Central European Distribution Corporation Announces First Quarter 2012 Results

MT. LAUREL, N.J., May 10, 2012 /PRNewswire/ -- Central European Distribution Corporation (NASDAQ: CEDC) today announced its results for the first quarter of 2012.  Net sales for the three months ended March 31, 2012 were $148.2 million as compared to $156.7 million reported for the same period in 2011.  CEDC also announced that net income on a U.S. GAAP basis (as hereinafter defined), for the quarter was $62.5 million or $0.86 per fully diluted share, as compared to net income of $1.1 million or $0.02 per fully diluted share, for the same period in 2011.  On a comparable basis, CEDC announced a net loss of $21.4 million, or $0.29 per fully diluted share, for the first quarter of 2012, as compared to net loss of $17.4 million, or $0.24 per fully diluted share, for the same period in 2011. The number of fully diluted shares used in computing the earnings per share was 72.9 million for 2012 and 71.3 million for 2011.  For a complete reconciliation of comparable net income to net income reported under United States Generally Accepted Accounting Principles ("U.S. GAAP"), please see the section "Unaudited Reconciliation of Non-GAAP Measures".

William Carey, President and CEO commented, "We have been focused over the last six months in addressing key concerns that were facing the Company being primarily the maturity of our 2013 Convertible Notes and management challenges in our Russian business.  Regarding the first point, we believe we have found a strategic shareholder in Russian Standard, who not only addresses the 2013 Convertible Notes but is also a strong partner with a large complementary Russian spirit business, which in combination could provide favorable synergies to our Group.  We look forward to continued negotiations on this potential combination of businesses as well as other operational synergies that we believe we could achieve."

William Carey, President and CEO continued "We certainly recognize the challenges we face in Russia and strongly believe that our new management team, with extensive Russian FMCG experience, is more than capable of driving the necessary changes needed in our Russian business today to begin to show improved results.  Some of the key near term objectives that the team will be working on include, building a stronger 2nd tier management team (already begun), improving effectiveness of trade marketing spend, gaining market share and improved sales order planning and forecasting."

William Carey, President and CEO continued "We have also made numerous changes over the last twenty four months in our other businesses spread across Central/Eastern Europe, which have all started to deliver improved performance over the last few quarters.  These changes incorporate not only management changes but new product development and route to market improvements, and we would expect our current changes in Russia to also show marked improvements in our operating performance."

CEDC has reported net income and fully diluted net income per share in accordance with GAAP and on a non-GAAP basis, referred to in this release as comparable net income. CEDC's management believes that the non-GAAP reporting giving effect to the adjustments shown in the attached reconciliation provides meaningful information and an alternative presentation useful to investors' understanding of CEDC's core operating results and trends. CEDC discusses results and guidance on a comparable basis in order to give investors better insight into underlying business trends from continuing operations. CEDC's calculation of these measures may not be the same as similarly named measures presented by other companies. These measures are not presented as an alternative to net income computed in accordance with GAAP as a performance measure, and you should not place undue reliance on such measures. A reconciliation of GAAP to non-GAAP measures can be found in the section "Unaudited Reconciliation of Non-GAAP Measures" at the end of this press release.

CEDC is one of the largest producers of vodka in the world and Central and Eastern Europe's largest integrated spirit beverage business.  CEDC produces the Green Mark, Absolwent, Zubrowka, Bols, Parliament, Zhuravli, Royal and Soplica brands, among others. CEDC currently exports its products to many markets around the world, including the United States, England, France and Japan.

CEDC also is a leading importer of alcoholic beverages in Poland, Russia and Hungary.  In Poland, CEDC imports many of the world's leading brands, including brands such as Carlo Rossi Wines, Concha y Toro wines, Metaxa Liqueur, Remy Martin Cognac, Sutter Home wines, Grant's Whisky, Jagermeister, E&J Gallo, Jim Beam Bourbon, Sierra Tequila, Teacher's Whisky, Campari, Cinzano, and Old Smuggler. CEDC is also a leading importer of premium spirits and wines in Russia with such brands as Concha y Toro, among others.

This press release contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding expected sales, expectations of increased consumer demand for our products, potential synergies related to our Russian business, and the transaction with Russian Standard which is subject to regulatory and shareholder approval.  Forward looking statements are based on our knowledge of facts as of the date hereof and involve known and unknown risks and uncertainties that may cause the actual results, performance or achievements of CEDC to be materially different from any future results, performance or achievements expressed or implied by our forward looking statements.

