10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number: 001-37763

TURNING POINT BRANDS, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-0709285
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

5201 Interchange Way, Louisville, KY	40229
(Address of principal executive offices)	(Zip Code)

(502) 778-4421

(Registrant’s telephone number, including area code)

Former name, former address and former fiscal year, if changed since last report: not applicable

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, $0.01 par value	TPB	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☑    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).  Yes  ☑    No  ☐

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

Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐    No  ☑

At April 26, 2024, there were 17,621,706 shares outstanding of the registrant’s voting common stock, par value $0.01 per share.

TURNING POINT BRANDS, INC.

TABLE OF CONTENTS

			Page No.
PART I—FINANCIAL INFORMATION
	ITEM 1	Financial Statements (Unaudited)
		Consolidated Balance Sheets as of March 31, 2024, and December 31, 2023	5
		Consolidated Statements of Income for the three months ended March 31, 2024 and 2023	6
		Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023	7
		Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023	8
		Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023	9
		Notes to Consolidated Financial Statements	10
	ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	38
	ITEM 4	Controls and Procedures	39
PART II—OTHER INFORMATION
	ITEM 1	Legal Proceedings	40
	ITEM 1A	Risk Factors	40
	ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
	ITEM 3	Defaults Upon Senior Securities	40
	ITEM 4	Mine Safety Disclosures	40
	ITEM 5	Other Information	40
	ITEM 6	Exhibits	41
	Signatures		42

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (this “Quarterly Report”), contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may generally be identified by the use of words such as “anticipate,” “believe,” “expect,” “intend,” “plan,” and “will” or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events, and depend on circumstances, that may or may not occur in the future. As a result, actual events may differ materially from those expressed in, or suggested by, the forward-looking statements. Any forward-looking statement made by Turning Point Brands, Inc. (“TPB”), in this Quarterly Report on Form 10-Q speaks only as of the date hereof. New risks and uncertainties come up from time to time, and it is impossible for TPB to predict these events or how they may affect it. TPB has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws. Factors that could cause these differences include, but are not limited to:

● declining sales of tobacco products, and expected continuing decline of sales in the tobacco industry overall;

● our dependence on a small number of third-party suppliers and producers;

● the possibility that we will be unable to identify or contract with new suppliers or producers in the event of a supply or product disruption, as well as other supply chain concerns, including delays in product shipments and increases in freight cost;

● the possibility that our licenses to use certain brands or trademarks will be terminated, challenged or restricted;

● failure to maintain consumer brand recognition and loyalty of our customers;

● our reliance on relationships with several large retailers and national chains for distribution of our products;

● intense competition and our ability to compete effectively;

● competition from illicit sources and the damage caused by illicit products to our brand equity;

● contamination of our tobacco supply or products;

● uncertainty and continued evolution of the markets for our products;

● complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations;

● substantial and increasing regulation and changes in U.S. Food and Drug Administration (“FDA”) enforcement priorities;

● regulation or marketing denials of our products by the FDA, which has broad regulatory powers;

● many of our products contain nicotine, which is considered to be a highly addictive substance;

● requirement to maintain compliance with master settlement agreement escrow account;

● possible significant increases in federal, state and local municipal tobacco- and nicotine-related taxes;

● our products are marketed pursuant to a policy of FDA enforcement priorities which could change, and our products could become subject to increased regulatory burdens by the FDA;

● our products are subject to developing and unpredictable regulation, such as court actions that impact obligations;

● increase in state and local regulation of our products has been proposed or enacted;

● increase in tax of our products could adversely affect our business;

● sensitivity of end-customers to increased sales taxes and economic conditions, including as a result of inflation and other declines in purchasing power;

● possible increasing international control and regulation;

● failure to comply with environmental, health and safety regulations;

● imposition of significant tariffs on imports into the U.S.;

● the scientific community’s lack of information regarding the long-term health effects of certain substances contained in some of our products;

● significant product liability litigation;

● our amount of indebtedness;

● the terms of our indebtedness, which may restrict our current and future operations;

● our ability to establish and maintain effective internal controls over financial reporting;

● identification of material weaknesses in our internal control over financial reporting, which, if not remediated appropriately or timely, could result in loss of investor confidence and adversely impact our stock price;

● our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit acquisition bids or merger proposals, which may adversely affect the market price of our common stock;

● our certificate of incorporation limits the ownership of our common stock by individuals and entities that are Restricted Investors. These restrictions may affect the liquidity of our common stock and may result in Restricted Investors (as defined in our Certificate of Incorporation) being required to sell or redeem their shares at a loss or relinquish their voting, dividend and distribution rights;

● future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us;

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● we may issue preferred stock whose terms could adversely affect the voting power or value of our common stock;

● our business may be damaged by events outside of our suppliers’ control, such as the impact of epidemics (e.g., coronavirus), political upheavals, or natural disasters;

● adverse impact of climate change;

● our reliance on information technology;

● cybersecurity and privacy breaches, which have increased in part due to artificial intelligence;

● failure to manage our growth;

● failure to successfully integrate our acquisitions or otherwise be unable to benefit from pursuing acquisitions;

● fluctuations in our results;

● exchange rate fluctuations;

● adverse U.S. and global economic conditions;

● departure of key management personnel or our inability to attract and retain talent;

● infringement on or misappropriation of our intellectual property;

● third-party claims that we infringe on their intellectual property; and

● failure to meet expectations relating to environmental, social and governance factors.

4

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Turning Point Brands, Inc.

Consolidated Balance Sheets

(dollars in thousands except share data)

	(unaudited)
	March 31,			December 31,
ASSETS	2024			2023
Current assets:
Cash	$	130,903		$	117,886
Accounts receivable, net of allowances of $43 in 2024 and $78 in 2023		8,198			9,989
Inventories, net		105,467			98,960
Other current assets		34,437			40,781
Total current assets		279,005			267,616
Property, plant, and equipment, net		24,790			25,300
Deferred income taxes		1,426			1,468
Right of use assets		10,868			11,480
Deferred financing costs, net		2,305			2,450
Goodwill		136,365			136,250
Other intangible assets, net		80,177			80,942
Master Settlement Agreement (MSA) escrow deposits		28,427			28,684
Other assets		22,953			15,166
Total assets	$	586,316		$	569,356
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,934		$	8,407
Accrued liabilities		30,974			33,635
Current portion of long-term debt		59,397			58,294
Total current liabilities		109,305			100,336
Notes payable and long-term debt		306,496			307,064
Lease liabilities		9,360			9,950
Total liabilities		425,161			417,350
Commitments and contingencies
Stockholders’ equity:
Preferred stock; $0.01 par value; authorized shares 40,000,000; issued and outstanding shares -0-		–			–
Common stock, voting, $0.01 par value; authorized shares, 190,000,000; 20,016,822 issued shares and 17,627,817 outstanding shares at March 31, 2024, and 19,922,137 issued shares and 17,605,677 outstanding shares at December 31, 2023		200			199
Common stock, nonvoting, $0.01 par value; authorized shares, 10,000,000; issued and outstanding shares -0-		–			–
Additional paid-in capital		119,792			119,075
Cost of repurchased common stock (2,389,005 shares at March 31, 2024 and 2,316,460 shares December 31, 2023)		(80,172	)		(78,093	)
Accumulated other comprehensive loss		(3,048	)		(2,648	)
Accumulated earnings		123,192			112,443
Non-controlling interest		1,191			1,030
Total stockholders’ equity		161,155			152,006
Total liabilities and stockholders’ equity	$	586,316		$	569,356

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

5

Turning Point Brands, Inc.

Consolidated Statements of Income

(dollars in thousands except share and per share data)

(unaudited)

	Three Months Ended March 31,
	2024			2023
Net sales	$	97,058		$	100,956
Cost of sales		45,146			52,339
Gross profit		51,912			48,617
Selling, general, and administrative expenses		32,646			30,775
Operating income		19,266			17,842
Interest expense, net		3,479			4,010
Investment (gain) loss		(119	)		4,799
Gain on extinguishment of debt		–			(777	)
Income before income taxes		15,906			9,810
Income tax expense		3,727			2,468
Consolidated net income		12,179			7,342
Net income (loss) attributable to non-controlling interest		169			(255	)
Net income attributable to Turning Point Brands, Inc.	$	12,010		$	7,597
Basic income per common share:
Net income attributable to Turning Point Brands, Inc.	$	0.68		$	0.43
Diluted income per common share:
Net income attributable to Turning Point Brands, Inc.	$	0.63		$	0.41
Weighted average common shares outstanding:
Basic		17,654,684			17,531,414
Diluted		20,170,314			20,669,152

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

6

Turning Point Brands, Inc.

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(unaudited)

	Three Months Ended March 31,
	2024			2023
Consolidated net income	$	12,179		$	7,342
Other comprehensive income (loss), net of tax
Unrealized loss on MSA investments, net of tax of $15 in 2024 and $176 in 2023		(242	)		553
Foreign currency translation, net of tax of $0 in 2024 and 2023		13			(78	)
Unrealized loss on derivative instruments, net of tax of $57 in 2024 and $109 in 2023		(185	)		(344	)
Unrealized gain on investments, net of tax of $0 in 2024		6			–
		(408	)		131
Consolidated comprehensive income		11,771			7,473
Comprehensive income (loss) attributable to non-controlling interest		169			(255	)
Comprehensive income attributable to Turning Point Brands, Inc.	$	11,602		$	7,728

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

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Turning Point Brands, Inc.

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)

	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Consolidated net income	$	12,179		$	7,342
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on extinguishment of debt		–			(777	)
Loss (gain) on sale of property, plant, and equipment		1			(6	)
Gain on MSA investments		6			–
Depreciation and other amortization expense		944			776
Amortization of other intangible assets		779			771
Amortization of deferred financing costs		696			626
Deferred income tax expense (benefit)		114			299
Stock compensation expense		2,062			743
Noncash lease income		(42	)		(14	)
Loss on investments		–			4,897
Changes in operating assets and liabilities:
Accounts receivable		1,929			(216	)
Inventories		(6,296	)		6,173
Other current assets		3,130			2,639
Other assets		(270	)		(2,895	)
Accounts payable		10,525			2,051
Accrued liabilities and other		(3,118	)		(7,025	)
Net cash provided by operating activities	$	22,639		$	15,384
Cash flows from investing activities:
Capital expenditures	$	(366	)	$	(2,435	)
Purchases of investments		(7,119	)		–
Purchases of non-marketable equity investments		(500	)		–
Proceeds on sale of property, plan and equipment		–			3
Restricted cash, MSA escrow deposits		(1	)		–
Net cash used in investing activities	$	(7,986	)	$	(2,432	)
Cash flows from financing activities:
Convertible Senior Notes repurchased	$	–		$	(13,002	)
Proceeds from call options		–			33
Payment of dividends		(1,149	)		(1,052	)
Exercise of options		3			357
Redemption of restricted stock units		(136	)		–
Redemption of performance restricted stock units		(1,212	)		(889	)
Common stock repurchased		(2,079	)		–
Net cash used in financing activities	$	(4,573	)	$	(14,553	)
Net increase (decrease) in cash	$	10,080		$	(1,601	)
Effect of foreign currency translation on cash	$	(58	)	$	(1	)
Cash, beginning of period:
Unrestricted	$	117,886		$	106,403
Restricted		4,929			4,929
Total cash at beginning of period	$	122,815		$	111,332
Cash, end of period:
Unrestricted	$	130,903		$	104,801
Restricted		1,934			4,929
Total cash at end of period	$	132,837		$	109,730
Supplemental schedule of noncash investing activities:
Accrued capital expenditures	$	10		$	7
Supplemental schedule of noncash financing activities:
Dividends declared not paid	$	1,261		$	1,155

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

8

Turning Point Brands, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2024 and 2023

(dollars in thousands except share data)

(unaudited)

									Cost of			Accumulated
				Common		Additional			Repurchased			Other						Non-
	Voting			Stock,		Paid-In			Common			Comprehensive			Accumulated			Controlling
	Shares			Voting		Capital			Stock			Income (Loss)			Earnings			Interest			Total
Beginning balance January 1, 2024		17,605,677		$	199	$	119,075		$	(78,093	)	$	(2,648	)	$	112,443		$	1,030		$	152,006
Unrealized loss on MSA investments, net of tax of $15		–			–		–			–			(242	)		–			–			(242	)
Unrealized loss on derivative instruments, net of tax of $57		–			–		–			–			(185	)		–			–			(185	)
Foreign currency translation, net of tax of $0		–			–		–			–			21			–			(8	)		13
Unrealized gain on investments, net of tax of $0		–			–		–			–			6			–			–			6
Stock compensation expense		–			–		2,062			–			–			–			–			2,062
Exercise of options		198			–		3			–			–			–			–			3
Cost of repurchased common stock		(72,545	)		–		–			(2,079	)		–			–			–			(2,079	)
Issuance of performance based restricted stock units		126,109			1		–			–			–			–			–			1
Issuance of restricted stock units		21,697			–		–			–			–			–			–			–
Redemption of performance based restricted stock units		(48,177	)		–		(1,212	)		–			–			–			–			(1,212	)
Redemption of restricted stock units		(5,142	)		–		(136	)		–			–			–			–			(136	)
Dividends		–			–		–			–			–			(1,261	)		–			(1,261	)
Net income		–			–		–			–			–			12,010			169			12,179
Ending balance March 31, 2024		17,627,817		$	200	$	119,792		$	(80,172	)	$	(3,048	)	$	123,192		$	1,191		$	161,155
Beginning balance January 1, 2023		17,485,163		$	198	$	113,242		$	(78,093	)	$	(2,393	)	$	78,691		$	1,735		$	113,380
Unrealized gain on MSA investments, net of tax of $176		–			–		–			–			553			–			–			553
Unrealized loss on derivative instruments, net of tax of $109		–			–		–			–			(344	)		–			–			(344	)
Foreign currency translation, net of tax of $0		–			–		–			–			(50	)		–			(28	)		(78	)
Stock compensation expense		–			–		743			–			–			–			–			743
Exercise of options		24,955			–		357			–			–			–			–			357
Performance restricted stock units issuance		114,274			1		(1	)		–			–			–			–			–
Performance restricted stock units redeemed		(38,863	)		–		(889	)		–			–			–			–			(889	)
Settlement of call options, net of tax of $8		–			–		25			–			–			-			-			25
Dividends		–			–		–			–			–			(1,155	)		–			(1,155	)
Net income		–			–		–			–			–			7,597			(255	)		7,342
Ending balance March 31, 2023		17,585,529		$	199	$	113,477		$	(78,093	)	$	(2,234	)	$	85,133		$	1,452		$	119,934

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

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Turning Point Brands, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except where designated and per share data)

Note 1. Description of Business and Basis of Presentation

Description of Business

Turning Point Brands, Inc. and its subsidiaries (collectively referred to herein as the “Company,” “we,” “our,” or “us”) is a leading manufacturer, marketer and distributor of branded consumer products. The Company sells a wide range of products to adult consumers consisting of staple products with its iconic brands Zig-Zag^® and Stoker’s^® and its next generation products to fulfill evolving consumer preferences. Its segments are led by its core proprietary and iconic brands: Zig-Zag^® and CLIPPER^® in the Zig-Zag Products segment and Stoker’s^® along with Beech-Nut^® and Trophy^® in the Stoker’s Products segment. The Company’s products are available in more than 217,000 retail outlets in North America. The Company operates in three segments: (i) Zig-Zag Products, (ii) Stoker’s Products, and (iii) Creative Distribution Solutions (formerly known as NewGen).

Basis of Presentation

The accompanying unaudited, interim, consolidated financial statements have been prepared in accordance with the accounting practices described in the Company’s audited, consolidated financial statements as of and for the year ended December 31, 2023. In the opinion of management, the unaudited, interim, consolidated financial statements included herein contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods presented. Such adjustments, other than nonrecurring adjustments separately disclosed, are of a normal and recurring nature. The operating results for interim periods are not necessarily indicative of results to be expected for a full year or future interim periods. The unaudited, interim, consolidated financial statements should be read in conjunction with the Company’s audited, consolidated financial statements and accompanying notes as of and for the year ended December 31, 2023. The accompanying interim, consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, accordingly, do not include all the disclosures required by generally accepted accounting principles in the United States (“GAAP”) with respect to annual financial statements.

Note 2. Summary of Significant Accounting Policies

Consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries, all of which are wholly-owned, and variable interest entities for which the Company is considered the primary beneficiary. All significant intercompany transactions have been eliminated.

Revenue Recognition

The Company recognizes revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606), which includes excise taxes and shipping and handling charges billed to customers, net of cash discounts for prompt payment, sales returns and incentives, upon delivery of goods to the customer – at which time the Company’s performance obligation is satisfied - at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five-step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. The Company excludes from the transaction price, sales taxes and value-added taxes imposed at the time of sale (which do not include excise taxes on smokeless tobacco, cigars or other nicotine products billed to customers).

The Company records an allowance for sales returns, based principally on historical volume and return rates, which is included in accrued liabilities on the consolidated balance sheets. The Company records sales incentives, which consist of consumer incentives and trade promotion activities, as a reduction in revenues (a portion of which is based on amounts estimated to be due to wholesalers, retailers and consumers at the end of the period) based principally on historical volume and utilization rates. Expected payments for sales incentives are included in accrued liabilities on the consolidated balance sheets.

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A further requirement of ASC 606 is for entities to disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The Company’s management views business performance through segments that closely resemble the performance of major product lines. Thus, the primary and most useful disaggregation of the Company’s contract revenue for decision making purposes is the disaggregation by segment which can be found in Note 16, “Segment Information”. An additional disaggregation of contract revenue by sales channel can be found within Note 16 as well.

Shipping Costs

The Company records shipping costs incurred as a component of selling, general, and administrative expenses. Shipping costs incurred were approximately $5.6 million and $6.2 million for the three months ending March 31, 2024 and 2023, respectively.

Inventories

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method. Leaf tobacco is presented in current assets in accordance with standard industry practice, notwithstanding the fact that such tobaccos are carried longer than one year for the purpose of curing.

Fair Value

GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy under GAAP are described below:

● Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date.

● Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

● Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Derivative Instruments

The Company enters into foreign currency forward contracts to hedge a portion of its exposure to changes in foreign currency exchange rates on inventory purchase commitments. The Company accounts for its forward contracts under the provisions of ASC 815, Derivatives and Hedging. Under the Company’s policy, the Company may hedge up to 100% of its anticipated purchases of inventory in the denominated invoice currency over a forward period not to exceed twelve months. The Company may also, from time to time, hedge up to 100% of its non-inventory purchases (e.g., production equipment) in the denominated invoice currency. Forward contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these forward contracts are reclassified from other comprehensive income into inventory as the related inventories are received and are transferred to net income as inventory is sold. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Risks and Uncertainties

Manufacturers and sellers of tobacco products are subject to regulation at the federal, state, and local levels. Such regulations include, among others, labeling requirements, limitations on advertising, and prohibition of sales to minors. The tobacco industry is likely to continue to be heavily regulated. There can be no assurance as to the ultimate content, timing, or effect of any regulation of tobacco products by any federal, state, or local legislative or regulatory body, nor can there be any assurance that any such legislation or regulation would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. In a number of states targeted flavor bans have been proposed or enacted legislatively or by the administrative process. Depending on the number and location of such bans, that legislation or regulation could have a material adverse effect on the Company’s financial position, results of operations or cash flows. The U.S. Food and Drug Administration (“FDA”) continues to consider various restrictive regulations around our products, including targeted flavor bans; however, the details, timing, and ultimate implementation of such measures remain unclear.

11

The tobacco industry has experienced, and is experiencing, significant product liability litigation. Most tobacco liability lawsuits have been brought against manufacturers and sellers of cigarettes for injuries allegedly caused by smoking or exposure to smoke. However, several lawsuits have been brought against manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. Typically, such claims assert that use of smokeless products is addictive and causes oral cancer. Additionally, several lawsuits have been brought against manufacturers and distributors of Creative Distribution Solutions products due to malfunctioning devices. There can be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Master Settlement Agreement (MSA)

Pursuant to the Master Settlement Agreement (the “MSA”) entered into in November 1998 by most states (represented by their attorneys general acting through the National Association of Attorneys General) and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to include a manufacturer of make-your-own (“MYO”) cigarette tobacco) has the option of either becoming a signatory to the MSA or opening, funding, and maintaining an escrow account to have funds available for certain potential tobacco-related liabilities with sub-accounts on behalf of each settling state. Such companies are entitled to direct the investment of the escrowed funds and withdraw any appreciation but cannot withdraw the principal for twenty-five years from the year of each annual deposit, except to withdraw funds deposited pursuant to an individual state’s escrow statute to pay a final judgement to that state’s plaintiffs in the event of such a final judgement against the Company. The Company chose to open and fund an escrow account as its method of compliance. It is the Company’s policy to record amounts on deposit in the escrow account for prior years as a non-current asset. As of March 31, 2024, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $28.4 million. At December 31, 2023, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $28.7 million. The Company discontinued its generic category of MYO in 2019 and its Zig-Zag branded MYO cigarette smoking tobacco in 2017. Thus, pending a change in MSA legislation, the Company has no remaining product lines covered by the MSA and will not be required to make future escrow deposits.

The Company has chosen to invest a portion of the MSA escrow, from time to time, in U.S. Government securities including TIPS, Treasury Notes, and Treasury Bonds. These investments are classified as available-for-sale and carried at fair value. Realized losses are prohibited under the MSA; any investment in an unrealized loss position will be held until the value is recovered, or until maturity.

Fair values for the U.S. Governmental agency obligations are Level 2 in the fair value hierarchy. The following tables show cost and estimated fair value of the assets held in the MSA account, respectively, as well as the maturities of the U.S. Governmental agency obligations held in such account for the periods indicated.

	As of March 31, 2024							As of December 31, 2023
			Gross			Estimated				Gross			Estimated
			Unrealized			Fair				Unrealized			Fair
	Cost		Gains (Losses)			Value		Cost		Losses			Value
Cash and cash equivalents	$	1,934	$	–		$	1,934	$	1,929	$	–		$	1,929
U.S. Governmental agency obligations (unrealized position < 12 months)		1,196		6			1,202		–		–			–
U.S. Governmental agency obligations (unrealized position > 12 months)		28,943		(3,652	)		25,291		30,144		(3,389	)		26,755
	$	32,073	$	(3,646	)	$	28,427	$	32,073	$	(3,389	)	$	28,684

	As of
	March 31, 2024
Less than one year	$	3,250
One to five years		13,775
Five to ten years		11,159
Greater than ten years		1,955
Total	$	30,139

12

The following shows the amount of deposits by sales year for the MSA escrow account:

	Deposits as of
Sales Year	March 31, 2024		December 31, 2023
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,714		3,714
2005		4,553		4,553
2006		3,847		3,847
2007		4,167		4,167
2008		3,364		3,364
2009		1,619		1,619
2010		406		406
2011		193		193
2012		199		199
2013		173		173
2014		143		143
2015		101		101
2016		91		91
2017		82		82
Total	$	32,073	$	32,073

Note 3. Derivative Instruments

Foreign Currency

During the three months ended March 31, 2024, the Company executed no foreign exchange contracts meeting hedge accounting requirements. 

At March 31, 2024, the Company had foreign currency contracts outstanding for the purchase of €9.2 million and sale of €9.2 million. The foreign currency contracts’ fair value at March 31, 2024, resulted in an asset of $0.0 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities. At December 31, 2023, the Company had foreign currency contracts outstanding for the purchase of €15.2 million and sale of €15.2 million. The foreign currency contracts’ fair value at December 31, 2023, resulted in an asset of $0.3 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities.

Note 4. Fair Value of Financial Instruments

The estimated fair value amounts have been determined by the Company using the methods and assumptions described below. However, considerable judgment is required to interpret market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and Cash Equivalents

Cash and cash equivalents are, by definition, short-term. Thus, the carrying amount is a reasonable estimate of fair value.

Accounts Receivable

The fair value of accounts receivable approximates their carrying value due to their short-term nature.

13

Long-Term Debt

The Company’s Senior Secured Notes (as defined in Note 10) bear interest at a rate of 5.625% per year. As of March 31, 2024, the fair value approximated $237.3 million, with a carrying value of $250 million. As of December 31, 2023, the fair value of the Senior Secured Notes approximated $234.9 million, with a carrying value of $250 million.

The Convertible Senior Notes (as defined in Note 10) bear interest at a rate of 2.50% per year, and the fair value of the Convertible Senior Notes without the conversion feature approximated $117.5 million, with a carrying value of $118.5 million as of March 31, 2024. As of December 31, 2023, the fair value of the Convertible Senior Notes without the conversion feature approximated $114.7 million, with a carrying value of $118.5 million.

See Note 10, “Notes Payable and Long-Term Debt”, for further information regarding the Company’s long-term debt.

Note 5. Inventories

The components of inventories are as follows:

	March 31,		December 31,
	2024		2023
Raw materials and work in process	$	7,148	$	5,201
Leaf tobacco		41,461		34,894
Finished goods - Zig-Zag Products		39,103		41,783
Finished goods - Stoker’s Products		10,232		8,090
Finished goods - Creative Distribution Solutions		6,086		7,281
Other		1,437		1,711
Inventories	$	105,467	$	98,960

The inventory valuation allowance was $20.6 million as of  March 31, 2024 and December 31, 2023.

In December 2023, a third-party warehouse in Tennessee used to store some of the Company’s leaf tobacco incurred significant tornado damage resulting in damage to the leaf tobacco. As a result, the Company recorded a $15.2 million inventory reserve related to its leaf tobacco inventory which is included in Other operating income, net in the consolidated statement of income for the quarter ended December 31, 2023. The leaf tobacco inventory is covered by the Company’s stock throughput insurance policy and the Company believes the inventory loss is probable of being fully recovered under the policy. The Company does not expect to incur any delays in customer deliveries as a result of the damage.

Note 6. Other Current Assets

Other current assets consist of:

	March 31,		December 31,
	2024		2023
Inventory deposits	$	7,392	$	5,707
Insurance deposit		–		3,000
Prepaid taxes		–		153
Settlement receivable		–		4,000
Insurance recovery receivable		15,181		15,181
Other		11,864		12,740
Total	$	34,437	$	40,781

14

Note 7. Property, Plant, and Equipment

Property, plant, and equipment consists of:

	March 31,			December 31,
	2024			2023
Land	$	22		$	22
Buildings and improvements		4,217			3,956
Leasehold improvements		6,614			5,440
Machinery and equipment		28,568			29,751
Furniture and fixtures		8,439			8,391
Gross property, plant and equipment		47,860			47,560
Accumulated depreciation		(23,070	)		(22,260	)
Net property, plant and equipment	$	24,790		$	25,300

Note 8. Other Assets

Other assets consist of:

	March 31,		December 31,
	2024		2023
Non-marketable equity investments	$	2,882	$	2,405
Debt security investment		6,750		6,750
Capitalized software		6,108		5,923
Available-for-sale marketable securities		7,125		–
Other		88		88
Total	$	22,953	$	15,166

Debt and Non-Marketable Equity Investments

The Company records its non-marketable equity investments without a readily determinable fair value, that are not accounted for under the equity method, at cost, with adjustments for impairment and observable price changes. Should assumptions underlying the determination of the fair values of the Company’s non-marketable equity and debt security investments change, it could result in material future impairment charges.

In January 2024, the Company invested $0.8 million to acquire an 18.744% stake in Teaza Energy, LLC (“TeaZa”). TeaZa is an innovative brand of flavorful oral pouch products that can be dipped or sipped, designed as a health-conscious alternative to high energy drinks and other conventional oral stimulants. The investment is comprised of $0.5 million in cash and a $0.3 million payable to be offset against the Company’s allocated portion of future profit distributions. The Company also has options to purchase, at fair value, up to 51.744% of the equity interest in TeaZa between September 30, 2024 and January 31, 2025, and up to 100% of the equity interest from February 1, 2025 to June 30, 2026. The Company accounts for its investment in TeaZa using the equity method of accounting.

In July 2021, the Company invested $8.0 million in Old Pal Holding Company LLC (“Old Pal”). In July 2022, the Company invested an additional $1.0 million in Old Pal.  The Company invested in the form of a convertible note which includes additional follow-on investment rights. The accrued interest of $0.2 million from July 2021 to July 2022 was rolled into the convertible note in July 2022 resulting in a total investment of $9.2 million. Old Pal is a leading brand in the cannabis lifestyle space that operates a non-plant touching licensing model. The convertible note bears an interest rate of 3.0% per year and matures July 31, 2026.Interest and principal not paid to date are receivable at maturity. Old Pal has the option to extend the maturity date in one-year increments. The interest rate is subject to change based on Old Pal reaching certain sales thresholds. The weighted average interest rate on the convertible note was 3.0% for the three months ended March 31, 2024 and 2023. Old Pal has the option to convert the note into shares once sales reach a certain threshold. The conditions required to allow Old Pal to convert the note were not met as of March 31, 2024. Additionally, the Company has the right to convert the note into shares at any time. The Company has classified the debt security with Old Pal as available for sale. The Company reports interest income on available for sale debt securities in interest income in our Consolidated Statements of Income. Quarterly, we perform a qualitative assessment to determine if the fair value of the investment could be less than the amortized cost basis. In the second and fourth quarters of 2023, based on third-party quantitative assessments of the fair value using a Monte Carlo simulation (Level 3), the Company determined the fair value to be $7.7 million and 6.9 million, respectively, and recorded an allowance for credit losses of $0.3 million and $1.0 million, respectively, included in investment loss for the quarters ended June 30 and December 31, 2023. The Company has recorded accrued interest receivable of $0.2 million and $0.1 million at March 31, 2024 and December 31, 2023, respectively, in Other current assets on our Consolidated Balance Sheets.

15

In April 2021, the Company invested $8.7 million in Docklight Brands, Inc., a pioneering consumer products company with celebrated brands including Marley Natural® and Marley™. The Company has additional follow-on investment rights. As part of the investment, the Company has obtained exclusive U.S. distribution rights for Docklight’s Marley™ CBD topical products. In the first quarter of 2023, based on Docklight’s financial results and other operating difficulties, and the decline in the revenue multiples for public companies comparable to Docklight, the Company deemed the investment in Docklight was impaired resulting in a loss of $4.9 million which was recorded for the three months ended March 31, 2023. In the second quarter of 2023, based on a significant change in Docklight’s business model, the Company deemed its investment in Docklight fully impaired. Fair value for all periods presented was determined using a valuation derived from relevant revenue multiples (Level 3).

Available-for-Sale Marketable Securities

In December 2023, the Company formed a captive insurance company, Interchange IC, incorporated in the District of Columbia, to write a portion of our general product, and officer and director liability coverages under deductible reinsurance policies. Interchange IC is a fully licensed captive insurance company holding a certificate of authority from the District of Columbia Department of Insurance, Securities and Banking. Interchange IC is a wholly-owned subsidiary of Turning Point Brands and is consolidated in the Company’s financial statements.

The investments held within the captive are not available for operating activities and are carried at fair value on the consolidated balance sheet. They consist of money market, corporate bonds, government securities, real estate investment trusts and exchange traded funds. The Company believes any impairment of investments held with gross unrealized losses to be temporary and not the result of credit risk.

The Company’s captive investments are summarized in the following table.

	As of March 31, 2024
				Gross				Estimated
	Amortized			Unrealized				Fair
	Cost			Gains (Losses)				Value
Corporate bonds		$	1,703		$	8			$	1,711
U.S. Governmental agency obligations			1,799			(3	)			1,796
Real estate investment trusts and exchange traded funds			3,617			1				3,618
		$	7,119		$	6			$	7,125

The following table summarizes the fair value of the Company’s captive investments by contractual maturity.

