Central European Distribution Corporation Announces Third Quarter 2012 Results; Company Finalizes Restatement for 2nd Quarter 2012
MT. LAUREL, N.J., Nov. 16, 2012 /PRNewswire/ -- Central European Distribution Corporation (NASDAQ: CEDC) today announced its results for the third quarter of 2012. CEDC also announced that it has finalized the restatement of its financial statements for the second quarter 2012.
Third Quarter 2012 Results
CEDC today announced that, for the three months ended September 30, 2012 net sales were $191.3 million as compared to $209.6 million reported for the same period in 2011. CEDC also announced that its net income on a U.S. GAAP basis (as hereinafter defined), for the third quarter was $35.8 million or $0.44 per fully diluted share, as compared to a net loss of $848.7 million or $11.71 per fully diluted share, for the same period in 2011. On a comparable basis, CEDC announced a net loss of $0.3 million, or $0.00 per fully diluted share, for the third quarter of 2012, as compared to a net loss of $4.5 million, or $0.06 per fully diluted share, for the same period in 2011. The number of fully diluted shares used in computing the earnings per share was 81.8 million for the third quarter of 2012 and 72.6 million for the same period in 2011. For a complete reconciliation of comparable net income to net income reported under United States Generally Accepted Accounting Principles ("U.S. GAAP"), please see the section "Unaudited Reconciliation of Non-GAAP Measures".
Q3 2012 Business summary (in comparison to Q3 2011):
- Net sales of $191 million (-8.7%), driven by organic growth of 1 % which was offset by negative impact of FX (-9.7%);
- Overall comparable gross margin improvement from 38% to 43%;
- Comparable operating profit up by 22%; and
- Further growth of domestic vodka sales in volume and value in Poland; decline in the Russian market due to among others factors prior overstocking of the market before July 1st excise tax increase.
"In spite of the challenges faced by the company during this period, the changes in operational management and controls are starting to produce improved operating results. The efforts we have put into better execution of our pricing policy and focus on more profitable product mix in all of our key markets resulted in improvement of our comparable gross margin and significant increase of our comparable operating profit," commented David Bailey, CEO of CEDC
For further information regarding the third quarter of 2012, a slide presentation will be available on the Investor Relations section of our website at www.cedc.com/investor-relations.
Financial Restatement
As previously disclosed, upon the recommendation of senior management, the Audit Committee of CEDC's board of directors concluded that CEDC's unaudited condensed consolidated financial statements for the three and six months ended June 30, 2012, should no longer be relied upon because of a need to correct an excess write-off of accounts receivable previously recorded to account for promotional compensation granted to one customer at the Russian Alcohol Group ("RAG"), its main operating subsidiary in Russia. The excess write-off resulted in an inadvertent understatement of CEDC's accounts receivable. CEDC's management has concluded that as a result of the correction, accounts receivable as at June 30, 2012 were understated by $5.8 million, taxes other than income taxes were understated by $0.1 million, foreign currency translation adjustment was overstated by $0.3 million and selling, general and administrative expenses for the three and six months ended June 30, 2012 were overstated by $6.0 million, resulting in an understatement of the net income for the three and six months ended June 30, 2012 of $6.0 million. These amounts reflect the fact that certain accounts receivable from one customer of RAG that had been written off in the CEDC's unaudited condensed consolidated financial statements for the three and six month period ended June 30, 2012, were recovered before the filing of the CEDC's unaudited condensed consolidated financial statements for the three and six months ended June 30, 2012 with the United States Securities and Exchange Commission and therefore the associated accounts receivable should have been higher. The adjustments have no impact on previously reported net cash provided by operating activities reported in the cash flow statements during the period.
