10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_______________ to ________________

Commission file number: 001-37763

TURNING POINT BRANDS, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-0709285
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

5201 Interchange Way, Louisville, KY	40229
(Address of principal executive offices)	(Zip Code)

 (502) 778-4421

(Registrant’s telephone number, including area code)

 Former name, former address and former fiscal year, if changed since last report: not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   ☑     No   ☐ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   ☑    No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☑	(Do not check if a smaller reporting company)	Smaller reporting company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ☐    No   ☑

At August 9, 2016, there were 17,900,318 shares outstanding of the registrant’s voting common stock, par value $0.01 per share.

TURNING POINT BRANDS, INC.

TABLE OF CONTENTS

			Page No.
PART I          FINANCIAL INFORMATION
	ITEM 1	Financial Statements (Unaudited)
		Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	3
		Consolidated Statements of Operations for the three months ended June 30,2016 and 2015	4
		Consolidated Statements of Income for the six months ended June 30, 2016 and 2015	5
		Consolidated Statements of Comprehensive Income for the three months ended June 30, 2016 and 2015	6
		Consolidated Statements of Comprehensive Income for the six months ended June 30, 2016 and 2015	7
		Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	8
		Notes of Consolidated Financial Statements	10
	ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
	ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	52
	ITEM 4	Controls and Procedures	52
PART II         OTHER INFORMATION
	ITEM 1	Legal Proceedings	53
	ITEM 1A	Risk Factors	53
	ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	53
	ITEM 3	Defaults Upon Senior Securities	53
	ITEM 4	Mine Safety Disclosures	53
	ITEM 5	Other Information	53
	ITEM 6	Exhibits	53
	Signatures	Signatures	54
	Index to Exhibits		55

2

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Turning Point Brands, Inc.

Consolidated Balance Sheets

(dollars in thousands except share data)(unaudited)

ASSETS	June 30, 2016			December 31, 2015
Current assets:
Cash	$	3,612		$	4,835
Accounts receivable, net of allowances of $29 in 2016 and $137 in 2015		5,209			3,940
Inventories		51,756			44,339
Other current assets		9,895			10,838
Total current assets		70,472			63,952
Property, plant and equipment, net		5,876			5,603
Deferred financing costs, net		174			208
Goodwill		128,697			128,697
Other intangible assets, net		8,553			8,553
Master Settlement Agreement - escrow deposits		31,904			31,842
Other assets		701			3,608
Total assets	$	246,377		$	242,463
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	5,321		$	4,087
Accrued expenses		9,564			11,053
Accrued interest expense		629			4,329
First lien term loan		1,650			1,650
Revolving credit facility		6,621			18
Other current liabilities		295			-
Total current liabilities		24,080			21,137
Notes payable and long-term debt		199,435			290,772
Deferred income taxes		7,063			7,013
Postretirement benefits		4,607			4,666
Pension benefits		372			487
Total liabilities		235,557			324,075
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock; $0.01 par value; authorized shares 40,000,000; issued shares -0-
Common stock, voting, $0.01 par value; authorized shares, 190,000,000; issued shares, 2016 17,901,164 and 2015 6,259,480		179			63
Common stock, nonvoting, $0.01 par value; authorized shares, 10,000,000; issued shares, 2016 0 and 2015 938,857		-			9
Additional paid-in capital		104,759			12,628
Accumulated other comprehensive loss		(3,266	)		(3,512	)
Accumulated deficit		(90,852	)		(90,800	)
Total stockholders' equity (deficit)		10,820			(81,612	)
Total liabilities and stockholders' equity (deficit)	$	246,377		$	242,463

The accompanying notes are an integral part of the consolidated financial statements.

3

Turning Point Brands, Inc.

Consolidated Statements of Operations

(dollars in thousands except share data)

(unaudited)

	Three Months Ended
	June 30, 2016			June 30, 2015
Net sales	$	51,581		$	47,999
Cost of sales		26,707			25,388
Gross profit		24,874			22,611
Selling, general and administrative expenses		14,098			14,875
Operating income		10,776			7,736
Interest expense and financing costs		6,876			8,574
Investment income		(332	)		-
Loss on extinguishment of debt		2,824			-
Income (loss) before income taxes		1,408			(838	)
Income tax expense		609			583
Net income (loss)	$	799		$	(1,421	)
Basic earnings per common share:
Net income	$	0.05		$	(0.20	)
Diluted earnings per common share:
Net income	$	0.05		$	(0.20	)
Weighted average common shares outstanding:
Basic - inclusive of voting and non-voting shares		15,274,446			7,198,337
Diluted - inclusive of voting and non-voting shares		16,877,291			7,198,337

The accompanying notes are an integral part of the consolidated financial statements.

4

Turning Point Brands, Inc.

Consolidated Statements of Income

(dollars in thousands except share data)

(unaudited)

	Six Months Ended
	June 30, 2016			June 30, 2015
Net sales	$	101,447		$	99,085
Cost of sales		51,926			51,819
Gross profit		49,521			47,266
Selling, general and administrative expenses		27,836			27,546
Operating income		21,685			19,720
Interest expense and financing costs		15,338			17,056
Investment income		(332	)		-
Loss on extinguishment of debt		2,824			-
Income before income taxes		3,855			2,664
Income tax expense		822			658
Net income	$	3,033		$	2,006
Basic earnings per common share:
Net income	$	0.24		$	0.28
Diluted earnings per common share:
Net income	$	0.22		$	0.24
Weighted average common shares outstanding:
Basic - inclusive of voting and non-voting shares		12,476,719			7,197,928
Diluted - inclusive of voting and non-voting shares		13,924,626			8,334,137

The accompanying notes are an integral part of the consolidated financial statements.

5

Turning Point Brands, Inc.

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(unaudited)

	Three Months Ended
	June 30, 2016		June 30, 2015
Net income (loss)	$	799	$	(1,421	)
Other comprehensive income, net of tax -
Pension and postretirement
Amortization of unrealized losses recorded in cost of sales		6		6
Amortization of unrealized losses recorded in selling, general and administrative expenses		117		125
		123		131
Comprehensive income (loss)	$	922	$	(1,290	)

The accompanying notes are an integral part of the consolidated financial statements

6

Turning Point Brands, Inc.

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(unaudited)

	Six Months Ended
	June 30, 2016		June 30, 2015
Net income	$	3,033	$	2,006
Other comprehensive income, net of tax -
Pension and postretirement
Amortization of unrealized losses recorded in cost of sales		12		12
Amortization of unrealized losses recorded in selling, general and administrative expenses		234		251
		246		263
Comprehensive income	$	3,279	$	2,269

The accompanying notes are an integral part of the consolidated financial statements

7

Turning Point Brands, Inc.

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)

	Six Months Ended
	June 30, 2016			June 30, 2015
Cash flows from operating activities:
Net income	$	3,033		$	2,006
Adjustments to reconcile net income to net cash used in operating activities:
Loss on extinguishment of debt		2,824			-
Gain on sale of fixed assets		-			(1	)
Depreciation expense		586			519
Amortization of deferred financing costs		719			724
Amortization of original issue discount		459			524
Interest incurred but not paid on PIK Toggle Notes		3,422			3,963
Interest incurred but not paid on 7% Senior Notes		329			426
Interest paid on PIK Toggle Notes		(9,893	)		-
Deferred income taxes		50			(9	)
Stock compensation expense		25			92
Restricted stock compensation expense		8			-
Member unit compensation expense		13			57
Changes in operating assets and liabilities:
Accounts receivable		(1,269	)		(1,010	)
Inventories		(7,417	)		(3,962	)
Other current assets		943			(4,815	)
Other assets		(62	)		(87	)
Accounts payable		1,234			2,355
Accrued pension liabilities		131			82
Accrued postretirement liabilities		(59	)		(63	)
Accrued expenses and other		(4,188	)		(2,256	)
Net cash used in operating activities		(9,112	)		(1,455	)
Cash flows from investing activities:
Capital expenditures		(859	)		(641	)
Proceeds from sale of fixed assets		-			2
Note receivable		-			(430	)
Net cash used in investing activities		(859	)		(1,069	)

8

Turning Point Brands, Inc.

Consolidated Statements of Cash Flows (Cont.)

(dollars in thousands)

(unaudited)

	Six Months Ended
	June 30, 2016			June 30, 2015
Cash flows from financing activities:
Proceeds from revolving credit facility, net		6,603			213
Payment of financing costs		(200	)		-
Payment of first lien term loan		(3,563	)		(825	)
Payment of second lien term loan		(20,000	)		-
Payment of PIK Toggle Notes		(24,107	)		-
Redemption of Intrepid options		(661	)		-
Redemption of Intrepid warrants		(5,500	)		-
Stock option exercised		8			-
Proceeds from issuance of stock		56,168			1
Net cash provided by (used in) financing activities		8,748			(611	)
Net decrease in cash		(1,223	)		(3,135	)
Cash, beginning of period		4,835			8,467
Cash, end of period	$	3,612		$	5,332
Supplemental schedule of noncash financing activities:
Issuance of restricted stock	$	279		$	-
Conversion of PIK Toggle Notes to equity	$	29,014		$	-
Conversion of 7% Senior Notes to equity	$	10,074		$	-
Accrued expenses incurred for issuance of stock	$	423		$	-

The accompanying notes are an integral part of the consolidated financial statements.

9

Turning Point Brands, Inc.

Notes to Consolidated Financial Statements

(dollars in thousands, except where designated and per share data)

Note 1. Basis of Presentation:

Turning Point Brands, Inc. (formerly known as North Atlantic Holding Company, Inc.), (the “Company”) is a holding company which owns NATC Holding Company, Inc. (“NATC Holding”) and its subsidiaries and Turning Point Brands, LLC (“TPLLC”) and its subsidiary, Intrepid Brands, LLC (“Intrepid”). Except where the context otherwise requires, references to the Company include the Company, NATC Holding and its subsidiary, North Atlantic Trading Company, Inc. (“NATC”) and its subsidiaries, National Tobacco Company, L.P. (“NTC”), North Atlantic Operating Company, Inc. (“NAOC”), North Atlantic Cigarette Company, Inc. (“NACC”), National Tobacco Finance Corporation (“NTFC”), Fred Stoker & Sons, Inc., RBJ Sales, Inc. and Stoker, Inc. (collectively, “Stoker”) and TPLLC and Intrepid.

The accompanying interim condensed consolidated financial statements have been prepared in accordance with our accounting practices described in our audited consolidated financial statements as of and for the year ended December 31, 2015, and are unaudited. In the opinion of management, the unaudited interim condensed consolidated financial statements included herein contain all adjustments necessary to present fairly our financial position, results of operations and cash flows for the periods indicated. Such adjustments, other than nonrecurring adjustments that have been separately disclosed, are of a normal, recurring nature. The operating results for interim periods are not necessarily indicative of results to be expected for a full year of future interim periods. The unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2015. The accompanying interim condensed consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission and, accordingly, do not include all the disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) with respect to annual financial statements.

Note 2. Summary of Significant Accounting Policies:

Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions have been eliminated.

Revenue Recognition: The Company recognizes revenues and the related costs upon delivery to the customer, at which time there is a transfer of title and risk of loss to the customer in accordance with the Financial Accounting Standards Board Accounting Standards Codification^© (“ASC”) 605-10-S99. The Company classifies customer rebates as sales deductions in accordance with the requirements of ASC 605-50-25.

Shipping Costs: The Company records shipping costs incurred as a component of selling, general and administrative expenses. Shipping costs incurred were approximately $1.6 million and $1.9 million for the three months ended June 30, 2016 and 2015, respectively. Shipping costs incurred were approximately $3.1 million and $3.6 million for the six months ended June 30, 2016 and 2015, respectively.

Master Settlement Agreement Escrow Account: Pursuant to the Master Settlement Agreement (the “MSA”) entered into in November 1998 by most states (represented by their attorneys general acting through the National Association of Attorneys General) and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to include a manufacturer of make-your-own (“MYO”) cigarette tobacco) has the option of either becoming a signatory to the MSA or opening, funding, and maintaining an escrow account to have funds available for certain potential tobacco-related liabilities, with sub-accounts on behalf of each settling state.  The Company has chosen to open and fund an escrow account as its method of compliance.  It is the Company’s policy to record amounts on deposit in the escrow account for prior years as a non-current asset.  Each year’s annual obligation is required to be deposited in the escrow account by April 15 of the following year.  In addition to the annual deposit, many states have elected to require quarterly deposits for the previous quarter’s sales. As of June 30, 2016 and December 31, 2015, NATC had on deposit approximately $31.9 million and $31.8 million, respectively, in escrow.

Effective April 1, 2009, the federal excise tax on MYO products was increased from $1.0969 per pound to $24.78 per pound of tobacco. With this significant increase in the federal excise tax, the Company discontinued its generic category of MYO but continues to sell the Zig-Zag branded MYO. For further discussion of the MSA see our Form S-1/A filed on April 28, 2016 with the SEC, pages F-11 and F-12.

10

The following table represents the amount of deposits by sales year for the MSA escrow account and reflects the decline in annual deposits beginning in 2009, due to the significant increase in federal excise taxes, as described above:

	Deposits
Sales Year	June 30, 2016		December 31, 2015
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,715		3,715
2005		4,552		4,552
2006		3,847		3,847
2007		4,167		4,167
2008		3,364		3,364
2009		1,626		1,626
2010		406		406
2011		193		193
2012		198		198
2013		173		173
2014		142		142
2015		89		38
2016		11		-
Total	$	31,904	$	31,842

Recent Accounting Pronouncements Adopted:

The Company adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost in 2016. This ASU requires that debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Based on the requirements of this ASU, the Company has retrospectively applied ASU 2015-03 to the December 31, 2015 Consolidated Balance Sheet, which has resulted in $6.3 million being reclassified to direct deduction of the carrying amount of the debt.

The Company adopted ASU 2015-17, Income Taxes (Topic 740): Balance sheet classification of deferred taxes in 2016. This ASU requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. The Company has retrospectively applied ASU 2015-17 to the December 31, 2015 Consolidated Balance Sheet, which has resulted in $0.4 million of deferred tax liabilities being reclassified to a noncurrent deferred tax liability.

Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update (“ASU”), ASU 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which delayed the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting year. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on the consolidated financial statements.

11

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in this ASU require entities that measure inventory using the first-in, first-out or average cost methods to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. The Company is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less for which there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities and should recognize lease expense for such leases generally on a straight-line basis over the lease term. Certain qualitative disclosures along with specific quantitative disclosures will be required, so that users are able to understand more about the nature of an entity’s leasing activities. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. At transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients related to the identification and classification of leases that commenced before the effective date of ASU 2016-02. An entity that elects to use the practical expedients will, in effect, continue to account for leases that commenced before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The Company is currently evaluating the effect the adoption of this standard will have on its financial statements.

Subsequent Events:

The Company’s management has evaluated events and transactions that occurred from July 1, 2016 through August 11, 2016, the date these unaudited condensed consolidated financial statements were issued, for subsequent events requiring recognition or disclosure in the financial statements.

Note 3. Initial Public Offering (“IPO”):

In April of 2016, the Company increased the total authorized shares of preferred and voting and non-voting common stock and effected a 10.43174381 for 1 stock split of the voting and non-voting common stock. As a result of the stock split, all previously reported share amounts (including options and warrants) in the accompanying financial statements and related notes have been retrospectively restated to reflect the stock split.

In May of 2016, the Company sold 6,210,000 shares of voting common stock in its IPO (including shares sold pursuant to the underwriters’ option to purchase 810,000 shares to cover over-allotments) at a price of $10.00 per share. The gross proceeds totaled $62,100. The IPO proceeds were used as follows: 1) $3,884 for the payment of expenses in connection with the IPO; 2) $3,250 to purchase and retire Intrepid Warrants (See Note 12, for definition and information); 3) $34,000 to redeem and retire PIK Toggle Notes (See Note 8, for definition and information); 4) $20,200 to redeem and retire $20,000 in principal amount of Second Lien Term Notes and pay $200 as a 1% prepayment penalty (See Note 8, for definition and information); 5) $683 to purchase and retire all outstanding options to buy Intrepid Common Units which include $22 of payroll taxes (See Note 12, for definition and information); and 6) increased cash of $83.

In addition, in connection with the IPO the Company also: 1) issued 1,289,819 shares of voting common stock in exchange for all of the outstanding 7% Senior Notes (See Note 8); 2) issued 3,168,438 shares of voting common stock in exchange for all of the remaining outstanding PIK Toggle Notes not repurchased for cash as described above (See Note 8); and 3) paid $2,250 to retire all the remaining Intrepid Warrants (for a total expenditure of $5,500 to retire all the Intrepid Warrants).

As a result of the transactions summarized above, the Company has fully repurchased and retired the PIK Toggle Notes and 7% Senior Notes (See Note 8) and fully repurchased and retired all outstanding Intrepid Warrants and options to buy Intrepid Common Units.

12

The Company had the following voting and non-voting shares of common stock outstanding after the transactions summarized above:

Voting shares outstanding before transactions	6,259,480
Shares issued by the Initial Public Offering	6,210,000
Shares issued for 7% Senior Notes	1,289,819
Shares issued for PIK Toggle Notes	3,168,438
Voting shares outstanding after transactions	16,927,737
Non-Voting shares outstanding before and after transactions	938,857

In June 2016, the Board of Directors of the Company approved the conversion of 938,857 shares of non-voting common stock to shares of voting common stock. The Company had the following voting shares of common stock at June 30, 2016:

Voting shares outstanding after transactions above	16,927,737
Non-voting shares converted to voting shares	938,857
Voting shares issued as restricted stock	27,918
Voting shares issued from exercise of stock options	6,652
Voting shares outstanding at June 30, 2016	17,901,164

Note 4. Fair Value of Financial Instruments:

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of ASC 825, Financial Instruments. The estimated fair value amounts have been determined by the Company using the methods and assumptions described below. However, considerable judgment is required to interpret market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
   

Cash and Cash Equivalents: Cash and cash equivalents are by definition short-term and the carrying amount is a reasonable estimate of fair value.

Accounts Receivable: The fair value of accounts receivable approximates their carrying value.

Revolving Credit Facility: The fair value of the revolving credit facility approximates its carrying value.

Long-Term Debt: The fair value of the Company’s long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. At December 31, 2015, the fair value of the PIK Toggle Notes approximates their face amounts of $60.1 million. At December 31, 2015, the fair value of the 7% Senior Notes approximates their face amounts of $12.6 million.

As of June 30, 2016, the fair value of NATC’s First Lien Term Loan and NATC’s Second Lien Term Loan approximate their face amounts of $148.1 million and $60.0 million, respectively. At December 31, 2015, the fair value of NATC’s First Lien Term Loan and NATC’s Second Lien Term Loan approximate their face amounts of $151.7 million and $80.0 million, respectively.

Foreign Exchange: As of June 30, 2016, the Company had no open foreign exchange forward contracts.  As of December 31, 2015, the Company had seven outstanding foreign exchange forward contracts for the purchase of 5.1 million Euros.  The fair value of the foreign exchange forward contracts was based upon the quoted market price that resulted in an insignificant asset as of December 31, 2015.

13

Note 5. Inventories:

Inventories are stated at the lower of cost or market.  Cost is determined on the last-in, first-out (“LIFO”) method for approximately 58% of the inventories.  Leaf tobacco is presented in current assets in accordance with standard industry practice, notwithstanding the fact that such tobaccos are carried longer than one year for the purpose of curing.

The components of inventories are as follows:

	June 30, 2016			December 31, 2015
Raw materials and work in process	$	2,289		$	1,940
Leaf tobacco		26,268			20,839
Finished goods - smokeless products		4,364			3,615
Finished goods - smoking products		14,589			14,077
Finished goods - electronic / vaporizer products		6,812			5,939
Other		1,315			1,237
		55,637			47,647
LIFO reserve		(3,881	)		(3,308	)
	$	51,756		$	44,339

The Company recorded an inventory valuation allowance of $0.8 million as of June 30, 2016 and $0.3 million as of December 31, 2015.

Note 6. Property, Plant and Equipment:

Property, plant and equipment at June 30, 2016 and December 31, 2015 consists of:

	June 30, 2016			December 31, 2015
Leasehold improvements	$	2,215		$	2,196
Machinery and equipment		9,776			8,997
Furniture and fixtures		3,182			3,121
		15,173			14,314
Accumulated depreciation		(9,297	)		(8,711	)
	$	5,876		$	5,603

Note 7. Accrued Expenses:

Accrued expenses at June 30, 2016 and December 31, 2015 consist of:

	June 30, 2016		December 31, 2015
Accrued payroll and related items	$	2,417	$	3,659
Customer returns and allowances		1,937		2,015
Other		5,210		5,379
	$	9,564	$	11,053

Note 8. Notes Payable and Long-Term Debt:

Notes payable and long-term debt consists of the following in order of preference:

14

	June 30, 2016			December 31, 2015
First Lien Term Loan	$	147,134		$	150,555
Second Lien Term Loan		59,005			78,882
PIK Toggle Notes		-			58,882
7% Senior Notes		-			10,360
		206,139			298,679
Less deferred finance charges		(5,054	)		(6,257	)
Less current maturities		(1,650	)		(1,650	)
Total Notes Payable and Long-Term Debt	$	199,435		$	290,772

Long-term Debt

On January 13, 2014, NATC entered into (i) a $170 million First Lien Term Loan Credit Agreement among NATC, the Company, NATC Holding and Wells Fargo Bank, National Association, as administrative agent (the “First Lien Credit Agreement”), (ii) a $80 million Second Lien Term Loan Credit Agreement among NATC, the Company, NATC Holding and Wells Fargo Bank, National Association, as administrative agent (the “Second Lien Credit Agreement”), and (iii) a $40 million ABL Credit Agreement among NATC, NATC Holding and Wells Fargo Bank, National Association,  as ABL Agent (the “Revolving Credit Facility”).

First Lien Credit Agreement

All of NATC’s subsidiaries, as well as the Company and NATC Holding, are guarantors under the First Lien Credit Agreement.  TPLLC and its subsidiary are not guarantors of the First Lien Credit Agreement. The First Lien Credit Agreement is secured by a first priority lien on substantially all of the assets of the borrowers and the guarantors thereunder, including a pledge of the capital stock of NATC and its subsidiaries held by NATC Holding, NATC or any guarantor, other than certain excluded assets (the “Collateral”).  The loans designated as LIBOR rate loans bear interest at LIBOR Rate then in effect (but not less than 1.25%) plus 6.50% and the loans designated as base rate loans bear interest at the (i) highest of (A) the Prime Rate, (B) the Federal Funds Rate plus 0.50%, (C) LIBOR for an interest period of one month plus 1.00% and (D) 2.25% per year plus (ii) 5.50%. The weighted average interest rate at June 30, 2016 was 7.78%. The First Lien Credit Agreement matures in January 2020.

The First Lien Credit Agreement contains customary representations and warranties, events of default, affirmative covenants and negative covenants, which impose restrictions on, among other things, the ability of NATC and its subsidiaries to make investments, pay dividends, sell assets, and incur debt and additional liens. In addition, the First Lien Credit Agreement requires NATC to maintain a total leverage ratio as follows:

Period	Maximum Ratio
Closing Date through March 31, 2015	6.50 to 1.00
April 1, 2015 through September 30, 2016	6.25 to 1.00
October 1, 2016 through September 30, 2017	6.00 to 1.00
October 1, 2017 through September 30, 2018	5.75 to 1.00
October 1, 2018 and thereafter	5.50 to 1.00

NATC is required to make prepayments under the First Lien Credit Agreement upon the occurrence of certain events, including sales of certain assets, casualty events and the incurrence of additional indebtedness, subject to certain exceptions and reinvestment rights. NATC made a prepayment of approximately $2.7 million during the first quarter of 2016.

