##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



(MARK ONE)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004



OR



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



FOR THE TRANSITION PERIOD
FROM                .



COMMISSION FILE NUMBER 0-24341



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



|                                        |  |                                  
|--------------------------------------- |  | ---------------------------------
|DELAWARE                                |  | 54-18652710                      
|(STATE OF INCORPORATION)                |  | (IRS EMPLOYER IDENTIFICATION NO.)
|                                        | 
|1343 MAIN STREET, #301                  |  |                                  
|SARASOTA, FLORIDA                       |  | 34236                            
|(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) |  | (ZIP CODE)                       



(941) 330-1558

(REGISTRANTS TELEPHONE NUMBER,

INCLUDING AREA CODE)



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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 ̈



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12.b.2 of the Securities Exchange Act of 1934).  Yes  x    No ̈



The number of shares
outstanding of each class of the issuers common stock as of April 30, 2004:



|                              |  |                  
|----------------------------- |  | -----------------
|Common Stock ($.01 par value) |  | 10,800,746 shares



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##### Table of Contents

INDEX



|           |  |                                                                                                                                 |  |      
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | -----
|           |  |                                                                                                                                 |  | PAGE 
|           |  |                                                                                                                                
|PART I.    |  | FINANCIAL INFORMATION                                                                                                           |  | 3    
|           |  |                                                                                                                                
|Item 1.    |  | Financial Statements                                                                                                            |  |      
|           |  |                                                                                                                                
|           |  | Consolidated Condensed Balance Sheets, March 31, 2004 (unaudited) and December 31, 2003                                         |  | 3    
|           |  |                                                                                                                                
|           |  | Consolidated Condensed Statements of Income (unaudited) for the three month periods ended March 31, 2004 and March 31, 2003     |  | 4    
|           |  |                                                                                                                                
|           |  | Consolidated Condensed Statements of Changes in Stockholders Equity (unaudited) as of March 31, 2004                           |  | 5    
|           |  |                                                                                                                                
|           |  | Consolidated Condensed Statements of Cash Flows (unaudited) for the three month periods ended March 31, 2004 and March 31, 2003 |  | 6    
|           |  |                                                                                                                                
|           |  | Notes to Consolidated Condensed Financial Statements (unaudited)                                                                |  | 7-12 
|           |  |                                                                                                                                
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                           |  | 13-16
|           |  |                                                                                                                                
|Item 3.    |  | Quantitative and Qualitative Disclosure about Market Risk                                                                       |  | 18   
|           |  |                                                                                                                                
|Item 4.    |  | Controls and Procedures                                                                                                         |  | 18   
|           |  |                                                                                                                                
|PART II.   |  | OTHER INFORMATION                                                                                                               |  |      
|           |  |                                                                                                                                
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                                                |  | 20   
|           |  |                                                                                                                                
|Signatures |  |                                                                                                                                 |  | 21   



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##### Table of Contents

PART I

FINANCIAL INFORMATION



CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except share and per share information)



|                                                                                                                                                            |  |                |         |   |                   |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                                            |  | March 31, 2004 |         |   | December 31, 2003 |  
|                                                                                                                                                            |  | (unaudited)    |         |   |                   |  
|CURRENT ASSETS                                                                                                                                              |  |                |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                                   |  | $              | 6,534   |   |                   | $ | 6,229   |  
|Accounts receivable (net of allowance for doubtful accounts of $6,234 and $6,380 respectively)                                                              |  |                | 74,897  |   |                   |   | 90,071  |  
|Inventories                                                                                                                                                 |  |                | 27,081  |   |                   |   | 35,012  |  
|Prepaid expenses and other current assets                                                                                                                   |  |                | 4,130   |   |                   |   | 5,249   |  
|Deferred income taxes                                                                                                                                       |  |                | 1,074   |   |                   |   | 1,201   |  
|                                                                                                                                                            |  |                |         |   |                   |   |         |  
|TOTAL CURRENT ASSETS                                                                                                                                        |  | $              | 113,716 |   |                   | $ | 137,762 |  
|Intangible assets, net                                                                                                                                      |  |                | 2,319   |   |                   |   | 2,506   |  
|Goodwill, net                                                                                                                                               |  |                | 36,247  |   |                   |   | 35,618  |  
|Tangible fixed assets, net                                                                                                                                  |  |                | 11,786  |   |                   |   | 10,115  |  
|Deferred income taxes                                                                                                                                       |  |                | 1,169   |   |                   |   | 1,382   |  
|Other assets                                                                                                                                                |  |                | 171     |   |                   |   | 87      |  
|                                                                                                                                                            |  |                |         |   |                   |   |         |  
|TOTAL ASSETS                                                                                                                                                |  | $              | 165,408 |   |                   | $ | 187,470 |  
|                                                                                                                                                            |  |                |         |   |                   |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                        |  |                |         |   |                   |   |         |  
|CURRENT LIABILITIES                                                                                                                                         |  |                |         |   |                   |   |         |  
|Trade accounts payable                                                                                                                                      |  | $              | 49,155  |   |                   | $ | 65,776  |  
|Short term bank loans and overdraft facilities                                                                                                              |  |                | 22,599  |   |                   |   | 30,441  |  
|Current portion of long term debt                                                                                                                           |  |                | 180     |   |                   |   | 29      |  
|Current portion of obligations under capital leases                                                                                                         |  |                | 1,782   |   |                   |   | 1,282   |  
|Income taxes payable                                                                                                                                        |  |                | 1,220   |   |                   |   | 977     |  
|Taxes other than income taxes                                                                                                                               |  |                | 1,176   |   |                   |   | 1,230   |  
|Other accrued liabilities                                                                                                                                   |  |                | 2,062   |   |                   |   | 3,011   |  
|                                                                                                                                                            |  |                |         |   |                   |   |         |  
|TOTAL CURRENT LIABILITIES                                                                                                                                   |  |                | 78,174  |   |                   |   | 102,746 |  
|                                                                                                                                                            |  |               
|Long-term debt, less current maturities                                                                                                                     |  |                | 1,624   |   |                   |   | 497     |  
|Long-term obligations under capital leases                                                                                                                  |  |                | 1,206   |   |                   |   | 1,173   |  
|                                                                                                                                                            |  |               
|STOCKHOLDERS EQUITY                                                                                                                                        |  |                |         |   |                   |   |         |  
|Preferred Stock ($0.01 par value, 1,000,000 shares authorized; no shares issued and outstanding)                                                            |  |                |        |   |                   |   |        |  
|Common Stock ($0.01 par value, 20,000,000 shares authorized, 10,909,779 and 10,876,329 shares issued at March 31, 2004 and December 31, 2003,
respectively) |  |                | 109     |   |                   |   | 109     |  
|Additional paid-in-capital                                                                                                                                  |  |                | 53,226  |   |                   |   | 52,805  |  
|Retained earnings                                                                                                                                           |  |                | 33,646  |   |                   |   | 30,536  |  
|Accumulated other comprehensive loss                                                                                                                        |  |                | (2,427  | ) |                   |   | (246    | )
|Less Treasury Stock at cost (109,350 shares at March 31, 2004 and December 31, 2003)                                                                        |  |                | (150    | ) |                   |   | (150    | )
|                                                                                                                                                            |  |                |         |   |                   |   |         |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                  |  |                | 84,404  |   |                   |   | 83,054  |  
|                                                                                                                                                            |  |                |         |   |                   |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                  |  | $              | 165,408 |   |                   | $ | 187,470 |  
|                                                                                                                                                            |  |                |         |   |                   |   |         |  



