Q4 2023 Vector Group Ltd Earnings Call
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Company Representative: Good day everyone and welcome to Vector Group Ltd's fourth quarter 2023 earnings conference call. This call is being recorded and seems to have been waived.
Good day, everyone and welcome to vector group L. P fourth quarter 2023 earnings conference call.
This call is being recorded and human kills me webcast, an archived version of the webcast will be available on the Investor Relations section of the company's website located at Www Dot vector group L. P. P dot com during.
Company Representative: An archived version of the webcast will be available on the Investor Relations section of the company's website, located at www.vectorgroupltd.com. During this call, the terms Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, and Tobacco Adjusted Operating Income will be used. These terms are non-GAAP financial measures and should be considered in addition to, but not as a substitute for, other measures financial performance is prepared in accordance with. Reconciliations to Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, and Tobacco Adjusted Operating Income are contained in the company's earnings release, which has been posted to the Investor Relations section of the company's webcast. Before the call begins, The events made during this conference call that are not historical are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in more detail in the company's Securities and Exchange Commission filings.
During this call the terms adjusted operating income adjusted net income adjusted EBITDA and a buck and tobacco adjusted operating income will be used. These terms are non-GAAP financial measures and should be considered in addition to but not as a substitute for other measures of financial performance prepared in.
Ordinance we'd cap.
Reconciliations to adjusted operating income adjusted net income adjusted EBITDA and tobacco adjusted operating income are contained in the company's earnings release, which has been posted to the Investor Relations section of the company's west guys Biff.
Before the call begins I would like to read our safe Harbor statement.
The statements made during this conference call that are not historical fact are forward looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward looking statements. These risks are described in more detail in the company's securities and <unk>.
Exchange Commission filings.
Howard M. Lorber: And now I would like to turn the call over to President and Chief Executive Officer of Vector Group, Howard Lorber. Good morning, and thank you for joining us for Vector Group's 4th Quarter 2023 Earnings Conference Call. With me today are Richard Lampin, our Chief Operating Officer, Brian Kirkland, our Chief Financial Officer, and Nick Anson, President and Chief Operating Officer of Liggett Vector Brand. After updating you on our balance sheet, I will then review Vector's consolidated financial results for the fourth quarter of 2023. Then I will ask Nick to summarize the performance of our tobacco business. I will close with final comments and open the call for questions.
Now I would like to turn the call over to President and Chief Executive Officer of vector Group Howard Colorbearer.
Good morning, and thank you for joining us for vector group's fourth quarter 2020 Free earnings Conference call with me today are Richard Lamping, Our Chief operating Officer, Brian Kirkland, Our Chief Financial Officer, and Nick Anson, President and Chief operating officer of Liggett vector brands.
If you're updating you on our balance sheet I will then review factors consolidated financial results for the fourth quarter of 2023.
Then I'll ask Nick to summarize the performance of our tobacco business I will close with final comments and open the call for questions.
Howard M. Lorber: Turning to our balance sheet, as of December 31, 2023, we maintain significant liquidity with cash and cash equivalents of approximately $269 million, including cash of $17 million at. We also hold investment securities and longer-term investments with a fair value of approximately $158 million. Turning to Vector Group's consolidated results for the three months ended December 31, 2023. Vector's revenue for the fourth quarter of 2023 was $360.4 million, compared to $363.8 million in the corresponding 2022 period.
Turning to our balance sheet as of December 31, 2023, we maintained significant liquidity with cash and cash equivalents of approximately $269 million.
Cash of 17 million that.
We also held investment securities and long term investments with a fair value of approximately 158 million.
Turning to vector group's consolidated results for the three months ended December 31st 2023.
<unk> revenue for the fourth quarter of 2023, with $360 4 million compared to $363 8 million and the corresponding 'twenty to 'twenty two period.
Howard M. Lorber: Net income increased to $58 million or $0.37 per diluted common share, up from $48.2 million or $0.30 per diluted common share in the 2022 period. Adjusted EBITDA increased to $96 million, up from $92.7 million in the 2022 period; adjusted net income increased to $57.5 million or $0.36 per diluted share, up from $48.9 million or $0.31 per diluted share in the 2022 period. Now turning to Vector Group's Consolidated Results for Operations for the year ending December 30, 2023. Vector's revenue for the year was $1.42 billion, compared to $1.44 billion in the corresponding 2022 period. Net income increased to $183.5 million, or $1.16 per diluted common share, up from $158.7 million, or $1.01 per diluted common share in the 2022 period. Adjusted EBITDA increased to $363.2 million, up from $352.2 million in the 2022 period, and adjusted net income increased to $194.3 million, or $1.23 per diluted share, up from $153.4 million, or $0.97 per diluted share in Thank you, Howard, and good morning.
