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March 1, 2006
Central European Distribution Corporation Announces Record Net Sales (an Increase of 29% over 2004) and Operating Income for 2005 (an Increase of 82% over 2004) Bala Cynwyd, Pennsylvania: Central European Distribution Corporation, today announced its results for fiscal year 2005. Net sales for the full year ended December 31, 2005 increased 29% to $749.4 million from the $580.7 million reported for the same period in 2004. Operating income increased by 81.9% to $51.6 million from $28.4 million for the same period in 2004. On a comparable basis, CEDC announced earnings of $31.3 million, or $1.63 per fully diluted share (which is in line with previously issued guidance of $1.57 to $1.67 per fully diluted share), as compared to $21.8 million, or $1.31 per fully diluted share, for the same period in 2004. The comparable results exclude the impact of acquisition-related costs (which were fully accounted for in 2005) and foreign exchange movements related to CEDC's Senior Secured Notes financing. For a complete reconciliation of comparable earnings to earnings reported under United States Generally Accepted Accounting Principles ("GAAP"), please see the section "Unaudited Reconciliation of Non- GAAP Measures." CEDC reported a net profit under GAAP of $20.3 million or $1.05 per share on a fully diluted basis. Mr. William Carey, CEO and President, said, "We delivered record cash flow from operations of $34.1 million for the year, as well as a significant increase in gross margins in the fourth quarter to 22% from 13% in the fourth quarter of 2004. The key vodka brands that we acquired with the Polmos Bialystok and Bols acquisitions continued to show solid growth resulting in our vodka market share increasing to over 32% in the fourth quarter." Some of the key financial highlights to date include the following:
"We have acquired two distributors since November 2005 and we are targeting additional distributor acquisitions of approximately $64 million to $84 million in annualized net sales over the next 10 months. We are confirming our 2006 guidance for net sales of $931 million to $956 million and full year fully diluted earnings per share guidance of $1.90 to $2.10, which includes the impact of expensing options, which is estimated to be approximately $0.06 per fully diluted share." The 2006 guidance noted above does not take into account additional acquisitions that may be completed or any potential impact of foreign exchange movements on CEDC's Senior Secured Notes financing. All acquisition-related costs were fully accounted for in 2005. CEDC has reported net income and diluted net income per share in accordance with GAAP and on a non-GAAP basis, referred to in this release as comparable earnings, as well as the non-GAAP measure EBITDA. CEDC's management believes that pro forma 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 on a comparable basis in order to give investors better insight into underlying business trends from continuing operations. EBITDA represents GAAP earnings excluding interest, taxes, depreciation and amortization and other financial income and expenses. EBITDA is presented because management believes it provides additional information with respect to the cash flow of CEDC. A complete 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. The preliminary financial results reported in this press release have been prepared in accordance with GAAP. In addition to the GAAP results, CEDC also has provided additional information concerning its results, which includes certain financial measures not prepared in accordance with GAAP. These non-GAAP financial measures should not be considered a substitute for any measure derived in accordance with GAAP. These non-GAAP financial measures also may be inconsistent with the manner in which similar measures are derived or used by other companies. Management believes that the presentation of such non-GAAP financial measures, when considered in conjunction with the most directly comparable GAAP financial measures, provides additional useful information concerning CEDC's operations without certain non-recurring charges. CEDC has provided reconciling information in the text of this press release. CEDC is the largest vodka producer in Poland by value and produces the Absolwent, Zubrowka, Bols, and Soplica brands, among others. CEDC currently exports Zubrowka to European and Asian markets. CEDC is also the leading distributor by volume and a leading importer by value of alcoholic beverages in Poland. CEDC operates 15 distribution centers and 78 satellite branches throughout Poland. It distributes many of the world's leading brands in Poland, including brands such as Johnnie Walker Scotch, Stock Brandy, Sutter Home, Torres, Penfolds and Concha y Toro wines, and Corona, Foster's, Grolsch, Budweiser Budvar and Guinness Stout beers.
