Press Release

March 3, 2014 at 4:05 PM EST

Vector Group Reports Fourth Quarter and Full Year 2013 Financial Results

 

MIAMI--(BUSINESS WIRE)-- Vector Group Ltd. (NYSE:VGR) today announced financial results for the fourth quarter and year ended December 31, 2013.

On December 13, 2013, the Company increased its ownership of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after December 13, 2013, Vector Group consolidates the operations and financial position of Douglas Elliman Realty in its financial statements. The Company had previously accounted for its interest in Douglas Elliman under the equity method of accounting.

GAAP Financial Results

Fourth quarter 2013 revenues were $295.2 million, compared to revenues of $277.6 million in the fourth quarter of 2012. The increase in revenues in 2013 was primarily due to the acquisition of Douglas Elliman and the inclusion of $19.1 million of its revenues, along with $22.7 million of revenues related to the sale of lots at the Company's Escena development in Palm Springs, California. The increase was offset by a $24.3 million decline in revenues in the Company's tobacco business, which was attributable to a decline in unit sales of 11.9% in the fourth quarter of 2013 compared to the fourth quarter of 2012 and was partially offset by higher pricing in the tobacco business. The Company recorded operating income of $62.0 million in the fourth quarter of 2013, compared to operating income of $37.4 million in the fourth quarter of 2012. Net income for the 2013 fourth quarter was $64.0 million, or $0.61 per diluted common share, compared to net income of $16.5 million, or $0.14 per diluted common share, in the 2012 fourth quarter.

For the year ended December 31, 2013, revenues were $1.056 billion, compared to $1.085 billion for 2012. The decline in revenues in 2013 was primarily due to a decline in revenues in the Company's tobacco business of $70.2 million, which was attributable to decreased unit sales of 10.1% in 2013 compared to 2012 and was partially offset by higher pricing. The Company recorded operating income of $112.0 million for 2013, compared to operating income of $154.9 million for 2012. Net income for 2013 was $38.9 million, or $0.41 per diluted common share, compared to net income of $30.6 million, or $0.34 per diluted common share, for 2012.

Non-GAAP Financial Results

The Company's non-GAAP financial results are presented assuming the Company's acquisition of its additional 20.59% interest in Douglas Elliman Realty, LLC, and the related purchase accounting adjustments, occurred prior to January 1, 2012. Non-GAAP financial results also include adjustments for litigation settlement and judgment expenses in the Company's tobacco business, a one-time charge in 2013 related to the extinguishment of the Company's 11% Senior Secured Notes due 2015 and non-cash interest items associated with the Company's convertible debt. Reconciliations of non-GAAP financial results to the comparable GAAP financial results for the three and twelve months ended December 31, 2013 and 2012 are included in Tables 2, 3, 4, 5 and 6.

Three months ended December 31, 2013 compared to the three months ended December 31, 2012

Fourth quarter 2013 Pro-forma Adjusted Revenues (as described in Table 2 attached hereto) were $397.3 million compared to $383.5 million in 2012. The increase was primarily due to the $22.7 million of revenues from the sale of Escena lots and an increase in real estate revenues at Douglas Elliman of $15.3 million. The decline in revenues in the Company's tobacco business of $24.3 million partially offset these amounts.

Pro-forma Adjusted EBITDA attributed to Vector Group Ltd. (as described below and in Table 3 attached hereto) was $76.8 million for the fourth quarter of 2013 as compared to $50.8 million for the fourth quarter of 2012. The increase in Pro-forma Adjusted EBITDA attributed to Vector Group Ltd. was primarily attributable to a $20.2 million gain from the sale of Escena lots and higher profit margins at both Douglas Elliman and in the tobacco segment.

Pro-forma Adjusted Net Income (as described below and in Table 4 attached hereto) was $37.2 million or $0.36 per diluted share for the three months ended December 31, 2013 and $13.0 million or $0.14 per diluted share for the three months ended December 31, 2012.

Pro-forma Adjusted Operating Income (as described below and in Table 5 attached hereto) was $76.3 million for the three months ended December 31, 2013 and $47.1 million for the three months ended December 31, 2012.

Twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012

Pro-forma Adjusted Revenues (as described in Table 2 attached hereto) were $1.474 billion for the year ended December 31, 2013 compared to $1.463 billion in 2012. The increase was primarily due to an increase of $58.8 million in real estate revenues at Douglas Elliman and $22.7 million of real estate revenues from the sale of Escena lots. The decline in revenues in the Company's tobacco business of $70.2 million partially offset these amounts.

