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Vector Group Reports Second Quarter 2022 Financial Results

Achieved Approximate 15% Increase in Revenues Fueled by Continued Strong Volume and Market Share Growth

Second Quarter 2022 Highlights:

  • Consolidated revenues of $387.2 million, increased by 14.7% or $49.6 million compared to the prior year period

    • Tobacco Segment revenues of $374.3 million, increased by 13.6% compared to the prior year period.

    • Tobacco Segment unit volume increase of 16.2% compared to the prior year period.

    • Liggett’s wholesale and retail market share increases to 5.3% and 5.5% from 4.2% and 4.1%, respectively, in the prior year period.

  • Reported net income of $39.2 million or $0.25 per diluted common share, compared to $93.3 million or $0.60 per diluted common share in the prior year period; Adjusted Net Income from Continuing Operations of $40.2 million or $0.25 per diluted common share, compared to $64.6 million or $0.41 per diluted common share in the prior year period

  • Reported operating income of $90.7 million, declined by $3.2 million compared to the prior year period

    • Tobacco Segment operating income of $88.3 million, declined by 14.4% or $14.8 million compared to the prior year period, primarily attributable to the investment in Montego’s significant volume and market share growth.

  • Adjusted EBITDA from Continuing Operations of $95.1 million, declined by 3.9% or $3.8 million compared to the prior year period

    • Tobacco Segment Adjusted EBITDA from Continuing Operations of $89.9 million, declined by 14.3% or $15.0 million compared to the prior year period, primarily attributable to the investment in Montego’s significant volume and market share growth.

First Half 2022 Highlights:

  • Consolidated revenues of $699.2 million, increased by 14.9% or $90.7 million compared to the prior year period

    • Tobacco Segment revenues of $683.4 million, increased by 14.3% compared to the prior year period.

    • Tobacco Segment unit volume increase of 17.3% compared to the prior year period.

    • Liggett’s wholesale and retail market share increases to 5.3% and 5.3% from 4.1% and 4.1%, respectively, in the prior year period.

  • Reported net income of $71.7 million or $0.45 per diluted common share, compared to $125.3 million or $0.80 per diluted common share in the prior year period; Adjusted Net Income from Continuing Operations of $66.8 million or $0.42 per diluted common share, compared to $99.5 million or $0.64 per diluted common share in the prior year period

  • Reported operating income of $165.8 million, declined by $4.0 million compared to the prior year period

    • Tobacco Segment operating income of $166.0 million, declined by 10.2% or $18.8 million compared to the prior year period, primarily attributable to the investment in Montego’s significant volume and market share growth.

  • Adjusted EBITDA from Continuing Operations of $172.2 million, declined by 2.7% or $4.7 million compared to the prior year period

    • Tobacco Segment Adjusted EBITDA from Continuing Operations of $167.0 million, declined by 10.0% or $18.6 million compared to the prior year period, primarily attributable to the investment in Montego’s significant volume and market share growth.

  • Strong liquidity with cash and cash equivalents of $323.9 million and investment securities and long-term investments of $167.9 million at June 30, 2022

  • Cash dividends of $64 million returned to stockholders at a rate of $0.40 per common share

Last Twelve Months ended June 30, 2022 Highlights:

  • Consolidated revenues of $1.3 billion

    • Tobacco Segment revenues of $1.3 billion

  • Net income of $165.9 million

  • Operating income of $316.4 million

    • Tobacco Segment operating income of $341.5 million

  • Adjusted EBITDA from Continuing Operations of $345.2 million

    • Tobacco Segment Adjusted EBITDA from Continuing Operations of $345.8 million

MIAMI, August 04, 2022--(BUSINESS WIRE)--Vector Group Ltd. (NYSE:VGR) today announced financial results for the three and six months ended June 30, 2022.

"Vector Group delivered strong tobacco revenue performance in the second quarter as we capitalized on favorable market opportunities to substantially increase value and market share," said Howard M. Lorber, President and Chief Executive Officer of Vector Group Ltd. "Our price-fighting Montego brand is now our largest brand and the third largest discount brand in the United States. This strong performance demonstrates our commitment to optimizing long-term profit through the effective management of volume, pricing, and market share growth."