In addition to the error in recognition of accounts receivable in previously issued financial statements described above, the restated unaudited condensed consolidated financial statements for the three and six months ended June 30, 2012 to be filed by CEDC will also correct the presentation of non-trade receivables from accounts receivable and accrued liabilities to other current assets, and as a result reported accounts receivable will be decreased by $8.6 million, other accrued liabilities will be decreased by $2.0 million and other current assets will be increased by $6.6 million. The unaudited condensed consolidated statement of operations for the three and six month period ended June 30, 2012 and the unaudited condensed consolidated statement of cash flow for the six months then ended will not be affected by this presentation error.
CEDC is currently targeting a date of November 19, 2012, for filing an amended quarterly report on Form 10-Q for the three and six months ended June 30, 2012 with the United States Securities and Exchange Commission to reflect the restated financial statements. There can be no assurance, however, that this filing will be made within the anticipated period.
NASDAQ Compliance Letter
CEDC also announced that on November 14, 2012 it received a letter from the Nasdaq Listing Qualifications Department stating that, since CEDC has not yet filed its Form 10-Q for the period ended September 30, 2012, it no longer complies with Nasdaq Listing Rule 5250(c)(1). The letter states that CEDC has until January 8, 2013 to submit a plan to regain compliance and that, if it accepts CEDC's plan, Nasdaq can grant an exception until May 8, 2013 for CEDC to regain compliance. CEDC intends to file its Form 10-Q as soon as practicable and expects to regain compliance with Listing Rule 5250(c)(1) upon such filing.
Non-GAAP Financial Information
CEDC has reported net income and fully diluted net income per share in accordance with GAAP and on a non-GAAP basis, referred to in this release as comparable 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 and guidance 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. These measures are 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.
About Central European Distribution Corporation
CEDC is one of the largest producers of vodka in the world and Central and Eastern Europe's largest integrated spirit beverage business. CEDC produces the Green Mark, Absolwent, Zubrowka, Bols, Parliament, Zhuravli, Royal and Soplica brands, among others. CEDC currently exports its products to many markets around the world, including the United States, England, France and Japan.
CEDC also is a leading importer of alcoholic beverages in Poland, Russia and Hungary. In Poland, CEDC imports many of the world's leading brands, including brands such as Carlo Rossi Wines, Concha y Toro wines, Metaxa Liqueur, Remy Martin Cognac, Sutter Home wines, Grant's Whisky, Jagermeister, E&J Gallo, Jim Beam Bourbon, Sierra Tequila, Teacher's Whisky, Campari, Cinzano, and Old Smuggler. CEDC is also a leading importer of premium spirits and wines in Russia with such brands as Concha y Toro, among others.
Cautionary Statement about Forward-Looking Information
This press release contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the effect of changes in CEDC management and controls on CEDC's operating results, gross margin or operating profit. Forward looking statements are based on our knowledge of facts as of the date hereof and 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 our forward looking statements. Such risks include, among others, uncertainties regarding the timing of the filing of the restatement, unanticipated accounting issues or audit issues regarding the financial data for the period to be restated or adjusted and the inability of CEDC or its independent registered public accounting firm to confirm relevant information or data.
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 securities laws. Investors are referred to the full discussion of risks and uncertainties included in CEDC's Form 10-K/A for the fiscal year ended December 31, 2011, filed with the SEC on October 5, 2012, including statements made under the captions "Item 1A. Risks Relating to Our Business" and in other documents filed by CEDC with the SEC.
