Q1 2024 Vector Group Ltd Earnings Call

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Speaker Change: Welcome to vector group L. T D's first quarter 'twenty 'twenty four earnings conference call.

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Operator: Welcome to Vector Group Ltd's first quarter 2024 earnings conference call. This call is being recorded and simultaneously webcast.

Operator: An archived version of the webcast will be available on the Investor Relations section of the company's website, located at www.vectorgroupltd.com.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 of financial performance prepared in accordance with GAAP. 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 website.

Speaker Change: This call is being recorded and simultaneously webcast an archived version of the webcast will be available on the Investor Relations section of the company's website located at Www Dot back your group L. T D dotcom.

Speaker Change: During this call the terms adjusted operating income adjusted net income adjusted EBITDA and tobacco adjusted operating income will be used.

Speaker Change: 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 accordance with GAAP.

Speaker Change: 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 website.

Speaker Change: Before the call begins I would like to read a safe Harbor statement.

Operator: Before the call begins, I would like to read a Safe Harbor Statement. The statements made during this conference call that are not historical facts are forward-looking statements that are subject to risks and uncertainty 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. Now, I would like to turn the call over to the President and Chief Executive Officer of Vector Group, Howard Lorber.

Speaker Change: The statements made during this conference call that are not historical facts 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 now.

Speaker Change: I would like to turn the call over to the President and Chief Executive Officer of vector Group Howard Lorber.

Howard M. Lorber: Good morning, and thank you for joining us for vector group's first quarter 2024 earnings conference call.

Howard M. Lorber: Good morning, and thank you for joining us for Vector Group's first quarter 2024 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. I will provide an update on our balance sheet and review Vector's consolidated financial results for the first quarter of 2024. 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.

Howard M. Lorber: 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.

Howard M. Lorber: Turning to our balance sheet as of March 31, 2024, we maintain significant liquidity with cash and cash equivalents of approximately $333 million, including cash of $84 million at Liggett. We also hold investment securities and long-term investments with a fair value of approximately $179 million. Turning to Vector Group's consolidated results for the three months ended March 31st, 2024, Vector's revenues for the first quarter of 2024 were $324.6 million compared to $334.1 million in the corresponding 2023 period.

Howard M. Lorber: I will provide an update on our balance sheet and review vectors consolidated financial results for the first quarter of 2024.

Nicholas P. Anson: 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.

Nicholas P. Anson: Turning to our balance sheet as of March 31, 2024, we maintained significant liquidity with cash and cash equivalents of approximately 333 million.

Nicholas P. Anson: Cash of $84 million up like we also held investment securities and long term investments with a fair value of approximately $179 million.

Howard M. Lorber: Net income increased to $34.8 million or $0.22 per diluted common share from $34.7 million or $0.22 per diluted common share in the same period a year ago. Adjusted EBITDA increased to $82.8 million from $78.1 million in the 2023 period. Adjusted net income increased to $37.2 million or $0.24 per diluted share from $34 million or $0.22 per diluted share.

Nicholas P. Anson: Turning to vector group's consolidated results for the three months ended March 31, 2020 for Victor.

Nicholas P. Anson: <unk> revenues for the first quarter of 2024 were $324 6 million compared to $334 1 million in the corresponding 2023 period.

Nicholas P. Anson: Net income increased to $34 8 million or <unk> 22 cents dilutive.

Nicholas P. Anson: Diluted common share from $34 7 million or 22 cents per diluted common share in the same period a year ago.

Nicholas P. Anson: Adjusted EBITDA increased to $82 8 million from $78 1 million and in 2023 period.

Nicholas P. Anson: Adjusted net income increased to $37 2 million or <unk> 24 cents per diluted share from $34 million or 22 cents per diluted.

Howard M. Lorber: Chairperson in the 2023 period. And we'll now turn it over to Nick to discuss our tobacco operations.

Nicholas P. Anson: Sure in 2023 period.

