Condensed Consolidating Financial Information

6 Months Ended

Jun. 30, 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 $835,000 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 June 30, 2016 and December 31, 2015, the related Condensed Consolidating Statements of Operations for the three and six months ended June 30, 2016 and the related Condensed Consolidating Statements of Cash Flows for the six months ended June 30, 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

				June 30, 2016
						Subsidiary					Consolidated
	Parent/			Subsidiary		Non-		Consolidating			Vector Group
	Issuer			Guarantors		Guarantors		Adjustments			Ltd.
ASSETS:
Current assets:
Cash and cash equivalents	$	335,034		$	32,246	$	107,458	$	—		$	474,738
Investment securities available for sale	120,283			40,571		—		—			160,854
Accounts receivable - trade, net	—			15,015		10,061		—			25,076
Intercompany receivables	16,435			—		—		(16,435		)	—
Inventories	—			92,735		—		—			92,735
Income taxes receivable, net	12,342			—		—		(12,124		)	218
Restricted assets	—			8,523		914		—			9,437
Other current assets	618			3,794		35,751		—			40,163
Total current assets	484,712			192,884		154,184		(28,559		)	803,221
Property, plant and equipment, net	1,452			51,122		19,330		—			71,904
Investments in real estate, net	—			—		23,328		—			23,328
Long-term investments	58,414			454		501		—			59,369
Investments in real estate ventures	—			—		206,139		—			206,139
Investments in consolidated subsidiaries	517,365			—		—		(517,365		)	—
Restricted assets	1,720			7,666		—		—			9,386
Goodwill and other intangible assets, net	—			107,511		155,355		—			262,866
Prepaid pension costs	—			21,302		—		—			21,302
Other assets	7,621			12,002		2,362		—			21,985
Total assets	$	1,071,284		$	392,941	$	561,199	$	(545,924	)	$	1,479,500
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Current portion of notes payable and long-term debt	$	—		$	16,523	$	92	$	—		$	16,615
Current portion of employee benefits	—			914		—		—			914
Intercompany payables	—			585		15,850		(16,435		)	—
Income taxes payable, net	—			11,501		623		(12,124		)	—
Litigation accruals and current payments due under the Master Settlement Agreement	—			60,486		—		—			60,486
Other current liabilities	44,520			55,350		40,518		—			140,388
Total current liabilities	44,520			145,359		57,083		(28,559		)	218,403
Notes payable, long-term debt and other obligations, less current portion	1,104,171			6,338		222		—			1,110,731
Fair value of derivatives embedded within convertible debt	126,932			—		—		—			126,932
Non-current employee benefits	40,075			15,233		—		—			55,308
Deferred income taxes, net	7,826			35,138		44,950		—			87,914
Other liabilities, primarily litigation accruals and payments due under the Master Settlement Agreement	5,285			45,010		5,353		—			55,648
Total liabilities	1,328,809			247,078		107,608		(28,559		)	1,654,936
Commitments and contingencies
Stockholders' (deficiency) equity attributed to Vector Group Ltd.	(257,525		)	145,863		371,502		(517,365		)	(257,525		)
Non-controlling interest	—			—		82,089		—			82,089
Total stockholders' (deficiency) equity	(257,525		)	145,863		453,591		(517,365		)	(175,436		)
Total liabilities and stockholders' deficiency	$	1,071,284		$	392,941	$	561,199	$	(545,924	)	$	1,479,500

