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 13, 2018
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 7.01. Regulation FD Disclosure.
Vector Group Ltd. has prepared materials for presentations to investors, including the Morgan Stanley Global Consumer & Retail Conference on November 13, 2018. The materials are furnished (not filed) as Exhibits 99.1, 99.2 and 99.3 to this Current Report on Form 8-K pursuant to Regulation FD.
Non-GAAP Financial Measures
Exhibits 99.1, 99.2 and 99.3 contain the Non-GAAP Financial Measures discussed below.
Please refer to Current Reports on Form 8-K dated November 7, 2018, September 28, 2018, June 14, 2018, November 24, 2017, November 15, 2016 and October 2, 2015 for reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures. Non-GAAP Financial Measures include adjustments for the one-time non-cash benefit from the Tax Cuts and Jobs Act of 2017 arising out of the remeasurement of certain tax assets and liabilities, purchase accounting associated with the Company's acquisition of its additional 20.59% interest in Douglas Elliman Realty, LLC, as well as the related purchase accounting adjustments. Non-GAAP Financial Measures also include adjustments for litigation settlement and judgment expenses in the Tobacco segment, settlements of long-standing disputes related to the Master Settlement Agreement (“MSA”) in the Tobacco segment, restructuring and pension settlement expenses in the Tobacco segment, net interest expense capitalized to real estate ventures, non-cash stock compensation expenses (for purposes of Adjusted EBITDA only) and non-cash interest items associated with the Company's convertible debt.
Adjusted Revenues 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 Adjusted Revenues, 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 Adjusted Revenue is 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.
Adjusted Revenues is defined as revenues plus the additional revenues as a result of the consolidation of Douglas Elliman plus 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. EBITDA is defined as net income before interest, taxes, depreciation and amortization. Adjusted EBITDA is EBITDA, as defined above, and as adjusted for changes in fair value of derivatives embedded with convertible debt, equity gains (losses) on long-term investments, gains (losses) on sale of investment securities available for sale, equity income from non-consolidated real estate businesses, loss on extinguishment of debt, acceleration of interest expense related to debt conversion, stock-based compensation expense (for purposes of Adjusted EBITDA only), litigation settlement and judgment expense, settlements of long-standing disputes related to the MSA, restructuring and pension settlement expense, and other charges.
New Valley LLC (“New Valley”), the real estate subsidiary of the Company, owns real estate and 70.59% of Douglas Elliman, the largest residential brokerage firm in the New York metropolitan area, as well as a minority stake in numerous real estate investments. New Valley LLC Adjusted EBITDA is defined as the portion of Adjusted EBITDA that relates to New Valley. New Valley's Adjusted EBITDA does not include an allocation of expenses from the Corporate and Other segment of Vector Group Ltd.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements, which involve risk and uncertainties. The words "could", “believe,” “expect,” “estimate,” “may,” “will,” “could,” “plan,” or “continue” and similar expressions are intended to identify forward-looking statements. The Company’s actual results could differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as supplemented by Form 10-Q for the quarterly period ended September 30, 2018. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Current Report on Form 8-K. The Company undertakes no obligation to (and expressly disclaims any obligation to) revise or update any forward-looking statement, whether as a result of new information, subsequent events, or otherwise (except as may be required by law), in order to reflect any event or circumstance which may arise after the date of this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibit
(d) Exhibit.
