UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2016
VECTOR GROUP LTD. |
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE |
(State or Other Jurisdiction of Incorporation) |
1-5759 | 65-0949535 | |
(Commission File Number) | (I.R.S. Employer Identification No.) | |
4400 Biscayne Boulevard, Miami, Florida | 33137 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(305) 579-8000 |
(Registrant’s Telephone Number, Including Area Code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02. Results of Operations and Financial Condition
On November 3, 2016, Vector Group Ltd. announced its financial results for the three and nine months ended September 30, 2016. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Current Report on Form 8-K and the Exhibit attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibit
(c) | Exhibit. |
Exhibit No. | Exhibit | |
99.1 | Press Release issued on November 3, 2016 | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
VECTOR GROUP LTD. | ||
By: | /s/ J. Bryant Kirkland III | |
J. Bryant Kirkland III | ||
Senior Vice President, Treasurer and Chief Financial Officer | ||
Date: November 3, 2016
FOR IMMEDIATE RELEASE
Contact: | Emily Deissler/Benjamin Spicehandler/Spencer Waybright | |
Sard Verbinnen & Co | ||
212-687-8080 | ||
Jonathan Doorley/Conrad Harrington | ||
Sard Verbinnen & Co - Europe | ||
+44 (0)20 3178 8914 | ||
J. Bryant Kirkland III, Vector Group Ltd. | ||
305-579-8000 | ||
VECTOR GROUP REPORTS THIRD QUARTER 2016 FINANCIAL RESULTS
MIAMI, FL, November 3, 2016 - Vector Group Ltd. (NYSE:VGR) today announced financial results for the three and nine months ended September 30, 2016.
GAAP Financial Results
Third quarter 2016 revenues were $459.1 million, compared to revenues of $449.9 million in the third quarter of 2015. The Company recorded operating income of $69.4 million in the third quarter of 2016, compared to operating income of $69.4 million in the third quarter of 2015. Net income attributed to Vector Group Ltd. for the 2016 third quarter was $23.2 million, or $0.18 per diluted common share, compared to net income of $12.5 million, or $0.10 per diluted common share, in the 2015 third quarter.
For the nine months ended September 30, 2016 revenues were $1.278 billion, compared to revenues of $1.227 billion for the nine months ended September 30, 2015. The Company recorded operating income of $202.2 million for the nine months ended September 30, 2016, compared to operating income of $168.9 million for the nine months ended September 30, 2015. Net income attributed to Vector Group Ltd. for the nine months ended September 30, 2016 was $66.5 million, or $0.52 per diluted common share, compared to net income of $51.3 million, or $0.40 per diluted common share for the nine months ended September 30, 2015.
Non-GAAP Financial Measures
Non-GAAP financial measures also include adjustments for purchase accounting associated with the Company's acquisition of its additional 20.59% interest in Douglas Elliman Realty, LLC in December 2013, litigation settlement and judgment expenses in the Tobacco segment, settlements of long-standing disputes related to the Master Settlement Agreement in the Tobacco segment, restructuring and pension settlement expense in the Tobacco segment, stock-based compensation expense (for purposes of Pro-forma Adjusted EBITDA only) and non-cash interest items associated with the Company's convertible debt. Reconciliations of non-GAAP financial results to the comparable GAAP financial results for the three and nine months ended September 30, 2016 and 2015 are included in Tables 2 through 10.
Three months ended September 30, 2016 compared to the three months ended September 30, 2015
Third quarter 2016 Adjusted Revenues (as described in Table 2 attached hereto) were $459.1 million compared to $450.4 million in 2015.
Adjusted EBITDA attributed to Vector Group (as described below and in Table 3 attached hereto) were $75.1 million for the third quarter of 2016 as compared to $72.5 million for the third quarter of 2015.
Adjusted Net Income (as described below and in Table 4 attached hereto) was $24.3 million or $0.19 per diluted share for the three months ended September 30, 2016 and $13.1 million or $0.10 per diluted share for the three months ended September 30, 2015.
Adjusted Operating Income (as described below and in Table 5 attached hereto) was $71.1 million for the three months ended September 30, 2016 and $70.9 million for the three months ended September 30, 2015.
Nine months ended September 30, 2016 compared to the nine months ended September 30, 2015
For the nine months ended September 30, 2016 Adjusted Revenues (as described in Table 2 attached hereto) were $1.278 billion compared to $1.228 billion in 2015.
Adjusted EBITDA attributed to Vector Group (as described below and in Table 3 attached hereto) were $219.8 million for the nine months ended September 30, 2016 compared to $187.5 million in 2015.
Adjusted Net Income (as described below and in Table 4 attached hereto) was $67.1 million or $0.52 per diluted share for the nine months ended September 30, 2016 and $56.1 million or $0.44 per diluted share for the nine months ended September 30, 2015.
