0000059440-18-000039.txt : 20181107 0000059440-18-000039.hdr.sgml : 20181107 20181107073305 ACCESSION NUMBER: 0000059440-18-000039 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20181107 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20181107 DATE AS OF CHANGE: 20181107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VECTOR GROUP LTD CENTRAL INDEX KEY: 0000059440 STANDARD INDUSTRIAL CLASSIFICATION: CIGARETTES [2111] IRS NUMBER: 650949535 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05759 FILM NUMBER: 181164719 BUSINESS ADDRESS: STREET 1: 4400 BISCAYNE BOULEVARD STREET 2: 10TH FLOOR CITY: MIAMI STATE: FL ZIP: 33137 BUSINESS PHONE: 3055798000 MAIL ADDRESS: STREET 1: 4400 BISCAYNE BOULEVARD STREET 2: 10TH FLOOR CITY: MIAMI STATE: FL ZIP: 33137 FORMER COMPANY: FORMER CONFORMED NAME: BROOKE GROUP LTD DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: LIGGETT GROUP INC DATE OF NAME CHANGE: 19900815 FORMER COMPANY: FORMER CONFORMED NAME: LIGGETT & MYERS INC DATE OF NAME CHANGE: 19760602 8-K 1 a2018q3pressrelease8k.htm 8-K Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 7, 2018

VECTOR GROUP LTD.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)

1-5759
 
65-0949535
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
 
 
4400 Biscayne Boulevard, Miami, Florida
 
33137
(Address of Principal Executive Offices)
 
(Zip Code)

(305) 579-8000
(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 






Item 2.02. Results of Operations and Financial Condition

On November 7, 2018, Vector Group Ltd. announced its financial results for the three and nine months ended September 30, 2018. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Current Report on Form 8-K and the Exhibit attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibit

(c)
Exhibit.

Exhibit No.
 
Exhibit
 
Press Release issued on November 7, 2018






SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
VECTOR GROUP LTD.
 
 
 
By:
/s/ J. Bryant Kirkland III  
 
 
J. Bryant Kirkland III 
 
 
Senior Vice President, Treasurer and Chief Financial Officer 
Date: November 7, 2018



EX-99.1 2 a2018q3pressrelease-ex991.htm EXHIBIT 99.1 Exhibit


svca03.jpg
FOR IMMEDIATE RELEASE
Contact:
 
Emily Claffey/Benjamin Spicehandler
/Columbia Clancy
 
 
Sard Verbinnen & Co
 
 
212-687-8080
 
 
Conrad Harrington
 
 
Sard Verbinnen & Co - Europe
 
 
+44 (0)20 3178 8914
 
 
J. Bryant Kirkland III, Vector Group Ltd.
 
 
305-579-8000
VECTOR GROUP REPORTS THIRD QUARTER 2018 FINANCIAL RESULTS

 
MIAMI, FL, November 7, 2018 - Vector Group Ltd. (NYSE:VGR) today announced financial results for the three and nine months ended September 30, 2018.

GAAP Financial Results

Third quarter 2018 revenues were $513.9 million, compared to revenues of $484.6 million in the third quarter of 2017. The Company recorded operating income of $66.0 million in the third quarter of 2018, compared to operating income of $59.7 million in the third quarter of 2017. Net income attributed to Vector Group Ltd. for the third quarter of 2018 was $12.0 million, or $0.07 per diluted common share, compared to net income of $19.3 million, or $0.13 per diluted common share, in the third quarter of 2017.

For the nine months ended September 30, 2018 revenues were $1.424 billion, compared to revenues of $1.372 billion for the nine months ended September 30, 2017. The Company recorded operating income of $176.0 million for the nine months ended September 30, 2018, compared to operating income of $187.4 million for the nine months ended September 30, 2017. Net income attributed to Vector Group Ltd. for the nine months ended September 30, 2018 was $37.0 million, or $0.23 per diluted common share, compared to a net income of $41.8 million, or $0.27 per diluted common share, for the nine months ended September 30, 2017.

