Condensed Consolidating Financial Information

3 Months Ended

Mar. 31, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Consolidating Financial Information

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The accompanying condensed consolidating financial information has been prepared and presented pursuant to Securities and Exchange Commission (“SEC”) Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Affiliates Whose Securities Collateralize an Issue Registered or Being Registered.” Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all guarantees are full and unconditional and joint and several.

The Company’s investments in its consolidated subsidiaries are presented under the equity method of accounting.

The Company has outstanding $600,000 principal amount of its 7.75% Senior Secured Notes due 2021 that are guaranteed subject to certain customary automatic release provisions on a joint and several basis by all of the 100% owned domestic subsidiaries of the Company that are engaged in the conduct of its cigarette businesses. (See Note 6). The notes are not guaranteed by any of the Company’s subsidiaries engaged in the real estate businesses conducted through its subsidiary New Valley.

Presented herein are Condensed Consolidating Balance Sheets as of March 31, 2016 and December 31, 2015 and the related Condensed Consolidating Statements of Operations and Cash Flows for the three months ended March 31, 2016 and 2015 of Vector Group. (Parent/Issuer), the guarantor subsidiaries (Subsidiary Guarantors) and the subsidiaries that are not guarantors (Subsidiary Non-Guarantors).

The indenture contains covenants that restrict the payment of dividends by the Company if the Company’s consolidated earnings before interest, taxes, depreciation and amortization (“Consolidated EBITDA”), as defined in the indenture, for the most recently ended four full quarters is less than $75,000. 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. The Company’s Leverage Ratio is defined in the indenture as the ratio of the Company’s and the guaranteeing subsidiaries’ total debt less the fair market value of the Company’s cash, investments in marketable securities and long-term investments to Consolidated EBITDA, as defined in the indenture. The Company’s Secured Leverage Ratio is defined in the indenture in the same manner as the Leverage Ratio, except that secured indebtedness is substituted for indebtedness.

CONDENSED CONSOLIDATING BALANCE SHEETS

				March 31, 2016
						Subsidiary					Consolidated
	Parent/			Subsidiary		Non-		Consolidating			Vector Group
	Issuer			Guarantors		Guarantors		Adjustments			Ltd.
ASSETS:
Current assets:
Cash and cash equivalents	$	94,637		$	23,664	$	90,747	$	—		$	209,048
Investment securities available for sale	111,659			41,041		—		—			152,700
Accounts receivable - trade, net	—			10,451		9,998		—			20,449
Intercompany receivables	14,986			—		—		(14,986		)	—
Inventories	—			92,451		—		—			92,451
Deferred income taxes	—			—		—		—			—
Income taxes receivable, net	23,815			—		—		(19,194		)	4,621
Restricted assets	—			8,214		1,414		—			9,628
Other current assets	1,422			3,588		32,738		—			37,748
Total current assets	246,519			179,409		134,897		(34,180		)	526,645
Property, plant and equipment, net	1,671			52,723		19,214		—			73,608
Real estate held for sale, net	—			—		23,366		—			23,366
Long-term investments	58,525			462		501		—			59,488
Investments in real estate ventures	—			—		225,033		—			225,033
Investments in consolidated subsidiaries	518,783			—		—		(518,783		)	—
Restricted assets	1,716			13,171		—		—			14,887
Goodwill and other intangible assets, net	—			107,511		155,902		—			263,413
Prepaid pension costs	—			20,976		—		—			20,976
Other assets	7,332			11,817		2,224		—			21,373
Total assets	$	834,546		$	386,069	$	561,137	$	(552,963	)	$	1,228,789
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Current portion of notes payable and long-term debt	$	—		$	25,836	$	91	$	—		$	25,927
Current portion of employee benefits	—			914		—		—			914
Intercompany payables	—			315		14,671		(14,986		)	—
Income taxes payable, net	—			18,949		245		(19,194		)	—
Litigation accruals and current payments due under the Master Settlement Agreement	—			51,391		—		—			51,391
Other current liabilities	24,938			54,885		33,262		—			113,085
Total current liabilities	24,938			152,290		48,269		(34,180		)	191,317
Notes payable, long-term debt and other obligations, less current portion	857,493			6,815		246		—			864,554
Fair value of derivatives embedded within convertible debt	134,348			—		—		—			134,348
Non-current employee benefits	39,660			15,511		—		—			55,171
Deferred income taxes, net	7,167			33,493		44,409		—			85,069
Other liabilities, primarily litigation accruals and payments due under the Master Settlement Agreement	5,011			42,279		4,900		—			52,190
Total liabilities	1,068,617			250,388		97,824		(34,180		)	1,382,649
Commitments and contingencies
Stockholders' (deficiency) equity attributed to Vector Group Ltd.	(234,071		)	135,681		383,102		(518,783		)	(234,071		)
Non-controlling interest	—			—		80,211		—			80,211
Total stockholders' (deficiency) equity	(234,071		)	135,681		463,313		(518,783		)	(153,860		)
Total liabilities and stockholders' deficiency	$	834,546		$	386,069	$	561,137	$	(552,963	)	$	1,228,789

