Exhibit 99.2
Przedsiebiorstwo “POLMOS” Białystok
Spółka Akcyjna
Index to financial statements: | ||
Balance Sheets at June 30, 2005 (unaudited) and December 31, 2004 | F-1 | |
Statements of Income (unaudited) for three and six months ended June 30, 2005 and June 30, 2004 | F-2 | |
Statements of Changes in Stockholders’ Equity (unaudited) for six months ended June 30, 2005 | F-3 | |
Statements of Cash Flows (unaudited) for six months ended June 30, 2005 and June 30, 2004 | F-4 | |
Notes to Financial Statements | F-5 |
Przedsiebiorstwo “POLMOS” Białystok
Spółka Akcyjna
BALANCE SHEET
Amounts in columns expressed in thousands of U.S. dollars
Note | June 30, 2005 | December 31, 2004 | ||||||||
ASSETS | ||||||||||
CURRENT ASSETS | ||||||||||
Cash & cash equivalents | $ | 12,669 | $ | 36,480 | ||||||
Restricted cash | 1,204 | 1,735 | ||||||||
Short-term investments | 3 | 31,042 | 52,155 | |||||||
Securities subject to repurchase agreements | 3 | 50,996 | 12,571 | |||||||
Trade accounts receivable, net | 20,697 | 28,741 | ||||||||
Inventories | 4,727 | 4,238 | ||||||||
Prepaid expenses and other receivables | 3,167 | 3,092 | ||||||||
Deferred income taxes | 2,502 | 1,721 | ||||||||
TOTAL CURRENT ASSETS | 127,004 | 140,733 | ||||||||
Intangible assets, net | 119 | 146 | ||||||||
Tangible fixed assets, net | 9,419 | 10,578 | ||||||||
Deferred income taxes | 747 | 708 | ||||||||
Long-term investments | 19 | 21 | ||||||||
Other assets | 174 | 212 | ||||||||
TOTAL ASSETS | $ | 137,482 | $ | 152,398 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||
CURRENT LIABILITIES | ||||||||||
Trade accounts payable | $ | 4,097 | $ | 5,143 | ||||||
Taxes payable | 30,111 | 42,350 | ||||||||
Liabilities to shareholders | 5 | 62,834 | 70,308 | |||||||
Other accrued liabilities | 1,631 | 2,321 | ||||||||
TOTAL CURRENT LIABILITIES | 98,673 | 120,122 | ||||||||
Employee benefits | 3,929 | 3,727 | ||||||||
TOTAL NONCURRENT LIABILITIES | 3,929 | 3,727 | ||||||||
STOCKHOLDERS’ EQUITY | ||||||||||
Common stock (11,900,000 shares authorized and outstanding , PLN 10 par value) | 26,288 | 26,288 | ||||||||
Retained earnings | (8,820 | ) | (18,212 | ) | ||||||
Accumulated other comprehensive income | 17,412 | 20,473 | ||||||||
STOCKHOLDERS’ EQUITY | 34,880 | 28,549 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 137,482 | $ | 152,398 | ||||||
See accompanying notes
F-1
Przedsiebiorstwo “POLMOS” Białystok
Spółka Akcyjna
STATEMENT OF INCOME
Amounts in columns expressed in thousands of U.S. dollars
Three months ended | Six months ended | |||||||||||||||
June 30, 2005 | June 30, 2004 | June 30, 2005 | June 30, 2004 | |||||||||||||
Sales | $ | 83,543 | $ | 75,354 | $ | 165,604 | $ | 138,054 | ||||||||
Less –Excise taxes | (62,610 | ) | (55,917 | ) | (124,547 | ) | (102,175 | ) | ||||||||
Net Sales | 20,933 | 19,437 | 41,057 | 35,879 | ||||||||||||
Cost of goods sold | 12,449 | 12,275 | 25,033 | 22,499 | ||||||||||||
Gross profit | 8,484 | 7,162 | 16,024 | 13,380 | ||||||||||||
Selling, general and administrative expenses | 3,515 | 2,295 | 6,392 | 4,334 | ||||||||||||
Provision for doubtful accounts and notes | (596 | ) | 142 | (29 | ) | 717 | ||||||||||
Operating income | 5,565 | 4,725 | 9,661 | 8,329 | ||||||||||||
Non-operating income / (expense) | ||||||||||||||||
Profit on investments | 1,862 | 1,642 | 3,396 | 2,480 | ||||||||||||
Interest income | 132 | 72 | 203 | 116 | ||||||||||||
Other income / (expense), net | 35 | (57 | ) | 94 | (98 | ) | ||||||||||
Income before income taxes | 7,594 | 6,382 | 13,354 | 10,827 | ||||||||||||
Income tax expense | (1,218 | ) | (1,182 | ) | (2,632 | ) | (2,102 | ) | ||||||||
Net income | $ | 6,376 | $ | 5,200 | $ | 10,722 | $ | 8,725 | ||||||||
See accompanying notes.