Exhibit No. | Exhibit | |
Investor presentation of Vector Group Ltd. dated November 2018 (furnished pursuant to Regulation FD). | ||
Fact Sheet of Vector Group Ltd. dated November 2018 (furnished pursuant to Regulation FD). | ||
Fact Sheet of New Valley LLC dated November 2018 (furnished pursuant to Regulation FD). | ||
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 13, 2018
INVESTOR PRESENTATION November 2018
DISCLAIMER This document and any related oral presentation does not constitute an offer or invitation to subscribe for, purchase or otherwise acquire any equity securities or debt securities instruments of Vector Group Ltd. (“Vector,” “Vector Group Ltd.” or “the Company”) and nothing contained herein or its presentation shall form the basis of any contract or commitment whatsoever. The distribution of this document and any related oral presentation in certain jurisdictions may be restricted by law and persons into whose possession this document or any related oral presentation comes should inform themselves about, and observe, any such restriction. Any failure to comply with these restrictions may constitute a violation of the laws of any such other jurisdiction. The information contained herein does not constitute investment, legal, accounting, regulatory, taxation or other advice and the information does not take into account your investment objectives or legal, accounting, regulatory, taxation or financial situation or particular needs. You are solely responsible for forming your own opinions and conclusions on such matters and the market and for making your own independent assessment of the information. You are solely responsible for seeking independent professional advice in relation to the information and any action taken on the basis of the information. The following presentation may contain "forward-looking statements,” including any statements that may be contained in the presentation that reflect Vector’s expectations or beliefs with respect to future events and financial performance, such as the expectation that the tobacco transition payment program could yield substantial incremental free cash flow. These forward- looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement made by or on behalf of the Company, including the risk that changes in Vector’s capital expenditures impact its expected free cash flow and the other risk factors described in Vector’s annual report on Form 10-K for the year ended December 31, 2017 and quarterly report on Form 10-Q for the quarterly period ended September 30, 2018, as filed with the SEC. Please also refer to Vector's Current Reports on Forms 8-K, filed on October 2, 2015, November 15, 2016, November 24, 2017, March 1, 2018, June 14, 2018, August 7, 2018, September 28, 2018 and November 7, 2018 (Commission File Number 1-5759) as filed with the SEC for information, including cautionary and explanatory language, relating to Non-GAAP Financial Measures in this Presentation labeled "Adjusted". Results actually achieved may differ materially from expected results included in these forward-looking statements as a result of these or other factors. Due to such uncertainties and risks, potential investors are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date on which such statements are made. The Company disclaims any obligation to, and does not undertake to, update or revise and forward- looking statements in this presentation. 2
INVESTMENT HIGHLIGHTS & PORTFOLIO Overview . Diversified Holding Company with two unrelated, but complementary, businesses with iconic brand names: tobacco (Liggett Group) and real estate (Douglas Elliman) . History of strong earnings, and Adjusted EBITDA has increased from $178.3 million in 2011(1) to $243.2 million for the twelve months ended September 30, 2018(2) . Tobacco Adjusted EBITDA of $247.4 million for the twelve months ended September 30, 2018 (3) . Douglas Elliman, which is a 70.59%-owned subsidiary, produced Revenues of $754.2 million and Adjusted EBITDA of $14.2 million for the twelve months ended September 30, 2018(4) . Diversified portfolio of consolidated and non-consolidated real estate investments at New Valley . Maintains substantial liquidity with cash, marketable securities and long-term investments of $648.5 million ($452.8 million at Parent Company) as of September 30, 2018(5) . Uninterrupted quarterly cash dividends since 1995 and an annual 5% stock dividend since 1999 . Seasoned management team with average tenure of 25 years with Vector Group . Management team and directors beneficially own approximately 12% of Vector Group . Perpetual cost advantage over the largest U.S. tobacco companies – annual cost advantage ranged between $163 