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 ~~SEPTEMBER~~MARCH 3031, ~~2012~~2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 001-35293

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


Delaware		54-1865271
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

3000 Atrium Way, Suite 265 Mt. Laurel, New Jersey		08054
(Address of Principal Executive Offices)		(Zip code)

(856) 273-6980

(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 ¨x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x¨ No ¨x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

Large Accelerated Filer x¨ Accelerated Filer ¨ Non-Accelerated Filer ¨x (Do not check if a smaller reporting company) Smaller Reporting Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ¨ No x

The number of shares outstanding of each class of the issuer’s common stock as of ~~November~~June 145, ~~2012~~2013: Common Stock ($0.01 par value) 7810,~~761,652~~000.

INDEX

		PAGE
~~PART I FINANCIAL INFORMATION~~	PART I FINANCIAL INFORMATION
Item 1	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2012 (unaudited) and as of December 31, 2011		3
	Condensed Consolidated Balance Sheets as of March 31, 2013 (unaudited) and as of December 31, 2012		3
	Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three and nine month periods ended September 30, 2012 and September 30, 2011		4
	Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) for the three month periods ended March 31, 2013 and March 31, 2012		4
	Condensed Consolidated Statements of Cash Flow (unaudited) for the nine month periods ended September 30, 2012 and September 30, 2011		5
	Condensed Consolidated Statements of Cash Flow (unaudited) for the three month periods ended March 31, 2013 and March 31, 2012		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
	1. Organization and Significant Accounting Policies		6
Item 3	Quantitative and Qualitative Disclosures about Market Risk		33
	2. Sale of accounts receivable		8
	3. Inventories		9
	4. Borrowings		9
	5. Income Taxes		13
	6. Commitments and contingent liabilities		13
	7. Stock Option Plans and Warrants		15
	8. Comprehensive income / (loss)		15
	9. Related party transactions		15
	10. Interest income / (expense), net		16
	11. Other financial income / (expense), net		16
	12. Other non-operating income / (expense), net		17
	13. Earnings/(loss) per share		17
	14. Fair value measurements		17
	15. Effects of foreign currency movements		18
	16. Operating segments		19
	17. Subsequent events		20
	18. Recently issued accounting pronouncements		20
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3	Quantitative and Qualitative Disclosures about Market Risk		32
Item 4	Controls and Procedures		33
~~PART II OTHER INFORMATION~~	PART II OTHER INFORMATION		3433
Item 1	Legal Proceedings		3433
Item 1A	Risk Factors		3433
Item 6	Exhibits		34

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

All amounts are expressed in thousands

(except share information)

	September 30,2012(unaudited)			December 31,2011
	March 31,2013(unaudited)			December 31,2012
ASSETS
Current Assets
Cash and cash equivalents	$	~~102~~44,~~713~~012		$	9484,~~410~~729
Accounts receivable, net of allowance for doubtful accounts at September 30, 2012 of $26,512 and at December 31, 2011 of $24,510		220,802			410,866
Accounts receivable, net of allowance for doubtful accounts at March 31, 2013 of $18,159 and at December 31, 2012 of $25,250		201,614			352,089
Inventories		~~160~~152,~~061~~113			~~117~~174,~~690~~714
Prepaid expenses		2718,~~472~~988			1618,~~538~~099
Other current assets		48,780			23,020
Income taxes receivable		12,637			13,828
Deferred income taxes		5,173			4,717
Other current assets		101,583			92,421
Debt issuance costs		7,389			2,962
Deferred income taxes		1,092			2,298
Total Current Assets		572,390			670,203
Debt issuance costs		12,673			13,645
Intangible assets, net		486,787			463,848
Total Current Assets		544,712			751,823
Goodwill		706,924			670,294
Intangible assets, net		441,469			454,563
Property, plant and equipment, net		178,871			176,660
Goodwill		374,434			388,385
Deferred income taxes, net		23,195			21,488
Property, plant and equipment		163,456			169,744
Debt issuance costs		11,324			13,550
Deferred income taxes		3,035			3,037
Non-current assets held for sale		675			675
Total Non-Current Assets		982,394			1,015,729
Total Non-Current Assets		1,407,776			1,346,515
Total Assets	$	1,527,106		$	1,767,552
Total Assets	$	1,980,166		$	2,016,718
LIABILITIES AND EQUITY
Current Liabilities
Trade accounts payable	$	7880,~~735~~985		$	~~144~~126,~~797~~489
Bank loans and overdraft facilities		~~115~~81,~~196~~463			85130,~~762~~655
Obligations under Convertible Senior Notes		257,122			0
Obligations under RTL Credit Facility		50,000			0
Obligations under Debt Security		70,000			0
Obligations under Convertible Senior Notes		257,858			256,922
Income taxes payable		9,421			9,607
Obligations under Senior Secured Notes		928,658			944,499
Taxes other than income taxes		101,820			189,515
Obligations under RTL Notes		20,000			70,000
Other accrued liabilities		75,357			48,208
Deferred income taxes		2,998			4,907
Current portions of obligations under capital leases		832			1,109
Income taxes payable		4,755			10,039
Total Current Liabilities		708,483			478,998
Taxes other than income taxes		91,108			197,135
Long-term obligations under capital leases		674			532
Other accrued liabilities		128,757			88,573
Long-term obligations under Convertible Senior Notes		0			304,645
Current portions of obligations under capital leases		810			729
Long-term obligations under Senior Secured Notes		933,871			932,089
Total Current Liabilities		1,647,392			1,829,948
Long-term accruals		2,093			2,000
Long-term obligations under capital leases		519			499
Deferred income taxes		94,815			91,128
Long-term accruals		665			700
Commitments and contingent liabilities (Note 15)
Long-term income taxes payable		9,194			9,837
Total Long-Term Liabilities		1,031,453			1,330,394
Deferred income taxes		92,559			94,034
Temporary equity		29,443			0
Commitments and contingent liabilities (Note 6)
Total Long-Term Liabilities		102,937			105,070
Temporary equity		29,443			29,443
Stockholders’ Equity
Common Stock ($0.01 par value, 120,000,000 shares authorized, 73,045,992 and 72,740,302 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively)		730			727
Common Stock ($0.01 par value, 120,000,000 shares authorized, 76,107,506 and 76,047,506 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively)		761			760
Preferred Stock ($0.01 par value, 1,000,000 shares authorized, none issued and outstanding)		0			0
Additional paid-in-capital		1,~~371~~372,~~389~~670			1,~~369~~372,~~471~~378
Accumulated deficit		(1,~~189~~663,~~620~~679	)		(1,~~197~~584,~~884~~222	)
Accumulated other comprehensive income		2837,~~438~~732			3514,~~162~~325
Less Treasury Stock at cost (246,037 shares at September 30, 2012 and December 31, 2011)		(150	)		(150	)
Less Treasury Stock at cost (246,037 shares at March 31, 2013 and December 31, 2012)		(150	)		(150	)
Total Stockholders’ Equity		~~210~~(252,~~787~~666	)		~~207~~(196,~~326~~909	)
Total Liabilities and Equity	$	1,~~980~~527,~~166~~106		$	21,~~016~~767,~~718~~552

The accompanying notes are an integral part of the condensed consolidated financial statements.

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

All amounts are expressed in thousands

(except per share information)

	Three months ended September 30,						Nine months ended September 30,
	Three months ended March 31,
	2012			2011			2012			2011
	2013			2012
Sales	$	~~401~~328,~~113~~073		$	~~432~~321,~~942~~756		$	~~1,125,619~~		$	~~1,176,861~~
Excise taxes		(~~209~~171,~~782~~826	)		(~~223~~175,~~304~~767	)		~~(601,098~~	)		~~(630,513~~	)
Net sales		~~191~~156,~~331~~247			~~209~~145,~~638~~989			~~524,521~~			~~546,348~~
Cost of goods sold		~~109~~88,~~317~~374			~~131~~90,~~427~~874			~~312,055~~			~~340,820~~
Gross profit		8267,~~014~~873			7855,~~211~~115			~~212,466~~			~~205,528~~
Selling, general and administrative expenses		66,835			61,710			187,909			180,836
Operating expenses		74,468			58,934
Gain on remeasurement of previously held equity interests		0			0			0			(7,898	)
Operating loss		(6,595	)		(3,819	)
Impairment charge		0			674,515			0			674,515
Non operating income / (expense), net
Operating income		15,179			(658,014	)		24,557			(641,925	)
Interest income / (expense), net		(28,134	)		(26,302	)
Non operating income / (expense), net
Other financial income / (expense), net		(37,553	)		97,588
Interest income / (expense), net		(26,231	)		(28,123	)		(78,139	)		(83,336	)
Other non operating income / (expense), net		(4,108	)		(2,598	)
Other financial income / (expense), net		58,490			(170,337	)		80,648			(120,807	)
Income / (loss) before income taxes and equity in net losses from unconsolidated investments		(76,390	)		64,869
Other non operating income / (expense), net		(5,883	)		(10,683	)		(10,982	)		(14,320	)
Income tax expense		(3,066	)		(4,685	)
Income / (loss) before income taxes and equity in net losses from unconsolidated investments		41,555			(867,157	)		16,084			(860,388	)
Net income / (loss) attributable to the company		(79,456	)		60,184
Income tax benefit / (expense)		(5,786	)		18,422			(7,820	)		14,232
Net income / (loss) from operations per share of common stock, basic	$	(0.97	)	$	0.83
Equity in net losses of affiliates		0			0			0			(7,946	)
Net income / (loss) from operations per share of common stock, diluted	$	(0.97	)	$	0.82
Net income / (loss) attributable to the company		35,769			(848,735	)		8,264			(854,102	)
Other comprehensive income / (loss), net of tax:
Net income / (loss) from operations per share of common stock, basic	$	0.46		($	11.71	)	$	0.11		($	11.85	)
Foreign currency translation adjustments		23,406			22,524
Net income / (loss) from operations per share of common stock, diluted	$	0.44		($	11.71	)	$	0.10		($	11.85	)
Comprehensive income / (loss) attributable to the company	$	(56,050	)	$	82,708
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments		10,945			(215,010	)		(6,724	)		(50,410	)
Comprehensive income / (loss) attributable to the company	$	46,714		($	1,063,745	)	$	1,540		($	904,512	)

The accompanying notes are an integral part of the condensed consolidated financial statements.

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

All amounts are expressed in thousands

	Nine months ended September 30,
	Three months ended March 31,
	2012			2011
	2013			2012
Cash flows from operating activities
Net income / (loss)	$	8(79,~~264~~456	)	$	~~(854~~60,~~102~~184	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		154,~~075~~526			154,~~328~~815
Deferred income taxes		~~(1,948~~719	)		(51,~~138~~488	)
Unrealized foreign exchange gains		(77,591	)		118,366
Unrealized foreign exchange losses/(gains)		34,726			(98,006	)
Stock options fair value expense		~~1,919~~293			~~1,998~~864
Equity loss in affiliates		0			7,946
Other non cash items		2,102			221
Gain on fair value remeasurement of previously held equity interest		0			(6,397	)
Impairment charge		0			674,515
Impairments related to assets held for sale		0			7,355
Other non cash items		849			6,170
Changes in operating assets and liabilities:
Accounts receivable		~~211~~138,~~483~~026			~~246~~226,~~153~~070
Inventories		~~(33~~18,~~969~~534	)		(98,~~183~~413	)
Prepayments and other current assets		(4215,~~447~~932	)		(72,~~701~~318	)
Trade accounts payable		(7841,~~804~~642	)		(4289,~~518~~358	)
Other accrued liabilities and payables (including taxes)		(7152,~~829~~069	)		(~~106~~88,~~396~~607	)
Net cash provided by / (used in) operating activities		(68,998	)		46,396
Net cash provided by operating activities		9,827			23,766
Cash flows from investing activities
Purchase of fixed assets		(82,~~017~~814	)		(51,~~422~~329	)
Proceeds from the disposal of fixed assets		~~381~~302			0127
Purchase of intangibles		0			(693	)
Net cash used in investing activities		(2,512	)		(1,202	)
Purchase of trademarks		0			(17,473	)
Acquisitions of subsidiaries, net of cash acquired		0			(24,125	)
Net cash used in investing activities		(7,636	)		(47,713	)
Cash flows from financing activities
Borrowings on bank loans and overdraft facility		7830,~~177~~628			368,~~027~~594
Payment of bank loans, overdraft facility and other borrowings		(4577,~~439~~686	)		(3726,~~892~~872	)
Issuance of Debt Security, net of debt issuance cost of $838		69,162			0
Decrease in short term capital leases payable		163			90
Repayment of Convertible Senior Notes		(50,392	)		0
Net cash used in financing activities		(46,895	)		(18,188	)
Issuance of shares in private placement		29,885			0
Currency effect on brought forward cash balances		(1,137	)		9,012
Decrease in short term capital leases payable		(252	)		(34	)
Net increase / (decrease) in cash		(40,717	)		13,388
Proceeds from options exercised		0			72
Cash and cash equivalents at beginning of period		84,729			94,410
Net cash provided by / (used in) financing activities		81,141			(1,827	)
Cash and cash equivalents at end of period	$	44,012		$	107,798
Currency effect on brought forward cash balances		3,796			(7,781	)
Net increase / (decrease) in cash		8,303			(10,925	)
Cash and cash equivalents at beginning of period		94,410			122,116
Cash and cash equivalents at end of period	$	102,713		$	111,191
Supplemental Schedule of Non-cash Investing Activities
Common stock issued in connection with investment in subsidiaries	$	0		$	23,175

The accompanying notes are an integral part of the condensed consolidated financial statements.

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Amounts in tables expressed in thousands, except share and per share information

1.	ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization and description of business

WeCentral European Distribution Corporation (“CEDC”), a Delaware corporation incorporated on September 4, 1997, and its subsidiaries (collectively referred to as “we,” “us,” “our,” or the “Company”) operate primarily in the alcohol beverage industry. We are one of the largest producers of vodka in the world and ~~are~~ are Central and Eastern Europe’s largest integrated spirit beverages business, measured by total volume, with approximately 3329.29 million nine-liter cases produced and distributed in ~~2011~~2012. Our business primarily involves the production and ~~sale~~ sale of our own spirit brands (principally vodka), and the importation on an exclusive basis of a wide variety of spirits, wines and beers. Our primary operations are conducted in Poland, Russia, Ukraine and Hungary. We have six operational ~~manufacturing~~ manufacturing facilities located in Poland and Russia.

In Poland, we are one of the largest vodka producers with a brand portfolio that includes Absolwent, Żubrówka, Żubrówka Biała, Bols, Palace and Soplica brands, each of which we produce at our Polish distilleries. We produce and sell vodkas primarily in three of four vodka sectors: premium, mainstream and economy. In Poland, we also own and produce Royal, the top-selling vodka in Hungary.

We are also the largest vodka producer in Russia, the world’s largest vodka market. Our Green Mark brand is the top-selling mainstream vodka in Russia and the second-largest vodka brand by volume in the world, and our Parliament and Zhuravli brands are two top-selling sub-premium vodkas in Russia.

As well as sales and distribution of its own branded spirits, the Company is a leading exclusive importer of wines and spirits in Poland, Russia and Hungary.

Liquidity

~~The~~These ~~accompanying~~condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As ~~described~~discussed in ~~Note~~the 6,Annual ~~certain~~Report ~~credit~~on ~~and~~Form ~~factoring~~10-K ~~facilities~~for ~~are~~the ~~coming~~year ~~due~~ended inDecember ~~fourth~~31, ~~quarter~~2012 offiled ~~2012,~~on ~~which~~June ~~the~~18, ~~Company~~2013 ~~expects~~with tothe ~~renew~~U.S. ~~Furthermore,~~Securities ~~our~~and ~~Convertible~~Exchange ~~Senior~~Commission ~~Notes~~ (the ~~“Convertible~~ ~~Notes~~“SEC”), ~~are due~~ on March 15, 2013~~. Our current cash on hand~~, ~~estimated~~the Company ~~cash~~failed ~~from~~to ~~operations~~pay ~~and~~$257.9 ~~available~~million ~~credit~~principal ~~facilities~~due ~~will~~on ~~not~~the be2013 ~~sufficient~~Convertible toSenior ~~make~~Notes (the ~~repayment~~“CSN”). ofThe ~~principal~~CSN onwere ~~the~~governed ~~Convertible~~by ~~Notes~~an ~~and,~~Indenture ~~unless~~ (the ~~transaction~~“CSN ~~with~~Indenture”) ~~Russian~~dated ~~Standard~~March ~~Corporation~~7, ~~described~~2008 inbetween ~~Note 3, is completed~~ the Company ~~may~~and ~~default on them.~~ The ~~Company’s~~Bank ~~cash~~of ~~flow~~New ~~forecasts~~York, ~~include~~as Trustee, ~~the~~as ~~assumption~~amended ~~that certain credit~~ and ~~factoring~~supplemented ~~facilities~~by ~~that~~the ~~are~~first ~~coming~~Supplemental ~~due~~Indenture ~~in fourth~~dated ~~quarter~~March of7, ~~2012 will be renewed to manage working capital needs~~2008. ~~Moreover,~~Under the ~~Company~~terms ~~had~~of athe ~~net~~CSN ~~loss and significant impairment charges in 2011 and current liabilities exceed current assets at September 30~~Indenture, ~~2012.~~the ~~These~~failure ~~conditions~~to ~~raise substantial~~pay ~~doubt~~principal ~~about~~when ~~the~~due ~~Company’s~~constituted ~~ability~~an toEvent ~~continue~~of ~~as a going concern~~Default.

~~The~~Under ~~transaction~~the ~~with Russian~~Indenture ~~Standard~~(the ~~Corporation~~“SSN isIndenture”) ~~subject~~governing toCEDC ~~certain~~Finance ~~risks,~~Corporation ~~including~~International ~~shareholder approval which may not be obtained~~Inc. ~~The Company~~’s ~~2012~~2016 Senior ~~Annual~~Secured ~~Meeting~~Notes ~~of Stockholders~~ (the “~~AGM~~SSN”), ~~which was postponed due to~~ the ~~need~~failure to ~~restate~~pay ~~the Company’s~~principal ~~financial~~when ~~statements,~~due ison ~~expected to be held as soon as practicable. We believe that if~~ the ~~transaction~~CSN isconstituted ~~completed~~an asEvent ~~scheduled,~~of ~~the~~Default ~~Convertible~~under ~~Notes will be repaid by their maturity date, which would substantially reduce doubts about~~ the ~~Company’s~~SSN ~~ability to continue as a going concern~~Indenture.

~~Basis~~As described in Note 4 “Borrowings”, on March 18, 2013, the Company failed to pay $20.0 million due under the $20 million principal amount of ~~presentation~~Notes issued by CEDC to RTL (the “RTL Notes”).

~~These~~Following ~~unaudited~~the ~~condensed~~effectiveness ~~consolidated~~of ~~financial~~the ~~statements~~Plan ~~are~~of ~~prepared~~Reorganization, as described in ~~accordance~~the ~~with~~Annual ~~accounting~~Report ~~principles~~on ~~generally~~Form ~~accepted~~10-K infor the ~~United~~year ~~States~~ended December 31, 2012, all amounts due by the Company under the CSN, the SSN, the RTL Notes and also $50.0 million of ~~America~~secured credit facility provided by RTL to CEDC pursuant to facility agreement dated March 1, 2013 (the “~~U.S.~~RTL ~~GAAP~~Credit Facility”) were cancelled and are no longer outstanding. The Company issued new debt instruments in connection with the Plan, comprising (i) $465 million principal amount of new Senior Secured Notes due 2018 and (ii) $200 million principal amount of Junior Secured Notes due 2018.

~~CEDC’s~~Chapter ~~subsidiaries~~11 ~~maintain~~Filing their books of account and prepare their statutory financial statements in their respective local currencies. The subsidiaries’ financial statements have been adjusted to reflect U.S. GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our financial condition, results of operations and comprehensive income and cash flows for the interim periods presented have been included. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.

~~The~~On ~~balance~~April ~~sheet~~7, ~~at December 31~~2013, ~~2011~~the ~~has~~Company ~~been~~and ~~derived~~its ~~from~~two ~~the~~wholly ~~restated~~owned ~~audited~~subsidiaries, ~~consolidated~~CEDC ~~financial~~Finance ~~statements~~Corporation atInternational ~~that~~Inc. ~~date,~~and CEDC Finance Corporation LLC (the “Debtors”) filed ~~with~~Chapter 11 Cases under the ~~SEC~~Bankruptcy onCode ~~October 5,~~in ~~2012~~the asBankruptcy ~~Amendment~~Court ~~No. 2~~in ~~on Form~~Delaware ~~10-K/A~~in order to effectuate the ~~Company~~Debtors’s ~~Annual~~prepackaged ~~Report~~Plan ~~for~~of Reorganization. The Chapter 11 Cases were jointly administered under the ~~fiscal~~caption ~~year~~“In ~~ended~~re: ~~December 31,~~Central ~~2011~~European Distribution Corporation, ~~but~~et ~~does~~al.” ~~not~~Case ~~include~~No. ~~all~~13-10738. The Plan of Reorganization was confirmed by the ~~information~~Bankruptcy ~~and~~Court ~~footnotes~~on ~~required~~May by13, U2013.S. ~~GAAP~~The ~~for~~Effective ~~complete~~Date ~~financial~~of ~~statements.~~the Plan was June 5, 2013.

The Company believes that this successful restructuring improved its financial strength and flexibility and will enable it to focus on maximizing the value of its strong brands and market position. The Chapter 11 Cases and the Plan of Reorganization which were approved by the Bankruptcy Court, eliminated approximately $665.2 million in debt from the Company’s balance sheet. The Plan of Reorganization did not involve the Company’s operating subsidiaries in Poland, Russia, Ukraine or Hungary and had no impact on their business operations. Operations in these countries are independently funded and continued to generate revenue during this process. Under the Plan of Reorganization, obligations to employees, vendors, credit support providers and government authorities were not affected and were honored in the ordinary course without interruption.

Background to Chapter 11 Filing

Prior to filing, the Chapter 11 cases the management of the Company, in consultation with the Board of Directors and with the assistance of financial and legal advisors, reviewed the Company’s alternatives in light of its financial obligations, in particular the CSN. The Board and the management of the Company evaluated various alternatives and the Company and its advisors worked to further develop those alternatives to address the maturity of the CSN, including a strategic alliance with Mr. Roustam Tariko other possible strategic investments, the sale of certain assets and an exchange the CSN.

Following this work and in light of the impending maturity of the CSN, on February 25, 2013, the Company launched (i) exchange offers in respect of its CSN and the SSN, (ii) a solicitation of consents to amendments to the SSN Indenture, and (iii) a solicitation of votes on a pre-packaged Chapter 11 Plan of Reorganization relating to the CSN and the SSN. These transactions were launched by the Company to begin a process of consensual restructuring of the Company’s obligations with the participation of Roust Trading Limited (“RTL”), an entity controlled by Mr. Roustam Tariko, the 2016 Steering Committee and the 2013 Steering Committee; however none of RTL, the 2016 Steering Committee or the 2013 Steering Committee supported these transactions as launched by the Company. Following the launch of these transactions on February 25, 2013, these stakeholders continued to negotiate the terms of a mutually agreeable restructuring of the Company’s obligations.

On March 11, 2013, the Company announced amended terms to these exchange offers, consent and vote solicitations to reflect terms agreed to and supported by the Company, RTL and the 2016 Steering Committee (the “Plan of Reorganization”). Thereafter, on March 19, 2013, the Company announced the termination of its exchange offer in respect of the CSN and continued to solicit votes from the holders of the CSN and the SSN on the Plan of Reorganization on the amended terms. After extensive discussion with representatives of RTL, the 2016 Steering Committee and the 2013 Steering Committee and deliberation regarding the Company’s alternatives, the Board resolved unanimously to support the Plan of Reorganization.

Voting on the Plan of Reorganization closed on April 4, 2013. According to the official vote tabulation prepared by CEDC’s voting and information agent, impaired creditors voted overwhelmingly to accept the Plan of Reorganization. Specifically, approximately 95% of all CSN were voted. The Plan of Reorganization was accepted by 99.13% in number and 99.00% in amount of those CSN that were voted on the Plan of Reorganization. Approximately 95% of all SSN were voted, and of those, 97.26% in number and 97.34% in amount voted to accept the Plan of Reorganization.

On April 7, 2013, CEDC announced that the Debtors had received overwhelming support from creditors for the Plan of Reorganization and the CEDC Board of Directors resolved to implement the exchange offers through the prepackaged Plan of Reorganization. Accordingly, the Company filed the Chapter 11 Cases in the Bankruptcy Court in order to effectuate the Plan of Reorganization.

CEDC and CEDC Finance Corporation International, Inc. also announced the successful completion of the consent solicitation conducted with respect to the indenture governing the SSN, as the requisite consents were obtained to approve the amendments to covenants, and to release collateral and guarantees for the SSN. Approximately 95% of the SSN by principal amount voted to approve those waivers and amendments.

Finally, CEDC and CEDC Finance Corporation International, Inc. announced the termination of the exchange offer for the SSN. The exchange offer failed to meet the minimum tender condition necessary for the consummation of the offer.

On May 13, 2013, the Bankruptcy Court entered an order confirming the Plan. The Effective Date of the Plan was June 5, 2013.

Description of the Plan of Reorganization

The Plan of Reorganization included the following:

•

RTL made a $172.0 million cash investment and exchanged the $50.0 million RTL Credit Facility for new shares of common stock of the Company, with the proceeds of $172.0 million used to fund the cash consideration in the exchange offer for SSN described below;

•

all SSN representing approximately $982.2 million, including interest, were exchanged for (i) New Secured Notes in aggregate principal amount equal to $465 million (ii) New Convertible Secured Notes in aggregate principal amount equal to $200.0 million and (iii) $172 million in cash;

•

all CSN and the $20.0 million aggregate principal amount of RTL Notes were exchanged for their pro rata share (based upon the approximate $282.0 million sum of aggregate principal amount of CSN and the RTL Notes outstanding and accrued interest calculated through March 15, 2013) of $16.9 million in cash, which was also funded by RTL; and

•

in exchange for the RTL Investment and funding the cash distribution to 2013 Noteholders, RTL and its affiliates received new shares of common stock of the Company representing 100% of reorganized CEDC. All of the Company’s shares of common stock outstanding prior to the Effective Date of the Plan were cancelled.

In addition, RTL made an offer (i) outside the United States in “offshore transactions” in compliance with Regulation S under the Securities Act of 1933; and (ii) to ”accredited investors” to exchange, subject to certain conditions, CSN not held by RTL in exchange for an aggregate of $25.0 million in cash (the “Cash Payment”) and securities offered by RTL (the “RTL Offer Notes”). Each accepting holder assigned to RTL all of its rights under such CSN, including the right to its distribution under the Plan of Reorganization included in the amended terms.

Holders of CSN that did not participate in the RTL Offer received their proportionate share of $16.9 million in cash under the Plan of Reorganization (shared with the RTL Notes). Holders of CSN that participated in the RTL Offer did not receive a distribution from CEDC or its U.S. subsidiaries under the Plan of Reorganization.

~~These~~Basis ~~unaudited~~of ~~condensed~~presentation consolidated financial statements should be read in conjunction with the restated consolidated financial statements and related notes included in Amendment No. 2 on Form 10-K/A to the Company’s Annual Report for the fiscal year ended December 31, 2011, filed with the SEC on October 5, 2012.

