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Delaware
|
|
1-5759
|
|
65-0949535
|
(State or other jurisdiction of incorporation
incorporation or organization)
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|
Commission File Number
|
|
(I.R.S. Employer Identification No.)
|
4400 Biscayne Boulevard, Miami, Florida
(Address of principal executive offices)
|
|
33137
(Zip Code)
|
Title of each class
|
|
Name of each exchange on which registered
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Common Stock, par value $.10 per share
|
|
New York Stock Exchange
|
Large accelerated filer
R
|
|
Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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|
|
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Page
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|
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||
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EX-10.40
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EX-10.46
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EX-10.47
|
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EX-12.1
|
||
EX-21
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EX-23.1
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EX-23.2
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EX-23.3
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EX-23.4
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EX-31.1
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EX-31.2
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EX-32.1
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EX-32.2
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EX-99.1
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EX-99.2
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EX-99.3
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EX-99.4
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EX-101 INSTANCE DOCUMENT
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||
EX-101 SCHEMA DOCUMENT
|
||
EX-101 CALCULATION LINKBASE DOCUMENT
|
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EX-101 LABELS LINKBASE DOCUMENT
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EX-101 PRESENTATION LINKBASE DOCUMENT
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EX-101 DEFINITION LINKBASE DOCUMENT
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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 70.59% of Douglas Elliman Realty, LLC ("Douglas Elliman Realty"), 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 (EAGLE 20's, 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's 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.
|
•
|
EAGLE 20's - a brand positioned in the deep discount segment for long-term growth re-launched as a national brand in 2013,
|
•
|
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.
We are developing a 450-acre approved master planned community in Palm Springs, California. The development presently has 667 residential lots, which include both single and multi-family lots, an 18-hole golf course, clubhouse restaurant, golf shop and seven-acre site approved for a 450-room hotel. In October 2013, we sold 200 single family lots for $22.7 million.
|
•
|
Indian Creek
. We own an 80% interest in a residential real estate project located in Indian Creek Village, Florida.
|
•
|
Sesto Holdings.
We own an approximate 7.2% interest in an entity that is developing a 322-acre site in Milan, Italy into multi-parcel, multi-building mixed use urban regeneration project.
|
•
|
The Whitman.
We own an approximate 12% interest in a joint venture which owns The Whitman, a luxury residential condominium, which is located in the Flatiron District / NoMad neighborhood of Manhattan in New York City. Construction has been completed and three of the four units have been sold.
|
•
|
10 Madison Square West.
We own an approximate 5% interest in a joint venture that is developing 10 Madison Square West. The joint venture is converting a 260,000-square-foot office building into a luxury residential condominium in the Flatiron District / NoMad neighborhood of Manhattan and is expected to be completed by the summer of 2014.
|
•
|
The Marquand
. We own an approximate 18% interest in a joint venture that is converting a 12-story residential rental building into a luxury residential condominium. The building is located in Manhattan’s Upper East Side and is expected to be completed by the summer of 2014.
|
•
|
11 Beach Street.
We own an approximate 49.5% interest in a joint venture that is converting a 10-story, 250,000-square-foot office building into a luxury residential condominium. The building is located in the TriBeCa neighborhood of Manhattan and construction is expected to begin in January 2014.
|
•
|
701 Seventh Avenue
. We own an approximate 11.5% interest in a joint venture that is developing a 340,000-square-foot multi-use project located in Times Square in Manhattan. The development includes retail space, hotel space and signage. Construction has started and is expected to be completed by 2016.
|
•
|
101 Murray Street.
We own a 25% interest (and a related note receivable) in a joint venture that is developing a mixed-use property that includes both commercial space and a 150-unit luxury residential condominium in the TriBeCa neighborhood of Manhattan. Development is expected to begin in 2014 and be completed in 2017.
|
•
|
Leroy Street
. We own an approximate 5% interest in a development site in the West Greenwich Village neighborhood of Manhattan. The site is being developed as a high-rise condominium that will face the Hudson River. Development is expected to begin in 2014 and be completed in 2017.
|
•
|
8701 Collins Avenue.
We own a 15% interest in the Howard Johnson’s Dezerland Beach hotel in Miami Beach, Florida, which will be redeveloped into modern hotel and residential condominium units. Development is expected to begin in 2015 and be completed in 2017.
|
•
|
23-10 Queens Plaza South.
We own an approximate 45.4% interest in a joint venture that has purchased a pre-war Art Deco-style building and a neighboring building in Queens, New York. The joint venture plans to develop a new apartment tower with 287,000 square feet of residential space and 10,000 square feet of retail space.
|
•
|
Maryland Portfolio.
We own an approximate 7.5% indirect interest in a joint venture that owns approximately 5,500 apartment units primarily located in Baltimore County, Maryland.
|
•
|
ST Residential
. We own a
16.34%
interest in four Class A multi-family rental assets in partnership with Winthrop Realty Trust. The four buildings are located in: Houston, Texas; Phoenix, Arizona; San Pedro, California; and Stamford, Connecticut. The buildings include 761 apartment units and 25,000 square feet of retail space.
|
•
|
Chrystie Street.
We own an approximate 18.4% interest in a joint venture that owns a land development site in the Lower East Side neighborhood of Manhattan. The joint venture plans to develop the property into a 29-story mixed-use property with PUBLIC, an Ian Schrager-branded boutique hotel and luxury condominium residences.
|
•
|
Park Lane Hotel.
We own an approximate 5% interest in a joint venture that has agreed to acquire the Park Lane Hotel, which is presently a 47-story, 605-room independent hotel owned and operated by the Helmsley Family Trust and Estate. The joint venture is developing plans for a hotel and luxury residential condominiums. The development is estimated to take approximately 30 months to complete from commencement of construction.
|
•
|
Hotel Taiwana.
We own an approximate 17% interest in a joint venture that owns a luxury hotel located in St. Barthelemy, French West Indies that has been recently renovated.
|
•
|
Coral Beach.
We own a 49% interest in a joint venture that owns a 52-acre site in Bermuda. The property consists of the Horizons Hotel, which includes 56 hotel units, and Coral Beach and Tennis Club, which includes 31 hotel units, in Bermuda. The Coral Beach and Tennis Club is open while the Horizons hotel is closed. Renovation will begin on the Coral Beach and Tennis Club in 2014 and the project is expected to be completed in 2015.
|
ITEM 1A.
|
RISK FACTORS
|
•
|
cash interest expense of approximately
$87.1 million
,
|
•
|
$157.5 million
of our 6.75% convertible notes mature in 2014,
|
•
|
settlement payments remaining totaling approximately
$107.4 million
, of which
$59.5 million
is to be paid in 2014,
|
•
|
dividends on our outstanding common shares (currently at an annual rate of approximately
$157.0 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;
|
•
|
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.
|
•
|
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;
|
•
|
a negative perception of the market for residential real estate;
|
•
|
commission pressure from brokers who discount their commissions;
|
•
|
an increase in the cost of homeowners' insurance;
|
•
|
weak credit markets;
|
•
|
a low level of consumer confidence in the economy and/or the real estate market;
|
•
|
instability of financial institutions;
|
•
|
legislative, tax or regulatory changes that would adversely impact the real estate market, including but not limited to potential reform relating to Fannie Mae, Freddie Mac and other government sponsored entities that provide liquidity to the U.S. housing and mortgage markets, and potential limits on, or elimination of, the deductibility of certain mortgage interest expense and property taxes;
|
•
|
adverse changes in economic and general business conditions in the New York metropolitan area;
|
•
|
a decline in the affordability of homes;
|
•
|
declining demand for real estate;
|
•
|
decreasing home ownership rates, declining demand for real estate and changing social attitudes toward home ownership; and/or
|
•
|
acts of God, such as hurricanes, earthquakes and other natural disasters, or acts or threats of war or terrorism.
|
•
|
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
|
Year
|
|
High
|
|
Low
|
|
Cash Dividends
|
||||||
2013:
|
|
|
|
|
|
|
|
|
||||
Fourth Quarter
|
|
$
|
16.73
|
|
|
$
|
15.50
|
|
|
$
|
0.40
|
|
Third Quarter
|
|
16.45
|
|
|
15.26
|
|
|
$
|
0.38
|
|
||
Second Quarter
|
|
15.71
|
|
|
14.61
|
|
|
$
|
0.38
|
|
||
First Quarter
|
|
15.55
|
|
|
14.29
|
|
|
$
|
0.38
|
|
||
2012:
|
|
|
|
|
|
|
|
|
|
|||
Fourth Quarter
|
|
$
|
16.04
|
|
|
$
|
13.57
|
|
|
$
|
0.38
|
|
Third Quarter
|
|
16.19
|
|
|
15.03
|
|
|
0.36
|
|
|||
Second Quarter
|
|
16.25
|
|
|
14.88
|
|
|
0.36
|
|
|||
First Quarter
|
|
16.86
|
|
|
15.68
|
|
|
0.36
|
|
|
12/08
|
12/09
|
12/10
|
12/11
|
12/12
|
12/13
|
||||||
Vector Group Ltd.
|
100
|
|
120
|
|
172
|
|
202
|
|
195
|
|
249
|
|
S&P 500
|
100
|
|
126
|
|
146
|
|
149
|
|
172
|
|
228
|
|
S&P MidCap
|
100
|
|
137
|
|
174
|
|
171
|
|
201
|
|
268
|
|
NYSE Arca Tobacco
|
100
|
|
141
|
|
169
|
|
198
|
|
235
|
|
259
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Year Individual
Became an
Executive Officer
|
|
Howard M. Lorber
|
|
65
|
|
|
President and Chief Executive Officer
|
|
2001
|
Richard J. Lampen
|
|
60
|
|
|
Executive Vice President
|
|
1996
|
J. Bryant Kirkland III
|
|
48
|
|
|
Vice President, Chief Financial Officer and Treasurer
|
|
2006
|
Marc N. Bell
|
|
53
|
|
|
Vice President, General Counsel and Secretary
|
|
1998
|
Ronald J. Bernstein
|
|
60
|
|
|
President and Chief Executive Officer of Liggett
|
|
2000
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||
|
(dollars in thousands, except per share amounts)
|
||||||||||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenues
(1)
|
$
|
1,056,200
|
|
|
$
|
1,084,546
|
|
|
$
|
1,133,380
|
|
|
$
|
1,063,289
|
|
|
$
|
801,494
|
|
Operating income
|
112,036
|
|
(3)
|
154,933
|
|
|
143,321
|
|
|
111,313
|
|
|
143,167
|
|
|||||
Net income attributed to Vector Group Ltd.
|
38,944
|
|
(4)
|
30,622
|
|
|
75,020
|
|
|
54,084
|
|
|
24,806
|
|
|||||
Per basic common share
(2)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income applicable to common shares attributed to Vector Group Ltd.
|
$
|
0.41
|
|
|
$
|
0.34
|
|
|
$
|
0.85
|
|
|
$
|
0.62
|
|
|
$
|
0.28
|
|
Per diluted common share
(2)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income applicable to common shares attributed to Vector Group Ltd.
|
$
|
0.41
|
|
|
$
|
0.34
|
|
|
$
|
0.84
|
|
|
$
|
0.61
|
|
|
$
|
0.28
|
|
Cash distributions declared per common share
(2)
|
$
|
1.54
|
|
|
$
|
1.47
|
|
|
$
|
1.40
|
|
|
$
|
1.33
|
|
|
$
|
1.27
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets
|
$
|
588,311
|
|
|
$
|
639,056
|
|
|
$
|
509,741
|
|
|
$
|
526,763
|
|
|
$
|
389,208
|
|
Total assets
|
1,260,159
|
|
|
1,086,731
|
|
|
927,768
|
|
|
949,595
|
|
|
735,542
|
|
|||||
Current liabilities
|
405,005
|
|
|
195,159
|
|
|
315,198
|
|
|
226,872
|
|
|
149,008
|
|
|||||
Notes payable, embedded derivatives, long-term debt and other obligations, less current portion
|
633,700
|
|
|
759,074
|
|
|
542,371
|
|
|
647,064
|
|
|
487,936
|
|
|||||
Non-current employee benefits, deferred income taxes and other long-term liabilities
|
243,063
|
|
|
211,750
|
|
|
159,229
|
|
|
121,893
|
|
|
103,280
|
|
|||||
Stockholders’ deficiency
|
(21,609
|
)
|
|
(79,252
|
)
|
|
(89,030
|
)
|
|
(46,234
|
)
|
|
(4,682
|
)
|
(1)
|
Revenues include federal excise taxes of
$456,703
,
$508,027
,
$552,965
, $538,328, and $377,771, 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 27, 2013
, September 28,
2012
, September 29,
2011
, September 29,
2010
, and September 29,
2009
.
|
(3)
|
Operating income includes
$11,823
of income from MSA Settlements,
$86,213
of
Engle
progeny settlement charge and
$1,893
of litigation judgment expense.
|
(4)
|
Net income includes a gain of $36,140, net of taxes, to account for the difference between the carrying value and the fair value of the previously held
50%
interest in Douglas Elliman.
|
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 70.59% of Douglas Elliman, which operates the largest residential brokerage company in the New York metropolitan area.
|
•
|
EAGLE 20's - a brand positioned in the deep discount segment for long-term growth re-launched as a national brand in 2013,
|
•
|
PYRAMID — the industry’s first deep discount product with a brand identity re-launched 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.
|
|
Year Ended December 31,
|
|||||||||||||
|
2013
|
|
|
2012
|
|
|
2011
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||
Tobacco
|
$
|
1,014,341
|
|
|
|
$
|
1,084,546
|
|
|
|
$
|
1,133,380
|
|
|
Real estate
|
41,859
|
|
|
|
—
|
|
|
|
—
|
|
||||
Total revenues
|
$
|
1,056,200
|
|
|
|
$
|
1,084,546
|
|
|
|
$
|
1,133,380
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating income (loss):
|
|
|
|
|
|
|
|
|
||||||
Tobacco
|
112,020
|
|
(1
|
)
|
|
176,017
|
|
|
|
164,581
|
|
|||
Real estate
|
15,805
|
|
|
|
(2,013
|
)
|
|
|
(1,929
|
)
|
||||
Corporate and other
|
(15,789
|
)
|
|
|
(19,071
|
)
|
|
|
(19,331
|
)
|
||||
Total operating income
|
$
|
112,036
|
|
|
|
$
|
154,933
|
|
|
|
$
|
143,321
|
|
(1)
|
Operating income includes
$11,823
of income from MSA Settlements,
$86,213
of Engle progeny settlement charge and
$1,893
of litigation judgment expense.
|
Covenant
|
|
Indenture
Requirement
|
|
December 31,
2013 |
|
December 31,
2012 |
||||||
Consolidated EBITDA, as defined
|
|
$
|
75,000
|
|
|
$
|
264,958
|
|
|
$
|
231,385
|
|
Leverage ratio, as defined
|
|
<3.0 to 1
|
|
|
1.22 to 1
|
|
|
0.5 to 1
|
|
|||
Secured leverage ratio, as defined
|
|
<1.5 to 1
|
|
|
0.5 to 1
|
|
|
Negative
|
|
Contractual Obligations
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
Thereafter
|
|
Total
|
||||||||||||||
Long-term debt(1)
|
|
$
|
196,832
|
|
|
$
|
13,268
|
|
|
$
|
2,911
|
|
|
$
|
230
|
|
|
$
|
177
|
|
|
$
|
680,000
|
|
|
$
|
893,418
|
|
Operating leases(2)
|
|
18,146
|
|
|
16,975
|
|
|
13,762
|
|
|
12,007
|
|
|
9,999
|
|
|
26,032
|
|
|
96,921
|
|
|||||||
Inventory purchase commitments(3)
|
|
29,641
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,641
|
|
|||||||
Capital expenditure purchase commitments(4)
|
|
3,796
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,796
|
|
|||||||
Interest payments(5)
|
|
87,859
|
|
|
61,841
|
|
|
62,638
|
|
|
62,566
|
|
|
63,655
|
|
|
94,382
|
|
|
432,941
|
|
|||||||
Engle
progeny settlement
|
|
59,532
|
|
|
2,954
|
|
|
3,454
|
|
|
3,454
|
|
|
3,454
|
|
|
34,539
|
|
|
107,387
|
|
|||||||
Total (6),(7)
|
|
$
|
395,806
|
|
|
$
|
95,038
|
|
|
$
|
82,765
|
|
|
$
|
78,257
|
|
|
$
|
77,285
|
|
|
$
|
834,953
|
|
|
$
|
1,564,104
|
|
(1)
|
Long-term debt is shown before discount. For more information concerning our long-term debt, see “Liquidity and Capital Resources” above and Note
9
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
$130
in
2014
,
$111
in
2015
and zero thereafter. See Note
10
to our consolidated financial statements.
|
(3)
|
Inventory purchase commitments represent primarily 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, 2013
and the assumption our current policy of a cash dividend of $0.40 per quarter and an annual 5% stock dividend will continue. For more information concerning our long-term debt, see “Liquidity and Capital Resources” above and Note
9
to our consolidated financial statements.
|
(6)
|
Not included in the above table is approximately
$81,431
of net deferred tax liabilities and
$3,122
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
$48,856
at
December 31, 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;
|
•
|
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
|
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
|
|
Intercreditor Agreement, dated as of February 12, 2013, among Liggett Group LLC, 100 Maple LLC, U.S. Bank National Association and Wells Fargo Bank, National Association, relating to the 7.75% Senior Secured Notes due 2021 (incorporated by reference to Exhibit 4.6 of Vector's Form 8-K dated February 12, 2013).
|
|
|
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
* 4.3
|
|
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).
|
|
|
|
* 4.4
|
|
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).
|
|
|
|
* 4.5
|
|
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).
|
|
|
|
* 4.6
|
|
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).
|
|
|
|
* 4.7
|
|
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).
|
|
|
|
*4.8
|
|
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).
|
|
|
|
*4.9
|
|
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).
|
|
|
|
*4.10
|
|
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).
|
|
|
|
*4.11
|
|
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).
|
|
|
|
*4.12
|
|
Indenture, dated as of February 12, 2013, among Vector, the guarantors named therein and U.S. Bank National Association, as trustee, relating to the 7.75% Senior Secured Notes due 2021, including Form of Note (incorporated by reference to Exhibit 4.1 of Vector's Form 8-K dated February 12, 2013).
|
|
|
|
*4.13
|
|
First Supplemental Indenture, dated as of September 10, 2013, among Vector Group Ltd., Zoom E-Cigs LLC, the Subsidiary Guarantors and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of Vector's Form 10-Q dated September 30, 2013).
|
|
|
|
*4.14
|
|
Pledge Agreement, dated as of February 12, 2013, by and between VGR Holding LLC U.S. Bank National Association, as collateral agent, relating to the 7.75% Senior Secured Notes due 2021 (incorporated by reference to Exhibit 4.3 of Vector's Form 8-K dated February 12, 2013).
|
|
|
|
*4.15
|
|
Security Agreement, dated as of February 12, 2013, by and between Vector Tobacco Inc. and U.S. Bank National Association, as collateral agent, relating to the 7.75% Senior Secured Notes due 2021 (incorporated by reference to Exhibit 4.4 of Vector's Form 8-K dated February 12, 2013).
|
|
|
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
*4.16
|
|
Security Agreement, dated as of February 12, 2013, among Liggett Group LLC, 100 Maple LLC and U.S. Bank National Association, as collateral agent, relating to the 7.75% Senior Secured Notes due 2021 (incorporated by reference to Exhibit 4.5 of Vector's Form 8-K dated February 12, 2013).
|
|
|
|
* 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).
|
|
|
|
* 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).
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
* 10.27
|
|
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).
|
|
|
|
* 10.28
|
|
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).
|
|
|
|
* 10.29
|
|
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).
|
|
|
|
* 10.30
|
|
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).
|
|
|
|
* 10.31
|
|
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).
|
|
|
|
* 10.32
|
|
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).
|
|
|
|
* 10.33
|
|
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).
|
|
|
|
* 10.34
|
|
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).
|
|
|
|
* 10.35
|
|
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).
|
|
|
|
* 10.36
|
|
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).
|
|
|
|
* 10.37
|
|
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).
|
|
|
|
* 10.38
|
|
Stock Option Agreement, dated February 26, 2013, between Vector and Howard M. Lorber (incorporated by reference to Exhibit 10.1 to Vector's Form 10-Q dated March 31, 2013).
|
|
|
|
* 10.39
|
|
Stock Option Agreement, dated February 26, 2013, between Vector and Richard J. Lampen (incorporated by reference to Exhibit 10.2 to Vector's Form 10-Q dated March 31, 2013).
|
|
|
|
* 10.40
|
|
Stock Option Agreement, dated February 26, 2013, between Vector and J. Bryant Kirkland III (incorporated by reference to Exhibit 10.3 to Vector's Form 10-Q dated March 31, 2013).
|
|
|
|
* 10.41
|
|
Stock Option Agreement, dated February 26, 2013, between Vector and Marc N. Bell (incorporated by reference to Exhibit 10.4 to Vector's Form 10-Q dated March 31, 2013).
|
|
|
|
10.42
|
|
Restricted Share Award Agreement, dated as of October 28, 2013, between Vector Group Ltd. and Ronald J. Bernstein.
|
|
|
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
* 10.43
|
|
Vector Senior Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 in Vector’s Form 8-K dated January 14, 2011).
|
|
|
|
* 10.44
|
|
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).
|
|
|
|
* 10.45
|
|
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).
|
|
|
|
* 10.46
|
|
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).
|
|
|
|
* 10.47
|
|
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).
|
|
|
|
10.48
|
|
Settlement Agreement and Mutual Release by and among (i) Prudential Real Estate Financial Services of America Inc. and (ii) Douglas Elliman Realty LLC; Dorothy Herman; DTHY Realty, Inc.; New Valley Real Estate LLC; New Valley Mortgage LLC; Howard M. Lorber and Richard J. Lampen dated December 13, 2013.
|
|
|
|
10.49
|
|
Agreement Relating to Sale and Assignment of Membership Interest between New Valley Real Estate LLC and Prudential Real Estate Financial Services of America, Inc.
|
|
|
|
* 10.50
|
|
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).
|
|
|
|
* 10.51
|
|
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. (incorporated by reference to Exhibit 10.40 of Vector's Form 10-K dated December 31, 2012).
|
|
|
|
* 10.52
|
|
Vector Group Ltd. Equity Retention and Hedging Policy (incorporated by reference to Exhibit 10.1 of Vector's Form 8-K dated January 15, 2013),
|
|
|
|
12.1
|
|
Computation of Ratio of Earnings to Fixed Charges for each of the five years within the period ended December 31, 2013
|
|
|
|
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.
|
|
|
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
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, 2013.
|
|
|
|
99.3
|
|
Vector Tobacco Inc.’s Financial Statements for the three years ended December 31, 2013.
|
|
|
|
99.4
|
|
Douglas Elliman Realty LLC’s Consolidated Financial Statements for the period ended December 13, 2013 and for the two 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:
|
March 3, 2014
|
|
|
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, 2013
|
|
December 31, 2012
|
||||
|
(Dollars in thousands, except per share amounts)
|
||||||
ASSETS:
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
234,466
|
|
|
$
|
405,855
|
|
Investment securities available for sale
|
172,534
|
|
|
69,984
|
|
||
Accounts receivable — trade, net
|
12,159
|
|
|
11,247
|
|
||
Inventories
|
93,496
|
|
|
100,392
|
|
||
Deferred income taxes
|
50,479
|
|
|
36,609
|
|
||
Income tax receivable, net
|
—
|
|
|
6,779
|
|
||
Restricted assets
|
1,785
|
|
|
2,469
|
|
||
Other current assets
|
23,392
|
|
|
5,721
|
|
||
Total current assets
|
588,311
|
|
|
639,056
|
|
||
Property, plant and equipment, net
|
79,258
|
|
|
57,153
|
|
||
Investment in consolidated real estate businesses, net
|
20,911
|
|
|
13,295
|
|
||
Long-term investments accounted for at cost
|
20,788
|
|
|
16,367
|
|
||
Long-term investments accounted for under the equity method
|
8,595
|
|
|
6,432
|
|
||
Investments in non-consolidated real estate businesses
|
128,202
|
|
|
119,219
|
|
||
Restricted assets
|
11,981
|
|
|
9,792
|
|
||
Deferred income taxes
|
51,474
|
|
|
49,142
|
|
||
Intangible asset, net
|
11,360
|
|
|
—
|
|
||
Goodwill
|
72,135
|
|
|
—
|
|
||
Trademarks
|
80,000
|
|
|
—
|
|
||
Intangible asset associated with benefit under the Master Settlement Agreement
|
107,511
|
|
|
107,511
|
|
||
Prepaid pension costs
|
26,080
|
|
|
12,870
|
|
||
Other assets
|
53,553
|
|
|
55,894
|
|
||
Total assets
|
$
|
1,260,159
|
|
|
$
|
1,086,731
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY:
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
|
||
Current portion of notes payable and long-term debt
|
$
|
151,577
|
|
|
$
|
36,778
|
|
Current portion of fair value of derivatives embedded within convertible debt
|
19,128
|
|
|
—
|
|
||
Current payments due under the Master Settlement Agreement
|
25,348
|
|
|
32,970
|
|
||
Current portion of employee benefits
|
939
|
|
|
2,824
|
|
||
Accounts payable
|
26,694
|
|
|
6,099
|
|
||
Accrued promotional expenses
|
18,655
|
|
|
18,730
|
|
||
Income taxes payable
|
6,423
|
|
|
6,269
|
|
||
Accrued excise and payroll taxes payable, net
|
11,621
|
|
|
20,419
|
|
||
Litigation accruals
|
59,310
|
|
|
1,470
|
|
||
Deferred income taxes
|
45,734
|
|
|
27,299
|
|
||
Accrued interest
|
21,968
|
|
|
25,410
|
|
||
Other current liabilities
|
17,608
|
|
|
16,891
|
|
||
Total current liabilities
|
405,005
|
|
|
195,159
|
|
||
Notes payable, long-term debt and other obligations, less current portion
|
540,766
|
|
|
586,946
|
|
||
Fair value of derivatives embedded within convertible debt
|
92,934
|
|
|
172,128
|
|
||
Non-current employee benefits
|
47,917
|
|
|
45,860
|
|
||
Deferred income taxes
|
137,650
|
|
|
109,532
|
|
||
Payments due under the Master Settlement Agreement
|
27,571
|
|
|
52,639
|
|
||
Litigation accruals
|
27,058
|
|
|
1,862
|
|
||
Other liabilities
|
2,867
|
|
|
1,857
|
|
||
Total liabilities
|
1,281,768
|
|
|
1,165,983
|
|
||
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, 101,430,853 and 93,658,273 shares issued and 97,482,998 and 89,898,411 shares outstanding
|
9,748
|
|
|
8,989
|
|
||
Additional paid-in capital
|
—
|
|
|
—
|
|
||
Accumulated deficit
|
(114,787
|
)
|
|
(65,116
|
)
|
||
Accumulated other comprehensive income (loss)
|
22,860
|
|
|
(10,268
|
)
|
||
Less: 3,947,855 and 3,759,862 shares of common stock in treasury, at cost
|
(12,857
|
)
|
|
(12,857
|
)
|
||
Total Vector Group Ltd. stockholders’ deficiency
|
(95,036
|
)
|
|
(79,252
|
)
|
||
Non-controlling interest
|
73,427
|
|
|
—
|
|
||
Total stockholders’ deficiency
|
(21,609
|
)
|
|
(79,252
|
)
|
||
Total liabilities and stockholders’ deficiency
|
$
|
1,260,159
|
|
|
$
|
1,086,731
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(Dollars in thousands, except per share amounts)
|
||||||||||
Revenues*
|
$
|
1,056,200
|
|
|
$
|
1,084,546
|
|
|
$
|
1,133,380
|
|
Expenses:
|
|
|
|
|
|
|
|
||||
Cost of goods sold*
|
747,186
|
|
|
823,452
|
|
|
892,883
|
|
|||
Operating, selling, administrative and general expenses
|
108,872
|
|
|
106,161
|
|
|
97,176
|
|
|||
Litigation judgment expense
|
88,106
|
|
|
—
|
|
|
—
|
|
|||
Operating income
|
112,036
|
|
|
154,933
|
|
|
143,321
|
|
|||
Other income (expenses):
|
|
|
|
|
|
|
|
|
|||
Interest expense
|
(132,147
|
)
|
|
(110,102
|
)
|
|
(100,706
|
)
|
|||
Loss on extinguishment of debt
|
(21,458
|
)
|
|
—
|
|
|
—
|
|
|||
Changes in fair value of derivatives embedded within convertible debt
|
18,935
|
|
|
(7,476
|
)
|
|
7,984
|
|
|||
Acceleration of interest expense related to debt conversion
|
(12,414
|
)
|
|
(14,960
|
)
|
|
(1,217
|
)
|
|||
Gain on liquidation of long-term investments
|
—
|
|
|
—
|
|
|
25,832
|
|
|||
Equity (loss) income on long-term investments
|
2,066
|
|
|
(1,261
|
)
|
|
(859
|
)
|
|||
Gain on sale of investment securities available for sale
|
5,152
|
|
|
1,640
|
|
|
23,257
|
|
|||
Equity income from non-consolidated real estate businesses
|
22,925
|
|
|
29,764
|
|
|
19,966
|
|
|||
Gain on townhomes
|
—
|
|
|
—
|
|
|
3,843
|
|
|||
Gain on acquisition of Douglas Elliman
|
60,842
|
|
|
—
|
|
|
—
|
|
|||
Other, net
|
7,550
|
|
|
1,179
|
|
|
1,736
|
|
|||
Income before provision for income taxes
|
63,487
|
|
|
53,717
|
|
|
123,157
|
|
|||
Income tax expense
|
24,795
|
|
|
23,095
|
|
|
48,137
|
|
|||
|
|
|
|
|
|
||||||
Net income
|
38,692
|
|
|
30,622
|
|
|
75,020
|
|
|||
|
|
|
|
|
|
||||||
Net loss attributed to non-controlling interest
|
252
|
|
|
—
|
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Net income attributed to Vector Group Ltd.
|
$
|
38,944
|
|
|
$
|
30,622
|
|
|
$
|
75,020
|
|
|
|
|
|
|
|
||||||
Per basic common share:
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
||||||
Net income applicable to common shares attributed to Vector Group Ltd.
|
$
|
0.41
|
|
|
$
|
0.34
|
|
|
$
|
0.85
|
|
|
|
|
|
|
|
||||||
Per diluted common share:
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
||||||
Net income applicable to common shares attributed to Vector Group Ltd.
