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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 September 30, 2023

☐ 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)
Delaware1-575965-0949535
(State or other jurisdiction of incorporationCommission 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:TradingName of each exchange
Symbol(s)on which registered:
Common stock, par value $0.10 per shareVGRNew 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 October 30, 2023, Vector Group Ltd. had 155,933,020 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 September 30, 2023 and December 31, 2022
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022
Condensed Consolidated Statements of Stockholders' Deficiency for the three and nine months ended September 30, 2023 and 2022
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022
Notes to Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
SIGNATURE

1
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
September 30,
2023		December 31,
2022
ASSETS:
Current assets:
Cash and cash equivalents$436,522 $224,580 
Investment securities at fair value128,704 116,436 
Accounts receivable - trade, net25,026 40,677 
Inventories89,264 92,448 
Income taxes receivable, net2,898 8,454 
Other current assets12,302 9,770 
Total current assets694,716 492,365 
Property, plant and equipment, net43,600 39,580 
Long-term investments (includes $29,843 and $28,919 at fair value)
45,743 44,959 
Investments in real estate ventures122,172 121,117 
Operating lease right-of-use assets8,020 7,742 
Intangible assets107,511 107,511 
Other assets79,259 95,317 
Total assets$1,101,021 $908,591 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
   Current portion of notes payable and long-term debt$15 $22,065 
Current amounts due under the Master Settlement Agreement205,222 14,838 
Current operating lease liability3,854 3,551 
Other current liabilities129,225 135,170 
Total current liabilities338,316 175,624 
Notes payable, long-term debt and other obligations, less current portion1,385,499 1,390,261 
Non-current employee benefits65,509 63,216 
Deferred income taxes, net53,063 51,034 
Non-current operating lease liability5,147 5,469 
Amounts due under the Master Settlement Agreement8,747 11,116 
Other liabilities18,095 19,748 
Total liabilities1,874,376 1,716,468 
Commitments and contingencies (Note 7)
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, 155,933,020 and 154,840,902 shares issued and outstanding
15,593 15,484 
Additional paid-in capital8,702 5,092 
Accumulated deficit(782,125)(812,380)
Accumulated other comprehensive loss(15,525)(16,073)
Total Vector Group Ltd. stockholders' deficiency(773,355)(807,877)
Total liabilities and stockholders' deficiency$1,101,021 $908,591 

The accompanying notes are an integral part of the condensed consolidated financial statements.
2

VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Revenues:
   Tobacco*$364,111 $377,995 $1,063,918 $1,061,355 
   Real estate— — — 15,884 
       Total revenues364,111 377,995 1,063,918 1,077,239 
Expenses:
 Cost of sales:
   Tobacco*245,680 267,023 726,950 743,749 
   Real estate— — — 7,327 
       Total cost of sales245,680 267,023 726,950 751,076 
Operating, selling, administrative and general expenses27,512 27,040 81,734 76,265 
Litigation settlement and judgment expense414 31 18,789 160 
Operating income90,505 83,901 236,445 249,738 
Other income (expenses):
Interest expense(27,256)(27,598)(81,854)(83,420)
Gain (loss) on extinguishment of debt— 412 (181)412 
Equity in losses from investments(941)(619)(141)(5,172)
Equity in earnings (losses) from real estate ventures3,739 (1,903)4,800 (4,240)
Other, net7,107 (804)15,518 (5,043)
Income before provision for income taxes73,154 53,389 174,587 152,275 
Income tax expense20,455 14,533 49,058 41,724 
Net income$52,699 $38,856 $125,529 $110,551 
Per basic common share:
Net income applicable to common shares$0.33 $0.25 $0.80 $0.70 
Per diluted common share:
Net income applicable to common shares$0.33 $0.25 $0.80 $0.70 
                                      
* Revenues and cost of sales include federal excise taxes of $122,943, $138,041, $367,511, and $392,004 for the three and nine months ended September 30, 2023 and 2022, respectively.

