Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 4, 2017

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 August 4, 2017, Vector Group Ltd. announced its financial results for the three and six months ended June 30, 2017. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Current Report on Form 8-K and the Exhibit attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibit

(c)
Exhibit.

Exhibit No.
 
Exhibit
99.1
 
Press Release issued on August 4, 2017






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: August 4, 2017



Exhibit


https://cdn.kscope.io/9696519c6184877d67090debc36bc62e-copyofnycsvclogoa01a01a01a07.gif
FOR IMMEDIATE RELEASE
Contact:
 
Emily Claffey/Columbia Clancy
 
 
Sard Verbinnen & Co
 
 
212-687-8080
 
 
Conrad Harrington
 
 
Sard Verbinnen & Co - Europe
 
 
+44 (0)20 3178 8914
 
 
J. Bryant Kirkland III, Vector Group Ltd.
 
 
305-579-8000
VECTOR GROUP REPORTS SECOND QUARTER 2017 FINANCIAL RESULTS

 
MIAMI, FL, August 4, 2017 - Vector Group Ltd. (NYSE:VGR) today announced financial results for the three and six months ended June 30, 2017.

GAAP Financial Results

Second quarter of 2017 revenues were $472.0 million, compared to revenues of $438.3 million in the second quarter of 2016. The Company recorded operating income of $73.8 million in the second quarter of 2017, compared to operating income of $70.7 million in the second quarter of 2016. Net income attributed to Vector Group Ltd. for the second quarter of 2017 was $26.8 million, or $0.20 per diluted common share, compared to net income of $24.0 million, or $0.19 per diluted common share, in the second quarter of 2016.

For the six months ended June 30, 2017 revenues were $887.2 million, compared to revenues of $819.1 million for the six months ended June 30, 2016. The Company recorded operating income of $126.7 million for the six months ended June 30, 2017, compared to operating income of $132.9 million for the six months ended June 30, 2016. Net income attributed to Vector Group Ltd. for the six months ended June 30, 2017 was $22.6 million, or $0.16 per diluted common share, compared to net income of $43.4 million, or $0.34 per diluted common share for the six months ended June 30, 2016.

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 Adjusted EBITDA only) and non-cash interest expense associated with the Company's convertible debt. Reconciliations of non-GAAP financial results to the comparable GAAP financial results for the three and six months ended June 30, 2017 and 2016 are included in Tables 2 through 7.
Three months ended June 30, 2017 compared to the three months ended June 30, 2016
Second quarter of 2017 Adjusted EBITDA attributed to Vector Group (as described in Table 2 attached hereto) were $76.3 million compared to $75.1 million for the second quarter of 2016.
Adjusted Net Income (as described in Table 3 attached hereto) was $32.7 million or $0.25 per diluted share for the second quarter of 2017 and $24.6 million or $0.19 per diluted share for the second quarter of 2016.
Adjusted Operating Income (as described in Table 4 attached hereto) was $74.3 million for the second quarter of 2017 compared to $71.5 million for the second quarter of 2016.






