QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
(State or other jurisdiction of Incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
|
|
Large accelerated filer
|
☐
|
|
☑
|
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
|
|
Emerging growth company
|
|
|
Page No.
|
||
PART I—FINANCIAL INFORMATION
|
|||
ITEM 1
|
Financial Statements (Unaudited)
|
||
5
|
|||
6
|
|||
7
|
|||
8
|
|||
9
|
|||
10
|
|||
11
|
|||
12
|
|||
ITEM 2
|
39
|
||
ITEM 3
|
52
|
||
ITEM 4
|
53
|
||
PART II—OTHER INFORMATION
|
|||
ITEM 1
|
54
|
||
ITEM 1A
|
54
|
||
ITEM 2
|
56
|
||
ITEM 3
|
56
|
||
ITEM 4
|
56
|
||
ITEM 5
|
56
|
||
ITEM 6
|
57
|
||
58
|
•
|
declining sales of tobacco products, and expected continuing decline of sales, in the tobacco industry overall;
|
•
|
our dependence on a small number of third-party suppliers and producers;
|
•
|
the possibility that we will be unable to identify or contract with new suppliers or
producers in the event of a supply or product disruption, as well as other supply chain concerns, including delays in product shipments and increases in freight cost;
|
•
|
the possibility that our licenses to use certain brands or trademarks will be terminated, challenged or restricted;
|
•
|
failure to maintain consumer brand recognition and loyalty of our customers;
|
•
|
our reliance on relationships with several large retailers and national chains for distribution of our products;
|
•
|
intense competition and our ability to compete effectively;
|
•
|
competition from illicit sources and the damage caused by illicit products to brand equity;
|
•
|
contamination of our tobacco supply or products;
|
•
|
substantial and increasing U.S. regulation;
|
•
|
regulation or marketing denials of our products by the FDA, which has broad regulatory powers;
|
•
|
many of our products contain nicotine, which is considered to be a highly addictive substance;
|
•
|
requirement to maintain compliance with master settlement agreement;
|
•
|
possible significant increases in federal, state and local municipal tobacco- and vapor-related taxes;
|
•
|
uncertainty and continued evolution of regulation of our NewGen and cigar products;
|
•
|
our products are subject to developing and unpredictable regulation, such as court actions that impact obligations;
|
•
|
increase in state and local regulation of our NewGen products has been proposed or enacted;
|
•
|
increase in tax of our NewGen products could adversely affect our business;
|
•
|
sensitivity of end-customers to increased sales taxes and economic conditions
including significant increases in the rate of inflation and other declines in purchasing power;
|
•
|
possible increasing international control and regulation;
|
•
|
failure to comply with environmental, health and safety regulations;
|
•
|
imposition of significant tariffs on imports into the
U.S.;
|
•
|
the scientific community’s lack of information regarding the long-term health effects of certain substances contained in some of
our products;
|
•
|
infringement on or misappropriation of our intellectual property;
|
•
|
third-party claims that we infringe on their intellectual property;
|
•
|
significant product liability litigation;
|
•
|
the effect of the COVID-19 pandemic on our business;
|
•
|
our amount of indebtedness;
|
•
|
the terms of our indebtedness, which may restrict our current and future operations;
|
•
|
our loss of emerging growth status on December 31, 2021 and ability to comply with the additional requirements applicable to
non-emerging growth companies;
|
•
|
reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors,
potentially decreasing our stock price;
|
•
|
our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit
acquisition bids or merger proposals, which may adversely affect the market price of our common stock;
|
•
|
our certificate of incorporation limits the
ownership of our common stock by individuals and entities that are Restricted Investors. These restrictions may affect the liquidity of our common stock and may result in Restricted Investors (as defined in our Certificate of
Incorporation) being required to sell or redeem their shares at a loss or relinquish their voting, dividend and distribution rights;
|
•
|
future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in
us;
|
•
|
we may issue preferred stock whose terms could adversely affect the voting power or value of our common stock;
|
•
|
our business may be damaged by events outside of our suppliers’ control, such as the impact of epidemics (e.g., coronavirus),
political upheavals, or natural disasters;
|
•
|
our reliance on information technology;
|
•
|
cybersecurity and privacy breaches;
|
•
|
failure to manage our growth;
|
•
|
failure to successfully integrate our acquisitions or otherwise be unable to benefit from pursuing acquisitions;
|
• |
fluctuations in our results;
|
•
|
exchange rate fluctuations;
|
•
|
adverse U.S. and global economic conditions;
|
•
|
departure of key management personnel or our inability to attract and retain talent; and
|
•
|
failure to meet expectations relating to environmental, social and governance factors.
