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

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 20072008
   
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                     TO

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 – 749,568,124719,042,325 shares as of June 30, 2007.2008.


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


   
June 30,
  
Dec. 31,
 
 In millions, except per share 2008  2007 
 
 
Assets
      
 
 
Current Assets:
      
 
 
Cash
 $252.8  $ 283.2 
 
 
Accounts receivable
  1,252.3    805.2 
 
 
Inventories
  711.3    723.5 
 
 
Other current assets
  281.9    212.6 
 
 
Total current assets
  2,498.3    2,024.5 
 
 
Investments in affiliated companies
  4,138.4    4,019.5 
 
 
Plant and equipment, net
  8,742.7    8,833.5 
 
 
Intangible assets, including goodwill of $1,174.4 and $1,134.6
  1,587.3    1,547.9 
 
 
Other assets
  746.0    729.6 
 
 
Total Assets
 $17,712.7  $ 17,155.0 
           
           
 
 
Liabilities and Shareholders Equity
         
 
 
Current Liabilities:
         
 
 
Accounts payable
 $1,620.4  $ 1,464.5 
 
 
Accrued salaries, wages and benefits
  333.4    374.3 
 
 
Accrued taxes
  168.5    106.2 
 
 
Accrued interest
  143.8    136.4 
 
 
Other current liabilities
  350.8    222.4 
 
 
Total current liabilities
  2,616.9    2,303.8 
 
 
Retirement benefits
  882.3    1,002.5 
 
 
Debt
  8,483.2    9,140.3 
 
 
Deferred income taxes
  1,365.8    1,314.6 
 
 
Other long-term liabilities
  260.5    242.2 
 
 
Shareholders Equity:
         
 
 
Common stock, $1.00 par value, authorized 1.6 billion shares
  1,495.0    1,482.5 
 
 
Capital in excess of par value
  3,944.6    3,382.1 
 
 
Retained earnings
  18,652.7    17,923.9 
 
 
Treasury stock, at cost
  (19,401.9)   (18,714.7)
 
 
Accumulated nonowner changes in equity
  (586.4)   (922.2)
 
 
Total Shareholders Equity
  4,104.0    3,151.6 
 
 
Commitments and contingencies
  --    -- 
 
 
Total Liabilities and Shareholders Equity
 $17,712.7  $ 17,155.0 
           
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 12.11.


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)
  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 
         
   
Second Quarter
   
Six Months
  
   Ended June 30,   Ended June 30,  
 
 
In millions, except per share
 
2008
  
2007
   
2008
  
2007
  
 
 
Gross sales
 $5,336.1  $5,126.2   $9,990.8  $9,531.8  
 
 
Excise taxes
  (614.7)  (610.8)   (1,170.2)  (1,158.0) 
 
 
Net Sales
  4,721.4   4,515.4    8,820.6   8,373.8  
 
 
Cost of sales
  (2,998.4)  (2,857.9)   (5,628.5)  (5,332.6) 
 
 
Gross profit
  1,723.0   1,657.5    3,192.1   3,041.2  
 
 
Marketing, distribution and
administrative expenses
  (793.2)  (756.2)   (1,499.5)  (1,421.9) 
 
 
Operating income
  929.8   901.3    1,692.6   1,619.3  
 
 
Interest expense
  (121.6)  (119.7)   (250.7)  (239.6) 
 
 
Interest capitalized
  4.1   4.2    9.0   7.7  
 
 
Interest income
  1.2   1.5    2.3   2.0  
 
 
Other income/(expense), net
  2.9   9.6    (2.0)  3.7  
 
 
Income before income taxes
  816.4   796.9    1,451.2   1,393.1  
 
 
Provision for income taxes
  (294.2)  (314.6)   (544.1)  (552.7) 
 
 
Equity income, net of tax
  167.0   194.7    293.0   354.1  
 
 
Net income
 $689.2  $677.0   $1,200.1  $1,194.5  
                    
 
 
Basic earnings per share
 $.96  $.90   $1.68  $1.57  
 
 
Diluted earnings per share
 $.95  $.88   $1.65  $1.55  
                    
                    
 
 
Weighted average shares outstanding
                  
 
 
Basic
  714.2   754.8    715.4   759.2  
 
 
Diluted
  727.1   765.1    725.8   770.3  
                    


See the accompanying footnotes on pages 5 to 12.11.



3

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


   
Six Months
  
 
 
In millions
 
Ended June 30,
  
   2008  2007  
 
 
Cash flow from operating activities:
       
 
 
Net income
 $1,200.1  $1,194.5  
 
 
Adjustments to reconcile net income to cash provided by
operating activities:
         
 
 
Depreciation and amortization
  505.5   494.2  
 
 
Decrease in deferred income taxes
  (16.3)  (39.2) 
 
 
Stock-based compensation expense
  30.9   31.3  
 
 
Undistributed earnings of affiliated companies
  128.4   49.0  
 
 
Gain on sale of business
  --   (16.0) 
 
 
Other, net
  (82.0)  16.8  
 
 
Operating cash flow before the change in working capital
  1,766.6   1,730.6  
 
 
        Increase in working capital
  (150.7)  (117.5) 
 
 
Cash provided by operating activities
  1,615.9   1,613.1  
           
 
 
Cash flow from investing activities:
         
 
 
Capital expenditures
  (357.0)  (346.2) 
 
 
Acquisitions
  (49.0)  (84.6) 
 
 
Proceeds from sale of business
  37.0   16.2  
 
 
Cash used for investing activities
  (369.0)  (414.6) 
           
 
 
Cash flow from financing activities:
         
 
 
Increase in debt
  3.5   333.2  
 
 
Decrease in debt
  (665.9)  (71.5) 
 
 
Dividends paid to shareholders
  (471.3)  (448.1) 
 
 
Acquisition of treasury stock
  (695.3)  (1,131.4) 
 
 
Shares issued under stock plans
  551.7   203.2  
 
 
Cash used for financing activities
  (1,277.3)  (1,114.6) 
 
 
Net increase / (decrease) in cash during the period
  (30.4)  83.9  
 
 
Cash, beginning of period
  283.2   219.2  
 
 
Cash, end of period
 $252.8  $303.1  
           


See the accompanying footnotes on pages 5 to 11.




 
4

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

1. Unaudited Financial Statements
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, 2006.2007.
2. Business Segments Information
2.Business Segments Information
Comparative business segments 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
 
 
U.S. Beer
 
 
International
Beer
 
 
 
Packaging
 
 
 
Entertainment
 
 
Corporate
& Elims
 
 
 
Consolidated
 
2007
 
2008
            
Gross Sales$3,749.1349.3744.9400.6(117.7)$5,126.2
 
$3,893.1
 
 
402.6
 
 
726.7
 
 
416.4
 
 
(102.7)
 
 
$5,336.1
 
Net Sales:             
- Intersegment$0.90.2249.7-(250.8)$ -
 
$0.9
 
 
--
 
 
245.6
 
 
--
 
 
(246.5)
 
 
$ --
 
- External$3,208.1278.4495.2400.6133.1$4,515.4
 
$3,346.3
 
 
333.8
 
 
481.1
 
 
416.4
 
 
143.8
 
 
$4,721.4
 
Income Before
Income Taxes
$795.828.655.0113.9(196.4)$796.9
 
$809.2
 
 
48.1
 
 
49.5
 
 
106.4
 
 
(196.8)
 
 
$816.4
 
Equity Income$1.5193.2-$194.7
 
$(0.7)
 
 
167.7
 
 
--
 
 
--
 
 
--
 
 
$167.0
 
Net Income$494.9210.934.170.6(133.5)$677.0
 
$501.0
 
 
197.5
 
 
30.7
 
 
66.0
 
 
(106.0)
 