Adoption of accounting standards. Effective January 1, 2018, the Company has adopted several new accounting standards that impact financial reporting for the three and nine months ended September 30, 2018.  The new standards were Accounting Standards Updates (“ASU”) 2014-09 (Topic 606), and 2016-08, which relate to revenue recognition; ASU 2016-01 and ASU 2018-03, which relate to the Company’s investments in equity securities; and 2017-07, which relates to accounting for the Company’s defined benefit pension plans.  The adoption of ASU 2017-07 was retrospective and certain categories in the Company’s Statement of Operations were revised, including operating, selling, administrative and general expenses, operating income and other income; therefore these financial metrics, as well as non-GAAP financial measures, Adjusted EBITDA, Adjusted Operating Income, and Adjusted Operating Income for the Tobacco Segment, for the last twelve months ended September 30, 2018 and the three and nine months ended September 30, 2017 contained in this press release do not agree with the Company’s previously issued earnings press releases (November 7, 2017 and March 1, 2018).  The impact of the adoption of ASU 2017-07 on selling, general, and administrative expense, operating income, other income and Adjusted EBITDA, Adjusted Operating Income and Tobacco Adjusted Operating Income was reported in the Company’s Forms 8-K dated June 14, 2018 and September 28, 2018. In addition, ASU 2014-09 (Topic 606), ASU 2016-08, ASU 2016-01 and ASU 2018-03 were applied using the modified retrospective method and resulted in a cumulative adjustment to beginning stockholder’s deficiency at January 1, 2018.  The Company’s Statement of





Operations for the periods ending prior to January 1, 2018, including the three months ended March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017 have not been adjusted to reflect the adoption of these standards, which results in limited comparability between 2018 and 2017 operating results.

Segment changes. As a result of a significant reduction in the Company’s E-Cigarette business, results from the E-Cigarette segment are now included in the Corporate and Other segment and 2017 information has been recast to conform to the 2018 presentation.

Non-GAAP Financial Measures

Non-GAAP financial measures also include adjustments for purchase accounting associated with the Company’s 2013 acquisition of an additional 20.59% interest in Douglas Elliman Realty, LLC, litigation settlements and judgments, settlements of long-standing disputes related to the Master Settlement Agreement in the Tobacco segment, restructuring and pension settlement expense in the Tobacco segment, net interest expense capitalized to real estate ventures, stock-based compensation expense (for purposes of Adjusted EBITDA only) and non-cash interest expense associated with the Company’s convertible debt. Reconciliations of non-GAAP financial results to the comparable GAAP financial results for the three and nine months ended September 30, 2018 and 2017 are included in Tables 2 through 7.
Three months ended September 30, 2018 compared to the three months ended September 30, 2017
Third quarter of 2018 Adjusted EBITDA attributed to Vector Group (as described in Table 2 attached hereto) were $69.9 million compared to $65.4 million for the third quarter of 2017.
Adjusted Net Income (as described in Table 3 attached hereto) was $21.0 million or $0.14 per diluted share for the third quarter of 2018 and $22.1 million or $0.15 per diluted share for the third quarter of 2017.
Adjusted Operating Income (as described in Table 4 attached hereto) was $66.4 million for the third quarter of 2018 compared to $59.9 million for the third quarter of 2017.

Nine months ended September 30, 2018 compared to the nine months ended September 30, 2017
Adjusted EBITDA attributed to Vector Group Ltd. (as described in Table 2 attached hereto) were $187.9 million for the nine months ended September 30, 2018 compared to $204.0 million for the nine months ended September 30, 2017.
Adjusted Net Income (as described in Table 3 attached hereto) was $55.3 million or $0.36 per diluted share for the nine months ended September 30, 2018 and $73.3 million or $0.49 per diluted share for the nine months ended September 30, 2017.
Adjusted Operating Income (as described in Table 4 attached hereto) was $168.9 million for the nine months ended September 30, 2018 compared to $189.2 million for the nine months ended September 30, 2017.

