Vector Group Ltd. (NYSE:VGR) today announced financial results
for the fourth quarter and year ended December 31, 2014.
On December 13, 2013, Vector Group increased its ownership of
Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after
December 13, 2013, Vector Group consolidates the operations and
financial position of Douglas Elliman Realty in its financial
statements. It had previously accounted for its interest in Douglas
Elliman under the equity method of accounting.
GAAP Financial Results
Fourth quarter 2014 revenues were $417.6 million, compared to
revenues of $299.6 million in the fourth quarter of 2013. The
increase in revenues in 2014 was primarily due to the acquisition
and consolidated presentation of Douglas Elliman. The Company
recorded operating income of $47.4 million in the fourth quarter of
2014, compared to operating income of $62.0 million in the fourth
quarter of 2013. Net income attributed to Vector Group Ltd. for the
2014 fourth quarter was $11.6 million, or $0.11 per diluted common
share, compared to net income of $64.0 million, or $0.59 per
diluted common share, in the 2013 fourth quarter.
For the year ended December 31, 2014, revenues were $1.6
billion, compared to $1.1 billion for 2013. The increase in
revenues in 2014 was primarily due to the acquisition and
consolidated presentation of Douglas Elliman. The Company recorded
operating income of $213.4 million for 2014 , compared to operating
income of $112.0 million for 2013. Net income attributed to Vector
Group Ltd. for 2014 was $37.0 million, or $0.35 per diluted common
share, compared to net income of $38.9 million, or $0.39 per
diluted common share, for 2013.
Non-GAAP Financial Results
The Company's non-GAAP financial results are presented assuming
the Company's acquisition of its additional 20.59% interest in
Douglas Elliman Realty, LLC, and the related purchase accounting
adjustments, occurred prior to January 1, 2013. Non-GAAP financial
results also include adjustments for litigation settlement and
judgment expenses in the Company's tobacco business, a one-time
charge in 2013 related to the extinguishment of the Company's 11%
Senior Secured Notes, non-cash stock compensation expense (for
purposes of Pro-forma Adjusted EBITDA only), and non-cash interest
items associated with the Company's convertible debt.
Reconciliations of non-GAAP financial results to the comparable
GAAP financial results for the three and twelve months ended
December 31, 2014 and 2013 are included in Tables 2 through
10.
Three months ended December 31, 2014 compared to the three
months ended December 31, 2013
Fourth quarter 2014 Pro-forma Adjusted Revenues (as described in
Table 2 attached hereto) were $417.7 million compared to $401.7
million in 2013. The increase was primarily due to an increase in
Pro-forma Adjusted Revenues from the Company's tobacco segment of
$19.5 million and an increase in Pro-forma Adjusted Revenues at
Douglas Elliman of $18.7 million. These increases were offset by
the absence of $22.7 million in revenues in 2014 from the 2013 sale
of lots at the Company's Escena development in Palm Springs,
California.
Pro-forma Adjusted EBITDA attributed to Vector Group (as
described below and in Table 3 attached hereto) was $53.5 million
for the fourth quarter of 2014 as compared to $76.3 million for the
fourth quarter of 2013. The decline in Pro-forma Adjusted EBITDA
attributed to Vector Group for the three months ended December 31,
2014 was primarily attributable to the absence of a $20.2 million
gain from the sale of lots at the Company's Escena development in
Palm Springs, California, which occurred during the three months
ended December 31, 2013 as well as increased losses from the
Company’s E-cigarette segment in the 2014 period. This decline was
offset by higher profits in the tobacco segment.
Pro-forma Adjusted Net Income (as described below and in Table 4
attached hereto) was $11.9 million or $0.11 per diluted share for
the three months ended December 31, 2014 and $37.2 million or $0.35
per diluted share for the three months ended December 31, 2013.
Pro-forma Adjusted Operating Income (as described below and in
Table 5 attached hereto) was $49.8 million for the three months
ended December 31, 2014 and $75.8 million for the three months
ended December 31, 2013.
Twelve months ended December 31, 2014 compared to the
twelve months ended December 31, 2013
For the year ended December 31, 2014 Pro-forma Adjusted Revenues
(as described in Table 2 attached hereto) were $1.59 billion
compared to $1.50 billion in 2013. The increase was primarily due
to an increase in real estate revenues at Douglas Elliman.
Pro-forma Adjusted EBITDA attributed to Vector Group (as
described below and in Table 3 attached hereto) was $227.8 million
for the year ended December 31, 2014 as compared to $236.4 million
for the twelve-month period of 2013. The decline in Pro-forma
Adjusted EBITDA attributed to Vector Group for the twelve months
ended December 31, 2014 was primarily attributable to the absence
of a $20.2 million gain from the sale of lots at the Company's
Escena development in Palm Springs, California, which occurred
during the three months ended December 31, 2013 and increased
losses from the Company’s E-cigarette segment in 2014. This decline
was offset by higher profits in the tobacco segment and from the
Company’s 70.59% interest in Douglas Elliman Realty, LLC.
