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



				June 30, 2013
						Subsidiary					Consolidated
	Parent/			Subsidiary		Non-		Consolidating			Vector Group
	Issuer			Guarantors		Guarantors		Adjustments			Ltd.
ASSETS:
Current assets:
Cash and cash equivalents	$	273,219		$	7,779	$	715	$	—		$	281,713
Investment securities available for sale	83,019			51,122		—		—			134,141
Accounts receivable - trade, net	—			12,257		238		—			12,495
Intercompany receivables	879			—		—		(879		)	—
Inventories	—			96,761		—		—			96,761
Deferred income taxes	28,804			3,213		—		—			32,017
Income taxes receivable, net	44,764			—		—		(28,133		)	16,631
Restricted assets	—			1,241		—		—			1,241
Other current assets	479			4,548		193		—			5,220
Total current assets	431,164			176,921		1,146		(29,012		)	580,219
Property, plant and equipment, net	4,115			53,408		544		—			58,067
Investment in consolidated real estate businesses, net	—			—		23,200		—			23,200
Long-term investments accounted for at cost	20,540			—		752		—			21,292
Long-term investments accounted for under the equity method	6,671			—		—		—			6,671
Investments in non-consolidated real estate businesses	—			—		142,878		—			142,878
Investments in consolidated subsidiaries	265,105			—		—		(265,105		)	—
Restricted assets	1,892			10,365		31		—			12,288
Deferred income taxes	39,627			8,643		5,870		—			54,140
Intangible asset	—			107,511		—		—			107,511
Prepaid pension costs	—			13,787		—		—			13,787
Other assets	39,568			9,920		2		—			49,490
Total assets	$	808,682		$	380,555	$	174,423	$	(294,117	)	$	1,069,543
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Current portion of notes payable and long-term debt	$	—		$	33,752	$	154	$	—		$	33,906
Current portion of employee benefits	—			2,824		—		—			2,824
Accounts payable	782			5,025		113		—			5,920
Intercompany payables	—			493		386		(879		)	—
Accrued promotional expenses	—			17,618		—		—			17,618
Income taxes payable	—			449		34,107		(28,133		)	6,423
Accrued excise and payroll taxes payable, net	—			1,208		—		—			1,208
Litigation accruals and current payments due under the Master Settlement Agreement	—			59,966		—		—			59,966
Deferred income taxes	21,328			10,702		—		—			32,030
Accrued interest	22,398			—		—		—			22,398
Other current liabilities	3,872			7,917		1,291		—			13,080
Total current liabilities	48,380			139,954		36,051		(29,012		)	195,373
Notes payable, long-term debt and other obligations, less current portion	623,215			11,567		3,570		—			638,352
Fair value of derivatives embedded within convertible debt	166,629			—		—		—			166,629
Non-current employee benefits	26,436			19,941		—		—			46,377
Deferred income taxes	72,616			35,306		4,522		—			112,444
Other liabilities, primarily litigation accruals and payments due under the Master Settlement Agreement	908			37,504		1,458		—			39,870
Total liabilities	938,184			244,272		45,601		(29,012		)	1,199,045
Commitments and contingencies
Stockholders' deficiency	(129,502		)	136,283		128,822		(265,105		)	(129,502		)
Total liabilities and stockholders' deficiency	$	808,682		$	380,555	$	174,423	$	(294,117	)	$	1,069,543

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	—			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 June 30, 2013
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	249,120		$	—		$	—		$	249,120
Expenses:
Cost of goods sold	—			180,430			—			—			180,430
Operating, selling, administrative and general expenses	5,506			18,455			489			—			24,450
Management fee expense	—			2,377			—			(2,377		)	—
Operating (loss) income	(5,506		)	47,858			(489		)	2,377			44,240
Other income (expenses):
Interest expense	(31,723		)	(360		)	(3		)	—			(32,086		)
Change in fair value of derivatives embedded within convertible debt	2,450			—			—			—			2,450
Equity income from non-consolidated real estate businesses	—			—			6,804			—			6,804
Equity income on long-term investments	846			—			—			—			846
Loss on investment securities available for sale	(197		)	—			—			—			(197		)
Equity income in consolidated subsidiaries	32,277			—			—			(32,277		)	—
Management fee income	2,377			—			—			(2,377		)	—
Other, net	1,245			150			76			—			1,471
Income before provision for income taxes	1,769			47,648			6,388			(32,277		)	23,528
Income tax benefit (expense)	11,742			(19,134		)	(2,625		)	—			(10,017		)
Net income	13,511			28,514			3,763			(32,277		)	13,511
Comprehensive income	$	14,633		$	27,179		$	3,763		$	(30,942	)	$	14,633

