Exhibit 99.2
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to condensed consolidated financial statements: | ||
Consolidated Balance Sheets at June 30, 2005 (unaudited) and December 31, 2004 | F-1 | |
Consolidated Statements of Income (unaudited) for three months period ended June 30, 2005 and June 30, 2004 | F-2 | |
Consolidated Statements of Income (unuadited) for six months period ended June 30, 2005 and June 30, 2004 | F-2 | |
Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for six months ended June 30, 2005 and June 30, 2004 | F-3 | |
Consolidated Statements of Cash Flows (unaudited) for six months ended June 30, 2005 and June 30, 2004 | F-4 | |
Notes to Consolidated Financial Statements | F-5 |
BOTAPOL HOLDING B.V.
CONSOLIDATED BALANCE SHEETS
Amounts in columns expressed in thousands of U.S. dollars
June 30, 2005 | December 31, 2004 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash & cash equivalents | $ | 6,267 | $ | 7,598 | ||||
Trade accounts receivable, net (including related party receivables of $2,913 in 2005 and $2,223 in 2004) | 28,035 | 65,291 | ||||||
Inventories | 4 | 10,732 | 12,624 | |||||
Prepaid expenses and other current assets | 5 | 3,559 | 4,231 | |||||
Deferred income taxes | 2,111 | 1,580 | ||||||
TOTAL CURRENT ASSETS | 50,704 | 91,324 | ||||||
Intangible assets, net | 10,560 | 11,859 | ||||||
Tangible fixed assets, net | 10,316 | 12,019 | ||||||
Other assets | 4 | 4 | ||||||
TOTAL ASSETS | 71,584 | 115,206 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Trade accounts payable, net (including related party payables of $5,231 in 2005 and $6,655 in 2004) | 6,283 | 17,355 | ||||||
Short term loans and overdraft facilities (including related party loan of $5,483 in 2004) | 3,909 | 17,024 | ||||||
Current portion of obligations under capital leases | 8 | 1,040 | 1,301 | |||||
Taxes payable | 13,832 | 34,157 | ||||||
Other accrued liabilities | 9 | 18,190 | 19,853 | |||||
TOTAL CURRENT LIABILITIES | 43,254 | 89,690 | ||||||
Long-term obligations under capital leases | 392 | 844 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Common Stock (4,000 shares authorized and issued , EUR 1,000 par value) | 3,616 | 3,616 | ||||||
Additional paid in capital | 9,192 | 4,312 | ||||||
Retained earnings | 8,731 | 7,666 | ||||||
Accumulated other comprehensive income | 6,399 | 9,078 | ||||||
STOCKHOLDERS’ EQUITY | 27,938 | 24,672 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 71,584 | $ | 115,206 | ||||
See accompanying notes.
F-1
BOTAPOL HOLDING B.V.
CONSOLIDATED STATEMENTS 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 | $ | 33,632 | $ | 43,120 | $ | 87,253 | $ | 95,059 | ||||||||
Less –Excise taxes | (18,028 | ) | (25,280 | ) | (48,702 | ) | (56,125 | ) | ||||||||
Net Sales | 15,604 | 17,840 | 38,551 | 38,934 | ||||||||||||
Cost of goods sold | (8,936 | ) | (9,007 | ) | (19,035 | ) | (17,466 | ) | ||||||||
Gross profit | 6,668 | 8,833 | 19,516 | 21,468 | ||||||||||||
Selling, general and administrative expenses | (6,369 | ) | (5,096 | ) | (14,316 | ) | (11,846 | ) | ||||||||
Provision for doubtful accounts and notes | (2,401 | ) | (2,862 | ) | (2,946 | ) | (3,168 | ) | ||||||||
Operating income | (2,102 | ) | 875 | 2,254 | 6,454 | |||||||||||
Non-operating income / (expense) | ||||||||||||||||
Interest expense | (156 | ) | (108 | ) | (418 | ) | (396 | ) | ||||||||
Interest income | 59 | 10 | 83 | 17 | ||||||||||||
Realized and unrealized foreign currency transaction losses, net | (20 | ) | (80 | ) | (59 | ) | (85 | ) | ||||||||
Other non-operating expenses, net | (156 | ) | (15 | ) | (309 | ) | (205 | ) | ||||||||
Income/(loss) before income taxes | (2,375 | ) | 682 | 1,551 | 5,785 | |||||||||||
Income tax expense | 333 | (131 | ) | (486 | ) | (1,190 | ) | |||||||||
Net income/(loss) | $ | (2,042 | ) | $ | 551 | $ | 1,065 | $ | 4,595 | |||||||
See accompanying notes.
