Bala Cynwyd, Pa., Feb. 28 - Central European Distribution Corporation today announced its results for fiscal year 2006. Net sales for the full year ended December 31, 2006 increased 26% to $944.1 million from the $749.4 million reported for the same period in 2005. Operating income increased by 78% to $91.6 million from $51.6 million for the same period in 2005.
On a comparable basis, CEDC announced earnings of $46.1 million, or $1.28 per fully diluted share for the full year 2006, as compared to $31.3 million, or $1.09 per fully diluted share for the same period in 2005. Net Income, on a U.S. GAAP basis (as herein after defined) for the full year was $55.5 million or $1.53 per fully diluted share in 2006 as compared to $20.3 million or $0.70 per fully diluted share. The major difference between the U.S. GAAP net income and comparable non- GAAP net income reflects unrealized foreign exchange movements relating to our Senior Secured Notes. For a reconciliation of comparable earnings to earnings 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 2006 was 36.1 million.
Some of the Company's key financial highlights for 2006 include the following:
-- Full year net sales up 26%
-- Full year gross profit up 63%
-- Full year gross margins up from 16% to 21%
-- Full year operating income up 78%
-- Full year EBITDA (adjusted for minority interest) up 81% to
$101 million
-- Full year cash flow from operations up from $34.1 million to
$71.7 million
-- Exclusive import portfolio growth of 27%
-- Export sales increased by 36%
Mr. William Carey, CEO and President, said, "2006 represented our first full year as an integrated producer, importer/distributor and marketer of leading brands in Poland. Our key focus was on integrating the commercial and operational activities of our combined businesses while still producing solid top to bottom line results. We succeeded in delivering outstanding results for 2006 as evidenced in the above numbers. Our cash flow from operations illustrates the tremendous synergies that we were able to pull through the combined businesses. In addition to our integration of the Polish business we made our first step in operating outside of Polish borders with our acquisition of Bols Hungary in July 2006 which has exceeded our expectations. The Company also completed a dual listing on the Warsaw Stock Exchange in December which has opened up a new investor base in Central Europe which we feel will be beneficial in the near future."
Mr. Carey continued, "As we move into 2007 our strategy of growing our own brands and exclusive imports to drive higher sales and margins will be our top priority. We believe that the economic conditions remain strong in Central Europe, which should bode well for continued growth of our higher margin products. We see continued growth of our export business on the back of our new agreements signed in 2006 as well as our recently completed packaging change of our Zubrowka brand. Continued integration of our operations as well as finishing our investment in our rectification facilities should improve our overall operating margin. We will continue our acquisition strategy of targeting quality distributors in Poland as well as strong producers in Central and Eastern Europe."
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, as well as the non-GAAP measure EBITDA, adjusted for minority interest. 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. EBITDA, adjusted for minority interest represents GAAP earnings excluding interest, taxes, depreciation and amortization and other financial income and expenses, and adjusted for minority interest. EBITDA, adjusted for minority interest is presented because management believes it provides additional information with respect to the performance of CEDC. 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. 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.
