VECTOR GROUP LTD [VGR] Filings

10-Q 1 vgr-20240630.htm 10-Q vgr-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

VECTOR GROUP LTD.

(Exact name of registrant as specified in its charter)


Delaware	1-5759	65-0949535
(State or other jurisdiction of incorporation	Commission File Number	(I.R.S. Employer Identification No.)
incorporation or organization)

4400 Biscayne Boulevard

Miami, Florida 33137

305-579-8000

(Address, including zip code and telephone number, including area code,

of the principal executive offices)

Securities Registered Pursuant to 12(b) of the Act:


Title of each class:	Trading	Name of each exchange
	Symbol(s)	on which registered:
Common stock, par value $0.10 per share	VGR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☒

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes x No

At August 1, 2024, Vector Group Ltd. had 157,375,597 shares of common stock outstanding.

VECTOR GROUP LTD.

FORM 10-Q

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION

Item 1. Vector Group Ltd. Condensed Consolidated Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023			2

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023			3

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023			4

Condensed Consolidated Statements of Stockholders' Deficiency for the three and six months ended June 30, 2024 and 2023			5

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023			7

Notes to Condensed Consolidated Financial Statements			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30

Item 3. Quantitative and Qualitative Disclosures About Market Risk			46

Item 4. Controls and Procedures			47

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			48

Item 1A. Risk Factors			48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			48

Item 5. Other Information			48

Item 6. Exhibits			49

SIGNATURE			50

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	June 30, 2024		December 31, 2023
ASSETS:
Current assets:
Cash and cash equivalents	$	390,758	$	268,600
Investment securities at fair value	140,983		110,935

Accounts receivable - trade, net	29,637		26,442
Inventories	105,132		91,959
Income taxes receivable, net	583		—

Other current assets	14,094		11,665
Total current assets	681,187		509,601
Property, plant and equipment, net	43,609		43,380

Long-term investments (includes $29,435 and $29,402 at fair value)	46,789		46,760
Investments in real estate ventures	116,849		131,497

Operating lease right-of-use assets	11,377		11,017
Intangible assets	107,511		107,511
Other assets	86,699		84,329
Total assets	$	1,094,021	$	934,095
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
Current portion of notes payable and long-term debt	$	—	$	8

Current amounts due under the Master Settlement Agreement	131,200		8,812
Income taxes payable, net	—		717
Current operating lease liability	4,186		3,706
Other current liabilities	144,413		131,680
Total current liabilities	279,799		144,923
Notes payable, long-term debt and other obligations, less current portion	1,374,266		1,371,811

Non-current employee benefits	68,763		67,111
Deferred income taxes, net	53,897		57,970
Non-current operating lease liability	7,762		8,177
Amounts due under the Master Settlement Agreement	8,208		8,747

Other liabilities	14,672		17,170
Total liabilities	1,807,367		1,675,909
Commitments and contingencies (Note 6)
Stockholders' deficiency:
Preferred stock, par value $1 per share, 10,000,000 shares authorized	—		—
Common stock, par value $0.1 per share, 250,000,000 shares authorized, 157,377,564 and 155,978,020 shares issued and outstanding	15,738		15,598
Additional paid-in capital	14,508		11,384
Accumulated deficit	(730,793)		(755,883)
Accumulated other comprehensive loss	(12,799)		(12,913)

Total Vector Group Ltd. stockholders' deficiency	(713,346)		(741,814)


Total liabilities and stockholders' deficiency	$	1,094,021	$	934,095

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Revenues:
Tobacco*	$	371,914	$	365,662	$	696,481	$	699,807




Expenses:
Cost of sales:
Tobacco*	244,594		248,984		462,495		481,270




Operating, selling, administrative and general expenses	29,461		26,930		58,155		54,222
Litigation settlement and judgment expense	73		18,105		264		18,375



Operating income	97,786		71,643		175,567		145,940

Other income (expenses):
Interest expense	(26,583)		(27,124)		(54,032)		(54,598)
Loss on extinguishment of debt	—		(40)		—		(181)

