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): November 7, 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 November 7, 2017, Vector Group Ltd. announced its financial results for the three and nine months ended September 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
 
Press Release issued on November 7, 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: November 7, 2017



Exhibit


https://cdn.kscope.io/682d38277d11c2a6c60381fda425c250-svc.jpg
FOR IMMEDIATE RELEASE
Contact:
 
Emily Claffey/Benjamin Spicehandler
/Columbia Clancy
 
 
Sard Verbinnen & Co
 
 
212-687-8080
 
 
Conrad Harrington
 
 
Sard Verbinnen & Co - Europe
 
 
+44 (0)20 3178 8914
 
 
J. Bryant Kirkland III, Vector Group Ltd.
 
 
305-579-8000
VECTOR GROUP REPORTS THIRD QUARTER 2017 FINANCIAL RESULTS

 
MIAMI, FL, November 7, 2017 - Vector Group Ltd. (NYSE:VGR) today announced financial results for the three and nine months ended September 30, 2017.

GAAP Financial Results

Third quarter of 2017 revenues were $484.6 million, compared to revenues of $459.1 million in the third quarter of 2016. The Company recorded operating income of $59.2 million in the third quarter of 2017, compared to operating income of $69.4 million in the third quarter of 2016. Net income attributed to Vector Group Ltd. for the third quarter of 2017 was $19.3 million, or $0.13 per diluted common share, compared to net income of $23.2 million, or $0.17 per diluted common share, in the third quarter of 2016.

For the nine months ended September 30, 2017 revenues were $1.372 billion, compared to revenues of $1.278 billion for the nine months ended September 30, 2016. The Company recorded operating income of $186.0 million for the nine months ended September 30, 2017, compared to operating income of $202.2 million for the nine months ended September 30, 2016. Net income attributed to Vector Group Ltd. for the nine months ended September 30, 2017 was $41.8 million, or $0.28 per diluted common share, compared to net income of $66.5 million, or $0.49 per diluted common share for the nine months ended September 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 nine months ended September 30, 2017 and 2016 are included in Tables 2 through 7.
Three months ended September 30, 2017 compared to the three months ended September 30, 2016
Third quarter of 2017 Adjusted EBITDA attributed to Vector Group (as described in Table 2 attached hereto) were $64.9 million compared to $75.1 million for the third quarter of 2016.





Adjusted Net Income (as described in Table 3 attached hereto) was $22.1 million or $0.16 per diluted share for the third quarter of 2017 and $24.3 million or $0.18 per diluted share for the third quarter of 2016.
Adjusted Operating Income (as described in Table 4 attached hereto) was $59.4 million for the third quarter of 2017 compared to $71.1 million for the third quarter of 2016.