Tobacco Segment Financial Results
For the third quarter of 2018, the Tobacco segment had revenues of $302.0 million, compared to $294.2 million for the third quarter of 2017. The increase in revenues was primarily due to a 2.7% increase in unit sales volume.
For the nine months ended September 30, 2018, the Tobacco segment had revenues of $844.0 million, compared to $823.9 million for the nine months ended September 30, 2017. The increase in revenues was primarily due to a 2.1% increase in unit sales volume.
Operating Income from the Tobacco segment was $63.3 million and $189.2 million for the three and nine months ended September 30, 2018 compared to $61.6 million and $185.5 million for the three and nine months ended September 30, 2017, respectively.
Non-GAAP Financial Measures
Tobacco Adjusted Operating Income (as described in Table 5 attached hereto) for the third quarter of 2018 and 2017 was $63.3 million and $63.9 million, respectively. Tobacco Adjusted Operating Income for the nine months ended September 30, 2018 and 2017 was $183.4 million and $188.6 million, respectively.
For the third quarter of 2018, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 2.59 billion units compared to 2.52 billion units for the third quarter of 2017. For the nine months ended September 30, 2018, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 7.13 billion units compared to 6.98 billion units for the nine months ended September 30, 2017.
Liggett’s retail market share increased to 4.2% for the third quarter of 2018 and 4.1% for the nine months ended September 30, 2018 compared to 3.9% for third quarter of 2017 and 3.8% for the nine months ended September 30, 2017. Compared to the





third quarter of 2017, Liggett’s retail shipments increased 0.9% while the overall industry’s retail shipments declined by 4.8%. Compared to the nine months ended September 30, 2017, Liggett’s retail shipments increased 1.9% while the overall industry’s retail shipments declined by 4.7%, according to data from Management Science Associates, Inc.
Real Estate Segment Financial Results
For the third quarter of 2018, the Real Estate segment had revenues of $211.9 million, compared to $190.9 million for the third quarter of 2017. For the nine months ended September 30, 2018, the Real Estate segment had revenues of $580.4 million, compared to $548.4 million for the nine months ended September 30, 2017. For the third quarter of 2018, the Real Estate segment reported net income of $4.7 million, compared to a net income of $1.6 million for the third quarter of 2017. For the nine months ended September 30, 2018, the Real Estate segment reported a net loss of $0.9 million, compared to net income of $24.7 million for the nine months ended September 30, 2017.
Douglas Elliman’s results are included in Vector Group Ltd.’s Real Estate segment. For the third quarter of 2018, Douglas Elliman had revenues of $211.5 million, compared to $190.4 million for the third quarter of 2017For the nine months ended September 30, 2018, Douglas Elliman had revenues of $576.5 million, compared to $544.6 million for the nine months ended September 30, 2017. For the third quarter of 2018, Douglas Elliman reported net income of $10.0 million, compared to a net income of $4.2 million for the third quarter of 2017. For the nine months ended September 30, 2018, Douglas Elliman reported a net income of $7.8 million, compared to net income of $20.5 million for the nine months ended September 30, 2017.
Non-GAAP Financial Measures
For the third quarter of 2018, Real Estate Adjusted EBITDA attributed to the Company (as described in Table 6 attached hereto) were $8.0 million, compared to $2.6 million for the third quarter of 2017.
For the nine months ended September 30, 2018, Real Estate Adjusted EBITDA attributed to the Company were $8.7 million, compared to $18.4 million for the nine months ended September 30, 2017.
Douglas Elliman’s results are included in Vector Group Ltd.’s Real Estate segment. For the third quarter of 2018, Douglas Elliman’s Adjusted EBITDA (as described in Table 7 attached hereto) were $12.0 million ($8.5 million attributed to the Company), compared to $3.8 million ($2.7 million attributed to the Company) for the third quarter of 2017.
For the nine months ended September 30, 2018, Douglas Elliman’s Adjusted EBITDA were $11.8 million ($8.3 million attributed to the Company), compared to $23.8 million ($16.8 million attributed to the Company) for the nine months ended September 30, 2017.
For the three and nine months ended September 30, 2018, Douglas Elliman achieved closed sales of approximately $7.8 billion and $21.4 billion, compared to $7.0 billion and $19.8 billion for the three and nine months ended September 30, 2017.

