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): August 5, 2015
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
Vector Group Ltd. (the “Company”) is filing this Current Report on Form 8-K to revise the presentation of a previously reported non-GAAP financial measure in Table 3 of the Company's Press Release, dated July 29, 2015, which was filed as Exhibit 99.1 in its Current Report on Form 8-K, dated July 29, 2015.
The table below contains all changes to Table 3 of Exhibit 99.1 of previously reported Pro-forma Adjusted EBITDA for the last twelve months ended June 30, 2015. There were no changes to Pro-forma Adjusted EBITDA in total or by segment for the last twelve months ended June 30, 2015. There were also no other changes to the previously reported Table 3.
(Dollars in thousands) | |||||||||||
For the Twelve Months Ended | |||||||||||
June 30, 2015 | |||||||||||
Pro-forma Adjusted EBITDA | As Previously Reported | Revision | As Revised | ||||||||
Net income attributed to Vector Group Ltd. | $ | 66,313 | $ | (1,016 | ) | $ | 65,297 | ||||
Income tax expense | 48,859 | (608 | ) | 48,251 | |||||||
EBITDA | 293,002 | (1,624 | ) | 291,378 | |||||||
Equity (gain) loss on long-term investments | (540 | ) | 1,625 | 1,085 | |||||||
Other, net | (8,271 | ) | (1 | ) | (8,272 | ) | |||||
Pro-forma Adjusted EBITDA | $ | 245,922 | $ | — | $ | 245,922 | |||||
Non-GAAP Financial Measures
EBITDA is defined as Net Income before Interest, Taxes, Depreciation and Amortization. Pro-forma 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, litigation settlement and judgment expense, impact of the settlement of a dispute related to the Master Settlement Agreement (“MSA”), pension settlement charges, gains on acquisition of Douglas Elliman, changes to EBITDA as a result of the consolidation of Douglas Elliman and other charges.
Pro-forma Adjusted EBITDA is a financial measure not prepared in accordance with generally accepted accounting principles (“GAAP”). The Company believes that Pro-forma Adjusted EBITDA and the other non-GAAP financial measures it presents are important measures that supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. The Company believes these measures provide investors and analysts with a useful measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. Management uses these measures to review and assess operating performance of the Company's business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (Pro-forma Adjusted EBITDA and the other non-GAAP financial measures) of the Company's business. While management considers 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 Pro-forma Adjusted EBITDA and the other non-GAAP financial measures may not be comparable to those of other companies. Reconciliation of Pro-forma Adjusted EBITDA to the most comparable GAAP financial measure for the period above is included in Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
Vector Group Ltd. has prepared materials for presentations to investors updated for the three and six months ended June 30, 2015. The materials are furnished (not filed) as Exhibits 99.2, 99.3 and 99.4 to this Current Report on Form 8-K pursuant to Regulation FD.
Non-GAAP Financial Measures
Exhibits 99.2, 99.3 and 99.4 contain the Non-GAAP Financial Measures discussed below. The Pro-forma non-GAAP financial measures are presented assuming Vector Group Ltd.’s acquisition of the additional 20.59% interest in Douglas Elliman Realty LLC, and the related purchase accounting adjustments, occurred prior to beginning of each period presented.
Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income, Tobacco Adjusted Operating Income, New Valley LLC Pro-forma Adjusted Revenues, New Valley LLC Pro-forma Adjusted EBITDA, Douglas Elliman Realty, LLC Adjusted Revenues, and Douglas Elliman Realty, LLC Adjusted EBITDA (hereafter 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, capital investment cycles 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.
