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November 7, 2005
Central European Distribution Corporation Reports Record 3rd Quarter Net Sales and Operating Profit Growth of 44% Bala Cynwyd, Pennsylvania: Central European Distribution Corporation, today announced its unaudited third quarter results. Net sales for the three-month period ended September 30, 2005 increased 29% to $187.5 million from the $145.8 million reported for the same period in 2004. Operating income increased by 44% to $9.2 million from $6.4 million for the same period in 2004. On a comparable basis, the Company announced earnings of $6.5 million, or $0.35 per fully diluted share. The comparable results exclude the impact of acquisition related and other unusual items that resulted from recent distillery acquisitions. For a complete reconciliation of comparable earnings to earnings reported under GAAP, please see the section "Unaudited Reconciliation of Non-GAAP Measures." CEDC reported a net loss under Generally Accepted Accounting Principles (GAAP) of $2.0 million or $0.11 per share on a fully diluted basis. Mr. William Carey, CEO and President, said, "We delivered another strong quarter of sales and operating income as noted above, and in addition we also generated record cash flow from operations of approximately $23 million for the nine months ending September 30, 2005." Some of the highlights to date include the following:
CEDC also updated its full year 2005 guidance and is raising net sales guidance to $730 to $760 million from $705 to $725 million, due to the inclusion of the recently acquired Bols and Polmos Bialystok distilleries. The impact of the third quarter non-GAAP adjustments on the 2005 full year fully diluted earnings per share will be approximately $0.46 which will reduce our full year 2005 GAAP guidance to $1.11 to $1.21. The 2005 and 2006 guidance noted above does not take into account additional acquisitions that may be completed or any potential impact of foreign exchange movements on our Senior Secured Notes financing. The 2006 guidance does not include the impact of expensing of options, which is estimated to be approximately $0.05 to $0.07 per fully diluted share. 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. Management of the Company 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 the company's core operating results and trends. The Company discusses results on a comparable basis in order to give investors better insight on 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 performance of the Company. 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. 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 87 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. Regulation G: The preliminary financial results reported in this press release have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). In addition to the GAAP results, the Company has also 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 may also 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 the Company's operations without certain non-recurring charges. The Company has provided reconciling information in the text of this press release.
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share information)
September 30, December 31,
2005 2004
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $20,973 $10,491
Accounts receivable (net of allowance for
doubtful accounts of $8,684 and
$10,038, respectively) 125,284 131,799
Inventories 59,339 64,372
Prepaid expenses and other current assets 11,498 10,801
Deferred income taxes 5,287 822
TOTAL CURRENT ASSETS $222,381 $218,285
Intangible assets, net 174,028 2,543
Goodwill, net 122,874 51,370
Tangible fixed assets, net 27,424 17,387
Deferred income taxes 1,669 1,684
Restricted cash 229,639 -
Other assets 42,588 435
TOTAL ASSETS $820,603 $291,704
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $85,581 $115,678
Short-term bank loans and overdraft facilities 52,022 37,396
Current portion of long-term debt 214 234
Current portion of obligations
under capital leases 3,536 2,970
Current portion of obligations
under Senior Secured Notes - -
Income taxes payable 494 651
Taxes other than income taxes 18,189 3,108
Other accrued liabilities 20,670 7,338
TOTAL CURRENT LIABILITIES 180,706 167,375
Long-term debt, less current maturities 1,719 1,873
Long-term obligations under capital leases 859 2,140
Long-term obligations under
Senior Secured Notes 386,040 -
STOCKHOLDERS' EQUITY
Preferred Stock ($0.01 par value,
1,000,000 shares authorized; no shares issued
and outstanding) - -
Common Stock ($0.01 par value, 40,000,000 shares
authorized, 20,524,745 and 16,677,045 shares issued
at September 30, 2005 and December 31, 2004,
respectively) 205 166
Additional paid-in-capital 185,012 55,663
Retained earnings 60,563 52,366
Accumulated other comprehensive income 5,649 12,271
Less Treasury Stock at cost (164,025 shares at
September 30, 2005 and December 31, 2004) (150) (150)
TOTAL STOCKHOLDERS' EQUITY 251,279 120,316
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $820,603 $291,704