|
$
|
0.41
|
|
|
$
|
0.34
|
|
|
$
|
0.84
|
|
|
|
|
|
|
|
||||||
Cash distributions declared per share
|
$
|
1.54
|
|
|
$
|
1.47
|
|
|
$
|
1.40
|
|
*
|
Revenues and cost of goods sold include federal excise taxes of
$456,703
,
$508,027
and
$552,965
for the years ended December 31,
2013
,
2012
and
2011
, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(Dollars in thousands)
|
||||||||||
Net income
|
$
|
38,692
|
|
|
$
|
30,622
|
|
|
$
|
75,020
|
|
|
|
|
|
|
|
||||||
Net unrealized gains on investment securities available for sale:
|
|
|
|
|
|
||||||
Change in net unrealized (losses) gains
|
49,150
|
|
|
(13,267
|
)
|
|
23,573
|
|
|||
Net unrealized gains reclassified into net income
|
(5,152
|
)
|
|
(1,640
|
)
|
|
(23,257
|
)
|
|||
Net unrealized (losses) gains on investment securities available for sale
|
43,998
|
|
|
(14,907
|
)
|
|
316
|
|
|||
|
|
|
|
|
|
||||||
Net unrealized gains (losses) on long-term investments accounted for under the equity method
|
98
|
|
|
1,353
|
|
|
(3,596
|
)
|
|||
|
|
|
|
|
|
||||||
Net change in forward contracts
|
62
|
|
|
64
|
|
|
65
|
|
|||
|
|
|
|
|
|
||||||
Net change in pension-related amounts
|
11,612
|
|
|
2,394
|
|
|
(10,399
|
)
|
|||
|
|
|
|
|
|
||||||
Other comprehensive (loss) income
|
55,770
|
|
|
(11,096
|
)
|
|
(13,614
|
)
|
|||
|
|
|
|
|
|
||||||
Income tax effect on:
|
|
|
|
|
|
||||||
Change in net unrealized gains (losses) on investment securities
|
(19,955
|
)
|
|
5,387
|
|
|
(9,789
|
)
|
|||
Net unrealized gains reclassified into net income on investment securities
|
2,092
|
|
|
665
|
|
|
9,442
|
|
|||
Change in unrealized long-term investments
|
(40
|
)
|
|
(549
|
)
|
|
1,453
|
|
|||
Forward contracts
|
(25
|
)
|
|
(26
|
)
|
|
(26
|
)
|
|||
Pension-related amounts
|
(4,714
|
)
|
|
(972
|
)
|
|
4,401
|
|
|||
Income tax benefit (provision) on other comprehensive income (loss)
|
(22,642
|
)
|
|
4,505
|
|
|
5,481
|
|
|||
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax
|
33,128
|
|
|
(6,591
|
)
|
|
(8,133
|
)
|
|||
|
|
|
|
|
|
||||||
Comprehensive income
|
71,820
|
|
|
24,031
|
|
|
66,887
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive loss attributed to non-controlling interest
|
252
|
|
|
—
|
|
|
—
|
|
|||
Comprehensive income attributed to Vector Group Ltd.
|
$
|
72,072
|
|
|
$
|
24,031
|
|
|
$
|
66,887
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
|
|
Other
Comprehensive
Income (Loss)
|
|
Treasury
Stock
|
|
Non-controlling Interest
|
|
|
|||||||||||||||||
|
Shares
|
|
Amount
|
|
|
Deficit
|
|
|
|
|
Total
|
|||||||||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||||||||||||
Balance, January 1, 2011
|
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 income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(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 of $14,142
|
3,476,654
|
|
|
347
|
|
|
76,540
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76,887
|
|
|||||||
Beneficial conversion feature of notes payable, net of income taxes of $26,066
|
—
|
|
|
—
|
|
|
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
|
)
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
38,944
|
|
|
—
|
|
|
—
|
|
|
(252
|
)
|
|
38,692
|
|
|||||||
Change in net loss and prior service cost, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,898
|
|
|
—
|
|
|
—
|
|
|
6,898
|
|
|||||||
Forward contract adjustments, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|||||||
Unrealized gain on long-term investment securities accounted for under the equity method, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|||||||
Change in net unrealized gain on investment securities, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,195
|
|
|
—
|
|
|
—
|
|
|
29,195
|
|
|||||||
Net unrealized gains reclassified into net income, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,060
|
)
|
|
—
|
|
|
—
|
|
|
(3,060
|
)
|
|||||||
Unrealized gain on investment securities, net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,135
|
|
|||||||
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33,128
|
|
|||||||
Total comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
71,820
|
|
|||||||
Distributions and dividends on common stock
|
—
|
|
|
—
|
|
|
(57,891
|
)
|
|
(88,165
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(146,056
|
)
|
|||||||
Restricted stock grant
|
77,500
|
|
|
8
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Effect of stock dividend
|
4,498,579
|
|
|
450
|
|
|
—
|
|
|
(450
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Note conversion, net of income taxes of $7,242
|
2,970,168
|
|
|
297
|
|
|
53,357
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53,654
|
|
|||||||
Exercise of stock options
|
38,340
|
|
|
4
|
|
|
540
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
544
|
|
|||||||
Tax benefit of options exercised
|
—
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|||||||
Stock based compensation
|
—
|
|
|
—
|
|
|
2,519
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,519
|
|
|||||||
Deemed dividend from subsidiary
|
—
|
|
|
—
|
|
|
1,445
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,445
|
)
|
|
—
|
|
|||||||
Acquisition of Douglas Elliman Realty, LLC
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
85,703
|
|
|
85,703
|
|
|||||||
Contributions to non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,955
|
|
|
1,955
|
|
|||||||
Distributions to non-controlling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,534
|
)
|
|
(12,534
|
)
|
|||||||
Balance, December 31, 2013
|
97,482,998
|
|
|
$
|
9,748
|
|
|
$
|
—
|
|
|
$
|
(114,787
|
)
|
|
$
|
22,860
|
|
|
$
|
(12,857
|
)
|
|
$
|
73,427
|
|
|
$
|
(21,609
|
)
|
VECTOR GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
|
|||||||||||
|
|
|
|
|
|
||||||
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
|
(Dollars in thousands)
|
||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Proceeds from sale or maturity of investment securities
|
117,729
|
|
|
3,831
|
|
|
31,643
|
|
|||
Purchase of investment securities
|
(170,964
|
)
|
|
(5,647
|
)
|
|
(5,039
|
)
|
|||
Proceeds from sale or liquidation of long-term investments
|
580
|
|
|
72
|
|
|
66,190
|
|
|||
Purchase of long-term investments
|
(5,000
|
)
|
|
(5,000
|
)
|
|
(10,000
|
)
|
|||
Proceeds from sale of townhomes, net
|
—
|
|
|
—
|
|
|
19,629
|
|
|||
Increase (decrease) in restricted assets
|
1,081
|
|
|
(1,130
|
)
|
|
(96
|
)
|
|||
Investments in non-consolidated real estate businesses
|
(75,731
|
)
|
|
(33,375
|
)
|
|
(41,859
|
)
|
|||
Distributions from non-consolidated real estate businesses
|
3,142
|
|
|
49,221
|
|
|
8,450
|
|
|||
Issuance of notes receivable
|
(8,600
|
)
|
|
(383
|
)
|
|
(15,256
|
)
|
|||
Cash acquired in Douglas Elliman consolidation
|
116,935
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from sale of businesses and assets
|
48
|
|
|
444
|
|
|
205
|
|
|||
Capital expenditures
|
(13,275
|
)
|
|
(11,265
|
)
|
|
(11,838
|
)
|
|||
Increase in cash surrender value of life insurance policies
|
(628
|
)
|
|
(907
|
)
|
|
(744
|
)
|
|||
Purchase of subsidiaries
|
(67,616
|
)
|
|
—
|
|
|
—
|
|
|||
Repayment of notes receivable
|
10,347
|
|
|
—
|
|
|
—
|
|
|||
Net cash (used in) provided by investing activities
|
(91,952
|
)
|
|
(4,139
|
)
|
|
41,285
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of debt
|
457,767
|
|
|
244,075
|
|
|
6,419
|
|
|||
Repayments of debt
|
(422,581
|
)
|
|
(19,258
|
)
|
|
(4,960
|
)
|
|||
Deferred financing charges
|
(11,750
|
)
|
|
(11,479
|
)
|
|
—
|
|
|||
Borrowings under revolver
|
978,788
|
|
|
1,074,050
|
|
|
1,064,270
|
|
|||
Repayments on revolver
|
(977,794
|
)
|
|
(1,066,092
|
)
|
|
(1,078,508
|
)
|
|||
Distributions on common stock
|
(144,711
|
)
|
|
(137,114
|
)
|
|
(125,299
|
)
|
|||
Distributions to non-controlling interest
|
(11,764
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from the issuance of Vector stock
|
—
|
|
|
611
|
|
|
—
|
|
|||
Proceeds from exercise of Vector options
|
544
|
|
|
140
|
|
|
1,029
|
|
|||
Tax benefit of options exercised
|
38
|
|
|
52
|
|
|
821
|
|
|||
Net cash (used in) provided by financing activities
|
(131,463
|
)
|
|
84,985
|
|
|
(136,228
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(171,389
|
)
|
|
164,932
|
|
|
(58,902
|
)
|
|||
Cash and cash equivalents, beginning of year
|
405,855
|
|
|
240,923
|
|
|
299,825
|
|
|||
Cash and cash equivalents, end of year
|
$
|
234,466
|
|
|
$
|
405,855
|
|
|
$
|
240,923
|
|
1
.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
December 31,
2013 |
|
December 31,
2012 |
|
December 31,
2011 |
||||||
Net unrealized gains on investment securities available for sale, net of income taxes of $26,749, $8,886, and $14,938, respectively
|
$
|
39,136
|
|
|
$
|
13,001
|
|
|
$
|
21,856
|
|
Net unrealized losses on long-term investment accounted for under the equity method, net of income tax benefits of $418, $458 and $1,007, respectively
|
(612
|
)
|
|
(670
|
)
|
|
(1,474
|
)
|
|||
Forward contracts adjustment, net of income taxes of $63, $88, and $114, respectively
|
(92
|
)
|
|
(129
|
)
|
|
(167
|
)
|
|||
Pension-related amounts, net of income taxes of $10,644, $15,358, and $16,330, respectively
|
(15,572
|
)
|
|
(22,470
|
)
|
|
(23,892
|
)
|
|||
Accumulated other comprehensive (loss) income
|
$
|
22,860
|
|
|
$
|
(10,268
|
)
|
|
$
|
(3,677
|
)
|
|
Twelve Months Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Gain (loss) on warrants
|
$
|
1,165
|
|
|
$
|
(1,193
|
)
|
|
$
|
700
|
|
Interest income
|
5,421
|
|
|
2,256
|
|
|
1,035
|
|
|||
Accretion of interest income from debt discount on notes receivable
|
772
|
|
|
129
|
|
|
—
|
|
|||
Gain on long-term investment
|
189
|
|
|
135
|
|
|
—
|
|
|||
Other income
|
3
|
|
|
(148
|
)
|
|
1
|
|
|||
Other income, net
|
$
|
7,550
|
|
|
$
|
1,179
|
|
|
$
|
1,736
|
|
2
.
|
EARNINGS PER SHARE
|
|
2013
|
|
2012
|
|
2011
|
||||||
Net income attributed to Vector Group Ltd.
|
$
|
38,944
|
|
|
$
|
30,622
|
|
|
$
|
75,020
|
|
Income attributable to participating securities
|
(1,068
|
)
|
|
(608
|
)
|
|
(1,552
|
)
|
|||
Net income available to common stockholders attributed to Vector Group Ltd.
|
$
|
37,876
|
|
|
$
|
30,014
|
|
|
$
|
73,468
|
|
|
2013
|
|
2012
|
|
2011
|
|||
Weighted-average shares for basic EPS
|
91,506,678
|
|
|
88,843,244
|
|
|
86,738,428
|
|
Plus incremental shares related to stock options and warrants
|
237,494
|
|
|
84,402
|
|
|
223,255
|
|
Plus incremental shares related to convertible debt
|
—
|
|
|
—
|
|
|
—
|
|
Weighted-average shares for diluted EPS
|
91,744,172
|
|
|
88,927,646
|
|
|
86,961,683
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Number of stock options
|
—
|
|
|
—
|
|
|
3,578
|
|
|||
Weighted-average exercise price
|
N/A
|
|
|
N/A
|
|
|
$
|
15.70
|
|
||
Weighted-average shares of non-vested restricted stock
|
27,500
|
|
|
3,675
|
|
|
7,350
|
|
|||
Weighted-average expense per share
|
$
|
16.65
|
|
|
$
|
16.30
|
|
|
$
|
16.30
|
|
Weighted-average number of shares issuable upon conversion of debt
|
27,993,464
|
|
|
18,909,057
|
|
|
19,429,127
|
|
|||
Weighted-average conversion price
|
$
|
15.22
|
|
|
$
|
13.67
|
|
|
$
|
13.46
|
|
|
Cost
|
|
Gross
Unrealized
Gain
|
|
Gross
Unrealized
Loss
|
|
Fair
Value
|
||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities
|
$
|
53,586
|
|
|
$
|
65,851
|
|
|
$
|
(963
|
)
|
|
$
|
118,474
|
|
Marketable debt securities
|
53,063
|
|
|
1,497
|
|
|
(500
|
)
|
|
54,060
|
|
||||
|
$
|
106,649
|
|
|
$
|
67,348
|
|
|
$
|
(1,463
|
)
|
|
$
|
172,534
|
|
|
|
|
|
|
|
|
|
||||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable equity securities
|
$
|
48,097
|
|
|
$
|
23,621
|
|
|
$
|
(1,734
|
)
|
|
$
|
69,984
|
|
|
$
|
48,097
|
|
|
$
|
23,621
|
|
|
$
|
(1,734
|
)
|
|
$
|
69,984
|
|
Investment Type:
|
Market Value
|
|
Under 1 Year
|
|
1 Year up to 5 Years
|
|
More than 5 years
|
||||||||
U.S. Government securities
|
$
|
13,990
|
|
|
$
|
6,518
|
|
|
$
|
7,472
|
|
|
$
|
—
|
|
Corporate securities
|
29,923
|
|
|
808
|
|
|
22,330
|
|
|
6,785
|
|
||||
U.S. mortgage backed securities
|
495
|
|
|
—
|
|
|
495
|
|
|
—
|
|
||||
Commercial mortgage-backed securities
|
6,822
|
|
|
—
|
|
|
6,822
|
|
|
—
|
|
||||
U.S. asset backed securities
|
2,081
|
|
|
300
|
|
|
1,781
|
|
|
—
|
|
||||
Index-linked U.S. bonds
|
749
|
|
|
—
|
|
|
749
|
|
|
—
|
|
||||
Total fixed income securities by maturity dates
|
$
|
54,060
|
|
|
$
|
7,626
|
|
|
$
|
39,649
|
|
|
$
|
6,785
|
|
4
.
|
INVENTORIES
|
|
December 31,
2013 |
|
December 31,
2012 |
||||
Leaf tobacco
|
$
|
49,140
|
|
|
$
|
59,130
|
|
Other raw materials
|
3,161
|
|
|
3,151
|
|
||
Work-in-process
|
353
|
|
|
210
|
|
||
Finished goods
|
68,040
|
|
|
64,396
|
|
||
Inventories at current cost
|
120,694
|
|
|
126,887
|
|
||
LIFO adjustments
|
(27,198
|
)
|
|
(26,495
|
)
|
||
|
$
|
93,496
|
|
|
$
|
100,392
|
|
5
.
|
PROPERTY, PLANT AND EQUIPMENT
|
|
December 31,
2013 |
|
December 31,
2012 |
||||
Land and improvements
|
$
|
1,418
|
|
|
$
|
1,418
|
|
Buildings
|
14,950
|
|
|
14,945
|
|
||
Machinery and equipment
|
161,214
|
|
|
142,826
|
|
||
Leasehold improvements
|
16,614
|
|
|
3,868
|
|
||
|
194,196
|
|
|
163,057
|
|
||
Less accumulated depreciation and amortization
|
(114,938
|
)
|
|
(105,904
|
)
|
||
|
$
|
79,258
|
|
|
$
|
57,153
|
|
6
.
|
LONG-TERM INVESTMENTS
|
|
December 31, 2013
|
|
December 31, 2012
|
||||||||||||
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
Investment partnerships
|
$
|
20,041
|
|
|
$
|
24,095
|
|
|
$
|
15,540
|
|
|
$
|
16,962
|
|
Real estate partnership
|
747
|
|
|
1,067
|
|
|
827
|
|
|
1,391
|
|
||||
|
$
|
20,788
|
|
|
$
|
25,162
|
|
|
$
|
16,367
|
|
|
$
|
18,353
|
|
|
2013
|
|
2012
|
||||
Balance as of January 1
|
$
|
18,353
|
|
|
$
|
7,492
|
|
Contributions
|
5,000
|
|
|
—
|
|
||
Distributions
|
(769
|
)
|
|
(207
|
)
|
||
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
|
189
|
|
|
135
|
|
||
|
|
|
|
||||
Unrealized gains reclassified into net income
|
(189
|
)
|
|
(135
|
)
|
||
Unrealized gain on long-term investments
|
2,578
|
|
|
1,649
|
|
||
Net change in long-term investments
|
2,389
|
|
|
1,514
|
|
||
Balance as of December 31
|
$
|
25,162
|
|
|
$
|
18,353
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
Investment partnerships
|
$
|
8,595
|
|
|
$
|
6,432
|
|
|
2013
|
|
2012
|
||||
Balance as of January 1
|
$
|
6,432
|
|
|
$
|
16,499
|
|
Contributions
|
—
|
|
|
5,000
|
|
||
Reduction in partnership interest now accounted for under the cost method
|
—
|
|
|
(15,541
|
)
|
||
Equity income (loss) on long-term investments accounted for under the equity method
|
2,066
|
|
|
(1,261
|
)
|
||
|
|
|
|
||||
Unrealized gains reclassified into net income
|
97
|
|
|
—
|
|
||
Unrealized (loss) gain on long-term investments
|
—
|
|
|
1,735
|
|
||
Net change in long-term investments
|
97
|
|
|
1,735
|
|
||
Balance as of December 31
|
$
|
8,595
|
|
|
$
|
6,432
|
|
7
.
|
NEW VALLEY LLC
|
|
December 13,
2013 |
||
Cash and cash equivalents
|
$
|
116,935
|
|
Other current assets
|
12,647
|
|
|
Property, plant and equipment, net
|
20,275
|
|
|
Goodwill
|
72,103
|
|
|
Trademarks
|
80,000
|
|
|
Other intangible assets, net
|
12,928
|
|
|
Other non-current assets
|
3,384
|
|
|
Total assets acquired
|
$
|
318,272
|
|
|
|
||
Notes payable - current
|
$
|
201
|
|
Other current liabilities
|
26,247
|
|
|
Notes payable - long term
|
420
|
|
|
Total liabilities assumed
|
26,868
|
|
|
|
|
||
Net assets acquired
|
$
|
291,404
|
|
|
|
||
Non-controlling interest
|
$
|
85,703
|
|
|
December 31,
2013 |
|
December 31,
2012 |
||||
Revenues
|
$
|
1,472,655
|
|
|
$
|
1,461,364
|
|
Income from continuing operations
|
75,017
|
|
|
55,234
|
|
||
|
|
|
|
|
December 13,
2013 |
|
December 31,
2012 |
||||
Cash
|
$
|
117,660
|
|
|
$
|
78,015
|
|
Other current assets
|
11,922
|
|
|
8,543
|
|
||
Property, plant and equipment, net
|
16,293
|
|
|
15,796
|
|
||
Trademarks
|
21,663
|
|
|
21,663
|
|
||
Goodwill
|
38,776
|
|
|
38,523
|
|
||
Other intangible assets, net
|
431
|
|
|
897
|
|
||
Other non-current assets
|
3,384
|
|
|
3,182
|
|
||
Notes payable - current
|
201
|
|
|
466
|
|
||
Other current liabilities
|
26,921
|
|
|
22,065
|
|
||
Notes payable - long term
|
420
|
|
|
334
|
|
||
Other long-term liabilities
|
8,862
|
|
|
9,614
|
|
||
Members' equity
|
173,725
|
|
|
134,140
|
|
|
January 1 through December 31
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Revenues
|
$
|
416,453
|
|
|
$
|
378,175
|
|
|
$
|
346,309
|
|
Costs and expenses
|
369,852
|
|
|
346,617
|
|
|
315,318
|
|
|||
Depreciation expense
|
3,790
|
|
|
3,422
|
|
|
3,439
|
|
|||
Amortization expense
|
213
|
|
|
242
|
|
|
253
|
|
|||
Other income
|
(22
|
)
|
|
1,829
|
|
|
2,007
|
|
|||
Interest expense, net
|
23
|
|
|
62
|
|
|
136
|
|
|||
Income tax expense
|
996
|
|
|
780
|
|
|
946
|
|
|||
Net income
|
$
|
41,557
|
|
|
$
|
28,881
|
|
|
$
|
28,224
|
|
|
December 31,
2013 |
|
December 31,
2012 |
||||
Douglas Elliman
|
$
|
—
|
|
|
$
|
65,171
|
|
Sesto Holdings
|
5,037
|
|
|
5,037
|
|
||
1107 Broadway
|
6,579
|
|
|
5,566
|
|
||
The Whitman
|
1,165
|
|
|
900
|
|
||
The Marquand
|
7,000
|
|
|
7,000
|
|
||
11 Beach Street
|
11,160
|
|
|
9,642
|
|
||
701 Seventh Avenue
|
11,148
|
|
|
9,307
|
|
||
101 Murray Street
|
19,256
|
|
|
—
|
|
||
Leroy Street
|
1,150
|
|
|
—
|
|
||
8701 Collins Avenue
|
3,794
|
|
|
—
|
|
||
23-10 Queens Plaza South
|
8,058
|
|
|
7,350
|
|
||
Maryland Portfolio
|
3,498
|
|
|
4,615
|
|
||
ST Portfolio
|
15,984
|
|
|
—
|
|
||
Chrystie Street
|
2,048
|
|
|
1,973
|
|
||
Park Lane Hotel
|
19,514
|
|
|
—
|
|
||
Hotel Taiwana
|
7,428
|
|
|
2,658
|
|
||
Coral Beach
|
2,964
|
|
|
—
|
|
||
Other
|
2,419
|
|
|
—
|
|
||
Investments in non-consolidated real estate businesses
|
$
|
128,202
|
|
|
$
|
119,219
|
|
|
December 31,
2012 |
||
Cash
|
$
|
11
|
|
Other current assets
|
2
|
|
|
Net loans receivable
|
—
|
|
|
Interest receivable
|
—
|
|
|
Other assets
|
—
|
|
|
Accrued expenses
|
—
|
|
|
Members' equity
|
13
|
|
|
Year Ended December 31,
|
|
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,
2013 |
|
December 31,
2012 |
||||
Escena, net
|
$
|
10,625
|
|
|
$
|
13,295
|
|
Indian Creek
|
10,286
|
|
|
—
|
|
||
Investment in consolidated real estate businesses, net
|
$
|
20,911
|
|
|
$
|
13,295
|
|
|
December 31,
2013 |
|
December 31,
2012 |
||||
Land and land improvements
|
$
|
8,930
|
|
|
$
|
11,430
|
|
Building and building improvements
|
1,530
|
|
|
1,530
|
|
||
Other
|
1,577
|
|
|
1,374
|
|
||
|
12,037
|
|
|
14,334
|
|
||
Less accumulated depreciation
|
(1,412
|
)
|
|
(1,039
|
)
|
||
|
$
|
10,625
|
|
|
$
|
13,295
|
|
8
.
|
GOODWILL AND OTHER INTANGIBLE ASSETS
|
|
Goodwill
|
||
|
|
|
|
Balance at of January 1, 2013
|
$
|
—
|
|
Acquisitions
|
72,103
|
|
|
Balance at December 31, 2013
|
$
|
72,103
|
|
|
Useful Lives in Years
|
|
December 31,
2013 |
|
December 31,
2012 |
||||
Intangible asset associated with benefit under the Master Settlement Agreement
|
Indefinite
|
|
$
|
107,511
|
|
|
$
|
107,511
|
|
|
|
|
|
|
|
||||
Trademark - Douglas Elliman
|
Indefinite
|
|
$
|
80,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||
Favorable leases
|
1 - 10
|
|
$
|
9,598
|
|
|
$
|
—
|
|
Other intangibles
|
1 - 5
|
|
3,330
|
|
|
—
|
|
||
|
|
|
12,928
|
|
|
—
|
|
||
Less: accumulated amortization on amortizable intangibles
|
|
|
(1,568
|
)
|
|
—
|
|
||
|
|
|
$
|
11,360
|
|
|
$
|
—
|
|
9
.
|
NOTES PAYABLE, LONG-TERM DEBT AND OTHER OBLIGATIONS
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
Vector:
|
|
|
|
|
|||
7.75% Senior Secured Notes due 2021
|
$
|
450,000
|
|
|
$
|
—
|
|
11% Senior Secured Notes due 2015, net of unamortized discount of $0 and $408
|
—
|
|
|
414,592
|
|
||
6.75% Variable Interest Senior Convertible Note due 2014, net of unamortized discount of $19,311 and $30,383*
|
30,689
|
|
|
19,617
|
|
||
6.75% Variable Interest Senior Convertible Exchange Notes due 2014, net of unamortized discount of $25,944 and $45,038*
|
81,586
|
|
|
62,492
|
|
||
3.875% Variable Interest Senior Convertible Debentures due 2026, net of unamortized discount of $0 and $36,107*
|
—
|
|
|
7,115
|
|
||
7.5% Variable Interest Senior Convertible Notes due 2019, net of unamortized discount of $155,817 and $161,795*
|
74,183
|
|
|
68,205
|
|
||
Liggett:
|
|
|
|
||||
Revolving credit facility
|
30,424
|
|
|
29,430
|
|
||
Term loan under credit facility
|
3,884
|
|
|
4,179
|
|
||
Equipment loans
|
17,252
|
|
|
17,810
|
|
||
Other
|
4,325
|
|
|
284
|
|
||
Total notes payable, long-term debt and other obligations
|
692,343
|
|
|
623,724
|
|
||
Less:
|
|
|
|
|
|
||
Current maturities
|
(151,577
|
)
|
|
(36,778
|
)
|
||
Amount due after one year
|
$
|
540,766
|
|
|
$
|
586,946
|
|
*
|
The fair value of the derivatives embedded within the
6.75%
Variable Interest Senior Convertible Note (
$6,607
at
December 31, 2013
and
$11,682
at
December 31, 2012
, respectively), the
6.75%
Variable Interest Senior Convertible Exchange Notes (
$12,521
at
December 31, 2013
and
$22,146
at
December 31, 2012
, respectively), the
3.875%
Variable Interest Senior Convertible Debentures (
$0
at
December 31, 2013
and
$39,714
at
December 31, 2012
, respectively), and the
7.5%
Variable Interest Senior Convertible Debentures (
$92,934
at
December 31, 2013
and
$98,586
at
December 31, 2012
, respectively) is separately classified as a derivative liability in the condensed consolidated balance sheets.
