VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
| | | | | | | | | | | |
| June 30,
2022 | | December 31,
2021 |
| ASSETS: | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 323,885 | | | $ | 193,411 | |
| Investment securities at fair value | 122,394 | | | 146,687 | |
| | | |
| Accounts receivable - trade, net | 29,728 | | | 16,067 | |
| Inventories | 93,419 | | | 94,615 | |
| Income taxes receivable, net | 4,279 | | | 10,948 | |
| | | |
| Other current assets | 7,938 | | | 10,075 | |
| Total current assets | 581,643 | | | 471,803 | |
| Property, plant and equipment, net | 36,030 | | | 36,883 | |
| Investments in real estate, net | — | | | 9,098 | |
Long-term investments (includes $29,090 and $32,089 at fair value) | 45,522 | | | 53,073 | |
| Investments in real estate ventures | 108,864 | | | 105,062 | |
| | | |
| Operating lease right-of-use assets | 9,272 | | | 10,972 | |
| Intangible assets | 107,511 | | | 107,511 | |
| Other assets | 105,762 | | | 76,685 | |
| Total assets | $ | 994,604 | | | $ | 871,087 | |
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY: | | | |
| Current liabilities: | | | |
| Current portion of notes payable and long-term debt | $ | 51 | | | $ | 79 | |
| | | |
Current payments due under the Master Settlement Agreement | 136,245 | | | 11,886 | |
| | | |
| | | |
| | | |
| | | |
| Current operating lease liability | 3,795 | | | 3,838 | |
| | | |
| Other current liabilities | 144,659 | | | 149,487 | |
| Total current liabilities | 284,750 | | | 165,290 | |
| Notes payable, long-term debt and other obligations, less current portion | 1,400,701 | | | 1,398,591 | |
| | | |
| Non-current employee benefits | 69,357 | | | 68,970 | |
| Deferred income taxes, net | 33,518 | | | 34,768 | |
| Non-current operating lease liability | 6,981 | | | 8,853 | |
| Payments due under the Master Settlement Agreement | 11,116 | | | 13,224 | |
| | | |
| Other liabilities | 19,093 | | | 22,944 | |
| Total liabilities | 1,825,516 | | | 1,712,640 | |
| Commitments and contingencies (Note 9) | | | |
| Stockholders' deficiency: | | | |
Preferred stock, par value $1 per share, 10,000,000 shares authorized | — | | | — | |
Common stock, par value $0.1 per share, 250,000,000 shares authorized, 154,896,129 and 153,959,427 shares issued and outstanding | 15,490 | | | 15,396 | |
| Additional paid-in capital | 3,066 | | | 11,172 | |
| Accumulated deficit | (834,297) | | | (852,398) | |
| Accumulated other comprehensive loss | (15,171) | | | (15,723) | |
| | | |
| Total Vector Group Ltd. stockholders' deficiency | (830,912) | | | (841,553) | |
| | | |
| | | |
| Total liabilities and stockholders' deficiency | $ | 994,604 | | | $ | 871,087 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Revenues: | | | | | | | |
| Tobacco* | $ | 374,312 | | | $ | 329,496 | | | $ | 683,360 | | | $ | 597,959 | |
| Real estate | 12,890 | | | 8,058 | | | 15,884 | | | 10,583 | |
| | | | | | | |
| Total revenues | 387,202 | | | 337,554 | | | 699,244 | | | 608,542 | |
| | | | | | | |
| Expenses: | | | | | | | |
| Cost of sales: | | | | | | | |
| Tobacco* | 265,189 | | | 206,145 | | | 476,726 | | | 370,176 | |
| Real estate | 6,049 | | | 7,746 | | | 7,327 | | | 8,622 | |
| | | | | | | |
| Total cost of sales | 271,238 | | | 213,891 | | | 484,053 | | | 378,798 | |
| | | | | | | |
| Operating, selling, administrative and general expenses | 25,196 | | | 29,770 | | | 49,225 | | | 59,871 | |
| Litigation settlement and judgment expense | 57 | | | — | | | 129 | | | 5 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Operating income | 90,711 | | | 93,893 | | | 165,837 | | | 169,868 | |
| | | | | | | |
| Other income (expenses): | | | | | | | |
| Interest expense | (30,724) | | | (28,072) | | | (55,822) | | | (56,793) | |
| Loss on extinguishment of debt | — | | | — | | | — | | | (21,362) | |
| | | | | | | |
| Equity in (losses) earnings from investments | (2,311) | | | 941 | | | (4,553) | | | 1,518 | |
| Equity in (losses) earnings from real estate ventures | (460) | | | 16,610 | | | (2,337) | | | 18,199 | |
| Other, net | (3,094) | | | 8,613 | | | (4,239) | | | 11,319 | |
| Income before provision for income taxes | 54,122 | | | 91,985 | | | 98,886 | | | 122,749 | |
| Income tax expense | 14,969 | | | 27,004 | | | 27,191 | | | 36,218 | |
| Income from continuing operations | 39,153 | | | 64,981 | | | 71,695 | | | 86,531 | |
| Income from discontinued operations, net of income taxes | — | | | 28,324 | | | — | | | 38,731 | |
| Net income | $ | 39,153 | | | $ | 93,305 | | | $ | 71,695 | | | $ | 125,262 | |
| | | | | | | |
| | | | | | | |
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| | | | | | | |
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| | | | | | | |
| | | | | | | |
| Per basic common share: | | | | | | | |
| | | | | | | |
| Net income from continuing operations applicable to common shares | $ | 0.25 | | | $ | 0.41 | | | $ | 0.46 | | | $ | 0.55 | |
| Net income from discontinued operations applicable to common shares | — | | | 0.19 | | | — | | | 0.25 | |
| Net income applicable to common shares | $ | 0.25 | | | $ | 0.60 | | | $ | 0.46 | | | $ | 0.80 | |
| | | | | | | |
| Per diluted common share: | | | | | | | |
| | | | | | | |
| Net income from continuing operations applicable to common shares | $ | 0.25 | | | $ | 0.41 | | | $ | 0.45 | | | $ | 0.55 | |
| Net income from discontinued operations applicable to common shares | — | | | 0.19 | | | — | | | 0.25 | |
| Net income applicable to common shares | $ | 0.25 | | | $ | 0.60 | | | $ | 0.45 | | | $ | 0.80 | |
* Revenues and cost of sales include federal excise taxes of $137,884, $118,735, $253,963, and $216,449 for the three and six months ended June 30, 2022 and 2021, respectively.
