Central European Distribution Corporation Announces Third Quarter 2010 Results; Updates Full Year 2010 Guidance

MT. LAUREL, N.J., Nov. 5, 2010 /PRNewswire-FirstCall/ -- Central European Distribution Corporation (Nasdaq: CEDC) today announced its results for the third quarter of 2010.  Net sales for the three months ended September 30, 2010 were $157.8 million as compared to $187.5 million reported for the same period in 2009.  Operating profit on a comparable basis for the third quarter 2010 was $32.5 million as compared to $43.5 million for 2009.  On a comparable basis, CEDC announced net income, excluding discontinued operations of $8.5 million, or $0.12 per fully diluted share, for the third quarter of 2010, as compared to $27.2 million, or $0.49 per fully diluted share, for the same period in 2009.  CEDC also announced net profit on a U.S. GAAP basis (as hereinafter defined), excluding discontinued operations, for the quarter was $68.9 million or $0.98 per fully diluted share, as compared to net profit of $45.4 million or $0.83 per fully diluted share, for the same period in 2009.

Operating profit on a U.S. GAAP basis for the third quarter 2010 was $29.1 million as compared to $27.0 million for 2009. The number of fully diluted shares used in computing the earnings per share was 70.6 million for 2010 and 55.5 million for 2009.  For a complete reconciliation of comparable net income to net income reported under United States Generally Accepted Accounting Principles ("U.S. GAAP") and comparable operating profit to operating profit reported under U.S. GAAP, please see the section "Unaudited Reconciliation of Non-GAAP Measures."

William Carey, President and CEO commented, "We were disappointed by the results in the 3rd quarter of 2010 which were a result of a combination of factors including external events, currency movements, commodity prices and negative sales mix that occurred in our core markets.  After seeing solid volume growth coming from the 2nd quarter of 2010, we were expecting a continuation of these positive volume trends into the 3rd quarter.  The expected positive trends from the 2nd quarter were heavily impacted by the record heat wave across Eastern Europe and fires which spread across key parts of Russia.  These factors resulted in an estimated reduction in the vodka market in volume terms during this period by an estimated 6%-8% in Poland and 12%-15% in Russia as compared to the prior year.  We were able to see strong volume and market trends in September; however, these trends were not sufficient to cover the shortfall for the first two months of the quarter."

William Carey, President and CEO continued "We have spent a lot of management time on restructuring, integration and cost reductions over the past fifteen months which have all contributed to the lowering of our operating overheads.  The key objective for management on all levels is top line growth from our existing core portfolio, as well as new product development and new import agency business.  This will be our primary focus over the next 24 months; kicking off next week with our biggest ever new product launch in Poland.  In Russia, we have a pipeline of new products that will begin to enter the market early next year, not to mention our successful brandy launch last month. Our strategic aim is to grow profitable market share in Poland, Russia and Hungary through all segments."

William Carey, President and CEO continued "Over the last six months, we have seen continued improvement in consumer demand and sentiment in Russia as well as a positive outlook from a macro view in Russia.  The imported market for wines and spirits in Russia is benefitting the most from these trends, with our year to date sales in Whitehall up over 15% year on year.  This trend has also been confirmed by many multinational spirit companies who have reported strong brown spirit sales coming out of the Russian market.  We believe these trends of strong imported wine and spirit sales in Russia will continue dynamically for the next few years.  As stated last quarter, we are continuing the negotiation for an early buy out and controlling stake in the Whitehall Company which we anticipate could close in the near future."  

William Carey, President and CEO continued "As we are now in our biggest quarter of the year in terms of revenue and profitability we are forecasting high single digit volume growth and double digit value growth (taking into account recent price increases) for this quarter from our overall portfolio.  We have seen a stabilization of commodity prices since September, and we believe we will continue to benefit from a much lower cost base this quarter and beyond.  Although the 3rd quarter was a huge disappointment for us, our management team is extremely focused on delivering on these 4th quarter objectives, and we believe the worst is behind us."