Pro-forma Adjusted EBITDA attributed to Vector Group Ltd. (as described below and in Table 3 attached hereto) was $238.2 million for the year ended December 31, 2013 as compared to $195.0 million for the year ended December 31, 2012. The increase in Pro-forma Adjusted EBITDA attributed to Vector Group Ltd. in 2013 was primarily attributable to the $20.2 million gain from the sale of Escena lots and higher profit margins at both Douglas Elliman and in the tobacco segment.

Pro-forma Adjusted Net Income (as described below and in Table 4 attached hereto) was $84.0 million or $0.89 per diluted share for the year ended December 31, 2013 and $57.7 million or $0.64 per diluted share for the year ended December 31, 2012.

Pro-forma Adjusted Operating Income (as described below and in Table 5 attached hereto) was $234.8 million for the year ended December 31, 2013 and $185.1 million for the year ended December 31, 2012.

Tobacco Business Financial Results

For the fourth quarter and year ended December 31, 2013, the Company's tobacco business had revenues of $253.3 million and $1.014 billion, respectively, compared to $277.6 million and $1.085 billion for the fourth quarter and year ended December 31, 2012, respectively. Operating income was $49.5 million for the fourth quarter of 2013 and $112.0 million for the year ended 2013, compared to operating income of $45.8 million and $176.0 million, respectively, for the fourth quarter and year ended December 31, 2012. The results for the fourth quarter and year ended December 31, 2013 included pre-tax income of $0.9 million and $11.8 million related to the MSA Dispute Settlement, which were offset by pre-tax litigation settlement and judgment expense described above of $0.2 million and $88.1 million, respectively. Adjusting for these items, Tobacco Adjusted Operating Income (as described below and included in Table 6 attached hereto) for the fourth quarter and year ended December 31, 2013 was $48.9 million and $188.3 million, respectively, a 6.8% and 7.0% increase, respectively, over Tobacco Adjusted Operating Income for the fourth quarter and year ended December 31, 2012 of $45.8 million and $176.0 million.

Non-GAAP Financial Measures

Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income are financial measures not prepared in accordance with generally accepted accounting principles ("GAAP"). The Company believes that Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income are important measures that supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. The Company believes Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income provide investors and analysts with a useful measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. Management uses Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income 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 (Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income) of the Company's business. While management considers Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income 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, Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income are susceptible to varying calculations and the Company's measurement of Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income may not be comparable to those of other companies. Attached hereto as Tables 2, 3, 4, 5 and 6 is information relating to the Company's Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusting Operating Income for the years ended December 31, 2013, and 2012, and the three months ended December 31, 2013 and 2012.

Conference Call to Discuss Fourth Quarter and Full Year 2013 Results

As previously announced, the Company will host a conference call and webcast on Monday, March 3, 2014 at 4:30 P.M. (ET) to discuss fourth quarter and full year 2013 results. Investors can access the call by dialing 800-859-8150 and entering 37407008 as the conference ID number. The call will also be available via live webcast at www.investorcalendar.com. 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 March 3, 2014 through April 3, 2014. To access the replay, dial 877-656-8905 and enter 37407008 as the conference ID number. The archived webcast will also be available at www.investorcalendar.com for one year.

Vector Group is a holding company that indirectly owns Liggett Group LLC, Vector Tobacco Inc. and Zoom E-Cigs LLC and directly owns New Valley LLC, which owns a controlling interest in Douglas Elliman Realty, LLC. Additional information concerning the company is available on the Company's website, www.VectorGroupLtd.com.

[Financial Tables Follow]

             
TABLE 1
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

 

             
        Three Months Ended   Twelve Months Ended
        December 31,   December 31,
        2013   2012   2013   2012
        (Unaudited)        
Revenues*       $ 295,162     $ 277,563     $ 1,056,200     $ 1,084,546  
                     
Expenses:                    
Cost of goods sold*       198,809     207,770     747,186     823,452  
Operating, selling, administrative and general expenses       34,175     32,427     108,872     106,161  
Litigation settlement and judgment expense       193         88,106    

 
Operating income       61,985     37,366     112,036     154,933  
                     
Other income (expenses):                    
Interest expense       (33,102 )   (31,435 )   (132,147 )   (110,102 )
Loss on extinguishment of debt               (21,458 )    
Change in fair value of derivatives embedded within convertible debt       10,636     13,544     18,935     (7,476 )
Acceleration of interest expense related to debt conversion       (12,414

)