Adjusted Operating Income (as described below and in Table 5 attached hereto) was $207.9 million for the nine months ended September 30, 2016 and $177.8 million for the nine months ended September 30, 2015.
Tobacco Segment Financial Results
For the third quarter 2016, the Tobacco segment had revenues of $274.2 million, compared to $264.2 million for the third quarter 2015. The increase in revenues was primarily due to favorable net pricing variances and a 2.9% increase in unit sales volume.
For the nine months ended September 30, 2016, the Tobacco segment had revenues of $750.7 million, compared to $747.1 million for the nine months ended September 30, 2015. The increase in revenues was primarily driven by favorable net pricing variances partially offset by a 1.7% decline in unit sales volume.
Operating Income from the Tobacco segment was $67.0 million and $194.5 million for the three and nine months ended September 30, 2016 compared to $63.6 million and $169.5 million for the three and nine months ended September 30, 2015, respectively.
Non-GAAP Financial Measures
Tobacco Adjusted Operating Income (described below and included in Table 6 attached hereto) for the third quarter 2016 and 2015 was $66.6 million and $63.2 million, respectively. Tobacco Adjusted Operating Income for the nine months ended September 30, 2016 and 2015 was $196.5 million and $172.8 million, respectively.
For the three months ended September 30, 2016, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 2.31 billion units compared to 2.24 billion units for the three months ended September 30, 2015. For the nine months ended September 30, 2016, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 6.23 billion units compared to 6.34 billion for the nine months ended September 30, 2015.
Liggett's retail market share increased to approximately 3.5% during the nine months ended September 30, 2016. Compared to the nine months ended September 30, 2015, Liggett's retail shipments were flat while the overall industry's retail shipments declined by 2.2%, according to data from Management Science Associates, Inc.
Real Estate Segment Financial Results
For the third quarter 2016, the Real Estate segment had revenues of $184.9 million, compared to $185.6 million for the third quarter 2015. For the nine months ended September 30, 2016, the Real Estate segment had revenues of $527.4 million compared to $478.8 million for the nine months ended September 30, 2015. For third quarter 2016, the Real Estate segment reported net income of $4.7 million, compared to $4.7 million for the third quarter 2015. For the nine months ended September 30, 2016, the Real Estate segment reported net income of $14.3 million compared to $10.2 million for the nine months ended September 30, 2015.
Douglas Elliman's results are included in Vector Group Ltd.'s Real Estate segment. For the third quarter 2016, Douglas Elliman had revenues of $184.5 million, compared to $185.0 million for the third quarter 2015. For the nine months ended September 30, 2016, Douglas Elliman had revenues of $523.8 million compared to $474.4 million for the nine months ended September 30, 2015. For third quarter 2016, Douglas Elliman reported net income of $8.7 million, compared to $12.4 million for the third quarter 2015. For the nine months ended September 30, 2016, the Douglas Elliman net income of $27.2 million compared to $19.7 million for the nine months ended September 30, 2015.
Non-GAAP Financial Measures
For the third quarter 2016, the Real Estate segment had Adjusted Revenues of $184.9 million, compared to $186.0 million for the third quarter 2015. For the third quarter 2016, Real Estate Adjusted EBITDA attributed to the Company were $9.3 million, compared to $11.2 million for the third quarter 2015.
For the nine months ended September 30, 2016, the Real Estate segment had Adjusted Revenues of $527.4 million compared to $480.3 million for the nine months ended September 30, 2015. The increase in revenues was primarily due to an increase in
commissions and other brokerage income at Douglas Elliman. For the nine months ended September 30, 2016, Real Estate Adjusted EBITDA attributed to the Company were $27.4 million compared to $23.0 million for the nine months ended September 30, 2015.
Douglas Elliman's results are included in Vector Group Ltd.'s Real Estate segment. Douglas Elliman's Adjusted Revenues for the third quarter 2016 were $184.5 million, compared to $185.5 million for the third quarter 2015.
For the third quarter 2016, Douglas Elliman's Adjusted EBITDA were $13.3 million ($9.4 million attributed to the Company), compared to $16.3 million ($11.5 million attributed to the Company) for the third quarter 2015.
For the nine months ended September 30, 2016, Douglas Elliman's Adjusted Revenues were $523.8 million compared to $475.8 million for the nine months ended September 30, 2015.
For the nine months ended September 30, 2016, Douglas Elliman's Adjusted EBITDA were $37.2 million ($26.2 million attributed to the Company), compared to $29.9 million ($21.1 million attributed to the Company) for the nine months ended September 30, 2015.
For the three and nine months ended September 30, 2016 , Douglas Elliman achieved closed sales of approximately $6.8 billion and $18.9 billion, compared to $6.6 billion and $16.2 billion for the three and nine months ended September 30, 2015.
