-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, At7y/NsZxuWGilLl93Axe8PEm6egtD0ejOx3aMEHzn7f40WQ2B9JHlfsySURsmW4 OEz6E5iAvX7bKr1WBpMEiA== 0001021408-02-011443.txt : 20020828 0001021408-02-011443.hdr.sgml : 20020828 20020828105140 ACCESSION NUMBER: 0001021408-02-011443 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020509 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020828 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL EUROPEAN DISTRIBUTION CORP CENTRAL INDEX KEY: 0001046880 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-BEER, WINE & DISTILLED ALCOHOLIC BEVERAGES [5180] IRS NUMBER: 541865271 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-24341 FILM NUMBER: 02750446 BUSINESS ADDRESS: STREET 1: PALM TOWER BUILDING STREET 2: 1343 MAIN STREET SUITE 301 CITY: SARASOTA STATE: FL ZIP: 34236 BUSINESS PHONE: 9413301558 MAIL ADDRESS: STREET 1: PALM TOWER BUILDING STREET 2: 1343 MAIN STREET SUITE 301 CITY: SARASOTA STATE: FL ZIP: 34236 8-K/A 1 d8ka.txt FORM 8K - AMENDMENT #4 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 Form 8-K/A (Amendment No. 4) CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 May 9, 2002 (Date of Report) Central European Distribution Corporation (Exact name of registrant as specified in its charter) Delaware 0-24341 54-1865271 (State or other jurisdiction (Commission file number) (IRS employer identification number) of incorporation)
1343 Main Street, Suite 301, Sarasota Florida 34236 (Address of Principal Executive Offices) Registrants telephone number, including area code: (941) 330 1558 Explanatory Note The Registrant is amending its Form 8-K, initially filed on May 9, 2002, to provide the historical unaudited interim financial statements of AGIS S.A. and Damianex S.A., two companies acquired by the Registrant, at and for the period ended March 31, 2002. The Registrant has also added unaudited pro forma financial data at and for the period ended June 30, 2002. 2 ITEM 7 Financial Statements, Pro forma Financial Information and Exhibits (a) Financial Statements of Business Acquired See Exhibit 99.2 for the following financial statements of AGIS S.A.: Balance Sheets at December 31, 2000, 2001 and March 31, 2001 (unaudited) and March 31, 2002 (unaudited) Statements of Income for the years ended December 31, 2000 and 2001 and for the three month periods ended March 31, 2001 (unaudited) and March 31, 2002(unaudited) Statements of Changes in Stockholders' Equity for the years ended December 31, 2000 and 2001 Statements of Cash Flows for the years ended December 31, 2000 and 2001 and for the three month periods ended March 31, 2001(unaudited) and March 31, 2002 (unaudited) Notes to Financial Statements See Exhibit 99.3 for the following financial statements of Damianex S.A.: Balance Sheets at December 31, 2000 and December 31, 2001 and March 31, 2001 (unaudited) and March 31, 2002 (unaudited) Statements of Income for the years ended December 31, 2000 and December 31, 2001 and for the three month periods ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited) Statements of Changes in Stockholders' Equity for the years ended December 31, 2000 and December 31, 2001 Statements of Cash Flows for the years ended December 31, 2000 and December 31, 2001 and for the three month periods ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited) Notes to Financial Statements (b) Unaudited Pro Forma Financial Information See Exhibit 99.4 for the following pro forma financial information: Unaudited pro forma condensed combined balance sheet at June 30, 2002 Unaudited pro forma condensed combined income statement for the six month period ended June 30, 2002 3 Unaudited pro forma condensed combined income statement for the year ended December 31, 2001 Notes to the unaudited pro forma financial information (c) Exhibits. 2.1 Investment Agreement for Damianex S.A. dated April 22, 2002 (attached as Exhibit 2 to the Form 8-K/A filed on May 14, 2002). 2.2 Shares Purchase Agreement for AGIS S.A. dated April 24, 2002 (attached as Exhibit 2.2 to the Form 8-K/A filed on June 3, 2002). 23 Consent of Ernst & Young Sp. z o. o 99.1 Press Release dated April 25, 2002 concerning the completion of two strategic acquisitions of AGIS S.A. and Damianex S.A (attached as Exhibit 99.1 to the Form 8-K filed on May 9, 2002). 99.2 Financial Statements of AGIS S.A 99.3 Financial Statements of Damianex S.A. 99.4 Unaudited Pro Forma Financial Information 4 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: August 28, 2002 Central European Distribution Corporation By: /s/ James Archbold ------------------------------- James Archbold Vice President and Secretary 5 Exhibit Index Exhibit No. Description 2.1 Investment Agreement for Damianex S.A. dated April 22, 2002 (attached as Exhibit 2 to the Form 8-K/A filed on May 14, 2002). 2.2 Shares Purchase Agreement for AGIS S.A. dated April 24, 2002 (attached as Exhibit 2.2 to the Form 8-K/A filed on June 3, 2002). 23 Consent of Ernst & Young Sp. z o. o 99.1 Press Release dated April 25, 2002 concerning the completion of two strategic acquisitions of AGIS S.A. and Damianex S.A (attached as Exhibit 99.1 to the Form 8-K filed on May 9, 2002). 99.2 Financial Statements of AGIS S.A 99.3 Financial Statements of Damianex S.A. 99.4 Unaudited Pro Forma Financial Information 6 EX-23 3 dex23.txt CONSENT OF E&Y - APRIL 24, 2002 Exhibit 23 [LETTERHEAD OF ERNST & YOUNG] CONSENT OF INDEPENDENT AUDITORS We consent to the use of our reports dated April 22, 2002 and April 24, 2002 with respect to the financial statements of Damianex S.A. and Agis S.A. included in the Central European Distribution Corporation on Form 8-K/A at December 31, 2000 and 2001, and for the years then ended filed with the Securities and Exchange Commission. /s/ Ernst & Young Audit Sp. z o.o. ERNST & YOUNG AUDIT Sp. z o.o. Warsaw, Poland August 26, 2002 EX-99.2 4 dex992.txt FINANCIAL STATEMENTS FOR AGIS Exhibit 99.2 FINANCIAL STATEMENTS FOR AGIS S.A. INDEX
Page ---- Item 1. Report of Independent Auditors ................................................... EXA-2 Item 2. Financial Statements Balance Sheets at December 31, 2000, 2001 and March 31, 2001 (unaudited) and March 31, 2002 (unaudited) ........................ EXA-3 Statements of Income for the years ended December 31, 2000 and 2001 and for the three month periods ended March 31, 2001 (unaudited) and March 31, 2002(unaudited) .................................................... EXA-4 Statements of Changes in Stockholders' Equity for the years ended December 31, 2000 and 2001 ....................................................... EXA-5 Statements of Cash Flows for the years ended December 31, 2000 and 2001 and for the three month periods ended March 31, 2001(unaudited) and March 31, 2002 (unaudited) ................................................... EXA-6 Notes to Financial Statements .................................................... EXA-7
EXA-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors of AGIS S.A. We have audited the accompanying balance sheets of AGIS S.A. as of December 31, 2000 and 2001 and the related statements of income, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AGIS S.A. at December 31, 2000 and 2001, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG AUDIT Sp. z o.o. Warsaw, Poland April 24, 2002 EXA-2 AGIS S.A. BALANCE SHEETS (Monetary amounts in columns expressed in thousands)
December 31, December (Unaudited) (Unaudited) 2000 31, 2001 March 31, March 31, 2001 2002 ----------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 651 $ 344 $ 228 $ 219 Accounts receivable, (net of allowance for doubtful accounts of $398,000 and $504,000 for December 31, 2000 and 2001 respectively and $504,000 and $641,000 for March 31, 2000 (unaudited) and 2001 (unaudited), respectively 7,155 6,873 6,204 6,755 Inventories 2,352 2,536 2,985 3,495 Deferred income taxes 37 48 46 67 Value added tax receivable - 911 - - Prepaid expenses and other current assets 20 31 30 67 ----------------------------------------------------- Total Current Assets 10,215 10,743 9,493 10,603 Property, plant, and equipment, net 1,023 1,418 1,091 572 ----------------------------------------------------- Total Assets $ 11,238 $ 12,161 $ 10,584 $ 11,175 ===================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Trade accounts payable $ 6,463 $ 6,132 $ 4,966 $ 6,207 Bank loans and overdraft facilities 3,532 3,755 3,976 2,726 Income and other taxes payable 163 141 309 198 Other current liabilities 123 124 111 110 ----------------------------------------------------- Total Current Liabilities 10,281 10,152 9,362 9,241 Commitments and contingencies Stockholders' Equity Common Stock ($38.17 par value, 6,000 shares authorized, issued and outstanding at respective dates) 229 229 229 229 Retained earnings 775 1,780 1,027 1,791 Accumulated other comprehensive loss (47) - (34) (86) ----------------------------------------------------- Total Stockholders' Equity 957 2,009 1,222 1,934 ----------------------------------------------------- Total Liabilities and Stockholders' Equity $ 11,238 $ 12,161 $ 10,584 $ 11,175 =====================================================
See accompanying notes. EXA-3 AGIS S.A. STATEMENTS OF INCOME (Monetary amounts in columns expressed in thousands)
Year ended Year ended (Unaudited) (Unaudited) December December 3 month 3 month 31, 2000 31, 2001 period ended period ended March 31, March 31, 2001 2002 ------------------------------------------------------------- Net sales $49,795 $ 75,449 $ 14,685 $ 16,374 Cost of goods sold, excluding depreciation 45,849 69,649 13,422 15,614 ------------------------------------------------------------- 3,946 5,800 1,263 760 Selling, general and administrative expenses, excluding depreciation 2,270 2,703 530 555 Bad debt expense 115 106 106 137 Depreciation of tangible fixed assets 155 165 38 52 ------------------------------------------------------------- Operating income 1,406 2,826 589 16 Non-operating income (expense) Interest expense (421) (665) (215) (132) Interest income 4 12 - - Gain on sale of tangible fixed assets to related parties - - - 134 Other income (expenses), net 14 (26) 9 50 ------------------------------------------------------------- Income before income taxes 1,003 2,147 383 68 Income tax expense (362) (650) (131) (57) ------------------------------------------------------------- Net income $ 641 $ 1,497 $ 252 $ 11 =============================================================