|
ASSETS
|
(unaudited)
September 30,
2021
|
December 31,
2020
|
||||||
Current assets:
|
||||||||
Cash
|
$
|
|
$
|
|
||||
Accounts receivable, net of allowances of $
|
|
|
||||||
Inventories
|
|
|
||||||
Other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Property, plant, and equipment, net
|
|
|
||||||
Deferred income taxes
|
|
|
||||||
Right of use assets
|
|
|
||||||
Deferred financing costs, net
|
|
|
||||||
Goodwill
|
|
|
||||||
Other intangible assets, net
|
|
|
||||||
Master Settlement Agreement (MSA) escrow deposits
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Accrued liabilities
|
|
|
||||||
Current portion of long-term debt
|
|
|
||||||
Other current liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Notes payable and long-term debt
|
|
|
||||||
Deferred income taxes
|
|
|
||||||
Lease liabilities
|
|
|
||||||
Other long-term liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock; $
|
|
|
||||||
Common stock, voting, $
|
|
|
||||||
Common stock, nonvoting, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Cost of repurchased common
stock (
|
(
|
)
|
(
|
)
|
||||
Accumulated other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
Accumulated earnings
|
|
|
||||||
Non-controlling interest
|
|
|
||||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Net sales
|
$
|
|
$
|
|
||||
Cost of sales
|
|
|
||||||
Gross profit
|
|
|
||||||
Selling, general, and administrative expenses
|
|
|
||||||
Operating income
|
|
|
||||||
Interest expense, net
|
|
|
||||||
Investment income
|
(
|
)
|
(
|
)
|
||||
Gain on extinguishment of debt |
( |
) | ||||||
Net periodic income, excluding service cost
|
|
|
||||||
Income before income taxes
|
|
|
||||||
Income tax expense
|
|
|
||||||
Consolidated net income
|
|
|
||||||
Net loss attributable to non-controlling interest
|
(
|
)
|
|
|||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||
Basic income per common share:
|
||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||
Diluted income per common share:
|
||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||
Weighted average common shares outstanding:
|
||||||||
Basic
|
|
|
||||||
Diluted
|
|
|
Nine
Months Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Net sales
|
$
|
|
$
|
|
||||
Cost of sales
|
|
|
||||||
Gross profit
|
|
|
||||||
Selling, general, and administrative expenses
|
|
|
||||||
Operating income
|
|
|
||||||
Interest expense, net
|
|
|
||||||
Investment income
|
(
|
)
|
(
|
)
|
||||
Loss on extinguishment of debt
|
|
|
||||||
Net periodic income, excluding service cost
|
|
|
||||||
Income before income taxes
|
|
|
||||||
Income tax expense
|
|
|
||||||
Consolidated net income
|
|
|
||||||
Net loss attributable to non-controlling interest
|
(
|
)
|
|
|||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||
Basic income per common share:
|
||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||
Diluted income per common share:
|
||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||
Weighted average common shares outstanding:
|
||||||||
Basic
|
|
|
||||||
Diluted
|
|
|
Three Months Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Consolidated net income
|
$
|
|
$
|
|
||||
Other comprehensive income (loss), net of tax
|
||||||||
Amortization of unrealized pension and postretirement gain, net of tax of $
|
|
|
||||||
Unrealized loss on MSA investments, net of tax of $
|
(
|
)
|
|
|||||
Foreign currency translation, net
of tax of $
|
(
|
)
|
|
|||||
Unrealized gain on derivative instruments, net of tax of $
|
|
|
||||||
(
|
)
|
|
||||||
Consolidated comprehensive income
|
|
|
||||||
Comprehensive loss attributable to non-controlling interest
|
(
|
)
|
|
|||||
Comprehensive income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
Nine
Months Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Consolidated net income
|
$
|
|
$
|
|
||||
Other comprehensive income (loss), net of tax
|
||||||||
Amortization of unrealized
pension and postretirement gain, net of tax of $
|
|
|
||||||
Unrealized loss on MSA
investments, net of tax of $
|
(
|
)
|
|
|||||
Foreign currency translation, net
of tax of $
|
|
|
||||||
Unrealized gain (loss) on
derivative instruments, net of tax of $
|
|
(
|
)
|
|||||
|
|
|||||||
Consolidated comprehensive income
|
|
|
||||||
Comprehensive loss attributable to non-controlling interest
|
(
|
)
|
|
|||||
Comprehensive income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
Nine
Months Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Cash flows from operating activities:
|
||||||||
Consolidated net income
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Loss on extinguishment of debt
|
|
|
||||||
Pension settlement and curtailment loss
|
||||||||
Impairment loss
|
|
|
||||||
(Gain) loss on sale of property, plant, and equipment
|
(
|
)
|
|
|||||
Depreciation expense
|
|
|
||||||
Amortization of other intangible assets
|
|
|
||||||
Amortization of deferred financing costs
|
|
|
||||||
Deferred income taxes
|
|
|
||||||
Stock compensation expense
|
|
|
||||||
Noncash lease (income) expense
|
(
|
)
|
|
|||||
Gain on MSA escrow deposits
|
(
|
)
|
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
|
(
|
)
|
|||||
Inventories
|
(
|
)
|
(
|
)
|
||||
Other current assets
|
(
|
)
|
(
|
)
|
||||
Other assets
|
|
|
||||||
Accounts payable
|
|
(
|
)
|
|||||
Accrued postretirement liabilities
|
|
(
|
)
|
|||||
Accrued liabilities and other
|
(
|
)
|
|
|||||
Net cash provided by operating activities
|
$
|
|
$
|
|
||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Acquisitions, net of cash acquired
|
(
|
)
|
(
|
)
|
||||
Payments for investments
|
(
|
)
|
|
|||||
Restricted cash, MSA escrow deposits
|
(
|
)
|
|
|||||
Proceeds on the sale of property, plant and equipment
|
|
|
||||||
