VECTOR GROUP LTD - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - November 15, 2016

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EXHIBIT 99.2
TABLE 1
VECTOR GROUP LTD. AND SUBSIDIARIES
REVENUES AND RECONCILIATION OF ADJUSTED REVENUES
(Unaudited)
(Dollars in Thousands)

 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
Revenues
$
1,657,197

 
$
1,591,315

 
$
1,079,921

 
$
1,095,533

 
$
1,137,646

 
 
 
 
 
 
 
 
 
 
Reclassification of revenues as a result of the consolidation of Douglas Elliman (a)
—

 
—

 
416,453

 
378,175

 
346,309

Purchase accounting adjustments (b)
1,925

 
1,768

 
1,357

 
—

 
—

Total adjustments
1,925

 
1,768

 
417,810

 
378,175

 
346,309

 
 
 
 
 
 
 
 
 
 
Adjusted Revenues
$
1,659,122

 
$
1,593,083

 
$
1,497,731

 
$
1,473,708

 
$
1,483,955

 
 
 
 
 
 
 
 
 
 
Revenues by Segment
 
 
 
 
 
 
 
 
 
Tobacco (c)
1,017,761

 
1,021,259

 
1,014,341

 
1,084,546

 
1,133,380

E-cigarettes
641,406

 
561,467

 
65,580

 
10,987

 
4,266

Real Estate (d)
(1,970
)
 
8,589

 
—

 
—

 
—

Corporate and Other
—

 
—

 
—

 
—

 
—

Total (c)
1,657,197

 
1,591,315

 
1,079,921

 
1,095,533

 
1,137,646

 
 
 
 
 
 
 
 
 
 
Adjusted Revenues by Segment
 
 
 
 
 
 
 
 
 
Tobacco (c)
$
1,017,761

 
$
1,021,259

 
$
1,014,341

 
$
1,084,546

 
$
1,133,380

E-cigarettes
(1,970
)
 
8,589

 
—

 
—

 
—

Real Estate (d)
643,331

 
563,235

 
483,390

 
389,162

 
350,575

Corporate and Other
—

 
—

 
—

 
—

 
—

Total (c)
$
1,659,122

 
$
1,593,083

 
$
1,497,731

 
$
1,473,708

 
$
1,483,955

                                      

a.
Represents revenues of Douglas Elliman Realty, LLC for the respective annual periods. For the year ended December 31, 2013, represents revenues from 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 purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
c.
Includes excise taxes of $439,647, $446,086, $456,703, $508,027, and $552,965 for the years ended December 31, 2015, 2014, 2013, 2012 and 2011, respectively.
d.
Includes Adjusted Revenues from Douglas Elliman Realty, LLC of $637,000, $543,230, $456,909, $384,267 and $346,309 for the years ended December 31, 2015, 2014, 2013, 2012 and 2011, respectively.





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

 
Year Ended December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
59,198

 
$
36,856

 
$
37,300

 
$
30,675

 
$
74,478

Interest expense
120,691

 
160,991

 
132,147

 
110,102

 
100,706

Income tax expense
41,233

 
33,165

 
23,672

 
23,131

 
47,767

Net income (loss) attributed to non-controlling interest
7,274

 
12,258

 
(252
)
 
—

 
—

Depreciation and amortization
25,654

 
24,499

 
12,631

 
10,608

 
10,607

EBITDA
$
254,050

 
$
267,769

 
$
205,498

 
$
174,516

 
$
233,558

Change in fair value of derivatives embedded within convertible debt (a)
(24,455
)
 
(19,409
)
 
(18,935
)
 
7,476

 
(7,984
)
Gain on liquidation of long-term investments
—

 
—

 
—

 
—

 
(25,832
)
Equity in losses (earnings) on long-term investments (b)
2,681

 
(3,140
)
 
(3,126
)
 
(264
)
 
710

Impairment of investment securities
12,846

 
—

 
—

 
—

 
—

(Gain) loss on sale of investment securities available for sale
(11,138
)
 
11

 
(5,152
)
 
(1,640
)
 
(23,257
)
Equity in earnings from real estate ventures (c)
(2,001
)
 
(4,103
)
 
(22,925
)
 
(29,764
)
 
(19,966
)
Gain on sale of townhomes
—

 
—

 
—

 
—

 
(3,843
)
Loss on extinguishment of debt
—

 
—

 
21,458

 
—

 
—

Acceleration of interest expense related to debt conversion
—

 
5,205

 
12,414

 
14,960

 
1,217

Pension settlement charge
1,607

 
—

 
—

 
—

 
—

Stock-based compensation expense (d)
5,620

 
3,251

 
2,519

 
5,563

 
3,183

Litigation settlement and judgment expense (e)
20,072

 
2,475

 
88,106

 
—

 
—

Impact of MSA Settlement (f)
(4,364
)
 