      (12,414 )   (14,960 )
Equity income (loss) on long-term investments       1,296     (56 )   2,066     (1,261 )
Gain on sale of investment securities available for sale       42         5,152     1,640  
Equity income from non-consolidated real estate businesses       6,151     8,795     22,925     29,764  
Gain on acquisition of Douglas Elliman       60,842         60,842      
Other, net       2,399     323     7,550     1,179  
                     
Income before provision for income taxes       97,835     28,537     63,487     53,717  
Income tax expense       34,082     12,052     24,795     23,095  
                     
Net income       63,753     16,485     38,692     30,622  
                     
Net loss attributed to non-controlling interest       252         252      
                     
Net income attributed to Vector Group Ltd.       $ 64,005     $ 16,485     $ 38,944     $ 30,622  
                     
Per basic common share:                    
                     
Net income applicable to common shares attributed to Vector Group Ltd.       $ 0.67     $ 0.18     $ 0.41     $ 0.34  
                     
Per diluted common share:                    
                     
Net income applicable to common shares attributed to Vector Group Ltd.       $ 0.61     $ 0.14     $ 0.41     $ 0.34  
                     
Cash distributions and dividends declared per share       $ 0.40     $ 0.36     $ 1.54     $ 1.47  
                                     

* Revenues and Cost of goods sold include excise taxes of $113,409, $128,746, $456,703 and $508,027, respectively.

                                     
             
TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF PRO-FORMA ADJUSTED REVENUES
(Unaudited)

(Dollars in Thousands)

 

             
        Three Months Ended   Twelve Months Ended
        December 31,   December 31,
        2013   2012   2013   2012
             
Revenues       $ 295,162     $ 277,563     $ 1,056,200     $ 1,084,546
                     
Reclassification of revenues as a result of the consolidation of Douglas Elliman (a)       100,732     105,899     416,453     378,175
Purchase accounting adjustments (b)       1,357         1,357    
Total adjustments       102,089     105,899     417,810     378,175
                     
Pro-forma Adjusted Revenues       $ 397,251     $ 383,462     $ 1,474,010     $ 1,462,721
                     
Pro-forma Adjusted Revenue by Segment                    
Tobacco       $ 253,303     $ 277,563     $ 1,014,341     $ 1,084,546
Real Estate ©       143,948     105,899     459,669     378,175
Total       $ 397,251     $ 383,462     $ 1,474,010     $ 1,462,721
                                   
       

a.

 

Represents revenues of Douglas Elliman Realty, LLC from October 1, 2013 to December 13, 2013, the three months ended December 31, 2012, from January 1, 2013 to December 13, 2013 and the year ended December 31, 2012. On December 13, 2013, the Company increased its ownership of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after December 13, 2013, the Company consolidates the operations and financial position of Douglas Elliman Realty, LLC in its financial statements. The Company had previously accounted for its interest in Douglas Elliman Realty, LLC under the equity method and revenues from Douglas Elliman Realty, LLC was not included in the Company's revenues.

             
       

b.

 

Amounts represent one-time purchase accounting adjustments to fair value for deferred revenues recorded in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC on December 13, 2013.

             
       

c.

 

Includes Pro-Forma Adjusted Revenues from Douglas Elliman Realty, LLC of $121,214 and $105,899 for the three months ended December 31, 2013 and 2012, respectively, and $436,935 and $378,175 for the twelve months ended December 31, 2013 and 2012, respectively. Also includes Pro-Forma Adjusted Revenues from the sale of Escena lots of $22,734 for the three and twelve months ended December 31, 2013.

             
TABLE 3
VECTOR GROUP LTD. AND SUBSIDIARIES
COMPUTATION OF PRO-FORMA ADJUSTED EBITDA
(Unaudited)

(Dollars in Thousands)

 

             
        Three Months Ended   Twelve Months Ended
        December 31,   December 31,
        2013   2012   2013   2012
             
Net income attributed to Vector Group Ltd.       $ 64,005     $ 16,485     $ 38,944     $ 30,622  
Interest expense       33,102     31,435     132,147     110,102  
Income tax expense       34,082     12,052     24,795     23,095  
Depreciation and amortization       4,626     2,660     12,631     10,608  
EBITDA       $ 135,815     $ 62,632     $ 208,517     $ 174,427  
Change in fair value of derivatives embedded within convertible debt (a)       (10,636 )   (13,544 )   (18,935 )   7,476  
Equity loss (gain) on long-term investments (b)       (1,296 )   56     (2,066 )   1,261  
Loss (gain) on sale of investment securities available for sale       (42 )       (5,152 )   (1,640 )
Equity income from non-consolidated real estate businesses ©       (6,151 )   (8,795 )   (22,925 )   (29,764 )
Loss on extinguishment of debt               21,458      
Acceleration of interest expense related to debt conversion       12,414         12,414     14,960  
Stock-based compensation expense (d)       586     3,129     2,519     5,563  
Litigation settlement and judgment expense (e)       193         88,106      
Impact of MSA Settlement (f)       (860 )       (11,823 )    
Gain on acquisition of Douglas Elliman       (60,842 )       (60,842 )    
Reclassification of EBITDA as a result of the consolidation of Douglas Elliman (g)       14,244     10,762     48,805     33,858  
Other, net       (2,399 )   (323 )   (7,550 )   (1,179 )
Pro-forma Adjusted EBITDA       $ 81,026     $ 53,917     $ 252,526     $ 204,962  
Pro-forma Adjusted EBITDA attributed to non-controlling interest      