 
$689.2
 
 
2006
 
Gross Sales$3,528.5339.9714.7369.4(98.5)$4,854.0
Net Sales:     
- Intersegment$0.8-243.3-(244.1) $ -
- External$3,001.8267.7471.4369.4145.7$4,256.0
Income Before
Income Taxes
$783.326.045.2108.5(198.8)$764.2
Equity Income$1.1169.3-$170.4
Net Income$486.8185.428.067.3(129.7)$637.8
 
 
2007
            
 
Gross Sales
 
$3,741.9
 
 
356.5
 
 
744.9
 
 
400.6
 
 
(117.7)
 
 
$5,126.2
 
 
Net Sales:
            
 
 - Intersegment
 
$0.9
 
 
0.2
 
 
249.7
 
 
-
 
 
(250.8)
 
 
$ -
 
 
 - External
 
$3,200.9
 
 
285.6
 
 
495.2
 
 
400.6
 
 
133.1
 
 
$4,515.4
 
 
Income Before
 Income Taxes
 
$791.7
 
 
30.0
 
 
55.0
 
 
113.9
 
 
(193.7)
 
 
$796.9
 
 
Equity Income
 
$1.5
 
 
193.2
 
 
-
 
 
-
 
 
-
 
 
$194.7
 
 
Net Income
 
$492.3
 
 
211.8
 
 
34.1
 
 
70.6
 
 
(131.8)
 
 
$677.0
 


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
       
     2006
      
Gross Sales$6,886.2597.01,344.1540.1(217.1)$9,150.3
Net Sales:      
 - Intersegment$1.5-469.2-(470.7)$ -
 - External$5,858.3484.6874.9540.1253.7$8,011.6
Income Before
 Income Taxes
$1,557.548.183.990.9(400.8)$1,379.6
Equity Income$1.7291.1---$292.8
Net Income$967.4320.952.056.4(259.7)$1,137.0
 
 
First Six
Months
 
 
U.S. Beer
 
 
International
Beer
 
 
 
Packaging
 
 
 
Entertainment
 
 
Corporate
& Elims
 
 
 
Consolidated
 
 
 
2008
            
 
 
Gross Sales
 
$7,467.8
 
 
740.4
 
 
1,371.2
 
 
638.0
 
 
(226.6)
 
 
$9,990.8
 
 
 
Net Sales:
            
 
 
 - Intersegment
 
$1.7
 
 
0.1
 
 
487.6
 
 
--
 
 
(489.4)
 
 
$ --
 
 
 
 - External
 
$6,412.2
 
 
624.0
 
 
883.6
 
 
638.0
 
 
262.8
 
 
$8,820.6
 
 
 
Income Before
 Income Taxes
 
$1,584.7
 
 
85.6
 
 
89.4
 
 
100.3
 
 
(408.8)
 
 
$1,451.2
 
 
 
Equity Income
 
$(1.1)
 
 
294.1
 
 
--
 
 
--
 
 
--
 
 
$293.0
 
 
 
Net Income
 
$981.4
 
 
347.2
 
 
55.4
 
 
62.2
 
 
(246.1)
 
 
$1,200.1
 
 
 
2007
            
 
 
Gross Sales
 
$7,199.3
 
 
642.1
 
 
1,349.4
 
 
585.6
 
 
(244.6)
 
 
$9,531.8
 
 
 
Net Sales:
            
 
 
 - Intersegment
 
$1.7
 
 
0.5
 
 
481.7
 
 
-
 
 
(483.9)
 
 
$-
 
 
 
 - External
 
$6,154.2
 
 
527.0
 
 
867.7
 
 
585.6
 
 
239.3
 
 
$8,373.8
 
 
 
Income Before
 Income Taxes
 
$1,549.7
 
 
49.1
 
 
99.5
 
 
95.4
 
 
(400.6)
 
 
$1,393.1
 
 
 
Equity Income
 
$1.6
 
 
352.5
 
 
-
 
 
-
 
 
-
 
 
$354.1
 
 
 
Net Income
 
$962.4
 
 
382.9
 
 
61.7
 
 
59.1
 
 
(271.6)
 
 
$1,194.5
 

In 2007,2008, the company changed reporting responsibility for beer sales in the Caribbean region from U.S. Beer to International Beer and also reassigned certain administrative and technology support costs frombetween Corporate to theand U.S. beer segment. 2006 segmentBeer. Segment results for 2007 have been updated to conform to thisthe revised reporting convention.conventions.

3. Stock Compensation
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 New 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, 2007,2008, existing stock plans authorized issuance of 140125 million shares of common stock. The company has 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.
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

6

compensation is reported, and is classified as a corporate item for business segments reporting.
Unrecognized stock compensation expense as of June 30, 20072008 totaled $87 million, of which will$15 million is expected to be recognized over a weighted average period of approximately 1.5 years.in the third quarter with the remainder recognized in the fourth quarter.
The following table provides additional information regarding options outstanding and options that were exercisable as of June 30, 20072008 (options and in-the-money values in millions).
Options OutstandingOptions ExercisableOptions Outstanding Options 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
 
 
 
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
 
0.4
 
0.4 years
 
$29.97
 
 
$12.9
 
 
0.4
 
$29.97
 
 
$12.9
$30 - $396.72.3 years$37.8494.16.7$37.8494.1
 
3.2
 
1.4 years
 
$37.84
 
 
79.1
 
 
3.2
 
$37.84
 
 
79.1
$40 - $4956.25.9 years$46.49332.140.3$46.95171.9
 
48.5
 
5.1 years
 
$46.55
 
 
739.1
 
 
39.2
 
$46.79
 
 
604.8
$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
$50 - $54
 
35.5
 
6.4 years
 
$51.46
 
 
394.0
 
 
25.8
 
$51.29
 
 
279.8
$20 - $54
 
87.6
 
5.5 years
 
$48.13
 
 
$1,225.1
 
 
68.6
 
$47.96
 
 
$976.6

4. Derivatives
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-ownernon 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 QuarterSecond Quarter First Six Months
Second Quarter
 
 
First Six Months
2007 2006 2007 2006
2008
2008
 
 
2007
 
 
2008
 
 
2007
GainsLosses GainsLosses GainsLosses GainsLosses
 
Losses
 
 
Gains
 
Losses
 
 
Gains
 
Losses
 
 
Gains
 
Losses
$2.8$4.3 --$14.2 $6.5$9.4 $0.5$40.9
$8.5
 
$1.4
 
 
$2.8
 
$4.3
 
 
$14.0
 
$5.9
 
 
$6.5
 
$9.4

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 lossesgains due to this hedge ineffectiveness of $0.8 million for the second quarter of 2008 compared to net ineffective pretax losses 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 2006.2007.  For the first six months, the company recognized net ineffective losses of $5.7 million in 2008 and $1.4 million in both 2007 and 2006.2007.

