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 15, 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) |
(Not Applicable) |
(Former Name or Former Address, if Changed Since Last Report) |
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 August 31, 2016, the Board of Directors of Vector Group Ltd. (the “Company”) declared a 5% stock dividend to stockholders of record as of September 21, 2016. The stock dividend was paid on September 29, 2016. The Company is filing updated Selected Financial Data to reflect the stock dividend as Exhibit 99.1.
Revisions to December 31, 2014, 2013, 2012, and 2011 Consolidated Balance Sheets due to Adoption of Accounting Standard. In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2015-03, “Interest-Imputation of Interest”, which requires debt issuance costs to be reported in the balance sheet as a direct deduction from the face amount of the note. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015. This amendment must be applied retrospectively to all periods presented. The Company adopted the provisions of this ASU retrospectively in the first quarter of 2016, and adjusted all prior periods accordingly. The adoption of this ASU will simplify the presentation of debt issuance costs and reduce complexity without decreasing the usefulness of information provided to users of financial statements.
The Company also updated Selected Financial Data to reflect the adoption of ASU 2015-03. The cumulative impacts of the application are presented in the table below:
December 31, 2014 | ||||||||||||
As Previously Reported | ASU Adoption | As Revised | ||||||||||
Other assets | $ | 53,902 | $ | (34,212 | ) | $ | 19,690 | |||||
Total assets | $ | 1,423,254 | $ | (34,212 | ) | $ | 1,389,042 | |||||
Notes payable, long-term debt and other obligations, less current portion | $ | 860,711 | $ | (34,212 | ) | $ | 826,499 | |||||
Total liabilities | 1,443,934 | (34,212 | ) | 1,409,722 | ||||||||
Total stockholders' deficiency | (20,680 | ) | — | (20,680 | ) | |||||||
Total liabilities and stockholders' deficiency | $ | 1,423,254 | $ | (34,212 | ) | $ | 1,389,042 | |||||
December 31, 2013 | ||||||||||||
As Previously Reported | ASU Adoption | As Revised | ||||||||||
Other assets | $ | 46,666 | $ | (25,828 | ) | $ | 20,838 | |||||
Total assets | $ | 1,115,793 | $ | (25,828 | ) | $ | 1,089,965 | |||||
Notes payable, long-term debt and other obligations, less current portion | $ | 540,766 | $ | (25,828 | ) | $ | 514,938 | |||||
Total liabilities | 1,166,398 | (25,828 | ) | 1,140,570 | ||||||||
Total stockholders' deficiency | (50,605 | ) | — | (50,605 | ) | |||||||
Total liabilities and stockholders' deficiency | $ | 1,115,793 | $ | (25,828 | ) | $ | 1,089,965 | |||||
December 31, 2012 | ||||||||||||
As Previously Reported | ASU Adoption | As Revised | ||||||||||
Other assets | $ | 40,778 | $ | (19,485 | ) | $ | 21,293 | |||||
Total assets | $ | 986,928 | $ | (19,485 | ) | $ | 967,443 | |||||
Notes payable, long-term debt and other obligations, less current portion | $ | 586,946 | $ | (19,485 | ) | $ | 567,461 | |||||
Total liabilities | 1,075,998 | (19,485 | ) | 1,056,513 | ||||||||
Total stockholders' deficiency | (89,070 | ) | — | (89,070 | ) | |||||||
Total liabilities and stockholders' deficiency | $ | 986,928 | $ | (19,485 | ) | $ | 967,443 | |||||
December 31, 2011 | ||||||||||||
As Previously Reported | ASU Adoption | As Revised | ||||||||||
Other assets | $ | 29,372 | $ | (7,719 | ) | $ | 21,653 | |||||
Total assets | $ | 824,979 | $ | (7,719 | ) | $ | 817,260 | |||||
Notes payable, long-term debt and other obligations, less current portion | $ | 493,356 | $ | (7,719 | ) | $ | 485,637 | |||||
Total liabilities | 934,987 | (7,719 | ) | 927,268 | ||||||||
Total stockholders' deficiency | (110,008 | ) | — | (110,008 | ) | |||||||
Total liabilities and stockholders' deficiency | $ | 824,979 | $ | (7,719 | ) | $ | 817,260 | |||||
Item 7.01 Regulation FD Disclosure
Vector Group Ltd. has prepared materials for presentations to investors updated for the three months ended September 30, 2016. The materials are furnished (not filed) as Exhibits 99.3, 99.4 and 99.5 to this Current Report on Form 8-K pursuant to Regulation FD.
Non-GAAP Financial Measures
The Company is also filing this Current Report on Form 8-K to revise previously reported non-GAAP financial measures to reflect the impact of its recent 5% stock dividend, which was paid on September 29, 2016 to stockholders of record on September 21, 2016, in calculating its non-GAAP financial measure of Adjusted Net Income (related to Earnings Per Share). The Company is also including Adjusted Revenues and Adjusted EBITDA (collectively, with Adjusted Net Income, the “Non-GAAP financial measures”) for certain of the periods presented in the Selected Financial Data. All Non-GAAP financial measures and their reconciliations to GAAP measures have been presented as part of Exhibit 99.2. The Non-GAAP financial measures included in Exhibit 99.2 were previously reported in the Current Reports on Form 8-K, which were filed on November 3, 2016, July 28, 2016, April 28, 2016, April 1, 2016, March 8, 2016 and October 2, 2015.
Exhibits 99.2, 99.3, 99.4 and 99.5 contain the Non-GAAP Financial Measures discussed below.
Tables 1 through 4 of Exhibit 99.2 contain information relating to the Company's Non-GAAP Financial Measures for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 and the three months ended September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015.
Non-GAAP Financial Measures include adjustments for purchase accounting associated with the Company's acquisition of its additional 20.59% interest in Douglas Elliman Realty, LLC, and the related purchase accounting adjustments, occurred prior to the beginning of each period presented. Non-GAAP Financial Measures also include adjustments for litigation settlement and judgment expenses in the Tobacco segment, settlements of long-standing disputes related to the Master Settlement Agreement
(“MSA”) in the Tobacco segment, restructuring and pension settlement expense in the Tobacco segment, non-cash stock compensation expense (for purposes of Adjusted EBITDA only) and non-cash interest items associated with the Company's convertible debt.
Adjusted Revenues, New Valley LLC Adjusted Revenues, Douglas Elliman Realty, LLC Adjusted Revenues (hereafter referred to as “the Non-GAAP Revenue 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 (hereafter referred to as “the Non-GAAP Financial Measures”) are financial measures not prepared in accordance with 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.