Six months ended June 30, 2017 compared to the six months ended June 30, 2016
Adjusted EBITDA attributed to Vector Group (as described below and in Table 2 attached hereto) were $137.6 million for the six months ended June 30, 2017 compared to $144.7 million in 2016.
Adjusted Net Income (as described below and in Table 3 attached hereto) was $51.2 million or $0.38 per diluted share for the six months ended June 30, 2017 and $42.7 million or $0.33 per diluted share for the six months ended June 30, 2016.
Adjusted Operating Income (as described below and in Table 4 attached hereto) was $128.3 million for the six months ended June 30, 2017 and $136.8 million for the six months ended June 30, 2016.
Tobacco Segment Financial Results
For the second quarter of 2017, the Tobacco segment had revenues of $272.2 million, compared to $255.5 million for the second quarter of 2016. The increase in revenues was primarily due to a 7.4% increase in unit sales volume.
For the six months ended June 30, 2017, the Tobacco segment had revenues of $529.6 million, compared to $476.5 million for the six months ended June 30, 2016. The increase in revenues was primarily driven by a 13.6% increase in unit sales volume.
Operating Income from the Tobacco segment was $64.4 million and $124.2 million for the three and six months ended June 30, 2017 compared to $66.0 million and $127.5 million for the three and six months ended June 30, 2016, respectively.
Non-GAAP Financial Measures
Tobacco Adjusted Operating Income (as described in Table 5 attached hereto) for the second quarter of 2017 and 2016 was $64.5 million and $66.0 million, respectively. Tobacco Adjusted Operating Income for the six months ended June 30, 2017 and 2016 was $125.0 million and $129.9 million, respectively.
For the second quarter of 2017, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 2.29 billion units compared to 2.13 billion units for the second quarter of 2016. For the six months ended June 30, 2017, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 4.46 billion units compared to 3.93 billion for the six months ended June 30, 2016.
Liggett's retail market share increased to approximately 3.8% during the second quarter of 2017 and the six months ended June 30, 2017. Compared to the second quarter of 2016, Liggett's retail shipments increased 5.0% while the overall industry's retail shipments declined by 5.5%, according to data from Management Science Associates, Inc. Compared to the six months ended June 30, 2016, Liggett's retail shipments increased 5.7% while the overall industry's retail shipments declined by 4.2%, according to data from Management Science Associates, Inc.
Real Estate Segment Financial Results
For the second quarter of 2017, the Real Estate segment had revenues of $199.8 million, compared to $182.8 million for the second quarter of 2016. For the six months ended June 30, 2017, the Real Estate segment had revenues of $357.6 million compared to $342.5 million for the six months ended June 30, 2016. For the second quarter of 2017, the Real Estate segment reported a net income of $16.0 million, compared to net income of $6.5 million for the second quarter of 2016. For the six months ended June 30, 2017, the Real Estate segment reported Net Income of $23.1 million compared to $9.6 million for the six months ended June 30, 2016.
Douglas Elliman's results are included in Vector Group Ltd.'s Real Estate segment.  For the second quarter of 2017, Douglas Elliman had revenues of $198.7 million, compared to $181.7 million for the second quarter of 2016. For the six months ended June 30, 2017, Douglas Elliman had revenues of $354.2 million compared to $339.3 million for the six months ended June 30, 2016. For the second quarter of 2017, Douglas Elliman reported net income of $16.1 million, compared to $11.4 million for the second quarter of 2016. For the six months ended June 30, 2017, the Douglas Elliman Net Income of $16.3 million compared to $18.5 million for the six months ended June 30, 2016.
Non-GAAP Financial Measures
For the second quarter of 2017, Real Estate Adjusted EBITDA attributed to the Company (as described in Table 6 attached hereto) were $13.3 million, compared to $10.6 million for the second quarter of 2016.
For the six months ended June 30, 2017, Real Estate Adjusted EBITDA attributed to the Company were $15.8 million compared to $18.1 million for the six months ended June 30, 2016.
Douglas Elliman's results are included in Vector Group Ltd.'s Real Estate segment. For the second quarter of 2017, Douglas Elliman's Adjusted EBITDA (as described in Table 7 attached hereto) were $18.2 million ($12.9 million attributed to the Company), compared to $14.8 million ($10.5 million attributed to the Company) for the second quarter of 2016.





For the six months ended June 30, 2017, Douglas Elliman's Adjusted EBITDA were $20.0 million ($14.1 million attributed to the Company), compared to $23.9 million ($16.9 million attributed to the Company) for the six months ended June 30, 2016.
For the three and six months ended June 30, 2017, Douglas Elliman achieved closed sales of approximately $7.2 billion and $12.7 billion, compared to $6.4 billion and $12.1 billion for the three and six months ended June 30, 2016.

Non-GAAP Financial Measures
Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Income, Tobacco Adjusted Operating Income, New Valley LLC Adjusted EBITDA and Douglas Elliman Realty, LLC Adjusted EBITDA ("the Non-GAAP Financial Measures") are financial measures not prepared in accordance with generally accepted accounting principles (“GAAP”). The Company believes that the Non-GAAP Financial Measures are important measures that supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. The Company believes the Non-GAAP Financial Measures provide investors and analysts with a useful measure of operating results unaffected by differences in capital structures and ages of related assets among otherwise comparable companies.

