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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Schedule of new accounting pronouncements



	Six Months Ended
	June 30, 2017
	As Previously Reported			Adoption of ASU 2016-18		As Revised
Decrease in restricted assets	$	(1,235	)	$	3,780	$	2,545
Net cash used in investing activities	(15,222		)	3,780		(11,442		)
Net increase in cash, cash equivalents and restricted cash	16,879			3,780		20,659
Cash, cash equivalents and restricted cash, beginning of period	393,530			5,048		398,578
Cash, cash equivalents and restricted cash, end of period	410,409			8,828		419,237



	Three Months Ended							Six Months Ended
	June 30, 2017							June 30, 2017
	As Previously Reported		Adoption of ASU 2017-07			As Revised		As Previously Reported		Adoption of ASU 2017-07			As Revised
Operating, selling, administrative and general expenses	$	83,183	$	(490	)	$	82,693	$	167,952	$	(980	)	$	166,972
Operating income	73,810		490			74,300		126,741		980			127,721
Other, net	1,288		(490		)	798		3,058		(980		)	2,078
Loss before provision for income taxes	$	50,373	$	—		$	50,373	43,366		—			43,366

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 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 June 30, 2018:

The following table compares the reported condensed consolidated balance sheet as of June 30, 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	$	30,836		$	28,888		$	1,948		⁽¹⁾
Income taxes receivable, net	9,126			11,526			(2,400		)	⁽⁶⁾
Other current assets	30,099			26,225			3,874			⁽²⁾⁽³⁾
Total current assets	629,012			625,590			3,422
Other assets	47,116			43,299			3,817			⁽³⁾
Total assets	$	1,333,911		$	1,326,672		$	7,239
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Other current liabilities	$	147,531		$	135,699		$	11,832		^(1)(2)(4)
Total current liabilities	464,107			452,275			11,832
Deferred income taxes, net	56,637			62,843			(6,206		)	⁽⁵⁾
Other liabilities	53,045			23,231			29,814			⁽⁴⁾
Total liabilities	1,762,630			1,727,190			35,440
Stockholders' deficiency:							—
Accumulated deficit	(495,637		)	(476,849		)	(18,788		)	⁽⁶⁾
Total Vector Group Ltd. stockholders' deficiency	(500,235		)	(481,447		)	(18,788		)
Non-controlling interest	71,516			80,929			(9,413		)	⁽⁶⁾
Total stockholders' deficiency	(428,719		)	(400,518		)	(28,201		)
Total liabilities and stockholders' deficiency	$	1,333,911		$	1,326,672		$	7,239


⁽¹⁾	Adjustments of $1,948 to accounts receivable and $1,365 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 $2,189 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 $1,685 to other current assets and $3,817 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 $8,278 to other current liabilities and $29,814 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 estimated annual effective tax rate of approximately 39.23% 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 June 30, 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	$	274,833		$	275,144		$	(311	)
Real estate	206,655			212,528			(5,873		)
Total revenues	481,488			487,672			(6,184		)	⁽¹⁾

Expenses:
Cost of sales:
Tobacco	192,761			191,242			1,519
Real estate	140,005			142,418			(2,413		)
Total cost of sales	332,766			333,660			(894		)	⁽²⁾

Operating, selling, administrative and general expenses	86,336			88,756			(2,420		)	⁽³⁾
Operating income	61,861			64,731			(2,870		)
Other income (expenses):
Income before provision for income taxes	31,756			34,626			(2,870		)
Income tax expense	12,760			13,573			(813		)	⁽⁴⁾

Net income	18,996			21,053			(2,057		)

Net income attributed to non-controlling interest	(1,178		)	(2,021		)	843

Net income attributed to Vector Group Ltd.	$	17,818		$	19,032		(1,214		)

Per basic common share:

Net income applicable to common share attributed to Vector Group Ltd.	$	0.12		$	0.13

Per diluted common share:

