Exhibit 99.1
Central European Distribution Corporation Announces Second Quarter 2007 Results
Bala Cynwyd, Pennsylvania July 31, 2007: Central European Distribution Corporation (NASDAQ: CEDC) today announced its results for fiscal second quarter 2007. Net sales for the second quarter 2007 increased by 21% to $269 million from $222 million reported for the same period in 2006. Comparable net income increased by 42% to $13.7 million from $9.6 million for the same period in 2006.
On a comparable basis, CEDC announced net income of $13.7 million, or $0.34 per fully diluted share for the second quarter 2007, as compared to $9.6 million or $0.27 per fully diluted share for the same period in 2006. On a U.S. GAAP basis (as hereinafter defined), CEDC announced net income of $20.0 million or $0.49 per fully diluted share for the second quarter of 2007, as compared to net income of $109,000, or $0.00 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 other non recurring charges. For a reconciliation of comparable non-GAAP net income to the net income reported under United States Generally Accepted Accounting Principles (“GAAP”), please see the section “Unaudited Reconciliation of Non-GAAP Measures” below. The weighted average number of shares used for calculating diluted earnings per share for second quarter 2007 was 40.6 million compared to 36.0 million for the second quarter 2006.
Some of the Company’s key financial highlights for the second quarter 2007 compared to the same quarter last year include the following:
• | Net sales up 21% |
• | Organic sales growth of 17% |
• | Gross profit margins up from 20.6% to 20.7% |
• | Operating income up 14% |
• | Comparable net income up 42% |
• | Exclusive import portfolio growth of 42% |
• | Export sales increased by 51% |
Mr. William Carey, CEO and President, said, “The continued strong growth of the Polish economy of 6.4% in the second quarter of 2007 has continued to drive strong demand for our branded beverages. Our record organic growth of 17% and the double digit volume growth of our core vodka brands has led to the strong top to bottom line performance in the second quarter. Our import portfolio continues to outperform the market with second quarter growth of over 42%.”
Mr. Carey continued, “With our recent signing of new distribution agreements in Poland, we look forward to continue to execute on our core business model for the second half of the year. With our rectification facility expected to come on line in the fall of this year, coupled with the continued decline in spirit pricing in Poland, we look forward to continued margin improvement in our overall business.”
Mr. Carey concluded, “Overall, we are extremely satisfied with our continued development of our core business, which was recently confirmed in our raising of earnings guidance for 2007 and 2008.”
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 by value and produces the Absolwent, Zubrowka, Bols and Soplica brands, among others. CEDC currently exports Zubrowka to European and Asian markets.
CEDC also is the leading distributor by volume and a leading importer by value of alcoholic beverages in Poland. CEDC operates 16 distribution centers and 76 satellite branches throughout Poland. CEDC imports many of the world’s leading brands to Poland, including brands such as Rémy Martin, 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)
June 30, 2007 | December 31, 2006 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 104,995 | $ | 159,362 | ||||
Accounts receivable, net of allowance for doubtful accounts of $26,072 and $24,354 respectively | 179,693 | 224,575 | ||||||
Inventories | 90,393 | 89,522 | ||||||
