CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The accompanying condensed consolidating financial information has been prepared and presented pursuant to Securities and Exchange Commission Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered”. Each of the subsidiary guarantors are 100% owned, directly or indirectly, by the Company, and all guarantees are joint and several and subject to certain automatic release provisions. Relief from the financial statement requirements under Rule 3-10 is being provided because the Company's guarantee release provisions are considered customary pursuant to Section 2510.5 of the SEC Division of Corporation Finance Financial Reporting Manual. The Company's investments in its consolidated subsidiaries are presented under the equity method of accounting.

The indenture of the 7.75% Senior Secured Notes contains similar guarantees and covenants to those of the 11% Senior Secured Notes, except the indenture has covenants that restrict the payment of dividends by the Company if the Company's consolidated earnings before interest, taxes, depreciation and amortization, as defined in the indenture, for the most recently ended four full quarters is less than $75,000 and the indenture also restricts the incurrence of debt if the Company's Leverage Ratio and its Secured Leverage Ratio, as defined in the indenture, exceed 3.0 and 1.5, respectively.

CONDENSED CONSOLIDATING BALANCE SHEETS



				March 31, 2013
						Subsidiary					Consolidated
	Parent/			Subsidiary		Non-		Consolidating			Vector Group
	Issuer			Guarantors		Guarantors		Adjustments			Ltd.
ASSETS:
Current assets:
Cash and cash equivalents	$	335,873		$	15,265	$	764	$	—		$	351,902
Investment securities available for sale	39,950			42,489		—		—			82,439
Accounts receivable - trade, net	—			10,236		180		—			10,416
Intercompany receivables	334			—		—		(334		)	—
Inventories	—			98,502		—		—			98,502
Deferred income taxes	30,719			3,573		—		—			34,292
Income taxes receivable, net	46,120			—		—		(29,316		)	16,804
Restricted assets	—			2,469		—		—			2,469
Other current assets	923			4,799		254		—			5,976
Total current assets	453,919			177,333		1,198		(29,650		)	602,800
Property, plant and equipment, net	3,336			54,346		499		—			58,181
Investment in consolidated real estate businesses, net	—			—		22,733		—			22,733
Long-term investments accounted for at cost	15,540			—		827		—			16,367
Long-term investments accounted for under the equity method	7,367			—		—		—			7,367
Investments in non-consolidated real estate businesses	—			—		119,603		—			119,603
Investments in consolidated subsidiaries	247,223			—		—		(247,223		)	—
Restricted assets	1,890			7,864		31		—			9,785
Deferred income taxes	36,476			9,125		5,581		—			51,182
Intangible asset	—			107,511		—		—			107,511
Prepaid pension costs	—			13,329		—		—			13,329
Other assets	47,786			9,626		499		—			57,911
Total assets	$	813,537		$	379,134	$	150,971	$	(276,873	)	$	1,066,769
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Current portion of notes payable and long-term debt	$	—		$	17,457	$	167	$	—		$	17,624
Current portion of employee benefits	—			2,824		—		—			2,824
Accounts payable	884			5,869		337		—			7,090
Intercompany payables	—			37		297		(334		)	—
Accrued promotional expenses	—			17,348		—		—			17,348
Income taxes payable, net	—			4,173		31,473		(29,316		)	6,330
Accrued excise and payroll taxes payable, net	—			7,215		—		—			7,215
Litigation accruals and current payments due under the Master Settlement Agreement	—			64,980		—		—			64,980
Deferred income taxes	21,561			9,633		—		—			31,194
Accrued interest	13,679			—		—		—			13,679
Other current liabilities	2,903			8,057		1,321		—			12,281
Total current liabilities	39,027			137,593		33,595		(29,650		)	180,565
Notes payable, long-term debt and other obligations, less current portion	614,751			13,222		23		—			627,996
Fair value of derivatives embedded within convertible debt	169,079			—		—		—			169,079
Non-current employee benefits	26,017			20,002		—		—			46,019
Deferred income taxes	72,193			34,548		4,242		—			110,983
Other liabilities, primarily litigation accruals and payments due under the Master Settlement Agreement	765			38,959		698		—			40,422
Total liabilities	921,832			244,324		38,558		(29,650		)	1,175,064
Commitments and contingencies
Stockholders' deficiency	(108,295		)	134,810		112,413		(247,223		)	(108,295		)
Total liabilities and stockholders' deficiency	$	813,537		$	379,134	$	150,971	$	(276,873	)	$	1,066,769