Equity in (losses) earnings from investments	(641)		959		1,497		800
Equity in (losses) earnings from real estate ventures	(1,213)		2,954		(11,934)		1,061
Other, net	5,585		4,791		11,970		8,411
Income before provision for income taxes	74,934		53,183		123,068		101,433
Income tax expense	20,756		15,094		34,090		28,603
Net income	$	54,178	$	38,089	$	88,978	$	72,830

Per basic common share:

Net income applicable to common shares	$	0.34	$	0.24	$	0.56	$	0.46

Per diluted common share:

Net income applicable to common shares	$	0.34	$	0.24	$	0.56	$	0.46

* Revenues and cost of sales include federal excise taxes of $120,452, $126,750, $226,275 and $244,568 for the three and six months ended June 30, 2024 and 2023, respectively.

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Thousands)

Unaudited


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023

Net income	$	54,178	$	38,089	$	88,978	$	72,830

Net unrealized (losses) gains on investment securities available for sale:
Change in net unrealized losses	(129)		(237)		(387)		(426)
Net unrealized losses reclassified into net income	79		211		103		435
Net unrealized (losses) gains on investment securities available for sale	(50)		(26)		(284)		9



Net change in pension-related amounts:


Amortization of loss	218		244		437		490
Net change in pension-related amounts	218		244		437		490

Other comprehensive income	168		218		153		499

Income tax effect on:
Change in net unrealized losses on investment securities	32		60		97		109
Net unrealized losses reclassified into net income on investment securities	(20)		(54)		(26)		(112)



Pension-related amounts	(55)		(63)		(110)		(126)
Income tax provision on other comprehensive income	(43)		(57)		(39)		(129)

Other comprehensive income, net of tax	125		161		114		370

Comprehensive income	$	54,303	$	38,250	$	89,092	$	73,200

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

(Dollars in Thousands, Except Share Amounts)

Unaudited


	Vector Group Ltd. Stockholders' Deficiency
				Additional Paid-In				Accumulated Other Comprehensive
	Common Stock					Accumulated
	Shares	Amount		Capital		Deficit		Loss		Total
Balance as of April 1, 2024	157,419,093	$	15,742	$	11,149	$	(753,031)	$	(12,924)	$	(739,064)

Net income	—	—		—		54,178		—		54,178


Total other comprehensive income	—	—		—		—		125		125

Dividends on common stock ($0.20 per share)	—	—		—		(31,940)		—		(31,940)


Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting	(41,529)	(4)		(448)		—		—		(452)












Stock-based compensation	—	—		3,807		—		—		3,807








Balance as of June 30, 2024	157,377,564	$	15,738	$	14,508	$	(730,793)	$	(12,799)	$	(713,346)


	Vector Group Ltd. Stockholders' Deficiency
				Additional Paid-In				Accumulated Other Comprehensive
	Common Stock					Accumulated
	Shares	Amount		Capital		Deficit		Loss		Total
Balance as of April 1, 2023	155,976,547	$	15,598	$	3,897	$	(809,403)	$	(15,864)	$	(805,772)

Net income	—	—		—		38,089		—		38,089






Total other comprehensive income	—	—		—		—		161		161

Dividends on common stock ($0.20 per share)	—	—		—		(31,755)		—		(31,755)


Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting	(41,560)	(5)		(488)		—		—		(493)













Stock-based compensation	—	—		2,645		—		—		2,645






Balance as of June 30, 2023	155,934,987	$	15,593	$	6,054	$	(803,069)	$	(15,703)	$	(797,125)

The accompanying notes are an integral part of the condensed consolidated financial statements.