15

Second Lien Credit Agreement

The Second Lien Credit Agreement has the benefit of a second priority security interest in the Collateral and is guaranteed by the same entities as the First Lien Credit Agreement.  The Second Lien Credit Agreement, contains substantially similar representations and warranties, events of default and covenants as the First Lien Credit Agreement; provided, however, that the total leverage ratio required to be maintained by NATC under the Second Lien Credit Agreement is as follows:

Period	Maximum Ratio
Closing Date through March 31, 2015	6.75 to 1.00
April 1, 2015 through September 30, 2016	6.50 to 1.00
October 1, 2016 through September 30, 2017	6.25 to 1.00
October 1, 2017 through September 30, 2018	6.00 to 1.00
October 1, 2018 and thereafter	5.75 to 1.00

Under the Second Lien Credit Agreement the loans designated as LIBOR rate loans bear interest at a rate of at LIBOR Rate then in effect (but not less than 1.25%) plus 10.25% and the loans designated as base rate loans bear interest at (i) highest of (A) the Prime Rate, (B) the Federal Funds Rate plus 0.50%, (C) LIBOR for an interest period of one month plus 1.00% and (D) 2.25% per year plus (ii) 9.25%.  The weighted average interest rate at June 30, 2016 was 11.5%. The Second Lien Credit Agreement matures in July 2020. In connection with the Company’s IPO in May of 2016, the Company prepaid $20 million of the borrowings under the Second Lien Credit Agreement (see Note 3).

Revolving Credit Facility

The Revolving Credit Facility provides for aggregate commitments of up to $40 million, subject to a borrowing base, which is calculated as the sum of (i) 85% of eligible accounts receivable, plus (ii) the lesser of (A) the product of 70% multiplied by the value of  eligible inventory  and (B) the product of 85% multiplied by the net recovery percentage identified in the most recent inventory appraisal multiplied by the value of eligible inventory, plus (iii) the lesser of (A) the product of 75% multiplied by the value of eligible inventory and (B) the product of 85% multiplied by the net recovery percentage identified in the most recent inventory appraisal multiplied by the value of the eligible finished goods inventory, minus (iv) the aggregate amount of reserves established by the administrative agent.

The interest rates per annum applicable to loans under the Revolving Credit Facility are, at the option of NATC, equal to the applicable Base Rate or LIBOR Rate plus the applicable Interest Margin, as defined below:

Pricing Level	Average Excess Availability	Applicable Margin for Base Rate Loans (the “Base Rate Margin”)	Applicable Margin for LIBOR Rate Loans (the “LIBOR Rate Margin”)
I	> $30,000,000	1.25%	2.25%
II	< $30,000,000 but > $15,000,000	1.50%	2.50%
III	< $15,000,000	1.75%	2.75%

The Revolving Credit Facility matures in January 2019 and the balance outstanding at June 30, 2016 was $6.6 million. The weighted average interest rate at June 30, 2016 was 5.00%.

16

PIK Toggle Notes

On January 13, 2014, the Company issued PIK Toggle Notes (“PIK Toggle Notes”) to Standard General Master Fund, L.P. (“Standard General”) with a principal amount of $45 million and warrants to purchase 42,424 of the Company’s common stock at $.01 per share, as adjusted for stock splits and other events specified in the agreement. After adjustment for the stock split effected in connection with our IPO of 10.43174381 to 1, the warrants have been adjusted to provide for the purchase of 442,558 of the Company’s common stock. Due to the issuance of the warrants, the PIK Toggle Notes had an original issue discount of $1.7 million and were initially valued at $43.3 million. The PIK Toggle Notes were scheduled to mature and the warrants to expire on January 13, 2021.

The PIK Toggle Notes accrued interest based on the LIBOR Rate then in effect (but not less than 1.25%) plus 13.75%. Interest was payable on the last day of each quarter and upon maturity. The Company had the flexibility to pay interest in kind through an increase in the principal amount at the same interest rate as the PIK Toggle Notes. The Company chose to increase the PIK Toggle Notes for all interest for the first three months of 2016.

The PIK Toggle Notes contained covenants which limited the ability of the Company to enter into transactions with affiliates and make dividends or other distributions or repurchase capital stock. The PIK Toggle Notes were unsecured and did not limit the Company’s ability to incur additional debt or liens.

In connection with the IPO, in May of 2016, the Company redeemed and retired all of the outstanding PIK Toggle Notes in exchange for a combination of cash and shares of the Company’s voting common stock (see Note 3).

7% Senior Notes

In January of 2014, the Company issued 7% Senior Notes to various stockholders with a principal amount of $11 million and warrants to purchase 11,000,000 units of membership interests in Intrepid, which represented 40% of the Intrepid Common Units outstanding on a fully diluted basis, at a purchase price of $1.00 per unit. Due to the issuance of the Intrepid warrants, the 7% Senior Notes had an original issue discount of $2.8 million and were initially valued at $8.2 million. The 7% Senior Notes were scheduled to mature and the warrants to expire on December 31, 2023.

The 7% Senior Notes accrued interest at a fixed rate of 7% per annum. Interest was payable on the last business day of June and December in each year and provided that the Company was permitted to elect to pay all or a portion of the interest in kind. The Company made such election for all of 2014 and 2015.

The 7% Senior Notes were the general unsecured obligations of the Company and ranked equally with the Company’s other unsecured and unsubordinated debt from time to time outstanding. Redemptions of the 7% Senior Notes could be made by the Company at any time without penalty or premium.

In connection with the IPO, in May of 2016, we redeemed and retired all of the outstanding 7% Senior Notes in exchange for shares of the Company’s voting common stock (see Note 3).

Restricted / Non-Restricted Condensed Consolidating Financial Statements

The payment of principal and interest on the First Lien Term Loan, Second Lien Term Loan and Revolving Credit Facility are guaranteed by or obligations of NATC and its subsidiaries (“Issuer/Restricted”). TPLLC and its subsidiary (“Non-Restricted”) are not guarantors of the First Lien Term Loan, Second Lien Term Loan and Revolving Credit Facility. The separate financial statements of the Issuer/Restricted are not included herein because the Issuer/Restricted are the Company’s wholly-owned consolidated subsidiaries and are jointly, severally, fully and unconditionally liable for the obligations represented by the First Lien Term Loan, Second Lien Term Loan and Revolving Credit Facility. The Company believes that the consolidating financial information for the Issuer/Restricted and the Non-Restricted provide information that is more meaningful in understanding the financial position of the Issuer/Restricted than separate financial statements of the Issuer/Restricted.

The following consolidating financial information presents consolidating financial data for the Issuer/Restricted, Non-Restricted and an elimination column for adjustments to arrive at the information for the Company on a consolidated basis as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions.

17

Turning Point Brands, Inc.

Consolidating Balance Sheet

June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Eliminations			Consolidated
ASSETS
Current assets:
Cash	$	1,384		$	2,228		$	-		$	3,612
Accounts receivable		5,014			195			-			5,209
Inventories		44,623			7,133			-			51,756
Other current assets		7,050			2,845			-			9,895
Total current assets		58,071			12,401			-			70,472
Property, plant and equipment, net		5,751			125			-			5,876
Deferred income taxes		1,864			-			(1,864	)		-
Deferred financing costs, net		174			-			-			174
Goodwill		128,697			-			-			128,697
Investment in subsidiaries		39,922			-			(39,922	)		-
Note receivable		2,000			-			(2,000	)		-
Other intangible assets, net		8,553			-			-			8,553
Master Settlement Agreement - escrow deposits		31,904			-			-			31,904
Other assets		271			430			-			701
Total assets	$	277,207		$	12,956		$	(43,786	)	$	246,377
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	5,120		$	201		$	-		$	5,321
Accrued expenses		8,537			1,027			-			9,564
Accrued interest expense		629			-			-			629
Accrued income taxes		295			-			-			295
First lien term loan		1,650			-			-			1,650
Note payable		-			2,000			(2,000	)		-
Revolving credit facility		6,621			-			-			6,621
Total current liabilities		22,852			3,228			(2,000	)		24,080
Notes payable and long-term debt		199,435			-			-			199,435
Deferred Income Taxes		8,927			-			(1,864	)		7,063
Postretirement benefits		4,607			-			-			4,607
Pension benefits		372			-			-			372
Total Liabilities		236,193			3,228			(3,864	)		235,557
Stockholders' equity (deficit):
Common stock, voting		179			-			-			179
Additional paid-in capital		168,854			10,900			(74,995	)		104,759
Advance to TPB		2,323			(2,323	)		-			-
Accumulated other comprehensive loss		(3,266	)		-			-			(3,266	)
Retained earnings (accumulated deficit)		(127,076	)		1,151			35,073			(90,852	)
Total stockholders' equity (deficit)		41,014			9,728			(39,922	)		10,820
Total liabilities and stockholders' equity (deficit)	$	277,207		$	12,956		$	(43,786	)	$	246,377

18

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the three months ended June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Net sales	$	48,480		$	3,101		$	51,581
Cost of sales		23,917			2,790			26,707
Gross profit		24,563			311			24,874
Selling, general and administrative expenses		13,143			955			14,098
Operating income (loss)		11,420			(644	)		10,776
Interest expense and financing costs		6,852			24			6,876
Investment income		(332	)		-			(332	)
Loss on extinguishment of debt		2,824			-			2,824
Income before income taxes		2,076			(668	)		1,408
Income tax expense		609			-			609
Net income (loss)	$	1,467		$	(668	)	$	799

19

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the six months ended June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Net sales	$	94,704		$	6,743		$	101,447
Cost of sales		46,623			5,303			51,926
Gross profit		48,081			1,440			49,521
Selling, general and administrative expenses		25,868			1,968			27,836
Operating income (loss)		22,213			(528	)		21,685
Interest expense and financing costs		15,321			17			15,338
Investment income		(332	)		-			(332	)
Loss on extinguishment of debt		2,824			-			2,824
Income before income taxes		4,400			(545	)		3,855
Income tax expense		822			-			822
Net income (loss)	$	3,578		$	(545	)	$	3,033

20

Turning Point Brands, Inc.

Consolidating Statement of Cash Flows

for the six months ended June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Cash flows from operating activities:
Net income (loss)	$	3,578		$	(545	)	$	3,033
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss on extinguishment		2,824			-			2,824
Depreciation expense		586			-			586
Amortization of deferred financing costs		719			-			719
Amortization of original issue discount		459			-			459
Interest incurred but not paid on PIK toggle notes		3,422			-			3,422
Interest incurred but not paid on 7% senior notes		329			-			329
Interest  paid on PIK toggle notes		(9,893	)		-			(9,893	)
Deferred income taxes		50			-			50
Stock compensation expense		25			-			25
Restricted stock compensation expense		8			-			8
Member unit compensation expense		-			13			13
Changes in operating assets and liabilities:
Accounts receivable		(1,186	)		(83	)		(1,269	)
Inventories		(6,558	)		(859	)		(7,417	)
Other current assets		(1,460	)		2,403			943
Other assets		(62	)		-			(62	)
Accounts payable		1,082			152			1,234
Accrued pension liabilities		131			-			131
Accrued postretirement liabilities		(59	)		-			(59	)
Accrued expenses and other		(4,118	)		(70	)		(4,188	)
Net cash provided by (used in) operating activities		(10,123	)		1,011			(9,112	)
Cash flows from investing activities:
Capital expenditures		(734	)		(125	)		(859	)
Net cash used in investing activities		(734	)		(125	)		(859	)
Cash flows from financing activities:
Proceeds from revolving credit facility, net		6,603			-			6,603
Proceeds from (payments for) note receivable		(2,000	)		2,000			-
Proceeds from (payment to) parent, net		1,565			(1,565	)		-
Payment of financing costs		(200	)		-			(200	)
Payment for first lien term loan		(3,563	)		-			(3,563	)
Payment for second lien term loan		(20,000	)		-			(20,000	)
Payment of PIK toggle notes		(24,107	)		-			(24,107	)
Redemption of Intrepid options		-			(661	)		(661	)
Redemption of Intrepid warrants		(5,500	)		-			(5,500	)
Stock options exercised		8			-			8
Proceeds from issuance of stock		56,168			-			56,168
Net cash provided by financing activities		8,974			(226	)		8,748
Net increase (decrease) in cash		(1,883	)		660			(1,223	)
Cash, beginning of period		3,267			1,568			4,835
Cash, end of period	$	1,384		$	2,228		$	3,612

21

Turning Point Brands, Inc.

Consolidating Balance Sheet

December 31, 2015

(in thousands)

	Issuer/ Restricted			Non-Restricted			Eliminations			Consolidated
ASSETS
Current assets:
Cash	$	3,267		$	1,568		$	-		$	4,835
Accounts receivable		3,828			112			-			3,940
Inventories		38,065			6,274			-			44,339
Other current assets		5,590			5,248			-			10,838
Total current assets		50,750			13,202			-			63,952
Property, plant and equipment, net		5,603			-			-			5,603
Deferred financing costs, net		208			-			-			208
Goodwill		128,697			-			-			128,697
Investment in subsidiaries		31,489			-			(31,489	)		-
Other intangible assets, net		8,553			-			-			8,553
Master Settlement Agreement - escrow deposits		31,842			-			-			31,842
Other assets		3,178			430			-			3,608
Total assets	$	260,320		$	13,632		$	(31,489	)	$	242,463
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	4,038		$	49		$	-		$	4,087
Accrued expenses		9,956			1,097			-			11,053
Accrued interest expense		4,329			-			-			4,329
First lien term loan		1,650			-			-			1,650
Revolving credit facility		18			-			-			18
Total current liabilities		19,991			1,146			-			21,137
Notes payable and long-term debt		290,772			-			-			290,772
Deferred Income Taxes		7,013			-			-			7,013
Postretirement benefits		4,666			-			-			4,666
Pension benefits		487			-			-			487
Total Liabilities		322,929			1,146			-			324,075
Stockholders' equity (deficit):
Common stock, voting		63									63
Common stock, non-voting		9									9
Additional paid-in capital		76,410			11,213			(74,995	)		12,628
Advance to TPB		793			(793	)		-			-
Accumulated other comprehensive loss		(3,512	)		-			-			(3,512	)
Retained earnings (accumulated deficit)		(136,372	)		2,066			43,506			(90,800	)
Total stockholders' equity (deficit)		(62,609	)		12,486			(31,489	)		(81,612	)
Total liabilities and stockholders' equity (deficit)	$	260,320		$	13,632		$	(31,489	)	$	242,463

22

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the three months ended June 30, 2015

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Net sales	$	43,290		$	4,709		$	47,999
Cost of sales		21,788			3,600			25,388
Gross profit		21,502			1,109			22,611
Selling, general and administrative expenses		12,685			2,190			14,875
Operating income (loss)		8,817			(1,081	)		7,736
Interest expense and financing costs		8,550			24			8,574
Income (loss) before income taxes		267			(1,105	)		(838	)
Income tax expense		583			-			583
Net loss	$	(316	)	$	(1,105	)	$	(1,421	)

23

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the six months ended June 30, 2015

(in thousands)

	Issuer/ Restricted		Non-Restricted			Consolidated
Net sales	$	88,893	$	10,192		$	99,085
Cost of sales		44,787		7,032			51,819
Gross profit		44,106		3,160			47,266
Selling, general and administrative expenses		24,081		3,465			27,546
Operating income		20,025		(305	)		19,720
Interest expense and financing costs		17,000		56			17,056
Income (loss) before income taxes		3,025		(361	)		2,664
Income tax expense		658		-			658
Net income (loss)	$	2,367	$	(361	)	$	2,006

24

Turning Point Brands, Inc.

Consolidating Statement of Cash Flows

for the six months ended June 30, 2015

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Cash flows from operating activities:
Net income (loss)	$	2,367		$	(361	)	$	2,006
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Gain on sale of fixed assets		(1	)		-			(1	)
Depreciation expense		519			-			519
Amortization of deferred financing costs		724			-			724
Amortization of original issue discount		524			-			524
Interest incurred but not paid on PIK toggle note		3,963			-			3,963
Interest incurred but not paid on 7% senior notes		426			-			426
Deferred income taxes		(9	)		-			(9	)
Stock compensation expense		92			-			92
Member unit compensation expense		-			57			57
Changes in operating assets and liabilities:
Accounts receivable		(791	)		(219	)		(1,010	)
Inventories		(7,711	)		3,749			(3,962	)
Other current assets		(997	)		(3,818	)		(4,815	)
Other assets		(87	)		-			(87	)
Accounts payable		3,271			(916	)		2,355
Accrued pension liabilities		82			-			82
Accrued postretirement liabilities		(63	)		-			(63	)
Accrued expenses and other		(1,553	)		(703	)		(2,256	)
Net cash provided by (used in) operating activities		756			(2,211	)		(1,455	)
Cash flows from investing activities:
Capital expenditures		(641	)		-			(641	)
Proceeds from sale of fixed assets		2			-			2
Note receivable		-			(430	)		(430	)
Net cash used in investing activities		(639	)		(430	)		(1,069	)
Cash flows from financing activities:
Proceeds from revolving credit facility, net		213			-			213
Proceeds from (payments for) note receivable		(2,300	)		2,300			-
Proceeds from issuance of stock		1			-			1
Payments for first lien term loan		(825	)		-			(825	)
Net cash provided by (used in) financing activities		(2,911	)		2,300			(611	)
Net decrease in cash		(2,794	)		(341	)		(3,135	)
Cash, beginning of period		8,014			453			8,467
Cash, end of period	$	5,220		$	112		$	5,332

25

Note 9. Income Taxes:

The Company has determined, that at June 30, 2016, its ability to realize future benefits of certain net deferred tax assets does not meet the “more likely than not” criteria in ASC 740, Income Taxes; therefore, a valuation allowance has been recorded. The Company’s income tax expense for the six months ended June 30, 2016 and 2015 does not bear the normal relationship to income before income taxes because of net operating loss carryforwards that were utilized and were partially offset by certain minimum state income taxes.

The Company follows the provisions of ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company has determined that they did not have any uncertain tax positions requiring recognition under the provisions of ASC 740-10-25. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions, if any, as part of interest expense. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  In general, the Company is no longer subject to U.S. federal and state tax examinations for years prior to 2012.

Note 10. Pension and Postretirement Benefit Plans:

The components of Net Periodic Benefit Cost are as follows:

	Pension Benefits						Postretirement Benefits
For the three months ended June 30,	2016			2015			2016		2015
Service cost	$	26		$	31		$	-	$	-
Interest cost		175			174			53		52
Expected return on plan assets		(258	)		(296	)		-		-
Amortization of gains and losses		123			131			-		-
Net periodic benefit cost	$	66		$	40		$	53	$	52

	Pension Benefits						Postretirement Benefits
For the six months ended June 30,	2016			2015			2016		2015
Service cost	$	52		$	62		$	-	$	-
Interest cost		350			348			105		104
Expected return on plan assets		(517	)		(591	)		-		-
Amortization of gains and losses		246			263			-		-
Net periodic benefit cost	$	131		$	82		$	105	$	104

NATC has a defined benefit pension plan covering its employees. Benefits for the hourly employees are based on a stated benefit per year of service, reduced by amounts earned in a previous plan. Benefits for salaried employees are based on years of service and the employees’ final compensation. This defined benefit plan is frozen.

NATC sponsored a defined benefit postretirement plan that covered hourly employees. This plan provides medical and dental benefits. This plan is contributory, with retiree contributions adjusted annually.

NATC expects to contribute approximately $0.3 million to its postretirement plan in 2016 for the payment of benefits. Plan contributions and benefits have amounted to $164 and $167 for the six months ended June 30, 2016 and 2015, respectively. NATC expects to make no contributions to the pension plan in the year ending December 31, 2016.

Note 11. Share Incentive Plans:

On April 28, 2016, the Board of Directors of the Company adopted the Turning Point Brands, Inc. 2015 Equity Incentive Plan (the “2015 Plan”) and approved a form of Restricted Stock Award Agreement (the “Form Award Agreement”) pursuant to which awards under the 2015 Plan may be granted to employees, non-employee directors and consultants. In addition, the 2015 Plan provides for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Pursuant to the 2015 Plan, 1,400,000 shares of common stock of the Company are reserved for issuance as awards to employees, consultants and non-employee directors as compensation for past or future services or the attainment of certain performance goals. The 2015 Plan is scheduled to terminate on April 27, 2026. The 2015 Plan is administrated by a committee (the “Committee”) of the Company’s Board of Directors. The Committee determines the criteria for the vesting period and will be specified in the award agreement. As of June 30, 2016, 27,777 shares of restricted stock have been granted to employees of NATC under the 2015 Plan. There are 1,372,223 shares available for grant under the 2015 Plan.

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On February 8, 2006, the Board of Directors of the Company adopted the North Atlantic Holding Company, Inc. 2006 Equity Incentive Plan (the “2006 Plan”) and approved a form of Restricted Stock Award Agreement (the “Form Award Agreement”) pursuant to which awards under the 2006 Plan may be granted to employees.  The 2006 Plan provides for the granting of nonqualified stock options and restricted stock awards.  Upon the adoption of the Company’s 2015 Equity Incentive Plan in connection with its IPO (see Note 3) the Company determined that no additional grants would be made under the 2006 Plan, however all awards issued under the plan that have not been previously terminated or forfeited remain outstanding and continue unaffected.

There are no shares available for grant under the 2006 Plan. Stock option activity for the 2006 Plan is summarized below:

	Incentive Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Outstanding, December 31, 2014		1,692,051		$	2.17	$	1.19
Exercised		(1,043	)		1.06		0.54
Forfeited		(23,337	)		1.06		0.54
Outstanding, December 31, 2015		1,667,671			2.19		1.20
Exercised		(6,652	)		1.22		0.64
Forfeited		(6,262	)		3.83		2.17
Outstanding, June 30, 2016		1,654,757		$	2.19	$	1.20

Under the 2006 Plan, the total intrinsic value of options exercised during the three months ended June 30, 2016 and 2015 was $58 and $0, respectively. The total intrinsic value of options exercised during the six months ended June 30, 2016 and 2015 was $58 and $7, respectively.

At June 30, 2016, under the 2006 Plan, the outstanding stock options’ exercise price for 980,096 options is $1.06 per share all of which are exercisable. The outstanding stock options’ exercise price for 674,661 options is $3.83 per share of which 622,718 options are exercisable. The weighted average of the remaining lives of the outstanding stock options is approximately 1.4 years for the options with the $1.06 exercise price, and 6.2 years for the options with the $3.83 exercise price. The Company estimates that the expected life of all stock options is ten years from the date of grant. For the $1.06 per share options, the weighted average fair value of options was determined using the Black-Scholes model assuming a ten-year life from grant date; a current share price and exercise price of $1.06; risk free interest rate of 4.366%; a volatility of 30%; and no assumed dividend yield.  Based on these assumptions, the fair value of these options is approximately $0.54 per share option granted. For the $3.83 per share options,the weighted average fair value of options was determined using the Black-Scholes model assuming a ten-year life from grant date; a current share price and exercise price of $3.83; risk-free interest rate of 3.57%; a volatility of 40%; and no assumed dividend yield.  Based on these assumptions, the fair value of these options is approximately $2.17 per share option granted.

The Company has recorded compensation expense related to the options based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the options on the date of grant and amortized over the vesting period. The Company recorded compensation expense of approximately $13 and $46 in the consolidated statements of income for the three months ended June 30, 2016 and 2015, respectively and approximately $25 and $92 for the six months ended June 30, 2016 and 2015, respectively.

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Note 12. Unit Incentive Plans and Warrants for Intrepid Brands, LLC:

Effective August 7, 2014, the Company adopted the Intrepid Brands, LLC 2014 Option Plan (“2014 Plan”) for units of ownership in Intrepid. The purpose of the 2014 Plan was to promote the success and enhance the value of the Company by linking the personal interests of the service providers (including employees, consultants and managers) to those of Company equity holders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company equity holders.