	As of
	March 31, 2024
Due within one year	$	1,711
Due after ten years		1,796
Real estate investment trusts and exchange traded funds		3,618
Total investments at fair value	$	7,125

Note 9. Accrued Liabilities

Accrued liabilities consist of:

	March 31,		December 31,
	2024		2023
Accrued payroll and related items	$	4,669	$	7,085
Customer returns and allowances		4,642		5,239
Taxes payable		6,995		3,821
Lease liabilities		2,615		2,678
Accrued interest		2,221		6,682
Other		9,832		8,130
Total	$	30,974	$	33,635

16

Note 10. Notes Payable and Long-Term Debt

Notes payable and long-term debt consists of the following in order of preference:

	March 31,			December 31,
	2024			2023
Senior Secured Notes	$	250,000		$	250,000
Convertible Senior Notes		118,541			118,541
Gross notes payable and long-term debt		368,541			368,541
Less deferred finance charges		(2,648	)		(3,183	)
Less current maturities		(59,397	)		(58,294	)
Notes payable and long-term debt	$	306,496		$	307,064

Senior Secured Notes

On February 11, 2021, the Company closed a private offering (the “Offering”) of $250.0 million aggregate principal amount of its 5.625% senior secured notes due 2026 (the “Senior Secured Notes” or the “Notes”). The Senior Secured Notes bear interest at a rate of 5.625% and will mature on February 15, 2026. Interest on the Senior Secured Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2021.The Company used the proceeds from the Offering (i) to repay all obligations under and terminate the 2018 First Lien Credit Facility, (ii) to pay related fees, costs, and expenses and (iii) for general corporate purposes.

Obligations under the Senior Secured Notes are guaranteed by the Company’s existing and future wholly-owned domestic subsidiaries (the “Guarantors”) that guarantee any credit facility (as defined in the indenture governing the Senior Secured Notes or the “Senior Secured Notes Indenture”) or capital markets debt securities of the Company or Guarantors in excess of $15.0 million. The Senior Secured Notes and the related guarantees are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions.

The Company may redeem the Senior Secured Notes, in whole or in part, at any time at the redemption prices (expressed as a percentage of the principal amount to be redeemed) set forth below, plus accrued and unpaid interest, if any, on the Senior Secured Notes to be redeemed to (but not including) the applicable redemption date if redeemed during the period indicated below:

On or after February 15, 2023	102.813	%
On or after February 15, 2024	101.406	%
On or after February 15, 2025 and thereafter	100.000	%

If the Company experiences a change of control (as defined in the Senior Secured Notes Indenture), the Company must offer to repurchase the Senior Secured Notes at a repurchase price equal to 101% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.

The Senior Secured Notes Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to: (i) grant or incur liens; (ii) incur, assume or guarantee additional indebtedness; (iii) sell or otherwise dispose of assets, including capital stock of subsidiaries; (iv) make certain investments; (v) pay dividends, make distributions or redeem or repurchase capital stock; (vi) engage in certain transactions with affiliates; and (vii) consolidate or merge with or into, or sell substantially all of our assets to another entity. These covenants are subject to a number of limitations and exceptions set forth in the Senior Secured Notes Indenture. The Senior Secured Notes Indenture provides for customary events of default. The Company was in compliance with all covenants as of March 31, 2024.

The Company incurred debt issuance costs attributable to the issuance of the Senior Secured Notes of $6.4 million which are amortized to interest expense using the straight-line method over the expected life of the Senior Secured Notes.

2021 Revolving Credit Facility

In connection with the Offering, the Company also entered into a $25.0 million senior secured revolving credit facility (the “2021 Revolving Credit Facility”) with the lenders party thereto and Barclays Bank PLC, as administrative agent and collateral agent (in such capacity, the “Agent”). On May 10, 2023, the Company and certain of its subsidiaries, as guarantors, entered into an amendment (the “Amendment”) to the 2021 Revolving Credit Facility (as amended, the “Amended Revolving Credit Facility”).  The Amendment includes certain modifications to the 2021 Revolving Credit Facility relating to the replacement of the London Inter-Bank Offered Rate with a Secured Overnight Financing Rate (“SOFR”) as the interest rate benchmark under the 2021 Revolving Credit Facility and adjusts certain other provisions to reflect current documentation standards and other agreed modifications.

17

On November 7, 2023, in connection with the entry by a subsidiary of the Company in a new asset-backed revolving credit facility, the Company terminated the Amended Revolving Credit Facility. See “2023 ABL Facility” below.

The Company had letters of credit outstanding under the Amended Revolving Credit Facility of approximately $1.4 million that were terminated with the facility in the fourth quarter of 2023.

The Company incurred debt issuance costs attributable to the issuance of the Amended Revolving Credit Facility of $0.5 million, with the remaining $0.2 million written off to gain on debt extinguishment upon termination of the facility.

2023 ABL Facility

On November 7, 2023, TPB Specialty Finance, LLC, a wholly-owned subsidiary of the Company (the “ABL Borrower”), entered into a new $75.0 million  asset-backed revolving credit facility (the “2023 ABL Facility”), with the several lenders thereunder, and Barclays Bank Plc, as administrative agent (the “Administrative Agent”) and as collateral agent (the “Collateral Agent”) and First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”). Under the 2023 ABL Facility, the ABL Borrower may draw up to $75.0 million under Revolving Credit Loans and Last In Last Out (“LILO”) Loans. The 2023 ABL Facility includes a $40.0 million accordion feature.  In connection with the 2023 ABL Facility, Turning Point Brands contributed certain existing inventory to the ABL Borrower. The 2023 ABL Facility is secured on a first priority basis (subject to customary exceptions) by all assets of the ABL Borrower.

The 2023 ABL Facility contains customary borrowing conditions including a borrowing base equal to the sum of (a) the lesser of (1) 85% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) 85% of the cost of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (2) 85% of the net orderly liquidation value (“NOLV”) percentage of the lower of (1)(A) or (1)(B); plus (b) 85% of the face value of all eligible accounts of the ABL Borrower minus (c) the amount of all eligible reserves.  The 2023 ABL Facility also includes a LILO borrowing base equal to the sum of (a) the lesser of: (1) 10% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) the cost of the sum of eligible inventory, plus eligible in-transit inventory and (2) 10% of the NOLV percentage of the lower of  (1)(A) or (1)(B); plus (b) 10% of the face amount of eligible account; minus (c) the amount of all eligible reserves.

Amounts borrowed under the 2023 ABL Facility are subject to an interest rate margin per annum equal to (a) from and after the closing date until the last day of the first full fiscal quarter ended after the closing date, (i) 1.25% per annum, in the case base rate loans, and (ii) 2.25% per annum, in the case of revolving credit loans that are SOFR Loans, (b)(i) 2.25% per annum, in the case of LILO loans that are base rate loans, and (ii) 3.25% per annum, in the case of LILO loans that are SOFR loans, (c) on the first day of each fiscal quarter, the applicable interest rate margins will be determined from the pricing grid below based upon the historical excess availability for the most recent fiscal quarter ended immediately prior to the relevant date, as calculated by the Administrative Agent.

Level	Historical Excess Availability	Applicable Margin for SOFR Loans	Applicable Margin for Base Rate Loans
I	Greater than or equal to 66.66%	1.75%	0.75%
II	Less than 66.66%, but greater than or equal to 33.33%	2.00%	1.00%
III	Less than 33.33%	2.25%	1.25%

The 2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four consecutive fiscal quarters if excess availability shall be less than the greater of (a) 12.5% of the line cap and (b) $9.4 million, at any time and continuing until excess availability is equal to or exceeds the greater of (i) 12.5% of the line and (ii) $9.4 million for thirty (30) consecutive calendar days; provided that such $9.4 million level shall automatically increase in proportion to the amount of any increase in the aggregate revolving credit commitments thereunder in connection with any incremental facility.

The 2023 ABL Facility shall mature on the earlier of (x) November 7, 2027 and (y) the date that is 91 days prior to the maturity date of any material debt of the ABL Borrower or the Company or any of its restricted subsidiaries (subject to customary extensions agreed by the lenders thereunder); provided that clause (y) shall not apply to the extent that on any applicable date of determination (on any date prior to the date set forth in clause (y)), (A) the sum of (x) cash that is held in escrow for the repayment of such material debt pursuant to arrangements satisfactory to the Administrative Agent, (y) cash that is held in accounts with the Administrative Agent and/or the Additional Collateral Agent, plus (z) excess availability, is sufficient to repay such material debt and (B) the ABL Borrower has excess availability of at least $15.0 million after giving effect to such repayment of material debt, including any borrowings under the commitments in connection therewith.

18

The Company has not drawn any borrowings under the 2023 ABL Facility but has letters of credit of approximately $1.2 million outstanding under the facility and has an available balance of $59.0 million based on the borrowing base as of March 31, 2024.

The Company incurred debt issuance costs attributable to the 2023 ABL Facility of $2.6 million which are amortized to interest expense using the straight-line method over the expected life of the 2023 ABL Facility.

Convertible Senior Notes

In July 2019, the Company closed an offering of $172.5 million in aggregate principal amount of its 2.50% Convertible Senior Notes due July 15, 2024 (the “Convertible Senior Notes”). The Convertible Senior Notes bear interest at a rate of 2.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2020. The Convertible Senior Notes are senior unsecured obligations of the Company.

In  2023, a wholly owned subsidiary of the Company repurchased $44.0 million in aggregate principal amount of the Convertible Senior Notes on the open market resulting in a $1.9 million gain on extinguishment of debt. The repurchased notes continue to be held by our subsidiary and may be resold subject to compliance with applicable securities law. As of March 31, 2024, $118.5 million aggregate principal remains outstanding and held by third parties.

The Convertible Senior Notes held by third parties are convertible into approximately 2,219,704 shares of TPB Common Stock under certain circumstances prior to maturity at a conversion rate of 18.7252 shares per $1,000 principal amount of the Convertible Senior Notes, which represents a conversion price of approximately $53.40 per share, subject to adjustment under certain conditions, but will not be adjusted for any accrued and unpaid interest. The conversion price is adjusted periodically as a result of dividends paid by the Company in excess of pre-determined thresholds of $0.04 per share. Upon conversion, the Company may pay cash, shares of common stock or a combination of cash and stock, as determined by the Company at its discretion. The conditions required to allow the holders to convert their Convertible Senior Notes were not met as of March 31, 2024.

As discussed above, on November 7, 2023, a wholly-owned subsidiary of the Company entered into the 2023 ABL Facility to refinance up to $75.0 million of the Convertible Senior notes at maturity. As a result, the Company classified $59.0 million related to the Convertible Senior Notes in Notes payable and long-term debt on the Company’s March 31, 2024 Consolidated Balance Sheet. Based on current liquidity, free cash flow generation and availability under the 2023 ABL Facility, the Company believes it will have sufficient liquidity to address the maturity of the remaining Convertible Senior Notes.

The Company incurred debt issuance costs attributable to the Convertible Senior Notes of $5.9 million which are amortized to interest expense using the straight-line method over the expected life of the Convertible Senior Notes.

In connection with the Convertible Senior Notes offering, the Company entered into privately negotiated capped call transactions with certain financial institutions. The capped call transactions have a strike price of $53.40 per share and a cap price of $82.86 per share, and are exercisable when, and if, the Convertible Senior Notes are converted. The Company paid $20.53 million for these capped calls at the time they were entered into and charged that amount to additional paid-in capital.

Note 11. Leases

The Company’s leases consist primarily of leased property for manufacturing, warehouse, corporate offices and retail space, as well as vehicle leases. At lease inception, the Company recognizes a lease right of use asset and lease liability calculated as the present value of future minimum lease payments. In general, the Company does not recognize any renewal periods within the lease terms as there are no significant barriers to ending the lease at the initial term. Lease and non-lease components are accounted for as a single lease component.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

19

The components of lease expense consisted of the following:

	Three Months Ended March 31,
	2024		2023
Operating lease cost
Cost of sales	$	133	$	128
Selling, general and administrative		464		521
Variable lease cost (1)		297		225
Short-term lease cost		–		6
Total	$	894	$	880

(1) Variable lease cost includes elements of a contract that do not represent a good or service but for which the lessee is responsible for paying.

	Three Months Ended March 31,
	2024		2023
Financing lease cost
Selling, general and administrative	$	150	$	338
Total	$	150	$	338

	March 31,		December 31,
	2024		2023
Assets:
Right of use assets - Operating	$	8,714	$	8,950
Right of use assets - Financing		2,154		2,530
Total lease assets	$	10,868	$	11,480
Liabilities:
Current lease liabilities - Operating (2)	$	1,946	$	1,991
Current lease liabilities - Financing (2)		669		687
Long-term lease liabilities - Operating		7,925		8,374
Long-term lease liabilities - Financing		1,435		1,576
Total lease liabilities	$	11,975	$	12,628

(2) Reported within accrued liabilities on the balance sheet.

Note 12. Income Taxes

The Company’s effective income tax rate for the three months ended March 31, 2024 was 23.4%. The Company’s effective income tax rate for the three months ended March 31, 2023 was 25.2%.

The Company follows the provisions of ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company has determined that the Company did not have any uncertain tax positions requiring recognition under the provisions of ASC 740-10-25. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions, if any, as part of interest expense. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. In general, the Company is no longer subject to U.S. federal and state tax examinations for years prior to 2020.

20

Note 13. Share Incentive Plans

On March 22, 2021, the Company’s Board of Directors adopted the Turning Point Brands, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which awards may be granted to employees, non-employee directors, and consultants. In addition, the 2021 Plan provides for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Pursuant to the 2021 Plan, 1,290,000 shares, plus 100,052 shares remaining available for issuance under the 2015 Equity Incentive Plan (the “2015 Plan”), of TPB Common Stock are reserved for issuance as awards to employees, non-employee directors, and consultants as compensation for past or future services or the attainment of certain performance goals. The 2021 Plan is scheduled to terminate on March 21, 2031. The 2021 Plan is administered by the compensation committee (the “Committee”) of the Company’s Board of Directors. The Committee determines the vesting criteria for the awards, with such criteria to be specified in the award agreement. As of March 31, 2024, net of forfeitures, there were 400,682 Restricted Stock Units (“RSUs”), 161,658 options and 102,216 Performance Based Restricted Stock Units (“PRSUs”) granted under the 2021 Plan. There are 725,496 shares available for future grant under the 2021 Plan.

On April 28, 2016, the Board of Directors of the Company adopted the 2015 Plan, pursuant to which awards could have been granted to employees, non-employee directors, and consultants. In addition, the 2015 Plan provided for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Upon adoption of the 2021 Plan, the 2015 Plan was terminated, and the Company determined no additional grants would be made under the 2015 Plan. However, all awards issued under the 2015 Plan that have not been previously terminated or forfeited remain outstanding and continue unaffected. There are no shares available for grant under the 2015 Plan. 

On February 8, 2006, the Board of Directors of the Company adopted the 2006 Equity Incentive Plan (the “2006 Plan”) of North Atlantic Holding Company, Inc., pursuant to which nonqualified stock options and restricted stock awards may be granted to employees. Upon the adoption of the Company’s 2015 Equity Incentive Plan in connection with its IPO, the Company determined no additional grants would be made under the 2006 Plan. However, all awards issued under the 2006 Plan that have not been previously terminated or forfeited remain outstanding and continue unaffected. There are no shares available for grant under the 2006 Plan.

Stock option activity for the 2006, 2015 and 2021 Plans is summarized below:

				Weighted		Weighted
	Stock			Average		Average
	Option			Exercise		Grant Date
	Shares			Price		Fair Value
Outstanding, December 31, 2022		683,214		$	29.74	$	9.24
Granted		77,519			20.71		6.45
Exercised		(33,851	)		13.30		4.24
Forfeited		(69,931	)		27.51		9.11
Outstanding, December 31, 2023		656,951		$	29.79	$	9.18
Granted		54,289			27.19		9.21
Exercised		(198	)		14.85		4.41
Forfeited		(6,433	)		30.19		8.85
Outstanding, March 31, 2024		704,609		$	29.59	$	9.19

Under the 2006, 2015 and 2021 Plans, the total intrinsic value of options exercised during the three months ended March 31, 2024 and 2023, was $0.0 million, and $0.2 million, respectively.

At March 31, 2024, under the 2006 Plan, the exercise price for the 43,693 outstanding options is $3.83 per share, all of which are exercisable. The weighted average of the remaining lives of the outstanding stock options with an exercise price of $3.83 is approximately 0.35 years. The Company estimates the expected life of these stock options is ten years from the date of grant. For the $3.83 per share options, the weighted average fair value of options at the date of grant was determined using the Black-Scholes model with the following assumptions: a ten-year life from grant date, a current share price and exercise price of $3.83, a risk-free interest rate of 3.57%, volatility of 40%, and no assumed dividend yield. Based on these assumptions, the fair value of these options is approximately $2.17 per share option granted.

21

At March 31, 2024, under the 2015 and 2021 Plans, the risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. The expected volatility is based on the average long-term historical volatilities of peer companies. We intend to continue to consistently use the same group of publicly traded peer companies to determine expected volatility until sufficient information regarding volatility of our share price becomes available or until the selected companies are no longer suitable for this purpose. Due to our limited trading history, we are using the simplified method presented by SEC Staff Accounting Bulletin No. 107 to calculate expected holding periods, which represent the periods of time for which options granted are expected to be outstanding. We will continue to use this method until we have sufficient historical exercise experience to give us confidence in the reliability of our calculations. The fair values of these options were determined using the Black-Scholes option pricing model.

The following table outlines the assumptions based on the number of options granted under the 2015 Plan.

	February 10,			May 17,			March 7,			March 20,			October 24,			March 18,			February 18,			May 3,
	2017			2017			2018			2019			2019			2020			2021			2021
Number of options granted		40,000			93,819			98,100			155,780			25,000			155,000			100,000			12,000
Options outstanding at March 31, 2024		20,000			38,033			51,067			124,864			25,000			77,777			87,350			12,000
Number exercisable at March 31, 2024		20,000			38,033			51,067			124,864			25,000			77,777			87,350			12,000
Exercise price	$	13.00		$	15.41		$	21.21		$	47.58		$	20.89		$	14.85		$	51.75		$	47.76
Remaining lives		2.87			3.13			3.94			4.97			5.57			5.97			6.89			7.09
Risk free interest rate		1.89	%		1.76	%		2.65	%		2.34	%		1.58	%		0.79	%		0.56	%		0.84	%
Expected volatility		27.44	%		26.92	%		28.76	%		30.95	%		31.93	%		35.72	%		28.69	%		29.03	%
Expected life		6.000			6.000			6.000			6.000			6.000			6.000			6.000			6.000
Dividend yield		–			–			0.83	%		0.42	%		0.95	%		1.49	%		0.55	%		0.59	%
Fair value at grant date	$	3.98		$	4.60		$	6.37		$	15.63		$	6.27		$	4.41		$	13.77		$	13.06

The following table outlines the assumptions based on the number of options granted under the 2021 Plan.

	May 17,			March 14,			April 29,			May 12,			March 11,
	2021			2022			2022			2023			2024
Number of options granted		7,500			100,000			14,827			77,519			54,289
Options outstanding at March 31, 2024		7,500			70,690			14,827			77,519			54,289
Number exercisable at March 31, 2024		7,500			47,442			9,935			77,519			–
Exercise price	$	45.05		$	30.46		$	31.39		$	20.71		$	27.19
Remaining lives		7.13			7.96			8.08			9.12			9.95
Risk free interest rate		0.84	%		2.10	%		2.92	%		3.41	%		4.06	%
Expected volatility		31.50	%		35.33	%		35.33	%		34.51	%		35.09	%
Expected life		6.000			6.000			6.000			5.186			5.186
Dividend yield		0.63	%		1.01	%		0.98	%		1.61	%		1.26	%
Fair value at grant date	$	13.23		$	10.23		$	11.07		$	6.45		$	9.21

The Company has recorded compensation expense related to the options based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the options on the date of grant and amortized over the vesting period. The Company recorded compensation expense related to the options of approximately $0.3 million and $0.0 million for the three months ended March 31, 2024 and 2023, respectively. Total unrecognized compensation expense related to options at March 31, 2024, is $0.3 million, which will be expensed over 0.75 years.

PRSUs are restricted stock units subject to both performance-based and service-based vesting conditions. The number of shares of TPB Common Stock a recipient will receive upon vesting of a PRSU will be calculated by reference to certain performance metrics related to the Company’s performance over a five-year period. PRSUs will vest on the measurement date, which is no more than 65 days after the performance period provided the applicable service and performance conditions are satisfied. As of March 31, 2024, there are 447,266 PRSUs outstanding. The following table outlines the PRSUs granted and outstanding as of March 31, 2024.

	March 18,		February 18,		March 14,		May 4,		March 1,
	2020		2021		2022		2023		2024
Number of PRSUs granted		94,000		100,000		49,996		133,578		111,321
PRSUs outstanding at March 31, 2024		80,910		82,190		40,325		132,520		111,321
Fair value as of grant date	$	14.85	$	51.75	$	30.46	$	22.25	$	26.52
Remaining lives		0.75		1.75		2.75		1.75		2.75

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The Company recorded compensation expense related to the PRSUs of approximately $0.9 million and $0.5 million in the consolidated statements of income for the three months ended March 31, 2024 and 2023, respectively, based on the probability of achieving the performance condition. Total unrecognized compensation expense related to these awards at March 31, 2024, is $6.1 million which will be expensed over the service periods based on the probability of achieving the performance condition.

The Company has granted 325,523 RSUs which are outstanding and vest over one to five years. The following table outlines the RSUs granted and outstanding as of March 31, 2024.

	March 14,		March 14,		April 29,		May 5,		May 8,		March 1,		March 11,
	2022		2022		2022		2023		2023		2024		2024
Number of RSUs granted		50,004		28,726		4,522		130,873		20,101		105,257		18,389
RSUs outstanding at March 31, 2024		39,367		9,481		4,522		128,406		20,101		105,257		18,389
Fair value as of grant date	$	30.46	$	30.46	$	31.39	$	22.25	$	21.77	$	26.52	$	27.19
Remaining lives		2.75		0.75		2.75		2.00		0.10		3.00		0.75

The Company has recorded compensation expense related to the RSUs based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the RSUs on the date of grant and amortized over the vesting period. The Company recorded compensation expense related to the RSUs of approximately $0.9 million and $0.3 million for the three months ended March 31, 2024 and 2023. Total unrecognized compensation expense related to RSUs at March 31, 2024, is $5.1 million, which will be expensed over 2.52 years.

Note 14. Contingencies

On October 9, 2020, a purported stockholder of Turning Point Brands, Inc., Paul-Emile Berteau, filed a complaint in the Delaware Court of Chancery relating to the merger of Standard Diversified, Inc. (“SDI”) with a TPB subsidiary (“Merger Sub”)pursuant to the Agreement and Plan of Merger and Reorganization, dated as of April 7, 2020, by and among TPB, SDI and Merger Sub. The parties attended a mediation in late November 2022 where a settlement was reached. On December 12, 2023, the Court approved the settlement and dismissed the action with prejudice. As of December 31, 2023, the Company recorded a $4.0 million receivable in other current assets, and a corresponding gain on settlement in other income on its Consolidated Statement of Income for the year ended December 31, 2023. These funds were received in January 2024.

Other major tobacco companies are defendants in product liability claims. In a number of these cases, the amounts of punitive and compensatory damages sought are significant and, if such a claim were brought against the Company, could have a material adverse effect on our business and results of operations. The Company is subject to several lawsuits alleging personal injuries resulting from malfunctioning vaporizer devices or batteries and may be subject to claims in the future relating to our other Creative Distribution Solutions products. The Company is still evaluating these claims and the potential defenses to them. For example, the Company did not design or manufacture the products at issue; rather, the Company was merely the distributor. Nonetheless, there can be no assurance that the Company will prevail in these cases, and they could have a material adverse effect on the financial position, results of operations or cash flows of the Company.

We have several subsidiaries engaged in making, distributing, and selling liquid nicotine products. As a result of the overall publicity and controversy surrounding the industry generally, many companies have received informational subpoenas from various regulatory bodies and in some jurisdictions regulatory lawsuits have been filed regarding marketing practices and possible underage sales. We expect that our subsidiaries will be subject to some such cases and investigative requests. To the extent that litigation becomes necessary, we believe that the subsidiaries have strong factual and legal defenses against claims that they unfairly marketed products.

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Note 15. Income Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations of net income:

	Three Months Ended March 31,
	2024						2023
					Per						Per
	Income		Shares		Share		Income		Shares		Share
Basic EPS:
Numerator
Net income attributable to Turning Point Brands, Inc.	$	12,010					$	7,597
Denominator
Weighted average				17,654,684	$	0.68				17,531,414	$	0.43
Diluted EPS:
Numerator
Net income attributable to Turning Point Brands, Inc.	$	12,010					$	7,597
Interest expense related to Convertible Senior Notes, net of tax		731						954
Diluted net income attributable to Turning Point Brands. Inc.	$	12,741					$	8,551
Denominator
Basic weighted average				17,654,684						17,531,414
Convertible Senior Notes				2,218,018						3,029,699
Stock options and restricted stock units				297,612						108,039
				20,170,314	$	0.63				20,669,152	$	0.41

Note 16. Segment Information

In accordance with ASC 280, Segment Reporting, the Company has three reportable segments, (1) Zig-Zag Products; (2) Stoker’s Products; and (3) Creative Distribution Solutions. The Zig-Zag Products segment markets and distributes (a) rolling papers, tubes, and related products; (b) finished cigars and MYO cigar wraps and (c) CLIPPER reusable lighters and other accessories. The Stoker’s Products segment (a) manufactures and markets moist snuff and (b) contracts for and markets loose-leaf chewing tobacco products. The Creative Distribution Solutions segment (a) markets and distributes liquid nicotine products and certain other products without tobacco and/or nicotine; (b) distributes a wide assortment of products to non-traditional retail outlets via Vapor Beast; and (c) markets and distributes a wide assortment of products to individual consumers via the VaporFi B2C online platform. Products in the Zig-Zag Products and Stoker’s Products segments are distributed primarily through wholesale distributors in the U.S. and Canada while products in the Creative Distribution Solutions segment are distributed primarily through e-commerce to non-traditional retail outlets and direct to consumers in the U.S. Corporate unallocated includes the costs and assets of the Company not assigned to one of the three reportable segments such as intercompany transfers, deferred taxes, deferred financing fees, and investments in subsidiaries.

The accounting policies of these segments are the same as those of the Company. Corporate costs are not directly charged to the three reportable segments in the ordinary course of operations. The Company evaluates the performance of its segments and allocates resources to them based on operating income.

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The tables below present financial information about reported segments:

	Three Months Ended March 31,
	2024			2023
Net sales
Zig-Zag products	$	46,697		$	41,887
Stoker’s products		36,367			33,662
Total Zig-Zag and Stoker’s products	$	83,064		$	75,549
Creative Distribution Solutions		13,994			25,407
Total	$	97,058		$	100,956
Gross profit
Zig-Zag products	$	27,538		$	22,390
Stoker’s products		20,815			19,465
Total Zig-Zag and Stoker’s products	$	48,353		$	41,855
Creative Distribution Solutions		3,559			6,762
Total	$	51,912		$	48,617
Operating income (loss)
Zig-Zag products	$	18,000		$	13,641
Stoker’s products		15,396			14,563
Corporate unallocated (1)(2)		(14,127	)		(10,623	)
Total Zig-Zag and Stoker’s products	$	19,269		$	17,581
Creative Distribution Solutions		(3	)		261
Total	$	19,266		$	17,842
Interest expense, net		3,479			4,010
Investment (income) loss		(119	)		4,799
Gain on extinguishment of debt		–			(777	)
Income before income taxes	$	15,906		$	9,810
Capital expenditures
Zig-Zag products	$	166		$	973
Stoker’s products		200			1,462
Total Zig-Zag and Stoker’s products	$	366		$	2,435
Creative Distribution Solutions		–			–
Total	$	366		$	2,435
Depreciation and amortization
Zig-Zag products	$	274		$	267
Stoker’s products		879			706
Total Zig-Zag and Stoker’s products	$	1,153		$	973
Creative Distribution Solutions		570			574
Total	$	1,723		$	1,547

(1) Includes corporate costs that are not allocated to any of the three reportable segments.

(2) Includes costs related to PMTA of $0.8 million in 2024 and $0.1 million in 2023.

25

	March 31,		December 31,
	2024		2023
Assets
Zig-Zag products	$	176,629	$	177,135
Stoker’s products		187,794		174,994
Corporate unallocated (1)		194,702		190,223
Total Zig-Zag and Stoker’s products	$	559,125	$	542,352
Creative Distribution Solutions		27,191		27,004
Total	$	586,316	$	569,356

(1) Includes assets not assigned to the three reportable segments. All goodwill has been allocated to the reportable segments.

Revenue Disaggregation—Sales Channel

Revenues of the Zig-Zag Products and Stoker’s Products segments are primarily comprised of sales made to wholesalers while Creative Distribution Solutions sales are made business to business and business to consumer, both online and through our corporate retail stores. Creative Distribution Solutions net sales are broken out by sales channel below.

	Creative Distribution Solutions Segment
	Three Months Ended
	March 31,
	2024		2023
Business to Business	$	12,585	$	22,493
Business to Consumer - Online		1,380		2,810
Other		29		104
Total	$	13,994	$	25,407

Net Sales—Domestic vs. Foreign

The following table shows a breakdown of consolidated net sales between domestic and foreign customers.

	Three Months Ended
	March 31,
	2024		2023
Domestic	$	89,910	$	93,860
Foreign		7,148		7,096
Total	$	97,058	$	100,956

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Note 17. Additional Information with Respect to Unrestricted Subsidiary

Under the terms of the Senior Secured Notes Indenture and Senior Secured Notes, the Company has designated its subsidiaries, South Beach Brands LLC, TPB Beast LLC and Intrepid Brands, LLC as “Unrestricted Subsidiaries”. South Beach Brands LLC is a holding company under which our vape business TPB Beast LLC operating as Creative Distribution Solutions sits. The Company is required under the terms of the Senior Secured Notes Indenture and the Senior Secured Notes to present additional information that reflects the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Company’s Unrestricted Subsidiaries as of and for the periods presented. This additional information is below.