	Vector Group Ltd. Stockholders' Deficiency
				Additional Paid-In				Accumulated Other Comprehensive
	Common Stock					Accumulated
	Shares	Amount		Capital		Deficit		Loss		Total
Balance as of January 1, 2024	155,978,020	$	15,598	$	11,384	$	(755,883)	$	(12,913)	$	(741,814)

Net income	—	—		—		88,978		—		88,978






Total other comprehensive income	—	—		—		—		114		114

Dividends on common stock ($0.40 per share)	—	—		—		(63,888)		—		(63,888)
Restricted stock grants	1,745,000	175		(175)		—		—		—

Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting	(345,456)	(35)		(3,822)		—		—		(3,857)












Stock-based compensation	—	—		7,121		—		—		7,121








Balance as of June 30, 2024	157,377,564	$	15,738	$	14,508	$	(730,793)	$	(12,799)	$	(713,346)


	Vector Group Ltd. Stockholders' Deficiency
				Additional Paid-In				Accumulated Other Comprehensive
	Common Stock					Accumulated
	Shares	Amount		Capital		Deficit		Loss		Total
Balance as of January 1, 2023	154,840,902	$	15,484	$	5,092	$	(812,380)	$	(16,073)	$	(807,877)

Net income	—	—		—		72,830		—		72,830






Total other comprehensive income	—	—		—		—		370		370

Dividends on common stock ($0.40 per share)	—	—		—		(63,519)		—		(63,519)
Restricted stock grants	1,290,000	129		(129)		—		—		—

Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting	(238,981)	(25)		(3,127)		—		—		(3,152)
Withholding of shares as payment of payroll tax liabilities in connection with exercise of stock options	(1,012,249)	(101)		(12,532)		—		—		(12,633)









Exercise of stock options	1,055,315	106		11,999		—		—		12,105


Stock-based compensation	—	—		4,751		—		—		4,751






Balance as of June 30, 2023	155,934,987	$	15,593	$	6,054	$	(803,069)	$	(15,703)	$	(797,125)

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

Unaudited


	Six Months Ended
	June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	88,978	$	72,830
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,262		3,423
Non-cash stock-based expense	7,121		4,751

Loss on extinguishment of debt	—		181


Deferred income taxes	(4,074)		2,227




Equity in earnings from investments	(1,497)		(800)
Net gains on investment securities	(1,018)		(207)

Equity in losses (earnings) from real estate ventures	11,934		(1,061)
Distributions from real estate ventures	329		3,954

Non-cash interest expense	1,096		1,392
Non-cash lease expense	1,633		1,710







Changes in assets and liabilities:
Receivables	(3,195)		6,316
Inventories	(13,173)		(6,268)
Accounts payable and accrued liabilities	8,939		(1,028)
Amounts due under the Master Settlement Agreement	121,849		118,868
Litigation accruals	419		18,643



Other assets and liabilities, net	(7,282)		(6,713)
Net cash provided by operating activities	$	215,321	$	218,218

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)


	Six Months Ended
	June 30,
	2024		2023
Cash flows from investing activities:
Sale of investment securities	$	427	$	9,505
Maturities of investment securities	23,550		39,764
Purchase of investment securities	(53,317)		(48,726)
Proceeds from sale or liquidation of long-term investments	4,750		—



Purchase of long-term investments	(2,000)		(5,088)
Investments in real estate ventures	(5,220)		(5,281)
Distributions from investments in real estate ventures	10,029		4,109
Increase in cash surrender value of life insurance policies	(1,329)		(1,109)
Increase in restricted assets	(15)		(18)


Capital expenditures	(3,387)		(7,790)



Paydowns of investment securities	40		65


Net cash used in investing activities	(26,472)		(14,569)
Cash flows from financing activities:


Repurchase and repayments of debt	(8)		(8,412)
Borrowings under revolving credit facility	299		87,429
Repayments on revolving credit facility	(299)		(109,460)
Dividends on common stock	(63,457)		(63,200)




Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting and exercise of stock options	(3,857)		(3,680)

Net cash used in financing activities	(67,322)		(97,323)
Net increase in cash, cash equivalents and restricted cash	121,527		106,326
Cash, cash equivalents and restricted cash, beginning of period	270,106		250,374
Cash, cash equivalents and restricted cash, end of period	$	391,633	$	356,700

The accompanying notes are an integral part of the condensed consolidated financial statements.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)Basis of Presentation:

The condensed consolidated financial statements of Vector Group Ltd. (the “Company” or “Vector”) include the accounts of Liggett Group LLC (“Liggett”), Vector Tobacco LLC (“Vector Tobacco”), Liggett Vector Brands LLC (“Liggett Vector Brands”), New Valley LLC (“New Valley”) and other less significant subsidiaries. All significant intercompany balances and transactions have been eliminated.