F-2
BOTAPOL HOLDING B.V.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Amounts in columns expressed in thousands of U.S. dollars
Common Stock Issued | Additional Paid-in- Capital | Retained Earnings | Accumulated comprehensive | Total | |||||||||||||||
No. of Shares | Amount | ||||||||||||||||||
Balance at December 31, 2004 | 4,000 | $ | 3,616 | $ | 4,312 | $ | 7,666 | $ | 9,078 | $ | 24,672 | ||||||||
Net income for the six months ended June 30, 2005 | 1,065 | 1,065 | |||||||||||||||||
Foreign currency translation adjustment | (2,679 | ) | (2,679 | ) | |||||||||||||||
Comprehensive income for the six months ended June 30, 2005 | (1,614 | ) | |||||||||||||||||
Subscriptions of shareholders1 | 4,880 | 4,880 | |||||||||||||||||
Balance at June 30, 2005 | 4,000 | $ | 3,616 | $ | 9,192 | $ | 8,731 | $ | 6,399 | $ | 27,938 | ||||||||
See accompanying notes.
1 | In May 2005 according to shareholders’ the resolution the contribution of EUR 4,0 million ($ 4.9 million) was paid by Botapol Management B.V. and Takirra Investment Corporation N.V. |
F-3
BOTAPOL HOLDING B.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in columns expressed in thousands of U.S. dollars
Six months ended June 30, | Six months ended June 30, | |||||||
Operating Activities | ||||||||
Net income | $ | 1,065 | $ | 4,595 | ||||
Adjustments to reconcile net income to net cash provided by / (used in) operating activities: | ||||||||
Depreciation and amortization | 1,043 | 1,035 | ||||||
Interest | 336 | 378 | ||||||
(Profit)/Loss on investing activities | 110 | (17 | ) | |||||
Other | (190 | ) | (135 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 30,315 | 25,464 | ||||||
Inventories | 550 | (196 | ) | |||||
Prepayments and other current assets | 223 | 762 | ||||||
Trade accounts payable | (9,233 | ) | (1,359 | ) | ||||
Income and other taxes | (17,379 | ) | (12,694 | ) | ||||
Other accrued liabilities and other | (427 | ) | 1,983 | |||||
Net cash provided by operating activities | 7,267 | 19,816 | ||||||
Investing Activities | ||||||||
Purchases of equipment and intangible assets | (625 | ) | (890 | ) | ||||
Acquisitions of subsidiaries | — | (9,509 | ) | |||||
Proceeds from the disposal of equipment and financial assets | — | 130 | ||||||
Net cash used in investing activities | (625 | ) | (10,269 | ) | ||||
Financing Activities | ||||||||
Borrowings on loans and overdraft facility | 123 | 4,486 | ||||||
Re-payment of loans and overdraft facility | (11,437 | ) | (13,379 | ) | ||||
Interest paid | (139 | ) | (253 | ) | ||||
Payment from shareholders | 4,880 | — | ||||||
Payment of capital leases | (486 | ) | (344 | ) | ||||
Net cash used in financing activities | (7,059 | ) | (9,490 | ) | ||||
Currency effect on cash balances | (914 | ) | 1,153 | |||||
Net increase / (decrease) in cash | (1,331 | ) | 1,210 | |||||
Cash and cash equivalents at beginning of period | 7,598 | 5,763 | ||||||
Cash and cash equivalents at end of period | $ | 6,267 | $ | 6,973 | ||||
Supplemental disclosures of cash flow information | ||||||||
Interest paid | $ | 139 | $ | 253 | ||||
Income tax paid | $ | 972 | $ | 1,592 |
See accompanying notes.
F-4
BOTAPOL HOLDING B.V.
NOTES TO FINANCIAL STATEMENTS
Amounts in columns expressed in thousands of U.S. dollars
1. Organization and Description of Business
Botapol Holding B.V (“Botapol”) is a holding company with no operations which has two wholly owned subsidiaries, Bols Sp. z o.o (“Bols”) and Hillcroft Limited Sp. z o.o.(“Hillcroft”). The holding company is a Dutch company. The operating subsidiaries are Polish companies dealing with the distillation and sale of locally produced vodka and the importation and distribution of vodka and other spirits and wines. Hillcroft is the owner of the Soplica and Czysta Slaska trademarks. Other than owning these trademarks, Hillcroft has no operations. Hillcroft licenses these trademarks to Bols in consideration of royalty payments. Bols has one subsidiary, WTK Soplica Sp. z o.o. ( “WTK Soplica”). Bols is one of the largest producers of vodka in Poland producing leading vodka brands such asBols Vodka andSoplica.
