Vector Group Annual Report 2021 Form 10-K (NYSE:VGR) Published: March 1st, 2021 PDF generated by stocklight.com SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________________________ Form 10-K _____________________________________________ ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended December 31, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 _____________________________________________ VECTOR GROUP LTD. (Exact name of registrant as specified in its charter) _____________________________________________ Delaware 1-5759 65-0949535 (State or other jurisdiction of incorporation Commission File Number (I.R.S. Employer Identification No.) incorporation or organization) 4400 Biscayne Boulevard Miami, Florida 33137 305-579-8000 (Address, including zip code and telephone number, including area code, of the principal executive offices) _____________________________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class: Trading Symbol(s) Name of each exchange on which registered: Common stock, par value $0.10 per share VGR New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes o No Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. o Yes þ No Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting Emerging Growth ☑ ☐ ☐ ☐ company ☐ Company Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ Indicate by check mark whether the Registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. ☐ Yes þ No The aggregate market value of the common stock held by non-affiliates of Vector Group Ltd. as of June 30, 2020 was approximately $1.43 billion. At February 26, 2021, Vector Group Ltd. had 154,194,629 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Part III (Items 10, 11, 12, 13 and 14) from the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission no later than 120 days after the end of the Registrant’s fiscal year covered by this report. VECTOR GROUP LTD. FORM 10-K TABLE OF CONTENTS Page PART I Item 1. Business 3 Item 1A. Risk Factors 17 Item 1B. Unresolved Staff Comments 32 Item 2. Properties 32 Item 3. Legal Proceedings 33 Item 4. Mine Safety Disclosures 33 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34 Item 6. Selected Financial Data 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59 Item 8. Financial Statements and Supplementary Data 60 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 60 Item 9A. Controls and Procedures 60 Item 9B. Other Information 62 PART III Item 10. Directors, Executive Officers and Corporate Governance 63 Item 11. Executive Compensation 63 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 63 Item 13. Certain Relationships and Related Transactions, and Director Independence 63 Item 14. Principal Accounting Fees and Services 63 PART IV Item 15. Exhibits and Financial Statement Schedules 64 Item 16. Form 10-K Summary 68 SIGNATURES 69 EX-10.22 EX-21 EX-22 EX-23.1 EX-31.1 EX-31.2 EX-32.1 EX-32.2 EX-99.1 EX-99.2 EX-101 INSTANCE DOCUMENT - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. EX-101 SCHEMA DOCUMENT EX-101 CALCULATION LINKBASE DOCUMENT EX-101 LABELS LINKBASE DOCUMENT EX-101 PRESENTATION LINKBASE DOCUMENT EX-101 DEFINITION LINKBASE DOCUMENT 2 PART I ITEM 1. BUSINESS Overview Vector Group Ltd., a Delaware corporation, is a holding company and is engaged principally in two business segments: • Tobacco: the manufacture and sale of cigarettes in the United States through our Liggett Group LLC (“Liggett”) and Vector Tobacco Inc. (“Vector Tobacco”) subsidiaries, and • Real Estate: the real estate services, technology and investment business through our subsidiary New Valley LLC (“New Valley”), which (i) owns Douglas Elliman Realty, LLC (“Douglas Elliman”), (ii) has interests in numerous real estate projects across the United States and (iii) is seeking to acquire or invest in additional real estate services, technologies, properties or projects. Douglas Elliman operates the largest residential brokerage company in the New York metropolitan area and also conducts residential real estate brokerage operations in Florida, California, Connecticut, Massachusetts, Colorado, New Jersey and Texas. Strategy Our strategy is to maximize stockholder value by increasing the profitability of our subsidiaries in the following ways: Liggett and Vector Tobacco • Continue to offer an excellent value proposition in the U.S. cigarette industry by consistently delivering high quality products within the discount segment; • Capitalize on our tobacco subsidiaries’ cost advantage in the United States cigarette market due to the favorable treatment that they receive under the Master Settlement Agreement (“MSA”); • Focus marketing and selling efforts on the discount segment, continue to build volume and margin in core discount brands ( Eagle 20’s, Pyramid, Montego, Grand Prix, Liggett Select and Eve) and utilize core brand equity to selectively build distribution; • Selectively expand the portfolio of partner brands and private label brands utilizing a pricing strategy that offers long-term price stability for customers; • Increase operational efficiency by developing and adopting an organizational structure to maximize profit potential; and • Identify, develop and launch relevant new tobacco products to the market in the future. New Valley • Continue to grow Douglas Elliman’s operations by utilizing its strong brand name recognition and pursuing strategic and financial opportunities, including entry into new markets and expanding ancillary services, which are complementary to Douglas Elliman’s core residential brokerage business, offered to Douglas Elliman’s customers; • Identifying and investing in property technology (“PropTech”) opportunities that, in addition to maximizing stockholder value, will supplement and enhance the technology-based experience of Douglas Elliman’s agents as well as create synergies to reduce operating expenses at Douglas Elliman; • Continue to leverage our expertise as direct investors by actively pursuing real estate investments, including PropTech opportunities, in the United States and abroad; and • Invest our excess funds opportunistically in real estate situations that we believe can maximize stockholder value. Tobacco Operations General. Our Tobacco segment operates through our two subsidiaries, Liggett and Vector Tobacco. Liggett is the operating successor to Liggett & Myers Tobacco Company, which was founded in 1873. Vector Tobacco is a discount cigarette manufacturer selling product in the deep discount category. In this report, certain references to “Liggett” refer to our tobacco operations, including the business of Liggett and Vector Tobacco, unless otherwise specified. For the year ended December 31, 2020, Liggett was the fourth-largest manufacturer of cigarettes in the United States in terms of unit sales. Liggett’s manufacturing facilities are located in Mebane, North Carolina where it manufactures most of Vector Tobacco’s cigarettes pursuant to a contract manufacturing agreement. At present, Liggett and Vector Tobacco have no foreign operations. The U.S. cigarette market consists of premium cigarettes, which are generally marketed under well-recognized brand names at higher retail prices to adult smokers with a strong preference for branded products, and discount cigarettes, which are marketed at lower retail prices to adult smokers who are more value conscious. In recent years, however, the discounting of premium cigarettes has become far more significant in the