Nine months ended September 30, 2017 compared to the nine months ended September 30, 2016
Adjusted EBITDA attributed to Vector Group (as described below and in Table 2 attached hereto) were $202.5 million for the nine months ended September 30, 2017 compared to $219.8 million in 2016.
Adjusted Net Income (as described below and in Table 3 attached hereto) was $73.3 million or $0.52 per diluted share for the nine months ended September 30, 2017 and $67.1 million or $0.50 per diluted share for the nine months ended September 30, 2016.
Adjusted Operating Income (as described below and in Table 4 attached hereto) was $187.7 million for the nine months ended September 30, 2017 and $207.9 million for the nine months ended September 30, 2016.
Tobacco Segment Financial Results
For the third quarter of 2017, the Tobacco segment had revenues of $294.2 million, compared to $274.2 million for the third quarter of 2016. The increase in revenues was primarily due to a 9.4% increase in unit sales volume.
For the nine months ended September 30, 2017, the Tobacco segment had revenues of $823.9 million, compared to $750.7 million for the nine months ended September 30, 2016. The increase in revenues was primarily due to a 12.0% increase in unit sales volume.
Operating Income from the Tobacco segment was $61.7 million and $185.9 million for the three and nine months ended September 30, 2017 compared to $67.0 million and $194.5 million for the three and nine months ended September 30, 2016, respectively.
Non-GAAP Financial Measures
Tobacco Adjusted Operating Income (as described in Table 5 attached hereto) for the third quarter of 2017 and 2016 was $64.0 million and $66.6 million, respectively. Tobacco Adjusted Operating Income for the nine months ended September 30, 2017 and 2016 was $189.0 million and $196.5 million, respectively.
For the third quarter of 2017, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 2.52 billion units compared to 2.31 billion units for the third quarter of 2016. For the nine months ended September 30, 2017, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 6.98 billion units compared to 6.23 billion for the nine months ended September 30, 2016.
Liggett’s retail market share increased to approximately 3.9% during the third quarter of 2017 and approximately 3.8% for the nine months ended September 30, 2017. Compared to the third quarter of 2016, Liggett’s retail shipments increased 5.8% while the overall industry’s retail shipments declined by 2.9%, according to data from Management Science Associates, Inc. Compared to the nine months ended September 30, 2016, Liggett’s retail shipments increased 5.7% while the overall industry’s retail shipments declined by 3.7%, according to data from Management Science Associates, Inc.
Real Estate Segment Financial Results
For the third quarter of 2017, the Real Estate segment had revenues of $190.9 million, compared to $184.9 million for the third quarter of 2016. For the nine months ended September 30, 2017, the Real Estate segment had revenues of $548.4 million compared to $527.4 million for the nine months ended September 30, 2016. For the third quarter of 2017, the Real Estate segment reported a net income of $1.6 million, compared to net income of $4.7 million for the third quarter of 2016. For the nine months ended September 30, 2017, the Real Estate segment reported net income of $24.7 million compared to $14.3 million for the nine months ended September 30, 2016.
Douglas Elliman’s results are included in Vector Group Ltd.’s Real Estate segment.  For the third quarter of 2017, Douglas Elliman had revenues of $190.4 million, compared to $184.5 million for the third quarter of 2016. For the nine months ended September 30, 2017, Douglas Elliman had revenues of $544.6 million compared to $523.8 million for the nine months ended September 30, 2016. For the third quarter of 2017, Douglas Elliman reported net income of $4.2 million, compared to $8.7 million for the third quarter of 2016. For the nine months ended September 30, 2017, Douglas Elliman reported net income of $20.5 million compared to $27.2 million for the nine months ended September 30, 2016.
Non-GAAP Financial Measures
For the third quarter of 2017, Real Estate Adjusted EBITDA attributed to the Company (as described in Table 6 attached hereto) were $2.6 million, compared to $9.3 million for the third quarter of 2016.





For the nine months ended September 30, 2017, Real Estate Adjusted EBITDA attributed to the Company were $18.4 million compared to $27.4 million for the nine months ended September 30, 2016.
Douglas Elliman’s results are included in Vector Group Ltd.’s Real Estate segment. For the third quarter of 2017, Douglas Elliman’s Adjusted EBITDA (as described in Table 7 attached hereto) were $3.8 million ($2.7 million attributed to the Company), compared to $13.3 million ($9.4 million attributed to the Company) for the third quarter of 2016.
For the nine months ended September 30, 2017, Douglas Elliman’s Adjusted EBITDA were $23.8 million ($16.8 million attributed to the Company), compared to $37.2 million ($26.2 million attributed to the Company) for the nine months ended September 30, 2016.
For the three and nine months ended September 30, 2017, Douglas Elliman achieved closed sales of approximately $7.0 billion and $19.8 billion, compared to $6.8 billion and $18.9 billion for the three and nine months ended September 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 nine months ended September 30, 2017 and 2016.