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except share and per share information)
Three Months Ended Twelve Months Ended
Dec 31, Dec 31,
2006 2005 2006 2005
GAAP net income/(loss) $32,089 $12,071 $55,450 $20,268
Foreign exchange impact
and hedge revaluation (13,590) 1,842(A) (11,810) $6,832(A)
Pre-acquisition
financing costs - 464(B) $3,907(B)
Other acquisition costs 423 114(C) 423 $ 317(C)
Impact of Polmos Lublin
acquistion costs write-off 95 -(D) 469 (D)
Impact of expensing
stock options 793 -(E) 1,548 $ -(E)
Comparable non-GAAP
net income $19,810 $14,491 $46,080 $31,324
Comparable net income
per share of common
stock, basic $ 0.55 $ 0.41 $1.29 $1.11
Comparable net income
per share of common
stock, diluted $ 0.54 $ 0.41 $1.28 $1.09
Three Months Ended Twelve Months Ended
Dec 31, Dec 31,
2006 2005 2006 2005
GAAP net income/(loss) $32,089 $12,071 $55,450 $20,268
Income tax 7,635 3,382 13,986 5,346
Net interest expense 7,905 8,222 31,750 15,828
Net other financial
expense/(income) (18,947) 2,283 (17,212) 7,678
Depreciation and
amortization 1,881 1,329 8,739 4,529
Minority interest 2,037 2,261 8,727 2,261
EBITDA, adjusted for
minority interest $32,600 $29,548 $101,440 $55,910
Change in working
capital and accruals (7,160) (5,494) 9,975 6,357
Financing charges (6,170) (10,505) (31,750) (23,506)
Non cash expenses 450 712 3,807 1,380
Tax adjustment (3,266) (3,382) (11,781) (6,060)
Net cash provided by
Operating Activities $16,454 $10,879 $71,691 $34,081
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 year over year
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. CEDC closed a EURO 325 million Senior Secured Notes offering on July
25, 2005 in order to fund the acquisitions of Polmos Bialystok and
Bols. Due to various delays in receiving final approval from the
Polish Anti-Monopoly office, the acquisitions were not completed until
August 17, 2005, in the case of Bols, and October 12, 2005, in the
case of Polmos Bialystok. These amounts represent the proportional
share of interest accrued (net of interest earned in escrow) prior to
completion of the acquisitions. In addition, the CEDC incurred
additional debt to support the deposit payment made to the State
Treasury as part of the Polmos Bialystok acquisition. The costs
relating to this additional financing are also represented in this
calculation.
C. Represents other miscellaneous costs incurred in 2005, directly
related to the acquisitions of Bols and Polmos Bialystok and 2006 cost
related to the tender for additional shares of Polmos Bialystok.
D. Represents cost incurred with the potential acquisition of Polmos
Lublin which was not completed and has since been acquired by another
company.
E. On January 1, 2006, the Company adopted SFAS 123(R) and began to
expense stock options. This amount represents the net after tax impact
of the expensing of stock options.
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Amount in columns expressed in thousands)
December 31, December 31,
2006 2005
ASSETS
Current Assets
Cash and cash equivalents $159,362 $60,745
Short term financial assets - 4,269
Accounts receivable, net of
allowance for doubtful
accounts of $24,172 and
$22,851 respectively 224,575 188,029
Inventories 89,522 73,411
Prepaid expenses and other
current assets 24,299 19,198
Deferred income taxes 4,171 5,847
Total Current Assets 501,929 351,499
Intangible assets, net 371,624 316,821
Goodwill, net 398,005 372,664
Property, plant and equipment, net 49,801 39,784
Deferred income taxes 4,485 2,361
Other assets 204 1,343
Total Assets $1,326,048 $1,084,472
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $138,585 $112,838
Bank loans and overdraft facilities 24,656 26,747
Income taxes payable 2,975 672
Taxes other than income taxes 94,985 59,387
Other accrued liabilities 57,620 62,577
Current portions of obligations
under capital leases 2,005 3,328
Total Current Liabilities 320,826 265,549
Long-term debt, less
current maturities 8 9
Long-term obligations
under capital leases 1,122 1,455
Long-term obligations under