Liggett and Vector Tobacco are engaged in the manufacture and sale of cigarettes in the United States. Liggett Vector Brands coordinates Liggett and Vector Tobacco’s sales and marketing efforts. Certain references to “Liggett” refer to the Company’s tobacco operations, including the business of Liggett and Vector Tobacco, unless otherwise specified. New Valley is engaged in the real estate business.

The unaudited, interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and, in management’s opinion, contain all adjustments, consisting only of normal recurring items, necessary for a fair statement of the results for the periods presented. Accordingly, they do not include all information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”). The consolidated results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the entire year.

(b)Distributions and Dividends on Common Stock:

The Company records distributions on its common stock as dividends in its condensed consolidated statements of stockholders’ deficiency to the extent of retained earnings and net income for the respective fiscal year. Any amounts exceeding retained earnings and net income are recorded as a reduction to additional paid-in capital to the extent paid-in-capital is available and then to accumulated deficit.

(c)Earnings Per Share (“EPS”):

Net income for purposes of determining basic and diluted EPS applicable to common shares was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net income	$	54,178	$	38,089	$	88,978	$	72,830
Income attributable to participating securities	(1,355)		(1,043)		(2,256)		(1,973)
Net income available to common stockholders	$	52,823	$	37,046	$	86,722	$	70,857

Basic and diluted EPS were calculated using the following common shares:


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2024	2023	2024	2023
Weighted-average shares for basic EPS	153,740,654	153,214,347	153,595,959	153,114,197

Incremental shares related to stock options and non-vested restricted stock	229,116	109,203	211,087	129,085
Weighted-average shares for diluted EPS	153,969,770	153,323,550	153,807,046	153,243,282

The following non-vested restricted stock was outstanding during the three and six months ended June 30, 2024 and 2023, respectively, and was not included in the computation of diluted EPS because the impact of the per share expense associated

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

with the non-vested restricted stock was greater than the average market price of the common shares during the respective periods.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023


Weighted-average shares of non-vested restricted stock	375,000		—		412,775		—
Weighted-average expense per share	$	12.90	$	—	$	12.90	$	—

(d)Other, net:

Other, net consisted of:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023

Interest and dividend income	$	6,028	$	4,916	$	11,487	$	8,851






Net (losses) gains recognized on investment securities	(178)		213		1,018		207
Net periodic benefit cost other than the service costs	(267)		(339)		(535)		(678)


Other income	2		1		—		31
Other, net	$	5,585	$	4,791	$	11,970	$	8,411

(e)Other Assets:

Other assets consisted of:


	June 30, 2024		December 31, 2023
Restricted assets	$	985	$	1,619
Prepaid pension costs	46,725		45,292
Other assets	38,989		37,418
Total other assets	$	86,699	$	84,329

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(f)Other Current Liabilities:

Other current liabilities consisted of:


	June 30, 2024		December 31, 2023
Accounts payable	$	6,148	$	6,749
Accrued promotional expenses	58,067		51,146
Accrued excise and payroll taxes payable, net	17,386		13,144
Accrued interest	30,041		30,041
Accrued salaries and benefits	7,811		10,952
Allowance for sales returns	13,614		12,675
Other current liabilities	11,346		6,973
Total other current liabilities	$	144,413	$	131,680

(g)Reconciliation of Cash, Cash Equivalents and Restricted Cash:

The components of “Cash, cash equivalents and restricted cash” in the condensed consolidated statements of cash flows were as follows:


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	390,758	$	268,600

Restricted cash and cash equivalents included in other assets	875		1,506
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	391,633	$	270,106

(h)Related Party Transactions:

Agreements with Douglas Elliman. The Company received $1,050 and $2,100 under the Transition Services Agreement for the three and six months ended June 30, 2024 and 2023, respectively, and $1,000 and $1,595 under the Aircraft Lease Agreements for the three and six months ended June 30, 2024 and $734 and $1,296 for the three and six months ended June 30, 2023, respectively.