Pro-forma Adjusted Net Income (as described below and in Table 4
attached hereto) was $63.9 million or $0.60 per diluted share for
the year ended December 31, 2014 and $84.0 million or $0.85 per
diluted share for the year ended December 31, 2013.
Pro-forma Adjusted Operating Income (as described below and in
Table 5 attached hereto) was $223.0 million for the year ended
December 31, 2014 and $232.6 million for the year ended December
31, 2013.
Tobacco Business Financial Results
For the fourth quarter 2014, the Company's tobacco business had
revenues of $272.8 million, compared to $253.3 million for the
fourth quarter 2013. The increase in revenues was primarily due to
a 4.6% increase in unit sales volume and by favorable net pricing
variances. Tobacco Adjusted Operating Income (described below and
included in Table 6 attached hereto) for the fourth quarter 2014
and 2013 was $52.5 million and $49.3 million, respectively.
For the year ended December 31, 2014, the Company's tobacco
business had revenues of $1.021 billion, compared to $1.014 billion
for the year ended December 31, 2013. The increase in revenues was
primarily due to 3.1% favorable net pricing variances offset by a
2.3% decline in unit sales volume. Tobacco Adjusted Operating
Income (described below and included in Table 6 attached hereto)
for the year ended December 31, 2014 and 2013 was $200.2 million
and $189.3 million, respectively.
For the fourth quarter and year ended December 31, 2014, the
Company's tobacco business had conventional cigarette sales of
approximately 2.36 billion units and 8.86 billion units,
respectively, compared to 2.25 billion units and 9.07 billion units
for the fourth quarter and year ended December 31, 2013.
Real Estate Business Financial Results
For the fourth quarter 2014, the Company's real estate segment
had Pro-forma Adjusted Revenues of $146.3 million, compared to
$148.4 million for the fourth quarter 2013. For the year ended
December 31, 2014, the Company's real estate segment's Pro-forma
Adjusted Revenues were $563.2 million compared to $483.4 million
for the year ended December 31, 2013. The increase in revenues was
primarily due to an increase in revenues at Douglas Elliman
combined with the sale of the Company's Indian Creek property. For
the fourth quarter 2014, Real Estate Pro-forma Adjusted EBITDA
attributed to the Company were $6.2 million, compared to $28.9
million for the fourth quarter 2013. For the year ended December
31, 2014, Real Estate Pro-forma Adjusted EBITDA attributed to the
Company were $40.2 million, compared to $51.1 million for the year
ended December 31, 2013.
Douglas Elliman's results are included in the Real Estate
segment and it continued to post strong growth with increases in
Pro-Forma Adjusted Revenues of 14.9% and 18.9% for the three and
twelve months ended December 31, 2014 , respectively, from the
comparable 2013 periods. Additionally, Douglas Elliman continued to
make strategic investments in 2014 by expanding into new markets,
bolstering its development marketing division and incurring
increased advertising and marketing expenses to strengthen the
long-term value of the Douglas Elliman brand name.
Douglas Elliman's Pro-Forma Adjusted Revenues for the fourth
quarter 2014 were $144.6 million, compared to $125.8 million for
the fourth quarter 2013. For the year ended December 31, 2014,
Douglas Elliman's Pro-forma Adjusted Revenues were $543.2 million
compared to $456.9 million for the year ended December 31, 2013.
For the fourth quarter 2014, Douglas Elliman's Pro-forma Adjusted
EBITDA were $6.1 million ($4.3 million attributed to the Company),
compared to $13.2 million ($9.3 million attributed to the Company)
for the fourth quarter 2013. For the year ended December 31, 2014,
Douglas Elliman's Pro-forma Adjusted EBITDA were $50.7 million
($35.8 million attributed to the Company), compared to $45.7
million ($32.3 million attributed to the Company) for the year
ended December 31, 2013.
For the fourth quarter and year ended December 31, 2014, Douglas
Elliman achieved closed sales of approximately $4.9 billion and
$18.2 billion, respectively, compared to $4.0 billion and $14.8
billion for the fourth quarter and year ended December 31,
2013.
In 2014, the Company was required under Section 404 of the
Sarbanes-Oxley Act of 2002 to complete an assessment of internal
controls of Douglas Elliman Realty, LLC, which became a
consolidated subsidiary of the Company on December 13, 2013. In the
Company’s assessment, it has identified material weaknesses in
internal controls over financial reporting at Douglas Elliman
related to the effectiveness of its monitoring process for
evaluating its financial reporting. Vector Group is beginning the
evaluation process associated with remediation of these weaknesses
and will continue to take measures, including engaging service
providers that may be necessary and advisable, to address these
weaknesses.
E-cigarettes
For the fourth quarter 2014, the Company's E-cigarette segment
had Pro-forma Adjusted Revenues of negative $1.4 million and a loss
of Pro-forma Adjusted EBITDA of $6.0 million. The negative revenues
of $1.4 million in the Company’s E-Cigarette segment for the three
months ended December 31, 2014 are the result of a
newly-established sales returns allowance of $2.7 million because
of the rapid decline of disposable e-cigarette sales in the U.S.
market. For the year ended December 31, 2014, the Company's
E-cigarette segment had Pro-forma Adjusted Revenues of $8.6 million
and a loss of Pro-forma Adjusted EBITDA of $13.1 million.