E-cigarettes Segment Financial Results
For the third quarter, the E-cigarette segment had a loss of Adjusted EBITDA of $0.2 million compared to revenues of $0.2 million and a loss of Adjusted EBITDA of $2.1 million for the third quarter 2015.
For the nine months ended September 30, 2016, the E-cigarette segment had a loss of Adjusted EBITDA of $0.4 million compared to revenues of $0.9 million and a loss of Adjusted EBITDA of $7.7 million for the nine months ended September 30, 2015.
Retrospective Adjustment to Previously Reported Results
Amounts previously reported for the three and nine months ended September 30, 2015 have been adjusted, as required by Generally Accepted Accounting Principles, to retroactively apply the equity method of accounting for two investments (Ladenburg Thalmann Financial Services Inc. and Castle Brands, Inc.) since the inception of each investment. Please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 as well as the Company’s Current Report on Form 8-K, dated April 1, 2016, for additional information.
Non-GAAP Financial Measures
Adjusted Revenues, New Valley LLC Adjusted Revenues and Douglas Elliman Realty, LLC Adjusted Revenues (hereafter referred to as "the Non-GAAP Revenue Financial Measures") and Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Income, Tobacco Adjusted Operating Income, New Valley LLC Adjusted EBITDA and Douglas Elliman Realty, LLC Adjusted EBITDA (hereafter, along with the Non-GAAP Revenue Measures referred to as "the Non-GAAP Financial Measures") are financial measures not prepared in accordance with generally accepted accounting principles (“GAAP”). The Company believes that the Non-GAAP Financial Measures are important measures that supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. The Company believes the Non-GAAP Financial Measures provide investors and analysts with a useful measure of operating results unaffected by differences in capital structures and ages of related assets among otherwise comparable companies. In the case of the Non-GAAP Revenue Financial Measures, management believes revenue growth in its real estate segment is an important measure of growth because increased revenues generally result in increased gross margin as a result of absorption of fixed operating costs, which management believes will lead to increased future profitability as well as increased capacity to expand into new and existing markets. A key strategy of the Company is its ability to move into new markets and therefore gross revenues provide information with respect to the Company's ability to achieve its strategic objectives. Management also believes increased revenues generally indicate increased market share in existing markets as well as expansion into new markets. Consequently, management believes the Non-GAAP Revenue Financial Measures are meaningful indicators of operating performance.
Management uses the Non-GAAP Financial Measures as measures to review and assess operating performance of the Company's business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (the Non-GAAP Financial Measures) of the Company's business. While management considers the Non-GAAP Financial Measures to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating income, net income and cash flows from operations. In addition, the Non-GAAP Financial Measures are susceptible to varying calculations and the Company's measurement of the Non-GAAP Financial Measures may not be comparable to those of other companies. Attached hereto as Tables 2 through 10 is information relating to the Company's the Non-GAAP Financial Measures for the three and nine months ended September 30, 2016 and 2015.
Conference Call to Discuss Third quarter 2016 Results
As previously announced, the Company will host a conference call and webcast on Thursday, November 3, 2016 at 8:30 AM. (ET) to discuss third quarter 2016 results. Investors can access the call by dialing 800-859-8150 and entering 21770048 as the conference ID number. The call will also be available via live webcast atwww.investorcalendar.com. Webcast participants should allot extra time to register before the webcast begins.
A replay of the call will be available shortly after the call ends on November 3, 2016 through November 17, 2016. To access the replay, dial 877-656-8905 and enter 21770048 as the conference ID number. The archived webcast will also be available at www.investorcalendar.com for one year.
Vector Group is a holding company that indirectly owns Liggett Group LLC, Vector Tobacco Inc. and Zoom E-Cigs LLC and directly owns New Valley LLC, which owns a controlling interest in Douglas Elliman Realty, LLC. Additional information concerning the company is available on the Company's website, www.VectorGroupLtd.com.