GAAP Financial Results

Three months ended June 30, 2022 and 2021. Second quarter 2022 revenues were $387.2 million, compared to revenues of $337.6 million in the second quarter of 2021. The Company recorded operating income of $90.7 million in the second quarter of 2022, compared to operating income of $93.9 million in the second quarter of 2021. Net income for the second quarter of 2022 was $39.2 million, or $0.25 per diluted common share, compared to net income of $93.3 million, or $0.60 per diluted common share, in the second quarter of 2021.

Six months ended June 30, 2022 and 2020. For the six months ended June 30, 2022, revenues were $699.2 million, compared to revenues of $608.5 million for the six months ended June 30, 2021. The Company recorded operating income of $165.8 million for the six months ended June 30, 2022, compared to operating income of $169.9 million for the six months ended June 30, 2021. Net income attributed to Vector Group Ltd. for the six months ended June 30, 2022 was $71.7 million, or $0.45 per diluted common share, compared to net income of $125.3 million, or $0.80 per diluted common share, for the six months ended June 30, 2021.

Non-GAAP Financial Measures

Non-GAAP financial results include adjustments for litigation settlements and judgment expense, impact of Master Settlement Agreement settlements, transaction expenses, acceleration of stock compensation expense (for purposes of Adjusted Net Income from Continuing Operations and Adjusted Operating Income only), net gains on sales of assets (for purposes of Adjusted EBITDA from Continuing Operations and Adjusted Operating Income only), and loss on extinguishment of debt (for purposes of Adjusted EBITDA from Continuing Operations and Adjusted Net Income from Continuing Operations). For purposes of Adjusted EBITDA from Continuing Operations only, adjustments include equity in earnings from investments, equity in (earnings) losses from real estate ventures, stock-based compensation expense, litigation settlements and judgment expense, impact of Master Settlement Agreement settlements, transaction expenses, and other, net. For purposes of Adjusted Net Income from Continuing Operations only, adjustments include net interest expense capitalized to real estate ventures and adjustments for a derivative associated with a guarantee. Reconciliations of non-GAAP financial measures to the comparable GAAP financial results for the last twelve months ended June 30, 2022 and the three and six months ended June 30, 2022 and 2021 are included in Tables 2 through 6.

Three months ended June 30, 2022 compared to the three months ended June 30, 2021

Adjusted EBITDA from Continuing Operations (as described in Table 2 attached hereto) were $95.1 million for the second quarter of 2022, compared to $99.0 million for the second quarter of 2021.

Adjusted Net Income from Continuing Operations (as described in Table 3 attached hereto) was $40.2 million, or $0.25 per diluted share, for the second quarter of 2022, and $64.6 million or $0.41 per diluted share, for the second quarter of 2021.

Adjusted Operating Income (as described in Table 4 attached hereto) was $90.8 million for the second quarter of 2022, compared to $93.9 million for the second quarter of 2021.

Six months ended June 30, 2022 compared to the six months ended June 30, 2021

Adjusted EBITDA from Continuing Operations (as described in Table 2 attached hereto) were $172.2 million for the six months ended June 30, 2022, compared to $176.9 million for the six months ended June 30, 2021.

Adjusted Net Income from Continuing Operations (as described in Table 3 attached hereto) was $66.8 million, or $0.42 per diluted share, for the six months ended June 30, 2022, compared to $99.5 million, or $0.64 per diluted share, for the six months ended June 30, 2021.

Adjusted Operating Income (as described in Table 4 attached hereto) was $163.8 million for the six months ended June 30, 2022, compared to $167.2 million for the six months ended June 30, 2021.

Last twelve months ended June 30, 2022

For the last twelve months ended June 30, 2022, revenues were $1.3 billion. The Company recorded operating income of $316.4 million for the last twelve months ended June 30, 2022. Net income for the last twelve months ended June 30, 2022 was $165.9 million.

For the last twelve months ended June 30, 2022, Adjusted EBITDA (as described in Table 2 attached hereto) were $345.2 million. Adjusted Operating Income (as described in Table 4 attached hereto) was $328.5 million for the last twelve months ended June 30, 2022.

Consolidated Balance Sheet

Vector maintained significant liquidity at June 30, 2022 with cash and cash equivalents of $323.9 million, including $105.2 million of cash at Liggett, and investment securities of $122.4 million and long-term investments of $45.5 million.