Real estate venture investments. Douglas Elliman has been engaged by the developers as the sole broker or the co-broker for several of the real estate development projects that New Valley owns an interest in through its real estate venture investments. Douglas Elliman had gross commissions from these projects of approximately $793 and $2,017 for the three and six months ended June 30, 2024 and $0 and $842 for the three and six months ended June 30, 2023.

(i)New Accounting Pronouncements:

ASUs to be adopted in future periods:

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The ASU requires that all public entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. The ASU is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The ASU requires that all public entities improve the reportable segment disclosure primarily through enhanced disclosures about significant segment expenses. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

SEC Rule Changes:

On March 6, 2024, the SEC passed rule changes that will require registrants to provide certain climate-related information in their registration statements and annual reports. The rules require information about a registrant's climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks will also include disclosure of a registrant's greenhouse gas emissions. In addition, the rules will require registrants to present certain climate-related financial metrics in their audited financial statements. On April 4, 2024, the SEC voluntarily stayed the rules pending the resolution of certain legal challenges. The Company is currently evaluating the impact of the rule changes.

2. INVENTORIES

Inventories consisted of:


	June 30, 2024		December 31, 2023
Leaf tobacco	$	57,852	$	46,190
Other raw materials	10,463		9,372
Work-in-process	973		814

Finished goods	67,786		65,295

Inventories at current cost	137,074		121,671
LIFO adjustments:
Leaf tobacco	(21,616)		(19,941)
Other raw materials	(2,636)		(2,411)
Work-in-process	(110)		(105)
Finished goods	(7,580)		(7,255)
Total LIFO adjustments	(31,942)		(29,712)
	$	105,132	$	91,959

All inventories as of June 30, 2024 and December 31, 2023 are reported under the LIFO method.

The amount of capitalized Master Settlement Agreement (“MSA”) cost in “Finished goods” inventory was $23,731 and $22,988 as of June 30, 2024 and December 31, 2023, respectively. Federal excise tax capitalized in inventory was $25,193 and $25,151 as of June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024, Liggett had tobacco purchase commitments of approximately $31,363. Liggett has a single-source supply agreement for reduced ignition propensity cigarette paper through December 2025.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

3. INVESTMENT SECURITIES

Investment securities consisted of the following:


	June 30, 2024		December 31, 2023
Debt securities available for sale	$	102,849	$	73,225


Equity securities at fair value:
Marketable equity securities	14,103		14,286
Mutual funds invested in debt securities	24,031		23,424
Long-term investment securities at fair value (1)	29,435		29,402
Total equity securities at fair value	67,569		67,112

Total investment securities at fair value	170,418		140,337
Less:
Long-term investment securities at fair value (1)	29,435		29,402
Current investment securities at fair value	$	140,983	$	110,935

Long-term investment securities at fair value (1)	$	29,435	$	29,402
Equity-method investments	17,354		17,358
Total long-term investments	$	46,789	$	46,760

Equity securities and other long-term investments at cost (2)	$	7,555	$	7,555

_____________________________

(1) These assets are measured at net asset value (“NAV”) as a practical expedient under ASC 820.

(2) These assets are without readily determinable fair values that do not qualify for the NAV practical expedient and are included in Other assets on the condensed consolidated balance sheets.

