Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2016

VECTOR GROUP LTD.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)

1-5759
 
65-0949535
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
 
 
4400 Biscayne Boulevard, Miami, Florida
 
33137
(Address of Principal Executive Offices)
 
(Zip Code)

(305) 579-8000
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 






Item 2.02. Results of Operations and Financial Condition

On November 3, 2016, Vector Group Ltd. announced its financial results for the three and nine months ended September 30, 2016. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Current Report on Form 8-K and the Exhibit attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibit

(c)
Exhibit.

Exhibit No.
 
Exhibit
99.1
 
Press Release issued on November 3, 2016






SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
VECTOR GROUP LTD.
 
 
 
By:
/s/ J. Bryant Kirkland III  
 
 
J. Bryant Kirkland III 
 
 
Senior Vice President, Treasurer and Chief Financial Officer 
Date: November 3, 2016



Exhibit


https://cdn.kscope.io/b8f03e644c90bbfe72c85b3f56ce5803-copyofnycsvclogoa01a01a01a02.gif
FOR IMMEDIATE RELEASE
Contact:
 
Emily Deissler/Benjamin Spicehandler/Spencer Waybright
 
 
Sard Verbinnen & Co
 
 
212-687-8080
 
 
Jonathan Doorley/Conrad Harrington
 
 
Sard Verbinnen & Co - Europe
 
 
+44 (0)20 3178 8914
 
 
J. Bryant Kirkland III, Vector Group Ltd.
 
 
305-579-8000
VECTOR GROUP REPORTS THIRD QUARTER 2016 FINANCIAL RESULTS

 
MIAMI, FL, November 3, 2016 - Vector Group Ltd. (NYSE:VGR) today announced financial results for the three and nine months ended September 30, 2016.

GAAP Financial Results

Third quarter 2016 revenues were $459.1 million, compared to revenues of $449.9 million in the third quarter of 2015. The Company recorded operating income of $69.4 million in the third quarter of 2016, compared to operating income of $69.4 million in the third quarter of 2015. Net income attributed to Vector Group Ltd. for the 2016 third quarter was $23.2 million, or $0.18 per diluted common share, compared to net income of $12.5 million, or $0.10 per diluted common share, in the 2015 third quarter.
For the nine months ended September 30, 2016 revenues were $1.278 billion, compared to revenues of $1.227 billion for the nine months ended September 30, 2015. The Company recorded operating income of $202.2 million for the nine months ended September 30, 2016, compared to operating income of $168.9 million for the nine months ended September 30, 2015. Net income attributed to Vector Group Ltd. for the nine months ended September 30, 2016 was $66.5 million, or $0.52 per diluted common share, compared to net income of $51.3 million, or $0.40 per diluted common share for the nine months ended September 30, 2015.

Non-GAAP Financial Measures

Non-GAAP financial measures also include adjustments for purchase accounting associated with the Company's acquisition of its additional 20.59% interest in Douglas Elliman Realty, LLC in December 2013, litigation settlement and judgment expenses in the Tobacco segment, settlements of long-standing disputes related to the Master Settlement Agreement in the Tobacco segment, restructuring and pension settlement expense in the Tobacco segment, stock-based compensation expense (for purposes of Pro-forma Adjusted EBITDA only) 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 nine months ended September 30, 2016 and 2015 are included in Tables 2 through 10.
Three months ended September 30, 2016 compared to the three months ended September 30, 2015
Third quarter 2016 Adjusted Revenues (as described in Table 2 attached hereto) were $459.1 million compared to $450.4 million in 2015.
Adjusted EBITDA attributed to Vector Group (as described below and in Table 3 attached hereto) were $75.1 million for the third quarter of 2016 as compared to $72.5 million for the third quarter of 2015.
Adjusted Net Income (as described below and in Table 4 attached hereto) was $24.3 million or $0.19 per diluted share for the three months ended September 30, 2016 and $13.1 million or $0.10 per diluted share for the three months ended September 30, 2015.