7

5. Earnings Per Share
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
 
 
2008
 
 
2007
 
 
2008
 
 
2007
 
Basic weighted average shares
 
714.2
 
 
754.8
 
 
715.4
 
 
759.2
 
Diluted weighted average shares
 
727.1
 
 
765.1
 
 
725.8
 
 
770.3
 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. Non-Owner Changes in Shareholders Equity
6.
Nonowner Changes in Shareholders Equity
The components of accumulated non-ownernonowner changes in shareholders equity, net of applicable taxes, as of June 30, 20072008 and December 31, 20062007 follow (in millions):
 June 30, 2007 Dec. 31, 2006
Foreign currency translation loss$(346.3) $(452.2)
Deferred hedging gains / (losses)(1.8) 2.1
Deferred securities valuation gains1.1 1.3
Deferred retirement benefits costs(751.0) (782.0)
  Accumulated non-owner changes in shareholders equity$(1,098.0) $(1,230.8)
 
 
June 30, 2008
 
 
Dec. 31, 2007
 
Foreign currency translation gains / (losses)
 
$(63.4)
 
 
$(347.0)
 
Deferred hedging gains / (losses)
 
29.7
 
 
0.1
 
Deferred securities valuation gains / (losses)
 
1.3
 
 
1.0
 
Deferred retirement benefits costs
 
(554.0)
 
 
(576.3)
 
  Accumulated nonowner changes in shareholders equity
 
$(586.4)
 
 
$(922.2)

Combined net income and non-ownernonowner 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
 2007 2006 2007 2006
Net income$677.0 $637.8 $1,194.5 $1,137.0
Foreign currency translation gains / (losses)147.0 (236.6) 105.9 (202.1)
Net change in deferred hedging losses(7.0) (2.8) (3.9) (3.4)
Net change in deferred securities valuation0.2 0.6 (0.2) 1.0
Change in deferred retirement benefits costs31.0 -- 31.0 --
 
Combined net income and non-owner
changes in shareholders equity
 
$848.2
 
 
$399.0
 
 
$1,327.3
 
 
$932.5
 
 
Second Quarter
 
 
First Six Months
 
 
2008
 
 
2007
 
 
2008
 
 
2007
 
Net income
 
$689.2
 
 
$677.0
 
 
$1,200.1
 
 
$1,194.5
 
Net change in foreign currency translation
 
176.2
 
 
147.0
 
 
283.6
 
 
105.9
 
Net change in deferred hedging gains / (losses)
 
18.7
 
 
(7.0)
 
 
29.6
 
 
(3.9)
 
Net change in deferred securities valuation
 
(0.8)
 
 
0.2
 
 
0.3
 
 
(0.2)
 
Net change in deferred retirement benefits costs
 
11.1
 
 
31.0
 
 
22.3
 
 
31.0
 
 
Combined net income and nonowner changes in shareholders equity
 
$894.4
 
 
$848.2
 
 
$1,535.9
 
 
$1,327.3




8


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
7.Inventories
The company’s inventories were comprised of the following as of June 30, 20072008 and December 31, 20062007 (in millions).
 June 30, 2008 Dec. 31, 2007
 
Raw Materials
 
$284.8
 
 
$365.4
 
Work-in-Process
 
127.2
 
 
109.9
 
Finished Goods
 
299.3
 
 
248.2
 
  Total Inventories
 
$711.3
 
 
$723.5
 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
8.Goodwill
Following is goodwill by business segment, as of June 30, 20072008 and December 31, 20062007 (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 20072008 is primarily due to fluctuations in foreign currency exchange rates.
June 30, 2007 Dec. 31, 2006
 
June 30, 2008
 
 
Dec. 31, 2007
Domestic Beer$21.2 $21.2
 
$21.2
 
 
$21.2
International Beer1,311.6 1,283.0
 
1,439.0
 
 
1,343.3
Packaging21.9 21.9
 
15.8
 
 
21.9
Entertainment288.3 288.3
 
288.3
 
 
288.3
Total goodwill$1,643.0 $1,614.4
Total Goodwill
 
$1,764.3
 
 
$1,674.7



9


9. Pension and Postretirement Health Care Expense
9.Pension and Postretirement Health Care Expense
The components of expense for pensions and postretirement health care benefits are shown below for the second quarter and first six months of 20072008 and 20062007 (in millions). In order to enhance the funded status of its defined benefit pension plans, the company made discretionary pension contributions of $85 million and $214 million in January 2007 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 Quarter First Six Months
2007200620072006
 
2008
 
2007
 
 
2008
 
2007
Service cost (benefits earned during the period)Service cost (benefits earned during the period)$25.0$26.5$50.1$53.1
Service cost (benefits earned during the period)
 
$24.9
 
$25.0
 
 
$49.8
 
$50.1
Interest cost on benefit obligationInterest cost on benefit obligation44.742.589.385.0
Interest cost on benefit obligation
 
47.6
 
44.7
 
 
95.1
 
89.3
Assumed return on plan assetsAssumed return on plan assets(52.2)(49.6)(104.3)(99.2)
Assumed return on plan assets
 
(55.4)
 
(52.2)
 
 
(110.8)
 
(104.3)
Amortization of prior service cost and net actuarial
losses
Amortization of prior service cost and net actuarial
losses
 
21.4
 
28.5
 
42.7
 
57.0
Amortization of prior service cost and net actuarial losses
 
15.0
 
21.4
 
 
30.0
 
42.7
FAS 88 SettlementFAS 88 Settlement--19.0--
FAS 88 Settlement
 
2.7
 
--
 
 
2.7
 
19.0
Expense for defined benefit plans38.947.996.895.9 
 
34.8
 
38.9
 
 
66.8
 
96.8
Cash contributed to multi-employer plansCash contributed to multi-employer plans4.08.27.9
Cash contributed to multi-employer plans
 
4.4
 
4.0
 
 
8.5
 
8.2
Cash contributed to defined contribution plansCash contributed to defined contribution plans5.15.010.39.7
Cash contributed to defined contribution plans
 
5.2
 
5.1
 
 
10.6
 
10.3
Total expense$48.0$56.9$115.3$113.5 
 
$44.4
 
$48.0
 
 
$85.9
 
$115.3

Postretirement Health Care Postretirement Health Care
Second QuarterFirst Six Months Second Quarter First Six Months
2007200620072006
 
2008
 
2007
 
 
2008
 
2007
Service cost (benefits earned during the period)Service cost (benefits earned during the period)$6.9$6.1$13.4$12.3
Service cost (benefits earned during the period)
 
$6.7
 
$6.9
 
 
$14.2
 
$13.4
Interest cost on benefit obligationInterest cost on benefit obligation11.78.722.617.4
Interest cost on benefit obligation
 
13.4
 
11.7
 
 
25.5
 
22.6
Amortization of prior service cost and net actuarial
losses
Amortization of prior service cost and net actuarial
losses
 
4.1
 
1.4
 
8.2
 
2.7
Amortization of prior service cost and net actuarial losses
 
3.3
 
4.1
 
 
7.9
 
8.2
Total expense$22.7$16.2$44.2$32.4
 
Total expense
 
$23.4
 
$22.7
 
 
$47.6
 
$44.2


10. Equity Investment in Grupo Modelo
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 20072008 and 20062007 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
 Second Quarter  First Six Months
 2007 2006  2007 2006
Gross sales$1,843.8 $1,473.5  $3,274.8 $2,706.5
Net sales$1,743.6 $1,374.3  $3,076.0 $2,516.7
Gross profit$947.1 $733.5  $1,663.4 $1,338.9
Minority interest expense$67.0 $0.5  $110.4 $0.8
Net income$380.1 $331.8  $692.8 $573.7
         
 As of June 30   
 2007 2006     
Cash / marketable securities$1,573.6 $1,617.6     
Other current assets$1,506.8 $946.7     
Non-current assets$4,937.7 $4,281.6     
Current liabilities$623.9 $466.1     
Non-current liabilities$368.8 $353.1     
 
 
Results of Operations
 Second Quarter  First Six Months
 
 
2008
 
 
2007
  
 
2008
 
 
2007
 
Net sales
 
$1,576.1
 
 
$1,438.1
  
 
$2,880.5
 
 
$2,596.1
 
Gross profit
 
$794.9
 
 
$739.7
  
 
$1,458.5
 
 
$1,349.0
 
Minority interest expense
 
$(4.4)
 
 
$(6.2)
  
 
$(5.2)
 
 
$(2.0)
 
Net income
 
$337.9
 
 
$380.1
  
 
$593.1
 
 
$692.8

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.

10
 
11.
Fair Value Measurements
Effective in the first quarter 2008, the company adopted FAS No. 157, “Fair Value Measurements.”  FAS 157 requires specific disclosures regarding assets and liabilities measured at fair value, including the primary sources and potentially the inputs used to determine fair value, depending on the type and reliability of those inputs.  Currently, the disclosures prescribed by FAS 157 apply only to financial assets and liabilities. Applicability to nonfinancial assets and liabilities is effective in the first quarter 2009.
The company’s policy iscompany accounts for financial derivatives at fair value and at June 30, 2008 had derivatives-based assets (amounts due from counterparties) of $59.1 million and liabilities (amounts due to accruecounterparties) of $8.3 million reported on the balance sheet. The liabilities are reported in other current liabilities while $58.8 million of the assets are reported in other current assets with the remaining $0.3 million reported in other assets.  The fair values of derivatives are determined either through quoted prices in active markets for exchange traded derivatives, which for Anheuser-Busch are primarily commodity derivatives, or through pricing from brokers who develop values based on inputs observable in active markets, such as interest related to potential underpaymentrates and currency volatilities. The fair value of income taxes within the provision for income taxes.  The liability for accrued interest totaled $7.8derivatives based on market quoted pricing was net assets of $46.6 million as of January 1, 2007. Interest is computed onJune 30, 2008, while the difference betweenfair value related to broker quoted pricing was net assets of $4.2 million.
Anheuser-Busch also uses fair value measurements when it periodically evaluates the recoverability of goodwill and other intangible assets, and when preparing annual fair value disclosures regarding the company’s uncertain tax benefit positions under FIN 48long-term debt portfolio.

12.
InBev Transaction
On July 13, 2008, InBev NV and Anheuser-Busch announced an agreement to combine the amount deducted ortwo companies, forming the world’s leading global brewer. Anheuser-Busch shareholders will receive $70 per share in cash, for an aggregate equity value of $52 billion. The combined company will be called Anheuser-Busch InBev. Both companies’ Boards of Directors have unanimously approved the transaction. The combination is expected to be deducted incomplete by 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 examinationend 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.2008.


11

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, 2007,2008, compared to the second quarter and first six months ended June 30, 2006,2007, and the year ended December 31, 2006.2007.  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, 2006.2007.
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
Anheuser-Busch reportedachieved solid sales and earnings per share growth for the quarter and first half of the year, reporting that second quarter 20072008 net sales increased 6.1%4.6% and diluted earnings per share increased 7.3%8%. For the first six months of 2007,2008, net sales increased 4.5%5.3% and diluted earnings per share increased 6.2%6.5%. Led by U.S. beer operations, allshipments and wholesaler sales-to-retailers increased in the quarter over last year, led by the successful launch of Bud Light Lime and improved performance of other core brands. According to IRI supermarket data, Anheuser-Busch has gained 1.0 share points at the consumer level during the four weeks ended July 6th. The company is encouraged by the success of its marketing and selling initiatives and is optimistic concerning the outlook for the remaining summer selling season. Anheuser-Busch’s new Strategic Plan expands and accelerates the cost reduction and operating efficiency initiatives generated by the Blue Ocean project, as well as the company’s business segments reported improved earnings in the second quarterplanned price increases. These initiatives, combined with our increased marketing and Anheuser-Busch is on trackselling efforts, are all contributing to deliver accelerating earnings growth in the second half of the year. The positivea very strong outlook is based on a favorable pricing environment, the company’s broadened U.S. beer portfolio that provides access to high-margin growth opportunities, successful productivity improvement initiatives that are mitigating cost pressures and enhanced earnings contributions from the international beer segment, led by Grupo Modelo. Anheuser-Busch continues to target long term earnings per share growth in the 7% to 10% range, and expects the company’s 2007 earnings per share increase to exceed this range.for profit growth.
The second quarters of both 2007 and 2006 include one-time items that impact the comparability of reported operating results. InResults for the second quarter of 2007 the company recordedinclude a $16 million pretax gain ($.01 per share) on the sale of itsthe company’s remaining interest in its Spanish theme park investment and ininvestment. This one-time gain impacts the second quartercomparability of 2006, Anheuser-Busch recognized a $7.8 million tax provision benefit due to the reduction of deferred income taxes resulting from state tax legislation in Texas.financial results between years. Excluding the impact of these one-time items from both years,this gain, which the company believes allows a better comparison of
underlying operating results, diluted earnings per share increased 7.4%9.2% for the second quarter and 6.2%7.1% for the first six months (see additional discussiontables on pages 17 through 19)page 17).


12

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 20072008 versus comparable 20062007 periods.
 
 
Reported Beer Volume (millions of barrels) for Periods Ended June 30
 
Second Quarter
 
Six Months
   
Versus 2006
   
Versus 2006
 
2007
 
Barrels
 
%
 
2007
 
Barrels
 
%
U.S.27.5 Up 0.6 Up 2.3% 53.3 Up 0.8 Up 1.5%
International
5.9
 
Up 0.1
 
Up 1.6%
 
11.1
 
Up 0.5
 
Up 4.8%
Worldwide A-B Brands
33.4 Up 0.7 Up 2.2% 64.4 Up 1.3 Up 2.0%
Int’l Equity Partner Brands
9.1
 
Up 0.6
 
Up 6.8%
 
15.7
 
Up 0.8
 
Up 5.6%
Total Brands
42.5
 
Up 1.3
 
Up 3.2%
 
80.1
 
Up 2.1
 
Up 2.7%
            
 
 
Reported Beer Volume (millions of barrels) for Periods Ended June 30
 
   
Second Quarter
  
First Six Months
 
      
Versus 2007
     
Versus 2007
 
   
2008
  
Barrels
 
%
  
2008
  
Barrels
 
%
 
 
 
U.S.
  27.6  
 
 Up  0.1
 
 
Up 0.5%
   53.4  
 
Up 0.2
 
 
Up  0.4%
 
 
 
International
    6.2  
 
 
Up 0.3
 
 
 
Up 4.8%
     11.6  
 
 
Up 0.5
 
 
 
Up 4.0%
 
 
 
Worldwide A-B Brands
  33.8  
 
Up 0.4
 
 
Up 1.2%
   65.0  
 
Up 0.7
 
 
Up 1.1%
 
 
 
Equity Partner Brands
    9.3  
 
 
Up 0.2
 
 
 
Up 2.1%
     16.6  
 
 
Up 0.8
 
 
 
Up 5.2%
 
 
 
Total Brands
 
    43.1  
 
 
Up 0.6
 
 
 
 
 
Up 1.4%
 
 
     81.6  
 
 
Up 1.5
 
 
 
 
 
Up 1.9%
 
 
 
                    

U.S. beer volume represents beer shipments to wholesalers in the United States. U.S. beer volumeshipments-to-wholesalers increased 2.3%0.5% for the second quarter. Sales-to-retailers for the quarter increased 0.4% despite the timing of the Fourth of July holiday that adversely impacted the comparison with second quarter 2007 results. Sales-to-retailers for the second quarter whileplus first week of July, which eliminates the holiday timing distortion, were up 1.9% over the comparable period last year. For the first six months of 2008, shipments-to-wholesalers increased 0.4%, and sales-to-retailers increaseddecreased 0.1%.  Import with import brands contributed 1.9contributing 0.2 basis points of growth to shipments and 1.60.4 basis points to sales-to-retailers.
For The Fourth of July timing also adversely impacted year-to-date sales-to-retailers although to a lesser degree than in the first six monthsquarter. Wholesaler inventories for Anheuser-Busch produced brands at the end of 2007, shipments-to-wholesalers increased 1.5%, and sales-to-retailers increased 0.1%the second quarter were essentially level compared with acquired and import brands contributing 1.7 points of growth to shipments and 1.6 points to sales-to-retailers.  Wholesaler inventories at the end of the second quarter were slightly higher than at the end of the second quarter 2006.2007.
The company’s estimated U.S. beer market share for the first six months of 20072008 was 48.8% compared to prior year market share of 48.9%.  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, increased 1.6%4.8% for the second quarter, to 6 million barrels, and 4.8%4% for the first half of 2007,2008, to 12 million barrels, driven primarily by volume increases in China, Canada and Mexico,Argentina, partially offset by lower volume in the United Kingdom.Kingdom and Ireland. Worldwide Anheuser-Busch brands volume is comprised of U.S. and international volume, and rose 2.2%1.2% for the second quarter and 2.0%1.1% year-to-date, to 33.434 million and 64.465 million barrels, respectively.
Equity partner brands volume, which represents the company’s share of its foreign equity partners’ volume reported on a one-month lag, increased 6.8%2.1% for the second quarter of 2007,2008, to 9.19 million

barrels, and increased 5.6%5.2% for the first six months to 15.717 million barrels, due to ModeloTsingtao and Tsingtao Modelo

13

volume growth in both periods. Total brands volume, which combines worldwide Anheuser-Busch brand volume with equity partner brands volume was 42.543 million barrels in the second quarter and 80.182 million barrels for the six months, up 3.2%1.4% and 2.7%1.9%, respectively.

20072008 Financial Results
Following is a summary and discussion of key operating results for the second quarter and first six months of 20072008 versus comparable 20062007 periods.
 
    
$ in millions, except per share
Second Quarter
 
2007 vs. 2006
 2007  2007  $      %      
Gross Sales$5,126 $4,854 Up $272 Up 5.6%
Net Sales$4,515 $4,256 Up $259 Up 6.1%
Income Before Income Taxes$797 $764 Up $33 Up 4.3%
Equity Income$195 $170 Up $25 Up 14.2%
Net Income$677 $638 Up $39 Up 6.1%
Diluted Earnings per Share$.88 $.82 Up $.06 Up 7.3%
 
 
$ in millions, except per share
 
 
Second Quarter
  
 
 
2008 vs. 2007
 
  
 
 
2008
  
 
 
2007
  
 
 
$
  
 
 
%
 
 
 
Gross Sales
 
$5,336
  
 
$5,126
  
 
Up $210
  
 
Up 4.1%
 
 
 
Net Sales
 
$4,721
  
 
$4,515
  
 
Up $206
  
 
Up 4.6%
 
 
 
Income Before Income Taxes
 
$816
  
 
$797
  
 
Up $19
  
 
Up 2.4%
 
 
 
Equity Income
 
$167
  
 
$195
  
 
Dn $28
  
 
Dn 14.2%
 
 
 
Net Income
 
$689
  
 
$677
  
 
Up $12
  
 
Up 1.8%
 
 
 
Diluted Earnings per Share
 
 
$.95
  
 
$.88
  
 
Up $.07
  
 
Up 8.0%
 

    
$ in millions, except per share
First Six Months
 
2007 vs. 2006
 2007  2006  $      %      
Gross Sales$9,532 $9,150 Up $382 Up 4.2%
Net Sales$8,374 $8,012 Up $362 Up 4.5%
Income Before Income Taxes$1,393 $1,380 Up $13 Up 1.0%
Equity Income$354 $293 Up $61 Up 20.9%
Net Income$1,195 $1,137 Up $58 Up 5.1%
Diluted Earnings per Share$1.55 $1.46 Up $.09 Up 6.2%
 
 
$ in millions, except per share
 
 
First Six Months
  
 
 
2008 vs. 2007
 
  
 
 
2008
  
 
 
2007
  
 
 
$
  
 
 
%
 
 
 
Gross Sales
 
$9,991
  
 
$9,532
  
 
Up $459
  
 
Up 4.8%
 
 
 
Net Sales
 
$8,821
  
 
$8,374
  
 
Up $447
  
 
Up 5.3%
 
 
 
Income Before Income Taxes
 
$1,451
  
 
$1,393
  
 
Up $58
  
 
Up 4.2%
 
 
 
Equity Income
 
$293
  
 
$354
  
 
Dn $61
  
 
Dn 17.3%
 
 
 
Net Income
 
$1,200
  
 
$1,195
  
 
Up $5
  
 
Up 0.5%
 
 
 
Diluted Earnings per Share
 
 
$1.65
  
 
$1.55
  
 
Up $.10
  
 
Up 6.5%
 

Anheuser-Busch reported gross sales of $5.1$5.3 billion during the second quarter 2007,2008, an increase of $272$210 million, or 5.6%4.1%.  Gross sales increased 4.2%4.8%, or $382$459 million, to $9.5$10 billion for the first six months.  Net sales were $4.5$4.7 billion and $8.4$8.8 billion, increases of $259$206 million and $362$447 million, respectively, or 6.1%4.6% for the quarter and 4.5%5.3% year-to-date. The differences between gross and net sales in 20072008 are due to beer excise taxes of $611$615 million and $1.2 billion, respectively.  The sales increases were driven by higher sales for all operating segments, with the exception of a year-to-datesecond quarter decline in packaging segment sales. For the second quarter and first six months, respectively, U.S. beer segment net sales increased 6.9%4.5%, or $206$145 million, and 5.3%4.2%, or $309$258 million on higher volume, increased revenue per barrel higher promotional prices over the key summer holiday periods and


favorable brand mix; international beer net sales increased 4%$48 million and 6%$97 million primarily due to volume gainsincreased sales in China Canada and Mexico offset by declines in the United Kingdom;Canada; packaging operations net sales increased 5%decreased $14 million for the second quarter on higherlower aluminum can manufacturing revenues, and recycling revenues, but decreased 1%increased $16 million for the first six months on lower can manufacturinghigher recycling sales; and

14

entertainment segment sales increased 8.4% in both periods$16 million and $52 million due to increased attendance and higher ticket pricing and higher in-park spending.pricing.
 U.S. beer revenue per barrel was up 3.1%3.2% in the second quarter 20072008 and grew 2.7% compared towith the first half of 2006,2007, due to the successful implementation of price increases in late 2007 and discount reductions on over half the company’s U.S. volume earlierfirst quarter 2008 and favorable brand mix, especially in the year.second quarter. Revenue per barrel increases accounted for $128$111 million and $216$190 million, respectively, of the increases in U.S. beer net sales in the second quarter and first six months, while higher beer volume contributed $78$14 million and $93$25 million, respectively, to the increases for the same periods.and nonbeer revenues added $20 million and $43 million, respectively. Revenue per barrel is calculated as net sales generated by the company’s U.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 its pattern forThe U.S. beer pricing actions in recent years,environment remained favorable through the important Memorial Day and Fourth of July holidays, as expected. The company expectsplans to implement price increases on the majorityapproximately 85% of its U.S. volume early next year,in September and October 2008, with a few selective increases in the fourth quarter 2007.  As in the past, pricing initiatives will be tailored to selected markets, brands and packages. The company is projecting revenue per barrel growth, including mix, of 4% for the full year 2008.
The cost of sales for the second quarter 20072008 was $2.9$3 billion, an increase of $197$141 million, or 7.4%4.9%, and was up $254$296 million, or 5%5.5%, to $5.3$5.6 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 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 brewing and packaging materials andmaterials; higher labor and operating costs for international beer and entertainment operations, partially offset by lowerin both periods and for the packaging segment year-to-date; increased energy costs, including freight costs; and lower packaging segment costs due to lower volumes. Grossassociated with higher U.S. and international beer volume.  Consolidated gross profit as a percentage of net sales was 36.7%36.5% for the second quarter and 36.3%36.2% year-to-date, down 8020 basis points and 3010 basis points, respectively.
Marketing, distribution and administrative expenses were $756$793 million for the second quarter and $1.4$1.5 billion year-to-date, representing a $42$37 million increase for the quarter and a $92$78 million increase year-to-date. The changes versus prior year periods are due to higher U.S. beer marketing costs, including incremental marketing and selling expense for the company’s new import beer portfolio,costs; higher advertising expenses in China, particularly year-to-date; increased marketing costs for entertainment operations,operations; higher delivery costs for company-owned beer wholesalerships, including an incremental location versus last year; and increased administrative expenses year-to-date. Administrative expenses for the first six months include a FAS 88 settlement charge and an asset disposition gain.
Operating income was $901$930 million, an increase of $20$29 million, or 2.3%3.2% for the second quarter 2007.2008.  For the first six months of 2007,2008, operating income was $1.6$1.7 billion, an increase of $16$73 million, or