[Financial Tables Follow]
TABLE 1
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Revenues | |||||||||||||||
Tobacco* | $ | 274,164 | $ | 264,170 | $ | 750,677 | $ | 747,145 | |||||||
Real estate | 184,936 | 185,563 | 527,448 | 478,841 | |||||||||||
E-Cigarettes | 4 | 201 | 52 | 881 | |||||||||||
Total revenues | 459,104 | 449,934 | 1,278,177 | 1,226,867 | |||||||||||
Expenses: | |||||||||||||||
Cost of sales: | |||||||||||||||
Tobacco* | 186,343 | 174,418 | 491,688 | 506,315 | |||||||||||
Real estate | 117,089 | 121,078 | 331,784 | 309,306 | |||||||||||
E-Cigarettes | 10 | 421 | 23 | 1,518 | |||||||||||
Total cost of sales | 303,442 | 295,917 | 823,495 | 817,139 | |||||||||||
Operating, selling, administrative and general expenses | 86,298 | 79,352 | 250,048 | 233,449 | |||||||||||
Litigation, settlement and judgment expense | — | 3,750 | 2,350 | 5,843 | |||||||||||
Restructuring charges | — | 1,548 | 41 | 1,548 | |||||||||||
Operating income | 69,364 | 69,367 | 202,243 | 168,888 | |||||||||||
Other income (expenses): | |||||||||||||||
Interest expense | (37,365 | ) | (32,898 | ) | (104,454 | ) | (96,405 | ) | |||||||
Change in fair value of derivatives embedded within convertible debt | 6,112 | 7,044 | 23,222 | 18,760 | |||||||||||
Equity in earnings (losses) from real estate ventures | 1,022 | (916 | ) | 3,328 | 1,278 | ||||||||||
Equity in losses from investments | (1,526 | ) | (1,103 | ) | (2,108 | ) | (2,654 | ) | |||||||
Gain (loss) on sale of investment securities available for sale | 142 | (821 | ) | 848 | 12,018 | ||||||||||
Impairment of investment securities available for sale | (54 | ) | (12,211 | ) | (4,916 | ) | (12,211 | ) | |||||||
Other, net | 1,328 | 1,342 | 2,956 | 5,100 | |||||||||||
Income before provision for income taxes | 39,023 | 29,804 | 121,119 | 94,774 | |||||||||||
Income tax expense | 13,316 | 13,694 | 46,682 | 37,739 | |||||||||||
Net income | 25,707 | 16,110 | 74,437 | 57,035 | |||||||||||
Net income attributed to non-controlling interest | (2,532 | ) | (3,644 | ) | (7,909 | ) | (5,741 | ) | |||||||
Net income attributed to Vector Group Ltd. | $ | 23,175 | $ | 12,466 | $ | 66,528 | $ | 51,294 | |||||||
Per basic common share: | |||||||||||||||
Net income applicable to common shares attributed to Vector Group Ltd. | $ | 0.18 | $ | 0.10 | $ | 0.52 | $ | 0.40 | |||||||
Per diluted common share: | |||||||||||||||
Net income applicable to common shares attributed to Vector Group Ltd. | $ | 0.18 | $ | 0.10 | $ | 0.52 | $ | 0.40 | |||||||
Cash distributions declared per share | $ | 0.38 | $ | 0.36 | $ | 1.14 | $ | 1.09 | |||||||
* Revenues and cost of sales include federal excise taxes of $116,024, $112,773, $313,731 and $319,044, respectively.
TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
REVENUES AND RECONCILIATION OF ADJUSTED REVENUES
(Unaudited)
(Dollars in Thousands)
LTM | Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | |||||||||||||||||
2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Revenues | $ | 1,708,507 | $ | 459,104 | $ | 449,934 | $ | 1,278,177 | $ | 1,226,867 | |||||||||
Purchase accounting adjustments (a) | 481 | — | 481 | — | 1,444 | ||||||||||||||
Total adjustments | 481 | — | 481 | — | 1,444 | ||||||||||||||
Adjusted Revenues (b) | $ | 1,708,988 | $ | 459,104 | $ | 450,415 | $ | 1,278,177 | $ | 1,228,311 | |||||||||
Revenues by Segment | |||||||||||||||||||
Tobacco (b) | $ | 1,021,293 | $ | 274,164 | $ | 264,170 | $ | 750,677 | $ | 747,145 | |||||||||
E-cigarettes | (2,799 | ) | 4 | 201 | 52 | 881 | |||||||||||||
Real Estate (c) | 690,013 | 184,936 | 185,563 | 527,448 | 478,841 | ||||||||||||||
Corporate and Other | — | — | — | — | — | ||||||||||||||
Total (b) | $ | 1,708,507 | $ | 459,104 | $ | 449,934 | $ | 1,278,177 | $ | 1,226,867 | |||||||||
Adjusted Revenues by Segment | |||||||||||||||||||
Tobacco (b) | $ | 1,021,293 | $ | 274,164 | $ | 264,170 | $ | 750,677 | $ | 747,145 | |||||||||
E-cigarettes | (2,799 | ) | 4 | 201 | 52 | 881 | |||||||||||||
Real Estate (c) | 690,494 | 184,936 | 186,044 | 527,448 | 480,285 | ||||||||||||||
Corporate and Other | — | — | — | — | — | ||||||||||||||
Total (b) | $ | 1,708,988 | $ | 459,104 | $ | 450,415 | $ | 1,278,177 | $ | 1,228,311 | |||||||||
a. | Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013. |