Nicholas P. Anson: Now I'll turn it over to Nick to discuss our tobacco operations Nick.

Thank you Howard and good morning.

Nicholas P. Anson: Thank you, Howard, and good morning. Continuing our trend of strong market performance, Liggett once again delivered excellent results in the first quarter. Operating income from the tobacco segment increased by $4.4 million or 5.6% compared to the prior year period, while retail market share remained stable at 5.8%. The stability of our market share as we continue to build margin reflects the market strength of Montego, which remains the largest discount cigarette brand in the United States and the country's fourth largest brand.

Continuing our trend of strong market performance Liggett once again delivered excellent results in the first quarter.

Nicholas P. Anson: Operating income from the tobacco segment increased by $4 4 million or five 6% compared to the prior year period, while our retail market share remained stable at five 8%.

Nicholas P. Anson: The stability of our market share as we continue to build margin reflects the market strength of Montego, which remains the largest discount cigarette brand in the United States and the country's fourth largest brand.

Nicholas P. Anson: Our ability to continue to grow Montego in the first quarter while improving gross profit margin is a result of our ongoing market analysis, broad-based distribution, and excellent retail execution. Montego's national retail market share grew to 4% in the first quarter of 2024, up from 3.4% in the prior year period, which is particularly noteworthy considering our strategic price increase. In addition, 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. In the first quarter of 2024, Montego's distribution expanded to approximately 97,500 stores, up from 82,500 stores in the prior year period.

Nicholas P. Anson: Our ability to continue to grow them on till you go in the first quarter, while improving gross profit margin is a result of our ongoing market analysis.

Nicholas P. Anson: Broad based distribution and excellent retail execution.

Nicholas P. Anson: Monte you guys national retail market share grew to 4% in the first quarter of 2024 up from three 4% in the prior year period, which is particularly noteworthy considering all strategic price increases.

Nicholas P. Anson: In addition, the price gap between months you go in the industry's leading premium brands has remained stable in the range of about 45% to 50% discount retail.

Nicholas P. Anson: In the first quarter of 2024 months. He goes distribution expanded to approximately 97500 stores.

Nicholas P. Anson: Up from 82500 stores in the prior year period.

Nicholas P. Anson: Our strategy with Montego remains consistent with our long-term objective of optimizing profit by effectively managing volume, pricing, and market share while providing consumers with excellent value in this category. Looking to the year ahead, we expect our market share to remain relatively stable while gradually increasing our margin. From a broader industry perspective, the deep discount segment remains strong and continues to outperform the overall U.S. cigarette market. Additionally, as consumers select more affordable options, including brands like Montego, they recognize that the product quality is on par with more expensive brands.

Nicholas P. Anson: Our strategy with months he got remains consistent with our long term objective of optimizing profit by effectively managing volume pricing and market share, while providing consumers with excellent value in this category.

Nicholas P. Anson: Looking to the year ahead, we expect our market share to remain relatively stable, while gradually increasing our margins.

Nicholas P. Anson: From a broader industry perspective, the deep discount segment remains strong and continues to outperform the overall U S cigarette market. Additionally, as consumers select more affordable options, including brands like Montego. They recognize that the product quality is on par with more expensive brands.

Nicholas P. Anson: During the first quarter of 2024, based on Management Science Associates retail data, the deep discount category increased 6% while industry volumes declined 8.9% compared to the same period last year. As a result, the deep discount segment comprised 15.9% of the overall market in the first quarter, up from 13.7% in the same period a year ago and 15.3% last quarter. This segment continues to present an attractive price option for consumers, and we are confident that our value-focused brand portfolio and nationwide footprint provide Liggett with a meaningful competitive advantage as the migration to deep discounts continues.

Nicholas P. Anson: During the first quarter of 2024 based on management Science Associates retail data the deep discount category increased 6% while industry volumes declined eight 9% compared to the same period last year.

