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 ~~March 31,~~June 30, 2021

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

SECURITIES EXCHANGE ACT OF 1934

VECTOR GROUP LTD.

(Exact name of registrant as specified in its charter)


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

4400 Biscayne Boulevard

Miami, Florida 33137

305-579-8000

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

of the principal executive offices)

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


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

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

x Yes o No

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

x Yes o No

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

☒

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging Growth Company

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

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

☐ Yes x No

At ~~May~~August 3, 2021, Vector Group Ltd. had ~~154,194,629~~153,959,427 shares of common stock outstanding.

VECTOR GROUP LTD.

FORM 10-Q

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION

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

Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2021 and December 31, 2020			2

Condensed Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2021 and 2020			3

Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three and six months ended ~~March 31,~~June 30, 2021 and 2020			4

Condensed Consolidated Statements of Stockholders' Deficiency for the three and six months ended ~~March 31,~~June 30, 2021 and 2020			5

Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020			67

Notes to Condensed Consolidated Financial Statements			78

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			4245

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5965

Item 4. Controls and Procedures			5965

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			6066

Item 1A. Risk Factors			6066

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6268

Item 6. Exhibits			6369

SIGNATURE			6470

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
ASSETS:	ASSETS:					ASSETS:
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	382,387	$	352,842	Cash and cash equivalents	$	490,390	$	352,842
Investment securities at fair value	Investment securities at fair value	149,087		135,585		Investment securities at fair value	157,001		135,585

Accounts receivable - trade, net	Accounts receivable - trade, net	45,905		40,711		Accounts receivable - trade, net	51,463		40,711
Inventories	Inventories	100,945		97,545		Inventories	93,161		97,545

Other current assets	Other current assets	46,906		37,220		Other current assets	46,171		37,220
Total current assets	Total current assets	725,230		663,903		Total current assets	838,186		663,903
Property, plant and equipment, net	Property, plant and equipment, net	75,678		77,988		Property, plant and equipment, net	72,804		77,988
Investments in real estate, net	Investments in real estate, net	15,802		15,631		Investments in real estate, net	9,608		15,631
Long-term investments (includes $38,108 and $34,218 at fair value)		56,995		52,528
Long-term investments (includes $35,534 and $34,218 at fair value)						Long-term investments (includes $35,534 and $34,218 at fair value)	55,362		52,528
Investments in real estate ventures	Investments in real estate ventures	83,984		85,400		Investments in real estate ventures	76,192		85,400

Operating lease right-of-use assets	Operating lease right-of-use assets	140,777		145,356		Operating lease right-of-use assets	138,057		145,356
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net	207,536		207,577		Goodwill and other intangible assets, net	207,497		207,577
Other assets	Other assets	97,585		95,026		Other assets	98,671		95,026
Total assets	Total assets	$	1,403,587	$	1,343,409	Total assets	$	1,496,377	$	1,343,409
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:	LIABILITIES AND STOCKHOLDERS' DEFICIENCY:					LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of notes payable and long-term debt	Current portion of notes payable and long-term debt	$	12,556	$	12,557	Current portion of notes payable and long-term debt	$	12,558	$	12,557

Current payments due under the Master Settlement Agreement	Current payments due under the Master Settlement Agreement	73,036		38,767		Current payments due under the Master Settlement Agreement	89,488		38,767

Income taxes payable, net	Income taxes payable, net	16,458		5,847		Income taxes payable, net	13,834		5,847

Current operating lease liability	Current operating lease liability	27,207		27,207		Current operating lease liability	26,625		27,207

Other current liabilities	Other current liabilities	203,641		198,937		Other current liabilities	223,498		198,937
Total current liabilities	Total current liabilities	332,898		283,315		Total current liabilities	366,003		283,315
Notes payable, long-term debt and other obligations, less current portion	Notes payable, long-term debt and other obligations, less current portion	1,405,399		1,393,729		Notes payable, long-term debt and other obligations, less current portion	1,402,827		1,393,729

Non-current employee benefits	Non-current employee benefits	66,722		66,616		Non-current employee benefits	66,829		66,616
Deferred income taxes, net	Deferred income taxes, net	34,854		32,456		Deferred income taxes, net	36,602		32,456
Non-current operating lease liability	Non-current operating lease liability	148,417		154,199		Non-current operating lease liability	144,487		154,199
Payments due under the Master Settlement Agreement	Payments due under the Master Settlement Agreement	17,933		17,933		Payments due under the Master Settlement Agreement	13,224		17,933

Other liabilities	Other liabilities	53,863		54,848		Other liabilities	58,450		54,848
Total liabilities	Total liabilities	2,060,086		2,003,096		Total liabilities	2,088,422		2,003,096
Commitments and contingencies (Note 9)	Commitments and contingencies (Note 9)	0		0		Commitments and contingencies (Note 9)	0		0
Stockholders' deficiency:	Stockholders' deficiency:					Stockholders' deficiency:
Preferred stock, par value $1 per share, 10,000,000 shares authorized	Preferred stock, par value $1 per share, 10,000,000 shares authorized	0		0		Preferred stock, par value $1 per share, 10,000,000 shares authorized	0		0
Common stock, par value $0.1 per share, 250,000,000 shares authorized, 154,194,629 and 153,324,629 shares issued and outstanding		15,419		15,332
Common stock, par value $0.1 per share, 250,000,000 shares authorized, 154,156,100 and 153,324,629 shares issued and outstanding						Common stock, par value $0.1 per share, 250,000,000 shares authorized, 154,156,100 and 153,324,629 shares issued and outstanding	15,416		15,332
Additional paid-in capital	Additional paid-in capital	2,573		0		Additional paid-in capital	5,048		0
Accumulated deficit	Accumulated deficit	(653,606)		(653,945)		Accumulated deficit	(591,911)		(653,945)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(20,885)		(21,074)		Accumulated other comprehensive loss	(20,598)		(21,074)

Total Vector Group Ltd. stockholders' deficiency	Total Vector Group Ltd. stockholders' deficiency	(656,499)		(659,687)		Total Vector Group Ltd. stockholders' deficiency	(592,045)		(659,687)
Non-controlling interest	Non-controlling interest	0		0		Non-controlling interest	0		0
Total stockholders' deficiency	Total stockholders' deficiency	(656,499)		(659,687)		Total stockholders' deficiency	(592,045)		(659,687)
Total liabilities and stockholders' deficiency	Total liabilities and stockholders' deficiency	$	1,403,587	$	1,343,409	Total liabilities and stockholders' deficiency	$	1,496,377	$	1,343,409

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

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited


		Three Months Ended			Three Months Ended						Six Months Ended
		March 31,			June 30,						June 30,
			2021			2020			2021		2020		2021		2020
Revenues:	Revenues:							Revenues:
Tobacco*	Tobacco*		$	268,463		$	287,069	Tobacco*	$	329,496	$	312,510	$	597,959	$	599,579
Real estate	Real estate		275,301			167,419		Real estate	400,033		133,250		675,334		300,669

Total revenues	Total revenues		543,764			454,488		Total revenues	729,529		445,760		1,273,293		900,248

Expenses:	Expenses:							Expenses:
Cost of sales:	Cost of sales:							Cost of sales:
Tobacco*	Tobacco*		164,031			197,290		Tobacco*	206,145		214,067		370,176		411,357
Real estate	Real estate		199,511			113,333		Real estate	294,265		90,818		493,776		204,151

Total cost of sales	Total cost of sales		363,542			310,623		Total cost of sales	500,410		304,885		863,952		615,508

Operating, selling, administrative and general expenses	Operating, selling, administrative and general expenses		90,014			90,517		Operating, selling, administrative and general expenses	92,043		71,064		182,057		161,581
Litigation settlement and judgment expense	Litigation settlement and judgment expense		5			0		Litigation settlement and judgment expense	0		53		5		53
Impairments of goodwill and other intangible assets	Impairments of goodwill and other intangible assets		0			58,252		Impairments of goodwill and other intangible assets	0		0		0		58,252

Operating income (loss)			90,203			(4,904)
Restructuring charges								Restructuring charges	0		2,961		0		2,961
Operating income								Operating income	137,076		66,797		227,279		61,893

Other income (expenses):	Other income (expenses):							Other income (expenses):
Interest expense	Interest expense		(28,751)			(35,627)		Interest expense	(28,115)		(29,358)		(56,866)		(64,985)
Loss on extinguishment of debt	Loss on extinguishment of debt		(21,362)			0		Loss on extinguishment of debt	0		0		(21,362)		0
Change in fair value of derivatives embedded within convertible debt	Change in fair value of derivatives embedded within convertible debt		0			3,330		Change in fair value of derivatives embedded within convertible debt	0		1,669		0		4,999

Equity in earnings from investments	Equity in earnings from investments		577			50,152		Equity in earnings from investments	941		2,207		1,518		52,359
Equity in earnings (losses) from real estate ventures	Equity in earnings (losses) from real estate ventures		1,589			(6,505)		Equity in earnings (losses) from real estate ventures	16,685		(12,260)		18,274		(18,765)
Other, net	Other, net		2,754			(10,655)		Other, net	5,578		7,635		8,332		(3,020)
Income (loss) before provision for income taxes			45,010			(4,209)
Income tax expense (benefit)			13,053			(978)
Income before provision for income taxes								Income before provision for income taxes	132,165		36,690		177,175		32,481
Income tax expense								Income tax expense	38,860		10,916		51,913		9,938

Net income (loss)			31,957			(3,231)
Net income								Net income	93,305		25,774		125,262		22,543

Net income attributed to non-controlling interest	Net income attributed to non-controlling interest		0			0		Net income attributed to non-controlling interest	0		0		0		0

Net income (loss) attributed to Vector Group Ltd.			$	31,957		$	(3,231)
Net income attributed to Vector Group Ltd.								Net income attributed to Vector Group Ltd.	$	93,305	$	25,774	$	125,262	$	22,543

Per basic common share:	Per basic common share:							Per basic common share:

Net income (loss) applicable to common shares attributed to Vector Group Ltd.			$	0.20		$	(0.03)
Net income applicable to common shares attributed to Vector Group Ltd.								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:							Per diluted common share:

Net income (loss) applicable to common shares attributed to Vector Group Ltd.			$	0.20		$	(0.03)
Net income applicable to common shares attributed to Vector Group Ltd.								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 ~~$97,714,~~$118,735, $121,170, $216,449, and ~~$113,139~~$234,309 for the three and six months ended ~~March 31,~~June 30, 2021 and 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 ~~(LOSS)~~

(Dollars in Thousands)

Unaudited

Three Months Ended
March 31,
2021 2020

Net income (loss) $ 31,957 $ (3,231)
Net unrealized losses on investment securities available for sale:
Change in net unrealized losses (182) (664)
Net unrealized (gains) losses reclassified into net income (loss) (41) 503
Net unrealized losses on investment securities available for sale (223) (161)
Net change in pension-related amounts:
Amortization of loss 482 464
Net change in pension-related amounts 482 464
Other comprehensive income 259 303
Income tax effect on:
Change in net unrealized losses on investment securities 49 180
Net unrealized (gains) losses reclassified into net income (loss) on investment securities 11 (136)
Pension-related amounts (130) (125)
Income tax provision on other comprehensive income (70) (81)
Other comprehensive income, net of tax 189 222
Comprehensive income (loss) 32,146 (3,009)
Comprehensive income attributed to non-controlling interest 0 0
Comprehensive income (loss) attributed to Vector Group Ltd. $ 32,146 $ (3,009)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020

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 income	34		(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 loss	481		463		963		927


Other comprehensive income	393		1,037		652		1,340

Income tax effect on:
Change in net unrealized (losses) gains on investment securities	33		(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 tax	287		757		476		979

Comprehensive income	93,592		26,531		125,738		23,522

Comprehensive income attributed to non-controlling interest	0		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.

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

(Dollars in Thousands, Except Share Amounts)

Unaudited


		Vector Group Ltd. Stockholders' Deficiency																			Vector Group Ltd. Stockholders' Deficiency
					Additional Paid-In						Accumulated Other Comprehensive			Non-controlling															Additional Paid-In						Accumulated Other Comprehensive			Non-controlling
		Common Stock					Accumulated											Common Stock										Accumulated
		Shares	Amount				Capital			Deficit			Loss			Interest						Total			Shares			Amount			Capital			Deficit			Loss			Interest		Total
Balance as of January 1, 2021		153,324,629	$	15,332	$	0		$	(653,945)		$	(21,074)				$	0					$	(659,687)
Balance as of April 1, 2021																						Balance as of April 1, 2021		154,194,629		$	15,419		$	2,573		$	(653,606)		$	(20,885)		$	0	$	(656,499)

Net income	Net income	—	—		—			31,957			—			—					31,957			Net income		—		—			—			93,305			—			—		93,305

Total other comprehensive income	Total other comprehensive income	—	—		—			—			189			—					189			Total other comprehensive income		—		—			—			—			287			—		287

Dividends on common stock ($0.20 per share)	Dividends on common stock ($0.20 per share)	—	—		0			(31,618)			—			—					(31,618)			Dividends on common stock ($0.20 per share)		—		—			—			(31,610)			—			—		(31,610)
Restricted stock grants		870,000	87		(87)			—			—			—					0
Restricted stock grant																						Restricted stock grant		3,500		1			(1)			—			—			—		0

Surrender of shares in connection with restricted stock vesting																						Surrender of shares in connection with restricted stock vesting		(42,029)		(4)			(604)			—			—			—		(608)

Stock-based compensation	Stock-based compensation	—	—		2,660			—			—			—					2,660			Stock-based compensation		—		—			3,080			—			—			—		3,080

Balance as of March 31, 2021		154,194,629	$	15,419	$	2,573		$	(653,606)		$	(20,885)		$	0				$	(656,499)
Balance as of June 30, 2021																						Balance as of June 30, 2021		154,156,100		$	15,416		$	5,048		$	(591,911)		$	(20,598)		$	0	$	(592,045)

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, 2020 148,084,900 $ 14,808 $ 0 $ (678,464) $ (21,808) $ 448 $ (685,016)
Impact of adoption of new accounting standards — — — (2,263) — — (2,263)
Net loss — — — (3,231) — 0 (3,231)
Total other comprehensive income — — — — 222 — 222
Distributions and dividends on common stock ($0.20 per share) — — (2,258) (28,263) — — (30,521)
Stock-based compensation — — 2,258 — — — 2,258
Distributions to non-controlling interest — — — — — (448) (448)
Balance as of March 31, 2020 148,084,900 $ 14,808 $ 0 $ (712,221) $ (21,586) $ 0 $ (718,999)


	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, 2020	148,084,900	$	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 grant	405,000	41		(41)		—		—		—		0

Surrender of shares in connection with restricted stock vesting	(5,423)	(1)		(61)		—		—		—		(62)





Issuance of common stock	5,000,000	500		52,063		—		—		—		52,563







Stock-based compensation	—	—		2,283		—		—		—		2,283




Other	—	—		—		80		—		—		80
Balance as of June 30, 2020	153,484,477	$	15,348	$	0	$	(663,723)	$	(20,829)	$	0	$	(669,204)

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


	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, 2021	153,324,629	$	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 grants	873,500	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, 2021	154,156,100	$	15,416	$	5,048	$	(591,911)	$	(20,598)	$	0	$	(592,045)


	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, 2020	148,084,900	$	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 grant	405,000	41		(41)		—		—		—		0

Surrender of shares in connection with restricted stock vesting	(5,423)	(1)		(61)		—		—		—		(62)





Issuance of common stock	5,000,000	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, 2020	153,484,477	$	15,348	$	0	$	(663,723)	$	(20,829)	$	0	$	(669,204)

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

VECTOR GROUP LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

Unaudited


		Three Months Ended		Three Months Ended			Six Months Ended		Six Months Ended
		March 31, 2021		March 31, 2020			June 30, 2021		June 30, 2020
Net cash provided by operating activities	Net cash provided by operating activities	$	78,364	$	115,309	Net cash provided by operating activities	$	221,300	$	341,329
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Sale of investment securities	Sale of investment securities	10,228		16,672		Sale of investment securities	23,477		19,555
Maturities of investment securities	Maturities of investment securities	13,968		15,616		Maturities of investment securities	36,461		31,574
Purchase of investment securities	Purchase of investment securities	(38,441)		(15,798)		Purchase of investment securities	(74,805)		(16,867)
Proceeds from sale or liquidation of long-term investments	Proceeds from sale or liquidation of long-term investments	4,389		19,544		Proceeds from sale or liquidation of long-term investments	8,009		23,407

Purchase of long-term investments	Purchase of long-term investments	(5,813)		(5,238)		Purchase of long-term investments	(6,963)		(5,238)
Investments in real estate ventures	Investments in real estate ventures	(8,087)		(673)		Investments in real estate ventures	(9,902)		(3,858)
Distributions from investments in real estate ventures	Distributions from investments in real estate ventures	7,577		1,036		Distributions from investments in real estate ventures	11,163		5,172
Increase in cash surrender value of life insurance policies	Increase in cash surrender value of life insurance policies	(564)		(258)		Increase in cash surrender value of life insurance policies	(1,348)		(751)
(Increase) decrease in restricted assets	(Increase) decrease in restricted assets	(3)		93		(Increase) decrease in restricted assets	(5)		87

Capital expenditures	Capital expenditures	(1,931)		(4,888)		Capital expenditures	(3,055)		(6,242)

Paydowns of investment securities	Paydowns of investment securities	172		202		Paydowns of investment securities	302		415

Investments in real estate, net	Investments in real estate, net	0		(340)		Investments in real estate, net	0		(679)
Net cash (used in) provided by investing activities	Net cash (used in) provided by investing activities	(18,505)		25,968		Net cash (used in) provided by investing activities	(16,666)		46,575
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of debt	Proceeds from issuance of debt	875,000		36		Proceeds from issuance of debt	875,000		531
Deferred financing costs	Deferred financing costs	(20,000)		0		Deferred financing costs	(20,109)		0
Repayments of debt	Repayments of debt	(853,158)		(2,638)		Repayments of debt	(856,316)		(172,467)
Borrowings under revolver	Borrowings under revolver	259		126,603		Borrowings under revolver	7,699		130,641
Repayments on revolver	Repayments on revolver	(259)		(137,056)		Repayments on revolver	(7,699)		(165,593)
Dividends and distributions on common stock	Dividends and distributions on common stock	(32,273)		(32,074)		Dividends and distributions on common stock	(63,738)		(63,478)

Distributions to non-controlling interest	Distributions to non-controlling interest	0		(448)		Distributions to non-controlling interest	0		(448)

Proceeds from issuance of common stock						Proceeds from issuance of common stock	0		52,563

Other	Other	(21)		0		Other	(51)		5
Net cash used in financing activities	Net cash used in financing activities	(30,452)		(45,577)		Net cash used in financing activities	(65,214)		(218,246)
Net increase in cash, cash equivalents and restricted cash	Net increase in cash, cash equivalents and restricted cash	29,407		95,700		Net increase in cash, cash equivalents and restricted cash	139,420		169,658
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	365,677		379,476		Cash, cash equivalents and restricted cash, beginning of period	365,677		379,476
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	395,084	$	475,176	Cash, cash equivalents and restricted cash, end of period	$	505,097	$	549,134

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

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)Basis of Presentation:

The condensed consolidated financial statements of Vector Group Ltd. (the “Company” or “Vector”) include the accounts of Liggett Group LLC (“Liggett”), Vector Tobacco 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, 2020 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 2020 financial information to conform to the 2021 presentation. Credit loss ~~expense~~income (expense) has been reclassified from Other (expense) income as components of Other, net.