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, 2014 and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015. 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
(c) | Exhibit. |
Exhibit No. | Exhibit | |
99.1 | Non-GAAP Financial Measures. | |
99.2 | Investor presentation of Vector Group Ltd. dated August 2015 (furnished pursuant to Regulation FD). | |
99.3 | Fact Sheet of Vector Group Ltd. dated July 31, 2015 (furnished pursuant to Regulation FD). | |
99.4 | Fact Sheet of New Valley LLC dated July 31, 2015 (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 | ||
Vice President, Treasurer and Chief Financial Officer | ||
Date: August 5, 2015
TABLE 3
VECTOR GROUP LTD. AND SUBSIDIARIES
COMPUTATION OF PRO-FORMA ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
LTM | Three Months Ended | Six Months Ended | |||||||||||||||||
June 30, | June 30, | June 30, | |||||||||||||||||
2015 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net income attributed to Vector Group Ltd. | $ | 65,297 | $ | 17,868 | $ | 7,925 | $ | 38,824 | $ | 10,505 | |||||||||
Interest expense | 144,862 | 31,761 | 44,183 | 63,507 | 79,636 | ||||||||||||||
Income tax expense | 48,251 | 11,364 | 6,101 | 24,043 | 9,043 | ||||||||||||||
Net income attributed to non-controlling interest | 8,300 | 1,837 | 5,106 | 2,097 | 6,055 | ||||||||||||||
Depreciation and amortization | 24,668 | 6,442 | 5,462 | 12,723 | 12,554 | ||||||||||||||
EBITDA | $ | 291,378 | $ | 69,272 | $ | 68,777 | $ | 141,194 | $ | 117,793 | |||||||||
Change in fair value of derivatives embedded within convertible debt (a) | (30,805 | ) | (5,256 | ) | (1,970 | ) | (11,716 | ) | (320 | ) | |||||||||
Equity (gain) loss on long-term investments (b) | 1,085 | 1,657 | 273 | 1,694 | (633 | ) | |||||||||||||
(Gain) loss on sale of investment securities available for sale | (12,899 | ) | 190 | 18 | (12,839 | ) | 71 | ||||||||||||
Equity income (loss) from real estate ventures (c) | (6,553 | ) | (1,856 | ) | 1,808 | (2,194 | ) | 256 | |||||||||||
Pension settlement charge | 1,607 | 1,607 | — | 1,607 | — | ||||||||||||||
Acceleration of interest expense related to debt conversion | 1,087 | — | 439 | — | 4,118 | ||||||||||||||
Stock-based compensation expense (d) | 4,664 | 1,236 | 464 | 2,400 | 987 | ||||||||||||||
Litigation settlement and judgment expense (e) | 3,068 | 1,250 | — | 2,093 | 1,500 | ||||||||||||||
Impact of MSA settlement (f) | — | — | (1,419 | ) | — | (1,419 | ) | ||||||||||||
Purchase accounting adjustments (g) | 1,562 | 358 | 367 | 690 | 606 | ||||||||||||||
Other, net | (8,272 | ) | (1,525 | ) | (3,575 | ) | (3,421 | ) | (5,701 | ) | |||||||||
Pro-forma Adjusted EBITDA | $ | 245,922 | $ | 66,933 | $ | 65,182 | $ | 119,508 | $ | 117,258 | |||||||||
Pro-forma Adjusted EBITDA attributed to non-controlling interest | (11,901 | ) | (2,913 | ) | (5,712 | ) | (3,997 | ) | (7,954 | ) | |||||||||
Pro-forma Adjusted EBITDA attributed to Vector Group Ltd. | $ | 234,021 | $ | 64,020 | $ | 59,470 | $ | 115,511 | $ | 109,304 | |||||||||
Pro-forma Adjusted EBITDA by Segment | |||||||||||||||||||
Tobacco | $ | 226,476 | $ | 62,024 | $ | 53,273 | $ | 115,496 | $ | 100,188 | |||||||||
E-cigarettes | (14,498 | ) | (2,400 | ) | (3,765 | ) | (5,564 | ) | (4,190 | ) | |||||||||
Real Estate (h) | 43,533 | 10,326 | 18,890 | 15,717 | 28,220 | ||||||||||||||
Corporate and Other | (9,589 | ) | (3,017 | ) | (3,216 | ) | (6,141 | ) | (6,960 | ) | |||||||||
Total | $ | 245,922 | $ | 66,933 | $ | 65,182 | $ | 119,508 | $ | 117,258 | |||||||||
Pro-forma Adjusted EBITDA Attributed to Vector Group by Segment | |||||||||||||||||||
Tobacco | $ | 226,476 | $ | 62,024 | $ | 53,273 | $ | 115,496 | $ | 100,188 | |||||||||
E-cigarettes | (14,498 | ) | (2,400 | ) | (3,765 | ) | (5,564 | ) | (4,190 | ) | |||||||||
Real Estate (i) | 31,632 | 7,413 | 13,178 | 11,720 | 20,266 | ||||||||||||||
Corporate and Other | (9,589 | ) | (3,017 | ) | (3,216 | ) | (6,141 | ) | (6,960 | ) | |||||||||