The Company also announced it has updated its full year 2010 net sales guidance from $764 - $914 million to $730 -$780 million and its full year comparable fully-diluted earnings per share guidance from $2.10 -$2.20 to $1.50 -$1.70. This revised guidance includes exchange rates assumptions based upon recent market rates.  The number of fully diluted shares used in computing the full year 2010 guidance is approximately 70.5 million.

CEDC has reported net income, fully diluted net income per share and operating profit in accordance with GAAP and on a non-GAAP basis, referred to in this release as comparable net income and comparable operating profit.  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 producer 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, 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, without limitation, statements regarding expected sales, operating profit and earnings guidance, expected gross margins and operating margins, reduced leverage, expectations of increased consumer demand for our products, integration of our acquired companies, and expected results of, and synergies relating to, our Russian businesses. 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, 2009, 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 Zaluska

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)




September 30,


December 31,



2010


2009





(as adjusted)

ASSETS





Current Assets





Cash and cash equivalents


$232,857


$126,439

Restricted cash


0


481,419

Accounts receivable, net of allowance for doubtful accounts of $38,373 and $37,630 respectively


312,499


475,126

Inventories


91,126


92,216

Prepaid expenses and other current assets


33,402


33,302

Loans granted


0


1,608

Loans granted to affiliates


0


7,635

Deferred income taxes


26,781


82,609

Current assets of discontinued operations


0


267,561

Total Current Assets


696,665


1,567,915






Intangible assets, net


760,370


773,222

Goodwill, net


1,450,122


1,484,072

Property, plant and equipment, net


202,569


215,916

Deferred income taxes


93,887


27,123

Equity method investment in affiliates


230,164


244,504

Non-current assets of discontinued operations


0


101,778

Total Non-Current Assets


2,737,112


2,846,615






Total Assets


$3,433,777


$4,414,530






LIABILITIES AND STOCKHOLDERS' EQUITY





Current Liabilities





Trade accounts payable


$64,187


$113,006

Bank loans and overdraft facilities


98,522


81,053

Income taxes payable


2,284


3,827

Taxes other than income taxes


110,897


208,784

Other accrued liabilities


111,207


91,435

Short-term obligations under Senior Notes


0


358,943

Current portions of obligations under capital leases


471


481

Deferred consideration


4,853


160,880

Current liabilities of discontinued operations


0


194,761

Total Current Liabilities


392,421


1,213,170






Long-term debt, less current maturities


19,360


106,043

Long-term obligations under capital leases


824


480

Long-term obligations under Senior Notes


1,170,949


1,205,467

Long-term accruals


2,598


3,214

Deferred income taxes


193,824


198,174

Non-current liabilities of discontinued operations


0


2,820

Total Long Term Liabilities


1,387,555


1,516,198






Stockholders' Equity





Common Stock ($0.01 par value, 120,000,000 shares authorized, 70,684,670 and 69,411,845 shares issued at September 30, 2010 and December 31, 2009, respectively)


707


694

Additional paid-in-capital


1,341,567


1,296,391

Retained earnings


263,453


264,917

Accumulated other comprehensive income / (loss) of continuing operations


48,224


82,994

Accumulated other comprehensive income / (loss) of discontinued operations


0


40,316

Less Treasury Stock at cost (246,037 shares at September 30, 2010 and December 31, 2009, respectively)  


(150)


(150)

Total CEDC Stockholders' Equity


1,653,801


1,685,162






Noncontrolling interests in subsidiaries


0


0

Total Equity


1,653,801


1,685,162






Total Liabilities and Stockholders' Equity


$3,433,777


$4,414,530









CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

Amounts in columns expressed in thousands



Three months ended


Nine months ended










September 30, 2010


September 30, 2009


September 30, 2010


September 30, 2009




(as adjusted)




(as adjusted)








Sales

$347,492


$415,182


$1,058,260


$974,802

Excise taxes

(189,732)