Nicholas P. Anson: As a result, the deep discount segment comprised 15, 9% at the overall market in the first quarter up from 13, 7% in the same period, a year ago, and 15, 3% last quarter.

Nicholas P. Anson: This segment continues to present, an attractive price option for consumers and we are confident.

Nicholas P. Anson: Value focused brand portfolio, a nationwide footprint provides us with a meaningful competitive advantage has been migration to deep discount continues.

Nicholas P. Anson: Liggett's first quarter retail shipments declined by 8.7% compared to the same period in 2023, while industry retail shipments declined by 8.9%, according to data from the Management Science Association. While our retail shipments modestly outperformed the market, our wholesale shipments declined by 10.8%, while industry wholesale shipments declined by 9.8%. The discrepancy between our retail and wholesale shipping performance reflects the inconsistent nature of short-term wholesaler purchasing patterns, which, in the first quarter, were primarily driven by the timing of various manufacturers' pricing claims.

Nicholas P. Anson: Liggett's first quarter retail shipments declined by eight 7% compared to the same period in 2023, while industry retail shipments declined by eight 9%. According to data from management Science Associates.

Nicholas P. Anson: While our retail shipments modestly outperformed the market our wholesale shipments declined by 10, 8% while industry wholesale shipments declined by nine 8% the.

Nicholas P. Anson: The discrepancy between our retail and wholesale shipment performance reflects the inconsistent nature of short term wholesaler purchasing patterns, which in the first quarter were primarily driven by the timing of various manufacturers' price increases.

Nicholas P. 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 March 31st, 2024, revenues declined 2.8% to $324.6 million from $334.1 million in the first quarter of 2023. This decline was attributable to the previously referenced 10.8% decrease in wholesaler shipments during the period, which was partially offset by an 8.6% increase in prices.

As we have noted in the past, we believe that retail shipments are a significantly more reliable indicator of industry volume performance.

Nicholas P. Anson: I will now turn to the consolidated tobacco financials for Liggett group and vector tobacco.

Nicholas P. Anson: For the three months ended March 31st 2024 revenues declined two 8% to $324 6 million from $334 1 million in the first quarter of 2023.

Nicholas P. Anson: This decline was attributable to the previously referenced 10, 8% decrease in wholesaler shipments during the period, which was partially offset by an eight 6% increase in pricing.

Nicholas P. Anson: Like its operating income for the three months ended March 31, 2024 increased five 6% to $83 million compared to $78 6 million in the corresponding 2023 period.

Nicholas P. Anson: Liggett's operating income for the three months ended March 31st, 2024 increased 5.6% to $83 million compared to $78.6 million in the corresponding 2023 period. Tobacco adjusted EBITDA in the first quarter increased 5.5% to $84.4 million compared to $80 million for the corresponding prior year period. Our first quarter gross margin equated to 32.9% of revenues, representing an increase of approximately 240 basis points compared to the first quarter of 2023. On the regulatory front, we are pleased to hear the recent news that the government has decided to delay its decision to publish a final regulatory ruling and instead consult further with outside groups on this matter.

Nicholas P. Anson: Tobacco adjusted EBITDA in the first quarter increased five 5% to $84 4 million compared to $80 million for the corresponding prior year period.

Nicholas P. Anson: Our first quarter gross margin equated to 32, 9% of revenues, representing an increase of approximately 240 basis points compared to the first quarter of 2023.

Nicholas P. Anson: On the regulatory front, we were pleased to hear the recent news that the government has decided to delay its decision to publish a final mental ruling and instead consult with outside groups on this matter.

Nicholas P. Anson: 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 MENFA will be vigorously challenged by the industry.

Nicholas P. Anson: 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 growth of illicit unregulated markets.

Nicholas P. Anson: We expect any final ruling that includes a ban on menthol will be vigorously challenge by the industry.

