Central European Distribution Corporation Announces Full Year 2008 Results; Net Sales up 38% and Operating Income up 68%

BALA CYNWYD, Penn., March 2 /PRNewswire-FirstCall/ -- Central European Distribution Corporation (Nasdaq: CEDC) today announced its results for the fiscal year 2008. Net sales for the full year ended December 31, 2008 increased by 38% to $1,647.0 million from the $1,189.8 million reported for the same period in 2007. Operating income increased by 68% to $198.7 million from $118.1 million for the same period in 2007.

On a comparable basis, CEDC announced net income of $131.3 million, or $2.93 per fully diluted share, for the full year 2008, as compared to $69.9 million, or $1.73 per fully diluted share, for the same period in 2007. Net loss, on a U.S. GAAP basis (as hereinafter defined) for the full year was $16.6 million or $0.38 per fully diluted share, as compared to net income of $77.1 million or $1.91 per fully diluted share, for the same period in 2007. Generally, the major difference between the U.S. GAAP net income and comparable non- GAAP net income reflects unrealized foreign exchange movements relating to foreign currency financing. For a 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, "Our operating profit margin improvement of over 200 basis points for the full year 2008 as compared to 2007 and over 500 basis points for the 4th quarter of 2008 as compared to the 3rd quarter of 2008 shows a continued improvement in the underlying business even in the face of a global crisis and regional currency weakness accelerating in the 4th quarter. During the year we have shown consecutive quarterly increases in gross margins and operating profit margins throughout 2008, which highlights our management team's key objectives of improving the underlying fundamentals of our business."

Mr. Carey continued, "We continue to see a challenging environment for the consumer, however, we are also experiencing a substantial slowdown in wage inflation, energy costs and raw material inputs (especially in raw spirit where pricing is 40% lower in Poland and 10% lower in Russia during the first two months of 2009 as compared to the same period 2008). We believe our company is well positioned with our brand portfolio, proven management execution, and leading market shares in each of our key markets to emerge out of the current global crisis with a much stronger market position. The recent currency weakness in the region has obviously impacted our results from a translation perspective as well as the mark to market (non-cash) of our long term dollar and euro denominated debt, however our core underlying business remains solid and we believe we will emerge out of this crisis as a stronger company with fewer competitors."

William Carey continued, "We are engaged in discussions with Lion Capital to restructure the current agreement regarding the buyout of the remaining 58% stake in the Russian Alcohol Group, the largest spirit producer in Russia. Although the discussions are not final, and remain subject to further legal, accounting and tax analysis, and board approval, we are in general agreement with Lion Capital on the main commercial terms. We expect an agreement would include a fixed price for the remaining 58% interest in Russian Alcohol Group that we do not own (including the conversion of our $103.5 million plus accrued interest of loan notes) at a valuation which is more reflective of current market conditions and the positive sales performance of the business. Our payments would be spread out over 5 years ending in the year 2013, with smaller payments for 2009 and 2013 and more equal payments from years 2010 to 2012, and we would agree to certain security arrangements to Lion. We would not take control over the Russian Alcohol Group until 2011, though we would receive significantly enhanced minority rights. We would expect to finance the transaction over the 5 years through a combination of cash, debt and equity."

"We believe this new proposed structure would be a win/win for both Lion Capital and CEDC as Lion would get to solidify its return in difficult market conditions, and CEDC would receive financial flexibility to buy the remaining shares in the Russian Alcohol Group, arguably the best performing consumer/spirits company in Russia today."

Chris Biedermann, CFO commented, "Our cash flow from operations in 2008 was over $72 million which includes outflows of $27 million related to working capital we funded into our Parliament business in Russia which we acquired in March 2008 (as we purchased newly created legal entities, there was no significant working capital in the business). Adding back the funding provided to the Parliament Group of $27 million, our adjusted cash flow from operations would have been $99.2 million Additionally we consolidated the working capital cycle at the end of the year, which is predominately a period of outflows, of our Whitehall business in Russia (which we acquired in May 2008), without the benefit of consolidating the stronger cash flow period during the 1st quarter."

