Vector Group reports Q1 net earnings of US$2.6M, compared to year-ago loss of US$1.7M, as revenues rise 41% to US$347.2M

MIAMI , May 13, 2014 (press release) – Vector Group Ltd. (NYSE:VGR) today announced financial results for the three months ended March 31, 2014.

On December 13, 2013, Vector Group increased its ownership of Douglas Elliman Realty, LLC from 50% to 70.59%. Consequently, after December 13, 2013, Vector Group consolidates the operations and financial position of Douglas Elliman Realty in its financial statements. It had previously accounted for its interest in Douglas Elliman under the equity method of accounting.

GAAP Financial Results

First quarter 2014 revenues were $347.2 million, compared to revenues of $246.2 million in the first quarter of 2013. The increase in revenues in 2014 was primarily due to the acquisition of Douglas Elliman and was partially offset by a decline in revenues in the Company's tobacco business. The Company recorded operating income of $42.7 million in the first quarter of 2014, compared to operating income of $43.1 million in the first quarter of 2013. Net income for the 2014 first quarter was $2.6 million, or $0.03 per diluted common share, compared to net loss of $1.7 million, or $(0.02) per diluted common share, in the 2013 first quarter.

Non-GAAP Financial Results

The Company's non-GAAP financial results are presented assuming the Company's acquisition of its additional 20.59% interest in Douglas Elliman Realty, LLC, and the related purchase accounting adjustments, occurred prior to January 1, 2013. Non-GAAP financial results also include adjustments for litigation settlement and judgment expenses in the Company's tobacco business, a one-time charge in 2013 related to the extinguishment of the Company's 11% Senior Secured Notes and non-cash interest items associated with the Company's convertible debt. Reconciliations of non-GAAP financial results to the comparable GAAP financial results for the three months ended March 31, 2014 and 2013 are included in Tables 2, 3, 4, 5 and 6.

Three months ended March 31, 2014 compared to the three months ended March 31, 2013

First quarter 2014 Pro-forma Adjusted Revenues (as described in Table 2 attached hereto) were $348.9 million compared to $320.7 million in 2013. The increase was primarily due to an increase in real estate revenues at Douglas Elliman and was partially offset by a decline in revenues in the Company's tobacco business.

Pro-forma Adjusted EBITDA attributed to Vector Group (as described below and in Table 3 attached hereto) was $50.9 million for the first quarter of 2014 as compared to $41.3 million for the first quarter of 2013. The increase in Pro-forma Adjusted EBITDA attributed to Vector Group were primarily attributable to higher profit margins in both the real estate and tobacco segments.

Pro-forma Adjusted Net Income (as described below and in Table 4 attached hereto) was $14.6 million or $0.15 per diluted share for the three months ended March 31, 2014 and $11.1 million or $0.12 per diluted share for the three months ended March 31, 2013.

Pro-forma Adjusted Operating Income (as described below and in Table 5 attached hereto) was $47.6 million for the three months ended March 31, 2014 and $37.4 million for the three months ended March 31, 2013.

Tobacco Business Financial Results

For the three months ended March 31, 2014, the Company's tobacco business had revenues of $233.4 million, compared to $240.4 million for the three months ended March 31, 2013. The decline in revenues was primarily due to a decline in unit sales of 6.0% in the first quarter of 2014 compared to the first quarter of 2013 and was partially offset by higher pricing in the tobacco business. Operating income was $42.9 million for the first quarter of 2014 and $47.2 million for the first quarter of 2013. Tobacco Adjusted Operating Income (described below and included in Table 6 attached hereto) for the first quarter of 2014 and 2013 was $44.4 million and $41.6 million, respectively.

Non-GAAP Financial Measures

Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income are financial measures not prepared in accordance with generally accepted accounting principles (“GAAP”). The Company believes that Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income are important measures that supplement discussions and analysis of its results of operations and enhances an understanding of its operating performance. The Company believes Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income provide investors and analysts with a useful measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. Management uses Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income as measures to review and assess operating performance of the Company's business, and management and investors should review both the overall performance (GAAP net income) and the operating performance (Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income) of the Company's business. While management considers Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income to be important, they should be considered in addition to, but not as substitutes for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating income, net income and cash flows from operations. In addition, Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income are susceptible to varying calculations and the Company's measurement of Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusted Operating Income may not be comparable to those of other companies. Attached hereto as Tables 2, 3, 4, 5 and 6 is information relating to the Company's Pro-forma Adjusted Revenues, Pro-forma Adjusted EBITDA, Pro-forma Adjusted Net Income, Pro-forma Adjusted Operating Income and Tobacco Adjusting Operating Income for the three months ended March 31, 2014 and 2013.

Conference Call to Discuss First Quarter 2014 Results

As previously announced, the Company will host a conference call and webcast on Tuesday, May 13, 2014 at 9:00 A.M. (ET) to discuss first quarter 2014 results. Investors can access the call by dialing 800-859-8150 and entering 96728866 as the conference ID number. The call will also be available via live webcast at www.investorcalendar.com. Webcast participants should allot extra time to register before the webcast begins.

A replay of the call will be available shortly after the call ends on May 13, 2014 through June 13, 2014. To access the replay, dial 877-656-8905 and enter 96728866 as the conference ID number. The archived webcast will also be available at www.investorcalendar.com for one year.

Vector Group is a holding company that indirectly owns Liggett Group LLC, Vector Tobacco Inc. and Zoom E-Cigs LLC and directly owns New Valley LLC, which owns a controlling interest in Douglas Elliman Realty, LLC. Additional information concerning the company is available on the Company's website, www.VectorGroupLtd.com.

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