Exhibit 99.4
Pro Forma Financial Statements
Central European Distribution Corporation
Pro Forma Combined Condensed Financial Information
The unaudited pro forma condensed combined balance sheet information set forth
below for Central European Distribution (CEDC), AGIS S.A. (purchased on April
24, 2002) and Damianex S.A. (purchased on April 22, 2002) is presented as if
these acquisitions had been completed on January 1, 2001. The unaudited
condensed combined income statement for 2001 assumes the acquisitions were
completed on January 1, 2001. The unaudited condensed combined income statement
for the six-month period ended June 30, 2002 assumes the acquisitions were
completed on January 1, 2001. Because CEDC has already filed its Form 10-Q for
the six months ended June 30, 2002, the financial statements included therein
have been used as the base in compiling the pro-forma balance sheet and income
statement as of and for the six month period ended June 30, 2002 included
herein. The pro-forma adjustments made for Damianex and AGIS in the pro-forma
statements relates to the results for the periods prior to acquisition (Damianex
April 22, 2002 and AGIS April 24, 2002) as the result after these respective
dates are already included in the historical data. The data is subject to the
assumptions and adjustments in the accompanying notes to the pro forma balance
sheets and income statements. CEDC has accounted for the acquisitions of
Damianex S.A. and AGIS S.A. as purchases in accordance with SFAS 141.
The pro forma information does not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements and therefore should be read in conjunction with the historical
financial statements of CEDC included in its Annual 2001 Report on Form 10-K,
and its first and second quarter 2002 Reports on Form 10-Q and the historical
financial statements of Damianex S.A. and AGIS S.A. for 2000 and 2001, included
herein.
The pro forma adjustments do not reflect operating efficiencies and cost savings
that may be achievable with respect to the newly acquired companies. The pro
forma adjustments do not include any adjustments to the historical operating
data for future changes in selling prices, or operating efficiencies which may
arise.
A final determination of required purchase accounting adjustments, including the
allocation of the purchase price to the assets acquired and liabilities assumed
based on their respective estimated fair values, will be made after completion
of the escrow period on August 31, 2002 (applicable to the Damianex
acquisition), upon final adjustments of the AGIS S.A. purchase price related to
old AGIS accounts receivable and upon receipt of independent valuations for both
acquisitions. Accordingly, the purchase accounting adjustment(s) and the
following pro forma condensed combined balance sheet and income statement
information may be revised. CEDC currently knows of no events that would require
a substantial change to the preliminary purchase price allocation.
The pro forma financial information is presented for illustrative purposes only
and is not intended to be indicative of the financial position and operating
results that would have occurred if the acquisitions had been consummated in
accordance with the assumptions set forth below nor is it intended to be a
forecast of future operating results or financial position.
INDEX
Page
----
Unaudited pro forma condensed combined balance sheet at June 30, 2002 ............... EXC-3
Unaudited pro forma condensed combined income statement for the six
month period ended June 30, 2002 .................................................... EXC-4
Unaudited pro forma condensed combined income statement for the year ended
December 31, 2001 ................................................................... EXC-5
Notes to the unaudited pro forma financial information .............................. EXC-6
EXC-2
Central European Distribution Corporation
Unaudited Pro Forma Condensed Combined Balance Sheet Information
June 30, 2002
Amounts in columns expressed in thousands of USD
Total
Damianex AGIS S.A, Pro Forma
Historical CEDC S.A. Pro Forma CEDC with
(A1) Pro Forma Adjust- AGIS S.A. and
Adjustments ments DAMIANEX S.A.
