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): March 1, 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 2.02. Results of Operations and Financial Condition
On March 1, 2018, Vector Group Ltd. announced its financial results for the fourth quarter and full year ended December 31, 2017. 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 | |
Press Release issued on March 1, 2018 | ||
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: March 1, 2018
FOR IMMEDIATE RELEASE
Contact: | Emily Claffey/Benjamin Spicehandler /Columbia Clancy | |
Sard Verbinnen & Co | ||
212-687-8080 | ||
Conrad Harrington | ||
Sard Verbinnen & Co - Europe | ||
+44 (0)20 3178 8914 | ||
J. Bryant Kirkland III, Vector Group Ltd. | ||
305-579-8000 | ||
VECTOR GROUP REPORTS FOURTH QUARTER AND FULL-YEAR 2017 FINANCIAL RESULTS
MIAMI, FL, March 1, 2018 - Vector Group Ltd. (NYSE:VGR) today announced financial results for the three months and year ended December 31, 2017.
GAAP Financial Results
Fourth quarter of 2017 revenues were $435.7 million, compared to revenues of $412.8 million in the fourth quarter of 2016. The Company recorded operating income of $47.7 million in the fourth quarter of 2017, compared to operating income of $30.8 million in the fourth quarter of 2016. Net income attributed to Vector Group Ltd. for the fourth quarter of 2017 was $42.7 million, or $0.27 per diluted common share, compared to net income of $4.6 million, or $0.03 per diluted common share, in the fourth quarter of 2016.
For the year ended December 31, 2017 revenues were $1.81 billion, compared to revenues of $1.69 billion for the year ended December 31, 2016. The Company recorded operating income of $233.7 million for the year ended December 31, 2017, compared to operating income of $233.0 million for the year ended December 31, 2016. Net income attributed to Vector Group Ltd. for the year ended December 31, 2017 was $84.6 million, or $0.59 per diluted common share, compared to net income of $71.1 million, or $0.53 per diluted common share for the year ended December 31, 2016.
Non-GAAP Financial Measures
Non-GAAP financial measures also 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 deferred tax assets and liabilities, 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 Adjusted EBITDA only) and non-cash interest expense associated with the Company’s convertible debt. Reconciliations of non-GAAP financial results to the comparable GAAP financial results for the three months and years ended December 31, 2017 and 2016 are included in Tables 2 through 7.
Three months ended December 31, 2017 compared to the three months ended December 31, 2016
Fourth quarter of 2017 Adjusted EBITDA attributed to Vector Group (as described in Table 2 attached hereto) were $54.9 million compared to $60.5 million for the fourth quarter of 2016.
Adjusted Net Income (as described in Table 3 attached hereto) was $13.0 million or $0.09 per diluted share for the fourth quarter of 2017 and $16.4 million or $0.12 per diluted share for the fourth quarter of 2016.
Adjusted Operating Income (as described in Table 4 attached hereto) was $48.7 million for the fourth quarter of 2017 compared to $52.5 million for the fourth quarter of 2016.
Year ended December 31, 2017 compared to the year ended December 31, 2016
Adjusted EBITDA attributed to Vector Group (as described below and in Table 2 attached hereto) were $257.4 million for the year ended December 31, 2017 compared to $280.2 million in 2016.
Adjusted Net Income (as described below and in Table 3 attached hereto) was $86.2 million or $0.60 per diluted share for the year ended December 31, 2017 and $83.4 million or $0.62 per diluted share for the year ended December 31, 2016.
Adjusted Operating Income (as described below and in Table 4 attached hereto) was $236.4 million for the year ended December 31, 2017 and $260.4 million for the year ended December 31, 2016.
Tobacco Segment Financial Results
For the fourth quarter of 2017, the Tobacco segment had revenues of $257.1 million, compared to $260.9 million for the fourth quarter of 2016. The decline in revenues was primarily due to a 2.8% decline in unit sales volume.
For the year ended December 31, 2017, the Tobacco segment had revenues of $1.08 billion, compared to $1.01 billion for the year ended December 31, 2016. The increase in revenues was primarily due to a 8.1% increase in unit sales volume.
Operating Income from the Tobacco segment was $55.0 million and $240.9 million for the three months and year ended December 31, 2017 compared to $43.8 million and $238.3 million for the three months and year ended December 31, 2016, respectively.
