|
Delaware
|
|
1-5759
|
|
65-0949535
|
(State or other jurisdiction of incorporation
incorporation or organization)
|
|
Commission File Number
|
|
(I.R.S. Employer Identification No.)
|
100 S.E. Second Street, Miami, Florida
(Address of principal executive offices)
|
|
33131
(Zip Code)
|
Title of each class
|
|
Name of each exchange on which registered
|
Common Stock, par value $.10 per share
|
|
New York Stock Exchange
|
Large accelerated filer
R
|
|
Accelerated filer
o
|
|
Non-accelerated filer
o
|
|
Smaller reporting company
o
|
|
|
|
|
(Do not check if a smaller reporting company)
|
|
|
|
|
|
Page
|
|
|
|
|
||
|
||
|
||
EX-10.40
|
||
EX-12.1
|
||
EX-21
|
||
EX-23.1
|
||
EX-23.2
|
||
EX-23.3
|
||
EX-23.4
|
||
EX-31.1
|
||
EX-31.2
|
||
EX-32.1
|
||
EX-32.2
|
||
EX-99.1
|
||
EX-99.2
|
||
EX-99.3
|
||
EX-99.4
|
||
EX-101 INSTANCE DOCUMENT
|
||
EX-101 SCHEMA DOCUMENT
|
||
EX-101 CALCULATION LINKBASE DOCUMENT
|
||
EX-101 LABELS LINKBASE DOCUMENT
|
||
EX-101 PRESENTATION LINKBASE DOCUMENT
|
||
EX-101 DEFINITION LINKBASE DOCUMENT
|
ITEM 1.
|
BUSINESS
|
•
|
the manufacture and sale of cigarettes in the United States through our Liggett Group LLC (“Liggett”) and Vector Tobacco Inc. (“Vector Tobacco”) subsidiaries, and
|
•
|
the real estate business through our New Valley LLC subsidiary, which is seeking to acquire additional operating companies and real estate properties. New Valley owns 50% of Douglas Elliman Realty, LLC, which operates the largest residential brokerage company in the New York metropolitan area.
|
•
|
Capitalize upon our tobacco subsidiaries’ cost advantage in the U.S. cigarette market due to the favorable treatment that they receive under the Master Settlement Agreement,
|
•
|
Focus marketing and selling efforts on the discount segment, continue to build volume and margin in core discount brands (PYRAMID, GRAND PRIX, LIGGETT SELECT and EVE) and utilize core brand equity to selectively build distribution,
|
•
|
Continue product development to provide the best quality products relative to other discount products in the marketplace,
|
•
|
Increase efficiency by developing and adopting an organizational structure to maximize profit potential,
|
•
|
Selectively expand the portfolio of private and control label partner brands utilizing a pricing strategy that offers long-term list price stability for customers,
|
•
|
Identify, develop and launch relevant new cigarette brands and other tobacco products to the market in the future, and
|
•
|
Pursue strategic acquisitions of smaller tobacco manufacturers.
|
•
|
Continue to grow Douglas Elliman Realty operations by utilizing its strong brand name recognition and pursuing strategic and financial opportunities,
|
•
|
Continue to leverage our expertise as direct investors by actively pursuing real estate investments in the United States and abroad which we believe will generate above-market returns,
|
•
|
Acquire operating companies through mergers, asset purchases, stock acquisitions or other means, and
|
•
|
Invest our excess funds opportunistically in situations that we believe can maximize stockholder value.
|
•
|
PYRAMID — the industry’s first deep discount product with a brand identity relaunched in the second quarter of 2009,
|
•
|
GRAND PRIX — re-launched as a national brand in 2005,
|
•
|
LIGGETT SELECT — a leading brand in the deep discount category,
|
•
|
EVE
—
a leading brand of 120 millimeter cigarettes in the branded discount category, and
|
•
|
USA and various Partner Brands and private label brands.
|
•
|
all claims of the Settling States and their respective political subdivisions and other recipients of state health care funds, relating to: (i) past conduct arising out of the use, sale, distribution, manufacture, development, advertising and marketing of tobacco products; (ii) the health effects of, the exposure to, or research, statements or warnings about, tobacco products; and
|
•
|
all monetary claims of the Settling States and their respective subdivisions and other recipients of state health care funds, relating to future conduct arising out of the use of or exposure to, tobacco products that have been manufactured in the ordinary course of business.
|
•
|
Escena
. Development of a 450-acre approved master planned community in Palm Springs, California.
|
•
|
701 Seventh Avenue.
Construct a 340,000 square foot multi-use project located in Times Square which will include retail space, hotel space and signage.
|
•
|
11 Beach Street.
Convert an existing office building located in Manhattan into a luxury residential condominium.
|
•
|
East 68th Street.
Convert a 12-story residential rental building located in Manhattan into a luxury residential condominium.
|
•
|
Queens Plaza.
Construct a 350,000 square foot luxury residential rental building located in Queens, New York.
|
•
|
1107 Broadway.
Convert a 260,000 square foot office building located in Manhattan into a luxury residential condominium.
|
•
|
Chrystie Street.
Develop a 250,000 square foot mixed use project located in Manhattan to include hotel space and a residential condominium.
|
•
|
Maryland Portfolio.
Operate and improve a portfolio of over 5,000 garden apartment rental units in 10 locations in Maryland.
|
•
|
Sesto Holdings.
Develop a 322 acre site in Milan, Italy to be developed into multi-parcel, multi-building mixed use urban regeneration project.
|
•
|
Hotel Taiwana.
Redevelop a luxury hotel located on St. Barts, French West Indies.
|
ITEM 1A.
|
RISK FACTORS
|
•
|
cash interest expense of approximately
$101.6 million
,
|
•
|
dividends on our outstanding common shares (currently at an annual rate of approximately
$143.9 million
), and
|
•
|
other corporate expenses and taxes.
|
•
|
make it more difficult for us to satisfy our other obligations with respect to our debt, including repurchase obligations upon the occurrence of specified change of control events;
|
•
|
increase our vulnerability to general adverse economic and industry conditions;
|
•
|
limit our ability to obtain additional financing;
|
•
|
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, reducing the amount of our cash flow available for dividends on our common stock and other general corporate purposes;
|
•
|
require us to sell other securities or to sell some or all of our assets, possibly on unfavorable terms, to meet payment obligations;
|
•
|
restrict us from making strategic acquisitions, investing in new capital assets or taking advantage of business opportunities;
|
•
|
limit our flexibility in planning for, or reacting to, changes in our business and industry; and
|
•
|
place us at a competitive disadvantage compared to competitors that have less debt.
|
•
|
incur or guarantee additional indebtedness or issue preferred stock;
|
•
|
pay dividends or distributions on, or redeem or repurchase, capital stock;
|
•
|
create liens with respect to our assets;
|
•
|
make investments, loans or advances;
|
•
|
prepay subordinated indebtedness;
|
•
|
enter into transactions with affiliates; and
|
•
|
merge, consolidate, reorganize or sell our assets.
|
•
|
increases the number of health warnings required on cigarette and smokeless tobacco products, increases the size of warnings on packaging and in advertising, requires FDA to develop graphic warnings for cigarette packages, and grants FDA authority to require new warnings;
|
•
|
requires practically all tobacco product advertising to eliminate color and imagery and instead consist solely of black text on white background;
|
•
|
imposes new restrictions on the sale and distribution of tobacco products, including significant new restrictions on tobacco product advertising and promotion, as well as the use of brand and trade names;
|
•
|
bans the use of “light,” “mild,” “low” or similar descriptors on tobacco products;
|
•
|
bans the use of “characterizing flavors” in cigarettes other than tobacco or menthol;
|
•
|
gives FDA the authority to impose tobacco product standards that are appropriate for the protection of the public health (by, for example, requiring reduction or elimination of the use of particular constituents or components, requiring product testing, or addressing other aspects of tobacco product construction, constituents, properties or labeling);
|
•
|
requires manufacturers to obtain FDA review and authorization for the marketing of certain new or modified tobacco products;
|
•
|
requires pre-market approval by FDA for tobacco products represented (through labels, labeling, advertising, or other means) as presenting a lower risk of harm or tobacco-related disease;
|
•
|
requires manufacturers to report ingredients and harmful constituents and requires FDA to disclose certain constituent information to the public;
|
•
|
mandates that manufacturers test and report on ingredients and constituents identified by FDA as requiring such testing to protect the public health, and allows FDA to require the disclosure of testing results to the public;
|
•
|
requires manufacturers to submit to FDA certain information regarding the health, toxicological, behavioral or physiological effects of tobacco products;
|
•
|
prohibits use of tobacco containing a pesticide chemical residue at a level greater than allowed under federal law;
|
•
|
requires FDA to establish “good manufacturing practices” to be followed at tobacco manufacturing facilities;
|
•
|
requires tobacco product manufacturers (and certain other entities) to register with FDA;
|
•
|
authorizes FDA to require the reduction of nicotine (although it may not require the reduction of nicotine yields of a tobacco product to zero) and the potential reduction or elimination of other constituents, including menthol;
|
•
|
imposes (and allows FDA to impose) various recordkeeping and reporting requirements on tobacco product manufacturers;
|
•
|
grants FDA the regulatory authority to impose broad additional restrictions; and
|
•
|
imposes user fees on tobacco product manufacturers.
|
•
|
use of “net” units is not required by the MSA (as reflected by, among other things, the use of “gross” units through 2005);
|
•
|
such a change is not authorized without the consent of affected parties to the MSA;
|
•
|
the MSA provides for four-year time limitation periods for revisiting calculations and determinations, which precludes recalculating Liggett’s 1997 Market Share (and thus, Liggett’s market share exemption); and
|
•
|
Liggett and others have relied upon the calculations based on “gross” units since 1998.
|
•
|
periods of economic slowdown or recession;
|
•
|
rising interest rates;
|
•
|
the general availability of mortgage financing, including:
|
•
|
the impact of the recent contraction in the subprime and mortgage markets generally; and
|
•
|
the effect of more stringent lending standards for home mortgages;
|
•
|
adverse changes in economic and general business conditions in the New York metropolitan area;
|
•
|
a decrease in the affordability of homes;
|
•
|
declining demand for real estate;
|
•
|
a negative perception of the market for residential real estate;
|
•
|
commission pressure from brokers who discount their commissions;
|
•
|
acts of God, such as hurricanes, earthquakes and other natural disasters, or acts or threats of war or terrorism; and/or
|
•
|
an increase in the cost of homeowners insurance.
|
•
|
actual or anticipated fluctuations in our operating results;
|
•
|
changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
|
•
|
the operating and stock performance of our competitors;
|
•
|
announcements by us or our competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
|
•
|
the initiation or outcome of litigation;
|
•
|
changes in interest rates;
|
•
|
general economic, market and political conditions;
|
•
|
additions or departures of key personnel; and
|
•
|
future sales of our equity or convertible securities.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 2.
|
PROPERTIES
|
Type
|
|
Location
|
|
Owned or Leased
|
|
Approximate Total
Square Footage
|
|
|
|
|
|
|
|
|
|
Storage Facilities
|
|
Danville, VA
|
|
Owned
|
|
578,000
|
|
Office and Manufacturing Complex
|
|
Mebane, NC
|
|
Owned
|
|
240,000
|
|
Warehouse
|
|
Mebane, NC
|
|
Owned
|
|
60,000
|
|
Warehouse
|
|
Mebane, NC
|
|
Leased
|
|
125,000
|
|
Warehouse
|
|
Mebane, NC
|
|
Leased
|
|
22,000
|
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Year
|
|
High
|
|
Low
|
|
Cash Dividends
|
||||||
2012:
|
|
|
|
|
|
|
|
|
||||
Fourth Quarter
|
|
$
|
16.84
|
|
|
$
|
14.25
|
|
|
$
|
0.40
|
|
Third Quarter
|
|
17.00
|
|
|
15.78
|
|
|
$
|
0.38
|
|
||
Second Quarter
|
|
17.07
|
|
|
15.62
|
|
|
$
|
0.38
|
|
||
First Quarter
|
|
17.70
|
|
|
16.47
|
|
|
$
|
0.38
|
|
||
2011:
|
|
|
|
|
|
|
|
|
|
|||
Fourth Quarter
|
|
$
|
17.33
|
|
|
$
|
15.74
|
|
|
$
|
0.38
|
|
Third Quarter
|
|
17.49
|
|
|
14.74
|
|
|
0.36
|
|
|||
Second Quarter
|
|
17.47
|
|
|
15.68
|
|
|
0.36
|
|
|||
First Quarter
|
|
16.11
|
|
|
13.94
|
|
|
0.36
|
|
|
12/07
|
12/08
|
12/09
|
12/10
|
12/11
|
12/12
|
||||||
Vector Group Ltd.
|
100
|
|
79
|
|
95
|
|
135
|
|
159
|
|
153
|
|
S&P 500
|
100
|
|
63
|
|
80
|
|
92
|
|
94
|
|
109
|
|
S&P MidCap
|
100
|
|
64
|
|
88
|
|
111
|
|
109
|
|
128
|
|
NYSE Arca Tobacco
|
100
|
|
80
|
|
112
|
|
134
|
|
157
|
|
186
|
|
Period
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||
|
|
|
|
|
|
|
|
||||
October 1 to October 31, 2012
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
November 1 to November 30, 2012
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
December 1 to December 31, 2012
|
162,397
|
|
(1)
|
15.38
|
(1)
|
—
|
|
|
—
|
|
|
Total
|
162,397
|
|
|
$15.38
|
|
—
|
|
|
—
|
|
(1)
|
Delivery of shares to us in payment of tax wtihholding in connection with an employee's vesting in restricted stock. The shares were immediately canceled.
|
Name
|
|
Age
|
|
Position
|
|
Year Individual
Became an
Executive Officer
|
|
Howard M. Lorber
|
|
64
|
|
|
President and Chief Executive Officer
|
|
2001
|
Richard J. Lampen
|
|
59
|
|
|
Executive Vice President
|
|
1996
|
J. Bryant Kirkland III
|
|
47
|
|
|
Vice President, Chief Financial Officer and Treasurer
|
|
2006
|
Marc N. Bell
|
|
52
|
|
|
Vice President, General Counsel and Secretary
|
|
1998
|
Ronald J. Bernstein
|
|
59
|
|
|
President and Chief Executive Officer of Liggett
|
|
2000
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||
|
(dollars in thousands, except per share amounts)
|
||||||||||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenues
(1)
|
$
|
1,084,546
|
|
|
$
|
1,133,380
|
|
|
$
|
1,063,289
|
|
|
$
|
801,494
|
|
|
$
|
565,186
|
|
Operating income
|
154,933
|
|
|
143,321
|
|
|
111,313
|
|
|
143,167
|
|
|
135,304
|
|
|||||
Net income
|
30,622
|
|
|
75,020
|
|
|
54,084
|
|
|
24,806
|
|
|
60,504
|
|
|||||
Per basic common share
(2)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income applicable to common shares
|
$
|
0.35
|
|
|
$
|
0.89
|
|
|
$
|
0.65
|
|
|
$
|
0.30
|
|
|
$
|
0.74
|
|
Per diluted common share
(2)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income applicable to common shares
|
$
|
0.35
|
|
|
$
|
0.89
|
|
|
$
|
0.64
|
|
|
$
|
0.30
|
|
|
$
|
0.66
|
|
Cash distributions declared per common share
(2)
|
$
|
1.54
|
|
|
$
|
1.47
|
|
|
$
|
1.40
|
|
|
$
|
1.33
|
|
|
$
|
1.27
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets
|
$
|
639,056
|
|
|
$
|
509,741
|
|
|
$
|
526,763
|
|
|
$
|
389,208
|
|
|
$
|
355,283
|
|
Total assets
|
1,086,731
|
|
|
927,768
|
|
|
949,595
|
|
|
735,542
|
|
|
717,712
|
|
|||||
Current liabilities
|
195,159
|
|
|
315,198
|
|
|
226,872
|
|
|
149,008
|
|
|
296,159
|
|
|||||
Notes payable, embedded derivatives, long-term debt and other obligations, less current portion
|
759,074
|
|
|
542,371
|
|
|
647,064
|
|
|
487,936
|
|
|
287,546
|
|
|||||
Non-current employee benefits, deferred income taxes and other long-term liabilities
|
211,750
|
|
|
159,229
|
|
|
121,893
|
|
|
103,280
|
|
|
100,402
|
|
|||||
Stockholders’ (deficiency) equity
|
(79,252
|
)
|
|
(89,030
|
)
|
|
(46,234
|
)
|
|
(4,682
|
)
|
|
33,605
|
|
(1)
|
Revenues include federal excise taxes of
$508,027
,
$552,965
,
$538,328
, $377,771, and $168,170, respectively. Effective April 1, 2009, federal excise taxes increased from $0.39 per pack of cigarettes to $1.01 per pack of cigarettes.
|
(2)
|
Per share computations include the impact of 5% stock dividends on
September 28, 2012
, September 29,
2011
, September 29,
2010
, September 29,
2009
, and September 29,
2008
.
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
the manufacture and sale of cigarettes in the United States through our Liggett Group LLC and Vector Tobacco Inc. subsidiaries, and
|
•
|
the real estate business through our New Valley LLC subsidiary, which is seeking to acquire additional operating companies and real estate properties. New Valley owns 50% of Douglas Elliman Realty, LLC, which operates the largest residential brokerage company in the New York metropolitan area.
|
•
|
PYRAMID — the industry’s first deep discount product with a brand identity re-launched in the second quarter of 2009, and
|
•
|
GRAND PRIX — re-launched as a national brand in 2005,
|
•
|
LIGGETT SELECT — a leading brand in the deep discount category,
|
•
|
EVE — a leading brand of 120 millimeter cigarettes in the branded discount category, and
|
•
|
USA and various Partner Brands and private label brands.
|
|
Year Ended December 31,
|
|
||||||||||||
|
2012
|
|
|
2011
|
|
|
2010
|
|
||||||
|
(Dollars in thousands)
|
|
||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Tobacco
|
$
|
1,084,546
|
|
|
|
$
|
1,133,380
|
|
|
|
$
|
1,063,289
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|||||
Tobacco
|
176,017
|
|
|
|
164,581
|
|
|
|
130,157
|
|
(1)
|
|||
Real estate
|
(2,013
|
)
|
|
|
(1,929
|
)
|
|
|
(631
|
)
|
|
|||
Corporate and other
|
(19,071
|
)
|
|
|
(19,331
|
)
|
|
|
(18,213
|
)
|
|
|||
Total operating income
|
$
|
154,933
|
|
|
|
$
|
143,321
|
|
|
|
$
|
111,313
|
|
|
(1)
|
Operating income includes litigation judgment expense of $16,161 and a $3,000 settlement charge.
|
Covenant
|
|
Indenture
Requirement
|
|
December 31,
2012 |
|
December 31,
2011 |
||||||
Consolidated EBITDA, as defined
|
|
$
|
75,000
|
|
|
$
|
231,385
|
|
|
$
|
226,554
|
|
Leverage ratio, as defined
|
|
<3.0 to 1
|
|
|
0.5 to 1
|
|
|
0.9 to 1
|
|
|||
Secured leverage ratio, as defined
|
|
<1.5 to 1
|
|
|
Negative
|
|
|
0.5 to 1
|
|
Contractual Obligations
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
Thereafter
|
|
Total
|
||||||||||||||
Long-term debt(1),(8)
|
|
$
|
36,778
|
|
|
$
|
164,262
|
|
|
$
|
422,240
|
|
|
$
|
44,175
|
|
|
$
|
—
|
|
|
$
|
230,000
|
|
|
$
|
897,455
|
|
Operating leases(2)
|
|
3,976
|
|
|
3,430
|
|
|
2,887
|
|
|
2,264
|
|
|
2,226
|
|
|
3,958
|
|
|
18,741
|
|
|||||||
Inventory purchase commitments(3)
|
|
11,914
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,914
|
|
|||||||
Capital expenditure purchase commitments(4)
|
|
1,995
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,995
|
|
|||||||
Interest payments(5),(8)
|
|
102,533
|
|
|
104,811
|
|
|
79,122
|
|
|
31,160
|
|
|
27,681
|
|
|
35,972
|
|
|
381,279
|
|
|||||||
Total (6),(7)
|
|
$
|
157,196
|
|
|
$
|
272,503
|
|
|
$
|
504,249
|
|
|
$
|
77,599
|
|
|
$
|
29,907
|
|
|
$
|
269,930
|
|
|
$
|
1,311,384
|
|
(1)
|
Long-term debt is shown before discount and assumes retirement in 2016 of
$43,222
of our 3.875% variable interest senior convertible debentures due 2026 which we may be required to repurchase on June 15, 2016. For more information concerning our long-term debt, see “Liquidity and Capital Resources” above and Note 7 to our consolidated financial statements.
|
(2)
|
Operating lease obligations represent estimated lease payments for facilities and equipment. The amounts presented do not include amounts scheduled to be received under non-cancelable operating subleases of
$402
in
2013
and zero thereafter. See Note 8 to our consolidated financial statements.
|
(3)
|
Inventory purchase commitments represent purchase commitments under our leaf inventory management program. See Note 4 to our consolidated financial statements.
|
(4)
|
Capital expenditure purchase commitments represent purchase commitments for machinery and equipment at Liggett and Vector Tobacco. See Note 5 to our consolidated financial statements.
|
(5)
|
Interest payments are based on current interest rates at
December 31, 2012
and the assumption our current policy of a cash dividend of $0.40 per quarter and an annual 5% stock dividend will continue. In addition, interest payments have been computed assuming retirement in 2016 of
$43,222
of our 3.875% variable interest senior convertible debentures due 2026 which we may be required to repurchase on June 15, 2016 as discussed in Note (1) above. For more information concerning our long-term debt, see “Liquidity and Capital Resources” above and Note 7 to our consolidated financial statements.
|
(6)
|
Not included in the above table is approximately
$51,080
of net deferred tax liabilities and
$6,269
of unrecognized income tax benefits.
|
(7)
|
Because their future cash outflows are uncertain, the above table excludes our pension and post benefit plans unfunded obligations of
$48,684
at
December 31, 2012
.
|
(8)
|
Long-term debt and interest payments are shown without consideration for the the tender offer for our 11% senior secured notes due 2015 or the issuance of our 7.75% senior secured notes due 2021 in February 2013.
|
•
|
increases the number of health warnings required on cigarette and smokeless tobacco products, increases the size of warnings on packaging and in advertising, requires FDA to develop graphic warnings for cigarette packages, and grants FDA authority to require new warnings;
|
•
|
requires practically all tobacco product advertising to eliminate color and imagery and instead consist solely of black text on white background;
|
•
|
imposes new restrictions on the sale and distribution of tobacco products, including significant new restrictions on tobacco product advertising and promotion, as well as the use of brand and trade names;
|
•
|
bans the use of “light,” “mild,” “low” or similar descriptors on tobacco products;
|
•
|
bans the use of “characterizing flavors” in cigarettes other than tobacco or menthol;
|
•
|
gives FDA the authority to impose tobacco product standards that are appropriate for the protection of the public health (by, for example, requiring reduction or elimination of the use of particular constituents or components, requiring product testing, or addressing other aspects of tobacco product construction, constituents, properties or labeling);
|
•
|
requires manufacturers to obtain FDA review and authorization for the marketing of certain new or modified tobacco products;
|
•
|
requires pre-market approval by FDA for tobacco products represented (through labels, labeling, advertising, or other means) as presenting a lower risk of harm or tobacco-related disease;
|
•
|
requires manufacturers to report ingredients and harmful constituents and requires FDA to disclose certain constituent information to the public;
|
•
|
mandates that manufacturers test and report on ingredients and constituents identified by FDA as requiring such testing to protect the public health, and allows FDA to require the disclosure of testing results to the public;
|
•
|
requires manufacturers to submit to FDA certain information regarding the health, toxicological, behavioral or physiological effects of tobacco products;
|
•
|
prohibits use of tobacco containing a pesticide chemical residue at a level greater than allowed under federal law;
|
•
|
requires FDA to establish “good manufacturing practices” to be followed at tobacco manufacturing facilities;
|
•
|
requires tobacco product manufacturers (and certain other entities) to register with FDA;
|
•
|
authorizes FDA to require the reduction of nicotine (although it may not require the reduction of nicotine yields of a tobacco product to zero) and the potential reduction or elimination of other constituents, including menthol;
|
•
|
imposes (and allows FDA to impose) various recordkeeping and reporting requirements on tobacco product manufacturers; and
|
•
|
grants FDA the regulatory authority to impose broad additional restrictions.
|
•
|
a recommendation on modified risk applications;
|
•
|
a recommendation on the effects of tobacco product nicotine yield alteration and whether there is a threshold level below which nicotine yields do not produce dependence;
|
•
|
a report on the public health impact of the use of menthol in cigarettes; and
|
•
|
a report on the public health impact of dissolvable tobacco products.
|
•
|
economic outlook,
|
•
|
capital expenditures,
|
•
|
cost reduction,
|
•
|
legislation and regulations,
|
•
|
cash flows,
|
•
|
operating performance,
|
•
|
litigation,
|
•
|
impairment charges and cost saving associated with restructurings of our tobacco operations, and
|
•
|
related industry developments (including trends affecting our business, financial condition and results of operations).
|
•
|
general economic and market conditions and any changes therein, due to acts of war and terrorism or otherwise,
|
•
|
governmental regulations and policies,
|
•
|
effects of industry competition,
|
•
|
impact of business combinations, including acquisitions and divestitures, both internally for us and externally in the tobacco industry,
|
•
|
impact of legislation on our competitors’ payment obligations, results of operations and product costs, i.e. the impact of federal legislation eliminating the federal tobacco quota system and providing for regulation of tobacco products by the FDA,
|
•
|
impact of substantial increases in federal, state and local excise taxes,
|
•
|
uncertainty related to product liability litigation including the
Engle
progeny cases pending in Florida; and,
|
•
|
potential additional payment obligations for us under the MSA and other settlement agreements with the states.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Schedule II — Valuation and Qualifying Accounts Page
|
F-72
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
|
|
* 3.1
|
|
Amended and Restated Certificate of Incorporation of Vector Group Ltd. (formerly known as Brooke Group Ltd.) (“Vector”) (incorporated by reference to Exhibit 3.1 in Vector’s Form 10-Q for the quarter ended September 30, 1999).
|
|
|
|
* 3.2
|
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Vector (incorporated by reference to Exhibit 3.1 in Vector’s Form 8-K dated May 24, 2000).
|
|
|
|
* 3.3
|
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Vector Group Ltd. (incorporated by reference to Exhibit 3.1 in Vector’s Form 10-Q for the quarter ended June 30, 2007).
|
|
|
|
* 3.4
|
|
Amended and Restated By-Laws of Vector Group Ltd. (incorporated by reference to Exhibit 3.4 in Vector’s Form 8-K dated October 19, 2007).
|
|
|
|
* 4.1
|
|
Second Amended and Restated Loan and Security Agreement dated as of February 21, 2012, between Wells Fargo Bank, N.A. and Liggett Group LLC (incorporated by reference to Exhibit 10.1 in Vector's Form 8-K/A dated February 21, 2012).
|
|
|
|
* 4.2
|
|
Amended and Restated Term Promissory Note dated as of February 21, 2012, between Wells Fargo Bank, N.A. and 100 Maple LLC (incorporated by reference to Exhibit 10.2 in Vector's Form 8-K/A dated February 21, 2012).
|
|
|
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
* 4.3
|
|
Indenture, dated as of July 12, 2006, by and between Vector and Wells Fargo Bank, N.A., relating to the 3
7
/
8
% Variable Interest Senior Convertible Debentures due 2026 (the “3
7
/
8
% Debentures”), including the form of the 3
7
/
8
% Debenture (incorporated by reference to Exhibit 4.1 in Vector’s Form 8-K dated July 11, 2006).
|
|
|
|
* 4.4
|
|
Indenture, dated as of August 16, 2007, between Vector Group Ltd., the subsidiary guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 11% Senior Secured Notes due 2015, including the form of Note (the “Senior Notes Indenture”) (incorporated by reference to Exhibit 4.1 in Vector’s Form 8-K dated August 16, 2007).
|
|
|
|
* 4.5
|
|
First Supplemental Indenture, dated as of July 15, 2008, to the Senior Notes Indenture (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated July 15, 2008).
|
|
|
|
* 4.6
|
|
Second Supplemental Indenture, dated as of September 1, 2009, to the Senior Notes Indenture (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated September 1, 2009).
|
|
|
|
* 4.7
|
|
Third Supplemental Indenture, dated as of April 20, 2010, to the Senior Notes Indenture (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated April 20, 2010).
|
|
|
|
* 4.8
|
|
Fourth Supplemental Indenture, dated as of December 3, 2010, to the Senior Notes Indenture (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated December 3, 2010).
|
|
|
|
* 4.9
|
|
Fifth Supplemental Indenture, dated as of December 16, 2010, to the Senior Notes Indenture (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated December 16, 2010).
|
|
|
|
* 4.10
|
|
Pledge Agreement, dated as of August 16, 2007, between VGR Holding LLC, as Grantor, and U.S. Bank National Association, as Collateral Agent (incorporated by reference to Exhibit 4.2 in Vector’s Form 8-K dated August 16, 2007).