Adjusted Revenues is defined as Revenues plus the additional revenues as a result of the consolidation of Douglas Elliman plus one-time purchase accounting adjustments to fair value for deferred revenues recorded in connection with the increase of the Company’s ownership of Douglas Elliman. EBITDA is defined as Net Income before Interest, Taxes, Depreciation and Amortization. Adjusted EBITDA is EBITDA, as defined above, and as adjusted for changes in fair value of derivatives embedded with convertible debt, equity in earnings (losses) on long-term investments, gains (losses) on sale of investment securities available for sale, equity income from non-consolidated real estate businesses, loss on extinguishment of debt, acceleration of interest expense related to debt conversion, stock-based compensation expense (for purposes of Adjusted EBITDA only), litigation settlement and judgment expense, settlements of long-standing disputes related to the MSA, restructuring and pension settlement expense, gains on acquisition of Douglas Elliman, changes to EBITDA as a result of the consolidation of Douglas Elliman and other charges.
New Valley LLC ("New Valley"), the real estate subsidiary of the Company, owns real estate and 70.59% of Douglas Elliman, the largest residential brokerage firm in the New York metropolitan area, as well as a minority stake in numerous real estate investments. New Valley LLC Pro-forma Adjusted Revenues and New Valley LLC Pro-forma Adjusted EBITDA are defined as the portion of Pro-forma Adjusted Revenues and Pro-forma Adjusted EBITDA that relate to New Valley. New Valley's Pro-forma Adjusted EBITDA does not include an allocation of expenses from the Corporate and Other segment of Vector Group Ltd.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements, which involve risk and uncertainties. The words “could,” “believe,” “expect,” “estimate,” “may,” “will,” “could,” “plan,” or “continue” and similar expressions are intended to identify forward-looking statements. The Company’s actual results could differ significantly from the results discussed in such forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016. 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. Condensed Consolidated Financial Statements and Exhibit
(c) | Exhibit. |
Exhibit No. | Exhibit | |
99.1 | Selected Financial Data adjusted to reflect 5% stock dividend paid September 29, 2016 to stockholders of record on September 21, 2016. | |
99.2 | Non-GAAP Financial Measures (furnished pursuant to Regulation FD). | |
99.3 | Investor presentation of Vector Group Ltd. dated November 2016 (furnished pursuant to Regulation FD). | |
99.4 | Fact Sheet of Vector Group Ltd. dated November 2016 (furnished pursuant to Regulation FD). | |
99.5 | Fact Sheet of New Valley LLC dated November 2016 (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 | ||
Sr. Vice President, Treasurer and Chief Financial Officer | ||
Date: November 15, 2016
EXHIBIT 99.1
Selected Financial Data
The following table sets forth our summary condensed consolidated financial data for the periods presented below and our earnings per share as adjusted for the stock dividends described below. The summary condensed consolidated financial data as of September 30, 2016 have been derived from our unaudited condensed consolidated financial statements. Our unaudited condensed consolidated financial statements include only normal and recurring adjustments, necessary to state fairly the data included therein.
The per-share amounts shown below have been retroactively adjusted to reflect the 5% stock dividend which was paid on September 29, 2016 to stockholders of record on September 21, 2016 (see note (2) below).
Our historical results are not necessarily indicative of the results of operations for future periods, and our results of operations for the nine-month period ended September 30, 2016 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2016. You should read the following summary condensed consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes included in our Quarterly Report on Form 10-Q for the period ended September 30, 2016.
Year Ended December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
Statement of Operations Data: | |||||||||||||||||||
Total revenues (1) | $ | 1,657,197 | $ | 1,591,315 | $ | 1,079,921 | $ | 1,095,533 | $ | 1,137,646 | |||||||||
Operating income | 199,920 | 212,438 | 111,186 | 154,083 | 142,621 | ||||||||||||||
Net income attributed to Vector Group Ltd. | 59,198 | 36,856 | 37,300 | 30,675 | 74,478 | ||||||||||||||
Per basic common share (2) | |||||||||||||||||||
Net income attributed to Vector Group Ltd. applicable to common shares | $ | 0.46 | $ | 0.32 | $ | 0.34 | $ | 0.29 | $ | 0.72 | |||||||||
Per diluted common share (2) | |||||||||||||||||||
Net income attributed to Vector Group Ltd. applicable to common shares | $ | 0.46 | $ | 0.32 | $ | 0.34 | $ | 0.29 | $ | 0.72 | |||||||||
Cash distributions declared per common share (2) | $ | 1.47 | $ | 1.40 | $ | 1.33 | $ | 1.27 | $ | 1.21 | |||||||||
September 30, | December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
As Revised | As Revised | As Revised | As Revised | ||||||||||||||||||||
Balance Sheet Data: | |||||||||||||||||||||||
Current assets | $ | 783,725 | $ | 583,739 | $ | 751,397 | $ | 484,388 | $ | 579,336 | $ | 426,996 | |||||||||||
Total assets | 1,464,730 | 1,280,615 | 1,389,042 | 1,089,965 | 967,443 | 817,260 | |||||||||||||||||
Current liabilities | 217,357 | 216,292 | 212,424 | 359,376 | 167,860 | 279,313 | |||||||||||||||||
Notes payable, embedded derivatives, long-term debt and other obligations, less current portion | 1,242,253 | 1,000,150 | 995,001 | 607,872 | 739,589 | 534,652 | |||||||||||||||||
Noncurrent employee benefits, deferred income taxes and other long-term liabilities | 203,717 | 186,334 | 202,297 | 173,322 | 149,064 | 113,303 | |||||||||||||||||
Total stockholders' deficiency | (198,597 | ) | (122,161 | ) | (20,680 | ) | (50,605 | ) | (89,070 | ) | (110,008 | ) | |||||||||||
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||||||||||
September 30, 2016 | June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | September 30, 2016 | September 30, 2015 | |||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||||||||
Total revenues (3) | $ | 459,104 | $ | 438,273 | $ | 380,800 | $ | 430,330 | $ | 449,934 | $ | 416,173 | $ | 360,760 | $ | 1,278,177 | $ | 1,226,867 | |||||||||||||||||
Operating income | 69,364 | 70,720 | 62,159 | 31,032 | 69,367 | 55,803 | 43,718 | 202,243 | 168,888 | ||||||||||||||||||||||||||