Total | $ | 234,021 | $ | 64,020 | $ | 59,470 | $ | 115,511 | $ | 109,304 | |||||||||
a. | Represents income or losses recognized from changes in the fair value of the derivatives embedded in the Company's convertible debt. |
b. | Represents income or losses recognized on long-term investments that the Company accounts for under the equity method. |
c. | Represents equity income recognized from the Company's investment in certain real estate businesses that are not consolidated in its financial results. |
d. | Represents amortization of stock-based compensation. |
e. | Represents accruals for settlements of judgments in the Engle progeny tobacco litigation. |
f. | Represents the Company's tobacco business'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 Pro-forma Adjusted EBITDA for Douglas Elliman Realty, LLC of $41,071 for the last twelve months ended June 30, 2015 and $9,906, $15,791, $13,591,and $23,175 for the three and six months ended June 30, 2015 and 2014, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC's entire Pro-forma Adjusted EBITDA. |
i. | Includes Pro-forma Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $28,992 for the last twelve months ended June 30, 2015 and $6,993, $11,147, $9,594, and $16,359 the three and six months ended June 30, 2015 and 2014, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC's Pro-forma Adjusted EBITDA for non-controlling interest. |
August 2015 INVESTOR PRESENTATION
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, 2014 and Form 10-Q for the quarterly period ended June 30, 2015, as filed with the SEC. Please also refer to Vector's Current Reports on Forms 8-K, filed on October 6, 2014, November 10, 2014, March 2, 2015, July 29, 2015 and August 5, 2015 (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 "Pro-forma Adjusted" or "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
3 MANAGEMENT Name Position Years at Company HOWARD M. LORBER President and Chief Executive Officer 21 RICHARD J. LAMPEN Executive Vice President 20 J. BRYANT KIRKLAND III Vice President, Chief Financial Officer and Treasurer 23 MARC N. BELL Vice President, General Counsel and Secretary 21 RONALD J. BERNSTEIN President and Chief Executive Officer of Liggett Group LLC and Liggett Vector Brands LLC 24
INTRODUCTION Vector’s management continues to take transformative actions — Increased ownership stake in Douglas Elliman Realty, LLC (“Douglas Elliman”), the fourth-largest residential real estate brokerage firm in the United States and the largest residential brokerage firm in the New York metropolitan area, from 50% to 70.59% for a $60 million purchase price — Reached a settlement with approximately 4,900 Engle progeny plaintiffs, which represented the overwhelming majority of Liggett’s pending litigation — Introduced Eagle 20’s, a deep discount cigarette brand positioned for long-term growth Vector continues to show strong financial results —Vector ’s Pro-Forma Adjusted EBITDA of $234.0 million for the twelve months ended June 30, 2015(1) —Adjusted EBITDA for the Company’s tobacco segment (“Tobacco Adjusted EBITDA”) was $226.5 million for the twelve months ended June 30, 2015(2) —Vector is well capitalized with $238 million of cash and cash equivalents and investments with a fair value of $399 million at June 30, 2015 Vector’s debt has no significant maturities until February 2019 —Vector has paid a quarterly cash dividend to its stockholders since 1995 and a 5% stock dividend to its stockholders since 1999 4 (1) This is a Non-GAAP Financial Measure. Please refer to Exhibit 99.1 of the Company’sCurrent Reports on Forms 8-K, dated July 29, 2015 (Table 3) and August 5, 2015, for a reconciliation to GAAP as well as the Disclaimer to this document on Page 2. (2) 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 Table 3 of Exhibit 99.1 to the Company’s Current Reports on Form 8-K, dated July 29, 2015 and August 5, 2015.
