SEC Filing | Vector Group LTD.

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vgr-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

VECTOR GROUP LTD.

(Exact name of registrant as specified in its charter)


Delaware	1-5759	65-0949535
(State or other jurisdiction of incorporation	Commission File Number	(I.R.S. Employer Identification No.)
incorporation or organization)

4400 Biscayne Boulevard

Miami, Florida 33137

305-579-8000

(Address, including zip code and telephone number, including area code,

of the principal executive offices)

Securities Registered Pursuant to 12(b) of the Act:


Title of each class:	Trading	Name of each exchange
	Symbol(s)	on which registered:
Common stock, par value $0.10 per share	VGR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☒

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes x No

At May 3, 2021, Vector Group Ltd. had 154,194,629 shares of common stock outstanding.

VECTOR GROUP LTD.

FORM 10-Q

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION

Item 1. Vector Group Ltd. Condensed Consolidated Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020			2

Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020			3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020			4

Condensed Consolidated Statements of Stockholders' Deficiency for the three months ended March 31, 2021 and 2020			5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020			6

Notes to Condensed Consolidated Financial Statements			7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			42

Item 3. Quantitative and Qualitative Disclosures About Market Risk			59

Item 4. Controls and Procedures			59

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			60

Item 1A. Risk Factors			60

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			62

Item 6. Exhibits			63

SIGNATURE			64

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	March 31, 2021		December 31, 2020
ASSETS:
Current assets:
Cash and cash equivalents	$	382,387	$	352,842
Investment securities at fair value	149,087		135,585

Accounts receivable - trade, net	45,905		40,711
Inventories	100,945		97,545


Other current assets	46,906		37,220
Total current assets	725,230		663,903
Property, plant and equipment, net	75,678		77,988
Investments in real estate, net	15,802		15,631
Long-term investments (includes $38,108 and $34,218 at fair value)	56,995		52,528
Investments in real estate ventures	83,984		85,400

Operating lease right-of-use assets	140,777		145,356
Goodwill and other intangible assets, net	207,536		207,577
Other assets	97,585		95,026
Total assets	$	1,403,587	$	1,343,409
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Current portion of notes payable and long-term debt	$	12,556	$	12,557

Current payments due under the Master Settlement Agreement	73,036		38,767


Income taxes payable, net	16,458		5,847

Current operating lease liability	27,207		27,207

Other current liabilities	203,641		198,937
Total current liabilities	332,898		283,315
Notes payable, long-term debt and other obligations, less current portion	1,405,399		1,393,729

Non-current employee benefits	66,722		66,616
Deferred income taxes, net	34,854		32,456
Non-current operating lease liability	148,417		154,199
Payments due under the Master Settlement Agreement	17,933		17,933

Other liabilities	53,863		54,848
Total liabilities	2,060,086		2,003,096
Commitments and contingencies (Note 9)
Stockholders' deficiency:
Preferred stock, par value $1 per share, 10,000,000 shares authorized	—		—
Common stock, par value $0.1 per share, 250,000,000 shares authorized, 154,194,629 and 153,324,629 shares issued and outstanding	15,419		15,332
Additional paid-in capital	2,573		—
Accumulated deficit	(653,606)		(653,945)
Accumulated other comprehensive loss	(20,885)		(21,074)

Total Vector Group Ltd. stockholders' deficiency	(656,499)		(659,687)
Non-controlling interest	—		—
Total stockholders' deficiency	(656,499)		(659,687)
Total liabilities and stockholders' deficiency	$	1,403,587	$	1,343,409

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	Three Months Ended
	March 31,
		2021		2020
Revenues:
Tobacco*		$	268,463	$	287,069
Real estate		275,301		167,419

Total revenues		543,764		454,488

Expenses:
Cost of sales:
Tobacco*		164,031		197,290
Real estate		199,511		113,333

Total cost of sales		363,542		310,623

Operating, selling, administrative and general expenses		90,014		90,517
Litigation settlement and judgment expense		5		—
Impairments of goodwill and other intangible assets		—		58,252

Operating income (loss)		90,203		(4,904)

Other income (expenses):
Interest expense		(28,751)		(35,627)
Loss on extinguishment of debt		(21,362)		—
Change in fair value of derivatives embedded within convertible debt		—		3,330

Equity in earnings from investments		577		50,152
Equity in earnings (losses) from real estate ventures		1,589		(6,505)
Other, net		2,754		(10,655)
Income (loss) before provision for income taxes		45,010		(4,209)
Income tax expense (benefit)		13,053		(978)

Net income (loss)		31,957		(3,231)

Net income attributed to non-controlling interest		—		—

Net income (loss) attributed to Vector Group Ltd.		$	31,957	$	(3,231)

Per basic common share:

Net income (loss) applicable to common shares attributed to Vector Group Ltd.		$	0.20	$	(0.03)

Per diluted common share:

Net income (loss) applicable to common shares attributed to Vector Group Ltd.		$	0.20	$	(0.03)

* Revenues and cost of sales include federal excise taxes of $97,714, and $113,139 for the three months ended March 31, 2021 and 2020, respectively.

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

Unaudited


	Three Months Ended
	March 31,
		2021		2020

Net income (loss)		$	31,957	$	(3,231)

Net unrealized losses on investment securities available for sale:
Change in net unrealized losses		(182)		(664)
Net unrealized (gains) losses reclassified into net income (loss)		(41)		503
Net unrealized losses on investment securities available for sale		(223)		(161)



Net change in pension-related amounts:


Amortization of loss		482		464
Net change in pension-related amounts		482		464

Other comprehensive income		259		303

Income tax effect on:
Change in net unrealized losses on investment securities		49		180
Net unrealized (gains) losses reclassified into net income (loss) on investment securities		11		(136)



Pension-related amounts		(130)		(125)
Income tax provision on other comprehensive income		(70)		(81)

Other comprehensive income, net of tax		189		222

Comprehensive income (loss)		32,146		(3,009)

Comprehensive income attributed to non-controlling interest		—		—
Comprehensive income (loss) attributed to Vector Group Ltd.		$	32,146	$	(3,009)

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

(Dollars in Thousands, Except Share Amounts)

Unaudited


	Vector Group Ltd. Stockholders' Deficiency
				Additional Paid-In				Accumulated Other Comprehensive		Non-controlling
	Common Stock					Accumulated
	Shares	Amount		Capital		Deficit		Loss		Interest		Total
Balance as of January 1, 2021	153,324,629	$	15,332	$	—	$	(653,945)	$	(21,074)	$	—	$	(659,687)

Net income	—	—		—		31,957		—		—		31,957






Total other comprehensive income	—	—		—		—		189		—		189

Dividends on common stock ($0.20 per share)	—	—		—		(31,618)		—		—		(31,618)
Restricted stock grants	870,000	87		(87)		—		—		—		—














Stock-based compensation	—	—		2,660		—		—		—		2,660






Balance as of March 31, 2021	154,194,629	$	15,419	$	2,573	$	(653,606)	$	(20,885)	$	—	$	(656,499)


	Vector Group Ltd. Stockholders' Deficiency
				Additional Paid-In				Accumulated Other Comprehensive		Non-controlling
	Common Stock					Accumulated
	Shares	Amount		Capital		Deficit		Loss		Interest		Total
Balance as of January 1, 2020	148,084,900	$	14,808	$	—	$	(678,464)	$	(21,808)	$	448	$	(685,016)
Impact of adoption of new accounting standards	—	—		—		(2,263)		—		—		(2,263)
Net loss	—	—		—		(3,231)		—		—		(3,231)






Total other comprehensive income	—	—		—		—		222		—		222

Distributions and dividends on common stock ($0.20 per share)	—	—		(2,258)		(28,263)		—		—		(30,521)
















Stock-based compensation	—	—		2,258		—		—		—		2,258



Distributions to non-controlling interest	—	—		—		—		—		(448)		(448)
Balance as of March 31, 2020	148,084,900	$	14,808	$	—	$	(712,221)	$	(21,586)	$	—	$	(718,999)

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

Unaudited


	Three Months Ended		Three Months Ended
	March 31, 2021		March 31, 2020
Net cash provided by operating activities	$	78,364	$	115,309
Cash flows from investing activities:
Sale of investment securities	10,228		16,672
Maturities of investment securities	13,968		15,616
Purchase of investment securities	(38,441)		(15,798)
Proceeds from sale or liquidation of long-term investments	4,389		19,544



Purchase of long-term investments	(5,813)		(5,238)
Investments in real estate ventures	(8,087)		(673)
Distributions from investments in real estate ventures	7,577		1,036
Increase in cash surrender value of life insurance policies	(564)		(258)
(Increase) decrease in restricted assets	(3)		93


Capital expenditures	(1,931)		(4,888)



Paydowns of investment securities	172		202

Investments in real estate, net	—		(340)
Net cash (used in) provided by investing activities	(18,505)		25,968
Cash flows from financing activities:
Proceeds from issuance of debt	875,000		36
Deferred financing costs	(20,000)		—
Repayments of debt	(853,158)		(2,638)
Borrowings under revolver	259		126,603
Repayments on revolver	(259)		(137,056)
Dividends and distributions on common stock	(32,273)		(32,074)

Distributions to non-controlling interest	—		(448)



Other	(21)		—
Net cash used in financing activities	(30,452)		(45,577)
Net increase in cash, cash equivalents and restricted cash	29,407		95,700
Cash, cash equivalents and restricted cash, beginning of period	365,677		379,476
Cash, cash equivalents and restricted cash, end of period	$	395,084	$	475,176

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)Basis of Presentation:

The condensed consolidated financial statements of Vector Group Ltd. (the “Company” or “Vector”) include the accounts of Liggett Group LLC (“Liggett”), Vector Tobacco Inc. (“Vector Tobacco”), Liggett Vector Brands LLC (“Liggett Vector Brands”), New Valley LLC (“New Valley”) and other less significant subsidiaries. New Valley includes the accounts of Douglas Elliman Realty, LLC (“Douglas Elliman”) and other less significant subsidiaries. All significant intercompany balances and transactions have been eliminated.

Liggett and Vector Tobacco are engaged in the manufacture and sale of cigarettes in the United States. Liggett Vector Brands coordinates Liggett and Vector Tobacco’s sales and marketing efforts. Certain references to “Liggett” refer to the Company’s tobacco operations, including the business of Liggett and Vector Tobacco, unless otherwise specified. New Valley is engaged in the real estate business.

The unaudited, interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and, in management’s opinion, contain all adjustments, consisting only of normal recurring items, necessary for a fair statement of the results for the periods presented. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”). The consolidated results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the entire year.

Certain reclassifications have been made to the 2020 financial information to conform to the 2021 presentation. Credit loss expense has been reclassified from Other (expense) income as components of Other, net.

(b)Distributions and Dividends on Common Stock:

The Company records distributions on its common stock as dividends in its condensed consolidated statement of stockholders’ deficiency to the extent of retained earnings. Any amounts exceeding retained earnings are recorded as a reduction to additional paid-in capital to the extent paid-in-capital is available and then to accumulated deficit.

(c)Earnings Per Share (“EPS”):

Net income (loss) for purposes of determining basic and diluted EPS was as follows:


	Three Months Ended
	March 31,
		2021		2020
Net income (loss) attributed to Vector Group Ltd.		$	31,957	$	(3,231)
Income attributed to participating securities		(756)		(561)
Net income (loss) applicable to common shares attributed to Vector Group Ltd.		$	31,201	$	(3,792)

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Basic and diluted EPS were calculated using the following common shares:


	Three Months Ended
	March 31,
		2021	2020
Weighted-average shares for basic EPS		152,249,440	147,000,114

Plus incremental shares related to stock options and non-vested restricted stock		134,650	83,603
Weighted-average shares for diluted EPS		152,384,090	147,083,717

The following non-vested restricted stock and shares issuable upon the conversion of convertible debt were outstanding during the three months ended March 31, 2021 and 2020, but were not included in the computation of diluted EPS because the impact of the per share expense associated with the restricted stock was greater than the average market price of the common shares during the respective periods and the common shares issuable under the convertible debt were anti-dilutive to EPS.


	Three Months Ended
	March 31,
		2021		2020


Weighted-average shares of non-vested restricted stock		97,222		625,122
Weighted-average expense per share		$	14.31	$	19.54
Weighted-average number of shares issuable upon conversion of debt		—		8,368,690
Weighted-average conversion price		$	—	$	20.27

(d)Investments in Real Estate Ventures:

In accounting for its investments in real estate ventures, the Company identified its participation in Variable Interest Entities (“VIE”), which are defined as (a) entities in which the equity investment at risk is not sufficient to finance its activities without additional subordinated financial support; (b) as a group, the equity investors at risk lack 1) the power to direct the activities of a legal entity that most significantly impact the entity’s economic performance, 2) the obligation to absorb the expected losses of the entity, or 3) the right to receive the expected residual returns of the entity; or (c) as a group, the equity investors have voting rights that are not proportionate to their economic interests and the entity’s activities involve or are conducted on behalf of an investor with a disproportionately small voting interest.

The Company’s interest in VIEs is primarily in the form of equity ownership. The Company examines specific criteria and uses judgment when determining if the Company is the primary beneficiary of a VIE. Factors considered include risk and reward sharing, experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights exclusive of protective rights or voting rights and level of economic disproportionality between the Company and its other partner(s).

Accounting guidance requires the consolidation of VIEs in which the Company is the primary beneficiary. The guidance requires consolidation of VIEs that an enterprise has a controlling financial interest. A controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The Company’s maximum exposure to loss in its investments in unconsolidated VIEs is limited to its investment in the VIE, any unfunded capital commitments to the VIE, and, in some cases, guarantees in connection with debt on the specific project. The Company’s maximum exposure to loss in its investment in consolidated VIEs is limited to its investment, which is the carrying value of the investment net of the non-controlling interest. Creditors of the consolidated VIEs have no recourse to the general credit of the primary beneficiary.

On a quarterly basis, the Company evaluates its investments in real estate ventures to determine if there are indicators of impairment. If so, the Company further investigates to determine if an impairment has occurred and whether such impairment is considered temporary or other than temporary. The Company believes that the assessment of temporary or other-than-temporary impairment is facts-and-circumstances driven.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(e)Other, net:

Other, net consisted of:


	Three Months Ended
	March 31,
		2021		2020

Interest and dividend income		$	611	$	2,680






Net gains (losses) recognized on investment securities		2,449		(12,240)
Net periodic benefit cost other than the service costs		(244)		(455)


Credit loss expense		—		(1,560)
Other (expense) income		(62)		920
Other, net		$	2,754	$	(10,655)

(f)Other Assets:

Other assets consisted of:


	March 31, 2021		December 31, 2020
Restricted assets	$	4,529	$	3,456
Prepaid pension costs	35,480		35,209
Contract assets, net	24,183		24,002
Other assets	33,393		32,359
Total other assets	$	97,585	$	95,026

(g)Other Current Liabilities:

Other current liabilities consisted of:


	March 31, 2021		December 31, 2020
Accounts payable	$	15,170	$	12,846
Accrued promotional expenses	40,697		45,579
Accrued excise and payroll taxes payable, net	23,359		13,849
Accrued interest	32,974		31,624
Commissions payable	33,077		25,615
Accrued salaries and benefits	13,253		27,104
Contract liabilities	7,758		7,633
Allowance for sales returns	7,340		7,356
Other current liabilities	30,013		27,331
Total other current liabilities	$	203,641	$	198,937

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(h)Reconciliation of Cash, Cash Equivalents and Restricted Cash:

The components of “Cash, cash equivalents and restricted cash” in the condensed consolidated statements of cash flows were as follows:


	March 31, 2021		December 31, 2020
Cash and cash equivalents	$	382,387	$	352,842
Restricted cash and cash equivalents included in other current assets	10,790		10,374
Restricted cash and cash equivalents included in other assets	1,907		2,461
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	395,084	$	365,677

Amounts included in current restricted assets and non-current restricted assets represent cash and cash equivalents required to be deposited into escrow for bonds required to appeal adverse product liability judgments, amounts required for letters of credit related to office leases, and certain deposit requirements for banking arrangements. The restrictions related to the appellate bonds will remain in place until the appeal process has been completed. The restrictions related to the letters of credit will remain in place for the duration of the respective lease. The restrictions related to the banking arrangements will remain in place for the duration of the arrangement.

(i)New Accounting Pronouncements:

Accounting Standards Updates (“ASU”) adopted in 2021:

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This update simplifies various aspects related to accounting for income taxes, removes certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740, and clarifies and amends existing guidance to improve consistent application. ASU No. 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”). The new standard clarifies the interaction of accounting for the transition into and out of the equity method. The new standard also clarifies the accounting for measuring certain purchased options and forward contracts to acquire investments. The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

ASUs to be adopted in future periods:

In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This ASU is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance is effective for all entities for contract modifications beginning March 12, 2020 and can be applied prospectively through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 to clarify the scope of the guidance and allow certain aspects of Topic 848 to be applied to all derivative instruments that undergo a modification of the interest rate used for discounting, margining or contract price alignment as a result of the reference reform. The Company has not yet determined the extent to which it will utilize these expedients and exceptions should a modification occur. The Company does not anticipate an impact on its condensed consolidated financial statements.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

2. REVENUE RECOGNITION

Disaggregation of Revenue

In the following table, revenue is disaggregated by major product line for the Tobacco segment:


	Three Months Ended
	March 31,
		2021		2020
Tobacco Segment Revenues:
Core Discount Brands - Eagle 20’s, Pyramid, Montego, Grand Prix, Liggett Select, and Eve		$	253,256	$	269,005
Other Brands		15,207		18,064
Total tobacco revenues		$	268,463	$	287,069

In the following table, revenue is disaggregated by major services line and primary geographical market for the Real Estate segment:


	Three Months Ended March 31, 2021
	New York City		Northeast		Southeast		West		Total
Real Estate Segment Revenues:
Commission and other brokerage income - existing home sales	$	70,135	$	56,250	$	75,553	$	41,078	$	243,016
Commission and other brokerage income - development marketing	8,444		—		7,307		333		16,084
Property management revenue	9,095		173		—		—		9,268
Escrow and title fees	466		417		—		3,525		4,408
Total Douglas Elliman revenue	88,140		56,840		82,860		44,936		272,776
Other real estate revenues	—		—		—		2,525		2,525
Total real estate revenues	$	88,140	$	56,840	$	82,860	$	47,461	$	275,301


	Three Months Ended March 31, 2020
	New York City		Northeast		Southeast		West		Total
Real Estate Segment Revenues:
Commission and other brokerage income - existing home sales	$	50,109	$	34,724	$	30,178	$	25,700	$	140,711
Commission and other brokerage income - development marketing	8,451		—		6,722		82		15,255
Property management revenue	8,562		217		—		—		8,779
Escrow and title fees	593		263		—		—		856
Total Douglas Elliman revenue	67,715		35,204		36,900		25,782		165,601
Other real estate revenues	—		—		—		1,818		1,818
Total real estate revenues	$	67,715	$	35,204	$	36,900	$	27,600	$	167,419

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Contract Balances

The following table provides information about contract assets and contract liabilities from development marketing and commercial leasing contracts with customers:


	March 31, 2021		December 31, 2020

Receivables, which are included in accounts receivable - trade, net	$	1,715	$	1,520
Contract assets, net, which are included in other current assets	6,609		6,529
Payables, which are included in other current liabilities	1,245		1,113
Contract liabilities, which are included in other current liabilities	7,758		7,633
Contract assets, net, which are included in other assets	24,183		24,002
Contract liabilities, which are included in other liabilities	33,730		32,104

The Company recognized revenue of $932 for the three months ended March 31, 2021, that were included in the contract liabilities balances at December 31, 2020. The Company recognized revenue of $2,737 for the three months ended March 31, 2020, that were included in the contract liabilities balances at December 31, 2019.

3. CURRENT EXPECTED CREDIT LOSSES

Tobacco receivables: Average collection terms for Tobacco sales range between three and twelve days from the time that the cigarettes are shipped to the customer. Based on Tobacco historical and ongoing cash collections from customers, an estimated credit loss in accordance with ASU 2016-13 was not recorded for these trade receivables as of March 31, 2021 and December 31, 2020.

Real estate broker agent receivables: Douglas Elliman Realty is exposed to credit losses for various amounts due from real estate agents, which are included in Other current assets on the condensed consolidated balance sheets, net of an allowance for credit losses. The Company estimates its allowance for credit losses on receivables from agents based on an evaluation of aging, agent sales in pipeline, any security, specific exposures, historical experience of collections from the individual agents, and current and expected future market trends (such as the current and expected impact of COVID-19 on the real estate market). The Company estimated that the credit losses for these receivables were $7,314 and $7,038 at March 31, 2021 and December 31, 2020, respectively.

Term loan receivables: New Valley periodically provides term loans to commercial real estate developers, which are included in Other assets on the condensed consolidated balance sheets. New Valley had two loans with a total amortized cost basis of $15,928, including accrued interest receivable of $6,428 at both March 31, 2021 and December 31, 2020, and have maturities in 2021 and beyond. The loans are secured by guarantees and given their risk profiles are evaluated individually. As New Valley does not have internal historical loss information by which to evaluate the risk of credit losses, external market data measuring default risks on high yield loans as of each measurement date was utilized to estimate reserves for credit losses on these loans. Pursuant to the requirements of ASU 2016-13, New Valley’s expected credit loss estimate was $15,928 at both March 31, 2021 and December 31, 2020.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

The following is the rollforward of the allowance for credit losses for the three months ended March 31, 2021:


	January 1, 2021		Current Period Provision			Write-offs		Recoveries		March 31, 2021
Allowance for credit losses:

Real estate broker agent receivables	$	7,038	$	385	(1)	$	109	$	—	$	7,314

New Valley term loan receivables	15,928		—			—		—		15,928

_____________________________

(1) The bad debt expense related to the real estate broker agent receivables is included in Operating, selling, administrative and general expenses on the condensed consolidated statements of operations.

The following is the rollforward of the allowance for credit losses for the three months ended March 31, 2020:


	January 1, 2020		Current Period Provision			Write-offs		Recoveries		March 31, 2020
Allowance for credit losses:

Real estate broker agent receivables	$	6,132	$	360	(1)	$	—	$	—	$	6,492

New Valley term loan receivables	3,100		1,560		(2)	—		—		4,660

_____________________________

(2) The credit losses related to the New Valley term loan receivables are included in Other, net on the condensed consolidated statements of operations.

4. LEASES

Leases

The Company has operating and finance leases for corporate and sales offices, and certain vehicles and equipment. The components of lease expense were as follows:


	Three Months Ended
	March 31,
		2021		2020
Operating lease cost		$	9,301	$	9,424
Short-term lease cost		291		401
Variable lease cost		1,008		567

Finance lease cost:
Amortization		16		38
Interest on lease liabilities		3		4
Total lease cost		$	10,619	$	10,434

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Supplemental cash flow information related to leases was as follows:


	Three Months Ended
	March 31,
	2021		2020
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	10,739	$	9,546
Operating cash flows from finance leases	3		4
Financing cash flows from finance leases	15		37

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	724		66
Finance leases	—		60

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Supplemental balance sheet information related to leases was as follows:



	March 31,			December 31,
	2021			2020
Operating leases:
Operating lease right-of-use assets	$	140,777		$	145,356

Current operating lease liability	$	27,207		$	27,207
Non-current operating lease liability	148,417			154,199
Total operating lease liabilities	$	175,624		$	181,406

Finance leases:
Investments in real estate, net (1)	$	53		$	62

Property, plant and equipment, at cost	$	127		$	127
Accumulated amortization	(51)			(44)
Property and equipment, net	$	76		$	83

Current portion of notes payable and long-term debt	$	57		$	57
Notes payable, long-term debt and other obligations, less current portion	81			96
Total finance lease liabilities	$	138		$	153

Weighted average remaining lease term:
Operating leases	7.75			7.87
Finance leases	2.50			2.71

Weighted average discount rate:
Operating leases	9.27		%	9.26		%
Finance leases	7.90		%	7.82		%

(1) Included in Investments in real estate, net on the condensed consolidated balance sheets are financing lease equipment, at cost of $748 and $748 and accumulated amortization of $695 and $686 as of March 31, 2021 and December 31, 2020, respectively.