Non-GAAP Financial Measures
Tobacco Adjusted Operating Income (as described in Table 5 attached hereto) for the fourth quarter of 2017 and 2016 was $55.8 million and $62.1 million, respectively. Tobacco Adjusted Operating Income for the years ended December 31, 2017 and 2016 was $244.8 million and $258.6 million, respectively.
For the fourth quarter of 2017, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 2.17 billion units compared to 2.23 billion units for the fourth quarter of 2016. For the year ended December 31, 2017, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 9.15 billion units compared to 8.46 billion for the year ended December 31, 2016.
Liggett’s retail market share increased to 4.0% during the fourth quarter of 2017 and 3.9% for the year ended December 31, 2017. Compared to the fourth quarter of 2016, Liggett’s retail shipments increased 3.6% while the overall industry’s retail shipments declined by 5.2%, according to data from Management Science Associates, Inc. Compared to the year ended December 31, 2016, Liggett’s retail shipments increased 5.2% while the overall industry’s retail shipments declined by 4.1%, according to data from Management Science Associates, Inc.
Real Estate Segment Financial Results
For the fourth quarter of 2017, the Real Estate segment had revenues of $178.9 million, compared to $152.7 million for the fourth quarter of 2016. For the year ended December 31, 2017, the Real Estate segment had revenues of $727.4 million compared to $680.1 million for the year ended December 31, 2016. For the fourth quarter of 2017, the Real Estate segment reported net income of $12.9 million, compared to a net loss of $0.8 million for the fourth quarter of 2016. For the year ended December 31, 2017, the Real Estate segment reported net income of $37.6 million compared to $13.5 million for the year ended December 31, 2016.
Douglas Elliman’s results are included in Vector Group Ltd.’s Real Estate segment. For the fourth quarter of 2017, Douglas Elliman had revenues of $177.7 million, compared to $151.5 million for the fourth quarter of 2016. For the year ended December 31, 2017, Douglas Elliman had revenues of $722.3 million compared to $675.3 million for the year ended December 31, 2016. For the fourth quarter of 2017, Douglas Elliman reported net income of $0.9 million, compared to a net loss of $6.1 million for the fourth quarter of 2016. For the year ended December 31, 2017, Douglas Elliman reported net income of $21.4 million compared to $21.1 million for the year ended December 31, 2016.
Non-GAAP Financial Measures
For the fourth quarter of 2017, Real Estate Adjusted EBITDA attributed to the Company (as described in Table 6 attached hereto) were $1.9 million, compared to $0.6 million for the fourth quarter of 2016.
For the year ended December 31, 2017, Real Estate Adjusted EBITDA attributed to the Company were $20.3 million compared to $27.9 million for the year ended December 31, 2016.
Douglas Elliman’s results are included in Vector Group Ltd.’s Real Estate segment. For the fourth quarter of 2017, Douglas Elliman’s Adjusted EBITDA (as described in Table 7 attached hereto) were $2.4 million ($1.7 million attributed to the Company), compared to negative $0.5 million (negative $0.4 million attributed to the Company) for the fourth quarter of 2016.
For the year ended December 31, 2017, Douglas Elliman’s Adjusted EBITDA were $26.1 million ($18.4 million attributed to the Company), compared to $36.7 million ($25.9 million attributed to the Company) for the year ended December 31, 2016.
For the three months and year ended December 31, 2017, Douglas Elliman achieved closed sales of approximately $6.3 billion and $26.1 billion, compared to $5.7 billion and $24.6 billion for the three months and year ended December 31, 2016.
Non-GAAP Financial Measures
Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Income, Tobacco Adjusted Operating Income, New Valley LLC Adjusted EBITDA and Douglas Elliman Realty, LLC Adjusted EBITDA (“the Non-GAAP Financial Measures”) are financial measures not prepared in accordance with generally accepted accounting principles (“GAAP”). The Company believes that the Non-GAAP Financial Measures are important measures that supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. The Company believes the Non-GAAP Financial Measures provide investors and analysts with a useful measure of operating results unaffected by differences in capital structures and ages of related assets among otherwise comparable companies.
Management uses the Non-GAAP Financial Measures as measures to review and assess operating performance of the Company’s business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (the Non-GAAP Financial Measures) of the Company’s business. While management considers the Non-GAAP Financial Measures to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating income, net income and cash flows from operations. In addition, the Non-GAAP Financial Measures are susceptible to varying calculations and the Company’s measurement of the Non-GAAP Financial Measures may not be comparable to those of other companies. Attached hereto as Tables 2 through 7 is information relating to the Company’s Non-GAAP Financial Measures for the years ended December 31, 2017 and 2016.