1% 4.5%. Operating margins declined 7030 basis points for both the second quarter and 10 basis points for the first six months, to 20.0%19.7% and 19.3%19.2%, respectively.
Interest expense less interest income was $118$120 million for the second quarter and $238$248 million for the first six months of 2007,2008, increases versus respective 20062007 periods of $3$2 million and $8$11 million. The increases in both periods are due to higher interest rates combined with higher average outstanding debt during the quarter and higher interest ratesbalances partially offset by lower average debt balances year-to-date.interest rates. Interest income was greaterdown slightly in both 2007 periodsthe second quarter and higher year-to-date

15

in 2008 versus 2006.2007. Interest capitalized of $4.2$4 million in the second quarter and $7.7$9 million for the first six months was downlevel and up slightly, respectively, due to the timing of capital spending and project in-service dates.
Other income/(expense), net reflects the impact of numerous items not directly related to the company’s operations. For the second quarter of 2007,2008, the company had other income of $9.6$3 million versus other expenseincome of $6.8$10 million in 2006.2007. Year-to-date the company recognized expense of $2 million in 2008 compared with income of $3.7 million in 2007 compared to expense of $3.1$4 million.  Other income for the second quarter and first six months of 2007 includes the $16.0$16 million gain from the sale of the company’s remaining interest in its Spanish theme park investment. For business segment reporting purposes, the gain is reported as a corporate item.
Income before income taxes for the second quarter 20072008 was $797$816 million, an increase of $33$19 million, or 4.3%2.4%, due toon improved results for all segments.U.S. and international beer partially offset by lower results for packaging and entertainment. Year-to-date, pretax income was $1.4$1.5 billion, an increase of $13$58 million or 1%4.2%, primarily due toon higher earnings from the packagingU.S. beer, international beer and entertainment segments partially offset by lower earnings for international beer operations and higher interest and administrative expenses.packaging segment results. U.S. beer pretax profits improved $12.5$18 million in the second quarter and were essentially level with 2006up $35 million for the first six months, due to higher beer sales volume and increased pricing beingpartially offset by higher marketing and distribution expenses and increased beer production costs. International beer pretax income increased $2.6$18 million in the second quarter and decreased $1.9increased $37 million year-to-date on profit growth in China, Canada and Mexico plus lower marketing costs, partially offset by lower results in the United Kingdom in the quarter, and fully offset for the six months.Kingdom. Packaging segment pretax profits were up $9.8down $6 million and $15.6$10 million, respectively, primarily due to increased profits from can manufacturing and aluminumlower recycling on improved pricing partially offset by lower volume, and increased label manufacturing earnings from higher volumes.earnings. Entertainment segment pretax profits grew $5.4declined $8 million and $4.5grew $5 million, respectively, due primarily to increased attendance and increased ticket pricing, and higher in-park spending partiallybeing fully offset by higher park operating costs in both periods.the quarter and partially offset year-to-date.
Equity income of $195$167 million for the second quarter and $354$293 million year-to-date increased $25decreased $28 million and $61 million, respectively, reflecting the benefit of improvedhigher materials and operating costs at Grupo Modelo earnings frompartially offset by volume growth in both periods and higher volume and benefits associated withpricing in the new Crown import and distribution joint venture.second quarter. Tsingtao equity results for the second quarter include a $7 million charge for higher income tax rates mandated by the government retroactively for 2007. Equity income in 2007 includes


benefits of $12 million and $29 million, respectively, in the second quarter and for the first six months due to the return of advertising funds that were part of Modelo’s prior beer import contracts. The benefit for the first six months was partially offset by a timing change in the recognition of Modelo’s export sales to the U.S.
Anheuser-Busch’s effective income tax rate was 39.5% for the second quarter 2007 and 39.7% for the first six months, representing increases of 70 and 90 basis points, respectively, primarily due to higher taxes on foreign earnings and the favorable impact of the Texas state income tax legislation in 2006, partially offset by a step-up in the domestic manufacturing deduction in 2007. The effective tax rates for 2007 include a benefit from partial capital loss utilization.
Net income of $677$689 million in the second quarter of 20072008 represented an increase of $39$12 million, or 6.1%2%.  Net income grew 5.1%0.5%, to $1.2 billion for the first six months of 2007.2008. Diluted earnings per share were $.88$.95 and $1.55,$1.65, respectively, for the second quarter and first six months of 2007,2008, representing increases of 7.3%8% and 6.2%6.5%, respectively.  Diluted earnings per share for 2008 benefited from the repurchase of 22.413.7 million shares in the first six months under the company’s share repurchase program.  The effective income tax rate was 36% for the second quarter 2008 and 37.5% for the first

16

six months, representing decreases of 350 and 220 basis points, respectively, primarily due to lower taxes on foreign earnings and tax benefits related to the exercise of employee incentive stock options.
The company believes that excluding the impact of the $16 million one-time gain from the sale of the Spanish theme park investment in 2007 and the favorable income tax benefit in 2006 provides more meaningful comparisons of financial results between periods. As shown in the following table, pretax income, net income and diluted earnings per share excluding these one-time items increased 2.2%, 5.9% and 7.4%, respectively for the second quarter whileincreased 4.5%, 3.3% and 9.2%, respectively, excluding the effective income tax rate decreased 40 basis points.one-time gain. For the first six months, income before income taxes, declined 0.2%, while net income and diluted earnings per share excluding the gain increased 5.4%, 1.3% and the effective income tax rate increased 4.9%7.1%, 6.2% and 30 basis points, respectively.
 
Income
Before
Income
Taxes
 
Provision
for Income
Taxes
 
Net
Income
 
Diluted
Earnings
Per
Share
 
Effective
Tax Rate
Second Quarter         
2008         
Reported$816.4 ($294.2) $689.2   $.95 36.0%
          
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%
          
Percentage Change – 2008 vs. 2007         
Reported2.4%   1.8% 8.0% (350) pts
Excluding One-Time Item4.5%   3.3% 9.2% (350) pts





($ in millions, except per share)
 
Income
Before
Income
Taxes
  
Provision
for Income
Taxes
  
Net
Income
  
Diluted
Earnings
Per Share
  
Effective
Tax
Rate
 
Second Quarter
               
         
First Six Months         
2008         
Reported$1,451.2 ($544.1) $1,200.1 $1.65 37.5%
         
2007
                        
Reported $796.9  $(314.6) $677.0  $0.88   39.5% $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)          (16.0)      6.1          (9.9)   (0.01)  
Excluding One-Time Item $780.9  $(308.5) $667.1  $0.87   39.5% $1,377.1 ($546.6) $1,184.6 $1.54 39.7%
                             
2006
                    
Percentage Change – 2008 vs. 2007         
Reported $764.2  $(296.8) $637.8  $0.82   38.8% 4.2%   0.5% 6.5% (220) pts
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% 5.4%   1.3% 7.1% (220) pts
                    
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 

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
The primary source of the company’s cash flow is 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 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.