~~The~~These ~~significant~~unaudited ~~interim~~condensed ~~accounting~~consolidated ~~policies~~financial ~~include~~statements ~~the~~are ~~recognition~~prepared ofin aaccordance ~~pro-rata~~with ~~share~~accounting ~~of certain estimated annual~~principles ~~sales incentives, marketing, promotion and advertising costs,~~ generally accepted in ~~proportion to sales, and~~ the ~~recognition~~United States of ~~income~~America ~~taxes~~(“U.S. ~~using an estimated annual effective tax rate adjusted for tax amendments related to prior years and changes in estimates~~GAAP”).

OnCEDC’s ~~February 7,~~subsidiaries ~~2011,~~maintain ~~the~~their ~~Company~~books ~~acquired~~of account ~~full~~and ~~voting~~prepare ~~and~~their ~~economic~~statutory ~~control~~financial ~~over~~statements ~~Whitehall~~in ~~Group~~their respective local currencies. The subsidiaries’ financial statements have been adjusted to reflect U.S. GAAP for interim financial information and ~~changed~~in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the ~~accounting~~information ~~treatment~~and ~~for~~disclosures ~~its~~required ~~interest~~by inU.S. ~~Whitehall~~GAAP ~~from~~for complete financial statements. In the ~~equity~~opinion ~~method~~of management, all adjustments (consisting of normal ~~accounting~~recurring adjustments) considered necessary to ~~consolidation~~fairly ~~beginning~~present onour ~~February~~financial condition, results of operations and comprehensive income and cash flows for the interim periods presented have been included. Operating results for the three months ended March 731, ~~2011~~2013 are not necessarily indicative of the results that may be expected for the year ended December 31, 2013.

2The balance sheet at December 31, 2012 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP ~~SALE~~for OFcomplete ~~ACCOUNTS~~financial ~~RECEIVABLE~~statements.

OnThese ~~February 24,~~unaudited ~~2011,~~condensed ~~two~~consolidated ~~subsidiaries~~financial ofstatements ~~the~~should ~~Company,~~be ~~namely~~read ~~CEDC International Sp. z o.o.~~in ~~(“CEDC~~conjunction ~~International”) and Polmos Białystok S.A. (“Polmos Bialystok”), entered into factoring arrangements (“Factoring Agreements”)~~ with ~~ING Commercial Finance Polska (“ING Polska”) for~~ the ~~sale~~consolidated ~~up to~~financial ~~290.0 million~~statements Polish zlotys (approximately $91.3 million) of receivables. On January 1, 2012, the total limit under the Factoring Agreements was reduced from 290.0 million Polish zlotys ($91.3 million) to 250.0 million Polish zlotys ($78.7 million) and ~~from~~related ~~March 1,~~notes ~~2012~~included itin ~~was~~our ~~further~~Annual ~~reduced~~Report ~~to 220.0 million Polish zlotys ($69.2 million). The Factoring Agreements were to mature~~ on ~~April~~Form ~~30,~~10-K ~~2012,~~for ~~however on April 25, 2012~~ the ~~Company~~fiscal ~~extended~~year ~~these agreements~~ended ~~until September~~December 3031, 2012 ~~with further decrease of the total limit to 200.0 million Polish zlotys (approximately $62.9 million). On September 28~~, ~~2012~~filed ~~the Company further extended these agreements until December 31, 2012~~ with ~~decrease of~~ the ~~total~~SEC ~~limit~~on ~~to 170.0~~June ~~million~~18, ~~Polish zlotys (approximately $53~~2013.5 ~~million).~~

AsIn ~~of September 30,~~interim ~~2012~~periods, ~~the~~costs ~~total~~and ~~balance~~expenses ofother ~~receivables~~than ~~under~~product ~~factoring~~costs ~~amounted~~are charged to ~~95.9 million~~income ~~Polish~~as ~~zlotys~~incurred, ~~(approximately~~or ~~$30.2~~are ~~million)~~allocated among interim periods based on an estimate of time expired, benefit received or activity associated with the ~~170~~periods.~~0 million~~ ~~Polish~~Income ~~zlotys~~taxes ~~limit~~are ~~available.~~recognized using an estimated annual effective tax rate adjusted for tax amendments related to prior years and changes in estimates.

For the three and nine months ended September 30, 2012, the Company sold receivables in the amount of 282.3 million Polish zlotys ($88.8 million) and 979.7 million Polish zlotys ($308.3 million), respectively and recognized a loss on the sale in the statement of operations and comprehensive income in the amount of 2.8 million Polish zlotys ($0.8 million) and 9.1 million Polish zlotys ($2.7 million), respectively in respect of the non-recourse factoring.

Furthermore, the Company signed in June 2011 and in January 2012 factoring agreements with ING Polska and with Bank Handlowy w Warszawie Spółka Akcyjna (“Bank Handlowy”), respectively. These agreements allow the Company to sale to the banks receivable of three Company’s distributors named in these agreements. There is no financing limit in any of the two agreements. As a result of the agreement with ING Polska, in three and nine month periods ended September 30, 2012 the Company sold receivables in the amount of 20.9 million Polish zlotys ($6.6 million) and 76.6 million Polish zlotys ($24.1 million), respectively and recognized a loss on the sale in the statement of operations and comprehensive income in the amount of 0.14 million Polish zlotys ($0.04 million) and 0.50 million Polish zlotys ($0.15 million). As a result of the agreement with Bank Handlowy, in three and nine month periods ended September 30, 2012 the Company sold receivables in the amount of 21.1 million Polish zlotys ($6.6 million) and 65.3 million Polish zlotys ($20.5 million), respectively and recognized a loss on the sale in the statement of operations and comprehensive income in the amount of 0.10 million Polish zlotys ($0.03 million) and 0.3 million Polish zlotys ($0.09 million).

Additionally, in August 2012, the Company signed agreements with its distributor and Bank Zachodni WBK S.A. for non-recourse factoring of the receivables from the distributor and its related parties. There is no financing limit fixed in these agreements. As a result of these agreement, in the three and nine month period ended September 30, 2012 the Company sold receivables in the amount of 129.9 million Polish zlotys ($40.9 million) and recognized a loss on the sale in the statement of operations and comprehensive income in the amount of 1.3 million Polish zlotys ($0.4 million). The Company has no continuing involvement with the sold non-recourse receivables.

As of September 30, 2012, the liabilities from factoring with recourse amounted to $1.7 million and are included in the short term bank loans in the balance sheet. Corresponding receivables from factoring with recourse are presented under accounts receivable in the balance sheet.

3. AGREEMENT WITH ROUST TRADING

On April 23, 2012, the Company entered into a Securities Purchase Agreement (“SPA”) with Roust Trading Limited (“Roust Trading”), for a strategic transaction. Pursuant to this SPA, Roust Trading agreed to make an investment in the Company in three stages, subject to typical closing conditions. In the first stage, on May 7, 2012, Roust Trading acquired 5,714,286 newly issued shares of the Company’s common stock for an aggregate purchase price of $30 million, or $5.25 per share (the “Initial Shares”). The Initial Shares were accounted for as temporary equity in the balance sheet. Also on May 7, 2012, JSC Russian Standard Bank (“Russian Standard Bank”), a subsidiary of Roust Trading, purchased $70 million aggregate principal amount of senior notes due March 18, 2013, bearing an interest rate of 3.00% (the “Debt Security”) issued by the Company. The SPA also contemplated the following transactions:

• upon approval of CEDC’s shareholders, and after the satisfaction of certain other conditions, the Company would be able to cause Roust Trading to or Roust Trading would be able to

• purchase such number of shares of common stock at a purchase price of $5.25 per share sufficient to repay the then-outstanding principal amount of the Debt Security, plus the accrued and unpaid interest thereon, totaling approximately 13.3 million shares of common stock (the “Exchange Shares”) plus additional shares representing accrued and unpaid interest thereon, and

• sell to CEDC the entire principal amount of the Debt Security;

• the purchase by Roust Trading of a new debt security with a principal aggregate amount of approximately $102.6 million maturing on July 31, 2016 (the “Rollover Notes”), with the Rollover Notes to bear a blended interest rate of 6.00% over the term of the Rollover Notes and interest accrued on the Rollover Notes to be effectively paid in shares of common stock before January 1, 2014, and in cash thereafter; and

• the receipt by CEDC of the right to put to Roust Trading a debt security maturing on July 31, 2016 (the “Backstop Notes”) of an aggregate principal amount of up to $107.5 million, with the Backstop Notes to bear a blended interest rate of 6.00% over the term of the Backstop Notes and interest to be accrued on the Backstop Notes to be effectively paid in shares of common stock before January 1, 2014, and in cash thereafter.

On2 ~~July 9,~~SALE ~~2012,~~OF ~~the~~ACCOUNTS Company entered into an amended and restated securities purchase agreement (the “Amended SPA”) with Roust Trading, which amended and restated the entirety of the SPA described above. The material amendments to the terms of the SPA as set forth in the Amended SPA include: RECEIVABLE

•As ~~the Company will, within five business days~~ of ~~a request by Roust Trading~~March 31, ~~issue~~2013 ~~to Roust Trading, as an adjustment to~~ the ~~issue~~Company ~~price~~was ofa ~~the~~party ~~Initial Shares and Exchange Shares, up to the following amount~~ of ~~shares of common stock at any time after~~ the following ~~dates~~Factoring Arrangements: (i) 3 million shares of common stock after the execution of the Amended SPA; (ii) 5 million shares of common stock after receipt of Company Stockholder Approval (as defined in the Amended SPA); and (iii) 2 million shares following the Backstop Escrow Release Date (as defined in the Amended SPA) (the shares of common stock in clauses (i), (ii) and (iii) above collectively the “Additional Shares”);

• ~~interest~~The ~~payable~~agreement ~~(i)~~with onING ~~the~~Commercial ~~Debt~~Finance ~~Security~~Polska ~~prior to the Second Closing~~ (asING ~~defined in the Amended SPA~~Polska) ~~may,~~signed ~~at the option of Roust Trading and after the Second Closing, be effectively paid~~ in ~~shares of common stock at a price of $3.44 per share of common stock, (ii) on the Rollover Notes through~~ June 30, 2014, will be effectively paid in a number of shares of common stock, determined by dividing the amount of interest payable over such period by the 5-day volume weighted average price (the “VWAP”) of the common stock (as traded on NASDAQ), provided that the VWAP may never exceed $42011.13 orThere beis ~~lower~~no ~~than~~financing ~~$2.75~~limit ~~(the “VWAP Amount”), and (iii) on the Backstop Notes through December 31, 2013, will be effectively paid~~ in athis ~~number of shares of common stock, determined by dividing the amount of interest payable over such period by the VWAP Amount;~~agreement.

• ~~the~~The ~~final~~agreement ~~maturity~~with ~~date~~Bank ~~for~~Handlowy ~~the~~w ~~Debt~~Warszawie ~~Security~~Spółka ~~will~~Akcyjna be(Bank ~~extended~~Handlowy) tosigned ~~July~~in ~~31,~~January ~~2016;~~2012. ~~and~~There is no financing limit in this agreement.

• ~~the~~The ~~Company’s~~agreement ~~board~~with ofBank ~~directors~~Zachodni ~~authorized~~WBK ~~(subject~~S.A tosigned ~~applicable blackout periods and regulatory limitations) Roust Trading to purchase an amount of shares of common stock~~ in ~~the~~August ~~market~~2012. ~~that,~~There ~~when~~is ~~added~~no tofinancing ~~the~~limit ~~shares currently owned by Roust Trading, the Exchange Shares, the Additional Shares and the shares that Roust Trading would receive~~ in ~~connection~~this with interest payments under notes issued and to be issued to Roust Trading, would not exceed an amount of outstanding share capital of the Company that would require Roust Trading to make a tender offer for the Company’s common stock under Polish lawagreement. ~~Upon receipt of certain Polish regulatory waivers if and to the extent received, the Company’s board of directors has agreed that the threshold will be raised to 42.9%.~~

In• ~~consideration~~The ofagreement ~~the~~with ~~above~~RBS ~~terms,~~Bank ~~and~~signed ~~subject~~in toJanuary ~~the~~2013. ~~fulfillment~~There ofis ~~certain~~no ~~conditions,~~financing ~~Roust~~limit ~~Trading~~in ~~agreed~~this to waive certain contractual claims it may have under the Original SPA and under certain other agreements arising from the accounting errors announced on the Company’s Form 8-K filed with the SEC on June 4, 2012agreement.

• The ~~cash~~agreement ~~proceeds from the Rollover Notes will be used by the Company to repurchase the Convertible Notes held by Roust Trading or its affiliates~~ with aRBS ~~face~~Bank ~~value~~for ~~of approximately $102.6 million, at par. The remaining proceeds (net of transaction fees and expenses) received by~~ the ~~Company~~sale ~~from~~up ~~the issuance of the Initial Shares, Debt Security and Backstop Notes will be used~~ to ~~repurchase~~60 ormillion ~~repay~~Polish ~~the~~zlotys ~~outstanding~~signed ~~amount~~in ofMarch ~~Convertible Notes~~2013.

As• ~~described~~The inagreement ~~Amendment No. 2 on Form 10-K/A to the Company’s Annual Report for the year ended December 31, 2011, filed~~ with ~~SEC~~ING onPolska ~~October 5,~~signed 2012, the Company restated its consolidated financial statements as of and for the years ended December 31, 2011 and 2010, primarily due to the fact that certain retroactive trade rebates and trade marketing refunds were not properly recorded by CEDC’s principle operating subsidiary in ~~Russia,~~February ~~the Russian Alcohol Group~~2013. ~~The~~There ~~cumulative~~is ~~impact~~no offinancing ~~restatements for~~limit ~~the years ended December 31, 2011 and 2010, exceeded certain thresholds as set out~~ in the Amended SPA. As a result, Roust Trading may no longer be obliged to consummate the associated funding transaction and may have other claims against the Company, including potential event of default under the New Debt. Roust Trading has reserved its rights and therefore it is uncertain at this ~~stage whether Roust Trading will consummate the funding transaction agreed with the Company or if Roust Trading will propose new terms to an amended transaction or propose an alternative transaction~~agreement. ~~Discussions have commenced between the Company and Roust Trading regarding of the impact of the restatement on our strategic alliance.~~

4In addition, in the first quarter 2013 the Company was a party of the agreement with ING Polska signed in February 2011 for the sale up to 290.0 million ~~COMPREHENSIVE~~Polish ~~INCOME~~zlotys. The limit was finally reduced to 170 million Polish zloty. The agreement expired at the end of February 2013. Following the expiration of this factoring agreement, the Company signed a new factoring agreement with ING Polska in February 2013. As of March 31, 2013 there was no outstanding balance in relation to the expired agreement.

~~Comprehensive~~All ~~income~~of isthe ~~defined~~above asfactoring ~~all~~arrangements, ~~changes in equity during a period~~ except ~~those~~for ~~resulting~~the ~~from investments~~agreement bywith ~~owners~~ING ~~and~~Polska ~~distributions~~signed toin ~~owners.~~February ~~Comprehensive~~2011, ~~income~~are ~~includes~~factoring ~~net~~agreements ~~income~~without ~~adjusted by foreign currency translation adjustments~~recourse. The ~~foreign~~Company ~~translation~~has ~~losses/gains~~no oncontinuing ~~the~~involvement ~~re-measurements~~with ~~from foreign currencies to U.S. dollars are~~the ~~classified~~sold ~~separately~~no-recourse ~~as foreign currency translation adjustment within accumulated other comprehensive income included in stockholders’ equity~~factoring.

AsFor ofthe ~~September~~three months ended March 3031, 2013 and 2012, ~~our~~the ~~functional~~Company ~~currencies~~sold ~~exchange~~receivables ~~rates~~in ~~used~~the amount toof ~~translate~~375.4 and 359.7 million Polish zlotys, respectively ($119.3 and $111.5 million), respectively and recognized a loss on the ~~balance~~sale ~~sheet~~in ~~strengthened~~the ~~against~~statement of operations and comprehensive income in the Uamount of 3.S2 and 3.6 ~~dollar~~million asPolish ~~compared~~zlotys ($1.0 toand ~~the~~$1.1 ~~exchange~~million), ~~rates~~respectively. asAs of ~~December~~March 31, ~~2011~~ 2013, ~~and~~there aswas ano ~~result~~balance $6of financing obtained through factoring.7 ~~million~~As of ~~foreign~~March 31, ~~currency~~2013, ~~translation~~the ~~adjustment~~Company ~~was~~did ~~recognized~~not asuse ~~part~~financing ofthrough ~~total~~factoring ~~comprehensive~~with ~~income~~recourse.

As of March 31, 2012 the Company was a party of the following Factoring Arrangements:

•

The agreement with ING Polska signed in February 2011 for the sale up to 290.0 million Polish zlotys. As of March 31, 2012 the limit was reduced to 220 million Polish zloty.

•

The agreement with ING Polska signed in June 2011. There is no financing limit in this agreement.

•

The agreement with Bank Handlowy signed in January 2012. There is no financing limit in this agreement.

All of the factoring arrangements existing as of March 31, 2012, except for the agreement with ING Polska signed in February 2011, were factoring agreements without recourse. The Company has no continuing involvement with the sold no-recourse factoring.

As of December 31, 2012 the Company was a party of the following Factoring Arrangements:

•

The agreement with ING Commercial Finance Polska (ING Polska) signed in February 2011 for the sale up to 290.0 million Polish zlotys. The limit was finally reduced to 170 million Polish zloty.

•

The agreement with ING Commercial Finance Polska (ING Polska) signed in June 2011. There is no financing limit in this agreement.

•

The agreement with Bank Handlowy signed in January 2012. There is no financing limit in this agreement.

•

The agreement with Bank Zachodni WBK S.A signed in August 2012. There is no financing limit in this agreement.

All of the factoring arrangements existing as of December 31, 2012, except for the agreement with ING Polska signed in February 2011, are factoring agreements without recourse. The Company has no continuing involvement with the sold no-recourse factoring.

As of December 31, 2012, the total balance of financing obtained through factoring amounted to 126.1 million Polish zlotys (approximately $40.7 million). As of December 31, 2012 the liabilities from factoring with recourse amounted to $8.6 million Polish zlotys ($2.8 million) and were included in the short term bank loans in the balance sheet. Corresponding receivables from factoring with recourse were presented under accounts receivable in the balance sheet.

53. ~~EARNINGS PER SHARE~~INVENTORIES

The following table ~~sets~~summarizes ~~forth~~our ~~the~~inventories: ~~computation of basic and diluted earnings per share for the periods indicated.~~

	Three months endedSeptember 30,						Nine months endedSeptember 30,
	March 31,2013			December 31,2012
	2012			2011			2012		2011
Raw materials and supplies	$	23,934		$	19,598
Net income / (loss)	$	35,769		$	(848,735	)	$	8,264	$	(854,102	)
In-process inventories		8,011			5,039
Weighted average shares of common stock outstanding (used to calculate basic EPS)		78,582			72,490			75,902		72,063
Finished goods and goods for resale		122,283			152,973
Shares issuable according to Amended SPA (See Note 3)		3,000			0			3,000		0
Reserve for stock obsolescence		(2,115	)		(2,896	)
Net effect of dilutive employee stock options based on the treasury stock method		209			104			202		115
Total	$	152,113		$	174,714
Weighted average shares of common stock outstanding (used to calculate diluted EPS)		81,791			72,594			79,104		72,178
Net income / (loss) per common share - basic	$	0.46		$	(11.71	)	$	0.11	$	(11.85	)
Net income / (loss) per common share - diluted	$	0.44		$	(11.71	)	$	0.10	$	(11.85	)

~~Employee~~Because ~~stock~~of ~~options~~the ~~granted~~nature ~~have~~of ~~not~~the ~~been~~products ~~included~~supplied inby the ~~above~~Company, ~~calculations~~great ofattention ~~diluted~~is ~~earnings~~paid ~~per~~to inventory ~~share~~rotations. ~~where~~The ~~the~~number ~~exercise~~of ~~price~~days isin ~~less~~inventory ~~than~~increased ~~the~~from ~~average~~approximately ~~market~~45 ~~price~~days as of ~~the~~December 31, ~~common~~2012 ~~stock~~to ~~during~~approximately ~~the~~53 ~~three~~days ~~and~~as ~~nine~~of ~~months ended September~~March 3031, 2013. ~~2012~~As ~~and~~a ~~2011.~~comparison, Inthe ~~addition~~number ~~there~~of isdays noin ~~adjustment~~inventory toas ~~fully~~of ~~diluted~~March 31, ~~shares~~2012 ~~related~~ amounted to ~~the~~41 ~~Convertible Senior~~days. ~~Notes~~Increase asin ~~the~~inventory ~~average~~days ~~market~~in ~~price~~2013 ~~was~~resulted ~~below~~primarily ~~the~~from ~~conversion~~general ~~price~~decline ~~for~~in ~~the~~Russian ~~periods~~alcohol market.

64. BORROWINGS

Bank Loans and Overdraft Facilities

As of ~~September~~March 3031, ~~2012~~2013, the Company ~~has~~had outstanding liability of €22 30.54 million ($2939.10 million) from the term loans from Alfa-Bank, Bank Zenit and ~~Zenith~~Raiffeisenbank ~~Bank~~ drawn by Whitehall:

• The loan agreement with Alfa -Bank, dated July 22, 2008, matures on October 18, 2014. The credit limit under this agreement is €20.0 million ($25.96 million). This loans has financial covenants that need to be met. The loan as of ~~September~~March 3031, ~~2012~~2013 consists of ~~seven~~sixteen open tranches released between ~~March~~October 3012, 2012 and ~~September~~February 2628, ~~2012~~2013, and isare repayable between ~~September~~April 3012, ~~2012~~2013 and ~~December~~October 28, ~~2012~~2013. As of ~~September~~March 3031, ~~2012~~2013, the Company had outstanding liability of €~~17.0~~19 million ($2224.04 million) from this term loan;. Further repayments were made after the balance sheet date. Only a quarter of the limit is currently utilized.

• The loan agreement with ~~Zenith~~ Bank Zenit, dated ~~March~~August 2916, ~~2011~~2012, ~~matured~~matures on ~~June~~April 625, ~~2012~~2014. The ~~original~~credit ~~loan~~limit ~~was~~under ~~repaid~~this atagreement ~~maturity~~is ~~date~~€10.0 Amillion ~~new~~($12.8 million). This loan ~~agreement~~has ~~was~~financial ~~signed~~covenants onthat ~~August~~need ~~16,~~to ~~2012~~be ~~with~~met. ~~maturity~~The ~~date~~loan as of ~~April~~March 2531, ~~2014.~~2013 ~~The~~consists ~~credit~~of ~~limit~~three ~~under~~open ~~this~~tranches ~~agreement~~released isbetween ~~€10.0~~January ~~million~~28, ~~($12.9~~2013 ~~million).~~and ~~The~~March ~~loan~~11, ~~was~~2013, ~~released~~and inare ~~two~~repayable ~~tranches~~between onOctober ~~August 16~~25, ~~2012~~2013 and ~~September~~March 107, ~~2012~~2014. As of ~~September~~March 3031, ~~2012~~2013, the Company had outstanding liability of €56.54 million ($78.12 million) from this term loan. Further repayments were made after the balance sheet date. Only a half of the limit is currently utilized.

• The ~~aforementioned~~loan ~~loans~~agreement ~~drawn~~with byRaiffeisenbank, ~~Whitehall~~dated ~~are~~October ~~guaranteed~~26, by2012, ~~Whitehall~~matures ~~companies~~on September 30, 2013. The ~~both~~credit ~~loans~~limit under this agreement is €5.0 million ($6.4 million). This loan has financial covenants that need to be met. The loan as of March 31, 2013 consists of four open tranches released between October 29, 2012 and November 20, 2012, and are ~~secured~~repayable byon September 30, 2013. As of March 31, 2013, the Company’s ~~inventory~~had outstanding liability of €5.0 million ($6.4 million) from this term loan.

AsThe ofaforementioned ~~September 30, 2012, the Company has outstanding term~~ loans ~~of 2,371.4 million Russian rubles ($76.6 million) from MKB Bank, Unicredit, Alfabank and JSC Grand Invest Bank, all~~ drawn by ~~Russian~~Whitehall ~~Alcohol,~~are asguaranteed ~~well~~by ~~as,~~Whitehall ancompanies. ~~overdraft~~The ~~facility~~loan ~~from~~agreement ~~Nomos~~with Alfa-Bank ~~drawn by Russian Alcohol~~ and anwith ~~overdraft~~Bank ~~facility~~Zenit ~~from~~are ~~Sberbank~~secured ~~drawn~~ by ~~Bravo~~the ~~Premium:~~Whitehall’s inventory.

•As ~~The~~of ~~loan agreement with MKB Bank~~March 31, ~~dated July 19~~2013, ~~2012,~~the ~~matures~~Company onhad ~~February~~outstanding ~~25,~~term ~~2013.~~loans ~~This~~including ~~loan~~accrued ~~has~~interest noof ~~financial~~1,251 ~~covenants~~million ~~that~~Russian ~~need~~rubles ~~to be met~~($40.3 million) Asfrom ofGrand ~~September~~Invest 30Bank, ~~2012,~~Sberbank ~~the~~and ~~Company~~Russian ~~has~~Standard ~~outstanding~~bank ~~liability~~drawn ofby ~~1,000.0 million~~ Russian ~~rubles~~Alcohol ~~($32~~Group.3 ~~million) from this term loan;~~

• The loan agreement with ~~Alfabank~~Grand Invest Bank, dated ~~July~~November 25, ~~2012~~2011, matures on ~~December~~November 3123, ~~2012~~2013. ~~This loan has no financial covenants that need to be met.~~ As of ~~September~~March 3031, ~~2012~~2013, the Company has outstanding liability of ~~560.0~~110 million Russian rubles ($183.15 million) from this term loan;. This loan has the turnover clauses that need to be met. It was fully repaid after the balance sheet date.

• The second loan agreement with ~~Unicredit~~Grand Invest Bank, dated ~~May~~December 2419, ~~2011~~2012, matures on November 2522, ~~2012~~2013. ~~This~~As ~~loan~~of ~~has~~March no31, ~~financial~~2013, ~~covenants~~the ~~and~~Company ishas ~~secured~~outstanding byliability ~~inventory~~ of up150 ~~to 720~~ million Russian rubles ($234.39 million) ~~and~~from ~~guarantees~~this ~~given~~term ~~by companies of Russian Alcohol~~loan. AsThis ofloan ~~September~~has ~~30, 2012,~~ the ~~Company~~turnover ~~has~~clauses ~~outstanding~~that ~~liability~~need ofto ~~600~~be met.0 ~~million~~It ~~Russian~~was ~~rubles~~fully ~~($19.4~~repaid ~~million)~~after ~~from~~the ~~this~~balance ~~term~~sheet ~~loan;~~date.

•

The loan agreement with Sberbank dated November 23, 2012, matures on November 22, 2013. As of March 31, 2013 outstanding debt is 520 (521.4 including accrued interest) million Russian rubles ($16.8 million). This loan is secured by equipment, inventory and pledge on real estate. This loan has turnover clauses and financial covenants that need to be met.

•

The related party loan agreement with Russian Standard Bank dated February 27, 2013, matures on February 27, 2014. As of March 31, 2013 outstanding debt is 465 (469.7 including accrued interest) million Russian rubles ($15.1 million). This loan is secured by pledge of rights of claims. There are no financial covenants related to this loan.

As of March 31, 2013, Bols Hungary had an overdraft facility dated August 2, 2012, maturing on August 1, 2013. The credit limit under this agreement is 500 million Hungarian forint ($2.1 million). As of March 31, 2013, the loan was utilized in the amount 350.1 million Hungarian forint ($1.5 million). The loan is secured by inventory and receivables.

Bank loans and overdraft facilities include $0.8 million of interest on RTL Credit facility. Refer to Note 9 “Related Party Transactions”.