The accompanying notes are an integral part of the condensed consolidated financial statements.
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | | | |
| Net income | $ | 39,153 | | | $ | 93,305 | | | $ | 71,695 | | | $ | 125,262 | |
| | | | | | | |
| Net unrealized losses on investment securities available for sale: | | | | | | | |
| Change in net unrealized losses | (671) | | | (122) | | | (1,893) | | | (304) | |
| Net unrealized losses (gains) reclassified into net income | 665 | | | 34 | | | 1,830 | | | (7) | |
| Net unrealized losses on investment securities available for sale | (6) | | | (88) | | | (63) | | | (311) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net change in pension-related amounts: | | | | | | | |
| | | | | | | |
| | | | | | | |
| Amortization of loss | 404 | | | 481 | | | 808 | | | 963 | |
| Net change in pension-related amounts | 404 | | | 481 | | | 808 | | | 963 | |
| | | | | | | |
| Other comprehensive income | 398 | | | 393 | | | 745 | | | 652 | |
| | | | | | | |
| Income tax effect on: | | | | | | | |
| Change in net unrealized losses on investment securities | 172 | | | 33 | | | 488 | | | 82 | |
| Net unrealized losses (gains) reclassified into net income on investment securities | (171) | | | (9) | | | (472) | | | 2 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Pension-related amounts | (104) | | | (130) | | | (209) | | | (260) | |
| Income tax provision on other comprehensive income | (103) | | | (106) | | | (193) | | | (176) | |
| | | | | | | |
| Other comprehensive income, net of tax | 295 | | | 287 | | | 552 | | | 476 | |
| | | | | | | |
| Comprehensive income | $ | 39,448 | | | $ | 93,592 | | | $ | 72,247 | | | $ | 125,738 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(Dollars in Thousands, Except Share Amounts)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Vector Group Ltd. Stockholders' Deficiency | | |
| | | Additional Paid-In | | | | Accumulated
Other Comprehensive | | | | Non-controlling | | |
| Common Stock | | | Accumulated | | | | | | |
| Shares | | Amount | | Capital | | Deficit | | Loss | | | | Interest | | Total |
| Balance as of April 1, 2022 | 154,938,177 | | | $ | 15,494 | | | $ | 12,183 | | | $ | (852,863) | | | $ | (15,466) | | | | | $ | — | | | $ | (840,652) | |
| | | | | | | | | | | | | | | |
| Net income | — | | | — | | | — | | | 39,153 | | | — | | | | | — | | | 39,153 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total other comprehensive income | — | | | — | | | — | | | — | | | 295 | | | | | — | | | 295 | |
| | | | | | | | | | | | | | | |
Dividends on common stock ($0.20 per share) | — | | | — | | | — | | | (31,759) | | | — | | | | | — | | | (31,759) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting | (42,048) | | | (4) | | | (515) | | | — | | | — | | | | | — | | | (519) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Stock-based compensation | — | | | — | | | 2,570 | | | — | | | — | | | | | — | | | 2,570 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Reallocation of distribution of Douglas Elliman | — | | | — | | | (11,172) | | | 11,172 | | | — | | | | | — | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Balance as of June 30, 2022 | 154,896,129 | | | $ | 15,490 | | | $ | 3,066 | | | $ | (834,297) | | | $ | (15,171) | | | | | $ | — | | | $ | (830,912) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Vector Group Ltd. Stockholders' Deficiency | | |
| | | Additional Paid-In | | | | Accumulated
Other Comprehensive | | | | Non-controlling | | |
| Common Stock | | | Accumulated | | | | | | |
| Shares | | Amount | | Capital | | Deficit | | Loss | | | | Interest | | Total |
| Balance as of April 1, 2021 | 154,194,629 | | | $ | 15,419 | | | $ | 2,573 | | | $ | (653,606) | | | $ | (20,885) | | | | | $ | — | | | $ | (656,499) | |
| | | | | | | | | | | | | | | |
| Net income | — | | | — | | | — | | | 93,305 | | | — | | | | | — | | | 93,305 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total other comprehensive income | — | | | — | | | — | | | — | | | 287 | | | | | — | | | 287 | |
| | | | | | | | | | | | | | | |
Distributions and dividends on common stock ($0.20 per share) | — | | | — | | | — | | | (31,610) | | | — | | | | | — | | | (31,610) | |
| Restricted stock grant | 3,500 | | | 1 | | | (1) | | | — | | | — | | | | | — | | | — | |
| | | | | | | | | | | | | | | |
| Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting | (42,029) | | | (4) | | | (604) | | | — | | | — | | | | | — | | | (608) | |
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| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Stock-based compensation | — | | | — | | | 3,080 | | | — | | | — | | | | | — | | | 3,080 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Balance as of June 30, 2021 | 154,156,100 | | | $ | 15,416 | | | $ | 5,048 | | | $ | (591,911) | | | $ | (20,598) | | | | | $ | — | | | $ | (592,045) | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Vector Group Ltd. Stockholders' Deficiency | | | | |
| | | Additional Paid-In | | | | Accumulated
Other Comprehensive | | | | | | |
| Common Stock | | | Accumulated | | | | | | |
| Shares | | Amount | | Capital | | Deficit | | Loss | | | | | | Total |
| Balance as of January 1, 2022 | 153,959,427 | | | $ | 15,396 | | | $ | 11,172 | | | $ | (852,398) | | | $ | (15,723) | | | | | | | $ | (841,553) | |
| | | | | | | | | | | | | | | |
| Net income | — | | | — | | | — | | | 71,695 | | | — | | | | | | | 71,695 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total other comprehensive income | — | | | — | | | — | | | — | | | 552 | | | | | | | 552 | |
| | | | | | | | | | | | | | | |
Dividends on common stock ($0.40 per share) | — | | | — | | | — | | | (63,526) | | | — | | | | | | | (63,526) | |
| Restricted stock grants | 1,070,000 | | | 107 | | | (107) | | | — | | | — | | | | | | | — | |
| | | | | | | | | | | | | | | |
| Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting | (133,298) | | | (13) | | | (1,544) | | | — | | | — | | | | | | | (1,557) | |
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| Stock-based compensation | — | | | — | | | 4,717 | | | — | | | — | | | | | | | 4,717 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Reallocation of distribution of Douglas Elliman | — | | | — | | | (11,172) | | | 11,172 | | | — | | | | | | | — | |
| Other | — | | | — | | | — | | | (1,240) | | | — | | | | | | | (1,240) | |
| Balance as of June 30, 2022 | 154,896,129 | | | $ | 15,490 | | | $ | 3,066 | | | $ | (834,297) | | | $ | (15,171) | | | | | | | $ | (830,912) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Vector Group Ltd. Stockholders' Deficiency | | | | |
| | | Additional Paid-In | | | | Accumulated
Other Comprehensive | | | | | | |
| Common Stock | | | Accumulated | | | | | | |
| Shares | | Amount | | Capital | | Deficit | | Loss | | | | | | Total |
| Balance as of January 1, 2021 | 153,324,629 | | | $ | 15,332 | | | $ | — | | | $ | (653,945) | | | $ | (21,074) | | | | | | | $ | (659,687) | |