Mr. Carey continued, "Our key vodka brands and imported brands continued to perform strongly over the course of 2008 and although, we anticipate a slow down in 2009 from last years high growth levels, we still expect growth in the single to double digit range for our key brands in Poland, Russia and Hungary. Our market share gains in Russia have been extremely dynamic over 2008, reaching a 20% share by volume (up from 12% by volume at the beginning of the year), which is almost double the next competitor. As we move into 2009, accounts receivable will remain a key focus for the company and thus far in the first quarter of 2009, we have remained in line with our local management objectives for receivable collection."

"We have emerged over the last year as the largest vodka manufacturer in the world, not to mention the leading spirits player in the region. Our key objectives in 2009 are to continue to gain market share, improve margins, actively manage working capital, and emerge from the current global crisis as a stronger company."

The Company also reconfirms its full year 2009 net sales guidance of $1.25 - $1.40 billion and its full year comparable fully diluted earnings per share guidance of $2.50 - $2.80.

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 non-GAAP 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 the largest vodka producer in Poland and produces the Absolwent, Zubrowka, Bols and Soplica brands, among others. CEDC currently exports Zubrowka to many markets around the world, including the United States, England, France and Japan. CEDC also produces and distributes Royal Vodka, the top selling vodka in Hungary, and produces Parliament Vodka, the leading sub-premium vodka in Russia. CEDC also has an approximately 42% equity stake in the Russian Alcohol Group which produces Green Mark, the number one selling vodka in Russia along with Zhuravli, another top-selling sub-premium vodka in Russia.

CEDC also is the leading national distributor of alcoholic beverages in Poland by value, and a leading importer of alcoholic beverages in Poland 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 Brandy, Remy Martin Cognac, Guinness, Sutter Home wines, Grant's Whisky, Jagermeister, E&J Gallo, Jim Beam Bourbon, Sierra Tequila, Teacher's Whisky, Campari, Cinzano, Skyy Vodka and Old Smuggler. CEDC is also a leading importer of premium spirits and wines in Russia with such brands as Hennessey, Moet & Chandon and 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 statements about a potential restructuring of our agreements relating to Russian Alcohol Group. Forward looking statements 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. In particular, we cannot provide any assurances as to whether, or on what terms, we may reach an agreement to restructure our arrangements in respect of Russian Alcohol Group.

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, 2007, 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 as well as risks arising from current credit market and economic conditions globally and in the markets in which we operate.

    Contact:
    Jim Archbold,
    Investor Relations Officer
    Central European Distribution Corporation
    610-660-7817



                     CENTRAL EUROPEAN DISTRIBUTION CORPORATION
                       CONSOLIDATED CONDENSED BALANCE SHEETS

                                                             December 31,
                                                           2008        2007
                          ASSETS
    Current Assets
    Cash and cash equivalents                            $107,601     $87,867
    Accounts receivable, net of allowance for
     doubtful accounts of
     $22,155 and $29,277 respectively                     430,683     316,277
    Inventories                                           180,304     141,272
    Prepaid expenses and other current assets              22,894      16,536
    Deferred income taxes                                  24,386       5,141
    Total Current Assets                                  765,868     567,093

    Intangible assets, net                                570,505     545,697
    Goodwill, net                                         745,256     577,282
    Property, plant and equipment, net                     92,221      79,979
    Deferred income taxes                                  12,886      11,407
    Equity method investment in affiliates                189,243           -
    Subordinated intercompany loans                       107,707           -
    Other assets                                                -         710
                                                        1,717,818   1,215,075

    Total Assets                                       $2,483,686  $1,782,168

           LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
    Trade accounts payable                               $234,948    $172,340
    Bank loans and overdraft facilities                   109,552      42,785
    Income taxes payable                                    7,227       5,408
    Taxes other than income taxes                         125,774     101,929
    Other accrued liabilities                              80,270      71,959
    Current portions of obligations under capital
     leases                                                 2,385       1,759
    Total Current Liabilities                             560,156     396,180

    Long-term debt, less current maturities               170,510     122,952
    Long-term obligations under capital leases              2,194       2,708
    Long-term obligations under Senior Notes              650,243     344,298
    Deferred income taxes                                 106.486     100,113
    Total Long Term Liabilities                           929,433     570,071