•Following ~~The~~ loan ~~agreement~~agreements ~~with~~were ~~JSC~~closed ~~Grand~~during ~~Invest~~the ~~Bank,~~quarter ~~dated~~ended ~~November 25~~March 31, 2011, matures on November 23, 2012. This loan has no financial covenants that need to be met. As of September 30, 2012, the Company has outstanding liability of 211.4 million Russian rubles ($6.8 million) from this term loan;2013:

• ~~The~~Loan ~~overdraft~~agreements ~~agreement~~ with ~~Nomos-~~Alfa Bank, ~~dated~~- ~~July~~in 6,the ~~2012,~~amount ~~matures~~of on724 ~~December 29, 2012. The credit limit under this agreement is 500.0~~ million Russian rubles ($1623.23 million). ~~This~~repaid ~~loan~~together ~~has~~with noall ~~collateral.~~interest ~~As of September 30, 2012, the loan was utilized in the amount of 173.4 million Russian rubles ($5.6 million).~~accrued;

• ~~The~~Loan ~~overdraft~~ agreement with ~~Sberbank,~~Moscow ~~dated~~Credit ~~February~~Bank 6,- ~~2012,~~in ~~matures~~the onamount ~~February~~of 5,900 ~~2013. The credit limit under this agreement is 60.0~~ million Russian rubles ($129.90 million). ~~This~~repaid ~~loan~~together iswith ~~secured~~all byinterest ~~fixed assets. As of September 30, 2012, the loan was fully utilized.~~accrued;

~~Convertible~~• ~~Senior~~Overdraft ~~Notes~~facility ~~due~~with ~~2013~~ Nomos-Bank;

~~On March 7,~~• ~~2008,~~Overdraft ~~the~~facility ~~Company~~with ~~completed the issuance of $310 million aggregate principal amount of 3% Convertible Senior Notes due 2013 (the “Convertible Senior Notes”)~~Sberbank. Interest is due semi-annually on the 15th of March and September, beginning on September 15, 2008. The Convertible Senior Notes are convertible in certain circumstances into cash and, if applicable, shares of our common stock, based on an initial conversion rate of 14.7113 shares per $1,000 principal amount, subject to certain adjustments. Upon conversion of the notes, the Company will deliver cash up to the aggregate principal amount of the notes to be converted and, at the election of the Company, cash and/or shares of common stock in respect to the remainder, if any, of the conversion obligation. The proceeds from the Convertible Senior Notes were used to fund the cash portions of the acquisition of Copecresto Enterprises Limited and Whitehall.

InConvertible ~~the~~Senior ~~period~~Notes ~~from May to September of 2012,~~ (the ~~Company~~“CSN”) ~~repurchased $52.1 million principal amount of Convertible Notes in six tranches for $50.2 million.~~

AsOn ~~of September~~March 307, ~~2012 and December 31~~2008, ~~2011,~~ the Company ~~had~~completed ~~accrued~~the ~~interest~~issuance of $~~0.5~~310 million ~~and~~aggregate ~~$2.7~~principal ~~million,~~amount ~~respectively, related~~of to3% ~~the~~ Convertible Senior Notes, due 2013 with an interest due semi-annually on the ~~next~~15th ~~coupon~~of ~~due~~March ~~for~~and ~~payment~~September, beginning on ~~March~~September 15, ~~2013~~2008. ~~Total~~The ~~obligations~~CSN ~~under~~were ~~the~~to ~~Convertible~~be ~~Senior~~convertible ~~Notes~~in ~~are~~certain ~~shown~~circumstances ~~net~~into cash and, if applicable, shares of ~~deferred~~our ~~finance~~common ~~costs~~stock, based ~~amortized~~on ~~over~~an ~~the~~initial ~~life~~conversion rate of ~~the~~14.7113 ~~borrowings~~shares ~~using~~per $1,000 principal amount, subject to certain adjustments. The proceeds from the ~~effective~~ ~~interest~~CSN ~~rate~~were ~~method~~used asto ~~shown~~fund inthe cash portions of the ~~table~~acquisition ~~below:~~of Copecresto Enterprises Limited and Whitehall.

	September 30,2012			December 31,2011
Convertible Senior Notes	$	257,858		$	310,000
Unamortized debt discount		(320	)		(1,070	)
Debt discount related to ASC 470-20		(416	)		(4,285	)
Total	$	257,122		$	304,645

In the period from May 2012 to March 2013, the Company repurchased $52.1 million principal amount of CSN in six tranches for $50.2 million.

~~For~~The ~~the~~maturity ~~three~~period ~~and~~of ~~nine~~the ~~months~~CSN ~~ended~~was ~~September~~on March 3015, ~~2012,~~2013. ~~the~~On ~~additional~~that ~~pre-tax~~day ~~non-cash interest~~the ~~expense~~Company ~~recognized~~failed into ~~the~~pay ~~condensed consolidated statement of operations was~~ $1257.~~5 million~~9 ~~and $4.1~~ million, ~~respectively~~principal ~~and~~due ~~for~~on ~~three~~the CSN and ~~nine~~accrued ~~months~~interest ~~ended~~of ~~September 30, 2011~~ $14.~~1 million and $3.~~2 million, ~~respectively.~~related ~~Pre-tax increase in non-cash interest expense on our condensed consolidated statements of operations and comprehensive income~~ to bethese ~~recognized until 2013, the maturity date of the Convertible Senior~~ Notes~~, amounts to $0~~.4 ~~million.~~

~~Senior~~Total ~~Secured~~obligations ~~Notes~~under ~~due~~the ~~2016~~CSN are shown net of deferred finance costs, amortized over the life of the borrowings using the effective interest rate method as shown in the table below:

On December 2, 2009, the Company issued $380 million 9.125% Senior Secured Notes due 2016 and €380 million ($491.9 million) 8.875% Senior Secured Notes due 2016 (the “2016 Notes”) in an unregistered offering to institutional investors. The Company used a portion of the net proceeds from the 2016 Notes to redeem the Company’s outstanding 2012 Notes, having an aggregate principal amount of €245.4 million ($317.7 million) on January 4, 2010. The remainder of the net proceeds from the 2016 Notes was used to (i) purchase Lion Capital’s remaining equity interest in Russian Alcohol by exercising the Lion Option and the Co-Investor Option, pursuant to the terms and conditions of the Lion Option Agreement and the Co-Investor Option Agreement, respectively (ii) repay all amounts outstanding under Russian Alcohol credit facilities; and (iii) repay certain other indebtedness.


	March 31, 2013		December 31, 2012

Convertible Senior Notes (CSN)	$	257,858	$	257,858
Unamortized debt discount		0		(148	)
Debt discount related to ASC 470-20		0		(788	)


Total	$	257,858	$	256,922

OnThe ~~December 9,~~fair ~~2010,~~value of the ~~Company~~CSN ~~issued~~as anof ~~additional €50.0 million~~March ~~($64.7~~31, ~~million)~~2013 ~~8.875%~~and ~~Senior~~as ~~Secured~~of ~~Notes~~December 31, ~~due~~2012 ~~2016~~was ~~(the “2016 Notes”) in an unregistered offering to institutional investors~~$58.0 ~~The~~million ~~Company used the net proceeds from the additional 2016 Notes to repay its term loans~~ and ~~overdraft facilities with Bank Handlowy w Warszawie S~~$138.A1 ~~and~~million, ~~Bank Zachodni WBK S~~respectively.A.

AsThe ASC Topic 470-20 requires the issuer of ~~September~~convertible debt instruments with cash settlement features to separately account for the liability ($290.3 million as of the date of the issuance of the CSN) and equity components ($19.7 million as of the date of the issuance of the CSN) of the instrument. The debt component was recognized at the present value of its cash flows discounted using a 4.5% discount rate, our borrowing rate at the date of the issuance of the CSN for a similar debt instrument without the conversion feature. The equity component, recorded as additional paid-in capital, was $12.8 million, which represents the difference between the proceeds from the issuance of the CSN and the fair value of the liability, net of deferred taxes of $6.9 million as of the date of the issuance of the CSN. ASC Topic 470-20 also requires an accretion of the resultant debt discount over the expected life of the CSN, which was March 307, ~~2012~~2008 to March 15, 2013. For the period ended March 31, 2013 and ~~December~~March 31, ~~2011~~2012 the additional ~~Company~~pre-tax ~~had~~non-cash ~~accrued~~ interest expense recognized in the consolidated statement of operations was $~~28.~~0.8 million and $71.01 million, respectively. Accumulated amortization related to the ~~Senior~~debt ~~Secured~~discount ~~Notes~~was ~~due~~$19.7 ~~2016,~~million ~~with~~and ~~the~~$18.9 ~~next~~million ~~coupon~~as ~~due~~of March 31, ~~for~~2013 ~~payment~~and on December 131, 2012, respectively.

	September 30,2012			December 31,2011
Senior Secured Notes due 2016	$	936,635		$	935,296
Unamortized debt discount		(2,764	)		(3,207	)
Total	$	933,871		$	932,089

Under the terms of the CSN Indenture, the failure to pay principal when done constituted an Event of Default. The Company addressed the default under CSN through the Plan of Reorganization as described in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on June 18, 2013. Effective June 5, 2013, the outstanding balance of CSN was cancelled.

Senior ~~notes~~Secured ~~due~~Notes ~~March 18, 2013~~ (“the ~~Debt Security~~“SSN”)

AsOn ~~described in Note 3 above, on May~~December 72, ~~2012~~2009, the Company issued $70380 million ~~principal~~9.125% ~~amount~~Senior ofSecured ~~senior~~Notes ~~notes~~ due 2016 and ~~March~~€380 ~~18,~~million ~~2013,~~($487.1 ~~bearing~~million) ~~an interest rate of 3~~8.00875% toSenior ~~Russian~~Secured ~~Standard~~Notes ~~Bank.~~due ~~Pursuant~~2016 toin ~~the~~an ~~Amended~~unregistered ~~SPA,~~offering ~~upon~~to ~~approval~~institutional ofinvestors. ~~the~~The Company’s ~~shareholders,~~used ~~and~~a ~~after~~portion ~~the satisfaction~~ of ~~certain~~the ~~other~~net ~~conditions~~proceeds ~~including~~from the ~~receipt~~SSN ofto ~~certain Polish~~redeem ~~regulatory~~the ~~waivers,~~Company’s ~~Roust~~outstanding ~~Trading~~2012 ~~will~~Notes, having ~~purchase~~an ~~such~~aggregate ~~number~~principal ofamount ~~shares~~ of ~~common~~€245.4 ~~stock at a purchase price of~~ million ($5314.256 ~~per~~million) ~~share~~on ~~sufficient~~January 4, to2010. ~~repay~~The ~~the~~remainder ~~then-outstanding principal amount~~ of the ~~Debt~~net ~~Security,~~proceeds ~~totaling~~from ~~approximately 13.3 million~~the ~~shares~~SSN ofwas ~~common~~used ~~stock and sell~~ to ~~CEDC~~(i) purchase ~~the~~Lion ~~entire~~Capital’s ~~principal~~remaining ~~amount~~equity ofinterest ~~the~~in ~~Debt~~Russian ~~Security.~~Alcohol Group Inby ~~addition,~~exercising ~~interest~~the ~~payable~~Lion onOption and the ~~Debt~~Co-Investor ~~Security~~Option, ~~prior~~pursuant to the ~~Second~~terms ~~Closing~~and ~~may,~~conditions atof the ~~option~~Lion ofOption ~~Roust~~Agreement ~~Trading~~ and ~~after~~ the ~~Second Closing,~~Co-Investor beOption ~~effectively~~Agreement, ~~paid~~respectively in(ii) repay ~~shares~~all ofamounts ~~common~~outstanding ~~stock~~under atRussian aAlcohol ~~price~~Group credit ~~$3.44~~facilities; ~~per~~and ~~share~~(iii) repay ofcertain ~~common~~other ~~stock~~indebtedness. ~~Pursuant to the Amended SPA, the final maturity date for the Debt Security will be extended to July 31, 2016.~~

	September 30,2012		December 31,2011
Senior Notes due 2013	$	70,000	$	0
Total	$	70,000	$	0

On December 9, 2010, the Company issued an additional €50.0 million ($64.1 million) 8.875% Senior Secured Notes due 2016 in an unregistered offering to institutional investors. The Company used the net proceeds from the additional 2016 Notes to repay its term loans and overdraft facilities with Bank Handlowy w Warszawie S.A and Bank Zachodni WBK S.A.

As of ~~September~~March 3031, ~~2012~~2013 and December 31, 2012 the Company had accrued interest of $027.9 million and $7.1 million respectively, related to the ~~Debt Security~~SSN, with the next coupon due for payment on ~~March~~June 181, 2013, that was not paid.

~~Total~~The ~~accumulated~~failure ~~unamortized~~to ~~debt~~pay ~~discount~~principal ~~related~~when todue on the CSN constituted an Event of Default under the SSN Indenture. Under the 2016 SSN Indenture, if an Event of Default occurs and is continuing, then the ~~Company’s~~Trustee ~~debt~~or ~~was~~holders ~~$18~~of not less than 25% of the aggregate principal amount of the outstanding 9.~~7 million~~125% Senior Secured Notes due 2016 and ~~$16~~8.5875% ~~million~~Senior asSecured ofNotes ~~September 30~~due 2016 may, ~~2012~~declare the principal plus any accrued and unpaid interest on the SSN to be immediately due and payable. The default on CSN caused the SSN to become callable on demand. The Company addressed the default under SSN through the Plan of Reorganization as described in our Annual Report on Form 10-K for the year December 31, ~~2011~~2012 filed with the SEC on June 18, ~~respectively~~2013. Effective June 5, 2013, all SSN were cancelled.

~~The~~Total ~~following~~obligations isunder athe ~~schedule~~SSN byare ~~years~~shown net of ~~the~~deferred ~~future~~finance ~~principal~~costs, ~~repayments~~amortized ~~for~~over the life of the borrowings using the effective interest rate method as ofshown ~~September 30,~~in ~~2012~~the table below:

	September 30,2012			December 31,2011
	March 31,2013			December 31,2012
Principal repayments for the following years
Senior Secured Notes due 2016 (SSN)	$	931,174		$	947,127
2012	$	53,203		$	78,504
Unamortized debt discount		(2,516	)		(2,628	)
2013		389,114			304,645
Total	$	928,658		$	944,499
2014		0			0
2015		0			0
2016 and beyond		933,871			932,089
Total	$	1,376,188		$	1,315,238

The fair value of the SSN as of March 31, 2013 and as of December 31, 2012 was $729.3 million and $590.9 million, respectively.

Debt Security (the “RTL Notes”)

On May 7, 2012, the Company issued $70 million principal amount of senior notes due March 18, 2013, bearing an interest rate of 3.00% to Russian Standard Bank. Pursuant to the Amended SPA, upon approval of the Company’s shareholders,

7 and after the satisfaction of certain other conditions including the receipt of certain Polish regulatory waivers, RTL was to purchase such number of shares of common stock at a purchase price of $5.25 ~~INVENTORIES~~per share sufficient to repay the then-outstanding principal amount of the Debt Security, totaling approximately 13.3 million shares of common stock and sell to CEDC the entire principal amount of the Debt Security. In addition, interest payable on the Debt Security prior to the Second Closing was, at the option of RTL and after the Second Closing, to be effectively paid in shares of common stock at a price $3.44 per share of common stock. Pursuant to the Amended SPA, the final maturity date for the Debt Security was to be extended to July 31, 2016.

~~The~~On ~~following~~March 1, ~~table~~2013, ~~summarizes~~with effect ~~our~~from ~~inventories:~~February 25, 2013 the Company and RTL have entered into a credit facility with an aggregate principal amount of $50 million (the “RTL Credit Facility”). Pursuant to the terms of the RTL Credit Facility, $50 million aggregate principal amount of the RTL Notes was converted into a new term loan from RTL to the Company in an aggregate principal amount of $50 million.

	September 30,2012		December 31,2011
Raw materials and supplies	$	34,510	$	22,237
In-process inventories		4,714		2,655
Finished goods and goods for resale		120,837		92,798
Total	$	160,061	$	117,690

As of March 31, 2013 the remaining balance of RTL Notes of $20 million was not paid and was overdue. The Company addressed the unsettled RTL Notes through the Plan of Reorganization as described in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on June 18, 2013.

~~Because~~Total ofobligations ~~the~~under ~~nature~~Debt ofSecurity ~~the~~amortized ~~products~~over ~~supplied by~~ the ~~Company,~~life ~~great attention is paid to inventory rotation. The number~~ of ~~days~~the inborrowings ~~inventory~~using ~~increased~~the ~~from~~effective ~~approximately~~interest 81rate ~~days~~method as ofare ~~December 31,~~shown ~~2011~~in ~~to approximately 135 days as of September 30, 2012. As a comparison,~~ the ~~number~~table ofbelow: ~~days in inventory as of September 30, 2011 amounted to 85 days with total balance of $121.4 million.~~

8. INCOME TAXES


	March 31, 2013		December 31, 2012

Debt Security (RTL Notes)	$	20,000	$	70,000


Total	$	20,000	$	70,000

~~Our~~The ~~tax~~fair ~~charge~~value ~~for the nine months ended September 30, 2012 was $7.8 million which represents an effective tax rate for this period~~ of ~~48.6%. The underlying tax rates in our key jurisdictions are 19% in Poland, 20% in Russia, 21% in Ukraine, 16% in Hungary and 35% in~~ the ~~United~~Debt ~~States.~~Security ~~Changes~~as in the Company’s uncertain income tax positions, excluding the related accrual for interest and penalties, for the nine-month period ended September 30, 2012 result from additions to accruals for current and prior year tax positions. There were no reductions for prior year tax positions, settlements or lapses in statutes of ~~limitations. As of September~~March 3031, ~~2012~~2013 and December 31, ~~2011,~~2012 ~~the uncertain income tax position balance~~ was $821.01 million and $770.14 million, respectively.

9As of March 31, 2013, the Company had accrued interest of $1.1 ~~OPERATING~~million, ~~SEGMENTS~~related to the Debt Security, with the coupon due for payment on March 18, 2013, which was not settled.

~~The~~Total ~~Company~~accumulated ~~operates~~unamortized debt ~~and~~discount ~~manages~~related ~~its~~to ~~business~~the ~~based~~Company’s ~~upon~~debt ~~three~~was ~~primary~~$12.7 million ~~geographic segments: Poland, Russia~~ and ~~Hungary~~$13.6 ~~Selected~~million ~~financial~~as ~~data~~of ~~split~~March 31, ~~based~~2013 ~~upon~~and ~~this~~December 31, ~~segmentation~~2012, ~~assuming~~respectively. ~~elimination~~The ofDebt ~~intercompany~~Security ~~revenues~~was ~~and~~cancelled ~~profits~~by isthe ~~shown~~effectiveness ~~below:~~of ~~Segment~~the ~~information~~Plan ~~represents~~of ~~only continuing operations~~Reorganization.

	Segment Net Sales
	Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011
Segment
Poland	$	56,471	$	58,234	$	159,778	$	163,463
Russia		128,895		143,623	$	347,675	$	362,393
Hungary		5,965		7,781	$	17,068	$	20,492
Total Net Sales	$	191,331	$	209,638	$	524,521	$	546,348

Conversion of RTL Notes

	Operating income / (loss)
	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Segment
Poland before fair value adjustments	$	11,905		$	8,120		$	27,497		$	21,155
Gain on remeasurement of previously held equity interests		0		$	0			0			7,898
Impairment charge		0		$	(213,687	)		0		$	(213,687	)
Poland after fair value adjustments		11,905			(205,567	)		27,497			(184,634	)
Russia before fair value adjustments		19,634		$	9,167			20,221			6,011
Impairment charge		0		$	(460,828	)		0			(460,828	)
Russia after fair value adjustments		19,634			(451,661	)		20,221			(454,817	)
Hungary		987		$	1,446			2,469			3,387
Corporate Overhead
General corporate overhead		(17,017	)	$	(1,570	)		(23,711	)		(3,862	)
Option Expense		(330	)	$	(662	)		(1,919	)		(1,999	)
Total Operating income / (loss)	$	15,179		$	(658,014	)	$	24,557		$	(641,925	)

As mentioned above, on March 1, 2013, with effect from February 25, 2013 the Company and Roust Trading Ltd. (“Roust Trading”) entered into a credit facility with an aggregate principal amount of $50 million (the “RTL Credit Facility”).

Pursuant to the terms of the RTL Credit Facility, $50 million aggregate principal amount of the 3% senior notes due 2013 issued by the Company to RTL in May, 2012, (the “RTL Notes”) was converted into a new term loan from Roust Trading to the Company in an aggregate principal amount of $50 million (the “Conversion”). The amounts owed under the RTL Credit Facility are to be used for working capital and general corporate purposes.

The RTL Credit Facility bears interest at 3.00% per annum. Accrued interest under the RTL Credit Facility should have been paid by the Company on March 18, 2013. On the last day of the first interest period under the RTL Credit Facility, the Company should have paid to Roust Trading an amount equal to the amount of interest accrued on $50 million of the RTL Notes between September 18, 2012 and the day falling immediately prior to the date on which the Conversion takes place. Both, the first interest payment and the additional interest were not paid as of March 31, 2013. As of March 31, 2013, total outstanding debt under RTL Credit Facility is $50.8 million.

The RTL Credit facility was cancelled by the effectiveness of the Plan of Reorganization.

	Identifiable Operating Assets
	September 30,2012		December 31,2011
Segment
Poland	$	560,792	$	600,940
Russia		1,316,088		1,369,744
Hungary		20,349		20,265
Corporate		82,937		25,769
Total Identifiable Assets	$	1,980,166	$	2,016,718

5.	INCOME TAXES

	Goodwill
	September 30,2012		December 31,2011
Segment
Poland	$	271,069	$	252,080
Russia		429,286		412,105
Hungary		6,569		6,109
Total Goodwill	$	706,924	$	670,294

Tax charge for the three months ended March 31, 2013 was $3.1 million which represents an effective tax rate for this period of (4.0%). The underlying tax rates in key jurisdictions are 20% in Russia, 19% in Poland and Ukraine, 19% in Hungary and 35% in the United States. The difference between the effective tax rate and statutory rates was primarily due to valuation allowance recorded against tax loss carryforwards that the Company believes will not be utilised in the future. Changes in the Company’s uncertain income tax positions, excluding the related accrual for interest and penalties, for the three-month period ended March 31, 2013 result from additions to accruals for current year tax positions and reductions for prior year tax positions. As of March 31, 2013 and December 31, 2012, the uncertain income tax position balance was $17.8 million and $18.9 million, respectively.

106. ~~INTEREST~~COMMITMENTS ~~EXPENSE,~~AND ~~NET~~CONTINGENT LIABILITIES

~~The~~Supply ~~following~~contracts ~~items are included in Interest expense, net:~~

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Interest income	$	578		$	127		$	1,398		$	1,008
Interest expense		(26,809	)		(28,250	)		(79,537	)		(84,344	)
Total interest expense, net	$	(26,231	)	$	(28,123	)	$	(78,139	)	$	(83,336	)

The Company has various agreements covering its sources of supply, which, in some cases, may be terminated by either party on relatively short notice. Thus, there is a risk that a portion of the Company’s supply of products could be curtailed at any time.

Bank Guarantees

In accordance with current legislation in Russia each producer of spirit beverages must acquire excise stamps and must pay excise tax in full before buying spirit for production purposes. For each lot of stamps purchased, the alcohol producer must provide the relevant body with a bank guarantee in the full amount of payment for the excise tax to secure the legality of usage of the excise stamps. This bank guarantee serves as insurance against the illegal usage of excise stamps by an alcohol producer.

In addition, under new legislation effective since August 1, 2012 the producer purchasing spirit alcohol must a) prepay the excise tax in full or b) provide the relevant tax body with a bank guarantee in the full amount of the excise tax before purchasing to secure payment of the excise tax. This bank guarantee serves as insurance that the excise tax is paid in time.

Russian Alcohol has in place a guarantee line agreement with multiple banks pursuant to which it was provided with a guarantee limit of 23.2 billion Russian rubles (approximately $747.5 million) for a period from 1 to 4 years, Bravo Premium signed a guarantee line agreement with multiple banks pursuant to which it was provided with a guarantee limit of 837.8 million Russian rubles (approximately $27.0 million) for a period from 1 to 2 years and Whitehall has in place a guarantee line agreement with multiple banks pursuant to which it was provided with a guarantee limit of 1.9 billion Russian rubles (approximately $61.2 million) as insurance against the illegal usage of excise stamps.

11According to the agreements, companies have the right to obtain bank guarantees during the agreement term for each purchase of excise stamps and spirits. ~~OTHER~~The ~~FINANCIAL~~guarantees ~~INCOME~~for /excise stamps are held by Rosalkoregulirovanie (~~EXPENSE~~the Federal Service for Alcohol Market Regulation), ~~NET~~during the whole production period for which the excise stamps were purchased. The guarantee for excise tax is held by the beneficiary (the tax body) for 6 months after the end of month the spirit was purchased.

~~The~~As ~~following~~of ~~items~~March 31, ~~are~~2013, ~~included~~the Company has bank guarantees related to customs duties on imported goods in ~~Other~~Poland ~~financial~~of ~~income~~4.9 million /Polish zlotys (~~expense),~~approximately ~~net:~~$1.5 million).

	Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011
Foreign exchange impact related to foreign currency financing	$	62,145		$	(173,664	)	$	82,682		$	(123,196	)
Gain on debt extinguishment		640			0			1,949			0
Other gains / (losses)		(4,295	)		3,327			(3,983	)		2,389
Total other financial income / (expense), net	$	58,490		$	(170,337	)	$	80,648		$	(120,807	)

Leases and Rent Commitments

12Total rental expense related to operating leases for the three months period ended March 31, 2013 and March 31, 2012 are $4.1 ~~OTHER~~million ~~NON-OPERATING~~and ~~EXPENSE~~$3.2 million respectively. The Company makes rental payments for real estate, vehicles, office, computer, and manufacturing equipment under operating leases.

The following ~~items~~is ~~are~~a ~~included~~schedule inby ~~Other~~years of the future rental payments under the non-cancelable operating ~~income~~leases /as ~~(expense)~~of March 31, 2013:

	Three months ended September 30						Nine months ended September 30,
2013	$	10,902
	2012			2011			2012			2011
2014		14,106
Write-off of assets held for sale		0			(7,355	)		0			(7,355	)
2015		12,026
Factoring costs and bank fees	$	(2,781	)	$	(1,651	)	$	(6,501	)	$	(3,662	)
2016		9,223
Bank waiver costs		(1,867	)		0			(1,867	)		0
2017		8,862
Other gains / (losses)		(1,235	)		(1,677	)		(2,614	)		(3,303	)
Thereafter		2,634
Total other non operating income / (expense), net	$	(5,883	)	$	(10,683	)	$	(10,982	)	$	(14,320	)
Total	$	57,753

During 2013, the Company continued its policy of renewing its transportation fleet by way of capital leases.

