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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 June 30, 20202021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
VECTOR GROUP LTD.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,, Florida33137
305-579-8000305-579-8000
(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 August 5, 2020,3, 2021, Vector Group Ltd. had 153,293,358153,959,427 shares of common stock outstanding.




VECTOR GROUP LTD.

FORM 10-Q

TABLE OF CONTENTS

Page
PART I. FINANCIAL INFORMATION
Page
PART I. FINANCIAL INFORMATION
Item 1. Vector Group Ltd. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of June 30, 20202021 and December 31, 20192020
2
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 20202021 and 20192020
3
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 20202021 and 20192020
4
Condensed Consolidated Statements of Stockholders' Deficiency for the three and six months ended June 30, 20202021 and 20192020
65
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 20202021 and 20192020
7
Notes to Condensed Consolidated Financial Statements
8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
5645
Item 3. Quantitative and Qualitative Disclosures About Market Risk
7165
Item 4. Controls and Procedures
7165
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
7366
Item 1A. Risk Factors
7366
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
7468
Item 6. Exhibits
7569
SIGNATURE
7670

1
VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited

June 30,
2021		December 31,
2020
ASSETS:
Current assets:
Cash and cash equivalents$490,390 $352,842 
Investment securities at fair value157,001 135,585 
Accounts receivable - trade, net51,463 40,711 
Inventories93,161 97,545 
Other current assets46,171 37,220 
Total current assets838,186 663,903 
Property, plant and equipment, net72,804 77,988 
Investments in real estate, net9,608 15,631 
Long-term investments (includes $35,534 and $34,218 at fair value)55,362 52,528 
Investments in real estate ventures76,192 85,400 
Operating lease right-of-use assets138,057 145,356 
Goodwill and other intangible assets, net207,497 207,577 
Other assets98,671 95,026 
Total assets$1,496,377 $1,343,409 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:
   Current portion of notes payable and long-term debt$12,558 $12,557 
 Current payments due under the Master Settlement Agreement89,488 38,767 
Income taxes payable, net13,834 5,847 
Current operating lease liability26,625 27,207 
Other current liabilities223,498 198,937 
Total current liabilities366,003 283,315 
Notes payable, long-term debt and other obligations, less current portion1,402,827 1,393,729 
Non-current employee benefits66,829 66,616 
Deferred income taxes, net36,602 32,456 
Non-current operating lease liability144,487 154,199 
Payments due under the Master Settlement Agreement13,224 17,933 
Other liabilities58,450 54,848 
Total liabilities2,088,422 2,003,096 
Commitments and contingencies (Note 9)00
Stockholders' deficiency:
Preferred stock, par value $1 per share, 10,000,000 shares authorized0 0 
Common stock, par value $0.1 per share, 250,000,000 shares authorized, 154,156,100 and 153,324,629 shares issued and outstanding15,416 15,332 
Additional paid-in capital5,048 0 
Accumulated deficit(591,911)(653,945)
Accumulated other comprehensive loss(20,598)(21,074)
Total Vector Group Ltd. stockholders' deficiency(592,045)(659,687)
Non-controlling interest0 0 
Total stockholders' deficiency(592,045)(659,687)
Total liabilities and stockholders' deficiency$1,496,377 $1,343,409 
 June 30,
2020		 December 31,
2019
ASSETS:   
Current assets:   
Cash and cash equivalents$540,363
 $371,341
Investment securities at fair value88,643
 129,641
Accounts receivable - trade, net32,760
 36,959
Inventories98,609
 98,762
Other current assets38,363
 44,911
Total current assets798,738
 681,614
Property, plant and equipment, net77,617
 82,160
Investments in real estate, net28,876
 28,317
Long-term investment securities at fair value33,232
 45,781
Investments in real estate ventures115,377
 131,556
Operating lease right-of-use assets148,662
 149,578
Goodwill and other intangible assets, net207,659
 265,993
Other assets121,586
 120,090
Total assets$1,531,747
 $1,505,089
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:   
Current liabilities:   
   Current portion of notes payable and long-term debt$8,853
 $209,269
   Current portion of fair value of derivatives embedded within convertible debt—
 4,999
 Current payments due under the Master Settlement Agreement102,125
 34,116
Income taxes payable, net36,831
 5,138
Current operating lease liability18,268
 18,294
Other current liabilities332,034
 189,317
Total current liabilities498,111
 461,133
Notes payable, long-term debt and other obligations, less current portion1,398,194
 1,397,216
Non-current employee benefits61,025
 67,853
Deferred income taxes, net12,438
 33,695
Non-current operating lease liability159,296
 156,963
Payments due under the Master Settlement Agreement18,130
 17,275
Other liabilities53,757
 55,970
Total liabilities2,200,951
 2,190,105
Commitments and contingencies (Note 9)

 

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, 153,484,477 and 148,084,900 shares issued and outstanding15,348
 14,808
Accumulated deficit(663,723) (678,464)
Accumulated other comprehensive loss(20,829) (21,808)
Total Vector Group Ltd. stockholders' deficiency(669,204) (685,464)
Non-controlling interest—
 448
Total stockholders' deficiency(669,204) (685,016)
Total liabilities and stockholders' deficiency$1,531,747
 $1,505,089

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 Ended Six Months EndedThree Months EndedSix Months Ended
June 30, June 30,June 30,June 30,
2020 2019 2020 20192021202020212020
Revenues:       Revenues:
Tobacco*$312,510
 $294,501
 $599,579
 $551,257
 Tobacco*$329,496 $312,510 $597,959 $599,579 
Real estate133,250
 243,931
 300,669
 408,099
 Real estate400,033 133,250 675,334 300,669 
Total revenues445,760
 538,432
 900,248
 959,356
 Total revenues729,529 445,760 1,273,293 900,248 
       
Expenses:       Expenses:
Cost of sales:        Cost of sales:
Tobacco*214,067
 204,461
 411,357
 381,764
 Tobacco*206,145 214,067 370,176 411,357 
Real estate90,818
 163,713
 204,151
 272,430
 Real estate294,265 90,818 493,776 204,151 
Total cost of sales304,885
 368,174
 615,508
 654,194
 Total cost of sales500,410 304,885 863,952 615,508 
       
Operating, selling, administrative and general expenses71,064
 93,359
 161,581
 185,673
Operating, selling, administrative and general expenses92,043 71,064 182,057 161,581 
Litigation settlement and judgment expense53
 655
 53
 655
Litigation settlement and judgment expense0 53 5 53 
Impairments of goodwill and intangible assets—
 —
 58,252
 —
Impairments of goodwill and other intangible assetsImpairments of goodwill and other intangible assets0 0 0 58,252 
Restructuring charges2,961
 —
 2,961
 —
Restructuring charges0 2,961 0 2,961 
Operating income66,797
 76,244
 61,893
 118,834
Operating income137,076 66,797 227,279 61,893 
       
Other income (expenses):       Other income (expenses):
Interest expense(29,358) (32,753) (64,985) (70,273)Interest expense(28,115)(29,358)(56,866)(64,985)
Loss on extinguishment of debtLoss on extinguishment of debt0 0 (21,362)0 
Change in fair value of derivatives embedded within convertible debt1,669
 3,788
 4,999
 14,137
Change in fair value of derivatives embedded within convertible debt0 1,669 0 4,999 
Equity in earnings (losses) from investments2,207
 (1,685) 52,359
 (323)
Equity in (losses) earnings from real estate ventures(12,260) 6,391
 (18,765) 3,952
Equity in earnings from investmentsEquity in earnings from investments941 2,207 1,518 52,359 
Equity in earnings (losses) from real estate venturesEquity in earnings (losses) from real estate ventures16,685 (12,260)18,274 (18,765)
Other, net7,635
 4,781
 (3,020) 12,221
Other, net5,578 7,635 8,332 (3,020)
Income before provision for income taxes36,690
 56,766
 32,481
 78,548
Income before provision for income taxes132,165 36,690 177,175 32,481 
Income tax expense10,916
 17,459
 9,938
 24,208
Income tax expense38,860 10,916 51,913 9,938 
       
Net income25,774
 39,307
 22,543
 54,340
Net income93,305 25,774 125,262 22,543 
       
Net income attributed to non-controlling interest—
 —
 —
 (80)Net income attributed to non-controlling interest0 0 0 0 
       
Net income attributed to Vector Group Ltd.$25,774
 $39,307
 $22,543
 $54,260
Net income attributed to Vector Group Ltd.$93,305 $25,774 $125,262 $22,543 
       
Per basic common share:       Per basic common share:
       
Net income applicable to common shares attributed to Vector Group Ltd.$0.17
 $0.25
 $0.14
 $0.34
Net income applicable to common shares attributed to Vector Group Ltd.$0.61 $0.17 $0.81 $0.14 
       
Per diluted common share:       Per diluted common share:
       
Net income applicable to common shares attributed to Vector Group Ltd.$0.16
 $0.25
 $0.14
 $0.33
Net income applicable to common shares attributed to Vector Group Ltd.$0.61 $0.16 $0.81 $0.14 
                                      

* Revenues and cost of sales include federal excise taxes of $118,735, $121,170, $119,943, $216,449, and $234,309 for the three and six months ended June 30, 2021 and$234,309, and $224,576,2020, 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,
 2020 2019 2020 2019
    
Net income$25,774
 $39,307
 $22,543
 $54,340
        
Net unrealized gains on investment securities available for sale:       
Change in net unrealized gains (losses)644
 346
 (20) 723
Net unrealized (gains) losses reclassified into net income(70) (4) 433
 (37)
Net unrealized gains on investment securities available for sale574
 342
 413
 686
     

  
Net change in pension-related amounts       
Amortization of loss463
 491
 927
 948
Net change in pension-related amounts463
 491
 927
 948
        
Other comprehensive income1,037
 833
 1,340
 1,634
        
Income tax effect on:       
Change in net unrealized gains (losses) on investment securities(174) (94) 6
 (198)
Net unrealized (gains) losses reclassified into net income on investment securities19
 1
 (117) 10
Pension-related amounts(125) (135) (250) (260)
Income tax provision on other comprehensive income(280) (228) (361) (448)
        
Other comprehensive income, net of tax757
 605
 979
 1,186
        
Comprehensive income26,531
 39,912
 23,522
 55,526
        
Comprehensive income attributed to non-controlling interest—
 —
 —
 (80)
Comprehensive income attributed to Vector Group Ltd.$26,531
 $39,912
 $23,522
 $55,446

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
 Non-controlling  
 Common Stock  Accumulated    
 Shares Amount Capital Deficit Loss Interest Total
Balance as of April 1, 2020148,084,900
 $14,808
 $—
 $(712,221) $(21,586) $—
 $(718,999)
Net income—
 —
 —
 25,774
 —
 —
 25,774
Total other comprehensive income—
 —
 —
 —
 757
 —
 757
Distributions and dividends on common stock ($0.20 per share)—
 —
 (54,244) 22,644
 —
 —
 (31,600)
Restricted stock grant405,000
 41
 (41) —
 —
 —
 —
Surrender of shares in connection with restricted stock vesting(5,423) (1) (61) —
 —
 —
 (62)
Issuance of common stock, net of offering costs5,000,000
 500
 52,063
 —
 —
 —
 52,563
Stock-based compensation—
 —
 2,283
 —
 —
 —
 2,283
Other—
 —
 —
 80
 —
 —
 80
Balance as of June 30, 2020153,484,477
 $15,348
 $—
 $(663,723) $(20,829) $—
 $(669,204)
 Vector Group Ltd. Stockholders' Deficiency  
   Additional Paid-In   
Accumulated
Other Comprehensive
 Non-controlling  
 Common Stock  Accumulated    
 Shares Amount Capital Deficit Loss Interest Total
Balance as of April 1, 2019140,899,065
 $14,090
 $—
 $(580,581) $(24,098) $488
 $(590,101)
Net income—
 —
 —
 39,307
 —
 —
 39,307
Total other comprehensive income—
 —
 —
 —
 605
 —
 605
Distributions and dividends on common stock ($0.38 per share)—
 —
 (2,285) (56,512) —
 —
 (58,797)
Restricted stock grant60,000
 6
 (6) —
 —
 —
 —
Surrender of shares in connection with restricted stock vesting(5,165) (1) (47) —
 —
 —
 (48)
Effect of 2019 stock dividend*7,047,695
 705
 —
 (705) —
 —
 —
Stock-based compensation—
 —
 2,338
 —
 —
 —
 2,338
Balance as of June 30, 2019148,001,595
 $14,800
 $—
 $(598,491) $(23,493) $488
 $(606,696)
*    Represents the effect of the September 27, 2019 stock dividend on the second quarter 2019 common-stock activity.
The accompanying notes are an integral part of the condensed consolidated financial statements.

3

 Vector Group Ltd. Stockholders' Deficiency   
   Additional Paid-In   
Accumulated
Other Comprehensive
 Non-controlling  
 Common Stock  Accumulated    
 Shares Amount Capital Deficit Loss Interest Total
Balance as of January 1, 2020148,084,900
 $14,808
 $—
 $(678,464) $(21,808) $448
 $(685,016)
Impact of adoption of new accounting standards—
 —
 —
 (2,263) —
 —
 (2,263)
Net income—
 —
 —
 22,543
 —
 —
 22,543
Total other comprehensive income—
 —
 —
 —
 979
 —
 979
Distributions and dividends on common stock ($0.40 per share)—
 —
 (56,502) (5,619) —
 —
 (62,121)
Restricted stock grant405,000
 41
 (41) —
 —
 —
 —
Surrender of shares in connection with restricted stock vesting(5,423) (1) (61) —
 —
 —
 (62)
Issuance of common stock, net of offering costs5,000,000
 500
 52,063
 —
 —
 —
 52,563
Stock-based compensation—
 —
 4,541
 —
 —
 —
 4,541
Distributions to non-controlling interest—
 —
 —
 —
 —
 (448) (448)
Other—
 —
 —
 80
 —
 —
 80
Balance as of June 30, 2020153,484,477
 $15,348
 $—
 $(663,723) $(20,829) $—
 $(669,204)
 Vector Group Ltd. Stockholders' Deficiency   
   Additional Paid-In   
Accumulated
Other Comprehensive
 Non-controlling  
 Common Stock  Accumulated    
 Shares Amount Capital Deficit Loss Interest Total
Balance as of January 1, 2019140,914,642
 $14,092
 $—
 $(542,169) $(19,982) $693
 $(547,366)
Impact of adoption of new accounting standards—
 —
 —
 3,147
 (4,697) —
 (1,550)
Net income—
 —
 —
 54,260
 —
 80
 54,340
Total other comprehensive income—
 —
 —
 —
 1,186
 —
 1,186
Distributions and dividends on common stock ($0.76 per share)—
 —
 (4,550) (113,024) —
 —
 (117,574)
Restricted stock grant60,000
 6
 (6) —
 —
 —
 —
Surrender of shares in connection with restricted stock vesting(20,742) (3) (218) —
 —
 —
 (221)
Effect of 2019 stock dividend*7,047,695
 705
 —
 (705) —
 —
 —
Stock-based compensation—
 —
 4,774
 —
 —
 —
 4,774
Distributions to non-controlling interest—
 —
 —
 —
 —
 (285) (285)
Balance as of June 30, 2019148,001,595
 $14,800
 $—
 $(598,491) $(23,493) $488
 $(606,696)

VECTOR GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
*    (Represents the effect of the September 27, 2019 stock dividend on the second quarter 2019 common-stock activity.Dollars in Thousands)
Unaudited
 Three Months EndedSix Months Ended
June 30,June 30,
 2021202020212020
 
Net income$93,305 $25,774 $125,262 $22,543 
Net unrealized (losses) gains on investment securities available for sale:
Change in net unrealized (losses) gains(122)644 (304)(20)
Net unrealized losses (gains) reclassified into net income34 (70)(7)433 
Net unrealized (losses) gains on investment securities available for sale(88)574 (311)413 
Net change in pension-related amounts:
Amortization of loss481 463 963 927 
Other comprehensive income393 1,037 652 1,340 
Income tax effect on:
Change in net unrealized (losses) gains on investment securities33 (174)82 6 
Net unrealized losses (gains) reclassified into net income on investment securities(9)19 2 (117)
Pension-related amounts(130)(125)(260)(250)
Income tax provision on other comprehensive income(106)(280)(176)(361)
Other comprehensive income, net of tax287 757 476 979 
Comprehensive income93,592 26,531 125,738 23,522 
Comprehensive income attributed to non-controlling interest0 0 0 0 
Comprehensive income attributed to Vector Group Ltd.$93,592 $26,531 $125,738 $23,522 

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		Non-controlling
Common StockAccumulated
SharesAmountCapitalDeficitLossInterestTotal
Balance as of April 1, 2021154,194,629 $15,419 $2,573 $(653,606)$(20,885)$0 $(656,499)
Net income— — — 93,305 — — 93,305 
Total other comprehensive income— — — — 287 — 287 
Dividends on common stock ($0.20 per share)— — — (31,610)— — (31,610)
Restricted stock grant3,500 1 (1)— — — 0 
Surrender of shares in connection with restricted stock vesting(42,029)(4)(604)— — — (608)
Stock-based compensation— — 3,080 — — — 3,080 
Balance as of June 30, 2021154,156,100 $15,416 $5,048 $(591,911)$(20,598)$0 $(592,045)
Vector Group Ltd. Stockholders' Deficiency
Additional Paid-InAccumulated
Other Comprehensive		Non-controlling
Common StockAccumulated
SharesAmountCapitalDeficitLossInterestTotal
Balance as of April 1, 2020148,084,900 $14,808 $0 $(712,221)$(21,586)$0 $(718,999)
Net income— — — 25,774 — — 25,774 
Total other comprehensive income— — — — 757 — 757 
Distributions and dividends on common stock ($0.20 per share)— — (54,244)22,644 — — (31,600)
Restricted stock grant405,000 41 (41)— — — 0 
Surrender of shares in connection with restricted stock vesting(5,423)(1)(61)— — — (62)
Issuance of common stock5,000,000 500 52,063 — — — 52,563 
Stock-based compensation— — 2,283 — — — 2,283 
Other— — — 80 — — 80 
Balance as of June 30, 2020153,484,477 $15,348 $0 $(663,723)$(20,829)$0 $(669,204)

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

Vector Group Ltd. Stockholders' Deficiency
Additional Paid-InAccumulated
Other Comprehensive		Non-controlling
Common StockAccumulated
SharesAmountCapitalDeficitLossInterestTotal
Balance as of January 1, 2021153,324,629 $15,332 $0 $(653,945)$(21,074)$0 $(659,687)
Net income— — — 125,262 — — 125,262 
Total other comprehensive income— — — — 476 — 476 
Dividends on common stock ($0.40 per share)— — — (63,228)— — (63,228)
Restricted stock grants873,500 88 (88)— — — 0 
Surrender of shares in connection with restricted stock vesting(42,029)(4)(604)— — — (608)
Stock-based compensation— — 5,740 — — — 5,740 
Balance as of June 30, 2021154,156,100 $15,416 $5,048 $(591,911)$(20,598)$0 $(592,045)
Vector Group Ltd. Stockholders' Deficiency
Additional Paid-InAccumulated
Other Comprehensive		Non-controlling
Common StockAccumulated
SharesAmountCapitalDeficitLossInterestTotal
Balance as of January 1, 2020148,084,900 $14,808 $0 $(678,464)$(21,808)$448 $(685,016)
Impact of adoption of new accounting standards— — — (2,263)— — (2,263)
Net income— — — 22,543 — — 22,543 
Total other comprehensive income— — — — 979 — 979 
Distributions and dividends on common stock ($0.40 per share)— — (56,502)(5,619)— — (62,121)
Restricted stock grant405,000 41 (41)— — — 0 
Surrender of shares in connection with restricted stock vesting(5,423)(1)(61)— — — (62)
Issuance of common stock5,000,000 500 52,063 — — — 52,563 
Stock-based compensation— — 4,541 — — — 4,541 
Distributions to non-controlling interest— — — — — (448)(448)
Other— — — 80 — — 80 
Balance as of June 30, 2020153,484,477 $15,348 $0 $(663,723)$(20,829)$0 $(669,204)

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

Six Months EndedSix Months Ended
June 30,
2021		June 30,
2020
Net cash provided by operating activities$221,300 $341,329 
Cash flows from investing activities:
Sale of investment securities23,477 19,555 
Maturities of investment securities36,461 31,574 
Purchase of investment securities(74,805)(16,867)
Proceeds from sale or liquidation of long-term investments8,009 23,407 
Purchase of long-term investments(6,963)(5,238)
Investments in real estate ventures(9,902)(3,858)
Distributions from investments in real estate ventures11,163 5,172 
Increase in cash surrender value of life insurance policies(1,348)(751)
(Increase) decrease in restricted assets(5)87 
Capital expenditures(3,055)(6,242)
Paydowns of investment securities302 415 
Investments in real estate, net0 (679)
Net cash (used in) provided by investing activities(16,666)46,575 
Cash flows from financing activities:
Proceeds from issuance of debt875,000 531 
Deferred financing costs(20,109)0 
Repayments of debt(856,316)(172,467)
Borrowings under revolver7,699 130,641 
Repayments on revolver(7,699)(165,593)
Dividends and distributions on common stock(63,738)(63,478)
Distributions to non-controlling interest0 (448)
Proceeds from issuance of common stock0 52,563 
Other(51)5 
Net cash used in financing activities(65,214)(218,246)
Net increase in cash, cash equivalents and restricted cash139,420 169,658 
Cash, cash equivalents and restricted cash, beginning of period365,677 379,476 
Cash, cash equivalents and restricted cash, end of period$505,097 $549,134 
 Six Months Ended Six Months Ended
 June 30,
2020		 June 30,
2019
Net cash provided by operating activities$341,329
 $98,102
Cash flows from investing activities:   
Sale of investment securities19,555
 12,942
Maturities of investment securities31,574
 28,610
Purchase of investment securities(16,867) (44,222)
Proceeds from sale or liquidation of long-term investments23,407
 —
Purchase of long-term investments(5,238) —
Investments in real estate ventures(3,858) (21,908)
Distributions from investments in real estate ventures5,172
 23,200
Increase in cash surrender value of life insurance policies(751) (789)
Decrease in restricted assets87
 668
Proceeds from sale of fixed assets—
 8
Capital expenditures(6,242) (6,320)
Purchase of subsidiaries—
 (668)
Pay downs of investment securities415
 545
Investments in real estate, net(679) (1,153)
Net cash provided by (used in) investing activities46,575
 (9,087)
Cash flows from financing activities:   
Proceeds from issuance of debt531
 —
Deferred financing costs—
 (33)
Repayments of debt(172,467) (230,771)
Borrowings under revolver130,641
 172,224
Repayments on revolver(165,593) (169,727)
Dividends and distributions on common stock(63,478) (118,748)
Distributions to non-controlling interest(448) (285)
Proceeds from issuance of Vector stock52,563
 —
Other5
 —
Net cash used in financing activities(218,246) (347,340)
Net increase (decrease) in cash, cash equivalents and restricted cash169,658
 (258,325)
Cash, cash equivalents and restricted cash, beginning of period379,476
 591,729
Cash, cash equivalents and restricted cash, end of period$549,134
 $333,404

The accompanying notes are an integral part of the condensed consolidated financial statements.
7
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)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 Inc. (“Vector Tobacco”), Liggett Vector Brands LLC (“Liggett Vector Brands”), New Valley LLC (“New Valley”) and other less significant subsidiaries. New Valley includes the accounts of Douglas Elliman Realty, LLC (“Douglas Elliman”) 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 of the 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, 20192020 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.
Certain reclassifications have been made to the 20192020 financial information to conform to the 20202021 presentation. Credit loss income (expense) has been reclassified from Other (expense) income as components of Other, net.

(b)
(b)Distributions and Dividends on Common Stock:

:

The Company records distributions on its common stock as dividends in its condensed consolidated statementstatements of stockholders’ deficiency to the extent of retained earnings. Any amounts exceeding retained earnings are recorded as a reduction to additional paid-in capital to the extent paid-in-capital is available and then to accumulated deficit. The Company’s stock dividends are recorded as stock splits and given retroactive effect to earnings per share for all periods presented. On November 5, 2019, the Company announced that its board of directors decided that the Company will no longer pay an annual stock dividend.

(c)
Earnings Per Share (“EPS”):

Information concerning the Company’s common stock has been adjusted to give retroactive effect to the 5% stock dividend distributed to Company stockholders on September 27, 2019. All per share amounts and references to share amounts have been updated to reflect the retrospective effect of the stock dividend.
(c)Earnings Per Share (“EPS”):

Net income for purposes of determining basic EPS was as follows:

Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Net income attributed to Vector Group Ltd.$93,305 $25,774 $125,262 $22,543 
Income attributed to participating securities(952)(707)(1,686)(1,268)
Net income applicable to common shares attributed to Vector Group Ltd.$92,353 $25,067 $123,576 $21,275 
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Net income attributed to Vector Group Ltd.$25,774
 $39,307
 $22,543
 $54,260
Income attributed to participating securities(707) (2,027) (1,268) (4,029)
Net income applicable to common shares attributed to Vector Group Ltd.$25,067
 $37,280
 $21,275
 $50,231










8
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


Net income for purposes of determining diluted EPS was as follows:

Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Net income attributed to Vector Group Ltd.$93,305 $25,774 $125,262 $22,543 
Income attributable to 5.50% Variable Interest Senior Convertible Notes0 (375)0 0 
Income attributed to participating securities(952)(707)(1,686)(1,268)
Net income applicable to common shares attributed to Vector Group Ltd.$92,353 $24,692 $123,576 $21,275 
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Net income attributed to Vector Group Ltd.$25,774
 $39,307
 $22,543
 $54,260
Income attributable to 5.5% Variable Interest Senior Convertible Notes(375) —
 —
 —
Income attributable to 7.5% Variable Interest Senior Convertible Notes—
 —
 —
 (1,246)
Income attributed to participating securities(707) (2,027) (1,268) (4,029)
Net income applicable to common shares attributed to Vector Group Ltd.$24,692
 $37,280
 $21,275
 $48,985


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

Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Weighted-average shares for basic EPS152,285,182 149,379,306 152,267,410 148,189,710 
Plus incremental shares related to convertible debt0 1,379,454 0 0 
Plus incremental shares related to stock options and non-vested restricted stock282,313 88,100 206,381 85,701 
Weighted-average shares for diluted EPS152,567,495 150,846,860 152,473,791 148,275,411 
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Weighted-average shares for basic EPS149,379,306
 146,509,025
 148,189,710
 146,490,322
Plus incremental shares related to convertible debt1,379,454
 —
 —
 1,449,753
Plus incremental shares related to stock options and non-vested restricted stock88,100
 12,082
 85,701
 14,242
Weighted-average shares for diluted EPS150,846,860
 146,521,107
 148,275,411
 147,954,317


The following non-vested restricted stock and shares issuable upon the conversion of convertible debt were outstanding during the three and six months ended June 30, 20202021 and 2019,2020, but were not included in the computation of diluted EPS because the impact of the per share expense associated with the restricted stock werewas greater than the average market price of the common shares during the respective periodsperiods. The following shares issuable upon the conversion of convertible debt were outstanding during the three and six months ended June 30, 2020, but were not included in the computation of diluted EPS because the impact of the common shares issuable under the convertible debt were anti-dilutive to EPS.

Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
  Weighted-average shares of non-vested restricted stock0 625,122 0 625,122 
  Weighted-average expense per share$0 $19.54 $0 $19.54 
  Weighted-average number of shares issuable upon conversion of debt0 0 0 4,874,072 
  Weighted-average conversion price$0 $0 $0 $20.27 
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
  Weighted-average shares of non-vested restricted stock625,122
 1,407,820
 625,122
 1,407,820
  Weighted-average expense per share$19.54
 $17.92
 $19.54
 $17.92
  Weighted-average number of shares issuable upon conversion of debt—
 11,447,061
 4,874,072
 11,447,061
  Weighted-average conversion price$—
 $20.27
 $20.27
 $20.27


9
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(d)Restructuring:
In(Dollars in Thousands, Except Per Share Amounts)
Unaudited

(d)Restructuring:

During 2020, in response to the current novel coronavirus pandemic (“COVID-19”), the Company's Real Estate segment, including Douglas Elliman, has commencedunderwent a restructuring by realigning its administrative support function and office locations as well as adjusting its business model to more efficiently serve its clients. This included a reduction of staffbrokerage personnel by approximately 25% at Douglas Elliman. For the three and six months ended June 30, 2021, there were 0 restructuring charges. As of December 31, 2020, there was 0 accrual for restructuring charges.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


The following table summarizes amounts expensed for the three and six months ended June 30, 2020:
 Three Months Ended June 30, 2020 Six Months Ended June 30, 2020
Cash Charges:   
Employee severance and benefits$1,599
 $1,599
Other restructuring expenses218
 218
 1,817
 1,817
Non-Cash:   
Loss on fixed assets associated with consolidation of sales offices1,144
 1,144
 1,144
 1,144
    
  Total restructuring charges$2,961
 $2,961
    

Three Months EndedSix Months Ended
June 30, 2020June 30, 2020
Cash Charges:
    Employee severance and benefits$1,599 $1,599 
    Other restructuring expenses218 218
1,817 1,817 
Non-Cash:
  ��  Loss on fixed assets associated with consolidation of sales offices1,144 1,144 
Total restructuring charges$2,961 $2,961 
All amounts expensed for the three and six months ended June 30, 2020 are included as Restructuring charges in the Company’s condensed consolidated statements of operations and are all attributable to the Company’s Real Estate segment.

Severance and benefits expensed for the three and six months ended June 30, 2020 relate entirely to a reduction in administrative positions.

The following table presents the activity under the Real Estate segment restructuring plan for the six months ended June 30, 2020:
  Employee Severance and Benefits Other Non-Cash Loss on Fixed Assets Total
Accrual balance as of January 1, 2020 $—
 $—
 $—
 $—
Restructuring charges 1,599
 218
 1,144
 2,961
Utilized (1,239) —
 (1,144) (2,383)
Accrual balance as of June 30, 2020 $360
 $218
 $—
 $578

Employee Severance and BenefitsOtherNon-Cash Loss on Fixed AssetsTotal
Accrual balance as of January 1, 2020$0 $0 $0 $0 
Restructuring charges1,599 218 1,144 2,961 
Utilized(1,239)0 (1,144)(2,383)
Accrual balance as of June 30, 2020$360 $218 $0 $578 

(e)Investments in Real Estate Ventures:
(e)Investments in Real Estate Ventures:

In accounting for its investments in real estate ventures, the Company identified its participation in Variable Interest Entities (“VIE”), which are defined as (a) entities in which the equity investment at risk is not sufficient to finance its activities without additional subordinated financial support; (b) as a group, the equity investors at risk lack 1) the power to direct the activities of a legal entity that most significantly impact the entity’s economic performance, 2) the obligation to absorb the expected losses of the entity, or 3) the right to receive the expected residual returns of the entity; or (c) as a group, the equity investors have voting rights that are not proportionate to their economic interests and the entity’s activities involve or are conducted on behalf of an investor with a disproportionately small voting interest.
The Company’s interest in VIEs is primarily in the form of equity ownership. The Company examines specific criteria and uses judgment when determining if the Company is the primary beneficiary of a VIE. Factors considered include risk and reward sharing, experience and financial condition of other partner(s), voting rights, involvement in day-to-day capital and
10
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

operating decisions, representation on a VIE’s executive committee, existence of unilateral kick-out rights exclusive of protective rights or voting rights and level of economic disproportionality between the Company and its other partner(s).
Accounting guidance requires the consolidation of VIEs in which the Company is the primary beneficiary. The guidance requires consolidation of VIEs that an enterprise has a controlling financial interest. A controlling financial interest will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
The Company’s maximum exposure to loss in its investments in unconsolidated VIEs is limited to its investment in the VIE,
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


any unfunded capital commitments to the VIE, and, in some cases, guarantees in connection with debt on the specific project. The Company’s maximum exposure to loss in its investment in consolidated VIEs is limited to its investment, which is the carrying value of the investment net of the non-controlling interest. Creditors of the consolidated VIEs have no recourse to the general credit of the primary beneficiary.
On a quarterly basis, the Company evaluates its investments in real estate ventures to determine if there are indicators of impairment. If so, the Company further investigates to determine if an impairment has occurred and whether such impairment is considered temporary or other than temporary. The Company believes that the assessment of temporary or other-than-temporary impairment is facts-and-circumstances driven.

(f)Other, net:

(f)
Other, Net:

Other, net consisted of:
Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Interest and dividend income$525 $968 $1,136 $3,648 
Net gains (losses) recognized on investment securities8,469 4,781 10,918 (7,459)
Net periodic benefit cost other than the service costs(243)(454)(487)(909)
Credit loss income (expense)0 1,128 0 (432)
Other (expense) income(3,173)1,212 (3,235)2,132 
Other, net$5,578 $7,635 $8,332 $(3,020)
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Interest and dividend income$968
 $3,139
 $3,648
 $6,347
Net gains (losses) recognized on investment securities4,781
 2,315
 (7,459) 7,088
Net periodic benefit cost other than the service costs(454) (575) (909) (1,116)
Other income (expense)2,340
 (98) 1,700
 (98)
Other, net$7,635
 $4,781
 $(3,020) $12,221

(g)Other Assets:

Other assets consisted of:
June 30,
2021		December 31, 2020
Restricted assets$4,170 $3,456 
Prepaid pension costs35,751 35,209 
Contract assets, net23,538 24,002 
Other assets35,212 32,359 
Total other assets$98,671 $95,026 
11
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


(g)
Other Assets:

Other assets consisted of:
 June 30,
2020		 December 31, 2019
Restricted assets$4,004
 $5,241
Prepaid pension costs32,207
 31,686
Equity-method investments14,817
 15,942
Contract assets, net25,957
 18,443
Other assets44,601
 48,778
Total other assets$121,586
 $120,090


(h)
(h)Other Current Liabilities:

Other current liabilities consisted of:
June 30,
2021		December 31, 2020
Accounts payable$10,718 $12,846 
Accrued promotional expenses49,269 45,579 
Accrued excise and payroll taxes payable, net22,973 13,849 
Accrued interest30,998 31,624 
Commissions payable38,832 25,615 
Accrued salaries and benefits25,517 27,104 
Contract liabilities7,507 7,633 
Allowance for sales returns7,414 7,356 
Other current liabilities30,270 27,331 
Total other current liabilities$223,498 $198,937 
 June 30,
2020		 December 31, 2019
Accounts payable$12,232
 $10,222
Accrued promotional expenses44,254
 35,900
Accrued excise and payroll taxes payable, net149,758
 18,653
Accrued interest31,623
 35,756
Commissions payable22,225
 18,378
Accrued salary and benefits15,407
 29,464
Contract liabilities7,830
 9,358
Allowance for sales returns8,191
 7,785
Other current liabilities40,514
 23,801
Total other current liabilities$332,034
 $189,317


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

(i)
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,
2021		December 31,
2020
Cash and cash equivalents$490,390 $352,842 
Restricted cash and cash equivalents included in other current assets11,364 10,374 
Restricted cash and cash equivalents included in other assets3,343 2,461 
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows$505,097 $365,677 
 June 30,
2020		 December 31,
2019
Cash and cash equivalents$540,363
 $371,341
Restricted cash and cash equivalents included in other current assets6,310
 4,423
Restricted cash and cash equivalents included in other assets2,461
 3,712
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows$549,134
 $379,476


Amounts included in current restricted assets and non-current restricted assets represent cash and cash equivalents required to be deposited into escrow for bonds required to appeal adverse product liability judgments, amounts required for letters of credit related to office leases, and certain deposit requirements for banking arrangements. The restrictions related to the appellate bonds will remain in place until the appeal process has been completed. The restrictions related to the letters of credit will remain in place for the duration of the respective lease. The restrictions related to the banking arrangements will remain in place for the duration of the arrangement.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


(j)New Accounting Pronouncements:

Accounting Standards Updates (“ASU”) adopted in2020 2021:
In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. The guidance requires indirect interests held through related parties under common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changesto the Disclosure Requirements for Fair Value Measurement, which is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. The ASU eliminates disclosures such as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. The ASU also adds new disclosure requirements for Level 3 measurements. ASU No. 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of ASU 2018-13 impacted financial statement disclosure and had no impact on operating results.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), sets forth a current expected credit loss model that changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. Subsequent updates were released in November 2018 (ASU No. 2018-19), November 2019 (ASU No. 2019-10 and 2019-11) and February 2020 (ASU No. 2020-02) that provided additional guidance on this Topic. This guidance is effective for fiscal years beginning after December 15, 2019.
The ASU introduces a new accounting model, the Current Expected Credit Losses model (CECL), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for notes and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaced the previous impairment models in U.S. GAAP, which generally required that a loss be incurred before it is recognized. The new standard applies to receivables arising from revenue transactions such as contract assets and accounts receivables. The adoption of this standard resulted in an increase in stockholders’ deficiency of $2,263, net of tax, attributed to commercial real estate term loans allowance for credit losses of $3,100 as of January 1, 2020.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test forGoodwill Impairment. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. Under the amendments of the ASU, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments in this update are effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. This guidance was adopted on January 1, 2020, on a prospective basis. The Company applied the new guidance to evaluate its goodwill during the first quarter of 2020. As a result, a goodwill impairment charge of $46,252 was recorded as the Company's estimated fair value of a reporting unit was less than its book value.