|
|
|
|
* 4.11
|
|
Security Agreement, dated as of August 16, 2007, between Vector Tobacco Inc., as Grantor, and U.S. Bank National Association, as Collateral Agent (incorporated by reference to Exhibit 4.3 in Vector’s Form 8-K dated August 16, 2007).
|
|
|
|
* 4.12
|
|
Security Agreement, dated as of August 16, 2007, between Liggett Group LLC and 100 Maple LLC, as Grantors, and U.S. Bank National Association, as Collateral Agent (incorporated by reference to Exhibit 4.4 in Vector’s Form 8-K dated August 16, 2007).
|
|
|
|
* 4.13
|
|
Note, dated May 11, 2009, by Vector Group Ltd. to Frost Nevada Investments Trust (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated May 11, 2009).
|
|
|
|
* 4.14
|
|
Purchase Agreement, dated as of May 11, 2009, between Vector Group Ltd. and Frost Nevada Investments Trust (incorporated by reference to Exhibit 4.2 of Vector’s Form 8-K dated May 11, 2009).
|
|
|
|
* 4.15
|
|
Form of Issuance and Exchange Agreement, dated as of June 15, 2009, between Vector Group Ltd. and holders of its 5% Variable Interest Senior Convertible Notes due 2011 (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated June 15, 2009).
|
|
|
|
* 4.16
|
|
Indenture, dated as of June 30, 2009, between Vector Group Ltd. and Wells Fargo Bank, N.A. as trustee, relating to the 6.75% Variable Interest Senior Convertible Exchange Notes Due 2014, including the form of Note (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated June 30, 2009).
|
|
|
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
*4.17
|
|
Share Lending Agreement, dated as of November 15, 2012, between Vector Group Ltd. and Jefferies & Company, Inc. (incorporated by reference to Exhibit 10.1 of Vector's Form 8-K dated November 15, 2012).
|
|
|
|
*4.18
|
|
Indenture, dated as of November 20, 2012, by and between Vector Group Ltd. and Wells Fargo Bank, N. A., as trustee, relating to the 7.5% Variable Interest Senior Convertible Notes due 2019 (incorporated by reference to Exhibit 4.1 of Vector's Form 8-K dated November 20, 2012).
|
|
|
|
*4.19
|
|
First Supplemental Indenture, dated as of November 20, 2012, to the Indenture dated November 20, 2012, by and between Vector Group Ltd. and Wells Fargo Bank, N. A., as trustee, relating to the 7.5% Variable Interest Senior Convertible Notes due 2019 (incorporated by reference to Exhibit 4.2 of Vector's Form 8-K dated November 20, 2012).
|
|
|
|
*4.20
|
|
Form of Global Note, relating to the 7.5% Variable Interest Senior Convertible Notes due 2019 (incorporated by reference to Exhibit 4.3 of Vector's Form 8-K dated November 20, 2012).
|
|
|
|
* 10.1
|
|
Corporate Services Agreement, dated as of June 29, 1990, between Vector and Liggett (incorporated by reference to Exhibit 10.10 in Liggett’s Registration Statement on Form S-1,No. 33-47482).
|
|
|
|
* 10.2
|
|
Services Agreement, dated as of February 26, 1991, between Brooke Management Inc. (“BMI”) and Liggett (the “Liggett Services Agreement”) (incorporated by reference to Exhibit 10.5 in VGR Holding’s Registration Statement on Form S-1,No. 33-93576).
|
|
|
|
* 10.3
|
|
First Amendment to Liggett Services Agreement, dated as of November 30, 1993, between Liggett and BMI (incorporated by reference to Exhibit 10.6 in VGR Holding’s Registration Statement on Form S-1,No. 33-93576).
|
|
|
|
* 10.4
|
|
Second Amendment to Liggett Services Agreement, dated as of October 1, 1995, between BMI, Vector and Liggett (incorporated by reference to Exhibit 10(c) in Vector’s Form 10-Q for the quarter ended September 30, 1995).
|
|
|
|
* 10.5
|
|
Third Amendment to Liggett Services Agreement, dated as of March 31, 2001, by and between Vector and Liggett (incorporated by reference to Exhibit 10.5 in Vector’s Form 10-K for the year ended December 31, 2003).
|
|
|
|
*10.6
|
|
Fourth Amendment to Service Agreement dated as of October 4, 2006, between Vector Group Ltd. and Liggett Group LLC (incorporated by reference to Exhibit 10.1 in Vector's Form 10-Q dated June 30, 2012).
|
|
|
|
* 10.7
|
|
Fifth Amendment to Service Agreement dated as of November 30, 2011, between Vector Group Ltd. and Liggett Group LLC (incorporated by reference to Exhibit 10.2 in Vector's Form 10-Q dated June 30, 2012).
|
|
|
|
* 10.8
|
|
Corporate Services Agreement, dated January 1, 1992, between VGR Holding and Liggett (incorporated by reference to Exhibit 10.13 in Liggett’s Registration Statement on Form S-1,No. 33-47482).
|
|
|
|
* 10.9
|
|
Service Agreement dated as of October 1, 2006 between Vector Group Ltd. and Vector Tobacco Ltd. (incorporated by reference to Exhibit 10.3 in Vector's Form 10-Q dated June 30, 2012).
|
|
|
|
* 10.10
|
|
Tax sharing agreement dated May 24, 1999 between Brooke Group Ltd., BGLS Inc., Liggett Group Inc., Epic Holdings Inc., and Carolina Tobacco Express Company Inc. (incorporated by reference to Exhibit 10.4 in Vector's Form 10-Q dated June 30, 2012).
|
|
|
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
* 10.11
|
|
Settlement Agreement, dated March 15, 1996, by and among the State of West Virginia, State of Florida, State of Mississippi, Commonwealth of Massachusetts, and State of Louisiana, Brooke Group Holding and Liggett (incorporated by reference to Exhibit 15 in the Schedule 13D filed by Vector on March 11, 1996, as amended, with respect to the common stock of RJR Nabisco Holdings Corp.).
|
|
|
|
* 10.12
|
|
Addendum to Initial States Settlement Agreement (incorporated by reference to Exhibit 10.43 in Vector’s Form 10-Q for the quarter ended March 31, 1997).
|
|
|
|
* 10.13
|
|
Settlement Agreement, dated March 12, 1998, by and among the States listed in Appendix A thereto, Brooke Group Holding and Liggett (incorporated by reference to Exhibit 10.35 in Vector’s Form 10-K for the year ended December 31, 1997).
|
|
|
|
* 10.14
|
|
Master Settlement Agreement made by the Settling States and Participating Manufacturers signatories thereto (incorporated by reference to Exhibit 10.1 in Philip Morris Companies Inc.’s Form 8-K dated November 25, 1998, Commission File No. 1-8940).
|
|
|
|
* 10.15
|
|
General Liggett Replacement Agreement, dated as of November 23, 1998, entered into by each of the Settling States under the Master Settlement Agreement, and Brooke Group Holding and Liggett (incorporated by reference to Exhibit 10.34 in Vector’s Form 10-K for the year ended December 31, 1998).
|
|
|
|
* 10.16
|
|
Stipulation and Agreed Order regarding Stay of Execution Pending Review and Related Matters, dated May 7, 2001, entered into by Philip Morris Incorporated, Lorillard Tobacco Co., Liggett and Brooke Group Holding Inc. and the class counsel in Engel, et. al., v. R.J. Reynolds Tobacco Co., et. al. (incorporated by reference to Exhibit 99.2 in Philip Morris Companies Inc.’s Form 8-K dated May 7, 2001).
|
|
|
|
* 10.17
|
|
Amended and Restated Employment Agreement dated as of January 27, 2006, between Vector and Howard M. Lorber (incorporated by reference to Exhibit 10.1 in Vector’s Form 8-K dated January 27, 2006).
|
|
|
|
* 10.18
|
|
Employment Agreement, dated as of January 27, 2006, between Vector and Richard J. Lampen (incorporated by reference to Exhibit 10.3 in Vector’s Form 8-K dated January 27, 2006).
|
|
|
|
*10.19
|
|
Amendment to the Employment Agreement dated as of February 22, 2012 between Vector Group Ltd. and Richard J. Lampen (incorporated by reference to Exhibit 10.3 in Vector's Form 8-K/A dated February 21, 2012).
|
|
|
|
* 10.20
|
|
Amended and Restated Employment Agreement, dated as of January 27, 2006, between Vector and Marc N. Bell (incorporated by reference to Exhibit 10.4 in Vector’s Form 8-K dated January 27, 2006).
|
|
|
|
* 10.21
|
|
Employment Agreement, dated as of November 11, 2005, between Liggett Group Inc. and Ronald J. Bernstein (incorporated by reference to Exhibit 10.1 in Vector’s Form 8-K dated November 11, 2005).
|
|
|
|
* 10.22
|
|
Amendment to Employment Agreement, dated as of January 14, 2011, between Liggett and Ronald J. Bernstein (incorporated by reference to Exhibit 10.17 in Vector's Form 10-K for the year ended December 31, 2010).
|
|
|
|
* 10.23
|
|
Employment Agreement, dated as of January 27, 2006, between Vector and J. Bryant Kirkland III (incorporated by reference to Exhibit 10.5 in Vector’s Form 8-K dated January 27, 2006).
|
|
|
|
* 10.24
|
|
Vector Group Ltd. Amended and Restated 1999 Long-Term Incentive Plan (incorporated by reference to Appendix A in Vector’s Proxy Statement dated April 21, 2004).
|
|
|
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
* 10.25
|
|
Stock Option Agreement, dated December 3, 2009, between Vector and Richard J. Lampen (incorporated by reference to Exhibit 10.19 in Vector’s Form 10-K dated December 31, 2009).
|
|
|
|
* 10.26
|
|
Stock Option Agreement, dated December 3, 2009, between Vector and Marc N. Bell (incorporated by reference to Exhibit 10.20 in Vector’s Form 10-K dated December 31, 2009).
|
|
|
|
* 10.27
|
|
Stock Option Agreement, dated December 3, 2009, between Vector and Howard M. Lorber (incorporated by reference to Exhibit 10.22 in Vector’s Form 10-K dated December 31, 2009).
|
|
|
|
* 10.28
|
|
Stock Option Agreement, dated December 3, 2009, between Vector and J. Bryant Kirkland III (incorporated by reference to Exhibit 10.23 in Vector’s Form 10-K dated December 31, 2009).
|
|
|
|
* 10.29
|
|
Option Letter Agreement, dated as of November 11, 2005 between Vector and Ronald J. Bernstein (incorporated by reference to Exhibit 10.3 in Vector’s Form 8-K dated November 11, 2005).
|
|
|
|
* 10.30
|
|
Restricted Share Award Agreement, dated as of April 7, 2009, between Vector Group Ltd. and Howard M. Lorber (incorporated by reference to Exhibit 10.1 of Vector’s Form 8-K dated April 10, 2009).
|
|
|
|
* 10.31
|
|
Amendment, effective as of December 11, 2012, to the Restricted Share Award Agreement, dated as of April 7, 2009, by and between Vector Group ltd. and Howard M. Lorber (incorporated by reference to Exhibit 10.2 in Vector's Form 8-K dated December 11, 2012).
|
|
|
|
* 10.32
|
|
Agreement, effective as of December 11, 2012, by and between Vector Group ltd. and Howard M. Lorber (incorporated by reference to Exhibit 10.1 in Vector's Form 8-K dated December 11, 2012).
|
|
|
|
* 10.33
|
|
Stock Option Agreement, dated January 14, 2011, between Vector and Howard M. Lorber (incorporated by reference to Exhibit S to Schedule 13D, as amended, dated January 21, 2011 filed by Howard M. Lorber).
|
|
|
|
* 10.34
|
|
Vector Senior Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 in Vector’s Form 8-K dated January 14, 2011).
|
|
|
|
* 10.35
|
|
Vector Supplemental Retirement Plan (as amended and restated April 24, 2008) (incorporated by reference to Exhibit 10.1 in Vector’s Form 10-Q for the quarter ended June 30, 2008).
|
|
|
|
* 10.36
|
|
Operating Agreement of Douglas Elliman Realty, LLC (formerly known as Montauk Battery Realty LLC) dated December 17, 2002 (incorporated by reference to Exhibit 10.1 in New Valley’s Form 8-K dated December 13, 2002).
|
|
|
|
* 10.37
|
|
First Amendment to Operating Agreement of Douglas Elliman Realty, LLC (formerly known as Montauk Battery Realty LLC), dated as of March 14, 2003 (incorporated by reference to Exhibit 10.1 in New Valley’s Form 10-Q for the quarter ended March 31, 2003).
|
|
|
|
* 10.38
|
|
Second Amendment to Operating Agreement of Douglas Elliman Realty, LLC, dated as of May 19, 2003 (incorporated by reference to Exhibit 10.1 in New Valley’s Form 10-Q for the quarter ended June 30, 2003).
|
|
|
|
* 10.39
|
|
Office Lease, dated as of September 10, 2012, between Vector Group Ltd. and Frost Real Estate Holdings, LLC. (incorporated by reference to Exhibit 10.1 in Vector's Form 8-K dated September 10, 2012).
|
|
|
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
10.40
|
|
First Amendment, dated as of November 12, 2012, to Office Lease, dated as of September 10, 2012, between Vector Group Ltd. and Frost Real Estate Holdings, LLC.
|
|
|
|
12.1
|
|
Computation of Ratio of Earnings to Fixed Charges for each of the five years within the period ended December 31, 2012
|
|
|
|
21
|
|
Subsidiaries of Vector.
|
|
|
|
23.1
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
|
23.2
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
|
23.3
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
|
23.4
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer, Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer, Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
99.1
|
|
Material Legal Proceedings.
|
|
|
|
99.2
|
|
Liggett Group LLC’s Consolidated Financial Statements for the three years ended December 31, 2012.
|
|
|
|
99.3
|
|
Vector Tobacco Inc.’s Financial Statements for the three years ended December 31, 2012.
|
|
|
|
99.4
|
|
Douglas Elliman Realty LLC’s Consolidated Financial Statements for the three years ended December 31, 2012.
|
*
|
Incorporated by reference
|
|
|
VECTOR GROUP LTD.
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
By:
|
/s/ J. Bryant Kirkland III
|
|
|
|
J. Bryant Kirkland III
|
|
|
|
Vice President, Treasurer and Chief Financial
Officer
|
Date:
|
February 28, 2013
|
|
|
SIGNATURE
|
|
TITLE
|
|
|
|
/s/ Howard M. Lorber
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
Howard M. Lorber
|
|
|
|
|
|
/s/ J. Bryant Kirkland III
|
|
Vice President, Treasurer and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
|
J. Bryant Kirkland III
|
|
|
|
|
|
/s/ Henry C. Beinstein
|
|
Director
|
Henry C. Beinstein
|
|
|
|
|
|
/s/ Ronald J. Bernstein
|
|
Director
|
Ronald J. Bernstein
|
|
|
|
|
|
/s/ Stanley S. Arkin
|
|
Director
|
Stanley S. Arkin
|
|
|
|
|
|
/s/ Bennett S. LeBow
|
|
Director
|
Bennett S. LeBow
|
|
|
|
|
|
/s/ Jeffrey S. Podell
|
|
Director
|
Jeffery S. Podell
|
|
|
|
|
|
/s/ Jean E. Sharpe
|
|
Director
|
Jean E. Sharpe
|
|
|
|
Page
|
|
|
|
|
FINANCIAL STATEMENTS:
|
|
|
Vector Group Ltd. Consolidated Financial Statements
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
FINANCIAL STATEMENT SCHEDULE:
|
|
|
|
|
December 31,
2012 |
|
December 31,
2011 |
||||
|
(Dollars in thousands, except per share amounts)
|
||||||
ASSETS:
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
405,855
|
|
|
$
|
240,923
|
|
Investment securities available for sale
|
69,984
|
|
|
76,486
|
|
||
Accounts receivable — trade
|
11,247
|
|
|
24,869
|
|
||
Inventories
|
100,392
|
|
|
109,228
|
|
||
Deferred income taxes
|
36,609
|
|
|
42,951
|
|
||
Income tax receivable, net
|
6,779
|
|
|
9,553
|
|
||
Restricted assets
|
2,469
|
|
|
1,474
|
|
||
Other current assets
|
5,721
|
|
|
4,257
|
|
||
Total current assets
|
639,056
|
|
|
509,741
|
|
||
Property, plant and equipment, net
|
57,153
|
|
|
56,556
|
|
||
Investment in Escena, net
|
13,295
|
|
|
13,280
|
|
||
Long-term investments accounted for at cost
|
16,367
|
|
|
5,675
|
|
||
Long-term investments accounted for under the equity method
|
6,432
|
|
|
16,499
|
|
||
Investments in non-consolidated real estate businesses
|
119,219
|
|
|
124,469
|
|
||
Restricted assets
|
9,792
|
|
|
9,626
|
|
||
Deferred income taxes
|
49,142
|
|
|
31,017
|
|
||
Intangible asset
|
107,511
|
|
|
107,511
|
|
||
Prepaid pension costs
|
12,870
|
|
|
10,047
|
|
||
Other assets
|
55,894
|
|
|
43,347
|
|
||
Total assets
|
$
|
1,086,731
|
|
|
$
|
927,768
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY:
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
|
||
Current portion of notes payable and long-term debt
|
$
|
36,778
|
|
|
$
|
50,844
|
|
Current portion of fair value of derivatives embedded within convertible debt
|
—
|
|
|
84,485
|
|
||
Current payments due under the Master Settlement Agreement
|
32,970
|
|
|
51,174
|
|
||
Current portion of employee benefits
|
2,824
|
|
|
2,690
|
|
||
Accounts payable
|
6,099
|
|
|
9,532
|
|
||
Accrued promotional expenses
|
18,730
|
|
|
17,056
|
|
||
Income taxes payable
|
6,269
|
|
|
6,597
|
|
||
Accrued excise and payroll taxes payable, net
|
20,419
|
|
|
17,992
|
|
||
Litigation accruals
|
1,470
|
|
|
1,551
|
|
||
Deferred income taxes
|
27,299
|
|
|
35,885
|
|
||
Accrued interest
|
25,410
|
|
|
20,888
|
|
||
Other current liabilities
|
16,891
|
|
|
16,504
|
|
||
Total current liabilities
|
195,159
|
|
|
315,198
|
|
||
Notes payable, long-term debt and other obligations, less current portion
|
586,946
|
|
|
493,356
|
|
||
Fair value of derivatives embedded within convertible debt
|
172,128
|
|
|
49,015
|
|
||
Non-current employee benefits
|
45,860
|
|
|
45,982
|
|
||
Deferred income taxes
|
109,532
|
|
|
60,642
|
|
||
Payments due under the Master Settlement Agreement
|
52,639
|
|
|
49,338
|
|
||
Litigation accruals
|
1,862
|
|
|
1,600
|
|
||
Other liabilities
|
1,857
|
|
|
1,667
|
|
||
Total liabilities
|
1,165,983
|
|
|
1,016,798
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Stockholders’ deficiency:
|
|
|
|
|
|
||
Preferred stock, par value $1.00 per share, 10,000,000 shares authorized
|
—
|
|
|
—
|
|
||
Common stock, par value $0.10 per share, 150,000,000 shares authorized, 93,658,273 and 83,022,812 shares issued and 89,898,411 and 79,441,991 shares outstanding
|
8,989
|
|
|
7,944
|
|
||
Additional paid-in capital
|
—
|
|
|
—
|
|
||
Accumulated deficit
|
(65,116
|
)
|
|
(80,440
|
)
|
||
Accumulated other comprehensive loss
|
(10,268
|
)
|
|
(3,677
|
)
|
||
Less: 3,759,862 and 3,580,821 shares of common stock in treasury, at cost
|
(12,857
|
)
|
|
(12,857
|
)
|
||
Total stockholders’ deficiency
|
(79,252
|
)
|
|
(89,030
|
)
|
||
Total liabilities and stockholders’ deficiency
|
$
|
1,086,731
|
|
|
$
|
927,768
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands, except per share amounts)
|
||||||||||
Revenues*
|
$
|
1,084,546
|
|
|
$
|
1,133,380
|
|
|
$
|
1,063,289
|
|
Expenses:
|
|
|
|
|
|
|
|
||||
Cost of goods sold*
|
823,452
|
|
|
892,883
|
|
|
845,106
|
|
|||
Operating, selling, administrative and general expenses
|
106,161
|
|
|
97,176
|
|
|
90,709
|
|
|||
Litigation judgment expense
|
—
|
|
|
—
|
|
|
16,161
|
|
|||
Operating income
|
154,933
|
|
|
143,321
|
|
|
111,313
|
|
|||
Other income (expenses):
|
|
|
|
|
|
|
|
|
|||
Interest expense
|
(110,102
|
)
|
|
(100,706
|
)
|
|
(84,096
|
)
|
|||
Changes in fair value of derivatives embedded within convertible debt
|
(7,476
|
)
|
|
7,984
|
|
|
11,524
|
|
|||
Acceleration of interest expense related to debt conversion
|
(14,960
|
)
|
|
(1,217
|
)
|
|
—
|
|
|||
Gain on liquidation of long-term investments
|
—
|
|
|
25,832
|
|
|
—
|
|
|||
Equity (loss) income on long-term investments
|
(1,261
|
)
|
|
(859
|
)
|
|
1,489
|
|
|||
Gain on sale of investment securities available for sale
|
1,640
|
|
|
23,257
|
|
|
19,869
|
|
|||
Equity income from non-consolidated real estate businesses
|
29,764
|
|
|
19,966
|
|
|
23,963
|
|
|||
Gain on townhomes
|
—
|
|
|
3,843
|
|
|
—
|
|
|||
Other, net
|
1,179
|
|
|
1,736
|
|
|
1,508
|
|
|||
Income before provision for income taxes
|
53,717
|
|
|
123,157
|
|
|
85,570
|
|
|||
Income tax expense
|
23,095
|
|
|
48,137
|
|
|
31,486
|
|
|||
Net income
|
$
|
30,622
|
|
|
$
|
75,020
|
|
|
$
|
54,084
|
|
Per basic common share:
|
|
|
|
|
|
|
|
|
|||
Net income applicable to common shares
|
$
|
0.35
|
|
|
$
|
0.89
|
|
|
$
|
0.65
|
|
Per diluted common share:
|
|
|
|
|
|
|
|
||||
Net income applicable to common shares
|
$
|
0.35
|
|
|
$
|
0.89
|
|
|
$
|
0.64
|
|
Cash distributions declared per share
|
$
|
1.54
|
|
|
$
|
1.47
|
|
|
$
|
1.40
|
|
*
|
Revenues and cost of goods sold include federal excise taxes of
$508,027
,
$552,965
and
$538,328
for the years ended December 31,
2012
,
2011
and
2010
, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands, except per share amounts)
|
||||||||||
Net income
|
$
|
30,622
|
|
|
$
|
75,020
|
|
|
$
|
54,084
|
|
|
|
|
|
|
|
||||||
Net unrealized gains on investment securities available for sale:
|
|
|
|
|
|
||||||
Change in net unrealized (losses) gains
|
(13,267
|
)
|
|
23,573
|
|
|
45,908
|
|
|||
Net unrealized gains reclassified into net income
|
(1,640
|
)
|
|
(23,257
|
)
|
|
(19,869
|
)
|
|||
Net unrealized (losses) gains on investment securities available for sale
|
(14,907
|
)
|
|
316
|
|
|
26,039
|
|
|||
|
|
|
|
|
|
||||||
Net unrealized gains (losses) on long-term investments accounted for under the equity method
|
1,353
|
|
|
(3,596
|
)
|
|
1,115
|
|
|||
|
|
|
|
|
|
||||||
Net change in forward contracts
|
64
|
|
|
65
|
|
|
72
|
|
|||
|
|
|
|
|
|
||||||
Net change in pension-related amounts
|
2,394
|
|
|
(10,399
|
)
|
|
4,522
|
|
|||
|
|
|
|
|
|
||||||
Other comprehensive (loss) income
|
(11,096
|
)
|
|
(13,614
|
)
|
|
31,748
|
|
|||
|
|
|
|
|
|
||||||
Income tax effect on:
|
|
|
|
|
|
||||||
Change in net unrealized gains (losses) on investment securities
|
5,387
|
|
|
(9,789
|
)
|
|
(18,301
|
)
|
|||
Net unrealized gains reclassified into net income on investment securities
|
665
|
|
|
9,442
|
|
|
7,948
|
|
|||
Change in unrealized long-term investments
|
(549
|
)
|
|
1,453
|
|
|
(446
|
)
|
|||
Forward contracts
|
(26
|
)
|
|
(26
|
)
|
|
(30
|
)
|
|||
Pension-related amounts
|
(972
|
)
|
|
4,401
|
|
|
(1,584
|
)
|
|||
Income tax benefit (provision) on other comprehensive income (loss)
|
4,505
|
|
|
5,481
|
|
|
(12,413
|
)
|
|||
|
|
|
|
|
|
||||||
Other comprehensive (loss) income, net of tax
|
(6,591
|
)
|
|
(8,133
|
)
|
|
19,335
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive income
|
$
|
24,031
|
|
|
$
|
66,887
|
|
|
$
|
73,419
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
|
|
Other
Comprehensive
Income (Loss)
|
|
Treasury
Stock
|
|
|
|||||||||||||||
|
Shares
|
|
Amount
|
|
|
Deficit
|
|
|
|
Total
|
||||||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||||||||
Balance, January 1, 2010
|
71,262,684
|
|
|
$
|
7,126
|
|
|
$
|
15,928
|
|
|
$
|
—
|
|
|
$
|
(14,879
|
)
|
|
$
|
(12,857
|
)
|
|
$
|
(4,682
|
)
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
54,084
|
|
|
—
|
|
|
—
|
|
|
54,084
|
|
||||||
Change in net loss and prior service cost, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,938
|
|
|
—
|
|
|
2,938
|
|
||||||
Forward contract adjustments, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42
|
|
|
—
|
|
|
42
|
|
||||||
Unrealized gain on long-term investment securities accounted for under the equity method, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
669
|
|
|
—
|
|
|
669
|
|
||||||
Change in net unrealized gain on investment securities, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,607
|
|
|
—
|
|
|
27,607
|
|
||||||
Net unrealized gains reclassified into net income, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,921
|
)
|
|
—
|
|
|
(11,921
|
)
|
||||||
Unrealized gain on investment securities, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,686
|
|
||||||
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,335
|
|
||||||
Total comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
73,419
|
|
||||||
Distributions and dividends on common stock
|
—
|
|
|
—
|
|
|
(19,081
|
)
|
|
(99,054
|
)
|
|
—
|
|
|
—
|
|
|
(118,135
|
)
|
||||||
Restricted stock grant
|
50,000
|
|
|
5
