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Central European Distribution Corp. Reports Operating Results (10-Q)

November 19, 2012 | About:
10qk

10qk

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Central European Distribution Corp. (CEDC) filed Quarterly Report for the period ended 2012-09-30.

Central European Distribution Corp has a market cap of $131 million; its shares were traded at around $1.86 with a P/E ratio of 33.2 and P/S ratio of 0.2.

Highlight of Business Operations:

Sales for Russia decreased by $14.7 million from $143.6 million for the three months ended September 30, 2011 to $128.9 million for the three months ended September 30, 2012. The sales decline in Russia resulted from the impact of foreign exchange translation of $12.7 million, higher value of export sales of $4.9 million due to the increased lower value sales to the Ukraine partially offset by domestic sales value decrease of $6.9 million. Domestic vodka sales volumes were flat for the quarter however improved pricing and lower trade spend resulted in sales value growth.

Total gross profit increased by approximately 4.9%, or $3.8 million, to $82.0 million for the three months ended September 30, 2012, from $78.2 million for the three months ended September 30, 2011. Absolute gross margin increased, gross profit margins as a percentage of net sales increased by 5.6 percentage points from 37.3% to 42.9% for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011. The improvement in gross margin percentage was driven by a number of factors including improved product and channel mix in Poland and price increases taken in Russia. Part of the improvement in pricing coming from the Russian market was offset by the year on year growth of spirit pricing which resulted in approximately $3.5 million of additional cost in the third quarter of 2012.

Sales for Russia decreased by $14.7 million from $362.4 for the nine months ended September 30, 2011 to $347.7 for the nine months ended September 30, 2012. For the first half of the year sales for Russia remained stable and in the third quarter sales for Russia decreased by $14.7 million. This decline resulted from the impact of foreign exchange translation of $12.7 million, higher value of export sales of $4.9 million due to the increased lower value sales to the Ukraine partially offset by domestic sales value decrease of $6.9 million.

Total gross profit increased by approximately 3.4%, or $7.0 million, to $212.5 million for the nine months ended September 30, 2012, from 205.5 million for the nine months ended September 30, 2011. Gross profit margins as a percentage of net sales increased by 2.9 percentage points from 37.6% to 40.5% for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011. The improvement in gross margin percentage was driven by a number of factors including improved product and channel mix in Poland and price increases taken in Russia. Part of the improvement in pricing coming from the Russian market was offset by the year on year growth of spirit pricing which resulted in approximately $11.3 million of additional cost in the nine months period of 2012.

Operating expenses consist of selling, general and administrative, or S,G&A expenses, advertising expenses, non-production depreciation and amortization, and provision for bad debts. Total operating expenses decreased by approximately 77.8%, or $659.6 million, from $847.5 million for the nine months ended September 30, 2011 to $187.9 million for the nine months ended September 30, 2012. This change includes a one-time gain in the nine month period ended September 30, 2011, amounting to $7.9 million in operating income based on the remeasurement of previously held equity interests in Whitehall to fair value and $674.5 of impairment charge. For comparability of costs between periods, items of operating expenses excluding this fair value adjustment and impairment charge are shown separately in the table below. Operating expenses, excluding fair value adjustments and impairment charge as a percent of net sales increased from 33.1% for the nine months ended September 30, 2011 to 35.8% for the nine months ended September 30, 2012. Operating expenses, net of fair value adjustments and impairment charge increased by $7.1 million, from $180.8 million for the nine months ended September 30, 2011 to $187.9 million for the nine months ended September 30, 2012.

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