Vector Group Ltd. (NYSE:VGR) today announced financial results
for the three months ended March 31, 2017.
GAAP Financial Results
First quarter of 2017 revenues were $415.2 million, compared to
revenues of $380.8 million in the first quarter of 2016. The
Company recorded operating income of $52.9 million in the first
quarter of 2017, compared to operating income of $62.2 million in
the first quarter of 2016. Net loss attributed to Vector Group Ltd.
for the first quarter of 2017 was $4.2 million, or $(0.03) per
diluted common share, compared to net income of $19.3 million, or
$0.15 per diluted common share, in the first quarter of 2016.
Non-GAAP Financial Measures
Non-GAAP financial measures also include adjustments for
purchase accounting associated with the Company's acquisition of
its additional 20.59% interest in Douglas Elliman Realty, LLC in
December 2013, litigation settlement and judgment expenses in
the Tobacco segment, settlements of long-standing disputes related
to the Master Settlement Agreement in the Tobacco segment,
restructuring and pension settlement expense in the Tobacco
segment, 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
months ended March 31, 2017 and 2016 are included in Tables 2
through 7.
Three months ended March 31, 2017 compared to the three
months ended March 31, 2016
First quarter of 2017 Adjusted EBITDA attributed to Vector
Group (as described in Table 2 attached hereto) were $61.3 million
compared to $69.6 million for the first quarter of 2016.
Adjusted Net Income (as described in Table 3 attached hereto)
was $18.4 million or $0.14 per diluted share for the first quarter
of 2017 and $18.1 million or $0.14 per diluted share for the first
quarter of 2016.
Adjusted Operating Income (as described in Table 4 attached
hereto) was $54.1 million for the first quarter of 2017 compared to
$65.2 million for the first quarter of 2016.
Tobacco Segment Financial Results
For the first quarter of 2017, the Tobacco segment had revenues
of $257.5 million, compared to $221.0 million for the first quarter
of 2016. The increase in revenues was primarily due to a 21.0%
increase in unit sales volume.
Operating Income from the Tobacco segment was $59.8 million for
the first quarter of 2017 compared to $61.5 million for the first
quarter of 2016.
Non-GAAP Financial Measures
Tobacco Adjusted Operating Income (as described in Table 5
attached hereto) for the first quarter of 2017 and 2016 was $60.5
million and $63.9 million, respectively.
For the first quarter of 2017, the Tobacco segment had
conventional cigarette (wholesale) shipments of approximately 2.17
billion units compared to 1.80 billion units for the first quarter
of 2016.
Liggett's retail market share increased to approximately 3.75%
during the first quarter of 2017. Compared to the first quarter of
2016, Liggett's retail shipments increased 6.2% while the overall
industry's retail shipments declined by 2.7%, according to data
from Management Science Associates, Inc.
Real Estate Segment Financial Results
For the first quarter of 2017, the Real Estate segment had
revenues of $157.8 million, compared to $159.7 million for the
first quarter of 2016. For the first quarter of 2017, the Real
Estate segment reported a net income of $7.1 million, compared to
net income of $3.0 million for the first quarter of 2016.
Douglas Elliman's results are included in Vector Group Ltd.'s
Real Estate segment. For the first quarter of 2017, Douglas Elliman
had revenues of $155.5 million, compared to $157.6 million for the
first quarter of 2016. For the first quarter of 2017, Douglas
Elliman reported net income of $0.1 million, compared to $7.1
million for the first quarter of 2016.
Non-GAAP Financial Measures
For the first quarter of 2017, Real Estate Adjusted EBITDA
attributed to the Company (as described in Table 6 attached hereto)
were $2.5 million, compared to $7.5 million for the first quarter
of 2016.
Douglas Elliman's results are included in Vector Group Ltd.'s
Real Estate segment. For the first quarter of 2017, Douglas
Elliman's Adjusted EBITDA (as described in Table 7 attached hereto)
were $1.8 million ($1.2 million attributed to the Company),
compared to $9.1 million ($6.4 million attributed to the Company)
for the first quarter of 2016.
For the first quarter of 2017, Douglas Elliman achieved closed
sales of approximately $5.6 billion, compared to $5.7 billion for
the first quarter of 2016.