In connection with the IPO, in May of 2016 all options outstanding under the 2014 Plan were repurchased for aggregate cash consideration of $683 which included $22 of payroll taxes (see Note 3). With the repurchase of the options, the 2014 Plan was terminated.

In January of 2014, the Company issued warrants to purchase 11,000,000 units of membership interests in Intrepid (the “Intrepid Warrants”) concurrent with the 7% Senior Notes (see Note 8). This represented 40% of the Intrepid Common Units outstanding on a fully diluted basis, at a purchase price of $1.00 per unit. The warrants were exercisable beginning January 21, 2014 and were scheduled to expire on December 31, 2023.

In connection with the IPO, in May of 2016 all outstanding Intrepid Warrants were repurchased for aggregate cash consideration of approximately $5.5 million (see Note 3).

Note 13. Contingencies:

The Company is involved in various claims and actions that arise in the normal course of business. While the outcome of these legal proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of the proceedings should not have a material adverse effect on the financial position, results of operations or cash flows of the Company.

Note 14. Earnings Per Share:

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations of net income:

	Three Months Ended
	June 30, 2016						June 30, 2015
	Income		Shares		Per Share		Income			Shares		Per Share
Net income (loss)	$	799					$	(1,421	)
Basic EPS:
Weighted average				15,274,446	$	0.05					7,198,337	$	(0.20	)
Diluted EPS:
Effect of Dilutive securities:
Stock options and warrants				1,602,845							-
				16,877,291	$	0.05					7,198,337	$	(0.20	)

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	Six Months Ended
	June 30, 2016						June 30, 2015
	Income		Shares		Per Share		Income		Shares		Per Share
Net income	$	3,033					$	2,006
Basic EPS:
Weighted average				12,476,719	$	0.24				7,197,928	$	0.28
Diluted EPS:
Effect of Dilutive securities:
Stock options and warrants				1,447,907						1,136,209
				13,924,626	$	0.22				8,334,137	$	0.24

For the six months ended June 30, 2015, weighted average options to purchase 663,459 shares of common stock were outstanding but were not included in the computation of diluted earnings per share because they were anti-dilutive. Due to the IPO in May 2016, the Company’s weighted average shares and basic and diluted earnings per share are significantly different as of June 30, 2016 when compared to prior periods. See Note 3, for a description of the IPO and shares issued in connection herewith.

Note 15. Parent-Only Financial Information:

The Company is a holding company with independent operations including cash and its investments in its subsidiaries.

All of NATC’s subsidiaries are wholly-owned and guarantee the First Lien Term Loan and the Second Lien Term Loan of NATC on a full, unconditional, and joint and several basis. Within the First Lien Term Loan and the Second Lien Term Loan there are no significant restrictions on the ability of NATC to obtain funds from its subsidiaries by dividend or loan, but NATC is subject to significant restrictions on its ability to pay dividends or make other payments to the Company. NATC and its subsidiaries are generally unable to pay dividends and make other restricted payments to the Company, except in limited circumstances, including (i) to pay certain costs in the ordinary course of business, (ii) to redeem, retire or otherwise acquire certain of our outstanding equity interest and (iii) to pay certain tax obligations. As a result of such restrictions on the Company’s subsidiaries’ ability to make distributions to the Company, $233,421 of its consolidated total assets are currently restricted assets of its consolidated subsidiaries, which may not be transferred to the Company in the form of loans, advances or cash dividends without the consent of a third party. The Company has disclosed the amount of restricted total assets rather than restricted net assets due to the negative net assets of the Company and its restricted subsidiaries.

TPLLC and Intrepid are wholly-owned by the Company. TPLLC and its subsidiary are not guarantors of the First Lien Term Loan and Second Lien Term Loan.

Note 16. Segment Information:

In accordance with ASC 280, Segment Reporting, the Company operates in three segments: (i) smokeless products, (ii) smoking products and (iii) NewGen products. In our smokeless products segment we (i) manufacture and market moist snuff and (ii) contract for and market loose leaf chewing tobacco products. In our smoking products segment, we (i) market and distribute cigarette papers and related products, as well as package, market and distribute MYO cigarette smoking tobaccos and related products and (ii) market and distribute MYO cigar wraps, MYO loose cigar smoking tobacco, and cigars, and package, market and distribute traditional pipe tobaccos. In our NewGen products segment, we market and distribute liquid vapor products, tobacco vaporizer products, certain other related products, such as e-liquids and shishafruits, shisha gels and other products without tobacco and/or nicotine. The Other segment includes the assets of the Company not assigned to the three reportable segments and Elimination includes the elimination of intercompany accounts between segments.

The accounting policies of these segments are the same as those of the Company. Segment data includes a charge allocating corporate costs to the three reportable segments based on their respective Net sales. The Company evaluates the performance of its segments and allocates resources to them based on Operating income.

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The tables below present financial information about reported segments for the three and six months ended June 30, 2016 and 2015:

For the three months ended	June 30, 2016			June 30, 2015
Net Sales
Smokeless Products	$	21,691		$	18,678
Smoking Products		26,789			24,612
NewGen Products		3,101			4,709
	$	51,581		$	47,999
Operating Income
Smokeless Products	$	4,843		$	3,699
Smoking Products		7,206			5,648
NewGen Products		(644	)		(1,081	)
Other (1)		(22	)		(22	)
	$	11,383		$	8,244
Less Eliminations (2)		(607	)		(508	)
	$	10,776		$	7,736
Interest expense and financing costs		(6,876	)		(8,574	)
Investment income		332			-
Loss on extinguishment of debt		(2,824	)		-
Income (loss) before income taxes	$	1,408		$	(838	)
Assets
Smokeless Products	$	85,175		$	84,404
Smoking Products		532,419			501,213
NewGen Products		12,956			16,211
Other (1)		32,605			32,438
		663,155			634,266
Less Eliminations (2)		(416,778	)		(384,442	)
	$	246,377		$	249,824

(1) “Other” includes our assets that are not assigned to our three reportable segments, such as intercompany transfers and investments in subsidiaries. All goodwill has been allocated to our reportable segments.

(2) “Elimination” includes the elimination of intercompany accounts between segments and investments in subsidiaries.

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For the six months ended	June 30, 2016			June 30, 2015
Net Sales
Smokeless Products	$	40,030		$	36,194
Smoking Products		54,674			52,699
NewGen Products		6,743			10,192
	$	101,447		$	99,085
Operating Income
Smokeless Products	$	8,402		$	8,222
Smoking Products		14,746			12,633
NewGen Products		(528	)		(305	)
Other (1)		(178	)		(152	)
	$	22,442		$	20,398
Less Eliminations (2)		(757	)		(678	)
	$	21,685		$	19,720
Interest expense and financing costs		(15,338	)		(17,056	)
Investment income		332			-
Loss on extinguishment of debt		(2,824	)		-
Income before income taxes	$	3,855		$	2,664
Assets
Smokeless Products	$	85,175		$	84,404
Smoking Products		532,419			501,213
NewGen Products		12,956			16,211
Other (1)		32,605			32,438
		663,155			634,266
Less Eliminations (2)		(416,778	)		(384,442	)
	$	246,377		$	249,824

(1) “Other” includes our assets that are not assigned to our three reportable segments, such as intercompany transfers and investments in subsidiaries. All goodwill has been allocated to our reportable segments.

(2) “Elimination” includes the elimination of intercompany accounts between segments and investments in subsidiaries.

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Net Sales - Domestic and Foreign

(in thousands)

The tables below present financial information about our domestic and foreign net sales for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended
	June 30, 2016		June 30, 2015
Domestic	$	49,126	$	46,273
Foreign		2,455		1,726
Net Sales	$	51,581	$	47,999

	Six Months Ended
	June 30, 2016		June 30, 2015
Domestic	$	96,100	$	95,046
Foreign		5,347		4,039
Net Sales	$	101,447	$	99,085

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Cautionary Note Regarding Forward-Looking Statements

This document includes and other information we make public from time to time may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about our estimates, expectations, projections, beliefs, intentions or strategies for the future, and the assumptions underlying such statements. We use the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” and similar expressions to identify our forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. Factors that could cause these differences include, but are not limited to, the factors set forth in “Risk Factors” included in our Prospectus dated May 10, 2016 and other reports filed with the Securities and Exchange Commission from time to time, as well as:

• 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;

• 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;

• substantial and increasing U.S. regulation;

• regulation of our products by the FDA;

• uncertainty related to the regulation and taxation of our NewGen products;

• possible significant increases in federal, state and local municipal tobacco-related taxes;

• possible significant increases in tobacco-related taxes;

• possible increasing international control and regulation;

• our reliance on relationships with several large retailers and national chains for distribution of our products;

• intense competition and our ability to compete effectively;

• significant potential product liability litigation;

• the scientific community’s lack of information regarding the long-term health effects of electronic cigarettes, vaporizer and e-liquid use;

• our amount of indebtedness;

• the terms of our credit facilities may restrict our current and future operations;

• competition from illicit sources;

• our reliance on information technology;

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• security and privacy breaches;

• contamination of our tobacco supply or products;

• infringement on our intellectual property;

• third-party claims that we infringe on their intellectual property;

• concentration of business with large customers;

• failure to manage our growth;

• fluctuations in our month-to-month results;

• exchange rate fluctuations;

• adverse U.S. and global economic conditions;

• failure to comply with certain regulations; and

• departure of key management personnel or our inability to attract and retain talent.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of the historical financial condition and results of operations in conjunction with our interim condensed consolidated financial statements and accompanying notes, which are included elsewhere in this Quarterly Report on Form 10-Q, with our annual consolidated financial statements and accompanying notes, which are included in our prospectus dated May 10, 2016, filed with the SEC in accordance with Rule 424(b) of the Securities Act on May 12, 2016 (the “Prospectus”) and with the Risk Factors included in the Prospectus. In addition, this discussion includes forward-looking statements that are subject to risks and uncertainties that may result in actual results differing from statements we make. See “Cautionary Note Regarding Forward-Looking Statements.” Factors that could cause actual results to differ include those risks and uncertainties that are discussed in “Risk Factors” in our Prospectus.

The following discussion relates to the interim unaudited financial statements of the Company included elsewhere in this Quarterly Report on Form 10-Q. In this discussion, unless the context requires otherwise, references to “our Company” “we,” “our,” or “us” refer to Turning Point Brands, Inc. and our consolidated subsidiaries. References to “TPB” refer to Turning Point Brands, Inc. without any of its subsidiaries. We were incorporated in 2004 under the name North Atlantic Holding Company, Inc. On November 4, 2015, we changed our name to Turning Point Brands, Inc. Many of the amounts and percentages in this discussion have been rounded for convenience of presentation.

Overview

We are a leading independent provider of Other Tobacco Products (“OTP”) in the U.S. We sell a wide range of products across the OTP spectrum, including moist snuff, loose leaf chewing tobacco, premium cigarette papers, make-your-own (“MYO”) cigar wraps and cigar smoking tobacco, cigars, liquid vapor products and tobacco vaporizer products. We do not sell cigarettes. We estimate that the OTP industry generated approximately $10.0 billion in manufacturer revenue in 2014. In contrast to manufactured cigarettes, which have been experiencing declining sales for decades based on data published by the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), the OTP industry is demonstrating increased consumer appeal. For instance, according to Management Science Incorporated (“MSAi”), OTP consumer units shipped to retail increased by approximately 2% from 2013 to 2014 and approximately 3% from 2014 to 2015.

Our portfolio of brands includes some of the most widely recognized names in the OTP industry, such as Zig-Zag^®, Beech-Nut^®, Stoker’s^®, Trophy^®, Havana Blossom^®, Durango^®, Our Pride^® and Red Cap™.

We generate revenues from the sale of our products primarily to wholesale distributors who in turn resell them to retail operations, as well as from the sale of our products directly to retail operations. Our net sales, which include federal excise taxes, consist of gross sales, net of cash discounts, returns, and selling and marketing allowances.

Our principal operating expenses include the cost of raw materials used to manufacture the limited number of our products which we manufacture; the cost of finished products, which are purchased goods; federal excise taxes; restructuring and impairment expenses; legal expenses and compensation expenses, including benefits and costs of salaried personnel. Our other principal expenses include interest expense and amortization of deferred financing costs and other expenses.

Recent Developments

On May 10, 2016, we priced the initial public offering (the “IPO”) of our voting common stock.  In the IPO, we sold 6,210,000 shares of our voting common stock (including 810,000 shares pursuant to the underwriters option to purchase additional shares to cover over-allotments (the “Over-allotment Option”)) at a price per share of $10.00. The IPO closed on May 13, 2016 and the sale of shares pursuant to the exercise of the Over-Allotment Option closed on May 19, 2016.

The Company raised a total of approximately $62.1 million in gross proceeds from the IPO, or $58.2 million in net proceeds after deducting underwriting commissions and other associated costs.  We used the proceeds from the IPO together with cash on hand to pay fees and expenses related to the IPO, repurchase outstanding warrants and options issued by our subsidiary, Intrepid Brands LLC (“Intrepid”), repay approximately $34 million of our floating rate PIK Toggle Notes due 2021 (the “PIK Toggle Notes”) and to repay approximately $20 million of the borrowings outstanding under our second lien credit facility.

In connection with the IPO, we exchanged (i) all of the PIK Toggle Notes that were not repaid in cash with a portion of the proceeds from the IPO for 3,168,438 shares of Common Stock and (ii) all of our outstanding 7% Senior Notes for 1,289,819 shares of our common stock.

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As noted above, in connection with the IPO and related transactions we were able to significantly reduce our leverage.  The following table provides outstanding balances under our debt facilities and instruments as of June 30, 2016:

	June 30, 2016
Cash	$	3.6
Total Debt		207.7
Net Debt	$	204.1

Segment Information

We operate in three segments: (i) smokeless products, (ii) smoking products and (iii) NewGen products. In our smokeless products segment we (i) manufacture and market moist snuff and (ii) contract for and market loose leaf chewing tobacco products. In our smoking products segment, we (i) market and distribute cigarette papers and related products, as well as package, market and distribute MYO cigarette smoking tobaccos and related products and (ii) market and distribute MYO cigar wraps, MYO loose cigar smoking tobacco, and cigars, and package, market and distribute traditional pipe tobaccos. In our NewGen products segment, we market and distribute liquid vapor products, tobacco vaporizer products, certain other related products, such as e-liquids and shishafruits, shisha gels and other products without tobacco and/or nicotine.

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The tables below present financial information for reported segments for the three and six months ended June 30, 2016 and 2015:

For the three months ended	June 30, 2016			June 30, 2015
Net Sales
Smokeless Products	$	21,691		$	18,678
Smoking Products		26,789			24,612
NewGen Products		3,101			4,709
	$	51,581		$	47,999
Operating Income
Smokeless Products	$	4,843		$	3,699
Smoking Products		7,206			5,648
NewGen Products		(644	)		(1,081	)
Other (1)		(22	)		(22	)
	$	11,383		$	8,244
Less Eliminations (2)		(607	)		(508	)
	$	10,776		$	7,736
Interest expense and financing costs		(6,876	)		(8,574	)
Investment income		332			-
Loss on extinguishment of debt		(2,824	)		-
Income (loss) before income taxes	$	1,408		$	(838	)
Assets
Smokeless Products	$	85,175		$	84,404
Smoking Products		532,419			501,213
NewGen Products		12,956			16,211
Other (1)		32,605			32,438
		663,155			634,266
Less Eliminations (2)		(416,778	)		(384,442	)
	$	246,377		$	249,824

(1) “Other” includes our assets that are not assigned to our three reportable segments, such as intercompany transfers and investments in subsidiaries. All goodwill has been allocated to our reportable segments.

(2) “Elimination” includes the elimination of intercompany accounts between segments and investments in subsidiaries.

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For the six months ended	June 30, 2016			June 30, 2015
Net Sales
Smokeless Products	$	40,030		$	36,194
Smoking Products		54,674			52,699
NewGen Products		6,743			10,192
	$	101,447		$	99,085
Operating Income
Smokeless Products	$	8,402		$	8,222
Smoking Products		14,746			12,633
NewGen Products		(528	)		(305	)
Other (1)		(178	)		(152	)
	$	22,442		$	20,398
Less Eliminations (2)		(757	)		(678	)
	$	21,685		$	19,720
Interest expense and financing costs		(15,338	)		(17,056	)
Investment income		332			-
Loss on extinguishment of debt		(2,824	)		-
Income before income taxes	$	3,855		$	2,664
Assets
Smokeless Products	$	85,175		$	84,404
Smoking Products		532,419			501,213
NewGen Products		12,956			16,211
Other (1)		32,605			32,438
		663,155			634,266
Less Eliminations (2)		(416,778	)		(384,442	)
	$	246,377		$	249,824

(1) “Other” includes our assets that are not assigned to our three reportable segments, such as intercompany transfers and investments in subsidiaries. All goodwill has been allocated to our reportable segments.

(2) “Elimination” includes the elimination of intercompany accounts between segments and investments in subsidiaries.

Key Factors Affecting Our Results of Operations

We consider the following factors to be the key factors affecting our results of operations:

• 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 tobacco products among consumers;

• Price sensitivity in our end-markets;

• Marketing and promotional initiatives, which cause variability in our month-to-month results;

• General economic conditions, including consumer access to disposable income;

• Cost and increasing regulation of promotional and advertising activities;

• Cost of complying with regulation, including newly passed “deeming regulations”;

• Counterfeit and other illegal products in our end-markets; and

• Currency fluctuations.

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Critical Accounting Policies and Uses of Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Prospectus, dated May 10, 2016 related to the IPO.

Recent Accounting Pronouncements Adopted:

The Company adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost in 2016. This ASU requires that debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Based on the requirements of this ASU, the Company has retrospectively applied ASU 2015-03 to the December 31, 2015 Consolidated Balance Sheet which has resulted in $6.3 million being reclassified to direct deduction of the carrying amount of the debt.

The Company adopted ASU 2015-17, Income Taxes (Topic 740): Balance sheet classification of deferred taxes in 2016. This ASU requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. The Company has retrospectively applied ASU 2015-17 to the December 31, 2015 Consolidated Balance Sheet which has resulted in $0.4 million of deferred tax liabilities being reclassified to a noncurrent deferred tax liability.

Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update (“ASU”), ASU 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which delayed the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting year. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on the consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in this ASU require entities that measure inventory using the first-in, first-out or average cost methods to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. The Company is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less for which there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities and should recognize lease expense for such leases generally on a straight-line basis over the lease term. Certain qualitative disclosures along with specific quantitative disclosures will be required, so that users are able to understand more about the nature of an entity’s leasing activities. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. At transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients related to the identification and classification of leases that commenced before the effective date of ASU 2016-02. An entity that elects to use the practical expedients will, in effect, continue to account for leases that commenced before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The Company is currently evaluating the effect the adoption of this standard will have on its financial statements.

39

Results of Operations

Summary

The table and discussion set forth below relate to our consolidated results of operations for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended
	June 30, 2016			June 30, 2015
Net sales	$	51,581		$	47,999
Cost of sales		26,707			25,388
Gross profit		24,874			22,611
Selling, general and administrative expenses		14,098			14,875
Operating income		10,776			7,736
Interest expense and financing costs		6,876			8,574
Investment income		(332	)		-
Loss on extinguishment of debt		2,824			-
Income (loss) before income taxes		1,408			(838	)
Income tax expense		609			583
Net income (loss)	$	799		$	(1,421	)

	Six Months Ended
	June 30, 2016			June 30, 2015
Net sales	$	101,447		$	99,085
Cost of sales		51,926			51,819
Gross profit		49,521			47,266
Selling, general and administrative expenses		27,836			27,546
Operating income		21,685			19,720
Interest expense and financing costs		15,338			17,056
Investment income		(332	)		-
Loss of extinguishment of debt		2,824			-
Income before income taxes		3,855			2,664
Income tax expense		822			658
Net income	$	3,033		$	2,006

Components of our Results of Operations

Set forth below is a brief description of the composition of the key line items of our consolidated income statement:

Net Sales. Net sales includes gross sales from the direct sales of our products to wholesalers and retailers less discounts, returns and selling and marketing allowances.

Cost of Sales. Cost of sales includes our manufacturing costs or the cost of purchases for resale (“CPR”). Each product category within a segment has a different cost of goods sold.

Selling, General and Administrative Expenses. Selling, general and administrative expenses include research and development costs, shipping costs, compensation expenses, depreciation expenses, professional and board fees and all other expenses necessary for our operations.

Interest Expense and Financing Costs. Interest expense and financing costs includes interest charged on our outstanding debt.

Investment Income. Investment income is a result of income from investment options related to our Master Settlement Agreement (“MSA”) accounts.

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Loss on Extinguishment of Debt. Loss on extinguishment of debt is related to the payoff and conversion of our PIK Toggle Notes.

Income Tax Expense. Income tax expense includes federal and state income taxes on our net income (loss).

Comparison of the Three Months Ended June 30, 2016 to the Three Months Ended June 30, 2015

Net Sales. Company net sales for the three months ended June 30, 2016 were $51.6 million, an increase of $3.6 million or 7.5% from the corresponding period of the prior year. This increase was the result of increases in the Smokeless Products and Smoking Products segments, partially offset by a decrease in net sales in the NewGen Products segment.

Net sales for the Smokeless Products segment for the current period increased $3.0 million or 16.1% compared to the corresponding period of the prior year. Revenue growth was driven by the ongoing roll-out of Stoker moist snuff tobacco (“MST”) 1.2oz. cans, driving MST retail penetration, and by pricing in both chewing tobacco and MST. Year over year industry volumes for chewing tobacco declined by approximately 5% in the quarter while MST grew 2%, according to MSAi.¹  TPB grew its MSAi share in chewing tobacco and posted double digit volume gains in MST.  For the three months ended June 30, 2016, Smokeless products inventories at trade increased, driven primarily by successful promotions at an industry trade show.  We estimate that trade inventories at the end of the second quarter 2016 increased by approximately $1.3 million as a result of the aforementioned trade show activity.

In prior periods we have used simple averages of case volumes and price changes in each of our segments to help the reader understand the change in sales for the respective periods being compared. We believe an analysis that uses a weighted average volume and price methodology provides a more meaningful analysis for readers and have changed our presentation to provide this information. For the three months ended June 30, 2016, Smokeless Products volume increased 10.9% and price/mix accounted for the remainder or 5.2%.

Net sales for the Smoking Products segment increased $2.2 million or 8.8% to $26.8 million compared to the corresponding period of the prior year. For the three months ended June 30, 2016, continued growth in our Make-Your-Own (“MYO”) cigar wraps and strong orders in the cigarette papers business contributed to the increase.  Modest initial shipments of Zig-Zag cigars to Canada were also made in support of the launch. Industry volumes for cigarette papers increased by low-single digits and MYO cigar wraps increased by mid-single digits, according to MSAi.  We held share in cigarette papers and grew our share in cigar wraps on the continuing rollout of cigarillo sized wraps, according to MSAi. For the three months ended June 30, 2016, volume increased 5.9% and price/mix accounted for the remainder or 3.0%.

Net sales of the NewGen Products segment decreased $1.6 million or 34.1% to $3.1 million in comparison to the corresponding period of the prior year due to the introductions of new products into the marketplace by competitors and other factors, including the continuing but slowing movement of industry vapor volumes away from traditional retail to vape and accessory shops.Industry volumes in e-cigarettes grew by double-digit rates, while e-liquids and vaporizers in traditional retail each declined by double digits on a year over year basis, according to MSAi.  From a retail distribution perspective, the number of traditional outlets carrying e-cigarettes declined by high-single digits relative to the three months ended June 30, 2015.  The number of e-liquid and vaporizer traditional retail outlets carrying the products declined by double digits. For the quarter, volume decreased 20.8% and price/mix accounted for a decrease of 13.4%.

