CEDC Announces Restatement Of Prior Reported Financial Statements
MT. LAUREL, N.J., June 4, 2012 /PRNewswire/ -- Central European Distribution Corporation (NASDAQ: CEDC) announced today that it expects to restate its financial results for all financial reporting periods from and after January 1, 2010.
As previously announced, CEDC changed its senior management at its main operating subsidiary in Russia, the Russian Alcohol Group ("RAG"), during April 2012. Following this change, senior CEDC management requested that the new management team review RAG's business operations and internal controls, including an assessment of the resources and needs of the corporate finance and reporting departments, as identified in Item 9A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011. As a result of the preliminary findings of that review, which is ongoing, senior CEDC management determined that CEDC's reported net sales in the years ended December 31, 2010 and 2011 failed to reflect the timely reporting of the full amount of retroactive trade rebates provided to RAG's customers in Russia. In addition, the Company is reviewing whether any adjustments will also need to be made to the Company's financial statements for the year ended December 31, 2009. CEDC estimates that the aggregate effect of the adjustments identified to date will result in a reduction of its consolidated net sales, operating profit and related accounts receivable from January 1, 2010 through December 31, 2011 of approximately $30 to $40 million, which amount is subject to change as CEDC continues its review of the accounting matters discussed herein. The majority of this amount reflects the fact that certain retroactive trade rebates were estimated incorrectly, and therefore both net revenues and accounts receivable were over stated. The adjustments are not expected to have any impact on previously reported net cash provided by operating activities reported in the cash flow statements during any of the periods covered.
While CEDC believes that introducing new management in RAG was a key and necessary step in addressing the material weaknesses in its internal control over financial reporting previously disclosed in the Company's 2011 Annual Report on Form 10-K, CEDC's management is continuing to evaluate the causes of the above described accounting errors and control deficiencies and is working closely with the new management team at RAG to change the control environment and strengthen RAG's internal control system over financial reporting.
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