable securities$1,617.6
 
$1,326.8
 
 
 
 
$1,573.6 $1,617.6    
Other current assets$946.7
 
$854.1
 
 
 
 
$1,506.8 $946.7    
Non-current assets$4,281.6
 
$4,343.0
 
 
 
 
$4,937.7 $4,281.6    
Current liabilities$466.1
 
$426.4
 
 
 
 
$623.9 $466.1    
Non-current liabilities$353.1
 
$421.3    $368.8 $353.1    


In June 2007, Grupo Modelo restructured its distribution operations in Mexico City and recognized related costs in its month of June results.  Anheuser-Busch reports its equity share of Modelo results on a one-month lag basis, and as such will report its share of Modelo’s June results, including the related restructuring costs, in the company’s third quarter.
11. Uncertain Tax Positions
Effective January 1, 2007, Anheuser-Busch adopted FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.” On adoption, the company had $96.8 million in gross unrecognized tax benefits, resulting in $45.9 million of net uncertain tax benefit positions that would reduce the company’s effective income tax rate if recognized.  To comply with FIN 48, Anheuser-Busch reclassified $102.6 million of tax liabilities from current to noncurrent on the balance sheet and also separately recognized $53.1 million of deferred tax assets which had previously been netted against tax liabilities. The company made no adjustments to retained earnings related to adoption, there have been no material changes in the amount of unrecognized tax benefits since adoption, and the company anticipates no significant changes in the next 12 months.
The company’s policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes.  The liability for accrued interest totaled $7.8 million as of January 1, 2007. Interest is computed on the difference between the company’s uncertain tax benefit positions under FIN 48 and the amount deducted or expected to be deducted in the company’s tax returns.
The principal jurisdictions for which Anheuser-Busch files income tax returns are U.S. federal and the various city, state, and international locations where the company has operations. The company participates in the IRS Compliance Assurance Process program for the examination of U.S. federal income tax returns, and examinations are substantively complete through 2006.  City and state examinations are substantially complete through 2001. The status of international tax examinations varies by jurisdiction. The company does not anticipate any material adjustments to its financial statements resulting from tax examinations currently in progress.


13


Management’s Discussion and Analysis of Operations and Financial Condition
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 second quarter and six months ended June 30, 2006,2007, compared to the second quarter and first six months ended June 30, 2005,2006, and the year ended December 31, 2005.2006.  This discussion should be read in conjunction with the consolidated financial statements and notes included in the company’scompany's annual report to shareholders for the year ended December 31, 2005.2006.
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.
 
Results of Operations
EffectiveAnheuser-Busch reported that second quarter 2007 net sales increased 6.1% and diluted earnings per share increased 7.3%.  For the first six months of 2007, net sales increased 4.5% and diluted earnings per share increased 6.2%. Led by U.S. beer operations, all of the company’s business segments reported improved earnings in the firstsecond quarter 2006,and Anheuser-Busch adopted FAS 123R, “Share-Based Payment.” FAS 123R requiresis on track to deliver accelerating earnings growth in the recognitionsecond half of stock compensation expense for stock options and other forms of equity compensation,the year. The positive outlook is 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

14

stock compensation expense. The impact of adopting FAS 123R is not material to the results of operations for any period presented. See Note 3 for additional information.
Anheuser-Busch is off to a good start this year with favorable performances by all business segments. The company’s domestic beer volume momentum continues to be positive into the key summer selling season, with the largest sales-to-retailers volume in June of any month inpricing environment, the company’s history. The domesticbroadened U.S. beer pricing environment is favorable andportfolio that provides access to high-margin growth opportunities, successful productivity improvement initiatives that are helping mitigate continuingmitigating cost pressures. In addition,pressures and enhanced earnings contributions from the international beer segment, led by Grupo Modelo, and the entertainment segment are having outstanding years. Based on these positive factorsModelo. Anheuser-Busch is optimistic concerning its sales and earnings outlook for 2006.
Consolidated net sales for the second quarter and first six months increased 5.9% and 5.7%, respectively, versus prior year, while dilutedcontinues to target long term earnings per share increased 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%7% to 10% range, and domestic beer shipments-to-wholesalers increasing 2.2% versusexpects the second quarter 2005.
Reportedcompany’s 2007 earnings per share for theincrease to exceed this range.
The second quarter and first six monthsquarters of both 20062007 and 20052006 include one-time items that impact the comparability of reported operating results between 2006 and 2005.results. In the second quarter of both2007, the company recorded a $16 million pretax gain ($.01 per share) on the sale of its remaining interest in its Spanish theme park investment and in the second quarter of 2006, and 2005, Anheuser-Busch experienced favorable income tax events—in 2006,recognized a $7.8 million tax provision benefit fromdue to the reduction of deferred income taxes resulting from state tax legislation enacted in Texas; and in 2005, a $7.2 million favorable reduction of deferred income taxes due to tax legislation in Ohio plus a $6.8 million favorable settlement of certain Chilean taxes associated with the sale of the company’s equity stake in Compañía Cervecerías Unidas S.A. (CCU) in December 2004. In the first quarter of 2005, the company also had a $15.4 million pretax gain on the sale of a theme park interest in Spain.Texas.  Excluding the impact of these one-time items from both years, which the company believes allows a better comparison of
underlying operating results, diluted earnings per share increased 9.5%7.4% for the second quarter and 7.4%6.2% for the first six months (see additional discussion on pages 2017 through 22)19).