Cost of Sales.For the three months ended June 30, 2016, cost of sales increased to $26.7 million from $25.4 million for the three months ended June 30, 2015, an increase of $1.3 million, or 5.2%, principally due to an increase in net sales.

For the three months ended June 30, 2016, cost of sales in the Smokeless Products segment increased to $10.8 million from $9.2 million for the three months ended June 30, 2015, an increase of $1.6 million, or 17.8%, principally due to an increase in net sales of products with a higher manufacturing cost.

For the three months ended June 30, 2016, cost of sales in the Smoking Products segment increased to $13.1 million from $12.6 million for the three months ended June 30, 2015, an increase of $0.5 million, or 3.9%, principally due to an increase in sales volume of cigar wraps, which have higher manufacturing costs than other products in the segment.

¹ Management Science Associates, Inc. (“MSAi”) administers a proprietary information system that captures sales from approximately 1,000 wholesalers to over 250,000 retailers.

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For the three months ended June 30, 2016, cost of sales in the NewGen products segment decreased to $2.8 million from $3.6 million for the three months ended June 30, 2015, a decrease of $0.8 million, or 22.5%, principally due to a reduction in sales volume of vaporizers and e-cigarettes.

Gross Profit. Gross profit for the three months ended June 30, 2016 increased to $24.9 million from $22.6 million compared to the corresponding period of the prior year. Gross margin improved from 47.1% in the corresponding period of the prior year to 48.2% in the three months ended June 30, 2016.

Gross profit of the Smokeless Products segment increased 14.5% or $1.4 million to $10.9 million compared to the corresponding period of the prior year. Gross margin for this segment decreased to 50.2% of net sales for the current period from 50.9% in the corresponding period of the prior year due primarily to the mix / shift from chewing tobacco to MST products and introductory discounts associated with the MST expansion.

Gross profit of the Smoking Products segment increased $1.7 million or 14.0% to $13.7 million compared to the corresponding period of the prior year. Gross margin of the Smoking Products segment increased to 51.0% of net sales for the current period in comparison to 48.7% for the corresponding period in 2015, principally as the result of favorable mix / shifts within the segment.

Gross profit in the NewGen segment decreased $0.8 million or 72.0% to $0.3 million compared to the corresponding period of the prior year. Gross margin of the NewGen segment decreased to 10.0% of net sales for the current period in comparison to 23.6% for the corresponding period of the prior year as margins were negatively impacted by higher than normal returned goods associated with the trade adjusting levels to meet reduced market demand in traditional retail and a write-off of obsolete inventory.  Trade return rates moderated in both May and June.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses ("SG&A") for the three months ended June 30, 2016 were $14.1 million compared to $14.9 million for the corresponding period of the prior year, down 5.2% from the three months ended June 30, 2015. For the three months ended June 30, 2016, spending on non-recurring strategic initiatives was $2.2 million lower than the prior year. Non-recurring SG&A launch costs were $0.3 million for the three months ended June 30, 2016 compared to $1.1 million in the corresponding period of the prior year. The second quarter of 2016 included $0.6 million in non-recurring compensation costs in connection with the IPO and $0.1 million in recurring public company costs. We continue to invest and strengthen both our sales and regulatory infrastructures to facilitate future growth.

Interest Expense and Financing Costs. Interest expense and financing costs for the three months ended June 30, 2016 were $6.9 million compared to $8.6 million for the corresponding period of the prior year. The decrease in interest expense for 2016 is due to a reduction in outstanding indebtedness.

Investment Income. Investment income for the three months ended June 30, 2016 was $332. The Company made a change in the investment strategy relating to the MSA account during the second quarter of 2016.

Loss on Extinguishment of Debt. The Company recognized a loss on extinguishment of debt for the three months ended June 30, 2016 of $2.8 million due to the repurchase and conversion of its PIK Toggle Notes relating to its IPO in May 2016.

Income Tax Expense.  The Company’s income tax expense for the three months ended June 30, 2015 does not bear the normal relationship to loss before income taxes due to certain minimum state income taxes.

Net Income. Due to the factors described above, net income for the three months ended June 30, 2016 was $0.8 million compared with a net loss of $1.4 million for the three months ended June 30, 2015.

Comparison of the Six Months Ended June 30, 2016 to the Six Months Ended June 30, 2015

Net Sales. Company net sales for the six months ended June 30, 2016 were $101.4 million, an increase of $2.4 million or 2.4% from the corresponding period of the prior year. This increase was the result of increases in the Smokeless and Smoking Products segments, partially offset by a decrease in net sales in the NewGen Products segment.

Net sales for the Smokeless Products segment for the current period increased $3.8 million or 10.6% to $40.0 million from the corresponding period of the prior year. Revenue growth was driven by the ongoing roll-out of MST 1.2oz. cans, driving MST retail penetration, and by pricing in both chewing tobacco and MST. For the six months ended June 30, 2016, volume increased 6.0% and price/mix accounted for the remainder or 4.6%.

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Net sales for the Smoking Products segment increased $2.0 million or 3.7% to $54.7 million compared to the corresponding period of the prior year. Continued growth in our Make-Your-Own (MYO) cigar wraps and strong orders in the cigarette papers business contributed to the increase. For the six months ended June 30, 2016, volume increased 0.3% and price/mix accounted for the remainder or 3.4%.

Net sales of the NewGen Products segment decreased $3.4 million or 33.8% to $6.7 million in comparison to the corresponding period of the prior year. due to the introductions of new products into the marketplace by competitors and other factors, including the continuing but slowing movement of industry vapor volumes away from traditional retail to vape and accessory shops.  For the six months ended June 30, 2016, volume decreased 26.1% and price/mix accounted for the remainder or 7.7%.

Cost of Sales.For the six months ended June 30, 2016, cost of sales increased to $51.9 million from $51.8 million for the six months ended June 30, 2015, an increase of $0.1 million, or 0.2%, principally due to an increase in cost of sales in the Smokeless Products segment, partially offset by decreases in cost of sales in the Smoking Products and NewGen Products segments.

For the six months ended June 30, 2016, cost of sales in the Smokeless Products segment increased to $19.9 million from $17.8 million for the six months ended June 30, 2015, an increase of $2.1 million, or 12.1%, principally due to an increase in net sales of products with a higher manufacturing cost.

For the six months ended June 30, 2016, cost of sales in the Smoking Products segment decreased to $26.7 million from $27.0 million for the six months ended June 30, 2015, a decrease of $0.3 million, or 1.2%, principally due to higher cost of sales for the six months ended June 30, 2015 relating to the revaluation of inventory on hand.

For the six months ended June 30, 2016, cost of sales in the NewGen products segment decreased to $5.3 million from $7.0 million for the six months ended June 30, 2015, a decrease of $1.7 million, or 24.6%, principally due to a reduction in sales volume of vaporizers and e-cigarettes.

Gross Profit. Gross profit for the six months ended June 30, 2016 totaled $49.5 million from $47.3 million in comparison to the corresponding period of the prior year. Gross margin improved from 47.7% in the corresponding period of the prior year to 48.8% in the six months ended June 30, 2016.

Gross profit of the Smokeless Products segment increased 9.2% or $1.7 million to $20.1 million compared to the corresponding period of the prior year. Gross margin for this segment decreased to 50.2% of net sales for the current period from 50.9% in the corresponding period of the prior year due primarily to the mix / shift from chewing tobacco to MST products and introductory discounts associated with the MST expansion.

Gross profit of the Smoking Products segment increased $2.3 million or 8.9% to $28.0 million when compared to the corresponding period of the prior year. Gross margin of the Smoking Products segment increased to 51.2% of net sales for the current period in comparison to 48.8% for the corresponding period in 2015, principally as the result of favorable mix / shifts within the segment. 

Gross profit in the NewGen segment decreased $1.7 million or 54.4% to $1.4 million when compared to the corresponding period of the prior year. Gross margin of the NewGen segment decreased to 21.4% of net sales for the current period in comparison to 31.0% for the corresponding period of the prior year. Margins for the six-months ended June 30, 2016 were negatively impacted by higher than normal returned goods associated with the trade adjusting levels to meet reduced market demand in traditional retail and a write-off of obsolete inventory.  Trade return rates moderated in both May and June.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses for the six months ended June 30, 2016 were $27.8 million compared to $27.5 million for the corresponding period of the prior year, a 1.1% increase from the six months ended June 30, 2015. Spending for the six months ended June, 30, 2016 on non-recurring strategic initiatives and non-recurring SG&A launch costs was lower compared to the corresponding period of the prior year by $2.1 million and $0.8 million, respectively. The six months ended June 30, 2016 included $0.6 million in non-recurring compensation costs in connection with the IPO and $0.1 million in recurring public costs. We continue to invest and strengthen both our sales and regulatory infrastructures to facilitate future growth.

Interest Expense and Financing Costs. Interest expense and financing costs for the six months ended June 30, 2016 were $15.3 million compared to $17.1 million for the corresponding period of the prior year. The decrease in interest expense for 2016 is due to a reduction in outstanding indebtedness.

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Investment Income. Investment income for the six months ended June 30, 2016 was $332. NATC made a change in the investment strategy relating to the MSA account during the second quarter of 2016.

Loss on Extinguishment of Debt. The Company recognized a loss on extinguishment of debt for the six months ended June 30, 2016 of $2.8 million due to the repurchase and conversion of its PIK Toggle Notes relating to its IPO in May 2016.

Income Tax Expense.  The Company’s income tax expense for the six months ended June 30, 2016 and 2015 does not bear the normal relationship to income before income taxes because of net operating loss carryforwards which were utilized and were partially offset by certain minimum state income taxes.

Net Income. Due to the factors described above, net income for the six months ended June 30, 2016 and 2015 was $3.0 million and $2.0 million, respectively.

EBITDA and Adjusted EBITDA:

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use non-U.S. GAAP financial measures, including EBITDA and Adjusted EBITDA. We believe Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA is used by management to compare our performance to that of prior periods for trend analyses and planning purposes and is presented to our board of directors. We believe that EBITDA and Adjusted EBITDA are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to business performance.

In addition, our credit agreements contain financial covenants that use Adjusted EBITDA calculations.

We define “EBITDA” as net income before depreciation and amortization, interest expense and provision for income taxes. We define “Adjusted EBITDA” as net income before depreciation and amortization, interest expense, provision for income taxes, loss on extinguishment of debt, other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance.

Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. Adjusted EBITDA excludes significant expenses that are required by U.S. GAAP to be recorded in our financial statements and is subject to inherent limitations. In addition, other companies in our industry may calculate this non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. The tables below provide a reconciliation between net income and Adjusted EBITDA for the three and six months ended June 30, 2016 and 2015.

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	Three Months Ended
	June 30, 2016		June 30, 2015
Net income	$	799	$	(1,421	)
Add:
Interest expense		6,876		8,574
Depreciation expense		293		267
Income tax expense		609		583
EBITDA	$	8,577	$	8,003
Components of Adjusted EBITDA
LIFO adjustment (a)		264		51
Pension/postretirement expense (b)		119		92
Non-cash stock options, restricted stock and incentives expense		24		74
Foreign exchange hedging (c)		56		(215	)
Loss on extinguishment of debt (d)		2,824		-
Strategic initiatives (f)		30		2,231
Launch costs (g)		326		1,091
IPO related compensation costs (h)		605		-
Adjusted EBITDA	$	12,825	$	11,327

(a) Represents non-cash expense related to an inventory valuation allowance for last-in, first-out ("LIFO") reporting.

(b) Represents our non-cash Pension/Postretirement expense.

(c) Represents non-cash gain and loss stemming from our foreign exchange hedging activities.

(d) Represents the non-cash loss due to the write-off of accrued interest expense.

(e) Represents the one-time relocation of finished product for improved logistical services.

(f) Represents the fees incurred for the study of strategic initatives.

(g) Represents product launch costs of our new product lines.

(h) Represents non-recurring compensation expenses incurred coincident with the May IPO.

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	Six Months Ended
	June 30, 2016		June 30, 2015
Net income	$	3,033	$	2,006
Add:
Interest expense		15,338		17,056
Depreciation expense		586		518
Income tax expense		822		658
EBITDA	$	19,779	$	20,238
Components of Adjusted EBITDA
LIFO adjustment (a)		572		482
Pension/postretirement expense (b)		236		186
Non-cash stock options, restricted stock and incentives expense		46		149
Foreign exchange hedging (c)		35		24
Loss on extinguishment of debt (d)		2,824		-
Warehouse reconfiguation (e)		-		375
Strategic initiatives (f)		462		2,601
Launch costs (g)		718		1,182
IPO related compensation costs (h)		605		-
Adjusted EBITDA	$	25,277	$	25,237

(a) Represents non-cash expense related to an inventory valuation allowance for last-in, first-out ("LIFO") reporting.

(b) Represents our non-cash Pension/Postretirement expense.

(c) Represents non-cash gain and loss stemming from our foreign exchange hedging activities.

(d) Represents the non-cash loss due to the write-off of accrued interest expense.

(e) Represents the one-time relocation of finished product for improved logistical services.

(f) Represents the fees incurred for the study of strategic initatives.

(g) Represents product launch costs of our new product lines.

(h) Represents non-recurring compensation expenses incurred coincident with the May IPO.

Liquidity and Capital Reserves

Our principal uses for cash are working capital, debt service and capital expenditures. We believe that our cash flows from operations and borrowing availability under our Revolving Credit Facility are adequate to satisfy our operating cash requirements for the foreseeable future.

We had working capital of $46.4 million at June 30, 2016 compared to working capital of $42.8 million at December 31, 2015. This increase is primarily the result of an increase in inventory and a decrease in accrued interest, partially offset by an increase in the revolving credit facility.

	June 30, 2016		December 31, 2015
Current Assets	$	70,472	$	63,952
Current Liabilities		24,080		21,137
Working Capital	$	46,392	$	42,815

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Cash Flows From Operating Activities

The following table sets out the principal components of our cash flows from operating activities for the six months ended June 30, 2016 and 2015:

	Six Months Ended
	June 30, 2016			June 30, 2015
Cash flows from operating activities:
Net income	$	3,033		$	2,006
Adjustments to reconcile net income to net cash used in operating activities:
Loss on extinguishment of debt		2,824			-
Gain on sale of fixed assets		-			(1	)
Depreciation expense		586			519
Amortization of deferred financing costs		719			724
Amortization of original issue discount		459			524
Interest incurred but not paid on PIK Toggle Notes		3,422			3,963
Interest incurred but not paid on 7% Senior Notes		329			426
Interest paid on PIK Toggle Notes		(9,893	)		-
Deferred income taxes		50			(9	)
Stock compensation expense		25			92
Restricted stock compensation expense		8			-
Member unit compensation expense		13			57
Changes in operating assets and liabilities:
Accounts receivable		(1,269	)		(1,010	)
Inventories		(7,417	)		(3,962	)
Other current assets		943			(4,815	)
Other assets		(62	)		(87	)
Accounts payable		1,234			2,355
Accrued pension liabilities		131			82
Accrued postretirement liabilities		(59	)		(63	)
Accrued expenses and other		(4,188	)		(2,256	)
Net cash used in operating activities	$	(9,112	)	$	(1,455	)

For the six months ended June 30, 2016, net cash used in operating activities increased to $9.1 million from $1.5 million for the six months ended June 30, 2015, an increase of $7.6 million, principally due to interest paid on PIK Toggle Notes, partially offset by other cash operating results.We used cash proceeds from the IPO to repay $34 million in accreted value of the outstanding PIK Toggle Notes. A portion of the accreted value that was repaid ($9.9 million) was deemed to relate to pay in kind interest on the PIK Toggle Notes in prior interest periods that was added to the principal balance of the PIK Toggle Notes.

Cash Flows from Investing Activities

The following table sets out the principal components of our cash flows from investing activities for the six months ended June 30, 2016 and 2015:

	Six Months Ended
	June 30, 2016			June 30, 2015
Cash flows from investing activities:
Capital expenditures	$	(859	)	$	(641	)
Proceeds from sale of fixed assets		-			2
Note receivable		-			(430	)
Net cash used in investing activities	$	(859	)	$	(1,069	)

For the six months ended June 30, 2016, net cash used in investing activities decreased to $0.9 million from $1.1 million for the six months ended June 30, 2015, a decrease of $0.2 million.

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Cash Flows from Financing Activities

The following table sets out the principal components of our cash flows used in financing activities for the six months ended June 30, 2016 and 2015:

	Six Months Ended
	June 30, 2016			June 30, 2015
Cash flows from financing activities:
Proceeds from revolving credit facility	$	6,603		$	213
Payment of financing costs		(200	)		-
Payment of first lien term loan		(3,563	)		-
Payment of second lien term loan		(20,000	)		(825	)
Payment of PIK Toggle Notes		(24,107	)		-
Redemption of Intrepid options		(661	)		-
Redemption of Intrepid warrants		(5,500	)		-
Stock option exercised		8			-
Proceeds from issuance of stock		56,168			1
Net cash provided by (used in) financing activities	$	8,748		$	(611	)

For the six months ended June 30, 2016, net cash provided by financing activities was $8.7 million compared with net cash used in financing activities of $0.6 million for the six months ended June 30, 2015, an increase of $9.3 million, principally due to proceeds from the revolving credit facility and from the issuance of stock, partially offset by payments on the first lien term loan, second lien term loan, PIK Toggle Notes and redemption of warrants.

Long-Term Debt

The Company’s long-term indebtedness currently consists of our Revolving Credit Facility (the “Revolving Credit Facility”), First Lien Credit Agreement (the “First Lien Credit Agreement”) and Second Lien Credit Facility (the “Second Lien Credit Agreement”). In connection with the IPO we repurchased and retired all of our outstanding PIK Toggle Notes and 7% Senior Notes for a combination of cash and shares of our common stock (see Note 3). As of June 30, 2016, we were in compliance with the financial and restrictive covenants in our existing debt instruments. The following table provides outstanding balances under our debt instruments as of June 30, 2016 and December 31, 2015.

	June 30, 2016			December 31, 2015
Revolving Credit Facility	$	6,621		$	18
First Lien Term Loan		147,134			150,555
Second Lien Term Loan		59,005			78,882
PIK Toggle Notes		-			58,882
7% Senior Notes		-			10,360
		212,760			298,697
Less deferred financing charges		(5,054	)		(6,257	)
Less current maturities		(1,650	)		(1,650	)
	$	206,056		$	290,790

Revolving Credit Facility

The Revolving Credit Facility provides for aggregate commitments of up to $40 million, subject to a borrowing base, equal to the sum of (i) 85% of eligible accounts receivable, plus (ii) the lesser of (A) the product of 70% multiplied by the value of  eligible inventory  and (B) the product of 85% multiplied by the net recovery percentage identified in the most recent inventory appraisal multiplied by the value of eligible inventory, plus (iii) the lesser of (A) the product of 75% multiplied by the value of eligible inventory and (B) the product of 85% multiplied by the net recovery percentage identified in the most recent inventory appraisal multiplied by the value of the eligible finished goods inventory, minus (iv) the aggregate amount of reserves established by the administrative agent.

The interest rates per annum applicable to loans under the Revolving Credit Facility are, at the option of North Atlantic Trading Company, Inc. (“NATC”), the borrower under the facility, equal to the applicable Base Rate or LIBOR Rate plus the applicable Interest Margin, as defined below in the Revolving Credit Facility.

48

The Revolving Credit Facility matures in January 2019 and the balance outstanding at June 30, 2016 was $6.6 million. The weighted average interest rate on June 30, 2016 was 5.0%. As of June 30, 2016, we have the ability to borrow an additional $27.4 million.

The Company is subject to financial covenants under the Revolving Credit Facility and is required to maintain a consolidated fixed charge coverage ratio of at least 1.10 to 1.00 for each applicable period. The Company is subject to similar negative and affirmative covenants, and events of default as the first lien and second lien term loans described below. As of June 30, 2016, we were in compliance with all such covenants.

First Lien Term Loan

On January 13, 2014, we entered into the First Lien Credit Agreement with Wells Fargo Securities, LLC and Jefferies Finance LLC, as Joint Lead Arrangers and Joint Bookrunners, and Wells Fargo Bank, National Association as Administrative Agent for a $170.0 million first lien term loan, which matures on January 13, 2020.

The borrowings under the First Lien Credit Agreement are secured by a first priority lien on substantially all of the assets of the borrower and the guarantors of this facility (which include all of our subsidiaries other than Turning Point Brands, LLC (“TPLLC”) and its subsidiary), including a pledge of the capital stock of NATC and its subsidiaries held by Holdings, NATC or any Guarantor (other than Holdings), other than certain excluded assets. The aggregate outstanding amounts under the first lien term loan are paid in consecutive quarterly installments on the last business day of each March, June, September and December.

The loans designated as LIBOR rate loans bear interest at the LIBOR Rate then in effect (but not less than 1.25%) plus 6.50% and the loans designated as base rate loans bear interest at the (i) highest of (A) the Prime Rate, (B) the Federal Funds Rate plus 0.50%, (C) LIBOR for an interest period of one month plus 1.00% and (D) 2.25% per year plus (ii) 5.50%. We are required to make mandatory prepayments in certain circumstances including in connection with certain debt issuances by NATC or any of its subsidiaries or in connection with certain asset dispositions. We are permitted to voluntarily prepay the obligations at any time and from time to time without any penalty or premium. The First Lien Credit Agreement requires principal payments of $1.650 million in each of the years of 2016, 2017 and 2018, respectively, and $1.238 million in 2019. As of June 30, 2016, the weighted average interest rate on the first lien term loan was 7.78%.

The first lien term loan contains certain financial covenants that require NATC to maintain a consolidated fixed charge coverage ratio of not be less than 1.25 to 1.00 at the end of any fiscal quarter, and a consolidated total leverage ratio ranging from 6.25 to 1.00 from April 1, 2015 through September 30, 2016, decreasing to a ratio of 5.50 to 1.00 from October 1, 2018 to maturity.

The First Lien Credit Agreement contains negative covenants that, among other things, limit the incurrence of additional indebtedness, the distribution of dividends, transactions with affiliates, asset sales, acquisitions, mergers, prepayments of other indebtedness, the incurrence of liens and encumbrances, capital expenditures, restricted payments, and other matters customarily restricted in such agreements. The First Lien Credit Agreement also contains customary affirmative covenants including, among others, the provision of financial statements, maintenance of property, licenses and insurance. The First Lien Credit Agreement also contains an affirmative covenant requiring us to maintain in effect the Bolloré distribution and license agreements. The First Lien Credit Agreement also contains customary events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross-acceleration, cross-defaults to certain other indebtedness, bankruptcy and insolvency, the occurrence of a change of control and judgment defaults. As of June 30, 2016, we were in compliance with all such covenants. If any events of default occur and are not cured within applicable grace periods or waived, the outstanding loans may be accelerated and the lenders’ commitments may be terminated. The occurrence of the bankruptcy and insolvency event of default will result in the automatic termination of commitments and acceleration of outstanding amounts under the First Lien Credit Agreement.

Second Lien Term Loan

On January 13, 2014, we entered into the Second Lien Credit Facility, with NATC as borrower, between the same parties as the First Lien Credit Agreement for an $80.0 million second lien term loan, which matures on July 13, 2020. The Second Lien Credit Facility is guaranteed by the same guarantors as the First Lien Term Agreement and is secured by a second priority lien over the same collateral.

49

In connection with the IPO, we prepaid $20 million of the borrowings outstanding under the facility in May 2016.