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Surrender of shares in connection with restricted stock vesting
|
(51,941
|
)
|
|
(5
|
)
|
|
(1,035
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,040
|
)
|
||||||
Effect of stock dividend
|
3,567,023
|
|
|
357
|
|
|
—
|
|
|
(357
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Exercise of stock options
|
111,518
|
|
|
11
|
|
|
1,254
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,265
|
|
||||||
Tax benefit of options exercised
|
—
|
|
|
—
|
|
|
269
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
269
|
|
||||||
Stock based compensation
|
—
|
|
|
—
|
|
|
2,670
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,670
|
|
||||||
Balance, December 31, 2010
|
74,939,284
|
|
|
7,494
|
|
|
—
|
|
|
(45,327
|
)
|
|
4,456
|
|
|
(12,857
|
)
|
|
(46,234
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
75,020
|
|
|
—
|
|
|
—
|
|
|
75,020
|
|
||||||
Change in net loss and prior service cost, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,998
|
)
|
|
—
|
|
|
(5,998
|
)
|
||||||
Forward contract adjustments, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
39
|
|
||||||
Unrealized gain on long-term investment securities accounted for under the equity method, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,143
|
)
|
|
—
|
|
|
(2,143
|
)
|
||||||
Change in net unrealized gain on investment securities, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,784
|
|
|
—
|
|
|
13,784
|
|
||||||
Net unrealized gains reclassified into net income, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,815
|
)
|
|
—
|
|
|
(13,815
|
)
|
||||||
Unrealized gain on investment securities, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31
|
)
|
||||||
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,133
|
)
|
||||||
Total comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66,887
|
|
||||||
Distributions and dividends on common stock
|
—
|
|
|
—
|
|
|
(15,215
|
)
|
|
(109,755
|
)
|
|
—
|
|
|
—
|
|
|
(124,970
|
)
|
||||||
Restricted stock grant
|
6,667
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Restricted stock grant canceled
|
(7,350
|
)
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Surrender of shares in connection with restricted stock vesting
|
(112,429
|
)
|
|
(11
|
)
|
|
(1,950
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,961
|
)
|
||||||
Effect of stock dividend
|
3,782,308
|
|
|
378
|
|
|
—
|
|
|
(378
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Note conversion, net of income taxes
|
652,386
|
|
|
65
|
|
|
12,150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,215
|
|
||||||
Exercise of options, net of 300,799 shares delivered to pay exercise price
|
181,125
|
|
|
18
|
|
|
1,011
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,029
|
|
||||||
Tax benefit of options exercised
|
—
|
|
|
—
|
|
|
821
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
821
|
|
||||||
Stock based compensation
|
—
|
|
|
—
|
|
|
3,183
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,183
|
|
||||||
Balance, December 31, 2011
|
79,441,991
|
|
|
7,944
|
|
|
—
|
|
|
(80,440
|
)
|
|
(3,677
|
)
|
|
(12,857
|
)
|
|
(89,030
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
30,622
|
|
|
—
|
|
|
—
|
|
|
30,622
|
|
||||||
Change in net loss and prior service cost, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,422
|
|
|
—
|
|
|
1,422
|
|
||||||
Forward contract adjustments, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
38
|
|
||||||
Unrealized gain on long-term investment securities accounted for under the equity method, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
804
|
|
|
—
|
|
|
804
|
|
||||||
Change in net unrealized gain on investment securities, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,880
|
)
|
|
—
|
|
|
(7,880
|
)
|
||||||
Net unrealized gains reclassified into net income, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(975
|
)
|
|
—
|
|
|
(975
|
)
|
||||||
Unrealized gain on investment securities, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,855
|
)
|
||||||
Total other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,591
|
)
|
||||||
Total comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,031
|
|
||||||
Distributions and dividends on common stock
|
—
|
|
|
—
|
|
|
(120,188
|
)
|
|
(14,884
|
)
|
|
—
|
|
|
—
|
|
|
(135,072
|
)
|
||||||
Surrender of shares in connection with restricted stock vesting
|
(234,926
|
)
|
|
(23
|
)
|
|
(3,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,773
|
)
|
||||||
Effect of stock dividend
|
4,142,378
|
|
|
414
|
|
|
—
|
|
|
(414
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Note conversion, net of income taxes
|
3,476,654
|
|
|
347
|
|
|
76,540
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76,887
|
|
||||||
Beneficial conversion feature of notes payable, net of income taxes
|
—
|
|
|
—
|
|
|
38,135
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38,135
|
|
||||||
Issuance of common stock under share lending facility
|
6,114,000
|
|
|
611
|
|
|
3,204
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,815
|
|
||||||
Return of common stock under share lending facility
|
(3,057,000
|
)
|
|
(306
|
)
|
|
306
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Exercise of stock options
|
15,314
|
|
|
2
|
|
|
138
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
140
|
|
||||||
Tax benefit of options exercised
|
—
|
|
|
—
|
|
|
52
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
||||||
Stock based compensation
|
—
|
|
|
—
|
|
|
5,563
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,563
|
|
||||||
Balance, December 31, 2012
|
89,898,411
|
|
|
$
|
8,989
|
|
|
$
|
—
|
|
|
$
|
(65,116
|
)
|
|
$
|
(10,268
|
)
|
|
$
|
(12,857
|
)
|
|
$
|
(79,252
|
)
|
VECTOR GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||||||
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands, except per share amounts)
|
||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|||
Net income
|
$
|
30,622
|
|
|
$
|
75,020
|
|
|
$
|
54,084
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
||||
Depreciation and amortization
|
10,608
|
|
|
10,607
|
|
|
10,790
|
|
|||
Non-cash stock-based expense
|
5,563
|
|
|
3,183
|
|
|
2,704
|
|
|||
Acceleration of interest expense related to debt conversion
|
14,960
|
|
|
1,217
|
|
|
—
|
|
|||
(Gain) loss on sale of assets
|
—
|
|
|
(43
|
)
|
|
74
|
|
|||
Deferred income taxes
|
(7,336
|
)
|
|
9,366
|
|
|
1,225
|
|
|||
Gain on sale of townhomes
|
—
|
|
|
(3,843
|
)
|
|
—
|
|
|||
Distributions from long-term investments accounted for at cost
|
135
|
|
|
—
|
|
|
—
|
|
|||
Gain on liquidation of long-term investments accounted for at cost
|
(135
|
)
|
|
(25,832
|
)
|
|
—
|
|
|||
Loss (income) on long-term investments accounted under the equity method
|
1,261
|
|
|
859
|
|
|
(2,604
|
)
|
|||
Gain on sale of marketable securities
|
(1,640
|
)
|
|
(23,257
|
)
|
|
(19,869
|
)
|
|||
Equity income in non-consolidated real estate businesses
|
(29,764
|
)
|
|
(19,966
|
)
|
|
(23,963
|
)
|
|||
Distributions from non-consolidated real estate businesses
|
19,169
|
|
|
9,322
|
|
|
12,212
|
|
|||
Premium on issuance of debt
|
—
|
|
|
—
|
|
|
3,450
|
|
|||
Non-cash interest expense
|
28,150
|
|
|
7,373
|
|
|
1,082
|
|
|||
Loss (gain) on warrants
|
1,193
|
|
|
(700
|
)
|
|
—
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
||||
Receivables
|
13,622
|
|
|
(23,020
|
)
|
|
6,249
|
|
|||
Inventories
|
8,837
|
|
|
(2,149
|
)
|
|
(8,593
|
)
|
|||
Accounts payable and accrued liabilities
|
4,497
|
|
|
(3,216
|
)
|
|
2,575
|
|
|||
Payments due under the Master Settlement Agreement
|
(14,903
|
)
|
|
26,419
|
|
|
32,985
|
|
|||
Cash payments on restructuring liabilities
|
—
|
|
|
—
|
|
|
(179
|
)
|
|||
Other assets and liabilities, net
|
(753
|
)
|
|
(5,299
|
)
|
|
(5,218
|
)
|
|||
Net cash provided by operating activities
|
84,086
|
|
|
36,041
|
|
|
67,004
|
|
VECTOR GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
|
|||||||||||
|
|
|
|
|
|
||||||
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(Dollars in thousands, except per share amounts)
|
||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from sale or maturity of investment securities
|
3,831
|
|
|
31,643
|
|
|
28,587
|
|
|||
Purchase of investment securities
|
(5,647
|
)
|
|
(5,039
|
)
|
|
(9,394
|
)
|
|||
Proceeds from sale or liquidation of long-term investments
|
72
|
|
|
66,190
|
|
|
1,002
|
|
|||
Purchase of long-term investments
|
(5,000
|
)
|
|
(10,000
|
)
|
|
(5,062
|
)
|
|||
Purchase of Aberdeen mortgages
|
—
|
|
|
—
|
|
|
(13,462
|
)
|
|||
Proceeds from sale of townhomes, net
|
—
|
|
|
19,629
|
|
|
—
|
|
|||
Increase in restricted assets
|
(1,130
|
)
|
|
(96
|
)
|
|
(1,100
|
)
|
|||
Investments in non-consolidated real estate businesses
|
(33,375
|
)
|
|
(41,859
|
)
|
|
(24,645
|
)
|
|||
Distributions from non-consolidated real estate businesses
|
49,221
|
|
|
8,450
|
|
|
3,539
|
|
|||
Issuance of notes receivable
|
(383
|
)
|
|
(15,256
|
)
|
|
(930
|
)
|
|||
Cash acquired in Aberdeen consolidation
|
—
|
|
|
—
|
|
|
473
|
|
|||
Proceeds from sale of businesses and assets
|
444
|
|
|
205
|
|
|
187
|
|
|||
Capital expenditures
|
(11,265
|
)
|
|
(11,838
|
)
|
|
(23,391
|
)
|
|||
Increase in cash surrender value of life insurance policies
|
(907
|
)
|
|
(744
|
)
|
|
(936
|
)
|
|||
Net cash (used in) provided by investing activities
|
(4,139
|
)
|
|
41,285
|
|
|
(45,132
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of debt
|
244,075
|
|
|
6,419
|
|
|
185,714
|
|
|||
Repayments of debt
|
(19,258
|
)
|
|
(4,960
|
)
|
|
(14,539
|
)
|
|||
Deferred financing charges
|
(11,479
|
)
|
|
—
|
|
|
(5,077
|
)
|
|||
Borrowings under revolver
|
1,074,050
|
|
|
1,064,270
|
|
|
1,034,924
|
|
|||
Repayments on revolver
|
(1,066,092
|
)
|
|
(1,078,508
|
)
|
|
(1,016,598
|
)
|
|||
Distributions on common stock
|
(137,114
|
)
|
|
(125,299
|
)
|
|
(117,459
|
)
|
|||
Proceeds from the issuance of Vector stock
|
611
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from exercise of Vector options
|
140
|
|
|
1,029
|
|
|
1,265
|
|
|||
Tax benefit of options exercised
|
52
|
|
|
821
|
|
|
269
|
|
|||
Net cash provided by (used in) financing activities
|
84,985
|
|
|
(136,228
|
)
|
|
68,499
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
164,932
|
|
|
(58,902
|
)
|
|
90,371
|
|
|||
Cash and cash equivalents, beginning of year
|
240,923
|
|
|
299,825
|
|
|
209,454
|
|
|||
Cash and cash equivalents, end of year
|
$
|
405,855
|
|
|
$
|
240,923
|
|
|
$
|
299,825
|
|
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
December 31,
2012 |
|
December 31,
2011 |
|
December 31,
2010 |
||||||
Net unrealized gains on investment securities available for sale, net of income taxes of $8,886, $14,938, and $14,591, respectively
|
$
|
13,001
|
|
|
$
|
21,856
|
|
|
$
|
21,887
|
|
Net unrealized (losses) gains on long-term investment accounted for under the equity method, net of income tax benefits of $458 and $1,007 and expense of $446, respectively
|
(670
|
)
|
|
(1,474
|
)
|
|
669
|
|
|||
Forward contracts adjustment, net of income taxes of $88, $114, and $140, respectively
|
(129
|
)
|
|
(167
|
)
|
|
(206
|
)
|
|||
Pension-related amounts, net of income taxes of $15,358, $16,330, and $11,929, respectively
|
(22,470
|
)
|
|
(23,892
|
)
|
|
(17,894
|
)
|
|||
Accumulated other comprehensive (loss) income
|
$
|
(10,268
|
)
|
|
$
|
(3,677
|
)
|
|
$
|
4,456
|
|
2.
|
EARNINGS PER SHARE
|
|
2012
|
|
2011
|
|
2010
|
||||||
Net income
|
$
|
30,622
|
|
|
$
|
75,020
|
|
|
$
|
54,084
|
|
Income attributable to participating securities
|
(608
|
)
|
|
(1,552
|
)
|
|
(1,146
|
)
|
|||
Net income available to common stockholders
|
$
|
30,014
|
|
|
$
|
73,468
|
|
|
$
|
52,938
|
|
|
2012
|
|
2011
|
|
2010
|
|||
Weighted-average shares for basic EPS
|
84,612,613
|
|
|
82,608,027
|
|
|
81,949,878
|
|
Plus incremental shares related to stock options and warrants
|
80,383
|
|
|
212,624
|
|
|
400,102
|
|
Weighted-average shares for diluted EPS
|
84,692,996
|
|
|
82,820,651
|
|
|
82,349,980
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Number of stock options
|
N/A
|
|
|
3,408
|
|
|
174,649
|
|
|||
Weighted-average exercise price
|
N/A
|
|
|
$
|
16.48
|
|
|
$
|
22.26
|
|
|
Weighted-average shares of non-vested restricted stock
|
3,500
|
|
|
7,000
|
|
|
—
|
|
|||
Weighted-average expense per share
|
$
|
17.12
|
|
|
$
|
17.12
|
|
|
$
|
—
|
|
Weighted-average number of shares issuable upon conversion of debt
|
18,008,626
|
|
|
18,503,930
|
|
|
18,900,356
|
|
|||
Weighted-average conversion price
|
$
|
14.35
|
|
|
$
|
14.13
|
|
|
$
|
14.16
|
|
3.
|
INVESTMENT SECURITIES AVAILABLE FOR SALE
|
|
Cost
|
|
Gross
Unrealized
Gain
|
|
Gross
Unrealized
Loss
|
|
Fair
Value
|
||||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities
|
$
|
48,097
|
|
|
$
|
23,621
|
|
|
$
|
(1,734
|
)
|
|
$
|
69,984
|
|
|
|
|
|
|
|
|
|
||||||||
2011
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities
|
$
|
39,692
|
|
|
$
|
38,173
|
|
|
$
|
(1,379
|
)
|
|
$
|
76,486
|
|
4.
|
INVENTORIES
|
|
December 31,
2012 |
|
December 31,
2011 |
||||
Leaf tobacco
|
$
|
59,130
|
|
|
$
|
65,411
|
|
Other raw materials
|
3,151
|
|
|
3,831
|
|
||
Work-in-process
|
210
|
|
|
688
|
|
||
Finished goods
|
64,396
|
|
|
64,594
|
|
||
Inventories at current cost
|
126,887
|
|
|
134,524
|
|
||
LIFO adjustments
|
(26,495
|
)
|
|
(25,296
|
)
|
||
|
$
|
100,392
|
|
|
$
|
109,228
|
|
5.
|
PROPERTY, PLANT AND EQUIPMENT
|
|
December 31,
2012 |
|
December 31,
2011 |
||||
Land and improvements
|
$
|
1,418
|
|
|
$
|
1,418
|
|
Buildings
|
14,945
|
|
|
14,410
|
|
||
Machinery and equipment
|
142,826
|
|
|
134,168
|
|
||
Leasehold improvements
|
3,868
|
|
|
3,038
|
|
||
|
163,057
|
|
|
153,034
|
|
||
Less accumulated depreciation and amortization
|
(105,904
|
)
|
|
(96,478
|
)
|
||
|
$
|
57,153
|
|
|
$
|
56,556
|
|
6.
|
LONG-TERM INVESTMENTS
|
|
December 31, 2012
|
|
December 31, 2011
|
||||||||||||
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
Investment partnerships
|
$
|
15,540
|
|
|
$
|
16,962
|
|
|
$
|
4,776
|
|
|
$
|
6,199
|
|
Real estate partnership
|
827
|
|
|
1,391
|
|
|
899
|
|
|
1,293
|
|
||||
|
$
|
16,367
|
|
|
$
|
18,353
|
|
|
$
|
5,675
|
|
|
$
|
7,492
|
|
|
2012
|
|
2011
|
||||
Balance as of January 1
|
$
|
7,492
|
|
|
$
|
72,102
|
|
Distributions
|
(207
|
)
|
|
(66,190
|
)
|
||
Reduction in partnership interest now accounted for under the cost method
|
15,541
|
|
|
—
|
|
||
Revision for partnership now accounted for as investment securities available for sale
|
(6,122
|
)
|
|
—
|
|
||
Realized gain on liquidation of long-term investments
|
135
|
|
|
25,832
|
|
||
|
|
|
|
||||
Unrealized gains reclassified into net income
|
(135
|
)
|
|
(25,832
|
)
|
||
Unrealized gain on long-term investments
|
1,649
|
|
|
1,580
|
|
||
Net change in long-term investments
|
1,514
|
|
|
(24,252
|
)
|
||
Balance as of December 31
|
$
|
18,353
|
|
|
$
|
7,492
|
|
|
December 31, 2012
|
|
December 31, 2011
|
||||
Investment partnerships
|
$
|
6,432
|
|
|
$
|
16,499
|
|
|
2012
|
|
2011
|
||||
Balance as of January 1
|
$
|
16,499
|
|
|
$
|
10,954
|
|
Contributions
|
5,000
|
|
|
10,000
|
|
||
Reduction in partnership interest now accounted for under the cost method
|
(15,541
|
)
|
|
—
|
|
||
Equity loss on long-term investments accounted for under the equity method
|
(1,261
|
)
|
|
(859
|
)
|
||
|
|
|
|
||||
Unrealized gains reclassified into net income
|
—
|
|
|
—
|
|
||
Unrealized (loss) gain on long-term investments
|
1,735
|
|
|
(3,596
|
)
|
||
Net change in long-term investments
|
1,735
|
|
|
(3,596
|
)
|
||
Balance as of December 31
|
$
|
6,432
|
|
|
$
|
16,499
|
|
7.
|
NOTES PAYABLE, LONG-TERM DEBT AND OTHER OBLTIGATIONS
|
|
December 31, 2012
|
|
December 31, 2011
|
||||
Vector:
|
|
|
|
|
|||
11% Senior Secured Notes due 2015, net of unamortized discount of $408 and $591
|
$
|
414,592
|
|
|
$
|
414,409
|
|
6.75% Variable Interest Senior Convertible Note due 2014, net of unamortized discount of $30,383 and $35,704*
|
19,617
|
|
|
14,296
|
|
||
6.75% Variable Interest Senior Convertible Exchange Notes due 2014, net of unamortized discount of $45,038 and $57,036*
|
62,492
|
|
|
50,494
|
|
||
3.875% Variable Interest Senior Convertible Debentures due 2026, net of unamortized discount of $36,107 and $82,948*
|
7,115
|
|
|
16,052
|
|
||
7.5% Variable Interest Senior Convertible Debentures due 2019, net of unamortized discount of $161,795 and $0*
|
68,205
|
|
|
—
|
|
||
Liggett:
|
|
|
|
||||
Revolving credit facility
|
29,430
|
|
|
21,472
|
|
||
Term loan under credit facility
|
4,179
|
|
|
5,689
|
|
||
Equipment loans
|
17,810
|
|
|
21,255
|
|
||
Other
|
284
|
|
|
533
|
|
||
Total notes payable, long-term debt and other obligations
|
623,724
|
|
|
544,200
|
|
||
Less:
|
|
|
|
|
|
||
Current maturities
|
(36,778
|
)
|
|
(50,844
|
)
|
||
Amount due after one year
|
$
|
586,946
|
|
|
$
|
493,356
|
|
*
|
The fair value of the derivatives embedded within the
6.75%
Variable Interest Senior Convertible Note (
$11,682
at
December 31, 2012
and
$16,929
at
December 31, 2011
, respectively), the
6.75%
Variable Interest Senior Convertible Exchange Notes (
$22,146
at
December 31, 2012
and
$32,086
at
December 31, 2011
, respectively), the
3.875%
Variable Interest Senior Convertible Debentures (
$39,714
at
December 31, 2012
and
$84,485
at
December 31, 2011
, respectively), and the
7.5%
Variable Interest Senior Convertible Debentures (
$98,586
at
December 31, 2012
and
$0
at
December 31, 2011
, respectively) is separately classified as a derivative liability in the condensed consolidated balance sheets.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
6.75% note
|
$
|
2,842
|
|
|
$
|
1,415
|
|
|
$
|
749
|
|
6.75% exchange notes
|
7,416
|
|
|
4,745
|
|
|
3,113
|
|
|||
3.875% convertible debentures
|
57
|
|
|
195
|
|
|
575
|
|
|||
7.5% convertible notes
|
369
|
|
|
—
|
|
|
—
|
|
|||
Interest expense associated with embedded derivatives
|
$
|
10,684
|
|
|
$
|
6,355
|
|
|
$
|
4,437
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
6.75% note
|
$
|
5,247
|
|
|
$
|
3,290
|
|
|
$
|
3,671
|
|
6.75% exchange notes
|
9,940
|
|
|
6,238
|
|
|
9,228
|
|
|||
3.875% convertible debentures
|
(22,281
|
)
|
|
(1,544
|
)
|
|
(1,375
|
)
|
|||
7.5% convertible notes
|
(382
|
)
|
|
—
|
|
|
—
|
|
|||
(Loss) gain on changes in fair value of derivatives embedded within convertible debt
|
$
|
(7,476
|
)
|
|
$
|
7,984
|
|
|
$
|
11,524
|
|
|
6.75%
Note
|
|
6.75%
Exchange
Notes
|
|
3.875%
Convertible
Debentures
|
|
7.5%
Convertible
Notes
|
|
Total
|
||||||||||
Balance at January 1, 2010
|
$
|
23,890
|
|
|
$
|
47,552
|
|
|
$
|
81,574
|
|
|
$
|
—
|
|
|
$
|
153,016
|
|
(Gain) loss from changes in fair value of embedded derivatives
|
(3,671
|
)
|
|
(9,228
|
)
|
|
1,375
|
|
|
—
|
|
|
(11,524
|
)
|
|||||
Balance at December 31, 2010
|
20,219
|
|
|
38,324
|
|
|
82,949
|
|
|
—
|
|
|
141,492
|
|
|||||
Conversion of $11,000 of 3.875% Variable Interest Senior Convertible Debentures due June 15, 2011
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
|||||
(Gain) loss from changes in fair value of embedded derivatives
|
(3,290
|
)
|
|
(6,238
|
)
|
|
1,544
|
|
|
—
|
|
|
(7,984
|
)
|
|||||
Balance at December 31, 2011
|
16,929
|
|
|
32,086
|
|
|
84,485
|
|
|
—
|
|
|
133,500
|
|
|||||
Conversion of $55,778 of 3.875% Variable Interest Senior Convertible Debentures due June 15, 2016
|
—
|
|
|
—
|
|
|
(67,052
|
)
|
|
—
|
|
|
(67,052
|
)
|
|||||
Issuance of 7.5% Note
|
—
|
|
|
—
|
|
|
—
|
|
|
98,204
|
|
|
98,204
|
|
|||||
(Gain) loss from changes in fair value of embedded derivatives
|
(5,247
|
)
|
|
(9,940
|
)
|
|
22,281
|
|
|
382
|
|
|
7,476
|
|
|||||
Balance at December 31, 2012
|
$
|
11,682
|
|
|
$
|
22,146
|
|
|
$
|
39,714
|
|
|
$
|
98,586
|
|
|
$
|
172,128
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Amortization of beneficial conversion feature:
|
|
|
|
|
|
|
|
|
|||
6.75% note
|
$
|
2,479
|
|
|
$
|
1,234
|
|
|
$
|
653
|
|
6.75% exchange notes
|
4,582
|
|
|
2,932
|
|
|
1,923
|
|
|||
3.875% convertible debentures
|
30
|
|
|
(80
|
)
|
|
(46
|
)
|
|||
7.5% convertible notes
|
241
|
|
|
—
|
|
|
—
|
|
|||
Interest expense associated with beneficial conversion feature
|
$
|
7,332
|
|
|
$
|
4,086
|
|
|
$
|
2,530
|
|
|
6.75%
Note
|
|
6.75%
Exchange
Notes
|
|
3.875%
Convertible
Debentures
|
|
7.5%
Convertible
Notes
|
|
Total
|
||||||||||
Balance at January 1, 2010
|
$
|
39,755
|
|
|
$
|
69,749
|
|
|
$
|
83,589
|
|
|
$
|
—
|
|
|
$
|
193,093
|
|
Amortization of embedded derivatives
|
(749
|
)
|
|
(3,113
|
)
|
|
(575
|
)
|
|
—
|
|
|
(4,437
|
)
|
|||||
Amortization of beneficial conversion feature
|
(653
|
)
|
|
(1,923
|
)
|
|
46
|
|
|
—
|
|
|
(2,530
|
)
|
|||||
Balance at December 31, 2010
|
38,353
|
|
|
64,713
|
|
|
83,060
|
|
|
—
|
|
|
186,126
|
|
|||||
Conversion of $11,000 of 3.875% Variable Interest Senior Convertible Debentures due June 15, 2011
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|||||
Amortization of embedded derivatives
|
(1,415
|
)
|
|
(4,745
|
)
|
|
(195
|
)
|
|
—
|
|
|
(6,355
|
)
|
|||||
Amortization of beneficial conversion feature
|
(1,234
|
)
|
|
(2,932
|
)
|
|
80
|
|
|
—
|
|
|
(4,086
|
)
|
|||||
Balance at December 31, 2011
|
35,704
|
|
|
57,036
|
|
|
82,948
|
|
|
—
|
|
|
175,688
|
|
|||||
Conversion of $55,778 of 3.875% Variable Interest Senior Convertible Debentures due June 15, 2016
|
—
|
|
|
—
|
|
|
(46,754
|
)
|
|
—
|
|
|
(46,754
|
)
|
|||||
Issuance of convertible notes - embedded derivative
|
—
|
|
|
—
|
|
|
—
|
|
|
98,204
|
|
|
98,204
|
|
|||||
Issuance of convertible notes - beneficial conversion feature
|
—
|
|
|
—
|
|
|
—
|
|
|
64,201
|
|
|
64,201
|
|
|||||
Amortization of embedded derivatives
|
(2,842
|
)
|
|
(7,416
|
)
|
|
(57
|
)
|
|
(369
|
)
|
|
(10,684
|
)
|
|||||
Amortization of beneficial conversion feature
|
(2,479
|
)
|
|
(4,582
|
)
|
|
(30
|
)
|
|
(241
|
)
|
|
(7,332
|
)
|
|||||
Balance at December 31, 2012
|
$
|
30,383
|
|
|
$
|
45,038
|
|
|
$
|
36,107
|
|
|
$
|
161,795
|
|
|
$
|
273,323
|
|
|
December 31, 2012
|
|
December 31, 2011
|
||||||||||||
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
Notes payable and long-term debt
|
$
|
623,724
|
|
|
$
|
963,672
|
|
|
$
|
544,200
|
|
|
$
|
801,353
|
|
|
Principal
|
|
Unamortized
Discount
|
|
Net
|
||||||
Year Ending December 31:
|
|
|
|
|
|
|
|
|
|||
2013
|
$
|
36,778
|
|
|
$
|
—
|
|
|
$
|
36,778
|
|
2014
|
164,262
|
|
|
75,421
|
|
|
88,841
|
|
|||
2015
|
422,240
|
|
|
408
|
|
|
421,832
|
|
|||
2016
|
44,175
|
|
|
36,107
|
|
|
8,068
|
|
|||
2017
|
—
|
|
|
—
|
|
|
—
|
|
|||
Thereafter
|
230,000
|
|
|
161,795
|
|
|
68,205
|
|
|||
Total
|
$
|
897,455
|
|
|
$
|
273,731
|
|
|
$
|
623,724
|
|
8.
|
COMMITMENTS
|
|
Lease
Commitments
|
|
Sublease
Rentals
|
|
Net
|
||||||
Year Ending December 31:
|
|
|
|
|
|
|
|
|
|||
2013
|
$
|
3,976
|
|
|
$
|
402
|
|
|
$
|
3,574
|
|
2014
|
3,430
|
|
|
—
|
|
|
3,430
|
|
|||
2015
|
2,887
|
|
|
—
|
|
|
2,887
|
|
|||
2016
|
2,264
|
|
|
—
|
|
|
2,264
|
|
|||
2017
|
2,226
|
|
|
—
|
|
|
2,226
|
|
|||
Thereafter
|
3,958
|
|
|
—
|
|
|
3,958
|
|
|||
Total
|
$
|
18,741
|
|
|
$
|
402
|
|
|
$
|
18,339
|
|
9.
