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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Net income for purposes of determining basic and diluted EPS

Net income (loss) for purposes of determining basic and diluted EPS was as follows:



	Three Months Ended
	March 31,
	2018			2017
Net income (loss) attributed to Vector Group Ltd.	$	7,211		$	(4,227	)
Income attributed to participating securities	(1,772		)	(1,483		)
Net income (loss) available to common shares attributed to Vector Group Ltd.	$	5,439		$	(5,710	)

Basic and diluted EPS calculation shares

Basic and diluted EPS were calculated using the following common shares:



	Three Months Ended
	March 31,
	2018	2017
Weighted-average shares for basic EPS	132,655,676	131,846,816
Plus incremental shares related to stock options and non-vested restricted stock	322,468	—
Weighted-average shares for diluted EPS	132,978,144	131,846,816

Outstanding shares not included in the computation of diluted EPS

The following were outstanding during the three months ended March 31, 2018 and 2017, but were not included in the computation of diluted EPS because the effect was anti-dilutive.



	Three Months Ended
	March 31,
	2018		2017
Weighted-average shares of non-vested restricted stock	—		2,057,345
Weighted-average expense per share	$	—	$	18.23
Weighted-average number of shares issuable upon conversion of debt	27,447,263		27,447,263
Weighted-average conversion price	$	17.81	$	17.81

Schedule of other income (loss), net

Other, net consisted of:



	Three Months Ended
	March 31,
	2018			2017
Interest and dividend income	$	1,922		$	1,745
Net periodic benefit cost other than the service costs	(253		)	(490		)
Impairment of debt securities available for sale	(586		)	(39		)
Other (expense) income	(32		)	64
Other, net	$	1,051		$	1,280

Schedule of other current liabilities

Other current liabilities consisted of:



	March 31, 2018		December 31, 2017
Accounts payable	$	10,325	$	18,552
Accrued promotional expenses	22,207		30,691
Accrued excise and payroll taxes payable, net	18,872		11,946
Accrued interest	20,123		33,138
Commissions payable	14,528		14,320
Accrued salary and benefits	13,918		29,639
Other current liabilities	31,434		18,837
Total other current liabilities	$	131,407	$	157,123

Schedule of goodwill and other intangible assets, net

The components of “Goodwill and other intangible assets, net” were as follows:



	March 31, 2018		December 31, 2017
Goodwill	$	77,059	$	77,059

Indefinite life intangibles:
Intangible asset associated with benefit under the MSA	107,511		107,511
Trademark - Douglas Elliman	80,000		80,000

Intangibles with a finite life, net	2,716		3,138

Total goodwill and other intangible assets, net	$	267,286	$	267,708

Schedule of components of cash, cash equivalents and restricted cash

The components of “Cash, cash equivalents and restricted cash” in the Statement of Cash Flows were as follows:



	March 31, 2018		December 31, 2017
Cash and cash equivalents	$	281,986	$	301,353
Restricted cash and cash equivalents included in current restricted assets	2,832		9,081
Restricted cash and cash equivalents included in non-current restricted assets	4,485		503
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	289,303	$	310,937

Schedule of new accounting pronouncements



	Three Months Ended
	March 31, 2017
	As Previously Reported			Adoption of ASU 2017-07			As Revised
Operating, selling, administrative and general expenses	$	84,769		$	(490	)	$	84,279
Operating income	52,931			490			53,421
Other, net	1,770			(490		)	1,280
Loss before provision for income taxes	(7,007		)	—			(7,007		)



	Three Months Ended
	March 31, 2017
	As Previously Reported			Adoption of ASU 2016-18		As Revised
Decrease in restricted assets	$	1,156		$	948	$	2,104
Net cash used in investing activities	(22,365		)	948		(21,417		)
Net decrease in cash, cash equivalents and restricted cash	(36,843		)	948		(35,895		)
Cash, cash equivalents and restricted cash, beginning of period	393,530			5,078		398,608
Cash, cash equivalents and restricted cash, end of period	356,687			6,026		362,713

The following tables summarize the impacts of Topic 606 adoption on the Company’s condensed consolidated balance sheet as of January 1, 2018.