CONDENSED CONSOLIDATING BALANCE SHEETS

				December 31, 2015
						Subsidiary					Consolidated
	Parent/			Subsidiary		Non-		Consolidating			Vector Group
	Issuer			Guarantors		Guarantors		Adjustments			Ltd.
ASSETS:
Current assets:
Cash and cash equivalents	$	111,470		$	12,375	$	116,523	$	—		$	240,368
Investment securities available for sale	131,810			50,166		—		—			181,976
Accounts receivable - trade, net	—			15,913		7,976		—			23,889
Intercompany receivables	11,293			—		—		(11,293		)	—
Inventories	—			86,516		—		—			86,516
Income taxes receivable, net	8,213			—		—		(5,372		)	2,841
Restricted assets	—			7,781		1,414		—			9,195
Other current assets	575			3,747		34,632		—			38,954
Total current assets	263,361			176,498		160,545		(16,665		)	583,739
Property, plant and equipment, net	1,711			54,097		19,824		—			75,632
Real estate held for sale, net	—			—		23,318		—			23,318
Long-term investments	61,747			478		501		—			62,726
Investments in real estate ventures	—			—		217,168		—			217,168
Investments in consolidated subsidiaries	532,501			—		—		(532,501		)	—
Restricted assets	1,713			10,590		—		—			12,303
Goodwill and other intangible assets, net	—			107,511		156,448		—			263,959
Prepaid pension costs	—			20,650		—		—			20,650
Other assets	7,582			11,769		1,769		—			21,120
Total assets	$	868,615		$	381,593	$	579,573	$	(549,166	)	$	1,280,615
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Current portion of notes payable and long-term debt	$	—		$	8,733	$	186	$	—		$	8,919
Current portion of employee benefits	—			915		—		—			915
Intercompany payables	—			586		10,707		(11,293		)	—
Income taxes payable, net	—			5,464		4		(5,372		)	96
Litigation accruals and current payments due under the Master Settlement Agreement	—			52,145		—		—			52,145
Other current liabilities	38,140			74,083		41,994		—			154,217
Total current liabilities	38,140			141,926		52,891		(16,665		)	216,292
Notes payable, long-term debt and other obligations, less current portion	848,368			7,519		221		—			856,108
Fair value of derivatives embedded within convertible debt	144,042			—		—		—			144,042
Non-current employee benefits	39,244			15,811		—		—			55,055
Deferred income taxes, net	2,675			33,791		42,963		—			79,429
Other liabilities, primarily litigation accruals and payments due under the Master Settlement Agreement	2,193			44,982		4,675		—			51,850
Total liabilities	1,074,662			244,029		100,750		(16,665		)	1,402,776
Commitments and contingencies
Stockholders' (deficiency) equity attributed to Vector Group Ltd.	(206,047		)	137,564		394,937		(532,501		)	(206,047		)
Non-controlling interest	—			—		83,886		—			83,886
Total stockholders' (deficiency) equity	(206,047		)	137,564		478,823		(532,501		)	(122,161		)
Total liabilities and stockholders' deficiency	$	868,615		$	381,593	$	579,573	$	(549,166	)	$	1,280,615

