Press Release

May 8, 2020 at 6:45 AM EDT

Vector Group Reports First Quarter 2020 Financial Results

MIAMI--(BUSINESS WIRE)--May 8, 2020-- Vector Group Ltd. (NYSE:VGR) today announced financial results for the three months ended March 31, 2020.

GAAP Financial Results

First quarter 2020 revenues were $454.5 million, compared to revenues of $420.9 million for the first quarter of 2019. The Company recorded operating income of $53.3 million for the first quarter of 2020, compared to operating income of $42.6 million for the first quarter of 2019. Net loss attributed to Vector Group Ltd. for the first quarter of 2020 was $3.2 million, or $(0.03) per diluted common share, compared to net income of $15.0 million, or $0.08 per diluted common share, for the first quarter of 2019.

Non-GAAP Financial Measures

Non-GAAP financial measures also include adjustments for the derivative associated with the 2018 acquisition of 29.41% of Douglas Elliman Realty, LLC, litigation settlements and judgments, impairment charges of goodwill and intangible assets, settlements of long-standing disputes related to the Master Settlement Agreement in the Tobacco segment, net interest expense capitalized to real estate ventures, stock-based compensation expense (for purposes of Adjusted EBITDA only) and non-cash interest expense associated with the Company’s convertible debt. Reconciliations of non-GAAP financial measures to the comparable GAAP financial results for the three months ended March 31, 2020 and 2019 are included in Tables 2 through 7.

Three months ended March 31, 2020 compared to the three months ended March 31, 2019

Adjusted EBITDA attributed to Vector Group Ltd. (as described in Table 2 attached hereto) were $60.2 million for the first quarter of 2020, compared to $49.7 million for the first quarter of 2019.

Adjusted Net Income (as described in Table 3 attached hereto) was $39.9 million, or $0.27 per diluted share, for the first quarter of 2020, and $13.0 million, or $0.07 per diluted share, for the first quarter of 2019.

Adjusted Operating Income (as described in Table 4 attached hereto) was $53.3 million for the first quarter of 2020, compared to $42.6 million for the first quarter of 2019.

Tobacco Segment Financial Results

For the first quarter of 2020, the Tobacco segment had revenues of $287.1 million, compared to $256.8 million for the first quarter of 2019.

Operating Income from the Tobacco segment was $69.2 million for the three months ended March 31, 2020 compared to $60.1 million for the three months ended March 31, 2019.

Non-GAAP Financial Measures

Tobacco Adjusted Operating Income (as described in Table 5 attached hereto) for the first quarter of 2020 was $69.2 million, compared to $60.1 million for the for the first quarter of 2019.

For the three months ended March 31, 2020, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 2.25 billion units, compared to 2.08 billion units for the first quarter of 2019.

Liggett’s retail market share increased to 4.3% for the three months ended March 31, 2020, compared to 4.2% for the three months ended March 31, 2019. Compared to the three months ended March 31, 2019, Liggett’s retail shipments increased by 2.2% while the overall industry’s retail shipments declined by 0.4%, according to data from Management Science Associates, Inc.

Real Estate Segment Financial Results

For the first quarter of 2020, the Real Estate segment had revenues of $167.4 million, compared to $164.2 million for the first quarter of 2019. For the first quarter of 2020, the Real Estate segment reported a net loss of $54.4 million, compared to a net loss of $9.1 million for the first quarter of 2019.

Douglas Elliman’s results are included in Vector Group Ltd.’s Real Estate segment. For the first quarter of 2020, Douglas Elliman had revenues of $165.6 million, compared to $161.9 million for the first quarter of 2019. For the first quarter of 2020, Douglas Elliman reported a net loss of $69.0 million, compared to a net loss of $10.4 million for the first quarter of 2019.

Results for the first quarter of 2020 for the Real Estate segment and Douglas Elliman included non-cash impairment charges of $58.3 million.

Non-GAAP Financial Measures

For the first quarter of 2020, Real Estate Adjusted EBITDA attributed to the Company (as described in Table 6 attached hereto) were a loss of $6.9 million, compared to a loss of $7.9 million for the first quarter of 2019.

For the first quarter of 2020, Douglas Elliman’s Adjusted EBITDA (as described in Table 7 attached hereto) were a loss of $7.7 million, compared to a loss of $9.0 million for the first quarter of 2019.

For the three months ended March 31, 2020, Douglas Elliman achieved closed sales of approximately $5.9 billion compared to $5.8 billion for the three months ended March 31, 2019.

Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Income, Tobacco Adjusted Operating Income, Tobacco Adjusted EBITDA, New Valley LLC Adjusted EBITDA and Douglas Elliman Realty, LLC Adjusted EBITDA (“the Non-GAAP Financial Measures”) are financial measures not prepared in accordance with generally accepted accounting principles (“GAAP”). The Company believes that the Non-GAAP Financial Measures are important measures that supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. The Company believes the Non-GAAP Financial Measures provide investors and analysts with a useful measure of operating results unaffected by differences in capital structures and ages of related assets among otherwise comparable companies.

Management uses the Non-GAAP Financial Measures as measures to review and assess operating performance of the Company’s business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (the Non-GAAP Financial Measures) of the Company’s business. While management considers the Non-GAAP Financial Measures to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating income, net income and cash flows from operations. In addition, the Non-GAAP Financial Measures are susceptible to varying calculations and the Company’s measurement of the Non-GAAP Financial Measures may not be comparable to those of other companies. Attached hereto as Tables 2 through 7 is information relating to the Company’s Non-GAAP Financial Measures for the three months ended March 31, 2020 and 2019.

Conference Call to Discuss First Quarter 2020 Results

As previously announced, the Company will host a conference call and webcast on Friday, May 8, 2020 at 8:30AM (ET) to discuss its first quarter 2020 results. Investors can access the call by dialing 877-271-1828 and entering 52181623 as the conference ID number. The call will also be available via live webcast at https://www.webcaster4.com/Webcast/Page/2271/34015. Webcast participants should allot extra time to register before the webcast begins.

A replay of the call will be available shortly after the call ends on May 8, 2020 through May 22, 2020. To access the replay, dial 877-919-4059 and enter 52181623 as the conference ID number. The archived webcast will also be available at https://www.webcaster4.com/Webcast/Page/2271/34015 for one year.

About Vector Group Ltd.

Vector Group is a holding company for Liggett Group LLC, Vector Tobacco Inc., New Valley LLC, and Douglas Elliman Realty, LLC. Additional information concerning the company is available on the Company’s website, www.VectorGroupLtd.com.

Forward-Looking and Cautionary Statements

This press release includes forward-looking statements within the meaning of the federal securities law. All statements other than statements of historical or current facts, including statements regarding the current or anticipated impact of the COVID-19 pandemic on our business, made in this document are forward-looking. We identify forward-looking statements in this document by using words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may be,” “objective,” “plan,” “seek,” “predict,” “project” and “will be” and similar words or phrases or their negatives. Forward-looking statements reflect our current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons. In particular, the extent, duration and severity of the spread of the COVID-19 pandemic and economic consequences stemming from the COVID-19 crisis (including a potential significant economic contraction) as well as related risks and the impact of any of the foregoing on our business, results of operations and liquidity could affect our future results and cause actual results to differ materially from those expressed in forward-looking statements.

Risks and uncertainties that could cause our actual results to differ significantly from our current expectations are described in our 2019 Annual Report on Form 10-K and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. We undertake no responsibility to publicly update or revise any forward-looking statement except as required by applicable law.

[Financial Tables Follow]

TABLE 1

VECTOR GROUP LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

 

 

Three Months Ended

 

March 31,

 

2020

 

2019

 

(Unaudited)

Revenues:

 

 

 

Tobacco*

$

 

287,069

 

 

$

 

256,756

 

Real estate

 

167,419

 

 

 

164,168

 

Total revenues

 

454,488

 

 

 

420,924

 

 

 

 

 

Expenses:

 

 

 

Cost of sales:

 

 

 

Tobacco*

 

197,290

 

 

 

177,303

 

Real estate

 

113,333

 

 

 

108,717

 

Total cost of sales

 

310,623

 

 

 

286,020

 

 

 

 

 

Operating, selling, administrative and general expenses

 

90,517

 

 

 

92,314

 

Operating income

 

53,348

 

 

 

42,590

 

 

 

 

 

Other income (expenses):

 

 

 

Interest expense

 

(35,627

)

 

 

(37,520

)

Change in fair value of derivatives embedded within convertible debt

 

3,330

 

 

 

10,349

 

Impairments of goodwill and intangible assets

 

(58,252

)

 

 

Equity in losses from real estate ventures

 

(6,505

)

 

 

(2,439

)

Equity in earnings from investments

 

50,152

 

 

 

1,362

 

Other, net

 

(10,655

)

 

 

7,440

 

(Loss) income before provision for income taxes

 

(4,209

)

 

 

21,782

 

Income tax (benefit) expense

 

(978

)

 

 

6,749

 

 

 

 

 

Net (loss) income

 

(3,231

)

 

 

15,033

 

 

 

 

 

Net income attributed to non-controlling interest

 

 

 

(80

)

 

 

 

 

Net (loss) income attributed to Vector Group Ltd.