KEY INVESTMENT HIGHLIGHTS Historically strong financial performance — Vector’s Pro-Forma Adjusted EBITDA of $234.0 million and Tobacco Adjusted EBITDA of $226.5 million for the twelve months ended June 30, 2015(1) Key cost advantage resulting from Master Settlement Agreement (“MSA”)(2) —Current cost advantage of 64 cents per pack compared to the three largest U.S. tobacco companies and quality advantage compared to smaller firms(3) —MSA exemption worth approximately $160 million annually Recent expiration of the Tobacco Transition Payment Program (TTPP) could yield substantial incremental free cash flow — Approximately $13.5 million based on Liggett’s TTPP payments for the twelve months ended June 30, 2015 Diversified New Valley assets — Pro-FormaAdjusted Revenues and Pro-FormaAdjusted EBITDA from Douglas Elliman Realty, LLC of $588.1 million and $41.1 million for the twelve months ended June 30, 2015(4) — Broad portfolio of consolidated and non-consolidated domestic and international real estate investments Substantial liquidity with cash, marketable securities and long-term investments of $637 million as of June 30, 2015(5) Proven management team with substantial equity ownership — Executive management and directors beneficially own approximately 14% of the Company 5 (1) These are Non-GAAP Financial Measures. Please refer to Exhibit 99.1 of the Company’s Current Reports on Form 8-K, dated July 29, 2015 and August 5, 2015, for a reconciliation to GAAP (Table 3) as well as the Disclaimer to this document on Page 2. (2) In 1998, various tobacco companies, including Liggett and the then four largest U.S. cigarette manufacturers, Philip Morris, Brown & Williamson, R.J. Reynolds and Lorillard, entered into the Master Settlement Agreement (“MSA”) with 46 states, the District of Columbia, Puerto Rico and various other territories to settle their asserted and unasserted health care cost recovery and certain other claims caused by cigarette smoking (Brown & Williamson, Lorillard and R.J. Reynolds are now owned by Reynolds American). 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. (3) Cost advantage applies only to cigarettes sold below applicable market share exemption. (4) These are Non-GAAP Financial Measures. Please refer to Exhibit 99.1 of the Company’s Current Report on Form 8-K, dated July 29, 2015, for a reconciliation to GAAP (Tables, 9 and 10) as well as the Disclaimer to this document on Page 2. (5) Excludes real estate investments.
TOBACCO OPERATIONS 6
LIGGETT OVERVIEW Fourth-largest U.S. tobacco company; founded in 1873 — Core Discount Brands – Pyramid, Grand Prix, Liggett Select, Eve and Eagle 20’s — Partner Brands – USA, Bronson and Tourney Consistent and strong cash flow —Tobacco Adjusted EBITDA of $226.5 million for the twelve months ended June 30, 2015(1) —Low capital requirements with capital expenditures of $5.0 million related to tobacco operations for the twelve months ended June 30, 2015 —2014 expiration of the TTPP could yield substantial incremental free cash flow Approximately $13.5 million based on Liggett’s TTPP payments for the twelve months ended June 30, 2015 Current cost advantage of 64 cents per pack compared to the three 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 worth approximately $160 million annually for Liggett and Vector Tobacco 7 (1) Tobacco Adjusted EBITDA is a Non-GAAP Financial Measure and is defined in Table 3 of Exhibit 99.1 of the Company’s Current Reports on Form 8-K, dated July 29, 2015 and August 5, 2015. Please also refer to the Disclaimer to this document on Page 2.
LIGGETT HISTORY 8 $46 $79 $77 $121 $111 $127 $130 $144 $146 $158 $170 $165 $158 $174 $186 $200 $211 $226 1.3% 1.2% 1.5% 2.2% 2.4% 2.5% 2.3% 2.2% 2.4% 2.5% 2.5% 2.7% 3.5% 3.8% 3.5% 3.3% 3.4% 3.3% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% $0 $50 $100 $150 $200 $250 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 To b ac co A d ju st e d EB IT D A (1 ) ($ M ill io n s) 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 3 of Exhibit 99.1 of the Company’s Current Reports on Form 8-K, dated March 2, 2015, July 29, 2015 and August 5, 2015, as well as Table 1 to Exhibit 99.1 of the Company’s Current Report on Form 8-K, dated November 10, 2014. D o m e st ic M arke t Sh are 1998 1999 2005 2009 2013 Today Signed the MSA as a Subsequent Participating Manufacturer, which established perpetual cost advantage over three largest U.S. tobacco companies Introduced deep discount brand Liggett Select ,taking advantage of the Company’s cost advantage resulting from the MSA Launched deep discount brand Grand Prix Repositioned Pyramid as a deep-discount brand in response to a large Federal Excise Tax increase LTM 6/30/15 Introduced deep discount brand Eagle 20’s Liggett focuses on margin enhancement resulting in continued earnings growth with record Tobacco Adjusted EBITDA