Net income increased to 58 million or <unk> 37 cents per diluted common share up from $48 2 million or 30 cents per diluted common share in the 2022 period.
Adjusted EBITDA increased to $96 million up from $92 7 million in the 2022 period.
Adjusted net income increased to $57 5 million or 36 cents per diluted share up from $48 9 million or 31 cents per diluted share into 2022 period.
Now turning to vector group's consolidated results from <unk>.
Operations for the year ended December 30 of 2023.
<unk> revenue for the year were 1.42 billion compared to 1.44 billion and the corresponding 'twenty to 'twenty two period.
Net income increased to $183 5 million or $1 16 per diluted common share up from $158 7 million or a dollar in one cent per diluted common share in the 2022 period.
Adjusted EBITDA increased to $363 2 million up from $352 2 million in the 2022 period.
Adjusted net income increased to $194 3 million or $1 23 per diluted share up from $153 4 million or <unk> 97 cents per diluted share in the 2022 period I will.
I'll now turn it over to Nick to discuss our tobacco businesses Nick.
Thank you Howard and good morning.
Nick Anson: 2023 marked the 150th anniversary of Liggett's founding, an important milestone that we celebrated in part by delivering one of the best operational and market performances in the company's history. In 2023, our annual retail market share grew 30 basis points to 5.8%, the highest it's been in more than 50 years. We also delivered record-adjusted EBITDA of $370.6 million, up 5.5% from the prior year period.
2023 marked the 150th anniversary of Liggett founding.
An important milestone that we celebrated in PAH by delivering one of the best operational and market performances in the Companys history.
In 2023 annual retail market share grew 30 basis points to five 8% the highest it's been in more than 50 years.
We also delivered record adjusted EBITDA of $376 million.
Up five 5% from the prior year period and.
Nick Anson: In addition, as reported in the third quarter, Montego became the largest discount brand in the United States and remains the country's fourth largest brand. Montego's performance reinforces the benefits of our targeted investment strategy and ongoing commitment to provide consumers with excellent value in this category. Liggett's operating income in the fourth quarter increased by $5.2 million, or 5.6% compared to the prior year period, while our retail market share remains stable at 5.8%, reflecting the continued success of Montego. We are pleased with our year-over-year earnings growth and believe we are outperforming our peers amid a challenging income environment for the industry. In the fourth quarter of 2023, Montego's distribution expanded to approximately 95,000 stores, up from 77,000 stores in the prior year period. Montego's national retail market share also increased to 3.8% in the fourth quarter of 2023, up from 3.2% in the prior year period.
In addition, as reported in the third quarter Monte go became the largest discount brand in the United States. It remains it remains the country's fourth largest brand.
Monte you guys performance reinforces the benefits of our targeted investment strategy and ongoing commitment to provide consumers with excellent value in this category.
They get to operating income in the fourth quarter increased by $5 2 million or five 6% compared to the prior year period.
While our retail market share remained stable at five 8%, reflecting the continued success of montego.
We are pleased with our year over year earnings growth and believe we are outperforming our peers amid a challenging income environment for the industry.
In the fourth quarter of 2023 months. He goes distribution expanded to approximately 95000 stores up from 77000 stores in the prior year period.
Monte you guys National retail market share also increased to three 8% in the fourth quarter of 2023 up from three 2% in the prior year period.
Nick Anson: Montego's positioning at the top of the discount category is particularly noteworthy considering our strategic price increases and the brand's improved gross profit margin. Despite these increases, the price gap between Montego and the industry's leading premium brands has remained stable in the range of a 45-50% discount at retail. Our strategy with Montego remains consistent with our long-term objective of optimizing profit by effectively managing volume, pricing, and market share in our value-based brand portfolio. Over the past 20 years, Liggett has been successful at introducing multiple brands and managing them through an investment cycle that leads to long-term profits, a process that requires constant market analysis and adjustment. Looking to the year ahead, we expect our retail market share to remain stable as we gradually increase the return on our Montego Investments.