million and $169 million from 2012 to 2017(6) (1) Vector’s Net income for the year ended December 31, 2011 was $74.5M. Adjusted EBITDA is a Non-GAAP Financial Measure. Please refer to Exhibit 99.2 of the Company’s Current Report on Form 8-K, dated November 15, 2016 (Table 2) for a reconciliation of Net income to Adjusted EBITDA as well as the Disclaimer to this document on Page 2. (2) Vector’s Net income for the twelve months ended September 30, 2018 was $79.8 million. Adjusted EBITDA is a Non-GAAP Financial Measure. Please refer to Exhibit 99.1 of the Company’s Current Report on Form 8-K, filed on November 7, 2018 (Table 2), for a reconciliation of Net income to Adjusted EBITDA as well as the Disclaimer to this document on Page 2. (3) All “Liggett” and “Tobacco” financial information in this presentation includes the operations of Liggett Group LLC, Vector Tobacco Inc., and Liggett Vector Brands LLC unless otherwise noted. Tobacco Adjusted EBITDA is a Non-GAAP Financial Measure and is defined in Tables 2 and 5 of Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on November 7, 2018. (4) Douglas Elliman’s Net income was $8.7 million for the twelve months ended September 30, 2018. Adjusted EBITDA is a Non-GAAP Financial Measure. Please refer to Exhibit 99.1 of the Company’s Current Report on Form 8-K, filed on November 7, 2018, for a reconciliation of Adjusted EBITDA to net income (Table 7) as well as the Disclaimer to this document. (5) At September 30, 2018 the total amount ($648.5 million) includes cash at Douglas Elliman, a 70.59%-owned subsidiary, of $89.9 million and cash at Liggett, a wholly-owned subsidiary of $105.9 million. Excludes real estate investments. (6) Cost advantage applies only to cigarettes sold below applicable market share exemption. 3
TOBACCO OPERATIONS 4
LIGGETT GROUP OVERVIEW . Fourth-largest U.S. tobacco company; founded in 1873 — Core Discount Brands – Eagle 20’s, Pyramid, Grand Prix, Liggett Select and Eve — Partner Brands – USA, Bronson and Tourney . Consistent and strong cash flow —Tobacco Adjusted EBITDA of $247.4 million for the twelve months ended September 30, 2018(1) —Low capital requirements with capital expenditures of $5.2 million related to tobacco operations for the twelve months ended September 30, 2018 . Current cost advantage of approximately $0.70 per pack compared to the largest U.S. tobacco companies expected to maintain volume and drive profit in core brands — Pursuant to the MSA, Liggett has no payment obligations unless its market share exceeds a market share exemption of approximately 1.65% of total cigarettes sold in the United States, and Vector Tobacco has no payment obligations unless its market share exceeds a market share exemption of approximately 0.28% of total cigarettes sold in the United States — MSA exemption annual cost advantage ranged between $163 million and $169 million for Liggett and Vector Tobacco from 2012 to 2017. (1) Tobacco Adjusted EBITDA is a Non-GAAP Financial Measure and is defined in the Company’s Current Report on Forms 8-K, filed on August 7, 2018. Please also refer to the Disclaimer to this document on Page 2. 5
LIGGETT GROUP HISTORY Signed the MSA as a Subsequent Relaunched Repositioned Liggett maintains its long-term Participating Manufacturer, which deep discount Eagle 20’s as a focus by balancing market share established perpetual cost brand Grand national deep and profit growth, which advantage over three largest U.S. Prix discount brand maximizes long-term Tobacco tobacco companies Adjusted EBITDA. 1998 1999 2005 2009 2013 Today Introduced deep discount brand Liggett Select taking advantage Repositioned Pyramid as a deep-discount brand in response of the Company’s cost advantage resulting from the MSA to a large Federal Excise Tax increase $300 5.0% (1) $250 3.8% 3.9% Share DomesticMarket A 4.0% D 3.7% 3.5% 3.5% 3.4% IT 3.3% 3.3% 3.3% B ) E s $200 n d o e 2.7% t 3.0% illi s 2.4% 2.5% 2.4% 2.5% 2.5% M 2.2% 2.3% 2.2% dju $ $150 ( A $268 o $253 $243 $247 2.0% cc 1.5% a $209 $100 1.3% 1.2% $186 $198 $170 $174 Tob $165 $144 $146 $158 $158 $121 $127 $130 1.0% $50 $111 $79 $77 $46 $0 0.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 LTM 9/30/18 Source: MSA CRA wholesale shipment database. Note: The Liggett and Vector Tobacco businesses have been combined into a single segment for all periods since 2007. (1) Tobacco Adjusted EBITDA is a Non-GAAP Financial Measure and is defined in Table 2 of Exhibit 99.1 of the Company’s Current Reports on Form 8-K, filed on August 7, 2018 as well as Table 2 to Exhibit 99.2 of the Company’s Current Report son Form 8-K, 6 dated October 2, 2015, November 15, 2016 , March 1, 2018, June 14, 2018, September 28, 2018 and November 7, 2018.