Income Statement for the Three Months Ended March 31, 2024 and 2023 (unaudited):

	Three Months Ended March 31
	2024									2023
	Company and Restricted Subsidiaries			Unrestricted Subsidiaries			Consolidated			Company and Restricted Subsidiaries			Unrestricted Subsidiaries		Consolidated
Net sales	$	83,064		$	13,994		$	97,058		$	75,549		$	25,407	$	100,956
Cost of sales		34,711			10,435			45,146			33,694			18,645		52,339
Gross profit		48,353			3,559			51,912			41,855			6,762		48,617
Selling, general, and administrative expenses		29,084			3,562			32,646			24,274			6,501		30,775
Operating income (loss)		19,269			(3	)		19,266			17,581			261		17,842
Interest expense, net		3,479			–			3,479			4,010			–		4,010
Investment (gain) loss		(119	)		–			(119	)		4,799			–		4,799
Gain on extinguishment of debt		–			–			–			(777	)		–		(777	)
Income (loss) before income taxes		15,909			(3	)		15,906			9,549			261		9,810
Income tax expense (benefit)		3,728			(1	)		3,727			2,402			66		2,468
Consolidated net income (loss)		12,181			(2	)		12,179			7,147			195		7,342
Net income (loss) attributable to non-controlling interest		169			–			169			(255	)		–		(255	)
Net income (loss) attributable to Turning Point Brands, Inc.	$	12,012		$	(2	)	$	12,010		$	7,402		$	195	$	7,597

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Balance Sheet as of March 31, 2024 (unaudited):

ASSETS	Company and Restricted Subsidiaries		Unrestricted Subsidiaries		Eliminations			Consolidated
Current assets:
Cash	$	126,066	$	4,837	$	–		$	130,903
Accounts receivable, net		8,198		–		–			8,198
Inventories, net		99,381		6,086		–			105,467
Other current assets		32,836		1,601		–			34,437
Total current assets		266,481		12,524		–			279,005
Property, plant, and equipment, net		24,705		85		–			24,790
Deferred income taxes		1,426		–		–			1,426
Right of use assets		10,764		104		–			10,868
Deferred financing costs, net		2,305		–		–			2,305
Goodwill		136,365		–		–			136,365
Other intangible assets, net		66,199		13,978		–			80,177
Master Settlement Agreement (MSA) escrow deposits		28,427		–		–			28,427
Other assets		22,453		500		–			22,953
Investment in unrestricted subsidiaries		62,732		–		(62,732	)		–
Total assets	$	621,857	$	27,191	$	(62,732	)	$	586,316
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,596	$	338	$	–		$	18,934
Accrued liabilities		29,618		1,356		–			30,974
Current portion of long-term debt		59,397		–		–			59,397
Total current liabilities		107,611		1,694		–			109,305
Notes payable and long-term debt		306,496		–		–			306,496
Lease liabilities		9,327		33		–			9,360
Total liabilities		423,434		1,727		–			425,161
Commitments and contingencies
Stockholders’ equity:
Total Turning Point Brands, Inc. Stockholders’ Equity/Net parent investment in unrestricted subsidiaries		197,232		25,464		(62,732	)		159,964
Non-controlling interest		1,191		–		–			1,191
Total stockholders’ equity		198,423		25,464		(62,732	)		161,155
Total liabilities and stockholders’ equity	$	621,857	$	27,191	$	(62,732	)	$	586,316

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Balance Sheet as of December 31, 2023:

ASSETS	Company and Restricted Subsidiaries		Unrestricted Subsidiaries		Eliminations			Consolidated
Current assets:
Cash	$	116,725	$	1,161	$	–		$	117,886
Accounts receivable, net		9,989		–		–			9,989
Inventories, net		91,679		7,281		–			98,960
Other current assets		36,937		3,844		–			40,781
Total current assets		255,330		12,286		–			267,616
Property, plant, and equipment, net		25,142		158		–			25,300
Deferred income taxes		1,468		–		–			1,468
Right of use assets		11,359		121		–			11,480
Deferred financing costs, net		2,450		–		–			2,450
Goodwill		136,250		–		–			136,250
Other intangible assets, net		66,490		14,452		–			80,942
Master Settlement Agreement (MSA) escrow deposits		28,684		–		–			28,684
Other assets		15,166		–		–			15,166
Investment in unrestricted subsidiaries		48,229		–		(48,229	)		–
Total assets	$	590,568	$	27,017	$	(48,229	)	$	569,356
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,781	$	626	$	–		$	8,407
Accrued liabilities		32,052		1,583		–			33,635
Current portion of long-term debt		58,294		–		–			58,294
Total current liabilities		98,127		2,209		–			100,336
Notes payable and long-term debt		307,064		–		–			307,064
Lease liabilities		9,898		52		–			9,950
Total liabilities		415,089		2,261		–			417,350
Commitments and contingencies
Stockholders’ equity:
Total Turning Point Brands, Inc. Stockholders’ Equity/Net parent investment in unrestricted subsidiaries		174,449		24,756		(48,229	)		150,976
Non-controlling interest		1,030		–		–			1,030
Total stockholders’ equity		175,479		24,756		(48,229	)		152,006
Total liabilities and stockholders’ equity	$	590,568	$	27,017	$	(48,229	)	$	569,356

Note 18. Dividends and Share Repurchases

A dividend of $0.07 per common share was paid on April 12, 2024, to shareholders of record at the close of business on March 22, 2024.

The Company currently pays a quarterly cash dividend. Dividends are considered restricted payments under the Senior Secured Notes Indenture. The Company is generally permitted to make restricted payments provided that, at the time of payment, or as a result of payment, the Company is not in default on its debt covenants. Additional earnings and market capitalization restrictions limit the aggregate amount of restricted, quarterly dividends during a fiscal year.

On February 25, 2020, the Company’s Board of Directors approved a $50.0 million share repurchase program which is intended for opportunistic execution based upon a variety of factors including market dynamics. The program is subject to the ongoing discretion of the Board of Directors. On October 25, 2021, the Board of Directors increased the approved share repurchase program by $30.7 million and by an additional $24.6 million on February 24, 2022, in each case bringing the aggregate approval back to $50.0 million. In the first quarter of 2024, the Company repurchased $2.1 million of common stock, with $25.1 million remaining available for share repurchases under the program at March 31, 2024.

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

You should read the following discussion of the historical financial conditions and results of operations in conjunction with our consolidated financial statements and accompanying notes, which are included elsewhere in this Quarterly Report on Form 10-Q. In addition, this discussion includes forward-looking statements which are subject to risks and uncertainties that may result in actual results differing from statements we make. See “Cautionary Note Regarding Forward-Looking Statements.” Factors that could cause actual results to differ include those risks and uncertainties discussed in “Risk Factors.”

The following Management’s Discussion and Analysis (“MD&A”) relates to the unaudited financial statements of Turning Point Brands, Inc., included elsewhere in this Quarterly Report on Form 10-Q. The MD&A is intended to enable the reader to understand the Company’s financial condition and results of operations, including any material changes in the Company’s financial condition and results of operations since December 31, 2023, and as compared with the three months ended March 31, 2023.  The MD&A is provided as a supplement to and should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this Quarterly report on Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Annual Report”).

In this MD&A, unless the context requires otherwise, references to “our Company” “we,” “our,” or “us” refer to Turning Point Brands, Inc., and its consolidated subsidiaries. References to “TPB” refer to Turning Point Brands, Inc., without any of its subsidiaries. We were incorporated in 2004 under the name North Atlantic Holding Company, Inc. On November 4, 2015, we changed our name to Turning Point Brands, Inc. Many of the amounts and percentages in this discussion have been rounded for convenience of presentation.

Overview

Turning Point Brands, Inc. is a leading manufacturer, marketer and distributor of branded  consumer products. We sell a wide range of products to adult consumers consisting of staple products with our iconic brands Zig-Zag^® and Stoker’s^® and our next generation products to fulfill evolving consumer preferences. Among other markets, we compete in the alternative smoking accessories and Other Tobacco Products (“OTP”) industries. The alternative smoking accessories market is a dynamic market experiencing robust secular growth driven by cannabinoid legalization in the U.S. and Canada, and positively evolving consumer perception and acceptance in North America. The OTP industry, which consists of non-cigarette tobacco products, exhibited low-single-digit consumer unit annualized growth over the four-year period ended 2023 as reported by Management Science Associates, Inc. a third-party analytics and information company. Our segments are led by our core proprietary and iconic brands: Zig-Zag^® and CLIPPER® in the Zig-Zag Products segment and Stoker’s^® along with Beech-Nut^® and Trophy^® in the Stoker’s Products segment. Our businesses generate solid cash flow which we use to invest in our business, finance acquisitions, increase brand support, expand our distribution infrastructure, and strengthen our capital position. We currently ship to approximately 820 distributors with an additional 650 secondary, indirect wholesalers in the U.S. that carry and sell our products. Under the leadership of a senior management team with extensive experience in the consumer products, alternative smoking accessories and tobacco industries, we have grown and diversified our business through new product launches, category expansions, and acquisitions while concurrently improving operational efficiency.

We believe there are meaningful opportunities to grow through investing in organic growth, acquisitions and joint ventures across all product categories. Our products are currently available in approximately 197,000 U.S. retail locations which, with the addition of retail stores in Canada, brings our total North American retail presence to an estimated 217,000 points of distribution. Our sales team targets widespread distribution to all traditional retail channels, including convenience stores, and we have a growing e-commerce business.

Products

We operate in three segments: Zig-Zag Products, Stoker’s Products and Creative Distribution Solutions. In our Zig-Zag Products segment, we principally market and distribute (i) rolling papers, tubes, and related products; (ii) finished cigars and make-your-own (“MYO”) cigar wraps; and (iii) CLIPPER reusable lighters and other accessories.  In addition, we have a majority stake in Turning Point Brands Canada which is a specialty marketing and distribution firm focused on building brands in the Canadian cannabis accessories, tobacco and alternative products categories. In our Stoker’s Products segment, we (i) manufacture and market moist snuff tobacco (“MST”) and (ii) contract for and market loose leaf chewing tobacco products. In our Creative Distribution Solutions segment, we (i) market and distribute liquid nicotine products and certain other products without tobacco and/or nicotine; (ii) distribute a wide assortment of products to non-traditional retail via VaporBeast; and (iii) market and distribute a wide assortment of products to individual consumers via the VaporFi B2C online platform.

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Operations

Our core Zig-Zag Products and Stoker’s Products segments primarily generate revenues from the sale of our products to wholesale distributors who, in turn, resell the products to retail operations. Our acquisition of Vapor Beast in 2016 expanded our revenue streams as we began selling directly to non-traditional retail outlets. Our acquisition of IVG in 2018 enhanced our B2C revenue stream with the addition of the Vapor-Fi online platform. Our net sales, which include federal excise taxes, consist of gross sales net of cash discounts, returns, and selling and marketing allowances.

We rely on long-standing relationships with high-quality, established manufacturers to provide the majority of our produced products. Approximately 75% of our production, as measured by net sales, is outsourced to suppliers. The remaining production consists primarily of our moist snuff tobacco operations located in Dresden, Tennessee and Louisville, Kentucky. Our principal operating expenses include the cost of raw materials used to manufacture the limited number of our products which we produce in-house; the cost of finished products, which are generally purchased goods; federal excise taxes; legal expenses; and compensation expenses, including benefits and costs of salaried personnel.

Key Factors Affecting Our Results of Operations

We consider the following to be the key factors affecting our results of operations:

● Our ability to further penetrate markets with our existing products;

● Our ability to introduce new products and product lines that complement our core business;

● Decreasing interest in some tobacco products among consumers;

● Price sensitivity in our end-markets;

● Marketing and promotional initiatives, which cause variability in our results;

● Costs and increasing regulation of promotional and advertising activities;

● General economic conditions, including consumer access to disposable income and other conditions affecting purchasing power such as inflation and the interest rate environment;

● Labor and production costs;

● Cost of complying with regulation, including the “deeming regulation”;

● Increasing and unpredictable regulation and/or marketing order decisions impacting Creative Distribution Solutions products;

● Counterfeit and other illegal products in our end-markets;

● Currency fluctuations;

● Our ability to identify attractive acquisition opportunities; and

● Our ability to successfully integrate acquisitions.

Critical Accounting Policies and Uses of Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that impact the Company.

Recent Developments

Non-Marketable Equity Investments

In January 2024, the Company invested $0.8 million in Teaza Energy, LLC (“TeaZa”), an innovative brand of flavorful oral pouch products designed as a healthier alternative to high energy drinks and other oral stimulants. The Company’s investment is comprised of $0.5 million in cash and a $0.3 million payable to be offset against the Company’s allocated portion of future profit distributions.

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Results of Operations

Comparison of the Three Months Ended March 31, 2024, to the Three Months Ended March 31, 2023

The table and discussion set forth below displays our consolidated results of operations (in thousands):

	Three Months Ended March 31,
	2024			2023			% Change
Consolidated Results of Operations Data:
Net sales
Zig-Zag products	$	46,697		$	41,887			11.5	%
Stoker’s products		36,367			33,662			8.0	%
Total Zig-Zag and Stoker’s products		83,064			75,549			9.9	%
Creative Distribution Solutions		13,994			25,407			-44.9	%
Total net sales		97,058			100,956			-3.9	%
Cost of sales		45,146			52,339			-13.7	%
Gross profit
Zig-Zag products		27,538			22,390			23.0	%
Stoker’s products		20,815			19,465			6.9	%
Total Zig-Zag and Stoker’s products		48,353			41,855			15.5	%
Creative Distribution Solutions		3,559			6,762			-47.4	%
Total gross profit		51,912			48,617			6.8	%
Selling, general, and administrative expenses		32,646			30,775			6.1	%
Operating income		19,266			17,842			8.0	%
Interest expense, net		3,479			4,010			-13.2	%
Investment (gain) loss		(119	)		4,799			-102.5	%
Gain on extinguishment of debt		–			(777	)	NM
Income before income taxes		15,906			9,810			62.1	%
Income tax expense		3,727			2,468			51.0	%
Consolidated net income		12,179			7,342			65.9	%
Net income (loss) attributable to non-controlling interest		169			(255	)		-166.3	%
Net income attributable to Turning Point Brands, Inc.	$	12,010		$	7,597			58.1	%

Net Sales:  For the three months ended March 31, 2024, consolidated net sales decreased to $97.1 million from $101.0 million for the three months ended March 31, 2023, a decrease of $3.9 million or 3.9%.

For the three months ended March 31, 2024, net sales in the Zig-Zag Products segment increased to $46.7 million from $41.9 million for the three months ended March 31, 2023, an increase of $4.8 million or 11.5%. The increase in net sales was driven by growth in our U.S. papers and wraps businesses, partially offset by declines in sales in our Clipper business against trade load in prior year.

For the three months ended March 31, 2024, net sales in the Stoker’s Products segment increased to $36.4 million from $33.7 million for the three months ended March 31, 2023, an increase of $2.7 million or 8.0%. For the three months ended March 31, 2024, volume increased 0.1% and price/product mix increased 7.9%. The increase in net sales was driven by mid-single-digit growth of Stoker’s^® MST and triple-digit growth of our modern oral product FRE, partially offset by mid-single-digit decline in loose-leaf chewing tobacco.

For the three months ended March 31, 2024, net sales in the Creative Distribution Solutions segment decreased to $14.0 million from $25.4 million for the three months ended March 31, 2023, a decrease of $11.4 million or 44.9%. The decrease in net sales was primarily the result of lower volumes in the liquid nicotine distribution business and our strategic decision to eliminate certain unprofitable brands and to focus on a narrower set of products.

Gross Profit:  For the three months ended March 31, 2024, consolidated gross profit increased to $51.9 million from $48.6 million for the three months ended March 31, 2023, an increase of $3.3 million or 6.8%. Gross profit as a percentage of net sales increased to 53.5% for the three months ended March 31, 2024, compared to 48.2% for the three months ended March 31, 2023 driven by product mix in our Zig-Zag Products segment.

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For the three months ended March 31, 2024, gross profit in the Zig-Zag Products segment increased to $27.5 million from $22.4 million for the three months ended March 31, 2023, an increase of $5.1 million or 23.0%. Gross profit as a percentage of net sales increased to 59.0% of net sales for the three months ended March 31, 2024, from 53.5% of net sales for the three months ended March 31, 2023, driven primarily by product mix.

For the three months ended March 31, 2024, gross profit in the Stoker’s Products segment increased to $20.8 million from $19.5 million for the three months ended March 31, 2023, an increase of $1.3 million or 6.9%. Gross profit as a percentage of net sales decreased to 57.2% of net sales for the three months ended March 31, 2024, from 57.8% of net sales for the three months ended March 31, 2023, primarily as a result of product mix, as net sales of FRE were higher and have lower margins than other products in the segment.

For the three months ended March 31, 2024, gross profit in the Creative Distribution Solutions segment decreased to $3.6 million from $6.8 million for the three months ended March 31, 2023, a decrease of $3.2 million or 47.4%. Gross profit as a percentage of net sales decreased to 25.4% of net sales for the three months ended March 31, 2024, from 26.6% of net sales for the three months ended March 31, 2023, primarily as a result of channel mix and our strategic decision to eliminate certain unprofitable brands and to focus on a narrower set of products.

Selling, General, and Administrative Expenses:  For the three months ended March 31, 2024, selling, general, and administrative expenses increased to $32.6 million from $30.8 million for the three months ended March 31, 2023, an increase of $1.9 million or 6.1%. Selling, general and administrative expenses in the three months ended March 31, 2024, included $2.1 million of stock options, restricted stock and incentives expense, $0.8 million of expense related to PMTA, $1.3 million of expense related to corporate restructuring, and $0.1 million of expense related to the new ERP and CRM systems. Selling, general and administrative expenses in the three months ended March 31, 2023, included $0.7 million of stock options, restricted stock and incentives expense, $0.2 million of expense related to PMTA and $0.1 million of consulting expense related to the scoping and mobilization of the new ERP and CRM systems.

Interest Expense, net:  For the three months ended March 31, 2024, interest expense, net decreased to $3.5 million from $4.0 million for the three months ended March 31, 2023 as a result of increased interest income on cash deposits as a result of rising interest rates.

Investment (Gain) Loss:  For the three months ended March 31, 2024, we had an investment gain of $0.1 million compared to a $4.8 million loss for the three months ended March 31, 2023. The change is a result of an impairment charge recognized on our investment in Docklight for $4.9 million in the first quarter of 2023.

Gain on Extinguishment of Debt: There was no gain or loss on extinguishment of debt for the three months ended March 31, 2024 compared to a $0.8 million gain for the three months ended March 31, 2023 as a result of repurchasing $13.9 million of Convertible Senior Notes in the first quarter of 2023.

Income Tax Expense:  Our income tax expense of $3.7 million was 23.4% of income before income taxes for the three months ended March 31, 2024. Our effective income tax rate was 25.2% for the three months ended March 31, 2023.

Net Income (Loss) Attributable to Non-Controlling Interest:  Net gain attributable to non-controlling interest was $0.2 million for the three months ended March 31, 2024 compared to $0.3 million net loss for the three months ended March 31, 2023.

Net Income Attributable to Turning Point Brands, Inc.:  Due to the factors described above, net income attributable to Turning Point Brands, Inc. for the three months ended March 31, 2024 and 2023, was $12.0 million and $7.6 million, respectively.

EBITDA and Adjusted EBITDA

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use non-U.S. GAAP financial measures including EBITDA and Adjusted EBITDA. We believe Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA is used by management to compare our performance to that of prior periods for trend analyses and planning purposes and is presented to our Board of Directors. We believe that EBITDA and Adjusted EBITDA are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to operating performance. In addition, our debt instruments contain covenants which use Adjusted EBITDA calculations.

We define “EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for income taxes, depreciation, and amortization. We define “Adjusted EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for income taxes, depreciation, amortization, other non-cash items, and other items we do not consider the ordinary course in our evaluation of ongoing operating performance noted in the reconciliation below.

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Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. Adjusted EBITDA excludes significant expenses required to be recorded in our financial statements by U.S. GAAP and is subject to inherent limitations. Other companies in our industry may calculate this non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. The tables below provide reconciliations between net income and Adjusted EBITDA.

(in thousands)	Three Months Ended March 31,
	2024		2023
Net income attributable to Turning Point Brands, Inc.	$	12,010	$	7,597
Add:
Interest expense, net		3,479		4,010
Gain on extinguishment of debt		–		(777	)
Income tax expense		3,727		2,468
Depreciation expense		837		776
Amortization expense		886		771
EBITDA	$	20,939	$	14,845
Components of Adjusted EBITDA
Corporate and CDS restructuring (a)		1,261		–
ERP/CRM (b)		138		138
Stock options, restricted stock, and incentives expense (c)		2,062		743
Transactional expenses and strategic initiatives (d)		30		4
FDA PMTA (e)		841		158
Non-cash asset impairment (f)		–		4,897
Adjusted EBITDA	$	25,271	$	20,785

(a) Represents costs associated with corporate and CDS restructuring, including severance.

(b) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses.

(c) Represents non-cash stock options, restricted stock, incentives expense and Solace performance stock units.

(d) Represents the fees incurred for transaction expenses.

(e) Represents costs associated with applications related to FDA premarket tobacco product application (“PMTA”).

(f) Represents impairment of investment assets.

Liquidity and Capital Resources

As of March 31, 2024, we have $130.9 million of cash on hand and have $59.0 million of availability under the 2023 ABL Facility. Our principal uses for cash are working capital, debt service, and capital expenditures.

Our Convertible Senior Notes, with an outstanding balance of $118.5 million as of March 31, 2024, mature in July 2024. On November 7, 2023, one of our wholly-owned subsidiaries entered into the 2023 ABL Facility to refinance up to $75.0 million of the Convertible Senior Notes at maturity. As a result, we classified $59.0 million (our current availability under the 2023 ABL Facility based on borrowing base calculations) related to the Convertible Senior Notes in long-term liabilities on our March 31, 2024 Consolidated Balance Sheet. With our strong cash balance, free cash flow generation and borrowing availability under the 2023 ABL Facility, we expect to have ample liquidity to address the remaining balance of the Convertible Senior Notes maturing in July, and to satisfy our operating cash requirements for the foreseeable future.

Our working capital, which we define as current assets less cash and current liabilities, decreased to $38.8 million at March 31, 2024, compared with $49.4 million at December 31, 2023. The decrease in working capital is primarily a result of the timing of inventory payments as well as $3.0 million insurance deposits being invested in investments.

	As of
(in thousands)	March 31, 2024		December 31, 2023
Current assets	$	148,102	$	149,730
Current liabilities		109,305		100,336
Working capital	$	38,797	$	49,394

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Cash Flows from Operating Activities

For the three months ended March 31, 2024, net cash provided by operating activities was $22.6 million compared to net cash provided by operating activities of $15.4 million for the three months ended March 31, 2023, an increase of $7.2 million, primarily due to the timing of changes in other working capital and net income from operations.

Cash Flows from Investing Activities

For the three months ended March 31, 2024, net cash used in investing activities was $8.0 million compared to net cash used in investing activities of $2.4 million for the three months ended March 31, 2023, an increase in cash used in investing activities of $5.6 million, primarily due to an increase in purchases of captive insurance investments.

Cash Flows from Financing Activities

For the three months ended March 31, 2024, net cash used in financing activities was $4.6 million compared to net cash used in financing activities of $14.6 million for the three months ended March 31, 2023, a decrease of $10.0 million, primarily due to an increase in repurchases of common stock of $2.1 million during the period, offset by $13.0 million in repurchases of Convertible Senior Notes during the same period in 2023.

Dividends and Share Repurchase

A dividend of $0.07 per common share was paid on April 12, 2024, to shareholders of record at the close of business on March 22, 2024.

On February 25, 2020, our Board of Directors approved a $50.0 million share repurchase program, which is intended for opportunistic execution based upon a variety of factors including market dynamics. The program is subject to the ongoing discretion of the Board of Directors. On October 25, 2021, the Board of Directors increased the approved share repurchase program by $30.7 million and by an additional $24.6 million on February 24, 2022. In the first quarter of 2024, the Company repurchased $2.1 million of common stock, with $25.1 million remaining available for share repurchases under the program as of March 31, 2024.

Long-Term Debt

Notes payable and long-term debt consisted of the following at March 31, 2024 and December 31, 2023, in order of preference:

	March 31, 2024			December 31, 2023
Senior Secured Notes	$	250,000		$	250,000
Convertible Senior Notes		118,541			118,541
Gross notes payable and long-term debt		368,541			368,541
Less deferred finance charges		(2,648	)		(3,183	)
Less current maturities		(59,397	)		(58,294	)
Notes payable and long-term debt	$	306,496		$	307,064

Senior Secured Notes

On February 11, 2021, we closed a private offering (the “Offering”) of $250 million aggregate principal amount of our 5.625% senior secured notes due 2026 (the “Senior Secured Notes”). The Senior Secured Notes bear interest at a rate of 5.625% and will mature on February 15, 2026. Interest on the Senior Secured Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2021.We used the proceeds from the Offering (i) to repay all obligations under and terminate the 2018 First Lien Credit Facility, (ii) to pay related fees, costs, and expenses and (iii) for general corporate purposes.

Obligations under the Senior Secured Notes are guaranteed by the Company’s existing and future wholly-owned domestic subsidiaries (the “Guarantors”) that guarantee any credit facility (as defined in the indenture governing the Senior Secured Notes or the “Senior Secured Notes Indenture”) or capital markets debt securities of the Company or Guarantors in excess of $15.0 million. The Senior Secured Notes and the related guarantees are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions.

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The Company may redeem the Senior Secured Notes, in whole or in part, at any time, at the redemption prices (expressed as a percentage of the principal amount to be redeemed) set forth below, plus accrued and unpaid interest, if any, on the Senior Secured Notes to be redeemed to (but not including) the applicable redemption date if redeemed during the period indicated below:

On or after February 15, 2023	102.813	%
On or after February 15, 2024	101.406	%
On or after February 15, 2025 and thereafter	100.000	%

If we experience a change of control (as defined in the Senior Secured Notes Indenture), we must offer to repurchase the Senior Secured Notes at a repurchase price equal to 101% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.

The Senior Secured Notes Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to: (i) grant or incur liens; (ii) incur, assume or guarantee additional indebtedness; (iii) sell or otherwise dispose of assets, including capital stock of subsidiaries; (iv) make certain investments; (v) pay dividends, make distributions or redeem or repurchase capital stock; (vi) engage in certain transactions with affiliates; and (vii) consolidate or merge with or into, or sell substantially all of our assets to another entity. These covenants are subject to a number of limitations and exceptions set forth in the Senior Secured Notes Indenture. The Senior Secured Notes Indenture provides for customary events of default. We were in compliance with all covenants as of March 31, 2024.

We incurred debt issuance costs attributable to the issuance of the Senior Secured Notes of $6.4 million which are amortized to interest expense using the straight-line method over the expected life of the Senior Secured Notes.

2021 Revolving Credit Facility

In connection with the Offering, we also entered into a $25.0 million senior secured revolving credit facility (the “2021 Revolving Credit Facility”) with the lenders party thereto and Barclays Bank PLC, as administrative agent and collateral agent (in such capacity, the “Agent”).  This facility was terminated in November 2023 in connection with the entry by a subsidiary of the Company in a new asset-backed revolving credit facility. See “2023 ABL Facility” below. We incurred debt issuance costs attributable to the issuance of the 2021 Revolving Credit Facility of $0.5 million, with the remaining $0.2 million written off to gain on debt extinguishment upon termination of the facility.

2023 ABL Facility

On November 7, 2023, TPB Specialty Finance, LLC, a wholly-owned subsidiary of the Company (the “ABL Borrower”), entered into a new $75.0 million  asset-backed revolving credit facility (the “2023 ABL Facility”), with the several lenders thereunder, and Barclays Bank Plc, as administrative agent (the “Administrative Agent”) and as collateral agent (the “Collateral Agent”) and First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”). Under the 2023 ABL Facility, the ABL Borrower may draw up to $75.0 million under Revolving Credit Loans and Last In Last Out (“LILO”) Loans. The 2023 ABL Facility includes a $40.0 million accordion feature.  In connection with the 2023 ABL Facility, Turning Point Brands contributed certain existing inventory to the ABL Borrower. The 2023 ABL Facility is secured on a first priority basis (subject to customary exceptions) by all assets of the ABL Borrower.

The 2023 ABL Facility contains customary borrowing conditions including a borrowing base equal to the sum of (a) the lesser of (1) 85% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) 85% of the cost of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (2) 85% of the net orderly liquidation value (“NOLV”) percentage of the lower of (1)(A) or (1)(B); plus (b) 85% of the face value of all eligible accounts of the ABL Borrower minus (c) the amount of all eligible reserves.  The 2023 ABL Facility also includes a LILO borrowing base equal to the sum of (a) the lesser of: (1) 10% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) the cost of the sum of eligible inventory, plus eligible in-transit inventory and (2) 10% of the NOLV percentage of the lower of  (1)(A) or (1)(B); plus (b) 10% of the face amount of eligible account; minus (c) the amount of all eligible reserves.

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Amounts borrowed under the 2023 ABL Facility are subject to an interest rate margin per annum equal to (a) from and after the closing date until the last day of the first full fiscal quarter ended after the closing date, (i) 1.25% per annum, in the case base rate loans, and (ii) 2.25% per annum, in the case of revolving credit loans that are SOFR Loans, (b)(i) 2.25% per annum, in the case of LILO loans that are base rate loans, and (ii) 3.25% per annum, in the case of LILO loans that are SOFR loans, (c) on the first day of each fiscal quarter, the applicable interest rate margins will be determined from the pricing grid below based upon the historical excess availability for the most recent fiscal quarter ended immediately prior to the relevant date, as calculated by the Administrative Agent.

Level	Historical Excess Availability	Applicable Margin for SOFR Loans	Applicable Margin for Base Rate Loans
I	Greater than or equal to 66.66%	1.75%	0.75%
II	Less than 66.66%, but greater than or equal to 33.33%	2.00%	1.00%
III	Less than 33.33%	2.25%	1.25%

The 2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four consecutive fiscal quarters if excess availability shall be less than the greater of (a) 12.5% of the line cap and (b) $9.4 million, at any time and continuing until excess availability is equal to or exceeds the greater of (i) 12.5% of the line and (ii) $9.4 million for thirty (30) consecutive calendar days; provided that such $9.4 million level shall automatically increase in proportion to the amount of any increase in the aggregate revolving credit commitments thereunder in connection with any incremental facility.

The 2023 ABL Facility will mature on the earlier of (x) November 7, 2027 and (y) the date that is 91 days prior to the maturity date of any material debt of the ABL Borrower or the Company or any of its restricted subsidiaries (subject to customary extensions agreed by the lenders thereunder); provided that clause (y) shall not apply to the extent that on any applicable date of determination (on any date prior to the date set forth in clause (y)), (A) the sum of (x) cash that is held in escrow for the repayment of such material debt pursuant to arrangements satisfactory to the Administrative Agent, (y) cash that is held in accounts with the Administrative Agent and/or the Additional Collateral Agent, plus (z) excess availability, is sufficient to repay such material debt and (B) the ABL Borrower has excess availability of at least $15.0 million after giving effect to such repayment of material debt, including any borrowings under the commitments in connection therewith.

The Company has not drawn any borrowings under the 2023 ABL Facility but has letters of credit of approximately $1.2 million outstanding under the facility and has an available balance of $59.0 million based on the borrowing base as of March 31, 2024.

The Company incurred debt issuance costs attributable to the 2023 ABL Facility of $2.6 million which are amortized to interest expense using the straight-line method over the expected life of the 2023 ABL Facility.

Convertible Senior Notes

In July 2019, the Company closed an offering of $172.5 million in aggregate principal amount of its 2.50% Convertible Senior Notes due July 15, 2024 (the “Convertible Senior Notes”). The Convertible Senior Notes bear interest at a rate of 2.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2020. The Convertible Senior Notes are senior unsecured obligations of the Company.

In 2023, a wholly owned subsidiary of the Company repurchased $44.0 million in aggregate principal amount of the Convertible Senior Notes on the open market resulting in a $1.9 million gain on extinguishment of debt. The repurchased notes continue to be held by our subsidiary and may be resold subject to compliance with applicable securities law. As of March 31, 2024, $118.5 million aggregate principal remains outstanding and held by third parties.

The Convertible Senior Notes held by third parties are convertible into approximately 2,219,704 shares of TPB Common Stock under certain circumstances prior to maturity at a conversion rate of 18.7252 shares per $1,000 principal amount of the Convertible Senior Notes, which represents a conversion price of approximately $53.40 per share, subject to adjustment under certain conditions, but will not be adjusted for any accrued and unpaid interest. The conversion price is adjusted periodically as a result of dividends paid by the Company in excess of pre-determined thresholds of $0.04 per share. Upon conversion, the Company may pay cash, shares of common stock or a combination of cash and stock, as determined by the Company at its discretion. The conditions required to allow the holders to convert their Convertible Senior Notes were not met as of March 31, 2024.