Management uses the Non-GAAP Financial Measures as measures to review and assess operating performance of the Company's business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (the Non-GAAP Financial Measures) of the Company's business. While management considers the Non-GAAP Financial Measures to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating income, net income and cash flows from operations. In addition, the Non-GAAP Financial Measures are susceptible to varying calculations and the Company's measurement of the Non-GAAP Financial Measures may not be comparable to those of other companies. Attached hereto as Tables 2 through 7 is information relating to the Company's Non-GAAP Financial Measures for the six months ended June 30, 2017 and 2016.

Conference Call to Discuss Second Quarter Results

As previously announced, the Company will host a conference call and webcast on Friday, August 4, 2017 at 9:00 AM (ET) to discuss second quarter 2017 results. Investors can access the call by dialing 800-859-8150 and entering 59415962 as the conference ID number. The call will also be available via live webcast at www.investorcalendar.com. Webcast participants should allot extra time to register before the webcast begins.

A replay of the call will be available shortly after the call ends on August 4, 2017 through August 18, 2017. To access the replay, dial 877-656-8905 and enter 59415962 as the conference ID number. The archived webcast will also be available at www.investorcalendar.com for one year.

Vector Group is a holding company that indirectly owns Liggett Group LLC and Vector Tobacco Inc. and directly owns New Valley LLC, which owns a controlling interest in Douglas Elliman Realty, LLC. Additional information concerning the company is available on the Company's website, www.VectorGroupLtd.com.

[Financial Tables Follow]





TABLE 1
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
 
(Unaudited)
 
(Unaudited)
Revenues
 
 
 
 
 
 
 
   Tobacco*
$
272,177

 
$
255,498

 
$
529,631

 
$
476,513

   Real estate
199,812

 
182,765

 
357,566

 
342,512

   E-cigarettes

 
10

 

 
48

          Total Revenues
471,989

 
438,273

 
887,197

 
819,073

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 Cost of sales:
 
 
 
 
 
 
 
   Tobacco*
186,907

 
168,607

 
362,661

 
305,345

   Real estate
127,987

 
115,017

 
228,156

 
214,695

   E-cigarettes

 
7

 

 
13

       Total cost of sales
314,894

 
283,631

 
590,817

 
520,053

 
 
 
 
 
 
 
 
Operating, selling, administrative and general expenses
83,183

 
83,922

 
167,952

 
163,750

Litigation settlement and judgment expense
102

 

 
1,687

 
2,350

Restructuring charges

 

 

 
41

Operating income
73,810

 
70,720

 
126,741

 
132,879

 
 
 
 
 
 
 
 
Other income (expenses):
 
 
 
 
 
 
 
Interest expense
(46,691
)
 
(36,369
)
 
(92,912
)
 
(67,089
)
Loss on extinguishment of debt

 

 
(34,110
)
 

Change in fair value of derivatives embedded within convertible debt
8,134

 
7,416

 
16,705

 
17,110

Equity in earnings from real estate ventures
15,291

 
2,813

 
26,404

 
2,306

Equity in (losses) earnings from investments
(1,459
)
 
1,089

 
(2,520
)
 
(582
)
Gain on sale of investment securities available for sale
37

 
139

 
187

 
706

Impairment of investment securities available for sale
(87
)
 
(49
)
 
(126
)
 
(4,862
)
Other, net
1,338

 
581

 
2,997

 
1,628

Income before provision for income taxes
50,373

 
46,340

 
43,366

 
82,096

Income tax expense
18,827

 
19,003

 
16,045

 
33,366

 
 
 
 
 
 
 
 
Net income
31,546

 
27,337

 
27,321

 
48,730

 
 
 
 
 
 
 
 
Net income attributed to non-controlling interest
(4,735
)
 
(3,322
)
 
(4,737
)
 
(5,377
)
 
 
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
26,811

 
$
24,015

 
$
22,584

 
$
43,353

 
 
 
 
 
 
 
 
Per basic common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to common share attributed to Vector Group Ltd.
$
0.20

 
$
0.19

 
$
0.16

 
$
0.34

 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to common share attributed to Vector Group Ltd.
$
0.20

 
$
0.19

 
$
0.16

 
$
0.34

 
 
 
 
 
 
 
 
Dividends declared per share
$
0.40

 
$
0.38

 
$
0.80

 
$
0.76


* Revenues and cost of sales include federal excise taxes of $115,194, $106,861, $224,562 and $197,707, respectively.





TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
 
LTM
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
50,358

 
$
26,811

 
$
24,015

 
$
22,584

 
$
43,353

Interest expense
168,805

 
46,691

 
36,369

 
92,912

 
67,089

Income tax expense
31,842

 
18,827

 
19,003

 
16,045

 
33,366

Net income attributed to non-controlling interest
5,499

 
4,735

 
3,322

 
4,737

 
5,377

Depreciation and amortization
20,967

 
4,613

 
5,870

 
9,642

 
11,034

EBITDA
$
277,471

 
$
101,677

 
$
88,579

 
$
145,920

 
$
160,219

Change in fair value of derivatives embedded within convertible debt (a)
(31,305
)
 
(8,134
)
 
(7,416
)
 
(16,705
)
 
(17,110
)
Equity in losses (earnings) from investments (b)
4,692

 
1,459

 
(1,089
)
 
2,520

 
582

Gain on sale of investment securities available for sale
(2,388
)
 
(37
)
 
(139
)
 
(187
)
 
(706
)
Impairment of investment securities available for sale
645

 
87

 
49

 
126

 
4,862

Equity in (earnings) losses from real estate ventures (c)
(29,298
)
 
(15,291
)
 
(2,813
)
 
(26,404
)
 
(2,306
)
Loss on extinguishment of debt
34,110

 

 

 
34,110

 

Stock-based compensation expense (d)
11,239

 
3,020

 
2,532

 
6,026

 
4,839

Litigation settlement and judgment expense (e)
19,337

 
102

 

 
1,687

 
2,350

Impact of MSA settlement (f)
(648
)
 

 

 
(895
)
 

Restructuring charges

 

 

 

 
41

Purchase accounting adjustments (g)
4,939

 
144

 
348

 
257

 
548

Other, net
(6,101
)
 
(1,338
)
 
(581
)
 
(2,997
)
 
(1,628
)
Adjusted EBITDA
$
282,693

 
$
81,689

 
$
79,470

 
$
143,458

 
$
151,691

Adjusted EBITDA attributed to non-controlling interest
(9,531
)
 
(5,347
)
 
(4,358
)
 
(5,832
)
 
(6,997
)
Adjusted EBITDA attributed to Vector Group Ltd.
$
273,162

 
$
76,342

 
$
75,112

 
$
137,626

 
$
144,694

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
263,783

 
$
66,863

 
$
68,536

 
$
129,764

 
$
134,871

E-cigarettes
(1,197
)
 
(1
)
 
(91
)
 
(78
)
 
(284
)
Real Estate (h)
35,161

 
18,643

 
14,997

 
21,598

 
25,153

Corporate and Other
(15,054
)
 
(3,816
)
 
(3,972
)
 
(7,826
)
 
(8,049
)
Total
$
282,693

 
$
81,689

 
$
79,470

 
$
143,458

 
$
151,691

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Attributed to Vector Group Ltd. by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
263,783

 
$
66,863

 
$
68,536

 
$
129,764

 
$
134,871

E-cigarettes
(1,197
)
 
(1
)
 
(91
)
 
(78
)
 
(284
)
Real Estate (i)
25,630

 
13,296

 
10,639

 
15,766

 
18,156

Corporate and Other
(15,054
)
 
(3,816
)
 
(3,972
)
 
(7,826
)
 
(8,049
)
Total
$
273,162

 
$
76,342

 
$
75,112

 
$
137,626

 
$
144,694

                                      

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) 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 $32,756 for the last twelve months ended June 30, 2017 and $18,225, $14,818, $19,981 and $23,882 for the three and six months ended June 30, 2017 and 2016, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC's entire Adjusted EBITDA.
i.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $23,123 for the last twelve months ended and $12,865, $10,460, $14,105 and $16,858 for the three and six months ended June 30, 2017 and 2016, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC's Adjusted EBITDA for non-controlling interest.