ADJUSTED U.S. TOBACCO INDUSTRY MARKET SHARE 15.00% Newport – acquired by RAI in 2015 12.47% Brands acquired by ITG in 2015 12.15% Legacy brands 10.00% 9.45% 8.48% 8.81% 9.26% 6.74% 5.00% 6.76% 50.0% 48.8% 47.4% 3.91% 46.7% 46.5% 3.36% 2.44% 2.36% 3.65% 40.0% 2.89% 2.71% 1.72% 0.00% 32.4% 32.4% 2003 2006 2014 LTM 9/30/18 2003 2006 2014 LTM 9/30/18 30.0% 28.9% 28.4% 12.4% 13.3% 7.7% 8.8% 20.0% 12.2% 12.5% 9.5% 10.0% 21.2% 19.6% 19.9% 19.1% 8.5% 9.3% 8.8% 6.7% 3.4% 3.9% 6.8% 2.4% 2.4% 2.9% 3.7% 2.7% 0.0% 1.7% 2003 2006 2014 LTM 2003 2006 2014 LTM 2003 2006 2014 LTM 2003 2006 2014 LTM 9/30/18 9/30/18 9/30/18 9/30/18 PHILIP MORRIS REYNOLDS USA AMERICAN ITG BRANDS LIGGETT GROUP Source: The Maxwell Report’s sales estimates for the cigarette Industry for the years ended 2003 (February 2004), 2006 (February 2007) and 2014 (March 2015) and internal estimates for LTM 9/30/18. (1) All 2018 percentages are from internal company estimates. Actual Market Share in 2003, 2006 and 2014 reported in the Maxwell Report for Reynolds American was 29.6%, 27.6% and 23.1%, respectively, and, for ITG Brands, was 2.9%, 3.7%. and 2.7%, respectively. Adjusted market share has been computed by Vector Group Ltd. by applying historical market share of each brand to the present owner of brand. Thus, the graph assumes each company owned its current brands on January 1, 2003. The legacy brands market share of Reynolds American in 2003 includes the market share of Brown & Williamson, which was acquired by Reynolds American in 2004. In 2015, Reynolds American acquired Lorillard Tobacco Company, which manufactured the Newport brand, and sold a portfolio of brands, including the Winston, Salem, Kool and Maverick brands to ITG Brands. 7 (2) Does not include smaller manufacturers, whose cumulative market shares were 9.8%, 7.9%, 8.8% and 8.7% in 2003, 2006, 2014 and LTM 9/30/18, respectively.
TOBACCO LITIGATION AND REGULATORY UPDATES Litigation . In 2013, Liggett reached a settlement with approximately 4,900 Engle progeny plaintiffs, which represented a substantial portion of Liggett’s pending litigation — Liggett agreed to pay $60 million in a lump sum in 2014 and the balance in installments of $3.4 million in each of the following 14 years (2015 – 2028) . In 2016 and 2017, Liggett settled an additional 163 Engle progeny cases for $26.7 million — Approximately 70 Engle progeny plaintiffs remain at September 30, 2018 . Liggett is also a defendant in 32 non-Engle smoking-related individual cases and three (3) smoking-related actions where either a class had been certified or plaintiffs were seeking class certification . In January 2016, the Mississippi Attorney General filed a motion to enforce Mississippi’s 1996 settlement agreement with Liggett and alleged that Liggett owes Mississippi at least $27 million in damages plus punitive damages and legal fees Regulatory . Since 1998, the MSA has restricted the advertising and marketing of tobacco products . In 2009, Family Smoking Prevention and Tobacco Control Act granted the FDA power to regulate the manufacture, sale, marketing and packaging of tobacco products — FDA is prohibited from issuing regulations that ban cigarettes — In 2018, FDA issued a Notice of Proposed Rulemaking to consider reducing nicotine in tobacco . Federal Excise Tax is $1.01/pack (since April 1, 2009) and additional state and municipal excise taxes exist 8
REAL ESTATE OPERATIONS 9
REAL ESTATE OVERVIEW . New Valley, which owns 70.59% of Douglas Elliman Realty, LLC, is a diversified real estate company that is seeking to acquire or invest in additional real estate properties or projects . New Valley has invested approximately $167 million(1), as of September 30, 2018, in a broad portfolio of real estate projects New Valley Revenues – LTM September 30, 2018 New Valley Adjusted EBITDA(2) Real Estate Brokerage Commissions Other Property Management $11M $26.9M $27.9M $33M $20.3M $759M $10.6M $715M 2015 2016 2017 LTM 9/30/18 (1) Net of cash returned. (2) New Valley’s net income was $11.7M, $13.5M, $37.6M and $12M for the periods presented. Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Net income to Adjusted EBITDA, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on March 8, 2016, March 1, 2017, March 1, 2018 and November 7, 2018, Form 10-K for the fiscal year ended December 31, 2017 and Form 10-Q for the quarterly period ended September 30, 2018 (Commission File Number 1-5759) as well as the Disclaimer to this document on Page 2. New Valley’s Adjusted EBITDA do not include an allocation of Vector Group Ltd.’s Corporate and Other Expenses (for purposes of computing Adjusted EBITDA) of $13.2M, $15.3M. $15.7M and $15.6M for the periods presented, respectively. 10
DOUGLAS ELLIMAN REALTY, LLC . Largest residential real estate brokerage firm in the Douglas Elliman Closed Sales – LTM September 30, 2018 highly competitive New York metropolitan area and third-largest residential brokerage firm in the U.S. Long Island, Westchester, . Connecticut Approximately 7,000 affiliated agents and 125 offices $7.4B in the U.S. Boston . Alliance with Knight Frank provides a network with 520 New York City offices across 60 countries with 21,550 affiliated agents Aspen $11.9B Los . Also offers title and settlement services, relocation Angeles services, and residential property management services through various subsidiaries South Florida $4.4B Douglas Elliman Douglas Elliman Douglas Elliman Adjusted EBITDA(1) Closed Sales Revenues – LTM September 30, 2018 $26.1B $28.5B $24.5B Real Estate Brokerage Commissions Other $22.4B Property Management $6M $18.2B $35.7M $36.7M $14.9B $33M $12.4B $26.1M $14.2M $754M 2012 2013 2014 2015 2016 2017 LTM $715M 2015 2016 2017 LTM 9/30/18 6/30/18 (1) Douglas Elliman’s net income was $22.2M, $21.1M, $21.4M and $2.9M for the periods presented. Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to net income, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on March 8, 2016, March 1, 2017, March 1, 2018 and November 7, 2018, Form 10-K for the fiscal year ended December 31, 2017 and Form 10-Q for the quarterly period ended September 30, 2018 (Commission File Number 1-5759) as well as the Disclaimer to this document on Page 2. 11
(1) NEW VALLEY’S REAL ESTATE INVESTMENTS AT SEPTEMBER 30, 2018 Land Development/Real Apartments/ Commercial Retail/ Estate Held for Sale, net Condominiums/Hotels Office Assets West Hollywood Edition Sagaponack The Plaza at Harmon (West Hollywood) (East Hampton) Meadow (New Jersey) Maryland Portfolio (Baltimore County) New York City Investments (see Page 13) Takanasee (New Jersey) 500 Broadway INTERNATIONAL (Santa INVESTMENTS Monica) Wynn Las Vegas Retail (Nevada) Coral Beach and Tennis Club Bermuda Mosaic II Escena Fontainebleau (Houston) 87 Park Monad Terrace (Palm Springs) (Las Vegas) (in liquidation) (Miami Beach) (Miami Beach) (1) For the percentage of each real estate project owned, please refer to the “Summary of Real Estate Investments” section of Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Vector Group Ltd.’s Form 10-Q 12 for the quarterly period ended September 30, 2018 (Commission File Number 1-5759).
(1) NEW VALLEY’S REAL ESTATE INVESTMENTS IN NEW YORK CITY 1 1. The Marquand Upper East Side 10 2. 10 Madison Square West Flatiron District/NoMad (in liquidation) 9 3. 11 Beach Street TriBeCa 8 4 4. 20 Times Square Times Square (in liquidation) 5. 111 Murray Street TriBeCa 6. 160 Leroy Street Greenwich Village 2 7. 215 Chrystie Street Lower East Side 12 8. The Dutch Long Island City 14 6 9. 1 QPS Tower Long Island City 10. Park Lane Hotel Central Park South 7 5 3 11. 125 Greenwich Street Financial District 12. The XI (formerly “The Eleventh”) West Chelsea 11 13. 15 East 19th Street (formerly “New Brookland”) Flatbush 13 14. The Dime (Havemeyer Street) Brooklyn (1) For the percentage of each real estate project owned, please refer to the “Summary of Real Estate Investments” section of Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - of Vector Group Ltd.’s Form 10-Q 13 for the quarterly period ended September 30, 2018 (Commission File Number 1-5759).