|
EMPLOYEE BENEFIT PLANS
|
|
Pension Benefits
|
|
Other
Postretirement Benefits
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Benefit obligation at January 1
|
$
|
(151,008
|
)
|
|
$
|
(148,968
|
)
|
|
$
|
(9,635
|
)
|
|
$
|
(9,850
|
)
|
Service cost
|
(1,275
|
)
|
|
(1,422
|
)
|
|
(14
|
)
|
|
(13
|
)
|
||||
Interest cost
|
(6,513
|
)
|
|
(7,481
|
)
|
|
(465
|
)
|
|
(500
|
)
|
||||
Benefits paid
|
12,813
|
|
|
11,448
|
|
|
512
|
|
|
534
|
|
||||
Expenses paid
|
308
|
|
|
430
|
|
|
—
|
|
|
—
|
|
||||
Actuarial (gain) loss
|
(8,041
|
)
|
|
(5,015
|
)
|
|
(556
|
)
|
|
194
|
|
||||
Benefit obligation at December 31
|
$
|
(153,716
|
)
|
|
$
|
(151,008
|
)
|
|
$
|
(10,158
|
)
|
|
$
|
(9,635
|
)
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair value of plan assets at January 1
|
$
|
122,012
|
|
|
$
|
132,993
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
15,656
|
|
|
537
|
|
|
—
|
|
|
—
|
|
||||
Expenses paid
|
(308
|
)
|
|
(430
|
)
|
|
—
|
|
|
—
|
|
||||
Contributions
|
3,513
|
|
|
360
|
|
|
512
|
|
|
534
|
|
||||
Benefits paid
|
(12,813
|
)
|
|
(11,448
|
)
|
|
(512
|
)
|
|
(534
|
)
|
||||
Fair value of plan assets at December 31
|
$
|
128,060
|
|
|
$
|
122,012
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Funded status at December 31
|
$
|
(25,656
|
)
|
|
$
|
(28,996
|
)
|
|
$
|
(10,158
|
)
|
|
$
|
(9,635
|
)
|
Amounts recognized in the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prepaid pension costs
|
$
|
12,870
|
|
|
$
|
10,046
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other accrued liabilities
|
(2,161
|
)
|
|
(2,057
|
)
|
|
(663
|
)
|
|
(656
|
)
|
||||
Non-current employee benefit liabilities
|
(36,365
|
)
|
|
(36,985
|
)
|
|
(9,495
|
)
|
|
(8,979
|
)
|
||||
Net amounts recognized
|
$
|
(25,656
|
)
|
|
$
|
(28,996
|
)
|
|
$
|
(10,158
|
)
|
|
$
|
(9,635
|
)
|
|
Pension Benefits
|
|
Other Postretirement
Benefits
|
||||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
||||||||||||
Service cost — benefits earned during the period
|
$
|
1,275
|
|
|
$
|
1,422
|
|
|
$
|
1,360
|
|
|
$
|
14
|
|
|
$
|
13
|
|
|
$
|
13
|
|
Interest cost on projected benefit obligation
|
6,513
|
|
|
7,481
|
|
|
8,131
|
|
|
465
|
|
|
500
|
|
|
521
|
|
||||||
Expected return on assets
|
(8,145
|
)
|
|
(8,834
|
)
|
|
(8,271
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of net loss (gain)
|
3,602
|
|
|
2,807
|
|
|
3,376
|
|
|
(121
|
)
|
|
(88
|
)
|
|
(129
|
)
|
||||||
Net expense
|
$
|
3,245
|
|
|
$
|
2,876
|
|
|
$
|
4,596
|
|
|
$
|
358
|
|
|
$
|
425
|
|
|
$
|
405
|
|
|
Defined
Benefit
Pension Plans
|
|
Post-
Retirement
Plans
|
|
Total
|
||||||
Actuarial loss (gain)
|
$
|
1,466
|
|
|
$
|
(64
|
)
|
|
$
|
1,402
|
|
|
Defined
Benefit
Pension Plans
|
|
Post-
Retirement
Plans
|
|
Total
|
||||||
Prior year accumulated other comprehensive income
|
$
|
(40,717
|
)
|
|
$
|
495
|
|
|
$
|
(40,222
|
)
|
Amortization of prior service costs
|
2,018
|
|
|
—
|
|
|
2,018
|
|
|||
Amortization of gain (loss)
|
1,584
|
|
|
(121
|
)
|
|
1,463
|
|
|||
Net loss arising during the year
|
(531
|
)
|
|
(556
|
)
|
|
(1,087
|
)
|
|||
Current year accumulated other comprehensive loss
|
$
|
(37,646
|
)
|
|
$
|
(182
|
)
|
|
$
|
(37,828
|
)
|
|
Defined
Benefit
Pension Plans
|
|
Post-
Retirement
Plans
|
|
Total
|
||||||
Prior year accumulated other comprehensive income
|
$
|
(30,210
|
)
|
|
$
|
388
|
|
|
$
|
(29,822
|
)
|
Amortization of prior service costs
|
2,018
|
|
|
—
|
|
|
2,018
|
|
|||
Amortization of gain (loss)
|
789
|
|
|
(88
|
)
|
|
701
|
|
|||
Net (loss) gain arising during the year
|
(13,314
|
)
|
|
195
|
|
|
(13,119
|
)
|
|||
Current year accumulated other comprehensive (loss) income
|
$
|
(40,717
|
)
|
|
$
|
495
|
|
|
$
|
(40,222
|
)
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
||||
Weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rates — benefit obligation
|
2.25% - 4.00%
|
|
3.75% - 4.75%
|
|
5.25
|
%
|
|
4.25
|
%
|
|
5.00
|
%
|
|
5.25
|
%
|
Discount rates — service cost
|
3.75% - 4.75%
|
|
5.25%
|
|
5.75
|
%
|
|
5.00
|
%
|
|
5.25
|
%
|
|
5.75
|
%
|
Assumed rates of return on invested assets
|
7.00%
|
|
7.00%
|
|
7.00
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
Salary increase assumptions
|
N/A
|
|
N/A
|
|
N/A
|
|
|
3.00
|
%
|
|
3.00
|
%
|
|
3.00
|
%
|
|
Plan Assets at
December 31,
|
||||
|
2012
|
|
2011
|
||
Asset category:
|
|
|
|
|
|
Equity securities
|
47
|
%
|
|
50
|
%
|
Investment grade fixed income securities
|
30
|
%
|
|
30
|
%
|
High yield fixed income securities
|
10
|
%
|
|
9
|
%
|
Alternative investments
|
8
|
%
|
|
9
|
%
|
Short-term investments
|
5
|
%
|
|
2
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
|
Fair Value Measurements as of December 31, 2012
|
||||||||||||||
|
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Significant
Unobservable Inputs
|
||||||||
Description
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Insurance contracts
|
|
$
|
2,079
|
|
|
$
|
—
|
|
|
$
|
2,079
|
|
|
$
|
—
|
|
Amounts in individually managed investment accounts:
|
|
|
|
|
|
|
|
|
|
|||||||
Cash
|
|
6,309
|
|
|
6,309
|
|
|
—
|
|
|
—
|
|
||||
U.S. equity securities
|
|
43,246
|
|
|
43,246
|
|
|
—
|
|
|
—
|
|
||||
Common collective trusts
|
|
65,867
|
|
|
—
|
|
|
52,714
|
|
|
13,153
|
|
||||
Investment partnership
|
|
10,559
|
|
|
—
|
|
|
—
|
|
|
10,559
|
|
||||
Total
|
|
$
|
128,060
|
|
|
$
|
49,555
|
|
|
$
|
54,793
|
|
|
$
|
23,712
|
|
|
|
Fair Value Measurements as of December 31, 2011
|
||||||||||||||
|
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Significant
Unobservable Inputs
|
||||||||
Description
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Insurance contracts
|
|
$
|
2,047
|
|
|
$
|
—
|
|
|
$
|
2,047
|
|
|
$
|
—
|
|
Amounts in individually managed investment accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash, mutual funds and common stock
|
|
2,401
|
|
|
2,401
|
|
|
—
|
|
|
—
|
|
||||
U.S. equity securities
|
|
46,630
|
|
|
46,630
|
|
|
—
|
|
|
—
|
|
||||
Common collective trusts
|
|
59,954
|
|
|
—
|
|
|
48,350
|
|
|
11,604
|
|
||||
Investment partnership
|
|
10,978
|
|
|
—
|
|
|
—
|
|
|
10,978
|
|
||||
Total
|
|
$
|
122,010
|
|
|
$
|
49,031
|
|
|
$
|
50,397
|
|
|
$
|
22,582
|
|
|
2012
|
|
2011
|
||||
Balance as of January 1
|
$
|
22,582
|
|
|
$
|
16,905
|
|
Distributions
|
(2,905
|
)
|
|
(517
|
)
|
||
Contributions
|
864
|
|
|
6,237
|
|
||
Unrealized loss on long-term investments
|
2,442
|
|
|
(1,810
|
)
|
||
Realized gain on long-term investments
|
729
|
|
|
1,767
|
|
||
Balance as of December 31
|
$
|
23,712
|
|
|
$
|
22,582
|
|
|
1% Increase
|
|
1% Decrease
|
||||
Effect on total of service and interest cost components
|
$
|
5
|
|
|
$
|
(5
|
)
|
Effect on benefit obligation
|
125
|
|
|
(115
|
)
|
|
Pension
|
|
Postretirement
Medical
|
||||
2013
|
$
|
13,136
|
|
|
$
|
664
|
|
2014
|
40,237
|
|
|
659
|
|
||
2015
|
10,455
|
|
|
661
|
|
||
2016
|
10,005
|
|
|
662
|
|
||
2017
|
9,631
|
|
|
664
|
|
||
2018 - 2022
|
44,009
|
|
|
3,342
|
|
10.
|
INCOME TAXES
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Current:
|
|
|
|
|
|
|
|
|
|||
U.S. Federal
|
$
|
24,246
|
|
|
$
|
30,458
|
|
|
$
|
33,142
|
|
State
|
6,185
|
|
|
8,313
|
|
|
101
|
|
|||
|
$
|
30,431
|
|
|
$
|
38,771
|
|
|
$
|
33,243
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|||
U.S. Federal
|
$
|
(5,779
|
)
|
|
$
|
7,765
|
|
|
$
|
(3,381
|
)
|
State
|
(1,557
|
)
|
|
1,601
|
|
|
1,624
|
|
|||
|
(7,336
|
)
|
|
9,366
|
|
|
(1,757
|
)
|
|||
Total
|
$
|
23,095
|
|
|
$
|
48,137
|
|
|
$
|
31,486
|
|
|
December 31, 2012
|
|
December 31, 2011
|
||||||||||||
|
Deferred Tax
Assets
|
|
Deferred Tax
Liabilities
|
|
Deferred Tax
Assets
|
|
Deferred Tax
Liabilities
|
||||||||
Excess of tax basis over book basis- non-consolidated entities
|
$
|
3,654
|
|
|
$
|
—
|
|
|
$
|
4,488
|
|
|
$
|
—
|
|
Employee benefit accruals
|
15,125
|
|
|
—
|
|
|
16,418
|
|
|
—
|
|
||||
Book/tax differences on fixed and Intangible assets
|
—
|
|
|
45,439
|
|
|
—
|
|
|
41,616
|
|
||||
Book/tax differences on inventory
|
—
|
|
|
18,165
|
|
|
—
|
|
|
20,865
|
|
||||
Book/tax differences on long-term investments
|
1
|
|
|
—
|
|
|
22
|
|
|
—
|
|
||||
Impact of accounting on convertible debt
|
—
|
|
|
40,040
|
|
|
—
|
|
|
15,990
|
|
||||
Impact of timing of settlement payments
|
31,407
|
|
|
—
|
|
|
38,164
|
|
|
—
|
|
||||
Various U.S. state tax loss carryforwards
|
10,854
|
|
|
—
|
|
|
14,428
|
|
|
—
|
|
||||
Other
|
31,020
|
|
|
33,187
|
|
|
10,200
|
|
|
18,056
|
|
||||
Valuation allowance
|
(6,310
|
)
|
|
—
|
|
|
(9,752
|
)
|
|
—
|
|
||||
|
$
|
85,751
|
|
|
$
|
136,831
|
|
|
$
|
73,968
|
|
|
$
|
96,527
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Income before income taxes
|
$
|
53,717
|
|
|
$
|
123,157
|
|
|
$
|
85,570
|
|
Federal income tax expense at statutory rate
|
18,801
|
|
|
43,105
|
|
|
29,950
|
|
|||
Increases (decreases) resulting from:
|
|
|
|
|
|
|
|
||||
State income taxes, net of federal income tax benefits
|
3,009
|
|
|
6,444
|
|
|
1,121
|
|
|||
Non-deductible expenses
|
3,311
|
|
|
1,974
|
|
|
1,491
|
|
|||
Impact of domestic production deduction
|
(2,026
|
)
|
|
(4,256
|
)
|
|
(654
|
)
|
|||
Tax credits
|
—
|
|
|
—
|
|
|
(25
|
)
|
|||
Changes in valuation allowance, net of equity and tax audit adjustments
|
—
|
|
|
870
|
|
|
(397
|
)
|
|||
Income tax expense
|
$
|
23,095
|
|
|
$
|
48,137
|
|
|
$
|
31,486
|
|
Balance at January 1, 2010
|
$
|
10,216
|
|
Additions based on tax positions related to current year
|
847
|
|
|
Additions based on tax positions related to prior years
|
1,178
|
|
|
Reductions based on tax positions related to prior years
|
(2,303
|
)
|
|
Settlements
|
(1,076
|
)
|
|
Expirations of the statute of limitations
|
(2,094
|
)
|
|
Balance at December 31, 2010
|
6,768
|
|
|
Additions based on tax positions related to prior years
|
250
|
|
|
Expirations of the statute of limitations
|
(421
|
)
|
|
Balance at December 31, 2011
|
6,597
|
|
|
Additions based on tax positions related to prior years
|
588
|
|
|
Expirations of the statute of limitations
|
(916
|
)
|
|
Balance at December 31, 2012
|
$
|
6,269
|
|
11.
|
STOCK COMPENSATION
|
|
2011
|
|
2010
|
||
Risk-free interest rate
|
1.4% – 1.9%
|
|
2.59
|
%
|
|
Expected volatility
|
24.78% – 25.02%
|
|
24.43
|
%
|
|
Dividend yield
|
0.0% - 10.08%
|
|
9.8
|
%
|
|
Expected holding period
|
4.00 – 4.75 years
|
|
4.74 years
|
|
|
Weighted-average grant date fair value
|
$0.90 – $3.81
|
|
$
|
1.03
|
|
|
Number of
Shares
|
|
Weighted-Average
Exercise Price
|
|
Weighted-Average
Remaining
Contractual Term
(Years)
|
|
Aggregate
Intrinsic
Value(1)
|
|||||
Outstanding on January 1, 2010
|
2,550,048
|
|
|
$
|
12.53
|
|
|
6.6
|
|
$
|
1,947
|
|
Granted
|
115,763
|
|
|
$
|
14.18
|
|
|
|
|
|
|
|
Exercised
|
(128,189
|
)
|
|
$
|
9.87
|
|
|
|
|
|
|
|
Cancelled
|
(21
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
Outstanding on December 31, 2010
|
2,537,601
|
|
|
$
|
12.74
|
|
|
6.0
|
|
$
|
11,208
|
|
Granted
|
503,843
|
|
|
$
|
15.58
|
|
|
|
|
|
|
|
Exercised
|
(531,321
|
)
|
|
$
|
10.85
|
|
|
|
|
|
|
|
Cancelled
|
(202,119
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
Outstanding on December 31, 2011
|
2,308,004
|
|
|
$
|
13.10
|
|
|
7.6
|
|
$
|
11,187
|
|
Granted
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Exercised
|
(16,079
|
)
|
|
$
|
8.66
|
|
|
|
|
|
|
|
Cancelled
|
(6,285
|
)
|
|
$
|
15.07
|
|
|
|
|
|
||
Outstanding on December 31, 2012
|
2,285,640
|
|
|
$
|
13.12
|
|
|
6.6
|
|
$
|
4,371
|
|
Options exercisable at:
|
|
|
|
|
|
|
|
|
|
|
||
December 31, 2010
|
1,118,264
|
|
|
|
|
|
|
|
|
|
||
December 31, 2011
|
391,859
|
|
|
|
|
|
|
|
|
|
||
December 31, 2012
|
398,437
|
|
|
|
|
|
|
|
|
|
(1)
|
The aggregate intrinsic value represents the amount by which the fair value of the underlying common stock (
$14.87
,
$16.91
and
$15.71
at
December 31, 2012
,
2011
and
2010
, respectively) exceeds the option exercise price.
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Range of Exercise Prices
|
|
Outstanding
as of
|
|
Weighted-Average
Remaining
Contractual Life
(Years)
|
|
Weighted-Average
Exercise Price
|
|
Exercisable
as of
|
|
Weighted-Average
Exercise Price
|
||||||||
|
12/31/2012
|
|
|
|
12/31/2012
|
|
||||||||||||
$0.00
|
-
|
$12.73
|
|
1,602,731
|
|
|
6.3
|
|
$
|
12.22
|
|
|
306,191
|
|
|
$
|
12.41
|
|
$12.73
|
-
|
$15.28
|
|
206,629
|
|
|
6.0
|
|
$
|
14.33
|
|
|
92,246
|
|
|
$
|
14.44
|
|
$15.28
|
-
|
$17.82
|
|
476,280
|
|
|
8.0
|
|
$
|
15.65
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
2,285,640
|
|
|
6.6
|
|
$
|
13.12
|
|
|
398,437
|
|
|
$
|
12.88
|
|
12.
|
CONTINGENCIES
|
State
|
|
Number
of Cases
|
|
Florida
|
|
47
|
|
New York
|
|
8
|
|
Maryland
|
|
7
|
|
Louisiana
|
|
3
|
|
West Virginia
|
|
2
|
|
Missouri
|
|
1
|
|
Ohio
|
|
1
|
|
Date
|
|
Case Name
|
|
County
|
|
Net Compensatory
Damages
|
|
Punitive Damages
|
|
Status
|
June 2002
|
|
Lukacs v. R.J. Reynolds
|
|
Miami-Dade
|
|
$12,418
|
|
None
|
|
Affirmed by the Third District Court of Appeal. Judgment has been satisfied and the case is concluded.
|
August 2009
|
|
Campbell v. R.J. Reynolds
|
|
Escambia
|
|
$156
|
|
None
|
|
Affirmed by the First District Court of Appeal. Defendants filed a motion with the District Court of Appeal for certification to the Florida Supreme Court, which was denied in May 2011. Defendants sought review by the US Supreme Court, which was denied in March 2012. In April 2012, the judgment was satisfied and, except for an appeal regarding calculation of interest, the case is concluded. Oral argument occurred on February 13, 2013 on the interest rate appeal. A decision is pending.
|
March 2010
|
|
Douglas v. R.J. Reynolds
|
|
Hillsborough
|
|
$1,350
|
|
None
|
|
Affirmed by the Second District Court of Appeal. The court certified the question of the constitutionality of the Engle findings as a question of great public importance. The Florida Supreme Court agreed to review the case. Oral argument occurred on September 6, 2012. A decision is pending.
|
April 2010
|
|
Clay v. R.J. Reynolds
|
|
Escambia
|
|
$349
|
|
$1,000
|
|
Affirmed by the First District Court of Appeal. Motion for rehearing was denied. The US Supreme Court declined to review the case. Liggett satisfied the judgment in December 2012 and the case is concluded, other than plaintiff's claim for post-trial attorneys' fees.
|
April 2010
|
|
Putney v. R.J. Reynolds
|
|
Broward
|
|
$3,008
|
|
None
|
|
On appeal to the Fourth District Court of Appeal. Oral argument occurred on September 27, 2012. A decision is pending.
|
April 2011
|
|
Tullo v. R.J. Reynolds
|
|
Palm Beach
|
|
$225
|
|
None
|
|
On appeal to the Fourth District Court of Appeal.
|
January 2012
|
|
Ward v. R.J. Reynolds
|
|
Escambia
|
|
$1
|
|
None
|
|
A joint and several judgment was entered for $487 against Liggett and RJR. On appeal to the First District Court of Appeal.
|
May 2012
|
|
Calloway v. R.J. Reynolds
|
|
Escambia
|
|
$1,947
|
|
$7,600
|
|
Post-trial motions were denied. A joint and several judgment was entered for $16,100 against all defendants. On appeal to the Fourth District Court of Appeal.
|
December 2012
|
|
Buchanan v. R.J. Reynolds
|
|
Leon
|
|
$2,035
|
|
None
|
|
Post-trial motions were heard on January 16, 2013.
|
•
|
all claims of the Settling States and their respective political subdivisions and other recipients of state health care funds, relating to: (i) past conduct arising out of the use, sale, distribution, manufacture, development, advertising and marketing of tobacco products; (ii) the health effects of, the exposure to, or research, statements or warnings about, tobacco products; and
|
•
|
all monetary claims of the Settling States and their respective subdivisions and other recipients of state health care funds relating to future conduct arising out of the use of, or exposure to, tobacco products that have been manufactured in the ordinary course of business.
|
•
|
use of “net” units is not required by the MSA (as reflected by, among other things, the use of “gross” units through 2005);
|
•
|
such a change is not authorized without the consent of affected parties to the MSA;
|
•
|
the MSA provides for four-year time limitation periods for revisiting calculations and determinations, which precludes recalculating Liggett’s 1997 Market Share (and thus, Liggett’s market share exemption); and
|
•
|
Liggett and others have relied upon the calculations based on “gross” units since 1998.
|
|
Current Liabilities
|
|
Non-Current Liabilities
|
||||||||||||||||||||
|
Payments due under Master Settlement Agreement
|
|
Litigation Accruals
|
|
Total
|
|
Payments due under Master Settlement Agreement
|
|
Litigation Accruals
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance at January 1, 2010
|
$
|
18,803
|
|
|
$
|
—
|
|
|
$
|
18,803
|
|
|
$
|
22,305
|
|
|
$
|
—
|
|
|
$
|
22,305
|
|
Expenses
|
135,684
|
|
|
19,882
|
|
|
155,566
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Change in MSA obligations capitalized as inventory
|
2,736
|
|
|
—
|
|
|
2,736
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Payments
|
(105,435
|
)
|
|
(15,699
|
)
|
|
(121,134
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification to non-current liabilities
|
(7,900
|
)
|
|
—
|
|
|
(7,900
|
)
|
|
7,900
|
|
|
—
|
|
|
7,900
|
|
||||||
Interest on withholding
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balance at December 31, 2010
|
43,888
|
|
|
4,183
|
|
|
48,071
|
|
|
30,205
|
|
|
—
|
|
|
30,205
|
|
||||||
Expenses
|
155,707
|
|
|
885
|
|
|
156,592
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Change in MSA obligations capitalized as inventory
|
(2,495
|
)
|
|
—
|
|
|
(2,495
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Payments
|
(128,258
|
)
|
|
(1,917
|
)
|
|
(130,175
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification to non-current liabilities
|
(17,668
|
)
|
|
(1,600
|
)
|
|
(19,268
|
)
|
|
17,667
|
|
|
1,600
|
|
|
19,267
|
|
||||||
Interest on withholding
|
—
|
|
|
—
|
|
|
|
|
1,466
|
|
|
—
|
|
|
1,466
|
|
|||||||
Balance at December 31, 2011
|
51,174
|
|
|
1,551
|
|
|
52,725
|
|
|
49,338
|
|
|
1,600
|
|
|
50,938
|
|
||||||
Expenses
|
137,746
|
|
|
1,725
|
|
|
139,471
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Change in MSA obligations capitalized as inventory
|
49
|
|
|
—
|
|
|
49
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Payments
|
(155,094
|
)
|
|
(2,170
|
)
|
|
(157,264
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification to non-current liabilities
|
(905
|
)
|
|
224
|
|
|
(681
|
)
|
|
905
|
|
|
(224
|
)
|
|
681
|
|
||||||
Interest on withholding
|
—
|
|
|
140
|
|
|
140
|
|
|
2,396
|
|
|
486
|
|
|
2,882
|
|
||||||
Balance at December 31, 2012
|
$
|
32,970
|
|
|
$
|
1,470
|
|
|
$
|
34,440
|
|
|
$
|
52,639
|
|
|
$
|
1,862
|
|
|
$
|
54,501
|
|
13.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
I. Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|||
Interest
|
$
|
81,821
|
|
|
$
|
83,677
|
|
|
$
|
67,918
|
|
Income taxes
|
27,693
|
|
|
53,074
|
|
|
41,523
|
|
|||
II. Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
||||
Issuance of stock dividend
|
414
|
|
|
378
|
|
|
357
|
|
|||
Debt retired in debt conversion
|
55,778
|
|
|
10,993
|
|
|
—
|
|
14.
|
RELATED PARTY TRANSACTIONS
|
15.
|
INVESTMENTS AND FAIR VALUE MEASUREMENTS
|
|
|
Fair Value Measurements as of December 31, 2012
|
||||||||||||||
Description
|
|
Total
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
372,718
|
|
|
$
|
372,718
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit
|
|
2,240
|
|
|
—
|
|
|
2,240
|
|
|
—
|
|
||||
Bonds
|
|
6,306
|
|
|
6,306
|
|
|
—
|
|
|
—
|
|
||||
Investment securities available for sale
|
|
69,984
|
|
|
69,107
|
|
|
877
|
|
|
—
|
|
||||
Warrants
(1)
|
|
769
|
|
|
—
|
|
|
—
|
|
|
769
|
|
||||
Total
|
|
$
|
452,017
|
|
|
$
|
448,131
|
|
|
$
|
3,117
|
|
|
$
|
769
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Fair value of derivatives embedded within convertible debt
|
|
$
|
172,128
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
172,128
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Warrants include
1,000,000
of LTS Warrants received on November 4, 2011 which were carried at
$717
as of
December 31, 2012
and are included in "Other assets". The Company recognized
a loss
of
$1,174
for the
year ended December 31, 2012
related to the change in fair value of the Warrants.
|
|
|
Fair Value Measurements as of December 31, 2011
|
||||||||||||||
Description
|
|
Total
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
194,259
|
|
|
$
|
194,259
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit
|
|
2,206
|
|
|
—
|
|
|
2,206
|
|
|
—
|
|
||||
Bonds
|
|
4,573
|
|
|
4,573
|
|
|
—
|
|
|
—
|
|
||||
Investment securities available for sale
|
|
76,486
|
|
|
70,884
|
|
|
5,602
|
|
|
—
|
|
||||
Warrants
(1)
|
|
1,962
|
|
|
—
|
|
|
—
|
|
|
1,962
|
|
||||
Total
|
|
$
|
279,486
|
|
|
$
|
269,716
|
|
|
$
|
7,808
|
|
|
$
|
1,962
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Fair value of derivatives embedded within convertible debt
|
|
$
|
133,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
133,500
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Warrants include
1,000,000
of LTS Warrants received on November 4, 2011 which were carried at
$1,890
as of
December 31, 2011
and are included in "Other assets". The Company recognized
income
of
$690
for the year ended December 31, 2011 related to the change in fair value from receipt. (See Note 14.)
|
|
|
Quantitative Information about Level 3 Fair Value Measurements
|
||||||||||
|
|
Fair Value at
|
|
|
|
|
|
|
||||
|
|
December 31,
2012 |
|
Valuation Technique
|
|
Unobservable Input
|
|
Range (Actual)
|
||||
|
|
|
|
|
|
|
|
|
||||
Warrants
|
|
$
|
769
|
|
|
Option model
|
|
Stock price
|
|
$
|
1.40
|
|
|
|
|
|
|
|
Exercise price
|
|
$
|
1.68
|
|
||
|
|
|
|
|
|
Term (in years)
|
|
3.8
|
|
|||
|
|
|
|
|
|
Volatility
|
|
76.87
|
%
|
|||
|
|
|
|
|
|
Dividend rate
|
|
—
|
|
|||
|
|
|
|
|
|
Risk-free return
|
|
0.50
|
%
|
|||
|
|
|
|
|
|
|
|
|
||||
Fair value of derivatives embedded within convertible debt
|
|
172,128
|
|
|
Discounted cash flow
|
|
Assumed annual stock dividend
|
|
5
|
%
|
||
|
|
|
|
|
|
Assumed annual cash dividend
|
|
$
|
1.60
|
|
||
|
|
|
|
|
|
Stock price
|
|
$
|
14.87
|
|
||
|
|
|
|
|
|
Convertible trading price
|
|
109.0
|
%
|
|||
|
|
|
|
|
|
Volatility
|
|
18.00
|
%
|
|||
|
|
|
|
|
|
Implied credit spread
|
|
10.00% - 11.00% (10.50%)
|
|
|
|
Quantitative Information about Level 3 Fair Value Measurements
|
||||||||||
|
|
Fair Value at
|
|
|
|
|
|
|
||||
|
|
December 31,
2011 |
|
Valuation Technique
|
|
Unobservable Input
|
|
Range (Actual)
|
||||
|
|
|
|
|
|
|
|
|
||||
Warrants
|
|
$
|
1,962
|
|
|
Option model
|
|
Stock price
|
|
$
|
2.48
|
|
|
|
|
|
|
|
Exercise price
|
|
$
|
1.68
|
|
||
|
|
|
|
|
|
Term (in years)
|
|
4.9
|
|
|||
|
|
|
|
|
|
Volatility
|
|
94.12
|
%
|
|||
|
|
|
|
|
|
Dividend rate
|
|
—
|
|
|||
|
|
|
|
|
|
Risk-free return
|
|
0.83
|
%
|
|||
|
|
|
|
|
|
|
|
|
||||
Fair value of derivatives embedded within convertible debt
|
|
133,500
|
|
|
Discounted cash flow
|
|
Assumed annual stock dividend
|
|
5
|
%
|
||
|
|
|
|
|
|
Assumed annual cash dividend
|
|
$
|
1.60
|
|
||
|
|
|
|
|
|
Yield to worst call on the Company's senior secured notes
|
|
9.33
|
%
|
|||
|
|
|
|
|
|
Average spread of unsecured debt
|
|
1.49
|
%
|
|||
|
|
|
|
|
|
Average spread of subordinated debt
|
|
1.89
|
%
|
|||
|
|
|
|
|
|
Discount rate
|
|
12% - 13% (12.5%)
|
|
16.