(227,639)


(575,097)


(540,598)

Net Sales

157,760


187,543


483,163


434,204

Cost of goods sold

80,448


92,029


243,241


214,455









Gross Profit

77,312


95,514


239,922


219,749









Operating expenses

48,239


53,496


144,369


128,023

Contingent consideration true-up

0


15,000


0


15,000

Gain on remeasurement of previously held equity interests

0


0


0


(225,605)

Impairment charge

0


0


0


20,309









Operating Income

29,073


27,018


95,553


282,022









Non operating income / (expense), net








Interest (expense), net

(25,749)


(15,895)


(77,848)


(46,556)

Other financial income / (expense), net

81,773


57,831


4,987


29,021

Amortization of deferred charges

0


(16,192)


0


(27,423)

Other non operating income / (expense), net

(914)


(2,541)


(12,266)


(10,798)









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

84,183


50,221


10,426


226,266

Income tax benefit / (expense)

(17,023)


(10,236)


(2,275)


(44,824)

Equity in net earnings / (losses) of affiliates

1,719


5,433


2,163


(13,419)

Net income /(loss) from continuing operations

$68,879


$45,418


$10,314


$168,023









Discontinued operations








Income / (loss) from operations of distribution business (including impairment charge of $28.2 million in 9 months ended September 30, 2010)

30,870


1,979


(11,815)


8,471

Income tax (expense)

147


(204)


37


(1,098)

Income / (loss) on discontinued operations

31,017


1,775


(11,778)


7,373









Net income / (loss)

99,896


47,193


(1,464)


175,396









Less: Net income attributable to noncontrolling interests in subsidiaries

0


47


0


2,185









Net income / (loss) attributable to CEDC

$99,896


$47,146


($1,464)


$173,211

















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

$0.98


$0.83


$0.15


$3.31

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

$0.44


$0.03


($0.17)


$0.14

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

$1.42


$0.86


($0.02)


$3.45









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

$0.98


$0.83


$0.15


$3.30

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

$0.43


$0.02


($0.17)


$0.14

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

$1.41


$0.85


($0.02)


$3.44












CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW

Amounts in columns expressed in thousands




Nine months ended September 30,



2010


2009





(as adjusted)






Cash flows from operating activities of continuing operations





Net income / (loss)


($1,464)


$175,396

Adjustments to reconcile net income / (loss) to net cash provided by / (used in) operating activities:





Net income / (loss) from discontinued operations


11,778


7,373

Depreciation and amortization


12,717


8,458

Deferred income taxes


(12,103)


(34,727)

Unrealized foreign exchange (gains) / losses


(2,090)


(28,536)

Cost of debt extinguishment


14,114


0

Stock options fair value expense


2,433


2,862

Dividends received


17,983


3,528

Hedge fair value revaluation


0


9,160

Equity income in affiliates


(2,163)


13,419

Gain on fair value remeasurement of previously held equity interest, net of impairment


0


(153,778)

Amortization of deferred charges


0


27,423

Other non cash items


11,532


3,429

Changes in operating assets and liabilities:





Accounts receivable


155,430


136,759

Inventories


(3,179)


(919)

Prepayments and other current assets


(4,253)


8,231

Trade accounts payable


(44,636)


(56,805)

Other accrued liabilities and payables


(81,407)


(22,332)

Net cash provided by / (used in) operating activities from continuing operations


74,692


98,941






Cash flows from investing activities of continuing operations





Investment in fixed assets


(3,226)


(8,282)

Proceeds from the disposal of fixed assets


0


3,815

Changes in restricted cash


481,419


0

Investment in trademarks


(6,000)


0

Disposal of subsidiaries


124,160


0

Acquisitions of subsidiaries, net of cash acquired


(135,964)


(40,764)

Net cash provided by investing activities from continuing operations


460,389


(45,231)






