Vector Group Ltd. (NYSE:VGR) today announced financial results
for the three months ended March 31, 2019.
GAAP Financial Results
First quarter of 2019 revenues were $420.9 million, compared to
revenues of $429.0 million for the first quarter of 2018. The
Company recorded operating income of $42.6 million for the first
quarter of 2019, compared to operating income of $48.1 million for
the first quarter of 2018. Net income attributed to Vector Group
Ltd. for the first quarter of 2019 was $15.0 million, or $0.08 per
diluted common share, compared to a net income of $7.2 million, or
$0.04 per diluted common share, for the first quarter of 2018.
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, the impact of non-controlling interest associated with
the 29.41% of Douglas Elliman Realty, LLC that was purchased by the
Company on December 31, 2018, litigation settlements and judgments,
settlements of long-standing disputes related to the Master
Settlement Agreement 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 measures to the comparable
GAAP financial results for the three months ended March 31,
2019 and 2018 are included in Tables 2 through 7.
Three months ended March 31, 2019 compared to the three
months ended March 31, 2018
Adjusted EBITDA attributed to Vector Group Ltd. (as
described in Table 2 attached hereto) were $49.7 million for the
first quarter of 2019 compared to $50.4 million for the first
quarter of 2018.
Adjusted Net Income (as described in Table 3 attached hereto)
was $13.0 million, or $0.08 per diluted share, for the first
quarter of 2019, and $5.6 million, or $0.03 per diluted share for
the first quarter of 2018.
Adjusted Operating Income (as described in Table 4 attached
hereto) was $42.6 million for the first quarter of 2019 compared to
$42.5 million for the first quarter of 2018.
Tobacco Segment Financial Results
For the first quarter of 2019, the Tobacco segment had revenues
of $256.8 million, compared to $267.1 million for the first quarter
of 2018. The decline in revenues was primarily due to a 7.1%
decline in unit sales volume.
Operating Income from the Tobacco segment was $60.1 million for
the three months ended March 31, 2019, compared to $63.4 million
for the three months ended March 31, 2018.
Non-GAAP Financial Measures
Tobacco Adjusted Operating Income for the first quarter of 2019
and 2018 was $60.1 million and $59.9 million, respectively.
For the first quarter of 2019, the Tobacco segment had
conventional cigarette (wholesale) shipments of approximately 2.08
billion units compared to 2.24 billion units for the first quarter
of 2018.
Liggett’s retail market share increased to 4.2% for the first
quarter of 2019 from 4.0% for the first quarter of 2018. Compared
to the first quarter of 2018, Liggett’s retail shipments declined
by 2.1% while the overall industry’s retail shipments declined by
5.6%, according to data from Management Science Associates,
Inc.
Real Estate Segment Financial Results
For the first quarter of 2019, the Real Estate segment had
revenues of $164.2 million, compared to $161.9 million for the
first quarter of 2018. First quarter of 2019, the Real Estate
segment reported a net loss of $9.1 million, compared to net loss
of $8.5 million for the first quarter of 2018.
Douglas Elliman’s results are included in Vector Group Ltd.’s
Real Estate segment. For the first quarter of 2019, Douglas Elliman
had revenues of $161.9 million, compared to $159.4 million for the
first quarter of 2018. For the first quarter of 2019, Douglas
Elliman reported net loss of $10.4 million, compared to net loss of
$8.1 million for the first quarter of 2018.
Non-GAAP Financial Measures
For the first quarter of 2019, Real Estate Adjusted EBITDA
attributed to the Company were loss of $7.9 million, compared to a
loss of $7.6 million for the first quarter of 2018.
Douglas Elliman’s results are included in Vector Group Ltd.’s
Real Estate segment. For the first quarter of 2019, Douglas
Elliman’s Adjusted EBITDA (as described in Table 7 attached hereto)
were negative $9.0 million, compared to negative $8.6 million for
the first quarter of 2018.
For the three months ended March 31, 2019, Douglas Elliman
achieved closed sales of approximately $5.8 billion, compared to
$6.1 billion for the three months ended March 31, 2018.
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.
On December 31, 2018, New Valley LLC, the real estate subsidiary
of Vector Group Ltd, acquired the 29.41% interest in Douglas
Elliman Realty, LLC it did not previously own. Vector Group Ltd.
has adjusted its presentation of Non-GAAP Financial Measures in
Tables 2, 3, 6 and 7 to assume the transaction occurred on January
1, 2018 and to improve comparability between the three months ended
March 31, 2019 and 2018, respectively, as well as the twelve months
ended March 31, 2019. Please refer to Vector Group Ltd.’s Form
8-K, which is dated May 3, 2019, for additional information.
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, 2019 and 2018.