Contact:
In the U.S.:
Jim Archbold
Investor Relations Officer
Central European Distribution Corporation
856-273-6980
In Europe:
Anna Załuska
Corporate PR Manager
Central European Distribution Corporation
48-22-456-6061
| CENTRAL EUROPEAN DISTRIBUTION CORPORATION |
||||
| 30 September, 2012 |
31 December, 2011 |
|||
| (unaudited) |
||||
| ASSETS |
||||
| Current Assets |
||||
| Cash and cash equivalents |
$102,713 |
$94,410 |
||
| Accounts receivable, net of allowance for doubtful accounts at September 30, 2012 of $26,512 and at December 31, 2011 of $24,510 |
220,802 |
410,866 |
||
| Inventories |
160,061 |
117,690 |
||
| Prepaid expenses |
27,472 |
16,538 |
||
| Other current assets |
48,780 |
23,020 |
||
| Deferred income taxes |
5,173 |
4,717 |
||
| Debt issuance costs |
7,389 |
2,962 |
||
| Total Current Assets |
572,390 |
670,203 |
||
| Intangible assets, net |
486,787 |
463,848 |
||
| Goodwill |
706,924 |
670,294 |
||
| Property, plant and equipment, net |
178,871 |
176,660 |
||
| Deferred income taxes, net |
23,195 |
21,488 |
||
| Debt issuance costs |
11,324 |
13,550 |
||
| Non-current assets held for sale |
675 |
675 |
||
| Total Non-Current Assets |
1,407,776 |
1,346,515 |
||
| Total Assets |
$1,980,166 |
$2,016,718 |
||
| LIABILITIES AND EQUITY |
||||
| Current Liabilities |
||||
| Trade accounts payable |
$78,735 |
$144,797 |
||
| Bank loans and overdraft facilities |
115,196 |
85,762 |
||
| Obligations under Convertible Senior Notes |
257,122 |
0 |
||
| Obligations under Debt Security |
70,000 |
0 |
||
| Income taxes payable |
9,421 |
9,607 |
||
| Taxes other than income taxes |
101,820 |
189,515 |
||
| Other accrued liabilities |
75,357 |
48,208 |
||
| Current portions of obligations under capital leases |
832 |
1,109 |
||
| Total Current Liabilities |
708,483 |
478,998 |
||
| Long-term obligations under capital leases |
674 |
532 |
||
| Long-term obligations under Convertible Senior Notes |
0 |
304,645 |
||
| Long-term obligations under Senior Secured Notes |
933,871 |
932,089 |
||
| Long-term accruals |
2,093 |
2,000 |
||
| Deferred income taxes |
94,815 |
91,128 |
||
| Commitments and contingent liabilities (Note 15) |
||||
| Total Long-Term Liabilities |
1,031,453 |
1,330,394 |
||
| Temporary equity |
29,443 |
0 |
||
| Stockholders' Equity |
||||
| Common Stock ($0.01 par value, 120,000,000 shares authorized, 73,045,992 and 72,740,302 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively) |
730 |
727 |
||
| Preferred Stock ($0.01 par value, 1,000,000 shares authorized, none issued and outstanding) |
0 |
0 |
||
| Additional paid-in-capital |
1,371,389 |
1,369,471 |
||
| Accumulated deficit |
(1,189,620) |
(1,197,884) |
||
| Accumulated other comprehensive income |
28,438 |
35,162 |
||
| Less Treasury Stock at cost (246,037 shares at September 30, 2012 and December 31, 2011, respectively) |
(150) |
(150) |
||
| Total Stockholders' Equity |
210,787 |
207,326 |
||
| Total Liabilities and Equity |
$1,980,166 |
$2,016,718 |
||
| CENTRAL EUROPEAN DISTRIBUTION CORPORATION |
|||||||
| Three months ended September 30, |
Nine months ended September 30, |
||||||
| 2012 |
2011 |
2012 |
2011 |
||||
| Sales |
$401,113 |
$432,942 |
$1,125,619 |
$1,176,861 |
|||
| Excise taxes |
(209,782) |
(223,304) |
(601,098) |
(630,513) |
|||
| Net sales |
191,331 |
209,638 |
524,521 |
546,348 |
|||
| Cost of goods sold |
109,317 |
131,427 |
312,055 |
340,820 |
|||