37

As discussed above, on November 7, 2023, a wholly-owned subsidiary of the Company entered into the 2023 ABL Facility to refinance up to $75.0 million of the Convertible Senior notes at maturity. As a result, the Company classified $59.0 million related to the Convertible Senior Notes in Notes payable and long-term debt on the Company’s March 31, 2024 Consolidated Balance Sheets. Based on current liquidity, free cash flow generation and availability under the 2023 ABL Facility, the Company believes it will have sufficient liquidity to address the maturity of the remaining Convertible Senior Notes.

The Company incurred debt issuance costs attributable to the Convertible Senior Notes of $5.9 million which are amortized to interest expense using the straight-line method over the expected life of the Convertible Senior Notes.

In connection with the Convertible Senior Notes offering, the Company entered into privately negotiated capped call transactions with certain financial institutions. The capped call transactions have a strike price of $53.40 per share and a cap price of $82.86 per share, and are exercisable when, and if, the Convertible Senior Notes are converted. The Company paid $20.53 million for these capped calls at the time they were entered into and charged that amount to additional paid-in capital.

Off-balance Sheet Arrangements

During the three months ended March 31, 2024, the Company executed no foreign exchange contracts meeting hedge accounting requirements. At March 31, 2024, we had foreign currency contracts outstanding for the purchase of €9.2 million and sale of €9.2 million, with maturities ranging from April to September 2024. The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $0.0 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities at March 31, 2024. During 2023, we executed various foreign exchange contracts for the purchase of €20.1 million and sale of €15.2 million. At December 31, 2023, we had foreign currency contracts outstanding for the purchase of €15.2 million and sale of €15.2 million. The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $0.3 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities at December 31, 2023.

Inflation

Inflation in general, coupled with increases in gas prices have had a substantial negative effect on the purchasing power of consumers. While historically, we have been able to increase prices at a rate equal to or greater than that of inflation, doing so would be difficult in the current inflationary environment. However, we have implemented price increases in areas where doing so has been feasible. In addition, we have been able to maintain a relatively stable variable cost structure for our products due, in part, to our successful procurement regarding our tobacco products and, in part, to our existing contractual agreement for the purchase of our premium cigarette papers.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Sensitivity

During the quarter ended March 31, 2024, there have been no material changes in our exposure to exchange rate fluctuation risk, as reported within our 2023 Annual Report on Form 10-K. Please refer to our ‘Quantitative and Qualitative Disclosures about Market Risk’ included in our 2023 Annual Report on Form 10-K filed with the SEC.

Credit Risk

There have been no material changes in our exposure to credit risk, as reported within our 2023 Annual Report on Form 10-K, during the three months ended March 31, 2024. Please refer to our ‘Quantitative and Qualitative Disclosures about Market Risk’ included in our 2023 Annual Report on Form 10-K filed with the SEC.

Interest Rate Sensitivity

In February 2021, we issued the Senior Secured Notes in an aggregate principal amount of $250 million. In July 2019, we issued Convertible Senior Notes in an aggregate principal amount of $172.5 million. We carry the Senior Secured Notes and Convertible Senior Notes at face value. Since the Senior Secured Notes and Convertible Senior Notes bear interest at a fixed rate, we have no financial statement risk associated with changes in interest rates. However, the fair value of the Convertible Senior Notes changes when the market price of our stock fluctuates, or interest rates change. Our remaining debt instrument is a revolving credit facility, which has no borrowing outstanding.

38

Item 4. Controls and Procedures

We have carried out an evaluation under the supervision, and with the participation of, our management including our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and Chief Accounting Officer (“CAO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934), as of March 31, 2024. Based upon the evaluation, our CEO, CFO, and CAO concluded our disclosure controls and procedures are not effective as of such date solely due to material weaknesses in internal controls over financial reporting that were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, during our evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, we concluded that our internal control over financial reporting was not effective solely due to the existence of the following material weakness:

We did not design and maintain effective internal controls related to our information technology general controls (“ITGCs”) in the areas of user access and program change-management over certain information technology (“IT”) systems that support the Company’s financial reporting processes. Our business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. We believe that these control deficiencies were a result of: IT control processes lacking sufficient documentation such that the successful operation of ITGCs was overly dependent upon knowledge and actions of certain individuals with IT expertise and inherent system limitations.

The material weakness did not result in any identified misstatements to our financial statements, and there were no changes to previously released financial results. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time, and management has concluded through testing that these controls are operating effectively.

Remediation Plan

While our remediation plan may evolve and expand, management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) implementation of a new ERP system in 2024; (ii)  developing and maintaining documentation underlying ITGCs; (iii) implementing an IT management review and testing plan to monitor ITGCs with a specific focus on systems supporting our financial reporting processes; and (iv) enhanced quarterly reporting on the remediation measures to the Audit Committee of the Board of Directors.

We believe that these actions will remediate the material weakness. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

39

PART II—OTHER INFORMATION

Item 1.  Legal Proceedings

For a description of our material pending legal proceedings, please see Contingencies in Note 14 to the Notes to the Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report.

See ‘Risk Factors—We are subject to significant product liability litigation’ within our 2023 Annual Report on Form 10-K for additional details.

Item 1A. Risk Factors

In addition to the other information set forth in this report, carefully consider the factors discussed in the ‘Risk Factors’ section contained in our 2023 Annual Report on Form 10-K. There have been no material changes to the Risk Factors set forth in the 2023 Annual Report on Form 10-K.

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

On February 25, 2020, the Company’s Board of Directors approved a $50.0 million share repurchase program, which is intended for opportunistic execution based upon a variety of factors including market dynamics. On October 25, 2021, the Board of Directors increased the approved share repurchase program by $30.7 million bringing the authority at the time back to $50.0 million (including approximately $19.3 million available for repurchases under the Board of Directors’ previous authorization). On February 24, 2022, the Board of Directors increased the approved share repurchase program by $24.6 million bringing total authority at that time to $50.0 million. This share repurchase program has no expiration date and is subject to the ongoing discretion of the Board of Directors. All repurchases to date under our stock repurchase programs have been made through open market transactions, but in the future, we may also purchase shares through privately negotiated transactions or 10b5-1 repurchase plans.

The following table includes information regarding purchases of our common stock made by us during the quarter ended March 31, 2024 in connection with the repurchase program described above.

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to January 31		3,015	$	26.32		–	$	27,197,886
February 1 to February 29		39,429	$	24.84		–	$	27,197,886
March 1 to March 31		83,420	$	27.94		72,545	$	25,118,746
Total		125,864				72,545

(1) The total number of shares purchased includes shares withheld by the Company in an amount equal to the statutory withholding taxes for holders who vested in stock-based awards, which totaled 3,015 shares in January, 39,429 shares in February and 10,875 shares in March. Shares withheld by the Company to cover statutory withholdings taxes are repurchased pursuant to the applicable plan and not the authorization under the share repurchase program.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

40

Item 6. Exhibits

Exhibit No.	Description
10.1	Employment Agreement by and between the Company and Andrew Flynn, dated as of March 6, 2024  (incorporated herein by reference to Exhibit 10.1 of Turning Point Brands, Inc’s Current Report on Form 8-K filed with the Commission on March 12, 2024 (File No. 001-37763)).
10.2	Employment Agreement by and between the Company and David Glazek, dated as of March 29, 2024.*
31.1	Rule 13a-14(a)/15d-14(a) Certification of Graham Purdy.*
31.2	Rule 13a-14(a)/15d-14(a) Certification of Andrew Flynn.*
31.3	Rule 13a-14(a)/15d-14(a) Certification of Brian Wigginton.*
32.1	Section 1350 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101	XBRL (eXtensible Business Reporting Language). The following materials from Turning Point Brands, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed on May 2, 2024, formatted in Inline XBRL (iXBRL): (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows, and (v) the notes to consolidated financial statements.*
104	Cover Page Interactive Data File (formatted in iXBRL and included in Exhibit 101).*

* Filed or furnished herewith

41

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TURNING POINT BRANDS, INC.
		By: /s/ Graham Purdy
		Name: Graham Purdy
		Title:  President and Chief Executive Officer
		By: /s/ Andrew Flynn
		Name:  Andrew Flynn
		Title: Chief Financial Officer
		By:  /s/ Brian Wigginton
		Name:  Brian Wigginton
		Title:  Chief Accounting Officer
Date:  May 2, 2024

42

EX-10.2

Exhibit 10.2

Turning Point Brands, Inc.

5201 Interchange Way

Louisville, KY 40229

March 29, 2024

Dear David:

As discussed, the Board of Directors (the “Board”) of Turning Point Brands, Inc., together with any successor thereto (“Turning Point” and, together with its applicable employing subsidiaries, the “Company”) wishes to extend your service as Executive Chairman of Turning Point on the general terms, provisions and conditions set forth in this letter agreement (the “Letter”). If you find these terms, provisions and conditions acceptable, please sign this Letter where indicated and return to me as soon as possible.

Term: Your service as Executive Chairman will be for an initial term ending on December 31, 2025 (the “Initial Term”), unless terminated earlier by either party. Your employment period will be automatically renewed each year on January 1^st thereafter , unless either you or the Company provides the other with a written notice of non-renewal at least ninety (90) days prior to the applicable expiration date (the Initial Term and any renewal period(s) together, the “Term”).

Compensation: You will not receive an annual base salary for your service as Executive Chairman.  For each calendar year commencing during the Term, in lieu of salary you will receive an equity award consisting of at least 50% time-based restricted stock units and 50% stock options having an aggregate grant date value of $1,000,000 (the “Annual Equity Award”). The Annual Equity Award will vest in quarterly installments during the Term. The Annual Equity Award will be subject to the terms and conditions of the Company’s equity incentive plan and shall be subject to the award agreement(s) attached hereto as Exhibit A.  The Annual Equity Award for each calendar year shall be granted on January 1 or the first business day of that year, subject to any blackout restrictions. The Board or a committee thereof shall determine an appropriate target-level annual bonus or other opportunity for you in connection with its annual compensation-setting process and will consult with you on any applicable performance objectives/parameters. Performance-based or time-based awards granted under the Company’s Long-Term Incentive Plan (“LTIP”) to you and other eligible participants shall remain subject to those respective agreements, irrespective of treatment of the Annual Equity Award as contemplated by this Agreement.

Additional Benefits: You will be entitled to participate in the Company’s long-term equity incentive program as well as medical, dental and 401(k) savings benefit plans offered to the Company’s executives pursuant to the terms and conditions of each such plan in effect from time to time, which may be authorized, amended or discontinued by the Company in its sole discretion. The Company will provide a description of the benefit programs and enrollment forms.

Additional Terms and Conditions

1.   Duties and Responsibilities: As Executive Chair, you will report to the full Board, and will be responsible for carrying out the duties and responsibilities described on Schedule A.  You shall have all of the authority, and perform all of the functions, that are consistent with such position, subject to lawful direction by the Board. You will be subject to, and agree to abide by, such rules, policies and procedures as the Company maintains (including, but not limited to, the Turning Point Brands, Inc. Code of Business Conduct and Ethics (as amended from time to time, the “Code of Conduct and Ethics”)) or may from time to time establish with respect to executives, employees in general, standard operating procedures, business operations, etc.

2.  Indemnification: The Company shall, to the fullest extent to which it is empowered to do so by applicable law, defend, indemnify and hold you harmless from and against all claims, demands, lawsuits, liabilities, losses, damages, penalties, fines, costs and expense (including, but not limited to, reasonable related attorneys’ fees) arising from any actual, threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise, to which you are or are threatened to be made a party by reason of your services as an officer and/or director of the Company.  Nothing in this Letter shall be deemed to preclude you from receiving any of the benefits or protections, including without limitation representation, available to you following any separation under (a) any officers and directors insurance policy maintained by the Company which provides coverage during your employment by the Company as an officer or director of the Company or (b) the Company’s bylaws, Certificate of Incorporation or under applicable law. Any such benefits and protections shall or shall not be provided solely in accordance with the terms and conditions of any such policies, documents and applicable law.

3.   Amendment; Assignment:This Letter shall not be amended or modified except by written agreement signed by both parties.  Any successor to the Company shall be obligated to assume and perform the terms of this Letter.

4. Severance Benefits: If the Term and your employment with the Company are terminated by the Company without Cause (as defined in paragraph 4.5), but excluding death or disability, or if your resign with Good Reason, or if the Company chooses not to renew the Term of this Agreement (a “Qualifying Termination”), you shall be entitled to receive the Severance Benefits described below (the “Severance Benefits”), provided that you have executed and delivered a Release and Severance Agreement in the form of Exhibit A attached hereto (as may be modified by the Company and reasonably acceptable to you due to subsequent changes in law), and all applicable revocation periods relating to the release expire, within 55 days following the date of such Separation.

4.1 Severance Benefits Period:A period of 12 months following a termination of your employment with the Company and its subsidiaries by the Company without Cause (other than death or disability) or resignation of your employment with the Company and its subsidiaries by you for Good Reason, other than within one year following a Change of Control. If you resign for Good Reason or are terminated by the Company without Cause (other than death or disability) within one year following a Change of Control, the Severance Benefits Period shall be a period of 24 months following such termination of employment.

4.2 Severance Compensation: Continuation of the cash equivalent of the grant date value of your Annual Equity Award during the Severance Benefits Period described above (“Severance Pay”). In the event of a Qualifying Termination within one year following a Change of Control, your Severance Pay shall instead be equal to two times the grant date value of your Annual Equity Award that would have otherwise been received by you during the 24 months following your Separation. The Severance Pay shall be paid in accordance with the Company’s regular payroll cycle, with the first such payment beginning on the 60th day following the Separation Date (the “Payment Date”). The first such payment will include all accrued amounts during the 60-day period from the Separation Date through the Payment Date.

4.3 Health Benefits Stipend and Access: Upon a Qualifying Termination, the Company will pay a lump sum payment to you in amount equal to the cost of the employer-portion of maintaining COBRA coverage based on rates in effect at the time of termination for you and your eligible dependents for 12 months, payable on the Payment Date.

4.4 Other Additional Benefits: In the event of a Qualifying Termination,  any unvested portion of any Annual Equity Award granted prior to such Qualifying Termination, as well as any other equity-based awards held by you that are unvested as of the date of such Qualifying Termination, will be treated as fully vested and you shall be entitled to any and all ownership interests in said equity awards as if your termination of employment had not occurred.  Your entitlement to actively participate as an employee in the Company’s health and welfare and retirement plans will cease upon your Separation, except as otherwise provided in this Agreement or the written terms of the applicable benefit plans.

As used herein, the term “Good Reason Event” means any of the following without your consent: (i) the Board requesting that you resign from the position of Executive Chairman (regardless of whether or not you remain on the Board) for a reason other than (x) your disability or (y) for Cause, (ii) a material diminution in your duties, position, authorities or responsibilities as Executive Chairman (including you no longer holding the position of Executive Chairman following a Change in Control); provided, that any alleged conflict with your duties, position, authorities or responsibilities and those of the Company’s CEO shall not give rise to Good Reason, (iii) you no longer reporting directly to the full Board, or (iv) the breach in any material respect by the Company of any of its other obligations or agreements set forth in this Agreement so long as, in each case: (x) you provided the Company with a written notice detailing the specific circumstances alleged to constitute Good Reason within 90 days after the first occurrence of such circumstances, (y) the Company failed to cure such Good Reason event(s) within 30 days following receipt of such notice to cure such circumstances in all material respects, and (z) following the Company’s failure to cure during the 30 day cure period, you terminate your position as Executive Chair (regardless of whether or not you remain on the Board) no later than 60 days after the expiration of such cure period.

As used herein, the term “Cause” means: (i) your commission of an act of fraud, embezzlement or similar dishonest act against any member of the Company or any customer, client or business associate of any member of the Company; (ii) Your conviction for any felony or crime of dishonesty (as determined by a court of competent jurisdiction, and which is not subject to further appeal); (iii) Any egregious or unwarranted conduct by you that materially discredits any member of the Company or is materially detrimental to the reputation or standing of any member of the Company; or (iv) Willful misconduct that is demonstrably deliberate on your part, or gross negligence.

As used herein, “Change in Control” shall have the meaning set forth in the Company’s 2021 Equity Incentive Plan.

/s/ Brittani Cushman	3/29/2024
Brittani Cushman, General Counsel	Date

I agree to the terms and conditions of the offer set forth above.

/s/ David Glazek	3/29/2024
David Glazek	Date

Exhibit A

Release of Claims

Schedule A

You will be responsible for carrying out all duties and responsibilities associated with your position as Executive Chairman of the Company and will be expected to devote the majority of your working time and attention to the Company.

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Graham Purdy, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Turning Point Brands, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: May 2, 2024	By:	/s/ Graham Purdy
		Graham Purdy
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Andrew Flynn, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Turning Point Brands, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: May 2, 2024	By:	/s/ Andrew Flynn
		Andrew Flynn
		Chief Financial Officer
		(Principal Financial Officer)

EX-31.3

Exhibit 31.3

CERTIFICATIONS

I, Brian Wigginton, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Turning Point Brands, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: May 2, 2024	By:	/s/ Brian Wigginton
		Brian Wigginton
		Chief Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Turning Point Brands, Inc. (the “Company”) for the quarterly period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Graham Purdy, President and Chief Executive Officer, Andrew Flynn, Chief Financial Officer, and Brian Wigginton, Chief Accounting Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: May 2, 2024	By:	/s/ Graham Purdy
		Graham Purdy
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 2, 2024	By:	/s/ Andrew Flynn
		Andrew Flynn
		Chief Financial Officer
		(Principal Financial Officer)

Date: May 2, 2024	By:	/s/ Brian Wigginton
		Brian Wigginton
		Chief Accounting Officer

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2024	Apr. 26, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2024
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Document Transition Report	false
Entity File Number	001-37763
Entity Registrant Name	TURNING POINT BRANDS, INC.
Entity Central Index Key	0001290677
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-0709285
Entity Address, Address Line One	5201 Interchange Way
Entity Address, City or Town	Louisville
Entity Address, State or Province	KY
Entity Address, Postal Zip Code	40229
City Area Code	502
Local Phone Number	778-4421
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	TPB
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		17,621,706

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Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets:
Cash	$ 130,903	$ 117,886
Accounts receivable, net of allowances of $43 in 2024 and $78 in 2023	8,198	9,989
Inventories, net	105,467	98,960
Other current assets	34,437	40,781
Total current assets	279,005	267,616
Property, plant, and equipment, net	24,790	25,300
Deferred income taxes	1,426	1,468
Right of use assets	10,868	11,480
Deferred financing costs, net	2,305	2,450
Goodwill	136,365	136,250
Other intangible assets, net	80,177	80,942
Master Settlement Agreement (MSA) escrow deposits	28,427	28,684
Other assets	22,953	15,166
Total assets	586,316	569,356
Current liabilities:
Accounts payable	18,934	8,407
Accrued liabilities	30,974	33,635
Current portion of long-term debt	59,397	58,294
Total current liabilities	109,305	100,336
Notes payable and long-term debt	306,496	307,064
Lease liabilities	9,360	9,950
Total liabilities	425,161	417,350
Commitments and contingencies
Stockholders' equity:
Preferred stock; $0.01 par value; authorized shares 40,000,000; issued and outstanding shares -0-	0	0
Additional paid-in capital	119,792	119,075
Cost of repurchased common stock (2,389,005 shares at March 31, 2024 and December 31, 2023)	(80,172)	(78,093)
Accumulated other comprehensive loss	(3,048)	(2,648)
Accumulated earnings	123,192	112,443
Non-controlling interest	1,191	1,030
Total stockholders' equity	161,155	152,006
Total liabilities and stockholders' equity	586,316	569,356
Common Stock, Voting [Member]
Stockholders' equity:
Common stock	200	199
Common Stock, Nonvoting [Member]
Stockholders' equity:
Common stock	$ 0	$ 0

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets:
Accounts receivable, allowance	$ 43	$ 78
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	40,000,000	40,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Repurchased common stock (in shares)	2,389,005	2,316,460
Common Stock, Voting [Member]
Stockholders' equity:
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	190,000,000	190,000,000
Common stock, shares issued (in shares)	20,016,822	19,922,137
Common stock, shares outstanding (in shares)	17,627,817	17,605,677
Common Stock, Nonvoting [Member]
Stockholders' equity:
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares issued (in shares)	0	0
Common stock, shares outstanding (in shares)	0	0

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Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Consolidated Statements of Income [Abstract]
Net sales	$ 97,058	$ 100,956
Cost of sales	45,146	52,339
Gross profit	51,912	48,617
Selling, general, and administrative expenses	32,646	30,775
Operating income	19,266	17,842
Interest expense, net	3,479	4,010
Investment (gain) loss	(119)	4,799
Gain on extinguishment of debt	0	(777)
Income before income taxes	15,906	9,810
Income tax expense	3,727	2,468
Consolidated net income	12,179	7,342
Net income (loss) attributable to non-controlling interest	169	(255)
Net income attributable to Turning Point Brands, Inc.	$ 12,010	$ 7,597
Basic income per common share:
Net income attributable to Turning Point Brands, Inc. (in dollars per share)	$ 0.68	$ 0.43
Diluted income per common share:
Net income attributable to Turning Point Brands, Inc. (in dollars per share)	$ 0.63	$ 0.41
Weighted average common shares outstanding:
Basic (in shares)	17,654,684	17,531,414
Diluted (in shares)	20,170,314	20,669,152

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Consolidated Statements of Comprehensive Income [Abstract]
Consolidated net income	$ 12,179	$ 7,342
Other comprehensive income (loss), net of tax
Unrealized loss on MSA investments, net of tax	(242)	553
Foreign currency translation, net of tax	13	(78)
Unrealized loss on derivative instruments, net of tax	(185)	(344)
Unrealized gain on investments, net of tax	6	0
Other comprehensive income (loss), net of tax	(408)	131
Consolidated comprehensive income	11,771	7,473
Comprehensive income (loss) attributable to non-controlling interest	169	(255)
Comprehensive income attributable to Turning Point Brands, Inc.	$ 11,602	$ 7,728

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Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Other comprehensive income (loss), net of tax
Unrealized loss on MSA investments, tax	$ 15	$ 176
Foreign currency translation, tax	0	0
Unrealized loss on derivative instruments, tax	57	$ 109
Unrealized gain on investments, tax	$ 0

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Cash flows from operating activities:
Consolidated net income	$ 12,179	$ 7,342
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on extinguishment of debt	0	(777)
Loss (gain) on sale of property, plant, and equipment	1	(6)
Gain on MSA investments	6	0
Depreciation and other amortization expense	944	776
Amortization of other intangible assets	779	771
Amortization of deferred financing costs	696	626
Deferred income tax expense (benefit)	114	299
Stock compensation expense	2,062	743
Noncash lease income	(42)	(14)
Loss on investments	0	4,897
Changes in operating assets and liabilities:
Accounts receivable	1,929	(216)
Inventories	(6,296)	6,173
Other current assets	3,130	2,639
Other assets	(270)	(2,895)
Accounts payable	10,525	2,051
Accrued liabilities and other	(3,118)	(7,025)
Net cash provided by operating activities	22,639	15,384
Cash flows from investing activities:
Capital expenditures	(366)	(2,435)
Purchases of investments	(7,119)	0
Purchases of non-marketable equity investments	(500)	0
Proceeds on sale of property, plant and equipment	0	3
Restricted cash, MSA escrow deposits	(1)	0
Net cash used in investing activities	(7,986)	(2,432)
Cash flows from financing activities:
Convertible Senior Notes repurchased	0	(13,002)
Proceeds from call options	0	33
Payment of dividends	(1,149)	(1,052)
Exercise of options	3	357
Redemption of restricted stock units	(136)	0
Redemption of performance restricted stock units	(1,212)	(889)
Common stock repurchased	(2,079)	0
Net cash used in financing activities	(4,573)	(14,553)
Net increase (decrease) in cash	10,080	(1,601)
Effect of foreign currency translation on cash	(58)	(1)
Cash, beginning of period:
Unrestricted	117,886	106,403	$ 106,403
Restricted	4,929	4,929	4,929
Total cash at beginning of period	122,815	111,332	111,332
Cash, end of period:
Unrestricted	130,903	104,801	117,886
Restricted	1,934	4,929	4,929
Total cash at end of period	132,837	109,730	$ 122,815
Supplemental schedule of noncash investing activities:
Accrued capital expenditures	10	7
Supplemental schedule of noncash financing activities:
Dividends declared not paid	$ 1,261	$ 1,155

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Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member] Voting [Member]	Additional Paid-In Capital [Member]	Cost of Repurchased Common Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Accumulated Earnings [Member]	Non-Controlling Interest [Member]	Total
Beginning balance at Dec. 31, 2022	$ 198	$ 113,242	$ (78,093)	$ (2,393)	$ 78,691	$ 1,735	$ 113,380
Beginning balance (in shares) at Dec. 31, 2022							17,485,163
Unrealized gain (loss) on MSA investments, net of tax	0	0	0	553	0	0	$ 553
Unrealized loss on derivative instruments, net of tax	0	0	0	(344)	0	0	(344)
Foreign currency translation, net of tax	0	0	0	(50)	0	(28)	(78)
Unrealized gain on investments, net of tax							0
Stock compensation expense	0	743	0	0	0	0	743
Exercise of options	$ 0	357	0	0	0	0	357
Exercise of options (in shares)	24,955
Issuance of performance based restricted stock units	$ 1	(1)	0	0	0	0	0
Issuance of performance based restricted stock units (in shares)	114,274
Performance restricted stock units redeemed	$ 0	(889)	0	0	0	0	(889)
Performance restricted stock units redeemed (in shares)	(38,863)
Settlement of call options, net of tax	$ 0	25	0	0	0	0	25
Dividends	0	0	0	0	(1,155)	0	(1,155)
Net income	0	0	0	0	7,597	(255)	7,342
Ending balance at Mar. 31, 2023	199	113,477	(78,093)	(2,234)	85,133	1,452	$ 119,934
Ending balance (in shares) at Mar. 31, 2023							17,585,529
Beginning balance at Dec. 31, 2022	198	113,242	(78,093)	(2,393)	78,691	1,735	$ 113,380
Beginning balance (in shares) at Dec. 31, 2022							17,485,163
Ending balance at Dec. 31, 2023	199	119,075	(78,093)	(2,648)	112,443	1,030	$ 152,006
Ending balance (in shares) at Dec. 31, 2023							17,605,677
Unrealized gain (loss) on MSA investments, net of tax	0	0	0	(242)	0	0	$ (242)
Unrealized loss on derivative instruments, net of tax	0	0	0	(185)	0	0	(185)
Foreign currency translation, net of tax	0	0	0	21	0	(8)	13
Unrealized gain on investments, net of tax	0	0	0	6	0	0	6
Stock compensation expense	0	2,062	0	0	0	0	2,062
Exercise of options	$ 0	3	0	0	0	0	3
Exercise of options (in shares)	198
Cost of repurchased common stock	$ 0	0	$ (2,079)	0	0	0	(2,079)
Cost of repurchased common stock (in shares)			(72,545)
Issuance of performance based restricted stock units	$ 1	0	$ 0	0	0	0	1
Issuance of performance based restricted stock units (in shares)	126,109
Issuance of restricted stock units	$ 0	0	0	0	0	0	0
Issuance of restricted stock units (in shares)	21,697
Redemption of performance based restricted stock units	$ 0	(1,212)	0	0	0	0	(1,212)
Redemption of performance based restricted stock units (in shares)	(48,177)
Redemption of restricted stock units	$ 0	(136)	0	0	0	0	(136)
Redemption of restricted stock units (in shares)	(5,142)
Dividends	$ 0	0	0	0	(1,261)	0	(1,261)
Net income	0	0	0	0	12,010	169	12,179
Ending balance at Mar. 31, 2024	$ 200	$ 119,792	$ (80,172)	$ (3,048)	$ 123,192	$ 1,191	$ 161,155
Ending balance (in shares) at Mar. 31, 2024							17,627,817

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Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Consolidated Statements of Changes in Stockholders' Equity [Abstract]
Unrealized loss on MSA investments, tax	$ 176
Unrealized loss on derivative instruments, tax	109
Foreign currency translation, tax	0
Settlement of call options, tax	$ 8

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Description of Business and Basis of Presentation

3 Months Ended

Mar. 31, 2024

Description of Business and Basis of Presentation [Abstract]

Description of Business and Basis of Presentation

Note 1. Description of Business and Basis of Presentation

Description of Business

Turning Point Brands, Inc. and its subsidiaries (collectively referred to herein as the “Company,” “we,” “our,” or “us”) is a leading manufacturer, marketer and distributor of branded consumer products. The Company sells a wide range of products to adult consumers consisting of staple products with its iconic brands Zig-Zag^® and Stoker’s^® and its next generation products to fulfill evolving consumer preferences. Its segments are led by its core proprietary and iconic brands: Zig-Zag^® and CLIPPER^® in the Zig-Zag Products segment and Stoker’s^® along with Beech-Nut^® and Trophy^® in the Stoker’s Products segment. The Company’s products are available in more than 217,000 retail outlets in North America. The Company operates in three segments: (i) Zig-Zag Products, (ii) Stoker’s Products, and (iii) Creative Distribution Solutions (formerly known as NewGen).

Basis of Presentation

The accompanying unaudited, interim, consolidated financial statements have been prepared in accordance with the accounting practices described in the Company’s audited, consolidated financial statements as of and for the year ended December 31, 2023. In the opinion of management, the unaudited, interim, consolidated financial statements included herein contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods presented. Such adjustments, other than nonrecurring adjustments separately disclosed, are of a normal and recurring nature. The operating results for interim periods are not necessarily indicative of results to be expected for a full year or future interim periods. The unaudited, interim, consolidated financial statements should be read in conjunction with the Company’s audited, consolidated financial statements and accompanying notes as of and for the year ended December 31, 2023. The accompanying interim, consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, accordingly, do not include all the disclosures required by generally accepted accounting principles in the United States (“GAAP”) with respect to annual financial statements.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries, all of which are wholly-owned, and variable interest entities for which the Company is considered the primary beneficiary. All significant intercompany transactions have been eliminated.

Revenue Recognition

The Company recognizes revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606), which includes excise taxes and shipping and handling charges billed to customers, net of cash discounts for prompt payment, sales returns and incentives, upon delivery of goods to the customer – at which time the Company’s performance obligation is satisfied - at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five-step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. The Company excludes from the transaction price, sales taxes and value-added taxes imposed at the time of sale (which do not include excise taxes on smokeless tobacco, cigars or other nicotine products billed to customers).

The Company records an allowance for sales returns, based principally on historical volume and return rates, which is included in accrued liabilities on the consolidated balance sheets. The Company records sales incentives, which consist of consumer incentives and trade promotion activities, as a reduction in revenues (a portion of which is based on amounts estimated to be due to wholesalers, retailers and consumers at the end of the period) based principally on historical volume and utilization rates. Expected payments for sales incentives are included in accrued liabilities on the consolidated balance sheets.

A further requirement of ASC 606 is for entities to disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The Company’s management views business performance through segments that closely resemble the performance of major product lines. Thus, the primary and most useful disaggregation of the Company’s contract revenue for decision making purposes is the disaggregation by segment which can be found in Note 16, “Segment Information”. An additional disaggregation of contract revenue by sales channel can be found within Note 16 as well.