(b)Distributions and Dividends on Common Stock:

The Company records distributions on its common stock as dividends in its condensed consolidated ~~statement~~statements 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.

(c)Earnings Per Share (“EPS”):

Net income ~~(loss)~~ for purposes of determining basic ~~and diluted~~ EPS was as follows:

Three Months Ended
March 31,
2021 2020
Net income (loss) attributed to Vector Group Ltd. $ 31,957 $ (3,231)
Income attributed to participating securities (756) (561)
Net income (loss) applicable to common shares attributed to Vector Group Ltd. $ 31,201 $ (3,792)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
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

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 Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income attributed to Vector Group Ltd.	$	93,305	$	25,774	$	125,262	$	22,543
Income attributable to 5.50% Variable Interest Senior Convertible Notes	0		(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

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


		Three Months Ended		Three Months Ended				Six Months Ended
		March 31,		June 30,				June 30,
			2021		2020		2021	2020	2021	2020
Weighted-average shares for basic EPS	Weighted-average shares for basic EPS		152,249,440		147,000,114	Weighted-average shares for basic EPS	152,285,182	149,379,306	152,267,410	148,189,710

Plus incremental shares related to convertible debt						Plus incremental shares related to convertible debt	0	1,379,454	0	0
Plus incremental shares related to stock options and non-vested restricted stock	Plus incremental shares related to stock options and non-vested restricted stock		134,650		83,603	Plus incremental shares related to stock options and non-vested restricted stock	282,313	88,100	206,381	85,701
Weighted-average shares for diluted EPS	Weighted-average shares for diluted EPS		152,384,090		147,083,717	Weighted-average shares for diluted EPS	152,567,495	150,846,860	152,473,791	148,275,411

The following non-vested restricted stock ~~and shares issuable upon the conversion of convertible debt~~ were outstanding during the three and six months ended ~~March 31,~~June 30, 2021 and 2020, but were not included in the computation of diluted EPS because the impact of the per share expense associated with the restricted stock was greater than the average market price of the common shares during the respective ~~periods~~periods. 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 Ended			Three Months Ended						Six Months Ended
		March 31,			June 30,						June 30,
			2021			2020			2021		2020		2021		2020

Weighted-average shares of non-vested restricted stock	Weighted-average shares of non-vested restricted stock		97,222			625,122		Weighted-average shares of non-vested restricted stock	0		625,122		0		625,122
Weighted-average expense per share	Weighted-average expense per share		$	14.31		$	19.54	Weighted-average expense per share	$	0	$	19.54	$	0	$	19.54
Weighted-average number of shares issuable upon conversion of debt	Weighted-average number of shares issuable upon conversion of debt		0			8,368,690		Weighted-average number of shares issuable upon conversion of debt	0		0		0		4,874,072
Weighted-average conversion price	Weighted-average conversion price		$	0		$	20.27	Weighted-average conversion price	$	0	$	0	$	0	$	20.27

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(d)Restructuring:

During 2020, in response to the coronavirus pandemic (“COVID-19”), the Company's Real Estate segment, including Douglas Elliman, underwent 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 brokerage 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.

The following table summarizes amounts expensed for the three and six months ended June 30, 2020:


	Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020
Cash Charges:
Employee severance and benefits	$	1,599	$	1,599
Other restructuring expenses	218		218
	1,817		1,817
Non-Cash:
�� Loss on fixed assets associated with consolidation of sales offices	1,144		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	$	0	$	0	$	0	$	0
Restructuring charges	1,599		218		1,144		2,961
Utilized	(1,239)		0		(1,144)		(2,383)
Accrual balance as of June 30, 2020	$	360	$	218	$	0	$	578

~~(d)~~(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

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, 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.

~~VECTOR GROUP LTD.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Dollars in Thousands, Except Per Share Amounts)~~

~~Unaudited~~

~~(e)~~(f)Other, net:

Other, net consisted of:


		Three Months Ended			Three Months Ended						Six Months Ended
		March 31,			June 30,						June 30,
			2021			2020			2021		2020		2021		2020

Interest and dividend income	Interest and dividend income		$	611		$	2,680	Interest and dividend income	$	525	$	968	$	1,136	$	3,648

Net gains (losses) recognized on investment securities	Net gains (losses) recognized on investment securities		2,449			(12,240)		Net gains (losses) recognized on investment securities	8,469		4,781		10,918		(7,459)
Net periodic benefit cost other than the service costs	Net periodic benefit cost other than the service costs		(244)			(455)		Net periodic benefit cost other than the service costs	(243)		(454)		(487)		(909)

Credit loss expense			0			(1,560)
Credit loss income (expense)								Credit loss income (expense)	0		1,128		0		(432)
Other (expense) income	Other (expense) income		(62)			920		Other (expense) income	(3,173)		1,212		(3,235)		2,132
Other, net	Other, net		$	2,754		$	(10,655)	Other, net	$	5,578	$	7,635	$	8,332	$	(3,020)

~~(f)~~(g)Other Assets:

Other assets consisted of:

March 31,
2021 December 31, 2020
Restricted assets $ 4,529 $ 3,456
Prepaid pension costs 35,480 35,209
Contract assets, net 24,183 24,002
Other assets 33,393 32,359
Total other assets $ 97,585 $ 95,026

~~(g)Other Current Liabilities~~:

~~Other current liabilities consisted of:~~

March 31,
2021 December 31, 2020
Accounts payable $ 15,170 $ 12,846
Accrued promotional expenses 40,697 45,579
Accrued excise and payroll taxes payable, net 23,359 13,849
Accrued interest 32,974 31,624
Commissions payable 33,077 25,615
Accrued salaries and benefits 13,253 27,104
Contract liabilities 7,758 7,633
Allowance for sales returns 7,340 7,356
Other current liabilities 30,013 27,331
Total other current liabilities $ 203,641 $ 198,937


	June 30, 2021		December 31, 2020
Restricted assets	$	4,170	$	3,456
Prepaid pension costs	35,751		35,209
Contract assets, net	23,538		24,002
Other assets	35,212		32,359
Total other assets	$	98,671	$	95,026

911

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(h)Other Current Liabilities:

Other current liabilities consisted of:


	June 30, 2021		December 31, 2020
Accounts payable	$	10,718	$	12,846
Accrued promotional expenses	49,269		45,579
Accrued excise and payroll taxes payable, net	22,973		13,849
Accrued interest	30,998		31,624
Commissions payable	38,832		25,615
Accrued salaries and benefits	25,517		27,104
Contract liabilities	7,507		7,633
Allowance for sales returns	7,414		7,356
Other current liabilities	30,270		27,331
Total other current liabilities	$	223,498	$	198,937

(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:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	382,387	$	352,842	Cash and cash equivalents	$	490,390	$	352,842
Restricted cash and cash equivalents included in other current assets	Restricted cash and cash equivalents included in other current assets	10,790		10,374		Restricted cash and cash equivalents included in other current assets	11,364		10,374
Restricted cash and cash equivalents included in other assets	Restricted cash and cash equivalents included in other assets	1,907		2,461		Restricted cash and cash equivalents included in other assets	3,343		2,461
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	395,084	$	365,677	Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows	$	505,097	$	365,677

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.

~~(i)~~(j)New Accounting Pronouncements:

Accounting Standards Updates (“ASU”) adopted in 2021:

In December 2019, the Financial 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. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial 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

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. Adoption of this update did not have a material impact on the Company’s condensed consolidated financial 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 does not anticipate an impact on its condensed consolidated financial statements.

~~VECTOR GROUP LTD.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Dollars in Thousands, Except Per Share Amounts)~~

~~Unaudited~~

2. REVENUE RECOGNITION

Disaggregation of Revenue

In the following table, revenue is disaggregated by major product line for the Tobacco segment:


		Three Months Ended					Three Months Ended				Six Months Ended
		March 31,					June 30,				June 30,
			2021		2020				2021		2020		2021		2020
Tobacco Segment Revenues:	Tobacco Segment Revenues:							Tobacco Segment Revenues:
Core Discount Brands - Eagle 20’s, Pyramid, Montego, Grand Prix, Liggett Select, and Eve	Core Discount Brands - Eagle 20’s, Pyramid, Montego, Grand Prix, Liggett Select, and Eve		$	253,256	$	269,005		Core Discount Brands - Eagle 20’s, Pyramid, Montego, Grand Prix, Liggett Select, and Eve	$	313,264	$	295,388	$	566,520	$	564,393
Other Brands	Other Brands		15,207		18,064			Other Brands	16,232		17,122		31,439		35,186
Total tobacco revenues	Total tobacco revenues		$	268,463	$	287,069		Total tobacco revenues	$	329,496	$	312,510	$	597,959	$	599,579

In the following table, revenue is disaggregated by major services line and primary geographical market for the Real Estate segment:


		Three Months Ended March 31, 2021											Three Months Ended June 30, 2021
		New York City		Northeast		Southeast		West		Total			New York City		Northeast		Southeast		West		Total
Real Estate Segment Revenues:	Real Estate Segment Revenues:											Real Estate Segment Revenues:
Commission and other brokerage income - existing home sales	Commission and other brokerage income - existing home sales	$	70,135	$	56,250	$	75,553	$	41,078	$	243,016	Commission and other brokerage income - existing home sales	$	105,852	$	66,419	$	121,966	$	51,518	$	345,755
Commission and other brokerage income - development marketing	Commission and other brokerage income - development marketing	8,444		0		7,307		333		16,084		Commission and other brokerage income - development marketing	15,919		0		14,078		281		30,278
Property management revenue	Property management revenue	9,095		173		0		0		9,268		Property management revenue	9,762		139		0		0		9,901
Escrow and title fees	Escrow and title fees	466		417		0		3,525		4,408		Escrow and title fees	1,413		392		0		4,236		6,041
Total Douglas Elliman revenue	Total Douglas Elliman revenue	88,140		56,840		82,860		44,936		272,776		Total Douglas Elliman revenue	132,946		66,950		136,044		56,035		391,975
Other real estate revenues	Other real estate revenues	0		0		0		2,525		2,525		Other real estate revenues	6,750		0		0		1,308		8,058
Total real estate revenues	Total real estate revenues	$	88,140	$	56,840	$	82,860	$	47,461	$	275,301	Total real estate revenues	$	139,696	$	66,950	$	136,044	$	57,343	$	400,033

Three Months Ended March 31, 2020
New York City Northeast Southeast West Total
Real Estate Segment Revenues:
Commission and other brokerage income - existing home sales $ 50,109 $ 34,724 $ 30,178 $ 25,700 $ 140,711
Commission and other brokerage income - development marketing 8,451 0 6,722 82 15,255
Property management revenue 8,562 217 0 0 8,779
Escrow and title fees 593 263 0 0 856
Total Douglas Elliman revenue 67,715 35,204 36,900 25,782 165,601
Other real estate revenues 0 0 0 1,818 1,818
Total real estate revenues $ 67,715 $ 35,204 $ 36,900 $ 27,600 $ 167,419

1113

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 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		0		2,747		586		8,506
Property management revenue	8,617		215		0		0		8,832
Escrow and title fees	474		369		0		0		843
Total Douglas Elliman revenue	50,125		36,215		25,979		20,610		132,929
Other real estate revenues	0		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 City		Northeast		Southeast		West		Total
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 marketing	24,363		0		21,385		614		46,362
Property management revenue	18,857		312		0		0		19,169
Escrow and title fees	1,879		809		0		7,761		10,449
Total Douglas Elliman revenue	221,086		123,790		218,904		100,971		664,751
Other real estate revenues	6,750		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 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		0		9,469		668		23,761
Property management revenue	17,179		432		0		0		17,611
Escrow and title fees	1,067		632		0		0		1,699
Total Douglas Elliman revenue	117,840		71,419		62,879		46,392		298,530
Other real estate revenues	0		0		0		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

Contract Balances

The following table provides information about contract assets and contract liabilities from development marketing and commercial leasing contracts with customers:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

Receivables, which are included in accounts receivable - trade, net	Receivables, which are included in accounts receivable - trade, net	$	1,715	$	1,520	Receivables, which are included in accounts receivable - trade, net	$	2,703	$	1,520
Contract assets, net, which are included in other current assets	Contract assets, net, which are included in other current assets	6,609		6,529		Contract assets, net, which are included in other current assets	6,563		6,529
Payables, which are included in other current liabilities	Payables, which are included in other current liabilities	1,245		1,113		Payables, which are included in other current liabilities	2,072		1,113
Contract liabilities, which are included in other current liabilities	Contract liabilities, which are included in other current liabilities	7,758		7,633		Contract liabilities, which are included in other current liabilities	7,507		7,633
Contract assets, net, which are included in other assets	Contract assets, net, which are included in other assets	24,183		24,002		Contract assets, net, which are included in other assets	23,538		24,002
Contract liabilities, which are included in other liabilities	Contract liabilities, which are included in other liabilities	33,730		32,104		Contract liabilities, which are included in other liabilities	34,302		32,104

The Company recognized revenue of ~~$932~~$1,717 and $2,649 for the three and six months ended ~~March 31,~~June 30, 2021, that were included in the contract liabilities balances at December 31, 2020. The Company recognized revenue of ~~$2,737~~$3,921 and $6,658 for the three and six months ended ~~March 31,~~June 30, 2020, that were included in the contract liabilities balances at December 31, 2019.

3. CURRENT EXPECTED CREDIT LOSSES

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 recorded for these trade receivables as of ~~March 31,~~June 30, 2021 and 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 estimates its allowance for credit losses on receivables from agents based on an evaluation of aging, agent sales in pipeline, any security, specific exposures, historical experience of collections from the individual agents, and current and expected future market trends (such as the current and expected impact of COVID-19 on the real estate market). The Company estimated that the credit losses for these receivables were ~~$7,314~~$7,128 and $7,038 at ~~March 31,~~June 30, 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 $15,928, including accrued interest receivable of $6,428 at both ~~March 31,~~June 30, 2021 and December 31, 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 ASU 2016-13, New Valley’s expected credit loss estimate was $15,928 at both ~~March 31,~~June 30, 2021 and December 31, 2020.

1215

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

The following is the rollforward of the allowance for credit losses for the ~~three~~six months ended ~~March 31,~~June 30, 2021:


		January 1, 2021		Current Period Provision			Write-offs		Recoveries		March 31, 2021			January 1, 2021		Current Period Provision			Write-offs		Recoveries		June 30, 2021
Allowance for credit losses:	Allowance for credit losses:												Allowance for credit losses:

Real estate broker agent receivables	Real estate broker agent receivables	$	7,038	$	385	(1)	$	109	$	0	$	7,314	Real estate broker agent receivables	$	7,038	$	289	(1)	$	199	$	0	$	7,128

New Valley term loan receivables	New Valley term loan receivables	15,928		0			—		0		15,928		New Valley term loan receivables	15,928		0			0		0		15,928

_____________________________

(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 ~~three~~six months ended ~~March 31,~~June 30, 2020:


		January 1, 2020		Current Period Provision			Write-offs		Recoveries		March 31, 2020			January 1, 2020		Current Period Provision			Write-offs		Recoveries		June 30, 2020
Allowance for credit losses:	Allowance for credit losses:												Allowance for credit losses:

Real estate broker agent receivables	Real estate broker agent receivables	$	6,132	$	360	(1)	$	0	$	0	$	6,492	Real estate broker agent receivables	$	6,132	$	1,270	(1)	$	41	$	0	$	7,361

New Valley term loan receivables	New Valley term loan receivables	3,100		1,560		(2)	0		0		4,660		New Valley term loan receivables	3,100		432		(2)	0		0		3,532

_____________________________

(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

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 Ended			Three Months Ended						Six Months Ended
		March 31,			June 30,						June 30,
			2021			2020			2021		2020		2021		2020
Operating lease cost	Operating lease cost		$	9,301		$	9,424	Operating lease cost	$	9,292	$	9,356	$	18,593	$	18,780
Short-term lease cost	Short-term lease cost		291			401		Short-term lease cost	261		389		552		790
Variable lease cost	Variable lease cost		1,008			567		Variable lease cost	1,029		588		2,037		1,155

Finance lease cost:	Finance lease cost:							Finance lease cost:
Amortization	Amortization		16			38		Amortization	14		39		30		77
Interest on lease liabilities	Interest on lease liabilities		3			4		Interest on lease liabilities	2		4		5		7
Total lease cost	Total lease cost		$	10,619		$	10,434	Total lease cost	$	10,598	$	10,376	$	21,217	$	20,809

1316

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:


		Three Months Ended					Six Months Ended
		March 31,					June 30,
		2021		2020			2021		2020
Cash paid for amounts included in measurement of lease liabilities:	Cash paid for amounts included in measurement of lease liabilities:					Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	10,739	$	9,546	Operating cash flows from operating leases	$	21,879	$	11,953
Operating cash flows from finance leases	Operating cash flows from finance leases	3		4		Operating cash flows from finance leases	5		7
Financing cash flows from finance leases	Financing cash flows from finance leases	15		37		Financing cash flows from finance leases	28		69

Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	724		66		Operating leases	3,432		9,076
Finance leases	Finance leases	0		60		Finance leases	0		60

~~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:


		March 31,			December 31,				June 30,			December 31,
		2021			2020				2021			2020
Operating leases:	Operating leases:							Operating leases:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	140,777		$	145,356		Operating lease right-of-use assets	$	138,057		$	145,356