| | | | | | | | | | | | | | | |
| Net income | — | | | — | | | — | | | 125,262 | | | — | | | | | | | 125,262 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total other comprehensive income | — | | | — | | | — | | | — | | | 476 | | | | | | | 476 | |
| | | | | | | | | | | | | | | |
Dividends on common stock ($0.40 per share) | — | | | — | | | — | | | (63,228) | | | — | | | | | | | (63,228) | |
| Restricted stock grant | 873,500 | | | 88 | | | (88) | | | — | | | — | | | | | | | — | |
| | | | | | | | | | | | | | | |
| Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting | (42,029) | | | (4) | | | (604) | | | — | | | — | | | | | | | (608) | |
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| | | | | | | | | | | | | | | |
| Stock-based compensation | — | | | — | | | 5,740 | | | — | | | — | | | | | | | 5,740 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Balance as of June 30, 2021 | 154,156,100 | | | $ | 15,416 | | | $ | 5,048 | | | $ | (591,911) | | | $ | (20,598) | | | | | | | $ | (592,045) | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Unaudited
| | | | | | | | | | | |
| Six Months Ended |
| June 30, |
| 2022 | | 2021 |
| Net cash provided by operating activities | $ | 211,211 | | | $ | 221,300 | |
| Cash flows from investing activities: | | | |
| Sale of investment securities | 21,011 | | | 23,477 | |
| Maturities of investment securities | 36,357 | | | 36,461 | |
| Purchase of investment securities | (39,000) | | | (74,805) | |
| Proceeds from sale or liquidation of long-term investments | 1,101 | | | 8,009 | |
| | | |
| | | |
| | | |
| Purchase of long-term investments | (1,000) | | | (6,963) | |
| Investments in real estate ventures | (10,456) | | | (9,902) | |
| Distributions from investments in real estate ventures | 3,641 | | | 11,163 | |
| Increase in cash surrender value of life insurance policies | (1,282) | | | (1,348) | |
| Increase in restricted assets | — | | | (5) | |
| Issuance of notes receivable | (10) | | | — | |
| | | |
| Capital expenditures | (2,911) | | | (3,055) | |
| | | |
| | | |
| | | |
| Paydowns of investment securities | 114 | | | 302 | |
| | | |
| | | |
| Net cash provided by (used in) investing activities | 7,565 | | | (16,666) | |
| Cash flows from financing activities: | | | |
| Proceeds from issuance of debt | — | | | 875,000 | |
| Deferred financing costs | — | | | (20,109) | |
| Repayments of debt | (17) | | | (856,316) | |
| Borrowings under revolving credit facility | 67,373 | | | 7,699 | |
| Repayments on revolving credit facility | (67,375) | | | (7,699) | |
| Dividends on common stock | (63,327) | | | (63,738) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Other | (938) | | | (51) | |
| Net cash used in financing activities | (64,284) | | | (65,214) | |
| Net increase in cash, cash equivalents and restricted cash | 154,492 | | | 139,420 | |
| Cash, cash equivalents and restricted cash, beginning of period | 194,849 | | | 365,677 | |
| Cash, cash equivalents and restricted cash, end of period | $ | 349,341 | | | $ | 505,097 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Basis of Presentation:
The condensed consolidated financial statements of Vector Group Ltd. (the “Company” or “Vector”) include the accounts of Liggett Group LLC (“Liggett”), Vector Tobacco LLC (“Vector Tobacco”), Liggett Vector Brands LLC (“Liggett Vector Brands”), New Valley LLC (“New Valley”) and other less significant subsidiaries. New Valley includes the accounts of other less significant subsidiaries. All significant intercompany balances and transactions have been eliminated.
Liggett and Vector Tobacco are engaged in the manufacture and sale of cigarettes in the United States. Liggett Vector Brands coordinates Liggett and Vector Tobacco’s sales and marketing efforts. Certain references to “Liggett” refer to the Company’s tobacco operations, including the business of Liggett and Vector Tobacco, unless otherwise specified. New Valley is engaged in the real estate business.
The unaudited, interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and, in management’s opinion, contain all adjustments, consisting only of normal recurring items, necessary for a fair statement of the results for the periods presented. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”). The consolidated results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the entire year.
(b)Distributions and Dividends on Common Stock:
The Company records distributions on its common stock as dividends in its condensed consolidated statements of stockholders’ deficiency to the extent of retained earnings and net income for the respective fiscal year. Any amounts exceeding retained earnings and net income are recorded as a reduction to additional paid-in capital to the extent paid-in-capital is available and then to accumulated deficit.
(c)Earnings Per Share (“EPS”):
Net income for purposes of determining basic and diluted EPS for discontinued operations and net income available to common stockholders was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Net income from continuing operations | $ | 39,153 | | | $ | 64,981 | | | $ | 71,695 | | | $ | 86,531 | |
| Net income from discontinued operations | — | | | 28,324 | | | — | | | 38,731 | |
| Net income | 39,153 | | | 93,305 | | | 71,695 | | | 125,262 | |
| Income from continuing operations attributable to participating securities | (1,249) | | | (2,699) | | | (2,226) | | | (3,411) | |
| Net income applicable to common shares | $ | 37,904 | | | $ | 90,606 | | | $ | 69,469 | | | $ | 121,851 | |
Net income for purposes of determining basic and diluted EPS for continuing operations applicable to common shares was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Net income from continuing operations | $ | 39,153 | | | $ | 64,981 | | | $ | 71,695 | | | $ | 86,531 | |
| Income from continuing operations attributable to participating securities | (1,249) | | | (1,829) | | | (2,226) | | | (2,261) | |
| Net income available to common stockholders | $ | 37,904 | | | $ | 63,152 | | | $ | 69,469 | | | $ | 84,270 | |
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
Basic and diluted EPS for continuing and discontinued operations were calculated using the following common shares:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Weighted-average shares for basic EPS | 152,700,134 | | | 152,285,182 | | | 152,643,830 | | | 152,267,410 | |
| | | | | | | |
| Plus incremental shares related to stock options and non-vested restricted stock | 263,362 | | | 282,313 | | | 210,230 | | | 206,381 | |
| Weighted-average shares for diluted EPS | 152,963,496 | | | 152,567,495 | | | 152,854,060 | | | 152,473,791 | |
It may not be possible to recalculate EPS attributable to common stockholders by adjusting EPS from continuing operations by EPS from discontinued operations as each amount is calculated independently.
