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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended June 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
VECTOR GROUP LTD.
(Exact name of registrant as specified in its charter)
Delaware 1-5759 65-0949535
(State or other jurisdiction of incorporation Commission File Number (I.R.S. Employer Identification No.)
incorporation or organization)
4400 Biscayne Boulevard
Miami, Florida 33137
305-579-8000
(Address, including zip code and telephone number, including area code,
of the principal executive offices)
Securities Registered Pursuant to 12(b) of the Act:
Title of each class: Trading Name of each exchange
Symbol(s) on which registered:
Common stock, par value $0.10 per share VGR New York Stock Exchange
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x Yes o No
    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
x Yes o No
    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging Growth Company
    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
    Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes x No
    At August 4, 2022, Vector Group Ltd. had 154,795,902 shares of common stock outstanding.



VECTOR GROUP LTD.

FORM 10-Q

TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Vector Group Ltd. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021
2
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021
3
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021
4
Condensed Consolidated Statements of Stockholders' Deficiency for the three and six months ended June 30, 2022 and 2021
5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021
7
Notes to Condensed Consolidated Financial Statements
8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
SIGNATURE

1

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.
2


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 
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 
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.
3


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)
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.
4


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)
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) —  —  —  — 
Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting (42,029) (4) (604) —  —  —  (608)
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.
5


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)
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 
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)
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.
6


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.
7

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 
8

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 
9

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.

10

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
14  20  30 
Interest on lease liabilities
Total lease cost
$ 1,358  $ 1,311  $ 2,658  $ 2,639 

11

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
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 

12

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.

13

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 10  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  $ $ —  $ 85,371 


14

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 $ $ 11  $ $ 67 
Gross realized losses on sales (1) (1) (1) (2)
Net gains recognized on debt securities available for sale $ $ 10  $ $ 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 

15

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.

16

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 

17

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.
18

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.
19

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.

20

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.
21

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