Nicholas P. Anson: In summary, the operational and financial performance of our tobacco business remains strong, and our stable retail market share and profit growth validate our long-term strategy and competitive advantages in the discount segment. As leaders in 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 statement to provide the best value propositions in the US market has never been more relevant.

Nicholas P. Anson: In summary, the operational and financial performance about tobacco business remains strong and our stable retail market share and profit growth validate our long term strategy and competitive advantages in the discount segment.

Nicholas P. Anson: 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.

Nicholas P. Anson: Our market plans for 2020 full had been carefully developed and our mission statement to provide the best value propositions in the U S market has never been more relevant.

Nicholas P. Anson: While we are operating in an increasingly competitive environment, our proven expertise and leadership in the discount segment positions us well to maintain our momentum and build on our foundation for long-term earnings growth. As always, thanks for your attention, and back to you, Howard.

Nicholas P. Anson: While we are operating in an increasingly competitive environment, our proven expertise and leadership in the discount segment positions us well to maintain our momentum and build on our foundation for long term earnings growth.

Nicholas P. Anson: As always thanks for your attention and back to you Howard.

Thank you Nick.

Howard M. Lorber: Thank you, Nick. In summary, we are pleased with our first quarter operating results as well as our long-standing practice of paying a quarterly dividend. We expect that this dividend policy will continue. Now, operator, please open the call to questions.

Howard M. Lorber: Summary, we are pleased with our first quarter operating results as well as our longstanding practice of paying a quarterly dividend. We expect that this dividend policy will continue.

Speaker Change: Now operator, please open the call for questions.

Speaker Change: At this time, if you would like to ask a question. Please press the star and one on your telephone keypad, you may remove yourself from the queue at any time by pressing star two.

Operator: At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and one to ask a question. We will pause for a moment to allow questions to queue, and we will take our first question from Ian Zaffino on behalf of Oppenheimer.

Speaker Change: Once again that is star one to ask a question, we'll pause for a moment to allow questions to queue.

Speaker Change: And we will take our first question from Ian Zaffino with Oppenheimer.

Ian Alton Zaffino: Hi, great. Thank you very much. So I'd ask about Montego, you know, very strong market share gains. Where do you think the ultimate market share can get for this brand, I guess, before you start harvesting profits, or maybe to point to a similar brand that you had in the past that performed and what Montego might remind you of, maybe a guideline of what we should be able to expect from the Montego Band. Thank you. Sure, thanks. And yeah, obviously, I was very pleased.

Ian Alton Zaffino: Hi, great. Thank you very much.

Ian Alton Zaffino: Just wanted to ask about mine can go.

Ian Alton Zaffino: So very strong market share gains.

Ian Alton Zaffino: Where do you think your ultimate market share can get in this in this brand I guess you place our harvesting profits or maybe you could point to.

Ian Alton Zaffino: Similar brand that you had in the past that performed in Montenegro might remind you all of us.

Speaker Change: A guideline of what we shouldn't be able to expect from my T about Brian. Thank you.

Speaker Change: Sure. Thanks.

Nicholas P. Anson: Sure. Thanks, Ian. Yeah, obviously, very pleased with the Montego brand's performance in the first quarter. Again, even though we've strategically been taking price increases and increasing the margin on that brand, it's continued to gain market share. So it's continuing to grow. That is similar to other brands that we've launched and invested in and grown, both Grand Prix and the Pyramid brand. And I would take the opportunity to remind you that, obviously, brands continue to grow even though they may not be the cheapest in the store, and that's again down to our excellent retail execution.

Speaker Change: Yes, obviously very pleased with the demand.

Speaker Change: Most of you guys brands performance in the first quarter again, even though we have strategically been taking price increases and increasing our margin on that brand. It's continued to gain market share. So it's continuing to grow.

Speaker Change: That is similar to other brands that.

Speaker Change: We've launched and invest.