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
6.75% note
|
$
|
5,914
|
|
|
$
|
2,842
|
|
|
$
|
1,415
|
|
6.75% exchange notes
|
11,799
|
|
|
7,416
|
|
|
4,745
|
|
|||
3.875% convertible debentures
|
155
|
|
|
57
|
|
|
195
|
|
|||
7.5% convertible notes
|
3,614
|
|
|
369
|
|
|
—
|
|
|||
Interest expense associated with embedded derivatives
|
$
|
21,482
|
|
|
$
|
10,684
|
|
|
$
|
6,355
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
6.75% note
|
$
|
5,075
|
|
|
$
|
5,247
|
|
|
$
|
3,290
|
|
6.75% exchange notes
|
9,625
|
|
|
9,940
|
|
|
6,238
|
|
|||
3.875% convertible debentures
|
(1,417
|
)
|
|
(22,281
|
)
|
|
(1,544
|
)
|
|||
7.5% convertible notes
|
5,652
|
|
|
(382
|
)
|
|
—
|
|
|||
(Loss) gain on changes in fair value of derivatives embedded within convertible debt
|
$
|
18,935
|
|
|
$
|
(7,476
|
)
|
|
$
|
7,984
|
|
|
6.75%
Note
|
|
6.75%
Exchange
Notes
|
|
3.875%
Convertible
Debentures
|
|
7.5%
Convertible
Notes
|
|
Total
|
||||||||||
Balance at January 1, 2011
|
$
|
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
|
|
|||||
Conversion of $43,222 of 3.875% Variable Interest Senior Convertible Debentures due June 15, 2016
|
—
|
|
|
—
|
|
|
(41,131
|
)
|
|
—
|
|
|
(41,131
|
)
|
|||||
(Gain) loss from changes in fair value of embedded derivatives
|
(5,075
|
)
|
|
(9,625
|
)
|
|
1,417
|
|
|
(5,652
|
)
|
|
(18,935
|
)
|
|||||
Balance at December 31, 2013
|
$
|
6,607
|
|
|
$
|
12,521
|
|
|
$
|
—
|
|
|
$
|
92,934
|
|
|
$
|
112,062
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Amortization of beneficial conversion feature:
|
|
|
|
|
|
|
|
|
|||
6.75% note
|
$
|
5,157
|
|
|
$
|
2,479
|
|
|
$
|
1,234
|
|
6.75% exchange notes
|
7,294
|
|
|
4,582
|
|
|
2,932
|
|
|||
3.875% convertible debentures
|
82
|
|
|
30
|
|
|
(80
|
)
|
|||
7.5% convertible notes
|
2,363
|
|
|
241
|
|
|
—
|
|
|||
Interest expense associated with beneficial conversion feature
|
$
|
14,896
|
|
|
$
|
7,332
|
|
|
$
|
4,086
|
|
|
6.75%
Note
|
|
6.75%
Exchange
Notes
|
|
3.875%
Convertible
Debentures
|
|
7.5%
Convertible
Notes
|
|
Total
|
||||||||||
Balance at January 1, 2011
|
$
|
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
|
|
|||||
Conversion of $43,222 of 3.875% Variable Interest Senior Convertible Debentures due June 15, 2016
|
—
|
|
|
—
|
|
|
(35,870
|
)
|
|
—
|
|
|
(35,870
|
)
|
|||||
Amortization of embedded derivatives
|
(5,914
|
)
|
|
(11,799
|
)
|
|
(155
|
)
|
|
(3,614
|
)
|
|
(21,482
|
)
|
|||||
Amortization of beneficial conversion feature
|
(5,157
|
)
|
|
(7,294
|
)
|
|
(82
|
)
|
|
(2,363
|
)
|
|
(14,896
|
)
|
|||||
Balance at December 31, 2013
|
$
|
19,312
|
|
|
$
|
25,945
|
|
|
$
|
—
|
|
|
$
|
155,818
|
|
|
$
|
201,075
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||||||||||
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
||||||||
Notes payable and long-term debt
|
$
|
692,343
|
|
|
$
|
1,006,562
|
|
|
$
|
623,724
|
|
|
$
|
963,672
|
|
|
Principal
|
|
Unamortized
Discount
|
|
Net
|
||||||
Year Ending December 31:
|
|
|
|
|
|
|
|
|
|||
2014
|
$
|
196,832
|
|
|
$
|
45,257
|
|
|
$
|
151,575
|
|
2015
|
13,268
|
|
|
—
|
|
|
13,268
|
|
|||
2016
|
2,911
|
|
|
—
|
|
|
2,911
|
|
|||
2017
|
230
|
|
|
—
|
|
|
230
|
|
|||
2018
|
177
|
|
|
—
|
|
|
177
|
|
|||
Thereafter
|
680,000
|
|
|
155,818
|
|
|
524,182
|
|
|||
Total
|
$
|
893,418
|
|
|
$
|
201,075
|
|
|
$
|
692,343
|
|
10
.
|
COMMITMENTS
|
|
Lease
Commitments
|
|
Sublease
Rentals
|
|
Net
|
||||||
Year Ending December 31:
|
|
|
|
|
|
|
|
|
|||
2014
|
$
|
18,146
|
|
|
$
|
130
|
|
|
$
|
18,016
|
|
2015
|
16,975
|
|
|
111
|
|
|
16,864
|
|
|||
2016
|
13,762
|
|
|
—
|
|
|
13,762
|
|
|||
2017
|
12,007
|
|
|
—
|
|
|
12,007
|
|
|||
2018
|
9,999
|
|
|
—
|
|
|
9,999
|
|
|||
Thereafter
|
26,032
|
|
|
—
|
|
|
26,032
|
|
|||
Total
|
$
|
96,921
|
|
|
$
|
241
|
|
|
$
|
96,680
|
|
11
.
|
EMPLOYEE BENEFIT PLANS
|
|
Pension Benefits
|
|
Other
Postretirement Benefits
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Benefit obligation at January 1
|
$
|
(153,716
|
)
|
|
$
|
(151,008
|
)
|
|
$
|
(10,158
|
)
|
|
$
|
(9,635
|
)
|
Service cost
|
(1,170
|
)
|
|
(1,275
|
)
|
|
(16
|
)
|
|
(14
|
)
|
||||
Interest cost
|
(5,518
|
)
|
|
(6,513
|
)
|
|
(418
|
)
|
|
(465
|
)
|
||||
Plan settlement
|
1,819
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Benefits paid
|
10,510
|
|
|
12,813
|
|
|
560
|
|
|
512
|
|
||||
Expenses paid
|
350
|
|
|
308
|
|
|
—
|
|
|
—
|
|
||||
Actuarial (gain) loss
|
(3,186
|
)
|
|
(8,041
|
)
|
|
1,133
|
|
|
(556
|
)
|
||||
Benefit obligation at December 31
|
$
|
(150,911
|
)
|
|
$
|
(153,716
|
)
|
|
$
|
(8,899
|
)
|
|
$
|
(10,158
|
)
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair value of plan assets at January 1
|
$
|
128,060
|
|
|
$
|
122,012
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
19,482
|
|
|
15,656
|
|
|
—
|
|
|
—
|
|
||||
Plan settlement
|
(1,819
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Expenses paid
|
(350
|
)
|
|
(308
|
)
|
|
—
|
|
|
—
|
|
||||
Contributions
|
2,173
|
|
|
3,513
|
|
|
560
|
|
|
512
|
|
||||
Benefits paid
|
(10,510
|
)
|
|
(12,813
|
)
|
|
(560
|
)
|
|
(512
|
)
|
||||
Fair value of plan assets at December 31
|
$
|
137,036
|
|
|
$
|
128,060
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Funded status at December 31
|
$
|
(13,875
|
)
|
|
$
|
(25,656
|
)
|
|
$
|
(8,899
|
)
|
|
$
|
(10,158
|
)
|
Amounts recognized in the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prepaid pension costs
|
$
|
26,080
|
|
|
$
|
12,870
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other accrued liabilities
|
(342
|
)
|
|
(2,161
|
)
|
|
(597
|
)
|
|
(663
|
)
|
||||
Non-current employee benefit liabilities
|
(39,613
|
)
|
|
(36,365
|
)
|
|
(8,304
|
)
|
|
(9,495
|
)
|
||||
Net amounts recognized
|
$
|
(13,875
|
)
|
|
$
|
(25,656
|
)
|
|
$
|
(8,901
|
)
|
|
$
|
(10,158
|
)
|
|
Pension Benefits
|
|
Other Postretirement
Benefits
|
||||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
2011
|
||||||||||||
Service cost — benefits earned during the period
|
$
|
1,170
|
|
|
$
|
1,275
|
|
|
$
|
1,422
|
|
|
$
|
16
|
|
|
$
|
14
|
|
|
$
|
13
|
|
Interest cost on projected benefit obligation
|
5,518
|
|
|
6,513
|
|
|
7,481
|
|
|
418
|
|
|
465
|
|
|
500
|
|
||||||
Expected return on assets
|
(7,915
|
)
|
|
(8,145
|
)
|
|
(8,834
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlement loss
|
244
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of net loss (gain)
|
1,918
|
|
|
3,602
|
|
|
2,807
|
|
|
(64
|
)
|
|
(121
|
)
|
|
(88
|
)
|
||||||
Net expense
|
$
|
935
|
|
|
$
|
3,245
|
|
|
$
|
2,876
|
|
|
$
|
370
|
|
|
$
|
358
|
|
|
$
|
425
|
|
|
Defined
Benefit
Pension Plans
|
|
Post-
Retirement
Plans
|
|
Total
|
||||||
Actuarial loss (gain)
|
$
|
1,075
|
|
|
$
|
(60
|
)
|
|
$
|
1,015
|
|
|
Defined
Benefit
Pension Plans
|
|
Post-
Retirement
Plans
|
|
Total
|
||||||
Prior year accumulated other comprehensive income
|
$
|
(37,646
|
)
|
|
$
|
(182
|
)
|
|
$
|
(37,828
|
)
|
Amortization of prior service costs
|
—
|
|
|
—
|
|
|
—
|
|
|||
Amortization of gain (loss)
|
2,163
|
|
|
(64
|
)
|
|
2,099
|
|
|||
Net loss arising during the year
|
8,381
|
|
|
1,132
|
|
|
9,513
|
|
|||
Current year accumulated other comprehensive loss
|
$
|
(27,102
|
)
|
|
$
|
886
|
|
|
$
|
(26,216
|
)
|
|
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) income
|
$
|
(37,646
|
)
|
|
$
|
(182
|
)
|
|
$
|
(37,828
|
)
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
2011
|
|||
Weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rates — benefit obligation
|
3.00% - 4.75%
|
|
2.25% - 4.00%
|
|
3.75% - 4.75%
|
|
5.00
|
%
|
|
4.25
|
%
|
|
5.00
|
%
|
Discount rates — service cost
|
2.25% - 4.00%
|
|
3.75% - 4.75%
|
|
5.25%
|
|
4.25
|
%
|
|
5.00
|
%
|
|
5.25
|
%
|
Assumed rates of return on invested assets
|
6.50%
|
|
7.00%
|
|
7.00%
|
|
—
|
|
|
—
|
|
|
—
|
|
Salary increase assumptions
|
N/A
|
|
N/A
|
|
N/A
|
|
3.00
|
%
|
|
3.00
|
%
|
|
3.00
|
%
|
|
Plan Assets at
December 31,
|
||||
|
2013
|
|
2012
|
||
Asset category:
|
|
|
|
|
|
Equity securities
|
50
|
%
|
|
47
|
%
|
Investment grade fixed income securities
|
28
|
%
|
|
30
|
%
|
High yield fixed income securities
|
10
|
%
|
|
10
|
%
|
Alternative investments
|
6
|
%
|
|
8
|
%
|
Short-term investments
|
6
|
%
|
|
5
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
|
Fair Value Measurements as of December 31, 2013
|
||||||||||||||
|
|
|
|
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
|
|
$
|
2,396
|
|
|
$
|
—
|
|
|
$
|
2,396
|
|
|
$
|
—
|
|
Amounts in individually managed investment accounts:
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash
|
|
7,424
|
|
|
7,424
|
|
|
—
|
|
|
—
|
|
||||
U.S. equity securities
|
|
46,520
|
|
|
46,520
|
|
|
—
|
|
|
—
|
|
||||
Common collective trusts
|
|
57,912
|
|
|
—
|
|
|
57,912
|
|
|
—
|
|
||||
Investment partnership
|
|
22,748
|
|
|
—
|
|
|
13,717
|
|
|
9,031
|
|
||||
Total
|
|
$
|
137,000
|
|
|
$
|
53,944
|
|
|
$
|
74,025
|
|
|
$
|
9,031
|
|
|
|
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, mutual funds and common stock
|
|
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
|
|
|
2013
|
|
2012
|
||||
Balance as of January 1
|
$
|
23,712
|
|
|
$
|
22,582
|
|
Transfers
|
(13,153
|
)
|
|
—
|
|
||
Distributions
|
(2,669
|
)
|
|
(2,905
|
)
|
||
Contributions
|
—
|
|
|
864
|
|
||
Unrealized loss on long-term investments
|
(1,779
|
)
|
|
2,442
|
|
||
Realized gain on long-term investments
|
2,920
|
|
|
729
|
|
||
Balance as of December 31
|
$
|
9,031
|
|
|
$
|
23,712
|
|
|
1% Increase
|
|
1% Decrease
|
||||
Effect on total of service and interest cost components
|
$
|
6
|
|
|
$
|
(6
|
)
|
Effect on benefit obligation
|
119
|
|
|
(110
|
)
|
|
Pension
|
|
Postretirement
Medical
|
||||
2014
|
$
|
10,749
|
|
|
$
|
596
|
|
2015
|
10,422
|
|
|
603
|
|
||
2016
|
10,080
|
|
|
607
|
|
||
2017
|
9,793
|
|
|
611
|
|
||
2018
|
39,101
|
|
|
615
|
|
||
2019 - 2023
|
54,013
|
|
|
3,114
|
|
12
.
|
INCOME TAXES
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Current:
|
|
|
|
|
|
|
|
|
|||
U.S. Federal
|
$
|
20,808
|
|
|
$
|
24,246
|
|
|
$
|
30,458
|
|
State
|
3,521
|
|
|
6,185
|
|
|
8,313
|
|
|||
|
$
|
24,329
|
|
|
$
|
30,431
|
|
|
$
|
38,771
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|||
U.S. Federal
|
$
|
596
|
|
|
$
|
(5,779
|
)
|
|
$
|
7,765
|
|
State
|
(130
|
)
|
|
(1,557
|
)
|
|
1,601
|
|
|||
|
466
|
|
|
(7,336
|
)
|
|
9,366
|
|
|||
Total
|
$
|
24,795
|
|
|
$
|
23,095
|
|
|
$
|
48,137
|
|
|
December 31, 2013
|
|
December 31, 2012
|
||||||||||||
|
Deferred Tax
Assets
|
|
Deferred Tax
Liabilities
|
|
Deferred Tax
Assets
|
|
Deferred Tax
Liabilities
|
||||||||
Excess of tax basis over book basis- non-consolidated entities
|
$
|
4,434
|
|
|
$
|
3,582
|
|
|
$
|
3,654
|
|
|
$
|
—
|
|
Employee benefit accruals
|
19,539
|
|
|
9,378
|
|
|
17,508
|
|
|
2,383
|
|
||||
Book/tax differences on fixed and Intangible assets
|
—
|
|
|
48,086
|
|
|
—
|
|
|
45,439
|
|
||||
Book/tax differences on inventory
|
—
|
|
|
19,213
|
|
|
—
|
|
|
18,165
|
|
||||
Book/tax differences on long-term investments
|
—
|
|
|
30,898
|
|
|
1
|
|
|
—
|
|
||||
Impact of accounting on convertible debt
|
9,202
|
|
|
44,823
|
|
|
16,306
|
|
|
56,346
|
|
||||
Impact of timing of settlement payments
|
56,551
|
|
|
—
|
|
|
32,113
|
|
|
706
|
|
||||
Various U.S. state tax loss carryforwards
|
10,010
|
|
|
—
|
|
|
10,854
|
|
|
—
|
|
||||
Other
|
8,231
|
|
|
27,404
|
|
|
11,625
|
|
|
13,792
|
|
||||
Valuation allowance
|
(6,014
|
)
|
|
—
|
|
|
(6,310
|
)
|
|
—
|
|
||||
|
$
|
101,953
|
|
|
$
|
183,384
|
|
|
$
|
85,751
|
|
|
$
|
136,831
|
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
Income before income taxes
|
$
|
63,487
|
|
|
$
|
53,717
|
|
|
$
|
123,157
|
|
Federal income tax expense at statutory rate
|
22,221
|
|
|
18,801
|
|
|
43,105
|
|
|||
Increases (decreases) resulting from:
|
|
|
|
|
|
|
|
||||
State income taxes, net of federal income tax benefits
|
2,204
|
|
|
3,009
|
|
|
6,444
|
|
|||
Impact of non-controlling interest
|
88
|
|
|
—
|
|
|
—
|
|
|||
Non-deductible expenses
|
2,698
|
|
|
3,311
|
|
|
1,974
|
|
|||
Impact of domestic production deduction
|
(1,889
|
)
|
|
(2,026
|
)
|
|
(4,256
|
)
|
|||
Tax credits
|
(433
|
)
|
|
—
|
|
|
—
|
|
|||
Changes in valuation allowance, net of equity and tax audit adjustments
|
(94
|
)
|
|
—
|
|
|
870
|
|
|||
Income tax expense
|
$
|
24,795
|
|
|
$
|
23,095
|
|
|
$
|
48,137
|
|
Balance at January 1, 2011
|
$
|
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
|
|
|
Additions based on tax positions related to prior years
|
179
|
|
|
Settlements
|
(250
|
)
|
|
Expirations of the statute of limitations
|
(3,076
|
)
|
|
Balance at December 31, 2013
|
$
|
3,122
|
|
13
.
|
STOCK COMPENSATION
|
|
2013
|
|
2011
|
|
Risk-free interest rate
|
0.6% – 1.8%
|
|
|
1.4% – 1.9%
|
Expected volatility
|
20.05% – 24.08%
|
|
|
24.78% – 25.02%
|
Dividend yield
|
0.0
|
%
|
|
0.0% - 10.08%
|
Expected holding period
|
4.00 – 10.00 years
|
|
4.00 – 4.75 years
|
|
Weighted-average grant date fair value
|
$2.72 – $5.80
|
|
|
$0.90 – $3.81
|
|
Number of
Shares
|
|
Weighted-Average
Exercise Price
|
|
Weighted-Average
Remaining
Contractual Term
(Years)
|
|
Aggregate
Intrinsic
Value(1)
|
|||||
Outstanding on January 1, 2011
|
2,664,481
|
|
|
$
|
12.13
|
|
|
6.0
|
|
$
|
11,208
|
|
Granted
|
529,035
|
|
|
$
|
14.84
|
|
|
|
|
|
|
|
Exercised
|
(557,887
|
)
|
|
$
|
10.33
|
|
|
|
|
|
|
|
Canceled
|
(212,225
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
Outstanding on December 31, 2011
|
2,423,404
|
|
|
$
|
12.48
|
|
|
7.6
|
|
$
|
11,187
|
|
Granted
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Exercised
|
(16,883
|
)
|
|
$
|
8.25
|
|
|
|
|
|
|
|
Canceled
|
(6,599
|
)
|
|
$
|
14.35
|
|
|
|
|
|
|
|
Outstanding on December 31, 2012
|
2,399,922
|
|
|
$
|
12.50
|
|
|
6.6
|
|
$
|
4,371
|
|
Granted
|
787,500
|
|
|
$
|
15.36
|
|
|
|
|
|
|
|
Exercised
|
(40,175
|
)
|
|
$
|
13.54
|
|
|
|
|
|
|
|
Canceled
|
(13
|
)
|
|
$
|
—
|
|
|
|
|
|
||
Outstanding on December 31, 2013
|
3,147,234
|
|
|
$
|
13.21
|
|
|
6.5
|
|
$
|
9,959
|
|
Options exercisable at:
|
|
|
|
|
|
|
|
|
|
|
||
December 31, 2011
|
411,452
|
|
|
|
|
|
|
|
|
|
||
December 31, 2012
|
418,359
|
|
|
|
|
|
|
|
|
|
||
December 31, 2013
|
1,777,158
|
|
|
|
|
|
|
|
|
|
(1)
|
The aggregate intrinsic value represents the amount by which the fair value of the underlying common stock (
$16.37
,
$14.16
and
$16.10
at
December 31, 2013
,
2012
and
2011
, 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
Remaining
Contractual Life
(Years)
|
|
Weighted-Average
Exercise Price |
|
Aggregate Intrinsic Value
|
|||||||||||
|
12/31/2013
|
|
|
|
12/31/2013
|
|
|
|
|||||||||||||||||
$0.00
|
-
|
$12.13
|
|
1,679,616
|
|
|
5.3
|
|
|
$
|
11.64
|
|
|
1,679,616
|
|
|
5.3
|
|
$
|
11.64
|
|
|
$
|
—
|
|
$12.13
|
-
|
$14.55
|
|
180,024
|
|
|
5.7
|
|
|
$
|
13.61
|
|
|
97,542
|
|
|
5.0
|
|
$
|
13.64
|
|
|
—
|
|
|
$15.28
|
-
|
$16.98
|
|
1,287,594
|
|
|
8.3
|
|
|
$
|
15.19
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
—
|
|
|
$17.82
|
-
|
$19.40
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
—
|
|
|
$20.37
|
-
|
$21.83
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
—
|
|
|
$22.91
|
-
|
$24.25
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
—
|
|
|
$0.00
|
-
|
$0.00
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
—
|
|
|
$0.00
|
-
|
$0.00
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
$
|
—
|
|
|
—
|
|
|
|
|
|
|
3,147,234
|
|
|
6.5
|
|
|
$
|
13.21
|
|
|
1,777,158
|
|
|
5.3
|
|
$
|
11.75
|
|
|
$
|
8,203
|
|
State
|
|
Number
of Cases
|
|
Florida
|
|
39
|
|
New York
|
|
9
|
|
Maryland
|
|
4
|
|
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
|
|
Liggett satisfied the judgment and the case is concluded.
|
August 2009
|
|
Campbell v. R.J. Reynolds
|
|
Escambia
|
|
$156
|
|
None
|
|
Liggett satisfied the judgment and the case is concluded.
|
March 2010
|
|
Douglas v. R.J. Reynolds
|
|
Hillsborough
|
|
$1,350
|
|
None
|
|
Liggett satisfied the judgment and the case is concluded.
|
April 2010
|
|
Clay v. R.J. Reynolds
|
|
Escambia
|
|
$349
|
|
$1,000
|
|
Liggett satisfied the judgment and the case is concluded.
|
April 2010
|
|
Putney v. R.J. Reynolds
|
|
Broward
|
|
$3,008
|
|
None
|
|
On June 12, 2013, the Fourth District Court of Appeal reversed and remanded the case for further proceedings. Plaintiff filed a motion for rehearing which was denied. Both sides have sought discretionary review from the Florida Supreme Court. The appeal is stayed pending the outcome of the Hess appeal.
|
April 2011
|
|
Tullo v. R.J. Reynolds
|
|
Palm Beach
|
|
$225
|
|
None
|
|
Affirmed by the Fourth District Court of Appeal. The defendants have sought discretionary review from the Florida Supreme Court.
|
January 2012
|
|
Ward v. R.J. Reynolds
|
|
Escambia
|
|
$1
|
|
None
|
|
Affirmed by the First District Court of Appeal. Liggett satisfied the merits judgment and other than an issue regarding attorneys' fees, the case is concluded. Oral argument on the attorneys' fee appeal occurred on February 11, 2014.
|
May 2012
|
|
Calloway v. R.J. Reynolds
|
|
Broward
|
|
$1,947
|
|
$7,600
|
|
A joint and several judgment for $16,100 was entered against R.J. Reynolds, Philip Morris, Lorillard and Liggett. On appeal to the Fourth District Court of Appeal.
|
December 2012
|
|
Buchanan v. R.J. Reynolds
|
|
Leon
|
|
$2,035
|
|
None
|
|
A joint and several judgment for $5,500 was entered against Liggett and Philip Morris. On appeal to the First District Court of Appeal.
|
May 2013
|
|
Cohen v. R.J. Reynolds
|
|
Palm Beach
|
|
$205
|
|
None
|
|
Defendants' motion seeking a new trial was granted by the trial court. Plaintiff appealed to the Fourth District Court of Appeal.
|
August 2013
|
|
Rizzuto v. R.J. Reynolds
|
|
Hernando
|
|
$3,479
|
|
None
|
|
A joint and several judgment for $11,132 was entered against Philip Morris and Liggett. The court denied defendants' request to reduce the compensatory damages by the plaintiff's comparative fault. On appeal to the Fifth District Court of Appeal.
|
|
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 31, 2011
|
$
|
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 from 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 from 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
|
|
||||||
Expenses
|
117,085
|
|
|
63,292
|
|
|
180,377
|
|
|
—
|
|
|
25,218
|
|
|
25,218
|
|
||||||
MSA settlement and arbitration adjustments
|
(3,928
|
)
|
|
—
|
|
|
(3,928
|
)
|
|
(18,138
|
)
|
|
—
|
|
|
(18,138
|
)
|
||||||
Change in MSA obligations capitalized as inventory
|
1,611
|
|
|
—
|
|
|
1,611
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Payments
|
(129,320
|
)
|
|
(6,070
|
)
|
|
(135,390
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification from non-current liabilities
|
6,930
|
|
|
223
|
|
|
7,153
|
|
|
(6,930
|
)
|
|
(223
|
)
|
|
(7,153
|
)
|
||||||
Interest on withholding
|
—
|
|
|
395
|
|
|
395
|
|
|
—
|
|
|
201
|
|
|
201
|
|
||||||
Balance as of December 31, 2013
|
$
|
25,348
|
|
|
$
|
59,310
|
|
|
$
|
84,658
|
|
|
$
|
27,571
|
|
|
$
|
27,058
|
|
|
$
|
54,629
|
|
|
15
.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
Year Ended December 31,
|
||||||||||
|
2013
|
|
2012
|
|
2011
|
||||||
I. Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|||
Interest
|
$
|
114,301
|
|
|
$
|
81,821
|
|
|
$
|
83,677
|
|
Income taxes
|
17,585
|
|
|
27,693
|
|
|
53,074
|
|
|||
II. Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
||||
Issuance of stock dividend
|
450
|
|
|
414
|
|
|
378
|
|
|||
Acquisitions
|
84,859
|
|
|
—
|
|
|
—
|
|
|||
Non-controlling interest
|
87,657
|
|
|
—
|
|
|
—
|
|
|||
Debt retired in debt conversion
|
43,222
|
|
|
55,778
|
|
|
11,000
|
|
|||
Embedded derivative, net retired in debt conversion
|
17,377
|
|
|
8,001
|
|
|
1,150
|
|
16
.
|
RELATED PARTY TRANSACTIONS
|
17
.
|
INVESTMENTS AND FAIR VALUE MEASUREMENTS
|
|
|
Fair Value Measurements as of December 31, 2013
|
||||||||||||||
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
|
|
$
|
130,733
|
|
|
$
|
130,733
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit
|
|
2,961
|
|
|
—
|
|
|
2,961
|
|
|
—
|
|
||||
Bonds
|
|
5,337
|
|
|
5,337
|
|
|
—
|
|
|
—
|
|
||||
Investment securities available for sale
|
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
|
118,474
|
|
|
117,737
|
|
|
737
|
|
|
—
|
|
||||
Fixed income securities
|
|
|
|
|
|
|
|
—
|
|
|||||||
U.S. Government securities
|
|
13,990
|
|
|
—
|
|
|
13,990
|
|
|
—
|
|
||||
Corporate securities
|
|
29,923
|
|
|
6,497
|
|
|
23,426
|
|
|
—
|
|
||||
U.S. mortgage backed securities
|
|
495
|
|
|
—
|
|
|
495
|
|
|
—
|
|
||||
Commercial mortgage-backed securities
|
|
6,822
|
|
|
—
|
|
|
6,822
|
|
|
—
|
|
||||
U.S. asset backed securities
|
|
2,081
|
|
|
—
|
|
|
2,081
|
|
|
—
|
|
||||
Index-linked U.S. bonds
|
|
749
|
|
|
—
|
|
|
749
|
|
|
—
|
|
||||
Total fixed income securities
|
|
54,060
|
|
|
6,497
|
|
|
47,563
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Warrants
(1)
|
|
1,935
|
|
|
—
|
|
|
—
|
|
|
1,935
|
|
||||
Total
|
|
$
|
313,500
|
|
|
$
|
260,304
|
|
|
$
|
51,261
|
|
|
$
|
1,935
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Fair value of derivatives embedded within convertible debt
|
|
$
|
112,062
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
112,062
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Warrants include
1,000,000
of LTS Warrants received on November 4, 2011 which were carried at
$1,758
as of
December 31, 2013
and are included in "Other assets". The Company recognized
income
of
$1,041
for the
year ended December 31, 2013
related to the change in fair value of the Warrants.
|
|
|
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, 2011 related to the change in fair value from receipt. (See Note
16
.)
|
|
|
Quantitative Information about Level 3 Fair Value Measurements
|
||||||||||
|
|
Fair Value at
|
|
|
|
|
|
|
||||
|
|
December 31,
2013 |
|
Valuation Technique
|
|
Unobservable Input
|
|
Range (Actual)
|
||||
|
|
|
|
|
|
|
|
|
||||
Warrants
|
|
$
|
1,935
|
|
|
Option model
|
|
Stock price
|
|
$
|
3.13
|
|
|
|
|
|
|
|
Exercise price
|
|
$
|
1.68
|
|
||
|
|
|
|
|
|
Term (in years)
|
|
2.8
|
|
|||
|
|
|
|
|
|
Volatility
|
|
53.82
|
%
|
|||
|
|
|
|
|
|
Dividend rate
|
|
—
|
|
|||
|
|
|
|
|
|
Risk-free return
|
|
0.72
|
%
|
|||
|
|
|
|
|
|
|
|
|
||||
Fair value of derivatives embedded within convertible debt
|
|
112,062
|
|
|
Discounted cash flow
|
|
Assumed annual stock dividend
|
|
5
|
%
|
||
|
|
|
|
|
|
Assumed annual cash dividend
|
|
$
|
1.60
|
|
||
|
|
|
|
|
|
Stock price
|
|
$
|
16.37
|
|
||
|
|
|
|
|
|
Convertible trading price
|
|
118.7
|
%
|
|||
|
|
|
|
|
|
Volatility
|
|
18.00
|
%
|
|||
|
|
|
|
|
|
Implied credit spread
|
|
7.5% - 8.5% (8.0%)
|
|
|
|
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
|
|
109.00
|
%
|
|||
|
|
|
|
|
|
Volatility
|
|
18
|
%
|
|||
|
|
|
|
|
|
Implied credit spread
|
|
10% - 11% (10.5%)
|
|
|
Tobacco
|
|
|
Real
Estate
|
|
|
Corporate
and Other
|
|
Total
|
||||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues
|
$
|
1,014,341
|
|
|
|
$
|
41,859
|
|
|
|
$
|
—
|
|
|
$
|
1,056,200
|
|
Operating income (loss)
|
112,020
|
|
(1)
|
|
15,805
|
|
|
|
(15,789
|
)
|
|
112,036
|
|
||||
Equity income from non-consolidated real estate businesses
|
—
|
|
|
|
22,925
|
|
|
|
—
|
|
|
22,925
|
|
||||
Total assets
|
442,701
|
|
|
|
426,982
|
|
(2)
|
|
390,476
|
|
|
1,260,159
|
|
||||
Depreciation and amortization
|
9,509
|
|
|
|
2,421
|
|
|
|
701
|
|
|
12,631
|
|
||||
Capital expenditures
|
9,784
|
|
|
|
1,194
|
|
|
|
2,297
|
|
|
13,275
|
|
||||
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
|
|
||||
Total 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
|
|
||||
Total 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
|
|
(1)
|
Operating income includes
$11,823
of income from MSA Settlements,
$86,213
of Engle progeny settlement charge and
$1,893
of litigation judgment expense.
|
(2)
|
Includes investments accounted for under the equity method of accounting of
$128,202
,
$125,651
and
$140,968
as of
December 31, 2013
,
2012
and
2011
, respectively.
|
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
||||||||
|
2013
|
|
2013
|
|
2013
|
|
2013
|
||||||||
Revenues
|
$
|
295,162
|
|
|
$
|
271,516
|
|
|
$
|
249,120
|
|
|
$
|
240,402
|
|
Gross Profit
|
96,353
|
|
|
76,525
|
|
|
68,690
|
|
|
67,446
|
|
||||
Operating income
|
61,985
|
|
|
(37,285
|
)
|
|
44,240
|
|
|
43,096
|
|
||||
Net income (loss) applicable to common shares attributed to Vector Group Ltd
|
$
|
64,005
|
|
|
$
|
(36,891
|
)
|
|
$
|
13,511
|
|
|
$
|
(1,681
|
)
|
Per basic common share(1):
|
|
|
|
|
|
|
|
||||||||
Net income (loss) applicable to common shares attributed to Vector Group Ltd.
|
$
|
0.67
|
|
|
$
|
(0.40
|
)
|
|
$
|
0.14
|
|
|
$
|
(0.02
|
)
|
Per diluted common share(1):
|
|
|
|
|
|
|
|
||||||||
Net income (loss) applicable to common shares attributed to Vector Group Ltd.
|
$
|
0.61
|
|
|
$
|
(0.40
|
)
|
|
$
|
0.14
|
|
|
$
|
(0.02
|
)
|
(1)
|
Per share computations include the impact of a
5%
stock dividend paid on
September 27, 2013
. 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,
|
||||||||
|
2012
|
|
2012
|
|
2012
|
|
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 applicable to common shares
|
$
|
0.18
|
|
|
$
|
0.20
|
|
|
$
|
0.04
|
|
|
$
|
(0.09
|
)
|
Per diluted common share(1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income applicable to common shares
|
$
|
0.14
|
|
|
$
|
0.20
|
|
|
$
|
0.04
|
|
|
$
|
(0.09
|
)
|
(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.
|
•
|
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, 2013
|
|
|
||||||||||||||
|
|
|
|
|
Subsidiary
|
|
|
|
Consolidated
|
||||||||||
|
Parent/
|
|
Subsidiary
|
|
Non-
|
|
Consolidating
|
|
Vector Group
|
||||||||||
|
Issuer
|
|
Guarantors
|
|
Guarantors
|
|
Adjustments
|
|
Ltd.