LITIGATION AND REGULATORY UPDATES Liggett led the industry in acknowledging the addictive properties of nicotine while seeking a legislated settlement of litigation On October 23, 2013, Liggett reached a settlement with approximately 4,900 Engle plaintiffs, which represented substantially all 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 over the next 14 years (2015 – 2028) — Approximately 300 Engle progeny plaintiffs remain — There are presently another ten cases under appeal, and the range of loss in these cases is $0 to $28.3 million (plus attorneys’ fees and interest) of which Liggett has secured approximately $12.3 million in outstanding bonds related to adverse verdicts on appeal 9 Litigation 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 Federal Excise Tax is $1.01/pack (since April 1, 2009) and additional state and municipal excise taxes exist. The TTPP, also known as the tobacco quota buyout, was established in 2004 and expired at the end of 2014 — For the twelve months ended June 30, 2015, Liggett paid $13.5 million under the TTPP
REAL ESTATE OPERATIONS 10
Douglas Elliman Pro-Forma Adjusted EBITDA(2) DOUGLAS ELLIMAN REALTY, LLC Douglas Elliman is 70.59% owned by New Valley: — Largest residential real estate brokerage firm in the highly competitive New York metropolitan area and largest non- franchised residential brokerage firm in the U.S. in 2014 — Approximately 6,000 affiliated agents and 80 offices in the U.S. — Alliance with Knight Frank provides a network with 400 offices across 55 countries with 20,000 affiliated agents — Also offers title and settlement services, relocation services, and residential property management services through various subsidiaries — Became a consolidated subsidiary in December 2013 11 (1) These are Non-GAAP Financial Measures. Please refer to Exhibit 99.1 of the Company’s Current Report on Form 8-K, dated July 29, 2015, for a reconciliation (Tables 9 and 10) as well as the Disclaimer to this document on Page 2. (2) Douglas Elliman’s Revenues were $587M and Douglas Elliman’s net income was $28.4M for the twelve months ended June 30, 2015. Pro-forma Adjusted EBITDA and Pro-forma Adjusted Revenues are non-GAAP financial measures. For a reconciliation of Pro-forma Adjusted EBITDA to net income and Pro-forma Adjusted Revenues to revenues, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on July 29, 2015, March 2, 2015, and November 10, 2014 and Form 10-Q, filed on July 31, 2015 (Commission File Number 1-5759). New Valley’s Pro-Forma Adjusted EBITDA does not include an allocation of Vector Group Ltd.’s Corporate and Other Expenses (for purposes of computing Pro-Forma Adjusted EBITDA) of $13.1M, $12.6M, $10.4M and $9.6M, for the periods presented, respectively. Douglas Elliman Closed Sales – LTM June 30, 2015 $30.9M $45.7M $50.7M $41.1M PF2012 PF2013 PF2014 LTM 6/30/2015 Douglas Elliman Closed Sales – LTM June 30, 2015 $11.5B $11.1B $12.4B $14.9B $18.2B $19.8B 2010 2011 2012 2013 2014 LTM 6/30/2015 Douglas Elliman Pro-Forma Adjusted Revenues – LTM June 30, 2015 (2) $4M $28M $556M $588M Real Estate Brokerage Commissions Property Management Other Long Island, Westchester, Connecticut $5.9B New York City $11.6B South Florida $1.8B Aspen Los Angeles
NEW VALLEY’S REAL ESTATE INVESTMENTS 12 ST Apartment Portfolio (Houston and Stamford) 87 Park (Miami Beach) Monad Terrace (Miami Beach) Sagaponack (East Hampton) Maryland Portfolio (Baltimore County) The Plaza at Harmon Meadow (New Jersey) West Hollywood Edition (West Hollywood) New York City Investments (see slide 13) Escena Master Planned Community (Palm Springs) Commercial Retail/ Office Assets Apartments/ Condominiums/Hotels Land Development/Real Estate Held for Sale, net Milanosesto Holdings Milan, Italy Hotel Taiwana St. Barthélemy Coral Beach and Tennis Club Bermuda International Investments1 (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 - located on page 56 of Vector Group Ltd.’s Form 10-Q for the quarterly period ended June 30, 2015 (Commission File Number 1-5759).