The Company's E-cigarette segment did not have any revenues in
the 2013 periods and reported a loss from Pro-forma Adjusted EBITDA
of approximately $459,000 and $1.0 million for the three months and
year ended December 31, 2013.
As a result of the amount of operating losses in the Company's
E-cigarette segment, effective as of September 30, 2014, when
compared to the remaining components of the Company's Corporate and
Other segment, the Company has reevaluated its operating segments
and has separated the operations of the Company's E-cigarette
segment from the Corporate and Other segment for previously
reported 2014 periods and from the Tobacco segment for the
previously reported 2013 periods. Thus, information reported prior
to September 30, 2014 has been recast to conform to the current
presentation. This change did not have an impact to the Company's
historical consolidated results.
Non-GAAP Financial Measures
Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA,
Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income,
Tobacco Adjusted Operating Income, New Valley LLC Pro-forma
Adjusted Revenues, New Valley LLC Pro-forma Adjusted EBITDA,
Douglas Elliman Realty, LLC Adjusted Revenues, and Douglas Elliman
Realty, LLC Adjusted EBITDA are financial measures not prepared in
accordance with generally accepted accounting principles (“GAAP”).
The Company believes that Pro-forma Adjusted Revenues, Pro-forma
Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted
Operating Income, Tobacco Adjusted Operating Income, New Valley LLC
Pro-forma Adjusted Revenues, New Valley LLC Pro-forma Adjusted
EBITDA, Douglas Elliman Realty, LLC Adjusted Revenues, and Douglas
Elliman Realty, LLC Adjusted EBITDA are important measures that
supplement discussions and analysis of its results of operations
and enhances an understanding of its operating performance. The
Company believes Pro-forma Adjusted Revenues, Pro-forma Adjusted
EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating
Income, Tobacco Adjusted Operating Income, New Valley LLC Pro-forma
Adjusted Revenues, New Valley LLC Pro-forma Adjusted EBITDA,
Douglas Elliman Realty, LLC Adjusted Revenues, and Douglas Elliman
Realty, LLC Adjusted EBITDA provide investors and analysts with a
useful measure of operating results unaffected by differences in
capital structures, capital investment cycles and ages of related
assets among otherwise comparable companies. Management uses
Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma
Adjusted Net Income, Pro-forma Adjusted Operating Income, Tobacco
Adjusted Operating Income, New Valley LLC Pro-forma Adjusted
Revenues, New Valley LLC Pro-forma Adjusted EBITDA, Douglas Elliman
Realty, LLC Adjusted Revenues, and Douglas Elliman Realty, LLC
Adjusted EBITDA 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 (Pro-forma Adjusted Revenues, Pro-forma
Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted
Operating Income, Tobacco Adjusted Operating Income, New Valley LLC
Pro-forma Adjusted Revenues, New Valley LLC Pro-forma Adjusted
EBITDA, Douglas Elliman Realty, LLC Adjusted Revenues, and Douglas
Elliman Realty, LLC Adjusted EBITDA) of the Company's business.
While management considers Pro-forma Adjusted Revenues, Pro-forma
Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted
Operating Income, Tobacco Adjusted Operating Income, New Valley LLC
Pro-forma Adjusted Revenues, New Valley LLC Pro-forma Adjusted
EBITDA, Douglas Elliman Realty, LLC Adjusted Revenues, and Douglas
Elliman Realty, LLC Adjusted EBITDA 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, Pro-forma Adjusted Revenues, Pro-forma
Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted
Operating Income, Tobacco Adjusted Operating Income, New Valley LLC
Pro-forma Adjusted Revenues, New Valley LLC Pro-forma Adjusted
EBITDA, Douglas Elliman Realty, LLC Adjusted Revenues, and Douglas
Elliman Realty, LLC Adjusted EBITDA are susceptible to varying
calculations and the Company's measurement of Pro-forma Adjusted
Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income,
Pro-forma Adjusted Operating Income, Tobacco Adjusted Operating
Income, New Valley LLC Pro-forma Adjusted Revenues, New Valley LLC
Pro-forma Adjusted EBITDA, Douglas Elliman Realty, LLC Adjusted
Revenues, and Douglas Elliman Realty, LLC Adjusted EBITDA may not
be comparable to those of other companies. Attached hereto as
Tables 2 through 10 is information relating to the Company's
Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma
Adjusted Net Income, Pro-forma Adjusted Operating Income, Tobacco
Adjusted Operating Income, New Valley LLC Pro-forma Adjusted
Revenues, New Valley LLC Pro-forma Adjusted EBITDA, Douglas Elliman
Realty, LLC Adjusted Revenues, and Douglas Elliman Realty, LLC
Adjusted EBITDA for the three and twelve months ended
December 31, 2014 and 2013.
Conference Call to Discuss Fourth Quarter and Full Year 2014
Results
As previously announced, the Company will host a conference call
and webcast on Monday, March 2, 2015 at 9:30 A.M. (ET) to
discuss fourth quarter and full year 2014 results. Investors can
access the call by dialing 800-859-8150 and entering
78148193 as the conference ID number. The call will also be
available via live webcast at www.investorcalendar.com. Webcast participants
should allot extra time to register before the webcast begins.