|
||||||||||
ASSETS:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
151,342
|
|
|
$
|
11,812
|
|
|
$
|
71,312
|
|
|
$
|
—
|
|
|
$
|
234,466
|
|
Investment securities available for sale
|
114,886
|
|
|
57,648
|
|
|
—
|
|
|
—
|
|
|
172,534
|
|
|||||
Accounts receivable - trade, net
|
—
|
|
|
10,154
|
|
|
2,005
|
|
|
—
|
|
|
12,159
|
|
|||||
Intercompany receivables
|
509
|
|
|
—
|
|
|
—
|
|
|
(509
|
)
|
|
—
|
|
|||||
Inventories
|
—
|
|
|
93,496
|
|
|
—
|
|
|
—
|
|
|
93,496
|
|
|||||
Deferred income taxes
|
45,578
|
|
|
4,901
|
|
|
—
|
|
|
—
|
|
|
50,479
|
|
|||||
Income taxes receivable, net
|
—
|
|
|
10,447
|
|
|
—
|
|
|
(10,447
|
)
|
|
—
|
|
|||||
Restricted assets
|
—
|
|
|
1,060
|
|
|
725
|
|
|
—
|
|
|
1,785
|
|
|||||
Other current assets
|
513
|
|
|
12,579
|
|
|
10,300
|
|
|
—
|
|
|
23,392
|
|
|||||
Total current assets
|
312,828
|
|
|
202,097
|
|
|
84,342
|
|
|
(10,956
|
)
|
|
588,311
|
|
|||||
Property, plant and equipment, net
|
3,641
|
|
|
55,093
|
|
|
20,524
|
|
|
—
|
|
|
79,258
|
|
|||||
Investment in consolidated real estate businesses, net
|
—
|
|
|
—
|
|
|
20,911
|
|
|
—
|
|
|
20,911
|
|
|||||
Long-term investments accounted for at cost
|
20,041
|
|
|
—
|
|
|
747
|
|
|
—
|
|
|
20,788
|
|
|||||
Long-term investments accounted for under the equity method
|
8,595
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,595
|
|
|||||
Investments in non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
128,202
|
|
|
—
|
|
|
128,202
|
|
|||||
Investments in consolidated subsidiaries
|
410,442
|
|
|
—
|
|
|
—
|
|
|
(410,442
|
)
|
|
—
|
|
|||||
Restricted assets
|
1,895
|
|
|
10,086
|
|
|
—
|
|
|
—
|
|
|
11,981
|
|
|||||
Deferred income taxes
|
35,000
|
|
|
12,766
|
|
|
3,708
|
|
|
—
|
|
|
51,474
|
|
|||||
Goodwill and other intangible assets, net
|
—
|
|
|
107,511
|
|
|
163,495
|
|
|
—
|
|
|
271,006
|
|
|||||
Prepaid pension costs
|
—
|
|
|
26,080
|
|
|
—
|
|
|
—
|
|
|
26,080
|
|
|||||
Other assets
|
38,374
|
|
|
10,126
|
|
|
5,053
|
|
|
—
|
|
|
53,553
|
|
|||||
Total assets
|
$
|
830,816
|
|
|
$
|
423,759
|
|
|
$
|
426,982
|
|
|
$
|
(421,398
|
)
|
|
$
|
1,260,159
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current portion of notes payable and long-term debt
|
$
|
112,275
|
|
|
$
|
39,013
|
|
|
$
|
289
|
|
|
$
|
—
|
|
|
$
|
151,577
|
|
Current portion of fair value of derivatives embedded within convertible debt
|
19,128
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,128
|
|
|||||
Current portion of employee benefits
|
—
|
|
|
939
|
|
|
—
|
|
|
—
|
|
|
939
|
|
|||||
Accounts payable
|
1,509
|
|
|
4,136
|
|
|
21,049
|
|
|
—
|
|
|
26,694
|
|
|||||
Intercompany payables
|
—
|
|
|
39
|
|
|
470
|
|
|
(509
|
)
|
|
—
|
|
|||||
Accrued promotional expenses
|
—
|
|
|
18,655
|
|
|
—
|
|
|
—
|
|
|
18,655
|
|
|||||
Income taxes payable, net
|
16,870
|
|
|
—
|
|
|
—
|
|
|
(10,447
|
)
|
|
6,423
|
|
|||||
Accrued excise and payroll taxes payable, net
|
—
|
|
|
11,621
|
|
|
—
|
|
|
—
|
|
|
11,621
|
|
|||||
Litigation accruals and current payments due under the Master Settlement Agreement
|
—
|
|
|
84,658
|
|
|
—
|
|
|
—
|
|
|
84,658
|
|
|||||
Deferred income taxes
|
32,309
|
|
|
13,425
|
|
|
—
|
|
|
—
|
|
|
45,734
|
|
|||||
Accrued interest
|
21,968
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,968
|
|
|||||
Other current liabilities
|
6,103
|
|
|
10,495
|
|
|
1,010
|
|
|
—
|
|
|
17,608
|
|
|||||
Total current liabilities
|
210,162
|
|
|
182,981
|
|
|
22,818
|
|
|
(10,956
|
)
|
|
405,005
|
|
|||||
Notes payable, long-term debt and other obligations, less current portion
|
524,182
|
|
|
12,573
|
|
|
4,011
|
|
|
—
|
|
|
540,766
|
|
|||||
Fair value of derivatives embedded within convertible debt
|
92,934
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
92,934
|
|
|||||
Non-current employee benefits
|
31,462
|
|
|
16,455
|
|
|
—
|
|
|
—
|
|
|
47,917
|
|
|||||
Deferred income taxes
|
65,759
|
|
|
37,602
|
|
|
34,289
|
|
|
—
|
|
|
137,650
|
|
|||||
Other liabilities, primarily litigation accruals and payments due under the Master Settlement Agreement
|
1,353
|
|
|
54,924
|
|
|
1,219
|
|
|
—
|
|
|
57,496
|
|
|||||
Total liabilities
|
925,852
|
|
|
304,535
|
|
|
62,337
|
|
|
(10,956
|
)
|
|
1,281,768
|
|
|||||
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders' (deficiency) equity attributed to Vector Group Ltd.
|
(95,036
|
)
|
|
119,224
|
|
|
291,218
|
|
|
(410,442
|
)
|
|
(95,036
|
)
|
|||||
Non-controlling interest
|
—
|
|
|
—
|
|
|
73,427
|
|
|
—
|
|
|
73,427
|
|
|||||
Total Stockholders' (deficiency) equity
|
(95,036
|
)
|
|
119,224
|
|
|
364,645
|
|
|
(410,442
|
)
|
|
(21,609
|
)
|
|||||
Total liabilities and stockholders' deficiency
|
$
|
830,816
|
|
|
$
|
423,759
|
|
|
$
|
426,982
|
|
|
$
|
(421,398
|
)
|
|
$
|
1,260,159
|
|
|
|
|
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 consolidated real estate business, 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 associated with benefit under the Master Settlement Agreement
|
—
|
|
|
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) equity
|
(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
|
|
|
|
|
Year Ended December 31, 2013
|
|
|
||||||||||||||
|
|
|
|
|
Subsidiary
|
|
|
|
Consolidated
|
||||||||||
|
Parent/
|
|
Subsidiary
|
|
Non-
|
|
Consolidating
|
|
Vector Group
|
||||||||||
|
Issuer
|
|
Guarantors
|
|
Guarantors
|
|
Adjustments
|
|
Ltd.
|
||||||||||
Revenues
|
$
|
—
|
|
|
$
|
1,014,341
|
|
|
$
|
41,859
|
|
|
$
|
—
|
|
|
$
|
1,056,200
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of goods sold
|
—
|
|
|
729,393
|
|
|
17,793
|
|
|
—
|
|
|
747,186
|
|
|||||
Operating, selling, administrative and general expenses
|
22,835
|
|
|
77,780
|
|
|
8,257
|
|
|
—
|
|
|
108,872
|
|
|||||
Litigation settlement and judgment expense
|
—
|
|
|
88,106
|
|
|
—
|
|
|
—
|
|
|
88,106
|
|
|||||
Management fee expense
|
—
|
|
|
9,508
|
|
|
—
|
|
|
(9,508
|
)
|
|
—
|
|
|||||
Operating (loss) income
|
(22,835
|
)
|
|
109,554
|
|
|
15,809
|
|
|
9,508
|
|
|
112,036
|
|
|||||
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
(130,417
|
)
|
|
(1,716
|
)
|
|
(14
|
)
|
|
—
|
|
|
(132,147
|
)
|
|||||
Change in fair value of derivatives embedded within convertible debt
|
18,935
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,935
|
|
|||||
Acceleration of interest expense related to debt conversion
|
(12,414
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,414
|
)
|
|||||
Loss on extinguishment of debt
|
(21,458
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,458
|
)
|
|||||
Equity income from non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
22,925
|
|
|
—
|
|
|
22,925
|
|
|||||
Equity loss on long-term investments
|
2,066
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,066
|
|
|||||
(Loss) gain on investment securities available for sale
|
(272
|
)
|
|
5,424
|
|
|
—
|
|
|
—
|
|
|
5,152
|
|
|||||
Gain on Douglas Elliman acquisition
|
—
|
|
|
—
|
|
|
60,842
|
|
|
—
|
|
|
60,842
|
|
|||||
Equity income in consolidated subsidiaries
|
144,689
|
|
|
—
|
|
|
—
|
|
|
(144,689
|
)
|
|
—
|
|
|||||
Management fee income
|
9,508
|
|
|
—
|
|
|
—
|
|
|
(9,508
|
)
|
|
—
|
|
|||||
Other, net
|
4,439
|
|
|
2,763
|
|
|
348
|
|
|
—
|
|
|
7,550
|
|
|||||
Income before provision for income taxes
|
(7,759
|
)
|
|
116,025
|
|
|
99,910
|
|
|
(144,689
|
)
|
|
63,487
|
|
|||||
Income tax benefit (expense)
|
46,703
|
|
|
(30,758
|
)
|
|
(40,740
|
)
|
|
—
|
|
|
(24,795
|
)
|
|||||
Net income
|
38,944
|
|
|
85,267
|
|
|
59,170
|
|
|
(144,689
|
)
|
|
38,692
|
|
|||||
Net loss attributed to non-controlling interest
|
—
|
|
|
—
|
|
|
252
|
|
|
—
|
|
|
252
|
|
|||||
Net income attributed to Vector Group Ltd.
|
38,944
|
|
|
85,267
|
|
|
59,422
|
|
|
(144,689
|
)
|
|
38,944
|
|
|||||
Comprehensive loss attributed to non-controlling interest
|
—
|
|
|
—
|
|
|
252
|
|
|
—
|
|
|
$
|
252
|
|
||||
Comprehensive income attributed to Vector Group Ltd.
|
$
|
72,072
|
|
|
$
|
102,344
|
|
|
$
|
59,422
|
|
|
$
|
(161,766
|
)
|
|
$
|
72,072
|
|
|
|
|
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
|
|
|||||
Gain on investment securities available for sale
|
—
|
|
|
1,640
|
|
|
—
|
|
|
—
|
|
|
1,640
|
|
|||||
Equity loss on long-term investments
|
(1,261
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,261
|
)
|
|||||
Equity income in consolidated subsidiaries
|
120,036
|
|
|
—
|
|
|
—
|
|
|
(120,036
|
)
|
|
—
|
|
|||||
Management fee income
|
9,163
|
|
|
—
|
|
|
—
|
|
|
(9,163
|
)
|
|
—
|
|
|||||
Other, net
|
1,022
|
|
|
21
|
|
|
136
|
|
|
—
|
|
|
1,179
|
|
|||||
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
|
||||||||||||||||||
|
Parent/
Issuer
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-
Guarantors
|
|
Consolidating
Adjustments
|
|
Consolidated
Vector Group
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
|
|
|||||
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
|
)
|
|||||
Changes 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 sale 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, 2013
|
|
|
||||||||||||||
|
|
|
|
|
Subsidiary
|
|
|
|
Consolidated
|
||||||||||
|
Parent/
|
|
Subsidiary
|
|
Non-
|
|
Consolidating
|
|
Vector Group
|
||||||||||
|
Issuer
|
|
Guarantors
|
|
Guarantors
|
|
Adjustments
|
|
Ltd.
|
||||||||||
Net cash provided by (used in) operating activities
|
$
|
71,730
|
|
|
$
|
115,829
|
|
|
$
|
(16,239
|
)
|
|
$
|
(119,294
|
)
|
|
$
|
52,026
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Sale of investment securities
|
111,127
|
|
|
6,602
|
|
|
—
|
|
|
—
|
|
|
117,729
|
|
|||||
Purchase of investment securities
|
(159,463
|
)
|
|
(11,501
|
)
|
|
—
|
|
|
—
|
|
|
(170,964
|
)
|
|||||
Proceeds from sale or liquidation of long-term investments
|
500
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
580
|
|
|||||
Purchase of long-term investments
|
(5,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,000
|
)
|
|||||
Investments in non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
(75,731
|
)
|
|
—
|
|
|
(75,731
|
)
|
|||||
Distributions from non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
3,142
|
|
|
—
|
|
|
3,142
|
|
|||||
Increase in cash surrender value of life insurance policies
|
(144
|
)
|
|
(484
|
)
|
|
—
|
|
|
—
|
|
|
(628
|
)
|
|||||
Decrease (increase) in non-current restricted assets
|
3
|
|
|
1,078
|
|
|
—
|
|
|
—
|
|
|
1,081
|
|
|||||
Issuance of notes receivable
|
—
|
|
|
—
|
|
|
(8,600
|
)
|
|
—
|
|
|
(8,600
|
)
|
|||||
Investments in subsidiaries
|
(155,961
|
)
|
|
—
|
|
|
—
|
|
|
155,961
|
|
|
—
|
|
|||||
Proceeds from sale of fixed assets
|
35
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
48
|
|
|||||
Cash acquired in Douglas Elliman consolidation
|
—
|
|
|
—
|
|
|
116,935
|
|
|
—
|
|
|
116,935
|
|
|||||
Purchase of subsidiaries
|
—
|
|
|
—
|
|
|
(67,616
|
)
|
|
—
|
|
|
(67,616
|
)
|
|||||
Repayment of notes receivable
|
10,347
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,347
|
|
|||||
Capital expenditures
|
(2,297
|
)
|
|
(9,784
|
)
|
|
(1,194
|
)
|
|
—
|
|
|
(13,275
|
)
|
|||||
Net cash (used in) provided by investing activities
|
(200,853
|
)
|
|
(14,076
|
)
|
|
(32,984
|
)
|
|
155,961
|
|
|
(91,952
|
)
|
|||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from debt issuance
|
450,000
|
|
|
4,687
|
|
|
3,080
|
|
|
—
|
|
|
457,767
|
|
|||||
Deferred financing costs
|
(11,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,750
|
)
|
|||||
Repayments of debt
|
(415,000
|
)
|
|
(7,466
|
)
|
|
(115
|
)
|
|
—
|
|
|
(422,581
|
)
|
|||||
Borrowings under revolver
|
—
|
|
|
978,788
|
|
|
—
|
|
|
—
|
|
|
978,788
|
|
|||||
Repayments on revolver
|
—
|
|
|
(977,794
|
)
|
|
—
|
|
|
—
|
|
|
(977,794
|
)
|
|||||
Capital contributions received
|
—
|
|
|
13,950
|
|
|
142,011
|
|
|
(155,961
|
)
|
|
—
|
|
|||||
Intercompany dividends paid
|
—
|
|
|
(105,882
|
)
|
|
(13,412
|
)
|
|
119,294
|
|
|
—
|
|
|||||
Distributions on common stock
|
(144,711
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(144,711
|
)
|
|||||
Distributions to non-controlling interest
|
—
|
|
|
—
|
|
|
(11,764
|
)
|
|
—
|
|
|
(11,764
|
)
|
|||||
Proceeds from the issuance of Vector stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Proceeds from exercise of Vector options
|
544
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
544
|
|
|||||
Tax benefit of options exercised
|
38
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|||||
Net cash provided by (used in) financing activities
|
(120,879
|
)
|
|
(93,717
|
)
|
|
119,800
|
|
|
(36,667
|
)
|
|
(131,463
|
)
|
|||||
Net increase in cash and cash equivalents
|
(250,002
|
)
|
|
8,036
|
|
|
70,577
|
|
|
—
|
|
|
(171,389
|
)
|
|||||
Cash and cash equivalents, beginning of period
|
401,344
|
|
|
3,776
|
|
|
735
|
|
|
—
|
|
|
405,855
|
|
|||||
Cash and cash equivalents, end of period
|
$
|
151,342
|
|
|
$
|
11,812
|
|
|
$
|
71,312
|
|
|
$
|
—
|
|
|
$
|
234,466
|
|
|
|
|
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 of 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
|
)
|
|||||
Proceeds from sale of townhomes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Proceeds from sale of fixed assets
|
432
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
444
|
|
|||||
Investments in subsidiaries
|
(31,209
|
)
|
|
—
|
|
|
—
|
|
|
31,209
|
|
|
—
|
|
|||||
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
|
||||||||||||||||||
|
Parent/
Issuer
|
|
Subsidiary
Guarantors
|
|
Subsidiary
Non-
Guarantors
|
|
Consolidating
Adjustments
|
|
Consolidated
Vector Group
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 or liquidation of long-term investments
|
66,190
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66,190
|
|
|||||
Purchase of long-term investments
|
(10,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,000
|
)
|
|||||
Decrease (increase) in non-current restricted assets
|
512
|
|
|
(608
|
)
|
|
—
|
|
|
—
|
|
|
(96
|
)
|
|||||
Investment in non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
(41,859
|
)
|
|
—
|
|
|
(41,859
|
)
|
|||||
Distributions from non-consolidated real estate businesses
|
—
|
|
|
—
|
|
|
8,450
|
|
|
—
|
|
|
8,450
|
|
|||||
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
|
)
|
|||||
Increase in cash surrender value of life insurance policies
|
(315
|
)
|
|
(429
|
)
|
|
—
|
|
|
—
|
|
|
(744
|
)
|
|||||
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 issuance of debt
|
—
|
|
|
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
|
1,029
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,029
|
|
|||||
Excess tax benefit of options exercised
|
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
|
|
Description
|
|
Balance at
Beginning
of Period
|
|
Additions
Charged to
Costs and
Expenses
|
|
Deductions
|
|
Balance
at End
of Period
|
||||||||
Year Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Allowances for:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Doubtful accounts
|
|
$
|
318
|
|
|
$
|
198
|
|
|
$
|
324
|
|
|
$
|
192
|
|
Cash discounts
|
|
259
|
|
|
25,207
|
|
|
25,225
|
|
|
241
|
|
||||
Deferred tax valuation allowance
|
|
6,310
|
|
|
—
|
|
|
296
|
|
|
6,014
|
|
||||
Sales returns
|
|
4,067
|
|
|
4,019
|
|
|
3,666
|
|
|
4,420
|
|
||||
Total
|
|
$
|
10,954
|
|
|
$
|
29,424
|
|
|
$
|
29,511
|
|
|
$
|
10,867
|
|
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
|
|
I.
|
DEFINITIONS (not otherwise set forth in the body of the Agreement)
|
A.
|
“CPI%” means the actual total percent change in the Consumer Price Index – All Urban Consumers, as published by the Bureau of Labor Statistics of the U.S. Department of Labor (“DOL”), during the calendar year immediately preceding the year in which the Annual Payment (described in Section IV(B)(2)(b)(iii)) is due. For example, if the Consumer Price Index for December 2023 (as released by DOL) is 2% higher than the Consumer Price Index for December 2022 (as released by DOL), then the CPI% for the Annual Payment due in 2024 would be 2%.
|
B.
|
“Effective Date” of this Agreement shall be October 22, 2013.
|
C.
|
“Engle Progeny Action” shall mean any litigation that has been, or could be, brought in federal and/or state courts pursuant to the Florida Supreme Court’s decision in
Engle v. Liggett Group, Inc., et al.
, 945 So. 2d 1246 (Fla. 2006).
|
D.
|
“Non-Settling Defendant” shall mean a defendant in any of the Engle Progeny Actions that is not a Party to this Agreement.
|
E.
|
“Non-Settling Plaintiff” has the meaning set forth in Section II(C).
|
F.
|
“Other Engle Plaintiff” has the meaning set forth in Section II(D).
|
G.
|
“Participating Plaintiff” shall mean a plaintiff in any Engle Progeny Action that is identified on Exhibits B or C hereto.
|
H.
|
“Participating Plaintiffs’ Counsel” shall mean those counsel, attorneys and law firms who represent one or more of the Participating Plaintiffs and/or Other Engle Plaintiffs, and are identified on Exhibit A to this Agreement.
|
I.
|
“Person” or “persons” identified herein (including, without limitation, the Releasors, or any Participating Plaintiff, Non-Settling Plaintiff, Other Engle Plaintiff, counsel, attorney, agent or representative) shall mean individuals and entities, whether public, private or governmental, including, but not limited to, any natural person, corporation, limited liability company, partnership, proprietorship, firm, association, company, and joint venture, and their respective members, shareholders, directors, officers, successors, heirs, estates, survivors, minor children, agents, representatives, personal representatives, affiliates, entities, administrators, executors, trusts, attorneys, designated payees and assigns.
|
J.
|
“Plaintiffs’ Coordinating Counsel” shall mean Grossman Roth, P.A., Suite 1150, 2525 Ponce de Leon Blvd., Coral Gables, FL 33134.
|
K.
|
“Released Claims” shall mean any and all actions, causes of action, suits, damages, sums of money, accounts, injuries, claims, benefits and demands of any type whatsoever, including, without limitation, those for damages, costs, losses (whether compensatory, exemplary and/or punitive damages), expenses or any other liabilities, whether based in tort, contract, breach of warranty, breach of duty, negligence, strict liability, failure to warn, fraud, deceit, concealment, conspiracy, statute, equity, or any other theory of recovery, that arise, concern or relate to the Releasors’ Engle Progeny Action, or arise, concern or relate to any use of, exposure to, and/or manufacturing, sale and/or marketing of, cigarettes, cigarette smoking or tobacco, that Releasors had in the past, now have, may have or which may hereafter accrue, be claimed, or otherwise be acquired in the future against any and all of the Released Parties, whether known or unknown, matured, latent or unmatured, filed or unfiled and whether accrued or not, along with any derivative or related claim(s) belonging to spouses, estates or survivors, such as wrongful death, loss of maintenance, support, companionship and/or services, loss of net accumulations, and/or loss of consortium, as those terms are used in the Releases attached as Exhibits G1 and G2.
|
L.
|
“Released Parties” shall mean Liggett Group LLC and Vector Group Ltd., and each of their respective parents, subsidiaries, predecessors, successors, assigns, administrators, affiliates, stockholders, directors, members, officers, attorneys, insurers, representatives and agents, but shall not include the Non-Settling Defendants, as those terms are used in the Releases attached as Exhibits G1 and G2.
|
M.
|
“Releasor” or “Releasors” shall mean the Participating Plaintiff or Other Engle Plaintiff, and their respective successors, heirs, estates, survivors, minor children, agents, representatives, personal representatives, affiliates, entities, administrators, executors, trusts, attorneys, designated payees and assigns, or in the capacity as a
|
N.
|
“Settlement Fund Matrix” and “Special Appeal Fund” have been agreed to by Participating Plaintiffs’ Counsel and Plaintiffs’ Coordinating Counsel, and together establish how the Settlement Proceeds (as defined in Section IV(B)) are to be allocated and distributed to and among the Participating Plaintiffs and the Other Engle Plaintiffs subject to the terms and conditions herein.
|
O.
|
“The Wilner Firm” shall mean Norwood S. Wilner, Esq. and/or The Wilner Firm, P.A., 444 E. Duval Street, Jacksonville, FL 32202, along with any co-counsel engaged by The Wilner Firm.
|
P.
|
“Tier Zero Plaintiff” shall mean a Participating Plaintiff that asserts that the smoker at issue in the respective Engle Progeny Action did not use Liggett Brand cigarettes or used only a
de minimis
quantity of Liggett brand cigarettes and therefore qualifies as a Tier Zero Plaintiff pursuant to the Settlement Fund Matrix (
i.e.
, that group of Participating Plaintiffs that are entitled to no more than $1,000.00 as their respective, individual share of the Settlement Proceeds as defined in Section IV(B)).
|
II.
|
THE PARTICIPATING PLAINTIFFS
|
A.
|
The undersigned Participating Plaintiffs’ Counsel represent, warrant and severally agree that their respective clients, who are plaintiffs in Engle Progeny Actions, or have or may have claims relating to any Engle Progeny Action, and who are participating in this settlement and agree to be bound by the terms and conditions of this Agreement, are correctly identified on the two lists of Participating Plaintiffs (the “Participating Plaintiff Lists” attached as Exhibits B and C hereto) including, as to each Participating Plaintiff: (i) the correct full name for the Participating Plaintiff; (ii) the case name(s), number(s) and venue(s) sufficient to identify any and all Engle Progeny Actions brought by, or on behalf of, the Participating Plaintiff; (iii) the identity of the Participating Plaintiffs’ Counsel who is representing the Participating Plaintiff in any and all Engle Progeny Actions; and (iv) whether the Participating Plaintiff is a Tier Zero Plaintiff. Participating Plaintiffs’ Counsel will obtain and provide to Plaintiffs’ Coordinating Counsel, or its designee, the Social Security Number, Health Insurance Claim Number (“HICN”) or any other information reasonably requested for each of the Participating Plaintiffs on Exhibits B and C for purposes of satisfying Medical Expense Liens and/or allocating Settlement Proceeds (as set forth in Sections IV, VI and VII hereto), or resolving any other issue reasonably necessary to effectuate the terms and conditions of this Agreement.
|
B.
|
The undersigned Participating Plaintiffs’ Counsel represent, warrant and severally agree that Exhibit B identifies the Participating Plaintiffs who are their clients and who have agreed to accept their respective share of the Settlement Proceeds over a fifteen (15) year payout schedule (the “Payout Plaintiffs”), and Exhibit C identifies
|
C.
|
Non-Settling Plaintiffs
. The following persons are “Non-Settling Plaintiffs” and are not Participating Plaintiffs subject to this Agreement:
|
1.
|
Any person who was or is a party to an Engle Progeny Action that resulted in a judgment against a Settling Defendant, whether or not such judgment was final, prior to the Effective Date of this Agreement;
|
2.
|
Any person who was or is a party to an Engle Progeny Action that, prior to the Effective Date of this Agreement, dropped and/or dismissed the Settling Defendants from their respective Engle Progeny Action with prejudice and/or executed a written settlement agreement with Settling Defendants, with the exception of those certain persons (identified by asterisk on Exhibits B or C hereto), who agreed to be Participating Plaintiffs in connection with a written settlement agreement with a Settling Defendant or Settling Defendants prior to the Effective Date of this Agreement;
|
3.
|
Any person who was dropped and/or dismissed with prejudice as a party or plaintiff to an Engle Progeny Action, or was a party to an Engle Progeny Action that was dismissed with prejudice, prior to the Effective Date of this Agreement;
|
4.
|
Persons represented in an Engle Progeny Action by The Wilner Firm, who are identified by full name, case name and venue, and case number, on Exhibit D hereto (the “Wilner Plaintiffs”), and are subject to a separate settlement agreement as described in Section XI(I); and
|
5.
|
Persons who are plaintiffs to an Engle Progeny Action and, after sufficient notice of the terms and conditions hereto, have affirmatively opted-out of joining this Agreement, and who are identified with specificity on Exhibit E hereto (the “Opt-Out Plaintiffs”). The undersigned Participating Plaintiffs’ Counsel represent, warrant and severally agree that Exhibit E is a full and complete list of any and all Opt-Out Plaintiffs they represent, including their respective: (i) correct full name for the Opt-Out Plaintiff; (ii) the case name(s), number(s) and venue(s) of any and all Engle Progeny Actions brought by, or on behalf of, the Opt-Out Plaintiff; (iii) the identity of counsel who is representing the Opt-Out Plaintiff in any and all Engle Progeny Actions; and (iv) the tier for which such Opt-Out Plaintiff would qualify under the Settlement Fund Matrix.
|
D.
|
Other Engle Plaintiffs
. The “Other Engle Plaintiffs” are persons who are plaintiffs in an Engle Progeny Action who, on or before the Effective Date, were not identified on Exhibits B or C hereto and not included or identified as a Non-Settling Plaintiff and: (1) could not be located or contacted by Participating Plaintiffs’ Counsel to confirm whether they wish to participate, join, or opt-out of joining in this Agreement; or (2) are not otherwise participating in this Agreement. The undersigned Participating Plaintiffs’ Counsel represent, warrant and severally agree that, as to their respective clients, Exhibit F hereto is a full and complete list of any and all Other Engle Plaintiffs, including their respective: (i) correct full name for the Other Engle Plaintiff; (ii) the case name(s), number(s) and venue(s) sufficient to identify any and all Engle Progeny Actions brought by, or on behalf of, the Other Engle Plaintiff; and (iii) the identity of the counsel representing the Other Engle Plaintiff in any and all Engle Progeny Actions. Exhibit F shall also identify by asterisk those Other Engle Plaintiffs who could not be located or contacted pursuant to Section (II)(D)(1). On or before sixty (60) days after the Effective Date, Other Engle Plaintiffs may join this Agreement subject to all of the terms and conditions hereto, including, without limitation, the requirement of providing a Release and the Dropping or Dismissal Notice with prejudice, as set forth in Section III, and shall thereafter be deemed a Participating Plaintiff. The addition, joinder or non-joinder of any Other Engle Plaintiff to this Agreement shall not increase or decrease the amount of the Settlement Proceeds.
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E.
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Participating Plaintiffs’ Counsel and Plaintiffs’ Coordinating Counsel do hereby represent, warrant and agree that:
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1.
|
Each of the Participating Plaintiffs’ Counsel are authorized by each and every one of their respective Participating Plaintiffs to: (i) accept the terms of this Agreement on their behalf; (ii) drop the Settling Defendants (and only Settling Defendants) from each and every one of the Participating Plaintiffs’ respective Engle Progeny Actions with prejudice; and (iii) settle, resolve, acquit, remise, discharge and forever release the Released Parties, but not the Non-Settling Defendants, from any and all of the Participating Plaintiffs’ Engle Progeny Actions and the Released Claims;
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2.
|
Each of the Participating Plaintiffs’ Counsel will use best efforts to contact and provide notice of the material terms and conditions of this proposed settlement and this Agreement to all persons and entities that are believed by them in good faith to be, or represent the interest of, their respective clients who are plaintiffs in the Engle Progeny Actions and that they are not aware of any of their respective clients that is a plaintiff, or an agent or representative to a plaintiff, to an Engle Progeny Action that is not a Participating Plaintiff set forth on Exhibits B and C hereto, other than those persons or entities described and identified in Section II(C), subparagraphs (1) through (5), and the Other Engle Plaintiffs on Exhibit F hereto. Each of the Participating Plaintiffs’ Counsel further represent, warrant and severally agree that they will use best efforts to contact and secure a response as to their desire to
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3.
|
Notwithstanding that there may be other or additional counsel representing some or all of the Participating Plaintiffs or the Other Engle Plaintiffs in any of the Engle Progeny Actions or for any other matters, the Participating Plaintiffs’ Counsel represent that no other counsel, attorney, or law firm needs to be consulted by them, or any of the Participating Plaintiffs or Other Engle Plaintiffs they represent, in order to enter into this Agreement on behalf of their respective Participating Plaintiffs and/or Other Engle Plaintiffs.