Prepaid expenses and other current assets | 17,940 | 24,299 | ||||||
Deferred income taxes | 3,636 | 5,336 | ||||||
Total Current Assets | 396,657 | 503,094 | ||||||
Intangible assets, net | 475,596 | 371,624 | ||||||
Goodwill, net | 438,508 | 398,005 | ||||||
Property, plant and equipment, net | 61,248 | 49,801 | ||||||
Deferred income taxes | 11,309 | 3,305 | ||||||
Other assets | 533 | 204 | ||||||
Total Assets | $ | 1,383,851 | $ | 1,326,033 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Trade accounts payable | $ | 93,589 | $ | 138,585 | ||||
Bank loans and overdraft facilities | 144,310 | 24,656 | ||||||
Income taxes payable | 3,960 | 2,975 | ||||||
Taxes other than income taxes | 75,134 | 94,985 | ||||||
Other accrued liabilities | 75,231 | 57,620 | ||||||
Current portions of obligations under capital leases | 1,589 | 2,005 | ||||||
Total Current Liabilities | 393,813 | 320,826 | ||||||
Long-term debt, less current maturities | 3 | 8 | ||||||
Long-term obligations under capital leases | 1,941 | 1,122 | ||||||
Long-term obligations under Senior Secured Notes | 310,670 | 393,434 | ||||||
Deferred income taxes | 87,242 | 68,275 | ||||||
Total Long Term Liabilities | 399,856 | 462,839 | ||||||
Minority interests | 491 | 21,395 | ||||||
Stockholders’ Equity | ||||||||
Common Stock ($0.01 par value, 80,000,000 shares authorized, 40,325,107 and 38,691,635 shares issued at June 30, 2007 and December 31, 2006, respectively) | 404 | 387 | ||||||
Additional paid-in-capital | 423,518 | 374,985 | ||||||
Retained earnings | 142,879 | 128,084 | ||||||
Accumulated other comprehensive income | 23,040 | 17,667 | ||||||
Less Treasury Stock at cost (246,037 shares at June 30, 2007 and December 31, 2006) | (150 | ) | (150 | ) | ||||
Total Stockholders’ Equity | 589,691 | 520,973 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 1,383,851 | $ | 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 | Six months ended | |||||||||||||||
June 30, 2007 | June 30, 2006 | June 30, 2007 | June 30, 2006 | |||||||||||||
PROFIT AND LOSS | ||||||||||||||||
Sales | $ | 334,150 | $ | 280,032 | $ | 623,146 | $ | 519,509 | ||||||||
Excise taxes | (65,515 | ) | (58,003 | ) | (126,296 | ) | (107,363 | ) | ||||||||
Net Sales | 268,635 | 222,029 | 496,850 | 412,146 | ||||||||||||
Cost of goods sold | 213,081 | 176,250 | 394,978 | 328,906 | ||||||||||||
Gross Profit | 55,554 | 45,779 | 101,872 | 83,240 | ||||||||||||
Operating expenses | 30,405 | 23,748 | 57,807 | 46,637 | ||||||||||||
Operating Income | 25,149 | 22,031 | 44,065 | 36,603 | ||||||||||||
Non operating income / (expense), net | ||||||||||||||||
Interest / (expense), net | (8,305 | ) | (7,856 | ) | (16,954 | ) | (15,915 | ) | ||||||||
Other financial income / (expense), net | 9,837 | (11,413 | ) | (5,562 | ) | (7,590 | ) | |||||||||
Other non operating income / (expense), net | (1,670 | ) | 165 | (2,014 | ) | 1,476 | ||||||||||
Income before taxes | 25,011 | 2,927 | 19,535 | 14,574 | ||||||||||||
Income tax (benefit) / expense | 4,714 | 557 | 3,685 | 2,421 | ||||||||||||
Minority interests | 326 | 2,261 | 1,055 | 4,229 | ||||||||||||
Net income | $ | 19,971 | $ | 109 | $ | 14,795 | $ | 7,924 | ||||||||
Net income per share of common stock, basic | $ | 0.50 | $ | 0.00 | $ | 0.37 | $ | 0.22 | ||||||||
Net income per share of common stock, diluted | $ | 0.49 | $ | 0.00 | $ | 0.37 | $ | 0.22 | ||||||||
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
(Amount in columns expressed in thousands)
Six months ended June 30, | ||||||||
2007 | 2006 | |||||||
CASH FLOW | ||||||||
Operating Activities | ||||||||
Net income | $ | 14,795 | $ | 7,924 | ||||
Adjustments to reconcile net income to net cash provided by / (used in) operating activities: | ||||||||
