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Vector Group Reports Third Quarter 2012 Financial Results

Vector Group Ltd. (NYSE: VGR) today announced financial results for the three and nine months ended September 30, 2012.

Third quarter 2012 revenues were $272.8 million, compared to revenues of $289.0 million in the third quarter 2011. The decline in revenues in 2012 was primarily due to decreased unit sales of approximately 10.7% in the 2012 period compared to the 2011 period, which was partially offset by higher pricing. The Company recorded operating income of $43.2 million in the third quarter of 2012, compared to operating income of $37.9 million in the third quarter of 2011. Net income for the 2012 third quarter was $17.9 million, or $0.21 per diluted common share, compared to $17.5 million, or $0.20 per diluted common share, in the 2011 third quarter. The results for the three months ended September 30, 2012 included a pretax loss from the acceleration of interest expense of $7.1 million related to the conversion of the Company's convertible debt and pre-tax gains related changes in the fair value of derivatives embedded within convertible debt of $6.0 million. Adjusting for these items, third quarter 2012 net income was $18.6 million or $0.21 per diluted share. The results for the three months ended September 30, 2011 included pre-tax gains from changes in the fair value of derivatives embedded within convertible debt of $4.4 million and the liquidation of long-term investments of $2.2 million. Adjusting for the pre-tax gains, third quarter 2011 net income was $13.6 million or $0.16 per diluted share.

For the nine months ended September 30, 2012, revenues were $807.0 million, compared to $840.6 million for the first nine months of 2011. The decline in revenues in 2012 was primarily due to decreased unit sales of approximately 7.9% in the 2012 nine-month period compared to the 2011 period, which was partially offset by higher pricing. The Company recorded operating income of $117.6 million for the 2012 nine-month period, compared to operating income of $107.3 million for the 2011 period. Net income for the 2012 nine-month period was $14.1 million, or $0.16 per diluted common share, compared to net income of $67.2 million, or $0.78 per diluted common share, for the 2011 period. The results for the nine months ended September 30, 2012 included pre-tax losses from changes in the fair value of derivatives embedded within convertible debt of $21.0 million and the acceleration of interest expense of $15.0 million related to the conversion of the Company's convertible debt. Adjusting for these items, net income for the nine months ended September 30, 2012 was $35.6 million or $0.42 per diluted share. The results for the nine months ended September 30, 2011 included pre-tax gains from the liquidation of long-term investments of $25.8 million, changes in the fair value of derivatives embedded within convertible debt of $13.2 million and the sales of townhomes of $3.7 million offset by a pretax loss from the acceleration of interest expense of $1.2 million related to the conversion of the Company's convertible debt. Adjusting for these items, net income for the nine months ended September 30, 2011 was $42.6 million or $0.50 per diluted share.

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