Conference Call to Discuss Third Quarter Results

As previously announced, the Company will host a conference call and webcast on Tuesday, November 7, 2017 at 8:30 AM (ET) to discuss third quarter 2017 results. Investors can access the call by dialing 800-859-8150 and entering 74164830 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 November 7, 2017 through November 21, 2017. To access the replay, dial 877-656-8905 and enter 74164830 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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
 
(Unaudited)
 
(Unaudited)
Revenues
 
 
 
 
 
 
 
   Tobacco*
$
294,245

 
$
274,164

 
$
823,876

 
$
750,677

   Real estate
190,860

 
184,936

 
548,426

 
527,448

   E-cigarettes
(480
)
 
4

 
(480
)
 
52

       Total revenues
484,625

 
459,104

 
1,371,822

 
1,278,177

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 Cost of sales:
 
 
 
 
 
 
 
   Tobacco*
207,800

 
186,343

 
570,461

 
491,688

   Real estate
130,316

 
117,089

 
358,472

 
331,784

   E-cigarettes

 
10

 

 
23

       Total cost of sales
338,116

 
303,442

 
928,933

 
823,495

 
 
 
 
 
 
 
 
Operating, selling, administrative and general expenses
83,172

 
86,298

 
251,124

 
250,048

Litigation settlement and judgment expense
4,104

 

 
5,791

 
2,350

Restructuring charges

 

 

 
41

Operating income
59,233

 
69,364

 
185,974

 
202,243

 
 
 
 
 
 
 
 
Other income (expenses):
 
 
 
 
 
 
 
Interest expense
(43,234
)
 
(37,365
)
 
(136,146
)
 
(104,454
)
Loss on extinguishment of debt

 

 
(34,110
)
 

Change in fair value of derivatives embedded within convertible debt
9,437

 
6,112

 
26,142

 
23,222

Equity in (losses) earnings from real estate ventures
(47
)
 
1,022

 
26,357

 
3,328

Equity in losses from investments
(303
)
 
(1,526
)
 
(2,823
)
 
(2,108
)
Gain on sale of investment securities available for sale
96

 
142

 
283

 
848

Impairment of investment securities available for sale
(53
)
 
(54
)
 
(179
)
 
(4,916
)
Other, net
1,821

 
1,328

 
4,818

 
2,956

Income before provision for income taxes
26,950

 
39,023

 
70,316

 
121,119

Income tax expense
6,472

 
13,316

 
22,517

 
46,682

 
 
 
 
 
 
 
 
Net income
20,478

 
25,707

 
47,799

 
74,437

 
 
 
 
 
 
 
 
Net income attributed to non-controlling interest
(1,214
)
 
(2,532
)
 
(5,951
)
 
(7,909
)
 
 
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
19,264

 
$
23,175

 
$
41,848

 
$
66,528

 
 
 
 
 
 
 
 
Per basic common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to common share attributed to Vector Group Ltd.
$
0.13

 
$
0.17

 
$
0.28

 
$
0.49

 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to common share attributed to Vector Group Ltd.
$
0.13

 
$
0.17

 
$
0.28

 
$
0.49

 
 
 
 
 
 
 
 
Dividends declared per share
$
0.38

 
$
0.36

 
$
1.14

 
$
1.09


* Revenues and cost of sales include federal excise taxes of $126,912, $116,024, $351,474 and $313,731, respectively.





TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
46,447

 
$
19,264

 
$
23,175

 
$
41,848

 
$
66,528

Interest expense
174,674

 
43,234

 
37,365

 
136,146

 
104,454

Income tax expense
24,998

 
6,472

 
13,316

 
22,517

 
46,682

Net income attributed to non-controlling interest
4,181

 
1,214

 
2,532

 
5,951

 
7,909

Depreciation and amortization
19,520

 
4,386

 
5,833

 
14,028

 
16,867

EBITDA
$
269,820

 
$
74,570

 
$
82,221

 
$
220,490

 
$
242,440

Change in fair value of derivatives embedded within convertible debt (a)
(34,630
)
 
(9,437
)
 
(6,112
)
 
(26,142
)
 