|
NEW VALLEY LLC
|
|
December 31,
2012 |
|
December 31,
2011 |
||||
Douglas Elliman Realty LLC
|
$
|
65,171
|
|
|
$
|
53,970
|
|
Chelsea Eleven
|
—
|
|
|
6,320
|
|
||
Fifty Third-Five Building
|
—
|
|
|
18,000
|
|
||
Sesto Holdings
|
5,037
|
|
|
5,037
|
|
||
1107 Broadway
|
5,566
|
|
|
5,489
|
|
||
Lofts 21
|
900
|
|
|
900
|
|
||
Hotel Taiwana
|
2,658
|
|
|
2,658
|
|
||
SOCAL Portfolio
|
—
|
|
|
25,095
|
|
||
East 68th Street
|
7,000
|
|
|
7,000
|
|
||
11 Beach Street
|
9,642
|
|
|
—
|
|
||
Maryland Portfolio
|
4,615
|
|
|
—
|
|
||
701 Seventh Avenue
|
9,307
|
|
|
—
|
|
||
Queens Plaza
|
7,350
|
|
|
—
|
|
||
Chrystie Street
|
1,973
|
|
|
—
|
|
||
Investments in non-consolidated real estate businesses
|
$
|
119,219
|
|
|
$
|
124,469
|
|
|
December 31,
2012 |
|
December 31,
2011 |
||||
Cash
|
$
|
78,015
|
|
|
$
|
57,450
|
|
Other current assets
|
8,543
|
|
|
3,293
|
|
||
Property, plant and equipment, net
|
15,796
|
|
|
14,595
|
|
||
Trademarks
|
21,663
|
|
|
21,663
|
|
||
Goodwill
|
38,523
|
|
|
38,742
|
|
||
Other intangible assets, net
|
897
|
|
|
827
|
|
||
Other non-current assets
|
3,182
|
|
|
3,096
|
|
||
Notes payable - current
|
466
|
|
|
602
|
|
||
Other current liabilities
|
22,065
|
|
|
18,734
|
|
||
Notes payable - long term
|
334
|
|
|
1,104
|
|
||
Other long-term liabilities
|
9,614
|
|
|
9,490
|
|
||
Members' equity
|
134,140
|
|
|
109,736
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Revenues
|
$
|
378,175
|
|
|
$
|
346,309
|
|
|
$
|
348,136
|
|
Costs and expenses
|
346,617
|
|
|
315,318
|
|
|
303,358
|
|
|||
Depreciation expense
|
3,422
|
|
|
3,439
|
|
|
3,682
|
|
|||
Amortization expense
|
242
|
|
|
253
|
|
|
329
|
|
|||
Other income
|
1,829
|
|
|
2,007
|
|
|
2,440
|
|
|||
Interest expense, net
|
62
|
|
|
136
|
|
|
552
|
|
|||
Income tax expense
|
780
|
|
|
946
|
|
|
1,329
|
|
|||
Net income
|
$
|
28,881
|
|
|
$
|
28,224
|
|
|
$
|
41,326
|
|
|
December 31,
2012 |
|
December 31,
2011 |
||||
Cash
|
$
|
11
|
|
|
$
|
365
|
|
Other current assets
|
2
|
|
|
—
|
|
||
Net loans receivable
|
—
|
|
|
96,970
|
|
||
Interest receivable
|
—
|
|
|
254
|
|
||
Other assets
|
—
|
|
|
400
|
|
||
Accrued expenses
|
—
|
|
|
269
|
|
||
Members' equity
|
13
|
|
|
97,720
|
|
|
Year Ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
Interest and dividend income
|
$
|
25,122
|
|
|
$
|
635
|
|
Costs and expenses
|
424
|
|
|
269
|
|
||
Interest expense, net
|
7,794
|
|
|
—
|
|
||
Income tax expense
|
12
|
|
|
—
|
|
||
Net income
|
$
|
16,892
|
|
|
$
|
366
|
|
|
December 31,
2012 |
|
December 31,
2011 |
||||
Land and land improvements
|
$
|
11,430
|
|
|
$
|
11,245
|
|
Building and building improvements
|
1,530
|
|
|
1,525
|
|
||
Other
|
1,374
|
|
|
1,208
|
|
||
|
14,334
|
|
|
13,978
|
|
||
Less accumulated depreciation
|
(1,039
|
)
|
|
(698
|
)
|
||
|
$
|
13,295
|
|
|
$
|
13,280
|
|
17.
|
SEGMENT INFORMATION
|
|
Tobacco
|
|
|
Real
Estate
|
|
|
Corporate
and Other
|
|
Total
|
||||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues
|
$
|
1,084,546
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
1,084,546
|
|
Operating income (loss)
|
176,017
|
|
|
|
(2,013
|
)
|
|
|
(19,071
|
)
|
|
154,933
|
|
||||
Equity income from non-consolidated real estate businesses
|
—
|
|
|
|
29,764
|
|
|
|
—
|
|
|
29,764
|
|
||||
Identifiable assets
|
426,027
|
|
|
|
139,940
|
|
(2)
|
|
520,764
|
|
|
1,086,731
|
|
||||
Depreciation and amortization
|
9,759
|
|
|
|
414
|
|
|
|
435
|
|
|
10,608
|
|
||||
Capital expenditures
|
9,339
|
|
|
|
406
|
|
|
|
1,520
|
|
|
11,265
|
|
||||
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues
|
$
|
1,133,380
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
1,133,380
|
|
Operating income (loss)
|
164,581
|
|
|
|
(1,929
|
)
|
|
|
(19,331
|
)
|
|
143,321
|
|
||||
Equity income from non-consolidated real estate businesses
|
—
|
|
|
|
19,966
|
|
|
|
—
|
|
|
19,966
|
|
||||
Identifiable assets
|
440,564
|
|
|
|
138,096
|
|
(2)
|
|
349,108
|
|
|
927,768
|
|
||||
Depreciation and amortization
|
9,118
|
|
|
|
326
|
|
|
|
1,163
|
|
|
10,607
|
|
||||
Capital expenditures
|
10,725
|
|
|
|
252
|
|
|
|
861
|
|
|
11,838
|
|
||||
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues
|
$
|
1,063,289
|
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
1,063,289
|
|
Operating income (loss)
|
130,157
|
|
(1)
|
|
(631
|
)
|
|
|
(18,213
|
)
|
|
111,313
|
|
||||
Equity income from non-consolidated real estate businesses
|
—
|
|
|
|
23,963
|
|
|
|
—
|
|
|
23,963
|
|
||||
Identifiable assets
|
434,842
|
|
|
|
110,532
|
|
(2)
|
|
404,221
|
|
|
949,595
|
|
||||
Depreciation and amortization
|
8,179
|
|
|
|
298
|
|
|
|
2,313
|
|
|
10,790
|
|
||||
Capital expenditures
|
23,073
|
|
|
|
226
|
|
|
|
92
|
|
|
23,391
|
|
(1)
|
Operating income includes litigation judgment expense of
$16,161
and a
$3,000
settlement charge.
|
(2)
|
Includes investments accounted for under the equity method of accounting of
$125,651
,
$140,968
and
$86,333
as of
December 31, 2012
,
2011
and
2010
, respectively.
|
18.
|
QUARTERLY FINANCIAL RESULTS (UNAUDITED)
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
||||||||
|
2012
|
|
September 30, 2012
|
|
June 30, 2012
|
|
March 31, 2012
|
||||||||
Revenues
|
$
|
277,563
|
|
|
$
|
272,783
|
|
|
$
|
276,594
|
|
|
$
|
257,606
|
|
Gross Profit
|
69,793
|
|
|
69,034
|
|
|
64,842
|
|
|
57,425
|
|
||||
Operating income
|
37,366
|
|
|
43,193
|
|
|
40,928
|
|
|
33,446
|
|
||||
Net income (loss) applicable to common shares
|
$
|
16,485
|
|
|
$
|
17,932
|
|
|
$
|
3,895
|
|
|
$
|
(7,690
|
)
|
Per basic common share(1):
|
|
|
|
|
|
|
|
||||||||
Net income (loss) applicable to common shares
|
$
|
0.19
|
|
|
$
|
0.21
|
|
|
$
|
0.05
|
|
|
$
|
(0.09
|
)
|
Per diluted common share(1):
|
|
|
|
|
|
|
|
||||||||
Net income (loss) applicable to common shares
|
$
|
0.14
|
|
|
$
|
0.21
|
|
|
$
|
0.05
|
|
|
$
|
(0.10
|
)
|
(1)
|
Per share computations include the impact of a
5%
stock dividend paid on
September 28, 2012
. Quarterly basic and diluted net income per common share were computed independently for each quarter and do not necessarily total to the year to date basic and diluted net income per common share.
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
||||||||
|
2011
|
|
September 30, 2011
|
|
June 30, 2011
|
|
March 31, 2011
|
||||||||
Revenues
|
$
|
292,827
|
|
|
$
|
288,995
|
|
|
$
|
291,180
|
|
|
$
|
260,378
|
|
Gross Profit
|
64,057
|
|
|
61,132
|
|
|
60,107
|
|
|
55,201
|
|
||||
Operating income
|
36,023
|
|
|
37,855
|
|
|
37,967
|
|
|
31,476
|
|
||||
Net income (loss) applicable to common shares
|
$
|
7,797
|
|
|
$
|
17,549
|
|
|
$
|
30,301
|
|
|
$
|
19,373
|
|
Per basic common share(1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income applicable to common shares
|
$
|
0.09
|
|
|
$
|
0.21
|
|
|
$
|
0.36
|
|
|
$
|
0.23
|
|
Per diluted common share(1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income applicable to common shares
|
$
|
0.09
|
|
|
$
|
0.20
|
|
|
$
|
0.33
|
|
|
$
|
0.23
|
|
(1)
|
Per share computations include the impact of a
5%
stock dividend paid on September 29, 2011. Quarterly basic and diluted net income per common share were computed independently for each quarter and do not necessarily total to the year to date basic and diluted net income per common share.
|
19.
|
CONDENSED CONSOLIDATING FINANCIAL INFORMATION
|
•
|
the sale or other disposition of all or substantially all of the assets or all of the capital stock of any subsidiary guarantor; and
|
•
|
t
he satisfaction of the requirements for legal defeasance or the satisfaction and discharge of the indenture.
|
|
|
|
December 31, 2012
|
|
|
||||||||||||||
|
|
|
|
|
Subsidiary
|
|
|
|
Consolidated
|
||||||||||
|
Parent/
|
|
Subsidiary
|
|
Non-
|
|
Consolidating
|
|
Vector Group
|
||||||||||
|
Issuer
|
|
Guarantors
|
|
Guarantors
|
|
Adjustments
|
|
Ltd.
|
||||||||||
ASSETS:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
401,344
|
|
|
$
|
3,776
|
|
|
$
|
735
|
|
|
$
|
—
|
|
|
$
|
405,855
|
|
Investment securities available for sale
|
35,330
|
|
|
34,654
|
|
|
—
|
|
|
—
|
|
|
69,984
|
|
|||||
Accounts receivable - trade, net
|
—
|
|
|
11,183
|
|
|
64
|
|
|
—
|
|
|
11,247
|
|
|||||
Intercompany receivables
|
354
|
|
|
—
|
|
|
—
|
|
|
(354
|
)
|
|
—
|
|
|||||
Inventories
|
—
|
|
|
100,392
|
|
|
—
|
|
|
—
|
|
|
100,392
|
|
|||||
Deferred income taxes
|
33,238
|
|
|
3,371
|
|
|
—
|
|
|
—
|
|
|
36,609
|
|
|||||
Income taxes receivable, net
|
33,302
|
|
|
—
|
|
|
—
|
|
|
(26,523
|
)
|
|
6,779
|
|
|||||
Restricted assets
|
—
|
|
|
2,469
|
|
|
—
|
|
|
—
|
|
|
2,469
|
|
|||||
Other current assets
|
665
|
|
|
4,848
|
|
|
208
|
|
|
—
|
|
|
5,721
|
|
|||||
Total current assets
|
504,233
|
|
|
160,693
|
|
|
1,007
|
|
|
(26,877
|
)
|
|
639,056
|
|
|||||
Property, plant and equipment, net
|
2,104
|
|
|
54,810
|
|
|
239
|
|
|
—
|
|
|
57,153
|
|
|||||
Investment in Escena, net
|
—
|
|
|
—
|
|
|
13,295
|
|
|
—
|
|
|
13,295
|
|
|||||
Long-term investments accounted for at cost
|
15,540
|
|
|
—
|
|
|
827
|
|
|
—
|
|
|
16,367
|
|
|||||
Long-term investments accounted for under the equity method
|
6,432
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,432
|
|
|||||
Investments in non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
119,219
|
|
|
—
|
|
|
119,219
|
|
|||||
Investments in consolidated subsidiaries
|
210,525
|
|
|
—
|
|
|
—
|
|
|
(210,525
|
)
|
|
—
|
|
|||||
Restricted assets
|
1,898
|
|
|
7,863
|
|
|
31
|
|
|
—
|
|
|
9,792
|
|
|||||
Deferred income taxes
|
38,077
|
|
|
5,669
|
|
|
5,396
|
|
|
—
|
|
|
49,142
|
|
|||||
Intangible asset
|
—
|
|
|
107,511
|
|
|
—
|
|
|
—
|
|
|
107,511
|
|
|||||
Prepaid pension costs
|
—
|
|
|
12,870
|
|
|
—
|
|
|
—
|
|
|
12,870
|
|
|||||
Other assets
|
39,534
|
|
|
16,144
|
|
|
216
|
|
|
—
|
|
|
55,894
|
|
|||||
Total assets
|
$
|
818,343
|
|
|
$
|
365,560
|
|
|
$
|
140,230
|
|
|
$
|
(237,402
|
)
|
|
$
|
1,086,731
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current portion of notes payable and long-term debt
|
$
|
—
|
|
|
$
|
36,617
|
|
|
$
|
161
|
|
|
$
|
—
|
|
|
$
|
36,778
|
|
Current portion of employee benefits
|
—
|
|
|
2,824
|
|
|
—
|
|
|
—
|
|
|
2,824
|
|
|||||
Accounts payable
|
661
|
|
|
5,173
|
|
|
265
|
|
|
—
|
|
|
6,099
|
|
|||||
Intercompany payables
|
—
|
|
|
64
|
|
|
290
|
|
|
(354
|
)
|
|
—
|
|
|||||
Accrued promotional expenses
|
—
|
|
|
18,730
|
|
|
—
|
|
|
—
|
|
|
18,730
|
|
|||||
Income taxes payable, net
|
—
|
|
|
1,445
|
|
|
31,347
|
|
|
(26,523
|
)
|
|
6,269
|
|
|||||
Accrued excise and payroll taxes payable, net
|
—
|
|
|
20,419
|
|
|
—
|
|
|
—
|
|
|
20,419
|
|
|||||
Litigation accruals and current payments due under the Master Settlement Agreement
|
—
|
|
|
34,440
|
|
|
—
|
|
|
—
|
|
|
34,440
|
|
|||||
Deferred income taxes
|
23,304
|
|
|
3,995
|
|
|
—
|
|
|
—
|
|
|
27,299
|
|
|||||
Accrued interest
|
25,410
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,410
|
|
|||||
Other current liabilities
|
5,545
|
|
|
9,658
|
|
|
1,688
|
|
|
—
|
|
|
16,891
|
|
|||||
Total current liabilities
|
54,920
|
|
|
133,365
|
|
|
33,751
|
|
|
(26,877
|
)
|
|
195,159
|
|
|||||
Notes payable, long-term debt and other obligations, less current portion
|
572,023
|
|
|
14,860
|
|
|
63
|
|
|
—
|
|
|
586,946
|
|
|||||
Fair value of derivatives embedded within convertible debt
|
172,128
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
172,128
|
|
|||||
Non-current employee benefits
|
25,599
|
|
|
20,261
|
|
|
—
|
|
|
—
|
|
|
45,860
|
|
|||||
Deferred income taxes
|
71,777
|
|
|
33,793
|
|
|
3,962
|
|
|
—
|
|
|
109,532
|
|
|||||
Other liabilities, primarily litigation accruals and payments due under the Master Settlement Agreement
|
1,148
|
|
|
54,506
|
|
|
704
|
|
|
—
|
|
|
56,358
|
|
|||||
Total liabilities
|
897,595
|
|
|
256,785
|
|
|
38,480
|
|
|
(26,877
|
)
|
|
1,165,983
|
|
|||||
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders' deficiency
|
(79,252
|
)
|
|
108,775
|
|
|
101,750
|
|
|
(210,525
|
)
|
|
(79,252
|
)
|
|||||
Total liabilities and stockholders' deficiency
|
$
|
818,343
|
|
|
$
|
365,560
|
|
|
$
|
140,230
|
|
|
$
|
(237,402
|
)
|
|
$
|
1,086,731
|
|
|
|
|
December 31, 2011
|
|
|
||||||||||||||
|
|
|
|
|
Subsidiary
|
|
|
|
Consolidated
|
||||||||||
|
Parent/
|
|
Subsidiary
|
|
Non-
|
|
Consolidating
|
|
Vector Group
|
||||||||||
|
Issuer
|
|
Guarantors
|
|
Guarantors
|
|
Adjustments
|
|
Ltd.
|
||||||||||
ASSETS:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
238,262
|
|
|
$
|
2,488
|
|
|
$
|
173
|
|
|
$
|
—
|
|
|
$
|
240,923
|
|
Investment securities available for sale
|
50,401
|
|
|
26,085
|
|
|
—
|
|
|
—
|
|
|
76,486
|
|
|||||
Accounts receivable - trade, net
|
—
|
|
|
24,869
|
|
|
—
|
|
|
—
|
|
|
24,869
|
|
|||||
Intercompany receivables
|
64
|
|
|
—
|
|
|
—
|
|
|
(64
|
)
|
|
—
|
|
|||||
Inventories
|
—
|
|
|
109,228
|
|
|
—
|
|
|
—
|
|
|
109,228
|
|
|||||
Deferred income taxes
|
39,883
|
|
|
3,068
|
|
|
—
|
|
|
—
|
|
|
42,951
|
|
|||||
Income taxes receivable, net
|
47,484
|
|
|
4,984
|
|
|
—
|
|
|
(42,915
|
)
|
|
9,553
|
|
|||||
Restricted assets
|
—
|
|
|
1,474
|
|
|
—
|
|
|
—
|
|
|
1,474
|
|
|||||
Other current assets
|
565
|
|
|
3,498
|
|
|
194
|
|
|
—
|
|
|
4,257
|
|
|||||
Total current assets
|
376,659
|
|
|
175,694
|
|
|
367
|
|
|
(42,979
|
)
|
|
509,741
|
|
|||||
Property, plant and equipment, net
|
1,345
|
|
|
55,211
|
|
|
—
|
|
|
—
|
|
|
56,556
|
|
|||||
Investment in Escena, net
|
—
|
|
|
—
|
|
|
13,280
|
|
|
—
|
|
|
13,280
|
|
|||||
Long-term investments accounted for at cost
|
4,777
|
|
|
—
|
|
|
898
|
|
|
—
|
|
|
5,675
|
|
|||||
Long-term investments accounted for under the equity method
|
16,499
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,499
|
|
|||||
Investments in non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
124,469
|
|
|
—
|
|
|
124,469
|
|
|||||
Investments in consolidated subsidiaries
|
211,219
|
|
|
—
|
|
|
—
|
|
|
(211,219
|
)
|
|
—
|
|
|||||
Restricted assets
|
2,161
|
|
|
7,465
|
|
|
—
|
|
|
—
|
|
|
9,626
|
|
|||||
Deferred income taxes
|
18,564
|
|
|
6,412
|
|
|
6,041
|
|
|
—
|
|
|
31,017
|
|
|||||
Intangible asset
|
—
|
|
|
107,511
|
|
|
—
|
|
|
—
|
|
|
107,511
|
|
|||||
Prepaid pension costs
|
—
|
|
|
10,047
|
|
|
—
|
|
|
—
|
|
|
10,047
|
|
|||||
Other assets
|
28,108
|
|
|
15,239
|
|
|
—
|
|
|
—
|
|
|
43,347
|
|
|||||
Total assets
|
$
|
659,332
|
|
|
$
|
377,579
|
|
|
$
|
145,055
|
|
|
$
|
(254,198
|
)
|
|
$
|
927,768
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current portion of notes payable and long-term debt
|
$
|
16,052
|
|
|
$
|
34,651
|
|
|
$
|
141
|
|
|
$
|
—
|
|
|
$
|
50,844
|
|
Current portion of fair value of derivatives embedded within convertible debt
|
84,485
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
84,485
|
|
|||||
Current portion of employee benefits
|
—
|
|
|
2,690
|
|
|
—
|
|
|
—
|
|
|
2,690
|
|
|||||
Accounts payable
|
1,040
|
|
|
8,321
|
|
|
171
|
|
|
—
|
|
|
9,532
|
|
|||||
Intercompany payables
|
—
|
|
|
64
|
|
|
—
|
|
|
(64
|
)
|
|
—
|
|
|||||
Accrued promotional expenses
|
—
|
|
|
17,056
|
|
|
—
|
|
|
—
|
|
|
17,056
|
|
|||||
Income taxes payable, net
|
6,597
|
|
|
—
|
|
|
42,915
|
|
|
(42,915
|
)
|
|
6,597
|
|
|||||
Accrued excise and payroll taxes payable, net
|
—
|
|
|
17,992
|
|
|
—
|
|
|
—
|
|
|
17,992
|
|
|||||
Litigation accruals and current payments due under the Master Settlement Agreement
|
—
|
|
|
52,725
|
|
|
—
|
|
|
—
|
|
|
52,725
|
|
|||||
Deferred income taxes
|
32,558
|
|
|
3,327
|
|
|
—
|
|
|
—
|
|
|
35,885
|
|
|||||
Accrued interest
|
20,888
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,888
|
|
|||||
Other current liabilities
|
6,683
|
|
|
9,079
|
|
|
742
|
|
|
—
|
|
|
16,504
|
|
|||||
Total current liabilities
|
168,303
|
|
|
145,905
|
|
|
43,969
|
|
|
(42,979
|
)
|
|
315,198
|
|
|||||
Notes payable, long-term debt and other obligations, less current portion
|
479,199
|
|
|
13,941
|
|
|
216
|
|
|
—
|
|
|
493,356
|
|
|||||
Fair value of derivatives embedded within convertible debt
|
49,015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
49,015
|
|
|||||
Non-current employee benefits
|
23,023
|
|
|
22,959
|
|
|
—
|
|
|
—
|
|
|
45,982
|
|
|||||
Deferred income taxes
|
27,970
|
|
|
30,135
|
|
|
2,537
|
|
|
—
|
|
|
60,642
|
|
|||||
Other liabilities, primarily litigation accruals and payments due under the Master Settlement Agreement
|
852
|
|
|
51,010
|
|
|
743
|
|
|
—
|
|
|
52,605
|
|
|||||
Total liabilities
|
748,362
|
|
|
263,950
|
|
|
47,465
|
|
|
(42,979
|
)
|
|
1,016,798
|
|
|||||
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders' deficiency
|
(89,030
|
)
|
|
113,629
|
|
|
97,590
|
|
|
(211,219
|
)
|
|
(89,030
|
)
|
|||||
Total liabilities and stockholders' deficiency
|
$
|
659,332
|
|
|
$
|
377,579
|
|
|
$
|
145,055
|
|
|
$
|
(254,198
|
)
|
|
$
|
927,768
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
||||||||||||||
|
|
|
|
|
Subsidiary
|
|
|
|
Consolidated
|
||||||||||
|
Parent/
|
|
Subsidiary
|
|
Non-
|
|
Consolidating
|
|
Vector Group
|
||||||||||
|
Issuer
|
|
Guarantors
|
|
Guarantors
|
|
Adjustments
|
|
Ltd.
|
||||||||||
Revenues
|
$
|
—
|
|
|
$
|
1,084,546
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,084,546
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of goods sold
|
—
|
|
|
823,452
|
|
|
—
|
|
|
—
|
|
|
823,452
|
|
|||||
Operating, selling, administrative and general expenses
|
26,039
|
|
|
78,054
|
|
|
2,068
|
|
|
—
|
|
|
106,161
|
|
|||||
Management fee expense
|
—
|
|
|
9,163
|
|
|
—
|
|
|
(9,163
|
)
|
|
—
|
|
|||||
Operating (loss) income
|
(26,039
|
)
|
|
173,877
|
|
|
(2,068
|
)
|
|
9,163
|
|
|
154,933
|
|
|||||
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
(105,465
|
)
|
|
(4,614
|
)
|
|
(23
|
)
|
|
—
|
|
|
(110,102
|
)
|
|||||
Change in fair value of derivatives embedded within convertible debt
|
(7,476
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,476
|
)
|
|||||
Acceleration of interest expense related to debt conversion
|
(14,960
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,960
|
)
|
|||||
Equity income from non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
29,764
|
|
|
—
|
|
|
29,764
|
|
|||||
Equity loss on long-term investments
|
(1,261
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,261
|
)
|
|||||
Gain on investment securities available for sale
|
—
|
|
|
1,640
|
|
|
—
|
|
|
—
|
|
|
1,640
|
|
|||||
Equity income in consolidated subsidiaries
|
120,036
|
|
|
—
|
|
|
—
|
|
|
(120,036
|
)
|
|
—
|
|
|||||
Management fee income
|
9,163
|
|
|
—
|
|
|
—
|
|
|
(9,163
|
)
|
|
—
|
|
|||||
Other, net
|
1,022
|
|
|
21
|
|
|
136
|
|
|
—
|
|
|
1,179
|
|
|||||
(Loss) income before provision for income taxes
|
(24,980
|
)
|
|
170,924
|
|
|
27,809
|
|
|
(120,036
|
)
|
|
53,717
|
|
|||||
Income tax benefit (expense)
|
55,602
|
|
|
(67,294
|
)
|
|
(11,403
|
)
|
|
—
|
|
|
(23,095
|
)
|
|||||
Net income
|
30,622
|
|
|
103,630
|
|
|
16,406
|
|
|
(120,036
|
)
|
|
30,622
|
|
|||||
Comprehensive income
|
$
|
24,031
|
|
|
$
|
104,520
|
|
|
$
|
16,406
|
|
|
$
|
(120,926
|
)
|
|
$
|
24,031
|
|
|
|
|
Year Ended December 31, 2011
|
|
|
||||||||||||||
|
|
|
|
|
Subsidiary
|
|
|
|
Consolidated
|
||||||||||
|
Parent/
|
|
Subsidiary
|
|
Non-
|
|
Consolidating
|
|
Vector Group
|
||||||||||
|
Issuer
|
|
Guarantors
|
|
Guarantors
|
|
Adjustments
|
|
Ltd.
|
||||||||||
Revenues
|
$
|
—
|
|
|
$
|
1,133,380
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,133,380
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of goods sold
|
—
|
|
|
892,883
|
|
|
—
|
|
|
—
|
|
|
892,883
|
|
|||||
Operating, selling, administrative and general expenses
|
25,318
|
|
|
69,827
|
|
|
2,031
|
|
|
—
|
|
|
97,176
|
|
|||||
Litigation judgment expense
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|||||||
Management fee expense
|
—
|
|
|
8,834
|
|
|
—
|
|
|
(8,834
|
)
|
|
—
|
|
|||||
Operating (loss) income
|
(25,318
|
)
|
|
161,836
|
|
|
(2,031
|
)
|
|
8,834
|
|
|
143,321
|
|
|||||
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
(97,888
|
)
|
|
(2,786
|
)
|
|
(32
|
)
|
|
—
|
|
|
(100,706
|
)
|
|||||
Change in fair value of derivatives embedded within convertible debt
|
7,984
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,984
|
|
|||||
Acceleration of interest expense related to debt conversion
|
(1,217
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,217
|
)
|
|||||
Equity income from non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
19,966
|
|
|
—
|
|
|
19,966
|
|
|||||
Gain on investment securities available for sale
|
—
|
|
|
23,257
|
|
|
—
|
|
|
—
|
|
|
23,257
|
|
|||||
Gain on liquidation of long-term investments
|
25,832
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,832
|
|
|||||
Gain on sales of townhomes
|
—
|
|
|
—
|
|
|
3,843
|
|
|
—
|
|
|
3,843
|
|
|||||
Equity loss on long-term investments
|
(859
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(859
|
)
|
|||||
Equity income in consolidated subsidiaries
|
127,103
|
|
|
—
|
|
|
—
|
|
|
(127,103
|
)
|
|
—
|
|
|||||
Management fee income
|
8,834
|
|
|
—
|
|
|
—
|
|
|
(8,834
|
)
|
|
—
|
|
|||||
Other, net
|
1,675
|
|
|
61
|
|
|
—
|
|
|
—
|
|
|
1,736
|
|
|||||
Income before provision for income taxes
|
46,146
|
|
|
182,368
|
|
|
21,746
|
|
|
(127,103
|
)
|
|
123,157
|
|
|||||
Income tax benefit (expense)
|
28,874
|
|
|
(68,182
|
)
|
|
(8,829
|
)
|
|
—
|
|
|
(48,137
|
)
|
|||||
Net income
|
75,020
|
|
|
114,186
|
|
|
12,917
|
|
|
(127,103
|
)
|
|
75,020
|
|
|||||
Comprehensive income
|
$
|
66,887
|
|
|
$
|
103,495
|
|
|
$
|
12,917
|
|
|
$
|
(116,412
|
)
|
|
$
|
66,887
|
|
|
Year Ended December 31, 2010
|
||||||||||||||||||
|
Parent/
Issuer
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-
Guarantors
|
|
Consolidating
Adjustments
|
|
Consolidated
Vector Group
Ltd.
|
||||||||||
Revenues
|
$
|
—
|
|
|
$
|
1,063,289
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,063,289
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Cost of goods sold
|
—
|
|
|
845,106
|
|
|
—
|
|
|
—
|
|
|
845,106
|
|
|||||
Operating, selling, administrative and general expenses
|
21,842
|
|
|
67,939
|
|
|
928
|
|
|
—
|
|
|
90,709
|
|
|||||
Litigation judgment expense
|
—
|
|
|
16,161
|
|
|
—
|
|
|
—
|
|
|
16,161
|
|
|||||
Management fee expense
|
—
|
|
|
8,521
|
|
|
—
|
|
|
(8,521
|
)
|
|
—
|
|
|||||
Operating (loss) income
|
(21,842
|
)
|
|
125,562
|
|
|
(928
|
)
|
|
8,521
|
|
|
111,313
|
|
|||||
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense
|
(82,828
|
)
|
|
(1,227
|
)
|
|
(41
|
)
|
|
—
|
|
|
(84,096
|
)
|
|||||
Changes in fair value of derivatives embedded within convertible debt
|
11,524
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,524
|
|
|||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Provision for loss on investments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Equity income from non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
23,963
|
|
|
—
|
|
|
23,963
|
|
|||||
Gain on investment securities available for sale
|
10,612
|
|
|
9,257
|
|
|
—
|
|
|
—
|
|
|
19,869
|
|
|||||
Equity income on long-term investments
|
1,489
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,489
|
|
|||||
Equity income in consolidated subsidiaries
|
91,715
|
|
|
—
|
|
|
—
|
|
|
(91,715
|
)
|
|
—
|
|
|||||
Management fee income
|
8,521
|
|
|
—
|
|
|
—
|
|
|
(8,521
|
)
|
|
—
|
|
|||||
Other, net
|
1,469
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
1,508
|
|
|||||
Income before provision for income taxes
|
20,660
|
|
|
133,631
|
|
|
22,994
|
|
|
(91,715
|
)
|
|
85,570
|
|
|||||
Income tax benefit (expense)
|
33,424
|
|
|
(55,713
|
)
|
|
(9,197
|
)
|
|
—
|
|
|
(31,486
|
)
|
|||||
Net income
|
54,084
|
|
|
77,918
|
|
|
13,797
|
|
|
(91,715
|
)
|
|
54,084
|
|
|||||
Comprehensive income
|
$
|
73,419
|
|
|
$
|
92,708
|
|
|
$
|
13,797
|
|
|
$
|
(106,505
|
)
|
|
$
|
73,419
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
||||||||||||||
|
|
|
|
|
Subsidiary
|
|
|
|
Consolidated
|
||||||||||
|
Parent/
|
|
Subsidiary
|
|
Non-
|
|
Consolidating
|
|
Vector Group
|
||||||||||
|
Issuer
|
|
Guarantors
|
|
Guarantors
|
|
Adjustments
|
|
Ltd.