The following non-vested restricted stock was outstanding during the three and six months ended June 30, 2022 and 2021, but was not included in the computation of diluted EPS because the impact of the per share expense associated with the restricted stock was greater than the average market price of the common shares during the respective periods.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
| | | | | | | |
| Weighted-average shares of non-vested restricted stock | — | | | — | | | — | | | — | |
| Weighted-average expense per share | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | |
| | | | | | | |
(d)Other, net:
Other, net consisted of:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
| Interest and dividend income | $ | 935 | | | $ | 457 | | | $ | 1,385 | | | $ | 991 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net (losses) gains recognized on investment securities | (4,130) | | | 8,401 | | | (7,169) | | | 10,816 | |
| Net periodic benefit cost other than the service costs | (237) | | | (243) | | | (473) | | | (487) | |
| | | | | | | |
| | | | | | | |
| Other income (expense) | 338 | | | (2) | | | 2,018 | | | (1) | |
| Other, net | $ | (3,094) | | | $ | 8,613 | | | $ | (4,239) | | | $ | 11,319 | |
(e)Other Assets:
Other assets consisted of:
| | | | | | | | | | | |
| June 30,
2022 | | December 31, 2021 |
| Restricted assets | $ | 25,569 | | | $ | 1,551 | |
| Prepaid pension costs | 45,148 | | | 44,585 | |
| Other assets | 35,045 | | | 30,549 | |
| Total other assets | $ | 105,762 | | | $ | 76,685 | |
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
(f)Other Current Liabilities:
Other current liabilities consisted of:
| | | | | | | | | | | |
| June 30,
2022 | | December 31, 2021 |
| Accounts payable | $ | 7,590 | | | $ | 9,443 | |
| Accrued promotional expenses | 60,342 | | | 55,647 | |
| Accrued excise and payroll taxes payable, net | 22,701 | | | 22,919 | |
| Accrued interest | 30,676 | | | 30,676 | |
| Accrued salaries and benefits | 5,979 | | | 13,982 | |
| Allowance for sales returns | 6,496 | | | 6,669 | |
| Other current liabilities | 10,875 | | | 10,151 | |
| Total other current liabilities | $ | 144,659 | | | $ | 149,487 | |
(g)Reconciliation of Cash, Cash Equivalents and Restricted Cash:
The components of “Cash, cash equivalents and restricted cash” in the condensed consolidated statements of cash flows were as follows:
| | | | | | | | | | | |
| June 30,
2022 | | December 31,
2021 |
Cash and cash equivalents | $ | 323,885 | | | $ | 193,411 | |
| | | |
| Restricted cash and cash equivalents included in other assets | 25,456 | | | 1,438 | |
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows | $ | 349,341 | | | $ | 194,849 | |
(h)Related Party Transactions:
Agreements with Douglas Elliman. The Company received $1,050 and $2,100 under the Transition Services Agreement and $686 and $1,177 under the Aircraft Lease Agreement during the three and six months ended June 30, 2022.
The Company has agreed to indemnify Douglas Elliman for certain tax matters under the Tax Disaffiliation Agreement. The Company has recorded a payable of $553 in its condensed consolidated balance sheet as of June 30, 2022 as well as Other expense of $553 in its condensed consolidated statement of operations for each of the three and six months ended June 30, 2022 related to the tax indemnification.
Real estate venture investments. Douglas Elliman has been engaged by the developers as the sole broker or the co-broker for several of the real estate development projects that New Valley owns an interest in through its real estate venture investments. Douglas Elliman had gross commissions of approximately $201, $4,228, $1,101, and $6,585 from these projects for the three and six months ended June 30, 2022 and 2021, respectively.
(i)New Accounting Pronouncements:
ASUs to be adopted in future periods:
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires that an acquirer recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
SEC Proposed Rules
On March 21, 2022, the SEC proposed rule changes that would require registrants to provide certain climate-related information in their registration statements and annual reports. The proposed rules would require information about a registrant's climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant's greenhouse gas emissions, which have become a commonly used metric to assess a registrant's exposure to such risks. In addition, under the proposed rules, certain climate-related financial metrics would be required in a registrant's audited financial statements. The Company is currently evaluating the impact of the proposed rule changes.
2. REVENUE RECOGNITION
Disaggregation of Revenue
The Company disaggregates revenues by segment.
Tobacco. Tobacco segment revenues are not disaggregated because all revenues are generated from the discount segment of the U.S. cigarette industry.
Real Estate. Real Estate segment revenues are disaggregated in the table below.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Real Estate Segment Revenues | | | | | | | |
| Sales on facilities located on investments in real estate | $ | 290 | | | $ | 1,308 | | | $ | 3,259 | | | $ | 2,933 | |
| Revenues from investments in real estate | 12,600 | | | 6,750 | | | 12,625 | | | 7,650 | |
| Total real estate revenues | $ | 12,890 | | | $ | 8,058 | | | $ | 15,884 | | | $ | 10,583 | |
3. LEASES
The Company has operating and finance leases for corporate and sales offices, and certain vehicles and equipment. The components of lease expense were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Operating lease cost | $ | 1,110 | | | $ | 1,150 | | | $ | 2,235 | | | $ | 2,316 | |
Short-term lease cost | 101 | | | 92 | | | 204 | | | 183 | |
Variable lease cost | 140 | | | 53 | | | 196 | | | 105 | |
| | | | | | | |
Finance lease cost: | | | | | | | |
Amortization | 6 | | | 14 | | | 20 | | | 30 | |
Interest on lease liabilities | 1 | | | 2 | | | 3 | | | 5 | |
Total lease cost | $ | 1,358 | | | $ | 1,311 | | | $ | 2,658 | | | $ | 2,639 | |
| | | | | | | |
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
Supplemental cash flow information related to leases was as follows:
| | | | | | | | | | | | |
| Six Months Ended | |
| June 30, | |
| 2022 | | 2021 | |
| Cash paid for amounts included in measurement of lease liabilities: | | | | |
Operating cash flows from operating leases | $ | 2,455 | | | $ | 2,487 | | |
Operating cash flows from finance leases | 3 | | | 5 | | |
Financing cash flows from finance leases | 23 | | | 28 | | |
| | | | |
Right-of-use assets obtained in exchange for lease obligations: | | | | |
Operating leases | 31 | | | 107 | | |
Finance leases | — | | | — | | |
| | | | |
| | | | |
As of June 30, 2022, the Company had $120 in undiscounted lease payments relating to operating leases for equipment that have not yet commenced. The operating leases will commence in the second half of 2022 with lease terms ranging between 2 and 3 years.