A replay of the call will be available shortly after the call
ends on March 2, 2015 through March 13, 2015. To access the
replay, dial 877-656-8905 and enter 78148193 as the conference ID
number. The archived webcast will also be available at www.investorcalendar.com for one year.
Vector Group is a holding company that indirectly
owns Liggett Group LLC, Vector Tobacco
Inc. and Zoom E-Cigs LLC and directly owns New
Valley LLC, which owns a controlling interest in Douglas
Elliman Realty, LLC. Additional information concerning the company
is available on the Company's website, www.VectorGroupLtd.com.
[Financial Tables Follow]
TABLE 1
VECTOR GROUP LTD. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Dollars in
Thousands, Except Per Share Amounts)
Three Months Ended Twelve Months Ended December 31, December
31, 2014 2013 2014 2013
(Unaudited) (Unaudited) Revenues Tobacco* $ 272,791 $ 253,303 $
1,021,259 $ 1,014,341 Real estate 146,187 46,282 561,467 65,580
E-Cigarettes (1,388 ) — 8,589 — Total revenues
417,590 299,585 1,591,315 1,079,921 Expenses: Cost of sales:
Tobacco* 198,058 181,016 735,725 729,393 Real estate 92,497 21,558
354,028 37,638 E-Cigarettes 950 — 7,307 —
Total cost of sales 291,505 202,574 1,097,060 767,031
Operating, selling, administrative and general expenses 77,961
34,833 278,392 112,748 Litigation settlement and judgment expense
750 193 2,475 88,106 Operating income
47,374 61,985 213,388 112,036 Other income (expenses):
Interest expense (37,321 ) (33,102 ) (160,991 ) (132,147 ) Loss on
extinguishment of debt — — — (21,458 ) Change in fair value of
derivatives embedded within convertible debt 11,962 10,636 19,409
18,935 Acceleration of interest expense related to debt conversion
(93 ) (12,414 ) (5,205 ) (12,414 ) Equity income from real estate
ventures 1,101 6,151 4,103 22,925 Equity (loss) income on long-term
investments (220 ) 1,296 1,242 2,066 Gain (loss) on sale of
investment securities available for sale 27 42 (11 ) 5,152 Gain on
acquisition of Douglas Elliman — 60,842 — 60,842 Other, net 2,385
2,399 10,552 7,550 Income before
provision for income taxes 25,215 97,835 82,487 63,487 Income tax
expense 12,244 34,082 33,251 24,795
Net income 12,971 63,753 49,236 38,692 Net (income)
loss attributed to non-controlling interest (1,377 ) 252
(12,258 ) 252 Net income attributed to Vector Group
Ltd. $ 11,594 $ 64,005 $ 36,978 $ 38,944
Per basic common share: Net income applicable
to common shares attributed to Vector Group Ltd. $ 0.11 $
0.64 $ 0.35 $ 0.39 Per diluted common
share: Net income applicable to common shares attributed to
Vector Group Ltd. $ 0.11 $ 0.59 $ 0.35 $ 0.39
Cash distributions and dividends declared per share $
0.40 $ 0.38 $ 1.54 $ 1.47
* Revenues and Cost of goods sold
include excise taxes of $118,652, $113,409, $446,086 and $456,703,
respectively.
TABLE 2
VECTOR GROUP LTD. AND
SUBSIDIARIES
RECONCILIATION OF PRO-FORMA ADJUSTED
REVENUES
(Unaudited)
(Dollars in
Thousands)
Three Months Ended Twelve Months Ended December 31, December
31, 2014 2013 2014 2013
Revenues $ 417,590 $ 299,585 $ 1,591,315 $ 1,079,921
Reclassification of revenues as a result
of the consolidation of Douglas Elliman (a)
— 100,732 — 416,453 Purchase accounting adjustments (b) 85
1,357 1,768 1,357 Total adjustments 85 102,089 1,768
417,810 Pro-forma Adjusted Revenues $ 417,675 $
401,674 $ 1,593,083 $ 1,497,731
Pro-forma
Adjusted Revenues by Segment Tobacco $ 272,791 $ 253,303 $
1,021,259 $ 1,014,341 E-cigarettes (1,388 ) — 8,589 — Real Estate
(c) 146,272 148,371 563,235 483,390 Corporate and Other — —
— — Total $ 417,675 $ 401,674 $
1,593,083 $ 1,497,731 a. Represents revenues
of Douglas Elliman Realty, LLC in the respective 2013 periods. On
December 13, 2013, the Company increased its ownership of Douglas
Elliman Realty, LLC from 50% to 70.59%. Consequently, after
December 13, 2013, the Company consolidates the operations and
financial position of Douglas Elliman Realty, LLC in its financial
statements. The Company had previously accounted for its interest
in Douglas Elliman Realty, LLC under the equity method and revenues
from Douglas Elliman Realty, LLC were not included in the Company's
revenues. b. Amounts represent one-time purchase accounting
adjustments to fair value for deferred revenues recorded in
connection with the increase of the Company's ownership of Douglas
Elliman Realty, LLC on December 13, 2013. c. Includes Pro-Forma
Adjusted Revenues from Douglas Elliman Realty, LLC of $144,564,
$125,820, $543,230, and $456,909 for the three months and years
ended December 31, 2014 and 2013, respectively.