Depreciation and amortization | 4,772 | 5,524 | ||||||
Deferred income taxes | (6,719 | ) | (652 | ) | ||||
Bad debt provision | 566 | 511 | ||||||
Minority interests | 1,055 | 4,229 | ||||||
Hedge valuation | — | (11,772 | ) | |||||
Unrealized foreign exchange losses | (6,172 | ) | 18,900 | |||||
Cost of debt extinguishment | 11,869 | — | ||||||
Stock options expense | 948 | 309 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 50,722 | 55,699 | ||||||
Inventories | 2,315 | 6,409 | ||||||
Prepayments and other current assets | 1,579 | (4,592 | ) | |||||
Trade accounts payable | (48,361 | ) | (27,027 | ) | ||||
Income and other taxes | (16,533 | ) | (2,942 | ) | ||||
Other accrued liabilities and other | 9,209 | (12,356 | ) | |||||
Net Cash provided by Operating Activities | 20,045 | 40,164 | ||||||
Investing Activities | ||||||||
Investment in fixed assets | (13,967 | ) | (3,359 | ) | ||||
Proceeds from the disposal of fixed assets | 2,647 | 362 | ||||||
Proceeds from the disposal of financial assets | — | 1,865 | ||||||
Refundable purchase price related to Botapol acquisition | 5,000 | — | ||||||
Acquisitions of subsidiaries, net of cash acquired | (133,992 | ) | (1,870 | ) | ||||
Net Cash used in Investing Activities | (140,312 | ) | (3,002 | ) | ||||
Financing Activities | ||||||||
Borrowings on bank loans and overdraft facility | 132,524 | 19,381 | ||||||
Payment of bank loans and overdraft facility | (17,315 | ) | (15,774 | ) | ||||
Payment of long-term borrowings | (1 | ) | (1 | ) | ||||
Payment of Senior Secured Notes | (95,440 | ) | — | |||||
Hedge closure | — | (4,677 | ) | |||||
Movements in capital leases payable | 291 | (1,081 | ) | |||||
Issuance of shares in public placement | 42,355 | — | ||||||
Options exercised | 547 | 1,310 | ||||||
Net Cash provided by Financing Activities | 62,961 | (842 | ) | |||||
Currency effect on brought forward cash balances | 2,939 | 2,680 | ||||||
Net Increase / (Decrease) in Cash | (54,367 | ) | 39,000 | |||||
Cash and cash equivalents at beginning of period | 159,362 | 60,745 | ||||||
Cash and cash equivalents at end of period | $ | 104,995 | $ | 99,745 | ||||
Supplemental Schedule of Non-cash Investing Activities | ||||||||
Common stock issued in connection with investment in subsidiaries | $ | — | $ | 161 | ||||
Supplemental disclosures of cash flow information | ||||||||
Interest paid | $ | 19,739 | $ | 19,524 | ||||
Income tax paid | $ | 8,883 | $ | 2,447 | ||||
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except share and per share information)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2007 | 2006 | 2007 | 2006 | ||||||||||||||
GAAP net income/(loss) | $ | 19,971 | $ | 109 | $ | 14,795 | $ | 7,924 | |||||||||
Foreign exchange impact and hedge revaluation | (7,772 | ) | 9,245 | (5,047 | ) | 6,148 | (A | ) | |||||||||
Acquisition related costs | 762 | 1,045 | — | (B | ) | ||||||||||||
Cost associated with early retirement of debt | 9,609 | — | (C | ) | |||||||||||||
Impact of expensing stock options | 392 | 261 | 752 | 457 | (D | ) | |||||||||||
Other non recurring costs | 307 |
| — | 307 |
| — | (E | ) | |||||||||
Comparable non-GAAP net income | $ | 13,660 | $ | 9,615 | $ | 21,461 | $ | 14,529 | |||||||||
Comparable net income per share of common stock, basic | $ | 0.34 | $ | 0.27 | $ | 0.53 | $ | 0.41 | |||||||||
Comparable net income per share of common stock, diluted | $ | 0.34 | $ | 0.27 | $ | 0.53 | $ | 0.40 |
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 and other acquisitions. |
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. |
E. | Represents one-time charge for early retirement incentive. |