(1) NEW VALLEY’S REAL ESTATE SUMMARY AS OF SEPTEMBER 30, 2018 Projected Cummulative construction end Range of Number of Net cash invested earnings / (loss) (2) Carrying value (2)(3) date ownership investments Land owned New York City SMSA $ 14,962 $ - $ 14,962 N/A 100.0% 1 All other U.S. areas 2,568 7,668 10,236 N/A 100.0% 1 $ 17,530 $ 7,668 $ 25,198 2 Condominium and Mixed Use Development (Minority interest owned) New York City SMSA $ (10,634) $ 74,913 $ 64,279 2018 - 2020 3.1% - 49.5% 13 All other U.S. areas 27,458 4,788 32,246 2018 - 2020 15% - 48.5% 4 $ 16,824 $ 79,701 $ 96,525 17 Apartments (Minority Interest owned) New York City SMSA $ 15,234 $ (8,351) $ 6,883 N/A 45.4% 1 All other U.S. areas (769) 873 104 N/A 7.6% - 16.3% 2 $ 14,465 $ (7,478) $ 6,987 3 Hotels (Minority interest owned) New York City SMSA 32,344 (13,306) 19,038 N/A 5.2% - 15% 3 All other U.S. areas 6,048 (3,610) 2,438 N/A 15% 1 International 7,786 (652) 7,134 N/A 49% 1 $ 46,178 $ (17,568) $ 28,610 5 Commercial (Minority interest owned) New York City SMSA 4,816 (3,004) 1,812 N/A 49% 1 All other U.S. areas 5,167 1,820 6,987 N/A 1.6% 1 $ 9,983 $ (1,184) $ 8,799 2 Total $ 104,980 $ 61,139 $ 166,119 29 Summary New York City SMSA $ 56,722 $ 50,252 $ 106,974 19 All other U.S. areas 40,472 11,539 52,011 9 International 7,786 (652) 7,134 1 $ 104,980 $ 61,139 $ 166,119 29 (1) For the percentage of each real estate project owned, please refer to the “Summary of Real Estate Investments” section of Item 2 -Management’s Discussion and Analysis of Financial Condition and Results of Operations of Vector Group Ltd.’s Form 10-Q for the period ended September 30, 2018 (Commission File Number 1-5759). (2) Includes interest expense capitalized to real estate ventures of $25,483. 14 (3) Carrying value includes non-controlling interest of $690.
FINANCIAL DATA
ADJUSTED HISTORICAL FINANCIAL DATA (Dollars in millions) Adjusted Revenues(1) Adjusted EBITDA(1) Tobacco Real Estate E-Cigarettes Corporate & Other Tobacco Real Estate E-Cigarettes Corporate & Other $1,860 $1,807 $1,660 $1,691 $282 $245 $257 $243 $1,081 $1,101 $1,011 $1,017 $268 $243 $253 $247 $680 $759 $643 $727 $27 $28 $20 $11 ($12) ($13) ($15) $(15) 2015 2016 2017 LTM 9/30/18 ($13) ($1) $(1) 2015 2016 2017 LTM 9/30/18 (1) Vector’s revenues for the periods presented were $1,657, $1,691, $1,807 and $1,860, respectively. Vector’s Net income for the periods presented was $59.2, $71.1, $84.6 and $79.8 respectively Adjusted Revenues and Adjusted EBITDA are Non-GAAP Financial Measures. Please refer to the Company’s Current Report on Forms 8-K, filed on March 8, 2016, March 1, 2017, March 1, 2018, June 14, 2018 and November 7, 2018 (Exhibit 99.1) for a reconciliation of Non-GAAP financial measures to GAAP as well as the Disclaimer to this document on Page 2. 16
SUMMARY
SUMMARY . Vector Group, a holding . Tobacco segment . Real Estate segment company, owning — Liggett is the fourth- — New Valley owns a Tobacco and Real Estate largest U.S. Cigarette diversified portfolio of businesses and holding company with 3.9% consolidated and non- consolidated cash, wholesale market share consolidated real estate investment securities and and 4.1% retail market investments totaling $168 share over LTM 9/30/18 million at September 30, long-term investments of 2018. $648.5 million ($453 — Only major U.S. cigarette million at holding manufacturer to increase — New Valley owns 70.59% both market share and of Douglas Elliman Realty company level) at unit volumes over the last September 30, 2018 • Largest residential real 10 years estate brokerage firm in — Vector’s management — $247 million(1) of EBITDA New York Metropolitan team has an average (LTM 9/30/18) area and third-largest tenure of 25 years with residential brokerage the Company and, — Liggett’s MSA exemption firm in the U.S. has resulted in an annual along with directors, • Closed sales volume of beneficially owns 12% of cost advantage over the $28.5 billion over LTM Vector’s common stock largest U.S. Cigarette 9/30/18 companies – between $163 million and $169 • Revenues have increased from $541 million in million from 2012 (2) 2014 to $753 million to 2017 over LTM 9/30/18 (1) Vector’s operating income from the tobacco segment for the twelve months ended September 30, 2018 was $244.1 million. Adjusted EBITDA is a Non-GAAP Financial Measure. Please refer to Exhibit 99.1 of the Company’s Current Report on Form 8-K, filed on November 7, 2018 (Table 5), for a reconciliation of Net income to Adjusted EBITDA as well as the Disclaimer to this document on Page 2. (2) Cost advantage applies only to cigarettes sold below applicable market share exemption. 18