Vector continued its longstanding history of paying a quarterly cash dividend in the second quarter of 2022. For the six months ended June 30, 2022, Vector returned a total of $64 million to stockholders at a quarterly rate of $0.20 per common share.

Tobacco Segment Financial Results

For the second quarter of 2022, the Tobacco segment had revenues of $374.3 million, compared to $329.5 million for the second quarter of 2021. For the six months ended June 30, 2022, the Tobacco segment had revenues of $683.4 million, compared to $598.0 million for the six months ended June 30, 2021. For the last twelve months ended June 30, 2022, the Tobacco segment had revenues of $1.3 billion.

Operating Income from the Tobacco segment was $88.3 million and $166.0 million for the three and six months ended June 30, 2022, respectively, compared to $103.2 million and $184.8 million for the three and six months ended June 30, 2021, respectively. Operating Income from the Tobacco segment was $341.5 million for the last twelve months ended June 30, 2022.

Non-GAAP Financial Measures

Tobacco Adjusted Operating Income (as described in Table 5 attached hereto) for the second quarter of 2022 and 2021 was $88.4 million and $103.2 million, respectively. Tobacco Adjusted Operating Income for the six months ended June 30, 2022 was $164.0 million, compared to $182.1 million for the six months ended June 30, 2021.

For the second quarter of 2022, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 2.74 billion units, compared to 2.36 billion units for the second quarter of 2021. For the six months ended June 30, 2022, the Tobacco segment had conventional cigarette (wholesale) shipments of approximately 5.04 billion units, compared to 4.30 billion units for the six months ended June 30, 2021.

According to data from Management Science Associates, for the second quarter of 2022, Liggett’s retail market share increased to 5.5% compared to 4.1% for the second quarter of 2021. For the six months ended June 30, 2022, Liggett’s retail market share increased to 5.3%, compared to 4.1% for the six months ended June 30, 2021. Compared to the second quarter of 2021, Liggett’s retail shipments in the second quarter of 2022 increased by 21.1% while the overall industry’s retail shipments declined by 9.4%. Compared to the six months ended June 30, 2021, Liggett’s retail shipments for six months ended June 30, 2022 increased by 18.2% while the overall industry’s retail shipments declined by 8.5%.

Non-GAAP Financial Measures

Adjusted EBITDA from Continuing Operations, Adjusted Net Income from Continuing Operations, Adjusted Operating Income, Tobacco Adjusted Operating Income, Tobacco Adjusted EBITDA, and financial measures for the last twelve months ("LTM") ended June 30, 2022 ("the Non-GAAP Financial Measures") are financial measures not prepared in accordance with generally accepted accounting principles ("GAAP"). The Company believes that the Non-GAAP Financial Measures are important measures that supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. The Company believes the Non-GAAP Financial Measures provide investors and analysts with a useful measure of operating results unaffected by differences in capital structures and ages of related assets among otherwise comparable companies.

Management uses the Non-GAAP Financial Measures as measures to review and assess operating performance of the Company’s business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (the Non-GAAP Financial Measures) of the Company’s business. While management considers the Non-GAAP Financial Measures to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating income, net income and cash flows from operations. In addition, the Non-GAAP Financial Measures are susceptible to varying calculations and the Company’s measurement of the Non-GAAP Financial Measures may not be comparable to those of other companies. Attached hereto as Tables 2 through 6 is information relating to the Company’s Non-GAAP Financial Measures for the last twelve months ended June 30, 2022 and the three and six months ended June 30, 2022 and 2021.

Conference Call to Discuss Second Quarter 2022 Results

As previously announced, the Company will host a conference call and webcast on Friday, August 5, 2022 at 8:30 AM (ET) to discuss its second quarter 2022 results. Investors can access the call by dialing 800-420-1271 and entering 63108 as the conference ID number. The call will also be available via live webcast at https://www.webcaster4.com/Webcast/Page/2271/46299. Webcast participants should allot extra time to register before the webcast begins.

A replay of the call will be available shortly after the call ends on August 5, 2022 through August 19, 2022. To access the replay, dial 800-925-9627 and enter 63108 as the conference ID number. The archived webcast will also be available at https://www.webcaster4.com/Webcast/Page/2271/46299 for one year.

About Vector Group Ltd.

Vector Group is a holding company for Liggett Group LLC, Vector Tobacco Inc., and New Valley LLC. Additional information concerning the Company is available on the Company’s website, www.VectorGroupLtd.com.