15

Beer Sales Results
Following is a summary and discussion of the company’s beer volume and sales results for the second quarter and first six months of 20062007 versus comparable 20052006 periods.
 
Reported Beer Volume (millions of barrels) for Periods Ended June 30Reported Beer Volume (millions of barrels) for Periods Ended June 30
Reported Beer Volume (millions of barrels) for Periods Ended June 30
Second Quarter Six Months
Second Quarter
 
Six Months
  Versus 2005   Versus 2005  
Versus 2006
   
Versus 2006
2006 Barrels % 2006 Barrels %
2007
 
Barrels
 
%
 
2007
 
Barrels
 
%
Domestic
 
26.9
 
 
Up 0.6
 
 
Up 2.2%
 
 
52.5
 
 
Up 1.7
 
 
Up 3.4%
U.S.27.5 Up 0.6 Up 2.3% 53.3 Up 0.8 Up 1.5%
International
 
5.8
 
 
Up 0.9
 
 
Up 18.5%
 
 
10.6
 
 
Up 1.3
 
 
Up 14.2%
5.9
 
Up 0.1
 
Up 1.6%
 
11.1
 
Up 0.5
 
Up 4.8%
Worldwide A-B Brands
 
32.7
 
 
Up 1.5
 
 
Up 4.8%
 
 
63.1
 
 
Up 3.0
 
 
Up 5.0%
33.4 Up 0.7 Up 2.2% 64.4 Up 1.3 Up 2.0%
Int’l Equity Partner Brands
 
8.5
 
 
Up 1.7
 
 
Up 25.1%
 
 
14.9
 
 
Up 3.8
 
 
Up 34.0%
9.1
 
Up 0.6
 
Up 6.8%
 
15.7
 
Up 0.8
 
Up 5.6%
Total Brands
 
41.2
 
 
Up 3.2
 
 
Up 8.4%
 
 
78.0
 
 
Up 6.8
 
 
Up 9.6%
42.5
 
Up 1.3
 
Up 3.2%
 
80.1
 
Up 2.1
 
Up 2.7%
                      

DomesticU.S. beer volume represents Anheuser-Busch beer produced and shipped withinshipments to wholesalers in the United States. DomesticU.S. beer shipments-to-wholesalersvolume increased 2.2%2.3% for the second quarter, andwhile sales-to-retailers increased 2%, with the new Rolling Rock, Grolsch and Tiger0.1%.  Import 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) with Rolling Rock, Grolsch and Tiger contributing 0.2contributed 1.9 points of growth to shipments and 1.6 points to sales-to-retailers.
For the first six months of 2007, shipments-to-wholesalers increased 1.5%, and sales-to-retailers increased 0.1% with acquired and import brands contributing 1.7 points of growth to shipments and 1.6 points to sales-to-retailers.  Sales-to-retailers increases were led by Bud Light, which grew approximately 6% for bothWholesaler inventories at the end of the second quarter and year-to-date (selling day adjusted). The acquisitionwere slightly higher than at the end of the Rolling Rock brands, plus the new arrangements with Grolsch, Tiger and the Hansen’s energy brands leverage the strength of the company’s distribution system and provide opportunities for earnings enhancements for Anheuser-Busch and its wholesalers.second quarter 2006.
The company’s estimated domesticU.S. beer market share (excluding exports) for the first six months of 20062007 was 48.9%,48.8% compared to prior year market share of 48.7%48.9%.  Domestic marketMarket 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

16

18.5% 1.6% for the second quarter and 14%4.8% for the first half of 2006,2007, driven primarily by salesvolume increases in China, Canada and Mexico, andpartially offset by lower volume in the United Kingdom. Worldwide Anheuser-Busch brands volume is comprised of domestic volumeU.S. and international volume, and rose 5%2.2% for both the second quarter and 2.0% year-to-date, to 3333.4 million and 6364.4 million barrels, respectively.
Equity partner brands volume, which includesrepresents the company’s share of its foreign equity partners’ volume reported on a one-month lag, increased 25%6.8% for the second quarter of 2006,2007, to 8.59.1 million

barrels, due to the strong volume performance of Grupo Modelo and the inclusion of Tsingtao volume. The company began accounting for Tsingtao on an equity basis in May 2005. Equity partner brands volume was up 34%increased 5.6% for the first six months of 2006.
to 15.7 million barrels, due to Modelo and Tsingtao volume growth in both periods. Total brands volume, which combines worldwide Anheuser-Busch brand volume with equity partner brands volume was 4142.5 million barrels in the second quarter and 7880.1 million barrels for the six months, up 8%3.2% and 10%2.7%, respectively.