As of March 31, 2021, maturities of lease liabilities were as follows:


	Operating Leases		Finance Leases
Period Ending December 31:
Remainder of 2021	$	33,125	$	49
2022	38,183		60
2023	33,398		35
2024	27,378		8
2025	22,219		—
2026	18,534		—
Thereafter	78,236		—
Total lease payments	251,073		152
Less imputed interest	(75,449)		(14)
Total	$	175,624	$	138

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

As of March 31, 2021, the Company had $2,320 in undiscounted lease payments relating to an additional operating lease for equipment that has not yet commenced. The operating lease will commence in the second half of 2021 with a lease term of 3 years.

As a result of the COVID-19 pandemic, the Company received lease concessions from landlords in 2020 mostly in the form of rent deferrals and a few in the form of rent abatements. The Company elected to treat these deferrals and abatements as lease modifications and the existing lease liabilities were remeasured with a corresponding adjustment to the right-of-use asset on the effective date of the modification in 2020. The deferrals varied as to the timing of repayment but all agreements required repayment of the deferrals over the remaining lease terms.

5. INVENTORIES

Inventories consisted of:


	March 31, 2021		December 31, 2020
Leaf tobacco	$	47,256	$	42,988
Other raw materials	5,301		5,987
Work-in-process	664		520

Finished goods	68,455		68,781

Inventories at current cost	121,676		118,276
LIFO adjustments	(20,731)		(20,731)
	$	100,945	$	97,545

All of the Company’s inventories at March 31, 2021 and December 31, 2020 are reported under the LIFO method. The $20,731 LIFO adjustment as of March 31, 2021 decreased the current cost of inventories by $14,139 for Leaf tobacco, $474 for Other raw materials, $26 for Work-in-process and $6,092 for Finished goods. The $20,731 LIFO adjustment as of December 31, 2020 decreased the current cost of inventories by $14,139 for Leaf tobacco, $474 for Other raw materials, $26 for Work-in-process and $6,092 for Finished goods.

The amount of capitalized MSA cost in “Finished goods” inventory was $21,099 and $21,120 at March 31, 2021 and December 31, 2020, respectively. Federal excise tax capitalized in inventory was $25,172 and $27,683 at March 31, 2021 and December 31, 2020, respectively.

At March 31, 2021, Liggett had tobacco purchase commitments of approximately $2,037. Liggett has a single-source supply agreement for reduced ignition propensity cigarette paper through 2022.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

6. INVESTMENT SECURITIES

Investment securities consisted of the following:


	March 31, 2021		December 31, 2020
Debt securities available for sale	$	102,958	$	91,204


Equity securities at fair value:
Marketable equity securities	25,389		21,155
Mutual funds invested in debt securities	23,240		23,226
Long-term investment securities at fair value (1)	35,608		34,218
Total equity securities at fair value	84,237		78,599

Total investment securities at fair value	187,195		169,803
Less:
Long-term investment securities at fair value (1)	35,608		34,218
Property technology (“PropTech”) convertible debt securities	2,500		—
Current investment securities at fair value	149,087		135,585

Long-term investment securities at fair value (1)	35,608		34,218
Equity-method investments	18,887		18,310
PropTech convertible debt securities	2,500		—
Total long-term investments	$	56,995	$	52,528

(1) These assets are measured at net asset value (“NAV”) as a practical expedient under ASC 820.

Net gains (losses) recognized on investment securities were as follows:


	Three Months Ended
	March 31,
		2021		2020
Net gains (losses) recognized on equity securities		$	2,408	$	(11,737)
Net gains (losses) recognized on debt securities available for sale		55		(117)

Impairment expense		(14)		(386)



Net gains (losses) recognized on investment securities		$	2,449	$	(12,240)

(a) Debt Securities Available for Sale:

The components of debt securities available for sale at March 31, 2021 were as follows:


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value


Marketable debt securities	$	100,098	$	360	$	—	$	100,458
PropTech convertible debt securities	2,500		—		—		2,500
Total debt securities available for sale	$	102,598	$	360	$	—	$	102,958

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

New Valley, through its subsidiary New Valley Ventures LLC, is actively seeking to capitalize on its real estate knowledge and experience by investing in PropTech ventures that will both supplement and enhance the technology-based experience of Douglas Elliman’s agents and the general real estate industry as well as improve the operating efficiency of New Valley. As of March 31, 2021, New Valley Ventures has invested $2,500 into convertible notes of four PropTech ventures. The maturities of the notes are between April 2022 and March 2023.

The table below summarizes the maturity dates of debt securities available for sale at March 31, 2021.


Investment Type:	Fair Value		Under 1 Year		1 Year up to 5 Years		More than 5 Years
U.S. Government securities	$	17,976	$	13,106	$	4,870	$	—
Corporate securities	48,601		35,373		13,228		—
U.S. mortgage-backed securities	9,626		2,270		7,356		—


Commercial paper	23,031		23,031		—		—

Foreign fixed-income securities	1,224		—		1,224		—
PropTech convertible debt securities	2,500		—		2,500		—
Total debt securities available for sale by maturity dates	$	102,958	$	73,780	$	29,178	$	—

The components of debt securities available for sale at December 31, 2020 were as follows:


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value


Marketable debt securities	$	90,621	$	583	$	—	$	91,204

There were no available-for-sale debt securities with continuous unrealized losses for less than 12 months and 12 months or greater at March 31, 2021 and December 31, 2020, respectively.

Gross realized gains and losses on debt securities available for sale were as follows:


	Three Months Ended
	March 31,
		2021		2020
Gross realized gains on sales		$	56	$	98
Gross realized losses on sales		(1)		(215)
Net gains (losses) recognized on debt securities available for sale		$	55	$	(117)

Impairment expense		$	(14)	$	(386)

Although management generally does not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing the Company’s investment securities portfolio, management may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(b) Equity Securities at Fair Value:

The following is a summary of unrealized and realized net gains and losses recognized in net income on equity securities at fair value during the three months ended March 31, 2021 and 2020, respectively:


	Three Months Ended
	March 31,
		2021		2020
Net gains (losses) recognized on equity securities		$	2,408	$	(11,737)
Less: Net gains (losses) recognized on equity securities sold		169		(618)
Net unrealized gains (losses) recognized on equity securities still held at the reporting date		$	2,239	$	(11,119)

The Company’s mutual funds invested in debt securities are classified as Level 1 under the fair value hierarchy disclosed in Note 12. Their fair values are based on quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets. The Company has unfunded commitments of $1,864 related to long-term investment securities at fair value as of March 31, 2021.

The Company received cash distributions of $4,389 and recognized a receivable of $154 of in-transit redemptions as of March 31, 2021 related to its long-term investment securities at fair value. The Company classified $4,389 of these distributions as investing cash inflows for the three months ended March 31, 2021.

Equity-method investments consisted of the following:


	March 31, 2021		December 31, 2020
Mutual fund and hedge funds	$	18,887	$	18,310

At March 31, 2021, the Company’s ownership percentages in the mutual fund and hedge funds accounted for under the equity method ranged from 6.6% to 37.09%. The Company’s ownership percentage in these investments meets the threshold for equity-method accounting.

On February 14, 2020, the Company received proceeds of $53,169 in exchange for the Company’s 15,191,205 common shares of Ladenburg Thalmann Financial Services Inc. (“LTS”). The Company also tendered 240,000 shares of LTS 8% Series A Cumulative Redeemable Preferred Stock (Liquidation Preference $25.00 Per Share) for redemption and received an additional $6,009 in March 2020. At the closing of the transaction, the Company’s Executive Vice President and Chief Operating Officer resigned as Chairman, President and Chief Executive Officer of LTS, and the Company’s management agreement with LTS was terminated.

Equity in earnings from investments were:


	Three Months Ended
	March 31,
		2021		2020
Mutual fund and hedge funds		$	577	$	(2,900)
LTS		—		53,052

Equity in earnings from investments		$	577	$	50,152

The Company received cash distributions of $53,382 (including the $53,169 received by the Company in exchange for the Company’s 15,191,205 common shares of LTS) from the Company’s equity-method investments for the three months ended March 31, 2020. The Company classified these cash distributions as operating activities on the condensed consolidated statements of cash flows for the three months ended March 31, 2020.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(d) Equity Securities Without Readily Determinable Fair Values That Do Not Qualify for the NAV Practical Expedient

Equity securities without readily determinable fair values that do not qualify for the NAV practical expedient consisted of investments in various limited liability companies at March 31, 2021 and December 31, 2020, respectively. The total carrying value of these investments was $5,200 as of both March 31, 2021 and December 31, 2020, and was included in “Other assets” on the condensed consolidated balance sheets. No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified for the three months ended March 31, 2021 and 2020, respectively.

(e) Combined Financial Statements for Unconsolidated Subsidiaries Accounted for on Equity Method

Pursuant to Rule 4-08(g), the following summarized financial data for unconsolidated subsidiaries includes information for Boyar.


	Three Months Ended
	March 31,
	2021		2020
Investment income	$	115	$	140
Expenses	121		112
Net investment (loss) gain	(6)		28
Total net realized gain (loss) and net change in unrealized appreciation (depreciation) from investments	2,845		(6,833)
Net increase (decrease) in partners’ capital resulting from operations	$	2,839	$	(6,805)

7. NEW VALLEY LLC

Investments in real estate ventures:

The components of “Investments in real estate ventures” were as follows:


	Range of Ownership (1)	March 31, 2021		December 31, 2020
Condominium and Mixed Use Development:
New York City Standard Metropolitan Statistical Area (“SMSA”)	4.2% - 46.7%	$	29,212	$	30,465
All other U.S. areas	19.6% - 77.8%	39,218		37,773
		68,430		68,238




Hotels:
New York City SMSA	0.4% - 15.7%	2,167		2,629
International	49.0%	1,346		1,852
		3,513		4,481
Commercial:
New York City SMSA	49.0%	2,713		2,591
All other U.S. areas	1.6%	7,041		7,084
		9,754		9,675

Other:	15.0% - 49.0%	2,287		3,006
Investments in real estate ventures		$	83,984	$	85,400

_____________________________

(1) The Range of Ownership reflects New Valley’s estimated current ownership percentage. New Valley’s actual ownership percentage as well as the percentage of earnings and cash distributions may ultimately differ as a result of a number of factors including potential dilution, financing or admission of additional partners.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Contributions:

The components of New Valley’s contributions to its investments in real estate ventures were as follows:


	Three Months Ended
	March 31,
	2021		2020
Condominium and Mixed Use Development:
New York City SMSA	$	180	$	495
All other U.S. areas	6,661		—
	6,841		495





Hotels:
New York City SMSA	1,246		—

	1,246		—





Other:	—		178
Total contributions	$	8,087	$	673

For ventures where New Valley previously held an investment, New Valley contributed its proportionate share of additional capital along with contributions by the other investment partners during the three months ended March 31, 2021 and March 31, 2020. New Valley’s direct investment percentage for these ventures did not significantly change.

Distributions:

The components of distributions received by New Valley from its investments in real estate ventures were as follows:


	Three Months Ended
	March 31,
	2021		2020
Condominium and Mixed Use Development:
New York City SMSA	$	—	$	1,036
All other U.S. areas	2,833		996
	2,833		2,032
Apartment Buildings:

All other U.S. areas	4,608		—
	4,608		—




Commercial:
New York City SMSA	—		3
All other U.S. areas	136		52
	136		55

Other	—		23
Total distributions	$	7,577	$	2,110

Of the distributions received by New Valley from its investment in real estate ventures, $1,074 were from distributions of earnings for the three months ended March 31, 2020, and $7,577 and $1,036 were a return of capital for the three months ended March 31, 2021 and 2020, respectively. Distributions from earnings are included in cash from operations in the condensed consolidated statements of cash flows, while distributions that are returns of capital are included in cash flows from investing activities in the condensed consolidated statements of cash flows.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Equity in Earnings (losses) from Real Estate Ventures:

New Valley recognized equity in earnings (losses) from real estate ventures as follows:


	Three Months Ended
	March 31,
		2021		2020
Condominium and Mixed Use Development:
New York City SMSA		$	(1,505)	$	(3,347)
All other U.S. areas		(41)		(2,799)
		(1,546)		(6,146)
Apartment Buildings:

All other U.S. areas		4,608		—
		4,608		—
Hotels:
New York City SMSA		(462)		(107)
International		(506)		(461)
		(968)		(568)
Commercial:
New York City SMSA		122		(74)
All other U.S. areas		93		249
		215		175

Other:		(720)		34
Equity in earnings (losses) from real estate ventures		$	1,589	$	(6,505)

VIE Consideration:

The Company has determined that New Valley is the primary beneficiary of one real estate venture because it controls the activities that most significantly impact the economic performance of the real estate venture. Consequently, New Valley consolidates this variable interest entity (“VIE”).

The carrying amount of the consolidated assets of the VIE was $0 at both March 31, 2021 and December 31, 2020. Those assets are owned by the VIE, not the Company. The consolidated VIE had no recourse liabilities as of March 31, 2021 and December 31, 2020. A VIE’s assets can only be used to settle the obligations of that VIE. The VIE is not a guarantor of the Company’s senior notes and other debts payable.

For the remaining investments in real estate ventures, New Valley determined that the entities were VIEs but New Valley was not the primary beneficiary. Therefore, New Valley’s investment in such real estate ventures has been accounted for under the equity method of accounting.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Maximum Exposure to Loss:

New Valley’s maximum exposure to loss from its investments in real estate ventures consisted of the net carrying value of the venture adjusted for any future capital commitments and/or guarantee arrangements. The maximum exposure to loss was as follows:


	March 31, 2021
Condominium and Mixed Use Development:
New York City SMSA	$	29,212
All other U.S. areas	39,218
	68,430




Hotels:
New York City SMSA	2,167
International	1,346
	3,513
Commercial:
New York City SMSA	2,713
All other U.S. areas	7,041
	9,754

Other	2,287
Total maximum exposure to loss	$	83,984

New Valley capitalized $430 and $1,253 of interest costs into the carrying value of its ventures whose projects were currently under development for the three months ended March 31, 2021 and 2020, respectively.

Douglas Elliman has been engaged by the developers as the sole broker or the co-broker for several of the real estate development projects that New Valley owns an interest in through its real estate venture investments. Douglas Elliman had gross commissions of approximately $2,357 and $5,530 from these projects for the three months ended March 31, 2021 and 2020, respectively.

Combined Financial Statements for Unconsolidated Subsidiaries Accounted for under the Equity Method:

Pursuant to Rule 4-08(g), the following summarized financial data for unconsolidated subsidiaries includes information for the following: Other Condominium and Mixed Use Development (West Hollywood Edition, 111 Murray Street, and Collins 11th Floor) Hotels (215 Chrystie Street) and Other (Witkoff GP Partners).

Other Condominium and Mixed Use Development:


	Three Months Ended March 31,
	2021		2020
Income Statements
Revenue	$	10,287	$	35,134

Other expenses	26,500		42,520
Loss from continuing operations	$	(16,213)	$	(7,386)

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Hotels:


	Three Months Ended March 31,
	2021		2020
Income Statements
Revenue	$	—	$	13,447

Other expenses	16,553		19,261
Loss from continuing operations	$	(16,553)	$	(5,814)

Other:


	Three Months Ended March 31,
	2021		2020
Income Statements
Revenue	$	21	$	337

Other expenses	300,829		2,800
Loss from continuing operations	$	(300,808)	$	(2,463)

Investments in Real Estate, net:

The components of “Investments in real estate, net” were as follows:


	March 31, 2021		December 31, 2020
Escena, net	$	9,670	$	9,735
Townhome A (11 Beach Street)	6,132		5,896

Investments in real estate, net	$	15,802	$	15,631

Escena. The assets of “Escena, net” were as follows:


	March 31, 2021		December 31, 2020
Land and land improvements	$	8,911	$	8,911
Building and building improvements	1,926		1,926
Other	1,663		1,672
	12,500		12,509
Less accumulated depreciation	(2,830)		(2,774)
	$	9,670	$	9,735

New Valley recorded operating income of $370 and $357 for the three months ended March 31, 2021 and 2020, respectively, from Escena. Escena is a master planned community, golf course, and club house in Palm Springs, California.

Townhome A (11 Beach Street). In November 2020, New Valley received, as part of a liquidating distribution from a real estate joint venture, Unit TH-A, a townhouse located in Manhattan, NY. The unit is wholly owned and the balances are included in the condensed consolidated financial statements of the Company. As of March 31, 2021, the carrying value of Unit TH-A was $6,132 and consisted of the value assigned to the unit as part of the distribution, acquisition costs and property related expenses.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

8. NOTES PAYABLE, LONG-TERM DEBT AND OTHER OBLIGATIONS

Notes payable, long-term debt and other obligations consisted of:


	March 31, 2021		December 31, 2020
Vector:
5.75% Senior Secured Notes due 2029	$	875,000	$	—
6.125% Senior Secured Notes due 2025	—		850,000
10.5% Senior Notes due 2026, net of unamortized discount of $2,946 and $3,040	552,054		551,960

Liggett:


Equipment loans	83		89
Other	22,350		25,484
Notes payable, long-term debt and other obligations	1,449,487		1,427,533
Less:
Debt issuance costs	(31,532)		(21,247)
Total notes payable, long-term debt and other obligations	1,417,955		1,406,286
Less:
Current maturities	(12,556)		(12,557)
Amount due after one year	$	1,405,399	$	1,393,729

5.75% Senior Secured Notes due 2029 — Vector:

On January 28, 2021, the Company completed the sale of $875,000 in aggregate principal amount of its 5.75% Senior Secured Notes due 2029 (“5.75% Senior Secured Notes”) to qualified institutional buyers and non-U.S. persons in a private offering pursuant to the exemptions from the registration requirements of the Securities Act contained in Rule 144A and Regulation S under the Securities Act. The aggregate net cash proceeds from the sale of the 5.75% Senior Secured Notes were approximately $855,500 after deducting the initial purchaser’s discount and estimated expenses and fees payable by the Company in connection with the offering. The Company used the net cash proceeds from the 5.75% Senior Secured Notes offering, together with cash on hand, to redeem all of the Company’s outstanding 6.125% Senior Secured Notes due 2025, including accrued interest and premium thereon, and to pay fees and expenses in connection with the offering of the 5.75% Senior Secured Notes and the redemption of the 6.125% Secured Notes due 2025.

The 5.75% Senior Secured Notes pay interest on a semi-annual basis at a rate of 5.75% per year and mature on the earlier of February 1, 2029 and the date that is 91 days before November 1, 2026, the final stated maturity date of the 10.5% Senior Notes due 2026 (“10.5% Senior Notes”) if such 10.5% Senior Notes have not been repurchased and cancelled or refinanced by such date.

The 5.75% Senior Secured Notes are fully and unconditionally guaranteed, subject to certain customary automatic release provisions, on a joint and several basis by all of the wholly-owned domestic subsidiaries of the Company that are engaged in the conduct of the Company’s cigarette businesses, which subsidiaries, as of the issuance date of the 5.75% Senior Secured Notes were also guarantors under the Company’s outstanding 10.5% Senior Notes. The 5.75% Senior Secured Notes are not guaranteed by New Valley LLC, or any of the Company’s subsidiaries engaged in the Company’s real estate business conducted through its subsidiary, New Valley LLC. The guarantees provided by certain of the guarantors are secured by first priority or second priority security interests in certain collateral of such guarantors pursuant to security and pledge agreements, subject to certain permitted liens and exceptions as further described in the indenture and the security documents relating thereto. The Company does not provide any security for the 5.75% Senior Secured Notes.

As of March 31, 2021, the Company was in compliance with all debt covenants.

VECTOR GROUP LTD.

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6.125% Senior Secured Notes due 2025 — Vector:

On February 1, 2021, the 6.125% Senior Secured Notes due 2025 were redeemed in full and the Company recorded a loss on the extinguishment of debt of $21,362 for the three months ended March 31, 2021, including $13,014 of premium and $8,348 of other costs and non-cash interest expense related to the recognition of previously unamortized deferred finance costs.

10.5% Senior Notes due 2026 — Vector:

As of March 31, 2021, the Company was in compliance with all debt covenants related to its 10.5% Senior Notes due 2026.

Revolving Credit Agreement — Liggett:

On March 22, 2021, Liggett, 100 Maple LLC (“Maple”) and Vector Tobacco entered into Amendment No. 4 and Joinder to Third Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as agent and lender.

The existing credit agreement was amended to, among other things, (i) add Vector Tobacco as a borrower under the Credit Agreement, (ii) extend the maturity of the Credit Agreement to March 22, 2026, and (iii) increase the amount of the maximum credit line thereunder from $60,000 to $90,000.

As of March 31, 2021, there was no outstanding balance due under the Credit Agreement. Availability, as determined under the Credit Agreement, was approximately $90,000 based on eligible collateral at March 31, 2021. As of March 31, 2021, Liggett, Maple, and Vector Tobacco were in compliance with all debt covenants under the Credit Agreement.

Other:

Other notes payable consist primarily of $21,875 of notes payable issued by New Valley as part of the acquisition of the remaining 29.41% interest in Douglas Elliman in December 2018. Interest on the outstanding principal balance of the notes accrues at the then-current mid-term applicable federal rate. Principal and interest is payable in installments through October 1, 2022. $8,125 of principal has been repaid through March 31, 2021 and the remaining principal is due to be repaid as follows: (1) $9,375 in 2021; and (2) $12,500 in 2022.

Non-Cash Interest Expense — Vector:


	Three Months Ended
	March 31,
		2021		2020
Amortization of debt discount, net		$	94	$	4,600
Amortization of debt issuance costs		893		1,158
Loss on extinguishment of 6.125% Senior Secured Notes		8,349		—


		$	9,336	$	5,758

Fair Value of Notes Payable and Long-Term Debt:


	March 31, 2021				December 31, 2020
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Senior Notes	$	1,427,054	$	1,493,436	$	1,401,960	$	1,464,208

Liggett and other	22,433		22,440		25,573		25,581
Notes payable and long-term debt	$	1,449,487	$	1,515,876	$	1,427,533	$	1,489,789

Notes payable and long-term debt are carried on the condensed consolidated balance sheets at amortized cost. The fair value determinations disclosed above are classified as Level 2 under the fair value hierarchy disclosed in Note 12 if such liabilities were recorded on the condensed consolidated balance sheets at fair value. The estimated fair value of the Company’s notes payable and long-term debt has been determined by the Company using available market information and appropriate

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valuation methodologies including the evaluation of the Company’s credit risk. The Company used a derived price based upon quoted market prices and trade activity as of March 31, 2021 to determine the fair value of its publicly-traded notes and debentures. The carrying value of the revolving credit facility is equal to fair value. The fair value of the equipment loans and other obligations was determined by calculating the present value of the required future cash flows. However, considerable judgment is required to develop the estimates of fair value and, accordingly, the estimate presented herein is not necessarily indicative of the amount that could be realized in a current market exchange.

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9. CONTINGENCIES

Tobacco-Related Litigation:

Overview. Since 1954, Liggett and other United States cigarette manufacturers have been named as defendants in numerous direct, third-party and purported class actions predicated on the theory that cigarette manufacturers should be liable for damages alleged to have been caused by cigarette smoking or by exposure to secondary smoke from cigarettes. The cases have generally fallen into the following categories: (i) smoking and health cases alleging personal injury brought on behalf of individual plaintiffs (“Individual Actions”); (ii) lawsuits by individuals requesting the benefit of the Engle ruling (“Engle progeny cases”); (iii) smoking and health cases primarily alleging personal injury or seeking court-supervised programs for ongoing medical monitoring, as well as cases alleging that use of the terms “lights” and/or “ultra lights” constitutes a deceptive and unfair trade practice, common law fraud or violation of federal law, purporting to be brought on behalf of a class of individual plaintiffs (“Class Actions”); and (iv) health care cost recovery actions brought by various foreign and domestic governmental plaintiffs and non-governmental plaintiffs seeking reimbursement for health care expenditures allegedly caused by cigarette smoking and/or disgorgement of profits (“Health Care Cost Recovery Actions”). The future financial impact of the risks and expenses of litigation are not quantifiable. For the three months ended March 31, 2021 and 2020, Liggett incurred tobacco product liability legal expenses and costs totaling $1,525 and $1,550 respectively. Legal defense costs are expensed as incurred.

Litigation is subject to uncertainty and it is possible that there could be adverse developments in pending cases. With the commencement of new cases, the defense costs and the risks relating to the unpredictability of litigation increase. Management reviews on a quarterly basis with counsel all pending litigation and evaluates the probability of a loss being incurred and whether an estimate can be made of the possible loss or range of loss that could result from an unfavorable outcome. An unfavorable outcome or settlement of pending tobacco-related litigation could encourage the commencement of additional litigation. Damages awarded in tobacco-related litigation can be significant.

Bonds. Although Liggett has been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts are on appeal, there remains a risk that such relief may not be obtainable in all cases. This risk has been reduced given that a majority of states now limit the dollar amount of bonds or require no bond at all. As of March 31, 2021, Liggett had no outstanding bonds.

In June 2009, Florida amended its existing bond cap statute by adding a $200,000 bond cap that applies to all Engle progeny cases in the aggregate and establishes individual bond caps for individual Engle progeny cases in amounts that vary depending on the number of judgments in effect at a given time. The maximum amount of any such bond for an appeal in the Florida state courts will be no greater than $5,000. In several cases, plaintiffs challenged the constitutionality of the bond cap statute, but to date the courts have upheld the constitutionality of the statute. It is possible that the Company’s consolidated financial position, results of operations, and cash flows could be materially adversely affected by an unfavorable outcome of such challenges.

Accounting Policy. The Company and its subsidiaries record provisions in their consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, except as discussed in this Note 9: (i) management has concluded that it is not probable that a loss has been incurred in any of the pending tobacco-related cases; or (ii) management is unable to reasonably estimate the possible loss or range of loss that could result from an unfavorable outcome of any of the pending tobacco-related cases and, therefore, management has not provided any amounts in the condensed consolidated financial statements for unfavorable outcomes, if any.

Although Liggett has generally been successful in managing the litigation filed against it, litigation is subject to uncertainty and significant challenges remain, including with respect to the remaining Engle progeny cases. There can be no assurances that Liggett’s past litigation experience will be representative of future results. Judgments have been entered against Liggett in the past, in Individual Actions and Engle progeny cases, and several of those judgments were affirmed on appeal and satisfied by Liggett. It is possible that the consolidated financial position, results of operations and cash flows of the Company could be materially adversely affected by an unfavorable outcome or settlement of any of the remaining smoking-related litigation. Liggett believes, and has been so advised by counsel, that it has valid defenses to the litigation pending against it, as well as valid bases for appeal of adverse verdicts. All such cases are and will continue to be vigorously defended. Liggett has entered into settlement discussions in individual cases or groups of cases where Liggett has determined it was in its best interest to do so, and it may continue to do so in the future. As cases proceed through the appellate process, the Company will consider accruals on a case-by-case basis if an unfavorable outcome becomes probable and the amount can be reasonably estimated.

VECTOR GROUP LTD.

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Individual Actions

As of March 31, 2021, there were 75 Individual Actions pending against Liggett, where one or more individual plaintiffs allege injury resulting from cigarette smoking, addiction to cigarette smoking or exposure to secondary smoke and seek compensatory and, in some cases, punitive damages. These cases do not include the remaining Engle progeny cases. The following table lists the number of Individual Actions by state:


State						Number of Cases
Florida						45
Illinois						14
Nevada						7
New Mexico						5
Louisiana						2
Hawaii						1
Massachusetts						1

The plaintiffs’ allegations of liability in cases in which individuals seek recovery for injuries allegedly caused by cigarette smoking are based on various theories of recovery, including negligence, gross negligence, breach of special duty, strict liability, fraud, concealment, misrepresentation, design defect, failure to warn, breach of express and implied warranties, conspiracy, aiding and abetting, concert of action, unjust enrichment, common law public nuisance, property damage, invasion of privacy, mental anguish, emotional distress, disability, shock, indemnity, violations of deceptive trade practice laws, the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), state RICO statutes and antitrust statutes. In many of these cases, in addition to compensatory damages, plaintiffs also seek other forms of relief including treble/multiple damages, medical monitoring, disgorgement of profits and punitive damages. Although alleged damages often are not determinable from a complaint, and the law governing the pleading and calculation of damages varies from state to state and jurisdiction to jurisdiction, compensatory and punitive damages have been specifically pleaded in a number of cases, sometimes in amounts ranging into the hundreds of millions and even billions of dollars.

Defenses raised in Individual Actions include lack of proximate cause, assumption of the risk, comparative fault and/or contributory negligence, lack of design defect, statute of limitations, statute of repose, equitable defenses such as “unclean hands” and lack of benefit, failure to state a claim and federal preemption.

Engle Progeny Cases

In May 1994, the Engle case was filed as a class action against Liggett and others in Miami-Dade County, Florida. The class consisted of all Florida residents who, by November 21, 1996, “have suffered, presently suffer or have died from diseases and medical conditions caused by their addiction to cigarette smoking.” A trial was held and the jury returned a verdict adverse to the defendants (approximately $145,000,000 in punitive damages, including $790,000 against Liggett). Following an appeal to the Third District Court of Appeal, the Florida Supreme Court in July 2006 decertified the class on a prospective basis and affirmed the appellate court’s reversal of the punitive damages award. Former class members had until January 2008 to file individual lawsuits. As a result, Liggett and the Company, and other cigarette manufacturers, were sued in thousands of Engle progeny cases in both federal and state courts in Florida. Although the Company was not named as a defendant in the Engle case, it was named as a defendant in substantially all of the Engle progeny cases where Liggett was named as a defendant.

Cautionary Statement About Engle Progeny Cases. Since 2009, judgments have been entered against Liggett and other cigarette manufacturers in Engle progeny cases. A number of the judgments were affirmed on appeal and satisfied by the defendants. Many were overturned on appeal. As of March 31, 2021, 25 Engle progeny cases where Liggett was a defendant at trial resulted in verdicts.

There have been 16 verdicts returned in favor of the plaintiffs and nine in favor of Liggett. In five of the cases, punitive damages were awarded against Liggett. Several of the adverse verdicts were overturned on appeal and new trials were ordered. In certain cases, the judgments were entered jointly and severally with other defendants and Liggett may face the risk that one or more co-defendants decline or otherwise fail to participate in the bonding required for an appeal or to pay their proportionate or jury-allocated share of a judgment. As a result, under certain circumstances, Liggett may have to pay more than its proportionate share of any bonding or judgment related amounts. Except as discussed in this Note 9, management is unable to

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estimate the possible loss or range of loss from the remaining Engle progeny cases as there are currently multiple defendants in each case and, in most cases, discovery has not occurred or is limited. As a result, the Company lacks information about whether plaintiffs are in fact Engle class members, the relevant smoking history, the nature of the alleged injury and the availability of various defenses, among other things. Further, plaintiffs typically do not specify the amount of their demand for damages. As cases proceed through the appellate process, the Company will consider accruals on a case-by-case basis if an unfavorable outcome becomes probable and the amount can be reasonably estimated.

Engle Progeny Settlements.

In October 2013, the Company and Liggett entered into a settlement with approximately 4,900 Engle progeny plaintiffs and their counsel. Pursuant to the terms of the settlement, Liggett agreed to pay a total of approximately $110,000, with $61,600 paid in an initial lump sum and the balance to be paid in installments over 14 years starting in February 2015. The Company’s future payments will be approximately $3,400 per annum through 2028, with a cost of living increase beginning in 2021. In exchange, the claims of these plaintiffs were dismissed with prejudice against the Company and Liggett.

Liggett subsequently entered into two separate settlement agreements with a total of 152 Engle progeny plaintiffs where Liggett paid a total of $23,150. On an individual basis, Liggett settled an additional 202 Engle progeny cases for approximately $8,100 in the aggregate.

Notwithstanding the comprehensive nature of the Engle progeny settlements, 39 plaintiffs’ claims remain pending in state court. Therefore, the Company and Liggett may still be subject to periodic adverse judgments which could have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.

Judgments Paid in Engle Progeny Cases.

As of March 31, 2021, Liggett had paid in the aggregate $40,111, including interest and attorneys’ fees, to satisfy the judgments in the following Engle progeny cases: Lukacs, Campbell, Douglas, Clay, Tullo, Ward, Rizzuto, Lambert, Buchanan, and Santoro.

Maryland Cases

Liggett was a defendant in 16 multi-defendant personal injury cases in Maryland alleging claims arising from asbestos and tobacco exposure (“synergy cases”). In July 2016, the Court of Appeals (Maryland’s highest court) ruled that joinder of tobacco and asbestos cases may be possible in certain circumstances, but plaintiffs must demonstrate at the trial court level how such cases may be joined while providing appropriate safeguards to prevent embarrassment, delay, expense or prejudice to defendants and “the extent to which, if at all, the special procedures applicable to asbestos cases should extend to tobacco companies.” The Court of Appeals remanded these issues to be determined at the trial court level. In June 2017, the trial court issued an order dismissing all synergy cases against the tobacco defendants, including Liggett, without prejudice. Plaintiffs may seek appellate review or file new cases against the tobacco companies.

Liggett Only Cases

There are currently five cases where Liggett is the sole defendant: Cowart and Clay are Individual Actions and Tumin, Forbing and Jones, are Engle progeny cases. It is possible that cases where Liggett is the only defendant could increase as a result of the remaining Engle progeny cases and newly filed Individual Actions.

Upcoming Trials

As of March 31, 2021, there was one Engle progeny case (Rearick) and six Individual Actions (Baron, Clark, Cupp, Feld, Geist, and Mendez) scheduled for trial through March 31, 2022, where Liggett (and/or the Company) is a named defendant. Trial dates are subject to change and additional cases could be set for trial during this time.

Class Actions

As of March 31, 2021, two actions were pending for which either a class had been certified or plaintiffs were seeking class certification where Liggett is a named defendant. Other cigarette manufacturers are also named in these two cases.

Plaintiffs’ allegations of liability in class action cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, nuisance, breach of express and implied warranties, breach of special duty, conspiracy, concert of action, violation of deceptive trade practice laws and consumer protection statutes and claims under the federal and state anti-racketeering statutes. Plaintiffs in the class actions seek various forms of relief, including compensatory and punitive damages, treble/multiple damages and other statutory damages

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Unaudited

and penalties, creation of medical monitoring and smoking cessation funds, disgorgement of profits, and injunctive and equitable relief.

Defenses raised in these cases include, among others, lack of proximate cause, individual issues predominate, assumption of the risk, comparative fault and/or contributory negligence, statute of limitations and federal preemption.

In November 1997, in Young v. American Tobacco Co., a purported personal injury class action was commenced on behalf of plaintiff and all similarly situated residents in Louisiana who, though not themselves cigarette smokers, allege they were exposed to secondhand smoke from cigarettes that were manufactured by the defendants, including Liggett, and suffered injury as a result of that exposure. The plaintiffs seek to recover an unspecified amount of compensatory and punitive damages. No class certification hearing has been held. A stay order entered on March 16, 2016 stays the case pending completion of the smoking cessation program ordered by the court in Scott v. The American Tobacco Co.

In February 1998, in Parsons v. AC & S Inc., a purported class action was commenced on behalf of all West Virginia residents who allegedly have claims arising from their exposure to cigarette smoke and asbestos fibers. The operative complaint seeks to recover unspecified compensatory and punitive damages on behalf of the putative class. The case is stayed as a result of the December 2000 bankruptcy of three of the defendants.

Health Care Cost Recovery Actions

As of March 31, 2021, one Health Care Cost Recovery Action was pending against Liggett, Crow Creek Sioux Tribe v. American Tobacco Company, a South Dakota case filed in 1997, where the plaintiff seeks to recover damages from Liggett and other cigarette manufacturers based on various theories of recovery as a result of alleged sales of tobacco products to minors. The case is dormant.

The claims asserted in health care cost recovery actions vary, but can include the equitable claim of indemnity, common law claims of negligence, strict liability, breach of express and implied warranty, breach of special duty, fraud, negligent misrepresentation, conspiracy, public nuisance, claims under state and federal statutes governing consumer fraud, antitrust, deceptive trade practices and false advertising, and claims under RICO. Although no specific damage amounts are typically pleaded, it is possible that requested damages might be in the billions of dollars. In these cases, plaintiffs typically assert equitable claims that the tobacco industry was “unjustly enriched” by their payment of health care costs allegedly attributable to smoking and seek reimbursement of those costs. Relief sought by some, but not all, plaintiffs include punitive damages, multiple damages and other statutory damages and penalties, injunctions prohibiting alleged marketing and sales to minors, disclosure of research, disgorgement of profits, funding of anti-smoking programs, additional disclosure of nicotine yields, and payment of attorney and expert witness fees.

Department of Justice Lawsuit

In September 1999, the United States government commenced litigation against Liggett and other cigarette manufacturers in the United States District Court for the District of Columbia. The action sought to recover, among other things, an unspecified amount of health care costs paid and to be paid by the federal government for smoking-related illnesses allegedly caused by the fraudulent and tortious conduct of defendants. In August 2006, the trial court entered a Final Judgment against each of the cigarette manufacturing defendants, except Liggett. The judgment was affirmed on appeal. As a result, the cigarette manufacturing defendants, other than Liggett, are now subject to the trial court’s Final Judgment which ordered, among other things, the issuance of “corrective statements” in various media regarding the adverse health effects of smoking, the addictiveness of smoking and nicotine, the lack of any significant health benefit from smoking “low tar” or “lights” cigarettes, defendants’ manipulation of cigarette design to ensure optimum nicotine delivery and the adverse health effects of exposure to environmental tobacco smoke.

MSA and Other State Settlement Agreements

In March 1996, March 1997 and March 1998, Liggett entered into settlements of smoking-related litigation with 45 states and territories. The settlements released Liggett from all smoking-related claims made by those states and territories, including claims for health care cost reimbursement and claims concerning sales of cigarettes to minors.

In November 1998, Philip Morris, R.J. Reynolds and two other companies (the “Original Participating Manufacturers” or “OPMs”) and Liggett and Vector Tobacco (together with any other tobacco product manufacturer that becomes a signatory, the “Subsequent Participating Manufacturers” or “SPMs”) (the OPMs and SPMs are hereinafter referred to jointly as “PMs”) entered into the Master Settlement Agreement (the “MSA”) with 46 states, the District of Columbia, Puerto Rico, Guam, the United States Virgin Islands, American Samoa and the Northern Mariana Islands (collectively, the “Settling States”) to settle

VECTOR GROUP LTD.

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Unaudited

the asserted and unasserted health care cost recovery and certain other claims of the Settling States. The MSA received final judicial approval in each Settling State.

As a result of the MSA, the Settling States released Liggett and Vector Tobacco from:

•all claims of the Settling States and their respective political subdivisions and other recipients of state health care funds, relating to: (i) past conduct arising out of the use, sale, distribution, manufacture, development, advertising and marketing of tobacco products; (ii) the health effects of, the exposure to, or research, statements or warnings about, tobacco products; and

•all monetary claims of the Settling States and their respective subdivisions and other recipients of state health care funds relating to future conduct arising out of the use of, or exposure to, tobacco products that have been manufactured in the ordinary course of business.

The MSA restricts tobacco product advertising and marketing within the Settling States and otherwise restricts the activities of PMs. Among other things, the MSA prohibits the targeting of youth in the advertising, promotion or marketing of tobacco products; bans the use of cartoon characters in all tobacco advertising and promotion; limits each PM to one tobacco brand name sponsorship during any 12-month period; bans all outdoor advertising, with certain limited exceptions; prohibits payments for tobacco product placement in various media; bans gift offers based on the purchase of tobacco products without sufficient proof that the intended recipient is an adult; prohibits PMs from licensing third parties to advertise tobacco brand names in any manner prohibited under the MSA; and prohibits PMs from using as a tobacco product brand name any nationally recognized non-tobacco brand or trade name or the names of sports teams, entertainment groups or individual celebrities.

The MSA also requires PMs to affirm corporate principles to comply with the MSA and to reduce underage use of tobacco products and imposes restrictions on lobbying activities conducted on behalf of PMs. In addition, the MSA provides for the appointment of an independent auditor to calculate and determine the amounts of payments owed pursuant to the MSA.

Under the payment provisions of the MSA, PMs are required to make annual payments of $9,000,000 (subject to applicable adjustments, offsets and reductions including a “Non-Participating Manufacturers Adjustment” or “NPM Adjustment”). These annual payments are allocated based on unit volume of domestic cigarette shipments. The payment obligations under the MSA are the several, and not joint, obligation of each PM and are not the responsibility of any parent or affiliate of a PM.

Liggett has no payment obligations under the MSA except to the extent its market share exceeds a market share exemption of approximately 1.65% of total cigarettes sold in the United States. Vector Tobacco has no payment obligations under the MSA except to the extent its market share exceeds a market share exemption of approximately 0.28% of total cigarettes sold in the United States. Liggett and Vector Tobacco’s domestic shipments accounted for approximately 4.1% of the total cigarettes sold in the United States in 2020. If Liggett’s or Vector Tobacco’s market share exceeds their respective market share exemption in a given year, then on April 15 of the following year, Liggett and/or Vector Tobacco, as the case may be, must pay on each excess unit an amount equal (on a per-unit basis) to that due from the OPMs for that year. On December 30, 2020, Liggett and Vector Tobacco pre-paid $143,000 of their approximate $178,000 2020 MSA obligation, the balance of which was paid in April 2021, subject to applicable disputes or adjustments.

Certain MSA Disputes

NPM Adjustment. Liggett and Vector Tobacco contend that they are entitled to an NPM Adjustment for each year from 2003 - 2020. The NPM Adjustment is a potential adjustment to annual MSA payments, available when PMs suffer a market share loss to NPMs for a particular year and an economic consulting firm selected pursuant to the MSA determines (or the parties agree) that the MSA was a “significant factor contributing to” that loss. A Settling State that has “diligently enforced” its qualifying escrow statute in the year in question may be able to avoid its allocable share of the NPM Adjustment. For 2003 - 2020, Liggett and Vector Tobacco, as applicable, disputed that they owed the Settling States the NPM Adjustments as calculated by the independent auditor. As permitted by the MSA, Liggett and Vector Tobacco either paid subject to dispute, withheld payment, or paid into a disputed payment account, the amounts associated with these NPM Adjustments.

In June 2010, after the PMs prevailed in 48 of 49 motions to compel arbitration, the parties commenced the arbitration for the 2003 NPM Adjustment. That arbitration concluded in September 2013. It was followed by various challenges filed in state courts by states that did not prevail in the arbitration. Those challenges resulted in reductions, but not elimination of, the amounts awarded.

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Unaudited

The PMs settled most of the disputed NPM Adjustment years with 37 states representing approximately 75% of the MSA share for 2003 - 2022. The 2004 NPM Adjustment arbitration commenced in 2016, with the final individual state hearing scheduled to occur in October 2021 and a second phase addressing the effect of the settlements to start thereafter. The parties have also selected an arbitration panel to address the NPM Adjustments for 2005-2007, and, in April 2021, that panel is set to issue a Case Management Order setting a schedule for the arbitration.

As a result of the settlement and arbitration award described above, Liggett and Vector Tobacco reduced cost of sales for years 2013 - 2020 by $54,382 and by $1,675 for the three months ended March 31, 2021. Liggett and Vector Tobacco may be entitled to further adjustments. As of March 31, 2021, Liggett and Vector Tobacco had accrued approximately $13,200 related to the disputed amounts withheld from the non-settling states for 2004 - 2010, which may be subject to payment, with interest, if Liggett and Vector Tobacco lose the disputes for those years. As of March 31, 2021, there remains approximately $40,700 in the disputed payments account relating to Liggett and Vector Tobacco’s 2011 - 2019 NPM Adjustment disputes with the non-settling states. If Liggett and Vector Tobacco lose the disputes for all or any of those years, pursuant to the MSA, no interest would be due on the amounts paid into the disputed payment account.

Other State Settlements. The MSA replaced Liggett’s prior settlements with all states and territories except for Florida, Mississippi, Texas and Minnesota. Each of these four states, prior to the effective date of the MSA, negotiated and executed settlement agreements with each of the other major tobacco companies, separate from those settlements reached previously with Liggett. Except as described below, Liggett’s agreements with these states remain in full force and effect. These states’ settlement agreements with Liggett contained most favored nation provisions which could reduce Liggett’s payment obligations based on subsequent settlements or resolutions by those states with certain other tobacco companies. Beginning in 1999, Liggett determined that, based on settlements or resolutions with United States Tobacco Company, Liggett’s payment obligations to those four states were eliminated. With respect to all non-economic obligations under the previous settlements, Liggett believes it is entitled to the most favorable provisions as between the MSA and each state’s respective settlement with the other major tobacco companies. Therefore, Liggett’s non-economic obligations to all states and territories are now defined by the MSA.

In 2003, as a result of a dispute with Minnesota regarding its settlement agreement, Liggett agreed to pay $100 a year in any year cigarettes manufactured by Liggett are sold in that state. Further, the Attorneys General for Florida, Mississippi and Texas advised Liggett that they believed Liggett had failed to make payments under the respective settlement agreements with those states. In 2010, Liggett settled with Florida and agreed to pay $1,200 and to make further annual payments of $250 for a period of 21 years, starting in March 2011, with the payments from year 12 forward being subject to an inflation adjustment.

In January 2016, the Attorney General for Mississippi filed a motion in Chancery Court in Jackson County, Mississippi to enforce the March 1996 settlement agreement (the “1996 Agreement”) alleging that Liggett owes Mississippi at least $27,000 in compensatory damages and additional amounts for interest, punitive damages and attorneys’ fees. In April 2017, the Chancery Court ruled that the 1996 Agreement should be enforced and referred the matter to a Special Master for further proceedings to determine the amount of damages, if any, to be awarded. In June 2018, the Chancery Court granted Liggett’s motion to compel arbitration as to two issues concerning damages and stayed the proceedings before the Special Master pending completion of the arbitration. In March 2019, the arbitration panel issued its final arbitration award on the two issues before it: (i) the panel ruled in favor of Liggett, finding that the $294,000 of proceeds from Eve Holdings’ 1999 brand sale should not be included in Liggett’s pre-tax income; and (ii) ruled in favor of Mississippi on the remaining issue, finding that compensatory damages to Mississippi, if any, would be based on 0.5% of Liggett’s annual pre-tax income for the term of the settlement agreement. Following confirmation of the arbitration award, Mississippi voluntarily dismissed with prejudice its claims for punitive damages and attorneys’ fees.

In September 2019, the Special Master held a hearing regarding the state’s claim for approximately $17,500 in prejudgment interest as well as post-judgment interest in amounts to be determined. A decision is pending. Liggett continues to believe that the April 2017 Chancery Court order is in error because the most favored nations provision in the 1996 Agreement eliminated all of Liggett’s payment obligations to Mississippi, and it reserved all rights to appeal this and other issues at the conclusion of the case. In April 2021, the parties stipulated that the unpaid principal (exclusive of interest) purportedly due from Liggett to Mississippi pursuant to the 1996 Agreement (from inception through 2020 - the final contract year) is approximately $16,700, subject to Liggett’s right to litigate and/or appeal the enforceability of the 1996 Agreement (and all issues other than the calculation of such principal amount). In the event Liggett appeals an adverse judgment, the posting of a bond may be required.

Liggett may be required to make additional payments to Mississippi and Texas which could have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Cautionary Statement

Management is not able to reasonably predict the outcome of the litigation pending or threatened against Liggett or the Company. Litigation is subject to many uncertainties. Liggett has been found liable in multiple Engle progeny cases and Individual Actions, several of which were affirmed on appeal and satisfied by Liggett. It is possible that other cases could be decided unfavorably against Liggett and that Liggett will be unsuccessful on appeal. Liggett may attempt to settle particular cases if it believes it is in its best interest to do so.

Management cannot predict the cash requirements related to any future defense costs, settlements or judgments, including cash required to bond any appeals, and there is a risk that Liggett may not be able to meet those requirements. An unfavorable outcome of a pending smoking-related case could encourage the commencement of additional litigation. Except as discussed in this Note 9, management is unable to estimate the loss or range of loss that could result from an unfavorable outcome of the cases pending against Liggett or the costs of defending such cases and as a result has not provided any amounts in its consolidated financial statements for unfavorable outcomes.

The tobacco industry is subject to a wide range of laws and regulations regarding the marketing, sale, taxation and use of tobacco products imposed by local, state and federal governments. There have been a number of restrictive regulatory actions, adverse legislative and political decisions and other unfavorable developments concerning cigarette smoking and the tobacco industry. These developments may negatively affect the perception of potential triers of fact with respect to the tobacco industry, possibly to the detriment of certain pending litigation, and may prompt the commencement of additional litigation or legislation.

It is possible that the Company’s consolidated financial position, results of operations and cash flows could be materially adversely affected by an unfavorable outcome in any of the smoking-related litigation.

The activity in the Company’s accruals for the MSA and tobacco litigation for the three months ended March 31, 2021 was as follows:


	Current Liabilities						Non-Current Liabilities
	Payments due under Master Settlement Agreement		Litigation Accruals		Total		Payments due under Master Settlement Agreement		Litigation Accruals		Total

Balance as of January 1, 2021	$	38,767	$	3,967	$	42,734	$	17,933	$	19,268	$	37,201
Expenses	34,121		5		34,126		—		—		—

Change in MSA obligations capitalized as inventory	148		—		148		—		—		—
Payments	—		(4,065)		(4,065)		—		—		—
Reclassification to/(from) non-current liabilities	—		3,351		3,351		—		(3,351)		(3,351)
Interest on withholding	—		197		197		—		418		418
Balance as of March 31, 2021	$	73,036	$	3,455	$	76,491	$	17,933	$	16,335	$	34,268

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

The activity in the Company’s accruals for the MSA and tobacco litigation for the three months ended March 31, 2020 was as follows:


	Current Liabilities						Non-Current Liabilities
	Payments due under Master Settlement Agreement		Litigation Accruals		Total		Payments due under Master Settlement Agreement		Litigation Accruals		Total

Balance as of January 1, 2020	$	34,116	$	4,249	$	38,365	$	17,275	$	20,594	$	37,869
Expenses	43,464		(25)		43,439		—		—		—

Change in MSA obligations capitalized as inventory	(295)		—		(295)		—		—		—
Payments	—		(4,271)		(4,271)		—		—		—
Reclassification to/(from) non-current liabilities	—		3,252		3,252		—		(3,252)		(3,252)
Interest on withholding	—		150		150		—		459		459
Balance as of March 31, 2020	$	77,285	$	3,355	$	80,640	$	17,275	$	17,801	$	35,076

Other Matters:

Liggett’s and Vector Tobacco’s management are unaware of any material environmental conditions affecting their existing facilities. Liggett’s and Vector Tobacco’s management believe that current operations are conducted in material compliance with all environmental laws and regulations and other laws and regulations governing cigarette manufacturers. Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material impact on the capital expenditures, results of operations or competitive position of Liggett or Vector Tobacco.

Liggett and the Company have received three separate demands for indemnification from Altria Client Services, on behalf of Philip Morris, relating to lawsuits alleging smokers’ use of L&M cigarettes. The indemnification demands are purportedly issued in connection with Eve Holdings’ 1999 sale of certain brands to Philip Morris.

In addition to the foregoing, Douglas Elliman and certain of its subsidiaries are subject to numerous proceedings, lawsuits and claims in connection with their ordinary business activities. Many of these matters are covered by insurance or, in some cases, the Company is indemnified by third parties.

Management is of the opinion that the liabilities, if any, resulting from other proceedings, lawsuits and claims pending against the Company and its consolidated subsidiaries, unrelated to tobacco product liability, should not materially affect the Company’s consolidated financial position, results of operations or cash flows.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

10. GOODWILL AND OTHER INTANGIBLE ASSETS

The components of Goodwill and other intangible assets, net were as follows:


	December 31, 2020		Impairment Losses		Amortization		March 31, 2021
Goodwill	$	31,756	$	—	$	—	$	31,756

Indefinite life intangibles:
Intangible asset associated with benefit under the MSA	107,511		—		—		107,511

Trademark - Douglas Elliman	68,000				—		68,000

Intangibles with a finite life, net	310		—		(41)		269

Total goodwill and other intangible assets, net	$	207,577	$	—	$	(41)	$	207,536


	December 31, 2019		Impairment Losses		Amortization		March 31, 2020
Goodwill	$	78,008	$	(46,252)	$	—	$	31,756

Indefinite life intangibles:
Intangible asset associated with benefit under the MSA	107,511		—		—		107,511

Trademark - Douglas Elliman	80,000		(12,000)		—		68,000

Intangibles with a finite life, net	474		—		(42)		432

Total goodwill and other intangible assets, net	$	265,993	$	(58,252)	$	(42)	$	207,699

Goodwill is evaluated for impairment annually or whenever the Company identifies certain triggering events or circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, macro and reporting unit specific economic factors (for example, interest rate and foreign exchange rate fluctuations, and loss of key personnel), supply costs, unanticipated competitive activities, and acts by governments and courts.

During the first quarter of 2020, the Company determined that a triggering event occurred related to the Douglas Elliman reporting unit due to a decline in sales and profitability projections for the reporting unit driven by the COVID-19 pandemic and related economic disruption. The Company utilized third-party valuation specialists to prepare a quantitative assessment of goodwill and trademark intangible asset related to Douglas Elliman.

For the goodwill testing, the Company utilized an income approach (a discounted cash flows method) to estimate the fair value of the Douglas Elliman business. The estimated fair value of the trademark indefinite-life intangible asset related to the Douglas Elliman brand name was determined using an approach that values the Company’s cash savings from having a royalty-free license compared to the market rate it would pay for access to use the trade name.

The third-party quantitative assessments of the goodwill and trademark intangible asset reflected management’s assumptions regarding revenue growth rates, economic and market trends including current expectations of deterioration resulting from the COVID-19 pandemic, changes to cost structures and other expectations about the anticipated short-term and long-term operating results of Douglas Elliman. The quantitative assessments resulted in impairment charges to goodwill of $46,252 and to the trademark intangible asset of $12,000.

The Company determined that there have not been any triggering events since the first quarter of 2020. If the Company fails to achieve the financial projections used in the quantitative assessments of fair value or the impacts of COVID-19 are more severe than expected, additional impairment charges could result in future periods, and such impairment charges could be material.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

11. INCOME TAXES

The Company’s effective income tax rate is based on expected income, statutory rates, valuation allowances against deferred tax assets, and any tax planning opportunities available to the Company. For interim financial reporting, the Company estimates the annual effective income tax rate based on full year projections and applies the annual effective income tax rate against year-to-date pretax income (loss) to record income tax expense (benefit), adjusted for discrete items, if any. The Company refines annual estimates as new information becomes available. The Company’s tax rate does not bear a relationship to statutory tax rates due to permanent differences, which are primarily related to nondeductible compensation, and state taxes.

The Company’s income tax expense (benefit) consisted of the following:


	Three Months Ended
	March 31,
		2021		2020
Income (loss) before provision for income taxes		$	45,010	$	(4,209)
Income tax expense using estimated annual effective income tax rate		13,053		308




Impact of discrete items, net		—		(1,286)




Income tax expense (benefit)		$	13,053	$	(978)

The net discrete items for the three months ended March 31, 2020 primarily relates to income tax benefits on goodwill and trademark impairment charges and changes in value of certain contingent consideration partially offset by the income tax expense related to the equity in earnings from investments associated with the one-time gain on sale of LTS.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

12. INVESTMENTS AND FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities subject to fair value measurements were as follows:


	Fair Value Measurements as of March 31, 2021
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (1)	$	244,115	$	244,115	$	—	$	—

Commercial paper (1)	30,467		—		30,467		—

Certificates of deposit (2)	2,113		—		2,113		—



Investment securities at fair value
Equity securities at fair value
Marketable equity securities	25,389		25,389		—		—
Mutual funds invested in debt securities	23,240		23,240		—		—
Total equity securities at fair value	48,629		48,629		—		—
Debt securities available for sale
U.S. government securities	17,976		—		17,976		—
Corporate securities	48,601		—		48,601		—
U.S. government and federal agency	9,626		—		9,626		—


Commercial paper	23,031		—		23,031		—

Foreign fixed-income securities	1,224		—		1,224		—
PropTech convertible debt securities	2,500		—		2,500		—
Total debt securities available for sale	102,958		—		102,958		—

Total investment securities at fair value	151,587		48,629		102,958		—

Long-term investments
Long-term investment securities at fair value (3)	35,608		—		—		—

Total	$	463,890	$	292,744	$	135,538	$	—

Liabilities:
Fair value of contingent liability	$	926	$	—	$	—	$	926

Total	$	926	$	—	$	—	$	926

(1) Amounts included in Cash and cash equivalents on the condensed consolidated balance sheet, except for $10,790 that is included in Other current assets and $1,907 that is included in Other assets.

(2) Amounts included in current restricted assets and non-current restricted assets on the condensed consolidated balance sheets.

(3) In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	Fair Value Measurements as of December 31, 2020
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (1)	$	255,294	$	255,294	$	—	$	—

Commercial paper (1)	44,397		—		44,397		—

Certificates of deposit (2)	2,111		—		2,111		—

Money market funds securing legal bonds (2)	535		535		—		—

Investment securities at fair value
Equity securities at fair value
Marketable equity securities	21,155		21,155		—		—
Mutual funds invested in debt securities	23,226		23,226		—		—
Total equity securities at fair value	44,381		44,381		—		—
Debt securities available for sale
U.S. government securities	19,200		—		19,200		—
Corporate securities	52,434		—		52,434		—
U.S. government and federal agency	10,484		—		10,484		—

Commercial paper	9,086		—		9,086		—



Total debt securities available for sale	91,204		—		91,204		—

Total investment securities at fair value	135,585		44,381		91,204		—

Long-term investments
Long-term investment securities at fair value (3)	34,218		—		—		—

Total	$	472,140	$	300,210	$	137,712	$	—

Liabilities:
Fair value of contingent liability	$	999	$	—	$	—	$	999

Total	$	999	$	—	$	—	$	999

(1) Amounts included in Cash and cash equivalents on the condensed consolidated balance sheet, except for $10,374 that is included in current restricted assets and $1,907 that is included in non-current restricted assets.

(2) Amounts included in current restricted assets and non-current restricted assets on the condensed consolidated balance sheets.

(3) In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.

The fair value of the Level 2 certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is the rate offered by the financial institution. The fair value of investment securities at fair value included in Level 1 is based on quoted market prices from various stock exchanges. The Level 2 investment securities at fair value are based on quoted market prices of securities that are thinly traded, quoted prices for identical or similar assets in markets that are not active or inputs other than quoted prices such as interest rates and yield curves.

The long-term investments are based on NAV per share provided by the partnerships based on the indicated market value of the underlying assets or investment portfolio. In accordance with Subtopic 820-10, these investments are not classified under the fair value hierarchy disclosed above because they are measured at fair value using the NAV practical expedient.

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at March 31, 2021:

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at
	March 31, 2021		Valuation Technique	Unobservable Input	Range (Actual)




















Fair value of contingent liability	$	926	Monte Carlo simulation model	Estimated fair value of the Douglas Elliman reporting unit	$	169,000
				Risk-free rate for a 2-year term	0.14		%
				Leverage-adjusted equity volatility of peer firms	84.95		%

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at December 31, 2020:


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at
	December 31, 2020		Valuation Technique	Unobservable Input	Range (Actual)

















Fair value of contingent liability	$	999	Monte Carlo simulation model	Estimated fair value of the Douglas Elliman reporting unit	$	169,000
				Risk-free rate for a 2-year term	0.13		%
				Leverage-adjusted equity volatility of peer firms	78.57		%

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record assets and liabilities at fair value on a nonrecurring basis. Generally, assets and liabilities are recorded at fair value on a nonrecurring basis as a result of impairment charges. The Company had no nonrecurring nonfinancial assets subject to fair value measurements as of March 31, 2021 and December 31, 2020, respectively, except for investments in real estate ventures that were impaired as of December 31, 2020.

The Company’s investments in real estate ventures subject to nonrecurring fair value measurements are as follows:


			Fair Value Measurement Using:
	Year Ended December 31, 2020				Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description	Impairment Charge		Total

Assets:
Investments in real estate ventures	$	16,513	$	—	$	—	$	—	$	—

The Company estimated the fair value of its investments in real estate ventures using observable inputs such as market pricing based on recent events, however, significant judgment was required to select certain inputs from observed market data. The decrease in the investments in real estate ventures was attributed to the decline in the projected sales prices and the duration of the estimated sell out of the respective real estate ventures. The $16,513 of impairment charges were included in equity in losses from real estate ventures for the year ended December 31, 2020.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

13. SEGMENT INFORMATION

The Company’s business segments for the three months ended March 31, 2021 and 2020 were Tobacco and Real Estate. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Financial information for the Company’s operations before taxes and non-controlling interests for the three months ended March 31, 2021 and 2020 were as follows:


				Real			Corporate
	Tobacco			Estate			and Other		Total












Three months ended March 31, 2021
Revenues	$	268,463		$	275,301		$	—	$	543,764
Operating income (loss)	81,599		(1)	15,260			(6,656)		90,203
Equity in earnings from real estate ventures	—			1,589			—		1,589

Depreciation and amortization	1,760			2,188			231		4,179
Capital expenditures	937			597			397		1,931

Three months ended March 31, 2020
Revenues	$	287,069		$	167,419		$	—	$	454,488
Operating income (loss)	69,186			(67,475)		(2)	(6,615)		(4,904)
Equity in losses from real estate ventures	—			(6,505)			—		(6,505)

Depreciation and amortization	2,042			2,313			220		4,575
Capital expenditures	2,749			2,119			20		4,888

(1) Operating income includes $2,722 received from a litigation settlement associated with the MSA (which reduced cost of sales) and $5 of litigation settlement and judgment expense.

(2) Operating loss includes $58,252 of impairment charges related to the impairments of goodwill and other intangible assets.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of Vector Group Ltd.’s financial statements with a narrative from our management’s perspective. Our MD&A is divided into the following sections:

•Overview

•Recent Developments

•Results of Operations

•Summary of Real Estate Investments

•Liquidity and Capital Resources

Please read this discussion along with our MD&A and audited financial statements as of and for the year ended December 31, 2020 and Notes thereto, included in our 2020 Annual Report on Form 10-K, and our Condensed Consolidated Financial Statements and related Notes as of and for the quarterly period ended March 31, 2021 and 2020.

Overview

We are a holding company and are engaged principally in two business segments:

•Tobacco: the manufacture and sale of cigarettes in the United States through our Liggett Group LLC (“Liggett”) and Vector Tobacco Inc. (“Vector Tobacco”) subsidiaries, and

•Real Estate: the real estate services, technology and investment business through our subsidiary New Valley, which (i) owns Douglas Elliman Realty LLC (“Douglas Elliman”), (ii) has interests in numerous real estate projects across the United States and (iii) is seeking to acquire or invest in additional real estate services, technologies, properties or projects. Douglas Elliman operates the largest residential brokerage company in the New York metropolitan area and also conducts residential real estate brokerage operations in Florida, California, Connecticut, Massachusetts, Colorado, New Jersey and Texas.

Our tobacco subsidiaries’ cigarettes are produced in 100 combinations of length, style and packaging. Liggett’s current brand portfolio includes:

•Eagle 20’s

•Pyramid

•Montego

•Grand Prix

•Liggett Select

•Eve

•USA and various Partner Brands and private label brands.

The discount segment is a challenging marketplace, with consumers having less brand loyalty and placing greater emphasis on price. Liggett’s competition is divided into two segments. The first segment consists of the three largest manufacturers of cigarettes in the United States: Philip Morris USA Inc., which is owned by Altria Group, Inc., RJ Reynolds Tobacco Company, which is owned by British American Tobacco Plc, and ITG Brands LLC, which is owned by Imperial Brands Plc. These three manufacturers, while primarily premium cigarette-based companies, also produce and sell discount cigarettes. The second segment of competition is comprised of a group of smaller manufacturers and importers, most of which sell deep discount cigarettes.

COVID-19 Pandemic

The COVID-19 pandemic continues to evolve and disrupt normal activities in many segments of the U.S. economy even as COVID-19 vaccines have been and continue to be administered in 2021. Although much uncertainty still surrounds the pandemic, including its duration and ultimate overall impact on our operations and real estate ventures, we are continuing to carefully evaluate potential outcomes and working to mitigate risks. Similar to many other companies, our operations have been affected by COVID-19. We have implemented remote working for many employees and adopted safety requirements, including the social distancing protocols recommended by public health authorities. The following provides a summary of our actions in our two segments - Tobacco and Real Estate - since COVID-19 was declared a pandemic in March 2020.

Impact of COVID-19 on Tobacco Segment. To date, we have not experienced any material disruptions to our supply or distribution chains, and have not experienced any material adverse effects associated with governmental actions to restrict consumer movement or business operations. However, our suppliers and members of our distribution chain may be subject to government action requiring facility closures and remote working protocols. The majority of retail stores in which our tobacco products are sold, including convenience stores, have been deemed to be essential businesses by authorities and have remained open. We continue to monitor the risk that a supplier, a distributor or any other entity within our supply and distribution chain closes temporarily or permanently.

Although our tobacco segment has not been negatively impacted to date by COVID-19, there remains uncertainty as to how the pandemic may ultimately impact the market. We continue to monitor the macro-economic risks of COVID-19 and the effect on tobacco consumers, including purchasing behavior changes and changes in sales volumes and mix within the discount category. Our Eagle 20’s and Montego brands are priced in the deep discount category and our other brands are primarily priced in the traditional discount category.

Impact of COVID-19 on Real Estate Segment. Douglas Elliman is the largest residential real estate broker in the New York City market and approximately 46% of its brokerage revenues were derived from this region in 2018 and 2019. In addition, New Valley has investments in multiple real estate ventures and properties in the New York metropolitan area, which had a carrying value of $34,092 at March 31, 2021. Published reports and data indicate that the New York metropolitan area was initially impacted more than any other area in the United States. Consequently, various governmental agencies in the New York metropolitan area and in other markets where Douglas Elliman operates, instituted quarantines, “pause” orders, “shelter-in-place” rules, restrictions on travel and restrictions on the types of businesses that could operate. These restrictions adversely impacted Douglas Elliman’s ability to conduct business during the year ended December 31, 2020 and, in particular from March 2020 to October 2020. For example, Douglas Elliman’s agents were restricted from performing in-person showings of properties or conducting open houses in most of Douglas Elliman’s markets from March 2020 to June 2020. Douglas Elliman experienced a severe decline in closed sales volume in New York City from March 2020 to October 2020. As a result of the impact of COVID-19 pandemic on the New York City market, and combined with the increased demand for existing-homes in other areas of the U.S., the percentage of Douglas Elliman’s brokerage revenues from the New York City market declined from approximately 46% in 2019 to approximately 28% for the twelve months ended March 31, 2021. As Douglas Elliman’s markets began reopening and vaccines for COVID-19 have become available, and consistent with home buying trends in the U.S., Douglas Elliman’s business improved significantly in markets complementary to New York City, including the New York City suburbs (Long Island, Westchester County and Connecticut), the Hamptons, Palm Beach, Miami, Los Angeles, and Aspen and, more recently, New York City.

Beginning in April 2020, as a response to the impact of the COVID-19 pandemic, we made significant operating adjustments at Douglas Elliman, including a reduction of personnel of approximately 25% and reductions of other administrative expenses, as well as a reduction, deferral or elimination of certain office lease expenses. Despite increases in expenses, which began during the fourth quarter of 2020 as business improved, Douglas Elliman operated at a lower cost basis for the first quarter ended March 31, 2021 compared to the first quarter ended March 31, 2020.

The circumstances around the potential impact of COVID-19 pandemic on our Real Estate segment remain fluid and we continue to actively monitor the impact of the pandemic, including the availability of vaccines, and related macroeconomic trends on our Real Estate segment. In addition, the likelihood and magnitude of a material impact from the pandemic increases with the amount of time the virus affects activity levels in locations in which Douglas Elliman operates. Therefore, we are unable to predict the ultimate impact of the COVID-19 pandemic and related macroeconomic trends (including, in particular, the virtual work trend arising as a result of the COVID-19 pandemic and the availability of vaccines), or other factors resulting therefrom on the future financial condition, results of operations and cash flows from our Real Estate segment.

Recent Developments

Issuance of Senior Secured Notes due 2029. In January 2021, we issued $875,000 in aggregate principal of our 5.75% Senior Secured Notes due 2029 (“5.75% Senior Secured Notes”) in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to persons outside the United States in compliance with Regulation S under the Securities Act. The 5.75% Senior Secured Notes pay interest on a semi-annual basis at a rate of 5.75% per year and mature on February 1, 2029. Prior to February 1, 2024, we may redeem some or all of the 5.75% Senior Secured Notes at any time at a make-whole redemption price and, thereafter, we may redeem some or all of the 5.75% Senior Secured Notes at a premium that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. The aggregate net proceeds from the issuance of the 5.75% Senior Secured Notes were approximately $855,500 after deducting offering expenses. We used the net proceeds of the issuance, together with cash on hand, to redeem all of our outstanding 6.125% Senior Secured Notes due 2025, including accrued interest and any premium thereon, and to pay fees and expenses in connection with the offering of the 5.75% Senior Secured Notes.

Liggett Credit Facility. On March 22, 2021, Liggett, 100 Maple LLC (“Maple”) and Vector Tobacco entered into Amendment No. 4 and Joinder to Third Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as agent and lender.

The existing credit agreement was amended to, among other things, (i) add Vector Tobacco as a borrower under the Restated Credit Agreement, (ii) extend the maturity of the Credit Agreement to March 22, 2026, and (iii) increase the amount of the maximum credit line thereunder from $60,000 to $90,000. As of March 31, 2021, approximately $90,000 was available for borrowing with no outstanding balance under the Restated Credit Agreement.

Montego. Since August 2020, Liggett has expanded the distribution of its Montego deep discount brand by 12 states, primarily located in the southeast and midwest. Montego was Liggett’s third-largest brand for the three months ended March 31, 2021. Prior to August 2020, Montego was sold in select targeted markets in four states. Montego’s volume represented 10.0% of Liggett’s unit volume for the three months ended March 31, 2021 compared to 5.0% for the three months ended March 31, 2020.

Property Technology (“PropTech”) Investments. New Valley Ventures’ made the following investments (all of which are currently $1.0 million or less) during the three months ended March 31, 2021.

•Rechat – an investment in February 2021 in a mobile-centric real estate agent marketing, customer relationship management and transaction-management software. This investment aligns strategically with Douglas Elliman’s multi-year services agreement with Rechat for its agents.

•Purlin – an investment in March 2021 in an automated intelligence platform to aid in home buying.

•EVPassport – an investment in March 2021 in an electronic vehicle charging platform.

•Humming Homes – an investment in March 2021 in a tech-enabled home management service.

Recent Developments in Litigation

The cigarette industry continues to be challenged on numerous fronts. New cases continue to be commenced against Liggett and other cigarette manufacturers. Liggett could be subjected to substantial liabilities and bonding requirements from litigation relating to cigarette products. Adverse litigation outcomes could have a negative impact on our ability to operate due to their impact on cash flows. It is possible that there could be adverse developments in pending cases including the certification of additional class actions. An unfavorable outcome or settlement of pending tobacco-related litigation could encourage the commencement of additional litigation. In addition, an unfavorable outcome in any tobacco-related litigation could have a material adverse effect on our consolidated financial position, results of operations or cash flows. Liggett could face difficulties in obtaining a bond to stay execution of a judgment pending appeal.

Mississippi Dispute. In January 2016, the Attorney General for Mississippi filed a motion in Chancery Court in Jackson County, Mississippi to enforce the March 1996 settlement agreement (the “1996 Agreement”). In April 2017, the Chancery Court ruled that the 1996 Agreement should be enforced and referred the matter to a Special Master for further proceedings to determine the amount of damages, if any, to be awarded. In September 2019, the Special Master held a hearing regarding the state’s claim for approximately $17,500 in prejudgment interest as well as post-judgment interest in amounts to be determined. A decision is pending. Liggett continues to believe that the April 2017 Chancery Court order is in error because the most favored nations provision in the 1996 Agreement eliminated all of Liggett’s payment obligations to Mississippi, and it reserved all rights to appeal this and other issues at the conclusion of the case. In April 2021, the parties stipulated that the unpaid principal (exclusive of interest) purportedly due from Liggett to Mississippi pursuant to the 1996 Agreement (from inception through 2020 - the final contract year) is approximately $16,700, subject to Liggett’s right to litigate and/or appeal the enforceability of the 1996 Agreement (and all issues other than the calculation of such principal amount). In the event Liggett appeals an adverse judgment, the posting of a bond may be required.

See “Legislation and Regulation” in Item 2 of the MD&A for further information on litigation.

Critical Accounting Policies

There are no material changes except for the items listed below from the critical accounting policies set forth in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K, for the year ended December 31, 2020. Please refer to that section and the information below for disclosures regarding the critical accounting policies related to our business.

Results of Operations

The following discussion provides an assessment of our results of operations, capital resources and liquidity and should be read in conjunction with our condensed consolidated financial statements included elsewhere in this report. The condensed consolidated financial statements include the accounts of Liggett, Vector Tobacco, Liggett Vector Brands, New Valley and other less significant subsidiaries.

For purposes of this discussion and other consolidated financial reporting, our business segments for the three months ended March 31, 2021 and 2020 were Tobacco and Real Estate. The Tobacco segment consisted of the manufacture and sale of cigarettes. The Real Estate segment included our investment in New Valley, which includes ownership of Douglas Elliman, investments in real estate and investments in real estate ventures.


	Three Months Ended
	March 31,
		2021			2020
Revenues:
Tobacco		$	268,463		$	287,069

Real estate		275,301			167,419

Total revenues		$	543,764		$	454,488
Operating income (loss):
Tobacco		$	81,599	(1)	$	69,186

Real estate		15,260			(67,475)		(2)
Corporate and Other		(6,656)			(6,615)
Total operating income		$	90,203		$	(4,904)

(1) Operating income includes $2,722 received from a litigation settlement associated with the MSA (which reduced cost of sales) and $5 of litigation settlement and judgment expense.

(2) Operating loss includes $58,252 of impairment charges related to the impairments of goodwill and other intangible assets.

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Revenues. Total revenues were $543,764 for the three months ended March 31, 2021 compared to $454,488 for the three months ended March 31, 2020. The $89,276 (19.6%) increase in revenues was primarily due to a $107,882 increase in Real Estate revenues, which was primarily related to an increase in Douglas Elliman’s brokerage revenues related to the strength of the U.S. existing home market during the 2021 period. This was offset by a $18,606 decline in Tobacco revenues related to lower unit volume partially offset by increases in net pricing resulting primarily from increases in 2020 and 2021.

Cost of sales. Total cost of sales was $363,542 for the three months ended March 31, 2021 compared to $310,623 for the three months ended March 31, 2020. The $52,919 (17.0%) increase in cost of sales was primarily due to a $86,178 increase in Real Estate cost of sales, which was primarily related to increased Douglas Elliman’s commissions. This was offset by a $33,259 decline in Tobacco cost of sales primarily related to decreased sales volume.

Expenses. Operating expenses were $90,019 for the three months ended March 31, 2021 compared to $148,769 for the same period last year. The $58,750 (39.5%) decline was due to a $61,031 decline in Real Estate expenses, primarily related to the absence of the impairment of goodwill and other intangible asset charge at Douglas Elliman of $58,252 recorded in the 2020 period. This was offset by a $2,240 increase in Tobacco expenses and by a $41 increase in Corporate and Other expense for the three months ended March 31, 2021.

Operating income. Operating income was $90,203 for the three months ended March 31, 2021 compared to an operating loss of $4,904 for the same period last year. Operating income for the three months ended March 31, 2020 included an impairment expense associated with goodwill and other intangible assets in our real estate segment. Real Estate operating income increased $82,735 primarily related to increased revenues at Douglas Elliman in the first quarter of 2021 associated with the strength of existing-home sales, which was propelled by home-buying trends associated with increased demand in Douglas Elliman’s markets, and the absence of the impairment expense in the 2021 period. Tobacco operating income increased by $12,413 due primarily to increases in net pricing and lower per unit MSA expense. This was offset by the increased Corporate and Other operating loss of $41.

Other expenses (income). Other expenses were $45,193 for the three months ended March 31, 2021 compared to other income of $695 for the three months ended March 31, 2020. For the three months ended March 31, 2021, other expenses primarily consisted of interest expense of $28,751, and loss on the extinguishment of debt of $21,362. This was offset by equity in earnings from real estate ventures of $1,589, equity in earnings from investments of $577 and other income of $2,754. For the three months ended March 31, 2020, other income primarily consisted of equity in earnings of investments of $50,152 and income of $3,330 from changes in fair value of derivatives embedded within convertible debt. This was offset by interest expense of $35,627, equity in losses from real estate ventures of $6,505 and other expenses of $10,655.

Income (loss) before provision for income taxes. Income before income taxes was $45,010 for the three months ended March 31, 2021 compared to loss before income taxes of $4,209 for the three months ended March 31, 2020.

Income tax expense (benefit). Income tax expense was $13,053 for the three months ended March 31, 2021 compared to income tax benefit of $978 for the three months ended March 31, 2020. Our provision for income taxes in interim periods is based on expected income, statutory rates, permanent differences, valuation allowances against deferred tax assets, and any tax planning opportunities available to us. For interim financial reporting, we estimate the annual effective income tax rate based on full year projections and apply the annual effective income tax rate against year-to-date pretax income (loss) to record income tax expense (benefit), adjusted for discrete items, if any. We refine annual estimates as new information becomes available. For the three months ended March 31, 2020, the annual effective tax rate applied to year-to-date income resulted in tax expense which was reduced by discrete items and resulted in an income tax benefit for the period. The net discrete tax benefit of $1,286 primarily relates to income tax benefits on goodwill and trademark impairment charges, changes in value of certain contingent consideration partially offset by the income tax expense related to equity in earnings from investments associated with the one-time gain on sale of LTS.

Tobacco.

Tobacco revenues. Liggett increased the list price of Eagle 20’s, Pyramid, Liggett Select, Eve and Grand Prix by $0.14 on January 25, 2021, by $0.13 per pack in November 2020, $0.11 per pack in June 2020, and $0.08 per pack in February 2020.

All of our Tobacco sales were in the discount category in 2021 and 2020. For the three months ended March 31, 2021, Tobacco revenues were $268,463 compared to $287,069 for the three months ended March 31, 2020. Revenues declined by $18,606 (6.5%) due primarily to a 13.8% (311 million units) decline in unit sales volume partially offset by an increase in the average selling price of our brands for the three months ended March 31, 2021. We believe that unit volumes for the three months ended March 31, 2021 declined due to elevated wholesale inventories at December 31, 2020, which were the result of purchases after a competitor’s announcement of a price increase in December 2020, as well as the prospect of increased restrictions associated with the COVID-19 pandemic.

Tobacco cost of sales. The major components of our Tobacco cost of sales were as follows:


	Three Months Ended
	March 31,
	2021			2020

Manufacturing overhead, raw materials and labor	$	27,261		$	32,865
Customer shipping and handling	1,416			1,472
Federal Excise Taxes, net	97,714			113,139

FDA expense	6,072			6,350
MSA expense, net of market share exemption	31,568		(1)	43,464
Total cost of sales	$	164,031		$	197,290

(1) Includes $2,722 received from a litigation settlement associated with the MSA expense.

The Tobacco segment’s MSA expense is included in cost of sales. Under the terms of the MSA, we have no payment obligations except to the extent that our tobacco subsidiaries’ market share of the U.S. cigarette market exceeds 1.92%. The calculation of our benefit from the MSA is an estimate based on U.S. domestic taxable cigarette shipments. As of March 31, 2021, we estimate taxable shipments in the U.S. will decline by 6.0% in 2021. Our annual MSA liability changes by approximately $1,700 for each percentage change in estimated shipment volumes in the U.S. market.

Tobacco gross profit was $104,432 for the three months ended March 31, 2021 compared to $89,779 for the three months ended March 31, 2020, an increase of $14,653 (16.3%). For the three months ended March 31, 2021, gross profit included $2,722 received from an MSA settlement, which reduced cost of sales. Excluding this settlement, gross profit for the three months ended March 31, 2021 was $101,710, an increase of $11,931 (13.3%). This increase in gross profit for the three months ended March 31, 2021 was primarily attributable to increased net pricing across Liggett’s brand portfolio more than offsetting the impact of a 13.8% decline in unit sales. As a percentage of revenue (excluding Federal Excise Taxes), Tobacco gross profit increased from 51.6% in the 2020 period to 61.2% in the 2021 period. The increase in gross profit was a result of increased pricing and lower per unit MSA and manufacturing costs. Manufacturing costs per unit were higher in the comparable 2020 period due to the costs associated with a voluntary shutdown of Liggett’s manufacturing facility in March 2020 related to the COVID-19 pandemic.

Despite recent pricing increases, Eagle 20’s remains Liggett’s primary low-cost cigarette brand and its percentage of Liggett’s total unit volume sales declined from approximately 62% in the three months ended March 31, 2020 to approximately 61% for the three months ended March 31, 2021. Pyramid, Liggett’s second largest brand, declined from approximately 24% of total unit volume sales in the three months ended March 31, 2020 to approximately 21% for the three months ended March 31, 2021. Montego is Liggett’s third largest brand and increased from approximately 5% of total unit volume sales in the three months ended March 31, 2020 to approximately 10% for the three months ended March 31, 2021.

Tobacco expenses. Tobacco operating, selling, general and administrative expenses, excluding settlements and judgments, were $22,828 for the three months ended March 31, 2021 compared to $20,593 for the three months ended March 31, 2020. The increase of $2,235 was mainly due to increased litigation expenses associated with Colorado’s minimum price legislation. Tobacco product liability legal expenses, including settlements and judgments, were $1,525 and $1,550 for the three months ended March 31, 2021 and 2020, respectively.

Tobacco operating income. Tobacco operating income was $81,599 for the three months ended March 31, 2021 compared to $69,186 for the same period last year, an increase of $12,413. The increase in operating income was primarily attributable to higher gross profit margins, as discussed above, partially offset by increased operating, selling, general and administrative expenses.

Real Estate.

Real Estate revenues. Real Estate revenues were $275,301 and $167,419 for the three months ended March 31, 2021 and 2020, respectively. Real Estate revenues increased by $107,882 (64.4%), which was primarily related to an increase of $103,134 in Douglas Elliman’s commission and other brokerage income, which increased as a result of increased revenues from existing home sales as a result of home-buying trends in Douglas Elliman’s markets. These trends are consistent with the increased demand for existing-homes in Douglas Elliman’s markets as well as other areas of the U.S. Douglas Elliman’s revenues generated from the sales of existing homes increased by $45,375 in the Southeast region, $21,526 in the Northeast region, which does not include New York City, $15,378 in the West region and $20,026 in New York City. In addition, Douglas Elliman’s sales from Development Marketing increased by $829 for the three months ended March 31, 2021.

From March 2020 to October 2020, the COVID-19 pandemic had a significant effect on the economy and, especially, in the New York City market, where approximately 46% of Douglas Elliman’s commissions and other brokerage revenues were derived in 2018 and 2019. During this time, in response to the pandemic, various governmental agencies in the markets where Douglas Elliman operates instituted restrictions on individuals and on the types of businesses that were permitted to operate from March 2020 to June 2020, which adversely impacted Douglas Elliman’s business. As a result of the impact of COVID-19 pandemic on the New York City market, and combined with the increased demand for existing-homes in other areas of the U.S., the percentage of Douglas Elliman’s brokerage revenues from the New York City market declined from approximately 46% in 2019 to approximately 28% for the twelve months ended March 31, 2021. As Douglas Elliman’s markets began reopening and vaccines for COVID-19 have become available, and consistent with home buying trends in the U.S., Douglas Elliman’s business improved significantly in markets complementary to New York City, including the New York City suburbs (Long Island, Westchester County and Connecticut), the Hamptons, Palm Beach, Miami, Los Angeles, and Aspen and, more recently, New York City.

Real Estate revenues and cost of sales for the three months ended March 31, 2021 and 2020, respectively, were as follows:


	Three Months Ended
	March 31,
	2021		2020
Real Estate Revenues:
Commission and other brokerage income	$	259,100	$	155,966
Property management revenue	9,268		8,779
Escrow and title fees	4,408		856
Revenues from investments in real estate	900		—
Sales on facilities primarily from Escena	1,625		1,818
Other	—		—
Total real estate revenues	$	275,301	$	167,419

Real Estate Cost of Sales:
Real estate agent commissions	$	197,017	$	112,199

Cost of sales on facilities primarily from Escena	876		996
Escrow and title fees	1,618		138

Total real estate cost of sales	$	199,511	$	113,333

Real Estate cost of sales. Real Estate cost of sales were $199,511 and $113,333 for the three months ended March 31, 2021 and 2020, respectively. Real Estate cost of sales increased by $86,178, primarily related to $84,818 increase in Douglas Elliman’s real estate commissions which increased as a result of increased commission and other brokerage income.

Douglas Elliman’s gross profit increased by $21,704 (40.1%) while gross margin percentage on real estate brokerage income declined from 28.1% for the three months ended March 31, 2020 to 24.0% for the three months ended March 31, 2021. This was primarily due to the decline in the percentage of revenues from the New York City region, which traditionally earns higher gross margin percentages than the Southeast (Florida) and Western (primarily California) regions.

See Impact of COVID-19 on Real Estate Segment. for a discussion of the impact of the COVID-19 pandemic on the Real Estate segment.

Real Estate expenses. Real Estate expenses were $60,530 and $121,561 for the three months ended March 31, 2021 and 2020. The expenses for the three months ended March 31, 2020 included the non-cash impairment of goodwill and other intangible assets of $58,252 at Douglas Elliman. Real estate expenses, excluding the non-cash impairment charge, declined by $2,779 as a result of the continued expense-reduction initiatives that began at Douglas Elliman in the second quarter of 2020. Douglas Elliman’s expenses declined as a result of lower administrative, professional services, occupancy and travel expenses. The decline in these expenses was offset by increased advertising expense as Douglas Elliman’s business increased.

Real Estate operating income (loss). The Real Estate segment reported operating income of $15,260 and operating loss of $67,475 for the three months ended March 31, 2021 and 2020, respectively. The increase in the Real Estate segment’s operating income, after excluding the non-cash impairment charge in the 2020 period, was primarily the result of the increase in gross profit discussed above along with the impact of expense-reduction initiatives that began at Douglas Elliman in the second quarter of 2020.

Corporate and Other.

Corporate and Other loss. The operating loss at the Corporate and Other segment was $6,656 for the three months ended March 31, 2021 compared to $6,615 for the same period in 2020.

Summary of Real Estate Investments

We own and seek to acquire investment interests in various domestic and international real estate projects through debt and equity investments. Our real estate investments primarily include the following projects as of March 31, 2021:


	(Dollars in Thousands. Area and Unit Information in Ones)
	Location	Date of Initial Investment	Percentage Owned (1)		Net Cash Invested (Returned)		Cumulative Earnings (Losses)		Carrying Value as of March 31, 2021		Future Capital Commit- ments from New Valley (2)		Projected Residential and/or Hotel Area		Projected Commercial Space		Projected Number of Residential Lots, Units and/or Hotel Rooms		Actual/Projected Construction Start Date	Projected Construction End Date

Escena, net	Master planned community, golf course, and club house in Palm Springs, CA	March 2008	100	%	$	2,951	$	6,719	$	9,670	$	—	450	Acres			667 450	R Lots H	N/A	N/A
Townhome A (11 Beach Street)	TriBeCa, Manhattan, NY	November 2020	100	%	6,132		—		6,132		—		6,169	SF			1	R	N/A	Completed
Investments in real estate, net					$	9,083	$	6,719	$	15,802	$	—

Investments in real estate ventures:



111 Murray Street	TriBeCa, Manhattan, NY	May 2013	9.5	%	$	6,819	$	(4,414)	$	2,405	$	—	330,000	SF	1,700	SF	157	R	September 2014	Completed


87 Park (8701 Collins Avenue)	Miami Beach, FL	December 2013	23.1	%	(893)		893		—		—		160,000	SF	TBD		70	R	October 2015	Completed
125 Greenwich Street	Financial District, Manhattan, NY	August 2014	13.4	%	7,992		(7,992)		—		—		306,000	SF	16,000	SF	273	R	March 2015	TBD
West Hollywood Edition (9040 Sunset Boulevard)	West Hollywood, CA	October 2014	48.5	%	11,513		(11,513)		—		—		210,000	SF	—		20 190	R H	May 2015	Completed
The XI (76 Eleventh Avenue)	West Chelsea, Manhattan, NY	May 2015	5.1	%	17,000		(17,000)		—		—		630,000	SF	85,000	SF	236 137	R H	September 2016	TBD
Monad Terrace	Miami Beach, FL	May 2015	19.6	%	7,635		(5,490)		2,145		—		160,000	SF	—		59	R	May 2016	Completed
Takanasee (805 Ocean Ave)	Long Branch, NJ	December 2015	22.8	%	6,144		(6,144)		—		—		63,000	SF	—		13	R	June 2017	TBD
Brookland (15 East 19th St)	Brooklyn, NY	April 2017	9.8	%	402		20		422		—		24,000	SF	—		33	R	August 2017	Completed
Dime (209 Havemeyer St)	Brooklyn, NY	November 2017	16.5	%	9,145		(42)		9,103		—		100,000	SF	150,000	SF	177	R	May 2017	Completed
352 6th Avenue	Brooklyn, NY	February 2019	37.0	%	685		98		783		—		5,200	SF	—		4	R	September 2019	Completed
Meatpacking Plaza	Meatpacking District, NY	April 2019	16.9	%	10,692		(2,527)		8,165		—		TBD	—	TBD	—	TBD	—	TBD	TBD

The Park on Fifth	Miami Beach, FL	September 2019	38.9	%	18,098		1,228		19,326		—		482,000	SF	15,000	SF	330	R	April 2020	August 2023
9 DeKalb	Brooklyn, NY	April 2019	4.2	%	5,000		804		5,804		—		450,000	SF	120,000	SF	540	R	March 2019	February 2023
West Hialeah	Miami, FL	December 2019	77.8	%	12,522		1,116		13,638		—		1,400,000	SF	—		1,369	R	December 2019	November 2022
Townhome B (11 Beach Street)	TriBeCa, Manhattan, NY	November 2020	46.7	%	2,530		—		2,530		—		4,752	SF	—		1	R	N/A	Completed
Ritz-Carlton Villas	Miami Beach, FL	December 2020	50.0	%	4,109		—		4,109		—		55,000	SF	—		15	R	October 2020	August 2022

Condominium and Mixed Use Development					$	119,393	$	(50,963)	$	68,430	$	—

Maryland Portfolio	Primarily Baltimore County, MD	July 2012	7.6	%	$	(3,626)	$	3,626	$	—	—		N/A		N/A		4,064	R	N/A	N/A
Apartment Buildings					$	(3,626)	$	3,626	$	—	$	—

Park Lane Hotel (36 Central Park South)	Central Park South, Manhattan, NY	November 2013	1.0	%	$	8,682	$	(7,056)	$	1,626	$	—	446,000	SF	—		628	H	N/A	N/A
215 Chrystie Street	Lower East Side, Manhattan, NY	December 2012	15.7	%	(2,136)		2,136		—		—		246,000	SF	—		367	H	June 2014	Completed
Coral Beach and Tennis Club	Coral Beach, Bermuda	December 2013	49.0	%	6,048		(4,702)		1,346		—		52	Acres	—		101	H	N/A	N/A
Parker New York	Central Park South, Manhattan, NY	July 2019	0.4	%	1,000		(459)		541		—		TBD		—		589 99	H R	May 2020	February 2022
Hotels					$	13,594	$	(10,081)	$	3,513	$	—

The Plaza at Harmon Meadow	Secaucus, NJ	March 2015	49.0	%	$	4,200	$	(1,487)	$	2,713	$	—	—	—	219,000	SF	—	—	N/A	N /A
Wynn Las Vegas Retail	Las Vegas, NV	December 2016	1.6	%	4,602		2,439		7,041		—		—	—	160,000	SF	—	—	N/A	N/A
Commercial					$	8,802	$	952	$	9,754	$	—

Witkoff GP Partners (3)	Multiple	March 2017	15.0	%	$	11,154	$	(9,849)	$	1,305	$	—	N/A		N/A		N/A		N/A	N/A
1 QPS Tower (23-10 Queens Plaza South)	Long Island City, NY	December 2012	45.4	%	(14,406)		14,406		—		—		N/A		N/A		N/A		March 2014	Completed
Witkoff EB-5 Capital Partners	Multiple	September 2018	49.0	%	516		466		982		—		N/A		N/A		N/A		N/A	N/A
Diverse Real Estate Portfolio					$	(2,736)	$	5,023	$	2,287	$	—

Investments in real estate ventures					$	135,427	$	(51,443)	$	83,984	$	—

Total Carrying Value					$	144,510	$	(44,724)	$	99,786	$	—

(1) The Percentage Owned reflects our estimated current ownership percentage. Our actual ownership percentage as well as the percentage of earnings and cash distributions may ultimately differ as a result of a number of factors including potential dilution, financing or admission of additional partners.

(2) This column only represents capital commitments required under the various joint venture agreements. However, many of the operating agreements provide for the operating partner to call capital. If a joint venture partner, such as New Valley, declines to fund the capital call, then the partner’s ownership percentage could either be diluted or, in some situations, the character of a funding member’s contribution would be converted from a capital contribution to a member loan.

(3) The Witkoff GP Partners venture includes a $1,305 investment in 500 Broadway, a Condominium and Mixed Use Development in Santa Monica, CA.

N/A - Not applicable

SF - Square feet

H - Hotel rooms

TBD -To be determined

R - Residential Units

R Lots - Residential lots

New Valley capitalizes net interest expense into the carrying value of its ventures whose projects were under development. Net capitalized interest costs included in Carrying Value as of March 31, 2021 were $7,787. This amount is included in the “Cumulative Earnings (Losses)” column in the table above. During the three months ended March 31, 2021, New Valley capitalized $430 of interest costs and utilized (reversed) $120 of previously capitalized interest in connection with the recognition of equity in (losses) earnings, gains and liquidations from various ventures.

Liquidity and Capital Resources

Cash, cash equivalents and restricted cash increased by $29,407 for the three months ended March 31, 2021 and increased by $95,700 for the three months ended March 31, 2020.

Cash provided from operations was $78,364 and $115,309 for the three months ended March 31, 2021 and 2020, respectively. The decline in cash provided from operations related primarily to the absence of proceeds in the 2021 period associated with the sale of LTS, which occurred in 2020, and cash expenditures in February 2021 associated with the premium for the retirement of our 6.125% Senior Secured Notes due 2025. These amounts were offset by increases in operating income during the three months ended March 31, 2021.

Cash used in investing activities was $18,505 for the three months ended March 31, 2021 and cash provided by investing activities was $25,968 for the three months ended March 31, 2020. In the first three months of 2021, cash used in investing activities was for the purchase of investment securities of $38,441, investments in real estate ventures of $8,087, capital expenditures of $1,931, an increase in cash surrender value of life insurance policies of $564, purchase of long-term investments of $5,813, and an increase in restricted assets of $3. This was offset by the sale of investment securities of $10,228, paydowns of investment securities of $172, maturities of investment securities of $13,968, distributions from investments in real estate ventures of $7,577, and proceeds from the sale or liquidation of long-term investments of $4,389. In the first three months of 2020, cash provided by investing activities was from the sale of investment securities of $16,672, pay downs of investment securities of $202, maturities of investment securities of $15,616, distributions from investments in real estate ventures of $1,036, a decrease in restricted assets of $93, and proceeds from the sale or liquidation of long-term investments of $19,544. This was offset by the purchase of investment securities of $15,798, investments in real estate ventures of $673, capital expenditures of $4,888, investments in real estate, net of $340, an increase in cash surrender value of life insurance policies of $258, and purchase of long-term investments of $5,238.

Cash used in financing activities was $30,452 and $45,577 for the three months ended March 31, 2021 and 2020, respectively. In the first three months of 2021, cash was used for the dividends and distributions on common stock of $32,273, repayments of debt of $853,158, deferred financing costs of $20,000, and other of $21. This was offset by proceeds from debt issuance of $875,000. In the first three months of 2020, cash was used for dividends and distributions on common stock of $32,074, repayments of debt of $2,638, distributions to non-controlling interest of $448, and net repayments of debt under the revolver of $10,453, offset by proceeds from debt issuance of $36.

We have significant liquidity commitments at the corporate level (not including our tobacco and real estate operations) that require the use of existing cash resources. These include cash interest expense of approximately $108,900, dividends on our outstanding common shares of approximately $128,900, which is based on an assumed quarterly cash dividend of $0.20 per share, and other corporate expenses and income taxes.

In order to meet these liquidity requirements as well as other liquidity needs in the normal course of business, we have in the past used cash flows from operations as well as existing cash and cash equivalents, which have, in the past, been generated from operations, monetization of investments and proceeds from debt and equity issuances. Should these resources be insufficient to meet upcoming liquidity needs, we may also liquidate investment securities and other long-term investments, or, if available, draw on Liggett’s credit facility. While there are actions we can take to reduce our liquidity needs, there can be no assurance that such measures will be successful. As of March 31, 2021, we had cash and cash equivalents of $382,387 (including $107,380 of cash at Douglas Elliman and $83,046 of cash at Liggett), investment securities and long-term investments, which were carried at $206,082 (see Note 6 to condensed consolidated financial statements). As of March 31, 2021, our investments in real estate ventures were carried at $83,984 and our investment in real estate, net of accumulated depreciation, was carried at $15,802.

Limitation of interest expense deductible for income taxes. Since 2018, the amount of interest expense that is deductible in the computation of income tax liability has been limited to a percentage of adjusted taxable income, as defined by applicable law. In 2019 and 2020, the amount of deductible interest expense was limited to 50% of taxable income before interest, depreciation and amortization and, in 2021, the amount will be limited to 30% of taxable income before interest, depreciation and amortization. Beginning in 2022, the amount will be limited to 30% of taxable income before interest. However, interest expense allocable to a designated excepted trade or business is not subject to limitation. One such excepted trade or business is any electing real property trade or business, for which portions of our real estate businesses may qualify. If any interest expense is disallowed, we are permitted to carry forward the disallowed interest expense indefinitely. As a result of interest expense that is allocated to our real estate businesses (from the holding company) not being subject to the limitation, all of our interest expense to date has been tax deductible; however, due to our high degree of leverage and the large amount of our interest expense that is currently allocated to our real estate businesses (from the holding company) for income tax purposes, a portion of our interest expense in future years may not be deductible, which could increase the after-tax cost of any new debt financings as well as the refinancing of our existing debt.

Tobacco Litigation. As of March 31, 2021, 16 verdicts were entered in Engle progeny cases against Liggett. Several of these verdicts have been affirmed on appeal and have been satisfied by Liggett. Liggett has paid $40,111, including interest and attorney’s fees, to satisfy the final judgments entered against it. It is possible that additional cases could be decided unfavorably.

Notwithstanding the comprehensive nature of the Engle Progeny Settlements of more than 5,200 cases, approximately 39 plaintiffs’ claims remain outstanding. Therefore, we and Liggett may still be subject to periodic adverse judgments that could have a material adverse effect on our consolidated financial position, results of operations and cash flows.

In addition, Liggett may be required to make additional payments to Mississippi which could have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows. See Recent Developments in Litigation.

Management cannot predict the cash requirements related to any future settlements or judgments, including cash required to bond any appeals, and there is a risk that those requirements will not be able to be met. Management is unable to make a reasonable estimate of the amount or range of loss that could result from an unfavorable outcome of the cases pending against Liggett or the costs of defending such cases. It is possible that our consolidated financial position, results of operations or cash flows could be materially adversely affected by an unfavorable outcome in any such tobacco-related litigation.

Vector.

6.125% Senior Secured Notes. On February 1, 2021, the 6.125% Senior Secured Notes due 2025 were redeemed in full and we recorded a loss on the extinguishment of debt of $21,362 for the three months ended March 31, 2021, including $13,014 of premium and $8,348 of other costs and non-cash interest expense related to the recognition of previously unamortized deferred finance costs.

5.75% Senior Secured Notes due 2029. On January 28, 2021, we completed the sale of $875,000 in aggregate principal amount of our 5.75% Senior Secured Notes due 2029 (“5.75% Senior Secured Notes”) to qualified institutional buyers and non-U.S. persons in a private offering pursuant to the exemptions from the registration requirements of the Securities Act contained in Rule 144A and Regulation S thereunder. The aggregate net cash proceeds from the sale of the 5.75% Senior Secured Notes were approximately $855,500 after deducting the initial purchaser’s discount and estimated expenses and fees in connection with the offering. We used the net cash proceeds from the 5.75% Senior Secured Notes offering, together with cash on hand, to redeem all of our outstanding 6.125% Senior Secured Notes due 2025, including accrued interest and premium thereon, on January 28, 2021.

The 5.75% Senior Secured Notes pay interest on a semi-annual basis at a rate of 5.75% per year and mature on the earlier of February 1, 2029 and the date that is 91 days before the final stated maturity date of our 10.5% Senior Notes due 2026 (“10.5% Senior Notes”) if such 10.5% Senior Notes have not been repurchased and cancelled or refinanced by such date. Prior to February 1, 2024, we may redeem some or all of the 5.75% Senior Secured Notes at any time at a make-whole redemption price. On or after February 1, 2024, we may redeem some or all of the 5.75% Senior Secured Notes at a premium that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. In addition, any time prior to February 1, 2024, we may redeem up to 40% of the aggregate outstanding amount of the 5.75% Senior Secured Notes with the net proceeds of certain equity offerings at 105.75% of the aggregate principal amount of the 5.75% Senior Secured Notes, plus accrued and unpaid interest, if any, to the redemption date, if at least 60% of the aggregate principal amount of the 5.75% Senior Secured Notes originally issued remains outstanding after such redemption, and the redemption occurs within 90 days of the closing of such equity offering. In the event of a change of control, as defined in the indenture governing the 5.75% Senior Secured Notes (the “2029 Indenture”), each holder of the 5.75% Senior Secured Notes may require the Company to repurchase some or all of its 5.75% Senior Secured Notes at a repurchase price equal to 101% of their aggregate principal amount plus accrued and unpaid interest, if any, to the date of purchase. If the Company sells certain assets and does not apply the proceeds as required pursuant to the 2029 Indenture, it must offer to repurchase the 5.75% Senior Secured Notes at the prices listed in the 2029 Indenture.

The 5.75% Senior Secured Notes are fully and unconditionally guaranteed, subject to certain customary automatic release provisions, on a joint and several basis by all of our wholly-owned domestic subsidiaries that are engaged in the conduct of our cigarette businesses, which subsidiaries, as of the issuance date of the 5.75% Senior Secured Notes, were also guarantors under our outstanding 10.5% Senior Notes. The 5.75% Senior Secured Notes are not guaranteed by New Valley LLC, or any of our subsidiaries engaged in our real estate business conducted through our subsidiary, New Valley LLC. The guarantees provided by certain of the guarantors are secured by first priority or second priority security interests in certain collateral of such guarantors pursuant to security and pledge agreements, subject to certain permitted liens and exceptions as further described in the 2029 Indenture and the security documents relating thereto. Vector Group Ltd does not provide any security for the 5.75% Senior Secured Notes.

The 2029 Indenture contains covenants that restrict the payment of dividends if our consolidated earnings before interest, taxes, depreciation and amortization (“Consolidated EBITDA”), as defined in the 2029 Indenture, for the most recently ended four full quarters is less than $75,000. The 2029 Indenture also restricts the incurrence of debt if our Leverage Ratio and our Secured Leverage Ratio, each as defined in the 2029 Indenture, exceed 3.0 to 1.0 and 1.5 to 1.0, respectively. Our Leverage Ratio is defined in the 2029 Indenture as the ratio of our and our guaranteeing subsidiaries’ total debt less the fair market value of our cash, investment securities and long-term investments to Consolidated EBITDA, as defined in the 2029 Indenture. Our Secured Leverage Ratio is defined in the 2029 Indenture in the same manner as the Leverage Ratio, except that secured indebtedness is substituted for indebtedness. The following table summarizes the requirements of these financial test and the extent to which we would have satisfied these requirements had the 2029 Indenture been in effect as of March 31, 2021.

Indenture

March 31,
2021

Covenant

Requirement

Consolidated EBITDA, as defined

$75,000

$364,459

Leverage ratio, as defined

<3.0 to 1

2.57 to 1

Secured leverage ratio, as defined

<1.5 to 1

1.09 to 1

As of March 31, 2021, we were in compliance with all debt covenants related to the 2029 Indenture.

10.5% Senior Notes due 2026. On November 2, 2018 and November 18, 2019, respectively, we sold $325,000 and $230,000, respectively, in aggregate principal amount of our 10.5% Senior Notes to qualified institutional buyers and non-U.S. persons pursuant to the exemptions from the registration requirements of the Securities Act contained in Rule 144A and Regulation S thereunder. The 10.5% Senior Secured Notes due 2026 are guaranteed by all of our wholly owned domestic subsidiaries that are engaged in the conduct of our cigarette business and DER Holdings LLC.

The indenture governing our 10.5% Senior Notes due 2026 (the “2026 Indenture”) contains covenants that restrict the payment of dividends and certain other distributions subject to certain exceptions, including exceptions for (1) dividends and other distributions in an amount up to 50% of our consolidated net income, plus certain specified proceeds received by the Company, if no event of default has occurred, and we are in compliance with a Fixed Charge Coverage Ratio (as defined in the 2026 Indenture) of at least 2.0 to 1.0, and (2) dividends and other distributions in an unlimited amount, if no event of default has occurred and we are in compliance with a Net Leverage Ratio (as defined in the 2026 Indenture) no greater than 4.0 to 1.0. As a result, absent an event of default, we can pay dividends if the Net Leverage ratio is below 4.0 to 1.0, regardless of the value of the Fixed Charge Coverage Ratio at the time. The 2026 Indenture also restricts our ability to incur debt if our Fixed Charge Coverage Ratio is less than 2.0 to 1.0, and restricts our ability to secure debt to the extent doing so would cause our Secured Leverage Ratio (as defined in the 2026 Indenture) to exceed 3.75 to 1.0, unless the 10.5% Senior Notes are secured on an equal and ratable basis. In addition, the 2026 Indenture restricts our ability to spin-off or transfer New Valley and its subsidiaries as a whole, or DER Holdings LLC and its subsidiaries (including Douglas Elliman) as a whole, unless (1) such spin-off or transfer complies with the covenants restricting mergers and asset sales, or (2) our Net Leverage Ratio is no greater than 4.0 to 1.0. Our Fixed Charge Coverage Ratio is defined in the 2026 Indenture as the ratio of our Consolidated EBITDA to our Fixed Charges (each as defined in the 2026 Indenture). Our Net Leverage Ratio is defined in the 2026 Indenture as the ratio of our and our guaranteeing subsidiaries’ total debt less our cash, cash equivalents, and the fair market value of our investment securities, long-term investments, investments in real estate, net, and investments in real estate ventures, to Consolidated EBITDA, as defined in the 2026 Indenture. Our Secured Leverage Ratio is defined in the 2026 Indenture as the ratio of our and our guaranteeing subsidiaries’ total secured debt, to Consolidated EBITDA, as defined in the 2026 Indenture. The following table summarizes the requirements of these financial test and the extent to which we satisfied these requirements as of March 31, 2021.

Covenant

Indenture Requirement

March 31,
2021

Consolidated EBITDA, as defined

N/A

$370,860

Fixed charge coverage ratio, as defined

>2.0 to 1

3.42 to 1

Net leverage ratio, as defined

<4.0 to 1

2.02 to 1

Secured leverage ratio, as defined

<3.75 to 1

2.37 to 1

As of March 31, 2021 and December 31, 2020, we were in compliance with all of the debt covenants related to the 2026 Indenture.

Guarantor Summarized Financial Information. Vector Group Ltd. (the “Issuer”) and its wholly-owned domestic subsidiaries that are engaged in the conduct of its cigarette business (the “Subsidiary Guarantors”) have filed a shelf registration

statement for the offering of debt and equity securities on a delayed or continuous basis and we are including this condensed consolidating financial information in connection therewith. Any such debt securities may be issued by us and guaranteed by our Subsidiary Guarantors. New Valley and any of its subsidiaries, other than DER Holdings LLC (the “Nonguarantor Subsidiaries”) will not guarantee any such debt securities. Both the Subsidiary Guarantors and the Nonguarantor Subsidiaries are wholly-owned by the Issuer. The Condensed Consolidating Balance Sheets as of March 31, 2021 and the related Condensed Consolidating Statements of Operations for the three months ended March 31, 2021 of the Issuer, Subsidiary Guarantors and Nonguarantor Subsidiaries are set forth in Exhibit 99.2.

Presented herein are the Summarized Combined Balance Sheets as of March 31, 2021 and December 31, 2020 and the related Summarized Combined Statements of Operations for the three months ended March 31, 2021 for the Issuer and the Subsidiary Guarantors (collectively, the “Obligor Group”). The summarized combined financial information is presented after the elimination of: (i) intercompany transactions and balances among the Obligor Group, and (ii) equity in earnings from and investments in the Nonguarantor Subsidiaries.

Summarized Combined Balance Sheets:


	March 31, 2021		December 31, 2020
Assets:
Current assets	$	540,370	$	515,082
Noncurrent assets	265,649		264,041
Intercompany receivables from Nonguarantor Subsidiaries	5,902		2,040

Liabilities:
Current liabilities	245,924		193,125
Noncurrent liabilities	1,531,591		1,521,293

Summarized Combined Statements of Operations:


	Three Months Ended
	March 31,
	2021		2020
Revenues	$	268,486	$	287,188
Cost of sales	164,031		197,290
Operating income	75,018		62,673
Net income	19,891		51,201

Liggett Credit Facility and Liggett Term Loan Under Credit Facility. On March 22, 2021, Liggett, Maple and Vector Tobacco entered into the Amendment with Wells Fargo, as agent and lender.

The Amendment amended the existing credit agreement to, among other things, (i) add Vector Tobacco as a borrower under the Credit Agreement, (ii) extend the maturity of the Credit Agreement to March 22, 2026, and (iii) increase the amount of the maximum credit line thereunder from $60,000 to $90,000. As of March 31, 2021, there was no outstanding balance under the Credit Agreement. Availability as determined under the Credit Agreement was approximately $90,000 based on eligible collateral at March 31, 2021. At March 31, 2021, Liggett was in compliance with all covenants under the Credit Agreement; Liggett’s EBITDA, as defined, were $338,799 for the last twelve months ended March 31, 2021.

Anticipated Liquidity Obligations. We and our subsidiaries have significant indebtedness and debt service obligations. As of March 31, 2021, we and our subsidiaries had total outstanding indebtedness of approximately $1,427,400. Of this amount, $875,000 comprised of the outstanding amount under our 5.75% Senior Secured Notes due 2029, and $555,000 comprised of the outstanding amount under our 10.5% Senior Notes due 2026. There is a risk that we will not be able to generate sufficient funds to repay our debt. If we cannot service our fixed charges, it would have a material adverse effect on our business and results of operations.

We currently believe that our tobacco and real estate segments will generate positive cash flow and will continue to be able to sustain their operations in 2021 without any significant liquidity concerns.

In order to meet the above liquidity requirements as well as other anticipated liquidity needs in the normal course of business, we had cash and cash equivalents of approximately $382,400, investment securities at fair value of approximately $149,100, long-term investments with an estimated value of approximately $57,100, including in-transit redemptions, and availability under Liggett’s credit facility of approximately $90,000 at March 31, 2021. Management currently anticipates that these amounts, as well as expected cash flows from our operations, proceeds from public and/or private debt and equity financing to the extent available, management fees and other payments from subsidiaries should be sufficient to meet our liquidity needs over the next 12 months.

We continue to evaluate our capital structure and current market conditions related to our capital structure. Depending on market conditions, we may utilize our cash, investment securities and long-term investments to repurchase our 10.5% Senior Notes due 2026 in open-market purchases or privately negotiated transactions.

There can be no assurance that we would be able to continue to issue debt at a lower interest rate than our historical borrowing levels in the future and, in the event we pursue any capital markets activities, our ability to complete any debt or equity offering would be subject to market conditions.

Furthermore, we may access the capital markets to refinance our 10.5% Senior Notes due 2026. We are able to redeem such bonds at price of 105.3% on November 1, 2021 and the redemption price declines to 102.625% on November 1, 2022 and 100% on November 1, 2023. There can be no assurance that we would be able to continue to issue debt at a lower interest rate than our historical borrowing levels in the future and, in the event we pursue any capital markets activities, our ability to complete any debt or equity offering would be subject to market conditions.

We may acquire or seek to acquire additional operating businesses through merger, purchase of assets, stock acquisition or other means, or to make other investments, which may limit our liquidity otherwise available.

Market Risk

We are exposed to market risks principally from fluctuations in interest rates, foreign currency exchange rates and equity prices. We seek to minimize these risks through our regular operating and financing activities and our long-term investment strategy. Our market risk management procedures cover all market risk sensitive financial instruments.

As of March 31, 2021, approximately $21,900 of our outstanding debt at face value had variable interest rates determined by various interest rate indices, which increases the risk of fluctuating interest rates. Our exposure to market risk includes interest rate fluctuations in connection with our variable rate borrowings, which could adversely affect our cash flows. As of March 31, 2021, there was no outstanding balance on the Liggett Credit Facility which also has variable interest rates. As of March 31, 2021, we had no interest rate caps or swaps. Based on a hypothetical 100 basis point increase or decrease in interest rates (1%), our annual interest expense could increase or decrease by approximately $200.

We held debt securities available for sale totaling $102,958 as of March 31, 2021. See Note 6 to our condensed consolidated financial statements. Adverse market conditions could have a significant impact on the value of these investments.

On a quarterly basis, we evaluate our debt securities available for sale and equity securities without readily determinable fair values that do not qualify for the NAV practical expedient to determine whether an impairment has occurred. If so, we also make a determination if such impairment is considered temporary or other-than-temporary. We believe that the assessment of temporary or other-than-temporary impairment is facts-and-circumstances driven. The impairment indicators that are taken into consideration as part of our analysis include (a) a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee, (b) a significant adverse change in the regulatory, economic, or technological environment of the investee, (c) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates, and (d) factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants.

Equity Security Price Risk

As of March 31, 2021, we held various investments in equity securities with a total fair value of $84,237, of which $48,629 represents equity securities at fair value and $35,608 represents long-term investment securities at fair value. The latter securities represent long-term investments in various investment partnerships. These investments are illiquid and their ultimate realization is subject to the performance of the underlying entities. See Note 6 to our condensed consolidated financial

statements, respectively, for more details on equity securities at fair value and long-term investment securities at fair value. The impact to our condensed consolidated statement of operations related to equity securities fluctuates based on changes in their fair value.

We record changes in the fair value of equity securities in net income. To the extent that we continue to hold equity securities, our operating results may fluctuate significantly. Based on our equity securities held as of March 31, 2021, a hypothetical decrease of 10% in the price of these equity securities would reduce the fair value of the investments and, accordingly, our net income by approximately $8,424.

New Accounting Pronouncements

Refer to Note 1, Summary of Significant Accounting Policies, to our financial statements for further information on New Accounting Pronouncements.

Legislation and Regulation

There are no material changes from the Legislation and Regulation section set forth in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2020, except as set forth below:

Menthol and Flavorings

The Tobacco Products Scientific Advisory Committee (“TPSAC”) completed its review of the use of menthol in cigarettes and issued a report with recommendations to the U.S. Food and Drug Administration (“FDA”) in March 2011. The report stated that “removal of menthol cigarettes from the marketplace would benefit public health in the United States,” but did not expressly recommend that FDA ban menthol cigarettes. In July 2013, FDA made available its preliminary scientific evaluation (“PSE”) of public health issues related to the use of menthol in cigarettes, in which it concluded that menthol cigarettes likely pose a public health risk above that seen with non-menthol cigarettes. FDA also issued and accepted public comment on an Advance Notice of Proposed Rulemaking (“ANPR”) seeking input related to potential regulatory options it might consider in determining what future regulatory action, if any, it believes is warranted. A decision by FDA to ban menthol in tobacco products could have a material adverse effect on us. In July 2014, the federal district court for the District of Columbia ruled on cross-motions for summary judgment in a lawsuit brought by several cigarette manufacturers against FDA challenging the composition of the TPSAC. The district court granted, in part, the manufacturers’ motion for summary judgment, ordering FDA to reconstitute the TPSAC and barring the agency from relying in any manner on the March 2011 TPSAC report on menthol. FDA appealed the decision to the U.S. Court of Appeals for the District of Columbia Circuit. In January 2016, the D.C. Circuit vacated the district court’s decision due to the manufacturers’ lack of standing and lifted the prohibition on FDA relying on the March 2011 TPSAC report. The D.C. Circuit’s decision does not preclude future challenges if FDA ultimately relies on the March 2011 TPSAC report to restrict or ban menthol in cigarettes.

In July 2017, FDA announced a comprehensive plan for Tobacco and Nicotine Regulation. As part of this comprehensive plan, FDA announced its intent to issue an ANPR requesting public stakeholder input on the impact of flavors (including menthol) on increased initiation among youth and young adults, as well as assisting adult smokers to switch to potentially less harmful forms of nicotine delivery. FDA issued this ANPR on March 21, 2018, seeking comments, data, research results, or other information about, among other things, how flavors attract youth to initiate tobacco product use and about whether and how certain flavors may help adult cigarette smokers reduce cigarette use and switch to potentially less harmful products. In the ANPR, FDA stated that potential regulatory actions include, but are not limited to, tobacco product standards and restrictions on the sale and distribution of tobacco products with flavors.

On April 29, 2021, FDA announced that it intends to issue a proposed rule to prohibit menthol as a characterizing flavor in cigarettes within the next year. FDA indicated that the proposed rule will be one of the agency’s highest priorities. The public would have at minimum 60 days to provide comments on the proposed rule and, if FDA decides to proceed, it would then draft and publish a final rule. The rulemaking process could take many months or years and once a final rule is published it ordinarily would not be expected to take effect until at least one year after the date of publication. For the twelve months ended March 31, 2021, approximately 19% of our cigarette unit sales were menthol flavored. We cannot predict how a tobacco product standard or a restriction on the sale and distribution of tobacco products with menthol, if ultimately issued by FDA, will impact product sales, whether it will have a material adverse effect on Liggett or Vector Tobacco, or whether it will impact Liggett and Vector Tobacco to a greater degree than other companies in the industry.

In December 2019, Massachusetts enacted a ban on the sale of menthol cigarettes effective June 1, 2020. Although certain municipalities throughout the United States have banned the sale of menthol cigarettes, Massachusetts is the first state to do so.

We cannot predict how the menthol ban in Massachusetts will impact product sales, whether it will have a material adverse effect on Liggett or Vector Tobacco, or whether it will impact Liggett and Vector Tobacco to a greater degree than other companies in the industry. We also cannot predict whether other states will enact similar bans on the sale of menthol cigarettes.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this report contains “forward-looking statements” within the meaning of the federal securities law. Forward-looking statements include information relating to our intent, belief or current expectations, primarily with respect to, but not limited to:

•economic outlook,

•capital expenditures,

•cost reduction,

•legislation and regulations,

•cash flows,

•operating performance,

•litigation, and

•related industry developments (including trends affecting our business, financial condition and results of operations).

We identify forward-looking statements in this report by using words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may be,” “objective,” “plan,” “seek,” “predict,” “project” and “will be” and similar words or phrases or their negatives.

The forward-looking information involves important risks and uncertainties that could cause our actual results, performance or achievements to differ materially from our anticipated results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, without limitation, the following:

•general economic and market conditions and any changes therein, due to acts of war and terrorism or otherwise,

•governmental regulations and policies,

•adverse changes in global, national, regional and local economic and market conditions, including those related to pandemics and health crises, such as the outbreak of COVID-19, which began in 2020,

•impact of legislation on our results of operations and product costs, i.e. the impact of federal legislation providing for regulation of tobacco products by FDA,

•impact of substantial increases in federal, state and local excise taxes,

•uncertainty related to product liability and other tobacco-related litigations including the Engle progeny cases pending in Florida and other individual and class action cases where certain plaintiffs have alleged compensatory and punitive damage amounts ranging into the hundreds of million and even billions of dollars,

•potential additional payment obligations for us under the MSA and other settlement agreements with the states;

•significant changes in the price, availability or quality of tobacco, other raw materials or component parts, including as a result of the COVID-19 pandemic,

•the timing and breadth of COVID-19 vaccine administration,

•adult smoker purchasing behavior of those who receive the COVID-19 vaccine,

•potential dilution to our holders of or common stock as a result of issuances of additional shares of common stock to fund our financial obligations and other financing activities,

•effects of industry competition,

•impact of business combinations, including acquisitions and divestitures, both internally for us and externally in the tobacco industry,

•the impacts of the Tax Cuts and Jobs Act of 2017, including the deductibility of interest expense and the impact of the markets on our Real Estate segment,

•the impacts of future income tax legislation in the U.S., including the impact of the markets on our Real Estate segment,

•failure to properly use and protect client and employee information and data, and

•the effect of a material breach of security or other performance issues of any of the Company’s or its vendors’ systems.

Further information on the risks and uncertainties to our business include the risk factors discussed above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission.

Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, there is a risk that these expectations will not be attained and that any deviations will be material. The forward-looking statements speak only as of the date they are made.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risk” is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and, based on their evaluation, our principal executive officer and principal financial officer have concluded that these controls and procedures are effective.

There have not been any changes in our internal control over financial reporting that occurred during the first quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

Reference is made to Note 9, incorporated herein by reference, to our condensed consolidated financial statements included elsewhere in this report which contains a general description of certain legal proceedings to which our company, or its subsidiaries are a party and certain related matters. Reference is also made to Exhibit 99.1 for additional information regarding the pending smoking-related legal proceedings to which Liggett or us is a party. A copy of Exhibit 99.1 will be furnished without charge upon written request to us at our principal executive offices, 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137, Attn. Investor Relations.

Item 1A. Risk Factors

There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2020, except as set forth below:

FDA Regulation under the Family Smoking Prevention and Tobacco Control Act may adversely affect our sales and operating profit.

In June 2009, the Family Smoking Prevention and Tobacco Control Act (“TCA”) became law. The TCA grants FDA broad authority over the manufacture, sale, marketing and packaging of tobacco products, although FDA is prohibited from banning all cigarettes or all smokeless tobacco products. For a more complete discussion of the TCA, see Item 1. Business. Legislation and Regulation.

In July 2017, FDA announced a comprehensive plan for tobacco and nicotine regulation, proposing an increased focus on the impact of flavors (including menthol) and on reducing the level of nicotine in tobacco. On April 29, 2021, FDA announced that it intends to issue a proposed rule to prohibit menthol as a characterizing flavor in cigarettes within the next year. FDA indicated that the proposed rule will be one of the agency’s highest priorities. The rulemaking process could take many months or years and once a final rule is published it ordinarily would not be expected to take effect until at least one year after the date of publication. For the last twelve months ended March 31, 2021, approximately 19% of our cigarette unit sales were menthol flavored. Regulations under the TCA that restrict or prohibit the sale of menthol flavored cigarettes would reduce the demand for our cigarettes and may have an adverse effect on our business and results of operations. We cannot predict how a tobacco product standard or a restriction on the sale and distribution of tobacco products with menthol, if ultimately issued by FDA, will impact product sales, whether it will have a material adverse effect on Liggett or Vector Tobacco, or whether it will impact Liggett and Vector Tobacco to a greater degree than other companies in the industry

As part of the comprehensive plan announced in July 2017, FDA said it would focus on nicotine addiction, with the goal of lowering nicotine levels in combustible cigarettes through a product standard developed through notice and comment rulemaking, which FDA announced in March 2018. See Item 1. Business. Legislation and Regulation. At this time, we cannot predict the specific regulations FDA will enact, the timeframe for such regulations, or the effect of such regulations. The rulemaking process could take years and once a final rule is issued it typically does not take effect for at least one year. We cannot predict how a nicotine tobacco product standard, if ultimately issued by FDA, would impact product sales, whether it would have a material adverse effect on Liggett or Vector Tobacco, or whether it would impact Liggett and Vector Tobacco to a greater degree than other companies in the industry.

In April 2018, FDA announced a change in its process for reviewing “provisional” substantial equivalence applications. See Item 1. Business. Legislation and Regulation for additional information on the substantial equivalence process. Vector Tobacco received a letter from FDA in April 2018 advising that FDA does not intend to conduct further review of Vector Tobacco’s remaining applications, with certain “conditions” (as described under Item 1. Business. Legislation and Regulation). Liggett received a letter from FDA in May 2018 advising that FDA does not intend to conduct further review for certain applications, also with certain “conditions” (as described under Item 1. Business. Legislation and Regulation). FDA has not indicated whether the applications relating to Liggett’s other products, not covered by that May 2018 letter, would proceed through FDA review. We cannot predict whether FDA will deem Liggett’s outstanding applications to be sufficient to support determinations of substantial equivalence for the products covered by these substantial equivalence reports. It is possible that FDA could determine that some, or all, of these products are “not substantially equivalent” to a preexisting tobacco product, as

the agency has already done for 20 of Liggett’s applications. NSE orders for other cigarette styles may require us to stop the sale of the applicable cigarettes and other cigarette styles and could have a material adverse effect on us.

On March 18, 2020, FDA issued a final rule to require new health warnings on cigarette packages and in cigarette advertisements. This rule requires each cigarette package and advertisement to bear one of eleven textual warning statements accompanied by a corresponding graphic image covering 50% of the area of the front and rear panels of cigarette packages and at least 20% of the area at the top of cigarette advertisements. The rule establishes marketing requirements that include the random and equal display and distribution of the required warnings for cigarette packages and quarterly rotation of the required warnings for cigarette advertisements. The final rule provided for an effective date of June 18, 2021, 15 months after issuance of the final rule. The inclusion of new warnings and rotation requirements pursuant to the final rule would likely increase Liggett’s production costs. On April 3, 2020, Liggett, along with other tobacco companies, commenced an action against the FDA in the United States District Court, District of Texas (Tyler Division) challenging the legality of the graphic warning final rule. On May 8, 2020, the court issued an updated scheduling order and granted a joint motion to postpone the effective date of the final rule by 120 days to October 16, 2021. The court subsequently postponed the effective date to April 14, 2022.

We cannot predict whether the court will delay the effective date and/or determine that some or all of the proposed textual and/or graphic warnings, or proposed prominence of the warnings, violate the First Amendment, Administrative Procedure Act, or other legal requirements, or what the impact of such a court ruling would have on the compliance timeline or requirements imposed on industry.

It is likely that the TCA and further regulatory efforts by FDA could result in a decrease in cigarette sales in the United States, including sales of Liggett’s and Vector Tobacco’s brands. Compliance and related costs are not possible to predict and depend substantially on the future requirements imposed by FDA under the law. Costs, however, could be substantial and could have a material adverse effect on the companies’ financial condition, results of operations, and cash flows. In addition, FDA has a number of investigatory and enforcement tools available to it. Failure to comply with the law and with FDA regulatory requirements could result in significant financial penalties and could have a material adverse effect on the business, financial condition and results of operation of both Liggett and Vector Tobacco. At present, we are not able to predict whether the law will impact Liggett and Vector Tobacco to a greater degree than other companies in the industry, thus affecting our competitive position.

Maintaining the integrity of our computer systems and protecting confidential information and personal identifying information has become increasingly costly, as cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.

Global cybersecurity threats and incidents can range from uncoordinated individual attempts that gain unauthorized access to information technology systems both internally and externally, to sophisticated and targeted measures known as advanced persistent threats, directed at the Company and its affiliated agents. In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and intellectual property, and personally identifiable information of our tobacco and real estate customers. Additionally, we increasingly rely on third-party data storage providers, including cloud storage solution providers. The secure processing, maintenance and transmission of this information are critical to our operations and with respect to information collected and stored by our third-party service providers, we are reliant upon their security procedures. Our systems and the confidential information on them may also be compromised by employee misconduct or employee error. We and our third-party service providers have experienced, and expect to continue to experience, these types of internal and external threats and incidents, which can result, and have resulted, in the misappropriation and unavailability of critical data and confidential or proprietary information (our own and that of third parties, including personally identifiable information) and the disruption of business operations. Depending on their nature and scope, these incidents could potentially also result in the destruction or corruption of such data and information. Our business interruption insurance may be insufficient to compensate us for losses that may occur. The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties, diminution in the value of the services we provide to our customers, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness and results of operations. Developments in the laws and regulations governing the handling and transmission of personal identifying information in the United States may require us to devote more resources to protecting such information, which could in turn adversely affect our results of operations and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

No equity securities of ours which were not registered under the Securities Act have been issued or sold by us during the three months ended March 31, 2021.

Item 6. Exhibits:


* 4.1			Indenture, dated as of January 28, 2021, among Vector Group Ltd., the guarantors named therein and U.S. Bank National Association, as trustee and collateral agent (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated January 28, 2021).

* 4.2			Pledge Agreement, dated as of January 28, 2021, between VGR Holding LLC and U.S. Bank National Association, as collateral agent (incorporated by reference to Exhibit 4.2 of Vector’s Form 8-K dated January 28, 2021).

* 4.3			Security Agreement, dated as of January 28, 2021, between Vector Tobacco Inc. and U.S. Bank National Association, as collateral agent (incorporated by reference to Exhibit 4.3 of Vector’s Form 8-K dated January 28, 2021).

* 4.4			Security Agreement, dated as of January 28, 2021, among Liggett Group LLC, 100 Maple LLC and U.S. Bank National Association, as collateral agent (incorporated by reference to Exhibit 4.4 of Vector’s Form 8-K dated January 28, 2021).

* 4.5			Second Amended and Restated Intercreditor and Lien Subordination Agreement, dated as of January 28, 2021, among Liggett Group LLC, 100 Maple LLC, U.S. Bank National Association and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.5 of Vector’s Form 8-K dated January 28, 2021).

*10.1			Amendment to the Employment Agreement dated January 15, 2021 between Vector Group Ltd. and Richard J. Lampen (incorporated by reference to Exhibit 10.1 in Vector’s Form 8-K dated January 14, 2021).

10.2			Performance-based Restricted Shares Award Agreement Pursuant to the Vector Group Ltd. 2014 Management Incentive Plan.

*10.3			Third Amended and Restated Credit Agreement, dated as of January 14, 2015, among Liggett Group LLC, 100 Maple LLC, and, upon its accession thereto pursuant to Amendment No. 4 and Joinder, Vector Tobacco Inc., the lenders party thereto from time to time and Wells Fargo Bank, National Association, as administrative and collateral agent, as amended by Amendment No. 1 to Third Amended and Restated Credit Agreement, dated as of January 27, 2017, Amendment No. 2 to Third Amended and Restated Credit Agreement, dated as of October 30, 2018, Amendment No. 3 to Third Amended and Restated Credit Agreement, dated as of October 31, 2019, and Amendment No. 4 and Joinder to Third Amended and Restated Credit Agreement, dated as of March 22, 2021 (incorporated by reference to Exhibit 10.1 of Vector’s Form 8-K dated March 22, 2021).

*22			List of Subsidiary Guarantors (incorporated by reference to Exhibit 22 of Vector’s Form 10-K for the year ended December 31, 2020).

31.1			Certification of Chief Executive Officer, Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer, Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1			Material Legal Proceedings.

99.2			Condensed Consolidating Financial Statements of Vector Group Ltd.

101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase

104			Cover Page Interactive Data File (the cover page tabs are embedded within the Inline XBRL document).

* Incorporated by reference

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


		VECTOR GROUP LTD.
		(Registrant)

		By: /s/ J. Bryant Kirkland III
		J. Bryant Kirkland III
		Senior Vice President, Treasurer and
		Chief Financial Officer
Date:	May 6, 2021

Document

EXHIBIT 10.2

PERFORMANCE-BASED RESTRICTED SHARES AWARD AGREEMENT

PURSUANT TO THE

VECTOR GROUP LTD.

2014 MANAGEMENT INCENTIVE PLAN

THIS AGREEMENT (the “Agreement”), made as of [Grant Date] (“Grant Date”), by and between Vector Group Ltd., a Delaware Corporation, with its principal office at 4400 Biscayne Boulevard, 10th Floor, Miami, FL 33137 (the “Company”), and [Participant] (the “Participant”).

WHEREAS, the Board of Directors of the Company (the “Board”) adopted the Vector Group Ltd. 2014 Management Incentive Plan on March 10, 2014 (approved by the stockholders of the Company on May 16, 2014) (as such plan may be amended from time to time, the “Plan”);

WHEREAS, the Plan provides that the Company, through the Compensation Committee of the Board (the “Committee”), can grant awards of Restricted Shares to Employees, Non-Employee Directors and Consultants who provide services to the Company; and

WHEREAS, subject to the terms and conditions of this Agreement and the Plan, the Committee has determined that Participant, an Employee of the Company, shall be awarded Restricted Shares in the amount set forth below and subject to the terms, conditions and restrictions set forth herein.

NOW, THEREFORE, the Company and the Participant each agree as follows:

1. Grant of Restricted Shares. Subject to the terms, conditions and restrictions of the Plan and this Agreement, the Company hereby grants to the Participant [Amount of] Restricted Shares effective as of the Grant Date. For the avoidance of doubt, the Participant is being granted the Restricted Shares at the closing price as of the Grant Date of $[Price] and on the same terms as were approved by the Committee on such date, and, accordingly, the Participant shall be entitled to all rights of a holder of shares of common stock of the Company (“Common Stock”) set forth in Section 4 hereof as of the Grant Date. Pursuant to the Plan and Section 2 of this Agreement, the Restricted Shares are subject to certain restrictions, some of which shall expire in accordance with the provisions of the Plan and Section 2 hereof. A book entry in Participant’s name evidencing the Restricted Shares will be made with the Company or its designated agent until such Restricted Shares are released to the Participant or forfeited in accordance with this Agreement. Unless otherwise provided herein, capitalized terms used herein that are not defined herein shall have the meanings attributable thereto in the Plan.

2. Vesting. (a) Except as otherwise provided in Sections 2(b) and 3 hereof, the Restricted Shares shall become vested in the following percentages and at the following times subject to both (i) satisfying the target for [Performance Criteria] (as defined below) on the applicable Vesting Date and (ii) Participant’s continued employment or engagement with the Company through and on the applicable Vesting Date:

Vesting Date Number of Vested Shares (Cumulative)

[Vesting Dates] [Vesting Schedule]

[Description of Performance Criteria]

There shall be no proportionate or partial vesting of the Restricted Shares in or during the months, days or periods prior to each Vesting Date, and all vesting of the Restricted Shares shall occur only on the applicable Vesting Date. Upon the termination or cessation of the Participant’s employment or engagement with the Company, other than a Without Cause Termination or a Good Reason Termination, any portion of the Restricted Shares which is not yet then vested shall automatically and without notice terminate, be forfeited and be and become null and void except as otherwise provided herein.

(b) Notwithstanding any other term or provision of this Agreement, (i) the Restricted Shares subject to this Agreement shall become immediately fully vested as of the date of a Change in Control (as defined below) provided that the Participant’s employment or engagement with the Company and its Related Entities continues through and on the date of such Change in Control; and (ii) the requirement to be continuously employed on any future Vesting Date shall be waived in the event the Participant’s employment or engagement with the Company and its Related Entities terminates through either a Without Cause Termination or a Good Reason Termination (as such quoted terms are defined below), in which case vesting will continue to be subject to achievement of the applicable level of [Performance Metric].

(d) For purposes of this Agreement, (i) a “Without Cause Termination” shall mean a termination of the Participant’s employment by the Company or a subsidiary thereof other than for Cause (as defined below) or as a result of the Participant’s death or disability, (ii) a “Good Reason Termination” shall mean a termination of the Participant’s employment by the Participant for “good reason” pursuant to and in accordance with the Participant’s written employment agreement with the Company or a subsidiary thereof (if any) on the date hereof, and (iii) “Cause” shall mean (x) the Participant’s willful misconduct or gross negligence in the performance of his or her duties for the Company or a subsidiary thereof that is not cured by the Participant within thirty (30) days after his or her receipt of written notice from the Company or such subsidiary (as applicable); (y) the Participant’s conviction of, or plea of guilty or nolo contendere to, a crime relating to the Company or a subsidiary thereof or any felony; or (z) a material breach by the Participant of the Participant’s employment agreement, offer letter or other offer arrangement with the Company or a subsidiary, or any other material written agreement entered into between the Participant and the Company or any subsidiary thereof (if any) that is not cured by the Participant within thirty (30) days after his or her receipt of written notice from the Company or such subsidiary (as applicable).

3. Effect of Vesting; Forfeiture.

(a) Upon the vesting of any Restricted Shares, such vested Restricted Shares will no longer be subject to forfeiture as provided in this Agreement. Promptly after vesting, the Company will deliver to the Participant the Restricted Shares that have vested subject to applicable tax withholding obligations pursuant to Section 10.

(b) If the Participant’s employment or engagement with the Company and the Related Entities is terminated for any reason other than a Without Cause Termination or a Good Reason Termination, the Participant shall automatically forfeit any unvested Restricted Shares and the Company shall acquire such unvested Restricted Shares for the amount paid by the Participant for such Restricted Shares (or, if no amount was paid by the Participant for such Restricted Shares, then the Company shall acquire such Restricted Shares for no consideration). The Committee shall have the power and authority to enforce on behalf of the Company any rights of the Company under this Agreement in the event of the Participant’s forfeiture of the Restricted Shares pursuant to this Section 3.

4. Rights as a Holder of Restricted Shares. From and after the Grant Date, the Participant shall have, with respect to the Restricted Shares (whether vested or unvested), all of the rights of a holder of shares of Common Stock of the Company, including, without limitation, the right to vote the shares, and to exercise all other rights, powers and privileges of a holder of shares with respect to the Restricted Shares; provided that the Participant shall be entitled to receive and retain dividends and distributions payable on the Restricted Shares (and with a record on and after the Grant Date) only if the Restricted Shares on which they are paid are subsequently vested. Any such dividend or other distribution shall be paid to the Participant as soon as reasonably practicable after the underlying Restricted Shares have become vested. No interest shall be paid on any dividends or other distributions.

5. Taxes; Section 83(b) Election. The Participant acknowledges that (i) no later than the earlier of (x) the date on which any Restricted Shares shall have become vested or (y) the date on which the Participant makes a Section 83(b) election (if he or she so chooses to make such an election), the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding payment of, any Federal, state or local or other taxes of any kind required by law to be withheld with respect to any Restricted Shares which shall have

become so vested; (ii) the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Participant any Federal, state or local or other taxes of any kind required by law to be withheld with respect to any Restricted Shares which shall have become so vested, including that the Company may, but shall not be required to, sell a number of Restricted Shares sufficient to cover applicable withholding taxes; and (iii) in the event that the Participant does not satisfy (i) above on a timely basis, the Company may, but shall not be required to, pay such required withholding and, to the extent permitted by applicable law, treat such amount as a demand loan to the Participant at the maximum rate permitted by law, with such loan, at the Company’s sole discretion and provided the Company so notifies the Participant within thirty (30) days of the making of the loan, secured by the Restricted Shares and any failure by the Participant to pay the loan upon demand shall entitle the Company to all of the rights at law of a creditor secured by the Restricted Shares. The Company may hold as security any certificates representing any Restricted Shares and, upon demand of the Company, the Participant shall deliver to the Company any certificates in his or her possession representing the Restricted Shares together with a stock power duly endorsed in blank. The Participant also acknowledges that it is his or her sole responsibility, and not the Company’s, to file timely and properly any election under Section 83(b) of the Code, and any corresponding provisions of state tax laws, if the Participant wishes to utilize such election.

6. No Obligation to Continue Employment. This Agreement is not an agreement of employment. Neither the execution of this Agreement nor the issuance of the Restricted Shares hereunder constitute an agreement by the Company or any Related Entity thereof to employ or to continue to employ the Participant during the entire, or any portion of, the term of this Agreement, including but not limited to any period during which any Restricted Shares are outstanding.

7. Legend. In the event that a certificate evidencing the Restricted Shares is issued, the certificate representing the Restricted Shares shall have endorsed thereon the following legends:

(a) “THE ANTICIPATION, ALIENATION, ATTACHMENT, SALE, TRANSFER, ASSIGNMENT, PLEDGE, ENCUMBRANCE OR CHARGE OF THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF VECTOR GROUP LTD. (THE “COMPANY”) 2014 MANAGEMENT INCENTIVE PLAN ADOPTED BY THE COMPANY’S BOARD OF DIRECTORS ON MARCH 10, 2014 (APPROVED BY THE STOCKHOLDERS OF THE COMPANY ON MAY 16, 2014) (AS SUCH PLAN MAY BE AMENDED FROM TIME TO TIME, THE “PLAN”) AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND THE COMPANY DATED AS OF [GRANT DATE]. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.”

(b) Any legend required to be placed thereon by applicable blue sky laws of any state.

Notwithstanding the foregoing, in no event shall the Company be obligated to issue a certificate representing the Restricted Shares prior to vesting as set forth in Section 2 hereof.

8. Power of Attorney. The Company, its successors and assigns, is hereby appointed the attorney-in-fact, with full power of substitution, of the Participant for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instruments which such attorney-in-fact may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. The Company, as attorney-in-fact for the Participant, may in the name and stead of the Participant, make and execute all conveyances, assignments and transfers of the Restricted Shares provided for herein, and the Participant hereby ratifies and confirms that which the Company, as said attorney-in-fact, shall do by virtue hereof. Nevertheless, the Participant shall, if so requested by the Company, execute and deliver to the Company all such instruments as may, in the judgment of the Company, be advisable for this purpose.

9. Transferability. Unless otherwise determined by the Committee, the Restricted Shares shall not be subject to a Transfer (as defined below), otherwise than by will or under the applicable laws of descent and distribution, unless and until the shares become vested under Section 2 hereof. The terms of this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Participant. Except as otherwise permitted pursuant to the first sentence of this Section 9, any attempt to effect a Transfer of any Restricted

Shares shall be void ab initio. For purposes of this Agreement, “Transfer” shall mean any sale, transfer, encumbrance, gift, donation, assignment, pledge, hypothecation, or other disposition, whether similar or dissimilar to those previously enumerated, whether voluntary or involuntary, and including, but not limited to, any disposition by operation of law, by court order, by judicial process, or by foreclosure, levy or attachment.

10. Tax Withholding. Upon each vesting of the Restricted Shares, the Company shall withhold shares of Common Stock having a Fair Market Value (as defined in the Plan) on the date the tax is to be determined equal to the minimum statutory amount to satisfy any federal, state or local taxes required by law to be withheld as a result of such vesting.

11. Miscellaneous.

(a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal legal representatives, successors, trustees, administrators, distributes, devisees and legatees. The Company may assign to, and require, any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree in writing to perform this Agreement. Notwithstanding the foregoing, the Participant may not assign this Agreement or any of the Participant’s rights, interest or obligations hereunder.

(b) This award of Restricted Shares shall not affect in any way the right or power of the Board or stockholders of the Company to make or authorize an adjustment, recapitalization or other change in the capital structure or the business of the Company, any merger or consolidation of the Company or subsidiaries, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Restricted Shares, the dissolution or liquidation of the Company, any sale or transfer of all or part of its assets or business or any other corporate act or proceeding.

(c) The Participant agrees that the award of the Restricted Shares hereunder is special incentive compensation and that, with the exception of dividends paid thereon, will not be taken into account as “salary”, “Base Salary” (as defined in the Participant’s employment agreement), “compensation” or “bonus” in determining the amount of any matching payment under the Liggett Vector Brands Savings Plan or any other pension, retirement or profit-sharing plan of the Company or subsidiary thereof or any life insurance, disability or other benefit plan of the Company or subsidiary thereof.

(d) No modification or waiver of any of the provisions of this Agreement shall be effective unless in writing and signed by the party against whom it is sought to be enforced.

(e) This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one contract, and such execution may be evidenced by electronic means pursuant to any procedures established by the Company for electronic acceptance.

(f) The failure of any party hereto at any time to require performance by another party of any provision of this Agreement shall not affect the right of such party to require performance of that provision, and any waiver by any party of any breach of any provision of this Agreement shall not be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right under this Agreement.

(g) The headings of the sections of this Agreement have been inserted for convenience of reference only and shall in no way restrict or modify any of the terms or provisions hereof.

(h) All notices, consents, requests, approvals, instructions and other communications provided for herein shall be in writing and validly given or made when delivered, or on the second succeeding business day after being mailed by registered or certified mail, whichever is earlier, to the persons entitled or required to receive the same, at the addresses set forth at the heading of this Agreement or to such other address as either party may designate by like notice. Notices to the Company shall be addressed to Vector Group Ltd. at 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137, Attn: Marc N. Bell, Senior Vice President, General Counsel and Secretary.

(i) This Agreement shall be construed and interpreted in accordance with and governed by the laws of the state of Florida (disregarding any choice of law rules which might look to the laws of any other jurisdiction).

12. Provisions of Plan Control. This Agreement is subject to all the terms, conditions and provisions of the Plan, including, without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted thereunder and as may be in effect from time to time. The Plan is incorporated herein by reference. A copy of the Plan has been delivered to the Participant. If and to the extent that this Agreement conflicts or is inconsistent with the terms, conditions and provisions of the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof (other than any other documents expressly contemplated herein or in the Plan) and supersedes any prior agreements between the Company and the Participant.