Investors and others should note that we may post information about the Company or its subsidiaries on our website at www.VectorGroupLtd.com and/or at the websites of those subsidiaries or, if applicable, on their accounts on LinkedIn, TikTok, Twitter or other social media platforms. It is possible that the postings or releases could include information deemed to be material information. Therefore, we encourage investors, the media and others interested in our company to review the information we post on our website at www.VectorGroupLtd.com, on the websites of our subsidiaries and on their social media accounts.

Forward-Looking and Cautionary Statements

This press release includes forward-looking statements within the meaning of the federal securities law. All statements other than statements of historical or current facts made in this document are forward-looking. We identify forward-looking statements in this document by using words or phrases such as "anticipate," "believe," "estimate," "expect," "intend," "may be," "continue’" "could," "potential," "objective," "plan," "seek," "predict," "project" and "will be" and similar words or phrases or their negatives. Forward-looking statements reflect our current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons.

Risks and uncertainties that could cause our actual results to differ significantly from our current expectations are described in our 2021 Annual Report on Form 10-K and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022. We undertake no responsibility to publicly update or revise any forward-looking statement except as required by applicable law.

[Financial Tables Follow]

TABLE 1
VECTOR GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)

On December 29, 2021, Vector Group Ltd. completed the distribution of its real estate brokerage, services and PropTech investment business into a new stand-alone public company, Douglas Elliman Inc. (NYSE:DOUG) through a distribution of Douglas Elliman’s common stock to Vector Group Ltd. stockholders. The historical results of the real estate brokerage, services and PropTech investment business owned by Douglas Elliman Inc. are excluded from revenues and expenses below and reflected as income from discontinued operations, net of income taxes, in Vector Group Ltd.’s Consolidated Statements of Operations below.

Three Months Ended

Six Months Ended

June 30,

June 30,

2022

2021

2022

2021

(Unaudited)

(Unaudited)

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

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.

TABLE 2
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA FROM CONTINUING OPERATIONS
(Unaudited)
(Dollars in Thousands)

Table 2 reflects a reconciliation of GAAP to non-GAAP financial information on a continuing operations basis. Because Douglas Elliman Inc.’s results are reflected within discontinued operations, they are excluded from the financial information provided below.

LTM

Year Ended

Three Months Ended

Six Months Ended

June 30,

December 31,

June 30,

June 30,

2022

2021

2022

2021

2022

2021

Net income

$

165,896

$

219,463

$

39,153

$

93,305

$

71,695

$

125,262

Net income from discontinued operations

(33,578

)

(72,309

)

(28,324

)

(38,731

)

Interest expense

111,757

112,728

30,724

28,072

55,822

56,793

Income tax expense

53,780

62,807

14,969

27,004

27,191

36,218

Net loss attributed to non-controlling interest

(190

)

(190

)

Depreciation and amortization

7,411

7,816

1,793

1,992

3,643

4,048

EBITDA

$

305,076

$

330,315

$

86,639

$

122,049

$

158,351

$

183,590

Equity in losses (earnings) from investments (a)

3,396

(2,675

)

2,311

(941

)

4,553

(1,518

)

Equity in losses (earnings) from real estate ventures (b)

10,286

(10,250

)

460

(16,610

)

2,337

(18,199

)

Loss on extinguishment of debt

21,362

21,362

Stock-based compensation expense (c)

13,776

14,799

2,570

3,080

4,717

5,740

Litigation settlement and judgment expense (d)

335

211

57

129

5

Impact of MSA settlement (e)

(2,123

)

(2,722

)

(2,123

)

(2,722

)

Transaction expenses (f)

10,468

10,468

Net gains on sales of assets

(910

)

(910

)

Other, net

4,871

(10,687

)

3,094

(8,613

)

4,239

(11,319

)

Adjusted EBITDA from continuing operations

$

345,175

$

349,911

$

95,131

$

98,965

$

172,203

$

176,939

Adjusted EBITDA from Continuing Operations by Segment

Tobacco

$

345,828

$

364,399

$

89,883

$

104,885

$

166,959

$

185,530

Real Estate

11,696

4,125

6,873

(760

)

7,908

337

Corporate and Other

(12,349

)

(18,613

)

(1,625

)