Adjusted Operating Income (as described below and in Table 5 attached hereto) was $71.1 million for the three months ended September 30, 2016 and $70.9 million for the three months ended September 30, 2015.
Nine months ended September 30, 2016 compared to the nine months ended September 30, 2015
For the nine months ended September 30, 2016 Adjusted Revenues (as described in Table 2 attached hereto) were $1.278 billion compared to $1.228 billion in 2015.
Adjusted EBITDA attributed to Vector Group (as described below and in Table 3 attached hereto) were $219.8 million for the nine months ended September 30, 2016 compared to $187.5 million in 2015.
Adjusted Net Income (as described below and in Table 4 attached hereto) was $67.1 million or $0.52 per diluted share for the nine months ended September 30, 2016 and $56.1 million or $0.44 per diluted share for the nine months ended September 30, 2015.
Adjusted Operating Income (as described below and in Table 5 attached hereto) was $207.9 million for the nine months ended September 30, 2016 and $177.8 million for the nine months ended September 30, 2015.
Tobacco Segment Financial Results
For the third quarter 2016, the Tobacco segment had revenues of $274.2 million, compared to $264.2 million for the third quarter 2015. The increase in revenues was primarily due to favorable net pricing variances and a 2.9% increase in unit sales volume.
For the nine months ended September 30, 2016, the Tobacco segment had revenues of $750.7 million, compared to $747.1 million for the nine months ended September 30, 2015. The increase in revenues was primarily driven by favorable net pricing variances partially offset by a 1.7% decline in unit sales volume.
Operating Income from the Tobacco segment was $67.0 million and $194.5 million for the three and nine months ended September 30, 2016 compared to $63.6 million and $169.5 million for the three and nine months ended September 30, 2015, respectively.
Non-GAAP Financial Measures
Tobacco Adjusted Operating Income (described below and included in Table 6 attached hereto) for the third quarter 2016 and 2015 was $66.6 million and $63.2 million, respectively. Tobacco Adjusted Operating Income for the nine months ended September 30, 2016 and 2015 was $196.5 million and $172.8 million, respectively.
For the three months ended September 30, 2016, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 2.31 billion units compared to 2.24 billion units for the three months ended September 30, 2015. For the nine months ended September 30, 2016, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 6.23 billion units compared to 6.34 billion for the nine months ended September 30, 2015.
Liggett's retail market share increased to approximately 3.5% during the nine months ended September 30, 2016. Compared to the nine months ended September 30, 2015, Liggett's retail shipments were flat while the overall industry's retail shipments declined by 2.2%, according to data from Management Science Associates, Inc.
Real Estate Segment Financial Results
For the third quarter 2016, the Real Estate segment had revenues of $184.9 million, compared to $185.6 million for the third quarter 2015. For the nine months ended September 30, 2016, the Real Estate segment had revenues of $527.4 million compared to $478.8 million for the nine months ended September 30, 2015. For third quarter 2016, the Real Estate segment reported net income of $4.7 million, compared to $4.7 million for the third quarter 2015. For the nine months ended September 30, 2016, the Real Estate segment reported net income of $14.3 million compared to $10.2 million for the nine months ended September 30, 2015.
Douglas Elliman's results are included in Vector Group Ltd.'s Real Estate segment.  For the third quarter 2016, Douglas Elliman had revenues of $184.5 million, compared to $185.0 million for the third quarter 2015. For the nine months ended September 30, 2016, Douglas Elliman had revenues of $523.8 million compared to $474.4 million for the nine months ended September 30, 2015. For third quarter 2016, Douglas Elliman reported net income of $8.7 million, compared to $12.4 million for the third quarter 2015. For the nine months ended September 30, 2016, the Douglas Elliman net income of $27.2 million compared to $19.7 million for the nine months ended September 30, 2015.
Non-GAAP Financial Measures
For the third quarter 2016, the Real Estate segment had Adjusted Revenues of $184.9 million, compared to $186.0 million for the third quarter 2015. For the third quarter 2016, Real Estate Adjusted EBITDA attributed to the Company were $9.3 million, compared to $11.2 million for the third quarter 2015.
For the nine months ended September 30, 2016, the Real Estate segment had Adjusted Revenues of $527.4 million compared to $480.3 million for the nine months ended September 30, 2015. The increase in revenues was primarily due to an increase in





