From the Wires
Central European Distribution Corporation Announces Third Quarter 2008 Results; Net Sales up 51% and Operating Income up 86%
Nov. 5, 2008 05:01 PM
BALA CYNWYD, Pa., Nov. 5 /PRNewswire-FirstCall/ -- Central European
Distribution Corporation (Nasdaq: CEDC) today announced its results for the
third quarter of 2008. Net sales for the three months ended September 30,
2008 increased by 51% to $452.4 million from the $299.6 million reported for
the same period in 2007. Operating income increased by 86% to $52.8 million
from $28.4 million for the same period in 2007.
On a comparable basis, CEDC announced net income of $41.7 million, or
$0.89 per fully diluted share, for the third quarter of 2008, as compared to
$18.3 million, or $0.45 per fully diluted share, for the same period in 2007.
Net income, on a U.S. GAAP basis (as hereinafter defined) for the third
quarter was $0.66 million or $0.01 per fully diluted share, as compared to a
net income of $17.0 million or $0.42 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 our 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". The weighted average
number of shares used for calculating diluted earnings per share for the third
quarter of 2008 was 47.0 million.
Some of the Company's key financial highlights for the third quarter of
2008 as compared to the third quarter of 2007 include the following:
-- Net Sales up 51%
-- Gross margin up to 25.6% from 20.6%
-- Operating income up 86%
-- Comparable net income up 128%
William Carey, President and CEO commented, "We are seeing continued
margin accretion in the business driven by the strong performance of our core
vodka brands and exclusive imports. We continued to see strong organic growth
in the third quarter in Russia of over 25% as well as approximately 7% in
Poland. As we move into our most profitable quarter, the fourth quarter, we
look to see gross margins continue to expand to 28% - 30% in the quarter and
operating profit to grow by 450-550 basis points as compared to the third
quarter 2008."
Mr. Carey continued, "Due to strong organic growth in Russia, we are
seeing our leading market share, based on value, increase, from approximately
12% in the beginning of 2008 to an estimated 14% at present. We are seeing
faster consolidation whereby stronger companies with access to short term
liquidity in addition to a well balanced brand portfolio should be very well
positioned for acceleration of growth opportunities leading into 2009. As we
move into 2009, we believe we have a solid business model and balance sheet to
support our growth opportunities within our core markets."
Due to the expansion of our gross and operating margins as highlighted
above, the Company is revising upwards its full year 2008 comparable fully
diluted earnings per share guidance from $2.75-$2.95 to $2.85-$3.05 and
reconfirming full year 2008 net sales guidance of $1.65-$1.80 billion. The
Company also reconfirms its full year 2009 net sales guidance of $1.93 - $2.03
billion and its full year comparable fully diluted earnings per share guidance
of $3.75-$4.00.
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
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.
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 including, without
limitation, statements regarding our anticipated net sales, earnings per share
and comparable earnings per share. 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 forward-looking
statements. Statements as to anticipated sales, earnings per share and
comparable earnings per share are based on management's current assumptions as
to many factors, including exchange rates. Exchange rates are inherently
unpredictable and changes therein may have a material effect on our financial
results. 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 the 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, and in other documents
filed by CEDC with the Securities and Exchange Commission, including our
Current Report on Form 8-K, which included certain updates to our risk factor
disclosure.
Contact:
Jim Archbold,
Investor Relations Officer
Central European Distribution Corporation
610-660-7817
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
2008 2007
ASSETS
Current Assets
Cash and cash equivalents $89,740 $87,867
Accounts receivable, net of allowance for
doubtful accounts of $28,363 and $29,277
respectively 313,033 316,277
Inventories 195,853 141,272
Prepaid expenses and other current assets 34,847 16,536
Deferred income taxes 10,085 5,141
Total Current Assets 643,558 567,093
Intangible assets, net 700,726 545,697
Goodwill, net 909,596 577,282
Property, plant and equipment, net 115,623 79,979
Deferred income taxes 10,639 11,407
Equity method investment in affiliates 214,960 -
Convertible Notes 103,500 -
Other assets - 710
2,055,044 1,215,075
Total Assets $2,698,602 $1,782,168
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $182,621 $172,340
Bank loans and overdraft facilities 218,829 42,785
Income taxes payable 1,498 5,408
Taxes other than income taxes 85,575 101,929
Other accrued liabilities 140,693 71,959
Current portions of obligations under
capital leases 2,370 1,759
Total Current Liabilities 631,586 396,180
Long-term debt, less current maturities 70,177 122,952
Long-term obligations under capital leases 3,548 2,708
Long-term obligations under Senior Notes 627,136 344,298
Other long-term accrued liabilities 13,418 -
Deferred income taxes 136,234 100,113
Total Long Term Liabilities 850,513 570,071
Minority interests 21,457 481
Stockholders' Equity
Common Stock ($0.01 par value, 80,000,000
shares authorized, 46,458,850 and
40,566,096 shares issued at September 30,
2008 and December 31, 2007, respectively) 465 406
Additional paid-in-capital 753,964 429,554
Retained earnings 271,186 205,186
Accumulated other comprehensive income 169,581 180,440
Less Treasury Stock at cost (246,037 shares
at September 30, 2008 and December 31, 2007) (150) (150)