---------------- ------------------------------ ---------------
ASSETS
Current Assets
Cash and cash equivalents $ 2,681 $ 2,681
Accounts receivable, net 41,316 41,316
Inventories 15,949 15,949
Deferred income taxes and
other current assets 2,942 2,942
---------------- ------------------------------ ---------------
62,888 62,888
Property, plant and
equipment, net 6,113 6,113
Intangible assets, net 2,863 2,863
Goodwill, net 22,515 C2 43 C1 67 22,625
Deferred income taxes and
other assets 1,570 1,570
---------------- ------------------------------ ---------------
Total Assets $ 95,949 43 67 $ 96,059
================ ============================== ===============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Trade accounts payable $ 28,634 $ 28,634
Bank loans and overdraft
facilities 17,054 17,054
Income and other taxes payable 1,915 1,915
Other accrued liabilities 2,095 2,095
Current portion of debt and
capital leases 3,755 3,755
---------------- ------------------------------ ---------------
53,453 53,453
Non-current deferred taxes
Long-term portion of debt and
capital leases 6,088 6,088
Temporary equity 1,836 1,836
Stockholders' Equity
Common stock 58 58
Additional paid-in-capital 26,479 26,479
Retained earnings 9,884 C2 43 C1 67 9,994
Accumulated other
comprehensive income (loss) (1,699) (1,699)
Less Treasury shares (150) (150)
---------------- ------------------------------ ---------------
34,572 43 67 34,682
---------------- ------------------------------ ---------------
Total Liabilities and
Stockholders' Equity $ 95,949 43 67 $ 96,059
================ ============================== ===============
EXC-3
Central European Distribution Corporation
Unaudited Pro Forma Condensed Combined Income Statement Information
For the six month period ended June 30, 2002
Amounts in columns expressed in thousands of USD (except per share data)
Total
Pro Forma
Historical Pre- Pre- DAMIANEX AGIS S.A. CEDC with
CEDC acquisition acquisition S.A. Pro Forma AGIS S.A.
(A1) Daminanex AGIS S.A Pro Forma Adjustments and
(A5) (A3) Adjustments Damianex
S.A.
--------------- ------------- --------------- --------------------------------------------------
Net sales $114,108 $21,653 $20,267 $156,028
Cost of goods sold,
excluding depreciation
and amortization 98,704 19,478 19,079 137,261
--------------- ------------- ------------------------------------------------------------------
15,404 2,175 1,188 18,767
Selling, general and
administrative expenses, F1 (20)
excluding depreciation 9,700 1,915 1,079 F1 72 12,746
Bad debt expense 580 8 (2) 586
Depreciation of tangible
fixed assets 565 23 67 F2 3 F1 (8) 650
Amortization of
intangible assets 103 - - 103
--------------- ------------- ------------------------------------------------------------------
Operating income 4,456 229 44 (3) (44) 4,682
Non-operating income
(expense)
Interest expense (551) (169) (152) D (35) D (25) (932)
Other income (expense),
net (284) 40 230 (14)
--------------- ------------- ------------------------------------------------------------------
Income before income
taxes 3,621 100 122 (38) (69) 3,736
Income tax (expense)
benefit (898) (30) (5) G 11 G 19 (903)
--------------- ------------- ------------------------------------------------------------------
Net income $ 2,723 $ 70 $ 117 $(27) $(50) $ 2,833
=============== ============= ==================================================================
Net income per share of
common stock, basic $ 0.54 $ 0.52
=============== ==============
Net income per share of
common stock, diluted $ 0.52 $ 0.49
=============== ==============
EXC-4
Central European Distribution Corporation
Unaudited Pro Forma Condensed Combined Income Statement Information
For the year ended December 31, 2001
Amounts in columns expressed in thousands of USD (except per share data)
Total
Pro Forma
Historical Historical Historical DAMIANEX AGIS S.A. CEDC with
CEDC Damianex AGIS S.A (A4) S.A. Pro Forma AGIS S.A.
(A2) S.A Pro Forma Adjustments and
(A6) Adjustments DAMIANEX
S.A.
