-Net Sales for Q4 2023 Zig-Zag and Stoker’s
Products Increased 5.9 Percent Year-Over-Year
-Adjusted EBITDA for Q4 2023 of $24.8 Million
Increased 7.5 Percent Year-Over-Year
-FY 2023 Free Cash Flow of $61.2 Million
Turning Point Brands, Inc. (“TPB” or “the Company”) (NYSE: TPB),
a manufacturer, marketer and distributor of branded consumer
products, including alternative smoking accessories and consumables
with active ingredients, announced today financial results for the
fourth quarter and full year ended December 31, 2023.
Q4 2023 vs. Q4 2022
- Total consolidated net sales decreased 6.1% to $97.1 million
- Zig-Zag Products net sales decreased by 2.9%
- Stoker’s Products net sales increased by 18.6%
- Creative Distribution Solutions net sales decreased by
43.7%
- Gross profit increased 1.9% to $50.5 million
- Net income increased $26.4 million to $10.1 million
- Adjusted net income increased 15.9% to $15.3 million (see
Schedule B for a reconciliation to net income)
- Adjusted EBITDA increased 7.5% to $24.8 million (see Schedule A
for a reconciliation to net income)
- Diluted EPS of $0.53 and Adjusted Diluted EPS of $0.79 compared
to $(0.93) and $0.69 in the same period one year ago, respectively
(see Schedule B for a reconciliation to Diluted EPS)
FY 2023 vs. FY 2022
- Total consolidated net sales decreased 2.3% to $405.4 million
- Zig-Zag Products net sales decreased by 5.2%
- Stoker’s Products net sales increased by 10.5%
- Creative Distribution Solutions net sales decreased by
14.3%
- Gross profit decreased 1.1% to $203.2 million
- Net income increased 230.4% to $38.5 million
- Adjusted net income increased 1.1% to $56.8 million (see
Schedule B for a reconciliation to net income)
- Adjusted EBITDA decreased 2.4% to $95.3 million (see Schedule A
for a reconciliation to net income)
- Diluted EPS of $2.01 and Adjusted Diluted EPS of $2.91 compared
to $0.64 and $2.83 in the same period one year ago, respectively
(see Schedule B for a reconciliation to Diluted EPS)
Graham Purdy, President and CEO, commented: “Our fourth quarter
results were at the high-end of our expectations. The Zig-Zag
segment was stable from the previous year excluding the impact of a
discontinued product line and is well positioned to return to
growth in 2024. Stoker’s had an outstanding quarter posting its
highest growth rate in over four years led by double-digit growth
year-over-year in Stoker’s MST. We also had strong free cash flow
generation during the year allowing us to build a cash balance to
address the remaining principal amount of our convertible notes at
maturity in July. Our outlook for 2024 is positive as we expect
solid growth in our Zig-Zag and Stoker’s Products businesses.”
Zig-Zag Products Segment (46% of total net sales in the
quarter)
For the fourth quarter, Zig-Zag Products net sales decreased
2.9% to $45.1 million due to the discontinuation of an unprofitable
product line in Canada that impacted sales by $1.4 million.
For the quarter, the Zig-Zag Products segment gross profit
decreased 1.0% to $25.5 million. Gross margin increased 100 basis
points to 56.5% driven by product mix.
For the full year, net sales of Zig-Zag Products decreased 5.2%
to $180.5 million due to the reduction of trade inventory earlier
in the year and the discontinuation of an unprofitable product line
in Canada that impacted sales by $4.9 million.
For the full year, Zig-Zag Products segment gross profit
decreased 5.2% to $101.1 million. Gross margin was steady at
56.0%.
“Our US Zig-Zag papers and alternative channel business posted a
strong quarter with double-digit growth to close the year,” said
Purdy. “With the reduction of trade inventory through the year,
Zig-Zag is now positioned to return to growth aided by industry
secular growth trends and internal growth initiatives.”