F-2
Przedsiebiorstwo “POLMOS” Białystok
Spółka Akcyjna
STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
Amounts in columns expressed in thousands of U.S. dollars
Common Stock | Retained earnings | Accumulated other comprehensive income - Foreign currency translation adjustment | Total | ||||||||||
No. of Shares | Amount | ||||||||||||
Balance at December 31, 2004 | 11,900 | 26,288 | (18,212 | ) | 20,473 | 28,549 | |||||||
Net income for the six months ended June 30, 2005 | — | — | 10,722 | — | 10,722 | ||||||||
Foreign currency translation adjustment | — | — | — | (3,061 | ) | (3,061 | ) | ||||||
Comprehensive income for six months 2005 | — | — | — | — | 7,661 | ||||||||
Dividend paid | — | — | (1,330 | ) | — | (1,330 | ) | ||||||
Balance at June 30, 2005 | 11,900 | 26,288 | (8,820 | ) | 17,412 | 34,880 | |||||||
See accompanying notes
F-3
Przedsiebiorstwo “POLMOS” Białystok
Spółka Akcyjna
STATEMENTS OF CASH FLOWS
Amounts in columns expressed in thousands
Six months ended June 30, 2005 | Six months ended June 30, 2004 | |||||||
Operating activities | ||||||||
Net income | $ | 10,722 | $ | 8,725 | ||||
Adjustments to reconcile net income to net cash provided by / (used in) operating activities: | ||||||||
Depreciation and amortization | 718 | 803 | ||||||
Gain on investments | (3,396 | ) | (2,480 | ) | ||||
Interest received | (203 | ) | (116 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 4,988 | (1,007 | ) | |||||
Inventories | (940 | ) | (1,080 | ) | ||||
Prepayments and other current assets | (2,595 | ) | (285 | ) | ||||
Trade accounts payable | (500 | ) | (53 | ) | ||||
Income and other taxes | (8,814 | ) | (1,342 | ) | ||||
Purchase of trade securities, net | (20,796 | ) | (9,925 | ) | ||||
Other liabilities | 213 | 1,573 | ||||||
Net cash used in operating activities | (20,603 | ) | (5,187 | ) | ||||
Investing activities | ||||||||
Purchase of intangible assets, net | (24 | ) | (16 | ) | ||||
Purchase of tangible assets, net | (733 | ) | (977 | ) | ||||
Interest received | 203 | 116 | ||||||
Decrease/ (increase) in restricted cash | 347 | (1,083 | ) | |||||
Net cash used in investing activities | (207 | ) | (1,960 | ) | ||||
Financing activities | ||||||||
Proceeds from sale of accounts receivable | 2,207 | — | ||||||
Dividend payment | (1,330 | ) | (584 | ) | ||||
Net cash provided by / (used in) financing activities | 877 | (584 | ) | |||||
Currency effect on brought forward cash balances | (3,878 | ) | 158 | |||||
Net decrease in cash | (23,811 | ) | (7,573 | ) | ||||
Cash and cash equivalents at beginning of period | 36,480 | 31,154 | ||||||
Cash and cash equivalents at end of period | $ | 12,669 | $ | 23,581 | ||||
Supplemental disclosures of cash flow information | ||||||||
Income tax paid | $ | 1,930 | $ | 1,527 |
See accompanying notes
F-4
Przedsiebiorstwo “POLMOS” Białystok
Spółka Akcyjna
NOTES TO FINANCIAL STATEMENTS
Amounts in columns expressed in thousands of U.S. dollars
1. Organization and Description of Business
Przedsiebiorstwo “Polmos” Białystok Spółka Akcyjna (hereinafter referred to as “Polmos Białystok” or the “Company”) is a Polish enterprise that was established as a result of the privatization of a state owned enterprise. The Company is based in North-East Poland and has been in operation since 1928. In May 2005, the Company was listed on the Warsaw Stock Exchange (WSE), with 32% of outstanding shares floated. The remaining shares are held by employees and the State Treasury with 61% of the company designated for sale to a strategic investor.
The Company’s primary source of earnings is the production and sale of vodka, including the Absolwent and Zubrówka brands.