    Minority interests                                     48,248         481

    Stockholders' Equity
    Common Stock ($0.01 par value, 80,000,000
     shares authorized, 47,344,874 and 40,566,096
     shares issued at December 31, 2008 and
    2007, respectively)                                       473         406
    Additional paid-in-capital                            803,703     429,554
    Retained earnings                                     188,595     205,186
    Accumulated other comprehensive income                (46,772)    180,440
    Less Treasury Stock at cost (246,037 shares at
     December 31, 2008 and 2007, respectively)               (150)       (150)
    Total Stockholders' Equity                            945,849     815,436

    Total Liabilities and Stockholders' Equity         $2,483,686  $1,782,168

                     CENTRAL EUROPEAN DISTRIBUTION CORPORATION
                    CONSOLIDATED CONDENSED STATEMENTS OF INCOME
       (Amount in columns expressed in thousands, except share and per share
                                    information)

                                              Year ended December 31,
                                            2008        2007        2006


    Sales                               $2,136,570  $1,483,344  $1,193,248
    Excise taxes                          (489,566)   (293,522)   (249,140)
    Net Sales                            1,647,004   1,189,822     944,108
    Cost of goods sold                   1,224,899     941,060     745,721

    Gross Profit                           422,105     248,762     198,387

    Operating expenses                     223,373     130,677     106,805

    Operating Income                       198,732     118,085      91,582

    Non operating income / (expense), net
     Interest (expense), net               (50,360)    (35,829)    (31,750)
     Other financial (expense), net       (132,936)     13,594      17,212
     Other non operating income /
      (expense), net                           410      (1,770)      1,119

    Income before taxes                     15,846      94,080      78,163
    Income tax expense                      12,952      15,910      13,986

    Minority interests                      10,483       1,068       8,727

    Equity in net earnings of
     affiliates                             (9,002)          -           -

    Net income                            ($16,591)    $77,102     $55,450

    Net income per share of common
     stock, basic                           ($0.38)      $1.93       $1.55

    Net income per share of common
     stock, diluted                         ($0.38)      $1.91       $1.53

                     CENTRAL EUROPEAN DISTRIBUTION CORPORATION
                  CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
                    (Amount in columns expressed in thousands)

                       CASH FLOW           Twelve months ended December 31,
                                              2008       2007       2006
    Operating Activities
    Net income                              ($16,591)   $77,102    $55,450
    Adjustments to reconcile net income
     to net cash provided by / (used in)
     operating activities:
     Depreciation and amortization            14,786      9,968      8,739
     Deferred income taxes                   (19,282)     9,957      2,205
     Minority interests                       10,483      1,044      8,727
     Hedge valuation                               -          -    (13,118)
     Unrealized foreign exchange (gains) /
      losses                                 133,528    (23,940)    (3,274)
     Cost of debt extinguishment               1,156     11,864          -
     Stock options expense                     3,850      1,866      1,908
     Equity income in affiliates               9,002          -          -
     Other non cash items                       (693)     7,308      1,079
     Changes in operating assets and
      liabilities:
     Accounts receivable                    (121,589)   (38,812)    (7,554)
     Inventories                             (41,712)   (21,986)    (3,165)
     Prepayments and other current assets     17,100      5,865     (2,026)
     Trade accounts payable                   62,459       (880)     8,123
     Other accrued liabilities and
      payables                                19,699    (16,272)    14,597
    Net Cash provided by Operating
     Activities                               72,196     23,084     71,691

    Investing Activities
    Investment in fixed assets               (22,572)   (25,787)   (11,713)
    Proceeds from the disposal of fixed
     assets                                    6,943      2,670      2,045
    Investment in trademarks                       -          -     (1,210)
    Purchase of financial assets            (103,500)         -          -
    Proceeds from the disposal of
     financial assets                              -          -      4,784
    Refundable purchase price related to
     Botapol acquisition                           -      5,000          -
    Acquisitions of subsidiaries, net of
     cash acquired                          (548,799)  (141,005)   (35,828)
    Net Cash used in Investing
     Activities                             (667,928)  (159,122)   (41,922)