Shipping Costs

The Company records shipping costs incurred as a component of selling, general, and administrative expenses. Shipping costs incurred were approximately $5.6 million and $6.2 million for the three months ending March 31, 2024 and 2023, respectively.

Inventories

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method. Leaf tobacco is presented in current assets in accordance with standard industry practice, notwithstanding the fact that such tobaccos are carried longer than one year for the purpose of curing.

Fair Value

GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy under GAAP are described below:

● Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date.

● Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

● Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Derivative Instruments

The Company enters into foreign currency forward contracts to hedge a portion of its exposure to changes in foreign currency exchange rates on inventory purchase commitments. The Company accounts for its forward contracts under the provisions of ASC 815, Derivatives and Hedging. Under the Company’s policy, the Company may hedge up to 100% of its anticipated purchases of inventory in the denominated invoice currency over a forward period not to exceed twelve months. The Company may also, from time to time, hedge up to 100% of its non-inventory purchases (e.g., production equipment) in the denominated invoice currency. Forward contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these forward contracts are reclassified from other comprehensive income into inventory as the related inventories are received and are transferred to net income as inventory is sold. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Risks and Uncertainties

Manufacturers and sellers of tobacco products are subject to regulation at the federal, state, and local levels. Such regulations include, among others, labeling requirements, limitations on advertising, and prohibition of sales to minors. The tobacco industry is likely to continue to be heavily regulated. There can be no assurance as to the ultimate content, timing, or effect of any regulation of tobacco products by any federal, state, or local legislative or regulatory body, nor can there be any assurance that any such legislation or regulation would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. In a number of states targeted flavor bans have been proposed or enacted legislatively or by the administrative process. Depending on the number and location of such bans, that legislation or regulation could have a material adverse effect on the Company’s financial position, results of operations or cash flows. The U.S. Food and Drug Administration (“FDA”) continues to consider various restrictive regulations around our products, including targeted flavor bans; however, the details, timing, and ultimate implementation of such measures remain unclear.

The tobacco industry has experienced, and is experiencing, significant product liability litigation. Most tobacco liability lawsuits have been brought against manufacturers and sellers of cigarettes for injuries allegedly caused by smoking or exposure to smoke. However, several lawsuits have been brought against manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. Typically, such claims assert that use of smokeless products is addictive and causes oral cancer. Additionally, several lawsuits have been brought against manufacturers and distributors of Creative Distribution Solutions products due to malfunctioning devices. There can be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Master Settlement Agreement (MSA)

Pursuant to the Master Settlement Agreement (the “MSA”) entered into in November 1998 by most states (represented by their attorneys general acting through the National Association of Attorneys General) and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to include a manufacturer of make-your-own (“MYO”) cigarette tobacco) has the option of either becoming a signatory to the MSA or opening, funding, and maintaining an escrow account to have funds available for certain potential tobacco-related liabilities with sub-accounts on behalf of each settling state. Such companies are entitled to direct the investment of the escrowed funds and withdraw any appreciation but cannot withdraw the principal for twenty-five years from the year of each annual deposit, except to withdraw funds deposited pursuant to an individual state’s escrow statute to pay a final judgement to that state’s plaintiffs in the event of such a final judgement against the Company. The Company chose to open and fund an escrow account as its method of compliance. It is the Company’s policy to record amounts on deposit in the escrow account for prior years as a non-current asset. As of March 31, 2024, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $28.4 million. At December 31, 2023, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $28.7 million. The Company discontinued its generic category of MYO in 2019 and its Zig-Zag branded MYO cigarette smoking tobacco in 2017. Thus, pending a change in MSA legislation, the Company has no remaining product lines covered by the MSA and will not be required to make future escrow deposits.

The Company has chosen to invest a portion of the MSA escrow, from time to time, in U.S. Government securities including TIPS, Treasury Notes, and Treasury Bonds. These investments are classified as available-for-sale and carried at fair value. Realized losses are prohibited under the MSA; any investment in an unrealized loss position will be held until the value is recovered, or until maturity.

Fair values for the U.S. Governmental agency obligations are Level 2 in the fair value hierarchy. The following tables show cost and estimated fair value of the assets held in the MSA account, respectively, as well as the maturities of the U.S. Governmental agency obligations held in such account for the periods indicated.

	As of March 31, 2024							As of December 31, 2023
			Gross			Estimated				Gross			Estimated
			Unrealized			Fair				Unrealized			Fair
	Cost		Gains (Losses)			Value		Cost		Losses			Value
Cash and cash equivalents	$	1,934	$	–		$	1,934	$	1,929	$	–		$	1,929
U.S. Governmental agency obligations (unrealized position < 12 months)		1,196		6			1,202		–		–			–
U.S. Governmental agency obligations (unrealized position > 12 months)		28,943		(3,652	)		25,291		30,144		(3,389	)		26,755
	$	32,073	$	(3,646	)	$	28,427	$	32,073	$	(3,389	)	$	28,684

	As of
	March 31, 2024
Less than one year	$	3,250
One to five years		13,775
Five to ten years		11,159
Greater than ten years		1,955
Total	$	30,139

The following shows the amount of deposits by sales year for the MSA escrow account:

	Deposits as of
Sales Year	March 31, 2024		December 31, 2023
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,714		3,714
2005		4,553		4,553
2006		3,847		3,847
2007		4,167		4,167
2008		3,364		3,364
2009		1,619		1,619
2010		406		406
2011		193		193
2012		199		199
2013		173		173
2014		143		143
2015		101		101
2016		91		91
2017		82		82
Total	$	32,073	$	32,073

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Derivative Instruments

3 Months Ended

Mar. 31, 2024

Derivative Instruments [Abstract]

Derivative Instruments

Note 3. Derivative Instruments

Foreign Currency

During the three months ended March 31, 2024, the Company executed no foreign exchange contracts meeting hedge accounting requirements. 

At March 31, 2024, the Company had foreign currency contracts outstanding for the purchase of €9.2 million and sale of €9.2 million. The foreign currency contracts’ fair value at March 31, 2024, resulted in an asset of $0.0 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities. At December 31, 2023, the Company had foreign currency contracts outstanding for the purchase of €15.2 million and sale of €15.2 million. The foreign currency contracts’ fair value at December 31, 2023, resulted in an asset of $0.3 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities.

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2024

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 4. Fair Value of Financial Instruments

The estimated fair value amounts have been determined by the Company using the methods and assumptions described below. However, considerable judgment is required to interpret market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and Cash Equivalents

Cash and cash equivalents are, by definition, short-term. Thus, the carrying amount is a reasonable estimate of fair value.

Accounts Receivable

The fair value of accounts receivable approximates their carrying value due to their short-term nature.

Long-Term Debt

The Company’s Senior Secured Notes (as defined in Note 10) bear interest at a rate of 5.625% per year. As of March 31, 2024, the fair value approximated $237.3 million, with a carrying value of $250 million. As of December 31, 2023, the fair value of the Senior Secured Notes approximated $234.9 million, with a carrying value of $250 million.

The Convertible Senior Notes (as defined in Note 10) bear interest at a rate of 2.50% per year, and the fair value of the Convertible Senior Notes without the conversion feature approximated $117.5 million, with a carrying value of $118.5 million as of March 31, 2024. As of December 31, 2023, the fair value of the Convertible Senior Notes without the conversion feature approximated $114.7 million, with a carrying value of $118.5 million.

See Note 10, “Notes Payable and Long-Term Debt”, for further information regarding the Company’s long-term debt.

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Inventories

3 Months Ended

Mar. 31, 2024

Inventories [Abstract]

Inventories

Note 5. Inventories

The components of inventories are as follows:

	March 31,		December 31,
	2024		2023
Raw materials and work in process	$	7,148	$	5,201
Leaf tobacco		41,461		34,894
Finished goods - Zig-Zag Products		39,103		41,783
Finished goods - Stoker’s Products		10,232		8,090
Finished goods - Creative Distribution Solutions		6,086		7,281
Other		1,437		1,711
Inventories	$	105,467	$	98,960

The inventory valuation allowance was $20.6 million as of  March 31, 2024 and December 31, 2023.

In December 2023, a third-party warehouse in Tennessee used to store some of the Company’s leaf tobacco incurred significant tornado damage resulting in damage to the leaf tobacco. As a result, the Company recorded a $15.2 million inventory reserve related to its leaf tobacco inventory which is included in Other operating income, net in the consolidated statement of income for the quarter ended December 31, 2023. The leaf tobacco inventory is covered by the Company’s stock throughput insurance policy and the Company believes the inventory loss is probable of being fully recovered under the policy. The Company does not expect to incur any delays in customer deliveries as a result of the damage.

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Other Current Assets

3 Months Ended

Mar. 31, 2024

Other Current Assets [Abstract]

Other Current Assets

Note 6. Other Current Assets

Other current assets consist of:

	March 31,		December 31,
	2024		2023
Inventory deposits	$	7,392	$	5,707
Insurance deposit		–		3,000
Prepaid taxes		–		153
Settlement receivable		–		4,000
Insurance recovery receivable		15,181		15,181
Other		11,864		12,740
Total	$	34,437	$	40,781

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Property, Plant, and Equipment

3 Months Ended

Mar. 31, 2024

Property, Plant, and Equipment [Abstract]

Property, Plant, and Equipment

Note 7. Property, Plant, and Equipment

Property, plant, and equipment consists of:

	March 31,			December 31,
	2024			2023
Land	$	22		$	22
Buildings and improvements		4,217			3,956
Leasehold improvements		6,614			5,440
Machinery and equipment		28,568			29,751
Furniture and fixtures		8,439			8,391
Gross property, plant and equipment		47,860			47,560
Accumulated depreciation		(23,070	)		(22,260	)
Net property, plant and equipment	$	24,790		$	25,300

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Other Assets

3 Months Ended

Mar. 31, 2024

Other Assets [Abstract]

Other Assets

Note 8. Other Assets

Other assets consist of:

	March 31,		December 31,
	2024		2023
Non-marketable equity investments	$	2,882	$	2,405
Debt security investment		6,750		6,750
Capitalized software		6,108		5,923
Available-for-sale marketable securities		7,125		–
Other		88		88
Total	$	22,953	$	15,166

Debt and Non-Marketable Equity Investments

The Company records its non-marketable equity investments without a readily determinable fair value, that are not accounted for under the equity method, at cost, with adjustments for impairment and observable price changes. Should assumptions underlying the determination of the fair values of the Company’s non-marketable equity and debt security investments change, it could result in material future impairment charges.

In January 2024, the Company invested $0.8 million to acquire an 18.744% stake in Teaza Energy, LLC (“TeaZa”). TeaZa is an innovative brand of flavorful oral pouch products that can be dipped or sipped, designed as a health-conscious alternative to high energy drinks and other conventional oral stimulants. The investment is comprised of $0.5 million in cash and a $0.3 million payable to be offset against the Company’s allocated portion of future profit distributions. The Company also has options to purchase, at fair value, up to 51.744% of the equity interest in TeaZa between September 30, 2024 and January 31, 2025, and up to 100% of the equity interest from February 1, 2025 to June 30, 2026. The Company accounts for its investment in TeaZa using the equity method of accounting.

In July 2021, the Company invested $8.0 million in Old Pal Holding Company LLC (“Old Pal”). In July 2022, the Company invested an additional $1.0 million in Old Pal.  The Company invested in the form of a convertible note which includes additional follow-on investment rights. The accrued interest of $0.2 million from July 2021 to July 2022 was rolled into the convertible note in July 2022 resulting in a total investment of $9.2 million. Old Pal is a leading brand in the cannabis lifestyle space that operates a non-plant touching licensing model. The convertible note bears an interest rate of 3.0% per year and matures July 31, 2026.Interest and principal not paid to date are receivable at maturity. Old Pal has the option to extend the maturity date in one-year increments. The interest rate is subject to change based on Old Pal reaching certain sales thresholds. The weighted average interest rate on the convertible note was 3.0% for the three months ended March 31, 2024 and 2023. Old Pal has the option to convert the note into shares once sales reach a certain threshold. The conditions required to allow Old Pal to convert the note were not met as of March 31, 2024. Additionally, the Company has the right to convert the note into shares at any time. The Company has classified the debt security with Old Pal as available for sale. The Company reports interest income on available for sale debt securities in interest income in our Consolidated Statements of Income. Quarterly, we perform a qualitative assessment to determine if the fair value of the investment could be less than the amortized cost basis. In the second and fourth quarters of 2023, based on third-party quantitative assessments of the fair value using a Monte Carlo simulation (Level 3), the Company determined the fair value to be $7.7 million and 6.9 million, respectively, and recorded an allowance for credit losses of $0.3 million and $1.0 million, respectively, included in investment loss for the quarters ended June 30 and December 31, 2023. The Company has recorded accrued interest receivable of $0.2 million and $0.1 million at March 31, 2024 and December 31, 2023, respectively, in Other current assets on our Consolidated Balance Sheets.

In April 2021, the Company invested $8.7 million in Docklight Brands, Inc., a pioneering consumer products company with celebrated brands including Marley Natural® and Marley™. The Company has additional follow-on investment rights. As part of the investment, the Company has obtained exclusive U.S. distribution rights for Docklight’s Marley™ CBD topical products. In the first quarter of 2023, based on Docklight’s financial results and other operating difficulties, and the decline in the revenue multiples for public companies comparable to Docklight, the Company deemed the investment in Docklight was impaired resulting in a loss of $4.9 million which was recorded for the three months ended March 31, 2023. In the second quarter of 2023, based on a significant change in Docklight’s business model, the Company deemed its investment in Docklight fully impaired. Fair value for all periods presented was determined using a valuation derived from relevant revenue multiples (Level 3).

Available-for-Sale Marketable Securities

In December 2023, the Company formed a captive insurance company, Interchange IC, incorporated in the District of Columbia, to write a portion of our general product, and officer and director liability coverages under deductible reinsurance policies. Interchange IC is a fully licensed captive insurance company holding a certificate of authority from the District of Columbia Department of Insurance, Securities and Banking. Interchange IC is a wholly-owned subsidiary of Turning Point Brands and is consolidated in the Company’s financial statements.

The investments held within the captive are not available for operating activities and are carried at fair value on the consolidated balance sheet. They consist of money market, corporate bonds, government securities, real estate investment trusts and exchange traded funds. The Company believes any impairment of investments held with gross unrealized losses to be temporary and not the result of credit risk.

The Company’s captive investments are summarized in the following table.

	As of March 31, 2024
				Gross				Estimated
	Amortized			Unrealized				Fair
	Cost			Gains (Losses)				Value
Corporate bonds		$	1,703		$	8			$	1,711
U.S. Governmental agency obligations			1,799			(3	)			1,796
Real estate investment trusts and exchange traded funds			3,617			1				3,618
		$	7,119		$	6			$	7,125

The following table summarizes the fair value of the Company’s captive investments by contractual maturity.

	As of
	March 31, 2024
Due within one year	$	1,711
Due after ten years		1,796
Real estate investment trusts and exchange traded funds		3,618
Total investments at fair value	$	7,125

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Accrued Liabilities

3 Months Ended

Mar. 31, 2024

Accrued Liabilities [Abstract]

Accrued Liabilities

Note 9. Accrued Liabilities

Accrued liabilities consist of:

	March 31,		December 31,
	2024		2023
Accrued payroll and related items	$	4,669	$	7,085
Customer returns and allowances		4,642		5,239
Taxes payable		6,995		3,821
Lease liabilities		2,615		2,678
Accrued interest		2,221		6,682
Other		9,832		8,130
Total	$	30,974	$	33,635

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Notes Payable and Long-Term Debt

3 Months Ended

Mar. 31, 2024

Notes Payable and Long-Term Debt [Abstract]

Notes Payable and Long-Term Debt

Note 10. Notes Payable and Long-Term Debt

Notes payable and long-term debt consists of the following in order of preference:

	March 31,			December 31,
	2024			2023
Senior Secured Notes	$	250,000		$	250,000
Convertible Senior Notes		118,541			118,541
Gross notes payable and long-term debt		368,541			368,541
Less deferred finance charges		(2,648	)		(3,183	)
Less current maturities		(59,397	)		(58,294	)
Notes payable and long-term debt	$	306,496		$	307,064

Senior Secured Notes

On February 11, 2021, the Company closed a private offering (the “Offering”) of $250.0 million aggregate principal amount of its 5.625% senior secured notes due 2026 (the “Senior Secured Notes” or the “Notes”). The Senior Secured Notes bear interest at a rate of 5.625% and will mature on February 15, 2026. Interest on the Senior Secured Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2021.The Company used the proceeds from the Offering (i) to repay all obligations under and terminate the 2018 First Lien Credit Facility, (ii) to pay related fees, costs, and expenses and (iii) for general corporate purposes.

Obligations under the Senior Secured Notes are guaranteed by the Company’s existing and future wholly-owned domestic subsidiaries (the “Guarantors”) that guarantee any credit facility (as defined in the indenture governing the Senior Secured Notes or the “Senior Secured Notes Indenture”) or capital markets debt securities of the Company or Guarantors in excess of $15.0 million. The Senior Secured Notes and the related guarantees are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions.

The Company may redeem the Senior Secured Notes, in whole or in part, at any time at the redemption prices (expressed as a percentage of the principal amount to be redeemed) set forth below, plus accrued and unpaid interest, if any, on the Senior Secured Notes to be redeemed to (but not including) the applicable redemption date if redeemed during the period indicated below:

On or after February 15, 2023	102.813	%
On or after February 15, 2024	101.406	%
On or after February 15, 2025 and thereafter	100.000	%

If the Company experiences a change of control (as defined in the Senior Secured Notes Indenture), the Company must offer to repurchase the Senior Secured Notes at a repurchase price equal to 101% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.

The Senior Secured Notes Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to: (i) grant or incur liens; (ii) incur, assume or guarantee additional indebtedness; (iii) sell or otherwise dispose of assets, including capital stock of subsidiaries; (iv) make certain investments; (v) pay dividends, make distributions or redeem or repurchase capital stock; (vi) engage in certain transactions with affiliates; and (vii) consolidate or merge with or into, or sell substantially all of our assets to another entity. These covenants are subject to a number of limitations and exceptions set forth in the Senior Secured Notes Indenture. The Senior Secured Notes Indenture provides for customary events of default. The Company was in compliance with all covenants as of March 31, 2024.

The Company incurred debt issuance costs attributable to the issuance of the Senior Secured Notes of $6.4 million which are amortized to interest expense using the straight-line method over the expected life of the Senior Secured Notes.

2021 Revolving Credit Facility

In connection with the Offering, the Company also entered into a $25.0 million senior secured revolving credit facility (the “2021 Revolving Credit Facility”) with the lenders party thereto and Barclays Bank PLC, as administrative agent and collateral agent (in such capacity, the “Agent”). On May 10, 2023, the Company and certain of its subsidiaries, as guarantors, entered into an amendment (the “Amendment”) to the 2021 Revolving Credit Facility (as amended, the “Amended Revolving Credit Facility”).  The Amendment includes certain modifications to the 2021 Revolving Credit Facility relating to the replacement of the London Inter-Bank Offered Rate with a Secured Overnight Financing Rate (“SOFR”) as the interest rate benchmark under the 2021 Revolving Credit Facility and adjusts certain other provisions to reflect current documentation standards and other agreed modifications.

On November 7, 2023, in connection with the entry by a subsidiary of the Company in a new asset-backed revolving credit facility, the Company terminated the Amended Revolving Credit Facility. See “2023 ABL Facility” below.

The Company had letters of credit outstanding under the Amended Revolving Credit Facility of approximately $1.4 million that were terminated with the facility in the fourth quarter of 2023.

The Company incurred debt issuance costs attributable to the issuance of the Amended Revolving Credit Facility of $0.5 million, with the remaining $0.2 million written off to gain on debt extinguishment upon termination of the facility.

2023 ABL Facility

On November 7, 2023, TPB Specialty Finance, LLC, a wholly-owned subsidiary of the Company (the “ABL Borrower”), entered into a new $75.0 million  asset-backed revolving credit facility (the “2023 ABL Facility”), with the several lenders thereunder, and Barclays Bank Plc, as administrative agent (the “Administrative Agent”) and as collateral agent (the “Collateral Agent”) and First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”). Under the 2023 ABL Facility, the ABL Borrower may draw up to $75.0 million under Revolving Credit Loans and Last In Last Out (“LILO”) Loans. The 2023 ABL Facility includes a $40.0 million accordion feature.  In connection with the 2023 ABL Facility, Turning Point Brands contributed certain existing inventory to the ABL Borrower. The 2023 ABL Facility is secured on a first priority basis (subject to customary exceptions) by all assets of the ABL Borrower.

The 2023 ABL Facility contains customary borrowing conditions including a borrowing base equal to the sum of (a) the lesser of (1) 85% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) 85% of the cost of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (2) 85% of the net orderly liquidation value (“NOLV”) percentage of the lower of (1)(A) or (1)(B); plus (b) 85% of the face value of all eligible accounts of the ABL Borrower minus (c) the amount of all eligible reserves.  The 2023 ABL Facility also includes a LILO borrowing base equal to the sum of (a) the lesser of: (1) 10% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) the cost of the sum of eligible inventory, plus eligible in-transit inventory and (2) 10% of the NOLV percentage of the lower of  (1)(A) or (1)(B); plus (b) 10% of the face amount of eligible account; minus (c) the amount of all eligible reserves.

Amounts borrowed under the 2023 ABL Facility are subject to an interest rate margin per annum equal to (a) from and after the closing date until the last day of the first full fiscal quarter ended after the closing date, (i) 1.25% per annum, in the case base rate loans, and (ii) 2.25% per annum, in the case of revolving credit loans that are SOFR Loans, (b)(i) 2.25% per annum, in the case of LILO loans that are base rate loans, and (ii) 3.25% per annum, in the case of LILO loans that are SOFR loans, (c) on the first day of each fiscal quarter, the applicable interest rate margins will be determined from the pricing grid below based upon the historical excess availability for the most recent fiscal quarter ended immediately prior to the relevant date, as calculated by the Administrative Agent.

Level	Historical Excess Availability	Applicable Margin for SOFR Loans	Applicable Margin for Base Rate Loans
I	Greater than or equal to 66.66%	1.75%	0.75%
II	Less than 66.66%, but greater than or equal to 33.33%	2.00%	1.00%
III	Less than 33.33%	2.25%	1.25%

The 2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four consecutive fiscal quarters if excess availability shall be less than the greater of (a) 12.5% of the line cap and (b) $9.4 million, at any time and continuing until excess availability is equal to or exceeds the greater of (i) 12.5% of the line and (ii) $9.4 million for thirty (30) consecutive calendar days; provided that such $9.4 million level shall automatically increase in proportion to the amount of any increase in the aggregate revolving credit commitments thereunder in connection with any incremental facility.

The 2023 ABL Facility shall mature on the earlier of (x) November 7, 2027 and (y) the date that is 91 days prior to the maturity date of any material debt of the ABL Borrower or the Company or any of its restricted subsidiaries (subject to customary extensions agreed by the lenders thereunder); provided that clause (y) shall not apply to the extent that on any applicable date of determination (on any date prior to the date set forth in clause (y)), (A) the sum of (x) cash that is held in escrow for the repayment of such material debt pursuant to arrangements satisfactory to the Administrative Agent, (y) cash that is held in accounts with the Administrative Agent and/or the Additional Collateral Agent, plus (z) excess availability, is sufficient to repay such material debt and (B) the ABL Borrower has excess availability of at least $15.0 million after giving effect to such repayment of material debt, including any borrowings under the commitments in connection therewith.

The Company has not drawn any borrowings under the 2023 ABL Facility but has letters of credit of approximately $1.2 million outstanding under the facility and has an available balance of $59.0 million based on the borrowing base as of March 31, 2024.

The Company incurred debt issuance costs attributable to the 2023 ABL Facility of $2.6 million which are amortized to interest expense using the straight-line method over the expected life of the 2023 ABL Facility.

Convertible Senior Notes

In July 2019, the Company closed an offering of $172.5 million in aggregate principal amount of its 2.50% Convertible Senior Notes due July 15, 2024 (the “Convertible Senior Notes”). The Convertible Senior Notes bear interest at a rate of 2.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2020. The Convertible Senior Notes are senior unsecured obligations of the Company.

In  2023, a wholly owned subsidiary of the Company repurchased $44.0 million in aggregate principal amount of the Convertible Senior Notes on the open market resulting in a $1.9 million gain on extinguishment of debt. The repurchased notes continue to be held by our subsidiary and may be resold subject to compliance with applicable securities law. As of March 31, 2024, $118.5 million aggregate principal remains outstanding and held by third parties.

The Convertible Senior Notes held by third parties are convertible into approximately 2,219,704 shares of TPB Common Stock under certain circumstances prior to maturity at a conversion rate of 18.7252 shares per $1,000 principal amount of the Convertible Senior Notes, which represents a conversion price of approximately $53.40 per share, subject to adjustment under certain conditions, but will not be adjusted for any accrued and unpaid interest. The conversion price is adjusted periodically as a result of dividends paid by the Company in excess of pre-determined thresholds of $0.04 per share. Upon conversion, the Company may pay cash, shares of common stock or a combination of cash and stock, as determined by the Company at its discretion. The conditions required to allow the holders to convert their Convertible Senior Notes were not met as of March 31, 2024.

As discussed above, on November 7, 2023, a wholly-owned subsidiary of the Company entered into the 2023 ABL Facility to refinance up to $75.0 million of the Convertible Senior notes at maturity. As a result, the Company classified $59.0 million related to the Convertible Senior Notes in Notes payable and long-term debt on the Company’s March 31, 2024 Consolidated Balance Sheet. Based on current liquidity, free cash flow generation and availability under the 2023 ABL Facility, the Company believes it will have sufficient liquidity to address the maturity of the remaining Convertible Senior Notes.

The Company incurred debt issuance costs attributable to the Convertible Senior Notes of $5.9 million which are amortized to interest expense using the straight-line method over the expected life of the Convertible Senior Notes.

In connection with the Convertible Senior Notes offering, the Company entered into privately negotiated capped call transactions with certain financial institutions. The capped call transactions have a strike price of $53.40 per share and a cap price of $82.86 per share, and are exercisable when, and if, the Convertible Senior Notes are converted. The Company paid $20.53 million for these capped calls at the time they were entered into and charged that amount to additional paid-in capital.

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Leases

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Leases

Note 11. Leases

The Company’s leases consist primarily of leased property for manufacturing, warehouse, corporate offices and retail space, as well as vehicle leases. At lease inception, the Company recognizes a lease right of use asset and lease liability calculated as the present value of future minimum lease payments. In general, the Company does not recognize any renewal periods within the lease terms as there are no significant barriers to ending the lease at the initial term. Lease and non-lease components are accounted for as a single lease component.

Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

The components of lease expense consisted of the following:

	Three Months Ended March 31,
	2024		2023
Operating lease cost
Cost of sales	$	133	$	128
Selling, general and administrative		464		521
Variable lease cost (1)		297		225
Short-term lease cost		–		6
Total	$	894	$	880

(1) Variable lease cost includes elements of a contract that do not represent a good or service but for which the lessee is responsible for paying.

	Three Months Ended March 31,
	2024		2023
Financing lease cost
Selling, general and administrative	$	150	$	338
Total	$	150	$	338

	March 31,		December 31,
	2024		2023
Assets:
Right of use assets - Operating	$	8,714	$	8,950
Right of use assets - Financing		2,154		2,530
Total lease assets	$	10,868	$	11,480
Liabilities:
Current lease liabilities - Operating (2)	$	1,946	$	1,991
Current lease liabilities - Financing (2)		669		687
Long-term lease liabilities - Operating		7,925		8,374
Long-term lease liabilities - Financing		1,435		1,576
Total lease liabilities	$	11,975	$	12,628

(2) Reported within accrued liabilities on the balance sheet.

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Income Taxes

3 Months Ended

Mar. 31, 2024

Income Taxes [Abstract]

Income Taxes

Note 12. Income Taxes

The Company’s effective income tax rate for the three months ended March 31, 2024 was 23.4%. The Company’s effective income tax rate for the three months ended March 31, 2023 was 25.2%.

The Company follows the provisions of ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company has determined that the Company did not have any uncertain tax positions requiring recognition under the provisions of ASC 740-10-25. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions, if any, as part of interest expense. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. In general, the Company is no longer subject to U.S. federal and state tax examinations for years prior to 2020.

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Share Incentive Plans

3 Months Ended

Mar. 31, 2024

Share Incentive Plans [Abstract]

Share Incentive Plans

Note 13. Share Incentive Plans

On March 22, 2021, the Company’s Board of Directors adopted the Turning Point Brands, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which awards may be granted to employees, non-employee directors, and consultants. In addition, the 2021 Plan provides for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Pursuant to the 2021 Plan, 1,290,000 shares, plus 100,052 shares remaining available for issuance under the 2015 Equity Incentive Plan (the “2015 Plan”), of TPB Common Stock are reserved for issuance as awards to employees, non-employee directors, and consultants as compensation for past or future services or the attainment of certain performance goals. The 2021 Plan is scheduled to terminate on March 21, 2031. The 2021 Plan is administered by the compensation committee (the “Committee”) of the Company’s Board of Directors. The Committee determines the vesting criteria for the awards, with such criteria to be specified in the award agreement. As of March 31, 2024, net of forfeitures, there were 400,682 Restricted Stock Units (“RSUs”), 161,658 options and 102,216 Performance Based Restricted Stock Units (“PRSUs”) granted under the 2021 Plan. There are 725,496 shares available for future grant under the 2021 Plan.

On April 28, 2016, the Board of Directors of the Company adopted the 2015 Plan, pursuant to which awards could have been granted to employees, non-employee directors, and consultants. In addition, the 2015 Plan provided for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Upon adoption of the 2021 Plan, the 2015 Plan was terminated, and the Company determined no additional grants would be made under the 2015 Plan. However, all awards issued under the 2015 Plan that have not been previously terminated or forfeited remain outstanding and continue unaffected. There are no shares available for grant under the 2015 Plan. 

On February 8, 2006, the Board of Directors of the Company adopted the 2006 Equity Incentive Plan (the “2006 Plan”) of North Atlantic Holding Company, Inc., pursuant to which nonqualified stock options and restricted stock awards may be granted to employees. Upon the adoption of the Company’s 2015 Equity Incentive Plan in connection with its IPO, the Company determined no additional grants would be made under the 2006 Plan. However, all awards issued under the 2006 Plan that have not been previously terminated or forfeited remain outstanding and continue unaffected. There are no shares available for grant under the 2006 Plan.

Stock option activity for the 2006, 2015 and 2021 Plans is summarized below:

				Weighted		Weighted
	Stock			Average		Average
	Option			Exercise		Grant Date
	Shares			Price		Fair Value
Outstanding, December 31, 2022		683,214		$	29.74	$	9.24
Granted		77,519			20.71		6.45
Exercised		(33,851	)		13.30		4.24
Forfeited		(69,931	)		27.51		9.11
Outstanding, December 31, 2023		656,951		$	29.79	$	9.18
Granted		54,289			27.19		9.21
Exercised		(198	)		14.85		4.41
Forfeited		(6,433	)		30.19		8.85
Outstanding, March 31, 2024		704,609		$	29.59	$	9.19

Under the 2006, 2015 and 2021 Plans, the total intrinsic value of options exercised during the three months ended March 31, 2024 and 2023, was $0.0 million, and $0.2 million, respectively.