E-cigarettes Segment Financial Results
For the first quarter of 2017, the E-cigarette segment had a
loss of Adjusted EBITDA of $0.1 million compared to a loss of
Adjusted EBITDA of $0.2 million for the first quarter of 2016.
Non-GAAP Financial Measures
Adjusted EBITDA, Adjusted Net Income, Adjusted Operating Income,
Tobacco Adjusted Operating Income, 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 months ended
March 31, 2017 and 2016.
Conference Call to Discuss First Quarter Results
As previously announced, the Company will host a conference call
and webcast on Friday, May 5, 2017 at 9:00 AM (ET) to
discuss first quarter 2017 results. Investors can access
the call by dialing 800-859-8150 and entering 90330388 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 May 5, 2017 through May 19, 2017. To access the
replay, dial 877-656-8905 and enter 90330388 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 March 31, 2017
2016 (Unaudited) Revenues Tobacco* $ 257,454 $
221,015 Real estate 157,754 159,747 E-cigarettes — 38
Total Revenues 415,208 380,800 Expenses: Cost of sales:
Tobacco* 175,754 136,738 Real estate 100,169 99,678 E-cigarettes —
6 Total cost of sales 275,923 236,422
Operating, selling, administrative and general expenses 84,769
79,828 Litigation settlement and judgment expense 1,585 2,350
Restructuring charges — 41 Operating income 52,931
62,159 Other income (expenses): Interest expense (46,221 )
(30,720 ) Loss on extinguishment of debt (34,110 ) — Change in fair
value of derivatives embedded within convertible debt 8,571 9,694
Equity in earnings (losses) from real estate ventures 11,113 (507 )
Equity in losses from investments (1,061 ) (1,671 ) Gain on sale of
investment securities available for sale 150 567 Impairment of
investment securities available for sale (39 ) (4,813 ) Other, net
1,659 1,047 (Loss) income before provision for income
taxes (7,007 ) 35,756 Income tax (benefit) expense (2,782 ) 14,363
Net (loss) income (4,225 ) 21,393 Net income
attributed to non-controlling interest (2 ) (2,055 ) Net
(loss) income attributed to Vector Group Ltd. $ (4,227 ) $ 19,338
Per basic common share: Net (loss) income
applicable to common share attributed to Vector Group Ltd. $ (0.03
) $ 0.15 Per diluted common share: Net (loss)
income applicable to common share attributed to Vector Group Ltd. $
(0.03 ) $ 0.15 Dividends declared per share $ 0.40
$ 0.38
* Revenues and cost of sales include
federal excise taxes of $109,368 and $90,846, respectively.
TABLE 2
VECTOR GROUP LTD. AND
SUBSIDIARIES
RECONCILIATION OF ADJUSTED
EBITDA
(Unaudited)
(Dollars in
Thousands)
LTM Three Months Ended
March 31, March 31, 2017 2017 2016 Net income
(loss) attributed to Vector Group Ltd. $ 47,562 $ (4,227 ) $ 19,338
Interest expense 158,483 46,221 30,720 Income tax expense (benefit)
32,018 (2,782 ) 14,363 Net income attributed to non-controlling
interest 4,086 2 2,055 Depreciation and amortization 22,224
5,029 5,164 EBITDA $ 264,373 $ 44,243 $ 71,640 Change
in fair value of derivatives embedded within convertible debt (a)
(30,587 ) (8,571 ) (9,694 ) Equity in losses from investments (b)
2,144 1,061 1,671 Gain on sale of investment securities available
for sale (2,490 ) (150 ) (567 ) Impairment of investment securities
available for sale 607 39 4,813 Equity in (earnings) losses from
real estate ventures (c) (16,820 ) (11,113 ) 507 Loss on
extinguishment of debt 34,110 34,110 — Stock-based compensation
expense (d) 10,751 3,006 2,307 Litigation settlement and judgment
expense (e) 19,235 1,585 2,350 Impact of MSA settlement (f) (648 )
(895 ) — Restructuring charges — — 41 Purchase accounting
adjustments (g) 5,143 113 200 Other, net (5,344 ) (1,659 ) (1,047 )
Adjusted EBITDA $ 280,474 $ 61,769 $ 72,221 Adjusted EBITDA
attributed to non-controlling interest (8,542 ) (485 ) (2,639 )
Adjusted EBITDA attributed to Vector Group Ltd. $ 271,932 $
61,284 $ 69,582
Adjusted EBITDA by Segment
Tobacco $ 265,456 $ 62,901 $ 66,335 E-cigarettes (1,287 ) (77 )
(193 ) Real Estate (h) 31,515 2,955 10,156 Corporate and Other
(15,210 ) (4,010 ) (4,077 ) Total $ 280,474 $ 61,769
$ 72,221
Adjusted EBITDA Attributed to Vector Group Ltd.