b. | Includes excise taxes of $432,073 for the last twelve months ended September 30, 2016 and $116,024, $112,773, $313,731 and $319,044 for the three and nine months ended September 30, 2016 and 2015, respectively. |
c. | Includes Adjusted Revenues from Douglas Elliman Realty, LLC of $684,960 for the last twelve months ended September 30, 2016 and $184,453, $185,481, $523,767 and $475,807 for the three and nine months ended September 30, 2016 and 2015, respectively. |
TABLE 3
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
LTM | Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | |||||||||||||||||
2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net income attributed to Vector Group Ltd. | $ | 74,432 | $ | 23,175 | $ | 12,466 | $ | 66,528 | $ | 51,294 | |||||||||
Interest expense | 128,740 | 37,365 | 32,898 | 104,454 | 96,405 | ||||||||||||||
Income tax expense | 50,176 | 13,316 | 13,694 | 46,682 | 37,739 | ||||||||||||||
Net income attributed to non-controlling interest | 9,442 | 2,532 | 3,644 | 7,909 | 5,741 | ||||||||||||||
Depreciation and amortization | 23,125 | 5,833 | 6,673 | 16,867 | 19,396 | ||||||||||||||
EBITDA | $ | 285,915 | $ | 82,221 | $ | 69,375 | $ | 242,440 | $ | 210,575 | |||||||||
Change in fair value of derivatives embedded within convertible debt (a) | (28,917 | ) | (6,112 | ) | (7,044 | ) | (23,222 | ) | (18,760 | ) | |||||||||
Equity in losses from investments (b) | 2,135 | 1,526 | 1,103 | 2,108 | 2,654 | ||||||||||||||
Loss (gain) on sale of investment securities available for sale | 32 | (142 | ) | 821 | (848 | ) | (12,018 | ) | |||||||||||
Impairment of investment securities available for sale | 5,551 | 54 | 12,211 | 4,916 | 12,211 | ||||||||||||||
Equity in (earnings) losses from real estate ventures (c) | (4,051 | ) | (1,022 | ) | 916 | (3,328 | ) | (1,278 | ) | ||||||||||
Pension settlement charge | — | — | — | — | 1,607 | ||||||||||||||
Stock-based compensation expense (d) | 9,249 | 2,438 | 1,248 | 7,277 | 3,648 | ||||||||||||||
Litigation settlement and judgment expense (e) | 16,579 | — | 3,750 | 2,350 | 5,843 | ||||||||||||||
Impact of MSA settlement (f) | 981 | (370 | ) | (5,715 | ) | (370 | ) | (5,715 | ) | ||||||||||
Restructuring charges | 5,750 | — | 1,548 | 41 | 1,548 | ||||||||||||||
Purchase accounting adjustments (g) | 2,580 | 1,653 | 366 | 2,201 | 1,056 | ||||||||||||||
Other, net | (4,265 | ) | (1,328 | ) | (1,342 | ) | (2,956 | ) | (5,100 | ) | |||||||||
Adjusted EBITDA | $ | 291,539 | $ | 78,918 | $ | 77,237 | $ | 230,609 | $ | 196,271 | |||||||||
Adjusted EBITDA attributed to non-controlling interest | (13,384 | ) | (3,852 | ) | (4,735 | ) | (10,849 | ) | (8,732 | ) | |||||||||
Adjusted EBITDA attributed to Vector Group Ltd. | $ | 278,155 | $ | 75,066 | $ | 72,502 | $ | 219,760 | $ | 187,539 | |||||||||
Adjusted EBITDA by Segment | |||||||||||||||||||
Tobacco | $ | 268,086 | $ | 69,421 | $ | 66,084 | $ | 204,292 | $ | 181,580 | |||||||||
E-cigarettes | (5,776 | ) | (165 | ) | (2,146 | ) | (449 | ) | (7,710 | ) | |||||||||
Real Estate (h) | 44,710 | 13,144 | 15,981 | 38,297 | 31,698 | ||||||||||||||
Corporate and Other | (15,481 | ) | (3,482 | ) | (2,682 | ) | (11,531 | ) | (9,297 | ) | |||||||||
Total | $ | 291,539 | $ | 78,918 | $ | 77,237 | $ | 230,609 | $ | 196,271 | |||||||||
Adjusted EBITDA Attributed to Vector Group Ltd. by Segment | |||||||||||||||||||
Tobacco | $ | 268,086 | $ | 69,421 | $ | 66,084 | $ | 204,292 | $ | 181,580 | |||||||||
E-cigarettes | (5,776 | ) | (165 | ) | (2,146 | ) | (449 | ) | (7,710 | ) | |||||||||
Real Estate (i) | 31,326 | 9,292 | 11,246 | 27,448 | 22,966 | ||||||||||||||
Corporate and Other | (15,481 | ) | (3,482 | ) | (2,682 | ) | (11,531 | ) | (9,297 | ) | |||||||||
Total | $ | 278,155 | $ | 75,066 | $ | 72,502 | $ | 219,760 | $ | 187,539 | |||||||||
a. | Represents income or losses recognized from changes in the fair value of the derivatives embedded in the Company's convertible debt. |
b. | Represents equity in losses recognized from investments that the Company accounts for under the equity method. |
c. | Represents equity in (earnings) losses recognized from the Company's investment in certain real estate businesses that are not consolidated in its financial results. |
d. | Represents amortization of stock-based compensation. |
e. | Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation. |
f. | Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement. |
g. | Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013. |
h. | Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $43,034 for the last twelve months ended September 30, 2016 and $13,297, $16,294, $37,179 and $29,885 for the three and nine months ended September 30, 2016 and 2015, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC's entire Adjusted EBITDA. |
i. | Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $30,378 for the last twelve months ended September 30, 2016 and $9,386, $11,502, $26,245 and $21,096 for the three and nine months ended September 30, 2016 and 2015, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC's Adjusted EBITDA for non-controlling interest. |
TABLE 4
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income attributed to Vector Group Ltd. | $ | 23,175 | $ | 12,466 | $ | 66,528 | $ | 51,294 | |||||||
Change in fair value of derivatives embedded within convertible debt | (6,112 | ) | (7,044 | ) | (23,222 | ) | (18,760 | ) | |||||||
Non-cash amortization of debt discount on convertible debt | 10,167 | 7,187 | 27,623 | 19,646 | |||||||||||
Litigation settlement and judgment expense (a) | — | 3,750 | 2,350 | 5,843 | |||||||||||
Pension settlement charge | — | — | — | 1,607 | |||||||||||
Impact of interest expense capitalized to real estate ventures, net | (3,276 | ) | — | (8,111 | ) | — | |||||||||
Impact of MSA settlement (b) | (370 | ) | (5,715 | ) | (370 | ) | (5,715 | ) | |||||||
Restructuring charges | — | 1,548 | 41 | 1,548 | |||||||||||
Douglas Elliman Realty, LLC purchase accounting adjustments (c) | 1,511 | 1,351 | 2,568 | 3,945 | |||||||||||
Total adjustments | 1,920 | 1,077 | 879 | 8,114 | |||||||||||
Tax expense related to adjustments | (780 | ) | (448 | ) | (357 | ) | (3,358 | ) | |||||||
Adjusted Net Income attributed to Vector Group Ltd. | $ | 24,315 | $ | 13,095 | $ | 67,050 | $ | 56,050 | |||||||
Per diluted common share: | |||||||||||||||
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd. | $ | 0.19 | $ | 0.10 | $ | 0.52 | $ | 0.44 | |||||||
a. Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.
b. | Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement. |
c. | Represents 70.59% of purchase accounting adjustments in the periods presented for assets acquired in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013. |
TABLE 5
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED OPERATING INCOME
(Unaudited)
(Dollars in Thousands)
LTM | Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | |||||||||||||||||
2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Operating income | $ | 233,275 | $ | 69,364 | $ | 69,367 | $ | 202,243 | $ | 168,888 | |||||||||
Litigation settlement and judgment expense (a) | 16,579 | — | 3,750 | 2,350 | 5,843 | ||||||||||||||
Pension settlement charge | — | — | — | — | 1,607 | ||||||||||||||
Restructuring expense | 5,750 | — | 1,548 | 41 | 1,548 | ||||||||||||||
Impact of MSA settlement (b) | 981 | (370 | ) | (5,715 | ) | (370 | ) | (5,715 | ) | ||||||||||
Douglas Elliman Realty, LLC purchase accounting adjustments (c) | 5,563 | 2,141 | 1,913 | 3,638 | 5,588 | ||||||||||||||
Total adjustments | 28,873 | 1,771 | 1,496 | 5,659 | 8,871 | ||||||||||||||
Adjusted Operating Income (d) | $ | 262,148 | $ | 71,135 | $ | 70,863 | $ | 207,902 | $ | 177,759 | |||||||||
a. | Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation. |
b. | Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement. |
c. | Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013. |
d. | Does not include a reduction for 29.41% non-controlling interest in Douglas Elliman Realty, LLC. |
TABLE 6
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF TOBACCO ADJUSTED OPERATING INCOME
AND TOBACCO ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
LTM | Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | |||||||||||||||||
2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Tobacco Adjusted Operating Income: | |||||||||||||||||||
Operating income from tobacco segment | $ | 234,351 | $ | 66,974 | $ | 63,630 | $ | 194,473 | $ | 169,515 | |||||||||
Litigation settlement and judgment expense (a) | 16,579 | — | 3,750 | 2,350 | 5,843 | ||||||||||||||
Pension settlement charge | — | — | — | — | 1,607 | ||||||||||||||
Restructuring expense | 5,750 | — | 1,548 | 41 | 1,548 | ||||||||||||||
Impact of MSA settlement (b) | 981 | (370 | ) | (5,715 | ) | (370 | ) | (5,715 | ) | ||||||||||
Total adjustments | 23,310 | (370 | ) | (417 | ) | 2,021 | 3,283 | ||||||||||||