commissions and other brokerage income at Douglas Elliman. For the nine months ended September 30, 2016, Real Estate Adjusted EBITDA attributed to the Company were $27.4 million compared to $23.0 million for the nine months ended September 30, 2015.
Douglas Elliman's results are included in Vector Group Ltd.'s Real Estate segment. Douglas Elliman's Adjusted Revenues for the third quarter 2016 were $184.5 million, compared to $185.5 million for the third quarter 2015.
For the third quarter 2016, Douglas Elliman's Adjusted EBITDA were $13.3 million ($9.4 million attributed to the Company), compared to $16.3 million ($11.5 million attributed to the Company) for the third quarter 2015.
For the nine months ended September 30, 2016, Douglas Elliman's Adjusted Revenues were $523.8 million compared to $475.8 million for the nine months ended September 30, 2015.
For the nine months ended September 30, 2016, Douglas Elliman's Adjusted EBITDA were $37.2 million ($26.2 million attributed to the Company), compared to $29.9 million ($21.1 million attributed to the Company) for the nine months ended September 30, 2015.
For the three and nine months ended September 30, 2016 , Douglas Elliman achieved closed sales of approximately $6.8 billion and $18.9 billion, compared to $6.6 billion and $16.2 billion for the three and nine months ended September 30, 2015.
E-cigarettes Segment Financial Results
For the third quarter, the E-cigarette segment had a loss of Adjusted EBITDA of $0.2 million compared to revenues of $0.2 million and a loss of Adjusted EBITDA of $2.1 million for the third quarter 2015.
For the nine months ended September 30, 2016, the E-cigarette segment had a loss of Adjusted EBITDA of $0.4 million compared to revenues of $0.9 million and a loss of Adjusted EBITDA of $7.7 million for the nine months ended September 30, 2015.

Retrospective Adjustment to Previously Reported Results

Amounts previously reported for the three and nine months ended September 30, 2015 have been adjusted, as required by Generally Accepted Accounting Principles, to retroactively apply the equity method of accounting for two investments (Ladenburg Thalmann Financial Services Inc. and Castle Brands, Inc.) since the inception of each investment.  Please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as well as the Company’s Current Report on Form 8-K, dated April 1, 2016, for additional information.

Non-GAAP Financial Measures
Adjusted Revenues, New Valley LLC Adjusted Revenues and Douglas Elliman Realty, LLC Adjusted Revenues (hereafter referred to as "the Non-GAAP Revenue Financial Measures") and Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Income, Tobacco Adjusted Operating Income, New Valley LLC Adjusted EBITDA and Douglas Elliman Realty, LLC Adjusted EBITDA (hereafter, along with the Non-GAAP Revenue Measures referred to as "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. In the case of the Non-GAAP Revenue Financial Measures, management believes revenue growth in its real estate segment is an important measure of growth because increased revenues generally result in increased gross margin as a result of absorption of fixed operating costs, which management believes will lead to increased future profitability as well as increased capacity to expand into new and existing markets. A key strategy of the Company is its ability to move into new markets and therefore gross revenues provide information with respect to the Company's ability to achieve its strategic objectives. Management also believes increased revenues generally indicate increased market share in existing markets as well as expansion into new markets. Consequently, management believes the Non-GAAP Revenue Financial Measures are meaningful indicators of operating performance.






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 10 is information relating to the Company's the Non-GAAP Financial Measures for the three and nine months ended September 30, 2016 and 2015.

Conference Call to Discuss Third quarter 2016 Results

As previously announced, the Company will host a conference call and webcast on Thursday, November 3, 2016 at 8:30 AM. (ET) to discuss third quarter 2016 results. Investors can access the call by dialing 800-859-8150 and entering 21770048 as the conference ID number. The call will also be available via live webcast atwww.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 November 3, 2016 through November 17, 2016. To access the replay, dial 877-656-8905 and enter 21770048 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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
 
(Unaudited)
 
(Unaudited)
Revenues
 
 
 
 
 
 
 