Conference Call to Discuss Fourth Quarter and Full-Year 2017 Results
As previously announced, the Company will host a conference call and webcast on Thursday, March 1, 2018 at 8:30 AM (ET) to discuss fourth quarter 2017 results. Investors can access the call by dialing 800-859-8150 and entering 99976716 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 1, 2018 through March 15, 2018. To access the replay, dial 877-656-8905 and enter 99976716 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 and Vector Tobacco Inc. 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, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Revenues: | |||||||||||||||
Tobacco* | $ | 257,074 | $ | 260,943 | $ | 1,080,950 | $ | 1,011,620 | |||||||
Real estate | 178,938 | 152,657 | 727,364 | 680,105 | |||||||||||
E-cigarettes | (358 | ) | (828 | ) | (838 | ) | (776 | ) | |||||||
Total revenues | 435,654 | 412,772 | 1,807,476 | 1,690,949 | |||||||||||
Expenses: | |||||||||||||||
Cost of sales: | |||||||||||||||
Tobacco* | 180,307 | 180,743 | 750,768 | 672,431 | |||||||||||
Real estate | 118,806 | 93,045 | 477,278 | 424,829 | |||||||||||
E-cigarettes | — | 61 | — | 84 | |||||||||||
Total cost of sales | 299,113 | 273,849 | 1,228,046 | 1,097,344 | |||||||||||
Operating, selling, administrative and general expenses | 88,027 | 90,519 | 339,151 | 340,567 | |||||||||||
Litigation settlement and judgment expense | 800 | 17,650 | 6,591 | 20,000 | |||||||||||
Restructuring charges | — | — | — | 41 | |||||||||||
Operating income | 47,714 | 30,754 | 233,688 | 232,997 | |||||||||||
Other income (expenses): | |||||||||||||||
Interest expense | (37,539 | ) | (38,528 | ) | (173,685 | ) | (142,982 | ) | |||||||
Loss on extinguishment of debt | — | — | (34,110 | ) | — | ||||||||||
Change in fair value of derivatives embedded within convertible debt | 9,777 | 8,488 | 35,919 | 31,710 | |||||||||||
Equity in (losses) earnings from real estate ventures | (4,962 | ) | 1,872 | 21,395 | 5,200 | ||||||||||
Equity in earnings (losses) from investments | 2,058 | (646 | ) | (765 | ) | (2,754 | ) | ||||||||
(Loss) gain on sale of investment securities available for sale | (114 | ) | 2,059 | 169 | 2,907 | ||||||||||
Impairment of investment securities available for sale | (286 | ) | (465 | ) | (465 | ) | (5,381 | ) | |||||||
Other, net | 2,204 | 1,776 | 7,022 | 4,732 | |||||||||||
Income before provision for income taxes | 18,852 | 5,310 | 89,168 | 126,429 | |||||||||||
Income tax (benefit) expense | (24,099 | ) | 2,481 | (1,582 | ) | 49,163 | |||||||||
Net income | 42,951 | 2,829 | 90,750 | 77,266 | |||||||||||
Net (income) loss attributed to non-controlling interest | (227 | ) | 1,770 | (6,178 | ) | (6,139 | ) | ||||||||
Net income attributed to Vector Group Ltd. | $ | 42,724 | $ | 4,599 | $ | 84,572 | $ | 71,127 | |||||||
Per basic common share: | |||||||||||||||
Net income applicable to common share attributed to Vector Group Ltd. | $ | 0.31 | $ | 0.03 | $ | 0.59 | $ | 0.53 | |||||||
Per diluted common share: | |||||||||||||||
Net income applicable to common share attributed to Vector Group Ltd. | $ | 0.27 | $ | 0.03 | $ | 0.59 | $ | 0.53 | |||||||
Dividends declared per share | $ | 0.40 | $ | 0.38 | $ | 1.54 | $ | 1.47 | |||||||
* Revenues and cost of sales include federal excise taxes of $109,086, $112,249, $460,561 and $425,980, respectively.
TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income attributed to Vector Group Ltd. | $ | 42,724 | $ | 4,599 | $ | 84,572 | $ | 71,127 | |||||||
Interest expense | 37,539 | 38,528 | 173,685 | 142,982 | |||||||||||
Income tax (benefit) expense | (24,099 | ) | 2,481 | (1,582 | ) | 49,163 | |||||||||
Net income (loss) attributed to non-controlling interest | 227 | (1,770 | ) | 6,178 | 6,139 | ||||||||||
Depreciation and amortization | 4,586 | 5,492 | 18,614 | 22,359 | |||||||||||
EBITDA | $ | 60,977 | $ | 49,330 | $ | 281,467 | $ | 291,770 | |||||||
Change in fair value of derivatives embedded within convertible debt (a) | (9,777 | ) | (8,488 | ) | (35,919 | ) | (31,710 | ) | |||||||
Equity in (earnings) losses from investments (b) | (2,058 | ) | 646 | 765 | 2,754 | ||||||||||
Loss (gain) on sale of investment securities available for sale | 114 | (2,059 | ) | (169 | ) | (2,907 | ) | ||||||||
Impairment of investment securities available for sale | 286 | 465 | 465 | 5,381 | |||||||||||
Equity in losses (earnings) from real estate ventures (c) | 4,962 | (1,872 | ) | (21,395 | ) | (5,200 | ) | ||||||||
Loss on extinguishment of debt | — | — | 34,110 | — | |||||||||||
Stock-based compensation expense (d) | 2,431 | 2,775 | 10,887 | 10,052 | |||||||||||
Litigation settlement and judgment expense (e) | 800 | 17,650 | 6,591 | 20,000 | |||||||||||
Impact of MSA settlement (f) | — | 617 | (2,721 | ) | 247 | ||||||||||
Restructuring charges | — | — | — | 41 | |||||||||||
Purchase accounting adjustments (g) | (14 | ) | 3,029 | (2,102 | ) | 5,230 | |||||||||
Other, net | (2,204 | ) | (1,776 | ) | (7,022 | ) | (4,732 | ) | |||||||
Adjusted EBITDA | $ | 55,517 | $ | 60,317 | $ | 264,957 | $ | 290,926 | |||||||
Adjusted EBITDA attributed to non-controlling interest | (653 | ) | 153 | (7,576 | ) | (10,696 | ) | ||||||||
Adjusted EBITDA attributed to Vector Group Ltd. | $ | 54,864 | $ | 60,470 | $ | 257,381 | $ | 280,230 | |||||||
Adjusted EBITDA by Segment | |||||||||||||||
Tobacco | $ | 57,845 | $ | 64,598 | $ | 253,685 | $ | 268,890 | |||||||
E-cigarettes | (283 | ) | (954 | ) | (888 | ) | (1,403 | ) | |||||||
Real Estate (h) | 2,531 | 419 | 27,848 | 38,716 | |||||||||||
Corporate and Other | (4,576 | ) | (3,746 | ) | (15,688 | ) | (15,277 | ) | |||||||
Total | $ | 55,517 | $ | 60,317 | $ | 264,957 | $ | 290,926 | |||||||
Adjusted EBITDA Attributed to Vector Group Ltd. by Segment | |||||||||||||||
Tobacco | $ | 57,845 | $ | 64,598 | $ | 253,685 | $ | 268,890 | |||||||
E-cigarettes | (283 | ) | (954 | ) | (888 | ) | (1,403 | ) | |||||||
Real Estate (i) | 1,878 | 572 | 20,272 | 28,020 | |||||||||||
Corporate and Other | (4,576 | ) | (3,746 | ) | (15,688 | ) | (15,277 | ) | |||||||
Total | $ | 54,864 | $ | 60,470 | $ | 257,381 | $ | 280,230 | |||||||
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 (earnings) losses recognized from investments that the Company accounts for under the equity method. |
c. | Represents equity in losses (earnings) 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 $2,357, $(522), $26,110 and $36,657 for the three months and years ended December 31, 2017 and 2016, 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 $1,664, $(368), $18,431 and $25,876 for the three months and years ended December 31, 2017 and 2016, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC’s Adjusted EBITDA for non-controlling interest. |
TABLE 3
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income attributed to Vector Group Ltd. | $ | 42,724 | $ | 4,599 | $ | 84,572 | $ | 71,127 | |||||||
Change in fair value of derivatives embedded within convertible debt | (9,777 | ) | (8,488 | ) | (35,919 | ) | (31,710 | ) | |||||||
Non-cash amortization of debt discount on convertible debt | 16,330 | 10,905 | 56,787 | 38,528 | |||||||||||
Loss on extinguishment of debt | — | — | 34,110 | — | |||||||||||