At March 31, 2024, under the 2006 Plan, the exercise price for the 43,693 outstanding options is $3.83 per share, all of which are exercisable. The weighted average of the remaining lives of the outstanding stock options with an exercise price of $3.83 is approximately 0.35 years. The Company estimates the expected life of these stock options is ten years from the date of grant. For the $3.83 per share options, the weighted average fair value of options at the date of grant was determined using the Black-Scholes model with the following assumptions: a ten-year life from grant date, a current share price and exercise price of $3.83, a risk-free interest rate of 3.57%, volatility of 40%, and no assumed dividend yield. Based on these assumptions, the fair value of these options is approximately $2.17 per share option granted.

At March 31, 2024, under the 2015 and 2021 Plans, the risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. The expected volatility is based on the average long-term historical volatilities of peer companies. We intend to continue to consistently use the same group of publicly traded peer companies to determine expected volatility until sufficient information regarding volatility of our share price becomes available or until the selected companies are no longer suitable for this purpose. Due to our limited trading history, we are using the simplified method presented by SEC Staff Accounting Bulletin No. 107 to calculate expected holding periods, which represent the periods of time for which options granted are expected to be outstanding. We will continue to use this method until we have sufficient historical exercise experience to give us confidence in the reliability of our calculations. The fair values of these options were determined using the Black-Scholes option pricing model.

The following table outlines the assumptions based on the number of options granted under the 2015 Plan.

	February 10,			May 17,			March 7,			March 20,			October 24,			March 18,			February 18,			May 3,
	2017			2017			2018			2019			2019			2020			2021			2021
Number of options granted		40,000			93,819			98,100			155,780			25,000			155,000			100,000			12,000
Options outstanding at March 31, 2024		20,000			38,033			51,067			124,864			25,000			77,777			87,350			12,000
Number exercisable at March 31, 2024		20,000			38,033			51,067			124,864			25,000			77,777			87,350			12,000
Exercise price	$	13.00		$	15.41		$	21.21		$	47.58		$	20.89		$	14.85		$	51.75		$	47.76
Remaining lives		2.87			3.13			3.94			4.97			5.57			5.97			6.89			7.09
Risk free interest rate		1.89	%		1.76	%		2.65	%		2.34	%		1.58	%		0.79	%		0.56	%		0.84	%
Expected volatility		27.44	%		26.92	%		28.76	%		30.95	%		31.93	%		35.72	%		28.69	%		29.03	%
Expected life		6.000			6.000			6.000			6.000			6.000			6.000			6.000			6.000
Dividend yield		–			–			0.83	%		0.42	%		0.95	%		1.49	%		0.55	%		0.59	%
Fair value at grant date	$	3.98		$	4.60		$	6.37		$	15.63		$	6.27		$	4.41		$	13.77		$	13.06

The following table outlines the assumptions based on the number of options granted under the 2021 Plan.

	May 17,			March 14,			April 29,			May 12,			March 11,
	2021			2022			2022			2023			2024
Number of options granted		7,500			100,000			14,827			77,519			54,289
Options outstanding at March 31, 2024		7,500			70,690			14,827			77,519			54,289
Number exercisable at March 31, 2024		7,500			47,442			9,935			77,519			–
Exercise price	$	45.05		$	30.46		$	31.39		$	20.71		$	27.19
Remaining lives		7.13			7.96			8.08			9.12			9.95
Risk free interest rate		0.84	%		2.10	%		2.92	%		3.41	%		4.06	%
Expected volatility		31.50	%		35.33	%		35.33	%		34.51	%		35.09	%
Expected life		6.000			6.000			6.000			5.186			5.186
Dividend yield		0.63	%		1.01	%		0.98	%		1.61	%		1.26	%
Fair value at grant date	$	13.23		$	10.23		$	11.07		$	6.45		$	9.21

The Company has recorded compensation expense related to the options based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the options on the date of grant and amortized over the vesting period. The Company recorded compensation expense related to the options of approximately $0.3 million and $0.0 million for the three months ended March 31, 2024 and 2023, respectively. Total unrecognized compensation expense related to options at March 31, 2024, is $0.3 million, which will be expensed over 0.75 years.

PRSUs are restricted stock units subject to both performance-based and service-based vesting conditions. The number of shares of TPB Common Stock a recipient will receive upon vesting of a PRSU will be calculated by reference to certain performance metrics related to the Company’s performance over a five-year period. PRSUs will vest on the measurement date, which is no more than 65 days after the performance period provided the applicable service and performance conditions are satisfied. As of March 31, 2024, there are 447,266 PRSUs outstanding. The following table outlines the PRSUs granted and outstanding as of March 31, 2024.

	March 18,		February 18,		March 14,		May 4,		March 1,
	2020		2021		2022		2023		2024
Number of PRSUs granted		94,000		100,000		49,996		133,578		111,321
PRSUs outstanding at March 31, 2024		80,910		82,190		40,325		132,520		111,321
Fair value as of grant date	$	14.85	$	51.75	$	30.46	$	22.25	$	26.52
Remaining lives		0.75		1.75		2.75		1.75		2.75

The Company recorded compensation expense related to the PRSUs of approximately $0.9 million and $0.5 million in the consolidated statements of income for the three months ended March 31, 2024 and 2023, respectively, based on the probability of achieving the performance condition. Total unrecognized compensation expense related to these awards at March 31, 2024, is $6.1 million which will be expensed over the service periods based on the probability of achieving the performance condition.

The Company has granted 325,523 RSUs which are outstanding and vest over one to five years. The following table outlines the RSUs granted and outstanding as of March 31, 2024.

	March 14,		March 14,		April 29,		May 5,		May 8,		March 1,		March 11,
	2022		2022		2022		2023		2023		2024		2024
Number of RSUs granted		50,004		28,726		4,522		130,873		20,101		105,257		18,389
RSUs outstanding at March 31, 2024		39,367		9,481		4,522		128,406		20,101		105,257		18,389
Fair value as of grant date	$	30.46	$	30.46	$	31.39	$	22.25	$	21.77	$	26.52	$	27.19
Remaining lives		2.75		0.75		2.75		2.00		0.10		3.00		0.75

The Company has recorded compensation expense related to the RSUs based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the RSUs on the date of grant and amortized over the vesting period. The Company recorded compensation expense related to the RSUs of approximately $0.9 million and $0.3 million for the three months ended March 31, 2024 and 2023. Total unrecognized compensation expense related to RSUs at March 31, 2024, is $5.1 million, which will be expensed over 2.52 years.

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Contingencies

3 Months Ended

Mar. 31, 2024

Contingencies [Abstract]

Contingencies

Note 14. Contingencies

On October 9, 2020, a purported stockholder of Turning Point Brands, Inc., Paul-Emile Berteau, filed a complaint in the Delaware Court of Chancery relating to the merger of Standard Diversified, Inc. (“SDI”) with a TPB subsidiary (“Merger Sub”)pursuant to the Agreement and Plan of Merger and Reorganization, dated as of April 7, 2020, by and among TPB, SDI and Merger Sub. The parties attended a mediation in late November 2022 where a settlement was reached. On December 12, 2023, the Court approved the settlement and dismissed the action with prejudice. As of December 31, 2023, the Company recorded a $4.0 million receivable in other current assets, and a corresponding gain on settlement in other income on its Consolidated Statement of Income for the year ended December 31, 2023. These funds were received in January 2024.

Other major tobacco companies are defendants in product liability claims. In a number of these cases, the amounts of punitive and compensatory damages sought are significant and, if such a claim were brought against the Company, could have a material adverse effect on our business and results of operations. The Company is subject to several lawsuits alleging personal injuries resulting from malfunctioning vaporizer devices or batteries and may be subject to claims in the future relating to our other Creative Distribution Solutions products. The Company is still evaluating these claims and the potential defenses to them. For example, the Company did not design or manufacture the products at issue; rather, the Company was merely the distributor. Nonetheless, there can be no assurance that the Company will prevail in these cases, and they could have a material adverse effect on the financial position, results of operations or cash flows of the Company.

We have several subsidiaries engaged in making, distributing, and selling liquid nicotine products. As a result of the overall publicity and controversy surrounding the industry generally, many companies have received informational subpoenas from various regulatory bodies and in some jurisdictions regulatory lawsuits have been filed regarding marketing practices and possible underage sales. We expect that our subsidiaries will be subject to some such cases and investigative requests. To the extent that litigation becomes necessary, we believe that the subsidiaries have strong factual and legal defenses against claims that they unfairly marketed products.

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Income Per Share

3 Months Ended

Mar. 31, 2024

Income Per Share [Abstract]

Income Per Share

Note 15. Income Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations of net income:

	Three Months Ended March 31,
	2024						2023
					Per						Per
	Income		Shares		Share		Income		Shares		Share
Basic EPS:
Numerator
Net income attributable to Turning Point Brands, Inc.	$	12,010					$	7,597
Denominator
Weighted average				17,654,684	$	0.68				17,531,414	$	0.43
Diluted EPS:
Numerator
Net income attributable to Turning Point Brands, Inc.	$	12,010					$	7,597
Interest expense related to Convertible Senior Notes, net of tax		731						954
Diluted net income attributable to Turning Point Brands. Inc.	$	12,741					$	8,551
Denominator
Basic weighted average				17,654,684						17,531,414
Convertible Senior Notes				2,218,018						3,029,699
Stock options and restricted stock units				297,612						108,039
				20,170,314	$	0.63				20,669,152	$	0.41

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Segment Information

3 Months Ended

Mar. 31, 2024

Segment Information [Abstract]

Segment Information

Note 16. Segment Information

In accordance with ASC 280, Segment Reporting, the Company has three reportable segments, (1) Zig-Zag Products; (2) Stoker’s Products; and (3) Creative Distribution Solutions. The Zig-Zag Products segment markets and distributes (a) rolling papers, tubes, and related products; (b) finished cigars and MYO cigar wraps and (c) CLIPPER reusable lighters and other accessories. The Stoker’s Products segment (a) manufactures and markets moist snuff and (b) contracts for and markets loose-leaf chewing tobacco products. The Creative Distribution Solutions segment (a) markets and distributes liquid nicotine products and certain other products without tobacco and/or nicotine; (b) distributes a wide assortment of products to non-traditional retail outlets via Vapor Beast; and (c) markets and distributes a wide assortment of products to individual consumers via the VaporFi B2C online platform. Products in the Zig-Zag Products and Stoker’s Products segments are distributed primarily through wholesale distributors in the U.S. and Canada while products in the Creative Distribution Solutions segment are distributed primarily through e-commerce to non-traditional retail outlets and direct to consumers in the U.S. Corporate unallocated includes the costs and assets of the Company not assigned to one of the three reportable segments such as intercompany transfers, deferred taxes, deferred financing fees, and investments in subsidiaries.

The accounting policies of these segments are the same as those of the Company. Corporate costs are not directly charged to the three reportable segments in the ordinary course of operations. The Company evaluates the performance of its segments and allocates resources to them based on operating income.

The tables below present financial information about reported segments:

	Three Months Ended March 31,
	2024			2023
Net sales
Zig-Zag products	$	46,697		$	41,887
Stoker’s products		36,367			33,662
Total Zig-Zag and Stoker’s products	$	83,064		$	75,549
Creative Distribution Solutions		13,994			25,407
Total	$	97,058		$	100,956
Gross profit
Zig-Zag products	$	27,538		$	22,390
Stoker’s products		20,815			19,465
Total Zig-Zag and Stoker’s products	$	48,353		$	41,855
Creative Distribution Solutions		3,559			6,762
Total	$	51,912		$	48,617
Operating income (loss)
Zig-Zag products	$	18,000		$	13,641
Stoker’s products		15,396			14,563
Corporate unallocated (1)(2)		(14,127	)		(10,623	)
Total Zig-Zag and Stoker’s products	$	19,269		$	17,581
Creative Distribution Solutions		(3	)		261
Total	$	19,266		$	17,842
Interest expense, net		3,479			4,010
Investment (income) loss		(119	)		4,799
Gain on extinguishment of debt		–			(777	)
Income before income taxes	$	15,906		$	9,810
Capital expenditures
Zig-Zag products	$	166		$	973
Stoker’s products		200			1,462
Total Zig-Zag and Stoker’s products	$	366		$	2,435
Creative Distribution Solutions		–			–
Total	$	366		$	2,435
Depreciation and amortization
Zig-Zag products	$	274		$	267
Stoker’s products		879			706
Total Zig-Zag and Stoker’s products	$	1,153		$	973
Creative Distribution Solutions		570			574
Total	$	1,723		$	1,547

(1) Includes corporate costs that are not allocated to any of the three reportable segments.

(2) Includes costs related to PMTA of $0.8 million in 2024 and $0.1 million in 2023.

	March 31,		December 31,
	2024		2023
Assets
Zig-Zag products	$	176,629	$	177,135
Stoker’s products		187,794		174,994
Corporate unallocated (1)		194,702		190,223
Total Zig-Zag and Stoker’s products	$	559,125	$	542,352
Creative Distribution Solutions		27,191		27,004
Total	$	586,316	$	569,356

(1) Includes assets not assigned to the three reportable segments. All goodwill has been allocated to the reportable segments.

Revenue Disaggregation—Sales Channel

Revenues of the Zig-Zag Products and Stoker’s Products segments are primarily comprised of sales made to wholesalers while Creative Distribution Solutions sales are made business to business and business to consumer, both online and through our corporate retail stores. Creative Distribution Solutions net sales are broken out by sales channel below.

	Creative Distribution Solutions Segment
	Three Months Ended
	March 31,
	2024		2023
Business to Business	$	12,585	$	22,493
Business to Consumer - Online		1,380		2,810
Other		29		104
Total	$	13,994	$	25,407

Net Sales—Domestic vs. Foreign

The following table shows a breakdown of consolidated net sales between domestic and foreign customers.

	Three Months Ended
	March 31,
	2024		2023
Domestic	$	89,910	$	93,860
Foreign		7,148		7,096
Total	$	97,058	$	100,956

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Additional Information with Respect to Unrestricted Subsidiary

3 Months Ended

Mar. 31, 2024

Additional Information with Respect to Unrestricted Subsidiary [Abstract]

Additional Information with Respect to Unrestricted Subsidiary

Note 17. Additional Information with Respect to Unrestricted Subsidiary

Under the terms of the Senior Secured Notes Indenture and Senior Secured Notes, the Company has designated its subsidiaries, South Beach Brands LLC, TPB Beast LLC and Intrepid Brands, LLC as “Unrestricted Subsidiaries”. South Beach Brands LLC is a holding company under which our vape business TPB Beast LLC operating as Creative Distribution Solutions sits. The Company is required under the terms of the Senior Secured Notes Indenture and the Senior Secured Notes to present additional information that reflects the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Company’s Unrestricted Subsidiaries as of and for the periods presented. This additional information is below.

Income Statement for the Three Months Ended March 31, 2024 and 2023 (unaudited):

	Three Months Ended March 31
	2024									2023
	Company and Restricted Subsidiaries			Unrestricted Subsidiaries			Consolidated			Company and Restricted Subsidiaries			Unrestricted Subsidiaries		Consolidated
Net sales	$	83,064		$	13,994		$	97,058		$	75,549		$	25,407	$	100,956
Cost of sales		34,711			10,435			45,146			33,694			18,645		52,339
Gross profit		48,353			3,559			51,912			41,855			6,762		48,617
Selling, general, and administrative expenses		29,084			3,562			32,646			24,274			6,501		30,775
Operating income (loss)		19,269			(3	)		19,266			17,581			261		17,842
Interest expense, net		3,479			–			3,479			4,010			–		4,010
Investment (gain) loss		(119	)		–			(119	)		4,799			–		4,799
Gain on extinguishment of debt		–			–			–			(777	)		–		(777	)
Income (loss) before income taxes		15,909			(3	)		15,906			9,549			261		9,810
Income tax expense (benefit)		3,728			(1	)		3,727			2,402			66		2,468
Consolidated net income (loss)		12,181			(2	)		12,179			7,147			195		7,342
Net income (loss) attributable to non-controlling interest		169			–			169			(255	)		–		(255	)
Net income (loss) attributable to Turning Point Brands, Inc.	$	12,012		$	(2	)	$	12,010		$	7,402		$	195	$	7,597

Balance Sheet as of March 31, 2024 (unaudited):

ASSETS	Company and Restricted Subsidiaries		Unrestricted Subsidiaries		Eliminations			Consolidated
Current assets:
Cash	$	126,066	$	4,837	$	–		$	130,903
Accounts receivable, net		8,198		–		–			8,198
Inventories, net		99,381		6,086		–			105,467
Other current assets		32,836		1,601		–			34,437
Total current assets		266,481		12,524		–			279,005
Property, plant, and equipment, net		24,705		85		–			24,790
Deferred income taxes		1,426		–		–			1,426
Right of use assets		10,764		104		–			10,868
Deferred financing costs, net		2,305		–		–			2,305
Goodwill		136,365		–		–			136,365
Other intangible assets, net		66,199		13,978		–			80,177
Master Settlement Agreement (MSA) escrow deposits		28,427		–		–			28,427
Other assets		22,453		500		–			22,953
Investment in unrestricted subsidiaries		62,732		–		(62,732	)		–
Total assets	$	621,857	$	27,191	$	(62,732	)	$	586,316
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,596	$	338	$	–		$	18,934
Accrued liabilities		29,618		1,356		–			30,974
Current portion of long-term debt		59,397		–		–			59,397
Total current liabilities		107,611		1,694		–			109,305
Notes payable and long-term debt		306,496		–		–			306,496
Lease liabilities		9,327		33		–			9,360
Total liabilities		423,434		1,727		–			425,161
Commitments and contingencies
Stockholders’ equity:
Total Turning Point Brands, Inc. Stockholders’ Equity/Net parent investment in unrestricted subsidiaries		197,232		25,464		(62,732	)		159,964
Non-controlling interest		1,191		–		–			1,191
Total stockholders’ equity		198,423		25,464		(62,732	)		161,155
Total liabilities and stockholders’ equity	$	621,857	$	27,191	$	(62,732	)	$	586,316

Balance Sheet as of December 31, 2023:

ASSETS	Company and Restricted Subsidiaries		Unrestricted Subsidiaries		Eliminations			Consolidated
Current assets:
Cash	$	116,725	$	1,161	$	–		$	117,886
Accounts receivable, net		9,989		–		–			9,989
Inventories, net		91,679		7,281		–			98,960
Other current assets		36,937		3,844		–			40,781
Total current assets		255,330		12,286		–			267,616
Property, plant, and equipment, net		25,142		158		–			25,300
Deferred income taxes		1,468		–		–			1,468
Right of use assets		11,359		121		–			11,480
Deferred financing costs, net		2,450		–		–			2,450
Goodwill		136,250		–		–			136,250
Other intangible assets, net		66,490		14,452		–			80,942
Master Settlement Agreement (MSA) escrow deposits		28,684		–		–			28,684
Other assets		15,166		–		–			15,166
Investment in unrestricted subsidiaries		48,229		–		(48,229	)		–
Total assets	$	590,568	$	27,017	$	(48,229	)	$	569,356
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,781	$	626	$	–		$	8,407
Accrued liabilities		32,052		1,583		–			33,635
Current portion of long-term debt		58,294		–		–			58,294
Total current liabilities		98,127		2,209		–			100,336
Notes payable and long-term debt		307,064		–		–			307,064
Lease liabilities		9,898		52		–			9,950
Total liabilities		415,089		2,261		–			417,350
Commitments and contingencies
Stockholders’ equity:
Total Turning Point Brands, Inc. Stockholders’ Equity/Net parent investment in unrestricted subsidiaries		174,449		24,756		(48,229	)		150,976
Non-controlling interest		1,030		–		–			1,030
Total stockholders’ equity		175,479		24,756		(48,229	)		152,006
Total liabilities and stockholders’ equity	$	590,568	$	27,017	$	(48,229	)	$	569,356

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Dividends and Share Repurchases

3 Months Ended

Mar. 31, 2024

Dividends and Share Repurchases [Abstract]

Dividends and Share Repurchases

Note 18. Dividends and Share Repurchases

A dividend of $0.07 per common share was paid on April 12, 2024, to shareholders of record at the close of business on March 22, 2024.

The Company currently pays a quarterly cash dividend. Dividends are considered restricted payments under the Senior Secured Notes Indenture. The Company is generally permitted to make restricted payments provided that, at the time of payment, or as a result of payment, the Company is not in default on its debt covenants. Additional earnings and market capitalization restrictions limit the aggregate amount of restricted, quarterly dividends during a fiscal year.

On February 25, 2020, the Company’s Board of Directors approved a $50.0 million share repurchase program which is intended for opportunistic execution based upon a variety of factors including market dynamics. The program is subject to the ongoing discretion of the Board of Directors. On October 25, 2021, the Board of Directors increased the approved share repurchase program by $30.7 million and by an additional $24.6 million on February 24, 2022, in each case bringing the aggregate approval back to $50.0 million. In the first quarter of 2024, the Company repurchased $2.1 million of common stock, with $25.1 million remaining available for share repurchases under the program at March 31, 2024.

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Insider Trading Arrangements	3 Months Ended
	Mar. 31, 2024
Insider Trading Arrangements [Line Items]
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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Description of Business and Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2024

Description of Business and Basis of Presentation [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited, interim, consolidated financial statements have been prepared in accordance with the accounting practices described in the Company’s audited, consolidated financial statements as of and for the year ended December 31, 2023. In the opinion of management, the unaudited, interim, consolidated financial statements included herein contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods presented. Such adjustments, other than nonrecurring adjustments separately disclosed, are of a normal and recurring nature. The operating results for interim periods are not necessarily indicative of results to be expected for a full year or future interim periods. The unaudited, interim, consolidated financial statements should be read in conjunction with the Company’s audited, consolidated financial statements and accompanying notes as of and for the year ended December 31, 2023. The accompanying interim, consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, accordingly, do not include all the disclosures required by generally accepted accounting principles in the United States (“GAAP”) with respect to annual financial statements.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2024

Summary of Significant Accounting Policies [Abstract]

Consolidation

Consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries, all of which are wholly-owned, and variable interest entities for which the Company is considered the primary beneficiary. All significant intercompany transactions have been eliminated.

Revenue Recognition

Revenue Recognition

The Company recognizes revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606), which includes excise taxes and shipping and handling charges billed to customers, net of cash discounts for prompt payment, sales returns and incentives, upon delivery of goods to the customer – at which time the Company’s performance obligation is satisfied - at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five-step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. The Company excludes from the transaction price, sales taxes and value-added taxes imposed at the time of sale (which do not include excise taxes on smokeless tobacco, cigars or other nicotine products billed to customers).

The Company records an allowance for sales returns, based principally on historical volume and return rates, which is included in accrued liabilities on the consolidated balance sheets. The Company records sales incentives, which consist of consumer incentives and trade promotion activities, as a reduction in revenues (a portion of which is based on amounts estimated to be due to wholesalers, retailers and consumers at the end of the period) based principally on historical volume and utilization rates. Expected payments for sales incentives are included in accrued liabilities on the consolidated balance sheets.

A further requirement of ASC 606 is for entities to disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The Company’s management views business performance through segments that closely resemble the performance of major product lines. Thus, the primary and most useful disaggregation of the Company’s contract revenue for decision making purposes is the disaggregation by segment which can be found in Note 16, “Segment Information”. An additional disaggregation of contract revenue by sales channel can be found within Note 16 as well.

Shipping Costs

Shipping Costs

The Company records shipping costs incurred as a component of selling, general, and administrative expenses. Shipping costs incurred were approximately $5.6 million and $6.2 million for the three months ending March 31, 2024 and 2023, respectively.

Inventories

Inventories

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method. Leaf tobacco is presented in current assets in accordance with standard industry practice, notwithstanding the fact that such tobaccos are carried longer than one year for the purpose of curing.

Fair Value

Fair Value

GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy under GAAP are described below:

● Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date.

● Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

● Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Derivative Instruments

Derivative Instruments

The Company enters into foreign currency forward contracts to hedge a portion of its exposure to changes in foreign currency exchange rates on inventory purchase commitments. The Company accounts for its forward contracts under the provisions of ASC 815, Derivatives and Hedging. Under the Company’s policy, the Company may hedge up to 100% of its anticipated purchases of inventory in the denominated invoice currency over a forward period not to exceed twelve months. The Company may also, from time to time, hedge up to 100% of its non-inventory purchases (e.g., production equipment) in the denominated invoice currency. Forward contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these forward contracts are reclassified from other comprehensive income into inventory as the related inventories are received and are transferred to net income as inventory is sold. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Risks and Uncertainties

Risks and Uncertainties

Manufacturers and sellers of tobacco products are subject to regulation at the federal, state, and local levels. Such regulations include, among others, labeling requirements, limitations on advertising, and prohibition of sales to minors. The tobacco industry is likely to continue to be heavily regulated. There can be no assurance as to the ultimate content, timing, or effect of any regulation of tobacco products by any federal, state, or local legislative or regulatory body, nor can there be any assurance that any such legislation or regulation would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. In a number of states targeted flavor bans have been proposed or enacted legislatively or by the administrative process. Depending on the number and location of such bans, that legislation or regulation could have a material adverse effect on the Company’s financial position, results of operations or cash flows. The U.S. Food and Drug Administration (“FDA”) continues to consider various restrictive regulations around our products, including targeted flavor bans; however, the details, timing, and ultimate implementation of such measures remain unclear.

The tobacco industry has experienced, and is experiencing, significant product liability litigation. Most tobacco liability lawsuits have been brought against manufacturers and sellers of cigarettes for injuries allegedly caused by smoking or exposure to smoke. However, several lawsuits have been brought against manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. Typically, such claims assert that use of smokeless products is addictive and causes oral cancer. Additionally, several lawsuits have been brought against manufacturers and distributors of Creative Distribution Solutions products due to malfunctioning devices. There can be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Master Settlement Agreement (MSA)

Pursuant to the Master Settlement Agreement (the “MSA”) entered into in November 1998 by most states (represented by their attorneys general acting through the National Association of Attorneys General) and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to include a manufacturer of make-your-own (“MYO”) cigarette tobacco) has the option of either becoming a signatory to the MSA or opening, funding, and maintaining an escrow account to have funds available for certain potential tobacco-related liabilities with sub-accounts on behalf of each settling state. Such companies are entitled to direct the investment of the escrowed funds and withdraw any appreciation but cannot withdraw the principal for twenty-five years from the year of each annual deposit, except to withdraw funds deposited pursuant to an individual state’s escrow statute to pay a final judgement to that state’s plaintiffs in the event of such a final judgement against the Company. The Company chose to open and fund an escrow account as its method of compliance. It is the Company’s policy to record amounts on deposit in the escrow account for prior years as a non-current asset. As of March 31, 2024, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $28.4 million. At December 31, 2023, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $28.7 million. The Company discontinued its generic category of MYO in 2019 and its Zig-Zag branded MYO cigarette smoking tobacco in 2017. Thus, pending a change in MSA legislation, the Company has no remaining product lines covered by the MSA and will not be required to make future escrow deposits.

The Company has chosen to invest a portion of the MSA escrow, from time to time, in U.S. Government securities including TIPS, Treasury Notes, and Treasury Bonds. These investments are classified as available-for-sale and carried at fair value. Realized losses are prohibited under the MSA; any investment in an unrealized loss position will be held until the value is recovered, or until maturity.

Fair values for the U.S. Governmental agency obligations are Level 2 in the fair value hierarchy. The following tables show cost and estimated fair value of the assets held in the MSA account, respectively, as well as the maturities of the U.S. Governmental agency obligations held in such account for the periods indicated.

	As of March 31, 2024							As of December 31, 2023
			Gross			Estimated				Gross			Estimated
			Unrealized			Fair				Unrealized			Fair
	Cost		Gains (Losses)			Value		Cost		Losses			Value
Cash and cash equivalents	$	1,934	$	–		$	1,934	$	1,929	$	–		$	1,929
U.S. Governmental agency obligations (unrealized position < 12 months)		1,196		6			1,202		–		–			–
U.S. Governmental agency obligations (unrealized position > 12 months)		28,943		(3,652	)		25,291		30,144		(3,389	)		26,755
	$	32,073	$	(3,646	)	$	28,427	$	32,073	$	(3,389	)	$	28,684

	As of
	March 31, 2024
Less than one year	$	3,250
One to five years		13,775
Five to ten years		11,159
Greater than ten years		1,955
Total	$	30,139

The following shows the amount of deposits by sales year for the MSA escrow account:

	Deposits as of
Sales Year	March 31, 2024		December 31, 2023
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,714		3,714
2005		4,553		4,553
2006		3,847		3,847
2007		4,167		4,167
2008		3,364		3,364
2009		1,619		1,619
2010		406		406
2011		193		193
2012		199		199
2013		173		173
2014		143		143
2015		101		101
2016		91		91
2017		82		82
Total	$	32,073	$	32,073

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2024

Summary of Significant Accounting Policies [Abstract]

Fair Value of Investments

The following tables show cost and estimated fair value of the assets held in the MSA account, respectively, as well as the maturities of the U.S. Governmental agency obligations held in such account for the periods indicated.

	As of March 31, 2024							As of December 31, 2023
			Gross			Estimated				Gross			Estimated
			Unrealized			Fair				Unrealized			Fair
	Cost		Gains (Losses)			Value		Cost		Losses			Value
Cash and cash equivalents	$	1,934	$	–		$	1,934	$	1,929	$	–		$	1,929
U.S. Governmental agency obligations (unrealized position < 12 months)		1,196		6			1,202		–		–			–
U.S. Governmental agency obligations (unrealized position > 12 months)		28,943		(3,652	)		25,291		30,144		(3,389	)		26,755
	$	32,073	$	(3,646	)	$	28,427	$	32,073	$	(3,389	)	$	28,684

Maturities of U.S. Governmental Agency Obligations

	As of
	March 31, 2024
Less than one year	$	3,250
One to five years		13,775
Five to ten years		11,159
Greater than ten years		1,955
Total	$	30,139

Deposits by Sales Year for MSA Escrow Account

The following shows the amount of deposits by sales year for the MSA escrow account:

	Deposits as of
Sales Year	March 31, 2024		December 31, 2023
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,714		3,714
2005		4,553		4,553
2006		3,847		3,847
2007		4,167		4,167
2008		3,364		3,364
2009		1,619		1,619
2010		406		406
2011		193		193
2012		199		199
2013		173		173
2014		143		143
2015		101		101
2016		91		91
2017		82		82
Total	$	32,073	$	32,073

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Inventories (Tables)

3 Months Ended

Mar. 31, 2024

Inventories [Abstract]

Inventories

The components of inventories are as follows:

	March 31,		December 31,
	2024		2023
Raw materials and work in process	$	7,148	$	5,201
Leaf tobacco		41,461		34,894
Finished goods - Zig-Zag Products		39,103		41,783
Finished goods - Stoker’s Products		10,232		8,090
Finished goods - Creative Distribution Solutions		6,086		7,281
Other		1,437		1,711
Inventories	$	105,467	$	98,960

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Other Current Assets (Tables)

3 Months Ended

Mar. 31, 2024

Other Current Assets [Abstract]

Other Current Assets

Other current assets consist of:

	March 31,		December 31,
	2024		2023
Inventory deposits	$	7,392	$	5,707
Insurance deposit		–		3,000
Prepaid taxes		–		153
Settlement receivable		–		4,000
Insurance recovery receivable		15,181		15,181
Other		11,864		12,740
Total	$	34,437	$	40,781

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Property, Plant, and Equipment (Tables)

3 Months Ended

Mar. 31, 2024

Property, Plant, and Equipment [Abstract]

Property, Plant and Equipment, Net

Property, plant, and equipment consists of:

	March 31,			December 31,
	2024			2023
Land	$	22		$	22
Buildings and improvements		4,217			3,956
Leasehold improvements		6,614			5,440
Machinery and equipment		28,568			29,751
Furniture and fixtures		8,439			8,391
Gross property, plant and equipment		47,860			47,560
Accumulated depreciation		(23,070	)		(22,260	)
Net property, plant and equipment	$	24,790		$	25,300

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Other Assets (Tables)

3 Months Ended

Mar. 31, 2024

Other Assets [Abstract]

Other Assets

Other assets consist of:

	March 31,		December 31,
	2024		2023
Non-marketable equity investments	$	2,882	$	2,405
Debt security investment		6,750		6,750
Capitalized software		6,108		5,923
Available-for-sale marketable securities		7,125		–
Other		88		88
Total	$	22,953	$	15,166

Other Assets [Abstract]

Fair Value of Investments

The following tables show cost and estimated fair value of the assets held in the MSA account, respectively, as well as the maturities of the U.S. Governmental agency obligations held in such account for the periods indicated.