   Tobacco*
$
274,164

 
$
264,170

 
$
750,677

 
$
747,145

   Real estate
184,936

 
185,563

 
527,448

 
478,841

   E-Cigarettes
4

 
201

 
52

 
881

          Total revenues
459,104

 
449,934

 
1,278,177

 
1,226,867

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
   Cost of sales:
 
 
 
 
 
 
 
     Tobacco*
186,343

 
174,418

 
491,688

 
506,315

     Real estate
117,089

 
121,078

 
331,784

 
309,306

     E-Cigarettes
10

 
421

 
23

 
1,518

        Total cost of sales
303,442

 
295,917

 
823,495

 
817,139

 
 
 
 
 
 
 
 
Operating, selling, administrative and general expenses
86,298

 
79,352

 
250,048

 
233,449

Litigation, settlement and judgment expense

 
3,750

 
2,350

 
5,843

Restructuring charges

 
1,548

 
41

 
1,548

Operating income
69,364

 
69,367

 
202,243

 
168,888

 
 
 
 
 
 
 
 
Other income (expenses):
 
 
 
 
 
 
 
Interest expense
(37,365
)
 
(32,898
)
 
(104,454
)
 
(96,405
)
Change in fair value of derivatives embedded within convertible debt
6,112

 
7,044

 
23,222

 
18,760

Equity in earnings (losses) from real estate ventures
1,022

 
(916
)
 
3,328

 
1,278

Equity in losses from investments
(1,526
)
 
(1,103
)
 
(2,108
)
 
(2,654
)
Gain (loss) on sale of investment securities available for sale
142

 
(821
)
 
848

 
12,018

Impairment of investment securities available for sale
(54
)
 
(12,211
)
 
(4,916
)
 
(12,211
)
Other, net
1,328

 
1,342

 
2,956

 
5,100

Income before provision for income taxes
39,023

 
29,804

 
121,119

 
94,774

Income tax expense
13,316

 
13,694

 
46,682

 
37,739

 
 
 
 
 
 
 
 
Net income
25,707

 
16,110

 
74,437

 
57,035

 
 
 
 
 
 
 
 
Net income attributed to non-controlling interest
(2,532
)
 
(3,644
)
 
(7,909
)
 
(5,741
)
 
 
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
23,175

 
$
12,466

 
$
66,528

 
$
51,294

 
 
 
 
 
 
 
 
Per basic common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to common shares attributed to Vector Group Ltd.
$
0.18

 
$
0.10

 
$
0.52

 
$
0.40

 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to common shares attributed to Vector Group Ltd.
$
0.18

 
$
0.10

 
$
0.52

 
$
0.40

 
 
 
 
 
 
 
 
Cash distributions declared per share
$
0.38

 
$
0.36

 
$
1.14

 
$
1.09


* Revenues and cost of sales include federal excise taxes of $116,024, $112,773, $313,731 and $319,044, respectively.





TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
REVENUES AND RECONCILIATION OF ADJUSTED REVENUES
(Unaudited)
(Dollars in Thousands)


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
Revenues
$
1,708,507

 
$
459,104

 
$
449,934

 
$
1,278,177

 
$
1,226,867

 
 
 
 
 
 
 
 
 
 
Purchase accounting adjustments (a)
481

 

 
481

 

 
1,444

Total adjustments
481

 

 
481

 

 
1,444

 
 
 
 
 
 
 
 
 
 
Adjusted Revenues (b)
$
1,708,988

 
$
459,104

 
$
450,415

 
$
1,278,177

 
$
1,228,311

 
 
 
 
 
 
 
 
 
 
Revenues by Segment
 
 
 
 
 
 
 
 
 
Tobacco (b)
$
1,021,293

 
$
274,164

 
$
264,170

 
$
750,677

 
$
747,145

E-cigarettes
(2,799
)
 
4

 
201

 
52

 
881

Real Estate (c)
690,013

 
184,936

 
185,563

 
527,448

 
478,841

Corporate and Other

 

 

 

 

Total (b)
$
1,708,507

 
$
459,104

 
$
449,934

 
$
1,278,177

 
$
1,226,867

 
 
 
 
 
 
 
 
 
 
Adjusted Revenues by Segment
 
 
 
 
 