Net income attributed to Vector Group Ltd. | 23,175 | 24,015 | 19,338 | 7,904 | 12,466 | 17,607 | 21,221 | 66,528 | 51,294 | ||||||||||||||||||||||||||
Per basic common share (2) | |||||||||||||||||||||||||||||||||||
Net income attributed to Vector Group Ltd. applicable to common shares | $ | 0.18 | $ | 0.19 | $ | 0.15 | $ | 0.06 | $ | 0.10 | $ | 0.14 | $ | 0.17 | $ | 0.52 | $ | 0.40 | |||||||||||||||||
Per diluted common share (2) | |||||||||||||||||||||||||||||||||||
Net income attributed to Vector Group Ltd. applicable to common shares | $ | 0.18 | $ | 0.19 | $ | 0.15 | $ | 0.06 | $ | 0.10 | $ | 0.14 | $ | 0.17 | $ | 0.52 | $ | 0.40 | |||||||||||||||||
Cash distributions declared per common share (2) | $ | 0.38 | $ | 0.38 | $ | 0.38 | $ | 0.38 | $ | 0.36 | $ | 0.36 | $ | 0.36 | $ | 1.14 | $ | 1.09 | |||||||||||||||||
______________________________
(1) | Revenues include excise taxes of $439,647, $446,086, $456,703, $508,027, and $552,965, respectively. |
(2) | Per share computations include the impact of 5% stock dividends on September 29, 2016, September 29, 2015, September 26, 2014, September 27, 2013, September 28, 2012, and September 29, 2011, respectively. |
(3) | Revenues include excise taxes of $116,024, $106,861, $90,846, $118,342, $112,773, $108,912, $97,359, $313,731, and $319,044 respectively. |
EXHIBIT 99.2
TABLE 1
VECTOR GROUP LTD. AND SUBSIDIARIES
REVENUES AND RECONCILIATION OF ADJUSTED REVENUES
(Unaudited)
(Dollars in Thousands)
Year Ended December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
Revenues | $ | 1,657,197 | $ | 1,591,315 | $ | 1,079,921 | $ | 1,095,533 | $ | 1,137,646 | |||||||||
Reclassification of revenues as a result of the consolidation of Douglas Elliman (a) | — | — | 416,453 | 378,175 | 346,309 | ||||||||||||||
Purchase accounting adjustments (b) | 1,925 | 1,768 | 1,357 | — | — | ||||||||||||||
Total adjustments | 1,925 | 1,768 | 417,810 | 378,175 | 346,309 | ||||||||||||||
Adjusted Revenues | $ | 1,659,122 | $ | 1,593,083 | $ | 1,497,731 | $ | 1,473,708 | $ | 1,483,955 | |||||||||
Revenues by Segment | |||||||||||||||||||
Tobacco (c) | 1,017,761 | 1,021,259 | 1,014,341 | 1,084,546 | 1,133,380 | ||||||||||||||
E-cigarettes | 641,406 | 561,467 | 65,580 | 10,987 | 4,266 | ||||||||||||||
Real Estate (d) | (1,970 | ) | 8,589 | — | — | — | |||||||||||||
Corporate and Other | — | — | — | — | — | ||||||||||||||
Total (c) | 1,657,197 | 1,591,315 | 1,079,921 | 1,095,533 | 1,137,646 | ||||||||||||||
Adjusted Revenues by Segment | |||||||||||||||||||
Tobacco (c) | $ | 1,017,761 | $ | 1,021,259 | $ | 1,014,341 | $ | 1,084,546 | $ | 1,133,380 | |||||||||
E-cigarettes | (1,970 | ) | 8,589 | — | — | — | |||||||||||||
Real Estate (d) | 643,331 | 563,235 | 483,390 | 389,162 | 350,575 | ||||||||||||||
Corporate and Other | — | — | — | — | — | ||||||||||||||
Total (c) | $ | 1,659,122 | $ | 1,593,083 | $ | 1,497,731 | $ | 1,473,708 | $ | 1,483,955 | |||||||||
a. | Represents revenues of Douglas Elliman Realty, LLC for the respective annual periods. For the year ended December 31, 2013, represents revenues from Douglas Elliman Realty, LLC for the period from January 1, 2013 to December 13, 2013. On December 13, 2013, the Company increased its ownership of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after December 13, 2013, the Company consolidates the operations and financial position of Douglas Elliman Realty, LLC in its financial statements. The Company had previously accounted for its interest in Douglas Elliman Realty, LLC under the equity method and revenues from Douglas Elliman Realty, LLC were not included in the Company's revenues. |
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. |
c. | Includes excise taxes of $439,647, $446,086, $456,703, $508,027, and $552,965 for the years ended December 31, 2015, 2014, 2013, 2012 and 2011, respectively. |
d. | Includes Adjusted Revenues from Douglas Elliman Realty, LLC of $637,000, $543,230, $456,909, $384,267 and $346,309 for the years ended December 31, 2015, 2014, 2013, 2012 and 2011, respectively. |
TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
Year Ended December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
Net income attributed to Vector Group Ltd. | $ | 59,198 | $ | 36,856 | $ | 37,300 | $ | 30,675 | $ | 74,478 | |||||||||
Interest expense | 120,691 | 160,991 | 132,147 | 110,102 | 100,706 | ||||||||||||||
Income tax expense | 41,233 | 33,165 | 23,672 | 23,131 | 47,767 | ||||||||||||||
Net income (loss) attributed to non-controlling interest | 7,274 | 12,258 | (252 | ) | — | — | |||||||||||||
Depreciation and amortization | 25,654 | 24,499 | 12,631 | 10,608 | 10,607 | ||||||||||||||
EBITDA | $ | 254,050 | $ | 267,769 | $ | 205,498 | $ | 174,516 | $ | 233,558 | |||||||||
Change in fair value of derivatives embedded within convertible debt (a) | (24,455 | ) | (19,409 | ) | (18,935 | ) | 7,476 | (7,984 | ) | ||||||||||
Gain on liquidation of long-term investments | — | — | — | — | (25,832 | ) | |||||||||||||
Equity in losses (earnings) on long-term investments (b) | 2,681 | (3,140 | ) | (3,126 | ) | (264 | ) | 710 | |||||||||||
Impairment of investment securities | 12,846 | — | — | — | — | ||||||||||||||
(Gain) loss on sale of investment securities available for sale | (11,138 | ) | 11 | (5,152 | ) | (1,640 | ) | (23,257 | ) | ||||||||||
Equity in earnings from real estate ventures (c) | (2,001 | ) | (4,103 | ) | (22,925 | ) | (29,764 | ) | (19,966 | ) | |||||||||
Gain on sale of townhomes | — | — | — | — | (3,843 | ) | |||||||||||||
Loss on extinguishment of debt | — | — | 21,458 | — | — | ||||||||||||||
Acceleration of interest expense related to debt conversion | — | 5,205 | 12,414 | 14,960 | 1,217 | ||||||||||||||
Pension settlement charge | 1,607 | — | — | — | — | ||||||||||||||
Stock-based compensation expense (d) | 5,620 | 3,251 | 2,519 | 5,563 | 3,183 | ||||||||||||||
Litigation settlement and judgment expense (e) | 20,072 | 2,475 | 88,106 | — | — | ||||||||||||||
Impact of MSA Settlement (f) | (4,364 | ) | (1,419 | ) | (11,823 | ) | — | — | |||||||||||
Restructuring expense | 7,257 | — | — | — | — | ||||||||||||||
Gain on acquisition of Douglas Elliman | — | — | (60,842 | ) | — | — | |||||||||||||
Reclassification of EBITDA as a result of the consolidation of Douglas Elliman (g) | — | — | 46,640 | 31,558 | 30,991 | ||||||||||||||
Purchase accounting adjustments (h) | 1,435 | 1,478 | — | — | — | ||||||||||||||
Other, net | (6,409 | ) | (9,396 | ) | (4,573 | ) | (593 | ) | (1,375 | ) | |||||||||
Adjusted EBITDA | $ | 257,201 | $ | 242,722 | $ | 249,259 | $ | 201,812 | $ | 187,402 | |||||||||
