SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD ______________ TO ________________
COMMISSION FILE NUMBER 0-24341
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 54-18652710
------------------------ ---------------------------------
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
1343 MAIN ST., #100
SARASOTA, FLORIDA 34236
--------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
941-330-1558
-------------------------------
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of each class of the issuer's common stock
as of March 31, 2000:
Common Stock ($.01 par value)............................4,402,356 shares
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
- --------------------------------------------------------------------------------
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Condensed Balance Sheet, March 31, 2000 (unaudited) 3
Consolidated Condensed Statements of Income (unaudited) for the
three months ended March 31, 1999 and March 31, 2000 5
Consolidated Condensed Statements of Changes in
Stockholders' Equity (unaudited) 6
Consolidated Condensed Statements of Cash Flows (unaudited)
for the three months ended March 31, 1999 and 2000 7
Notes to Consolidated Condensed Financial Statements (unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................14
PART II. OTHER INFORMATION
Item 2. Changes in Securities and use of Proceeds..........................19
Item 5. Other Information..................................................19
Item 6. Exhibits and Reports on Form 8-K...................................19
Signatures..................................................................20
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION Amounts in columns
expressed in thousands
- --------------------------------------------------------------------------------
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,115 $ 3,724
Accounts receivable, net of allowance for doubtful accounts
of $343,000 and $778,000, respectively 17,299 18,430
Inventories 7,610 7,647
Prepaid expenses and other current assets 2,208 2,854
Deferred income taxes 107 197
------- -------
TOTAL CURRENT ASSETS 30,339 32,852
Equipment, net 1,618 2,501
Intangible assets, net 6,676 11,249
Deferred income taxes 194 205
Other assets 139 80
------- -------
TOTAL ASSETS 38,966 46,887
======= =======
</TABLE>
See accompanying notes.
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION Amounts in columns
expressed in thousands
- --------------------------------------------------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
----------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 14,629 $ 16,080
Bank loans and overdraft facilities 4,930 6,978
Other current liabilities 1,172 2,660
-------- --------
TOTAL CURRENT LIABILITIES 20,731 25,718
Long term debt 3,622 5,472
STOCKHOLDERS' EQUITY
Preferred stock ($0.01 par value, 1,000,000 shares authorized; no shares
issued and outstanding) -- --
Common Stock ($0.01 par value, 20,000,000 shares authorized, 4,134,230
and 4,402,356 shares issued and outstanding at December 31, 1999 and
March 31, 2000, respectively) 42 45
Additional paid-in-capital 12,900 14,175
Retained earnings 3,650 3,673
Accumulated other comprehensive (loss) (1,979) (2,196)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 14,613 15,697
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 38,966 46,887
======== ========
</TABLE>
See accompanying notes.
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION Amounts in columns
expressed in thousands
- --------------------------------------------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1999 2000
-------- --------
NET SALES 14,241 18,720
Cost of goods sold 12,143 15,920
-------- --------
GROSS PROFIT 2,098 2,800
Sales, general and administrative expenses 1,538 2,553
-------- --------
OPERATING INCOME 560 247
Non-operating income (expense)
Interest expense (26) (136)
Interest income 85 56
Realized and unrealized foreign currency
transaction (losses) gains, net (103) (91)
Other income (expense), net 14 (42)
-------- --------
INCOME BEFORE INCOME TAXES 530 34
Income tax expense (197) (11)
-------- --------
NET INCOME $ 333 $ 23
======== ========
NET INCOME PER COMMON SHARE, BASIC AND DILUTIVE
$ 0.09 $ 0.01
======== ========
See accompanying notes.
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION Amounts in columns
expressed in thousands
- --------------------------------------------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
PAID-IN- RETAINED COMPREHENSIVE
COMMON STOCK CAPITAL EARNINGS (LOSS) INCOME TOTAL
--------------------- --------- -------- ------------- --------
NO. OF
SHARES AMOUNT
-------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 4,134 $ 42 $ 12,900 $ 3,650 $ (1,979) $ 14,613
Issue of shares for acquisition 268 3 1,275 1,278
Net income for the three months 23 23
ended March 31, 2000
Foreign currency translation (217) (217)
adjustment
-----------------------------------------------------------------------------
Comprehensive loss for the three 23 (217) (194)
months ended
March 31, 2000
-----------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000 4,402 $ 45 $ 14,175 $ 3,673 $ (2,196) $ 15,697
=============================================================================
</TABLE>
See accompanying notes.
