Vector Group Ltd. (NYSE:VGR) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 08:30 am ET

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Vector Group Ltd. (NYSE:VGR) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Rupert Jones

It's absolute pleasure to welcome Vector Group back to take this conference, and particularly, Bryant Kirkland, CFO; Ron Bernstein, CEO of Liggett Vector Brands. Vector Group is the fourth-largest manufacturer of cigarettes in the US and that's -- I think we are going to focus on more this afternoon, outside the proxy investments. And are primarily operating in the core discount sector and which has been a very dynamic space over the last 12 months and longer. Today, we'll have a presentation and then very much open up the Q&A and there's no breakout. We look forward to the presentation and get started with the Q&A.

Executive
James Bryant Kirkland

Rupert, we always enjoy speaking at the Barclays Consumer Staples Conference and appreciate the invitation every year. As Rupert said, my name is Bryant Kirkland, I'm Vector's CFO. With me is Ron Bernstein, who is CEO of Liggett Vector Brands, which is Vector's largest subsidiary. Ron and I have each been with Vector Group for more than 26 years. We will be speaking today for the presentation on the screen, which is also available in the Investor Relations section of Vector Group Limited's website www.vectorgrouplimited.com

(Forward-Looking Cautionary Statements)

Now, moving to page three of the presentation. This is a summary of the Vector Group Limited, which I will discuss. Ron will then speak about Vector's Tobacco segment. I will then speak about the Company's Real Estate segment and provide summary remarks. We will then be available to answer any questions.

In summary, Vector is a diversified holding company, with two unrelated, but complementary operating segments: Tobacco and Real Estate. These segments operate in unrelated industries and are complementary, because Tobacco has historically provided stable cash flow and Real Estate has provided significant revenue growth in recent years.

Importantly, these two businesses have iconic names, each with more than 100 years of a stellar reputation, Liggett in Tobacco and Douglas Elliman in Real Estate. Both businesses have been in investment phase in 2017 and 2018, as Douglas Elliman has expanded into new markets and has continued to build its development and marketing division, while Liggett has invested in increasing its retail market share, which for the first time in more than 30 years is more than 4%. We will discuss these investment programs later.

Liggett's last 12 months EBITDA, 248 million, and very importantly, the Master Settlement Agreement provides Liggett with an annual cost advantage of approximately $165 million per year over its largest competitors. Ron will discuss this business, this -- excuse me, this benefit and how it relates to Liggett's strategy later.

Douglas Elliman's last 12 months' revenues are 733 million and last 12 months' EBITDA is 5.9 million. Over the past four years, Douglas Elliman's revenues have grown by approximately 45% from 503 million to 733 million. In addition to Douglas Elliman, Vector's Real Estate segment also includes a diversified portfolio of real estate investments and this portfolio is carried at approximately 175 million at June 30th, 2018.

Further, at June 30th, 2018,