Tobacco Adjusted Operating Income | $ | 257,661 | $ | 66,604 | $ | 63,213 | $ | 196,494 | $ | 172,798 | |||||||||
LTM | Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | |||||||||||||||||
2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Tobacco Adjusted EBITDA: | |||||||||||||||||||
Operating income from tobacco segment | $ | 234,351 | $ | 66,974 | $ | 63,630 | $ | 194,473 | $ | 169,515 | |||||||||
Litigation settlement and judgment expense (a) | 16,579 | — | 3,750 | 2,350 | 5,843 | ||||||||||||||
Pension settlement charge | — | — | — | — | 1,607 | ||||||||||||||
Restructuring expense | 5,750 | — | 1,548 | 41 | 1,548 | ||||||||||||||
Impact of MSA settlement (b) | 981 | (370 | ) | (5,715 | ) | (370 | ) | (5,715 | ) | ||||||||||
Total adjustments | 23,310 | (370 | ) | (417 | ) | 2,021 | 3,283 | ||||||||||||
Tobacco Adjusted Operating Income | 257,661 | 66,604 | 63,213 | 196,494 | 172,798 | ||||||||||||||
Depreciation and amortization | 10,341 | 2,796 | 2,871 | 7,735 | 8,717 | ||||||||||||||
Stock-based compensation expense | 84 | 21 | — | 63 | 65 | ||||||||||||||
Total adjustments | 10,425 | 2,817 | 2,871 | 7,798 | 8,782 | ||||||||||||||
Tobacco Adjusted EBITDA | $ | 268,086 | $ | 69,421 | $ | 66,084 | $ | 204,292 | $ | 181,580 | |||||||||
a. | Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation. |
b. | Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement. |
TABLE 7
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF REAL ESTATE SEGMENT (NEW VALLEY LLC) ADJUSTED REVENUES
(Unaudited)
(Dollars in Thousands)
LTM | Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | |||||||||||||||||
2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Real Estate Segment (New Valley LLC) revenues | $ | 690,013 | $ | 184,936 | $ | 185,563 | $ | 527,448 | $ | 478,841 | |||||||||
Purchase accounting adjustments (a) | 481 | — | 481 | — | 1,444 | ||||||||||||||
Total adjustments | 481 | — | 481 | — | 1,444 | ||||||||||||||
Real Estate Segment (New Valley LLC) Adjusted Revenues (b) | $ | 690,494 | $ | 184,936 | $ | 186,044 | $ | 527,448 | $ | 480,285 | |||||||||
a. | Amounts represent purchase accounting adjustments recorded in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC., which occurred in 2013. |
b. | Includes Adjusted Revenues from Douglas Elliman Realty, LLC of $684,960 for the last twelve months ended September 30, 2016 and $184,453, $185,481, $523,767 and $475,807 for the three and nine months ended September 30, 2016 and 2015, respectively. |
TABLE 8
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF REAL SEGMENT (NEW VALLEY LLC) ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
LTM | Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | |||||||||||||||||
2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net income attributed to Vector Group Ltd. from subsidiary non-guarantors (a) | $ | 15,744 | $ | 4,721 | $ | 4,695 | $ | 14,291 | $ | 10,215 | |||||||||
Interest expense (a) | 17 | 7 | 1 | 14 | 4 | ||||||||||||||
Income tax expense (a) | 10,877 | 2,430 | 3,395 | 9,891 | 7,904 | ||||||||||||||
Net income attributed to non-controlling interest (a) | 9,442 | 2,532 | 3,644 | 7,909 | 5,741 | ||||||||||||||
Depreciation and amortization | 11,089 | 2,647 | 3,388 | 7,872 | 9,372 | ||||||||||||||
EBITDA | $ | 47,169 | $ | 12,337 | $ | 15,123 | $ | 39,977 | $ | 33,236 | |||||||||
Loss (income) from non-guarantors other than New Valley LLC | 109 | 8 | (1 | ) | 84 | 66 | |||||||||||||
Equity in (earnings) losses from real estate ventures (b) | (4,051 | ) | (1,022 | ) | 916 | (3,328 | ) | (1,278 | ) | ||||||||||
Purchase accounting adjustments (c) | 2,580 | 1,653 | 366 | 2,201 | 1,056 | ||||||||||||||
Other, net | (1,172 | ) | 136 | (305 | ) | (704 | ) | (1,286 | ) | ||||||||||
Adjusted EBITDA | $ | 44,635 | $ | 13,112 | $ | 16,099 | $ | 38,230 | $ | 31,794 | |||||||||
Adjusted EBITDA attributed to non-controlling interest | (13,384 | ) | (3,852 | ) | (4,735 | ) | (10,849 | ) | (8,732 | ) | |||||||||
Adjusted EBITDA attributed to New Valley LLC | $ | 31,251 | $ | 9,260 | $ | 11,364 | $ | 27,381 | $ | 23,062 | |||||||||
Adjusted EBITDA by Segment | |||||||||||||||||||
Real Estate (d) | $ | 44,710 | $ | 13,144 | $ | 15,981 | $ | 38,297 | $ | 31,698 | |||||||||
Corporate and Other | (75 | ) | (32 | ) | 118 | (67 | ) | 96 | |||||||||||