Speaker Change: <unk> invested and grown both Grand Prix and and the pyramid brand and I would take the opportunity to remind you that obviously.

Speaker Change:

Speaker Change: Brands continue to grow even though they may not be the cheapest in our in the store. So that's again down to all of our excellent retail at excellent retail execution. So again, feeling very good about the brand, whereas physician again I'll reinforce all.

Speaker Change:

Speaker Change: Our.

Nicholas P. Anson: So again, feeling very good about the brand, where it's positioned. Again, I'll reinforce, I'll... Our, Good evening. Our, Our, One second, I apologize. Our mission statement to provide the best value proposition has never been more relevant. So, I feel very good about where we stand in the marketplace at the moment.

Speaker Change:

Speaker Change: Excuse me our.

Speaker Change: Okay.

Speaker Change: Our.

One second I apologize.

Speaker Change: Our.

Speaker Change: Our mission statement to provide the best value proposition has never been never been more relevant so feeling very good about where we stand in the marketplace at the moment.

Ian Alton Zaffino: Understandable. Thank you. And then, just as a follow-up, you know, good commentary on the mental delay.

Speaker Change: Understood. Thank you and then just as a follow up good commentary on the mental delay.

Nicholas P. Anson: I guess I have two questions. Was there any, like, noticeable difference in shipments that you had seen maybe leading up to this potential ban that should then normalize coming out of this? And then also, how are you thinking about maybe state-level bans and, you know, would those be equally as challenging as a federal ban? Thank you.

Speaker Change: I guess two questions was there any noticeable difference in shipments that you had seen maybe leading up to this potential ban.

Speaker Change: That should then normalize coming out of this and then also how are you thinking about maybe state level bans and.

Speaker Change: Would those be equally as challenging as terrible damn. Thank you.

Nicholas P. Anson: Feeling obviously very pleased with the decision to delay; again, we think that's the right decision. We're not sure when exactly that final rule will be made, but I think it's inevitable, as we've seen in states, that we may see some increased activity with respect to mental bans at the state level, but that will be handled on a state by state basis, Ian.

Speaker Change: Yes, they're feeling they're obviously very pleased with the.

Speaker Change: Obviously very pleased with the.

Speaker Change: The decision to delay.

Again, we think that's the that's the right decision, we're not sure when exactly that.

Speaker Change: The rule will be made but I think it's inevitable as we've seen in states that we may see some increased activity with respect to mental bands update at the state level, but that will be handled on a on a state by state basis Ian.

Ian Alton Zaffino: Alright, Thank you very much.

Ian Alton Zaffino: All right, thank you very much.

Ian Alton Zaffino: Thank you and our next question comes from Hale Holden with Barclays.

Operator: Thank you. And our next question comes from Hale Holden with Barclays.

Ian Alton Zaffino: Okay.

Hale Holden: Thank you. Good morning. Two quick questions. The 97,000 points of distribution for Montego's, should we consider that close to full distribution? I think you were higher previously for Pyramid and some of the other brands, or is there room to grow?

Hale Holden: Thank you good morning.

Hale Holden: Right.

Hale Holden: Two quick questions.

Hale Holden: 97000 points of distribution for Monte goes is that should we consider that close to full distribution I think you've been higher previously for pyramid and some of the other brands or is there a room to growth.

Nicholas P. Anson: Still some room to grow, you know, overall distribution for Ligavit Vector Brands in total for our portfolio is about 125,000. Not to say that we'll get into all those stores, but there's certainly continued room to grow. And you know, we increased distribution quarter over quarter by about 3,000 stores. So certainly, we're continuing to see growth in distribution.

Hale Holden: There's still some room to grow overall distribution for legacy <unk> brands in total and for our portfolio was about 125000.

Hale Holden: Not to say that we'll get into all of those stores, but that's certainly continued room to grow and we.

We increased distribution quarter over quarter by about 3000 stores.

Hale Holden: So certainly we're continuing to see growth in distribution.