The Company through its subsidiaries derives all its revenues in Poland.
2. Basis of Presentation
The interim condensed consolidated financial statements include the accounts of Botapol Holding B.V. and all its wholly and majority-owned subsidiaries and fully controlled subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidation.
Botapol Holding B.V. subsidiaries maintain their books of account and prepare their statutory financial statements in Polish Zloties (PLN) in accordance with Polish statutory requirements and the Accounting Act of September 29, 1994. The subsidiaries’ 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 condensed consolidated financial statements are prepared under U.S. GAAP and have been presented in U.S. dollars.
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 interim condensed consolidated financial statements should be read with reference to the consolidated financial statements and footnotes for the year ended December 31, 2004.
3. Comprehensive Income/(Loss)
Comprehensive Income/(loss) is defined as all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income includes net income adjusted by, among other items, foreign currency translation adjustments. The foreign exchange gains/(losses) on the translation of the financial statements from PLN to U.S. dollars are classified separately as a component of stockholders’ equity and are the only additional component of accumulated other comprehensive income included therein.
F-5
BOTAPOL HOLDING B.V.
NOTES TO FINANCIAL STATEMENTS
Amounts in columns expressed in thousands of U.S. dollars
4. Inventories
Total inventories comprise:
June 30, 2005 | December 31, 2004 | |||||
Raw materials and supplies | $ | 2,373 | $ | 3,809 | ||
Finished goods | 8,359 | 8,815 | ||||
Total | $ | 10,732 | $ | 12,624 | ||
5. Prepaid expenses and other receivables
Prepaid expenses and other receivables comprise:
June 30, 2005 | December 31, 2004 | |||||
Prepaid expenses | $ | 2,929 | $ | 2,841 | ||
Tax receivables | 378 | 1,098 | ||||
Other receivables | 252 | 292 | ||||
Total | $ | 3,559 | $ | 4,231 | ||
6. Income and Deferred Taxes
The Company operates in two tax jurisdictions, the Netherlands and Poland. All Polish subsidiaries file their own separate corporate tax returns and account for their own deferred tax balances.
Total income tax expense varies from the expected income tax expense computed at Polish statutory rates (19% in 2004 and 2005) as follows:
Three months ended | Six months ended | ||||||||||||
June 30, 2005 | June 30, 2004 | June 30, 2005 | June 30, 2004 | ||||||||||
Tax at Polish statutory rate | $ | (451 | ) | $ | 130 | $ | 295 | $ | 1,099 | ||||
Permanent differences | 118 | 1 | 191 | 91 | |||||||||
Total income tax expense | $ | (333 | ) | $ | 131 | $ | 486 | $ | 1,190 | ||||
The tax liabilities (including corporate income tax, Value Added Tax (VAT), social security and other taxes) may be subject to examinations by Polish tax authorities for up to five years from the end of the year the tax is payable. As the application of tax laws and regulations are susceptible to varying interpretations, amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities.
F-6
BOTAPOL HOLDING B.V.
NOTES TO FINANCIAL STATMENTS
Amounts in columns expressed in thousands of U.S. dollars
7. Short Term Loans and Credit Facilities
The Company has banking facilities with BRE Bank S.A. which are used to support the Company with working capital.
As of June 30, 2005 the total debt outstanding under BRE Bank S.A. credit facilities was PLN 0 million with PLN50.0 million ($16.7 million) available.
These facilities are disclosed in the financial statements as:
June 30, 2005 | December 31, 2004 | |||||
Overdrafts | $ | — | $ | 7,305 | ||
Related party loan | — | 5,483 | ||||
Third party short term loan | 3,909 | 4,236 | ||||
Total | $ | 3,909 | $ | 17,024 | ||
The related party loans from Takirra Investment Corporation N.V. and Remy Cointreau S.A. were repaid in May 2005
The third party short term loan related to a loan from J.H.H. Exploitatie Maatschapij B.V. to WTK Soplica. WTK Soplica was sold by Bols in July 2005 (Note 10).
8. Lease Obligations
In May 2000, the Company entered into a non cancelable operating lease, for its main office in Warsaw, which stipulated monthly payments of $18,000 for six years, this lease cannot be terminated. In February 2004, the Company renegotiated this lease by signing a new agreement ending May 31, 2006 at a lower rent of $16,000 per month. In June 2004, the Company entered into another non cancelable operating lease agreement, for its Central and Eastern Europe (“CEE”) office in Warsaw. The rental agreement, with monthly payments of $6,000 will end in July, 2010. The following is a schedule by years of the future rental payments under the non-cancelable operating leases as of June 31, 2005.