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III.
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RELEASE, DISMISSAL OF
CLAIMS AND COVENANT NOT TO SUE |
A.
|
In consideration of the terms and conditions herein, each and every Participating Plaintiff shall execute a Release and Covenant Not to Sue using the appropriate form attached hereto as Exhibit G1 or G2 (the “Release”), and their respective counsel of record shall execute a Notice of Dropping the Settling Defendants With Prejudice, from each of the Participating Plaintiffs’ respective Engle Progeny Actions, in the form attached hereto at Exhibit H (the “Dropping Notice”), or, in circumstances where Liggett and/or Vector are the sole defendants in the Engle Progeny Action at issue, by a Notice of Voluntary Dismissal With Prejudice of the Engle Progeny Action, in the form attached hereto at Exhibit I (the “Dismissal Notice”). Participating Plaintiffs’ Counsel shall secure fully executed Releases and shall prepare, execute and deliver Dropping or Dismissal Notices from and on behalf of each of their Participating Plaintiffs, along with all further documentation required by a court to effectuate the release and dismissal of the Released Claims.
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1.
|
With respect to the Payout Plaintiffs (other than those Tier Zero Plaintiffs who are subject to Section III(A)(3)), Participating Plaintiffs’ Counsel shall deliver the fully executed Releases and Dropping or Dismissal Notices for each of the Participating Plaintiffs identified on Exhibit B to Plaintiffs’ Coordinating Counsel no later than fourteen (14) days after the Effective Date of this Agreement. No later than twenty-one (21) days after the Effective Date, Plaintiffs’ Coordinating Counsel shall notify the law firm of Kasowitz Benson, Torres & Friedman LLP (“KBTF”), counsel for the Settling Defendants, of receipt of the Releases and Dropping or Dismissal Notices as to each such person and case, and shall hold them in escrow until such time as that portion of the Settlement Proceeds set forth in Section IV(B)(2)(b)(i) is paid by Liggett to the Settlement Fund, after which Plaintiffs’ Coordinating Counsel shall deliver the Dropping or Dismissal Notices to KBTF to be filed with the appropriate courts. Plaintiffs’ Coordinating Counsel shall hold the Releases (for those Participating Plaintiffs on Exhibit B) in escrow until such time as the Annual Payments are completed (whether by payout over fifteen (15) years or by acceleration) by Liggett in accordance with Section IV(B)(2)(b) hereto, and thereafter tender the Releases to Liggett.
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2.
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With respect to the Lump Sum Plaintiffs (other than those Tier Zero Plaintiffs who are subject to Section III(A)(3)), Participating Plaintiffs’ Counsel shall deliver the fully executed Releases and Dropping or Dismissal Notices for each of the Participating Plaintiffs identified on Exhibit C to Plaintiffs’ Coordinating Counsel no later than fourteen (14) days after the Effective Date of this Agreement. No later than twenty-one (21) days after the Effective Date, Plaintiffs’ Coordinating Counsel shall notify KBTF of receipt of the Releases and Dropping or Dismissal Notices as to each such person and case, and shall hold them in escrow until such time as that portion of the Settlement Proceeds set forth in Section IV(B)(2)(a) is paid by Liggett to the Settlement Fund, after which Plaintiffs’ Coordinating Counsel shall deliver the Dropping or Dismissal Notices to KBTF to be filed with the appropriate courts and tender the Releases to Liggett.
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3.
|
With respect to all Tier Zero Plaintiffs, Participating Plaintiffs’ Counsel shall deliver the fully executed Dropping or Dismissal Notices for each Tier Zero Plaintiff to Plaintiffs’ Coordinating Counsel no later than fourteen (14) days after the Effective Date of this Agreement. No later than twenty-one (21) days after the Effective Date, Plaintiffs’ Coordinating Counsel shall notify KBTF of receipt of the Dropping or Dismissal Notices as to each such person and case, and shall hold them in escrow until such time as that portion of the Settlement Proceeds set forth in Section IV(B)(2)(a) is paid by Liggett to the Settlement Fund, after which Plaintiffs’ Coordinating Counsel shall deliver the Dropping or Dismissal Notices to KBTF to be filed with the appropriate courts. The respective Releases for each Tier Zero Plaintiff shall be executed and delivered to Plaintiffs’ Coordinating Counsel before their share of the Settlement Proceeds pursuant to the Settlement Fund Matrix is paid to them or to their respective Participating Plaintiffs’ Counsel. Participating Plaintiffs’ Counsel may utilize the administrator of the Settlement Fund designated by Plaintiffs’ Coordinating Counsel to assist in the collection of the executed Releases for Tier Zero Plaintiffs. Notwithstanding, Participating Plaintiffs’ Counsel shall be responsible for obtaining and delivering each of the executed Releases for Tier Zero Plaintiffs to Plaintiffs’ Coordinating Counsel no later than sixty (60) days after the Effective Date. Plaintiffs’ Coordinating Counsel shall timely notify KBTF of the receipt of the Releases as to each Tier Zero Plaintiff, and shall hold them in escrow until such time as that portion of the Settlement Proceeds set forth in Section IV(B)(2)(a) is paid, after which Plaintiffs’ Coordinating Counsel shall deliver the Releases to Liggett.
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B.
|
With respect to those persons identified as Other Engle Plaintiffs (on Exhibit F hereto) who elect to become Participating Plaintiffs, each shall execute a Release and their respective Participating Plaintiffs’ Counsel shall, on their behalf, execute a Dropping Notice or, where Liggett and/or Vector are the sole defendants in the Engle Progeny Action, the Dismissal Notice (using the appropriate form attached hereto at Exhibit H or I), and deliver such Dropping or Dismissal Notices and Releases to Plaintiffs’ Coordinating Counsel no later than sixty (60) days after the Effective Date of this
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C.
|
With respect to those Other Engle Plaintiffs who could not be located (as identified by asterisk on Exhibit F) (hereafter, the “Non-Responsive Plaintiffs”), an amount of the Settlement Proceeds, to be determined exclusively by Participating Plaintiffs’ Counsel and Plaintiffs’ Coordinating Counsel, shall be set aside from the Settlement Fund for the benefit of the Non-Responsive Plaintiffs. Such Settlement Proceeds shall be allocated to and among those Non-Responsive Plaintiffs, exclusively by Participating Plaintiffs’ Counsel and Plaintiffs’ Coordinating Counsel, as a lump sum payment to each in accordance with the Settlement Fund Matrix subject to Sections IV, VI and VII (the “Non-Responsive Plaintiff Settlement Payment”). The Non-Responsive Plaintiff Settlement Payments shall be held in escrow by the administrator of the Settlement Fund designated by Plaintiffs’ Coordinating Counsel, in trust until such time as the Non-Responsive Plaintiff, or their legal representative, is located or comes forward to claim their Non-Responsive Plaintiff Settlement Payment, agrees to participate in the Agreement, and executes, authorizes and delivers to KBTF a Release and appropriate Dropping or Dismissal Notice.
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D.
|
As of the Effective Date, the Participating Plaintiffs’ Counsel will, for and on behalf of their respective Participating Plaintiffs and Non-Responsive Plaintiffs cease to prosecute, and hereby agree to a standstill, of any further litigation activity concerning the Settling Defendants (but only with respect to the Settling Defendants) in any Engle Progeny Action, unless and until this Agreement is terminated by the Settling Defendants.
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E.
|
Any document filed with a court to effectuate the dropping of the Settling Defendants from, or dismissing the claims asserted against the Settling Defendants in, any Engle Progeny Action pursuant to the terms and conditions of this Agreement (whether it is by way of dropping and/or dismissing the Settling Defendants or asserted claims) must make clear that it is as to the Settling Defendants only, and does not dismiss the Engle Progeny Action or the pending claims against the Non-Settling Defendants, if any.
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F.
|
Participating Plaintiffs’ Counsel represent that each one of their respective Participating Plaintiffs has consulted with their respective counsel regarding the effect of the Release, and understands that each Participating Plaintiff is releasing and covenanting not to sue the Released Parties with respect to the Released Claims including, among other things, any past, present, future, known or unknown, latent and/or un-matured injury relating in any way to, or arising from, the use of, exposure to, and/or manufacturing, sale and/or marketing of, cigarettes or tobacco products, including, without limitation, claims unrelated in whole or in part to current actual or alleged injuries. Furthermore, as of the Effective Date, Participating Plaintiffs’
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G.
|
Participating Plaintiffs’ Counsel represent that the person executing the Exhibit G Releases are Participating Plaintiffs in the respective Engle Progeny Action or, in the limited circumstances of Tier Zero Participating Plaintiffs, they are either a Participating Plaintiff or a representative with authority to execute the Release on behalf of the respective Releasors.
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H.
|
Participating Plaintiffs’ Counsel and their respective Participating Plaintiffs agree and consent to the execution, delivery and filing of the Dropping and Dismissal Notices pursuant to this Section irrespective of whether the Participating Plaintiff, whose Engle Progeny Action is the subject of such Notice, has executed or delivered a Release.
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I.
|
In any Engle Progeny Action (other than those brought by Tier Zero Plaintiffs) where the alleged injured smoker at issue is deceased, the Participating Plaintiff shall be the legally and duly appointed personal representative of the respective decedent, decedent’s estate and survivors with authority to execute the Release on behalf of the Releasors and authorize the filing of the Dropping and Dismissal Notices.
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IV.
|
SETTLEMENT PROCEEDS
|
A.
|
The payment of Settlement Proceeds (defined below) pursuant to this Agreement is the sole responsibility of Liggett. Participating Plaintiffs, Plaintiffs’ Coordinating Counsel and Participating Plaintiffs’ Counsel shall look solely to Liggett for any payment obligations under this Agreement, including, but not limited to, the Settlement Proceeds, and the payment to Plaintiffs’ Coordinating Counsel in Section V of this Agreement.
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B.
|
In consideration and in exchange for the terms and conditions set forth herein, Liggett agrees to pay the sums set forth in Section IV(B)(2)(a) and (b)
(the “Settlement Proceeds”), on the following terms and conditions, and as adjusted as set forth below:
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1.
|
Plaintiffs’ Coordinating Counsel, or a person designated in writing by it, shall, as a precondition to payment of the Settlement Proceeds, establish a Qualified Settlement Fund pursuant to Treasury Regulation 1.468B-1 (also see Section XI(K)) and other applicable law (the “Settlement Fund”) to manage and distribute the Settlement Proceeds in accordance with this Agreement. Plaintiffs’ Coordinating Counsel, or the person designated by it, shall have sole access to, and control of, the Settlement Fund.
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2.
|
Failure by Participating Plaintiffs’ Counsel and/or Plaintiffs’ Coordinating Counsel to deliver or file fully executed Releases and Dropping or Dismissal Notices as set forth in Section III shall be a material breach of this Agreement. If Participating Plaintiffs’ Counsel do not deliver and file each and every one of the Releases and Dropping or Dismissal Notices pursuant to Section III, then, unless Settling Defendants waive the breach, Settling Defendants, in their sole discretion, have the right to terminate and cancel this Agreement in its entirety, and Settling Defendants shall have no obligation to pay any Settlement Proceeds, to fund the Settlement Fund, to make the Section V payment, to make any further payment or payments, or to perform any other term or condition of this Agreement, and the Agreement shall be null and void in all respects.
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a.
|
Lump Sum Payment
. Not more than ninety (90) days after the Effective Date, Liggett shall make a one time, lump sum payment to the Settlement Fund of $50,821,830.41
for the benefit of the Participating Plaintiffs set forth on Exhibit C (the “Lump Sum Payment”); and
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b.
|
Annual Payments
. Liggett shall make fifteen (15) annual payments to the Settlement Fund for the benefit of the Participating Plaintiffs set forth on Exhibit B (the “Annual Payments”) on the following schedule in the amounts prescribed below:
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i.
|
Not more than ninety (90) days after the Effective Date, Liggett shall make the first Annual Payment in the amount of $791,229.73
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ii.
|
For each of the second through seventh years after the Effective Date, Liggett shall, no later than the anniversary of the first Annual Payment, make an Annual Payment of $791,229.73 to the Settlement Fund.
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iii.
|
For each of the eighth through fifteenth years after the Effective Date, Liggett shall, no later than the anniversary of the first Payment Date, make an Annual Payment in the same amount as the Annual Payment paid in the immediately previous year; however, the amount of the Annual Payment in each of these years will be adjusted upwards for inflation from the prior calendar year by the lesser of either (a) 3%, or (b) the CPI%.
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iv.
|
During the fifteen (15) year payout period of the Annual Payments, should Liggett be involved in a business transaction where all or substantially all of Liggett’s assets or stock are sold to a non-affiliated entity, or where there is a merger, acquisition or other business transaction with a non-affiliate pursuant to which Liggett is more than 50% owned by such non-affiliate, then the remaining Annual Payments due at the time of the transaction will be accelerated and paid by Liggett (or by a person or entity designated by Liggett), to the Settlement Fund within ninety (90) days of the closing of such transaction, and discounted by an interest rate equal to 3% plus the yield of a United States Treasury security with a maturity equal to the remaining number of years for which Annual Payments are to be made at the time of the transaction. In such circumstances, the inflation adjustment set forth in Section IV(B)(2)(b)(iii) shall not be applied to any remaining Annual Payments that are subject to the acceleration.
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C.
|
Any and all deadlines or other time periods in the Agreement may be extended by agreement between Settling Defendants and Plaintiffs’ Coordinating Counsel.
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D.
|
Participating Plaintiffs’ Counsel and/or Plaintiffs’ Coordinating Counsel shall have sole responsibility for allocating the Settlement Proceeds (including the Lump Sum Payments and the Annual Payments) in the Settlement Fund to and among the Participating Plaintiffs in accordance with the Settlement Fund Matrix and the Special Appeal Fund, and subject to any adjustments or reductions that may be necessary to satisfy Medical Expense Liens or other appropriate liens, fees, costs and expenses, including those set forth in Section VI of this Agreement. Settling Defendants shall not be responsible for, or participate in, any allocation of the Settlement Proceeds from the Settlement Fund.
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E.
|
The Annual Payments, as adjusted in accordance with Section IV(B)(2)(b)(iii), and the Lump Sum Payment constitute the total amount of the Settlement Proceeds to be paid by the Settling Plaintiffs pursuant to this Agreement.
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F.
|
Each Party agrees that the Settlement Proceeds are reasonable and adequate consideration for the settlement and this Agreement. In no circumstances shall the reasonableness or adequacy of the Settlement Proceeds be challenged by any Party to this Agreement.
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G.
|
Other than as set forth in Section V, each Participating Plaintiff is solely responsible for payment of his or her respective attorneys’ fees, costs, expenses and any applicable taxes relating in any way to the Engle Progeny Actions or this Agreement.
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H.
|
If the Florida Supreme Court or United States Supreme Court should hold that the Engle Phase I Findings established by the Florida Supreme Court in
Engle v. Liggett Group, Inc., et al.,
945 So. 2d 1246 (Fla. 2006): (1) constitute a violation of due process rights; or (2) cannot for any reason be used to establish either a fact or element concerning one or more claims asserted in the Engle Progeny Actions, Settling Defendants have the exclusive right to terminate this Agreement with respect to the Payout Plaintiffs. If Settling Defendants terminate this Agreement pursuant to this section, Settling Defendants shall not be obligated to make any further payment of the Settlement Proceeds, or to make further payments of any kind, pursuant to this Agreement to those Payout Plaintiffs with whom the Settlement has been terminated (the “Terminated Plaintiffs”); the Releases held in escrow for the Terminated Plaintiffs will be rendered null and void and returned to their respective Participating Plaintiffs’ Counsel; and any monies paid to a Terminated Plaintiff pursuant to this Agreement prior to the termination of the Agreement shall be treated as a set-off against any damages that may be ultimately awarded to that Terminated Plaintiff against Settling Defendants in any action.
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V.
|
PAYMENT TO PLAINTIFFS’ COORDINATING COUNSEL
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A.
|
Provided that this Agreement has not been terminated by the Settling Defendants pursuant to the terms and conditions herein, on or before ninety (90) days after the Effective Date or, if extended pursuant to Section IV(C), on or before one hundred and eighty (180) days after the Effective Date, Liggett shall pay four million dollars ($4,000,000) to Plaintiffs’ Coordinating Counsel. The payment of this sum is to be used by Plaintiffs’ Coordinating Counsel for, among other things, the cost of administration of this settlement, lien resolution and other related matters, claims administration, if required, and reimbursement of litigation costs as defined by Plaintiffs’ Coordinating Counsel, including common costs expended by Participating Plaintiffs’ Counsel as well as case-specific costs as determined by Plaintiffs’ Coordinating Counsel. In addition, Liggett agrees to pay all fees associated with the formation of the Qualified Settlement Fund, pursuant to a written retainer agreement subject to the approval of Liggett.
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B.
|
Plaintiffs’ Coordinating Counsel shall receive five (5%) percent of the Settlement Proceeds for the services rendered as Plaintiffs’ Coordinating Counsel (the “5% Grossman Fee”). The 5% Grossman Fee shall be deducted and withheld by Liggett from the Settlement Proceeds paid by Liggett to the Settlement Fund. The 5% Grossman Fee shall be allocated to that portion of the Settlement Proceeds charged by Participating Plaintiffs’ Counsel as attorneys’ fees to the Participating Plaintiffs, and is not to be deducted from, and shall not reduce, the Participating Plaintiffs’ allocation or share of the Settlement Proceeds. Neither of the Settling Defendants shall have any obligation to make or guarantee the 5% Grossman Fee or any such additional or further compensation or payments to Plaintiffs’ Coordinating Counsel or any other person.
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VI.
|
DISCHARGE OF LIENS, ASSIGNMENT
RIGHTS AND OTHER THIRD-PARTY PAYOR CLAIMS |
A.
|
The Parties agree that any and all liens, subrogation rights and/or claims arising from medical expenses for Participating Plaintiffs and/or Other Engle Plaintiffs incurred as a result of the use of, exposure to, and/or manufacturing, sale and marketing of, Settling Defendants’ cigarettes and/or tobacco products, the claims against Settling Defendants alleged in the Engle Progeny Actions or otherwise relating to the injuries and damages alleged against Settling Defendants in the Engle Progeny Actions, including, but not limited to, liens, subrogation rights or other claims by any financial institutions, medical providers, doctors, hospitals, chiropractors, employers, health insurers, Blue Cross-Blue Shield, HMO, Medicare (Parts A and B) (“Medicare”), Medicaid, other insurers, or any other third parties, and/or their agents, representatives successors, affiliates or subrogees, including, without limitation, the United States or any agency of any state or local government (hereafter, the “Medical Expense Liens”) will be satisfied.
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B.
|
Plaintiffs’ Coordinating Counsel, or its designee, The Garretson Resolution Group, Inc., and/or its successor designee as provided in writing by Plaintiffs’ Coordinating Counsel, are responsible for establishing a process by which any and all of the Medical Expense Liens are satisfied by those persons who have such obligations and performing the tasks and functions necessary to comply with this Section VI of the Agreement in connection with reimbursement claims that may be asserted by federal Medicare; Medicaid liens and certain other governmental health care programs with statutory reimbursement or subrogation rights, limited to TRICARE, VA, and Indian Health Services benefits (hereinafter “Governmental Authority Third Party Payer/Providers”); and any reimbursement interests being asserted by private insurance carriers or self-funded employer welfare plans (hereinafter “Private Third Party Payer/Providers”). Each Participating Plaintiff will be required to cooperate with the procedures and protocols established by the Plaintiffs’ Coordinating Counsel or its designee for the identification and resolution of any such liens and/or reimbursement claims.
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C.
|
Participating Plaintiffs’ Counsel, Plaintiffs’ Coordinating Counsel, and/or its designee, The Garretson Resolution Group, Inc., or any designated successor designee as provided in writing by Plaintiffs’ Coordinating Counsel, are solely responsible for obtaining the satisfaction of any and all Medical Expense Liens.
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D.
|
The duties of Plaintiffs’ Coordinating Counsel or its designee pursuant to this section shall include, not only ensuring compliance with all relevant provisions of the Medicare Secondary Payer Act (42 U.S.C. §1395y) concerning Medicare repayment claims, but also ensuring compliance under Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (42 U.S.C. §1395y(b)(8)) (the “MMSEA”), which poses certain reporting requirements for certain entities involved in settling personal injury claims involving a Medicare beneficiary.
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E.
|
Plaintiffs’ Coordinating Counsel or its designee shall resolve all conditional payment reimbursement rights that have been or may be asserted by Medicare within the meaning of the Medicare Secondary Payer statute (42 U.S.C. §1395y) and all payments made by state Medicaid agencies, as appropriate, and any other federal reimbursement right that is being asserted under any of TRICARE, VA or Indian Health Services based upon the provision of medical care or treatment provided to a person connected or alleged to be connected with claims settled pursuant to this Settlement Agreement; provided however, that nothing herein is intended to create a right of reimbursement where none would otherwise exist under applicable state or federal tort recovery statutes.
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F.
|
Each of the Participating Plaintiffs
agree and covenant to release, and to indemnify and hold harmless the Released Parties, from and against any and all of their respective Medical Expense Liens which may arise or have heretofore arisen in favor of any financial institutions, medical providers, doctors, hospitals, chiropractors, employers, health insurers, Blue Cross-Blue Shield, HMO, Medicare, Medicaid, other insurers, or any other third parties, including the United States or any agency of any state or local government, by operation of law or equity. In the event that either Defendant is obligated to pay with respect to, or in connection with, any Medical Expense Lien, Liggett may reduce the amount of the Settlement Proceeds to offset such payment(s).
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G.
|
Settling Defendants shall be entitled to proof of satisfaction and discharge of any and all Medical Expense Lien or Liens in relation to any Participating Plaintiff or Other Engle Plaintiff. On or before ninety (90) days after the Effective Date, Plaintiffs’ Coordinating Counsel or its designee shall provide Settling Defendants with written confirmation that is reasonably satisfactory to the Settling Defendants (the “Lien Confirmation”) that any and all Medical Expense Liens have been fully satisfied or that appropriate holdback amounts are in place to satisfy any and all Medical Expense Liens. Settling Defendants shall not be obligated to pay, tender or release any of the Settlement Proceeds, or make any payment or payments pursuant to this Agreement, including the Lump Sum Payment and/or the Annual Payments, until Plaintiffs’ Coordinating Counsel provides the Lien Confirmation to Settling Defendants which is reasonably satisfactory to the Settling Defendants in all respects.
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VII.
|
ALLOCATION OF SETTLEMENT PROCEEDS/THIRD-PARTY CLAIMS
|
A.
|
Plaintiffs’ Coordinating Counsel and Participating Plaintiffs’ Counsel represent that they have complied, and will comply, with any requirement (1) to disclose to their respective Participating Plaintiffs and clients: the existence and nature of the terms and conditions of this Agreement; the participation of each person or entity in the Agreement; the claims asserted by the Participating Plaintiffs; and the allocation, and basis therefore, of Settlement Proceeds, including, without limitation, the disclosure of the allocation of the Settlement Proceeds and the basis therefore among a Participating Plaintiffs’ Counsel’s respective Participating Plaintiffs; and (2) to obtain informed written consent from their respective Participating Plaintiffs and clients regarding this Agreement, in accordance with Rule 1.8 of the ABA Model
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B.
|
Participating Plaintiffs, Participating Plaintiffs’ Counsel and Plaintiffs’ Coordinating Counsel covenant and agree that they will have no claim or recourse against Settling Defendants for any disputes or claims regarding the allocation of the Settlement Fund, the Settlement Fund Matrix and the Special Appeal Fund, or the claims administration process in any way.
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C.
|
The Parties covenant and agree that this Agreement and the Settlement Proceeds herein are reasonable and constitute a good faith settlement sufficient to bar, preclude and cut off any and all contribution or other claims, cross-claims and third-party claims by any Non-Settling Defendant concerning the Engle Progeny Actions.
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VIII.
|
CONFIDENTIALITY
|
A.
|
Once executed, this Agreement and the Exhibits and attachments hereto shall not be confidential and, subject to the terms of this section, may be disclosed without limitation by any Party. However, the Parties agree that to the extent any personal records or other personal information of a Participating Plaintiff, such as medical records, Social Security numbers and/or HICNs (“Confidential Information”) are provided to a Party pursuant to this Agreement, such Confidential Information shall remain confidential. In addition, information regarding the amount of any payments made to specific Participating Plaintiffs under this Agreement (the “Award Information”) shall be kept confidential by the Parties and shall not be disclosed except (1) to appropriate persons to the extent necessary to process a Participating Plaintiffs’ Settlement Fund allocation; (2) as otherwise expressly provided in this Agreement; (3) as may be required by law or court order; or (4) as may be reasonably necessary in order to enforce, or exercise Participating Plaintiffs’ and/or Settling Defendants’ rights under or with respect to this Agreement.
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B.
|
Any Party that may be required to disclose Confidential Information or Award Information pursuant to the previous paragraph shall take reasonable steps to adequately protect the confidential nature of the Confidential Information and Award Information, including, but not limited to, those steps required pursuant to applicable federal, state or local law or regulation. All Participating Plaintiffs shall be deemed to have consented to the disclosure of Confidential Information and Award Information, as well as all other records and information, for these purposes. Notwithstanding anything to the contrary contained herein, a Participating Plaintiff may disclose Award Information to immediate family members, counsel, accountants and/or financial advisors of such Participating Plaintiff, if any (each of whom shall be instructed to maintain and honor the confidentiality of such information).
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IX.
|
GOVERNING LAW AND VENUE IN CASE OF DISPUTES
|
X.
|
MERGER CLAUSE
|
XI.
|
MISCELLANEOUS PROVISIONS
|
A.
|
Remedies for Breach of the Agreement
|
1.
|
The Parties reserve all rights and remedies with respect to enforcement of the terms and conditions of this Agreement as set forth and defined herein. Unless this Agreement is terminated by the Settling Defendants pursuant to Section IV(B)(2), any breach of the terms and conditions of this Agreement (including, without limitation, any breach of a representation, warranty, release or covenant herein) may and can result, among other things, in a claim for money damages in favor of the non-breaching Party, and the prevailing party to such a claim or action shall be entitled to an award of their reasonable attorneys’ fees, costs and interest.
|
2.
|
In the event that Liggett defaults in the payment of Settlement Proceeds due under this Agreement, as their sole and exclusive remedy, the Participating Plaintiffs shall be entitled to aggregate their claims for such payment(s) and have a judgment entered based on the remaining unpaid Settlement Proceeds. In such circumstances, any unpaid Settlement Proceeds: (a) shall be accelerated without discount; (b) shall be subject to the imposition of post-judgment interest at the default rate pursuant to Florida Statute Section 687.02 at the time of entry of the judgment; and (c) Participating Plaintiffs enforcing such a judgment shall be entitled to collect reasonable attorneys’ fees from Liggett for any proceedings required to enforce the judgment.
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B.
|
Waiver of Inconsistent Provisions of Law
|
C.
|
Severability
|
D.
|
Arm’s Length Negotiation
|
E.
|
No Assignment of Claims
|
F.
|
No Effect on Parties’ Rights Against Non-Parties
|
G.
|
No Admissions
|
H.
|
Admissibility of this Agreement
|
I.
|
Wilner Agreement Contingency and Tolling of the Effective Date
|
J.
|
Contingencies
|
K.
|
Qualified Settlement Fund
|
L.
|
Headings are for Convenience Only
|
M.
|
Application of Deadlines
|
N.
|
Notice
|
1.
|
Overnight delivery; or
|
2.
|
Hand delivery.
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O.
|
Manner of Execution of This Agreement
|
P.
|
Amendments
|
Q.
|
Non-Waiver
|
R.
|
Survival
|
S.
|
Cooperation
|
Liggett Group LLC
By:
/S/_Ronald J. Bernstein_____________
Name: Ronald J. Bernstein
Title: President and Chief Executive Officer
|
|
|
|
I.
|
DEFINITIONS (not otherwise set forth in the body of the Agreement)
|
A.
|
“CPI%” means the actual total percent change in the Consumer Price Index – All Urban Consumers, as published by the Bureau of Labor Statistics of the U.S. Department of Labor (“DOL”), during the calendar year immediately preceding the year in which the Annual Payment (described in Section IV(B)(2)(a)(iii)) is due. For example, if the Consumer Price Index for December 2023 (as released by DOL) is 2% higher than the Consumer Price Index for December 2022 (as released by DOL), then the CPI% for the Annual Payment due in 2024 would be 2%.
|
B.
|
“Effective Date” of this Agreement shall be October 22, 2013.
|
C.
|
“Engle Progeny Action” shall mean any litigation that has been, or could be, brought in federal and/or state courts pursuant to the Florida Supreme Court’s decision in
Engle v. Liggett Group, Inc., et al.
, 945 So. 2d 1246 (Fla. 2006).
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D.
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“Non-Responsive Plaintiff” has the meaning set forth in Section II(C).
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E.
|
“Non-Settling Defendant” shall mean a defendant in any of the Engle Progeny Actions that is not a Party to this Agreement.
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F.
|
“Non-Wilner Plaintiffs” shall mean plaintiffs in Engle Progeny Actions represented by counsel other than The Wilner Firm that are participating in or subject to a separate settlement agreement with Settling Defendants.
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G.
|
“Participating Plaintiff” shall mean a plaintiff in any Engle Progeny Action that is identified on Exhibit A hereto.
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H.
|
“Person” or “persons” identified herein (including, without limitation, the Releasors, or any Participating Plaintiff or Non-Responsive Plaintiff, counsel, attorney, agent or representative) shall mean individuals and entities, whether public, private or governmental, including, but not limited to, any natural person, corporation, limited liability company, partnership, proprietorship, firm, association, company, and joint venture, and their respective members, shareholders, directors, officers, successors, heirs, estates, survivors, minor children, agents, representatives, personal representatives, affiliates, entities, administrators, executors, trusts, attorneys, designated payees and assigns.
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I.
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“Plaintiffs’ Coordinating Counsel” shall mean Grossman Roth, P.A., Suite 1150, 2525 Ponce de Leon Blvd., Coral Gables, FL 33134.
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J.
