SDI Standard Diversified Inc

Standard Diversified Inc. (the “Company”) (NYSE American: SDI) today announced its financial results for the third quarter and nine months ended September 30, 2019. In addition to its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission, the Company will also make available an updated Investor Presentation on its corporate website at www.standarddiversified.com.

2019 Third Quarter Highlights

• Total revenues increased 13.6% to $104.1 million as a result of strong growth at Turning Point Brands, Inc. (NYSE: TPB) (“TPB”)
• Net income attributable to SDI was $0.2 million, or $0.01 per diluted share

2019 Nine Month Highlights

• Total revenues increased 16.3% to $305.8 million as a result of strong growth at TPB
• Net loss attributable to SDI was $2.3 million, or $0.14 per diluted share

Operating Events

• In its third quarter 2019 press release (Turning Point Brands - 2019 Third Quarter Financial Results), TPB presented strong quarterly results in the smokeless and smoking segments, producing overall increases (as compared to the same quarter last year) in net sales, gross profit, net income and adjusted EBITDA, all despite the impact of negative vaping headlines and the resulting decline in its third-party vaping distribution.

• TPB is reviewing strategic alternatives for the third-party vaping distribution business, including a continuing effort to repurpose its infrastructure to support proprietary CBD sales, which continue to grow month over month. Additionally, in an attempt to mitigate the impact of declines in third-party vaping distribution, TPB will accelerate its SG&A cost reduction plans which are expected to deliver $8-10 million of annualized savings.

• During the nine months ended September 30, 2019, the Company recorded impairment charges of $0.8 million and $2.0 million related to the full impairment of the goodwill and intangible asset balances, respectively, in its insurance company, Maidstone Insurance Company (“Maidstone”). During the quarter ended September 30, 2019, the Company provided the New York State Department of Financial Services (“NYSDFS”) its consent to the filing of a petition for the Entry of an Order of Liquidation and the Company is now awaiting the filing by the NYSDFS in the Supreme Court of the State of New York. Once the Order of Liquidation is entered by the Supreme Court of the State of New York, the Company shall be relieved of the assets and liabilities of Maidstone.

Corporate Headquarters Relocation

The Company relocated its corporate headquarters, effective September 2, 2019, to 767 5th Ave, 12th FL, New York NY 10153.

About Standard Diversified Inc.

Standard Diversified Inc. is a holding company that owns and operates subsidiaries in a variety of industries, including other tobacco products, outdoor advertising and insurance. For more information about the Company, please visit the Company’s website at www.standarddiversified.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, are forward-looking statements. These forward-looking statements address, among other things activities, events or developments that the Company expects, believes or anticipates will or may occur in the future. These forward-looking statements are subject to a number of risks that could cause actual results to differ materially from those contained in the forward-looking statements, including those risks described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Except as required by law, the Company assumes no obligation to update publicly any such forward-looking statements.

 

Standard Diversified Inc. and Subsidiaries

Consolidated Statements of Income (Loss)

(dollars in thousands except share and per share data)

(unaudited)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

2019

 

2018

 

2019

 

2018

Revenues:                         Net sales

$

            97,520

 

$

            84,035

 

$

          283,882

 

$

           240,156

 

Insurance premiums earned    

              6,055

 

   

              7,088

 

   

            20,362

 

   

             21,539

 

Net investment income

                 210

 

                 309

 

                 767

 

                  679

 

Other income    

                 279

 

   

                 163

 

   

                 829

 

   

                  557

 

Total revenues  

          104,064

 

 

            91,595

 

 

          305,840

 

 

           262,931

 

                          Operating costs and expenses: Cost of sales    

            54,636

 

   

            47,742

 

   

          159,217

 

   

           136,147

 

Selling, general and administrative expenses

            31,024

 

            24,492

 

            84,201

 

             70,237

 

Incurred losses and loss adjustment expenses    

              4,790

 

   

              5,790

 

   

            20,506

 

   

             17,007

 

Impairment loss on goodwill and other intangible assets

                    -  

 

                    -  

 

              2,826

 

                     -  

 

Other operating expenses    

              2,003

 

   

              2,682

 

   

              7,248

 

   

               5,512

 

Total operating costs and expenses  

            92,453

 

 

            80,706

 

 

          273,998

 

 

           228,903

 

Operating income    

            11,611

 

   

            10,889

 

   

            31,842

 

   

             34,028

 

  Interest expense, net

              4,680

 

              4,450

 

            13,529

 

             12,556

 

Interest and investment income    

                (777

)

   

                (243

)

   

             (1,115

)

   

                (620

)

Loss on extinguishment of debt

              2,117

 

                    -  

 

              2,267

 

               2,384

 

Net periodic benefit (income) expense, excluding service cost    

                  (12

)

   

                  (45

)

   

                  (34

)

   

                  176

 

Income before income taxes

              5,603

 

              6,727

 

            17,195

 

             19,532

 

Income tax expense    

              2,236

 

   

              1,436

 

   

              6,569

 

   

               4,153

 

Net income  

              3,367

 

 

              5,291

 

 

            10,626

 

 

             15,379

 

Net income attributable to noncontrolling interests    

             (3,133

)

   

             (3,924

)

   

           (12,973

)

   

             (9,962

)

Net income (loss) attributable to Standard Diversified Inc.