TABLE 3
VECTOR GROUP LTD. AND
SUBSIDIARIES
COMPUTATION OF PRO-FORMA
ADJUSTED EBITDA
(Unaudited)
(Dollars in
Thousands)
Three Months Ended Twelve Months Ended December 31, December
31, 2014 2013 2014 2013
Net income attributed to Vector Group Ltd. $ 11,594 $ 64,005
$ 36,978 $ 38,944 Interest expense 37,321 33,102 160,991 132,147
Income tax expense 12,244 34,082 33,251 24,795 Net income (loss)
attributed to non-controlling interest 1,377 (252 ) 12,258 (252 )
Depreciation and amortization 5,900 4,626 24,499
12,631 EBITDA $ 68,436 $ 135,563 $ 267,977 $ 208,265
Change in fair value of derivatives embedded within convertible
debt (a) (11,962 ) (10,636 ) (19,409 ) (18,935 ) Equity (gain) loss
on long-term investments (b) 220 (1,296 ) (1,242 ) (2,066 ) (Gain)
loss on sale of investment securities available for sale (27 ) (42
) 11 (5,152 ) Equity income from real estate ventures (c) (1,101 )
(6,151 ) (4,103 ) (22,925 ) Loss on extinguishment of debt — — —
21,458 Acceleration of interest expense related to debt conversion
93 12,414 5,205 12,414 Stock-based compensation expense (d) 1,224
586 3,251 2,519 Litigation settlement and judgment expense (e) 750
193 2,475 88,106 Impact of MSA Settlement (f) — (860 ) (1,419 )
(11,823 ) Gain on acquisition of Douglas Elliman — (60,842 ) —
(60,842 ) Reclassification of EBITDA as a result of the
consolidation of Douglas Elliman (g) — 13,804 — 46,640 Purchase
accounting adjustments 465 — 1,478 — Other, net (2,385 ) (2,399 )
(10,552 ) (7,550 ) Pro-forma Adjusted EBITDA $ 55,713 $ 80,334 $
243,672 $ 250,109 Pro-forma Adjusted EBITDA attributed to
non-controlling interest (2,244 ) (4,060 ) (15,858 ) (13,717 )
Pro-forma Adjusted EBITDA attributed to Vector Group Ltd. $ 53,469
$ 76,274 $ 227,814 $ 236,392
Pro-forma Adjusted EBITDA by Segment Tobacco $ 54,882 $
51,746 $ 211,168 $ 198,866 E-cigarettes (6,023 ) (459 ) (13,124 )
(1,019 ) Real Estate (h) 8,447 32,983 56,036 64,866 Corporate and
Other (1,593 ) (3,936 ) (10,408 ) (12,604 ) Total $ 55,713 $
80,334 $ 243,672 $ 250,109
Pro-forma
Adjusted EBITDA Attributed to Vector Group by Segment Tobacco $
54,882 $ 51,746 $ 211,168 $ 198,866 E-cigarettes (6,023 ) (459 )
(13,124 ) (1,019 ) Real Estate (i) 6,203 28,923 40,178 51,149
Corporate and Other (1,593 ) (3,936 ) (10,408 ) (12,604 ) Total $
53,469 $ 76,274 $ 227,814 $ 236,392
a. Represents income or losses recognized from
changes in the fair value of the derivatives embedded in the
Company's convertible debt. b. Represents income or losses
recognized on long-term investments that the Company accounts for
under the equity method. c. Represents equity income recognized
from the Company's investment in certain real estate businesses
that are not consolidated in its financial results. d. Represents
amortization of stock-based compensation. e. Represents accrual for
a settlement of an Engle progeny judgment. f. Represents the
Company's tobacco business's settlement of a long-standing dispute
related to the Master Settlement Agreement. g. Represents Adjusted
EBITDA of Douglas Elliman Realty, LLC in the respective 2013
periods. On December 13, 2013, the Company increased its ownership
of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently,
after December 13, 2013, the Company consolidates the operations
and financial position of Douglas Elliman Realty, LLC in its
financial statements . The Company had previously accounted for its
interest in Douglas Elliman Realty, LLC under the equity method,
and operating income as well as depreciation and amortization
expense from Douglas Elliman Realty, LLC were not included in the
Company's Adjusted EBITDA. h. Includes Pro-forma Adjusted EBITDA
for Douglas Elliman Realty, LLC of $6,125, $13,169, $50,655 and
$45,710 for the three months and years ended December 31, 2014 and
2013, respectively. Amounts reported in this footnote reflect 100%
of Douglas Elliman Realty, LLC's entire Pro-forma Adjusted EBITDA.
i. Includes Pro-forma Adjusted EBITDA for Douglas Elliman Realty,
LLC less non-controlling interest of $4,324, $9,297, $35,757 and
$32,267 the three months and years ended December 31, 2014 and
2013, respectively. Amounts reported in this footnote have adjusted
Douglas Elliman Realty, LLC's Pro-forma Adjusted EBITDA for
non-controlling interest.