Under the Second Lien Credit Facility, the loans designated as LIBOR rate loans bear interest at the LIBOR Rate then in effect (but not less than 1.25%) plus 10.25% and the loans designated as base rate loans bear interest at (i) the highest of (A) the Prime Rate, (B) the Federal Funds Rate plus 0.50%, (C) LIBOR for an interest period of one month plus 1.00% and (D) 2.25% per year plus (ii) 9.25%. There is no maximum interest rate other than that permitted by applicable law. We are required to make mandatory prepayments in certain circumstances including in connection with certain debt issuances by NATC or any of its subsidiaries or in connection with certain asset dispositions. We are permitted to voluntarily prepay the obligations without any penalty or premium at any time after the third anniversary of the closing date. For the first three years following the closing date, we must pay a prepayment premium, beginning at 3.0% of the amount being prepaid, refinanced or assigned, which reduces to 2.0% following the first anniversary and to 1.0% following the second anniversary. As of June 30, 2016, the weighted average interest rate was 11.5%.

We are subject to substantially similar negative and affirmative covenants, and events of default as under the First Lien Credit Agreement. With respect to the financial covenants, we have the same fixed charge coverage ratio requirements, however, NATC is required to maintain a consolidated total leverage ratio under the Second Lien Credit Facility ranging from 6.50 to 1.00 from April 1, 2015 through September 30, 2016, reducing to a maximum ratio of 5.75 to 1.00 from October 1, 2018 to maturity. As of June 30, 2016, we were in compliance with all such covenants.

PIK Toggle Notes and Standard General Warrants

On January 13, 2014, TPB issued the PIK Toggle Notes to Standard General in an aggregate principal amount of $45.0 million and issued warrants, which were valued at $1.7 million, to purchase 42,424 of our common stock at $.01 per share, in connection therewith. After adjustment for the stock split effected prior to the IPO, the warrants provide for the purchase of 442,558 shares of the Company’s common stock. The PIK Toggle Notes had an original issue discount of $1.7 million and were initially valued at $43.3 million.

The PIK Toggle Notes accrued interest based on the LIBOR Rate then in effect (but not less than 1.25%) plus 13.75%, reset quarterly. We chose to pay interest in kind for all interest payments for the three months ended March 31, 2016 and the years ended December 31, 2015 and 2014.

In connection with the IPO, in May of 2016 we repurchased all of the outstanding PIK Toggle Notes in exchange for a combination of cash and shares of our common stock (see Note 3).

As of June 30, 2016, 442,558 Standard General Warrants remained issued and outstanding.

7% Senior Notes

In January of 2014, TPB conducted a rights offering to certain of our stockholders that qualified as “accredited investors” under the Securities Act of 1933, as amended, pursuant to which TPB issued our 7% Senior Notes to various stockholders, including Standard General and members of management, for a principal amount of $11.0 million and issued the noteholders warrants to purchase 11,000,000 units of membership interests in Intrepid Brands (the “Intrepid Warrants”). The Intrepid Warrants represented 40% of the Intrepid Brands common units outstanding on a fully diluted basis, and are exercisable at a purchase price of $1.00 per unit. As a result of the issuance of the Intrepid Warrants, the 7% Senior Notes had an original issue discount of $2.8 million and were initially valued at $8.2 million.

In connection with the IPO, in May of 2016 we repurchased all of the outstanding 7% Senior Notes in exchange for shares of our common stock and all outstanding Intrepid Warrants for cash (see Note 3).

Credit Line with Standard General

The Company has entered into an agreement with Standard General for a $50.0 million line of credit that we may use to finance acquisitions that are approved by Standard General L.P. in its sole discretion. The line of credit will terminate and all borrowings under the line will mature on May 13, 2021. Borrowings under the line of credit will bear interest at a floating rate equal to LIBOR plus a margin of 6.5% with a LIBOR floor of 1.0%. TPB will be the borrower under the facility and none of its present subsidiaries will guarantee the facility.

50

Off-balance Sheet Arrangements

As of June 30, 2016, NATC had no foreign exchange forward contracts.

During the year ended December 31, 2015, we executed various forward contracts for the purchase of 11.5 million Euros with maturity dates from May 13, 2015 to July 11, 2016. On December 31, 2015, we had foreign currency contracts to purchase a total amount of 5.1 million Euros.

The effect of a hypothetical 10% change in Euro and US exchange rates applicable to our business would not have had a material impact on our consolidated financial statements.

Contractual Obligations

As of June 30, 2016, there had been no material changes outside the ordinary course to our contractual obligations from December 31, 2015 as reported in our Prospectus dated May 10, 2016 and filed with the SEC.

Inflation

The Company believes that any effect of inflation at current levels will be minimal. Historically, we have been able to increase prices at a rate equal to or greater than that of inflation and believe that we will continue to be able to do so for the foreseeable future. In addition, we have been able to maintain a relatively stable variable cost structure for our products due, in part, to our successful procurement and reformulation activities with regard to our tobacco products and, in part, to our existing contractual agreement for the purchase of our premium cigarette papers.

51

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Sensitivity

There have been no material changes in our exposure to market risk during the six months ended June 30, 2016. Please refer to our “Quantitative and Qualitative Disclosures about Market Risk” included in our Prospectus dated May 10, 2016 related to the IPO.

Item 4. Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Act”)) as of June 30, 2016. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Act is: (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms; and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

There have been no changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

52

PART II OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various claims and actions that arise in the normal course of business. While the outcome of these legal proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of the proceedings should not have a material adverse effect on our financial position, results of operations or cash flows of the Company.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” contained in our Prospectus dated May 10, 2016 related to the IPO. There have been no material changes to the Risk Factors set forth in the Prospectus.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

See the Exhibit Index immediately following the signature page of this Quarterly Report on Form 10-Q.

53

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TURNING POINT BRANDS, INC.
		By: /s/ Lawrence S. Wexler
		Name: Lawrence S. Wexler
		Title:  Chief Executive Officer
		/s/ Mark A. Stegeman
		Name: Mark A. Stegeman
		Title:  Chief Financial and Accounting Officer
Dated: August 11, 2016

54

Exhibit No.	Description
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

55

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT

I, Lawrence S. Wexler, certify that:

1.     I have reviewed this Quarterly Report on Form 10-Q of Turning Point Brands, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2016	By:	/s/ LAWRENCE S. WEXLER
		Lawrence S. Wexler
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT

I, Mark A. Stegeman, certify that:

1.     I have reviewed this Quarterly Report on Form 10-Q of Turning Point Brands, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2016	By:	/s/ MARK A. STEGEMAN
		Mark A. Stegeman
		Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

In connection with the Quarterly Report on Form 10-Q of Turning Point Brands, Inc. (the "Company") for the quarterly period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Lawrence S. Wexler, President and Chief Executive Officer, and Mark A. Stegeman, Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: August 11, 2016	By:	/s/ LAWRENCE S. WEXLER
		Lawrence S. Wexler
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: August 11, 2016	By:	/s/ MARK A. STEGEMAN
		Mark A. Stegeman Chief Financial Officer (Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 09, 2016
Entity Information [Line Items]
Entity Registrant Name	Turning Point Brands, Inc.
Entity Central Index Key	0001290677
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Voting Common Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		17,900,318

XML

Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash	$ 3,612	$ 4,835
Accounts receivable, net of allowances of $29 in 2016 and $137 in 2015	5,209	3,940
Inventories	51,756	44,339
Other current assets	9,895	10,838
Total current assets	70,472	63,952
Property, plant and equipment, net	5,876	5,603
Deferred financing costs, net	174	208
Goodwill	128,697	128,697
Other intangible assets, net	8,553	8,553
Master Settlement Agreement - escrow deposits	31,904	31,842
Other assets	701	3,608
Total assets	246,377	242,463
Current liabilities:
Accounts payable	5,321	4,087
Accrued expenses	9,564	11,053
Accrued interest expense	629	4,329
First lien term loan	1,650	1,650
Revolving credit facility	6,621	18
Other current liabilities	295	0
Total current liabilities	24,080	21,137
Notes payable and long-term debt	199,435	290,772
Deferred income taxes	7,063	7,013
Postretirement benefits	4,607	4,666
Pension benefits	372	487
Total liabilities	235,557	324,075
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock; $0.01 par value; authorized shares 40,000,000; issued shares -0-	0	0
Additional paid-in capital	104,759	12,628
Accumulated other comprehensive loss	(3,266)	(3,512)
Accumulated deficit	(90,852)	(90,800)
Total stockholders' equity (deficit)	10,820	(81,612)
Total liabilities and stockholders' equity (deficit)	246,377	242,463
Common Stock, Voting [Member]
Stockholders' equity (deficit):
Common stock	179	63
Common Stock, Nonvoting [Member]
Stockholders' equity (deficit):
Common stock	$ 0	$ 9

XML

Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Accounts receivable, allowance	$ 29	$ 137
Stockholders' equity (deficit):
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	40,000,000	40,000,000
Preferred stock, shares issued (in shares)	0	0
Common Stock, Voting [Member]
Stockholders' equity (deficit):
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	190,000,000	190,000,000
Common stock, shares issued (in shares)	17,901,164	6,259,480
Common Stock, Nonvoting [Member]
Stockholders' equity (deficit):
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares issued (in shares)	0	0

XML

Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Consolidated Statements of Operations (unaudited) [Abstract]
Net sales	$ 51,581	$ 47,999	$ 101,447	$ 99,085
Cost of sales	26,707	25,388	51,926	51,819
Gross profit	24,874	22,611	49,521	47,266
Selling, general and administrative expenses	14,098	14,875	27,836	27,546
Operating income (loss)	10,776	7,736	21,685	19,720
Interest expense and financing costs	6,876	8,574	15,338	17,056
Investment income	(332)	0	(332)	0
Loss on extinguishment of debt	2,824	0	2,824	0
Income (loss) before income taxes	1,408	(838)	3,855	2,664
Income tax expense	609	583	822	658
Net income (loss)	$ 799	$ (1,421)	$ 3,033	$ 2,006
Basic earnings per common share:
Net income (in dollars per share)	$ 0.05	$ (0.20)	$ 0.24	$ 0.28
Diluted earnings per common share:
Net income (in dollars per share)	$ 0.05	$ (0.20)	$ 0.22	$ 0.24
Weighted average common shares outstanding:
Basic - inclusive of voting and non-voting shares (in shares)	15,274,446	7,198,337	12,476,719	7,197,928
Diluted - inclusive of voting and non-voting shares (in shares)	16,877,291	7,198,337	13,924,626	8,334,137

XML

Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net income (loss)	$ 799	$ (1,421)	$ 3,033	$ 2,006
Other comprehensive income, net of tax
Pension and postretirement amortization of unrealized losses	123	131	246	263
Comprehensive income (loss)	922	(1,290)	3,279	2,269
Cost of Sales [Member]
Other comprehensive income, net of tax
Pension and postretirement amortization of unrealized losses	6	6	12	12
Selling, General and Administrative Expenses [Member]
Other comprehensive income, net of tax
Pension and postretirement amortization of unrealized losses	$ 117	$ 125	$ 234	$ 251

XML

Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net income	$ 3,033	$ 2,006
Adjustments to reconcile net income to net cash used in operating activities:
Loss on extinguishment of debt	2,824	0
Gain on sale of fixed assets	0	(1)
Depreciation expense	586	519
Amortization of deferred financing costs	719	724
Amortization of original issue discount	459	524
Interest paid on PIK Toggle Notes	(9,893)	0
Deferred income taxes	50	(9)
Stock compensation expense	25	92
Restricted stock compensation expense	8	0
Member unit compensation expense	13	57
Changes in operating assets and liabilities:
Accounts receivable	(1,269)	(1,010)
Inventories	(7,417)	(3,962)
Other current assets	943	(4,815)
Other assets	(62)	(87)
Accounts payable	1,234	2,355
Accrued pension liabilities	131	82
Accrued postretirement liabilities	(59)	(63)
Accrued expenses and other	(4,188)	(2,256)
Net cash provided by (used in) operating activities	(9,112)	(1,455)
Cash flows from investing activities:
Capital expenditures	(859)	(641)
Proceeds from sale of fixed assets	0	2
Note receivable	0	(430)
Net cash used in investing activities	(859)	(1,069)
Cash flows from financing activities:
Proceeds from revolving credit facility, net	6,603	213
Payment of financing costs	(200)	0
Payment of PIK Toggle Notes	(24,107)	0
Redemption of Intrepid options	(661)	0
Redemption of Intrepid warrants	(5,500)	0
Stock option exercised	8	0
Proceeds from issuance of stock	56,168	1
Net cash provided by (used in) financing activities	8,748	(611)
Net decrease in cash	(1,223)	(3,135)
Cash, beginning of period	4,835	8,467
Cash, end of period	3,612	5,332
Supplemental schedule of noncash financing activities:
Issuance of restricted stock	279	0
Accrued expenses incurred for issuance of stock	423	0
PIK Toggle Notes [Member]
Supplemental schedule of noncash financing activities:
Conversion of Notes to equity	29,014	0
7% Senior Notes [Member]
Supplemental schedule of noncash financing activities:
Conversion of Notes to equity	10,074	0
PIK Toggle Notes [Member]
Adjustments to reconcile net income to net cash used in operating activities:
Interest incurred but not paid on Notes	3,422	3,963
7% Senior Notes [Member]
Adjustments to reconcile net income to net cash used in operating activities:
Interest incurred but not paid on Notes	329	426
First Lien Term Loan [Member]
Cash flows from financing activities:
Payment for lien term loan	(3,563)	(825)
Second Lien Term Loan [Member]
Cash flows from financing activities:
Payment for lien term loan	$ (20,000)	$ 0

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2016

Basis of Presentation [Abstract]

Basis of Presentation

Note 1. Basis of Presentation:

Turning Point Brands, Inc. (formerly known as North Atlantic Holding Company, Inc.), (the “Company”) is a holding company which owns NATC Holding Company, Inc. (“NATC Holding”) and its subsidiaries and Turning Point Brands, LLC (“TPLLC”) and its subsidiary, Intrepid Brands, LLC (“Intrepid”). Except where the context otherwise requires, references to the Company include the Company, NATC Holding and its subsidiary, North Atlantic Trading Company, Inc. (“NATC”) and its subsidiaries, National Tobacco Company, L.P. (“NTC”), North Atlantic Operating Company, Inc. (“NAOC”), North Atlantic Cigarette Company, Inc. (“NACC”), National Tobacco Finance Corporation (“NTFC”), Fred Stoker & Sons, Inc., RBJ Sales, Inc. and Stoker, Inc. (collectively, “Stoker”) and TPLLC and Intrepid.

The accompanying interim condensed consolidated financial statements have been prepared in accordance with our accounting practices described in our audited consolidated financial statements as of and for the year ended December 31, 2015, and are unaudited. In the opinion of management, the unaudited interim condensed consolidated financial statements included herein contain all adjustments necessary to present fairly our financial position, results of operations and cash flows for the periods indicated. Such adjustments, other than nonrecurring adjustments that have been separately disclosed, are of a normal, recurring nature. The operating results for interim periods are not necessarily indicative of results to be expected for a full year of future interim periods. The unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2015. The accompanying interim condensed consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission and, accordingly, do not include all the disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) with respect to annual financial statements.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies:

Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions have been eliminated.

Revenue Recognition: The Company recognizes revenues and the related costs upon delivery to the customer, at which time there is a transfer of title and risk of loss to the customer in accordance with the Financial Accounting Standards Board Accounting Standards Codification^© (“ASC”) 605-10-S99. The Company classifies customer rebates as sales deductions in accordance with the requirements of ASC 605-50-25.

Shipping Costs: The Company records shipping costs incurred as a component of selling, general and administrative expenses. Shipping costs incurred were approximately $1.6 million and $1.9 million for the three months ended June 30, 2016 and 2015, respectively. Shipping costs incurred were approximately $3.1 million and $3.6 million for the six months ended June 30, 2016 and 2015, respectively.

Master Settlement Agreement Escrow Account: Pursuant to the Master Settlement Agreement (the “MSA”) entered into in November 1998 by most states (represented by their attorneys general acting through the National Association of Attorneys General) and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to include a manufacturer of make-your-own (“MYO”) cigarette tobacco) has the option of either becoming a signatory to the MSA or opening, funding, and maintaining an escrow account to have funds available for certain potential tobacco-related liabilities, with sub-accounts on behalf of each settling state.  The Company has chosen to open and fund an escrow account as its method of compliance.  It is the Company’s policy to record amounts on deposit in the escrow account for prior years as a non-current asset.  Each year’s annual obligation is required to be deposited in the escrow account by April 15 of the following year.  In addition to the annual deposit, many states have elected to require quarterly deposits for the previous quarter’s sales. As of June 30, 2016 and December 31, 2015, NATC had on deposit approximately $31.9 million and $31.8 million, respectively, in escrow.

Effective April 1, 2009, the federal excise tax on MYO products was increased from $1.0969 per pound to $24.78 per pound of tobacco. With this significant increase in the federal excise tax, the Company discontinued its generic category of MYO but continues to sell the Zig-Zag branded MYO. For further discussion of the MSA see our Form S-1/A filed on April 28, 2016 with the SEC, pages F-11 and F-12.

The following table represents the amount of deposits by sales year for the MSA escrow account and reflects the decline in annual deposits beginning in 2009, due to the significant increase in federal excise taxes, as described above:

	Deposits
Sales Year	June 30, 2016		December 31, 2015
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,715		3,715
2005		4,552		4,552
2006		3,847		3,847
2007		4,167		4,167
2008		3,364		3,364
2009		1,626		1,626
2010		406		406
2011		193		193
2012		198		198
2013		173		173
2014		142		142
2015		89		38
2016		11		-
Total	$	31,904	$	31,842

Recent Accounting Pronouncements Adopted:

The Company adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost in 2016. This ASU requires that debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Based on the requirements of this ASU, the Company has retrospectively applied ASU 2015-03 to the December 31, 2015 Consolidated Balance Sheet, which has resulted in $6.3 million being reclassified to direct deduction of the carrying amount of the debt.

The Company adopted ASU 2015-17, Income Taxes (Topic 740): Balance sheet classification of deferred taxes in 2016. This ASU requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. The Company has retrospectively applied ASU 2015-17 to the December 31, 2015 Consolidated Balance Sheet, which has resulted in $0.4 million of deferred tax liabilities being reclassified to a noncurrent deferred tax liability.

Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update (“ASU”), ASU 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which delayed the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting year. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on the consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in this ASU require entities that measure inventory using the first-in, first-out or average cost methods to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. The Company is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less for which there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities and should recognize lease expense for such leases generally on a straight-line basis over the lease term. Certain qualitative disclosures along with specific quantitative disclosures will be required, so that users are able to understand more about the nature of an entity’s leasing activities. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. At transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients related to the identification and classification of leases that commenced before the effective date of ASU 2016-02. An entity that elects to use the practical expedients will, in effect, continue to account for leases that commenced before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The Company is currently evaluating the effect the adoption of this standard will have on its financial statements.

Subsequent Events:

The Company’s management has evaluated events and transactions that occurred from July 1, 2016 through August 11, 2016, the date these unaudited condensed consolidated financial statements were issued, for subsequent events requiring recognition or disclosure in the financial statements.

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Initial Public Offering

6 Months Ended

Jun. 30, 2016

Initial Public Offering [Abstract]

Initial Public Offering

Note 3. Initial Public Offering (“IPO”):

In April of 2016, the Company increased the total authorized shares of preferred and voting and non-voting common stock and effected a 10.43174381 for 1 stock split of the voting and non-voting common stock. As a result of the stock split, all previously reported share amounts (including options and warrants) in the accompanying financial statements and related notes have been retrospectively restated to reflect the stock split.

In May of 2016, the Company sold 6,210,000 shares of voting common stock in its IPO (including shares sold pursuant to the underwriters’ option to purchase 810,000 shares to cover over-allotments) at a price of $10.00 per share. The gross proceeds totaled $62,100. The IPO proceeds were used as follows: 1) $3,884 for the payment of expenses in connection with the IPO; 2) $3,250 to purchase and retire Intrepid Warrants (See Note 12, for definition and information); 3) $34,000 to redeem and retire PIK Toggle Notes (See Note 8, for definition and information); 4) $20,200 to redeem and retire $20,000 in principal amount of Second Lien Term Notes and pay $200 as a 1% prepayment penalty (See Note 8, for definition and information); 5) $683 to purchase and retire all outstanding options to buy Intrepid Common Units which include $22 of payroll taxes (See Note 12, for definition and information); and 6) increased cash of $83.

In addition, in connection with the IPO the Company also: 1) issued 1,289,819 shares of voting common stock in exchange for all of the outstanding 7% Senior Notes (See Note 8); 2) issued 3,168,438 shares of voting common stock in exchange for all of the remaining outstanding PIK Toggle Notes not repurchased for cash as described above (See Note 8); and 3) paid $2,250 to retire all the remaining Intrepid Warrants (for a total expenditure of $5,500 to retire all the Intrepid Warrants).

As a result of the transactions summarized above, the Company has fully repurchased and retired the PIK Toggle Notes and 7% Senior Notes (See Note 8) and fully repurchased and retired all outstanding Intrepid Warrants and options to buy Intrepid Common Units.

The Company had the following voting and non-voting shares of common stock outstanding after the transactions summarized above:

Voting shares outstanding before transactions	6,259,480
Shares issued by the Initial Public Offering	6,210,000
Shares issued for 7% Senior Notes	1,289,819
Shares issued for PIK Toggle Notes	3,168,438
Voting shares outstanding after transactions	16,927,737
Non-Voting shares outstanding before and after transactions	938,857

In June 2016, the Board of Directors of the Company approved the conversion of 938,857 shares of non-voting common stock to shares of voting common stock. The Company had the following voting shares of common stock at June 30, 2016:

Voting shares outstanding after transactions above	16,927,737
Non-voting shares converted to voting shares	938,857
Voting shares issued as restricted stock	27,918
Voting shares issued from exercise of stock options	6,652
Voting shares outstanding at June 30, 2016	17,901,164

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2016

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 4. Fair Value of Financial Instruments:

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of ASC 825, Financial Instruments. The estimated fair value amounts have been determined by the Company using the methods and assumptions described below. However, considerable judgment is required to interpret market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
   

Cash and Cash Equivalents: Cash and cash equivalents are by definition short-term and the carrying amount is a reasonable estimate of fair value.

Accounts Receivable: The fair value of accounts receivable approximates their carrying value.

Revolving Credit Facility: The fair value of the revolving credit facility approximates its carrying value.

Long-Term Debt: The fair value of the Company’s long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. At December 31, 2015, the fair value of the PIK Toggle Notes approximates their face amounts of $60.1 million. At December 31, 2015, the fair value of the 7% Senior Notes approximates their face amounts of $12.6 million.

As of June 30, 2016, the fair value of NATC’s First Lien Term Loan and NATC’s Second Lien Term Loan approximate their face amounts of $148.1 million and $60.0 million, respectively. At December 31, 2015, the fair value of NATC’s First Lien Term Loan and NATC’s Second Lien Term Loan approximate their face amounts of $151.7 million and $80.0 million, respectively.

Foreign Exchange: As of June 30, 2016, the Company had no open foreign exchange forward contracts.  As of December 31, 2015, the Company had seven outstanding foreign exchange forward contracts for the purchase of 5.1 million Euros.  The fair value of the foreign exchange forward contracts was based upon the quoted market price that resulted in an insignificant asset as of December 31, 2015.

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Inventories

6 Months Ended

Jun. 30, 2016

Inventories [Abstract]

Inventories

Note 5. Inventories:

Inventories are stated at the lower of cost or market.  Cost is determined on the last-in, first-out (“LIFO”) method for approximately 58% of the inventories.  Leaf tobacco is presented in current assets in accordance with standard industry practice, notwithstanding the fact that such tobaccos are carried longer than one year for the purpose of curing.