Adjusted EBITDA attributed to non-controlling interest | (11,267 | ) | (15,858 | ) | (13,717 | ) | (9,281 | ) | (9,114 | ) | |||||||||
Adjusted EBITDA attributed to Vector Group Ltd. | $ | 245,934 | $ | 226,864 | $ | 235,542 | $ | 192,531 | $ | 178,288 | |||||||||
Adjusted EBITDA by Segment | |||||||||||||||||||
Tobacco | $ | 245,374 | $ | 211,168 | $ | 198,866 | $ | 185,798 | $ | 173,721 | |||||||||
E-cigarettes | (13,037 | ) | (13,124 | ) | (1,019 | ) | — | — | |||||||||||
Real Estate (i) | 38,111 | 56,036 | 64,866 | 29,959 | 29,388 | ||||||||||||||
Corporate and Other | (13,247 | ) | (11,358 | ) | (13,454 | ) | (13,945 | ) | (15,707 | ) | |||||||||
Total | $ | 257,201 | $ | 242,722 | $ | 249,259 | $ | 201,812 | $ | 187,402 | |||||||||
Adjusted EBITDA Attributed to Vector Group by Segment | |||||||||||||||||||
Tobacco | $ | 245,374 | $ | 211,168 | $ | 198,866 | $ | 185,798 | $ | 173,721 | |||||||||
E-cigarettes | (13,037 | ) | (13,124 | ) | (1,019 | ) | — | — | |||||||||||
Real Estate (j) | 26,844 | 40,178 | 51,149 | 20,678 | 20,274 | ||||||||||||||
Corporate and Other | (13,247 | ) | (11,358 | ) | (13,454 | ) | (13,945 | ) | (15,707 | ) | |||||||||
Total | $ | 245,934 | $ | 226,864 | $ | 235,542 | $ | 192,531 | $ | 178,288 | |||||||||
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 (earnings) recognized from investments that the Company accounts for under the equity method. |
c. | Represents equity in 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. | Represents EBITDA of Douglas Elliman Realty, LLC for all periods prior to December 13, 2013. On December 13, 2013, the Company increased its ownership of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after December 13, 2013, the Company consolidates the operations and financial position of Douglas Elliman Realty, LLC in its financial statements. The Company had previously accounted for its interest in Douglas Elliman Realty, LLC under the equity method, and operating income as well as depreciation and amortization expense from Douglas Elliman Realty, LLC, were not included in the Company's Adjusted EBITDA. |
h. | 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. |
i. | Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $35,740, $50,655, $45,710, $30,910, and $30,991 for the years ended December 31, 2015, 2014, 2013, 2012, and 2011, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC's entire Adjusted EBITDA. |
j. | Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $25,229, $35,757, $31,993, $21,629, and $21,877 for the years ended December 31, 2015, 2014, 2013, 2012, and 2011, 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)
September 30, | June 30, | March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||||||
2016 | 2016 | 2016 | 2015 | 2015 | 2015 | 2015 | |||||||||||||||||||||
Net income attributed to Vector Group Ltd. | $ | 23,175 | $ | 24,015 | $ | 19,338 | $ | 7,904 | $ | 12,466 | $ | 17,607 | $ | 21,221 | |||||||||||||
Change in fair value of derivatives embedded within convertible debt | (6,112 | ) | (7,416 | ) | (9,694 | ) | (5,695 | ) | (7,044 | ) | (5,256 | ) | (6,460 | ) | |||||||||||||
Non-cash amortization of debt discount on convertible debt | 10,167 | 9,170 | 8,286 | 7,565 | 7,187 | 6,516 | 5,943 | ||||||||||||||||||||
Litigation settlement and judgment expense (a) | — | — | 2,350 | 14,229 | 3,750 | 1,250 | 843 | ||||||||||||||||||||
Cash interest capitalized to real estate venture | — | — | — | (9,928 | ) | — | — | — | |||||||||||||||||||
Impact of MSA Settlement (b) | (370 | ) | — | — | 1,351 | (5,715 | ) | — | — | ||||||||||||||||||
Pension settlement charge | — | — | — | — | — | 1,607 | — | ||||||||||||||||||||
Impact of interest expense capitalized to real estate ventures, net | (3,276 | ) | (1,315 | ) | (3,520 | ) | — | — | — | — | |||||||||||||||||
Restructuring expense | — | — | 41 | 5,709 | 1,548 | — | — | ||||||||||||||||||||
Douglas Elliman Realty, LLC purchase accounting adjustments (c) | 1,511 | 581 | 476 | 1,358 | 1,351 | 1,343 | 1,251 | ||||||||||||||||||||
Total adjustments | 1,920 | 1,020 | (2,061 | ) | 14,589 | 1,077 | 5,460 | 1,577 | |||||||||||||||||||
Tax expense related to adjustments | (780 | ) | (424 | ) | 858 | (6,089 | ) | (448 | ) | (2,258 | ) | (652 | ) | ||||||||||||||
Adjusted Net Income attributed to Vector Group Ltd. | $ | 24,315 | $ | 24,611 | $ | 18,135 | $ | 16,404 | $ | 13,095 | $ | 20,809 | $ | 22,146 | |||||||||||||
Per diluted common share: | |||||||||||||||||||||||||||
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd. | $ | 0.19 | $ | 0.19 | $ | 0.14 | $ | 0.13 | $ | 0.10 | $ | 0.16 | $ | 0.17 | |||||||||||||
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 4
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
Year Ended December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
Net income attributed to Vector Group Ltd. | $ | 59,198 | $ | 36,856 | $ | 37,300 | $ | 30,675 | $ | 74,478 | |||||||||
Acceleration of interest expense related to debt conversion | — | 5,205 | 12,414 | 14,960 | 1,217 | ||||||||||||||
Change in fair value of derivatives embedded within convertible debt | (24,455 | ) | (19,409 | ) | (18,935 | ) | 7,476 | (7,984 | ) | ||||||||||
Non-cash amortization of debt discount on convertible debt | 27,211 | 51,472 | 36,378 | 18,016 | 10,441 | ||||||||||||||
Loss on extinguishment of 11% Senior Secured Notes due 2015 | — | — | 21,458 | — | — | ||||||||||||||
Litigation settlement and judgment expense (a) | 20,072 | 2,475 | 88,106 | — | — | ||||||||||||||
Capitalized interest | (9,928 | ) | — | — | — | — | |||||||||||||
Impact of MSA Settlement (b) | (4,364 | ) | (1,419 | ) | (11,823 | ) | — | — | |||||||||||
Interest income from MSA Settlement (c) | — | — | (1,971 | ) | — | — | |||||||||||||
Pension settlement charge | 1,607 | — | — | — | — | ||||||||||||||
Gain on acquisition of Douglas Elliman Realty, LLC (d) | — | — | (60,842 | ) | — | — | |||||||||||||
Restructuring expense | 7,257 | — | — | — | — | ||||||||||||||
Adjustment to reflect additional 20.59% of net income from Douglas Elliman Realty, LLC (e) | — | — | 8,557 | 5,947 | 5,811 | ||||||||||||||
Out-of-period adjustment related to Douglas Elliman acquisition in 2013 (f) | — | (1,231 | ) | — | — | — | |||||||||||||
Douglas Elliman Realty, LLC purchase accounting adjustments (g) | 5,303 | 6,019 | 1,165 | — | — | ||||||||||||||
Gain on liquidation of long-term investments | — | — | — | — | (25,832 | ) | |||||||||||||
Gain on townhomes | — | — | — | — | (3,843 | ) | |||||||||||||
Total adjustments | 22,703 | 43,112 | 74,507 | 46,399 | (20,190 | ) | |||||||||||||