Stoker’s Products Segment (39% of total net sales in the
quarter)
For the fourth quarter, Stoker’s Products net sales increased
18.6% to $38.0 million on double-digit growth of MST and
high-single-digit growth of loose-leaf. For the fourth quarter,
total Stoker’s Products segment volume increased 14.2%, while price
/ mix increased 4.4%.
For the quarter, the Stoker’s Products segment gross profit
increased 27.2% to $21.9 million. Gross margin expanded 380 basis
points to 57.6% due to MST pricing gains and operating
leverage.
For the full year, net sales of Stoker’s Products increased
10.5% to $144.6 million on double-digit growth of MST and
low-single-digit growth of loose-leaf. For the full year, total
Stoker’s Products segment volume increased 4.2%, while price / mix
increased 6.3%.
For the full year, the Stoker’s Products segment gross profit
increased 14.9% to $81.9 million. Gross margin increased 210 basis
points to 56.6% due to MST pricing gains.
“Stoker’s had an exceptional quarter with strong market share
gains in both the MST and loose-leaf categories as its value
proposition continues to resonate with consumers,” continued Purdy.
“We are excited about the planned expansion of our FRĒ white
nicotine pouch product throughout the year.”
Performance Measures in the Fourth Quarter
Fourth quarter consolidated selling, general and administrative
(“SG&A”) expenses were $30.9 million compared to $31.2 million
in the fourth quarter of 2022.
Fourth quarter SG&A included the following notable
items:
- $1.9 million of stock options, restricted stock and incentive
expense compared to $1.2 million in the year-ago period
- $1.0 million of FDA PMTA-related expenses for modern oral
products compared to $0.3 million in the year-ago period
- $0.2 million of restructuring costs compared to $1.8 million in
the year-ago period
- $0.1 million of ERP / CRM duplicative system costs compared to
$0.3 million of ERP / CRM scoping expenses in the year-ago
period
Total gross debt as of December 31, 2023 was $368.5 million. Net
debt (total gross debt less unrestricted cash) at December 31, 2023
was $250.7 million. The Company ended the quarter with total
liquidity of $177.9 million, comprised of $117.9 million in cash
and $60.0 million of revolving credit facility capacity.
During the quarter, the Company received a net federal excise
tax refund of $4.3 million, which is included in other operating
income and $0.8 million of interest income related to the refund,
which is included in net interest expense. The Company also
recorded $4.0 million in other income related to a legal settlement
receivable and a $1.0 million impairment of a minority investment
in a development stage venture.
2024 Outlook
Management expects full-year 2024 adjusted EBITDA to be $95 to
$100 million. This excludes any contribution from our CDS business
which contributed a little over $2 million of EBITDA in FY
2023.
Creative Distribution Solutions (“CDS”) (15% of total net
sales in the quarter)
For the fourth quarter, CDS net sales were $14.1 million, gross
profit was $3.1 million, and gross margin was 22.4%.
Earnings Conference Call
As previously disclosed, a conference call with the investment
community to review TPB’s financial results has been scheduled for
10:00 a.m. Eastern on Wednesday, February 28, 2024. Investment
community participants should dial in 10 minutes ahead of time
using the toll-free number 888-330-2502 (international participants
should call 240-789-2713), and follow the audio prompts after
typing in the event ID: 6640134. A live listen-only webcast of the
call will be available on the Events and Presentations section of
the investor relations portion of the Company website
(www.turningpointbrands.com). A replay of the webcast will be
available on the site two hours following the call.
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
generally accepted accounting principles in the United States
(GAAP), this press release includes certain non-GAAP financial
measures including EBITDA, Adjusted EBITDA, Adjusted Net Income,
Adjusted Diluted EPS, Adjusted Operating Income (Loss) and Free
Cash Flow. A reconciliation of these non-GAAP financial measures
accompanies this release.
About Turning Point Brands, Inc.