Senior Secured Notes 393,434 367,575
Deferred income taxes 68,290 59,805
Total Long Term Liabilities 462,854 428,844
Minority interests 21,395 15,137
Stockholders' Equity
Common Stock ($0.01 par value,
80,000,000 shares authorized,
38,445,598 and 23,885,245
shares issued at December 31,
2006 and December 31, 2005,
respectively) 387 239
Additional paid-in-capital 374,985 296,574
Retained earnings 128,084 72,634
Accumulated other comprehensive
income 17,667 5,645
Less Treasury Stock at cost
(246,037 and 164,025 shares
at December 31, 2006 and
December 31, 2005 respectively) (150) (150)
Total Stockholders' Equity 520,973 374,942
Total Liabilities and
Stockholders' Equity $1,326,048 $1,084,472
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Amount in columns expressed in thousands, except share and per share
information)
Year ended December 31,
PROFIT AND LOSS 2006 2005 2004
Gross sales $1,193,248 $828,918 $580,744
Excise taxes (249,140) (79,503) -
Net sales 944,108 749,415 580,744
Cost of goods sold 745,721 627,368 506,413
Gross profit 198,387 122,047 74,331
Operating expenses 106,805 70,404 45,946
Operating income 91,582 51,643 28,385
Non-operating income /
(expense)
Interest income /
(expense), net (31,750) (15,828) (2,115)
Other financial income /
(expense), net 17,212 (7,678) (19)
Other income /
(expense), net 1,119 (262) 193
Income before income taxes 78,163 27,875 26,444
Income tax expense 13,986 5,346 4,614
Minority interests 8,727 2,261 -
Net income $55,450 $20,268 $21,830
Net income per share
of common stock, basic $1.55 $0.72 $0.89
Net income per share
of common stock, diluted $1.53 $0.70 $0.87
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
(Amount in columns expressed in thousands)
CASH FLOW Year ended December 31,
2006 2005 2004
Operating Activities
Net income $55,450 $20,268 $21,830
Adjustments to reconcile
net income to net cash
provided by / (used in)
operating activities:
Depreciation and
amortization 8,739 4,529 3,414
Deferred income taxes 2,205 (317) 228
Bad debt provision 999 984 758
Minority interests 8,727 2,261 -
Non cash items (14,404) - -
Changes in operating
assets and liabilities:
Accounts receivable (7,554) (23,730) (23,495)
Inventories (3,165) (238) (21,245)
Prepayments and
other current
assets (2,026) (6,575) (2,090)
Trade accounts
payable 8,123 (7,149) 29,424
Income and other
taxes (122) 9,015 993
Other accrued
liabilities and
other 14,719 35,034 (956)
Net Cash provided by
Operating Activities 71,691 34,081 8,861
Investing Activities
Investment in distribution
assets (11,713) (8,091) (5,449)
Investment in trademarks (1,210) - -
Proceeds from the disposal
of equipment 2,045 2,454 1,490
Purchase of financial assets - (79,412) (5,378)
Proceeds from the disposal
of financial assets 4,784 115,028 -
Acquisitions of subsidiaries,
net of cash acquired (35,828) (490,092) -
Net Cash used in Investing
Activities (41,922) (460,113) (9,337)
Financing Activities
Borrowings on bank loans
and overdraft facility 15,379 4,804 7,604
Payment of bank loans and
overdraft facility (21,526) (13,565) (4,029)
Long-term borrowings - - 1,518
Payment of long-term borrowings (3) (6,438) (4,400)
Payment of capital leases (2,232) (1,676) (1,838)
Net Borrowings of Senior
Secured Notes - 378,447 -
Hedge closure (7,323) - -
Net proceeds from public
placement issuance of shares 71,719 - -
Net proceeds from private
placement issuance of shares - 111,594 -
Options exercised 4,772 3,205 1,780
Net Cash provided by
Financing Activities 60,786 476,371 635
Currency effect on brought
forward cash balances 8,062 (86) 4,103
Net Increase / (Decrease)
in Cash 98,617 50,254 4,262
Cash and cash equivalents
at beginning of period 60,745 10,491 6,229
Cash and cash equivalents
at end of period $159,362 $60,745 $10,491
Supplemental Schedule of
Non-cash Investing Activities
Common stock issued in
connection with investment
in subsidiaries $161 $126,156 $2,390
Capital leases $688 $962 $2,872
Supplemental disclosures of
cash flow information
Interest paid $37,256 $2,669 $2,078
Income tax paid $11,980 $4,580 $2,636