(23,222
)
Equity in losses from investments (b)
3,469

 
303

 
1,526

 
2,823

 
2,108

Gain on sale of investment securities available for sale
(2,342
)
 
(96
)
 
(142
)
 
(283
)
 
(848
)
Impairment of investment securities available for sale
644

 
53

 
54

 
179

 
4,916

Equity in (earnings) losses from real estate ventures (c)
(28,229
)
 
47

 
(1,022
)
 
(26,357
)
 
(3,328
)
Loss on extinguishment of debt
34,110

 

 

 
34,110

 

Stock-based compensation expense (d)
11,231

 
2,430

 
2,438

 
8,456

 
7,277

Litigation settlement and judgment expense (e)
23,441

 
4,104

 

 
5,791

 
2,350

Impact of MSA settlement (f)
(2,104
)
 
(1,826
)
 
(370
)
 
(2,721
)
 
(370
)
Restructuring charges

 

 

 

 
41

Purchase accounting adjustments (g)
941

 
(2,345
)
 
1,653

 
(2,088
)
 
2,201

Other, net
(6,594
)
 
(1,821
)
 
(1,328
)
 
(4,818
)
 
(2,956
)
Adjusted EBITDA
$
269,757

 
$
65,982

 
$
78,918

 
$
209,440

 
$
230,609

Adjusted EBITDA attributed to non-controlling interest
(6,770
)
 
(1,091
)
 
(3,852
)
 
(6,923
)
 
(10,849
)
Adjusted EBITDA attributed to Vector Group Ltd.
$
262,987

 
$
64,891

 
$
75,066

 
$
202,517

 
$
219,760

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
260,438

 
$
66,076

 
$
69,421

 
$
195,840

 
$
204,292

E-cigarettes
(1,559
)
 
(527
)
 
(165
)
 
(605
)
 
(449
)
Real Estate (h)
25,736

 
3,719

 
13,144

 
25,317

 
38,297

Corporate and Other
(14,858
)
 
(3,286
)
 
(3,482
)
 
(11,112
)
 
(11,531
)
Total
$
269,757

 
$
65,982

 
$
78,918

 
$
209,440

 
$
230,609

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Attributed to Vector Group Ltd. by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
260,438

 
$
66,076

 
$
69,421

 
$
195,840

 
$
204,292

E-cigarettes
(1,559
)
 
(527
)
 
(165
)
 
(605
)
 
(449
)
Real Estate (i)
18,966

 
2,628

 
9,292

 
18,394

 
27,448

Corporate and Other
(14,858
)
 
(3,286
)
 
(3,482
)
 
(11,112
)
 
(11,531
)
Total
$
262,987

 
$
64,891

 
$
75,066

 
$
202,517

 
$
219,760

                                      

a.
Represents income or losses recognized from changes in the fair value of the derivatives embedded in the Company’s convertible debt.
b.
Represents equity in losses recognized from investments that the Company accounts for under the equity method.
c.
Represents equity in (earnings) losses recognized from the Company’s investment in certain real estate businesses that are not consolidated in its financial results.
d.
Represents amortization of stock-based compensation.
e.
Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.
f.
Represents the Company’s tobacco segment’s settlement of a long-standing dispute related to the Master Settlement Agreement.
g.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company’s ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
h.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $23,231 for the last twelve months ended September 30, 2017 and $3,772, $13,297, $23,753 and $37,179 for the three and nine months ended September 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 $16,400 for the last twelve months ended September 30, 2017 and $2,663, $9,386, $16,767 and $26,245 for the three and nine months ended September 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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
Net income attributed to Vector Group Ltd.
$
19,264

 
$
23,175

 
$
41,848

 
$
66,528

 
 
 
 
 
 
 
 
Change in fair value of derivatives embedded within convertible debt
(9,437
)
 
(6,112
)
 
(26,142
)
 
(23,222
)
Non-cash amortization of debt discount on convertible debt
14,978

 
10,167

 
40,457

 
27,623

Loss on extinguishment of debt

 

 
34,110

 