Monte you guys positioning of the top of the discount category is particularly noteworthy considering all strategic price increases and the brands improved gross profit margins.
Despite these increases the price gap between months he go and the industry's leading premium brands has remained stable in the range of 45% to 50% discount at retail.
Our strategy with Montego remains consistent with our long term objective of optimizing profit by effectively managing volume pricing and market share and value based brand portfolio.
Okay.
20 years Liggett has been successful at introducing multiple brands and managing them through an investment cycle that leads to long term profits a process that requires constant market analysis and adjustments.
Looking to the year ahead, we expect our retail market share to remain stable as we gradually increase the return on a monthly go investment.
Nick Anson: While our success with Montego has expanded our foundation for long-term earnings growth, we continue to derive significant benefits from Eagle 20s and Pyramid, which deliver substantial income and market presence. From a broader industry perspective, the deep discount segment remains strong and continues to outperform the overall U.S. cigarette market. As a leading Wall Street tobacco analyst recently observed, increased downtrading suggests price-conscious tobacco consumers are not as brand loyal as they have been historically. Additionally, as consumers select more affordable options, particularly brands like Montego, they recognize that the product quality is on par with more expensive brands.
While our success with Montego has expanded our foundation for long term earnings growth. We continued to reap significant benefits from Eagle Twenty's and pyramid, we still have a substantial income our market presence.
From a broader industry perspective, the deep discount segment remains strong and continues to outperform the overall U S cigarette market.
As a leading wall Street tobacco analyst recently observed increased down trading suggests price conscious tobacco casinos.
As brand loyal as they have been historically additionally, as consumers select more affordable options, particularly brands like montego. They recognize that the product quality is on par with more expensive brands.
Nick Anson: During the fourth quarter of 2023, based on Management Science Associates' retail data, the deep discount category increased 8.1% while industry volumes declined 8.5% compared to the same period last year. As a result, for the three months ended December 31st, 2023, the deep discount segment comprised 15.3% of the overall market, up from 12.9% in the same period a year ago and 14.6% in the third quarter of 2023. This segment continues to present an attractive price option for consumers, and we are confident that our value-focused brand portfolio and national distribution provide Legate with a meaningful competitive advantage as the migration to deep discount continues. According to data from Management Science Associates, Liggett's fourth-quarter retail shipments declined by 8.4 percent compared to the same period in 2022, while industry retail shipments declined by 8.5 percent. In addition, Liggett's fourth-quarter wholesale shipments declined by 7.4% compared to the same period in 2022, while industry wholesale shipments declined by 9.5%. This offsets Liggett's third-quarter wholesale shipment performance and reinforces the inconsistent nature of short-term wholesaler purchasing patterns.
During the fourth quarter of 2023 based on management Science Associates retail data the.
The deep discount category increased eight 1% while industry volumes declined eight 5% compared to the same period last year.
As a result for the three months ended December 31st 2023, the deep discount segment comprised 15, 3% of the overall market up from 12, 9% in the same period, a year ago and 14, 6% in the third quarter of 2023.
This segment continues to present, an attractive price option for consumers and we are confident that our value focused brand portfolio and national distribution provider with a meaningful competitive advantage as the migration to deep discount continues.
According to data from management Science Associates, Liggett's fourth quarter retail shipments declined by eight 4% compared to the same period in 2022, while industry retail shipments declined by eight 5%.
In addition, like it's fourth quarter wholesale shipments declined by seven 4% compared to the same period in 2022, while industry wholesale shipments declined by nine 5%.
This offsets liggett's third quarter wholesale shipment performance and reinforces the inconsistent nature of short time wholesaler purchasing patents.
Nick Anson: As we have noted in the past, we believe that retail shipments are a significantly more reliable indicator of industry volume performance. I will now turn to the Consolidated Tobacco Financials for Liggett Group and Vector Tobacco. For the three months ended December 31st, 2023, revenues declined slightly to $360.4 million from $363.8 million in the fourth quarter of 2022. This decline was attributable to the previously referenced 7.4% decrease in wholesaler shipments during the period, which was partially offset by a 7.2% increase in pricing.
As we have noted in the past, we believe that retail shipments are a significantly more reliable indicator of industry volume performance.
I will now turn to the consolidated tobacco financials for Liggett group and back to the back half.
So the three months ended December 31, 2023 revenues declined slightly to $364 million from $363 8 million in the fourth quarter of 2022. This decline was attributable to the previously referenced seven 4% decrease.