(1,419
)
 
(11,823
)
 
—

 
—

Restructuring expense
7,257

 
—

 
—

 
—

 
—

Gain on acquisition of Douglas Elliman
—

 
—

 
(60,842
)
 
—

 
—

Reclassification of EBITDA as a result of the consolidation of Douglas Elliman (g)
—

 
—

 
46,640

 
31,558

 
30,991

Purchase accounting adjustments (h)
1,435

 
1,478

 
—

 
—

 
—

Other, net
(6,409
)
 
(9,396
)
 
(4,573
)
 
(593
)
 
(1,375
)
Adjusted EBITDA
$
257,201

 
$
242,722

 
$
249,259

 
$
201,812

 
$
187,402

Adjusted EBITDA attributed to non-controlling interest
(11,267
)
 
(15,858
)
 
(13,717
)
 
(9,281
)
 
(9,114
)
Adjusted EBITDA attributed to Vector Group Ltd.
$
245,934

 
$
226,864

 
$
235,542

 
$
192,531

 
$
178,288

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
245,374

 
$
211,168

 
$
198,866

 
$
185,798

 
$
173,721

E-cigarettes
(13,037
)
 
(13,124
)
 
(1,019
)
 
—

 
—

Real Estate (i)
38,111

 
56,036

 
64,866

 
29,959

 
29,388

Corporate and Other
(13,247
)
 
(11,358
)
 
(13,454
)
 
(13,945
)
 
(15,707
)
Total
$
257,201

 
$
242,722

 
$
249,259

 
$
201,812

 
$
187,402

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA Attributed to Vector Group by Segment
 
 
 
 
 
 
 
 
 
Tobacco
$
245,374

 
$
211,168

 
$
198,866

 
$
185,798

 
$
173,721

E-cigarettes
(13,037
)
 
(13,124
)
 
(1,019
)
 
—

 
—

Real Estate (j)
26,844

 
40,178

 
51,149

 
20,678

 
20,274

Corporate and Other
(13,247
)
 
(11,358
)
 
(13,454
)
 
(13,945
)
 
(15,707
)
Total
$
245,934

 
$
226,864

 
$
235,542

 
$
192,531

 
$
178,288

                                      





a.
Represents income or losses recognized from changes in the fair value of the derivatives embedded in the Company's convertible debt.
b.
Represents equity in losses (earnings) recognized from investments that the Company accounts for under the equity method.
c.
Represents equity in earnings 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 accruals for settlements of judgment expenses in the Engle progeny tobacco litigation.
f.
Represents the Company's tobacco segment's settlement of a long-standing dispute related to the Master Settlement Agreement.
g.
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.
h.
Amounts represent purchase accounting adjustments recorded in the periods presented in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.
i.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC of $35,740, $50,655, $45,710, $30,910, and $30,991 for the years ended December 31, 2015, 2014, 2013, 2012, and 2011, respectively. Amounts reported in this footnote reflect 100% of Douglas Elliman Realty, LLC's entire Adjusted EBITDA.
j.
Includes Adjusted EBITDA for Douglas Elliman Realty, LLC less non-controlling interest of $25,229, $35,757, $31,993, $21,629, and $21,877 for the years ended December 31, 2015, 2014, 2013, 2012, and 2011, respectively. Amounts reported in this footnote have adjusted Douglas Elliman Realty, LLC's Adjusted EBITDA for non-controlling interest.





TABLE 3
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)

 
 
 
 
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2016
 
2016
 
2016
 
2015
 
2015
 
2015
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
23,175

 
$
24,015

 
$
19,338

 
$
7,904

 
$
12,466

 
$
17,607

 
$
21,221

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in fair value of derivatives embedded within convertible debt
(6,112
)
 
(7,416
)
 
(9,694
)
 
(5,695
)
 
(7,044
)
 
(5,256
)
 
(6,460
)
Non-cash amortization of debt discount on convertible debt
10,167

 
9,170

 
8,286

 
7,565

 
7,187

 
6,516

 
5,943

Litigation settlement and judgment expense (a)
—

 
—

 
2,350

 
14,229

 
3,750

 
1,250

 
843

Cash interest capitalized to real estate venture
—

 
—

 
—

 
(9,928
)
 
—

 
—

 
—

Impact of MSA Settlement (b)
(370
)
 