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



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except share and per share information)



|                                                                                      |  |                                   |         |   |                                   |   |        |  
|------------------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | --------------------------------- | - | ------ | -
|                                                                                      |  | Three months ended March 31, 2004 |         |   | Three months ended March 31, 2003 |  
|Net sales                                                                             |  | $                                 | 110,477 |   |                                   | $ | 79,468 |  
|Cost of goods sold                                                                    |  |                                   | 96,711  |   |                                   |   | 68,985 |  
|                                                                                      |  |                                   |         |   |                                   |   |        |  
|Gross profit                                                                          |  |                                   | 13,766  |   |                                   |   | 10,483 |  
|Selling, general and administrative expenses, excluding depreciation and amortization |  |                                   | 8,884   |   |                                   |   | 6,802  |  
|Depreciation and amortization                                                         |  |                                   | 706     |   |                                   |   | 474    |  
|Bad debt provision                                                                    |  |                                   | 66      |   |                                   |   | 67     |  
|                                                                                      |  |                                   |         |   |                                   |   |        |  
|Operating income                                                                      |  |                                   | 4,110   |   |                                   |   | 3,140  |  
|Non operating income/(expense)                                                        |  |                                   |         |   |                                   |   |        |  
|Interest income                                                                       |  |                                   | 43      |   |                                   |   | 27     |  
|Interest expense                                                                      |  |                                   | (461    | ) |                                   |   | (553   | )
|Realized and unrealized foreign currency transaction (losses), net                    |  |                                   | (46     | ) |                                   |   | (2     | )
|Other income/(expense), net                                                           |  |                                   | 20      |   |                                   |   | (14    | )
|                                                                                      |  |                                   |         |   |                                   |   |        |  
|Income before income taxes                                                            |  |                                   | 3,666   |   |                                   |   | 2,598  |  
|Income tax expense                                                                    |  |                                   | 556     |   |                                   |   | 681    |  
|                                                                                      |  |                                   |         |   |                                   |   |        |  
|Net income                                                                            |  | $                                 | 3,110   |   |                                   | $ | 1,917  |  
|                                                                                      |  |                                   |         |   |                                   |   |        |  
|Net income per share of common stock, basic                                           |  | $                                 | 0.29    |   |                                   | $ | 0.21   |  
|                                                                                      |  |                                   |         |   |                                   |   |        |  
|Net income per share of common stock, diluted                                         |  | $                                 | 0.29    |   |                                   | $ | 0.20   |  
|                                                                                      |  |                                   |         |   |                                   |   |        |  



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



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN

STOCKHOLDERS EQUITY (UNAUDITED)

(in
thousands)



|                                                               |  |                            |  |                                 |     |  |                            |  |                  |      |                                   |  |   |                           |  |   |        |  |   |        |   |  |   |       
|-------------------------------------------------------------- |  | -------------------------- |  | ------------------------------- | --- |  | -------------------------- |  | ---------------- | ---- | --------------------------------- |  | - | ------------------------- |  | - | ------ |  | - | ------ | - |  | - | ------
|                                                               |  | Capital Stock              |  |                                 |     |  |                            |  |                  |      |                                   | 
|                                                               |  | Issued No. of AmountShares |  | In Treasury No. of AmountShares |     |  | AdditionalPaid-in- Capital |  | RetainedEarnings |      | AccumulatedOtherComprehensiveLoss |  |   | Total Stock-holdersEquity
|Balance at December 31, 2003                                   |  | 10,876                     |  | $                               | 109 |  | 109                        |  | $                | (150 | )                                 |  | $ | 52,805                    |  | $ | 30,536 |  | $ | (246   | ) |  | $ | 83,054
|Net income for the three months ended March 31, 2004           |  |                            |  |                                 |     |  |                            |  |                  |      |                                   |  |   |                           |  |   | 3,110  |  |   |        |   |  |   |       
|Foreign currency translation adjustment                        |  |                            |  |                                 |     |  |                            |  |                  |      |                                   |  |   |                           |  |   |        |  |   | (2,181 | ) |  |   |       
|                                                               |  |                            |  |                                 |     |  |                            |  |                  |      |                                   |  |   |                           |  |   |        |  |   |        |   |  |   |       
|Comprehensive income for the three months ended March 31, 2004 |  |                            |  |                                 |     |  |                            |  |                  |      |                                   |  |   |                           |  |   | 3,110  |  |   | (2,181 | ) |  |   | 929   
|Common stock issue in connection with acquisitions             |  | 5                          |  |                                 |     |  |                            |  |                  |      |                                   |  |   | 159                       |  |   |        |  |   |        |   |  |   | 159   
|Common stock issued in connection with options                 |  | 28                         |  |                                 |     |  |                            |  |                  |      |                                   |  |   | 262                       |  |   |        |  |   |        |   |  |   | 262   
|                                                               |  |                            |  |                                 |     |  |                            |  |                  |      |                                   |  |   |                           |  |   |        |  |   |        |   |  |   |       
|Balance at March 31, 2004                                      |  | 10,909                     |  | $                               | 109 |  | 109                        |  | $                | (150 | )                                 |  | $ | 53,226                    |  | $ | 33,646 |  | $ | (2,427 | ) |  | $ | 84,404
|                                                               |  |                            |  |                                 |     |  |                            |  |                  |      |                                   |  |   |                           |  |   |        |  |   |        |   |  |   |       



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



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)