20062007 Financial Results
Following is a summary and discussion of key operating results for the second quarter and first six months of 20062007 versus comparable 20052006 periods.
 
      
$ in millions, except per shareSecond Quarter 2006 vs. 2005
Second Quarter
 
2007 vs. 2006
 
2006
 
 
2005
 
 
$
 
 
%
2007  2007  $      %      
Gross Sales
 
$4,854
 
 
$4,597
 
 
Up $257
 
 
Up 5.6%
$5,126 $4,854 Up $272 Up 5.6%
Net Sales
 
$4,256
 
 
$4,018
 
 
Up $238
 
 
Up 5.9%
$4,515 $4,256 Up $259 Up 6.1%
Income Before Income Taxes
 
$764
 
 
$717
 
 
Up $47
 
 
Up 6.6%
$797 $764 Up $33 Up 4.3%
Equity Income
 
$170
 
 
$137
 
 
Up $33
 
 
Up 24.2%
$195 $170 Up $25 Up 14.2%
Net Income
 
$638
 
 
$594
 
 
Up $44
 
 
Up 7.4%
$677 $638 Up $39 Up 6.1%
Diluted Earnings per Share
 
$.82
 
 
$.76
 
 
Up $.06
 
 
Up 7.9%
$.88 $.82 Up $.06 Up 7.3%



17



   
$ in millions, except per share
 
First Six Months
 
 
2006 vs. 2005
First Six Months
 
2007 vs. 2006
 
2006
 
 
2005
 
 
$
 
 
%
2007  2006  $      %      
Gross Sales
 
$9,150
 
 
$8,682
 
 
Up $468
 
 
Up 5.4%
$9,532 $9,150 Up $382 Up 4.2%
Net Sales
 
$8,012
 
 
$7,582
 
 
Up $430
 
 
Up 5.7%
$8,374 $8,012 Up $362 Up 4.5%
Income Before Income Taxes
 
$1,380
 
 
$1,342
 
 
Up $38
 
 
Up 2.8%
$1,393 $1,380 Up $13 Up 1.0%
Equity Income
 
$293
 
 
$243
 
 
Up $50
 
 
Up 20.4%
$354 $293 Up $61 Up 20.9%
Net Income
 
$1,137
 
 
$1,094
 
 
Up $43
 
 
Up 3.9%
$1,195 $1,137 Up $58 Up 5.1%
Diluted Earnings per Share
 
$1.46
 
 
$1.39
 
 
Up $.07
 
 
Up 5.0%
$1.55 $1.46 Up $.09 Up 6.2%

Anheuser-Busch reported gross sales of $4.9$5.1 billion during the second quarter 2006,2007, an increase of $257$272 million, or 6%5.6%.  Gross sales increased 5%4.2%, or $468$382 million, to $9.2$9.5 billion for the first six months.  Net sales were $4.3$4.5 billion and $8.0$8.4 billion, increases of $238$259 million and $430$362 million, respectively, or 6%6.1% for both periods.the quarter and 4.5% year-to-date. The differences between gross and net sales in 20062007 are due to beer excise taxes of $598$611 million and $1.1$1.2 billion, respectively.
The sales increases in both gross and net sales were driven by higher sales increases for all operating segments.segments, with the exception of a year-to-date decline in packaging segment sales. For the second quarter and first six months, respectively, domesticU.S. beer segment net sales increased 3%6.9%, or $206 million, and 4%5.3%, or $309 million on higher volume, and increased revenue per barrel;barrel, higher promotional prices over the key summer holiday periods and


favorable brand mix; international beer net sales increased 13%4% and 10%6% primarily due to volume gains in China, Canada and Mexico offset by declines in the United Kingdom; packaging operations net sales increased 12%5% for the second quarter on higher aluminum can and recycling revenues, but decreased 1% for the first six months on lower can manufacturing sales; and entertainment segment sales increased 8.4% in both periods due to increased attendance, higher aluminum canticket pricing and recycling revenues; and entertainment segment sales 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 in 2006 versus in the first quarter in 2005.in-park spending.
 Domestic U.S. beer revenue per barrel was up 0.9%3.1% in the second quarter 20062007 and grew 0.4%2.7% compared to the first half of 2005,2006, due to the successful implementation of price increases and discount reductions on over half the company’s domestic volume. Revenue per barrel growth includesU.S. volume earlier in the impact of acquired and import brands Rolling Rock, Grolsch and Tiger.year.  Revenue per barrel increases accounted for $39$128 million and $40$216 million, respectively, of the increases in domesticU.S. beer net sales in the second

18

quarter and first six months. Highermonths, while higher beer volume contributed $50$78 million and $171$93 million, respectively, to the increases for the same periods. Revenue per barrel is calculated as net sales generated by the company’s domesticU.S. beer operations on barrels of beer sold, determined on a U.S. GAAP basis, divided by the total volume of beer shipped to U.S. wholesalers. Consistent with theits pattern for 2006 pricing actions in recent years, the company expects to implement increases on the majority of its volume early next year, with a few selective increases in the fourth quarter 2006.2007.  As in the past, pricing initiatives will be tailored to selected markets, brands and packages.
The cost of sales for the second quarter 20062007 was $2.7$2.9 billion, an increase of $181$197 million, or 7%7.4%, and was up $368$254 million, or 8%5%, to $5.1$5.3 billion for the first six months.  The increases in cost of sales are primarily attributable to the costs associated with higher U.S. and international beer volume worldwide,of $101 million and $8 million, respectively, for the second quarter and $132 million and $24 million, respectively, for the first six months.  Additional factors include increased costs for beerbrewing and packaging materials and higher labor and operating costs for entertainment operations, partially offset by lower energy costs and increasedlower packaging segment costs for packaging and entertainment operations.due to lower volumes. Gross profit as a percentage of net sales was 37.5%36.7% for the second quarter and 36.6%36.3% year-to-date, down 80 basis points and 13030 basis points, respectively, due primarily to increased beer volume being offset by increased costs.respectively.
Marketing, distribution and administrative expenses were $714$756 million for the second quarter and $1.3$1.4 billion year-to-date, representing a $2$42 million increase for the quarter and a $2$92 million decreaseincrease year-to-date. TheseThe changes versus prior year periods are due to favorablehigher U.S. beer marketing expenses, especiallycosts, including incremental marketing and selling expense for domesticthe company’s new import beer and level distributionportfolio, increased marketing costs for entertainment operations, higher delivery costs for company-owned beer wholesale operations due to having one less location, partially offset bywholesalerships, and increased generaladministrative expenses year-to-date. Administrative expenses for the first six months include a FAS 88 settlement charge and administrative costs.an asset disposition gain.
Operating income was $881$901 million, an increase of $55$20 million, or 7%2.3% for the second quarter 2006. Operating margin for the quarter increased 10 basis points, to 20.7% due primarily to increased sales and essentially stable marketing, distribution and administrative expenses.2007.  For the first six months of 2006,2007, operating income was $1.6 billion, an increase of $64$16 million, or 4%, while operating margin was 20.0%, or 30


1%. Operating margins declined 70 basis points lower than 2005.for both the second quarter and first six months, to 20.0% and 19.3%, respectively.
Interest expense less interest income was $115$118 million for the second quarter and $230$238 million for the first six months of 2007, increases versus respective 2006 both amounts essentially level with comparable 2005 periods of $3 million and $8 million. The increases are due to slightly lowerhigher interest rates combined with higher average outstanding debt balances

19

offset byduring the quarter and higher interest rates andpartially offset by lower interestaverage debt balances year-to-date. Interest income year-to-date.was greater in both 2007 periods versus 2006.  Interest capitalized of $5$4.2 million in the second quarter 2006and $7.7 million for the first six months was down slightly and was down $2 million year-to-date, due to lower qualifyingthe timing of capital spending.spending and project in-service dates.
Other income/expense,(expense), net reflects the impact of numerous items not directly related to the company’s operations. For the second quarter of 2006,2007, the company had other expenseincome of $7$9.6 million versus other incomeexpense of $1$6.8 million in 2005.2006. Year-to-date the company recognized income of $3.7 million in 2007 compared to expense of $3 million in 2006 compared to income of $21 million in 2005.$3.1 million.  Other income for the second quarter and first six months of 20052007 includes the $15.4$16.0 million gain from the sale of the company’s equityremaining interest in theits Spanish theme park.park investment. For business segment reporting purposes, the gain is reported as a corporate item.
Income before income taxes for the second quarter 20062007 was $764$797 million, an increase of $47$33 million, or 7%4.3%, due to improved results for all segments. Year-to-date, pretax income was $1.4 billion, an increase of $13 million or 1%, primarily due to higher profits inearnings from the domestic beerpackaging and entertainment segments partially offset by lower one-time items. These same factors led to year-to-dateearnings for international beer operations and higher interest and administrative expenses. U.S. beer pretax income of $1.4 billion, and increase of $38profits improved $12.5 million or 3%. Forin the second quarter and were essentially level with 2006 for the first six months, domestic beer pretax profits improved $21 million and $22 million, due to higher beer sales volume and increased pricing and lower marketing, partiallybeing offset by higher packaging materials, energymarketing expenses and plant operatingbeer production costs. International beer pretax income was essentially level for both periods due toincreased $2.6 million in the second quarter and decreased $1.9 million year-to-date on profit growth in China, Canada and Mexico plus lower marketing costs, partially offset by lower earningsresults in China and the United Kingdom. ProfitsKingdom in China declined due to price competitionthe quarter, and increased marketing and selling costs, while United Kingdom profits were down due primarily to lower pricing and unfavorable revenue mix.fully offset for the six months. Packaging segment pretax profits were up $1$9.8 million and $4$15.6 million, respectively, primarily due to increased profits from can manufacturing in both periods and aluminum recycling on improved pricing partially offset by higherlower volume, and increased label manufacturing costs year-to-date.earnings from higher volumes. Entertainment segment pretax resultsprofits grew $31$5.4 million and $19$4.5 million, respectively, due to the quarterly timing of the Easter holidayincreased attendance, increased ticket pricing and higher overall attendance for the first six months,in-park spending partially offset by higher park operating costs in both periods.
Equity income of $195 million for the second quarter and $354 million year-to-date increased $33$25 million and $61 million, respectively, reflecting the benefit of improved Grupo Modelo earnings from higher volume and benefits associated with the new Crown import and distribution joint venture.  Equity income includes


