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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

OR

FOR THE TRANSITION PERIOD JANUARY 1, 2004 TO JUNE 30, 2004

COMMISSION FILE NUMBER 0-24341

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

(941) 330-1558

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-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 July 28, 2004:

Common Stock ($.01 par value)                          16,348,211 shares

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INDEX

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PART I

FINANCIAL INFORMATION

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except per share information)

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

(in thousands, except per share information)

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 CHANGES

IN STOCKHOLDERS’ EQUITY

(in thousands)

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

(in thousands)

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

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

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 ten distribution centers and 70 satellite branches, the Company offers a 24 hour delivery service of alcoholic beverages to both the on and off trade. Since its incorporation in September 1997, the Company has acquired 100% of the outstanding common stock or 100% of the voting rights of its 14 subsidiaries.

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

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 and six-month periods ended June 30, 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.

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 appreciation of the Polish Zloty against the U.S. Dollar during the six-month period ending June 30, 2004, the Company earned foreign currency translation gains of $166,000 on these equity investments. This movement means that the cumulative balance on the Comprehensive Loss Account is $80,000 as at June 30, 2004 and this has been reflected in the Consolidated Condensed Balance Sheet and Statements of Changes in Stockholders’ Equity. The total of the accumulated other comprehensive profit 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

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

Earnings 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.

During the second quarter of 2004, the Company acquired 100% of the voting rights of Miro Sp. z o.o. based in western Poland. The Company also acquired from Saol Sp. z o.o. the assets and liabilities pertaining to alcohol distribution in the Krakow region. The acquisition was accounted for as a business combination. The Goodwill assumed and the assets acquired are outlined in the table below.

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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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

Assuming the consummation of the Dako-Galant, Panta-Hurt, Multi-Ex, Miro and Saol acquisitions and the issuance of common shares as of January 1, 2003, the unaudited pro-forma consolidated operating results for the three and six months ended June 30, 2003 and June 30, 2004 were as follows:

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’s leading banks so as to improve cash management throughout the group.

All the Company’s banking facilities are denominated in Polish Zloty (though restated here as U.S. Dollar equivalents) and consist of:

Within the total overdraft facilities agreed as at June 30, 2004, $25.6 million remains available. These overdraft facilities have a one year term and are subject to renewal by December 2004. The Company expects that these facilities will be renewed in due course.

The weighted average interest rate for the six months ended June 30, 2004 was 6.42% and for the three months ended June 30, 2004 was 6.61%.

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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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

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 of the future rental payments under the non-cancelable operating lease as of June 30, 2004:

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 with two or three months 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.

During 2004, the Company continued its policy of renewing its transportation fleet by way of capital leases. The future minimum lease payments for the assets under capital lease at June 30, 2004 are as follows:

The Company operates in two tax jurisdictions, Delaware in the United States of America and Poland. All Polish subsidiaries file their own corporate tax returns as well as account for their own deferred tax assets. The Company does not file a tax return in Delaware based upon its consolidated income, simply upon that income statement for transactions occurring in the United States.

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

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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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

The tax liabilities of the Polish subsidiaries (including corporate income tax, Value Added Tax (VAT), social security and other taxes) may be subject to examinations by Polish tax authorities for up to five years from the end of the year the tax is payable. CEDC’s U.S. federal income tax returns are also subject to examination by the U.S. tax authorities. As the applications of tax laws and regulations, to 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.

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 reserved for future issuance, up to 1,612,388 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 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 1.91%; 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.

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:

During the six months ended June 30, 2004, several events occurred to increase the number of shares of common stock used within the earnings per share calculation. These events are briefly listed below.

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CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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

On May 28, 2004, the Company effected a three for two stock split of its common stock to shareholders of record as of May 17, 2004. This stock split was accounted for as a stock dividend. Throughout these financial statements and the notes thereto, the amounts for share and per share data have been amended to reflect this stock split.

Employee options to purchase a total of 170,000 shares were exercised during the first half of 2004.

The Company is involved in litigation from time to time and has claims against it for matters arising in the ordinary course of business. In the opinion of management, the outcome of these litigations 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, should the subsidiary fail to successfully argue its case, there is a risk of a subsequent adjustment totalling $181,000.

There have been no subsequent events of note since June 30, 2004.

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The following analysis should be read in conjunction with the Consolidated Financial Statements and the notes thereto 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” section 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 the six months ended June 30, 2004, Poland saw an increase in its inflation rate, which moved from 0.8% in the first six months of 2003 to 2.9% for the six months ending June 30, 2004. As a consequence, core-lending (3 month WIBOR) rates have increased slightly year over year, from 5.4% as at June 30, 2003 to 5.9% as at June 30, 2004.