Tax (expense) benefit related to adjustments | (9,447 | ) | (17,827 | ) | (29,467 | ) | (19,332 | ) | 8,197 | ||||||||||
One-time adjustment to income tax expense due to purchase accounting (h) | — | 1,670 | — | — | — | ||||||||||||||
Adjusted Net Income attributed to Vector Group Ltd. | $ | 72,454 | $ | 63,811 | $ | 82,340 | $ | 57,742 | $ | 62,485 | |||||||||
Per diluted common share: | |||||||||||||||||||
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd. | $ | 0.57 | $ | 0.55 | $ | 0.75 | $ | 0.55 | $ | 0.61 | |||||||||
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 interest income from the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement. |
d. | Represents gain associated with the increase of ownership of Douglas Elliman Realty, LLC. |
e. | Represents 20.59% of Douglas Elliman Realty LLC's net income from January 1, 2013 to December 13, 2013 and the years ended December 31, 2012 and 2011. On December 13, 2013, the Company increased its ownership of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after December 13, 2013, the Company includes an additional 20.59% of Adjusted Net Income from Douglas Elliman Realty, LLC in the Company's Adjusted Net Income. |
f. | Represents an out-of-period adjustment related to a non-accrual of a receivable from Douglas Elliman in the fourth quarter of 2013 and would have increased the Company’s gain on acquisition of Douglas Elliman in 2013. |
g. | 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. |
h. | Represents adjustments to income tax expense due to a change in the Company's marginal income tax rate from 40.6% to 41.35% as a result of its acquisition of 20.59% of Douglas Elliman Realty, LLC on December 13, 2013. |
November 2016
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, 2015, as filed with the SEC. Please also refer to Vector’s Form 10‐Q for the quarterly period
ended September 30, 2016. Please also refer to Vector's Current Reports on Forms 8‐K, filed on October 2, 2015, March 8, 2016, April 1, 2016, November
3, 2016 and November 15, 2016 (Commission File Number 1‐5759) as filed with the SEC for information, including cautionary and explanatory language,
relating to Non‐GAAP Financial Measures in this Presentation labeled "Adjusted".
Results actually achieved may differ materially from expected results included in these forward‐looking statements as a result of these or other factors. Due
to such uncertainties and risks, potential investors are cautioned not to place undue reliance on such forward‐looking statements, which speak only as of
the date on which such statements are made. The Company disclaims any obligation to, and does not undertake to, update or revise and forward‐
looking statements in this presentation.
2
INVESTMENT HIGHLIGHTS & PORTFOLIO
Diversified Holding Company with two unrelated, but complementary, businesses with iconic brand names: tobacco (Liggett
Group) and real estate (Douglas Elliman)
History of strong earnings, and Adjusted EBITDA has increased from $178.3 million in 2011(1) to $278.2 million for the twelve
months ended September 30, 2016(2)
Tobacco Adjusted EBITDA of $268.1 million for the twelve months ended September 30, 2016(3)
Douglas Elliman, which is a 70.59%‐owned subsidiary, produces Adjusted Revenues of $685 million and Adjusted EBITDA
of $43 million for the twelve months ended September 30, 2016(4)
Diversified New Valley portfolio of consolidated and non‐consolidated real estate investments
Maintains substantial liquidity with cash, marketable securities and long‐term investments of $718 million as of September
30, 2016(5) and has no significant debt maturities until February 2019
Uninterrupted quarterly cash dividends since 1995 and an annual 5% stock dividend since 1999
Seasoned management team with average tenure of 23 years with Vector Group
Management team and directors beneficially own approximately 13% of Vector Group
Perpetual cost advantage over the largest U.S. tobacco companies – annual cost advantage ranged between $163 million
and $168 million from 2011 to 2015(6)
3
Overview
(1) Vector’s Net income for the year ended December 31, 2011 was $74.5M. Adjusted EBITDA is a Non-GAAP Financial Measure. Please refer to Exhibit 99.2 of the Company’s Current Report on Form 8-K, dated November 15, 2016 (Table 2) for a reconciliation
of Net income to Adjusted EBITDA as well as the Disclaimer to this document on Page 2.
(2) Vector’s Net income for the twelve months ended September 30, 2016 was $74.4 million. Adjusted EBITDA is a Non-GAAP Financial Measure. Please refer to Exhibit 99.1 of the Company’s Current Report on Form 8-K, filed on November 3, 2016, for a
reconciliation of Net income to Adjusted EBITDA as well as the Disclaimer to this document on Page 2.
(3) All “Liggett” and “Tobacco” financial information in this presentation includes the operations of Liggett Group LLC, Vector Tobacco Inc., and Liggett Vector Brands LLC unless otherwise noted. Tobacco Adjusted EBITDA is a Non-GAAP Financial Measure and is
defined in Table 3 of Exhibit 99.1 to the Company’s Current Report on Form 8-K, dated November 3, 2016.
(4) Douglas Elliman’s revenues were $684.5 million and its Net income was $29.6 million for the twelve months ended September 30, 2016. Adjusted Revenues and Adjusted EBITDA are Non-GAAP Financial Measures. Please refer to Exhibit 99.1 of the
Company’s Current Report on Form 8-K, dated November 3, 2016, for a reconciliation to Revenues of Non-GAAP financial measures and Net Income to Adjusted Revenues and Adjusted EBITDA (Tables 9 and 10) as well as the Disclaimer to this document.
(5) Excludes real estate investments.
(6) Cost advantage applies only to cigarettes sold below applicable market share exemption.
TOBACCO OPERATIONS
4
LIGGETT GROUP 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 $268.1 million for the twelve months ended September 30, 2016(1)
—Low capital requirements with capital expenditures of $6 million related to tobacco operations for the twelve months
ended September 30, 2016
Current cost advantage of 68 cents per pack compared to the largest U.S. tobacco companies expected to
maintain volume and drive profit in core brands
— Pursuant to the MSA, Liggett has no payment obligations unless its market share exceeds a market share exemption of approximately
1.65% of total cigarettes sold in the United States, and Vector Tobacco has no payment obligations unless its market share exceeds a
market share exemption of approximately 0.28% of total cigarettes sold in the United States
— MSA exemption annual cost advantage ranged between $163 million and $168 million for Liggett and Vector Tobacco from 2011 to
2015.