The accompanying notes are an integral part of the condensed consolidated financial statements.
3

VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
Unaudited
 Three Months Ended Nine Months Ended
September 30,September 30,
 2023202220232022
 
Net income$52,699 $38,856 $125,529 $110,551 
Net unrealized (losses) gains on investment securities available for sale:
Change in net unrealized losses(38)(948)(464)(2,841)
Net unrealized losses reclassified into net income32 953 467 2,783 
Net unrealized (losses) gains on investment securities available for sale(6)5 3 (58)
Net change in pension-related amounts:
Amortization of loss245 403 735 1,211 
Net change in pension-related amounts245 403 735 1,211 
Other comprehensive income239 408 738 1,153 
Income tax effect on:
Change in net unrealized losses on investment securities11 245 120 733 
Net unrealized losses reclassified into net income on investment securities(9)(246)(121)(718)
Pension-related amounts(63)(104)(189)(313)
Income tax provision on other comprehensive income(61)(105)(190)(298)
Other comprehensive income, net of tax178 303 548 855 
Comprehensive income$52,877 $39,159 $126,077 $111,406 

The accompanying notes are an integral part of the condensed consolidated financial statements.
4

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-InAccumulated
Other Comprehensive
Common StockAccumulated
SharesAmountCapitalDeficitLossTotal
Balance as of July 1, 2023155,934,987 $15,593 $6,054 $(803,069)$(15,703)$(797,125)
Net income— — — 52,699 — 52,699 
Total other comprehensive income— — — — 178 178 
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(1,967)— (25)— — (25)
Stock-based compensation— — 2,673 — — 2,673 
Balance as of September 30, 2023155,933,020 $15,593 $8,702 $(782,125)$(15,525)$(773,355)
Vector Group Ltd. Stockholders' Deficiency
Additional Paid-InAccumulated
Other Comprehensive
Common StockAccumulated
SharesAmountCapitalDeficitLossTotal
Balance as of July 1, 2022154,896,129 $15,490 $3,066 $(834,297)$(15,171)$(830,912)
Net income— — — 38,856 — 38,856 
Total other comprehensive income— — — — 303 303 
Dividends on common stock ($0.20 per share)
— — — (31,739)— (31,739)
Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting(100,227)(10)(1,101)— — (1,111)
Stock-based compensation— — 1,558 — — 1,558 
Other— — — (265)— (265)
Balance as of September 30, 2022154,795,902 $15,480 $3,523 $(827,445)$(14,868)$(823,310)

The accompanying notes are an integral part of the condensed consolidated financial statements.
5

Vector Group Ltd. Stockholders' Deficiency
Additional Paid-InAccumulated
Other Comprehensive
Common StockAccumulated
SharesAmountCapitalDeficitLossTotal
Balance as of January 1, 2023154,840,902 $15,484 $5,092 $(812,380)$(16,073)$(807,877)
Net income— — — 125,529 — 125,529 
Total other comprehensive income— — — — 548 548 
Dividends on common stock ($0.60 per share)
— — — (95,274)— (95,274)
Restricted stock grants1,290,000 129 (129)— — — 
Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting(240,948)(25)(3,152)— — (3,177)
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 options1,055,315 106 11,999 — — 12,105 
Stock-based compensation— — 7,424 — — 7,424 
Balance as of September 30, 2023155,933,020 $15,593 $8,702 $(782,125)$(15,525)$(773,355)
Vector Group Ltd. Stockholders' Deficiency
Additional Paid-InAccumulated
Other Comprehensive
Common StockAccumulated
SharesAmountCapitalDeficitLossTotal
Balance as of January 1, 2022153,959,427 $15,396 $11,172 $(852,398)$(15,723)$(841,553)
Net income— — — 110,551 — 110,551 
Total other comprehensive income— — — — 855 855 
Dividends on common stock ($0.60 per share)
— — — (95,265)— (95,265)
Restricted stock grants1,070,000 107 (107)— — — 
Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting(233,525)(23)(2,645)— — (2,668)
Stock-based compensation— — 6,275 — — 6,275 
Reallocation of distribution of Douglas Elliman— — (11,172)11,172 — — 
Other— — — (1,505)— (1,505)
Balance as of September 30, 2022154,795,902 $15,480 $3,523 $(827,445)$(14,868)$(823,310)