Non-GAAP Financial Measures
Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Income, Tobacco Adjusted Operating Income, Tobacco Adjusted EBITDA, New Valley LLC Adjusted EBITDA and Douglas Elliman Realty, LLC Adjusted EBITDA (“the Non-GAAP Financial Measures”) are financial measures not prepared in accordance with generally accepted accounting principles (“GAAP”). The Company believes that the Non-GAAP Financial Measures are important measures that supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. The Company believes the Non-GAAP Financial Measures provide investors and analysts with a useful measure of operating results unaffected by differences in capital structures and ages of related assets among otherwise comparable companies.

Management uses the Non-GAAP Financial Measures as measures to review and assess operating performance of the Company’s business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (the Non-GAAP Financial Measures) of the Company’s business. While management considers the Non-GAAP Financial Measures to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating income, net income and cash flows from operations. In addition, the Non-GAAP Financial Measures are susceptible to varying calculations and the Company’s measurement of the Non-GAAP Financial Measures may not be comparable to those of other companies. Attached hereto as Tables 2 through 7 is information relating to the Company’s Non-GAAP Financial Measures for the three and nine months ended September 30, 2018 and 2017.

Conference Call to Discuss Third Quarter 2018 Results

As previously announced, the Company will host a conference call and webcast on Wednesday, November 7, 2018 at 8:30 AM (ET) to discuss third quarter 2018 results. Investors can access the call by dialing 800-859-8150 and entering 68647573 as the





conference ID number. The call will also be available via live webcast at www.investorcalendar.com. Webcast participants should allot extra time to register before the webcast begins.

A replay of the call will be available shortly after the call ends on November 7, 2018 through November 21, 2018. To access the replay, dial 877-656-8905 and enter 68647573 as the conference ID number. The archived webcast will also be available at www.investorcalendar.com for one year.

Vector Group is a holding company that indirectly owns Liggett Group LLC and Vector Tobacco Inc. and directly owns New Valley LLC, which owns a controlling interest in Douglas Elliman Realty, LLC. Additional information concerning the company is available on the Company’s website, www.VectorGroupLtd.com.

[Financial Tables Follow]





TABLE 1
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
 
(Unaudited)
 
(Unaudited)
Revenues:
 
 
 
 
 
 
 
   Tobacco*
$
302,009

 
$
294,245

 
$
843,958

 
$
823,876

   Real estate
211,860

 
190,860

 
580,365

 
548,426

   Corporate and Other

 
(480
)
 

 
(480
)
       Total revenues
513,869

 
484,625

 
1,424,323

 
1,371,822

 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 Cost of sales:
 
 
 
 
 
 
 
   Tobacco*
219,769

 
207,800

 
597,492

 
570,461

   Real estate
140,533

 
130,316

 
389,851

 
358,472

       Total cost of sales
360,302

 
338,116

 
987,343

 
928,933

 
 
 
 
 
 
 
 
Operating, selling, administrative and general expenses
87,549

 
82,682

 
262,961

 
249,654

Litigation settlement and judgment expense (income)

 
4,104

 
(1,944
)
 
5,791

Operating income
66,018

 
59,723

 
175,963

 
187,444

 
 
 
 
 
 
 
 
Other income (expenses):
 
 
 
 
 
 
 
Interest expense
(51,084
)
 
(43,234
)
 
(145,452
)
 
(136,146
)
Loss on extinguishment of debt

 

 

 
(34,110
)
Change in fair value of derivatives embedded within convertible debt
10,005

 
9,437

 
31,289

 
26,142

Equity in earnings (losses) from real estate ventures
294

 
(47
)
 
(8,378
)
 
26,357

Equity in earnings (losses) from investments
3,230

 
(303
)
 
9,205

 
(2,823
)
Net loss recognized on equity securities
(797
)
 

 
(306
)
 