5
(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 Report on Forms 8‐K, dated November 3, 2016. Please also refer to the Disclaimer to this document on Page 2.
LIGGETT GROUP HISTORY
6
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 8, 2016, July 28, 2016, and November 3, 2016 as well as Table 2 to Exhibit 99.2 of the
Company’s Current Report son Form 8‐K, dated October 2, 2015 and November 15, 2016.
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
Introduced deep
discount brand
Eagle 20’s
Liggett focuses on margin
enhancement resulting in
continued earnings
growth with record
Tobacco Adjusted EBITDA
$46
$79 $77
$121 $111 $127
$130 $144 $146
$158 $170 $165 $158 $174
$186 $199
$211
$245
$268
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% 3.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
$0
$50
$100
$150
$200
$250
$300
T
o
b
a
c
c
o
A
d
j
u
s
t
e
d
E
B
I
T
D
A
(
1
)
(
$
M
i
l
l
i
o
n
s
)
D
om
estic M
arket Share
7
ADJUSTED U.S. TOBACCO INDUSTRY MARKET SHARE (1, 2)
46.7%
48.8% 47.4% 47.7%
21.2% 19.6% 19.9% 19.5%
2.9% 3.7% 2.7% 2.2%
2.4% 2.4%
3.4% 3.3%
7.7% 8.8%
12.4% 13.1%
9.3% 8.8%
6.7% 6.5%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2003 2006 2014 LTM
09/30/16
2003 2006 2014 LTM
09/30/16
2003 2006 2014 LTM
09/30/16
2003 2006 2014 LTM
09/30/16
28.9% 28.4%
32.4% 32.6%
Philip Morris USA R.J. Reynolds
2.89%
3.65%
2.71% 2.23%
2.44% 2.36%
3.36% 3.30%
9.26%
8.81%
6.74%
6.48%
0.00%
5.00%
10.00%
15.00%
2003 2006 2014 LTM
09/30/16
2003 2006 2014 LTM
09/30/16
12.15% 12.47%
9.45%
8.71%
ITG Brands Liggett Group
12.2% 12.5%
9.5% 8.7%
Newport – acquired by RJR in 2015
Brands acquired by ITG in 2015
Legacy brands
Source: The Maxwell Report’s sales estimates for the cigarette Industry for the years ended 2003 (February 2004), 2006 (February 2007) and 2015 (March 2016) and internal company estimates.
(1) Actual Market Share in 2003, 2006 and 2014 reported in the Maxwell Report for R.J. Reynolds was 29.6%, 27.6%, 23.1% and 32.6%, respectively, and, for ITG Brands, was 2.9%, 3.7%., 2.7% and 8.7%, respectively. Adjusted market share has been computed by Vector
Group Ltd. by applying historical market share of each brand to the present owner of brand. Thus, the graph assumes each company owned its current brands on January 1, 2003. The legacy brands market share of R.J. Reynolds in 2003 includes the market share of
Brown & Williamson, which was acquired by R.J. Reynolds in 2004. In 2015, R.J. Reynolds acquired Lorillard Tobacco Company, which manufactured the Newport brand, and sold a portfolio of brands, including the Winston, Salem, Kool and Maverick brands to ITG
Brands.
(2) Does not include smaller manufacturers, whose cumulative market shares were 9.8%, 7.9%, 8.8% and 7.7% in 2003, 2006, 2014 and the LTM 9/30/16, respectively.
TOBACCO LITIGATION AND REGULATORY UPDATES
Liggett led the industry in acknowledging the addictive properties of nicotine while seeking a legislated
settlement of litigation
In 2013, Liggett reached a settlement with approximately 4,900 Engle progeny 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 in the following 14
years (2015 – 2028)
— Approximately 240 Engle progeny plaintiffs remain
— As of September 30, 2016, there were eight cases under appeal. The current range of loss for the cases, related to awarded
damages, is $0 to $3.3 million (plus attorneys’ fees and interest).
— As of September 30, 2016, Liggett has secured approximately $5.2 million in outstanding bonds related to these cases.
8
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.
REAL ESTATE OPERATIONS
9
REAL ESTATE OVERVIEW
New Valley, which owns 70.59% of Douglas Elliman Realty, LLC, is a diversified real estate company that is
seeking to acquire or invest in additional real estate properties or projects
New Valley has invested approximately $200 million, as of September 30, 2016, in a broad portfolio of 23
real estate investments
10
New Valley Adjusted EBITDA(1)
$51.3M
$40.2M
$26.9M
2013 2014 2015 LTM 09/30/16
New Valley Adjusted
Revenues – LTM September 30, 2016(1)
$11M
$28M
$651M
$690M
Real Estate Brokerage Commissions
Property Management
Other
(1) New Valley’s revenues were $690M and New Valley’s net income was $59.4M, $21.4M, $11.7M and $15.7M for the periods presented. Adjusted EBITDA and Adjusted Revenues are non-GAAP financial measures. For a reconciliation of
Revenues to Adjusted Revenues and Net income to Adjusted EBITDA, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on October 2, 2015 (Exhibit 99.2). March 8, 2016 (Exhibit 99.1) and November 3, 2016, as well as Form
10-K for the fiscal year ended December 31, 2015 and Form 10-Q for the quarterly period ended September 30, 2016 (Commission File Number 1-5759) as well as the Disclaimer to this document on Page 2. New Valley’s Adjusted EBITDA do not
include an allocation of Vector Group Ltd.’s Corporate and Other Expenses (for purposes of computing Adjusted EBITDA) of $13.5M, $11.4M, $13.2M and $15.5M for the periods presented, respectively.
$31.3M
Douglas Elliman Adjusted EBITDA(1)
DOUGLAS ELLIMAN REALTY, LLC
11
Largest residential real estate brokerage firm in the highly
competitive New York metropolitan area and fourth‐
largest residential brokerage firm in the U.S.
Approximately 6,000 affiliated agents and 90 offices in
the U.S.
Alliance with Knight Frank provides a network with 400
offices across 55 countries with 22,000 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
(1) Douglas Elliman’s Revenues were $684.5 million for the twelve months ended September 30, 2016 and Douglas Elliman’s net income was $38.1M, $38.4M, $22.2M and $29.6M for the periods presented. Adjusted EBITDA and Adjusted
Revenues are non-GAAP financial measures. For a reconciliation of Adjusted EBITDA to net income and Adjusted Revenues to revenues, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on October 2, 2015 (Exhibit 99.2),
March 8, 2016 (Exhibit 99.1) and November 3, 2016 (Exhibit 99.1) and Form 10-K for the fiscal year ended December 31, 2015 (Commission File Number 1-5759) as well as the Disclaimer to this document on Page 2.