Net cash used in investing activities
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Cash flows from financing activities:
|
||||||||
Proceeds from Senior Secured Notes
|
$
|
|
$
|
|
||||
Payments of 2018 first lien term loan
|
(
|
)
|
(
|
)
|
||||
Settlement of interest rate swaps
|
(
|
)
|
|
|||||
Payment of promissory note
|
( |
) | ||||||
Payment of IVG note
|
|
(
|
)
|
|||||
Proceeds from unsecured notes
|
|
|
||||||
Standard Diversified Inc. reorganization, net of cash acquired
|
( |
) | ||||||
Payment of dividends
|
(
|
)
|
(
|
)
|
||||
Payments of financing costs
|
(
|
)
|
(
|
)
|
||||
Exercise of options
|
|
|
||||||
Redemption of options
|
(
|
)
|
|
|||||
Common stock repurchased
|
(
|
)
|
(
|
)
|
||||
Net cash provided by (used in) financing activities
|
$
|
|
$
|
(
|
)
|
|||
Net increase (decrease) in cash
|
$
|
|
$
|
(
|
)
|
|||
Effect of foreign currency translation on cash
|
$
|
|
$
|
|
||||
Cash, beginning of period:
|
||||||||
Unrestricted
|
|
|
||||||
Restricted
|
|
|
||||||
Total cash at beginning of period
|
|
|
||||||
Cash, end of period:
|
||||||||
Unrestricted
|
|
|
||||||
Restricted
|
|
|
||||||
Total cash at end of period
|
$
|
|
$
|
|
||||
Supplemental schedule of noncash financing activities:
|
||||||||
Dividends declared not paid
|
$
|
|
$
|
|
||||
Issuance of note payable for acquisition
|
$
|
|
$
|
|
||||
Accrued consideration for acquisition
|
$
|
|
$
|
|
Voting
Shares
|
Common
Stock,
Voting
|
Additional
Paid-In
Capital
|
Cost of
Repurchased
Common Stock
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Accumulated
Earnings (Deficit)
|
Non-
Controlling
Interest
|
Total
|
|||||||||||||||||||||||||
Beginning balance July 1, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Unrealized loss on MSA investments, net of tax of $
|
-
|
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||
Unrealized gain on derivative instruments, net of tax of $
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Foreign currency translation, net of tax of $
|
-
|
|
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||
Stock compensation expense
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Exercise of options
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Cost of repurchased common stock
|
(
|
)
|
|
|
(
|
)
|
|
|
|
(
|
)
|
|||||||||||||||||||||
Acquisition of Recreation Marketing interest
|
- | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
Dividends
|
-
|
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||||
Ending balance September 30, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||
Beginning balance July 1, 2020
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||
Unrecognized pension and postretirement cost adjustment, net of tax of $
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Unrealized gain on derivative instruments, net of tax of $
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Stock compensation expense
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Exercise of options
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Cost of repurchased common stock
|
(
|
)
|
|
|
(
|
)
|
|
|
|
(
|
)
|
|||||||||||||||||||||
Standard Diversified Inc. reorganization, net
|
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Dividends
|
-
|
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Ending balance September 30, 2020
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
Voting
Shares
|
Common
Stock,
Voting
|
Additional
Paid-In
Capital
|
Cost of
Repurchased
Common Stock
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Accumulated
Earnings (Deficit)
|
Non-
Controlling
Interest
|
Total
|
|||||||||||||||||||||||||
Beginning balance January 1, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|
||||||||||||||||
Unrealized loss on MSA investments, net of tax of $
|
-
|
(
|
)
|
|
|
(
|
)
|
|||||||||||||||||||||||||
Unrealized gain on derivative instruments, net of tax of $
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Foreign currency translation, net of tax of $
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Stock compensation expense
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Exercise of options
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Redemption of options
|
-
|
|
(
|
)
|
|
|
|
|
(
|
)
|
||||||||||||||||||||||
Cost of repurchased common stock
|
(
|
)
|
|
|
(
|
)
|
|
|
|
(
|
)
|
|||||||||||||||||||||
Acquisition of Recreation Marketing interest
|
- | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
Dividends
|
-
|
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||||||||
Ending balance September 30, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||
Beginning balance January 1, 2020
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||||||||||
Unrecognized pension and postretirement cost adjustment, net of tax of $
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Unrealized loss on derivative instruments, net of tax of $
|
-
|
|
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||||||||
Stock compensation expense
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Exercise of options
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Cost of repurchased common stock
|
(
|
)
|
|
|
(
|
)
|
|
|
|
(
|
)
|
|||||||||||||||||||||
Standard Diversified Inc. reorganization, net
|
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Dividends
|
-
|
|
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Ending balance September 30, 2020
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
● |
Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date.
|
● |
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar
assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
● |
Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement
date.