Conference Call to Discuss First Quarter 2019 Results
As previously announced, the Company will host a conference call
and webcast on Tuesday, May 7, 2019 at 8:30 AM (ET) to
discuss first quarter 2019 results. Investors can access
the call by dialing 800-859-8150 and entering 70986911 as the
conference ID number. The call will also be available via live
webcast at
https://www.investornetwork.com/event/presentation/48438. 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 7, 2019 through May 21, 2019. To access the
replay, dial 877-656-8905 and enter 70986911 as the conference ID
number. The archived webcast will also be available at
https://www.investornetwork.com/event/presentation/48438 for one
year.
Vector Group is a holding company for Liggett Group
LLC, Vector Tobacco Inc., New Valley LLC, and 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in
Thousands, Except Per Share Amounts)
Three Months Ended March 31, 2019 2018 (Unaudited)
Revenues: Tobacco* $ 256,756 $ 267,116 Real estate 164,168
161,850 Total revenues 420,924 428,966 Expenses: Cost
of sales: Tobacco* 177,303 184,962 Real estate 108,717
109,313 Total cost of sales 286,020 294,275
Operating, selling, administrative and general expenses 92,314
89,076 Litigation settlement and judgment income
-
(2,469 ) Operating income 42,590 48,084 Other income
(expenses): Interest expense (37,520 ) (45,947 ) Change in fair
value of derivatives embedded within convertible debt 10,349 10,567
Equity in losses from real estate ventures (2,439 ) (6,560 ) Equity
in earnings from investments 1,362 1,162 Net gains (losses)
recognized on investment securities 4,773 (3,340 ) Other, net 2,667
1,646 Income before provision for income taxes 21,782
5,612 Income tax expense 6,749 1,948 Net
income 15,033 3,664 Net (income) loss attributed to
non-controlling interest (80 ) 3,547 Net income
attributed to Vector Group Ltd. $ 14,953 $ 7,211
Per basic common share: Net income applicable to
common share attributed to Vector Group Ltd. $ 0.09 $ 0.04
Per diluted common share: Net income
applicable to common share attributed to Vector Group Ltd. $ 0.08
$ 0.04
* Revenues and cost of sales include
federal excise taxes of $104,633 and $112,801, respectively.
TABLE 2VECTOR GROUP LTD. AND
SUBSIDIARIESRECONCILIATION OF ADJUSTED
EBITDA(Unaudited)(Dollars in
Thousands)
LTM Three Months Ended March 31, March
31, 2019 2019 2018 Net income attributed to Vector
Group Ltd. $ 65,847 $ 14,953 $ 7,211 Interest expense 195,353
37,520 45,947 Income tax expense 26,353 6,749 1,948 Net income
(loss) attributed to non-controlling interest 3,529 80 (3,547 )
Depreciation and amortization 18,928 4,708 4,587
EBITDA $ 310,010 $ 64,010 $ 56,146 Change in fair value of
derivatives embedded within convertible debt (a) (44,771 ) (10,349
) (10,567 ) Equity in earnings from investments (b) (3,358 ) (1,362
) (1,162 ) Net gains (losses) recognized on investment securities
2,052 (4,773 ) 3,340 Equity in (earnings) losses from real estate
ventures (c) (18,567 ) 2,439 6,560 Loss on extinguishment of debt
4,066 — — Stock-based compensation expense (d) 10,003 2,436 2,384
Litigation settlement and judgment expense (income) (e) 685 —
(2,469 ) Impact of MSA settlement (f) (2,808 ) — (3,490 ) Purchase
accounting adjustments (g) 426 — 182 Other, net (11,949 ) (2,667 )
(1,646 ) Adjusted EBITDA $ 245,789 $ 49,734 $ 49,278 Adjusted
EBITDA attributed to non-controlling interest (7,015 ) — 3,696
Adjustment to reflect additional 29.41% of Adjusted EBITDA from
Douglas Elliman Realty, LLC (h) 5,849 — (2,530 )
Adjusted EBITDA attributed to Vector Group Ltd. $ 244,623 $
49,734 $ 50,444
Adjusted EBITDA by
Segment Tobacco $ 249,352 $ 62,122 $ 61,979 Real Estate (i)
12,004 (7,908 ) (8,758 ) Corporate and Other (15,567 ) (4,480 )
(3,943 ) Total $ 245,789 $ 49,734 $ 49,278
Adjusted EBITDA Attributed to Vector Group Ltd. by
Segment Tobacco $ 249,352 $ 62,122 $ 61,979 Real Estate (i)
10,838 (7,908 ) (7,592 ) Corporate and Other (15,567 ) (4,480 )
(3,943 ) Total $ 244,623 $ 49,734 $ 50,444
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 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 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. Represents 29.41% of Douglas Elliman Realty
LLC's Adjusted EBITDA in the respective periods. On December 31,
2018, the Company increased its ownership of Douglas Elliman
Realty, LLC from 70.59% to 100%. i. Includes Adjusted EBITDA for
Douglas Elliman Realty, LLC of $10,896 for the last twelve months
ended March 31, 2019 and negative $8,991 and negative $8,603 for
the three months ended March 31, 2019 and 2018, respectively.
