Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

Summary of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)Basis of Presentation:

The condensed consolidated financial statements of Vector Group Ltd. (the “Company” or “Vector”) include the accounts of Liggett Group LLC (“Liggett”), Vector Tobacco LLC (“Vector Tobacco”), Liggett Vector Brands LLC (“Liggett Vector Brands”), New Valley LLC (“New Valley”) and other less significant subsidiaries. New Valley includes the accounts of other less significant subsidiaries. All significant intercompany balances and transactions have been eliminated.

Liggett and Vector Tobacco are engaged in the manufacture and sale of cigarettes in the United States. Liggett Vector Brands coordinates Liggett and Vector Tobacco’s sales and marketing efforts. Certain references to “Liggett” refer to the Company’s tobacco operations, including the business of Liggett and Vector Tobacco, unless otherwise specified. New Valley is engaged in the real estate business.

The unaudited, interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and, in management’s opinion, contain all adjustments, consisting only of normal recurring items, necessary for a fair statement of the results for the periods presented. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”). The consolidated results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the entire year.

(b)Distributions and Dividends on Common Stock:

The Company records distributions on its common stock as dividends in its condensed consolidated statements of stockholders’ deficiency to the extent of retained earnings. Any amounts exceeding retained earnings are recorded as a reduction to additional paid-in capital to the extent paid-in-capital is available and then to accumulated deficit.

(c)Earnings Per Share (“EPS”):

Net income for purposes of determining basic and diluted EPS for discontinued operations and net income available to common stockholders was as follows:


	Three Months Ended
	March 31,
		2022		2021
Net income from continuing operations		$	32,542	$	21,550
Net income from discontinued operations		—		10,407
Net income		32,542		31,957
Income from continuing operations attributable to participating securities		(983)		(776)
Net income applicable to common shares		$	31,559	$	31,181

Net income for purposes of determining basic and diluted EPS for continuing operations applicable to common shares was as follows:


	Three Months Ended
	March 31,
		2022		2021
Net income from continuing operations		$	32,542	$	21,550
Income from continuing operations attributable to participating securities		(983)		(754)
Net income available to common stockholders		$	31,559	$	20,796

Basic and diluted EPS for continuing and discontinued operations were calculated using the following common shares:


	Three Months Ended
	March 31,
		2022	2021
Weighted-average shares for basic EPS		152,586,900	152,249,440

Plus incremental shares related to stock options and non-vested restricted stock		158,353	134,650
Weighted-average shares for diluted EPS		152,745,253	152,384,090

It may not be possible to recalculate EPS attributable to common stockholders by adjusting EPS from continuing operations by EPS from discontinued operations as each amount is calculated independently.

The following non-vested restricted stock was outstanding during the three months ended March 31, 2022 and 2021, but was not included in the computation of diluted EPS because the impact of the per share expense associated with the restricted stock was greater than the average market price of the common shares during the respective periods.


	Three Months Ended
	March 31,
		2022		2021


Weighted-average shares of non-vested restricted stock		—		97,222
Weighted-average expense per share		$	—	$	14.31

(d)Other, net:

Other, net consisted of:


	Three Months Ended
	March 31,
		2022		2021

Interest and dividend income		$	450	$	534






Net (losses) gains recognized on investment securities		(3,039)		2,415
Net periodic benefit cost other than the service costs		(236)		(244)


Other income		1,680		1
Other, net		$	(1,145)	$	2,706

(e)Other Assets:

Other assets consisted of:


	March 31, 2022		December 31, 2021
Restricted assets	$	1,551	$	1,551
Prepaid pension costs	44,866		44,585
Other assets	34,467		30,549
Total other assets	$	80,884	$	76,685

(f)Other Current Liabilities:

Other current liabilities consisted of:


	March 31, 2022		December 31, 2021
Accounts payable	$	7,453	$	9,443
Accrued promotional expenses	57,610		55,647
Accrued excise and payroll taxes payable, net	21,375		22,919
Accrued interest	32,667		30,676
Accrued salaries and benefits	4,042		13,982
Allowance for sales returns	6,063		6,669
Other current liabilities	10,751		10,151
Total other current liabilities	$	139,961	$	149,487

(g)Reconciliation of Cash, Cash Equivalents and Restricted Cash:

The components of “Cash, cash equivalents and restricted cash” in the condensed consolidated statements of cash flows were as follows:


	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	238,305	$	193,411

Restricted cash and cash equivalents included in other assets	1,438		1,438
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	239,743	$	194,849

(h)Related Party Transactions:

Agreements with Douglas Elliman. The Company received $1,050 under the Transition Services Agreement and $491 under the Aircraft Lease Agreement during the three months ended March 31, 2022.

Real estate venture investments. Douglas Elliman has been engaged by the developers as the sole broker or the co-broker for several of the real estate development projects that New Valley owns an interest in through its real estate venture investments. Douglas Elliman had gross commissions of approximately $900 and $2,357 from these projects for the three months ended March 31, 2022 and 2021, respectively.

(i)New Accounting Pronouncements:

ASUs to be adopted in future periods:

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires that an acquirer recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.