In wholesale shipments during the period, which was partially offset by seven 2% increase in pricing.
Nick Anson: For the year ended December 31st, 2023, revenues were flat in comparison to the prior year at $1.42 billion. This reflects a 6.8% increase in pricing, which is offset by a 6.4% decrease in wholesale shipment volume. Legislative Operating Income for the three months into December 31, 2023 increased 5.6% to $98.1 million compared to $93 million in the corresponding 2022 period. For the year ended December 31st, 2023, Liggett's operating income declined $346.7 million compared to $347 million in 2022. The 2023 results include a one-time $18 million charge in the second quarter related to the settlement of a long-standing dispute with Mississippi over our 1996 settlement agreement. Tobacco-adjusted EBITDA in the fourth quarter increased 5.4% to $99.6 million compared to $94.5 million for the corresponding prior year period. For the year ended December 31st, 2023, tobacco-adjusted EBITDA increased 5.5% to $370.6 million, compared to $351.1 million in 2022. Liggett's fourth quarter adjusted operating income increased 5.5% to $98.1 million compared to $93 million in the prior year period.
For the year ended December 31, 2020 through revenues were flat in comparison to the prior year at 140 billion.
This reflects a six 8% increase in pricing, which was offset by a six 4% decrease in wholesale shipment volumes.
I think its operating income for the three months ended December 31, 2023 increased five 6% to $98 1 million compared to $93 million in the corresponding 2022 period.
For the year ended December 31, 2023, like its operating income declined $346 7 million compared to $347 million in 2022.
The 2023 results include a one time $18 million charge in the second quarter related to the settlement of a longstanding dispute with Mississippi over 1996 settlement agreement.
Tobacco adjusted EBITDA in the fourth quarter increased five 4% to $99 6 million compared to $94 $5 million for the corresponding prior year period.
For the year ended December 31, 2023, tobacco adjusted EBITDA increased five 5% to $370 6 million compared to $351 1 million in 2022.
<unk> fourth quarter, adjusted operating income increased five 5% to $98 1 million compared to $93 million in the prior year period.
Nick Anson: Our fourth quarter gross margin comprised 33.8% of revenues, representing an increase of 190 basis points compared to the fourth quarter of 2022 and approximately 130 basis points sequentially. On the regulatory front for the latest published Health and Human Services Unified Agenda, we anticipate a final regulatory ruling from the FDA in the near term. As we have previously discussed, while we have always supported reasonable regulation based on sound scientific evidence, we remain firm in our position that prohibition is not the right answer, as it inevitably drives unintended consequences such as the growth of illicit, unregulated markets. We expect any final ruling that includes a ban on menthol will be vigorously challenged by the industry.
Our fourth quarter gross margin comprised 33, 8% of revenues, representing an increase of 190 basis points compared to the fourth quarter of 2022, and approximately 130 basis points sequentially.
Yeah.
On the regulatory front by the latest published health and human services Unified agenda, we anticipate a final mental ruling from the FDA in the near term as.
As we have previously discussed while we have always supported reasonable regulation based on sound scientific evidence we remain firm in our position that prohibition is not the right answer as it inevitably drives unintended consequences, such as the growth of illicit unregulated markets.
We expect any final ruling that includes a ban on menthol will be vigorously challenged by the industry.
Nick Anson: In summary, the operational and financial performance of our tobacco business remains strong, and our retail market share gains and profit growth validate our long-term strategy and competitive advantages in the discount segment. As leaders of the only growth segment in the market, with the nation's number one discount brand, we have a great platform to build on. Our market plans for 2024 have been carefully developed, and our mission to provide the best value proposition in the U.S. market have never been more relevant. While we are operating in an increasingly competitive environment, our proven expertise and leadership in the discount segment positions us well to continue our momentum and build on our foundation for long-term earnings growth. Thanks for your attention, and back to you, Howard. Thank you, Nick.
In summary, the operational and financial performance of our tobacco business remains strong and our retail market share gains and profit growth validate our long term strategy and competitive advantages in the discount segment.
As leaders of the only growth segment in the market with the nation's number one discount brand we have a great platform to build on our.
Our market plans for 2024 have been carefully developed and our mission to provide the best value proposition in the U S market has never been more relevant.
While we are operating in an increasingly competitive environment, our proven expertise and leadership in the discount segment positions us well to continue our momentum and build on our foundation for long term earnings growth.