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except share and per share information)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
(unaudited) (unaudited) (unaudited) (unaudited)
Sales $197,688 $145,831 $511,939 $389,312
Excise taxes 10,160 - 10,160 -
Net Sales 187,528 145,831 501,779 389,312
Cost of goods sold 160,186 127,525 433,849 340,605
Gross Profit 27,342 18,306 67,930 48,707
Selling, general and
administrative
expenses 17,807 11,676 43,825 31,825
Bad debt provision 319 223 668 474
Operating Income 9,216 6,407 23,437 16,408
Non operating income /
(expense)
Interest income /
(expense), net (6,219) (519) (7,606) (1,429)
Other financial
income / (expense),
net
(5,331) 226 (5,395) 284
Other income /
(expense), net (163) 22 (275) 77
Income before taxes (2,497) 6,136 10,161 15,340
Income tax expense /
(benefit) (474) 1,040 1,964 2,618
Net income $(2,023) $5,096 $8,197 $12,722
Net income per share of
common stock, basic $(0.11) $0.31 $0.47 $0.78
Net income per share of
common stock, diluted $(0.11) $0.31 $0.47 $0.77
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
(in thousands, except share and per share information)
Nine Months Nine Months
ended ended
Sept. 30, Sept. 30,
2005 2004
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net income $8,197 $12,722
Adjustments to reconcile net income to
net cash provided by / (used in)
operating activities:
Depreciation and amortization 3,199 2,302
Deferred income tax benefit (713) (157)
Bad debt provision 668 474
Foreign exchange losses - 5
Changes in operating assets and liabilities:
Accounts receivable 20,396 10,658
Inventories 8,046 7,446
Prepayments and other current assets 365 (148)
Trade accounts payable (28,122) (17,325)
Income taxes and other taxes payable (3,994) 799
Other accrued liabilities and
other assets 15,160 (679)
Net Cash Provided By Operating Activities 23,202 16,097
INVESTING ACTIVITIES
Acquisition of businesses and subsidiaries
(net of cash acquired) (178,502) (1,402)
Changes in restricted cash (229,639) -
Purchase of fixed assets (3,982) (4,213)
Proceeds from sales of fixed assets 1,960 275
Net Cash Used in Investing Activities (410,163) (5,340)
FINANCING ACTIVITIES
(Repayments) / Borrowings of short-term
borrowings and overdraft facilities 17,697 (7,871)
(Repayments) / Proceeds from long-term borrowings (6) 1,518
Borrowings of Senior Secured Notes 378,541 -
Capital lease repayments (1,705) (1,733)
Stock options exercised 3,204 987
Net Cash (Used in) / Provided By
Financing Activities 397,731 (7,099)
Effect of exchange rate changes on cash
and cash equivalents (288) 1,845
Net increase / (decrease) in cash
and cash equivalents 10,482 5,503
Cash and cash equivalents at beginning of period 10,491 6,229
Cash and cash equivalents at end of period $20,973 $11,732
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except share and per share information)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
GAAP net income /
(loss) (2,023) 5,096 8,197 12,722
Pre-acquisition financing
cost 3,443 - 3,443 - (A)
Foreign exchange impact
of escrowed cash,
Senior Secured Notes
and hedge revaluation 3,589 - 3,589 - (B)
Foreign exchange impact
of Bols acquisition 1,337 - 1,337 - (C)
Other acquisition-related
costs 203 - 203 - (D)
Comparable non-GAAP
net income 6,549 5,096 16,769 12,722
Comparable non-GAAP
income per share of
common stock, basic 0.35 0.31 0.97 0.78
Comparable non-GAAP
income per share of
common stock, diluted 0.35 0.31 0.95 0.77
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
GAAP net income /
(loss) (2,023) 5,096 8,197 12,722
Income Tax (474) 1,040 1,964 2,618
Net Interest Expense 6,219 519 7,606 1,429
Net Other Financial
Expense / (Income) 5,331 (226) 5,395 (284)
Depreciation and
Amortization 1,215 855 3,199 2,302
EBITDA 10,268 7,284 26,361 18,787
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. A description of these items are presented below:
(A) The Company closed a 325 million euros 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, the Company 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) Represents the net impact of escrowed cash, Senior Secured Notes
principal and coupon hedge revaluation for the period. As these are
non-cash adjustments related to the Polmos Bialystok and Bols
acquisitions and were not part of prior year results, the net impact
has been excluded from comparable non-GAAP net income. In addition,
in anticipation of volatility in exchange rates in Poland due to
elections that were held in late September, the Company purchased
additional hedges to protect the value of the cash obtained from the
Notes, held in escrow. All derivates other than a coupon hedge have
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. The Company incurred spot losses in exchanging these
funds. The spot loss above represents less than 1% of the cash
value of the transaction.
(D) Other miscellaneous costs directly related with the acquisitions of
Bols and Polmos Bialystok.
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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