Turning Point Brands (NYSE: TPB) is a manufacturer, marketer and
distributor of branded consumer products including alternative
smoking accessories and consumables with active ingredients through
its iconic Zig-Zag® and Stoker’s® brands. TPB’s products are
available in more than 215,000 retail outlets in North America, and
on sites such as www.zigzag.com. For the latest news and
information about TPB and its brands, please visit
www.turningpointbrands.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements may generally be identified by the use of words such as
"anticipate," "believe," "expect," "intend," "plan" and "will" or,
in each case, their negative, or other variations or comparable
terminology. These forward-looking statements include all matters
that are not historical facts. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. As a result, these statements are not guarantees of future
performance and actual events may differ materially from those
expressed in or suggested by the forward-looking statements. Any
forward-looking statement made by TPB in this press release, its
reports filed with the Securities and Exchange Commission (the
“SEC”) and other public statements made from time-to-time speak
only as of the date made. New risks and uncertainties come up from
time to time, and it is impossible for TPB to predict or identify
all such events or how they may affect it. TPB has no obligation,
and does not intend, to update any forward-looking statements after
the date hereof, except as required by federal securities laws.
Factors that could cause these differences include, but are not
limited to those included it the Company’s Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and other reports filed by the
Company with the SEC. These statements constitute the Company’s
cautionary statements under the Private Securities Litigation
Reform Act of 1995.
Financial Statements Follow:
Turning Point Brands, Inc. Consolidated Statements of
Income (dollars in thousands except share data) (unaudited)
Three Months Ended
December 31,
2023
2022
Net sales
$
97,120
$
103,392
Cost of sales
46,596
53,829
Gross profit
50,524
49,563
Selling, general, and administrative expenses
30,916
31,245
Other operating income, net
(4,345
)
-
Operating income
23,953
18,318
Interest expense, net
2,632
4,382
Investment loss
934
7,229
Other income
(4,000
)
-
Goodwill and intangible impairment loss
-
27,566
Loss (gain) on extinguishment of debt
194
(885
)
Income (loss) before income taxes
24,193
(19,974
)
Income tax expense (benefit)
14,328
(3,857
)
Consolidated net income (loss)
9,865
(16,117
)
Net (loss) income attributable to non-controlling interest
(244
)
200
Net income (loss) attributable to Turning Point Brands, Inc.
$
10,109
$
(16,317
)
Basic income (loss) per common share: Net income (loss)
attributable to Turning Point Brands, Inc.
$
0.57
$
(0.93
)
Diluted income (loss) per common share: Net income (loss)
attributable to Turning Point Brands, Inc.
$
0.53
$
(0.93
)
Weighted average common shares outstanding: Basic
17,604,313
17,530,278
Diluted
20,153,157
17,530,278
Supplemental disclosures of statement of income information:
Excise tax expense
$
5,137
$
5,771
FDA fees
$
138
$
158
Turning Point Brands, Inc. Consolidated Statements of
Income (dollars in thousands except share data) (unaudited)
For the year ended
December 31,
2023
2022
Net sales
$
405,393
$
415,013
Cost of sales
202,152
209,475
Gross profit
203,241
205,538
Selling, general, and administrative expenses
125,009
130,024
Other operating income, net
(4,345
)
-
Operating income
82,577
75,514
Interest expense, net
14,645
19,524
Investment loss
11,914
13,303
Other income
(4,000
)
-
Goodwill and intangible impairment loss
-
27,566
Gain on extinguishment of debt
(1,664
)
(885
)
Income before income taxes
61,682
16,006
Income tax expense
23,901
4,849
Consolidated net income
37,781
11,157
Net loss attributable to non-controlling interest
(681
)
(484
)
Net income attributable to Turning Point Brands, Inc.
$
38,462
$
11,641
Basic income per common share: Net income attributable to
Turning Point Brands, Inc.
$
2.19
$
0.65
Diluted income per common share: Net income attributable to Turning
Point Brands, Inc.