 
 
 
 
Tobacco (b)
$
1,021,293

 
$
274,164

 
$
264,170

 
$
750,677

 
$
747,145

E-cigarettes
(2,799
)
 
4

 
201

 
52

 
881

Real Estate (c)
690,494

 
184,936

 
186,044

 
527,448

 
480,285

Corporate and Other

 

 

 

 

Total (b)
$
1,708,988

 
$
459,104

 
$
450,415

 
$
1,278,177

 
$
1,228,311


                              

a.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
b.
Includes excise taxes of $432,073 for the last twelve months ended September 30, 2016 and $116,024, $112,773, $313,731 and $319,044 for the three and nine months ended September 30, 2016 and 2015, respectively.
c.
Includes Adjusted Revenues from Douglas Elliman Realty, LLC of $684,960 for the last twelve months ended September 30, 2016 and $184,453, $185,481, $523,767 and $475,807 for the three and nine months ended September 30, 2016 and 2015, respectively.






TABLE 3
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
74,432

 
$
23,175

 
$
12,466

 
$
66,528

 
$
51,294

Interest expense
128,740

 
37,365

 
32,898

 
104,454

 
96,405

Income tax expense
50,176

 
13,316

 
13,694

 
46,682

 
37,739

Net income attributed to non-controlling interest
9,442

 
2,532

 
3,644

 
7,909

 
5,741

Depreciation and amortization
23,125

 
5,833

 
6,673

 
16,867

 
19,396

EBITDA
$
285,915

 
$
82,221

 
$
69,375

 
$
242,440

 
$
210,575

Change in fair value of derivatives embedded within convertible debt (a)
(28,917
)
 
(6,112
)
 
(7,044
)
 
(23,222
)
 
(18,760
)
Equity in losses from investments (b)
2,135

 
1,526

 
1,103

 
2,108

 
2,654

Loss (gain) on sale of investment securities available for sale
32

 
(142
)
 
821

 
(848
)
 
(12,018
)
Impairment of investment securities available for sale
5,551

 
54

 
12,211

 
4,916

 
12,211

Equity in (earnings) losses from real estate ventures (c)
(4,051
)
 
(1,022
)
 
916

 
(3,328
)
 
(1,278
)
Pension settlement charge

 

 

 

 
1,607

Stock-based compensation expense (d)
9,249

 
2,438

 
1,248

 
7,277

 
3,648

Litigation settlement and judgment expense (e)
16,579

 

 
3,750

 
2,350

 
5,843

Impact of MSA settlement (f)
981

 
(370
)
 
(5,715
)
 
(370
)
 
(5,715
)
Restructuring charges
5,750

 

 
1,548

 
41

 
1,548

Purchase accounting adjustments (g)
2,580

 
1,653

 
366

 
2,201

 
1,056

Other, net
(4,265
)
 
(1,328
)
 
(1,342
)
 
(2,956
)
 
(5,100
)
Adjusted EBITDA
$
291,539

 
$
78,918

 
$
77,237

 
$
230,609

 
$
196,271

Adjusted EBITDA attributed to non-controlling interest
(13,384
)
 
(3,852
)
 
(4,735
)
 
(10,849
)
 
(8,732
)
Adjusted EBITDA attributed to Vector Group Ltd.
$
278,155

 
$
75,066

 
$
72,502

 
$
219,760

 
$
187,539

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
268,086

 
$
69,421

 
$
66,084

 
$
204,292

 
$
181,580

E-cigarettes
(5,776
)
 
(165
)
 
(2,146
)
 
(449
)
 
(7,710
)
Real Estate (h)
44,710

 
13,144

 
15,981

 
38,297

 
31,698

Corporate and Other
(15,481
)
 
(3,482
)
 
(2,682
)
 
(11,531
)
 
(9,297
)
Total
$
291,539

 
$
78,918

 
$
77,237

 
$
230,609

 
$
196,271

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Attributed to Vector Group Ltd. by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
268,086

 
$
69,421

 
$
66,084

 
$
204,292

 
$
181,580

E-cigarettes
(5,776
)
 
(165
)
 
(2,146
)
 
(449
)
 