2. Basis of Presentation
The balance sheet at December 31, 2004, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
The Company maintains their books of account and prepares their statutory financial statements in Polish zloty (PLN) in accordance with Polish statutory requirements and the Accounting Act of September 29, 1994. The financial statements have been adjusted to reflect accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our financial condition, results of operations and cash flows for the interim periods presented have been included. Operating results for the three and six month period ended June 30, 2005, are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. The interim financial statements should be read with reference to the financial statements and footnotes for the year ended December 31, 2004.
The interim financial statements are prepared under U.S. GAAP and have been presented in U.S. dollars.
F-5
Przedsiebiorstwo “POLMOS” Białystok
Spółka Akcyjna
NOTES TO FINANCIAL STATEMENTS
Amounts in columns expressed in thousands of U.S. dollars
3. Investments
Short-term investments and securities subject to repurchase agreement as of June 30, 2005 consist of:
Classified as: | |||||||||||
Cost basis | Unrealized gains | Recorded basis | Short-term investments | Securities subject to repurchase agreements | |||||||
Investments funds | 15,255 | 770 | 16,025 | 16,025 | — | ||||||
Government bills | 16,958 | 36 | 16,994 | — | 16,994 | ||||||
Corporate bonds | 19,224 | 784 | 20,008 | 4,336 | 15,672 | ||||||
Government bonds | 20,388 | 468 | 20,857 | 2,527 | 18,330 | ||||||
Municipal bonds | 7,770 | 384 | 8,154 | 8,154 | — | ||||||
Total | $ | 79,596 | 2,442 | 82,038 | 31,042 | 50,996 | |||||
As of June 30, 2005 investments with a maturity up to 1 year amounted to $81,388 thousand and those with a maturity from 1 year to 3 years amounted to $650 thousand.
Short-term investments and securities subject to repurchase agreement as of December 31, 2004 consist of:
Classified as: | |||||||||||
Cost basis | Unrealized gains | Recorded basis | Short-term investments | Securities subject to repurchase agreements | |||||||
Investments funds | 13,376 | 657 | 14,034 | 14,034 | — | ||||||
Certificates of deposit | 11,061 | 32 | 11,093 | 11,093 | — | ||||||
Government bills | 24,221 | 528 | 24,748 | 12,177 | 12,571 | ||||||
Corporate bonds | 2,675 | 649 | 3,324 | 3,324 | — | ||||||
Government bonds | 2,561 | 177 | 2,738 | 2,738 | — | ||||||
Municipal bonds | 8,695 | 95 | 8,789 | 8,789 | — | ||||||
Total | $ | 62,589 | 2,138 | 64,726 | 52,155 | 12,571 | |||||
As of December 31, 2004 investments with a maturity up to 1 year amounted to $61,402 thousand, those with a maturity from 1 year to 3 years amounted to $780 thousand and those with a maturity over 3 years amounted to $2,544 thousand.
F-6
Przedsiebiorstwo “POLMOS” Białystok
Spółka Akcyjna
NOTES TO FINANCIAL STATEMENTS
Amounts in columns expressed in thousands of U.S. dollars
4. Related party transactions
The Company was owned 100% by the State Treasury until its privatization. Therefore payments due to the State Treasury can be recognized as related party transactions.
The payments made to the State Treasury consist primarily of VAT (sales tax), excise tax, income tax and dividends and the retirement of shares presented as a liability to shareholders.
The Company’s main supplier of spirits used for production is Polmos Torun S.A. (“Polmos Torun”), that is owned by the State Treasury. Polmos Torun supplies approximately 65%-70% of the total value of rectified spirit purchased by the Company. The total value of spirits purchased by the Company from Polmos Torun was $4,945 thousand in the first six months of 2005 and $5,720 thousand in the first six months of 2004.
The accounts payable to Polmos Torun as at June 30, 2005 was $1,065 thousand and as at June 30, 2004 was $1.337 thousand.
5. Liabilities to stockholders
On December 16, 2004 the Company repurchased from the State Treasury and retired 5,000,000 shares. The fair value of shares purchased was $67,731 thousand (PLN 210,250 thousand). As of June 30, 2005 the liability to the State Treasury decreased to $62,834 thousand due to the exchange rate changes. This liability to the State Treasury was paid by the Company in July 2005.
6. Subsequent events
On July 11, 2005 the Polish State Treasury concluded the share sale agreement to sell 61% of Polmos Białystok to Central European Distribution Corporation for a total purchase price of 1.06 billion PLN, conditional upon obtaining the Anti-monopoly Office approval. On October 12, 2005 following approval from the Anti-monopoly Office, the State Treasury closed the share sale agreement.
F-7