    Financing Activities
    Borrowings on bank loans and
     overdraft facility                      120,586     13,225     15,379
    Borrowings on long-term bank loans        43,192    122,508          -
    Payment of bank loans and overdraft
     facility                                (31,935)   (30,153)   (21,526)
    Payment of long-term borrowings                -          8         (3)
    Payment of Senior Secured Notes          (26,996)   (95,440)         -
    Hedge closure                                  -          -     (7,323)
    Movements in capital leases payable        1,216        445     (2,232)
    Issuance of shares in public
     placement                               233,845     42,354     71,719
    Net Borrowings on Convertible Senior
     Notes                                   304,403          -          -
    Options exercised                          1,899      3,976      4,772
    Net Cash provided by Financing
     Activities                              646,210     56,923     60,786
    Currency effect on brought forward
     cash balances                           (30,744)     7,620      8,062
    Net Increase / (Decrease) in Cash         19,734    (71,495)    98,617
    Cash and cash equivalents at
     beginning of period                      87,867    159,362     60,745
    Cash and cash equivalents at end of
     period                                 $107,601    $87,867   $159,362

                     CENTRAL EUROPEAN DISTRIBUTION CORPORATION
                   UNAUDITED RECONCILIATION OF NON-GAAP MEASURES
              (in thousands, except share and per share information)

    Comparable measures are provided as additional information as management
    believes this information provides investors with better insight on
    underlying business trends and results in order to evaluate ongoing
    financial performance.  Descriptions of these items are presented below:

                                   Three Months Ended    Twelve Months Ended
                                          Dec 31,               Dec 31,
                                     2008        2007      2008        2007

    GAAP net income/(loss)        ($82,591)    $45,287  ($16,591)    $77,102

    A. Foreign exchange impact
       related to USD and EUR
       denominated  financing      126,801     (15,933)  134,279     (20,036)
    B. Foreign exchange impact
       related to USD denominated
       financing of Russian
       Alcohol                      11,465                22,255           0
    C. Foreign exchange impact
       related to the USD
       denominated Convertible
       Notes issued by the
       Russian Alcohol Group       (17,211)              (27,746)          0
    D. Other acquisition
       related costs                               369       659       1,414
    E. Cost associated with
       early retirement of debt          0           0       548       9,609
    F. Impact of expensing
       stock options                   853         358     3,119       1,511
    G. Impact of change in
       provision for tax
       provisions                    8,693                 8,693           0
    H. Other non recurring
       costs                         4,536                 5,997         307

    Comparable non-GAAP net
     income                        $52,546     $30,081  $131,213     $69,907

    Comparable net income per
     share of common stock,
     basic                           $1.12       $0.75     $2.98       $1.75
    Comparable net income per
     share of common stock,
     diluted                         $1.12       $0.74     $2.93       $1.73