	As of March 31, 2024							As of December 31, 2023
			Gross			Estimated				Gross			Estimated
			Unrealized			Fair				Unrealized			Fair
	Cost		Gains (Losses)			Value		Cost		Losses			Value
Cash and cash equivalents	$	1,934	$	–		$	1,934	$	1,929	$	–		$	1,929
U.S. Governmental agency obligations (unrealized position < 12 months)		1,196		6			1,202		–		–			–
U.S. Governmental agency obligations (unrealized position > 12 months)		28,943		(3,652	)		25,291		30,144		(3,389	)		26,755
	$	32,073	$	(3,646	)	$	28,427	$	32,073	$	(3,389	)	$	28,684

Investments Classified by Contractual Maturity

	As of
	March 31, 2024
Less than one year	$	3,250
One to five years		13,775
Five to ten years		11,159
Greater than ten years		1,955
Total	$	30,139

Interchange IC [Member]

Other Assets [Abstract]

Fair Value of Investments

The Company’s captive investments are summarized in the following table.

	As of March 31, 2024
				Gross				Estimated
	Amortized			Unrealized				Fair
	Cost			Gains (Losses)				Value
Corporate bonds		$	1,703		$	8			$	1,711
U.S. Governmental agency obligations			1,799			(3	)			1,796
Real estate investment trusts and exchange traded funds			3,617			1				3,618
		$	7,119		$	6			$	7,125

Investments Classified by Contractual Maturity

The following table summarizes the fair value of the Company’s captive investments by contractual maturity.

	As of
	March 31, 2024
Due within one year	$	1,711
Due after ten years		1,796
Real estate investment trusts and exchange traded funds		3,618
Total investments at fair value	$	7,125

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Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2024

Accrued Liabilities [Abstract]

Accrued Liabilities

Accrued liabilities consist of:

	March 31,		December 31,
	2024		2023
Accrued payroll and related items	$	4,669	$	7,085
Customer returns and allowances		4,642		5,239
Taxes payable		6,995		3,821
Lease liabilities		2,615		2,678
Accrued interest		2,221		6,682
Other		9,832		8,130
Total	$	30,974	$	33,635

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Notes Payable and Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2024

Notes Payable and Long-Term Debt [Abstract]

Notes Payable and Long-Term Debt

Notes payable and long-term debt consists of the following in order of preference:

	March 31,			December 31,
	2024			2023
Senior Secured Notes	$	250,000		$	250,000
Convertible Senior Notes		118,541			118,541
Gross notes payable and long-term debt		368,541			368,541
Less deferred finance charges		(2,648	)		(3,183	)
Less current maturities		(59,397	)		(58,294	)
Notes payable and long-term debt	$	306,496		$	307,064

Redemption Prices of Senior Secured Notes

The Company may redeem the Senior Secured Notes, in whole or in part, at any time at the redemption prices (expressed as a percentage of the principal amount to be redeemed) set forth below, plus accrued and unpaid interest, if any, on the Senior Secured Notes to be redeemed to (but not including) the applicable redemption date if redeemed during the period indicated below:

On or after February 15, 2023	102.813	%
On or after February 15, 2024	101.406	%
On or after February 15, 2025 and thereafter	100.000	%

Interest Rate Margins

Amounts borrowed under the 2023 ABL Facility are subject to an interest rate margin per annum equal to (a) from and after the closing date until the last day of the first full fiscal quarter ended after the closing date, (i) 1.25% per annum, in the case base rate loans, and (ii) 2.25% per annum, in the case of revolving credit loans that are SOFR Loans, (b)(i) 2.25% per annum, in the case of LILO loans that are base rate loans, and (ii) 3.25% per annum, in the case of LILO loans that are SOFR loans, (c) on the first day of each fiscal quarter, the applicable interest rate margins will be determined from the pricing grid below based upon the historical excess availability for the most recent fiscal quarter ended immediately prior to the relevant date, as calculated by the Administrative Agent.

Level	Historical Excess Availability	Applicable Margin for SOFR Loans	Applicable Margin for Base Rate Loans
I	Greater than or equal to 66.66%	1.75%	0.75%
II	Less than 66.66%, but greater than or equal to 33.33%	2.00%	1.00%
III	Less than 33.33%	2.25%	1.25%

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Leases (Tables)

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Components of Lease Expense

The components of lease expense consisted of the following:

	Three Months Ended March 31,
	2024		2023
Operating lease cost
Cost of sales	$	133	$	128
Selling, general and administrative		464		521
Variable lease cost (1)		297		225
Short-term lease cost		–		6
Total	$	894	$	880

(1) Variable lease cost includes elements of a contract that do not represent a good or service but for which the lessee is responsible for paying.

Amounts Related to Operating and Financing Leases

	Three Months Ended March 31,
	2024		2023
Financing lease cost
Selling, general and administrative	$	150	$	338
Total	$	150	$	338

	March 31,		December 31,
	2024		2023
Assets:
Right of use assets - Operating	$	8,714	$	8,950
Right of use assets - Financing		2,154		2,530
Total lease assets	$	10,868	$	11,480
Liabilities:
Current lease liabilities - Operating (2)	$	1,946	$	1,991
Current lease liabilities - Financing (2)		669		687
Long-term lease liabilities - Operating		7,925		8,374
Long-term lease liabilities - Financing		1,435		1,576
Total lease liabilities	$	11,975	$	12,628

(2) Reported within accrued liabilities on the balance sheet.

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Share Incentive Plans (Tables)

3 Months Ended

Mar. 31, 2024

Share Incentive Plans [Abstract]

Stock Option Activity

Stock option activity for the 2006, 2015 and 2021 Plans is summarized below:

				Weighted		Weighted
	Stock			Average		Average
	Option			Exercise		Grant Date
	Shares			Price		Fair Value
Outstanding, December 31, 2022		683,214		$	29.74	$	9.24
Granted		77,519			20.71		6.45
Exercised		(33,851	)		13.30		4.24
Forfeited		(69,931	)		27.51		9.11
Outstanding, December 31, 2023		656,951		$	29.79	$	9.18
Granted		54,289			27.19		9.21
Exercised		(198	)		14.85		4.41
Forfeited		(6,433	)		30.19		8.85
Outstanding, March 31, 2024		704,609		$	29.59	$	9.19

Assumptions for Options Granted Under 2015 and 2021 Plan

The following table outlines the assumptions based on the number of options granted under the 2015 Plan.

	February 10,			May 17,			March 7,			March 20,			October 24,			March 18,			February 18,			May 3,
	2017			2017			2018			2019			2019			2020			2021			2021
Number of options granted		40,000			93,819			98,100			155,780			25,000			155,000			100,000			12,000
Options outstanding at March 31, 2024		20,000			38,033			51,067			124,864			25,000			77,777			87,350			12,000
Number exercisable at March 31, 2024		20,000			38,033			51,067			124,864			25,000			77,777			87,350			12,000
Exercise price	$	13.00		$	15.41		$	21.21		$	47.58		$	20.89		$	14.85		$	51.75		$	47.76
Remaining lives		2.87			3.13			3.94			4.97			5.57			5.97			6.89			7.09
Risk free interest rate		1.89	%		1.76	%		2.65	%		2.34	%		1.58	%		0.79	%		0.56	%		0.84	%
Expected volatility		27.44	%		26.92	%		28.76	%		30.95	%		31.93	%		35.72	%		28.69	%		29.03	%
Expected life		6.000			6.000			6.000			6.000			6.000			6.000			6.000			6.000
Dividend yield		–			–			0.83	%		0.42	%		0.95	%		1.49	%		0.55	%		0.59	%
Fair value at grant date	$	3.98		$	4.60		$	6.37		$	15.63		$	6.27		$	4.41		$	13.77		$	13.06

The following table outlines the assumptions based on the number of options granted under the 2021 Plan.

	May 17,			March 14,			April 29,			May 12,			March 11,
	2021			2022			2022			2023			2024
Number of options granted		7,500			100,000			14,827			77,519			54,289
Options outstanding at March 31, 2024		7,500			70,690			14,827			77,519			54,289
Number exercisable at March 31, 2024		7,500			47,442			9,935			77,519			–
Exercise price	$	45.05		$	30.46		$	31.39		$	20.71		$	27.19
Remaining lives		7.13			7.96			8.08			9.12			9.95
Risk free interest rate		0.84	%		2.10	%		2.92	%		3.41	%		4.06	%
Expected volatility		31.50	%		35.33	%		35.33	%		34.51	%		35.09	%
Expected life		6.000			6.000			6.000			5.186			5.186
Dividend yield		0.63	%		1.01	%		0.98	%		1.61	%		1.26	%
Fair value at grant date	$	13.23		$	10.23		$	11.07		$	6.45		$	9.21

PRSU Activity

The following table outlines the PRSUs granted and outstanding as of March 31, 2024.

	March 18,		February 18,		March 14,		May 4,		March 1,
	2020		2021		2022		2023		2024
Number of PRSUs granted		94,000		100,000		49,996		133,578		111,321
PRSUs outstanding at March 31, 2024		80,910		82,190		40,325		132,520		111,321
Fair value as of grant date	$	14.85	$	51.75	$	30.46	$	22.25	$	26.52
Remaining lives		0.75		1.75		2.75		1.75		2.75

RSU Activity

The following table outlines the RSUs granted and outstanding as of March 31, 2024.

	March 14,		March 14,		April 29,		May 5,		May 8,		March 1,		March 11,
	2022		2022		2022		2023		2023		2024		2024
Number of RSUs granted		50,004		28,726		4,522		130,873		20,101		105,257		18,389
RSUs outstanding at March 31, 2024		39,367		9,481		4,522		128,406		20,101		105,257		18,389
Fair value as of grant date	$	30.46	$	30.46	$	31.39	$	22.25	$	21.77	$	26.52	$	27.19
Remaining lives		2.75		0.75		2.75		2.00		0.10		3.00		0.75

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Income Per Share (Tables)

3 Months Ended

Mar. 31, 2024

Income Per Share [Abstract]

Basic and Diluted Net Income per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations of net income:

	Three Months Ended March 31,
	2024						2023
					Per						Per
	Income		Shares		Share		Income		Shares		Share
Basic EPS:
Numerator
Net income attributable to Turning Point Brands, Inc.	$	12,010					$	7,597
Denominator
Weighted average				17,654,684	$	0.68				17,531,414	$	0.43
Diluted EPS:
Numerator
Net income attributable to Turning Point Brands, Inc.	$	12,010					$	7,597
Interest expense related to Convertible Senior Notes, net of tax		731						954
Diluted net income attributable to Turning Point Brands. Inc.	$	12,741					$	8,551
Denominator
Basic weighted average				17,654,684						17,531,414
Convertible Senior Notes				2,218,018						3,029,699
Stock options and restricted stock units				297,612						108,039
				20,170,314	$	0.63				20,669,152	$	0.41

XML

Segment Information (Tables)

3 Months Ended

Mar. 31, 2024

Segment Information [Abstract]

Financial Information of Reportable Segments

The tables below present financial information about reported segments:

	Three Months Ended March 31,
	2024			2023
Net sales
Zig-Zag products	$	46,697		$	41,887
Stoker’s products		36,367			33,662
Total Zig-Zag and Stoker’s products	$	83,064		$	75,549
Creative Distribution Solutions		13,994			25,407
Total	$	97,058		$	100,956
Gross profit
Zig-Zag products	$	27,538		$	22,390
Stoker’s products		20,815			19,465
Total Zig-Zag and Stoker’s products	$	48,353		$	41,855
Creative Distribution Solutions		3,559			6,762
Total	$	51,912		$	48,617
Operating income (loss)
Zig-Zag products	$	18,000		$	13,641
Stoker’s products		15,396			14,563
Corporate unallocated (1)(2)		(14,127	)		(10,623	)
Total Zig-Zag and Stoker’s products	$	19,269		$	17,581
Creative Distribution Solutions		(3	)		261
Total	$	19,266		$	17,842
Interest expense, net		3,479			4,010
Investment (income) loss		(119	)		4,799
Gain on extinguishment of debt		–			(777	)
Income before income taxes	$	15,906		$	9,810
Capital expenditures
Zig-Zag products	$	166		$	973
Stoker’s products		200			1,462
Total Zig-Zag and Stoker’s products	$	366		$	2,435
Creative Distribution Solutions		–			–
Total	$	366		$	2,435
Depreciation and amortization
Zig-Zag products	$	274		$	267
Stoker’s products		879			706
Total Zig-Zag and Stoker’s products	$	1,153		$	973
Creative Distribution Solutions		570			574
Total	$	1,723		$	1,547

(1) Includes corporate costs that are not allocated to any of the three reportable segments.

(2) Includes costs related to PMTA of $0.8 million in 2024 and $0.1 million in 2023.

	March 31,		December 31,
	2024		2023
Assets
Zig-Zag products	$	176,629	$	177,135
Stoker’s products		187,794		174,994
Corporate unallocated (1)		194,702		190,223
Total Zig-Zag and Stoker’s products	$	559,125	$	542,352
Creative Distribution Solutions		27,191		27,004
Total	$	586,316	$	569,356

(1) Includes assets not assigned to the three reportable segments. All goodwill has been allocated to the reportable segments.

Revenue Disaggregation - Sales Channel

Revenues of the Zig-Zag Products and Stoker’s Products segments are primarily comprised of sales made to wholesalers while Creative Distribution Solutions sales are made business to business and business to consumer, both online and through our corporate retail stores. Creative Distribution Solutions net sales are broken out by sales channel below.

	Creative Distribution Solutions Segment
	Three Months Ended
	March 31,
	2024		2023
Business to Business	$	12,585	$	22,493
Business to Consumer - Online		1,380		2,810
Other		29		104
Total	$	13,994	$	25,407

Net Sales - Domestic and Foreign

The following table shows a breakdown of consolidated net sales between domestic and foreign customers.

	Three Months Ended
	March 31,
	2024		2023
Domestic	$	89,910	$	93,860
Foreign		7,148		7,096
Total	$	97,058	$	100,956

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Additional Information with Respect to Unrestricted Subsidiary (Tables)

3 Months Ended

Mar. 31, 2024

Additional Information with Respect to Unrestricted Subsidiary [Abstract]

Income Statement

Income Statement for the Three Months Ended March 31, 2024 and 2023 (unaudited):

	Three Months Ended March 31
	2024									2023
	Company and Restricted Subsidiaries			Unrestricted Subsidiaries			Consolidated			Company and Restricted Subsidiaries			Unrestricted Subsidiaries		Consolidated
Net sales	$	83,064		$	13,994		$	97,058		$	75,549		$	25,407	$	100,956
Cost of sales		34,711			10,435			45,146			33,694			18,645		52,339
Gross profit		48,353			3,559			51,912			41,855			6,762		48,617
Selling, general, and administrative expenses		29,084			3,562			32,646			24,274			6,501		30,775
Operating income (loss)		19,269			(3	)		19,266			17,581			261		17,842
Interest expense, net		3,479			–			3,479			4,010			–		4,010
Investment (gain) loss		(119	)		–			(119	)		4,799			–		4,799
Gain on extinguishment of debt		–			–			–			(777	)		–		(777	)
Income (loss) before income taxes		15,909			(3	)		15,906			9,549			261		9,810
Income tax expense (benefit)		3,728			(1	)		3,727			2,402			66		2,468
Consolidated net income (loss)		12,181			(2	)		12,179			7,147			195		7,342
Net income (loss) attributable to non-controlling interest		169			–			169			(255	)		–		(255	)
Net income (loss) attributable to Turning Point Brands, Inc.	$	12,012		$	(2	)	$	12,010		$	7,402		$	195	$	7,597

Balance Sheets

Balance Sheet as of March 31, 2024 (unaudited):

ASSETS	Company and Restricted Subsidiaries		Unrestricted Subsidiaries		Eliminations			Consolidated
Current assets:
Cash	$	126,066	$	4,837	$	–		$	130,903
Accounts receivable, net		8,198		–		–			8,198
Inventories, net		99,381		6,086		–			105,467
Other current assets		32,836		1,601		–			34,437
Total current assets		266,481		12,524		–			279,005
Property, plant, and equipment, net		24,705		85		–			24,790
Deferred income taxes		1,426		–		–			1,426
Right of use assets		10,764		104		–			10,868
Deferred financing costs, net		2,305		–		–			2,305
Goodwill		136,365		–		–			136,365
Other intangible assets, net		66,199		13,978		–			80,177
Master Settlement Agreement (MSA) escrow deposits		28,427		–		–			28,427
Other assets		22,453		500		–			22,953
Investment in unrestricted subsidiaries		62,732		–		(62,732	)		–
Total assets	$	621,857	$	27,191	$	(62,732	)	$	586,316
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,596	$	338	$	–		$	18,934
Accrued liabilities		29,618		1,356		–			30,974
Current portion of long-term debt		59,397		–		–			59,397
Total current liabilities		107,611		1,694		–			109,305
Notes payable and long-term debt		306,496		–		–			306,496
Lease liabilities		9,327		33		–			9,360
Total liabilities		423,434		1,727		–			425,161
Commitments and contingencies
Stockholders’ equity:
Total Turning Point Brands, Inc. Stockholders’ Equity/Net parent investment in unrestricted subsidiaries		197,232		25,464		(62,732	)		159,964
Non-controlling interest		1,191		–		–			1,191
Total stockholders’ equity		198,423		25,464		(62,732	)		161,155
Total liabilities and stockholders’ equity	$	621,857	$	27,191	$	(62,732	)	$	586,316

Balance Sheet as of December 31, 2023:

ASSETS	Company and Restricted Subsidiaries		Unrestricted Subsidiaries		Eliminations			Consolidated
Current assets:
Cash	$	116,725	$	1,161	$	–		$	117,886
Accounts receivable, net		9,989		–		–			9,989
Inventories, net		91,679		7,281		–			98,960
Other current assets		36,937		3,844		–			40,781
Total current assets		255,330		12,286		–			267,616
Property, plant, and equipment, net		25,142		158		–			25,300
Deferred income taxes		1,468		–		–			1,468
Right of use assets		11,359		121		–			11,480
Deferred financing costs, net		2,450		–		–			2,450
Goodwill		136,250		–		–			136,250
Other intangible assets, net		66,490		14,452		–			80,942
Master Settlement Agreement (MSA) escrow deposits		28,684		–		–			28,684
Other assets		15,166		–		–			15,166
Investment in unrestricted subsidiaries		48,229		–		(48,229	)		–
Total assets	$	590,568	$	27,017	$	(48,229	)	$	569,356
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,781	$	626	$	–		$	8,407
Accrued liabilities		32,052		1,583		–			33,635
Current portion of long-term debt		58,294		–		–			58,294
Total current liabilities		98,127		2,209		–			100,336
Notes payable and long-term debt		307,064		–		–			307,064
Lease liabilities		9,898		52		–			9,950
Total liabilities		415,089		2,261		–			417,350
Commitments and contingencies
Stockholders’ equity:
Total Turning Point Brands, Inc. Stockholders’ Equity/Net parent investment in unrestricted subsidiaries		174,449		24,756		(48,229	)		150,976
Non-controlling interest		1,030		–		–			1,030
Total stockholders’ equity		175,479		24,756		(48,229	)		152,006
Total liabilities and stockholders’ equity	$	590,568	$	27,017	$	(48,229	)	$	569,356

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Description of Business and Basis of Presentation (Details) Outlet in Thousands	3 Months Ended
	Mar. 31, 2024 Outlet Segment
Description of Business and Basis of Presentation [Abstract]
Number of reportable segments | Segment	3
Number of retail outlets in North America | Outlet	217

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Summary of Significant Accounting Policies, Shipping Costs (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Shipping Costs [Abstract]
Shipping costs	$ 5.6	$ 6.2

XML

Summary of Significant Accounting Policies, Derivative Instruments (Details) - Maximum [Member]	3 Months Ended
	Mar. 31, 2024
Derivative Instruments [Abstract]
Percentage of anticipated purchases of inventory that may be hedged	100.00%
Term of hedge	12 months
Percentage of non-inventory purchases that may be hedged	100.00%

XML

Summary of Significant Accounting Policies, Master Settlement Agreement (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Dec. 31, 2023
Master Settlement Agreement [Abstract]
Term for restricted withdrawal of principal from MSA escrow account	25 years
Fair Value of MSA Escrow Account, More than 12 Months [Abstract]
Estimated fair value, more than 12 months	$ 6,750	$ 6,750
Fair Value of MSA Escrow Account [Abstract]
Cost	32,073	32,073
Gross unrealized gains (losses)	(3,646)	(3,389)
Estimated fair value	28,427	28,684
Maturities of U.S. Governmental Agency Obligations [Abstract]
Less than one year	3,250
One to five years	13,775
Five to ten years	11,159
Greater than ten years	1,955
Total	30,139
Master Settlement Agreement Escrow Account by Sales Year [Abstract]
1999	211	211
2000	1,017	1,017
2001	1,673	1,673
2002	2,271	2,271
2003	4,249	4,249
2004	3,714	3,714
2005	4,553	4,553
2006	3,847	3,847
2007	4,167	4,167
2008	3,364	3,364
2009	1,619	1,619
2010	406	406
2011	193	193
2012	199	199
2013	173	173
2014	143	143
2015	101	101
2016	91	91
2017	82	82
Total	32,073	32,073
Cash and Cash Equivalents [Member]
Fair Value of MSA Escrow Account [Abstract]
Cost	1,934	1,929
Gross unrealized gains (losses)	0	0
Estimated fair value	1,934	1,929
U.S. Governmental Agency Obligations [Member]
Fair Value of MSA Escrow Account, Less than 12 Months [Abstract]
Cost, less than 12 months	1,196	0
Gross unrealized gains (losses), less than 12 months	6	0
Estimated fair value, less than 12 months	1,202	0
Fair Value of MSA Escrow Account, More than 12 Months [Abstract]
Cost, more than 12 months	28,943	30,144
Gross unrealized gains (losses), more than 12 months	(3,652)	(3,389)
Estimated fair value, more than 12 months	$ 25,291	$ 26,755

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Derivative Instruments (Details) - Foreign Currency [Member] € in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2024 USD ($)	Mar. 31, 2024 EUR (€)	Dec. 31, 2023 USD ($)	Dec. 31, 2023 EUR (€)
Derivative Instruments [Abstract]
Notional amount of contracts executed	$ 0.0
Other Current Assets [Member]
Derivative Instruments [Abstract]
Fair value, asset	0.0		$ 0.3
Accrued Liabilities [Member]
Derivative Instruments [Abstract]
Fair value, liability	$ 0.1		$ 0.1
Purchase [Member]
Derivative Instruments [Abstract]
Notional amount | €		€ 9.2		€ 15.2
Sale [Member]
Derivative Instruments [Abstract]
Notional amount | €		€ 9.2		€ 15.2

XML

Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Fair Value of Financial Instruments [Abstract]
Carrying value of long-term debt	$ 368,541	$ 368,541
Senior Secured Notes [Member]
Fair Value of Financial Instruments [Abstract]
Interest rate	5.625%
Carrying value of long-term debt	$ 250,000	250,000
Convertible Senior Notes [Member]
Fair Value of Financial Instruments [Abstract]
Interest rate	2.50%
Carrying value of long-term debt	$ 118,541	118,541
Fair Value [Member] | Senior Secured Notes [Member]
Fair Value of Financial Instruments [Abstract]
Fair value of long-term debt	237,300	234,900
Fair Value [Member] | Convertible Senior Notes [Member]
Fair Value of Financial Instruments [Abstract]
Fair value of long-term debt	$ 117,500	$ 114,700

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Inventories (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Mar. 31, 2024
Inventories [Abstract]
Raw materials and work in process	$ 5,201	$ 7,148
Leaf tobacco	34,894	41,461
Other	1,711	1,437
Inventories	98,960	105,467
Inventory valuation allowance	20,600	20,600
Zig-Zag Products [Member]
Inventories [Abstract]
Finished goods	41,783	39,103
Stoker's Products [Member]
Inventories [Abstract]
Finished goods	8,090	10,232
Creative Distribution Solutions [Member]
Inventories [Abstract]
Finished goods	7,281	$ 6,086
Leaf Tobacco Inventory [Member] | Other Operating Income [Member]
Inventories [Abstract]
Inventory reserve	$ 15,200

XML

Other Current Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Other Current Assets [Abstract]
Inventory deposits	$ 7,392	$ 5,707
Insurance deposit	0	3,000
Prepaid taxes	0	153
Settlement receivable	0	4,000
Insurance recovery receivable	15,181	15,181
Other	11,864	12,740
Total	$ 34,437	$ 40,781

XML

Property, Plant, and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Property, Plant and Equipment [Abstract]
Property, plant and equipment	$ 47,860	$ 47,560
Accumulated depreciation	(23,070)	(22,260)
Net property, plant and equipment	24,790	25,300
Land [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	22	22
Buildings and Improvements [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	4,217	3,956
Leasehold Improvements [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	6,614	5,440
Machinery and Equipment [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	28,568	29,751
Furniture and Fixtures [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	$ 8,439	$ 8,391

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Other Assets, Summary (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Other Assets [Abstract]
Non-marketable equity investments	$ 2,882	$ 2,405
Debt security investment	6,750	6,750
Capitalized software	6,108	5,923
Available-for-sale marketable securities	7,125	0
Other	88	88
Total	$ 22,953	$ 15,166

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Other Assets, Debt and Non-Marketable Equity Investments (Details) - USD ($) $ in Thousands		1 Months Ended			3 Months Ended
	Jul. 31, 2022	Jan. 31, 2024	Jul. 31, 2021	Apr. 30, 2021	Mar. 31, 2024	Dec. 31, 2023	Jun. 30, 2023	Mar. 31, 2023
Other Assets [Abstract]
Equity investments					$ 2,882	$ 2,405
Payment for investment					500			$ 0
Debt security investment					$ 6,750	6,750
Old Pal Holding Company LLC [Member]
Other Assets [Abstract]
Payment for investment	$ 1,000		$ 8,000
Accrued interest receivable	200
Debt security investment	$ 9,200
Interest rate					3.00%
Extension period for maturity date					1 year
Weighted average interest rate					3.00%			3.00%
Allowance for credit losses						1,000	$ 300
Old Pal Holding Company LLC [Member] | Other Current Assets [Member]
Other Assets [Abstract]
Accrued interest receivable					$ 200	100
Old Pal Holding Company LLC [Member] | Level 3 [Member]
Other Assets [Abstract]
Debt security investment						$ 6,900	$ 7,700
TeaZa [Member]
Other Assets [Abstract]
Equity investments		$ 800
Ownership interest		18.744%
Payment for investment		$ 500
Payable to be offset against allocated portion of future profit distributions		$ 300
TeaZa [Member] | Minimum [Member]
Other Assets [Abstract]
Ownership interest that can be purchased					51.744%
TeaZa [Member] | Maximum [Member]
Other Assets [Abstract]
Ownership interest that can be purchased					100.00%
Docklight Brands, Inc. [Member]
Other Assets [Abstract]
Payment for investment				$ 8,700
Gain (loss) on investment								$ (4,900)

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Other Assets, Captive Investments (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Captive Investments [Abstract]
Amortized cost	$ 32,073	$ 32,073
Gross unrealized gains (losses)	(3,646)	(3,389)
Estimated fair value	28,427	$ 28,684
Interchange IC [Member]
Captive Investments [Abstract]
Amortized cost	7,119
Gross unrealized gains (losses)	6
Estimated fair value	7,125
Interchange IC [Member] | Corporate Bonds [Member]
Captive Investments [Abstract]
Amortized cost	1,703
Gross unrealized gains (losses)	8
Estimated fair value	1,711
Interchange IC [Member] | U.S. Governmental Agency Obligations [Member]
Captive Investments [Abstract]
Amortized cost	1,799
Gross unrealized gains (losses)	(3)
Estimated fair value	1,796
Interchange IC [Member] | Real Estate Investment Trusts and Exchange Traded Funds [Member]
Captive Investments [Abstract]
Amortized cost	3,617
Gross unrealized gains (losses)	1
Estimated fair value	$ 3,618

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Other Assets, Captive Investments by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Captive Investments [Abstract]
Total	$ 28,427	$ 28,684
Interchange IC [Member]
Captive Investments [Abstract]
Due within one year	1,711
Due after ten years	1,796
Real estate investment trusts and exchange traded funds	3,618
Total	$ 7,125

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Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Accrued Liabilities [Abstract]
Accrued payroll and related items	$ 4,669	$ 7,085
Customer returns and allowances	4,642	5,239
Taxes payable	6,995	3,821
Lease liabilities	2,615	2,678
Accrued interest	2,221	6,682
Other	9,832	8,130
Total	$ 30,974	$ 33,635

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Notes Payable and Long-Term Debt, Summary of Notes Payable and Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Notes Payable and Long-Term Debt [Abstract]
Gross notes payable and long-term debt	$ 368,541	$ 368,541
Less deferred finance charges	(2,648)	(3,183)
Less current maturities	(59,397)	(58,294)
Net notes payable and long-term debt	306,496	307,064
Senior Secured Notes [Member]
Notes Payable and Long-Term Debt [Abstract]
Gross notes payable and long-term debt	250,000	250,000
Convertible Senior Notes [Member]
Notes Payable and Long-Term Debt [Abstract]
Gross notes payable and long-term debt	118,541	$ 118,541
Net notes payable and long-term debt	$ 59,000

XML

Notes Payable and Long-Term Debt, Senior Secured Notes (Details) - Senior Secured Notes [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Feb. 11, 2021
Notes Payable and Long-Term Debt [Abstract]
Face amount		$ 250.0
Interest rate	5.625%
Maturity date	Feb. 15, 2026
Guarantee threshold amount for obligations	$ 15.0
Redemption price (expressed as a percentage of the principal amount to be redeemed) if the Company experiences a change in control	101.00%
Debt issuance costs		$ 6.4
On or after February 15, 2023 [Member]
Notes Payable and Long-Term Debt [Abstract]
Redemption price (expressed as a percentage of the principal amount to be redeemed)	102.813%
On or after February 15, 2024 [Member]
Notes Payable and Long-Term Debt [Abstract]
Redemption price (expressed as a percentage of the principal amount to be redeemed)	101.406%
On or after February 15, 2025 and thereafter [Member]
Notes Payable and Long-Term Debt [Abstract]
Redemption price (expressed as a percentage of the principal amount to be redeemed)	100.00%

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Notes Payable and Long-Term Debt, 2021 Revolving Credit Facility (Details) - Amended Revolving Credit Facility [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Dec. 31, 2023	Feb. 11, 2021
Notes Payable and Long-Term Debt [Abstract]
Maximum borrowing capacity			$ 25.0
Letters of credit outstanding		$ 1.4
Debt issuance costs	$ 0.5
Gain on debt extinguishment	$ 0.2