Current operating lease liability	Current operating lease liability	$	27,207		$	27,207		Current operating lease liability	$	26,625		$	27,207
Non-current operating lease liability	Non-current operating lease liability	148,417			154,199			Non-current operating lease liability	144,487			154,199
Total operating lease liabilities	Total operating lease liabilities	$	175,624		$	181,406		Total operating lease liabilities	$	171,112		$	181,406

Finance leases:	Finance leases:							Finance leases:
Investments in real estate, net (1)	Investments in real estate, net (1)	$	53		$	62		Investments in real estate, net (1)	$	45		$	62

Property, plant and equipment, at cost	Property, plant and equipment, at cost	$	127		$	127		Property, plant and equipment, at cost	$	127		$	127
Accumulated amortization	Accumulated amortization	(51)			(44)			Accumulated amortization	(57)			(44)
Property and equipment, net	Property and equipment, net	$	76		$	83		Property and equipment, net	$	70		$	83

Current portion of notes payable and long-term debt	Current portion of notes payable and long-term debt	$	57		$	57		Current portion of notes payable and long-term debt	$	57		$	57
Notes payable, long-term debt and other obligations, less current portion	Notes payable, long-term debt and other obligations, less current portion	81			96			Notes payable, long-term debt and other obligations, less current portion	67			96
Total finance lease liabilities	Total finance lease liabilities	$	138		$	153		Total finance lease liabilities	$	124		$	153

Weighted average remaining lease term:	Weighted average remaining lease term:							Weighted average remaining lease term:
Operating leases	Operating leases	7.75			7.87			Operating leases	7.62			7.87
Finance leases	Finance leases	2.50			2.71			Finance leases	2.27			2.71

Weighted average discount rate:	Weighted average discount rate:							Weighted average discount rate:
Operating leases	Operating leases	9.27		%	9.26		%	Operating leases	9.24		%	9.26		%
Finance leases	Finance leases	7.90		%	7.82		%	Finance leases	7.98		%	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 ~~$695~~$703 and $686 as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

~~As of March 31, 2021, maturities of lease liabilities were as follows:~~

Operating Leases Finance
Leases
Period Ending December 31:
Remainder of 2021 $ 33,125 $ 49
2022 38,183 60
2023 33,398 35
2024 27,378 8
2025 22,219 0
2026 18,534 0
Thereafter 78,236 0
Total lease payments 251,073 152
Less imputed interest (75,449) (14)
Total $ 175,624 $ 138

1517

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

As of ~~March 31,~~June 30, 2021, maturities of lease liabilities were as follows:


	Operating Leases		Finance Leases
Period Ending December 31:
Remainder of 2021	$	21,960	$	33
2022	38,780		60
2023	34,007		35
2024	28,054		8
2025	22,895		0
2026	19,114		0
Thereafter	78,236		0
Total lease payments	243,046		136
Less imputed interest	(71,934)		(12)
Total	$	171,112	$	124

As of June 30, 2021, the Company had ~~$2,320~~$2,181 in undiscounted lease payments relating to an additional operating lease for equipment that has not yet commenced. The operating lease will commence in the second half of 2021 with a lease term of 3 years.

As a result of the COVID-19 pandemic, the Company received 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 treat these deferrals and abatements as lease modifications and the existing lease liabilities were remeasured with a corresponding adjustment to the right-of-use asset on the effective date of the modification in 2020. The deferrals varied as to the timing of repayment but all agreements required repayment of the deferrals over the remaining lease terms.

5. INVENTORIES

Inventories consisted of:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Leaf tobacco	Leaf tobacco	$	47,256	$	42,988	Leaf tobacco	$	41,693	$	42,988
Other raw materials	Other raw materials	5,301		5,987		Other raw materials	5,292		5,987
Work-in-process	Work-in-process	664		520		Work-in-process	674		520

Finished goods	Finished goods	68,455		68,781		Finished goods	66,233		68,781

Inventories at current cost	Inventories at current cost	121,676		118,276		Inventories at current cost	113,892		118,276
LIFO adjustments	LIFO adjustments	(20,731)		(20,731)		LIFO adjustments	(20,731)		(20,731)
		$	100,945	$	97,545		$	93,161	$	97,545

All of the Company’s inventories at ~~March 31,~~June 30, 2021 and December 31, 2020 are reported under the LIFO method. The $20,731 LIFO adjustment as of ~~March 31,~~June 30, 2021 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 $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 ~~$21,099~~$21,416 and $21,120 at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. Federal excise tax capitalized in inventory was ~~$25,172~~$24,695 and $27,683 at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

At ~~March 31,~~June 30, 2021, Liggett had tobacco purchase commitments of approximately ~~$2,037.~~$18,772. Liggett has a single-source supply agreement for reduced ignition propensity cigarette paper through 2022.

1618

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

6. INVESTMENT SECURITIES

Investment securities consisted of the following:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Debt securities available for sale	Debt securities available for sale	$	102,958	$	91,204	Debt securities available for sale	$	108,489	$	91,204

Property technology (“PropTech”) convertible trading debt securities						Property technology (“PropTech”) convertible trading debt securities	2,481		0

Equity securities at fair value:	Equity securities at fair value:					Equity securities at fair value:
Marketable equity securities	Marketable equity securities	25,389		21,155		Marketable equity securities	25,187		21,155
Mutual funds invested in debt securities	Mutual funds invested in debt securities	23,240		23,226		Mutual funds invested in debt securities	23,325		23,226
Long-term investment securities at fair value (1)	Long-term investment securities at fair value (1)	35,608		34,218		Long-term investment securities at fair value (1)	33,053		34,218
Total equity securities at fair value	Total equity securities at fair value	84,237		78,599		Total equity securities at fair value	81,565		78,599

Total investment securities at fair value	Total investment securities at fair value	187,195		169,803		Total investment securities at fair value	192,535		169,803
Less:	Less:					Less:
Long-term investment securities at fair value (1)	Long-term investment securities at fair value (1)	35,608		34,218		Long-term investment securities at fair value (1)	33,053		34,218
Property technology (“PropTech”) convertible debt securities		2,500		0
PropTech convertible trading debt securities						PropTech convertible trading debt securities	2,481		0
Current investment securities at fair value	Current investment securities at fair value	149,087		135,585		Current investment securities at fair value	157,001		135,585

Long-term investment securities at fair value (1)	Long-term investment securities at fair value (1)	35,608		34,218		Long-term investment securities at fair value (1)	33,053		34,218
Equity-method investments	Equity-method investments	18,887		18,310		Equity-method investments	19,828		18,310
PropTech convertible debt securities		2,500		0
PropTech convertible trading debt securities						PropTech convertible trading debt securities	2,481		0
Total long-term investments	Total long-term investments	$	56,995	$	52,528	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.

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

Three Months Ended
March 31,
2021 2020
Net gains (losses) recognized on equity securities $ 2,408 $ (11,737)
Net gains (losses) recognized on debt securities available for sale 55 (117)
Impairment expense (14) (386)
Net gains (losses) recognized on investment securities $ 2,449 $ (12,240)

~~(a) Debt Securities Available for Sale:~~

~~The components of debt securities available for sale at March 31, 2021 were as follows:~~

Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
Marketable debt securities $ 100,098 $ 360 $ 0 $ 100,458
PropTech convertible debt securities 2,500 0 0 2,500
Total debt securities available for sale $ 102,598 $ 360 $ 0 $ 102,958

1719

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

~~New Valley, through its subsidiary New Valley Ventures LLC, is actively seeking to capitalize~~Net gains (losses) recognized on ~~its real estate knowledge and experience by investing in PropTech ventures that will both supplement and enhance the technology-based experience~~investment securities were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net gains (losses) recognized on equity securities	$	8,522	$	4,711	$	10,930	$	(7,026)
Net gains (losses) recognized on debt securities available for sale	10		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 Sale:

The components of ~~Douglas Elliman’s agents and the general real estate industry~~debt securities available for sale at June 30, 2021 were as well as improve the operating efficiency of New Valley. As of March 31, 2021, New Valley Ventures has invested $2,500 into convertible notes of 4 PropTech ventures. The maturities of the notes are between April 2022 and March 2023.follows:


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value


Marketable debt securities	$	108,217	$	272	$	0	$	108,489

The table below summarizes the maturity dates of debt securities available for sale at ~~March 31,~~June 30, 2021.


Investment Type:	Investment Type:	Fair Value		Under 1 Year		1 Year up to 5 Years		More than 5 Years		Investment Type:	Fair Value		Under 1 Year		1 Year up to 5 Years		More than 5 Years
U.S. Government securities	U.S. Government securities	$	17,976	$	13,106	$	4,870	$	0	U.S. Government securities	$	12,512	$	10,195	$	2,317	$	0
Corporate securities	Corporate securities	48,601		35,373		13,228		0		Corporate securities	49,843		31,457		18,386		0
U.S. mortgage-backed securities	U.S. mortgage-backed securities	9,626		2,270		7,356		0		U.S. mortgage-backed securities	15,467		200		15,267		0

Commercial paper	Commercial paper	23,031		23,031		0		0		Commercial paper	29,443		29,443		0		0

Foreign fixed-income securities	Foreign fixed-income securities	1,224		0		1,224		0		Foreign fixed-income securities	1,224		0		1,224		0
PropTech convertible debt securities		2,500		0		2,500		0

Total debt securities available for sale by maturity dates	Total debt securities available for sale by maturity dates	$	102,958	$	73,780	$	29,178	$	0	Total debt securities available for sale by maturity dates	$	108,489	$	71,295	$	37,194	$	0

The components of debt securities available for sale at December 31, 2020 were as follows:


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value


Marketable debt securities	$	90,621	$	583	$	0	$	91,204

There were no available-for-sale debt securities with continuous unrealized losses for less than 12 months and 12 months or greater at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

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 Ended			Three Months Ended						Six Months Ended
		March 31,			June 30,						June 30,
			2021			2020			2021		2020		2021		2020
Gross realized gains on sales	Gross realized gains on sales		$	56		$	98	Gross realized gains on sales	$	11	$	72	$	67	$	170
Gross realized losses on sales	Gross realized losses on sales		(1)			(215)		Gross realized losses on sales	(1)		(2)		(2)		(217)
Net gains (losses) recognized on debt securities available for sale	Net gains (losses) recognized on debt securities available for sale		$	55		$	(117)	Net gains (losses) recognized on debt securities available for sale	$	10	$	70	$	65	$	(47)

Impairment expense	Impairment expense		$	(14)		$	(386)	Impairment expense	$	(44)	$	0	$	(58)	$	(386)

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.

~~VECTOR GROUP LTD.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~(b) PropTech Convertible Trading Debt Securities:

~~(Dollars~~New Valley, through its subsidiary New Valley Ventures LLC, is actively seeking to capitalize on its real estate knowledge and experience by investing in ~~Thousands, Except Per Share Amounts)~~

~~Unaudited~~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.

~~(b)~~(c) Equity Securities at Fair Value:

The following is a summary of unrealized and realized net gains and losses recognized in net income on equity securities at fair value during the three and six months ended ~~March 31,~~June 30, 2021 and 2020, respectively:


		Three Months Ended			Three Months Ended						Six Months Ended
		March 31,			June 30,						June 30,
			2021			2020			2021		2020		2021		2020
Net gains (losses) recognized on equity securities	Net gains (losses) recognized on equity securities		$	2,408		$	(11,737)	Net gains (losses) recognized on equity securities	$	8,522	$	4,711	$	10,930	$	(7,026)
Less: Net gains (losses) recognized on equity securities sold	Less: Net gains (losses) recognized on equity securities sold		169			(618)		Less: Net gains (losses) recognized on equity securities sold	4,054		601		4,223		(17)
Net unrealized gains (losses) recognized on equity securities still held at the reporting date	Net unrealized gains (losses) recognized on equity securities still held at the reporting date		$	2,239		$	(11,119)	Net unrealized gains (losses) recognized on equity securities still held at the reporting date	$	4,468	$	4,110	$	6,707	$	(7,009)

The Company’s 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 ~~$1,864~~$1,939 related to long-term investment securities at fair value as of ~~March 31,~~June 30, 2021.

The Company received cash distributions of ~~$4,389~~$8,009 and ~~recognized a receivable of $154 of in-transit redemptions as of March 31, 2021~~$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 ~~$4,389~~$8,009 and $23,407 of these distributions as investing cash inflows for the ~~three~~six months ended ~~March 31, 2021.~~June 30, 2021 and 2020, respectively.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

~~(c)~~(Dollars in Thousands, Except Per Share Amounts)

Unaudited

(d) Equity-Method Investments:

Equity-method investments consisted of the following:

March 31,
2021 December 31, 2020
Mutual fund and hedge funds $ 18,887 $ 18,310


	June 30, 2021		December 31, 2020
Mutual fund and hedge funds	$	19,828	$	18,310

At ~~March 31,~~June 30, 2021, the Company’s ownership percentages in the mutual fund and hedge funds accounted for under the equity method ranged from ~~6.6%~~6.63% to 37.09%. The Company’s ownership percentage in these investments meets the threshold for equity-method accounting.

On February 14, 2020, the Company received proceeds of $53,169 in exchange for the Company’s 15,191,205 common shares of 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 from investments were:


		Three Months Ended			Three Months Ended						Six Months Ended
		March 31,			June 30,						June 30,
			2021			2020			2021		2020		2021		2020
Mutual fund and hedge funds	Mutual fund and hedge funds		$	577		$	(2,900)	Mutual fund and hedge funds	$	941	$	2,207	$	1,518	$	(693)
LTS	LTS		0			53,052		LTS	0		0		0		53,052

Equity in earnings from investments	Equity in earnings from investments		$	577		$	50,152	Equity in earnings from investments	$	941	$	2,207	$	1,518	$	52,359

The Company received cash distributions of ~~$53,382~~$53,484 (including the $53,169 received by the Company in exchange for the Company’s 15,191,205 common shares of LTS) from the Company’s equity-method investments for the ~~three~~six months ended ~~March 31,~~June 30, 2020. The Company classified these cash distributions as operating activities on the condensed consolidated statements of cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2020.

~~VECTOR GROUP LTD.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Dollars in Thousands, Except Per Share Amounts)~~

~~Unaudited~~

~~(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 various limited liability companies at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. The total carrying value of these investments was $6,225 as of June 30, 2021 and $5,200 as of ~~both March 31, 2021 and~~ December 31, 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 ~~March 31,~~June 30, 2021 and 2020, respectively.

~~(e) Combined Financial Statements for Unconsolidated Subsidiaries Accounted for on Equity Method~~

~~Pursuant to Rule 4-08(g), the following summarized financial data for unconsolidated subsidiaries includes information for Boyar.~~

Three Months Ended
March 31,
2021 2020
Investment income $ 115 $ 140
Expenses 121 112
Net investment (loss) gain (6) 28
Total net realized gain (loss) and net change in unrealized appreciation (depreciation) from investments 2,845 (6,833)
Net increase (decrease) in partners’ capital resulting from operations $ 2,839 $ (6,805)

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)	March 31, 2021		December 31, 2020			Range of Ownership (1)	June 30, 2021		December 31, 2020
Condominium and Mixed Use Development:	Condominium and Mixed Use Development:						Condominium and Mixed Use Development:
New York City Standard Metropolitan Statistical Area (“SMSA”)	New York City Standard Metropolitan Statistical Area (“SMSA”)	4.2% - 46.7%	$	29,212	$	30,465	New York City Standard Metropolitan Statistical Area (“SMSA”)	4.2% - 46.7%	$	25,233	$	30,465
All other U.S. areas	All other U.S. areas	19.6% - 77.8%	39,218		37,773		All other U.S. areas	19.6% - 77.8%	36,253		37,773
			68,430		68,238				61,486		68,238

Hotels:	Hotels:						Hotels:
New York City SMSA	New York City SMSA	0.4% - 15.7%	2,167		2,629		New York City SMSA	0.4% - 17.8%	2,114		2,629
International	International	49.0%	1,346		1,852		International	49.0%	1,324		1,852
			3,513		4,481				3,438		4,481
Commercial:	Commercial:						Commercial:
New York City SMSA	New York City SMSA	49.0%	2,713		2,591		New York City SMSA	49.0%	0		2,591
All other U.S. areas	All other U.S. areas	1.6%	7,041		7,084		All other U.S. areas	1.6%	7,139		7,084
			9,754		9,675				7,139		9,675

Other:	Other:	15.0% - 49.0%	2,287		3,006		Other:	15.0% - 50.0%	4,129		3,006
Investments in real estate ventures	Investments in real estate ventures		$	83,984	$	85,400	Investments in real estate ventures		$	76,192	$	85,400

_____________________________

(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.

~~VECTOR GROUP LTD.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Dollars in Thousands, Except Per Share Amounts)~~

~~Unaudited~~

Contributions:

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


		Three Months Ended					Six Months Ended
		March 31,					June 30,
		2021		2020			2021		2020
Condominium and Mixed Use Development:	Condominium and Mixed Use Development:					Condominium and Mixed Use Development:
New York City SMSA	New York City SMSA	$	180	$	495	New York City SMSA	$	396	$	1,169
All other U.S. areas	All other U.S. areas	6,661		0		All other U.S. areas	6,661		2,161
		6,841		495			7,057		3,330
Apartment Buildings:						Apartment Buildings:

All other U.S. areas						All other U.S. areas	0		76
							0		76

Hotels:	Hotels:					Hotels:
New York City SMSA	New York City SMSA	1,246		0		New York City SMSA	1,246		0

		1,246		0			1,246		0

Other:	Other:	0		178		Other:	1,599		452
Total contributions	Total contributions	$	8,087	$	673	Total contributions	$	9,902	$	3,858

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 ~~three~~six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020. New Valley’s direct investment percentage for these ventures did not significantly change.