Investors are cautioned that forward looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. CEDC undertakes no obligation to publicly update or revise any forward looking statements or to make any other forward looking statements, whether as a result of new information, future events or otherwise, unless required to do so by securities laws. Investors are referred to the full discussion of risks and uncertainties included in CEDC's Form 10-K for the fiscal year ended December 31, 2011, including statements made under the captions "Item 1A. Risks Relating to Our Business" and in other documents filed by CEDC with the Securities and Exchange Commission.

Contact:
In the U.S.:
Jim Archbold
Investor Relations Officer
Central European Distribution Corporation
856-273-6980

In Europe:
Anna Załuska
Corporate PR Manager
Central European Distribution Corporation
48-22-456-6000


 






CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEET

Amounts in columns expressed in thousands

(Except share information)








March 31,


December 31,



2012


2011



(unaudited)



ASSETS





Current Assets





Cash and cash equivalents


$107,798


$94,410

Accounts receivable, net of allowance for doubtful accounts at

March 31, 2012 of $26,221 and at December 31, 2011 of $23,112


280,761


466,317

Inventories


121,324


116,897

Prepaid expenses


23,594


16,982

Other current assets


19,341


20,007

Deferred income taxes


6,572


8,455

Debt issuance costs


2,959


2,962

Total Current Assets


562,349


726,030






Intangible assets, net


508,605


463,848

Goodwill


731,675


666,653

Property, plant and equipment, net


193,838


179,478

Deferred income taxes, net


22,811


22,295

Debt issuance costs


12,789


13,550

Non-current assets held for sale


675


675

Total Non-Current Assets


1,470,393


1,346,499






Total Assets


$2,032,742


$2,072,529






LIABILITIES AND STOCKHOLDERS' EQUITY





Current Liabilities





Trade accounts payable


$69,868


$144,801

Bank loans and overdraft facilities


66,708


85,762

Short-term obligations under Convertible Senior Notes


305,977


0

Income taxes payable


7,208


8,766

Taxes other than income taxes


99,863


188,307

Other accrued liabilities


70,715


44,501

Current portions of obligations under capital leases


1,159


1,109

Total Current Liabilities


621,498


473,246






Long-term obligations under capital leases


728


532

Long-term obligations under Convertible Senior Notes


0


304,645

Long-term obligations under Senior Secured Notes


950,643


932,764

Long-term accruals


2,221


2,027

Deferred income taxes


99,199


92,945

Commitments and contingent liabilities (Note 13)





Total Long-Term Liabilities


1,052,791


1,332,913






Stockholders' Equity





Common Stock ($0.01 par value, 120,000,000 shares authorized,

73,125,230 and 72,740,302 shares issued and outstanding at March

31, 2012 and December 31, 2011, respectively)


731


727

Preferred Stock ($0.01 par value, 1,000,000 shares authorized,

none issued and outstanding)


0


0

Additional paid-in-capital


1,370,335


1,369,471

Accumulated deficit


(1,069,070)


(1,131,566)

Accumulated other comprehensive income


56,607


27,888

Less Treasury Stock at cost (246,037 shares at March 31, 2012 and

December 31, 2011, respectively) 


(150)


(150)






Total Stockholders' Equity


358,453


266,370






Total Liabilities and Stockholders' Equity


$2,032,742


$2,072,529






 



CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

Amounts in columns expressed in thousands

(Except per share information)




Three months ended March 31,


2012


2011


(unaudited)


(unaudited)




Sales

$323,975


$336,139

Excise taxes

(175,767)


(179,428)

Net sales

148,208


156,711

Cost of goods sold

89,529


97,374





Gross profit

58,679


59,337





Selling, general and administrative expenses

61,770


57,877

Gain on remeasurement of previously held equity interests

0


(7,898)





Operating income / (loss)

(3,091)


9,358





Non operating income / (expense), net




Interest income / (expense), net

(26,224)


(26,852)

Other financial income / (expense), net

97,922


31,046

Other non operating income / (expense), net

(2,598)


(976)





Income before income taxes and equity in net losses from

unconsolidated investments

66,009


12,576

Income tax expense

(3,513)