Cash flows from financing activities of continuing operations





Borrowings on bank loans and overdraft facility


18,568


5,289

Payment of bank loans, overdraft facility and other borrowings


(76,265)


(61,930)

Payment of long-term borrowings


0


(601)

Payment of Senior Secured Notes


(367,954)


0

Repayment of obligation to former shareholders


0


(28,814)

Hedge closure


0


(1,940)

Repayment of short term capital leases


0


(913)

Proceeds from short term capital leases


324


0

Issuance of shares in public placement


0


179,579

Transactions with equity holders


7,500


(7,876)

Options exercised


2,336


817

Net cash provided by / (used in) financing activities from continuing operations


(415,491)


83,611






Cash flows from discontinued operations





Net cash provided by / (used in) operating activities of discontinued operations


2,806


10,237

Net cash provided by / (used in) investing activities of discontinued operations


(330)


(647)

Net cash provided by / (used in) financing activities of discontinued operations


100


(7,329)

Net cash used in discontinued operations


2,576


2,261






Adjustment to reconcile the change in cash balances of discontinued operations


(2,576)


(2,261)

Currency effect on brought forward cash balances


(13,172)


26,819

Net Increase / (Decrease) in Cash


106,418


164,140

Cash and cash equivalents at beginning of period


126,439


107,601

Cash and cash equivalents at end of period


$232,857


$271,741






Supplemental Schedule of Non-cash Investing Activities





Common stock issued in connection with investment in subsidiaries


$41,344


$51,196






Supplemental disclosures of cash flow information





Interest paid


$82,406


$48,048

Income tax paid


$25,441


$5,244









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

E

F

Comparable



Q3-10

FX

APB 14

Acquisition related costs and FV adjustments

RAG Adjustments

Restructuring Costs

Other Adjustments

Q3-10











Sales


$347,492

$0

$0

$0

$0

$0

$0

$347,492

Excise taxes


(189,732)







(189,732)

Net Sales


157,760

0

0

0

0

0

0

157,760

Cost of goods sold


80,448







80,448











Gross Profit


77,312

0

0

0

0

0

0

77,312



49.01%







49.01%

Operating expenses


48,239





(3,400)


44,839

Contingent consideration true-up


0







0

Gain on remeasurement of previously held equity interest


0







0

Impairment charge


0







0











Operating Income


29,073

0

0

0

0

3,400

0

32,473



18.43%







20.58%

Non operating income / (expense), net










Interest income / (expense), net


(25,749)


1,030





(24,719)

Other financial income / (expense), net


81,773

(81,773)






0

Amortization of deferred charges


0







0

Other non operating income / (expense), net


(914)







(914)











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


84,183

(81,773)

1,030

0

0

3,400

0

6,840

Income tax benefit / (expense)


(17,023)

16,109

(360)

0

0

(646)

0

(1,920)

Equity in net earnings of affiliates


1,719

1,832






3,551

Net income / (loss) from continuing operations


$68,879

($63,832)

$670

$0

$0

$2,754

$0

$8,471











Discontinued operations










Income from operations of distribution business (including impairment charge of $28.4 million)


30,870







30,870

Income tax (expense)


147







147

Loss on discontinued operations


$31,017







$31,017











Net income /(loss)


$99,896

($63,832)

$670

$0

$0

$2,754

$0

$39,488











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


$0.98







$0.12

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


$0.44







$0.44











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


$0.98







$0.12

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


$0.43







$0.44







GAAP

A

B

C

D

E

F

Comparable



Q3-09

FX

APB 14

Acquisition related costs and FV adjustments

RAG Adjustments

Restructuring Costs

Other Adjustments

Q3-09










Sales


$415,182

$0

$0

$0

$0

$0

$0

$415,182

Excise taxes


(227,639)

0

0

0

0

0

0

(227,639)

Net Sales


187,543

0

0

0

0

0

0

187,543

Cost of goods sold


92,029

0

0

0

0

0

0

92,029











Gross Profit


95,514

0

0

0

0

0

0

95,514



50.93%







50.93%

Operating expenses


53,496





(1,433)