Other, net
2,048

 
1,374

 
4,761

 
3,452

Income before provision for income taxes
29,714

 
26,950

 
67,082

 
70,316

Income tax expense
14,686

 
6,472

 
29,394

 
22,517

 
 
 
 
 
 
 
 
Net income
15,028

 
20,478

 
37,688

 
47,799

 
 
 
 
 
 
 
 
Net income attributed to non-controlling interest
(3,026
)
 
(1,214
)
 
(657
)
 
(5,951
)
 
 
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
12,002

 
$
19,264

 
$
37,031

 
$
41,848

 
 
 
 
 
 
 
 
Per basic common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to common share attributed to Vector Group Ltd.
$
0.07

 
$
0.13

 
$
0.23

 
$
0.27

 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income applicable to common share attributed to Vector Group Ltd.
$
0.07

 
$
0.13

 
$
0.23

 
$
0.27

 
 
 
 
 
 
 
 
Dividends declared per share
$
0.38

 
$
0.36

 
$
1.14

 
$
1.09


* Revenues and cost of sales include federal excise taxes of $130,428, $126,912, $359,199 and $351,474, respectively.





TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
79,755

 
$
12,002

 
$
19,264

 
$
37,031

 
$
41,848

Interest expense
182,991

 
51,084

 
43,234

 
145,452

 
136,146

Income tax expense
5,295

 
14,686

 
6,472

 
29,394

 
22,517

Net income attributed to non-controlling interest
884

 
3,026

 
1,214

 
657

 
5,951

Depreciation and amortization
18,629

 
4,707

 
4,386

 
14,043

 
14,028

EBITDA
$
287,554

 
$
85,505

 
$
74,570

 
$
226,577

 
$
220,490

Change in fair value of derivatives embedded within convertible debt (a)
(41,066
)
 
(10,005
)
 
(9,437
)
 
(31,289
)
 
(26,142
)
Equity in (earnings) losses from investments (b)
(11,263
)
 
(3,230
)
 
303

 
(9,205
)
 
2,823

Net loss recognized on equity securities
306

 
797

 

 
306

 

Equity in losses (earnings) from real estate ventures (c)
13,340

 
(294
)
 
47

 
8,378

 
(26,357
)
Loss on extinguishment of debt

 

 

 

 
34,110

Stock-based compensation expense (d)
9,855

 
2,584

 
2,430

 
7,424

 
8,456

Litigation settlement and judgment (income) expense (e)
(1,144
)
 

 
4,104

 
(1,944
)
 
5,791

Impact of MSA settlement (f)
(6,298
)
 

 
(1,826
)
 
(6,298
)
 
(2,721
)
Purchase accounting adjustments (g)
531

 
184

 
(2,345
)
 
545

 
(2,088
)
Other, net
(6,075
)
 
(2,048
)
 
(1,374
)
 
(4,761
)
 
(3,452
)
Adjusted EBITDA
$
245,740

 
$
73,493

 
$
66,472

 
$
189,733

 
$
210,910

Adjusted EBITDA attributed to non-controlling interest
(2,501
)
 
(3,638
)
 
(1,091
)
 
(1,848
)
 
(6,923
)
Adjusted EBITDA attributed to Vector Group Ltd.
$
243,239

 
$
69,855

 
$
65,381

 
$
187,885

 
$
203,987

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
247,365

 
$
65,339

 
$
65,950

 
$
189,646

 
$
195,462

Real Estate (h)
13,934

 
11,697

 
3,719

 
11,403

 
25,317

Corporate and Other
(15,559
)
 
(3,543
)
 
(3,197
)
 
(11,316
)
 
(9,869
)
Total
$
245,740

 
$
73,493

 
$
66,472

 
$
189,733

 
$
210,910

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Attributed to Vector Group Ltd. by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
247,365

 
$
65,339

 
$
65,950

 
$
189,646

 
$
195,462

Real Estate (i)
11,433

 
8,059

 
2,628

 
9,555

 
18,394

Corporate and Other
(15,559
)
 
(3,543
)
 
(3,197
)
 
(11,316
)
 