(7,710
)
Real Estate (i)
31,326

 
9,292

 
11,246

 
27,448

 
22,966

Corporate and Other
(15,481
)
 
(3,482
)
 
(2,682
)
 
(11,531
)
 
(9,297
)
Total
$
278,155

 
$
75,066

 
$
72,502

 
$
219,760

 
$
187,539

                                      

a.
Represents income or losses recognized from changes in the fair value of the derivatives embedded in the Company's convertible debt.
b.
Represents equity in losses recognized from investments that the Company accounts for under the equity method.
c.
Represents equity in (earnings) 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 the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.
g.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
h.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $43,034 for the last twelve months ended September 30, 2016 and $13,297, $16,294, $37,179 and $29,885 for the three and nine months ended September 30, 2016 and 2015, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC's entire Adjusted EBITDA.





i.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $30,378 for the last twelve months ended September 30, 2016 and $9,386, $11,502, $26,245 and $21,096 for the three and nine months ended September 30, 2016 and 2015, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC's Adjusted EBITDA for non-controlling interest.






TABLE 4
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)


 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
Net income attributed to Vector Group Ltd.
$
23,175

 
$
12,466

 
$
66,528

 
$
51,294

 
 
 
 
 
 
 
 
Change in fair value of derivatives embedded within convertible debt
(6,112
)
 
(7,044
)
 
(23,222
)
 
(18,760
)
Non-cash amortization of debt discount on convertible debt
10,167

 
7,187

 
27,623

 
19,646

Litigation settlement and judgment expense (a)

 
3,750

 
2,350

 
5,843

Pension settlement charge

 

 

 
1,607

Impact of interest expense capitalized to real estate ventures, net
(3,276
)
 

 
(8,111
)
 

Impact of MSA settlement (b)
(370
)
 
(5,715
)
 
(370
)
 
(5,715
)
Restructuring charges

 
1,548

 
41

 
1,548

Douglas Elliman Realty, LLC purchase accounting adjustments (c)
1,511

 
1,351

 
2,568

 
3,945

Total adjustments
1,920

 
1,077

 
879

 
8,114

 
 
 
 
 
 
 
 
Tax expense related to adjustments
(780
)
 
(448
)
 
(357
)
 
(3,358
)
 
 
 
 
 
 
 
 
Adjusted Net Income attributed to Vector Group Ltd.
$
24,315

 
$
13,095

 
$
67,050

 
$
56,050

 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd.
$
0.19

 
$
0.10

 
$
0.52

 
$
0.44

 
 
 
 
 
 
 
 

                                      

a. Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.
b.
Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.
c.
Represents 70.59% of purchase accounting adjustments in the periods presented for assets acquired in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.

    








TABLE 5
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED OPERATING INCOME
(Unaudited)
(Dollars in Thousands)


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
Operating income
$
233,275

 
$
69,364

 
$
69,367

 
$
202,243

 
$
168,888

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
16,579

 

 
3,750

 
2,350

 
5,843

Pension settlement charge

 

 

 

 
1,607

   Restructuring expense
5,750

 

 
1,548

 
41

 
1,548

Impact of MSA settlement (b)
981

 
(370
)
 
(5,715
)
 
(370
)
 
(5,715
)
Douglas Elliman Realty, LLC purchase accounting adjustments (c)
5,563

 
2,141

 
1,913

 
3,638

 
5,588

Total adjustments
28,873

 
1,771

 
1,496

 
5,659

 
8,871

 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income (d)
$
262,148

 
$
71,135

 
$
70,863

 
$
207,902

 
$
177,759


                                      

a.
Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.
b.
Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.
c.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
d.
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
AND TOBACCO ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
Tobacco Adjusted Operating Income:
 
 
 
 
 
 
 
 
 
Operating income from tobacco segment
$
234,351

 
$
66,974

 
$
63,630

 
$
194,473

 
$
169,515

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
16,579

 

 
3,750

 
2,350

 
5,843

Pension settlement charge

 

 

 

 
1,607

   Restructuring expense
5,750

 

 
1,548

 
41

 
1,548

Impact of MSA settlement (b)
981

 
(370
)
 