Litigation settlement and judgment expense (a) | 800 | 17,650 | 6,591 | 20,000 | |||||||||||
Impact of MSA settlement (b) | — | 617 | (2,721 | ) | 247 | ||||||||||
Impact of interest expense capitalized to real estate ventures | (9,044 | ) | (3,322 | ) | (6,385 | ) | (11,433 | ) | |||||||
Restructuring charges | — | — | — | 41 | |||||||||||
Douglas Elliman Realty, LLC purchase accounting adjustments (c) | 136 | 2,489 | (800 | ) | 5,057 | ||||||||||
Total adjustments | (1,555 | ) | 19,851 | 51,663 | 20,730 | ||||||||||
Tax benefit (expense) related to adjustments | 637 | (8,060 | ) | (21,156 | ) | (8,416 | ) | ||||||||
Tax benefit from Tax Cuts and Jobs Act of 2017 (d) | (28,845 | ) | — | (28,845 | ) | — | |||||||||
Adjusted Net Income attributed to Vector Group Ltd. | $ | 12,961 | $ | 16,390 | $ | 86,234 | $ | 83,441 | |||||||
Per diluted common share: | |||||||||||||||
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd. | $ | 0.09 | $ | 0.12 | $ | 0.60 | $ | 0.62 | |||||||
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. |
d. | Represents one-time benefit from change in tax rates to net deferred tax liabilities at December 31, 2017 as a result of Tax Cuts and Jobs Act of 2017. |
TABLE 4
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED OPERATING INCOME
(Unaudited)
(Dollars in Thousands)
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating income | $ | 47,714 | $ | 30,754 | $ | 233,688 | $ | 232,997 | |||||||
Litigation settlement and judgment expense (a) | 800 | 17,650 | 6,591 | 20,000 | |||||||||||
Restructuring expense | — | — | — | 41 | |||||||||||
Impact of MSA settlement (b) | — | 617 | (2,721 | ) | 247 | ||||||||||
Douglas Elliman Realty, LLC purchase accounting adjustments (c) | 193 | 3,526 | (1,133 | ) | 7,164 | ||||||||||
Total adjustments | 993 | 21,793 | 2,737 | 27,452 | |||||||||||
Adjusted Operating Income (d) | $ | 48,707 | $ | 52,547 | $ | 236,425 | $ | 260,449 | |||||||
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 5
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF TOBACCO ADJUSTED OPERATING INCOME
AND TOBACCO ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Tobacco Adjusted Operating Income: | |||||||||||||||
Operating income from tobacco segment | $ | 55,000 | $ | 43,820 | $ | 240,904 | $ | 238,293 | |||||||
Litigation settlement and judgment expense (a) | 800 | 17,650 | 6,591 | 20,000 | |||||||||||
Restructuring expense | — | — | — | 41 | |||||||||||
Impact of MSA settlement (b) | — | 617 | (2,721 | ) | 247 | ||||||||||
Total adjustments | 800 | 18,267 | 3,870 | 20,288 | |||||||||||
Tobacco Adjusted Operating Income | $ | 55,800 | $ | 62,087 | $ | 244,774 | $ | 258,581 | |||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Tobacco Adjusted EBITDA: | |||||||||||||||
Operating income from tobacco segment | $ | 55,000 | $ | 43,820 | $ | 240,904 | $ | 238,293 | |||||||
Litigation settlement and judgment expense (a) | 800 | 17,650 | 6,591 | 20,000 | |||||||||||
Restructuring expense | — | — | — | 41 | |||||||||||
Impact of MSA settlement (b) | — | 617 | (2,721 | ) | 247 | ||||||||||
Total adjustments | 800 | 18,267 | 3,870 | 20,288 | |||||||||||
Tobacco Adjusted Operating Income | 55,800 | 62,087 | 244,774 | 258,581 | |||||||||||
Depreciation and amortization | 2,023 | 2,489 | 8,826 | 10,224 | |||||||||||
Stock-based compensation expense | 22 | 22 | 85 | 85 | |||||||||||
Total adjustments | 2,045 | 2,511 | 8,911 | 10,309 | |||||||||||
Tobacco Adjusted EBITDA | $ | 57,845 | $ | 64,598 | $ | 253,685 | $ | 268,890 | |||||||
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 6
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF REAL ESTATE SEGMENT (NEW VALLEY LLC) ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) attributed to Vector Group Ltd. from subsidiary non-guarantors (a) | $ | 12,873 | $ | (814 | ) | $ | 37,610 | $ | 13,477 | ||||||