52,063

Contingent consideration true-up


15,000



(15,000)




0

Gain on remeasurement of previously held equity interest


0







0

Impairment charge


0







0











Operating Income


27,018

0

0

15,000

0

1,433

0

43,451



14.41%







23.17%

Non operating income / (expense), net










Interest income / (expense), net


(15,895)


1,008





(14,887)

Other financial income / (expense), net


57,831

(57,831)






0

Amortization of deferred charges


(16,192)




16,192



0

Other non operating income, net


(2,541)






459

(2,082)











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


50,221

(57,831)

1,008

15,000

16,192

1,433

459

26,482

Income tax benefit / (expense)


(10,236)

12,029

(187)

(2,850)

(3,076)

(301)

(77)

(4,698)

Equity in net earnings of affiliates


5,433







5,433

Net income / (loss) from continuing operations


$45,418

($45,802)

$821

$12,150

$13,116

$1,132

$382

$27,217











Discontinued operations










Income from operations of distribution business (including impairment charge of $28.4 million)


1,979

($735)






1,244

Income tax (expense)


(204)







(204)

Income / (loss) on discontinued operations


$1,775

($735)

$0

$0

$0

$0

$0

$1,040











Net income /(loss)


$47,193

($46,537)

$821

$12,150

$13,116

$1,132

$382

$28,257











Less: Net income attributable to noncontrolling interests in subsidiaries


47




1,038



1,085











Net income /(loss) attributable to CEDC


$47,146

($46,537)

$821

$12,150

$12,078

$1,132

$382

$27,172











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


$0.83







$0.49

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


$0.03







$0.02











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


$0.83







$0.49

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


$0.02







$0.02




  1. 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.  
  2. 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.
  3. For 2010 this represents the legal and professional service costs related to the potential acquisition of Nemiroff, which was ultimately not pursued by the Company.  For 2009 as a result of the change in accounting treatment of the investment in the Russian Alcohol Group during the second quarter of 2009 from equity accounting to consolidation, CEDC was required to revalue the equity investment to market value at the time of conversion.  This amount was then netted with an impairment charge for RAG goodwill.
  4. In 2009 the Company has recorded deferred payments to Lion in connection with the RAG acquisition on the balance sheet at fair value and amortizes this discount as a non cash amortization expense over the payment period and records its investment in RAG as if it owned Lions shares.  This adjustment on the 2009 results eliminates the non-cash amortization and increases the minority interest for the net profit attributable to the shares held by Lion Capital to reflect CEDC results as if it owned 52% of RAG without amortization of the deferred payments to Lion.
  5. Represents one-off restructuring costs associated with the integration of Parliament and the Russian Alcohol Group.
  6. For 2010, this adjustment eliminates the dividend income receive from its Polish Wholesale business which is accounted for as a discontinued operation and was fully disposed of on August 2, 2010.  For 2009 the amount represents one off tax charges related to a tax inspection for the period prior to the investment in 2008.




GAAP

A

B

C

D

E

F

G

Comparable



Q3-10 PTD

FX

APB 14

Acquisition related costs and FV adjustments

RAG Adjustments

Restructuring Costs

Cost associated with debt refinancing

Other Adjustments

Q3-10 PTD












Sales


$1,058,260

0

0

0

0

0

0

0

$1,058,260

Excise taxes


(575,097)

0

0

0

0

0

0

0

(575,097)

Net Sales


483,163

0

0

0

0

0

0

0

483,163

Cost of goods sold


243,241

0

0

0

0

0

0

0

243,241












Gross Profit


239,922

0

0

0

0

0

0

0

239,922











49.66%

Operating expenses


144,369

0

0

(500)

0

(7,759)