Litigation settlement and judgment expense (a)
4,104

 

 
5,791

 
2,350

Impact of MSA settlement (b)
(1,826
)
 
(370
)
 
(2,721
)
 
(370
)
Impact of interest expense (capitalized to) reversed from real estate ventures, net
(1,108
)
 
(3,276
)
 
2,659

 
(8,111
)
Restructuring charges

 

 

 
41

Douglas Elliman Realty, LLC purchase accounting adjustments (c)
(1,508
)
 
1,511

 
(936
)
 
2,568

Total adjustments
5,203

 
1,920

 
53,218

 
879

 
 
 
 
 
 
 
 
Tax expense related to adjustments
(2,357
)
 
(780
)
 
(21,793
)
 
(357
)
 
 
 
 
 
 
 
 
Adjusted Net Income attributed to Vector Group Ltd.
$
22,110

 
$
24,315

 
$
73,273

 
$
67,050

 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd.
$
0.16

 
$
0.18

 
$
0.52

 
$
0.50


                                      

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
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
Operating income
$
216,728

 
$
59,233

 
$
69,364

 
$
185,974

 
$
202,243

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
23,441

 
4,104

 

 
5,791

 
2,350

   Restructuring expense

 

 

 

 
41

Impact of MSA settlement (b)
(2,104
)
 
(1,826
)
 
(370
)
 
(2,721
)
 
(370
)
Douglas Elliman Realty, LLC purchase accounting adjustments (c)
2,200

 
(2,136
)
 
2,141

 
(1,326
)
 
3,638

Total adjustments
23,537

 
142

 
1,771

 
1,744

 
5,659

 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income (d)
$
240,265

 
$
59,375

 
$
71,135

 
$
187,718

 
$
207,902


                                      

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
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
Tobacco Adjusted Operating Income:
 
 
 
 
 
 
 
 
 
Operating income from tobacco segment
$
229,724

 
$
61,727

 
$
66,974

 
$
185,904

 
$
194,473

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
23,441

 
4,104

 

 
5,791

 
2,350

   Restructuring expense

 

 

 

 
41

Impact of MSA settlement (b)
(2,104
)
 
(1,826
)
 
(370
)
 
(2,721
)
 
(370
)
Total adjustments
21,337

 
2,278

 
(370
)
 
3,070

 
2,021

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted Operating Income
$
251,061

 
$
64,005

 
$
66,604

 
$
188,974

 
$
196,494


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Operating income from tobacco segment
$
229,724

 
$
61,727

 
$
66,974

 
$
185,904

 
$
194,473

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
23,441

 
4,104

 

 
5,791

 
2,350

   Restructuring expense

 

 

 

 
41

Impact of MSA settlement (b)
(2,104
)
 
(1,826
)
 
(370
)
 
(2,721
)
 
(370
)
Total adjustments
21,337

 
2,278

 
(370
)
 
3,070

 
2,021

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted Operating Income
251,061

 
64,005

 
66,604

 
188,974

 
196,494

 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
9,292

 
2,050

 
2,796

 
6,803

 
7,735

Stock-based compensation expense
85

 
21

 
21

 
63

 
63

Total adjustments
9,377

 
2,071

 
2,817

 
6,866

 
7,798

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted EBITDA
$
260,438

 
$
66,076

 
$
69,421

 
$
195,840

 
$
204,292



                                      

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
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
Net income attributed to Vector Group Ltd. from subsidiary non-guarantors (a)
$
23,923

 
$
1,602

 
$
4,721

 
$
24,737

 
$
14,291

Interest expense (a)
28

 
10

 
7

 
22

 
14

Income tax expense (a)
17,145

 
1,381

 
2,430

 
17,701

 
9,891

Net income attributed to non-controlling interest (a)
4,181

 
1,214

 
2,532

 
5,951

 
7,909

Depreciation and amortization
8,823

 
2,075

 
2,647

 
6,210

 
7,872

EBITDA
$
54,100

 
$
6,282

 
$
12,337

 
$
54,621

 
$
39,977

Loss from non-guarantors other than New Valley LLC
133

 
36

 
8

 
119

 
84

Equity in (earnings) losses from real estate ventures (b)
(28,229
)
 