| Gross profit |
82,014 |
78,211 |
212,466 |
205,528 |
|||
| 42.9% |
37.3% |
40.5% |
37.6% |
||||
| Selling, general and administrative expenses |
66,835 |
61,710 |
187,909 |
180,836 |
|||
| Gain on remeasurement of previously held equity interests |
0 |
0 |
0 |
(7,898) |
|||
| Impairment charge |
0 |
674,515 |
0 |
674,515 |
|||
| Operating income / (loss) |
15,179 |
(658,014) |
24,557 |
(641,925) |
|||
| Non operating income / (expense), net |
|||||||
| Interest income / (expense), net |
(26,231) |
(28,123) |
(78,139) |
(83,336) |
|||
| Other financial income / (expense), net |
58,490 |
(170,337) |
80,648 |
(120,807) |
|||
| Other non operating income / (expense), net |
(5,883) |
(10,683) |
(10,982) |
(14,320) |
|||
| Income / (loss) before income taxes and equity in net losses from unconsolidated investments |
41,555 |
(867,157) |
16,084 |
(860,388) |
|||
| Income tax benefit / (expense) |
(5,786) |
18,422 |
(7,820) |
14,232 |
|||
| Equity in net losses of affiliates |
0 |
0 |
0 |
(7,946) |
|||
| Net income / (loss) attributable to the company |
35,769 |
(848,735) |
8,264 |
(854,102) |
|||
| Net income / (loss) from operations per share of common stock, basic |
$0.46 |
($11.71) |
$0.11 |
($11.85) |
|||
| Net income / (loss) from operations per share of common stock, diluted |
$0.44 |
($11.71) |
$0.10 |
($11.85) |
|||
| Other comprehensive income / (loss), net of tax: |
|||||||
| Foreign currency translation adjustments |
10,945 |
(215,010) |
(6,724) |
(50,410) |
|||
| Comprehensive income / (loss) attributable to the company |
$46,714 |
($1,063,745) |
$1,540 |
($904,512) |
|||
| CENTRAL EUROPEAN DISTRIBUTION CORPORATION |
||||
| Nine months ended September 30, |
||||
| 2012 |
2011 |
|||
| Cash flows from operating activities |
||||
| Net income / (loss) |
$8,264 |
($854,102) |
||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||
| Depreciation and amortization |
15,075 |
15,328 |
||
| Deferred income taxes |
(1,948) |
(5,138) |
||
| Unrealized foreign exchange gains |
(77,591) |
118,366 |
||
| Stock options fair value expense |
1,919 |
1,998 |
||
| Equity loss in affiliates |
0 |
7,946 |
||
| Gain on fair value remeasurement of previously held equity interest |
0 |
(6,397) |
||
| Impairment charge |
0 |
674,515 |
||
| Impairments related to assets held for sale |
0 |
7,355 |
||
| Other non cash items |
849 |
6,170 |
||
| Changes in operating assets and liabilities: |
||||
| Accounts receivable |
211,483 |
246,153 |
||
| Inventories |
(33,969) |
(9,183) |
||
| Prepayments and other current assets |
(42,447) |
(7,701) |
||
| Trade accounts payable |
(78,804) |
(42,518) |
||
| Other accrued liabilities and payables (including taxes) |
(71,829) |
(106,396) |
||
| Net cash provided by / (used in) operating activities |
(68,998) |
46,396 |
||
| Cash flows from investing activities |
||||
| Purchase of fixed assets |
(8,017) |
(5,422) |
||
| Proceeds from the disposal of fixed assets |
381 |
0 |
||
| Purchase of intangibles |
0 |
(693) |
||
| Purchase of trademarks |
0 |
(17,473) |
||
| Acquisitions of subsidiaries, net of cash acquired |
0 |
(24,125) |
||
| Net cash used in investing activities |
(7,636) |
(47,713) |
||
| Cash flows from financing activities |
||||
| Borrowings on bank loans and overdraft facility |
78,177 |
36,027 |
||
| Payment of bank loans, overdraft facility and other borrowings |
(45,439) |
(37,892) |
||
| Debt security, net of debt issuance cost of $838 |