$
2.01
$
0.64
Weighted average common shares outstanding: Basic
17,578,270
17,899,794
Diluted
20,467,406
18,055,015
Supplemental disclosures of statement of income information:
Excise tax expense
$
20,575
$
23,274
FDA fees
$
586
$
623
Turning Point Brands, Inc. Consolidated Balance
Sheets (dollars in thousands except share data) (unaudited)
December 31,
ASSETS
2023
2022
Current assets: Cash
$
117,886
$
106,403
Accounts receivable, net of allowances of $78 in 2023 and $114 in
2022
9,989
8,377
Inventories, net
98,960
119,915
Other current assets
40,781
22,959
Total current assets
267,616
257,654
Property, plant, and equipment, net
25,300
22,788
Deferred income taxes
1,468
8,443
Right of use assets
11,480
12,465
Deferred financing costs, net
2,450
282
Goodwill
136,250
136,253
Other intangible assets, net
80,942
83,592
Master Settlement Agreement (MSA) escrow deposits
28,684
27,980
Other assets
15,166
22,649
Total assets
$
569,356
$
572,106
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable
$
8,407
$
8,355
Accrued liabilities
33,635
33,001
Current portion of long-term debt, net
58,294
-
Other current liabilities
-
20
Total current liabilities
100,336
41,376
Notes payable and long-term debt
307,064
406,757
Lease liabilities
9,950
10,593
Total liabilities
417,350
458,726
Commitments and contingencies Stockholders' equity:
Preferred stock; $0.01 par value; authorized shares 40,000,000;
issued and outstanding shares -0-
-
-
Common stock, voting, $0.01 par value; authorized shares,
190,000,000; 19,922,137 issued shares, 17,605,677 outstanding
shares at December 31, 2023, and 19,801,623 issued shares,
17,485,163 outstanding shares at December 31, 2022
199
198
Common stock, nonvoting, $0.01 par value; authorized shares,
10,000,000; issued and outstanding shares -0-
-
-
Additional paid-in capital
119,075
113,242
Cost of repurchased common stock (2,316,460 shares at December 31,
2023 and 2022)
(78,093
)
(78,093
)
Accumulated other comprehensive loss
(2,648
)
(2,393
)
Accumulated earnings
112,443
78,691
Non-controlling interest
1,030
1,735
Total stockholders' equity
152,006
113,380
Total liabilities and stockholders' equity
$
569,356
$
572,106
Turning Point Brands, Inc. Consolidated Statements of
Cash Flows (dollars in thousands) (unaudited)
For the Year Ended
December 31,
2023
2022
Cash flows from operating activities: Consolidated net income
$
37,781
$
11,157
Adjustments to reconcile net income to net cash provided by
operating activities: Gain on extinguishment of debt
(1,664
)
(885
)
Loss (gain) on sale of property, plant, and equipment
90
(9
)
Loss on goodwill impairment
-
25,585
Loss on intangible asset impairment
-
1,982
Gain on insurance recovery of inventory loss
(15,181
)
-
Loss on investments
12,177
13,570
Depreciation and other amortization expense
3,262
3,388
Amortization of other intangible assets
3,096
1,911
Amortization of deferred financing costs
2,445
2,576
Deferred income tax expense (benefit)
7,024
(6,506
)
Stock compensation expense
6,561
5,273
Noncash lease income
(82
)
(29
)
Gain on MSA escrow deposits
-
(54
)
Changes in operating assets and liabilities: Accounts receivable
(1,609
)
(2,103
)
Inventories
20,977
(32,653
)
Other current assets
(3,533
)
4,581
Other assets
(4,835
)
420
Accounts payable
(14
)
1,240
Accrued liabilities and other
386
830
Net cash provided by operating activities
66,881
30,273
Cash flows from investing activities: Capital expenditures
$
(5,707
)
$
(7,685
)
Payments for investments
(202
)
(1,000
)
Restricted cash, MSA escrow deposits
-
(10,170
)
Proceeds on the sale of property, plant and equipment
3
62
Net cash used in investing activities
(5,906
)
(18,793
)
Turning Point Brands, Inc. Consolidated Statements of
Cash Flows (Cont.) (dollars in thousands) (unaudited)
For the Year Ended
December 31,
2023
2022
Cash flows from financing activities: Convertible Senior Notes
repurchased