(5,715
)
 
(370
)
 
(5,715
)
Total adjustments
23,310

 
(370
)
 
(417
)
 
2,021

 
3,283

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted Operating Income
$
257,661

 
$
66,604

 
$
63,213

 
$
196,494

 
$
172,798


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Operating income from tobacco segment
$
234,351

 
$
66,974

 
$
63,630

 
$
194,473

 
$
169,515

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
16,579

 

 
3,750

 
2,350

 
5,843

Pension settlement charge

 

 

 

 
1,607

   Restructuring expense
5,750

 

 
1,548

 
41

 
1,548

Impact of MSA settlement (b)
981

 
(370
)
 
(5,715
)
 
(370
)
 
(5,715
)
Total adjustments
23,310

 
(370
)
 
(417
)
 
2,021

 
3,283

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted Operating Income
257,661

 
66,604

 
63,213

 
196,494

 
172,798

 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
10,341

 
2,796

 
2,871

 
7,735

 
8,717

Stock-based compensation expense
84

 
21

 

 
63

 
65

Total adjustments
10,425

 
2,817

 
2,871

 
7,798

 
8,782

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted EBITDA
$
268,086

 
$
69,421

 
$
66,084

 
$
204,292

 
$
181,580



                                      

a.
Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.
b.
Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.






TABLE 7
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF REAL ESTATE SEGMENT (NEW VALLEY LLC) ADJUSTED REVENUES
(Unaudited)
(Dollars in Thousands)


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
Real Estate Segment (New Valley LLC) revenues
$
690,013

 
$
184,936

 
$
185,563

 
$
527,448

 
$
478,841

 
 
 
 
 
 
 
 
 
 
Purchase accounting adjustments (a)
481

 

 
481

 

 
1,444

Total adjustments
481

 

 
481

 

 
1,444

 
 
 
 
 
 
 
 
 
 
Real Estate Segment (New Valley LLC) Adjusted Revenues (b)
$
690,494

 
$
184,936

 
$
186,044

 
$
527,448

 
$
480,285


                              

a.
Amounts represent purchase accounting adjustments recorded in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC., which occurred in 2013.
b.
Includes Adjusted Revenues from Douglas Elliman Realty, LLC of $684,960 for the last twelve months ended September 30, 2016 and $184,453, $185,481, $523,767 and $475,807 for the three and nine months ended September 30, 2016 and 2015, respectively.







TABLE 8
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF REAL SEGMENT (NEW VALLEY LLC) ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
Net income attributed to Vector Group Ltd. from subsidiary non-guarantors (a)
$
15,744

 
$
4,721

 
$
4,695

 
$
14,291

 
$
10,215

Interest expense (a)
17

 
7

 
1

 
14

 
4

Income tax expense (a)
10,877

 
2,430

 
3,395

 
9,891

 
7,904

Net income attributed to non-controlling interest (a)
9,442

 
2,532

 
3,644

 
7,909

 
5,741

Depreciation and amortization
11,089

 
2,647

 
3,388

 
7,872

 
9,372

EBITDA
$
47,169

 
$
12,337

 
$
15,123

 
$
39,977

 
$
33,236

Loss (income) from non-guarantors other than New Valley LLC
109

 
8

 
(1
)
 
84

 
66

Equity in (earnings) losses from real estate ventures (b)
(4,051
)
 
(1,022
)
 
916

 
(3,328
)
 
(1,278
)
Purchase accounting adjustments (c)
2,580

 
1,653

 
366

 
2,201

 
1,056

Other, net
(1,172
)
 
136

 
(305
)
 
(704
)
 
(1,286
)
Adjusted EBITDA
$
44,635

 
$
13,112

 
$
16,099

 
$
38,230

 
$
31,794

Adjusted EBITDA attributed to non-controlling interest
(13,384
)
 
(3,852
)
 
(4,735
)
 
(10,849
)
 
(8,732
)
Adjusted EBITDA attributed to New Valley LLC
$
31,251

 
$
9,260

 
$
11,364

 
$
27,381

 
$
23,062

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
 
 
Real Estate (d)
$
44,710

 
$
13,144

 
$
15,981

 
$
38,297

 
$
31,698

Corporate and Other
(75
)
 