—

 
—

 
1,351

 
(5,715
)
 
—

 
—

Pension settlement charge
—

 
—

 
—

 
—

 
—

 
1,607

 
—

Impact of interest expense capitalized to real estate ventures, net
(3,276
)
 
(1,315
)
 
(3,520
)
 
—

 
—

 
—

 
—

Restructuring expense
—

 
—

 
41

 
5,709

 
1,548

 
—

 
—

Douglas Elliman Realty, LLC purchase accounting adjustments (c)
1,511

 
581

 
476

 
1,358

 
1,351

 
1,343

 
1,251

Total adjustments
1,920

 
1,020

 
(2,061
)
 
14,589

 
1,077

 
5,460

 
1,577

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tax expense related to adjustments
(780
)
 
(424
)
 
858

 
(6,089
)
 
(448
)
 
(2,258
)
 
(652
)
Adjusted Net Income attributed to Vector Group Ltd.
$
24,315

 
$
24,611

 
$
18,135

 
$
16,404

 
$
13,095

 
$
20,809

 
$
22,146

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd.
$
0.19

 
$
0.19

 
$
0.14

 
$
0.13

 
$
0.10

 
$
0.16

 
$
0.17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                      

a. Represents accruals for settlements of judgment expenses 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.
c.
Represents 70.59% of purchase accounting adjustments in the periods presented for assets acquired in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 2013.





TABLE 4
VECTOR GROUP LTD. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)

 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
Net income attributed to Vector Group Ltd.
$
59,198

 
$
36,856

 
$
37,300

 
$
30,675

 
$
74,478

 
 
 
 
 
 
 
 
 
 
Acceleration of interest expense related to debt conversion
—

 
5,205

 
12,414

 
14,960

 
1,217

Change in fair value of derivatives embedded within convertible debt
(24,455
)
 
(19,409
)
 
(18,935
)
 
7,476

 
(7,984
)
Non-cash amortization of debt discount on convertible debt
27,211

 
51,472

 
36,378

 
18,016

 
10,441

Loss on extinguishment of 11% Senior Secured Notes due 2015
—

 
—

 
21,458

 
—

 
—

Litigation settlement and judgment expense (a)
20,072

 
2,475

 
88,106

 
—

 
—

Capitalized interest
(9,928
)
 
—

 
—

 
—

 
—

Impact of MSA Settlement (b)
(4,364
)
 
(1,419
)
 
(11,823
)
 
—

 
—

Interest income from MSA Settlement (c)
—

 
—

 
(1,971
)
 
—

 
—

Pension settlement charge
1,607

 
—

 
—

 
—

 
—

Gain on acquisition of Douglas Elliman Realty, LLC (d)
—

 
—

 
(60,842
)
 
—

 
—

Restructuring expense
7,257

 
—

 
—

 
—

 
—

Adjustment to reflect additional 20.59% of net income from Douglas Elliman Realty, LLC (e)
—

 
—

 
8,557

 
5,947

 
5,811

Out-of-period adjustment related to Douglas Elliman acquisition in 2013 (f)
—

 
(1,231
)
 
—

 
—

 
—

Douglas Elliman Realty, LLC purchase accounting adjustments (g)
5,303

 
6,019

 
1,165

 
—

 
—

Gain on liquidation of long-term investments
—

 
—

 
—

 
—

 
(25,832
)
Gain on townhomes
—

 
—

 
—

 
—

 
(3,843
)
Total adjustments
22,703

 
43,112

 
74,507

 
46,399

 
(20,190
)
 
 
 
 
 
 
 
 
 
 
Tax (expense) benefit related to adjustments
(9,447
)
 
(17,827
)
 
(29,467
)
 
(19,332
)
 
8,197

One-time adjustment to income tax expense due to purchase accounting (h)
—

 
1,670

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
Adjusted Net Income attributed to Vector Group Ltd.
$
72,454

 
$
63,811

 
$
82,340

 
$
57,742

 
$
62,485

 
 
 
 
 
 
 
 
 
 
Per diluted common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted Net Income applicable to common shares attributed to Vector Group Ltd.
$
0.57

 
$
0.55

 
$
0.75

 
$
0.55

 
$
0.61

                                      

a. Represents accruals for settlements of judgment expenses 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.
c.
Represents interest income from 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 from January 1, 2013 to December 13, 2013 and the years ended December 31, 2012 and 2011. 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 purchase accounting adjustments in the periods presented for assets acquired in connection with the increase of the Company's ownership of Douglas Elliman Realty, LLC, which occurred in 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.



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