The components of inventories are as follows:

	June 30, 2016			December 31, 2015
Raw materials and work in process	$	2,289		$	1,940
Leaf tobacco		26,268			20,839
Finished goods - smokeless products		4,364			3,615
Finished goods - smoking products		14,589			14,077
Finished goods - electronic / vaporizer products		6,812			5,939
Other		1,315			1,237
		55,637			47,647
LIFO reserve		(3,881	)		(3,308	)
	$	51,756		$	44,339

The Company recorded an inventory valuation allowance of $0.8 million as of June 30, 2016 and $0.3 million as of December 31, 2015.

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Property, Plant and Equipment

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Note 6. Property, Plant and Equipment:

Property, plant and equipment at June 30, 2016 and December 31, 2015 consists of:

	June 30, 2016			December 31, 2015
Leasehold improvements	$	2,215		$	2,196
Machinery and equipment		9,776			8,997
Furniture and fixtures		3,182			3,121
		15,173			14,314
Accumulated depreciation		(9,297	)		(8,711	)
	$	5,876		$	5,603

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Accrued Expenses

6 Months Ended

Jun. 30, 2016

Accrued Expenses [Abstract]

Accrued Expenses

Note 7. Accrued Expenses:

Accrued expenses at June 30, 2016 and December 31, 2015 consist of:

	June 30, 2016		December 31, 2015
Accrued payroll and related items	$	2,417	$	3,659
Customer returns and allowances		1,937		2,015
Other		5,210		5,379
	$	9,564	$	11,053

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Notes Payable and Long-Term Debt

6 Months Ended

Jun. 30, 2016

Notes Payable and Long-Term Debt [Abstract]

Notes Payable and Long-Term Debt

Note 8. Notes Payable and Long-Term Debt:

Notes payable and long-term debt consists of the following in order of preference:

	June 30, 2016			December 31, 2015
First Lien Term Loan	$	147,134		$	150,555
Second Lien Term Loan		59,005			78,882
PIK Toggle Notes		-			58,882
7% Senior Notes		-			10,360
		206,139			298,679
Less deferred finance charges		(5,054	)		(6,257	)
Less current maturities		(1,650	)		(1,650	)
Total Notes Payable and Long-Term Debt	$	199,435		$	290,772

Long-term Debt

On January 13, 2014, NATC entered into (i) a $170 million First Lien Term Loan Credit Agreement among NATC, the Company, NATC Holding and Wells Fargo Bank, National Association, as administrative agent (the “First Lien Credit Agreement”), (ii) a $80 million Second Lien Term Loan Credit Agreement among NATC, the Company, NATC Holding and Wells Fargo Bank, National Association, as administrative agent (the “Second Lien Credit Agreement”), and (iii) a $40 million ABL Credit Agreement among NATC, NATC Holding and Wells Fargo Bank, National Association,  as ABL Agent (the “Revolving Credit Facility”).

First Lien Credit Agreement

All of NATC’s subsidiaries, as well as the Company and NATC Holding, are guarantors under the First Lien Credit Agreement.  TPLLC and its subsidiary are not guarantors of the First Lien Credit Agreement. The First Lien Credit Agreement is secured by a first priority lien on substantially all of the assets of the borrowers and the guarantors thereunder, including a pledge of the capital stock of NATC and its subsidiaries held by NATC Holding, NATC or any guarantor, other than certain excluded assets (the “Collateral”).  The loans designated as LIBOR rate loans bear interest at LIBOR Rate then in effect (but not less than 1.25%) plus 6.50% and the loans designated as base rate loans bear interest at the (i) highest of (A) the Prime Rate, (B) the Federal Funds Rate plus 0.50%, (C) LIBOR for an interest period of one month plus 1.00% and (D) 2.25% per year plus (ii) 5.50%. The weighted average interest rate at June 30, 2016 was 7.78%. The First Lien Credit Agreement matures in January 2020.

The First Lien Credit Agreement contains customary representations and warranties, events of default, affirmative covenants and negative covenants, which impose restrictions on, among other things, the ability of NATC and its subsidiaries to make investments, pay dividends, sell assets, and incur debt and additional liens. In addition, the First Lien Credit Agreement requires NATC to maintain a total leverage ratio as follows:

Period	Maximum Ratio
Closing Date through March 31, 2015	6.50 to 1.00
April 1, 2015 through September 30, 2016	6.25 to 1.00
October 1, 2016 through September 30, 2017	6.00 to 1.00
October 1, 2017 through September 30, 2018	5.75 to 1.00
October 1, 2018 and thereafter	5.50 to 1.00

NATC is required to make prepayments under the First Lien Credit Agreement upon the occurrence of certain events, including sales of certain assets, casualty events and the incurrence of additional indebtedness, subject to certain exceptions and reinvestment rights. NATC made a prepayment of approximately $2.7 million during the first quarter of 2016.

Second Lien Credit Agreement

The Second Lien Credit Agreement has the benefit of a second priority security interest in the Collateral and is guaranteed by the same entities as the First Lien Credit Agreement.  The Second Lien Credit Agreement, contains substantially similar representations and warranties, events of default and covenants as the First Lien Credit Agreement; provided, however, that the total leverage ratio required to be maintained by NATC under the Second Lien Credit Agreement is as follows:

Period	Maximum Ratio
Closing Date through March 31, 2015	6.75 to 1.00
April 1, 2015 through September 30, 2016	6.50 to 1.00
October 1, 2016 through September 30, 2017	6.25 to 1.00
October 1, 2017 through September 30, 2018	6.00 to 1.00
October 1, 2018 and thereafter	5.75 to 1.00

Under the Second Lien Credit Agreement the loans designated as LIBOR rate loans bear interest at a rate of at LIBOR Rate then in effect (but not less than 1.25%) plus 10.25% and the loans designated as base rate loans bear interest at (i) highest of (A) the Prime Rate, (B) the Federal Funds Rate plus 0.50%, (C) LIBOR for an interest period of one month plus 1.00% and (D) 2.25% per year plus (ii) 9.25%.  The weighted average interest rate at June 30, 2016 was 11.5%. The Second Lien Credit Agreement matures in July 2020. In connection with the Company’s IPO in May of 2016, the Company prepaid $20 million of the borrowings under the Second Lien Credit Agreement (see Note 3).

Revolving Credit Facility

The Revolving Credit Facility provides for aggregate commitments of up to $40 million, subject to a borrowing base, which is calculated as the sum of (i) 85% of eligible accounts receivable, plus (ii) the lesser of (A) the product of 70% multiplied by the value of  eligible inventory  and (B) the product of 85% multiplied by the net recovery percentage identified in the most recent inventory appraisal multiplied by the value of eligible inventory, plus (iii) the lesser of (A) the product of 75% multiplied by the value of eligible inventory and (B) the product of 85% multiplied by the net recovery percentage identified in the most recent inventory appraisal multiplied by the value of the eligible finished goods inventory, minus (iv) the aggregate amount of reserves established by the administrative agent.

The interest rates per annum applicable to loans under the Revolving Credit Facility are, at the option of NATC, equal to the applicable Base Rate or LIBOR Rate plus the applicable Interest Margin, as defined below:

Pricing Level	Average Excess Availability	Applicable Margin for Base Rate Loans (the “Base Rate Margin”)	Applicable Margin for LIBOR Rate Loans (the “LIBOR Rate Margin”)
I	> $30,000,000	1.25%	2.25%
II	< $30,000,000 but > $15,000,000	1.50%	2.50%
III	< $15,000,000	1.75%	2.75%

The Revolving Credit Facility matures in January 2019 and the balance outstanding at June 30, 2016 was $6.6 million. The weighted average interest rate at June 30, 2016 was 5.00%.

PIK Toggle Notes

On January 13, 2014, the Company issued PIK Toggle Notes (“PIK Toggle Notes”) to Standard General Master Fund, L.P. (“Standard General”) with a principal amount of $45 million and warrants to purchase 42,424 of the Company’s common stock at $.01 per share, as adjusted for stock splits and other events specified in the agreement. After adjustment for the stock split effected in connection with our IPO of 10.43174381 to 1, the warrants have been adjusted to provide for the purchase of 442,558 of the Company’s common stock. Due to the issuance of the warrants, the PIK Toggle Notes had an original issue discount of $1.7 million and were initially valued at $43.3 million. The PIK Toggle Notes were scheduled to mature and the warrants to expire on January 13, 2021.

The PIK Toggle Notes accrued interest based on the LIBOR Rate then in effect (but not less than 1.25%) plus 13.75%. Interest was payable on the last day of each quarter and upon maturity. The Company had the flexibility to pay interest in kind through an increase in the principal amount at the same interest rate as the PIK Toggle Notes. The Company chose to increase the PIK Toggle Notes for all interest for the first three months of 2016.

The PIK Toggle Notes contained covenants which limited the ability of the Company to enter into transactions with affiliates and make dividends or other distributions or repurchase capital stock. The PIK Toggle Notes were unsecured and did not limit the Company’s ability to incur additional debt or liens.

In connection with the IPO, in May of 2016, the Company redeemed and retired all of the outstanding PIK Toggle Notes in exchange for a combination of cash and shares of the Company’s voting common stock (see Note 3).

7% Senior Notes

In January of 2014, the Company issued 7% Senior Notes to various stockholders with a principal amount of $11 million and warrants to purchase 11,000,000 units of membership interests in Intrepid, which represented 40% of the Intrepid Common Units outstanding on a fully diluted basis, at a purchase price of $1.00 per unit. Due to the issuance of the Intrepid warrants, the 7% Senior Notes had an original issue discount of $2.8 million and were initially valued at $8.2 million. The 7% Senior Notes were scheduled to mature and the warrants to expire on December 31, 2023.

The 7% Senior Notes accrued interest at a fixed rate of 7% per annum. Interest was payable on the last business day of June and December in each year and provided that the Company was permitted to elect to pay all or a portion of the interest in kind. The Company made such election for all of 2014 and 2015.

The 7% Senior Notes were the general unsecured obligations of the Company and ranked equally with the Company’s other unsecured and unsubordinated debt from time to time outstanding. Redemptions of the 7% Senior Notes could be made by the Company at any time without penalty or premium.

In connection with the IPO, in May of 2016, we redeemed and retired all of the outstanding 7% Senior Notes in exchange for shares of the Company’s voting common stock (see Note 3).

Restricted / Non-Restricted Condensed Consolidating Financial Statements

The payment of principal and interest on the First Lien Term Loan, Second Lien Term Loan and Revolving Credit Facility are guaranteed by or obligations of NATC and its subsidiaries (“Issuer/Restricted”). TPLLC and its subsidiary (“Non-Restricted”) are not guarantors of the First Lien Term Loan, Second Lien Term Loan and Revolving Credit Facility. The separate financial statements of the Issuer/Restricted are not included herein because the Issuer/Restricted are the Company’s wholly-owned consolidated subsidiaries and are jointly, severally, fully and unconditionally liable for the obligations represented by the First Lien Term Loan, Second Lien Term Loan and Revolving Credit Facility. The Company believes that the consolidating financial information for the Issuer/Restricted and the Non-Restricted provide information that is more meaningful in understanding the financial position of the Issuer/Restricted than separate financial statements of the Issuer/Restricted.

The following consolidating financial information presents consolidating financial data for the Issuer/Restricted, Non-Restricted and an elimination column for adjustments to arrive at the information for the Company on a consolidated basis as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions.

Turning Point Brands, Inc.

Consolidating Balance Sheet

June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Eliminations			Consolidated
ASSETS
Current assets:
Cash	$	1,384		$	2,228		$	-		$	3,612
Accounts receivable		5,014			195			-			5,209
Inventories		44,623			7,133			-			51,756
Other current assets		7,050			2,845			-			9,895
Total current assets		58,071			12,401			-			70,472
Property, plant and equipment, net		5,751			125			-			5,876
Deferred income taxes		1,864			-			(1,864	)		-
Deferred financing costs, net		174			-			-			174
Goodwill		128,697			-			-			128,697
Investment in subsidiaries		39,922			-			(39,922	)		-
Note receivable		2,000			-			(2,000	)		-
Other intangible assets, net		8,553			-			-			8,553
Master Settlement Agreement - escrow deposits		31,904			-			-			31,904
Other assets		271			430			-			701
Total assets	$	277,207		$	12,956		$	(43,786	)	$	246,377
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	5,120		$	201		$	-		$	5,321
Accrued expenses		8,537			1,027			-			9,564
Accrued interest expense		629			-			-			629
Accrued income taxes		295			-			-			295
First lien term loan		1,650			-			-			1,650
Note payable		-			2,000			(2,000	)		-
Revolving credit facility		6,621			-			-			6,621
Total current liabilities		22,852			3,228			(2,000	)		24,080
Notes payable and long-term debt		199,435			-			-			199,435
Deferred Income Taxes		8,927			-			(1,864	)		7,063
Postretirement benefits		4,607			-			-			4,607
Pension benefits		372			-			-			372
Total Liabilities		236,193			3,228			(3,864	)		235,557
Stockholders' equity (deficit):
Common stock, voting		179			-			-			179
Additional paid-in capital		168,854			10,900			(74,995	)		104,759
Advance to TPB		2,323			(2,323	)		-			-
Accumulated other comprehensive loss		(3,266	)		-			-			(3,266	)
Retained earnings (accumulated deficit)		(127,076	)		1,151			35,073			(90,852	)
Total stockholders' equity (deficit)		41,014			9,728			(39,922	)		10,820
Total liabilities and stockholders' equity (deficit)	$	277,207		$	12,956		$	(43,786	)	$	246,377

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the three months ended June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Net sales	$	48,480		$	3,101		$	51,581
Cost of sales		23,917			2,790			26,707
Gross profit		24,563			311			24,874
Selling, general and administrative expenses		13,143			955			14,098
Operating income (loss)		11,420			(644	)		10,776
Interest expense and financing costs		6,852			24			6,876
Investment income		(332	)		-			(332	)
Loss on extinguishment of debt		2,824			-			2,824
Income before income taxes		2,076			(668	)		1,408
Income tax expense		609			-			609
Net income (loss)	$	1,467		$	(668	)	$	799

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the six months ended June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Net sales	$	94,704		$	6,743		$	101,447
Cost of sales		46,623			5,303			51,926
Gross profit		48,081			1,440			49,521
Selling, general and administrative expenses		25,868			1,968			27,836
Operating income (loss)		22,213			(528	)		21,685
Interest expense and financing costs		15,321			17			15,338
Investment income		(332	)		-			(332	)
Loss on extinguishment of debt		2,824			-			2,824
Income before income taxes		4,400			(545	)		3,855
Income tax expense		822			-			822
Net income (loss)	$	3,578		$	(545	)	$	3,033

Turning Point Brands, Inc.

Consolidating Statement of Cash Flows

for the six months ended June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Cash flows from operating activities:
Net income (loss)	$	3,578		$	(545	)	$	3,033
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss on extinguishment		2,824			-			2,824
Depreciation expense		586			-			586
Amortization of deferred financing costs		719			-			719
Amortization of original issue discount		459			-			459
Interest incurred but not paid on PIK toggle notes		3,422			-			3,422
Interest incurred but not paid on 7% senior notes		329			-			329
Interest  paid on PIK toggle notes		(9,893	)		-			(9,893	)
Deferred income taxes		50			-			50
Stock compensation expense		25			-			25
Restricted stock compensation expense		8			-			8
Member unit compensation expense		-			13			13
Changes in operating assets and liabilities:
Accounts receivable		(1,186	)		(83	)		(1,269	)
Inventories		(6,558	)		(859	)		(7,417	)
Other current assets		(1,460	)		2,403			943
Other assets		(62	)		-			(62	)
Accounts payable		1,082			152			1,234
Accrued pension liabilities		131			-			131
Accrued postretirement liabilities		(59	)		-			(59	)
Accrued expenses and other		(4,118	)		(70	)		(4,188	)
Net cash provided by (used in) operating activities		(10,123	)		1,011			(9,112	)
Cash flows from investing activities:
Capital expenditures		(734	)		(125	)		(859	)
Net cash used in investing activities		(734	)		(125	)		(859	)
Cash flows from financing activities:
Proceeds from revolving credit facility, net		6,603			-			6,603
Proceeds from (payments for) note receivable		(2,000	)		2,000			-
Proceeds from (payment to) parent, net		1,565			(1,565	)		-
Payment of financing costs		(200	)		-			(200	)
Payment for first lien term loan		(3,563	)		-			(3,563	)
Payment for second lien term loan		(20,000	)		-			(20,000	)
Payment of PIK toggle notes		(24,107	)		-			(24,107	)
Redemption of Intrepid options		-			(661	)		(661	)
Redemption of Intrepid warrants		(5,500	)		-			(5,500	)
Stock options exercised		8			-			8
Proceeds from issuance of stock		56,168			-			56,168
Net cash provided by financing activities		8,974			(226	)		8,748
Net increase (decrease) in cash		(1,883	)		660			(1,223	)
Cash, beginning of period		3,267			1,568			4,835
Cash, end of period	$	1,384		$	2,228		$	3,612

Turning Point Brands, Inc.

Consolidating Balance Sheet

December 31, 2015

(in thousands)

	Issuer/ Restricted			Non-Restricted			Eliminations			Consolidated
ASSETS
Current assets:
Cash	$	3,267		$	1,568		$	-		$	4,835
Accounts receivable		3,828			112			-			3,940
Inventories		38,065			6,274			-			44,339
Other current assets		5,590			5,248			-			10,838
Total current assets		50,750			13,202			-			63,952
Property, plant and equipment, net		5,603			-			-			5,603
Deferred financing costs, net		208			-			-			208
Goodwill		128,697			-			-			128,697
Investment in subsidiaries		31,489			-			(31,489	)		-
Other intangible assets, net		8,553			-			-			8,553
Master Settlement Agreement - escrow deposits		31,842			-			-			31,842
Other assets		3,178			430			-			3,608
Total assets	$	260,320		$	13,632		$	(31,489	)	$	242,463
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	4,038		$	49		$	-		$	4,087
Accrued expenses		9,956			1,097			-			11,053
Accrued interest expense		4,329			-			-			4,329
First lien term loan		1,650			-			-			1,650
Revolving credit facility		18			-			-			18
Total current liabilities		19,991			1,146			-			21,137
Notes payable and long-term debt		290,772			-			-			290,772
Deferred Income Taxes		7,013			-			-			7,013
Postretirement benefits		4,666			-			-			4,666
Pension benefits		487			-			-			487
Total Liabilities		322,929			1,146			-			324,075
Stockholders' equity (deficit):
Common stock, voting		63									63
Common stock, non-voting		9									9
Additional paid-in capital		76,410			11,213			(74,995	)		12,628
Advance to TPB		793			(793	)		-			-
Accumulated other comprehensive loss		(3,512	)		-			-			(3,512	)
Retained earnings (accumulated deficit)		(136,372	)		2,066			43,506			(90,800	)
Total stockholders' equity (deficit)		(62,609	)		12,486			(31,489	)		(81,612	)
Total liabilities and stockholders' equity (deficit)	$	260,320		$	13,632		$	(31,489	)	$	242,463

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the three months ended June 30, 2015

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Net sales	$	43,290		$	4,709		$	47,999
Cost of sales		21,788			3,600			25,388
Gross profit		21,502			1,109			22,611
Selling, general and administrative expenses		12,685			2,190			14,875
Operating income (loss)		8,817			(1,081	)		7,736
Interest expense and financing costs		8,550			24			8,574
Income (loss) before income taxes		267			(1,105	)		(838	)
Income tax expense		583			-			583
Net loss	$	(316	)	$	(1,105	)	$	(1,421	)

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the six months ended June 30, 2015

(in thousands)

	Issuer/ Restricted		Non-Restricted			Consolidated
Net sales	$	88,893	$	10,192		$	99,085
Cost of sales		44,787		7,032			51,819
Gross profit		44,106		3,160			47,266
Selling, general and administrative expenses		24,081		3,465			27,546
Operating income		20,025		(305	)		19,720
Interest expense and financing costs		17,000		56			17,056
Income (loss) before income taxes		3,025		(361	)		2,664
Income tax expense		658		-			658
Net income (loss)	$	2,367	$	(361	)	$	2,006

Turning Point Brands, Inc.

Consolidating Statement of Cash Flows

for the six months ended June 30, 2015

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Cash flows from operating activities:
Net income (loss)	$	2,367		$	(361	)	$	2,006
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Gain on sale of fixed assets		(1	)		-			(1	)
Depreciation expense		519			-			519
Amortization of deferred financing costs		724			-			724
Amortization of original issue discount		524			-			524
Interest incurred but not paid on PIK toggle note		3,963			-			3,963
Interest incurred but not paid on 7% senior notes		426			-			426
Deferred income taxes		(9	)		-			(9	)
Stock compensation expense		92			-			92
Member unit compensation expense		-			57			57
Changes in operating assets and liabilities:
Accounts receivable		(791	)		(219	)		(1,010	)
Inventories		(7,711	)		3,749			(3,962	)
Other current assets		(997	)		(3,818	)		(4,815	)
Other assets		(87	)		-			(87	)
Accounts payable		3,271			(916	)		2,355
Accrued pension liabilities		82			-			82
Accrued postretirement liabilities		(63	)		-			(63	)
Accrued expenses and other		(1,553	)		(703	)		(2,256	)
Net cash provided by (used in) operating activities		756			(2,211	)		(1,455	)
Cash flows from investing activities:
Capital expenditures		(641	)		-			(641	)
Proceeds from sale of fixed assets		2			-			2
Note receivable		-			(430	)		(430	)
Net cash used in investing activities		(639	)		(430	)		(1,069	)
Cash flows from financing activities:
Proceeds from revolving credit facility, net		213			-			213
Proceeds from (payments for) note receivable		(2,300	)		2,300			-
Proceeds from issuance of stock		1			-			1
Payments for first lien term loan		(825	)		-			(825	)
Net cash provided by (used in) financing activities		(2,911	)		2,300			(611	)
Net decrease in cash		(2,794	)		(341	)		(3,135	)
Cash, beginning of period		8,014			453			8,467
Cash, end of period	$	5,220		$	112		$	5,332

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Income Taxes

6 Months Ended

Jun. 30, 2016

Income Taxes [Abstract]

Income Taxes

Note 9. Income Taxes:

The Company has determined, that at June 30, 2016, its ability to realize future benefits of certain net deferred tax assets does not meet the “more likely than not” criteria in ASC 740, Income Taxes; therefore, a valuation allowance has been recorded. The Company’s income tax expense for the six months ended June 30, 2016 and 2015 does not bear the normal relationship to income before income taxes because of net operating loss carryforwards that were utilized and were partially offset by certain minimum state income taxes.

The Company follows the provisions of ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company has determined that they did not have any uncertain tax positions requiring recognition under the provisions of ASC 740-10-25. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions, if any, as part of interest expense. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  In general, the Company is no longer subject to U.S. federal and state tax examinations for years prior to 2012.

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Pension and Postretirement Benefit Plans

6 Months Ended

Jun. 30, 2016

Pension and Postretirement Benefit Plans [Abstract]

Pension and Postretirement Benefit Plans

Note 10. Pension and Postretirement Benefit Plans:

The components of Net Periodic Benefit Cost are as follows:

	Pension Benefits						Postretirement Benefits
For the three months ended June 30,	2016			2015			2016		2015
Service cost	$	26		$	31		$	-	$	-
Interest cost		175			174			53		52
Expected return on plan assets		(258	)		(296	)		-		-
Amortization of gains and losses		123			131			-		-
Net periodic benefit cost	$	66		$	40		$	53	$	52

	Pension Benefits						Postretirement Benefits
For the six months ended June 30,	2016			2015			2016		2015
Service cost	$	52		$	62		$	-	$	-
Interest cost		350			348			105		104
Expected return on plan assets		(517	)		(591	)		-		-
Amortization of gains and losses		246			263			-		-
Net periodic benefit cost	$	131		$	82		$	105	$	104

NATC has a defined benefit pension plan covering its employees. Benefits for the hourly employees are based on a stated benefit per year of service, reduced by amounts earned in a previous plan. Benefits for salaried employees are based on years of service and the employees’ final compensation. This defined benefit plan is frozen.