$

 

(3,231

)

 

$

 

14,953

 

 

 

 

 

Per basic common share:

 

 

 

 

 

 

 

Net (loss) income applicable to common share attributed to Vector Group Ltd.

$

 

(0.03

)

 

$

 

0.09

 

 

 

 

 

Per diluted common share:

 

 

 

 

 

 

 

Net (loss) income applicable to common share attributed to Vector Group Ltd.

$

 

(0.03

)

 

$

 

0.08

 

 

* Revenues and cost of sales include federal excise taxes of $113,139 and $104,633, respectively.

TABLE 2

VECTOR GROUP LTD. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED EBITDA

(Unaudited)

(Dollars in Thousands)

 

 

LTM

 

Three Months Ended

 

March 31,

 

March 31,

 

2020

 

2020

 

2019

 

 

 

 

Net income (loss) attributed to Vector Group Ltd.

$

 

82,790

 

 

$

 

(3,231

)

 

$

 

14,953

 

Interest expense

 

136,555

 

 

 

35,627

 

 

 

37,520

 

Income tax expense (benefit)

 

25,086

 

 

 

(978

)

 

 

6,749

 

Net (loss) income attributed to non-controlling interest

 

(39

)

 

 

 

 

80

 

Depreciation and amortization

 

17,718

 

 

 

4,575

 

 

 

4,708

 

EBITDA

$

 

262,110

 

 

$

 

35,993

 

 

$

 

64,010

 

Change in fair value of derivatives embedded within convertible debt (a)

 

(19,406

)

 

 

(3,330

)

 

 

(10,349

)

Equity in earnings from investments (b)

 

(65,790

)

 

 

(50,152

)

 

 

(1,362

)

Equity in losses from real estate ventures (c)

 

23,354

 

 

 

6,505

 

 

 

2,439

 

Stock-based compensation expense (d)

 

9,291

 

 

 

2,258

 

 

 

2,436

 

Litigation settlement and judgment expense (e)

 

990

 

 

 

 

 

Impairments of goodwill and intangible assets (f)

 

58,252

 

 

 

58,252

 

 

 

Other, net

 

(3,210

)

 

 

10,655

 

 

 

(7,440

)

Adjusted EBITDA attributed to Vector Group Ltd.

$

 

269,892

 

 

$

 

60,181

 

 

$

 

49,734

 

 

 

 

 

 

 

Adjusted EBITDA Attributed to Vector Group Ltd. by Segment

 

 

 

 

 

Tobacco

$

 

279,571

 

 

$

 

71,228

 

 

$

 

62,122

 

Real Estate (g)

 

7,101

 

 

 

(6,910

)

 

 

(7,908

)

Corporate and Other

 

(16,780

)

 

 

(4,137

)

 

 

(4,480

)

Total

$

 

269,892

 

 

$

 

60,181

 

 

$

 

49,734

 

a.

Represents income recognized from changes in the fair value of the derivatives embedded in the Company’s convertible debt.

b.

Represents equity in earnings recognized from investments that the Company accounts for under the equity method. Included in the amount are equity earnings from Castle Brands Inc. of $16,427 and Ladenburg Thalmann Financial Services of $52,148 for the twelve months ended March 31, 2020 and Ladenburg Thalmann Financial Services of $53,052 for the three months ended ended March 31, 2020.

c.

Represents equity in losses recognized from the Company’s investment in certain real estate businesses that are not consolidated in its financial results.

d.

Represents amortization of stock-based compensation.

e.

Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.

f.

Represents non-cash intangible asset impairment charges within the Real Estate segment related to the Douglas Elliman Realty, LLC reporting unit and trademark.

g.

Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $6,620 for the last twelve months ended March 31, 2020, losses of $7,704 and $8,991 for the three months ended March 31, 2020 and 2019, respectively.

TABLE 3

VECTOR GROUP LTD. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED NET INCOME

(Unaudited)

(Dollars in Thousands, Except Per Share Amounts)

 

 

Three Months Ended

 

March 31,

 

2020

 

2019

 

 

Net (loss) income attributed to Vector Group Ltd.