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
Investments in real estate, 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 June 30, 2016
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	255,648		$	182,765		$	(140	)	$	438,273
Expenses:
Cost of sales	—			168,614			115,017			—			283,631
Operating, selling, administrative and general expenses	9,019			18,943			56,100			(140		)	83,922
Management fee expense	—			2,663			—			(2,663		)	—
Operating (loss) income	(9,019		)	65,428			11,648			2,663			70,720
Other income (expenses):
Interest expense	(35,522		)	(843		)	(4		)	—			(36,369		)
Change in fair value of derivatives embedded within convertible debt	7,416			—			—			—			7,416
Equity in earnings from real estate ventures	—			—			2,813			—			2,813
Equity in earnings (loss) from investments	1,097			(8		)	—			—			1,089
Gain on sale of investment securities available for sale	139			—			—			—			139
Impairment of investment securities available for sale	(49		)	—			—			—			(49		)
Equity in earnings in consolidated subsidiaries	46,441			—			—			(46,441		)	—
Management fee income	2,663			—			—			(2,663		)	—
Other, net	(93		)	244			430			—			581
Income before provision for income taxes	13,073			64,821			14,887			(46,441		)	46,340
Income tax benefit (expense)	10,942			(24,907		)	(5,038		)	—			(19,003		)
Net income	24,015			39,914			9,849			(46,441		)	27,337
Net income attributed to non-controlling interest	—			—			(3,322		)	—			(3,322		)
Net income attributed to Vector Group Ltd.	$	24,015		$	39,914		$	6,527		$	(46,441	)	$	24,015
Comprehensive income attributed to non-controlling interest	$	—		$	—		$	(3,322	)	$	—		$	(3,322	)
Comprehensive income attributed to Vector Group Ltd.	$	23,746		$	39,793		$	6,527		$	(46,320	)	$	23,746

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

				Three Months Ended June 30, 2015
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	255,291		$	161,022		$	(140	)	$	416,173
Expenses:
Cost of sales	—			175,334			103,870			—			279,204
Operating, selling, administrative and general expenses	7,174			22,555			50,327			(140		)	79,916
Litigation settlement and judgment expense	—			1,250			—			—			1,250
Management fee expense	—			2,563			—			(2,563		)	—
Operating (loss) income	(7,174		)	53,589			6,825			2,563			55,803
Other income (expenses):
Interest expense	(30,880		)	(879		)	(2		)	—			(31,761		)
Change in fair value of derivatives embedded within convertible debt	5,256			—			—			—			5,256
Equity in earnings from real estate ventures	—			—			1,856			—			1,856
Equity in loss from investments	(2,147		)	(16		)	—			—			(2,163		)
Loss on sale of investment securities available for sale	(190		)	—			—			—			(190		)
Equity in earnings in consolidated subsidiaries	35,745			—			—			(35,745		)	—
Management fee income	2,563			—			—			(2,563		)	—
Other, net	1,192			200			429			—			1,821
Income before provision for income taxes	4,365			52,894			9,108			(35,745		)	30,622
Income tax benefit (expense)	13,242			(21,219		)	(3,201		)	—			(11,178		)
Net income	17,607			31,675			5,907			(35,745		)	19,444
Net income attributed to non-controlling interest	—			—			(1,837		)	—			(1,837		)
Net income attributed to Vector Group Ltd.	$	17,607		$	31,675		$	4,070		$	(35,745	)	$	17,607
Comprehensive income attributed to non-controlling interest	$	—		$	—		$	(1,837	)	$	—		$	(1,837	)
Comprehensive income attributed to Vector Group Ltd.	$	17,834		$	31,131		$	4,070		$	(35,201	)	$	17,834