|
As of September 30, 2021
|
As of December 31, 2020
|
|||||||||||||||||||
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair
Value
|
Cost and
Estimated
Fair Value
|
||||||||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
U.S. Governmental agency obligations (unrealized loss position < 12 months)
|
|
|
(
|
)
|
|
|
||||||||||||||
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
As of September 30,
2021
|
||||
Less than one year
|
$
|
|
||
One to five years
|
|
|||
Five to ten years
|
|
|||
Greater than ten years
|
|
|||
Total
|
$
|
|
|
Deposits as of
|
|||||||
Sales
Year
|
September 30,
2021
|
December 31,
2020
|
||||||
1999
|
$
|
|
$
|
|
||||
2000
|
|
|
||||||
2001
|
|
|
||||||
2002
|
|
|
||||||
2003
|
|
|
||||||
2004
|
|
|
||||||
2005
|
|
|
||||||
2006
|
|
|
||||||
2007
|
|
|
||||||
2008
|
|
|
||||||
2009
|
|
|
||||||
2010
|
|
|
||||||
2011
|
|
|
||||||
2012
|
|
|
||||||
2013
|
|
|
||||||
2014
|
|
|
||||||
2015
|
|
|
||||||
2016
|
|
|
||||||
2017
|
|
|
||||||
Total
|
$
|
|
$
|
|
Total consideration transferred
|
$
|
|
||
Adjustments to consideration transferred:
|
||||
Cash acquired
|
(
|
)
|
||
Accrued consideration
|
|
|||
Adjusted consideration transferred
|
|
|||
Assets acquired:
|
||||
Working capital (primarily AR and inventory)
|
|
|||
Fixed assets and Other long term assets
|
|
|||
Net assets acquired
|
$
|
|
||
Goodwill
|
$
|
|
Total consideration transferred
|
$
|
|
||
Adjustments to consideration transferred:
|
||||
Cash acquired
|
(
|
)
|
||
Working capital
|
|
|||
Debt eliminated in consolidation
|
|
|||
Adjusted consideration transferred
|
|
|||
Assets acquired:
|
||||
Working capital (primarily AR and inventory)
|
|
|||
Fixed assets and Other long term assets
|
|
|||
Other liabilities
|
(
|
)
|
||
Non-controlling interest
|
(
|
)
|
||
Net assets acquired
|
$
|
(
|
)
|
|
Goodwill
|
$
|
|
Consolidated Statement of Income
|
For the three months ended
September 30,
2020
|
|||||||||||
As Originally Reported
|
Effect of LIFO Change
|
As Adjusted
|
||||||||||
Cost of sales
|
$
|
|
$
|
|
$
|
|
||||||
Income before income taxes
|
$
|
|
$
|
|
$
|
|
||||||
Income tax expense
|
$
|
|
$
|
|
$
|
|
||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
$
|
|
||||||
Earnings per common share:
|
||||||||||||
Basic
|
$
|
|
$
|
|
$
|
|
||||||
Diluted
|
$
|
|
$
|
|
$
|
|
For the nine
months ended
September 30,
2020
|
||||||||||||
As Originally Reported
|
Effect of LIFO Change
|
As Adjusted
|
||||||||||
Cost of sales
|
$
|
|
$
|
|
$
|
|
||||||
Income before income taxes
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Income tax expense
|
$
|
|
$
|
|
$
|
|
||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Earnings per common share:
|
||||||||||||
Basic
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Diluted
|
$
|
|
$
|
(
|
)
|
$
|
|
Consolidated Balance Sheets
|
December 31, 2020
|
|||||||||||
As Originally Reported
|
Effect of LIFO Change
|
As Adjusted
|
||||||||||
Inventories
|
$
|
|
$
|
|
$
|
|
||||||
Deferred income taxes
|
$
|
|
$
|
|
$
|
|
||||||
Accumulated earnings (deficit)
|
$
|
|
$
|
|
$
|
|
Consolidated Statement of Cash Flows
|
For the nine
months ended
September 30,
2020
|
|||||||||||
As Originally Reported
|
Effect of LIFO Change
|
As Adjusted
|
||||||||||
Consolidated net income
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Deferred income taxes
|
$
|
|
$
|
|
$
|
|
||||||
Inventories
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
|
September 30,
2021
|
December 31,
2020
|
||||||
Raw materials and work in process
|
$
|
|
$
|
|
||||
Leaf tobacco
|
|
|
||||||
Finished goods - Zig-Zag Products
|
|
|
||||||
Finished goods - Stoker’s Products
|
|
|
||||||
Finished goods - NewGen products
|
|
|
||||||
Other
|
|
|
||||||
Inventories
|
$
|
|
$
|
|
September 30,
2021
|
December 31,
2020
|
|||||||
Inventory deposits
|
$
|
|
$
|
|
||||
Insurance deposit
|
|
|
||||||
Prepaid taxes
|
|
|
||||||
Other
|
|
|
||||||
Total
|
$
|
|
$
|
|
September 30,
2021
|
December 31,
2020
|
|||||||
Land
|
$
|
|
$
|
|
||||
Buildings and improvements
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Machinery and equipment
|
|
|
||||||
Furniture and fixtures
|
|
|
||||||
Gross property, plant and equipment
|
|
|
||||||
Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
Net property, plant and equipment
|
$
|
|
$
|
|
|
September 30,
2021
|
December 31,
2020
|
||||||
Equity investments
|
$
|
|
$
|
|
||||
Debt security investment | ||||||||
Other
|
|
|
||||||
Total
|
$
|
|
$
|
|
|
September 30,
2021
|
December 31,
2020
|
||||||
Accrued payroll and related items
|
$
|
|
$
|
|
||||
Customer returns and allowances
|
|
|
||||||
Taxes payable
|
|
|
||||||
Lease liabilities
|
|
|
||||||
Accrued interest
|
|
|
||||||
Other
|
|
|
||||||
Total
|
$
|
|
$
|
|
September 30,
2021
|
December 31,
2020
|
|||||||
Senior Secured Notes
|
$
|
|
$
|
|
||||
2018 First Lien Term Loan
|
|
|
||||||
Convertible Senior Notes
|
|
|
||||||
Note payable - Promissory Note
|
|
|
||||||
Note payable - Unsecured Loan
|
|
|
||||||
Gross notes payable and long-term debt
|
|
|
||||||
Less deferred finance charges
|
(
|
)
|
(
|
)
|
||||
Less current maturities
|
(
|
)
|
(
|
)
|
||||
Notes payable and long-term debt
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