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

				Three Months Ended March 31, 2016
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	221,142		$	159,747		$	(89	)	$	380,800
Expenses:
Cost of sales	—			136,744			99,678			—			236,422
Operating, selling, administrative and general expenses	9,196			18,273			52,448			(89		)	79,828
Litigation settlement and judgment expense	—			2,350			—			—			2,350
Management fee expense	—			2,662			—			(2,662		)	—
Restructuring charges	—			41			—			—			41
Operating (loss) income	(9,196		)	61,072			7,621			2,662			62,159
Other income (expenses):
Interest expense	(29,758		)	(959		)	(3		)	—			(30,720		)
Change in fair value of derivatives embedded within convertible debt	9,694			—			—			—			9,694
Equity in losses from real estate ventures	—			—			(507		)	—			(507		)
Equity in losses from investments	(1,655		)	(16		)	—			—			(1,671		)
Gain on sale of investment securities available for sale	176			391			—			—			567
Impairment of investment securities available for sale	(41		)	(4,772		)	—			—			(4,813		)
Equity in earnings in consolidated subsidiaries	35,610			—			—			(35,610		)	—
Management fee income	2,662			—			—			(2,662		)	—
Other, net	400			237			410			—			1,047
Income before provision for income taxes	7,892			55,953			7,521			(35,610		)	35,756
Income tax benefit (expense)	11,446			(23,386		)	(2,423		)	—			(14,363		)
Net income	19,338			32,567			5,098			(35,610		)	21,393
Net income attributed to non-controlling interest	—			—			(2,055		)	—			(2,055		)
Net income attributed to Vector Group Ltd.	$	19,338		$	32,567		$	3,043		$	(35,610	)	$	19,338
Comprehensive income attributed to non-controlling interest	$	—		$	—		$	(2,055	)	$	—		$	(2,055	)
Comprehensive income attributed to Vector Group Ltd.	$	19,381		$	32,710		$	3,043		$	(35,753	)	$	19,381

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

				Three Months Ended March 31, 2015
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	228,623		$	132,256		$	(119	)	$	360,760
Expenses:
Cost of sales	—			157,660			84,358			—			242,018
Operating, selling, administrative and general expenses	7,194			21,337			45,769			(119		)	74,181
Litigation settlement and judgment expense	—			843			—			—			843
Management fee expense	—			2,562			—			(2,562		)	—
Operating (loss) income	(7,194		)	46,221			2,129			2,562			43,718
Other income (expenses):
Interest expense	(30,754		)	(991		)	(1		)	—			(31,746		)
Change in fair value of derivatives embedded within convertible debt	6,460			—			—			—			6,460
Equity in earnings from real estate ventures	—			—			338			—			338
(Loss) gain on sale of investment securities available for sale	(146		)	13,175			—			—			13,029
Equity in earnings from investments	604			8			—			—			612
Equity in earnings in consolidated subsidiaries	35,994			—			—			(35,994		)	—
Management fee income	2,562			—			—			(2,562		)	—
Other, net	1,065			320			552			—			1,937
Income before provision for income taxes	8,591			58,733			3,018			(35,994		)	34,348
Income tax benefit (expense)	12,625			(24,184		)	(1,308		)	—			(12,867		)
Net income	21,216			34,549			1,710			(35,994		)	21,481
Net income attributed to non-controlling interest	—			—			(260		)	—			(260		)
Net income attributed to Vector Group Ltd.	$	21,216		$	34,549		$	1,450		$	(35,994	)	$	21,221
Comprehensive income attributed to non-controlling interest	$	—		$	—		$	(260	)	$	—		$	(260	)
Comprehensive income attributed to Vector Group Ltd.	$	27,592		$	32,267		$	1,450		$	(35,106	)	$	26,203