The following table presents gross amount of motor vehicles under capital lease and their accumulated depreciation:


	March 31, 2013			December 31, 2012

Motor vehicles gross amount	$	2,516		$	2,362

Less: accumulated depreciation		(668	)		(651	)


Motor vehicles net amount	$	1,848		$	1,711

The future minimum lease payments for the assets under capital leases as of March 31, 2013 are as follows:


2013	$	810
2014		380
2015		139

Gross payments due	$	1,329
Less interest		(73	)

Net payments due	$	1,256

Assets subject to pledges

The following assets are subject to pledges:

•

The Bialystok facility is located on 78,665 square meters of land that has been pledged as part of the collateral to 2016 Notes

•

The Oborniki facility is located on 80,519 square meters of land that has been pledged as part of the collateral to 2016 Notes

•

The Siberia plant has been pledged as part of the collateral to 2016 Notes

•

The Tula facility has been pledged as part of the collateral to 2016 Notes

•

The Parliament production plant had been pledged as a security for a loan from Grand Invest Bank

~~13.~~Legal ~~STOCK~~proceedings ~~BASED COMPENSATION PLANS AND WARRANTS~~

~~During~~From ~~the~~time ~~nine~~to ~~months~~time ~~ended~~we ~~September 30,~~are ~~2012,~~involved in legal proceedings arising in the ~~range~~normal course of ~~exercise~~our ~~prices~~business, ~~for~~including ~~outstanding~~opposition ~~options~~and ~~was~~cancellation ~~$2.00~~proceedings with respect to ~~$60.92.~~trademarks ~~During~~similar ~~the~~to ~~nine~~some ~~months~~of ~~ended~~our ~~September 30~~brands, ~~2012~~and other proceedings, both in the ~~weighted~~United ~~average~~States ~~remaining~~and ~~contractual~~elsewhere. ~~life~~Except ofas ~~options~~set ~~outstanding~~forth isbelow, ~~4.5~~we ~~years.~~are ~~Exercise~~not ~~prices~~currently ~~for~~involved ~~options~~in ~~exercisable~~or asaware of ~~September 30,~~any ~~2012~~pending ~~ranged~~or ~~from~~threatened ~~$2.00~~proceedings tothat ~~$60~~we reasonably expect, either individually or in the aggregate, will result in a material adverse effect on our condensed consolidated financial statements.~~92.~~

~~The~~On ~~Company~~October ~~has~~24, ~~issued~~2011, ~~stock~~a ~~options~~class toaction ~~employees~~complaint ~~under~~titled Steamfitters Local 449 Pension Fund vs. Central European Distribution Corporation, et al., was filed in the United States District Court, District of New Jersey on behalf of a putative class of all purchasers of our common stock ~~based~~from ~~compensation~~August ~~plans~~5, 2010 through February 28, 2011 against us and certain of our officers. ~~Stock~~The ~~options~~complaint ~~are~~seeks unspecified money damages and alleges violations of federal securities law in connection with alleged materially false and misleading statements and/or omissions regarding our business, financial results and ~~issued~~prospects atin our public statements and public filings with the ~~current~~SEC ~~market~~for ~~price~~the second and third quarters of 2010, ~~subject~~relating to adeclines ~~vesting~~in ~~period~~our vodka portfolio, ~~which~~our ~~varies~~need to take an impairment charge relating to the deterioration in fair value of certain of our brands in Poland and negative financial results from ~~one~~the launch of Żubrówka Biaĩa. Subsequent to ~~three~~the ~~years~~above complaint, a second, substantially similar class action complaint titled Tim Schuler v. AsCentral ofEuropean Distribution ~~September 30~~Corporation, et al., was filed in the same court. By court orders dated August 22, 2012, the Steamfitters action and the Schuler action were consolidated and are now proceeding in the District of New Jersey under the caption In re Central European Distribution Corp. Securities Litigation, 11-cv-6247 (JBS-KMW). The Arkansas Public Employees Retirement System and the Fresno County Employees’ Retirement Association have been named Lead Plaintiffs in this action. Pursuant to an Order of the Court, on February 19, 2013, Lead Plaintiffs filed a consolidated complaint on behalf of a purported class of all purchasers of the Company’s ~~has~~common ~~not~~stock ~~changed~~between March 1, 2010 and February 28, 2011, advancing similar allegations to those contained in the ~~terms~~original complaints concerning purported materially false and misleading statements and/or omissions relating principally to the purported negative financial results from the launch of Żubrówka ~~any~~Biaĩa. ~~outstanding~~On ~~awards~~April 10, 2013, the Court stayed the action as to CEDC pursuant to section 362 of chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) as a result of its April 7, 2013 filing of a voluntary petition (the “Petition”) for relief under the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).

~~During~~On May 13, 2013, the ~~nine~~Bankruptcy ~~months~~Court ~~ended~~conducted ~~September~~a hearing (the “Confirmation Hearing”) on (i) 30the adequacy of the Amended and Restated Offering Memorandum, ~~2012~~Consent Solicitation Statement and Disclosure Statement Soliciting Acceptances of a Prepackaged Plan of Reorganization, dated March 8, 2013, as supplemented by Supplement No. 1 to the Amended and Restated Offering Memorandum, Consent Solicitation, and Disclosure Statement Soliciting Acceptances of a Prepackaged Plan of Reorganization, dated March 18, 2013 (Docket No. 10) (the “Disclosure Statement”), and (ii) confirmation of the Company’s ~~recognized~~Second ~~compensation~~Amended ~~cost~~and Restated Joint Prepackaged Chapter 11 Plan of $1Reorganization (Docket No.92 ~~million~~126) (the “Plan”). After the Confirmation Hearing the Bankruptcy Court entered its Findings of Fact, Conclusions of Law and Order (I) Approving (A) the Disclosure Statement Pursuant to Sections 1125 and 1126(c) of the Bankruptcy Code, (B) the Prepetition Solicitation Procedures, and (C) the Forms of Ballots, and (II) Confirming the Second Amended and Restated Joint Prepackaged Chapter 11 Plan of Reorganization of Central European Distribution Corporation et al. (Docket No. 166) (the “Confirmation Order”). Upon entry of the Confirmation Order by the Bankruptcy Court, the Company’s obligations with respect to this action were discharged and pursuant to the Plan (as modified by the Confirmation Order) and section 524 of the Bankruptcy Code, continuation of this action is permanently enjoined as to the Company.

AsOn ofJune ~~September 30~~8, 2012, ~~there~~a purported securities fraud class action titled Grodko v. Central European Distribution Corporation, et al., was $1filed against the Company in the United States District Court for the Southern District of New York.2 ~~million~~The plaintiff in the lawsuit, who is suing purportedly on behalf of ~~total~~a ~~unrecognized~~class ~~compensation~~of ~~cost~~all purchasers of the Company’s common stock between March 1, 2010 and June 4, 2012, alleges that the Company made false and/or misleading statements related to ~~non-vested~~and/or ~~stock~~failed ~~options~~to disclose that (1) the Company’s reported net sales in the years ended December 31, 2010 and 2011 were ~~restricted~~materially ~~stock~~inflated; ~~units~~(2) as a result of a failure to account for retroactive trade rebates provided to the customers of Russian Alcohol, the Company anticipates restating its reported consolidated net sales, operating profit and ~~restricted~~related ~~stock~~accounts ~~granted~~for these ~~under~~periods; and (3) as a result of the foregoing, the Company’s ~~Stock~~statements ~~Incentive~~were ~~Plan~~materially false and misleading at all relevant times. ~~The~~On ~~costs~~August ~~are~~7, ~~expected~~2012 a second, substantially similar class action complaint titled Puerto Rico System of Annuities and Pension for Teachers v. Central European Distribution Corporation, et al., was filed in the same court. By court orders dated September 4, 2012, the Grodko action and the Puerto Rico System of Annuities and Pension for Teachers action were transferred to bethe ~~recognized~~United ~~over~~States District Court for the District of New Jersey, where the actions have been consolidated and are proceeding under the caption Grodko v. Central European Distribution Corporation, et. al, No. 12-cv-5530 (JBS-KMW). The Puerto Rico System of Annuities and Pensions for Teachers has been named Lead Plaintiff in this action. On February 15, 2013, the Lead Plaintiff filed a consolidated amended complaint on behalf of a purported class of all purchasers of the Company’s common stock between March 1, 2010 and November 13, 2012, advancing similar allegations to ~~2014~~those ~~period~~contained in the original complaints concerning purported materially false and misleading statements and/or omissions relating principally to accounting practices at CEDC’s Russian subsidiary, Russian Alcohol Group, and the Company’s related restatements. On April 10, 2013, the Court stayed the action as to CEDC pursuant to section 362 the Bankruptcy Code, as a result of its April 7, 2013 filing of the Petition for relief under the Bankruptcy Code in the Bankruptcy Court.

~~The~~Upon ~~following~~entry ~~weighted-average~~of ~~assumptions~~the ~~were~~Confirmation ~~used~~Order inby the ~~calculation~~Bankruptcy ofCourt, ~~fair~~the ~~value~~Company’s ~~for~~obligations ~~options~~with ~~granted~~respect ~~during~~to ~~2011.~~this ~~For~~action were discharged and pursuant to the ~~nine~~Plan ~~months~~(as ~~ended~~modified ~~September 30,~~by ~~2012~~the Confirmation Order) and section 524 of the ~~Company~~Bankruptcy ~~did~~Code, ~~not~~continuation ~~grant~~of ~~any options~~this action is permanently enjoined as to ~~its~~the ~~employees~~Company.

	December 31, 2011
Fair Value	$	7.60
Dividend Yield		0	%
Expected Volatility		66.1	%
Weighted Average Volatility		66.1	%
Risk Free Interest Rate		3	%
Expected Life of Options from Grant		3.2

By complaints dated December 13, 2012, a single plaintiff filed two separate “derivative” actions against seven current and former CEDC directors, and against CEDC as a “nominal” defendant. The seven current and former directors named as defendants are: William Carey, Christopher Biedermann, David Bailey, Marek E. Forysiak, Markus Sieger, N. Scott Fine, Robert P. Koch and William S. Shanahan. These two actions were filed in the Superior Court of New Jersey, Burlington County, Chancery Division. Both complaints allege breaches of fiduciary duty, waste of corporate assets, and unjust enrichment. One complaint deals with alleged violations of the Foreign Corrupt Practices Act. The other complaint deals with alleged GAAP violations resulting from the Russian Alcohol Group trade rebate issue. Plaintiff is still in the process of attempting to effectuate service of the complaints on defendants. By orders dated April 30, 2013, the Court dismissed these derivative actions without prejudice and subject to reinstatement if the bankruptcy proceedings do not fully dispose of the issues between the parties.

14The Company intends to mount a vigorous defense to the claims asserted. ~~RELATED~~Although we ~~PARTY~~believe ~~TRANSACTIONS~~the allegations in the above complaints are without merit, these types of lawsuits can be protracted, time-consuming, distracting to management and expensive and, whether or not the claims are ultimately successful, could ultimately have an adverse effect on our business, operating results and cash flows.

~~Pursuant~~As tonoted in the ~~SPA~~Company’s ~~and~~Annual Report ~~the~~on ~~Amended~~Form ~~SPA~~10-K/A asfor ~~described~~the inyear ~~Note~~ended 3December 31, 2011, filed with the SEC on ~~May~~October 75, 2012, ~~Roust~~the ~~Trading~~Audit ~~acquired~~Committee, 5through its counsel,~~714,286 shares~~ voluntarily notified the SEC of its internal investigation regarding the Company’s retroactive ~~common~~trade ~~stock~~rebates, trade marketing refunds and related accounting issues. ~~Roust~~The ~~Trading~~Company ~~directly~~has ~~controls~~subsequently ~~Russian~~been ~~Standard~~contacted ~~Corporation~~by ~~and~~the ~~indirectly~~Fraud ~~controls~~Division ~~other~~of ~~Russian~~the ~~Standard~~Criminal ~~entities.~~Division ~~Mr.~~of the US Department of Justice (“DOJ”) regarding the disclosure in the Form 10-K/A for the year ended December ~~Roustam~~31, ~~Tariko~~2011, ~~who~~filed ~~indirectly~~with ~~controls~~the ~~Roust~~SEC ~~Trading~~on October 5, 2012 that there has been ~~appointed~~a tobreach of the books and records provisions of the Foreign Corrupt Practices Act (“FCPA”) of ~~CEDC’s~~the ~~Board~~United States and potentially other breaches of ~~Directors~~the asFCPA. The Company has been asked to provide information about these matters on a ~~non-Executive~~voluntary ~~Chairman~~basis ofto the ~~Board~~SEC and DOJ. ~~Effectively~~The ~~all~~Company ~~entities~~is ~~controlled~~fully bycooperating Mrwith the SEC and DOJ. ~~Tariko~~ ~~are~~Any asaction ofby ~~now~~the ~~related~~SEC or ~~parties~~DOJ could result in criminal or civil sanctions against the Company and/or certain of ~~CEDC~~its current or former officers, ~~including~~directors ~~Russian~~or ~~Standard~~employees. ~~Bank~~The Company cannot predict the duration, ~~Russian~~scope ~~Standard~~or ~~Corporation~~ultimate outcome of the investigations and ~~Roust~~is ~~Inc.~~unable ~~(“Roust”)~~to estimate the financial impact they may have, or predict the reporting periods in which any such financial impacts may be recorded.

~~As disclosed in Note 3 and Note 6 above, on May~~ 7~~, 2012, the Company issued $70 million principal amount of senior notes due March 18, 2013, bearing on interest rate of 3% to Russian Standard Bank~~. ~~The~~STOCK ~~details~~OPTION ofPLANS ~~this~~AND ~~transaction are described in Note 6 above.~~ WARRANTS

InDuring the ~~ordinary~~three ~~course~~months ofended ~~business~~March 31, 2013, the ~~Company~~range isof ~~involved~~exercise inprices ~~transactions~~for ~~with~~outstanding ~~entities~~options was ~~controlled~~$7.90 byto Mr$60. ~~Tariko~~92. ~~that~~During ~~resulted~~the inthree ~~recognition~~months ofended ~~revenues~~March 31, ~~expenses~~2013, ~~assets~~the ~~and~~weighted ~~liabilities~~average byremaining ~~the Company.~~contractual ~~There~~life ~~were~~of nooptions ~~significant~~outstanding ~~transactions~~is ~~with~~5.3 ~~the~~years. ~~entities~~Exercise ~~controlled~~prices byfor ~~Mr.~~options exercisable as of March ~~Tariko~~31, in2013 ~~prior~~ranged ~~periods~~from $7.90 to $60.92.

The Company has issued stock options to employees under stock based compensation plans. Stock options ~~following~~are ~~table~~issued ~~summarizes~~at the ~~transactions~~current ~~with~~market ~~Roust~~price, assubject ~~included~~to ina vesting period, which varies from one to three years. As of March 31, 2013, the Company’s ~~Consolidated~~has ~~Financial~~not ~~Statements:~~changed the terms of any outstanding awards.

Related Party Transactions with Roust (in thousands)
Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) for thethree and nine month periods ended September 30, 2012 and September 30, 2011	Three months endedSeptember 30,				Nine months endedSeptember 30,
	2012		2011		2012		2011
Sales	$	1,473	$	0	$	1,473	$	0
Selling, general and administrative expenses		83		0		83		0

During the three months ended March 31, 2013, the Company recognized compensation cost of $0.3 million.

As of March 31, 2013, there was $1.0 million of total unrecognized compensation cost related to non-vested stock options, restricted stock units and restricted stock granted under the Company’s Stock Incentive Plan. The costs are expected to be recognized over the 2013 to 2014 period.

During the year ended December 31, 2012 and for the three months ended March 31, 2013 the Company did not grant any options to its employees. All of the outstanding options and warrants were cancelled pursuant to the Plan of Reorganization.

8.	COMPREHENSIVE INCOME/(LOSS)

Comprehensive income/(loss) is defined as all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income/(loss) includes net income/(loss) adjusted by foreign currency translation adjustments. The foreign translation (losses)/gains on the re-measurements from foreign currencies to U.S. dollars are classified separately as foreign currency translation adjustment within accumulated other comprehensive income included in stockholders’ equity.

As of March 31, 2013, functional currencies exchange rates used to translate the balance sheet strengthened against the U.S. dollar as compared to the exchange rates as of December 31, 2012 and as a result $23.4 million of foreign currency translation adjustment was recognized as part of total comprehensive income.

9.	RELATED PARTY TRANSACTIONS

Pursuant to the SPA, the Amended SPA and the Plan of Reorganization, as described in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on June 18, 2013. Mr. Roustam Tariko became the sole shareholder of CEDC. Further, Mr. Roustam Tariko has been appointed to CEDC’s Board of Directors as a non-Executive Chairman of the Board. Given that Mr. Roustam Tariko indirectly controls Roust Trading and Roust Trading directly controls Russian Standard Corporation (and indirectly controls other Russian Standard entities), all entities controlled by Mr. Tariko have become related parties of CEDC, including Russian Standard Bank, Russian Standard Corporation, Roust Inc., Russian Standard Vodka (USA), Inc., Russian Standard Vodka, Union Trust Story, F.LLI GANCIA & C. SpA.

As disclosed in Note 4, on May 7, 2012, the Company issued the RTL Notes, bearing on interest rate of 3% to Russian Standard Bank. On March 1, 2013, with effect from February 25, 2013 the Company and Roust Trading entered into the RTL Credit Facility. Pursuant to the terms of the RTL Credit Facility, $50 million RTL Notes were converted into a new term loan from Roust Trading to the Company. The RTL Credit Facility of $50 million is disclosed below in the table.

The outstanding balance of RTL Notes of $20.0 million was addressed through the Plan of Reorganization as described in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on June 18, 2013. Effective June 5, 2013 the outstanding balance of RTL Notes was fully eliminated.

Accrued interest on RTL Credit Facility and RTL Notes in the amount of $0.8 million and $1.1 million, is included in bank loans and other accrued liabilities, respectively, as of March 31, 2013.

Russian Standard Bank loan of $15.1 million was described in details in Note 4.

Condensed Consolidated Balance Sheets as of September 30, 2012 (unaudited) and asof December 31, 2011 (in thousands)	September 30,2012(unaudited)		December 31,2011
Current Assets
Accounts receivable		1,798		0
Other current assets		1,034		0
Total due from Roust		2,832		0
Current Liabilities
Other accrued liabilities		95		0
Total due to Roust		95		0

In the ordinary course of business, the Company is involved in transactions with entities controlled by Mr. Tariko (“Roust”) that resulted in recognition of revenues, expenses, assets and liabilities by the Company. There were no significant transactions with the entities controlled by Mr. Tariko within the comparative quarter of prior year.

~~15.~~The ~~FINANCING~~following ~~COMMITMENTS~~table ~~AND~~summarizes ~~CONTINGENT~~the ~~LIABILITIES~~transactions with Roust as included in the Company’s Condensed Consolidated Financial Statements (unaudited):

Supply contracts


Related Party Transactions (in thousands)
Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited)	Three months ended March 31,
	2013		2012

Net Sales	$	204	$	0
Cost of goods sold		160		0
Selling, general and administrative expenses		417		0
Interest expense		904		0


Condensed Consolidated Balance Sheets (unaudited) (in thousands)	March 31, 2013 (unaudited)		December 31, 2012

Current Assets
Accounts receivable		1,025		57
Other current assets		1,571		2,291

Total due from Roust		2,596		2,348


Current Liabilities
Trade accounts payable		3,873		1,946
Bank loans (Russian Standard)		15,946		0
RTL Credit Facility		50,000		0
RTL Notes		20,000		70,000
Other accrued liabilities		1,204		929

Total due to Roust		91,023		72,875

~~Bank~~Accounts ~~Guarantees~~receivable and trade accounts payable result from sold and purchase transactions made primarily with Roust Inc. in the ordinary course of business. Other current assets comprise mainly of CEDC inventories sold at market prices and held by Roust Inc. under an arrangement to repurchase those inventories with storage and logistic cost mark-up.

InNet ~~accordance~~sales ~~with~~and ~~current~~costs ~~legislation in Russia each producer~~ of ~~spirit~~goods ~~beverages~~sold ~~must~~comprise ~~acquire~~revenue ~~excise stamps~~ and ~~must~~related ~~pay excise~~costs ~~tax~~from insales ~~full~~of ~~before~~Gancia products ~~buying~~to ~~spirit~~Roust ~~for production purposes~~Inc. ~~For~~SG&A ~~each~~relate ~~lot~~to costs of ~~stamps~~renting ~~purchased,~~office ~~the~~premises ~~alcohol~~from ~~producer~~Union ~~must~~Trust ~~provide~~Story ~~the~~and ~~relevant~~Russian ~~body~~Standard ~~with~~Vodka. aInterest ~~bank~~expense ~~guarantee~~comprises in$0.6 ~~the~~million ~~full amount~~ of ~~payment~~interest ~~for~~on ~~the~~RTL ~~excise~~Notes ~~tax~~and to$0.3 ~~secure~~million ~~the legality~~ of ~~usage~~ ofinterest ~~the~~on ~~excise stamps. This~~ bank ~~guarantee~~loans ~~serves~~from asRussian Standard ~~insurance~~Bank ~~against~~and ~~the~~Roust ~~illegal~~Trading ~~usage~~Ltd., ofmentioned ~~excise stamps by an alcohol producer~~above.

In10. ~~addition,~~INTEREST ~~under~~INCOME ~~new~~/ ~~legislation effective since August 1~~(EXPENSE), 2011 the producer purchasing spirit alcohol must a) prepay the excise tax in full or b) provide the relevant tax body with a bank guarantee in the full amount of the excise tax before purchasing to secure payment of the excise tax. This bank guarantee serves as insurance that the excise tax is paid in time. NET

~~Russian~~The ~~Alcohol~~following ~~has~~items inare ~~place~~included ain ~~guarantee~~Interest ~~line~~Income/ ~~agreement with multiple banks pursuant to which it was provided with a guarantee limit of 22.7 billion Russian rubles~~ (~~approximately $735.5 million~~expense) ~~for a period from 1 to 4 years~~, ~~Bravo~~net: Premium signed a guarantee line agreement with multiple banks pursuant to which it was provided with a guarantee limit of 820.0 million Russian rubles (approximately $26.5 million) for a period from 1 to 2 years and Whitehall has in place a guarantee line agreement with multiple banks pursuant to which it was provided with a guarantee limit of 1.2 billion Russian rubles (approximately $37.5 million) as insurance against the illegal usage of excise stamps.

According to the agreements, companies have the right to obtain bank guarantees during the agreement term for each purchase of excise stamps and for the purchase of spirit. The guarantees for excise stamps are held by Rosalkoregulirovanie (the Federal Service for Alcohol Market Regulation), during the whole production period for which the excise stamps were purchased. The guarantee for excise tax is held by the beneficiary (the tax body) for 6 months after the end of month the spirit was purchased.


	Three months ended March 31,
	2013			2012
Interest income	$	543		$	245
Interest expense		(28,677	)		(26,547	)

Total interest expense, net	$	(28,134	)	$	(26,302	)

As11. ofOTHER ~~September 30,~~FINANCIAL ~~2012,~~INCOME ~~the~~/ ~~Company has bank guarantees related to customs duties on imported goods in Poland of 4.4 million Polish zlotys~~ (~~approximately $1.4 million~~EXPENSE)., NET

~~Operating~~The ~~Leases~~following ~~and~~items ~~Rent~~are ~~Commitments~~included in Other financial income / (expense), net:

The Company makes rental payments for real estate, vehicles, office, computer, and manufacturing equipment under operating leases. The following is a schedule by years of the future rental payments under the non-cancelable operating lease as of September 30, 2012:


	Three months ended March 31,
	2013			2012
Foreign exchange impact related to foreign currency financing	$	(34,726	)	$	98,347
Other gains / (losses)		(2,827	)		(759	)

Total other financial income / (expense), net	$	(37,553	)	$	97,588

2012	$	2,918
2013		9,130
2014		8,722
2015		8,148
2016		5,536
Thereafter		2,976
Total	$	37,430

~~During 2012, the Company continued its policy of renewing its transportation fleet by way of capital leases~~12. ~~The~~OTHER ~~future~~NON-OPERATING ~~minimum~~INCOME ~~lease~~/ ~~payments for the assets under capital lease as of September 30~~(EXPENSE), ~~2012 are as follows:~~ net

2012	$	594
2013		593
2014		236
Gross payments due	$	1,423
Less interest		(100	)
Net payments due	$	1,323

The following items are included in Other non-operating income / (expense):

Legal proceedings


	Three months ended March 31
	2013			2012

Factoring costs and bank fees	$	(3,585	)	$	(2,262	)
Other gains / (losses)		(523	)		(336	)

Total other non operating expense	$	(4,108	)	$	(2,598	)

From time to time we are involved in legal proceedings arising in the normal course of our business, including opposition and cancellation proceedings with respect to trademarks similar to some of our brands, and other proceedings, both in the United States and elsewhere13. ~~Except~~EARNINGS as/ ~~set~~(LOSS) ~~forth~~PER below, we are not currently involved in or aware of any pending or threatened proceedings that we reasonably expect, either individually or in the aggregate, will result in a material adverse effect on our consolidated financial statements. SHARE

OnThe ~~October 24,~~following ~~2011,~~table asets ~~class~~forth ~~action complaint titled Steamfitters Local 449 Pension Fund vs. Central European Distribution Corporation, et al., was filed in~~ the ~~United~~computation ~~States District Court, District~~ of ~~New~~basic ~~Jersey on behalf of a putative class of all purchasers of our common stock from August 5, 2010 through February 28, 2011 against us~~ and ~~certain~~diluted ofearnings ~~our~~per ~~officers.~~share The complaint seeks unspecified money damages and alleges violations of federal securities law in connection with alleged materially false and misleading statements and/or omissions regarding our business, financial results and prospects in our public statements and public filings with the U.S. Securities & Exchange Commission for the ~~second~~periods and third quarters of 2010, relating to declines in our vodka portfolio, our need to take an impairment charge relating to the deterioration in fair value of certain of our brands in Poland and negative financial results from the launch of Żubrówka Białaindicated. ~~Subsequent to the above complaint, a second, substantially similar class~~ action complaint titled Tim Schuler v. Central European Distribution Corporation, et al., was filed in the same court. By court orders dated August 22, 2012, the Steamfitters action and the Schuler action were consolidated and are now proceeding in the District of New Jersey under the caption In re Central European Distribution Corp. Securities Litigation.

On June 8, 2012, a purported securities fraud class action titled Grodko v. Central European Distribution Corporation, et al., was filed against the Company in the United States District Court for the Southern District of New York. The plaintiff in the lawsuit, who is suing purportedly on behalf of a class of all purchasers of the Company’s common stock between March 1, 2010 and June 4, 2012, alleges that the Company made false and/or misleading statements related to and/or failed to disclose that (1) the Company’s reported net sales in the years ended December 31, 2010 and 2011 were materially inflated; (2) as a result of a failure to account for retroactive trade rebates provided to the customers of Russian Alcohol, the Company anticipates restating its reported consolidated net sales, operating profit and related accounts for these periods; and (3) as a result of the foregoing, the Company’s statements were materially false and misleading at all relevant times. On August 7, 2012 a second, substantially similar class action complaint titled Puerto Rico System of Annuities and Pension for Teachers v. Central European Distribution Corporation, et al., was filed in the same court. By court orders dated September 4, 2012, the Grodko action and the Puerto Rico System of Annuities and Pension for Teachers action were transferred to the United States District Court for the District of New Jersey, where the actions have been consolidated with the prior-pending cases in New Jersey, described above, and are proceeding under the caption In re Central European Distribution Corp. Securities Litigation. Objections by certain plaintiffs to the consolidation of these actions are pending.