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Notes Payable and Long-Term Debt, 2023 ABL Facility (Details) $ in Millions		3 Months Ended
	Nov. 07, 2023 USD ($) qtr	Mar. 31, 2024 USD ($)
2023 ABL Facility [Member]
Notes Payable and Long-Term Debt [Abstract]
Maximum borrowing capacity	$ 75.0
Accordion feature	$ 40.0
Percentage used in calculation of borrowing base	85.00%
Percentage used in calculation of LILO borrowing base	10.00%
Fixed charge coverage ratio	1
Number of consecutive quarters to maintain minimum fixed charge coverage ratio | qtr	4
Percentage of line cap	12.50%
Threshold excess availability	$ 9.4
Period to maintain excess availability	30 days
Period prior to maturity date of any material debt outstanding	91 days
Excess availability threshold	$ 15.0
Amount drawn under credit facility		$ 0.0
Letters of credit outstanding		1.2
Available balance		59.0
Debt issuance costs		$ 2.6
2023 ABL Facility [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Historical excess availability threshold	33.33%
2023 ABL Facility [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Historical excess availability threshold	66.66%
SOFR Loans [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate margin	2.25%
Applicable margin on variable rate, Level I	1.75%
Applicable margin on variable rate, Level II	2.00%
Applicable margin on variable rate, Level III	2.25%
Base Rate Loans [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate margin	1.25%
Applicable margin on variable rate, Level I	0.75%
Applicable margin on variable rate, Level II	1.00%
Applicable margin on variable rate, Level III	1.25%
LILO Loans that are Base Rate Loans [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate margin	2.25%
LILO Loans that are SOFR Loans [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate margin	3.25%

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Notes Payable and Long-Term Debt, Convertible Senior Notes (Details)	1 Months Ended	3 Months Ended		12 Months Ended
	Jul. 31, 2019 USD ($)	Mar. 31, 2024 USD ($) shares $ / shares	Mar. 31, 2023 USD ($)	Dec. 31, 2023 USD ($)	Nov. 07, 2023 USD ($)
Notes Payable and Long-Term Debt [Abstract]
Gain on extinguishment of debt		$ 0	$ 777,000
Outstanding principal amount		368,541,000		$ 368,541,000
Notes payable and long-term debt		$ 306,496,000		307,064,000
Strike price (in dollars per share) | $ / shares		53.4
Cap price (in dollars per share) | $ / shares		82.86
Payment for cost of capped call transactions	$ 20,530,000
Convertible Senior Notes [Member]
Notes Payable and Long-Term Debt [Abstract]
Face amount	172,500,000
Interest rate		2.50%
Maturity date		Jul. 15, 2024
Principal amount of convertible debt repurchased				44,000,000
Gain on extinguishment of debt				1,900,000
Outstanding principal amount		$ 118,541,000		$ 118,541,000
Shares issued upon conversion (in shares) | shares		2,219,704
Conversion rate		18.7252
Principal amount of notes to be converted		$ 1,000
Conversion price (in dollars per share) | $ / shares		$ 53.4
Pre-determined threshold value for adjusting conversion price as a result of dividends paid (in dollars per share) | $ / shares		$ 0.04
Notes to be refinanced					$ 75,000,000
Notes payable and long-term debt		$ 59,000,000
Debt issuance costs	$ 5,900,000

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Leases (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Operating Lease Cost [Abstract]
Variable lease cost	[1]	$ 297	$ 225
Short-term lease cost		0	6
Total operating lease cost		894	880
Financing Lease Cost [Abstract]
Financing lease cost		150	338
Assets [Abstract]
Right of use assets - Operating		$ 8,714		$ 8,950
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]		Total lease assets		Total lease assets
Right of use assets - Financing		$ 2,154		$ 2,530
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration]		Total lease assets		Total lease assets
Total lease assets		$ 10,868		$ 11,480
Liabilities [Abstract]
Current lease liabilities - Operating	[2]	$ 1,946		$ 1,991
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]		Accrued Liabilities, Current		Accrued Liabilities, Current
Current lease liabilities - Financing	[2]	$ 669		$ 687
Finance Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]		Accrued Liabilities, Current		Accrued Liabilities, Current
Long-term lease liabilities - Operating		$ 7,925		$ 8,374
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]		Operating and Finance Lease, Liability, Noncurrent		Operating and Finance Lease, Liability, Noncurrent
Long-term lease liabilities - Financing		$ 1,435		$ 1,576
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible Enumeration]		Operating and Finance Lease, Liability, Noncurrent		Operating and Finance Lease, Liability, Noncurrent
Total lease liabilities		$ 11,975		$ 12,628
Cost of Sales [Member]
Operating Lease Cost [Abstract]
Operating lease cost		133	128
Selling, General and Administrative [Member]
Operating Lease Cost [Abstract]
Operating lease cost		464	521
Financing Lease Cost [Abstract]
Financing lease cost		$ 150	$ 338

[1] Variable lease cost includes elements of a contract that do not represent a good or service but for which the lessee is responsible for paying.

[2] Reported within accrued liabilities on the balance sheet.

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Income Taxes (Details)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Income Taxes [Abstract]
Effective income tax rate	23.40%	25.20%

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Share Incentive Plans, Equity Incentive Plans (Details) - shares	Mar. 31, 2024	Mar. 22, 2021
RSUs [Member]
Share Incentive Plans [Abstract]
Number of awards granted, net of forfeitures (in shares)	325,523
2021 Plan [Member]
Share Incentive Plans [Abstract]
Number of shares authorized for issuance (in shares)		1,290,000
Number of shares available for future grant (in shares)	725,496
2021 Plan [Member] | RSUs [Member]
Share Incentive Plans [Abstract]
Number of awards granted, net of forfeitures (in shares)	400,682
2021 Plan [Member] | Stock Options [Member]
Share Incentive Plans [Abstract]
Number of awards granted, net of forfeitures (in shares)	161,658
2021 Plan [Member] | Performance-Based Restricted Stock Units [Member]
Share Incentive Plans [Abstract]
Number of awards granted, net of forfeitures (in shares)	102,216
2015 Plan [Member]
Share Incentive Plans [Abstract]
Number of shares authorized for issuance (in shares)		100,052
Number of shares available for future grant (in shares)	0
2006 Plan [Member]
Share Incentive Plans [Abstract]
Number of shares available for future grant (in shares)	0

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Share Incentive Plans, Stock Option Activity (Details) - 2006, 2015 and 2021 Plans [Member] - Stock Options [Member] - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Stock Option Shares [Roll Forward]
Outstanding, beginning balance (in shares)	656,951	683,214	683,214
Granted (in shares)	54,289		77,519
Exercised (in shares)	(198)		(33,851)
Forfeited (in shares)	(6,433)		(69,931)
Outstanding, ending balance (in shares)	704,609		656,951
Weighted Average Exercise Price [Abstract]
Outstanding, beginning balance (in dollars per share)	$ 29.79	$ 29.74	$ 29.74
Granted (in dollars per share)	27.19		20.71
Exercised (in dollars per share)	14.85		13.3
Forfeited (in dollars per share)	30.19		27.51
Outstanding, ending balance (in dollars per share)	29.59		29.79
Weighted Average Grant Date Fair Value [Abstract]
Outstanding, beginning balance (in dollars per share)	9.18	$ 9.24	9.24
Granted (in dollars per share)	9.21		6.45
Exercised (in dollars per share)	4.41		4.24
Forfeited (in dollars per share)	8.85		9.11
Outstanding, ending balance (in dollars per share)	$ 9.19		$ 9.18
Intrinsic value of options exercised	$ 0.0	$ 0.2

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Share Incentive Plans, Assumptions for Options Granted Under 2006 Plan (Details) - 2006 Plan [Member] - Stock Options [Member] - Exercise Price $3.83 [Member]	3 Months Ended
	Mar. 31, 2024 $ / shares shares
Share Incentive Plans [Abstract]
Number of options (in shares) | shares	43,693
Exercise price (in dollars per share)	$ 3.83
Number of options exercisable (in shares) | shares	43,693
Remaining lives	4 months 6 days
Expected life	10 years
Exercise price (in dollars per share)	$ 3.83
Risk free interest rate	3.57%
Expected volatility	40.00%
Dividend yield	0.00%
Fair value at grant date (in dollars per share)	$ 2.17

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Share Incentive Plans, Assumptions for Options Granted Under 2015 Plan (Details) - 2015 Plan [Member] - Stock Options [Member] - $ / shares									3 Months Ended
	May 03, 2021	Feb. 18, 2021	Mar. 18, 2020	Oct. 24, 2019	Mar. 20, 2019	Mar. 07, 2018	May 17, 2017	Feb. 10, 2017	Mar. 31, 2024
February 10, 2017 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)								40,000
Options outstanding (in shares)									20,000
Number exercisable (in shares)									20,000
Exercise price (in dollars per share)									$ 13
Remaining lives									2 years 10 months 13 days
Risk free interest rate									1.89%
Expected volatility									27.44%
Expected life									6 years
Dividend yield									0.00%
Fair value at grant date (in dollars per share)									$ 3.98
May 17, 2017 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)							93,819
Options outstanding (in shares)									38,033
Number exercisable (in shares)									38,033
Exercise price (in dollars per share)									$ 15.41
Remaining lives									3 years 1 month 17 days
Risk free interest rate									1.76%
Expected volatility									26.92%
Expected life									6 years
Dividend yield									0.00%
Fair value at grant date (in dollars per share)									$ 4.6
March 7, 2018 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)						98,100
Options outstanding (in shares)									51,067
Number exercisable (in shares)									51,067
Exercise price (in dollars per share)									$ 21.21
Remaining lives									3 years 11 months 8 days
Risk free interest rate									2.65%
Expected volatility									28.76%
Expected life									6 years
Dividend yield									0.83%
Fair value at grant date (in dollars per share)									$ 6.37
March 20, 2019 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)					155,780
Options outstanding (in shares)									124,864
Number exercisable (in shares)									124,864
Exercise price (in dollars per share)									$ 47.58
Remaining lives									4 years 11 months 19 days
Risk free interest rate									2.34%
Expected volatility									30.95%
Expected life									6 years
Dividend yield									0.42%
Fair value at grant date (in dollars per share)									$ 15.63
October 24, 2019 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)				25,000
Options outstanding (in shares)									25,000
Number exercisable (in shares)									25,000
Exercise price (in dollars per share)									$ 20.89
Remaining lives									5 years 6 months 25 days
Risk free interest rate									1.58%
Expected volatility									31.93%
Expected life									6 years
Dividend yield									0.95%
Fair value at grant date (in dollars per share)									$ 6.27
March 18, 2020 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)			155,000
Options outstanding (in shares)									77,777
Number exercisable (in shares)									77,777
Exercise price (in dollars per share)									$ 14.85
Remaining lives									5 years 11 months 19 days
Risk free interest rate									0.79%
Expected volatility									35.72%
Expected life									6 years
Dividend yield									1.49%
Fair value at grant date (in dollars per share)									$ 4.41
February 18, 2021 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)		100,000
Options outstanding (in shares)									87,350
Number exercisable (in shares)									87,350
Exercise price (in dollars per share)									$ 51.75
Remaining lives									6 years 10 months 20 days
Risk free interest rate									0.56%
Expected volatility									28.69%
Expected life									6 years
Dividend yield									0.55%
Fair value at grant date (in dollars per share)									$ 13.77
May 3, 2021 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)	12,000
Options outstanding (in shares)									12,000
Number exercisable (in shares)									12,000
Exercise price (in dollars per share)									$ 47.76
Remaining lives									7 years 1 month 2 days
Risk free interest rate									0.84%
Expected volatility									29.03%
Expected life									6 years
Dividend yield									0.59%
Fair value at grant date (in dollars per share)									$ 13.06

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Share Incentive Plans, Assumptions for Options Granted Under 2021 Plan (Details) - 2021 Plan [Member] - Stock Options [Member] - $ / shares						3 Months Ended
	Mar. 11, 2024	May 12, 2023	Apr. 29, 2022	Mar. 14, 2022	May 17, 2021	Mar. 31, 2024
May 17, 2021 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)					7,500
Options outstanding (in shares)						7,500
Number exercisable (in shares)						7,500
Exercise price (in dollars per share)						$ 45.05
Remaining lives						7 years 1 month 17 days
Risk free interest rate						0.84%
Expected volatility						31.50%
Expected life						6 years
Dividend yield						0.63%
Fair value at grant date (in dollars per share)						$ 13.23
March 14, 2022 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)				100,000
Options outstanding (in shares)						70,690
Number exercisable (in shares)						47,442
Exercise price (in dollars per share)						$ 30.46
Remaining lives						7 years 11 months 15 days
Risk free interest rate						2.10%
Expected volatility						35.33%
Expected life						6 years
Dividend yield						1.01%
Fair value at grant date (in dollars per share)						$ 10.23
April 29, 2022 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)			14,827
Options outstanding (in shares)						14,827
Number exercisable (in shares)						9,935
Exercise price (in dollars per share)						$ 31.39
Remaining lives						8 years 29 days
Risk free interest rate						2.92%
Expected volatility						35.33%
Expected life						6 years
Dividend yield						0.98%
Fair value at grant date (in dollars per share)						$ 11.07
May 12, 2023 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)		77,519
Options outstanding (in shares)						77,519
Number exercisable (in shares)						77,519
Exercise price (in dollars per share)						$ 20.71
Remaining lives						9 years 1 month 13 days
Risk free interest rate						3.41%
Expected volatility						34.51%
Expected life						5 years 2 months 7 days
Dividend yield						1.61%
Fair value at grant date (in dollars per share)						$ 6.45
March 11, 2024 [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)	54,289
Options outstanding (in shares)						54,289
Number exercisable (in shares)						0
Exercise price (in dollars per share)						$ 27.19
Remaining lives						9 years 11 months 12 days
Risk free interest rate						4.06%
Expected volatility						35.09%
Expected life						5 years 2 months 7 days
Dividend yield						1.26%
Fair value at grant date (in dollars per share)						$ 9.21

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Share Incentive Plans, Compensation Expense Related to Options (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Compensation Expense [Abstract]
Compensation expense related to options	$ 0.3	$ 0.0
Unrecognized compensation expense related to options	$ 0.3
Period over which unrecognized compensation expense will be expensed	9 months

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Share Incentive Plans, Performance-Based Restricted Stock Units (Details) - Performance-Based Restricted Stock Units [Member] - USD ($) $ / shares in Units, $ in Millions						3 Months Ended
	Mar. 01, 2024	May 04, 2023	Mar. 14, 2022	Feb. 18, 2021	Mar. 18, 2020	Mar. 31, 2024	Mar. 31, 2023
Share Incentive Plans [Abstract]
Period between performance period and measurement date						65 days
PRSUs outstanding (in shares)						447,266
Compensation expense						$ 0.9	$ 0.5
Unrecognized compensation expense						$ 6.1
Employees [Member]
Share Incentive Plans [Abstract]
Performance period						5 years
March 18, 2020 [Member] | Employees [Member]
Share Incentive Plans [Abstract]
Number of PRSUs granted (in shares)					94,000
PRSUs outstanding (in shares)						80,910
Fair value as of grant date (in dollars per share)					$ 14.85
Remaining lives						9 months
February 18, 2021 [Member] | Employees [Member]
Share Incentive Plans [Abstract]
Number of PRSUs granted (in shares)				100,000
PRSUs outstanding (in shares)						82,190
Fair value as of grant date (in dollars per share)				$ 51.75
Remaining lives						1 year 9 months
March 14, 2022 [Member] | Employees [Member]
Share Incentive Plans [Abstract]
Number of PRSUs granted (in shares)			49,996
PRSUs outstanding (in shares)						40,325
Fair value as of grant date (in dollars per share)			$ 30.46
Remaining lives						2 years 9 months
May 4, 2023 [Member] | Employees [Member]
Share Incentive Plans [Abstract]
Number of PRSUs granted (in shares)		133,578
PRSUs outstanding (in shares)						132,520
Fair value as of grant date (in dollars per share)		$ 22.25
Remaining lives						1 year 9 months
March 1, 2024 [Member] | Employees [Member]
Share Incentive Plans [Abstract]
Number of PRSUs granted (in shares)	111,321
PRSUs outstanding (in shares)						111,321
Fair value as of grant date (in dollars per share)	$ 26.52
Remaining lives						2 years 9 months

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Share Incentive Plans, Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Millions							3 Months Ended
	Mar. 11, 2024	Mar. 01, 2024	May 08, 2023	May 05, 2023	Apr. 29, 2022	Mar. 14, 2022	Mar. 31, 2024	Mar. 31, 2023
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Period over which unrecognized compensation expense will be expensed							9 months
RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Number of awards granted (in shares)							325,523
Compensation expense							$ 0.9	$ 0.3
Unrecognized compensation expense							$ 5.1
Period over which unrecognized compensation expense will be expensed							2 years 6 months 7 days
RSUs [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Vesting period							1 year
RSUs [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Vesting period							5 years
RSUs [Member] | March 14, 2022 [Member] | Vest in Five Years [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Number of RSUs granted (in shares)						50,004
RSUs outstanding (in shares)							39,367
Fair value as of grant date (in dollars per share)						$ 30.46
Remaining lives							2 years 9 months
RSUs [Member] | March 14, 2022 [Member] | Vest in Three Years [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Number of RSUs granted (in shares)						28,726
RSUs outstanding (in shares)							9,481
Fair value as of grant date (in dollars per share)						$ 30.46
Remaining lives							9 months
RSUs [Member] | April 29, 2022 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Number of RSUs granted (in shares)					4,522
RSUs outstanding (in shares)							4,522
Fair value as of grant date (in dollars per share)					$ 31.39
Remaining lives							2 years 9 months
RSUs [Member] | May 5, 2023 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Number of RSUs granted (in shares)				130,873
RSUs outstanding (in shares)							128,406
Fair value as of grant date (in dollars per share)				$ 22.25
Remaining lives							2 years
RSUs [Member] | May 8, 2023 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Number of RSUs granted (in shares)			20,101
RSUs outstanding (in shares)							20,101
Fair value as of grant date (in dollars per share)			$ 21.77
Remaining lives							1 month 6 days
RSUs [Member] | March 1, 2024 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Number of RSUs granted (in shares)		105,257
RSUs outstanding (in shares)							105,257
Fair value as of grant date (in dollars per share)		$ 26.52
Remaining lives							3 years
RSUs [Member] | March 11, 2024 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract]
Number of RSUs granted (in shares)	18,389
RSUs outstanding (in shares)							18,389
Fair value as of grant date (in dollars per share)	$ 27.19
Remaining lives							9 months

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Contingencies (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Mar. 31, 2024
Contingencies [Abstract]
Settlement receivable	$ 4,000	$ 0
Complaint Related to Merger of SDI [Member] | Other Income [Member]
Contingencies [Abstract]
Gain on settlement	4,000
Complaint Related to Merger of SDI [Member] | Other Current Assets [Member]
Contingencies [Abstract]
Settlement receivable	$ 4,000

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Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Numerator [Abstract]
Net income attributable to Turning Point Brands, Inc.	$ 12,010	$ 7,597
Denominator [Abstract]
Basic weighted average shares (in shares)	17,654,684	17,531,414
Basic EPS (in dollars per share)	$ 0.68	$ 0.43
Numerator [Abstract]
Net income attributable to Turning Point Brands, Inc.	$ 12,010	$ 7,597
Interest expense related to Convertible Senior Notes, net of tax	731	954
Diluted net income attributable to Turning Point Brands. Inc.	$ 12,741	$ 8,551
Denominator [Abstract]
Basic weighted average shares (in shares)	17,654,684	17,531,414
Convertible Senior Notes (in shares)	2,218,018	3,029,699
Stock options and restricted stock units (in shares)	297,612	108,039
Diluted weighted average shares (in shares)	20,170,314	20,669,152
Diluted EPS (in dollars per share)	$ 0.63	$ 0.41

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Segment Information, Financial Information of Reportable Segments (Details) $ in Thousands		3 Months Ended
		Mar. 31, 2024 USD ($) Segment	Mar. 31, 2023 USD ($)	Dec. 31, 2023 USD ($)
Segment Information [Abstract]
Number of reportable segments | Segment		3
Segment Information [Abstract]
Net sales		$ 97,058	$ 100,956
Gross profit		51,912	48,617
Operating income (loss)		19,266	17,842
Interest expense, net		3,479	4,010
Investment (income) loss		(119)	4,799
Gain on extinguishment of debt		0	(777)
Income before income taxes		15,906	9,810
Capital expenditures		366	2,435
Depreciation and amortization		1,723	1,547
Assets		586,316		$ 569,356
Zig- Zag and Stoker's Products [Member]
Segment Information [Abstract]
Net sales		83,064	75,549
Gross profit		48,353	41,855
Operating income (loss)		19,269	17,581
Capital expenditures		366	2,435
Depreciation and amortization		1,153	973
Assets		559,125		542,352
Creative Distribution Solutions [Member]
Segment Information [Abstract]
Net sales		13,994	25,407
Reportable Segments [Member] | Zig-Zag Products [Member]
Segment Information [Abstract]
Net sales		46,697	41,887
Gross profit		27,538	22,390
Operating income (loss)		18,000	13,641
Capital expenditures		166	973
Depreciation and amortization		274	267
Assets		176,629		177,135
Reportable Segments [Member] | Stoker's Products [Member]
Segment Information [Abstract]
Net sales		36,367	33,662
Gross profit		20,815	19,465
Operating income (loss)		15,396	14,563
Capital expenditures		200	1,462
Depreciation and amortization		879	706
Assets		187,794		174,994
Reportable Segments [Member] | Creative Distribution Solutions [Member]
Segment Information [Abstract]
Net sales		13,994	25,407
Gross profit		3,559	6,762
Operating income (loss)		(3)	261
Capital expenditures		0	0
Depreciation and amortization		570	574
Assets		27,191		27,004
Corporate Unallocated [Member]
Segment Information [Abstract]
Operating income (loss)	[1],[2]	(14,127)	(10,623)
Operating costs related to PMTA		800	100
Assets	[3]	194,702		$ 190,223
Reconciling Items [Member]
Segment Information [Abstract]
Interest expense, net		3,479	4,010
Investment (income) loss		(119)	4,799
Gain on extinguishment of debt		$ 0	$ (777)

[1] Includes corporate costs that are not allocated to any of the three reportable segments.

[2] Includes costs related to PMTA of $0.8 million in 2024 and $0.1 million in 2023.

[3] Includes assets not assigned to the three reportable segments. All goodwill has been allocated to the reportable segments.

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Segment Information, Revenue Disaggregation - Sales Channel (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Net Sales by Sales Channel [Abstract]
Net sales	$ 97,058	$ 100,956
Creative Distribution Solutions [Member]
Net Sales by Sales Channel [Abstract]
Net sales	13,994	25,407
Creative Distribution Solutions [Member] | Business to Business [Member]
Net Sales by Sales Channel [Abstract]
Net sales	12,585	22,493
Creative Distribution Solutions [Member] | Business to Consumer - Online [Member]
Net Sales by Sales Channel [Abstract]
Net sales	1,380	2,810
Creative Distribution Solutions [Member] | Other [Member]
Net Sales by Sales Channel [Abstract]
Net sales	$ 29	$ 104

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Segment Information, Net Sales - Domestic and Foreign (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Segment Information [Abstract]
Net sales	$ 97,058	$ 100,956
Reportable Geographical Component [Member] | Domestic [Member]
Segment Information [Abstract]
Net sales	89,910	93,860
Reportable Geographical Component [Member] | Foreign [Member]
Segment Information [Abstract]
Net sales	$ 7,148	$ 7,096

XML

Additional Information with Respect to Unrestricted Subsidiary, Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Income Statement [Abstract]
Net sales	$ 97,058	$ 100,956
Cost of sales	45,146	52,339
Gross profit	51,912	48,617
Selling, general, and administrative expenses	32,646	30,775
Operating income	19,266	17,842
Interest expense, net	3,479	4,010
Investment (gain) loss	(119)	4,799
Gain on extinguishment of debt	0	(777)
Income before income taxes	15,906	9,810
Income tax expense (benefit)	3,727	2,468
Consolidated net income	12,179	7,342
Net income (loss) attributable to non-controlling interest	169	(255)
Net income attributable to Turning Point Brands, Inc.	12,010	7,597
Company and Restricted Subsidiaries [Member]
Income Statement [Abstract]
Net sales	83,064	75,549
Cost of sales	34,711	33,694
Gross profit	48,353	41,855
Selling, general, and administrative expenses	29,084	24,274
Operating income	19,269	17,581
Interest expense, net	3,479	4,010
Investment (gain) loss	(119)	4,799
Gain on extinguishment of debt	0	(777)
Income before income taxes	15,909	9,549
Income tax expense (benefit)	3,728	2,402
Consolidated net income	12,181	7,147
Net income (loss) attributable to non-controlling interest	169	(255)
Net income attributable to Turning Point Brands, Inc.	12,012	7,402
Unrestricted Subsidiary [Member]
Income Statement [Abstract]
Net sales	13,994	25,407
Cost of sales	10,435	18,645
Gross profit	3,559	6,762
Selling, general, and administrative expenses	3,562	6,501
Operating income	(3)	261
Interest expense, net	0	0
Investment (gain) loss	0	0
Gain on extinguishment of debt	0	0
Income before income taxes	(3)	261
Income tax expense (benefit)	(1)	66
Consolidated net income	(2)	195
Net income (loss) attributable to non-controlling interest	0	0
Net income attributable to Turning Point Brands, Inc.	$ (2)	$ 195

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Additional Information with Respect to Unrestricted Subsidiary, Balance Sheets (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash	$ 130,903	$ 117,886	$ 104,801	$ 106,403
Accounts receivable, net	8,198	9,989
Inventories, net	105,467	98,960
Other current assets	34,437	40,781
Total current assets	279,005	267,616
Property, plant, and equipment, net	24,790	25,300
Deferred income taxes	1,426	1,468
Right of use assets	10,868	11,480
Deferred financing costs, net	2,305	2,450
Goodwill	136,365	136,250
Other intangible assets, net	80,177	80,942
Master Settlement Agreement (MSA) escrow deposits	28,427	28,684
Other assets	22,953	15,166
Investment in unrestricted subsidiaries	0	0
Total assets	586,316	569,356
Current liabilities:
Accounts payable	18,934	8,407
Accrued liabilities	30,974	33,635
Current portion of long-term debt	59,397	58,294
Total current liabilities	109,305	100,336
Notes payable and long-term debt	306,496	307,064
Lease liabilities	9,360	9,950
Total liabilities	425,161	417,350
Commitments and contingencies
Stockholders' equity:
Total Turning Point Brands, Inc. Stockholders' Equity/Net parent investment in unrestricted subsidiaries	159,964	150,976
Non-controlling interest	1,191	1,030
Total stockholders' equity	161,155	152,006	$ 119,934	$ 113,380
Total liabilities and stockholders' equity	586,316	569,356
Eliminations [Member]
Current assets:
Cash	0	0
Accounts receivable, net	0	0
Inventories, net	0	0
Other current assets	0	0
Total current assets	0	0
Property, plant, and equipment, net	0	0
Deferred income taxes	0	0
Right of use assets	0	0
Deferred financing costs, net	0	0
Goodwill	0	0
Other intangible assets, net	0	0
Master Settlement Agreement (MSA) escrow deposits	0	0
Other assets	0	0
Investment in unrestricted subsidiaries	(62,732)	(48,229)
Total assets	(62,732)	(48,229)
Current liabilities:
Accounts payable	0	0
Accrued liabilities	0	0
Current portion of long-term debt	0	0
Total current liabilities	0	0
Notes payable and long-term debt	0	0
Lease liabilities	0	0
Total liabilities	0	0
Commitments and contingencies
Stockholders' equity:
Total Turning Point Brands, Inc. Stockholders' Equity/Net parent investment in unrestricted subsidiaries	(62,732)	(48,229)
Non-controlling interest	0	0
Total stockholders' equity	(62,732)	(48,229)
Total liabilities and stockholders' equity	(62,732)	(48,229)
Company and Restricted Subsidiaries [Member]
Current assets:
Cash	126,066	116,725
Accounts receivable, net	8,198	9,989
Inventories, net	99,381	91,679
Other current assets	32,836	36,937
Total current assets	266,481	255,330
Property, plant, and equipment, net	24,705	25,142
Deferred income taxes	1,426	1,468
Right of use assets	10,764	11,359
Deferred financing costs, net	2,305	2,450
Goodwill	136,365	136,250
Other intangible assets, net	66,199	66,490
Master Settlement Agreement (MSA) escrow deposits	28,427	28,684
Other assets	22,453	15,166
Investment in unrestricted subsidiaries	62,732	48,229
Total assets	621,857	590,568
Current liabilities:
Accounts payable	18,596	7,781
Accrued liabilities	29,618	32,052
Current portion of long-term debt	59,397	58,294
Total current liabilities	107,611	98,127
Notes payable and long-term debt	306,496	307,064
Lease liabilities	9,327	9,898
Total liabilities	423,434	415,089
Commitments and contingencies
Stockholders' equity:
Total Turning Point Brands, Inc. Stockholders' Equity/Net parent investment in unrestricted subsidiaries	197,232	174,449
Non-controlling interest	1,191	1,030
Total stockholders' equity	198,423	175,479
Total liabilities and stockholders' equity	621,857	590,568
Unrestricted Subsidiary [Member]
Current assets:
Cash	4,837	1,161
Accounts receivable, net	0	0
Inventories, net	6,086	7,281
Other current assets	1,601	3,844
Total current assets	12,524	12,286
Property, plant, and equipment, net	85	158
Deferred income taxes	0	0
Right of use assets	104	121
Deferred financing costs, net	0	0
Goodwill	0	0
Other intangible assets, net	13,978	14,452
Master Settlement Agreement (MSA) escrow deposits	0	0
Other assets	500	0
Investment in unrestricted subsidiaries	0	0
Total assets	27,191	27,017
Current liabilities:
Accounts payable	338	626
Accrued liabilities	1,356	1,583
Current portion of long-term debt	0	0
Total current liabilities	1,694	2,209
Notes payable and long-term debt	0	0
Lease liabilities	33	52
Total liabilities	1,727	2,261
Commitments and contingencies
Stockholders' equity:
Total Turning Point Brands, Inc. Stockholders' Equity/Net parent investment in unrestricted subsidiaries	25,464	24,756
Non-controlling interest	0	0
Total stockholders' equity	25,464	24,756
Total liabilities and stockholders' equity	$ 27,191	$ 27,017

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Dividends and Share Repurchases (Details) - USD ($) $ / shares in Units, $ in Thousands				3 Months Ended
	Apr. 12, 2024	Feb. 24, 2022	Oct. 25, 2021	Mar. 31, 2024	Feb. 25, 2020
Share Repurchases [Abstract]
Share repurchase program authorized amount		$ 50,000	$ 50,000		$ 50,000
Increase in share repurchase program authorized amount		$ 24,600	$ 30,700
Common stock repurchased				$ 2,079
Remaining share repurchase program authorized amount				$ 25,100
Dividend Declared Q1-2024 [Member]
Dividends [Abstract]
Dividend payable, date to be paid				Apr. 12, 2024
Dividend payable, date of record				Mar. 22, 2024
Dividend Declared Q1-2024 [Member] | Subsequent Event [Member]
Dividends [Abstract]
Cash dividends paid per common share (in dollars per share)	$ 0.07