November 2018 Vector Group Ltd. owns Liggett Group, Vector Tobacco and New Valley. New Valley owns a 70% interest in Douglas Elliman. TOBACCO EXECUTIVE MANAGEMENT • Fourth-largest cigarette manufacturer in the U.S. with a strong family of brands — Pyramid, Howard M. Lorber Grand Prix, Liggett Select, Eve and Eagle 20’s — representing 14% share of the discount market. President and Chief Executive Officer • Focused on brand strength and long-term profit growth, while continuing to evaluate Richard J. Lampen opportunities to pursue incremental volume and margin growth. Executive Vice President • Annual cost advantage due to favorable treatment under the Master Settlement Agreement that J. Bryant Kirkland III ranged between $163 million and $169 million from 2012 to 2017. Senior Vice President, Chief Financial Officer • The only cigarette company to have reached a comprehensive settlement resolving substantially all and Treasurer of the individual Engle progeny product liability cases pending in Florida. The Engle progeny cases have represented a substantial portion of Liggett’s pending litigation. Marc N. Bell Senior Vice President, General Counsel and Secretary Ronald J. Bernstein President and Chief Executive Officer of Liggett Vector Brands COMPANY HIGHLIGHTS REAL ESTATE • Headquartered in Miami with an executive • New Valley, which owns 70.59% of Douglas Elliman Realty, LLC, is a diversified real estate office in Manhattan and tobacco operations company that is seeking to acquire additional operating companies and real estate properties. in North Carolina • New Valley has invested approximately $167 million, as of September 30, 2018, in a broad portfolio of real estate investments. • Employs approximately 1,500 people • Douglas Elliman is the largest residential real estate brokerage firm in the New York metropolitan area and the third-largest in the U.S. • Executive management and directors beneficially own 12% of the Company • Douglas Elliman’s closings totaled $28.5 billion for the last twelve months ended September 30, 2018, and it has approximately 7,000 affiliated agents and 125 offices throughout the New York • Reported cash of $3642 million and metropolitan area, South Florida, Aspen, Greenwich, Los Angeles, and Massachusetts. investments with fair value of $285 million at September 30, 2018. • Recognized as one of America’s Most Trustworthy Companies by Forbes in 2013 Adjusted EBITDA1 LTM 9/30/18 Revenues Tobacco Real Estate E-Cigarettes Corporate and Other Tobacco Real Estate $282M $257M $245M $243M $759M TOTAL $243M $268M $253M $247M $1.860B $28M $1.101B $27M $20M $11M ($12M) ($13M) ($15M) ($15M) ($13M) ($1M) ($1M) 2015 2016 2017 LTM 9/30/2018 1 Net income attributable to Vector Group Ltd. for the periods presented was approximately $60M, $71M, $85M and $80M, respectively. Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Net income to Adjusted EBITDA, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on March 8, 2016, March 1, 2017, March 1, 2018, June 14, 2018 and August 7, 2018 10-K for the fiscal year ended December 31, 2017 and Form 10-Q for the quarterly period ended September 30, 2018 (Commission File Number 1-5759) 2 At September 30, 2018 this amount includes cash at Douglas Elliman, a 70.59%-owned subsidiary, of $90 million and cash at Liggett, a wholly-owned subsidiary of $106 million. Excludes real estate investments This summary contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have identified these forward-looking statements using words such as “could” and similar expressions. These statements reflect our current beliefs. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. Contact: Emily Claffey / Ben Spicehandler / Columbia Clancy of Sard Verbinnen & Co (212) 687-8080 vectorgroupltd.com