Amounts reported in this footnote reflect 100% of Douglas Elliman
Realty, LLC’s entire Adjusted EBITDA.
TABLE 3VECTOR GROUP LTD. AND
SUBSIDIARIESRECONCILIATION OF ADJUSTED NET
INCOME(Unaudited)(Dollars in
Thousands, Except Per Share Amounts)
Three Months Ended March 31, 2019 2018
Net income attributed to Vector Group Ltd. $ 14,953 $ 7,211
Change in fair value of derivatives embedded within
convertible debt (10,349 ) (10,567 ) Non-cash amortization of debt
discount on convertible debt 8,525 18,193 Litigation settlement and
judgment income (a) — (2,469 ) Impact of MSA settlement (b) —
(3,490 ) Impact of net interest expense capitalized to real estate
ventures (930 ) (1,953 ) Douglas Elliman Realty, LLC purchase
accounting adjustments (c) — 375 Adjustment to reflect additional
29.41% of net income from Douglas Elliman Realty, LLC (d) —
(2,381 ) Total adjustments (2,754 ) (2,292 ) Tax benefit
related to adjustments 763 655 Adjusted Net Income
attributed to Vector Group Ltd. $ 12,962 $ 5,574
Per diluted common share: Adjusted Net Income
applicable to common shares attributed to Vector Group Ltd. $ 0.08
$ 0.03 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
100% of purchase accounting adjustments in the periods presented
for assets acquired in connection with the Company’s acquisition of
the 20.59% of Douglas Elliman Realty, LLC on December 31, 2013. d.
Represents 29.41% of Douglas Elliman Realty LLC's net income in the
respective 2018 period. On December 31, 2018, the Company increased
its ownership of Douglas Elliman Realty, LLC from 70.59% to 100%.
TABLE 4VECTOR GROUP LTD. AND
SUBSIDIARIESRECONCILIATION OF ADJUSTED OPERATING
INCOME(Unaudited)(Dollars in
Thousands)
LTM Three Months Ended March 31, March
31, 2019 2019 2018 Operating income $ 218,555 $
42,590 $ 48,084 Litigation settlement and judgment expense
(income) (a) 685 — (2,469 ) Impact of MSA settlement (b) (2,808 ) —
(3,490 ) Douglas Elliman Realty, LLC purchase accounting
adjustments (c) 1,031 — 375 Total adjustments
(1,092 ) — (5,584 ) Adjusted Operating Income (d) $ 217,463
$ 42,590 $ 42,500 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. for the last twelve months ended March 31, 2019 and
three months ended March 31, 2018.
TABLE 5VECTOR GROUP LTD. AND
SUBSIDIARIESRECONCILIATION OF TOBACCO ADJUSTED OPERATING
INCOMEAND TOBACCO ADJUSTED
EBITDA(Unaudited)(Dollars in
Thousands)
LTM Three Months Ended March 31, March
31, 2019 2019 2018
Tobacco Adjusted Operating
Income: Operating income from tobacco segment $ 243,260 $
60,144 $ 63,411 Litigation settlement and judgment expense
(a) 685 — — Impact of MSA settlement (b) (2,808 ) — (3,490 )
Total adjustments (2,123 ) — (3,490 ) Tobacco Adjusted
Operating Income $ 241,137 $ 60,144 $ 59,921
LTM
Three Months Ended
March 31, March 31, 2019 2019 2018
Tobacco Adjusted
EBITDA: Operating income from tobacco segment $ 243,260 $
60,144 $ 63,411 Litigation settlement and judgment expense
(a) 685 — — Impact of MSA settlement (b) (2,808 ) — (3,490 )
Total adjustments (2,123 ) — (3,490 ) Tobacco Adjusted
Operating Income 241,137 60,144 59,921 Depreciation and
amortization 8,130 1,957 2,037 Stock-based compensation expense 85
21 21 Total adjustments 8,215 1,978 2,058
Tobacco Adjusted EBITDA $ 249,352 $ 62,122 $
61,979 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 6VECTOR GROUP LTD. AND
SUBSIDIARIESRECONCILIATION OF REAL ESTATE SEGMENT (NEW
VALLEY LLC) ADJUSTED EBITDA(Unaudited)(Dollars in Thousands)
LTM Three Months Ended March 31, March
31, 2019 2019 2018 Net income (loss) attributed to
Vector Group Ltd. from subsidiary non-guarantors (a) $ 14,238 $
(9,085 ) $ (8,544 ) Interest expense (a) 247 229 49 Income
tax expense (benefit) (a) 3,524 (3,419 ) (2,994 ) Net income (loss)
attributed to non-controlling interest (a) 3,529 80 (3,547 )