Thanks for your attention.
Back to you Howard.
Thank you Nick in summary, we are pleased with our fourth quarter and full year 2023 results as well as our long standing practice of paying a quarterly cash dividend. We expect that this dividend policy will continue.
Howard M. Lorber: In summary, we are pleased with our fourth quarter and full year 2023 results, as well as our long-standing practice of paying a quarterly cash dividend. We expect that this dividend policy will continue. Now, operator, please open the call for questions. And at this time, if you would like to ask a question, please press star and 1 on your telephone keypad. You may withdraw your question at any time by pressing star 2.
Now operator, please open the call for questions.
And at this time, if you would like to ask a question. Please press star one on your telephone keypad.
Draw your question at any time.
Star two.
Operator: Once again, to ask a question, please press star and 1 on your telephone keypad. And we will take our first question from Hale Holden on Barclays. Please go ahead. Hey, good morning.
Once again Chuck a question. Please press star one on your telephone keypad.
We will take our first question from Hale Holden with Barclays. Please go ahead.
Hey, good morning.
Hale Holden: Nick, I think you said that you expected market share to kind of remain flat going forward as you focus on profits. So I guess the question I have is this: The implications are negative volumes for this year, but potentially higher margin. Is that how you're thinking about the go forward? Yeah, I mean, certainly as in the past, with our kind of investment and return cycles that we've done with previous brands, we go through a growth cycle, growing the volume, building a base of business, then, ultimately, slowly and prudently looking to get a return on that business. And so obviously, we've gone through a tremendous growth phase with Montego, we've built a very good base of business, and now we're The good news is how Montego, the brand...
I think you said.
That you expected market share to kind of remain flat going forward as you focus on profits.
I guess the question I have is.
<unk>.
The implication is negative volumes for this year, but potentially higher margin.
How youre thinking about it.
Go for it.
Yeah.
Yes, I mean, certainly as in the past held with all kind of investment and return cycles that we've done with previous brands. We go through our growth cycle growing the volume building a base of business and ultimately slowly and prudently looking to get a return on that business and so obviously, we've gone through a.
This growth phase with Montego, we've built a very good base of business and now we're at that stage of a prudently starting to to realize a return on that business. The good news how the montego the brand.
Nick Anson: So, even though we've taken those price increases, they've still been gaining market share, which is very encouraging. But overall, certainly, our market share has stabilized, so for the foreseeable future here, yes, stable market share, and continued return on the Montego investment. Great.
Even though we've taken those price increases has still been gaining market share, which is very encouraging but overall suddenly all our.
Our market share has stabilized so for the foreseeable future here, yes stable market share continued return on the Montego investment.
Bryant Kirkland: Thank you. And then, Bryant, I'm sure I'll see you in the 10K, but I was wondering if you could tell us if you had repurchased any of the 2026 bonds in the quarter. Good morning, Hal.
Great. Thank you and then.
Alright.
I'm sure I'll see it in the 10-K, but I was wondering if you could tell us if you had repurchased any of our 2026 months in the quarter.
Good morning.
Bryant Kirkland: And we also were pleased by the recent upgrade on our bonds. In addition to that, we did repurchase $15.1 million of our 10.5% senior notes to 2026. The balance of those notes, outstanding right now is about $519 million. Thank you very much.
And we also were pleased by recent upgrade on our bonds.
In addition to that we did repurchased $15 $1 million of our 10, 5% senior notes due 2026.
The balance of.
Outstanding right now is about $519 million on those.
Thank you very much I appreciate it guys.
Ian Zaffino: I appreciate it, guys. Thank you, and our next question comes from Ian Zaffino with Oppenheimer. Please go ahead. I agree. Thank you very much. Um, you know, just want to key in on the Montego comments. Um, you know, as you, I guess, move it more to harvest mode.
Okay.
Thank you and our next question comes from Ian Zaffino with Oppenheimer. Please go ahead.
Hi, great. Thank you very much.
Just wanted to key in on demand he go comments.
As you I guess move it more to harvest mode.
Nick Anson: What do you think the potential is for that brand as far as profit is concerned? And I know it's a difficult question, but maybe point us to some of these other brands where you've moved from market share to harvesting and maybe what type of EBITDA or profitability did those generate? And then how would you then kind of extrapolate it to Montego?
What do you think the potential is for that brand as far as profit.
