AP NEWS

Vector Group Reports Third Quarter 2018 Financial Results

November 7, 2018

MIAMI--(BUSINESS WIRE)--Nov 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 2017. For 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]

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

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.

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.

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.

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.

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.

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.

View source version on businesswire.com:https://www.businesswire.com/news/home/20181107005312/en/

CONTACT: Emily Claffey/Benjamin Spicehandler

/Columbia Clancy

Sard Verbinnen & Co

212-687-8080

or

Conrad Harrington

Sard Verbinnen & Co - Europe

+44 (0)20 3178 8914

or

J. Bryant Kirkland III, Vector Group Ltd.

305-579-8000

KEYWORD: UNITED STATES NORTH AMERICA FLORIDA

INDUSTRY KEYWORD: PROFESSIONAL SERVICES BANKING FINANCE OTHER PROFESSIONAL SERVICES

SOURCE: Vector Group Ltd.

Copyright Business Wire 2018.

PUB: 11/07/2018 07:30 AM/DISC: 11/07/2018 09:34 AM

http://www.businesswire.com/news/home/20181107005312/en

AP RADIO
Update hourly