Interest expense (a) | 13 | 6 | 35 | 20 | |||||||||||
Income tax (benefit) expense (a) | (17,491 | ) | (556 | ) | 210 | 9,335 | |||||||||
Net income (loss) attributed to non-controlling interest (a) | 227 | (1,770 | ) | 6,178 | 6,139 | ||||||||||
Depreciation and amortization | 2,301 | 2,613 | 8,511 | 10,485 | |||||||||||
EBITDA | $ | (2,077 | ) | $ | (521 | ) | $ | 52,544 | $ | 39,456 | |||||
(Income) loss from non-guarantors other than New Valley LLC | (16 | ) | 14 | 103 | 98 | ||||||||||
Equity in losses (earnings) from real estate ventures (b) | 4,962 | (1,872 | ) | (21,395 | ) | (5,200 | ) | ||||||||
Purchase accounting adjustments (c) | (14 | ) | 3,029 | (2,102 | ) | 5,230 | |||||||||
Other, net | (326 | ) | (235 | ) | (1,324 | ) | (939 | ) | |||||||
Adjusted EBITDA | $ | 2,529 | $ | 415 | $ | 27,826 | $ | 38,645 | |||||||
Adjusted EBITDA attributed to non-controlling interest | (653 | ) | 153 | (7,576 | ) | (10,696 | ) | ||||||||
Adjusted EBITDA attributed to New Valley LLC | $ | 1,876 | $ | 568 | $ | 20,250 | $ | 27,949 | |||||||
Adjusted EBITDA by Segment | |||||||||||||||
Real Estate (d) | $ | 2,531 | $ | 419 | $ | 27,848 | $ | 38,716 | |||||||
Corporate and Other | (2 | ) | (4 | ) | (22 | ) | (71 | ) | |||||||
Total (f) | $ | 2,529 | $ | 415 | $ | 27,826 | $ | 38,645 | |||||||
Adjusted EBITDA Attributed to New Valley LLC by Segment | |||||||||||||||
Real Estate (e) | $ | 1,878 | $ | 572 | $ | 20,272 | $ | 28,020 | |||||||
Corporate and Other | (2 | ) | (4 | ) | (22 | ) | (71 | ) | |||||||
Total (f) | $ | 1,876 | $ | 568 | $ | 20,250 | $ | 27,949 | |||||||
a. | Amounts are derived from Vector Group Ltd.’s Condensed Consolidated Financial Statements. See Note entitled “Condensed Consolidating Financial Information” contained in Vector Group Ltd.’s Form 10-K for the year ended December 31, 2017. |
b. | Represents equity in losses (earnings) 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 $2,357, $(522), $26,110 and $36,657 for the three months and year ended December 31, 2017 and 2016, 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 $1,664, $(368), $18,431 and $25,876 for the three months and year ended December 31, 2017 and 2016, 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 2 of this press release) of $4,576, $3,746, $15,688 and $15,277 for the three months and year ended December 31, 2017 and 2016, respectively. |
TABLE 7
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA
AND DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA ATTRIBUTED TO REAL ESTATE SEGMENT
(Unaudited)
(Dollars in Thousands)
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) attributed to Douglas Elliman Realty, LLC | $ | 907 | $ | (6,113 | ) | $ | 21,358 | $ | 21,068 | ||||||
Interest expense | 8 | — | 13 | — | |||||||||||
Income tax (benefit) expense | (695 | ) | 177 | (47 | ) | 1,126 | |||||||||
Depreciation and amortization | 2,201 | 2,508 | 8,108 | 10,116 | |||||||||||
Douglas Elliman Realty, LLC EBITDA | $ | 2,421 | $ | (3,428 | ) | $ | 29,432 | $ | 32,310 | ||||||
Equity in earnings from real estate ventures (a) | (22 | ) | (70 | ) | (1,138 | ) | (1,062 | ) | |||||||
Purchase accounting adjustments (b) | (14 | ) | 3,029 | (2,102 | ) | 5,230 | |||||||||
Other, net | (28 | ) | (53 | ) | (82 | ) | 179 | ||||||||
Douglas Elliman Realty, LLC Adjusted EBITDA | $ | 2,357 | $ | (522 | ) | $ | 26,110 | $ | 36,657 | ||||||
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to non-controlling interest | (693 | ) | 154 | (7,679 | ) | (10,781 | ) | ||||||||
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to Real Estate Segment | $ | 1,664 | $ | (368 | ) | $ | 18,431 | $ | 25,876 | ||||||
a. | Represents equity in earnings recognized from the Company’s investment in certain real estate businesses that are not consolidated in its financial results. |
b. | 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. |