47

 
(1,022
)
 
(26,357
)
 
(3,328
)
Purchase accounting adjustments (c)
941

 
(2,345
)
 
1,653

 
(2,088
)
 
2,201

Other, net
(1,233
)
 
(317
)
 
136

 
(998
)
 
(704
)
Adjusted EBITDA
$
25,712

 
$
3,703

 
$
13,112

 
$
25,297

 
$
38,230

Adjusted EBITDA attributed to non-controlling interest
(6,769
)
 
(1,090
)
 
(3,852
)
 
(6,923
)
 
(10,849
)
Adjusted EBITDA attributed to New Valley LLC
$
18,943

 
$
2,613

 
$
9,260

 
$
18,374

 
$
27,381

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
 
 
Real Estate (d)
$
25,736

 
$
3,719

 
$
13,144

 
$
25,317

 
$
38,297

Corporate and Other
(24
)
 
(16
)
 
(32
)
 
(20
)
 
(67
)
Total (f)
$
25,712

 
$
3,703

 
$
13,112

 
$
25,297

 
$
38,230

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Attributed to New Valley LLC by Segment
 
 
 
 
 
 
 
 
 
Real Estate (e)
$
18,967

 
$
2,629

 
$
9,292

 
$
18,394

 
$
27,448

Corporate and Other
(24
)
 
(16
)
 
(32
)
 
(20
)
 
(67
)
Total (f)
$
18,943

 
$
2,613

 
$
9,260

 
$
18,374

 
$
27,381

             
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 nine months ended September 30, 2017.
b.
Represents equity in (earnings) losses recognized from the Company’s investment in certain real estate businesses that are not consolidated in its financial results.
c.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company’s ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
d.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $23,231 for the last twelve months ended September 30, 2017 and $3,772, $13,297, $23,753 and $37,179 for the three and nine months ended September 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 $16,400 or the last twelve months ended September 30, 2017 and $2,663, $9,386, $16,767 and $26,245 for the three and nine months ended September 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 $14,858 for the last twelve months ended and $3,286, $3,482, $11,112 and $11,531 for the three and nine months ended September 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
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net income attributed to Douglas Elliman Realty, LLC
$
14,338

 
$
4,197

 
$
8,684

 
$
20,451

 
$
27,181

Interest expense
5

 
5

 

 
5

 

Income tax expense
825

 
248

 
311

 
648

 
949

Depreciation and amortization
8,415

 
1,974

 
2,549

 
5,907

 
7,608

Douglas Elliman Realty, LLC EBITDA
$
23,583

 
$
6,424

 
$
11,544

 
$
27,011

 
$
35,738

Equity in earnings from real estate ventures (a)
(1,186
)
 
(271
)
 
(235
)
 
(1,116
)
 
(992
)
Purchase accounting adjustments (b)
941

 
(2,345
)
 
1,653

 
(2,088
)
 
2,201

Other, net
(107
)
 
(36
)
 
335

 
(54
)
 
232

Douglas Elliman Realty, LLC Adjusted EBITDA
$
23,231

 
$
3,772

 
$
13,297

 
$
23,753

 
$
37,179

Douglas Elliman Realty, LLC Adjusted EBITDA attributed to non-controlling interest
(6,831
)
 
(1,109
)
 
(3,911
)
 
(6,986
)
 
(10,934
)
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to Real Estate Segment
$
16,400

 
$
2,663

 
$
9,386

 
$
16,767

 
$
26,245

             
a.
Represents equity in earnings recognized from the Company’s investment in certain real estate businesses that are not consolidated in its financial results.
b.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company’s ownership of Douglas Elliman Realty, LLC, which occurred in 2013.