I know, it's a difficult question, but maybe point us to some of these other brands, where you've moved from market share to harvesting.
And maybe what type of EBITDA or profitability does generate our normal how would you then kind of extrapolate it to maybe Monte though.
Howard M. Lorber: Kind of a crystal ball question, but maybe if we look at historical kinds of performance, we can maybe triangulate what the. Certainly not going to go into the specifics of future earnings, but yeah, as you said, I would go back to our previous brand releases, all the way back to Liggett Select 2001, Grand Prix 2005, Pyramid 2009, Eagle 20's first release in 2013, every time we built that base of business and invested in that brand and built a significant volume base there. We've done a very good job of significantly raising the base of our earnings for future years. That's been the pattern for all those brands, and we have every confidence that we'll be able to repeat that with the Montego brand.
The Crystal ball question, but maybe if we can look at historical kind of performance, we could maybe triangulate what this brand can do.
Yes, Ian.
I'm really not going to go into the specifics of <unk>.
<unk>, but yes.
I would go back to our previous brand new leases all the way back to Liggett select 2000, a one gram pre 2005 pyramid 2009.
Eagle Twenty's bus release in 2013 every time we've.
Built that base of business and invested in that band and built a significant volume base. There we've done a very good job and significantly raising the base of our earnings in future years.
It's been the pattern of all those brands and we have every confidence that we'll be able to repeat that with with the months He got Brian.
Okay. Thank you.
Howard M. Lorber: Okay, thank you. And then, you know, as far as a ban on menthol, can you give us maybe a sense of how this might play out? Is this something where you're going to then file a stay, and you'll still be able to sell it? Is this something that you're going to pull everything off of the shelves? How does it actually work, and what should we expect?
As far as.
Ban on menthol.
<unk>.
How can you maybe a sense of how this might play out is this something where you're going to then file a stay in you being able to sell it is there something that you have to pull everything off the shelves.
How does that actually work and what should we expect this sort of you know.
Howard M. Lorber: sort of, you know, industrious and I. Yeah, it's Howard Lorber. I think, you know, we've been through this kind of problem in the past, and realistically... I doubt very seriously if it's going to happen quickly. They may try to ban it, and then there'll be a stay, and then we'll see what happens. You really don't know exactly what's going to happen, but quite honestly, It's going to be a real fight if they do that, because there are only certain groups that are really incremental and that sort of..., sort of adverse to those groups, and I think that when COOLA prevailed.
Investors and analysts.
Yes.
I think we've been through this type of <unk>.
<unk> in the past.
And realistically.
I doubt very seriously, it's going to happen quickly.
They may try to ban it and then there'll be a stay and then we'll see what happens.
You really don't know exactly what's going to happen, but quite honestly.
It's going to be a real fight if they do about it.
Because there are only certain groups that are really into the menthol.
And it's sort of.
Sort of adverse.
To those groups and I think that.
When cooler heads prevail.
Nick Anson: My guess is it won't be bad. Yeah, and I would just, yeah, good point, Howard, and I would add to that. If you look back at these other kinds of issues, warning labels being a perfect example. That was an issue that was raised and litigated back in 2013. And here we are 10 years later, and it's still being litigated.
My guess is it won't be banned.
Yeah, and I would just.
Pointed out and I would add to that.
If you look back at these other kind of issues warning labels being.
A perfect example that was a.
That was an issue that was raised in litigated back in in 2013 and here we are.
10 years later, and it's it's still being litigated recently.
Nick Anson: Recently, the industry got a positive result there, and the government is in the process of appealing, but that is 10 years in the making. And in addition to that, I would add that we under index the industry on menthol, Nick. We're around 20 to 21% of our volume is menthol, where the industry is around one third menthol. Correct. Okay, perfect.
The industry got a positive result, there and the government is in the process of appealing but that.
That is 10 years plus in the making.
And in addition to that I would add that.
We under indexed the industry on mental Nick we're around 20% to 21% of our volume its menthol, where the industry is around one third mentor.
Correct.
Okay perfect. Thanks for calling let someone else ask a question.
Operator: Thanks to the caller. Your next question comes from Karru Martinson with Jeffreys. Please go ahead. Good morning.
Thank you. Our next question comes from Carol Martinsen with Jefferies. Please go ahead.
Good morning, just following up on <unk> balance sheet questions.