Total (f) | $ | 44,635 | $ | 13,112 | $ | 16,099 | $ | 38,230 | $ | 31,794 | |||||||||
Adjusted EBITDA Attributed to New Valley LLC by Segment | |||||||||||||||||||
Real Estate (e) | $ | 31,326 | $ | 9,292 | $ | 11,246 | $ | 27,448 | $ | 22,966 | |||||||||
Corporate and Other | (75 | ) | (32 | ) | 118 | (67 | ) | 96 | |||||||||||
Total (f) | $ | 31,251 | $ | 9,260 | $ | 11,364 | $ | 27,381 | $ | 23,062 | |||||||||
a. | Amounts are derived from Vector Group Ltd.'s Consolidated Financial Statements. See Note entitled "Vector Group Ltd.'s Condensed Consolidating Financial Information" contained in Vector Group Ltd.'s Form 10-K and Form 10-Q for the year ended December 31, 2015 and the quarterly period ended September 30, 2016, respectively. |
b. | Represents equity in (earnings) losses recognized from the Company's investment in certain real estate businesses that are not consolidated in its financial results. |
c. | Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013. |
d. | Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $43,034 for the last twelve months ended September 30, 2016 and $13,297, $16,294, $37,179 and $29,885 for the three and nine months ended September 30, 2016 and 2015, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC's entire Adjusted EBITDA. |
e. | Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $30,378 for the last twelve months ended September 30, 2016 and $9,386, $11,502, $26,245 and $21,096 for the three and nine months ended September 30, 2016 and 2015, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC's Adjusted EBITDA for non-controlling interest. |
f. | New Valley's Adjusted EBITDA does not include an allocation of Vector Group Ltd.'s "Corporate and Other" segment's expenses (for purposes of computing Adjusted EBITDA contained in Table 3 of this press release) of $15,481 for the last twelve months ended September 30, 2016 and $3,482, $2,682, $11,531 and $9,297 for the three and nine months ended September 30, 2016 and 2015, respectively. |
TABLE 9
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF DOUGLAS ELLIMAN REALTY, LLC ADJUSTED REVENUES
(Unaudited)
(Dollars in Thousands)
LTM | Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | |||||||||||||||||
2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Douglas Elliman Realty, LLC revenues | $ | 684,479 | $ | 184,453 | $ | 185,000 | $ | 523,767 | $ | 474,363 | |||||||||
Purchase accounting adjustments (a) | 481 | — | 481 | — | 1,444 | ||||||||||||||
Total adjustments | 481 | — | 481 | — | 1,444 | ||||||||||||||
Douglas Elliman Realty, LLC Adjusted Revenues | $ | 684,960 | $ | 184,453 | $ | 185,481 | $ | 523,767 | $ | 475,807 | |||||||||
a. | Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013. |
TABLE 10
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA
AND DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA ATTRIBUTED TO REAL ESTATE SEGMENT
(Unaudited)
(Dollars in Thousands)
LTM | Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | September 30, | |||||||||||||||||
2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net income attributed to Douglas Elliman Realty, LLC | $ | 29,631 | $ | 8,684 | $ | 12,437 | $ | 27,181 | $ | 19,713 | |||||||||
Interest expense | 1 | — | — | — | 3 | ||||||||||||||
Income tax expense | 904 | 311 | 349 | 949 | 876 | ||||||||||||||
Depreciation and amortization | 10,756 | 2,549 | 3,329 | 7,608 | 9,195 | ||||||||||||||
Douglas Elliman Realty, LLC EBITDA | $ | 41,292 | $ | 11,544 | $ | 16,115 | $ | 35,738 | $ | 29,787 | |||||||||
Equity income from real estate ventures (a) | (1,029 | ) | (235 | ) | (211 | ) | (992 | ) | (908 | ) | |||||||||
Purchase accounting adjustments (b) | 2,580 | 1,653 | 366 | 2,201 | 1,056 | ||||||||||||||
Other, net | 191 | 335 | 24 | 232 | (50 | ) | |||||||||||||
Douglas Elliman Realty, LLC Adjusted EBITDA | $ | 43,034 | $ | 13,297 | $ | 16,294 | $ | 37,179 | $ | 29,885 | |||||||||
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to non-controlling interest | (12,656 | ) | (3,911 | ) | (4,792 | ) | (10,934 | ) | (8,789 | ) | |||||||||
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to Real Estate Segment | 30,378 | 9,386 | 11,502 | 26,245 | 21,096 | ||||||||||||||
a. | Represents equity income recognized from the Company's investment in certain real estate businesses that are not consolidated in its financial results. |
b. | Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013. |