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:


		Three Months Ended					Six Months Ended
		March 31,					June 30,
		2021		2020			2021		2020
Condominium and Mixed Use Development:	Condominium and Mixed Use Development:					Condominium and Mixed Use Development:
New York City SMSA	New York City SMSA	$	0	$	1,036	New York City SMSA	$	3,338	$	1,735
All other U.S. areas	All other U.S. areas	2,833		996		All other U.S. areas	13,594		5,214
		2,833		2,032			16,932		6,949
Apartment Buildings:	Apartment Buildings:					Apartment Buildings:

All other U.S. areas	All other U.S. areas	4,608		0		All other U.S. areas	17,567		0
		4,608		0			17,567		0

Commercial:	Commercial:					Commercial:
New York City SMSA	New York City SMSA	0		3		New York City SMSA	0		3
All other U.S. areas	All other U.S. areas	136		52		All other U.S. areas	219		52
		136		55			219		55

Other	Other	0		23		Other	75		23
Total distributions	Total distributions	$	7,577	$	2,110	Total distributions	$	34,793	$	7,027

Of the distributions received by New Valley from its investment in real estate ventures, ~~$1,074~~$23,630 and $1,855 were from distributions of earnings for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and ~~$7,577~~$11,163 and ~~$1,036~~$5,172 were a return of capital for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. Distributions from earnings are included in cash from operations in the condensed consolidated statements of cash flows, while distributions that are returns of capital are included in cash flows from investing activities in the condensed consolidated statements of cash flows.

2124

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Equity in Earnings (losses) from Real Estate Ventures:

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


		Three Months Ended					Three Months Ended				Six Months Ended
		March 31,					June 30,				June 30,
			2021		2020				2021		2020		2021		2020
Condominium and Mixed Use Development:	Condominium and Mixed Use Development:							Condominium and Mixed Use Development:
New York City SMSA	New York City SMSA		$	(1,505)	$	(3,347)		New York City SMSA	$	(967)	$	(5,104)	$	(2,472)	$	(8,451)
All other U.S. areas	All other U.S. areas		(41)		(2,799)			All other U.S. areas	7,315		(6,489)		7,274		(9,288)
			(1,546)		(6,146)				6,348		(11,593)		4,802		(17,739)
Apartment Buildings:	Apartment Buildings:							Apartment Buildings:

All other U.S. areas	All other U.S. areas		4,608		0			All other U.S. areas	12,959		(76)		17,567		(76)
			4,608		0				12,959		(76)		17,567		(76)
Hotels:	Hotels:							Hotels:
New York City SMSA			(462)		(107)
New York City SMSA (1)								New York City SMSA (1)	(386)		(542)		(848)		(649)
International	International		(506)		(461)			International	(23)		(90)		(529)		(551)
			(968)		(568)				(409)		(632)		(1,377)		(1,200)
Commercial:	Commercial:							Commercial:
New York City SMSA	New York City SMSA		122		(74)			New York City SMSA	(2,713)		301		(2,591)		227
All other U.S. areas	All other U.S. areas		93		249			All other U.S. areas	180		(264)		273		(15)
			215		175				(2,533)		37		(2,318)		212

Other:	Other:		(720)		34			Other:	320		4		(400)		38
Equity in earnings (losses) from real estate ventures	Equity in earnings (losses) from real estate ventures		$	1,589	$	(6,505)		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 $333 as a result of recording equity in losses in excess of the joint venture’s carrying value.

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 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, 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.

VIE 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 real estate venture. Consequently, New Valley consolidates this variable interest entity (“VIE”).

The carrying amount of the consolidated assets of the VIE was $0 at both ~~March 31,~~June 30, 2021 and December 31, 2020. Those assets are owned by the VIE, not the Company. The consolidated VIE had no recourse liabilities as of ~~March 31,~~June 30, 2021 and December 31, 2020. A VIE’s assets can only be used to settle the obligations of that VIE. The VIE is not a guarantor of the Company’s senior notes and other debts payable.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

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.

~~VECTOR GROUP LTD.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(Dollars in Thousands, Except Per Share Amounts)~~

~~Unaudited~~

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:


	~~March 31,~~June 30, 2021
Condominium and Mixed Use Development:
New York City SMSA	$	~~29,212~~25,233
All other U.S. areas	~~39,218~~36,253
	~~68,430~~61,486




Hotels:
New York City SMSA	~~2,167~~2,114
International	~~1,346~~1,324
	~~3,513~~3,438
Commercial:
~~New York City SMSA~~	~~2,713~~
All other U.S. areas	~~7,041~~7,139
	~~9,754~~7,139

Other	~~2,287~~4,129
Total maximum exposure to loss	$	~~83,984~~76,192

New Valley capitalized ~~$430~~$592 and ~~$1,253~~$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 ~~March 31,~~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, respectively.

Douglas Elliman has been engaged by the developers as the sole broker or the co-broker for several of the real estate development projects that New Valley owns an interest in through its real estate venture investments. Douglas Elliman had gross commissions of approximately ~~$2,357~~$6,585 and ~~$5,530~~$7,698 from these projects for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

Combined Financial Statements for Unconsolidated Subsidiaries Accounted for under the Equity Method:

Pursuant to Rule 4-08(g), the following summarized financial data for unconsolidated subsidiaries includes information for the following: Other Condominium and Mixed Use Development (West Hollywood ~~Edition, 111 Murray Street, and Collins 11th Floor) Hotels (215 Chrystie Street) and Other (Witkoff GP Partners)~~Edition).

Other Condominium and Mixed Use Development:

Three Months Ended
March 31,
2021 2020
Income Statements
Revenue $ 10,287 $ 35,134
Other expenses 26,500 42,520
Loss from continuing operations $ (16,213) $ (7,386)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Income Statements
Revenue	$	4,991	$	1,830	$	15,278	$	33,409
Cost of goods sold	0		0		0		22,100
Other expenses	16,997		14,013		42,340		31,926
Loss from continuing operations	$	(12,006)	$	(12,183)	$	(27,062)	$	(20,617)

2326

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

~~Hotels:~~

Three Months Ended
March 31,
2021 2020
Income Statements
Revenue $ 0 $ 13,447
Other expenses 16,553 19,261
Loss from continuing operations $ (16,553) $ (5,814)

~~Other:~~

Three Months Ended
March 31,
2021 2020
Income Statements
Revenue $ 21 $ 337
Other expenses 300,829 2,800
Loss from continuing operations $ (300,808) $ (2,463)

Investments in Real Estate, net:

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


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Escena, net	Escena, net	$	9,670	$	9,735	Escena, net	$	9,608	$	9,735
Townhome A (11 Beach Street)	Townhome A (11 Beach Street)	6,132		5,896		Townhome A (11 Beach Street)	0		5,896

Investments in real estate, net	Investments in real estate, net	$	15,802	$	15,631	Investments in real estate, net	$	9,608	$	15,631

Escena. The assets of “Escena, net” were as follows:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Land and land improvements	Land and land improvements	$	8,911	$	8,911	Land and land improvements	$	8,911	$	8,911
Building and building improvements	Building and building improvements	1,926		1,926		Building and building improvements	1,926		1,926
Other	Other	1,663		1,672		Other	1,655		1,672
		12,500		12,509			12,492		12,509
Less accumulated depreciation	Less accumulated depreciation	(2,830)		(2,774)		Less accumulated depreciation	(2,884)		(2,774)
		$	9,670	$	9,735		$	9,608	$	9,735

New Valley recorded operating ~~income~~losses of ~~$370~~$90 and ~~$357~~$629 for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, from Escena. New Valley recorded operating income of $280 and operating losses of $272 for the six months ended June 30, 2021 and 2020, respectively, from Escena. Escena is a master planned community, golf course, and club house in Palm Springs, California.

Townhome A (11 Beach Street). In November 2020, New Valley received, as part of a liquidating distribution from a real estate joint venture, Unit TH-A, a townhouse located in 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 ~~unit is wholly owned~~sale was presented as revenue and the ~~balances are included in~~cost of the investment as cost of sales on the condensed consolidated ~~financial~~ statements of the Company. As of March 31, 2021, the carrying value of Unit TH-A was $6,132 and consisted of the value assigned to the unit as part of the distribution, acquisition costs and property related expenses.operations.

2427

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

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


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Vector:	Vector:					Vector:
5.75% Senior Secured Notes due 2029	5.75% Senior Secured Notes due 2029	$	875,000	$	0	5.75% Senior Secured Notes due 2029	$	875,000	$	0
6.125% Senior Secured Notes due 2025	6.125% Senior Secured Notes due 2025	0		850,000		6.125% Senior Secured Notes due 2025	0		850,000
10.5% Senior Notes due 2026, net of unamortized discount of $2,946 and $3,040		552,054		551,960
10.5% Senior Notes due 2026, net of unamortized discount of $2,849 and $3,040						10.5% Senior Notes due 2026, net of unamortized discount of $2,849 and $3,040	552,151		551,960

Liggett:	Liggett:					Liggett:

Equipment loans	Equipment loans	83		89		Equipment loans	77		89
Other	Other	22,350		25,484		Other	18,797		25,484
Notes payable, long-term debt and other obligations	Notes payable, long-term debt and other obligations	1,449,487		1,427,533		Notes payable, long-term debt and other obligations	1,446,025		1,427,533
Less:	Less:					Less:
Debt issuance costs	Debt issuance costs	(31,532)		(21,247)		Debt issuance costs	(30,640)		(21,247)
Total notes payable, long-term debt and other obligations	Total notes payable, long-term debt and other obligations	1,417,955		1,406,286		Total notes payable, long-term debt and other obligations	1,415,385		1,406,286
Less:	Less:					Less:
Current maturities	Current maturities	(12,556)		(12,557)		Current maturities	(12,558)		(12,557)
Amount due after one year	Amount due after one year	$	1,405,399	$	1,393,729	Amount due after one year	$	1,402,827	$	1,393,729

5.75% Senior Secured Notes due 2029 — Vector:

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 Securities Act contained in Rule 144A and Regulation S under the Securities Act. The aggregate 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 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 a rate of 5.75% per year and mature on the earlier of February 1, 2029 and the date that is 91 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 joint and several basis by all of the wholly-owned domestic subsidiaries of the Company that are engaged in the 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 ~~March 31,~~June 30, 2021, the Company was in compliance with all debt covenants.

2528

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:

On February 1, 2021, the 6.125% Senior Secured Notes due 2025 were redeemed in full and the Company recorded a loss on the extinguishment of debt of $21,362 for the ~~three~~six months ended ~~March 31,~~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 ~~March 31,~~June 30, 2021, the Company was in compliance with all debt covenants related to its 10.5% Senior Notes due 2026.

Revolving Credit Agreement — Liggett:

On 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”) 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 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 ~~March 31,~~June 30, 2021, there was 0 outstanding balance due under the Credit Agreement. Availability, as determined under the Credit Agreement, was approximately ~~$90,000~~$84,600 based on eligible collateral at ~~March 31,~~June 30, 2021. As of ~~March 31,~~June 30, 2021, Liggett, Maple, and Vector Tobacco were in compliance with all debt covenants under the Credit Agreement.

Other:

Other notes payable consist primarily of ~~$21,875~~$18,750 of notes payable issued by New Valley as part of the acquisition of the remaining 29.41% interest in Douglas Elliman in December 2018. Interest on the outstanding principal balance of the notes accrues at the then-current mid-term applicable federal rate. Principal and interest is payable in installments through October 1, 2022. ~~$8,125~~$11,250 of principal has been repaid through ~~March 31,~~June 30, 2021 and the remaining principal is due to be repaid as follows: (1) ~~$9,375~~$6,250 in 2021; and (2) $12,500 in 2022.

Non-Cash Interest Expense — Vector:


		Three Months Ended			Three Months Ended						Six Months Ended
		March 31,			June 30,						June 30,
			2021			2020			2021		2020		2021		2020
Amortization of debt discount, net	Amortization of debt discount, net		$	94		$	4,600	Amortization of debt discount, net	$	97	$	847	$	191	$	5,447
Amortization of debt issuance costs	Amortization of debt issuance costs		893			1,158		Amortization of debt issuance costs	942		889		1,835		2,047
Loss on extinguishment of 6.125% Senior Secured Notes	Loss on extinguishment of 6.125% Senior Secured Notes		8,349			0		Loss on extinguishment of 6.125% Senior Secured Notes	0		0		8,349		0

			$	9,336		$	5,758		$	1,039	$	1,736	$	10,375	$	7,494

Fair Value of Notes Payable and Long-Term Debt:


		March 31, 2021				December 31, 2020					June 30, 2021				December 31, 2020
		Carrying		Fair		Carrying		Fair			Carrying		Fair		Carrying		Fair
		Value		Value		Value		Value			Value		Value		Value		Value
Senior Notes	Senior Notes	$	1,427,054	$	1,493,436	$	1,401,960	$	1,464,208	Senior Notes	$	1,427,151	$	1,482,980	$	1,401,960	$	1,464,208

Liggett and other	Liggett and other	22,433		22,440		25,573		25,581		Liggett and other	18,874		18,880		25,573		25,581
Notes payable and long-term debt	Notes payable and long-term debt	$	1,449,487	$	1,515,876	$	1,427,533	$	1,489,789	Notes payable and long-term debt	$	1,446,025	$	1,501,860	$	1,427,533	$	1,489,789

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 sheets 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

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Unaudited

valuation methodologies including the evaluation of the Company’s credit risk. The Company used a derived price based upon quoted market prices and trade activity as of ~~March 31,~~June 30, 2021 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.

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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 ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, Liggett incurred tobacco product liability legal expenses and costs totaling ~~$1,525~~$3,067 and ~~$1,550~~$3,191 respectively. 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 ~~March 31,~~June 30, 2021, Liggett 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 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.

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(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Individual Actions

As of ~~March 31,~~June 30, 2021, there were 75 74Individual 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
Florida						45
Illinois						14
Nevada						7
New Mexico						5
Louisiana						2
Hawaii						1
~~Massachusetts~~						1

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, equitable 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 ~~March 31,~~June 30, 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 possible loss or range of loss from the remaining Engle progeny cases as there are currently multiple defendants in

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(Dollars in Thousands, Except Per Share Amounts)

Unaudited

~~estimate the possible loss or range of loss from the remaining~~ ~~Engle~~ ~~progeny cases as there are currently multiple defendants in~~ 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 to be paid in installments over 14 years starting in February 2015. 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. On an individual basis, Liggett settled an additional ~~202~~203 Engle progeny cases for approximately $8,100 in the aggregate.

Notwithstanding the comprehensive nature of the Engle progeny settlements, 3938 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 ~~March 31,~~June 30, 2021, Liggett had paid in the aggregate $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, and Santoro.

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 54 cases where Liggett is the sole defendant: Cowart~~and~~ ~~Clay~~ ~~are~~is an Individual ~~Actions~~Action and Tumin, Forbing, and Jones, are Engle progeny 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 ~~March 31,~~June 30, 2021, there was one Engle progeny case (~~Rearick~~Alvarez) and ~~six~~eight Individual Actions (Baron, ~~Clark,~~Bennett, Cupp, Feld, Geist, Lane, Mendez and ~~Mendez~~ Tully) scheduled for trial through ~~March 31,~~June 30, 2022, 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.

Class Actions

As of ~~March 31,~~June 30, 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.

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(Dollars in Thousands, Except Per Share Amounts)

Unaudited

~~and penalties, creation of medical monitoring and smoking cessation funds, disgorgement of profits, and injunctive and equitable relief.~~

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.

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 ~~March 31,~~June 30, 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.

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 and unasserted health care cost recovery and certain other claims of the Settling States. The MSA received final judicial approval in each Settling State.

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(Dollars in Thousands, Except Per Share Amounts)

Unaudited

~~the asserted and unasserted health care cost recovery and certain other claims of the Settling States. The MSA received final judicial approval in each Settling State.~~

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 4.1% of the total cigarettes sold in the United States in 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, 2020, Liggett and Vector Tobacco pre-paid $143,000 of their approximate $178,000 2020 MSA obligation, the balance of which was paid in April 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 - 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 - 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 for 2003 - 2022. The 2004 NPM Adjustment arbitration commenced in 2016, with the final individual state hearing scheduled to occur in October 2021 and a 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 ~~2005-2007, and,~~2005-2007.

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in ~~April 2021, that panel is set to issue a Case Management Order setting a schedule for the arbitration.~~Thousands, Except Per Share Amounts)

Unaudited

As a result of the settlement and arbitration award described above, Liggett and Vector Tobacco reduced cost of sales for years 2013 - 2020 by $54,382 and by ~~$1,675~~$3,935 for the ~~three~~six months ended ~~March 31,~~June 30, 2021. Liggett and Vector Tobacco may be entitled to further adjustments. As of ~~March 31,~~June 30, 2021, Liggett and Vector Tobacco had accrued approximately $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 ~~March 31,~~June 30, 2021, there remains approximately ~~$40,700~~$49,800 in the disputed payments account relating to Liggett and Vector Tobacco’s 2011 - ~~2019~~2020 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~~April 2021, following confirmation 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, finding~~parties stipulated that the ~~$294,000~~unpaid principal (exclusive of ~~proceeds~~interest) purportedly due 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~~Liggett to Mississippi ~~if any, would be based on 0.5% of~~pursuant to the 1996 Agreement was approximately $16,700, subject to Liggett’s ~~annual pre-tax income for~~right to litigate and/or appeal the ~~term~~enforceability of the ~~settlement agreement. Following confirmation~~1996 Agreement (and all issues other than the calculation of the ~~arbitration award, Mississippi voluntarily dismissed with prejudice its claims for punitive damages and attorneys’ fees.~~principal amount allegedly due).