The accompanying notes are an integral part of the condensed consolidated financial statements.
6
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Unaudited

Nine Months Ended
September 30,
20232022
Cash flows from operating activities:
Net income$125,529 $110,551 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization5,185 5,430 
Non-cash stock-based expense7,424 6,275 
Loss (gain) on extinguishment of debt181 (412)
Deferred income taxes1,953 2,724 
Distributions from investments— 540 
Equity in losses from investments141 5,172 
Net (gains) losses on investment securities(373)10,296 
Equity in (earnings) losses from real estate ventures(4,800)4,240 
Distributions from real estate ventures4,091 2,986 
Non-cash interest expense1,814 3,333 
Non-cash lease expense2,597 2,530 
Other7 — 
Changes in assets and liabilities:
Receivables15,829 (11,519)
Inventories3,184 8,514 
Accounts payable and accrued liabilities(11,198)(21,099)
Amounts due under the Master Settlement Agreement188,016 200,266 
Litigation accruals1,260 — 
Other assets and liabilities, net131 (810)
Net cash provided by operating activities$340,971 $329,017 
7

VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
Nine Months Ended
September 30,
20232022
Cash flows from investing activities:
Sale of investment securities$9,492 $21,152 
Maturities of investment securities58,563 49,789 
Purchase of investment securities(79,099)(48,828)
Proceeds from sale or liquidation of long-term investments4,062 4,413 
Purchase of long-term investments(9,361)(4,312)
Investments in real estate ventures(6,632)(19,644)
Distributions from investments in real estate ventures9,273 3,791 
Increase in cash surrender value of life insurance policies(1,263)(1,268)
(Increase) decrease in restricted assets(18)5 
Issuance of notes receivable(500)— 
Proceeds from sale of fixed assets3 — 
Capital expenditures(9,067)(8,759)
Paydowns of investment securities91 157 
Net cash used in investing activities(24,456)(3,504)
Cash flows from financing activities:
Repurchase and repayments of debt(8,420)(12,246)
Borrowings under revolving credit facility87,497 67,451 
Repayments on revolving credit facility(109,532)(67,453)
Dividends on common stock(94,716)(96,636)
Withholding of shares as payment of payroll tax liabilities in connection with restricted stock vesting and exercise of stock options(3,705)— 
Other— (938)
Net cash used in financing activities(128,876)(109,822)
Net increase in cash, cash equivalents and restricted cash187,639 215,691 
Cash, cash equivalents and restricted cash, beginning of period250,374 194,849 
Cash, cash equivalents and restricted cash, end of period$438,013 $410,540 

The accompanying notes are an integral part of the condensed consolidated financial statements.
8
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, 2022 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 EndedNine Months Ended
September 30,September 30,
2023202220232022
Net income$52,699 $38,856 $125,529 $110,551 
Income attributable to participating securities(1,438)(1,180)(3,418)(3,405)
Net income available to common stockholders$51,261 $37,676 $122,111 $107,146 


Basic and diluted EPS were calculated using the following common shares:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Weighted-average shares for basic EPS153,276,443 152,859,378 153,168,872 152,716,470 
Incremental shares related to stock options and non-vested restricted stock119,660 50,802 127,385 156,452 
Weighted-average shares for diluted EPS153,396,103 152,910,180 153,296,257 152,872,922 

The following non-vested restricted stock was outstanding during the three and nine months ended September 30, 2023 and 2022, respectively, and was not included in the computation of diluted EPS because the impact of the per share expense
9
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

associated with the non-vested restricted stock was greater than the average market price of the common shares during the respective periods.
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
  Weighted-average shares of non-vested restricted stock22,500 — — — 
  Weighted-average expense per share$11.23 $— $— $— 

(d)Other, net:

Other, net consisted of:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Interest and dividend income$6,808 $2,406 $15,659 $3,791 
Net gains (losses) recognized on investment securities166 (3,127)373 (10,296)
Net periodic benefit cost other than the service costs(337)(236)(1,015)(709)
Other income470 153 501 2,171 
Total other, net$7,107 $(804)$15,518 $(5,043)



(e)Other Assets:

Other assets consisted of:
September 30,
2023		December 31, 2022
Restricted assets$1,604 $25,907 
Prepaid pension costs39,951 38,100 
Other assets37,704 31,310 
Total other assets$79,259 $95,317 
10
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:
September 30,
2023		December 31, 2022
Accounts payable$6,364 $6,351 
Accrued promotional expenses54,454 56,645 
Accrued excise and payroll taxes payable, net4,497 17,160 
Accrued interest31,738 30,451 
Accrued salaries and benefits8,572 9,614 
Allowance for sales returns11,468 7,526 
Other current liabilities12,132 7,423 
Total other current liabilities$129,225 $135,170 
(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:
September 30,
2023		December 31,
2022
Cash and cash equivalents
$436,522 $224,580 
Restricted cash and cash equivalents included in other assets1,491 25,794 
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows
$438,013 $250,374 
(h)Related Party Transactions:

Agreements with Douglas Elliman. The Company received $1,050 and $3,150 under the Transition Services Agreement and $452 and $1,748 under the Aircraft Lease Agreements for the three and nine months ended September 30, 2023 and $352 and $1,529 for the three and nine months ended September 30, 2022, respectively.
The Company has agreed to indemnify Douglas Elliman for certain tax matters under the Tax Disaffiliation Agreement. The Company paid Douglas Elliman $581 as of September 30, 2022 and recorded Other expense of $28 and $581 in its condensed consolidated statement of operations for the three and nine months ended September 30, 2022 related to the tax indemnification.
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 $104 and $946 for the three and nine months ended September 30, 2023 and $115 and $1,216 for the three and nine months ended September 30, 2022, respectively.
(i)New Accounting Pronouncements:    

Accounting Standards Updates (“ASUs”) adopted in 2023:
In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires that an acquirer recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.
11
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

SEC Proposed Rules
On March 21, 2022, the SEC proposed rule changes that would require registrants to provide certain climate-related information in their registration statements and annual reports. The proposed rules would 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 would also include disclosure of a registrant's greenhouse gas emissions, which have become a commonly used metric to assess a registrant's exposure to such risks. In addition, under the proposed rules, certain climate-related financial metrics would be required in a registrant's audited financial statements. The Company is currently evaluating the impact of the proposed rule changes.

2.    REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenues by segment.
Tobacco. Tobacco segment revenues are not disaggregated because all revenues are generated from the discount segment of the U.S. cigarette industry.
Real Estate. Real Estate segment revenues are disaggregated in the table below. The Real Estate segment includes the Company’s investment in New Valley, investments in real estate ventures and, prior to April 2022 when Escena was sold, included investments in real estate. After the sale of Escena, the Company has no revenues from its real estate segment.
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Real Estate Segment Revenues
 Sales on facilities located on investments in real estate$— $— $— $3,259 
 Revenues from investments in real estate— — — 12,625 
Total real estate revenues$— $— $— $15,884 

3.    INVENTORIES

Inventories consisted of:
September 30,
2023		December 31,
2022
Leaf tobacco$40,731 $39,893 
Other raw materials10,915 8,808 
Work-in-process903 798 
Finished goods64,348 64,865 
Inventories at current cost116,897 114,364 
LIFO adjustments:
Leaf tobacco(18,249)(15,213)
Other raw materials(2,520)(1,220)
Work-in-process(25)(25)
Finished goods(6,839)(5,458)
       Total LIFO adjustments(27,633)(21,916)
$89,264 $92,448 

All inventories as of September 30, 2023 and December 31, 2022 are reported under the LIFO method.

12
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

The amount of capitalized Master Settlement Agreement (“MSA”) cost in “Finished goods” inventory was $23,020 and $23,084 as of September 30, 2023 and December 31, 2022, respectively. Federal excise tax capitalized in inventory was $25,164 and $26,423 as of September 30, 2023 and December 31, 2022, respectively.