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“Released Claims” shall mean any and all actions, causes of action, suits, damages, sums of money, accounts, injuries, claims, benefits and demands of any type whatsoever, including, without limitation, those for damages, costs, losses (whether compensatory, exemplary and/or punitive damages), expenses or any other liabilities, whether based in tort, contract, breach of warranty, breach of duty, negligence, strict liability, failure to warn, fraud, deceit, concealment, conspiracy, statute, equity, or any other theory of recovery, that arise, concern or relate to the Releasors’ Engle Progeny Action, or arise, concern or relate to any use of, exposure to, and/or manufacturing, sale and/or marketing of, cigarettes, cigarette smoking or tobacco, that Releasors had in the past, now have, may have or which may hereafter accrue, be claimed, or otherwise be acquired in the future against any and all of the Released Parties, whether known or unknown, matured, latent or unmatured, filed or unfiled and whether accrued or not, along with any derivative or related claim(s) belonging to spouses, estates or survivors, such as wrongful death, loss of maintenance, support, companionship and/or services, loss of net accumulations, and/or loss of consortium.
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K.
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“Released Parties” shall mean Liggett Group LLC and Vector Group Ltd., and each of their respective parents, subsidiaries, predecessors, successors, assigns, administrators, affiliates, stockholders, directors, members, officers, attorneys, insurers, representatives and agents.
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L.
|
“Releasor” or “Releasors” shall mean the Participating Plaintiff or Non-Responsive Plaintiff, and their respective successors, heirs, estates, survivors, minor children, agents, representatives, personal representatives, affiliates, entities, administrators, executors, trusts, attorneys, designated payees and assigns, or in the capacity as a personal representative, administrator, executor, trustee, agent or representative of an estate, a survivor, or any other person or entity.
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M.
|
“Settlement Fund Matrix” shall be established by The Wilner Firm, and sets forth how the Settlement Proceeds (as defined in Section IV(B)) are to be allocated and distributed to and among the Participating Plaintiffs and the Non-Responsive Plaintiffs subject to the terms and conditions herein.
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N.
|
“The Wilner Firm” shall mean Norwood S. Wilner, Esq. and/or The Wilner Firm, P.A., 444 E. Duval Street, Jacksonville, FL 32202, along with co-counsel engaged by The Wilner Firm as identified on Exhibit D hereto.
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O.
|
“Tier Zero Plaintiff” shall mean a Participating Plaintiff that asserts that the smoker at issue in the respective Engle Progeny Action did not use Liggett Brand cigarettes or used only a
de minimis
quantity of Liggett brand cigarettes and therefore qualifies as a Tier Zero Plaintiff pursuant to the Settlement Fund Matrix with each to receive $1,250.00 as their share of the Settlement Proceeds as defined in Section IV(B).
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II.
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THE PARTICIPATING PLAINTIFFS
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A.
|
The Wilner Firm represents, warrants and agrees that, except for the Non-Settling Plaintiffs (as defined in Section II(B)), each of its clients who are plaintiffs in Engle Progeny Actions, or have or may have claims relating to any Engle Progeny Action, agree to be bound by the terms and conditions of this Agreement and are all correctly identified on Exhibit A, including, as to each Participating Plaintiff: (i) the correct full name for the Participating Plaintiff; (ii) the case name(s), number(s) and venue(s) sufficient to identify any and all Engle Progeny Actions brought by, or on behalf of, the Participating Plaintiff; (iii) whether the Participating Plaintiff qualifies as a Tier Zero Plaintiff; and (iv) whether the Participating Plaintiff was dropped and/or dismissed as a party or plaintiff to an Engle Progeny Action, or was a party to an Engle Progeny Action that was dismissed, prior to the Effective Date, and such dropping and/or dismissal is or may be subject to appeal or further judicial review (the “Appealing Plaintiffs”). The Wilner Firm shall obtain the Social Security Number, Health Insurance Claim Number (“HICN”) or any other information that is necessary for each of the Participating Plaintiffs for purposes of satisfying Medical Expense Liens and/or allocating Settlement Proceeds (as set forth in Sections IV, VI and VII hereto), or resolving any other issue reasonably necessary to effectuate the terms and conditions of this Agreement. A Participating Plaintiff may designate a contingent payee to receive Settlement Proceeds on his or her behalf in the event that the Participating Plaintiff predeceases the completion of the Annual Payments. If no payee is designated for a Participating Plaintiff, then any further payment as to that Participating Plaintiff pursuant to this Agreement will be payable to his or her estate.
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B.
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Non-Settling Plaintiffs
. The following persons are “Non-Settling Plaintiffs” and are not Participating Plaintiffs subject to this Agreement:
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1.
|
Any person who was or is a party to an Engle Progeny Action that resulted in a judgment against a Settling Defendant, whether or not such judgment was final, prior to the Effective Date of this Agreement;
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2.
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Any person who was or is a party to an Engle Progeny Action that, prior to the Effective Date of this Agreement, dropped and/or dismissed the Settling Defendants from their respective Engle Progeny Action with prejudice and/or executed a written settlement agreement with Settling Defendants, with the exception of those certain persons (identified by asterisk on Exhibit A hereto), who agreed to be Participating Plaintiffs in connection with a written settlement agreement with a Settling Defendant or Settling Defendants prior to the Effective Date of this Agreement;
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3.
|
Any person who was dropped and/or dismissed with prejudice as a party or plaintiff to an Engle Progeny Action, or was a party to an Engle Progeny
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4.
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Any Non-Wilner Plaintiffs.
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C.
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Non-Responsive Plaintiffs
. The “Non-Responsive Plaintiffs” are persons, if any, who are plaintiffs that are represented by The Wilner Firm in an Engle Progeny Action who: (i) are not identified as a Participating Plaintiff on Exhibit A; (ii) are not Non-Settling Plaintiffs pursuant to Section II(B); and (iii) could not be located or contacted by The Wilner Firm to confirm whether they wish to participate, join, or opt-out of joining in this Agreement. On or before the Effective Date, The Wilner Firm shall either represent and certify in writing that there are no Non-Responsive Plaintiffs (in the form set forth at Exhibit B1), or shall represent, warrant and agree that Exhibit B2 hereto is a full and complete list of any and all Non-Responsive Plaintiffs, including their respective: (i) correct full name for the Non-Responsive Plaintiff; and (ii) the case name(s), number(s) and venue(s) sufficient to identify any and all Engle Progeny Actions brought by, or on behalf of, the Non-Responsive Plaintiff. On or before sixty (60) days after the Effective Date, Non-Responsive Plaintiffs may join this Agreement subject to all of the terms and conditions hereto, and shall thereafter be deemed a Participating Plaintiff. If a Non-Responsive Plaintiff does not join this Agreement on or before sixty (60) days after the Effective Date, they remain eligible for a Non-Responsive Plaintiff Settlement Payment in accordance with Section III(B). The addition, joinder or non-joinder of any Non-Responsive Plaintiff to this Agreement shall not increase or decrease the amount of the Settlement Proceeds.
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D.
|
The Wilner Firm hereby represents, warrants and agrees that:
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1.
|
The Wilner Firm is authorized by each and every one of their Participating Plaintiffs to: (i) accept the terms of this Agreement on their behalf; (ii) drop or dismiss the Settling Defendants (and only Settling Defendants) from each and every one of the Participating Plaintiffs’ respective Engle Progeny Actions with prejudice; and (iii) settle, resolve, acquit, remise, discharge and forever release the Released Parties from any and all of the Participating Plaintiffs’ Engle Progeny Actions and the Released Claims;
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2.
|
The Wilner Firm has used best efforts to contact and provide notice of the material terms and conditions of this proposed settlement and this Agreement to all persons that are believed by them in good faith to be, or represent the interest of, their clients who are plaintiffs in the Engle Progeny Actions.
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3.
|
The Wilner Firm represents, warrants and agrees that it has used best efforts to contact and secure a response as to their desire to participate in this Agreement from each and every one of their clients who are identified as Non-Responsive Plaintiffs; and
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4.
|
Notwithstanding that there may be other or additional counsel representing some or all of the Participating Plaintiffs or the Non-Responsive Plaintiffs in any of the Engle Progeny Actions or for any other matters, The Wilner Firm
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III.
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RELEASE, DISMISSAL OF
CLAIMS AND COVENANT NOT TO SUE |
A.
|
In consideration of the terms and conditions herein, each and every Participating Plaintiff shall execute a Release and Covenant Not to Sue in the appropriate form attached hereto at Exhibit C (the “Release”), and The Wilner Firm shall: (i) as to Participating Plaintiffs’ Engle Progeny Actions pending in Florida state courts, execute a Notice of Dropping the Settling Defendants With Prejudice, from each of the Participating Plaintiffs’ respective Engle Progeny Actions, in the appropriate form attached hereto at Exhibit E (the “Dropping Notice”), or, in circumstances where Liggett and/or Vector are the sole defendants in the Engle Progeny Action at issue, by a Notice of Voluntary Dismissal With Prejudice of the Engle Progeny Action, in the appropriate form attached hereto at Exhibit F (the “Dismissal Notice”); and (ii) as to the Participating Plaintiffs’ Engle Progeny Actions pending in federal courts, shall execute a joint motion for voluntary dismissal with prejudice, with the law firm of Kasowitz Benson, Torres & Friedman LLP (“KBTF”), counsel for the Settling Defendants, seeking an order from the court to dismiss the Settling Defendants from the Engle Progeny Actions in the federal courts with prejudice, in the form attached hereto as Exhibit G1 for individual Engle Progeny actions and in the form attached hereto as Exhibit G2 for multiple Engle Progeny Actions (the “Joint Motions of Dismissal”). The Wilner Firm shall secure fully executed Releases and shall prepare, execute and deliver the Dropping Notices, Dismissal Notices and the Joint Motions for Dismissal from and on behalf of each Participating Plaintiff, along with all further documentation required by a court to effectuate the release and dismissal of the Released Claims.
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1.
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With respect to all Participating Plaintiffs other than those described in Sections III(A)(2) and III(A)(3), The Wilner Firm shall deliver the fully executed Releases and Dropping Notices, Dismissal Notices and the Joint Motions of Dismissal for each of those Participating Plaintiffs to Plaintiffs’ Coordinating Counsel no later than fourteen (14) days after the Effective Date, to hold in escrow until such time as that portion of the Settlement Proceeds set forth in Section IV(B)(2)(a)(i) is paid by Liggett to the Settlement Fund, after which time Plaintiffs’ Coordinating Counsel shall deliver the Dropping Notices, Dismissal Notices and Joint Motions of Dismissal to KBTF for filing with the appropriate court. Plaintiffs’ Coordinating Counsel shall notify KBTF of receipt of the documents and hold the Releases in escrow until the last payment under Sections IV(B)(2)(a)(ii) and (iii) is made by Liggett, after which the Releases shall be delivered to Liggett.
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2.
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With respect to all Tier Zero Plaintiffs (except the Appealing Plaintiffs), The Wilner Firm shall deliver the fully executed Dropping Notices, Dismissal Notices and the Joint Motions of Dismissal for each of those Participating Plaintiffs to Plaintiffs’ Coordinating Counsel no later than fourteen (14) days
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3.
|
With respect to the Appealing Plaintiffs, The Wilner Firm shall, in the event that an appellate or reviewing court reinstates in whole or in part their respective claims or actions in any manner, deliver the appropriate, fully executed Releases, Dropping Notices, Dismissal Notices and the Joint Motions of Dismissal for each of those Participating Plaintiffs to KBTF no later than thirty (30) days after the date of the decision, opinion or order giving rise to such reinstatement, and KBTF shall file the Dropping Notices, Dismissal Notices and Joint Motions of Dismissal with the appropriate court.
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4.
|
With respect to persons identified as Non-Responsive Plaintiffs, if any, The Wilner Firm shall, on behalf of the Non-Responsive Plaintiff, execute the appropriate Dropping Notices, Dismissal Notices or Joint Motions of Dismissal and deliver them to KBTF no later than fourteen (14) days after the Effective Date of this Agreement, to hold in escrow until such time as that portion of the Settlement Proceeds set forth in Section IV(B)(2)(a)(i) is paid by Liggett to the Settlement Fund, after which KBTF shall file them with the appropriate court.
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B.
|
In consideration for the dropping or dismissal of the Settling Defendants with prejudice from their respective Engle Progeny Actions as set forth in Section III(A), an amount of the Settlement Proceeds, to be determined exclusively by The Wilner Firm, shall be set aside from the Settlement Fund for the benefit of the Non-Responsive Plaintiffs. Such Settlement Proceeds shall be allocated to and among the Non-Responsive Plaintiffs, exclusively by The Wilner Firm, as payment to each in accordance with the Settlement Fund Matrix subject to Sections IV, VI and VII hereto
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C.
|
As of the Effective Date, The Wilner Firm will, for and on behalf of the Participating Plaintiffs and Non-Responsive Plaintiffs, cease to prosecute, and hereby agree to a standstill of any further litigation activity concerning the Settling Defendants (but only with respect to the Settling Defendants) in any Engle Progeny Action, unless and until this Agreement is terminated by the Settling Defendants.
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D.
|
The Wilner Firm represents that they have advised each Participating Plaintiff regarding the effect of the Release, and each understands that they are releasing and covenanting not to sue the Released Parties with respect to the Released Claims including, among other things, any past, present, future, known or unknown, latent and/or un-matured injury relating in any way to, or arising from, the use of, exposure to, and/or manufacturing, sale and/or marketing of, cigarettes or tobacco products, including, without limitation, claims unrelated in whole or in part to current actual or alleged injuries. Furthermore, as of the Effective Date, The Wilner Firm represents that each Participating Plaintiff acknowledges that they may not know of any or all injuries relating in any way to the use of, exposure to, and/or manufacturing, sale and/or marketing of, cigarettes or tobacco, and knowingly and voluntarily agree to release, and covenant not to sue, the Released Parties, with respect to all such past, present, future, unknown, latent and/or un-matured injuries, if any.
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E.
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The Wilner Firm and the Participating Plaintiffs agree and consent to the execution, delivery and filing of the Dropping Notices, Dismissal Notices and Joint Motions of Dismissal pursuant to this Section irrespective of whether the Participating Plaintiff, whose Engle Progeny Action is the subject of such Notice or Motion, has executed, delivered or effectuated a Release.
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F.
|
The Wilner Firm may utilize the administrator of the Settlement Fund designated by Plaintiffs’ Coordinating Counsel to assist in the collection of the Releases and the endorsed Tier Zero Checks. Notwithstanding, The Wilner Firm shall remain responsible for obtaining and delivering executed Releases for all of the Participating Plaintiffs as required by Section III, including, without limitation, the Releases for all Tier Zero Plaintiffs.
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G.
|
The Wilner Firm agrees to indemnify, defend and hold harmless the Released Parties, from and against any and all claims and/or legal actions that may be asserted by any Participating Plaintiff who has not provided a Release, objects to or disputes the release or dismissal of their claims and/or asserts that they are not bound by the terms of this Agreement. Liggett may deduct and/or withhold any Settlement Proceeds, or recover from the Settlement Fund any Settlement Proceeds that Liggett had already paid to the Settlement Fund, to reimburse Liggett and/or reimburse any fees, costs,
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H.
|
The Wilner Firm represents that the person executing or effectuating the Release is the Participating Plaintiff in the respective Engle Progeny Action. In any Engle Progeny Action where the alleged injured smoker at issue is deceased, the Participating Plaintiff shall be the legally and duly appointed personal representative of the respective decedent, decedent’s estate and survivors with authority to execute or effectuate the Release on behalf of the Releasors and authorize the filing of the Dropping Notices, Dismissal Notices and/or Joint Motions of Dismissal.
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IV.
|
SETTLEMENT PROCEEDS
|
A.
|
The payment of Settlement Proceeds (defined below) pursuant to this Agreement is the sole responsibility of Liggett. The Participating Plaintiffs and the Non-Responsive Plaintiffs shall look solely to Liggett for any payment obligations under this Agreement.
|
B.
|
In consideration and in exchange for the terms and conditions set forth herein, Liggett agrees to pay $43,000,000 (the “Settlement Proceeds”) as set forth below:
|
1.
|
Plaintiffs’ Coordinating Counsel, or a person designated in writing by it, shall, as a precondition to payment of the Settlement Proceeds, have established a Qualified Settlement Fund pursuant to Treasury Regulation 1.468B-1 (also see Section XI(K)) and other applicable law (the “Settlement Fund”) to manage and distribute the Settlement Proceeds in accordance with this Agreement. Plaintiffs’ Coordinating Counsel, or the person designated by it, shall have sole access to, and control of, the Settlement Fund.
|
2.
|
Failure by The Wilner Firm to deliver fully executed Releases and Dropping Notices, Dismissal Notices or Joint Motions of Dismissal as set forth in Section III shall be a material breach of this Agreement. If The Wilner Firm does not deliver each and every one of the Releases and Dropping Notices, Dismissal Notices or Joint Motions of Dismissal pursuant to Section III, then, unless Settling Defendants waive the breach, Settling Defendants, in their sole discretion, have the right to terminate and cancel this Agreement in its entirety and Settling Defendants shall have no obligation to pay any Settlement Proceeds, to fund the Settlement Fund, to make any further payment or payments, or to perform any other term or condition of this Agreement, and the Agreement shall be null and void in all respects and Liggett shall be entitled to recover from the Settlement Fund any Settlement Proceeds that it has already paid.
|
a.
|
Liggett shall make fifteen (15) annual payments to the Settlement Fund for the benefit of the Participating Plaintiffs and the Non-
|
i.
|
Not more than ninety (90) days after the Effective Date, Liggett shall make the first Annual Payment in the amount of $2,867,000 to the Settlement Fund.
|
ii.
|
For each of the second through seventh years after the Effective Date, Liggett shall, no later than the anniversary of the first Annual Payment, make an Annual Payment of $2,867,000 to the Settlement Fund.
|
iii.
|
For each of the eighth through fifteenth years after the Effective Date, Liggett shall, no later than the anniversary of the first Payment Date, make an Annual Payment in the same amount as the Annual Payment paid in the immediately previous year; however, the amount of the Annual Payment in each of these years will be adjusted upwards for inflation from the prior calendar year by the lesser of either (a) 3%, or (b) the CPI%.
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iv.
|
During the fifteen (15) year payout period of the Annual Payments, should Liggett be involved in a business transaction where all or substantially all of Liggett’s assets or stock are sold to a non-affiliated entity, or where there is a merger, acquisition or other business transaction with a non-affiliate pursuant to which Liggett is more than 50% owned by such non-affiliate, then the remaining Annual Payments due at the time of the transaction will be accelerated and made payable by Liggett (or by a person or entity designated by Liggett), to the Settlement Fund within ninety (90) days of the closing of such transaction, and discounted by an interest rate equal to 3% plus the yield of a United States Treasury security with a maturity equal to the remaining number of years for which Annual Payments are to be made at the time of the transaction. In such circumstances, the inflation adjustment set forth in Section IV(B)(2)(a)(iii) shall not be applied to any remaining Annual Payments that are subject to the acceleration.
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C.
|
Any and all deadlines or other time periods set forth in this Agreement may be extended by agreement between Settling Defendants and The Wilner Firm. If the deadlines are extended in the Non-Wilner Plaintiffs’ Settlement Agreement (defined below), then the deadlines set forth herein shall automatically be extended consistent with the extension in the Non-Wilner Plaintiffs’ Settlement Agreement.
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D.
|
The Wilner Firm shall have sole responsibility for allocating the Settlement Proceeds to and among the Participating Plaintiffs in accordance with the Settlement Fund Matrix, and subject to any adjustments or reductions that may be necessary to satisfy
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E.
|
On May 1, 2014, Liggett shall make a one-time payment to the Settlement Fund in the amount of the Tier Zero Lump Sum, which Liggett shall deduct from the Annual Payment due in the second year pursuant to Section IV(B)(2)(a)(ii).
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F.
|
The Annual Payments, as adjusted in accordance with this Agreement, constitute the total amount of the Settlement Proceeds to be paid by the Settling Defendants.
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G.
|
Each Party agrees that the Settlement Proceeds are reasonable and adequate consideration for the settlement and this Agreement. In no circumstances shall the reasonableness or adequacy of the Settlement Proceeds be challenged by any Party to this Agreement.
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H.
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Each Participating Plaintiff is solely responsible for payment of their respective attorneys’ fees, costs, expenses and any applicable taxes relating in any way to the Engle Progeny Actions or this Agreement. Participating Plaintiffs shall be solely responsible for all fees, costs and expenses not otherwise expressly designated herein as obligations of the Settling Defendants.
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I.
|
If the Florida Supreme Court, the Court of Appeals for the Eleventh Circuit or the United States Supreme Court should hold that the Engle Phase I Findings established by the Florida Supreme Court in
Engle v. Liggett Group, Inc., et al.,
945 So.2d 1246 (Fla. 2006): (1) constitute a violation of due process rights; or (2) cannot for any reason be used to establish either a fact or element concerning one or more claims asserted in the Engle Progeny Actions, Settling Defendants have the exclusive right to terminate this Agreement. If Settling Defendants terminate this Agreement pursuant to this section, Settling Defendants shall not be obligated to make any further payment of the Settlement Proceeds; the Releases will be rendered null and void and returned to The Wilner Firm; and any monies paid to a Participating Plaintiff or Non-Responsive Plaintiff pursuant to this Agreement prior to the termination of the Agreement shall be treated as a set-off against any damages that may be ultimately awarded to that person against Settling Defendants in any action.
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V.
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PAYMENT TO THE PLAINTIFFS’ COORDINATING COUNSEL
|
VI.
|
DISCHARGE OF LIENS, ASSIGNMENT
RIGHTS AND OTHER THIRD-PARTY PAYOR CLAIMS |
A.
|
The Parties agree that any and all liens, subrogation rights and/or claims arising from medical expenses for Participating Plaintiffs and/or Non-Responsive Plaintiffs incurred as a result of the use of, exposure to, and/or manufacturing, sale and marketing of, Settling Defendants’ cigarettes and/or tobacco products, the claims against Settling Defendants alleged in the Engle Progeny Actions or otherwise relating to the injuries and damages alleged against Settling Defendants in the Engle Progeny Actions, including, but not limited to, liens, subrogation rights or other claims by any financial institutions, medical providers, doctors, hospitals, chiropractors, employers, health insurers, Blue Cross-Blue Shield, HMO, Medicare (Parts A and B) (“Medicare”), Medicaid, other insurers, or any other third parties, and/or their agents, representatives successors, affiliates or subrogees, including, without limitation, the United States or any agency of any state or local government (hereafter, the “Medical Expense Liens”) will be satisfied.
|
B.
|
Plaintiffs’ Coordinating Counsel, The Wilner Firm, The Garretson Resolution Group, Inc., (“Garretson”) and/or their successor designee (if any), are responsible for establishing a process by which any and all of the Medical Expense Liens are satisfied by those persons who have such obligations and performing the tasks and functions necessary to comply with this Section VI of the Agreement in connection with reimbursement claims that may be asserted by federal Medicare; Medicaid liens and certain other governmental health care programs with statutory reimbursement or subrogation rights, limited to TRICARE, VA, and Indian Health Services benefits (hereinafter “Governmental Authority Third Party Payer/Providers”); and any reimbursement interests being asserted by private insurance carriers or self-funded employer welfare plans (hereinafter “Private Third Party Payer/Providers”). Each Participating Plaintiff will be required to cooperate with the procedures and protocols established by Plaintiffs’ Coordinating Counsel, The Wilner Firm or their designee for the identification and resolution of any such liens and/or reimbursement claims.
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C.
|
Plaintiffs’ Coordinating Counsel, The Wilner Firm, Garretson and/or their successor designee, are together solely responsible for obtaining the satisfaction of any and all Medical Expense Liens.
|
D.
|
The duties of Plaintiffs’ Coordinating Counsel, The Wilner Firm, Garretson and/or their designee pursuant to this section shall include, not only ensuring compliance with all relevant provisions of the Medicare Secondary Payer Act (42 U.S.C. §1395y) concerning Medicare repayment claims, but also ensuring compliance under Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (42 U.S.C. §1395y(b)(8)) (the “MMSEA”), which poses certain reporting requirements for certain entities involved in settling personal injury claims involving a Medicare beneficiary.
|
E.
|
Plaintiffs’ Coordinating Counsel, The Wilner Firm or their designee shall resolve all conditional payment reimbursement rights that have been or may be asserted by
|
F.
|
Each of the Participating Plaintiffs
agree and covenant to release, and to indemnify and hold harmless the Released Parties, from and against any and all of their respective Medical Expense Liens which may arise or have heretofore arisen in favor of any financial institutions, medical providers, doctors, hospitals, chiropractors, employers, health insurers, Blue Cross-Blue Shield, HMO, Medicare, Medicaid, other insurers, or any other third parties, including the United States or any agency of any state or local government, by operation of law or equity. In the event that either Settling Defendant is obligated to pay with respect to, or in connection with, any Medical Expense Lien, Liggett may reduce the amount of the Settlement Proceeds to offset such payment(s).
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G.
|
Settling Defendants shall be entitled to proof of satisfaction and discharge of any and all Medical Expense Lien or Liens in relation to any Participating Plaintiff or Non-Responsive Plaintiff. On or before ninety (90) days after the Effective Date, Plaintiffs’ Coordinating Counsel, The Wilner Firm or their designee shall provide Settling Defendants with written confirmation that is reasonably satisfactory to the Settling Defendants (the “Lien Confirmation”) that any and all Medical Expense Liens have been fully satisfied or that holdback amounts are in place to satisfy any and all Medical Expense Liens. Settling Defendants shall not be obligated to pay, tender or release any of the Settlement Proceeds, or make any payment or payments pursuant to this Agreement, until Plaintiffs’ Coordinating Counsel, The Wilner Firm or their designee provides the Lien Confirmation to Settling Defendants which is reasonably satisfactory to the Settling Defendants in all respects.
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VII.
|
ALLOCATION OF SETTLEMENT PROCEEDS/THIRD-PARTY CLAIMS
|
A.
|
The Wilner Firm represents that it has complied, and will comply, with any requirement: (1) to disclose to the Participating Plaintiffs: the existence and nature of the terms and conditions of this Agreement; the participation of each person in the Agreement; the claims asserted by the Participating Plaintiffs; and the allocation, and basis therefore, of Settlement Proceeds, including, without limitation, the disclosure of the allocation of the Settlement Proceeds and the basis therefore; and (2) to obtain informed written consent from their clients regarding this Agreement, in accordance with Rule 1.8 of the ABA Model Rules of Professional Conduct, Florida Rule of Professional Conduct 4-1.8, or other applicable law or rule of professional conduct.
|
B.
|
The Wilner Firm and Participating Plaintiffs covenant and agree that they will have no claim or recourse against Settling Defendants for any disputes or claims regarding
|
C.
|
The Parties covenant and agree that this Agreement and the Settlement Proceeds herein are reasonable and constitute a good faith settlement sufficient to bar, preclude and cut off any and all contribution or other claims, cross-claims and third-party claims by any Non-Settling Defendant concerning the Engle Progeny Actions.
|
VIII.
|
CONFIDENTIALITY
|
A.
|
Once executed, this Agreement and the Exhibits and attachments hereto shall not be confidential and, subject to the terms of this section, may be disclosed without limitation by any Party. However, the Parties agree that to the extent any personal records or other personal information of a Participating Plaintiff, such as medical records, Social Security numbers and/or HICNs (“Confidential Information”) are provided to a Party pursuant to this Agreement, such Confidential Information shall remain confidential. In addition, information regarding the amount of any payments made to specific Participating Plaintiffs under this Agreement (the “Award Information”) shall be kept confidential by the Parties and shall not be disclosed except (1) to appropriate persons to the extent necessary to process a Participating Plaintiffs’ Settlement Fund allocation; (2) as otherwise expressly provided in this Agreement; (3) as may be required by law or court order; or (4) as may be reasonably necessary in order to enforce, or exercise Participating Plaintiffs and/or Settling Defendants’ rights under or with respect to this Agreement.
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B.
|
Any Party that may be required to disclose Confidential Information or Award Information pursuant to the previous paragraph shall take reasonable steps to adequately protect the confidential nature of the Confidential Information and Award Information, including, but not limited to, those steps required pursuant to applicable federal, state or local law or regulation. All Participating Plaintiffs shall be deemed to have consented to the disclosure of Confidential Information and Award Information, as well as all other records and information, for these purposes. Notwithstanding anything to the contrary contained herein, a Participating Plaintiff may disclose Award Information to immediate family members, counsel, accountants and/or financial advisors of such Participating Plaintiff, if any (each of whom shall be instructed to maintain and honor the confidentiality of such information).
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IX.
|
GOVERNING LAW AND VENUE IN CASE OF DISPUTES
|
X.
|
MERGER CLAUSE
|
XI.
|
MISCELLANEOUS PROVISIONS
|
A.
|
Remedies for Breach of the Agreement
|
1.
|
The Parties reserve all rights and remedies with respect to enforcement of the terms and conditions of this Agreement as set forth and defined herein. Unless this Agreement is terminated by the Settling Defendants pursuant to Section IV(B)(2), any breach of the terms and conditions of this Agreement (including, without limitation, any breach of a representation, warranty, release or covenant herein) may and can result, among other things, in a claim for money damages in favor of the non-breaching Party, and the prevailing party to such a claim or action shall be entitled to an award of their reasonable attorneys’ fees, costs and interest.
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2.
|
In the event that Liggett defaults in the payment of Settlement Proceeds due under this Agreement, as their sole and exclusive remedy, the Participating Plaintiffs shall be entitled to aggregate their claims for such payment(s) and have a judgment entered based on the remaining unpaid Settlement Proceeds. In such circumstances, any unpaid Settlement Proceeds: (a) shall be accelerated without discount; (b) shall be subject to the imposition of post-judgment interest at the default rate pursuant to Florida Statute Section 687.02 at the time of entry of the judgment; and (c) Participating Plaintiffs enforcing such a judgment shall be entitled to collect reasonable attorneys’ fees from Liggett for any proceedings required to enforce the judgment.
|
B.
|
Waiver of Inconsistent Provisions of Law
|
C.
|
Severability
|
D.
|
Arm’s Length Negotiation
|
E.
|
No Assignment of Claims
|
F.
|
No Effect on Parties’ Rights Against Non-Parties
|
G.
|
No Admissions
|
H.
|
Admissibility of this Agreement
|
I.
|
Non-Wilner Plaintiffs’ Settlement
Agreement Contingency and Tolling of the Effective Date |
J.
|
Contingencies
|
K.
|
Qualified Settlement Fund
|
L.
|
Headings are for Convenience Only
|
M.
|
Application of Deadlines
|
N.
|
Notice
|
1.
|
Overnight delivery; or
|
2.
|
Hand delivery.
|
O.
|
Manner of Execution of This Agreement
|
P.
|
Amendments
|
Q.
|
Non-Waiver
|
R.
|
Survival
|
S.
|
Cooperation
|
Liggett Group LLC
By:
/S/ Ronald J. Bernstein
Name: Ronald J. Bernstein
Title: President and Chief Executive Officer
|
|
|
VECTOR GROUP LTD.
|
|
|
|
|
|
By:
|
/s/ J. Bryant Kirkland III
|
|
|
J. Bryant Kirkland III
|
|
|
Vice President, Treasurer and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Ronald J. Bernstein
|
|
|
Ronald J. Bernstein
|
|
|
|
|
|
|
Prudential:
|
The Prudential Real Estate Financial Services of America, Inc.
c/o Prudential Capital Group
100 Mulberry Street, Gateway Center Three, Floor 18, NJ-05-18-03
Newark, NJ 07102-4077
Attn: Paul H. Procyk, Senior Vice President
and
c/o Prudential Capital Group
4 Embarcadero Center, Suite 2700
San Francisco, CA 94111
Attn: James Evert
|
|
|
Douglas Elliman:
|
Douglas Elliman Realty, LLC
575 Madison Avenue
New York, NY 10022
Attn: Kenneth I. Haber, Executive Vice President and General Counsel
With a copy to:
Brian K. Ziegler, Esq.