See accompanying notes. EXA-4 AGIS S.A. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Monetary amounts in columns expressed in thousands)
Common Retained Accumulated Total Stock Earnings other comprehensive income/(loss) ----------------------- ----------- --------------- ------------- No. of Amount shares ---------- --------- Balance at December 6,000 $ 229 $ 272 $ 7 $ 508 31, 1999 Net income 641 - 641 Foreign currency translation adjustment (net of tax ) (54) (54) ------------- Comprehensive income - - 587 Dividend declared and paid - - (138) - (138) ------------------------- ----------- --------------- ------------- Balance at December 6,000 229 775 (47) 957 31, 2000 Net income - - 1,497 - 1,497 Foreign currency translation adjustment (net of tax ) 47 47 ------------- Comprehensive income - - 1,544 Dividend declared and paid - - (492) - (492) ------------------------- ----------- --------------- ------------- Balance at 31 December 2001 6,000 $ 229 $ 1,780 $ - $ 2,009 ========================= =========== =============== =============
See accompanying notes. EXA-5 AGIS S.A. STATEMENTS OF CASH FLOWS (Amounts in columns expressed in thousands)
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period ended period ended March 31, March 31, 2001 2002 ---------------------------------------------------------------- Operating Activities Net income $ 641 $1,497 $ 252 $ 11 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 155 165 38 52 Bad debt provision 115 106 106 137 Deferred income tax benefit (10) (11) (9) (19) Gain on disposal of fixed assets (10) (4) - (159) Changes in operating assets and liabilities: Accounts receivable (1,845) 176 845 19 Inventories (386) (184) (633) (959) Prepayments and other current assets (3) (11) (10) (48) Value added tax receivable - (911) - 911 Trade accounts payable 69 (331) (1,497) 75 Income and other taxes payable 38 (22) 146 57 Other liabilities (72) 52 (14) (42) ---------------------------------------------------------------- Net Cash Provided by (Used in) Operating Activities (1,308) 522 (776) 35 Investing Activities Purchase of property and equipment (234) (564) (91) - Proceeds from sale of equipment 31 4 - 869 --------------------------------------------------------------- Net Cash provided by (Used in) Investing Activities (203) (560) (91) 869 Financing Activities Proceeds from short-term borrowings 3,367 3,755 3,976 2,726 Repayment of short-term borrowings (1,656) (3,532) (3,532) (3,755) Dividends paid (138) (492) - - --------------------------------------------------------------- Net Cash Provided by (Used in) Financing Activities 1,573 (269) 444 (1,029) --------------------------------------------------------------- Net Increase (Decrease) in cash and cash equivalents 62 (307) (423) (125) Cash and cash equivalents at beginning of period 589 651 651 344 --------------------------------------------------------------- Cash and cash equivalents at end of period $ 651 $ 344 $ 228 $ 219 =============================================================== Supplement cash flow information: Interest paid $ 421 $ 665 $ 215 $ 134 Income taxes paid $ 289 $ 678 $ 82 $ 7
See accompanying notes. EXA-6 AGIS S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) 1. Organization and Description of Business The business AGIS S.A. was originally organized as a Polish limited liability company during 1990 and on December 15, 1995 was transformed into a Polish joint stock company - AGIS S.A. (the "Company"). The Company's main activities are the wholesale of alcoholic (mainly vodka) beverages. The Company has approximately 200 employees and 14 branch offices, which are located throughout northern-central Poland. The Company's headquarters are located in Torun, Poland and all of the Company's operations are conducted within the boundaries of Poland. Pursuant to Polish statutory requirements, AGIS S.A. may pay annual dividends, based on its audited Polish statutory financial statements, to the extent of its retained earnings as defined. At December 31, 2001, substantially all retained earnings were available for payment of dividends referred to in Note 8. 2. Accounting Policies The significant accounting policies and practices followed by the Company are as follows: Basis of Presentation The Company maintains its books of account and prepares its statutory financial statements in Polish zloties (PLN) in accordance with Polish statutory requirements and the Accounting Act of September 29, 1994. The accompanying financial statements have been adjusted to reflect accounting principles generally accepted in the United States ("US GAAP"). In the opinion of Company management, the unaudited financial statements as of and for each three month period ended March 31, 2001 and 2002 include all adjustments necessary to present financial position, results of operations and cash flows in accordance with US GAAP. Such adjustments are of a normal recurring nature. The results of operations for the three month period ended March 31, 2002 are not necessarily indicative of the results for the entire year ended December 31, 2002. Foreign Currency Translation and Transactions The accompanying financial statements have been prepared in US Dollars. The Company's functional currency is the local currency - Polish Zloty (PLN). Assets and liabilities are translated to US Dollars at the exchange rate in effect at each year end. Income statement accounts are translated to US dollars at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a separate component of stockholders' equity. Gains and losses from foreign currency transactions are included in net income for the period. The exchange rate used on zloty denominated transactions and balances for translation purposes as of December 31, 2000 and 2001 for one U.S. dollar was 4.14 PLN and 3.98 PLN, respectively. The exchange rate as of April 24, 2002 was 4.04 PLN. The exchange rate used on zloty denominated transactions and balances for translation purposes as of March 31, 2000 and 2001 for one U.S. dollar was 4.10 PLN and 4.13 PLN, respectively. The exchange rate as of August 19, 2002 was 4.16 PLN. EXA-7 AGIS S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) Property, Plant and Equipment Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Depreciation periods are as follows: Type Depreciation life in years - -------------------------------------- ----------------------------------------- Land - Buildings 25-40 Machinery and Equipment 3-10 Transportation Equipment 2-5 Other 2-10 The Company periodically reviews property, plant and equipment, when indicators of impairment exist and if the value of the asset is impaired, an impairment loss is recognized. The Company recognizes impairment losses on long-lived assets in the event the net book values of such assets exceeds the future undiscounted cash flows attributable to such assets. No such impairment adjustment has been recorded by the Company. Revenue Recognition Revenue is recognized when goods have been delivered to customers in accordance with United States Securities and Exchange Commission Staff Accounting Bulletin 101. Sales are presented net of sales returns, customer discounts and sales taxes. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market value. Inventories are comprised of spirits and non-alcoholic beverages. The Company has not experienced significant losses from spoilage or obsolescence. Cash and Cash Equivalents Short-term investments that have a maturity of three months or less at the date of purchase are classified as cash equivalents. All of the amounts were located in bank accounts in Poland at December 31, 2001 and 2000, and March 31, 2001 and 2002. Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates and such differences may be material to the financial statements. Income Taxes The Company computes and records income taxes in accordance with the liability method. Comprehensive income Comprehensive income, is defined as all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income includes net income adjusted by, among other items, foreign currency translation adjustments. The currency translation gains and losses on the translation from Polish zloties to US dollars are classified as a separate component of stockholders' equity as "accumulated other comprehensive loss". Such adjustments were the only items effecting accumulated other comprehensive income or loss and 2002 interim periods During the period ended December 31, 2001, the Company incurred foreign currency translation gains of $47,000 (net of tax). The total of the accumulated other comprehensive loss consists of currency translation adjustments ($8,000 net loss, net of taxes) and hyper-inflation adjustments related to assets purchased prior to January 1, 1998 ($8,000 net gain, net of taxes). At March 31, 2002 (unaudited), the hyper-inflationary foreign currency translation gain in regards to the EXA-8 AGIS S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) sale of the tangible fixed assets of $16,000 has been reclassified and netted against the gain on the sale of the fixed assets. The change in comprehensive loss for the three month periods ended March 31, 2000 and 2001 is solely due to translation losses, net. Employee Benefits The Company is required pursuant to Polish labor laws, to pay a bonus of one month's salary to employees upon retirement. The estimated liability for these benefits is not accrued on a current basis as it is not material. The Company also accrues for vacation pay. Recently issued accounting pronouncements In June 2001, the Financial Accounting Standards Board "FASB" released SFAS 141 "Business Combinations". This statement requires that combinations be accounted for by a single method - the purchase method. This statement also requires among other things, separate recognition of intangible assets apart from goodwill if they meet the prescribed criteria. The provisions of this statement apply to all business combinations initiated after June 30, 2001. In June 2001, the FASB released SFAS 142 "Goodwill and other intangible assets". This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses among other things, how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. The provisions of this statement are required to be applied starting with fiscal years beginning after December 15, 2001. The Company does not anticipate that these two statements will have a material effect on its financial statements. In August 2001, the FASB released SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". This standard supersedes SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of". This statement removes goodwill from its scope (addressed in SFAS 142), and addresses long-lived assets to be held and used, to be disposed of other than by sale and to be disposed of by sale. The provisions of this statement are required to be applied starting with fiscal years beginning after December 15, 2001. The Company does not anticipate that this statement will have a material effect on its financial statements. EXA-9 AGIS S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) 3. Property, Plant and equipment Property, plant and equipment, presented net of accumulated depreciation in the balance sheets, consists of:
December 31, December 31, (Unaudited) (Unaudited) 2000 2001 3 month period 3 month period ended March 31, ended March 31, 2001 2002 ----------------------------------------------------------- Land $ 12 $ 29 $ 12 $ 8 Buildings 638 901 638 104 Machinery and equipment 121 156 121 163 Transportation equipment 565 777 661 745 Other 147 170 147 105 ----------------------------------------------------------- 1,483 2,033 1,579 1,125 Less accumulated depreciation 460 615 488 553 ----------------------------------------------------------- Property, plant and equipment, net $ 1,023 $ 1,418 $1,091 $ 572 ===========================================================
4. Allowances for Doubtful Accounts Changes in the allowance for doubtful accounts were as follows:
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month period 3 month period 2000 2001 ended March ended March 31, 2001 31, 2002 ------------------------------------------------------------ Balance, beginning of year/ period $ 283 $398 $ 398 $ 504 Provision for doubtful accounts 115 106 106 137 ------------------------------------------------------------ Balance, end of year/ period $ 398 $504 $ 504 $ 641 ============================================================
EXA-10 AGIS S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) 5. Short-term bank loan and overdraft facilities During year 2000, the Company had three overdraft facilities as follows: PLN 2,000,000 overdraft facility (secured by bills of exchange and cession rights to receivables, with an interest rate of 3 months WIBOR plus 1.4%); PLN 4,000,000 overdraft facility which was secured similarly (the interest rate applied was 1 month WIBOR plus 0.6%); and a PLN 12,000,000 overdraft facility which was secured with bills of exchange, cession rights to receivables and inventory amounting to PLN 7,000,000, ($1,700,000). There were two new bank loans acquired at March 31, 2001: loan for PLN 1,500,000 having interest of WIBOR plus 0.9% and loan for PLN 500,000 with interest of WIBOR plus 1.2% (both secured with bills of exchange and cession of receivables for 10 of the biggest customer balances). Outstanding amounts were as follows: December 31, 2000 (Unaudited) March 31, 2001 Polish Zloty (PLN) 2,000 (US$ 488) $ 387 $ - Polish Zloty (PLN) 4,000 (US$ 976) 483 976 Polish Zloty (PLN) 12,000 (US$ 2,927) 2,662 2,557 Polish Zloty (PLN) 500 (US$122) - 77 Polish Zloty (PLN) 1,500 (US$366) - 366 --------------------------------- Total $ 3,532 $ 3,976 ================================= During year 2001 overdraft facilities acquired were as follows: PLN 1,500,000 overdraft facility secured by bills of exchange and cession rights to receivables, bearing an interest rate of 3 month WIBOR plus 0.9%; PLN 500,000 overdraft facility secured by bills of exchange and cession rights to receivables, bearing interest rate of 3 months WIBOR plus 1.2%; PLN 12,000,000 overdraft facility which was secured with bills of exchange and the Company's inventory, the interest rate was 1 month WIBOR plus 0.8%; loan facility for PLN 500,000 secured with bill of exchange and transfer of ownership of stock, which loan is interest bearing of 1 month WIBOR plus 1%; loan facility for PLN 4,000,000 secured with bill of exchange and cession of receivables, which loan bears interest of 3 months WIBOR plus 0.6%. At March 31, 2001 the Company increased their original overdraft of PLN 4,000,000 to PLN 14,000,000 with no modifications of terms. The Company also acquired a new loan for PLN 500,000 secured with bill of exchange, transfer of stock ownership and cession of receivables, which loan is bearing interest of 3 months WIBOR plus 0.9%. Outstanding amounts were as follows: (Unaudited) December 31, 2001 March 31, 2002 Polish Zloty (PLN) 12,000 (US$ 2,904) $ 2,418 $ - Polish Zloty (PLN) 1,500 (US$ 376) 376 - Polish Zloty (PLN) 4,000 (US$ 968) 940 - Polish Zloty (PLN) 500 (US$ 121) 21 78 Polish Zloty (PLN) 14,000 (US$ 3,388) - 2,648 ---------------------------------- Total $ 3,755 $ 2,726 ================================== The weighted average interest rate on short-term borrowings at December 31, 2001 and 2000 was approximately 18.51% and 22.45% respectively. EXA-11 AGIS S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) 6. Income Taxes Income tax expense is summarized below:
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period ended period ended March 31, March 31, 2002 2002 ------------------------------------------------------------- Current Polish income tax expense $ 376 $ 661 $ 138 $ 13 Deferred Polish tax benefit, net (14) (11) (7) 44 ------------------------------------------------------------- Income tax expense $ 362 $ 650 $ 131 $ 57 =============================================================
Total income tax expense varies from expected income tax expense computed at Polish statutory rates (30% in 2000 and 28% in 2001 and 2002) as follows:
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period ended period ended March 31, March 31, 2001 2002 --------------------------------------------------------------- Tax at Polish statutory rate $ 301 $ 601 $ 107 $ 24 Increase in deferred tax asset valuation allowance relating primarily to bad debt expense 14 21 21 27 Permanent differences between financial and taxable income 47 28 3 6 ------------------------------------------------------------- Income tax expense $ 362 $ 650 $ 131 $ 57 =============================================================
Significant components of the Company's deferred tax assets are as follows :
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period ended period ended March 31, March 31, 2001 2002 -------------------------------------------------------------------- Deferred tax assets: Allowance for doubtful accounts $111 $141 141 180 receivable Accrued expenses, deferred income 4 6 4 13 and prepaids, net -------------------------------------------------------------------- 115 147 145 193 Less valuation allowance (78) (99) (99) (126) -------------------------------------------------------------------- Net deferred tax asset $ 37 $ 48 $ 46 $ 67 ====================================================================
Valuation allowances are provided when it is more likely than not that some or all of the deferred tax assets will not be realized in the future. These evaluations are based on expected future taxable income and expected reversals of the various net deductible temporary differences. The valuation allowance relates solely to the estimated future tax deductibility of the allowance for bad debts which may not be deductible under local statutes. EXA-12 AGIS S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) In November 1999, legislation was enacted which reduced the corporate income tax rates in Poland effective January 1, 2000 to 30% in 2000, 28% in 2001 and 2002, 24% in 2003 and 22% thereafter. The Company's tax liabilities (including corporate income tax, Value Added Tax (VAT), social security and other taxes) may be subject to examinations by Polish tax authorities for up to five years from the end of the year the tax is payable. As the application of tax laws and regulations and transactions are susceptible to varying interpretations, amounts reported in the financial statements could be changed at a later date upon final determination by the tax authorities. 7. Financial Instruments, Commitments and Contingent Liabilities Financial Instruments With On-Balance Sheet Risk and Their Fair Values Financial instruments with on-balance sheet risk include cash and cash equivalents, accounts receivable, certain other current assets, trade accounts payable, bank loans and overdraft facilities, and other payables. These financial instruments are shown separately in the balance sheets and their carrying values approximate their fair values. This is because substantially all of these financial instruments have short maturity periods or carry interest at rates that approximate current market rates. The Company does not utilize financial derivatives. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable from Polish companies. The Company restricts temporary cash investments to financial institutions with high credit standing. Credit is given to customers only after a thorough review of their credit worthiness. The Company does not normally require collateral with respect to credit sales. As of December 31, 2000 and 2001, the Company had no customers which accounted for more than 10 percent of outstanding receivables. The Company has not experienced large credit losses in the past. Supply contracts The Company has various agreements covering its sources of supply. Either party on relatively short notice may terminate some of them. Thus, there is a risk that some portion of the Company's supply of products could be curtailed at any time. Management believes that if these arrangements were terminated that alternative suppliers would be found without significant disruption to the business. Lease Obligations The Company has cancelable rental agreements for a number of the branch office locations. Monthly rentals range from approximately $1000 to $2000. All the branch office leases can be terminated by either party within two to three months. The rental expense incurred under operating leases were as follows:
Year ended Year ended (Unaudited) (Unaudited) December 31, 2000 December 31, 2001 3 month 3 month period period ended March ended March 31, 31, 2001 2002 -------------------------------------------------------------------------------- Rent expense $ 169 $155 $ 39 $ 54 ================================================================================
EXA-13 AGIS S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) 8. Subsequent Events On April 24, 2002, the shareholders of the Company sold all of their shares to Central European Distribution Corporation ("CEDC"), a United States company and to its wholly-owned subsidiary Carey Agri International Poland. The sales price consisted of approximately $4,568,000 of cash and 172,676 unregistered newly issued common shares of CEDC, with a six -month restriction on sale. In contemplation of the sale of the Company, all the real estate owned by the Company was sold to the former shareholders for a price of $869,000. The Company also sold other assets to the former shareholders (two vehicles). The proceeds from the sale of these assets were received on the date of the sale. The Company recognized a gain of approximately $134,000, which has been separately disclosed in the statement of operations. Prior to the sale of the Company, a cash dividend of $1,412,415 was declared. The dividend is to be paid over two equal installments starting on May 31, 2002. EXA-14 EX-99.3 5 dex993.txt FINANCIAL STATEMENTS FOR DAMIANEX S.A. Exhibit 99.3 FINANCIAL STATEMENTS FOR DAMIANEX S.A. INDEX
Page ---- Item 1. Report of Independent Auditors ............................................ EXB-2 Item 2. Financial Statements Balance Sheets at December 31, 2000 and December 31, 2001 and March 31, 2001 (unaudited) and March 31, 2002 (unaudited) ............. EXB-3 Statements of Income for the years ended December 31, 2000 and December 31, 2001 and for the three month periods ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited) ................. EXB-4 Statements of Changes in Stockholders' Equity for the years ended December 31, 2000 and December 31, 2001 ................................... EXB-5 Statements of Cash Flows for the years ended December 31, 2000 and December 31, 2001 and for the three month periods ended March 31, 2001 (unaudited) and March 31, 2002 (unaudited) ................. EXB-6 Notes to Financial statements ............................................. EXB-7
EXB-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors of Damianex S.A. We have audited the accompanying balance sheets of Damianex S.A. as of December 31, 2000 and 2001 and the related statements of income, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Damianex S.A. at December 31, 2000 and 2001, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG AUDIT Sp. z o.o. Warsaw, Poland April 22, 2002 EXB-2 DAMIANEX S.A. BALANCE SHEETS (Amounts in columns expressed in thousands)
December December (Unaudited) (Unaudited) 31, 2000 31, 2001 March 31, March 31, 2001 2002 -------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 2,688 $ 2,327 $ 2,349 $ 451 Accounts receivable, (net of allowance for doubtful accounts of $55,000 and $273,000 at December 31, 2000 and December 31, 2001, respectively and $109,000 and $287,000 at March 31, 2000 and March 31, 2001 5,795 6,964 5,406 6,497 Inventories 4,282 4,356 4,686 4,550 Deferred income taxes 2 19 59 19 Prepaid expenses and other current assets 178 54 213 211 -------------------------------------------------------------------- Total Current Assets 12,945 13,720 12,713 11,728 Non-current deferred income taxes 164 172 182 180 Property, plant, and equipment, net 1,370 1,550 1,499 1,497 -------------------------------------------------------------------- Total Assets $14,479 $15,442 $ 14,394 $13,405 ==================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Trade accounts payable $ 6,431 $ 3,346 $ 3,788 $ 4,385 Bank loans and overdraft facilities 5,303 8,012 7,508 4,704 Income and other taxes payable 264 308 385 413 Other current liabilities 143 205 213 204 -------------------------------------------------------------------- Total Current Liabilities 12,141 11,871 11,894 9,706 Commitments and contingencies Stockholders' Equity Common Stock ($57 par value, 30,500 shares authorized, issued and outstanding at respective dates) 1,739 1,739 1,739 1,739 Retained earnings 617 1,727 737 1,992 Accumulated other comprehensive income (loss) (18) 105 24 (32) -------------------------------------------------------------------- Total Stockholders' Equity 2,338 3,571 2,500 3,699 -------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $14,479 $15,442 $ 14,394 $13,405 ====================================================================
See accompanying notes. EXB-3 DAMIANEX S.A. STATEMENTS OF INCOME (amounts in columns expressed in thousands)
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period period ended ended March 31, March 31, 2001 2002 -------------------------------------------------------------------------- Net sales $ 59,135 $ 78,977 $14,921 $ 17,554 Cost of goods sold, excluding 52,756 70,262 13,208 15,565 depreciation -------------------------------------------------------------------------- 6,379 8,715 1,713 1,989 Selling, general and administrative 4,976 6,008 1,284 1,451 expenses, excluding depreciation Bad debt expense 45 218 54 14 Depreciation of tangible fixed assets 49 258 51 68 -------------------------------------------------------------------------- Operating income 1,309 2,231 324 456 Non-operating income (expense) Interest expense (401) (555) (113) (151) Interest income 62 108 10 4 Realized and unrealized foreign currency transaction gains, (losses), net 16 140 (9) 54 Other expenses, net (88) (193) (59) (10) -------------------------------------------------------------------------- Income before income taxes 898 1,731 153 353 Income tax expense (296) (520) (33) (88) -------------------------------------------------------------------------- Net income $ 602 $ 1,211 $ 120 $ 265 ==========================================================================
See accompanying notes. EXB-4 DAMIANEX S.A. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Monetary amounts in columns expressed in thousands)
Common Retained Accumulated other Total Stock Earnings comprehensive income/(loss) ---------------------------------------- ----------------------------------------- No. of Amount shares - --------------------------------- ----------- Balance at 31 30,500 $ 1,739 $ 15 $ 184 $ 1,938 December 1999 Net income 602 - 602 Foreign currency translation - - - (202) (202) adjustment (net of tax effect) --------------- Comprehensive income - - 400 --------- ----------- ----------- --------------------- --------------- Balance at 31 30,500 1,739 617 (18) 2,338 December 2000 Net income - - 1,211 - 1,211 Foreign currency translation adjustment (net of - - - 123 123 tax effect) --------------- Comprehensive income - - 1,334 Dividend declared and paid (101) (101) ------------------------ ----------- --------------------- --------------- Balance at 31 30,500 $ 1,739 $1,727 $ 105 $ 3,571 December 2001 ======================== =========== ===================== ===============
See accompanying notes. EXB-5 DAMIANEX S.A. STATEMENTS OF CASH FLOWS (amounts in columns expressed in thousands)
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period period ended ended March 31, 2001 March 31, 2002 -------------------------------------------------------------------------- Operating Activities Net income $ 602 $ 1,211 $ 120 $ 265 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 49 258 51 68 Bad debt provision 45 218 54 14 Deferred income tax benefit (2) (25) (75) (8) Gain on disposal of fixed assets (6) (14) - (2) Changes in operating assets and liabilities: Accounts receivable (2,203) (1,387) 353 453 Inventories (3,617) (74) (404) (194) Prepayments and other (156) 124 (35) (158) current assets Trade accounts payable 4,545 (3,085) (2,643) 1,039 Income and other taxes 216 44 121 105 payable Other 141 199 94 (133) -------------------------------------------------------------------------- Net Cash provided by (used in) Operating Activities (386) (2,531) (2,364) 1,449 Investing Activities Purchase of property and equipment (645) (481) (187) (17) Proceeds from sale of equipment 35 43 7 - -------------------------------------------------------------------------- Net Cash used in Investing Activities (610) (438) (180) (17) Financing Activities Proceeds from short-term borrowings 5,303 8,012 3,425 2,561 Repayments of short-term borrowings (1,717) (5,303) (1,220) (5,869) Dividends paid - (101) - - -------------------------------------------------------------------------- Net Cash provided by (used in) Financing Activities 3,586 2,608 2,205 (3,308) -------------------------------------------------------------------------- Net Increase (decrease) in cash and 2,590 (361) (339) (1,876) cash equivalents Cash and cash equivalents at beginning 98 2,688 2,688 2,327 of period -------------------------------------------------------------------------- Cash and cash equivalents at end of $ 2,688 $ 2,327 $ 2,349 $ 451 period ========================================================================== Supplement cash flow information: Interest paid $ 397 $ 447 $ 126 $ 134 Income taxes paid $ 163 $ 391 $ 114 $ 5