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION Amounts in columns
expressed in thousands
- --------------------------------------------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1999 2000
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING $ (764) $ 1,425
ACTIVITIES
INVESTING ACTIVITIES
Purchases of equipment (119) (288)
Proceeds from the disposal of equipment 5 --
Acquisition of subsidiary (2,958) (3,855)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (3,072) (4,143)
FINANCING ACTIVITIES
Borrowings on overdraft facility 1,094 --
Payment of overdraft facility (1,036) (171)
Short-term borrowings 536 --
Payment of short term borrowings -- (502)
Long-term borrowings 3,500 4,000
------- -------
NET CASH PROVIDED BY FINANCING
ACTIVITIES
4,094 3,327
------- -------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 258 609
Cash and cash equivalents at beginning of
period 3,628 3,115
------- -------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 3,886 $ 3,724
======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Common stock issued in connection with
acquisition of subsidiary $ 1,668 $ 1,278
======= =======
</TABLE>
See accompanying notes.
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANISATION AND DESCRIPTION OF BUSINESS
Central European Distribution Corporation (CEDC) was organized as a
Delaware Corporation in September 1997 to operate as a holding company
through its sole subsidiary, Carey Agri International Poland Sp. z o.o.
(Carey Agri). In 1999 CEDC formed two additional subsidiaries to make
certain acquisitions and in 2000 acquired another company as disclosed in
Note 5 below. CEDC and its subsidiaries as of the date of their
organization are referred to herein as the Company.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three month period ended March 31, 2000 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at the date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in CEDC's annual report on Form 10-K for the
year ended December 31, 1999.
3. COMPREHENSIVE INCOME (LOSS)
During the three months ended March 31, 2000, the Company incurred a
comprehensive loss of approximatelly $194,000 and reported an accumulated
other comprehensive loss of $2,196,000 as of March 31, 2000. The loss is
due to translation losses from fluctuations in the exchange rates of the
U.S. Dollar and the Polish Zloty and Polish Zloty translation losses on
U.S. Dollar transactions of a long term investment nature between CEDC and
its Polish subsidiaries.
4. EARNINGS PER SHARE
Net income per common share is calculated under the provisions of FAS No.
128, "Earnings per Share". The weighted average number of shares
outstanding for the three months ended March 31, 2000 and 1999 were
4,137,176 and 3,831,939, respectively. The increase in 2000 gives effect to
the acquisitions in 1999 and 2000.
The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
1999 2000
------ ------
IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C>
Basic:
Net income $ 333 $ 23
Average shares outstanding 3,832 4,137
------ ------
Basic EPS $ 0.09 $ 0.01
====== ======
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Diluted:
Net income $ 333 $ 23
Average shares outstanding 3,832 4,137
Net effect of dilutive stock options - based on the 22 0
treasury stock method
------ ------
Totals 3,854 4,137
====== ======
Diluted EPS $ 0.09 $ 0.01
====== ======
</TABLE>
No stock options have been exercised in the first quarter of 2000. Warrants
granted in connection with the IPO have been excluded from the above
calculation of diluted shares since the exercise price is greater then the
average market price of the common shares.
5. ACQUISITIONS
As previously reported, in separate transactions in March 1999 and May
1999, the Company acquired certain assets, businesses and trademarks of
Multi Trade Company S.C. and The Cellar of Fine Wines for a combination of
cash and common stock. On March 31, 2000, the Company purchased 100% of the
shares of Polskie Hurtownie Alkoholi Sp. z o.o. ("PHA" distributing
alcoholic beverages in Western Poland) for $4 million cash and 268,126
shares of common stock. The stock cannot be sold for three years and it is
unregistered. The pro forma unaudited results of operations for three
months ended March 31,1999 and 2000, assuming consummation of these
acquisitions and issuance of the common stock as of January 1, 1999 and
January 1, 2000 are shown below. The pro forma results for the 1999 period
include the results for all three companies referred to above. The pro
forma results for the 2000 period reflect the results of PHA only.
THREE MONTHS ENDED MARCH 31,
----------------------------------
1999 2000
------------ -----------
IN THOUSANDS, EXCEPT PER SHARE DATA
Net sales $ 30,508 $ 28,193
Net income 124 (94)
Net income per share data:
Basic and diluted $ 0.03 $ (0.02)
The allocation of the purchase price for the PHA acquisition reflected in
the March 31, 2000 condensed consolidated balance sheet is preliminary and
subject to revision upon expiration of the escrow period upon which certain
adjustments of the purchase price may occur. Also, the Company has not
obtained an independent valuation of PHA at this time. Consequently, the
entire amount ( $5,228,000) of the excess cost over net assets acquired has
been provisionally reported as goodwill in the accompanying balance sheet
and for purposes of the pro forma disclosures noted above it is being
amortized over a 20 year period. The escrow deposit of $ 250,000 will be
paid in full to the seller if between March 31, 2000 and August 31, 2000
the gross margin on sales by PHA is not less than the gross margin on sales
by PHA during the period from March 31, 1999 to August 31, 1999. Management
expects to finalize the purchase price and related allocations later in the
year 2000.
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. LONG-TERM DEBT AND SHORT-TERM BANK LOANS
On March 21, 2000 the Company signed an agreement for a $700,000 loan for
working capital for MTC. The interest rate is 3 months LIBOR plus 1.5% and
it is repayable on March 31, 2001.
On March 29, 2000 the Company signed an agreement for a long term loan of
$4,000,000. This loan was used as part of the consideration in the
acquisition of PHA. The annual interest rate is 3 months LIBOR plus 1.65%.
The loan is repayable in installments of $500,000 commencing June 30, 2001.
7. INCOME TAXES
Total income tax expense varies from expected income tax expense computed
at Polish statutory rates (34% in 1999 and 30% in 2000) as follows:
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 2000
------------------ ------------------
Tax at Polish statutory rate 180 10
Increase (reduction) in deferred tax
valuation allowance 12 --
Permanent differences 5 1
--- ---
Income tax expense 197 11
=== ===
The corporate income tax rates in Poland will be 30% in 2000 and 28% in
2001.
Tax liabilities (including corporate income tax, Value Added Tax, social
security, and other taxes) of the Company's Polish subsidiaries may be
subject to examinations by Polish tax authorities for up to five years from
the end of the year the tax is payable. CEDC's US federal income tax
returns are also subject to examination by US tax authorities. Because the
application of tax laws and regulations to many types of transactions is
susceptible to varying interpretations, amounts reported in the financial
statements could be changed at a later date upon final determination by the
tax authorities.
8. CONTINGENT LIABILITIES
The Company is involved in litigation and has claims against it for matters
arising in the ordinary course of business. In the opinion of management,
the outcome will not have a material adverse effect on the Company.
The Company has signed an agreement to purchase a modern warehouse and
distribution facility within Warsaw city limits. Consideration for the
purchase will be $15 million and completion is expected in quarter 4. The
Company has so far only been required to pay $50,000 as a contract signing
fee. The next payment is scheduled for quarter 3.
In order to manage its foreign currency exposures the Company has
introduced a new hedging policy late in quarter 1. It is expected that this
policy will minimize any adverse impact of currency fluctuations.
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following analysis should be read in conjunction with the financial
statements and the notes thereto appearing elsewhere in this report.