CONDENSED CONSOLIDATING BALANCE SHEETS



				December 31, 2012
						Subsidiary					Consolidated
	Parent/			Subsidiary		Non-		Consolidating			Vector Group
	Issuer			Guarantors		Guarantors		Adjustments			Ltd.
ASSETS:
Current assets:
Cash and cash equivalents	$	401,344		$	3,776	$	735	$	—		$	405,855
Investment securities available for sale	35,330			34,654		—		—			69,984
Accounts receivable - trade, net	—			11,183		64		—			11,247
Intercompany receivables	354			—		—		(354		)	—
Inventories	—			100,392		—		—			100,392
Deferred income taxes	33,238			3,371		—		—			36,609
Income taxes receivable, net	33,302			—		—		(26,523		)	6,779
Restricted assets	—			2,469		—		—			2,469
Other current assets	665			4,848		208		—			5,721
Total current assets	504,233			160,693		1,007		(26,877		)	639,056
Property, plant and equipment, net	2,104			54,810		239		—			57,153
Investment in consolidated real estate businesses, net	—			—		13,295		—			13,295
Long-term investments accounted for at cost	15,540			—		827		—			16,367
Long-term investments accounted for under the equity method	6,432			—		—		—			6,432
Investments in non- consolidated real estate businesses	—			—		119,219		—			119,219
Investments in consolidated subsidiaries	210,525			—		—		(210,525		)	—
Restricted assets	1,898			7,863		31		—			9,792
Deferred income taxes	38,077			5,669		5,396		—			49,142
Intangible asset	—			107,511		—		—			107,511
Prepaid pension costs	—			12,870		—		—			12,870
Other assets	39,534			16,144		216		—			55,894
Total assets	$	818,343		$	365,560	$	140,230	$	(237,402	)	$	1,086,731
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Current portion of notes payable and long-term debt	$	—		$	36,617	$	161	$	—		$	36,778
Current portion of employee benefits	—			2,824		—		—			2,824
Accounts payable	661			5,173		265		—			6,099
Intercompany payables	—			64		290		(354		)	—
Accrued promotional expenses	—			18,730		—		—			18,730
Income taxes payable, net	—			1,445		31,347		(26,523		)	6,269
Accrued excise and payroll taxes payable, net	—			20,419		—		—			20,419
Litigation accruals and current payments due under the Master Settlement Agreement	—			34,440		—		—			34,440
Deferred income taxes	23,304			3,995		—		—			27,299
Accrued interest	25,410			—		—		—			25,410
Other current liabilities	5,545			9,658		1,688		—			16,891
Total current liabilities	54,920			133,365		33,751		(26,877		)	195,159
Notes payable, long-term debt and other obligations, less current portion	572,023			14,860		63		—			586,946
Fair value of derivatives embedded within convertible debt	172,128			—		—		—			172,128
Non-current employee benefits	25,599			20,261		—		—			45,860
Deferred income taxes	71,777			33,793		3,962		—			109,532
Other liabilities, primarily litigation accruals and payments due under the Master Settlement Agreement	1,148			54,506		704		—			56,358
Total liabilities	897,595			256,785		38,480		(26,877		)	1,165,983
Commitments and contingencies
Stockholders' deficiency	(79,252		)	108,775		101,750		(210,525		)	(79,252		)
Total liabilities and stockholders' deficiency	$	818,343		$	365,560	$	140,230	$	(237,402	)	$	1,086,731

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS



				Three Months Ended March 31, 2013
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	240,402		$	—		$	—		$	240,402
Expenses:
Cost of goods sold	—			172,956			—			—			172,956
Operating, selling, administrative and general expenses	5,876			18,494			(20		)	—			24,350
Management fee expense	—			2,377			—			(2,377		)	—
Operating (loss) income	(5,876		)	46,575			20			2,377			43,096
Other income (expenses):
Interest expense	(32,960		)	(412		)	(4		)	—			(33,376		)
Change in fair value of derivatives embedded within convertible debt	3,049			—			—			—			3,049
Loss on extinguishment of debt	(21,458		)	—			—			—			(21,458		)
Equity income from non-consolidated real estate businesses	—			—			481			—			481
Equity loss on long-term investments	(23		)	—			—			—			(23		)
Gain on investment securities available for sale	—			5,406			—			—			5,406
Equity income in consolidated subsidiaries	31,288			—			—			(31,288		)	—
Management fee income	2,377			—			—			(2,377		)	—
Other, net	702			55			52			—			809
(Loss) income before provision for income taxes	(22,901		)	51,624			549			(31,288		)	(2,016		)
Income tax benefit (expense)	21,220			(20,657		)	(228		)	—			335
Net (loss) income	(1,681		)	30,967			321			(31,288		)	(1,681		)
Comprehensive income	$	4,233		$	34,445		$	321		$	(34,766	)	$	4,233