November 2018 New Valley LLC, the real estate subsidiary of Vector Group Ltd. (NYSE: VGR), owns real estate and 70% of Douglas Elliman, the largest residential brokerage firm in the New York metropolitan area, as well as a minority stake1 in numerous real estate investments. 1 NEW VALLEY REAL ESTATE INVESTMENTS1 New Valley’s New York Real Estate Investments 1. The Marquand Upper East Side New Valley has invested approximately $167 million, as of September 30, 2018, in a broad portfolio of 2. 10 Madison Square West Flatiron District/NoMad (in liquidation) real estate projects. 3. 11 Beach Street TriBeCa 4. 20 Times Square Times Square (in liquidation) 5. 111 Murray Street TriBeCa New Valley’s Real Estate Investment Portfolio1 6. 160 Leroy Street Greenwich Village 7. 215 Chrystie Street Lower East Side Land Development/Real Apartments/ Condo- Commercial Retail/ 8. Estate Held for Sale, net miniums/Hotels Office Assets The Dutch Long Island City 10 1 9. 1 QPS Tower Long Island City COLUMBUS CIRCLE 10. Park Lane Hotel Central Park South West Hollywood Edition Sagaponack The Plaza at Harmon (West Hollywood) (East Hampton) Meadow (New Jersey) 4 MIDTOWN QUEENSBORO 11. 125 Greenwich Street Financial District BRIDGE 12. The XI (formerly “The Eleventh”) West Chelsea 500 Broadway Maryland Portfolio 9 th 12 QUEENS-MIDTOWN 13. 15 East 19 Street (formerly “New Brookland”) Flatbush (Santa Monica) (Baltimore County) TUNNEL 8 2 QUEENS 14. The Dime (Havemeyer Street) Brooklyn HUDSON RIVER NY City MEATPACKING 1 6DISTRICT UNION EAST RIVER International Investments Investments SQUARE GREENWICH Coral Beach VILLAGE 5 and Tennis Club 3 Bermuda Wynn Las Vegas WEST 7 VILLAGE SOHO LOWER (Nevada) 14 Retail Takanasee 11 EAST SIDE (New Jersey) WILLIAMSBURG TRIBECA BRIDGE Fontainebleau MANHATTAN BRIDGE (Las Vegas) BROOKLYN BRIDGE BROOKLYN EXECUTIVE MANAGEMENT Escena Mosaic II 87 Park Monad Terrace 13 (Palm Springs) (Houston) (Miami Beach) (Miami Beach) Howard M. Lorber (in liquidation) President and Chief Executive Officer Richard J. Lampen DOUGLAS ELLIMAN Executive Vice President • Largest residential real estate brokerage firm in New York metropolitan area and third-largest in J. Bryant Kirkland III the United States. Senior Vice President, Chief Financial Officer and Treasurer • Closings of $28.5 billion for the last twelve months ended September 30, 2018; Douglas Elliman Marc N. Bell has approximately 7,000 affiliated agents and 125 offices throughout the New York metropolitan Senior Vice President, Secretary and General Counsel area, South Florida, Aspen, Greenwich, Los Angeles, and Massachusetts. Bennett P. Borko • Maintains an alliance with Knight Frank— the largest independent residential brokerage in the Executive Vice President of New Valley Realty division United Kingdom— to jointly market high-end properties, providing a network with 520 offices across 60 countries with 21,550 affiliated agents. COMPANY HIGHLIGHTS 2 • Revenues and Adjusted EBITDA of Douglas Elliman of $754 millionand $14.2 million, respectively, • Executive offices in Manhattan and Miami for the last twelve months ended September 30, 2018. • Employs approximately 900 people 2 Douglas Elliman Closings New Valley Revenues – LTM 9/30/18 New Valley Adjusted EBITDA $28.5B Real Estate Brokerage Commissions $11M $24.6B $26.1B $22.4B Property Management $18.2B $33M Other $27.9M $26.9M $20.3M $14.9B $10.6M $759M 2013 2014 2015 2016 2017 LTM $715M 2015 2016 2017 LTM 9/30/18 9/30/18 1 Please refer to Vector Group Ltd.’s Form 10-Q (Commission File Number 1-5759) for the quarterly period ended September 30, 2018 in the section “Summary of Real Estate Investments” in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 2 Douglas Elliman’s net income was $9M for the twelve months ended September 30, 2018. New Valley’s net income was $12M, $14M, $38M and $12M for the periods presented. Adjusted EBITDA is a non-GAAP financial measure. New Valley’s Adjusted EBITDA do not include an allocation of Vector Group Ltd.’s Corporate and Other Expenses (for purposes of computing Adjusted EBITDA) of approximately $13M, $15M, $16M and $16M for the periods presented, respectively. For a reconciliation of Net income to Adjusted EBITDA, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on March 8, 2016, March 1, 2017, March 1, 2018 and August 7, 2018, Form 10-K for the fiscal year ended December 31, 2017 and Form 10-Q for the quarterly period ended September 30, 2018 (Commission File Number 1-5759) Contact: Emily Claffey / Ben Spicehandler / Columbia Clancy of Sard Verbinnen & Co (212) 687-8080 newvalley.com