-------------- ----------- ------------------------------------------------------------------
Net sales $ 178,236 $78,977 $75,449 $332,662
Cost of goods sold, excluding
--------------
depreciation and
--------------
amortization 154,622 70,262 69,649 294,533
-------------- ----------- ------------------------------------------------------------------
23,614 8,715 5,800 38,129
Selling, general and
administrative expenses, 16,445 6,008 2,703 F (41) 25,331
excluding depreciation F1 216
Bad debt expense 711 218 106 1,035
Depreciation of tangible
fixed assets 841 258 165 F2 10 F1 (16) 1,258
Amortization of intangible
assets 762 - - 762
-------------- ----------- ------------------------------------------------------------------
Operating income 4,855 2,231 2,826 (10) (159) 9,743
Non-operating income (expense)
Interest expense (1,345) (555) (665) D (106) D (77) (2,748)
Other income (expense), net 148 55 (14) - 189
-------------- ----------- ------------------------------------------------------------------
Income before income taxes 3,658 1,731 2,147 (116) (236) 7,184
Income tax (expense) benefit
(1,132) (520) (650) G 33 G 66 (2,203)
-------------- ----------- ------------------------------------------------------------------
Net income $ 2,526 $ 1,211 $ 1,497 $(83) $(170) $ 4,981
============== =========== ==================================================================
Net income per share of common
stock, basic $ 0.58 $ 0.90
============== ==============
Net income per share of common
stock, diluted $ 0.57 $ 0.90
============== ==============
EXC-5
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(Amounts in columns expressed in thousands of USD)
A. THESE COLUMNS REPESENT THE HISTORICAL BALANCE SHEETS AND RESULTS OF
OPERATIONS AS FOLLOWS:
(1)-CEDC - consolidated financial position and operating results
as of and for the six month period ended June 30, 2002
(2)-CEDC - consolidated operating results for the year ended
December 31, 2001
(3)-AGIS S.A. - historical pre-acquisition financial position and
operating results between January 1, 2002 and April 24,
2002
(4)-AGIS S.A. - historical operating results for the year ended
December 31, 2001
(5)-Damianex S.A. - historical pre-acquisition financial position and
operating results between January 1, 2002 and April 22,
2002
(6)-Damianex S.A. - historical operating results for the year ended
December 31, 2001
B. ACQUISITIONS
(1). AGIS S.A.
On April 24, 2002, the CEDC group purchased the outstanding shares of AGIS
S.A. Total consideration for the acquisition consisted of the following:
Cash consideration to stockholders $ 4,568
*172,676 shares of CEDC common stock 2,171
Acquisition costs (estimated) 262
--------
$ 7,001
========
* CEDC's common stock was valued at the average stock price a few days before
and after the purchase intent was announced and the agreement terms were
finalized. The shares issued are not registered and may not be sold without
the consent of CEDC for six months subsequent to the acquisition date.
EXC-6
Central European Distribution Corporation
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(Amounts in columns expressed in thousands of USD)
(2). DAMIANEX S.A.
On April 22, 2002, the CEDC group purchased the outstanding shares of
Damianex S.A. Total consideration for the acquisition consisted of the
following:
Cash consideration to stockholders $ 7,138
*152,996 shares of CEDC common stock
1,836
Acquisition costs (estimated) 317
----------
$ 9,291
==========
* CEDC's common stock was valued at the average stock price a few days
before and after the agreement terms were finalized. The shares issued are
not registered and may not be sold without the consent of CEDC for one year
subsequent to the acquisition date.
The sellers were granted an option to sell the acquired CEDC stock ("Put
Option") back to the Company at a price of $12.00 per share during the
period from April 23, 2003 to April 29, 2003. If the put lapses, the shares
will be transferred to equity. If the shares are purchased by the Company
they will be treated as treasury shares. These shares have been disclosed in
the pro forma condensed combined balance sheet as temporary equity above
stockholders' equity. The accounting entries for the temporary equity is as
follows:
152,996 shares at $11.64* $1,781,000
152,996 shares at $00.36** $ 55,000
Total value 152,996 at $12.00 $1,836,000
*The average market price a few days before and after the acquisition was
agreed.
** The added value required to bring the total value to the $12.00 put
option price.
Prior to the exercise option period (April 23, 2003 to April 29, 2003) these
shares will be considered in the calculation of diluted earnings per share
(unless they are anti-dilutive).
As part of the Agreement, approximately $3,200,000 was transferred to an
escrow account. The funds in the escrow account will be paid to the sellers
when CEDC receives approval from the Polish Government in regards to the
ownership of the real estate element of the transaction (estimated to be
approximately 3 months). If approval is not received, the real estate will
be separated from the Company and sold to a mutually agreed upon third party
for a mutually agreed price. As part of the sale of the real estate, a lease
agreement would be established for a period of three to five years with the
buyers which shall not exceed the market price applicable in the region. If
the real estate is not sold within six months from the day the Polish
Government informs the parties of its refusal, the funds in the escrow
account will be transferred back to CEDC with 50% of the interest earned on
the escrowed amount.