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, NY 11554
|
Seller:
|
The Prudential Real Estate Financial Services of America, Inc.
c/o Prudential Capital Group
100 Mulberry Street, Gateway Center Three, Floor
18, NJ-05-18-03
Newark, NJ 07102-4077
Attn: Paul H. Procyk, Senior Vice President
and
c/o Prudential Capital Group
4 Embarcadero Center, Suite 2700
San Francisco, CA 94111
Attn: James Evert
|
NV:
|
New Valley Real Estate LLC
c/o Vector Group Ltd.
4400 Biscayne Blvd., 10
th
Floor
Miami, FL 33137
Attn: Marc Bell, Vice President and General Counsel
and
Douglas Elliman Realty, LLC
575 Madison Avenue
New York, NY 10022
Attn: Kenneth I Haber, Executive Vice President and General Counsel
With a copy to:
Brian K. Ziegler, Esq.
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, NY 11554
|
NV:
NEW VALLEY REAL ESTATE LLC
By:
/s/ Howard M. Lorber
Name:
Howard M. Lorber
Title:
Manager
Dated: December 13, 2013
|
SELLER:
PRUDENTIAL REAL ESTATE FINANCIAL SERVICES OF AMERICA, INC.
By:
/s/ Paul H. Procyk
Name: Paul H. Procyk
Title: Vice President
Dated: December 13, 2013
|
|
Year Ended December 31,
|
|||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|||||
Earnings as defined:
|
|
|
|
|
|
|
|
|
|
|||||
Pre-tax income (loss)
|
63,487
|
|
|
53,717
|
|
|
123,157
|
|
|
85,570
|
|
|
28,537
|
|
Distributions from investees
|
4,251
|
|
|
19,169
|
|
|
9,322
|
|
|
12,212
|
|
|
6,715
|
|
Interest expense
|
147,084
|
|
|
132,538
|
|
|
93,939
|
|
|
72,572
|
|
|
104,415
|
|
(Income) in equity of affiliate
|
(22,925
|
)
|
|
(29,764
|
)
|
|
(19,966
|
)
|
|
(23,963
|
)
|
|
(15,213
|
)
|
Interest portion of rental expense (1)
|
2,174
|
|
|
1,367
|
|
|
1,438
|
|
|
1,223
|
|
|
1,301
|
|
Total earnings
|
194,071
|
|
|
177,027
|
|
|
207,890
|
|
|
147,614
|
|
|
125,755
|
|
Fixed charges as defined:
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense
|
147,084
|
|
|
132,538
|
|
|
93,939
|
|
|
72,572
|
|
|
104,415
|
|
Interest portion of rent expense (1)
|
2,174
|
|
|
1,367
|
|
|
1,438
|
|
|
1,223
|
|
|
1,301
|
|
Total fixed charges
|
149,258
|
|
|
133,905
|
|
|
95,377
|
|
|
73,795
|
|
|
105,716
|
|
Ratio of earnings to fixed charges
|
1.3
|
|
|
1.32
|
|
|
2.18
|
|
|
2.00
|
|
|
1.19
|
|
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
|
Douglas Elliman Realty, LLC
|
New York
|
New Valley PS 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:
|
March 3, 2014
|
|
|
|
|
|
|
/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:
|
March 3, 2014
|
|
|
|
|
|
|
/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:
|
March 3, 2014
|
|
|
|
|
|
|
/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:
|
March 3, 2014
|
|
|
|
|
|
|
/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, 2014.
|
(ii)
|
Post-Trial Engle Progeny Cases.
|
A.
|
Smoking Related
.
|
B.
|
Price Fixing
.
|
|
Page(s)
|
|
|
Report of Independent Registered Certified Public Accounting Firm
|
|
Consolidated Financial Statements
|
|
Consolidated Balance Sheets as of December 31, 2013 and 2012
|
|
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011
|
|
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
|
|
Consolidated Statement of Member’s Investment for the years ended December 31, 2013, 2012 and 2011
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
|
|
Notes to Consolidated Financial Statements for the years ended December 31, 2013, 2012 and 2011
|
|
Consolidated Financial Statement Schedule
|
|
Schedule II — Valuation and Qualifying Accounts
|
|
2013
|
|
2012
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
5
|
|
|
$
|
8
|
|
Accounts receivable
|
|
|
|
||||
Trade, less allowances of $319 and $566, respectively
|
8,649
|
|
|
10,918
|
|
||
Due from related parties
|
3,135
|
|
|
3,067
|
|
||
Other
|
1,046
|
|
|
952
|
|
||
Inventories
|
85,223
|
|
|
95,320
|
|
||
Income taxes receivable
|
4,824
|
|
|
—
|
|
||
Restricted assets
|
818
|
|
|
2,225
|
|
||
Deferred income taxes
|
467
|
|
|
2,969
|
|
||
Other current assets
|
1,978
|
|
|
2,354
|
|
||
Total current assets
|
106,145
|
|
|
117,813
|
|
||
Property, plant and equipment, net
|
54,448
|
|
|
53,961
|
|
||
Prepaid pension costs
|
26,080
|
|
|
12,870
|
|
||
Restricted assets
|
9,949
|
|
|
7,727
|
|
||
Deferred income taxes
|
8,770
|
|
|
2,355
|
|
||
Other assets
|
8,083
|
|
|
14,357
|
|
||
Total assets
|
$
|
213,475
|
|
|
$
|
209,083
|
|
|
2013
|
|
2012
|
||||
Liabilities and Member’s Investment
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Current portion of notes payable and long-term debt
|
$
|
8,569
|
|
|
$
|
7,155
|
|
Revolving credit facility
|
30,424
|
|
|
29,430
|
|
||
Current payments due under the Master Settlement Agreement
|
16,611
|
|
|
31,677
|
|
||
Current portion of pension and post-retirement liabilities
|
939
|
|
|
2,824
|
|
||
Due to related parties
|
5,508
|
|
|
—
|
|
||
Accounts payable — trade
|
4,012
|
|
|
5,042
|
|
||
Accrued promotional expenses
|
16,569
|
|
|
17,378
|
|
||
Income taxes payable
|
—
|
|
|
2,916
|
|
||
Other accrued taxes, principally excise taxes
|
11,586
|
|
|
20,311
|
|
||
Allowance for sales returns
|
4,290
|
|
|
4,000
|
|
||
Litigation accruals
|
59,310
|
|
|
1,470
|
|
||
Deferred income taxes
|
1,657
|
|
|
—
|
|
||
Other current liabilities
|
1,152
|
|
|
1,422
|
|
||
Total current liabilities
|
160,627
|
|
|
123,625
|
|
||
Notes payable and long-term debt, less current portion
|
12,567
|
|
|
14,834
|
|
||
Non-current employee benefits
|
16,648
|
|
|
20,261
|
|
||
Deferred income taxes
|
3,573
|
|
|
3,950
|
|
||
Payments due under the Master Settlement Agreement
|
25,666
|
|
|
46,837
|
|
||
Litigation accruals
|
27,059
|
|
|
1,861
|
|
||
Total liabilities
|
246,140
|
|
|
211,368
|
|
||
Commitments and contingencies
|
|
|
|
||||
Member’s investment
|
|
|
|
||||
Contributed capital
|
—
|
|
|
10,346
|
|
||
Accumulated other comprehensive loss
|
(12,763
|
)
|
|
(22,497
|
)
|
||
Retained earnings (accumulated deficit)
|
(19,902
|
)
|
|
9,866
|
|
||
Total member’s investment
|
(32,665
|
)
|
|
(2,285
|
)
|
||
Total liabilities and member's investment
|
$
|
213,475
|
|
|
$
|
209,083
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Revenues *
|
$
|
968,811
|
|
|
$
|
1,050,226
|
|
|
$
|
1,095,116
|
|
Expenses
|
|
|
|
|
|
||||||
Cost of goods sold *
|
715,330
|
|
|
817,633
|
|
|
882,987
|
|
|||
Litigation judgment and settlement charges
|
88,106
|
|
|
1,424
|
|
|
—
|
|
|||
Operating, selling, administrative and general expenses
|
68,604
|
|
|
72,088
|
|
|
64,394
|
|
|||
Management fees paid to Vector Group Ltd.
|
9,008
|
|
|
8,663
|
|
|
8,336
|
|
|||
Net loss (gain) on sale of assets
|
146
|
|
|
18
|
|
|
(40
|
)
|
|||
Operating income
|
87,617
|
|
|
150,400
|
|
|
139,439
|
|
|||
Other income (expense)
|
|
|
|
|
|
||||||
Interest income
|
1,982
|
|
|
21
|
|
|
50
|
|
|||
Interest expense
|
(1,716
|
)
|
|
(4,421
|
)
|
|
(2,395
|
)
|
|||
Income before provision for income taxes
|
87,883
|
|
|
146,000
|
|
|
137,094
|
|
|||
Income tax expense
|
(32,697
|
)
|
|
(55,903
|
)
|
|
(49,925
|
)
|
|||
Net income
|
$
|
55,186
|
|
|
$
|
90,097
|
|
|
$
|
87,169
|
|
*
|
Revenues and cost of goods sold include net federal excise taxes of
$404,522
,
$466,538
and
$506,514
for the years ended
December 31, 2013
,
2012
and
2011
, respectively.
|
|
2013
|
|
2012
|
|
2011
|
||||||
Net income
|
$
|
55,186
|
|
|
$
|
90,097
|
|
|
$
|
87,169
|
|
|
|
|
|
|
|
||||||
Net change in forward contracts
|
64
|
|
|
64
|
|
|
62
|
|
|||
Net change in pension-related amounts
|
15,600
|
|
|
1,672
|
|
|
(11,921
|
)
|
|||
Other comprehensive income
|
15,664
|
|
|
1,736
|
|
|
(11,859
|
)
|
|||
|
|
|
|
|
|
||||||
Income tax effect on forward contracts
|
(24
|
)
|
|
(24
|
)
|
|
(24
|
)
|
|||
Income tax effect on pension-related amounts
|
(5,906
|
)
|
|
(622
|
)
|
|
4,706
|
|
|||
Income tax (expense) benefit on other comprehensive income
|
(5,930
|
)
|
|
(646
|
)
|
|
4,682
|
|
|||
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax
|
9,734
|
|
|
1,090
|
|
|
(7,177
|
)
|
|||
|
|
|
|
|
|
||||||
Comprehensive income
|
$
|
64,920
|
|
|
$
|
91,187
|
|
|
$
|
79,992
|
|
|
|
|
|
|
|
|
Contributed
Capital
|
|
Accumulated
Other
Comprehensive Loss
|
|
Retained
Earnings (Accumulated deficit)
|
|
Total
|
||||||||
Balance, January 1, 2011
|
$
|
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
|
)
|
||||
Net income
|
—
|
|
|
—
|
|
|
55,186
|
|
|
55,186
|
|
||||
Change in pension related amounts, net of taxes
|
—
|
|
|
9,694
|
|
|
—
|
|
|
9,694
|
|
||||
Change in fair value of forward contracts, net of taxes
|
—
|
|
|
40
|
|
|
—
|
|
|
40
|
|
||||
Distributions
|
(10,346
|
)
|
|
—
|
|
|
(84,954
|
)
|
|
(95,300
|
)
|
||||
Balance, December 31, 2013
|
$
|
—
|
|
|
$
|
(12,763
|
)
|
|
$
|
(19,902
|
)
|
|
$
|
(32,665
|
)
|
|
2013
|
|
2012
|
|
2011
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
55,186
|
|
|
$
|
90,097
|
|
|
$
|
87,169
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
8,981
|
|
|
9,095
|
|
|
8,576
|
|
|||
Deferred income taxes
|
(3,296
|
)
|
|
109
|
|
|
(1,830
|
)
|
|||
Loss (gain) on sale of assets
|
146
|
|
|
21
|
|
|
(43
|
)
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Trade accounts receivable, net of allowances
|
2,269
|
|
|
13,410
|
|
|
(22,645
|
)
|
|||
Due to/(from) related parties
|
5,440
|
|
|
4,249
|
|
|
6,987
|
|
|||
Other receivables
|
(95
|
)
|
|
(211
|
)
|
|
(298
|
)
|
|||
Inventories
|
10,097
|
|
|
10,002
|
|
|
(3,607
|
)
|
|||
Income taxes
|
(12,824
|
)
|
|
2,916
|
|
|
(19,675
|
)
|
|||
Other assets
|
6,626
|
|
|
(1,367
|
)
|
|
75
|
|
|||
Accounts payable, trade
|
905
|
|
|
(5,164
|
)
|
|
3,074
|
|
|||
Accrued expenses
|
48,331
|
|
|
3,173
|
|
|
(660
|
)
|
|||
Payments due under the Master Settlement Agreement
|
(36,237
|
)
|
|
(15,571
|
)
|
|
26,671
|
|
|||
Employee benefits
|
(3,109
|
)
|
|
(2,025
|
)
|
|
3,338
|
|
|||
Other long-term liabilities
|
25,198
|
|
|
237
|
|
|
1,557
|
|
|||
Change in book overdraft
|
(1,936
|
)
|
|
1,913
|
|
|
(1,156
|
)
|
|||
Net cash provided by operating activities
|
105,682
|
|
|
110,884
|
|
|
87,533
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Proceeds from sale of property, plant and equipment
|
13
|
|
|
—
|
|
|
195
|
|
|||
Increase in restricted assets
|
(815
|
)
|
|
(1,392
|
)
|
|
(608
|
)
|
|||
Increase in cash surrender value of life insurance policies
|
(266
|
)
|
|
(264
|
)
|
|
(264
|
)
|
|||
Capital expenditures
|
(9,457
|
)
|
|
(8,918
|
)
|
|
(9,905
|
)
|
|||
Net cash used in investing activities
|
(10,525
|
)
|
|
(10,574
|
)
|
|
(10,582
|
)
|
|
2013
|
|
2012
|
|
2011
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Repayments of debt
|
(7,434
|
)
|
|
(18,970
|
)
|
|
(4,672
|
)
|
|||
Proceeds from issuance of debt
|
6,580
|
|
|
14,015
|
|
|
6,364
|
|
|||
Deferred finance charges
|
—
|
|
|
(315
|
)
|
|
—
|
|
|||
Borrowings under revolving credit facility
|
978,788
|
|
|
1,074,050
|
|
|
1,064,270
|
|
|||
Repayments under revolving credit facility
|
(977,794
|
)
|
|
(1,066,092
|
)
|
|
(1,078,508
|
)
|
|||
Distributions to Vector Group Ltd.
|
(95,300
|
)
|
|
(103,000
|
)
|
|
(64,400
|
)
|
|||
Net cash used in financing activities
|
(95,160
|
)
|
|
(100,312
|
)
|
|
(76,946
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(3
|
)
|
|
(2
|
)
|
|
5
|
|
|||
Cash and cash equivalents
|
|
|
|
|
|
||||||
Beginning of year
|
8
|
|
|
10
|
|
|
5
|
|
|||
End of year
|
$
|
5
|
|
|
$
|
8
|
|
|
$
|
10
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||||||
Cash payments during the period for
|
|
|
|
|
|
||||||
Interest
|
$
|
1,671
|
|
|
$
|
1,527
|
|
|
$
|
1,168
|
|
Income taxes
|
$
|
—
|
|
|
$
|
175
|
|
|
$
|
2
|
|
Tax sharing payments to Vector Group Ltd.
|
$
|
49,000
|
|
|
$
|
47,800
|
|
|
$
|
71,650
|
|
•
|
Liggett Group LLC recorded comprehensive income of
$9,694
(net of taxes), and
$1,050
(net of taxes) in 2013 and 2012, respectively, and a comprehensive loss of ($7,215) (net of taxes) during
2011
in relation to certain of its pension plans (Note 5). In
2013
,
2012
and
2011
, Liggett recorded
$40
(net of taxes),
$40
(net of taxes) and
$38
(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
|
|
2013
|
|
2012
|
||||
Pension-related amounts, net of taxes of $7,696 and $13,602, respectively
|
$
|
(12,676
|
)
|
|
$
|
(22,371
|
)
|
Forward contract adjustment, net of taxes of $67 and $90, respectively
|
(87
|
)
|
|
(126
|
)
|
||
Accumulated other comprehensive loss
|
$
|
(12,763
|
)
|
|
$
|
(22,497
|
)
|
|
|
Fair Value Measurements as of December 31, 2013
|
|||||||||||
|
|
|
|
Quoted Prices in
Active Markets for Identical Assets |
|
Significant Other
Observable Inputs |
|
||||||
Description
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
Restricted assets
|
|
10,767
|
|
|
—
|
|
|
10,767
|
|
|
|||
Total
|
|
$
|
10,772
|
|
|
$
|
5
|
|
|
$
|
10,767
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
—
|
|
|
|||
Notes payable and long-term debt
|
|
$
|
51,560
|
|
|
—
|
|
|
$
|
51,577
|
|
|
|
Total
|
|
$
|
51,560
|
|
|
$
|
5
|
|
|
$
|
51,577
|
|
|
|
|
Fair Value Measurements as of December 31, 2012
|
|||||||||||
|
|
|
|
Quoted Prices in
Active Markets for Identical Assets |
|
Significant Other
Observable Inputs |
|
||||||
Description
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
Restricted assets
|
|
9,952
|
|
|
—
|
|
|
9,952
|
|
|
|||
Total
|
|
$
|
9,960
|
|
|
$
|
8
|
|
|
$
|
9,952
|
|
|
Financial liabilities:
|
|
|
|
|
|
—
|
|
|
|||||
Notes payable and long-term debt
|
|
$
|
51,419
|
|
|
—
|
|
|
$
|
51,522
|
|
|
|
Total
|
|
$
|
51,419
|
|
|
$
|
—
|
|
|
$
|
51,522
|
|
|
3.
|
Inventories
|
|
2013
|
|
2012
|
||||
Leaf tobacco
|
$
|
49,140
|
|
|
$
|
59,131
|
|
Other raw materials
|
3,161
|
|
|
3,152
|
|
||
Work-in-process
|
353
|
|
|
210
|
|
||
Finished goods
|
59,661
|
|
|
59,163
|
|
||
Inventories at current cost
|
112,315
|
|
|
121,656
|
|
||
LIFO adjustment
|
(27,092
|
)
|
|
(26,336
|
)
|
||
Inventories, net
|
$
|
85,223
|
|
|
$
|
95,320
|
|
4.
|
Property, Plant and Equipment
|
|
2013
|
|
2012
|
||||
Land and land improvements
|
$
|
1,418
|
|
|
$
|
1,418
|
|
Buildings
|
15,097
|
|
|
15,092
|
|
||
Machinery and equipment
|
124,675
|
|
|
115,027
|
|
||
Property, plant and equipment
|
141,190
|
|
|
131,537
|
|
||
Less accumulated depreciation
|
(86,742
|
)
|
|
(77,576
|
)
|
||
Property, plant and equipment, net
|
$
|
54,448
|
|
|
$
|
53,961
|
|
5.
|
Employee Benefits Plans
|
|
|
|
|
|
Other
|
||||||||||
|
Pension Benefits
|
|
Postretirement Benefits
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Change in benefit obligation
|
|
|
|
|
|
|
|
||||||||
Benefit obligation at January 1
|
$
|
(128,117
|
)
|
|
$
|
(126,295
|
)
|
|
$
|
(10,158
|
)
|
|
$
|
(9,629
|
)
|
Service cost
|
(734
|
)
|
|
(871
|
)
|
|
(16
|
)
|
|
(14
|
)
|
||||
Interest cost
|
(4,726
|
)
|
|
(5,618
|
)
|
|
(417
|
)
|
|
(465
|
)
|
||||
Benefits paid (including expenses)
|
12,679
|
|
|
11,411
|
|
|
559
|
|
|
506
|
|
||||
Actuarial gain (loss)
|
1,256
|
|
|
(6,744
|
)
|
|
1,133
|
|
|
(556
|
)
|
||||
Benefit obligation at December 31
|
$
|
(119,642
|
)
|
|
$
|
(128,117
|
)
|
|
$
|
(8,899
|
)
|
|
$
|
(10,158
|
)
|
Change in plan assets
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at January 1
|
$
|
128,060
|
|
|
$
|
122,013
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
19,482
|
|
|
15,656
|
|
|
—
|
|
|
—
|
|
||||
Contributions
|
2,173
|
|
|
1,802
|
|
|
560
|
|
|
512
|
|
||||
Benefits paid (including expenses)
|
(12,679
|
)
|
|
(11,411
|
)
|
|
(560
|
)
|
|
(512
|
)
|
||||
Fair value of plan assets at December 31
|
$
|
137,036
|
|
|
$
|
128,060
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Funded status at December 31
|
$
|
17,394
|
|
|
$
|
(57
|
)
|
|
$
|
(8,899
|
)
|
|
$
|
(10,158
|
)
|
Amounts recognized in the balance sheet:
|
|
|
|
|
|
|
|
||||||||
Prepaid pension cost
|
$
|
26,080
|
|
|
$
|
12,870
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other accrued expenses
|
(342
|
)
|
|
(2,161
|
)
|
|
(596
|
)
|
|
(663
|
)
|
||||
Non-current employee benefit liabilities
|
(8,344
|
)
|
|
(10,766
|
)
|
|
(8,303
|
)
|
|
(9,495
|
)
|
||||
Net amounts recognized
|
$
|
17,394
|
|
|
$
|
(57
|
)
|
|
$
|
(8,899
|
)
|
|
$
|
(10,158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
2011
|
||||||||||||
Service cost — benefits earned during the period
|
$
|
734
|
|
|
$
|
870
|
|
|
$
|
847
|
|
|
$
|
16
|
|
|
$
|
14
|
|
|
$
|
13
|
|
Interest cost on projected benefit obligation
|
4,726
|
|
|
5,618
|
|
|
6,301
|
|
|
417
|
|
|
465
|
|
|
500
|
|
||||||
Expected return on assets
|
(7,914
|
)
|
|
(8,145
|
)
|
|
(8,834
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlement loss
|
243
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of net loss (gain)
|
1,465
|
|
|
1,584
|
|
|
789
|
|
|
(64
|
)
|
|
(121
|
)
|
|
(88
|
)
|
||||||
Net (income) expense
|
$
|
(746
|
)
|
|
$
|
(73
|
)
|
|
$
|
(897
|
)
|
|
$
|
369
|
|
|
$
|
358
|
|
|
$
|
425
|
|
|
Defined
Benefit
Pension
Plans
|
|
Post -
Retirement
Plans
|
|
Total
|
||||||
Actuarial loss (gain)
|
$
|
1,075
|
|
|
$
|
(60
|
)
|
|
$
|
1,015
|
|
|
Defined
Benefit
Pension
Plans
|
|
Post-
Retirement
Benefits
|
|
Total
|
||||||
Prior year accumulated other comprehensive loss
|
$
|
(35,790
|
)
|
|
$
|
(183
|
)
|
|
$
|
(35,973
|
)
|
Amortization of gain (loss)
|
1,466
|
|
|
(64
|
)
|
|
1,402
|
|
|||
Effect of settlement
|
243
|
|
|
—
|
|
|
243
|
|
|||
Net gain (loss) arising during the year
|
12,824
|
|
|
1,133
|
|
|
13,957
|
|
|||
Current year accumulated other comprehensive income (loss)
|
$
|
(21,257
|
)
|
|
$
|
886
|
|
|
$
|
(20,371
|
)
|
|
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
|
)
|
|
|
|
|
|
|
|
|
||||||||||
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||||||
|
2013
|
|
2012
|
|
2011
|
|
2013
|
|
2012
|
|
2011
|
||||||
Weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Discount rates — benefit obligation
|
3.00% - 4.75%
|
|
|
2.25% - 4.00%
|
|
|
3.75% - 4.75%
|
|
|
5.00
|
%
|
|
4.25
|
%
|
|
5.00
|
%
|
Discount rates — service cost
|
2.25% - 4.00%
|
|
|
3.75% - 4.75%
|
|
|
5.25
|
%
|
|
4.25
|
%
|
|
5.00
|
%
|
|
5.25
|
%
|
Assumed rates of return on invested assets
|
6.50
|
%
|
|
7.00
|
%
|
|
7.00
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
Salary increase assumptions
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
3.00
|
%
|
|
3.00
|
%
|
|
3.00
|
%
|
|
Plan Assets
At
December 31,
|
||||
|
2013
|
|
2012
|
||
Asset category
|
|
|
|
||
Equity securities
|
50
|
%
|
|
47
|
%
|
Investment grade fixed income securities
|
28
|
%
|
|
30
|
%
|
High yield fixed income securities
|
10
|
%
|
|
10
|
%
|
Alternative investments
|
6
|
%
|
|
8
|
%
|
Short-term investments
|
6
|
%
|
|
5
|
%
|
|
100
|
%
|
|
100
|
%
|
|
Fair Value Measurements as of December 31, 2013
|
||||||||||||||
|
|
|
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
|
$
|
2,396
|
|
|
$
|
—
|
|
|
$
|
2,396
|
|
|
$
|
—
|
|
Amounts in individually managed investment accounts:
|
|
|
|
|
|
|
|
||||||||
Cash
|
7,424
|
|
|
7,424
|
|
|
—
|
|
|
—
|
|
||||
U.S. equity securities
|
46,520
|
|
|
46,520
|
|
|
—
|
|
|
—
|
|
||||
Common collective trusts
|
57,912
|
|
|
—
|
|
|
57,912
|
|
|
—
|
|
||||
Investment partnership
|
22,748
|
|
|
—
|
|
|
13,717
|
|
|
9,031
|
|
||||
Total
|
$
|
137,000
|
|
|
$
|
53,944
|
|
|
$
|
74,025
|
|
|
$
|
9,031
|
|
|
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
|
|
|
2013
|
|
2012
|
||||
Prior year balance
|
$
|
23,712
|
|
|
$
|
22,582
|
|
Distributions
|
(2,669
|
)
|
|
(2,905
|
)
|
||
Transfers
|
(13,153
|
)
|
|
—
|
|
||
Contributions
|
—
|
|
|
864
|
|
||
Unrealized gain on long-term investments
|
(1,779
|
)
|
|
2,442
|
|
||
Realized gain on long-term investments
|
2,920
|
|
|
729
|
|
||
Balance as of December 31
|
$
|
9,031
|
|
|
$
|
23,712
|
|
|
1%
Increase
|
|
1%
Decrease
|
||||
Effect on total of service and interest cost components
|
$
|
6
|
|
|
$
|
(6
|
)
|
Effect on benefit obligation
|
$
|
119
|
|
|
$
|
(110
|
)
|
|
Pension
|
|
Postretirement
Medical
|
||||
2014
|
$
|
10,749
|
|
|
$
|
596
|
|
2015
|
10,422
|
|
|
603
|
|
||
2016
|
10,080
|
|
|
607
|
|
||
2017
|
9,793
|
|
|
611
|
|
||
2018
|
9,461
|
|
|
615
|
|
||
2019 — 2023
|
48,144
|
|
|
3,114
|
|
6.
|
Income Taxes
|
|
2013
|
|
2012
|
|
2011
|
||||||
Current
|
|
|
|
|
|
||||||
Federal
|
$
|
26,910
|
|
|
$
|
43,745
|
|
|
$
|
41,116
|
|
State
|
9,083
|
|
|
12,049
|
|
|
9,927
|
|
|||
|
$
|
35,993
|
|
|
$
|
55,794
|
|
|
$
|
51,043
|
|
Deferred
|
|
|
|
|
|
||||||
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
(3,296
|
)
|
|
109
|
|
|
(1,118
|
)
|
|||
|
$
|
(3,296
|
)
|
|
$
|
109
|
|
|
$
|
(1,118
|
)
|
Total tax provision
|
$
|
32,697
|
|
|
$
|
55,903
|
|
|
$
|
49,925
|
|
|
2013
|
|
2012
|
||||||||||||
|
Deferred Tax
|
|
Deferred Tax
|
||||||||||||
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
||||||||
Sales and product allowances
|
$
|
323
|
|
|
$
|
—
|
|
|
$
|
320
|
|
|
$
|
—
|
|
Inventories
|
133
|
|
|
1,657
|
|
|
109
|
|
|
1,484
|
|
||||
Property, plant and equipment
|
—
|
|
|
2,568
|
|
|
—
|
|
|
2,466
|
|
||||
Employee benefit plan accruals
|
1,022
|
|
|
1,005
|
|
|
871
|
|
|
—
|
|
||||
Tobacco litigation settlements
|
7,748
|
|
|
—
|
|
|
4,009
|
|
|
—
|
|
||||
Forward contracts
|
11
|
|
|
—
|
|
|
15
|
|
|
—
|
|
||||
Total deferred tax
|
$
|
9,237
|
|
|
$
|
5,230
|
|
|
$
|
5,324
|
|
|
$
|
3,950
|
|
|
2013
|
|
2,012
|
|
2011
|
||||||
Income before income taxes
|
$
|
87,883
|
|
|
$
|
146,000
|
|
|
$
|
137,094
|
|
|
|
|
|
|
|
||||||
Federal income tax at statutory rate
|
$
|
30,758
|
|
|
$
|
51,100
|
|
|
$
|
47,982
|
|
State income taxes, net of federal taxes
|
3,999
|
|
|
6,643
|
|
|
5,725
|
|
|||
Impact of domestic production deduction
|
(2,060
|
)
|
|
(1,840
|
)
|
|
(4,162
|
)
|
|||
Impact of other non-taxable differences and IRS audit settlement
|
—
|
|
|
—
|
|
|
380
|
|
|||
Income tax expense
|
$
|
32,697
|
|
|
$
|
55,903
|
|
|
$
|
49,925
|
|
|
|
||
Balance at January 1, 2011
|
$
|
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
|
|
2013
|
|
2012
|
||||
Borrowings under revolving credit facility
|
$
|
30,424
|
|
|
$
|
29,430
|
|
Term loan under revolving credit facility
|
3,884
|
|
|
4,179
|
|
||
Equipment loans
|
17,252
|
|
|
17,810
|
|
||
|
51,560
|
|
|
51,419
|
|
||
Less current maturities
|
(38,993
|
)
|
|
(36,585
|
)
|
||
Amount due after one year
|
$
|
12,567
|
|
|
$
|
14,834
|
|
8.