$

 

(3,231

)

 

$

 

14,953

 

 

 

 

 

Change in fair value of derivatives embedded within convertible debt

 

(3,330

)

 

 

(10,349

)

Non-cash amortization of debt discount on convertible debt

 

4,517

 

 

 

8,525

 

Impact of net interest expense capitalized to real estate ventures

 

1,519

 

 

 

(930

)

Adjustment for derivative associated with acquisition of 29.41% of Douglas Elliman Realty, LLC

 

(2,065

)

 

 

Impairments of goodwill and intangible assets (a)

 

58,252

 

 

 

Total adjustments

 

58,893

 

 

 

(2,754

)

 

 

 

 

Tax (expense) benefit related to adjustments

 

(15,713

)

 

 

763

 

 

 

 

 

Adjusted Net Income attributed to Vector Group Ltd.

$

 

39,949

 

 

$

 

12,962

 

 

 

 

 

Per diluted common share:

 

 

 

 

 

 

 

Adjusted Net Income applicable to common shares attributed to Vector Group Ltd.

$

 

0.27

 

 

$

 

0.07

 

Represents non-cash intangible asset impairment charges within the Real Estate segment related to the Douglas Elliman Realty, LLC reporting unit and trademark.

TABLE 4

VECTOR GROUP LTD. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED OPERATING INCOME

(Unaudited)

(Dollars in Thousands)

 

 

 

LTM

 

Three Months Ended

 

March 31,

 

March 31,

 

2020

 

2020

 

2019

 

 

 

 

Operating income

$

 

241,893

 

 

$

 

53,348

 

 

$

 

42,590

 

 

 

 

 

 

 

Litigation settlement and judgment expense (a)

 

990

 

 

 

 

 

Total adjustments

 

990

 

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Income

$

 

242,883

 

 

$

 

53,348

 

 

$

 

42,590

 

a.

Represents accruals for settlements and judgment expenses in the Engle progeny tobacco litigation.

TABLE 5

VECTOR GROUP LTD. AND SUBSIDIARIES

RECONCILIATION OF TOBACCO ADJUSTED OPERATING INCOME

AND TOBACCO ADJUSTED EBITDA

(Unaudited)

(Dollars in Thousands)

 

 

LTM

 

Three Months Ended

 

March 31,

 

March 31,

 

2020

 

2020

 

2019

 

 

 

 

Tobacco Adjusted Operating Income:

 

 

 

 

 

Operating income from tobacco segment

$

 

270,672

 

 

$

 

69,186

 

 

$

 

60,144

 

 

 

 

 

 

 

Litigation settlement and judgment expense (a)

 

990

 

 

 

 

 

Total adjustments

 

990

 

 

 

 

 

 

 

 

 

 

 

Tobacco Adjusted Operating Income

$

 

271,662

 

 

$

 

69,186

 

 

$

 

60,144

 

 

 

LTM

 

Three Months Ended

 

March 31,

 

March 31,

 

2020

 

2020

 

2019

 

 

 

 

 

 

Tobacco Adjusted EBITDA:

 

 

 

 

 

Operating income from tobacco segment

$

 

270,672

 

 

$

 

69,186

 

 

$

 

60,144

 

 

 

 

 

 

 

Litigation settlement and judgment expense (a)

 

990

 

 

 

 

 

Total adjustments

 

990

 

 

 

 

 

 

 

 

 

 

 

Tobacco Adjusted Operating Income

 

271,662

 

 

 

69,186

 

 

 

60,144

 

 

 

 

 

 

 

Depreciation and amortization

 

7,909

 

 

 

2,042

 

 

 

1,957

 

Stock-based compensation expense

 

 

 

 

 

21

 

Total adjustments

 

7,909

 

 

 

2,042

 

 

 

1,978

 

 

 

 

 

 

 

Tobacco Adjusted EBITDA

$

 

279,571

 

 

$

 

71,228

 

 

$

 

62,122

 

a.

Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.