Hale Holden: Okay, great. And then my second question is sort of, if you zoom way out, the rate of decline for the industry has been pretty high over the last year and seems to be settling at this kind of high single-digit rate. So I was wondering if that changes any of the competitive forces that you face on a day-to-day basis or changes the way that you're kind of thinking about the long term in the tobacco and the cigarette industry.

Hale Holden: Okay.

Hale Holden: Great.

Speaker Change: And my second question is sort of.

Speaker Change: Zoom way out.

Speaker Change: The rate of decline.

Speaker Change: For the industry has been pretty high.

Speaker Change:

Speaker Change: Over the last year and seems to be settling in and those kind of those high single digit.

Speaker Change: Great.

Speaker Change: So I was wondering if you think that changes.

Speaker Change: Any of the competitive forces that kind of your face on a day to day basis or changes the way that you.

Speaker Change: Just kind of thinking about the long term.

Speaker Change: Tobacco cigarette industry.

Speaker Change: Yeah look I think if you if you look at the <unk>.

Nicholas P. Anson: Yeah, look, I think if you look at that decline rate, it's certainly been elevated the last couple of years. I would argue that probably the underlying decline rate is more in the four to five percent, and then you're looking at both the macroeconomic factors in addition to, kind of, the growth of the illicit disposables that's accentuating the decline. Look, I'm not in a position to say when the macroeconomic situation is going to improve for our smokers, and I think it's going to take some time for the illicit disposable market to be cleaned up.

Speaker Change: That decline right.

Speaker Change: It's certainly been elevated the last couple of years I would argue that probably is the underlying.

Speaker Change: Decline rate is more in the 4% to 5% and then you're looking at.

Speaker Change: The macroeconomic factors.

Speaker Change: In addition to.

Speaker Change: The growth of the illicit disposables that's.

Speaker Change: Accentuating the decline.

Speaker Change: Well I'm not in a position to say when the macro economic position is going to improve for smokers.

Speaker Change: And I think it's going to take some <unk>.

Speaker Change: Time for the illicit disposable market to be cleaned out so certainly for the foreseeable future, we're gonna be dealing with those players more elevated declines, but again that said.

Nicholas P. Anson: So certainly, for the foreseeable future, we're going to be dealing with those more elevated declines. But again, that said, we're operating in a discount segment which is actually growing and performing well relative to the rest of the market. So take comfort in that and continue to capitalize on that growth in the segment where we're the leaders. Great, thank you.

Speaker Change: We're operating in the discount segment, which is actually growing and performing well relative to the relative to the rest of the markets.

Speaker Change: Taken come for that taking comfort in that and continue to to capitalize on that that growth in the segment, where we're the leaders in.

Hale Holden: Great. Thank you so much, Nick. I appreciate it.

Speaker Change: Great. Thank you so much thanks I appreciate it.

Speaker Change: Thank you once again, if you would like to ask a question. Please press star and one on your telephone keypad now.

Operator: Thank you. Once again, if you would like to ask a question, please press star and one on your telephone keypad now. We will take our next question from Karru Martinson with Jeffreys.

Speaker Change: We will take our next question from Korea Martinsen with Jefferies.

Karru Martinson: Good morning. When you look at the deep discount category up 6%, and our sales being down 2.9%, is that just the timing aspect, as you referenced the wholesalers, or is that a result of a conscious effort to continue to raise prices and take margins?

Karru Martinson: Good morning.

Karru Martinson: When you look at the deep discount category up 6%.

Karru Martinson: Our sales being down two 9% is that just the timing aspect as you referenced the wholesale or sizes.

Karru Martinson: The result of a conscious effort to continue to raise price and take margin.

Nicholas P. Anson: Yeah, I mean, that's a reflection, obviously, of the increasing pricing actions that we've taken on Montego and obviously the slowing growth on that, but also, we do have a portfolio of brands in what's referred to as the traditional discount category, which category is also coming under pressure. So it's a combination of those volume declines and obviously a slowing growth in the Montego brand, offset by price increases.