4. DISCONTINUED OPERATIONS
On December 29, 2021, the Company completed the distribution to its stockholders (including Vector common stock underlying outstanding stock options awards and restricted stock awards) of the common stock of Douglas Elliman Inc. (the “Distribution”).
There were no assets or liabilities of discontinued operations of Douglas Elliman as of June 30, 2022 or December 31, 2021.
The financial results of Douglas Elliman through the completion of the Distribution are presented as income from discontinued operations, net of income taxes on the Company’s condensed consolidated statements of operations. The following table presents financial results of Douglas Elliman for the periods prior to the completion of the Distribution:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
| | (Dollars in thousands) |
| Revenues: | | | | | | | | | |
| Real estate | $ | — | | | $ | 391,975 | | | $ | — | | | $ | 664,751 | | | |
| | | | | | | | | |
| Expenses: | | | | | | | | | |
| Cost of sales | — | | | 286,519 | | | — | | | 485,154 | | | |
| | | | | | | | | |
| Operating, selling, administrative and general expenses | — | | | 62,273 | | | — | | | 122,186 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Operating income | — | | | 43,183 | | | — | | | 57,411 | | | |
| | | | | | | | | |
| Other income (expenses): | | | | | | | | | |
| Interest expense | — | | | (43) | | | — | | | (73) | | | |
| Equity in earnings from real estate ventures | — | | | 75 | | | — | | | 75 | | | |
| Other, net | — | | | (3,035) | | | — | | | (2,987) | | | |
| Pretax income from discontinued operations | — | | | 40,180 | | | — | | | 54,426 | | | |
| Income tax expense | — | | | 11,856 | | | — | | | 15,695 | | | |
| Income from discontinued operations | $ | — | | | $ | 28,324 | | | $ | — | | | $ | 38,731 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
The following table presents the information regarding certain components of cash flows from discontinued operations:
| | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2022 | | 2021 | | |
| | (Dollars in thousands) |
| Depreciation and amortization | $ | — | | | $ | 4,220 | | | |
| Non-cash lease expense | — | | | 9,094 | | | |
| | | | | |
| | | | | |
| | | | | |
| Capital expenditures | — | | | (1,263) | | | |
| | | | | |
| | | | | |
| | | | | |
5. INVENTORIES
Inventories consisted of:
| | | | | | | | | | | |
| June 30,
2022 | | December 31,
2021 |
| Leaf tobacco | $ | 38,416 | | | $ | 38,825 | |
| Other raw materials | 10,172 | | | 7,560 | |
| Work-in-process | 774 | | | 2,639 | |
| | | |
| Finished goods | 62,984 | | | 64,218 | |
| | | |
| Inventories at current cost | 112,346 | | | 113,242 | |
| LIFO adjustments | (18,927) | | | (18,627) | |
| $ | 93,419 | | | $ | 94,615 | |
All of the Company’s inventories at June 30, 2022 and December 31, 2021 are reported under the LIFO method. The $18,927 LIFO adjustment as of June 30, 2022 reduced the current cost of inventories by $12,428 for Leaf tobacco, $829 for Other raw materials, $18 for Work-in-process and $5,652 for Finished goods. The $18,627 LIFO adjustment as of December 31, 2021 reduced the current cost of inventories by $12,128 for Leaf tobacco, $829 for Other raw materials, $18 for Work-in-process and $5,652 for Finished goods.
The amount of capitalized Master Settlement Agreement (“MSA”) cost in “Finished goods” inventory was $21,419 and $20,450 at June 30, 2022 and December 31, 2021, respectively. Federal excise tax capitalized in inventory was $25,236 and $25,160 at June 30, 2022 and December 31, 2021, respectively.
At June 30, 2022, Liggett had tobacco purchase commitments of approximately $20,033. Liggett has a single-source supply agreement for reduced ignition propensity cigarette paper through December 2025.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
6. INVESTMENT SECURITIES
Investment securities consisted of the following:
| | | | | | | | | | | |
| June 30,
2022 | | December 31, 2021 |
| Debt securities available for sale | $ | 85,371 | | | $ | 103,906 | |
| | | |
| | | |
| Equity securities at fair value: | | | |
| Marketable equity securities | 14,967 | | | 19,560 | |
| Mutual funds invested in debt securities | 22,056 | | | 23,221 | |
Long-term investment securities at fair value (1) | 29,090 | | | 32,089 | |
| Total equity securities at fair value | 66,113 | | | 74,870 | |
| | | |
| Total investment securities at fair value | 151,484 | | | 178,776 | |
| Less: | | | |
Long-term investment securities at fair value (1) | 29,090 | | | 32,089 | |
| Current investment securities at fair value | $ | 122,394 | | | $ | 146,687 | |
| | | |
Long-term investment securities at fair value (1) | $ | 29,090 | | | $ | 32,089 | |
| Equity-method investments | 16,432 | | | 20,984 | |
| Total long-term investments | $ | 45,522 | | | $ | 53,073 | |
| | | |
Equity securities at cost (2) | $ | 6,200 | | | $ | 5,200 | |
| | | |
| | | |
(1) These assets are measured at net asset value (“NAV”) as a practical expedient under ASC 820.
(2) These assets are without readily determinable fair values that do not qualify for the NAV practical expedient and are included in Other assets on the condensed consolidated balance sheets.