(4,189

)   (3,165 )  

(14,354

)   (9,958 )
Pro-forma Adjusted EBITDA attributed to Vector Group Ltd.       $

76,837

    $ 50,752     $

238,172

    $ 195,004  
                     
Pro-forma Adjusted EBITDA by Segment                    
Tobacco       $ 51,287     $ 48,234     $ 197,847     $ 185,797  
Real Estate (h)      

29,486

    6,488    

52,929

    22,301  
Corporate and Other       (3,936 )   (3,970 )   (12,604 )   (13,094 )
Total       $

76,837

    $ 50,752     $ 238,172     $ 195,004  
                                     
       

a.

 

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

             
       

b.

 

Represents income or losses recognized on long-term investments that the Company accounts for under the equity method.

             
       

c.

 

Represents equity income 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 expenses primarily associated with a comprehensive settlement resolving substantially all of the individual Engle progeny tobacco litigation cases pending in Florida.

             
       

f.

 

Represents the Company's tobacco business's settlement of a long-standing dispute related to the Master Settlement Agreement.

             
       

g.

 

Represents Adjusted EBITDA of Douglas Elliman Realty, LLC from October 1, 2013 to December 13, 2013, the three months ended December 31, 2012, from January 1, 2013 to December 13, 2013 and the year ended December 31, 2012. On December 13, 2013, the Company increased its ownership of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after December 13, 2013, the Company consolidates the operations and financial position of Douglas Elliman Realty, LLC in its financial statements. The Company had previously accounted for its interest in Douglas Elliman Realty, LLC under the equity method, and operating income as well as depreciation and amortization expense from Douglas Elliman Realty, LLC, was not included in the Company's Adjusted EBITDA. Amounts shown include management fees paid from Douglas Elliman Realty, LLC to the Company of $440, $525, $2,165 and $2,300 for the three months ended December 31, 2013 and 2012, respectively, and the years ended December 31, 2013 and 2012, respectively.

             
       

h.

 

Includes $20,186, $0, $20,186 and $0, respectively, of gain related to the Escena lots for the three months ended December 31, 2013 and 2012, respectively, and years ended December 31, 2013 and 2012, respectively. Also includes $13,804, $10,187, $46,640 and $31,558 of Pro-forma Adjusted EBITDA for Douglas Elliman Realty, LLC for the three months ended December 31, 2013 and 2012, respectively, and the years ended December 31, 2013 and 2012, respectively.

             
TABLE 4
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF PRO-FORMA ADJUSTED NET INCOME
(Unaudited)

(Dollars in Thousands, Except Per Share Amounts)

 

             
        Three Months Ended   Twelve Months Ended
        December 31,   December 31,
        2013   2012   2013   2012
             
Net income attributed to Vector Group Ltd.       $ 64,005     $ 16,485     $ 38,944     $ 30,622  
                     
Acceleration of interest expense related to debt conversion       12,414         12,414     14,960  
Change in fair value of derivatives embedded within convertible debt       (10,636 )   (13,544 )   (18,935 )   7,476  
Non-cash amortization of debt discount on convertible debt       10,946     5,796     36,378     18,016  
Loss on extinguishment of 11% Senior Secured Notes due 2015               21,458      
Litigation settlement and judgment expense (a)       193         88,106      
Impact of MSA Settlement (b)       (860 )       (11,823 )    
Interest income from MSA Settlement ©               (1,971 )    
Gain on acquisition of Douglas Elliman Realty, LLC (d)       (60,842 )       (60,842 )    
Adjustment to reflect additional 20.59% of net income from Douglas Elliman Realty, LLC (e)       2,467     1,881     8,557     5,947  
Douglas Elliman Realty, LLC purchase accounting adjustments (f)       1,165         1,165      
Total adjustments       (45,153 )   (5,867 )   74,507     46,399  
                     
Tax expense related to adjustments       18,332     2,383     (29,467 )   (19,332 )
                     
Pro-forma Adjusted Net Income attributed to Vector Group Ltd.       $ 37,184     $ 13,001     $ 83,984     $ 57,689  
                     
Per diluted common share:                    
                     
Pro-forma Adjusted Net Income applicable to common shares attributed to Vector Group Ltd.       $ 0.36     $ 0.14     $ 0.89     $ 0.64  
       

a.