(in thousands)



|                                                                                              |  |                                  |         |   |                                  |   |         |  
|--------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | -------------------------------- | - | ------- | -
|                                                                                              |  | Three monthsended March 31, 2004 |         |   | Three monthsended March 31, 2003 |  
|OPERATING ACTIVITIES                                                                          |  |                                  |         |   |                                  |   |         |  
|Net income                                                                                    |  | $                                | 3,110   |   |                                  | $ | 1,917   |  
|Adjustments to reconcile net income to net cash provided by / (used in) operating activities: |  |                                  |         |   |                                  |   |         |  
|Depreciation and amortization                                                                 |  |                                  | 706     |   |                                  |   | 474     |  
|Deferred income tax benefit                                                                   |  |                                  | (40     | ) |                                  |   | (29     | )
|Bad debt provision                                                                            |  |                                  | 66      |   |                                  |   | 67      |  
|Changes in operating assets and liabilities:                                                  |  |                                  |         |   |                                  |   |         |  
|Accounts receivable                                                                           |  |                                  | 15,320  |   |                                  |   | 18,075  |  
|Inventories                                                                                   |  |                                  | 7,931   |   |                                  |   | 5,663   |  
|Prepayments and other current assets                                                          |  |                                  | 1,119   |   |                                  |   | (677    | )
|Trade accounts payable                                                                        |  |                                  | (16,621 | ) |                                  |   | (25,347 | )
|Income taxes and other taxes payable                                                          |  |                                  | 189     |   |                                  |   | 130     |  
|Other accrued liabilities and other assets                                                    |  |                                  | (949    | ) |                                  |   | 232     |  
|                                                                                              |  |                                  |         |   |                                  |   |         |  
|Net Cash Provided By Operating Activities                                                     |  |                                  | 10,831  |   |                                  |   | 505     |  
|INVESTING ACTIVITIES                                                                          |  |                                  |         |   |                                  |   |         |  
|Purchases of tangible fixed assets                                                            |  |                                  | (2,171  | ) |                                  |   | (98     | )
|Proceeds from sales of tangible fixed assets                                                  |  |                                  | 428     |   |                                  |   |        |  
|                                                                                              |  |                                  |         |   |                                  |   |         |  
|Net Cash Used In Investing Activities                                                         |  |                                  | (1,743  | ) |                                  |   | (98     | )
|FINANCING ACTIVITIES                                                                          |  |                                  |         |   |                                  |   |         |  
|(Repayments) / Borrowings of short-term borrowings and overdraft facilities                   |  |                                  | (7,842  | ) |                                  |   | 296     |  
|Proceeds from long-term borrowings                                                            |  |                                  | 1,278   |   |                                  |   |        |  
|Capital lease repayments                                                                      |  |                                  | (396    | ) |                                  |   |        |  
|Net proceeds from private placement offering of Companys common stock                        |  |                                  |        |   |                                  |   | (1,152  | )
|Stock options exercised                                                                       |  |                                  | 262     |   |                                  |   | 1,004   |  
|                                                                                              |  |                                  |         |   |                                  |   |         |  
|Net Cash (Used in) / Provided By Financing Activities                                         |  |                                  | (6,698  | ) |                                  |   | 148     |  
|                                                                                              |  |                                  |         |   |                                  |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                                  |  |                                  | (2,085  | ) |                                  |   | (985    | )
|Net increase / (decrease) in cash and cash equivalents                                        |  |                                  | 305     |   |                                  |   | (430    | )
|Cash and cash equivalents at beginning of period                                              |  |                                  | 6,229   |   |                                  |   | 2,237   |  
|                                                                                              |  |                                  |         |   |                                  |   |         |  
|Cash and cash equivalents at end of period                                                    |  | $                                | 6,534   |   |                                  | $ | 1,807   |  
|                                                                                              |  |                                  |         |   |                                  |   |         |  
|SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES                                        |  |                                  |         |   |                                  |   |         |  
|Common stock issued for acquisitions                                                          |  | $                                | 159     |   |                                  | $ |        |  
|                                                                                              |  |                                  |         |   |                                  |   |         |  
|Capital leases amounts advanced                                                               |  | $                                | 799     |   |                                  | $ |        |  
|                                                                                              |  |                                  |         |   |                                  |   |         |  
|Supplemental disclosures of cash flow information                                             |  |                                  |         |   |                                  |   |         |  
|Interest paid                                                                                 |  | $                                | 406     |   |                                  | $ | 543     |  
|Income tax paid                                                                               |  | $                                | 376     |   |                                  | $ | 839     |  



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



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(amounts in tables expressed in thousands except per share information)



|1. | ORGANIZATION AND DESCRIPTION OF BUSINESS
|-- | ----------------------------------------



Central European Distribution Corporation (CEDC), a Delaware corporation, and its subsidiaries (collectively referred to as the Company) operates
primarily as a wholesale distributor of fine wines, beers and liquors across Poland. Based in Warsaw and operating through nine distribution centers and 58 satellite branches the Company offers a 24 hour delivery service of alcoholic beverages.
Since its incorporation in September 1997, the Company has acquired 100% of the outstanding common stock or 100% of the voting rights of its 12 subsidiaries.



The Company through its various subsidiaries derives all its revenues in Poland.



|2. | BASIS OF PRESENTATION
|-- | ---------------------



The accompanying unaudited condensed consolidated financial statements include the accounts of CEDC and its subsidiaries all of which the Company wholly
owns or owns 100% of the voting rights. All inter-company accounts and transactions have been eliminated in the consolidated financial statements.



CEDCs subsidiaries maintain their books of account and prepare their statutory financial statements in Polish Zloties (PLN) in accordance with
Polish statutory requirements and the Accounting Act of 29 September 1994. The subsidiaries financial statements have been adjusted to reflect accounting principles generally accepted in the United States of America (U.S. GAAP) for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles in the United States of
America 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 cash flows for the
interim periods presented have been included. Operating results for the three-month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.



The balance sheet at December 31, 2003 has been derived from the audited
financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.



The unaudited interim financial statements should be read with reference to the consolidated financial statements and
footnotes thereto included in our annual report on Form 10-K for the year ended December 31, 2003.



|3. | COMPREHENSIVE LOSS
|-- | ------------------



The Companys equity investments are substantially all in Polish Zloty and gains or losses resulting from the restatement of these shareholder equity
balances into U.S. Dollars are posted to the Comprehensive Loss Account. As a result of the depreciation of the Polish Zloty against the U.S. Dollar during the three-month period ending March 31, 2004, the Company incurred foreign currency
translation losses of $2,181,000 on these equity investments. This movement means that the cumulative balance on the Comprehensive Loss Account was a loss of $2,427,000 as at March 31, 2004 and this has been reflected in the Consolidated Condensed
Balance Sheet and Statements of Changes in Stockholders Equity (unaudited). The total of the accumulated other comprehensive loss consist solely of currency exchange adjustments. No tax benefit has been recorded.