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

				Three Months Ended March 31, 2016
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Net cash provided by operating activities	$	12,633		$	30,671		$	1,917		$	(50,157	)	$	(4,936	)
Cash flows from investing activities:
Sale of investment securities	46,497			4,721			—			—			51,218
Maturities of investment securities	343			—			—			—			343
Purchase of investment securities	(29,112		)	—			—			—			(29,112		)
Investments in real estate ventures	—			—			(5,795		)	—			(5,795		)
Distributions from investments in real estate ventures	—			—			12			—			12
Increase in cash surrender value of life insurance policies	—			(62		)	—			—			(62		)
Increase in restricted assets	(3		)	(3,014		)	—			—			(3,017		)
Investments in subsidiaries	(471		)	—			—			471			—
Capital expenditures	(18		)	(2,618		)	(1,279		)	—			(3,915		)
Pay downs of investment securities	2,174			—			—			—			2,174
Investments in real estate held for sale	—			—			(49		)	—			(49		)
Net cash provided by (used in) investing activities	19,410			(973		)	(7,111		)	471			11,797
Cash flows from financing activities:
Proceeds from issuance of debt	—			—			57			—			57
Repayments of debt	—			(1,545		)	(31		)	—			(1,576		)
Borrowings under revolver	—			59,426			—			—			59,426
Repayments on revolver	—			(41,482		)	—			—			(41,482		)
Capital contributions received	—			100			371			(471		)	—
Intercompany dividends paid	—			(34,908		)	(15,249		)	50,157			—
Dividends and distributions on common stock	(48,876		)	—			—			—			(48,876		)
Contributions from non-controlling interest	—			—			248			—			248
Distributions to non-controlling interest	—			—			(5,978		)	—			(5,978		)
Net cash used in financing activities	(48,876		)	(18,409		)	(20,582		)	49,686			(38,181		)
Net (decrease) increase in cash and cash equivalents	(16,833		)	11,289			(25,776		)	—			(31,320		)
Cash and cash equivalents, beginning of period	111,470			12,375			116,523			—			240,368
Cash and cash equivalents, end of period	$	94,637		$	23,664		$	90,747		$	—		$	209,048

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

				Three Months Ended March 31, 2015
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Net cash (used in) provided by operating activities	$	(1,451	)	$	58,885		$	(4,122	)	$	(45,484	)	$	7,828
Cash flows from investing activities:
Sale of investment securities	60,176			14,415			—			—			74,591
Maturities of investment securities	947			—			—			—			947
Purchase of investment securities	(66,152		)	(1,476		)	—			—			(67,628		)
Proceeds from sale or liquidation of long-term investments	1,106			—			110			—			1,216
Purchase of long-term investments	(5,000		)	—			—			—			(5,000		)
Investments in real estate ventures	—			—			(7,816		)	—			(7,816		)
Increase in cash surrender value of life insurance policies	(558		)	(48		)	—			—			(606		)
Increase in restricted assets	(1		)	(6,932		)	—			—			(6,933		)
Pay downs of investment securities	1,594			—			—			—			1,594
Proceeds from sale of fixed assets	—			3			—			—			3
Investments in subsidiaries	(1,969		)	—			—			1,969			—
Capital expenditures	—			(956		)	(2,200		)	—			(3,156		)
Net cash (used in) provided by investing activities	(9,857		)	5,006			(9,906		)	1,969			(12,788		)
Cash flows from financing activities:
Deferred financing costs	—			(585		)	—			—			(585		)
Repayments of debt	—			(1,797		)	(60		)	—			(1,857		)
Borrowings under revolver	—			107,668			—			—			107,668
Repayments on revolver	—			(110,792		)	—			—			(110,792		)
Capital contributions received	—			1,950			19			(1,969		)	—
Intercompany dividends paid	—			(43,955		)	(1,529		)	45,484			—
Dividends and distributions on common stock	(46,350		)	—			—			—			(46,350		)
Proceeds from exercise of Vector options	809			—			—			—			809
Tax benefit of options exercised	274			—			—			—			274
Net cash used in financing activities	(45,267		)	(47,511		)	(1,570		)	43,515			(50,833		)
Net (decrease) increase in cash and cash equivalents	(56,575		)	16,380			(15,598		)	—			(55,793		)
Cash and cash equivalents, beginning of period	211,751			9,724			104,890			—			326,365
Cash and cash equivalents, end of period	$	155,176		$	26,104		$	89,292		$	—		$	270,572