||||||||
2021 |
2020 |
|||||||
Operating lease cost
|
||||||||
Cost of sales
|
$
|
|
$
|
|
||||
Selling, general and administrative
|
||||||||
Variable lease cost (1)
|
||||||||
Short-term lease cost
|
||||||||
Sublease income
|
|
(
|
)
|
|||||
Total
|
$
|
|
$
|
|
(1) |
|
Nine Months Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Operating lease cost
|
||||||||
Cost of sales
|
$
|
|
$
|
|
||||
Selling, general and administrative | ||||||||
Variable lease cost (1) | ||||||||
Short-term lease cost | ||||||||
Sublease income | ( |
) |
( |
) |
||||
Total | $ | $ |
(1) |
|
September 30,
2021
|
December 31,
2020
|
|||||||
Assets:
|
||||||||
Right of use assets
|
$
|
|
$
|
|
||||
Total lease assets
|
$
|
|
$
|
|
||||
Liabilities:
|
||||||||
(2) |
$
|
|
$
|
|
||||
Long-term lease liabilities
|
||||||||
Total lease liabilities
|
$
|
|
$
|
|
(2) |
Reported within accrued liabilities on the balance sheet
|
As of September 30,
|
||||||||
2021
|
2020
|
|||||||
Weighted-average remaining lease term - operating leases
|
|
|
||||||
Weighted-average discount rate - operating leases
|
|
%
|
|
%
|
|
September 30,
2021
|
|||
2021
|
$
|
|
||
2022
|
|
|||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
Years thereafter
|
|
|||
Total lease payments
|
$
|
|
||
Less: Imputed interest
|
|
|||
Present value of lease liabilities
|
$
|
|
Three Months Ended September 30,
|
||||||||||||||||
Pension
Benefits
|
Postretirement
Benefits
|
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Service cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Interest cost
|
|
|
|
|
||||||||||||
Expected return on plan assets
|
|
|
|
|
||||||||||||
Amortization of (gains) losses | ||||||||||||||||
Settlement and curtailment loss
|
|
|
|
|
||||||||||||
Net periodic benefit income
|
$
|
|
$
|
|
$
|
|
$
|
|
Nine
Months Ended September 30,
|
||||||||||||||||
Pension
Benefits
|
Postretirement
Benefits
|
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Service cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Interest cost
|
|
|
|
|
||||||||||||
Expected return on plan assets
|
|
(
|
)
|
|
|
|||||||||||
Amortization of (gains) losses | ( |
) | ||||||||||||||
Settlement and curtailment loss
|
|
|
|
|
||||||||||||
Net periodic benefit income
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
Stock
Option
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Grant Date
Fair Value
|
||||||||||
Outstanding, December 31, 2019
|
|
$
|
|
$
|
|
|||||||
Granted
|
|
|
|
|||||||||
Exercised
|
(
|
)
|
|
|
||||||||
Forfeited
|
(
|
)
|
|
|
||||||||
Outstanding, December 31, 2020
|
|
|
|
|||||||||
Granted
|
|
|
|
|||||||||
Exercised
|
(
|
)
|
|
|
||||||||
Forfeited
|
(
|
)
|
|
|
||||||||
Outstanding, September 30, 2021
|
|
$
|
|
$
|
|
February 10,
2017
|
May 17,
2017
|
March 7,
2018
|
March 20,
2019
|
October 24,
2019
|
March 18,
2020
|
February 18,
2021
|
May 3,
2021
|
|||||||||||||||||||||||||
Number of options granted
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Options outstanding at September 30, 2021
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Number exercisable at September 30, 2021
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Exercise price
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Remaining lives
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Risk free interest rate
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||||||||||
Expected volatility
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||||||||||
Expected life
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Dividend yield
|
|
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||||||||||||
Fair value at grant date
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
May 17,
2021
|
|||
Number of options granted
|
|
|||
Options outstanding at September 30, 2021
|
|
|||
Number exercisable at September 30, 2021
|
|
|||
Exercise price
|
$
|
|
||
Remaining lives
|
|
|||
Risk free interest rate
|
|
%
|
||
Expected volatility
|
|
%
|
||
Expected life
|
|
|||
Dividend yield
|
|
%
|
||
Fair value at grant date
|
$
|
|
|
March 31,
2017
|
March 7,
2018
|
March 20,
2019
|
March 20,
2019
|
July 19,
2019
|
March 18,
2020
|
December 28,
2020
|
February 18,
2021
|
||||||||||||||||||||||||
Number of PRSUs granted
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
PRSUs outstanding at September 30, 2021
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Fair value as of grant date
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||||||
Remaining lives
|
|
|
|
-
|
|
|
|
|
|
Three Months Ended September 30,
|
|||||||||||||||||||||||
2021
|
2020
|
|||||||||||||||||||||||
Income
|
Shares
|
Per
Share
|
Income
|
Shares
|
Per
Share
|
|||||||||||||||||||
Basic EPS:
|
||||||||||||||||||||||||
Numerator
|
||||||||||||||||||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||||||||||||||||||
Denominator
|
||||||||||||||||||||||||
Weighted average
|
|
$
|
|
|
$
|
|
||||||||||||||||||
Diluted EPS:
|
||||||||||||||||||||||||
Numerator
|
||||||||||||||||||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||||||||||||||||||
Interest expense related to Convertible Senior Notes, net of tax
|
|
|
||||||||||||||||||||||
Diluted net income attributable to Turning Point Brands. Inc.