by Segment Tobacco $ 265,456 $ 62,901 $ 66,335 E-cigarettes
(1,287 ) (77 ) (193 ) Real Estate (i) 22,973 2,470 7,517 Corporate
and Other (15,210 ) (4,010 ) (4,077 ) Total $ 271,932 $
61,284 $ 69,582 a. Represents income or
losses recognized from changes in the fair value of the derivatives
embedded in the Company's convertible debt. b. Represents equity in
losses recognized from investments that the Company accounts for
under the equity method. c. Represents equity in (earnings) losses
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. f. Represents the Company's tobacco segment's
settlement of a long-standing dispute related to the Master
Settlement Agreement. g. 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. h. Includes Adjusted EBITDA for
Douglas Elliman Realty, LLC of $29,349 for the last twelve months
ended March 31, 2017 and $1,756 and $9,064 for the three months
ended March 31, 2017 and 2016, 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 $20,717 for the last
twelve months ended and $1,240 and $6,398 for the three months
ended March 31, 2017 and 2016, 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 March 31, 2017
2016 Net (loss) income attributed to Vector
Group Ltd. $ (4,227 ) $ 19,338 Change in fair value of
derivatives embedded within convertible debt (8,571 ) (9,694 )
Non-cash amortization of debt discount on convertible debt 12,053
8,286 Loss on extinguishment of debt 34,110 — Litigation settlement
and judgment expense (a) 1,585 2,350 Impact of interest expense
capitalized to real estate ventures, net (445 ) (3,520 ) Impact of
MSA settlement (b) (895 ) — Restructuring charges — 41
Douglas Elliman Realty, LLC purchase
accounting adjustments (c)
321
476 Total adjustments 38,158 (2,061 ) Tax
expense related to adjustments (15,492 ) 858 Adjusted
Net Income attributed to Vector Group Ltd. $ 18,439 $ 18,135
Per diluted common share: Adjusted Net Income
applicable to common shares attributed to Vector Group Ltd. $ 0.14
$ 0.14 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. 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
March 31, March 31, 2017 2017 2016 Operating
income $ 223,769 $ 52,931 $ 62,159 Litigation settlement and
judgment expense (a) 19,235 1,585 2,350 Restructuring expense — —
41 Impact of MSA settlement (b) (648 ) (895 ) — Douglas Elliman
Realty, LLC purchase accounting adjustments (c) 6,945 455
674 Total adjustments 25,532 1,145 3,065 Adjusted
Operating Income (d) $ 249,301 $ 54,076 $ 65,224 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. 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
March 31, March 31, 2017 2017 2016
Tobacco
Adjusted Operating Income: Operating income from tobacco
segment $ 236,580 $ 59,770 $ 61,483 Litigation settlement
and judgment expense (a) 19,235 1,585 2,350 Restructuring expense —
— 41 Impact of MSA settlement (b) (648 ) (895 ) — Total adjustments
18,587 690 2,391 Tobacco Adjusted Operating Income $ 255,167
$ 60,460 $ 63,874 LTM
Three Months Ended March 31, March 31, 2017 2017
2016
Tobacco Adjusted EBITDA: Operating
income from tobacco segment $ 236,580 $ 59,770 $ 61,483
Litigation settlement and judgment expense (a) 19,235 1,585 2,350
Restructuring expense — — 41 Impact of MSA settlement (b) (648 )
(895 ) — Total adjustments 18,587 690 2,391 Tobacco Adjusted
Operating Income 255,167 60,460 63,874 Depreciation and
amortization 10,204 2,420 2,440 Stock-based compensation expense 85
21 21 Total adjustments 10,289 2,441 2,461
Tobacco Adjusted EBITDA $ 265,456 $ 62,901 $ 66,335
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 SEGMENT (NEW
VALLEY LLC) ADJUSTED EBITDA
(Unaudited)
(Dollars in
Thousands)