See accompanying notes. EXB-6 DAMIANEX S.A. NOTES TO FINANCIAL STATEMENT (amounts in columns expressed in thousands) 1. Organization and Description of Business The business "Damianex" was originally organized as a partnership ("the Partnership") during 1991. Damianex S.A. (the "Company", "S.A.") was established on December 10, 1998 as a Polish Joint Stock Company. The Company started trading activities on May 21, 1999, when inventories were transferred to the Company from the Partnership in exchange for cash. The Partnership ceased to exist during 2000. The Company's main activities are the wholesale of alcoholic (mainly beer) and non-alcoholic beverages. The Company has approximately 600 employees and 11 branch offices, which are located throughout south-eastern Poland. The Company's headquarters are located in Lancut, Poland and all of the Company's operations are conducted within the boundaries of Poland. Pursuant to Polish statutory requirements, Damianex S.A. may pay annual dividends, based on their audited Polish statutory financial statements, to the extent of their retained earnings as defined. At December 31, 2001, substantially all retained earnings were available for payment of dividends. 2. Accounting Policies The significant accounting policies and practices followed by the Company are as follows: Basis of Presentation The Company maintains its books of account and prepares its statutory financial statements in Polish zloties (PLN) in accordance with Polish statutory requirements and the Accounting Act of September 29, 1994. The accompanying financial statements have been adjusted to reflect accounting principles generally accepted in the United States ("US GAAP"). In the opinion of Company management, the unaudited financial statements as of and for each three month period ended March 31, 2001 and 2002 include all adjustments necessary to present financial position, results of operations and cash flows in accordance with US GAAP. Such adjustments are of a normal recurring nature. The results of operations for the three month period ended March 31, 2002 are not necessarily indicative of the results for the entire year ended December 31, 2002. Foreign Currency Translation and Transactions The accompanying financial statements have been prepared in US Dollars. The Company's functional currency is the local currency-Polish Zloty. Assets and liabilities are translated to US Dollars at the exchange rate in effect at each year end. Income statement accounts are translated to US Dollars at the average rate of exchange prevailing during the year. Translation adjustments (net of taxes) arising from the use of differing exchange rates from period to period are included as a separate component of stockholders' equity. Gains and losses from foreign currency transactions are included in net income for the period. The exchange rate used on zloty denominated transactions and balances for translation purposes as of December 31, 2000 and 2001 for one US dollar was 4.14 PLN and 3.98 PLN respectively. As of April 22, 2002, the rate had changed to 4.04 PLN. The exchange rate used on zloty denominated transactions and balances for translation purposes as of March 31, 2000 and 2001 for one US dollar was 4.10 PLN and 4.13 PLN respectively. As of August 15, 2002, the rate had changed to 4.16 PLN. EXB-7 DAMIANEX S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) Property, Plant and Equipment Property, plant and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Depreciation periods are as follows: Type Depreciation life in years - ---------------------------------------------- ------------------------------- Land - Buildings 25-40 Machinery and Equipment 2-5 Transportation Equipment 2-5 Other 2-7 The Company periodically reviews property, plant and equipment, when indicators of impairment exist and if the value of the asset is impaired, an impairment loss is recognized. The Company recognizes impairment losses on long-lived assets in the event the net book values of such assets exceeds the future undiscounted cash flows attributable to such assets. No such impairment adjustments have been recorded by the Company. Revenue Recognition Revenue is recognized when goods have been delivered to customers in accordance with United States Securities and Exchange Commission Staff Accounting Bulletin 101. Sales are presented net of sales returns, customer discounts and sales taxes. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market value. Inventories are comprised primarily of beer and non-alcoholic beverages. The Company has not experienced significant losses from spoilage or obsolescence. Cash and Cash Equivalents Short-term investments that have a maturity of three months or less at the date of purchase are classified as cash equivalents. All of the amounts were located in bank accounts in Poland at December 31, 2001 and 2000 and March 31, 2001 and 2002. Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates and such differences may be material to the financial statements. Income Taxes The Company computes and records income taxes in accordance with the liability method. Comprehensive income Comprehensive income, is defined as all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income includes net income adjusted by, among other items, foreign currency translation adjustments. The foreign translation gains and losses on the translation from Polish zloties to U.S. dollars are classified as a separate component of the stockholders' equity as "accumulated other comprehensive income (loss)". Such adjustments were the only items effecting accumulated other comprehensive income or loss in 2001 and 2002 interim periods. During the period ended December 31, 2001, the Company incurred foreign currency translation gains of $123,000 (net of tax effect) and reported this amount as part of the accumulated comprehensive income in stockholders' equity of $105,000. The total of the accumulated other comprehensive income consists of currency translation adjustments EXB-8 DAMIANEX S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) ($12,000 net loss, net of taxes) and adjustments from discontinuing hyper-inflationary accounting for assets purchased prior to January 1, 1998 ($117,000 gain, net of taxes) Employee benefits The Company is required pursuant to Polish labor laws, to pay a bonus of one month's salary to employees upon retirement. The estimated liability for these benefits is accrued on a current basis. The Company also accrues for vacation pay. Recently issued accounting pronouncements In June 2001, the Financial Accounting Standards Board (FASB) released SFAS 141 "Business Combinations". This Statement requires that combinations be accounted for by a single method - the purchase method. This Statement also requires among other things, separate recognition of intangible assets apart from goodwill if they meet the prescribed criteria. The provisions of this Statement apply to all business combinations initiated after June 30, 2001. In June 2001, the FASB released SFAS 142 "Goodwill and other intangible assets". This Statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses among other things, how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. The provisions of this Statement are required to be applied starting with fiscal years beginning after December 15, 2001. The Company does not anticipate that these two statements will have a material effect on its financial statements. In August 2001, the FASB released SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". This standard supersedes SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed of". This statement removes goodwill from its scope, (addressed in SFAS 142) and addresses long-lived assets to be held and used, to be disposed of other than by sale and to be disposed of by sale. The provisions of this statement are required to be applied starting with fiscal years beginning after December 15, 2001. The Company does not anticipate that this statement will have a material effect on its financial statements. 3. Property, Plant and equipment Property, plant and equipment, presented net of accumulated depreciation in the balance sheets, consists of:
December 31, December 31, (Unaudited) (Unaudited) 2000 2001 March March 31, 2001 31, 2002 -------------------------------------------------------------------------- Land $ 78 $ 87 $ 84 $ 84 Buildings 738 799 785 804 Machinery and equipment 57 86 66 95 Transportation equipment 575 878 688 870 Other 148 179 160 192 -------------------------------------------------------------------------- 1,596 2,029 1,783 2,045 Less accumulated depreciation 226 479 284 548 -------------------------------------------------------------------------- Property, plant and equipment, net $1,370 $1,550 $1,499 $1,497 ==========================================================================
EXB-9 DAMIANEX S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) 4. Allowance for Doubtful Accounts Changes in the allowance for doubtful accounts were as follows:
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period ended period ended March 31, 2001 March 31, 2002 ---------------------------------------------------------------------- Balance, beginning of year $10 $ 55 $ 55 $273 Provision for doubtful accounts 45 218 54 14 ---------------------------------------------------------------------- Balance, end of year/period $55 $273 $109 $287 ======================================================================
5. Short-term bank loan and overdraft facilities During 2000, the Company entered into two overdraft facilities that were denominated in foreign currencies. These were: 4,707,900 Swiss Francs (CHF) (increased to CHF 8,744,000 Swiss Francs at March 31, 2001 (unaudited)) (secured by an authorization to the Company's current bank account and the cession of rights to an insurance agreement, with an interest rate of 3 months CHF LIBOR) and a $1,220,000 USD facility which was secured with a bill of exchange, cession of rights to an insurance agreement and take-over rights in regards to inventory and fixed assets. The interest rate applied amounted to 6 months USD LIBOR plus 1%. The Company also opened a 5,000,000 Polish Zloty (PLN) overdraft facility, secured by cession of rights to an insurance agreement, bill of exchange and take-over rights to vehicles. The interest rate applied was WIBOR. Outstanding amounts follow:
(Unaudited) December 31, 2000 March 31, 2001 Swiss Franc (CHF), maximum available CHF 4,708 and CHF 8,744(unaudited) respectively $2,876 $5,056 USD overdraft, maximum available $1,220 1,220 - Polish Zloty (PLN), maximum available PLN 5,000 and 10,055(unaudited) respectively 1,207 2,452 ------------------------------------------------ Total $5,303 $7,508 ================================================
During 2001, all outstanding overdraft facilities as at 31 December 2000 were repaid. A new overdraft facility was acquired for 4,000,000 Swiss Francs (CHF) which was secured by the Company's inventories. The interest rate was set at 3 month CHF LIBOR plus 1.8%. The other overdraft facilities opened in 2001 were as follows: 18,000,000 Polish Zloty (PLN), which was secured by the Lancut premises, and authorization to the Company's bank accounts and inventories. The interest rate applied was 1 month WIBOR plus 0.7%; 10,000,000 PLN which was secured with authorization to the Company's bank accounts and take over rights of Company inventories, interest rate at 1 month WIBOR + 2%. Outstanding amounts follow:
December 31, 2001 (Unaudited) March 31, 2002 Swiss Franc (CHF), maximum available CHF $1,191 $ - 4,000 ($ 2,384) Polish Zloty (PLN), maximum available PLN 4,312 4,232 18,000 ($ 4,515) Polish Zloty (PLN), maximum available PLN 2,509 472 10,000 ( $ 2,509) -------------------------------------------------------------- Total $8,012 $4,704 ==============================================================
The weighted average interest rate on short-term borrowings at December 31, 2001 and 2000 was approximately 14.33%, and 14.55% respectively. EXB-10 DAMIANEX S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) Income tax expense is summarized below:
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period ended period ended March 31, 2001 March 31, 2002 ------------------------------------------------------------------------------- Current Polish $298 $545 $ 157 $41 income tax expense Deferred Polish (2) (25) (124) 47 income tax benefit ------------------------------------------------------------------------------- Income tax expense $296 $520 $ 33 $88 ===============================================================================
Total income tax expense varies from expected income tax expense computed at Polish statutory rates (30% in 2000 and 28% in 2001 and 2002) as follows:
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period ended period ended March 31, 2001 March 31, 2002 --------------------------------------------------------------------------- Tax at Polish statutory rate $269 $485 $ 43 $ 99 Increase in deferred tax 10 5 asset valuation allowance 10 41 relating primarily to bad debt expense Permanent differences between financial and taxable income 17 (6) (20) (16) --------------------------------------------------------------------------- Income tax expense $296 $520 $ 33 $ 88 ===========================================================================
EXB-11 DAMIANEX S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) Significant components of the Company's deferred tax asset is as follows:
Year ended Year ended (Unaudited) (Unaudited) December 31, December 31, 3 month 3 month 2000 2001 period period ended ended March 31, March 31, 2001 2002 ------------------------------------------------------------------------- Deferred tax liabilities: Unrealized foreign exchange gains $ - $ (12) $ - $ - Prepaid expenses (14) - (24) (44) ------------------------------------------------------------------------- $ (14) $ (12) $ (24) $ (44) Deferred tax assets: Differences on fixed assets resulting from hyperinflationary $ 164 $ 172 $ 182 $ 180 adjustments and in the tax base Allowance for doubtful accounts 17 76 31 80 receivable Unrealized foreign exchange losses 11 - 39 - Accrued expenses and deferred income - 8 35 41 ------------------------------------------------------------------------- 178 244 263 257 Less valuation allowance (12) (53) (22) (58) ------------------------------------------------------------------------- Net deferred tax asset $ 166 $ 191 $ 241 $ 199 ========================================================================= Consisting of: Current deferred tax asset $ 2 $ 19 $ 59 $ 19 Non-current deferred tax asset 164 172 182 180 ------------------------------------------------------------------------- $ 166 $ 191 $ 241 $ 199 =========================================================================
Valuation allowances are provided when it is more likely than not that some or all of the deferred tax assets will not be realized in the future. These evaluations are based on expected future taxable income and expected reversals of the various net deductible temporary differences. The valuation allowance relates primarily to the future tax deductibility of the allowance for bad debts which may not be deductible under local statutes. In November 1999, legislation was enacted which reduced the corporate income tax rates in Poland effective January 1, 2000. The tax rate of 32% was reduced to 30% in 2000, 28% in 2001 and 2002, 24% in 2003 and 22% thereafter. The Company's tax liabilities (including corporate income tax, Value Added Tax (VAT), social security and other taxes) may be subject to examinations by Polish tax authorities for up to five years from the end of the year the tax is payable. As the application of tax laws and regulations and transactions are susceptible to varying interpretations, amounts reported in the financial statements could be changed at a later date upon final determination by the tax authorities. 7. Financial Instruments, Commitments and Contingent Liabilities Financial Instruments With On-Balance Sheet Risk and Their Fair Values Financial instruments with on-balance sheet risk include cash and cash equivalents, accounts receivable, certain other current assets, trade accounts payable, bank loans and overdraft facilities, and other payables. These financial instruments are shown separately in the balance sheets and their carrying values approximate their fair values. This is because substantially all of these financial instruments have short maturity periods or carry interest at rates that approximate current market rates. The Company does not utilize financial derivatives such as foreign currency contracts or interest rate swaps. EXB-12 DAMIANEX S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable from Polish companies. The Company restricts temporary cash investments to financial institutions with high credit standing. Credit is given to customers only after a thorough review of their credit worthiness. The Company does not normally require collateral with respect to credit sales. As of December 31, 2000 and 2001 and March 31, 2001 and 2002, the Company had no customers, which accounted for more than ten percent of outstanding receivables. The Company has not experienced significant credit losses in the past. Currency Risk A portion of Company's bank loans and financial costs are expected to continue to be denominated in or indexed to other non-Polish denominated currencies. By contrast, all of the Company's revenue is denominated in Polish zloty. Any devaluation of the Polish zloty against the non-Polish denominated currency that the Company is unable to offset through price adjustments will require the Company to use a larger portion of its revenue to service its non-zloty denominated obligations. Supply contracts The Company has various agreements covering its sources of supply. Either party on relatively short notice may terminate some of them. Thus, there is a risk that some portion of the Company's supply of products could be curtailed at any time. Management believes that if these arrangements were terminated that alternative suppliers would be found without significant disruption to the business. Lease Obligations The Company has cancelable rental agreements for a number of the branch office locations. Monthly rentals range from approximately $4,000 to $8,000. All the branch office leases can be terminated by either party within two to three months. The rental expense incurred under operating leases during 2000, 2001 and 2002 was as follows:
Year ended Year ended December (Unaudited) (Unaudited) December 31, 31, 2001 3 month 3 month 2000 period ended period ended March 31, 2001 March 31, 2002 ----------------------------------------------------------------------------------------- Rent expense $ 246 $ 431 $76 $98 =========================================================================================
8. Related party transactions In January 2000, the Company acquired the following business operating assets from the Partnership for cash consideration, which was equivalent to the underlying carrying value in the accounts of the Partnership. 2000 ---------------- Vehicles $ 156 Computers $ 10 Other $ 12 Inventory $ 60 EXB-13 DAMIANEX S.A. NOTES TO FINANCIAL STATEMENTS (amounts in columns expressed in thousands of USD) 9. Subsequent Events On April 22, 2002, the shareholders of the Company sold one hundred percent of their shares to Central European Distribution Corporation ("CEDC"), a United States company and to its wholly-owned subsidiary Carey Agri International Poland. The sales price consisted of approximately $7,138,000 of cash and 152,996 unregistered newly issued common shares of CEDC, with a 1-year restriction on sale. On April 13, 2002, a dividend of $740,000 was declared with respect to prior earnings. The dividend is to be paid over five consecutive months, starting May 2002. EXB-14 EX-99.4 6 dex994.txt UNAUDITED PRO FORMA FINANCIAL INFORMATION Exhibit 99.4 Pro Forma Financial Statements Central European Distribution Corporation Pro Forma Combined Condensed Financial Information The unaudited pro forma condensed combined balance sheet information set forth below for Central European Distribution (CEDC), AGIS S.A. (purchased on April 24, 2002) and Damianex S.A. (purchased on April 22, 2002) is presented as if these acquisitions had been completed on January 1, 2001. The unaudited condensed combined income statement for 2001 assumes the acquisitions were completed on January 1, 2001. The unaudited condensed combined income statement for the six-month period ended June 30, 2002 assumes the acquisitions were completed on January 1, 2001. Because CEDC has already filed its Form 10-Q for the six months ended June 30, 2002, the financial statements included therein have been used as the base in compiling the pro-forma balance sheet and income statement as of and for the six month period ended June 30, 2002 included herein. The pro-forma adjustments made for Damianex and AGIS in the pro-forma statements relates to the results for the periods prior to acquisition (Damianex April 22, 2002 and AGIS April 24, 2002) as the result after these respective dates are already included in the historical data. The data is subject to the assumptions and adjustments in the accompanying notes to the pro forma balance sheets and income statements. CEDC has accounted for the acquisitions of Damianex S.A. and AGIS S.A. as purchases in accordance with SFAS 141. The pro forma information does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and therefore should be read in conjunction with the historical financial statements of CEDC included in its Annual 2001 Report on Form 10-K, and its first and second quarter 2002 Reports on Form 10-Q and the historical financial statements of Damianex S.A. and AGIS S.A. for 2000 and 2001, included herein. The pro forma adjustments do not reflect operating efficiencies and cost savings that may be achievable with respect to the newly acquired companies. The pro forma adjustments do not include any adjustments to the historical operating data for future changes in selling prices, or operating efficiencies which may arise. A final determination of required purchase accounting adjustments, including the allocation of the purchase price to the assets acquired and liabilities assumed based on their respective estimated fair values, will be made after completion of the escrow period on August 31, 2002 (applicable to the Damianex acquisition), upon final adjustments of the AGIS S.A. purchase price related to old AGIS accounts receivable and upon receipt of independent valuations for both acquisitions. Accordingly, the purchase accounting adjustment(s) and the following pro forma condensed combined balance sheet and income statement information may be revised. CEDC currently knows of no events that would require a substantial change to the preliminary purchase price allocation. The pro forma financial information is presented for illustrative purposes only and is not intended to be indicative of the financial position and operating results that would have occurred if the acquisitions had been consummated in accordance with the assumptions set forth below nor is it intended to be a forecast of future operating results or financial position. INDEX