Net income applicable to common share attributed to Vector Group Ltd.	$	0.12		$	0.12

⁽¹⁾

The impact to revenue for the three months ended June 30, 2018 was a decrease of $6,184 primarily due to $1,352 of commission revenue payments received in the current period for the Real Estate Commercial Leasing business relating to performance obligations satisfied and accrued for in prior periods under Topic 606, and $6,370 in advance commission and services payments received in the current period for the Real Estate Development Marketing business that are deferred since they do not constitute satisfied performance obligations under Topic 606, offset by revenue recognized for performance obligations satisfied in the current period. Commission payments for these businesses would have been previously recognized as revenue upon receipt.

⁽²⁾

The impact to cost of sales was a decrease of $894 primarily related to the decrease in Real Estate business of $2,413 related primarily to commission expense payments made in the current period that relate to performance obligations satisfied and accrued for in prior periods or deferred until the performance obligation is satisfied, offset by the reclassification of $1,318 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 $2,420 primarily due to:


•	The reclassification of $1,318 Tobacco shipping and handling costs to cost of sales,


•	The reclassification of $512 sales returns reserve provision to revenue for the Tobacco business,


•	The deferral of $626 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 $325.


⁽⁴⁾	The net impact of the adoption of Topic 606 was estimated to result in an increase in income taxes of $813 based on a recalculation of the income tax provision using the estimated annual effective tax rate of approximately 39.23% and the Company’s deferred rate approximately 27.46%.

The following table compares the reported condensed consolidated statement of operations for the six months ended June 30, 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	$	541,949	$	542,633	$	(684	)
Real estate	368,505		376,333		(7,828		)
Total revenues	910,454		918,966		(8,512		)	⁽¹⁾

Expenses:
Cost of sales:
Tobacco	377,723		374,717		3,006
Real estate	249,318		251,092		(1,774		)
Total cost of sales	627,041		625,809		1,232			⁽²⁾

Operating, selling, administrative and general expenses	175,412		180,061		(4,649		)	⁽³⁾
Operating income	109,945		115,040		(5,095		)
Other income (expenses):
Income before provision for income taxes	37,368		42,463		(5,095		)
Income tax expense	14,708		16,119		(1,411		)	⁽⁴⁾

Net income	22,660		26,344		(3,684		)

Net loss attributed to non-controlling interest	2,369		871		1,498

Net income attributed to Vector Group Ltd.	$	25,029	$	27,215	$	(2,186	)

Per basic common share:

Net income applicable to common share attributed to Vector Group Ltd.	$	0.16	$	0.18

Per diluted common share:

Net income applicable to common share attributed to Vector Group Ltd.	$	0.16	$	0.18

⁽¹⁾

The impact to revenue for the six months ended June 30, 2018 was a decrease of $8,512 primarily due to $3,161 of commission revenue payments received in the current period for the Real Estate Commercial Leasing business relating to performance obligations satisfied and accrued for in prior periods under Topic 606, and $10,277 in advance commission and services payments received in the current period for the Real Estate Development Marketing business that are deferred since they do not constitute satisfied performance obligations under Topic 606, offset by revenue recognized for performance obligations satisfied in the current period. Commission payments for these businesses would have been previously recognized as revenue upon receipt.

⁽²⁾

The impact to cost of sales was an increase of $1,232 primarily related to the reclassification of $2,670 of Tobacco shipping and handling costs from operating, selling, administrative and general expenses to costs of sales as a result of adopting Topic 606, offset by a $1,774 decrease from the Real Estate business related primarily to commission expense payments made in the current period that relate to performance obligations satisfied and accrued for in prior periods or deferred until the performance obligation is satisfied.


⁽³⁾	The impact to operating, selling, administrative and general expenses was a decrease of $4,649 primarily due to:


•	The reclassification of $2,670 Tobacco shipping and handling costs to cost of sales,


•	The reclassification of $1,020 sales returns reserve provision to revenue for the Tobacco business,


•	The deferral of $1,731 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 $592.


