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

November 19, 2012 | About:
10qk

10qk

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Central European Distribution Corp. (CEDC) filed Amended Quarterly Report for the period ended 2012-06-30.

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 Poland decreased by $2.4 million from $58.6 million for the three months ended June 30, 2011 to $56.2 million for the three months ended June 30, 2012. This decrease was mainly a combination of a volume growth of domestic vodkas of 6%, resulting in a net sales value increase of $7.7 million, or 9% in local currency terms, offset by weaker Polish zloty against the U.S. dollar which accounted for approximately $10.1 million of sales in U.S. dollar terms. The Company continued to see strong demand for its Żubrówka Biała as well as higher margin flavored vodkas including Soplica.

Sales for Russia decreased by $6.8 million from $132.2 million for the three months ended June 30, 2011 to $125.4 million for the three months ended June 30, 2012. The sales decline in Russia resulted from the impact of foreign exchange translation of $13.3 million, offset by increased export sales of $1.0 million and domestic sales value increase of $5.5 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 0.9%, or $0.7 million, to $75.3 million for the three months ended June 30, 2012, from $74.6 million for the three months ended June 30, 2011. The decline in margin was driven primarily by the lower sales value in Russia. Although absolute gross margin declined, gross profit margins as a percentage of net sales increased by 2.9 percentage points from 37.6% to 40.2% for the three months ended June 30, 2012 as compared to the three months ended June 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 $4.5 million of additional cost in the second quarter of 2012.

Total gross profit increased by approximately 2.5%, or $3.2 million, to $130.5 million for the six months ended June 30, 2012, from $127.3 million for the six months ended June 30, 2011. Gross profit margins as a percentage of net sales increased by 1.4 percentage points from 37.8% to 39.2% for the six months ended June 30, 2012 as compared to the six months ended June 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 $7.7 million of additional cost in the six 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 increased by approximately 8.9%, or $9.9 million, from $111.2 million for the six months ended June 30, 2011 to $121.1 million for the six months ended June 30, 2012. This change includes a one-time gain in the six month period ended June 30, 2011, amounting to $7.9 million in operating income based on the remeasurement of previously held equity interests in Whitehall to fair value. For comparability of costs between periods, items of operating expenses after excluding this fair value adjustment are shown separately in the table below. Operating expenses, excluding fair value adjustments as a percent of net sales increased from 35.4% for the six months ended June 30, 2011 to 36.3% for the six months ended June 30, 2012. Operating expenses, net of fair value adjustments increased by $2.0 million, from $119.1 million for the six months ended June 30, 2011 to $121.1 million for the six months ended June 30, 2012.

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10qk
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