At September 30, 2023, Liggett had tobacco purchase commitments of approximately $40,210. Liggett has a single-source supply agreement for reduced ignition propensity cigarette paper through December 2025.

4.    INVESTMENT SECURITIES

Investment securities consisted of the following:
September 30,
2023		December 31, 2022
Debt securities available for sale$92,646 $81,643 
Equity securities at fair value:
Marketable equity securities13,351 12,724 
Mutual funds invested in debt securities22,707 22,069 
Long-term investment securities at fair value (1)
29,843 28,919 
          Total equity securities at fair value65,901 63,712 
Total investment securities at fair value158,547 145,355 
Less:
Long-term investment securities at fair value (1)
29,843 28,919 
Current investment securities at fair value$128,704 $116,436 
Long-term investment securities at fair value (1)
$29,843 $28,919 
Equity-method investments15,900 16,040 
Total long-term investments$45,743 $44,959 
Equity securities and other long-term investments at cost (2)
$7,755 $2,755 
(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.

13
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

Net gains (losses) recognized on investment securities were as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Net gains (losses) recognized on equity securities$198 $(2,174)$840 $(7,513)
Net gains (losses) recognized on debt securities available for sale2 — (177)6 
Impairment expense(34)(953)(290)(2,789)
Net gains (losses) recognized on investment securities$166 $(3,127)$373 $(10,296)
(a) Debt Securities Available for Sale:
The components of debt securities available for sale as of September 30, 2023 were as follows:    
CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Marketable debt securities$92,633 $13 $— $92,646 


The table below summarizes the maturity dates of debt securities available for sale as of September 30, 2023.
Investment Type:Fair ValueUnder 1 Year1 Year up to 5 YearsMore than 5 Years
U.S. government securities$28,544 $— $28,544 $— 
Corporate securities20,857 16,474 4,383 — 
U.S. mortgage-backed securities24,298 20,247 4,019 32 
Commercial paper8,979 8,979 — — 
U.S. treasury bills9,968 9,968 — — 
Total debt securities available for sale by maturity dates
$92,646 $55,668 $36,946 $32 

The components of debt securities available for sale at December 31, 2022 were as follows:
CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Marketable debt securities$81,629 $14 $— $81,643 

There were no available-for-sale debt securities with continuous unrealized losses for less than 12 months and 12 months or greater as of September 30, 2023 and December 31, 2022, respectively.

14
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

Gross realized gains and losses on debt securities available for sale were as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Gross realized gains on sales$2 $— $7 $7 
Gross realized losses on sales— — (184)(1)
Net gains (losses) recognized on debt securities available for sale$2 $— $(177)$6 
Impairment expense$(34)$(953)$(290)$(2,789)

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 and losses recognized in net income on equity securities at fair value during the three and nine months ended September 30, 2023 and 2022, respectively:

Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Net gains (losses) recognized on equity securities$198 $(2,174)$840 $(7,513)
Less: Net gains (losses) recognized on equity securities sold32 (16)303 290 
Net unrealized gains (losses) recognized on equity securities still held at the reporting date$166 $(2,158)$537 $(7,803)
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 9. Their fair values are based on quoted prices for identical assets in active markets or inputs that 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 September 30, 2023.
The Company received $4,062 and $4,953 of cash distributions for the nine months ended September 30, 2023 and 2022, respectively. The company recorded $88 of in-transit redemptions as of September 30, 2023. The Company classified all cash distributions as investing cash inflows.

(c) Equity-Method Investments:

Equity-method investments consisted of the following:
 September 30,
2023		December 31, 2022
Mutual fund and hedge funds$15,900 $16,040 

On September 30, 2023, the Company’s ownership percentages in the mutual fund and hedge funds accounted for under the equity method ranged from 7.40% to 38.67%. The Company’s ownership percentage in these investments meets the threshold for equity-method accounting.

15
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

Equity in losses from investments were:
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