NEW VALLEY’S REAL ESTATE INVESTMENTS IN NEW YORK CITY 1. The Marquand Upper East Side 2. 10 Madison Square Park West Flatiron District/NoMad 3. 11 Beach Street TriBeCa 4. 20 Times Square Times Square 5. 111 Murray Street TriBeCa 6. 357 West Street Greenwich Village 7. PUBLIC Chrystie House Lower East Side 8. The Dutch Long Island City 9. Queens Plaza Long Island City 10. Park Lane Hotel Central Park South 11. 125 Greenwich Street Financial District 12. 76 Eleventh Avenue West Chelsea 13 1 10 4 2 12 9 8 6 5 3 11 7
NEW VALLEY’S REAL ESTATE SUMMARY 14 Net cash invested Cumulative earnings (loss) Carrying value Range of ownership per investment Number of investments Land owned New York metropolitan area $ 12,502 $ - $ 12,502 100.0% 1 All other U.S. areas 1,975 8,566 10,541 100.0% 1 $ 14,477 $ 8,566 $ 23,043 2 Condominium and Mixed Use Development New York metropolitan area $ 110,036 $ 8,101 $ 118,137 5.0% - 49.5% 11 All other U.S. areas 17,804 (264) 17,540 15.0% - 48.5% 3 $ 127,840 $ 7,837 $ 135,677 14 Apartments All other U.S. areas 18,876 950 19,826 7.5% - 16.4% 2 $ 18,876 $ 950 $ 19,826 2 Hotels New York metropolitan area $ 22,806 $ (3,277) $ 19,529 5.0% 1 International 13,098 (1,867) 11,231 17.0% - 49.0% 2 $ 35,904 $ (5,144) $ 30,760 3 Commercial New York metropolitan area 5,931 27 5,958 49.0% 1 $ 5,931 $ 27 $ 5,958 1 Land Development International 5,037 - 5,037 7.2% 1 $ 5,037 $ - $ 5,037 7.2% 1 Total $ 208,065 $ 12,236 $ 220,301 23 SUMMARY New York metropolitan area $ 151,275 $ 4,851 $ 156,126 14 All other U.S. areas 38,655 9,252 47,907 6 International 18,135 (1,867) 16,268 3 $ 208,065 $ 12,236 $ 220,301 23 (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 - located on page 56 of Vector Group Ltd.’s Form 10-Q for the quarterly period ended June 30, 2015 (Commission File Number 1-5759). (Dollars in thousands)
FINANCIAL DATA
$21 $51 $40 $32 $186 $199 $211 $226 2012 2013 2014 LTM 6/30/15 PRO-FORMA HISTORICAL FINANCIAL DATA $389 $483 $563 $594 $1,085 $1,014 $1,021 $1,020 2012 2013 2014 LTM 6/30/15 16 $9 $1 $1,474 $1,498 $1,615$1,593 Real Estate E-cigarettes Tobacco Corporate & Other Pro-Forma Adjusted Revenues1 Pro-Forma Adjusted EBITDA1 $193 $236 $234$228 (1) Pro-Forma Adjusted Revenues and Pro-Forma Adjusted EBITDA are Non-GAAP Financial Measures. Please refer to Exhibit 99.1 of the Company’s Current Report on Form 8-K, dated July 29, 2015 (Tables 2 and 3), for a reconciliation to GAAP as well as the Disclaimer to this document on Page 2. ($13) ($14) ($13) ($10) ($10) ($14) Real Estate E-cigarettes Tobacco Corporate & Other (Dollars in millions)
Vector Group Ltd. 100.0 112.1 143.4 112.5 135.4 192.7 227.0 219.3 279.5 411.4 506.5 S&P 500 100.0 115.8 122.2 77.0 97.4 112.0 114.4 132.7 175.7 199.7 206.3 S&P MidCap 100.0 109.0 119.1 76.0 104.3 132.1 129.8 152.9 204.1 224.0 233.7 NYSE ARCA Tobacco 100.0 140.2 154.2 123.0 173.7 207.4 243.8 289.4 318.9 317.0 397.2 Dow Jones Real Estate Total Return 100.0 135.5 110.9 66.5 86.9 110.4 117.1 139.3 141.8 180.4 179.1 HISTORICAL STOCK PRICE PERFORMANCE 17 Note: The graph above compares the total annual return of Vector’s Common Stock, the S&P 500 Index, the S&P MidCap 400 Index, the NYSE ARCA Tobacco Index and the Dow Jones Real Estate Total Return for the period from December 31, 2005 through July 31, 2015. The graph assumes that all dividends and distributions were reinvested. Source: Bloomberg LP 0% 100% 200% 300% 500% 400% Value of $100 Invested – December 31, 2005 C u m u la ti ve R e tu rn 406.53% 297.18% 133.66% 106.34% 79.12% Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 July-15 Vector Group Ltd. S&P 500 S&P MidCap NYSE ARCA Tobacco Dow Jones Real Estate Total Return