	As Previously Reported			Adjustments							As Revised
	December 31, 2017			Tobacco			Real Estate				January 1, 2018
ASSETS:
Accounts receivable - trade, net	$	29,481		$	—		$	4,514		⁽²⁾	$	33,995
Other current assets	21,121			2,525		⁽¹⁾	623			⁽³⁾	24,269
Total current assets	613,709			2,525			5,137				621,371
Other assets	36,786			—			3,740			⁽³⁾	40,526
Total assets	$	1,328,278		$	2,525		$	8,877			$	1,339,680
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY:
Other current liabilities	$	157,123		$	2,525	⁽¹⁾	$	7,806		⁽²⁾⁽⁴⁾	$	167,454
Total current liabilities	204,639			2,525			7,806				214,970
Deferred income taxes, net	58,801			—			(5,217		)	⁽⁵⁾	53,584
Other liabilities	22,380			—			27,983			⁽⁴⁾	50,363
Total liabilities	1,660,038			2,525			30,572				1,693,135
Accumulated deficit	(414,785		)	—			(13,780		)		(428,565		)
Total Vector Group Ltd. stockholders' deficiency	(413,919		)	—			(13,780		)	⁽⁶⁾	(427,699		)
Non-controlling interest	82,159			—			(7,915		)	⁽⁶⁾	74,244
Total stockholders' deficiency	(331,760		)	—			(21,695		)		(353,455		)
Total liabilities and stockholders' deficiency	$	1,328,278		$	2,525		$	8,877			$	1,339,680

⁽¹⁾

Adjustments to other current assets and other current liabilities for $2,525 relates to the presentation as a receivable the component of the allowance for sales returns representing the federal excise tax refunds expected for future returned product as a receivable in other current assets, which was previously presented as a reduction to the allowance for sales returns liability in other current liabilities.


⁽²⁾	Adjustments of $4,514 to accounts receivable and $3,139 to other current liabilities relate to commission receivables and commissions payable from the Real Estate commercial leasing contracts for which the performance obligation has been satisfied, have extended payment terms and are expected to be received and paid in the next twelve-months.


⁽³⁾	Adjustments of $623 to other current assets and $3,740 to other assets represents the current and noncurrent portions, respectively, of deferred contract costs relating to direct fulfillment costs incurred in advance of the satisfaction of performance obligations for Development Marketing arrangements.


⁽⁴⁾	Adjustments of $4,667 to other current liabilities and $27,983 to other liabilities relate to the current and long term portions, respectively, of contract liabilities representing payments received from customers in advance of the performance obligations being satisfied under contracts for Real Estate development marketing.


⁽⁵⁾	Adjustment reflects the tax effect of the adoption of Topic 606 which was estimated to result in a decrease in net deferred income tax liability of $5,217 based on a recalculation of the income tax provision using the current annual effective tax rate of approximately 38.10% and the Company’s deferred rate of approximately 27.46%.


⁽⁶⁾	The allocation of the net impact of the adoption of Topic 606 between accumulated deficit and non-controlling interest is based on relative ownership interest of 70.59% and 29.41%, respectively.

Impacts on Financial Statements at March 31, 2018:

The following table compares the reported condensed consolidated balance sheet as of March 31,2018, to the pro-forma amounts had the previous guidance been in effect:



	As Reported			Pro forma as if the previous accounting guidance were in effect			Increase/(Decrease)

ASSETS:
Accounts receivable - trade, net	$	23,321		$	18,666		$	4,655		⁽¹⁾
Income taxes receivable, net	3,576			4,606			(1,030		)	⁽⁶⁾
Other current assets	28,320			25,208			3,112			⁽²⁾⁽³⁾
Total current assets	571,684			564,947			6,737
Other assets	46,749			42,270			4,479			⁽⁴⁾
Total assets	$	1,299,122		$	1,287,906		$	11,216
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:							—
Other current liabilities	$	131,407		$	120,731		$	10,676		^(1)(2)(4)
Total current liabilities	404,337			393,661			10,676
Deferred income taxes, net	48,421			54,070			(5,649		)	⁽⁵⁾
Other liabilities	53,285			22,578			30,707			⁽⁴⁾
Total liabilities	1,693,341			1,657,607			35,734
Stockholders' deficiency:							—
Accumulated deficit	(459,996		)	(444,048		)	(15,948		)	⁽⁶⁾
Total Vector Group Ltd. stockholders' deficiency	(464,916		)	(448,968		)	(15,948		)
Non-controlling interest	70,697			79,267			(8,570		)	⁽⁶⁾
Total stockholders' deficiency	(394,219		)	(369,701		)	(24,518		)
Total liabilities and stockholders' deficiency	$	1,299,122		$	1,287,906		$	11,216


⁽¹⁾	Adjustments of $4,655 to accounts receivable and $3,333 to other current liabilities relate to commission receivables and commissions payable from the Real Estate commercial leasing contracts for which the performance obligation has been satisfied, have extended payment terms and are expected to be received and paid in the next twelve-months.