OVERVIEW
The Company's operating results are generally determined by the volume of
alcoholic beverages that can be sold by the Company through its national
distribution system, the gross profits on such sales and control of costs. The
Company purchases the alcoholic beverages it distributes from producers as well
as other importers and wholesalers. Almost all such purchases are made with the
sellers providing a period of time, generally between 25 and 90 days, before the
purchase price is to be paid by the Company. Since the initial public offering,
the Company pays cash on delivery for its domestic vodka purchases in order to
receive additional discounts in excess of the interest foregone. The Company
sells the alcoholic beverages with a mark-up over its purchase price, which mark
up reflects the market price for such individual product brands in the Polish
market. The Company's bad debt ratio provision as a percentage of net sales was
0.17% in 1998, 0.28% in 1999 and 0.34% in the three-month period ended March 31,
2000.
The following comments regarding variations in operating results should be
read considering the rates of inflation in Poland during the period -- 8.5% in
1998, 9.8% in 1999 and 10.2% for the period to March 31, 2000. Consideration
should also be given to the movements of the Polish zloty compared to the U.S.
Dollar. In 1998 the zloty appreciated against the Dollar by 0.3%, in 1999 it
depreciated by 18.6%. In the three months ended March 31, 2000 it has
appreciated 0.1%.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2000
Net sales increased $4.5 million, or 31.5% from $14.24 million in the three
months ended March 31, 1999 to $18.72 million in the three months ended March
31, 2000. This increase is due to increased market penetration by the existing
distribution system and increased sales following the acquisition of Multi Trade
Company (MTC) in March 1999 and PWW in May 1999. The acquisition of MTC added
$2.2 million to net sales during last half of March 1999. PWW sales for the
quarter ended March 31, 2000 totaled to $495,000.
Cost of goods sold increased $3.77 million, or 31.1%, from $12.14 million
in the three months ended March 31, 1999 to $15.92 million in the three months
ended March 31, 2000. As a percentage of net sales, cost of goods sold decreased
from 85.3% to 85.0%. This decrease is mainly due to the better discounts the
Company is able to obtain from its suppliers.
Sales, general and administrative expense increased 66% from $1.54 million
in the three months ended March 31, 1999 to $2.55 million in the three months
ended March 31, 2000. This increase is mainly due to the inclusion of the two
acquisitions mentioned above. As a percentage of net sales, sales, general and
administrative expenses increased from 10.8% to 13.6%. These increases are due
to three key reasons; firstly the inclusion of the S,G&A expense of the acquired
subsidiaries for the first time (3.6%), secondly the inclusion of the associated
amortization of goodwill (0.7%) and thirdly the additional provision for
doubtful debts.
Interest expense increased $110,000 or 423% from $26,000 in the three
months ended March 31, 1999 to $136,000 in the three months ended March 31,
2000. This increase is mainly due to the use of bank financing for acquisitions.
As a percentage of net sales, interest expense increased from 0.2% in 1999 to
0.7% in 2000.
Interest income was $56,000 in the three months ended March 31, 2000
compared to $85,000 in the three months ended March 31, 1999.
Net realized and unrealized foreign currency transactions resulted in
losses of $103,000 in the three months ended March 31, 1999 and losses of
$91,000 in the three months ended March 31, 2000. The net loss in 1999 is mainly
due to the depreciation of the zloty, versus the U.S. dollar, in which a
substantial portion of the Company's liabilities are denominated.
Income tax expense decreased $186,000, from $197,000 in the three months
ended March 31, 1999 to $11,000 in the three months ended March 31, 2000. This
decrease is mainly due to the decrease in income before income taxes from
$530,000 to
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
$34,000, respectively.
The effective tax rate decreased from 37% in the three months ended March
31, 1999 to 32.4% in the three months ended March 31, 2000. This was due mainly
to the reduction of statutory tax rates in Poland which decreased from 34% in
1999 to 30% in 2000.
Net income decreased $310,000 from $333,000 in the three months ended March
31, 1999 to $23,000 in the three months ended March 31, 2000. This decrease is
due to the factors noted above.
STATEMENT OF LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash balance increased by $609,000 in the three months
ended March 31, 2000. The increase in 2000 is partly due to the inclusion of
PHA, whose balance sheet added $145,000. The balance, $464,000 results from
tighter control of working capital.
The net cash generated from operating activities was $1,425,000 in the
first three months of 2000 compared to $764,000 used during the same period in
1999.