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS



				Three Months Ended June 30, 2012
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	276,594		$	—		$	—		$	276,594
Expenses:
Cost of goods sold	—			211,752			—			—			211,752
Operating, selling, administrative and general expenses	5,223			18,419			272			—			23,914
Management fee expense	—			2,290			—			(2,290		)	—
Operating (loss) income	(5,223		)	44,133			(272		)	2,290			40,928
Other income (expenses):
Interest expense	(25,497		)	(1,006		)	(6		)	—			(26,509		)
Change in fair value of derivatives embedded within convertible debt	(6,003		)	—			—			—			(6,003		)
Acceleration of interest expense related to debt conversion	(7,888		)	—			—			—			(7,888		)
Equity income from non-consolidated real estate businesses	—			—			5,232			—			5,232
Equity loss on long-term investments	(1,215		)	—			—			—			(1,215		)
Equity income in consolidated subsidiaries	28,924			—			—			(28,924		)	—
Management fee income	2,290			—			—			(2,290		)	—
Other, net	456			(8		)	135			—			583
(Loss) income before provision for income taxes	(14,156		)	43,119			5,089			(28,924		)	5,128
Income tax benefit (expense)	18,051			(16,973		)	(2,311		)	—			(1,233		)
Net income	3,895			26,146			2,778			(28,924		)	3,895
Comprehensive income	$	1,137		$	26,585		$	2,778		$	(29,363	)	$	1,137

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS



				Six Months Ended June 30, 2013
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	489,522		$	—		$	—		$	489,522
Expenses:
Cost of goods sold	—			353,386			—			—			353,386
Operating, selling, administrative and general expenses	11,382			36,949			469			—			48,800
Management fee expense	—			4,754			—			(4,754		)	—
Operating (loss) income	(11,382		)	94,433			(469		)	4,754			87,336
Other income (expenses):
Interest expense	(64,683		)	(772		)	(7		)	—			(65,462		)
Change in fair value of derivatives embedded within convertible debt	5,499			—			—			—			5,499
Loss on extinguishment of debt	(21,458		)	—			—			—			(21,458		)
Equity income from non-consolidated real estate businesses	—			—			7,285			—			7,285
Equity income on long-term investments	823			—			—			—			823
(Loss) gain on investment securities available for sale	(197		)	5,406			—			—			5,209
Equity income in consolidated subsidiaries	63,565			—			—			(63,565		)	—
Management fee income	4,754			—			—			(4,754		)	—
Other, net	1,947			205			128			—			2,280
(Loss) income before provision for income taxes	(21,132		)	99,272			6,937			(63,565		)	21,512
Income tax benefit (expense)	32,962			(39,791		)	(2,853		)	—			(9,682		)
Net income	11,830			59,481			4,084			(63,565		)	11,830
Comprehensive income	$	18,866		$	61,624		$	4,084		$	(65,708	)	$	18,866

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS



				Six Months Ended June 30, 2012
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	534,200		$	—		$	—		$	534,200
Expenses:
Cost of goods sold	—			411,933			—			—			411,933
Operating, selling, administrative and general expenses	11,484			36,623			(214		)	—			47,893
Management fee expense	—			4,581			—			(4,581		)	—
Operating (loss) income	(11,484		)	81,063			214			4,581			74,374
Other income (expenses):
Interest expense	(50,406		)	(2,342		)	(13		)	—			(52,761		)
Change in fair value of derivatives embedded within convertible debt	(27,060		)	—			—			—			(27,060		)
Acceleration of interest expense related to debt conversion	(7,888		)	—			—			—			(7,888		)
Equity income from non-consolidated real estate businesses	—			—			8,095			—			8,095
Equity loss on long-term investments	(1,329		)	—			—			—			(1,329		)
Equity income in consolidated subsidiaries	53,542			—			—			(53,542		)	—
Management fee income	4,581			—			—			(4,581		)	—
Other, net	361			19			135			—			515
(Loss) income before provision for income taxes	(39,683		)	78,740			8,431			(53,542		)	(6,054		)
Income tax benefit (expense)	35,888			(30,206		)	(3,423		)	—			2,259
Net (loss) income	(3,795		)	48,534			5,008			(53,542		)	(3,795		)
Comprehensive (loss) income	$	(10,896	)	$	48,349		$	5,008		$	(53,357	)	$	(10,896	)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