benefits of $12 million and $29 million, respectively, in the second quarter 2006 and $50 million year-to-date, reflectingfor the first six months due to the return of advertising funds that were part of prior import contracts. The benefit for the first six months was partially offset by a timing change in the recognition of Grupo Modelo volume growth, Mexican price increases taken atModelo’s export sales to the beginning of the year and a lower MexicanU.S.
Anheuser-Busch’s effective income tax rate plus Tsingtao equity income growth year to date. The company began applying equity accountingwas 39.5% for Tsingtao in May 2005.
Anheuser-Busch’s effective tax rate was 38.8% for both the second quarter 20062007 and 39.7% for the first six months, representing increases of 24070 and 22090 basis points,

20

respectively, and primarily due to higher taxes on foreign earnings. The effective rates forearnings and the second quarter 2006 and for bothfavorable impact of the second quarter and first six months of 2005 were all lower than typical, reflecting favorable one-timeTexas state income tax items pluslegislation in 2006, partially offset by a deferred income tax benefit onstep-up in the sale of the Spanish theme park. Both the quarterly and year-to-datedomestic manufacturing deduction in 2007. The effective tax rates for 20062007 include a benefit from partial capital loss utilization.
Net income of $638$677 million in the second quarter of 20062007 represented an increase of $44$39 million, or 7%6.1%.  Net income grew 4%5.1%, to $1.1$1.2 billion for the first six months of 2006.2007. Diluted earnings per share were $.82$.88 and $1.46,$1.55, respectively, for the second quarter and first six months of 2006,2007, representing increases of 8%7.3% and 5%6.2%, respectively.  Diluted earnings per share benefited from the company’s repurchase of 10.922.4 million shares in the first six months under the company’s on-going share repurchase program.
As shown in the following table,The company believes excluding the favorable income tax events in 2006 and 2005 and the one-time gain from the sale of the Spanish theme park investment in 2005, which2007 and the company believesfavorable income tax benefit in 2006 provides more meaningful comparisons between periods,periods. As shown in the following table, pretax income, net income and diluted earnings per share excluding these one-time items increased 9%2.2%, 5.9% and 9.5%7.4%, respectively for the second quarter, while the effective income tax rate increased 160decreased 40 basis points.  For the first six months, income before income taxes declined 0.2%, while net income, diluted earnings per share and the effective income tax rate increased 4%4.9%, 6%, 7%6.2% and 10030 basis points, respectively.




21



            
Reconciliation of Comparative Operating Results
        
            
            
   Income        
   Before Provision   Diluted  
   Income for Income Net Earnings Effective
 
Second Quarter
 Taxes Taxes Income Per Share Tax Rate
 
2006
          
 Reported $764.2 ($296.8) $637.8 $.82 38.8%
 Texas Income Tax Legislation Benefit   (7.8) (7.8) (.01)  
 Excluding One-Time Items $764.2 ($304.6) $630.0 $0.81 39.9%
 
2005
          
 As Reported $736.0 ($266.2) $607.0 $0.78  
 FAS 123R Impact (18.9) 5.5 (13.4) (0.02)  
 Including FAS 123R 717.1 (260.7) 593.6 0.76 36.4%
 CCU Sale Chile Income Tax Settlement   (6.8) (6.8) (.009)  
 Ohio Income Tax Legislation Benefit   (7.2) (7.2) (.009)  
 Excluding One-Time Items $717.1 ($274.7) $579.6 $0.74 38.3%
            
 
Percentage Change - 2006 vs. 2005
          
 Including FAS 123R 6.6%   7.4% 7.9% 2.4%
 Excluding One-Time Items 6.6%   8.7% 9.5% 1.6%
            
            
 
First Six Months
          
 
2006
          
 Reported $1,379.6 ($535.4) $1,137.0 $1.46 38.8%
 Texas Income Tax Legislation Benefit   (7.8) (7.8) (.01)  
 Excluding One-Time Items $1,379.6 ($543.2) $1,129.2 $1.45 39.4%
 