(9,869
)
Total
$
243,239

 
$
69,855

 
$
65,381

 
$
187,885

 
$
203,987

                                      

a.
Represents income recognized from changes in the fair value of the derivatives embedded in the Company’s convertible debt.
b.
Represents equity in (earnings) losses recognized from investments that the Company accounts for under the equity method.
c.
Represents equity in losses (earnings) recognized from the Company’s investment in certain real estate businesses that are not consolidated in its financial results.
d.
Represents amortization of stock-based compensation.
e.
Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation and proceeds received from a litigation award at Douglas Elliman Realty, LLC.
f.
Represents the Company’s tobacco segment’s settlement of a long-standing dispute related to the Master Settlement Agreement.
g.
Represents purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company’s ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
h.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $14,181  for the last twelve months ended September 30, 2018 and $12,048, $3,772, $11,824 and $23,753 for the three and nine months ended September 30, 2018 and 2017, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC’s entire Adjusted EBITDA.
i.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $10,011 for the last twelve months ended September 30, 2018 and $8,505, $2,663, $8,347 and $16,767 for the three and nine months ended September 30, 2018 and 2017, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC’s Adjusted EBITDA for non-controlling interest.





TABLE 3
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)


 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
Net income attributed to Vector Group Ltd.
$
12,002

 
$
19,264

 
$
37,031

 
$
41,848

 
 
 
 
 
 
 
 
Change in fair value of derivatives embedded within convertible debt
(10,005
)
 
(9,437
)
 
(31,289
)
 
(26,142
)
Non-cash amortization of debt discount on convertible debt
22,871

 
14,978

 
61,450

 
40,457

Loss on extinguishment of debt

 

 

 
34,110

Litigation settlement and judgment expense (income) (a)

 
4,104

 
(1,218
)
 
5,791

Impact of MSA settlement (b)

 
(1,826
)
 
(6,298
)
 
(2,721
)
Impact of net interest expense capitalized to real estate ventures
(596
)
 
(1,108
)
 
1,775

 
2,659

Douglas Elliman Realty, LLC purchase accounting adjustments (c)
272

 
(1,508
)
 
805

 
(936
)
Total adjustments
12,542

 
5,203

 
25,225

 
53,218

 
 
 
 
 
 
 
 
Tax expense related to adjustments
(3,588
)
 
(2,357
)
 
(6,927
)
 
(21,793
)
 
 
 
 
 
 
 
 
Adjusted Net Income attributed to Vector Group Ltd.
$
20,956

 
$
22,110

 
$
55,329

 
$
73,273

 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd.
$
0.14

 
$
0.15

 
$
0.36

 
$
0.49


                                      

a.
Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation and proceeds received from a litigation award at Douglas Elliman Realty, LLC, net of non-controlling interest.
b.
Represents the Company’s tobacco segment’s settlement of a long-standing dispute related to the Master Settlement Agreement.
c.
Represents 70.59% of purchase accounting adjustments in the periods presented for assets acquired in connection with the increase of the Company’s ownership of Douglas Elliman Realty, LLC, which occurred in 2013.


    








TABLE 4
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED OPERATING INCOME
(Unaudited)
(Dollars in Thousands)


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
Operating income
$
224,167

 
$
66,018

 
$
59,723

 
$
175,963

 
$
187,444

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (income) (a)
(1,144
)
 

 
4,104

 
(1,944
)
 
5,791

Impact of MSA settlement (b)
(6,298
)
 

 
(1,826
)
 
(6,298
)
 
(2,721
)
Douglas Elliman Realty, LLC purchase accounting adjustments (c)
1,334

 
386

 
(2,136
)
 
1,141

 
(1,326
)
Total adjustments
(6,108
)
 
386

 
142

 
(7,101
)
 
1,744

 
 
 
 
 
 
 
 
 
 
Adjusted Operating Income (d)
$
218,059

 
$
66,404

 
$
59,865

 
$
168,862

 
$
189,188


                                      

a.
Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation and proceeds received from a litigation award at Douglas Elliman Realty, LLC.
b.
Represents the Company’s tobacco segment’s settlement of a long-standing dispute related to the Master Settlement Agreement.
c.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company’s ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
d.
Does not include a reduction for 29.41% non-controlling interest in Douglas Elliman Realty, LLC.