ASUs to be adopted in future periods:
In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General(Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”).
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


ASU 2018-14 eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. ASU 2018-14 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. The Company does not plan to early adopt. The adoption of ASU 2018-14 will impact financial statement disclosure with no impact on operating results.
In December 2019, the FASBFinancial Accounting Standards Board (the “FASB”) issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This update simplifies various aspects related to accounting for income taxes, removes certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740, and clarifies and amends existing guidance to improve consistent application. ASU No. 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluatingAdoption of this update did not have a material impact on the effect the standard will have on itsCompany’s condensed consolidated financial statements and related disclosures.statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”). The new standard clarifies the interaction of accounting for the transition into and out of the equity method. The new standard also clarifies the accounting for measuring certain purchased options and forward contracts to acquire investments. The ASU is effective for
12
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted, including early adoption in an interim period. The Company is currently evaluatingAdoption of this update did not have a material impact on the effect the standard will have on itsCompany’s condensed consolidated financial statements and related disclosures.statements.


ASUs to be adopted in future periods:
In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This ASU is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance is effective for all entities for contract modifications beginning March 12, 2020 and can be applied prospectively through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 to clarify the scope of the guidance and allow certain aspects of Topic 848 to be applied to all derivative instruments that undergo a modification of the interest rate used for discounting, margining or contract price alignment as a result of the reference reform. The Company has not yet determined the extent to which it will utilize these expedients and exceptions should a modification occur. The Company is currently evaluating thedoes not anticipate an impact of the new guidance on its condensed consolidated financial statements.

2.    REVENUE RECOGNITION

Disaggregation of Revenue
In the following table, revenue is disaggregated by major product line for the Tobacco segment:
Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Tobacco Segment Revenues:
Core Discount Brands - Eagle 20’s, Pyramid, Montego, Grand Prix, Liggett Select, and Eve
$313,264 $295,388 $566,520 $564,393 
Other Brands16,232 17,122 31,439 35,186 
Total tobacco revenues$329,496 $312,510 $597,959 $599,579 
  Three Months Ended Six Months Ended
  June 30, June 30,
  2020 2019 2020 2019
Tobacco Segment Revenues:        
Core Discount Brands - EAGLE 20’s, PYRAMID, GRAND PRIX, LIGGETT SELECT, and EVE $283,951
 $267,277
 $542,166
 $500,383
Other Brands 28,559
 27,224
 57,413
 50,874
Total tobacco revenues $312,510
 $294,501
 $599,579
 $551,257
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited



In the following table, revenue is disaggregated by major services line and primary geographical market for the Real Estate segment:
Three Months Ended June 30, 2021
New York CityNortheastSoutheastWestTotal
Real Estate Segment Revenues:
Commission and other brokerage income - existing home sales$105,852 $66,419 $121,966 $51,518 $345,755 
Commission and other brokerage income - development marketing15,919 0 14,078 281 30,278 
Property management revenue9,762 139 0 0 9,901 
Escrow and title fees1,413 392 0 4,236 6,041 
Total Douglas Elliman revenue132,946 66,950 136,044 56,035 391,975 
Other real estate revenues6,750 0 0 1,308 8,058 
  Total real estate revenues$139,696 $66,950 $136,044 $57,343 $400,033 
  Three months ended June 30, 2020
  New York City Northeast Southeast West Total
Real Estate Segment Revenues:
          
Commission and other brokerage income - existing home sales $35,861
 $35,631
 $23,232
 $20,024
 $114,748
Commission and other brokerage income - development marketing 5,173
 —
 2,747
 586
 8,506
Property management revenue 8,617
 215
 —
 —
 8,832
Title fees 474
 369
 —
 —
 843
Total Douglas Elliman revenue 50,125
 36,215
 25,979
 20,610
 132,929
Other real estate revenues —
 —
 —
 321
 321
  Total real estate revenues $50,125
 $36,215
 $25,979
 $20,931
 $133,250

13
  Three months ended June 30, 2019
  New York City Northeast Southeast West Total
Real Estate Segment Revenues:
          
Commission and other brokerage income - existing home sales $104,301
 $39,880
 $31,324
 $31,653
 $207,158
Commission and other brokerage income - development marketing 22,718
 —
 436
 22
 23,176
Property management revenue 10,048
 170
 —
 —
 10,218
Title fees 1,869
 471
 —
 60
 2,400
Total Douglas Elliman revenue 138,936
 40,521
 31,760
 31,735
 242,952
Other real estate revenues —
 —
 —
 979
 979
  Total real estate revenues $138,936
 $40,521
 $31,760
 $32,714
 $243,931
  Six Months Ended June 30, 2020
  New York City Northeast Southeast West Total
Real Estate Segment Revenues:
          
Commission and other brokerage income - existing home sales $85,970
 $70,355
 $53,410
 $45,724
 $255,459
Commission and other brokerage income - development marketing 13,624
 —
 9,469
 668
 23,761
Property management revenue 17,179
 432
 —
 —
 17,611
Title fees 1,067
 632
 —
 —
 1,699
Total Douglas Elliman revenue 117,840
 71,419
 62,879
 46,392
 298,530
Other real estate revenues —
 —
 —
 2,139
 2,139
  Total real estate revenues $117,840
 $71,419
 $62,879
 $48,531
 $300,669

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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

Three Months Ended June 30, 2020
New York CityNortheastSoutheastWestTotal
Real Estate Segment Revenues:
Commission and other brokerage income - existing home sales$35,861 $35,631 $23,232 $20,024 $114,748 
Commission and other brokerage income - development marketing5,173 0 2,747 586 8,506 
Property management revenue8,617 215 0 0 8,832 
Escrow and title fees474 369 0 0 843 
Total Douglas Elliman revenue50,125 36,215 25,979 20,610 132,929 
Other real estate revenues0 0 0 321 321 
  Total real estate revenues$50,125 $36,215 $25,979 $20,931 $133,250 
Six Months Ended June 30, 2021
New York CityNortheastSoutheastWestTotal
Real Estate Segment Revenues:
Commission and other brokerage income - existing home sales$175,987 $122,669 $197,519 $92,596 $588,771 
Commission and other brokerage income - development marketing24,363 0 21,385 614 46,362 
Property management revenue18,857 312 0 0 19,169 
Escrow and title fees1,879 809 0 7,761 10,449 
Total Douglas Elliman revenue221,086 123,790 218,904 100,971 664,751 
Other real estate revenues6,750 0 0 3,833 10,583 
  Total real estate revenues$227,836 $123,790 $218,904 $104,804 $675,334 
Six Months Ended June 30, 2020
New York CityNortheastSoutheastWestTotal
Real Estate Segment Revenues:
Commission and other brokerage income - existing home sales$85,970 $70,355 $53,410 $45,724 $255,459 
Commission and other brokerage income - development marketing13,624 0 9,469 668 23,761 
Property management revenue17,179 432 0 0 17,611 
Escrow and title fees1,067 632 0 0 1,699 
Total Douglas Elliman revenue117,840 71,419 62,879 46,392 298,530 
Other real estate revenues0 0 0 2,139 2,139 
  Total real estate revenues$117,840 $71,419 $62,879 $48,531 $300,669 

  Six Months Ended June 30, 2019
  New York City Northeast Southeast West Total
Real Estate Segment Revenues:
          
Commission and other brokerage income - existing home sales $169,980
 $70,991
 $54,295
 $50,182
 $345,448
Commission and other brokerage income - development marketing 34,104
 —
 3,066
 29
 37,199
Property management revenue 18,215
 354
 —
 —
 18,569
Title fees 2,663
 910
 60
 —
 3,633
Total Douglas Elliman revenue 224,962
 72,255
 57,421
 50,211
 404,849
Other real estate revenues —
 —
 —
 3,250
 3,250
  Total real estate revenues $224,962
 $72,255
 $57,421
 $53,461
 $408,099
14
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

Contract Balances
The following table provides information about contractscontract assets and contract liabilities from development marketing and commercial leasing contracts with customers:
June 30, 2021December 31, 2020
Receivables, which are included in accounts receivable - trade, net$2,703 $1,520 
Contract assets, net, which are included in other current assets6,563 6,529 
Payables, which are included in other current liabilities2,072 1,113 
Contract liabilities, which are included in other current liabilities7,507 7,633 
Contract assets, net, which are included in other assets23,538 24,002 
Contract liabilities, which are included in other liabilities34,302 32,104 
 June 30, 2020 December 31, 2019
Receivables, which are included in accounts receivable - trade, net$1,532
 $2,129
Contract assets, net, which are included in other current assets5,296
 8,766
Payables, which are included in other current liabilities1,084
 1,663
Contract liabilities, which are included in other current liabilities7,830
 9,358
Contract assets, net, which are included in other assets25,957
 18,443
Contract liabilities, which are included in other liabilities32,125
 29,045


The Company recognized revenue of $1,717 and $2,649 for the three and six months ended June 30, 2021, that were included in the contract liabilities balances at December 31, 2020. The Company recognized revenue of $3,921 and $6,658 for the three and six months ended June 30, 2020, that were included in the contract liabilities balances at December 31, 2019. There was 0 revenue recognized relating to performance obligations satisfied or partially satisfied in prior periods for the three and six months ended June 30, 2020 and 2019, respectively.

3.
3.CURRENT EXPECTED CREDIT LOSSES

On January 1, 2020, the Company adopted ASU No. 2016-13, which sets forth a current expected credit loss model that changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.
ASU 2016-13 introduces a new accounting model, the Current Expected Credit Losses model (CECL), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The Company adopted this guidance using the modified retrospective approach, as required, and has not adjusted prior period comparative information and will continue to disclose the prior period financial information in accordance with the previous guidance. The adoption of this standard resulted in an increase in stockholders’ deficiency of $2,263 net of tax, attributed to commercial real estate term loans allowance for credit losses of $3,100 as of January 1, 2020.
Tobacco receivables: Average collection terms for Tobacco sales range between three and twelve days from the time that the cigarettes are shipped to the customer. Based on Tobacco historical and ongoing cash collections from customers, an estimated credit loss in accordance with ASU 2016-13 was not requiredrecorded for these trade receivables as of January 1, 2020June 30, 2021 and June 30,December 31, 2020.
Real estate broker agent receivables: Douglas Elliman Realty is exposed to credit losses for various amounts due from real estate agents, which are included in Other current assets on the condensed consolidated balance sheets, net of an allowance for credit losses. The Company historically estimatedestimates its allowance for credit losses on receivables from agents based on an evaluation of aging, agent sales in pipeline, any security, specific exposures, and historical experience of collections from the individual
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


agents. Based on the Company’s historical credit losses on receivables from agents, and current and expected future market trends (such as the current and expected impact of COVID-19 on the real estate market), it was determined that the requirements of Topic 326 did not result in a material impact on the Company’s allowance for credit losses as of January 1, 2020 of $6,132.. The Company estimated that the credit losses for these receivables were $7,361$7,128 and $7,038 at June 30, 2020.2021 and December 31, 2020, respectively.
Term loan receivables: New Valley periodically provides term loans to commercial real estate developers, which are included in Other assets on the condensed consolidated balance sheets. New Valley had 2 loans with a total amortized cost basis of $15,534 and $15,276,$15,928, including accrued interest receivable of $6,034 and $5,776$6,428 at both June 30, 20202021 and December 31, 2019, respectively,2020, and have maturities in 2021 and beyond. The loans are secured by guarantees and given their risk profiles are evaluated individually. As New Valley does not have internal historical loss information by which to evaluate the risk of credit losses, external market data measuring default risks on high yield loans as of each measurement date was utilized to estimate reserves for credit losses on these loans. Pursuant to the requirements of Topic 326,ASU 2016-13, New Valley’s expected credit loss estimate was $3,100 as of January 1, 2020 and $3,532 as of$15,928 at both June 30, 2020, which reflects the significant current2021 and expected declineDecember 31, 2020.

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

(Dollars in market conditions as of June 30, 2020 due to the impact of COVID-19 on the real estate market.Thousands, Except Per Share Amounts)
Unaudited

The adoption of this standard did not have a material impact on the debt securities available for sale portfolio.
The following is the rollforward of the allowance for credit losses for the six months ended June 30, 2020:2021:
January 1,
2021		Current Period ProvisionWrite-offsRecoveriesJune 30,
2021
Allowance for credit losses:
Real estate broker agent receivables$7,038 $289 (1)$199 $0 $7,128 
New Valley term loan receivables15,928 0 0 0 15,928 
 January 1,
2020		 Current Period Provision Write-offs Recoveries June 30,
2020
Allowance for credit losses:         
          
Real estate broker agent receivables$6,132
 $1,270
(1)$41
 $—
 7,361
          
New Valley term loan receivables3,100
 432
(2)—
 —
 3,532
___________________________________________________
(1) The bad debt expense related to the real estate broker agent receivables is included in Operating, selling, administrative and general expenses on the condensed consolidated statements of operations.

The following is the rollforward of the allowance for credit losses for the six months ended June 30, 2020:
January 1,
2020		Current Period ProvisionWrite-offsRecoveriesJune 30,
2020
Allowance for credit losses:
Real estate broker agent receivables$6,132 $1,270 (1)$41 $0 $7,361 
New Valley term loan receivables3,100 432 (2)0 0 3,532 
_____________________________
(1) The bad debt expense related to the real estate broker agent receivables is included in Operating, selling, administrative and general expenses on the condensed consolidated statements of operations.
(2) The credit losses related to the New Valley term loan receivables are included in Other, net on the condensed consolidated statements of operations.

4.LEASES
4.LEASES

Leases
The Company has operating and finance leases for corporate and sales offices, and certain vehicles and equipment. The components of lease expense were as follows:
Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Operating lease cost$9,292 $9,356 $18,593 $18,780 
Short-term lease cost261 389 552 790 
Variable lease cost1,029 588 2,037 1,155 
Finance lease cost:
Amortization14 39 30 77 
Interest on lease liabilities2 4 5 7 
Total lease cost$10,598 $10,376 $21,217 $20,809 

16
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Operating lease cost$9,356
 $9,630
 $18,780
 $18,505
Short-term lease cost389
 279
 790
 513
Variable lease cost588
 898
 1,155
 1,690
        
Finance lease cost:       
Amortization39
 63
 77
 119
Interest on lease liabilities4
 4
 7
 7
Total lease cost$10,376
 $10,874
 $20,809
 $20,834

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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


Supplemental cash flow information related to leases was as follows:
Six Months Ended
June 30,
20212020
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases$21,879 $11,953 
Operating cash flows from finance leases5 7 
Financing cash flows from finance leases28 69 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases3,432 9,076 
Finance leases0 60 
 Six Months Ended
 June 30,
 2020 2019
Cash paid for amounts included in measurement of lease liabilities:   
Operating cash flows from operating leases$11,953
 $18,440
Operating cash flows from finance leases7
 7
Financing cash flows from finance leases69
 113
    
Right-of-use assets obtained in exchange for lease obligations:   
Operating leases9,076
 13,061
Finance leases60
 123


Supplemental balance sheet information related to leases was as follows:

June 30,December 31,
20212020
Operating leases:
Operating lease right-of-use assets$138,057 $145,356 
Current operating lease liability$26,625 $27,207 
Non-current operating lease liability144,487 154,199 
Total operating lease liabilities$171,112 $181,406 
Finance leases:
Investments in real estate, net (1)
$45 $62 
Property, plant and equipment, at cost$127 $127 
Accumulated amortization(57)(44)
Property and equipment, net$70 $83 
Current portion of notes payable and long-term debt$57 $57 
Notes payable, long-term debt and other obligations, less current portion67 96 
Total finance lease liabilities$124 $153 
Weighted average remaining lease term:
Operating leases7.627.87
Finance leases2.272.71
Weighted average discount rate:
Operating leases9.24 %9.26 %
Finance leases7.98 %7.82 %
(1)     Included in Investments in real estate, net on the condensed consolidated balance sheets are financing lease equipment, at cost of $748 and $748 and accumulated amortization of $703 and $686 as of June 30, 2021 and December 31, 2020, respectively.

17
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


Supplemental balance sheet information related to leases was as follows:
 June 30, December 31,
 2020 2019
Operating leases:   
Operating lease right-of-use assets$148,662
 $149,578
    
Current operating lease liability$18,268
 $18,294
Non-current operating lease liability159,296
 156,963
Total operating lease liabilities$177,564
 $175,257
    
Finance leases:   
Investments in real estate, net (1)
$84
 $88
    
Property, plant and equipment, at cost$127
 $127
Accumulated amortization(32) (19)
Property and equipment, net$95
 $108
    
Current portion of notes payable and long-term debt$61
 $86
Notes payable, long-term debt and other obligations, less current portion124
 108
Total finance lease liabilities$185
 $194
    
Weighted average remaining lease term:   
Operating leases8.35
 8.46
Finance leases3.10
 3.01
    
Weighted average discount rate:   
Operating leases9.48% 10.75%
Finance leases7.68% 8.61%
(1)
Included in Investments in real estate, net on the condensed consolidated balance sheets are financing lease equipment, at cost of $822 and $762 and accumulated amortization of $738 and $674 as of June 30, 2020 and December 31, 2019, respectively.

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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


As of June 30, 2020,2021, maturities of lease liabilities were as follows:
 Operating Leases 
Finance
 Leases
Period Ending December 31: 
  
Remainder of 2020$15,374
 $39
202138,992
 66
202234,772
 61
202331,516
 35
202425,902
 8
202520,980
 —
Thereafter96,668
 —
Total lease payments264,204
 209
 Less imputed interest(86,640) (24)
Total$177,564
 $185


Operating LeasesFinance
 Leases
Period Ending December 31:  
Remainder of 2021$21,960 $33 
202238,780 60 
202334,007 35 
202428,054 8 
202522,895 0 
202619,114 0 
Thereafter78,236 0 
Total lease payments243,046 136 
 Less imputed interest(71,934)(12)
Total$171,112 $124 
As of June 30, 2020,2021, the Company had $870$2,181 in undiscounted lease payments relating to an additional operating leaseslease for office space and equipment that havehas not yet commenced. The operating leaseslease will commence in the third and fourth quartersecond half of 20202021 with a lease terms ranging from 1.5 years to 5term of 3 years.
Due to the business disruptions and challenges severely affecting the global economy caused by the COVID-19 pandemic, lessors may provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in Topic 842 addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance does not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of some lessees arising from the COVID-19 pandemic and restrictions intended to prevent its spread.
In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided asAs a result of the COVID-19 pandemic. Under existing lease guidance,pandemic, the Company would havereceived lease concessions from landlords in 2020 mostly in the form of rent deferrals and a few in the form of rent abatements. The Company elected to determine, on atreat these deferrals and abatements as lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rightsmodifications and obligations within the existing lease agreement (precluded from applyingliabilities were remeasured with a corresponding adjustment to the leaseright-of-use asset on the effective date of the modification accounting framework).in 2020. The Lease Modification Q&A allows the Company, if certain criteria have been met,deferrals varied as to bypass the lease by lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances.
The Company entered into rent deferral concession agreements during the three months ended June 30, 2020, with approximately half of its existing landlords. The agreements varied on the timing of repayment but all agreements required repayment of the deferrals over the remaining lease terms. The Company elected to treat these deferrals agreements as lease modifications and the existing lease liabilities were remeasured with a corresponding adjustment to the ROU asset on the effective date of the modification.
The Lease Modification Q&A’s future impact to the Company’s condensed consolidated financial statements is dependent upon the extent of any lease concessions granted to the Company or its subsidiaries as a result of the COVID-19 pandemic in future periods and the elections made by the Company at the time of entering into such concessions.

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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


5.
INVENTORIES

Inventories consisted of:
June 30,
2021		December 31,
2020
Leaf tobacco$41,693 $42,988 
Other raw materials5,292 5,987 
Work-in-process674 520 
Finished goods66,233 68,781 
Inventories at current cost113,892 118,276 
LIFO adjustments(20,731)(20,731)
$93,161 $97,545 
 June 30,
2020		 December 31,
2019
Leaf tobacco$48,482
 $44,516
Other raw materials4,564
 4,669
Work-in-process532
 333
Finished goods66,970
 71,183
Inventories at current cost120,548
 120,701
LIFO adjustments(21,939) (21,939)
 $98,609
 $98,762


All of the Company’s inventories at June 30, 20202021 and December 31, 20192020 are reported under the LIFO method. The $21,939$20,731 LIFO adjustment as of June 30, 2020 decreases the current cost of inventories by $15,210 for Leaf tobacco, $183 for Other raw materials, $24 for Work-in-process and $6,522 for Finished goods. The $21,939 LIFO adjustment as of December 31, 20192021 decreased the current cost of inventories by $15,210$14,139 for Leaf tobacco, $182$474 for Other raw materials, $24$26 for Work-in-process and $6,523$6,092 for Finished goods. The $20,731 LIFO adjustment as of December 31, 2020 decreased the current cost of inventories by $14,139 for Leaf tobacco, $474 for Other raw materials, $26 for Work-in-process and $6,092 for Finished goods.
The amount of capitalized MSA cost in “Finished goods” inventory was $20,801$21,416 and $20,472$21,120 at June 30, 20202021 and December 31, 2019,2020, respectively. Federal excise tax capitalized in inventory was $27,663$24,695 and $27,676$27,683 at June 30, 20202021 and December 31, 2019,2020, respectively.
At June 30, 2020,2021, Liggett had tobacco purchase commitments of approximately $18,799.$18,772. Liggett has a single sourcesingle-source supply agreement for reduced ignition propensity cigarette paper through 2022.

18
6
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

6.    INVESTMENT SECURITIES

.
INVESTMENT SECURITIES

Investment securities consisted of the following:
 June 30,
2020		 December 31, 2019
Debt securities available for sale$54,885
 $83,445
    
Equity securities at fair value:   
Marketable equity securities11,091
 23,819
Mutual funds invested in debt securities22,667
 22,377
Long-term investment securities at fair value (1)
33,232
 45,781
          Total equity securities at fair value66,990
 91,977
    
Total investment securities at fair value121,875
 175,422
Less:   
Long-term investment securities at fair value33,232
 45,781
Current investment securities at fair value88,643
 129,641
    
Equity-method investments$14,817
 $15,942

June 30,
2021		December 31, 2020
Debt securities available for sale$108,489 $91,204 
Property technology (“PropTech”) convertible trading debt securities2,481 0 
Equity securities at fair value:
Marketable equity securities25,187 21,155 
Mutual funds invested in debt securities23,325 23,226 
Long-term investment securities at fair value (1)
33,053 34,218 
          Total equity securities at fair value81,565 78,599 
Total investment securities at fair value192,535 169,803 
Less:
Long-term investment securities at fair value (1)
33,053 34,218 
PropTech convertible trading debt securities2,481 0 
Current investment securities at fair value157,001 135,585 
Long-term investment securities at fair value (1)
33,053 34,218 
Equity-method investments19,828 18,310 
PropTech convertible trading debt securities2,481 0 
Total long-term investments$55,362 $52,528 
(1) These assets are measured at net asset value (“NAV”) as a practical expedient under ASC 820.

19
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 Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Net gains (losses) recognized on equity securities$4,711
 $2,311
 $(7,026) $7,051
Net gains (losses) recognized on debt securities available for sale70
 6
 (47) 42
Impairment expense—
 (2) (386) (5)
Net gains (losses) recognized on investment securities$4,781
 $2,315
 $(7,459) $7,088

Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Net gains (losses) recognized on equity securities$8,522 $4,711 $10,930 $(7,026)
Net gains (losses) recognized on debt securities available for sale10 70 65 (47)
Impairment expense(44)0 (58)(386)
Net losses recognized on PropTech convertible trading debt securities(19)0 (19)0 
Net gains (losses) recognized on investment securities$8,469 $4,781 $10,918 $(7,459)
(a) Debt Securities Available for SaleSale:
The components of debt securities available for sale at June 30, 20202021 were as follows:

CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Marketable debt securities$108,217 $272 $0 $108,489 
 Cost 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Marketable debt securities$53,741
 $1,144
 $—
 $54,885



The table below summarizes the maturity dates of debt securities available for sale at June 30, 2020.2021.

Investment Type:Fair ValueUnder 1 Year1 Year up to 5 YearsMore than 5 Years
U.S. Government securities$12,512 $10,195 $2,317 $0 
Corporate securities49,843 31,457 18,386 0 
U.S. mortgage-backed securities15,467 200 15,267 0 
Commercial paper29,443 29,443 0 0 
Foreign fixed-income securities1,224 0 1,224 0 
Total debt securities available for sale by maturity dates$108,489 $71,295 $37,194 $0 
Investment Type:Fair Value Under 1 Year 1 Year up to 5 Years More than 5 Years
U.S. Government securities$12,754
 $8,761
 $3,993
 $—
Corporate securities37,145
 22,570
 14,575
 —
U.S. mortgage-backed securities4,984
 3,134
 1,850
 —
Commercial mortgage-backed securities2
 2
 —
 —
Total debt securities available for sale by maturity dates$54,885
 $34,467
 $20,418
 $—


The components of debt securities available for sale at December 31, 20192020 were as follows:

CostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Marketable debt securities$90,621 $583 $0 $91,204 
 Cost 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Marketable debt securities$82,714
 $731
 $—
 $83,445


There were no available-for-sale debt securities with continuous unrealized losses for less than 12 months and 12 months or greater at June 30, 20202021 and December 31, 2019,2020, respectively.

20
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 EndedSix Months Ended
June 30,June 30,
2021202020212020
Gross realized gains on sales$11 $72 $67 $170 
Gross realized losses on sales(1)(2)(2)(217)
Net gains (losses) recognized on debt securities available for sale$10 $70 $65 $(47)
Impairment expense$(44)$0 $(58)$(386)
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Gross realized gains on sales$72
 $9
 $170
 $47
Gross realized losses on sales(2) (3) (217) (5)
Net gains (losses) recognized on debt securities available for sale$70
 $6
 $(47) $42
        
Impairment expense$—
 $(2) $(386) $(5)
 
 
 
 


Although management generally 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) PropTech Convertible Trading Debt Securities:

New Valley, through its subsidiary New Valley Ventures LLC, is actively seeking to capitalize on its real estate knowledge and experience by investing in PropTech ventures that will both supplement and enhance the technology-based experience of Douglas Elliman’s agents and the general real estate industry as well as improve the operating efficiency of New Valley. During the first quarter 2021, New Valley Ventures invested $2,500 into convertible notes of 4 PropTech ventures. The securities are classified as trading debt securities and are accounted for at fair value. The maturities of the notes are between April 2022 and March 2023.

(c) Equity Securities at Fair ValueValue:

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 six months ended June 30, 20202021 and 2019,2020, respectively:

Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Net gains (losses) recognized on equity securities$8,522 $4,711 $10,930 $(7,026)
Less: Net gains (losses) recognized on equity securities sold4,054 601 4,223 (17)
Net unrealized gains (losses) recognized on equity securities still held at the reporting date$4,468 $4,110 $6,707 $(7,009)
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Net gains (losses) recognized on equity securities$4,711
 $2,311
 $(7,026) $7,051
Less: Net gains (losses) recognized on equity securities sold601
 278
 (17) 410
Net unrealized gains (losses) recognized on equity securities still held at the reporting date$4,110
 $2,033
 $(7,009) $6,641
        

The Company’s marketable equity securities and mutual funds invested in debt securities are classified as Level 1 under the fair value hierarchy disclosed in Note 12. 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 $1,939 related to long-term investment securities at fair value as of June 30, 2021.

The Company received cash distributions of $23,510$8,009 and recorded $2,148 of in-transit redemptions as of June 30, 2020$23,510 related to its long-term investment securities at fair value.value for the six months ended June 30, 2021 and 2020, respectively. The Company classified $8,009 and $23,407 of these distributions as investing cash inflows for the six months ended June 30, 2020. The remaining distributions were classified as operating cash inflows.

(c) Equity-Method Investments:
Equity-method investments consisted of the following:2021 and 2020, respectively.
 June 30,
2020		 December 31, 2019
Mutual fund and hedge funds$14,817
 $15,509
Ladenburg Thalmann Financial Services Inc. (“LTS”)—
 433
 $14,817
 $15,942
21


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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

(d) Equity-Method Investments:

Equity-method investments consisted of the following:
 June 30,
2021		December 31, 2020
Mutual fund and hedge funds$19,828 $18,310 

At June 30, 2020,2021, the Company’s ownership percentages in the mutual fund and hedge funds accounted for under the equity method ranged from 7.10%6.63% to 35.75%37.09%. The Company’s ownership percentage in these investments meets the threshold for equity-method accounting.
In November 2019, LTS entered into an Agreement and Plan of Merger with Advisor Group whereby each LTS common share would be converted into the right to receive $3.50 per common share. On February 14, 2020, the merger was completed and the Company received proceeds of $53,169 in exchange for the Company’s 15,191,205 common shares of LTS.Ladenburg Thalmann Financial Services Inc. (“LTS”). The Company also tendered 240,000 shares of LTS 8% Series A Cumulative Redeemable Preferred Stock (Liquidation Preference $25.00 Per Share) for redemption and received an additional $6,009 in March 2020. At the closing of the transaction, the Company’s Executive Vice President and Chief Operating Officer resigned as Chairman, President and Chief Executive Officer of LTS, and the Company’s management agreement with LTS was terminated.
Equity in earnings (losses) from investments were:
Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Mutual fund and hedge funds$941 $2,207 $1,518 $(693)
LTS0 0 0 53,052 
Equity in earnings from investments$941 $2,207 $1,518 $52,359 
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Mutual fund and hedge funds$2,207
 $(230) $(693) $612
LTS—
 (1,480) 53,052
 (985)
Other—
 25
 —
 50
Equity in earnings (losses) from investments$2,207
 $(1,685) $52,359
 $(323)


The Company received cash distributions of $53,484 (including the $53,169 received by the Company in exchange for the Company’s 15,191,205 common shares of LTS) and $855 from the Company’s equity-method investments for the six months ended June 30, 2020 and 2019, respectively.2020. The Company classified itsthese cash distributions of $53,484 and $855 as operating activities on the condensed consolidated statements of cash flows for the six months ended June 30, 2020 and June 30, 2019, respectively.2020.

(d)(e) Equity Securities Without Readily Determinable Fair Values That Do Not Qualify for the NAV Practical Expedient

Equity securities without readily determinable fair values that do not qualify for the NAV practical expedient consisted of investments in the common stock of a reinsurance company and membership units of a commercial real estatevarious limited liability companycompanies at June 30, 20202021 and December 31, 2019,2020, respectively. Membership units of a real estate limited liability company were also included in the balance as of December 31, 2019. The total carrying value of these investments was $5,200$6,225 as of June 30, 20202021 and $6,200$5,200 as of December 31, 2019,2020, and was included in “Other assets” on the condensed consolidated balance sheets. NaN 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, 20202021 and 2019,2020, respectively.



22
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


7. 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, 2021December 31, 2020
Condominium and Mixed Use Development:
            New York City Standard Metropolitan Statistical Area (“SMSA”)4.2% - 46.7%$25,233 $30,465 
            All other U.S. areas19.6% - 77.8%36,253 37,773 
61,486 68,238 
Hotels:
            New York City SMSA0.4% - 17.8%2,114 2,629 
            International49.0%1,324 1,852 
3,438 4,481 
Commercial:
            New York City SMSA49.0%0 2,591 
            All other U.S. areas1.6%7,139 7,084 
7,139 9,675 
Other:15.0% - 50.0%4,129 3,006 
Investments in real estate ventures$76,192 $85,400 
 
Range of Ownership (1)
 June 30, 2020 December 31, 2019
Condominium and Mixed Use Development:     
            New York City Standard Metropolitan Statistical Area (“SMSA”)3.1% - 49.5% $42,851
 $51,078
            All other U.S. areas15.0% - 77.8% 47,172
 55,842
   90,023
 106,920
Hotels:     
            New York City SMSA1.0% - 18.4% 3,107
 2,462
            International49.0% 1,610
 2,161
   4,717
 4,623
Commercial:     
            New York City SMSA49.0% 2,076
 1,852
            All other U.S. areas1.6% 7,567
 7,634
   9,643
 9,486
      
Other:15.0% - 49.0% 10,994
 10,527
Investments in real estate ventures  $115,377
 $131,556
___________________________________________________
(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 as a result of a number of factors including potential dilution, financing or admission of additional partners.

Contributions:

The components of New Valley’s contributions to its investments in real estate ventures were as follows:
Six Months Ended
June 30,
20212020
Condominium and Mixed Use Development:
            New York City SMSA$396 $1,169 
            All other U.S. areas6,661 2,161 
7,057 3,330 
Apartment Buildings:
            All other U.S. areas0 76 
0 76 
Hotels:
            New York City SMSA1,246 0 
1,246 0 
Other:1,599 452 
Total contributions$9,902 $3,858 
 Six Months Ended
 June 30,
 2020 2019
Condominium and Mixed Use Development:   
            New York City SMSA$1,169
 $21,537
            All other U.S. areas2,161
 —
 3,330
 21,537
Apartment Buildings:   
       ��    All other U.S. areas76
 —
 76
 —
    
Hotels:   
            New York City SMSA—
 172
 —
 172
    
Other:452
 199
Total contributions$3,858
 $21,908


For ventures where New Valley previously held an investment, New Valley contributed its proportionate share of additional capital along with contributions by the other investment partners during the six months ended June 30, 20202021 and June 30, 2019.2020. New Valley’s direct investment percentage for these ventures did not significantly change. 
23
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited



Distributions:

The components of distributions received by New Valley from its investments in real estate ventures were as follows:
Six Months Ended
June 30,
20212020
Condominium and Mixed Use Development:
            New York City SMSA$3,338 $1,735 
            All other U.S. areas13,594 5,214 
16,932 6,949 
Apartment Buildings:
            All other U.S. areas17,567 0 
17,567 0 
Commercial:
            New York City SMSA0 3 
            All other U.S. areas219 52 
219 55 
Other75 23 
Total distributions$34,793 $7,027 
 Six Months Ended
 June 30,
 2020 2019
Condominium and Mixed Use Development:   
            New York City SMSA$1,735
 $571
            All other U.S. areas5,214
 1,279
 6,949
 1,850
Apartment Buildings:   
            All other U.S. areas—
 3
 —
 3
Hotels:   
            New York City SMSA—
 21,572
 —
 21,572
Commercial:   
            New York City SMSA3
 9
            All other U.S. areas52
 129
 55
 138
    
Other23
 1,697
Total distributions$7,027
 $25,260


Of the distributions received by New Valley from its investment in real estate ventures, $1,855$23,630 and $2,060$1,855 were from distributions of earnings for the six months ended June 30, 20202021 and 2019,2020, respectively, and $5,172$11,163 and $23,200$5,172 were a return of capital for the six months ended June 30, 20202021 and 2019,2020, respectively. Distributions from earnings are included in cash from operations in the condensed consolidatingconsolidated statements of cash flows, while distributions that are returns of capital are included in cash flows from investing activities in the condensed consolidatingconsolidated statements of cash flows.