(41,794
)
(9,000
)
Proceeds from call options
114
51
Payment of dividends
(4,497
)
(4,250
)
Payments of financing costs
(2,437
)
-
Exercise of options
450
504
Redemption of options
(346
)
(155
)
Redemption of restricted stock units
(995
)
(1,229
)
Common stock repurchased
-
(29,224
)
Net cash used in financing activities
$
(49,505
)
$
(43,303
)
Net increase (decrease) in cash
$
11,470
$
(31,823
)
Effect of foreign currency translation on cash
$
13
$
(320
)
Cash, beginning of period: Unrestricted
$
106,403
$
128,320
Restricted
4,929
15,155
Total cash at beginning of period
$
111,332
$
143,475
Unrestricted
$
117,886
$
106,403
Restricted
4,929
4,929
Total cash at end of period
$
122,815
$
111,332
Non-GAAP Financial Measures
To supplement our financial information presented in accordance
with generally accepted accounting principles in the United States,
or U.S. GAAP, we use non-U.S. GAAP financial measures, including
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS,
Adjusted Gross Profit and Adjusted Operating Income (Loss). We
believe Adjusted EBITDA provides useful information to management
and investors regarding certain financial and business trends
relating to our financial condition and results of operations.
Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS,
Adjusted Gross Profit and Adjusted Operating Income (Loss) are used
by management to compare our performance to that of prior periods
for trend analyses and planning purposes and are presented to our
board of directors. We believe that EBITDA, Adjusted EBITDA,
Adjusted Net Income, Adjusted Diluted EPS, Adjusted Gross Profit
and Adjusted Operating Income (Loss) are appropriate measures of
operating performance because they eliminate the impact of expenses
that do not relate to business performance.
We define “EBITDA” as net income (loss) before interest expense,
gain (loss) on extinguishment of debt, provision for (benefit from)
income taxes, depreciation and amortization. We define “Adjusted
EBITDA” as net income before interest expense, gain (loss) on
extinguishment of debt, provision for (benefit from) income taxes,
depreciation, amortization, other non-cash items and other items
that we do not consider ordinary course in our evaluation of
ongoing operating performance. We define “Adjusted Net Income” as
net income excluding items that we do not consider ordinary course
in our evaluation of ongoing operating performance. We define
“Adjusted Diluted EPS” as diluted earnings per share excluding
items that we do not consider ordinary course in our evaluation of
ongoing operating performance. We define “Adjusted Gross Profit: as
gross profit excluding other non-cash items and other items that we
do not consider ordinary course in our evaluation of ongoing
operating performance. We define “Adjusted Operating Income (Loss)”
as operating income excluding other non-cash items and other items
that we do not consider ordinary course in our evaluation of
ongoing operating performance. We define “Free Cash Flow” as “Net
Cash provided by operating activities” less Capital
expenditures.
Non-U.S. GAAP measures should not be considered a substitute
for, or superior to, financial measures calculated in accordance
with U.S. GAAP. EBITDA, Adjusted Net Income, Adjusted EBITDA
Adjusted Diluted EPS, Adjusted Gross Profit and Adjusted Operating
Income (Loss) exclude significant expenses that are required by
U.S. GAAP to be recorded in our financial statements and are
subject to inherent limitations. In addition, other companies in
our industry may calculate these non-U.S. GAAP measure differently
than we do or may not calculate it at all, limiting their
usefulness as comparative measures.
In accordance with SEC rules, we have provided, in the
supplemental information attached, a reconciliation of the non-GAAP
measures to the next directly comparable GAAP measures.