Douglas Elliman Closed Sales – LTM September 30, 2016
$45.7M
$50.7M
$35.7M
2013 2014 2015 LTM 09/30/16
$43.0M
Douglas Elliman
Closed Sales – LTM September 30, 2016
$11.1B $12.4B
$14.9B
$18.2B
$22.4B
2011 2012 2013 2014 2015 LTM
09/30/16
$25.1B
Douglas Elliman Adjusted
Revenues – LTM September 30, 2016(1)
$5M
$28M
$651M
$684M
Real Estate Brokerage Commissions
Property Management
Other
Long Island,
Westchester,
Connecticut
$7B
New York City
$14.4B
South
Florida
$2.9B
Aspen
Los
Angeles
NEW VALLEY’S REAL ESTATE INVESTMENTS AT SEPTEMBER 30, 2016
12
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 Page 13)
Escena
(Palm Springs)
Commercial Retail/
Office Assets
Apartments/
Condominiums/Hotels
Land Development/Real
Estate Held for Sale, net
Hotel
Taiwana
St. Barthélemy
Coral Beach
and Tennis Club
Bermuda
International Investments
Mosaic II
(ST Portfolio)
(Houston)
(1) For the percentage of each real estate project owned, please refer to the “Summary of Real Estate Investments” section of Item 2 ‐Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Vector Group Ltd.’s Form 10‐Q
for the quarterly period ended September 30, 2016 (Commission File Number 1‐5759).
Takanasee
(New Jersey)
(1)
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. 160 Leroy Street Greenwich Village
7. PUBLIC Chrystie House Lower East Side
8. The Dutch Long Island City
9. 1 QPS Tower 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
(1) For the percentage of each real estate project owned, please refer to the “Summary of Real Estate Investments” section of Item 2 ‐Management’s Discussion and Analysis of Financial Condition and Results of Operations ‐of Vector Group Ltd.’s Form 10‐Q
for the quarterly period ended September 30, 2016 (Commission File Number 1‐5759).
(1)
NEW VALLEY’S REAL ESTATE SUMMARY AS OF SEPTEMBER 30, 2016
14
Net cash
invested
Cumulative earnings /
(loss)(2)
Carrying
value(2)(3)
Projected
cumulative area
Projected construction
end date
Range of ownership
Number of
investments
Land owned
New York City SMSA $ 12,733 $ ‐ $ 12,733 N/A 100.0% 1
All other U.S. areas 2,644 8,253 10,897 450 Acres N/A 100.0% 1
$ 15,377 $ 8,253 $ 23,630 2
Condominium and Mixed Use Development (Minority interest owned)
New York City SMSA(3) $ 98,672 $ 29,313 $ 127,985 2,846,700 Square feet 2015 ‐ 2019 3.1% ‐ 49.5% 11
All other U.S. areas 35,055 2,900 37,955 593,000 Square feet 2017 ‐ 2019 15.0% ‐ 48.5% 4
$ 133,727 $ 32,213 $ 165,940 3,439,700 Square feet 15
Apartments (Minority interest owned)
All other U.S. areas 7,257 1,865 9,122 6,005 Apartments N/A 7.6% ‐ 16.3% 2
$ 7,257 $ 1,865 $ 9,122 2
Hotels (Minority interest owned)
New York City SMSA $ 26,211 $ (5,591) $ 20,620 628 Hotel rooms N/A 5.2% 1
International 13,989 (3,266) 10,723 124 Hotel rooms N/A 17.0% ‐ 49.0% 2
$ 40,200 $ (8,857) $ 31,343 752 Hotel rooms 3
Commercial (Minority interest owned)
New York City SMSA 5,076 (1,615) 3,461 219,382 Square feet N/A 49.0% 1
$ 5,076 $ (1,615) $ 3,461 1
Total $ 201,637 $ 31,859 $ 233,496 23
SUMMARY
New York City SMSA(3) $ 142,692 $ 22,107 $ 164,799 14
All other U.S. areas 44,956 13,018 57,974 7
International 13,989 (3,266) 10,723 2
$ 201,637 $ 31,859 $ 233,496 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 of Vector Group Ltd.’s Form 10‐Q for
the quarterly period ended September 30, 2016 (Commission File Number 1‐5759).
(2) Includes interest expense capitalized to real estate ventures of $18,040.
(3) Carrying value includes non‐controlling interest of $4,013.
(Dollars in thousands)
(1)
FINANCIAL DATA
$51 $40 $27 $31
$199 $211 $245
$268
2013 2014 2015 LTM 09/30/16
ADJUSTED HISTORICAL FINANCIAL DATA
$483
$563 $690
$1,014
$1,021
$1,021
2013 2014 2015 LTM 09/30/16
16
$9
$1,498
$1,709
$1,593
Tobacco Real Estate E‐Cigarettes Corporate & Other
Adjusted Revenues(1) Adjusted EBITDA(1)
$236 $227
$278
$246
(1) Vector’s revenues for the periods presented were $1,096, $1,080, $1,591 and $1,709, respectively. Vector’s Net income for the periods presented was $30.7, $37.3, $36.9 and $74.4, respectively Adjusted Revenues and Adjusted
EBITDA are Non-GAAP Financial Measures. Please refer to the Company’s Current Report on Forms 8-K, filed on March 8, 2016 (Exhibit 99.1), April 1, 2016 (Exhibit 99.2), November 3, 2016 (Exhibit 99.1) and November 15, 2016
(Exhibit 99.2) for a reconciliation of Non-GAAP financial measures to GAAP as well as the Disclaimer to this document on Page 2.
($13) ($11) ($13)
($13)
$(6)
$(15)
(Dollars in millions)
($13)
Tobacco Real Estate E‐Cigarettes Corporate & Other
$1,660
$1,017
$643
($1)
Vector Group Ltd. 100.0 112.1 143.4 112.5 135.4 192.7 227.0 219.3 279.5 411.4 513.2 504.4
S&P 500 100.0 115.8 122.2 77.0 97.4 112.0 114.4 132.7 175.6 199.7 202.4 214.3
S&P MidCap 100.0 110.3 119.1 76.0 104.3 132.1 129.8 152.9 204.1 224.0 219.1 239.7
NYSE ARCA Tobacco 100.0 140.2 154.2 123.0 173.7 207.4 243.9 289.5 319.0 317.0 384.1 441.2
Dow Jones Real Estate Total
Return
100.0 135.5 110.9 66.5 86.9 110.4 117.1 139.2 141.6 180.2 184.1 194.3
HISTORICAL STOCK 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 December31,2005 through
October 31, 2016. The graph assumes that all dividends and distributions were reinvested. Source: Bloomberg LP
Value of $100 Invested – December 31, 2005
C
u
m
u
l
a
t
i
v
e
R
e
t
u
r
n
Vector Group Ltd. S&P 500 S&P MidCap NYSE ARCA Tobacco Dow Jones Real Estate Total Return
404.4%
341.2%
139.7%
114.3%
94.3%
Oct‐16Dec‐15Dec‐14Dec‐13Dec‐12Dec‐11Dec‐10Dec‐09Dec‐08Dec‐07Dec‐06Dec‐05
500%
400%
300%
200%
100%
0%
($13M)
Vector Group Ltd. owns Liggett Group, Vector Tobacco and New Valley.
