Exhibit 99.1
Central European Distribution Corporation Announces First Quarter 2007 Results; Operating Income Increases 30% over First Quarter 2006
Bala Cynwyd, Pennsylvania May 2, 2007: Central European Distribution Corporation (NASDAQ: CEDC) today announced its results for fiscal first quarter 2007. Net sales for the first quarter 2007 increased 20% to $228 million from the $190 million reported for the same period in 2006. Operating income increased by 30% to $18.9 million from $14.6 million for the same period in 2006.
On a comparable basis, CEDC announced net income of $7.8 million, or $0.20 per fully diluted share for the first quarter 2007, as compared to $4.9 million or $0.14 per fully diluted share for the same period in 2006. On a U.S. GAAP basis (as hereinafter defined), CEDC announced a net loss of $5.2 million or $0.13 per fully diluted share for the first quarter of 2007, as compared to net income of $7.8 million, or $0.22 per fully diluted share, for the same period in 2006. The major differences between the U.S. GAAP net income and comparable non-GAAP net income reflects unrealized foreign exchange movements relating to our Senior Secured Notes and costs associated with the early retirement of debt. For a reconciliation of comparable non-GAAP net income to the net loss reported under United States Generally Accepted Accounting Principles (“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 first quarter 2007 was 39.4 million compared to 36.0 million for the first quarter 2006.
Some of the Company’s key financial highlights for the first quarter 2007 compared to the same quarter last year include the following:
• | Net sales up 20% |
• | Organic sales growth of 15% |
• | Gross profit up 24% |
• | Gross margins up from 19.7% to 20.3% |
• | Operating income up 30% |
• | Exclusive import portfolio growth of 74% |
• | Export sales increased by 35% |
Mr. William Carey, CEO and President, said, “The Polish economy has hit record levels of GDP growth of approximately 8% in the first quarter 2007, which has fueled demand for our branded products, as is evidenced in our sales of exclusive import brands growth of 74%. We also had double digit growth of our top four core vodka brands. The recent integration of our distribution and production companies coupled with strong consumer demand for branded beverages has driven our organic sales growth to record levels of 15%. Spirit pricing has continued to drop year to date by 5-7% versus our 2007 budgeted spirit pricing of approximately $1.15 per liter.”
Mr. Carey continued, “With our successful offering of shares in December and February, we were able to pay down 20% of our outstanding Senior Secured Notes which had much higher interest rates than we have been able to obtain recently. As a result of this improvement in ongoing interest rates, the company took one time charges related to the early retirement of our Senior Secured Notes, as described in the Unaudited Reconciliation of Non-GAAP Measures. All charges related to the early retirement of our Senior Secured Notes are reflected in the first quarter of 2007.”
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 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 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. This measure is 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. CEDC also produces and distributes Royal Vodka, the number one selling vodka in Hungary.
CEDC also is the leading distributor and the leading importer of alcoholic beverages in Poland and Hungary. In Poland, CEDC operates 16 distribution centers and 76 satellite branches and imports many of the world’s leading brands, including brands such as Remy Martin, Jagermeister, Metaxa, Jim Beam, Sauza Tequila, Grant’s, E&J Gallo, Sutter Home, Torres, Penfolds and Concha y Toro wines, Corona, Foster’s, and Guinness Stout beers and Evian.
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 CEDC 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. 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, 2006, and in other periodic and current reports filed by CEDC with the Securities and Exchange Commission.
Contact:
Jim Archbold,
Investor Relations Officer
Central European Distribution Corporation
610-660-7817
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Amount in columns expressed in thousands)
March 31, | December 31, | |||||||
2007 | 2006 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 108,674 | $ | 159,362 | ||||
Accounts receivable, net of allowance for doubtful accounts of $24,538 and $24,354 respectively | 179,889 | 224,575 | ||||||
Inventories | 78,076 | 89,522 | ||||||
Prepaid expenses and other current assets | 12,296 | 24,299 | ||||||
Deferred income taxes | 6,584 | 5,336 | ||||||
Total Current Assets | 385,519 | 503,094 | ||||||
Intangible assets, net | 431,075 | 371,624 | ||||||
Goodwill, net | 424,788 | 398,005 | ||||||
Property, plant and equipment, net | 50,553 | 49,801 | ||||||
Deferred income taxes | 8,110 | 3,305 | ||||||
Other assets | 200 | 204 | ||||||
Total Assets | $ | 1,300,245 | $ | 1,326,033 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Trade accounts payable | $ | 91,735 | $ | 138,585 | ||||
Bank loans and overdraft facilities | 113,230 | 24,656 | ||||||
Income taxes payable | 6,123 | 2,975 | ||||||
Taxes other than income taxes | 70,086 | 94,985 | ||||||
Other accrued liabilities | 52,952 | 57,620 | ||||||
Current portions of obligations under capital leases | 2,219 | 2,005 | ||||||
Total Current Liabilities | 336,345 | 320,826 | ||||||
Long-term debt, less current maturities | 4 | 8 | ||||||
Long-term obligations under capital leases | 748 | 1,122 | ||||||