69,162 |
0 |
||
| Repayment of Convertible Senior Notes |
(50,392) |
0 |
||
| Issuance of shares in private placement |
29,885 |
0 |
||
| Decrease in short term capital leases payable |
(252) |
(34) |
||
| Proceeds from options exercised |
0 |
72 |
||
| Net cash provided by / (used in) financing activities |
81,141 |
(1,827) |
||
| Currency effect on brought forward cash balances |
3,796 |
(7,781) |
||
| Net increase in cash |
8,303 |
(10,925) |
||
| Cash and cash equivalents at beginning of period |
94,410 |
122,116 |
||
| Cash and cash equivalents at end of period |
$102,713 |
$111,191 |
||
| Supplemental Schedule of Non-cash Investing Activities |
||||
| Common stock issued in connection with investment in subsidiaries |
$0 |
$23,175 |
||
| CENTRAL EUROPEAN DISTRIBUTION CORPORATION |
|||||||
| GAAP |
A |
B |
C |
D |
Comparable |
||
| Q3-12 |
FX |
APB 14 |
Advisory costs |
Restructuring / Re-licensing Costs |
Q3-12 |
||
| Sales |
$401,113 |
$0 |
$0 |
$0 |
$0 |
$401,113 |
|
| Excise taxes |
(209,782) |
0 |
0 |
0 |
0 |
(209,782) |
|
| Net sales |
191,331 |
0 |
0 |
0 |
0 |
191,331 |
|
| Cost of goods sold |
109,317 |
0 |
0 |
0 |
0 |
109,317 |
|
| Gross profit |
82,014 |
0 |
0 |
0 |
0 |
82,014 |
|
| 42.86% |
42.86% |
||||||
| Operating expenses |
66,835 |
0 |
0 |
(11,383) |
(1,932) |
53,520 |
|
| Operating income |
15,179 |
0 |
0 |
11,383 |
1,932 |
28,494 |
|
| 7.93% |
14.89% |
||||||
| Non operating income / (expense), net |
|||||||
| Interest income / (expense), net |
(26,231) |
0 |
1,510 |
0 |
0 |
(24,721) |
|
| Other financial income / (expense), net |
58,490 |
(58,490) |
0 |
0 |
0 |
0 |
|
| Other non operating income / (expense), net |
(5,883) |
0 |
0 |
1,867 |
0 |
(4,016) |
|
| Income / (loss) before taxes and equity in net income from unconsolidated investments |
41,555 |
(58,490) |
1,510 |
13,250 |
1,932 |
(243) |
|
| Income tax benefit / (expense) |
(5,786) |
11,698 |
(529) |
(4,355) |
(1,043) |
(15) |
|
| Net income /(loss) |
$35,769 |
($46,792) |
$981 |
$8,895 |
$889 |
($258) |
|
| Net income / (loss) from continuing operations per share of common stock, basic |
$0.46 |
($0.00) |
|||||
| Net income / (loss) from continuing operations per share of common stock, diluted |
$0.44 |
($0.00) |
|||||
A. Represents the net after tax impact of the foreign currency revaluation related to our USD and EUR liabilities as a majority of these have been lent down to entities that have the Polish Zloty or Russian Ruble as their functional currency. Also includes the proportional net after tax impact of the foreign currency revaluation related to the foreign currency liabilities included in the earnings of the Russian Alcohol Group as it has the Russian Ruble as its functional currency.
B. In May 2008, the FASB issued FSP APB 14-1, which impacts the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. FSP APB 14-1 will impact the accounting associated with our $310.0 million senior convertible notes. This FSP requires us to recognize additional non-cash interest expense on a retrospective basis, based on the market rate for similar debt instruments without the conversion feature. Furthermore, it requires recognizing interest expense in prior periods pursuant to the retrospective accounting treatment. FSP APB 14-1 has become effective beginning in our first quarter of 2009 and is required to be applied retrospectively to all presented periods, as applicable.