TABLE 3
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)


 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
Net income attributed to Vector Group Ltd.
$
26,811

 
$
24,015

 
$
22,584

 
$
43,353

 
 
 
 
 
 
 
 
Change in fair value of derivatives embedded within convertible debt
(8,134
)
 
(7,416
)
 
(16,705
)
 
(17,110
)
Non-cash amortization of debt discount on convertible debt
13,426

 
9,170

 
25,479

 
17,456

Loss on extinguishment of debt

 

 
34,110

 

Litigation settlement and judgment expense (a)
102

 

 
1,687

 
2,350

Impact of interest expense capitalized to real estate ventures, net
4,212

 
(1,315
)
 
3,767

 
(4,835
)
Impact of MSA settlement (b)

 

 
(895
)
 

Restructuring charges

 

 

 
41

Douglas Elliman Realty, LLC purchase accounting adjustments (c)
251

 
581

 
572

 
1,057

Total adjustments
9,857

 
1,020

 
48,015

 
(1,041
)
 
 
 
 
 
 
 
 
Tax (expense) benefit related to adjustments
(3,944
)
 
(424
)
 
(19,436
)
 
433

 
 
 
 
 
 
 
 
Adjusted Net Income attributed to Vector Group Ltd.
$
32,724

 
$
24,611

 
$
51,163

 
$
42,745

 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd.
$
0.25

 
$
0.19

 
$
0.38

 
$
0.33


                                      

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 OPERATING INCOME
(Unaudited)
(Dollars in Thousands)


 
LTM
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
Operating income
$
226,859

 
$
73,810

 
$
70,720

 
$
126,741

 
$
132,879

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
19,337

 
102

 

 
1,687

 
2,350

   Restructuring expense

 

 

 

 
41

Impact of MSA settlement (b)
(648
)
 

 

 
(895
)
 

Douglas Elliman Realty, LLC purchase accounting adjustments (c)
6,477

 
355

 
823

 
810

 
1,497

Total adjustments
25,166

 
457

 
823

 
1,602

 
3,888

 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income (d)
$
252,025

 
$
74,267

 
$
71,543

 
$
128,343

 
$
136,767


                                      

a.
Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.
b.
Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.
c.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
d.
Does not include a reduction for 29.41% non-controlling interest in Douglas Elliman Realty, LLC.






TABLE 5
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF TOBACCO ADJUSTED OPERATING INCOME
AND TOBACCO ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)


 
LTM
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
Tobacco Adjusted Operating Income:
 
 
 
 
 
 
 
 
 
Operating income from tobacco segment
$
234,971

 
$
64,407

 
$
66,016

 
$
124,177

 
$
127,499

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
19,337

 
102

 

 
1,687

 
2,350

   Restructuring expense

 

 

 

 
41

Impact of MSA settlement (b)
(648
)
 

 

 
(895
)
 

Total adjustments
18,689

 
102

 

 
792

 
2,391

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted Operating Income
$
253,660

 
$
64,509

 
$
66,016

 
$
124,969

 
$
129,890


 
LTM
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Operating income from tobacco segment
$
234,971

 
$
64,407

 
$
66,016

 
$
124,177

 
$
127,499

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
19,337

 
102

 

 
1,687

 
2,350

   Restructuring expense

 

 

 

 
41

Impact of MSA settlement (b)
(648
)
 

 

 
(895
)
 

Total adjustments
18,689

 
102

 

 
792

 
2,391

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted Operating Income
253,660

 
64,509

 
66,016

 
124,969

 
129,890

 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
10,038

 
2,333

 
2,499

 
4,753

 
4,939

Stock-based compensation expense
85

 
21

 
21

 
42

 
42

Total adjustments
10,123

 
2,354

 
2,520

 
4,795

 
4,981

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted EBITDA
$
263,783

 
$
66,863

 
$
68,536

 
$
129,764

 
$
134,871



                                      

a.
Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.
b.
Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.






TABLE 6
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF REAL ESTATE SEGMENT (NEW VALLEY LLC) ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
 
LTM
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
Net income attributed to Vector Group Ltd. from subsidiary non-guarantors (a)
$
27,042

 
$
16,030

 
$
6,527

 
$
23,135

 
$
9,570

Interest expense (a)
25

 
6

 
4

 
12

 
7

Income tax expense (a)
18,194

 
11,367

 
5,038

 
16,320

 
7,461

Net income attributed to non-controlling interest (a)
5,499

 
4,735

 
3,322

 
4,737

 
5,377

Depreciation and amortization
9,395

 
1,913

 
2,943

 
4,135

 
5,225

EBITDA
$
60,155

 
$
34,051

 
$
17,834

 
$
48,339

 
$
27,640

Loss from non-guarantors other than New Valley LLC
105

 
37

 
42

 
83

 
76

Equity in earnings from real estate ventures (b)
(29,298
)
 