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION



NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(amounts in tables expressed in thousands except per share information)



|4. | EARNINGS PER SHARE
|-- | ------------------



Net income per share of common stock is calculated under the provisions of SFAS No. 128, Earnings per Share. The following table sets forth
the computation of basic and diluted earnings per share for the periods indicated.



|                                                                                    |  |                             |        |      |   |      
|----------------------------------------------------------------------------------- |  | --------------------------- | ------ | ---- | - | -----
|                                                                                    |  | Three Months EndedMarch 31,
|                                                                                    |  | 2004                        |        | 2003
|Basic:                                                                              |  |                             |        |      |   |      
|Net income                                                                          |  | $                           | 3,110  |      | $ | 1,917
|                                                                                    |  |                             |        |      |   |      
|Weighted Average shares of common stock outstanding                                 |  |                             | 10,790 |      |   | 9,009
|                                                                                    |  |                             |        |      |   |      
|Basic earnings per share                                                            |  | $                           | 0.29   |      | $ | 0.21 
|                                                                                    |  |                             |        |      |   |      
|Diluted:                                                                            |  |                             |        |      |   |      
|Net Income                                                                          |  | $                           | 3,110  |      | $ | 1,917
|                                                                                    |  |                             |        |      |   |      
|Weighted Average shares of common stock outstanding                                 |  |                             | 10,790 |      |   | 9,009
|Effect of diluted effect employee stock options based on the treasury stock method. |  |                             | 106    |      |   | 389  
|                                                                                    |  |                             |        |      |   |      
|Totals                                                                              |  |                             | 10,896 |      |   | 9,398
|                                                                                    |  |                             |        |      |   |      
|Diluted earnings per share                                                          |  | $                           | 0.29   |      | $ | 0.20 
|                                                                                    |  |                             |        |      |   |      



During the three month
period ended March 31, 2004, 28,450 stock options were exercised.



|5. | ACQUISITIONS
|-- | ------------



Overview

The Companys strategy
and objectives regarding its acquisition policy are to acquire regionally strong alcohol distributors in order to build market share and construct a nationwide distribution network in order to attract and retain national clients and to strengthen
its buying leverage. The price paid by the Company in making its acquisitions is based on earnings projections of the acquired company operating under the Companys business model.



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CENTRAL EUROPEAN DISTRIBUTION CORPORATION



NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(amounts in tables expressed in thousands except per share information)



|5. | ACQUISITIONS (contd)
|-- | ---------------------



While the Company made no new acquisitions in the three months ended March 31, 2004, it made three acquisitions during 2003. Assuming consummation of
these acquisitions (Dako-Galant, Panta-Hurt and Multi-Ex) and the issuance of common shares as of January 1, 2003, the unaudited pro-forma consolidated operating results for the three months ended March 31, 2003 was as follows:



|                                           |  |      |        
|------------------------------------------ |  | ---- | -------
|                                           |  | 2003
|Net sales                                  |  | $    | 111,597
|Net income                                 |  | $    | 1,119  
|Net income per share data:                 |  |      |        
|Basic earnings per share of common stock   |  | $    | 0.12   
|Diluted earnings per share of common stock |  | $    | 0.12   



9



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##### Table of Contents

CENTRAL EUROPEAN DISTRIBUTION CORPORATION



NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(amounts in tables expressed in thousands except per share information)



|6. | BANK LOANS AND OVERDRAFT FACILITIES
|-- | -----------------------------------



The Company has banking facilities with six banks which are used to support both the Companys acquisition strategy and its cash on delivery (COD)
vodka purchasing requirements. During the fourth quarter of 2003, the Company secured group facilities from one of Poland leading banks so as to improve cash management throughout the group. The roll out of this group facility is expected to be
completed by mid 2004.



The credit lines are only denominated
Polish zloty:



|                                         |  |               |        |                  |   |       
|---------------------------------------- |  | ------------- | ------ | ---------------- | - | ------
|                                         |  | March31, 2004 |        | December31, 2003
|PLN (restated in U.S. Dollar equivalent) |  | $             | 24,403 |                  | $ | 30,967
|                                         |  |               |        |                  |   |       
|                                         |  | $             | 24,403 |                  | $ | 30,967
|                                         |  |               |        |                  |   |       



These facilities are
disclosed in the financial statements as:



|                                          |  |               |        |                  |   |       
|----------------------------------------- |  | ------------- | ------ | ---------------- | - | ------
|                                          |  | March31, 2004 |        | December31, 2003
|Overdrafts                                |  | $             | 22,599 |                  | $ | 30,441
|Long term debt  current portion          |  |               | 180    |                  |   | 29    
|Total long term debt less current portion |  |               | 1,624  |                  |   | 497   
|                                          |  |               |        |                  |   |       
|Total                                     |  | $             | 24,403 |                  | $ | 30,967
|                                          |  |               |        |                  |   |       



|                                              |  |               |        |                  |   |       
|--------------------------------------------- |  | ------------- | ------ | ---------------- | - | ------
|Principal repayments for the followings years |  | March31, 2004 |        | December31, 2003
|                                              |  |               |        |                  |   |       
|2004                                          |  | $             | 22,599 |                  | $ | 30,441
|2005                                          |  |               | 180    |                  |   | 29    
|2006                                          |  |               | 180    |                  |   | 497   
|2007                                          |  |               | 180    |                  |   |      
|2007 plus                                     |  |               | 1,264  |                  |   |      
|                                              |  |               |        |                  |   |       
|Total                                         |  | $             | 24,403 |                  | $ | 30,967
|                                              |  |               |        |                  |   |       



Within the total
overdraft facilities agreed as at March 31, 2004, $18.1 million remains available. These overdraft facilities are subject to renewal between April and December 2004 and the Company has not historically encountered any difficulties in successfully
renegotiating them.



|7. | LEASE OBLIGATIONS
|-- | -----------------



In November 2000, the Company entered into a non-cancelable five-year operating lease, for its main warehouse and office in Warsaw, which stipulated
monthly payments of $130,000. In February 2003, the Company renegotiated this lease by signing a seven-year agreement starting from May 1, 2003 at a lower rent of $96,000 per month. The following is a schedule by years of the future rental payments
under the non-cancelable operating lease as of March 31, 2004:



|           |  |   |      
|---------- |  | - | -----
|2004       |  | $ | 864  
|2005       |  |   | 1,152
|2006       |  |   | 1,152
|2007       |  |   | 1,152
|2008       |  |   | 1,152
|           |  |   |      
|Thereafter |  |   | 1,752
|           |  |   |      
|           |  | $ | 7,224
|           |  |   |      



10



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##### Table of Contents

CENTRAL EUROPEAN DISTRIBUTION CORPORATION



NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(amounts in tables expressed in thousands except per share information)



|7. | LEASE OBLIGATIONS (contd)
|-- | --------------------------



The Company also has rental agreements for all of the regional offices and warehouse space. Monthly rentals range from approximately $2,000 to $11,670.
All of the regional office and warehouse leases can be terminated by either party within two or three months prior notice. The retail shop leases have no stated expiration date, but can be terminated by either party with three months to six
months prior notice.