(32
)
 
118

 
(67
)
 
96

Total (f)
$
44,635

 
$
13,112

 
$
16,099

 
$
38,230

 
$
31,794

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Attributed to New Valley LLC by Segment
 
 
 
 
 
 
 
 
 
Real Estate (e)
$
31,326

 
$
9,292

 
$
11,246

 
$
27,448

 
$
22,966

Corporate and Other
(75
)
 
(32
)
 
118

 
(67
)
 
96

Total (f)
$
31,251

 
$
9,260

 
$
11,364

 
$
27,381

 
$
23,062

             
a.
Amounts are derived from Vector Group Ltd.'s Consolidated Financial Statements. See Note entitled "Vector Group Ltd.'s Condensed Consolidating Financial Information" contained in Vector Group Ltd.'s Form 10-K and Form 10-Q for the year ended December 31, 2015 and the quarterly period ended September 30, 2016, respectively.
b.
Represents equity in (earnings) losses recognized from the Company's investment in certain real estate businesses that are not consolidated in its financial results.
c.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
d.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $43,034 for the last twelve months ended September 30, 2016 and $13,297, $16,294, $37,179 and $29,885 for the three and nine months ended September 30, 2016 and 2015, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC's entire Adjusted EBITDA.
e.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $30,378 for the last twelve months ended September 30, 2016 and $9,386, $11,502, $26,245 and $21,096 for the three and nine months ended September 30, 2016 and 2015, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC's Adjusted EBITDA for non-controlling interest.
f.
New Valley's Adjusted EBITDA does not include an allocation of Vector Group Ltd.'s "Corporate and Other" segment's expenses (for purposes of computing Adjusted EBITDA contained in Table 3 of this press release) of $15,481 for the last twelve months ended September 30, 2016 and $3,482, $2,682, $11,531 and $9,297 for the three and nine months ended September 30, 2016 and 2015, respectively.






TABLE 9
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF DOUGLAS ELLIMAN REALTY, LLC ADJUSTED REVENUES
(Unaudited)
(Dollars in Thousands)


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Douglas Elliman Realty, LLC revenues
$
684,479

 
$
184,453

 
$
185,000

 
$
523,767

 
$
474,363

 
 
 
 
 
 
 
 
 
 
Purchase accounting adjustments (a)
481

 

 
481

 

 
1,444

Total adjustments
481

 

 
481

 

 
1,444

 
 
 
 
 
 
 
 
 
 
Douglas Elliman Realty, LLC Adjusted Revenues
$
684,960

 
$
184,453

 
$
185,481

 
$
523,767

 
$
475,807

                              

a.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.






TABLE 10
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
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net income attributed to Douglas Elliman Realty, LLC
$
29,631

 
$
8,684

 
$
12,437

 
$
27,181

 
$
19,713

Interest expense
1

 

 

 

 
3

Income tax expense
904

 
311

 
349

 
949

 
876

Depreciation and amortization
10,756

 
2,549

 
3,329

 
7,608

 
9,195

Douglas Elliman Realty, LLC EBITDA
$
41,292

 
$
11,544

 
$
16,115

 
$
35,738

 
$
29,787

Equity income from real estate ventures (a)
(1,029
)
 
(235
)
 
(211
)
 
(992
)
 
(908
)
Purchase accounting adjustments (b)
2,580

 
1,653

 
366

 
2,201

 
1,056

Other, net
191

 
335

 
24

 
232

 
(50
)
Douglas Elliman Realty, LLC Adjusted EBITDA
$
43,034

 
$
13,297

 
$
16,294

 
$
37,179

 
$
29,885

Douglas Elliman Realty, LLC Adjusted EBITDA attributed to non-controlling interest
(12,656
)
 
(3,911
)
 
(4,792
)
 
(10,934
)
 
(8,789
)
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to Real Estate Segment
30,378

 
9,386

 
11,502

 
26,245

 
21,096

             
a.
Represents equity income recognized from the Company's investment in certain real estate businesses that are not consolidated in its financial results.
b.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.