EXC-7
Central European Distribution Corporation
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(Amounts in columns expressed in thousands of USD)
C. DETERMINATION OF GOODWILL
(1) AGIS S.A.
In connection with the preparation of the pro forma condensed combined
balance sheet information, the book values of certain assets were adjusted
to estimated fair values as follows:
Cost of acquisition $7,001
Historical net book value *597
Other current assets **165
----------
Preliminary goodwill $6,239
==========
*The historical net book of $2,009,000 has been reduced to reflect a dividend
declared in April 2002 in regards to prior year earnings for the amount of
approximately $1,412,000.
**The goodwill was adjusted to reflect the estimated acquired goodwill
determined as of January 1, 2002.
Prior to the finalization of the business combination agreement all the real
estate (land and buildings) and certain vehicles were sold to the former
shareholders. CEDC believes fair market value of the remaining assets is
equal to their carrying values, and this will be confirmed upon finalization
of the appraisal of business combination assets.
(2) DAMIANEX S.A.
The book values of certain assets of the Damianex S.A. acquisition were
adjusted to estimated fair values as follows (assuming the Polish Government
approves the real estate element of the transaction):
Cost of acquisition $9,291
Historical net book value *2,831
To increase land to estimated fair value ***165
To increase buildings to estimated fair value ***203
To record deferred taxes on increase of book values of land and
buildings ***(92)
Other current assets **446
-----------
----------
Preliminary goodwill $5,738
==========
* The historical net book has been reduced to reflect a dividend declared in
April 2002 in the amount of $740,000.
** The goodwill was adjusted to reflect the estimated acquired goodwill
determined as of January 1, 2002.
*** Assuming the Polish Government approves the real estate element of the
transaction.
In accordance with SFAS 142, goodwill is no longer amortized. The allocation
of the excess purchase price to goodwill may be revised when the Company
receives the independent valuations in regards to the acquisitions (Damianex
S.A. and AGIS S.A.) of the tangible and intangible business assets acquired
and upon completion of the escrow period for the Damianex S.A. acquisition
and final determination of the purchase price for AGIS for
EXC-8
Central European Distribution Corporation
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
Amounts in columns expressed in thousands of USD
the effects of old accounts receivable. CEDC does not expect material
adjustments from the completion of this process.
D. FINANCING OF ACQUISITIONS
The Company secured additional long-term borrowings of approximately
$4,300,000 to finance the acquisitions. The interest rate on the additional
borrowings is LIBOR plus 2%. The average LIBOR plus 2% rate for 2001 and for
the three- month period ended March 31, 2002 was approximately 4.25%. The
Company allocated $1,800,000 and $2,500,000 of additional borrowing for the
purchases of AGIS S.A. and Damianex S.A., respectively. The additional
interest expense for AGIS S.A. in regards to the pro forma condensed combined
income statement information is approximately $77,000 and $25,000 for the
year end December 31, 2001 and for the pre-acquisition period January 1, 2002
to April 24, 2002. The additional interest expense for Damianex S.A. in
regards to the pro forma condensed combined income statement information is
approximately $106,000 and $35,000 for the year ended December 31, 2001 and
for the pre-acquisition period January 1, 2002 to April 22, 2002.
The loan is repayable in quarterly installments commencing during the second
quarter of 2003.
On March 28, 2002, CEDC finalized the private placement of 800,000 shares of
the Company's common stock. The Company received approximate net proceeds of
$7,543,000. The Company is using the proceeds as follows:
Acquisition of Damianex S.A. $4,638
Acquisition of AGIS S.A. 2,768
Other 137
-----------
$7,543
===========
Because the private placement was completed on March 28, 2002, it has been
included in the "historical CEDC" column. The effect is in cash ($7,543,000),
Stockholders Equity Common Stock ($8,000) and additional paid in capital
($7,535,000).
E. ELIMINATION OF ACQUIRED COMPANIES SHAREHOLDERS' EQUITY ACCOUNTS
For information purposes as at June 30, 2002 AGIS and Damianex had
shareholder equity account balances of :
AGIS S.A. Damianex S.A.