Karru Martinson: Just following up on Hale's balance sheet questions, where are we today in terms of the cap stack, and then also just kind of what's the outlook here for the refi on those 10.5s that you're buying back? Thank you.
Or are we today in terms of the cap stack and then also just kind of what's the outlook here for the refi on those 10 and a half that youre buying back.
Sure.
So as far as the cap stack, we have $875 million of 575% senior secured bonds. Due in 2020 as I mentioned earlier there is another $519 million of 10, 5% senior notes due 2020.
Bryant Kirkland: So as far as the cap stack is concerned, we have $875 million of 5.75% senior secured bonds due in 2020. As I mentioned earlier, there's another $519 million of 10.5% senior notes due in 2026. Those are due in November of 2026, and there is no premium penalty on those right now to retire.
Six those are due in November of 2026, and there is no premium penalty on those right now to retire we will be evaluating as everyone is in the capital markets.
Nick Anson: We'll be evaluating, as everyone is in the capital markets, what to do with those over the next year, and I expect to be communicating more on future conference calls. I would also add that if we had to do it now, we'd probably be back at the same 10.5%. Over the last few years, with much lower interest rates, we were sort of really hoping that we would have a much lower rate on those bonds. But I think the worst case is... We believe we are a very attractive credit, with our leverage ratio now going down to about 3.78 on a net total basis; we're about at 2.6 if you subtract cash and investments at the holding company. So we view this as very attractive given the long-term earnings growth of the loan.
What to do with those over the next year.
We expect to be communicative communicating more on future conference call I would I would also add that.
If we had to do it now we'd probably be back at that same 10, 5% over the last few years with a much lower interest rates, we were sort of really hoping that we would have much lower a much lower rate on those bonds.
The worst cases.
Are you going to stay where we are in the bedroom case savings rates are going to be lower and we're going to be able to do the bonds less than 10, and a half right. We believe we are a very attractive credit with our leverage ratio now going down to about $3 seven night on a total basis on a net basis.
On a total debt total basis, we're about $2 six if you subtract cash cash and investments at the holding company. So we view this as very attractive given the long term earnings growth.
Nick Anson: Okay, and then when we look at the challenging environment, are you seeing a competitive pricing response from some of your peers, be it in their discount offerings or potentially even in their premium offerings? Yeah, we're certainly seeing the premium brands starting to discount various lines of their business, but I would argue that those kind of discounts off of the base premium prices are in the range of about 15 to 20 percent, whereas obviously, as I mentioned in my earlier remarks, Montego's out there in the marketplace at anywhere between a 45 to 50 percent discount off of the base premium prices.
Okay, and then when we look at the.
Challenging environment are you seeing a competitive pricing response from some of your peers be it in their discount offerings.
Potentially even in their premium offerings.
Yes.
Suddenly seeing the premium starting to discount various lines of their business, but I would argue that those kind of discounts off of the.
The base premium prices in the range of about 15% to 20%, whereas obviously as I mentioned in my early remarks Monte goes out there in the marketplace that anywhere between 45% to 50% discount at off of off of premium prices. So suddenly seeing a response with respect to the.
Bryant Kirkland: So, certainly seeing a response with respect to the challenging environment, but certainly not impacting the deep discount segment where we're focused on.... Alright, just lastly, SG&A ticked up a little bit. Was there anything kind of one-time in that nature, or should we just kind of consider that the run rate going forward? And that was due primarily to timing of corporate expenses. Thank you very much, guys. I appreciate it. Thank you, and ladies and gentlemen, those are all the questions that we have for today. Thank you for joining us on Vector Group's Quarterly Earnings Conference Call. On behalf of all of us at Vector Group and Liggett, we thank you for your participation, and this concludes today's call. www.larryweaver.com BF-WATCH TV 2021, Representative, Ian Zaffino, Karru Martinson, Robert Sullivan, Howard Lorber, Ronald Bernstein, Edward Brucker, IanZaffino.com
<unk> environment, but certainly not impacting.
The deep discount segment, where we're focused on.
Alright, just lastly, SG&A ticked up a little bit was there anything kind of onetime in nature.
Consider that the run rate going forward.
That was due primarily to timing of corporate expenses correct.
Okay.
Thank you very much guys I appreciate it.
Thank you and ladies and gentlemen.
All the questions that we have for today.
Thank you for joining us on vector group's earnings conference call on behalf of all of US at vector group and Liggett. We thank you for your participation and this concludes today's call.
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