|
$
|
|
$
|
|
||||||||||||||||||||
Denominator
|
||||||||||||||||||||||||
Basic weighted average
|
|
|
||||||||||||||||||||||
Convertible Senior Notes
|
|
|
||||||||||||||||||||||
Stock options
|
|
|
||||||||||||||||||||||
|
$
|
|
|
$
|
|
|
Nine
Months Ended September 30,
|
|||||||||||||||||||||||
2021
|
2020
|
|||||||||||||||||||||||
Income
|
Shares
|
Per
Share
|
Income
|
Shares
|
Per
Share
|
|||||||||||||||||||
Basic EPS:
|
||||||||||||||||||||||||
Numerator
|
||||||||||||||||||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||||||||||||||||||
Denominator
|
||||||||||||||||||||||||
Weighted average
|
|
$
|
|
|
$
|
|
||||||||||||||||||
Diluted EPS:
|
||||||||||||||||||||||||
Numerator
|
||||||||||||||||||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
|
$
|
|
||||||||||||||||||||
Interest expense related to Convertible Senior Notes
|
|
|
||||||||||||||||||||||
Diluted net income attributable to Turning Point Brands. Inc.
|
$
|
|
$
|
|
||||||||||||||||||||
Denominator
|
||||||||||||||||||||||||
Basic weighted average
|
|
|
||||||||||||||||||||||
Convertible Senior Notes
|
|
|
||||||||||||||||||||||
Stock options
|
|
|
||||||||||||||||||||||
|
$
|
|
|
$
|
|
Three Months Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Net sales
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Total
|
$
|
|
$
|
|
||||
Gross profit
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Total
|
$
|
|
$
|
|
||||
Operating income (loss)
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Corporate unallocated (1)(2)(3)
|
(
|
)
|
(
|
)
|
||||
Total
|
$
|
|
$
|
|
||||
Interest expense, net
|
|
|
||||||
Investment income
|
(
|
)
|
(
|
)
|
||||
Gain on extinguishment of debt | ( |
) | ||||||
Net periodic income, excluding service cost
|
|
|
||||||
Income before income taxes
|
$
|
|
$
|
|
||||
Capital expenditures
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Total
|
$
|
|
$
|
|
||||
Depreciation and amortization
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Total
|
$
|
|
$
|
|
(1) |
|
(2) |
|
(3) |
|
Nine Months
Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Net sales
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Total
|
$
|
|
$
|
|
||||
Gross profit
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Total
|
$
|
|
$
|
|
||||
Operating income (loss)
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Corporate unallocated (1)(2)(3)
|
(
|
)
|
(
|
)
|
||||
Total
|
$
|
|
$
|
|
||||
Interest expense, net
|
|
|
||||||
Investment income
|
(
|
)
|
(
|
)
|
||||
Loss on extinguishment of debt
|
|
|
||||||
Net periodic income, excluding service cost
|
|
|
||||||
Income before income taxes
|
$
|
|
$
|
|
||||
Capital expenditures
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Total
|
$
|
|
$
|
|
||||
Depreciation and amortization
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Total
|
$
|
|
$
|
|
(1) |
|
(2) |
|
(3) |
|
|
September 30,
2021
|
December 31,
2020
|
||||||
Assets
|
||||||||
Zig-Zag products
|
$
|
|
$
|
|
||||
Stoker’s products
|
|
|
||||||
NewGen products
|
|
|
||||||
Corporate unallocated (1)
|
|
|
||||||
Total
|
$
|
|
$
|
|
(1) |
|
|
NewGen Segment
|
|||||||
Three Months Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Business to Business
|
$
|
|
$
|
|
||||
Business to Consumer - Online
|
|
|
||||||
Business to Consumer - Corporate store
|
|
|
||||||
Other
|
|
|
||||||
Total
|
$
|
|
$
|
|
|
NewGen Segment
|
|||||||
Nine Months
Ended
September 30,
|
||||||||
2021
|
2020
|
|||||||
Business to Business
|
$
|
|
$
|
|
||||
Business to Consumer - Online
|
|
|
||||||
Business to Consumer - Corporate store
|
|
|
||||||
Other
|
|
|
||||||
Total
|
$
|
|
$
|
|
|
Three Months Ended
September 30,
|
|||||||
2021
|
2020
|
|||||||
Domestic
|
$
|
|
$
|
|
||||
Foreign
|
|
|
||||||
Total
|
$
|
|
$
|
|
|
Nine Months
Ended
September 30,
|
|||||||
2021
|
2020
|
|||||||
Domestic
|
$
|
|
$
|
|
||||
Foreign
|
|
|
||||||
Total
|
$
|
|
$
|
|
• |
Our ability to further penetrate markets with our existing products;
|
• |
Our ability to introduce new products and product lines that complement our core business;
|
• |
Decreasing interest in some tobacco products among consumers;
|
• |
Price sensitivity in our end-markets;
|
• |
Marketing and promotional initiatives, which cause variability in our results;
|
• |
General economic conditions, including consumer access to disposable income;
|
• |
Freight and shipping costs and the availability of adequate freight for our shipments;
|
• |
Cost and increasing regulation of promotional and advertising activities;
|
• |
Cost of complying with regulation, including the “deeming regulations”;
|
• |
Counterfeit and other illegal products in our end-markets;
|
• |
Currency fluctuations;
|
• |
Our ability to identify attractive acquisition opportunities; and
|
• |
Our ability to integrate acquisitions.