The net cash used in investing activities amounted to $4.14 million in the
three months ended March 31, 2000 compared to $3.07 million in the three months
ended March 31, 1999. Investing activities consist primarily of the acquisition
of PHA.
The net cash provided by financing activities in the three months ended
March 31, 2000 was $3.33 million compared to net cash of $4.09 million provided
in the three months ended March 31, 1999. The net proceeds from borrowings in
2000 were accountable for this increase. The borrowings were used primarily for
the acquisition of PHA.
STATEMENT ON INFLATION AND CURRENCY FLUCTUATIONS
Inflation in Poland is projected at 6.0% for 2000, though for the first
quarter it was 10.2% slightly higher than last year. Whilst not material there
has been an impact on the costs incurred by the Company especially in its
overheads.
The share of purchases denominated in foreign currencies has decreased
resulting in lower foreign exchange exposure. However, the level of borrowing
denominated in U.S. dollars has increased due to working capital requirements
and the acquisitions of MTC and PWW.
SEASONALITY
The Company's sales have been historically seasonal with nearly 60% of
sales occurring in the second half of the year and over 33% occurring in the
last quarter. The first quarter is usually the slowest contributing around 20%
to both sales and gross margin.
The Company's working capital requirements are also seasonal and are
normally highest in the months of December and January. Liquidity then normally
improves as collections are made on the higher sales during the months of
November and December.
OTHER MATTERS
The Company continues to be involved in litigation from time to time in the
ordinary course of business.
In management's opinion, the litigation in which the Company is currently
involved, individually and in the aggregate, is not material to the Company's
financial condition or results of operations.
During March of 2000 the Company also finalized its acquisition of PHA
paying approximately $4.0 million in cash and 268,126 shares of restricted
stock. The transaction was completed on March 31, 2000 and therefore no
recognition of PHA's earnings for the quarter ended March 31, 2000 has been made
in this submission.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(c) All unregistered equity securities of the registrant sold during
the first quarter of 2000 were sold in reliance on Regulation S.
ITEM 5. OTHER INFORMATION
On March 31, 2000, the Company purchased 100% of the shares of Polskie Hurtownie
Alkoholi Sp. z o.o. for approximately $4 million in cash and 268,126 shares of
common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Employment Agreement between Neil Crook and Carey Agri.
10.2 Employment Agreement between Neil Crook and CEDC
27 Financial Data Schedule
(b) REPORTS ON FORM 8K
No reports on Form 8K were filed during the first quarter of 2000.
<PAGE>
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 THEREUNTO DULY AUTHORIZED.
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
(registrant)
Date: May 15, 2000 BY: /s/ WILLIAM V. CAREY
------------------------
William V. Carey
President and Chief Executive Officer
Date: May 15, 2000 BY: /s/ NEIL A.M. CROOK
-----------------------
Neil A.M. Crook
Chief Financial Officer
<PAGE>
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
- -------- -----------
10.1 Employment Agreement between Neil Crook and Carey Agri.
10.2 Employment Agreement between Neil Crook and CEDC
27 Financial Data Schedule
EXHIBIT 10.3
[LOGO]
Carey Agri International Poland Sp. z o.o.
ul. Lubelska 13, 03-802 Warszawa
Phone: (022) 618-50-25 Fax: (022) 618-02-38
EMPLOYMENT CONTRACT
Concluded on 10th January 2000
between:
CAREY AGRI INTERNATIONAL POLAND SP. Z O.O., with its registered seat in Warsaw,
13 Lubelska Street, represented by MR. WILLIAM V. CAREY hereinafter referred to
as "EMPLOYER"
and
MR. NEIL CROOK, residing at W. Kajle; 20, 04-634 Warsaw, hereinafter referred to
as "EMPLOYEE"
ss1
The EMPLOYER hires the EMPLOYEE as the CHIEF FINANCIAL OFFICER.
ss2
The agreement herewith is signed for a 3-YEAR PERIOD and can be dissolved by a
6-MONTH NOTICE.
ss3
The range of duties of the employed party is the following but not limited to:
1. Preparing and presenting the reports regarding the:
- P/L;
- balance sheet;
- actual overhead vs. projected overhead;
- profitability ratios of the Company.