TABLE 5
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF TOBACCO ADJUSTED OPERATING INCOME
AND TOBACCO ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
Tobacco Adjusted Operating Income:
 
 
 
 
 
 
 
 
 
Operating income from tobacco segment
$
244,059

 
$
63,259

 
$
61,601

 
$
189,185

 
$
185,526

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
1,325

 

 
4,104

 
525

 
5,791

Impact of MSA settlement (b)
(6,298
)
 

 
(1,826
)
 
(6,298
)
 
(2,721
)
Total adjustments
(4,973
)
 

 
2,278

 
(5,773
)
 
3,070

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted Operating Income
$
239,086

 
$
63,259

 
$
63,879

 
$
183,412

 
$
188,596


 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Operating income from tobacco segment
$
244,059

 
$
63,259

 
$
61,601

 
$
189,185

 
$
185,526

 
 
 
 
 
 
 
 
 
 
   Litigation settlement and judgment expense (a)
1,325

 

 
4,104

 
525

 
5,791

Impact of MSA settlement (b)
(6,298
)
 

 
(1,826
)
 
(6,298
)
 
(2,721
)
Total adjustments
(4,973
)
 

 
2,278

 
(5,773
)
 
3,070

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted Operating Income
239,086

 
63,259

 
63,879

 
183,412

 
188,596

 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
8,194

 
2,059

 
2,050

 
6,171

 
6,803

Stock-based compensation expense
85

 
21

 
21

 
63

 
63

Total adjustments
8,279

 
2,080

 
2,071

 
6,234

 
6,866

 
 
 
 
 
 
 
 
 
 
Tobacco Adjusted EBITDA
$
247,365

 
$
65,339

 
$
65,950

 
$
189,646

 
$
195,462



                                      

a.
Represents accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.
b.
Represents the Company’s tobacco segment’s settlement of a long-standing dispute related to the Master Settlement Agreement.






TABLE 6
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF REAL ESTATE SEGMENT (NEW VALLEY LLC) ADJUSTED EBITDA
(Unaudited)
(Dollars in Thousands)
 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
Net income (loss) attributed to Vector Group Ltd. from subsidiary non-guarantors (a)
$
11,958

 
$
4,703

 
$
1,602

 
$
(915
)
 
$
24,737

Interest expense (a)
76

 
7

 
10

 
63

 
22

Income tax (benefit) expense (a)
(19,317
)
 
1,971

 
1,381

 
(1,826
)
 
17,701

Net income attributed to non-controlling interest (a)
884

 
3,026

 
1,214

 
657

 
5,951

Depreciation and amortization
9,406

 
2,398

 
2,075

 
7,105

 
6,210

EBITDA
$
3,007

 
$
12,105

 
$
6,282

 
$
5,084

 
$
54,621

Loss from non-guarantors other than New Valley LLC
55

 
18

 
36

 
71

 
119

Equity in losses (earnings) from real estate ventures (b)
13,340

 
(294
)
 
47

 
8,378

 
(26,357
)
Purchase accounting adjustments (c)
531

 
184

 
(2,345
)
 
545

 
(2,088
)
Litigation settlement and judgment income (d)
(2,469
)
 

 

 
(2,469
)
 

Other, net
(1,346
)
 
(342
)
 
(317
)
 
(1,020
)
 
(998
)
Adjusted EBITDA
$
13,118

 
$
11,671

 
$
3,703

 
$
10,589

 
$
25,297

Adjusted EBITDA attributed to non-controlling interest
(2,501
)
 
(3,638
)
 
(1,090
)
 
(1,848
)
 
(6,923
)
Adjusted EBITDA attributed to New Valley LLC
$
10,617

 
$
8,033

 
$
2,613

 
$
8,741

 
$
18,374

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
 
 
Real Estate (e)
$
13,934

 
$
11,697

 
$
3,719

 
$
11,403

 
$
25,317

Corporate and Other
(816
)
 