2005
          
 As Reported $1,380.3 ($503.6) $1,119.8 $1.43  
 FAS 123R Impact (37.9) 12.1 (25.8) (.033)  
 Including FAS 123R 1,342.4 (491.5) 1,094.0 1.39 36.6%
 Gain on Sale of Spanish Theme Park (15.4) (3.5) (18.9) (.024)  
 CCU Sale Chile Income Tax Settlement   (6.8) (6.8) (.009)  
 Ohio Income Tax Legislation Benefit   (7.2) (7.2) (.009)  
 Excluding One-Time Items $1,327.0 ($509.0) $1,061.1 $1.35 38.4%
            
 
Percentage Change - 2006 vs. 2005
          
 Including FAS 123R 2.8%   3.9% 5.0% 2.2%
 Excluding One-Time Items 4.0%   6.4% 7.4% 1.0%
 
 
($ in millions, except per share)
 
Income
Before
Income
Taxes
  
Provision
for Income
Taxes
  
Net
Income
  
Diluted
Earnings
Per Share
  
Effective
Tax
Rate
 
Second Quarter
               
2007
               
Reported $796.9  $(314.6) $677.0  $0.88   39.5% 
Gain on Sale of Spanish Theme Park  (16.0)  6.1   (9.9)  (0.01)    
Excluding One-Time Item $780.9  $(308.5) $667.1  $0.87   39.5% 
                     
2006
                    
Reported $764.2  $(296.8) $637.8  $0.82   38.8% 
Texas Income Tax Legislation Benefit  --   (7.8)  (7.8)  (0.01)    
Excluding One-Time Item $764.2  $(304.6) $630.0  $0.81   39.9% 
                     
Percentage Change – 2007 vs. 2006
                    
Reported  4.3%      6.1%   7.3%  70 pts 
Excluding One-Time Items  2.2%       5.9%   7.4%  (40) pts 



22
First Six Months
               
2007
               
Reported $1,393.1  $(552.7) $1,194.5  $1.55   39.7% 
Gain on Sale of Spanish Theme Park  (16.0)  6.1   (9.9)  (0.01)    
Excluding One-Time Item $1,377.1  $(546.6) $1,184.6  $1.54   39.7% 
                     
2006
                    
Reported $1,379.6  $(535.4) $1,137.0  $1.46   38.8%
Texas Income Tax Legislation Benefit  --   (7.8)  (7.8)  (0.01)    
Excluding One-Time Item $1,379.6  $(543.2) $1,129.2  $1.45   39.4% 
                     
Percentage Change – 2007 vs. 2006
                    
Reported  1.0%       5.1%   6.2%  90 pts 
Excluding One-Time Items  (0.2)%       4.9%   6.2%  30 pts 
 
Liquidity and Financial Condition
Cash at June 30, 2006 was $223 million, a decrease of $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,repurchasing, 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.


Cash at June 30, 2007 was $303 million, an increase of $84 million from the December 31, 2006 balance.  The company generated operating cash flow before the change in working capital of $1.4$1.7 billion for the first six months of 2006, a decline2007, an increase of $139$295 million due primarily to the $214 millionincreased earnings, higher Grupo Modelo dividends and a lower discretionary defined benefit pension contribution in January 2006 partially offset by increased earnings. The discretionary contribution was2007, $85 million versus $214 million in addition to2006. See the consolidated statement of cash flows for additional information on the company’s required pension funding for the year. Full year pension contributions for 2006 are projected to be $270 million. The company also reported a favorable change in working capital in the first halfsources and uses of 2006 versus 2005 primarily due to lower trade receivables and raw materials inventories partially offset by higher accrued incentive compensation.cash.
There have been only normal and recurring changes in the company’s cash commitments since December 31, 2005.
Capital expenditures during the second quarter 2006 were $159 million, compared to $288 million for the second quarter 2005. Capital expenditures totaled $318 million and $565 million, respectively, for the first six months of 2006 and 2005. Full year 2006 capital expenditures are expected to approximate $850 million.
At its July 2006 meeting, the Board of Directors increased the company’s regular quarterly dividend 9.3%, to $.295 per share from $.27 per share on outstanding shares of the company’s common stock, payable September 11, 2006, to shareholders of

23

record August 9, 2006. This increase reflects management’s confidence regarding the company’s long-term prospects.
The company’s debt balance decreased a net $136increased $300 million in the first half of 2007 compared to a decrease of $136 million in 2006.  The details of the changes in debt for the first half of 2007 and 2006 and 2005 are outlined below.summarized below (in millions).
 