(15,291
)
 
(2,813
)
 
(26,404
)
 
(2,306
)
Purchase accounting adjustments (c)
4,939

 
144

 
348

 
257

 
548

Other, net
(780
)
 
(302
)
 
(430
)
 
(681
)
 
(840
)
Adjusted EBITDA
$
35,121

 
$
18,639

 
$
14,981

 
$
21,594

 
$
25,118

Adjusted EBITDA attributed to non-controlling interest
(9,531
)
 
(5,347
)
 
(4,358
)
 
(5,832
)
 
(6,997
)
Adjusted EBITDA attributed to New Valley LLC
$
25,590

 
$
13,292

 
$
10,623

 
$
15,762

 
$
18,121

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
 
 
Real Estate (d)
$
35,161

 
$
18,643

 
$
14,997

 
$
21,598

 
$
25,153

Corporate and Other
(40
)
 
(4
)
 
(16
)
 
(4
)
 
(35
)
Total (f)
$
35,121

 
$
18,639

 
$
14,981

 
$
21,594

 
$
25,118

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Attributed to New Valley LLC by Segment
 
 
 
 
 
 
 
 
 
Real Estate (e)
$
25,630

 
$
13,296

 
$
10,639

 
$
15,766

 
$
18,156

Corporate and Other
(40
)
 
(4
)
 
(16
)
 
(4
)
 
(35
)
Total (f)
$
25,590

 
$
13,292

 
$
10,623

 
$
15,762

 
$
18,121

             
a.
Amounts are derived from Vector Group Ltd.'s Condensed Consolidated Financial Statements. See Note entitled "Condensed Consolidating Financial Information" contained in Vector Group Ltd.'s Form 10-Q for the six months ended June 30, 2017.
b.
Represents equity in earnings recognized from the Company's investment in certain real estate businesses that are not consolidated in its financial results.
c.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
d.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $32,756 for the last twelve months ended June 30, 2017 and $18,225, $14,818, $19,981 and $23,882 for the three and six months ended June 30, 2017 and 2016, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC's entire Adjusted EBITDA.
e.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $23,123 or the last twelve months ended June 30, 2017 and $12,865, $10,460, $14,105 and $16,858 for the three and six months ended June 30, 2017 and 2016, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC's Adjusted EBITDA for non-controlling interest.
f.
New Valley's Adjusted EBITDA does not include an allocation of Vector Group Ltd.'s "Corporate and Other" segment's expenses (for purposes of computing Adjusted EBITDA contained in Table 2 of this press release) of $15,054 for the last twelve months ended and $3,816, $3,972, $7,826 and $8,049 for the three and six months ended June 30, 2017 and 2016, respectively.






TABLE 7
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA
AND DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA ATTRIBUTED TO REAL ESTATE SEGMENT
(Unaudited)
(Dollars in Thousands)
 
LTM
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net income attributed to Douglas Elliman Realty, LLC
$
18,825

 
$
16,141

 
$
11,420

 
$
16,254

 
$
18,497

Income tax expense
888

 
370

 
390

 
400

 
638

Depreciation and amortization
8,990

 
1,813

 
2,859

 
3,933

 
5,059

Douglas Elliman Realty, LLC EBITDA
$
28,703

 
$
18,324

 
$
14,669

 
$
20,587

 
$
24,194

Equity in earnings from real estate ventures (a)
(1,150
)
 
(265
)
 
(154
)
 
(845
)
 
(757
)
Purchase accounting adjustments (b)
4,939

 
144

 
348

 
257

 
548

Other, net
264

 
22

 
(45
)
 
(18
)
 
(103
)
Douglas Elliman Realty, LLC Adjusted EBITDA
$
32,756

 
$
18,225

 
$
14,818

 
$
19,981

 
$
23,882

Douglas Elliman Realty, LLC Adjusted EBITDA attributed to non-controlling interest
(9,633
)
 
(5,360
)
 
(4,358
)
 
(5,876
)
 
(7,024
)
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to Real Estate Segment
$
23,123

 
$
12,865

 
$
10,460

 
$
14,105

 
$
16,858

             
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.