Net (losses) gains recognized on investment securities were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net (losses) gains recognized on equity securities	$	(99)	$	424	$	1,121	$	642
Net gains (losses) recognized on debt securities available for sale	—		1		1		(179)

Impairment expense	(79)		(212)		(104)		(256)




Net (losses) gains recognized on investment securities	$	(178)	$	213	$	1,018	$	207

(a) Debt Securities Available for Sale:

The components of debt securities available for sale as of June 30, 2024 were as follows:


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value


Marketable debt securities	$	102,843	$	6	$	—	$	102,849

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

The table below summarizes the maturity dates of debt securities available for sale as of June 30, 2024.


Investment Type:	Fair Value		Under 1 Year		1 Year up to 5 Years		More than 5 Years
U.S. government securities	$	73,924	$	39,145	$	34,779	$	—
Corporate securities	6,516		6,516		—		—
U.S. mortgage-backed securities	7,068		6,970		98		—


Commercial paper	15,341		15,341		—		—



Total debt securities available for sale by maturity dates	$	102,849	$	67,972	$	34,877	$	—

The components of debt securities available for sale at December 31, 2023 were as follows:


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value


Marketable debt securities	$	72,939	$	286	$	—	$	73,225

There were no available-for-sale debt securities with continuous unrealized losses for less than 12 months and 12 months or greater as of June 30, 2024 and December 31, 2023, respectively.

Gross realized gains and losses on debt securities available for sale were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Gross realized gains on sales	$	—	$	1	$	1	$	5
Gross realized losses on sales	—		—		—		(184)
Net gains (losses) recognized on debt securities available for sale	$	—	$	1	$	1	$	(179)

Impairment expense	$	(79)	$	(212)	$	(104)	$	(256)

Although management does not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing the Company’s investment securities portfolio, management may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements.

(b) Equity Securities at Fair Value:

The following is a summary of unrealized and realized net gains recognized in net income on equity securities at fair value during the three and six months ended June 30, 2024 and 2023, respectively:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net (losses) gains recognized on equity securities	$	(99)	$	424	$	1,121	$	642
Less: Net (losses) gains recognized on equity securities sold	(22)		155		73		271
Net unrealized (losses) gains recognized on equity securities still held at the reporting date	$	(77)	$	269	$	1,048	$	371

The Company’s investments in mutual funds that invest in debt securities are classified as Level 1 under the fair value hierarchy disclosed in Note 8. Their fair values are based on quoted prices for identical assets in active markets or inputs that

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

are based upon quoted prices for similar instruments in active markets. The Company has unfunded commitments of $303 related to long-term investment securities at fair value as of June 30, 2024.

The Company received $4,750 of cash distributions for the six months ended June 30, 2024 and no cash distributions for the six months ended June 30, 2023. The Company recorded $151 of in-transit redemptions as of June 30, 2024. The Company classified all cash distributions as investing cash inflows.

Equity-method investments consisted of the following:


	June 30, 2024		December 31, 2023
Mutual fund and hedge funds	$	17,354	$	17,358

On June 30, 2024, the Company’s ownership percentages in the mutual fund and hedge funds accounted for under the equity method ranged from 8.13% to 35.89%. The Company’s ownership percentage in these investments meets the threshold for equity-method accounting.

Equity in (losses) earnings from investments were:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Mutual fund and hedge funds	$	(641)	$	959	$	1,497	$	800

(d) Equity Securities and Other Long-Term Investments Without Readily Determinable Fair Values That Do Not Qualify for the NAV Practical Expedient

Equity securities and other long-term investments without readily determinable fair values that do not qualify for the NAV practical expedient consisted of profit participation agreements and investments in various limited liability companies. The total carrying value of these investments without readily determinable fair values that do not qualify for the NAV practical expedient was $7,555 as of June 30, 2024 and December 31, 2023, and was included in “Other assets” on the condensed consolidated balance sheets. No impairment or other adjustments related to observable price changes in orderly transactions for identical or similar investments were identified for the three and six months ended June 30, 2024 and 2023, respectively.