NATC sponsored a defined benefit postretirement plan that covered hourly employees. This plan provides medical and dental benefits. This plan is contributory, with retiree contributions adjusted annually.

NATC expects to contribute approximately $0.3 million to its postretirement plan in 2016 for the payment of benefits. Plan contributions and benefits have amounted to $164 and $167 for the six months ended June 30, 2016 and 2015, respectively. NATC expects to make no contributions to the pension plan in the year ending December 31, 2016.

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Share Incentive Plans

6 Months Ended

Jun. 30, 2016

Share Incentive Plans [Abstract]

Share Incentive Plans

Note 11. Share Incentive Plans:

On April 28, 2016, the Board of Directors of the Company adopted the Turning Point Brands, Inc. 2015 Equity Incentive Plan (the “2015 Plan”) and approved a form of Restricted Stock Award Agreement (the “Form Award Agreement”) pursuant to which awards under the 2015 Plan may be granted to employees, non-employee directors and consultants. In addition, the 2015 Plan provides for the granting of nonqualified stock options to employees of the Company or any subsidiary of the Company. Pursuant to the 2015 Plan, 1,400,000 shares of common stock of the Company are reserved for issuance as awards to employees, consultants and non-employee directors as compensation for past or future services or the attainment of certain performance goals. The 2015 Plan is scheduled to terminate on April 27, 2026. The 2015 Plan is administrated by a committee (the “Committee”) of the Company’s Board of Directors. The Committee determines the criteria for the vesting period and will be specified in the award agreement. As of June 30, 2016, 27,777 shares of restricted stock have been granted to employees of NATC under the 2015 Plan. There are 1,372,223 shares available for grant under the 2015 Plan.

On February 8, 2006, the Board of Directors of the Company adopted the North Atlantic Holding Company, Inc. 2006 Equity Incentive Plan (the “2006 Plan”) and approved a form of Restricted Stock Award Agreement (the “Form Award Agreement”) pursuant to which awards under the 2006 Plan may be granted to employees.  The 2006 Plan provides for the granting of nonqualified stock options and restricted stock awards.  Upon the adoption of the Company’s 2015 Equity Incentive Plan in connection with its IPO (see Note 3) the Company determined that no additional grants would be made under the 2006 Plan, however all awards issued under the plan that have not been previously terminated or forfeited remain outstanding and continue unaffected.

There are no shares available for grant under the 2006 Plan. Stock option activity for the 2006 Plan is summarized below:

	Incentive Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Outstanding, December 31, 2014		1,692,051		$	2.17	$	1.19
Exercised		(1,043	)		1.06		0.54
Forfeited		(23,337	)		1.06		0.54
Outstanding, December 31, 2015		1,667,671			2.19		1.20
Exercised		(6,652	)		1.22		0.64
Forfeited		(6,262	)		3.83		2.17
Outstanding, June 30, 2016		1,654,757		$	2.19	$	1.20

Under the 2006 Plan, the total intrinsic value of options exercised during the three months ended June 30, 2016 and 2015 was $58 and $0, respectively. The total intrinsic value of options exercised during the six months ended June 30, 2016 and 2015 was $58 and $7, respectively.

At June 30, 2016, under the 2006 Plan, the outstanding stock options’ exercise price for 980,096 options is $1.06 per share all of which are exercisable. The outstanding stock options’ exercise price for 674,661 options is $3.83 per share of which 622,718 options are exercisable. The weighted average of the remaining lives of the outstanding stock options is approximately 1.4 years for the options with the $1.06 exercise price, and 6.2 years for the options with the $3.83 exercise price. The Company estimates that the expected life of all stock options is ten years from the date of grant. For the $1.06 per share options, the weighted average fair value of options was determined using the Black-Scholes model assuming a ten-year life from grant date; a current share price and exercise price of $1.06; risk free interest rate of 4.366%; a volatility of 30%; and no assumed dividend yield.  Based on these assumptions, the fair value of these options is approximately $0.54 per share option granted. For the $3.83 per share options,the weighted average fair value of options was determined using the Black-Scholes model assuming a ten-year life from grant date; a current share price and exercise price of $3.83; risk-free interest rate of 3.57%; a volatility of 40%; and no assumed dividend yield.  Based on these assumptions, the fair value of these options is approximately $2.17 per share option granted.

The Company has recorded compensation expense related to the options based on the provisions of ASC 718 under which the fixed portion of such expense is determined as the fair value of the options on the date of grant and amortized over the vesting period. The Company recorded compensation expense of approximately $13 and $46 in the consolidated statements of income for the three months ended June 30, 2016 and 2015, respectively and approximately $25 and $92 for the six months ended June 30, 2016 and 2015, respectively.

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Unit Incentive Plans and Warrants for Intrepid Brands, LLC

6 Months Ended

Jun. 30, 2016

Unit Incentive Plans and Warrants for Intrepid Brands, LLC [Abstract]

Unit Incentive Plans and Warrants for Intrepid Brands, LLC

Note 12. Unit Incentive Plans and Warrants for Intrepid Brands, LLC:

Effective August 7, 2014, the Company adopted the Intrepid Brands, LLC 2014 Option Plan (“2014 Plan”) for units of ownership in Intrepid. The purpose of the 2014 Plan was to promote the success and enhance the value of the Company by linking the personal interests of the service providers (including employees, consultants and managers) to those of Company equity holders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company equity holders.

In connection with the IPO, in May of 2016 all options outstanding under the 2014 Plan were repurchased for aggregate cash consideration of $683 which included $22 of payroll taxes (see Note 3). With the repurchase of the options, the 2014 Plan was terminated.

In January of 2014, the Company issued warrants to purchase 11,000,000 units of membership interests in Intrepid (the “Intrepid Warrants”) concurrent with the 7% Senior Notes (see Note 8). This represented 40% of the Intrepid Common Units outstanding on a fully diluted basis, at a purchase price of $1.00 per unit. The warrants were exercisable beginning January 21, 2014 and were scheduled to expire on December 31, 2023.

In connection with the IPO, in May of 2016 all outstanding Intrepid Warrants were repurchased for aggregate cash consideration of approximately $5.5 million (see Note 3).

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Contingencies

6 Months Ended

Jun. 30, 2016

Contingencies [Abstract]

Contingencies

Note 13. Contingencies:

The Company is involved in various claims and actions that arise in the normal course of business. While the outcome of these legal proceedings cannot be predicted with certainty, it is the opinion of management that the resolution of the proceedings should not have a material adverse effect on the financial position, results of operations or cash flows of the Company.

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Earnings Per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Note 14. Earnings Per Share:

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations of net income:

	Three Months Ended
	June 30, 2016						June 30, 2015
	Income		Shares		Per Share		Income			Shares		Per Share
Net income (loss)	$	799					$	(1,421	)
Basic EPS:
Weighted average				15,274,446	$	0.05					7,198,337	$	(0.20	)
Diluted EPS:
Effect of Dilutive securities:
Stock options and warrants				1,602,845							-
				16,877,291	$	0.05					7,198,337	$	(0.20	)

	Six Months Ended
	June 30, 2016						June 30, 2015
	Income		Shares		Per Share		Income		Shares		Per Share
Net income	$	3,033					$	2,006
Basic EPS:
Weighted average				12,476,719	$	0.24				7,197,928	$	0.28
Diluted EPS:
Effect of Dilutive securities:
Stock options and warrants				1,447,907						1,136,209
				13,924,626	$	0.22				8,334,137	$	0.24

For the six months ended June 30, 2015, weighted average options to purchase 663,459 shares of common stock were outstanding but were not included in the computation of diluted earnings per share because they were anti-dilutive. Due to the IPO in May 2016, the Company’s weighted average shares and basic and diluted earnings per share are significantly different as of June 30, 2016 when compared to prior periods. See Note 3, for a description of the IPO and shares issued in connection herewith.

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Parent-Only Financial Information

6 Months Ended

Jun. 30, 2016

Parent-Only Financial Information [Abstract]

Parent-Only Financial Information

Note 15. Parent-Only Financial Information:

The Company is a holding company with independent operations including cash and its investments in its subsidiaries.

All of NATC’s subsidiaries are wholly-owned and guarantee the First Lien Term Loan and the Second Lien Term Loan of NATC on a full, unconditional, and joint and several basis. Within the First Lien Term Loan and the Second Lien Term Loan there are no significant restrictions on the ability of NATC to obtain funds from its subsidiaries by dividend or loan, but NATC is subject to significant restrictions on its ability to pay dividends or make other payments to the Company. NATC and its subsidiaries are generally unable to pay dividends and make other restricted payments to the Company, except in limited circumstances, including (i) to pay certain costs in the ordinary course of business, (ii) to redeem, retire or otherwise acquire certain of our outstanding equity interest and (iii) to pay certain tax obligations. As a result of such restrictions on the Company’s subsidiaries’ ability to make distributions to the Company, $233,421 of its consolidated total assets are currently restricted assets of its consolidated subsidiaries, which may not be transferred to the Company in the form of loans, advances or cash dividends without the consent of a third party. The Company has disclosed the amount of restricted total assets rather than restricted net assets due to the negative net assets of the Company and its restricted subsidiaries.

TPLLC and Intrepid are wholly-owned by the Company. TPLLC and its subsidiary are not guarantors of the First Lien Term Loan and Second Lien Term Loan.

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Segment Information

6 Months Ended

Jun. 30, 2016

Segment Information [Abstract]

Segment Information

Note 16. Segment Information:

In accordance with ASC 280, Segment Reporting, the Company operates in three segments: (i) smokeless products, (ii) smoking products and (iii) NewGen products. In our smokeless products segment we (i) manufacture and market moist snuff and (ii) contract for and market loose leaf chewing tobacco products. In our smoking products segment, we (i) market and distribute cigarette papers and related products, as well as package, market and distribute MYO cigarette smoking tobaccos and related products and (ii) market and distribute MYO cigar wraps, MYO loose cigar smoking tobacco, and cigars, and package, market and distribute traditional pipe tobaccos. In our NewGen products segment, we market and distribute liquid vapor products, tobacco vaporizer products, certain other related products, such as e-liquids and shishafruits, shisha gels and other products without tobacco and/or nicotine. The Other segment includes the assets of the Company not assigned to the three reportable segments and Elimination includes the elimination of intercompany accounts between segments.

The accounting policies of these segments are the same as those of the Company. Segment data includes a charge allocating corporate costs to the three reportable segments based on their respective Net sales. The Company evaluates the performance of its segments and allocates resources to them based on Operating income.

The tables below present financial information about reported segments for the three and six months ended June 30, 2016 and 2015:

For the three months ended	June 30, 2016			June 30, 2015
Net Sales
Smokeless Products	$	21,691		$	18,678
Smoking Products		26,789			24,612
NewGen Products		3,101			4,709
	$	51,581		$	47,999
Operating Income
Smokeless Products	$	4,843		$	3,699
Smoking Products		7,206			5,648
NewGen Products		(644	)		(1,081	)
Other (1)		(22	)		(22	)
	$	11,383		$	8,244
Less Eliminations (2)		(607	)		(508	)
	$	10,776		$	7,736
Interest expense and financing costs		(6,876	)		(8,574	)
Investment income		332			-
Loss on extinguishment of debt		(2,824	)		-
Income (loss) before income taxes	$	1,408		$	(838	)
Assets
Smokeless Products	$	85,175		$	84,404
Smoking Products		532,419			501,213
NewGen Products		12,956			16,211
Other (1)		32,605			32,438
		663,155			634,266
Less Eliminations (2)		(416,778	)		(384,442	)
	$	246,377		$	249,824

(1) “Other” includes our assets that are not assigned to our three reportable segments, such as intercompany transfers and investments in subsidiaries. All goodwill has been allocated to our reportable segments.

(2) “Elimination” includes the elimination of intercompany accounts between segments and investments in subsidiaries.

For the six months ended	June 30, 2016			June 30, 2015
Net Sales
Smokeless Products	$	40,030		$	36,194
Smoking Products		54,674			52,699
NewGen Products		6,743			10,192
	$	101,447		$	99,085
Operating Income
Smokeless Products	$	8,402		$	8,222
Smoking Products		14,746			12,633
NewGen Products		(528	)		(305	)
Other (1)		(178	)		(152	)
	$	22,442		$	20,398
Less Eliminations (2)		(757	)		(678	)
	$	21,685		$	19,720
Interest expense and financing costs		(15,338	)		(17,056	)
Investment income		332			-
Loss on extinguishment of debt		(2,824	)		-
Income before income taxes	$	3,855		$	2,664
Assets
Smokeless Products	$	85,175		$	84,404
Smoking Products		532,419			501,213
NewGen Products		12,956			16,211
Other (1)		32,605			32,438
		663,155			634,266
Less Eliminations (2)		(416,778	)		(384,442	)
	$	246,377		$	249,824

(1) “Other” includes our assets that are not assigned to our three reportable segments, such as intercompany transfers and investments in subsidiaries. All goodwill has been allocated to our reportable segments.

(2) “Elimination” includes the elimination of intercompany accounts between segments and investments in subsidiaries.

Net Sales - Domestic and Foreign

(in thousands)

The tables below present financial information about our domestic and foreign net sales for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended
	June 30, 2016		June 30, 2015
Domestic	$	49,126	$	46,273
Foreign		2,455		1,726
Net Sales	$	51,581	$	47,999

	Six Months Ended
	June 30, 2016		June 30, 2015
Domestic	$	96,100	$	95,046
Foreign		5,347		4,039
Net Sales	$	101,447	$	99,085

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2016

Basis of Presentation [Abstract]

Basis of Presentation

Turning Point Brands, Inc. (formerly known as North Atlantic Holding Company, Inc.), (the “Company”) is a holding company which owns NATC Holding Company, Inc. (“NATC Holding”) and its subsidiaries and Turning Point Brands, LLC (“TPLLC”) and its subsidiary, Intrepid Brands, LLC (“Intrepid”). Except where the context otherwise requires, references to the Company include the Company, NATC Holding and its subsidiary, North Atlantic Trading Company, Inc. (“NATC”) and its subsidiaries, National Tobacco Company, L.P. (“NTC”), North Atlantic Operating Company, Inc. (“NAOC”), North Atlantic Cigarette Company, Inc. (“NACC”), National Tobacco Finance Corporation (“NTFC”), Fred Stoker & Sons, Inc., RBJ Sales, Inc. and Stoker, Inc. (collectively, “Stoker”) and TPLLC and Intrepid.

The accompanying interim condensed consolidated financial statements have been prepared in accordance with our accounting practices described in our audited consolidated financial statements as of and for the year ended December 31, 2015, and are unaudited. In the opinion of management, the unaudited interim condensed consolidated financial statements included herein contain all adjustments necessary to present fairly our financial position, results of operations and cash flows for the periods indicated. Such adjustments, other than nonrecurring adjustments that have been separately disclosed, are of a normal, recurring nature. The operating results for interim periods are not necessarily indicative of results to be expected for a full year of future interim periods. The unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2015. The accompanying interim condensed consolidated financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission and, accordingly, do not include all the disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) with respect to annual financial statements.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Consolidation

Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions have been eliminated.

Revenue Recognition

Revenue Recognition: The Company recognizes revenues and the related costs upon delivery to the customer, at which time there is a transfer of title and risk of loss to the customer in accordance with the Financial Accounting Standards Board Accounting Standards Codification^© (“ASC”) 605-10-S99. The Company classifies customer rebates as sales deductions in accordance with the requirements of ASC 605-50-25.

Shipping Costs

Shipping Costs: The Company records shipping costs incurred as a component of selling, general and administrative expenses. Shipping costs incurred were approximately $1.6 million and $1.9 million for the three months ended June 30, 2016 and 2015, respectively. Shipping costs incurred were approximately $3.1 million and $3.6 million for the six months ended June 30, 2016 and 2015, respectively.

Master Settlement Agreement Escrow Account

Master Settlement Agreement Escrow Account: Pursuant to the Master Settlement Agreement (the “MSA”) entered into in November 1998 by most states (represented by their attorneys general acting through the National Association of Attorneys General) and subsequent states’ statutes, a “cigarette manufacturer” (which is defined to include a manufacturer of make-your-own (“MYO”) cigarette tobacco) has the option of either becoming a signatory to the MSA or opening, funding, and maintaining an escrow account to have funds available for certain potential tobacco-related liabilities, with sub-accounts on behalf of each settling state.  The Company has chosen to open and fund an escrow account as its method of compliance.  It is the Company’s policy to record amounts on deposit in the escrow account for prior years as a non-current asset.  Each year’s annual obligation is required to be deposited in the escrow account by April 15 of the following year.  In addition to the annual deposit, many states have elected to require quarterly deposits for the previous quarter’s sales. As of June 30, 2016 and December 31, 2015, NATC had on deposit approximately $31.9 million and $31.8 million, respectively, in escrow.

Effective April 1, 2009, the federal excise tax on MYO products was increased from $1.0969 per pound to $24.78 per pound of tobacco. With this significant increase in the federal excise tax, the Company discontinued its generic category of MYO but continues to sell the Zig-Zag branded MYO. For further discussion of the MSA see our Form S-1/A filed on April 28, 2016 with the SEC, pages F-11 and F-12.

The following table represents the amount of deposits by sales year for the MSA escrow account and reflects the decline in annual deposits beginning in 2009, due to the significant increase in federal excise taxes, as described above:

	Deposits
Sales Year	June 30, 2016		December 31, 2015
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,715		3,715
2005		4,552		4,552
2006		3,847		3,847
2007		4,167		4,167
2008		3,364		3,364
2009		1,626		1,626
2010		406		406
2011		193		193
2012		198		198
2013		173		173
2014		142		142
2015		89		38
2016		11		-
Total	$	31,904	$	31,842

Recent Accounting Pronouncements Adopted

Recent Accounting Pronouncements Adopted:

The Company adopted ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost in 2016. This ASU requires that debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Based on the requirements of this ASU, the Company has retrospectively applied ASU 2015-03 to the December 31, 2015 Consolidated Balance Sheet, which has resulted in $6.3 million being reclassified to direct deduction of the carrying amount of the debt.

The Company adopted ASU 2015-17, Income Taxes (Topic 740): Balance sheet classification of deferred taxes in 2016. This ASU requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. The Company has retrospectively applied ASU 2015-17 to the December 31, 2015 Consolidated Balance Sheet, which has resulted in $0.4 million of deferred tax liabilities being reclassified to a noncurrent deferred tax liability.

Recent Accounting Pronouncements

Recent Accounting Pronouncements:

In May 2014, the FASB issued Accounting Standards Update (“ASU”), ASU 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which delayed the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting year. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on the consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in this ASU require entities that measure inventory using the first-in, first-out or average cost methods to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. The Company is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less for which there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities and should recognize lease expense for such leases generally on a straight-line basis over the lease term. Certain qualitative disclosures along with specific quantitative disclosures will be required, so that users are able to understand more about the nature of an entity’s leasing activities. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. At transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients related to the identification and classification of leases that commenced before the effective date of ASU 2016-02. An entity that elects to use the practical expedients will, in effect, continue to account for leases that commenced before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The Company is currently evaluating the effect the adoption of this standard will have on its financial statements.

Subsequent Events

Subsequent Events:

The Company’s management has evaluated events and transactions that occurred from July 1, 2016 through August 11, 2016, the date these unaudited condensed consolidated financial statements were issued, for subsequent events requiring recognition or disclosure in the financial statements.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Deposits by Sales Year for MSA Escrow Account

The following table represents the amount of deposits by sales year for the MSA escrow account and reflects the decline in annual deposits beginning in 2009, due to the significant increase in federal excise taxes, as described above:

	Deposits
Sales Year	June 30, 2016		December 31, 2015
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,715		3,715
2005		4,552		4,552
2006		3,847		3,847
2007		4,167		4,167
2008		3,364		3,364
2009		1,626		1,626
2010		406		406
2011		193		193
2012		198		198
2013		173		173
2014		142		142
2015		89		38
2016		11		-
Total	$	31,904	$	31,842

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Initial Public Offering (Tables)

6 Months Ended

Jun. 30, 2016

Initial Public Offering [Abstract]

Voting and Non-Voting Shares of Common Stock Outstanding

The Company had the following voting and non-voting shares of common stock outstanding after the transactions summarized above:

Voting shares outstanding before transactions	6,259,480
Shares issued by the Initial Public Offering	6,210,000
Shares issued for 7% Senior Notes	1,289,819
Shares issued for PIK Toggle Notes	3,168,438
Voting shares outstanding after transactions	16,927,737
Non-Voting shares outstanding before and after transactions	938,857

In June 2016, the Board of Directors of the Company approved the conversion of 938,857 shares of non-voting common stock to shares of voting common stock. The Company had the following voting shares of common stock at June 30, 2016:

Voting shares outstanding after transactions above	16,927,737
Non-voting shares converted to voting shares	938,857
Voting shares issued as restricted stock	27,918
Voting shares issued from exercise of stock options	6,652
Voting shares outstanding at June 30, 2016	17,901,164

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Inventories (Tables)

6 Months Ended

Jun. 30, 2016

Inventories [Abstract]

Inventories

The components of inventories are as follows:

	June 30, 2016			December 31, 2015
Raw materials and work in process	$	2,289		$	1,940
Leaf tobacco		26,268			20,839
Finished goods - smokeless products		4,364			3,615
Finished goods - smoking products		14,589			14,077
Finished goods - electronic / vaporizer products		6,812			5,939
Other		1,315			1,237
		55,637			47,647
LIFO reserve		(3,881	)		(3,308	)
	$	51,756		$	44,339

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Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, plant and equipment at June 30, 2016 and December 31, 2015 consists of:

	June 30, 2016			December 31, 2015
Leasehold improvements	$	2,215		$	2,196
Machinery and equipment		9,776			8,997
Furniture and fixtures		3,182			3,121
		15,173			14,314
Accumulated depreciation		(9,297	)		(8,711	)
	$	5,876		$	5,603

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2016

Accrued Expenses [Abstract]

Accrued Expenses

Accrued expenses at June 30, 2016 and December 31, 2015 consist of:

	June 30, 2016		December 31, 2015
Accrued payroll and related items	$	2,417	$	3,659
Customer returns and allowances		1,937		2,015
Other		5,210		5,379
	$	9,564	$	11,053

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Notes Payable and Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2016

Notes Payable and Long-Term Debt [Abstract]

Notes Payable and Long-Term Debt

Notes payable and long-term debt consists of the following in order of preference:

	June 30, 2016			December 31, 2015
First Lien Term Loan	$	147,134		$	150,555
Second Lien Term Loan		59,005			78,882
PIK Toggle Notes		-			58,882
7% Senior Notes		-			10,360
		206,139			298,679
Less deferred finance charges		(5,054	)		(6,257	)
Less current maturities		(1,650	)		(1,650	)
Total Notes Payable and Long-Term Debt	$	199,435		$	290,772

Notes Payable and Long-Term Debt [Abstract]

Interest Rates Applicable to Loans under the Revolving Credit Facility

The interest rates per annum applicable to loans under the Revolving Credit Facility are, at the option of NATC, equal to the applicable Base Rate or LIBOR Rate plus the applicable Interest Margin, as defined below:

Pricing Level	Average Excess Availability	Applicable Margin for Base Rate Loans (the “Base Rate Margin”)	Applicable Margin for LIBOR Rate Loans (the “LIBOR Rate Margin”)
I	> $30,000,000	1.25%	2.25%
II	< $30,000,000 but > $15,000,000	1.50%	2.50%
III	< $15,000,000	1.75%	2.75%

Restricted/Non-Restricted Consolidating Balance Sheet

Turning Point Brands, Inc.