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
118,399
|
|
|
$
|
133,308
|
|
|
$
|
(2,772
|
)
|
|
$
|
(164,849
|
)
|
|
$
|
84,086
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Sale of investment securities
|
—
|
|
|
3,831
|
|
|
—
|
|
|
—
|
|
|
3,831
|
|
|||||
Purchase of investment securities
|
—
|
|
|
(5,647
|
)
|
|
—
|
|
|
—
|
|
|
(5,647
|
)
|
|||||
Proceeds from sale or liquidation of long-term investments
|
—
|
|
|
—
|
|
|
72
|
|
|
—
|
|
|
72
|
|
|||||
Purchase of long-term investments
|
(5,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,000
|
)
|
|||||
Investments in non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
(33,375
|
)
|
|
—
|
|
|
(33,375
|
)
|
|||||
Distributions from non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
49,221
|
|
|
—
|
|
|
49,221
|
|
|||||
Increase in cash surrender value of life insurance policies
|
(425
|
)
|
|
(482
|
)
|
|
—
|
|
|
—
|
|
|
(907
|
)
|
|||||
Decrease (increase) in non-current restricted assets
|
263
|
|
|
(1,393
|
)
|
|
—
|
|
|
—
|
|
|
(1,130
|
)
|
|||||
Issuance of notes receivable
|
(383
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(383
|
)
|
|||||
Investments in subsidiaries
|
(31,209
|
)
|
|
—
|
|
|
—
|
|
|
31,209
|
|
|
—
|
|
|||||
Proceeds from sale of fixed assets
|
432
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
444
|
|
|||||
Capital expenditures
|
(1,520
|
)
|
|
(9,339
|
)
|
|
(406
|
)
|
|
—
|
|
|
(11,265
|
)
|
|||||
Net cash (used in) provided by investing activities
|
(37,842
|
)
|
|
(13,018
|
)
|
|
15,512
|
|
|
31,209
|
|
|
(4,139
|
)
|
|||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from debt issuance
|
230,000
|
|
|
14,033
|
|
|
42
|
|
|
—
|
|
|
244,075
|
|
|||||
Deferred financing costs
|
(11,164
|
)
|
|
(315
|
)
|
|
—
|
|
|
—
|
|
|
(11,479
|
)
|
|||||
Repayments of debt
|
—
|
|
|
(19,125
|
)
|
|
(133
|
)
|
|
—
|
|
|
(19,258
|
)
|
|||||
Borrowings under revolver
|
—
|
|
|
1,074,050
|
|
|
—
|
|
|
—
|
|
|
1,074,050
|
|
|||||
Repayments on revolver
|
—
|
|
|
(1,066,092
|
)
|
|
—
|
|
|
—
|
|
|
(1,066,092
|
)
|
|||||
Capital contributions received
|
—
|
|
|
6,991
|
|
|
24,218
|
|
|
(31,209
|
)
|
|
—
|
|
|||||
Intercompany dividends paid
|
—
|
|
|
(128,544
|
)
|
|
(36,305
|
)
|
|
164,849
|
|
|
—
|
|
|||||
Dividends and distributions on common stock
|
(137,114
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(137,114
|
)
|
|||||
Proceeds from the issuance of Vector stock
|
611
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
611
|
|
|||||
Proceeds from exercise of Vector options
|
140
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
140
|
|
|||||
Tax benefit of options exercised
|
52
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
|||||
Net cash provided by (used in) financing activities
|
82,525
|
|
|
(119,002
|
)
|
|
(12,178
|
)
|
|
133,640
|
|
|
84,985
|
|
|||||
Net increase in cash and cash equivalents
|
163,082
|
|
|
1,288
|
|
|
562
|
|
|
—
|
|
|
164,932
|
|
|||||
Cash and cash equivalents, beginning of period
|
238,262
|
|
|
2,488
|
|
|
173
|
|
|
—
|
|
|
240,923
|
|
|||||
Cash and cash equivalents, end of period
|
$
|
401,344
|
|
|
$
|
3,776
|
|
|
$
|
735
|
|
|
$
|
—
|
|
|
$
|
405,855
|
|
|
|
|
Year Ended December 31, 2011
|
|
|
||||||||||||||
|
|
|
|
|
Subsidiary
|
|
|
|
Consolidated
|
||||||||||
|
Parent/
|
|
Subsidiary
|
|
Non-
|
|
Consolidating
|
|
Vector Group
|
||||||||||
|
Issuer
|
|
Guarantors
|
|
Guarantors
|
|
Adjustments
|
|
Ltd.
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
67,588
|
|
|
$
|
101,223
|
|
|
$
|
7,352
|
|
|
$
|
(140,122
|
)
|
|
$
|
36,041
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Sale of investment securities
|
—
|
|
|
31,643
|
|
|
—
|
|
|
—
|
|
|
31,643
|
|
|||||
Purchase of investment securities
|
—
|
|
|
(5,039
|
)
|
|
—
|
|
|
—
|
|
|
(5,039
|
)
|
|||||
Proceeds from sale of or liquidation of long-term investments
|
66,190
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66,190
|
|
|||||
Purchase of long-term investments
|
(10,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,000
|
)
|
|||||
Investments in non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
(41,859
|
)
|
|
—
|
|
|
(41,859
|
)
|
|||||
Distributions from non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
8,450
|
|
|
—
|
|
|
8,450
|
|
|||||
Increase in cash surrender value of life insurance policies
|
(315
|
)
|
|
(429
|
)
|
|
—
|
|
|
—
|
|
|
(744
|
)
|
|||||
Decrease in non-current restricted assets
|
512
|
|
|
(608
|
)
|
|
—
|
|
|
—
|
|
|
(96
|
)
|
|||||
Issuance of notes receivable
|
(15,256
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,256
|
)
|
|||||
Proceeds from sale of townhomes
|
—
|
|
|
—
|
|
|
19,629
|
|
|
—
|
|
|
19,629
|
|
|||||
Proceeds from sale of fixed assets
|
—
|
|
|
196
|
|
|
9
|
|
|
—
|
|
|
205
|
|
|||||
Investments in subsidiaries
|
(29,565
|
)
|
|
—
|
|
|
—
|
|
|
29,565
|
|
|
—
|
|
|||||
Capital expenditures
|
(852
|
)
|
|
(10,725
|
)
|
|
(261
|
)
|
|
—
|
|
|
(11,838
|
)
|
|||||
Net cash provided by (used in) investing activities
|
10,714
|
|
|
15,038
|
|
|
(14,032
|
)
|
|
29,565
|
|
|
41,285
|
|
|||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from debt issuance
|
—
|
|
|
6,419
|
|
|
—
|
|
|
—
|
|
|
6,419
|
|
|||||
Repayments of debt
|
—
|
|
|
(4,838
|
)
|
|
(122
|
)
|
|
—
|
|
|
(4,960
|
)
|
|||||
Borrowings under revolver
|
—
|
|
|
1,064,270
|
|
|
—
|
|
|
—
|
|
|
1,064,270
|
|
|||||
Repayments on revolver
|
—
|
|
|
(1,078,508
|
)
|
|
—
|
|
|
—
|
|
|
(1,078,508
|
)
|
|||||
Capital contributions received
|
—
|
|
|
3,720
|
|
|
25,845
|
|
|
(29,565
|
)
|
|
—
|
|
|||||
Intercompany dividends paid
|
—
|
|
|
(121,050
|
)
|
|
(19,072
|
)
|
|
140,122
|
|
|
—
|
|
|||||
Dividends and distributions on common stock
|
(125,299
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(125,299
|
)
|
|||||
Proceeds from exercise of Vector options and warrants.
|
1,029
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,029
|
|
|||||
Tax benefits from exercise of Vector options and warrants
|
821
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
821
|
|
|||||
Net cash (used in) provided by financing activities
|
(123,449
|
)
|
|
(129,987
|
)
|
|
6,651
|
|
|
110,557
|
|
|
(136,228
|
)
|
|||||
Net decrease in cash and cash equivalents
|
(45,147
|
)
|
|
(13,726
|
)
|
|
(29
|
)
|
|
—
|
|
|
(58,902
|
)
|
|||||
Cash and cash equivalents, beginning of period
|
283,409
|
|
|
16,214
|
|
|
202
|
|
|
—
|
|
|
299,825
|
|
|||||
Cash and cash equivalents, end of period
|
$
|
238,262
|
|
|
$
|
2,488
|
|
|
$
|
173
|
|
|
$
|
—
|
|
|
$
|
240,923
|
|
|
Year Ended December 31, 2010
|
||||||||||||||||||
|
Parent/
Issuer
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-
Guarantors
|
|
Consolidating
Adjustments
|
|
Consolidated
Vector Group
Ltd.
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
58,329
|
|
|
$
|
165,095
|
|
|
$
|
(2,164
|
)
|
|
$
|
(154,256
|
)
|
|
$
|
67,004
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Proceeds from sale or maturity of investment securities
|
15,433
|
|
|
13,154
|
|
|
—
|
|
|
—
|
|
|
28,587
|
|
|||||
Purchase of investment securities
|
(7,414
|
)
|
|
(1,980
|
)
|
|
—
|
|
|
—
|
|
|
(9,394
|
)
|
|||||
Proceeds from sale or liquidation of long-term investments
|
1,002
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,002
|
|
|||||
Purchase of long-term investments
|
(5,000
|
)
|
|
—
|
|
|
(62
|
)
|
|
—
|
|
|
(5,062
|
)
|
|||||
Decrease in non-current restricted assets
|
363
|
|
|
(1,112
|
)
|
|
(351
|
)
|
|
—
|
|
|
(1,100
|
)
|
|||||
Purchase of mortgage receivable
|
(13,462
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,462
|
)
|
|||||
Investment in non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
(24,645
|
)
|
|
—
|
|
|
(24,645
|
)
|
|||||
Distributions from non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
3,539
|
|
|
—
|
|
|
3,539
|
|
|||||
Issuance of notes receivable
|
(930
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(930
|
)
|
|||||
Cash acquired in Aberdeen consolidation
|
—
|
|
|
—
|
|
|
473
|
|
|
—
|
|
|
473
|
|
|||||
Proceeds from sale of businesses and assets
|
—
|
|
|
187
|
|
|
—
|
|
|
—
|
|
|
187
|
|
|||||
Investments in subsidiaries
|
(12,530
|
)
|
|
—
|
|
|
—
|
|
|
12,530
|
|
|
—
|
|
|||||
Capital expenditures
|
—
|
|
|
(23,073
|
)
|
|
(318
|
)
|
|
—
|
|
|
(23,391
|
)
|
|||||
Increase in cash surrender value of life insurance policies
|
(513
|
)
|
|
(423
|
)
|
|
—
|
|
|
—
|
|
|
(936
|
)
|
|||||
Net cash (used in) provided by investing activities
|
(23,051
|
)
|
|
(13,247
|
)
|
|
(21,364
|
)
|
|
12,530
|
|
|
(45,132
|
)
|
|||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Proceeds from debt
|
165,000
|
|
|
20,714
|
|
|
—
|
|
|
—
|
|
|
185,714
|
|
|||||
Repayments of debt
|
—
|
|
|
(14,424
|
)
|
|
(115
|
)
|
|
—
|
|
|
(14,539
|
)
|
|||||
Deferred financing charges
|
(5,077
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,077
|
)
|
|||||
Borrowings under revolver
|
—
|
|
|
1,034,924
|
|
|
—
|
|
|
—
|
|
|
1,034,924
|
|
|||||
Repayments on revolver
|
—
|
|
|
(1,016,598
|
)
|
|
—
|
|
|
—
|
|
|
(1,016,598
|
)
|
|||||
Capital contributions received
|
—
|
|
|
12,530
|
|
|
—
|
|
|
(12,530
|
)
|
|
—
|
|
|||||
Intercompany dividends paid
|
—
|
|
|
(177,784
|
)
|
|
23,528
|
|
|
154,256
|
|
|
—
|
|
|||||
Dividends and distributions on common stock
|
(117,459
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(117,459
|
)
|
|||||
Proceeds from exercise of Vector options
|
1,265
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,265
|
|
|||||
Excess tax benefit of options exercised
|
269
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
269
|
|
|||||
Net cash provided by (used in) financing activities
|
43,998
|
|
|
(140,638
|
)
|
|
23,413
|
|
|
141,726
|
|
|
68,499
|
|
|||||
Net increase (decrease) in cash and cash equivalents
|
79,276
|
|
|
11,210
|
|
|
(115
|
)
|
|
—
|
|
|
90,371
|
|
|||||
Cash and cash equivalents, beginning of period
|
204,133
|
|
|
5,004
|
|
|
317
|
|
|
—
|
|
|
209,454
|
|
|||||
Cash and cash equivalents, end of period
|
$
|
283,409
|
|
|
$
|
16,214
|
|
|
$
|
202
|
|
|
$
|
—
|
|
|
$
|
299,825
|
|
Description
|
|
Balance at
Beginning
of Period
|
|
Additions
Charged to
Costs and
Expenses
|
|
Deductions
|
|
Balance
at End
of Period
|
||||||||
Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowances for:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Doubtful accounts
|
|
$
|
308
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
318
|
|
Cash discounts
|
|
573
|
|
|
26,620
|
|
|
26,934
|
|
|
259
|
|
||||
Deferred tax valuation allowance
|
|
9,752
|
|
|
—
|
|
|
3,442
|
|
|
6,310
|
|
||||
Sales returns
|
|
4,055
|
|
|
3,228
|
|
|
3,216
|
|
|
4,067
|
|
||||
Total
|
|
$
|
14,688
|
|
|
$
|
29,858
|
|
|
$
|
33,592
|
|
|
$
|
10,954
|
|
Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowances for:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Doubtful accounts
|
|
$
|
198
|
|
|
$
|
115
|
|
|
$
|
5
|
|
|
$
|
308
|
|
Cash discounts
|
|
40
|
|
|
27,671
|
|
|
27,138
|
|
|
573
|
|
||||
Deferred tax valuation allowance
|
|
10,290
|
|
|
332
|
|
|
870
|
|
|
9,752
|
|
||||
Sales returns
|
|
4,235
|
|
|
2,508
|
|
|
2,688
|
|
|
4,055
|
|
||||
Total
|
|
$
|
14,763
|
|
|
$
|
30,626
|
|
|
$
|
30,701
|
|
|
$
|
14,688
|
|
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowances for:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Doubtful accounts
|
|
$
|
154
|
|
|
$
|
78
|
|
|
$
|
34
|
|
|
$
|
198
|
|
Cash discounts
|
|
201
|
|
|
25,820
|
|
|
25,981
|
|
|
40
|
|
||||
Deferred tax valuation allowance
|
|
9,509
|
|
|
1,432
|
|
|
651
|
|
|
10,290
|
|
||||
Sales returns
|
|
4,337
|
|
|
3,363
|
|
|
3,465
|
|
|
4,235
|
|
||||
Total
|
|
$
|
14,201
|
|
|
$
|
30,693
|
|
|
$
|
30,131
|
|
|
$
|
14,763
|
|
|
|
|
|
|
LANDLORD:
|
|
|
Frost Real Estate Holdings, LLC a Florida limited liability company
|
|
|
/s/ Steven D. Rubin
|
|
|
Name: Steven D. Rubin
|
|
|
Title: Vice President
|
|
|
|
|
|
TENANT:
|
|
|
Vector Group Ltd., a Delaware corporation
|
|
|
/s/ Marc N. Bell
|
|
|
Name: Marc N. Bell
|
|
|
Title: Vice President & General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|||||
Earnings as defined:
|
|
|
|
|
|
|
|
|
|
|||||
Pre-tax income
|
53,717
|
|
|
123,157
|
|
|
85,570
|
|
|
28,537
|
|
|
94,572
|
|
Distributions from investees
|
19,169
|
|
|
9,322
|
|
|
12,212
|
|
|
6,715
|
|
|
13,741
|
|
Interest expense
|
132,538
|
|
|
93,939
|
|
|
72,572
|
|
|
104,415
|
|
|
37,998
|
|
(Income) in equity of affiliate
|
(29,764
|
)
|
|
(19,966
|
)
|
|
(23,963
|
)
|
|
(15,213
|
)
|
|
(24,399
|
)
|
Interest portion of rental expense (1)
|
1,367
|
|
|
1,438
|
|
|
1,223
|
|
|
1,301
|
|
|
1,275
|
|
Total earnings
|
177,027
|
|
|
207,890
|
|
|
147,614
|
|
|
125,755
|
|
|
123,187
|
|
Fixed charges as defined:
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense
|
132,538
|
|
|
93,939
|
|
|
72,572
|
|
|
104,415
|
|
|
37,998
|
|
Interest portion of rent expense (1)
|
1,367
|
|
|
1,438
|
|
|
1,223
|
|
|
1,301
|
|
|
1,275
|
|
Total fixed charges
|
133,905
|
|
|
95,377
|
|
|
73,795
|
|
|
105,716
|
|
|
39,273
|
|
Ratio of earnings to fixed charges
|
1.32
|
|
|
2.18
|
|
|
2.00
|
|
|
1.19
|
|
|
3.14
|
|
VGR Holding LLC
|
Delaware
|
Liggett Group LLC
|
Delaware
|
Vector Tobacco Inc.
|
Virginia
|
Liggett Vector Brands LLC
|
Delaware
|
Accommodations Acquisition Corporation
|
Delaware
|
New Valley LLC
|
Delaware
|
1.
|
I have reviewed this annual report on Form 10-K of Vector Group Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
February 28, 2013
|
|
|
|
|
|
|
/s/ Howard M. Lorber
|
|
|
Howard M. Lorber
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of Vector Group Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
(c)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(d)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
February 28, 2013
|
|
|
|
|
|
|
/s/ J. Bryant Kirkland III
|
|
|
J. Bryant Kirkland III
|
|
|
Vice President, Treasurer and Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
February 28, 2013
|
|
|
|
|
|
|
/s/ Howard M. Lorber
|
|
|
Howard M. Lorber
|
|
|
President and Chief Executive Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
February 28, 2013
|
|
|
|
|
|
|
/s/ J. Bryant Kirkland III
|
|
|
J. Bryant Kirkland III
|
|
|
Vice President, Treasurer and Chief Financial Officer
|
(i)
|
Engle Progeny Cases with trial dates through December 31, 2013.
|
(ii)
|
Post-Trial Engle Progeny Cases.
|
A.
|
Smoking Related
.
|
B.
|
Price Fixing
.
|
|
Page(s)
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Financial Statements
|
|
Consolidated Balance Sheets as of December 31, 2012 and 2011
|
|
Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010
|
|
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010
|
|
Consolidated Statement of Member’s Investment for the years ended December 31, 2012, 2011 and 2010
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010
|
|
Notes to Consolidated Financial Statements for the years ended December 31, 2012, 2011 and 2010
|
|
Consolidated Financial Statement Schedule
|
|
Schedule II — Valuation and Qualifying Accounts
|
|
2012
|
|
2011
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
8
|
|
|
$
|
10
|
|
Accounts receivable
|
|
|
|
||||
Trade, less allowances of $566 and $865, respectively
|
10,918
|
|
|
24,328
|
|
||
Related parties
|
3,067
|
|
|
7,316
|
|
||
Other
|
952
|
|
|
741
|
|
||
Inventories, net
|
95,320
|
|
|
105,322
|
|
||
Restricted assets
|
2,225
|
|
|
1,233
|
|
||
Deferred income taxes
|
2,969
|
|
|
5,485
|
|
||
Other current assets
|
2,354
|
|
|
1,130
|
|
||
Total current assets
|
117,813
|
|
|
145,565
|
|
||
Property, plant and equipment, net
|
53,961
|
|
|
54,000
|
|
||
Prepaid pension costs
|
12,870
|
|
|
10,047
|
|
||
Restricted assets
|
7,727
|
|
|
7,327
|
|
||
Deferred income taxes
|
2,355
|
|
|
1,054
|
|
||
Other assets
|
14,357
|
|
|
13,730
|
|
||
Total assets
|
$
|
209,083
|
|
|
$
|
231,723
|
|
|
2012
|
|
2011
|
||||
Liabilities and Member’s Investment
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Current portion of notes payable and long-term debt
|
$
|
7,155
|
|
|
$
|
13,031
|
|
Revolving credit facility
|
29,430
|
|
|
21,472
|
|
||
Current payments due under the Master Settlement Agreement
|
31,677
|
|
|
50,123
|
|
||
Current portion of pension and post-retirement liabilities
|
2,824
|
|
|
1,000
|
|
||
Accounts payable — trade
|
5,042
|
|
|
8,293
|
|
||
Accrued promotional expenses
|
17,378
|
|
|
16,604
|
|
||
Income taxes payable
|
2,916
|
|
|
—
|
|
||
Other accrued taxes, principally excise taxes
|
20,311
|
|
|
17,948
|
|
||
Allowance for sales returns
|
4,000
|
|
|
4,000
|
|
||
Litigation accruals
|
1,470
|
|
|
1,549
|
|
||
Deferred income taxes
|
—
|
|
|
2,095
|
|
||
Other current liabilities
|
1,422
|
|
|
1,307
|
|
||
Total current liabilities
|
123,625
|
|
|
137,422
|
|
||
Notes payable and long-term debt, less current portion
|
14,834
|
|
|
13,913
|
|
||
Non-current employee benefits
|
20,261
|
|
|
22,959
|
|
||
Deferred income taxes
|
3,950
|
|
|
2,315
|
|
||
Payments due under the Master Settlement Agreement
|
46,837
|
|
|
43,962
|
|
||
Litigation accruals
|
1,861
|
|
|
1,600
|
|
||
Other long-term liabilities
|
—
|
|
|
24
|
|
||
Total liabilities
|
211,368
|
|
|
222,195
|
|
||
Commitments and contingencies
|
|
|
|
||||
Member’s investment
|
|
|
|
||||
Contributed capital
|
10,346
|
|
|
10,346
|
|
||
Accumulated other comprehensive loss
|
(22,497
|
)
|
|
(23,587
|
)
|
||
Retained earnings
|
9,866
|
|
|
22,769
|
|
||
Total member’s investment
|
(2,285
|
)
|
|
9,528
|
|
||
Total liabilities and member's investment
|
$
|
209,083
|
|
|
$
|
231,723
|
|
|
2012
|
|
2011
|
|
2010
|
||||||
Revenues *
|
$
|
1,050,226
|
|
|
$
|
1,095,116
|
|
|
$
|
1,024,155
|
|
Expenses
|
|
|
|
|
|
||||||
Cost of goods sold *
|
817,633
|
|
|
882,987
|
|
|
833,595
|
|
|||
Operating, selling, administrative and general expenses
|
72,088
|
|
|
64,394
|
|
|
59,798
|
|
|||
Management fees paid to Vector Group Ltd.
|
8,663
|
|
|
8,336
|
|
|
8,020
|
|
|||
Net loss (gain) on sale of assets
|
18
|
|
|
(40
|
)
|
|
80
|
|
|||
Litigation judgment and settlement charges
|
1,424
|
|
|
—
|
|
|
16,161
|
|
|||
Operating income
|
150,400
|
|
|
139,439
|
|
|
106,501
|
|
|||
Other income (expense)
|
|
|
|
|
|
||||||
Interest income
|
21
|
|
|
50
|
|
|
36
|
|
|||
Interest expense
|
(4,421
|
)
|
|
(2,395
|
)
|
|
(1,040
|
)
|
|||
Income before provision for income taxes
|
146,000
|
|
|
137,094
|
|
|
105,497
|
|
|||
Income tax expense
|
(55,903
|
)
|
|
(49,925
|
)
|
|
(41,103
|
)
|
|||
Net income
|
$
|
90,097
|
|
|
$
|
87,169
|
|
|
$
|
64,394
|
|
*
|
Revenues and cost of goods sold include federal excise taxes of
$466,538
,
$506,514
and
$484,115
for the years ended
December 31, 2012
,
2011
and
2010
, respectively.