24
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited



Equity in (Losses) Earnings (losses) from Real Estate Ventures:

New Valley recognized equity in earnings (losses) earnings from real estate ventures as follows:
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Condominium and Mixed Use Development:       
            New York City SMSA$(5,104) $(1,120) $(8,451) $(3,226)
            All other U.S. areas (1)
(6,489) (2,258) (9,288) (2,366)
 (11,593) (3,378) (17,739) (5,592)
Apartment Buildings:       
            All other U.S. areas(76) 3
 (76) 3
 (76) 3
 (76) 3
Hotels:       
            New York City SMSA (1)
(542) 8,942
 (649) 8,234
            International(90) 122
 (551) (364)
 (632) 9,064
 (1,200) 7,870
Commercial:       
            New York City SMSA301
 384
 227
 263
            All other U.S. areas(264) 79
 (15) 371
 37
 463
 212
 634
        
Other:4
 239
 38
 1,037
Equity in (losses) earnings from real estate ventures$(12,260) $6,391
 $(18,765) $3,952

Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Condominium and Mixed Use Development:
            New York City SMSA$(967)$(5,104)$(2,472)$(8,451)
            All other U.S. areas7,315 (6,489)7,274 (9,288)
6,348 (11,593)4,802 (17,739)
Apartment Buildings:
            All other U.S. areas12,959 (76)17,567 (76)
12,959 (76)17,567 (76)
Hotels:
            New York City SMSA (1)
(386)(542)(848)(649)
            International(23)(90)(529)(551)
(409)(632)(1,377)(1,200)
Commercial:
            New York City SMSA(2,713)301 (2,591)227 
            All other U.S. areas180 (264)273 (15)
(2,533)37 (2,318)212 
Other:320 4 (400)38 
Equity in earnings (losses) from real estate ventures$16,685 $(12,260)$18,274 $(18,765)
___________________________________________________
(1) The Company recognized a liability, classified in Other current liabilities, of $2,498$333 as a result of recording equity in losses in excess of the joint ventures'venture’s carrying value.

DuringAs part of the Company’s ongoing assessment of the carrying values of its investments in real estate ventures, the Company determined that the fair value of one of its New York City SMSA Commercial ventures was less than its carrying value as of June 30, 2021. The Company determined that the impairment was other than temporary. The Company recorded an impairment charge as a component of equity in losses from real estate ventures of $2,713 for the three and six months ended June 30, 2019, New Valley’s Park Lane joint venture sold 80.0% of its interest in the Park Lane Hotel, a hotel located in the New York City SMSA. New Valley recognized equity in earnings of $10,328 from the sale and received distributions of $20,788 for the six months ended June 30, 2019. The sale reduced New Valley’s direct ownership percentage of the Park Lane Hotel from 5.2% to 1.0%. New Valley continues to account for its investment in the joint venture under the equity method of accounting because its ownership percentage in its direct investment continues to meet the threshold for equity method accounting.2021.

As part of the Company’s ongoing assessment of the carrying values of its investments in real estate ventures, the Company determined that the fair value of a New York City SMSA Condominium and Mixed Use Development venture was less than its carrying value as of June 30, 2020. The Company determined that the impairment was other than temporary. The Company recorded an impairment charge as a component of equity in losses from real estate ventures of $3,784 for the three and six months ended June 30, 2020.

As partVIE Consideration:

The Company has determined that New Valley is the primary beneficiary of 1 real estate venture because it controls the activities that most significantly impact the economic performance of the Company’s ongoing assessmentreal estate venture. Consequently, New Valley consolidates this variable interest entity (“VIE”).

The carrying amount of the carrying valuesconsolidated assets of its investments in real estate ventures, the Company determined thatVIE was $0 at both June 30, 2021 and December 31, 2020. Those assets are owned by the fair value of three New York City SMSA and one All other U.S. areas Condominium and Mixed Use Development ventures were less than their carrying valueVIE, not the Company. The consolidated VIE had no recourse liabilities as of June 30, 2019.2021 and December 31, 2020. A VIE’s assets can only be used to settle the obligations of that VIE. The Company determined thatVIE is not a guarantor of the impairment wasCompany’s senior notes and other than temporary. The Company recorded an impairment charge as a component of equity in earnings from real estate ventures of $3,866 for the three and six months ended June 30, 2019.debts payable.

25
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


VIE Consideration:

The Company has determined that New Valley is the primary beneficiary of 2 real estate ventures because it controls the activities that most significantly impact economic performance of each of the 2 real estate ventures. Consequently, New Valley consolidates these variable interest entities (“VIEs”).

The carrying amount of the consolidated assets of the VIEs was $0 and $897 as of June 30, 2020 and December 31, 2019, respectively. Those assets are owned by the VIEs, not the Company. Neither of the 2 consolidated VIEs had recourse liabilities as of June 30, 2020 and December 31, 2019. A VIE’s assets can only be used to settle obligations of that VIE. The VIEs are not guarantors of the Company’s senior notes and other debts payable.

For the remaining investments in real estate ventures, New Valley determined that the entities were VIEs but 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, 2021
Condominium and Mixed Use Development:
            New York City SMSA$25,233 
            All other U.S. areas36,253 
61,486 
Hotels:
            New York City SMSA2,114 
            International1,324 
3,438 
Commercial:
            All other U.S. areas7,139 
7,139 
Other4,129 
Total maximum exposure to loss$76,192 
 June 30, 2020
Condominium and Mixed Use Development: 
            New York City SMSA$42,851
            All other U.S. areas47,172
 90,023
Hotels: 
            New York City SMSA3,107
            International1,610
 4,717
Commercial: 
            New York City SMSA2,076
            All other U.S. areas7,567
 9,643
  
Other:24,641
Total maximum exposure to loss$129,024


New Valley capitalized $592 and $1,022 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, 2021, respectively. New Valley capitalized $1,004 and $2,257 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, 2020. New Valley capitalized $1,688 and $3,003 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, 2019.2020, respectively.
Douglas Elliman ishas been engaged by certainthe developers as athe sole broker or the co-broker for several of the real estate venturesdevelopment projects that New Valley invests in.owns an interest in through its real estate venture investments. Douglas Elliman earnedhad gross commissions of approximately $7,698$6,585 and $11,223$7,698 from these projects for the six months ended June 30, 20202021 and 2019,2020, respectively.

Combined Financial Statements for Unconsolidated Subsidiaries:Subsidiaries Accounted for under the Equity Method:
The
Pursuant to Rule 4-08(g), the following summarized financial data for certain unconsolidated subsidiaries that meet certain thresholds pursuant to SEC Regulation S-X Rule 210.10-01(b) includes information for the Westfollowing: Other Condominium and Mixed Use Development (West Hollywood Edition investment. New Valley has elected a one-month lag reporting period for the investment.Edition).

Other Condominium and Mixed Use Development:
Three Months Ended
June 30,		Six Months Ended
June 30,
2021202020212020
Income Statements
Revenue$4,991 $1,830 $15,278 $33,409 
Cost of goods sold0 0 0 22,100 
Other expenses16,997 14,013 42,340 31,926 
Loss from continuing operations$(12,006)$(12,183)$(27,062)$(20,617)
26
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited



Condominium and Mixed Use Development:
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Income Statement       
Revenue$1,830
 $—
 $33,409
 $—
Cost of goods sold—
 —
 22,100
 —
Other expenses14,013
 6
 31,926
 75
Loss from continuing operations$(12,183) $(6) $(20,617) $(75)

Investments in Real Estate, net:

The components of “Investments in real estate, net” were as follows:
June 30,
2021		December 31,
2020
Escena, net$9,608 $9,735 
Townhome A (11 Beach Street)0 5,896 
            Investments in real estate, net$9,608 $15,631 
 June 30,
2020		 December 31,
2019
Escena, net$9,852
 $9,972
Sagaponack19,024
 18,345
            Investments in real estate, net$28,876
 $28,317

Escena.  The assets of “Escena, net” were as follows:
 June 30,
2020		 December 31,
2019
Land and land improvements$8,911
 $8,910
Building and building improvements1,926
 1,926
Other1,673
 1,659
 12,510
 12,495
Less accumulated depreciation(2,658) (2,523)
 $9,852
 $9,972

June 30,
2021		December 31,
2020
Land and land improvements$8,911 $8,911 
Building and building improvements1,926 1,926 
Other1,655 1,672 
 12,492 12,509 
Less accumulated depreciation(2,884)(2,774)
 $9,608 $9,735 

New Valley recorded operating losses of $629$90 and $354$629 for the three months ended June 30, 20202021 and 2019,2020, respectively, from Escena. New Valley recorded operating income of $280 and operating losses of $272 and operating income of $332 for the six months ended June 30, 20202021 and 2019,2020, respectively, from Escena. Escena is a master planned community, golf course, and club house in Palm Springs, California.


Investment in Sagaponack.Townhome A (11 Beach Street). In April 2015,November 2020, New Valley invested $12,502 inreceived, as part of a residentialliquidating distribution from a real estate projectjoint venture, Unit TH-A, a townhouse located in Sagaponack,Manhattan, NY. In April 2021, New Valley sold the unit for $6,750 and recognized the revenue in accordance with the scope of ASC Topic 606 since New Valley has no continuing investment or involvement. The project is wholly-ownedsale was presented as revenue and the balancescost of the project are included ininvestment as cost of sales on the condensed consolidated financial statements of the Company. As of June 30, 2020 and December 31, 2019, the assets of Sagaponack consisted of land and land improvements of $19,024 and $18,345, respectively.operations.


27
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

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

8.
NOTES PAYABLE, LONG-TERM DEBT AND OTHER OBLIGATIONS

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

 June 30,
2020		 December 31,
2019
Vector:   
6.125% Senior Secured Notes due 2025$850,000
 $850,000
10.5% Senior Notes due 2026, net of unamortized discount of $3,221 and $3,392551,779
 551,608
5.5% Variable Interest Senior Convertible Debentures due 2020, net of unamortized discount of $0 and $5,276*—
 164,334
Liggett:   
Revolving credit facility—
 34,952
Equipment loans143
 347
Other28,033
 30,146
Notes payable, long-term debt and other obligations1,429,955
 1,631,387
Less:   
Debt issuance costs(22,908) (24,902)
Total notes payable, long-term debt and other obligations1,407,047
 1,606,485
Less:   
Current maturities(8,853) (209,269)
Amount due after one year$1,398,194
 $1,397,216
______________________
June 30,
2021		December 31,
2020
Vector:
5.75% Senior Secured Notes due 2029$875,000 $0 
6.125% Senior Secured Notes due 20250 850,000 
10.5% Senior Notes due 2026, net of unamortized discount of $2,849 and $3,040552,151 551,960 
Liggett:
Equipment loans77 89 
Other18,797 25,484 
Notes payable, long-term debt and other obligations1,446,025 1,427,533 
Less:
Debt issuance costs(30,640)(21,247)
Total notes payable, long-term debt and other obligations1,415,385 1,406,286 
Less:
Current maturities(12,558)(12,557)
Amount due after one year$1,402,827 $1,393,729 
*
5.75% Senior Secured Notes due 2029 — Vector The fair value:
On January 28, 2021, the Company completed the sale of $875,000 in aggregate principal amount of its 5.75% Senior Secured Notes due 2029 (“5.75% Senior Secured Notes”) to qualified institutional buyers and non-U.S. persons in a private offering pursuant to the exemptions from the registration requirements of the derivatives embedded withinSecurities Act contained in Rule 144A and Regulation S under the 5.5% Variable InterestSecurities Act. The aggregate net cash proceeds from the sale of the 5.75% Senior Convertible Debentures ($4,999Secured Notes were approximately $855,500 after deducting the initial purchaser’s discount and estimated expenses and fees payable by the Company in connection with the offering. The Company used the net cash proceeds from the 5.75% Senior Secured Notes offering, together with cash on hand, to redeem all of the Company’s outstanding 6.125% Senior Secured Notes due 2025, including accrued interest and premium thereon, and to pay fees and expenses in connection with the offering of the 5.75% Senior Secured Notes and the redemption of the 6.125% Secured Notes due 2025.
The 5.75% Senior Secured Notes pay interest on a semi-annual basis at December 31, 2019),a rate of 5.75% per year and mature on the earlier of February 1, 2029 and the date that is separately classified as91 days before November 1, 2026, the final stated maturity date of the 10.5% Senior Notes due 2026 (“10.5% Senior Notes”) if such 10.5% Senior Notes have not been repurchased and cancelled or refinanced by such date.
The 5.75% Senior Secured Notes are fully and unconditionally guaranteed, subject to certain customary automatic release provisions, on a derivative liabilityjoint and several basis by all of the wholly-owned domestic subsidiaries of the Company that are engaged in the condensed consolidated balance sheets.conduct of the Company’s cigarette businesses, which subsidiaries, as of the issuance date of the 5.75% Senior Secured Notes were also guarantors under the Company’s outstanding 10.5% Senior Notes. The 5.75% Senior Secured Notes are not guaranteed by New Valley LLC, or any of the Company’s subsidiaries engaged in the Company’s real estate business conducted through its subsidiary, New Valley LLC. The guarantees provided by certain of the guarantors are secured by first priority or second priority security interests in certain collateral of such guarantors pursuant to security and pledge agreements, subject to certain permitted liens and exceptions as further described in the indenture and the security documents relating thereto. The Company does not provide any security for the 5.75% Senior Secured Notes.
As of June 30, 2021, the Company was in compliance with all debt covenants.
28
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

6.125%Senior Secured Notes due 2025 — Vector:
As of June 30, 2020,On February 1, 2021, the Company was in compliance with all debt covenants related to its 6.125% Senior Secured Notes due 2025.2025 were redeemed in full and the Company recorded a loss on the extinguishment of debt of $21,362 for the six months ended June 30, 2021, including $13,014 of premium and $8,348 of other costs and non-cash interest expense related to the recognition of previously unamortized deferred finance costs.
10.5%Senior Notes due 2026 — Vector:
As of June 30, 2020,2021, the Company was in compliance with all debt covenants related to its 10.5% Senior Notes due 2026.
5.5%Variable Interest Senior Convertible Debentures due 2020 — Vector:
In April 2020, the Company paid $169,610 of principal as full payment of its 5.5% Variable Interest Senior Convertible Debentures due 2020, which matured on April 15, 2020.
Revolving Credit Agreement — Liggett:
As of June 30, 2020, there was 0 outstanding balance due under theOn March 22, 2021, Liggett, 100 Maple LLC (“Maple”) and Vector Tobacco entered into Amendment No. 4 and Joinder to Third Amended and Restated Credit Agreement (the “Credit Agreement”), all with Wells Fargo Bank, National Association, as agent and lender.
The existing credit agreement was amended to, among other things, (i) add Vector Tobacco as a borrower under the Credit Agreement, (ii) extend the maturity of which was classified as current debt asthe Credit Agreement to March 22, 2026, and (iii) increase the amount of the maximum credit line thereunder from $60,000 to $90,000.
As of June 30, 2020.2021, there was 0 outstanding balance due under the Credit Agreement. Availability, as determined under the Credit Agreement, was approximately $60,000$84,600 based on eligible collateral at June 30, 2020.2021. As of June 30, 2020, the Company’s applicable subsidiaries2021, Liggett, Maple, and Vector Tobacco were in compliance with all debt covenants under the Credit Agreement.
Other:
Other Notes Payablenotes payable consist primarily of $27,500$18,750 of notes payable issued by New Valley. On December 31, 2018, New Valley acquiredas part of the acquisition of the remaining 29.41% interest in Douglas Elliman for a total purchase price of $40,000, which included $10,000 of cash paid and the remaining $30,000 of notes payable to the sellers.in December 2018. Interest on the outstanding principal balance of the notes accruedaccrues at the then-current mid-term applicable federal rate (“AFR”) in effect as of December 31, 2018 until January 1, 2020 and thereafter is adjusted to the then-current AFR on each payment date.rate. Principal and interest is payable in installments through October 1, 2022. $2,500
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


$11,250 of principal has been repaid through June 30, 20202021 and the remaining principal is due to be repaid as follows: (1) $2,500 in the remainder of 2020; (2) $12,500$6,250 in 2021; and (3)(2) $12,500 in 2022.
Non-Cash Interest Expense — Vector:
Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Amortization of debt discount, net$97 $847 $191 $5,447 
Amortization of debt issuance costs942 889 1,835 2,047 
Loss on extinguishment of 6.125% Senior Secured Notes0 0 8,349 0 
$1,039 $1,736 $10,375 $7,494 
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Amortization of debt discount, net$847
 $5,447
 $5,447
 $13,972
Amortization of debt issuance costs889
 1,053
 2,047
 2,238

$1,736
 $6,500
 $7,494
 $16,210


Fair Value of Notes Payable and Long-Term Debt:

June 30, 2021December 31, 2020
CarryingFairCarryingFair
ValueValueValueValue
Senior Notes$1,427,151 $1,482,980 $1,401,960 $1,464,208 
Liggett and other18,874 18,880 25,573 25,581 
Notes payable and long-term debt$1,446,025 $1,501,860 $1,427,533 $1,489,789 
 June 30, 2020 December 31, 2019
 Carrying Fair Carrying Fair
 Value Value Value Value
Senior Notes$1,401,779
 $1,380,787
 $1,401,608
 $1,409,920
Variable Interest Senior Convertible Debt—
 —
 164,334
 176,289
Liggett and other28,176
 28,188
 65,445
 65,456
Notes payable and long-term debt$1,429,955
 $1,408,975
 $1,631,387
(1)$1,651,665

______________________
(1) The carrying value does not include the carrying value of the embedded derivative. See Note 12.

Notes payable and long-term debt are carried on the condensed consolidated balance sheets at amortized cost. The fair value determinations disclosed above are classified as Level 2 under the fair value hierarchy disclosed in Note 12 if such liabilities were recorded on the condensed consolidated balance sheetsheets at fair value. The estimated fair value of the Company’s notes payable and long-term debt has been determined by the Company using available market information and appropriate
29
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

valuation methodologies including the evaluation of the Company’s credit risk as described in the Company’s Form 10-K.risk. The Company used a derived price based upon quoted market prices and trade activity as of June 30, 20202021 to determine the fair value of its publicly-traded notes and debentures. The carrying value of the revolving credit facility is equal to fair value. The fair value of the equipment loans and other obligations was determined by calculating the present value of the required future cash flows. However, considerable judgment is required to develop the estimates of fair value and, accordingly, the estimate presented herein is not necessarily indicative of the amount that could be realized in a current market exchange.



30
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

9.    CONTINGENCIES

9.
CONTINGENCIES

Tobacco-Related Litigation:
Overview. Since 1954, Liggett and other United States cigarette manufacturers have been named as defendants in numerous direct, third-party and purported class actions predicated on the theory that cigarette manufacturers should be liable for damages alleged to have been caused by cigarette smoking or by exposure to secondary smoke from cigarettes. The cases have generally fallen into the following categories: (i) smoking and health cases alleging personal injury brought on behalf of individual plaintiffs (“Individual Actions”); (ii) lawsuits by individuals requesting the benefit of the Engle ruling (“Engle progeny cases”); (iii) smoking and health cases primarily alleging personal injury or seeking court-supervised programs for ongoing medical monitoring, as well as cases alleging that use of the terms “lights” and/or “ultra lights” constitutes a deceptive and unfair trade practice, common law fraud or violation of federal law, purporting to be brought on behalf of a class of individual plaintiffs (“Class Actions”); and (iv) health care cost recovery actions brought by various foreign and domestic governmental plaintiffs and non-governmental plaintiffs seeking reimbursement for health care expenditures allegedly caused by cigarette smoking and/or disgorgement of profits (“Health Care Cost Recovery Actions”). The future financial impact of the risks and expenses of litigation are not quantifiable. For the six months ended June 30, 20202021 and 2019,2020, Liggett incurred tobacco product liability legal expenses and costs totaling $3,067 and $3,191 and $3,737, respectively. The tobacco product liability legal expenses and costs are included in the operating, selling, administrative and general expenses and litigation settlement and judgment expense line items in the condensed consolidated statements of operations. Legal defense costs are expensed as incurred.
Litigation is subject to uncertainty and it is possible that there could be adverse developments in pending cases. With the commencement of new cases, the defense costs and the risks relating to the unpredictability of litigation increase. Management reviews on a quarterly basis with counsel all pending litigation and evaluates the probability of a loss being incurred and whether an estimate can be made of the possible loss or range of loss that could result from an unfavorable outcome. An unfavorable outcome or settlement of pending tobacco-related litigation could encourage the commencement of additional litigation. Damages awarded in tobacco-related litigation can be significant.
Bonds. Although Liggett has been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts are on appeal, there remains a risk that such relief may not be obtainable in all cases. This risk has been reduced given that a majority of states now limit the dollar amount of bonds or require no bond at all. As of June 30, 2020, to obtain a stay of the judgment pending the appeal of the Santoro case,2021, Liggett secured a $535 supersedeas bond.had 0 outstanding bonds.
In June 2009, Florida amended its existing bond cap statute by adding a $200,000 bond cap that applies to all Engle progeny cases in the aggregate and establishes individual bond caps for individual Engle progeny cases in amounts that vary depending on the number of judgments in effect at a given time. The maximum amount of any such bond for an appeal in the Florida state courts will be no greater than $5,000. In several cases, plaintiffs challenged the constitutionality of the bond cap statute, but to date the courts have upheld the constitutionality of the statute. It is possible that the Company’s consolidated financial position, results of operations, and cash flows could be materially adversely affected by an unfavorable outcome of such challenges.
Accounting Policy. The Company and its subsidiaries record provisions in their consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, except as discussed in this Note 9: (i) management has concluded that it is not probable that a loss has been incurred in any of the pending tobacco-related cases; or (ii) management is unable to reasonably estimate the possible loss or range of loss that could result from an unfavorable outcome of any of the pending tobacco-related cases and, therefore, management has not provided any amounts in the condensed consolidated financial statements for unfavorable outcomes, if any.
Although Liggett has generally been successful in managing the litigation filed against it, litigation is subject to uncertainty and significant challenges remain, including with respect to the remaining Engle progeny cases. There can be no assurances that Liggett’s past litigation experience will be representative of future results. Judgments have been entered against Liggett in the past, in Individual Actions and Engle progeny cases, and several of those judgments were affirmed on appeal and satisfied by Liggett. It is possible that the consolidated financial position, results of operations and cash flows of the Company could be materially adversely affected by an unfavorable outcome or settlement of any of the remaining smoking-related litigation. Liggett believes, and has been so advised by counsel, that it has valid defenses to the litigation pending against it, as well as valid bases for appeal of adverse verdicts. All such cases are and will continue to be vigorously defended. Liggett has entered into settlement discussions in individual cases or groups of cases where Liggett has determined it was in its best interest to do so, and it may
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


continue to do so in the future. As cases proceed through the appellate process, the Company will consider accruals on a case-by-case basis if an unfavorable outcome becomes probable and the amount can be reasonably estimated.
31
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

Individual Actions
As of June 30, 2020,2021, there were 5474 Individual Actions pending against Liggett, where one or more individual plaintiffs allege injury resulting from cigarette smoking, addiction to cigarette smoking or exposure to secondary smoke and seek compensatory and, in some cases, punitive damages. These cases do not include the remaining Engle progeny cases. The following table lists the number of Individual Actions by state:
State
Number

of Cases
Florida3745
Illinois914
Nevada57
LouisianaNew Mexico25
MassachusettsLouisiana2
Hawaii1

The plaintiffs’ allegations of liability in cases in which individuals seek recovery for injuries allegedly caused by cigarette smoking are based on various theories of recovery, including negligence, gross negligence, breach of special duty, strict liability, fraud, concealment, misrepresentation, design defect, failure to warn, breach of express and implied warranties, conspiracy, aiding and abetting, concert of action, unjust enrichment, common law public nuisance, property damage, invasion of privacy, mental anguish, emotional distress, disability, shock, indemnity, violations of deceptive trade practice laws, the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), state RICO statutes and antitrust statutes. In many of these cases, in addition to compensatory damages, plaintiffs also seek other forms of relief including treble/multiple damages, medical monitoring, disgorgement of profits and punitive damages. Although alleged damages often are not determinable from a complaint, and the law governing the pleading and calculation of damages varies from state to state and jurisdiction to jurisdiction, compensatory and punitive damages have been specifically pleaded in a number of cases, sometimes in amounts ranging into the hundreds of millions and even billions of dollars.
Defenses raised in Individual Actions include lack of proximate cause, assumption of the risk, comparative fault and/or contributory negligence, lack of design defect, statute of limitations,, statute of repose, equitableequitable defenses such as “unclean hands” and lack of benefit, failure to state a claim and federal preemption.
Engle Progeny Cases
In May 1994, the Engle case was filed as a class action against Liggett and others in Miami-Dade County, Florida. The class consisted of all Florida residents who, by November 21, 1996, “have suffered, presently suffer or have died from diseases and medical conditions caused by their addiction to cigarette smoking.” A trial was held and the jury returned a verdict adverse to the defendants (approximately $145,000,000 in punitive damages, including $790,000 against Liggett). Following an appeal to the Third District Court of Appeal, the Florida Supreme Court in July 2006 decertified the class on a prospective basis and affirmed the appellate court’s reversal of the punitive damages award. Former class members had until January 2008 to file individual lawsuits. As a result, Liggett and the Company, and other cigarette manufacturers, were sued in thousands of Engle progeny cases in both federal and state courts in Florida. Although the Company was not named as a defendant in the Engle case, it was named as a defendant in substantially all of the Engle progeny cases where Liggett was named as a defendant.
Cautionary Statement About Engle Progeny Cases. Since 2009, judgments have been entered against Liggett and other cigarette manufacturers in Engle progeny cases. A number of the judgments were affirmed on appeal and satisfied by the defendants. Many were overturned on appeal. As of June 30, 2020, 2021, 25 Engle progeny cases where Liggett was a defendant at trial resulted in verdicts.
There have been 16 verdicts returned in favor of the plaintiffs and 9 in favor of Liggett. In 5 of the cases, punitive damages were awarded against Liggett. Several of the adverse verdicts were overturned on appeal and new trials were ordered. In certain cases, the judgments were entered jointly and severally with other defendants and Liggett may face the risk that one or more co-defendants decline or otherwise fail to participate in the bonding required for an appeal or to pay their proportionate or jury-allocated share of a judgment. As a result, under certain circumstances, Liggett may have to pay more than its proportionate share of any bonding or judgment related amounts. Except as discussed in this Note 9, management is unable to estimate the
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


possible loss or range of loss from the remaining Engle progeny cases as there are currently multiple defendants in
32
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

each case and, in most cases, discovery has not occurred or is limited. As a result, the Company lacks information about whether plaintiffs are in fact Engle class members, the relevant smoking history, the nature of the alleged injury and the availability of various defenses, among other things. Further, plaintiffs typically do not specify the amount of their demand for damages. As cases proceed through the appellate process, the Company will consider accruals on a case-by-case basis if an unfavorable outcome becomes probable and the amount can be reasonably estimated.
Engle Progeny Settlements.
In October 2013, the Company and Liggett entered into a settlement with approximately 4,900 Engle progeny plaintiffs and their counsel. Pursuant to the terms of the settlement, Liggett agreed to pay a total of approximately $110,000, with $61,600 paid in an initial lump sum and the balance of $48,000 to be paid in installments over 14 years starting in February 2015. In exchange, the claims of these plaintiffs were dismissed with prejudice against the Company and Liggett. The Company’s future payments will be approximately $3,400 per annum through 2028, with a cost of living increase beginning in 2021. In exchange, the claims of these plaintiffs were dismissed with prejudice against the Company and Liggett.
Liggett subsequently entered into two separate settlement agreements with a total of 152 Engle progeny plaintiffs where Liggett paid a total of $23,150 to settle their claims.$23,150. On an individual basis, Liggett settled an additional 201203 Engle progeny cases for approximately $8,100 in the aggregate. NaN of these settlements occurred in the second quarter of 2020.
Notwithstanding the comprehensive nature of the Engle Progeny Settlements, 42progeny settlements, 38 plaintiffs’ claims remain pending in state court. Therefore, the Company and Liggett may still be subject to periodic adverse judgments which could have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.
Judgments Paid in Engle Progeny Cases.
As of June 30, 2020,2021, Liggett had paid in the aggregate $39,773,$40,111, including interest and attorneys’ fees, to satisfy the judgments in the following Engle progeny cases: Lukacs, Campbell, Douglas, Clay, Tullo, Ward, Rizzuto, Lambert,Buchanan, andBuchanan Santoro. An adverse verdict against Liggett for $265 in Santoro is currently on appeal.
Maryland Cases
Liggett was a defendant in 16 multi-defendant personal injury cases in Maryland alleging claims arising from asbestos and tobacco exposure (“synergy cases”). In July 2016, the Court of Appeals (Maryland’s highest court) ruled that joinder of tobacco and asbestos cases may be possible in certain circumstances, but plaintiffs must demonstrate at the trial court level how such cases may be joined while providing appropriate safeguards to prevent embarrassment, delay, expense or prejudice to defendants and “the extent to which, if at all, the special procedures applicable to asbestos cases should extend to tobacco companies.” The Court of Appeals remanded these issues to be determined at the trial court level. In June 2017, the trial court issued an order dismissing all synergy cases against the tobacco defendants, including Liggett, without prejudice. Plaintiffs may seek appellate review or file new cases against the tobacco companies.
Liggett Only Cases  
There are currently 24 cases where Liggett is the sole defendant: Cowart, a Florida is an Individual Action and Tumin, anForbing, and Jones are Engle progeny case.cases. It is possible that cases where Liggett is the only defendant could increase as a result of the remaining Engle progeny cases and newly filed Individual Actions.
Upcoming Trials
As of June 30, 2021, there was one Engle progeny case (Alvarez) and eight Individual Actions (Baron, Bennett, Cupp, Feld, Geist, Lane, Mendez and Tully) scheduled for trial through June 30, 2022, where Liggett is a named defendant. Trial dates are subject to change and additional cases could be set for trial during this time.
Class Actions
As of June 30, 2020,2021, 2 actions were pending for which either a class had been certified or plaintiffs were seeking class certification where Liggett is a named defendant. Other cigarette manufacturers are also named in these two cases.
Plaintiffs’ allegations of liability in class action cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, nuisance, breach of express and implied warranties, breach of special duty, conspiracy, concert of action, violation of deceptive trade practice laws and consumer protection statutes and claims under the federal and state anti-racketeering statutes. Plaintiffs in the class actions seek various forms of relief, including compensatory and punitive damages, treble/multiple damages and other statutory damages and penalties, creation of medical monitoring and smoking cessation funds, disgorgement of profits, and injunctive and equitable relief.
33
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

Defenses raised in these cases include, among others, lack of proximate cause, individual issues predominate, assumption of the risk, comparative fault and/or contributory negligence, statute of limitations and federal preemption.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


In November 1997, in Young v. American Tobacco Co., a purported personal injury class action was commenced on behalf of plaintiff and all similarly situated residents in Louisiana who, though not themselves cigarette smokers, allege they were exposed to secondhand smoke from cigarettes that were manufactured by the defendants, including Liggett, and suffered injury as a result of that exposure. The plaintiffs seek to recover an unspecified amount of compensatory and punitive damages. No class certification hearing has been held. A stay order entered on March 16, 2016 stays the case pending completion of the smoking cessation program ordered by the court in Scott v. The American Tobacco Co.
In February 1998, in Parsons v. AC & S Inc., a purported class action was commenced on behalf of all West Virginia residents who allegedly have claims arising from their exposure to cigarette smoke and asbestos fibers. The operative complaint seeks to recover unspecified compensatory and punitive damages on behalf of the putative class. The case is stayed as a result of the December 2000 bankruptcy of 3 of the defendants.
Health Care Cost Recovery Actions
As of June 30, 2020,2021, 1 Health Care Cost Recovery Action was pending against Liggett, Crow Creek Sioux Tribe v. American Tobacco Company, a South Dakota case filed in 1997, where the plaintiff seeks to recover damages from Liggett and other cigarette manufacturers based on various theories of recovery as a result of alleged sales of tobacco products to minors. The case is dormant.
The claims asserted in health care cost recovery actions vary, but can include the equitable claim of indemnity, common law claims of negligence, strict liability, breach of express and implied warranty, breach of special duty, fraud, negligent misrepresentation, conspiracy, public nuisance, claims under state and federal statutes governing consumer fraud, antitrust, deceptive trade practices and false advertising, and claims under RICO. Although no specific damage amounts are typically pleaded, it is possible that requested damages might be in the billions of dollars. In these cases, plaintiffs typically assert equitable claims that the tobacco industry was “unjustly enriched” by their payment of health care costs allegedly attributable to smoking and seek reimbursement of those costs. Relief sought by some, but not all, plaintiffs include punitive damages, multiple damages and other statutory damages and penalties, injunctions prohibiting alleged marketing and sales to minors, disclosure of research, disgorgement of profits, funding of anti-smoking programs, additional disclosure of nicotine yields, and payment of attorney and expert witness fees.
Department of Justice Lawsuit
In September 1999, the United States government commenced litigation against Liggett and other cigarette manufacturers in the United States District Court for the District of Columbia. The action sought to recover, among other things, an unspecified amount of health care costs paid and to be paid by the federal government for smoking-related illnesses allegedly caused by the fraudulent and tortious conduct of defendants. In August 2006, the trial court entered a Final Judgment against each of the cigarette manufacturing defendants, except Liggett. The judgment was affirmed on appeal. As a result, the cigarette manufacturing defendants, other than Liggett, are now subject to the trial court’s Final Judgment which ordered, among other things, the issuance of “corrective statements” in various media regarding the adverse health effects of smoking, the addictiveness of smoking and nicotine, the lack of any significant health benefit from smoking “low tar” or “lights” cigarettes, defendants’ manipulation of cigarette design to ensure optimum nicotine delivery and the adverse health effects of exposure to environmental tobacco smoke.
Upcoming Trials
As of June 30, 2020, there were 3 Individual Actions and 1 Engle progeny case scheduled for trial through June 30, 2021, where Liggett (and/or the Company) is a named defendant. Trial dates are subject to change and additional cases could be set for trial during this time.
MSA and Other State Settlement Agreements
In March 1996, March 1997 and March 1998, Liggett entered into settlements of smoking-related litigation with 45 states and territories. The settlements released Liggett from all smoking-related claims made by those states and territories, including claims for health care cost reimbursement and claims concerning sales of cigarettes to minors.
In November 1998, Philip Morris, R.J. Reynolds and two other companies (the “Original Participating Manufacturers” or “OPMs”) and Liggett and Vector Tobacco (together with any other tobacco product manufacturer that becomes a signatory, the “Subsequent Participating Manufacturers” or “SPMs”) (the OPMs and SPMs are hereinafter referred to jointly as “PMs”) entered into the Master Settlement Agreement (the “MSA”) with 46 states, the District of Columbia, Puerto Rico, Guam, the United States Virgin Islands, American Samoa and the Northern Mariana Islands (collectively, the “Settling States”) to settle the asserted
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


and unasserted health care cost recovery and certain other claims of the Settling States. The MSA received final judicial approval in each Settling State.
34
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