LTM Three Months Ended
March 31, March 31, 2017 2017 2016 Net income
attributed to Vector Group Ltd. from subsidiary non-guarantors (a)
$ 17,539 $ 7,105 $ 3,043 Interest expense (a) 23 6 3 Income tax
expense (a) 11,865 4,953 2,423 Net income attributed to
non-controlling interest (a) 4,086 2 2,055 Depreciation and
amortization 10,425 2,222 2,282 EBITDA $
43,938 $ 14,288 $ 9,806 Loss from non-guarantors other than New
Valley LLC 110 46 34 Equity in (earnings) losses from real estate
ventures (b) (16,820 ) (11,113 ) 507 Purchase accounting
adjustments (c) 5,143 113 200 Other, net (908 ) (379 ) (410 )
Adjusted EBITDA $ 31,463 $ 2,955 $ 10,137 Adjusted EBITDA
attributed to non-controlling interest (8,542 ) (485 ) (2,639 )
Adjusted EBITDA attributed to New Valley LLC $ 22,921 $
2,470 $ 7,498 Adjusted EBITDA by Segment Real
Estate (d) $ 31,515 $ 2,955 $ 10,156 Corporate and Other (52 ) —
(19 ) Total (f) $ 31,463 $ 2,955 $ 10,137
Adjusted EBITDA Attributed to New Valley LLC by
Segment Real Estate (e) $ 22,973 $ 2,470 $ 7,517 Corporate and
Other (52 ) — (19 ) Total (f) $ 22,921 $ 2,470
$ 7,498 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 months ended March
31, 2017. b. Represents equity in (earnings) losses recognized from
the Company's investment in certain real estate businesses that are
not consolidated in its financial results. 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. Includes
Adjusted EBITDA for Douglas Elliman Realty, LLC of $29,349 for the
last twelve months ended March 31, 2017 and $1,756 and $9,064 for
the three months ended March 31, 2017 and 2016, respectively.
Amounts reported in this footnote reflect 100% of Douglas Elliman
Realty, LLC's entire Adjusted EBITDA. e. Includes Adjusted EBITDA
for Douglas Elliman Realty, LLC less non-controlling interest of
$20,717 or the last twelve months ended March 31, 2017 and $1,240
and $6,398 for the three months ended March 31, 2017 and 2016,
respectively. Amounts reported in this footnote have adjusted
Douglas Elliman Realty, LLC's Adjusted EBITDA for non-controlling
interest. f. New Valley's Adjusted EBITDA does not include an
allocation of Vector Group Ltd.'s "Corporate and Other" segment's
expenses (for purposes of computing Adjusted EBITDA contained in
Table 2 of this press release) of $15,210 for the last twelve
months ended and $4,010 and $4,077 for the three months ended March
31, 2017 and 2016, 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
March 31, March 31, 2017 2017 2016 Net income
attributed to Douglas Elliman Realty, LLC $ 14,104 $ 113 $ 7,077
Income tax expense 908 30 248 Depreciation and amortization 10,036
2,120 2,200 Douglas Elliman Realty, LLC EBITDA
$ 25,048 $ 2,263 $ 9,525 Equity in earnings from real estate
ventures (a) (1,039 ) (580 ) (603 ) Purchase accounting adjustments
(b) 5,143 113 200 Other, net 197 (40 ) (58 ) Douglas Elliman
Realty, LLC Adjusted EBITDA $ 29,349 $ 1,756 $ 9,064 Douglas
Elliman Realty, LLC Adjusted EBITDA attributed to non-controlling
interest (8,632 ) (516 ) (2,666 ) Douglas Elliman Realty, LLC
Adjusted EBITDA attributed to Real Estate Segment $ 20,717 $
1,240 $ 6,398 a. Represents equity
income recognized from the Company's investment in certain real
estate businesses that are not consolidated in its financial
results. b. 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.
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Sard Verbinnen & CoEmily Claffey/Benjamin
Spicehandler/Columbia Clancy, 212-687-8080orSard Verbinnen & Co
- EuropeJonathan Doorley/Conrad Harrington, +44 (0)20 3178
8914orVector Group Ltd.J. Bryant Kirkland III, 305-579-8000
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