|
|
2012
|
|
2011
|
|
2010
|
||||||
Net income
|
$
|
90,097
|
|
|
$
|
87,169
|
|
|
$
|
64,394
|
|
|
|
|
|
|
|
||||||
Net change in forward contracts
|
64
|
|
|
62
|
|
|
75
|
|
|||
Net change in pension-related amounts
|
1,672
|
|
|
(11,921
|
)
|
|
8,810
|
|
|||
Other comprehensive income
|
1,736
|
|
|
(11,859
|
)
|
|
8,885
|
|
|||
|
|
|
|
|
|
||||||
Income tax effect on forward contracts
|
(24
|
)
|
|
(24
|
)
|
|
(26
|
)
|
|||
Income tax effect on pension-related amounts
|
(622
|
)
|
|
4,706
|
|
|
(3,520
|
)
|
|||
Income tax (expense) benefit on other comprehensive income
|
(646
|
)
|
|
4,682
|
|
|
(3,546
|
)
|
|||
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax
|
1,090
|
|
|
(7,177
|
)
|
|
5,339
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive income
|
$
|
91,187
|
|
|
$
|
79,992
|
|
|
$
|
69,733
|
|
|
|
|
|
|
|
|
Contributed
Capital
|
|
Accumulated
Other
Comprehensive Loss
|
|
Retained
Earnings
|
|
Total
|
||||||||
Balance, January 1, 2010
|
$
|
67,088
|
|
|
$
|
(21,749
|
)
|
|
$
|
30,814
|
|
|
$
|
76,153
|
|
Net income
|
—
|
|
|
—
|
|
|
64,394
|
|
|
64,394
|
|
||||
Change in pension related amounts, net of taxes
|
—
|
|
|
5,290
|
|
|
—
|
|
|
5,290
|
|
||||
Change in fair value of forward contracts, net of taxes
|
—
|
|
|
49
|
|
|
—
|
|
|
49
|
|
||||
Distributions
|
(56,742
|
)
|
|
—
|
|
|
(95,208
|
)
|
|
(151,950
|
)
|
||||
Balance, December 31, 2010
|
10,346
|
|
|
(16,410
|
)
|
|
—
|
|
|
(6,064
|
)
|
||||
Net income
|
—
|
|
|
—
|
|
|
87,169
|
|
|
87,169
|
|
||||
Change in pension related amounts, net of taxes
|
—
|
|
|
(7,215
|
)
|
|
—
|
|
|
(7,215
|
)
|
||||
Change in fair value of forward contracts, net of taxes
|
—
|
|
|
38
|
|
|
—
|
|
|
38
|
|
||||
Distributions
|
—
|
|
|
—
|
|
|
(64,400
|
)
|
|
(64,400
|
)
|
||||
Balance, December 31, 2011
|
10,346
|
|
|
(23,587
|
)
|
|
22,769
|
|
|
9,528
|
|
||||
Net income
|
—
|
|
|
—
|
|
|
90,097
|
|
|
90,097
|
|
||||
Change in pension related amounts, net of taxes
|
—
|
|
|
1,050
|
|
|
—
|
|
|
1,050
|
|
||||
Change in fair value of forward contracts, net of taxes
|
—
|
|
|
40
|
|
|
—
|
|
|
40
|
|
||||
Distributions
|
—
|
|
|
—
|
|
|
(103,000
|
)
|
|
(103,000
|
)
|
||||
Balance, December 31, 2012
|
$
|
10,346
|
|
|
$
|
(22,497
|
)
|
|
$
|
9,866
|
|
|
$
|
(2,285
|
)
|
|
2012
|
|
2011
|
|
2010
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
90,097
|
|
|
$
|
87,169
|
|
|
$
|
64,394
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
9,095
|
|
|
8,576
|
|
|
7,475
|
|
|||
Deferred income taxes
|
109
|
|
|
(1,830
|
)
|
|
(916
|
)
|
|||
Loss (gain) on sale of assets
|
21
|
|
|
(43
|
)
|
|
76
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Trade accounts receivable, net of allowances
|
13,410
|
|
|
(22,645
|
)
|
|
5,797
|
|
|||
Related party receivable
|
4,249
|
|
|
6,987
|
|
|
24,003
|
|
|||
Other receivables
|
(211
|
)
|
|
(298
|
)
|
|
537
|
|
|||
Inventories
|
10,002
|
|
|
(3,607
|
)
|
|
(9,012
|
)
|
|||
Income taxes payable
|
2,916
|
|
|
(19,675
|
)
|
|
19,420
|
|
|||
Other assets
|
(1,367
|
)
|
|
75
|
|
|
(360
|
)
|
|||
Accounts payable, trade
|
(5,164
|
)
|
|
3,074
|
|
|
3,401
|
|
|||
Accrued expenses
|
3,173
|
|
|
(660
|
)
|
|
1,172
|
|
|||
Payments due under the Master Settlement Agreement
|
(15,571
|
)
|
|
26,671
|
|
|
32,010
|
|
|||
Employee benefits
|
(2,025
|
)
|
|
3,338
|
|
|
(3,191
|
)
|
|||
Other long-term liabilities
|
237
|
|
|
1,557
|
|
|
(33
|
)
|
|||
Change in book overdraft
|
1,913
|
|
|
(1,156
|
)
|
|
512
|
|
|||
Net cash provided by operating activities
|
110,884
|
|
|
87,533
|
|
|
145,285
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Proceeds from sale of property, plant and equipment
|
—
|
|
|
195
|
|
|
187
|
|
|||
Decrease in restricted assets
|
(1,392
|
)
|
|
(608
|
)
|
|
(2,802
|
)
|
|||
Increase in cash surrender value of life insurance policies
|
(264
|
)
|
|
(264
|
)
|
|
(261
|
)
|
|||
Capital expenditures
|
(8,918
|
)
|
|
(9,905
|
)
|
|
(22,436
|
)
|
|||
Net cash used in investing activities
|
(10,574
|
)
|
|
(10,582
|
)
|
|
(25,312
|
)
|
|
2012
|
|
2011
|
|
2010
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Repayments of debt
|
(18,970
|
)
|
|
(4,672
|
)
|
|
(8,629
|
)
|
|||
Proceeds from issuance of debt
|
14,015
|
|
|
6,364
|
|
|
22,274
|
|
|||
Deferred finance charges
|
(315
|
)
|
|
—
|
|
|
—
|
|
|||
Borrowings under revolving credit facility
|
1,074,050
|
|
|
1,064,270
|
|
|
1,034,894
|
|
|||
Repayments under revolving credit facility
|
(1,066,092
|
)
|
|
(1,078,508
|
)
|
|
(1,016,566
|
)
|
|||
Distributions to Parent
|
(103,000
|
)
|
|
(64,400
|
)
|
|
(151,950
|
)
|
|||
Net cash used in financing activities
|
(100,312
|
)
|
|
(76,946
|
)
|
|
(119,977
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(2
|
)
|
|
5
|
|
|
(4
|
)
|
|||
Cash and cash equivalents
|
|
|
|
|
|
||||||
Beginning of year
|
10
|
|
|
5
|
|
|
9
|
|
|||
End of year
|
$
|
8
|
|
|
$
|
10
|
|
|
$
|
5
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||||||
Cash payments during the period for
|
|
|
|
|
|
||||||
Interest
|
$
|
1,527
|
|
|
$
|
1,168
|
|
|
$
|
737
|
|
Income taxes
|
$
|
175
|
|
|
$
|
2
|
|
|
$
|
1
|
|
Tax sharing payments to Parent
|
$
|
47,800
|
|
|
$
|
71,650
|
|
|
$
|
—
|
|
•
|
Liggett Group LLC recorded comprehensive income of
$1,050
(net of taxes), and comprehensive loss of
$7,215
(net of taxes) and comprehensive income of
$5,290
(net of taxes) during
2012
,
2011
and
2010
, respectively, in relation to certain of its pension plans (Note 5). In
2012
,
2011
and
2010
, Liggett recorded
$40
(net of taxes),
$38
(net of taxes) and
$49
(net of taxes), respectively, in comprehensive income in relation to the change in fair value of forward contracts.
|
1.
|
Basis of Presentation
|
2.
|
Summary of Significant Accounting Policies
|
|
2012
|
|
2011
|
||||
Forward contract adjustment, net of taxes of $90 and $114, respectively
|
$
|
(126
|
)
|
|
$
|
(166
|
)
|
Pension-related amounts, net of taxes of $13,602 and $14,224, respectively
|
(22,371
|
)
|
|
(23,421
|
)
|
||
Accumulated other comprehensive loss
|
$
|
(22,497
|
)
|
|
$
|
(23,587
|
)
|
|
December 31,
2012 |
|
December 31,
2011 |
||||||||||||
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Financial assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
10
|
|
|
$
|
10
|
|
Restricted assets
|
9,952
|
|
|
9,952
|
|
|
8,560
|
|
|
8,560
|
|
||||
Financial liabilities
|
|
|
|
|
|
|
|
||||||||
Long-term debt
|
$
|
51,419
|
|
|
$
|
51,522
|
|
|
$
|
48,416
|
|
|
$
|
48,416
|
|
3.
|
Inventories
|
|
2012
|
|
2011
|
||||
Leaf tobacco
|
$
|
59,131
|
|
|
$
|
65,411
|
|
Other raw materials
|
3,152
|
|
|
3,832
|
|
||
Work-in-process
|
210
|
|
|
688
|
|
||
Finished goods
|
59,163
|
|
|
60,613
|
|
||
Inventories at current cost
|
121,656
|
|
|
130,544
|
|
||
LIFO adjustment
|
(26,336
|
)
|
|
(25,222
|
)
|
||
Inventories, net
|
$
|
95,320
|
|
|
$
|
105,322
|
|
4.
|
Property, Plant and Equipment
|
|
2012
|
|
2011
|
||||
Land and land improvements
|
$
|
1,418
|
|
|
$
|
1,418
|
|
Buildings
|
15,092
|
|
|
14,557
|
|
||
Machinery and equipment
|
115,027
|
|
|
106,822
|
|
||
Property, plant and equipment
|
131,537
|
|
|
122,797
|
|
||
Less accumulated depreciation
|
(77,576
|
)
|
|
(68,797
|
)
|
||
Property, plant and equipment, net
|
$
|
53,961
|
|
|
$
|
54,000
|
|
5.
|
Employee Benefits Plans
|
|
|
|
|
|
Other
|
||||||||||
|
Pension Benefits
|
|
Postretirement Benefits
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Change in benefit obligation
|
|
|
|
|
|
|
|
||||||||
Benefit obligation at January 1
|
$
|
(126,295
|
)
|
|
$
|
(126,505
|
)
|
|
$
|
(9,629
|
)
|
|
$
|
(9,850
|
)
|
Service cost
|
(871
|
)
|
|
(847
|
)
|
|
(14
|
)
|
|
(13
|
)
|
||||
Interest cost
|
(5,618
|
)
|
|
(6,301
|
)
|
|
(465
|
)
|
|
(500
|
)
|
||||
Benefits paid (including expenses)
|
11,411
|
|
|
11,878
|
|
|
506
|
|
|
540
|
|
||||
Actuarial gain (loss)
|
(6,744
|
)
|
|
(4,520
|
)
|
|
(556
|
)
|
|
194
|
|
||||
Benefit obligation at December 31
|
$
|
(128,117
|
)
|
|
$
|
(126,295
|
)
|
|
$
|
(10,158
|
)
|
|
$
|
(9,629
|
)
|
Change in plan assets
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at January 1
|
$
|
122,013
|
|
|
$
|
132,994
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
15,656
|
|
|
536
|
|
|
—
|
|
|
—
|
|
||||
Contributions
|
1,802
|
|
|
361
|
|
|
512
|
|
|
540
|
|
||||
Benefits paid (including expenses)
|
(11,411
|
)
|
|
(11,878
|
)
|
|
(512
|
)
|
|
(540
|
)
|
||||
Fair value of plan assets at December 31
|
$
|
128,060
|
|
|
$
|
122,013
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Funded status at December 31
|
$
|
(57
|
)
|
|
$
|
(4,282
|
)
|
|
$
|
(10,158
|
)
|
|
$
|
(9,629
|
)
|
Amounts recognized in the balance sheet:
|
|
|
|
|
|
|
|
||||||||
Prepaid pension cost
|
$
|
12,870
|
|
|
$
|
10,047
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other accrued expenses
|
(2,161
|
)
|
|
(344
|
)
|
|
(663
|
)
|
|
(656
|
)
|
||||
Non-current employee benefit liabilities
|
(10,766
|
)
|
|
(13,986
|
)
|
|
(9,495
|
)
|
|
(8,973
|
)
|
||||
Net amounts recognized
|
$
|
(57
|
)
|
|
$
|
(4,283
|
)
|
|
$
|
(10,158
|
)
|
|
$
|
(9,629
|
)
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
||||||||||||
Service cost — benefits earned during the period
|
$
|
870
|
|
|
$
|
847
|
|
|
$
|
825
|
|
|
$
|
14
|
|
|
$
|
13
|
|
|
$
|
13
|
|
Interest cost on projected benefit obligation
|
5,618
|
|
|
6,301
|
|
|
6,951
|
|
|
465
|
|
|
500
|
|
|
521
|
|
||||||
Expected return on assets
|
(8,145
|
)
|
|
(8,834
|
)
|
|
(8,271
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of net loss (gain)
|
1,584
|
|
|
789
|
|
|
1,358
|
|
|
(121
|
)
|
|
(88
|
)
|
|
(130
|
)
|
||||||
Net (income) expense
|
$
|
(73
|
)
|
|
$
|
(897
|
)
|
|
$
|
863
|
|
|
$
|
358
|
|
|
$
|
425
|
|
|
$
|
404
|
|
|
Defined
Benefit
Pension
Plans
|
|
Post -
Retirement
Plans
|
|
Total
|
||||||
Actuarial loss (gain)
|
$
|
1,466
|
|
|
$
|
(64
|
)
|
|
$
|
1,402
|
|
|
Defined
Benefit
Pension
Plans
|
|
Post-
Retirement
Benefits
|
|
Total
|
||||||
Prior year accumulated other comprehensive income (loss)
|
$
|
(38,141
|
)
|
|
$
|
495
|
|
|
$
|
(37,646
|
)
|
Amortization of gain (loss)
|
1,584
|
|
|
(121
|
)
|
|
1,463
|
|
|||
Net gain (loss) arising during the year
|
767
|
|
|
(557
|
)
|
|
210
|
|
|||
Current year accumulated other comprehensive income (loss)
|
$
|
(35,790
|
)
|
|
$
|
(183
|
)
|
|
$
|
(35,973
|
)
|
|
Defined
Benefit
Pension
Plans
|
|
Post-
Retirement
Benefits
|
|
Total
|
||||||
Prior year accumulated other comprehensive income (loss)
|
$
|
(26,112
|
)
|
|
$
|
388
|
|
|
$
|
(25,724
|
)
|
Amortization of gain (loss)
|
789
|
|
|
(88
|
)
|
|
701
|
|
|||
Net gain (loss) arising during the year
|
(12,818
|
)
|
|
195
|
|
|
(12,623
|
)
|
|||
Current year accumulated other comprehensive income (loss)
|
$
|
(38,141
|
)
|
|
$
|
495
|
|
|
$
|
(37,646
|
)
|
|
|
|
|
|
|
|
|
||||||||||
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
||||||
Weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Discount rates — benefit obligation
|
2.25% - 4.00%
|
|
|
3.75% - 4.75%
|
|
|
5.25
|
%
|
|
4.25
|
%
|
|
5.00
|
%
|
|
5.25
|
%
|
Discount rates — service cost
|
3.75% - 4.75%
|
|
|
5.25
|
%
|
|
5.75
|
%
|
|
5.00
|
%
|
|
5.25
|
%
|
|
5.75
|
%
|
Assumed rates of return on invested assets
|
7.00
|
%
|
|
7.00
|
%
|
|
7.00
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
Salary increase assumptions
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
3.00
|
%
|
|
3.00
|
%
|
|
3.00
|
%
|
|
Plan Assets
At
December 31,
|
||||
|
2012
|
|
2011
|
||
Asset category
|
|
|
|
||
Equity securities
|
47
|
%
|
|
50
|
%
|
Investment grade fixed income securities
|
30
|
%
|
|
30
|
%
|
High yield fixed income securities
|
10
|
%
|
|
9
|
%
|
Alternative investments
|
8
|
%
|
|
9
|
%
|
Short-term investments
|
5
|
%
|
|
2
|
%
|
|
100
|
%
|
|
100
|
%
|
|
Fair Value Measurements as of December 31, 2012
|
||||||||||||||
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||
Description
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Insurance contracts
|
$
|
2,079
|
|
|
$
|
—
|
|
|
$
|
2,079
|
|
|
$
|
—
|
|
Amounts in individually managed investment accounts:
|
|
|
|
|
|
|
|
||||||||
Cash
|
6,309
|
|
|
6,309
|
|
|
—
|
|
|
—
|
|
||||
U.S. equity securities
|
43,246
|
|
|
43,246
|
|
|
—
|
|
|
—
|
|
||||
Common collective trusts
|
65,867
|
|
|
—
|
|
|
52,714
|
|
|
13,153
|
|
||||
Investment partnership
|
10,559
|
|
|
—
|
|
|
—
|
|
|
10,559
|
|
||||
Total
|
$
|
128,060
|
|
|
$
|
49,555
|
|
|
$
|
54,793
|
|
|
$
|
23,712
|
|
|
Fair Value Measurements as of December 31, 2011
|
||||||||||||||
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||
Description
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Insurance contracts
|
$
|
2,047
|
|
|
$
|
—
|
|
|
$
|
2,047
|
|
|
$
|
—
|
|
Amounts in individually managed investment accounts:
|
|
|
|
|
|
|
|
||||||||
Cash
|
2,401
|
|
|
2,401
|
|
|
—
|
|
|
—
|
|
||||
U.S. equity securities
|
46,630
|
|
|
46,630
|
|
|
—
|
|
|
—
|
|
||||
Common collective trusts
|
59,954
|
|
|
—
|
|
|
48,350
|
|
|
11,604
|
|
||||
Investment partnership
|
10,978
|
|
|
—
|
|
|
—
|
|
|
10,978
|
|
||||
Total
|
$
|
122,010
|
|
|
$
|
49,031
|
|
|
$
|
50,397
|
|
|
$
|
22,582
|
|
|
2012
|
|
2011
|
||||
Prior year balance
|
$
|
22,582
|
|
|
$
|
16,905
|
|
Distributions
|
(2,905
|
)
|
|
(517
|
)
|
||
Contributions
|
864
|
|
|
6,237
|
|
||
Unrealized gain on long-term investments
|
2,442
|
|
|
(1,810
|
)
|
||
Realized gain on long-term investments
|
729
|
|
|
1,767
|
|
||
Balance as of December 31
|
$
|
23,712
|
|
|
$
|
22,582
|
|
|
1%
Increase
|
|
1%
Decrease
|
||||
Effect on total of service and interest cost components
|
$
|
5
|
|
|
$
|
(5
|
)
|
Effect on benefit obligation
|
$
|
125
|
|
|
$
|
(115
|
)
|
|
Pension
|
|
Postretirement
Medical
|
||||
2013
|
$
|
13,136
|
|
|
$
|
664
|
|
2014
|
16,023
|
|
|
659
|
|
||
2015
|
10,455
|
|
|
661
|
|
||
2016
|
10,005
|
|
|
662
|
|
||
2017
|
9,631
|
|
|
664
|
|
||
2018 — 2022
|
41,909
|
|
|
3,342
|
|
6.
|
Income Taxes
|
|
2012
|
|
2011
|
|
2010
|
||||||
Current
|
|
|
|
|
|
||||||
Federal
|
$
|
43,745
|
|
|
$
|
41,116
|
|
|
$
|
33,650
|
|
State
|
12,049
|
|
|
9,927
|
|
|
8,725
|
|
|||
|
$
|
55,794
|
|
|
$
|
51,043
|
|
|
$
|
42,375
|
|
Deferred
|
|
|
|
|
|
||||||
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
109
|
|
|
(1,118
|
)
|
|
(1,272
|
)
|
|||
|
$
|
109
|
|
|
$
|
(1,118
|
)
|
|
$
|
(1,272
|
)
|
Total tax provision
|
$
|
55,903
|
|
|
$
|
49,925
|
|
|
$
|
41,103
|
|
|
2012
|
|
2011
|
||||||||||||
|
Deferred Tax
|
|
Deferred Tax
|
||||||||||||
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
||||||||
Sales and product allowances
|
$
|
320
|
|
|
$
|
—
|
|
|
$
|
307
|
|
|
$
|
—
|
|
Inventories
|
109
|
|
|
1,484
|
|
|
127
|
|
|
2,095
|
|
||||
Property, plant and equipment
|
—
|
|
|
2,466
|
|
|
—
|
|
|
2,315
|
|
||||
Employee benefit plan accruals
|
871
|
|
|
—
|
|
|
1,004
|
|
|
—
|
|
||||
Tobacco litigation settlements
|
4,009
|
|
|
—
|
|
|
5,081
|
|
|
—
|
|
||||
Forward contracts
|
15
|
|
|
—
|
|
|
20
|
|
|
—
|
|
||||
Total deferred tax
|
$
|
5,324
|
|
|
$
|
3,950
|
|
|
$
|
6,539
|
|
|
$
|
4,410
|
|
|
2012
|
|
2011
|
|
2010
|
||||||
Income before income taxes
|
$
|
146,000
|
|
|
$
|
137,094
|
|
|
$
|
105,497
|
|
|
|
|
|
|
|
||||||
Federal income tax at statutory rate
|
$
|
51,100
|
|
|
$
|
47,982
|
|
|
$
|
36,924
|
|
State income taxes, net of federal taxes
|
6,643
|
|
|
5,725
|
|
|
4,844
|
|
|||
Impact of domestic production deduction
|
(1,840
|
)
|
|
(4,162
|
)
|
|
(668
|
)
|
|||
Impact of other non-taxable differences and IRS audit settlement
|
—
|
|
|
380
|
|
|
3
|
|
|||
Income tax expense
|
$
|
55,903
|
|
|
$
|
49,925
|
|
|
$
|
41,103
|
|
|
|
||
Balance at January 1, 2010
|
$
|
279
|
|
Additions based on tax positions related to current year
|
—
|
|
|
Additions based on tax positions related to prior years
|
54
|
|
|
Reductions based on tax positions related to prior years
|
(157
|
)
|
|
Settlements
|
(80
|
)
|
|
Balance at December 31, 2010
|
96
|
|
|
Additions based on tax positions related to current year
|
—
|
|
|
Additions based on tax positions related to prior years
|
7
|
|
|
Reductions based on tax positions related to prior years
|
—
|
|
|
Settlements
|
—
|
|
|
Balance at December 31, 2011
|
103
|
|
|
Additions based on tax positions related to current year
|
—
|
|
|
Additions based on tax positions related to prior years
|
—
|
|
|
Reductions based on tax positions related to prior years
|
(103
|
)
|
|
Settlements
|
—
|
|
|
Balance at December 31, 2012
|
$
|
—
|
|
|
|
||
|
|
7.
|
Long-Term Debt
|
|
2012
|
|
2011
|
||||
Borrowings under revolving credit facility
|
$
|
29,430
|
|
|
$
|
21,472
|
|
Term loan under revolving credit facility
|
4,179
|
|
|
5,689
|
|
||
Equipment loans
|
17,810
|
|
|
21,255
|
|
||
|
51,419
|
|
|
48,416
|
|
||
Less current maturities
|
(36,585
|
)
|
|
(34,503
|
)
|
||
Amount due after one year
|
$
|
14,834
|
|
|
$
|
13,913
|
|
Year Ending December 31,
|
|
|
||
2013
|
|
$
|
36,585
|
|
2014
|
|
6,647
|
|
|
2015
|
|
7,234
|
|
|
2016
|
|
953
|
|
|
2017
|
|
—
|
|
|
Thereafter
|
|
—
|
|
|
|
|
$
|
51,419
|
|
8.
|
Operating Leases
|
|
Lease
Commitments
|
||
Year Ending December 31
|
|
||
2013
|
$
|
756
|
|
2014
|
764
|
|
|
2015
|
701
|
|
|
2016
|
74
|
|
|
2017
|
13
|
|
|
Thereafter
|
—
|
|
|
|
$
|
2,308
|
|
9.
|
Commitments and Contingencies
|
State
|
|
Number
of Cases |
|
Florida
|
|
47
|
|
New York
|
|
8
|
|
Maryland
|
|
7
|
|
Louisiana
|
|
3
|
|
West Virginia
|
|
2
|
|
Missouri
|
|
1
|
|
Ohio
|
|
1
|
|
Date
|
|
Case Name
|
|
County
|
|
Net Compensatory
Damages
|
|
Punitive Damages
|
|
Status
|
June 2002
|
|
Lukacs v. R.J. Reynolds
|
|
Miami-Dade
|
|
$12,418
|
|
None
|
|
Affirmed by the Third District Court of Appeal. Judgment has been satisfied and the case is concluded.
|
August 2009
|
|
Campbell v. R.J. Reynolds
|
|
Escambia
|
|
$156
|
|
None
|
|
Affirmed by the First District Court of Appeal. Defendants filed a motion with the District Court of Appeal for certification to the Florida Supreme Court, which was denied in May 2011. Defendants sought review by the US Supreme Court, which was denied in March 2012. In April 2012, the judgment was satisfied and, except for an appeal regarding calculation of interest, the case is concluded. Oral argument occurred on February 13, 2013 on the interest rate appeal. A decision is pending.
|
March 2010
|
|
Douglas v. R.J. Reynolds
|
|
Hillsborough
|
|
$1,350
|
|
None
|
|
Affirmed by the Second District Court of Appeal. The court certified the question of the constitutionality of the Engle findings as a question of great public importance. The Florida Supreme Court agreed to review the case. Oral argument occurred on September 6, 2012. A decision is pending.
|
April 2010
|
|
Clay v. R.J. Reynolds
|
|
Escambia
|
|
$349
|
|
$1,000
|
|
Affirmed by the First District Court of Appeal. Motion for rehearing was denied. The US Supreme Court declined to review the case. Liggett satisfied the judgment in December 2012 and the case is concluded, other than plaintiff's claim for post-trial attorneys' fees.
|
April 2010
|
|
Putney v. R.J. Reynolds
|
|
Broward
|
|
$3,008
|
|
None
|
|
On appeal to the Fourth District Court of Appeal. Oral argument occurred on September 27, 2012. A decision is pending.
|
April 2011
|
|
Tullo v. R.J. Reynolds
|
|
Palm Beach
|
|
$225
|
|
None
|
|
On appeal to the Fourth District Court of Appeal.
|
January 2012
|
|
Ward v. R.J. Reynolds
|
|
Escambia
|
|
$1
|
|
None
|
|
A joint and several judgment was entered for $487 against Liggett and RJR. On appeal to the First District Court of Appeal.
|
May 2012
|
|
Calloway v. R.J. Reynolds
|
|
Escambia
|
|
$1,947
|
|
$7,600
|
|
Post-trial motions were denied. A joint and several judgment was entered for $16,100 against all defendants. On appeal to the Fourth District Court of Appeal.
|
December 2012
|
|
Buchanan v. R.J. Reynolds
|
|
Leon
|
|
$2,035
|
|
None
|
|
Post-trial motions were heard on January 16, 2013.
|
|
Current Liabilities
|
|
Non-current Liabilities
|
||||||||||||||||||||
|
Payments due under Master Settlement Agreement
|
|
Previously Settled States & Litigation Accruals
|
|
Total
|
|
Payments due under Master Settlement Agreement
|
|
Previously Settled States & Litigation Accruals
|
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance at January 1, 2010
|
$
|
16,080
|
|
|
$
|
—
|
|
|
$
|
16,080
|
|
|
$
|
19,324
|
|
|
$
|
—
|
|
|
$
|
19,324
|
|
Expenses
|
129,392
|
|
|
19,882
|
|
|
149,274
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Change in MSA obligations capitalized as inventory
|
2,717
|
|
|
—
|
|
|
2,717
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Payments
|
(100,099
|
)
|
|
(15,699
|
)
|
|
(115,798
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification to non-current liabilities
|
(6,825
|
)
|
|
—
|
|
|
(6,825
|
)
|
|
6,825
|
|
|
—
|
|
|
6,825
|
|
||||||
Balance at December 31, 2010
|
41,265
|
|
|
4,183
|
|
|
45,448
|
|
|
26,149
|
|
|
—
|
|
|
26,149
|
|
||||||
Expenses
|
152,762
|
|
|
885
|
|
|
153,647
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Change in MSA obligations capitalized as inventory
|
(2,053
|
)
|
|
—
|
|
|
(2,053
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Payments
|
(125,111
|
)
|
|
(1,919
|
)
|
|
(127,030
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification to non-current liabilities
|
(16,740
|
)
|
|
(1,600
|
)
|
|
(18,340
|
)
|
|
16,740
|
|
|
1,600
|
|
|
18,340
|
|
||||||
Interest on withholding
|
—
|
|
|
—
|
|
|
—
|
|
|
1,073
|
|
|
—
|
|
|
1,073
|
|
||||||
Balance at December 31, 2011
|
50,123
|
|
|
1,549
|
|
|
51,672
|
|
|
43,962
|
|
|
1,600
|
|
|
45,562
|
|
||||||
Expenses
|
136,455
|
|
|
1,726
|
|
|
138,181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Change in MSA obligations capitalized as inventory
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Payments
|
(154,216
|
)
|
|
(2,170
|
)
|
|
(156,386
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification (to) from non-current liabilities
|
(672
|
)
|
|
224
|
|
|
(448
|
)
|
|
672
|
|
|
(224
|
)
|
|
448
|
|
||||||
Interest on withholding
|
—
|
|
|
141
|
|
|
141
|
|
|
2,203
|
|
|
485
|
|
|
2,688
|
|
||||||
Balance at December 31, 2012
|
$
|
31,677
|
|
|
$
|
1,470
|
|
|
$
|
33,147
|
|
|
$
|
46,837
|
|
|
$
|
1,861
|
|
|
$
|
48,698
|
|
10.
|
Related Party Transactions
|
11.
|
Restructuring
|
12.