(2,641)

Equity in net losses of affiliates

0


(8,814)





Net income attributable to the company

62,496


1,121









Net income from operations per share of common stock, basic

$0.86


$0.02





Net income from operations per share of common stock, diluted

$0.86


$0.02





Other comprehensive income, net of tax:




Foreign currency translation adjustments

28,719


137,016





Comprehensive income attributable to the company

$91,215


$138,137





 




CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW

Amounts in columns expressed in thousands






Three months ended March 31,



2012


2011



(unaudited)


(unaudited)

Cash flows from operating activities





Net income


$62,496


$1,121

Adjustments to reconcile net income / (loss) to net cash provided by

operating activities:





Depreciation and amortization


4,815


5,131

Deferred income taxes


121


725

Unrealized foreign exchange gains


(98,681)


(31,651)

Stock options fair value expense


864


693

Equity loss in affiliates


0


8,814

Gain on fair value remeasurement of previously held equity interest


0


(6,397)

Other non cash items


(26)


1,780

Changes in operating assets and liabilities:





Accounts receivable


226,728


268,051

Inventories


6,964


(5,197)

Prepaid expenses and other current assets


(3,114)


(16,860)

Trade accounts payable


(89,358)


(83,645)

Other accrued liabilities and payables (including taxes)


(87,043)


(58,176)

Net cash provided by operating activities


23,766


84,389






Cash flows from investing activities





Purchase of fixed assets


(1,329)


(505)

Proceeds from the disposal of fixed assets


127


0

Purchase of trademarks


0


(17,473)

Acquisitions of subsidiaries, net of cash acquired


0


(23,475)

Net cash used in investing activities


(1,202)


(41,453)






Cash flows from financing activities





Borrowings on bank loans and overdraft facility


8,594


0

Payment of bank loans, overdraft facility and other borrowings


(26,872)


(4,104)

Decrease in short term capital leases payable


90


(102)

Proceeds from options exercised


0


66

Net cash used in financing activities


(18,188)


(4,140)











Currency effect on brought forward cash balances


9,012


6,992

Net increase in cash


13,388


45,788

Cash and cash equivalents at beginning of period


94,410


122,324

Cash and cash equivalents at end of period


$107,798


$168,112






Supplemental Schedule of Non-cash Investing Activities





Common stock issued in connection with investment in subsidiaries


$0


$23,131






 









CENTRAL EUROPEAN DISTRIBUTION CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES

Amounts in columns expressed in thousands

(Except per share information)











GAAP

A

B

C

D

Comparable











Q1-12

FX

APB 14

Restructuring Costs

Other Adjustments

Q1-12









Sales


$323,975

$0

$0

$0

$0

$323,975

Excise taxes


(175,767)

0

0

0

0

(175,767)

Net Sales


148,208

0

0

0

0

148,208

Cost of goods sold


89,529

0

0

0

0

89,529









Gross Profit


58,679

0

0

0

0

58,679



39.59%





39.59%

Operating expenses


61,770

0

0

(3,729)

0

58,041









Operating income / (loss)


(3,091)

0

0

3,729

0

638



-2.09%





0.43%

Non operating income / (expense), net








Interest income / (expense), net


(26,224)

0

1,113

0

0

(25,111)

Other financial income / (expense), net


97,922

(97,922)

0

0

0

0

Other non operating income, net


(2,598)

0

0

0

0

(2,598)









Income / (loss) before taxes and equity in net income from unconsolidated investments


66,009

(97,922)

1,113

3,729

0

(27,071)

Income tax benefit / (expense)


(3,513)

20,564

(389)

(783)

(10,194)

5,685









Net income /(loss)


$62,496

($77,358)

$724

$2,946

($10,194)

($21,386)









Net income / (loss) from continuing operations per share of common stock, basic


$0.86





($0.29)









Net income / (loss) from continuing operations per share of common stock, diluted


$0.86





($0.29)









A.  Represents the net after tax impact of the foreign currency revaluation related to our USD and EUR liabilities as a majority of these have been lent down to entities that have the Polish Zloty or Russian Ruble as their functional currency.  Also includes the proportional net after tax impact of the foreign currency revaluation related to the foreign currency liabilities included in the earnings of the Russian Alcohol Group as it has the Russian Ruble as its functional currency. 