 

Represents expenses primarily associated with a comprehensive settlement resolving substantially all of the individual Engle progeny tobacco litigation cases pending in Florida.

             
       

b.

 

Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.

             
       

c.

 

Represents interest income from the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.

             
       

d.

 

Represents gain associated with the increase of ownership of Douglas Elliman Realty, LLC.

             
       

e.

 

Represents 20.59% of Douglas Elliman Realty LLC's net income from October 1, 2013 to December 13, 2013, the three months ended December 31, 2012, from January 1, 2013 to December 13, 2013 and the year ended December 31, 2012. On December 13, 2013, the Company increased its ownership of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after December 13, 2013, the Company includes an additional 20.59% of Adjusted Net Income from Douglas Elliman Realty, LLC in the Company's Adjusted Net Income.

             
       

f.

 

Amounts represent 70.59% of one-time purchase accounting adjustments to fair value for assets acquired in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC on December 13, 2013.

             
TABLE 5
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF PRO-FORMA ADJUSTED OPERATING INCOME
(Unaudited)

(Dollars in Thousands)

 

             
        Three Months Ended   Twelve Months Ended
        December 31,   December 31,
        2013   2012   2013   2012
             
Operating income       $ 61,985     $ 37,366     $ 112,036     $ 154,933
                     
Litigation settlement and judgment expense (a)       193         88,106    
Impact of MSA Settlement (b)       (860 )       (11,823 )  
Reclassification of operating income as a result of the consolidation of Douglas Elliman Realty, LLC©       13,352     9,747     44,802     30,194
Douglas Elliman purchase accounting adjustments (d)       1,650         1,650    
Total adjustments       14,335     9,747     122,735     30,194
                     
Pro-forma Adjusted Operating Income (e)       $ 76,320     $ 47,113     $ 234,771     $ 185,127
                                   
       

a.

 

Represents expenses primarily associated with a comprehensive settlement resolving substantially all of the individual Engle progeny tobacco litigation cases pending in Florida.

             
       

b.

 

Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.

             
       

c.

 

Represents Adjusted Operating Income of Douglas Elliman Realty, LLC from October 1, 2013 to December 13, 2013, the three months ended December 31, 2012, from January 1, 2013 to December 13, 2013 and the year ended December 31, 2012. On December 13, 2013, the Company increased its ownership of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after December 13, 2013, the Company consolidates the operations and financial position of Douglas Elliman Realty in its financial statements. The Company had previously accounted for its interest in Douglas Elliman under the equity method and operating income from Douglas Elliman Realty, LLC was not included in the Company's operating income. Amounts shown include management fees paid from Douglas Elliman Realty, LLC to the Company of $440, $525, $2,165 and $2,300 for the three months ended December 31, 2013 and 2012, respectively, and the years ended December 31, 2013 and 2012, respectively.

             
       

d.

 

Amounts represent one-time purchase accounting adjustments to fair value for assets acquired in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC on December 13, 2013.

             
       

e.

 

Does not include a reduction for 29.41% non-controlling interest in Douglas Elliman Realty, LLC.

             
TABLE 6
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF TOBACCO ADJUSTED OPERATING INCOME
(Unaudited)

(Dollars in Thousands)

 

             
        Three Months Ended   Twelve Months Ended
        December 31,   December 31,
        2013   2012   2013   2012
             
Operating income from tobacco business       $ 49,540     $ 45,773     $ 112,020     $ 176,017
                     
Litigation settlement and judgment expense (a)       193         88,106    
Impact of MSA Settlement (b)       (860 )       (11,823 )  
Total adjustments       (667 )       76,283    
                     
Tobacco Adjusted Operating Income       $ 48,873     $ 45,773     $ 188,303     $ 176,017
                                   
       

a.

 

Represents expenses primarily associated with a comprehensive settlement resolving substantially all of the individual Engle progeny tobacco litigation cases pending in Florida.

             
       

b.

 

Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.

 

Sard Verbinnen & Co
Paul Caminiti/Emily Deissler
212-687-8080

 

Source: Vector Group Ltd.

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