	Three months ended March 31,
	2013			2012

Net income / (loss)	$	(79,456	)	$	60,184

Weighted average shares of common stock outstanding (used to calculate basic EPS)		81,538			72,885

Net effect of dilutive employee stock options based on the treasury stock method		465			217

Weighted average shares of common stock outstanding (used to calculate diluted EPS)		82,003			73,102

Net income / (loss) per common share - basic	$	(0.97	)	$	0.83
Net income / (loss) per common share - diluted	$	(0.97	)	$	0.82

~~The~~Employee ~~Company intends~~stock tooptions ~~mount~~granted ahave ~~vigorous~~not ~~defense~~been toincluded in the ~~claims~~above ~~asserted.~~calculations ~~Although~~of wediluted ~~believe~~earnings per share where the ~~allegations~~exercise inprice is less than the ~~class~~average ~~action~~market ~~complaints~~price ~~are~~of ~~without~~the ~~merit,~~common ~~these~~stock ~~types~~during ofthe ~~lawsuits~~three ~~can~~months beended ~~protracted~~March 31, ~~time-consuming,~~2013 ~~distracting~~and to2012. ~~management~~In ~~and~~addition ~~expensive~~there ~~and, whether~~is orno ~~not~~adjustment ~~the~~to ~~claims~~fully ~~are~~diluted ~~ultimately~~shares ~~successful,~~related ~~could~~to ~~ultimately~~the ~~have~~Convertible anSenior ~~adverse~~Notes as ~~effect~~the onaverage ~~our~~market ~~business,~~price ~~operating~~was ~~results~~below ~~and~~the ~~cash~~conversion ~~flows~~price for the periods.

As noted in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011, filed with the SEC on October 5, 2012, the Audit Committee, through its counsel, voluntarily notified the SEC of its internal investigation regarding the Company’s retroactive trade rebates, trade marketing refunds and related accounting issues14. ~~The~~FAIR ~~Company~~VALUE has subsequently been contacted by the Fraud Division of the Criminal Division of the US Department of Justice (“DOJ”) regarding the disclosure in the Form 10-K/A for the year ended December 31, 2011, filed with the SEC on October 5, 2012 that there has been a breach of the books and records provisions of the Foreign Corrupt Practices Act (“FCPA”) of the United States and potentially other breaches of the FCPA. The Company has been asked to provide information about these matters on a voluntary basis to the SEC and DOJ. The Company is fully cooperating with the SEC and DOJ. Any action by the SEC or DOJ could result in criminal or civil sanctions against the Company and/or certain of its current or former officers, directors or employees. MEASUREMENTS

The Company measures certain assets and liabilities at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a fair value hierarchy, which gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs used to measure fair value are:


Level 1 —		Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 —		Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 —		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of substantially all of the Company’s assets is based on observable inputs, including readily available quoted market prices, which meet the definition of a Level 1 or Level 2 input.

As of March 31, 2013 and December 31, 2012, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents. The monetary assets represented by these financial instruments are primarily located in Poland, Hungary and Russia. Consequently, they are subject to currency translation risk when reporting in U.S. dollars.

The Company does not have any financial assets measured at fair value on a recurring basis as Level 3. The Company has also certain financial liabilities which are measured at fair value on recurring basis for disclosure purposes only, namely, Convertible Senior Notes, Senior Secured Notes and Debt Security. The fair value of Convertible Senior Notes and Secured Senior Notes is

16 determined based on quoted market prices in public markets and is categorized as Level 1. ~~FAIR~~Fair ~~VALUE~~value ~~MEASUREMENTS~~of Debt Security is determined based on the principal face value and accrued interest and is categorized as Level 3. The fair value of Convertible Senior Notes, Secured Senior Notes and Debt Security as of March 31, 2013 and December 31, 2012 is disclosed in Note 4 “Borrowings.” There were no transfers in or out of Level 1, Level 2 or Level 3 during the three months ended March 31, 2013 and during the annual period ended December 31, 2012.

The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the condensed financial statements on a recurring basis or on a nonrecurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels of inputs used to measure fair value are as follows:

Level 1 —		Quoted prices in active markets for identical assets or liabilities.
Level 2 —		Observable inputs other than quoted prices included in Level 1. We value assets and liabilities included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.
Level 3 —		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

As of September 30, 2012, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents. The monetary assets represented by these financial instruments are primarily located in Poland, Hungary and Russia. Consequently, they are subject to currency translation risk when reporting in U.S. dollars. The fair values of the cash and cash equivalents, Convertible Senior Notes and Secured Senior Notes is determined based on quoted market prices in public markets and is categorized as Level 1. Fair value of Debt Security is determined based on the principal face value and accrued interest and is categorized as Level 3. Apart from assets held for sale, the Company does not have any financial assets measured at fair value on a recurring basis as Level 3 and there were no transfers in or out of Level 1, Level 2 or Level 3 during the nine months ended September 30, 2012.

Non-financial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment on the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. Management reviews long-lived assets for potential impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use and eventual depletion of the asset. If an impairment exists, the resulting write-down would be the difference between the fair market value of the long-lived asset and the related net book value. As of the balance sheet date, the carrying value of its long-lived assets are recoverable and no impairment existed.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring and nonrecurring basis (cash and cash equivalents, goodwill, trademarks and customer relationships) as of March 31, 2013, and December 31, 2012:


			Fair value measurement on recurring basis
	Total		Quoted Prices in Activated Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)

March 31, 2013

Cash and cash equivalents	$	44,012	$	44,012	$	0	$	0

December 31, 2012

Cash and cash equivalents	$	84,729	$	84,729	$	0	$	0



			Fair value measurement on a non-recurring basis
	Total		Quoted Prices in Activated Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total loss

December 31, 2012

Trademarks and Customer Relationship (1)	$	174,242	$	0	$	0	$	174,242	$	45,052

Goodwill (2)	$	213,629	$	0	$	0	$	213,629	$	327,847

(1)

In 2012 trademarks and customer relationships with a carrying amount of $219.3 million were written down to their fair value of $174.2 million, resulting in an impairment charge of $45.1 million, which was included in earnings for the period.

(2)

In 2012 goodwill with a carrying amount of $ 541.4 million was written down to its fair value of $213.6 million, resulting in an impairment charge of $327.8 million, which was included in earnings for the period.

The Company has other financial instruments, such as receivables, accounts payable, overdrafts, short term bank loans and other liabilities which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value approximate their fair values. The Company did not have any other financial instruments with the scope of the fair value disclosure requirements as of March 31, 2013.

15.

EFFECTS OF FOREIGN CURRENCY MOVEMENTS

Substantially all of the Company’s operating cash flows and assets are denominated in Polish zloty, Russian ruble and Hungarian forint. This means that the Company is exposed to translation movements both on its balance sheet and statement of operations and comprehensive income. The impact on working capital items is demonstrated on the cash flow statement as the movement in exchange on cash and cash equivalents. The impact on the statement of operations is by the movement of the average exchange rate used to restate the statement of operations from Polish zloty, Russian ruble and Hungarian forint to U.S. dollars. The amounts shown as exchange rate gains or losses on the face of the statements of operations relate only to realized gains or losses on transactions that are not denominated in Polish zloty, Russian ruble or Hungarian forint. Table below presents the exchange rates used for translation of our balance sheet and statement of operations and comprehensive income balances as of and for the three months ended March 31, 2013:


	Balance sheet rate as of March 31, 2013		Balance sheet rate as of December 31, 2012		Average rate for the three months ended March 31, 2013		Average rate for the three months ended March 31, 2012
PLN / USD		3.2590		3.0996		3.1469		3.2249
RUR / USD		31.0381		30.4779		30.4048		30.1674
HUF / USD		237.8832		221.4000		224.7786		225.5175

Because the Company’s reporting currency is the U.S. dollar, the translation effects of fluctuations in the exchange rate of our functional currencies have impacted the Company’s financial condition and results of operations and have affected the comparability of our results between financial periods.

~~The~~ increase ~~following~~or ~~table~~decrease ~~sets~~the ~~forth~~value byof ~~level,~~the ~~within~~Company’s ~~the~~liabilities ~~fair~~on ~~value~~that ~~hierarchy,~~debt in terms of the Company’s ~~financial~~ ~~assets~~functional ~~accounted~~currencies ~~for~~when atthose ~~fair~~functional currencies depreciate or appreciate in value onrespectively. As a ~~recurring~~result ~~and~~of ~~nonrecurring~~this, ~~basis~~the ~~(cash~~Company is exposed to gains and ~~cash~~losses ~~equivalents~~on asthe ~~well~~re-measurement asof ~~assets~~these ~~held~~liabilities. ~~for~~The ~~sale~~table )below ~~and~~summarizes ~~fair~~the ~~values~~pre-tax impact of ~~financial~~a ~~assets~~one ~~accounted~~percent ~~for~~movement atin ~~their~~each ~~carrying~~of ~~values~~the ~~(Convertible~~exchange ~~Senior~~rate ~~Notes,~~which could result ~~Secured~~in ~~Senior~~a ~~Notes~~significant ~~and~~impact ~~Debt~~in ~~Security)~~the asresults of ~~September 30,~~the ~~2012,~~Company’s ~~and December 31, 2011~~operations.

			Assets at Fair Value Using
Exchange Rate	Value of notional amount as of March 31, 2013		Pre-tax impact of a 1%movement in exchange rate
			Quoted Prices in Activated Markets for Identical Assets		Significant Other ObservableInputs		UnobservableInputs
USD-Polish zloty*		$376.7 million	$	3.8 million gain/loss
	Total		(Level 1)		(Level 2)		(Level 3)
USD-Russian ruble*		$272.2 million	$	2.7 million gain/loss
September 30, 2012
EUR-USD*		€442.7 million or approximately $567.5 million	$	5.7 million gain/loss
Recurring items
EUR-Russian ruble		€30.4 million or approximately $39.0 million		0.4 million gain/loss
Cash and cash equivalents	$	102,713	$	102,713	$	0	$	0
Convertible Senior Notes	$	240,450	$	240,450	$	0	$	0
Secured Senior Notes	$	649,199	$	649,199	$	0	$	0
Debt Security	$	70,722	$	0	$	0	$	70,722
Nonrecurring items
Assets held for sale	$	675	$	0	$	0	$	675
December 31, 2011
Recurring items
Cash and cash equivalents	$	94,410	$	94,410	$	0	$	0
Convertible Senior Notes	$	248,000	$	248,000	$	0	$	0
Secured Senior Notes	$	702,700	$	702,700	$	0	$	0
Nonrecurring items
Assets held for sale	$	675	$	0	$	0	$	675

~~The~~* ~~Company~~Reflects ~~has~~debt ~~other~~outstanding ~~financial~~prior ~~instruments,~~to ~~such~~giving aseffect ~~receivables, accounts payable, overdrafts, short term bank loans and other liabilities which have been excluded from the tables above. Due~~ to the ~~short-term~~Plan ~~nature~~ of ~~these instruments, the carrying value approximate their fair values~~Reorganization. ~~The Company did not have any other financial instruments with the scope of the fair value disclosure requirements as of September 30, 2012.~~

1716. ~~EFFECTS~~OPERATING ~~OF FOREIGN CURRENCY MOVEMENTS~~SEGMENTS

~~Substantially~~The ~~all of the~~ Company’s ~~operating~~operates ~~cash flows~~ and ~~assets~~manages ~~are denominated in Polish zloty, Russian ruble and Hungarian forint. This means that the Company is exposed to translation movements both on~~ its ~~balance~~business ~~sheet~~based ~~and~~upon ~~statement~~three ofprimary ~~operations~~geographic ~~and~~segments: ~~comprehensive income. The impact on working capital items is demonstrated on the cash flow statement as~~Poland, ~~the~~Russia ~~movement in exchange on cash~~ and ~~cash equivalents~~Hungary. ~~The~~Selected ~~impact~~financial ondata ~~the~~split ~~statement~~based ofupon ~~operations~~this issegmentation byassuming ~~the~~elimination ~~movement~~ of ~~the~~intercompany ~~average~~revenues ~~exchange rate used to restate the statement of operations from Polish zloty, Russian ruble~~ and ~~Hungarian~~profits ~~forint~~is ~~to U.S. dollars. The amounts~~ shown asbelow: ~~exchange~~Segment ~~rate~~information ~~gains~~represents ~~or losses on the face of the statements of operations relate~~ only tocontinuing ~~realized gains or losses on transactions that are not denominated in Polish zloty, Russian ruble or Hungarian forint~~operations. Table below presents the exchange rates used for translation of our balance sheet and statement of operations and comprehensive income balances as of and for the three months ended September 30, 2012:

	Balance sheet rateas ofSeptember 30, 2012		Balance sheet rateas ofDecember 31, 2011		Average rate for thethree months endedSeptember 30, 2012		Average rate for thethree months endedSeptember 30, 2011
	Segment Net Sales
PLN / US$		3.1780		3.4174		3.3107		2.9400
	Three months ended March 31,
RUR / US$		30.9144		32.2092		31.9874		29.1667
	2013		2012
HUF / US$		219.1724		240.6620		226.7603		194.7020
Segment
Poland	$	51,310	$	47,135
Russia		100,616		93,426
Hungary		4,321		5,428
Total Net Sales	$	156,247	$	145,989


	Operating income / (loss)
	Three months ended March 31,
	2013			2012
Segment
Poland	$	6,970		$	6,480
Russia		2,600			(8,463	)
Hungary		278			720
Corporate overhead
General corporate overhead		(16,150	)		(1,692	)
Option expense		(293	)		(864	)


Total Operating income / (loss)	$	(6,595	)	$	(3,819	)


	Identifiable Operating Assets
	March 31, 2013		December 31, 2012
Segment
Poland	$	497,606	$	532,038
Russia		978,630		1,131,009
Hungary		17,164		28,832
Corporate		33,706		75,673

Total Identifiable Assets	$	1,527,106	$	1,767,552


	Goodwill
	March 31, 2013		December 31, 2012
Segment
Poland	$	203,436	$	213,897
Russia		164,818		167,848
Hungary		6,180		6,640


Total Goodwill	$	374,434	$	388,385

~~The Company has borrowings including its Convertible Notes due 2013 and Senior Secured Notes due 2016 that are denominated in U~~17.S. ~~dollars~~SUBSEQUENT and euros, which have been lent to its operations where the functional currency is the Polish zloty and Russian ruble. The effect of having debt denominated in currencies other than the Company’s functional currencies is to increase or decrease the value of the Company’s liabilities on that debt in terms of the Company’s functional currencies when those functional currencies depreciate or appreciate in value respectively. As a result of this, the Company is exposed to gains and losses on the re-measurement of these liabilities. The table below summarizes the pre-tax impact of a one percent movement in each of the exchange rate which could result in a significant impact in the results of the Company’s operations. EVENTS

Exchange Rate	Value of notional amount		Pre-tax impact of a 1%movement in exchange rate
USD-Polish zloty	$	444 million	$	4.4 million gain/loss
USD-Russian ruble	$	264 million	$	2.6 million gain/loss
EUR-Polish zloty	€	430 million or approximately $557 million	$	5.6 million gain/loss

Plan of Reorganization

18As described in Note 1, on March 15, 2013, the Company failed to pay $257.9 ~~SUBSEQUENT~~million ~~EVENTS~~principal due on the 2013 Notes. Under the terms of the 2013 Notes Indenture, the failure to pay principal when due constituted an event of default (as defined under the CSN Indenture).

InOn ~~October~~April ~~2012~~7, ~~Russian~~2013, ~~Alcohol~~CEDC ~~signed~~and ~~new~~its subsidiaries ~~agreements~~CEDC ~~with~~Finance ~~multiple~~Corporation ~~banks~~International, ~~related~~Inc. toand ~~its~~CEDC ~~bank guarantees.~~Finance AsCorporation, aLLC ~~result~~filed ofvoluntary ~~new~~petitions ~~agreements~~for ~~signed,~~reorganization ~~guaranteed~~under ~~limit~~Chapter ~~decreased~~11 byof ~~1.2~~title ~~billion~~11 ~~Russian~~of ~~rubles~~the United States Code (~~$39.9~~the ~~million~~“Bankruptcy Code”) toin ~~21.5~~the ~~billion~~United ~~Russian~~States Bankruptcy ~~rubles~~Court for the District of Delaware (~~$695.6~~the ~~million~~“Bankruptcy Court”) in order to effectuate the Debtors’ prepackaged Chapter 11 Plan of Reorganization, which became effective June 5, 2013.

On June 5, 2013, the Company along with CEDC Finance Corporation International, Inc., an indirect wholly-owned subsidiary of the Company (the “Issuer”), entered into an Indenture (the “Senior Secured Notes Indenture”), between the Company, the Issuer, certain subsidiary guarantors named therein, and US Bank, N.A., as Trustee. In connection with the Senior Secured Notes Indenture, the Issuer issued $465 million Senior Secured Notes due 2018 (the “Senior Secured Notes”) to holders of the SSN which were cancelled pursuant to the Plan of Reorganization. The issuance of the Senior Secured Notes to holders of the SSN is expected to take place on or about June 19, 2013. ~~RECENTLY~~The ~~ISSUED~~Senior ~~ACCOUNTING~~Secured ~~PRONOUNCEMENTS~~Notes will be secured by, among other things, (a) a first-priority pledge over the shares of the Issuer and certain subsidiaries of the Company, (b) a first-priority assignment of rights under certain bank accounts of the Company, (c) certain intercompany loans, and (d) a first-priority mortgage over certain real property and fixtures.

InOn ~~May~~June 5, ~~2011~~2013, the ~~FASB~~Company ~~issued~~and ~~ASU~~the ~~2011-04~~Issuer, ~~“Fair~~entered ~~Value~~into ~~Measurement~~an Indenture (~~Topic~~the ~~820):~~“Convertible ~~Amendments~~Notes ~~to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs~~Indenture” ~~(“ASU 2011-04”~~), between ~~which~~the isCompany, ~~effective~~the ~~for~~Issuer, ~~annual~~certain ~~reporting~~subsidiary ~~periods~~guarantors ~~beginning~~named ~~after December 15~~therein, ~~2011. This guidance amends certain accounting~~ and ~~disclosure~~US ~~requirements~~Bank, ~~related~~N.A., toas ~~fair~~Trustee ~~value~~(the ~~measurements~~“Trustee”). ~~Additional~~In ~~disclosure~~connection ~~requirements~~with in the ~~update~~Convertible ~~include:~~Notes ~~(1) for Level 3 fair value measurements~~Indenture, ~~quantitative~~the ~~information~~Issuer ~~about~~issued ~~unobservable~~$200 ~~inputs~~million ~~used,~~Convertible aJunior ~~description of the~~Secured ~~valuation~~Notes ~~processes~~due ~~used~~2018 by (the ~~entity,~~“Convertible Notes” and, atogether ~~qualitative~~with ~~discussion about~~ the ~~sensitivity~~Senior ofSecured ~~the~~Notes, ~~measurements to changes in~~ the ~~unobservable~~“New ~~inputs; (2~~Notes”) ~~for~~ anto ~~entity’s~~holders ~~use~~ of athe ~~nonfinancial~~SSN, ~~asset~~which ~~that~~were iscancelled ~~different~~pursuant ~~from~~to the ~~asset’s highest~~Company and ~~best use,~~ the ~~reason~~Issuer’s ~~for~~plan ~~the~~of ~~difference;~~reorganization. ~~(3) for~~The ~~financial~~issuance of ~~instruments~~the ~~not~~Convertible ~~measured~~Notes atto ~~fair~~holders ~~value~~of ~~but~~the ~~for~~SSN ~~which~~took ~~disclosure~~place ofon ~~fair~~or ~~value~~about ~~is required~~June 19, ~~the~~2013. ~~fair~~The ~~value~~Convertible ~~hierarchy~~Notes ~~level~~will inbe ~~which~~secured ~~the~~by, ~~fair~~among ~~value~~other ~~measurements~~things, ~~were determined; and~~ (4a) ~~the~~a ~~disclosure~~first-priority ofpledge ~~all~~over ~~transfers~~the ~~between~~shares ~~Level~~of 1the Issuer and ~~Level~~certain 2subsidiaries of the ~~fair value hierarchy. The~~ Company, ~~adopted~~(b) a ~~ASU 2011~~first-04priority ~~during~~assignment ~~the first quarter~~ of ~~the~~rights ~~current~~under ~~fiscal~~certain ~~year.~~bank ~~The~~accounts ~~adoption~~ of ~~ASU 2011-04 did not have a material impact on~~ the Company’s, ~~consolidated~~(c) certain ~~financial~~intercompany ~~statements~~loans, ~~other~~and ~~than~~(d) a ~~disclosures~~first-priority ~~related~~mortgage toover ~~fair~~certain ~~value~~real ~~measurements~~property and fixtures.

InOther ~~June~~material ~~2011,~~terms ~~the FASB issued ASU 2011-05, “Presentation~~ of Comprehensive Income” (“ASU 2011-05”), which was issued to enhance comparability between entities that report under U.S. GAAP and IFRS, and to provide a more consistent method of presenting non-owner transactions that affect an entity’s equity. ASU 2011-05 eliminates the ~~option~~indentures tocan ~~report~~be ~~other~~found ~~comprehensive income and its components~~ in the ~~statement of changes in stockholders~~Company’s ~~equity~~Form and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. However, in December 2011, the FASB issued ASU 2011T-123/As, ~~“Deferral~~filed ofwith the ~~Effective~~SEC Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”), which deferred the guidance on ~~whether to require~~ entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement where net income is presented and the statement where other comprehensive income is presented for both interim and annual financial statements. ASUMarch 2011-12 reinstated the requirements for the presentation of reclassifications that were in place prior to the issuance of ASU 2011-05 and did not change the effective date for ASU 2011-05. For public entities11, ~~the~~ ~~amendments~~2013 ~~in ASU 2011-05~~ and ~~ASU2011-12 are effective for fiscal years, and interim periods within those years, beginning after December~~May 1520, ~~2011, and should be applied retrospectively~~2013. The Company adopted both ASU 2011-05 and ASU 2011-12 during the first quarter of the current fiscal year. The adoption of ASU 2011-05 and ASU 2011-12 did not have a material impact on the Company’s consolidated financial statements, other than presentation of comprehensive income.

InOn ~~September 2011~~June 5, ~~the FASB issued ASU 2011-08~~2013, ~~“Testing~~in ~~Goodwill~~connection ~~for~~with Impairment” (“ASU 2011-08”), which simplifies testing for impairment by allowing an entity to first assess qualitative factors and determine if it is more likely than not (defined as 50% or more) that the ~~fair~~consummation ~~value~~ of the exchange ~~reporting~~offers, ~~unit~~the isCompany ~~less~~issued ~~than~~an ~~its~~aggregate ~~carrying~~of ~~amount.~~10,000 ~~That determination~~shares ~~can~~of ~~then~~New beCommon ~~used~~Stock to ~~decide~~RTL. ifThe itissuance isof ~~necessary to perform~~ the ~~two-step~~New ~~goodwill~~Notes ~~impairment test. ASU 2011-08 is effective for annual~~ and ~~interim~~the ~~goodwill~~common ~~impairment~~stock ~~tests~~under ~~performed~~the ~~for~~Plan ~~fiscal~~was ~~years~~made ~~beginning~~pursuant ~~after~~to ~~December 15, 2011,~~an ~~which~~exemption ~~corresponds~~from to the ~~Company’s~~registration ~~first~~requirements ~~quarter~~ of ~~current fiscal year. The Company will adopt ASU 2011-08 during~~ the ~~current~~Securities Act ~~fiscal~~contained ~~year~~in ~~and this adoption is not expected to have~~ Section 1145(a) ~~material~~of ~~impact on~~ the ~~Company’s~~Bankruptcy ~~consolidated financial statements~~Code.

Pursuant to the Plan, all of the Company’s shares of pre-emergence common stock (“Pre-Emergence Shares”) were cancelled on the Effective Date. Holders of such Pre-Emergence Shares did not and will not receive any distributions under the Plan. In accordance with the terms of the Plan, RTL and its affiliates have acquired control of 100% of the voting securities of the Company. As a result of the Company’s emergence from Chapter 11 and in accordance with the Plan, the following persons have been named as directors of the Company:

•

Mr. Roustam Tariko

•

Mr. N. Scott Fine

•

Mr. Jose L. Aragon

•

Judge Joseph Farnan

•

Mr. Alessandro Picchi

•

Mr. Pavel Merkul

•

Mr. Eberhard von Löhneysen

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

Pursuant to the Plan, the Company has filed an Amended and Restated Certificate of Incorporation (the “New Charter”) with the Secretary of State of the State of Delaware and has adopted Amended and Restated By-Laws (the “New By-Laws”), each of which became effective as of June 5, 2013. Changes implemented by the New Charter and New By-Laws include the following:

•

The authorized share capital of the Company is 90,000 shares of common stock of $0.01 par value per share and 10,000 shares of preferred stock of $0.01 par value per share.

•

The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Company entitled to vote, without the separate vote of the holders of the preferred stock as a class, unless a vote of any such holders is required pursuant to the terms of any certificate of designation. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

•

A director may be removed with or without cause, but in any case such removal shall only be effective if accomplished by the affirmative vote of holders of not less than a majority of the shares of the capital stock the Company issued and outstanding and entitled to vote generally in the election of directors cast at a meeting of the stockholders called for that purpose, notwithstanding the fact that a lesser percentage may be specified by law.

•

Certain provisions have been added to provide stockholder protections to Minority Stockholders (as defined in the New Charter), including:

•

Minority Stockholders have the right to nominate one director and such director’s successor.

•

The jurisdiction of incorporation and domicile of the Company will be Delaware until such time as (a) all of the Senior Secured Notes and all of the Convertible Notes have been redeemed, repaid or converted in their entirety, as applicable, and (b) no Minority Shares remain outstanding.

•

Certain registration rights as provided in Sections 6.3 and 6.4 of the New Charter.

•

Approval over certain significant transactions as provided in Section 6.5 of the New Charter.

•

Minority Stockholders have been provided tag along rights, drag along rights and preemptive rights in respect of share transfers by RTL.

The New Charter and the New By-Laws are attached as Exhibit 3.1 and Exhibit 3.2 of our 8-K Form filed with the SEC on June 11, 2013.

License Agreement with LUCAS BOLS B.V.

The Company is party to a License Agreement dated August 17, 2005 with LUCAS BOLS B.V. that gives the Company the right to use the BOLS Vodka trademark in Poland and Russia. The License Agreement provides LUCAS BOLS B.V. with the right to terminate the agreement upon a change of control or bankruptcy event occurring at the level of Central European Distribution Corporation and may allow LUCAS BOLS B.V. to terminate the agreement following the filing of the Plan. The Company’s representatives have discussed the License Agreement with LUCAS BOLS B.V. and LUCAS BOLS B.V. continues to assess its options under the License Agreement. The Company also has a similar license contract with LUCAS BOLS B.V. in respect of the use of the license for the Bols Vodka trademark in Hungary and this contract contains a similar termination right. The Company currently believes that the risk that the license will be terminated is relatively low and there is no risk of a negative cash outflow following any such termination.

Bilateral Facility Agreement

On April 7, 2013, the Company’s Board of Directors approved the terms of a Bilateral Facility Agreement, to be entered into between JSC “Russian Alcohol Group” or one or more other Company subsidiaries (a “Borrower”) and Steb Holdings Ltd. (the “Lender”), an affiliate of the Alfa Group, pursuant to a term sheet agreed between the Lender, Roust Trading Ltd. (“RTL”) and Closed Joint Stock Company “Russian Standard Corporation” (“RSC”) (the “Term Sheet”). The Lender’s commitment to make loans pursuant to a Bilateral Facility Agreement will terminate on the earliest to occur of (x) the date of drawdown, (y) the six-month anniversary of the date of the Term Sheet and (z) the termination of the Term Sheet by RTL pursuant to the terms thereof.

Under the Term Sheet, Company subsidiaries may enter into up to five Bilateral Facility Agreements with the Lender in a principal amount up to $100 million for general corporate and business development purposes. The Bilateral Facility Agreements are subject to definitive documentation. Any amounts drawn by the Borrower under a Bilateral Facility Agreement shall be unsecured with an interest rate of 13.75% payable quarterly and shall be for a term of one year that may be extended upon the agreement of the Lender, RTL, RSC and the Company.