B.  In May 2008, the FASB issued FSP APB 14-1, which impacts the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. FSP APB 14-1 will impact the accounting associated with our $310.0 million senior convertible notes. This FSP requires us to recognize additional non-cash interest expense on a retrospective basis, based on the market rate for similar debt instruments without the conversion feature. Furthermore, it requires recognizing interest expense in prior periods pursuant to the retrospective accounting treatment. FSP APB 14-1 has become effective beginning in our first quarter of 2009 and is required to be applied retrospectively to all presented periods, as applicable. 

C.  Represents one-off restructuring costs associated with Russian Alcohol Group and the Whitehall Group in Russia. 

D.  Normalization of the effective tax rate to blended average statutory rates.  Difference due to permanent differences primarily around treatment of unrealized FX gains and NOL provisions. 

 









CENTRAL EUROPEAN DISTRIBUTION CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP MEASURES

Amounts in columns expressed in thousands

(Except per share information)











GAAP

A

B

C

D

Comparable











Q1-11

FX

APB 14

Restructuring Costs

Cost associated

with debt refinancing

Q1-11









Sales


$336,139

$0

$0

$0

$0

$336,139

Excise taxes


(179,428)

0

0

0

0

(179,428)

Net Sales


156,711

0

0

0

0

156,711

Cost of goods sold


97,374

0

0

0

0

97,374









Gross Profit


59,337

0

0

0

0

59,337



37.86%





37.86%

Operating expenses


57,877

0

0

(1,403)

(1,900)

54,574

Gain on remeasurement of previously held equity interests


(7,898)

0

0

0

7,898

0









Operating income / (loss)


9,358

0

0

1,403

(5,998)

4,763



5.97%





3.04%

Non operating income / (expense), net








Interest income / (expense), net


(26,852)

0

964

0

0

(25,888)

Other financial income / (expense), net


31,046

(31,046)

0

0

0

0

Other non operating income / (expense), net


(976)

0

0

0

0

(976)









Income / (loss) before taxes and equity in net income from unconsolidated investments


12,576

(31,046)

964

1,403

(5,998)

(22,101)

Income tax benefit / (expense)


(2,641)

6,520

(183)

(295)

1,260

4,661

Equity in net earnings of affiliates


(8,814)

0

0

0

8,814

0

Net income / (loss) from continuing operations


$1,121

($24,526)

$781

$1,108

$4,076

($17,440)









Net income / (loss) from continuing operations per share of common stock, basic


$0.02





($0.24)









Net income / (loss) from continuing operations per share of common stock, diluted


$0.02





($0.24)









A.  Represents the net after tax impact of the foreign currency revaluation related to our USD and EUR liabilities as a majority of these have been lent down to entities that have the Polish Zloty or Russian Ruble as their functional currency. Also includes the proportional net after tax impact of the foreign currency revaluation related to the foreign currency liabilities included in the earnings of the Russian Alcohol Group as it has the Russian Ruble as its functional currency.

B.  In May 2008, the FASB issued FSP APB 14-1, which impacts the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. FSP APB 14-1 will impact the accounting associated with our $310.0 million senior convertible notes. This FSP requires us to recognize additional non-cash interest expense on a retrospective basis, based on the market rate for similar debt instruments without the conversion feature. Furthermore, it requires recognizing interest expense in prior periods pursuant to the retrospective accounting treatment. FSP APB 14-1 has become effective beginning in our first quarter of 2009 and is required to be applied retrospectively to all presented periods, as applicable.

C.  Represents one-off restructuring costs associated with the restructuring the Russian Alcohol Group, composed primarily of employee termination costs.

D.  Includes elimination of one time gain of $7.8 million related to the revaluation of the previously held equity interest in the Whitehall Group, recognized at the time of consolidation in February 2011, the $0.9 million loss in the first quarter of the Bravo business incurred due to the failure to get renewal of the production license (received back in the beginning of April 2011 and the $0.9 million reversal of management fees charged by the former management of the Whitehall group prior to the buy-out in Q1 2011. Also includes the elimination of equity in net earnings of affiliates which includes the results of the Moet Hennessey Joint Venture which was sold in March, 2011 as well as certain one-off costs associated with the acquisition of the Whitehall Group in February 2011.

 

SOURCE Central European Distribution Corporation



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