Total Stockholders' Equity 1,195,046 815,436
Total Liabilities and Stockholders' Equity $2,698,602 $1,782,168
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Amount in columns expressed in thousands, except share and per share
information)
PROFIT AND LOSS Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2008 2007 2008 2007
Sales $586,038 $368,910 $1,536,964 $992,056
Excise taxes (133,597) (69,311) (349,601) (195,607)
Net Sales 452,441 299,599 1,187,363 796,449
Cost of goods sold 336,609 237,892 901,577 632,870
Gross Profit 115,832 61,707 285,786 163,579
Operating expenses 62,992 33,297 164,635 91,104
Operating Income 52,840 28,410 121,151 72,475
Non operating income /
(expense), net
Interest (expense),
net (14,417) (9,337) (39,242) (26,291)
Other financial
income / (expense),
net (34,730) (1,110) 6,373 (6,672)
Other non operating
income / (expense),
net (423) 1,006 (565) (1,008)
Income before taxes 3,270 18,969 87,717 38,504
Income tax expense 678 1,943 17,944 5,628
Minority interests 3,018 6 5,762 1,061
Equity in net earnings
of affiliates 1,087 - 1,989 -
Net income $661 $17,020 $66,000 $31,815
Net income per share of
common stock, basic $0.01 $0.42 $1.53 $0.80
Net income per share of
common stock, diluted $0.01 $0.42 $1.50 $0.79
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
(Amount in columns expressed in thousands)
CASH FLOW Nine months ended
September 30,
2008 2007
Operating Activities
Net income $66,000 $31,815
Adjustments to reconcile net income to net cash
provided by / (used in) operating activities:
Depreciation and amortization 11,586 7,292
Deferred income taxes (6,051) (9,355)
Minority interests 5,762 1,061
Unrealized foreign exchange (gains) / losses (1,212) (4,414)
Cost of debt extinguishment 1,156 11,869
Stock options expense 2,798 1,424
Equity income in affiliates (1,989) -
Other non cash items (1,290) 1,290
Changes in operating assets and liabilities:
Accounts receivable 45,352 46,427
Inventories (24,784) (6,213)
Prepayments and other current assets 10,922 6,297
Trade accounts payable (20,113) (35,667)
Other accrued liabilities and payables (41,473) (21,508)
Net Cash provided by Operating Activities 46,664 30,318
Investing Activities
Investment in fixed assets (15,717) (22,342)
Proceeds from the disposal of fixed assets 7,628 2,647
Purchase of financial assets (103,500) -
Refundable purchase price related to Botapol -
acquisition 5,000
Acquisitions of subsidiaries, net of cash acquired (547,575) (141,000)
Net Cash used in Investing Activities (659,164) (155,695)
Financing Activities
Borrowings on bank loans and overdraft facility 95,219 132,524
Borrowings on long-term bank loans 43,192 -
Payment of bank loans and overdraft facility (31,935) (25,207)
Payment of long-term borrowings - (7)
Payment of Senior Secured Notes (20,197) (95,440)
Movements in capital leases payable 1,408 329
Issuance of shares in public placement 233,845 42,355
Net Borrowings on Convertible Senior Notes 304,403 -
Options exercised 1,293 1,117
Net Cash provided by Financing Activities 627,228 55,671
Currency effect on brought forward cash balances (12,855) 7,706
Net Increase / (Decrease) in Cash 1,873 (62,000)
Cash and cash equivalents at beginning of period 87,867 159,362
Cash and cash equivalents at end of period $89,740 $97,362
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 Nine Months Ended
Sep 30, Sep 30,
2008 2007 2008 2007
GAAP net income/(loss) $661 $17,020 $66,000 $31,815
Foreign exchange impact
related to USD and EUR
denominated acquisition
financing 39,844 896 7,478 (4,103)(A)
Foreign exchange impact
related to USD denominated
financing of Russian
Alcohol 10,790 0 10,790 0 (B)
Foreign exchange impact
related to the USD
denominated Convertible
Notes issued by the
Russian Alcohol Group (10,535) 0 (10,535) 0 (C)
Other acquisition related
costs 0 0 659 1,045 (D)
Cost associated with early
retirement of debt 0 0 548 9,609 (E)
Impact of expensing stock
options 907 388 2,266 1,153 (F)
Other non recurring costs 0 0 1,461 307 (G)
Comparable non-GAAP net
income $41,667 $18,304 $78,667 $39,826
Comparable net income
per share of common
stock, basic $0.90 $0.46 $1.82 $1.00
Comparable net income per
share of common stock,
diluted $0.89 $0.45 $1.79 $0.99
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 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 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 the functional currency. The impact
of foreign exchange revaluation will 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. 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 $1.461
million represents the net loss incurred by the discontinued operation for the
3 months ended June 30, 2008. For 2007, the amount represents one time
charges for an early retirement program.
Full Year Guidance, 12 Months Ending December 31, 2008 2009
Range for GAAP Fully Diluted Earnings per Share $2.57 $3.75
$2.77 $4.00
A. Foreign exchange impact related to USD and
EUR denominated financing 0.17 0.00
B. Foreign exchange impact related to USD
denominated financing of Russian Alcohol 0.25 0.00
C. Foreign exchange impact related to the USD
denominated Convertible Notes issued by the
Russian Alcohol Group (0.24) 0.00
D. Other acquisition related costs 0.01 0.00
E. Cost associated with early retirement of debt 0.01 0.00
F. Impact of expensing stock options 0.05 0.00
G. Other non-recurring items 0.03 0.00
Range for Comparable non-GAAP Fully Diluted
Earnings per Share $2.85 $3.75
$3.05 $4.00
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. 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. 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 $1.461
million represents the net loss incurred by the discontinued operation for the
3 months ended June 30, 2008. For 2007, the amount represents one time
charges for an early retirement program.
SOURCE Central European Distribution Corporation
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