Page ---- Unaudited pro forma condensed combined balance sheet at June 30, 2002 ............... EXC-3 Unaudited pro forma condensed combined income statement for the six month period ended June 30, 2002 .................................................... EXC-4 Unaudited pro forma condensed combined income statement for the year ended December 31, 2001 ................................................................... EXC-5 Notes to the unaudited pro forma financial information .............................. EXC-6
EXC-2 Central European Distribution Corporation Unaudited Pro Forma Condensed Combined Balance Sheet Information June 30, 2002 Amounts in columns expressed in thousands of USD
Total Damianex AGIS S.A, Pro Forma Historical CEDC S.A. Pro Forma CEDC with (A1) Pro Forma Adjust- AGIS S.A. and Adjustments ments DAMIANEX S.A. ---------------- ------------------------------ --------------- ASSETS Current Assets Cash and cash equivalents $ 2,681 $ 2,681 Accounts receivable, net 41,316 41,316 Inventories 15,949 15,949 Deferred income taxes and other current assets 2,942 2,942 ---------------- ------------------------------ --------------- 62,888 62,888 Property, plant and equipment, net 6,113 6,113 Intangible assets, net 2,863 2,863 Goodwill, net 22,515 C2 43 C1 67 22,625 Deferred income taxes and other assets 1,570 1,570 ---------------- ------------------------------ --------------- Total Assets $ 95,949 43 67 $ 96,059 ================ ============================== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Trade accounts payable $ 28,634 $ 28,634 Bank loans and overdraft facilities 17,054 17,054 Income and other taxes payable 1,915 1,915 Other accrued liabilities 2,095 2,095 Current portion of debt and capital leases 3,755 3,755 ---------------- ------------------------------ --------------- 53,453 53,453 Non-current deferred taxes Long-term portion of debt and capital leases 6,088 6,088 Temporary equity 1,836 1,836 Stockholders' Equity Common stock 58 58 Additional paid-in-capital 26,479 26,479 Retained earnings 9,884 C2 43 C1 67 9,994 Accumulated other comprehensive income (loss) (1,699) (1,699) Less Treasury shares (150) (150) ---------------- ------------------------------ --------------- 34,572 43 67 34,682 ---------------- ------------------------------ --------------- Total Liabilities and Stockholders' Equity $ 95,949 43 67 $ 96,059 ================ ============================== ===============
EXC-3 Central European Distribution Corporation Unaudited Pro Forma Condensed Combined Income Statement Information For the six month period ended June 30, 2002 Amounts in columns expressed in thousands of USD (except per share data)
Total Pro Forma Historical Pre- Pre- DAMIANEX AGIS S.A. CEDC with CEDC acquisition acquisition S.A. Pro Forma AGIS S.A. (A1) Daminanex AGIS S.A Pro Forma Adjustments and (A5) (A3) Adjustments Damianex S.A. --------------- ------------- --------------- -------------------------------------------------- Net sales $114,108 $21,653 $20,267 $156,028 Cost of goods sold, excluding depreciation and amortization 98,704 19,478 19,079 137,261 --------------- ------------- ------------------------------------------------------------------ 15,404 2,175 1,188 18,767 Selling, general and administrative expenses, F1 (20) excluding depreciation 9,700 1,915 1,079 F1 72 12,746 Bad debt expense 580 8 (2) 586 Depreciation of tangible fixed assets 565 23 67 F2 3 F1 (8) 650 Amortization of intangible assets 103 - - 103 --------------- ------------- ------------------------------------------------------------------ Operating income 4,456 229 44 (3) (44) 4,682 Non-operating income (expense) Interest expense (551) (169) (152) D (35) D (25) (932) Other income (expense), net (284) 40 230 (14) --------------- ------------- ------------------------------------------------------------------ Income before income taxes 3,621 100 122 (38) (69) 3,736 Income tax (expense) benefit (898) (30) (5) G 11 G 19 (903) --------------- ------------- ------------------------------------------------------------------ Net income $ 2,723 $ 70 $ 117 $(27) $(50) $ 2,833 =============== ============= ================================================================== Net income per share of common stock, basic $ 0.54 $ 0.52 =============== ============== Net income per share of common stock, diluted $ 0.52 $ 0.49 =============== ==============
EXC-4 Central European Distribution Corporation Unaudited Pro Forma Condensed Combined Income Statement Information For the year ended December 31, 2001 Amounts in columns expressed in thousands of USD (except per share data)
Total Pro Forma Historical Historical Historical DAMIANEX AGIS S.A. CEDC with CEDC Damianex AGIS S.A (A4) S.A. Pro Forma AGIS S.A. (A2) S.A Pro Forma Adjustments and (A6) Adjustments DAMIANEX S.A. -------------- ----------- ------------------------------------------------------------------ Net sales $ 178,236 $78,977 $75,449 $332,662 Cost of goods sold, excluding -------------- depreciation and -------------- amortization 154,622 70,262 69,649 294,533 -------------- ----------- ------------------------------------------------------------------ 23,614 8,715 5,800 38,129 Selling, general and administrative expenses, 16,445 6,008 2,703 F (41) 25,331 excluding depreciation F1 216 Bad debt expense 711 218 106 1,035 Depreciation of tangible fixed assets 841 258 165 F2 10 F1 (16) 1,258 Amortization of intangible assets 762 - - 762 -------------- ----------- ------------------------------------------------------------------ Operating income 4,855 2,231 2,826 (10) (159) 9,743 Non-operating income (expense) Interest expense (1,345) (555) (665) D (106) D (77) (2,748) Other income (expense), net 148 55 (14) - 189 -------------- ----------- ------------------------------------------------------------------ Income before income taxes 3,658 1,731 2,147 (116) (236) 7,184 Income tax (expense) benefit (1,132) (520) (650) G 33 G 66 (2,203) -------------- ----------- ------------------------------------------------------------------ Net income $ 2,526 $ 1,211 $ 1,497 $(83) $(170) $ 4,981 ============== =========== ================================================================== Net income per share of common stock, basic $ 0.58 $ 0.90 ============== ============== Net income per share of common stock, diluted $ 0.57 $ 0.90 ============== ==============
EXC-5 Notes to the Unaudited Pro Forma Condensed Combined Financial Information (Amounts in columns expressed in thousands of USD) A. THESE COLUMNS REPESENT THE HISTORICAL BALANCE SHEETS AND RESULTS OF OPERATIONS AS FOLLOWS: (1)-CEDC - consolidated financial position and operating results as of and for the six month period ended June 30, 2002 (2)-CEDC - consolidated operating results for the year ended December 31, 2001 (3)-AGIS S.A. - historical pre-acquisition financial position and operating results between January 1, 2002 and April 24, 2002 (4)-AGIS S.A. - historical operating results for the year ended December 31, 2001 (5)-Damianex S.A. - historical pre-acquisition financial position and operating results between January 1, 2002 and April 22, 2002 (6)-Damianex S.A. - historical operating results for the year ended December 31, 2001 B. ACQUISITIONS (1). AGIS S.A. On April 24, 2002, the CEDC group purchased the outstanding shares of AGIS S.A. Total consideration for the acquisition consisted of the following: Cash consideration to stockholders $ 4,568 *172,676 shares of CEDC common stock 2,171 Acquisition costs (estimated) 262 -------- $ 7,001 ======== * CEDC's common stock was valued at the average stock price a few days before and after the purchase intent was announced and the agreement terms were finalized. The shares issued are not registered and may not be sold without the consent of CEDC for six months subsequent to the acquisition date. EXC-6 Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information (Amounts in columns expressed in thousands of USD) (2). DAMIANEX S.A. On April 22, 2002, the CEDC group purchased the outstanding shares of Damianex S.A. Total consideration for the acquisition consisted of the following: Cash consideration to stockholders $ 7,138 *152,996 shares of CEDC common stock 1,836 Acquisition costs (estimated) 317 ---------- $ 9,291 ========== * CEDC's common stock was valued at the average stock price a few days before and after the agreement terms were finalized. The shares issued are not registered and may not be sold without the consent of CEDC for one year subsequent to the acquisition date. The sellers were granted an option to sell the acquired CEDC stock ("Put Option") back to the Company at a price of $12.00 per share during the period from April 23, 2003 to April 29, 2003. If the put lapses, the shares will be transferred to equity. If the shares are purchased by the Company they will be treated as treasury shares. These shares have been disclosed in the pro forma condensed combined balance sheet as temporary equity above stockholders' equity. The accounting entries for the temporary equity is as follows: 152,996 shares at $11.64* $1,781,000 152,996 shares at $00.36** $ 55,000 Total value 152,996 at $12.00 $1,836,000 *The average market price a few days before and after the acquisition was agreed. ** The added value required to bring the total value to the $12.00 put option price. Prior to the exercise option period (April 23, 2003 to April 29, 2003) these shares will be considered in the calculation of diluted earnings per share (unless they are anti-dilutive). As part of the Agreement, approximately $3,200,000 was transferred to an escrow account. The funds in the escrow account will be paid to the sellers when CEDC receives approval from the Polish Government in regards to the ownership of the real estate element of the transaction (estimated to be approximately 3 months). If approval is not received, the real estate will be separated from the Company and sold to a mutually agreed upon third party for a mutually agreed price. As part of the sale of the real estate, a lease agreement would be established for a period of three to five years with the buyers which shall not exceed the market price applicable in the region. If the real estate is not sold within six months from the day the Polish Government informs the parties of its refusal, the funds in the escrow account will be transferred back to CEDC with 50% of the interest earned on the escrowed amount. EXC-7 Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information (Amounts in columns expressed in thousands of USD) C. DETERMINATION OF GOODWILL (1) AGIS S.A. In connection with the preparation of the pro forma condensed combined balance sheet information, the book values of certain assets were adjusted to estimated fair values as follows: Cost of acquisition $7,001 Historical net book value *597 Other current assets **165 ---------- Preliminary goodwill $6,239 ========== *The historical net book of $2,009,000 has been reduced to reflect a dividend declared in April 2002 in regards to prior year earnings for the amount of approximately $1,412,000. **The goodwill was adjusted to reflect the estimated acquired goodwill determined as of January 1, 2002. Prior to the finalization of the business combination agreement all the real estate (land and buildings) and certain vehicles were sold to the former shareholders. CEDC believes fair market value of the remaining assets is equal to their carrying values, and this will be confirmed upon finalization of the appraisal of business combination assets. (2) DAMIANEX S.A. The book values of certain assets of the Damianex S.A. acquisition were adjusted to estimated fair values as follows (assuming the Polish Government approves the real estate element of the transaction): Cost of acquisition $9,291 Historical net book value *2,831 To increase land to estimated fair value ***165 To increase buildings to estimated fair value ***203 To record deferred taxes on increase of book values of land and buildings ***(92) Other current assets **446 ----------- ---------- Preliminary goodwill $5,738 ==========
* The historical net book has been reduced to reflect a dividend declared in April 2002 in the amount of $740,000. ** The goodwill was adjusted to reflect the estimated acquired goodwill determined as of January 1, 2002. *** Assuming the Polish Government approves the real estate element of the transaction. In accordance with SFAS 142, goodwill is no longer amortized. The allocation of the excess purchase price to goodwill may be revised when the Company receives the independent valuations in regards to the acquisitions (Damianex S.A. and AGIS S.A.) of the tangible and intangible business assets acquired and upon completion of the escrow period for the Damianex S.A. acquisition and final determination of the purchase price for AGIS for EXC-8 Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information Amounts in columns expressed in thousands of USD the effects of old accounts receivable. CEDC does not expect material adjustments from the completion of this process. D. FINANCING OF ACQUISITIONS The Company secured additional long-term borrowings of approximately $4,300,000 to finance the acquisitions. The interest rate on the additional borrowings is LIBOR plus 2%. The average LIBOR plus 2% rate for 2001 and for the three- month period ended March 31, 2002 was approximately 4.25%. The Company allocated $1,800,000 and $2,500,000 of additional borrowing for the purchases of AGIS S.A. and Damianex S.A., respectively. The additional interest expense for AGIS S.A. in regards to the pro forma condensed combined income statement information is approximately $77,000 and $25,000 for the year end December 31, 2001 and for the pre-acquisition period January 1, 2002 to April 24, 2002. The additional interest expense for Damianex S.A. in regards to the pro forma condensed combined income statement information is approximately $106,000 and $35,000 for the year ended December 31, 2001 and for the pre-acquisition period January 1, 2002 to April 22, 2002. The loan is repayable in quarterly installments commencing during the second quarter of 2003. On March 28, 2002, CEDC finalized the private placement of 800,000 shares of the Company's common stock. The Company received approximate net proceeds of $7,543,000. The Company is using the proceeds as follows: Acquisition of Damianex S.A. $4,638 Acquisition of AGIS S.A. 2,768 Other 137 ----------- $7,543 =========== Because the private placement was completed on March 28, 2002, it has been included in the "historical CEDC" column. The effect is in cash ($7,543,000), Stockholders Equity Common Stock ($8,000) and additional paid in capital ($7,535,000). E. ELIMINATION OF ACQUIRED COMPANIES SHAREHOLDERS' EQUITY ACCOUNTS For information purposes as at June 30, 2002 AGIS and Damianex had shareholder equity account balances of :
AGIS S.A. Damianex S.A. June 30, 2002 June 30, 2002 ----------------- ---------------- Common Stock $ 229 $1,739 Retained earnings 876 2,445 Accumulated other comprehensive loss, (net of tax) (102) (32) ----------------- ---------------- $ 1,003 $4,152 ================= ================
These balances were eliminated in determining the CEDC historical shareholder equity accounts. EXC-9 Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information Amounts in columns expressed in thousands of USD F. PROFORMA EXPENSE ADJUSTMENTS (1). CEDC did not acquire any of the AGIS buildings. As a result CEDC entered into lease agreements with the former shareholders of AGIS to lease the buildings for an unspecified period. This pro forma entry reflects the elimination with respect to the depreciation of the buildings and the addition of rent expense on the lease referred to above. Depreciation in the amount of $16,000 and $8,000 has been reduced for the year ended December 31, 2001 and the pre-acquisition period January 1, 2002 to April 24, 2002 respectively. Rent expense of $216,000 and $72,000 has been recognized for the year ended December 31, 2001 and for the pre-acquisition period January 1, 2002 to April 24, 2002, respectively. Additionally, the $150,000 profit made on the sale of the real estate prior to acquisition has been eliminated as it is a direct consequence of the acquisition. An adjustment of $42,000 regarding the associated tax charge has also been made. Additionally, real estate taxes and maintenance costs applicable to the buildings were eliminated, the expenses eliminated were $41,000 and $20,000 for the year ended December 31, 2001 and the pre-acquisition period January 1, 2002 to April 24, 2002, respectively. (2). Damianex S.A. - The increase in the fair market values of the acquired buildings subsequently increased the depreciation expense for the year ended 2001 and for the six month period ended June 30, 2002. The depreciation expense was calculated based on the estimated average remaining life of buildings (approximately 20 years) which is approximately 5%. The additional depreciation expense for the year ended December 31, 2001 and for the pre-acquisition period January 1, 2002 to April 24, 2002 is approximately $10,000 and $3,000. G. PRO FORMA INCOME TAX ADJUSTMENTS
AGIS S.A. Damianex S.A. Six-month period Six- month period ended June 30, 2002 ended June 30, 2002 Interest expense $ 25 $ 35 Rent expense 72 - Real estate tax and repairs and maintenance (20) - Depreciation (8) 3 ------------- ------------- Additional tax deductible expenditures 69 38 Tax rate for period 28% 28% ------------- ------------- Total pro forma tax expense $ 19 $ 11 ============= =============
EXC-10 Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information Amounts in columns expressed in thousands of USD (except per share data)
AGIS S.A. Damianex S.A. Year ended December Year ended December 31, 2001 31, 2001 Interest expense $ 77 $ 106 Rent expense 216 - Real estate tax and repairs and maintenance (41) - Depreciation (16) 10 ----------- ----------- Additional tax deductible expenditures 236 116 Tax rate for period 28% 28% ----------- ----------- Total pro forma tax expense $ 66 $ 33 =========== ===========
Goodwill is not tax deductible. H. PERSONNEL REDUCTIONS CEDC's management does not presently anticipate any significant personnel reductions as a result of the acquisitions. I. PRO FORMA NET INCOME PER SHARE INFORMATION Pro forma net income per share information considers the effects of shares issued in connection with the transaction as though they were outstanding during the periods presented. The shares used for these calculations were as follows:
Periods ended ------------- Year end Six month period ended December 31, 2001 June 30, 2002 ------------------------ ---------------------- Historical Pro forma Historical Pro forma ---------- --------- ---------- --------- Basic 4,359 *5,332 5,006 *5,497 Dilutive 4,447 **5,420 5,261 ***5,752
* Includes the following: 800,000 common shares issued in regards to the private placement offering. 172,676 common shares issued in regards to the AGIS acquisition ** The pro forma diluted earnings per share are calculated using the pro forma shares indicated above. The pro forma diluted earnings per share calculation does not include the 161,380 incremental shares as a result of applying the reverse treasury stock method to the 152,996 common shares with attached put options issued in connection with the Damianex acquisition. The result of this is anti-dilutive. ***The 152, 996 common shares as indicated above are anti-dilutive for the six-month period ended June 30, 2002. EXC-11 -----END PRIVACY-ENHANCED MESSAGE-----