In September 2019, the Special Master held a hearing regarding ~~the state’s~~Mississippi’s claim for ~~approximately $17,500 in prejudgment interest as well as~~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 ~~to be determined. A decision~~will 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 April 2021, 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 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

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 ~~three~~six months ended ~~March 31,~~June 30, 2021 was as follows:


		Current Liabilities						Non-Current Liabilities							Current Liabilities						Non-Current Liabilities
		Payments due under Master Settlement Agreement		Litigation Accruals		Total		Payments due under Master Settlement Agreement		Litigation Accruals		Total			Payments due under Master Settlement Agreement		Litigation Accruals		Total		Payments due under Master Settlement Agreement		Litigation Accruals		Total

Balance as of January 1, 2021	Balance as of January 1, 2021	$	38,767	$	3,967	$	42,734	$	17,933	$	19,268	$	37,201	Balance as of January 1, 2021	$	38,767	$	3,967	$	42,734	$	17,933	$	19,268	$	37,201
Expenses	Expenses	34,121		5		34,126		0		0		0		Expenses	80,922		5		80,927		0		0		0

Change in MSA obligations capitalized as inventory	Change in MSA obligations capitalized as inventory	148		0		148		0		0		0		Change in MSA obligations capitalized as inventory	296		0		296		0		0		0
Payments	Payments	0		(4,065)		(4,065)		0		0		0		Payments	(35,206)		(4,065)		(39,271)		0		0		0
Reclassification to/(from) non-current liabilities	Reclassification to/(from) non-current liabilities	0		3,351		3,351		0		(3,351)		(3,351)		Reclassification to/(from) non-current liabilities	4,709		3,351		8,060		(4,709)		(3,351)		(8,060)
Interest on withholding	Interest on withholding	0		197		197		0		418		418		Interest on withholding	0		288		288		0		851		851
Balance as of March 31, 2021		$	73,036	$	3,455	$	76,491	$	17,933	$	16,335	$	34,268
Balance as of June 30, 2021														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, 2020 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
Expenses	96,215		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 withholding	0		238		238		0		932		932
Balance as of June 30, 2020	$	102,125	$	3,443	$	105,568	$	18,130	$	18,274	$	36,404

3437

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

~~The activity in the Company’s accruals for the MSA and tobacco litigation for the three months ended March 31, 2020 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
Expenses 43,464 (25) 43,439 0 0 0
Change in MSA obligations capitalized as inventory (295) 0 (295) 0 0 0
Payments 0 (4,271) (4,271) 0 0 0
Reclassification to/(from) non-current liabilities 0 3,252 3,252 0 (3,252) (3,252)
Interest on withholding 0 150 150 0 459 459
Balance as of March 31, 2020 $ 77,285 $ 3,355 $ 80,640 $ 17,275 $ 17,801 $ 35,076

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 impact 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 is~~company 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.~~

~~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 Losses		Amortization		March 31, 2021			December 31, 2020		Impairment Losses		Amortization		June 30, 2021
Goodwill	Goodwill	$	31,756	$	0	$	—	$	31,756	Goodwill	$	31,756	$	0	$	—	$	31,756

Indefinite life intangibles:	Indefinite life intangibles:									Indefinite life intangibles:
Intangible asset associated with benefit under the MSA	Intangible asset associated with benefit under the MSA	107,511		0		—		107,511		Intangible asset associated with benefit under the MSA	107,511		0		—		107,511

Trademark - Douglas Elliman	Trademark - Douglas Elliman	68,000		0		—		68,000		Trademark - Douglas Elliman	68,000		0		—		68,000

Intangibles with a finite life, net	Intangibles with a finite life, net	310		0		(41)		269		Intangibles with a finite life, net	310		0		(80)		230

Total goodwill and other intangible assets, net	Total goodwill and other intangible assets, net	$	207,577	$	0	$	(41)	$	207,536	Total goodwill and other intangible assets, net	$	207,577	$	0	$	(80)	$	207,497


		December 31, 2019		Impairment Losses		Amortization		March 31, 2020			December 31, 2019		Impairment Losses		Amortization		June 30, 2020
Goodwill	Goodwill	$	78,008	$	(46,252)	$	—	$	31,756	Goodwill	$	78,008	$	(46,252)	$	—	$	31,756

Indefinite life intangibles:	Indefinite life intangibles:									Indefinite life intangibles:
Intangible asset associated with benefit under the MSA	Intangible asset associated with benefit under the MSA	107,511		0		—		107,511		Intangible asset associated with benefit under the MSA	107,511		0		—		107,511

Trademark - Douglas Elliman	Trademark - Douglas Elliman	80,000		(12,000)		—		68,000		Trademark - Douglas Elliman	80,000		(12,000)		—		68,000

Intangibles with a finite life, net	Intangibles with a finite life, net	474		0		(42)		432		Intangibles with a finite life, net	474		0		(82)		392

Total goodwill and other intangible assets, net	Total goodwill and other intangible assets, net	$	265,993	$	(58,252)	$	(42)	$	207,699	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

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 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 $46,252 and to the trademark intangible asset of $12,000.

The Company determined that there have not been any triggering events since the 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.

~~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 ~~(loss)~~ to record income tax expense, ~~(benefit),~~ 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 ~~(benefit)~~ consisted of the following:


		Three Months Ended			Three Months Ended						Six Months Ended
		March 31,			June 30,						June 30,
			2021			2020			2021		2020		2021		2020
Income (loss) before provision for income taxes			$	45,010		$	(4,209)
Income before provision for income taxes								Income before provision for income taxes	$	132,165	$	36,690	$	177,175	$	32,481
Income tax expense using estimated annual effective income tax rate	Income tax expense using estimated annual effective income tax rate		13,053			308		Income tax expense using estimated annual effective income tax rate	38,725		10,896		51,913		9,647

Changes in effective tax rates								Changes in effective tax rates	135		(12)		0		0

Impact of discrete items, net	Impact of discrete items, net		0			(1,286)		Impact of discrete items, net	0		32		0		291

Income tax expense (benefit)			$	13,053		$	(978)
Income tax expense								Income tax expense	$	38,860	$	10,916	$	51,913	$	9,938

The ~~net~~ discrete items for the three months ended ~~March 31,~~June 30, 2020 primarily relates to income tax ~~benefits~~expense on ~~goodwill and trademark impairment charges and~~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.

3739

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

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 March 31, 2021									Fair Value Measurements as of June 30, 2021
Description	Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Money market funds (1)	Money market funds (1)	$	244,115	$	244,115	$	0	$	0	Money market funds (1)	$	310,300	$	310,300	$	0	$	0

Commercial paper (1)	Commercial paper (1)	30,467		0		30,467		0		Commercial paper (1)	24,071		0		24,071		0

Certificates of deposit (2)	Certificates of deposit (2)	2,113		0		2,113		0		Certificates of deposit (2)	679		0		679		0

Investment securities at fair value	Investment securities at fair value									Investment securities at fair value
Equity securities at fair value	Equity securities at fair value									Equity securities at fair value
Marketable equity securities	Marketable equity securities	25,389		25,389		0		0		Marketable equity securities	25,187		25,187		0		0
Mutual funds invested in debt securities	Mutual funds invested in debt securities	23,240		23,240		0		0		Mutual funds invested in debt securities	23,325		23,325		0		0
Total equity securities at fair value	Total equity securities at fair value	48,629		48,629		0		0		Total equity securities at fair value	48,512		48,512		0		0
Debt securities available for sale	Debt securities available for sale									Debt securities available for sale
U.S. government securities	U.S. government securities	17,976		0		17,976		0		U.S. government securities	12,512		0		12,512		0
Corporate securities	Corporate securities	48,601		0		48,601		0		Corporate securities	49,843		0		49,843		0
U.S. government and federal agency	U.S. government and federal agency	9,626		0		9,626		0		U.S. government and federal agency	15,467		0		15,467		0

Commercial paper	Commercial paper	23,031		0		23,031		0		Commercial paper	29,443		0		29,443		0

Foreign fixed-income securities	Foreign fixed-income securities	1,224		0		1,224		0		Foreign fixed-income securities	1,224		0		1,224		0
PropTech convertible debt securities		2,500		0		2,500		0

Total debt securities available for sale	Total debt securities available for sale	102,958		0		102,958		0		Total debt securities available for sale	108,489		0		108,489		0

PropTech convertible trading debt securities										PropTech convertible trading debt securities	2,481		0		0		2,481
Total investment securities at fair value	Total investment securities at fair value	151,587		48,629		102,958		0		Total investment securities at fair value	159,482		48,512		108,489		2,481

Long-term investments	Long-term investments									Long-term investments
Long-term investment securities at fair value (3)	Long-term investment securities at fair value (3)	35,608		0		0		0		Long-term investment securities at fair value (3)	33,053		0		0		0

Total	Total	$	463,890	$	292,744	$	135,538	$	0	Total	$	527,585	$	358,812	$	133,239	$	2,481

Liabilities:	Liabilities:									Liabilities:
Fair value of contingent liability	Fair value of contingent liability	$	926	$	0	$	0	$	926	Fair value of contingent liability	$	4,522	$	0	$	0	$	4,522

Total	Total	$	926	$	0	$	0	$	926	Total	$	4,522	$	0	$	0	$	4,522

(1) Amounts included in Cash and cash equivalents on the condensed consolidated balance ~~sheet,~~sheets, except for ~~$10,790~~$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.

3840

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
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)	$	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 securities	21,155		21,155		0		0
Mutual funds invested in debt securities	23,226		23,226		0		0
Total equity securities at fair value	44,381		44,381		0		0
Debt securities available for sale
U.S. government securities	19,200		0		19,200		0
Corporate securities	52,434		0		52,434		0
U.S. government and federal agency	10,484		0		10,484		0

Commercial paper	9,086		0		9,086		0



Total debt securities available for sale	91,204		0		91,204		0

Total investment securities at fair value	135,585		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

(1) Amounts included in Cash and cash equivalents on the condensed consolidated balance ~~sheet,~~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.

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.

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.

~~The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at March 31, 2021:~~

3941

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

Quantitative Information about Level 3 Fair Value Measurements
Fair Value at
March 31,
2021 Valuation Technique Unobservable Input Range (Actual)
Fair value of contingent liability $ 926 Monte Carlo simulation model Estimated fair value of the Douglas Elliman reporting unit $ 169,000
Risk-free rate for a 2-year term 0.14 %
Leverage-adjusted equity volatility of peer firms 84.95 %
The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at June 30, 2021:


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at
	June 30, 2021		Valuation Technique	Unobservable Input	Range (Actual)








PropTech convertible trading debt securities	$	2,481	Discounted cash flow	Interest rates	3% - 5%
				Maturity	Apr 2022 - Mar 2023
				Volatility	43.6% - 111.6%
				Discount rate	23.75% - 43.33%

Fair value of contingent liability	$	4,522	Monte Carlo simulation model	Estimated fair value of the Douglas Elliman reporting unit	$	825,946
				Risk-free rate for a 1.5-year term	0.16		%
				Leverage-adjusted equity volatility of peer firms	48.21		%

The unobservable inputs related to the valuations of the Level 3 assets and liabilities were as follows at December 31, 2020:


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at
	December 31, 2020		Valuation Technique	Unobservable Input	Range (Actual)

















Fair value of contingent liability	$	999	Monte Carlo simulation model	Estimated fair value of the Douglas Elliman reporting unit	$	169,000
				Risk-free rate for a 2-year term	0.13		%
				Leverage-adjusted equity volatility of peer firms	78.57		%

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 ~~March 31,~~June 30, 2021 and December 31, 2020, respectively, except for investments in real estate ventures that were impaired as of June 30, 2021 and December 31, ~~2020.~~2020, respectively.

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, 2021				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	$	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 $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)
Description	Impairment Charge		Total

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, 2020.

4043

VECTOR GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

13. SEGMENT INFORMATION

The Company’s business segments for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 were Tobacco and Real Estate. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Financial information for the Company’s operations before taxes and non-controlling interests for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 were as follows:


					Real			Corporate								Real			Corporate
		Tobacco			Estate			and Other		Total			Tobacco			Estate			and Other		Total

Three months ended March 31, 2021
Three months ended June 30, 2021												Three months ended June 30, 2021
Revenues	Revenues	$	268,463		$	275,301		$	0	$	543,764	Revenues	$	329,496		$	400,033		$	0	$	729,529
Operating income (loss)	Operating income (loss)	81,599		(1)	15,260			(6,656)		90,203		Operating income (loss)	103,179			42,362			(8,465)		137,076
Equity in earnings from real estate ventures	Equity in earnings from real estate ventures	0			1,589			0		1,589		Equity in earnings from real estate ventures	0			16,685			0		16,685
Depreciation and amortization												Depreciation and amortization	1,697			2,158			234		4,089

Three months ended June 30, 2020												Three months ended June 30, 2020
Revenues												Revenues	$	312,510		$	133,250		$	0	$	445,760
Operating income (loss)												Operating income (loss)	79,309		(1)	(6,875)		(2)	(5,637)		66,797
Equity in losses from real estate ventures												Equity in losses from real estate ventures	0			(12,260)			0		(12,260)
Depreciation and amortization												Depreciation and amortization	2,000			2,198			214		4,412

Six months ended June 30, 2021												Six months ended June 30, 2021
Revenues												Revenues	$	597,959		$	675,334		$	0	$	1,273,293
Operating income (loss)												Operating income (loss)	184,778		(3)	57,622			(15,121)		227,279
Equity in earnings from real estate ventures												Equity in earnings from real estate ventures	0			18,274			0		18,274
Identifiable assets												Identifiable assets	406,978			620,499			468,900		1,496,377
Depreciation and amortization	Depreciation and amortization	1,760			2,188			231		4,179		Depreciation and amortization	3,457			4,346			465		8,268
Capital expenditures	Capital expenditures	937			597			397		1,931		Capital expenditures	1,375			1,263			417		3,055

Three months ended March 31, 2020
Six months ended June 30, 2020												Six months ended June 30, 2020
Revenues	Revenues	$	287,069		$	167,419		$	0	$	454,488	Revenues	$	599,579		$	300,669		$	0	$	900,248
Operating income (loss)	Operating income (loss)	69,186			(67,475)		(2)	(6,615)		(4,904)		Operating income (loss)	148,495		(4)	(74,350)		(5)	(12,252)		61,893
Equity in losses from real estate ventures	Equity in losses from real estate ventures	0			(6,505)			0		(6,505)		Equity in losses from real estate ventures	0			(18,765)			0		(18,765)

Identifiable assets												Identifiable assets	357,518			557,505			428,386		1,343,409
Depreciation and amortization	Depreciation and amortization	2,042			2,313			220		4,575		Depreciation and amortization	4,042			4,511			434		8,987
Capital expenditures	Capital expenditures	2,749			2,119			20		4,888		Capital expenditures	2,973			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 $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)~~(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.~~assets and $2,961 of restructuring charges.

4144

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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, 2020 and Notes thereto, included in our 2020 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 ~~March 31,~~June 30, 2021 and 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, 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.

4245

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. ~~Although much uncertainty still surrounds~~Many uncertainties continue to surround the pandemic, including ~~its~~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. Similar to many other companies, our operations have been affected by COVID-19. We have implemented remote working for many employees and adopted safety requirements, including the social distancing protocols recommended by public health authorities.

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. ~~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.~~ 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~~ ~~and~~ ~~Montego~~ ~~brands are priced in the deep discount category and our other brands are primarily priced in the traditional discount category.~~

Impact of COVID-19 on Real Estate Segment. ~~Douglas Elliman is~~The three and six months ended June 30, 2021 demonstrated continued strength in the ~~largest~~ residential real estate ~~broker~~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 ~~market~~suburbs (Long Island, Westchester County and ~~approximately 46% of its brokerage revenues were derived from this region~~Connecticut), the Hamptons, Los Angeles, and Aspen and, in ~~2018 and 2019. In addition, New Valley has investments~~2021, in ~~multiple real estate ventures and properties in the~~ New York metropolitan area, which had a carrying value of $34,092 at March 31, 2021. 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 during the year ended December 31,City.

In 2020, and, in particular, ~~from March~~the second quarter of 2020, ~~to October 2020.~~ ~~For example, Douglas Elliman’s agents were restricted from performing in-person showings of properties 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 from March 2020 to October 2020. As~~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 ~~28%~~29% for the twelve months ended ~~March 31,~~June 30, 2021. ~~As Douglas Elliman’s markets began reopening~~In addition, New Valley has investments in multiple real estate ventures and ~~vaccines for COVID-19 have become available, and consistent with home buying trends~~properties in ~~the U.S., Douglas Elliman’s business improved significantly in markets complementary to New York City, including~~ the New York ~~City suburbs (Long Island, Westchester County and Connecticut), the Hamptons, Palm Beach, Miami, Los Angeles, and Aspen and, more recently, New York City.~~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, ~~as business improved,~~ Douglas Elliman operated at a lower cost basis ~~for~~during the ~~first quarter~~three and six months ended ~~March 31,~~June 30, 2021 when compared to the ~~first quarter ended March 31, 2020.~~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 ~~availability~~timing and extent of ~~vaccines,~~vaccine administration and ~~related macroeconomic trends on our Real Estate segment. In addition,~~ the ~~likelihood and magnitude~~impact of ~~a material impact from~~COVID-19 variants, the duration of the pandemic ~~increases with the amount of time the virus affects activity levels in locations in which Douglas Elliman operates.~~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.

4346

Recent Developments

Issuance of Senior Secured Notes due 2029. In 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 Securities 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 semi-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 5.75% 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 hand, to redeem all of our outstanding 6.125% Senior Secured Notes due 2025, including accrued interest and any premium thereon, and to pay fees and expenses in 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 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 ~~March 31,~~June 30, 2021, approximately ~~$90,000~~$84,600 was available for borrowing with no outstanding balance under the Restated Credit Agreement.

Montego. Since August 2020, Liggett has expanded the distribution of its Montego deep discount brand by 1217 states, primarily located in the southeast and midwest. Montego was Liggett’s third-largest brand for the three months ended ~~March 31,~~June 30, 2021. Prior to August 2020, Montego was sold in select targeted markets in four states. Montego’s volume represented ~~10.0%~~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 ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~5.0%~~approximately 5% for the ~~three~~six months ended ~~March 31,~~June 30, 2020.

Property Technology (“PropTech”) Investments. New Valley Ventures’ made the following investments (all of which are currently ~~$1.0 million~~$1,000 or less) during the ~~three~~six months ended ~~March 31,~~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 multi-year services agreement with Rechat for its agents.

•Purlin – an investment in March 2021 in an automated intelligence platform to aid in home buying.

•EVPassport – an investment in March 2021 in an electronic 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 features the name and contact information of the selling agent.

•The Lab PropTech Fund – an investment in June 2021 into a Miami-based fund that will invest in emerging technology companies serving emerging real estate and construction industries.

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.

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 September 2019, the Special Master held a hearing regarding the state’s claim for approximately $17,500 in prejudgment interest as well as post-judgment interest in amounts to be determined. A decision is pending. 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 conclusion2021, following confirmation of the ~~case. In April 2021,~~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.

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, 2020. Please refer to that section and the information below for disclosures regarding the critical accounting policies related to our business.

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 ~~March 31,~~June 30, 2021 and 2020 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						Three Months Ended					Six Months Ended
		March 31,						June 30,					June 30,
			2021			2020					2021		2020			2021			2020
Revenues:	Revenues:									Revenues:
Tobacco	Tobacco		$	268,463		$	287,069			Tobacco	$	329,496	$	312,510		$	597,959		$	599,579

Real estate	Real estate		275,301			167,419				Real estate	400,033		133,250			675,334			300,669

Total revenues	Total revenues		$	543,764		$	454,488			Total revenues	$	729,529	$	445,760		$	1,273,293		$	900,248
Operating income (loss):	Operating income (loss):									Operating income (loss):
Tobacco	Tobacco		$	81,599	(1)	$	69,186			Tobacco	$	103,179	$	79,309	(1)	$	184,778	(3)	$	148,495	(4)

Real estate	Real estate		15,260			(67,475)			(2)	Real estate	42,362		(6,875)		(2)	57,622			(74,350)		(5)
Corporate and Other	Corporate and Other		(6,656)			(6,615)				Corporate and Other	(8,465)		(5,637)			(15,121)			(12,252)
Total operating income	Total operating income		$	90,203		$	(4,904)			Total operating income	$	137,076	$	66,797		$	227,279		$	61,893

(1) Operating income ~~includes~~included $53 of litigation settlement and judgement expense.

(2) Operating loss included $2,961 of restructuring charges.

(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)~~(4) Operating income included $53 of litigation settlement and judgement expense.

(5) Operating loss ~~includes~~included $58,252 of impairment charges related to the impairments of goodwill and other intangible ~~assets.~~assets and $2,961 of restructuring charges.

Three Months Ended ~~March 31,~~June 30, 2021 Compared to Three Months Ended ~~March 31,~~June 30, 2020

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. The $283,769 (63.7%) increase in revenues was primarily due to a $266,783 increase in Real Estate revenues, which was primarily related to Douglas Elliman and a $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. The $195,525 (64.1%) increase in cost of sales was primarily due to a $203,447 increase in Real Estate cost of sales, which was primarily related to Douglas Elliman. This was offset by a $7,922 decline in Tobacco cost of sales.

Expenses. Operating expenses were $92,043 for the three months ended June 30, 2021 compared to $74,078 for the same period last year. The $17,965 (24.3%) increase in operating expenses was due to a $14,099 increase in Real Estate expenses, which included $2,961 of restructuring expenses, a $1,038 increase in Tobacco expenses, and a $2,828 increase in Corporate and Other expenses.

Operating income. Operating income was $137,076 for the three months ended June 30, 2021 compared to $66,797 for the same period last year. The $70,279 (105.2%) increase in operating income was due to a $49,237 increase in Real Estate operating income, primarily related to Douglas Elliman, and a $23,870 increase in Tobacco operating income. This was offset by an increase of $2,828 in Corporate and Other operating loss.

Other expenses. Other expenses were $4,911 and $30,107 for the three months ended June 30, 2021 and 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.

Income before provision for income taxes. Income before income taxes was $132,165 and $36,690 for the three months ended June 30, 2021 and 2020, respectively.

Income tax expense. Income tax expense was $38,860 and $10,916 for the three months ended June 30, 2021 and 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 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 Eagle 20’s, Pyramid, Liggett Select and Grand Prix by $0.14 per pack on June 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.

All of our Tobacco sales were in the discount category in 2021 and 2020. For the three months ended June 30, 2021, Tobacco revenues were $329,496 compared to $312,510 for the three months ended June 30, 2020. Revenues increased by $16,986 (5.4%) due primarily to an increase in the average selling price of our brands for the three months ended June 30, 2021 partially offset by a 1.9% (46 million units) decline in sales volume.

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,
	2021		2020

Manufacturing overhead, raw materials and labor	$	33,277	$	32,669
Customer shipping and handling	1,885		1,361
Federal Excise Taxes, net	118,735		121,170

FDA expense	5,622		6,116
MSA expense, net of market share exemption	46,626		52,751
Total cost of sales	$	206,145	$	214,067

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, 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 and, the actual change in 2020 taxable shipments was an increase of 2.0%. Our annual MSA expense changes by approximately $1,650 for each percentage change in 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, 2021, Liggett’s management assumed an inflation adjustment to MSA expense of 3.4% for the six months ended June 30, 2021 and assumed 3% for the three 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. 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, an increase of $24,908 (25.3%). The increase in gross profit for the three months ended June 30, 2021 was primarily attributable to increased pricing associated with the Eagle 20’s and Pyramid brands more than offsetting the impact of a 1.9% decline in unit sales. As a percentage of revenue (excluding Federal Excise Taxes), Tobacco gross profit increased from 51.4% in the 2020 period to 58.5% in the 2021 period. The increase in gross profit was primarily the result of increased net pricing as well as lower per unit MSA expense.

Tobacco expenses. Tobacco operating, selling, general and administrative expenses, excluding settlements and judgments, were $20,172 and $19,081 for the three months ended June 30, 2021 and 2020, respectively. The increase of $1,091 was mainly due to increased travel and marketing expenses related to the lifting of COVID-19 pandemic related restrictions, and higher compensation 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 $1,542 and $1,641 for the three months ended June 30, 2021 and 2020, respectively.

Tobacco operating income. Tobacco operating income was $103,179 for the three months ended June 30, 2021 compared to $79,309 for the same period last year. The increase of $23,870 (30.1%) was primarily attributable to higher gross profit, as discussed above, partially offset by increased operating, selling, general and administrative expenses.

Real Estate.

Real Estate revenues. Real Estate revenues were $400,033 and $133,250 for the three months ended June 30, 2021 and 2020, respectively. Real Estate revenues increased by $266,783, which was primarily related to an increase of $252,779 in Douglas Elliman’s commission and 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 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 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, 2021.

Real Estate revenues and cost of sales for the three months ended June 30, 2021 and 2020, respectively, were as follows:


	Three Months Ended
	June 30,
	2021		2020
Real Estate Revenues:
Commission and other brokerage income	$	376,033	$	123,254
Property management revenue	9,901		8,832
Escrow and title fees	6,041		843
Revenues from investments in real estate	6,750		—
Sales on facilities primarily from Escena	1,308		321

Total real estate revenues	$	400,033	$	133,250

Real Estate Cost of Sales:
Real estate commissions	$	283,652	$	90,116
Cost of sales from investments in real estate	6,744		—
Escrow and title fees	2,867		139
Cost of sales on facilities primarily from Escena	1,002		563


Total real estate cost of sales	$	294,265	$	90,818

Real 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 Elliman’s real estate agent commissions, which 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 to $105,768 for the three months ended June 30, 2021, an increase of $63,336, 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 $63,406 and $49,307 for the three months ended June 30, 2021 and 2020, respectively. For the three months ended June 30, 2020, Real Estate expenses included restructuring charges, which were the result of expense-reduction initiatives, of $2,961 at Douglas

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.

Real Estate operating income (loss). The Real Estate segment reported 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. The increase in Real Estate segment’s operating income of $49,237 was primarily the result of the increase in gross profit discussed above along with the impact of expense-reduction initiatives that began at Douglas 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 $8,465 for the three months ended June 30, 2021 compared to $5,637 for the same period in 2020 and the difference was due primarily to increased administrative costs related to professional fees and travel expenses related to the lifting of COVID-19 restrictions.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Revenues. Total revenues were ~~$543,764~~$1,273,293 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$454,488~~$900,248 for the ~~three~~six months ended ~~March 31,~~June 30, 2020. The ~~$89,276 (19.6%~~$373,045 (41.4%) increase in revenues was primarily due to a ~~$107,882~~$374,665 increase in Real Estate revenues, which was primarily related to an increase in Douglas Elliman’s brokerage revenues related to the strength of the U.S. existing home market during the 2021 period. This was offset by a ~~$18,606~~$1,620 decline in Tobacco revenues related to lower unit volume partially offset by increases in net pricing resulting primarily from increases in 2020 and 2021.

Cost of sales. Total cost of sales was ~~$363,542~~$863,952 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$310,623~~$615,508 for the ~~three~~six months ended ~~March 31,~~June 30, 2020. The ~~$52,919 (17.0%~~$248,444 (40.4%) increase in cost of sales was primarily due to a ~~$86,178~~$289,625 increase in Real Estate cost of sales, which was primarily related to increased Douglas Elliman’s commissions. This was offset by a ~~$33,259~~$41,181 decline in Tobacco cost of sales primarily related to decreased sales volume.

Expenses. Operating expenses were ~~$90,019~~$182,062 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$148,769~~$222,847 for the same period last year. The ~~$58,750 (39.5%~~$40,785 (18.3%) decline was due to a ~~$61,031~~$46,932 decline in Real Estate expenses, primarily related to the absence of the impairment of goodwill and other intangible asset charge and restructuring charges at Douglas Elliman of $58,252 and $2,961, respectively, recorded in the 2020 period. This was offset by a ~~$2,240~~$3,278 increase in Tobacco expenses and by a ~~$41~~$2,869 increase in Corporate and Other expense for the ~~three~~six months ended ~~March 31,~~June 30, 2021.

Operating income. Operating income was ~~$90,203~~$227,279 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to an operating ~~loss~~income of ~~$4,904~~$61,893 for the same period last year. Operating income for the ~~three~~six months ended ~~March 31,~~June 30, 2020 included an impairment expense associated with goodwill and other intangible assets and restructuring charges in our ~~real estate~~Real Estate segment. Real Estate operating income increased ~~$82,735~~$131,972 primarily related to increased revenues at Douglas Elliman in ~~the first quarter of~~ 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 ~~expense~~and restructuring expenses in the 2021 period. Tobacco operating income increased by ~~$12,413~~$36,283 due primarily to increases in net pricing and lower per unit MSA expense. This was offset by the increased Corporate and Other operating loss of ~~$41.~~$2,869.

Other expenses ~~(income)~~. Other expenses were ~~$45,193~~$50,104 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to other ~~income~~expenses of ~~$695~~$29,412 for the ~~three~~six months ended ~~March 31,~~June 30, 2020. For the ~~three~~six months ended ~~March 31,~~June 30, 2021, other expenses primarily consisted of interest expense of ~~$28,751,~~$56,866, and loss on the extinguishment of debt of $21,362. This was offset by equity in earnings from real estate ventures of ~~$1,589,~~$18,274, equity in earnings from investments of ~~$577~~$1,518 and other income of ~~$2,754.~~$8,332. For the ~~three~~six months ended ~~March 31,~~June 30, 2020, other ~~income~~expenses primarily consisted of interest expense of $64,985, equity in losses from real estate ventures $18,765 and other expenses of $3,020. This was offset by equity in earnings of investments of ~~$50,152~~$52,359 and income of ~~$3,330~~$4,999 from changes in fair value of derivatives embedded within convertible debt. ~~This was offset by interest expense of $35,627, equity in losses from real estate ventures of $6,505 and other expenses of $10,655.~~

Income (loss) before provision for income taxes. Income before income taxes was ~~$45,010~~$177,175 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to loss before income taxes of ~~$4,209~~$32,481 for the ~~three~~six months ended ~~March 31,~~June 30, 2020.

Income tax expense (benefit). Income tax expense was ~~$13,053~~$51,913 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to income tax ~~benefit~~expense of ~~$978~~$9,938 for the ~~three~~six months ended ~~March 31,~~June 30, 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 ~~(loss)~~ to record income tax expense, ~~(benefit),~~ adjusted for discrete items, if any. We refine annual estimates as new information becomes available. For the ~~three~~six months ended ~~March 31,~~June 30, 2020, the annual effective tax rate applied to year-to-date income resulted in tax expense which was ~~reduced~~increased by discrete items ~~and resulted in an income tax benefit for the period. The net discrete tax benefit of $1,286 primarily relates~~related to income tax benefits on 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 equity in earnings from investments associated with the one-time gain on sale of LTS.

Tobacco.

Tobacco revenues. Liggett increased the list price of Eagle 20’s, Pyramid, Liggett Select, Eve and Grand Prix by $0.14 per pack on June 28, 2021, $0.14 per pack in January ~~25,~~ 2021, by $0.13 per pack in November 2020, $0.11 per pack in June 2020, and $0.08 per pack in February 2020.

All of our Tobacco sales were in the discount category in 2021 and 2020. For the ~~three~~six months ended ~~March 31,~~June 30, 2021, Tobacco revenues were ~~$268,463~~$597,959 compared to ~~$287,069~~$599,579 for the ~~three~~six months ended ~~March 31,~~June 30, 2020. Revenues declined by ~~$18,606 (6.5%~~$1,620 (0.3%) due primarily to a ~~13.8% (311~~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 ~~three~~six months ended ~~March 31,~~June 30, 2021. ~~We believe that~~

Despite recent pricing increases, Eagle 20’s remains Liggett’s primary low-cost cigarette brand and its percentage of Liggett’s total unit ~~volumes~~volume sales declined from approximately 63% in the six months ended June 30, 2020 to approximately 60% for the ~~three~~six months ended ~~March 31, 2021~~June 30, 2021. Pyramid, Liggett’s second largest brand, declined ~~due~~from approximately 24% of total unit volume sales in the six months ended June 30, 2020 to ~~elevated wholesale inventories at December 31,~~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 in the six months ended June 30, 2020 ~~which were~~to approximately 12% for the ~~result of purchases after a competitor’s announcement of a price increase in December 2020, as well as the prospect of increased restrictions associated with the COVID-19 pandemic.~~

six months ended June 30, 2021.

Tobacco cost of sales. The major components of our Tobacco cost of sales were as follows:


		Three Months Ended						Six Months Ended
		March 31,						June 30,
		2021			2020			2021			2020

Manufacturing overhead, raw materials and labor	Manufacturing overhead, raw materials and labor	$	27,261		$	32,865	Manufacturing overhead, raw materials and labor	$	60,538		$	65,534
Customer shipping and handling	Customer shipping and handling	1,416			1,472		Customer shipping and handling	3,301			2,833
Federal Excise Taxes, net	Federal Excise Taxes, net	97,714			113,139		Federal Excise Taxes, net	216,449			234,309

FDA expense	FDA expense	6,072			6,350		FDA expense	11,694			12,466
MSA expense, net of market share exemption	MSA expense, net of market share exemption	31,568		(1)	43,464		MSA expense, net of market share exemption	78,194		(1)	96,215
Total cost of sales	Total cost of sales	$	164,031		$	197,290	Total cost of sales	$	370,176		$	411,357

(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. 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 ~~March 31,~~June 30, 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 and, the actual change in 2020 taxable shipments was an increase of 2.0%. Our annual MSA ~~liability~~expense changes by approximately ~~$1,700~~$1,650 for each percentage change in 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 six months ended June 30, 2021, Liggett’s management assumed an inflation adjustment to MSA expense of 3.4% for the six months ended June 30, 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 ~~$104,432~~$227,783 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$89,779~~$188,222 for the ~~three~~six months ended ~~March 31,~~June 30, 2020, an increase of ~~$14,653 (16.3%~~$39,561 (21.0%). For the ~~three~~six months ended ~~March 31,~~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 ~~three~~six months ended ~~March 31,~~June 30, 2021 was ~~$101,710,~~$225,061, an increase of ~~$11,931 (13.3%~~$36,839 (19.6%). This increase in gross profit for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was primarily attributable to increased net pricing across Liggett’s brand portfolio more than offsetting the impact of a ~~13.8%~~7.7% decline in unit sales. As a percentage of revenue (excluding Federal Excise Taxes), Tobacco gross profit increased from ~~51.6%~~51.5% in the 2020 period to ~~61.2%~~59.7% in the 2021 period. The increase in gross profit was aprimarily the result of increased pricing and lower per unit MSA and manufacturing costs. Manufacturing costs per unit were higher in the comparable 2020 period due to the costs associated with a voluntary shutdown of Liggett’s manufacturing facility in March 2020 related to the COVID-19 pandemic.

~~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 62% in the three months ended March 31, 2020 to approximately 61% for the three months ended March 31, 2021. ~~Pyramid~~, Liggett’s second largest brand, declined from approximately 24% of total unit volume sales in the three months ended March 31, 2020 to approximately 21% for the three months ended March 31, 2021. ~~Montego~~ is Liggett’s third largest brand and increased from approximately 5% of total unit volume sales in the three months ended March 31, 2020 to approximately 10% for the three months ended March 31, 2021.expenses.

Tobacco expenses. Tobacco operating, selling, general and administrative expenses, excluding settlements and judgments, were ~~$22,828~~$43,000 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$20,593~~$39,674 for the ~~three~~six months ended ~~March 31,~~June 30, 2020. The increase of ~~$2,235~~$3,326 was mainly due to increased ~~litigation~~professional fees and expenses associated with Colorado’s minimum price ~~legislation.~~legislation, increased travel and marketing expenses related to the lifting of COVID-19 restrictions and higher compensation accruals. Tobacco product liability legal expenses, including settlements and judgments, were ~~$1,525~~$3,067 and ~~$1,550~~$3,191 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

Tobacco operating income. Tobacco operating income was ~~$81,599~~$184,778 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$69,186~~$148,495 for the ~~same period last year, an~~six months ended June 30, 2020. The increase of ~~$12,413. The increase in operating income~~$36,283 (24.4%) was primarily attributable to higher gross profit margins, as discussed above, partially offset by increased operating, selling, general and administrative expenses.

Real Estate.

Real Estate revenues. Real Estate revenues were ~~$275,301~~$675,334 and ~~$167,419~~$300,669 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. Real Estate revenues increased by ~~$107,882 (64.4%),~~$374,665, which was primarily related to an increase of ~~$103,134~~$355,913 in Douglas Elliman’s commission and other brokerage income, ~~which increased as a result of~~reflecting increased revenues from existing home sales ~~as a result of~~due to home-buying trends in Douglas Elliman’s markets. ~~These trends are consistent with~~

In 2020, and, in particular, the ~~increased demand for existing-homes~~second quarter of 2020, Douglas Elliman experienced a severe decline in ~~Douglas Elliman’s markets as well as other areas of the U.S. Douglas Elliman’s revenues generated from the~~closed sales ~~of existing homes increased by $45,375 in the Southeast region, $21,526 in the Northeast region, which does not include New York City, $15,378 in the West region and $20,026~~volume in New York City. ~~In addition, Douglas Elliman’s sales from Development Marketing increased by $829 for the three months ended March 31, 2021.~~

~~From March 2020 to October 2020, the COVID-19 pandemic had a significant effect on the economy and, especially, in the New York City market, where approximately 46% of Dou~~glas Elliman’s commissions and other brokerage revenues were derived in 2018 and 2019. During this time, in response to the pandemic, various governmental agencies in the markets where Douglas Elliman operates instituted restrictions on individuals and on the types of businesses that were permitted to operate from March 2020 to June 2020, which adversely impacted Douglas Elliman’s business. AsTherefore, 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 ~~28%~~29% for the twelve months ended ~~March 31,~~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 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, ~~Palm Beach, Miami,~~ Los Angeles, and Aspen and, ~~more recently,~~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, 2021.

Real Estate revenues and cost of sales for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively, were as follows:


		Three Months Ended					Six Months Ended
		March 31,					June 30,
		2021		2020			2021		2020
Real Estate Revenues:	Real Estate Revenues:					Real Estate Revenues:
Commission and other brokerage income	Commission and other brokerage income	$	259,100	$	155,966	Commission and other brokerage income	$	635,133	$	279,220
Property management revenue	Property management revenue	9,268		8,779		Property management revenue	19,169		17,611
Escrow and title fees	Escrow and title fees	4,408		856		Escrow and title fees	10,449		1,699
Revenues from investments in real estate	Revenues from investments in real estate	900		—		Revenues from investments in real estate	7,650		—
Sales on facilities primarily from Escena	Sales on facilities primarily from Escena	1,625		1,818		Sales on facilities primarily from Escena	2,933		2,139
Other		—		—

Total real estate revenues	Total real estate revenues	$	275,301	$	167,419	Total real estate revenues	$	675,334	$	300,669

Real Estate Cost of Sales:	Real Estate Cost of Sales:					Real Estate Cost of Sales:
Real estate agent commissions	Real estate agent commissions	$	197,017	$	112,199	Real estate agent commissions	$	480,669	$	202,315

Cost of sales from investments in real estate						Cost of sales from investments in real estate	6,744		—
Escrow and title fees						Escrow and title fees	4,485		277
Cost of sales on facilities primarily from Escena	Cost of sales on facilities primarily from Escena	876		996		Cost of sales on facilities primarily from Escena	1,878		1,559
Escrow and title fees		1,618		138

Total real estate cost of sales	Total real estate cost of sales	$	199,511	$	113,333	Total real estate cost of sales	$	493,776	$	204,151

Real Estate cost of sales. Real Estate cost of sales were ~~$199,511~~$493,776 and ~~$113,333~~$204,151 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. Real Estate cost of sales increased by ~~$86,178,~~$289,625, primarily related to ~~$84,818~~$278,354 increase in Douglas Elliman’s real estate agent commissions, which ~~increased as a result of increased commission and other brokerage income.~~

~~Douglas Elliman’s gross profit increased by $21,704 (40.1%) while gross margin percentage on real~~resulted from an increase in sales volume. Real estate brokerage ~~income declined~~commissions increased from ~~28.1%~~72.5% to for the ~~three~~six months ended ~~March 31,~~June 30, 2020 to ~~24.0%~~75.7% for the ~~three~~six months ended ~~March 31,~~June 30, 2021. This was primarily due to the ~~decline~~increase in the percentage of revenues from the ~~New York City region, which traditionally earns higher gross margin percentages than the~~ Southeast (Florida) and Western (primarily California) ~~regions.~~regions which traditionally pay higher commission percentages than the New York City region.

~~See~~ ~~Impact of COVID-19 on~~ Real Estate ~~Segment.~~segment gross profit increased from $96,518 for ~~a discussion~~the six months ended June 30, 2020 to $181,558 for the six months ended June 30, 2021, 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 ~~$60,530~~$123,936 and ~~$121,561~~$170,868 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020. The expenses for the ~~three~~six months ended ~~March 31,~~June 30, 2020 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. 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.

Beginning in April 2020, as a response to the impact of the COVID-19 pandemic, we made significant operating adjustments at Douglas Elliman, including reductions in brokerage personnel of approximately 25%, certain salaries and 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. Real estate expenses, excluding the restructuring charges and non-cash impairment, ~~charge, declined~~increased by ~~$2,779~~$14,281 for the six months ended June 30, 2021 compared to the comparable period in 2020, primarily as a result of increased personnel expense (associated with both discretionary compensation as well as the ~~continued expense-reduction initiatives that began at Douglas Elliman in the second quarter~~reinstatement of ~~2020.~~salary levels) and advertising expenses associated with Douglas Elliman’s ~~expenses declined as a result of~~increased listings in 2021. These amounts were offset by lower general and administrative, ~~professional services,~~ occupancy and travel expenses. ~~The decline in these expenses was offset by increased advertising expense as Douglas Elliman’s business increased.~~

Real Estate operating income (loss). The Real Estate segment reported operating income of ~~$15,260~~$57,622 and operating loss of ~~$67,475~~$74,350 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. The increase in the Real Estate segment’s operating income, after excluding the non-cash impairment charge in the 2020 period, was primarily the result of the increase in gross profit discussed above along 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 ~~$6,656~~$15,121 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to ~~$6,615~~$12,252 for the same period in 2020.

4955

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 ~~March 31,~~June 30, 2021:


		(Dollars in Thousands. Area and Unit Information in Ones)																					(Dollars in Thousands. Area and Unit Information in Ones)
		Location	Date of Initial Investment	Percentage Owned (1)		Net Cash Invested (Returned)		Cumulative Earnings (Losses)		Carrying Value as of March 31, 2021		Future Capital Commit- ments from New Valley (2)		Projected Residential and/or Hotel Area		Projected Commercial Space		Projected Number of Residential Lots, Units and/or Hotel Rooms		Actual/Projected Construction Start Date	Projected Construction End Date		Location	Date of Initial Investment	Percentage Owned (1)		Net Cash Invested (Returned)		Cumulative Earnings (Losses)		Carrying Value as of June 30, 2021		Future Capital Commit- ments from New Valley (2)		Projected Residential and/or Hotel Area		Projected Commercial Space		Projected Number of Residential Lots, Units and/or Hotel Rooms		Actual/Projected Construction Start Date	Projected Construction End Date

Escena, net	Escena, net	Master planned community, golf course, and club house in Palm Springs, CA	March 2008	100	%	$	2,951	$	6,719	$	9,670	$	—	450	Acres			667 450	R Lots H	N/A		Escena, net	Master planned community, golf course, and club house in Palm Springs, CA	March 2008	100	%	$	2,951	$	6,657	$	9,608	$	—	450	Acres			667 450	R Lots H	N/A
Townhome A (11 Beach Street)	Townhome A (11 Beach Street)	TriBeCa, Manhattan, NY	November 2020	100	%	6,132		—		6,132		—		6,169	SF			1	R	N/A	Completed	Townhome A (11 Beach Street)	TriBeCa, Manhattan, NY	November 2020	100	%	(6)		6		—		—		6,169	SF			1	R	N/A	Completed
Investments in real estate, net	Investments in real estate, net					$	9,083	$	6,719	$	15,802	$	—									Investments in real estate, net					$	2,945	$	6,663	$	9,608	$	—

Investments in real estate ventures:	Investments in real estate ventures:																					Investments in real estate ventures:

111 Murray Street	111 Murray Street	TriBeCa, Manhattan, NY	May 2013	9.5	%	$	6,819	$	(4,414)	$	2,405	$	—	330,000	SF	1,700	SF	157	R	September 2014	Completed	111 Murray Street	TriBeCa, Manhattan, NY	May 2013	9.5	%	$	6,819	$	(4,414)	$	2,405	$	—	330,000	SF	1,700	SF	157	R	September 2014	Completed

87 Park (8701 Collins Avenue)	87 Park (8701 Collins Avenue)	Miami Beach, FL	December 2013	23.1	%	(893)		893		—		—		160,000	SF	TBD		70	R	October 2015	Completed	87 Park (8701 Collins Avenue)	Miami Beach, FL	December 2013	23.1	%	(6,485)		6,485		—		—		160,000	SF	TBD		70	R	October 2015	Completed
125 Greenwich Street	125 Greenwich Street	Financial District, Manhattan, NY	August 2014	13.4	%	7,992		(7,992)		—		—		306,000	SF	16,000	SF	273	R	March 2015	TBD	125 Greenwich Street	Financial District, Manhattan, NY	August 2014	13.4	%	7,992		(7,992)		—		—		306,000	SF	16,000	SF	273	R	March 2015	TBD
West Hollywood Edition (9040 Sunset Boulevard)	West Hollywood Edition (9040 Sunset Boulevard)	West Hollywood, CA	October 2014	48.5	%	11,513		(11,513)		—		—		210,000	SF	—		20 190	R H	May 2015	Completed	West Hollywood Edition (9040 Sunset Boulevard)	West Hollywood, CA	October 2014	48.5	%	11,513		(11,513)		—		—		210,000	SF	—		20 190	R H	May 2015	Completed
The XI (76 Eleventh Avenue)	The XI (76 Eleventh Avenue)	West Chelsea, Manhattan, NY	May 2015	5.1	%	17,000		(17,000)		—		—		630,000	SF	85,000	SF	236 137	R H	September 2016	TBD	The XI (76 Eleventh Avenue)	West Chelsea, Manhattan, NY	May 2015	5.1	%	17,000		(17,000)		—		—		630,000	SF	85,000	SF	236 137	R H	September 2016	TBD
Monad Terrace		Miami Beach, FL	May 2015	19.6	%	7,635		(5,490)		2,145		—		160,000	SF	—		59	R	May 2016	Completed
Monad Terrace (1300 West Ave)																						Monad Terrace (1300 West Ave)	Miami Beach, FL	May 2015	19.6	%	7,635		(7,635)		—		—		160,000	SF	—		59	R	May 2016	Completed
Takanasee (805 Ocean Ave)	Takanasee (805 Ocean Ave)	Long Branch, NJ	December 2015	22.8	%	6,144		(6,144)		—		—		63,000	SF	—		13	R	June 2017	TBD	Takanasee (805 Ocean Ave)	Long Branch, NJ	December 2015	22.8	%	6,144		(6,144)		—		—		63,000	SF	—		13	R	June 2017	TBD
Brookland (15 East 19th St)	Brookland (15 East 19th St)	Brooklyn, NY	April 2017	9.8	%	402		20		422		—		24,000	SF	—		33	R	August 2017	Completed	Brookland (15 East 19th St)	Brooklyn, NY	April 2017	9.8	%	402		1		403		—		24,000	SF	—		33	R	August 2017	Completed
Dime (209 Havemeyer St)	Dime (209 Havemeyer St)	Brooklyn, NY	November 2017	16.5	%	9,145		(42)		9,103		—		100,000	SF	150,000	SF	177	R	May 2017	Completed	Dime (209 Havemeyer St)	Brooklyn, NY	November 2017	16.5	%	9,145		(1,356)		7,789		—		100,000	SF	150,000	SF	177	R	May 2017	Completed
352 6th Avenue	352 6th Avenue	Brooklyn, NY	February 2019	37.0	%	685		98		783		—		5,200	SF	—		4	R	September 2019	Completed	352 6th Avenue	Brooklyn, NY	February 2019	37.0	%	685		111		796		—		5,200	SF	—		4	R	September 2019	Completed
Meatpacking Plaza		Meatpacking District, NY	April 2019	16.9	%	10,692		(2,527)		8,165		—		TBD	—	TBD	—	TBD	—	TBD
Meatpacking Plaza (44 Ninth Ave)																						Meatpacking Plaza (44 Ninth Ave)	Meatpacking District, Manhattan, NY	April 2019	16.9	%	10,692		(2,746)		7,946		—		8,741	SF	76,919	SF	15	R	July 2021	May 2023

The Park on Fifth		Miami Beach, FL	September 2019	38.9	%	18,098		1,228		19,326		—		482,000	SF	15,000	SF	330	R	April 2020	August 2023
9 DeKalb		Brooklyn, NY	April 2019	4.2	%	5,000		804		5,804		—		450,000	SF	120,000	SF	540	R	March 2019	February 2023
West Hialeah		Miami, FL	December 2019	77.8	%	12,522		1,116		13,638		—		1,400,000	SF	—		1,369	R	December 2019	November 2022
Five Park (500 Alton Road)																						Five Park (500 Alton Road)	Miami Beach, FL	September 2019	38.9	%	18,098		1,461		19,559		—		482,000	SF	15,000	SF	291	R	April 2020	August 2023
9 DeKalb Avenue																						9 DeKalb Avenue	Brooklyn, NY	April 2019	4.2	%	5,000		894		5,894		—		450,000	SF	120,000	SF	540	R	March 2019	February 2023
Natura																						Natura	Miami, FL	December 2019	77.8	%	7,354		5,263		12,617		—		460,000	SF	—		460	R	December 2019	November 2022
Townhome B (11 Beach Street)	Townhome B (11 Beach Street)	TriBeCa, Manhattan, NY	November 2020	46.7	%	2,530		—		2,530		—		4,752	SF	—		1	R	N/A	Completed	Townhome B (11 Beach Street)	TriBeCa, Manhattan, NY	November 2020	46.7	%	(594)		594		—		—		4,752	SF	—		1	R	N/A	Completed
Ritz-Carlton Villas		Miami Beach, FL	December 2020	50.0	%	4,109		—		4,109		—		55,000	SF	—		15	R	October 2020	August 2022
Ritz-Carlton Villas (4701 Meridian Avenue)																						Ritz-Carlton Villas (4701 Meridian Avenue)	Miami Beach, FL	December 2020	50.0	%	4,109		(32)		4,077		—		55,000	SF	—		15	R	October 2020	August 2022

Condominium and Mixed Use Development	Condominium and Mixed Use Development					$	119,393	$	(50,963)	$	68,430	$	—									Condominium and Mixed Use Development					$	105,509	$	(44,023)	$	61,486	$	—

Maryland Portfolio	Maryland Portfolio	Primarily Baltimore County, MD	July 2012	7.6	%	$	(3,626)	$	3,626	$	—	—		N/A		N/A		4,064	R	N/A		Maryland Portfolio	Primarily Baltimore County, MD	July 2012	7.6	%	$	(16,585)	$	16,585	$	—	—		N/A		N/A		245	R	N/A
Apartment Buildings	Apartment Buildings					$	(3,626)	$	3,626	$	—	$	—									Apartment Buildings					$	(16,585)	$	16,585	$	—	$	—

Park Lane Hotel (36 Central Park South)	Park Lane Hotel (36 Central Park South)	Central Park South, Manhattan, NY	November 2013	1.0	%	$	8,682	$	(7,056)	$	1,626	$	—	446,000	SF	—		628	H	N/A		Park Lane Hotel (36 Central Park South)	Central Park South, Manhattan, NY	November 2013	1.0	%	$	8,682	$	(7,229)	$	1,453	$	—	446,000	SF	—		628	H	N/A
215 Chrystie Street(4)	215 Chrystie Street(4)	Lower East Side, Manhattan, NY	December 2012	15.7	%	(2,136)		2,136		—		—		246,000	SF	—		367	H	June 2014	Completed	215 Chrystie Street(4)	Lower East Side, Manhattan, NY	December 2012	17.8	%	(2,136)		1,803		(333)		—		246,000	SF	—		367	H	June 2014	Completed
Coral Beach and Tennis Club	Coral Beach and Tennis Club	Coral Beach, Bermuda	December 2013	49.0	%	6,048		(4,702)		1,346		—		52	Acres	—		101	H	N/A		Coral Beach and Tennis Club	Coral Beach, Bermuda	December 2013	49.0	%	6,048		(4,724)		1,324		—		52	Acres	—		101	H	N/A
Parker New York		Central Park South, Manhattan, NY	July 2019	0.4	%	1,000		(459)		541		—		TBD		—		589 99	H R	May 2020	February 2022
Parker New York (119 W 56th St)																						Parker New York (119 W 56th St)	Midtown, Manhattan, NY	July 2019	0.4	%	1,000		(339)		661		—		470,000	SF	—		587 99	H R	May 2020	December 2022
Hotels	Hotels					$	13,594	$	(10,081)	$	3,513	$	—									Hotels					$	13,594	$	(10,489)	$	3,105	$	—

The Plaza at Harmon Meadow	The Plaza at Harmon Meadow	Secaucus, NJ	March 2015	49.0	%	$	4,200	$	(1,487)	$	2,713	$	—	—	—	219,000	SF	—	—	N/A	N /A	The Plaza at Harmon Meadow	Secaucus, NJ	March 2015	49.0	%	$	4,200	$	(4,200)	$	—	$	—	—	—	219,000	SF	—	—	N/A	N /A
Wynn Las Vegas Retail	Wynn Las Vegas Retail	Las Vegas, NV	December 2016	1.6	%	4,602		2,439		7,041		—		—	—	160,000	SF	—	—	N/A		Wynn Las Vegas Retail	Las Vegas, NV	December 2016	1.6	%	4,519		2,620		7,139		—		—	—	160,000	SF	—	—	N/A
Commercial	Commercial					$	8,802	$	952	$	9,754	$	—									Commercial					$	8,719	$	(1,580)	$	7,139	$	—

Witkoff GP Partners (3)	Witkoff GP Partners (3)	Multiple	March 2017	15.0	%	$	11,154	$	(9,849)	$	1,305	$	—	N/A		N/A		N/A		N/A		Witkoff GP Partners (3)	Multiple	March 2017	15.0	%	$	11,154	$	(9,620)	$	1,534	$	—	N/A		N/A		N/A		N/A
1 QPS Tower (23-10 Queens Plaza South)	1 QPS Tower (23-10 Queens Plaza South)	Long Island City, NY	December 2012	45.4	%	(14,406)		14,406		—		—		N/A		N/A		N/A		March 2014	Completed	1 QPS Tower (23-10 Queens Plaza South)	Long Island City, NY	December 2012	45.4	%	(14,406)		14,406		—		—		N/A		N/A		N/A		March 2014	Completed
Witkoff EB-5 Capital Partners	Witkoff EB-5 Capital Partners	Multiple	September 2018	49.0	%	516		466		982		—		N/A		N/A		N/A		N/A		Witkoff EB-5 Capital Partners	Multiple	September 2018	49.0	%	516		479		995		—		N/A		N/A		N/A		N/A
Biscayne Mortgage																						Biscayne Mortgage	Multiple	April 2021	50.0	%	1,500		—		1,500		—		N/A		N/A		N/A		N/A
Partners Land Services																						Partners Land Services	Multiple	June 2021	50.0	%	100		—		100		—		N/A		N/A		N/A		N/A
Diverse Real Estate Portfolio	Diverse Real Estate Portfolio					$	(2,736)	$	5,023	$	2,287	$	—									Diverse Real Estate Portfolio					$	(1,136)	$	5,265	$	4,129	$	—

Investments in real estate ventures	Investments in real estate ventures					$	135,427	$	(51,443)	$	83,984	$	—									Investments in real estate ventures					$	110,101	$	(34,242)	$	75,859	$	—

Total Carrying Value	Total Carrying Value					$	144,510	$	(44,724)	$	99,786	$	—									Total Carrying Value					$	113,046	$	(27,579)	$	85,467	$	—

5056

(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 ~~$1,305~~$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 applicable

SF - Square feet

H - Hotel rooms

TBD -To be determined

R - Residential Units

R 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 ~~March 31,~~June 30, 2021 were ~~$7,787.~~$8,347. This amount is included in the “Cumulative Earnings (Losses)” column in the table above. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, New Valley capitalized ~~$430~~$1,022 of interest costs and utilized (reversed) ~~$120~~$153 of previously capitalized interest in connection with the recognition of equity in (losses) earnings, gains and liquidations from various ventures.

5157

Liquidity and Capital Resources

Cash, cash equivalents and restricted cash increased by ~~$29,407~~$139,420 and $169,658 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and ~~increased by $95,700 for the three months ended March 31, 2020.~~2020, respectively.

Cash provided from operations was ~~$78,364~~$221,300 and ~~$115,309~~$341,329 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. The decline in cash provided from operations related primarily to higher federal excise tax payments by the tobacco segment in 2021, (ii) the absence of proceeds in ~~the~~ 2021 ~~period~~ associated with the sale of LTS, which occurred in 2020, and (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 ~~increases in~~increased operating income during the ~~three~~six months ended June 30, 2021. The lower excise tax payments in 2020 related to the 90-day postponement of the payment due dates of U.S. excise taxes from March ~~31, 2021.~~1, 2020 to July 1, 2020. This postponement resulted in an increase to the liquidity of our tobacco segment in the second quarter of 2020 of approximately $131,700 and the payments were made in the third quarter of 2020.

Cash used in investing activities was ~~$18,505~~$16,666 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and cash provided by investing activities was ~~$25,968~~$46,575 for the ~~three~~six months ended ~~March 31,~~June 30, 2020. In the first ~~three~~six months of 2021, cash used in investing activities was for the purchase of investment securities of ~~$38,441,~~$74,805, investments in real estate ventures of ~~$8,087,~~$9,902, capital expenditures of ~~$1,931,~~$3,055, an increase in cash surrender value of life insurance policies of ~~$564,~~$1,348, purchase of long-term investments of ~~$5,813,~~$6,963, and an increase in restricted assets of ~~$3.~~$5. This was offset by the sale of investment securities of ~~$10,228,~~$23,477, paydowns of investment securities of ~~$172,~~$302, maturities of investment securities of ~~$13,968,~~$36,461, distributions from investments in real estate ventures of ~~$7,577,~~$11,163, and proceeds from the sale or liquidation of long-term investments of ~~$4,389.~~$8,009. In the first ~~three~~six months of 2020, cash provided by investing activities was from the sale of investment securities of ~~$16,672, pay downs~~$19,555, paydowns of investment securities of ~~$202,~~$415, maturities of investment securities of ~~$15,616,~~$31,574, distributions from investments in real estate ventures of ~~$1,036,~~$5,172, a decrease in restricted assets of ~~$93,~~$87, and proceeds from the sale or liquidation of long-term investments of ~~$19,544.~~$23,407. This was offset by the purchase of investment securities of ~~$15,798,~~$16,867, investments in real estate ventures of ~~$673,~~$3,858, capital expenditures of ~~$4,888,~~$6,242, investments in real estate, net of ~~$340,~~$679, an increase in cash surrender value of life insurance policies of ~~$258,~~$751, and purchase of long-term investments of $5,238.

Cash used in financing activities was ~~$30,452~~$65,214 and ~~$45,577~~$218,246 for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. In the first ~~three~~six months of 2021, cash was used for the dividends ~~and distributions~~ on common stock of ~~$32,273,~~$63,738, repayments of debt of ~~$853,158,~~$856,316, deferred financing costs of ~~$20,000,~~$20,109, and other of ~~$21.~~$51. This was offset by proceeds from debt issuance of $875,000. In the first ~~three~~six months of 2020, cash was used for dividends and distributions on common stock of ~~$32,074,~~$63,478, repayments of debt of ~~$2,638,~~$172,467, distributions to non-controlling interest of $448, and net repayments of debt under the revolver of ~~$10,453,~~$34,952. This was offset by proceeds from issuance of common stock of $52,563, proceeds from debt issuance of ~~$36.~~$531 and other of $5.

We ~~have~~use dividends from our tobacco and real estate subsidiaries, as well as cash and cash equivalents maintained at the corporate level, to fund our 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 $108,900, dividends on our outstanding 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 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 and equity 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 ~~March 31,~~June 30, 2021, we had cash and cash equivalents of ~~$382,387~~$490,390 (including ~~$107,380~~$155,224 of cash at Douglas Elliman and ~~$83,046~~$108,191 of cash at Liggett), investment securities and long-term investments, which were carried at ~~$206,082~~$212,363 (see Note 6 to condensed consolidated financial statements). As of ~~March 31,~~June 30, 2021, our investments in real estate ventures were carried at ~~$83,984~~$76,192 and our investment in real estate, net of accumulated depreciation, was carried at ~~$15,802.~~$9,608.

Limitation of interest expense deductible for income taxes. Since 2018, the amount of interest expense that is deductible in the computation of income tax liability has been limited to a percentage of adjusted taxable income, as defined by applicable law. In 2019 and 2020, the amount of deductible interest expense was limited to 50% of taxable income before interest, depreciation and amortization and, in 2021, the amount will be limited to 30% of taxable income before interest, depreciation and amortization. Beginning in 2022, the amount will be limited to 30% of taxable income before interest. However, interest expense allocable to a designated excepted trade or 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 businesses may qualify. If any interest expense is disallowed, we are permitted to carry forward the disallowed interest expense indefinitely. 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.

5258

Tobacco Litigation. As of ~~March 31,~~June 30, 2021, 16 verdicts were entered in Engle progeny cases against Liggett. Several of these verdicts have been affirmed on appeal and have been satisfied by Liggett. Liggett has paid $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 of more than 5,200 cases, approximately 3938 plaintiffs’ claims remain outstanding. Therefore, we and Liggett may still be subject to periodic adverse judgments that 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. On 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 ~~three~~six months ended ~~March 31,~~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 (“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 aggregate 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 “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.

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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 2029 Indenture, for the most recently ended four full quarters is less than $75,000. The 2029 Indenture also restricts the incurrence of debt if our Leverage Ratio and our Secured Leverage Ratio, each as defined in the 2029 Indenture, exceed 3.0 to 1.0 and 1.5 to 1.0, respectively. Our Leverage Ratio is defined in the 2029 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 2029 Indenture. Our Secured Leverage Ratio is defined in the 2029 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 test and the extent to which we would have satisfied these requirements had the 2029 Indenture been in effect as of ~~March 31,~~June 30, 2021.

Indenture

March 31,
2021

Indenture

June 30,
2021

Covenant

Requirement

Covenant

Requirement

June 30,
2021

Consolidated EBITDA, as defined

$75,000

$364,459

Consolidated EBITDA, as defined

$75,000

$411,838

Leverage ratio, as defined

<3.0 to 1

2.57 to 1

Leverage ratio, as defined

<3.0 to 1

2.10 to 1

Secured leverage ratio, as defined

<1.5 to 1

1.09 to 1

Secured leverage ratio, as defined

<1.5 to 1

0.79 to 1

As of ~~March 31,~~June 30, 2021, we were in compliance with all debt covenants related to the 2029 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 to qualified institutional buyers and non-U.S. persons pursuant to the exemptions from the registration requirements of the Securities Act contained in 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 conduct of our cigarette business and DER Holdings LLC.

The indenture governing our 10.5% Senior Notes due 2026 (the “2026 Indenture”) contains covenants that restrict the payment of dividends and 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 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 2.0 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 4.0 to 1.0. As a result, absent an event of default, we can pay dividends if the Net Leverage ratio is below 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 2.0 to 1.0, and restricts our ability to secure debt to the extent doing so would cause our Secured Leverage Ratio (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 4.0 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 ~~March 31,~~June 30, 2021.

Covenant

Indenture Requirement

~~March 31,~~June 30,
2021

Consolidated EBITDA, as defined

N/A

$~~370,860~~438,502

Fixed charge coverage ratio, as defined

>2.0 to 1

~~3.42~~4.01 to 1

Net leverage ratio, as defined

<4.0 to 1

~~2.02~~1.46 to 1

Secured leverage ratio, as defined

<3.75 to 1

~~2.37~~1.99 to 1

As of ~~March 31,~~June 30, 2021 and December 31, 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

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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 ~~March 31,~~June 30, 2021 and the related Condensed Consolidating Statements of Operations for the ~~three~~six months ended ~~March 31,~~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 ~~March 31,~~June 30, 2021 and December 31, 2020 and the related Summarized Combined Statements of Operations for the ~~three~~six months ended ~~March 31,~~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:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Assets:	Assets:					Assets:
Current assets	Current assets	$	540,370	$	515,082	Current assets	$	605,478	$	515,082
Noncurrent assets	Noncurrent assets	265,649		264,041		Noncurrent assets	262,690		264,041
Intercompany receivables from Nonguarantor Subsidiaries	Intercompany receivables from Nonguarantor Subsidiaries	5,902		2,040		Intercompany receivables from Nonguarantor Subsidiaries	1,835		2,040

Liabilities:	Liabilities:					Liabilities:
Current liabilities	Current liabilities	245,924		193,125		Current liabilities	256,488		193,125
Noncurrent liabilities	Noncurrent liabilities	1,531,591		1,521,293		Noncurrent liabilities	1,529,714		1,521,293

Summarized Combined Statements of Operations:


		Three Months Ended					Six Months Ended
		March 31,					June 30,
		2021		2020			2021		2020
Revenues	Revenues	$	268,486	$	287,188	Revenues	$	598,004	$	599,818
Cost of sales	Cost of sales	164,031		197,290		Cost of sales	370,176		411,357
Operating income	Operating income	75,018		62,673		Operating income	169,776		136,375
Net income	Net income	19,891		51,201		Net income	73,798		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 ~~March 31,~~June 30, 2021, there was no outstanding balance under the Credit Agreement. Availability as determined under the Credit Agreement was approximately ~~$90,000~~$84,600 based on eligible collateral at ~~March 31,~~June 30, 2021. At ~~March 31,~~June 30, 2021, Liggett was in compliance with all covenants under the Credit Agreement; Liggett’s EBITDA, as defined, were ~~$338,799~~$362,521 for the last twelve months ended ~~March 31,~~June 30, 2021.

Anticipated Liquidity Obligations. We and our subsidiaries have significant indebtedness and debt service obligations. As of ~~March 31,~~June 30, 2021, we and our subsidiaries had total outstanding indebtedness of approximately ~~$1,427,400.~~$1,448,900. Of this amount, $875,000 comprised of the outstanding amount under our 5.75% Senior Secured Notes due 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 and real estate segments will generate positive cash flow and will continue to be able to sustain their operations in 2021 without any significant liquidity concerns.

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 ~~$382,400,~~$490,400, investment securities at fair value of approximately ~~$149,100,~~$157,001, long-term investments with an estimated value of approximately ~~$57,100,~~$55,400, including in-transit redemptions, and availability under Liggett’s credit facility of approximately ~~$90,000~~$84,600 at ~~March 31,~~June 30, 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 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 ~~March 31,~~June 30, 2021, approximately ~~$21,900~~$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 ~~March 31,~~June 30, 2021, there was no outstanding balance on the Liggett Credit Facility which also has variable interest rates. As of ~~March 31,~~June 30, 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 $200.

We held debt securities available for sale totaling ~~$102,958~~$108,489 and convertible trading debt securities totaling $2,481 as of ~~March 31,~~June 30, 2021. See Note 6 to our condensed consolidated financial statements. Adverse market conditions could have a significant impact 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 ~~March 31,~~June 30, 2021, we held various investments in equity securities with a total fair value of ~~$84,237,~~$81,565, of which ~~$48,629~~$48,512 represents equity securities at fair value and ~~$35,608~~$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

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 ~~statement~~statements 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 ~~March 31,~~June 30, 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 ~~$8,424.~~$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, 2020, except as set forth below:

Menthol and Flavorings

The Tobacco Products Scientific Advisory Committee (“TPSAC”) completed its review of the use of menthol in cigarettes and issued a report with recommendations to the U.S. Food and Drug 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 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 ~~issue~~propose a ~~proposed~~ rule ~~to prohibit~~prohibiting menthol as a characterizing flavor in cigarettes ~~within~~by the ~~next year.~~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 ~~March 31,~~June 30, 2021, approximately 19% of our cigarette unit sales were menthol flavored. We cannot predict how a tobacco product standard or a restriction on the 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.

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 the 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 Vector Tobacco to a greater degree than other companies in 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 21, 2021, the court granted a 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 FDA on April 30, 2021.

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 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,

•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 ~~breadth~~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,

•the impacts of future income tax legislation in the U.S., including the impact of the markets on our Real Estate segment,

•failure to properly use and protect client and employee information and data, and

•the effect of a material breach of security or other performance issues of any of the 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, 2020 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 ~~first~~second quarter of 2021 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, 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.

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 prohibited 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 impact 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 agency’s highest priorities. The ~~rulemaking~~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 date of publication. For the last twelve months ended ~~March 31,~~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 and results of operations. We cannot predict how a tobacco product standard or a restriction on the 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

As part of the comprehensive plan announced in July 2017, FDA said it would focus on nicotine addiction, with the goal of lowering nicotine levels in combustible cigarettes through a product standard developed through notice and comment ~~rulemaking,~~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 the effect of such regulations. The ~~rulemaking~~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 Liggett or Vector Tobacco, or whether it would impact Liggett and Vector Tobacco to a greater degree than other companies in the industry.

In April 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 substantial equivalence process. Vector Tobacco received a letter from FDA in April 2018 advising that FDA does not intend to conduct further review of Vector 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 applicable cigarettes and other cigarette styles and could have a material adverse effect on us.

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, 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 ~~April~~July 14, 2022.

We cannot predict whether the court will further 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.

It is likely that the TCA and further regulatory efforts by FDA could result in a decrease in cigarette sales in the United States, including sales of Liggett’s and Vector Tobacco’s brands. Compliance and related costs are not possible to predict and depend substantially on the future requirements imposed by FDA under the law. Costs, however, could be substantial and could have a material adverse effect on the companies’ financial condition, results of operations, and cash flows. 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 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 ~~March 31,~~June 30, 2021.

Issuer Purchase of Equity Securities

Our purchase of our common stock during the three months ended June 30, 2021 were as follows:


Period	Total Number of Shares Purchased	Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1 to April 30, 2021	—	$	—	(1)	—	—
May 1 to May 31, 2021	42,029	14.48			—	—
June 1 to June 30, 2021	—	—			—	—
Total	42,029	$	14.48		—	—

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

Item 6. Exhibits:


* ~~4.1~~			Indenture, dated as of January 28, 2021, among Vector Group Ltd., the guarantors named therein and U.S. Bank National Association, as trustee and collateral agent (incorporated by reference to Exhibit 4.1 of Vector’s Form 8-K dated January 28, 2021).

* ~~4.2~~			Pledge Agreement, dated as of January 28, 2021, between VGR Holding LLC and U.S. Bank National Association, as collateral agent (incorporated by reference to Exhibit 4.2 of Vector’s Form 8-K dated January 28, 2021).

* ~~4.3~~			Security Agreement, dated as of January 28, 2021, between Vector Tobacco Inc. and U.S. Bank National Association, as collateral agent (incorporated by reference to Exhibit 4.3 of Vector’s Form 8-K dated January 28, 2021).

* ~~4.4~~			Security Agreement, dated as of January 28, 2021, among Liggett Group LLC, 100 Maple LLC and U.S. Bank National Association, as collateral agent (incorporated by reference to Exhibit 4.4 of Vector’s Form 8-K dated January 28, 2021).

* ~~4.5~~			Second Amended and Restated Intercreditor and Lien Subordination Agreement, dated as of January 28, 2021, among Liggett Group LLC, 100 Maple LLC, U.S. Bank National Association and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.5 of Vector’s Form 8-K dated January 28, 2021).

*10.1			~~Amendment to the Employment Agreement dated January 15, 2021 between~~ Vector Group Ltd. Amended and ~~Richard J. Lampen (incorporated by reference to Exhibit 10.1 in Vector’s Form 8-K dated January 14, 2021).~~Restated 2014 Management Incentive Plan.

10.2			Restricted Shares Award Agreement Pursuant to the Vector Group Ltd. Amended and Restated 2014 Management Incentive Plan.

10.3			Performance-based Restricted Shares Award Agreement Pursuant to the Vector Group Ltd. Amended and Restated 2014 Management Incentive Plan.

*~~10.3~~			Third Amended and Restated Credit Agreement, dated as of January 14, 2015, among Liggett Group LLC, 100 Maple LLC, and, upon its accession thereto pursuant to Amendment No. 4 and Joinder, Vector Tobacco Inc., the lenders party thereto from time to time and Wells Fargo Bank, National Association, as administrative and collateral agent, as amended by Amendment No. 1 to Third Amended and Restated Credit Agreement, dated as of January 27, 2017, Amendment No. 2 to Third Amended and Restated Credit Agreement, dated as of October 30, 2018, Amendment No. 3 to Third Amended and Restated Credit Agreement, dated as of October 31, 2019, and Amendment No. 4 and Joinder to Third Amended and Restated Credit Agreement, dated as of March 22, 2021 (incorporated by reference to Exhibit 10.1 of Vector’s Form 8-K dated March 22, 2021).

*22			List of Subsidiary Guarantors (incorporated by reference to Exhibit 22 of Vector’s Form 10-K for the year ended December 31, 2020).

31.1			Certification of Chief Executive Officer, Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer, Pursuant to Exchange Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1			Material Legal Proceedings.

99.2			Condensed Consolidating Financial Statements of Vector Group Ltd.

101.INS			XBRL 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.SCH			Inline XBRL Taxonomy Extension Schema

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase

104			Cover 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)

		By: /s/ J. Bryant Kirkland III
		J. Bryant Kirkland III
		Senior Vice President, Treasurer and
		Chief Financial Officer
Date:	~~May~~August 6, 2021

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	Three Months Ended March 31,
	2021		2020
Income Statements
Revenue	$	10,287	$	35,134

Other expenses	26,500		42,520
Loss from continuing operations	$	(16,213)	$	(7,386)