High real interest rates have lead to the strengthening of the Polish Zloty versus the U.S. Dollar. At December 31, 2003, the Zloty/U.S. Dollar exchange rate was 3.74, whereas at June 30, 2004, it was 3.72 an appreciation of 0.8% as opposed to a depreciation of 1.5% in the six months ended June 30, 2003.

On May 1, 2004, Poland joined the European Union and, as a result, products manufactured within the EU will no longer be subject to import duties, which should have a positive impact on our future results as the pricing of our imported product portfolio becomes aligned with local product. It is important to note that while Poland joined the EU in May 2004, joining the EU does not automatically result in joining the European Monetary Union (EMU). This is a separate process with different admission requirements. Poland is currently forecasting joining the EMU in 2008.

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, some of these suppliers offer significant discounts if we pay for goods when delivered. The discounts offered are considerably in excess of the effective rate we would pay for 60 day term loans under our bank facilities. Thus, the Company purchases approximately 45% of all goods on a cash-on-delivery basis.

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Results of Operations: Six months ended June 30, 2004 compared with six months ended June 30, 2003

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:

Net Sales and Gross Profit

Total net sales for the six months ended June 30, 2004 increased 31.9%, or $58.9 million, to $243.5 million. Net sales from continuing operations increased by 7.3% or $13.5 million.

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Total gross profit increased 26.2%, or $6.3 million, to $30.4 million though total gross margins have declined by 0.6% to 12.5% which is in line with previously reported Company guidance. Gross profits from continuing operations increased 5.1%, or $1.2 million. As a percentage of sales, gross profit from continuing operations decreased 0.3% to 12.8%.

On May 1, 2004, Poland joined the European Union (EU). This accession finally removes all duty restrictions on goods imported from the EU as well as reducing duty rates for countries with which the EU has regional agreements. For the first six months to 2004 the Company has been able to grow its sales of imported products by over 10% with particularly strong growth in wines which grew nearly 40%. The table below shows the growth in value of imported products over the past six months. The Company is expecting double digit growth rates on its imported products to continue.

Sales of domestic vodka make up 70% of the total sales mix which is consistent with the prior year.

Operating Expenses

Selling, general and administrative expenses from total operations increased 29.4%, or $4.2 million, which was generally in line with total sales growth. The increase attributable to continuing operations were 8.6% and again in line with corresponding sales growth.

Depreciation of fixed assets from total operations increased 45.6% primarily because of the inclusion in the six months ended June 30, 2004 of the acquisitions. The increase attributable to continuing operations was 19.3%. During the six months ending June 30, 2003 and 2004, the Company brought on line its investment in systems upgrades and fleet rotation which has lead to the increase in depreciation.

Provisions for doubtful debts have declined in total by 17.6%. The Company’s provisioning policy is based on the age profile of the underlying trade receivables. Over the past two years, the Company has been applying this policy so as to accumulate and maintain sufficient reserves. As the Company has also been very focused on managing its debt and levels of exposure to specific client and client groups, it has been able to improve its collections.

As a result of the above, total operating expenses increased by 29.0% or $4.6 million. Operating expenses from continuing operations only increased by 9.4%, or $1.5 million.

Operating Income

Operating income from total operations increased 20.7%, or $1.7 million. Operating income from continuing operations decreased 3.2%, or $263,000. The reduction in operating income from continuing operations is more fully explained in the section discussing the results for the three months ended June 30 below. When expressed as a percentage of sales, operating income from continuing operations decreased to 4.1% compared to 4.5% for the six months ended June 30, 2003.

Net Interest Expense

Net interest expense from total operations decreased 3.6%, or $34,000, and net interest expense from continuing operations decreased 31.7%. Net interest cover for total operations has increased from 8.8 times for the six months ended June 30, 2003 to 11.0 times for the same period in 2004.

Net Gains / Losses from Foreign Currency

The net gains from foreign currency transactions have decreased from $102,000 for the six months ended June 30, 2003 to $58,000 for the same period in 2004.

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Income Tax

The total taxation charge has decreased 20.1%, or $0.4 million, to $1.6 million as a result of a reduction in the applicable tax rate (from 27% to 19%) which was partially offset by an increase in total profit before tax of $1.8 million.

Net Income

As a result of the factors noted above, total net income increased 41.9%, or $2.3 million, and net income from continuing operations increased 14.6%, or $0.8 million. When expressed, as a percentage of sales net income, during the six months ended June 30, 2003 was 2.9% where as for the six months ended June 30, 2004, total net income was 3.1% and net income from continuing operations was 3.1%.

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Results of Operations: Three months ended June 30, 2004 compared with three months ended June 30, 2003

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: