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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
Form 10-K
_____________________________________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended December 31, 2023

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)
_____________________________________________
Delaware1-575965-0949535
(State or other jurisdiction of incorporation
incorporation or organization)
Commission File Number(I.R.S. Employer Identification No.)
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 Section 12(b) of the Act:
Title of each class:Trading Symbol(s)Name of each exchange on which registered:
Common stock, par value $0.10 per shareVGRNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes o No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. o Yes þ No
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, as amended (the “Exchange Act”), 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.  þ 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 such files).  þ Yes     o No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging Growth Company
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. 
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.  
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b)
Indicate by check mark whether the Registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.  Yes þ No
The aggregate market value of the common stock held by non-affiliates of Vector Group Ltd. as of June 30, 2023 was approximately $1.89 billion.
At February 14, 2024, Vector Group Ltd. had 157,683,020 shares of common stock outstanding.


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DOCUMENTS INCORPORATED BY REFERENCE:
Part III (Items 10, 11, 12, 13 and 14) from the definitive Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission no later than 120 days after the end of the Registrant’s fiscal year covered by this report.



VECTOR GROUP LTD.
FORM 10-K
TABLE OF CONTENTS
  Page
Item 1C.
 
Reserved
 
 
Item 16.Form 10-K Summary
 EX-21.1
 EX-22.1
 EX-23.1
 EX-31.1
 EX-31.2
 EX-32.1
 EX-97.1
 EX-99.1
 EX-99.2
 EX-101 INSTANCE DOCUMENT - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT
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PART I

ITEM 1. BUSINESS
Basis of Presentation
The Consolidated Financial Statements included in this annual report present the financial position of Vector Group Ltd., a Delaware corporation, as of December 31, 2023 and 2022 and the results of our operations for the years ended December 31, 2023, 2022 and 2021. Our results of operations for the year ended December 31, 2021 give effect to the distribution to our stockholders (including Vector common stock underlying outstanding stock options awards and restricted stock awards) of the common stock of Douglas Elliman Inc. (the “Distribution”) with the historical financial results of Douglas Elliman reflected as discontinued operations. The cash flows and comprehensive income related to Douglas Elliman have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, respectively, for the 2021 period presented. Unless otherwise indicated, the information in the Notes to the Consolidated Financial Statements related to the 2021 period refers only to Vector Group’s continuing operations and does not include discussion of balances or activity of Douglas Elliman.
Distribution of and Relationship with Douglas Elliman
On December 29, 2021, at 11:59 p.m., New York City time, we completed the Distribution. Following the Distribution, Douglas Elliman is a separate public company listed on the New York Stock Exchange trading under the symbol “DOUG” and owns the real estate services and property technology investment business formerly owned by Vector Group through Vector Group’s subsidiary New Valley LLC, a Delaware limited liability company. Vector Group and Douglas Elliman entered into a Distribution Agreement and several ancillary agreements for the purpose of accomplishing the distribution of Douglas Elliman common stock to Vector Group’s stockholders. These agreements also govern our relationship with Douglas Elliman after the Distribution and provide for the allocation of employee benefits, tax and additional liabilities and obligations attributable to periods before and after the distribution. These agreements also include a Transition Services Agreement with respect to transition services and several ongoing commercial relationships. The Distribution Agreement includes an agreement that Vector Group and Douglas Elliman will provide each other with appropriate indemnities with respect to liabilities arising out of their businesses. We also entered into a Tax Disaffiliation Agreement with Douglas Elliman that governs each of our respective rights, responsibilities and obligations with respect to taxes and tax benefits, the filing of tax returns, the control of audits and other tax matters. Douglas Elliman is party to other arrangements with Vector Group and its subsidiaries.
Overview
Vector Group is a holding company and is engaged principally in two business segments:
Tobacco: the manufacture and sale of discount cigarettes in the United States through our Liggett Group LLC and Vector Tobacco LLC subsidiaries, and
Real Estate: the real estate investment business through our subsidiary, New Valley LLC, which acquires and invests in real estate properties or projects.
Strategy
Our strategy is to maximize stockholder value by increasing the profitability of our subsidiaries in the following ways:
Liggett and Vector Tobacco
Continue to offer excellent value propositions in the U.S. cigarette industry by consistently delivering high-quality products within the discount segment;
Capitalize on our tobacco subsidiaries’ cost advantage in the U.S. cigarette market under the Master Settlement Agreement or the MSA;
Focus marketing and selling efforts on the discount segment, continue to build volume and margin in focus discount brands (Montego, Eagle 20’s, and Pyramid) and utilize core brand equity to selectively build distribution;
Selectively expand the portfolio of partner brands and private label brands utilizing a pricing strategy that offers long-term price stability for customers; and
Identify, develop and launch relevant new tobacco products to the market in the future.
New Valley
Continue to leverage our expertise as direct investors by actively pursuing real estate investments; and
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Invest our excess funds opportunistically in real estate situations that we believe can maximize stockholder value.
Tobacco Operations
General. Our Tobacco segment operates through our two discount cigarette manufacture subsidiaries, Liggett and Vector Tobacco. Liggett is the operating successor to Liggett & Myers Tobacco Company, which was founded in 1873. In this report, certain references to “Liggett” refer to our tobacco operations, including the business of Liggett and Vector Tobacco, unless otherwise specified.
For the year ended December 31, 2023, Liggett was the fourth-largest manufacturer of cigarettes in the U.S. in terms of unit sales. Liggett’s manufacturing facilities are in Mebane, North Carolina, where it also manufactures most of Vector Tobacco’s cigarettes pursuant to a contract manufacturing agreement. At present, Liggett and Vector Tobacco have no international operations.
The U.S. cigarette market consists of premium cigarettes, which are generally marketed under well-recognized brand names at higher retail prices to adult smokers with a strong preference for branded products, and discount cigarettes, which are marketed at lower retail prices to adult smokers who are more value conscious. In recent years, however, the discounting of premium cigarettes has become far more significant in the marketplace. Since 2004, Liggett has only produced discount cigarettes and all of its units sold in 2023, 2022 and 2021 were in the discount segment.
According to data from Management Science Associates, Inc., or MSAi, the discount segment represented 31.5% of the total U.S. cigarette market in 2023 compared to 29.4% in 2022 and 28.3% in 2021. Liggett’s domestic shipments of approximately 9.7 billion cigarettes during 2023 accounted for 5.5% of the total cigarettes shipped in the U.S. during such year. Liggett’s market share was 5.4% and 4.1% in 2022 and 2021, respectively. According to MSAi, Liggett held a share of approximately 17.5% of the overall discount market segment for 2023 compared to 18.5% for 2022 and 14.4% for 2021.
Liggett’s value propositions. Liggett produces cigarettes in approximately 100 combinations of length, style and packaging. Liggett’s current brand portfolio includes:
Montego — From August 2020 to February 2022, Liggett expanded the distribution of its Montego deep discount brand from select target markets in four states to nationwide. Montego became Liggett’s largest brand by volume during the second quarter of 2022. Montego’s unit volume represented 64% of Liggett’s total unit volume sales in 2023, 47% in 2022 and 16% in 2021.
Eagle 20’s — A brand positioned in the discount segment for long-term growth re-launched as a national brand in 2013; Eagle 20’s represented 24% of Liggett’s unit volume in 2023, 35% in 2022 and 57% in 2021. Eagle 20’s is Liggett’s second largest brand.
Pyramid — A brand re-launched in 2009 as a deep discount product; Pyramid, Liggett’s third-largest brand, represented 8% of Liggett’s unit volume in 2023, 13% in 2022 and 20% in 2021.
Grand Prix, Liggett Select, Eve, USA and various partner brands and private label brands.
Cost advantage under the Master Settlement Agreement. Under the MSA reached in November 1998 with 46 states and various territories, cigarette manufacturers selling product in the U.S. must make settlement payments to the states and territories based on how many cigarettes they sell annually. Liggett, however, is not required to make any payments unless its market share exceeds its grandfathered market share established under the MSA of approximately 1.65% of the U.S. cigarette market. Additionally, Vector Tobacco has no payment obligation unless its market share exceeds approximately 0.28% of the U.S. cigarette market. We believe our tobacco subsidiaries have gained a sustainable cost advantage over their competitors because of the settlement.
Liggett’s and Vector Tobacco’s payments under the MSA are based on each respective company’s incremental market share above the grandfathered market share applicable to each respective company. Thus, if Liggett’s total market share is 4%, its MSA payment is based on 2.35%, which is the difference between Liggett’s total market share of 4% and its approximate applicable grandfathered market share of 1.65%. We anticipate that both Liggett’s and Vector Tobacco’s payment exemptions will be fully utilized for the foreseeable future.
The source of industry data in this report is MSAi, an independent third-party data management organization that collects wholesale and retail shipment data from various cigarette manufacturers and distributors and provides analysis of market share and unit sales volume. Specifically, information relating to unit sales volume and market share of certain smaller cigarette manufacturers is based on estimates developed by MSAi.
Sales, Marketing and Distribution. Liggett’s products are distributed from a central distribution center in Mebane, North Carolina to public warehouses located throughout the U.S. by third-party trucking companies. These warehouses serve as local distribution centers for Liggett’s customers.
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Liggett’s customers are primarily wholesalers and distributors of tobacco and convenience products as well as large variety, grocery, convenience and drug store chains. Two customers accounted for 13% and 10% of Liggett’s revenues in 2023, 15% and 11% of Liggett’s revenues in 2022 and 14% and 12% of Liggett’s revenues in 2021. Concentrations of credit risk with respect to trade receivables are generally limited due to Liggett’s large number of customers. Liggett’s two largest customers represented approximately 4% and 8%, respectively, of net accounts receivable as of December 31, 2023, 4% and 37%, respectively, as of December 31, 2022 and 0% and 2%, respectively, as of December 31, 2021. Ongoing credit evaluations of customers’ financial condition are performed and, generally, no deposit is required. Liggett maintains appropriate reserves for potential credit losses and such losses, in the aggregate, have not exceeded management’s expectations.
Trademarks. All major trademarks used by Liggett are federally registered or are in the process of being registered in the U.S. and other markets. Trademark registrations typically have a duration of ten years and can be renewed at Liggett’s option prior to their expiration date.
In view of the significance of cigarette brand awareness among consumers, management believes that the protection afforded by these trademarks is material to the conduct of its business. These trademarks are pledged as collateral for certain of our senior secured debt.
Manufacturing. Liggett purchases and maintains leaf tobacco inventory to support its cigarette manufacturing requirements. Liggett believes that there is a sufficient worldwide supply of tobacco to satisfy its current production requirements. Liggett stores its leaf tobacco inventory in warehouses in North Carolina and Virginia. There are several different types of leaf tobacco, including flue-cured, burley, Maryland, oriental, cut stems and reconstituted sheet. Leaf components of American-style cigarettes are generally the flue-cured and burley tobaccos. While premium and discount brands use many of the same tobacco products, input ratios of these products may vary between premium and discount products. Liggett purchases its tobacco requirements from both domestic and international leaf dealers, much of it under long-term purchase commitments. As of December 31, 2023, the majority of Liggett’s commitments were for the purchase of tobacco from domestic and international leaf dealers.
Liggett’s cigarette manufacturing facility was designed for the execution of short production runs in a cost-effective manner, which enables Liggett to manufacture and market approximately 100 different cigarette brand styles. Liggett’s facility produced approximately 9.7 billion cigarettes in 2023 and maintains the capacity to produce approximately 17.6 billion cigarettes per year. Vector Tobacco has contracted with Liggett to produce most of its cigarettes at Liggett’s manufacturing facility in Mebane.
Competition. Liggett’s competition is divided into two segments. The first segment consists of the three largest manufacturers of cigarettes in the U.S.: 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.
Historically, there have been substantial barriers to entry into the cigarette business, including extensive distribution organizations, large capital outlays for sophisticated production equipment, substantial inventory investment, costly promotional spending, regulated advertising and, for premium brands, strong brand loyalty. However, after the MSA was signed, some smaller manufacturers and importers that are not parties to the MSA (“Non-Participating Manufacturers”) were able to overcome these competitive barriers due to an unintended cost advantage resulting from the MSA. These Non-Participating Manufacturers were subsequently impacted by the state statutes enacted pursuant to the MSA; however, these companies still have significant market share in the aggregate through competitive pricing in the discount segment.
In the cigarette business, Liggett competes on dual fronts. Philip Morris and RJ Reynolds, the two largest cigarette manufacturers, compete among themselves for premium brand market share based on advertising, promotional activities, trade rebates and incentives. They compete with Liggett and others for discount market share, primarily on the basis of price and in-store merchandising. These competitors have substantially greater financial resources than Liggett, and most of their brands have greater sales and consumer recognition than Liggett’s products. Liggett’s discount brands must also compete in the marketplace with the deep discount brands of smaller manufacturers and importers.
According to MSAi’s data, the unit sales of Philip Morris and RJ Reynolds accounted in the aggregate for 69.2% of the domestic cigarette market in 2023. Liggett’s domestic shipments of approximately 9.7 billion cigarettes during 2023 accounted for 5.5% of the approximately 177 billion cigarettes shipped in the U.S., compared to 10.4 billion cigarettes in 2022 (5.4%) and 8.6 billion cigarettes in 2021 (4.1%).
In 2023, industry wide shipments in the U.S. decreased by 7.5% (approximately 14.2 billion units) and for the five-year period from 2018 to 2023, industry-wide shipments of cigarettes in the U.S. have declined by approximately 5.6% per annum. Liggett’s management believes that industry-wide shipments of cigarettes in the U.S. will continue to decline because of
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numerous factors. These factors include health considerations, diminishing social acceptance of smoking, and a wide variety of federal, state and local laws limiting smoking in public places, as well as increases in federal and state excise taxes and settlement-related expenses which have contributed to higher cigarette prices in recent years.
Philip Morris and RJ Reynolds’ domination of the domestic cigarette market makes it more difficult for Liggett to compete for shelf space in retail outlets and could impact price competition in the market, either of which could have a material adverse effect on its sales volume, operating income and cash flows.
Historically, Philip Morris and RJ Reynolds have been able to determine cigarette prices for the various pricing tiers within the industry. Market pressures have historically caused other cigarette manufacturers to bring their prices in line with the levels established by these two major manufacturers. Off-list price discounting and similar promotional activity by manufacturers, however, has substantially affected the average price differential at retail, which can be significantly less than the manufacturers’ list price gap. In addition, in recent years, the discount segment has experienced increased price competition from smaller manufacturers which has led to more aggressive price discounting of certain “deep discount” brands when compared to “traditional discount” brands. Consequently, changes in the price gap of products at retail between “deep discount” and “traditional discount” has led to shifts in price segment performance.

Legislation and Regulation
In the U.S., tobacco products are subject to substantial and increasing legislation, regulation, taxation, and litigation, which have a negative effect on revenue and profitability.
The cigarette industry continues to be challenged on numerous fronts. The industry faces increased pressure from anti-smoking groups and continued smoking and health litigation, the effects of which, at this time, we are unable to quantify. Product liability litigation continues to adversely affect the cigarette industry. See Item 1A. “Risk Factors”, Item 3. “Legal Proceedings” and Note 15 to our consolidated financial statements, which contain a description of litigation.
The harmful physical effects of cigarette smoking have been publicized for many years and, in the opinion of Liggett’s management, have had and will continue to have an adverse effect on cigarette sales. Since 1964, the Surgeon General of the U.S. and the Secretary of Health and Human Services have released a number of reports stating that cigarette smoking is a causative factor with respect to a variety of health hazards, including certain cancers and heart and lung disease and have recommended various government actions to reduce the incidence of smoking. In 1997, Liggett publicly acknowledged that, as the Surgeon General and respected medical researchers have found, smoking causes health problems, including lung cancer, heart and vascular disease, and emphysema.
On June 22, 2009, the Family Smoking Prevention and Tobacco Control Act (the “TCA”) became law. The law grants the U.S. Food and Drug Administration (“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. Among other measures, the law (under various deadlines):
requires FDA to develop graphic warnings for cigarette packages and grants FDA authority to require new warnings;
imposes new restrictions on the sale and distribution of tobacco products, including significant new restrictions on tobacco product advertising and promotion, as well as the use of brand and trade names;
bans the use of “light,” “mild,” “low” or similar descriptors on tobacco products;
bans the use of “characterizing flavors” in cigarettes other than tobacco or menthol;
gives FDA the authority to impose tobacco product standards that are appropriate for the protection of the public health (by, for example, requiring reduction or elimination of the use of particular constituents or components, requiring product testing, or addressing other aspects of tobacco product construction, constituents, properties or labeling);
requires manufacturers to obtain FDA review and authorization for the marketing of certain new or modified tobacco products which could ultimately result in FDA prohibiting Liggett from selling certain of its products;
requires pre-market approval by FDA for tobacco products represented (through labels, labeling, advertising, or other means) as presenting a lower risk of harm or tobacco-related disease;
requires manufacturers to report ingredients and harmful constituents and requires FDA to disclose certain constituent information to the public;
mandates that manufacturers test and report on ingredients and constituents identified by FDA as requiring such testing to protect the public health and allows FDA to require the disclosure of testing results to the public;
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requires manufacturers to submit to FDA certain information regarding the health, toxicological, behavioral or physiological effects of tobacco products;
requires FDA to establish “good manufacturing practices” to be followed at tobacco manufacturing facilities;
authorizes FDA to require the reduction of nicotine (although it may not require the reduction of nicotine yields of a tobacco product to zero) and the potential reduction or elimination of other constituents, including menthol;
imposes (and allows FDA to impose) various recordkeeping and reporting requirements on tobacco product manufacturers; and
grants FDA broad regulatory authority to impose additional restrictions.
The TCA imposes user fees on certain tobacco product manufacturers in order to fund tobacco-related FDA activities. User fees are allocated among tobacco product classes according to a formula set out in the statute, and then among manufacturers and importers within each class based on market share. FDA user fees for 2023 were $32,121 for Liggett and Vector Tobacco combined and will likely increase in the future.
The law also required establishment of a Tobacco Products Scientific Advisory Committee (“TPSAC”) to provide advice, information and recommendations with respect to safety, dependence and health issues related to tobacco products.
Menthol and Flavorings
In May 2022, FDA published a proposed rule to prohibit menthol as a characterizing flavor in cigarettes. For the year ended December 31, 2023, approximately 21% of our cigarette unit sales were menthol flavored. FDA is expected to adopt a final rule in 2024. 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. In addition, if litigation is brought against FDA’s menthol regulation, the effective date may be extended further.
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 addition to FDA, California, Massachusetts, the District of Columbia and some cities have, or are considering, a ban on the sale of menthol cigarettes. While the menthol bans in Massachusetts, California, and the District of Columbia have not had a material impact on Liggett or Vector Tobacco’s product sales to date, we cannot predict whether additional states or cities will enact similar bans on the sale of menthol cigarettes and whether they will impact product sales or have a material adverse effect on Liggett or Vector Tobacco.
Advertising and Warnings on Packaging
The TCA imposed significant new restrictions on the advertising and promotion of tobacco products. As written, these regulations significantly limit the ability of manufacturers, distributors and retailers to advertise and promote tobacco products, by, for example, restricting the use of color and graphics in advertising, limiting the use of outdoor advertising, restricting the sale and distribution of non-tobacco items and services, gifts, and sponsorship of events, and imposing restrictions on the use for cigarette or smokeless tobacco products of trade or brand names that are used for non-tobacco products.
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. In December 2022, the district court granted plaintiffs’ motion for summary judgment finding that the graphic warning final rule violated the rights of the tobacco companies under the First Amendment. The final rule has been vacated and FDA has appealed the ruling. A decision on the appeal is pending with the circuit court. The inclusion of new warnings and rotation requirements pursuant to the final rule would likely increase Liggett’s production costs.
Product Review
The TCA requires premarket review of “new tobacco products.” A “new tobacco product” is one that was not commercially marketed in the U.S. as of February 15, 2007 or that was modified after that date. In general, before a company may commercially market a “new tobacco product,” it must either (a) submit an application and obtain an order from FDA permitting the product to be marketed; or (b) submit an application and receive an FDA order finding the product to be “substantially equivalent” to a “predicate” tobacco product that was commercially marketed in the U.S. as of February 15,
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2007. A “substantially equivalent” tobacco product is one that has the “same characteristics” as the predicate or one that has “different characteristics” but does not raise “different questions of public health.”
Manufacturers of products first introduced after February 15, 2007 and before March 22, 2011 who submitted a substantial equivalence application to FDA prior to March 23, 2011 may continue to market the tobacco product unless FDA issues an order that the product is not substantially equivalent (“NSE”). Failure to timely submit the application, or FDA’s conclusion that such a “new tobacco product” is not substantially equivalent, will cause the product to be deemed misbranded and/or adulterated. After March 22, 2011, a “new tobacco product” may not be marketed without an FDA substantial equivalence determination. Prior to the deadline, Liggett and Vector Tobacco submitted substantial equivalence applications to FDA for each of their respective cigarette brand styles.
To date, Liggett has received NSE orders relating to 20 cigarette brand styles. Liggett has elected to pursue administrative appeals with FDA for 14 of the 20 cigarette brand styles and discontinued six brand styles. Sales of these 14 cigarette brand styles accounted for approximately 0.4% of the tobacco segment’s annual revenue in 2023. Liggett is continuing to sell the affected cigarette brand styles during the administrative appeal process. Vector Tobacco received NSE orders relating to three cigarette brand styles in November 2017. Sales of these three cigarette brand styles accounted for approximately 0.3% of the tobacco segment’s annual revenue in 2023. Vector Tobacco elected to pursue administrative appeals with FDA and is continuing to sell the affected cigarette brand styles during the administrative appeal process.
On April 5, 2018, FDA announced a change in its process for reviewing “provisional” substantial equivalence applications. Both Liggett and Vector Tobacco submitted provisional substantial equivalence applications for all of their respective cigarette brand styles. FDA announced that it will continue to review the approximately 1,000 pending provisional applications that were determined to have the greatest potential to raise different questions of public health and will remove from review the approximately 1,500 provisional applications that were determined less likely to do so.
As a result, 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 substantial equivalence applications that have not yet received a substantial equivalence determination unless one of the following occurs: (i) the new tobacco product that is the subject of the provisional application is also the subject of another pending application submitted by the same manufacturer; (ii) FDA receives new information (e.g., from inspection findings) suggesting that the new tobacco product that is the subject of a provisional application is more likely to have the potential to raise different questions of public health than previously determined; or (iii) FDA has reason to believe that the new tobacco product was not introduced or delivered for introduction into interstate commerce for commercial distribution in the U.S. after February 15, 2007, and prior to March 22, 2011 ((i), (ii) and (iii) are collectively, the “Conditions”).
On May 21, 2018, FDA sent a letter to Liggett stating that the products identified in the letter would be removed from review unless one of the Conditions occurs.
We cannot predict whether FDA will deem Liggett’s and Vector Tobacco’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.
Nicotine
On June 21, 2022, FDA indicated it plans to publish a proposed rule that establishes a tobacco product standard reducing the level of nicotine in cigarettes to non-addictive levels. FDA has indicated it may publish a proposed rule in April 2024. 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. We cannot predict how a tobacco product standard reducing nicotine, 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.
Good Manufacturing Practices

In March 2023, the FDA, pursuant to the requirements of the TCA, issued a proposed rule with new requirements for tobacco product manufacturers regarding the manufacture, design, packing and storage of tobacco products.
This proposed rule establishes a framework of good manufacturing practices, including:
establishing tobacco product design and development controls;
ensuring that finished and bulk tobacco products are manufactured according to established specifications;
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minimizing the manufacture and distribution of tobacco products that do not meet specifications;
requiring manufacturers to take appropriate measures to prevent contamination of tobacco products;
requiring investigation and identification of products that do not meet specifications and requiring manufacturers to institute appropriate corrective actions, such as a recall; and
establishing the ability to trace all components or parts, ingredients, additives and materials, as well as each batch of finished or bulk tobacco products, to aid in investigations of those that do not meet specifications.
The rulemaking process could take many months or years and once a final rule is published, it would likely not take effect until at least two years after the date of publication. If finalized as proposed, the new good manufacturing practices requirements would likely increase Liggett’s and Vector Tobacco’s production costs.
State Minimum Price Legislation
In 2020, voters in the State of Colorado approved Proposition EE, increasing taxes on cigarettes, tobacco and nicotine products. In addition to raising the Colorado state excise tax on cigarettes, Proposition EE included a provision that fixed the minimum retail price of cigarettes in Colorado at $7.00 per pack as of January 1, 2021, and thus reduced the competitive advantage of our Company’s deep discount priced cigarettes in the Colorado marketplace. We were unsuccessful in litigation against Colorado challenging the legality of the minimum price provision contained in Proposition EE. Although no other state has adopted a fixed minimum retail price law for cigarettes, other states may attempt to do so. In the event that other states pass minimum price legislation, the result could have a material adverse effect on our financial condition, results of operations and cash flows.
The MSA and Other State Settlement Agreements
In March 1996, March 1997, and March 1998, Liggett entered into settlements of tobacco-related litigation with 45 states and territories. The settlements released Liggett from all tobacco-related claims within 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 (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 the “Participating Manufacturers”) entered into the MSA with 46 states and various territories (collectively, the “Settling States”) to settle the asserted and unasserted healthcare cost recovery and certain other claims of those Settling States. The MSA has 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; and (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 Participating Manufacturers. 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 Participating Manufacturer 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 Participating Manufacturers from licensing third parties to advertise tobacco brand names in any manner prohibited under the MSA; and prohibits Participating Manufacturers 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 Participating Manufacturers to affirm corporate principles to comply with the MSA and to reduce underage usage of tobacco products and imposes restrictions on lobbying activities conducted on behalf of Participating Manufacturers. 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, the Participating Manufacturers are required to make annual payments of $9.0 billion (subject to applicable adjustments, offsets and reductions). These annual payments are allocated based on unit volume of
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domestic cigarette shipments. The payment obligations under the MSA are the several, and not joint, obligations of each Participating Manufacturer and are not the responsibility of any parent or affiliate of a Participating Manufacturer.
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 U.S. 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 U.S. Liggett and Vector Tobacco’s domestic shipments accounted for 5.5% of the total cigarettes sold in the U.S. in 2023. 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 must pay on each excess unit an amount equal (on a per-unit basis) to that due from the OPMs for that year.
Liggett may have additional payment obligations under the MSA and its other settlement agreements with the states. See Item 1A. “Risk Factors” and Note 15 to our consolidated financial statements.
New Valley
New Valley is our real estate investment business. We have invested in numerous real estate projects in different asset classes, including planned communities, condominium and mixed–use developments, apartment buildings, hotels and commercial properties.
Real Estate Investments
In our real estate investment business, we seek to acquire investment interests in domestic and international real estate projects through debt and equity investments. We and our partners seek to enhance the cash flows and returns from our investments by using varying levels of leverage. In addition, we and our partners may earn incentives on certain investments if the investments achieve rates of return that exceed targeted thresholds. We may pursue growth in new markets where we identify attractive opportunities to invest in or acquire assets and to achieve strong risk-adjusted returns. We strive to invest at attractive valuations, capitalize on distressed situations where possible, create opportunities for superior valuation gains and cash flow returns and monetize assets at appropriate times to realize value. As of December 31, 2023, our real estate investment business held interests in joint ventures recorded on our financial statements at approximately $137.2 million. Our current real estate investments include the following categories of projects (as of December 31, 2023):
Condominium and Mixed-Use Development
As of December 31, 2023, we owned investments in condominium and mixed-use development real estate ventures, recorded at $114.1 million and located throughout the U.S. and presently in New York City, Florida, Tennessee, North Carolina, and California. We had condominium and mixed-use development real estate ventures with projected construction completion dates between March 2024 and December 2025 as of December 31, 2023.
Apartment Buildings
As of December 31, 2023, we owned investments in apartment building ventures recorded at $7.8 million located in Hoover, Alabama and in Santa Monica, California. The investments were operating as of December 31, 2023.
Hotels
As of December 31, 2023, we owned investments in hotels recorded at $0.1 million located in New York City and in Bermuda. The hotels were operating as of December 31, 2023.
Commercial
As of December 31, 2023, we owned investments in commercial real estate ventures recorded at $15.2 million located in New York City and in Las Vegas, Nevada. Both commercial real estate ventures were operating as of December 31, 2023.
For additional information concerning these investments, see Note 10 to our consolidated financial statements and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations. Summary of Real Estate Investments.

Human Capital
We have long believed that the diversity and talent of our people provide a competitive advantage to Vector Group and its subsidiaries. As of December 31, 2023, we employed 551 employees, of which 524 were employed by Liggett, and 27 were employed at Vector Group’s corporate headquarters.
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Approximately 25% of the Liggett workforce has been employed by the Company for more than 15 years. Liggett has maintained long relationships with its employees due to its philosophy of listening to their comments and concerns and regularly engaging them to enhance its human capital management objectives.
Historically, this has occurred with frequent communication across all levels of Liggett and in-person events with senior management. We believe this philosophy served Liggett well in recent years.
The health and safety of our employees is foundational to achieving our human capital objectives.
Liggett also offers comprehensive benefit programs to its employees which provide them with, among other things, medical, dental, and vision healthcare; 401(k) matching contributions; paid parental leave; tuition assistance; and paid vacation time.
Of the 524 employees at Liggett as of December 31, 2023, 302 were employed at Liggett’s Mebane factory, 158 were employed throughout the U.S. in sales positions and the remaining 64 were employed in administrative functions supporting and coordinating sales and marketing efforts.
Of the employees at Liggett’s factory, 218 were hourly employees who are represented by four unions affiliated with either the AFL-CIO or the Teamsters. Liggett has not experienced any significant work stoppages since 1977.
We will continue to listen, while engaging and connecting with employees at Liggett to further our human capital management objectives.
Available Information
Our website address is www.vectorgroupltd.com. We make available free of charge on the Investor Relations section of our website (http://www.vectorgroupltd.com/investor-relations/) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”). We also make available through our website other reports filed with the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of that Act. Copies of these filings are also available on the SEC’s website. Copies of our Code of Business Conduct and Ethics, Corporate Governance Guidelines, Audit Committee charter, Compensation Committee charter and Corporate Responsibility and Nominating Committee charter have been posted on the Investor Relations section of our website and are also available in print to any stockholder who requests it. We do not intend for information contained in, or available through, our website to be part of this Annual Report on Form 10-K.

ITEM 1A.RISK FACTORS
Our business faces many risks. We have described below the known material risks that we and our subsidiaries face. There may be additional risks that we do not yet know of or that we do not currently perceive to be significant that may also impact our business or the business of our subsidiaries. Each of the risks and uncertainties described below could lead to events or circumstances that have a material adverse effect on the business, results of operations, cash flows, financial condition or equity of us or one or more of our subsidiaries, which in turn could negatively affect the value of our common stock. You should carefully consider and evaluate all information included in this report and any subsequent reports that we may file with the SEC or make available to the public before investing in any securities issued by us.
Risks Relating to Our Tobacco Business
Liggett faces intense competition in the domestic tobacco industry.
Liggett is considerably smaller and has fewer resources than its major competitors, and, as a result, has in certain circumstances a more limited ability to respond to market developments. Further, all of Liggett’s unit volume is generated in the discount segment, which is highly competitive, with consumers having less brand loyalty and placing greater emphasis on price. MSAi’s data indicate that in 2023, Philip Morris and RJ Reynolds, the two largest cigarette manufacturers, controlled 69.2% of the U.S. cigarette market. Philip Morris is the largest manufacturer in the market, and its profits are derived principally from its sale of premium cigarettes. Philip Morris had 59.8% of the premium segment and 43.2% of the total domestic market during 2023. During 2023, all of Liggett’s sales were in the discount segment, and its share of the total domestic cigarette market was 5.5%. Historically, because of their dominant market share, Philip Morris and RJ Reynolds have been able to determine cigarette prices for the various pricing tiers within the industry.
Further consolidation in the industry could adversely affect our ability to compete in the U.S. cigarette market.
Liggett’s business is highly dependent on the discount cigarette segment and to maintain market share, it may be required to take steps to reduce prices.
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All of Liggett’s unit volume is generated in the discount segment, which is highly competitive. While Philip Morris, RJ Reynolds, and ITG Brands compete with Liggett in the discount segment of the market, Liggett also faces intense competition for market share in the discount segment from a group of smaller manufacturers and importers, most of which sell low quality deep discount cigarettes. While Liggett’s share of the discount market was 17.5% in 2023, 18.5% in 2022 and 14.4% in 2021, MSAi’s data indicate that the discount market share of these other smaller manufacturers and importers was approximately 35.0% in 2023, 30.3% in 2022 and 34.2% in 2021. If pricing in the discount market continues to be impacted by these smaller manufacturers and importers, margins in Liggett’s only market segment could be negatively affected and, to maintain market share, Liggett may be required to take steps to reduce prices. Thus, Liggett’s sales volume, operating income and cash flows would be materially adversely affected, which in turn could negatively affect the value of our common stock.
Declining unit sales in the domestic cigarette industry could result in lower sales or higher costs for us.
MSAi’s data indicated that domestic industry-wide shipments of cigarettes declined by approximately 7.5% in 2023, 9.9% in 2022 and 6.5% in 2021. Since 1995, industry-wide shipments of cigarettes have declined in all years except 2020. We believe the 2020 increase in shipments was a COVID-19 related anomaly and that industry-wide shipments of cigarettes in the U.S. will continue to decline in future years as a result of numerous factors. These factors include health considerations, diminishing social acceptance of smoking, and a wide variety of federal, state and local laws limiting smoking in restaurants, bars and other public places, as well as increases in federal and state excise taxes and settlement-related expenses which have contributed to higher cigarette prices in recent years. In addition to a declining market impacting our sales volume, operating income and cash flows, our annual cost advantage from our payment exemption under the MSA declines by approximately $1.7 million for each percentage point decline in shipment volumes in the U.S. market and approximately $2.8 million for each percentage point increase in inflation (with the MSA rate increasing each year by the greater of three percent or the Consumer Price Index increase). If this decline in industry-wide shipments continues and Liggett is unable to capture market share from its competitors, or if the industry as a whole is unable to offset the decline in unit sales with price increases, or if Liggett’s market share percentage falls below its MSA payment exemption percentage, or if prevailing inflation rates continue, Liggett’s sales volume, operating income and cash flows could be negatively affected, which in turn could negatively affect the value of our common stock.
Our tobacco operations are subject to substantial and increasing legislation, regulation and taxation, which have a negative effect on revenue and profitability.
Cigarettes are subject to substantial regulation and taxation at the federal, state and local levels, which has had and may continue to have an adverse effect on our business. For a more complete discussion of the material regulations and taxation applicable to our Business, see Item 1. “Business. Legislation and Regulation.” For instance:
Federal, state and local laws have limited the advertising, sale and use of cigarettes in the U.S., such as laws prohibiting smoking in restaurants and other public places. Private businesses have also implemented prohibitions on the use of cigarettes. Further regulations or rules limiting advertising, sale or use of cigarettes or ingredients or flavorings could negatively impact sales of cigarettes, which would have an adverse effect on our results of operations.
The federal government, as well as certain state, city and county governments, impose excise taxes on cigarettes, which has had, and is expected to continue to have, an adverse effect on sales of cigarettes.
Various state and local government regulations have, among other things, increased the minimum age to purchase tobacco products, banned the sale of menthol cigarettes, restricted or banned sampling and advertising and required ingredient and constituent disclosure. Significantly, the federal government increased the minimum age of sale for tobacco products from 18 to 21 years of age in December 2019. Further regulations that limit the group of individuals able to purchase cigarettes in the U.S. or other regulations that limit the types of products we can offer, such as limitations on use of flavoring or nicotine content, could have a material adverse effect on demand for our products, our results of operations and our business. FDA and other organizations have also conducted anti-tobacco media campaigns, which have and may continue to have an adverse effect on the demand for cigarettes.
There have also been adverse legislative and political decisions and other unfavorable developments concerning cigarette smoking and the tobacco industry, as well as restrictive actions by federal agencies, including the Environmental Protection Agency and FDA. Additionally, all states have enacted statutes requiring cigarettes to meet a reduced ignition propensity standard. 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 similar litigation or legislation. We are not able to evaluate the effect of these developing matters on pending litigation or the possible commencement of additional litigation, but our consolidated financial position, results of operations or cash flows could be materially adversely affected.
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Additional federal, state or local regulations relating to the manufacture, sale, distribution, advertising, labeling, or information disclosure of tobacco products could further reduce sales, increase costs and have a material adverse effect on our business.

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

The TCA became law in June 2009. 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. It is likely that the TCA and further regulatory efforts by FDA could result in a decline in cigarette sales in the U.S., 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. See Item 1. “Business, Legislation and Regulation” for a more detailed discussion.
Liggett and Vector Tobacco submitted substantial equivalence applications to FDA for each of their respective cigarette brand styles as required by the TCA, some of which remain under review by FDA. See Item 1. “Business, Legislation and Regulation” for a more detailed discussion. We cannot predict whether FDA will deem Liggett’s and Vector Tobacco’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 23 of our Tobacco segment’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.
Actions by FDA, including those specific actions described in Item 1. “Business, Legislation and Regulation” may (i) impact the adult tobacco consumer acceptability of or access to tobacco products (for example, through nicotine or constituent limits or menthol or other flavor bans), (ii) limit adult tobacco consumer choices, (iii) delay or prevent the launch of new or modified tobacco products, (iv) require the recall or other removal of tobacco products from the marketplace (for example as a result of (a) product contamination, (b) legislation and rulemaking that bans nicotine or menthol or other flavors, (c) a determination by FDA that one or more tobacco products do not satisfy the statutory requirements for substantial equivalence, (d) because FDA requires that a currently marketed tobacco product proceed through the pre-market review process or (e) because FDA does otherwise determines that removal is necessary for the protection of public health), (v) restrict communications to adult tobacco consumers, (vi) restrict the ability to differentiate tobacco products, (vii) create a competitive advantage or disadvantage for certain tobacco companies, (viii) impose additional manufacturing, labeling or packing requirements, (ix) interrupt manufacturing or otherwise significantly increase the cost of doing business or (x) restrict or prevent the use of specified tobacco products in certain locations or the sale of tobacco products by certain retail establishments. Any one or more of these actions may have a material adverse effect on our financial condition, results of operations and cash flows.
Additional states may pass minimum price legislation.
In 2020, voters in the state of Colorado approved Proposition EE, increasing taxes on cigarettes, tobacco and nicotine products. In addition to raising the Colorado state excise tax on cigarettes, Proposition EE included a provision that fixed the minimum retail price of cigarettes in Colorado at $7.00 per pack as of January 1, 2021, and thus reduced the competitive advantage of our Company’s deep discount priced cigarettes in the Colorado marketplace. Although no other state has adopted a fixed minimum retail price law, other states may attempt to do so. In the event that other states pass similar legislation, the result could have a material adverse effect on our financial condition, results of operations and cash flows.
Litigation will continue to harm the tobacco industry, including Liggett.
Liggett could be subjected to substantial liabilities and bonding requirements from litigation relating to cigarette products. Adverse judgments could have a negative impact on our ability to operate due to their impact on cash flows. We and our Liggett subsidiary, as well as the entire cigarette industry, continue to be challenged on numerous fronts. New cases continue to be commenced against Liggett and other cigarette manufacturers. As of December 31, 2023, there were 70 individual product liability lawsuits, two purported class actions and one health care cost recovery action pending in the U.S. in which Liggett and/or we were named defendants. It is likely that similar legal actions, proceedings and claims will continue to be filed against
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Liggett. Punitive damages, often in amounts ranging into billions of dollars, are specifically pleaded in certain cases, in addition to compensatory and other damages. 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. As new product liability cases are commenced against Liggett, the costs associated with defending these cases and the risks relating to the inherent unpredictability of litigation continue to increase.
Individual tobacco-related cases resulting from the Engle case could continue to harm Liggett.
In May 1994, the Engle case was filed as a class action against Liggett and others in Miami-Dade County, Florida. As a result, we and Liggett, and other cigarette manufacturers, were sued in thousands of Engle progeny cases in both federal and state courts in Florida. Notwithstanding Liggett’s multi-plaintiff settlements, Liggett and Vector Group remain defendants in several state court Engle progeny cases. The costs associated with defending these cases have negatively impacted our cash flows, and we cannot predict the cash requirements related to any future settlements and judgments, including cash required to bond any appeals, in the event of an adverse verdict.
Liggett may have additional payment obligations under the MSA.
NPM Adjustment. In March 2006, an economic consulting firm selected pursuant to the MSA determined that the MSA was a “significant factor contributing to” the loss of market share of the Participating Manufacturers for 2003. This same determination has been made for additional years. This is known as the “NPM Adjustment.” As a result, the Participating Manufacturers may be entitled to potential NPM Adjustments to their MSA payments.
As of December 31, 2023, the Participating Manufacturers had entered into agreements with 40 Settling States setting out terms for settlement of the NPM Adjustment and addressing the NPM Adjustment with respect to those states for future years.
The arbitration for 2004 found three states liable for the NPM Adjustment. Two of these states have challenged the determinations. As of December 31, 2023, Liggett and Vector Tobacco accrued approximately $8.7 million related to 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.
Liggett may have additional payment obligations under its individual state settlements.
In 2004, the Attorney General of Texas advised Liggett that he believed Liggett had failed to make all required payments under the respective settlement agreements with these states. Liggett believes these allegations are without merit, based, among other things, on the language of the most favored nation provisions of the settlement agreements. No amounts have been accrued in our consolidated financial statements for any additional amounts that may be payable by Liggett under the settlement agreement with Texas.
Our tobacco business faces multiple risks in today’s economic environment. These risks have the potential to significantly affect our business operations as well as our profitability.
International trade disruptions, shipping container availability, climate change, inflation, geopolitical instability, government regulations and man-made or natural disasters could affect the cost, availability and supply of our tobacco, raw materials as well as component parts for our equipment.
Overall economic conditions, including but not limited to inflation, labor shortages and supply chain disruptions, all present significant challenges and obstacles to overcome to enable our operations to continue uninterrupted. Our tobacco business also operates a single manufacturing facility which could affect our ability to produce and distribute our product if there was a major disruption.

Risks Associated with Our New Valley Real Estate Business. 
New Valley is subject to risks relating to the industries in which it operates.
The real estate industry is significantly affected by changes in economic and political conditions as well as real estate markets, which could adversely impact returns on our investments, trigger defaults in project financing, cause cancellations of property sales, reduce the value of our properties or investments and could affect our results of operations and liquidity. The
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real estate industry is cyclical and is significantly affected by changes in general and local economic conditions which are beyond our control.
These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets, levels of unemployment, consumer confidence and the general economic condition of the U.S. and the global economy. The real estate market also depends upon the strength of financial institutions, which are sensitive to changes in the general macroeconomic environment. Lack of available credit or lack of confidence in the financial sector could impact the real estate market, which in turn could adversely affect our business, financial condition and results of operations.
Any of the following could be associated with cyclicality in the real estate market by halting or limiting a recovery in the residential and commercial real estate markets, and have an adverse effect on our business by causing periods of lower growth or a decline in the number of home sales and/or property prices which, in turn, could adversely affect our business and financial condition:
periods of economic slowdown or recession;
rising interest rates;
the general availability of mortgage financing;
a negative perception of the market for residential and commercial real estate;
an increase in the cost of homeowners’ insurance;
weak credit markets;
a low level of consumer confidence in the economy and/or the real estate market;
instability of financial institutions;
legislative, tax or regulatory changes that would adversely impact the real estate market, including but not limited to potential reform relating to Fannie Mae, Freddie Mac and other government sponsored entities that provide liquidity to the U.S. housing and mortgage markets, and potential limits on, or elimination of, the income tax deduction of certain mortgage interest expense and property taxes;
adverse changes in economic and general business conditions in the areas we invest;
declining demand for real estate;
acts of God, such as hurricanes, earthquakes and other natural disasters, or acts or threats of war or terrorism; and/or
adverse changes in global, national, regional and local economic and market conditions, particularly where our businesses operate, including those relating to pandemics and health crises.
Real estate development is a competitive industry, and competitive conditions may adversely affect our results of operations. The real estate development industry is highly competitive. Real estate developers compete not only for buyers, but also for desirable properties, building materials, labor and capital. We compete with other local, regional, national and international real estate asset managers, investors and property developers, which have significant financial resources and experience. Competitive conditions in the real estate development industry could result in difficulty in acquiring suitable investments in properties at acceptable prices, increased selling incentives, lower sales volumes and prices, lower profit margins, impairments in the value of our investments in real estate developments and other assets, and/or increased construction costs, delays in construction and increased carry costs. Development projects are subject to special risks including potential increase in costs, changes in market demand, inability to meet deadlines which may delay the timely completion of projects, reliance on contractors who may be unable to perform and the need to obtain various governmental and third-party consents.
If the market value of our properties or investments decline, our results of operations could be adversely affected by impairments and write-downs. We acquire land and invest in real estate projects in the ordinary course of our business. There is an inherent risk that the value of our land and investments may decline after purchase, which also may affect the value of existing properties under construction. The valuation of property is inherently subjective and based on the individual characteristics of each property. The market value of our land and investments in real estate projects depends on general and local real estate market conditions. These conditions can change and thereby subject valuations to uncertainty. Moreover, all valuations are based on assumptions that may not prove to reflect economic or demographic reality. We may have acquired options to buy or bought and developed land at a cost we will not be able to recover fully or on which we cannot build and sell the property profitably. In addition, our deposits or investments in deposits for building lots controlled under option or similar contracts may be put at risk. If market conditions deteriorate, some of our assets may be subject to impairments and write-down charges which would adversely affect our operations and financial results.
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If demand for residential or commercial real estate decreases below what was anticipated when we purchased interests in or developed such inventory, profitability may be adversely affected and we may not be able to recover the related costs when selling and building our properties and/or investments. We regularly review the value of our investments and will continue to do so on a periodic basis. Write-downs and impairments in the value of our properties and/or investments may be required, and we may in the future sell properties and/or investments at a loss, which could adversely affect our results of operations and financial condition.
We face risks associated with property acquisitions. We may be unable to finance acquisitions or investments on favorable terms or properties may fail to perform as expected. We may underestimate the costs necessary to bring an investment up to standards established for its intended market position. We may also acquire or invest in properties subject to liabilities and with recourse, with respect to unknown liabilities. New Valley’s acquisition of real estate investments are subject to several risks including: underestimated operating expenses for a property, possibly making it uneconomical or unprofitable; a property may fail to perform in accordance with expectations, in which case New Valley may sustain lower-than-expected income or need to incur additional expenses for the property; and New Valley may not be able to sell, dispose or refinance the property at a favorable price or terms, or at all, as the case may be; in addition to any potential loss on a sale, New Valley may have no choice but to hold on to the property and continue to incur net operating losses if underperforming for an indefinite period of time, as well as incur continuing tax, environmental and other liabilities. Acquisition agreements will typically contain conditions to closing, including completion of due diligence to our satisfaction or other conditions that are not within our control, which may not be satisfied. Each of these factors could have an adverse effect on our results of operations and financial condition.
If we, or the entities we invest in, are not able to develop and market our real estate developments successfully or within expected timeframes or at projected pricing, our business and results of operations will be adversely affected. Before a property development generates any revenues, material expenditures are incurred to acquire land, obtain development approvals and construct significant portions of project infrastructure, amenities, model offices, showrooms, apartments or homes and sales facilities. It generally takes several years for a real estate development to achieve cumulative positive cash flow. If we, or the entities we invest in, are unable to develop and market our real estate developments successfully or to generate positive cash flows from these operations within expected timeframes, it could have a material adverse effect on our business and results of operations.
Because certain of our assets are illiquid, we may not be able to sell these assets when appropriate or when desired. Large real estate developments like the ones that we retain investments in can be hard to sell, especially if local market conditions are poor. Such illiquidity could limit our ability to diversify our assets promptly in response to changing economic or investment conditions. Additionally, financial difficulties of other property owners resulting in distressed sales could depress real estate values in the markets in which we operate in times of illiquidity. These restrictions reduce our ability to respond to changes in the performance of our assets and could adversely affect our financial condition and results of operations.
Guaranty risks; risks of joint ventures. New Valley has real estate-related investments in which other partners hold significant interests. New Valley must seek approval from these other parties for important actions regarding these joint ventures. Since the other parties’ interests may differ from those of New Valley, a deadlock could arise that might impair the ability of the ventures to function. Such a deadlock could significantly harm a venture. Further, our minority interest in these joint ventures means that we may not be able to influence the outcome of a project, and our rights to obtain information may be limited to the contractual requirements. As a result, we may not have adequate insight into the financial condition of any of our joint ventures given that we do not oversee their financial reporting or decision making. If our partners face adverse financial conditions, it may impair their ability to fund capital calls or satisfy their share of any guarantees on project financing. In addition, we are typically obligated to execute guarantees or indemnify our partners for guarantees they may execute in connection with the acquisition or construction financing for our projects. The guarantees that we might be obligated to sign include guarantees for environmental liability at a project, improper acts committed by New Valley (otherwise known as a “bad boy” guaranty), as well as carry and completion guarantees for a project. In the event of a default, if a lender were to exercise its rights under these guarantees, it could have a material adverse effect on our business and results of operations.
The real estate developments we invest in may be subject to losses as a result of construction defects. Real estate developers are subject to construction defect and warranty claims arising in the ordinary course of their business. These claims are common in the real estate development industry and can be costly.
Claims may be asserted against the real estate developments we invest in for construction defects, personal injury or property damage caused by the developer, general contractor or subcontractors, and if successful, these claims may give rise to liability. Subcontractors are independent of the homebuilders that contract with them under normal management practices and the terms of trade contracts and subcontracts within the industry; however, if U.S. or other regulatory agencies or courts reclassify the employees of sub-contractors as employees of real estate developers, real estate developers using subcontractors could be responsible for wage, hour and other employment-related liabilities of their subcontractors.
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In addition, where the real estate developments in which we invest hire general contractors, unforeseen events such as the bankruptcy of, or an uninsured or under-insured loss claimed against, the general contractor may sometimes result in the real estate developer becoming responsible for the losses or other obligations of the general contractor. The costs of insuring against construction defect and product liability claims are high, and the amount of coverage offered by insurance companies may be limited. There can be no assurance that this coverage will not be further restricted and become more costly. If the real estate developments in our real estate portfolio are not able to obtain adequate insurance against these claims in the future, our business and results of operations may be adversely affected.
Increasingly in recent years, individual and class action lawsuits have been filed against real estate developers asserting claims of personal injury and property damage caused by a variety of issues, including faulty materials and the presence of mold in residential dwellings. Furthermore, decreases in home values as a result of general economic conditions may result in an increase in both non-meritorious and meritorious construction defect claims, as well as claims based on marketing and sales practices. Insurance may not cover all claims arising from such issues, or such coverage may become prohibitively expensive. If real estate developments in our real estate portfolio are not able to obtain adequate insurance against these claims, they may experience litigation costs and losses that could reduce our revenues from these investments. Even if they are successful in defending such claims, we may incur significant losses.
Our real estate investments may face substantial damages as a result of existing or future litigation, arbitration or other claims. The real estate developments we invest in are exposed to potentially significant litigation, arbitration proceedings and other claims, including breach of contract, contractual disputes and disputes relating to defective title, property misdescription or construction defects. Class action lawsuits can be costly to defend, and if our assets were to lose any certified class action suit, it could result in substantial liability. With respect to certain general liability exposures, including construction defect and product liability claims, interpretation of underlying current and future trends, assessment of claims and the related liability and reserve estimation process requires us to exercise significant judgment due to the complex nature of these exposures, with each exposure exhibiting unique circumstances. Furthermore, once claims are asserted for construction defects, it is difficult to determine the extent to which the assertion of these claims will expand geographically. As a result, we may suffer losses on our investments which could adversely affect our business, financial condition and results of operations.
Our investments in real estate are susceptible to adverse weather conditions and natural and man-made disasters. Adverse weather conditions and natural and man-made disasters such as hurricanes, tornadoes, storms, earthquakes, floods, droughts, fires, snow, blizzards, as well as terrorist attacks, riots and electrical outages, can have a significant effect on the assets in our real estate portfolio. The severity and frequency of these adverse weather conditions are worsened by the effects of climate change. These adverse conditions can cause physical damage to work in progress and new developments, delays and increased costs in the construction of new developments and disruptions and suspensions of operations, whether caused directly or by disrupting or suspending operations of those upon whom our real estate developments rely in their operations. Such adverse conditions can mutually cause or aggravate each other, and their incidence and severity are unpredictable. If insurance is unavailable to the real estate developments we invest in or is unavailable on acceptable terms, or if insurance is not adequate to cover business interruptions or losses resulting from adverse weather or natural or man-made disasters, the real estate developments we invest in and our results of operations will be adversely affected. In addition, damage to properties in our real estate portfolio caused by adverse weather or a natural or man-made disaster may cause insurance costs for these properties to increase.
A major health and safety incident relating to our real estate investments could be costly in terms of potential liabilities and reputational damage. Building sites are inherently dangerous and operating in the real estate development industry poses certain inherent health and safety risks. Due to regulatory requirements, health and safety performance is critical to the success of our real estate investments. Any failure in health and safety performance may result in penalties for non-compliance with relevant regulatory requirements, and a failure that results in a major or significant health and safety incident is likely to be costly in terms of potential liabilities incurred as a result. Such a failure could generate significant negative publicity and have a corresponding impact on the reputation and relationships of the developer with relevant regulatory agencies or governmental authorities, which in turn could have an adverse effect on our investment and operating results.
Insurance may not cover some potential losses or may not be obtainable at commercially reasonable rates, which could adversely affect our financial condition and results of operations. Real estate properties in our real estate portfolio maintain insurance on their properties in amounts and with deductibles that we believe are comparable with what owners of similar properties carry; however, such insurance may not cover some potential losses or may not be obtainable at commercially reasonable rates in the future. There are also certain types of risks (such as war, environmental contamination such as toxic mold, and lease and other contract claims) which are either uninsurable or not economically insurable. Should any uninsured or underinsured loss occur, we could lose our investment in, and anticipated profits and cash flows from, one or more properties.

Risks Relating to the Distribution
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In connection with the Distribution, we agreed to indemnify Douglas Elliman and Douglas Elliman agreed to indemnify us for certain liabilities, and if we are required to perform under these indemnities or if Douglas Elliman is unable to satisfy its obligations under these indemnities, our financial results could be negatively affected.
In connection with the Transition Services Agreement, we and Douglas Elliman, as parties receiving services under the agreement, agreed to indemnify the party providing services for losses incurred by such party that arise out of or are otherwise in connection with the provision by such party of services under the agreement, except to the extent that such losses result from the providing party’s gross negligence, willful misconduct or breach of its obligations under the agreement. Similarly, each party providing services under the agreement agreed to indemnify the party receiving services for losses incurred by such party that arise out of or are otherwise in connection with the indemnifying party’s provision of services under the agreement if such losses result from the providing party’s gross negligence, willful misconduct or breach of its obligations under the agreement.
In connection with our tobacco business, from time-to-time Douglas Elliman may be named as a defendant in tobacco-related lawsuits, notwithstanding the completion of the Distribution. Pursuant to the Distribution Agreement, we and each of our subsidiaries agreed to indemnify Douglas Elliman for liabilities related to our tobacco business, including liabilities that Douglas Elliman may incur for tobacco-related litigation.
In connection with the Distribution, Douglas Elliman provided us with indemnities with respect to liabilities arising out of Douglas Elliman’s business. If we are subject to an adverse decision in a lawsuit related to Douglas Elliman’s business, and Douglas Elliman fails to satisfy its obligations, our financial condition could be materially adversely affected.
The Distribution and related transactions may expose us to potential liabilities arising out of state and federal fraudulent conveyance laws and legal distribution requirements.
The Distribution could be challenged under various state and federal fraudulent conveyance laws. An unpaid creditor could claim that we did not receive fair consideration or reasonably equivalent value in the Distribution, and that the Distribution left us insolvent or with unreasonably small capital or that we intended or believed we would incur debts beyond our ability to pay such debts as they mature. If a court were to agree with such a plaintiff, then such court could void the Distribution as a fraudulent transfer and could impose several different remedies, including without limitation, returning the assets or the shares of common stock in Douglas Elliman being distributed as part of the Distribution or providing us with a claim for money damages against the spun-off business in an amount equal to the difference between the consideration received by us and the fair market value of Douglas Elliman at the time of the Distribution.
Certain directors who serve on our Board of Directors currently serve as directors of Douglas Elliman following the Distribution, and ownership of shares of common stock of Douglas Elliman following the Distribution by our directors and executive officers may create, or appear to create, conflicts of interest.
Certain of our directors who serve on our Board of Directors currently serve on the board of directors of Douglas Elliman. This may create, or appear to create, conflicts of interest when our or Douglas Elliman's management and directors face decisions that could have different implications for us and Douglas Elliman, including the resolution of any dispute regarding the terms of the agreements governing the Distribution and the relationship between us and Douglas Elliman after the Distribution or any other commercial agreements entered into in the future between us and Douglas Elliman. For example, subsidiaries of Douglas Elliman have been engaged by certain 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 $1.8 million, $1.7 million and $9.0 million from these projects for the years ended December 31, 2023, 2022 and 2021, respectively.
In addition, all our executive officers and some of our non-employee directors currently own shares of the common stock of Douglas Elliman. The continued ownership of such common stock by our directors and executive officers following the Distribution creates or may create the appearance of a conflict of interest when these directors and executive officers are faced with decisions that could have different implications for us and Douglas Elliman
After the Distribution, certain of our executive officers do not devote their full time to Vector Group’s affairs, and the overlap may give rise to conflicts.
Our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Technology Officer and General Counsel serve in the same roles at Douglas Elliman. Our management model has and continues to use holding company executives to focus on public company matters while delegating the operations of our subsidiaries, including Liggett, to experienced operating professionals and we believe it has created stockholder value. Nonetheless, our management team divides its time between Vector Group and Douglas Elliman and consequently, does not spend its full time on our business. From time-to-time, our overlapping executive officers may be required to spend a significant portion of their time and attention
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on Douglas Elliman’s affairs, and there can be no assurance that they will be able to devote sufficient time to the Company’s affairs.
Our overlapping executive officers may also face actual or apparent conflicts of interest with respect to matters involving or affecting each company. For example, the potential for a conflict of interest may arise when we, on the one hand, and Douglas Elliman, on the other hand, consider corporate opportunities that may be suitable for both companies.
If the distribution, together with certain related transactions, were to fail to qualify as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of l986, as amended (“Code”), then our stockholders, we and Douglas Elliman might be required to pay substantial U.S. federal income taxes.
The distribution was conditioned upon our receipt of an opinion of our Distribution tax advisor to the effect that, subject to the assumptions and limitations described therein, the distribution of Douglas Elliman common stock to holders of our common stock (such distribution, excluding, for the avoidance of doubt, the distribution of Douglas Elliman common stock with respect to our stock option awards and restricted stock awards), together with certain related transactions, will qualify as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code in which no gain or loss is recognized by us or our stockholders, except, in the case of our stockholders, for cash received in lieu of fractional shares. The opinion of our Distribution tax advisor was based on, among other things, certain assumptions as well as on the continuing accuracy of certain factual representations and statements that we and Douglas Elliman made to the Distribution tax advisor. In rendering its opinion, the Distribution tax advisor also relied on certain covenants that we and Douglas Elliman entered into, including the adherence by us and by Douglas Elliman to certain restrictions on future actions contained in the Tax Disaffiliation Agreement. If any of the representations or statements that we or Douglas Elliman made are or become inaccurate or incomplete, or if we or Douglas Elliman breach any of such covenants, the Distribution and such related transactions might not qualify for such tax treatment. The opinion of the Distribution tax advisor is not binding on the U.S. Internal Revenue Service (“IRS”) or a court, and there can be no assurance that the IRS will not challenge the validity of the Distribution and such related transactions as a reorganization for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code eligible for tax-free treatment, or that any such challenge ultimately will not prevail.
If the Distribution does not qualify as a tax-free transaction for any reason, including because of a breach of a representation or covenant, we would recognize a substantial gain attributable to Douglas Elliman for U.S. federal income tax purposes. Additionally, if the Distribution does not qualify as tax-free under Section 355 of the Code, our stockholders will be treated as having received a distribution equal to the fair market value of the stock distributed, which generally would be treated first as a taxable dividend to the extent of such holder’s pro rata share of our current and accumulated earnings and profits, then as a non-taxable return of capital to the extent of such holder’s tax basis in our common stock, and thereafter as capital gain with respect to any remaining value.
We are subject to continuing contingent tax-related liabilities of Douglas Elliman following the Distribution.
After the Distribution, there are several significant areas where the liabilities of Douglas Elliman may become our obligations, either in whole or in part. For example, to the extent that any subsidiary of ours was included in the consolidated tax reporting group of Vector Group for any taxable period or portion of any taxable period ending on or before the effective date of the Distribution, such subsidiary is jointly and severally liable for the U.S. federal income tax liability of the entire consolidated tax reporting group of Vector Group, as applicable, for such taxable period. In connection with the Distribution, we have entered into a Tax Disaffiliation Agreement with Douglas Elliman that allocates the responsibility for prior period consolidated taxes to Vector Group. If we are unable to pay any prior period taxes for which we are responsible, however, Douglas Elliman could be required to pay the entire amount of such taxes, and such amounts could be significant. Other provisions of federal, state or local law may establish similar liability for other matters, including laws governing tax-qualified pension plans, as well as other contingent liabilities.
Our ability to engage in acquisitions and other strategic transactions is subject to limitations because we have agreed to certain restrictions intended to support the tax-free nature of the Distribution.
The U.S. federal income tax laws that apply to transactions like the Distribution generally create a presumption that the Distribution would be taxable to us (but not to our stockholders) if we engage in, or enter into an agreement to engage in, an acquisition of all or a significant portion of our common stock beginning two years before the distribution date, unless it is established that the transaction is not pursuant to a plan or series or transactions related to the Distribution. U.S. Treasury regulations currently in effect generally provide that whether an acquisition transaction and a distribution are part of a plan is determined based on all facts and circumstances, including specific factors listed in the Treasury regulations. In addition, these
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Treasury regulations provide several “safe harbors” for acquisition transactions that are not considered to be part of a plan that includes a distribution.
There are other restrictions imposed on us under current U.S. federal income tax laws with which we will need to comply for the Distribution and certain related transactions to qualify as a transaction that is tax-free under Sections 368(a)(1)(D) and 355 of the Code. For example, we will generally be required to continue to own and manage our business, and there will be limitations on issuances, redemptions and sales of our stock for cash or other property following the Distribution, except in connection with certain stock-for-stock acquisitions and other permitted transactions. If these restrictions are not followed, the Distribution could be taxable to us and our stockholders.
We entered into a Tax Disaffiliation Agreement with Douglas Elliman under which we have allocated, between Douglas Elliman and ourselves, responsibility for U.S. federal as well as state and local income and other taxes relating to taxable periods before and after the Distribution and provided for computing and apportioning tax liabilities and tax benefits between the parties. In the Tax Disaffiliation Agreement, we agreed that, among other things, we may not take, or fail to take, any action following the Distribution if such action, or failure to act: would be inconsistent with or prohibit the Distribution and certain related transactions from qualifying as a tax-free reorganization under Sections 368(a)(1)(D) and 355 and related provisions of the Code to us and our stockholders (except with respect to the receipt of cash in lieu of fractional shares of our stock).
In addition, we agreed that we may not, among other things, during the two-year period following the Distribution, except under certain specified circumstances, (i) redeem or otherwise repurchase our stock; (ii) liquidate, merge or consolidate with another person; (iii) sell or otherwise dispose of assets outside the ordinary course of business or materially change the manner of operating our business; or (iv) take any other action or actions that in the aggregate would have the effect that one or more persons acquire (or have the right to acquire), directly or indirectly, as part of a plan or series of related transactions, 35% of our stock. These restrictions could limit our strategic and operational flexibility, including our ability to finance our operations by issuing equity securities, make acquisitions using equity securities, repurchase our equity securities, or raise money by selling assets or enter into business combination transactions. We also agreed to indemnify Douglas Elliman for certain tax liabilities resulting from any such transactions. Further, our stockholders may consider these covenants and indemnity obligations unfavorable as they might discourage, delay or prevent a change of control.

Risks Relating to Our Indebtedness
We and our subsidiaries have a substantial amount of indebtedness and liquidity commitments.
We and our subsidiaries have significant indebtedness and debt service obligations. As of December 31, 2023, we and our subsidiaries had total outstanding indebtedness of $1.39 billion. In addition, subject to the terms of any future agreements, we and our subsidiaries may incur additional indebtedness in the future. 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 have significant liquidity commitments.
During 2024, we will have significant liquidity commitments that will require the use of our existing cash resources. As of December 31, 2023, our corporate expenditures (exclusive of Liggett, Vector Tobacco and New Valley) and other potential liquidity requirements over the next 12 months include the following:
cash interest expense of approximately $104.8 million,
dividends of approximately $127.9 million based on an assumed quarterly cash dividend rate of $0.20 per share (based on payments on 157,683,020 common shares outstanding as of February 14, 2024 and 2,248,226 employee stock options), and
other corporate expenses and taxes.
We will be required to use cash flows from operations as well as existing cash and cash equivalents to meet the above liquidity requirements as well as other liquidity needs in the normal course of business. Should these resources be insufficient to meet the upcoming liquidity needs, we may also be required to liquidate investment securities available for sale and other long-term investments, or, if available, draw on the Liggett 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.
Servicing our indebtedness requires a significant amount of cash and we may not generate sufficient cash flow from our businesses to pay our substantial indebtedness.
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Our ability to make scheduled payments of the principal, to pay interest on, or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive and regulatory factors, as well as other factors beyond our control. The cash flow from operations in the future may be insufficient to service our indebtedness because of factors beyond our control. If we are unable to generate the necessary cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Our high level of debt may adversely affect our ability to satisfy our obligations.
There can be no assurance that we will be able to meet our debt service obligations. A default in our debt obligations, including a breach of any restrictive covenant imposed by the terms of our indebtedness, could result in the acceleration of the affected debt as well as other of our indebtedness. In such a situation, it is unlikely that we would be able to fulfill our obligations under the debt or such other indebtedness or that we would otherwise be able to repay the accelerated indebtedness or make other required payments. Even in the absence of an acceleration of our indebtedness, a default under the terms of our indebtedness could have an adverse impact on our ability to satisfy our debt service obligations and on the trading price of our debt and our common stock.
Our high level of indebtedness, as well as volatility in the capital and credit markets, could have important consequences. For example, they could:
make it more difficult for us to satisfy our other obligations with respect to our debt, including repurchase obligations, upon the occurrence of specified change of control events;
increase our vulnerability to general adverse economic and industry conditions;
limit our ability to obtain additional financing;
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, reducing the amount of our cash flow available for dividends on our common stock and other general corporate purposes;
require us to sell other securities or to sell some or all of our assets, possibly on unfavorable terms, to meet payment obligations;
restrict us from making strategic acquisitions, investing in new capital assets or taking advantage of business opportunities;
limit our flexibility in planning for, or reacting to, changes in our business and industry; and
place us at a competitive disadvantage compared to competitors that have less debt.
Our 5.75% Senior Secured Notes, 10.5% Senior Notes, and Liggett Credit Facility contain restrictive covenants, and the Liggett Credit Facility contains financial ratios that limit our operating flexibility, and may limit our ability to pay dividends in the future.
The indenture governing our 5.75% Senior Secured Notes due 2029 (the “2029 Indenture”), the indenture governing our 10.5% Senior Notes due 2026 (the “2026 Indenture”) and the Liggett Credit Facility contain covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interest, including restrictions on our ability to:
incur or guarantee additional indebtedness or issue certain preferred stock;
pay dividends or distributions on, or redeem or repurchase, capital stock or subordinated indebtedness, or make other restricted payments;
create or incur liens with respect to our assets;
make investments, loans or advances;
incur dividend or other payment restrictions;
prepay subordinated indebtedness;
enter into certain transactions with affiliates; and
merge, consolidate, reorganize or sell our assets, or use asset sale proceeds.
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Our ability to comply with the provisions of the 2029 Indenture, the 2026 Indenture, and the Liggett Credit Facility may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events beyond our control. The breach of any of these covenants could result in a default under our indebtedness, which could cause those and other obligations to become due and payable. If any of our indebtedness is accelerated, we may not be able to repay it. See Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources” for details of debt covenant compliance.
Changes in respect of the debt ratings of our notes may materially and adversely affect the availability, the cost and the terms and conditions of our debt.
Both we and several issues of our notes have been publicly rated by Moody’s Investors Service, Inc., and Standard & Poor’s Rating Services, independent rating agencies. In addition, future debt instruments may be publicly rated. These debt ratings may affect our ability to raise debt. Any future downgrading of the notes or our other debt by Moody’s or S&P may affect the cost and terms and conditions of our financings and could adversely affect the value and trading of the notes.
The Tax Act may increase the after-tax cost of debt financings.
The Tax Act limits our interest expense deduction to 30% of taxable income before interest thereafter for non-excepted trade or businesses. One such excepted trade or business is any electing real property trade or business, of which portions of our New Valley real estate business may qualify. Interest expense allocable to an excepted trade or business is not subject to limitation. The Tax Act permits us to carry forward disallowed interest expense indefinitely. Due to our high degree of leverage, a portion of our interest expense in future years may not be deductible, which may increase the after-tax cost of any new debt financings as well as the refinancing of our existing debt. We evaluate the impact of the nondeductible interest on our operations and capital structure on an annual basis.

Risks Relating to Our Structure and Other Business Risks
We are a holding company and depend on cash payments from our subsidiaries, which are subject to contractual and other restrictions, to service our debt and to pay dividends on our common stock.
We are a holding company and have no operations of our own. We hold our interests in our various businesses through our wholly owned subsidiaries, VGR Holding LLC (“VGR Holding”) and New Valley. In addition to our own cash resources, our ability to pay interest on our debt and to pay dividends on our common stock depends on the ability of VGR Holding and New Valley to make cash available to us. VGR Holding’s ability to pay dividends to us depends primarily on the ability of Liggett and Vector Tobacco, its wholly owned subsidiaries, to generate cash and make it available to VGR Holding. The Liggett Credit Facility contains a restricted payments test that limits the ability of Liggett to pay cash dividends to VGR Holding. The ability of Liggett to meet the restricted payments test may be affected by factors beyond its control.
Our receipt of cash payments, as dividends or otherwise, from our subsidiaries is an important source of our liquidity and capital resources. If we do not have sufficient cash resources of our own and do not receive payments from our subsidiaries in an amount sufficient to repay our debts and to pay dividends on our common stock, we must obtain additional funds from other sources. There is a risk that we will not be able to obtain additional funds at all or on terms acceptable to us. Our inability to service these obligations and to continue to pay dividends on our common stock would significantly harm us and the value of our notes and our common stock.
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 us and our stakeholders. 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 customers. Additionally, we increasingly rely on third-party service 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), the disruption of business operations, and the loss of funds. Depending on their nature and scope, these incidents could potentially
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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, increased cybersecurity protection and remediation costs, business disruption, and the loss of funds or revenue, 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 U.S. may require us to devote more resources to protecting such information, which could in turn adversely affect our results of operations and financial condition.
We depend on our key personnel.
We depend on the efforts of our executive officers and other key personnel as our named executive officers have been employed by us for an average of 28 years as of December 31, 2023. While we believe that we could find replacements for these key personnel, the loss of their services could have a significant adverse effect on our operations. For more information about certain of our key personnel, see “— After the Distribution, certain of our executive officers do not devote their full time to Vector Group’s affairs, and the overlap may give rise to conflicts.”
Failure to maintain effective internal control over financial reporting could adversely affect us.
The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting, the implementation of which requires significant management attention. Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements because of its inherent limitations. These limitations include, among others, the possibility of human error, inadequacy or circumvention of controls and fraud. If we do not maintain effective internal control over financial reporting or design and implement controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements, including in connection with controls executed for us by third parties, we might fail to timely detect any misappropriation of corporate assets or inappropriate allocation or use of funds and could be unable to file accurate financial reports on a timely basis. As a result, our reputation, results of operations and stock price could be materially adversely affected.
Our liquidity could be adversely affected by conditions in the financial markets or the negative performance of financial institutions.

Our available cash and cash equivalents are held in accounts with or managed by financial institutions and consist of cash in our operating accounts and cash and cash equivalents invested in money market funds. The amount of cash in our operating accounts exceeds the Federal Deposit Insurance Corporation insurance limits. While we monitor our accounts regularly and adjust our balances as appropriate, the valuation of or our access to these accounts could be negatively impacted if the underlying financial institutions fail or become subject to other adverse conditions in the financial markets. The operations of U.S. and global financial services institutions are interconnected and the performance and financial strength of specific institutions are subject to rapid change, the timing and extent of which cannot be known. To date, we have experienced no material realized losses on or lack of access to our cash held in operating accounts or our invested cash or cash equivalents, however, we can provide no assurances that access to our cash held in operating accounts or our invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets or the negative performance of financial institutions. Any material loss that we may experience in the future or inability for a material time period to access our cash and cash equivalents could have an adverse effect on our ability to pay our operational expenses or make other payments, which could adversely affect our business.

Risks Relating to our Common Stock
The price of our common stock may fluctuate significantly.
The trading price of our common stock has ranged between $9.80 and $14.25 per share over the past 52 weeks.
The market price of our common stock may fluctuate in response to numerous factors, many of which are beyond our control. These factors include the following:
actual or anticipated fluctuations in our operating results;
changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
the operating and stock performance of our competitors;
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our dividend payment ratio and level;
announcements by us or our competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
the initiation or outcome of litigation;
the failure or significant disruption of our operations from various causes related to our critical information technologies and systems including cybersecurity threats to our data and customer data as well as reputational or financial risks associated with a loss of any such data;
changes in interest rates;
general economic, market and political conditions;
additions or departures of key personnel; and
future sales of our equity or convertible securities.
We cannot predict the extent, if any, to which future sales of shares of common stock or the availability of shares of common stock for future sale, may depress the trading price of our common stock.
In addition, the stock market in recent years has experienced extreme price and trading volume fluctuations that often have been unrelated or disproportionate to the operating performance of individual companies. These broad market fluctuations may adversely affect the price of our common stock, regardless of our operating performance. Furthermore, stockholders may initiate securities class action lawsuits if the market price of our stock drops significantly, which may cause us to incur substantial costs and could divert the time and attention of our management. These factors, among others, could significantly depress the price of our common stock.

ITEM 1B.UNRESOLVED STAFF COMMENTS
None.

ITEM 1C.    CYBERSECURITY
We have a comprehensive approach to identifying and managing cybersecurity risks that involves our information technology security personnel, senior management, Audit Committee and Board of Directors. Our cybersecurity risk management function is integrated into our overall risk management system and processes.
Governance. The Board of Directors has formally tasked the Audit Committee with oversight responsibility to review cybersecurity and data privacy risks. The Audit Committee receives regular reports from management about cybersecurity matters. In addition to regular reporting, we have procedures by which potential cybersecurity incidents are reported in a timely manner to the Chief Technology Officer, who then notifies the Chief Operating Officer and General Counsel of cybersecurity incidents and they collectively determine if a specific incident warrants escalation to the Audit Committee and the Board of Directors. Our CTO, who has more than 25 years of information security and cybersecurity experience, manages cybersecurity at the corporate and real estate segments and oversees a team of dedicated cybersecurity personnel employed in our tobacco segment. Our governance procedures are generally designed to identify, assess, mitigate, prevent and, where required, respond to cybersecurity security incidents and threats in a timely manner to minimize the loss or compromise of information and assets and to facilitate incident resolution.
Cybersecurity incident identification and response. We use a number of processes and procedures to protect our data, systems and employees from cyber incidents, to reduce our overall cybersecurity risk profile, and to identify and respond to cybersecurity incidents in a timely manner. These processes and procedures leverage a variety of tools, including a security incident and event manager interface that uses behavioral analytics and provides live metrics and reports of attempted breaches and logs of firewalls, authentication attempts, emails, anti-malware, attempted intrusions and applications. We also conduct periodic tests to assess our processes and procedures and the threat landscape, which include, among other things, the engagement of third-party experts for external and internal penetration testing and system security assessments.
We have adopted an incident response plan that applies in the event of a cybersecurity incident involving a breach of our own information technology systems and applications. Pursuant to this response plan, in the event of an incident, a multi-disciplinary team is assembled that includes our CTO and General Counsel and, if appropriate, our COO and CFO, which in turn may leverage the expertise of third-party consultants, external legal counsel and other resources. The plan includes procedures designed to facilitate containment of, and responses to, a cybersecurity incident, which are based on the type of incident, the location of the incident and the breadth of the incident. The plan also establishes procedures for notifying any impacted parties, including our customers, law enforcement and regulatory authorities, third-party vendors and insurance
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providers. Our CTO will provide periodic updates to the Audit Committee and, when appropriate, the Board of Directors during this process.
After an incident, we would review and document the causes and effects of the incident, evaluate the remediation plan, and consider post-incident improvements. Where applicable, the CTO reports these findings to the Audit Committee and, when appropriate, the Board of Directors.
Processes to identify material risks associated with the use of third-party service providers. In addition to internal resources, we utilize third-party service providers to supplement and maintain our information technology systems. We have procedures to oversee and identify cybersecurity risks associated with our use of these third-party service providers, including procedures that apply in the event of a cybersecurity incident at a third-party service provider that results in our systems or data or our customers’ data being compromised. These processes and procedures include, among others, a diligence review conducted by our information technology team of substantially all of our external business partners and a focused review of any such third parties’ cybersecurity audit attestations, such as Service Organization Controls, NIST 800 alignments, ISO certifications, PCI DSS compliance or other recognized external reviews. In the case of a cybersecurity incident affecting a third party, these procedures also govern interactions with personnel of the impacted third-party to determine the date, scope and effects of the cybersecurity incident, review the response and remediation measures taken by the third-party and conduct an inventory of potentially compromised data. Our notification process for a cybersecurity incident affecting a third party is the same as the notification process that applies to a cybersecurity incident that affects our own information technology systems and applications.
Cybersecurity risks and threats. We and certain of our third-party service providers have experienced, and may continue to experience, internal and external cybersecurity threats, which can result in impacts to critical data and confidential or proprietary information and the disruption of certain business operations. Nonetheless, we have not been subject to cybersecurity incidents that, individually or in aggregate, have been material to our operations or financial condition, and we cannot provide assurance that cybersecurity incidents will not have a material impact in the future. See Item 1A. “Risk Factors”.

ITEM 2.PROPERTIES
Our principal executive offices are in Miami, Florida. We lease 12,390 square feet of office space in an office building in Miami. The lease was extended in January 2023 and expires in April 2028.
We lease approximately 9,000 square feet of office space in New York, New York. The lease was extended in December 2023 and expires in December 2028. New Valley’s operating properties are discussed above under the description of New Valley’s business and in Note 10 to our consolidated financial statements.
Liggett and LVB
Liggett’s tobacco manufacturing facilities, and several of its distribution and storage facilities, are currently located in or near Mebane, North Carolina. Some of these facilities are owned and others are leased. Liggett’s office, manufacturing complex and warehouse are pledged as collateral under its Revolving Credit Facility. As of December 31, 2023, the principal properties owned or leased by Liggett are as follows:
TypeLocationOwned or LeasedApproximate Total
Square Footage
 
Storage FacilitiesDanville, VAOwned578,000 
Office and Manufacturing ComplexMebane, NCOwned240,000 
WarehouseMebane, NCOwned60,000 
WarehouseMebane, NCLeased125,000 
WarehouseMebane, NCLeased22,000 
LVB leases approximately 22,000 square feet of office space in Morrisville, North Carolina. The lease expires in June 2026.
Liggett’s management believes that its property, plant and equipment are well maintained and in good condition and that its existing facilities are sufficient to accommodate a substantial increase in production.

ITEM 3.LEGAL PROCEEDINGS
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Liggett and other U.S. cigarette manufacturers have been named as defendants in various types of cases predicated on the theory, among other things, that they should be liable for damages from adverse health effects alleged to have been caused by cigarette smoking or by exposure to secondary smoke from cigarettes.
Reference is made to Note 15 to our consolidated financial statements included elsewhere in this report and contains a general description of certain legal proceedings to which we, or our 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 we are 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 4.MINE SAFETY DISCLOSURES

Not applicable.
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PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed and traded on the New York Stock Exchange under the symbol “VGR.” At February 9, 2024, there were approximately 1,414 holders of record of our common stock.

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Performance Graph
The following graph compares the cumulative total annual return of our Common Stock, the S&P 500 Index, the S&P Small Cap 600 Index, and the NYSE Arca Tobacco Index for the five years ended December 31, 2023. The graph assumes that $100 was invested on December 31, 2018 in the Common Stock and each of the indices, and that all cash dividends and distributions were reinvested. The historical stock prices of Vector presented in the chart have been adjusted to reflect the impact of the distribution of Douglas Elliman Inc. on December 29, 2021. The chart does not reflect the Company’s forecast of future financial performance.
917
12/1812/1912/2012/2112/2212/23
Vector Group Ltd. 100 166 155 224 250 255 
S&P 500100 131 156 200 164 207 
S&P 600100 123 137 173 145 168 
NYSE Arca Tobacco100 133 134 159 140 144 

Unregistered Sales of Equity Securities and Use of Proceeds
No securities of ours which were not registered under the Securities Act of 1933 were issued or sold by us during the three months ended December 31, 2023.
Issuer Purchase of Equity Securities
We did not purchase our common stock during the three months ended December 31, 2023.

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EXECUTIVE OFFICERS OF THE REGISTRANT
The table below, together with the accompanying text, presents certain information regarding all our current executive officers as of February 16, 2024. Each of the executive officers serves until the election and qualification of such individual’s successor or until such individual’s death, resignation or removal by the Board of Directors.
NameAgePositionYear Individual
Became an
Executive Officer
Howard M. Lorber75 President and Chief Executive Officer2001
Richard J. Lampen70 Executive Vice President and Chief Operating Officer1996
J. Bryant Kirkland III58 Senior Vice President, Chief Financial Officer and Treasurer2006
Marc N. Bell63 Senior Vice President, General Counsel and Secretary1998
J. David Ballard56 Senior Vice President, Enterprise Efficiency and Chief Technology Officer2020
Nicholas P. Anson52 President and Chief Operating Officer of Liggett2020
Howard M. Lorber has been our President and Chief Executive Officer since January 2006. He served as our President and Chief Operating Officer from January 2001 to December 2005 and has served as a director of ours since January 2001. From November 1994 to December 2005, Mr. Lorber served as the President and as a member of the Board of Directors of New Valley Corporation, the predecessor to our wholly owned subsidiary, New Valley LLC. Mr. Lorber also serves as Chairman of the Board of Directors, President and Chief Executive Officer of Douglas Elliman (NYSE:DOUG), and as Executive Chairman of its subsidiary, Douglas Elliman Realty, LLC. Mr. Lorber was Chairman of the Board of Hallman & Lorber Assoc., Inc., consultants and actuaries of qualified pension and profit sharing plans, and various of its affiliates from 1975 to December 2004 and has been a consultant to these entities since January 2005; Chairman of the Board of Directors since 1987 and Chief Executive Officer from November 1993 to December 2006 of Nathan’s Famous, Inc., a chain of fast food restaurants; and a Director of Clipper Realty, Inc., a real estate investment trust, since July 2015. Mr. Lorber was Chairman of the Board of Ladenburg Thalmann Financial Services from May 2001 to July 2006 and Vice Chairman from July 2006 to February 2020. He is also a trustee of Long Island University.
Richard J. Lampen was appointed our Chief Operating Officer on January 14, 2021 and has served as our Executive Vice President since 1995. From October 1995 to December 2005, Mr. Lampen served as the Executive Vice President and General Counsel of New Valley Corporation, where he also served as a director. Mr. Lampen also serves as Executive Vice President and Chief Operating Officer and as a member of the Board of Directors of Douglas Elliman. From September 2006 to February 2020, he has served as President and Chief Executive Officer as well as a director of Ladenburg Thalmann Financial Services. Mr. Lampen also served as Chairman of Ladenburg Thalmann Financial Services from September 2018 to February 2020. From October 2008 to October 2019, Mr. Lampen served as President and Chief Executive Officer as well as a director of Castle Brands Inc.
J. Bryant Kirkland III has been our Chief Financial Officer and Treasurer since April 2006 and our Senior Vice President since May 2016. Mr. Kirkland served as a Vice President of ours from January 2001 to April 2016 and served as New Valley Corporation’s Vice President and Chief Financial Officer from January 1998 to December 2005. He has served since July 1992 in various financial capacities with us, Liggett and New Valley. Mr. Kirkland also serves as Senior Vice President, Treasurer and Chief Financial Officer of Douglas Elliman. Mr. Kirkland has served as Chairman of the Board of Directors, President and Chief Executive Officer of Multi Soft II, Inc. and Multi Solutions II, Inc. since July 2012.
Marc N. Bell has been our General Counsel and Secretary since May 1994 and our Senior Vice President since May 2016 and the Senior Vice President and General Counsel of Vector Tobacco since April 2002. Mr. Bell served as a Vice President of ours from January 1998 to April 2016. From November 1994 to December 2005, Mr. Bell served as Associate General Counsel and Secretary of New Valley Corporation and from February 1998 to December 2005, as a Vice President of New Valley. Mr. Bell previously served as Liggett’s General Counsel and currently serves as an officer, director or manager for many of Vector Group’s or New Valley’s subsidiaries. In addition, Mr. Bell serves as Senior Vice President, Secretary and General Counsel of Douglas Elliman.
J. David Ballard has been our Senior Vice President, Enterprise Efficiency and Chief Technology Officer since July 2020 and, from February 2020 to July 2020, served as a consultant to us. Mr. Ballard also serves as Senior Vice President, Enterprise Efficiency and Chief Technology Officer of Douglas Elliman. Prior to joining Vector Group, Mr. Ballard served as Senior Vice President, Enterprise Services of Ladenburg Thalmann Financial Services Inc. from April 2019 to February 2020. Prior to joining Ladenburg, he served as President and Chief Operating Officer for Docupace Technologies, a leading digital
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operations technology provider in the wealth management space from March 2018 to April 2019. Mr. Ballard was Executive Vice President and Chief Operating Officer at Cetera Financial Group from April 2015 to March 2018. Prior to his role at Cetera, Mr. Ballard spent more than two decades working in executive and management positions at several firms in the independent financial advisory and asset management industries, including AIG Advisor Group, SunAmerica Mutual Funds and AIG Retirement Services.
Nicholas P. Anson was promoted to President and Chief Operating Officer of Liggett and Liggett Vector Brands in April 2020. Mr. Anson joined Liggett in 2001 and has served in numerous senior roles over his more than 20 years with Liggett. Previously, Mr. Anson served as Executive Vice President of Finance & Administration and Chief Financial Officer for Liggett Vector Brands from 2013 to 2020. Mr. Anson was responsible for Liggett Vector Brands’ finance and human resources organizations. His duties included coordination with and certain indirect responsibilities for finance and human resources matters at Liggett and Vector Tobacco, which are affiliated companies of Liggett Vector Brands.



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ITEM 6.RESERVED

Reserved.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
Overview
We are a holding company and are engaged principally in two business segments:
Tobacco: the manufacture and sale of discount cigarettes in the U.S. through our Liggett Group LLC and Vector Tobacco LLC subsidiaries, and
Real Estate: the real estate investment business through our subsidiary, New Valley LLC, which acquires and invests in real estate properties or projects.
Our tobacco subsidiaries’ cigarettes are produced in 100 combinations of length, style and packaging. Our current brand portfolio includes:
Montego
Eagle 20’s
Pyramid
Grand Prix, Liggett Select, Eve, USA and various partner brands and private label brands.

All of our brands are priced in the discount segment and Montego, our lowest priced brand, is the largest discount brand in the U.S. Consumers in the discount segment are price conscious and have less brand loyalty. They place a greater emphasis on price and quality. Liggett’s competition is divided into two segments. The first segment consists of the three largest manufacturers of cigarettes in the U.S.: 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.
See Item 1. “Business” for detailed overview and description of our principal operations.
Certain discussions of the changes in our results of operations and liquidity and capital resources from the year ended December 31, 2022 as compared to the year ended December 31, 2021 have been omitted from this Form 10-K and may be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on February 21, 2023.

Recent Developments
Menthol and Flavorings. On May 4, 2022, FDA published a proposed rule to prohibit menthol as a characterizing flavor in cigarettes. For the year ended December 31, 2023, approximately 21% of our cigarette unit sales were menthol flavored. FDA is expected to adopt a final rule in 2024. 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. In addition, if litigation is brought against the FDA’s menthol regulation, the effective date may be extended further. 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, and whether it will have an adverse effect on Liggett or Vector Tobacco.
Nicotine. On June 21, 2022, FDA indicated it plans to publish a proposed rule that establishes a tobacco product standard reducing the level of nicotine in cigarettes to non-addictive levels. 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. We cannot predict how a tobacco product standard reducing nicotine, if ultimately issued by FDA, will impact
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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.
Repurchase of 10.5% Senior Notes due 2026. During the years ended December 31, 2023 and 2022, we repurchased in the market $23,443 and $12,865, respectively, in aggregate principal amount of our 10.5% Senior Notes outstanding and recorded a loss of $549 and a gain of $412, respectively. The 10.5% Senior Notes that were repurchased have been retired.

Recent Developments in Tobacco-Related Litigation
The cigarette industry continues to be challenged on numerous fronts. 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. 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. 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.
Mississippi Litigation. 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 among Liggett, Mississippi and other states alleging that Liggett owed Mississippi compensatory damages and interest. In August 2023, the parties settled the matter and Liggett paid $18,000 in connection with such settlement. In September 2023, Liggett redeemed the $24,000 bond that had been posted in June 2022 and received proceeds of $25,135, which included the principal balance and accrued interest.
See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations. Legislation and Regulation” for further information on litigation.

Critical Accounting Estimates
General. The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Significant estimates subject to material changes in the near term include impairment charges, valuation of intangible assets, promotional accruals, actuarial assumptions of pension plans, deferred tax liabilities, settlement accruals, valuation of investments, including other-than-temporary impairments to such investments, and litigation and defense costs. Actual results could differ from those estimates.
Revenue Recognition. Revenue is measured based on a consideration specified in a contract with a customer and excludes any sales incentives. Revenue is recognized when (a) an enforceable contract with a customer exists that has commercial substance, and collection of substantially all consideration for services is probable; and (b) the performance obligations to the customer are satisfied either over time or at a point in time.
Revenue from cigarette sales, which include federal excise taxes billed to customers, are recognized upon shipment of cigarettes when control has passed to the customer. Average collection terms for Tobacco sales range between three and twelve days from the time cigarettes are shipped to the customer. We record a liability for goods estimated to be returned in other current liabilities and the associated receivable for anticipated federal excise tax refunds in other current assets on the consolidated balance sheets. The allowance for returned goods is based principally on sales volumes and historical return rates. The estimated costs of sales incentives, including customer incentives and trade promotion activities, are based principally on historical experience and are accounted for as reductions in Tobacco revenue. Expected payments for sales incentives are included in other current liabilities on our consolidated balance sheets. We account for shipping and handling costs as fulfillment costs as part of cost of sales.
Revenue from facilities primarily related to Escena and consisted of revenues from food and beverage sales, fees charged for gameplay and the sale of golf related equipment and apparel. Revenue is recognized at the time of sale.
Revenue from investments in real estate is recognized from land and building sales at the time of the closing of a sale, which is typically when cash is due, the performance obligation is satisfied as the title to and possession of the real estate asset are transferred to the buyer and we have no further obligations or involvement in the real estate asset.
Contingencies. We record Liggett’s product liability legal expenses and other litigation costs as operating, selling, administrative and general expenses as those costs are incurred. As discussed in Note 15 to our consolidated financial statements, legal proceedings regarding Liggett’s tobacco products are pending or threatened in various jurisdictions against Liggett and us.
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We record provisions in our consolidated financial statements for pending litigation when we 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 Note 15 to our consolidated financial statements and discussed below related to the 16 cases where an adverse verdict was entered against Liggett: (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 consolidated financial statements for unfavorable outcomes, if any. Legal defense costs are expensed as incurred.
Although Liggett has generally been successful in managing litigation in the past, litigation is subject to uncertainty and significant challenges remain, particularly with respect to the Engle progeny cases.
A reader of this Form 10-K should not infer from the absence of any reserve in our consolidated financial statements that we will not be subject to significant tobacco-related liabilities in the future. Litigation is subject to many uncertainties, and 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.
There may be several other proceedings, lawsuits and claims pending against us and certain of our consolidated subsidiaries unrelated to tobacco or tobacco product liability. We are of the opinion that the liabilities, if any, ultimately resulting from such other proceedings, lawsuits and claims should not materially affect our financial position, results of operations or cash flows.
Master Settlement Agreement. As discussed in Note 15 to our consolidated financial statements, Liggett and Vector Tobacco are participants in the Master Settlement Agreement or the MSA. Liggett and Vector Tobacco have no payment obligations under the MSA except to the extent their market shares exceed approximately 1.65% and 0.28%, respectively, of total cigarettes sold in the U.S. Their obligations, and the related expense charges under the MSA, are subject to adjustments based upon, among other things, the volume of cigarettes sold by Liggett and Vector Tobacco, their relative market shares and inflation. Since relative market shares are based on cigarette shipments, the best estimate of the allocation of charges under the MSA is recorded in cost of sales when the products are shipped. Settlement expenses under the MSA recorded in the accompanying consolidated statements of operations were $271,478 for 2023, $276,204 for 2022 and $171,058 for 2021. Adjustments to these estimates are recorded in the period that the change becomes probable and the amount can be reasonably estimated.
Stock-Based Compensation. Our stock-based compensation uses a fair-value-based method to recognize non-cash compensation expense for share-based transactions. Under the fair value recognition provisions, we recognize stock-based compensation net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest on a straight-line basis over the requisite service period of the award. We recognized stock-based compensation expense of $42, $339 and $849 in 2023, 2022 and 2021, respectively, related to the amortization of stock option awards and $10,069, $7,509 and $13,949, respectively, related to the amortization of restricted stock grants. As of December 31, 2023 and 2022, there was $0 and $41, respectively, of total unrecognized cost related to employee stock options and $22,566 and $15,501, respectively, of total unrecognized cost related to restricted stock grants. See Note 14 to our consolidated financial statements.
Employee Benefit Plans. The determination of our net pension and other postretirement benefit income or expense is dependent on our selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include, among others, the discount rate, expected long-term rate of return on plan assets and rates of increase in compensation and healthcare costs. We determine discount rates by using a quantitative analysis that considers the prevailing prices of investment grade bonds and the anticipated cash flow from our two qualified defined benefit plans and our postretirement medical and life insurance plans. These analyses construct a hypothetical bond portfolio whose cash flow from coupons and maturities match the annual projected cash flows from our pension and retiree health plans. As of December 31, 2023, our benefit obligations were computed assuming a discount rate between 4.95% - 5.40%. As of December 31, 2023, our service cost was computed assuming a discount rate of 2.85% - 5.3%. In determining our expected rate of return on plan assets, we consider input from our external advisors and historical returns based on the expected long-term rate of return which is the weighted average of the target asset allocation of each individual asset class. Our actual 10-year annual rate of return on our pension plan assets was 4.42%, 4.83% and 7.74% for the years ended December 31, 2023, 2022 and 2021, respectively, and our actual five-year annual rate of return on our pension plan assets was 3%, 2.42% and 7.86% for the years ended December 31, 2023, 2022 and 2021, respectively. In computing expense for the year ended December 31, 2024, we will use an assumption of a 6.4% annual rate of return on our pension plan assets. In accordance with GAAP, actual results that differ from our assumptions are accumulated and amortized over future periods and therefore, generally affect our recognized income or expense in such future periods. While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our future net pension and other postretirement benefit income or expense.
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Net pension expense for defined benefit pension plans and other postretirement expense was $1,750, $1,358 and $1,390 for the years ended December 31, 2023, 2022 and 2021, respectively, and we currently anticipate benefit expense will be approximately $1,473 for 2024. In contrast, our funding obligations under the pension plans are governed by the Employee Retirement Income Security Act (“ERISA”). To comply with ERISA’s minimum funding requirements, we do not currently anticipate that we will be required to make any funding to the tax qualified pension plans for the pension plan year beginning on January 1, 2024 and ending on December 31, 2024.
Long-Term Investments and Impairments. As of December 31, 2023, our long-term investments were comprised of $29,402 of equity securities at fair value that qualify for the net asset value (“NAV”) practical expedient and $17,358 of long-term investments that were accounted for under the equity method. Our investments in equity securities at fair value that qualify for the NAV practical expedient consisted primarily of investment partnerships investing in investment securities. The investments in these investment partnerships are illiquid and the ultimate realization of these investments is subject to the performance of the underlying partnership and its management by the general partners. The estimated fair value of these investments was provided by the partnerships based on the indicated market values of the underlying assets or investment portfolio. Our investments accounted for under the equity method included interests in partnerships in which we have the ability to exercise significant influence over their operating and financial policies. The estimated fair value of the investments is either provided by the partnerships based on the indicated market values of the underlying assets or is calculated internally based on the number of shares owned and the equity in earnings or losses and interest income we recognize on the investment. Gains are recognized when realized in our consolidated statement of operations. Losses are recognized as realized or upon the determination of the occurrence of an other-than-temporary decline in fair value. Pursuant to the amendments provided by ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), our long-term investments that qualify for the NAV practical expedient are measured at fair value with changes in fair value recognized in net income. Therefore, impairment analyses for these investments are no longer warranted.
As of December 31, 2023, we also had $7,555 of investments in profit participation agreements and various limited liability companies that were classified as equity securities and other long-term investments without readily determinable fair values that do not qualify for the NAV practical expedient. The investments are included in “Other assets” on the consolidated balance sheets and are valued at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment. On a quarterly basis, we evaluate our investments to determine if there are indicators of impairment. If so, we also determine whether there is an impairment and if it is considered temporary or other than temporary. We believe that the assessment of temporary or other-than-temporary impairment includes judgment and relevant facts and circumstances. 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.
Current Expected Credit Losses. On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, therefore, our measurement of credit losses for most financial assets and certain other instruments has been modified as discussed in Note 3 to our consolidated financial statements.
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 December 31, 2023, 2022 and 2021.
Term loan receivables: New Valley provides term loans to real estate developers, which are included in Other assets on the consolidated balance sheets. The loans are secured by guarantees and are evaluated individually. Because 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. New Valley’s expected credit loss estimate was $3,100 as of adoption (January 1, 2020). New Valley’s expected credit loss estimate was $15,928 as of both December 31, 2023 and December 31, 2022.
Intangible Assets. Intangible assets with indefinite lives are not amortized, but instead are tested for impairment on an annual basis, or whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable.
Our intangible asset associated with the benefit under the MSA is related to Vector Tobacco. The fair value of the intangible asset associated with the benefit under the MSA is determined using discounted cash flows. This approach involves
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two steps: (i) estimating future cash savings due to the payment exemption under the MSA and (ii) discounting the resulting cash flow savings to determine fair value. This fair value is then compared with the carrying value of the intangible asset associated with the benefit under the MSA. To the extent that the carrying amount exceeds the implied fair value of the intangible asset, an impairment loss is recognized. We performed its impairment test for the year ended December 31, 2023 and no impairment was noted.
Income Taxes. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time and, as a result, changes in our subjective assumptions and judgments may materially affect amounts recognized in our consolidated financial statements.
See Note 13 to our consolidated financial statements for additional information regarding our accounting for income taxes and uncertain tax positions. 

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 consolidated financial statements and related notes included elsewhere in this report. The consolidated financial statements include the accounts of Liggett, Vector Tobacco, Liggett Vector Brands, New Valley, and other less significant subsidiaries.
Our business segments were Tobacco and Real Estate for the years ended December 31, 2023 and 2022. The Tobacco segment consisted of the manufacture and sale of cigarettes. The Real Estate segment includes our investment in New Valley, which includes investments in real estate ventures and, prior to 2023, included investments in real estate.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies and can be found in Note 1 to our consolidated financial statements.

 Year Ended December 31,
 2023 2022 
 (Dollars in thousands)
Revenues:    
Tobacco$1,424,268  $1,425,125  
Real Estate— 15,884 
  Total revenues$1,424,268 $1,441,009 
Operating income (loss):  
Tobacco$346,673 (1)$347,044 (2)
Real Estate313 8,016 
Corporate and Other(18,951)(16,050)
Total operating income $328,035  $339,010  
_____________________________
(1)Operating income includes $18,799 of litigation settlement and judgment expense and $734 received from a litigation settlement associated with the MSA (which reduced cost of sales).
(2)Operating income includes $239 of litigation settlement and judgment expense and $2,123 received from a litigation settlement associated with the MSA (which reduced cost of sales).

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Pricing actions

Since January 1, 2022, Liggett has taken the following pricing actions:
Brand
Amount per packMontegoEagle 20’sPyramidLiggett Select, Eve and Grand Prix
January 31, 2022 (1)
$0.10 P
January 31, 2022 (1)
0.15 PPP
April 29, 2022 (1)
0.16 PPP
May 1,2022 (2)
0.10 P
July 29, 2022 (1)
0.16 PPPP
October 28, 2022 (1)
0.16 PPP
October 28, 2022 (1)
0.10 P
January 27, 2023 (1)
0.16 PPP
January 27, 2023 (1)
0.10 P
April 28, 2023 (1)
0.16 PPP
April 28, 2023 (1)
0.20 P
August 25, 2023 (1)
0.10 P
August 25, 2023 (1)
0.16 PP
August 25, 2023 (1)
0.20 P
January 26, 2024 (1)
0.14 P
January 26, 2024 (1)
0.17 PP
January 26, 2024 (1)
0.30 P
_____________________________
(1)     List price increase
(2)     Promotional spending reduction
2023 Compared to 2022
Revenues. Total revenues were $1,424,268 for the year ended December 31, 2023 compared to $1,441,009 for the year ended December 31, 2022. The $16,741 (1.2%) decline in revenues was due to a $15,884 decline in Real Estate revenues and an $857 decline in Tobacco revenues related to declines in unit volume partially offset by increases in net pricing.
Cost of sales. Total cost of sales was $965,348 for the year ended December 31, 2023 compared to $998,658 for the year ended December 31, 2022. The $33,310 (3.3%) decline in cost of sales was due to a $25,983 decline in Tobacco cost of sales related to declines in sales volume and a $7,327 decline in Real Estate cost of sales.
Expenses. Operating expenses were $130,885 for the year ended December 31, 2023 compared to $103,341 for the year ended December 31, 2022. The $27,544 (26.7%) increase was due to a $25,497 increase in Tobacco expenses and a $2,901 increase in Corporate and Other expense. This was partially offset by an $854 decline in Real Estate expenses for the year ended December 31, 2023.
Operating income. Operating income was $328,035 for the year ended December 31, 2023 compared to $339,010 for the year ended December 31, 2022, a decline of $10,975 (3.2%). Real Estate operating income declined by $7,703, Corporate and Other operating loss increased by $2,901, and Tobacco operating income declined by $371.
Other expenses. Other expenses were $79,583 and $118,448 for the years ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, other expenses primarily consisted of interest expense of $108,617 and a loss of $549 recognized on the repurchase of the 10.5% Senior Notes. This was partially offset by other income of $26,119, which includes interest and dividend income of $23,491 and net gains from investments of $2,594, equity in earnings from real estate ventures of $2,202, and equity in earnings from investments of $1,262. For the year ended December 31, 2022, other expenses primarily consisted of interest expense of $110,665, equity in losses from real estate ventures of $5,946 and equity in losses from investments of $4,995. This was partially offset by other income of $2,746, and gain of $412 recognized on the repurchase of the 10.5% Senior Notes.
Income before provision for income taxes. Income before income taxes was $248,452 and $220,562 for the years ended December 31, 2023, and 2022, respectively.
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Income tax expense. Income tax expense was $64,926 for the year ended December 31, 2023 compared to income tax expense of $61,861 for the year ended December 31, 2022. Our income tax rates for the years ended December 31, 2023 and 2022 do not bear a customary relationship to statutory income tax rates due to the impact of certain nondeductible expenses, state income tax rates, changes in valuation allowances, uncertain tax benefits and excess tax benefits of stock-based compensation. We evaluate our marginal income tax rate and uncertain tax positions on a quarterly basis based on our operating activity. Our marginal income tax rate declined to 25.24% in 2023 from 25.81% in 2022 due to this evaluation during the fourth quarter of 2023; the decline in the marginal income tax rate resulted in a $1,169 benefit to our income tax provision for the year ended December 31, 2023. Further, because several income tax audits were successfully resolved in the fourth quarter of 2023, we reversed $1,455 of previously recognized uncertain tax positions in the fourth quarter of 2023. The reversal of these uncertain tax positions resulted in a $1,327 decline in tax expense related to uncertain tax positions for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Tobacco.
Tobacco revenues. All our Tobacco sales were in the discount category in 2023 and 2022. For the year ended December 31, 2023, Tobacco revenues were $1,424,268 compared to $1,425,125 for the year ended December 31, 2022. Revenues declined by $857 (0.1%) due primarily to a 6.4% (664.3 million units) decline in unit sales which resulted in an unfavorable volume variance of $91,475. This was partially offset by a favorable price variance of $90,618 due to price increases during the year associated with the gradual transition of our strategy on Montego from a volume-based growth strategy to an income-based growth strategy.
Montego became our largest brand in the second quarter of 2022 and is now the largest discount brand in the U.S. Prior to the third quarter of 2022, our strategy for Montego was based on volume growth, while our strategy for our other brands was based on income growth. In the third quarter of 2022, management made the determination to gradually transition Montego’s growth from a volume-based strategy to an income-based growth strategy and the price of Montego was raised five times between July 2022 and December 2023. For the year ended December 31, 2023, Montego’s volume increased to approximately 64% of Liggett’s total unit sales from approximately 47% for the year ended December 31, 2022.
Eagle 20’s is our second-largest brand and its percentage of our total unit sales declined to approximately 24% for the year ended December 31, 2023 from approximately 35% for the year ended December 31, 2022. Pyramid, our third-largest brand, also declined to approximately 8% of our total unit sales for the year ended December 31, 2023 from approximately 13% for the year ended December 31, 2022.
Tobacco cost of sales. The major components of our Tobacco cost of sales were as follows:                        
Year Ended December 31,
20232022
Manufacturing overhead, raw materials and labor$167,033 $154,934 
Federal excise taxes486,263 520,760 
FDA expense32,121 30,686 
MSA expense, net of market share exemption271,478 (1)276,204 (2)
Customer shipping and handling8,453 8,747 
Total cost of sales$965,348 $991,331 
_____________________________
(1)Includes $734 received from a litigation settlement associated with the MSA (which reduced cost of sales).
(2)Includes $2,123 received from a litigation settlement associated with the MSA (which reduced cost of sales).

The Tobacco segment’s MSA expense is the most volume-sensitive component (on a per-unit basis) of its cost of sales because, under the terms of the MSA, the Tobacco segment has no payment obligations except to the extent that its U.S. Cigarette market share exceeds 1.93%. We estimate MSA expense based on total U.S. taxable cigarette shipments, our taxable shipments and inflation. Based on assumptions discussed below, we estimated our MSA expense increased to $0.56 per pack for the year ended December 31, 2023 from our estimate of $0.53 per pack for the year ended December 31, 2022.
Due to Liggett and Vector Tobacco’s cost exemption, our MSA expense is impacted by total U.S. taxable cigarette shipments. As of December 31, 2023, we estimate taxable shipments in the U.S. declined by 7.5% in 2023 compared to our estimate as of December 31, 2022 of 9.8% in 2022. (The actual change in 2022 taxable shipments was a decline of 9.7%.) We anticipate that taxable shipments in the U.S. will continue to decline in 2024, in a manner consistent with the decline in 2023. We estimate our 2023 projected annual MSA expense changes by approximately $1,700 for each 1% change in U.S. shipment volumes.
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Under the MSA, our market share is computed using taxable shipments which closely resemble shipments from manufacturers to wholesalers. Our market share, computed on a wholesale basis, increased to 5.5% for the year ended December 31, 2023 from 5.4% for the year ended December 31, 2022. We believe market share, computed on a wholesale basis, may be affected by irregular industry wholesaler purchasing patterns.
The inflation rate also impacts Liggett’s MSA expense, which is subject to an annual inflation adjustment. The inflation adjustment is the greater of the U.S. CPI rate or 3%. As of December 31, 2023, Liggett’s management assumed an inflation adjustment to MSA expense of 3.4% compared to an assumption of 6.5% as of December 31, 2022. (The actual inflation adjustment to the MSA in 2022 was 6.5%.) Our annual MSA expense increases by approximately $2,800 for each 1% increase in the inflation rate of more than 3%.
In addition to the MSA expense, we could experience inflationary impacts from manufacturing costs. The largest component of Liggett’s manufacturing costs is leaf tobacco and other raw materials. In recent years, due to declining prices of leaf tobacco as well as efficiencies gained from technological innovation in Liggett’s factory, Liggett’s raw material costs have been relatively flat and, therefore, prior to 2021, Liggett’s cost of sales had not been impacted by inflation. During the year ended December 31, 2023, Liggett experienced a 16.2% increase in leaf tobacco and raw materials (on a per-unit basis) compared to 5.8% during the year ended December 31, 2022. Further, when including labor costs, manufacturing overhead and shipping costs with leaf tobacco and raw materials, Liggett experienced a 14.6% increase in production costs (on a per-unit basis) during the year ended December 31, 2023, compared to a 6.3% increase in production costs during the year ended December 31, 2022. While inflationary pressures continue to persist in the marketplace, we believe the cost increases of leaf tobacco and raw materials are stabilizing. The cost of leaf tobacco and raw materials represented approximately 10.1% and 9.0% of Liggett’s cost of sales for the years ended December 31, 2023 and 2022, respectively.
Tobacco cost of sales was reduced by litigation settlements associated with the MSA expense of $734 during the year ended December 31, 2023, compared to a reduction of $2,123 during the year ended December 31, 2022. The decline in settlements increased the change in cost of sales by $1,389 from the year ended December 31, 2022 compared to the year ended December 31, 2023.
Tobacco gross profit was $458,920 for the year ended December 31, 2023 compared to $433,794 for the year ended December 31, 2022, an increase of $25,126 (5.8%). This increase in gross profit for the year ended December 31, 2023 was primarily attributable to increases in net pricing partially offset by higher per unit MSA costs and a 6.4% decline in unit sales. As a percentage of revenue (excluding Federal Excise Taxes), Tobacco gross profit margin increased from 48.0% in the 2022 period to 48.9% in the 2023 period primarily due to increased pricing.
Tobacco expenses. Tobacco operating, selling, general and administrative expenses, excluding settlements and judgments, were $93,448 for the year ended December 31, 2023 compared to $86,511 for the year ended December 31, 2022. The $6,937 (8.0%) increase is primarily due to Liggett’s triennial national sales meeting held in March 2023, higher sales and marketing expenses, professional fees and compensation expenses. Tobacco product liability legal expenses, including settlements and judgments, were $26,612 and $8,031 for the years ended December 31, 2023 and 2022, respectively. Litigation settlement and judgment expenses for the year ended December 31, 2023 included the $18,000 Mississippi settlement. See “— Recent Developments in Tobacco-Related Litigation.”
Tobacco operating income. Tobacco operating income was $346,673 for the year ended December 31, 2023 compared to $347,044 for the year ended December 31, 2022. The decline of $371 (0.1%) was primarily attributable to the Mississippi settlement, partially offset by increased gross profit.
Real Estate.
Real Estate revenues. The Real Estate segment includes our investment in New Valley, investments in real estate ventures and, prior to April 2022, when Escena was sold, included investments in real estate. After the sale of Escena, we have no revenues from our real estate segment. Therefore, Real Estate revenues declined to $0 from $15,884 for the years ended December 31, 2023 and 2022, respectively.
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Real Estate revenues, cost of sales, expenses and operating income for the years ended December 31, 2023 and 2022, respectively, were as follows:
Year Ended December 31,
20232022
Real Estate Revenues:
Revenues from investments in real estate$— $12,625 
Sales on facilities located on investments in real estate— 3,259 
  Total real estate revenues— 15,884 
Real Estate Cost of Sales:
Cost of sales from investments in real estate— 5,891 
Cost of sales on facilities located on investment in real estate— 1,436 
Total real estate cost of sales— 7,327 
Operating, selling, administrative and general expenses(313)541 
Operating income$313 $8,016 
Corporate and Other.
Corporate and Other loss. The operating loss at the Corporate and Other segment was $18,951 for the year ended December 31, 2023 compared to $16,050 for the same period in 2022. The increase was primarily associated with increases in stock-based compensation expense.

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Summary of Real Estate Investments
We own and seek to acquire investment interests in various real estate projects through debt and equity investments. Our real estate investments primarily include the following projects as of December 31, 2023:
(Dollars in Thousands. Area and Unit Information in Ones)
LocationDate of Initial InvestmentPercentage Owned (1)Net Cash InvestedCumulative Earnings (Losses)Carrying Value as of 12/31/2023Future Capital Commit-
ments from New Valley (2)
Projected Residential and/or Hotel AreaProjected Commercial SpaceProjected Number of Residential Lots, Units and/or Hotel RoomsProjected Construction Start DateProjected Construction End Date
Investments in real estate ventures:
111 Murray Street TriBeCa, Manhattan, NYMay 20139.5%$9,030 $(4,413)$4,617 $— 330,000 SF1,700 SF157 RSeptember 2014Completed
87 Park (8701 Collins Avenue)Miami Beach, FLDecember 201323.1%(6,646)6,646 — — 160,000 SF— 70 ROctober 2015Completed
West Hollywood Edition (9040 Sunset Boulevard) (3)
West Hollywood, CAOctober 201448.5%18,673 (18,941)(268)— 210,000 SF— 20
190
R
H
May 2015Completed
Monad Terrace (1300 West Ave)Miami Beach, FLMay 201516.8%7,635 (7,635)— — 160,000 SF— 59 RMay 2016Completed
Dime (209 Havemeyer St)Brooklyn, NYNovember 201716.4%9,145 (9,145)— — 100,000 SF150,000 SF177 RMay 2017Completed
Meatpacking Plaza (44 Ninth Ave)Meatpacking District, Manhattan, NYApril 201916.7%10,692 (3,079)7,613 — 8,741 SF76,919 SF15 RJuly 2021March 2024
Five Park (500 Alton Road)Miami Beach, FLSeptember 201938.9%18,098 4,231 22,329 — 472,000 SF15,000 SF234 RApril 2020November 2024
The Brooklyn Tower (9 DeKalb Avenue)Brooklyn, NYApril 20194.1%5,000 1,442 6,442 — 450,000 SF120,000 SF540 RMarch 2019March 2024
Natura Gardens (17351 NW 94th Court)Miami, FLDecember 201977.8%8,886 2,168 11,054 — 460,000 SF— 460 RDecember 2019Completed
Ritz-Carlton Villas (4701 Meridian Avenue)Miami Beach, FLDecember 202050.0%(3,688)3,688 — — 58,000 SF— 15 ROctober 2020Completed
2000 N. Atlantic Ave.Daytona Beach, FLNovember 202175.0%2,953 285 3,238 — TBDTBDTBD
Society Nashville (915 Division St)Nashville, TNNovember 202139.2%27,000 3,913 30,913 — 335,000 SF8,000 SF502 RJuly 2022November 2025
3621 Collins Ave (4)
Miami Beach, FLMarch 20221.0%1,000 — 1,000 — TBDTBDTBD
Alchemy Nash Square (303 S. Dawson St)Raleigh, NCJune 202260.6%7,500 770 8,270 — TBDTBDTBD
Aventura View (2999 NE 191st St)Aventura, FLJune 202212.5%4,084 493 4,577 — TBD105,000 SFN/AN/A
2261 NE 164th StNorth Miami Beach, FLAugust 202235.0%4,406 165 4,571 — TBDTBDTBD
353 6th AveBrooklyn, NYJanuary 202326.8%700 27 727 — 5,360SF— RApril 2023October 2024
1717 N. Flagler Drive (4)
West Palm Beach, FLJune 2023N/A2,500 — 2,500 — 
20 N. Ocean Blvd (4)
Pompano Beach, FLJune 2023N/A2,500 — 2,500 — 
Banyan CayWest Palm Beach, FLDecember 202313.5%3,983 — 3,983 — 187,000SF— 150
232
H
R
July 2024December 2025
Condominium and Mixed-Use Development$133,451 $(19,385)$114,066 $— 
The Park (500 Broadway)Santa Monica, CAMarch 20171.5%$1,857 $(1,269)$588 $— 245,000 SF49,000SF249 RN/ACompleted
Riverchase LandingHoover, ALOctober 202150.0%$11,350 $(4,147)$7,203 $— 746,000 SFN/A468 RN/AN/A
Apartment Buildings$13,207 $(5,416)$7,791 $— 
Park Lane Hotel (36 Central Park South)Central Park South, Manhattan, NYNovember 20131.0%$3,518 $(3,518)$— $— 446,000 SF— 628 HN/AN/A
215 Chrystie StreetLower East Side, Manhattan, NYDecember 201212.3%(1,328)1,328 — — 246,000 SF— 367 HJune 2014Completed
Coral Beach and Tennis ClubCoral Beach, BermudaDecember 201349.0%6,048 (6,048)— — 52 Acres— 101 HN/AN/A
The Thompson Central Park (119 W 56th St)Midtown, Manhattan, NYJuly 20190.4%1,000 (862)138 — 470,000 SF— 587
99
H
R
May 2020Completed
Hotels$9,238 $(9,100)$138 $— 
The Plaza at Harmon MeadowSecaucus, NJMarch 201549.0%$12,270 $(5,280)$6,990 $— — 219,000 SF— N/AN /A
Wynn Las Vegas RetailLas Vegas, NVDecember 20161.6%2,670 5,574 8,244 — — 160,000 SF— N/AN/A
Commercial$14,940 $294 $15,234 $— 
Total Carrying Value$170,836 $(33,607)$137,229 $— 
(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) Equity in losses in excess of the joint ventures' carrying value were $268 as of December 31, 2023, and are classified in Other current liabilities on the consolidated balance sheets.
(4) The 3621 Collins Ave, 1717 N. Flagler Drive and 20 N. Ocean Blvd ventures are measured at cost, less impairment, following the guidance under ASC 821. The investments are included in Other Assets on the condensed consolidated balance sheets.
N/A - Not applicableSF - Square feetH - Hotel roomsTBD -To be determinedR - Residential UnitsR Lots - Residential lots
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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 December 31, 2023 were $14,998. This amount is included in the “Cumulative Earnings (Losses)” column in the table above. During the year ended December 31, 2023, New Valley capitalized $4,287 of interest costs and utilized (reversed) $83 of previously capitalized interest in connection with the recognition of equity in (losses) earnings, gains and liquidations from various ventures.

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Liquidity and Capital Resources
Cash and cash equivalents increased by $19,732 and $55,525 in 2023 and 2022, respectively.
Cash provided by operations was $209,984 and $181,317 in 2023 and 2022, respectively. The increase of cash provided by operations in 2023 compared to 2022 was related primarily to the timing of receipt of receivables from customers partially offset by the acceleration of payments due under the MSA.
Cash used in investing activities was $14,600 and $3,728 in 2023 and 2022, respectively. In 2023, cash used in investing activities was for the purchase of investment securities of $115,225, investments in real estate ventures of $17,433, capital expenditures of $10,557, the purchase of long-term investments of $9,416, an increase in the cash surrender value of life insurance policies of $1,169, and an increase in restricted assets of $18. This was offset by maturities of investment securities of $89,681, the sale of investment securities of $34,705, distributions from investments in real estate ventures of $9,186, proceeds from the sale or liquidation of long-term investments of $5,530, paydowns of investment securities of $113, and proceeds from the sale of fixed assets of $3. In 2022, cash used in investing activities was for the purchase of investment securities of $54,040, investments in real estate ventures of $25,569, capital expenditures of $9,957, the purchase of long-term investments of $4,363, and an increase in the cash surrender value of life insurance policies of $1,173. This was offset by maturities of investment securities of $53,030, the sale of investment securities of $23,929, proceeds from the sale or liquidation of long-term investments of $9,266, distributions from investments in real estate ventures of $4,946, paydowns of investment securities of $198, and a decrease in restricted assets of $5.
Cash used in financing activities was $175,652 and $122,064 in 2023 and 2022, respectively. In 2023, cash used in financing activities primarily consisted of dividends and distributions on common stock of $126,232, the repurchase and repayments of debt of $23,679, net repayments of debt under the Liggett Credit Agreement described below of $22,035, and the withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting and exercise of stock options of $3,706. Repurchases and repayments of debt for the year ended December 31, 2023 included our repurchase in the market of $23,443 in aggregate principal amount of our 10.5% Senior Notes due 2026 at a price of $23,527 plus accrued interest. The 10.5% Senior Notes Senior Notes that were repurchased have been retired. In 2022, cash used in financing activities comprised of dividends and distributions on common stock of $128,262, repayments of debt of $12,253, withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting of $2,622, other of $938, and net borrowings of debt under the Liggett Credit Agreement described below of $22,011. Repurchases and repayments of debt for the year ended December 31, 2022 included our repurchase in the market of $12,865 in aggregate principal amount of our 10.5% Senior Notes due 2026 at a price of $12,222 plus accrued interest. The 10.5% Senior Notes Senior Notes that were repurchased have been retired.
We use dividends from our tobacco and real estate subsidiaries, as well as cash and cash equivalents maintained at the corporate level, to fund our significant liquidity commitments at the corporate level (not including our tobacco and real estate operations). These liquidity commitments include cash interest expense of approximately $104,800, dividends on our outstanding common shares of approximately $127,900, which is based on an assumed quarterly cash dividend of $0.20 per share, and other corporate expenses and income taxes.
As of December 31, 2023, we had cash and cash equivalents of $268,600 (including $16,753 of cash at Liggett), investment securities and long-term investments, which were carried at $157,695 (see Note 7 to our consolidated financial statements). As of December 31, 2023, our investments in real estate ventures were carried at $131,497.
In June 2022, Liggett appealed the final judgment related to the Mississippi litigation and posted a bond of $24,000. The Mississippi litigation was settled in August 2023 and Liggett paid $18,000 which has been included as a reduction of cash provided from operations. In September 2023, the bond, which totaled $25,135 of principal and accrued interest, was returned to Liggett and the amount received was included in cash provided from op