|
Stock Compensation
|
Risk-free interest rate
|
2.59
|
%
|
|
Expected volatility
|
24.43
|
%
|
|
Dividend yield
|
9.75
|
%
|
|
Expected holding period
|
4.74 years
|
||
Weighted average grant date fair value
|
$
|
1.03
|
|
|
Balance at
Beginning
of Period
|
|
Additions
Charged
to Costs and
Expenses
|
|
Deductions
|
|
Balance
at End of
Period
|
||||||||
Description
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2012
|
|
|
|
|
|
|
|
||||||||
Allowance for:
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts
|
$
|
304
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
314
|
|
Cash discounts
|
561
|
|
|
24,561
|
|
|
24,870
|
|
|
252
|
|
||||
Sales returns
|
4,000
|
|
|
3,151
|
|
|
3,151
|
|
|
4,000
|
|
||||
Total
|
$
|
4,865
|
|
|
$
|
27,722
|
|
|
$
|
28,021
|
|
|
$
|
4,566
|
|
Year ended December 31, 2011
|
|
|
|
|
|
|
|
||||||||
Allowance for:
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts
|
$
|
194
|
|
|
$
|
115
|
|
|
$
|
5
|
|
|
$
|
304
|
|
Cash discounts
|
36
|
|
|
25,484
|
|
|
24,959
|
|
|
561
|
|
||||
Sales returns
|
3,850
|
|
|
2,441
|
|
|
2,291
|
|
|
4,000
|
|
||||
Total
|
$
|
4,080
|
|
|
$
|
28,040
|
|
|
$
|
27,255
|
|
|
$
|
4,865
|
|
Year ended December 31, 2010
|
|
|
|
|
|
|
|
||||||||
Allowance for:
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts
|
$
|
150
|
|
|
$
|
78
|
|
|
$
|
34
|
|
|
$
|
194
|
|
Cash discounts
|
186
|
|
|
23,361
|
|
|
23,511
|
|
|
36
|
|
||||
Sales returns
|
3,330
|
|
|
2,873
|
|
|
2,353
|
|
|
3,850
|
|
||||
Total
|
$
|
3,666
|
|
|
$
|
26,312
|
|
|
$
|
25,898
|
|
|
$
|
4,080
|
|
|
Page(s)
|
|
|
Report of Independent Registered Certified Public Accounting Firm
|
|
Financial Statements
|
|
Balance Sheets as of December 31, 2012 and 2011
|
|
Statements of Operations for the years ended December 31, 2012, 2011 and 2010
|
|
Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010
|
|
Statement of Stockholder's Equity for the years ended December 31, 2012, 2011 and 2010
|
|
Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010
|
|
Notes to Financial Statements for the years ended December 31, 2012, 2011 and 2010
|
|
Financial Statement Schedule
|
|
Schedule II — Valuation and Qualifying Accounts
|
|
2012
|
|
2011
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,395
|
|
|
$
|
763
|
|
Accounts receivable — trade, less allowances of $11 and $17, respectively
|
265
|
|
|
541
|
|
||
Inventories, net
|
5,072
|
|
|
3,906
|
|
||
Deferred income taxes
|
2,927
|
|
|
2,614
|
|
||
Income taxes receivable
|
1,471
|
|
|
79
|
|
||
Other current assets
|
616
|
|
|
482
|
|
||
Total current assets
|
13,746
|
|
|
8,385
|
|
||
Property, plant and equipment, net
|
10
|
|
|
13
|
|
||
Intangible asset
|
107,511
|
|
|
107,511
|
|
||
Deferred taxes
|
99,894
|
|
|
101,182
|
|
||
Other assets
|
1,789
|
|
|
1,510
|
|
||
Total assets
|
$
|
222,950
|
|
|
$
|
218,601
|
|
|
|
|
|
||||
Liabilities and Stockholder’s Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Due to related parties
|
$
|
6,217
|
|
|
$
|
5,159
|
|
Accrued promotional expenses
|
1,352
|
|
|
452
|
|
||
Accounts payable - trade
|
88
|
|
|
8
|
|
||
Allowance for sales returns
|
67
|
|
|
55
|
|
||
Current payments due under the Master Settlement Agreement
|
1,293
|
|
|
1,052
|
|
||
Deferred taxes
|
2,266
|
|
|
2,196
|
|
||
Current portion of employee benefits
|
—
|
|
|
1,690
|
|
||
Other current liabilities
|
342
|
|
|
108
|
|
||
Total current liabilities
|
11,625
|
|
|
10,720
|
|
||
Deferred taxes
|
31,072
|
|
|
27,769
|
|
||
Payments due under the Master Settlement Agreement
|
5,802
|
|
|
5,375
|
|
||
Total liabilities
|
48,499
|
|
|
43,864
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholder's equity
|
|
|
|
||||
Common stock ($1 par value per share; 1,000 shares authorized; 100 shares issued and outstanding)
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
307,892
|
|
|
329,392
|
|
||
Accumulated other comprehensive income
|
300
|
|
|
300
|
|
||
Accumulated deficit
|
(133,741
|
)
|
|
(154,955
|
)
|
||
Total stockholder's equity
|
174,451
|
|
|
174,737
|
|
||
Total liabilities and stockholder's equity
|
$
|
222,950
|
|
|
$
|
218,601
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
||||||
Revenues *
|
$
|
86,619
|
|
|
$
|
94,175
|
|
|
$
|
106,066
|
|
Expenses
|
|
|
|
|
|
||||||
Cost of goods sold *
|
58,117
|
|
|
65,807
|
|
|
78,444
|
|
|||
Operating, selling, administrative and general expenses
|
2,339
|
|
|
2,586
|
|
|
2,941
|
|
|||
Management fees paid to Vector Group Ltd.
|
500
|
|
|
500
|
|
|
500
|
|
|||
Research and development
|
45
|
|
|
140
|
|
|
524
|
|
|||
Operating income
|
25,618
|
|
|
25,142
|
|
|
23,657
|
|
|||
Other income (expense)
|
|
|
|
|
|
||||||
Interest income
|
—
|
|
|
1
|
|
|
1
|
|
|||
Interest expense
|
(193
|
)
|
|
(390
|
)
|
|
—
|
|
|||
Income before provision for income taxes
|
25,425
|
|
|
24,753
|
|
|
23,658
|
|
|||
Income tax (expense) benefit
|
(4,211
|
)
|
|
(5,595
|
)
|
|
6,733
|
|
|||
Net income
|
$
|
21,214
|
|
|
$
|
19,158
|
|
|
$
|
30,391
|
|
*
|
Revenues and cost of goods sold include net federal excise taxes of
$41,489
,
$46,451
and
$54,250
for the years ended
December 31, 2012
,
2011
and
2010
, respectively.
|
|
2012
|
|
2011
|
|
2010
|
||||||
Net income
|
$
|
21,214
|
|
|
$
|
19,158
|
|
|
$
|
30,391
|
|
|
|
|
|
|
|
||||||
Net change in pension-related amounts
|
—
|
|
|
12
|
|
|
(7
|
)
|
|||
Other comprehensive income (loss)
|
—
|
|
|
12
|
|
|
(7
|
)
|
|||
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax
|
—
|
|
|
12
|
|
|
(7
|
)
|
|||
|
|
|
|
|
|
||||||
Comprehensive income
|
$
|
21,214
|
|
|
$
|
19,170
|
|
|
$
|
30,384
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Shares
|
|
Amount
|
|
Additional Paid-In
Capital
|
|
Accumulated
Other Comprehensive
Income
|
|
Accumulated
Deficit
|
|
Total
Stockholder's Equity |
|||||||||||
Balance, January 1, 2010
|
100
|
|
*
|
$
|
—
|
|
|
$
|
372,292
|
|
|
$
|
295
|
|
|
$
|
(204,504
|
)
|
|
$
|
168,083
|
|
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,391
|
|
|
30,391
|
|
|||||
Accumulated Other Comprehensive Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|||||
Distributions
|
—
|
|
|
—
|
|
|
(13,600
|
)
|
|
—
|
|
|
—
|
|
|
(13,600
|
)
|
|||||
Balance, December 31, 2010
|
100
|
|
*
|
—
|
|
|
358,692
|
|
|
288
|
|
|
(174,113
|
)
|
|
184,867
|
|
|||||
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,158
|
|
|
19,158
|
|
|||||
Accumulated Other Comprehensive Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
12
|
|
|||||
Distributions
|
—
|
|
|
—
|
|
|
(29,300
|
)
|
|
—
|
|
|
—
|
|
|
(29,300
|
)
|
|||||
Balance, December 31, 2011
|
100
|
|
*
|
—
|
|
|
329,392
|
|
|
300
|
|
|
(154,955
|
)
|
|
174,737
|
|
|||||
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,214
|
|
|
21,214
|
|
|||||
Accumulated Other Comprehensive Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Distributions
|
—
|
|
|
—
|
|
|
(21,500
|
)
|
|
—
|
|
|
—
|
|
|
(21,500
|
)
|
|||||
Balance, December 31, 2012
|
100
|
|
*
|
$
|
—
|
|
|
$
|
307,892
|
|
|
$
|
300
|
|
|
$
|
(133,741
|
)
|
|
$
|
174,451
|
|
|
2012
|
|
2011
|
|
2010
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
21,214
|
|
|
$
|
19,158
|
|
|
$
|
30,391
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
3
|
|
|
4
|
|
|
8
|
|
|||
Deferred income taxes
|
4,348
|
|
|
4,634
|
|
|
(6,994
|
)
|
|||
Gain on sale of assets
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Trade accounts receivable, net of allowances
|
276
|
|
|
(378
|
)
|
|
446
|
|
|||
Inventories
|
(1,166
|
)
|
|
1,458
|
|
|
418
|
|
|||
Other assets
|
(194
|
)
|
|
390
|
|
|
(514
|
)
|
|||
Accounts payable
|
80
|
|
|
8
|
|
|
—
|
|
|||
Due to (from) related parties
|
1,058
|
|
|
687
|
|
|
(5,157
|
)
|
|||
Other current liabilities
|
1,146
|
|
|
(438
|
)
|
|
(792
|
)
|
|||
Cash payments on restructuring liabilities
|
—
|
|
|
—
|
|
|
(120
|
)
|
|||
Income taxes receivable
|
(1,392
|
)
|
|
(79
|
)
|
|
(538
|
)
|
|||
Employee benefits
|
(1,690
|
)
|
|
286
|
|
|
267
|
|
|||
Payments due under the Master Settlement Agreement
|
668
|
|
|
(252
|
)
|
|
975
|
|
|||
Net cash provided by operating activities
|
24,351
|
|
|
25,477
|
|
|
18,390
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Proceeds from sales of property, plant and equipment
|
—
|
|
|
1
|
|
|
—
|
|
|||
Increase in restricted assets
|
(1
|
)
|
|
—
|
|
|
(241
|
)
|
|||
Increase in cash surrender value of life insurance policies
|
(218
|
)
|
|
(218
|
)
|
|
(218
|
)
|
|||
Net cash used in investing activities
|
(219
|
)
|
|
(217
|
)
|
|
(459
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Distributions to Parent
|
(21,500
|
)
|
|
(29,300
|
)
|
|
(13,600
|
)
|
|||
Net cash used in financing activities
|
(21,500
|
)
|
|
(29,300
|
)
|
|
(13,600
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
2,632
|
|
|
(4,040
|
)
|
|
4,331
|
|
|||
Cash and cash equivalents
|
|
|
|
|
|
||||||
Beginning of period
|
763
|
|
|
4,803
|
|
|
472
|
|
|||
End of period
|
$
|
3,395
|
|
|
$
|
763
|
|
|
$
|
4,803
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||||||
Cash payments during the period for
|
|
|
|
|
|
||||||
Interest
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Income taxes
|
$
|
1,254
|
|
|
$
|
270
|
|
|
$
|
1,234
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
1.
|
Basis of Presentation
|
2.
|
Summary of Significant Accounting Policies
|
|
December 31,
2012 |
|
December 31,
2011 |
||||||||||||
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Financial assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
3,395
|
|
|
$
|
3,395
|
|
|
$
|
763
|
|
|
$
|
763
|
|
3.
|
Medallion Acquisition and Intangible Asset
|
4.
|
Inventories
|
|
2012
|
|
2011
|
||||
Finished goods, at current cost
|
$
|
5,231
|
|
|
$
|
3,980
|
|
LIFO adjustment
|
(159
|
)
|
|
(74
|
)
|
||
|
$
|
5,072
|
|
|
$
|
3,906
|
|
5.
|
Property, Plant and Equipment
|
|
2012
|
|
2011
|
||||
Machinery and equipment
|
$
|
826
|
|
|
$
|
843
|
|
Less accumulated depreciation
|
(816
|
)
|
|
(830
|
)
|
||
Property, plant and equipment, net
|
$
|
10
|
|
|
$
|
13
|
|
6.
|
Employee Benefits Plans
|
7.
|
Income Taxes
|
|
2012
|
|
2011
|
|
2010
|
||||||
Current
|
|
|
|
|
|
||||||
Federal
|
$
|
5,131
|
|
|
$
|
4,979
|
|
|
$
|
4,981
|
|
State
|
1,382
|
|
|
1,185
|
|
|
1,635
|
|
|||
|
$
|
6,513
|
|
|
$
|
6,164
|
|
|
$
|
6,616
|
|
Deferred
|
|
|
|
|
|
||||||
Federal
|
$
|
(2,498
|
)
|
|
$
|
(660
|
)
|
|
$
|
(14,386
|
)
|
State
|
196
|
|
|
91
|
|
|
1,037
|
|
|||
|
$
|
(2,302
|
)
|
|
$
|
(569
|
)
|
|
$
|
(13,349
|
)
|
Total tax provision
|
$
|
4,211
|
|
|
$
|
5,595
|
|
|
$
|
(6,733
|
)
|
|
2012
|
|
2011
|
||||||||||||
|
Deferred Tax
|
|
Deferred Tax
|
||||||||||||
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
||||||||
Sales and product allowances
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
29
|
|
|
$
|
—
|
|
Inventories
|
15
|
|
|
2,266
|
|
|
15
|
|
|
2,196
|
|
||||
Property, plant and equipment
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
||||
Compensation, benefits and related items
|
—
|
|
|
—
|
|
|
681
|
|
|
—
|
|
||||
Amortization of intangibles
|
—
|
|
|
31,064
|
|
|
—
|
|
|
27,761
|
|
||||
Settlement payments
|
2,881
|
|
|
—
|
|
|
2,571
|
|
|
—
|
|
||||
Net operating losses
|
111,175
|
|
|
—
|
|
|
124,927
|
|
|
—
|
|
||||
Valuation allowance
|
(11,281
|
)
|
|
—
|
|
|
(24,427
|
)
|
|
—
|
|
||||
Total deferred tax
|
$
|
102,821
|
|
|
$
|
33,338
|
|
|
$
|
103,796
|
|
|
$
|
29,965
|
|
|
2012
|
|
2011
|
|
2010
|
||||||
Income before income taxes
|
$
|
25,425
|
|
|
$
|
24,754
|
|
|
$
|
23,658
|
|
|
|
|
|
|
|
||||||
Federal income tax expense at statutory rate
|
$
|
8,899
|
|
|
$
|
8,663
|
|
|
$
|
8,280
|
|
State income taxes, net of federal taxes
|
1,026
|
|
|
1,237
|
|
|
1,736
|
|
|||
Other changes due to changes in state income tax rates
|
(70
|
)
|
|
713
|
|
|
7,682
|
|
|||
Change in estimated utilization of NOLs
|
(5,644
|
)
|
|
(5,018
|
)
|
|
(24,431
|
)
|
|||
Income tax (benefit) expense
|
$
|
4,211
|
|
|
$
|
5,595
|
|
|
$
|
(6,733
|
)
|
8.
|
Operating Leases
|
•
|
all claims of the Settling States and their respective political subdivisions and other recipients of state health care funds, relating to: (i) past conduct arising out of the use, sale, distribution, manufacture, development, advertising and marketing of tobacco products; (ii) the health effects of, the exposure to, or research, statements or warnings about, tobacco products; and
|
•
|
all monetary claims of the Settling States and their respective subdivisions and other recipients of state health care funds relating to future conduct arising out of the use of, or exposure to, tobacco products that have been manufactured in the ordinary course of business.
|
•
|
use of “net” unit amounts is not required by the MSA (as reflected by, among other things, the use of “gross” unit amounts through 2005);
|
•
|
such a change is not authorized without the consent of affected parties to the MSA;
|
•
|
the MSA provides for four-year time limitation periods for revisiting calculations and determinations, which precludes recalculating Liggett’s 1997 Market Share (and thus, Liggett’s market share exemption); and
|
•
|
Liggett and others have relied upon the calculations based on “gross” unit amounts since 1998.
|
|
Payments due under Master Settlement Agreement
|
|
Non-current payments due under Master Settlement Agreement
|
|
||||
|
|
|
|
|
||||
Balance at January 1, 2010
|
$
|
2,723
|
|
|
$
|
2,981
|
|
|
Expenses
|
6,292
|
|
|
—
|
|
|
||
Change in MSA obligations capitalized as inventory
|
20
|
|
|
—
|
|
|
||
Payments
|
(5,336
|
)
|
|
—
|
|
|
||
Reclassification to non-current liabilities
|
(1,075
|
)
|
|
1,075
|
|
|
||
Balance at December 31, 2010
|
2,624
|
|
|
4,056
|
|
|
||
Expenses
|
2,945
|
|
|
—
|
|
|
||
Change in MSA obligations capitalized as inventory
|
(443
|
)
|
|
—
|
|
|
||
Payments
|
(3,147
|
)
|
|
—
|
|
|
||
Reclassification to non-current liabilities
|
(927
|
)
|
|
927
|
|
|
||
Interest on withholding
|
—
|
|
|
392
|
|
|
||
Balance at December 31, 2011
|
1,052
|
|
|
5,375
|
|
|
||
Expenses
|
1,291
|
|
|
—
|
|
|
||
Change in MSA obligations capitalized as inventory
|
62
|
|
|
—
|
|
|
||
Payments
|
(878
|
)
|
|
—
|
|
|
||
Reclassification to non-current liabilities
|
(234
|
)
|
|
234
|
|
|
||
Interest on withholding
|
—
|
|
|
193
|
|
|
||
Balance at December 31, 2012
|
$
|
1,293
|
|
|
$
|
5,802
|
|
|
10.
|
Related Party Transactions
|
|
2012
|
|
2011
|
||||
Due to Liggett
|
$
|
2,288
|
|
|
$
|
1,357
|
|
Due to Liggett Vector Brands
|
3,929
|
|
|
3,802
|
|
||
|
$
|
6,217
|
|
|
$
|
5,159
|
|
11.
|
Stock Compensation
|
|
Balance at
Beginning
of Period
|
|
Additions
Charged
to Costs and
Expenses
|
|
Deductions
|
|
Balance
at End of
Period
|
||||||||
Description
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2012
|
|
|
|
|
|
|
|
||||||||
Allowance for:
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Cash discounts
|
13
|
|
|
2,059
|
|
|
2,065
|
|
|
7
|
|
||||
Deferred tax valuation allowance
|
24,427
|
|
|
—
|
|
|
13,146
|
|
|
11,281
|
|
||||
Sales returns
|
55
|
|
|
77
|
|
|
65
|
|
|
67
|
|
||||
Total
|
$
|
24,499
|
|
|
$
|
2,136
|
|
|
$
|
15,276
|
|
|
$
|
11,359
|
|
Year ended December 31, 2011
|
|
|
|
|
|
|
|
||||||||
Allowance for:
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Cash discounts
|
5
|
|
|
2,188
|
|
|
2,180
|
|
|
13
|
|
||||
Deferred tax valuation allowance
|
22,468
|
|
|
1,959
|
|
|
—
|
|
|
24,427
|
|
||||
Sales returns
|
385
|
|
|
67
|
|
|
397
|
|
|
55
|
|
||||
Total
|
$
|
22,862
|
|
|
$
|
4,214
|
|
|
$
|
2,577
|
|
|
$
|
24,499
|
|
Year ended December 31, 2010
|
|
|
|
|
|
|
|
||||||||
Allowance for:
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Cash discounts
|
14
|
|
|
2,459
|
|
|
2,468
|
|
|
5
|
|
||||
Deferred tax valuation allowance
|
46,899
|
|
|
—
|
|
|
24,431
|
|
|
22,468
|
|
||||
Sales returns
|
1,007
|
|
|
490
|
|
|
1,112
|
|
|
385
|
|
||||
Total
|
$
|
47,924
|
|
|
$
|
2,949
|
|
|
$
|
28,011
|
|
|
$
|
22,862
|
|
|
Page(s)
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
|
Consolidated Financial Statements
|
|
|
|
Consolidated Statements of Financial Position
|
|
|
|
Consolidated Statements of Operations
|
|
|
|
Consolidated Statements of Changes in Members’ Equity
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
Notes to Consolidated Financial Statements
|
|
2012
|
|
2011
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
77,290
|
|
|
$
|
56,725
|
|
Certificates of deposit
|
725
|
|
|
725
|
|
||
Receivables
|
4,448
|
|
|
1,340
|
|
||
Prepaid expenses and other current assets
|
3,692
|
|
|
1,953
|
|
||
Total current assets
|
86,155
|
|
|
60,743
|
|
||
Property, equipment and leasehold improvements, net
|
15,796
|
|
|
14,595
|
|
||
Goodwill
|
38,776
|
|
|
38,742
|
|
||
Trademarks
|
21,663
|
|
|
21,663
|
|
||
Other intangible assets, net
|
645
|
|
|
827
|
|
||
Security deposits and other non current assets
|
1,015
|
|
|
908
|
|
||
Investments in non-consolidated businesses
|
2,567
|
|
|
2,188
|
|
||
Total assets
|
$
|
166,617
|
|
|
$
|
139,666
|
|
Liabilities and Members’ Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Current portion of notes payable and other obligations
|
$
|
466
|
|
|
$
|
602
|
|
Current portion of notes payable to related parties
|
36
|
|
|
627
|
|
||
Accounts payable and accrued expenses
|
9,476
|
|
|
8,341
|
|
||
Accrued compensation
|
5,894
|
|
|
5,770
|
|
||
Commissions payable
|
6,551
|
|
|
3,674
|
|
||
Current portion of accrued royalties
|
107
|
|
|
322
|
|
||
Total current liabilities
|
22,530
|
|
|
19,336
|
|
||
Notes payable and other obligations, less current portion
|
630
|
|
|
1,104
|
|
||
Notes payable to related parties, less current portion
|
—
|
|
|
57
|
|
||
Deferred rent
|
9,319
|
|
|
9,326
|
|
||
Accrued royalties, less current portion
|
—
|
|
|
107
|
|
||
Total liabilities
|
32,479
|
|
|
29,930
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
||||
Members’ equity
|
134,138
|
|
|
109,736
|
|
||
Total liabilities and members’ equity
|
$
|
166,617
|
|
|
$
|
139,666
|
|
|
2012
|
|
2011
|
|
2010
|
||||||
Revenues
|
$
|
378,175
|
|
|
$
|
346,309
|
|
|
$
|
348,136
|
|
Costs and expenses
|
|
|
|
|
|
||||||
Selling
|
260,039
|
|
|
232,907
|
|
|
227,083
|
|
|||
General and administration
|
90,242
|
|
|
86,103
|
|
|
80,286
|
|
|||
Total costs and expenses
|
350,281
|
|
|
319,010
|
|
|
307,369
|
|
|||
Operating income
|
27,894
|
|
|
27,299
|
|
|
40,767
|
|
|||
Other income (expense)
|
|
|
|
|
|
||||||
Equity in net income of non-consolidated businesses
|
1,829
|
|
|
2,007
|
|
|
2,440
|
|
|||
Interest income
|
27
|
|
|
3
|
|
|
20
|
|
|||
Interest expense
|
(89
|
)
|
|
(139
|
)
|
|
(572
|
)
|
|||
Net income before taxes
|
29,661
|
|
|
29,170
|
|
|
42,655
|
|
|||
Income tax expense
|
780
|
|
|
946
|
|
|
1,329
|
|
|||
Net income
|
$
|
28,881
|
|
|
$
|
28,224
|
|
|
$
|
41,326
|
|
|
2012
|
|
2011
|
|
2010
|
||||||
Balance, Beginning of Year
|
$
|
109,736
|
|
|
$
|
96,956
|
|
|
$
|
74,602
|
|
Net income
|
28,881
|
|
|
28,224
|
|
|
41,326
|
|
|||
Distributions to members
|
(4,479
|
)
|
|
(15,444
|
)
|
|
(18,972
|
)
|
|||
Balance, End of Year
|
$
|
134,138
|
|
|
$
|
109,736
|
|
|
$
|
96,956
|
|
|
2012
|
|
2011
|
|
2010
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
28,881
|
|
|
$
|
28,224
|
|
|
$
|
41,326
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
||||||
Depreciation and amortization
|
3,664
|
|
|
3,692
|
|
|
4,011
|
|
|||
Loss on sale and disposal of property and equipment
|
6
|
|
|
—
|
|
|
22
|
|
|||
Interest paid in-kind
|
—
|
|
|
—
|
|
|
21
|
|
|||
Amortization of discount on subordinated debt
|
—
|
|
|
—
|
|
|
129
|
|
|||
Equity in net income of non-consolidated businesses
|
(1,829
|
)
|
|
(2,007
|
)
|
|
(2,440
|
)
|
|||
Dividends received from non-consolidated businesses
|
1,450
|
|
|
2,745
|
|
|
1,408
|
|
|||
Deferred rent
|
(7
|
)
|
|
(78
|
)
|
|
2,382
|
|
|||
Changes in operating assets and liabilities
|
|
|
|
|
|
||||||
Receivables
|
(3,108
|
)
|
|
2,091
|
|
|
1,271
|
|
|||
Prepaid expenses and other assets
|
(1,739
|
)
|
|
242
|
|
|
(293
|
)
|
|||
Other assets
|
(167
|
)
|
|
(50
|
)
|
|
62
|
|
|||
Accounts payable, accrued expenses and accrued compensation
|
1,259
|
|
|
(1,535
|
)
|
|
(716
|
)
|
|||
Commissions payable
|
2,877
|
|
|
(1,542
|
)
|
|
1,176
|
|
|||
Accrued royalties
|
(322
|
)
|
|
(296
|
)
|
|
(322
|
)
|
|||
Net cash provided by operating activities
|
30,965
|
|
|
31,486
|
|
|
48,037
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Capital expenditures
|
(4,629
|
)
|
|
(2,478
|
)
|
|
(4,959
|
)
|
|||
Other
|
(34
|
)
|
|
(66
|
)
|
|
(75
|
)
|
|||
Net cash used in investing activities
|
(4,663
|
)
|
|
(2,544
|
)
|
|
(5,034
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Payments of notes payable and other obligations
|
(610
|
)
|
|
(490
|
)
|
|
(274
|
)
|
|||
Payments of notes payable to related parties
|
(648
|
)
|
|
(590
|
)
|
|
(5,645
|
)
|
|||
Distributions to members
|
(4,479
|
)
|
|
(15,444
|
)
|
|
(18,972
|
)
|
|||
Net cash used in financing activities
|
(5,737
|
)
|
|
(16,524
|
)
|
|
(24,891
|
)
|
|||
Net change in cash and cash equivalents
|
20,565
|
|
|
12,418
|
|
|
18,112
|
|
|||
Cash and cash equivalents
|
|
|
|
|
|
||||||
Beginning of year
|
56,725
|
|
|
44,307
|
|
|
26,195
|
|
|||
End of year
|
$
|
77,290
|
|
|
$
|
56,725
|
|
|
$
|
44,307
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
||||||
Interest paid
|
$
|
89
|
|
|
$
|
139
|
|
|
$
|
234
|
|
Income taxes paid
|
470
|
|
|
946
|
|
|
1,308
|
|
|||
Assets acquired under capital lease
|
—
|
|
|
—
|
|
|
746
|
|
|||
Acquisition of property management contracts through borrowings
|
—
|
|
|
—
|
|
|
610
|
|
1.
|
Basis of Presentation
|
2.
|
Summary of Significant Accounting Policies
|
3.
|
Property and Equipment
|
|
2012
|
|
2011
|
||||
Furniture, fixtures and office equipment
|
$
|
22,733
|
|
|
$
|
22,794
|
|
Computer software
|
6,886
|
|
|
6,031
|
|
||
Leasehold improvements
|
24,627
|
|
|
21,644
|
|
||
Automobiles
|
137
|
|
|
137
|
|
||
Construction in progress
|
274
|
|
|
1,195
|
|
||
|
54,657
|
|
|
51,801
|
|
||
Less, accumulated depreciation and amortization
|
(38,861
|
)
|
|
(37,206
|
)
|
||
|
$
|
15,796
|
|
|
$
|
14,595
|
|
4.
|
Investments in Non-Consolidated Businesses
|
5.
|
Intangible Assets
|
|
2012
|
|
2011
|
|
2010
|
||||||
Goodwill
|
$
|
38,776
|
|
|
$
|
38,742
|
|
|
$
|
38,676
|
|
Trademarks
|
21,663
|
|
|
21,663
|
|
|
21,663
|
|
|||
Deferred financing charges
|
506
|
|
|
506
|
|
|
506
|
|
|||
Other intangible assets
|
3,399
|
|
|
3,340
|
|
|
3,345
|
|
|||
|
64,344
|
|
|
64,251
|
|
|
64,190
|
|
|||
Less: accumulated amortization on amortizable intangibles
|
(3,260
|
)
|
|
(3,019
|
)
|
|
(2,766
|
)
|
|||
|
$
|
61,084
|
|
|
$
|
61,232
|
|
|
$
|
61,424
|
|
6.
|
Notes Payable and Other Obligations
|
|
2012
|
|
2011
|
||||
Notes payable and other obligations
|
|
|
|
||||
Payment obligation — former owner
|
$
|
96
|
|
|
$
|
281
|
|
Term note payable — bank
|
234
|
|
|
409
|
|
||
Capital lease obligations
|
432
|
|
|
584
|
|
||
Notes payable issued in connection with acquisitions
|
334
|
|
|
432
|
|
||
Total notes payable and other obligations
|
1,096
|
|
|
1,706
|
|
||
Less, current maturities
|
(466
|
)
|
|
(602
|
)
|
||
Amount due after one year
|
$
|
630
|
|
|
$
|
1,104
|
|
7.
|
Notes Payable to Related Parties
|
|
2012
|
|
2011
|
||||
Franchise term notes payable — PREA
|
$
|
36
|
|
|
$
|
684
|
|
Less: Current maturities
|
(36
|
)
|
|
(627
|
)
|
||
Amount due after one year
|
$
|
—
|
|
|
$
|
57
|
|
8.
|
Franchise Agreement and Royalty Fees
|
9.
|
Income Taxes
|
|
2012
|
|
2011
|
|
2010
|
||||||
Provision for New York City UBT
|
$
|
780
|
|
|
$
|
946
|
|
|
$
|
1,329
|
|
Income tax expense
|
$
|
780
|
|
|
$
|
946
|
|
|
$
|
1,329
|
|
10.
|
Related Party Transaction
|
11.
|
Defined Contribution Plans
|
12.
|
Commitments and Contingencies
|
13.
|
Risks and Uncertainties
|