Vector Group Ltd. owns Liggett Group, Vector Tobacco, Zoom E-Cigs, and New Valley. New Valley owns a 70% interest in Douglas Elliman. Pro-Forma Adjusted Revenues LTM 6/30/151 EXECUTIVE MANAGEMENT Howard M. Lorber President and Chief Executive Officer Richard J. Lampen Executive Vice President J. Bryant Kirkland III Vice President, Chief Financial Officer and Treasurer Marc N. Bell Vice President, General Counsel and Secretary Ronald J. Bernstein President and Chief Executive Officer of Liggett Group LLC and Liggett Vector Brands LLC • New Valley, which owns 70.59% of Douglas Elliman Realty, LLC, is a diversified real estate company that is seeking to acquire additional operating companies and real estate properties. • New Valley has invested approximately $210 million, as of June 30, 2015, in a broad portfolio of 23 domestic and international real estate investments. • Douglas Elliman is the largest residential real estate brokerage firm in the New York metropolitan area and the fourth-largest in the U.S. • Douglas Elliman’s closings totaled $19.8 billion for the twelve months ended June 30, 2015 and it has approximately 6,000 affiliated agents and 80 offices throughout the New York metropolitan area, South Florida, Aspen, Greenwich, and Los Angeles. 10-Year Stockholder Return TOBACCO REAL ESTATE Real Estate Tobacco E-Cigarettes 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. • Fourth-largest cigarette manufacturer in the U.S. with a strong family of brands — Pyramid, Grand Prix, Liggett Select, Eve and Eagle 20’s — representing 12% share of the discount market. • Focused on brand strength and long-term profit growth, while continuing to evaluate opportunities to pursue incremental volume and margin growth. • Annual cost advantage of approximately $160 million due to favorable treatment under the Master Settlement Agreement. • The only cigarette company to have reached a comprehensive settlement resolving substantially all of the individual Engle progeny product liability cases pending in Florida. The Engle progeny cases have represented the most significant litigation against the U.S. cigarette industry in recent years. • 2014 expiration of the Tobacco Transition Payment Program could yield substantial incremental free cash flow. TTPP payments were approximately $13.5 million for the twelve months ended June 30, 2015. COMPANY HIGHLIGHTS • Headquartered in Miami with an executive office in Manhattan and tobacco operations in North Carolina • Employs approximately 1,500 people • Executive management and directors beneficially own 14% of the Company • Reported cash of $238 million and investments with fair value of $399 million at June 30, 2015 • Recognized as one of America’s Most Trustworthy Companies by Forbes in 2013 • In 2014, entered e-cigarette category with national rollout of Zoom, a superior disposable product featuring Tobacco and Menthol flavors. E-CIGARETTES Real Estate Tobacco Corporate and Other 2012 2013 LTM 6-30-20152014 $186M $200M $226M$211M $21M $51M $32M$40M ($13M) ($14M) ($10M)($10M) $193M $234M$228M$237M $1.020B $594M $1M TOTAL $1.615B Vector is a largely underfollowed company with a highly competent management team and numerous ways to unlock value “ “ Barron’s Online, August 14, 2014 Oppenheimer analyst Ian Zaffino 2 10-Year return from July 31, 2005 to July 31, 2015 and assumes reinvestment of dividends received. The Company’s net income attributable to Vector Group Ltd. for the periods presented was $31M, $39M, $37M and $65M, respectively. The Company’s revenues for the twelve months ended June 30, 2015 were $1.6B . Pro-Forma Adjusted EBITDA and Pro-Forma Adjusted Revenues are non-GAAP financial measures. For a reconciliation of Pro-Forma Adjusted EBITDA to net income and Pro-Forma Adjusted Revenues to revenues, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on October 6, 2014, November 10, 2014, March 2, 2015, July 29, 2015 and August 5, 2015 and Form 10-Q for the quarterly period ended June 30, 2015 (Commission File Number 1-5759). 1 Pro-Forma Adjusted EBITDA1 Contact: Emily Deissler / Ben Spicehandler / Spencer Waybright of Sard Verbinnen & Co (212) 687-8080 VGR Total Return 418% (17.9% Compounded) 2 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152005 S&P 500 Total Return 110% (7.7% Compounded) 2 500 400 300 200 100 www.vectorgroupltd.com July 31, 2015 E-Cigarettes ($1M) ($14M)($13M)