0

0

136,110

Contingent consideration true-up


0

0

0

0

0

0

0

0

0

Gain on remeasurement of previously held equity interest


0

0

0

0

0

0

0

0

0

Impairment charge


0

0

0

0

0

0

0

0

0












Operating Income


95,553

0

0

500

0

7,759

0

0

103,812











21.49%

Non operating income / (expense), net











Interest (expense), net


(77,848)

0

3,056

0

0

0

0

0

(74,792)

Other financial (expense), net


4,987

(4,085)

0

0

0

0

0

0

902

Amortization of deferred charges


0

0

0

0

0

0

0

0

0

Other non operating income / (expense), net


(12,266)

0

0

0

0

825

17,990

(7,642)

(1,093)












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


10,426

(4,085)

3,056

500

0

8,584

17,990

(7,642)

28,829

Income tax expense


(2,275)

771

(1,070)

(100)

0

(1,644)

(3,418)

1,452

(6,284)

Equity in net earnings of affiliates


2,163

1,832

0

0

0

0

0

0

3,995

Net income / (loss) from continuing operations


10,314

(1,482)

1,986

400

0

6,940

14,572

(6,190)

26,540












Discontinued operations











Income / (loss) from operations of distribution business (including impairment charge of $28.2 million in 9 months ended September 30, 2010)


(11,815)

0

0

0

0

0

0

0

(11,815)

Income tax (expense)


37

0

0

0

0

0

0

0

37

Income / (loss) on discontinued operations


(11,778)








(11,778)












Net income /(loss)


($1,464)

($1,482)

$1,986

$400

$0

$6,940

$14,572

($6,190)

$14,762












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


$0.15








$0.38

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


($0.17)








($0.17)












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


$0.15








$0.38

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


($0.17)








($0.17)







GAAP

A

B

C

D

E

F

G

Comparable



Q3-09 PTD

FX

APB 14

Acquisition related costs and FV adjustments

RAG Adjustments

Restructuring Costs

Cost associated with debt refinancing

Other Adjustments

Q3-09 PTD












Sales


$974,802

0

0

0

0

0

0

0

$974,802

Excise taxes


(540,598)

0

0

0

0

0

0

0

(540,598)

Net Sales


434,204

0

0

0

0

0

0

0

434,204

Cost of goods sold


214,455

0

0

0

0

0

0

0

214,455












Gross Profit


219,749

0

0

0

0

0

0

0

219,749



45.48%








45.48%

Operating expenses


128,023

0

0

1,040

0

(1,433)

0

0

127,630

Contingent consideration true-up


15,000

0

0

(15,000)

0

0

0

0

0

Gain on remeasurement of previously held equity interest


(225,605)

0

0

225,605

0

0

0

0

0

Impairment charge


20,309

0

0

(20,309)

0

0

0

0

0












Operating Income


282,022

0

0

(191,336)

0

1,433

0

0

92,119



58.37%








19.07%

Non operating income / (expense), net











Interest (expense), net


(46,556)

0

2,956

0

0

0

0

0

(43,600)

Other financial (expense), net


29,021

(29,021)

0

0

0

0

0

0

0

Amortization of deferred charges


(27,423)

0

0

0

27,423

0

0

0

0

Other non operating income / (expense), net


(10,798)

0

0

0

0

8,733

0

1,062

(1,003)












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


226,266

(29,021)

2,956

(191,336)

27,423

10,166

0

1,062

47,516

Income tax expense


(44,824)

2,435

(869)

40,702

(5,210)

(2,004)

0

(198)

(9,968)

Equity in net earnings of affiliates


(13,419)

23,709

0

0

0

0

0

0

10,290

Net income / (loss) from continuing operations attributable to CEDC


$168,023

($2,877)

$2,087

($150,634)

$22,213

$8,162

$0

$864

$47,838












Discontinued operations











Income / (loss) from operations of distribution business (including impairment charge of $28.2 million in 9 months ended September 30, 2010)


8,471

(735)

0

0

0

0

0

0

$7,736

Income tax (expense)


(1,098)

0

0

0

0

0

0

0

(1,098)