[signature page(s) follow]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

VECTOR GROUP LTD.

By: __________________________________

Name: Name of Officer]

Title: [Title of Officer]

Participant:

___________________________________________

[Participant]

Document

EXHIBIT 31.1

RULE 13a-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Howard M. Lorber, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Vector Group Ltd.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2021


			/s/ Howard M. Lorber
			Howard M. Lorber
			President and Chief Executive Officer

Document

EXHIBIT 31.2

RULE 13a-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, J. Bryant Kirkland III, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Vector Group Ltd.;

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2021


			/s/ J. Bryant Kirkland III
			J. Bryant Kirkland III
			Senior Vice President, Treasurer and Chief Financial Officer

Document

EXHIBIT 32.1

SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER

In connection with the Quarterly Report of Vector Group Ltd. (the “Company”) on Form 10-Q for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Howard M. Lorber, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 6, 2021


			/s/ Howard M. Lorber
			Howard M. Lorber
			President and Chief Executive Officer

Document

EXHIBIT 32.2

SECTION 1350 CERTIFICATION OF CHIEF FINANCIAL OFFICER

In connection with the Quarterly Report of Vector Group Ltd. (the “Company”) on Form 10-Q for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Bryant Kirkland III, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 6, 2021


			/s/ J. Bryant Kirkland III
			J. Bryant Kirkland III
			Senior Vice President, Treasurer and Chief Financial Officer

Document

Exhibit 99.1

I. INDIVIDUAL CASES

A. Engle Progeny Cases.

Pursuant to the Florida Supreme Court’s ruling in Engle v. Liggett Group Inc., which decertified the Engle class on a prospective basis, former class members had until January 2008 to file individual lawsuits. Lawsuits by individuals requesting the benefit of the Engle ruling are referred to as the “Engle progeny” cases. Liggett has resolved the claims of all but 39 Engle progeny plaintiffs. For more information on the Engle case and on the settlement, see “Note 9. Contingencies.”

(i)Engle Progeny Cases with trial dates through March 31, 2022.

Rearick. v. R.J. Reynolds Tobacco Company, et al., Case No. 2009-30059-CICI, Circuit Court of the 7th Judicial Circuit, Volusia County (case filed 01/05/09). One individual suing on behalf of the estate and survivors of a deceased smoker. The case is set for trial during the trial period starting 01/10/22.

(ii)Post-Trial Engle Progeny Cases.

Santoro v. R.J. Reynolds Tobacco Company, et al., Case No. 08-025807, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 06/05/08). On March 29, 2017, the jury returned a verdict in favor of the plaintiff and awarded compensatory damages in the amount of $1,605,000. The jury apportioned fault as follows: Decedent - 36%, Philip Morris - 28%, R.J. Reynolds - 26% and Liggett - 10% ($160,500). Defendants appealed the final judgment and Plaintiff cross-appealed. In May 2020, the Fourth District Court of Appeal affirmed the trial court on Defendants’ appellate issues. On Plaintiff’s cross-appeal, the appellate court reversed the trial court’s order granting directed verdict on strict liability and negligence claims and reinstated the jury’s verdict, including the punitive damages award. Defendants filed a notice to invoke the discretionary jurisdiction of the Florida Supreme Court which was denied. The judgment was paid by Liggett in February 2021.

B. Other Individual Cases.

Florida

Baluja v. Philip Morris USA Inc., et al., Case No. 20-CA-017956, Court of the 17th Judicial Circuit, Broward County (case filed 10/27/2020). One individual suing on behalf of the estate and survivors of a deceased smoker.

Barnes, et al. v. Philip Morris USA Inc., et al., Case No. 20-CA-000870, Circuit Court of the 8th Judicial Circuit, Alachua County (case filed 03/24/2020). Two individuals suing.

Baron, et al. v. Philip Morris USA Inc., et al., Case No. 17-CA-023133, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 12/21/17). Two individuals suing. The case is set for trial during the trial period starting 07/06/21.

Bennett, et al. v. Philip Morris USA Inc., et al., Case No. 17-CA-023046, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 12/20/17). Three individuals suing on behalf of the estate and survivors of a deceased smoker. The case is set for trial during the trial period starting 04/04/22.

Bennett v. R.J. Reynolds Tobacco Company, et al., Case No. 20-30196, Circuit Court of the 7th Judicial Circuit, Volusia County (case filed 02/27/2020). One individual suing on behalf of the estate

and survivors of a deceased smoker. Vector Group was sued, but Liggett was not named as a defendant.

Broughton v. Philip Morris USA Inc., et al., Case No. 18-CA-007187, Circuit Court of the 13th Judicial Circuit, Hillsborough County (case filed 07/25/18). One individual suing.

Bullock v. R.J. Reynolds Tobacco Company, et al., Case No. 19-028814, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 09/30/19). One individual suing.

Carmichael. et al. v. R.J. Reynolds Tobacco Company, et al., Case No. 20-025134, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 11/20/2020). Two individuals suing.

Cellini v. Philip Morris USA, Inc., et al., Case No. 20-CA-011084, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 07/08/2020). One individual suing.

Cole v. R.J. Reynolds Tobacco Company, et al., Case No. 19-000265, Circuit Court of the 6th Judicial Circuit, Pinellas County (case filed 01/11/19). One individual suing.

Cowart v. Liggett Group Inc., et al., Case No. 98-01483-CA, Circuit Court of the 4th Judicial Circuit, Duval County (case filed 03/16/98). One individual suing. Liggett is the only defendant in this case. The case is dormant.

Craig v. Philip Morris USA Inc., et al., Case No. 21-CA-008337, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 04/23/2021). One individual suing on behalf of the estate and survivors of a deceased smoker.

Cravens v. Philip Morris USA Inc., et al., Case No. 19-CA-002944, Circuit Court of the 2nd Judicial Circuit, Leon County (case filed 12/30/19). One individual suing.

Cunningham v. R.J. Reynolds Tobacco Company, et al., Case No. 17-CA-000293, Circuit Court of the 19th Judicial Circuit, St. Lucie County (case filed 02/20/17). One individual suing on behalf of the estate and survivors of a deceased smoker.

Cupp v. Philip Morris USA Inc., et al., Case No. 17-CA-020257, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 11/06/17). One individual suing. The case is set for trial in 03/22.

DaSilva, et al. v. Philip Morris USA Inc., et al., Case No. 17-CA-022955, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 12/19/17). Two individuals suing.

Davis v. R.J. Reynolds Tobacco Company, et al., Case No. 19-CA-001182, Circuit Court of the 12th Judicial Circuit, Manatee County (case filed 03/19/19). One individual suing.

Davis, M. v. Philip Morris USA Inc., et al., Case No. 2020CA001655, Circuit Court of the 8th Judicial Circuit, Alachua County (case filed 06/19/2020). One individual suing on behalf of the estate and survivors of a deceased smoker. Vector Group is a named defendant, but, not Liggett.

Feld v. Philip Morris USA Inc., et al., Case No. 17-CA-020119, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 11/03/17). One individual suing. The case is set for trial during the trial period starting 08/09/21.

Gonzalez v. Philip Morris USA Inc., et al., Case No. 18-36558, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 11/03/17). One individual suing.

Griffin v. R.J. Reynolds Tobacco Company, et al., Case No. 19-015066, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 05/17/19). One individual suing.

Harcourt v. Philip Morris USA Inc., et al., Case No. 17-CA-0202979, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 11/07/17). One individual suing.

Johnson v. R.J. Reynolds Tobacco Company, et al., Case No. 20-CA-000635, Circuit Court of the 2nd Judicial Circuit, Gadsden County (case filed 08/25/2020). One individual suing on behalf of the estate and survivors of a deceased smoker and for her own personal injuries.

Kenney v. Philip Morris USA Inc., et al., Case No. 20-CA-018169, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 10/30/2020). One individual suing.

Koedam v. Philip Morris USA Inc., et al., Case No. 19-CA-002970, Circuit Court of the 2nd Judicial Circuit, Leon County (case filed 01/03/2020). One individual suing.

Lane, et al. v. Philip Morris USA Inc., et al., Case No. 17-011591, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 06/16/17). Two individuals suing. The case is set for trial during the trial period starting 05/31/22.

McMakin. v. R.J. Reynolds Tobacco Company, et al., Case No. 20-30329, Circuit Court of the 7th Judicial Circuit, Volusia County, (case filed 03/30/2020). One individual suing on behalf of the estate and survivors of two deceased smokers. Vector Group is a named defendant, but, not Liggett.

Mendez v. Philip Morris USA Inc., et al., Case No. 18-042377, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 12/21/18). One individual suing on behalf of the estate and survivors of a deceased smoker. The case is set for trial in 11/21.

Moon v. Philip Morris USA Inc., et al., Case No. 19-CA-002941, Circuit Court of the 2nd Judicial Circuit, Leon County (case filed 12/30/19). One individual suing.

Nicholson, et al. v. R.J. Reynolds Tobacco Company, et al., Case No. 20-014354, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 07/08/2020). Two individuals suing.

Ochoa, et al. v. R.J. Reynolds Tobacco Company, et al., Case No. 20-0233114, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 10/28/2020). Two individuals suing.

Perez-Gell v. Philip Morris USA Inc., et al., Case No. 19-016287, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 05/30/19). One individual suing.

Roney v. Philip Morris USA Inc., et al., Case No. 19-CA-002943, Circuit Court of the 2nd Judicial Circuit, Leon County (case filed 12/30/19). One individual suing.

Royal v. Philip Morris USA Inc., et al., Case No. 17-CA-020204, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 10/16/17). One individual suing.

Santana v. Philip Morris USA Inc., et al., Case No. 19-37329, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 01/03/20). One individual suing.

Schnitzer v. Philip Morris USA Inc., et al., Case No. 18-026537, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 08/06/18). One individual suing on behalf of the estate and survivors of a deceased smoker.

Schoene v. R.J. Reynolds Tobacco Company, et al., Case No. 21-004689, Circuit Court of the 17th Judicial Circuit, Broward County (case filed 03/05/2021). One individual suing.

Siders v. Philip Morris USA Inc., et al., Case No. 19-CA-002942, Circuit Court of the 2nd Judicial Circuit, Leon County (case filed 12/30/19). One individual suing.

Smith v. Philip Morris USA Inc., et al., Case No. 20-008481, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 04/16/20). One individual suing on behalf of the estate and survivors of a deceased smoker.

Sweet v. Philip Morris USA Inc., et al., Case No. 19-001243, Circuit Court of the 2nd Judicial Circuit, Leon County (case filed 12/23/19). One individual suing.

Taylor v. Philip Morris USA Inc., et al., Case No. 19-CA-255, Circuit Court of the 2nd Judicial Circuit, Wakulla County (case filed 12/18/19). One individual suing.

Tozzi, Jr. v. Philip Morris USA Inc., et al. Case No. 20-CA-018210, Court of the 17th Judicial Circuit, Broward County (case filed 10/30/2020). One individual suing.

Voglio v. R.J. Reynolds Tobacco Company, et al., Case No. 18-CA-000640, Circuit Court of the 19th Judicial Circuit, Martin County (case filed 08/29/18). One individual suing on behalf of the estate and survivors of a deceased smoker.

Watson v. R.J. Reynolds Tobacco Company, et al., Case No. 20-CA-009690-O, Circuit Court of the 9th Judicial Circuit, Orange County (case filed 09/25/2020). One individual suing.

Whitehurst v. Philip Morris USA Inc., et al., Case No. 19-016282, Circuit Court of the 11th Judicial Circuit, Miami-Dade County (case filed 05/30/19). One individual suing.

Hawaii

Ricapor-Hall v. Philip Morris USA Inc., et. al., Case No. 1CCV-21-0000334, Circuit Court, First Circuit (case filed 03/16/2021). One individual suing.

Illinois

Akers, et al. v. Philip Morris USA Inc., et al., Case No. 2019-L-011779, Circuit Court of Cook County, Illinois (case filed 10/24/19). Two individuals suing.

Andersen v. Philip Morris USA Inc., et al., Case No. 2019-L-007984, Circuit Court of Cook County, Illinois (case filed 07/19/19). One individual suing.

Anderson J. v. Philip Morris USA Inc., et al., Case No. 2021-L-003338, Circuit Court of Cook County, Illinois (case filed 03/29/2021). One individual suing.

Bukowski, et al. v. Philip Morris USA, Inc., et al, Case No. 2019-L-010529, Circuit Court of Cook County, Illinois (case filed 09/24/19). Two individuals suing.

Clay v. Philip Morris USA Inc., et al., Case No. 1:18-cv-03549, United States District Court, Northern District of Illinois (case filed 04/16/18). One individual suing. Liggett is the only remaining defendant.

Dispenza, et al. v. Philip Morris USA Inc., et al., Case No. 2020-L-008496, Circuit Court of Cook County, Illinois (case filed 08/12/2020). Two individuals suing.

Jones v. Philip Morris USA Inc., et al., Case No. 1:20-cv-03349, United States District Court, Northern District of Illinois (case filed 05/04/20). One individual suing.

Jordan vs. R.J. Reynolds Tobacco Company, et al., Case No. 2021-L-000670, Circuit Court of Cook County, Illinois (case filed 01/20/2021). One individual suing.

Mitchell v. Philip Morris USA Inc., et al., Case No. 2018-L-011336, Circuit Court of Cook County, Illinois (case filed 10/22/18). One individual suing.

Porter v. R.J. Reynolds Tobacco Company, et al., Case No. 2021-L-003418, Circuit Court of Cook County, Illinois (case filed 03/31/2021). One individual suing.

Prescott v. Philip Morris USA Inc., et al., Case No. 2018-L-003905, Circuit Court of Cook County, Illinois (case filed 04/17/18). One individual suing on behalf of the estate and survivors of a deceased smoker.

Smith v. Philip Morris USA Inc., et al., Case No. 2018-L-008907, Circuit Court of Cook County, Illinois (case filed 08/16/18). One individual suing.

Stoklosa v. Philip Morris USA Inc., et al., Case No. 2019-L012409, Circuit Court of Cook County, Illinois (case filed 11/15/19). One individual suing.

Stone v. Philip Morris USA Inc., et al., Case No. 2020-L-008635, Circuit Court of Cook County, Illinois (case filed 08/17/20). One individual suing on behalf of the estate and survivors of a deceased smoker.

Louisiana

Oser v. The American Tobacco Co., et al., Case No. 97-9293, Circuit Court of the Civil District Court, Parish of Orleans (case filed 05/27/97). One individual suing. There has been no recent activity in this case.

Reese, et al. v. R. J. Reynolds, et al., Case No. 2003-12761, Circuit Court of the 22nd Judicial District Court, St. Tammany Parish (case filed 06/10/03). Five individuals suing. There has been no recent activity in this case.

Massachusetts

Moschella v. R J Reynolds Tobacco Company, et al., Case No. 2084CV01080, Superior Court, Suffolk County, Massachusetts (case filed 05/22/2020). One individual suing. Both Liggett and Liggett Vector Brands are named defendants.

Nevada

Camacho, et al. v. Philip Morris USA Inc., et al., Case No. A-19-807650C, District Court, Clark County, Nevada, (case filed 12/30/19). Two individuals suing.

Clark v. Philip Morris USA Inc., et al., Case No. A-19-802987C, District Court, Clark County, Nevada, (case filed 10/04/19). One individual suing on behalf of the estate and survivors of a deceased smoker. The case is set for trial during the trial period starting 01/03/22.

Geist v. Philip Morris USA Inc., et al., Case No. A-19-807653C, District Court, Clark County, Nevada, (case filed 12/30/19). One individual suing on behalf of the estate and survivors of a deceased smoker. The case is set for trial during the trial period starting 03/14/22.

Kelly, et al. v. Philip Morris USA Inc., et al., Case No. A-20-820112-C, District Court, Clark County, Nevada (case filed 08/25/20). Two individuals suing.

Rowan v. Philip Morris USA Inc., et al., Case No. A-20-811091C, District Court, Clark County, Nevada, (case filed 02/27/20). One individual suing on behalf of the estate and survivors of a deceased smoker.

Speed v. Philip Morris USA Inc., et al., Case No. A-20-819040-C, District Court, Clark County, Nevada, (case filed 08/04/2020). One individual suing on behalf of the estate and survivors of a deceased smoker.

Tully, et al. v. Philip Morris USA Inc., et al., Case No. A-19-807657C, District Court, Clark County, Nevada, (case filed 12/30/19). Two individuals suing. The case is set for trial during the trial period starting 05/23/22.

New Mexico

Duran v. RJ Reynolds Tobacco Company, et al., Case No. D-0101-CV-2020-01683, 1st Judicial District, Santa Fe County, New Mexico (case filed 08/04/2020). One individual suing.

Grace v. RJ Reynolds Tobacco Company, et al., Case No. D-0101-CV-2020-01689, 1st Judicial District, Santa Fe County, New Mexico (case filed 08/05/2020). One individual suing on behalf of the estate and survivors of a deceased smoker.

Lopez, H. v. RJ Reynolds Tobacco Company, et al., Case No. D-0101-CV-2020-01686, 1st Judicial District, Santa Fe County, New Mexico (case filed 08/04/2020). One individual suing on behalf of the estate and survivors of a deceased smoker.

Lopez, T. v. RJ Reynolds Tobacco Company, et al., Case No. D-0101-CV-2020-01688, 1st Judicial District, Santa Fe County, New Mexico (case filed 08/05/2020). One individual suing on behalf of the estate and survivors of a deceased smoker.

Martinez, et al. v. RJ Reynolds Tobacco Company, et al., Case No. D-0101-CV-2020-01691, 1st Judicial District, Santa Fe County, New Mexico (case filed 08/05/2020). Two individuals suing.

II. CLASS ACTION CASES

Parsons, et al. v. A C & S Inc., et al., Case No. 00-C-7000, First Judicial Circuit, West Virginia, Ohio County (case filed 02/09/98). This purported class action is brought on behalf of plaintiff and all West Virginia residents who allegedly have claims arising from their exposure to cigarette smoke and asbestos fibers. The operative complaint seeks to recover unspecified compensatory and punitive damages on behalf of the putative class. The case is stayed as a result of the December 2000 bankruptcy petitions filed by three defendants (Nitral Liquidators, Inc., Desseaux Corporation of North America and Armstrong World Industries).

Young, et al. v. American Brands Inc., et al., Case No. 97-19984cv, Civil District Court, Louisiana, Orleans Parish (case filed 11/12/97). This purported personal injury class action is brought on behalf of plaintiff and all similarly situated residents in Louisiana who, though not themselves cigarette smokers, were exposed to secondhand smoke from cigarettes that were manufactured by the defendants, including Liggett, and suffered injury as a result of that exposure. The plaintiffs seek an unspecified amount of compensatory and punitive damages. No class certification hearing has been held. In March 2016, the court entered an order staying the case, including all discovery, pending the completion of the smoking cessation program ordered by the court in Scott v. The American Tobacco Co.

III. HEALTH CARE COST RECOVERY ACTIONS

Crow Creek Sioux Tribe v. The American Tobacco Company, et al., Case No. cv-97-09-082, Tribal Court of the Crow Creek Sioux Tribe, South Dakota (case filed 09/26/97). The plaintiff seeks to recover actual and punitive damages, restitution, funding of a clinical cessation program, funding of a corrective public education program and disgorgement of unjust profits from alleged sales to minors. The case is dormant.

Document

EXHIBIT 99.2

Vector Group Ltd.

Condensed Consolidating Financial Statements

March 31, 2021

(in thousands of dollars)

Presented herein are Condensed Consolidating Balance Sheet as of March 31, 2021 and the related Condensed Consolidating Statements of Operations for the three months ended March 31, 2021 of Vector Group Ltd. (Parent/Issuer), the guarantor subsidiaries (Subsidiary Guarantors) and the subsidiaries that are not guarantors (Subsidiary Non-Guarantors).

CONDENSED CONSOLIDATING BALANCE SHEETS


	March 31, 2021
					Subsidiary				Consolidated
	Parent/		Subsidiary		Non-		Consolidating		Vector Group
	Issuer		Guarantors		Guarantors		Adjustments		Ltd.
ASSETS:
Current assets:
Cash and cash equivalents	$	173,718	$	83,127	$	125,542	$	—	$	382,387
Investment securities at fair value	149,087		—		—		—		149,087
Accounts receivable - trade, net	—		23,016		22,889		—		45,905
Intercompany receivables	5,902		—		—		(5,902)		—
Inventories	—		100,945		—		—		100,945

Income taxes receivable, net	3,419		—		—		(3,419)		—

Other current assets	1,245		5,813		39,848		—		46,906
Total current assets	333,371		212,901		188,279		(9,321)		725,230
Property, plant and equipment, net	426		25,858		49,394		—		75,678
Investments in real estate, net	—		—		15,802		—		15,802
Long-term investment securities at fair value	54,099		—		2,896		—		56,995
Investments in real estate ventures	—		—		83,984		—		83,984
Operating lease right-of-use assets	5,672		5,658		129,447		—		140,777
Investments in consolidated subsidiaries	428,542		203,754		—		(632,296)		—


Goodwill and other intangible assets, net	—		107,511		100,025		—		207,536

Other assets	15,771		50,654		31,160		—		97,585
Total assets	$	837,881	$	606,336	$	600,987	$	(641,617)	$	1,403,587
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Current portion of notes payable and long-term debt	$	—	$	12,525	$	12,531	$	(12,500)	$	12,556


Intercompany payables	—		4,073		1,829		(5,902)		—

Income taxes payable, net	—		18,260		1,617		(3,419)		16,458

Current payments due under the Master Settlement Agreement	—		73,036		—		—		73,036
Current operating lease liability	1,640		1,589		23,978		—		27,207

Other current liabilities	43,152		90,176		70,341		(28)		203,641
Total current liabilities	44,792		199,659		110,296		(21,849)		332,898
Notes payable, long-term debt and other obligations, less current portion	1,395,522		9,433		9,819		(9,375)		1,405,399

Non-current employee benefits	57,737		8,985		—		—		66,722
Deferred income taxes, net	(9,936)		23,789		21,001		—		34,854
Non-current operating lease liability	5,510		4,599		138,308		—		148,417
Other liabilities, including litigation accruals and payments due under the Master Settlement Agreement	755		35,197		36,770		(926)		71,796
Total liabilities	1,494,380		281,662		316,194		(32,150)		2,060,086
Commitments and contingencies
Stockholders' (deficiency) equity attributed to Vector Group Ltd.	(656,499)		324,674		284,793		(609,467)		(656,499)

Total stockholders' (deficiency) equity	(656,499)		324,674		284,793		(609,467)		(656,499)
Total liabilities and stockholders' deficiency	$	837,881	$	606,336	$	600,987	$	(641,617)	$	1,403,587

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS


			Three Months Ended March 31, 2021
					Subsidiary				Consolidated
	Parent/		Subsidiary		Non-		Consolidating		Vector Group
	Issuer		Guarantors		Guarantors		Adjustments		Ltd.
Revenues	$	—	$	268,486	$	275,493	$	(215)	$	543,764
Expenses:
Cost of sales	—		164,031		199,511		—		363,542
Operating, selling, administrative and general expenses	9,646		19,786		60,797		(215)		90,014
Litigation settlement and judgment expense	—		5		—		—		5


Management fee expense	—		3,241		—		(3,241)		—

Operating (loss) income	(9,646)		81,423		15,185		3,241		90,203
Other income (expenses):
Interest expense	(28,103)		(645)		(31)		28		(28,751)


Loss on extinguishment of debt	(21,362)		—		—		—		(21,362)
Equity in earnings from real estate ventures	—		—		1,589		—		1,589
Equity in earnings from investments	577		—		—		—		577



Equity in earnings (losses) in consolidated subsidiaries	72,844		13,924		—		(86,768)		—
Management fee income	3,241		—		—		(3,241)		—
Other, net	2,435		362		30		(73)		2,754
Income before provision for income taxes	19,986		95,064		16,773		(86,813)		45,010
Income tax benefit (expense)	11,971		(20,317)		(4,707)		—		(13,053)
Net income	31,957		74,747		12,066		(86,813)		31,957

Net income attributed to Vector Group Ltd.	$	31,957	$	74,747	$	12,066	$	(86,813)	$	31,957

Comprehensive income attributed to Vector Group Ltd.	$	32,146	$	74,862	$	12,066	$	(86,928)	$	32,146