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

				Six Months Ended June 30, 2016
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	476,790		$	342,512		$	(229	)	$	819,073
Expenses:
Cost of sales	—			305,358			214,695			—			520,053
Operating, selling, administrative and general expenses	18,215			37,216			108,548			(229		)	163,750
Litigation settlement and judgment expense	—			2,350			—			—			2,350
Management fee expense	—			5,325			—			(5,325		)	—
Restructuring charges	—			41			—			—			41
Operating (loss) income	(18,215		)	126,500			19,269			5,325			132,879
Other income (expenses):
Interest expense	(65,280		)	(1,802		)	(7		)	—			(67,089		)
Change in fair value of derivatives embedded within convertible debt	17,110			—			—			—			17,110
Equity in earnings from real estate ventures	—			—			2,306			—			2,306
Equity in losses from investments	(558		)	(24		)	—			—			(582		)
Gain on sale of investment securities available for sale	315			391			—			—			706
Impairment of investment securities available for sale	(90		)	(4,772		)	—			—			(4,862		)
Equity in earnings in consolidated subsidiaries	82,051			—			—			(82,051		)	—
Management fee income	5,325			—			—			(5,325		)	—
Other, net	307			481			840			—			1,628
Income before provision for income taxes	20,965			120,774			22,408			(82,051		)	82,096
Income tax benefit (expense)	22,388			(48,293		)	(7,461		)	—			(33,366		)
Net income	43,353			72,481			14,947			(82,051		)	48,730
Net income attributed to non-controlling interest	—			—			(5,377		)	—			(5,377		)
Net income attributed to Vector Group Ltd.	$	43,353		$	72,481		$	9,570		$	(82,051	)	$	43,353
Comprehensive income attributed to non-controlling interest	$	—		$	—		$	(5,377	)	$	—		$	(5,377	)
Comprehensive income attributed to Vector Group Ltd.	$	43,127		$	72,503		$	9,570		$	(82,073	)	$	43,127

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

				Six Months Ended June 30, 2015
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Revenues	$	—		$	483,914		$	293,278		$	(259	)	$	776,933
Expenses:
Cost of sales	—			332,994			188,228			—			521,222
Operating, selling, administrative and general expenses	14,368			43,892			96,096			(259		)	154,097
Litigation settlement and judgment expense	—			2,093			—			—			2,093
Management fee expense	—			5,125			—			(5,125		)	—
Operating (loss) income	(14,368		)	99,810			8,954			5,125			99,521
Other income (expenses):
Interest expense	(61,634		)	(1,870		)	(3		)	—			(63,507		)
Change in fair value of derivatives embedded within convertible debt	11,716			—			—			—			11,716
Equity in earnings from real estate ventures	—			—			2,194			—			2,194
(Loss) gain on sale of investment securities available for sale	(336		)	13,175			—			—			12,839
Equity in losses from investments	(1,543		)	(8		)	—			—			(1,551		)
Equity in earnings in consolidated subsidiaries	71,744			—			—			(71,744		)	—
Management fee income	5,125			—			—			(5,125		)	—
Other, net	2,257			520			981			—			3,758
Income before provision for income taxes	12,961			111,627			12,126			(71,744		)	64,970
Income tax benefit (expense)	25,867			(45,403		)	(4,509		)	—			(24,045		)
Net income	38,828			66,224			7,617			(71,744		)	40,925
Net income attributed to non-controlling interest	—			—			(2,097		)	—			(2,097		)
Net income attributed to Vector Group Ltd.	$	38,828		$	66,224		$	5,520		$	(71,744	)	$	38,828
Comprehensive income attributed to non-controlling interest	$	—		$	—		$	(2,097	)	$	—		$	(2,097	)
Comprehensive income attributed to Vector Group Ltd.	$	44,037		$	63,398		$	5,520		$	(68,918	)	$	44,037