Each Borrower’s obligations with respect to the Bilateral Facility Agreements would be guaranteed by RTL and RSC. In addition, RTL, guaranteed by RSC, has agreed to pay the Lender an arrangement fee of $0.5 million, a commitment fee of $10.3 million that is payable in three installments and, in certain circumstances specified in the Term Sheet, a break-up fee of $15.0 million, minus any arrangement fee paid.

NASDAQ Delisting

On April 10, 2013, the Company received a letter from the NASDAQ Office of General Counsel, Hearings, informing the Company that the NASDAQ Hearings Panel has affirmed the decision of the Listing Qualifications Department of The NASDAQ Stock Market LLC (“NASDAQ”) to delist the shares of the Company from NASDAQ. As a result, the Company’s shares were suspended from trading on NASDAQ, effective at the open of business on Friday, April 12, 2013.

Sale of Receivable Arrangement

On April 18, 2013 CEDC International Sp. z o.o. (the CEDC subsidiary) entered into the agreement on sale of a receivable of one of its customer with Bank Handlowy w Warszawie Spółka Akcyjna (“Bank Handlowy”). There is no financing limit in this arrangement. The agreement is in nature the non-recourse factoring and the Company has no further involvement in receivable sold under terms of such arrangement.

Credit lines with Alfa-Bank

On May 28, 2013 Alfa-Bank, resumed lending to CEDC by providing access to previously established credit lines of 2 billion Russian rubles (approximately $60 million) with the bank.

New Loans

On June 7, 2013 the Company signed new loan agreement with MKB Bank for a billion Russian rubles (approximately $30 million). Loan is partially secured by pledge on goods. There are no financial covenants related to this loan.

Bank guarantees

Up to date of these financial statements guarantees of 25.4 billion Russian rubles (approximately $765 million) have been issued with following banks: Alfa-Bank, Bank of Moscow, Rossgostrakh, Nomos Bank, Sudostroitelny Bank, Stroykredit Bank, Morskoy Bank.

18.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In April 2013, the FASB issued ASU 2013-07, Presentation of Financial Statements (Topic 205), Liquidation Basis of Accounting. The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The ASU is not applicable to CEDC.

In April 2013, the FASB issued ASU 2013-06, Services Received from Personnel of an Affiliate a consensus of the FASB Emerging Issues Task Force. This ASU relates to Not-for-Profit Entities (Topic 958) and is not applicable to CEDC.

In March 2013, the FASB issued two Accounting Standards Updates (ASUs) on EITF consensuses it ratified at its 31 January 2013 meeting. ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date, requires a reporting entity that is jointly and severally liable to measure the obligation as the sum of the amount the entity has agreed with co-obligors to pay and any additional amount it expects to pay on behalf of a co-obligor. ASU 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, specifies that a cumulative translation adjustment (CTA) should be released into earnings when an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity. For sales of an equity method investment that is a foreign entity, a pro rata portion of CTA attributable to the investment would be recognized in earnings upon sale of the investment. When an entity sells either a part or all of its investment in a consolidated foreign entity, CTA would be recognized in earnings only if the sale results in the parent no longer having a controlling financial interest in the foreign entity. CTA would be recognized in earnings in a business combination achieved in stages (i.e., a step acquisition). The both ASU will be effective for fiscal years (and interim reporting periods within those years) beginning after December 15,2013. The Company will analyze and implement requirements of ASU 2013-04 and 2013-05 for the first quarter of 2014.

In February 2013, the FASB issued ASU 2013-03, Financial Instruments (Topic 825), Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities. This ASU is not applicable to CEDC.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income to improve the reporting of reclassifications out of AOCI. The ASU sets requirements for presentation for significant items reclassified to net income in their entirety during the period and for items not reclassified to net income in their entirety during the period (e.g., pension amounts that are capitalized in inventory). It requires companies to present information about reclassifications out of AOCI in one place because the FASB believes it’s important for users of the financial statements to have a road map about the effect of reclassifications on the financial statements. It also requires companies to present reclassifications by component when reporting changes in AOCI balances. The new guidance does not change the requirement to present for annual periods items of net income and other comprehensive income, and totals for net income, OCI and comprehensive income in a single continuous statement or two consecutive statements. It also does not change the requirement to report a total for comprehensive income in a single continuous statement or two consecutive statements in interim periods. Public companies must make the disclosures prospectively in fiscal years and interim periods within those years beginning after December 15, 2012. The Company adopted ASU 2012-04 during the first quarter of current year. The adoption of ASU 2012-04 did not have impact on the Company’s condensed consolidated financial statements.

In October 2012, the FASB issued ASU 2012-04, Technical Corrections and Improvements. The ASU makes certain technical corrections and clarifications and improvements to the Codification. Additionally, the ASU includes amendments that identify when the use of fair value should be linked to the definition of fair value in Topic 820. ASU 2012-04 is effective for fiscal periods beginning after December 15, 2012. The Company adopted ASU 2012-04 during the first quarter of current year. The adoption of ASU 2012-04 did not have impact on the Company’s condensed consolidated financial statements.

In December 2011, the FASB issued ASU 2011-11 — Disclosures about Offsetting Assets and Liabilities (ASC 210). It requires new disclosures for recognized financial instruments and derivative instruments that are either: (1) offset on the balance sheet in accordance with the offsetting guidance in ASC 210-20-45 or ASC 815-10-45 (collectively, the offsetting guidance) or (2) subject to an enforceable master netting arrangement or similar agreement, regardless of whether they are offset in accordance with the offsetting guidance. Recognized assets and liabilities within the scope of the ASU include financial instruments such as derivatives, repurchase agreements, reverse repurchase agreements and securities lending and borrowing arrangements subject to master netting arrangements. Financial instruments outside the scope of the ASU include loans and customer deposits at the same institution (unless they are offset in the statement of financial position) and financial instruments that are subject only to a collateral agreement (e.g., collateralized loans). Furthermore, in January 2013 the FASB issued ASU 2013-01 that clarifies provisions of ASU 2011-11. The Update clarifies that the scope of ASU 2011-11 applies to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with Section 210-20-45 or Section 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. Both, ASU 2011-11 and ASU 2013-01 are effective for interim and annual reporting periods beginning after January 1, 2013. The Company adopted ASU 2011-11 and ASU 2013-01 during the first quarter of current year. The Adoption of ASU 2011-11 and ASU 2013-01 did not have material impact on the Company’s condensed consolidated 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 Condensed Consolidated Financial Statements and the notes thereto appearing elsewhere in this report.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Regarding Forward-Looking Information.

This report (and other oral and written statements we have made or make, including press releases containing information about our business, results of operations, financial condition, guidance and other business developments), contains forward-looking statements, which provide our current expectations or forecasts of future events. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “intends,” “may,” “will” or “should” or, in each case, their negative, or other variations or comparable terminology, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include, without limitation:

•

information concerning possible or assumed future results of operations, trends in financial results and business plans, including those relating to earnings growth and revenue growth, liquidity, prospects, strategies and the industry in which the Company and its affiliates operate, as well as the integration of recent acquisitions and other investments and the effect of such acquisitions and other investments on the Company;

•

statements about the expected level of our costs and operating expenses, and about the expected composition of the Company’s revenues;

•

information about the impact of governmental regulations on the Company’s businesses;

•

statements about local and global credit markets, currency exchange rates and economic conditions;

•

other statements about the Company’s plans, objectives, expectations and intentions including with respect to its credit facility and other outstanding indebtedness;

• statements relating to shareholder approval of the transaction with ~~Roust~~Mr. ~~Trading~~Roustam Tariko and ~~Roust~~Mr. ~~Trading~~Roustam Tariko’s ability or intention to fund some or all of its investment in the Company; and

•

other statements that are not historical facts.

By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, the development of the industries in which we operate, and the effects of acquisitions and other investments on us may differ materially from those anticipated in or suggested by the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.

We urge you to read and carefully consider the items of this and other reports and documents that we have filed with or furnished to the SEC for a more complete discussion of the factors and risks that could affect our future performance and the industry in which we operate, including the risk factors described in this report and in the Company’s Annual Report on Form 10-K~~/A filed~~ filed with the SEC on ~~October~~June 518, ~~2012~~2013. In light of these risks, uncertainties and assumptions, the forward-looking events described in this report may not occur as described, or at all.

You should not unduly rely on these forward-looking statements, because they reflect our views only as of the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement to reflect circumstances or events after the date of this report, or to reflect on the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this report.

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and the notes ~~thereto~~ thereto found elsewhere in this report.

2122

Overview

The Company is one of the world’s largest vodka producers and Central and Eastern Europe’s largest integrated spirit beverages business with its primary operations in Poland, Russia, ~~and~~Ukraine and Hungary. In ~~Poland,~~ the ~~Company~~first ~~was~~quarter ~~able~~of to2013 ~~see~~the ~~year~~Company oncontinued ~~year~~to ~~domestic~~improve ~~sales~~its ~~volume~~net ~~and~~sales, ~~value~~resulting ~~growth~~in ~~for~~ the ~~quarter~~increase ~~ending~~of ~~September 30,~~approximately ~~2012~~7.0% ~~primarily~~as ~~due~~compared to the ~~continued~~first ~~success~~quarter of ~~Żubrówka~~2012. ~~Biała~~CEDC International and ~~the~~Russian ~~higher~~Alcohol’s ~~margin~~exports ~~flavored~~grew both by volume ~~segment~~and ~~including~~by ~~Soplica.~~value Infor ~~Russia,~~the ~~although~~first ~~our~~quarter ~~sales~~of ~~volumes~~2013 ~~for~~as ~~the~~compared ~~nine~~to ~~months~~the ~~were~~relevant ~~down~~period bylast 8year.4% However, ~~sales~~total ~~were~~CEDC’s ~~flat~~volume was down by approximately 7% in the ~~third~~first quarter, ~~following~~of ~~the~~2013 ~~change~~due ofto significant declines in the ~~management~~Russian ~~team~~Alcohol domestic business. The entire vodka market in Russia. ~~Nonetheless,~~dropped ~~Russia~~14.8% ~~continues~~percent toin bethe ~~a challenging~~first ~~environment~~quarter ~~with~~of ~~excise~~2013 ~~taxes~~as ~~increasing~~compared byto ~~18%~~the infirst ~~July~~quarter of 2012 ~~(the~~due ~~second~~to ~~increase~~dramatic excise tax driven price increases of ~~the~~25%, ~~year)~~which affected consumer off take, and ~~overall~~destocking ~~difficult~~of some ~~consumer~~fourth ~~market~~quarter distributor purchases.

Significant factors affecting our consolidated results of operations

Effect of Exchange Rate and Interest Rate Fluctuations

Substantially all of Company’s operating cash flows and assets are denominated in Polish zloty, Russian ruble and Hungarian forint. This means that the Company is exposed to translation movements both on its balance sheet and statement of operations. The impact on working capital items is demonstrated on the cash flow statement as the movement in exchange on cash and cash equivalents. The impact on the statement of operations is due to the movement of the average exchange rate used to restate the statements of operations from Polish zloty, Russian ruble and Hungarian forint to U.S. dollars. The amounts shown as exchange rate gains or losses on the face of the statements of operations relate only to realized gains or losses on transactions that are not denominated in Polish zloty, Russian ruble or Hungarian forint. The table below presents the exchange rates used for translation of our balance sheet and statement of operations balances as of and for the quarter ended ~~September~~March 3031, ~~2012~~2013:

	Balance sheet rateas ofSeptember 30, 2012		Average rate for thethree months endedSeptember 30, 2012
	Balance sheet rateas ofMarch 31, 2013		Average rate for thethree months endedMarch 31, 2013
PLN / US$		3.1780		3.3107
PLN / USD		3.2590		3.1469
RUR / US$		30.9144		31.9874
RUR / USD		31.0381		30.4048
HUF / US$		219.1724		226.7603
HUF / USD		237.8832		224.7786

~~The~~As of March 31, 2013 the Company also ~~has~~had borrowings including its Convertible Notes due 2013 and Senior Secured Notes due 2016 that are denominated in U.S. dollars and euros, which have been lent to its operations where the functional currency is the Polish zloty and Russian ruble. The effect of having debt denominated in currencies other than the Company’s functional currencies is to increase or decrease the value of the Company’s liabilities on that debt in terms of the Company’s functional currencies when those functional currencies depreciate or appreciate in value, respectively. As a result of this, the Company is exposed to gains and losses on the re-measurement of these liabilities. The table below summarizes the pre-tax impact of a one percent movement in each of the exchange rate which could result in a significant impact in the results of the Company’s operations.

Exchange Rate	Value of notional amount as of March 31, 2013		Pre-tax impact of a 1%movement in exchange rate
USD-Polish zloty	$	444 million	$	4.4 million gain/loss
USD-Polish zloty*		$ 376.7 million	$	3.8 million gain/loss
USD-Russian ruble	$	264 million	$	2.6 million gain/loss
USD-Russian ruble*		$ 272.2 million	$	2.7 million gain/loss
EUR-Polish zloty	€	430 million or approximately $557 million	$	5.6 million gain/loss
EUR-USD*	€	442.7 million or approximately $567.5 million	$	5.7 million gain/loss
EUR-Russian ruble		€30.4 million or approximately $39.0 million		0.4 million gain/loss

22* Reflects debt outstanding prior to giving effect to the Plan of Reorganization.

Results of Operations:

Three months ended ~~September~~March 3031, ~~2012~~2013 compared to three months ended ~~September~~March 3031, ~~2011~~2012

A summary of the Company’s operating performance (expressed in thousands except per share amounts) is presented below.

	Three months ended September 30,
	Three months ended March 31,
	2012			2011
	2013			2012
Sales	$	~~401~~328,~~113~~073		$	~~432~~321,~~942~~756
Excise taxes		(~~209~~171,~~782~~826	)		(~~223~~175,~~304~~767	)
Net sales		~~191~~156,~~331~~247			~~209~~145,~~638~~989
Cost of goods sold		~~109~~88,~~317~~374			~~131~~90,~~427~~874
Gross profit		8267,~~014~~873			7855,~~211~~115
Selling, general and administrative expenses		66,835			61,710
Operating expenses		74,468			58,934
Impairment charge		0			674,515
Operating loss		(6,595	)		(3,819	)
Operating income / (loss)		15,179			(658,014	)
Non operating income / (expense), net
Interest income / (expense), net		(2628,~~231~~134	)		(2826,~~123~~302	)
Other financial income / (expense), net		58(37,~~490~~553	)		~~(170~~97,~~337~~588	)
Other non operating income / (expense), net		(54,~~883~~108	)		(102,~~683~~598	)
Income / (loss) before taxes and equity in net income from unconsolidated investments		41(76,~~555~~390	)		~~(867~~64,~~157~~869	)
Income tax expense		(53,~~786~~066	)		18(4,~~422~~685	)
Net income / (loss) attributable to the company		35(79,~~769~~456	)		~~(848~~60,~~735~~184	)
Net income / (loss) from operations per share of common stock, basic	$	(0.4697	)	$	~~(11~~0.7183	)
Net income / (loss) from operations per share of common stock, diluted	$	(0.4497	)	$	~~(11~~0.7182	)
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments		1023,~~945~~406			~~(215~~22,~~010~~524	)
Comprehensive income / (loss) attributable to the company	$	46(56,~~714~~050	)	$	(182,~~063,745~~708	)

Net Sales

Net sales represent total sales net of all customer rebates, excise tax on production and imports, and value added tax. Total net sales ~~decreased~~increased by approximately 8.7.0%, or $1810.32 million, from $~~209~~146.60 million for the three months ended ~~September~~March 3031, ~~2011~~2012 to $~~191~~156.32 million for the three months ended ~~September~~March 3031, ~~2012~~2013. ~~This~~The ~~decrease~~increase ~~was~~is ~~driven~~primarily bydue ~~the~~to ~~impact~~$23.3 ofmillion ~~foreign~~increase ~~exchange~~resulted ~~translation~~substantially from improved price and volume mix in Russia and Poland, as well as an increase in Russian and Polish exports of $201.3 2 million. ~~partially~~This increase was offset by ~~higher~~ ~~local~~lower ~~currency~~domestic sales ~~revenue~~ of $214.07 million in all segments.

	Segment Net SalesThree months ended September 30,
	Segment Net SalesThree months ended March 31,
	2012		2011
	2013		2012
Segment
Poland	$	5651,~~471~~310	$	5847,~~234~~135
Russia		~~128~~100,~~895~~616		~~143~~93,~~623~~426
Hungary		54,~~965~~321		75,~~781~~428
Total Net Sales	$	~~191~~156,~~331~~247	$	~~209~~145,~~638~~989

Sales for Poland ~~decreased~~increased by $14.72 million from $5847.21 million for the three months ended ~~September~~ March 3031, 2012 ~~2011~~ to $5651.53 million for the three months ended ~~September~~March 3031, ~~2012~~2013. This ~~decrease~~increase was mainly a combination of a volume ~~decrease~~increase of domestic ~~vodkas~~sales of ~~2.5~~3%, ~~resulting~~domestic ~~in a net~~ sales value increase of $41.82 million, ~~offset~~stronger ~~by weaker~~ Polish zloty against the U.S. dollar which accounted for approximately $61.52 million of sales in U.S. dollar terms. Improved price mix contributed $1.5 million of growth and $0.3 million export sales. The Company continued to see strong demand for its Żubrówka and Żubrówka Biała as well as higher margin flavored vodkas including Soplica.

~~Sales~~24 for Russia decreased by $14.7 million from $143.6 million for the three months ended September 30, 2011 to $128.9 million for the three months ended September 30, 2012. The sales decline in Russia resulted from the impact of foreign exchange translation of $12.7 million, higher value of export sales of $4.9 million due to the increased lower value sales to the Ukraine partially offset by domestic sales value decrease of $6.9 million. Domestic vodka sales volumes were flat for the quarter however improved pricing and lower trade spend resulted in sales value growth.

Sales for ~~Hungary~~Russia ~~decreased~~increased by $17.82 million from $793.84 million for the three months ended ~~September~~March 3031, ~~2011~~2012 to $6100.06 million for the three months ended ~~September~~March 3031, ~~2012,~~2013. ~~which~~The ~~resulted~~increase inis aprimarily due to sales increase of $021.76 million ~~decrease~~ in ~~volumes~~Russia onresulted ~~local~~from ~~currency~~the ~~terms,~~price asmix ~~well~~changes asand aincrease ~~weaker~~of ~~Hungarian~~$0.9 ~~forint~~million ~~against~~in ~~the~~export Usales.S. ~~dollar~~Those increases ~~which~~were ~~accounted for~~offset ~~approximately~~by lower domestic sales volume of $114.16 million ofand ~~sales~~negative inFX ~~U.S.~~impact ~~dollar~~of ~~terms~~$0.7 million.

Sales for Hungary decreased by $1.1 million from $5.4 million for the three months ended March 31, 2012 to $4.3 million for the three months ended March 31, 2013, which resulted mainly due to decrease in volumes on local currency terms.

Gross Profit

Total gross profit increased by approximately 423.92%, or $312.8 million, to $8267.09 million for the three months ended ~~September~~ March 3031, ~~2012~~2013, from $7855.21 million for the three months ended ~~September~~March 3031, ~~2011~~2012. ~~Absolute~~Gross ~~gross margin increased, gross~~ profit margins as a percentage of net sales increased by 5.6 percentage points from 37.38% to 4243.94% for the three months ended ~~September~~March 3031, ~~2012~~2013 as compared to the three months ended ~~September~~March 3031, ~~2011~~2012. The improvement in gross margin ~~percentage~~ was driven by a number of factors including improved product and channel mix in Poland and price increases ~~taken~~ in Russia. Part of the improvement in pricing coming from the Russian market was offset by the year on year growth of spirit pricing which resulted in approximately $32.56 million of additional cost in the ~~third~~first quarter of ~~2012~~2013.

Operating Expenses

Operating expenses consist of selling, general and administrative, or “SG&A” expenses, advertising expenses, non-production depreciation and amortization, and provision for bad debts. Total operating expenses ~~decreased~~increased by $~~669~~15.46 million, from $~~736~~58.29 million for the three months ended ~~September~~March 3031, ~~2011~~2012 to $6674.85 million for the three months ended ~~September~~March 3031, ~~2012~~2013. This ~~decrease~~increase was primarily driven by ~~the impairment charges for Poland and Russia recorded as of September 30, 2011 of $674.5 million and $5.6 million decrease resulting from weaker local currencies against U.S. dollar, offset by~~ additional costs related to the ~~restatement~~restructuring of ~~financial statements~~the ofCompany ~~$8.9 million and redundancy payments~~ of $415.46 million.

The table below sets forth the items of operating expenses.

	Operating ExpensesThree Months EndedSeptember 30,
	Operating ExpensesThree Months Ended March 31,
	2012		2011
	2013		2012
SG&A	$	5967,~~800~~891	$	5250,~~596~~088
Marketing		4,~~756~~499		6,~~472~~490
Depreciation and amortization		2,~~279~~078		2,~~642~~356
Sub-total		66,835		61,710
Total operating expense	$	74,468	$	58,934
Impairment charge	$	0	$	674,515
Total operating expense	$	66,835	$	736,225

SG&A consists of salaries, warehousing and transportation costs, administrative expenses and bad debt expense. SG&A expenses increased by $717.28 million, from $5250.61 million for the three months ended ~~September~~March 3031, ~~2011~~2012 to $5967.89 million for the three months ended ~~September~~March 3031, ~~2012~~2013. The increase in SG&A expenses results primarily from additional legal costs incurred in the three months ended ~~September~~March 3031, ~~2012~~2013 related to ~~the~~restructuring ~~restatement of financial statements of $8~~process.9 ~~million, $4.4 million of redundancy costs, offset by cost savings achieved on integration of businesses in Russia and Poland and effect of weaker local currencies against U.S. dollar.~~

Marketing expenses decreased by $12.70 million, from $6.5 million for the three months ended ~~September 30~~March 31, ~~2011~~2012 to $4.85 million for the three months ended ~~September 30~~March 31, ~~2012~~2013. Decrease ~~mainly~~ was asmainly a result of ~~postponed~~lower trade marketing ~~activities to fourth quarter, 2012~~ in Russia.

Depreciation and amortization decreased by $0.3 million, from $2.64 million for the three months ended ~~September~~March 3031, ~~2011~~2012 to $2.~~3 million~~1 million for the three months ended ~~September~~March 3031, ~~2012~~2013.

Operating Income

Total operating income increased by $673.2 million, from $658.0 million loss for the three months ended September 30, 2011 to $15.2 million profit for the three months ended September 30, 2012, primarily driven by impairment charge for the three months ended September 30, 2011 in Russia and Poland and offset by higher spirit costs in the Russian market. The table below summarizes the segmental split of operating profit.

	Operating Income/(Loss)Three months ended September30,
	2012			2011
Segment
Poland before fair value adjustments	$	11,905		$	8,120
Impairment charge		0			(213,687	)
Poland after fair value adjustments		11,905			(205,567	)
Russia before fair value adjustments		19,634			9,167
Impairment charge		0			(460,828	)
Russia after fair value adjustments		19,634			(451,661	)
Hungary		987			1,446
Corporate Overhead
General corporate overhead		(17,017	)		(1,570	)
Option Expense		(330	)		(662	)
Total Operating Profit/(Loss)	$	15,179		$	(658,014	)

Underlying operating income in Poland excluding fair value adjustments increased by approximately 46.9%, or $3.8 million, from $8.1 million for the three months ended September 30, 2011 to $11.9 million for the three months ended September 30, 2012. The operating income in Russia before fair value adjustment increased by $10.4 million from $9.2 million the three months ended September 30, 2011 to $19.6 million for the three months ended September 30, 2012. The changes in operating income in both of these segments were driven by all of the factors described above.

General corporate overheads increased by $15.4 million from $1.6 million for the three months ended September 30, 2011 to $17.0 million for the three months ended September 30, 2012. The increase mainly was driven by $9.8 million of additional costs related to restatement and $4.4 million of redundancy costs.

Non Operating Income and Expenses

Total interest expense decreased by approximately 6.8%, or $1.9 million, from $28.1 million for the three months ended September 30, 2011 to $26.2 million for the three months ended September 30, 2012. This decrease was primarily driven by the euro exchange rate as compared to the Polish zloty.

The Company recognized $58.5 million of non-cash unrealized foreign exchange rate gain in the three months ended September 30, 2012, primarily related to the impact of movements in exchange rates on our U.S. dollar and euro denominated liabilities by $62.1 million, as compared to $170.3 million of loss in the three months ended September 30, 2011. During three months ended September 30, 2012, the Company recognized $0.6 million gain on debt extinguishment related to repurchased part of Convertible Senior Notes due 2013.

Total other non-operating expenses decreased by $4.8 million, from a loss of $10.7 million for the three months ended September 30, 2011 to a loss of $5.9 million for the three months ended September 30, 2012.

	Three months ended September 30,
	2012			2011
Write-off assets held for sale		0			(7,355	)
Factoring costs and bank fees		(2,781	)		(1,651	)
Bank waiver costs		(1,867	)		0
Other gains / (losses)		(1,235	)		(1,677	)
Total other non operating income / (expense), net	$	(5,883	)	$	(10,683	)

Income Tax

Our effective tax rate for the three months ended September 30, 2012 was 13.9% as compared to an average blended statutory rate of 21%. The difference between the statutory and effective tax rates was due primarily to permanent tax differences related to valuation allowances recorded against tax loss carry forwards that the Company believes will not be utilized in the future.

Nine months ended September 30, 2012 compared to nine months ended September 30, 2011

A summary of the Company’s operating performance (expressed in thousands except per share amounts) is presented below.

	Nine months endedSeptember 30,
	2012			2011
Sales	$	1,125,619		$	1,176,861
Excise taxes		(601,098	)		(630,513	)
Net sales		524,521			546,348
Cost of goods sold		312,055			340,820
Gross profit		212,466			205,528
Selling, general and administrative expenses		187,909			180,836
Gain on re-measurement of previously held equity interests		0			(7,898	)
Impairment charge		0			674,515
Operating income / (loss)		24,557			(641,925	)
Non operating income / (expense), net
Interest income / (expense), net		(78,139	)		(83,336	)
Other financial income / (expense), net		80,648			(120,807	)
Other non operating income / (expense), net		(10,982	)		(14,320	)
Income / (loss) before income taxes and equity in net losses from unconsolidated investments		16,084			(860,388	)
Income tax benefit / (expense)		(7,820	)		14,232
Equity in net losses of affiliates		0			(7,946	)
Net income / (loss) attributable to the company	$	8,264		$	(854,102	)
Net income / (loss) from operations per share of common stock, basic	$	0.11		$	(11.85	)
Net income / (loss) from operations per share of common stock, diluted	$	0.10		$	(11.85	)
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments		(6,724	)		(50,410	)
Comprehensive income / (loss) attributable to the company	$	1,540		$	(904,512	)

Net Sales

Net sales represent total sales net of all customer rebates, excise tax on production and imports and value added tax. Total net sales decreased by approximately 4.0%, or $21.8 million, from $546.3 million for the nine months ended September 30, 2011 to $524.5 million for the nine months ended September 30, 2012.

The decrease was driven by the impact of foreign exchange translation of $53.4 million and lower local currency sales value of $26.1 million. Decrease was partially offset by the consolidation of Whitehall only for eight months in 2011 comparing to full three quarters in 2012 of $6.5 million, increase in export sales of $6.3 million and increase of $44.8 due to price mix. In Russia although sales volumes were lower, this was offset by improved pricing and lower trade marketing spend in the quarter.