Description
 
 
Amount
 
Interest Rate
(Fixed Unless Noted)
First Six Months of 2007
    
Increases:    
 U.S. Dollar Notes $317.3 $300.0 at 5.6% and $17.3 at 5.54%
 Industrial Revenue Bonds 12.5 Various
 Other, net 42.0 Various
 Total increases 371.8  
     
Decreases:    
 Commercial Paper (69.2) 5.38% Wtd. avg., floating
 Other, net (2.2) Various
 Total decreases (71.4)  
 Net Increase in Debt $300.4  
     
First Six Months of 2006
    
Increases:    
 U.S. dollar debentures $300.0 5.75%
 Other, net 6.9 Various
 Total increases 306.9  
     
Decreases:    
 Commercial Paper (428.2) 4.77% Wtd. avg., floating
 Other, net (14.3) Various
 Total decreases (442.5)  
 Net Decrease in Debt ($135.6)  

 
Increases in Debt (in millions)
   
 
Description
 
Amount
 
Interest Rate
(Fixed Unless Noted)
 
First Six Months of 2006
   
U.S. dollar debentures$300.0 5.75%
Industrial revenue bonds1.3 6.25%
Other, including issuance discounts and
related amortization
 
5.6
 
 
Various
 $306.9  
    
First Six Months of 2005
   
Commercial Paper$3.7 2.32% Wtd. avg., floating
United Kingdom brewery capital lease51.5 6.25%
Other, including issuance discounts and
related amortization
 
0.8
 
 
Various
 $56.0  

 
Reductions of Debt (in millions)
   
 
Description
 
Amount
 
Interest Rate
(Fixed Unless Noted)
 
First Six Months of 2006
   
Commercial paper$428.2 4.77% Wtd. avg., floating
U. S. Dollar Notes1.3 5.35%
Chinese renminbi-denominated bank loans7.3 5.4% Wtd. avg.
Other, net5.7 Various
 $442.5  
    
First Six Months of 2005
   
U.S. Dollar Notes$0.7 5.35%
Chinese renminbi-denominated bank loans54.5 5.41% Wtd. avg.
Other4.1 Various
 $59.3  

TheAs of June 30, 2007, the company has $1.35$1.05 billion of debt available for issuance through existing SEC shelf registrations.


The company’s commercial paper obligation of $674$589 million at June

24

30, 20062007 is classified as long-term, since commercial paper is maintained on a long-term basis with on-going support provided by the company’scompany's $2 billion revolving credit agreement. The interest rates for commercial paper were 5.36% at June 30, 2007 and 2006 were 5.28% and 3.23% at June 30, 2005.5.41%, respectively.

There have been only normal and recurring changes in the company’s cash commitments since December 31, 2006.
Other Matters

Grupo Modelo Joint Venture
In July, Grupo Modelo announcedCapital expenditures during the creation of a joint venture with Constellation Brandssecond quarter 2007 were $192 million, compared to $159 million for the importingsecond quarter 2006.  Capital expenditures totaled $346 million and marketing$318 million, respectively, for the first six months of Modelo’s beer brands2007 and 2006.  Full year 2007 capital expenditures are expected to be in the United States and Guam. The joint venture is expectedrange of $900 to become operational$950 million.
At its July 2007 meeting, the Board of Directors increased the company’s regular quarterly dividend rate on January 2,outstanding shares of the company’s common stock 11.9%, to $.33 per share from $.295, payable September 10, 2007, with the agreement running through December 31, 2016. The contract will renew in 10-year periods unless Modelo gives notice prior to the endshareholders of year seven of any term.record August 9, 2007.

New Accounting Pronouncement
In July, the Financial Accounting Standards Board issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” The Interpretation requires that realization of an uncertain income tax position must be “more likely than not” (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. Further, the Interpretation prescribes the benefit to be recorded in the financial statements as the amount most likely to be realized assuming a review by tax authorities having all relevant information and applying current conventions. The Interpretation also clarifies the financial statement classification of tax-related penalties and interest and sets forth new disclosures regarding unrecognized tax benefits.
The Interpretation is effective in the first quarter 2007 for Anheuser-Busch and the company plans to adopt the Interpretation when required. The Interpretation is currently being evaluated by Anheuser-Busch for its full impact. At this time, the company believes it has properly and adequately provided for all income tax positions and therefore expects minimal impact from adopting the Interpretation.



25


Item 3.  Disclosures About Market Risks
The company’s derivatives holdings fluctuate during the year based on normal and recurring changes in purchasing and production activity. Since December 31, 2005,2006, there have been no significant changes in the company’s interest rate, foreign currency or commodity exposures.  There have been no changes in the types of derivative instruments used to hedge the company’s exposures. Underlying commodity market conditions have been trending towards higher prices.

Item 4. Controls and Procedures
It is the responsibility of the chief executive officer and chief financial officer to ensure the company maintains disclosure controls and procedures designed to provide reasonable assurance that material information, both financial and non-financial, and other information required under the securities laws to be disclosed is identified and communicated to senior management on a timely basis.  The company’s disclosure controls and procedures include mandatory communication of material subsidiary events, automated accounting processing and reporting, management review of monthly and quarterly results, periodic subsidiary business reviews, an established system of internal controls and rotating internal control reviews by the company’s internal auditors.
The chief executive officer and chief financial officer evaluated the company’s disclosure controls and procedures as of the end of the quarter ended June 30, 20062007 and have concluded that they are effective as of June 30, 20062007 in providing reasonable assurance that such information is identified and communicated on a timely basis.  Additionally, there were no changes in the company’s internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.