Long-term obligations under Senior Secured Notes | 314,955 | 393,434 | ||||||
Deferred income taxes | 78,535 | 68,275 | ||||||
Total Long Term Liabilities | 394,242 | 462,839 | ||||||
Minority interests | 5,808 | 21,395 | ||||||
Stockholders’ Equity | ||||||||
Common Stock ($0.01 par value, 80,000,000 shares authorized, 40,309,482 and 38,691,635 shares issued at March 31, 2007 and December 31, 2006, respectively) | 404 | 387 | ||||||
Additional paid-in-capital | 423,097 | 374,985 | ||||||
Retained earnings | 122,908 | 128,084 | ||||||
Accumulated other comprehensive income | 17,591 | 17,667 | ||||||
Less Treasury Stock at cost (246,037 shares at March 31, 2007 and December 31, 2006) | (150 | ) | (150 | ) | ||||
Total Stockholders’ Equity | 563,849 | 520,973 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 1,300,245 | $ | 1,326,033 | ||||
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Amount in columns expressed in thousands, except share and per share information)
Three months ended | ||||||||
PROFIT AND LOSS | March 31, 2007 | March 31, 2006 | ||||||
Sales | $ | 288,996 | $ | 239,477 | ||||
Excise taxes | (60,782 | ) | (49,360 | ) | ||||
Net Sales | 228,214 | 190,117 | ||||||
Cost of goods sold | 181,897 | 152,656 | ||||||
Gross Profit | $ | 46,317 | $ | 37,461 | ||||
Operating expenses | 27,402 | 22,889 | ||||||
Operating Income | $ | 18,915 | $ | 14,572 | ||||
Non operating income / (expense), net | ||||||||
Interest / (expense), net | (8,649 | ) | (8,059 | ) | ||||
Other financial income / (expense), net | (15,400 | ) | 3,823 | |||||
Other non operating income / (expense), net | (343 | ) | 1,311 | |||||
Income before taxes | ($ | 5,477 | ) | $ | 11,647 | |||
Income tax (benefit) / expense | (1,030 | ) | 1,864 | |||||
Minority interests | 729 | 1,968 | ||||||
Net income | ($ | 5,176 | ) | $ | 7,815 | |||
Net income per share of common stock, basic | ($ | 0.13 | ) | $ | 0.22 | |||
Net income per share of common stock, diluted | ($ | 0.13 | ) | $ | 0.22 | |||
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
(Amount in columns expressed in thousands)
Three months ended March 31, | ||||||||
CASH FLOW | 2007 | 2006 | ||||||
Operating Activities | ||||||||
Net income | ($ | 5,176 | ) | $ | 7,815 | |||
Adjustments to reconcile net income to net cash provided by / (used in) operating activities: | ||||||||
Depreciation and amortization | 2,434 | 2,069 | ||||||
Deferred income taxes | (7,148 | ) | 1,872 | |||||
Bad debt provision | 188 | 377 | ||||||
Minority interests | 729 | 1,968 | ||||||
Hedge valuation | — | (11,772 | ) | |||||
Unrealized foreign exchange losses | 3,364 | 7,753 | ||||||
Cost of debt extinguishment | 11,869 | — | ||||||
Stock options expense | 463 | 242 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 44,461 | 46,815 | ||||||
Inventories | 11,431 | 12,576 | ||||||
Prepayments and other current assets | 6,807 | 1,802 | ||||||
Trade accounts payable | (46,825 | ) | (41,235 | ) | ||||
Income and other taxes | (16,543 | ) | (10,724 | ) | ||||
Other accrued liabilities and other | (3,649 | ) | (9,882 | ) | ||||
Net Cash provided by Operating Activities | 2,405 | 9,676 | ||||||
Investing Activities | ||||||||
Investment in distribution assets | (5,410 | ) | (1,245 | ) | ||||
Proceeds from the disposal of equipment | 2,647 | 114 | ||||||
Proceeds from the disposal of financial assets | — | 1,150 | ||||||
Refundable purchase price related to Botapol acquisition | 5,000 | — | ||||||
Acquisitions of subsidiaries, net of cash acquired | (90,917 | ) | (1,260 | ) | ||||
Net Cash used in Investing Activities | (88,680 | ) | (1,241 | ) | ||||
Financing Activities | ||||||||
Borrowings on bank loans and overdraft facility | 94,311 | 6,035 | ||||||
Payment of bank loans and overdraft facility | (5,733 | ) | (839 | ) | ||||
Payment of Senior Secured Notes | (95,440 | ) | — | |||||
Hedge closure | — | (4,677 | ) | |||||
Payment of capital leases | (160 | ) | (405 | ) | ||||
Issuance of shares in public placement | 42,354 | — | ||||||
Options exercised | 311 | 293 | ||||||
Net Cash provided by Financing Activities | 35,643 | 407 | ||||||
Currency effect on brought forward cash balances | (56 | ) | 673 | |||||
Net Increase / (Decrease) in Cash | (50,632 | ) | 9,515 | |||||
Cash and cash equivalents at beginning of period | 159,362 | 60,745 | ||||||
Cash and cash equivalents at end of period | $ | 108,674 | $ | 70,260 | ||||
Supplemental disclosures of cash flow information | ||||||||
Interest paid | $ | 18,124 | $ | 19,754 | ||||
Income tax paid | $ | 6,119 | $ | 4,681 | ||||
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except share and per share information)
Three Months Ended March 31, | |||||||||||
2007 | 2006 | ||||||||||
GAAP net income/(loss) | $ | (5,176 | ) | $ | 7,815 | ||||||
Foreign exchange impact and hedge revaluation | 2,725 | (3,097 | ) | (A | ) | ||||||
Pre-acquisition financing costs | 283 | — | (B | ) | |||||||
One-time costs associated with early retirement of debt | 9,609 | — | (C | ) | |||||||
Impact of expensing stock options | 360 | 196 | (D | ) | |||||||
— | — | ||||||||||
Comparable non-GAAP net income | $ | 7,801 | $ | 4,914 | |||||||
Comparable net income per share of common stock, basic | $ | 0.20 | $ | 0.14 | |||||||
Comparable net income per share of common stock, diluted | $ | 0.20 | $ | 0.14 |
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 Senior Secured Notes and mark to market revaluation of financing related hedges. |
B. | Represents other miscellaneous costs incurred in 2007, directly related to the tender for additional shares of Polmos Bialystok. |
C. | 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. |
D. | 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. |