Our business split by segment, which represents our primary geographic locations of operations, Poland, Russia and Hungary, is shown below:

	Segment Net Sales
	Nine months endedSeptember 30,
	2012		2011
Segment
Poland	$	159,778	$	163,463
Russia		347,675		362,393
Hungary		17,068		20,492
Total Net Sales	$	524,521	$	546,348

Sales for Poland decreased by $3.7 million from $163.5 million for the nine months ended September 30, 2011 to $159.8 million for the nine months ended September 30, 2012. This decrease was driven mainly by a weaker Polish zloty against the U.S. dollar which accounted for approximately $21.6 million of sales in U.S. dollar terms offset by higher volume sales of $18.0 million. In 2012, the Company continued to see strong demand for its Żubrówka Biała, as well as higher margin flavored vodkas including Soplica.

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

Sales for Hungary decreased by $3.4 million from $20.5 million for the nine months ended September 30, 2011 to $17.1 million for the nine months ended September 30, 2012 resulting primarily from weakening of the Hungarian forint against the U.S. dollar.

Gross Profit

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

Operating Expenses

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

The table below sets forth the items of operating expenses.

	Operating Expenses Nine Months Ended September 30,
	2012		2011
S,G&A	$	162,925	$	156,025
Marketing		18,063		16,360
Depreciation and amortization		6,921		8,451
Sub-Total		187,909		180,836
Impairment charge		0		674,515
Fair value adjustments		0		(7,898	)
Total operating expense	$	187,909	$	847,453

S,G&A consists of salaries, warehousing and transportation costs, administrative expenses and bad debt expense. S,G&A expenses increased by $6.9 million, from $156.0 million for the nine months ended September 30, 2011 to $162.9 million for the nine months ended September 30, 2012. The increase in SG&A is primarily due to the inclusion of full three quarters of the Whitehall Group in 2012 of $4.0 million, redundancy costs of $7.5 million, $13.5 million of additional legal costs incurred in the third quarter 2012 related to restatement of financial statements for 2010 and 2011 and additional bad debt provision in Russia of $3.2 million offset by impact of weaker local currencies against U.S. dollar.

Marketing expenses increased by $1.7 million, from $16.4 million for the nine months ended September 30, 2011 to $18.1 million for the nine months ended September 30, 2012 mainly due to higher marketing spending in Russia and Ukraine.

Depreciation and amortization decreased by $1.6 million, from $8.5 million for the nine months ended September 30, 2011 to $6.9 million for the nine months ended September 30, 2012.

Operating Income

Total operating ~~income~~loss increased by ~~approximately 103~~$2.8%, ~~or $666.5~~ million, from $~~641~~3.98 million loss for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 to $246.6 million ~~income~~loss for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013, ~~which is~~ primarily driven by ~~impairment~~by ~~charge~~restructuring costs incurred in the first quarter of ~~$674.5~~2013, ~~million~~offset ~~charged~~by higher operating income in ~~2011~~Russia. The table below summarizes the segmental split of operating profit.

	Operating Income Nine months ended September30,
	Operating Income/(Loss)Three months ended March 31,
	2012			2011
	2013			2012
Segment
Poland before fair value adjustments	$	27,497		$	21,155
Poland	$	6,970		$	6,480
Gain on remeasurement of previously held equity interests		0			7,898
Russia		2,600			(8,463	)
Impairment charge		0			(213,687	)
Hungary		278			720
Poland after fair value adjustments		27,497			(184,634	)
Corporate overhead
Russia before fair value adjustments		20,221			6,011
General corporate overhead		(16,150	)		(1,692	)
Impairment charge		0			(460,828	)
Option Expense		(293	)		(864	)
Russia after fair value adjustments		20,221			(454,817	)
Total operating loss	$	(6,595	)	$	(3,819	)
Hungary		2,469			3,387
Corporate Overhead
General corporate overhead		(23,711	)		(3,862	)
Option Expense		(1,919	)		(1,999	)
Total Operating Income / (Loss)	$	24,557		$	(641,925	)

Underlying operating income in Poland ~~excluding fair value adjustments~~ increased by approximately 297.7%, or $60.35 million, from $216.25 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 to $277.50 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013. The operating income in Russia ~~excluding fair value adjustments~~ increased by $1411.2 1 million from $68.05 million loss for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 to $~~20.~~2.6 million income for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013. The changes in operating income in both of these segments were driven by all of the factors described above.

General corporate overheads increased by $1914.85 million, from $31.97 million for the ~~nine~~three months ended ~~September 30~~March 31, ~~2011~~2012 to $2316.72 million for the ~~nine~~three months ended ~~September 30~~March 31, ~~2012~~2013. ~~This~~The increase mainly was driven by ~~$12.6 million of~~ additional costs related to ~~restatement~~restructuring and ~~$4.4 million of~~ redundancy ~~costs~~.

Non Operating Income and Expenses

Total interest expense ~~decreased~~increased by approximately 6.28%, or $51.28 million, from $8326.3 million for the ~~nine~~three months ended ~~September~~March 3031, 2012 ~~2011~~ to $7828.1 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~ 2013. This ~~decrease~~increase iswas ~~mainly~~primarily adriven ~~result~~by depreciation of ~~the weaker~~ euro asversus ~~compared~~Polish ~~to the U~~zloty.~~S. dollar,~~ ~~as a significant portion of the long-term borrowings are denominated in euro’s.~~

The Company recognized $8037.6 million of non-cash unrealized foreign exchange rate ~~gains~~loss in the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013, primarily related to the impact of movements in exchange rates on our U.S. dollar and euro denominated liabilities, as compared to $~~120~~97.8 6 million of gain ~~expense~~ in the ~~nine~~three months ended ~~September~~March 3031, ~~2011. These gains resulted mainly from the appreciation of the Polish zloty and Russian ruble against the U.S. dollar and euro. During the nine months ended September 30,~~ 2012~~, the Company recognized $1~~.9 ~~million gain on debt extinguishment related to repurchased part of Convertible Senior Notes due 2013.~~

Total other non -operating expenses ~~decreased~~increased by $31.35 million, from a loss of $142.36 million for the ~~nine~~three months ended ~~September~~March 3031, 2012 ~~2011~~ to a loss of $114.01 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013. ~~This decrease~~Expenses isfor ~~mainly~~the afirst ~~result~~quarter of ~~write-off~~2013 consists of ~~assets held for sale in 2011, which represent~~ $71.40 million of ~~the~~losses ~~decrease. The decrease was offset by higher costs~~ related to ~~factoring~~the ofcost ~~receivables in 2012, which represent $6.5 million~~ of ~~expense for~~factoring ~~the~~in ~~nine~~Poland ~~months~~and ~~ended~~bank ~~September 30,~~guarantees ~~2012~~in ~~comparing~~Russia toof $32.76 million. ~~for the nine months ended September 30, 2011~~

	Nine months ended September 30,
	Three months ended March 31,
	2012			2011
	2013			2012
Write-off assets held for sale		0			(7,355	)
Factoring costs and bank fees		(3,585	)		(2,262	)
Factoring costs and bank fees		(6,501	)		(3,662	)
Other gains / (losses)		(523	)		(336	)
Bank waiver costs		(1,867	)		0
Total other non operating income / (expense), net	$	(4,108	)	$	(2,598	)
Other gains / (losses)		(2,614	)		(3,303	)
Total other non operating income / (expense), net	$	(10,982	)	$	(14,320	)

Income Tax

~~Our~~Effective ~~effective~~ tax rate for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013 was 48(4.60%). asThe ~~compared~~difference tobetween anthe ~~average~~effective ~~blended~~tax ~~statutory~~ rate ofand ~~21%.~~the ~~The~~statutory ~~difference~~rates ~~between~~(20% ~~the~~in ~~statutory~~Russia, ~~and~~19% ~~effective~~in ~~tax~~Poland, ~~rates~~Ukraine ~~was~~and Hungary and ~~due~~35% ~~primarily~~in tothe ~~permanent~~United ~~tax~~States) ~~differences~~was ~~related~~primarily due to valuation ~~allowances~~allowance recorded against tax loss carry forwards that the Company believes will not be ~~utilized~~utilised in the future.

Equity in Net Earnings

Equity in net losses for the nine months ended September 30, 2011 include the Company’s proportional share of net income from its investment in the Moet Hennessey Russia Joint Venture for the period from January 1, 2011 to March 30, 2011 and Whitehall for the period from January 1, 2011 to February 7, 2011.

Statement of Liquidity and Capital Resources

During the ~~nine~~three months ended ~~September~~ March 3031, ~~2011~~2013, the Company’s primary sources of liquidity were cash flows generated from operations. The Company’s primary uses of cash were to fund its working capital requirements, service indebtedness and finance capital expenditures. The following table sets forth selected information concerning the Company’s condensed consolidated cash flow during the periods indicated.

	Nine months endedSeptember30, 2012			Nine months endedSeptember30, 2011
	Three months endedMarch 31, 2013			Three months endedMarch 31, 2012
Cash flow from operating activities	$	~~(68~~9,~~998~~827	)	$	4623,~~396~~766
Cash flow from investing activities	$	(72,~~636~~512	)	$	(471,~~713~~202	)
Cash flow from financing activities	$	81(46,~~141~~895	)	$	(118,~~827~~188	)

Management views and performs analysis of financial and non financial performance indicators of the business by segments that are split by countries. The extensive analysis of indicators such as sales value in local currencies, gross margin and operating expenses by segment is included in the MD&A section of this Form 10-Q.

Net cash flow from operating activities

Net cash flow from operating activities represents net cash from operations and interest. Overall cash flow from operating activities decreased from cash generation of $4623.48 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011~~2012 to cash ~~utilization~~generation of $699.08 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2012~~2013. The primary factors contributing to this lower cash generation in ~~2012~~2013 are due to the fact that in the first quarter of ~~2011~~2012, the ~~Company~~ Company entered into factoring arrangements in Poland for the first time which resulted in higher cash collection during this quarter. In 2011, the Polish operations received the cash inflow from the peak Q4 2010 sales as well as the cash from the factored receivables of the quarter, resulting in a one-off benefit in cash flow for the period. During the same period in 2012, the Polish operations only received the normal factored cash flow from the first quarter of 2012.

Overall working capital movements of ~~accounts~~operating ~~receivable,~~assets ~~inventory~~ and ~~accounts~~liabilities ~~payable~~ resulted in cash ~~outflow~~inflow of approximately $1546.6 9 million ~~of cash~~ during the three ~~nine~~ months ended ~~September~~March 3031, ~~2012~~2013. Days sales outstanding (“DSO”) as of ~~September~~March 3031, ~~2012~~2013 amounted to 3941 days as compared to 44 days as of ~~September~~March 3031, ~~2011~~2012. The number of days in inventory as of ~~September~~March 3031, ~~2012~~2013 amounted to ~~135~~ 53 days as compared to 8541 days as of ~~September~~March 3031, ~~2011~~2012. Increase in inventory days in 2013 resulted primarily from the general decline in Russian alcohol market. In addition, the ratio of our current assets to current liabilities, net of inventories, was 0.5824 as of ~~September~~March 3031, ~~2012~~2013 as compared to 10.54 60 as of ~~September 30~~March 31, ~~2011~~2012. Change in quick ratio was due to movement of obligations under SSN to current liabilities.

Net cash flow used in investing activities

Net cash flows used in investing activities represent net cash used to acquire ~~subsidiaries and~~ fixed assets. Net cash outflow for the ~~nine~~ three months ended ~~September~~March 3031, ~~2012~~2013 was $72.65 million as compared to $471.72 million outflow for the ~~nine~~three months ended ~~September 30~~March 31, ~~2011~~2012.

Net cash flow from financing activities

Net cash flow from financing activities represents cash used for servicing indebtedness, ~~borrowings~~ under credit facilities. Net cash ~~inflow~~outflow in financing activities was $8146.19 million for the ~~nine~~three months ended ~~September~~ March 3031, ~~2012~~2013 as compared to an outflow of $118.82 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2011.~~ ~~The primary inflow in the nine months ended September 30,~~ 2012 ~~was $100 million of cash invested by Roust Trading Limited and its affiliates offset by cash used for repayment of part of Convertible Senior Notes and loans by the Company~~.

Changes in working capital as recorded in Condensed Consolidated Balance Sheet

Inventories ~~increased~~decreased by $ 4222.4 6 million, from $~~117~~174.7 million as of December 31, ~~2011~~2012 to $~~160~~152.1 million as of ~~September 30~~March 31, ~~2012~~2013. This results from the normal course of the business as inventory is always build up in the ~~third~~second ~~quarter~~half of the year in order to prepare for coming season of the highest ~~sale~~sales during Christmas and Carnival.

Trade accounts payable decreased by $6645.15 million, from $~~144~~126.85 million as of December 31, 2012 ~~2011~~ to $7881.70 million as of ~~September 30~~March 31, ~~2012~~ 2013. The change results from the seasonality in the Company’s business. The Company has the highest turnover in the fourth quarter of the year. Inventory is build up during ~~the~~second ~~third~~half ~~quarter~~of the year and ~~sold~~sales starts in the fourth ~~and~~quarter. ~~resulting~~As a result, accounts payable are paid during following months. Additionally in December, 2011 one of the Russian subsidiaries of the Company realized a one-off distribution contract. Trade accounts payable resulting from this contract of 768.8 million Russian rubles (approx. $23.4 million) were settled after year end.

Accounts receivable, net of allowance for doubtful debts, decreased by $~~190~~150.15 million from $~~410~~352.91 million as of December 31, ~~2011~~2012 to $~~220~~201.86 million as of ~~September 30~~March 31, ~~2012~~2013. A decrease results from the fact that in the fourth quarter of the year the Company generates the highest turnover and significant part of payments is collected in the following ~~year~~quarter.

The Company’s Future Liquidity and Capital Resources

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As ~~discussed~~disclosed ~~further~~ in ~~Note 6, certain credit and factoring facilities are coming due in fourth quarter of 2012, which~~ the ~~Company~~Annual ~~expects to~~Report ~~renew.~~on ~~Furthermore,~~Form ~~our~~10-K ~~Convertible Senior Notes (~~for the ~~“Convertible~~year ~~Notes”)~~ended ~~are due on March~~December 1531, ~~2013.~~2012 ~~Our~~filed ~~current cash~~ on ~~hand~~June 18, ~~estimated~~2013 ~~cash~~with ~~from operations and available credit facilities will not be sufficient to make~~ the ~~repayment~~ ofU.S. ~~principal~~Securities ~~on the Convertible Notes~~ and, ~~unless~~Exchange Commission (the ~~transaction with Russian Standard Corporation~~SEC), ~~described in Note 3, is completed~~ the Company ~~may~~failed ~~default~~to onpay ~~them~~$257.9 ~~The~~million ~~Company’s~~principal ~~cash~~due ~~flow~~on ~~forecasts include~~ the ~~assumption~~2013 ~~that certain~~Convertible ~~credit~~Senior ~~and~~Notes ~~factoring~~(2013 ~~facilities that are coming due in fourth quarter of 2012 will be renewed to manage working capital needs~~Notes). ~~Moreover,~~Under the ~~Company~~terms ~~had~~of ~~a net loss and significant impairment charges in 2011 and current liabilities exceed~~the ~~current~~2013 ~~assets~~Notes ~~at September 30~~Indenture, ~~2012.~~the ~~These~~failure ~~conditions~~to ~~raise~~pay ~~substantial~~principal ~~doubt~~when ~~about~~due ~~the~~constituted ~~Company’s~~an ~~ability~~Event toof ~~continue as a going concern~~Default.

~~The~~27 Russian Standard transaction is subject to certain risks, including shareholder approval which may not be obtained. The Company’s board of directors, along with senior management, continue to review the timing of the Company’s 2012 Annual Meeting of Stockholders (the “AGM”) and expects to hold the AGM as soon as practicable. We believe that if the transaction is completed as scheduled, the Convertible Notes will be repaid by their maturity date which would substantially reduce doubts about the Company’s ability to continue as a going concern. Under the terms of the Indenture for our Senior Secured Notes due 2016, we expect that any indebtedness we incur in exchange for, or to redeem or refinance, all or a portion of the Convertible Notes will be required to be incurred as permitted refinancing indebtedness (a term defined in the Indenture); as a result, the terms of the indenture may limit our ability to enter into agreements that contain limitations on dividends (and certain payments having similar effects) payable to the Company (or its subsidiaries) by its subsidiaries. Any failure to pay the Convertible Notes would also be an event of default under our Senior Secured Notes due 2016 and the terms of our other indebtedness. Such events would jeopardize our ability to continue as a going concern. Notwithstanding the foregoing, we believe that cash on hand, cash from operations and available credit facilities will be sufficient to fund our anticipated cash requirements for working capital purposes and normal capital expenditures, and that we will remain in compliance with the financial covenants contained in our debt agreements, for at least the next twelve months. The Company’s cash flow forecasts used in making this determination include the assumption that certain credit and factoring facilities that are coming due in forth quarter of 2012 will be renewed to manage the Company’s working capital needs.

ForTable additional information, see also “Risk Factors—Risks Relating to Our Indebtedness”—included in Item 8 of our Annual Report on Form 10-K/A filed with the SEC on October 5, 2012. Contents

Under Section 6.1(5)(a) of the 2016 Notes Indenture, the failure to pay principal when due on the 2013 Notes constituted an Event of Default under 2016 Senior Secured Notes (2016 Notes) Indenture. Under Section 6.2 of the 2016 Notes Indenture, if an Event of Default occurs and is continuing, then the Trustee or holders of not less than 25 % of the aggregate principal amount of the outstanding 2016 Notes may, and the Trustee upon request of such holders shall, declare the principal plus any accrued and unpaid interest on the 2016 Notes to be immediately due and payable.

The failure to pay principal when due on the 2013 Notes constituted also Event of default under the $50 million RTL Credit Facility.

On March 18, 2013, the Company failed to pay $20.0 million due under the RTL Notes.

On April 7, 2013, the Company and its subsidiaries, CEDC Finance Corporation International Inc. and CEDC Finance Corporation LLC (the Debtors) filed voluntary petitions for reorganization under Chapter 11 (the Chapter 11 Cases) of the United States Code in the Bankruptcy Court in Delaware in order to effectuate the Debtors’ prepackaged Chapter 11 Plan of Reorganization.

On May 13, 2013 the Company received approval of the Plan of Reorganization (the Plan) from the U.S. Bankruptcy Court for the District of Delaware.

Following the effectiveness of the Plan of Reorganization on June 5, 2013, all amounts due by the Company under the CSN, the SSN, the RTL Notes and also $50.0 million of secured credit facility provided by RTL to CEDC pursuant to facility agreement dated March 1, 2013 (the “RTL Credit Facility”) were cancelled and are no longer due.

The Company believes that this restructuring process will improve its financial strength and flexibility and enable it to focus on maximizing the value of its strong brands and market position. In our opinion, doubts about the Company’s ability to continue as a going concern were substantially reduced.

The Chapter 11 Cases and the Plan of Reorganization did not involve the Company’s operating subsidiaries in Poland, Russia, Ukraine and Hungary and have no impact on their business operations. Operations in these countries are independently funded and continued to generate revenue during this process. All obligations to employees, vendors, credit support providers and government authorities are honored in the ordinary course of without interruption.

Financing Arrangements

Bank Loans and Overdraft Facilities

• The loan agreement with Alfa -Bank, dated July 22, 2008, matures on October 18, 2014. The credit limit under this agreement is €20.0 million ($25.96 million). This loan has financial covenants that need to be met. The loan as of ~~September~~March 3031, ~~2012~~2013 consists of ~~seven~~sixteen open tranches released between ~~March~~October 3012, 2012 and ~~September~~February 2628, ~~2012~~2013, and isare repayable between ~~September~~April 3012, ~~2012~~2013 and ~~December~~October 28, ~~2012~~2013. As of ~~September~~March 3031, ~~2012~~2013, the Company had outstanding liability of €1719.0 million ($2224.04 million) from this term loan;. Further repayments were made after the balance sheet date. Only a quarter of the limit is currently utilized.

• The loan agreement with ~~Zenith~~ Bank Zenit, dated ~~March 29, 2011, matured on June 6, 2012. The original loan was repaid at maturity date. A new loan agreement was signed on~~ August 16, 2012, ~~with~~matures ~~maturity~~on April 25, 2014. The credit limit under this agreement is €10.0 million ($12.98 million). This loans has financial covenants that need to be met. The loan ~~was~~as ~~released~~of inMarch ~~two~~31, 2013 consists of three open tranches onreleased ~~August~~between 16January 28, ~~2012~~2013 and ~~September~~March 1011, ~~2012~~2013, and are repayable between October 25, 2013 and March 7, 2014. As of ~~September~~March 3031, ~~2012~~2013, the Company had outstanding liability of €56.54 million ($78.12 million) from this term loan. Further repayments were made after the balance sheet date. Only a half of the limit is currently utilized.

AsThe ofaforementioned ~~September 30, 2012, the Company has outstanding term~~ loans ~~of 2,371.4 million Russian rubles ($76.7 million) from MKB Bank, Unicredit, Alfabank and JSC Grand Invest Bank, all~~ drawn by ~~Russian~~Whitehall ~~Alcohol,~~are asguaranteed ~~well~~by ~~as,~~Whitehall ancompanies. ~~overdraft~~The ~~facility~~loan ~~from~~agreement ~~Nomos~~with Alfa-Bank and anwith ~~overdraft~~Bank ~~facility~~Zenit ~~from~~are ~~Sberbank~~secured ~~drawn~~ by ~~Bravo~~the ~~Premium:~~Whitehall’s inventory.

~~• The loan agreement with MKB Bank, dated July 19, 2012, matures on February 25, 2013. This loan has no financial covenants that need to be met.~~ As of ~~September 30~~March 31, ~~2012~~2013, the Company ~~has~~had outstanding ~~liability~~term loans including accrued interest of 1,~~000~~251.01 million Russian rubles ($3240.3 million) from ~~this~~Grand ~~term~~Invest ~~loan;~~Bank, Sberbank and Russian Standard bank drawn by Russian Alcohol Group.

•

The loan agreement with Grand Invest Bank, dated November 25, 2011, matures on November 23, 2013. As of March 31, 2013, the Company has outstanding liability of 110 million Russian rubles ($3.5 million) from this term loan. This loan has turnover clauses that need to be met. It was fully repaid after the balance sheet date.

•

The second loan agreement with Grand Invest Bank, dated December 19, 2012, matures on November 22, 2013. This loan has turnover clauses that need to be met. As of March 31, 2013, the Company has outstanding liability of 150 million Russian rubles ($4.9 million) from this term loan. It was fully repaid after the balance sheet date.

•

The loan agreement with Sberbank dated November 23, 2012, matures on November 22, 2013. As of March 31, 2013 outstanding debt is 520 million Russian rubles (521.4 including accrued interest) ($16.8 million). This loan is secured by equipment, inventory and pledge on real estate. This loan has turnover clauses and financial covenants that need to be met.

•

The related party loan agreement with Russian Standard Bank dated February 27, 2013, matures on February 27, 2014. As of March 31, 2013 outstanding debt is 465 (469.7 including accrued interest) million Russian rubles ($15.1 million). This loan is secured by plegde of rights of claims. There are no financial covenants related to this loan.

Bank loans and overdraft facilities include $0.8 million of interest on RTL Credit Facility. Refer to Note 9 “Related Party Transactions”.

Following loan agreements were closed during the quarter ended March 31, 2013:

•

Loan agreements with Alfa Bank - total amount 724 million Russian rubles ($23.3 million) repaid together with all interest accrued;

•

Loan agreement with Moscow Credit Bank - 900 million Russian rubles ($29.0 million) repaid together with all interest accrued;

•

Overdraft facility with Nomos-Bank;

•

Overdraft facility with Sberbank.

Convertible Senior Notes (the “CSN”)

On March 7, 2008, the Company completed the issuance of $310 million aggregate principal amount of 3% Convertible Senior Notes due 2013 with an interest due semi-annually on the 15th of March and September, beginning on September 15, 2008. The CSN were to be convertible in certain circumstances into cash and, if applicable, shares of our common stock, based on an initial conversion rate of 14.7113 shares per $1,000 principal amount, subject to certain adjustments. The proceeds from the Convertible Senior Notes were used to fund the cash portions of the acquisition of Copecresto Enterprises Limited and Whitehall.

In the period from May 2012 to March 2013, the Company repurchased $52.1 million principal amount of the CSN in six tranches for $50.2 million.

The maturity period of the CSN was on March 15, 2013. On that day the Company failed to pay $257.9 million principal due on the CSN and accrued interest of $4.2 million related to these Notes.

Total obligations under the CSN are shown net of deferred finance costs, amortized over the life of the borrowings using the effective interest rate method as shown in the table below:


	March 31, 2013		December 31, 2012

Convertible Senior Notes (CSN)	$	257,858	$	257,858
Unamortized debt discount		0		(148	)
Debt discount related to ASC 470-20		0		(788	)


Total	$	257,858	$	256,922

The fair value of the CSN as of March 31, 2013 and as of December 31, 2012 was $58.0 million and $138.1 million, respectively.

The ASC Topic 470-20 requires the issuer of convertible debt instruments with cash settlement features to separately account for the liability ($290.3 million as of the date of the issuance of the CSN) and equity components ($19.7 million as of the date of the issuance of the CSN) of the instrument. The debt component was recognized at the present value of its cash flows discounted using a 4.5% discount rate, our borrowing rate at the date of the issuance of the CSN for a similar debt instrument without the conversion feature. The equity component, recorded as additional paid-in capital, was $12.8 million, which represents the difference between the proceeds from the issuance of the CSN and the fair value of the liability, net of deferred taxes of $6.9 million as of the date of the issuance of the CSN. ASC Topic 470-20 also requires an accretion of the resultant debt discount over the expected life of the CSN, which was March 7, 2008 to March 15, 2013. For the period ended March 31, 2013 and March 31, 2012 the additional pre-tax non-cash interest expense recognized in the consolidated statement of operations was $0.8 million and $1.1 million, respectively. Accumulated amortization related to the debt discount was $19.7 million and $18.9 million as of March 31, 2013 and December 31, 2012, respectively.

The CSN are governed by an Indenture (the “CSN Indenture”) dated March 7, 2008 between the Company and The Bank of New York, as Trustee, as amended and supplemented by the First Supplemental Indenture dated March 7, 2008. Under the terms of the CSN Indenture, the failure to pay principal when done constituted an Event of Default (as defined in the CSN Indenture). The Company addressed the default under CSN through the Plan of Reorganization as described in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on June 18, 2013. Effective June 5, 2013, the outstanding balance of the CSN was cancelled.

Senior Secured Notes (the “SSN”)

On December 2, 2009, the Company issued $380 million 9.125% Senior Secured Notes due 2016 and €380 million ($487.1 million) 8.875% Senior Secured Notes due 2016 (the “SSN”) in an unregistered offering to institutional investors. The Company used a portion of the net proceeds from the SSN to redeem the Company’s outstanding 2012 Notes, having an aggregate principal amount of €245.4 million ($314.6 million) on January 4, 2010. The remainder of the net proceeds from the SSN was used to (i) purchase Lion Capital’s remaining equity interest in Russian Alcohol by exercising the Lion Option and the Co-Investor Option, pursuant to the terms and conditions of the Lion Option Agreement and the Co-Investor Option Agreement, respectively (ii) repay all amounts outstanding under Russian Alcohol credit facilities; and (iii) repay certain other indebtedness.

On December 9, 2010, the Company issued an additional €50.0 million ($64.1 million) 8.875% Senior Secured Notes due 2016 (the “SSN”) in an unregistered offering to institutional investors. The Company used the net proceeds from the additional 2016 Notes to repay its term loans and overdraft facilities with Bank Handlowy w Warszawie S.A and Bank Zachodni WBK S.A.