As a result of the MSA, the Settling States released Liggett and Vector Tobacco from:
•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.
The MSA restricts tobacco product advertising and marketing within the Settling States and otherwise restricts the activities of PMs. Among other things, the MSA prohibits the targeting of youth in the advertising, promotion or marketing of tobacco products; bans the use of cartoon characters in all tobacco advertising and promotion; limits each PM to 1 tobacco brand name sponsorship during any 12-month period; bans all outdoor advertising, with certain limited exceptions; prohibits payments for tobacco product placement in various media; bans gift offers based on the purchase of tobacco products without sufficient proof that the intended recipient is an adult; prohibits PMs from licensing third parties to advertise tobacco brand names in any manner prohibited under the MSA; and prohibits PMs from using as a tobacco product brand name any nationally recognized non-tobacco brand or trade name or the names of sports teams, entertainment groups or individual celebrities.
The MSA also requires PMs to affirm corporate principles to comply with the MSA and to reduce underage use of tobacco products and imposes restrictions on lobbying activities conducted on behalf of PMs. In addition, the MSA provides for the appointment of an independent auditor to calculate and determine the amounts of payments owed pursuant to the MSA.
Under the payment provisions of the MSA, PMs are required to make annual payments of $9,000,000 (subject to applicable adjustments, offsets and reductions including a “Non-Participating Manufacturers Adjustment” or “NPM Adjustment”). These annual payments are allocated based on unit volume of domestic cigarette shipments. The payment obligations under the MSA are the several, and not joint, obligation of each PM and are not the responsibility of any parent or affiliate of a PM.
Liggett has 0 payment obligations under the MSA except to the extent its market share exceeds a market share exemption of approximately 1.65% of total cigarettes sold in the United States. Vector Tobacco has 0 payment obligations under the MSA except to the extent its market share exceeds a market share exemption of approximately 0.28% of total cigarettes sold in the United States. Liggett and Vector Tobacco’s domestic shipments accounted for approximately 4.0%4.1% of the total cigarettes sold in the United States in 2019.2020. If Liggett’s or Vector Tobacco’s market share exceeds their respective market share exemption in a given year, then on April 15 of the following year, Liggett and/or Vector Tobacco, as the case may be, must pay on each excess unit an amount equal (on a per-unit basis) to that due from the OPMs for that year. On December 30, 2019,2020, Liggett and Vector Tobacco pre-paid $140,000$143,000 of their approximate $169,000 2019$178,000 2020 MSA obligation, the balance of which was paid in April 2020,2021, subject to applicable disputes or adjustments.
Certain MSA Disputes
NPM Adjustment.  Liggett and Vector Tobacco contend that they are entitled to an NPM Adjustment for each year from 2003 - 2019.2020. The NPM Adjustment is a potential adjustment to annual MSA payments, available when PMs suffer a market share loss to NPMs for a particular year and an economic consulting firm selected pursuant to the MSA determines (or the parties agree) that the MSA was a “significant factor contributing to” that loss. A Settling State that has “diligently enforced” its qualifying escrow statute in the year in question may be able to avoid its allocable share of the NPM Adjustment. For 2003 - 2019,2020, Liggett and Vector Tobacco, as applicable, disputed that they owed the Settling States the NPM Adjustments as calculated by the independent auditor. As permitted by the MSA, Liggett and Vector Tobacco either paid subject to dispute, withheld payment, or paid into a disputed payment account, the amounts associated with these NPM Adjustments.
In June 2010, after the PMs prevailed in 48 of 49 motions to compel arbitration, the parties commenced the arbitration for the 2003 NPM Adjustment. That arbitration concluded in September 2013. It was followed by various challenges filed in state courts by states that did not prevail in the arbitration. Those challenges resulted in reductions, but not elimination of, the amounts awarded.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


The PMs settled most of the disputed NPM Adjustment years with 37 states representing approximately 75% of the MSA share.share for 2003 - 2022. The 2004 NPM Adjustment arbitration startedcommenced in 2016, with the final individual state hearing scheduled to occur in October 2021 and separate court proceedings continuea second phase addressing the effect of the settlements to start thereafter. The parties have also selected an arbitration panel to address the NPM Adjustments for states with which the PMs have not settled.2005-2007.
35
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

As a result of the settlement charge and arbitration award described above, Liggett and Vector Tobacco reduced cost of sales for years 2013 - 20192020 by $48,032.$54,382 and by $3,935 for the six months ended June 30, 2021. Liggett and Vector Tobacco may be entitled to further adjustments. As of June 30, 2020,2021, Liggett and Vector Tobacco had accrued approximately $13,400$13,200 related to the disputed amounts withheld from the non-settling states for 2004 - 2010, which may be subject to payment, with interest, if Liggett and Vector Tobacco lose the disputes for those years. As of June 30, 2020,2021, there remains approximately $41,500$49,800 in the disputed payments account relating to Liggett and Vector Tobacco’s 2011 - 20192020 NPM Adjustment disputes with the non-settling states. If Liggett and Vector Tobacco lose the disputes for all or any of those years, pursuant to the MSA, no interest would be due on the amounts paid into the disputed payment account.
Other State Settlements.  The MSA replaced Liggett’s prior settlements with all states and territories except for Florida, Mississippi, Texas and Minnesota. Each of these 4 states, prior to the effective date of the MSA, negotiated and executed settlement agreements with each of the other major tobacco companies, separate from those settlements reached previously with Liggett. Except as described below, Liggett’s agreements with these states remain in full force and effect. These states’ settlement agreements with Liggett contained most favored nation provisions which could reduce Liggett’s payment obligations based on subsequent settlements or resolutions by those states with certain other tobacco companies. Beginning in 1999, Liggett determined that, based on settlements or resolutions with United States Tobacco Company, Liggett’s payment obligations to those 4 states were eliminated. With respect to all non-economic obligations under the previous settlements, Liggett believes it is entitled to the most favorable provisions as between the MSA and each state’s respective settlement with the other major tobacco companies. Therefore, Liggett’s non-economic obligations to all states and territories are now defined by the MSA.
In 2003, as a result of a dispute with Minnesota regarding its settlement agreement, Liggett agreed to pay $100 a year in any year cigarettes manufactured by Liggett are sold in that state. Further, the Attorneys General for Florida, Mississippi and Texas advised Liggett that they believed Liggett had failed to make payments under the respective settlement agreements with those states. In 2010, Liggett settled with Florida and agreed to pay $1,200 and to make further annual payments of $250 for a period of 21 years, starting in March 2011, with the payments from year 12 forward being subject to an inflation adjustment.
In January 2016, the Attorney General for Mississippi filed a motion in Chancery Court in Jackson County, Mississippi to enforce the March 1996 settlement agreement among Liggett, Mississippi and other states (the “1996 Agreement”) alleging that Liggett owes Mississippi at least $27,000 in compensatory damages and additional amounts for interest, punitive damages and attorneys’ fees.interest. In April 2017, the Chancery Court ruled, over Liggett’s objections, that the 1996 Agreement should be enforced as Mississippi claims and referred the matter first to arbitration and then to a Special Master for further proceedings to determine the amount of damages, if any, to be awarded. In June 2018, the Chancery Court granted Liggett’s motion to compel arbitration as to two issues concerning damages and stayed the proceedings before the Special Master pending completion of the arbitration. In March 2019, the arbitration panel issued its final arbitration award on the two issues before it: (i) the panel ruled in favor of Liggett, findingthat the $294,000 of proceeds from Eve Holdings’ 1999 brand sale should not be included in Liggett’s pre-tax income; and (ii) ruled in favor of Mississippi on the remaining issue, finding that compensatory damages to Mississippi, if any, would be based on 0.5% of Liggett’s annual pre-tax income for the term of the settlement agreement. FollowingApril 2021, following confirmation of the final arbitration award, Mississippi voluntarily dismissed with prejudice its claims for punitive damages and attorneys’ fees.
In July 2019, the parties stipulated that the unpaid principal (exclusive of interest) purportedly due from Liggett to Mississippi pursuant to the 1996 Agreement (from inception through 2019) iswas approximately $15,500,$16,700, subject to Liggett’s right to litigate and/or appeal the enforceability of the 1996 Agreement (and all issues other than the calculation of suchthe principal amount)amount allegedly due).
In September 2019, the Special Master held a hearing regarding the state’sMississippi’s claim for approximately $17,500 in prejudgment interest as well aspre and post-judgment interest. In June 2021, the Special Master issued a draft report with proposed findings that pre-judgment interest, in the amount of approximately $18,600, is due from Liggett from April 2005 - July 9, 2021. At the request of the Special Master, the parties provided comments to the draft report and the matter is sub judice. The Special Master’s report, once finalized, is subject to objections by the parties and further review and hearing by the trial court before a final judgment may be entered. Once final judgment is entered, additional interest amounts to be determined. A decisionwill accrue if the judgment is pending.not overturned on appeal. Liggett continues to believe that the April 2017 Chancery Court order is in error because the most favored nations provision in the 1996 Agreement eliminated all of Liggett’s payment obligations to Mississippi, and it reserved all rights to appeal this and other issues at the conclusion of the case. In the event Liggett appeals an adverse judgment, the posting of a bond may be required.
Liggett may be required to make additional payments to Mississippi and Texas which could have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


Cautionary Statement  
Management is not able to reasonably predict the outcome of the litigation pending or threatened against Liggett or the Company. Litigation is subject to many uncertainties. Liggett has been found liable in multiple Engle progeny cases and Individual Actions, several of which were affirmed on appeal and satisfied by Liggett. It is possible that other cases could be decided unfavorably against Liggett and that Liggett will be unsuccessful on appeal. Liggett may attempt to settle particular cases if it believes it is in its best interest to do so.
Management cannot predict the cash requirements related to any future defense costs, settlements or judgments, including cash required to bond any appeals, and there is a risk that Liggett may not be able to meet those requirements. An unfavorable outcome of a pending smoking-related case could encourage the commencement of additional litigation. Except as discussed in
36
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

this Note 9, management is unable to estimate the loss or range of loss that could result from an unfavorable outcome of the cases pending against Liggett or the costs of defending such cases and as a result has not provided any amounts in its consolidated financial statements for unfavorable outcomes.
The tobacco industry is subject to a wide range of laws and regulations regarding the marketing, sale, taxation and use of tobacco products imposed by local, state and federal governments. There have been a number of restrictive regulatory actions, adverse legislative and political decisions and other unfavorable developments concerning cigarette smoking and the tobacco industry. These developments may negatively affect the perception of potential triers of fact with respect to the tobacco industry, possibly to the detriment of certain pending litigation, and may prompt the commencement of additional litigation or legislation.
It is possible that the Company’s consolidated financial position, results of operations and cash flows could be materially adversely affected by an unfavorable outcome in any of the smoking-related litigation.
The activity in the Company’s accruals for the MSA and tobacco litigation for the six months ended June 30, 20202021 was as follows:
 Current Liabilities Non-Current Liabilities
 Payments due under Master Settlement Agreement Litigation Accruals Total Payments due under Master Settlement Agreement Litigation Accruals Total
            
Balance as of January 1, 2020$34,116
 $4,249
 $38,365
 $17,275
 $20,594
 $37,869
Expenses96,215
 28
 96,243
 —
 —
 —
Change in MSA obligations capitalized as inventory(137) —
 (137) —
 —
 —
Payments(27,214) (4,324) (31,538) —
 —
 —
Reclassification to/(from) non-current liabilities(855) 3,252
 2,397
 855
 (3,252) (2,397)
Interest on withholding—
 238
 238
 —
 932
 932
Balance as of June 30, 2020$102,125
 $3,443
 $105,568
 $18,130
 $18,274
 $36,404
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


Current LiabilitiesNon-Current Liabilities
Payments due under Master Settlement AgreementLitigation AccrualsTotalPayments due under Master Settlement AgreementLitigation AccrualsTotal
Balance as of January 1, 2021$38,767 $3,967 $42,734 $17,933 $19,268 $37,201 
Expenses80,922 5 80,927 0 0 0 
Change in MSA obligations capitalized as inventory296 0 296 0 0 0 
Payments(35,206)(4,065)(39,271)0 0 0 
Reclassification to/(from) non-current liabilities4,709 3,351 8,060 (4,709)(3,351)(8,060)
Interest on withholding0 288 288 0 851 851 
Balance as of June 30, 2021$89,488 $3,546 $93,034 $13,224 $16,768 $29,992 
The activity in the Company’s accruals for the MSA and tobacco litigation for the six months ended June 30, 2019 were2020 was as follows:
Current LiabilitiesNon-Current Liabilities
Payments due under Master Settlement AgreementLitigation AccrualsTotalPayments due under Master Settlement AgreementLitigation AccrualsTotal
Balance as of January 1, 2020$34,116 $4,249 $38,365 $17,275 $20,594 $37,869 
Expenses96,215 28 96,243 0 0 0 
Change in MSA obligations capitalized as inventory(137)0 (137)0 0 0 
Payments(27,214)(4,324)(31,538)0 0 0 
Reclassification to/(from) non-current liabilities(855)3,252 2,397 855 (3,252)(2,397)
Interest on withholding0 238 238 0 932 932 
Balance as of June 30, 2020$102,125 $3,443 $105,568 $18,130 $18,274 $36,404 
 Current Liabilities Non-Current Liabilities
 Payments due under Master Settlement Agreement Litigation Accruals Total Payments due under Master Settlement Agreement Litigation Accruals Total
            
Balance as of January 1, 2019$36,561
 $310
 $36,871
 $16,383
 $21,794
 $38,177
Expenses80,128
 655
 80,783
 —
 ���
 —
Change in MSA obligations capitalized as inventory1,813
 —
 1,813
 —
 —
 —
Payments(31,959) (355) (32,314) —
 —
 —
Reclassification to/(from) non-current liabilities(892) 3,338
 2,446
 892
 (3,338) (2,446)
Interest on withholding—
 95
 95
 —
 1,076
 1,076
Balance as of June 30, 2019$85,651
 $4,043
 $89,694
 $17,275
 $19,532
 $36,807

37
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

Other Matters:

Liggett’s and Vector Tobacco’s management are unaware of any material environmental conditions affecting their existing facilities. Liggett’s and Vector Tobacco’s management believe that current operations are conducted in material compliance with all environmental laws and regulations and other laws and regulations governing cigarette manufacturers. Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effectimpact on the capital expenditures, results of operations or competitive position of Liggett or Vector Tobacco.
Liggett and the Company have received three separate demands for indemnification from Altria Client Services, on behalf of Philip Morris, relating to lawsuits alleging smokers’ use of L&M cigarettes. The indemnification demands are purportedly issued in connection with Eve Holdings’ 1999 sale of certain brands to Philip Morris.
In addition to the foregoing, Douglas Elliman and certain of its subsidiaries are subject to numerous proceedings, lawsuits and claims in connection with their ordinary business activities. Many of these matters are covered by insurance or, in some cases, the Company iscompany or its subsidiaries are indemnified by third parties.
Management is of the opinion that the liabilities, if any, resulting from other proceedings, lawsuits and claims pending against the Company and its consolidated subsidiaries, unrelated to tobacco product liability, should not materially affect the Company’s consolidated financial position, results of operations or cash flows.

VECTOR GROUP LTD.10.    GOODWILL AND OTHER INTANGIBLE ASSETS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


10.
GOODWILL AND OTHER INTANGIBLE ASSETS

The components of Goodwill and other intangible assets, net were as follows:
December 31,
2020		Impairment LossesAmortizationJune 30,
2021
Goodwill$31,756 $0 $— $31,756 
Indefinite life intangibles:
Intangible asset associated with benefit under the MSA107,511 0 — 107,511 
Trademark - Douglas Elliman68,000 0— 68,000 
Intangibles with a finite life, net310 0 (80)230 
  Total goodwill and other intangible assets, net$207,577 $0 $(80)$207,497 
  December 31,
2019		 Impairment Losses Amortization June 30,
2020
Goodwill $78,008
 $(46,252) $—
 $31,756
         
Indefinite life intangibles:        
Intangible asset associated with benefit under the MSA 107,511
 —
 —
 107,511
         
Trademark - Douglas Elliman 80,000
 (12,000) —
 68,000
         
Intangibles with a finite life, net 474
 —
 (82) 392
         
  Total goodwill and other intangible assets, net $265,993
 $(58,252) $(82) $207,659

December 31,
2019		Impairment LossesAmortizationJune 30,
2020
Goodwill$78,008 $(46,252)$— $31,756 
Indefinite life intangibles:
Intangible asset associated with benefit under the MSA107,511 0 — 107,511 
Trademark - Douglas Elliman80,000 (12,000)— 68,000 
Intangibles with a finite life, net474 0 (82)392 
  Total goodwill and other intangible assets, net$265,993 $(58,252)$(82)$207,659 
Goodwill is evaluated for impairment annually or whenever the Company identifies certain triggering events or circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Events or circumstances that might indicate an interim evaluation is warranted include, among other things, unexpected adverse business conditions, macro and reporting unit specific economic factors (for example, interest rate and foreign exchange rate fluctuations, and loss of key personnel), supply costs, unanticipated competitive activities, and acts by governments and courts.
During the first quarter of 2020, the Company determined that a triggering event occurred related to the Douglas Elliman reporting unit due to a decline in sales and profitability projections for the reporting unit driven by the COVID-19 pandemic
38
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

and related economic disruption. The Company utilized third-party valuation specialists to prepare a quantitative assessment of goodwill and trademark intangible asset related to Douglas Elliman.
For the goodwill testing, the Company utilized an income approach (a discounted cash flows “DCF” method) to estimate the fair value of the Douglas Elliman business. The estimated fair value of the trademark indefinite-life intangible asset related to the Douglas Elliman brand name was determined using an approach that values the Company’s cash savings from having a royalty-free license compared to the market rate it would pay for access to use the trade name.
The third-party quantitative assessments of the goodwill and trademark intangible asset reflected management’s assumptions regarding revenue growth rates, economic and market trends including current expectations of deterioration resulting from the COVID-19 pandemic, changes to cost structures and other expectations about the anticipated short-term and long-term operating results of Douglas Elliman. The quantitative assessments resulted in impairment charges to goodwill of $46,262$46,252 and to the trademark intangible asset of $12,000 during$12,000.
The Company determined that there have not been any triggering events since the three months ended March 31, 2020.first quarter of 2020. If the Company fails to achieve the financial projections used in the quantitative assessments of fair value or the impacts of COVID-19 are more severe than expected, additional impairment charges could result in future periods, and such impairment charges could be material.


11.    INCOME TAXES
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


11.
INCOME TAXES

The Company’s effective income tax rate is based on expected income, statutory rates, valuation allowances against deferred tax assets, and any tax planning opportunities available to the Company. For interim financial reporting, the Company estimates the annual effective income tax rate based on full year projections and applies the annual effective income tax rate against year-to-date pretax income to record income tax expense, adjusted for discrete items, if any. The Company refines annual estimates as new information becomes available. The Company’s tax rate does not bear a relationship to statutory tax rates due to permanent differences, which are primarily related to nondeductible compensation, and state taxes.
The Company’s income tax expense consisted of the following:

Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
Income before provision for income taxes$132,165 $36,690 $177,175 $32,481 
Income tax expense using estimated annual effective income tax rate38,725 10,896 51,913 9,647 
Changes in effective tax rates135 (12)0 0 
Impact of discrete items, net0 32 0 291 
Income tax expense$38,860 $10,916 $51,913 $9,938 
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Income before provision for income taxes$36,690
 $56,766
 $32,481
 $78,548
Income tax expense using estimated annual effective income tax rate10,896
 17,566
 9,647
 24,319
Changes in effective tax rates(12) (110) —
 —
Impact of discrete items, net32
 3
 291
 (111)
Income tax expense$10,916
 $17,459
 $9,938
 $24,208


The discrete items for the three months ended June 30, 2020 primarily relates to income tax expense on the changes in value of certain contingent consideration partially offset by income tax benefit related to stock-based compensation. The discrete items for the six months ended June 30, 2020 relate to income tax benefits on the goodwill and trademark impairment charges, changes in value of certain contingent consideration and stock-based compensation partially offset by the income tax expense related to the equity in earnings from investments associated with the one-time gain on sale of LTS. The discrete items for the three and six months ended June 30, 2019 related to an income tax benefit for stock-based compensation.
On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act into law. The Act includes several significant tax and payroll-related provisions for corporations, including the usage of net operating losses, bonus depreciation, interest expense, and certain payroll benefits. The Company continues to evaluate the impact this Act will have on its financial statements and required disclosures.
39
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

12.    INVESTMENTS AND FAIR VALUE MEASUREMENTS

12.
INVESTMENTS AND FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities subject to fair value measurements were as follows:
Fair Value Measurements as of June 30, 2021
DescriptionTotalQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Assets:
Money market funds (1)
$310,300 $310,300 $0 $0 
Commercial paper (1)
24,071 0 24,071 0 
Certificates of deposit (2)
679 0 679 0 
Investment securities at fair value
   Equity securities at fair value
   Marketable equity securities25,187 25,187 0 0 
   Mutual funds invested in debt securities23,325 23,325 0 0 
         Total equity securities at fair value48,512 48,512 0 0 
    Debt securities available for sale
U.S. government securities12,512 0 12,512 0 
Corporate securities49,843 0 49,843 0 
U.S. government and federal agency15,467 0 15,467 0 
Commercial paper29,443 0 29,443 0 
Foreign fixed-income securities1,224 0 1,224 0 
Total debt securities available for sale108,489 0 108,489 0 
     PropTech convertible trading debt securities2,481 0 0 2,481 
Total investment securities at fair value159,482 48,512 108,489 2,481 
Long-term investments
Long-term investment securities at fair value (3)
33,053 0 0 0 
Total$527,585 $358,812 $133,239 $2,481 
Liabilities:
Fair value of contingent liability$4,522 $0 $0 $4,522 
Total$4,522 $0 $0 $4,522 

(1)     Amounts included in Cash and cash equivalents on the condensed consolidated balance sheets, except for $11,364 that is included in Other current assets and $1,907 that is included in Other assets.
(2)    Amounts included in current restricted assets and non-current restricted assets on the condensed consolidated balance sheets.
(3)    In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.
40
  Fair Value Measurements as of June 30, 2020
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 (1)
 $455,669
 $455,669
 $—
 $—
         
Commercial paper (1)
 53,463
 —
 53,463
 —
         
Certificates of deposit (2)
 2,106
 —
 2,106
 —
         
Money market funds securing legal bonds (2)
 535
 535
 —
 —
         
Investment securities at fair value        
   Equity securities at fair value        
   Marketable equity securities 11,091
 11,091
 —
 —
   Mutual funds invested in debt securities 22,667
 22,667
 —
 —
         Total equity securities at fair value 33,758
 33,758
 —
 —
    Debt securities available for sale        
U.S. government securities 12,754
 —
 12,754
 —
Corporate securities 37,145
 —
 37,145
 —
U.S. government and federal agency 4,984
 —
 4,984
 —
Commercial mortgage-backed securities 2
 —
 2
 —
Total debt securities available for sale 54,885
 —
 54,885
 —
         
Total investment securities at fair value 88,643
 33,758
 54,885
 —
         
Long-term investments        
Long-term investment securities at fair value (3)
 33,232
 —
 —
 —
Total $633,648
 $489,962
 $110,454
 $—
         
Liabilities:        
Fair value of contingent liability $1,317
 $—
 $—
 $1,317
Total $1,317
 $—
 $—
 $1,317

(1)Amounts included in Cash and cash equivalents on the condensed consolidated balance sheet, except for $6,310 that is included in Other current assets and $1,907 that is included in Other assets.
(2)Amounts included in current restricted assets and non-current restricted assets on the condensed consolidated balance sheet.
(3)In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.

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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


Fair Value Measurements as of December 31, 2020
DescriptionTotalQuoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Assets:
Money market funds (1)
$255,294 $255,294 $0 $0 
Commercial paper (1)
44,397 0 44,397 0 
Certificates of deposit (2)
2,111 0 2,111 0 
Money market funds securing legal bonds (2)
535 535 0 0 
Investment securities at fair value
   Equity securities at fair value
   Marketable equity securities21,155 21,155 0 0 
   Mutual funds invested in debt securities23,226 23,226 0 0 
         Total equity securities at fair value44,381 44,381 0 0 
    Debt securities available for sale
U.S. government securities19,200 0 19,200 0 
Corporate securities52,434 0 52,434 0 
U.S. government and federal agency10,484 0 10,484 0 
Commercial paper9,086 0 9,086 0 
Total debt securities available for sale91,204 0 91,204 0 
Total investment securities at fair value135,585 44,381 91,204 0 
Long-term investments
Long-term investment securities at fair value (3)
34,218 0 0 0 
Total$472,140 $300,210 $137,712 $0 
Liabilities:
Fair value of contingent liability$999 $0 $0 $999 
Total$999 $0 $0 $999 

  Fair Value Measurements as of December 31, 2019
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 (1)
 $307,655
 $307,655
 $—
 $—
         
Commercial paper (1)
 47,328
 —
 47,328
 —
         
Certificates of deposit (2)
 2,193
 —
 2,193
 —
         
Money market funds securing legal bonds (2)
 535
 535
 —
 —
         
Investment securities at fair value        
   Equity securities at fair value        
   Marketable equity securities 23,819
 23,819
 —
 —
   Mutual funds invested in debt securities 22,377
 22,377
 —
 —
         Total equity securities at fair value 46,196
 46,196
 —
 —
    Debt securities available for sale        
U.S. government securities 14,660
 —
 14,660
 —
Corporate securities 54,413
 —
 54,413
 —
U.S. government and federal agency 6,816
 —
 6,816
 —
Commercial mortgage-backed securities 382
 —
 382
 —
Commercial paper 5,887
 —
 5,887
 —
Index-linked U.S. bonds 779
 —
 779
 —
Foreign fixed-income securities 508
 —
 508
 —
Total debt securities available for sale 83,445
 —
 83,445
 —
         
Total investment securities at fair value 129,641
 46,196
 83,445
 —
         
Long-term investments        
Long-term investment securities at fair value (3)
 45,781
 —
 —
 —
Total $533,133
 $354,386
 $132,966
 $—
         
Liabilities:        
Fair value of contingent liability $3,147
 $—
 $—
 $3,147
Fair value of derivatives embedded within convertible debt 4,999
 —
 —
 4,999
Total $8,146
 $—
 $—
 $8,146
(1)     Amounts included in Cash and cash equivalents on the condensed consolidated balance sheets, except for $10,374 that is included in current restricted assets and $1,907 that is included in non-current restricted assets.
(2)    Amounts included in current restricted assets and non-current restricted assets on the condensed consolidated balance sheets.
(3)    In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.

(1)Amounts included in Cash and cash equivalents on the condensed consolidated balance sheet, except for $4,423 that is included in current restricted assets and $3,160 that is included in non-current restricted assets.
(2)Amounts included in current restricted assets and non-current restricted assets on the condensed consolidated balance sheet.
(3)In accordance with Subtopic 820-10, investments that are measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy.

The fair value of the Level 2 certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is the rate offered by the financial institution. The fair value of investment securities at fair value included in Level 1 is based on quoted market prices from various stock exchanges. The Level 2 investment securities at fair value are based on quoted market prices of securities that are thinly traded, quoted prices for identical or similar assets in markets that are not active or inputs other than quoted prices such as interest rates and yield curves.
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


The long-term investments are based on NAV per share provided by the partnerships based on the indicated market value of the underlying assets or investment portfolio. In accordance with Subtopic 820-10, these investments are not classified under the fair value hierarchy disclosed above because they are measured at fair value using the NAV practical expedient.
41
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at June 30, 2020:
2021:
  Quantitative Information about Level 3 Fair Value Measurements
  Fair Value at      
  June 30,
2020		 Valuation Technique Unobservable Input Range (Actual)
         
Fair value of contingent liability $1,317
 Monte Carlo simulation model Estimated fair value of the Douglas Elliman reporting unit $169,000
      Risk-free rate for a 2.50 year term 0.17%
      Leverage-adjusted equity volatility of peer firms 64.78%

Quantitative Information about Level 3 Fair Value Measurements
Fair Value at
June 30,
2021		Valuation TechniqueUnobservable InputRange (Actual)
PropTech convertible trading debt securities$2,481 Discounted cash flowInterest rates3% - 5%
MaturityApr 2022 - Mar 2023
Volatility43.6% - 111.6%
Discount rate23.75% - 43.33%
Fair value of contingent liability$4,522 Monte Carlo simulation modelEstimated fair value of the Douglas Elliman reporting unit$825,946 
Risk-free rate for a 1.5-year term0.16 %
Leverage-adjusted equity volatility of peer firms48.21 %
The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at December 31, 2019:2020:
Quantitative Information about Level 3 Fair Value Measurements
Fair Value at
December 31,
2020		Valuation TechniqueUnobservable InputRange (Actual)
Fair value of contingent liability$999 Monte Carlo simulation modelEstimated fair value of the Douglas Elliman reporting unit$169,000 
Risk-free rate for a 2-year term0.13 %
Leverage-adjusted equity volatility of peer firms78.57 %
  Quantitative Information about Level 3 Fair Value Measurements
  Fair Value at      
  December 31,
2019		 Valuation Technique Unobservable Input Range (Actual)
         
Fair value of derivatives embedded within convertible debt $4,999
 Discounted cash flow Assumed annual stock dividend 5%
      Assumed remaining cash dividends - Q4 2019 and Q1 2020 $0.40/$0.20
      Stock price $13.39
      Convertible trading price (as a percentage of par value) 103.94%
      Volatility 36.94%
      Risk-free rate Term structure of US Treasury Securities
      Implied credit spread 1.0% - 3.0% (2.0%)
         
Fair value of contingent liability $3,147
 Monte Carlo simulation model Estimated fair value of the Douglas Elliman reporting unit $271,500
      Risk-free rate for a 3-year term 1.61%
      Leverage-adjusted equity volatility of peer firms 35.56%


In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record assets and liabilities at fair value on a nonrecurring basis. Generally, assets and liabilities are recorded at fair value on a nonrecurring basis as a result of impairment charges. The Company had 0 nonrecurring nonfinancial assets subject to fair value measurements as of June 30, 20202021 and December 31, 2019,2020, respectively, except for investments in real estate ventures that were impaired as of June 30, 20202021 and December 31, 2019.2020, respectively.


42
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


The Company’s investments in real estate ventures subject to nonrecurring fair value measurements are as follows:
    Fair Value Measurement Using:
  Three Months Ended June 30, 2020   Quoted Prices in Active Markets for Identical Assets
(Level 1)		 
Significant Other Observable Inputs
(Level 2)		 

Significant Unobservable Inputs
(Level 3)
Description Impairment Charge Total   
           
Assets:          
Investments in real estate ventures $3,784
 $1,980
 $—
 $—
 $1,980

The Company estimated the fair value of its investments in real estate ventures using observable inputs such as market pricing based on recent events, however, significant judgment was required to select certain inputs from observed market data. The decrease in the investments in real estate ventures was attributed to the decline in the projected sales prices of the respective real estate venture. The $3,784 of impairment charges were included in equity in losses from real estate ventures for the three months June 30, 2020.
    Fair Value Measurement Using:
  Year Ended December 31,
2019		   Quoted Prices in Active Markets for Identical Assets
(Level 1)		 
Significant Other Observable Inputs
(Level 2)		 

Significant Unobservable Inputs
(Level 3)
Description Impairment Charge Total   
           
Assets:          
Investments in real estate ventures $39,757
 $18,335
 $—
 $—
 $18,335


Fair Value Measurement Using:
Three Months Ended June 30, 2021Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
DescriptionImpairment ChargeTotal
Assets:
Investments in real estate ventures$2,713 $0 $0 $0 $0 
The Company estimated the fair value of its investments in real estate ventures using observable inputs such as market pricing based on recent events, however, significant judgment was required to select certain inputs from observed market data. The decrease in the investments in real estate ventures was attributed to the decline in the projected sales prices and the duration of the estimated sell out of the respective real estate ventures. The $39,757$2,713 of impairment charges were included in equity in earnings from real estate ventures for the three months ended June 30, 2021.
Fair Value Measurement Using:
Year Ended December 31,
2020		Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
DescriptionImpairment ChargeTotal
Assets:
Investments in real estate ventures$16,513 $0 $0 $0 $0 

The Company estimated the fair value of its investments in real estate ventures using observable inputs such as market pricing based on recent events, however, significant judgment was required to select certain inputs from observed market data. The decrease in the investments in real estate ventures was attributed to the decline in the projected sales prices and the duration of the estimated sell out of the respective real estate ventures. The $16,513 of impairment charges were included in equity in losses from real estate ventures for the year ended December 31, 2019.2020.


43
13
VECTOR GROUP LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited

13.    SEGMENT INFORMATION

.
SEGMENT INFORMATION

The Company’s business segments for the three and six months ended June 30, 20202021 and 20192020 were Tobacco and Real Estate. The Tobacco segment consisted of the manufacture and sale of conventional cigarettes. The Real Estate segment included the Company’s investment in New Valley, which includes Douglas Elliman, Escena, Sagaponack and investments in real estate ventures. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


Financial information for the Company’s operations before taxes and non-controlling interests for the three and six months ended June 30, 20202021 and 20192020 were as follows:

   Real Corporate  
 Tobacco Estate and Other Total
Three months ended June 30, 2020       
Revenues$312,510
 $133,250
 $—
 $445,760
Operating income (loss)79,309
(1)(6,875)(2)(5,637) 66,797
Equity in losses from real estate ventures—
 (12,260) —
 (12,260)
Depreciation and amortization2,000
 2,198
 214
 4,412
        
Three months ended June 30, 2019       
Revenues$294,501
 $243,931
 $—
 $538,432
Operating income (loss)68,651
(3)14,453
 (6,860) 76,244
Equity in earnings from real estate ventures—
 6,391
 —
 6,391
Depreciation and amortization1,950
 2,024
 250
 4,224
        
Six months ended June 30, 2020       
Revenues$599,579
 $300,669
 $—
 $900,248
Operating income (loss)148,495
(4)(74,350)(5)(12,252) 61,893
Equity in losses from real estate ventures—
 (18,765) —
 (18,765)
Depreciation and amortization4,042
 4,511
 434
 8,987
Capital expenditures2,973
 3,249
 20
 6,242
 

      
Six months ended June 30, 2019       
Revenues$551,257
 $408,099
 $—
 $959,356
Operating income (loss)128,795
(6)4,044
 (14,005) 118,834
Equity in earnings from real estate ventures—
 3,952
 —
 3,952
Depreciation and amortization3,907
 4,525
 500
 8,932
Capital expenditures2,753
 3,567
 —
 6,320
        

RealCorporate
TobaccoEstateand OtherTotal
Three months ended June 30, 2021
Revenues$329,496 $400,033 $0 $729,529 
Operating income (loss)103,179 42,362 (8,465)137,076 
Equity in earnings from real estate ventures0 16,685 0 16,685 
Depreciation and amortization1,697 2,158 234 4,089 
Three months ended June 30, 2020
Revenues$312,510 $133,250 $0 $445,760 
Operating income (loss)79,309 (1)(6,875)(2)(5,637)66,797 
Equity in losses from real estate ventures0 (12,260)0 (12,260)
Depreciation and amortization2,000 2,198 214 4,412 
Six months ended June 30, 2021
Revenues$597,959 $675,334 $0 $1,273,293 
Operating income (loss)184,778 (3)57,622 (15,121)227,279 
Equity in earnings from real estate ventures0 18,274 0 18,274 
Identifiable assets406,978 620,499 468,900 1,496,377 
Depreciation and amortization3,457 4,346 465 8,268 
Capital expenditures1,375 1,263 417 3,055 
Six months ended June 30, 2020
Revenues$599,579 $300,669 $0 $900,248 
Operating income (loss)148,495 (4)(74,350)(5)(12,252)61,893 
Equity in losses from real estate ventures0 (18,765)0 (18,765)
Identifiable assets357,518  557,505 428,386 1,343,409 
Depreciation and amortization4,042 4,511 434 8,987 
Capital expenditures2,973 3,249 20 6,242 
(1) Operating income includes $53 of litigation settlement and judgment expense.
(2) Operating loss includes $2,961 of restructuring charges.
(3)Operating income includes $655$2,722 received from a litigation settlement associated with the MSA (which reduced cost of sales) and $5 of litigation settlement and judgment expense.
(4)Operating income includes $53 of litigation settlement and judgment expense.
(5) Operating loss includes $58,252 of impairment charges related to the impairments of goodwill and other intangible assets and $2,961 of restructuring charges.
(6) Operating income includes $655of litigation settlement and judgment expense.