Net (losses) gains recognized on investment securities were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Net (losses) gains recognized on equity securities | $ | (3,465) | | | $ | 8,435 | | | $ | (5,339) | | | $ | 10,809 | |
| Net gains recognized on debt securities available for sale | 6 | | | 10 | | | 6 | | | 65 | |
| | | | | | | |
| Impairment expense | (671) | | | (44) | | | (1,836) | | | (58) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net (losses) gains recognized on investment securities | $ | (4,130) | | | $ | 8,401 | | | $ | (7,169) | | | $ | 10,816 | |
(a) Debt Securities Available for Sale:
The components of debt securities available for sale at June 30, 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Fair
Value |
| | | | | | | |
| | | | | | | |
| Marketable debt securities | $ | 85,367 | | | $ | 4 | | | $ | — | | | $ | 85,371 | |
| | | | | | | |
| | | | | | | |
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
The table below summarizes the maturity dates of debt securities available for sale at June 30, 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| Investment Type: | Fair Value | | Under 1 Year | | 1 Year up to 5 Years | | More than 5 Years |
| U.S. Government securities | $ | 3,072 | | | $ | 2,296 | | | $ | 776 | | | $ | — | |
| Corporate securities | 50,827 | | | 27,011 | | | 23,816 | | | — | |
| U.S. mortgage-backed securities | 25,728 | | | 8,557 | | | 17,171 | | | — | |
| | | | | | | |
| | | | | | | |
| Commercial paper | 4,529 | | | 4,529 | | | — | | | — | |
| | | | | | | |
| Foreign fixed-income securities | 1,215 | | | 1,215 | | | — | | | — | |
| | | | | | | |
Total debt securities available for sale by maturity dates | $ | 85,371 | | | $ | 43,608 | | | $ | 41,763 | | | $ | — | |
The components of debt securities available for sale at December 31, 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Fair
Value |
| | | | | | | |
| | | | | | | |
| Marketable debt securities | $ | 103,838 | | | $ | 68 | | | $ | — | | | $ | 103,906 | |
| | | | | | | |
There were no available-for-sale debt securities with continuous unrealized losses for less than 12 months and 12 months or greater at June 30, 2022 and December 31, 2021, respectively.
Gross realized gains and losses on debt securities available for sale were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Gross realized gains on sales | $ | 6 | | | $ | 11 | | | $ | 7 | | | $ | 67 | |
| Gross realized losses on sales | (1) | | | (1) | | | (1) | | | (2) | |
| Net gains recognized on debt securities available for sale | $ | 5 | | | $ | 10 | | | $ | 6 | | | $ | 65 | |
| | | | | | | |
| Impairment expense | $ | (671) | | | $ | (44) | | | $ | (1,836) | | | $ | (58) | |
| | | | | | | |
Although management generally does not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing the Company’s investment securities portfolio, management may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements.
(b) Equity Securities at Fair Value:
The following is a summary of unrealized and realized net losses and gains recognized in net income on equity securities at fair value during the three and six months ended June 30, 2022 and 2021, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Net (losses) gains recognized on equity securities | $ | (3,465) | | | $ | 8,435 | | | $ | (5,339) | | | $ | 10,809 | |
| Less: Net gains recognized on equity securities sold | 13 | | | 4,054 | | | 306 | | | 4,223 | |
| Net unrealized (losses) gains recognized on equity securities still held at the reporting date | $ | (3,478) | | | $ | 4,381 | | | $ | (5,645) | | | $ | 6,586 | |
| | | | | | | |
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
The Company’s investments in mutual funds that invest in debt securities are classified as Level 1 under the fair value hierarchy disclosed in Note 11. Their fair values are based on quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets. The Company has unfunded commitments of $514 related to long-term investment securities at fair value as of June 30, 2022.
The Company received cash distributions of $1,349 and $8,009 related to its long-term investment securities at fair value for the six months ended June 30, 2022 and 2021, respectively. Of the total $1,349 distributions, the Company classified $248 as operating cash inflows and $1,101 as investing cash inflows for the six months ended June 30, 2022, and the total $8,009 distributions were classified as investing cash inflows for the six months ended June 30, 2021.
(c) Equity-Method Investments:
Equity-method investments consisted of the following:
| | | | | | | | | | | |
| | June 30,
2022 | | December 31, 2021 |
| Mutual fund and hedge funds | $ | 16,432 | | | $ | 20,984 | |
| | | |
| | | |
At June 30, 2022, the Company’s ownership percentages in the mutual fund and hedge funds accounted for under the equity method ranged from 6.13% to 37.70%. The Company’s ownership percentage in these investments meets the threshold for equity-method accounting.
Equity in (losses) earnings from investments were:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Mutual fund and hedge funds | $ | (2,311) | | | $ | 941 | | | $ | (4,553) | | | $ | 1,518 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
(d) Equity Securities Without Readily Determinable Fair Values That Do Not Qualify for the NAV Practical Expedient
Equity securities without readily determinable fair values that do not qualify for the NAV practical expedient consisted of investments in various limited liability companies at June 30, 2022 and December 31, 2021, respectively. The total carrying value of these investments was $6,200 as of June 30, 2022 and $5,200 as of December 31, 2021, and was included in “Other assets” on the condensed consolidated balance sheets. No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified for the three and six months ended June 30, 2022 and 2021, respectively.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
7. NEW VALLEY LLC
Investments in real estate ventures:
The components of “Investments in real estate ventures” were as follows:
| | | | | | | | | | | | | | | | | |
| Range of Ownership (1) | | June 30, 2022 | | December 31, 2021 |
| Condominium and Mixed Use Development: | | | | | |
| New York City Standard Metropolitan Statistical Area (“SMSA”) | 4.2% - 37.0% | | $ | 20,147 | | | $ | 22,654 | |
| All other U.S. areas | 12.5% - 89.1% | | 60,059 | | | 57,485 | |
| | | 80,206 | | | 80,139 | |
| Apartment Buildings: | | | | | |
| | | | | |
| All other U.S. areas | 50.0% | | 10,576 | | | 11,900 | |
| | | 10,576 | | | 11,900 | |
| Hotels: | | | | | |
| New York City SMSA | 0.4% - 12.3% | | 1,098 | | | 1,635 | |
| International | 49.0% | | 1,217 | | | 1,522 | |
| | | 2,315 | | | 3,157 | |
| Commercial: | | | | | |
| New York City SMSA | 49.0% | | 7,912 | | | — | |
| All other U.S. areas | 1.6% | | 7,488 | | | 7,290 | |
| | | 15,400 | | | 7,290 | |
| | | | | |
| Other: | 15.0% - 49.0% | | 367 | | | 2,576 | |
| Investments in real estate ventures | | | $ | 108,864 | | | $ | 105,062 | |
_____________________________
(1) The Range of Ownership reflects New Valley’s estimated current ownership percentage. New Valley’s actual ownership percentage as well as the percentage of earnings and cash distributions may ultimately differ as a result of a number of factors including potential dilution, financing or admission of additional partners.
