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Central European Distribution Corporation Announces Third Quarter 2009 Results.

Article Excerpt
BALA CYNWYD, Pa., Nov. 3 /PRNewswire-FirstCall/ -- Central European Distribution Corporation today announced its results for the third quarter of 2009. Net Sales for the three months ended September 30, 2009 were $390.1 million as compared to $452.4 million reported for the same period in 2008, which represents a decline of 14% driven primarily by the 35% average devaluation of our primary functional currencies as well as the effects of consolidation of the Russian Alcohol Group in 2009.

CEDC announced net income on a U.S. GAAP basis (as hereinafter defined) for the quarter was $47.1 million or $0.80 per fully diluted share, as compared to net loss of $0.73 million or $0.02 per fully diluted share, for the same period in 2008. On a comparable basis, CEDC announced net income of $27.15 million, or $0.49 per fully diluted share, for the third quarter of 2009, as compared to $40.52 million, or $0.88 per fully diluted share, for the same period in 2008, which represents a 33% decline in net income for the period driven primarily by the 35% average devaluation of our primary functional currencies described above. As a result of the renegotiated agreements between CEDC and Lion Capital concluded in April 2009 for the staged acquisition of the equity tranches in RAG held by Lion Capital, these results include the consolidation beginning in the second quarter of 2009 of the Russian Alcohol Group, which was previously accounted for as an equity investment.

The major difference between the U.S. GAAP net income and comparable non- GAAP net income reflects unrealized foreign exchange movements relating to our foreign currency denominated financing, which are more fully described below under the heading "Unaudited Reconciliation of Non-GAAP Measures" and a one-time net gain on the revaluation of our initial equity investment in the Russian Alcohol Group realized in connection with the initial consolidation of the Russian Alcohol Group financials in the second quarter of 2009. The weighted average number of shares used for calculating diluted earnings per share on a comparable basis for the third quarter of 2009 was 55.5 million, whereas for U.S. GAAP purposes the weighted average number of shares was 58.8 million, with the difference due to 3.3 million shares not yet issued, but to be issued in the future, as part of the agreement with Lion Capital referred to above. For a 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".

William Carey, President and CEO commented, "Our primary objective for this year has been to improve margins, streamline costs, grow market share and generate strong cash flow while operating in a soft consumer environment. We feel we continue to execute on these objectives as well as positioning the Company with our recent acquisitions of the minority ownership in our Parliament business and a portion of the minority ownership of the Russian Alcohol Group, for stronger top line growth and substantial synergies to begin early next year."

Mr. Carey continued, "The company has continued its strategic portfolio reduction of low value/margin products in its distribution business in Poland which should be completed by the fourth quarter of 2009. The company is continuing to focus its core strategy on higher margin owned and imported lines and we believe that as the consumer demand starts to rebound the company should be well positioned with its overall strategy and superior product line to benefit from this top line expansion of its higher margin business."

Mr. Carey continued, "Our cost cutting initiatives, which will be continuing through the end of the year 2009 as well as the continued low spirit pricing in our markets are contributing to enhanced margins in our business with gross margins to reach 36%-37% and operating margins to reach 17.5%-18.5% in the fourth quarter of 2009."

Mr. Carey also said, "As we move into the fourth quarter of 2009, we have launched two new lower mainstream vodkas in Russian where our current product portfolio does not address. We believe that the middle class will continue to evolve in Russia over the next three to five years which should drive the growth of the mainstream and sub-premium sectors in Russia where we currently are market leaders. Our export and import portfolios continue to show strong growth over third quarter 2008 even in the face of market softness and we believe we are well positioned to accelerate top line growth as regional and global consumer demand picks up."

The Company reconfirms its full year 2009 net sales guidance of $1.58 - $1.70 billion and its...

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