|
Operating Leases
|
|
Lease
Commitments
|
||
Year Ending December 31
|
|
||
2014
|
$
|
769
|
|
2015
|
707
|
|
|
2016
|
81
|
|
|
2017
|
19
|
|
|
2018
|
—
|
|
|
Thereafter
|
—
|
|
|
|
$
|
1,576
|
|
9.
|
Commitments and Contingencies
|
State
|
|
Number
of Cases |
|
Florida
|
|
39
|
|
New York
|
|
9
|
|
Maryland
|
|
4
|
|
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
|
|
Liggett satisfied the judgment and the case is concluded.
|
August 2009
|
|
Campbell v. R.J. Reynolds
|
|
Escambia
|
|
$156
|
|
None
|
|
Liggett satisfied the judgment and the case is concluded.
|
March 2010
|
|
Douglas v. R.J. Reynolds
|
|
Hillsborough
|
|
$1,350
|
|
None
|
|
Liggett satisfied the judgment and the case is concluded.
|
April 2010
|
|
Clay v. R.J. Reynolds
|
|
Escambia
|
|
$349
|
|
$1,000
|
|
Liggett satisfied the judgment and the case is concluded.
|
April 2010
|
|
Putney v. R.J. Reynolds
|
|
Broward
|
|
$3,008
|
|
None
|
|
On June 12, 2013, the Fourth District Court of Appeal reversed and remanded the case for further proceedings. Plaintiff filed a motion for rehearing which was denied. Both sides have sought discretionary review from the Florida Supreme Court. The appeal is stayed pending the outcome of the Hess appeal.
|
April 2011
|
|
Tullo v. R.J. Reynolds
|
|
Palm Beach
|
|
$225
|
|
None
|
|
Affirmed by the Fourth District Court of Appeal. The defendants have sought discretionary review from the Florida Supreme Court.
|
January 2012
|
|
Ward v. R.J. Reynolds
|
|
Escambia
|
|
$1
|
|
None
|
|
Affirmed by the First District Court of Appeal. Liggett satisfied the merits judgment and other than an issue regarding attorneys' fees, the case is concluded. Oral argument on the attorneys' fee appeal occurred on February 11, 2014.
|
May 2012
|
|
Calloway v. R.J. Reynolds
|
|
Broward
|
|
$1,947
|
|
$7,600
|
|
A joint and several judgment for $16,100 was entered against R.J. Reynolds, Philip Morris, Lorillard and Liggett. On appeal to the Fourth District Court of Appeal.
|
December 2012
|
|
Buchanan v. R.J. Reynolds
|
|
Leon
|
|
$2,035
|
|
None
|
|
A joint and several judgment for $5,500 was entered against Liggett and Philip Morris. On appeal to the First District Court of Appeal.
|
May 2013
|
|
Cohen v. R.J. Reynolds
|
|
Palm Beach
|
|
$205
|
|
None
|
|
Defendants' motion seeking a new trial was granted by the trial court. Plaintiff appealed to the Fourth District Court of Appeal.
|
August 2013
|
|
Rizzuto v. R.J. Reynolds
|
|
Hernando
|
|
$3,479
|
|
None
|
|
A joint and several judgment for $11,132 was entered against Philip Morris and Liggett. The court denied defendants' request to reduce the compensatory damages by the plaintiff's comparative fault. On appeal to the Fifth District Court of Appeal.
|
|
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, 2011
|
$
|
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 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
|
|
||||||
Expenses
|
109,392
|
|
|
63,293
|
|
|
172,685
|
|
|
—
|
|
|
25,220
|
|
|
25,220
|
|
||||||
MSA settlements and arbitration
|
(4,002
|
)
|
|
—
|
|
|
(4,002
|
)
|
|
(14,348
|
)
|
|
—
|
|
|
(14,348
|
)
|
||||||
Change in MSA obligations capitalized as inventory
|
504
|
|
|
—
|
|
|
504
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Payments
|
(127,783
|
)
|
|
(6,070
|
)
|
|
(133,853
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Reclassification (to) from non-current liabilities
|
6,823
|
|
|
223
|
|
|
7,046
|
|
|
(6,823
|
)
|
|
(223
|
)
|
|
(7,046
|
)
|
||||||
Interest on withholding
|
—
|
|
|
394
|
|
|
394
|
|
|
|
|
|
201
|
|
|
201
|
|
||||||
Balance at December 31, 2013
|
$
|
16,611
|
|
|
$
|
59,310
|
|
|
$
|
75,921
|
|
|
$
|
25,666
|
|
|
$
|
27,059
|
|
|
$
|
52,725
|
|
10.
|
Related Party Transactions
|
|
2013
|
|
2012
|
||||
Due from Vector Tobacco
|
$
|
3,135
|
|
|
$
|
2,288
|
|
Due (to)/from Liggett Vector Brands
|
(5,508
|
)
|
|
779
|
|
||
|
$
|
(2,373
|
)
|
|
$
|
3,067
|
|
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, 2013
|
|
|
|
|
|
|
|
||||||||
Allowance for:
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts
|
$
|
314
|
|
|
$
|
120
|
|
|
$
|
324
|
|
|
$
|
110
|
|
Cash discounts
|
252
|
|
|
22,555
|
|
|
22,598
|
|
|
209
|
|
||||
Sales returns
|
4,000
|
|
|
3,858
|
|
|
3,568
|
|
|
4,290
|
|
||||
Total
|
$
|
4,566
|
|
|
$
|
26,533
|
|
|
$
|
26,490
|
|
|
$
|
4,609
|
|
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
|
|
|
Page(s)
|
|
|
Report of Independent Registered Certified Public Accounting Firm
|
|
Financial Statements
|
|
Balance Sheets as of December 31, 2013 and 2012
|
|
Statements of Operations for the years ended December 31, 2013, 2012 and 2011
|
|
Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011
|
|
Statement of Stockholder's Equity for the years ended December 31, 2013, 2012 and 2011
|
|
Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011
|
|
Notes to Financial Statements for the years ended December 31, 2013, 2012 and 2011
|
|
Financial Statement Schedule
|
|
Schedule II — Valuation and Qualifying Accounts
|
|
2013
|
|
2012
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
10,785
|
|
|
$
|
3,395
|
|
Accounts receivable — trade, less allowances of $114 and $11, respectively
|
1,505
|
|
|
265
|
|
||
Due from related parties
|
1,215
|
|
|
—
|
|
||
Inventories
|
7,434
|
|
|
5,072
|
|
||
Deferred income taxes
|
4,434
|
|
|
2,927
|
|
||
Income tax receivable, net
|
7,956
|
|
|
1,471
|
|
||
Other current assets
|
663
|
|
|
616
|
|
||
Total current assets
|
33,992
|
|
|
13,746
|
|
||
Property, plant and equipment, net
|
—
|
|
|
10
|
|
||
Intangible asset associated with benefit under the Master Settlement Agreement
|
107,511
|
|
|
107,511
|
|
||
Deferred income taxes
|
92,151
|
|
|
99,894
|
|
||
Due from related parties
|
9,595
|
|
|
—
|
|
||
Other assets
|
2,236
|
|
|
1,789
|
|
||
Total assets
|
$
|
245,485
|
|
|
$
|
222,950
|
|
Liabilities and Stockholder’s Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Current payments due under the Master Settlement Agreement
|
$
|
8,737
|
|
|
$
|
1,293
|
|
Due to related parties
|
3,135
|
|
|
6,217
|
|
||
Accrued promotional expenses
|
2,086
|
|
|
1,352
|
|
||
Accounts payable - trade
|
27
|
|
|
88
|
|
||
Allowance for sales returns
|
130
|
|
|
67
|
|
||
Deferred income taxes
|
2,310
|
|
|
2,266
|
|
||
Other current liabilities
|
227
|
|
|
342
|
|
||
Total current liabilities
|
16,652
|
|
|
11,625
|
|
||
Deferred income taxes
|
34,029
|
|
|
31,072
|
|
||
Payments due under the Master Settlement Agreement
|
1,905
|
|
|
5,802
|
|
||
Total liabilities
|
52,586
|
|
|
48,499
|
|
||
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
|
303,892
|
|
|
307,892
|
|
||
Accumulated other comprehensive income
|
115
|
|
|
300
|
|
||
Accumulated deficit
|
(111,108
|
)
|
|
(133,741
|
)
|
||
Total stockholder's equity
|
192,899
|
|
|
174,451
|
|
||
Total liabilities and stockholder's equity
|
$
|
245,485
|
|
|
$
|
222,950
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Revenues *
|
$
|
107,584
|
|
|
$
|
86,619
|
|
|
$
|
94,175
|
|
Expenses
|
|
|
|
|
|
||||||
Cost of goods sold *
|
76,116
|
|
|
58,117
|
|
|
65,807
|
|
|||
Operating, selling, administrative and general expenses
|
5,545
|
|
|
2,384
|
|
|
2,726
|
|
|||
Management fees paid to Vector Group Ltd.
|
500
|
|
|
500
|
|
|
500
|
|
|||
Operating income
|
25,423
|
|
|
25,618
|
|
|
25,142
|
|
|||
Other income (expense)
|
|
|
|
|
|
||||||
Interest income
|
73
|
|
|
—
|
|
|
1
|
|
|||
Interest expense
|
—
|
|
|
(193
|
)
|
|
(390
|
)
|
|||
Income before provision for income taxes
|
25,496
|
|
|
25,425
|
|
|
24,753
|
|
|||
Income tax expense
|
(2,863
|
)
|
|
(4,211
|
)
|
|
(5,595
|
)
|
|||
Net income
|
$
|
22,633
|
|
|
$
|
21,214
|
|
|
$
|
19,158
|
|
*
|
Revenues and cost of goods sold include net federal excise taxes of
$52,180
,
$41,489
and
$46,451
for the years ended
December 31, 2013
,
2012
and
2011
, respectively.
|
|
2013
|
|
2012
|
|
2011
|
||||||
Net income
|
$
|
22,623
|
|
|
$
|
21,214
|
|
|
$
|
19,158
|
|
|
|
|
|
|
|
||||||
Net change in pension-related amounts
|
(107
|
)
|
|
—
|
|
|
12
|
|
|||
Other comprehensive income (loss)
|
(107
|
)
|
|
—
|
|
|
12
|
|
|||
|
|
|
|
|
|
||||||
Income tax effect on pension-related amounts
|
(78
|
)
|
|
—
|
|
|
—
|
|
|||
Income tax expense on other comprehensive income
|
(78
|
)
|
|
—
|
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Other comprehensive income (loss), net of tax
|
(185
|
)
|
|
—
|
|
|
12
|
|
|||
|
|
|
|
|
|
||||||
Comprehensive income
|
$
|
22,438
|
|
|
$
|
21,214
|
|
|
$
|
19,170
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Shares
|
|
Amount
|
|
Additional Paid-In
Capital
|
|
Accumulated
Other Comprehensive
Income
|
|
Accumulated
Deficit
|
|
Total
Stockholder's Equity |
|||||||||||
Balance, January 1, 2011
|
100
|
|
*
|
$
|
—
|
|
|
$
|
358,692
|
|
|
$
|
288
|
|
|
$
|
(174,113
|
)
|
|
$
|
184,867
|
|
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,158
|
|
|
19,158
|
|
|||||
Other Comprehensive Income
|
—
|
|
|
—
|
|
|
—
|
|
|
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
|
|
|||||
Distributions
|
—
|
|
|
—
|
|
|
(21,500
|
)
|
|
—
|
|
|
—
|
|
|
(21,500
|
)
|
|||||
Balance, December 31, 2012
|
100
|
|
*
|
—
|
|
|
307,892
|
|
|
300
|
|
|
(133,741
|
)
|
|
174,451
|
|
|||||
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22,623
|
|
|
22,623
|
|
|||||
Other Comprehensive Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(185
|
)
|
|
—
|
|
|
(185
|
)
|
|||||
Distributions
|
—
|
|
|
—
|
|
|
(4,000
|
)
|
|
—
|
|
|
—
|
|
|
(4,000
|
)
|
|||||
Balance, December 31, 2013
|
100
|
|
*
|
$
|
—
|
|
|
$
|
303,892
|
|
|
$
|
115
|
|
|
$
|
(111,118
|
)
|
|
$
|
192,889
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
22,633
|
|
|
$
|
21,214
|
|
|
$
|
19,158
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
10
|
|
|
3
|
|
|
4
|
|
|||
Deferred income taxes
|
9,157
|
|
|
4,348
|
|
|
4,634
|
|
|||
Gain on sale of assets
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Trade accounts receivable, net of allowances
|
(1,240
|
)
|
|
276
|
|
|
(378
|
)
|
|||
Inventories
|
(2,361
|
)
|
|
(1,166
|
)
|
|
1,458
|
|
|||
Other assets
|
(83
|
)
|
|
(194
|
)
|
|
390
|
|
|||
Accounts payable
|
(61
|
)
|
|
80
|
|
|
8
|
|
|||
Due to (from) related parties
|
(4,297
|
)
|
|
1,058
|
|
|
687
|
|
|||
Other current liabilities
|
683
|
|
|
1,146
|
|
|
(438
|
)
|
|||
Income taxes
|
(6,485
|
)
|
|
(1,392
|
)
|
|
(79
|
)
|
|||
Employee benefits
|
(300
|
)
|
|
(1,690
|
)
|
|
286
|
|
|||
Payments due under the Master Settlement Agreement
|
3,547
|
|
|
668
|
|
|
(252
|
)
|
|||
Net cash provided by operating activities
|
21,203
|
|
|
24,351
|
|
|
25,477
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Proceeds from sales of property, plant and equipment
|
—
|
|
|
—
|
|
|
1
|
|
|||
Increase in restricted assets
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||
Increase in cash surrender value of life insurance policies
|
(218
|
)
|
|
(218
|
)
|
|
(218
|
)
|
|||
Net cash used in investing activities
|
(218
|
)
|
|
(219
|
)
|
|
(217
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|||
Loan financing agreement with ZOOM, LLC
|
(9,595
|
)
|
|
—
|
|
|
—
|
|
|||
Distributions to Vector Group Ltd.
|
(4,000
|
)
|
|
(21,500
|
)
|
|
(29,300
|
)
|
|||
Net cash used in financing activities
|
(13,595
|
)
|
|
(21,500
|
)
|
|
(29,300
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
7,390
|
|
|
2,632
|
|
|
(4,040
|
)
|
|||
Cash and cash equivalents
|
|
|
|
|
|
||||||
Beginning of period
|
3,395
|
|
|
763
|
|
|
4,803
|
|
|||
End of period
|
$
|
10,785
|
|
|
$
|
3,395
|
|
|
$
|
763
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
||||||
Cash payments during the period for
|
|
|
|
|
|
||||||
Interest
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Income taxes
|
$
|
191
|
|
|
$
|
1,254
|
|
|
$
|
270
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
1.
|
Basis of Presentation
|
2.
|
Summary of Significant Accounting Policies
|
|
December 31,
2013 |
|
December 31,
2012 |
||||||||||||
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Financial assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
10,785
|
|
|
$
|
10,785
|
|
|
$
|
3,395
|
|
|
$
|
3,395
|
|
3.
|
Medallion Acquisition and Intangible Asset
|
4.
|
Inventories
|
|
2013
|
|
2012
|
||||
Finished goods, at current cost
|
$
|
7,540
|
|
|
$
|
5,231
|
|
LIFO adjustment
|
(106
|
)
|
|
(159
|
)
|
||
|
$
|
7,434
|
|
|
$
|
5,072
|
|
5.
|
Property, Plant and Equipment
|
|
|
|
2012
|
||
Machinery and equipment
|
|
|
$
|
826
|
|
Less accumulated depreciation
|
|
|
(816
|
)
|
|
Property, plant and equipment, net
|
|
|
$
|
10
|
|
6.
|
Employee Benefits Plans
|
7.
|
Income Taxes
|
|
2013
|
|
2012
|
|
2011
|
||||||
Current
|
|
|
|
|
|
||||||
Federal
|
$
|
7,195
|
|
|
$
|
5,131
|
|
|
$
|
4,979
|
|
State
|
1,938
|
|
|
1,382
|
|
|
1,185
|
|
|||
|
$
|
9,133
|
|
|
$
|
6,513
|
|
|
$
|
6,164
|
|
Deferred
|
|
|
|
|
|
||||||
Federal
|
$
|
(5,985
|
)
|
|
$
|
(2,498
|
)
|
|
$
|
(660
|
)
|
State
|
(285
|
)
|
|
196
|
|
|
91
|
|
|||
|
$
|
(6,270
|
)
|
|
$
|
(2,302
|
)
|
|
$
|
(569
|
)
|
Total tax provision
|
$
|
2,863
|
|
|
$
|
4,211
|
|
|
$
|
5,595
|
|
|
2013
|
|
2012
|
||||||||||||
|
Deferred Tax
|
|
Deferred Tax
|
||||||||||||
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
||||||||
Sales and product allowances
|
$
|
99
|
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
—
|
|
Inventories
|
15
|
|
|
2,310
|
|
|
15
|
|
|
2,266
|
|
||||
Property, plant and equipment
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||
Compensation, benefits and related items
|
—
|
|
|
78
|
|
|
—
|
|
|
—
|
|
||||
Amortization of intangibles
|
—
|
|
|
33,951
|
|
|
—
|
|
|
31,064
|
|
||||
Settlement payments
|
4,320
|
|
|
—
|
|
|
2,881
|
|
|
—
|
|
||||
Net operating losses
|
102,819
|
|
|
—
|
|
|
111,175
|
|
|
—
|
|
||||
Valuation allowance
|
(10,668
|
)
|
|
—
|
|
|
(11,281
|
)
|
|
—
|
|
||||
Total deferred tax
|
$
|
96,585
|
|
|
$
|
36,339
|
|
|
$
|
102,821
|
|
|
$
|
33,338
|
|
|
2013
|
|
2012
|
|
2011
|
||||||
Income before income taxes
|
$
|
25,496
|
|
|
$
|
25,425
|
|
|
$
|
24,753
|
|
|
|
|
|
|
|
||||||
Federal income tax expense at statutory rate
|
$
|
8,924
|
|
|
$
|
8,899
|
|
|
$
|
8,663
|
|
State income taxes, net of federal taxes
|
1,745
|
|
|
1,026
|
|
|
1,237
|
|
|||
Other changes due to changes in state income tax rates
|
—
|
|
|
(70
|
)
|
|
713
|
|
|||
Change in estimated utilization of NOLs
|
(7,806
|
)
|
|
(5,644
|
)
|
|
(5,018
|
)
|
|||
Income tax expense
|
$
|
2,863
|
|
|
$
|
4,211
|
|
|
$
|
5,595
|
|
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.
|
|
Current Liabilities
|
|
Non-current Liabilities
|
|
||||
|
Payments due under Master Settlement Agreement
|
|
Non-current payments due under Master Settlement Agreement
|
|
||||
|
|
|
|
|
||||
Balance at January 1, 2011
|
$
|
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
|
|
|
||
Expenses
|
7,694
|
|
|
—
|
|
|
||
MSA settlements and arbitration rulings
|
74
|
|
|
(3,790
|
)
|
|
||
Change in MSA obligations capitalized as inventory
|
1,106
|
|
|
—
|
|
|
||
Payments
|
(1,537
|
)
|
|
—
|
|
|
||
Reclassification to non-current liabilities
|
107
|
|
|
(107
|
)
|
|
||
Interest on withholding
|
—
|
|
|
—
|
|
|
||
Balance at December 31, 2013
|
$
|
8,737
|
|
|
$
|
1,905
|
|
|
10.
|
Related Party Transactions
|
|
2013
|
|
2012
|
||||
Current
|
|
|
|
||||
Due (to) Liggett
|
$
|
(3,135
|
)
|
|
$
|
(2,288
|
)
|
Due (to)/from Liggett Vector Brands
|
1,215
|
|
|
(3,929
|
)
|
||
Total Current
|
(1,920
|
)
|
|
(6,217
|
)
|
||
Non-current
|
|
|
|
||||
Due from Zoom, LLC
|
9,595
|
|
|
—
|
|
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, 2013
|
|
|
|
|
|
|
|
||||||||
Allowance for:
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts
|
$
|
4
|
|
|
$
|
78
|
|
|
$
|
—
|
|
|
$
|
82
|
|
Cash discounts
|
7
|
|
|
2,652
|
|
|
2,627
|
|
|
32
|
|
||||
Deferred tax valuation allowance
|
11,281
|
|
|
—
|
|
|
613
|
|
|
10,668
|
|
||||
Sales returns
|
67
|
|
|
161
|
|
|
98
|
|
|
130
|
|
||||
Total
|
$
|
11,359
|
|
|
$
|
2,891
|
|
|
$
|
3,338
|
|
|
$
|
10,912
|
|
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
|
|
|
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
|
|
2013
|
|
2012
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
116,935
|
|
|
$
|
77,290
|
|
Certificates of deposit
|
725
|
|
|
725
|
|
||
Receivables
|
6,951
|
|
|
4,448
|
|
||
Prepaid expenses and other current assets
|
4,971
|
|
|
3,692
|
|
||
Total current assets
|
129,582
|
|
|
86,155
|
|
||
Property, equipment and leasehold improvements, net
|
16,293
|
|
|
15,796
|
|
||
Goodwill
|
38,776
|
|
|
38,776
|
|
||
Trademarks
|
21,663
|
|
|
21,663
|
|
||
Other intangible assets, net
|
431
|
|
|
645
|
|
||
Security deposits and other non current assets
|
1,022
|
|
|
1,015
|
|
||
Investments in non-consolidated businesses
|
2,362
|
|
|
2,567
|
|
||
Total assets
|
$
|
210,129
|
|
|
$
|
166,617
|
|
Liabilities and Members’ Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Current portion of notes payable and other obligations
|
$
|
201
|
|
|
$
|
466
|
|
Current portion of notes payable to related parties
|
—
|
|
|
36
|
|
||
Accounts payable and accrued expenses
|
12,411
|
|
|
9,476
|
|
||
Accrued compensation
|
7,841
|
|
|
5,894
|
|
||
Commissions payable
|
6,669
|
|
|
6,551
|
|
||
Current portion of accrued royalties
|
—
|
|
|
107
|
|
||
Total current liabilities
|
27,122
|
|
|
22,530
|
|
||
Notes payable and other obligations, less current portion
|
420
|
|
|
630
|
|
||
Deferred rent
|
8,862
|
|
|
9,319
|
|
||
Total liabilities
|
36,404
|
|
|
32,479
|
|
||
Commitments and contingencies (Note 12)
|
|
|
|
||||
Members’ equity
|
173,725
|
|
|
134,138
|
|
||
Total liabilities and members’ equity
|
$
|
210,129
|
|
|
$
|
166,617
|
|
|
January 1, 2013 to December 13, 2013
|
|
Year Ended December 31,
|
||||||||
|
|
2012
|
|
2011
|
|||||||
Revenues
|
|
|
|
|
|
||||||
Gross commission income
|
$
|
378,555
|
|
|
$
|
341,435
|
|
|
$
|
307,822
|
|
Property management fees
|
27,644
|
|
|
27,766
|
|
|
27,247
|
|
|||
Other income
|
10,256
|
|
|
8,974
|
|
|
11,240
|
|
|||
Total revenues
|
416,455
|
|
|
378,175
|
|
|
346,309
|
|
|||
Costs and expenses
|
|
|
|
|
|
||||||
Selling
|
283,530
|
|
|
260,039
|
|
|
232,907
|
|
|||
General and administration
|
90,326
|
|
|
90,242
|
|
|
86,103
|
|
|||
Total costs and expenses
|
373,856
|
|
|
350,281
|
|
|
319,010
|
|
|||
Operating income
|
42,599
|
|
|
27,894
|
|
|
27,299
|
|
|||
Other income (expense)
|
|
|
|
|
|
||||||
Equity in net income of non-consolidated businesses
|
(82
|
)
|
|
1,829
|
|
|
2,007
|
|
|||
Interest income
|
59
|
|
|
27
|
|
|
3
|
|
|||
Interest expense
|
(23
|
)
|
|
(89
|
)
|
|
(139
|
)
|
|||
Net income before taxes
|
42,553
|
|
|
29,661
|
|
|
29,170
|
|
|||
Income tax expense
|
996
|
|
|
780
|
|
|
946
|
|
|||
Net income
|
$
|
41,557
|
|
|
$
|
28,881
|
|
|
$
|
28,224
|
|
|
January 1, 2013 to December 13, 2013
|
|
Year Ended December 31,
|
||||||||
|
|
2012
|
|
2011
|
|||||||
Balance, Beginning of Year
|
$
|
134,138
|
|
|
$
|
109,736
|
|
|
$
|
96,956
|
|
Net income
|
41,557
|
|
|
28,881
|
|
|
28,224
|
|
|||
Distributions to members
|
(1,970
|
)
|
|
(4,479
|
)
|
|
(15,444
|
)
|
|||
Balance, End of Year
|
$
|
173,725
|
|
|
$
|
134,138
|
|
|
$
|
109,736
|
|
|
January 1, 2013 to December 13, 2013
|
|
Year Ended December 31,
|
||||||||
|
|
2012
|
|
2011
|
|||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
41,557
|
|
|
$
|
28,881
|
|
|
$
|
28,224
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
||||||
Depreciation and amortization
|
4,004
|
|
|
3,664
|
|
|
3,692
|
|
|||
Loss on sale and disposal of property and equipment
|
9
|
|
|
6
|
|
|
—
|
|
|||
Equity in net income of non-consolidated businesses
|
82
|
|
|
(1,829
|
)
|
|
(2,007
|
)
|
|||
Dividends received from non-consolidated businesses
|
748
|
|
|
1,450
|
|
|
2,745
|
|
|||
Deferred rent
|
(457
|
)
|
|
(7
|
)
|
|
(78
|
)
|
|||
Changes in operating assets and liabilities
|
|
|
|
|
|
||||||
Receivables
|
(2,503
|
)
|
|
(3,108
|
)
|
|
2,091
|
|
|||
Prepaid expenses and other assets
|
(1,279
|
)
|
|
(1,739
|
)
|
|
242
|
|
|||
Other assets
|
(7
|
)
|
|
(167
|
)
|
|
(50
|
)
|
|||
Accounts payable, accrued expenses and accrued compensation
|
4,882
|
|
|
1,259
|
|
|
(1,535
|
)
|
|||
Commissions payable
|
118
|
|
|
2,877
|
|
|
(1,542
|
)
|
|||
Accrued royalties
|
(107
|
)
|
|
(322
|
)
|
|
(296
|
)
|
|||
Net cash provided by operating activities
|
47,047
|
|
|
30,965
|
|
|
31,486
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Capital expenditures
|
(4,296
|
)
|
|
(4,629
|
)
|
|
(2,478
|
)
|
|||
Capital contributions in non-consolidated businesses, net
|
(625
|
)
|
|
—
|
|
|
—
|
|
|||
Other
|
—
|
|
|
(34
|
)
|
|
(66
|
)
|
|||
Net cash used in investing activities
|
(4,921
|
)
|
|
(4,663
|
)
|
|
(2,544
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Payments of notes payable and other obligations
|
(475
|
)
|
|
(610
|
)
|
|
(490
|
)
|
|||
Payments of notes payable to related parties
|
(36
|
)
|
|
(648
|
)
|
|
(590
|
)
|
|||
Distributions to members
|
(1,970
|
)
|
|
(4,479
|
)
|
|
(15,444
|
)
|
|||
Net cash used in financing activities
|
(2,481
|
)
|
|
(5,737
|
)
|
|
(16,524
|
)
|
|||
Net change in cash and cash equivalents
|
39,645
|
|
|
20,565
|
|
|
12,418
|
|
|||
Cash and cash equivalents
|
|
|
|
|
|
||||||
Beginning of year
|
77,290
|
|
|
56,725
|
|
|
44,307
|
|
|||
End of year
|
$
|
116,935
|
|
|
$
|
77,290
|
|
|
$
|
56,725
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
||||||
Interest paid
|
$
|
23
|
|
|
$
|
89
|
|
|
$
|
139
|
|
Income taxes paid
|
1,250
|
|
|
470
|
|
|
946
|
|
1.
|
Basis of Presentation
|
2.
|
Summary of Significant Accounting Policies
|
3.
|
Property and Equipment
|
|
2013
|
|
2012
|
||||
Furniture, fixtures and office equipment
|
$
|
24,471
|
|
|
$
|
22,733
|
|
Computer software
|
7,740
|
|
|
6,886
|
|
||
Leasehold improvements
|
25,264
|
|
|
24,627
|
|
||
Automobiles
|
121
|
|
|
137
|
|
||
Construction in progress
|
128
|
|
|
274
|
|
||
|
57,724
|
|
|
54,657
|
|
||
Less, accumulated depreciation and amortization
|
(41,431
|
)
|
|
(38,861
|
)
|
||
|
$
|
16,293
|
|
|
$
|
15,796
|
|
4.
|
Investments in Non-Consolidated Businesses
|
5.
|
Intangible Assets
|
|
2013
|
|
2012
|
||||
Goodwill
|
$
|
38,776
|
|
|
$
|
38,776
|
|
Trademarks
|
21,663
|
|
|
21,663
|
|
||
Deferred financing charges
|
506
|
|
|
506
|
|
||
Other intangible assets
|
3,399
|
|
|
3,399
|
|
||
|
64,344
|
|
|
64,344
|
|
||
Less: accumulated amortization on amortizable intangibles
|
(3,474
|
)
|
|
(3,260
|
)
|
||
|
$
|
60,870
|
|
|
$
|
61,084
|
|
6.
|
Notes Payable and Other Obligations
|
|
2013
|
|
2012
|
||||
Notes payable and other obligations
|
|
|
|
||||
Payment obligation — former owner
|
$
|
95
|
|
|
$
|
96
|
|
Term note payable — bank
|
—
|
|
|
234
|
|
||
Capital lease obligations
|
264
|
|
|
432
|
|
||
Notes payable issued in connection with acquisitions
|
262
|
|
|
334
|
|
||
Total notes payable and other obligations
|
621
|
|
|
1,096
|
|
||
Less, current maturities
|
(201
|
)
|
|
(466
|
)
|
||
Amount due after one year
|
$
|
420
|
|
|
$
|
630
|
|
7.
|
Notes Payable to Related Parties
|
|
2012
|
||
Franchise term notes payable — PREA
|
$
|
36
|
|
Less: Current maturities
|
(36
|
)
|
|
Amount due after one year
|
$
|
—
|
|
8.
|
Franchise Agreement and Royalty Fees
|
9.
|
Income Taxes
|
|
2012
|
|
2011
|
|
2010
|
||||||
Provision for New York City UBT
|
$
|
780
|
|
|
$
|
946
|
|
|
$
|
1,329
|
|
10.
|
Related Party Transaction
|
11.
|
Defined Contribution Plans
|
12.
|
Commitments and Contingencies
|
13.
|
Risks and Uncertainties
|