⁽⁴⁾	The net impact of the adoption of Topic 606 was estimated to result in an increase in income taxes of $1,411 based on a recalculation of the income tax provision using the estimated annual effective tax rate of approximately 39.23% and the Company’s deferred rate approximately 27.46%.

Disaggregation of Revenue

In the following table, revenue is disaggregated by major product line for the Tobacco segment:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Tobacco Segment Revenues:
Core Discount Brands - Pyramid, Grand Prix, Liggett Select, Eve and EAGLE 20’s	$	248,370	$	244,941	$	489,901	$	472,513
Other Brands	26,463		27,236		52,048		57,118
Total tobacco revenues	$	274,833	$	272,177	$	541,949	$	529,631

In the following table, revenue is disaggregated by major services line and primary geographical market for the Real Estate segment:



	Three Months Ended June 30, 2018
	Total		New York City		Northeast		Southeast		West
Real Estate Segment Revenues:
Commission and other brokerage income	$	179,411	$	76,175	$	43,228	$	31,909	$	28,099
Development marketing	15,525		10,559		129		4,788		49
Property management income	8,741		8,560		181		—		—
Title fees	1,922		—		1,922		—		—
Total Douglas Elliman Realty revenue	205,599		95,294		45,460		36,697		28,148
Other real estate revenues	1,056		—		—		—		1,056
Total real estate revenues	$	206,655	$	95,294	$	45,460	$	36,697	$	29,204



	Three Months Ended June 30, 2017
	Total		New York City		Northeast		Southeast		West
Real Estate Segment Revenues:
Commission and other brokerage income	$	175,769	$	92,213	$	55,211	$	20,897	$	7,448
Development marketing	12,705		8,203		17		3,066		1,419
Property management income	8,573		8,390		183		—		—
Title fees	1,661		—		1,661		—		—
Total Douglas Elliman Realty revenue	198,708		108,806		57,072		23,963		8,867
Other real estate revenues	1,102		—		—		—		1,102
Total real estate revenues	$	199,810	$	108,806	$	57,072	$	23,963	$	9,969



	Six Months Ended June 30, 2018
	Total		New York City		Northeast		Southeast		West
Real Estate Segment Revenues:
Commission and other brokerage income	$	318,307	$	136,583	$	75,906	$	56,307	$	49,511
Development marketing	26,745		21,169		252		5,081		243
Property management income	17,079		16,698		381		—		—
Title fees	2,911		—		2,911		—		—
Total Douglas Elliman Realty revenue	365,042		174,450		79,450		61,388		49,754
Other real estate revenues	3,463		—				—		3,463
Total real estate revenues	$	368,505	$	174,450	$	79,450	$	61,388	$	53,217



	Six Months Ended June 30, 2017
	Total		New York City		Northeast		Southeast		West
Real Estate Segment Revenues:
Commission and other brokerage income	$	310,273	$	173,032	$	78,841	$	43,825	$	14,575
Development marketing	25,094		17,217		96		6,161		1,620
Property management income	16,356		16,003		353		—		—
Title fees	2,522		—		2,522		—		—
Total Douglas Elliman Realty revenue	354,245		206,252		81,812		49,986		16,195
Other real estate revenues	3,319		—		—		—		3,319
Total real estate revenues	$	357,564	$	206,252	$	81,812	$	49,986	$	19,514

Contract Balances

The following table provides information about receivables, contracts assets, and contract liabilities from contracts with customers:




	June 30, 2018		At Adoption

Receivables, which are included in accounts receivable, net	$	1,948	$	4,514
Contract costs, net, which are included in other current assets	1,685		623
Payables, which are included in other current liabilities	1,365		3,139
Contract liabilities, which are included in other current liabilities	8,278		4,667
Contract costs, net, which are included in other assets	3,817		3,740
Contract liabilities, which are included in other liabilities	29,814		27,983