    A. Represents the non cash net after tax impact of the foreign currency
       revaluation related to our USD and EUR acquisition financing as these
       borrowings have been lent down to entities that have the Polish Zloty
       as the functional currency.  The impact of foreign exchange revaluation
       will change, which may have a material effect on our financial results.
    B. Represents 42% of the non cash net after tax impact of the foreign
       currency revaluation related to the USD financing included earnings in
       the Russian Alcohol Group as the Russian Alcohol Group has the Russian
       Ruble as its functional currency.   CEDC accounts for its investment in
       the Russian Alcohol Group under the equity method of accounting and
       therefore this loss is included in the proportional share of equity
       earnings recognized by CEDC.  The impact of foreign exchange
       revaluation will change, which may have a material effect on our
       financial results.
    C. Represents the non cash net after tax impact of the foreign currency
       revaluation related to our USD denominated investment in Convertible
       Notes, issued by the Russian Alcohol Group.  The notes were purchased
       by Carey Agri International who has the Polish Zloty as its functional
       currency.  The impact of foreign exchange revaluation may change, which
       may have a material effect on our financial results
    D. Represents other miscellaneous costs, directly related to the tender
       for additional shares of Polmos Bialystok and other acquisitions in
       2007 and pre-acquisition financing costs related to the Parliament
       acquisition in 2008.
    E. Represents the net after tax impact associated with the early
       retirement of 20% of CEDC's outstanding Senior Secured Notes, including
       an 8% one-time redemption premium payment to the Noteholders and write-
       off of prepaid financing costs in 2007 and costs associated with
       retirement of $14 million of the Senior Secured Notes in 2008.
    F. On January 1, 2006 CEDC adopted SFAS 123( R ) and began to expense
       stock options.  This amount represents the net after tax impact of the
       expensing of stock options.
    G. During the fourth quarter of 2009, the company took additional non cash
       tax provisions primarily for a tax loss carry forward in Poland.  Due
       to the level of foreign exchange losses incurred in 2008, management
       has determined that a portion of prior period tax losses will not be
       utilized in the future and has therefore taken a one time charge for
       this.
    H. On June 30, 2008, CEDC terminated operations of the German import
       business acquired as part of the Parliament acquisition and in July
       2008, moved all German import operations to a 3rd party importer.  The
       amount includes $1.461 million of net loss incurred by the discontinued
       operation for the 12 months ended December 31, 2008.   Additionally,
       $4.536 million of clean up related charges were reflected in CEDC's
       proportional share of net income from the Russian Alcohol Group.  These
       charges related to clean up of historical issues that stemmed from
       actions before acquisition in July 2008.  For 2007, the amount
       represents one time charges for an early retirement program.

    Full Year Guidance, 12 Months Ending December 31,         2009

    Range for GAAP  Fully Diluted Earnings per Share         $2.42
                                                             $2.72

    A. Foreign exchange impact related to USD and
       EUR denominated financing                              0.00
    B. Foreign exchange impact related to USD
       denominated financing of Russian Alcohol               0.00
    C. Foreign exchange impact related to the USD
       denominated Convertible Notes issued by the
       Russian Alcohol Group                                  0.00
    D. Impact of adoption of FSP APB 14-1                     0.08

    Range for Comparable non-GAAP Fully Diluted
     Earnings per Share                                      $2.50
                                                             $2.80

    Comparable measures are provided as additional information as management
    believes this information provides investors with better insight on
    underlying business trends and results in order to evaluate ongoing
    financial performance.  Descriptions of these items are presented below:


    A. Represents the net after tax impact of the foreign currency revaluation
       related to our USD and EUR acquisition financing as these borrowings
       have been lent down to entities that have the Polish Zloty as the
       functional currency.  The impact of foreign exchange revaluation is
       inherently unpredictable and we have not forecasted the impact thereof;
       changes in foreign exchange revaluation may have a material effect on
       our financial results.
    B. Represents 42% of the net after tax impact of the foreign currency
       revaluation related to the USD financing included earnings in the
       Russian Alcohol Group as the Russian Alcohol Group has the Russian
       Rubble as the function currency.   CEDC accounts for its investment in
       the Russian Alcohol Group under the equity method of accounting and
       therefore this loss is included in the proportional share of equity
       earnings recognized by CEDC.  The impact of foreign exchange
       revaluation is inherently unpredictable and we have not forecasted the
       impact thereof; changes in foreign exchange revaluation may have a
       material effect on our financial results.
    C. Represents the net after tax impact of the foreign currency revaluation
       related to our USD denominated investment in Convertible Notes, issued
       by the Russian Alcohol Group.  The notes were purchased by Carey Agri
       International who has the Polish Zloty as the functional currency.  The
       impact of foreign exchange revaluation is inherently unpredictable and
       we have not forecasted the impact thereof; changes in foreign exchange
       revaluation may have a material effect on our financial results.
    D. 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 will require us to recognize additional non-cash interest
       expense 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 will become effective beginning in our first
       quarter of 2009 and is required to be applied retrospectively to all
       presented periods, as applicable. The amount in the table represents
       managements best estimate to date, however the company is still
       currently evaluating the full impact on our financial statements of
       applying the provisions of FSP APB 14-1 on 2009.

SOURCE Central European Distribution Corporation