The Company continues its policy of
renewing its transportation fleet by way of capital leases. The future minimum lease payments for the assets under capital lease at March 31, 2004 are as follows:



|              |  |   |       |  
|------------- |  | - | ----- | -
|2004          |  | $ | 1,889 |  
|2005          |  |   | 1,279 |  
|              |  |   |       |  
|              |  | $ | 3,168 |  
|Less interest |  |   | (180  | )
|              |  |   |       |  
|              |  | $ | 2,988 |  
|              |  |   |       |  



|8. | INCOME TAXES
|-- | ------------



Total income tax expense varies from expected income tax expense computed at enacted Polish statutory rates (19% in 2004 and 27% in 2003) as follows:



|                                                                     |  |           |     |   |      |   |      |  
|-------------------------------------------------------------------- |  | --------- | --- | - | ---- | - | ---- | -
|                                                                     |  | March 31, |    
|                                                                     |  | 2004      |     |   | 2003 |  
|Tax at the Polish statutory rate                                     |  | $         | 697 |   |      | $ | 701  |  
|Temporary differences, net, U.S. tax losses                          |  |           | (50 | ) |      |   | (107 | )
|Movement in allowance for doubtful debts                             |  |           | 22  |   |      |   | 46   |  
|Movements in accruals                                                |  |           | (19 | ) |      |   | (75  | )
|Effect of foreign currency exchange rates on net deferred tax assets |  |           | (94 | ) |      |   | 113  |  
|Permanent differences                                                |  |           |     |   |      |   | 3    |  
|                                                                     |  |           |     |   |      |   |      |  
|Total income tax expense                                             |  | $         | 556 |   |      | $ | 681  |  
|                                                                     |  |           |     |   |      |   |      |  



Tax liabilities
(including corporate income tax, Value Added Tax (VAT), social security and other taxes) of the Companys Polish subsidiaries may be subject to examinations by Polish tax authorities for up to five years from the end of the year the tax is
payable. CEDCs U.S. federal income tax returns are also subject to examination by the U.S. tax authorities. As the application of tax laws and regulations, and transactions are susceptible to varying interpretations, amounts reported in the
consolidated financial statements could be changed at a later date upon final determination by the tax authorities.



|9. | STOCK OPTION PLANS AND WARRANTS
|-- | -------------------------------



The Company has elected to follow APB 25. Under APB 25, no compensation expense is recognized when the exercise price of the Companys employee stock
options equals the market price of the underlying stock on the date of grant.



The Companys 1997 Stock Incentive Plan (Incentive Plan) provides for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to directors, executives, and
other employees (employees) of the Company and to non-employee service providers of the Company. The Incentive Plan authorizes, and the Company has reserve for future issuance, up to 1,072,725 shares of Common Stock (subject to
anti-dilution adjustment in the event of a stock-split, recapitalization, or similar transaction). The Compensation Committee of the Board of Directors of the Company administers the Incentive Plan.



The option exercise price for stock options granted under the Incentive Plan
may not be less than fair market



11



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##### Table of Contents

CENTRAL EUROPEAN DISTRIBUTION CORPORATION



NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables expressed in thousands except per share information)



|9. | STOCK OPTION PLANS AND WARRANTS (contd)
|-- | ----------------------------------------



value but in some cases may be in excess of the market price of Common Stock on the date of grant. The Company sets the stock option price based on the
closing price of the Common Stock on the day before the date of grant if such price is not materially different than the opening price of the Common Stock on the date of grant. Accordingly, there is no compensation expense recorded for options
granted under the Incentive Plan to employees. Stock options may be exercised up to 10 years after the date of grant except as otherwise provided in the particular stock option agreement. Payment for the shares purchased under the Incentive Plan
must be in cash, which must be received by the Company prior to any shares being issued.



Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of
Statement 123. The fair value of these stock options were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of 1.90%, dividend yields of 0.0%;
volatility factors of the expected market price of the Companys common stock of 1.25; and a weighted-average expected life of the option of 3.4 years.



The Black-Scholes option valuation method was developed for use in the estimating the fair value of traded options which have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Companys employee stock option have characteristics significantly
different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate.



For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options vesting period. The
Companys pro forma information follows:



|                              |  |                          |       |      |   |      
|----------------------------- |  | ------------------------ | ----- | ---- | - | -----
|                              |  | Three Months toMarch 31,
|                              |  | 2004                     |       | 2003
|Net income as reported        |  | $                        | 3,110 |      | $ | 1,917
|Pro forma net income          |  | $                        | 2,766 |      | $ | 1,863
|Pro forma earnings per share: |  |                          |       |      |   |      
|Basic                         |  | $                        | 0.26  |      | $ | 0.21 
|Diluted                       |  | $                        | 0.26  |      | $ | 0.20 



|10. | SUBSEQUENT EVENTS
|--- | -----------------



There have been no subsequent events since March 31, 2004.



|11. | RECLASSIFICATIONS
|--- | -----------------



Certain amounts in the 2004 consolidated condensed financial statements have been reclassified to be consistent with the 2003 financial statements. These
reclassifications do not have a material effect on the financial statements.



|12. | COMMITMENTS AND CONTINGENT LIABILITIES
|--- | --------------------------------------



The Company is involved in litigation from time to time and has claims against it in connection with matters arising in the ordinary course of business.
In the opinion of management, the outcome of these proceedings will not have a material adverse effect on the Companys operations.



During 2003, the Company received a decision regarding a tax dispute in one of its subsidiaries which resulted in a tax obligation of $146,000, which was
paid and expensed in the fourth quarter of 2003. The Subsidiary is still disputing the basis of the decision though should it fail to successfully argue its case there is a risk of a subsequent adjustment totaling $181,000.



12



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



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



This Form 10-Q, including, but not limited to the
Managements Discussion and Analysis of Financial Condition and Results of Operations contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve
known and unknown risks and uncertainties that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by forward-looking
statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. The Company undertakes no obligation to publicly update or revise any
forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise unless required to do so by the securities laws.



The following discussion and analysis provides information which management believes is
relevant to the readers assessment and understanding of the Companys results of operations and financial condition and should be read in conjunction with the Consolidated Financial Statements and the notes thereto elsewhere in this
report. Investors are also referred to the Risk Factors in the Companys Form 10-K for the fiscal year ended December 31, 2003.