New Valley owns a 70% interest in Douglas Elliman.
Adjusted Revenues LTM 9/30/161
EXECUTIVE MANAGEMENT
Howard M. Lorber
President and Chief Executive Officer
Richard J. Lampen
Executive Vice President
J. Bryant Kirkland III
Senior Vice President, Chief Financial Officer and Treasurer
Marc N. Bell
Senior Vice President, General Counsel and Secretary
Ronald J. Bernstein
President and Chief Executive Officer of Liggett
Group LLC and Liggett Vector Brands LLC
10-Year Stockholder Return
• 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 $200 million, as of September 30, 2016, in a broad
portfolio of 23 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 $25.1 billion for the twelve months ended September 30,
2016 and it has approximately 6,000 affiliated agents and 90 offices throughout the New York
metropolitan area, South Florida, Aspen, Greenwich, and Los Angeles.
REAL ESTATE
Real Estate
Tobacco
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.
TOBACCO
• 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 due to favorable treatment under the Master Settlement Agreement that
ranged between $163 million and $168 million from 2011 to 2015.
• 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.
COMPANY HIGHLIGHTS
• Headquartered in Miami with an executive office in
Manhattan and tobacco operations in North Carolina
• Employs approximately 1,400 people
• Executive management and directors beneficially
own 13% of the Company
• Reported cash of $462 million and investments with
fair value of $272 million at September 30, 2016
• Recognized as one of America’s Most Trustworthy
Companies by Forbes in 2013
Real Estate
Tobacco
Corporate and Other
$1.021B
$690M
TOTAL
$1.709B
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 October 31, 2006 to October 31, 2016 and assumes reinvestment of dividends received
Net income attributable to Vector Group Ltd. for the periods presented was $37M, $37M, $59M and $74M, respectively. The Company’s revenues for the twelve months ended September 30, 2016 were $1.709B. Adjusted EBITDA and Adjusted Revenues are non-GAAP financial measures. For a reconciliation of
Adjusted EBITDA to net income and Adjusted Revenues to revenues, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on November 15, 2016, November 3, 2016, April 1, 2016 and March 8, 2016 (Commission File Number 1-5759). Please also see Vector Group Ltd.’s Form 10-K for the year
ended December 31, 2015 and Form 10-Q for the quarterly period ended September 30, 2016 (Commission File Number 1-5759).
1
Adjusted EBITDA1
Contact: Emily Deissler / Ben Spicehandler / Columbia Clancy of Sard Verbinnen & Co (212) 687-8080
VGR Total Return 376.4% (16.9% Compounded) 2
S&P 500 Total Return 91.2% (6.7% Compounded) 2
www.vectorgroupltd.com
November 2016
E-Cigarettes
LTM 9/30/2016
$268M
$31M
($15M)
$278M
($6M)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
100
0
300
200
400
2013
$199M
$51M
$236M
($1M)
2014
$211M
$40M
($11M)
$227M
2015
$245M
$27M
($13M)
$246M
($13M)($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 $200 million, as of September 30, 2016, in a broad portfolio
of real estate projects.
NEW VALLEY REAL ESTATE INVESTMENTS1
November 2016
DOUGLAS ELLIMAN
• Largest residential real estate brokerage firm in New York metropolitan area and fourth-largest
in United States.
• Closings of $25.1 billion for the last twelve months ended September 30, 2016; Douglas Elliman
has approximately 6,000 affiliated agents and 90 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.
• Adjusted Revenues and Adjusted EBITDA of Douglas Elliman of $684 million2 and $43 million2,
respectively, for the last twelve months ended September 30, 2016.
COMPANY HIGHLIGHTS
• Executive offices in Manhattan and Miami
• Employs approximately 900 people
Douglas Elliman’s Revenues were $684M and Douglas Elliman’s net income was $29.6M for the twelve months ended September 30, 2016. New Valley’s net income for the periods presented was approximately $59.4M, $21.4M, $11.7M and $15.7M, for the periods presented, respectively. New Valley’s revenues for the twelve
months ended September 30, 2016 were $690M. Adjusted EBITDA and Adjusted Revenues are non-GAAP financial measures. New Valley’s Adjusted EBITDA does not include an allocation of Vector Group Ltd.’s Corporate and Other Expenses (for purposes of computing Adjusted EBITDA) of $13.5M, $11.4M, $13.2M and $15.5M,
for the periods presented, respectively. For a reconciliation of Adjusted EBITDA to net income and Adjusted Revenues to revenues, please see Vector Group Ltd.’s Current Reports on Forms 8-K, filed on November 15, 2016, November 3, 2016, March 8, 2016 and October 2, 2015 (Commission File Number 1-5759). Please also see
Vector Group Ltd.’s Form 10-K for the year ended December 31, 2015 and Form 10-Q for the quarterly period ended September 30, 2016 (Commission File Number 1-5759).
2
LTM
9/30/2016
$30.4M
New Valley Adjusted EBITDA2
212
3
10
5
6
7
8
9
1
4
Maryland Portfolio
(Baltimore County)
New Valley’s Real Estate Investment 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. 160 Leroy Street Greenwich Village
7. PUBLIC Chrystie House Lower East Side
8. The Dutch Long Island City
9. 1 QPS Tower 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
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 / Columbia Clancy of Sard Verbinnen & Co (212) 687-8080
Escena
(Palm Springs)
Douglas Elliman Closings
LTM
9/30/2016
$25.1B
EXECUTIVE MANAGEMENT
Howard M. Lorber
President and Chief Executive Officer
Richard J. Lampen
Executive Vice President
J. Bryant Kirkland III
Senior Vice President, Treasurer and Chief Financial Officer
Marc N. Bell
Senior 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 of Vector Group Ltd.’s Form 10-Q for the quarterly period ended September 30, 2016 (Commission
File Number 1-5759).
1
New Valley Adjusted
Revenues – LTM September 30, 20162
Other
Real Estate Brokerage Commissions
Property Management
11
West Hollywood Edition
(West Hollywood)
The Plaza at Harmon
Meadow (New Jersey)
Sagaponack
(East Hampton)
87 Park
(Miami Beach)
Mosaic II
(ST Portfolio)
(Houston)
Takanasee
(New Jersey)
$690M
$651M
$28M
$11M
2011
$11.1B
2012
$12.4B
2013
$14.9B
$18.2B
2014 2015
$22.4B
2013
$51.3M
2014
$40.2M
2015
$26.9M