Contributions:
The components of New Valley’s contributions to its investments in real estate ventures were as follows:
| | | | | | | | | | | |
| Six Months Ended |
| June 30, |
| 2022 | | 2021 |
| Condominium and Mixed Use Development: | | | |
| New York City SMSA | $ | 498 | | | $ | 396 | |
| All other U.S. areas | 1,682 | | | 6,661 | |
| 2,180 | | | 7,057 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Hotels: | | | |
| New York City SMSA | 206 | | | 1,246 | |
| | | |
| 206 | | | 1,246 | |
| Commercial: | | | |
| New York City SMSA | 8,070 | | | — | |
| | | |
| 8,070 | | | — | |
| | | |
| Other: | — | | | 1,599 | |
| Total contributions | $ | 10,456 | | | $ | 9,902 | |
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
For ventures where New Valley previously held an investment, New Valley contributed its proportionate share of additional capital along with contributions by the other investment partners during the six months ended June 30, 2022 and 2021. New Valley’s direct investment percentage for these ventures did not significantly change.
Distributions:
The components of distributions received by New Valley from its investments in real estate ventures were as follows:
| | | | | | | | | | | |
| Six Months Ended |
| June 30, |
| 2022 | | 2021 |
| Condominium and Mixed Use Development: | | | |
| New York City SMSA | $ | 1,032 | | | $ | 3,338 | |
| All other U.S. areas | — | | | 13,594 | |
| 1,032 | | | 16,932 | |
| Apartment Buildings: | | | |
| | | |
| All other U.S. areas | 400 | | | 17,567 | |
| 400 | | | 17,567 | |
| | | |
| | | |
| | | |
| | | |
| Commercial: | | | |
| | | |
| All other U.S. areas | 476 | | | 219 | |
| 476 | | | 219 | |
| | | |
| Other | 4,459 | | | — | |
| Total distributions | $ | 6,367 | | | $ | 34,718 | |
Of the distributions received by New Valley from its investment in real estate ventures, $2,726 and $23,555 were from distributions of earnings for the six months ended June 30, 2022 and 2021, respectively, and $3,641 and $11,163 were a return of capital for the six months ended June 30, 2022 and 2021, respectively. Distributions from earnings are included in cash from operations in the condensed consolidated statements of cash flows, while distributions from return of capital are included in cash flows from investing activities in the condensed consolidated statements of cash flows.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
Equity in Earnings (losses) from Real Estate Ventures:
New Valley recognized equity in (losses) earnings from real estate ventures as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | |
| June 30, | | June 30, | |
| 2022 | | 2021 | | 2022 | | 2021 | |
| Condominium and Mixed Use Development: | | | | | | | | |
| New York City SMSA | $ | (955) | | | $ | (967) | | | $ | (2,171) | | | $ | (2,472) | | |
| All other U.S. areas | (479) | | | 7,315 | | | (961) | | | 7,274 | | |
| (1,434) | | | 6,348 | | | (3,132) | | | 4,802 | | |
| Apartment Buildings: | | | | | | | | |
| | | | | | | | |
| All other U.S. areas | (615) | | | 12,959 | | | (924) | | | 17,567 | | |
| (615) | | | 12,959 | | | (924) | | | 17,567 | | |
| Hotels: | | | | | | | | |
| New York City SMSA | (248) | | | (386) | | | (742) | | | (848) | | |
| International | (42) | | | (23) | | | (305) | | | (529) | | |
| (290) | | | (409) | | | (1,047) | | | (1,377) | | |
| Commercial: | | | | | | | | |
| New York City SMSA | (158) | | | (2,713) | | | (158) | | | (2,591) | | |
| All other U.S. areas | 302 | | | 180 | | | 674 | | | 273 | | |
| 144 | | | (2,533) | | | 516 | | | (2,318) | | |
| | | | | | | | |
| Other: | 1,735 | | | 245 | | | 2,250 | | | (475) | | |
| Equity in (losses) earnings from real estate ventures | $ | (460) | | | $ | 16,610 | | | $ | (2,337) | | | $ | 18,199 | | |
Investment in Real Estate Ventures Entered Into During the six months ended June 30, 2022:
In June 2022, New Valley invested $410 for an approximate 75.0% interest in Nash Square Upstream JV LLC. The joint venture plans to develop a mixed use development. The venture is a VIE; however, New Valley is not the primary beneficiary. New Valley accounts for this investment under the equity method of accounting. New Valley's maximum exposure to loss as a result of its investment in Nash Square Upstream JV LLC was $410 at June 30, 2022.
In June 2022, New Valley invested $1,000 for an approximate 25.0% interest in BH NV Aventura LLC. The joint venture plans to develop a mixed use development. The venture is a VIE; however, New Valley is not the primary beneficiary. New Valley accounts for this investment under the equity method of accounting. New Valley's maximum exposure to loss as a result of its investment in BH NV Aventura LLC was $1,000 at June 30, 2022.
VIE Consideration:
The Company has determined that New Valley is the primary beneficiary of one real estate venture because it controls the activities that most significantly impact the economic performance of the real estate venture. Consequently, New Valley consolidates this variable interest entity (“VIE”).
The carrying amount of the consolidated assets of the VIE was $0 at both June 30, 2022 and December 31, 2021. Those assets are owned by the VIE, not the Company. The consolidated VIE had no recourse liabilities as of June 30, 2022 and December 31, 2021. A VIE’s assets can only be used to settle the obligations of that VIE. The VIE is not a guarantor of the Company’s senior notes and other debts payable.