⁽²⁾	Adjustments to other current assets and other current liabilities for $2,390 relates to the presentation of the component of the allowance for sales returns representing the federal excise tax refunds expected for future returned product as a receivable in other current assets, which was previously presented as a reduction to the allowance for sales returns liability in other current liabilities.


⁽³⁾	Adjustments of $722 to other current assets and $4,479 to other assets represents the current and noncurrent portions, respectively, of deferred contract costs relating to direct fulfillment costs incurred in advance of the satisfaction of performance obligations for Development Marketing arrangements.


⁽⁴⁾	Adjustments of $4,953 to other current liabilities and $30,707 to other liabilities relate to the current and long term portions, respectively, of contract liabilities representing payments received from customers in advance of the performance obligations being satisfied under contracts for Real Estate development marketing.


⁽⁵⁾	Adjustments reflect the tax effect of the adoption of Topic 606 based on a recalculation of the income tax provision using the current annual effective tax rate of approximately 38.10% and the Company’s deferred rate approximately 27.46%.


⁽⁶⁾	The allocation of the net impact of the adoption of Topic 606 between accumulated deficit and non-controlling interest is based on relative ownership interest of 70.59% and 29.41%, respectively.

The following table compares the reported condensed consolidated statement of operations for the three months ended March 31, 2018, to the pro-forma amounts had the previous guidance been in effect:



	As Reported		Pro forma as if the previous accounting guidance were in effect		Increase/(Decrease)
Revenues:
Tobacco	$	267,116	$	267,489	$	(373	)
Real estate	161,850		163,805		(1,955		)
Total revenues	428,966		431,294		(2,328		)	⁽¹⁾

Expenses:
Cost of sales:
Tobacco	184,962		183,475		1,487
Real estate	109,313		108,674		639
Total cost of sales	294,275		292,149		2,126			⁽²⁾

Operating, selling, administrative and general expenses	89,076		91,305		(2,229		)	⁽³⁾
Operating income	48,084		50,309		(2,225		)
Other income (expenses):
Income before provision for income taxes	5,612		7,837		(2,225		)
Income tax expense	1,948		2,546		(598		)	⁽⁴⁾

Net income	3,664		5,291		(1,627		)

Net loss attributed to non-controlling interest	3,547		2,892		655

Net income attributed to Vector Group Ltd.	$	7,211	$	8,183	$	(972	)

Per basic common share:

Net income applicable to common share attributed to Vector Group Ltd.	$	0.04	$	0.05

Per diluted common share:

Net income applicable to common share attributed to Vector Group Ltd.	$	0.04	$	0.05

⁽¹⁾

The impact to revenue for the three months ended March 31, 2018 was a decrease of $2,328 primarily due to a $2,751 decrease to revenue from the Real Estate Development Marketing business representing advance payments for services and commissions that are deferred since they do not constitute satisfied performance obligations under Topic 606, and which would have been previously recognized as revenue upon receipt.


⁽²⁾	The impact to cost of sales was an increase of $2,126 primarily related to the reclassification of $1,352 of Tobacco shipping and handling costs from operating, selling, administrative and general expenses to costs of sales as a result of adopting Topic 606.


⁽³⁾	The impact to operating, selling, administrative and general expenses was a decrease of $2,229 primarily due to:


•	The reclassification of $1,352 Tobacco shipping and handling costs to cost of sales,


•	The deferral of $1,212 of direct costs in the Real Estate Development Marketing business related to performance obligations not satisfied as discussed above, offset by the amortization of previously deferred contract costs of $374.

⁽⁴⁾

The net impact of the adoption of Topic 606 was estimated to result in a decrease in income taxes of $598 based on a recalculation of the income tax provision using the current annual effective tax rate of approximately 38.10% and the Company’s deferred rate approximately 27.46%.