Overview



In order to aid understanding, we have prepared tables which segment our income statement information as presented in the financial statements into those elements which relate to operations acquired during the
reporting period and those which relate to operations owned in both reporting periods. Key definitions are:



| |  | Total Operations Q1 2004: This is an extract from the income statement for total operations for the quarter ended March 31, 2004.
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| |  | Operations Acquired 2003: This is the elimination of the amounts generated in the first quarter 2004 from operations acquired in 2003.
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| |  | Continuing Operations Q1 2004: The results from elements of the Company which were owned for the first quarter of each reported year.
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| |  | Total Operations Q1 2003: This is an extract from the income statement for total operations for the quarter ended March 31, 2003.
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| |  | Core growth: the growth rates achieved between results from continuing operations as reported in the current year versus the continuing operations of the previous year.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Readers will also find frequent references to the term cash on
delivery (COD). Normal trade terms from our Polish Vodka suppliers are 60 days; however, we are offered by some of these suppliers significant discounts off the invoice price if we pay for goods when delivered. The discounts offered are considerably
in excess of the effective rate we would pay for 60 day terms under our bank facilities.



13



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##### Table of Contents

Results of Operations



Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003



Operations acquired 2003 include the first quarter results for Dako-Galant (acquired April 5, 2003), Panta-Hurt (acquired
September 15, 2003) and Multi-Ex (acquired November 15, 2003). These results have been excluded from continuing operations Q1 2004 to show the impact of a common three month period of ownership in both years.



|                                                |  |                        |         |   |                        |        |   |                             |        |   |                        |        |   |                                  |       |   
|----------------------------------------------- |  | ---------------------- | ------- | - | ---------------------- | ------ | - | --------------------------- | ------ | - | ---------------------- | ------ | - | -------------------------------- | ----- | --
|                                                |  | TotaloperationsQ1 2004 |         |   | Operationsacquired2003 |        |   | ContinuingoperationsQ1 2004 |        |   | TotaloperationsQ1 2003 |        |   | Growth% fromcontinuingoperations |      
|                                                |  | ($ in thousands)       |        
|                                                |  |                        |         |   |                       
|Net Sales                                       |  | $                      | 110,477 |   |                        | 22,392 |   |                             | 88,085 |   |                        | 79,468 |   |                                  | 10.8  | % 
|Cost of goods sold, including excise taxes      |  |                        | 96,711  |   |                        | 19,607 |   |                             | 77,104 |   |                        | 68,985 |   |                                  | 11.8  | % 
|                                                |  |                        |         |   |                       
|Gross profit                                    |  |                        | 13,766  |   |                        | 2,785  |   |                             | 10,981 |   |                        | 10,483 |   |                                  | 4.8   | % 
|as a percentage of sales                        |  |                        | 12.5    | % |                        | 12.4   | % |                             | 12.5   | % |                        | 13.2   | % |                                  |       |   
|Selling, general and administrative expenses    |  |                        | 8,884   |   |                        | 1,723  |   |                             | 7,161  |   |                        | 6,802  |   |                                  | 5.3   | % 
|Depreciation and amortization                   |  |                        | 706     |   |                        | 131    |   |                             | 575    |   |                        | 474    |   |                                  | 21.3  | % 
|Bad debt provision                              |  |                        | 66      |   |                        | (118   | ) |                             | 184    |   |                        | 67     |   |                                  | 174.6 | % 
|                                                |  |                        |         |   |                       
|Operating income                                |  |                        | 4,110   |   |                        | 1,049  |   |                             | 3,061  |   |                        | 3,140  |   |                                  | (2.5  | %)
|as a percentage of sales                        |  |                        | 3.7     | % |                        | 4.7    | % |                             | 3.5    | % |                        | 4.0    | % |                                  |       |   
|Non operating income / (expense)                |  |                        |         |   |                        |        |   |                             |        |   |                        |        |   |                                  |       |   
|Interest income                                 |  |                        | 43      |   |                        | 5      |   |                             | 38     |   |                        | 27     |   |                                  | 40.7  | % 
|Interest expense                                |  |                        | (461    | ) |                        | (198   | ) |                             | (263   | ) |                        | (553   | ) |                                  | (52.4 | %)
|Realized and unrealized foreign exchange losses |  |                        | (46     | ) |                        |       |   |                             | (46    | ) |                        | (2     | ) |                                  |       |   
|Other income / (expense), net                   |  |                        | 20      |   |                        | 15     |   |                             | 5      |   |                        | (14    | ) |                                  |       |   
|                                                |  |                        |         |   |                       
|Income before taxes                             |  |                        | 3,666   |   |                        | 871    |   |                             | 2,795  |   |                        | 2,598  |   |                                  | 7.6   | % 
|as a percentage of sales                        |  |                        | 3.3     | % |                        | 3.9    | % |                             | 3.2    | % |                        | 3.3    | % |                                  |       |   
|Income tax expense                              |  |                        | 556     |   |                        | 109    |   |                             | 447    |   |                        | 681    |   |                                  |       |   
|                                                |  |                        |         |   |                       
|Net income                                      |  |                        | 3,110   |   |                        | 762    |   |                             | 2,348  |   |                        | 1,917  |   |                                  | 22.5  | % 
|as a percentage of sales                        |  |                        | 2.8     | % |                        | 3.4    | % |                             | 2.7    | % |                        | 2.4    | % |                                  |       |   



Net Sales



Total net sales for the three months ended March 31, 2004, increased by 39.0%, or $31.0
million, to $110.5 million. Net sales from continuing operations increased by 10.8%, or $8.6 million, to $88.1 million from $79.5 million for the same period in 2003. The increase in sales has been driven by the competitive pricing strategy we have
applied over the past few months. The objective of this strategy has been to gain market share from our competitors.



Gross Profit



Total gross profit on net sales increased by 31.3% or $3.3 million. When expressed as a percentage of sales, total gross margins decreased from 13.2% to 12.5%. This overall reduction is due to two factors. Firstly we
are addressing the market in an assertive manner so as to gain market share from our competitors. Secondly, the impending EU accession has meant that the supply chain is running down its inventories of EU sourced imported product while waiting for
changes to import duty classifications due to come into effect from May 1, 2004.



14



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##### Table of Contents

Operating Expenses



|                                                                           |  |                        |   |  |                        |    |  |                             |   |  |                        |  
|-------------------------------------------------------------------------- |  | ---------------------- | - |  | ---------------------- | -- |  | --------------------------- | - |  | ---------------------- | -
|                                                                           |  | TotaloperationsQ1 2004 |   |  | Operationsacquired2003 |    |  | ContinuingoperationsQ1 2004 |   |  | TotaloperationsQ1 2003 |  
|Selling, general and administrative expenses, as a percentage of net sales |  | 8.0                    | % |  | 7.7                    | %  |  | 8.1                         | % |  | 8.6                    | %
|Bad debt expense, as a percentage of net sales                             |  | 0.1                    | % |  | (0.5                   | %) |  | 0.2                         | % |  | 0.1                    | %



Total selling, general and
administrative expenses (SG&A) increased by 30.6% from $6.8 million in the first quarter of 2003 to $8.9 million in the first quarter of 2004. When expressed as a percentage of net sales, SG&A fell from 8.6% to 8.0%. This improvement is
attributable to the roll out of our cost reduction program based on centralization of core overhead supplies and the initial re-organization of the depot structure.