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

				Six Months Ended June 30, 2016
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Net cash provided by operating activities	$	73,915		$	75,513		$	28,437		$	(99,040	)	$	78,825
Cash flows from investing activities:
Sale of investment securities	62,312			4,721			—			—			67,033
Maturities of investment securities	343			—			—			—			343
Purchase of investment securities	(56,691		)	—			—			—			(56,691		)
Proceeds from sale or liquidation of long-term investments	1,000			—			—			—			1,000
Purchase of long-term investments	—			—			(50		)	—			(50		)
Investments in real estate ventures	—			—			(11,806		)	—			(11,806		)
Distributions from investments in real estate ventures	—			—			17,983			—			17,983
Increase in cash surrender value of life insurance policies	—			(393		)	—			—			(393		)
(Increase) decrease in restricted assets	(7		)	2,181			500			—			2,674
Investments in subsidiaries	(987		)	—			—			987			—
Proceeds from sale of fixed assets	—			4			1			—			5
Capital expenditures	(26		)	(3,716		)	(3,873		)	—			(7,615		)
Pay downs of investment securities	4,926			—			—			—			4,926
Investments in real estate, net	—			—			(81		)	—			(81		)
Net cash provided by investing activities	10,870			2,797			2,674			987			17,328
Cash flows from financing activities:
Proceeds from issuance of debt	243,225			—			57			—			243,282
Deferred financing costs	(6,600		)	—			—			—			(6,600		)
Repayments of debt	—			(2,863		)	(54		)	—			(2,917		)
Borrowings under revolver	—			89,695			—			—			89,695
Repayments on revolver	—			(80,223		)	—			—			(80,223		)
Capital contributions received	—			600			387			(987		)	—
Intercompany dividends paid	—			(65,648		)	(33,392		)	99,040			—
Dividends and distributions on common stock	(97,846		)	—			—			—			(97,846		)
Contributions from non-controlling interest	—			—			248			—			248
Distributions to non-controlling interest	—			—			(7,422		)	—			(7,422		)
Net cash provided by (used in) financing activities	138,779			(58,439		)	(40,176		)	98,053			138,217
Net increase (decrease) in cash and cash equivalents	223,564			19,871			(9,065		)	—			234,370
Cash and cash equivalents, beginning of period	111,470			12,375			116,523			—			240,368
Cash and cash equivalents, end of period	$	335,034		$	32,246		$	107,458		$	—		$	474,738

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

				Six Months Ended June 30, 2015
							Subsidiary						Consolidated
	Parent/			Subsidiary			Non-			Consolidating			Vector Group
	Issuer			Guarantors			Guarantors			Adjustments			Ltd.
Net cash provided by operating activities	$	42,679		$	99,159		$	13,057		$	(71,010	)	$	83,885
Cash flows from investing activities:
Sale of investment securities	103,846			14,415			—			—			118,261
Maturities of investment securities	1,737			—			—			—			1,737
Purchase of investment securities	(112,119		)	(1,476		)	—			—			(113,595		)
Proceeds from sale or liquidation of long-term investments	1,106			—			148			—			1,254
Purchase of long-term investments	(5,000		)	—			—			—			(5,000		)
Investments in real estate ventures	—			—			(34,857		)	—			(34,857		)
Investments in real estate, net	—			—			(12,502		)	—			(12,502		)
Increase in cash surrender value of life insurance policies	(717		)	(401		)	—			—			(1,118		)
Increase in restricted assets	(1,327		)	(6,607		)	—			—			(7,934		)
Issuance of notes receivable	—			—			(4,410		)	—			(4,410		)
Pay downs of investment securities	3,530			—			—			—			3,530
Proceeds from sale of fixed assets	—			3			—			—			3
Investments in subsidiaries	(42,808		)	—			—			42,808			—
Proceeds from sale of preferred securities	—			—			1,000						1,000
Capital expenditures	—			(2,350		)	(3,029		)	—			(5,379		)
Net cash (used in) provided by investing activities	(51,752		)	3,584			(53,650		)	42,808			(59,010		)
Cash flows from financing activities:
Proceeds from issuance of debt	—			22			—			—			22
Deferred financing costs	—			(625		)	—			—			(625		)
Repayments of debt	—			(3,254		)	(120		)	—			(3,374		)
Borrowings under revolver	—			126,727			—			—			126,727
Repayments on revolver	—			(144,492		)	—			—			(144,492		)
Capital contributions received	—			2,250			40,558			(42,808		)	—
Intercompany dividends paid	—			(69,075		)	(1,935		)	71,010			—
Dividends and distributions on common stock	(92,778		)	—			—			—			(92,778		)
Proceeds from exercise of Vector options	1,219			—			—			—			1,219
Tax benefit of options exercised	384			—			—			—			384
Net cash (used in) provided by financing activities	(91,175		)	(88,447		)	38,503			28,202			(112,917		)
Net (decrease) increase in cash and cash equivalents	(100,248		)	14,296			(2,090		)	—			(88,042		)
Cash and cash equivalents, beginning of period	211,751			9,724			104,890			—			326,365
Cash and cash equivalents, end of period	$	111,503		$	24,020		$	102,800		$	—		$	238,323