12 May 2008

BUD: Financial Analysis through March 2008 (Update)

We recently posted an analysis of the preliminary financial statements for the quarter that ended on 31 March 2008 for Anheuser-Busch Companies, Inc., the nation's top brewer. The statements were, for our gauge-calculation purposes, reasonably complete. But, we learned more when BUD later filed a formal 10-Q report with the SEC. In particular, the 10-Q included a previously unavailable decomposition of Inventories into Raw Materials, Work in Process, and Finished Goods components.

The Inventory breakout figures reveal that the Finished Goods/Inventory ratio equalled 36.1 percent on 31 March 2008. This metric, which contributes to the Cash Management gauge, has risen by small amount. An increase in the Finished Goods ratio can be an early warning that Sales were below expectations. In this case, the increase is minor enough to be more of a yellow flag than a red flag.

3 mos.
12 mos.
Finished Goods/Inventory
26.9 days
23.9 days
27.0 days
25.1 days

There are other ways to look at Inventory. The Inventory/CGS ratio measures how many days it would take the company to reconstitute its Inventory at current costs. (An alternative Inventory measure determines how many days of sales are held at the prices customers pay.) The ratio is now at a value comparable to what it was in March 2007, which shows the total inventory level is stable. This lessens our concern about the Finished Goods ratio. However, the Inventory level has edged up near the top of its historic range.

The additional data in the 10-Q reduced the gauge scores from those we computed using BUD's preliminary report:

See our previous post for an examination of BUD's Income Statement. This review wasn't changed by the data in the 10-Q.

It's interesting to see in the 10-Q that BUD made $130.6 million in "Nonowner Changes in Shareholders Equity." This income, mostly foreign currency translation gains, isn't included in the $510.9 million Net Income figure. It is included in Comprehensive Income.

Net Income at Grupo Modelo fell from $313 to $255 million in the quarter.

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