Total bad debt expense stayed constant year on year at around $66,000. As previously disclosed, in the absence of any special circumstances,
the Company reserves for doubtful accounts are based on the ageing of the total accounts receivable.



Operating Income



Total operating income
increased by 30.9%, or $1.0 million, to $4.1 million for the three months ended March 31, 2004. When expressed as a percentage of sales, total operating income was 3.7% for the three months ended March 31, 2004, as compared to 4.0% for the same
period of 2003. Operating income from continuing operations decreased by 2.5% to $3.1 million for the three months ended March 31, 2004. As a percentage of sales, operating income from continuing operations decreased to 3.4% for the three months
ended March 31, 2004 as compared to 4.0% for the same period of 2003. The increase in operating income was due to the factors noted above namely increased sales and margin combined with an increase of selling, general and administrative expenses.



Interest Expense



Total interest expense decreased $92,000, or 16.6%, from $553,000 for the three months ended
March 31, 2003 to $461,000 for the three months ended March 31, 2004. Interest cover, being the number of times interest expense is covered by operating income and calculated as operating income divided by interest expense, has increased
from 5.7 times in the first quarter of 2003 to 9.2 times in the first quarter of 2004. As mentioned in the overview, the Company makes extensive use of COD rebates when the discount offered is significantly better than the effective rate of bank
borrowing.



Net Realized and Unrealized Foreign Currency Losses



The net change relating to foreign exchange losses increased from $2,000
in the first quarter of 2003 to $46,000 in the first quarter of 2004. These losses were the result of translation movements on trade payables to non Polish suppliers offset by opposite movements in inventories denominated in currencies other than
the Polish zloty and held in the Companys bonded warehouse.



Income
Tax



The total tax charge for the period ending March 31, 2004 was
$556,000, or 15.2% of pre-tax profits. For the same period in 2003, the charge was $681,000, or 26.2% of pre-tax profits. This reduction in effective rate is due to the change in base corporation tax rates from 27% down to 19%. This change came into
effect from January 1, 2004.



Net Income



Total net income increased by 62.2% from $1,917,000 in the first quarter of 2003 to
$3,110,000 in the first quarter of 2004. Net income from continuing operations increased by 22.5%. These increases were due to the factors noted above.



15



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##### Table of Contents

Statement of Liquidity and Capital Resources



During the three months ended March 31, 2004, the Companys operating activities generated cash of $10.8 million compared to generating
$0.5 million of cash during the three months ended March 31, 2003. Operating cash flows are generated by :



| |  | cash earnings defined as net earnings as adjusted for non-cash expense/income items such as depreciation.
| | - | ---------------------------------------------------------------------------------------------------------



| |  | movements in working capital, primarily the movements of trade receivables and payables as well as inventory.
| | - | -------------------------------------------------------------------------------------------------------------



| |  | movements in other current assets and liabilities.
| | - | --------------------------------------------------



The sources and uses of operating cash flows can be summarized as:



|                                              |  |                             |        |      |   |        |  
|--------------------------------------------- |  | --------------------------- | ------ | ---- | - | ------ | -
|                                              |  | Three months endedMarch 31, |       
|                                              |  | 2004                        |        | 2003 |  
|Cash earnings                                 |  | $                           | 3,842  |      | $ | 2,429  |  
|Movements in working capital                  |  |                             | 6,630  |      |   | (1,609 | )
|Movements in other current assets/liabilities |  |                             | 359    |      |   | (315   | )
|                                              |  |                             |        |      |   |        |  
|Net cash generated by operating activities    |  | $                           | 10,831 |      | $ | 505    |  



The high sales concentration in
December 2003 has flowed through to cash in the first quarter of 2004. Cash earnings increased 58% year on year mainly because of the increase in earnings as explained earlier. The Companys drive for market share has been achieved through the
use of pricing mechanisms as opposed to a relaxing of credit terms extended to clients. Debtor days as at March 31, 2004 (based on gross trade receivables excluding VAT) were 53.4 down from a December value of 56.0 days. Inventory rotation also
improved falling from 28.5 days as at December 2003 to 24.7 days as at March 31, 2004. Our COD policy has stabilized at around 50% to 60% of domestic purchases. This means the movement of the amount invested into trade payables in the first quarter
2004 has not been as significant as it was in the first quarter of 2003.



The
Company completed its investment in its new regional distribution center at the end of March 2004. This represents the bulk of the capital expenditure during the period.



Financing activities absorbed $6.7 million during the quarter as the Company reduced its short term debt following its strong sales in the
fourth quarter of 2003.



The Company believes that its operating cash flow,
together with borrowings under available credit facilities will be sufficient for its operating needs, other than future acquisitions, and debt servicing requirements as they come due.



As stated above, the movements on the comprehensive loss account are driven by the effect of exchange rate movements in Polish zloty
denominated equity items within the balance sheet. Because of the size of the movement in this period, the Company has disclosed the item separately.



STATEMENT ON INFLATION AND CURRENCY FLUCTUATIONS



Inflation in Poland is projected at 2.4% for the whole of 2004, compared to actual inflation of 1.7% in 2003. For the first three months of 2004, the yearly inflation was
1.7%.



The Companys operating cash flows and substantially all of its
assets are denominated in Polish zloty. This means that the Company is exposed to translation risk both on its balance sheet and income statement. 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 income statement is by the movement of the average exchange rate used to restate the income statement from Polish zloty to U.S. Dollars. The amounts shown as FX gains of losses on the face of
the income statement relate only to realized gains losses on non Polish zloty denominated transactions.



During the three months ended March 31, 2004, the exchange rate for the Polish zloty versus the U.S. Dollar weakened from 3.7405 to 3.8813 or 3.8%.



16



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##### Table of Contents

Critical Accounting Policies and Estimates



General



The Companys discussion and analysis of its financial condition and results of operations are based upon the Companys consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of revenues,
expenses, assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different
assumptions and conditions.



Revenue Recognition



Revenue derived from beverage distribution is recognized when goods are shipped to customers
and where a delivery acceptance note is signed by the customer has been returned to the Company. Sales are stated net turnover related customer discounts, an estimate of customer returns and sales tax (VAT). Revenue derived from retail operations
(less than 1% of the total revenue) is recognized at the point of sale.



Expenses



The Company recognizes expenses in the period in
which either the cost is incurred or in the period in which the associated revenue and margin have been recognized.