2. Cooperation with the Chief Accountant.
3. Cooperation with the controller in analyzing the overhead costs of Warsaw
branch and other branches, as well as all subsidiaries of Carey.
4. All deferred tax work.
5. Preparation of the GAAP reports on a quarterly basis. Cooperation with the
Company Management.
<PAGE>
6. Creation of the internal procedures on finances of the Company.
7. Creation of the internal procedures of reporting.
ss4
The employment will begin as of February 7
ss5
Throughout the duration of the contract the EMPLOYEE will be paid as follows:
1. Monthly remuneration of 2,000 USD (BRUTTO) paid in the equivalent of Polish
zlotys.
2. The average exchange rate announced on the day of payment by the National
Bank of Poland will be used to calculate the equivalent.
ss6
The EMPLOYEE will be entitled to use a Company car in the range of a Ford Mondeo
for business purposes.
ss7
The EMPLOYEE is entitled to annual vacation according to the Labor Code
provisions.
ss8
All issues not regulated herein shall be settled in accordance with the Polish
Labor Code.
ss9
Any modifications of this contract must be made in writing under the penalty of
nullity.
ss10
This contract has been made in two identical copies, one for each Party.
[ILLEGIBLE] [ILLEGIBLE] 10/1/2000
- --------------------------- -----------------------
Employer Employee
<PAGE>
I declare that I have received a copy of this contract and after acknowledging
its substance, I accept the proposed terms of employment and remuneration.
Simultaneously, I acknowledge the work regulations presently in force within the
firm. I hereby confirm my undertaking to keep confidential all information
relating to my Employer and employment and not to convey them to any third
party.
[ILLEGIBLE] [ILLEGIBLE]
- ----------------------- -------------------------
EMPLOYEE RECIPIENT OF THE STATEMENT
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of February 7th,
2000, by and between Central European Distribution Corporation, Inc., a Delaware
corporation (the "Company"), and Neil Crook ("Officer").
WHEREAS, the Company desires to employ the Officer and the Officer desires
to be employed by the Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto agree as
follows:
1. TERM. The employment of the Officer by the Company shall commence on the
date of February 7th, 2000 and end three (3) years thereafter (the "Expiration
Date").
2. POSITION AND DUTIES. The Officer shall serve as chief financial officer
of the Company. The job description is outlined in the employment contract with
the Company's subsidiary, Carey Agri. The Officer shall devote the Officer's
reasonable best efforts and substantially full business time to the performance
of the Officer's duties and advancement of the business and affairs of the
Company and the Subsidiary. Officer acknowledges that it is the intent of the
Company that his primary responsibilities shall be in connection with the
business of the Subsidiaries.
3. COMPENSATION.
5(a). BASE SALARY. The Officer shall be paid an annual base salary
(the "Base Salary") at the rate of $39,000 per year.
5(b). STOCK OPTIONS. As part of the consideration for entering into
this Agreement and performing services hereunder, the Company grants stock
options for 15,000 shares in yearly blocks of 5,000 shares of common stock per
year starting from the employment date of February 7th, 2000. The exercise price
for each 5,000 share block shall be according to the following table:
February 7th, 2000 5,000 shares of common stock
February 7th, 2001 5,000 shares of common stock
February 7th, 2002 5,000 shares of common stock
(i) Each block shall be valid for a period of 48 months from the
exercise date and cannot be exercised for a statutory holding period of 12
months from the grant date.
<PAGE>
(ii) If the employment contract is terminated by either party
during any year the options for that year and any future options will be
terminated. Any options received in prior years will still be valid.
5(c). OTHER BENEFITS. The Officer shall be entitled to participate in
such plans and to receive such bonuses, incentive compensation and fringe
benefits as may be granted or established by the Company from time to time,
including the use of an automobile.
