Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 20, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | Turning Point Brands, Inc. | |
Entity Central Index Key | 0001290677 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Shell Company | false | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Common Stock, Shares Outstanding | 19,556,158 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Address, State or Province | KY |
Consolidated Balance Sheets (un
Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash | $ 99,406 | $ 95,250 |
Accounts receivable, net of allowances of $256 in 2020 and $280 in 2019 | 4,310 | 6,906 |
Inventories | 69,195 | 70,979 |
Other current assets | 18,868 | 16,115 |
Total current assets | 191,779 | 189,250 |
Property, plant, and equipment, net | 13,404 | 13,816 |
Right of use assets | 13,036 | 12,130 |
Deferred financing costs, net | 860 | 890 |
Goodwill | 154,282 | 154,282 |
Other intangible assets, net | 33,044 | 33,469 |
Master Settlement Agreement (MSA) escrow deposits | 32,074 | 32,074 |
Other assets | 10,841 | 10,673 |
Total assets | 449,320 | 446,584 |
Current liabilities: | ||
Accounts payable | 17,348 | 14,126 |
Accrued liabilities | 28,754 | 26,520 |
Current portion of long-term debt | 12,000 | 15,240 |
Revolving credit facility | 0 | 0 |
Total current liabilities | 58,102 | 55,886 |
Notes payable and long-term debt | 267,977 | 268,951 |
Deferred income taxes | 1,495 | 1,572 |
Lease liabilities | 11,673 | 11,067 |
Other long-term liabilities | 4,762 | 2,523 |
Total liabilities | 344,009 | 339,999 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, $0.01 par value; authorized shares 40,000,000; issued and outstanding shares -0- | 0 | 0 |
Additional paid-in capital | 126,151 | 125,469 |
Cost of repurchased common stock (134,130 shares at March 31, 2020 and 0 shares at December 31, 2019) | (2,627) | 0 |
Accumulated other comprehensive loss | (5,379) | (3,773) |
Accumulated deficit | (13,031) | (15,308) |
Total stockholders' equity | 105,311 | 106,585 |
Total liabilities and stockholders' equity | 449,320 | 446,584 |
Common Stock, Voting [Member] | ||
Stockholders' equity: | ||
Common stock | 197 | 197 |
Common Stock, Nonvoting [Member] | ||
Stockholders' equity: | ||
Common stock | $ 0 | $ 0 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Accounts receivable, allowance | $ 256 | $ 280 |
Stockholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 40,000,000 | 40,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Repurchased common stock (in shares) | 134,130 | 0 |
Common Stock, Voting [Member] | ||
Stockholders' equity: | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 190,000,000 | 190,000,000 |
Common stock, shares issued (in shares) | 19,723,080 | 19,680,673 |
Common stock, shares outstanding (in shares) | 19,588,950 | 19,680,673 |
Common Stock, Nonvoting [Member] | ||
Stockholders' equity: | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Common stock, shares issued (in shares) | 0 | 0 |
Common stock, shares outstanding (in shares) | 0 | 0 |
Consolidated Statements of Inco
Consolidated Statements of Income (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Consolidated Statements of Income (unaudited) [Abstract] | ||
Net sales | $ 90,689 | $ 91,628 |
Cost of sales | 49,258 | 51,164 |
Gross profit | 41,431 | 40,464 |
Selling, general, and administrative expenses | 32,394 | 28,429 |
Operating income | 9,037 | 12,035 |
Interest expense, net | 4,994 | 3,856 |
Investment income | (91) | (144) |
Net periodic income, excluding service cost | (87) | (11) |
Income before income taxes | 4,221 | 8,334 |
Income tax expense | 946 | 1,774 |
Consolidated net income | $ 3,275 | $ 6,560 |
Basic income per common share: | ||
Consolidated net income (in dollars per share) | $ 0.17 | $ 0.34 |
Diluted income per common share: | ||
Consolidated net income (in dollars per share) | $ 0.16 | $ 0.33 |
Weighted average common shares outstanding: | ||
Basic (in shares) | 19,689,446 | 19,559,596 |
Diluted (in shares) | 20,106,800 | 20,045,964 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Consolidated Statements of Comprehensive Income (unaudited) [Abstract] | ||
Consolidated net income | $ 3,275 | $ 6,560 |
Other comprehensive income (loss), net of tax | ||
Amortization of unrealized pension and postretirement gain (loss), net of tax of $2 in 2020 and $1 in 2019 | 9 | (4) |
Unrealized gain on investments, net of tax of $0 in 2020 and $93 in 2019 | 0 | 402 |
Unrealized loss on interest rate swaps, net of tax of $624 in 2020 and $182 in 2019 | (1,615) | (476) |
Other comprehensive income (loss), net of tax | (1,606) | (78) |
Consolidated comprehensive income | $ 1,669 | $ 6,482 |
Consolidated Statements of Co_2
Consolidated Statements of Comprehensive Income (unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Other comprehensive income (loss), net of tax | ||
Amortization of unrealized pension and postretirement gain (loss), tax | $ 2 | $ 1 |
Unrealized gain on investments, tax | 0 | 93 |
Unrealized loss on interest rate swaps, tax | $ 624 | $ 182 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Consolidated net income | $ 3,275 | $ 6,560 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Loss on sale of property, plant, and equipment | 0 | 23 |
Depreciation expense | 851 | 531 |
Amortization of other intangible assets | 425 | 359 |
Amortization of debt discount and deferred financing costs | 2,237 | 237 |
Deferred income taxes | 545 | (29) |
Stock compensation expense | 455 | 466 |
Noncash lease expense | 13 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,596 | (1,726) |
Inventories | 1,784 | 366 |
Other current assets | (2,420) | 2,984 |
Other assets | (130) | (427) |
Accounts payable | 3,210 | 8,229 |
Accrued postretirement liabilities | (27) | (9) |
Accrued liabilities and other | 1,913 | (3,539) |
Net cash provided by operating activities | 14,727 | 14,025 |
Cash flows from investing activities: | ||
Capital expenditures | (877) | (886) |
Restricted cash, MSA escrow deposits | 0 | 1,702 |
Net cash provided by (used in) investing activities | (877) | 816 |
Cash flows from financing activities: | ||
Payments of 2018 revolving credit facility | 0 | (12,000) |
Payment of dividends | (886) | (880) |
Payments of financing costs | (168) | 0 |
Exercise of options | 227 | 187 |
Redemption of options | 0 | (12) |
Common stock repurchased | (2,627) | 0 |
Net cash used in financing activities | (9,694) | (14,705) |
Net increase in cash | 4,156 | 136 |
Cash, beginning of period: | ||
Unrestricted | 95,250 | 3,306 |
Restricted | 32,074 | 2,361 |
Total cash at beginning of period | 127,324 | 5,667 |
Cash, end of period: | ||
Unrestricted | 99,406 | 1,741 |
Restricted | 32,074 | 4,062 |
Total cash at end of period | 131,480 | 5,803 |
Supplemental schedule of noncash financing activities: | ||
Accrued expenses incurred for financing costs | 13 | 0 |
Dividends declared not paid | 998 | 887 |
2018 First Lien Term Loan [Member] | ||
Cash flows from financing activities: | ||
Payments of term loan | (2,000) | (2,000) |
Payments of financing costs | (200) | |
IVG Note [Member] | ||
Cash flows from financing activities: | ||
Payments of term loan | $ (4,240) | $ 0 |
Consolidated Statements of Chan
Consolidated Statements of Change in Stockholders' Deficit (unaudited) - USD ($) $ in Thousands | Common Stock [Member]Voting [Member] | Additional Paid-In Capital [Member] | Cost of Repurchased Common Stock [Member] | Accumulated Other Comprehensive Loss [Member] | Accumulated Deficit [Member] | Total |
Beginning balance at Dec. 31, 2018 | $ 196 | $ 110,466 | $ 0 | $ (2,536) | $ (25,503) | $ 82,623 |
Beginning balance (in shares) at Dec. 31, 2018 | 19,553,857 | |||||
Unrecognized pension and postretirement cost adjustment, net of tax | $ 0 | 0 | 0 | (4) | 0 | (4) |
Unrealized loss on MSA investments, net of tax | 0 | 0 | 0 | 402 | 0 | 402 |
Unrealized loss on interest rate swaps, net of tax | 0 | 0 | 0 | (476) | 0 | (476) |
Stock compensation expense | 0 | 449 | 0 | 0 | 0 | 449 |
Restricted stock forfeitures | $ 0 | (1) | 0 | 0 | 0 | (1) |
Restricted stock forfeitures (in shares) | (47) | |||||
Exercise of options | $ 0 | 187 | 0 | 0 | 0 | 187 |
Exercise of options (in shares) | 22,588 | |||||
Redemption of options | $ 0 | (12) | 0 | 0 | 0 | (12) |
Dividends | 0 | 0 | 0 | 0 | (887) | (887) |
Net income | 0 | 0 | 0 | 0 | 6,560 | 6,560 |
Ending balance at Mar. 31, 2019 | $ 196 | 111,089 | 0 | (2,614) | (19,830) | 88,841 |
Ending balance (in shares) at Mar. 31, 2019 | 19,576,398 | |||||
Beginning balance at Dec. 31, 2018 | $ 196 | 110,466 | 0 | (2,536) | (25,503) | 82,623 |
Beginning balance (in shares) at Dec. 31, 2018 | 19,553,857 | |||||
Ending balance at Dec. 31, 2019 | $ 197 | 125,469 | 0 | (3,773) | (15,308) | 106,585 |
Ending balance (in shares) at Dec. 31, 2019 | 19,680,673 | |||||
Unrecognized pension and postretirement cost adjustment, net of tax | $ 0 | 0 | 0 | 9 | 0 | 9 |
Unrealized loss on interest rate swaps, net of tax | 0 | 0 | 0 | (1,615) | 0 | (1,615) |
Stock compensation expense | 0 | 455 | 0 | 0 | 0 | 455 |
Exercise of options | $ 0 | 227 | 0 | 0 | 0 | 227 |
Exercise of options (in shares) | 42,407 | |||||
Cost of repurchased common stock | $ 0 | 0 | $ (2,627) | 0 | 0 | $ (2,627) |
Cost of repurchased common stock (in shares) | (134,130) | (134,130) | ||||
Dividends | 0 | 0 | $ 0 | 0 | (998) | $ (998) |
Net income | 0 | 0 | 0 | 0 | 3,275 | 3,275 |
Ending balance at Mar. 31, 2020 | $ 197 | $ 126,151 | $ (2,627) | $ (5,379) | $ (13,031) | $ 105,311 |
Ending balance (in shares) at Mar. 31, 2020 | 19,588,950 |
Consolidated Statements of Ch_2
Consolidated Statements of Change in Stockholders' Deficit (unaudited) (Parenthetical) $ in Thousands | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Consolidated Statements of Change in Stockholders' Deficit (unaudited) [Abstract] | |
Unrecognized pension and postretirement cost adjustment, tax | $ 1 |
Unrealized gain (loss) on MSA investments, tax | 93 |
Unrealized loss on interest rate swaps, tax | $ 182 |
Organizations and Basis of Pres
Organizations and Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
Organizations and Basis of Presentation [Abstract] | |
Organizations and Basis of Presentation | Note 1. Organizations and Basis of Presentation Organizations Turning Point Brands, Inc. (the “Company”), is a holding company which owns North Atlantic Trading Company, Inc. (“NATC”) and its subsidiaries, Turning Point Brands, LLC (“TPLLC”), and its subsidiaries, and Turning Point Brands (Canada), Inc. (“TPBC”). Except where the context indicates otherwise, references to the Company include the Company; NATC and its subsidiaries National Tobacco Company, L.P. (“NTC”), National Tobacco Finance, LLC (“NTFLLC”), North Atlantic Operating Company, Inc. (“NAOC”), North Atlantic Cigarette Company, Inc. (“NACC”), and RBJ Sales, Inc. (“RBJ”); TPLLC and its subsidiaries Intrepid Brands, LLC (“Intrepid”), TPB Beast, LLC (“VaporBeast”), TPB Shark, LLC, and its subsidiaries (collectively, “Vapor Shark”), TPB International, LLC and its subsidiaries (collectively, “IVG”), Nu-X Ventures LLC (“Nu-X”), Nu-Tech Holdings LLC (“Nu-Tech”), and South Beach Holdings, LLC (“South Beach”); and TPBC. Basis of Presentation The accompanying unaudited interim, consolidated financial statements have been prepared in accordance with the accounting practices described in the Company’s audited, consolidated financial statements as of and for the year ended December 31, 2019. Certain prior year amounts have been reclassified to conform to the current year’s presentation. The changes did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows in any of the periods presented. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions have been eliminated. Revenue Recognition The Company recognizes revenues in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which includes excise taxes and shipping and handling charges billed to customers, net of cash discounts for prompt payment, sales returns and incentives, upon delivery of goods to the customer – at which time the Company’s performance obligation is satisfied - at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five-step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. The Company excludes from the transaction price, sales taxes and value-added taxes imposed at the time of sale (which do not include excise taxes on smokeless tobacco, cigars or vaping products billed to customers). The Company records an allowance for sales returns, based principally on historical volume and return rates, which is included in accrued liabilities on the consolidated balance sheets. The Company records sales incentives, which consist of consumer incentives and trade promotion activities, as a reduction in revenues (a portion of which is based on amounts estimated as being due to wholesalers, retailers and consumers at the end of the period) based principally on historical volume and utilization rates. Expected payments for sales incentives are included in accrued liabilities on the consolidated balance sheets. A further requirement of ASU 2014-09 is for entities to Shipping Costs The Company $4.3 million for the three months ending , 2020 and 2019, respectively. Fair Value GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy under GAAP are described below: • Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date. • Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Derivative Instruments Foreign Currency Forward Contracts: Interest Rate Swap Agreements: Risks and Uncertainties Manufacturers and sellers of tobacco products are subject to regulation at the federal, state, and local levels. Such regulations include, among others, labeling requirements, limitations on advertising, and prohibition of sales to minors. The tobacco industry is likely to continue to be heavily regulated. There can be no assurance as to the ultimate content, timing, or effect of any regulation of tobacco products by any federal, state, or local legislative or regulatory body, nor can there be any assurance that any such legislation or regulation would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. Recently, several state governors have reacted to perceived issues around nicotine vapor products by unilaterally, without regard to the legislative process, proclaiming bans on vapor products, particularly those that are flavored. Many of these executive actions have been challenged and temporarily restrained, but no assurance can be given that such state or local flavor bans will not be enacted or ultimately upheld. Indeed, in a number of states, targeted flavor bans, particularly with regard to vapor products, have been enacted legislatively. Depending on the number and location of such bans, that legislation or regulation could have a material adverse effect on the Company’s financial position, results of operations or cash flows. Food and Drug Administration (“FDA”) continues to consider various restrictive regulations around our products, including targeted flavor bans; however, the details, timing, and ultimate implementation of such measures remain unclear. The tobacco industry has experienced, and is experiencing, significant product liability litigation. Most tobacco liability lawsuits have been brought against manufacturers and sellers of cigarettes for injuries allegedly caused by smoking or exposure to smoke. However, several lawsuits have been brought against manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. Typically, such claims assert that use of smokeless products is addictive and causes oral cancer. Additionally, several lawsuits have been brought against manufacturers and distributors of NewGen products due to malfunctioning devices. There can be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. Master Settlement Agreement (MSA): The Company has chosen to invest a portion of the MSA escrow, from time to time, in U.S. Government securities including TIPS, Treasury Notes, and Treasury Bonds. These investments are classified as available-for-sale and carried at fair value. Realized losses are prohibited under the MSA; any investment in an unrealized loss position will be held until the value is recovered, or until maturity. All monies at March 31, 2020 and December 31, 2019 were held in money market savings accounts. The following shows the amount of deposits by sales year for the MSA escrow account: Deposits as of Sales Year March 31, 2020 December 31, 2019 1999 $ 211 $ 211 2000 1,017 1,017 2001 1,673 1,673 2002 2,271 2,271 2003 4,249 4,249 2004 3,714 3,714 2005 4,553 4,553 2006 3,847 3,847 2007 4,167 4,167 2008 3,364 3,364 2009 1,619 1,619 2010 406 406 2011 193 193 2012 199 199 2013 173 173 2014 143 143 2015 101 101 2016 91 91 2017 83 83 Total $ 32,074 $ 32,074 Food and Drug Administration: Under the TCA, tobacco product user fees are assessed on six classes of regulated tobacco products. The user fees are computed using a methodology similar to the methodology used by the U.S Department of Agriculture to compute the Tobacco Transition Payment Program (“TTPP,” also known as the “Tobacco Buyout”) assessment. First, the total, annual, congressionally established user fee assessment is allocated among the various classes of tobacco products using the federal excise tax weighted market share of tobacco products subject to regulation. Then, the assessment for each class of tobacco products is divided among individual manufacturers and importers. In August 2016, the FDA’s regulatory authority under the TCA was extended to all tobacco products not previously covered, including: (i) certain NewGen products (such as electronic cigarettes, vaporizers and e-liquids) and their components or parts (such as tanks, coils and batteries); (ii) cigars and their components or parts (such as cigar tobacco); (iii) pipe tobacco; (iv) hookah products; and (v) any other tobacco product “newly deemed” by the FDA. These “deeming regulations” apply to all products made or derived from tobacco intended for human consumption, but excluding accessories of tobacco products (such as lighters). Accordingly, the FDA has since regulated our pipe tobacco, cigar, and cigar wrap products as well as our vapor products containing tobacco-derived nicotine and products intended or reasonably expected to be used to consume such e-liquids. Under the deeming regulations, the FDA has responsibility for conducting premarket review of “new tobacco products”—defined as those products not commercially marketed in the United States as of February 15, 2007. There are three pathways for obtaining premarket authorization, including submission of a premarket tobacco product application (“PMTA”). When the FDA initially issued the deeming regulations, it recognized that many products in the deemed categories that were already on the market qualified as “new tobacco products” and lacked a marketing order. In August 2017, the FDA issued an authorization until specified deadlines had passed. Under the August 2017 Guidance, compliance dates vary depending upon the type of application submitted, but all newly-deemed products require an application no later than August 8, 2021, for “combustible” products (e.g. cigar and pipe), and August 8, 2022, for “non-combustible” products (e.g. vapor products) with the exception of “grandfathered” products (products in commerce as of February 15, 2007) which are already authorized. On March 27, 2018, several public health organizations filed a lawsuit (the “Maryland Lawsuit”) challenging the August 2017 Guidance. The plaintiffs asserted, among other arguments, that the modification to the deeming regulations included in the August 2017 Guidance conflicts with the TCA and exceeds FDA’s statutory authority. The plaintiffs also expressed concern that the August 2017 Guidance allows vapor products to remain marketed for a significant period of time without required premarket review. The court found in favor of the plaintiffs in May 2019 and vacated the August 2017 Guidance. On July 12, 2019, the court issued its remedy order (the “Remedy Order”). Specifically, the court ordered that: (1) for all deemed new tobacco products, marketers must file applications within 10 months of the Remedy Order to continue marketing such products; (2) such a product may remain on the market pending FDA review of a timely filed application for a period not to exceed one year from the date of the application’s submission; (3) in its discretion, the FDA may enforce the premarket review requirements against such products for which marketers do not file applications within 10 months; and (4) the FDA will have the ability to exempt deemed new tobacco products from these application submission requirements for good cause, on a case-by-case basis. On October 24, 2019, FDA filed a Notice of Appeal from the Remedy Order and other actions adverse to FDA. The court-ordered modification to the compliance policy remains subject to change as a result of potential appeals or litigation brought or pending in other venues. In January 2020, the FDA indicated it intended to maintain this deadline irrespective of the outcome of the pending appeal in the Maryland Lawsuit. On March 30, 2020, however, citing the impacts of the worldwide COVID-19 pandemic on both FDA and industry, FDA requested a modification to the Remedy Order that would extend the May 12, 2020, deadline for filing premarket applications by 120 days to September 9, 2020. After several procedural steps, the Remedy Order was modified on April 22, 2020 to reflect the new deadline, and since then, FDA has stated it will update relevant Guidance documents to reflect this new timeline. On September 11, 2019, President Donald Trump and the Department of Health and Human Services Secretary, Alex Azar, indicated FDA would adopt a regulatory policy restricting all flavors in vapor products. In January 2020, FDA issued a Guidance document (the “January 2020 Guidance”) that stated it would be prioritizing enforcement of several categories of electronic nicotine delivery systems (“ENDS”) products: (1) flavored, cartridge-based ENDS products (other than tobacco- or menthol-flavored ENDS products); (2) ENDS products for which the manufacturer has failed to take (or is failing to take) adequate measures to prevent minors’ access; (3) ENDS products targeted to minors or whose marketing is likely to promote the use of ENDS by minors; and (4) ENDS products offered for sale after the May 12, 2020, premarket application deadline for which the manufacturer has not submitted a premarket application. The policy outlined several factors the agency would consider in its enforcement of flavored cigars going forward but did not drastically restrict those products as it had considered in its March 2019 Guidance proposal. The FDA’s policy on these and other regulated products may change or expand over time in ways not yet known and may significantly impact our products or our PMTA filings. For example, as noted above, the FDA recently acted to modify the deadline for premarket applications from May 12, 2020, to September 9, 2020. As a result of the implementation of the modified Remedy Order, we would not be permitted to continue marketing our existing line of vapor products that the FDA regulates as tobacco products past September 9, 2020, unless we file an application for each such product by that date. We expect to be able to make appropriate PMTA applications by the deadlines and to supplement and complete the applications within FDA’s discretionary timeline. A successful PMTA must demonstrate that the subject product is “appropriate for the protection of public health,” taking into account the effect of the marketing of the product on all sub-populations. On September 25, 2019, FDA published a proposed rule outlining certain required elements of PMTA filings. This rule is not yet final, and its requirements may shift before being finalized. We believe we have products that meet the requisite standard and that we will be able to efficiently produce satisfactory PMTA filings. However, there is no assurance that the FDA’s guidance or ultimate regulation will not change, the Remedy Order will not be further altered or that unforeseen circumstances will not arise that prevent us from filing applications or otherwise increase the amount of time and money we are required to spend to successfully file all necessary PMTAs. Even if we successfully file all of our PMTAs in a timely manner, no assurance can be given that the applications will ultimately be successful. Given the shorter time frame mandated by the Remedy Order, which if not amended or successfully appealed, may result in the prioritization of meeting requisite deadlines by selecting high priority SKUs in our inventory position, and future revenues may be adversely impacted. In addition, we currently distribute many third-party manufactured vapor products for which we will be completely dependent on the manufacturer complying with the premarket filing requirements. There can be no assurances that some products that we currently distribute will be able to be sold to end consumers after September 2020. While we will take measures to pursue regulatory compliance for our own privately-branded or proprietary vape products that compete with these third-party products, there is no assurance that such proprietary products would be as successful in the marketplace or can fully displace third-party products that are currently being distributed by us, which could adversely affect our results of operations and liquidity. Recent Accounting Pronouncements Adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. The guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-15 effective January 1, 2020 . Recent Accounting Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC 740, Income Taxes |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2020 | |
Acquisitions [Abstract] | |
Acquisitions | Note 3. Acquisitions Solace Technologies In July 2019, the Company purchased the assets of E-Vape 12, Inc and Solace Technologies LLC (“Solace”) for $9.4 million in total consideration, comprised of $7.7 million in cash, $1.1 million earn-out fair value, and $0.5 million holdback for 18 months, which was adjusted by $0.2 million for a working capital deficiency. The earn-out consists of 44,295 shares of the Company’s common stock to be issued to the former owners upon the achievement of certain annual milestones. Immediately following the acquisition, 88,582 performance based restricted stock units with a fair value of $4.62 million were issued to former owners who became employees. See Note 15, “Share Incentive Plans”, for further details. Solace is an innovative product development company that has grown from the creator of one of the leading vape juice brands in the industry into a leader of alternative ingredients product development. The Company intends to incorporate Solace’s innovative products as well as the legacy vapor products into our Nu-X development engine. As of March 31, 2020, the Company had not completed the accounting for the acquisition. The following purchase price and goodwill and other intangibles are based on the excess of the acquisition price over the estimated fair value of the tangible assets acquired and are based on management’s preliminary estimates: Total consideration transferred $ 9,405 Adjustments to consideration transferred: Cash acquired (45 ) Working capital (235 ) Adjusted consideration transferred 9,125 Assets acquired: Working capital (primarily AR and inventory) 1,132 Fixed assets and Other long term assets 414 Intangible assets 1,352 Other liabilities (209 ) Net assets acquired $ 2,689 Goodwill $ 6,436 The goodwill of $6.4 million consists of the synergies and scale expected from combining the operations and is currently deductible for tax purposes. |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments [Abstract] | |
Derivative Instruments | Note 4. Derivative Instruments Foreign Currency The Company’s policy is to manage the risks associated with foreign exchange rate movements. The policy allows hedging up to 100% of its anticipated purchases of inventory over a forward period that will not exceed 12 rolling and consecutive months. The Company may, from time to time, hedge currency for non-inventory purchases, e.g. Interest Rate Swaps The Company’s policy is to manage interest rate risk by reducing the volatility of future cash flows associated with debt instruments bearing interest at variable rates. In March 2018, the Company executed various interest rate swap agreements for a notional amount of $70 million with an expiration of December 2022. The swap agreements fix LIBOR at 2.755%. The swap agreements met the hedge accounting requirements; thus, any change in fair value is recorded to other comprehensive income. The Company uses the Shortcut Method to account for the swap agreements. The Shortcut Method assumes the hedge to be perfectly effective; thus, there is no ineffectiveness to be recorded in earnings. The swap agreements’ fair values at March 31, 2020, and December 31, 2019, resulted in a liability of $4.8 million and $2.5 million, respectively, included in other long-term liabilities. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value of Financial Instruments [Abstract] | |
Fair Value of Financial Instruments | Note 5. Fair Value of Financial Instruments The estimated fair value amounts have been determined by the Company using the methods and assumptions described below. However, considerable judgment is required to interpret market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash and Cash Equivalents Cash and cash equivalents are, by definition, short-term. Thus, the carrying amount is a reasonable estimate of fair value. Accounts Receivable The fair value of accounts receivable approximates their carrying value due to their short-term nature. 2018 Revolving Credit Facility The fair value of the 2018 Revolving Credit Facility approximates its carrying value as the interest rate fluctuates with changes in market rates. Long-Term Debt The Company’s 2018 Credit Facility bears interest at variable rates that fluctuate with market rates, the carrying values of the long-term debt instruments approximate their respective fair values. As of March 31, 2020, the fair value of the 2018 First Lien Term Loan approximated $144.0 million. As of December 31, 2019, the fair value of the 2018 First Lien Term Loan approximated $146.0 million. The Convertible Senior Notes bear interest at a rate of 2.50% per year and the fair value approximated $141.6 million, with a carrying value of $172.5 million as of March 31, 2020. As of December 31, 2019, the fair value of the Convertible Senior Notes approximated $140.1 million, with a carrying value of $172.5 million. See Note 11, “Notes Payable and Long-Term Debt”, for further information regarding the Company’s long-term debt. Interest Rate Swaps The Company had swap contracts for a total notional amount of $70 million at March 31, 2020 and December 31, 2019. The fair values of the swap contracts are based upon quoted market prices and resulted in a liability of $4.8 million and $2.5 million as of March 31, 2020 and December 31, 2019, respectively. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2020 | |
Inventories [Abstract] | |
Inventories | Note 6. Inventories The components of inventories are as follows: March 31, 2020 December 31, 2019 Raw materials and work in process $ 6,574 $ 7,050 Leaf tobacco 36,900 32,763 Finished goods - Smokeless products 5,907 5,680 Finished goods - Smoking products 11,081 13,138 Finished goods - NewGen products 13,535 17,111 Other 950 989 Gross Inventory 74,947 76,731 LIFO reserve (5,752 ) (5,752 ) Net Inventory $ 69,195 $ 70,979 The inventory valuation allowance was $19.2 million and $21.5 million as of March 31 |
Other Current Assets
Other Current Assets | 3 Months Ended |
Mar. 31, 2020 | |
Other Current Assets [Abstract] | |
Other Current Assets | Note 7. Other Current Assets Other current assets consists of: March 31, 2020 December 31, 2019 Inventory deposits $ 5,616 $ 4,012 Prepaid taxes 3,250 3,673 Other 10,002 8,430 Total $ 18,868 $ 16,115 |
Property, Plant, and Equipment
Property, Plant, and Equipment | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Note 8. Property, Plant, and Equipment Property, plant, and equipment consists of: March 31, 2020 December 31, 2019 Land $ 22 $ 22 Buildings and improvements 2,655 2,655 Leasehold improvements 2,511 2,567 Machinery and equipment 15,087 14,516 Furniture and fixtures 8,307 8,502 Gross property, plant and equipment 28,582 28,262 Accumulated depreciation (15,178 ) (14,446 ) Net property, plant and equipment $ 13,404 $ 13,816 |
Other Assets
Other Assets | 3 Months Ended |
Mar. 31, 2020 | |
Other Assets [Abstract] | |
Other Assets | Note 9. Other Assets Other assets consists of: March 31, 2020 December 31, 2019 Equity investments $ 5,421 $ 5,421 Pension assets 1,753 1,686 Other 3,667 3,566 Total $ 10,841 $ 10,673 In July 2019, the Company obtained a 30% stake in Canadian distribution entity, ReCreation Marketing (“ReCreation”), for $1.0 million paid at closing. The Company also received options to acquire up to a 50% ownership position in ReCreation. |
Accrued Liabilities
Accrued Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Liabilities [Abstract] | |
Accrued Liabilities | Note 10. Accrued Liabilities Accrued liabilities consists of: March 31, 2020 December 31, 2019 Accrued payroll and related items $ 6,144 $ 5,267 Customer returns and allowances 5,537 6,160 Taxes payable 1,508 705 Lease liabilities 2,531 2,218 Accrued interest 928 1,909 Other 12,106 10,261 Total $ 28,754 $ 26,520 |
Notes Payable and Long-Term Deb
Notes Payable and Long-Term Debt | 3 Months Ended |
Mar. 31, 2020 | |
Notes Payable and Long-Term Debt [Abstract] | |
Notes Payable and Long-Term Debt | Note 11. Notes Payable and Long-Term Debt Notes payable and long-term debt consists of the following in order of preference: March 31, 2020 December 31, 2019 2018 First Lien Term Loan $ 144,000 $ 146,000 Convertible Senior Notes 172,500 172,500 Note payable - IVG - 4,240 Gross notes payable and long-term debt 316,500 322,740 Less deferred finance charges (6,190 ) (6,466 ) Less debt discount (30,333 ) (32,083 ) Less current maturities (12,000 ) (15,240 ) Net notes payable and long-term debt $ 267,977 $ 268,951 2018 Credit Facility On March 7, 2018, the Company entered into a $250 million credit facility consisting of a $160 million 2018 First Lien Term Loan with Fifth Third Bank, as administrative agent, and other lenders, and a $50 million 2018 Revolving Credit Facility (collectively, the “2018 First Lien Credit Facility”) in addition to a $40 million 2018 Second Lien Term Loan ( the “2018 Second Lien Credit Facility,” and, together with the 2018 First Lien Credit Facility, the “2018 Credit Facility” The 2018 Credit Facility contains customary events of default including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, and change in control defaults. The 2018 Credit Facility also contains certain negative covenants customary for facilities of these types including covenants that, subject to exceptions described in the 2018 Credit Facility, restrict the ability of the Company and its subsidiary guarantors: (i) to pledge assets, (ii) to incur additional indebtedness, (iii) to pay dividends, (iv) to make distributions, (v) to sell assets, and (vi) to make investments. See Note 19, “Dividends and Share Repurchase”, for further information regarding dividend restrictions. 2018 First Lien Credit Facility: March 31, 2020 March 31, 2020 March 31, 2020 2018 Second Lien Credit Facility: Convertible Senior Notes In July 2019, the Company closed an offering of $172.5 million in aggregate principal amount of our 2.50% Convertible Senior Notes due July 15, 2024 (the “Convertible Senior Notes”). The Convertible Senior Notes bear interest at a rate of 2.50% per year, payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2020. The Convertible Senior Notes will mature on July 15, 2024, unless earlier repurchased, redeemed or converted. The Convertible Senior Notes are senior unsecured obligations of the Company. The Convertible Senior Notes are convertible into approximately 3,202,808 shares of our voting common stock under certain circumstances prior to maturity at a conversion rate of 18.567 shares per $1,000 principal amount of the Convertible Senior Notes, which represents a conversion price of approximately $53.86 per share, subject to adjustment under certain conditions, but will not be adjusted for any accrued and unpaid interest. Upon conversion, the Company may pay cash, shares of common stock or a combination of cash and stock, as determined by the Company at its discretion. The conditions required to allow the holders to convert their Convertible Senior Notes were not met as of March 31, 2020. Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability and equity components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. Accordingly, in accounting for the issuance of the Convertible Senior Notes, the Company separated the Convertible Senior Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component, which is recognized as a debt discount, represents the difference between the proceeds from the issuance of the Convertible Senior Notes and the fair value of the liability component of the Convertible Senior Notes. The excess of the principal amount of the liability component over its carrying amount (“debt discount”), $35.0 million, will be amortized to interest expense using an effective interest rate of 7.5% over the expected life of the Convertible Senior Notes. The equity component is not remeasured as long as it continues to meet the criteria for equity classification. Interest expense includes $1.8 million of amortization for the three months ended March 31, 2020. In accounting for the issuance costs related to the issuance of the Convertible Senior Notes, the Company allocated the total amount incurred to the liability and equity components based on their relative fair values. Debt issuance costs attributable to the liability component are amortized to interest expense using the effective interest method over the expected life of the Convertible Senior Notes, $4.7 million, and the debt issuance costs attributable to the equity component, $1.2 million, are netted with the equity component of stockholders’ equity (deficit). In connection with the Convertible Senior Notes offering, the Company entered into privately negotiated capped call transactions with certain financial institutions. The capped call transactions have a strike price of $53.86 per and a cap price of $82.86 per, and are exercisable when, and if, the Convertible Senior Notes are converted. The Company paid $20.53 million for these capped calls and charged that amount to additional paid-in capital. Note Payable – IVG In September 2018, the Company issued a note payable to IVG’s former shareholders (“IVG Note”). The IVG Note was $4.0 million principal with 6.0% interest compounding annually and matured on March 5, 2020. All principal and accrued and unpaid interest under the IVG Note were subject to indemnification obligations of the sellers pursuant to the International Vapor Group Stock Purchase Agreement dated as of September 5, 2018. The carrying amount of the IVG Note, $4.2 million, was deposited into an escrow account pending agreement with the sellers of any indemnification obligations. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | Note 12. Leases As of January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) . Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term. The components of lease expense consisted of the following: Three Months Ended March 31, 2020 2019 Operating lease cost Cost of sales $ 233 $ 192 Selling, general and administrative 398 555 Variable lease cost (1) 312 245 Short-term lease cost 83 54 Sublease income (30 ) (30 ) Total $ 996 $ 1,016 (1) Variable lease cost includes elements of a contract that do not represent a good or service but for which the lessee is responsible for paying. March 31, 2020 December 31, 2019 Assets: Right of use assets $ 13,036 $ 12,130 Total lease assets $ 13,036 $ 12,130 Liabilities: Current lease liabilities (2) $ 2,531 $ 2,218 Long-term lease liabilities 11,673 11,067 Total lease liabilities $ 14,204 $ 13,285 (2) Reported within accrued liabilities on the balance sheet As of March 31, 2020 2019 Weighted-average remaining lease term - operating leases 7.8 years 9.0 years Weighted-average discount rate - operating leases 5.84 % 6.49 % Nearly all the lease contracts for the Company do not provide a readily determinable implicit rate. For these contracts, the Company estimated the incremental borrowing rate based on information available upon adoption of ASU 2016-02. The Company applied a consistent method in periods after the adoption of ASU 2016-02 to estimate the incremental borrowing rate. As of March 31, 2020, and December 31, 2019, maturities of lease liabilities consisted of the following: March 31, 2020 December 31, 2019 2020 $ 2,431 $ 2,924 2021 3,174 2,730 2022 2,595 2,165 2023 2,199 1,782 2024 1,063 1,028 Years thereafter 6,297 6,297 Total lease payments $ 17,759 $ 16,926 Less: Imputed interest 3,555 3,641 Present value of lease liabilities $ 14,204 $ 13,285 During the first quarter, the Company entered into a number of additional operating leases related to vehicles for business use. These changes resulted in additional lease liabilities of $1.6 million as of March 31, 2020. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes [Abstract] | |
Income Taxes | Note 13. Income Taxes The Company’s effective income tax rate for the three months ended March 31, 2020 March 31, 2019 March 31 The Company follows the provisions of ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company has determined that the Company did not have any uncertain tax positions requiring recognition under the provisions of ASC 740-10-25. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions, if any, as part of interest expense. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. In general, the Company is no longer subject to U.S. federal and state tax examinations for years prior to 2016. |
Pension and Postretirement Bene
Pension and Postretirement Benefit Plans | 3 Months Ended |
Mar. 31, 2020 | |
Pension and Postretirement Benefit Plans [Abstract] | |
Pension and Postretirement Benefit Plans | Note 14. Pension and Postretirement Benefit Plans The Company has a defined benefit pension plan. Benefits for hourly employees were based on a stated benefit per year of service, reduced by amounts earned in a previous plan. Benefits for salaried employees were based on years of service and the employees’ final compensation. The defined benefit pension plan is frozen. The Company’s policy is to make the minimum amount of contributions that can be deducted for federal income taxes. The Company expects to make no contributions to the pension plan in 2020. In October 2019, the Company elected to terminate the defined benefit pension plan, effective December 31, 2019 with final distributions to be made in 2020. The Company sponsored a defined benefit postretirement plan that covered hourly employees. This plan provides medical and dental benefits. This plan is contributory with retiree contributions adjusted annually. The Company’s policy is to make contributions equal to benefits paid during the year. The Company does not expect to contribute to its postretirement plan in 2020 for the payment of benefits. In October 2019, the Company amended the plan to cease benefits effective June 30, 2020. The following table provides the components of net periodic pension and postretirement benefit costs and total costs for the plans: Three Months Ended March 31, Pension Benefits Postretirement Benefits 2020 2019 2020 2019 Service cost $ - $ 26 $ - $ - Interest cost 95 130 - 25 Expected return on plan assets (161 ) (161 ) - - Amortization of (gains) losses 36 37 (57 ) (42 ) Net periodic benefit (income) cost $ (30 ) $ 32 $ (57 ) $ (17 ) |
Share Incentive Plans
Share Incentive Plans | 3 Months Ended |
Mar. 31, 2020 | |
Share Incentive Plans [Abstract] | |
Share Incentive Plans | Note 15. Share Incentive Plans On April 28, 2016, the Board of Directors of the Company adopted the Turning Point Brands, Inc., 2015 Equity Incentive Plan (the “2015 Plan”), pursuant to which awards may be granted to employees, non-employee directors, and consultants. In addition, the 2015 Plan provides for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Pursuant to the 2015 Plan, 1,400,000 shares of the Company’s voting common stock are reserved for issuance as awards to employees, non-employee directors, and consultants as compensation for past or future services or the attainment of certain performance goals. The 2015 Plan is scheduled to terminate on April 27, 2026. The 2015 Plan is administered by a committee (the “Committee”) of the Company’s Board of Directors. The Committee determines the vesting criteria for the awards, with such criteria to be specified in the award agreement. As of March 31, 2020, net of forfeitures, there were 16,159 shares of restricted stock, 440,232 performance-based restricted stock units, and 613,832 options granted under the 2015 Plan. There are 329,777 shares available for grant under the 2015 Plan. On February 8, 2006, the Board of Directors of the Company adopted the 2006 Equity Incentive Plan (the “2006 Plan”) of North Atlantic Holding Company, Inc., pursuant to which awards may be granted to employees. The 2006 Plan provides for the granting of nonqualified stock options and restricted stock awards to employees. Upon the adoption of the Company’s 2015 Equity Incentive Plan in connection with its IPO, the Company determined no additional grants would be made under the 2006 Plan. However, all awards issued under the 2006 Plan that have not been previously terminated or forfeited remain outstanding and continue unaffected. There are no shares available for grant under the 2006 Plan. Stock option activity for the 2006 and 2015 Plans is summarized below: Stock Option Shares Weighted Average Exercise Price Weighted Average Grant Date Fair Value Outstanding, December 31, 2018 659,574 $ 9.00 $ 3.34 Granted 180,780 43.89 14.34 Exercised (129,067 ) 5.72 2.58 Forfeited (14,571 ) 34.55 11.10 Outstanding, December 31, 2019 696,716 18.13 6.17 Granted 155,000 14.85 4.41 Exercised (42,407 ) 5.36 2.50 Forfeited (406 ) 34.27 11.07 Outstanding, March 31, 2020 808,903 $ 18.16 $ 6.03 Under the 2006 and 2015 Plans, the total intrinsic value of options exercised during the three months ended March 31, 2020 and 2019, was $0.9 million, and $0.8 million, respectively. At March 31, 2020, under the 2006 Plan, the outstanding stock options’ exercise price for 273,247 options is $3.83 per share, all of which are exercisable. The weighted average of the remaining lives of the outstanding stock options with an exercise price of $3.83 is approximately 3.28 years. The Company estimates the expected life of these stock options is ten years from the date of grant. For the $3.83 per share options, the weighted average fair value of options was determined using the Black-Scholes model assuming a ten-year life from grant date, a current share price and exercise price of $3.83, a risk-free interest rate of 3.57%, volatility of 40%, and no assumed dividend yield. Based on these assumptions, the fair value of these options is approximately $2.17 per share option granted. At March 31, 2020, under the 2015 Plan, the risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. The expected volatility is based on the average long-term historical volatilities of peer companies. We intend to continue to consistently use the same group of publicly traded peer companies to determine expected volatility until sufficient information regarding volatility of our share price becomes available or until the selected companies are no longer suitable for this purpose. Due to our limited trading history, we are using the simplified method presented by SEC Staff Accounting Bulletin No. 107 to calculate expected holding periods, which represent the periods of time for which options granted are expected to be outstanding. We will continue to use this method until we have sufficient historical exercise experience to give us confidence in the reliability of our calculations. The fair values of these options were determined using the Black-Scholes option pricing model. The following table outlines the assumptions based on the number of options granted under the 2015 Plan. February 10, 2017 May 17, 2017 March 7, 2018 March 13, 2018 March 20, 2019 October 24, 2019 March 18, 2020 Number of options granted 40,000 93,819 98,100 26,000 155,780 25,000 155,000 Options outstanding at March 31, 2020 28,700 66,572 86,792 26,000 147,592 25,000 155,000 Number exercisable at March 31, 2020 28,700 66,572 58,298 26,000 50,262 8,250 - Exercise price $ 13.00 $ 15.41 $ 21.21 $ 21.49 $ 47.58 $ 20.89 $ 14.85 Remaining lives 6.87 7.13 7.94 7.96 8.98 9.57 9.97 Risk free interest rate 1.89 % 1.76 % 2.65 % 2.62 % 2.34 % 1.58 % 0.79 % Expected volatility 27.44 % 26.92 % 28.76 % 28.76 % 30.95 % 31.93 % 35.72 % Expected life 6.000 6.000 6.000 5.495 6.000 6.000 6.000 Dividend yield - - 0.83 % 0.82 % 0.42 % 0.95 % 1.49 % Fair value at grant date $ 3.98 $ 4.60 $ 6.37 $ 6.18 $ 15.63 $ 6.27 $ 4.41 The Company has recorded compensation expense related to the options based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the options on the date of grant and amortized over the vesting period. The Company recorded compensation expense related to the options of approximately $0.2 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively. Total unrecognized compensation expense related to options at March 31, 2020, is $1.5 million, which will be expensed over 2.14 years. Performance-Based Restricted Stock Units (“PRSUs”) PRSUs are restricted stock units subject to both performance-based and service-based vesting conditions. The number of common stock shares a recipient will receive upon vesting of a PRSU will be calculated by reference to certain performance metrics related to the Company’s performance over a five-year period. PRSUs will vest on the measurement date, which is no more than 65 days after the performance period (provided the applicable service and performance conditions are satisfied. As of March 31, 2020, there are 440,232 PRSUs outstanding, all of which are unvested. The following table outlines the PRSUs granted and outstanding as of March 31, 2020. March 31, 2017 March 7, 2018 March 20, 2019 March 20, 2019 July 19, 2019 March 18, 2020 Number of PRSUs granted 94,000 96,000 92,500 4,901 88,582 90,000 PRSUs outstanding at March 31, 2020 83,000 93,000 85,650 - 88,582 90,000 Fair value as of grant date $ 15.60 $ 21.21 $ 47.58 $ 47.58 $ 52.15 $ 14.85 Remaining lives 1.75 2.75 3.75 - 2.75 4.75 The Company recorded compensation expense related to the PRSUs of approximately $0.2 million and $0.2 million in the consolidated statements of income for the three months ended March 31, 2020 and 2019, respectively, based on the probability of achieving the performance condition. Total unrecognized compensation expense related to these awards at March 31, 2020, is $9.0 million which will be expensed over the service periods based on the probability of achieving the performance condition. |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Contingencies [Abstract] | |
Contingencies | Note 16. Contingencies Other major tobacco companies are defendants in product liability claims. In a number of these cases, the amounts of punitive and compensatory damages sought are significant and could have a material adverse effect on our business and results of operations. The Company is subject to several lawsuits alleging personal injuries resulting from malfunctioning vaporizer devices or consumption of e-liquids and may be subject to claims in the future relating to other NewGen products. The Company is still evaluating these claims and the potential defenses to them. For example, the Company did not design or manufacture the products at issue; rather, the Company was merely the distributor. Nonetheless, there can be no assurance that the Company will prevail in these cases, and they could have a material adverse effect on the financial position, results of operations, or cash flows of the Company. Franchisors are defendants from time to time in the ordinary course of business. In certain of these cases, the amounts of punitive and compensatory damages sought are significant. One of the Company’s subsidiaries is a defendant in a lawsuit brought by a franchisee, which claim has been filed but not yet served. In that case, the franchisee is seeking compensatory and punitive damages and rescission of their franchise agreement, alleging that the Company’s subsidiary failed to make certain disclosures in the Franchise Disclosure Document. The subsidiary is evaluating these claims, the potential defenses to them as well as available counterclaims. The subsidiary believes that termination of the franchise agreement was proper, no damages are due and the franchisee is bound by an arbitration agreement pursuant to the terms of their franchise agreement and the Franchise Disclosure Document (and therefore it was improper to pursue litigation). There can be no assurance that the subsidiary will prevail in this case, and it could have a material adverse effect on the Company’s business and results of operations. The Company has several subsidiaries engaged in making, distributing, and retailing (online and in bricks-and-mortar) vapor products. As a result of the overall publicity and controversy surrounding the vapor industry generally, many companies have received informational subpoenas from various regulatory bodies and in some jurisdictions regulatory lawsuits have been filed regarding marketing practices and possible underage sales. The Company has subsidiaries that are subject to some information requests. In the acquisition of the vapor businesses, the Company negotiated financial “hold-backs”, which it expects to be able to use to defray expenses associated with the information production and the cost of defending any such lawsuits as well as the franchisee lawsuit. To the extent that litigation becomes necessary, the Company believes that the subsidiaries have strong factual and legal defenses against claims that it unfairly marketed vapor products. |
Income Per Share
Income Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Income Per Share [Abstract] | |
Income Per Share | Note 17. Income Per Share The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations of net income: Three Months Ended March 31, 2020 2019 Income Shares Per Share Income Shares Per Share Consolidated net income $ 3,275 $ 6,560 Basic EPS: Weighted average 19,689,446 $ 0.17 19,559,596 $ 0.34 Diluted EPS: Effect of dilutive securities: Stock options 417,354 486,368 20,106,800 $ 0.16 20,045,964 $ 0.33 For the three months ended March 31, 2020, the effect of the 3,202,808 shares issuable upon conversion of the Convertible Senior Notes were excluded from the diluted net income per share calculation because the Company’s average stock price did not exceed $53.86 during those periods. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2020 | |
Segment Information [Abstract] | |
Segment Information | Note 18. Segment Information In accordance with ASC 280, Segment Reporting, the Company has three reportable segments: Smokeless products, Smoking products, and NewGen products. The Smokeless products segment (i) manufactures and markets moist snuff and (ii) contracts for and markets chewing tobacco products. The Smoking products segment (i) markets cigarette papers, tubes, and related products; (ii) markets and distributes finished cigars and MYO cigar wraps; and (iii) processes, packages, markets, and distributes traditional pipe tobaccos. The NewGen products segment (i) markets and distributes e-cigarettes, e-liquids, vaporizers, and certain other products without tobacco and/or nicotine; (ii) markets and distributes a wide assortment of vaping and CBD related products to non-traditional retail outlets via VaporBeast, Vapor Shark, IVG and Solace; and (iii) markets and distributes a wide assortment of vapor and CBD related products to individual consumers via Vapor Shark and VaporFi branded retail outlets in addition to online platforms. Smokeless and Smoking products are distributed primarily through wholesale distributors in the United States while NewGen products are distributed primarily through e-commerce to non-traditional retail outlets and direct to consumers in the United States. The Other segment includes the costs and assets of the Company not assigned to one of the three reportable segments such as intercompany transfers, deferred taxes, deferred financing fees, and investments in subsidiaries. The accounting policies of these segments are the same as those of the Company. Corporate costs are not directly charged to the three reportable segments in the ordinary course of operations. The Company evaluates the performance of its segments and allocates resources to them based on operating income. The tables below present financial information about reported segments: Three Months Ended March 31, 2020 2019 Net sales Smokeless products $ 26,495 $ 22,544 Smoking products 28,914 25,519 NewGen products 35,280 43,565 Total $ 90,689 $ 91,628 Gross profit Smokeless products $ 13,874 $ 12,073 Smoking products 16,132 13,484 NewGen products 11,425 14,907 Total $ 41,431 $ 40,464 Operating income (loss) Smokeless products $ 9,746 $ 7,487 Smoking products 12,417 9,946 NewGen products 477 2,838 Corporate unallocated (1) (13,603 ) (8,236 ) Total $ 9,037 $ 12,035 Interest expense, net 4,994 3,856 Investment income (91 ) (144 ) Net periodic income, excluding service cost (87 ) (11 ) Income before income taxes $ 4,221 $ 8,334 Capital expenditures Smokeless products $ 860 $ 577 Smoking products - - NewGen products 17 309 Total $ 877 $ 886 Depreciation and amortization Smokeless products $ 519 $ 357 Smoking products - - NewGen products 757 533 Total $ 1,276 $ 890 (1) Includes corporate costs that are not allocated to any of the three reportable segments. March 31, 2020 December 31, 2019 Assets Smokeless products $ 128,406 $ 120,723 Smoking products 142,850 145,831 NewGen products 86,650 90,899 Corporate unallocated (1) 91,414 89,131 Total $ 449,320 $ 446,584 (1) Includes assets not assigned to the three reportable segments. All goodwill has been allocated to the reportable segments. Revenue Disaggregation—Sales Channel Revenues of the Smokeless and Smoking segments are primarily comprised of sales made to wholesalers while NewGen sales are made business to business and business to consumer, both online and through our corporate retail stores. NewGen net sales are broken out by sales channel below. NewGen Segment Three Months Ended March 31, 2020 2019 Business to Business $ 25,279 $ 32,463 Business to Consumer - Online 8,134 8,219 Business to Consumer - Corporate store 1,793 2,799 Other 74 84 Total $ 35,280 $ 43,565 Net Sales—Domestic vs. Foreign The following table shows a breakdown of consolidated net sales between domestic and foreign customers. Three Months Ended March 31, 2020 2019 Domestic $ 87,568 $ 88,769 Foreign 3,121 2,859 Total $ 90,689 $ 91,628 |
Dividends and Share Repurchase
Dividends and Share Repurchase | 3 Months Ended |
Mar. 31, 2020 | |
Dividends and Share Repurchase [Abstract] | |
Dividends and Share Repurchase | Note 19. Dividends and Share Repurchase The most recent dividend of $0.05 per common share was paid on April 10, 2020, to shareholders of record at the close of business on March 20, 2020. Dividends are classified as restricted payments within the 2018 Credit Facility. The Company is generally permitted to make restricted payments provided that, at the time of payment, or as a result of payment, the Company is not in default on its debt covenants. Additional restrictions limit the aggregate amount of restricted, quarterly dividends during a fiscal year to the aggregate amount of mandatory and voluntary principal payments made on the priority term loans during the fiscal year. On February 25, 2020, the Company’s Board of Directors approved a $50.0 million share repurchase authorization, which is intended for opportunistic execution based upon a variety of factors including market dynamics. The authorization is subject to the ongoing discretion of the Board. The total number of shares repurchased for the three months ended was 134,130 shares for a total cost of $2.6 million and an average price per share of $19.59. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 20. Subsequent Events Standard Diversified Inc. (“SDI”) Reorganization On April 8, 2020, the Company and SDI announced a definitive agreement under which SDI will be merged into a wholly-owned subsidiary of TPB in a tax-free downstream merger. Under the terms of the agreement, the holders of SDI’s Class A Common Stock and SDI’s Class B Common Stock (collectively, the “SDI Common Stock”) will receive in the aggregate, in return for their SDI Common Stock, TPB Voting Common Stock (“TPB Common Stock”) at a ratio of 0.97 of a share of TPB Common Stock for each share of TPB Common Stock held by SDI at the time of the merger. SDI will divest its assets prior to close such that the net liabilities at closing will not exceed $25,000 and the only assets that it shall retain is the remaining TPB stock holdings. The merger of SDI is subject to customary closing conditions, including approval by holders of a majority of the aggregate voting power of the SDI Common Stock and the receipt of any applicable statutory approvals. The Company expects the transaction to close in the summer of 2020. |
Organizations and Basis of Pr_2
Organizations and Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Organizations and Basis of Presentation [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim, consolidated financial statements have been prepared in accordance with the accounting practices described in the Company’s audited, consolidated financial statements as of and for the year ended December 31, 2019. |
Reclassifications | Certain prior year amounts have been reclassified to conform to the current year’s presentation. The changes did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows in any of the periods presented. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies [Abstract] | |
Consolidation | Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions have been eliminated. |
Revenue Recognition | Revenue Recognition The Company recognizes revenues in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which includes excise taxes and shipping and handling charges billed to customers, net of cash discounts for prompt payment, sales returns and incentives, upon delivery of goods to the customer – at which time the Company’s performance obligation is satisfied - at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five-step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. The Company excludes from the transaction price, sales taxes and value-added taxes imposed at the time of sale (which do not include excise taxes on smokeless tobacco, cigars or vaping products billed to customers). The Company records an allowance for sales returns, based principally on historical volume and return rates, which is included in accrued liabilities on the consolidated balance sheets. The Company records sales incentives, which consist of consumer incentives and trade promotion activities, as a reduction in revenues (a portion of which is based on amounts estimated as being due to wholesalers, retailers and consumers at the end of the period) based principally on historical volume and utilization rates. Expected payments for sales incentives are included in accrued liabilities on the consolidated balance sheets. A further requirement of ASU 2014-09 is for entities to |
Shipping Costs | Shipping Costs The Company $4.3 million for the three months ending , 2020 and 2019, respectively. |
Fair Value | Fair Value GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy under GAAP are described below: • Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date. • Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. |
Derivative Instruments | Derivative Instruments Foreign Currency Forward Contracts: Interest Rate Swap Agreements: |
Risks and Uncertainties | Risks and Uncertainties Manufacturers and sellers of tobacco products are subject to regulation at the federal, state, and local levels. Such regulations include, among others, labeling requirements, limitations on advertising, and prohibition of sales to minors. The tobacco industry is likely to continue to be heavily regulated. There can be no assurance as to the ultimate content, timing, or effect of any regulation of tobacco products by any federal, state, or local legislative or regulatory body, nor can there be any assurance that any such legislation or regulation would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. Recently, several state governors have reacted to perceived issues around nicotine vapor products by unilaterally, without regard to the legislative process, proclaiming bans on vapor products, particularly those that are flavored. Many of these executive actions have been challenged and temporarily restrained, but no assurance can be given that such state or local flavor bans will not be enacted or ultimately upheld. Indeed, in a number of states, targeted flavor bans, particularly with regard to vapor products, have been enacted legislatively. Depending on the number and location of such bans, that legislation or regulation could have a material adverse effect on the Company’s financial position, results of operations or cash flows. Food and Drug Administration (“FDA”) continues to consider various restrictive regulations around our products, including targeted flavor bans; however, the details, timing, and ultimate implementation of such measures remain unclear. The tobacco industry has experienced, and is experiencing, significant product liability litigation. Most tobacco liability lawsuits have been brought against manufacturers and sellers of cigarettes for injuries allegedly caused by smoking or exposure to smoke. However, several lawsuits have been brought against manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. Typically, such claims assert that use of smokeless products is addictive and causes oral cancer. Additionally, several lawsuits have been brought against manufacturers and distributors of NewGen products due to malfunctioning devices. There can be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows. Master Settlement Agreement (MSA): The Company has chosen to invest a portion of the MSA escrow, from time to time, in U.S. Government securities including TIPS, Treasury Notes, and Treasury Bonds. These investments are classified as available-for-sale and carried at fair value. Realized losses are prohibited under the MSA; any investment in an unrealized loss position will be held until the value is recovered, or until maturity. All monies at March 31, 2020 and December 31, 2019 were held in money market savings accounts. The following shows the amount of deposits by sales year for the MSA escrow account: Deposits as of Sales Year March 31, 2020 December 31, 2019 1999 $ 211 $ 211 2000 1,017 1,017 2001 1,673 1,673 2002 2,271 2,271 2003 4,249 4,249 2004 3,714 3,714 2005 4,553 4,553 2006 3,847 3,847 2007 4,167 4,167 2008 3,364 3,364 2009 1,619 1,619 2010 406 406 2011 193 193 2012 199 199 2013 173 173 2014 143 143 2015 101 101 2016 91 91 2017 83 83 Total $ 32,074 $ 32,074 Food and Drug Administration: Under the TCA, tobacco product user fees are assessed on six classes of regulated tobacco products. The user fees are computed using a methodology similar to the methodology used by the U.S Department of Agriculture to compute the Tobacco Transition Payment Program (“TTPP,” also known as the “Tobacco Buyout”) assessment. First, the total, annual, congressionally established user fee assessment is allocated among the various classes of tobacco products using the federal excise tax weighted market share of tobacco products subject to regulation. Then, the assessment for each class of tobacco products is divided among individual manufacturers and importers. In August 2016, the FDA’s regulatory authority under the TCA was extended to all tobacco products not previously covered, including: (i) certain NewGen products (such as electronic cigarettes, vaporizers and e-liquids) and their components or parts (such as tanks, coils and batteries); (ii) cigars and their components or parts (such as cigar tobacco); (iii) pipe tobacco; (iv) hookah products; and (v) any other tobacco product “newly deemed” by the FDA. These “deeming regulations” apply to all products made or derived from tobacco intended for human consumption, but excluding accessories of tobacco products (such as lighters). Accordingly, the FDA has since regulated our pipe tobacco, cigar, and cigar wrap products as well as our vapor products containing tobacco-derived nicotine and products intended or reasonably expected to be used to consume such e-liquids. Under the deeming regulations, the FDA has responsibility for conducting premarket review of “new tobacco products”—defined as those products not commercially marketed in the United States as of February 15, 2007. There are three pathways for obtaining premarket authorization, including submission of a premarket tobacco product application (“PMTA”). When the FDA initially issued the deeming regulations, it recognized that many products in the deemed categories that were already on the market qualified as “new tobacco products” and lacked a marketing order. In August 2017, the FDA issued an authorization until specified deadlines had passed. Under the August 2017 Guidance, compliance dates vary depending upon the type of application submitted, but all newly-deemed products require an application no later than August 8, 2021, for “combustible” products (e.g. cigar and pipe), and August 8, 2022, for “non-combustible” products (e.g. vapor products) with the exception of “grandfathered” products (products in commerce as of February 15, 2007) which are already authorized. On March 27, 2018, several public health organizations filed a lawsuit (the “Maryland Lawsuit”) challenging the August 2017 Guidance. The plaintiffs asserted, among other arguments, that the modification to the deeming regulations included in the August 2017 Guidance conflicts with the TCA and exceeds FDA’s statutory authority. The plaintiffs also expressed concern that the August 2017 Guidance allows vapor products to remain marketed for a significant period of time without required premarket review. The court found in favor of the plaintiffs in May 2019 and vacated the August 2017 Guidance. On July 12, 2019, the court issued its remedy order (the “Remedy Order”). Specifically, the court ordered that: (1) for all deemed new tobacco products, marketers must file applications within 10 months of the Remedy Order to continue marketing such products; (2) such a product may remain on the market pending FDA review of a timely filed application for a period not to exceed one year from the date of the application’s submission; (3) in its discretion, the FDA may enforce the premarket review requirements against such products for which marketers do not file applications within 10 months; and (4) the FDA will have the ability to exempt deemed new tobacco products from these application submission requirements for good cause, on a case-by-case basis. On October 24, 2019, FDA filed a Notice of Appeal from the Remedy Order and other actions adverse to FDA. The court-ordered modification to the compliance policy remains subject to change as a result of potential appeals or litigation brought or pending in other venues. In January 2020, the FDA indicated it intended to maintain this deadline irrespective of the outcome of the pending appeal in the Maryland Lawsuit. On March 30, 2020, however, citing the impacts of the worldwide COVID-19 pandemic on both FDA and industry, FDA requested a modification to the Remedy Order that would extend the May 12, 2020, deadline for filing premarket applications by 120 days to September 9, 2020. After several procedural steps, the Remedy Order was modified on April 22, 2020 to reflect the new deadline, and since then, FDA has stated it will update relevant Guidance documents to reflect this new timeline. On September 11, 2019, President Donald Trump and the Department of Health and Human Services Secretary, Alex Azar, indicated FDA would adopt a regulatory policy restricting all flavors in vapor products. In January 2020, FDA issued a Guidance document (the “January 2020 Guidance”) that stated it would be prioritizing enforcement of several categories of electronic nicotine delivery systems (“ENDS”) products: (1) flavored, cartridge-based ENDS products (other than tobacco- or menthol-flavored ENDS products); (2) ENDS products for which the manufacturer has failed to take (or is failing to take) adequate measures to prevent minors’ access; (3) ENDS products targeted to minors or whose marketing is likely to promote the use of ENDS by minors; and (4) ENDS products offered for sale after the May 12, 2020, premarket application deadline for which the manufacturer has not submitted a premarket application. The policy outlined several factors the agency would consider in its enforcement of flavored cigars going forward but did not drastically restrict those products as it had considered in its March 2019 Guidance proposal. The FDA’s policy on these and other regulated products may change or expand over time in ways not yet known and may significantly impact our products or our PMTA filings. For example, as noted above, the FDA recently acted to modify the deadline for premarket applications from May 12, 2020, to September 9, 2020. As a result of the implementation of the modified Remedy Order, we would not be permitted to continue marketing our existing line of vapor products that the FDA regulates as tobacco products past September 9, 2020, unless we file an application for each such product by that date. We expect to be able to make appropriate PMTA applications by the deadlines and to supplement and complete the applications within FDA’s discretionary timeline. A successful PMTA must demonstrate that the subject product is “appropriate for the protection of public health,” taking into account the effect of the marketing of the product on all sub-populations. On September 25, 2019, FDA published a proposed rule outlining certain required elements of PMTA filings. This rule is not yet final, and its requirements may shift before being finalized. We believe we have products that meet the requisite standard and that we will be able to efficiently produce satisfactory PMTA filings. However, there is no assurance that the FDA’s guidance or ultimate regulation will not change, the Remedy Order will not be further altered or that unforeseen circumstances will not arise that prevent us from filing applications or otherwise increase the amount of time and money we are required to spend to successfully file all necessary PMTAs. Even if we successfully file all of our PMTAs in a timely manner, no assurance can be given that the applications will ultimately be successful. Given the shorter time frame mandated by the Remedy Order, which if not amended or successfully appealed, may result in the prioritization of meeting requisite deadlines by selecting high priority SKUs in our inventory position, and future revenues may be adversely impacted. In addition, we currently distribute many third-party manufactured vapor products for which we will be completely dependent on the manufacturer complying with the premarket filing requirements. There can be no assurances that some products that we currently distribute will be able to be sold to end consumers after September 2020. While we will take measures to pursue regulatory compliance for our own privately-branded or proprietary vape products that compete with these third-party products, there is no assurance that such proprietary products would be as successful in the marketplace or can fully displace third-party products that are currently being distributed by us, which could adversely affect our results of operations and liquidity. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. The guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-15 effective January 1, 2020 . Recent Accounting Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC 740, Income Taxes |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Significant Accounting Policies [Abstract] | |
Deposits by Sales Year for MSA Escrow Account | The following shows the amount of deposits by sales year for the MSA escrow account: Deposits as of Sales Year March 31, 2020 December 31, 2019 1999 $ 211 $ 211 2000 1,017 1,017 2001 1,673 1,673 2002 2,271 2,271 2003 4,249 4,249 2004 3,714 3,714 2005 4,553 4,553 2006 3,847 3,847 2007 4,167 4,167 2008 3,364 3,364 2009 1,619 1,619 2010 406 406 2011 193 193 2012 199 199 2013 173 173 2014 143 143 2015 101 101 2016 91 91 2017 83 83 Total $ 32,074 $ 32,074 |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Solace [Member] | |
Acquisitions [Abstract] | |
Acquisition | The following purchase price and goodwill and other intangibles are based on the excess of the acquisition price over the estimated fair value of the tangible assets acquired and are based on management’s preliminary estimates: Total consideration transferred $ 9,405 Adjustments to consideration transferred: Cash acquired (45 ) Working capital (235 ) Adjusted consideration transferred 9,125 Assets acquired: Working capital (primarily AR and inventory) 1,132 Fixed assets and Other long term assets 414 Intangible assets 1,352 Other liabilities (209 ) Net assets acquired $ 2,689 Goodwill $ 6,436 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Inventories [Abstract] | |
Inventories | The components of inventories are as follows: March 31, 2020 December 31, 2019 Raw materials and work in process $ 6,574 $ 7,050 Leaf tobacco 36,900 32,763 Finished goods - Smokeless products 5,907 5,680 Finished goods - Smoking products 11,081 13,138 Finished goods - NewGen products 13,535 17,111 Other 950 989 Gross Inventory 74,947 76,731 LIFO reserve (5,752 ) (5,752 ) Net Inventory $ 69,195 $ 70,979 |
Other Current Assets (Tables)
Other Current Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Other Current Assets [Abstract] | |
Other Current Assets | Other current assets consists of: March 31, 2020 December 31, 2019 Inventory deposits $ 5,616 $ 4,012 Prepaid taxes 3,250 3,673 Other 10,002 8,430 Total $ 18,868 $ 16,115 |
Property, Plant, and Equipment
Property, Plant, and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, plant, and equipment consists of: March 31, 2020 December 31, 2019 Land $ 22 $ 22 Buildings and improvements 2,655 2,655 Leasehold improvements 2,511 2,567 Machinery and equipment 15,087 14,516 Furniture and fixtures 8,307 8,502 Gross property, plant and equipment 28,582 28,262 Accumulated depreciation (15,178 ) (14,446 ) Net property, plant and equipment $ 13,404 $ 13,816 |
Other Assets (Tables)
Other Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Other Assets [Abstract] | |
Other Assets | Other assets consists of: March 31, 2020 December 31, 2019 Equity investments $ 5,421 $ 5,421 Pension assets 1,753 1,686 Other 3,667 3,566 Total $ 10,841 $ 10,673 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Liabilities [Abstract] | |
Accrued Liabilities | Accrued liabilities consists of: March 31, 2020 December 31, 2019 Accrued payroll and related items $ 6,144 $ 5,267 Customer returns and allowances 5,537 6,160 Taxes payable 1,508 705 Lease liabilities 2,531 2,218 Accrued interest 928 1,909 Other 12,106 10,261 Total $ 28,754 $ 26,520 |
Notes Payable and Long-Term D_2
Notes Payable and Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Notes Payable and Long-Term Debt [Abstract] | |
Notes Payable and Long-Term Debt | Notes payable and long-term debt consists of the following in order of preference: March 31, 2020 December 31, 2019 2018 First Lien Term Loan $ 144,000 $ 146,000 Convertible Senior Notes 172,500 172,500 Note payable - IVG - 4,240 Gross notes payable and long-term debt 316,500 322,740 Less deferred finance charges (6,190 ) (6,466 ) Less debt discount (30,333 ) (32,083 ) Less current maturities (12,000 ) (15,240 ) Net notes payable and long-term debt $ 267,977 $ 268,951 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Components of Lease Expense | The components of lease expense consisted of the following: Three Months Ended March 31, 2020 2019 Operating lease cost Cost of sales $ 233 $ 192 Selling, general and administrative 398 555 Variable lease cost (1) 312 245 Short-term lease cost 83 54 Sublease income (30 ) (30 ) Total $ 996 $ 1,016 (1) Variable lease cost includes elements of a contract that do not represent a good or service but for which the lessee is responsible for paying. |
Operating Lease Assets and Liabilities | March 31, 2020 December 31, 2019 Assets: Right of use assets $ 13,036 $ 12,130 Total lease assets $ 13,036 $ 12,130 Liabilities: Current lease liabilities (2) $ 2,531 $ 2,218 Long-term lease liabilities 11,673 11,067 Total lease liabilities $ 14,204 $ 13,285 (2) Reported within accrued liabilities on the balance sheet |
Operating Lease Weighted-Average Remaining Lease Term and Discount Rate | As of March 31, 2020 2019 Weighted-average remaining lease term - operating leases 7.8 years 9.0 years Weighted-average discount rate - operating leases 5.84 % 6.49 % |
Maturities of Lease Liabilities | As of March 31, 2020, and December 31, 2019, maturities of lease liabilities consisted of the following: March 31, 2020 December 31, 2019 2020 $ 2,431 $ 2,924 2021 3,174 2,730 2022 2,595 2,165 2023 2,199 1,782 2024 1,063 1,028 Years thereafter 6,297 6,297 Total lease payments $ 17,759 $ 16,926 Less: Imputed interest 3,555 3,641 Present value of lease liabilities $ 14,204 $ 13,285 |
Pension and Postretirement Be_2
Pension and Postretirement Benefit Plans (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Pension and Postretirement Benefit Plans [Abstract] | |
Net Periodic Benefit Cost | The following table provides the components of net periodic pension and postretirement benefit costs and total costs for the plans: Three Months Ended March 31, Pension Benefits Postretirement Benefits 2020 2019 2020 2019 Service cost $ - $ 26 $ - $ - Interest cost 95 130 - 25 Expected return on plan assets (161 ) (161 ) - - Amortization of (gains) losses 36 37 (57 ) (42 ) Net periodic benefit (income) cost $ (30 ) $ 32 $ (57 ) $ (17 ) |
Share Incentive Plans (Tables)
Share Incentive Plans (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share Incentive Plans [Abstract] | |
Stock Option Activity | There are no shares available for grant under the 2006 Plan. Stock option activity for the 2006 and 2015 Plans is summarized below: Stock Option Shares Weighted Average Exercise Price Weighted Average Grant Date Fair Value Outstanding, December 31, 2018 659,574 $ 9.00 $ 3.34 Granted 180,780 43.89 14.34 Exercised (129,067 ) 5.72 2.58 Forfeited (14,571 ) 34.55 11.10 Outstanding, December 31, 2019 696,716 18.13 6.17 Granted 155,000 14.85 4.41 Exercised (42,407 ) 5.36 2.50 Forfeited (406 ) 34.27 11.07 Outstanding, March 31, 2020 808,903 $ 18.16 $ 6.03 |
Assumptions for Options Granted Under 2015 Plan | The following table outlines the assumptions based on the number of options granted under the 2015 Plan. February 10, 2017 May 17, 2017 March 7, 2018 March 13, 2018 March 20, 2019 October 24, 2019 March 18, 2020 Number of options granted 40,000 93,819 98,100 26,000 155,780 25,000 155,000 Options outstanding at March 31, 2020 28,700 66,572 86,792 26,000 147,592 25,000 155,000 Number exercisable at March 31, 2020 28,700 66,572 58,298 26,000 50,262 8,250 - Exercise price $ 13.00 $ 15.41 $ 21.21 $ 21.49 $ 47.58 $ 20.89 $ 14.85 Remaining lives 6.87 7.13 7.94 7.96 8.98 9.57 9.97 Risk free interest rate 1.89 % 1.76 % 2.65 % 2.62 % 2.34 % 1.58 % 0.79 % Expected volatility 27.44 % 26.92 % 28.76 % 28.76 % 30.95 % 31.93 % 35.72 % Expected life 6.000 6.000 6.000 5.495 6.000 6.000 6.000 Dividend yield - - 0.83 % 0.82 % 0.42 % 0.95 % 1.49 % Fair value at grant date $ 3.98 $ 4.60 $ 6.37 $ 6.18 $ 15.63 $ 6.27 $ 4.41 |
PRSUs Activity | The following table outlines the PRSUs granted and outstanding as of March 31, 2020. March 31, 2017 March 7, 2018 March 20, 2019 March 20, 2019 July 19, 2019 March 18, 2020 Number of PRSUs granted 94,000 96,000 92,500 4,901 88,582 90,000 PRSUs outstanding at March 31, 2020 83,000 93,000 85,650 - 88,582 90,000 Fair value as of grant date $ 15.60 $ 21.21 $ 47.58 $ 47.58 $ 52.15 $ 14.85 Remaining lives 1.75 2.75 3.75 - 2.75 4.75 |
Income Per Share (Tables)
Income Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Income Per Share [Abstract] | |
Basic and Diluted Net Income per Share | The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations of net income: Three Months Ended March 31, 2020 2019 Income Shares Per Share Income Shares Per Share Consolidated net income $ 3,275 $ 6,560 Basic EPS: Weighted average 19,689,446 $ 0.17 19,559,596 $ 0.34 Diluted EPS: Effect of dilutive securities: Stock options 417,354 486,368 20,106,800 $ 0.16 20,045,964 $ 0.33 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Information [Abstract] | |
Financial Information of Reported Segments | The tables below present financial information about reported segments: Three Months Ended March 31, 2020 2019 Net sales Smokeless products $ 26,495 $ 22,544 Smoking products 28,914 25,519 NewGen products 35,280 43,565 Total $ 90,689 $ 91,628 Gross profit Smokeless products $ 13,874 $ 12,073 Smoking products 16,132 13,484 NewGen products 11,425 14,907 Total $ 41,431 $ 40,464 Operating income (loss) Smokeless products $ 9,746 $ 7,487 Smoking products 12,417 9,946 NewGen products 477 2,838 Corporate unallocated (1) (13,603 ) (8,236 ) Total $ 9,037 $ 12,035 Interest expense, net 4,994 3,856 Investment income (91 ) (144 ) Net periodic income, excluding service cost (87 ) (11 ) Income before income taxes $ 4,221 $ 8,334 Capital expenditures Smokeless products $ 860 $ 577 Smoking products - - NewGen products 17 309 Total $ 877 $ 886 Depreciation and amortization Smokeless products $ 519 $ 357 Smoking products - - NewGen products 757 533 Total $ 1,276 $ 890 (1) Includes corporate costs that are not allocated to any of the three reportable segments. March 31, 2020 December 31, 2019 Assets Smokeless products $ 128,406 $ 120,723 Smoking products 142,850 145,831 NewGen products 86,650 90,899 Corporate unallocated (1) 91,414 89,131 Total $ 449,320 $ 446,584 (1) Includes assets not assigned to the three reportable segments. All goodwill has been allocated to the reportable segments. |
Revenue Disaggregation - Sales Channel | NewGen net sales are broken out by sales channel below. NewGen Segment Three Months Ended March 31, 2020 2019 Business to Business $ 25,279 $ 32,463 Business to Consumer - Online 8,134 8,219 Business to Consumer - Corporate store 1,793 2,799 Other 74 84 Total $ 35,280 $ 43,565 |
Net Sales - Domestic vs. Foreign | The following table shows a breakdown of consolidated net sales between domestic and foreign customers. Three Months Ended March 31, 2020 2019 Domestic $ 87,568 $ 88,769 Foreign 3,121 2,859 Total $ 90,689 $ 91,628 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies, Shipping Costs (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Shipping Costs [Abstract] | ||
Shipping costs | $ 5.3 | $ 4.3 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies, Derivative Instruments (Details) - Maximum [Member] | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments [Abstract] | |
Percentage of anticipated purchases of inventory that may be hedged | 100.00% |
Term of hedge | 12 months |
Percentage of non-inventory purchases that may be hedged | 90.00% |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies, Master Settlement Agreement (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Master Settlement Agreement [Abstract] | ||
Term for restricted withdrawal of principal from MSA escrow account | 25 years | |
Cost | $ 32,100 | $ 32,100 |
Estimated fair value | 32,100 | 32,100 |
Master Settlement Agreement Escrow Account by Sales Year [Abstract] | ||
1999 | 211 | 211 |
2000 | 1,017 | 1,017 |
2001 | 1,673 | 1,673 |
2002 | 2,271 | 2,271 |
2003 | 4,249 | 4,249 |
2004 | 3,714 | 3,714 |
2005 | 4,553 | 4,553 |
2006 | 3,847 | 3,847 |
2007 | 4,167 | 4,167 |
2008 | 3,364 | 3,364 |
2009 | 1,619 | 1,619 |
2010 | 406 | 406 |
2011 | 193 | 193 |
2012 | 199 | 199 |
2013 | 173 | 173 |
2014 | 143 | 143 |
2015 | 101 | 101 |
2016 | 91 | 91 |
2017 | 83 | 83 |
Total | $ 32,074 | $ 32,074 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies, Food and Drug Administration (Details) | 1 Months Ended | 3 Months Ended |
Jan. 31, 2020 | Mar. 31, 2020CategoryClassPathway | |
Food and Drug Administration [Abstract] | ||
Number of categories of tobacco products regulated by the FDA | Category | 4 | |
Number of classes of regulated tobacco products on which user fees are assessed | Class | 6 | |
Number of pathways for obtaining premarket authorization | Pathway | 3 | |
Application period for deemed new tobacco products | 10 months | |
Period deemed new tobacco products may remain on the market pending FDA review | 1 year | |
Proposed extension period for filing premarket applications | 120 days |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Jul. 31, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | |
Assets Acquired [Abstract] | |||
Goodwill | $ 154,282 | $ 154,282 | |
Solace [Member] | |||
Acquisitions [Abstract] | |||
Cash paid for acquisition | $ 7,700 | ||
Earn-out fair value | 1,100 | ||
Holdback for acquisition | $ 500 | ||
Holdback period | 18 months | ||
Shares to be issued upon achievement of milestones (in shares) | 44,295 | ||
Purchase Price [Abstract] | |||
Total consideration transferred | $ 9,405 | ||
Adjustments to Consideration Transferred [Abstract] | |||
Cash acquired | (45) | ||
Working capital | (235) | ||
Adjusted consideration transferred | 9,125 | ||
Assets Acquired [Abstract] | |||
Working capital (primarily AR and inventory) | 1,132 | ||
Fixed assets and other long term assets | 414 | ||
Intangible assets | 1,352 | ||
Other liabilities | (209) | ||
Net assets acquired | 2,689 | ||
Goodwill | 6,436 | ||
Goodwill deductible for tax purposes | $ 6,400 | ||
Solace [Member] | Performance-Based Restricted Stock Units [Member] | |||
Acquisitions [Abstract] | |||
Performance based restricted stock units issued (in shares) | 88,582 | ||
Fair value of performance based restricted stock units issued | $ 4,620 |
Derivative Instruments (Details
Derivative Instruments (Details) $ in Millions | 3 Months Ended | |||
Mar. 31, 2020USD ($)Contract | Mar. 31, 2019Contract | Dec. 31, 2019USD ($) | Mar. 31, 2018USD ($) | |
Maximum [Member] | ||||
Derivative Instruments [Abstract] | ||||
Percentage of anticipated purchases of inventory that may be hedged | 100.00% | |||
Term of hedge | 12 months | |||
Percentage of non-inventory purchases that may be hedged | 90.00% | |||
Foreign Currency [Member] | ||||
Derivative Instruments [Abstract] | ||||
Number of contracts executed | Contract | 0 | 0 | ||
Interest Rate Swap [Member] | ||||
Derivative Instruments [Abstract] | ||||
Notional amount | $ 70 | $ 70 | $ 70 | |
Fair value | $ 4.8 | $ 2.5 | ||
Interest Rate Swap [Member] | LIBOR [Member] | ||||
Derivative Instruments [Abstract] | ||||
Interest rate percentage | 2.755% |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2018 |
Fair Value of Financial Instruments [Abstract] | |||
Note payable | $ 316,500 | $ 322,740 | |
Interest Rate Swap [Member] | |||
Fair Value of Financial Instruments [Abstract] | |||
Notional amount | 70,000 | 70,000 | $ 70,000 |
Fair value | 4,800 | 2,500 | |
2018 First Lien Term Loan [Member] | |||
Fair Value of Financial Instruments [Abstract] | |||
Note payable | 144,000 | 146,000 | |
2.5% Convertible Senior Notes [Member] | |||
Fair Value of Financial Instruments [Abstract] | |||
Note payable | $ 172,500 | 172,500 | |
Interest rate | 2.50% | ||
Fair Value [Member] | 2018 First Lien Term Loan [Member] | |||
Fair Value of Financial Instruments [Abstract] | |||
Long-term debt | $ 144,000 | 146,000 | |
Fair Value [Member] | 2.5% Convertible Senior Notes [Member] | |||
Fair Value of Financial Instruments [Abstract] | |||
Long-term debt | $ 141,600 | $ 140,100 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Inventories [Abstract] | ||
Raw materials and work in process | $ 6,574 | $ 7,050 |
Leaf tobacco | 36,900 | 32,763 |
Other | 950 | 989 |
Gross Inventory | 74,947 | 76,731 |
LIFO reserve | (5,752) | (5,752) |
Net Inventory | 69,195 | 70,979 |
Inventory valuation allowance | 19,200 | 21,500 |
Smokeless Products [Member] | ||
Inventories [Abstract] | ||
Finished goods | 5,907 | 5,680 |
Smoking Products [Member] | ||
Inventories [Abstract] | ||
Finished goods | 11,081 | 13,138 |
NewGen Products [Member] | ||
Inventories [Abstract] | ||
Finished goods | $ 13,535 | $ 17,111 |
Other Current Assets (Details)
Other Current Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Other Current Assets [Abstract] | ||
Inventory deposits | $ 5,616 | $ 4,012 |
Prepaid taxes | 3,250 | 3,673 |
Other | 10,002 | 8,430 |
Total | $ 18,868 | $ 16,115 |
Property, Plant, and Equipmen_2
Property, Plant, and Equipment (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Abstract] | ||
Gross property, plant and equipment | $ 28,582 | $ 28,262 |
Accumulated depreciation | (15,178) | (14,446) |
Net property, plant and equipment | 13,404 | 13,816 |
Land [Member] | ||
Property, Plant and Equipment [Abstract] | ||
Gross property, plant and equipment | 22 | 22 |
Buildings and Improvements [Member] | ||
Property, Plant and Equipment [Abstract] | ||
Gross property, plant and equipment | 2,655 | 2,655 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Abstract] | ||
Gross property, plant and equipment | 2,511 | 2,567 |
Machinery and Equipment [Member] | ||
Property, Plant and Equipment [Abstract] | ||
Gross property, plant and equipment | 15,087 | 14,516 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Abstract] | ||
Gross property, plant and equipment | $ 8,307 | $ 8,502 |
Other Assets (Details)
Other Assets (Details) - USD ($) $ in Thousands | 1 Months Ended | ||
Jul. 31, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | |
Other Assets [Abstract] | |||
Equity investments | $ 5,421 | $ 5,421 | |
Pension assets | 1,753 | 1,686 | |
Other | 3,667 | 3,566 | |
Total | $ 10,841 | $ 10,673 | |
ReCreation [Member] | |||
Other Assets [Abstract] | |||
Ownership interest | 30.00% | ||
Payment for investment | $ 1,000 | ||
ReCreation [Member] | Maximum [Member] | |||
Other Assets [Abstract] | |||
Ownership interest that can be acquired | 50.00% |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | [1] | |
Accrued Liabilities [Abstract] | |||||
Accrued payroll and related items | $ 6,144 | $ 5,267 | |||
Customer returns and allowances | 5,537 | 6,160 | |||
Taxes payable | 1,508 | 705 | |||
Lease liabilities | 2,531 | [1] | 2,218 | $ 2,218 | |
Accrued interest | 928 | 1,909 | |||
Other | 12,106 | 10,261 | |||
Total accrued liabilities | $ 28,754 | $ 26,520 | |||
[1] | Reported within accrued liabilities on the balance sheet. |
Notes Payable and Long-Term D_3
Notes Payable and Long-Term Debt, Summary of Notes Payable and Long-Term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 | Jul. 31, 2019 |
Notes Payable and Long-Term Debt [Abstract] | |||
Gross notes payable and long-term debt | $ 316,500 | $ 322,740 | |
Less deferred finance charges | (6,190) | (6,466) | |
Less debt discount | (30,333) | (32,083) | |
Less current maturities | (12,000) | (15,240) | |
Net notes payable and long-term debt | 267,977 | 268,951 | |
2018 First Lien Term Loan [Member] | |||
Notes Payable and Long-Term Debt [Abstract] | |||
Gross notes payable and long-term debt | 144,000 | 146,000 | |
Convertible Senior Notes [Member] | |||
Notes Payable and Long-Term Debt [Abstract] | |||
Gross notes payable and long-term debt | 172,500 | 172,500 | |
Less debt discount | $ (35,000) | ||
Note Payable - IVG [Member] | |||
Notes Payable and Long-Term Debt [Abstract] | |||
Gross notes payable and long-term debt | $ 0 | $ 4,240 |
Notes Payable and Long-Term D_4
Notes Payable and Long-Term Debt, 2018 Credit Facility (Details) $ in Millions | Mar. 07, 2018USD ($) |
2018 Credit Facility [Member] | |
Notes Payable and Long-Term Debt [Abstract] | |
Secured credit facility | $ 250 |
Additional borrowing capacity under accordion feature | 40 |
2018 First Lien Term Loan [Member] | |
Notes Payable and Long-Term Debt [Abstract] | |
Face amount | 160 |
2018 Revolving Credit Facility [Member] | |
Notes Payable and Long-Term Debt [Abstract] | |
Maximum borrowing capacity | 50 |
2018 Second Lien Term Loan [Member] | |
Notes Payable and Long-Term Debt [Abstract] | |
Face amount | $ 40 |
Notes Payable and Long-Term D_5
Notes Payable and Long-Term Debt, 2018 First Lien Credit Facility (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Mar. 07, 2018 | |
Notes Payable and Long-Term Debt [Abstract] | ||||
Financing costs of amending facility | $ 168 | $ 0 | ||
Letter of Credit [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Maximum borrowing capacity | $ 3,700 | |||
2018 First Lien Credit Facility [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Maturity date | Mar. 7, 2023 | |||
Financing costs of amending facility | $ 700 | |||
2018 First Lien Credit Facility [Member] | Minimum [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Senior leverage ratio | 2.50 | |||
Total leverage ratio | 5 | |||
Fixed charge coverage ratio | 1.20 | |||
2018 First Lien Credit Facility [Member] | Maximum [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Senior leverage ratio | 3 | |||
Total leverage ratio | 5.50 | |||
2018 Revolving Credit Facility [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Outstanding borrowings | $ 0 | |||
Unused portion of credit facility | 50,000 | |||
Maximum borrowing capacity | $ 50,000 | |||
Availability under credit facility | $ 46,300 | |||
2018 Revolving Credit Facility [Member] | LIBOR [Member] | Minimum [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Margin on variable rate | 2.75% | |||
2018 Revolving Credit Facility [Member] | LIBOR [Member] | Maximum [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Margin on variable rate | 3.50% | |||
2018 First Lien Term Loan [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Frequency of required payment | Quarterly | |||
Financing costs of amending facility | $ 200 | |||
Principal payment due under excess cash covenant | $ 4,500 | |||
Consent fees | $ 100 | |||
Weighted average interest rate | 3.74% | |||
2018 First Lien Term Loan [Member] | June 30, 2018 through March 31, 2020 [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Required payment | $ 2,000 | |||
2018 First Lien Term Loan [Member] | June 30, 2020 through March 31, 2022 [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Required payment | 3,000 | |||
2018 First Lien Term Loan [Member] | June 30, 2022 and after [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Required payment | $ 4,000 | |||
2018 First Lien Term Loan [Member] | LIBOR [Member] | Minimum [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Margin on variable rate | 2.75% | |||
2018 First Lien Term Loan [Member] | LIBOR [Member] | Maximum [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Margin on variable rate | 3.50% | |||
Convertible Senior Notes [Member] | ||||
Notes Payable and Long-Term Debt [Abstract] | ||||
Maturity date | Jul. 15, 2024 | |||
Maximum notes to be issued | $ 200,000 |
Notes Payable and Long-Term D_6
Notes Payable and Long-Term Debt, 2018 Second Lien Credit Facility (Details) - 2018 Second Lien Term Loan [Member] - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | |
Notes Payable and Long-Term Debt [Abstract] | |||
Maturity date | Mar. 7, 2024 | ||
Payment of term loan | $ 35.5 | $ 4.5 | |
Loss on extinguishment of debt | $ (1.1) | $ (0.2) | |
LIBOR [Member] | |||
Notes Payable and Long-Term Debt [Abstract] | |||
Margin on variable rate | 7.00% |
Notes Payable and Long-Term D_7
Notes Payable and Long-Term Debt, Convertible Senior Notes (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | |
Jul. 31, 2019USD ($) | Mar. 31, 2020USD ($)shares$ / shares | Dec. 31, 2019USD ($) | |
Notes Payable and Long-Term Debt [Abstract] | |||
Debt discount | $ 30,333 | $ 32,083 | |
Strike price (in dollars per share) | $ / shares | 53.86 | ||
Cap price (in dollars per share) | $ / shares | 82.86 | ||
Payment for cost of capped call transactions | $ 20,530 | ||
2.5% Convertible Senior Notes [Member] | |||
Notes Payable and Long-Term Debt [Abstract] | |||
Face amount | 172,500 | ||
Interest rate | 2.50% | ||
Maturity date | Jul. 15, 2024 | ||
Shares issued upon conversion (in shares) | shares | 3,202,808 | ||
Conversion rate | 18.567 | ||
Principal amount of notes to be converted | $ 1 | ||
Conversion price (in dollars per share) | $ / shares | $ 53.86 | ||
Debt discount | 35,000 | ||
Effective interest rate | 7.50% | ||
Amortization of debt discount | $ 1,800 | ||
Debt issuance costs attributable to liability component | 4,700 | ||
Debt issuance costs attributable to equity component | $ 1,200 |
Notes Payable and Long-Term D_8
Notes Payable and Long-Term Debt, Note Payable - IVG (Details) - Note Payable - IVG [Member] - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Notes Payable and Long-Term Debt [Abstract] | |||
Face amount | $ 4,000 | ||
Interest rate | 6.00% | ||
Maturity date | Mar. 5, 2020 | ||
Payment of term loan | $ 4,240 | $ 0 |
Leases (Details)
Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | |||||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | ||||
Components of Lease Expense [Abstract] | ||||||
Variable lease cost | [1] | $ 312 | $ 245 | |||
Short-term lease cost | 83 | 54 | ||||
Sublease income | (30) | (30) | ||||
Total operating lease cost | 996 | 1,016 | ||||
Assets [Abstract] | ||||||
Right of use assets | 13,036 | 12,130 | $ 12,130 | |||
Liabilities [Abstract] | ||||||
Current lease liabilities | 2,531 | [2] | 2,218 | [2] | 2,218 | |
Long-term lease liabilities | 11,673 | 11,067 | 11,067 | |||
Total lease liabilities | $ 14,204 | $ 13,285 | 13,285 | |||
Weighted-Average Remaining Lease Term and Discount Rate [Abstract] | ||||||
Weighted-average remaining lease term - operating leases | 7 years 9 months 18 days | 9 years | ||||
Weighted-average discount rate - operating leases | 5.84% | 6.49% | ||||
Maturities of Lease Liabilities [Abstract] | ||||||
2020 | $ 2,431 | |||||
2021/2020 | 3,174 | 2,924 | ||||
2022/2021 | 2,595 | 2,730 | ||||
2023/2022 | 2,199 | 2,165 | ||||
2024/2023 | 1,063 | 1,782 | ||||
2024 | 1,028 | |||||
Years thereafter | 6,297 | |||||
Years thereafter | 6,297 | |||||
Total lease payments | 17,759 | 16,926 | ||||
Less: Imputed interest | 3,555 | 3,641 | ||||
Present value of lease liabilities | 14,204 | $ 13,285 | $ 13,285 | |||
Additional lease liabilities | 1,600 | |||||
Cost of Sales [Member] | ||||||
Components of Lease Expense [Abstract] | ||||||
Operating lease cost | 233 | 192 | ||||
Selling, General and Administrative [Member] | ||||||
Components of Lease Expense [Abstract] | ||||||
Operating lease cost | $ 398 | $ 555 | ||||
[1] | Variable lease cost includes elements of a contract that do not represent a good or service but for which the lessee is responsible for paying. | |||||
[2] | Reported within accrued liabilities on the balance sheet. |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Taxes [Abstract] | ||
Effective income tax rate | 22.40% | 21.30% |
Discrete tax deduction related to stock option exercises | $ 0.7 | $ 0.9 |
Pension and Postretirement Be_3
Pension and Postretirement Benefit Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Pension Benefits [Member] | ||
Plan Contributions [Abstract] | ||
Expected contributions in 2020 | $ 0 | |
Net Periodic Benefit Cost [Abstract] | ||
Service cost | 0 | $ 26 |
Interest cost | 95 | 130 |
Expected return on plan assets | (161) | (161) |
Amortization of (gains) losses | 36 | 37 |
Net periodic benefit (income) cost | (30) | 32 |
Postretirement Benefits [Member] | ||
Net Periodic Benefit Cost [Abstract] | ||
Service cost | 0 | 0 |
Interest cost | 0 | 25 |
Expected return on plan assets | 0 | 0 |
Amortization of (gains) losses | (57) | (42) |
Net periodic benefit (income) cost | $ (57) | $ (17) |
Share Incentive Plans, Equity I
Share Incentive Plans, Equity Incentive Plans (Details) - shares | Mar. 31, 2020 | Apr. 28, 2016 |
2015 Plan [Member] | ||
Share Incentive Plans [Abstract] | ||
Number of shares available for grant (in shares) | 329,777 | |
2015 Plan [Member] | Restricted Stock [Member] | ||
Share Incentive Plans [Abstract] | ||
Number of awards granted (in shares) | 16,159 | |
2015 Plan [Member] | Performance-Based Restricted Stock Units [Member] | ||
Share Incentive Plans [Abstract] | ||
Number of awards granted (in shares) | 440,232 | |
2015 Plan [Member] | Stock Options [Member] | ||
Share Incentive Plans [Abstract] | ||
Number of awards granted (in shares) | 613,832 | |
2015 Plan [Member] | Voting Common Stock [Member] | ||
Share Incentive Plans [Abstract] | ||
Number of shares authorized for issuance (in shares) | 1,400,000 | |
2006 Plan [Member] | ||
Share Incentive Plans [Abstract] | ||
Number of shares available for grant (in shares) | 0 |
Share Incentive Plans, Stock Op
Share Incentive Plans, Stock Option Activity (Details) - 2006 and 2015 Plans [Member] - Stock Options [Member] - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Incentive Shares [Roll Forward] | |||
Outstanding, beginning balance (in shares) | 696,716 | 659,574 | 659,574 |
Granted (in shares) | 155,000 | 180,780 | |
Exercised (in shares) | (42,407) | (129,067) | |
Forfeited (in shares) | (406) | (14,571) | |
Outstanding, ending balance (in shares) | 808,903 | 696,716 | |
Weighted Average Exercise Price [Abstract] | |||
Outstanding, beginning balance (in dollars per share) | $ 18.13 | $ 9 | $ 9 |
Granted (in dollars per share) | 14.85 | 43.89 | |
Exercised (in dollars per share) | 5.36 | 5.72 | |
Forfeited (in dollars per share) | 34.27 | 34.55 | |
Outstanding, ending balance (in dollars per share) | 18.16 | 18.13 | |
Weighted Average Grant Date Fair Value [Abstract] | |||
Outstanding, beginning balance (in dollars per share) | 6.17 | $ 3.34 | 3.34 |
Granted (in dollars per share) | 4.41 | 14.34 | |
Exercised (in dollars per share) | 2.50 | 2.58 | |
Forfeited (in dollars per share) | 11.07 | 11.10 | |
Outstanding, ending balance (in dollars per share) | $ 6.03 | $ 6.17 | |
Intrinsic value of options exercised | $ 0.9 | $ 0.8 |
Share Incentive Plans, Assumpti
Share Incentive Plans, Assumptions for Options Granted Under 2006 Plan (Details) - 2006 Plan [Member] - Stock Options [Member] | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Share Incentive Plans [Abstract] | |
Expected life | 10 years |
Exercise Price $3.83 [Member] | |
Share Incentive Plans [Abstract] | |
Number of options (in shares) | shares | 273,247 |
Exercise price (in dollars per share) | $ 3.83 |
Number of options exercisable (in shares) | shares | 273,247 |
Remaining lives | 3 years 3 months 11 days |
Expected life | 10 years |
Exercise price (in dollars per share) | $ 3.83 |
Risk free interest rate | 3.57% |
Expected volatility | 40.00% |
Dividend yield | 0.00% |
Fair value at grant date (in dollars per share) | $ 2.17 |
Share Incentive Plans, Assump_2
Share Incentive Plans, Assumptions for Options Granted Under 2015 Plan (Details) - 2015 Plan [Member] - Stock Options [Member] - $ / shares | Mar. 18, 2020 | Oct. 24, 2019 | Mar. 20, 2019 | Mar. 13, 2018 | Mar. 07, 2018 | May 17, 2017 | Feb. 10, 2017 | Mar. 31, 2020 |
February 10, 2017 [Member] | ||||||||
Share Incentive Plans [Abstract] | ||||||||
Number of options granted (in shares) | 40,000 | |||||||
Options outstanding (in shares) | 28,700 | |||||||
Number exercisable (in shares) | 28,700 | |||||||
Exercise price (in dollars per share) | $ 13 | |||||||
Remaining lives | 6 years 10 months 13 days | |||||||
Risk free interest rate | 1.89% | |||||||
Expected volatility | 27.44% | |||||||
Expected life | 6 years | |||||||
Dividend yield | 0.00% | |||||||
Fair value at grant date (in dollars per share) | $ 3.98 | |||||||
May 17, 2017 [Member] | ||||||||
Share Incentive Plans [Abstract] | ||||||||
Number of options granted (in shares) | 93,819 | |||||||
Options outstanding (in shares) | 66,572 | |||||||
Number exercisable (in shares) | 66,572 | |||||||
Exercise price (in dollars per share) | $ 15.41 | |||||||
Remaining lives | 7 years 1 month 17 days | |||||||
Risk free interest rate | 1.76% | |||||||
Expected volatility | 26.92% | |||||||
Expected life | 6 years | |||||||
Dividend yield | 0.00% | |||||||
Fair value at grant date (in dollars per share) | $ 4.60 | |||||||
March 7, 2018 [Member] | ||||||||
Share Incentive Plans [Abstract] | ||||||||
Number of options granted (in shares) | 98,100 | |||||||
Options outstanding (in shares) | 86,792 | |||||||
Number exercisable (in shares) | 58,298 | |||||||
Exercise price (in dollars per share) | $ 21.21 | |||||||
Remaining lives | 7 years 11 months 8 days | |||||||
Risk free interest rate | 2.65% | |||||||
Expected volatility | 28.76% | |||||||
Expected life | 6 years | |||||||
Dividend yield | 0.83% | |||||||
Fair value at grant date (in dollars per share) | $ 6.37 | |||||||
March 13, 2018 [Member] | ||||||||
Share Incentive Plans [Abstract] | ||||||||
Number of options granted (in shares) | 26,000 | |||||||
Options outstanding (in shares) | 26,000 | |||||||
Number exercisable (in shares) | 26,000 | |||||||
Exercise price (in dollars per share) | $ 21.49 | |||||||
Remaining lives | 7 years 11 months 16 days | |||||||
Risk free interest rate | 2.62% | |||||||
Expected volatility | 28.76% | |||||||
Expected life | 5 years 5 months 28 days | |||||||
Dividend yield | 0.82% | |||||||
Fair value at grant date (in dollars per share) | $ 6.18 | |||||||
March 20, 2019 [Member] | ||||||||
Share Incentive Plans [Abstract] | ||||||||
Number of options granted (in shares) | 155,780 | |||||||
Options outstanding (in shares) | 147,592 | |||||||
Number exercisable (in shares) | 50,262 | |||||||
Exercise price (in dollars per share) | $ 47.58 | |||||||
Remaining lives | 8 years 11 months 23 days | |||||||
Risk free interest rate | 2.34% | |||||||
Expected volatility | 30.95% | |||||||
Expected life | 6 years | |||||||
Dividend yield | 0.42% | |||||||
Fair value at grant date (in dollars per share) | $ 15.63 | |||||||
October 24, 2019 [Member] | ||||||||
Share Incentive Plans [Abstract] | ||||||||
Number of options granted (in shares) | 25,000 | |||||||
Options outstanding (in shares) | 25,000 | |||||||
Number exercisable (in shares) | 8,250 | |||||||
Exercise price (in dollars per share) | $ 20.89 | |||||||
Remaining lives | 9 years 6 months 25 days | |||||||
Risk free interest rate | 1.58% | |||||||
Expected volatility | 31.93% | |||||||
Expected life | 6 years | |||||||
Dividend yield | 0.95% | |||||||
Fair value at grant date (in dollars per share) | $ 6.27 | |||||||
March 18, 2020 [Member] | ||||||||
Share Incentive Plans [Abstract] | ||||||||
Number of options granted (in shares) | 155,000 | |||||||
Options outstanding (in shares) | 155,000 | |||||||
Number exercisable (in shares) | 0 | |||||||
Exercise price (in dollars per share) | $ 14.85 | |||||||
Remaining lives | 9 years 11 months 19 days | |||||||
Risk free interest rate | 0.79% | |||||||
Expected volatility | 35.72% | |||||||
Expected life | 6 years | |||||||
Dividend yield | 1.49% | |||||||
Fair value at grant date (in dollars per share) | $ 4.41 |
Share Incentive Plans, Compensa
Share Incentive Plans, Compensation Expense Related to Options (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Compensation Expense [Abstract] | ||
Compensation expense related to options | $ 0.2 | $ 0.2 |
Unrecognized compensation expense related to options | $ 1.5 | |
Period over which unrecognized compensation expense will be expensed | 2 years 1 month 20 days |
Share Incentive Plans, Performa
Share Incentive Plans, Performance-Based Restricted Stock Units (Details) - Performance-Based Restricted Stock Units [Member] - USD ($) $ / shares in Units, $ in Millions | Mar. 18, 2020 | Jul. 19, 2019 | Mar. 20, 2019 | Mar. 07, 2018 | Mar. 31, 2017 | Mar. 31, 2020 | Mar. 31, 2019 |
Share Incentive Plans [Abstract] | |||||||
Period between performance period and measurement date | 65 days | ||||||
PRSUs outstanding at March 31, 2020 (in shares) | 440,232 | ||||||
Compensation expense | $ 0.2 | $ 0.2 | |||||
Unrecognized compensation expense | $ 9 | ||||||
Employees [Member] | |||||||
Share Incentive Plans [Abstract] | |||||||
Performance period | 5 years | ||||||
March 31, 2017 [Member] | Employees [Member] | |||||||
Share Incentive Plans [Abstract] | |||||||
Number of PRSUs granted (in shares) | 94,000 | ||||||
PRSUs outstanding at March 31, 2020 (in shares) | 83,000 | ||||||
Fair value as of grant date (in dollars per share) | $ 15.60 | ||||||
Remaining lives | 1 year 9 months | ||||||
March 7, 2018 [Member] | Employees [Member] | |||||||
Share Incentive Plans [Abstract] | |||||||
Number of PRSUs granted (in shares) | 96,000 | ||||||
PRSUs outstanding at March 31, 2020 (in shares) | 93,000 | ||||||
Fair value as of grant date (in dollars per share) | $ 21.21 | ||||||
Remaining lives | 2 years 9 months | ||||||
March 20, 2019 [Member] | |||||||
Share Incentive Plans [Abstract] | |||||||
Number of PRSUs granted (in shares) | 4,901 | ||||||
PRSUs outstanding at March 31, 2020 (in shares) | 0 | ||||||
Fair value as of grant date (in dollars per share) | $ 47.58 | ||||||
Remaining lives | 0 years | ||||||
March 20, 2019 [Member] | Employees [Member] | |||||||
Share Incentive Plans [Abstract] | |||||||
Number of PRSUs granted (in shares) | 92,500 | ||||||
PRSUs outstanding at March 31, 2020 (in shares) | 85,650 | ||||||
Fair value as of grant date (in dollars per share) | $ 47.58 | ||||||
Remaining lives | 3 years 9 months | ||||||
July 19, 2019 [Member] | Employees [Member] | |||||||
Share Incentive Plans [Abstract] | |||||||
Number of PRSUs granted (in shares) | 88,582 | ||||||
PRSUs outstanding at March 31, 2020 (in shares) | 88,582 | ||||||
Fair value as of grant date (in dollars per share) | $ 52.15 | ||||||
Remaining lives | 2 years 9 months | ||||||
March 18, 2020 [Member] | Employees [Member] | |||||||
Share Incentive Plans [Abstract] | |||||||
Number of PRSUs granted (in shares) | 90,000 | ||||||
PRSUs outstanding at March 31, 2020 (in shares) | 90,000 | ||||||
Fair value as of grant date (in dollars per share) | $ 14.85 | ||||||
Remaining lives | 4 years 9 months |
Income Per Share (Details)
Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Per Share [Abstract] | ||
Consolidated net income | $ 3,275 | $ 6,560 |
Basic EPS [Abstract] | ||
Basic weighted average shares (in shares) | 19,689,446 | 19,559,596 |
Basic EPS (in dollars per share) | $ 0.17 | $ 0.34 |
Effect of Dilutive Securities [Abstract] | ||
Stock options (in shares) | 417,354 | 486,368 |
Diluted weighted average shares (in shares) | 20,106,800 | 20,045,964 |
Diluted EPS (in dollars per share) | $ 0.16 | $ 0.33 |
Income per Share [Abstract] | ||
Average stock price (in dollars per share) | $ 53.86 | |
Convertible Senior Notes [Member] | ||
Income per Share [Abstract] | ||
Shares excluded from calculation of diluted net income per share (in shares) | 3,202,808 |
Segment Information, Financial
Segment Information, Financial Information of Reportable Segments (Details) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2020USD ($)Segment | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | ||
Segment Information [Abstract] | ||||
Number of reportable segments | Segment | 3 | |||
Segment Information [Abstract] | ||||
Net sales | $ 90,689 | $ 91,628 | ||
Gross profit | 41,431 | 40,464 | ||
Operating income (loss) | 9,037 | 12,035 | ||
Interest expense, net | 4,994 | 3,856 | ||
Investment income | (91) | (144) | ||
Net periodic benefit income, excluding service cost | (87) | (11) | ||
Income before income taxes | 4,221 | 8,334 | ||
Capital expenditures | 877 | 886 | ||
Depreciation and amortization | 1,276 | 890 | ||
Assets | 449,320 | $ 446,584 | ||
NewGen Products [Member] | ||||
Segment Information [Abstract] | ||||
Net sales | 35,280 | 43,565 | ||
Corporate Unallocated [Member] | ||||
Segment Information [Abstract] | ||||
Operating income (loss) | [1] | (13,603) | (8,236) | |
Assets | [2] | 91,414 | 89,131 | |
Reportable Segments [Member] | Smokeless Products [Member] | ||||
Segment Information [Abstract] | ||||
Net sales | 26,495 | 22,544 | ||
Gross profit | 13,874 | 12,073 | ||
Operating income (loss) | 9,746 | 7,487 | ||
Capital expenditures | 860 | 577 | ||
Depreciation and amortization | 519 | 357 | ||
Assets | 128,406 | 120,723 | ||
Reportable Segments [Member] | Smoking Products [Member] | ||||
Segment Information [Abstract] | ||||
Net sales | 28,914 | 25,519 | ||
Gross profit | 16,132 | 13,484 | ||
Operating income (loss) | 12,417 | 9,946 | ||
Capital expenditures | 0 | 0 | ||
Depreciation and amortization | 0 | 0 | ||
Assets | 142,850 | 145,831 | ||
Reportable Segments [Member] | NewGen Products [Member] | ||||
Segment Information [Abstract] | ||||
Net sales | 35,280 | 43,565 | ||
Gross profit | 11,425 | 14,907 | ||
Operating income (loss) | 477 | 2,838 | ||
Capital expenditures | 17 | 309 | ||
Depreciation and amortization | 757 | $ 533 | ||
Assets | $ 86,650 | $ 90,899 | ||
[1] | Includes corporate costs that are not allocated to any of the three reportable segments. | |||
[2] | Includes assets not assigned to the three reportable segments. All goodwill has been allocated to the reportable segments. |
Segment Information, Revenue Di
Segment Information, Revenue Disaggregation - Sales Channel (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Net Sales by Sales Channel [Abstract] | ||
Net sales | $ 90,689 | $ 91,628 |
NewGen Products [Member] | ||
Net Sales by Sales Channel [Abstract] | ||
Net sales | 35,280 | 43,565 |
NewGen Products [Member] | Business to Business [Member] | ||
Net Sales by Sales Channel [Abstract] | ||
Net sales | 25,279 | 32,463 |
NewGen Products [Member] | Business to Consumer - Online [Member] | ||
Net Sales by Sales Channel [Abstract] | ||
Net sales | 8,134 | 8,219 |
NewGen Products [Member] | Business to Consumer - Corporate Store [Member] | ||
Net Sales by Sales Channel [Abstract] | ||
Net sales | 1,793 | 2,799 |
NewGen Products [Member] | Other [Member] | ||
Net Sales by Sales Channel [Abstract] | ||
Net sales | $ 74 | $ 84 |
Segment Information, Net Sales
Segment Information, Net Sales - Domestic vs. Foreign (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Segment Information [Abstract] | ||
Net sales | $ 90,689 | $ 91,628 |
Reportable Geographical Component [Member] | Domestic [Member] | ||
Segment Information [Abstract] | ||
Net sales | 87,568 | 88,769 |
Reportable Geographical Component [Member] | Foreign [Member] | ||
Segment Information [Abstract] | ||
Net sales | $ 3,121 | $ 2,859 |
Dividends and Share Repurchase
Dividends and Share Repurchase (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 10, 2020 | Mar. 31, 2020 | Feb. 25, 2020 |
Share Repurchase [Abstract] | |||
Share repurchase program authorized amount | $ 50,000 | ||
Total number of shares repurchased (in shares) | 134,130 | ||
Cost of shares repurchased | $ 2,627 | ||
Average price per share (in dollars per share) | $ 19.59 | ||
Dividend Declared Q1-2020 [Member] | Subsequent Event [Member] | |||
Dividends [Abstract] | |||
Cash dividend paid (in dollars per share) | $ 0.05 | ||
Dividend payable, date to be paid | Apr. 10, 2020 | ||
Dividend payable, date of record | Mar. 20, 2020 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event [Member] - Standard Diversified Inc. [Member] | Apr. 08, 2020USD ($) |
Reorganization [Abstract] | |
Common stock conversion ratio | 0.97 |
Net liabilities | $ 25,000 |