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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited



14. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The condensed consolidating financial information is based upon the following subsidiaries being subsidiary guarantors of unsecured debt securities that may be issued by the Company: VGR Holding LLC; Liggett Group LLC; Liggett Vector Brands LLC; Vector Research LLC; Vector Tobacco Inc.; Liggett & Myers Holdings Inc.; 100 Maple LLC; V.T. Aviation LLC; VGR Aviation LLC; Eve Holdings LLC; Zoom E-Cigs LLC; and DER Holdings LLC. Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all guarantees are full and unconditional and joint and several. The Company’s investments in its consolidated subsidiaries are presented under the equity method of accounting.
The Company and the guarantors have filed a shelf registration statement for the offering of debt securities on a delayed or continuous basis and the Company is including this condensed consolidating financial information in connection therewith. Any such debt securities may be issued by the Company and guaranteed by the guarantors, but not by New Valley or any of its subsidiaries, other than DER Holdings LLC.
Presented herein are Condensed Consolidating Balance Sheets as of June 30, 2020 and December 31, 2019, the related Condensed Consolidating Statements of Operations for the three and six months ended June 30, 2020 and 2019, and the related Condensed Consolidating Statements of Cash Flows for the three and six months ended June 30, 2020 and 2019 of Vector Group Ltd. (Parent/Issuer), the guarantor subsidiaries (Subsidiary Guarantors) and the subsidiaries that are not guarantors (Subsidiary Non-Guarantors).




















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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


CONDENSED CONSOLIDATING BALANCE SHEETS
   June 30, 2020  
     Subsidiary   Consolidated
 Parent/ Subsidiary Non- Consolidating Vector Group
 Issuer Guarantors Guarantors Adjustments Ltd.
ASSETS:         
Current assets:         
Cash and cash equivalents$261,167
 $217,748
 $61,448
 $—
 $540,363
Investment securities at fair value88,643
 —
 —
 —
 88,643
Accounts receivable - trade, net—
 13,222
 19,538
 —
 32,760
Intercompany receivables45,946
 —
 —
 (45,946) —
Inventories—
 98,609
 —
 —
 98,609
Income taxes receivable, net—
 —
 7,696
 (7,696) —
Other current assets2,560
 8,069
 28,209
 (475) 38,363
Total current assets398,316
 337,648
 116,891
 (54,117) 798,738
Property, plant and equipment, net413
 32,245
 44,959
 —
 77,617
Investments in real estate, net—
 —
 28,876
 —
 28,876
Long-term investment securities at fair value33,232
 —
 —
 —
 33,232
Investments in real estate ventures—
 —
 115,377
 —
 115,377
Operating lease right-of-use assets6,521
 3,918
 138,223
 —
 148,662
Investments in consolidated subsidiaries365,814
 163,958
 —
 (529,772) —
Goodwill and other intangible assets, net—
 107,511
 100,148
 —
 207,659
Other assets30,250
 47,092
 44,244
 —
 121,586
Total assets$834,546
 $692,372
 $588,718
 $(583,889) $1,531,747
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:         
Current liabilities:         
Current portion of notes payable and long-term debt$—
 $8,816
 $8,787
 $(8,750) $8,853
Intercompany payables—
 167
 45,779
 (45,946) —
Income taxes payable, net37,394
 7,133
 —
 (7,696) 36,831
Current payments due under the Master Settlement Agreement—
 102,125
 —
 —
 102,125
Current operating lease liability754
 1,694
 15,820
 —
 18,268
Other current liabilities45,267
 223,205
 63,780
 (218) 332,034
Total current liabilities83,415
 343,140
 134,166
 (62,610) 498,111
Notes payable, long-term debt and other obligations, less current portion1,378,871
 18,827
 19,246
 (18,750) 1,398,194
Non-current employee benefits51,599
 9,426
 —
 —
 61,025
Deferred income taxes, net(17,310) 21,756
 7,992
 —
 12,438
Non-current operating lease liability6,787
 2,790
 149,719
 —
 159,296
Other liabilities, including litigation accruals and payments due under the Master Settlement Agreement388
 37,724
 35,092
 (1,317) 71,887
Total liabilities1,503,750
 433,663
 346,215
 (82,677) 2,200,951
Commitments and contingencies


 


 


 


 


Stockholders' (deficiency) equity attributed to Vector Group Ltd.(669,204) 258,709
 242,503
 (501,212) (669,204)
Non-controlling interest—
 —
 —
 —
 —
Total stockholders' (deficiency) equity(669,204) 258,709
 242,503
 (501,212) (669,204)
Total liabilities and stockholders' deficiency$834,546
 $692,372
 $588,718
 $(583,889) $1,531,747


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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


CONDENSED CONSOLIDATING BALANCE SHEETS
   December 31, 2019  
     Subsidiary   Consolidated
 Parent/ Subsidiary Non- Consolidating Vector Group
 Issuer Guarantors Guarantors Adjustments Ltd.
ASSETS:         
Current assets:         
Cash and cash equivalents$272,282
 $27,178
 $71,881
 $—
 $371,341
Investment securities at fair value129,641
 —
 —
 —
 129,641
Accounts receivable - trade, net—
 15,646
 21,313
 —
 36,959
Intercompany receivables44,043
 —
 —
 (44,043) —
Inventories—
 98,762
 —
 —
 98,762
Income taxes receivable, net—
 —
 95
 (95) —
Other current assets9,159
 9,021
 26,731
 —
 44,911
Total current assets455,125
 150,607
 120,020
 (44,138) 681,614
Property, plant and equipment, net425
 33,816
 47,919
 —
 82,160
Investments in real estate, net—
 —
 28,317
 —
 28,317
Long-term investment securities at fair value45,781
 —
 —
 —
 45,781
Investments in real estate ventures—
 —
 131,556
 —
 131,556
Operating lease right-of-use assets7,085
 4,830
 137,663
 —
 149,578
Investments in consolidated subsidiaries420,353
 238,040
 —
 (658,393) —
Goodwill and other intangible assets, net—
 107,511
 158,482
 —
 265,993
Other assets31,022
 46,416
 42,652
 —
 120,090
Total assets$959,791
 $581,220
 $666,609
 $(702,531) $1,505,089
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:         
Current liabilities:         
Current portion of notes payable and long-term debt$163,932
 $45,210
 $10,127
 $(10,000) $209,269
Current portion of fair value of derivatives embedded within convertible debt4,999
 —
 —
 —
 4,999
Intercompany payables—
 236
 43,807
 (44,043) —
Income taxes payable, net2,398
 2,835
 —
 (95) 5,138
Current payments due under the Master Settlement Agreement—
 34,116
 —
 —
 34,116
Current operating lease liability508
 2,015
 15,771
 —
 18,294
Other current liabilities52,065
 78,947
 59,202
 (897) 189,317
Total current liabilities223,902
 163,359
 128,907
 (55,035) 461,133
Notes payable, long-term debt and other obligations, less current portion1,377,108
 20,089
 20,019
 (20,000) 1,397,216
Non-current employee benefits50,806
 17,047
 —
 —
 67,853
Deferred income taxes, net(14,492) 22,620
 25,567
 —
 33,695
Non-current operating lease liability7,558
 3,402
 146,003
 —
 156,963
Other liabilities, including litigation accruals and payments due under the Master Settlement Agreement373
 41,020
 34,999
 (3,147) 73,245
Total liabilities1,645,255
 267,537
 355,495
 (78,182) 2,190,105
Commitments and contingencies


 


 


 


 


Stockholders' (deficiency) equity attributed to Vector Group Ltd.(685,464) 313,683
 310,666
 (624,349) (685,464)
Non-controlling interest—
 —
 448
 —
 448
Total stockholders' (deficiency) equity(685,464) 313,683
 311,114
 (624,349) (685,016)
Total liabilities and stockholders' deficiency$959,791
 $581,220
 $666,609
 $(702,531) $1,505,089


VECTOR GROUP LTD.44
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

   Three Months Ended June 30, 2020  
     Subsidiary   Consolidated
   Parent/   Subsidiary Non- Consolidating Vector Group
   Issuer   Guarantors Guarantors Adjustments         Ltd.        
Revenues$—
 $312,630
 $133,250
 $(120) $445,760
Expenses:         
Cost of sales—
 214,067
 90,818
 —
 304,885
Operating, selling, administrative and general expenses8,429
 16,379
 46,376
 (120) 71,064
Litigation settlement and judgment expense—
 53
 —
 —
 53
Management fee expense—
 3,114
 —
 (3,114) —
Restructuring charges—
 —
 2,961
 —
 2,961
Operating (loss) income(8,429) 79,017
 (6,905) 3,114
 66,797
Other income (expenses):         
Interest expense(28,666) (690) (106) 104
 (29,358)
Change in fair value of derivatives embedded within convertible debt1,669
 —
 —
 —
 1,669
Equity in losses from real estate ventures—
 —
 (12,260) —
 (12,260)
Equity in earnings from investments2,207
 —
 —
 —
 2,207
Equity in earnings in consolidated subsidiaries46,526
 (5,042) —
 (41,484) —
Management fee income3,114
 —
 —
 (3,114) —
Other, net5,154
 (78) 2,325
 234
 7,635
Income (loss) before provision for income taxes21,575
 73,207
 (16,946) (41,146) 36,690
Income tax benefit (expense)4,199
 (19,644) 4,529
 —
 (10,916)
Net income (loss)25,774
 53,563
 (12,417) (41,146) 25,774
Net income (loss) attributed to Vector Group Ltd.$25,774
 $53,563
 $(12,417) $(41,146) $25,774
Comprehensive income (loss) attributed to Vector Group Ltd.$26,531
 $53,713
 $(12,417) $(41,296) $26,531


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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

   Three Months Ended June 30, 2019  
     Subsidiary   Consolidated
   Parent/   Subsidiary Non- Consolidating Vector Group
   Issuer   Guarantors Guarantors Adjustments         Ltd.        
Revenues$—
 $294,621
 $243,931
 $(120) $538,432
Expenses:         
Cost of sales—
 204,461
 163,713
 —
 368,174
Operating, selling, administrative and general expenses9,515
 18,167
 65,797
 (120) 93,359
Litigation settlement and judgment expense—
 655
 —
 —
 655
Management fee expense—
 2,992
 —
 (2,992) —
Operating (loss) income(9,515) 68,346
 14,421
 2,992
 76,244
Other income (expenses):         
Interest expense(31,706) (1,043) (228) 224
 (32,753)
Change in fair value of derivatives embedded within convertible debt3,788
 —
 —
 —
 3,788
Equity in earnings from real estate ventures—
 —
 6,391
 —
 6,391
Equity in losses from investments(1,685) —
 —
 —
 (1,685)
Equity in earnings in consolidated subsidiaries66,163
 15,138
 —
 (81,301) —
Management fee income2,992
 —
 —
 (2,992) —
Other, net3,702
 447
 632
 —
 4,781
Income before provision for income taxes33,739
 82,888
 21,216
 (81,077) 56,766
Income tax benefit (expense)5,568
 (17,118) (5,909) —
 (17,459)
Net income39,307
 65,770
 15,307
 (81,077) 39,307
Net income attributed to Vector Group Ltd.$39,307
 $65,770
 $15,307
 $(81,077) $39,307
Comprehensive income attributed to Vector Group Ltd.$39,912
 $66,004
 $15,307
 $(81,311) $39,912


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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS


   Six Months Ended June 30, 2020  
     Subsidiary   Consolidated
   Parent/   Subsidiary Non- Consolidating Vector Group
   Issuer   Guarantors Guarantors Adjustments         Ltd.        
Revenues$—
 $599,818
 $300,669
 $(239) $900,248
Expenses:         
Cost of sales—
 411,357
 204,151
 —
 615,508
Operating, selling, administrative and general expenses17,593
 34,440
 109,787
 (239) 161,581
Litigation settlement and judgment expense—
 53
 —
 —
 53
Impairments of goodwill and intangible assets—
 —
 58,252
 —
 58,252
Management fee expense—
 6,228
 —
 (6,228) —
Restructuring charges—
 —
 2,961
 —
 2,961
Operating (loss) income(17,593) 147,740
 (74,482) 6,228
 61,893
Other income (expenses):         
Interest expense(63,405) (1,576) (222) 218
 (64,985)
Change in fair value of derivatives embedded within convertible debt4,999
 —
 —
 —
 4,999
Equity in losses from real estate ventures—
 —
 (18,765) —
 (18,765)
Equity in earnings from investments52,359
 —
 —
 —
 52,359
Equity in earnings in consolidated subsidiaries43,185
 (74,082) —
 30,897
 —
Management fee income6,228
 —
 —
 (6,228) —
Other, net(5,700) 2,229
 2,282
 (1,831) (3,020)
Income (loss) before provision for income taxes20,073
 74,311
 (91,187) 29,284
 32,481
Income tax benefit (expense)2,470
 (36,746) 24,338
 —
 (9,938)
Net income (loss)22,543
 37,565
 (66,849) 29,284
 22,543
Net income (loss) attributed to Vector Group Ltd.$22,543
 $37,565
 $(66,849) $29,284
 $22,543
Comprehensive income (loss) attributed to Vector Group Ltd.$23,522
 $37,864
 $(66,849) $28,985
 $23,522


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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS


   Six Months Ended June 30, 2019  
     Subsidiary   Consolidated
   Parent/   Subsidiary Non- Consolidating Vector Group
   Issuer   Guarantors Guarantors Adjustments         Ltd.        
Revenues$—
 $551,496
 $408,099
 $(239) $959,356
Expenses:         
Cost of sales—
 381,764
 272,430
 —
 654,194
Operating, selling, administrative and general expenses19,346
 34,858
 131,708
 (239) 185,673
Litigation settlement and judgment expense—
 655
 —
 —
 655
Management fee expense—
 5,985
 —
 (5,985) —
Operating (loss) income(19,346) 128,234
 3,961
 5,985
 118,834
Other income (expenses):         
Interest expense(68,254) (2,010) (457) 448
 (70,273)
Change in fair value of derivatives embedded within convertible debt14,137
 —
 —
 —
 14,137
Equity in earnings from real estate ventures—
 —
 3,952
 —
 3,952
Equity in losses from investments(323) —
 —
 —
 (323)
Equity in earnings in consolidated subsidiaries101,428
 4,724
 —
 (106,152) —
Management fee income5,985
 —
 —
 (5,985) —
Other, net10,285
 600
 1,336
 —
 12,221
Income before provision for income taxes43,912
 131,548
 8,792
 (105,704) 78,548
Income tax benefit (expense)10,348
 (32,066) (2,490) —
 (24,208)
Net income54,260
 99,482
 6,302
 (105,704) 54,340
Net income attributed to non-controlling interest—
 —
 (80) —
 (80)
Net income attributed to Vector Group Ltd.$54,260
 $99,482
 $6,222
 $(105,704) $54,260
Comprehensive income attributed to non-controlling interest$—
 $—
 $(80) $—
 $(80)
Comprehensive income attributed to Vector Group Ltd.$55,446
 $99,951
 $6,222
 $(106,173) $55,446


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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

   Six Months Ended June 30, 2020  
     Subsidiary   Consolidated
   Parent/   Subsidiary Non- Consolidating Vector Group
 Issuer    Guarantors Guarantors Adjustments Ltd.
Net cash provided by (used in) operating activities$126,021
 $325,721
 $(5,489) $(104,924) $341,329
Cash flows from investing activities:         
Sale of investment securities19,555
 —
 —
 —
 19,555
Maturities of investment securities31,574
 —
 —
 —
 31,574
Purchase of investment securities(16,867) —
 —
 —
 (16,867)
Proceeds from sale or liquidation of long-term investments23,407
 —
 —
 —
 23,407
Purchase of long-term investments(5,238) —
 —
 —
 (5,238)
Investments in real estate ventures—
 —
 (3,858) —
 (3,858)
Distributions from investments in real estate ventures—
 —
 5,172
 —
 5,172
Increase in cash surrender value of life insurance policies(340) (411) —
 —
 (751)
(Increase) decrease in restricted assets(13) 100
 —
 —
 87
Investments in subsidiaries(9,164) —
 —
 9,164
 —
Capital expenditures(20) (2,973) (3,249) —
 (6,242)
Pay downs of investment securities415
 —
 —
 —
 415
Investments in real estate, net—
 —
 (679) —
 (679)
Net cash provided by (used in) investing activities43,309
 (3,284) (2,614) 9,164
 46,575
Cash flows from financing activities:         
Proceeds from issuance of debt—
 —
 531
 —
 531
Repayments of debt(169,610) (204) (2,653) —
 (172,467)
Borrowings under revolver—
 130,641
 —
 —
 130,641
Repayments on revolver—
 (165,593) —
 —
 (165,593)
Capital contributions received—
 550
 8,614
 (9,164) —
Intercompany dividends paid—
 (97,259) (7,665) 104,924
 —
Dividends and distributions on common stock(63,478) —
 —
 —
 (63,478)
Distributions to non-controlling interest—
 —
 (448) —
 (448)
Proceeds from issuance of Vector stock52,563
 —
 —
 —
 52,563
Other80
 —
 (75) —
 5
Net cash used in financing activities(180,445) (131,865) (1,696) 95,760
 (218,246)
Net (decrease) increase in cash, cash equivalents and restricted cash(11,115) 190,572
 (9,799) —
 169,658
Cash, cash equivalents and restricted cash, beginning of period272,282
 27,730
 79,464
 —
 379,476
Cash, cash equivalents and restricted cash, end of period$261,167
 $218,302
 $69,665
 $—
 $549,134


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

(Dollars in Thousands, Except Per Share Amounts)
Unaudited


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

   Six Months Ended June 30, 2019  
     Subsidiary   Consolidated
   Parent/   Subsidiary Non- Consolidating Vector Group
 Issuer    Guarantors Guarantors Adjustments Ltd.        
Net cash provided by operating activities$78,661
 $148,639
 $10,158
 $(139,356) $98,102
Cash flows from investing activities:         
Sale of investment securities12,942
 —
 —
 —
 12,942
Maturities of investment securities28,610
 —
 —
 —
 28,610
Purchase of investment securities(44,222) —
 —
 —
 (44,222)
Investments in real estate ventures—
 —
 (21,908) —
 (21,908)
Investments in real estate, net—
 —
 (1,153) —
 (1,153)
Purchase of subsidiaries—
 —
 (668) —
 (668)
Distributions from investments in real estate ventures—
 —
 23,200
 —
 23,200
Increase in cash surrender value of life insurance policies(385) (404) —
 —
 (789)
(Increase) decrease in restricted assets(15) 683
 —
 —
 668
Pay downs of investment securities545
 —
 —
 —
 545
Proceeds from sale of fixed assets—
 8
 —
 —
 8
Investments in subsidiaries(27,482) —
 —
 27,482
 —
Capital expenditures—
 (2,753) (3,567) —
 (6,320)
Net cash used in investing activities(30,007) (2,466) (4,096) 27,482
 (9,087)
Cash flows from financing activities:         
Deferred financing costs—
 (33) —
 —
 (33)
Repayments of debt(230,000) (621) (150) —
 (230,771)
Borrowings under revolver—
 172,224
 —
 —
 172,224
Repayments on revolver—
 (169,727) —
 —
 (169,727)
Capital contributions received—
 575
 26,907
 (27,482) —
Intercompany dividends paid—
 (102,739) (36,617) 139,356
 —
Dividends and distributions on common stock(118,748) —
 —
 —
 (118,748)
Distributions to non-controlling interest—
 —
 (285) —
 (285)
Net cash used in financing activities(348,748) (100,321) (10,145) 111,874
 (347,340)
Net (decrease) increase in cash, cash equivalents and restricted cash(300,094) 45,852
 (4,083) —
 (258,325)
Cash, cash equivalents and restricted cash, beginning of period474,880
 23,849
 93,000
 —
 591,729
Cash, cash equivalents and restricted cash, end of period$174,786
 $69,701
 $88,917
 $—
 $333,404




ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)


Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of Vector Group Ltd.’s financial statements with a narrative from our management’s perspective. Our MD&A is divided into the following sections:
•Overview
•Recent Developments
•Results of Operations
•Summary of Real Estate Investments
•Liquidity and Capital Resources

Please read this discussion along with our MD&A and audited financial statements as of and for the year ended December 31, 20192020 and Notes thereto, included in our 20192020 Annual Report on Form 10-K, and our Condensed Consolidated Financial Statements and related Notes as of and for the quarterly period and six months ended June 30, 20202021 and 2019.2020.

Overview
We are a holding company and are engaged principally in two business segments:
•Tobacco: the manufacture and sale of cigarettes in the United States through our Liggett Group LLC (“Liggett”) and Vector Tobacco Inc. (“Vector Tobacco”) subsidiaries, and
•Real Estate: the real estate services, technology and investment business through our subsidiary New Valley, LLC (“New Valley”), which (i) owns Douglas Elliman Realty LLC (“Douglas Elliman”), (ii) has interests in numerous real estate projects across the United States and (iii) is seeking to acquire or invest in additional real estate services, technologies, properties or projects. Douglas Elliman operates the largest residential brokerage company in the New York metropolitan area and also conducts residential real estate brokerage operations in Florida, California, Connecticut, Massachusetts, Colorado, New Jersey and Texas.
Our tobacco subsidiaries’ cigarettes are produced in 100 combinations of length, style and packaging. Liggett’s current brand portfolio includes:
•Eagle 20’s
•Pyramid
•Montego
•Grand Prix 
•Liggett Select
•Eve
•USA and various Partner Brands and private label brands.
The discount segment is a challenging marketplace, with consumers having less brand loyalty and placing greater emphasis on price. Liggett’s competition is divided into two segments. The first segment consists of the three largest manufacturers of cigarettes in the United States: Philip Morris USA Inc., which is owned by Altria Group, Inc., RJ Reynolds Tobacco Company, which is owned by British American Tobacco Plc, and ITG Brands LLC, which is owned by Imperial Brands Plc. These three manufacturers, while primarily premium cigarette-based companies, also produce and sell discount cigarettes. The second segment of competition is comprised of a group of smaller manufacturers and importers, most of which sell deep discount cigarettes.
    
45

COVID-19 Pandemic

The COVID-19 pandemic continues to evolve and disrupt normal activities in many segments of the U.S. economy even as COVID-19 vaccines have been and continue to be administered in 2021. Many uncertainties continue to surround the pandemic, including risks associated with the timing and extent of vaccine administration and the impact of COVID-19 variants, the duration of the pandemic and the length of immunity. Thus, the ultimate overall impact on our operations and real estate ventures is uncertain and we are continuing to carefully evaluate potential outcomes and working to mitigate risks.

The following provides a summary of our actions in our two segments - Tobacco and Real Estate - since COVID-19 was declared a pandemic in March 2020.

Impact of COVID-19 on Tobacco Segment. We believe many adult tobacco consumers have had incremental discretionary spending availability during the COVID-19 pandemic as a result of a variety of factors, including federal government stimulus payments and enhanced unemployment benefit payments enacted in response to the COVID-19 pandemic, and lower non-tobacco discretionary spending due to their stay-at-home practices.

Although our Tobacco segment has not experienced a material adverse impact to date by the COVID-19 pandemic, there is continued uncertainty as to how the COVID-19 pandemic (including vaccine administration and the impact of variants as well as changes in COVID-19-related restrictions and guidelines) may impact adult tobacco consumers in the future. The majority of retail stores in which our tobacco products are sold, including convenience stores, have been deemed to be essential businesses by authorities and have remained open.

Our management also continues to monitor the macroeconomic risks of the COVID-19 pandemic and its effect on adult tobacco consumers purchasing behaviors, including mix between premium and discount brand purchases. Our Eagle 20’s and Montego brands are priced in the deep discount category and our other brands are primarily priced in the traditional discount category.

To date, we have not experienced any material disruptions to our supply or distribution chains and have not experienced any material adverse effects associated with governmental actions to restrict consumer movement or business operations. However, our suppliers and members of our distribution chain may be subject to government action requiring facility closures and remote working protocols. We continue to monitor the risk that a supplier, a distributor or any other entity within our supply and distribution chain closes temporarily or permanently.

Impact of COVID-19 on Real Estate Segment. The three and six months ended June 30, 2021 demonstrated continued strength in the residential real estate market, which has improved markedly from a sharp decline in transactions, primarily in the second quarter of 2020, due to factors related to the COVID-19 pandemic. As Douglas Elliman’s markets began reopening and vaccines for COVID-19 have become available, and consistent with home buying trends in the U.S., Douglas Elliman’s business improved significantly in markets complementary to New York City, including South Florida (Miami and Palm Beach), the New York City suburbs (Long Island, Westchester County and Connecticut), the Hamptons, Los Angeles, and Aspen and, in 2021, in New York City.

In 2020, and, in particular, the second quarter of 2020, Douglas Elliman experienced a severe decline in closed sales volume in New York City. Therefore, as a result of the impact of COVID-19 pandemic on the New York City market, and combined with the increased demand for existing-homes in other areas of the U.S., the percentage of Douglas Elliman’s brokerage revenues from the New York City market declined from approximately 46% in 2019 to approximately 29% for the twelve months ended June 30, 2021. In addition, New Valley has investments in multiple real estate ventures and properties in the New York metropolitan area, which had a carrying value of $27,347 at June 30, 2021. 

Beginning in April 2020, as a response to the impact of the COVID-19 pandemic, we made significant operating adjustments at Douglas Elliman, including a reduction of brokerage personnel of approximately 25% and reductions of other administrative expenses, as well as a reduction, deferral or elimination of certain office lease expenses. As markets have reopened and Douglas Elliman’s revenues have significantly increased, Douglas Elliman’s expenses have increased from the comparable 2020 periods. These increases were primarily the result of increased personnel expenses (associated with both discretionary compensation as well as the reinstatement of salary levels) and advertising expenses (associated with increased listings in 2021). Despite increases in expenses, which began during the fourth quarter of 2020, Douglas Elliman operated at a lower cost basis during the three and six months ended June 30, 2021 when compared to the 2019 comparable periods.

The circumstances around the potential impact of COVID-19 pandemic on our Real Estate segment remain fluid and we continue to actively monitor the impact of the pandemic, including risks associated with the timing and extent of vaccine administration and the impact of COVID-19 variants, the duration of the pandemic and how long immunity lasts. Therefore, we are unable to predict the ultimate impact of the COVID-19 pandemic and related macroeconomic trends (including, in particular, the virtual work trend arising as a result of the COVID-19 pandemic and the availability of vaccines), or other factors resulting therefrom on the future financial condition, results of operations and cash flows from our Real Estate segment.

46

Recent Developments
COVID-19 Pandemic.Issuance of Senior Secured Notes due 2029. The recent outbreakIn January 2021, we issued $875,000 in aggregate principal of our 5.75% Senior Secured Notes due 2029 (“5.75% Senior Secured Notes”) in a private offering exempt from the registration requirements of the novel coronavirus, COVID-19, which was declaredSecurities Act of 1933, as amended (the “Securities Act”), to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to persons outside the United States in compliance with Regulation S under the Securities Act. The 5.75% Senior Secured Notes pay interest on a pandemic bysemi-annual basis at a rate of 5.75% per year and mature on February 1, 2029. Prior to February 1, 2024, we may redeem some or all of the World Health Organization5.75% Senior Secured Notes at any time at a make-whole redemption price and, thereafter, we may redeem some or all of the 5.75% Senior Secured Notes at a premium that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. The aggregate net proceeds from the issuance of the 5.75% Senior Secured Notes were approximately $855,500 after deducting offering expenses. We used the net proceeds of the issuance, together with cash on March 11, 2020, has ledhand, to adverse impacts on the U.S. and global economies and created economic uncertainty. Although much uncertainty still surrounds the pandemic, including its duration and ultimate overall impact on our operations and real estate ventures, we are carefully evaluating potential outcomes and working to mitigate risks. As with many other companies, our operations have been affected by COVID-19. We have implemented remote working for many employees and adopted the social distancing protocols recommended by public health authorities. The following provides a summaryredeem all of our actionsoutstanding 6.125% Senior Secured Notes due 2025, including accrued interest and any premium thereon, and to pay fees and expenses in our two segments -connection with the offering of the 5.75% Senior Secured Notes.
Liggett Credit Facility. On March 22, 2021, Liggett, 100 Maple LLC (“Maple”) and Vector Tobacco entered into Amendment No. 4 and Real Estate - since COVID-19 was declared a pandemic.Joinder to Third Amended and Restated Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as agent and lender.

The existing credit agreement was amended to, among other things, (i) add Vector Tobacco as a borrower under the Restated Credit Agreement, (ii) extend the maturity of the Credit Agreement to March 22, 2026, and (iii) increase the amount of the maximum credit line thereunder from $60,000 to $90,000. As of June 30, 2021, approximately $84,600 was available for borrowing with no outstanding balance under the Restated Credit Agreement.
ImpactMontego. Since August 2020, Liggett has expanded the distribution of COVID-19 on Tobacco Segment.its Montego To date, we have not experienced any material disruptions to our supply or distribution chains, and have not experienced any material adverse effects associated with governmental actions to restrict consumer movement or business operations. However, our suppliers and members of our distribution chain may be subject to government action requiring facility closures and remote working protocols. The majority of retail stores in which our tobacco products are sold, including convenience stores, have been deemed to be essential businessesdeep discount brand by authorities and have remained open.   We continue to monitor the risk that a supplier, a distributor or any other entity within our supply and distribution chain closes temporarily or permanently.

Although our tobacco segment has not been negatively impacted to date by COVID-19, there remains uncertainty as to how the pandemic may ultimately impact the market. We continue to monitor the macro-economic risks of COVID-19 and the effect on tobacco consumers, including purchasing behavior changes and changes in sales volumes and mix within the discount category.  Our EAGLE 20’s brand is priced17 states, primarily located in the deep discount categorysoutheast and our other brands are primarily priced in the traditional discount category.



midwest. Impact of COVID-19 on Real Estate Segment.Montego  Douglas Elliman is the largest residential real estate broker in the New York metropolitan area and approximately 70% of its revenues were derived from this region in 2018 and 2019. In addition, New Valley has investments in multiple real estate ventures and properties in the New York metropolitan area, which had a carrying value of $67,058 at June 30, 2020.  Published reports and data indicate that the New York metropolitan area was initially impacted more than any other area in the United States. Consequently, various governmental agencies in the New York metropolitan area and in other markets where Douglas Elliman operates, instituted quarantines, “pause” orders, “shelter-in-place” rules, restrictions on travel and restrictions on the types of businesses that could operate. These restrictions adversely impacted Douglas Elliman’s ability to conduct business duringLiggett’s third-largest brand for the three months ended June 30, 2020.2021. Prior to August 2020, For example,Montego was sold in select targeted markets in four states. Montego’s volume represented approximately 12% for the three months ended June 30, 2021 compared to approximately 5% of total unit volume sales for the three months ended June 30, 2020 and approximately 12% of Liggett’s unit volume for the six months ended June 30, 2021 compared to approximately 5% for the six months ended June 30, 2020.
Property Technology (“PropTech”) Investments. New Valley Ventures’ made the following investments (all of which are currently $1,000 or less) during the six months ended June 30, 2021.
•Rechat – an investment in February 2021 in a mobile-centric real estate agent marketing, customer relationship management and transaction-management software. This investment aligns strategically with Douglas Elliman’s agents were restricted from performing in-person showings of propertiemulti-year services agreement with Rechat for its agents.
•s or conducting open houses in most of Douglas Elliman’s markets from March 2020 to June 2020. Douglas Elliman experienced a severe decline in closed sales volume in New York City beginningPurlin – aninvestment in March 2020 which has continued. We anticipate2021 in an automated intelligence platform to aid in home buying.
•EVPassport – aninvestment in March 2021 in anelectronic vehicle charging platform.
•Humming Homes – an investment in March 2021 in a tech-enabled home management service.
•MoveEasy – an investment in June 2021 in a client-facing digital concierge service designed to assist clients move into and “set up” their new homes, while offering additional services to maintain their homes. MoveEasy is delivered in a white-labeled format in partnership with residential real estate brokerages in a package that sales volume in New York City may continue to be slow throughfeatures the fall of 2020,name and possibly longer.

Beginning in April 2020, we made significant operating adjustments at Douglas Elliman, including a reduction of personnel expense of approximately 25% and reductions of other administrative expenses, as well as a reduction, deferral or elimination of certain office lease expenses. While we continue to evaluate other expense reduction measures, to the extent Douglas Elliman’s business improves in the third quarter, we will begin to relinquish, as appropriate, somecontact information of the second quarter expense reductions, including advertising and personnel expenses.

The COVID-19 pandemic could continue to have a material impact on our Real Estate segment; the likelihood and magnitude of a material impact increases with the amount of time the virus affects activity levels in locations in which Douglas Elliman operates. Therefore, we are unable to predict the ultimate impact of the COVID-19 pandemic on the future financial condition, results of operations and cash flows from our Real Estate segment.

selling agent.
Ladenburg Thalmann Financial Services Inc. (“LTS”).
•On November 11, 2019, LTS entered intoThe Lab PropTech Fund – an Agreement and Plan of Merger with Advisor Group. On February 14, 2020, the merger was completed, and each share of LTS common stock was convertedinvestment in June 2021 into a cash payment of $3.50 per share. We received proceeds of $53,169 from our 15,191,205 common shares of LTS,Miami-based fund that will invest in emerging technology companies serving emerging real estate and we recorded a pre-tax gain of $53,052 from the transaction in the first quarter of 2020. We also tendered 240,000 shares of LTS’s 8% Series A Cumulative Redeemable Preferred Stock for redemption and received an additional $6,009 in March 2020. At the closing of the transaction, our Executive Vice President resigned as Chairman, President and Chief Executive Officer of LTS, and our management agreement with LTS was terminated.construction industries.

Maturity of 5.5% Variable Interest Senior Convertible Debentures due 2020. In April 2020, our 5.5% Variable Interest Senior Convertible Debentures due 2020 matured and we retired them with a cash payment for the principal balance of $169,610.

Issuance of Common Stock. On May 14, 2020, we announced the pricing of our underwritten public offering (the “Offering”) of 5,000,000 shares of our common stock. We received approximately $53,000 in proceeds from the offering.