TABLE 4
VECTOR GROUP LTD. AND
SUBSIDIARIES
RECONCILIATION OF PRO-FORMA ADJUSTED
NET INCOME
(Unaudited)
(Dollars in
Thousands, Except Per Share Amounts)
Three Months Ended Twelve Months Ended December 31, December
31, 2014 2013 2014 2013
Net income attributed to Vector Group Ltd. $ 11,594 $ 64,005
$ 36,978 $ 38,944 Acceleration of interest expense related
to debt conversion 93 12,414 5,205 12,414 Change in fair value of
derivatives embedded within convertible debt (11,962 ) (10,636 )
(19,409 ) (18,935 ) Non-cash amortization of debt discount on
convertible debt 9,744 10,946 51,472 36,378 Loss on extinguishment
of 11% Senior Secured Notes due 2015 — — — 21,458 Litigation
settlement and judgment expense (a) 750 193 2,475 88,106 Impact of
MSA Settlement (b) — (860 ) (1,419 ) (11,823 ) Interest income from
MSA Settlement (c) — — — (1,971 ) Gain on acquisition of Douglas
Elliman Realty, LLC (d) — (60,842 ) — (60,842 )
Adjustment to reflect additional 20.59% of
net income fromDouglas Elliman Realty, LLC (e)
— 2,467 — 8,557 Out-of-period adjustment related to Douglas Elliman
acquisition in 2013 (f) — — (1,231 ) — Douglas Elliman Realty, LLC
purchase accounting adjustments (g) 1,189 1,165 6,019
1,165 Total adjustments (186 ) (45,153 ) 43,112
74,507 Tax expense related to adjustments 77 18,332 (17,827
) (29,467 ) Adjustments to income tax expense due to purchase
accounting (h) 365 — 1,670 —
Pro-forma Adjusted Net Income attributed to
Vector Group Ltd. $ 11,850 $ 37,184 $ 63,933 $
83,984 Per diluted common share:
Pro-forma Adjusted Net Income applicable
to common sharesattributed to Vector Group Ltd.
$ 0.11 $ 0.35 $ 0.60 $ 0.85
a.
Represents accrual for a settlement of an Engle progeny
judgment. b. Represents the Company's tobacco segment's settlement
of a long-standing dispute related to the Master Settlement
Agreement.
c.
Represents interest income on the Company's tobacco segment's
settlement of a long-standing dispute related to the Master
Settlement Agreement. d. Represents gain associated with the
increase of ownership of Douglas Elliman Realty, LLC. e. Represents
20.59% of Douglas Elliman Realty LLC's net income in the respective
2013 periods. On December 13, 2013, the Company increased its
ownership of Douglas Elliman Realty, LLC from 50% to 70.59%.
Consequently, after December 13, 2013, the Company includes an
additional 20.59% of Adjusted Net Income from Douglas Elliman
Realty, LLC in the Company's Adjusted Net Income. f. Represents an
out-of-period adjustment related to a non-accrual of a receivable
from Douglas Elliman in the fourth quarter of 2013 and would have
increased the Company’s gain on acquisition of Douglas Elliman in
2013. g. Represents 70.59% of one-time purchase accounting
adjustments to fair value for assets acquired in connection with
the increase of the Company's ownership of Douglas Elliman Realty,
LLC on December 13, 2013.
h.
Represents adjustments to income tax expense due to a change in the
Company's marginal income tax rate from 40.6% to 41.35% as a result
of its acquisition of 20.59% of Douglas Elliman Realty, LLC on
December 13, 2013.
TABLE 5
VECTOR GROUP LTD. AND
SUBSIDIARIES
RECONCILIATION OF PRO-FORMA ADJUSTED
OPERATING INCOME
(Unaudited)
(Dollars in
Thousands)
Three Months Ended Twelve Months Ended December 31, December
31, 2014 2013 2014 2013
Operating income $ 47,374 $ 61,985 $ 213,388 $
112,036 Litigation settlement and judgment expense (a) 750
193 2,475 88,106 Impact of MSA Settlement (b) — (860 ) (1,419 )
(11,823 )
Reclassification of operating income as a
result of the consolidation ofDouglas Elliman Realty, LLC (c)
— 12,873 — 42,598 Douglas Elliman purchase accounting adjustments
(d) 1,684 1,650 8,527 1,650 Total
adjustments 2,434 13,856 9,583 120,531 Pro-forma Adjusted
Operating Income (e) $ 49,808 $ 75,841 $ 222,971
$ 232,567 a. Represents accrual for a
settlement of an Engle progeny judgment. b. Represents the
Company's tobacco segment's settlement of a long-standing dispute
related to the Master Settlement Agreement. c. Represents Adjusted
Operating Income of Douglas Elliman Realty, LLC in the respective
2013 periods. On December 13, 2013, the Company increased its
ownership of Douglas Elliman Realty, LLC from 50% to 70.59%.