$

                 234

 

$

              1,367

 

$

             (2,347

)

$

               5,417

 

  Net income (loss) attributable to SDI per Class A and Class B Common Share – Basic   

$

                0.01

 

 

$

0.08

 

 

$

               (0.14

)

 

$

0.33

 

Net income (loss) attributable to SDI per Class A and Class B Common Share – Diluted

$

                0.01

 

$

0.08

 

$

               (0.14

)

$

0.31

 

Weighted Average Class A and Class B Common Shares Outstanding – Basic    

     16,830,132

 

   

     16,677,412

 

   

     16,816,158

 

   

      16,618,823

 

Weighted Average Class A and Class B Common Shares Outstanding – Diluted

     16,877,690

 

     16,741,660

 

     16,816,158

 

      16,661,809

 

     

Standard Diversified Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands except share and per share data)

         

September 30,

 

December 31,

   

2019

 

2018

   

(Unaudited)

 

 

 

ASSETS     Cash and cash equivalents  

$

                97,347

 

 

$

 

               21,201

 

Fixed maturities available for sale, at fair value; amortized cost of $26,241 in 2019 and $32,474 in 2018  

                26,566

 

 

               32,132

 

Equity securities, at fair value; cost: $1,099 in 2019 and $794 in 2018    

                  1,115

 

   

                    693

 

Trade accounts receivable, net of allowances of $63 in 2019 and $44 in 2018  

                  7,276

 

 

                 2,901

 

Premiums receivable    

                  3,566

 

   

                 5,858

 

Inventories  

                98,719

 

 

               91,237

 

Other current assets    

                16,401

 

   

               15,045

 

Property, plant and equipment, net  

                29,759

 

 

               27,741

 

Deferred income taxes    

                  2,242

 

   

                      -  

 

Right of use assets  

                13,755

 

 

                      -  

 

Deferred financing costs, net    

                     960

 

   

                    870

 

Intangible assets, net  

                33,180

 

 

               38,325

 

Deferred policy acquisition costs    

                  1,468

 

   

                 2,279

 

Goodwill  

              154,479

 

 

             146,696

 

Master Settlement Agreement (MSA) escrow deposits    

                32,074

 

   

               30,550

 

Other assets    

                  6,891

 

   

                 6,415

 

Total assets  

$

              525,798

 

 

$

 

             421,943

 

      LIABILITIES AND EQUITY     Reserves for losses and loss adjustment expenses  

$

                26,432

 

 

$

 

               27,330

 

Unearned premiums  

                  8,370

 

 

               12,707

 

Advance premiums collected    

                     326

 

   

                    500

 

Accounts payable  

                  9,498

 

 

                 9,225

 

Accrued liabilities    

                21,571

 

   

               23,883

 

Current portion of long-term debt  

                15,958

 

 

                 9,431

 

Revolving credit facility    

                       -  

 

   

               26,000

 

Notes payable and long-term debt  

              330,150

 

 

             208,616

 

Lease liabilities    

                12,280

 

   

                      -  

 

Deferred income taxes  

                       -  

 

 

                 2,711

 

Postretirement benefits    

                  3,096

 

   

                 3,096

 

Asset retirement obligations  

                  2,100

 

 

                 2,028

 

Other long-term liabilities    

                  3,554

 

   

                 1,687

 

Total liabilities    

              433,335

 

   

             327,214

 

              Commitments and contingencies                   Equity:     Preferred stock, $0.01 par value; authorized shares 50,000,000; -0- issued and outstanding shares    

                       -  

 

   

                      -  

 

Class A common stock, $0.01 par value; authorized shares, 300,000,000; 9,036,095 issued and 9,029,479 outstanding at September 30, 2019 and 9,156,293 issued and 9,052,801 outstanding at December 31, 2018  

                       90

 

 

                      92

 

Class B common stock, $0.01 par value; authorized shares, 30,000,000; 7,722,564 and 7,801,995 issued and outstanding at September 30, 2019 and December 31, 2018, respectively; convertible into Class A shares on a one-for-one basis    

                       77

 

   

                      78

 

Additional paid-in capital  

                72,955

 

 

               81,260

 

Class A treasury stock, 6,616 and 103,492 common shares at cost as of September 30, 2019 and December 31, 2018, respectively    

                     (70

)

   

               (1,440

)

Accumulated other comprehensive loss  

                (1,243

)

 

               (1,683

)

Accumulated deficit    

              (26,960

)

   

             (24,613

)

Total stockholders' equity  

                44,849

 

 

               53,694

 

Noncontrolling interests    

                47,614

 

   

               41,035

 

Total equity    

                92,463

 

   

               94,729

 

Total liabilities and equity  

$

              525,798

 

 

$

 

             421,943

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191106006017/en/

Adam Prior The Equity Group Inc. Phone: (212) 836-9606 aprior@equityny.com