Recent Developments in Litigation
The cigarette industry continues to be challenged on numerous fronts. New cases continue to be commenced against Liggett and other cigarette manufacturers. Liggett could be subjected to substantial liabilities and bonding requirements from litigation relating to cigarette products. Adverse litigation outcomes could have a negative impact on our ability to operate due to their impact on cash flows. It is possible that there could be adverse developments in pending cases including the certification of additional class actions. An unfavorable outcome or settlement of pending tobacco-related litigation could encourage the commencement of additional litigation. In addition, an unfavorable outcome in any tobacco-related litigation could have a material adverse effect on our consolidated financial position, results of operations or cash flows. Liggett could face difficulties in obtaining a bond to stay execution of a judgment pending appeal.
47

Mississippi Dispute. In January 2016, the Attorney General for Mississippi filed a motion in Chancery Court in Jackson County, Mississippi to enforce the March 1996 settlement agreement (the “1996 Agreement”) alleging that Liggett owes Mississippi at least $27,000 in compensatory damages and interest. In April 2017, the Chancery Court ruled, over Liggett’s objections, that the 1996 Agreement should be enforced and referred the matter first to arbitration and then to a Special Master for further proceedings to determine the amount of damages, if any, to be awarded. In April 2021, following confirmation of the final arbitration award, the parties stipulated that the unpaid principal (exclusive of interest) purportedly due from Liggett to Mississippi pursuant to the 1996 Agreement (from inception through 2020 - the final contract year) is approximately $16,700, subject to Liggett’s right to litigate and/or appeal the enforceability of the 1996 Agreement (and all issues other than the calculation of such principal amount).
In September 2019, the Special Master held a hearing regarding Mississippi’s claim for pre and post-judgment interest. In June 2021, the Special Master issued a draft report with proposed findings that pre-judgment interest in the amount of approximately $18,600, is due from Liggett from April 2005 - July 9, 2021. At the request of the Special Master, the parties provided comments to the draft report and the matter is sub judice. The Special Master’s report, once finalized, is subject to objections by the parties and further review and hearing by the trial court before a final judgment may be entered. Once final judgment is entered, additional interest amounts will accrue if the judgment is not overturned on appeal. Liggett continues to believe that the April 2017 Chancery Court order is in error because the most favored nations provision in the 1996 Agreement eliminated all of Liggett’s payment obligations to Mississippi, and it reserved all rights to appeal this and other issues at the conclusion of the case. In the event Liggett appeals an adverse judgment, the posting of a bond may be required.
Liggett may be required to make additional payments to Mississippi and Texas which could have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.
See “Legislation and Regulation” in Item 2 of the MD&A for further information on litigation.

Critical Accounting Policies

There are no material changes except for the items listed below from the critical accounting policies set forth in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K, for the year ended December 31, 2019.2020. Please refer to that section and the information below for disclosures regarding the critical accounting policies related to our business.



Current Expected Credit Losses. On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, therefore, our measurement of credit losses for most financial assets and certain other instruments has been modified as discussed in Note 3 to our condensed consolidated financial statements.

Goodwill and Indefinite Life Assets. Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment on an annual basis, or whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable.

During the first quarter of 2020, we performed quantitative assessments of the goodwill associated with the Douglas Elliman reporting unit and its trademark intangible asset in conjunction with our quarterly review for indicators of impairment.

Based on the results of these assessments, we determined that the estimated fair value of the Douglas Elliman reporting unit in our Real Estate segment, for which the related goodwill had a carrying value of $78,008, exceeded the fair value, resulting in a non-cash goodwill impairment charge of $46,252. In addition, we recognized a non-cash impairment charge of $12,000 for intangible assets related to the Douglas Elliman trademark. These non-cash impairment charges are the result of consideration of potential impacts of COVID-19, including the possibility of an economic recession, on Douglas Elliman’s business.

If we fail to meet the financial projections used in the quantitative assessments of goodwill and trademark intangible asset in future periods or the impacts of COVID-19 are more severe than expected, this would result in additional impairment charges related to the Company’s goodwill and trademark intangible asset.


Results of Operations

The following discussion provides an assessment of our results of operations, capital resources and liquidity and should be read in conjunction with our condensed consolidated financial statements included elsewhere in this report. The condensed consolidated financial statements include the accounts of Liggett, Vector Tobacco, Liggett Vector Brands, New Valley and other less significant subsidiaries.

For purposes of this discussion and other consolidated financial reporting, our business segments for the three and six months ended June 30, 20202021 and 20192020 were Tobacco and Real Estate. The Tobacco segment consisted of the manufacture and sale of cigarettes. The Real Estate segment included our investment in New Valley, which includes ownership of Douglas Elliman, investments in real estate and investments in real estate ventures.
Three Months Ended Six Months Ended Three Months EndedSix Months Ended
June 30, June 30, June 30,June 30,
2020 2019 2020 2019 2021202020212020
Revenues:
        
Revenues:
Tobacco$312,510
 $294,501
 $599,579
 $551,257
 Tobacco$329,496 $312,510 $597,959 $599,579 
Real estate133,250
 243,931
 300,669
 408,099
 Real estate400,033 133,250 675,334 300,669 
Total revenues$445,760
 $538,432
 $900,248
 $959,356
 Total revenues$729,529 $445,760 $1,273,293 $900,248 
Operating income (loss):
        
Operating income (loss):
Tobacco$79,309
(1) 
$68,651
(3) 
$148,495
(4) 
$128,795
(6) 
Tobacco$103,179 $79,309 (1)$184,778 (3)$148,495 (4)
Real estate(6,875)
(2) 
14,453
 (74,350)
(5) 
4,044
 Real estate42,362 (6,875)(2)57,622 (74,350)(5)
Corporate and Other(5,637) (6,860) (12,252) (14,005) Corporate and Other(8,465)(5,637)(15,121)(12,252)
Total operating income$66,797
 $76,244
 $61,893
 $118,834
 Total operating income$137,076 $66,797 $227,279 $61,893 
(1) Operating income includesincluded $53 of litigation settlement and judgement expense.
(2) Operating loss included $2,961 of restructuring charges.
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(3)Operating income included$2,722 received from a litigation settlement associated with the MSA (which reduced cost of sales) and $5 of litigation settlement and judgment expense.
(2) Operating loss includes $2,961 of restructuring charges.
(3) (4) Operating income includes $655 of litigation settlement and judgment expense.
(4) Operating income includesincluded $53 of litigation settlement and judgmentjudgement expense.
(5)Operating loss includesincluded $58,252 of impairment charges related to the impairments of goodwill and other intangible assets and $2,961 of restructuring charges.
(6) Operating income includes $655 of litigation settlement and judgment expense.




Three Months Ended June 30, 20202021 Compared to Three Months Ended June 30, 20192020
Revenues. Total revenues were $729,529 for the three months ended June 30, 2021 compared to $445,760 for the three months ended June 30, 2020 compared to $538,432 for the three months ended June 30, 2019.2020. The $92,672 (17.2%$283,769 (63.7%) declineincrease in revenues was primarily due to a $110,681 decline$266,783 increase in Real Estate revenues, which was primarily related to Douglas Elliman and a decline in Douglas Elliman’s brokerage revenues, offset by a $18,009$16,986 increase in Tobacco revenues.
Cost of sales. Total cost of sales was $500,410 for the three months ended June 30, 2021 compared to $304,885 for the three months ended June 30, 2020 compared to $368,174 for the three months ended June 30, 2019.2020. The $63,289 (17.2%$195,525 (64.1%) declineincrease in cost of sales was primarily due to a $72,895 decline$203,447 increase in Real Estate cost of sales, which was primarily related to a decline in Douglas Elliman’s commissions.Elliman. This was offset by a $9,606 increase$7,922 decline in Tobacco cost of sales.
Expenses. Operating expenses were $74,078$92,043 for the three months ended June 30, 20202021 compared to $94,014$74,078 for the same period last year. The $19,936 (21.2%$17,965 (24.3%) declineincrease in operating expenses was due to a $16,458 decline$14,099 increase in Real Estate expenses, primarily at Douglas Elliman, includingwhich included $2,961 of restructuring charges of $2,961 for the three months ended June 30, 2020,expenses, a $2,255 decline$1,038 increase in Tobacco expenses, including a decline in litigation settlement and judgment expense of $602, and a $1,223 decline$2,828 increase in Corporate and Other expenses.
Operating income. Operating income was $66,797$137,076 for the three months ended June 30, 20202021 compared to $76,244$66,797 for the same period last year. The $9,447 (12.4%$70,279 (105.2%) declineincrease in operating income was due to a $21,328 decline$49,237 increase in Real Estate operating income, primarily related to Douglas Elliman.Elliman, and a $23,870 increase in Tobacco operating income. This was offset by a $10,658an increase in Tobacco operating income and a decline of $1,223$2,828 in Corporate and Other operating loss.
Other expenses. Other expenses were $30,107$4,911 and $19,478$30,107 for the three months ended June 30, 20202021 and 2019,2020, respectively. For the three months ended June 30, 2021, other expenses primarily consisted of interest expense of $28,115. This was offset by equity in earnings from real estate ventures of $16,685, other income of $5,578 and equity in earnings from investments of $941. For the three months ended June 30, 2020,, other expenses primarily consisted of interest expense of $29,358 and equity in losses from real estate ventures of $12,260. This was offset by income of $1,669 from changes in fair value of derivatives embedded within convertible debt, other income of $7,635 and equity in earnings from investments of $2,207. For the three months ended June 30, 2019, other expenses primarily consisted of interest expense of $32,753 and equity in losses from investments of $1,685. This was offset by income of $3,788 from changes in fair value of derivatives embedded within convertible debt, other income of $4,781, and equity in earnings from real estate ventures of $6,391.
Income before provision for income taxes. Income before income taxes was $36,690$132,165 and $56,766$36,690 for the three months ended June 30, 20202021 and 2019,2020, respectively.
Income tax expense. Income tax expense was $10,916$38,860 and $17,459$10,916 for the three months ended June 30, 20202021 and 2019,2020, respectively. Our provision for income taxes in interim periods is based on expected income, statutory rates, permanent differences, valuation allowances against deferred tax assets, and any tax planning opportunities available to us. For interim financial reporting, we estimate the annual effective income tax rate based on full year projections and apply the annual effective income tax rate against year-to-date pretax income to record income tax expense, adjusted for discrete items, if any. We refine annual estimates as new information becomes available. For the three months ended June 30, 2020, the annual effective tax rate applied to year-to-date income resulted in tax expense which was reduced by discrete items. The discrete items of $32 primarily relates to changes in value of certain contingent consideration and stock-based compensation.
Tobacco.
Tobacco revenues. Liggett increased the list price of EAGLEEagle 20’s, Pyramid, Liggett Select and Grand Prix by $0.11$0.14 per pack on June 22, 2020, $0.0828, 2021, $0.14 per pack in FebruaryJanuary 2021,by $0.13 per pack in November 2020, $0.11 per pack in June 2020, and $0.08 per pack in October 2019. Liggett also increased the list price of PYRAMID, LIGGETT SELECT, EVE and GRAND PRIX by $0.11 per pack on June 22, 2020, $0.08 per pack in February 2020, $0.08 per pack in October 2019, and $0.06 per pack in June 2019.2020.
All of our Tobacco sales were in the discount category in 20202021 and 2019.2020. For the three months ended June 30, 2020,2021, Tobacco revenues were $312,510$329,496 compared to $294,501$312,510 for the three months ended June 30, 2019.2020. Revenues increased by $18,009 (6.1%$16,986 (5.4%) due primarily to an increase in the average selling price of our brands for the three months ended June 30, 2020 along with2021 partially offset by a 1.0% (24.51.9% (46 million units) increasedecline in sales volume.
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Despite recent pricing increases, Eagle 20’s remains Liggett’s primary low-cost cigarette brand and its percentage of Liggett’s total unit volume sales has declined slightly from 63% in the three months ended June 30, 2020 to 60% for the three months ended June 30, 2021. Pyramid, Liggett’s second-largest brand, declined from 24% of total unit volume sales in the three months ended June 30, 2020 to 21% for the three months ended June 30, 2021. Montego is Liggett’s third largest brand and increased from approximately 5% of total unit volume sales in the three months ended June 30, 2020 to approximately 12% for the three months ended June 30, 2021.
Tobacco cost of sales. The major components of our Tobacco cost of sales were as follows:
Three Months Ended
June 30,
20212020
Manufacturing overhead, raw materials and labor$33,277 $32,669 
Customer shipping and handling1,885 1,361 
Federal Excise Taxes, net118,735 121,170 
FDA expense5,622 6,116 
MSA expense, net of market share exemption46,626 52,751 
Total cost of sales$206,145 $214,067 
    Three Months Ended 
    June 30, 
    2020 2019 
      
Manufacturing overhead, raw materials and labor $32,669
 $33,197
 
Customer shipping and handling  1,361
 1,503
 
Federal Excise Taxes, net  121,170
 119,943
 
FDA expense  6,116
 6,048
 
MSA expense, net of market share exemption  52,751
 43,770
 
Total cost of sales  $214,067
 $204,461
 
        

The Tobacco segment’s MSA expense is included in cost of sales. Under the terms of the MSA, we have no payment obligations except to the extent that our tobacco subsidiaries’ market share of the U.S. Cigarette market exceeds 1.92%. The calculation of our benefit from the MSA is an estimate based on U.S. domestic taxable cigarette shipments. As of June 30, 2020,2021, we estimate taxable shipments in the U.S. will decline by 6.0% in 2021. As of June 30, 2020, we estimated taxable shipments in the U.S. would decline by 4.5% in 2020.2020 and, the actual change in 2020 taxable shipments was an increase of 2.0%. Our annual MSA liabilityexpense changes by approximately $1,700$1,650 for each percentage change in the estimated shipment volumes in the U.S. market.
Inflationary pressures impact Liggett’s cost of sales through increases in MSA expense as well as manufacturing costs. Liggett’s MSA expense is subject to an annual inflation adjustment, which is the greater of the U.S. CPI rate or 3% and inflationary pressures in the U.S. economy could also increase Liggett’s cost of sales. For the three months ended June 30, 2020, the estimated decline in taxable shipments in excess of the annual MSA2021, Liggett’s management assumed an inflation adjustment resulted in an increase in costto MSA expense of sales of approximately $470 because3.4% for the value of Liggett’s market share exemption declined compared tosix months ended June 30, 2021 and assumed 3% for the three months ended June 30, 2019.2020. The actual inflation adjustment to the MSA in 2020 was 3%. In addition, the largest component of Liggett’s manufacturing costs is leaf tobacco and other raw materials. Our annual MSA expense increases by approximately $1,800 for each 1% percentage increase of inflation in excess of 3%. In addition, the largest component of Liggett’s manufacturing costs is leaf tobacco and other raw materials. In recent years, due to declining prices of leaf tobacco as well as efficiencies gained from technological innovation in Liggett’s factory, Liggett’s raw material costs have been flat and, therefore, has not been impacted by inflation. However, during 2021, Liggett experienced a 2.1% inflation increase for the three months ended June 30, 2021 and management anticipates the inflationary trends could continue.
Tobacco gross profit was $123,351 for the three months ended June 30, 2021 compared to $98,443 for the three months ended June 30, 2020, compared to $90,040 for the three months ended June 30, 2019 an increase of $24,908 (25.3%). The increase in gross profit for the three months ended June 30, 2020 is2021 was primarily attributable to increased pricing associated with the EAGLEEagle 20’s and Pyramid brands. For brands more than offsetting the three months ended June 30, 2020, EAGLE 20’s remains Liggett’s primary low-cost cigarette brand and its percentageimpact of Liggett’s totala 1.9% decline in unit volume sales has increased from 61% in the three months ended June 30, 2019 to 63% for the three months ended June 30, 2020. Pyramid, Liggett’s second-largest brand, declined from 26% of total unit volume sales in the three months ended June 30, 2019 to 24% for the three months ended June 30, 2020.sales. As a percentage of revenue (excluding Federal Excise Taxes), Tobacco gross profit declinedincreased from 51.6% in the 2019 period to 51.4% in the 2020 period to 58.5% in the 2021 period. The increase in gross profit was primarily as athe result of the continued growth of the lower-priced EAGLE 20’s brandincreased net pricing as well as a higherlower per unit MSA expense associated with the increases in unit volume above the market share exemption.  This was offset by price increases.expense.
Tobacco expenses. Tobacco operating, selling, general and administrative expenses, excluding settlements and judgments, were $19,081$20,172 and $20,734$19,081 for the three months ended June 30, 20202021 and 2019,2020, respectively. The declineincrease of $1,653 is primarily$1,091 was mainly due to decreasedincreased travel and marketing expenses incurred duringrelated to the lifting of COVID-19 pandemic related restrictions, and the timing ofhigher compensation expenses. accruals, partially offset by a decrease in professional fees and expenses associated with Colorado’s minimum price legislation.Total tobacco product liability legal expenses, including settlements and judgments, were $1,641$1,542 and $2,274$1,641 for the three months ended June 30, 20202021 and 2019,2020, respectively.
Tobacco operating income. Tobacco operating income was $79,309$103,179 for the three months ended June 30, 20202021 compared to $68,651$79,309 for the same period last year. The increase in operating income for the three months ended June 30, 2020 of $10,658 is$23,870 (30.1%) was primarily attributable to higher gross profit, as discussed above, and lowerpartially offset by increased operating, selling, general and administrative expenses.
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Real Estate.
Real Estate revenues. Real Estate revenues were $133,250$400,033 and $243,931$133,250 for the three months ended June 30, 20202021 and 2019,2020, respectively. Real Estate revenues declinedincreased by $110,681 (45.4%),$266,783, which was primarily related to a declinean increase of $107,080$252,779 in Douglas Elliman’s commission income. We believeand other brokerage income, reflecting increased revenues from existing home sales due to home-buying trends in Douglas Elliman’s markets.
In 2020, and, in particular, the second quarter of 2020, Douglas Elliman experienced a severe decline was attributable to two events: (i)in closed sales volume in New York City. Therefore, as a result of the impact of the COVID-19 pandemic and (ii) the acceleration of real estate closings inon the New York City market, duringand combined with the increased demand for existing-homes in other areas of the U.S., the percentage of Douglas Elliman’s brokerage revenues from the New York City market declined from approximately 46% in 2019 to approximately 29% for the twelve months ended June 30, 2021.
The three months ended June 30, 2021 demonstrated continued strength in the residential real estate market, which has improved markedly from a sharp decline in transactions, primarily in the second quarter of 2020, due to factors related to the COVID-19 pandemic. As Douglas Elliman’s markets began reopening and vaccines for COVID-19 have become available, and consistent with home buying trends in the U.S., Douglas Elliman’s business improved significantly in markets complementary to New York City, including South Florida (Miami and Palm Beach), the New York City suburbs (Long Island, Westchester County and Connecticut), the Hamptons, Los Angeles, and Aspen and, in 2021, in New York City. Douglas Elliman’s commission and other brokerage income generated from the sales of existing homes increased by $98,734 in the Southeast region, $69,991 in New York City, $31,494 in the West (California and Colorado) region, and $30,788 in the Northeast region, which excludes New York City. In addition, Douglas Elliman’s revenues from Development Marketing increased by $21,772 for the three months ended June 30, 2019 as a result of the increased transfer and “mansion” tax associated with resales of homes of more than $1,000, effective July 1, 2019.2021.


Real Estate revenues and cost of sales for the three months ended June 30, 2021 and 2020, and 2019respectively, were as follows:
Three Months EndedThree Months Ended
June 30,June 30,
2020 201920212020
Real Estate Revenues:
   
Real Estate Revenues:
Commission and other brokerage income$123,254
 $230,334
Commission and other brokerage income$376,033 $123,254 
Property management revenue8,832
 10,218
Property management revenue9,901 8,832 
Title fees843
 2,400
Escrow and title feesEscrow and title fees6,041 843 
Revenues from investments in real estateRevenues from investments in real estate6,750 — 
Sales on facilities primarily from Escena321
 979
Sales on facilities primarily from Escena1,308 321 
Total real estate revenues$133,250
 $243,931
 Total real estate revenues$400,033 $133,250 
   
Real Estate Cost of Sales:   Real Estate Cost of Sales:
Real estate commissions$90,116
 $162,192
Real estate commissions$283,652 $90,116 
Cost of sales from investments in real estateCost of sales from investments in real estate6,744 — 
Escrow and title feesEscrow and title fees2,867 139 
Cost of sales on facilities primarily from Escena563
 871
Cost of sales on facilities primarily from Escena1,002 563 
Title fees139
 650
Total real estate cost of sales$90,818
 $163,713
 Total real estate cost of sales$294,265 $90,818 
___________________________________

BrokerageReal Estate cost of sales. Real Estate cost of sales were $294,265 and $90,818 for the three months ended June 30, 2021 and 2020, respectively. Real Estate cost of sales increased by $203,447, primarily related to a $193,536 increase in Douglas EllimanElliman’s real estate agent commissions, decreased by $72,076which resulted from an increase in sales volume. Real estate brokerage commissions increased from 73.1% for the three months ended June��30, 2020 to 75.4% for the three months ended June 30, 2021. This was primarily due to the increase in the percentage of revenues from the Southeast (Florida) and Western (primarily California) regions which traditionally pay higher commission percentages than the New York City region.
Real Estate segment gross profit increased from $42,432 for the three months ended June 30, 2020 as a result of a decline in sales volume.
Douglas Elliman’s gross margin on real estate brokerage income declined from 29.6%to $105,768 for the three months ended June 30, 20192021, an increase of $63,336, which was primarily related to 26.9% for the three months ended June 30, 2020 primarily as a result of declinesincreases in revenues in its development marketing division and existing-home sales in the New York City and Northeast regions, which traditionally earn higher gross margin percentages than the Southeast (Florida) and Western (primarily California) regions.
The COVID-19 pandemic has had a profound effect on the economy and, especially, in the New York metropolitan area, where approximately 70% of Douglas Elliman’s commissionscommission and other brokerage revenues were derived in 2018 and 2019. In response to the pandemic, various governmental agencies in the New York metropolitan area and in other markets where Douglas Elliman operates instituted restrictions on individuals and on the types of businesses that are permitted to operate from March 2020 to June 2020, which adversely impacted Douglas Elliman’s business. We anticipate that sales volume may continue to be slow through the fall of 2020, and possibly longer.income.
Real Estate expenses. Real Estate expenses, which are primarily comprised of expenses atof Douglas Elliman, were $49,307$63,406 and $65,765$49,307 for the three months ended June 30, 20202021 and 2019,2020, respectively. For the three months ended June 30, 2020, Real Estate expenses included restructuring charges, which were the result of $2,961.expense-reduction initiatives, of $2,961 at Douglas
51

Elliman. The restructuring charges were the result of Douglas Elliman realigning its administrative support functions, and office locations as well as adjusting its business model to more efficiently serve its clients. In
Beginning in April 2020, as a response to the impact of the COVID-19 pandemic, we have implementedmade significant expense reductionsoperating adjustments at Douglas Elliman, including a reductionreductions in brokerage personnel of personnel by approximately 25%, certain salaries and other administrative expenses, as well as a reduction, deferral or elimination of leases across the country.certain office lease expenses. As a result of the expense reductions, in additional to personnel expenses,markets have reopened and Douglas Elliman’s professional services, advertising, travel and other occupancyrevenues have significantly increased, Douglas Elliman’s expenses were reduced duringhave increased from the comparable 2020 periods. Real estate expenses, excluding restructuring charges, increased by $17,060 for the three months ended June 30, 2020. While we continue to evaluate other expense reduction measures,2021 compared to the extentcomparable period in 2020, primarily as a result of increased personnel expense (associated with both discretionary compensation as well as the reinstatement of salary levels) and advertising expenses associated with Douglas Elliman’s business improvesincreased listings in the third quarter, we will begin to relinquish, as appropriate, some of the second quarter expense reductions, including advertising and personnel expenses.2021.
Real Estate operating income (loss) income. The Real Estate segment hadreported operating income of $42,362 for the three months ended June 30, 2021 compared to operating loss of $6,875 for the three months ended June 30, 2020 and2020. The increase in Real Estate segment’s operating income of $14,453 for the three months ended June 30, 2019. The decline in operating income of $21,328$49,237 was primarily related to reduced operating incomethe result of the increase in gross profit discussed above along with the impact of expense-reduction initiatives that began at Douglas Elliman.Elliman in the second quarter of 2020.
Corporate and Other.
Corporate and Other operating loss. The operating loss at the Corporate and Other segment was $5,637$8,465 for the three months ended June 30, 20202021 compared to $6,860$5,637 for the same period in 20192020 and the difference was due primarily to decreasedincreased administrative costs related to professional fees and travel expenses.expenses related to the lifting of COVID-19 restrictions.



Six Months Ended June 30, 20202021 Compared to Six Months Ended June 30, 20192020
Revenues. Total revenues were $900,248$1,273,293 for the six months ended June 30, 20202021 compared to $959,356$900,248 for the six months ended June 30, 2019.2020. The $59,108 (6.2%$373,045 (41.4%) declineincrease in revenues was primarily due to a $107,430 decline$374,665 increase in Real Estate revenues, which was primarily related to a decreasean increase in Douglas Elliman’s brokerage revenues.revenues related to the strength of the U.S. existing home market during the 2021 period. This was offset by a $48,322 increase$1,620 decline in Tobacco revenues related to an increase in bothlower unit volume partially offset by increases in net pricing resulting primarily from increases in 2020 and net pricing.2021.
Cost of sales. Total cost of sales was $615,508$863,952 for the six months ended June 30, 20202021 compared to $654,194$615,508 for the six months ended June 30, 2019.2020. The $38,686 (5.9%$248,444 (40.4%) declineincrease in cost of sales was primarily due to a $68,279 decline$289,625 increase in Real Estate cost of sales, which was primarily related to increasesincreased Douglas Elliman’s commissions. This was offset by a $29,593 increase$41,181 decline in Tobacco cost of sales primarily related to increaseddecreased sales volume and higher MSA expense.volume.
Expenses. Operating expenses were $222,847$182,062 for the six months ended June 30, 20202021 compared to $186,328$222,847 for the same period last year. The $36,519 (19.6%$40,785 (18.3%) increasedecline was due to a $39,243 increase$46,932 decline in Real Estate expenses, includingprimarily related to the absence of the impairment of goodwill and other intangible asset charge and restructuring charges at Douglas Elliman of $58,252 and restructuring charges of $2,961, respectively, recorded in the 2020 period. This was offset by a $3,278 increase in Tobacco expenses and a $2,869 increase in Corporate and Other expense for the six months ended June 30, 2020. This was offset by a $971 decline in Tobacco expenses, including a decline in litigation settlement and judgment expense of $602, and a $1,753 decline in Corporate and Other expense.
See Critical Accounting Policies - Goodwill and Indefinite Life Assets for detail of the Douglas Elliman impairment charge.2021.
Operating income. Operating income was $227,279 for the six months ended June 30, 2021 compared to an operating income of $61,893 for the same period last year. Operating income for the six months ended June 30, 2020 compared to $118,834 for the same period last year, a decline of $56,941 (47.9%).included an impairment expense associated with goodwill and other intangible assets and restructuring charges in our Real Estate segment. Real Estate operating income declined $78,394increased $131,972 primarily related to the impairments of goodwill and intangible assets of $58,252increased revenues at Douglas Elliman in 2021 associated with the strength of existing-home sales, which was propelled by home-buying trends associated with increased demand in Douglas Elliman’s markets, and the absence of the impairment and restructuring charges of $2,961.expenses in the 2021 period. Tobacco operating income increased by $36,283 due primarily to increases in net pricing and lower per unit MSA expense. This was offset by an increase in Tobacco operating income of $19,700 and the increased Corporate and Other operating loss declined $1,753.of $2,869.
Other expenses. Other expenses were $50,104 for the six months ended June 30, 2021 compared to other expenses of $29,412 for the six months ended June 30, 2020 compared to $40,286 for2020. For the six months ended June 30, 2019.2021, other expenses primarily consisted of interest expense of $56,866, and loss on the extinguishment of debt of $21,362. This was offset by equity in earnings from real estate ventures of $18,274, equity in earnings from investments of $1,518 and other income of $8,332. For the six months ended June 30, 2020,, other expenses primarily consisted of interest expense of $64,985, equity in losses from real estate ventures of $18,765 and other expenses of $3,020. This was offset by equity in earnings of investments of $52,359 and income of $4,999 from changes in fair value of derivatives embedded within convertible debt. For the six months ended June 30, 2019, other expenses primarily consisted of interest expense of $70,273 and equity in losses from investments of $323. This was offset by income of $14,137 from changes in fair value of derivatives embedded within convertible debt, other income of $12,221, and equity in earnings from real estate ventures of $3,952.
Income (loss) before provision for income taxes. Income before income taxes was $177,175 for the six months ended June 30, 2021 compared to loss before income taxes of $32,481 for the six months ended June 30, 2020 compared to $78,5482020.
52

Income tax expense (benefit). Income tax expense was $51,913 for the six months ended June 30, 2019.
Income2021 compared to income tax expense. Income tax expense was of $9,938 for the six months ended June 30, 2020 compared to $24,208 for the six months ended June 30, 2019.2020. Our provision for income taxes in interim periods is based on expected income, statutory rates, permanent differences, valuation allowances against deferred tax assets, and any tax planning opportunities available to us. For interim financial reporting, we estimate the annual effective income tax rate based on full year projections and apply the annual effective income tax rate against year-to-date pretax income to record income tax expense, adjusted for discrete items, if any. We refine annual estimates as new information becomes available. Our income tax expense forFor the six months ended June 30, 2020, the annual effective tax rate applied to year-to-date income resulted in tax expense which was increased by discrete items related to income tax benefits on the goodwill and trademark impairment charges, changes in value of certain contingent consideration and stock-based compensation, partially offset by the income tax expense related to the equity in earnings from investments associated with the one-time gain on sale of LTS. Our income tax expense for the six months ended June 30, 2019 was decreased by discrete items related to an income tax benefit for stock-based compensation.
Tobacco.
Tobacco revenues. Liggett increased the list price of EAGLEEagle 20’s, Pyramid, Liggett Select, Eve and Grand Prixby $0.11$0.14 per pack on June 22,28, 2021, $0.14 per pack in January 2021,by $0.13 per pack in November 2020, $0.11 per pack in June 2020, and $0.08 per pack in February 2020, $0.08 per pack in October 2019, and $0.11 per pack in February 2019. Liggett also increased the list price of PYRAMID, LIGGETT SELECT, EVE and GRAND PRIX by $0.11 per pack on June 22, 2020, $0.08 per pack in February 2020, $0.08 per pack in October 2019, $0.06 per pack in June 2019, and $0.11 per pack in February 2019.2020.
All of our Tobacco sales were in the discount category in 20202021 and 2019.2020. For the six months ended June 30, 2020,2021, Tobacco revenues were $599,579$597,959 compared to $551,257$599,579 for the six months ended June 30, 2019.2020. Revenues increaseddeclined by $48,322 (8.8%$1,620 (0.3%) due primarily to a 7.7% (357 million units) decline in unit sales volume partially offset by an increase in the average selling price of our brands for the six months ended June 30, 2021.
Despite recent pricing increases, Eagle 20’s remains Liggett’s primary low-cost cigarette brand and its percentage of Liggett’s total unit volume sales declined from approximately 63% in the six months ended June 30, 2020 along with a 4.4% (196 million units) increaseto approximately 60% for the six months ended June 30, 2021. Pyramid, Liggett’s second largest brand, declined from approximately 24% of total unit volume sales in the six months ended June 30, 2020 to approximately 21% for the six months ended June 30, 2021. Montego is Liggett’s third largest brand and increased from approximately 5% of total unit volume sales volume.


in the six months ended June 30, 2020 to approximately 12% for the six months ended June 30, 2021.
Tobacco cost of sales. The major components of our Tobacco cost of sales were as follows:
Six Months Ended
June 30,
20212020
Manufacturing overhead, raw materials and labor$60,538 $65,534 
Customer shipping and handling3,301 2,833 
Federal Excise Taxes, net216,449 234,309 
FDA expense11,694 12,466 
MSA expense, net of market share exemption78,194 (1)96,215 
    Total cost of sales$370,176 $411,357 
   Six Months Ended
   June 30,
   2020 2019
     
Manufacturing overhead, raw materials and labor $65,534
 $61,672
Customer shipping and handling 2,833
 2,995
Federal Excise Taxes, net 234,309
 224,576
FDA expense 12,466
 12,393
MSA expense, net of market share exemption 96,215
 80,128
 Total cost of sales $411,357
 $381,764
(1) Includes $2,722 received from a litigation settlement associated with the MSA expense.
The Tobacco segment’s MSA expense is included in cost of sales. Under the terms of the MSA, we have no payment obligations except to the extent that our tobacco subsidiaries’ market share of the U.S. Cigarettecigarette market exceeds 1.92%. The calculation of our benefit from the MSA is an estimate based on U.S. domestic taxable cigarette shipments. As of June 30, 2020,2021, we estimate taxable shipments in the U.S. will decline by 6.0% in 2021. As of June 30, 2020, we estimated taxable shipments in the U.S. would decline by 4.5% in 2020.2020 and, the actual change in 2020 taxable shipments was an increase of 2.0%. Our annual MSA liabilityexpense changes by approximately $1,700$1,650 for each percentage change in estimated shipment volumes in the U.S. market.
53

Inflationary pressures impact Liggett’s cost of sales through increases in MSA expense as well as manufacturing costs. Liggett’s MSA expense is subject to an annual inflation adjustment, which is the greater of the U.S. CPI rate or 3% and inflationary pressures in the U.S. economy could also increase Liggett’s cost of sales. For the six months ended June 30, 2020, the estimated decline in taxable shipments in excess of the annual MSA2021, Liggett’s management assumed an inflation adjustment resulted in an increase in costto MSA expense of sales of approximately $900 because the value of Liggett’s market share exemption declined compared to3.4% for the six months ended June 30, 2019.2021 and assumed 3% for the six months ended June 30, 2020. The actual inflation adjustment to the MSA in 2020 was 3%. In addition, the largest component of Liggett’s manufacturing costs is leaf tobacco and other raw materials. In recent years, due to declining prices of leaf tobacco as well as efficiencies gained from technological innovation in Liggett’s factory, Liggett’s raw material costs have been flat and, therefore, has not been impacted by inflation. However, during 2021, Liggett experienced a 1.2% inflation increase for the six months ended June 30, 2021 and management anticipates the inflationary trends could continue.
Tobacco gross profit was $227,783 for the six months ended June 30, 2021 compared to $188,222 for the six months ended June 30, 2020, compared to $169,493an increase of $39,561 (21.0%). For the six months ended June 30, 2021, gross profit included $2,722 received from an MSA settlement, which reduced cost of sales. Excluding this settlement, gross profit for the six months ended June 30, 2019,2021 was $225,061, an increase of $18,729. The$36,839 (19.6%). This increase in gross profit for the six months ended June 30, 20202021 was primarily attributable to increased net pricing onacross Liggett’s brand portfolio more than offsetting the EAGLE 20’s and Pyramid brands and increased EAGLE 20’s volume. For the six months ended June 30, 2020, EAGLE 20’s remains Liggett’s primary low-cost cigarette brand and its percentageimpact of Liggett’s totala 7.7% decline in unit volume sales has increased from approximately 59% in the six months ended June 30, 2019 to approximately 63% for the six months ended June 30, 2020. Pyramid, Liggett’s second largest brand, declined from approximately 28% of total unit volume sales in the six months ended June 30, 2019 to 24% for the six months ended June 30, 2020.sales. As a percentage of revenue (excluding Federal Excise Taxes), Tobacco gross profit decreasedincreased from 51.9% in the 2019 period to 51.5% in the 2020 period to 59.7% in the 2021 period. The increase in gross profit was primarily as athe result of the continued growth of the lower-priced EAGLE 20’s brand as well as a higherincreased pricing and lower per unit MSA expense associated with the increases in unit volume above the market share exemption. This was offset by price increases.expenses.
Tobacco expenses. Tobacco operating, selling, general and administrative expenses, excluding settlements and judgments, were $43,000 for the six months ended June 30, 2021 compared to $39,674 for the six months ended June 30, 2020 compared to $40,043 for the six months ended June 30, 2019.2020. The declineincrease of $369$3,326 was mainly due to lowerincreased professional fees and expenses associated with Colorado’s minimum price legislation, increased travel and marketing expenses related expenses partially offset byto the lifting of COVID-19 restrictions and higher professional fees.compensation accruals. Tobacco product liability legal expenses, including settlements and judgments, were $3,191$3,067 and $3,737$3,191 for the six months ended June 30, 20202021 and 2019,2020, respectively.
Tobacco operating income. Tobacco operating income was $184,778 for the six months ended June 30, 2021 compared to $148,495 for the six months ended June 30, 2020 compared to $128,795 for the same period last year, an2020. The increase of $19,700. The increase in operating income$36,283 (24.4%) was primarily attributable to higher gross profit margins, as discussed above.above, partially offset by increased operating, selling, general and administrative expenses.
Real Estate.
Real Estate revenues. Real Estate revenues were $300,669$675,334 and $408,099$300,669 for the six months ended June 30, 20202021 and 2019,2020, respectively. Real Estate revenues declinedincreased by $107,430 (26.3%),$374,665, which was primarily related to a declinean increase of $103,427$355,913 in Douglas Elliman’s Commissioncommission and other brokerage income, which we believe was becausereflecting increased revenues from existing home sales due to home-buying trends in Douglas Elliman’s markets.
In 2020, and, in particular, the second quarter of 2020, Douglas Elliman experienced a severe decline in closed sales volume in New York City. Therefore, as a result of the impact of COVID-19 pandemic on the New York City market, and combined with the increased demand for existing-homes in other areas of the U.S., the percentage of Douglas Elliman’s brokerage revenues from the New York City market declined from approximately 46% in 2019 to approximately 29% for the twelve months ended June 30, 2021.
The six months ended June 30, 2021 demonstrated continued strength in the residential real estate market, which has improved markedly from a sharp decline in transactions, primarily in the second quarter of 2020, due to factors related to the COVID-19 pandemic as well aspandemic. As Douglas Elliman’s markets began reopening and vaccines for COVID-19 have become available, and consistent with home buying trends in the impact ofU.S., Douglas Elliman’s business improved significantly in markets complementary to New York City, including South Florida (Miami and Palm Beach), the increased “mansion” taxNew York City suburbs (Long Island, Westchester County and Connecticut), the Hamptons, Los Angeles, and Aspen and, in 2021, in New York City. Douglas Elliman’s commission and other brokerage income generated from the sales of existing homes increased by $144,109 in the Southeast region, $90,017 in New York City, $52,314 in the Northeast region, which excludes New York City, and $46,872 in the West region. In addition, Douglas Elliman’s revenues from Development Marketing increased by $22,601 for the six months ended June 30, 2019, which is discussed in 2021.
Results of Operations - Three Months ended June 30, 2020 compared to Three Months ended June 30, 2019.
.