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except share and per share information)
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
GAAP net income/(loss) 12,071 9,108 20,268 21,830
Pre-acquisition financing cost 464 - 3,907 - (A)
Acquisition-related hedges - - 3,384 - (B)
Foreign exchange impact of
Bols acquisition - - 1,335 - (C)
Foreign exchange impact of
escrowed cash, Senior Secured
Notes and hedge revaluation 1,905 - 2,111 - (D)
Other acquisition-related costs 114 - 317 - (E)
Comparable non-GAAP net
income 14,554 9,108 31,322 21,830
Comparable non-GAAP net
income per share of
common stock, basic 0.62 0.55 1.66 1.34
Comparable non-GAAP net
income per share of
common stock, diluted 0.61 0.55 1.63 1.31
Twelve Months Ended
December 31,
2005 2004
GAAP net income/(loss) 20,268 21,830
Income Tax 5,346 4,614
Net Interest Expense 15,828 2,115
Net Other Financial Expense/(Income) 7,678 19
Depreciation and Amortization 4,529 3,414
Minority Interest 2,261 -
EBITDA, adjusted for minority interest 55,910 31,992
Change in working capital (18,232) (19,503)
Non cash expenses 984 758
Taxes paid (4,580) (4,386)
Net cash provided by Operating Activities 34,082 8,861
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 year over year financial performance. Descriptions of these items are presented below:
(A) CEDC closed a 325 million Euro Senior Secured Notes offering on July 25, 2005 in order to fund the acquisitions of Polmos Bialystok and Bols. Due to various delays in receiving final approval from the Polish Anti-Monopoly office, the acquisitions were not completed until August 17, 2005, in the case of Bols, and October 12, 2005, in the case of Polmos Bialystok. These amounts represent the proportional share of interest accrued (net of interest earned in escrow) prior to completion of the acquisitions. In addition, CEDC incurred additional debt to support the deposit payment made to the State Treasury as part of the Polmos Bialystok acquisition. The costs relating to this additional financing are also represented in this calculation. (B) In anticipation of volatility in exchange rates in Poland due to elections that were held in late September, CEDC purchased additional hedges to protect the value of the cash obtained from the Senior Secured Notes, held in escrow. All derivates other than coupon hedge had closed as of September 30, 2005. (C) The closing of the Bols acquisition required the exchange of funds through various currencies during a volatile period of exchange rate movements. CEDC incurred spot losses in exchanging these funds. The spot loss above represents less than 1% of the cash value of the transaction. (D) Represents the net impact of interest and foreign currency movements related to escrowed cash and Senior Secured Notes and coupon hedge revaluation for the period. As these are non-cash adjustments related to acquisition financing and were not part of prior year results, the net impact has been excluded from comparable non-GAAP net income. (E) Represents other miscellaneous costs directly related to the acquisitions of Bols and Polmos Bialystok of $203 and a one-time tax write-off related to a tax control in one of the operating subsidiaries of $114.