June 30, 2002 June 30, 2002
----------------- ----------------
Common Stock $ 229 $1,739
Retained earnings 876 2,445
Accumulated other comprehensive loss, (net of
tax) (102) (32)
----------------- ----------------
$ 1,003 $4,152
================= ================
These balances were eliminated in determining the CEDC historical shareholder
equity accounts.
EXC-9
Central European Distribution Corporation
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
Amounts in columns expressed in thousands of USD
F. PROFORMA EXPENSE ADJUSTMENTS
(1). CEDC did not acquire any of the AGIS buildings. As a result CEDC
entered into lease agreements with the former shareholders of AGIS to lease
the buildings for an unspecified period. This pro forma entry reflects the
elimination with respect to the depreciation of the buildings and the
addition of rent expense on the lease referred to above. Depreciation in the
amount of $16,000 and $8,000 has been reduced for the year ended December
31, 2001 and the pre-acquisition period January 1, 2002 to April 24, 2002
respectively. Rent expense of $216,000 and $72,000 has been recognized for
the year ended December 31, 2001 and for the pre-acquisition period January
1, 2002 to April 24, 2002, respectively.
Additionally, the $150,000 profit made on the sale of the real estate prior
to acquisition has been eliminated as it is a direct consequence of the
acquisition. An adjustment of $42,000 regarding the associated tax charge
has also been made.
Additionally, real estate taxes and maintenance costs applicable to the
buildings were eliminated, the expenses eliminated were $41,000 and $20,000
for the year ended December 31, 2001 and the pre-acquisition period January
1, 2002 to April 24, 2002, respectively.
(2). Damianex S.A. - The increase in the fair market values of the acquired
buildings subsequently increased the depreciation expense for the year ended
2001 and for the six month period ended June 30, 2002. The depreciation
expense was calculated based on the estimated average remaining life of
buildings (approximately 20 years) which is approximately 5%. The additional
depreciation expense for the year ended December 31, 2001 and for the
pre-acquisition period January 1, 2002 to April 24, 2002 is approximately
$10,000 and $3,000.
G. PRO FORMA INCOME TAX ADJUSTMENTS
AGIS S.A. Damianex S.A.
Six-month period Six- month period
ended June 30, 2002 ended June 30, 2002
Interest expense $ 25 $ 35
Rent expense 72 -
Real estate tax and repairs and maintenance (20) -
Depreciation (8) 3
------------- -------------
Additional tax deductible expenditures 69 38
Tax rate for period 28% 28%
------------- -------------
Total pro forma tax expense $ 19 $ 11
============= =============
EXC-10
Central European Distribution Corporation
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
Amounts in columns expressed in thousands of USD (except per share data)
AGIS S.A. Damianex S.A.
Year ended December Year ended December
31, 2001 31, 2001
Interest expense $ 77 $ 106
Rent expense 216 -
Real estate tax and repairs and maintenance (41) -
Depreciation (16) 10
----------- -----------
Additional tax deductible expenditures 236 116
Tax rate for period 28% 28%
----------- -----------
Total pro forma tax expense $ 66 $ 33
=========== ===========
Goodwill is not tax deductible.
H. PERSONNEL REDUCTIONS
CEDC's management does not presently anticipate any significant personnel
reductions as a result of the acquisitions.
I. PRO FORMA NET INCOME PER SHARE INFORMATION
Pro forma net income per share information considers the effects of shares
issued in connection with the transaction as though they were outstanding
during the periods presented. The shares used for these calculations were as
follows:
Periods ended
-------------
Year end Six month period ended
December 31, 2001 June 30, 2002
------------------------ ----------------------
Historical Pro forma Historical Pro forma
---------- --------- ---------- ---------
Basic 4,359 *5,332 5,006 *5,497
Dilutive 4,447 **5,420 5,261 ***5,752
* Includes the following:
800,000 common shares issued in regards to the
private placement offering.
172,676 common shares issued in regards to the
AGIS acquisition
** The pro forma diluted earnings per share are calculated using the pro forma
shares indicated above. The pro forma diluted earnings per share calculation
does not include the 161,380 incremental shares as a result of applying the
reverse treasury stock method to the 152,996 common shares with attached put
options issued in connection with the Damianex acquisition. The result of this
is anti-dilutive.
***The 152, 996 common shares as indicated above are anti-dilutive for the
six-month period ended June 30, 2002.
EXC-11