17

Cash at June 30, 20072008 was $303$253 million, an increasea decrease of $84$30 million from the December 31, 20062007 balance.  The company generated operating cash flow before the change in working capital of $1.7$1.8 billion for the first six months of 2007,2008, an increase of $295$36 million due primarily to increased earnings higher Grupo Modelo dividends and tax benefits on the exercise of employee stock options partially offset by a lowerhigher discretionary defined benefit pension contribution in 2007,2008. The company made a discretionary contribution of $165 million in 2008 versus a contribution of $85 million versus $214 million in 2006.2007. Discretionary contributions are in addition to required minimum funding. See the consolidated statement of cash flows for additional information on the company’s sources and uses of cash.
The company’s debt balance increased $300decreased $657 million in the first half of 20072008 compared to a decreasean increase of $136$300 million in 2006.2007.  The changes in debt for the first half of 20072008 and 20062007 are summarized below (in millions).
Description
Description
 
 
Amount
 
Interest Rate
(Fixed Unless Noted)
Description
 
 
 
Amount
 
 
Interest Rate
(Fixed Unless Noted)
First Six Months of 2008
First Six Months of 2008
    
Increases:
Increases:
    
 
Chinese yuan-denominated notes
 
 
$2.5
 
 
6.53% wtd. avg.
 
Other, net
 
 
2.2
 
 
Various
 
Total increases
 
 
4.7
  
    
Decreases:
Decreases:
    
 
Commercial paper
 
 
(441.6)
 
 
2.66% wtd. avg., floating
 
U.S. dollar notes
 
 
(151.8)
 
 
$150.0 at 5.75%; $1.7 at 5.35%
 
Capital lease obligation
 
 
(68.3)
 
 
6.0%
 
Other, net
 
 
(0.1)
 
 
Various
 
Total decreases
 
 
(661.8)
  
 
Net decrease in debt
 
 
$(657.1)
  
    
First Six Months of 2007
First Six Months of 2007
    
First Six Months of 2007
    
Increases:Increases:    
Increases:
    
U.S. Dollar Notes $317.3 $300.0 at 5.6% and $17.3 at 5.54%
 
U.S. dollar notes
 
 
$317.3
 
 
$300.0 at 5.6% and $17.3 at 5.54%
Industrial Revenue Bonds 12.5 Various
 
Industrial revenue bonds
 
 
12.5
 
 
Various
Other, net 42.0 Various
 
Other, net
 
 
42.0
 
 
Various
Total increases 371.8  
 
Total increases
 
 
371.8
  
         
Decreases:Decreases:    
Decreases:
    
Commercial Paper (69.2) 5.38% Wtd. avg., floating
 
Commercial paper
 
 
(69.2)
 
 
5.38% wtd. avg., floating
Other, net (2.2) Various
 
Other, net
 
 
(2.2)
 
 
Various
Total decreases (71.4)  
 
Total decreases
 
 
(71.4)
  
Net Increase in Debt $300.4  
 
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)  

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

18

The company’s commercial paper obligation of $589$597 million at June 30, 20072008 is classified as long-term, since commercial paper is maintained on a long-term basis with on-going support provided by the company's $2 billion revolving credit agreement. The interest rates for commercial paper at June 30, 2008 and 2007 were 2.37% and 2006 were 5.28% and 5.41%, respectively.
There have been only normal and recurring changes in the company’s cash commitments since December 31, 2006.
Capital expenditures during the second quarter 20072008 were $192$207 million, compared to $159with $192 million for the second quarter 2006.2007. Capital expenditures totaled $346$357 million and $318$346 million, respectively, for the first six months of 20072008 and 2006.2007.  Full year 20072008 capital expenditures are expected to be in the range of $900 to $950approximately $875 million.
At its July 20072008 meeting, the Board of Directors increased the company’s regular quarterly dividend rate on outstanding shares of the company’s common stock 11.9%12.1%, to $.33$.37 per share from $.295,$.33, payable September 10, 2007,9, 2008, to shareholders of record August 9,11, 2008.
Except as described below, there have been only normal and recurring changes in the company’s cash commitments since December 31, 2007.
Anheuser-Busch has developed an estimate of its costs resulting from the transaction with InBev and related matters. The company currently estimates these costs, primarily for investment banking, legal and accounting services, to approximate $120 million in the third quarter 2008, with associated cash payments of approximately $20 million in the third quarter and the remaining $100 million to be paid primarily in the fourth quarter. Additionally, in the fourth quarter the company anticipates incurring a noncash charge of approximately $72 million for the accelerated vesting of stock compensation awards, cash payments of approximately $40 million under an enhanced officer bonus program and cash payments totaling approximately $71 million related to officer and director deferred compensation and retirement plans.  The timing of the anticipated fourth quarter cash payments noted above assumes a change in control before December 31, 2008. If the change in control date is delayed, the timing of these payments will also be delayed.  
In June 2008, in connection with its plans to reduce costs and improve efficiency, Anheuser-Busch announced an enhanced retirement program to be offered to certain salaried employees. The program will provide enhanced pension and retiree medical benefits to salaried employees who are at least 55 years old as of December 31, 2008. The company estimates that its salaried workforce will be reduced by 10% to 15% as a result of this program and attrition.  In conjunction with this program, the company expects to recognize in the fourth quarter of 2008 a one-time pretax charge estimated in the range of $300 million to $400 million for enhanced retirement and severance costs, with associated cash expenditures of approximately $20 million to $30 million.

 
19


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, 2006,2007, 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.
 
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, 20072008 and have concluded that they are effective as of June 30, 20072008 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.



PART II – OTHER INFORMATION

Item 1. Legal Proceedings
On September 19, 2006, one of the Company’scompany’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.company.  This action is being heardwas filed in federal court in the Northern District of Ohio. The Company believescompany believed that the assertions of Novelis arewere without merit, intendsand filed a motion for summary judgment.  This motion was granted on May 22, 2008, resulting in a dismissal of all of Novelis' claims.  On June 20, 2008, Novelis filed an appeal to vigorously defend its rights under the cansheet supply agreement and6th Circuit Court of Appeals.  The company expects to prevail on appeal.