4. NEW VALLEY LLC

Investments in real estate ventures:

The components of “Investments in real estate ventures” were as follows:


	Range of Ownership (1)	June 30, 2024		December 31, 2023
Condominium and Mixed-Use Development	4.1% - 77.8%	$	93,976	$	108,334
Apartment Buildings	1.5% - 50.0%	6,285		7,791
Hotels	0.4% - 49.0%	5		138
Commercial	1.6% - 49.0%	16,583		15,234

Investments in real estate ventures		$	116,849	$	131,497

_____________________________

(1) The Range of Ownership reflects New Valley’s estimated current ownership percentage. New Valley’s actual ownership percentage as well as the percentage of earnings and cash distributions may ultimately differ because of a number of factors including potential dilution, financing or admission of additional partners.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Contributions:

The components of New Valley’s contributions to its investments in real estate ventures were as follows:


	Six Months Ended
	June 30,
	2024		2023
Condominium and Mixed-Use Development	$	3,649	$	5,166
Apartment Buildings	249		115
Hotels	57		—
Commercial	1,265		—

Total contributions	$	5,220	$	5,281

For ventures where New Valley previously held an investment and made an additional contribution, New Valley contributed its proportionate share of additional capital along with contributions by the other investment partners during the six months ended June 30, 2024 and 2023. New Valley’s direct investment percentage in its existing ventures did not significantly change.

Distributions:

The components of distributions received by New Valley from its investments in real estate ventures were as follows:


	Six Months Ended
	June 30,
	2024		2023
Condominium and Mixed-Use Development	$	10,029	$	7,883


Commercial	329		179

Total distributions	$	10,358	$	8,062

Of the distributions received by New Valley from its investment in real estate ventures, $329 and $3,954 were from distributions of earnings for the six months ended June 30, 2024 and 2023, respectively, and $10,029 and $4,109 were a return of capital for the six months ended June 30, 2024 and 2023, respectively. Distributions from earnings are included in cash from operations in the condensed consolidated statements of cash flows, while distributions from return of capital are included in cash flows from investing activities in the condensed consolidated statements of cash flows.

Equity in (Losses) Earnings from Real Estate Ventures:

New Valley recognized equity in (losses) earnings from real estate ventures as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Condominium and Mixed-Use Development	$	(441)	$	3,516	$	(10,401)	$	4,163
Apartment Buildings	(541)		(410)		(1,756)		(1,609)
Hotels	(26)		(171)		(189)		(2,094)
Commercial	(205)		19		412		601

Equity in (losses) earnings from real estate ventures	$	(1,213)	$	2,954	$	(11,934)	$	1,061

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

The Company recorded impairment expense of $0 and $7,030 for the three and six months ended June 30, 2024, respectively. The expense related to two ventures, which were condominium and mixed-use development ventures. The Company recorded impairment expense of $0 and $1,202 for the three and six months ended June 30, 2023, which related to one hotel venture. These ventures were recorded at fair value when the impairment charges were recorded.

VIE Consideration:

The Company has determined that the entities in the real estate ventures were variable interest entities (“VIEs”) and New Valley was not the primary beneficiary. Therefore, New Valley’s investment in such real estate ventures has been accounted for under the equity method of accounting.

Maximum Exposure to Loss:

New Valley’s maximum exposure to loss from its investments in real estate ventures consisted of the net carrying value of the venture adjusted for any future capital commitments and/or guarantee arrangements. The maximum exposure to loss was as follows:


	June 30, 2024
Condominium and Mixed-Use Development	$	93,976
Apartment Buildings	6,285
Hotels	5
Commercial	16,583

Total maximum exposure to loss	$	116,849

New Valley capitalized $1,233 and $2,424 of interest costs into the carrying value of its ventures whose projects were currently under development for the three and six months ended June 30, 2024, respectively. New Valley capitalized $1,071 and $2,128 of interest costs into the carrying value of its ventures whose projects were currently under development for the three and six months ended June 30, 2023, respectively.

5. NOTES PAYABLE, LONG-TERM DEBT AND OTHER OBLIGATIONS

Notes payable, long-term debt and other obligations consisted of:


	June 30, 2024		December 31, 2023
Vector:
5.75% Senior Secured Notes due 2029	$	875,000	$	875,000