Consequently, after December 13, 2013, the Company consolidates the
operations and financial position of Douglas Elliman Realty in its
financial statements. The Company had previously accounted for its
interest in Douglas Elliman under the equity method and operating
income from Douglas Elliman Realty, LLC was not included in the
Company's operating income. d. Amounts represent one-time purchase
accounting adjustments to fair value for assets acquired in
connection with the increase of the Company's ownership of Douglas
Elliman Realty, LLC on December 13, 2013. e. Does not include a
reduction for 29.41% non-controlling interest in Douglas Elliman
Realty, LLC.
TABLE 6
VECTOR GROUP LTD. AND
SUBSIDIARIES
RECONCILIATION OF TOBACCO ADJUSTED
OPERATING INCOME
(Unaudited)
(Dollars in
Thousands)
Three Months Ended Twelve Months Ended December 31, December 31,
2014 2013 2014 2013
Operating income from tobacco business $ 51,724 $
49,999 $ 199,119 $ 113,039 Litigation settlement and
judgment expense (a) 750 193 2,475 88,106 Impact of MSA Settlement
(b) — (860 ) (1,419 ) (11,823 ) Total adjustments 750 (667 )
1,056 76,283 Tobacco Adjusted Operating Income $ 52,474
$ 49,332 $ 200,175 $ 189,322 a.
Represents accruals for settlements of judgments in the
Engle progeny tobacco litigation. b. Represents the Company's
tobacco segment's settlement of a long-standing dispute related to
the Master Settlement Agreement.
TABLE 7
VECTOR GROUP LTD. AND
SUBSIDIARIES
ANALYSIS OF NEW VALLEY LLC PRO-FORMA
ADJUSTED REVENUES
(Unaudited)
(Dollars in
Thousands)
Three Months Ended Twelve Months Ended December 31, December
31, 2014 2013 2014 2013
New Valley LLC revenues $ 146,187 $ 46,282 $ 561,467
$ 65,580
Reclassification of revenues as a result
of the consolidation ofDouglas Elliman (a)
— 100,732 — 416,453 Purchase accounting adjustments (b) 85
1,357 1,768 1,357 Total adjustments 85 102,089 1,768
417,810 New Valley LLC Pro-forma Adjusted Revenues (c) $
146,272 $ 148,371 $ 563,235 $ 483,390
a. Represents revenues of Douglas Elliman Realty, LLC for
the respective three month periods. For the last twelve months
ended June 30, 2014, represents revenues of Douglas Elliman Realty,
LLC from July 1, 2013 to December 13, 2013. For the year ended
December 31, 2013, represents revenues of Douglas Elliman Realty,
LLC for the period from January 1, 2013 to December 13, 2013. On
December 13, 2013, the Company increased its ownership of Douglas
Elliman Realty, LLC from 50% to 70.59%. Consequently, after
December 13, 2013, the Company consolidates the operations and
financial position of Douglas Elliman Realty, LLC in its financial
statements. The Company had previously accounted for its interest
in Douglas Elliman Realty, LLC under the equity method and revenues
from Douglas Elliman Realty, LLC were not included in the Company's
revenues. b. Amounts represent one-time purchase accounting
adjustments to fair value for deferred revenues recorded in
connection with the increase of the Company's ownership of Douglas
Elliman Realty, LLC on December 13, 2013. c. Includes Pro-forma
Adjusted Revenues from Douglas Elliman Realty, LLC of $144,564,
$125,820, $543,230, and $456,909 for the three months and years
ended December 31, 2014 and 2013, respectively.
TABLE 8
VECTOR GROUP LTD. AND
SUBSIDIARIES
COMPUTATION OF NEW VALLEY LLC PRO-FORMA
ADJUSTED EBITDA
(Unaudited)
(Dollars in
Thousands)
Three Months Ended Twelve Months Ended December 31, December
31, 2014 2013 2014 2013
Net income attributed to Vector Group Ltd. from subsidiary
non-guarantors (a) $ 3,759 $ 50,286 $ 21,420 $ 59,422 Interest
expense (a) 1 4 41 14 Income tax expense (a) 2,008 34,394 17,428
40,740 Net income (loss) attributed to non-controlling interest (a)
1,377 (252 ) 12,258 (252 ) Depreciation and amortization 2,495
1,981 12,204 2,421 EBITDA $ 9,640 $
86,413 $ 63,351 $ 102,345 Income from non-guarantors other than New
Valley 7 36 93 131 Equity income from real estate ventures (b)
(1,101 ) (6,151 ) (4,103 ) (22,925 ) Gain on acquisition of Douglas
Elliman — (60,842 ) — (60,842 ) Reclassification of EBITDA as a
result of the consolidation of Douglas Elliman (c) — 13,804 —
46,640 Purchase accounting adjustments 465 — 1,478 — Other, net
(489 ) (222 ) (4,786 ) (348 ) Pro-forma Adjusted EBITDA $ 8,522 $
33,038 $ 56,033 $ 65,001 Pro-forma Adjusted EBITDA attributed to
non-controlling interest (2,244 ) (4,060 ) (15,858 ) (13,717 )
Pro-forma Adjusted EBITDA attributed to New Valley LLC $ 6,278
$ 28,978 $ 40,175 $ 51,284
Pro-forma Adjusted EBITDA by Segment Real Estate (d) $ 8,447 $
32,983 $ 56,036 $ 64,866 Corporate and Other 75 55 (3
) 135 Total (f) $ 8,522 $ 33,038 $ 56,033
$ 65,001 Pro-forma Adjusted EBITDA Attributed
to New Valley LLC by Segment Real Estate (e) $ 6,203 $ 28,923 $
40,178 $ 51,149 Corporate and Other 74 55 (3 ) 135
Total (f) $ 6,277 $ 28,978 $ 40,175 $
51,284 a. Amounts are derived from Vector
Group Ltd.'s Consolidated Financial Statements. See Note entitled
"Vector Group Ltd.'s Condensed Consolidating Financial Information"
contained in Vector Group Ltd.'s Form 10-K for each respective
period. b. Represents equity income recognized from the Company's
investment in certain real estate businesses that are not
consolidated in its financial results.