2005 | $ | 172 | |
2006 | 155 | ||
2007 | 75 | ||
2008 | 75 | ||
2009 | 75 | ||
Thereafter | 44 | ||
$ | 596 | ||
The Company also has rental agreements for warehouse space. The main external warehouse is located in Oborniki, in the proximity of the production plant and is mainly used for storage of POS materials, imported products and vodka sold to duty free and foreign customers. Monthly rentals amount to $40,000- $45,000 per month. The warehouse lease agreement can be terminated by either party with three month’s prior notice.
F-7
BOTAPOL HOLDING B.V.
NOTES TO FINANCIAL STATEMENTS
Amounts in columns expressed in thousands of U.S. dollars
During 2005, the Company continued its policy of renewing its car and fork-lift truck fleet utilizing capital lease financing. The future minimum lease payments for the assets under capital lease at June 30, 2005 are as follows:
2005 | 598 | ||
2006 | 834 | ||
Gross payments due | $ | 1,432 | |
Less interest | — | ||
Net payments due | $ | 1,432 | |
9. Other accrued liabilities
Other accrued liabilities comprised:
June 30, 2005 | December 31, 2004 | |||||
Provision for underpaid excise tax and related penalty interest | $ | 8,343 | $ | 9,336 | ||
Provision for penalty interest related underpaid VAT | 285 | 318 | ||||
Liabilities related to sales of receivables with recourse | 4,002 | 4,478 | ||||
Other accruals | 5,560 | 5,721 | ||||
Total | $ | 18,190 | $ | 19,853 | ||
In 2003 year the Company received an assessment of the Tax inspection Office (UKS) concerning an additional excise tax payment for the period October 1 to December 31, 2002 in the amount of PLN 8.1 million ($2.1 million) and a penalty of PLN 1.3 million ($0.3 million). According to UKS, the Company failed to comply with the obligation to decrease sales prices by 20% during the six months period from October 1, 2002, which constituted a condition for a 30% excise tax decrease. These additional charges were paid in 2003 and recognized in the financial statements for the year ended December 31, 2003.
In 2004 the Company was subject to a similar examination for the period January 1 to March 31, 2003. As a consequence of the previous tax assessment the Company decided to recognize the additional provision for underpaid excise tax of PLN 20.9 million ($ 7.0 million) and related penalty of PLN 6.9 million ($2.3 million) in the financial statements for the year ended December 31, 2003. In July 2005 the tax office issued the decision related to the period January 1 to March 31, 2003, which determined the excise tax underpayment at the level recognized by the Company.
10. Related Party Transactions
The Company had relationships with the following related parties; CLS Remy Cointreau S.A., Takirra Investment Corporation N.V., RC One, Bols Distilleries B.V., Bols International Export Licenses B.V., Bols Hungary Kft, Unipol B.V, and others.
All imported products distributed by the Company in Poland were purchased from related parties such as: CLS Remy Coitreau S.A., RC One, Bols International Export Licenses B.V.
F-8
BOTAPOL HOLDING B.V.
NOTES TO FINANCIAL STATEMENTS
Amounts in columns expressed in thousands of U.S. dollars
Unipol B.V. is the owner of theBols trade mark. Botapol Holding B.V. were obliged to pay charges concerning the license for using theBols trade mark in connection with the manufacturing, marketing and use ofBols vodka in Poland and Russia. In 2005 the charges concerning this license agreement amounted to $1.1 million.
Bols Sp. z o.o. renders services for CLS Remy Cointreau concerning the management of the Central and Eastern Europe Region (“CEE”) of Remy Cointreau.
In 2004 the Company concluded a loan facility agreements with Takirra Investment Corporation N.V. and Remy Cointreau S.A. amounting to EUR 1.9 million from Takirra and EUR 1.9 million from Remy. The loans were repaid in May 2005.
11. Subsequent events
On July 1, 2005 the Company sold all its shares in WTK Soplica for the amount of $ 5 thousand.
On June 27, 2005, Rémy Cointreau S.A., Botapol Management B.V. and Takirra Investment Corporation N.V., the owners of the Company, entered into a Share Sale Agreement with Central European Distribution Corporation (“CEDC”) and its wholly-owned subsidiary, Carey Agri International Poland Sp. z o.o. (“Carey Agri”) to sell 100% of the outstanding capital stock of the Company to CEDC for US $270.0 million. CEDC acquired 47.1% of the Company’s stock and Carey Agri acquired 52.9% of the Company’s stock. On August 17, 2005 the sale of the Company to CEDC and Carey Agri was completed, following approval of the Polish anti-monopoly office.
F-9