|
Three Months Ended September 30,
|
||||||||||||
2021
|
2020
|
% Change
|
||||||||||
Consolidated Results of Operations Data:
|
||||||||||||
Net sales
|
||||||||||||
Zig-Zag products
|
$
|
42,234
|
$
|
35,973
|
17.4
|
%
|
||||||
Stoker’s products
|
30,472
|
29,764
|
2.4
|
%
|
||||||||
NewGen products
|
37,198
|
38,437
|
-3.2
|
%
|
||||||||
Total net sales
|
109,904
|
104,174
|
5.5
|
%
|
||||||||
Cost of sales
|
55,635
|
55,867
|
-0.4
|
%
|
||||||||
Gross profit
|
||||||||||||
Zig-Zag products
|
23,703
|
21,263
|
11.5
|
%
|
||||||||
Stoker’s products
|
17,104
|
16,042
|
6.6
|
%
|
||||||||
NewGen products
|
13,462
|
11,002
|
22.4
|
%
|
||||||||
Total gross profit
|
54,269
|
48,307
|
12.3
|
%
|
||||||||
Selling, general, and administrative expenses
|
31,894
|
32,286
|
-1.2
|
%
|
||||||||
Operating income
|
22,375
|
16,021
|
39.7
|
%
|
||||||||
Interest expense, net
|
5,397
|
3,539
|
52.5
|
%
|
||||||||
Investment income
|
(157
|
)
|
(3
|
)
|
5133.3
|
%
|
||||||
Gain on extinguishment of debt
|
(375
|
)
|
-
|
NM
|
||||||||
Net periodic income, excluding service cost
|
-
|
1,188
|
-100.0
|
%
|
||||||||
Income before income taxes
|
17,510
|
11,297
|
55.0
|
%
|
||||||||
Income tax expense
|
4,073
|
2,277
|
78.9
|
%
|
||||||||
Consolidated net income
|
13,437
|
9,020
|
49.0
|
%
|
||||||||
Net loss attributable to non-controlling interest
|
(31
|
)
|
-
|
NM
|
||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
13,468
|
$
|
9,020
|
49.3
|
%
|
Nine Months Ended September 30,
|
||||||||||||
2021
|
2020
|
% Change
|
||||||||||
Consolidated Results of Operations Data:
|
||||||||||||
Net sales
|
||||||||||||
Zig-Zag products
|
$
|
130,440
|
$
|
92,290
|
41.3
|
%
|
||||||
Stoker’s products
|
93,096
|
87,081
|
6.9
|
%
|
||||||||
NewGen products
|
116,652
|
120,455
|
-3.2
|
%
|
||||||||
Total net sales
|
340,188
|
299,826
|
13.5
|
%
|
||||||||
Cost of sales
|
172,685
|
162,152
|
6.5
|
%
|
||||||||
Gross profit
|
||||||||||||
Zig-Zag products
|
76,342
|
53,066
|
43.9
|
%
|
||||||||
Stoker’s products
|
51,142
|
46,424
|
10.2
|
%
|
||||||||
NewGen products
|
40,019
|
38,184
|
4.8
|
%
|
||||||||
Total gross profit
|
167,503
|
137,674
|
21.7
|
%
|
||||||||
Selling, general, and administrative expenses
|
95,900
|
95,436
|
0.5
|
%
|
||||||||
Operating income
|
71,603
|
42,238
|
69.5
|
%
|
||||||||
Interest expense, net
|
15,406
|
10,143
|
51.9
|
%
|
||||||||
Investment income
|
(292
|
)
|
(128
|
)
|
128.1
|
%
|
||||||
Loss on extinguishment of debt
|
5,331
|
-
|
NM
|
|||||||||
Net periodic income, excluding service cost
|
-
|
997
|
-100.0
|
%
|
||||||||
Income before income taxes
|
51,158
|
31,226
|
63.8
|
%
|
||||||||
Income tax expense
|
11,151
|
7,412
|
50.4
|
%
|
||||||||
Consolidated net income
|
40,007
|
23,814
|
68.0
|
%
|
||||||||
Net loss attributable to non-controlling interest
|
(598
|
)
|
-
|
NM
|
||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
40,605
|
$
|
23,814
|
70.5
|
%
|
(in thousands)
|
Three Months Ended
September 30,
|
|||||||
2021
|
2020
|
|||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
13,468
|
$
|
9,020
|
||||
Add:
|
||||||||
Interest expense, net
|
5,397
|
3,539
|
||||||
Gain on extinguishment of debt
|
(375
|
)
|
-
|
|||||
Income tax expense
|
4,073
|
2,277
|
||||||
Depreciation expense
|
767
|
809
|
||||||
Amortization expense
|
477
|
477
|
||||||
EBITDA
|
$
|
23,807
|
$
|
16,122
|
||||
Components of Adjusted EBITDA
|
||||||||
Other (a)
|
-
|
1,188
|
||||||
Stock options, restricted stock, and incentives expense (b)
|
1,752
|
772
|
||||||
Transactional expenses (c)
|
(232
|
)
|
570
|
|||||
FDA PMTA (d)
|
960
|
5,271
|
||||||
Adjusted EBITDA
|
$
|
26,287
|
$
|
23,923
|
(a)
|
Represents non-cash pension expense (income) and foreign exchange hedging.