54

Real Estate revenues and cost of sales for the six months ended June 30, 20202021 and 2019,2020, respectively, were as follows:
Six Months EndedSix Months Ended
June 30,June 30,
2020 201920212020
Real Estate Revenues:
   
Real Estate Revenues:
Commission and other brokerage income$279,220
 $382,647
Commission and other brokerage income$635,133 $279,220 
Property management revenue17,611
 18,569
Property management revenue19,169 17,611 
Title fees1,699
 3,633
Escrow and title feesEscrow and title fees10,449 1,699 
Revenues from investments in real estateRevenues from investments in real estate7,650 — 
Sales on facilities primarily from Escena2,139
 3,250
Sales on facilities primarily from Escena2,933 2,139 
Total real estate revenues$300,669
 $408,099
 Total real estate revenues$675,334 $300,669 
   
Real Estate Cost of Sales:
   
Real Estate Cost of Sales:
Real estate commissions$202,315
 $269,542
Real estate agent commissionsReal estate agent commissions$480,669 $202,315 
Cost of sales from investments in real estateCost of sales from investments in real estate6,744 — 
Escrow and title feesEscrow and title fees4,485 277 
Cost of sales on facilities primarily from Escena1,559
 1,958
Cost of sales on facilities primarily from Escena1,878 1,559 
Title fees277
 930
Total real estate cost of sales$204,151
 $272,430
 Total real estate cost of sales$493,776 $204,151 
BrokerageReal Estate cost of sales. Douglas Elliman real estate commissions declined by $67,227 as a resultReal Estate cost of lower commissionsales were $493,776 and other brokerage income.
Douglas Elliman’s gross margin on real estate brokerage income declined from 29.6%$204,151 for the six months ended June 30, 20192021 and 2020, respectively. Real Estate cost of sales increased by $289,625, primarily related to 27.5%$278,354 increase in Douglas Elliman’s real estate agent commissions, which resulted from an increase in sales volume. Real estate brokerage commissions increased from 72.5% to for the six months ended June 30, 2020 to 75.7% for the six months ended June 30, 2021. This was primarily as a resultdue to the increase in the percentage of declines in revenues in its development marketing divisionfrom the Southeast (Florida) and existing-home sales inWestern (primarily California) regions which traditionally pay higher commission percentages than the New York City and Northeast regions, which traditionally earn higherregion.
Real Estate segment gross margin percentages thanprofit increased from $96,518 for the Southeast (Florida) and West (primarily California) regions.
See Results of Operations - Three Monthssix months ended June 30, 2020 compared to Three Months$181,558 for the six months ended June 30, 2019 for a discussion2021, an increase of the impact of the COVID-19 pandemic on the Real Estate segment.$85,040, which was primarily related to increases in Douglas Elliman’s commission and other brokerage income.
Real Estate expenses. Real Estate expenses, which are primarily comprised of expenses of Douglas Elliman, were $123,936 and $170,868 for the six months ended June 30, 2021 and $131,6252020. The expenses for the six months ended June 30, 2020 and 2019. These expenses included the non-cash impairment of goodwill and other intangible assets of $58,252 and restructuring charges, which were the result of expense-reduction initiatives, of $2,961 at Douglas Elliman for the six months ended June 30, 2020. The non-cash impairment related to the evaluation of potential impacts of the COVID-19 pandemic, including the possibility of an economic recession, on Douglas Elliman’s business.Elliman. The restructuring charges were the result of Douglas Elliman realigning its administrative support functions, and office locations as well as adjusting its business model to more efficiently serve its clients. In
Beginning in April 2020, as a response to the currentimpact of the COVID-19 pandemic, we have implementedmade significant expense reductionsoperating adjustments at Douglas Elliman, including a reductionreductions in brokerage personnel of personnel by approximately 25%, certain salaries and other administrative expenses, as well as a reduction, deferral or elimination of leases across the country.certain office lease expenses. As a result of the expense reductions, in additional to personnel expenses,markets have reopened and Douglas Elliman’s professional services, advertising, travelrevenues have significantly increased, Douglas Elliman’s expenses have increased from the comparable 2020 periods. Real estate expenses, excluding the restructuring charges and other occupancy expenses were reduced duringnon-cash impairment, increased by $14,281 for the six months ended June 30, 2020. While we continue to evaluate other expense reduction measures,2021 compared to the extentcomparable period in 2020, primarily as a result of increased personnel expense (associated with both discretionary compensation as well as the reinstatement of salary levels) and advertising expenses associated with Douglas Elliman’s business improvesincreased listings in the third quarter, we will begin to relinquish, as appropriate, some of the second quarter expense reductions, including advertising2021. These amounts were offset by lower general and personneladministrative, occupancy and travel expenses.
Real Estate operating income (loss) income. The Real Estate segment hadreported operating income of $57,622 and operating loss of $74,350 and operating income of $4,044 for the six months ended June 30, 20202021 and 2019,2020, respectively. The increase in the Real Estate segment’s operating lossincome, after excluding the non-cash impairment charge in the 2020 period, was caused byprimarily the decreasedresult of the increase in gross marginprofit discussed above the impairment of goodwill and intangible assets of $58,252 at Douglas Elliman and restructuring charges of $2,961 at Douglas Elliman offset byalong with the impact of expense-reduction initiatives that began at Douglas Elliman in the second quarter of 2020.
Corporate and Other.
Corporate and Other loss. The operating loss at the Corporate and Other segment was $12,252$15,121 for the six months ended June 30, 20202021 compared to $14,005$12,252 for the same period in 2019 and the difference was due primarily to decreased administrative costs related to professional fees and travel expenses.2020.

55

Summary of Real Estate Investments
We own and seek to acquire investment interests in various domestic and international real estate projects through debt and equity investments. Our real estate investments primarily include the following projects as of June 30, 2020:
2021:
 (Dollars in Thousands. Area and Unit Information in Ones)
 LocationDate of Initial InvestmentPercentage Owned (1)Net Cash Invested (Returned)Cumulative Earnings (Losses)Carrying Value as of June 30, 2020Future Capital Commit-
ments from New Valley (2)		Projected Residential and/or Hotel AreaProjected Commercial SpaceProjected Number of Residential Lots, Units and/or Hotel RoomsActual/Projected Construction Start DateProjected Construction End Date
                
SagaponackSagaponack, NYApril 2015100%$19,024
$—
$19,024
$—
TBD
 N/A
 1
RN/AN/A
Escena, netMaster planned community, golf course, and club house in Palm Springs, CAMarch 2008100%2,243
7,609
9,852
—
450
Acres—
 667
450
R Lots
H		N/AN/A
Investments in real estate, net   $21,267
$7,609
$28,876
$—
        
                
Investments in real estate ventures:               
10 Madison Square West (1107 Broadway)Flatiron District/NoMad neighborhood, Manhattan, NYOctober 20115.0%$(43,671)$43,671
$—
$—
260,000
SF20,000
SF124
RAugust 2012Completed
11 Beach StreetTriBeCa, Manhattan, NYJune 201249.5%4,090
5,600
9,690
—
97,000
SF—
 27
RMay 2014Completed
20 Times Square (701 Seventh Avenue)Times Square, Manhattan, NYAugust 20127.9%(7,827)7,827
—
—
252,000
SF80,000
SF452
HSeptember 2013Completed
111 Murray StreetTriBeCa, Manhattan, NYMay 20139.5%6,393
(4,413)1,980
—
330,000
SF1,700
SF157
RSeptember 2014Completed
160 Leroy StreetWest Greenwich Village, Manhattan, NYMarch 20133.1%(1,075)1,075
—
—
130,000
SF—
 57
RFall 2015Completed
The Dutch (25-19 43rd Avenue)Long Island City, NYMay 20149.9%(1,247)1,385
138
 65,000
SF—
 86
RSeptember 2014Completed
87 Park (8701 Collins Avenue)Miami Beach, FLDecember 201315.0%13,138
3,317
16,455
—
160,000
SFTBD
 70
ROctober 2015Completed
125 Greenwich StreetFinancial District, Manhattan, NYAugust 201413.4%7,992
(7,992)—
—
306,000
SF16,000
SF273
RMarch 2015TBD
West Hollywood Edition (9040 Sunset Boulevard) (4)West Hollywood, CAOctober 201448.5%3,949
(6,153)(2,204)—
210,000
SF—
 20
190
R
H		May 2015Completed
The XI (76 Eleventh Avenue)West Chelsea, Manhattan, NYMay 20155.1%17,000
(17,000)—
—
630,000
SF85,000
SF236
137
R
H		September 2016March 2021
Monad TerraceMiami Beach, FLMay 201519.6%7,635
(4,831)2,804
—
160,000
SF—
 59
RMay 2016September 2020
Takanasee (805 Ocean Ave)Long Branch, NJDecember 201522.8%6,144
(2,306)3,838
—
63,000
SF—
 13
RJune 2017TBD
Brookland (15 East 19th St)Brooklyn, NYApril 20179.8%402
45
447
—
24,000
SF—
 33
RAugust 2017Completed
Dime (209 Havemeyer St)Brooklyn, NYNovember 201716.5%9,145
2,331
11,476
—
100,000
SF150,000
SF177
RMay 2017September 2020
352 6th AvenueBrooklyn, NYFebruary 201937.0%500
61
561
—
5,200
SF—
 4
RSeptember 2019December 2020
Meatpacking PlazaMeatpacking District, NYApril 201916.9%10,692
(1,515)9,177
—
TBD
—TBD
—TBD
—TBDTBD
The Park on FifthMiami Beach, FLSeptember 201938.9%14,132
723
14,855
—
434,000
SF15,000
SF302
RApril 2020August 2023
9 DeKalbBrooklyn, NYApril 20194.2%5,000
544
5,544
—
450,000
SF120,000
SF540
RMarch 2019June 2022
West HialeahMiami, FLDecember 201977.8%12,522
536
13,058
—
1,400,000
SF—
 1,369
RDecember 2019February 2024
Condominium and Mixed Use Development   $64,914
$22,905
$87,819
$—
        
                
Maryland PortfolioPrimarily Baltimore County, MDJuly 20127.6%774
(774)—
—
N/A
 N/A
 5,517
RN/AN/A
Apartment Buildings   $774
$(774)$—
$—
        
                
Park Lane Hotel (36 Central Park South)Central Park South, Manhattan, NYNovember 20131.0%$8,682
$(6,519)$2,163
$—
446,000
SF—
 628
HN/AN/A
215 Chrystie Street (4)Lower East Side, Manhattan, NYDecember 201218.4%(4,551)4,257
(294)—
246,000
SF—
 367
HJune 2014Completed
Coral Beach and Tennis ClubCoral Beach, BermudaDecember 201349.0%6,048
(4,438)1,610
—
52
Acres—
 101
HN/AN/A
Parker New YorkCentral Park South, Manhattan, NYJuly 20191.0%1,000
(56)944
—
TBD
 —
 589
99
H
R		May 2020February 2022
Hotels   $11,179
$(6,756)$4,423
$—
        
                
The Plaza at Harmon MeadowSecaucus, NJMarch 201549.0%$4,797
$(2,721)$2,076
$—
—
—219,000
SF—
—N/AN /A
Wynn Las Vegas RetailLas Vegas, NVDecember 20161.6%4,798
2,769
7,567
—
—
—160,000
SF—
—N/AN/A
Commercial   $9,595
$48
$9,643
$—
        
                
Witkoff GP Partners (3)MultipleMarch 201715.0%$11,082
$(1,038)$10,044
$4,911
N/A
 N/A
 N/A
 N/AN/A
1 QPS Tower (23-10 Queens Plaza South)Long Island City, NYDecember 201245.4%(14,406)14,406
—
—
N/A
 N/A
 N/A
 March 2014Completed
Witkoff EB-5 Capital PartnersMultipleSeptember 201849.0%516
434
950
8,735
N/A
 N/A
 N/A
 N/AN/A
Diverse Real Estate Portfolio   $(2,808)$13,802
$10,994
$13,646
        
                
Investments in real estate ventures   $83,654
$29,225
$112,879
$13,646


       
                
Total Carrying Value   $104,921
$36,834
$141,755
         
(1) The Percentage Owned reflects our estimated current ownership percentage. Our actual ownership percentage as well as the percentage of earnings and cash distributions may ultimately differ as a result of a number of factors including potential dilution, financing or admission of additional partners.
(2) This column only represents capital commitments required under the various joint venture agreements. However, many of the operating agreements provide for the operating partner to call capital. If a joint venture partner, such as New Valley, declines to fund the capital call, then the partner’s ownership percentage could either be diluted or, in some situations, the character of a funding member’s contribution would be converted from a capital contribution to a member loan.
(3) The Witkoff GP Partners venture includes a $2,471 investment in 500 Broadway and a $7,573 investment in Fontainebleau Las Vegas.
(4) Equity in losses in excess of the joint ventures' carrying value were $2,498 as of June 30, 2020, and are classified in Other current liabilities.


(Dollars in Thousands. Area and Unit Information in Ones)
LocationDate of Initial InvestmentPercentage Owned (1)Net Cash Invested (Returned)Cumulative Earnings (Losses)Carrying Value as of June 30, 2021Future Capital Commit-
ments from New Valley (2)		Projected Residential and/or Hotel AreaProjected Commercial SpaceProjected Number of Residential Lots, Units and/or Hotel RoomsActual/Projected Construction Start DateProjected Construction End Date
Escena, netMaster planned community, golf course, and club house in Palm Springs, CAMarch 2008100 %$2,951 $6,657 $9,608 $— 450 Acres667
450		R Lots
H		N/AN/A
Townhome A (11 Beach Street)TriBeCa, Manhattan, NYNovember 2020100 %(6)6 — — 6,169 SF1 RN/ACompleted
Investments in real estate, net$2,945 $6,663 $9,608 $— 
Investments in real estate ventures:
111 Murray StreetTriBeCa, Manhattan, NYMay 20139.5 %$6,819 $(4,414)$2,405 $— 330,000 SF1,700 SF157 RSeptember 2014Completed
87 Park (8701 Collins Avenue)Miami Beach, FLDecember 201323.1 %(6,485)6,485 — — 160,000 SFTBD70 ROctober 2015Completed
125 Greenwich StreetFinancial District, Manhattan, NYAugust 201413.4 %7,992 (7,992)— — 306,000 SF16,000 SF273 RMarch 2015TBD
West Hollywood Edition (9040 Sunset Boulevard)West Hollywood, CAOctober 201448.5 %11,513 (11,513)— — 210,000 SF— 20
190		R
H		May 2015Completed
The XI (76 Eleventh Avenue)West Chelsea, Manhattan, NYMay 20155.1 %17,000 (17,000)— — 630,000 SF85,000 SF236
137		R
H		September 2016TBD
Monad Terrace (1300 West Ave)Miami Beach, FLMay 201519.6 %7,635 (7,635)— — 160,000 SF— 59 RMay 2016Completed
Takanasee (805 Ocean Ave)Long Branch, NJDecember 201522.8 %6,144 (6,144)— — 63,000 SF— 13 RJune 2017TBD
Brookland (15 East 19th St)Brooklyn, NYApril 20179.8 %402 1 403 — 24,000 SF— 33 RAugust 2017Completed
Dime (209 Havemeyer St)Brooklyn, NYNovember 201716.5 %9,145 (1,356)7,789 — 100,000 SF150,000 SF177 RMay 2017Completed
352 6th AvenueBrooklyn, NYFebruary 201937.0 %685 111 796 — 5,200 SF— 4 RSeptember 2019Completed
Meatpacking Plaza (44 Ninth Ave)Meatpacking District, Manhattan, NYApril 201916.9 %10,692 (2,746)7,946 — 8,741SF76,919SF15 RJuly 2021May 2023
Five Park (500 Alton Road)Miami Beach, FLSeptember 201938.9 %18,098 1,461 19,559 — 482,000 SF15,000 SF291 RApril 2020August 2023
9 DeKalb AvenueBrooklyn, NYApril 20194.2 %5,000 894 5,894 — 450,000 SF120,000 SF540 RMarch 2019February 2023
NaturaMiami, FLDecember 201977.8 %7,354 5,263 12,617 — 460,000 SF— 460 RDecember 2019November 2022
Townhome B (11 Beach Street)TriBeCa, Manhattan, NYNovember 202046.7 %(594)594 — — 4,752 SF— 1 RN/ACompleted
Ritz-Carlton Villas (4701 Meridian Avenue)Miami Beach, FLDecember 202050.0 %4,109 (32)4,077 — 55,000 SF— 15 ROctober 2020August 2022
Condominium and Mixed Use Development$105,509 $(44,023)$61,486 $— 
Maryland PortfolioPrimarily Baltimore County, MDJuly 20127.6 %$(16,585)$16,585 $— — N/AN/A245 RN/AN/A
Apartment Buildings$(16,585)$16,585 $— $— 
Park Lane Hotel (36 Central Park South)Central Park South, Manhattan, NYNovember 20131.0 %$8,682 $(7,229)$1,453 $— 446,000 SF— 628 HN/AN/A
215 Chrystie Street (4)
Lower East Side, Manhattan, NYDecember 201217.8 %(2,136)1,803 (333)— 246,000 SF— 367 HJune 2014Completed
Coral Beach and Tennis ClubCoral Beach, BermudaDecember 201349.0 %6,048 (4,724)1,324 — 52 Acres— 101 HN/AN/A
Parker New York (119 W 56th St)Midtown, Manhattan, NYJuly 20190.4 %1,000 (339)661 — 470,000SF— 587
99		H
R		May 2020December 2022
Hotels$13,594 $(10,489)$3,105 $— 
The Plaza at Harmon MeadowSecaucus, NJMarch 201549.0 %$4,200 $(4,200)$— $— — —219,000 SF— —N/AN /A
Wynn Las Vegas RetailLas Vegas, NVDecember 20161.6 %4,519 2,620 7,139 — — —160,000 SF— —N/AN/A
Commercial$8,719 $(1,580)$7,139 $— 
Witkoff GP Partners (3)
MultipleMarch 201715.0 %$11,154 $(9,620)$1,534 $— N/AN/AN/AN/AN/A
1 QPS Tower (23-10 Queens Plaza South)Long Island City, NYDecember 201245.4 %(14,406)14,406 — — N/AN/AN/AMarch 2014Completed
Witkoff EB-5 Capital PartnersMultipleSeptember 201849.0 %516 479 995 — N/AN/AN/AN/AN/A
Biscayne MortgageMultipleApril 202150.0 %1,500 — 1,500 — N/AN/AN/AN/AN/A
Partners Land ServicesMultipleJune 202150.0 %100 — 100 — N/AN/AN/AN/AN/A
Diverse Real Estate Portfolio$(1,136)$5,265 $4,129 $— 
Investments in real estate ventures$110,101 $(34,242)$75,859 $— 
Total Carrying Value$113,046 $(27,579)$85,467 $— 
56

(1) The Percentage Owned reflects our estimated current ownership percentage. Our actual ownership percentage as well as the percentage of earnings and cash distributions may ultimately differ as a result of a number of factors including potential dilution, financing or admission of additional partners.
(2) This column only represents capital commitments required under the various joint venture agreements. However, many of the operating agreements provide for the operating partner to call capital. If a joint venture partner, such as New Valley, declines to fund the capital call, then the partner’s ownership percentage could either be diluted or, in some situations, the character of a funding member’s contribution would be converted from a capital contribution to a member loan.
(3) The Witkoff GP Partners venture includes a $1,534 investment in 500 Broadway, a Condominium and Mixed Use Development in Santa Monica, CA.
(4) Equity in losses in excess of the joint ventures' carrying value were $333 as of June 30, 2021, and are classified in Other current liabilities.
N/A - Not applicableSF - Square feetH - Hotel roomsTBD -To be determinedR - Residential UnitsR Lots - Residential lots
New Valley capitalizes net interest expense into the carrying value of its ventures whose projects were under development. Net capitalized interest costs included in Carrying Value as of June 30, 20202021 were $7,547.$8,347. This amount is included in the “Cumulative Earnings (Losses)” column in the table above. During the six months ended June 30, 2020,2021, New Valley capitalized $2,257$1,022 of interest costs and utilized (reversed) $5,307$153 of previously capitalized interest in connection with the recognition of equity in (losses) earnings, gains and liquidations from various ventures.



57

Liquidity and Capital Resources

Cash, cash equivalents and restricted cash increased by $139,420 and $169,658 for the six months ended June 30, 2021 and 2020, respectively.
Cash provided from operations was $221,300 and decreased by $258,325$341,329 for the six months ended June 30, 2019.
Cash2021 and 2020, respectively. The decline in cash provided from operations was $341,329related primarily to higher federal excise tax payments by the tobacco segment in 2021, (ii) the absence of proceeds in 2021 associated with the sale of LTS, which occurred in 2020, and $98,102(iii) cash expenditures in February 2021 associated with the premium for the retirement of our 6.125% Senior Secured Notes due 2025. These amounts were offset by increased operating income during the six months ended June 30, 2020 and 2019, respectively.2021. The increase primarily related to increases in working capital, particularly in increasedlower excise tax payables, income tax payables and promotional accrualspayments in the tobacco segment, at June 30, 2020 as well as the proceeds received from the sale of LTS in the 2020 period offset by lower operating income in 2020. The increases in excise tax payables related to the 90-day postponement of the payment due dates of U.S. excise taxes from March 1, 2020 to July 1, 2020. We expect thisThis postponement resulted in an increase to the liquidity of our tobacco segment in the second quarter of 2020 of approximately $131,700 and will result in a corresponding declinethe payments were made in the third quarter of 2020.
Cash used in investing activities was $16,666 for the six months ended June 30, 2021 and cash provided by investing activities was $46,575 for the six months ended June 30, 2020 and2020. In the first six months of 2021, cash used in investing activities was $9,087 for the six months ended June 30, 2019.purchase of investment securities of $74,805, investments in real estate ventures of $9,902, capital expenditures of $3,055, an increase in cash surrender value of life insurance policies of $1,348, purchase of long-term investments of $6,963, and an increase in restricted assets of $5. This was offset by the sale of investment securities of $23,477, paydowns of investment securities of $302, maturities of investment securities of $36,461, distributions from investments in real estate ventures of $11,163, and proceeds from the sale or liquidation of long-term investments of $8,009. In the first six months of 2020, cash provided by investing activities was from the sale of investment securities of $19,555, pay downspaydowns of investment securities of $415, maturities of investment securities of $31,574, distributions from investments in real estate ventures of $5,172, a decrease in restricted assets of $87, and proceeds from the sale or liquidation of long-term investments of $23,407. This was offset by the purchase of investment securities of $16,867, investments in real estate ventures of $3,858, capital expenditures of $6,242, investments in real estate, net of $679, an increase in cash surrender value of life insurance policies of $751, and purchase of long-term investments of $5,238. In the first six months of 2019, cash used in investing activities was for the purchase of investment securities of $44,222, investments in real estate ventures of $21,908, capital expenditures of $6,320, investments in real estate, net of $1,153, an increase in cash surrender value of life insurance policies of $789, and purchase of subsidiaries of $668. This was offset by the sale of investment securities of $12,942, pay downs of investment securities of $545, maturities of investment securities of $28,610, and distributions from investments in real estate ventures of $23,200, a decrease in restricted assets of $668, and proceeds from the sale of fixed assets of $8.
Cash used in financing activities was $218,246$65,214 and $347,340$218,246 for the six months ended June 30, 2021 and 2020, respectively. In the first six months of 2021, cash was used for the dividends on common stock of $63,738, repayments of debt of $856,316, deferred financing costs of $20,109, and 2019, respectively.other of $51. This was offset by proceeds from debt issuance of $875,000. In the first six months of 2020, cash was used for the dividends and distributions on common stock of $63,478, repayments of debt of $172,467, distributions to non-controlling interest of $448, and net repayments of debt under the revolver of $34,952. This was offset by proceeds from issuance of common stock of $52,563, proceeds from debt issuance of $531 and other of $5. In
We use dividends from our tobacco and real estate subsidiaries, as well as cash and cash equivalents maintained at the first six months of 2019, cash was used for the dividends and distributions on common stock of $118,748, repayments of debt of $230,771, distributionscorporate level, to non-controlling interest of $285, deferred financing costs of $33, offset by net borrowings of debt under the revolver of $2,497.
The terms offund our 10.5% Senior Notes due 2026 contain covenants that place significant limitations on our ability to pay dividends and distributions in the future. See “10.5% Senior Notes due 2026” below. For the next twelve months beginning June 30, 2020, we have significant liquidity commitments at the corporate level (not including our tobacco and real estate operations) that require the use of existing cash resources.. These liquidity commitments include cash interest expense of approximately $110,300$108,900, dividends on our other debtoutstanding common shares of approximately $128,900, which is based on an assumed quarterly cash dividend of $0.20 per share, and other corporate expenses and income taxes. In addition, the board continues to evaluate our dividend policy on a quarterly basis. Based on the $0.20 per share quarterly dividend rate in 2020, payment of our quarterly dividend would require cash payments of approximately $128,900 over the next twelve months.

In order to meet these liquidity requirements as well as other liquidity needs in the normal course of business, we have in the past used cash flows from operations as well as existing cash and cash equivalents, which have, in the past, been generated from operations, monetization of investments and proceeds from debt issuances. Should these resources be insufficient to meet upcoming liquidity needs, we may also liquidate investment securities and other long-term investments, or, if available, draw on Liggett’s credit facility. While there are actions we can take to reduce our liquidity needs, there can be no assurance that such measures will be successful. As of June 30, 2020,2021, we had cash and cash equivalents of $540,363$490,390 (including $60,921$155,224 of cash at Douglas Elliman and $217,590$108,191 of cash at Liggett), investment securities and long-term investments, which were carried at $88,643$212,363 (see Note 6 to condensed consolidated financial statements), and long-term investments, which were carried at $33,232 (and, including in-transit redemptions at June 30, 2020, with a fair value of $35,380). As discussed elsewhere, we used $169,610 of cash to retire the convertible notes due in April 2020. As of June 30, 2020,2021, our investments in real estate ventures were carried at $115,377$76,192 and our investmentsinvestment in real estate, net of accumulated depreciation, werewas carried at $28,876.$9,608.

Limitation of interest expense deductible for income taxes. Since 2018, ourthe amount of interest expense that is deductible in the computation of our income tax liability has been limited to a percentage of adjusted taxable income, as defined with certain exceptions.by applicable law. In 2019 and 2020, the amount isof deductible interest expense was limited to 50% of taxable income before interest, depreciation and amortization and, in 2021, the amount iswill be limited to 30% of taxable income before interest, depreciation and amortization. Beginning in 2022, the amount iswill be limited to 30% of taxable income before interest. However, interest thereafter for non-exceptedexpense allocable to a designated excepted trade or businesses.business is not subject to limitation. One such excepted trade or


business is any electing real property trade or business, for which portions of our real estate businessbusinesses may qualify. Interest expense allocable to an excepted trade or business is not subject to limitation. If any interest expense is disallowed, we are permitted to carry forward the disallowed interest expense indefinitely. Nonetheless,As a result of interest expense that is allocated to our real estate businesses (from the holding company) not being subject to the limitation, all of our interest expense to date has been tax deductible; however, due to our high degree of leverage and the large amount of our interest expense that is currently allocated to our real estate businesses (from the holding company) for income tax purposes, a portion of our interest expense in future years may not be deductible, which could increase the after-tax cost of any new debt financings as well as the refinancing of our existing debt.
58

Tobacco Litigation. AdverseAs of June 30, 2021, 16 verdicts have beenwere entered in 16Engle progeny cases against Liggett. Several of these verdicts have been affirmed on appeal and have been satisfied by Liggett. Liggett has paid $39,773,$40,111, including interest and attorney’s fees, to satisfy the final judgments entered against it. It is possible that additional cases could be decided unfavorably.
Notwithstanding the comprehensive nature of the Engle progeny settlements, 42 Engle progenyProgeny Settlements of more than 5,200 cases, approximately 38 plaintiffs’ claims remain pending. In addition, 54 individual actions are pending.outstanding. Therefore, we and Liggett may still be subject to periodic adverse judgments whichthat could have a material adverse effect on our consolidated financial position, results of operations and cash flows.
In addition, Liggett may be required to make additional payments to Mississippi which could have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows. See Recent Developments in Litigation.
Management cannot predict the cash requirements related to any future settlements or judgments, including cash required to bond any appeals, and there is a risk that those requirements will not be able to be met. Management is unable to make a reasonable estimate of the amount or range of loss that could result from an unfavorable outcome of the cases pending against Liggett or the costs of defending such cases. It is possible that our consolidated financial position, results of operations or cash flows could be materially adversely affected by an unfavorable outcome in any such tobacco-related litigation.
Vector.
6.125% Senior Secured Notes due 2025.Notes. In January 2017, we issued $850,000 of ourOn February 1, 2021, the 6.125% Senior Secured Notes due 2025 were redeemed in full and we recorded a loss on the extinguishment of debt of $21,362 for the six months ended June 30, 2021, including $13,014 of premium and $8,348 of other costs and non-cash interest expense related to the recognition of previously unamortized deferred finance costs.
5.75% Senior Secured Notes due 2029. On January 28, 2021, we completed the sale of $875,000 in aggregate principal amount of our 5.75% Senior Secured Notes due 2029 (“6.125%5.75% Senior Secured Notes”). to qualified institutional buyers and non-U.S. persons in a private offering pursuant to the exemptions from the registration requirements of the Securities Act contained in Rule 144A and Regulation S thereunder. The indenture governingaggregate net cash proceeds from the sale of the 5.75% Senior Secured Notes were approximately $855,500 after deducting the initial purchaser’s discount and estimated expenses and fees in connection with the offering. We used the net cash proceeds from the 5.75% Senior Secured Notes offering, together with cash on hand, to redeem all of our outstanding 6.125% Senior Secured Notes due 2025, including accrued interest and premium thereon, on January 28, 2021.
The 5.75% Senior Secured Notes pay interest on a semi-annual basis at a rate of 5.75% per year and mature on the earlier of February 1, 2029 and the date that is 91 days before the final stated maturity date of our 10.5% Senior Notes due 2026 (“10.5% Senior Notes”) if such 10.5% Senior Notes have not been repurchased and cancelled or refinanced by such date. Prior to February 1, 2024, we may redeem some or all of the 5.75% Senior Secured Notes at any time at a make-whole redemption price. On or after February 1, 2024, we may redeem some or all of the 5.75% Senior Secured Notes at a premium that will decrease over time, plus accrued and unpaid interest, if any, to the redemption date. In addition, any time prior to February 1, 2024, we may redeem up to 40% of the aggregate outstanding amount of the 5.75% Senior Secured Notes with the net proceeds of certain equity offerings at 105.75% of the aggregate principal amount of the 5.75% Senior Secured Notes, plus accrued and unpaid interest, if any, to the redemption date, if at least 60% of the aggregate principal amount of the 5.75% Senior Secured Notes originally issued remains outstanding after such redemption, and the redemption occurs within 90 days of the closing of such equity offering. In the event of a change of control, as defined in the indenture governing the 5.75% Senior Secured Notes (the “2025“2029 Indenture”), each holder of the 5.75% Senior Secured Notes may require the Company to repurchase some or all of its 5.75% Senior Secured Notes at a repurchase price equal to 101% of their aggregate principal amount plus accrued and unpaid interest, if any, to the date of purchase. If the Company sells certain assets and does not apply the proceeds as required pursuant to the 2029 Indenture, it must offer to repurchase the 5.75% Senior Secured Notes at the prices listed in the 2029 Indenture.
The 5.75% Senior Secured Notes are fully and unconditionally guaranteed, subject to certain customary automatic release provisions, on a joint and several basis by all of our wholly-owned domestic subsidiaries that are engaged in the conduct of our cigarette businesses, which subsidiaries, as of the issuance date of the 5.75% Senior Secured Notes, were also guarantors under our outstanding 10.5% Senior Notes. The 5.75% Senior Secured Notes are not guaranteed by New Valley LLC, or any of our subsidiaries engaged in our real estate business conducted through our subsidiary, New Valley LLC. The guarantees provided by certain of the guarantors are secured by first priority or second priority security interests in certain collateral of such guarantors pursuant to security and pledge agreements, subject to certain permitted liens and exceptions as further described in the 2029 Indenture and the security documents relating thereto. Vector Group Ltd does not provide any security for the 5.75% Senior Secured Notes.
59