As of March 31, 2013 and December 31, 2012 the Company had accrued interest of $27.9 million and $7.1 million respectively, related to the Senior Secured Notes due 2016, with the next coupon due for payment on June 1, 2013 that was not paid.

The failure to pay principal when due on the CSN constitutes an Event of Default under the SSN Indenture. Under the SSN Indenture, if an Event of Default occurs and is continuing, then the Trustee or holders of not less than 25% of the aggregate principal amount of the outstanding 9.125% Senior Secured Notes due 2016 and 8.875% Senior Secured Notes due 2016 (together, the “SSN”) could declare the principal plus any accrued and unpaid interest on the SSN to be immediately due and payable. The default on CSN caused the SSN to become callable on demand. The Company addressed the default under 2016 Notes through the Plan of Reorganization as described in our Annual Report on Form 10-K for the year December 31, 2012 filed with the SEC on June 18, 2013. Effective June 5, 2013, all SSN were cancelled.

•Total ~~The~~obligations ~~loan~~under ~~agreement~~the ~~with~~SSN ~~Alfabank,~~are ~~dated~~shown ~~July~~net ~~25,~~of ~~2012,~~deferred ~~matures~~finance ~~on December 31~~costs, ~~2012.~~amortized ~~This~~over ~~loan~~the life ~~has no financial covenants that need to be met. As~~ of ~~September~~the ~~30,~~borrowings ~~2012,~~using the ~~Company~~effective ~~has~~interest ~~outstanding~~rate ~~liability~~method ofas ~~560.0~~shown ~~million~~in ~~Russian~~the ~~rubles~~table ~~($18.1~~below: ~~million) from this term loan;~~

• The loan agreement with Unicredit, dated May 24, 2011, matures on November 25, 2012. This loan has no financial covenants and is secured by inventory of up to 720 million Russian rubles ($23.3 million) and guarantees given by companies of Russian Alcohol. As of September 30, 2012, the Company has outstanding liability of 600.0 million Russian rubles ($19.4 million) from this term loan;


	March 31, 2013			December 31, 2012

Senior Secured Notes due 2016 (SSN)	$	931,174		$	947,127
Unamortized debt discount		(2,516	)		(2,628	)


Total	$	928,658		$	944,499

• The ~~loan~~fair ~~agreement~~value ~~with~~of ~~JSC~~the ~~Grand~~SSN ~~Invest~~as ~~Bank,~~of ~~dated November 25~~March 31, ~~2011,~~2013 ~~matures~~and onas ~~November 23, 2012. This loan has no financial covenants that need to be met. As~~ of ~~September 30~~December 31, 2012, ~~the Company has outstanding liability of 211~~was $729.43 million ~~Russian~~and ~~rubles (~~$6590.89 million), ~~from~~respectively. ~~this term loan;~~

•Debt ~~The~~Security ~~overdraft agreement with Nomos-Bank, dated July 6, 2012, matures on December 29, 2012. The credit limit under this agreement is 500.0 million Russian rubles~~ (~~$16.2 million). This loan has no collateral. As of September 30, 2012,~~ the ~~loan~~“RTL ~~was utilized in the amount of 173.4 million Russian rubles ($5.6 million~~Notes”).

•On ~~The~~May 7, ~~overdraft~~2012, ~~agreement~~the ~~with~~Company ~~Sberbank~~issued $70 million principal amount of senior notes due March 18, ~~dated~~2013, ~~February~~bearing 6an interest rate of 3.00% to Russian Standard Bank. Pursuant to the Amended SPA, ~~2012~~upon approval of the Company’s shareholders, ~~matures~~and onafter ~~February~~the 5satisfaction of certain other conditions including the receipt of certain Polish regulatory waivers, ~~2013.~~Roust Trading ~~The~~was ~~credit~~to ~~limit~~purchase ~~under~~such ~~this~~number ~~agreement~~of isshares ~~60.0~~of ~~million~~common ~~Russian~~stock ~~rubles~~at (a purchase price of $15.925 ~~million)~~per share sufficient to repay the then-outstanding principal amount of the Debt Security, totaling approximately 13.3 million ~~This~~shares ~~loan~~of iscommon ~~secured~~stock byand sell ~~fixed~~to ~~assets~~CEDC the entire principal amount of the Debt Security. AsIn addition, interest payable on the Debt Security prior to the Second Closing was, at the option of ~~September~~Roust 30Trading and after the Second Closing, ~~2012~~to be effectively paid in shares of common stock at a price $3.44 per share of common stock. Pursuant to the Amended SPA, the ~~loan~~final maturity date for the Debt Security was ~~fully~~to ~~utilized~~be extended to July 31, 2016.

~~Convertible~~On ~~Senior~~March 1, ~~Notes~~2013, ~~due~~with effect from February 25, 2013 the Company and Roust Trading Ltd. (“Roust Trading”) have entered into a credit facility with an aggregate principal amount of $50 million (the “RTL Credit Facility”). Pursuant to the terms of the RTL Credit Facility, $50 million aggregate principal amount of the RTL Notes was converted into a new term loan from Roust Trading to the Company in an aggregate principal amount of $50 million.

OnAs of March 731, ~~2008, the Company completed the issuance of $310 million aggregate principal amount of 3% Convertible Senior Notes due~~ 2013 (the ~~“Convertible~~remaining ~~Notes”).~~balance ~~Interest is due semi-annually on the 15th~~ of ~~March~~RTL ~~and September, beginning on September 15, 2008. The Convertible~~ Notes ~~are convertible in certain circumstances into cash and, if applicable, shares~~ of ~~our common stock, based on an initial conversion rate of 14.7113 shares per~~ $~~1,000~~20 ~~principal~~million ~~amount,~~was ~~subject~~not topaid ~~certain adjustments. Upon conversion of the notes, the Company will deliver cash up to the aggregate principal amount of the notes to be converted~~ and, atwas ~~the election of the Company, cash and/or shares of common stock in respect to the remainder, if any, of the conversion obligation~~overdue. The ~~proceeds~~Company ~~from~~addressed the ~~Convertible~~unsettled ~~Notes~~RTL ~~were used to fund the cash portions of the acquisitions of Copecresto Enterprises Limited and Whitehall. The indenture governing the Convertible~~ Notes ~~also~~through ~~contains a cross-acceleration covenant, which would apply in~~ the ~~event~~Plan ~~that we do not repay when due any indebtedness which equals or exceeds $30 million. In addition, in the event~~ of aReorganization ~~fundamental change (~~as ~~that~~described ~~term is used~~ in our ~~indenture),~~Annual weReport ~~would~~on beForm ~~required~~10-K tofor ~~offer to repay~~ the ~~outstanding~~ ~~indebtedness~~year ~~under~~ended ~~the~~December 31, ~~Convertible~~2012 ~~Notes~~filed inwith ~~cash at a price equal to 100% of~~ the ~~aggregate~~SEC ~~principal~~on ~~amount~~June 18, ~~thereof~~2013.

InTotal ~~May~~obligations ~~2012, the~~under ~~Company~~Debt ~~repurchased~~Security ~~$36.6~~amortized ~~million~~over ~~principal~~the ~~amount~~life of ~~Convertible~~the ~~Notes~~borrowings inusing ~~four~~the ~~tranches~~effective ~~for~~interest ~~$35.3~~rate ~~million.~~method ~~Additionally,~~as inare ~~July~~shown ~~and~~in ~~September 2012,~~ the ~~Company~~table ~~repurchased~~below: ~~$15.0 million and $0.5 million principal amount of Convertible Notes for $14.4 million and $0.46 million, respectively.~~

Senior Secured Notes due 2016


	March 31, 2013		December 31, 2012

Debt Security (RTL Notes)	$	20,000	$	70,000


Total	$	20,000	$	70,000

On December 2, 2009, the Company issued $380 million 9.125% Senior Secured Notes due 2016 and €380 million ($491.9 million) 8.875% Senior Secured Notes due 2016 (the “2016 Notes”) in an unregistered offering to institutional investors. The ~~Company~~fair ~~used~~value ~~a portion~~ of the ~~net~~Debt ~~proceeds~~Security ~~from~~as ~~the 2016 Notes to redeem the Company’s outstanding 2012 Notes, having an aggregate principal amount~~ of ~~€245.4 million~~March ~~($317.7~~31, ~~million)~~2013 onand ~~January~~December 431, ~~2010.~~2012 ~~The remainder of the net proceeds from the 2016 Notes~~ was ~~used~~$21.1 ~~to (i) purchase Lion Capital’s remaining equity interest in Russian Alcohol~~million ~~by exercising the Lion Option~~ and ~~the~~$70.4 ~~Co-Investor Option~~million, ~~pursuant to the terms and conditions of the Lion Option Agreement and the Co-Investor Option Agreement,~~ respectively ~~(ii) repay all amounts outstanding under Russian Alcohol credit facilities; and (iii) repay certain other indebtedness~~.

OnAs ~~December~~of March 931, ~~2010~~2013, the Company ~~issued~~had anaccrued ~~additional €50.0~~interest ~~million (~~of $641.71 million), ~~8.875%~~related ~~Senior Secured Notes due 2016 (the “2016 Notes”) in an unregistered offering~~ to ~~institutional investors. The Company used~~ the Debt ~~net~~Security, ~~proceeds~~with ~~from~~ the ~~additional~~coupon ~~2016~~due ~~Notes~~for topayment ~~repay~~on ~~its~~March 18, ~~term loans~~2013, ~~and~~which ~~overdraft~~was ~~facilities~~not ~~with Bank Handlowy w Warszawie S~~settled.A ~~and Bank Zachodni WBK S.A.~~

~~The~~Total ~~2016~~accumulated ~~Notes are guaranteed on~~unamortized adebt ~~senior~~discount ~~basis~~related byto ~~certain of~~ the Company’s ~~subsidiaries.~~debt Wewas ~~are~~$12.7 million ~~required~~and to$13.6 ~~ensure~~million ~~that subsidiaries representing at least 85% of our consolidated EBITDA,~~ as ~~defined in the indenture, guarantee the notes. The notes are secured, directly or indirectly, by a variety~~ of ~~our and our subsidiary’s assets~~March 31, ~~including~~2013 ~~shares of the issuer of the notes~~ and ~~subsidiaries in Poland~~December 31, ~~Cyprus~~2012, ~~Russia~~respectively. ~~and~~The ~~Luxembourg,~~Debt ~~certain~~Security ~~intercompany~~was ~~loans~~cancelled ~~made~~ by the ~~issuer~~effectiveness of the ~~notes~~Plan ~~and our Russian finance company in connection with the issuance~~ of ~~the notes, trademarks related to the Soplica brand registered in Poland, European Union trademarks for the Parliament brand registered in Germany, and bank accounts over $5~~Reorganization.~~0 million. We have~~ also provided mortgages over our Polmos and Bols production plants and the Russian Alcohol Siberian and Topaz Distilleries. The indenture governing the 2016 Notes contains certain restrictive covenants, including covenants limiting the Company’s ability to: incur or guarantee additional debt; make certain restricted payments; transfer or sell assets; enter into transactions with affiliates; create certain liens; create restrictions on the ability of restricted subsidiaries to pay dividends or other payments; issue guarantees of indebtedness

Conversion of RTL Notes

The RTL Credit Facility was cancelled by the effectiveness of the Plan of Reorganization.

by restricted subsidiaries; enter into sale and leaseback transactions; merge, consolidate, amalgamate or combine with other entities; designate restricted subsidiaries as unrestricted subsidiaries; and engage in any business other than a permitted business. The indenture governing the 2016 Notes also contains a cross-acceleration covenant, which would apply in the event that we do not repay when due our Convertible Notes or any other indebtedness which equals or exceeds $30 million. In addition, in the event of a change of control (as that term is used in our indenture), we would be required to offer to repay the outstanding indebtedness under the 2016 Notes at a price equal to 101% of the aggregate principal amount thereof.

Senior notes due March 18, 2013 (“Debt Security”)

As described in Note 3 to the accompanying condensed consolidated financial statements, on May 7, 2012, the Company issued $70 million principal amount of senior notes due March 18, 2013, bearing an interest rate of 3.00% to JSC Russian Standard Bank, an affiliate of Russian Standard Corporation. Pursuant to the Amended SPA, as described in Note 3 to the accompanying condensed consolidated financial statements, upon approval of the Company’s shareholders, and after the satisfaction of certain other conditions including the receipt of certain Polish regulatory waivers, Roust Trading will purchase such number of shares of common stock at a purchase price of $5.25 per share sufficient to repay the then-outstanding principal amount of the Debt Security, totaling approximately 13.3 million shares of common stock and sell to the Company the entire principal amount of the Debt Security. In addition, interest payable on the Debt Security prior to the Second Closing may, at the option of Roust Trading and after the Second Closing, be effectively paid in shares of common stock at a price $3.44 per share of common stock. Pursuant to the Amended SPA, the final maturity date for the Debt Security will be extended to July 31, 2016.

Effects of Inflation and Foreign Currency Movements

Inflation in Poland is projected at 31.82% for ~~2012~~2013, compared to actual inflation of 43.67% in ~~2011~~2012. In Russia, Hungary and Ukraine, inflation for ~~2012~~2013 is projected at 56.25%, 52.7% and 2.13% respectively, compared to actual inflation of 65.1%, 45.17% and 8.0.6% respectively, in ~~2011~~2012.

Substantially all of the Company’s operating cash flows and assets are denominated in Polish zloty, Russian ruble and Hungarian forint. This means that the Company is exposed to translation movements both on its balance sheet and statement of operations. The impact on working capital items is demonstrated on the cash flow statement as the movement in exchange on cash and cash equivalents. The impact on the statement of operations is by the movement of the average exchange rate used to restate the statement of operations from Polish zloty, Russian ruble and Hungarian forint to U.S. dollars. The amounts shown as exchange rate gains or losses on the face of the statements of operations relate only to realized gains or losses on transactions that are not denominated in Polish zloty, Russian ruble or Hungarian forint. Table below presents the exchange rates used for translation of our balance sheet and statement of operations balances as of and for the quarter ended ~~September~~March 3031, ~~2012~~2013:

	Balance sheet rateas ofSeptember 30,2012		Average rate for thethree months endedSeptember 30, 2012
	Balance sheet rateas ofMarch 31, 2013		Average rate for thethree months endedMarch 31, 2013
PLN / US$		3.1780		3.3107
PLN / USD		3.2590		3.1469
RUR / US$		30.9144		31.9874
RUR / USD		31.0381		30.4048
HUF / US$		219.1724		226.7603
HUF / USD		237.8832		224.7786

The Company has borrowings including its Convertible Notes due 2013 and Senior Secured Notes due 2016 that are denominated in U.S. dollars and euros, which have been lent to its operations where the functional currency is the Polish zloty and Russian ruble. The effect of having debt denominated in currencies other than the Company’s functional currencies is to increase or decrease the value of the Company’s liabilities on that debt in terms of the Company’s functional currencies when those functional currencies depreciate or appreciate in value respectively. As a result of this, the Company is exposed to gains and losses on the re-measurement of these liabilities. The table below summarizes the pre-tax impact of a one percent movement in each of the exchange rate which could result in a significant impact in the results of the Company’s operations.

Exchange Rate	Value of notional amount		Pre-tax impact of a 1%movement in exchange rate
USD-Polish zloty	$	444 million	$	4.4 million gain/loss
USD-Russian ruble	$	264 million	$	2.6 million gain/loss
EUR-Polish zloty	€	430 million or approximately $557 million	$	5.6 million gain/loss

As of March 31, 2013 the Company had borrowings including its Convertible Notes due 2013 and Senior Secured Notes due 2016 that are denominated in U.S. dollars and euros, which have been lent to its operations where the functional currency is the Polish zloty and Russian ruble. The effect of having debt denominated in currencies other than the Company’s functional currencies is to increase or decrease the value of the Company’s liabilities on that debt in terms of the Company’s functional currencies when those functional currencies depreciate or appreciate in value respectively. As a result of this, the Company is exposed to gains and losses on the re-measurement of these liabilities. The table below summarizes the pre-tax impact of a one percent movement in each of the exchange rate which could result in a significant impact in the results of the Company’s operations.


Exchange Rate	Value of notional amount As of March 31, 2013		Pre-tax impact of a 1% movement in exchange rate
USD-Polish zloty*		$ 376.7 million	$	3.8 million gain/loss
USD-Russian ruble*		$ 272.2 million	$	2.7 million gain/loss
EUR-USD*	€	442.7 million or approximately $567.5 million	$	5.7 million gain/loss
EUR-Russian ruble		€30.4 million or approximately $39.0 million		0.4 million gain/loss

*	Reflects debt outstanding prior to giving effect to the Plan of Reorganization.

Significant Accounting Policies and Estimates

For a discussion of our critical accounting policies, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~restated~~2012 ~~2011~~ Annual Report on Form 10-K/A.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our operations are conducted primarily in Poland and Russia, and our functional currencies are primarily the Polish zloty, Hungarian forint and Russian ruble, and our reporting currency is the U.S. dollar. Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, bank loans, overdraft facilities and long-term debt. All of the monetary assets represented by these financial instruments are located in Poland, Russia and Hungary. Consequently, they are subject to currency translation movements when reporting in U.S. dollars.

If the U.S. dollar increases in value against the Polish zloty, Russian ruble or Hungarian forint, the value in U.S. dollars of assets, liabilities, revenues and expenses originally recorded in Polish zloty, Russian ruble or Hungarian forint will decrease. Conversely, if the U.S. dollar decreases in value against the Polish zloty, Russian ruble or Hungarian forint, the value in U.S. dollars of assets, liabilities, revenues and expenses originally recorded in Polish zloty, Russian ruble or Hungarian forint will increase. Thus, increases and decreases in the value of the U.S. dollar can have a material impact on the value in U.S. dollars of our non-U.S. dollar assets, liabilities, revenues and expenses, even if the value of these items has not changed in their original currency.

~~The~~As ~~Company~~of ~~has~~March 31, 2013 the Company had borrowings including its Convertible Notes due 2013 and Senior Secured Notes due 2016 that are denominated in U.S. dollars and euros, which have been lent to its operations where the functional currency is the Polish zloty and Russian ruble. The effect of having debt denominated in currencies other than the Company’s functional currencies is to increase or decrease the value of the Company’s liabilities on that debt in terms of the Company’s functional currencies when those functional currencies depreciate or appreciate in value respectively. As a result of this, the Company is exposed to gains and losses on the re-measurement of these liabilities. The table below summarizes the pre-tax impact of a one percent movement in each of the exchange rate which could result in a significant impact in the results of the Company’s operations.

Exchange Rate	Value of notional ~~amount~~amountAs of March 31, 2013		Pre-tax impact of a 1%movement in exchange rate
USD-Polish zloty	$	444 million	$	4.4 million gain/loss
USD-Polish zloty*		$376.7 million	$	3.8 million gain/loss
USD-Russian ruble	$	264 million	$	2.6 million gain/loss
USD-Russian ruble*		$272.2 million	$	2.7 million gain/loss
EUR-Polish zloty	€	430 million or approximately $557 million	$	5.6 million gain/loss
EUR-USD*	€	442.7 million or approximately $567.5 million	$	5.7 million gain/loss
EUR-Russian ruble		€30.4 million or approximately $39.0 million		0.4 million gain/loss

*	Reflects debt outstanding prior to giving effect to the Plan of Reorganization.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

WeThe ~~have~~Company’s ~~carried out an evaluation under the supervision of~~management, ~~and~~ with the participation of, ~~our management, including~~ the Company’s Chief Executive Officer and Chief Financial Officer, ofevaluated the effectiveness of the Company’s disclosure controls and ~~design~~procedures, as defined in Rules 13a-15(e) and ~~operation~~15d-15(e) of ~~our~~the ~~disclosure~~Securities ~~controls~~Exchange ~~and~~Act ~~procedures~~of 1934, as of ~~September~~March 3031, ~~2012~~2013. Since December ~~31,~~ 2011, we have begun ~~the~~ restructuring of our corporate finance and reporting department in Poland and in Russia to implement more effective internal controls over financial reporting. ~~However,~~Further ~~our evaluation has disclosed material~~ weaknesses ~~still~~were ~~exist~~revealed induring ~~our~~the ~~internal~~2012 ~~control~~restructuring ~~over~~process ~~financial reporting~~ as ~~noted~~disclosed in ~~Management’s Assessment on Internal Control over Financial Reporting located in~~ Item 9A, ~~Financial Statements and Supplementary Data,~~ of our ~~restated 2011~~ Annual Report on Form 10-K/A for the year ended December 31, 2012 filed with the SEC on ~~October~~June 518, ~~2012~~2013 that still exist as of March 31, 2013.

Due to our material weaknesses, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are not effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

~~Changes~~Remediation inInitiatives ~~internal control over financial reporting.~~

~~There~~As ~~has~~disclosed ~~been~~in noour Annual Report on Form 10-K for the year ended December 31, 2012 in response to the identified material ~~change~~weakness, our management, with oversight from the Company’s Audit Committee, has dedicated significant in-house and external resources to implement enhancements to the Company’s internal control over financial reporting inso ~~the~~as ~~quarter~~to ~~ended~~remediate ~~September 30,~~all ~~2012,~~material ~~that~~weakness. These ongoing efforts has been focused on ~~materially~~(i) expanding ~~affected~~our organization capabilities to improve our monitoring, orcommunications, istraining ~~reasonably~~and ~~likely~~governance toprocesses ~~materially~~over ~~affect~~our financial statement closing process, (ii) implementing process improvements to strengthen our internal control and monitoring activities over retroactive trade rebates and trade marketing refunds, (iii) analyzing the impact of improper design of IT segregation of duties on financial ~~reporting~~statements and implementing adequate controls and (iv) the placement of additional qualified personnel to timely complete the Company’s financial reports, thus allowing for proper review and oversight.

In ~~response to~~ the ~~identified~~course ~~material~~of ~~weaknesses~~the inpast ~~our~~year, ~~internal~~we ~~control~~undertook ~~over~~a ~~financial~~number ~~reporting,~~of weremediation ~~are~~initiatives inincluding the ~~process~~change of ~~implementing~~senior management at the ~~remediation~~parent ~~steps~~company ~~listed~~level. For more details, see the information in ~~Item~~the Company’s 9AAnnual ofReport ~~our~~on Form 10-K/A for the year ended December 31, ~~2011~~2012, filed with the SEC on ~~October~~ 5June 18, ~~2012~~2013.

33Audit Committee

During the past year, the Audit Committee held a number of meetings with management to evaluate management’s assessment of internal controls over financial reporting. Specifically, on March 22, 2013, the Audit Committee evaluated the assessment of effectiveness of the Company’s internal control over financial reporting as of December 31, 2012 presented by management. As an outcome of this assessment, the Audit Committee requested that management to prepare a detailed remediation plan for the 2013 and the following years addressing the remaining material weaknesses as well as to allocate the resources necessary to remedy these weaknesses.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting for the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

Please refer to Note 156 of the accompanying Condensed Consolidated Financial Statements (unaudited) attached herein for a discussion of certain legal proceedings.

Item 1A.

Risk Factors.

For a discussion of the Company’s risk factors, see the information under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K/A for the year ended December 31, ~~2011~~2012, filed with the SEC on ~~October~~June 518, ~~2012~~2013.

Item 5.

Other Information.

Pursuant to the Plan, the Company has filed an Amended and Restated Certificate of Incorporation (the “New Charter”) with the Secretary of State of the State of Delaware and has adopted Amended and Restated By-Laws (the “New By-Laws”), each of which became effective as of June 5, 2013, and which changed the procedures by which security holders may recommend nominees to the registrant’s board of directors.

Pursuant to the New Charter, Minority Stockholders (as defined in the New Charter) have the right to nominate one director and such director’s successor. No person proposed to be nominated by the Requesting Stockholder Group shall be eligible for election as a director of the Corporation unless such person (i) satisfies the Independence Requirements delineated in the New Charter and (ii) is nominated in accordance with the procedures set forth in Section 6.1 of the New Charter.

Pursuant to the New Bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the directors then in office, whether or not a quorum, or by a sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the New Charter, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected. Each director so chosen shall hold office until the next election, and until such director’s successor is elected and qualified, or until such director’s earlier resignation or removal. In the event that one or more directors resigns from the Board of Directors, effective at a future date, subject to the terms of the New Charter, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next election, and until such director’s successor is elected and qualified, or until the director’s earlier resignation or removal.

Item 6.

Exhibits.

(a) Exhibits

Exhibit Number		Exhibit Description
3.1		Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q filed with the SEC on May 5, 2010 and incorporated herein by reference).
2.1		Amended and Restated Offering Memorandum, Consent Solicitation and Disclosure Statement Soliciting Acceptances of a Prepackaged Plan of Reorganization, dated March 8, 2013 (filed as Exhibit 99.(a)(1)(i) to the Schedule TO-I-A filed with the SEC on March 11, 2013 and incorporated herein by reference).
3.2*		Amended and Restated Bylaws.
2.2		Supplement No. 1 to the Amended and Restated Offering Memorandum, Consent Solicitation Statement and Disclosure Statement Soliciting Acceptances of a Prepackaged Plan of Reorganization, dated March 18, 2013 (filed as Exhibit 99.1 to the Current Report on Form 8-K filed with the SEC on March 19, 2013 and incorporated herein by reference).
10.65*		Employment Agreement dated July 9, 2012 between Central European Distribution Corporation and David Bailey.
2.3		Findings of Fact, Conclusions of Law and Order (I) Approving (A) the Disclosure Statement Pursuant to Sections 1125 and 1126(c) of the Bankruptcy Code, (B) the Prepetition Solicitations Procedures, and (C) Forms of Ballots, and (II) Confirming the Second Amended and Restated Joint Prepackaged Chapter 11 Plan of Reorganization of Central European Distribution Corporation, et al. (filed as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on June 11, 2013 and incorporated herein by reference).
10.66*		Separation Agreement dated September 14, 2012 between Central European Distribution Corporation and Christopher Biedermann.
2.4		Second Amended and Restated Joint Prepackaged Chapter 11 Plan of Reorganization of Central European Distribution Corporation, et al. (filed as Exhibit 2.2 to the Current Report on Form 8-K filed with the SEC on June 11, 2013 and incorporated herein by reference).
3.1		Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on June 11, 2013 and incorporated herein by reference).
3.2		Amended and Restated Bylaws (filed as Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on June 11, 2013 and incorporated herein by reference).
31.1*		Certificate of the CEO pursuant to Rule 13a-15(e) or Rule 15d-15(e).
31.2*		Certificate of the CFO pursuant to Rule 13a-15(e) or Rule 15d-15(e).
32.1*		Certification of the CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of the CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		The following financial statements from Central European Distribution Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 3031, ~~2012~~2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

*	Filed herewith.

3436

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)		~~CENTRAL EUROPEAN DISTRIBUTION CORPORATION (registrant)~~
Date: November 19, 2012			By:	/s/ David Bailey
Date: June 28, 2013	By:	/s/ Grant Winterton
				David Bailey
		Grant Winterton
				Interim Chief Executive Officer
		Chief Executive Officer
Date: November 19, 2012			By:	/s/ Bartosz Kołaciński
Date: June 28, 2013	By:	/s/ Ryan Lee
				Bartosz Kołaciński
		Ryan Lee
				Interim Chief Financial Officer
		Chief Financial Officer

3537

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

ForTable additional information, see also “Risk Factors—Risks Relating to Our Indebtedness”—included in Item 8 of our Annual Report on Form 10-K/A filed with the SEC on October 5, 2012. Contents

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