Provisions for Doubtful Debt



Allowances for doubtful accounts are based upon the aging of the accounts receivable. The Company makes an allowance based on a sliding scale which culminates in a 100%
provision once the receivable is past due over one year. Where circumstances require, the Company will make specific provisions for any excess not provided for under the general provision. When a final determination is delivered to the Company
regarding the non-recovery of a receivable, the Company then charges the unrecoverable amount to the accumulated allowance.



Inventory



Inventories are stated at the lower of cost (first-in, first-out method) or market. Costs include customs duty (where applicable), and all costs associated with bringing the inventory for sale. These costs include
importation, handling, storage and transport costs, and exclude rebates received from suppliers, which are reflected as reductions to closing inventory.



Because of the nature of the products supplied by the Company great attention is paid to inventory rotation. Where goods are estimated to be obsolete or unmarketable they
are written down to a value reflecting the saleable value in their relevant condition.



Goodwill



As required by FASB 142, acquired goodwill is no
longer amortized. Instead the Company assesses the recoverability of its goodwill at least once a year or whenever adverse events, changes in circumstances or business climate for individual business units may not be sufficient to support the
recorded goodwill. If undiscounted cash flows are not sufficient to support the goodwill, an impairment charge will be recognized to reduce the carrying value of the goodwill to an appropriate level. No such charge has been considered necessary in
the period being reported.



Intangible Assets



Intangible assets consist primarily of acquired trademarks. The trademarks are amortized on a
straight-line basis over the period of expected economic benefit which is currently estimated at 10 years. The Company assesses the recoverability of its trademark at least once a year or whenever adverse events, changes in circumstances or business
climate for individual business units may not be sufficient to support the recorded trademark. If undiscounted cash flows are not sufficient to support the recorded trademark, an impairment charge will be recognized to reduce the carrying value of
the recorded trademark to an appropriate level. No such charge has been considered necessary in the period being reported.



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Employee Stock Based Compensation



The Company accounts for grants to employees under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock
Issued to Employees,and related interpretations. For grants to employees, no stock-based employee compensation cost is reflected in net income, as all options granted under the Companys option plan had an exercise price at least equal to
the market value of the underlying common stock on the date of the grant.



Marketing and Promotion Costs



The Company does not involve
itself in any direct advertising but manages the marketing and promotional budgets of suppliers for which it has exclusive distribution rights. These marketing and promotion costs, which are recorded under Selling, General and Administrative costs,
are expensed as incurred and include free promotional product and point of sales merchandise. Where free product is given to a customer outside of any promotional activity it is included in cost of goods sold.



Shipping and Handling Costs



Where the Company has incurred costs in shipping goods to its warehouse facilities these
costs are recorded as part of inventory and then to cost of goods sold. Shipping and handling costs associated with distribution to customers are recorded in Selling, General and Administrative costs and are expensed as incurred.



Deferred Taxation



Deferred tax assets and liabilities are recorded where there is a timing delay in accounting for an income or expense item through the
Companys statutory tax records. The deferred tax assets and liabilities are calculated on a quarterly basis and the resulting asset or liability is accounted for on the balance sheet. Where a deferred tax asset arises the Company assesses
whether a valuation allowance is required to be made. Valuation allowances are provided when it is more likely than not that some or all of the deferred tax asset will not be realized in the future. The Company has concluded that a valuation
allowance is not considered necessary in the period being reported.



ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Foreign Currency Risk. Currently none of the Companys loans are denominated in currencies other than its functional currency, the Polish Zloty. As a result in the three months ended March 31, 2004, the Company
is not exposed to any risk from foreign exchange movements as regards its funding. The Company is exposed as regards its carrying of non Polish zloty balances for foreign suppliers, export sales and goods in bonded warehouses. As at March 31, 2004,
these balances were not significant.



ITEM 4. CONTROLS AND PROCEDURES



CEO and CFO
Certifications.Exhibits 31.1 and 31.2 of this quarterly report are the certifications of the CEO and the CFO required by Rules 13a-14 and 15d-14 the Securities Exchange Act of 1934 (the Certifications). This section of the quarterly
report contains the information concerning the evaluation of Disclosure Controls and changes to Internal Controls referred to in the Certifications and this information should be read in conjunction with the Certifications for a more complete
understanding of the topics presented.



Disclosure Controls and Internal
Controls. Disclosure Controls are procedures that are designed for the purpose of ensuring that information required to be disclosed in the Companys reports filed under the Securities Exchange Act of 1934 (such as this quarterly report),
is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Internal Controls are designed for the purpose of providing reasonable assurance that the Companys transactions are properly
authorized, recorded and reported and that the Companys assets are safeguarded from improper use to permit the preparation of the Companys financial statements in conformity with generally accepted accounting principles.



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Limitations on the Effectiveness of Controls. The Companys management, including the CEO and CFO, does not
expect that the Companys Disclosure Controls or Internal Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Because of the limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Further, the
design of any control system is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of
these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



Changes to Internal Controls.In accordance with the SECs requirements, the CEO and the CFO note that, since the date of their last evaluation, there have
been no significant changes in Internal Controls or in other factors that could significantly affect Internal Controls, including any corrective actions with regard to significant deficiencies and material weaknesses.



Conclusions regarding Disclosure Controls. Based upon the required evaluation of
Disclosure Controls, the CEO and CFO have concluded that, subject to the limitations noted above, the Companys Disclosure Controls are effective to ensure that material information relating to the Company and its consolidated subsidiaries is
made known to management, including the CEO and CFO, particularly during the period when the Companys periodic reports are being prepared.



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PART II.
OTHER INFORMATION



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



(a) Exhibit



|               |  |                                                                                    
|-------------- |  | -----------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit Description                                                                
|3.1            |  | Certificate of Amendment of Certificate of Incorporation                           
|               | 
|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.



(b) Reports on Form
8-K



During the quarter ended March 31, 2004,
the Company filed the following report on Form 8-K;



(i)
February 6, 2004  Reporting revised earnings guidance under Item 9 and filing the associated press release under Item 7.



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SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act Of 1934.





|                   |  |                                                        |  |                                                       
|------------------ |  | ------------------------------------------------------ |  | ------------------------------------------------------
|                   | 
|                   |  | CENTRAL EUROPEAN DISTRIBUTION CORPORATION (registrant)
|                   |  |                                                       
|Date: May 10, 2004 |  | By:                                                    |  | /s/    WILLIAM V. CAREY                               
|                   |  |                                                       
|                   |  |                                                        |  | William V. Carey President and Chief
Executive Officer
|                   |  |                                                       
|Date: May 10, 2004 |  | By:                                                    |  | /s/    NEIL A.M. CROOK                                
|                   |  |                                                        |  | Neil A.M. Crook Chief Financial
Officer               



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