Schedule A Turning Point Brands,
Inc. Reconciliation of GAAP Net Income (Loss) to Adjusted
EBITDA (dollars in thousands) (unaudited)
Three Months Ended
December 31,
2023
2022
Net income (loss) attributable to Turning Point Brands, Inc.
$
10,109
$
(16,317
)
Add: Interest expense, net
2,632
4,382
Loss (gain) on extinguishment of debt
194
(885
)
Income tax expense (benefit)
14,328
(3,857
)
Depreciation expense
804
777
Amortization expense
851
538
EBITDA
$
28,918
$
(15,362
)
Components of Adjusted EBITDA Corporate and CDS restructuring (a)
199
1,825
ERP/CRM (b)
138
336
Stock options, restricted stock, and incentives expense (c)
1,901
1,170
Transactional expenses and strategic initiatives(d)
3
12
FDA PMTA (e)
1,003
289
Non-cash asset impairment (f)
1,015
34,836
FET refund (g)
(4,345
)
-
Legal settlement (h)
(4,000
)
-
Adjusted EBITDA
$
24,832
$
23,106
(a) Represents costs associated with corporate and CDS
restructuring, including severance. (b) Represents cost associated
with scoping and mobilization of new ERP and CRM systems and cost
of duplicative ERP licenses. (c) Represents non-cash stock options,
restricted stock, incentives expense and Solace performance stock
units. (d) Represents the fees incurred for transaction expenses.
(e) Represents costs associated with applications related to FDA
premarket tobacco product application ("PMTA"). (f) Represents
impairment of goodwill, intangible and investment assets. (g)
Represents federal excise tax refund included in other operating
income, net. (h) Represents other income from litigation
settlement.
Schedule A Turning Point
Brands, Inc. Reconciliation of GAAP Net Income to Adjusted
EBITDA (dollars in thousands) (unaudited)
For the Year Ended
December 31,
2023
2022
Net income attributable to Turning Point Brands, Inc.
$
38,462
$
11,641
Add: Interest expense, net
14,645
19,524
Gain on extinguishment of debt
(1,664
)
(885
)
Income tax expense
23,901
4,849
Depreciation expense
3,121
3,388
Amortization expense
3,237
1,911
EBITDA
$
81,702
$
40,428
Components of Adjusted EBITDA Corporate and CDS restructuring (a)
389
3,444
ERP/CRM (b)
552
1,962
Stock options, restricted stock, and incentives expense (c)
6,561
5,273
Transactional expenses and strategic initiatives (d)
165
801
FDA PMTA (e)
2,098
4,554
Non-cash asset impairment (f)
12,177
41,136
FET refund (g)
(4,345
)
-
Legal settlement (h)
(4,000
)
-
Adjusted EBITDA
$
95,299
$
97,598
(a) Represents costs associated with corporate and CDS
restructuring, including severance. (b) Represents cost associated
with scoping and mobilization of new ERP and CRM systems and cost
of duplicative ERP licenses. (c) Represents non-cash stock options,
restricted stock, incentives expense and Solace performance stock
units. (d) Represents the fees incurred for transaction expenses.
(e) Represents costs associated with applications related to FDA
premarket tobacco product application ("PMTA"). (f) Represents
impairment of goodwill, intangible and investment assets. (g)
Represents federal excise tax refund included in other operating
income, net. (h) Represents other income from litigation
settlement.