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Amount in columns expressed in thousands)
December 31,
2005 2004
ASSETS
Current Assets
Cash and cash equivalents $60,745 $10,491
Short-term financial assets 4,269 -
Accounts receivable, net of allowance for
doubtful accounts of $22,851 and $10,038,
respectively 188,029 131,799
Inventories 73,411 64,372
Prepaid expenses and other current assets 19,198 10,801
Deferred income taxes 5,868 822
Total Current Assets 351,520 218,285
Trademark, net 316,821 2,543
Goodwill, net 312,860 51,370
Equipment, net 39,784 17,387
Deferred income taxes 2,340 1,684
Other assets 1,342 435
Total Assets $1,024,667 $291,704
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $112,838 $115,678
Bank loans and overdraft facilities 26,747 37,396
Income taxes payable 672 651
Taxes other than income taxes 59,387 3,108
Other accrued liabilities 62,577 7,338
Current portions of obligations
under capital leases 3,328 2,970
Current portion of long-term debt - 234
Total Current Liabilities 265,549 167,375
Long-term debt, less current maturities 9 1,873
Long-term obligations under capital leases 1,455 2,140
Long-term obligations under
Senior Secured Notes 367,575 -
Total Long-Term Liabilities 369,039 4,013
Minority interests 15,137 -
Stockholders' Equity
Common Stock ($0.01 par value, 40,000,000
shares authorized, 23,885,245 and 16,677,045
shares issued at December 31, 2005 and
December 31, 2004, respectively) 239 166
Additional paid-in-capital 296,574 55,663
Retained earnings 72,634 52,366
Accumulated other comprehensive income 5,645 12,271
Less Treasury Stock at cost (164,025 shares
at December 31, 2005 and 2004) (150) (150)
Total Stockholders' Equity 374,942 120,316
Total Liabilities and Stockholders' Equity $1,024,667 $291,704
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Amount in columns expressed in thousands, except share and per share
information)
Year ended December 31,
2005 2004 2003
Gross sales $828,918 $580,744 $429,118
Excise (79,503) - -
Net sales 749,415 580,744 429,118
Cost of goods sold 627,368 506,413 372,638
Gross profit 122,047 74,331 56,480
Selling, general and administrative
expenses 69,420 45,188 33,721
Bad debt provision 984 758 592
Operating income 51,643 28,385 22,167
Non-operating income / (expense)
Interest income / (expense), net (15,828) (2,115) (1,500)
Other financial income /
(expense), net (7,678) (19) (92)
Other income / (expense), net (262) 193 (59)
Income before income taxes 27,875 26,444 20,516
Income tax expense 5,346 4,614 5,441
Minority interests 2,261 - -
Net income $20,268 $21,830 $15,075
Net income per share of common stock,
basic $1.07 $1.34 $0.98
Net income per share of common stock,
diluted $1.05 $1.31 $0.96
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
(Amount in columns expressed in thousands)
Year ended December 31,
2005 2004 2003
Operating Activities
Net income $20,268 $21,830 $15,075
Adjustments to reconcile net income to
net cash provided by / (used in)
operating activities:
Depreciation and amortization 4,529 3,414 2,127
Deferred income taxes (316) 228 698
Bad debt provision 984 758 592
Minority interests 2,261 - -
Changes in operating assets and
liabilities:
Accounts receivable (23,730) (23,495) (6,862)
Inventories (238) (21,245) (4,143)
Prepayments and other current
assets (6,614) (2,090) (1,183)
Trade accounts payable (7,149) 29,424 (14,156)
Income and other taxes 9,015 993 766
Other accrued liabilities and
other 35,072 (956) (1,166)
Net Cash provided by Operating
Activities 34,082 8,861 (8,252)
Investing Activities
Investment in distribution assets (8,091) (5,449) (2,292)
Proceeds from the disposal of equipment 2,454 1,490 647
Purchase of financial assets (79,412) (5,378) (3,874)
Proceeds from the disposal of
financial assets 115,028 - -
Acquisitions of subsidiaries, net of
cash acquired (490,092) - -
Net Cash Used In Investing
Activities (460,113) (9,337) (5,519)
Financing Activities
Borrowings on bank loans and
overdraft facility 4,804 7,604 7,019
Payment of bank loans and overdraft
facility (13,565) (4,029) -
Long-term borrowings - 1,518 -
Payment of long-term borrowings (6,438) (4,400) (9,935)
Payment of capital leases (1,676) (1,838) (1,297)
Net borrowings of Senior Secured
Notes 378,447 - -
Net proceed from private placement
issuance of shares 111,594 - 19,308
Options exercised 3,205 1,780 2,035
Net cash provided by Financing
Activities 476,371 635 17,130
Currency effect on brought forward
cash balances (86) 4,103 633
Net Increase in Cash 50,254 4,262 3,992
Cash and cash equivalents at
beginning of period 10,491 6,229 2,237
Cash and cash equivalents at
end of period $60,745 $10,491 $6,229
Contact: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by 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. The Company 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 the securities laws. Investors are referred to the full discussion of risks and uncertainties included in the Company's Form 10-K for the fiscal year ended December 31, 2004, and in other periodic reports filed by the Company with the Securities and Exchange Commission. |
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