TABLE 6

VECTOR GROUP LTD. AND SUBSIDIARIES

RECONCILIATION OF REAL ESTATE SEGMENT (NEW VALLEY LLC) ADJUSTED EBITDA

(Unaudited)

(Dollars in Thousands)

 

 

LTM

 

Three Months Ended

 

March 31,

 

March 31,

 

2020

 

2020

 

2019

 

 

 

 

Net loss attributed to Vector Group Ltd. from subsidiary non-guarantors (a)

$

(56,787

)

 

$

(54,432

)

 

$

(9,085

)

Interest expense (a)

800

 

 

116

 

 

229

 

Income tax benefit (a)

(22,274

)

 

(19,809

)

 

(3,419

)

Net (loss) income attributed to non-controlling interest (a)

(39

)

 

 

 

80

 

Depreciation and amortization

8,845

 

 

2,313

 

 

2,501

 

EBITDA

$

(69,455

)

 

$

(71,812

)

 

$

(9,694

)

Loss from non-guarantors other than New Valley LLC

52

 

 

29

 

 

28

 

Equity in losses from real estate ventures (b)

23,354

 

 

6,505

 

 

2,439

 

Impairments of goodwill and intangible assets (c)

58,252

 

 

58,252

 

 

 

Other, net

(5,182

)

 

43

 

 

(704

)

Adjusted EBITDA attributed to New Valley LLC

$

7,021

 

 

$

(6,983

)

 

$

(7,931

)

 

 

 

 

 

 

Adjusted EBITDA Attributed to New Valley LLC by Segment

 

 

 

 

 

Real Estate (d)

$

7,101

 

 

$

(6,910

)

 

$

(7,908

)

Corporate and Other

(80

)

 

(73

)

 

(23

)

Total (e)

$

7,021

 

 

$

(6,983

)

 

$

(7,931

)

 

 

 

 

 

 

a.

Amounts are derived from Vector Group Ltd.’s Condensed Consolidated Financial Statements. See Note entitled “Condensed

Consolidating Financial Information” contained in Vector Group Ltd.’s Form 10-Q for the three months ended March 31, 2020.

b.

Represents equity in losses recognized from the Company’s investment in certain real estate businesses that are not consolidated in its financial results.

c.

Represents non-cash intangible asset impairment charges within the Real Estate segment related to the Douglas Elliman Realty, LLC reporting unit and trademark.

d.

Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $6,620 for the last twelve months ended March 31, 2020, losses of $7,704 and $8,991 for the three months ended March 31, 2020 and 2019, respectively.

e.

New Valley’s Adjusted EBITDA does not include an allocation of Vector Group Ltd.’s “Corporate and Other” segment expenses (for purposes of computing Adjusted EBITDA contained in Table 2 of this press release) of $16,780 for the last twelve months ended March 31, 2020, $4,137 and $4,480 for the three months ended March 31, 2020 and 2019, respectively.

TABLE 7

VECTOR GROUP LTD. AND SUBSIDIARIES

RECONCILIATION OF DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA

AND DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA ATTRIBUTED TO REAL ESTATE SEGMENT

(Unaudited)

(Dollars in Thousands)

 

 

LTM

 

Three Months Ended

 

March 31,

 

March 31,

 

2020

 

2020

 

2019

 

 

 

 

Net loss attributed to Douglas Elliman Realty, LLC

$

 

(52,441

)

 

$

 

(69,040

)

 

$

 

(10,414

)

Interest expense

 

6

 

 

 

1

 

 

 

3

 

Income tax expense

 

368

 

 

 

 

 

Depreciation and amortization

 

8,461

 

 

 

2,223

 

 

 

2,400

 

Douglas Elliman Realty, LLC EBITDA

$

 

(43,606

)

 

$

 

(66,816

)

 

$

 

(8,011

)

Equity in earnings from real estate ventures (a)

 

(7,846

)

 

 

(23

)

 

 

(649

)

Impairments of goodwill and intangible assets (b)

 

58,252

 

 

 

58,252

 

 

 

Other, net

 

(180

)

 

 

883

 

 

 

(331

)

Douglas Elliman Realty, LLC Adjusted EBITDA attributed to Real Estate Segment

$

 

6,620

 

 

$

 

(7,704

)

 

$

 

(8,991

)

a.

 

Represents equity in earnings recognized from the Company’s investment in certain real estate businesses that are not consolidated

in its financial results.

b.

Represents non-cash intangible asset impairment charges within the Real Estate segment related to the Douglas Elliman Realty, LLC reporting unit and trademark.

 

Emily Claffey/Benjamin Spicehandler
/Columbia Clancy
Sard Verbinnen & Co
212-687-8080
Conrad Harrington
Sard Verbinnen & Co - Europe
+44 (0)20 3178 8914
J. Bryant Kirkland III, Vector Group Ltd.
305-579-8000

Source: Vector Group Ltd.