Schedule B Turning Point Brands,
Inc. Reconciliation of GAAP Net Income (Loss) to Adjusted
Net Income and Diluted EPS to Adjusted Diluted EPS (dollars in
thousands except share data) (unaudited)
Three Months Ended
Three Months Ended
December 31, 2023
December 31, 2022
Net Income
Diluted EPS
Net Income (Loss)
Diluted EPS
GAAP
$
10,109
$
0.53
$
(16,317
)
$
(0.93
)
Anti-dilutive impact (a)
-
0.00
-
0.20
Gain on extinguishment of debt (b)
146
0.01
(714
)
(0.03
)
Corporate and CDS restructuring (c)
150
0.01
1,473
0.07
ERP/CRM (d)
104
0.01
271
0.01
Stock options, restricted stock, and incentives expense (e)
1,434
0.07
944
0.05
Transactional expenses and strategic initiatives (f)
2
0.00
10
0.00
FDA PMTA (g)
757
0.04
233
0.01
Non-cash asset impairment (h)
766
0.04
28,109
1.35
FET refund (i)
(3,843
)
(0.19
)
-
-
Legal settlement (j)
(3,017
)
(0.15
)
-
-
Deferred tax valuation allowance (k)
8,383
0.42
-
-
Impact of quarterly tax items to effective tax rate (l)
311
0.02
(804
)
(0.04
)
Adjusted
$
15,302
$
0.79
$
13,205
$
0.69
Total may not foot due to rounding Note: Quarterly tax rate used
excludes impact of deferred tax valuation allowance. (a) Represents
dilution of options and debt conversion that is anti-dilutive and
not included for GAAP. (b) Represents gain on extinguishment of
debt tax effected at the quarterly tax rate. (c) Represents costs
associated with corporate and CDS restructuring, including
severance tax effected at the quarterly tax rate. (d) Represents
cost associated with scoping and mobilization of new ERP and CRM
systems and cost of duplicative ERP licenses tax effected at the
quarterly tax rate. (e) Represents non-cash stock options,
restricted stock, incentives expense and Solace PRSUs tax effected
at the quarterly tax rate. (f) Represents the fees incurred for
transaction expenses tax effected at the quarterly tax rate. (g)
Represents costs associated with applications related to the FDA
PMTA tax effected at the quarterly tax rate. (h) Represents
impairment of goodwill, intangible and investment assets tax
effected at the quarterly tax rate. (i) Represents federal excise
tax refund and related interest income effected at the quarterly
tax rate. (j) Represents receivable from legal settlement tax
effected at the quarterly tax rate. (k) Represents deferred tax
valuation allowance. (l) Represents adjustment from quarterly tax
rate to annual projected tax rate of 23% in 2023 and 2022.
Schedule B Turning Point Brands, Inc.
Reconciliation of GAAP Net Income to Adjusted Net Income and
Diluted EPS to Adjusted Diluted EPS (dollars in thousands
except share data) (unaudited)
For the Year Ended For the
Year Ended December 31, 2023 December 31, 2022
Net Income Diluted EPS Net Income Diluted
EPS GAAP
$
38,462
$
2.01
$
11,641
$
0.64
Anti-dilutive impact (a)
-
(0.00
)
-
0.09
Gain on extinguishment of debt (b)
(1,245
)
(0.06
)
(617
)
(0.03
)
Corporate and CDS restructuring (c)
291
0.01
2,401
0.11
ERP/CRM (d)
413
0.02
1,368
0.06
Stock options, restricted stock, and incentives expense (e)
4,910
0.24
3,676
0.17
Transactional expenses and strategic initiatives (f)
123
0.01
558
0.03
FDA PMTA (g)
1,570
0.08
3,174
0.15
Non-cash asset impairment (h)
9,114
0.45
28,674
1.35
FET refund (i)
(3,813
)
(0.19
)
-
-
Legal settlement (j)
(2,994
)
(0.15
)
-
-
Deferred tax valuation allowance (k)
8,383
0.41
-
-
Impact of annual tax items to effective tax rate (l)
1,587
0.08
5,309
0.25
Adjusted
$
56,802
$
2.91
$
56,183
$
2.83
Total may not foot due to rounding Note: Annual tax rate used
excludes impact of deferred tax valuation allowance. (a) Represents
dilution of debt conversion that is anti-dilutive and not included
for GAAP. (b) Represents gain on extinguishment of debt tax
effected at the annual tax rate. (c) Represents costs associated
with corporate and CDS restructuring, including severance tax
effected at the annual tax rate. (d) Represents cost associated
with scoping and mobilization of new ERP and CRM systems and cost
of duplicative ERP licenses tax effected at the annual tax rate.