Karru Martinson: Yes.

Karru Martinson: That's a reflection obviously of the <unk>.

Karru Martinson: The increasing pricing actions that we've taken on once he got and obviously the growth.

Karru Martinson: Slowing on that but also we do have a portfolio of brands and the what's referred to as the the traditional discount category, which that category is also coming under pressure. So it's a combination of those volume declines and obviously a slowing growth and in the months of you go Brian offset with offset with price increases.

Karru Martinson: Okay, and while you're maintaining that 45-50% discount on the premium brands, are you seeing more competitive pressures in that discount and deep discount category?

Speaker Change: Okay, and and while youre, maintaining at 45%, 50% discount to the premium brands are you seeing more competitive pressures in that disc.

Speaker Change: Discount and deep discount category.

Nicholas P. Anson: Certainly, we're seeing from the bigger players more discounting of their premium brands in the overall market, but they may be discounting 10% to 15%, so they're really not impacting the deep discounts, so to speak. As always, the deep discount segment is extremely competitive, and any kind of pressures that we're getting are more on a regional basis, and we certainly feel confident with Montego's broad base of distribution that we can handle that and deal with it on a market-by-market, region-by-region basis.

Speaker Change: Suddenly we're seeing from the from the bigger players more discounting of their premium brands in the in the overall market, but they may be discounting, 10% to 15% so they're really not.

Speaker Change: Really not impacting the deep discount so to speak as always we the deep discount segment is extremely competitive and any kind of pressures.

Speaker Change: Pressures, but we're getting a more on a regional basis and we certainly feel confident with months. He goes broad base of distribution that we can we can handle that and and deal with that on a market by market region by region basis.

Speaker Change: Okay, and just lastly, since I ask this every time I want to keep the street going.

Speaker Change: <unk> got those 10 five notes.

Speaker Change: Sure Tony six our thinking about the capital streak.

Karru Martinson: And just lastly, since I ask this every time and I want to keep the streak going, you've got those 10 and a half notes, mature 26, how are we thinking about the capital streak? Hey Karru, it's Brian Kirkland, good morning.

Speaker Change: Brian clarify and good morning.

Speaker Change: Good morning.

James Bryant Kirkland: How we're thinking about them. So obviously, as you said, there are 519 million of the 10 and a half that are due in two and a half years, November 2026. So we're continuing to evaluate them. But I think what's very important to convey is that we really are in a position of strength. We have $428 million of cash at a holding company, Nick and his team are growing market share, they're growing profit. And we're paying, we're now paying less dividends than our earnings. And in addition to that, there's 90 million dollars of capacity under Liggett's revolver. So we feel good about all of our options, and we'll continue to evaluate them with our investment bank. Thank you very much, guys.

James Bryant Kirkland: How we're thinking about them. So obviously as you said there was 519 million 10, five that are due in two and a half years in November 2026. So we are continuing to evaluate them, but I think what's very important to convey is we really are in a position of strength, we have $428 million of cash at our holding company Nick and his team are <unk>.

James Bryant Kirkland: <unk> market share they're growing.

James Bryant Kirkland: <unk>.

James Bryant Kirkland: And we're paying.

James Bryant Kirkland: We're now paying less dividends that our earnings and in addition to that there is 90 million of capacity under legacy revolver. So we feel good about all of our options and we will continue to evaluate it with our investment bankers.

Speaker Change: Thank you very much guys.

Speaker Change: 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 we thank you for your participation and this concludes today's call.

Operator: 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 Legat, we thank you for your participation, and this concludes today's call.

Speaker Change: Thank you. Thank you.

Speaker Change: Uh-huh.

unknown: BF-WATCH TV 2021

Speaker Change: Mhm.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Oh.

Speaker Change: Mhm.