(26
)
 
(16
)
 
(814
)
 
(20
)
Total (g)
$
13,118

 
$
11,671

 
$
3,703

 
$
10,589

 
$
25,297

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Attributed to New Valley LLC by Segment
 
 
 
 
 
 
 
 
 
Real Estate (f)
$
11,433

 
$
8,059

 
$
2,629

 
$
9,555

 
$
18,394

Corporate and Other
(816
)
 
(26
)
 
(16
)
 
(814
)
 
(20
)
Total (g)
$
10,617

 
$
8,033

 
$
2,613

 
$
8,741

 
$
18,374

             
a.
Amounts are derived from Vector Group Ltd.’s Condensed Consolidated Financial Statements. See Note entitled “Condensed Consolidating Financial Information” contained in Vector Group Ltd.’s Form 10-Q for the three and nine months ended September 30, 2018.
b.
Represents equity in losses (earnings) recognized from the Company’s investment in certain real estate businesses that are not consolidated in its financial results.
c.
Represents purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company’s ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
d.
Represents proceeds received from a litigation award at Douglas Elliman Realty, LLC.
e.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $14,181 for the last twelve months ended September 30, 2018 and $12,048, $3,772, $11,824 and $23,753 for the three and nine months ended September 30, 2018 and 2017, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC’s entire Adjusted EBITDA.
f.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $10,011 for the last twelve months ended September 30, 2018 and $8,505, $2,663, $8,347 and $16,767 for the three and nine months ended September 30, 2018 and 2017, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC’s Adjusted EBITDA for non-controlling interest.
g.
New Valley’s Adjusted EBITDA does not include an allocation of Vector Group Ltd.’s “Corporate and Other” segment expenses (for purposes of computing Adjusted EBITDA contained in Table 2 of this press release) of $15,559 for the last twelve months ended September 30, 2018 and $3,543, $3,197, $11,316 and $9,869 for the three and nine months ended September 30, 2018 and 2017, respectively.






TABLE 7
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA
AND DOUGLAS ELLIMAN REALTY, LLC ADJUSTED EBITDA ATTRIBUTED TO REAL ESTATE SEGMENT
(Unaudited)
(Dollars in Thousands)
 
LTM
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
September 30,
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Net income attributed to Douglas Elliman Realty, LLC
$
8,680

 
$
9,965

 
$
4,197

 
$
7,773

 
$
20,451

Interest expense
59

 
3

 
5

 
51

 
5

Income tax (benefit) expense
(294
)
 
(85
)
 
248

 
401

 
648

Depreciation and amortization
8,998

 
2,295

 
1,974

 
6,797

 
5,907

Douglas Elliman Realty, LLC EBITDA
$
17,443

 
$
12,178

 
$
6,424

 
$
15,022

 
$
27,011

Equity in earnings from real estate ventures (a)
(1,173
)
 
(274
)
 
(271
)
 
(1,151
)
 
(1,116
)
Purchase accounting adjustments (b)
531

 
184

 
(2,345
)
 
545

 
(2,088
)
Litigation settlement and judgment income (c)
(2,469
)
 

 

 
(2,469
)
 

Other, net
(151
)
 
(40
)
 
(36
)
 
(123
)
 
(54
)
Douglas Elliman Realty, LLC Adjusted EBITDA
$
14,181

 
$
12,048

 
$
3,772

 
$
11,824

 
$
23,753

Douglas Elliman Realty, LLC Adjusted EBITDA attributed to non-controlling interest
(4,170
)
 
(3,543
)
 
(1,109
)
 
(3,477
)
 
(6,986
)
Douglas Elliman Realty, LLC Adjusted EBITDA attributed to Real Estate Segment
$
10,011

 
$
8,505

 
$
2,663

 
$
8,347

 
$
16,767

             
a.
Represents equity in earnings recognized from the Company’s investment in certain real estate businesses that are not consolidated in its financial results.
b.
Represents purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company’s ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
c.
Represents proceeds received from a litigation award at Douglas Elliman Realty, LLC.




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