For the remaining investments in real estate ventures, New Valley determined that the entities were VIEs but New Valley was not the primary beneficiary. Therefore, New Valley’s investment in such real estate ventures has been accounted for under the equity method of accounting.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
Maximum Exposure to Loss:
New Valley’s maximum exposure to loss from its investments in real estate ventures consisted of the net carrying value of the venture adjusted for any future capital commitments and/or guarantee arrangements. The maximum exposure to loss was as follows:
| | | | | |
| June 30, 2022 |
| Condominium and Mixed Use Development: | |
| New York City SMSA | $ | 20,147 | |
| All other U.S. areas | 60,059 | |
| 80,206 | |
| Apartment Buildings: | |
| |
| All other U.S. areas | 10,576 | |
| 10,576 | |
| Hotels: | |
| New York City SMSA | 1,098 | |
| International | 1,217 | |
| 2,315 | |
| Commercial: | |
| New York City SMSA | 7,912 | |
| All other U.S. areas | 7,488 | |
| 15,400 | |
| |
| Other | 367 | |
| Total maximum exposure to loss | $ | 108,864 | |
New Valley capitalized $1,028 and $2,051 of interest costs into the carrying value of its ventures whose projects were currently under development for the three and six months ended June 30, 2022, respectively. New Valley capitalized $592 and $1,022 of interest costs into the carrying value of its ventures whose projects were currently under development for the three and six months ended June 30, 2021, respectively.
Investments in Real Estate, net:
The components of “Investments in real estate, net” were as follows:
| | | | | | | | | | | |
| June 30,
2022 | | December 31,
2021 |
| Escena, net | $ | — | | | $ | 9,098 | |
| | | |
| | | |
| Investments in real estate, net | $ | — | | | $ | 9,098 | |
New Valley recorded operating income of $77 and $90 for the three months ended June 30, 2022 and 2021, respectively, from Escena. New Valley recorded operating income of $1,316 and $280 for the six months ended June 30, 2022 and 2021, respectively, from Escena. Escena is a master planned community, golf course, and club house in Palm Springs, California. In April 2022, New Valley sold Escena and received approximately $15,300 in net cash proceeds. The Company recognized the revenue in accordance with the scope of ASC Topic 606 since New Valley has no continuing investment or involvement. The sale was presented as revenue and the cost of the investment as cost of sales on the condensed consolidated statements of operations.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
8. NOTES PAYABLE, LONG-TERM DEBT AND OTHER OBLIGATIONS
Notes payable, long-term debt and other obligations consisted of:
| | | | | | | | | | | |
| June 30,
2022 | | December 31,
2021 |
| Vector: | | | |
5.75% Senior Secured Notes due 2029 | $ | 875,000 | | | $ | 875,000 | |
| | | |
10.5% Senior Notes due 2026, net of unamortized discount of $2,434 and $2,647 | 552,566 | | | 552,353 | |
| | | |
| Liggett: | | | |
Revolving credit facility | 23 | | | 24 | |
| | | |
Equipment loans | 51 | | | 64 | |
| Other | — | | | 32 | |
| Notes payable, long-term debt and other obligations | 1,427,640 | | | 1,427,473 | |
| Less: | | | |
Debt issuance costs | (26,888) | | | (28,803) | |
| Total notes payable, long-term debt and other obligations | 1,400,752 | | | 1,398,670 | |
| Less: | | | |
| Current maturities | (51) | | | (79) | |
| Amount due after one year | $ | 1,400,701 | | | $ | 1,398,591 | |
5.75% Senior Secured Notes due 2029 — Vector:
As of June 30, 2022, the Company was in compliance with all debt covenants related to its 5.75% Senior Secured Notes due 2029.
6.125% Senior Secured Notes due 2025 — Vector:
On February 1, 2021, the 6.125% Senior Secured Notes due 2025 were redeemed in full and the Company recorded a loss on the extinguishment of debt of $21,362 for the six months ended June 30, 2021, including $13,013 of premium and $8,349 of other costs and non-cash interest expense related to the recognition of previously unamortized deferred finance costs.
10.5% Senior Notes due 2026 — Vector:
As of June 30, 2022, the Company was in compliance with all debt covenants related to its 10.5% Senior Notes due 2026.
Revolving Credit Agreement — Liggett:
As of June 30, 2022, there was $23 outstanding balance due under the Credit Agreement. Availability, as determined under the Credit Agreement, was approximately $79,500 based on eligible collateral at June 30, 2022. As of June 30, 2022, Liggett, Maple, and Vector Tobacco were in compliance with all debt covenants under the Credit Agreement.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
Non-Cash Interest Expense — Vector:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Amortization of debt discount, net | $ | 108 | | | $ | 97 | | | $ | 213 | | | $ | 191 | |
| Amortization of debt issuance costs | 1,018 | | | 942 | | | 2,016 | | | 1,835 | |
Loss on extinguishment of 6.125% Senior Secured Notes | — | | | — | | | — | | | 8,349 | |
| | | | | | | |
| | | | | | | |
| $ | 1,126 | | | $ | 1,039 | | | $ | 2,229 | | | $ | 10,375 | |
Fair Value of Notes Payable and Long-Term Debt:
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| Carrying | | Fair | | Carrying | | Fair |
| Value | | Value | | Value | | Value |
| Senior Notes | $ | 1,427,566 | | | $ | 1,248,116 | | | $ | 1,427,353 | | | $ | 1,426,176 | |
| | | | | | | |
| Liggett and other | 74 | | | 75 | | | 120 | | | 124 | |
| Notes payable and long-term debt | $ | 1,427,640 | | | $ | 1,248,191 | | | $ | 1,427,473 | | | $ | 1,426,300 | |
| | | | | | | |
Notes payable and long-term debt are carried on the condensed consolidated balance sheets at amortized cost. The fair value determinations disclosed above are classified as Level 2 under the fair value hierarchy disclosed in Note 11 if such liabilities were recorded on the condensed consolidated balance sheets at fair value. The estimated fair value of the Company’s notes payable and long-term debt has been determined by the Company using available market information and appropriate valuation methodologies including the evaluation of the Company’s credit risk. The Company used a derived price based upon quoted market prices and trade activity as of June 30, 2022 to determine the fair value of its publicly-traded notes and debentures. The carrying value of the revolving credit facility is equal to fair value. The fair value of the equipment loans and other obligations was determined by calculating the present value of the required future cash flows. However, considerable judgment is required to develop the estimates of fair value and, accordingly, the estimate presented herein is not necessarily indicative of the amount that could be realized in a current market exchange.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
9. CONTINGENCIES
Tobacco-Related Litigation:
Overview. Since 1954, Liggett and other United States cigarette manufacturers have been named as defendants in numerous direct, third-party and purported class actions predicated on the theory that cigarette manufacturers should be liable for damages alleged to have been caused by cigarette smoking or by exposure to secondary smoke from cigarettes. The cases have generally fallen into the following categories: (i) smoking and health cases alleging personal injury brought on behalf of individual plaintiffs (“Individual Actions”); (ii) lawsuits by individuals requesting the benefit of the Engle