(e) Represents non-cash stock options, restricted stock, incentives
expense and Solace PRSUs tax effected at the annual tax rate. (f)
Represents the fees incurred for transaction expenses tax effected
at the annual tax rate. (g) Represents costs associated with
applications related to the FDA PMTA tax effected at the annual tax
rate. (h) Represents impairment of goodwill, intangible and
investment assets tax effected at the annual tax rate. (i)
Represents federal excise tax refund and related interest income
effected at the annual tax rate. (j) Represents receivable from
legal settlement tax effected at the annual tax rate. (k)
Represents deferred tax valuation allowance. (l) Represents
adjustment from annual tax rate to annual projected tax rate of 23%
in 2023 and 2022.
Schedule C Turning Point Brands,
Inc. Reconciliation of GAAP Operating Income (Loss) to
Adjusted Operating Income (Loss) (dollars in thousands)
(unaudited)
Consolidated
Zig-Zag
Stoker's
Creative Distribution
Solutions
4th Quarter
4th Quarter
4th Quarter
4th Quarter
4th Quarter
4th Quarter
4th Quarter
4th Quarter
2023
2022
2023
2022
2023
2022
2023
2022
Net sales
$
97,120
$
103,392
$
45,092
$
46,444
$
37,976
$
32,010
$
14,052
$
24,938
Gross profit
$
50,524
$
49,563
$
25,499
$
25,768
$
21,883
$
17,210
$
3,142
$
6,585
Operating income (loss)
$
23,953
$
18,318
$
20,968
$
17,362
$
12,533
$
12,794
$
(646
)
$
134
Adjustments: Transactional expenses and strategic initiatives
3
12
-
-
-
-
-
-
FDA PMTA
1,003
289
-
-
-
-
-
-
Corporate and CDS restructuring
199
1,825
-
-
-
-
-
-
ERP/CRM
138
336
-
-
-
-
-
-
FET refund
(4,345
)
-
-
-
(4,345
)
-
-
-
Adjusted operating income (loss)
$
20,951
$
20,780
$
20,968
$
17,362
$
8,188
$
12,794
$
(646
)
$
134
Schedule C Turning Point Brands, Inc.
Reconciliation of GAAP Operating Income (Loss) to Adjusted
Operating Income (Loss) (dollars in thousands) (unaudited)
Consolidated
Zig-Zag
Stoker's
Creative Distribution
Solutions
YTD
YTD
YTD
YTD
YTD
YTD
YTD
YTD
2023
2022
2023
2022
2023
2022
2023
2022
Net sales
$
405,393
$
415,013
$
180,455
$
190,403
$
144,609
$
130,826
$
80,329
$
93,784
Gross profit
$
203,241
$
205,538
$
101,055
$
106,576
$
81,887
$
71,254
$
20,299
$
27,708
Operating income (loss)
$
82,577
$
75,514
$
68,280
$
73,342
$
58,180
$
53,331
$
(383
)
$
1,506
Adjustments: Transactional expenses and strategic initiatives
165
801
-
-
-
-
-
-
FDA PMTA
2,098
4,554
-
-
-
-
-
-
Corporate and CDS restructuring
389
3,444
-
-
-
-
190
-
ERP/CRM
552
1,962
-
-
-
-
-
-
FET refund
(4,345
)
-
-
-
(4,345
)
-
-
-
Adjusted operating income (loss)
$
81,436
$
86,275
$
68,280
$
73,342
$
53,835
$
53,331
$
(193
)
$
1,506
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240228612689/en/
Investor Contacts Turning Point Brands, Inc.: Louie
Reformina, Senior Vice President, CFO Turning Point Brands, Inc.
502.774.9238 ir@tpbi.com
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