Depreciation and amortization 9,792 2,501 2,289
EBITDA $ 31,330 $ (9,694 ) $ (12,747 ) Loss from
non-guarantors other than New Valley LLC 80 28 34 Equity in
(earnings) losses from real estate ventures (b) (18,567 ) 2,439
6,560 Purchase accounting adjustments (c) 426 — 182 Litigation
settlement and judgment income (d) — — (2,469 ) Other, net (2,087 )
(704 ) (342 ) Adjusted EBITDA $ 11,182 $ (7,931 ) $ (8,782 )
Adjusted EBITDA attributed to non-controlling interest (7,015 ) —
3,696 Adjustment to reflect additional 29.41% of Adjusted EBITDA
from Douglas Elliman Realty, LLC (e) 5,849 — (2,530 )
Adjusted EBITDA attributed to New Valley LLC $ 10,016 $
(7,931 ) $ (7,616 ) Adjusted EBITDA by Segment Real Estate
(f) $ 12,004 $ (7,908 ) $ (8,758 ) Corporate and Other (822 ) (23 )
(24 ) Total (g) $ 11,182 $ (7,931 ) $ (8,782 )
Adjusted EBITDA Attributed to New Valley LLC by Segment Real Estate
(f) $ 10,838 $ (7,908 ) $ (7,592 ) Corporate and Other (822 ) (23 )
(24 ) Total (g) $ 10,016 $ (7,931 ) $ (7,616 ) 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, 2019. 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. 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.
Represents 29.41% of Douglas Elliman Realty LLC's Adjusted EBITDA
in the respective periods. On December 31, 2018, the Company
increased its ownership of Douglas Elliman Realty, LLC from 70.59%
to 100%. f. Includes Adjusted EBITDA for Douglas Elliman Realty,
LLC of $10,896 for the last twelve months ended March 31, 2019 and
negative $8,991 and negative $8,603 for the three months ended
March 31, 2019 and 2018, respectively. Amounts reported in this
footnote reflect 100% of Douglas Elliman Realty, LLC’s entire
Adjusted EBITDA. 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 $15,567 for the last twelve
months ended March 31, 2019 and $4,480 and $3,943 for the three
months ended March 31, 2019 and 2018, respectively.
TABLE 7VECTOR GROUP LTD. AND
SUBSIDIARIESRECONCILIATION OF DOUGLAS ELLIMAN REALTY, LLC
ADJUSTED EBITDAAND DOUGLAS ELLIMAN REALTY, LLC ADJUSTED
EBITDA ATTRIBUTED TO REAL ESTATE
SEGMENT(Unaudited)(Dollars in
Thousands)
LTM Three Months Ended March 31, March
31, 2019 2019 2018 Net income (loss) attributed to
Douglas Elliman Realty, LLC $ 2,880 $ (10,414 ) $ (8,097 )
Interest expense 11 3 45 Income tax expense (benefit) 180 — 220
Depreciation and amortization 9,384 2,400 2,187
Douglas Elliman Realty, LLC EBITDA $ 12,455 $ (8,011 ) $
(5,645 ) Equity in earnings from real estate ventures (a) (1,267 )
(649 ) (625 ) Purchase accounting adjustments (b) 426 — 182
Litigation settlement and judgment income (c) — — (2,469 ) Other,
net (718 ) (331 ) (46 ) Douglas Elliman Realty, LLC Adjusted EBITDA
$ 10,896 $ (8,991 ) $ (8,603 ) Douglas Elliman Realty, LLC Adjusted
EBITDA attributed to non-controlling interest (5,849 ) — 2,530
Adjustment to reflect additional 29.41% of
Adjusted EBITDA from Douglas Elliman Realty, LLC,which represents
the additional interest acquired on December 31, 2018 (d)
5,849 — (2,530 ) Douglas Elliman Realty, LLC Adjusted
EBITDA attributed to Real Estate Segment $ 10,896 $ (8,991 )
$ (8,603 ) 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. d. Represents 29.41% of Douglas Elliman Realty
LLC's Adjusted EBITDA in the respective periods. On December 31,
2018, the Company increased its ownership of Douglas Elliman
Realty, LLC from 70.59% to 100%.
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version on businesswire.com: https://www.businesswire.com/news/home/20190507005511/en/
Emily Claffey/Benjamin Spicehandler/Columbia ClancySard
Verbinnen & Co212-687-8080Conrad HarringtonSard Verbinnen &
Co - Europe+44 (0)20 3178 8914J. Bryant Kirkland III, Vector Group
Ltd.305-579-8000
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