5(d). VACATION; HOLIDAYS. The Officer shall be entitled to all public
holidays observed by the Subsidiary and vacation in accordance with the
applicable vacation policies for senior officers of the Company, which shall be
taken at a reasonable time or times.
6. EXPENSES. The Company and the Subsidiary shall reimburse the Officer for
all reasonable expenses incurred by the Officer (in accordance with the policies
and procedures in effect for senior officers of the Company and the
Subsidiaries) in connection with the Officer's services under this Agreement.
The Officer shall account to the Company or the Subsidiary, as the case may be,
for such expenses in accordance with policies and procedures established by the
Company or Subsidiary.
7. CONFIDENTIAL INFORMATION. The Officer covenants and agrees that the
Officer will not ever, without the prior written consent of the Board or a
person authorized by the Board, publish or disclose to any unaffiliated third
party or use for the Officer's personal benefit or advantage any confidential
information with respect to any of the Company's or Subsidiaries' products,
services, subscribers, suppliers, marketing techniques, methods or future plans
disclosed to the Officer as a result of the Officer's employment with the
Company, to the extent such information has heretofore remained confidential
(except for unauthorized disclosures) and except as otherwise ordered by a court
of competent jurisdiction.
8. NON-COMPETITION. The Officer covenants and agrees that the Officer will
not, during the Officer's employment hereunder and for a period of one (1) year
thereafter (to the extent permitted by law), at any time and in any state or
other jurisdiction in which the Company or Subsidiary is engaged or has
reasonably firm plans to engage in business, (i) compete with the Company or any
Subsidiaries on behalf of the Officer or any third party; (ii) participate as a
director, agent, representative, stockholder or partner or have any direct or
indirect financial interest in any enterprise which engages in the alcohol
product distribution business or any other business in which the Company or
Subsidiaries are engaged; or (iii) participate as an employee or officer in any
enterprise in which the Officer's responsibility relates to alcohol product
distribution business or any other business in which the Company or Subsidiaries
are engaged
<PAGE>
9. TERMINATION OF EMPLOYMENT.
9(a). DEATH. The Officer's employment hereunder shall terminate upon
the Officer's death.
9(b). BY THE COMPANY. The Company may terminate the Officer's
employment hereunder under the following circumstances with 180 days notice
unless there has been a material breach of the Agreement.
(i). If the Officer shall have been unable to perform all of the
Officer's duties hereunder by reason of illness, physical or mental disability
or other similar incapacity, which inability shall continue for more than three
(3) consecutive months, the Company may terminate the Officer's employment
hereunder.
9(c). BY THE OFFICER. The Officer may terminate the Officer's
employment hereunder for "Good Reason" with 180 days notice. For purposes of
this Agreement, "Good Reason" shall mean (i) the Company's failure to perform or
observe any of the material terms or provisions of this Agreement, and the
continued failure of the Company to cure such default within thirty (30) days
after written demand for performances has been given to the Company by the
Executive, which demand shall describe specifically the nature of such alleged
failure to perform or observe such material terms or provisions; or (ii) a
material reduction in the scope of the Officer's responsibilities and duties.
The termination notice is 180 days.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Registrant
Company Condensed Consolidated Balance Sheet (Unaudited) for March 31, 2000 and
Condensed Consolidated Statement of Income (Unaudited) for the three Months
ended March 31, 2000 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,724,000
<SECURITIES> 0
<RECEIVABLES> 18,430,000
<ALLOWANCES> 778,000
<INVENTORY> 7,647,000
<CURRENT-ASSETS> 32,852,000
<PP&E> 2,501,000
<DEPRECIATION> 104,000
<TOTAL-ASSETS> 46,887,000
<CURRENT-LIABILITIES> 25,718,000
<BONDS> 0
0
0
<COMMON> 45,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 46,887,000
<SALES> 18,720,000
<TOTAL-REVENUES> 18,720,000
<CGS> 15,920,000
<TOTAL-COSTS> 18,473,000
<OTHER-EXPENSES> 42,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136,000
<INCOME-PRETAX> 34,000
<INCOME-TAX> 11,000
<INCOME-CONTINUING> 23,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,000
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