Income / (loss) on discontinued operations


$7,373

($735)

$0

$0

$0

$0

$0

$0

$6,638












Net income /(loss)


$175,396

($3,612)

$2,087

($150,634)

$22,213

$8,162

$0

$864

$54,476












Less: Net income attributable to noncontrolling interests in subsidiaries


2,185

(12,022)

0

0

8,727

0

0

0

(1,110)












Net income /(loss) attributable to CEDC


$173,211

$8,410

$2,087

($150,634)

$13,486

$8,162

$0

$864

$55,586












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


$3.31








$0.94

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


$0.14








$0.13












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


$3.30








$0.94

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


$0.14








$0.13




  1. 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.  The amount has been adjusted to reflect only the CEDC portion of foreign exchange gains or losses of the Russian Alcohol Group and does not include the portion attributable to the minority shareholders.
  2. 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.
  3. For 2010 this represents the legal and professional service costs related to the potential acquisition of Nemiroff, which was ultimately not pursued by the Company.  For 2009 as a result of the change in accounting treatment of the investment in the Russian Alcohol Group during the second quarter of 2009 from equity accounting to consolidation, CEDC was required to revalue the equity investment to market value at the time of conversion.  This amount was then netted with an impairment charge for RAG goodwill.
  4. In 2009 the Company has recorded deferred payments to Lion in connection with the RAG acquisition on the balance sheet at fair value and amortizes this discount as a non cash amortization expense over the payment period and records its investment in RAG as if it owned Lions shares.  This adjustment on the 2009 results eliminates the non-cash amortization and increases the minority interest for the net profit attributable to the shares held by Lion Capital to reflect CEDC results as if it owned 52% of RAG without amortization of the deferred payments to Lion
  5. For 2010 this represents one-off restructuring costs associated with the integration of Parliament and the Russian Alcohol Group.  For 2009, represents other miscellaneous costs, directly related to acquisition costs related of  the Parliament acquisition in 2008 and RAG in 2009.
  6. Represents the net after tax impact associated with the early retirement of CEDC's outstanding Senior Secured Notes due 2012, including a 4% one-time redemption premium payment to the Noteholders and write-off of prepaid financing costs.
  7. For 2010, this adjustment eliminates the dividend income receive from the Polish Wholesale business which is accounted for as a discontinued operation and was fully disposed of on August 2, 2010.  For 2009 the amount represents one off tax charges related to a tax inspection for the period prior to the investment in 2008.

FULL YEAR 2010 COMPARABLE EPS RECONCILIATION

Full Year Guidance, 12 Months Ending December 31,


2010

Range for GAAP Fully Diluted Earnings per Share


$1.26



$1.46

A. Foreign exchange impact related to USD and EUR



denominated  financing


($0.02)

B. Impact of adoption of ABP14


$0.03

C. Acquisition Costs


$0.01

D. Integration Costs


$0.10

E. Cost associated with debt refinancing


$0.21

F. Dividend from discontinued operation


($0.09)

Range for Comparable non-GAAP Fully Diluted



Earnings per Share


$1.50



$1.70



  1. Represents the net after tax impact of the foreign currency revaluation related to our USD and EUR financing as a majority of these borrowings have been lent down to entities that have the Polish Zloty or Russian Ruble as their 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.
  2. 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.
  3. Represents the legal and professional service costs related to the potential acquisition of Nemiroff, which was ultimately not pursued by the Company
  4. For 2010 this represents one-off restructuring costs associated with the integration of Parliament and the Russian Alcohol Group.  
  5. Represents the net after tax impact associated with the early retirement of CEDC's outstanding Senior Secured Notes due 2012, including a 4% one-time redemption premium payment to the Noteholders and write-off of prepaid financing costs.
  6. Elimination of the dividend income received from the Polish Wholesale business which is accounted for as a discontinued operation and was fully disposed of on August 2, 2010.  

SOURCE Central European Distribution Corporation

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