20

Missouri Shareholder Suits
On June 4, 2008 and July 16, 2008, two substantially similar putative shareholder class and derivative actions were filed in the litigation.
Reference is madeCircuit Court of the City of St. Louis, Missouri against the company's Board of Directors (the "Board") and the company (in part as nominal defendant), styled as Pick v. Busch, et al., C.A. No. 0822-CC02134, and New Jersey Carpenters Pension and Annuities Funds v. Busch, et al., C.A. No. 0822-CC07280.  These plaintiffs alleged that the defendants breached their fiduciary duties by failing to give adequate consideration to the Company's 10-KInBev non-binding proposal and taking improper defensive actions against the offer in an attempt to maintain their positions on the Board.  The plaintiffs generally sought declaratory relief that the defendants breached their fiduciary duties, injunctive relief to prevent such breaches, and/or fees and expenses.  On July 2, 2008, a different plaintiff filed an action with similar allegations in United Stated District Court for the fiscal year ended December 31, 2006, which providesEastern District of Missouri, styled as United Food & Commercial Workers Pension Fund of Northeastern PA v. Anheuser-Busch Companies, Inc., et al., C.A. 4:08-cv-00968.  The plaintiff in the federal action sought damages in addition to the other forms of relief sought in the state actions.
The plaintiffs in the Missouri state court actions filed a descriptionmotion to consolidate those two cases and for the appointment of certainlead counsel on June 26, 2008 and a motion for expedited discovery on June 30, 2008.  The company filed motions to stay the two Missouri state actions in favor of the substantially similar lawsuits pending in the Delaware Court of Chancery on June 27, 2008.  On July 2, 2008, the Circuit Court of the City of St. Louis held a hearing on these motions and, on July 7, 2008, granted the company's motion to stay the two Missouri state actions in favor of substantially similar Delaware actions.  The Circuit Court also ruled that the plaintiffs' motion to consolidate the Missouri actions and motion for expedited discovery were moot.  On July 11, 2008, the plaintiffs filed a motion to lift the stay and the company filed an opposition brief on July 18, 2008.  On July 21, 2008, the court removed the motion to lift the stay from its hearing docket, to be reset on application.
Delaware Shareholder Suits
Between June 12, 2008 and July 2, 2008 a total of 11 substantially similar putative shareholder class and derivative actions were filed in the Delaware Court of Chancery against the Board and the company (in part as a nominal defendant), alleging that the defendants breached their fiduciary duties by failing to maximize shareholder value and adopting unreasonable defensive measures in the face of the InBev non-binding proposal, including undertaking merger negotiations with Grupo Modelo.  The plaintiffs generally sought declaratory relief that the defendants breached their fiduciary duties, injunctive relief to prevent such breaches, damages, and/or fees and expenses. 
On June 18, 2008 and June 24, 2008, the plaintiffs in two of these actions moved for expedited discovery. The court denied both motions.  On June 25, 2008, one of the plaintiffs filed an Order of Dismissal seeking a voluntary dismissal of its action without prejudice.  On July 10, 2008, the court

21

consolidated the remaining ten actions under the caption In re Anheuser-Busch Companies, Inc. Shareholders Litigation, C.A. No. 3851, appointed the following as lead plaintiffs:  Deka International S.A. Luxemburg, International Fund Management S.A. Luxemburg, Helaba Invest Kapitalanlagegesellschaft MBH, Deka Investmentgesellschaft MBH, Deka Fundmaster Investmentgesellschaft MBH, the General Retirement System of the City of Detroit, and Sjunde AP-Fonden.  The court further ordered the lead plaintiffs to file a consolidated amended derivative and class action lawsuitscomplaint and that the defendants need not respond to any of the previously filed-complaints.  The lead plaintiffs have not yet filed their consolidated amended complaint.
InBev's Delaware Suit
On June 26, 2008, InBev, which purports to be a shareholder of the company, filed a complaint in the Delaware Court of Chancery against the Company.  company, styled as InBev NV/SA v. Anheuser-Busch Companies, Inc., C.A. 3857.  In its complaint, InBev alleged that it intended to seek stockholder consents to remove the entire Board because the company intended to delay, frustrate and reject the InBev proposal.  For relief, InBev requested (1) a declaratory judgment that: (a) the company's 2006 Amendment to Article Fifth of its Certificate of Incorporation had declassified all three classes of the Board, and (b) the company's stockholders were, under the company's Certificate of Incorporation and Delaware law, permitted to remove all of the company's directors without cause; and (2) any other relief the court may choose to grant. 
On July 17, 2007,8, 2008, InBev filed a motion for expedited proceedings. InBev alleged that expedited proceedings were necessary due to its pending consent solicitation and the U.S. Courtcompany's stated position that it would challenge InBev's lawsuit.  InBev also filed a motion for summary judgment, arguing that as a matter of Appealslaw, the shareholders of the company may remove all directors of the company without cause and that the Board is not classified as provided in Section 141(d) of the Delaware General Corporation Law.
On July 23, 2008, InBev voluntarily dismissed this action.
Anheuser-Busch's Missouri Suit
On July 7, 2008, the company filed a complaint in federal court in the Eastern District of Missouri against InBev, styled as Anheuser-Busch Companies, Inc. v. InBev NV/SA, C.A. No. 4:08-cv-00993. The company alleged that InBev made false and misleading statements regarding the InBev non-binding proposal and Proposed Consent Actions.  The complaint sought: (1) injunctive relief (temporarily, preliminarily, and permanently) to prevent InBev (and its officers, agents, employees, attorneys, and all persons in active concern or participation with them) from taking any steps towards soliciting consents from the company's shareholders until such time as InBev has cured all of its false and misleading statements and there is a further court order, (2) costs and expenses for the Sixth Circuit dismissed the Michigancompany, including attorneys' fees, and Ohio cases on the grounds that the plaintiffs lacked standing to sue and thus that(3) any other relief the court lacked federal jurisdictionmay choose to heargrant.
On July 24, 2008, the claims.company voluntarily dismissed this action.

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Under the merger agreement, the company has agreed to voluntarily dismiss this action.
Levi Lawsuit
On May 27, 2008, Hunter R. Levi, a former employee of the company, filed a pro se lawsuit in the United Stated District Court in the Western District of Missouri against the company, the Board (excluding Patrick Stokes and William Porter Payne), and various other individuals and companies, styled as Levi v. Anheuser-Busch Companies, Inc., et al., C.A. 08-0398-cv-W-DGK.  The court also heldcomplaint alleges that Levi was wrongfully terminated in violation of Missouri law and the plaintiffs did not pleadSarbanes-Oxley Act of 2002.  The complaint seeks actual damages of $2.5 million and punitive damages between $5 million and $136 million.
On July 15, 2008, Levi filed a motion seeking (1) an injuryinjunction to prohibit the company, its executives, and could not plead causation because the illegal activities involved in underage drinking wereBoard from further negotiations between the company and InBev regarding a proposed sale of the company, including any Anheuser-Busch shareholder vote; (2) an intervening legal causeorder requiring the company to retain documents pertaining to Levi's complaint; and consequently that(3) investigative referrals to the claim asserted bySecurities and Exchange Commission, the plaintiffs was not redressable in court.Department of Justice, and the Federal Bureau of Investigation.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Following are the Company’scompany’s monthly common stock purchases during the second quarter 20072008 (in millions, except per share). All shares are repurchased under Board of Directors authorization. The Board’s most recent authorizationIn December 2006, the Board authorized a new program to repurchase 100 million shares occurred in December 2006.shares. 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, 2007105.3  
       
Repurchases Remaining Authorized Under Disclosed Programs at March 31, 2008
    52.0    
       
Share Repurchases
          
April1.1 $51.08  (1.5) $47.94 
May8.7 $50.13  (2.2) $51.26 
June3.1 $52.48  (0.9) $59.09 
Total12.9  
Repurchases Remaining Authorized Under Disclosed Programs at June 30, 2007
 
92.4
  
Total Second Quarter Repurchases
  (4.6)    
        
Repurchases Remaining Authorized Under Disclosed Programs at June 30, 2008
    47.4     

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Item 6.Exhibits

Exhibit
 
Description
   
10.34
Notice of Restricted Stock Award under Anheuser-Busch Companies, Inc. 2008 Long-Term Equity Incentive Plan for Non-Employee Directors
10.35
Notice of Restricted Stock Award under Anheuser-Busch Companies, Inc. 2008 Long-Term Equity Incentive Plan for Non-Employee Directors For a director who is a citizen of Mexico
10.36
Notice of Deferred Stock Unit Award under Anheuser-Busch Companies, Inc. 2008 Long-Term Equity Incentive Plan for Non-Employee Directors
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 27, 200725, 2008
 
 
 
/s/ John F. Kelly
John F. Kelly
Vice President and Controller
(Chief Accounting Officer)
July 27, 200725, 2008




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