				Six Months Ended June 30, 2013
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Net cash provided by operating activities	$	5,204		$	57,823		$	2,187		$	(60,024	)	$	5,190
Cash flows from investing activities:
Sale of investment securities	36,533			6,582			—			—			43,115
Purchase of investment securities	(79,368		)	(11,000		)	—			—			(90,368		)
Proceeds from sale or liquidation of long-term investments	—			—			75			—			75
Purchase of long-term investments	(5,000		)	—			—			—			(5,000		)
Investments in non-consolidated real estate businesses	—			—			(19,048		)	—			(19,048		)
Investments in consolidated real estate businesses	—			—			(7,657		)				(7,657		)
Decrease (increase) in cash surrender value of life insurance policies	79			(382		)	—						(303		)
Decrease (increase) in restricted assets	6			(1,274		)	—						(1,268		)
Investments in subsidiaries	(43,584		)	—			—			43,584			—
Proceeds from sale of fixed assets	—			13			—						13
Capital expenditures	(2,247		)	(3,319		)	(429		)				(5,995		)
Repayments of notes receivable	8,433			—			—			—			8,433
Net cash used in investing activities	(85,148		)	(9,380		)	(27,059		)	43,584			(78,003		)
Cash flows from financing activities:
Proceeds from debt issuance	450,000			—			3,080						453,080
Deferred financing costs	(11,663		)	—			—						(11,663		)
Repayments of debt	(415,000		)	(3,763		)	(70		)				(418,833		)
Borrowings under revolver	—			474,493			—						474,493
Repayments on revolver	—			(476,888		)	—						(476,888		)
Capital contributions received	—			12,300			31,284			(43,584		)	—
Intercompany dividends paid	—			(50,582		)	(9,442		)	60,024			—
Dividends and distributions on common stock	(71,518		)	—			—						(71,518		)
Net cash (used in) provided by financing activities	(48,181		)	(44,440		)	24,852			16,440			(51,329		)
Net (decrease) increase in cash and cash equivalents	(128,125		)	4,003			(20		)	—			(124,142		)
Cash and cash equivalents, beginning of period	401,344			3,776			735			—			405,855
Cash and cash equivalents, end of period	$	273,219		$	7,779		$	715		$	—		$	281,713

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



				Six Months Ended June 30, 2012
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Net cash provided by operating activities	$	22,900		$	74,473		$	5,557		$	(45,101	)	$	57,829
Cash flows from investing activities:
Purchase of investment securities	—			(1,148		)	—			—			(1,148		)
Proceeds from sale of or liquidation of long-term investments	—			—			72			—			72
Purchase of long-term investments	(5,000		)	—			—			—			(5,000		)
Investments in non-consolidated real estate businesses	—			—			(9,667		)	—			(9,667		)
Distributions from non-consolidated real estate businesses	—			—			6,221			—			6,221
Increase in cash surrender value of life insurance policies	(425		)	(195		)	—			—			(620		)
Decrease (increase) in restricted assets	268			(321		)	—			—			(53		)
Issuance of notes receivable	(234		)	—			—			—			(234		)
Proceeds from sale of fixed assets	393			11			—			—			404
Investments in subsidiaries	(1,008		)	—			—			1,008			—
Capital expenditures	(961		)	(6,334		)	(99		)	—			(7,394		)
Net cash used in investing activities	(6,967		)	(7,987		)	(3,473		)	1,008			(17,419		)
Cash flows from financing activities:
Proceeds from debt issuance	—			14,018			—			—			14,018
Deferred financing costs	—			(315		)	—			—			(315		)
Repayments of debt	—			(13,428		)	(65		)	—			(13,493		)
Borrowings under revolver	—			525,350			—			—			525,350
Repayments on revolver	—			(532,082		)	—			—			(532,082		)
Capital contributions received	—			950			58			(1,008		)	—
Intercompany dividends paid	—			(43,500		)	(1,601		)	45,101			—
Dividends and distributions on common stock	(66,112		)	—			—			—			(66,112		)
Proceeds from exercise of Vector options	45			—			—			—			45
Tax benefits from exercise of Vector options	4			—			—			—			4
Net cash used in financing activities	(66,063		)	(49,007		)	(1,608		)	44,093			(72,585		)
Net (decrease) increase in cash and cash equivalents	(50,130		)	17,479			476			—			(32,175		)
Cash and cash equivalents, beginning of period	238,262			2,488			173			—			240,923
Cash and cash equivalents, end of period	$	188,132		$	19,967		$	649		$	—		$	208,748