The 2029 Indenture contains covenants that restrict the payment of dividends if our consolidated earnings before interest, taxes, depreciation and amortization (“Consolidated EBITDA”), as defined in the 20252029 Indenture, for the most recently ended four full quarters is less than $75,000. The 20252029 Indenture also restricts the incurrence of debt if our Leverage Ratio and our Secured Leverage Ratio, each as defined in the 20252029 Indenture, exceed 3.0 to 1.0 and 1.5 to 1.0, respectively. Our Leverage Ratio is defined in the 20252029 Indenture as the ratio of our and our guaranteeing subsidiaries’ total debt less the fair market value of our cash, investment securities and long-term investments to Consolidated EBITDA, as defined in the 20252029 Indenture. Our Secured Leverage Ratio is defined in the 20252029 Indenture in the same manner as the Leverage Ratio, except that secured indebtedness is substituted for indebtedness. The following table summarizes the requirements of these financial covenantstest and the resultsextent to which we would have satisfied these requirements had the 2029 Indenture been in effect as of the calculation, as defined in the 2025 Indenture.June 30, 2021.
IndentureJune 30,
2021
CovenantRequirement
Consolidated EBITDA, as defined$75,000$411,838
Leverage ratio, as defined<3.0 to 12.10 to 1
Secured leverage ratio, as defined<1.5 to 10.79 to 1
  Indenture June 30,
2020
Covenant Requirement 
Consolidated EBITDA, as defined $75,000 $367,357
Leverage ratio, as defined <3.0 to 1 2.08 to 1
Secured leverage ratio, as defined <1.5 to 1 0.61 to 1

As of June 30, 2020 and December 31, 2019,2021, we were in compliance with all debt covenants related to the 20252029 Indenture.
10.5% Senior Notes due 2026. On November 2, 2018 and November 18, 2019, respectively, we sold $325,000 and $230,000, respectively, in aggregate principal amount of our 10.5% Senior Notes due 2026 in private offerings exemptto qualified institutional buyers and non-U.S. persons pursuant to the exemptions from the registration requirements of the Securities Act to qualified institutional buyerscontained in accordance with Rule 144A and Regulation S thereunder. The 10.5% Senior Secured Notes due 2026 are guaranteed by all of our wholly owned domestic subsidiaries that are engaged in the Securities Act.conduct of our cigarette business and DER Holdings LLC.
The indenture governing our 10.5% Senior Notes due 2026 (the “2026 Indenture”) restricts our ability to paycontains covenants that restrict the payment of dividends and make certain other distributions subject to certain exceptions, including exceptions for (1) dividends and other distributions in an amount up to 50% of our consolidated net income, plus certain specified proceeds received us,by the Company, if no event of default has occurred, and we are in compliance with a Fixed Charge Coverage Ratio (as defined in the 2026 Indenture) of at least 2.0x,2.0 to 1.0, and (2) dividends and other distributions in an unlimited amount, if no event of default has occurred and we are in compliance with a Net Leverage Ratio (as defined in the 2026 Indenture) no greater than 4.0x.4.0 to 1.0. As a result, absent an event of default, we can pay dividends if the Net Leverage ratio is below 4.0x,4.0 to 1.0, regardless of the value of the Fixed Charge Coverage Ratio at the time. The 2026 Indenture also restricts our ability to incur debt if our Fixed Charge Coverage Ratio is less than 2.0x,2.0 to 1.0, and restricts our ability to secure debt other than secured debt incurred pursuant to athe extent doing so would cause our Secured Leverage Ratio no greater than 3.75x,(as defined in the 2026 Indenture) to exceed 3.75 to 1.0, unless the 10.5% Senior Notes are secured on an equal and ratable basis. In addition, the 2026 Indenture restricts our ability to spin-off or transfer New Valley and its subsidiaries as a whole, or DER Holdings LLC and its subsidiaries (including Douglas Elliman) as a whole, unless (1) such spin-off or transfer complies with the covenants restricting mergers and asset sales, or (2) our Net Leverage Ratio is no greater than 4.0x.4.0 to 1.0. Our Fixed Charge Coverage Ratio is defined in the 2026 Indenture as the ratio of our Consolidated EBITDA to our Fixed Charges (each as defined in the 2026 Indenture). Our Net Leverage Ratio is defined in the 2026 Indenture as the ratio of our and our guaranteeing subsidiaries’ total debt less our cash, cash equivalents, and the fair market value of our investment securities, long-term investments, investments in real estate, net, and investments in real estate ventures, to Consolidated EBITDA, as defined


in the 2026 Indenture. Our Secured Leverage Ratio is defined in the 2026 Indenture as the ratio of our and our guaranteeing subsidiaries’ total secured debt, to Consolidated EBITDA, as defined in the 2026 Indenture.
The following table summarizes the requirements of these financial test and the extent to which we satisfied these requirements as of June 30, 2021.
CovenantIndenture RequirementJune 30,
20202021
Consolidated EBITDA, as definedN/A$270,637438,502
Fixed charge coverage ratio, as defined>2.0 to 12.684.01 to 1
Net leverage ratio, as defined<4.0 to 12.161.46 to 1
Secured leverage ratio, as defined<3.75 to 13.211.99 to 1
As of June 30, 20202021 and December 31, 2019,2020, we were in compliance with all of the debt covenants related to the 2026 Indenture.
Guarantor Summarized Financial Information. Vector Group Ltd. (the “Issuer”) and its wholly-owned domestic subsidiaries that are engaged in the conduct of its cigarette business (the “Subsidiary Guarantors”) have filed a shelf registration
60

statement for the offering of debt and equity securities on a delayed or continuous basis and we are including this condensed consolidating financial information in connection therewith. Any such debt securities may be issued by us and guaranteed by our Subsidiary Guarantors. New Valley and any of its subsidiaries, other than DER Holdings LLC (the “Nonguarantor Subsidiaries”) will not guarantee any such debt securities. Both the Subsidiary Guarantors and the Nonguarantor Subsidiaries are wholly-owned by the Issuer. The Condensed Consolidating Balance Sheets as of June 30, 2021 and the related Condensed Consolidating Statements of Operations for the six months ended June 30, 2021 of the Issuer, Subsidiary Guarantors and Nonguarantor Subsidiaries are set forth in Exhibit 99.2.
Presented herein are the Summarized Combined Balance Sheets as of June 30, 2021 and December 31, 2020 and the related Summarized Combined Statements of Operations for the six months ended June 30, 2021 for the Issuer and the Subsidiary Guarantors (collectively, the “Obligor Group”). The summarized combined financial information is presented after the elimination of: (i) intercompany transactions and balances among the Obligor Group, and (ii) equity in earnings from and investments in the Nonguarantor Subsidiaries.

Summarized Combined Balance Sheets:

June 30,
2021		December 31,
2020
Assets:
Current assets$605,478 $515,082 
Noncurrent assets262,690 264,041 
Intercompany receivables from Nonguarantor Subsidiaries1,835 2,040 
Liabilities:
Current liabilities256,488 193,125 
Noncurrent liabilities1,529,714 1,521,293 

Summarized Combined Statements of Operations:

Six Months Ended
June 30,
20212020
Revenues$598,004 $599,818 
Cost of sales370,176 411,357 
Operating income169,776 136,375 
Net income73,798 123,668 

Liggett Credit Facility and Liggett Term Loan Under Credit Facility. On March 22, 2021, Liggett, Maple and Vector Tobacco entered into the Amendment with Wells Fargo, as agent and lender.
The Amendment amended the existing credit agreement to, among other things, (i) add Vector Tobacco as a borrower under the Credit Agreement, (ii) extend the maturity of the Credit Agreement to March 22, 2026, and (iii) increase the amount of the maximum credit line thereunder from $60,000 to $90,000. As of June 30, 2020,2021, there was no outstanding balance under the Credit Agreement, which was primarily the result of the 90-day postponement of U.S. excise taxes due between March 1, 2020 and June 30, 2020.Agreement. Availability as determined under the Credit Agreement was $60,000approximately $84,600 based on eligible collateral at June 30, 2020.2021. At June 30, 2020,2021, Liggett was in compliance with all covenants under the Credit Agreement; Liggett’s EBITDA, as defined, were $243,545$362,521 for the last twelve months ended June 30, 2020.2021.
Anticipated Liquidity Obligations. We and our subsidiaries have significant indebtedness and debt service obligations. As of June 30, 2020,2021, we and our subsidiaries had total outstanding indebtedness of approximately $1,433,200.$1,448,900. Of this amount, $850,000$875,000 comprised of the outstanding amount under our 6.125%5.75% Senior Secured Notes due 2025,2029, and $555,000 comprised of the outstanding amount under our 10.5% Senior Notes due 2026. There is a risk that we will not be able to generate sufficient funds to repay our debt. If we cannot service our fixed charges, it would have a material adverse effect on our business and results of operations.
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We currently believe that our tobacco segmentand real estate segments will be agenerate positive cash-flow-generating unitcash flow and will continue to be able to sustain itstheir operations in 20202021 without any significant liquidity concerns. Our real estate segment has historically been a positive cash-flow generating segment, but we do not currently expect our real estate operations to generate positive cash-flow in 2020, primarily due to the COVID-19 pandemic and related economic disruption.
In order to meet the above liquidity requirements as well as other anticipated liquidity needs in the normal course of business, we had cash and cash equivalents of approximately $540,400,$490,400, investment securities at fair value of approximately $88,600,$157,001, long-term investments with an estimated value of approximately $35,400,$55,400, including in-transit redemptions, and availability under Liggett’s credit facility of approximately $60,000$84,600 at June 30, 2020.2021. Management currently anticipates that these amounts, as well as expected cash flows from our operations, proceeds from public and/or private debt and equity financing to the extent available, management fees and other payments from subsidiaries should be sufficient to meet our liquidity needs over the next 12 months. 
We continue to evaluate our capital structure and current market conditions related to our capital structure. Depending on market conditions, we may utilize our cash, investment securities and long-term investments to repurchase our 6.125% Senior Secured Notes due 2025 and 10.5% Senior Notes due 2026 in open-market purchases or privately negotiated transactions.
There can be no assurance that we would be able to continue to issue debt at a lower interest rate than our historical borrowing levels in the future and, in the event we pursue any capital markets activities, our ability to complete any debt or equity offering would be subject to market conditions.
 Furthermore, we may access the capital markets to refinance our 10.5% Senior Notes due 2026. We are able to redeem such bonds at price of 105.3% on November 1, 2021 and the redemption price declines to 102.625% on November 1, 2022 and 100% on November 1, 2023. There can be no assurance that we would be able to continue to issue debt at a lower interest rate than our historical borrowing levels in the future and, in the event we pursue any capital markets activities, our ability to complete any debt or equity offering would be subject to market conditions.

We may acquire or seek to acquire additional operating businesses through merger, purchase of assets, stock acquisition or other means, or to make other investments, which may limit our liquidity otherwise available.


Market Risk
We are exposed to market risks principally from fluctuations in interest rates, foreign currency exchange rates and equity prices. We seek to minimize these risks through our regular operating and financing activities and our long-term investment strategy. Our market risk management procedures cover all market risk sensitive financial instruments.
As of June 30, 2020,2021, approximately $27,500$18,800 of our outstanding debt at face value had variable interest rates determined by various interest rate indices, which increases the risk of fluctuating interest rates. Our exposure to market risk includes interest rate fluctuations in connection with our variable rate borrowings, which could adversely affect our cash flows. As of June 30, 2020,2021, there was no outstanding balance on the Liggett Credit Facility which also has variable interest rates. As of June 30, 2020,2021, we had no interest rate caps or swaps. Based on a hypothetical 100 basis point increase or decrease in interest rates (1%), our annual interest expense could increase or decrease by approximately $300.$200.
We held debt securities available for sale totaling $54,885$108,489 and convertible trading debt securities totaling $2,481 as of June 30, 2020.2021. See Note 6 to our condensed consolidated financial statements. Adverse market conditions could have a significant effectimpact on the value of these investments.
On a quarterly basis, we evaluate our debt securities available for sale and equity securities without readily determinable fair values that do not qualify for the NAV practical expedient to determine whether an impairment has occurred. If so, we also make a determination if such impairment is considered temporary or other-than-temporary. We believe that the assessment of temporary or other-than-temporary impairment is facts-and-circumstances driven. The impairment indicators that are taken into consideration


as part of our analysis include (a) a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee, (b) a significant adverse change in the regulatory, economic, or technological environment of the investee, (c) a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates, and (d) factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants.

Equity Security Price Risk

As of June 30, 2020,2021, we held various investments in equity securities with a total fair value of $66,990,$81,565, of which $33,758$48,512 represents equity securities at fair value and $33,232$33,053 represents long-term investment securities at fair value. The latter securities represent long-term investments in various investment partnerships. These investments are illiquid and their ultimate
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realization is subject to the performance of the underlying entities. See Note 6 to our condensed consolidated financial statements, respectively, for more details on equity securities at fair value and long-term investment securities at fair value. The impact to our condensed consolidated statementstatements of operations related to equity securities fluctuates based on changes in their fair value.
We record changes in the fair value of equity securities in net income. To the extent that we continue to hold equity securities, our operating results may fluctuate significantly. Based on our equity securities held as of June 30, 2020,2021, a hypothetical decrease of 10% in the price of these equity securities would reduce the fair value of the investments and, accordingly, our net income by approximately $6,699.$8,157.

New Accounting Pronouncements

Refer to Note 1, Summary of Significant Accounting Policies, to our financial statements for further information on New Accounting Pronouncements.


Legislation and Regulation
There are no material changes from the Legislation and Regulation section set forth in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2019,2020, except as follows. set forth below:
Menthol and Flavorings

The following paragraphTobacco Products Scientific Advisory Committee (“TPSAC”) completed its review of “Item. 1. Business--Legislationthe use of menthol in cigarettes and Regulation-Advertisingissued a report with recommendations to the U.S. Food and WarningsDrug Administration (“FDA”) in March 2011. The report stated that “removal of menthol cigarettes from the marketplace would benefit public health in the United States,” but did not expressly recommend that FDA ban menthol cigarettes. In July 2013, FDA made available its preliminary scientific evaluation (“PSE”) of public health issues related to the use of menthol in cigarettes, in which it concluded that menthol cigarettes likely pose a public health risk above that seen with non-menthol cigarettes. FDA also issued and accepted public comment on Packaging”an Advance Notice of Proposed Rulemaking (“ANPR”) seeking input related to potential regulatory options it might consider in determining what future regulatory action, if any, it believes is warranted. A decision by FDA to ban menthol in tobacco products could have a material adverse effect on us. In July 2014, the federal district court for the District of Columbia ruled on cross-motions for summary judgment in a lawsuit brought by several cigarette manufacturers against FDA challenging the composition of the TPSAC. The district court granted, in part, the manufacturers’ motion for summary judgment, ordering FDA to reconstitute the TPSAC and barring the agency from relying in any manner on the March 2011 TPSAC report on menthol. FDA appealed the decision to the U.S. Court of Appeals for the District of Columbia Circuit. In January 2016, the D.C. Circuit vacated the district court’s decision due to the manufacturers’ lack of standing and lifted the prohibition on FDA relying on the March 2011 TPSAC report. The D.C. Circuit’s decision does not preclude future challenges if FDA ultimately relies on the March 2011 TPSAC report to restrict or ban menthol in cigarettes.

In July 2017, FDA announced a comprehensive plan for Tobacco and Nicotine Regulation. As part of this comprehensive plan, FDA announced its intent to issue an ANPR requesting public stakeholder input on the impact of flavors (including menthol) on increased initiation among youth and young adults, as well as assisting adult smokers to switch to potentially less harmful forms of nicotine delivery. FDA issued this ANPR on March 21, 2018, seeking comments, data, research results, or other information about, among other things, how flavors attract youth to initiate tobacco product use and about whether and how certain flavors may help adult cigarette smokers reduce cigarette use and switch to potentially less harmful products. In the ANPR, FDA stated that potential regulatory actions include, but are not limited to, tobacco product standards and restrictions on the sale and distribution of tobacco products with flavors.

On April 29, 2021, FDA announced that it intends to propose a rule prohibiting menthol as a characterizing flavor in cigarettes by the end of April 2022. FDA indicated that the proposed rule will be one of the agency’s highest priorities. The public would have at minimum 60 days to provide comments on the proposed rule and, if FDA decides to proceed, it would then draft and publish a final rule. The rulemaking process could take many months or years and once a final rule is published it ordinarily would not be expected to take effect until at least one year after the date of publication. For the twelve months ended June 30, 2021, approximately 19% of our Annual Reportcigarette unit sales were menthol flavored. We cannot predict how a tobacco product standard or a restriction on Form 10-K, whichthe sale and distribution of tobacco products with menthol, if ultimately issued by FDA, will impact product sales, whether it will have a material adverse effect on Liggett or Vector Tobacco, or whether it will impact Liggett and Vector Tobacco to a greater degree than other companies in the industry.

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In December 2019, Massachusetts enacted a ban on the sale of menthol cigarettes effective June 1, 2020. Although certain municipalities throughout the United States have banned the sale of menthol cigarettes, Massachusetts is referenced therein, is amendedthe first state to do so.

We cannot predict how the menthol ban in Massachusetts will impact product sales, whether it will have a material adverse effect on Liggett or Vector Tobacco, or whether it will impact Liggett and restatedVector Tobacco to a greater degree than other companies in its entirety:  the industry. We also cannot predict whether other states will enact similar bans on the sale of menthol cigarettes.

On March 18, 2020, FDA issued a final rule to require new health warnings on cigarette packages and in cigarette advertisements. This rule requires each cigarette package and advertisement to bear one of eleven textual warning statements accompanied by a corresponding graphic image covering 50% of the area of the front and rear panels of cigarette packages and at least 20% of the area at the top of cigarette advertisements. The rule establishes marketing requirements that include the random and equal display and distribution of the required warnings for cigarette packages and quarterly rotation of the required warnings for cigarette advertisements. The final rule provided for an effective date of June 18, 2021, 15 months after issuance of the final rule. The inclusion of new warnings and rotation requirements pursuant to the final rule would likely increase Liggett’s production costs. On April 3, 2020, Liggett, along with other tobacco companies, commenced an action against the FDA in the United States District Court, District of Texas (Tyler Division) challenging the legality of the graphic warning final rule. On May 8, 2020,21, 2021, the court issued an updated scheduling order and granted a joint motion to postpone the effective date of the final rule to July 13, 2022.

FDA requires each tobacco manufacturer to submit a plan providing for the random and equal display and distribution of the required warnings on cigarette packaging and the quarterly rotation of the required warnings in cigarette advertising. FDA must review and approve the plan prior to implementation. Liggett and Vector Tobacco each submitted a plan to FDA and these plans were approved by 120 days to October 16,FDA on April 30, 2021.
We cannot predict whether the court will delay the effective date and/or determine that some or all of the proposed textual and/or graphic warnings, or proposed prominence of the warnings, violate the First Amendment, Administrative Procedure Act, or other legal requirements, or what the impact of such a court ruling would have on the compliance timeline or requirements imposed on industry. 

    
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this report contains “forward-looking statements” within the meaning of the federal securities law. Forward-looking statements include information relating to our intent, belief or current expectations, primarily with respect to, but not limited to:
•economic outlook,
•capital expenditures,
•cost reduction,


•legislation and regulations,
•cash flows,
•operating performance,
•litigation, and
•related industry developments (including trends affecting our business, financial condition and results of operations).
We identify forward-looking statements in this report by using words or phrases such as “anticipate,”“anticipate”, “believe”, “continue”, "could", “believe,” “estimate,”“estimate”, “expect,” “intend,”“intend”, “may be,” “objective,” “plan,” “seek,” “predict,”“objective”, “opportunistically”, “plan”, “potential”, “predict”, “project” and, “prospects”, “seek” or “will be” and similar words or phrases or their negatives.
The forward-looking information involves important risks and uncertainties that could cause our actual results, performance or achievements to differ materially from our anticipated results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, without limitation, the following:
•general economic and market conditions and any changes therein, due to acts of war and terrorism or otherwise,
•governmental regulations and policies,
•adverse changes in global, national, regional and local economic and market conditions, including those related to pandemics and health crises, such as the recent outbreak of COVID-19, which began in 2020, as well as the impact of associated variants of COVID-19,
•impact of legislation on our results of operations and product costs, i.e. the impact of federal legislation providing for regulation of tobacco products by FDA,
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•impact of substantial increases in federal, state and local excise taxes,
•uncertainty related to product liability and other tobacco-related litigations including the Engle progeny cases pending in Florida and other individual and class action cases where certain plaintiffs have alleged compensatory and punitive damage amounts ranging into the hundreds of million and even billions of dollars,
•potential additional payment obligations for us under the MSA and other settlement agreements with the states;
•significant changes in the price, availability or quality of tobacco, other raw materials or component parts, including as a result of the COVID-19 pandemic,
•the timing and extent of COVID-19 vaccine administration,
•the duration of the COVID-19 pandemic,
•adult smoker purchasing behavior of those who receive the COVID-19 vaccine,
•potential dilution to our holders of or common stock as a result of issuances of additional shares of common stock to fund our financial obligations and other financing activities,
•effects of industry competition,
•impact of business combinations, including acquisitions and divestitures, both internally for us and externally in the tobacco industry,
•the impacts of the Tax Cuts and Jobs Act of 2017, including the deductibility of interest expense and the impact of the markets on our Real Estate segment,
effects•the impacts of industry competition,
impact of business combinations, including acquisitions and divestitures, both internally for us and externallyfuture income tax legislation in the tobacco industry,
impact of legislation on our results of operations and product costs, i.e.U.S., including the impact of federal legislation providing for regulationthe markets on our Real Estate segment,
•failure to properly use and protect client and employee information and data, and
•the effect of tobacco products by FDA,
impacta material breach of substantial increases in federal, state and local excise taxes,
•
uncertainty related to product liability and other tobacco-related litigations including the Engle progeny cases pending in Florida and other individual and class action cases where certain plaintiffs have alleged compensatory and punitive damage amounts ranging into the hundredssecurity or other performance issues of any of million and even billions of dollars; and,
potential additional payment obligations for us under the MSA and other settlement agreements with the states.

Company’s or its vendors’ systems.
Further information on the risks and uncertainties to our business include the risk factors discussed above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20192020 filed with the Securities and Exchange Commission.
Although we believe the expectations reflected in these forward-looking statements are based on reasonable assumptions, there is a risk that these expectations will not be attained and that any deviations will be material. The forward-looking statements speak only as of the date they are made.


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risk” is incorporated herein by reference.


ITEM 4.    CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered


by this report, and, based on their evaluation, our principal executive officer and principal financial officer have concluded that these controls and procedures are effective.

There have not been any changes in our internal control over financial reporting that occurred during the second quarter of 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II

OTHER INFORMATION

Item 1.     Legal Proceedings

Reference is made to Note 9,, incorporated herein by reference, to our condensed consolidated financial statements included elsewhere in this report which contains a general description of certain legal proceedings to which our company, or its subsidiaries are a party and certain related matters. Reference is also made to Exhibit 99.1 for additional information regarding the pending smoking-related legal proceedings to which Liggett or us is a party. A copy of Exhibit 99.1 will be furnished without charge upon written request to us at our principal executive offices, 4400 Biscayne Boulevard, 10th Floor, Miami, Florida 33137, Attn. Investor Relations.


Item 1A. Risk Factors

There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A, “Risk Factors,” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,, except as set forth below:


FDA Regulation under the Family Smoking Prevention and Tobacco Control Act may adversely affect our sales and operating profit.
New Valley
In June 2009, the Family Smoking Prevention and Tobacco Control Act (“TCA”) became law. The TCA grants FDA broad authority over the manufacture, sale, marketing and packaging of tobacco products, although FDA is heavily dependentprohibited from banning all cigarettes or all smokeless tobacco products. For a more complete discussion of the TCA, see Item 1. Business. Legislation and Regulation.

In July 2017, FDA announced a comprehensive plan for tobacco and nicotine regulation, proposing an increased focus on the performanceimpact of flavors (including menthol) and on reducing the level of nicotine in tobacco. On April 29, 2021, FDA announced that it intends to issue a proposed rule to prohibit menthol as a characterizing flavor in cigarettes within the next year. FDA indicated that the proposed rule will be one of the real estate market inagency’s highest priorities. The rule making process could take many months or years and once a final rule is published it ordinarily would not be expected to take effect until at least one year after the New York metropolitan area, which has been adversely impacted by COVID-19.

New Valley’sdate of publication. For the last twelve months ended June 30, 2021, approximately 19% of our cigarette unit sales were menthol flavored. Regulations under the TCA that restrict or prohibit the sale of menthol flavored cigarettes would reduce the demand for our cigarettes and may have an adverse effect on our business primarily dependsand results of operations. We cannot predict how a tobacco product standard or a restriction on the performancesale and distribution of the real estate market in the New York metropolitan area. Our real estate brokerage businesses and our investments in real estate developments are largely located in the New York metropolitan area and to a lesser extent in South Florida, Los Angeles, and other markets.

Douglas Elliman’s residential brokerage business primarily depends on volumes oftobacco products with menthol, if ultimately issued by FDA, will impact product sales, transactions and sales prices for residential property in the New York metropolitan area and derived approximately 70% of its revenues in 2019 and 2018 from this region. Published reports and data indicate that the New York metropolitan area was impacted more than any other area in the United States by the COVID-19 pandemic. Consequently, various governmental agencies in the New York metropolitan area, and other markets where Douglas Elliman operates and where our real estate investments are located, instituted quarantines, “pause” orders, “shelter-in-place” rules, restrictions on travel and restrictions on the types of businesses that can operate. For example, Douglas Elliman’s agents were restricted from performing personal showings of properties or conducting open houses in most of Douglas Elliman’s markets from March 2020 to June 2020. As a result of such measures, volumes of residential property sales transactions in the New York metropolitan area have declined significantly, and the aggregate sales commissions earned by Douglas Elliman on sales transactions have correspondingly declined. This has had, and we expectwhether it will continue to have a material adverse effect on Douglas Elliman’s financial conditionLiggett or Vector Tobacco, or whether it will impact Liggett and results of operations, notwithstanding the mitigating actions we have initiated (including employee-related andVector Tobacco to a greater degree than other expense-reduction measures) and expect to continue during this crisis.

In addition, property development and investment activities are currently significantly lower than past levels and future growthcompanies in the property marketindustry

As part of the comprehensive plan announced in July 2017, FDA said it would focus on nicotine addiction, with the New York metropolitan area, South Florida, Los Angeles, Las Vegasgoal of lowering nicotine levels in combustible cigarettes through a product standard developed through notice and comment rule making, which FDA announced in March 2018. See Item 1. Business. Legislation and Regulation. At this time, we cannot predict the specific regulations FDA will enact, the timeframe for such regulations, or elsewhere in the United States are currently uncertain which mayeffect of such regulations. The rule making process could take years and once a final rule is issued it typically does not take effect for at least one year. We cannot predict how a nicotine tobacco product standard, if ultimately issued by FDA, would impact product sales, whether it would have a material adverse effect on New Valley’s real estate investments. As of June 30, 2020, we had investments inLiggett or were developing 16 projectsVector Tobacco, or whether it would impact Liggett and Vector Tobacco to a greater degree than other companies in the New York metropolitan area. industry.

In addition, duringApril 2018, FDA announced a change in its process for reviewing “provisional” substantial equivalence applications. See Item 1. Business. Legislation and Regulation for additional information on the second quartersubstantial equivalence process. Vector Tobacco received a letter from FDA in April 2018 advising that FDA does not intend to conduct further review of 2020, construction was halted at manyVector Tobacco’s remaining applications, with certain “conditions” (as described under Item 1. Business. Legislation and Regulation). Liggett received a letter from FDA in May 2018 advising that FDA does not intend to conduct further review for certain applications, also with certain “conditions” (as described under Item 1. Business. Legislation and Regulation). FDA has not indicated whether the applications relating to Liggett’s other products, not covered by that May 2018 letter, would proceed through FDA review. We cannot predict whether FDA will deem Liggett’s outstanding applications to be sufficient to support determinations of substantial equivalence for the products covered by these substantial equivalence reports. It is possible that FDA could determine that some, or all, of these products are “not substantially equivalent” to a preexisting tobacco product, as
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the agency has already done for 20 of Liggett’s applications. NSE orders for other cigarette styles may require us to stop the sale of the real estate projects that New Valley has made investments. Adverse developments in nationalapplicable cigarettes and local economic conditions as a result of the COVID-19 pandemic, as measured by such factors as GDP growth, employment levels, job growth, consumer confidence, interest ratesother cigarette styles and population growth in the New York metropolitan area and the United States generally, particularly in the regions where our investments and brokerage businesses are located, have reduced, and we expect will continue to reduce demand and depress prices for our properties and services and have had and we expect will continue tocould have a material adverse effect on our business, financial conditionus.

On March 18, 2020, FDA issued a final rule to require new health warnings on cigarette packages and resultsin cigarette advertisements. This rule requires each cigarette package and advertisement to bear one of operations.eleven textual warning statements accompanied by a corresponding graphic image covering 50% of the area of the front and rear panels of cigarette packages and at least 20% of the area at the top of cigarette advertisements. The rule establishes marketing requirements that include the random and equal display and distribution of the required warnings for cigarette packages and quarterly rotation of the required warnings for cigarette advertisements. The final rule provided for an effective date of June 18, 2021, 15 months after issuance of the final rule. The inclusion of new warnings and rotation requirements pursuant to the final rule would likely increase Liggett’s production costs. On April 3, 2020, Liggett, along with other tobacco companies, commenced an action against the FDA in the United States District Court, District of Texas (Tyler Division) challenging the legality of the graphic warning final rule. On May 8, 2020, the court issued an updated scheduling order and granted a joint motion to postpone the effective date of the final rule by 120 days to October 16, 2021. The court subsequently postponed the effective date to July 14, 2022.

We have made significant operating adjustments in Douglas Elliman’s real estate brokerage business, including staff reductions, which could negatively impactcannot predict whether the financial successcourt will further delay the effective date and/or determine that some or all of Douglas Elliman’s brokerage business in the future.

Douglas Elliman’s real estate brokerage offices generate revenue inproposed textual and/or graphic warnings, or proposed prominence of the form of commissions and service fees. Accordingly, its financial results depend uponwarnings, violate the operational and financial success of its brokerage offices and its agents. As a result ofFirst Amendment, Administrative Procedure Act, or other legal requirements, or what the impact of such a court ruling would have on the COVID-19 pandemiccompliance timeline or requirements imposed on Douglas Elliman’s brokerage business, in April 2020, we made significant operating adjustments at Douglas Elliman, including a reduction of personnelindustry.

It is likely that the TCA and further regulatory efforts by approximately 25%, which resultedFDA could result in a reductiondecrease in salaries and administrative expenses, as well as reduction, deferral or elimination of leases across the country. As a result of the expense


reductions, in additional to personnel expenses, Douglas Elliman’s professional services, advertising, travel and other occupancy expenses were reduced during the three months ended June 30, 2020. While such expense-reduction measures were necessary in order to mitigate the on-going financial impacts of the COVID-19 pandemic on Douglas Elliman’s real estate brokerage business, there can be no assurance that we will be able to re-hire those employeescigarette sales in the event that economic conditions improve,United States, including sales of Liggett’s and as a result,Vector Tobacco’s brands. Compliance and related costs are not possible to predict and depend substantially on the staff reductions that we have madefuture requirements imposed by FDA under the law. Costs, however, could negatively impact the financial success of Douglas Elliman’s brokerage business in the future. Further, while we continue to evaluate other expense reduction measures, to the extent Douglas Elliman’s business improves in the third quarter, we will begin to relinquish, as appropriate, some of the second quarter expense reductions, including advertisingbe substantial and personnel expenses.

The COVID-19 pandemic could continue to have a material impact on our Real Estate segment; the likelihood and magnitude of a material impact increases with the amount of time the virus impacts activity levels in locations in which Douglas Elliman operates. Therefore, we are unable to predict the ultimate impact of the COVID-19 pandemicadverse effect on the futurecompanies’ financial condition, results of operations, and cash flowsflows. In addition, FDA has a number of investigatory and enforcement tools available to it. Failure to comply with the law and with FDA regulatory requirements could result in significant financial penalties and could have a material adverse effect on the business, financial condition and results of operation of both Liggett and Vector Tobacco. At present, we are not able to predict whether the law will impact Liggett and Vector Tobacco to a greater degree than other companies in the industry, thus affecting our competitive position.

Maintaining the integrity of our computer systems and protecting confidential information and personal identifying information has become increasingly costly, as cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.
Global cybersecurity threats and incidents can range from uncoordinated individual attempts that gain unauthorized access to information technology systems both internally and externally, to sophisticated and targeted measures known as advanced persistent threats, directed at the Company and its affiliated agents. In the ordinary course of our Real Estate segment.business, we collect and store sensitive data, including our proprietary business information and intellectual property, and personally identifiable information of our tobacco and real estate customers. Additionally, we increasingly rely on third-party data storage providers, including cloud storage solution providers. The secure processing, maintenance and transmission of this information are critical to our operations and with respect to information collected and stored by our third-party service providers, we are reliant upon their security procedures. Our systems and the confidential information on them may also be compromised by employee misconduct or employee error. We and our third-party service providers have experienced, and expect to continue to experience, these types of internal and external threats and incidents, which can result, and have resulted, in the misappropriation and unavailability of critical data and confidential or proprietary information (our own and that of third parties, including personally identifiable information) and the disruption of business operations. Depending on their nature and scope, these incidents could potentially also result in the destruction or corruption of such data and information. Our business interruption insurance may be insufficient to compensate us for losses that may occur. The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties, diminution in the value of the services we provide to our customers, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness and results of operations. Developments in the laws and regulations governing the handling and transmission of personal identifying information in the United States may require us to devote more resources to protecting such information, which could in turn adversely affect our results of operations and financial condition.




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

No equity securities of ours which were not registered under the Securities Act have been issued or sold by us during the three months ended June 30, 2020.2021.

Issuer Purchase of Equity Securities

Our purchase of our common stock during the three months ended June 30, 20202021 were as follows:

PeriodTotal Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 to April 30, 2020—
 $—
 —
 —
May 1 to May 31, 20205,423
 11.44
(1) 
—
 —
June 1 to June 30, 2020—
 —
 —
 —
  Total5,423
 $11.44
 —
 —

PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 to April 30, 2021— $— (1)— — 
May 1 to May 31, 202142,029 14.48 — — 
June 1 to June 30, 2021— — — — 
  Total42,029 $14.48 — — 

(1) Delivery of shares to us in payment of tax withholding in connection with an employee’sseveral employees’ vesting in restricted stock. The shares were immediately canceled.

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Item 6.    Exhibits:


Form of Vector Group Ltd. Amended and Restated 2014 Management Incentive Plan.
Restricted Shares Award Agreement underPursuant to the Vector Group Ltd. Amended and Restated 2014 Management Incentive Plan.
Performance-based Restricted Shares Award Agreement Pursuant to the Vector Group Ltd. Amended and Restated 2014 Management Incentive Plan.
List of Subsidiary Guarantors (incorporated by reference to Exhibit 22 of Vector’s Form 10-K for the year ended December 31, 2020).
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.
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.
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.
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.
Material Legal Proceedings.
101.INSCondensed Consolidating Financial Statements of Vector Group Ltd.
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema
101.CALInline XBRL Taxonomy Extension Calculation Linkbase
101.DEFInline XBRL Taxonomy Extension Definition Linkbase
101.LABInline XBRL Taxonomy Extension Label Linkbase
101.PREInline XBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (the cover page tabs are embedded within the Inline XBRL document).
* Incorporated by reference


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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


VECTOR GROUP LTD.
(Registrant)
VECTOR GROUP LTD.
(Registrant)
By: /s/ J. Bryant Kirkland III
J. Bryant Kirkland III
Senior Vice President, Treasurer and
Chief Financial Officer
Date:August 7, 20206, 2021

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