C. Represents one-off legal and other professional service costs associated with transaction with the Russian Standard and the restatement process.
D. Represents net impact of one-off items related to restructuring associated with the Russian Alcohol Group and the Whitehall Group in Russia as well as severance payments for former officers of the Company.
| GAAP |
A |
B |
C |
D |
Comparable |
||
| Q3-11 |
FX |
APB 14 |
Restructuring Costs |
Other Adjustments |
Q3-11 |
||
| Sales |
$432,942 |
$0 |
$0 |
$0 |
$0 |
$432,942 |
|
| Excise taxes |
(223,304) |
0 |
0 |
0 |
0 |
(223,304) |
|
| Net sales |
209,638 |
0 |
0 |
0 |
0 |
209,638 |
|
| Cost of goods sold |
131,427 |
0 |
0 |
(446) |
0 |
130,981 |
|
| Gross profit |
78,211 |
0 |
0 |
446 |
0 |
78,657 |
|
| 37.31% |
37.52% |
||||||
| Operating expenses |
61,710 |
0 |
0 |
(6,415) |
0 |
55,295 |
|
| Impairment charge |
674,515 |
0 |
0 |
0 |
(674,515) |
0 |
|
| Operating income / (loss) |
(658,014) |
0 |
0 |
6,861 |
674,515 |
23,362 |
|
| -313.88% |
11.14% |
||||||
| Non operating income / (expense), net |
|||||||
| Interest income / (expense), net |
(28,123) |
0 |
1,101 |
0 |
0 |
(27,022) |
|
| Other financial income / (expense), net |
(170,337) |
170,337 |
0 |
0 |
0 |
0 |
|
| Other non operating income / (expense), net |
(10,683) |
0 |
0 |
8,678 |
0 |
(2,005) |
|
| Income / (loss) before taxes and equity in net income from unconsolidated investments |
(867,157) |
170,337 |
1,101 |
15,539 |
674,515 |
(5,665) |
|
| Income tax benefit / (expense) |
18,422 |
(34,067) |
(385) |
(3,263) |
20,484 |
1,190 |
|
| Net income /(loss) |
($848,735) |
$136,270 |
$716 |
$12,276 |
$694,999 |
($4,475) |
|
| Net loss from continuing operations per share of common stock, basic |
($11.71) |
($0.06) |
|||||
| Net loss from continuing operations per share of common stock, diluted |
($11.71) |
($0.06) |
|||||
A. Represents the net after tax impact of the foreign currency revaluation related to our USD and EUR liabilities as a majority of these have been lent down to entities that have the Polish Zloty or Russian Ruble as their functional currency. Also includes the proportional net after tax impact of the foreign currency revaluation related to the foreign currency liabilities included in the earnings of the Russian Alcohol Group as it has the Russian Ruble as its functional currency.
B. In May 2008, the FASB issued FSP APB 14-1, which impacts the accounting treatment for convertible debt instruments that allow for either mandatory or optional cash settlements. FSP APB 14-1 will impact the accounting associated with our $310.0 million senior convertible notes. This FSP requires us to recognize additional non-cash interest expense on a retrospective basis, based on the market rate for similar debt instruments without the conversion feature. Furthermore, it requires recognizing interest expense in prior periods pursuant to the retrospective accounting treatment. FSP APB 14-1 has become effective beginning in our first quarter of 2009 and is required to be applied retrospectively to all presented periods, as applicable.
C. Includes elimination costs associated with the re-licensing in Russia. Primarily consists of costs related to facility improvements and preparation of facilities for inspection as well as accounts receivables related to wholesalers who did not obtain required wholesale licenses. Also includes costs associated with the Tula plant which was discontinued during the period, including related fixed asset write-downs.
D. Net impact of impairment charge for goodwill and brands as well as tax true up of NOL provision in income taxes
SOURCE Central European Distribution Corporation
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