|
(b)
|
Represents non-cash stock options, restricted stock, incentives expense and Solace performance stock units.
|
(c)
|
Represents the fees incurred for transaction expenses.
|
(d)
|
Represents costs associated with applications related to FDA premarket tobacco product application (“PMTA”).
|
(in thousands)
|
Nine Months Ended
September 30,
|
|||||||
2021
|
2020
|
|||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
40,605
|
$
|
23,814
|
||||
Add:
|
||||||||
Interest expense, net
|
15,406
|
10,143
|
||||||
Loss on extinguishment of debt
|
5,331
|
-
|
||||||
Income tax expense
|
11,151
|
7,412
|
||||||
Depreciation expense
|
2,313
|
2,482
|
||||||
Amortization expense
|
1,431
|
1,304
|
||||||
EBITDA
|
$
|
76,237
|
$
|
45,155
|
||||
Components of Adjusted EBITDA
|
||||||||
Other (a)
|
-
|
841
|
||||||
Stock options, restricted stock, and incentives expense (b)
|
6,015
|
1,987
|
||||||
Transactional expenses (c)
|
1,077
|
1,909
|
||||||
FDA PMTA (d)
|
960
|
14,435
|
||||||
Adjusted EBITDA
|
$
|
84,289
|
$
|
64,327
|
(a)
|
Represents non-cash pension expense (income) and foreign exchange hedging.
|
(b)
|
Represents non-cash stock options, restricted stock, incentives expense and Solace performance stock units.
|
(c)
|
Represents the fees incurred for transaction expenses.
|
(d)
|
Represents costs associated with applications related to FDA premarket tobacco product application (“PMTA”).
|
As of
|
||||||||
(in thousands)
|
September 30,
2021
|
December 31,
2020
|
||||||
Current assets
|
$
|
134,225
|
$
|
121,638
|
||||
Current liabilities
|
54,056
|
56,629
|
||||||
Working capital
|
$
|
80,169
|
$
|
65,009
|
September 30,
2021
|
December 31,
2020
|
|||||||
Senior Secured Notes
|
$
|
250,000
|
$
|
-
|
||||
2018 First Lien Term Loan
|
-
|
130,000
|
||||||
Convertible Senior Notes
|
172,500
|
172,500
|
||||||
Note payable - Promissory Note
|
-
|
10,000
|
||||||
Note payable - Unsecured Loan
|
7,485
|
7,485
|
||||||
Gross notes payable and long-term debt
|
429,985
|
319,985
|
||||||
Less deferred finance charges
|
(8,947
|
)
|
(5,873
|
)
|
||||
Less current maturities
|
(7,485
|
)
|
(12,000
|
)
|
||||
Notes payable and long-term debt
|
$
|
413,553
|
$
|
302,112
|
Period
|
Total Number
of Shares
Purchased
|
Average
Price Paid
per Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
Maximum Number
(or Approximate
Dollar Value)
of Shares that
May Yet Be
Purchased Under the
Plans or Programs
|
||||||||||||
July 1 to July 31
|
-
|
$
|
-
|
-
|
$
|
25,723,385
|
||||||||||
August 1 to August 31
|
125,000
|
$
|
51.16
|
125,000
|
$
|
19,328,385
|
||||||||||
September 1 to September 30
|
-
|
$
|
-
|
-
|
$
|
19,328,385
|
||||||||||
Total
|
125,000
|
125,000
|
Exhibit No.
|
Description
|
Preferability letter from RSM US, LLP regarding a change in accounting method. (incorporated by reference to Exhibit 18.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 5, 2021)
|
|
Rule 13a-14(a)/15d-14(a) Certification of Lawrence S. Wexler.*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Luis Reformina.*
|
|
Rule 13a-14(a)/15d-14(a) Certification of Brian Wigginton.*
|
|
Section 1350 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
101
|
XBRL (eXtensible Business Reporting Language). The following materials from Turning Point Brands, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, filed on
October 26, 2021, formatted in Inline XBRL (iXBRL): (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows, and (v) the notes
to consolidated financial statements.*
|
104
|
Cover Page Interactive Data File (formatted in iXBRL and included in Exhibit 101).*
|
TURNING POINT BRANDS, INC.
|
||||
By: /s/ Lawrence S. Wexler
|
||||
Name: Lawrence S. Wexler
|
||||
Title: President and Chief Executive Officer
|
||||
By: /s/ Luis Reformina
|
||||
Name: Luis Reformina
|
||||
Title: Chief Financial Officer
|
||||
By: /s/ Brian Wigginton
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Name: Brian Wigginton
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Title: Chief Accounting Officer
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