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. New Valley has invested approximately $210 million, as of June 30, 2015, in a broad portfolio of real estate projects in the United States, the Caribbean and Europe. NEW VALLEY REAL ESTATE INVESTMENTS1 July 31, 2015 DOUGLAS ELLIMAN • Largest residential real estate brokerage firm in New York metropolitan area and fourth-largest in United States. • Closings of $19.8 billion for the last twelve months ended June 30, 2015; Douglas Elliman has approximately 6,000 affiliated agents and 80 offices throughout the New York metropolitan area, South Florida, Aspen, Greenwich, and Los Angeles. • Strategic Marketing Partnership with Yahoo!-Zillow® Real Estate Network that provides advertising exclusivity for Douglas Elliman’s listings. • Maintains an alliance with Knight Frank— the largest independent residential brokerage in the United Kingdom— to jointly market high-end properties, providing a network with 400 offices across 55 countries with 20,000 affiliated agents. • Pro-Forma Adjusted Revenues and Pro-Forma Adjusted EBITDA of Douglas Elliman of $588.1 million2 and $41.1 million2, respectively, for the last twelve months ended June 30, 2015. COMPANY HIGHLIGHTS • Executive offices in Manhattan and Miami • Employs approximately 900 people Douglas Elliman’s Revenues were $587M and Douglas Elliman’s net income was $28.4M for the twelve months ended June 30, 2015. New Valley’s net income for the periods presented was approximately $16.4M, $59.4M, $21.4M and $17.5M, for the periods presented, respectively. New Valley’s revenues for the twelve months ended June 30, 2015 were $593.2M. Pro-Forma Adjusted EBITDA and Pro-Forma Adjusted Revenues are non-GAAP financial measures. For a reconciliation of Pro-Forma Adjusted EBITDA to net income and Pro-Forma Adjusted Revenues to revenues, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on July 29, 2015, March 2, 2015, and November 10, 2014 and Form 10-Q for the quarterly period ended June 30, 2015 (Commission File Number 1-5759). New Valley’s Pro-Forma Adjusted EBITDA does not include an allocation of Vector Group Ltd.’s Corporate and Other Expenses (for purposes of computing Pro-Forma Adjusted EBITDA) of $13.1M, $12.6M, $10.4M and $9.6M, for the periods presented, respectively. 2 PF2012 PF2013 PF2014 LTM 6/30/2015 $20.6M $51.3M $40.2M $31.7M New Valley Pro-Forma Adjusted EBITDA2 212 3 10 5 6 7 8 9 1 4 Maryland Portfolio (Baltimore County) New Valley Investment & Development Portfolio1 New Valley’s New York Real Estate Investments1 1. The Marquand Upper East Side 2. 10 Madison Square Park West Flatiron District/NoMad 3. 11 Beach Street TriBeCa 4. 20 Times Square Times Square 5. 111 Murray Street TriBeCa 6. 357 West Street Greenwich Village 7. PUBLIC Chrystie House Lower East Side 8. The Dutch Long Island City 9. Queens Plaza Long Island City 10. Park Lane Hotel Central Park South 11. 125 Greenwich Street Financial District 12. 76 Eleventh Avenue West Chelsea Hotel Taiwana St. Barthélemy Milanosesto Holdings Milan, Italy Coral Beach and Tennis Club Bermuda International Investments1 Land Development/Real Estate Held for Sale, net Apartments/ Condo- miniums/Hotels Commercial Retail/ Office Assets Monad Terrace (Miami Beach) www.newvalley.comContact: Emily Deissler / Ben Spicehandler / Spencer Waybright of Sard Verbinnen & Co (212) 687-8080 Escena master planned community (Palm Springs) Douglas Elliman Closings 2010 2011 2012 2013 LTM 6/30/2015 $11.5B $11.1B $12.4B $14.9B $18.2B $19.8B 2014 EXECUTIVE MANAGEMENT Howard M. Lorber President and Chief Executive Officer Richard J. Lampen Executive Vice President J. Bryant Kirkland III Vice President, Treasurer and Chief Financial Officer Marc N. Bell Vice President, Secretary and General Counsel Bennett P. Borko Executive Vice President of New Valley Realty division Dorothy Herman President and Chief Executive Officer of Douglas Elliman NY City Investments 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 - located on page 56 of Vector Group Ltd.’s Form 10-Q for the quarterly period ended June 30, 2015 (Commission File Number 1-5759). 1 New Valley Pro-Forma Adjusted Revenues – LTM June 30, 20152 Other Real Estate Brokerage Commissions Property Management 11 West Hollywood Edition (West Hollywood) $594M $556M $28M $10M The Plaza at Harmon Meadow (New Jersey) Sagaponack (East Hampton) 87 Park (Miami Beach) ST Apartment Portfolio (Houston and Stamford)