c.
Represents EBITDA of Douglas Elliman Realty, LLC for all periods
prior to December 13, 2013. On December 13, 2013, the Company
increased its ownership of Douglas Elliman Realty, LLC from 50% to
70.59%. Consequently, after December 13, 2013, the Company
consolidates the operations and financial position of Douglas
Elliman Realty, LLC in its financial statements. The Company had
previously accounted for its interest in Douglas Elliman Realty,
LLC under the equity method, and operating income as well as
depreciation and amortization expense from Douglas Elliman Realty,
LLC, were not included in the Company's Adjusted EBITDA. d.
Includes Pro-forma Adjusted EBITDA for Douglas Elliman Realty, LLC
of $6,125, $13,169, $50,655 and $45,710 for the three months and
years ended December 31, 2014 and 2013, respectively. Amounts
reported in this footnote reflect 100% of Douglas Elliman Realty,
LLC's entire Pro-forma Adjusted EBITDA. e. Includes Pro-forma
Adjusted EBITDA for Douglas Elliman Realty, LLC less
non-controlling interest of $4,324, $9,297, $35,757 and $32,267 the
three months and years ended December 31, 2014 and 2013,
respectively. Amounts reported in this footnote have adjusted
Douglas Elliman Realty, LLC's Pro-forma Adjusted EBITDA for
non-controlling interest. f. New Valley's Pro-forma Adjusted EBITDA
does not include an allocation of Vector Group Ltd.'s "Corporate
and Other" segment's expenses of $1,593, $3,936, $10,408, and
$12,604 for t the three months and years ended December 31, 2014
and 2013, respectively.
TABLE 9
VECTOR GROUP LTD. AND
SUBSIDIARIES
ANALYSIS OF DOUGLAS ELLIMAN REALTY, LLC
PRO-FORMA ADJUSTED REVENUES
(Unaudited)
(Dollars in
Thousands)
Twelve Months Ended December 31, 2014 2013
Douglas Elliman Realty, LLC revenues $ 541,462
$ 436,935 Real estate brokerage revenues reclassified from
Vector Group Ltd. (a) — 18,617 Purchase accounting adjustments (b)
1,768 1,357 Total adjustments 1,768 19,974 Douglas
Elliman Realty, LLC Pro-forma Adjusted Revenues $ 543,230 $
456,909 a. Revenues from Douglas Elliman Florida,
LLC, which was a subsidiary of Vector from prior to January 1, 2013
to December 13, 2013 and acquired by Douglas Elliman Realty, LLC in
December 2013. b. Amounts represent one-time purchase accounting
adjustments to fair value for deferred revenues recorded in
connection with the increase of the Company's ownership of Douglas
Elliman Realty, LLC on December 13, 2013.
TABLE 10
VECTOR GROUP LTD. AND
SUBSIDIARIES
COMPUTATION OF DOUGLAS ELLIMAN REALTY,
LLC PRO-FORMA ADJUSTED EBITDA
(Unaudited)
(Dollars in
Thousands)
Twelve Months Ended December 31, 2014 2013
Net income attributed to Douglas Elliman Realty, LLC
$ 38,414 $ 38,095 Interest expense 38 18 Income tax expense
1,374 996 Depreciation and amortization 11,855 6,209
Douglas Elliman Realty, LLC EBITDA $ 51,681 $ 45,318 Equity income
from real estate ventures (a) (110 ) (57 ) Purchase accounting
adjustments 1,478 1,357 Income from Douglas Elliman Florida LLC —
(930 ) Other, net (2,394 ) 22 Douglas Elliman Realty, LLC
Pro-forma Adjusted EBITDA $ 50,655 $ 45,710 a.
Represents equity income recognized from the Company's
investment in certain real estate businesses that are not
consolidated in its financial results.
Sard Verbinnen & CoPaul Caminiti/Emily Deissler/Benjamin
Spicehandler/Spencer Waybright212-687-8080orVector Group Ltd.J.
Bryant Kirkland III305-579-8000
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