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS



				Three Months Ended March 31, 2012
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	257,606		$	—		$	—		$	257,606
Expenses:
Cost of goods sold	—			200,181			—			—			200,181
Operating, selling, administrative and general expenses	6,261			18,204			(486		)	—			23,979
Management fee expense	—			2,291			—			(2,291		)	—
Operating (loss) income	(6,261		)	36,930			486			2,291			33,446
Other income (expenses):
Interest expense	(24,909		)	(1,336		)	(7		)	—			(26,252		)
Change in fair value of derivatives embedded within convertible debt	(21,057		)	—			—			—			(21,057		)
Equity income from non-consolidated real estate businesses	—			—			2,863			—			2,863
Equity loss on long-term investments	(114		)	—			—			—			(114		)
Equity income in consolidated subsidiaries	24,618			—			—			(24,618		)	—
Management fee income	2,291			—			—			(2,291		)	—
Other, net	(95		)	27			—			—			(68		)
(Loss) income before provision for income taxes	(25,527		)	35,621			3,342			(24,618		)	(11,182		)
Income tax benefit (expense)	17,837			(13,233		)	(1,112		)	—			3,492
Net (loss) income	(7,690		)	22,388			2,230			(24,618		)	(7,690		)
Comprehensive (loss) income	$	(12,033	)	$	21,764		$	2,230		$	(23,994	)	$	(12,033	)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



				Three Months Ended March 31, 2013
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Net cash (used in) provided by operating activities	$	(36,170	)	$	40,891		$	900		$	(15,538	)	$	(9,917	)
Cash flows from investing activities:
Sale of investment securities	—			6,582			—			—			6,582
Purchase of investment securities	—			(5,000		)	—			—			(5,000		)
Investments in non-consolidated real estate businesses	—			—			(1,354		)	—			(1,354		)
Investments in consolidated real estate businesses	—			—			(7,617		)				(7,617		)
Increase in cash surrender value of life insurance policies	(21		)	(47		)	—						(68		)
Decrease (increase) in non-current restricted assets	8			(1		)	—						7
Investments in subsidiaries	(15,777		)	—			—			15,777			—
Capital expenditures	(1,315		)	(1,937		)	(305		)				(3,557		)
Net cash used in investing activities	(17,105		)	(403		)	(9,276		)	15,777			(11,007		)
Cash flows from financing activities:
Proceeds from debt issuance	450,000			—			—						450,000
Deferred financing costs	(11,447		)	—			—						(11,447		)
Repayments of debt	(415,000		)	(1,870		)	(34		)				(416,904		)
Borrowings under revolver	—			214,762			—						214,762
Repayments on revolver	—			(233,691		)	—						(233,691		)
Capital contributions received	—			5,800			9,977			(15,777		)	—
Intercompany dividends paid	—			(14,000		)	(1,538		)	15,538			—
Dividends and distributions on common stock	(35,749		)	—			—						(35,749		)
Net cash (used in) provided by financing activities	(12,196		)	(28,999		)	8,405			(239		)	(33,029		)
Net (decrease) increase in cash and cash equivalents	(65,471		)	11,489			29			—			(53,953		)
Cash and cash equivalents, beginning of period	401,344			3,776			735			—			405,855
Cash and cash equivalents, end of period	$	335,873		$	15,265		$	764		$	—		$	351,902

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



				Three Months Ended March 31, 2012
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Net cash (used in) provided by operating activities	$	(7,184	)	$	53,892		$	2,682		$	(8,814	)	$	40,576
Cash flows from investing activities:
Purchase of long-term investments	(5,000		)	—			—			—			(5,000		)
Investments in non-consolidated real estate businesses	—			—			(25		)	—			(25		)
Distributions from non-consolidated real estate businesses	—			—			740			—			740
Increase in cash surrender value of life insurance policies	(425		)	(47		)	—			—			(472		)
Decrease in non-current restricted assets	271			1,015			—			—			1,286
Issuance of notes receivable	(43		)	—			—			—			(43		)
Proceeds from sale of fixed assets	—			11			—			—			11
Investments in subsidiaries	(658		)	—			—			658			—
Capital expenditures	(759		)	(1,442		)	(42		)	—			(2,243		)
Net cash (used in) provided by investing activities	(6,614		)	(463		)	673			658			(5,746		)
Cash flows from financing activities:
Proceeds from debt issuance	—			9,870			—			—			9,870
Deferred financing costs	—			(150		)	—			—			(150		)
Repayments of debt	—			(11,494		)	(32		)	—			(11,526		)
Borrowings under revolver	—			236,595			—			—			236,595
Repayments on revolver	—			(258,064		)	—			—			(258,064		)
Capital contributions received	—			600			58			(658		)	—
Intercompany dividends paid	—			(6,000		)	(2,814		)	8,814			—
Dividends and distributions on common stock	(32,975		)	—			—			—			(32,975		)
Proceeds from exercise of Vector options and warrants.	44			—			—			—			44
Tax benefits from exercise of Vector options and warrants	4			—			—			—			4
Net cash used in financing activities	(32,927		)	(28,643		)	(2,788		)	8,156			(56,202		)
Net (decrease) increase in cash and cash equivalents	(46,725		)	24,786			567			—			(21,372		)
Cash and cash equivalents, beginning of period	238,262			2,488			173			—			240,923
Cash and cash equivalents, end of period	$	191,537		$	27,274		$	740		$	—		$	219,551