26


PART II -– OTHER INFORMATION

Item 1.  Legal Proceedings
In 2004, the Company was served with a complaint brought by two individuals seeking to bring a class action on behalf of all California residents who, while they were under 21 years of age, purchased alcohol beverages manufactured by the Company and another defendant during the last four years. The suit sought disgorgement of unspecified profits earned by the Company in the past and other unspecified damages and equitable relief. By order dated January 28, 2005, the California state court granted the defendants judgment on the pleadings and dismissed the case in its entirety. The plaintiffs in that action have appealed.
Additionally, the Company has been served with similar complaints in putative class action lawsuits in Michigan, Ohio, West Virginia and Wisconsin. In these suits, which name a large number of other brewers and distillers, the parents of illegal underage drinkers are suing to recover the sums that their offspring purportedly spent illegally buying alcohol from persons or entities other than the defendants. The claims asserted against the Company vary depending on the suit, but include negligence, unjust enrichment, violationOn September 19, 2006, one of the state’s Sales Practice Act or other statutory provisions, nuisance, fraudulent concealment and civil conspiracy. The suit filedCompany’s cansheet suppliers, Novelis Corporation (“Novelis”), instituted a lawsuit seeking relief from continued performance of its obligations under its cansheet supply agreement with the Company.  This action is being heard in Michigan includes a claim under the Michigan Consumer Protection Act. Each suit seeks money damages, punitive damages and injunctive and equitable relief, including so-called disgorgement of profits allegedly attributable to illegal underage drinking. The Company removed the Ohio case to federal court in the Northern District of Ohio in June 2005, removedOhio. The Company believes that the West Virginia caseassertions of Novelis are without merit, intends to federal courtvigorously defend its rights under the cansheet supply agreement and expects to prevail in the Northern Districtlitigation.
Reference is made to the Company's 10-K for the fiscal year ended December 31, 2006, which provides a description of West Virginia in May 2005 and removedcertain putative class action lawsuits filed against the Michigan case to federal court inCompany.  On July 17, 2007, the Eastern DistrictU.S. Court of Michigan in July 2005. The Company filed motions to dismissAppeals for the Michigan, Ohio, and Wisconsin cases, and the Michigan federal court, the Ohio federal court and the Wisconsin state courtSixth Circuit dismissed the entire cases with prejudice. The plaintiffs in the Michigan and Ohio cases have appealedon the dismissalsgrounds that the plaintiffs lacked standing to sue and thus that the court lacked federal jurisdiction to hear the claims.  The court of appeals. Thealso held that the plaintiffs did not plead an injury and could not plead causation because the illegal activities involved in underage drinking were an intervening legal cause and consequently that the Wisconsin case have appealedclaim asserted by the dismissal to the Wisconsin state court of appeals.  A motion to dismiss is pendingplaintiffs was not redressable in West Virginia. Similar actions were
court.

27

filed by the same law firm in New York and Florida, but the Company was not served in either case, and the Florida case has been voluntarily dismissed by the plaintiffs. The Company believes that it has strong legal and factual defenses to these class actions and intends to defend itself vigorously.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Following are the Company’s monthly common stock purchases during the second quarter 20062007 (in millions, except per share). All shares are repurchased under Board of Directors authorization. The Board authorized the current programBoard’s most recent authorization to repurchase 100 million shares occurred in March 2003.December 2006. There is no prescribed termination date for this program. The numbers of shares shown include shares delivered to the company to exercise stock options.
 
Shares
 
 
Avg. Price
Shares Avg. Price
Repurchases Remaining Authorized Under Disclosed Programs at March 31, 2006
 
25.5
  
Repurchases Remaining Authorized Under Disclosed Programs at March 31, 2007105.3  
Share Repurchases
      
April(2.7) $42.781.1 $51.08
May(0.6) $45.998.7 $50.13
June(1.7) $45.393.1 $52.48
Total(5.0)  12.9  
Repurchases Remaining Authorized Under Disclosed Programs at June 30, 2006
 
20.5
  
Repurchases Remaining Authorized Under Disclosed Programs at June 30, 2007
 
92.4
  




28



Item 6. ExhibitsExhibits

Exhibit
 
Description
12
Ratio of Earnings to Fixed Charges
   
12
Ratio of Earnings to Fixed Charges
31.1
 Certification of Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) under the Exchange Act
   
31.2
 Certification of Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) under the Exchange Act
   
32.1
 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2
 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
ANHEUSER-BUSCH COMPANIES, INC.
(Registrant)
  
 
/s/ W. Randolph Baker
W. Randolph Baker
Vice President and Chief Financial Officer
(Chief Financial Officer)
July 28, 200627, 2007
  
  
  
 
/s/ John F. Kelly
John F. Kelly
Vice President and Controller
(Chief Accounting Officer)
July 28, 200627, 2007


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