Consolidating Balance Sheet

June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Eliminations			Consolidated
ASSETS
Current assets:
Cash	$	1,384		$	2,228		$	-		$	3,612
Accounts receivable		5,014			195			-			5,209
Inventories		44,623			7,133			-			51,756
Other current assets		7,050			2,845			-			9,895
Total current assets		58,071			12,401			-			70,472
Property, plant and equipment, net		5,751			125			-			5,876
Deferred income taxes		1,864			-			(1,864	)		-
Deferred financing costs, net		174			-			-			174
Goodwill		128,697			-			-			128,697
Investment in subsidiaries		39,922			-			(39,922	)		-
Note receivable		2,000			-			(2,000	)		-
Other intangible assets, net		8,553			-			-			8,553
Master Settlement Agreement - escrow deposits		31,904			-			-			31,904
Other assets		271			430			-			701
Total assets	$	277,207		$	12,956		$	(43,786	)	$	246,377
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	5,120		$	201		$	-		$	5,321
Accrued expenses		8,537			1,027			-			9,564
Accrued interest expense		629			-			-			629
Accrued income taxes		295			-			-			295
First lien term loan		1,650			-			-			1,650
Note payable		-			2,000			(2,000	)		-
Revolving credit facility		6,621			-			-			6,621
Total current liabilities		22,852			3,228			(2,000	)		24,080
Notes payable and long-term debt		199,435			-			-			199,435
Deferred Income Taxes		8,927			-			(1,864	)		7,063
Postretirement benefits		4,607			-			-			4,607
Pension benefits		372			-			-			372
Total Liabilities		236,193			3,228			(3,864	)		235,557
Stockholders' equity (deficit):
Common stock, voting		179			-			-			179
Additional paid-in capital		168,854			10,900			(74,995	)		104,759
Advance to TPB		2,323			(2,323	)		-			-
Accumulated other comprehensive loss		(3,266	)		-			-			(3,266	)
Retained earnings (accumulated deficit)		(127,076	)		1,151			35,073			(90,852	)
Total stockholders' equity (deficit)		41,014			9,728			(39,922	)		10,820
Total liabilities and stockholders' equity (deficit)	$	277,207		$	12,956		$	(43,786	)	$	246,377

Turning Point Brands, Inc.

Consolidating Balance Sheet

December 31, 2015

(in thousands)

	Issuer/ Restricted			Non-Restricted			Eliminations			Consolidated
ASSETS
Current assets:
Cash	$	3,267		$	1,568		$	-		$	4,835
Accounts receivable		3,828			112			-			3,940
Inventories		38,065			6,274			-			44,339
Other current assets		5,590			5,248			-			10,838
Total current assets		50,750			13,202			-			63,952
Property, plant and equipment, net		5,603			-			-			5,603
Deferred financing costs, net		208			-			-			208
Goodwill		128,697			-			-			128,697
Investment in subsidiaries		31,489			-			(31,489	)		-
Other intangible assets, net		8,553			-			-			8,553
Master Settlement Agreement - escrow deposits		31,842			-			-			31,842
Other assets		3,178			430			-			3,608
Total assets	$	260,320		$	13,632		$	(31,489	)	$	242,463
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	4,038		$	49		$	-		$	4,087
Accrued expenses		9,956			1,097			-			11,053
Accrued interest expense		4,329			-			-			4,329
First lien term loan		1,650			-			-			1,650
Revolving credit facility		18			-			-			18
Total current liabilities		19,991			1,146			-			21,137
Notes payable and long-term debt		290,772			-			-			290,772
Deferred Income Taxes		7,013			-			-			7,013
Postretirement benefits		4,666			-			-			4,666
Pension benefits		487			-			-			487
Total Liabilities		322,929			1,146			-			324,075
Stockholders' equity (deficit):
Common stock, voting		63									63
Common stock, non-voting		9									9
Additional paid-in capital		76,410			11,213			(74,995	)		12,628
Advance to TPB		793			(793	)		-			-
Accumulated other comprehensive loss		(3,512	)		-			-			(3,512	)
Retained earnings (accumulated deficit)		(136,372	)		2,066			43,506			(90,800	)
Total stockholders' equity (deficit)		(62,609	)		12,486			(31,489	)		(81,612	)
Total liabilities and stockholders' equity (deficit)	$	260,320		$	13,632		$	(31,489	)	$	242,463

Restricted/Non-Restricted Consolidating Statement of Income

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the three months ended June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Net sales	$	48,480		$	3,101		$	51,581
Cost of sales		23,917			2,790			26,707
Gross profit		24,563			311			24,874
Selling, general and administrative expenses		13,143			955			14,098
Operating income (loss)		11,420			(644	)		10,776
Interest expense and financing costs		6,852			24			6,876
Investment income		(332	)		-			(332	)
Loss on extinguishment of debt		2,824			-			2,824
Income before income taxes		2,076			(668	)		1,408
Income tax expense		609			-			609
Net income (loss)	$	1,467		$	(668	)	$	799

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the six months ended June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Net sales	$	94,704		$	6,743		$	101,447
Cost of sales		46,623			5,303			51,926
Gross profit		48,081			1,440			49,521
Selling, general and administrative expenses		25,868			1,968			27,836
Operating income (loss)		22,213			(528	)		21,685
Interest expense and financing costs		15,321			17			15,338
Investment income		(332	)		-			(332	)
Loss on extinguishment of debt		2,824			-			2,824
Income before income taxes		4,400			(545	)		3,855
Income tax expense		822			-			822
Net income (loss)	$	3,578		$	(545	)	$	3,033

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the three months ended June 30, 2015

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Net sales	$	43,290		$	4,709		$	47,999
Cost of sales		21,788			3,600			25,388
Gross profit		21,502			1,109			22,611
Selling, general and administrative expenses		12,685			2,190			14,875
Operating income (loss)		8,817			(1,081	)		7,736
Interest expense and financing costs		8,550			24			8,574
Income (loss) before income taxes		267			(1,105	)		(838	)
Income tax expense		583			-			583
Net loss	$	(316	)	$	(1,105	)	$	(1,421	)

Turning Point Brands, Inc.

Consolidating Statement of Operations

for the six months ended June 30, 2015

(in thousands)

	Issuer/ Restricted		Non-Restricted			Consolidated
Net sales	$	88,893	$	10,192		$	99,085
Cost of sales		44,787		7,032			51,819
Gross profit		44,106		3,160			47,266
Selling, general and administrative expenses		24,081		3,465			27,546
Operating income		20,025		(305	)		19,720
Interest expense and financing costs		17,000		56			17,056
Income (loss) before income taxes		3,025		(361	)		2,664
Income tax expense		658		-			658
Net income (loss)	$	2,367	$	(361	)	$	2,006

Restricted/Non-Restricted Consolidating Statement of Cash Flows

Turning Point Brands, Inc.

Consolidating Statement of Cash Flows

for the six months ended June 30, 2016

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Cash flows from operating activities:
Net income (loss)	$	3,578		$	(545	)	$	3,033
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss on extinguishment		2,824			-			2,824
Depreciation expense		586			-			586
Amortization of deferred financing costs		719			-			719
Amortization of original issue discount		459			-			459
Interest incurred but not paid on PIK toggle notes		3,422			-			3,422
Interest incurred but not paid on 7% senior notes		329			-			329
Interest  paid on PIK toggle notes		(9,893	)		-			(9,893	)
Deferred income taxes		50			-			50
Stock compensation expense		25			-			25
Restricted stock compensation expense		8			-			8
Member unit compensation expense		-			13			13
Changes in operating assets and liabilities:
Accounts receivable		(1,186	)		(83	)		(1,269	)
Inventories		(6,558	)		(859	)		(7,417	)
Other current assets		(1,460	)		2,403			943
Other assets		(62	)		-			(62	)
Accounts payable		1,082			152			1,234
Accrued pension liabilities		131			-			131
Accrued postretirement liabilities		(59	)		-			(59	)
Accrued expenses and other		(4,118	)		(70	)		(4,188	)
Net cash provided by (used in) operating activities		(10,123	)		1,011			(9,112	)
Cash flows from investing activities:
Capital expenditures		(734	)		(125	)		(859	)
Net cash used in investing activities		(734	)		(125	)		(859	)
Cash flows from financing activities:
Proceeds from revolving credit facility, net		6,603			-			6,603
Proceeds from (payments for) note receivable		(2,000	)		2,000			-
Proceeds from (payment to) parent, net		1,565			(1,565	)		-
Payment of financing costs		(200	)		-			(200	)
Payment for first lien term loan		(3,563	)		-			(3,563	)
Payment for second lien term loan		(20,000	)		-			(20,000	)
Payment of PIK toggle notes		(24,107	)		-			(24,107	)
Redemption of Intrepid options		-			(661	)		(661	)
Redemption of Intrepid warrants		(5,500	)		-			(5,500	)
Stock options exercised		8			-			8
Proceeds from issuance of stock		56,168			-			56,168
Net cash provided by financing activities		8,974			(226	)		8,748
Net increase (decrease) in cash		(1,883	)		660			(1,223	)
Cash, beginning of period		3,267			1,568			4,835
Cash, end of period	$	1,384		$	2,228		$	3,612

Turning Point Brands, Inc.

Consolidating Statement of Cash Flows

for the six months ended June 30, 2015

(in thousands)

	Issuer/ Restricted			Non-Restricted			Consolidated
Cash flows from operating activities:
Net income (loss)	$	2,367		$	(361	)	$	2,006
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Gain on sale of fixed assets		(1	)		-			(1	)
Depreciation expense		519			-			519
Amortization of deferred financing costs		724			-			724
Amortization of original issue discount		524			-			524
Interest incurred but not paid on PIK toggle note		3,963			-			3,963
Interest incurred but not paid on 7% senior notes		426			-			426
Deferred income taxes		(9	)		-			(9	)
Stock compensation expense		92			-			92
Member unit compensation expense		-			57			57
Changes in operating assets and liabilities:
Accounts receivable		(791	)		(219	)		(1,010	)
Inventories		(7,711	)		3,749			(3,962	)
Other current assets		(997	)		(3,818	)		(4,815	)
Other assets		(87	)		-			(87	)
Accounts payable		3,271			(916	)		2,355
Accrued pension liabilities		82			-			82
Accrued postretirement liabilities		(63	)		-			(63	)
Accrued expenses and other		(1,553	)		(703	)		(2,256	)
Net cash provided by (used in) operating activities		756			(2,211	)		(1,455	)
Cash flows from investing activities:
Capital expenditures		(641	)		-			(641	)
Proceeds from sale of fixed assets		2			-			2
Note receivable		-			(430	)		(430	)
Net cash used in investing activities		(639	)		(430	)		(1,069	)
Cash flows from financing activities:
Proceeds from revolving credit facility, net		213			-			213
Proceeds from (payments for) note receivable		(2,300	)		2,300			-
Proceeds from issuance of stock		1			-			1
Payments for first lien term loan		(825	)		-			(825	)
Net cash provided by (used in) financing activities		(2,911	)		2,300			(611	)
Net decrease in cash		(2,794	)		(341	)		(3,135	)
Cash, beginning of period		8,014			453			8,467
Cash, end of period	$	5,220		$	112		$	5,332

First Lien Credit Agreement [Member]

Notes Payable and Long-Term Debt [Abstract]

Total Leverage Ratio

The First Lien Credit Agreement contains customary representations and warranties, events of default, affirmative covenants and negative covenants, which impose restrictions on, among other things, the ability of NATC and its subsidiaries to make investments, pay dividends, sell assets, and incur debt and additional liens. In addition, the First Lien Credit Agreement requires NATC to maintain a total leverage ratio as follows:

Period	Maximum Ratio
Closing Date through March 31, 2015	6.50 to 1.00
April 1, 2015 through September 30, 2016	6.25 to 1.00
October 1, 2016 through September 30, 2017	6.00 to 1.00
October 1, 2017 through September 30, 2018	5.75 to 1.00
October 1, 2018 and thereafter	5.50 to 1.00

Second Lien Credit Agreement [Member]

Notes Payable and Long-Term Debt [Abstract]

Total Leverage Ratio

The Second Lien Credit Agreement has the benefit of a second priority security interest in the Collateral and is guaranteed by the same entities as the First Lien Credit Agreement.  The Second Lien Credit Agreement, contains substantially similar representations and warranties, events of default and covenants as the First Lien Credit Agreement; provided, however, that the total leverage ratio required to be maintained by NATC under the Second Lien Credit Agreement is as follows:

Period	Maximum Ratio
Closing Date through March 31, 2015	6.75 to 1.00
April 1, 2015 through September 30, 2016	6.50 to 1.00
October 1, 2016 through September 30, 2017	6.25 to 1.00
October 1, 2017 through September 30, 2018	6.00 to 1.00
October 1, 2018 and thereafter	5.75 to 1.00

XML

Pension and Postretirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2016

Pension and Postretirement Benefit Plans [Abstract]

Components of Net Periodic Benefit Cost

The components of Net Periodic Benefit Cost are as follows:

	Pension Benefits						Postretirement Benefits
For the three months ended June 30,	2016			2015			2016		2015
Service cost	$	26		$	31		$	-	$	-
Interest cost		175			174			53		52
Expected return on plan assets		(258	)		(296	)		-		-
Amortization of gains and losses		123			131			-		-
Net periodic benefit cost	$	66		$	40		$	53	$	52

	Pension Benefits						Postretirement Benefits
For the six months ended June 30,	2016			2015			2016		2015
Service cost	$	52		$	62		$	-	$	-
Interest cost		350			348			105		104
Expected return on plan assets		(517	)		(591	)		-		-
Amortization of gains and losses		246			263			-		-
Net periodic benefit cost	$	131		$	82		$	105	$	104

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Share Incentive Plans (Tables)

6 Months Ended

Jun. 30, 2016

Share Incentive Plans [Abstract]

Stock Option Activity

Stock option activity for the 2006 Plan is summarized below:

	Incentive Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Outstanding, December 31, 2014		1,692,051		$	2.17	$	1.19
Exercised		(1,043	)		1.06		0.54
Forfeited		(23,337	)		1.06		0.54
Outstanding, December 31, 2015		1,667,671			2.19		1.20
Exercised		(6,652	)		1.22		0.64
Forfeited		(6,262	)		3.83		2.17
Outstanding, June 30, 2016		1,654,757		$	2.19	$	1.20

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations of net income:

	Three Months Ended
	June 30, 2016						June 30, 2015
	Income		Shares		Per Share		Income			Shares		Per Share
Net income (loss)	$	799					$	(1,421	)
Basic EPS:
Weighted average				15,274,446	$	0.05					7,198,337	$	(0.20	)
Diluted EPS:
Effect of Dilutive securities:
Stock options and warrants				1,602,845							-
				16,877,291	$	0.05					7,198,337	$	(0.20	)

	Six Months Ended
	June 30, 2016						June 30, 2015
	Income		Shares		Per Share		Income		Shares		Per Share
Net income	$	3,033					$	2,006
Basic EPS:
Weighted average				12,476,719	$	0.24				7,197,928	$	0.28
Diluted EPS:
Effect of Dilutive securities:
Stock options and warrants				1,447,907						1,136,209
				13,924,626	$	0.22				8,334,137	$	0.24

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2016

Segment Information [Abstract]

Financial Information of Reportable Segments

The tables below present financial information about reported segments for the three and six months ended June 30, 2016 and 2015:

For the three months ended	June 30, 2016			June 30, 2015
Net Sales
Smokeless Products	$	21,691		$	18,678
Smoking Products		26,789			24,612
NewGen Products		3,101			4,709
	$	51,581		$	47,999
Operating Income
Smokeless Products	$	4,843		$	3,699
Smoking Products		7,206			5,648
NewGen Products		(644	)		(1,081	)
Other (1)		(22	)		(22	)
	$	11,383		$	8,244
Less Eliminations (2)		(607	)		(508	)
	$	10,776		$	7,736
Interest expense and financing costs		(6,876	)		(8,574	)
Investment income		332			-
Loss on extinguishment of debt		(2,824	)		-
Income (loss) before income taxes	$	1,408		$	(838	)
Assets
Smokeless Products	$	85,175		$	84,404
Smoking Products		532,419			501,213
NewGen Products		12,956			16,211
Other (1)		32,605			32,438
		663,155			634,266
Less Eliminations (2)		(416,778	)		(384,442	)
	$	246,377		$	249,824

(1) “Other” includes our assets that are not assigned to our three reportable segments, such as intercompany transfers and investments in subsidiaries. All goodwill has been allocated to our reportable segments.

(2) “Elimination” includes the elimination of intercompany accounts between segments and investments in subsidiaries.

For the six months ended	June 30, 2016			June 30, 2015
Net Sales
Smokeless Products	$	40,030		$	36,194
Smoking Products		54,674			52,699
NewGen Products		6,743			10,192
	$	101,447		$	99,085
Operating Income
Smokeless Products	$	8,402		$	8,222
Smoking Products		14,746			12,633
NewGen Products		(528	)		(305	)
Other (1)		(178	)		(152	)
	$	22,442		$	20,398
Less Eliminations (2)		(757	)		(678	)
	$	21,685		$	19,720
Interest expense and financing costs		(15,338	)		(17,056	)
Investment income		332			-
Loss on extinguishment of debt		(2,824	)		-
Income before income taxes	$	3,855		$	2,664
Assets
Smokeless Products	$	85,175		$	84,404
Smoking Products		532,419			501,213
NewGen Products		12,956			16,211
Other (1)		32,605			32,438
		663,155			634,266
Less Eliminations (2)		(416,778	)		(384,442	)
	$	246,377		$	249,824

(1) “Other” includes our assets that are not assigned to our three reportable segments, such as intercompany transfers and investments in subsidiaries. All goodwill has been allocated to our reportable segments.

(2) “Elimination” includes the elimination of intercompany accounts between segments and investments in subsidiaries.

Net Sales - Domestic and Foreign

The table below presents financial information about our domestic and foreign net sales for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended
	June 30, 2016		June 30, 2015
Domestic	$	49,126	$	46,273
Foreign		2,455		1,726
Net Sales	$	51,581	$	47,999

	Six Months Ended
	June 30, 2016		June 30, 2015
Domestic	$	96,100	$	95,046
Foreign		5,347		4,039
Net Sales	$	101,447	$	99,085

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Summary of Significant Accounting Policies (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Apr. 01, 2009 $ / lb	Mar. 31, 2009 $ / lb
Shipping Costs [Abstract]
Shipping costs	$ 1,600	$ 1,900	$ 3,100	$ 3,600
Master Settlement Agreement Escrow Account [Abstract]
1999	211		211		$ 211
2000	1,017		1,017		1,017
2001	1,673		1,673		1,673
2002	2,271		2,271		2,271
2003	4,249		4,249		4,249
2004	3,715		3,715		3,715
2005	4,552		4,552		4,552
2006	3,847		3,847		3,847
2007	4,167		4,167		4,167
2008	3,364		3,364		3,364
2009	1,626		1,626		1,626
2010	406		406		406
2011	193		193		193
2012	198		198		198
2013	173		173		173
2014	142		142		142
2015	89		89		38
2016	11		11		0
Total	31,904		31,904		$ 31,842	$ 31,842
Federal excise tax rate on MYO products (in dollars per pound) | $ / lb							24.78	1.0969
Recent Accounting Pronouncements Adopted [Abstract]
Debt issuance costs	$ 5,054		$ 5,054			6,257
ASU 2015-03 [Member]
Recent Accounting Pronouncements Adopted [Abstract]
Debt issuance costs						6,300
ASU 2015-17 [Member]
Recent Accounting Pronouncements Adopted [Abstract]
Deferred income taxes						$ 400

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Initial Public Offering (Details) $ / shares in Units, $ in Thousands	1 Months Ended			6 Months Ended
	Jun. 30, 2016 USD ($) shares	May 31, 2016 USD ($) $ / shares shares	Apr. 30, 2016 shares	Jun. 30, 2016 USD ($) shares	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)	Jan. 31, 2014 USD ($)	Jan. 13, 2014 USD ($)
Initial Public Offering [Abstract]
Stock split conversion ratio			10.43174381
Payment of expenses in connection with Initial Public Offering		$ 3,884
Payment to purchase and retire Intrepid Warrants		5,500		$ 5,500	$ 0
Payment to redeem and retire PIK Toggle Notes		34,000		24,107	0
Payment to redeem and retire Second Lien Term Notes		20,200
Payments to repurchase and retire options to buy Intrepid Common Units		683
Payroll taxes related to payments to repurchase and retire options to buy Intrepid Common Units		22
Increase in cash		83		(1,223)	(3,135)
Second Lien Term Loan [Member]
Initial Public Offering [Abstract]
Payment to redeem and retire Second Lien Term Notes				20,000	$ 0
Face amount	$ 60,000	20,000		60,000		$ 80,000		$ 80,000
Payment of debt redemption penalty		$ 200
Debt redemption penalty percentage		1.00%
7% Senior Notes [Member]
Initial Public Offering [Abstract]
Face amount	$ 12,600			$ 12,600		$ 12,600	$ 11,000
Interest rate	7.00%			7.00%		7.00%	7.00%
Warrants Purchased and Retired with Proceeds from Initial Public Offering [Member]
Initial Public Offering [Abstract]
Payment to purchase and retire Intrepid Warrants		$ 3,250
Warrants Purchased and Retired Upon Redemption of 7% Senior Notes and PIK Toggle Notes [Member]
Initial Public Offering [Abstract]
Payment to purchase and retire Intrepid Warrants		$ 2,250
Voting Common Stock [Member]
Initial Public Offering [Abstract]
Stock split conversion ratio			10.43174381
Sales price (in dollars per share) | $ / shares		$ 10.00
Gross proceeds from sale of common stock		$ 62,100
Common Stock Outstanding [Abstract]
Shares outstanding before transactions (in shares) | shares	16,927,737		6,259,480
Shares issued by the Initial Public Offering (in shares) | shares		6,210,000
Non-voting shares converted to voting shares (in shares) | shares	938,857
Voting shares issued as restricted stock (in shares) | shares	27,918
Voting shares issued from exercise of stock options (in shares) | shares	6,652
Shares outstanding (in shares) | shares	17,901,164	16,927,737		17,901,164
Voting Common Stock [Member] | 7% Senior Notes [Member]
Common Stock Outstanding [Abstract]
Shares issued for Notes (in shares) | shares		1,289,819
Voting Common Stock [Member] | PIK Toggle Notes [Member]
Common Stock Outstanding [Abstract]
Shares issued for Notes (in shares) | shares		3,168,438
Voting Common Stock [Member] | Over-Allotment Option [Member]
Common Stock Outstanding [Abstract]
Shares issued by the Initial Public Offering (in shares) | shares		810,000
Nonvoting Common Stock [Member]
Initial Public Offering [Abstract]
Stock split conversion ratio			10.43174381
Common Stock Outstanding [Abstract]
Shares outstanding before transactions (in shares) | shares	938,857
Shares outstanding (in shares) | shares	938,857	938,857		938,857

XML

Fair Value of Financial Instruments (Details) $ in Thousands, € in Millions	Jun. 30, 2016 USD ($) Contract	May 31, 2016 USD ($)	Dec. 31, 2015 USD ($) Contract		Dec. 31, 2015 EUR (€) Contract	Jan. 31, 2014 USD ($)	Jan. 13, 2014 USD ($)
Foreign Exchange [Abstract]
Foreign exchange forward contracts	$ 0			[1]
Number of foreign exchange forward contracts held | Contract	0		7		7
PIK Toggle Notes [Member]
Long-Term Debt [Abstract]
Face amount			$ 60,100				$ 45,000
7% Senior Notes [Member]
Long-Term Debt [Abstract]
Face amount	$ 12,600		$ 12,600			$ 11,000
Interest rate	7.00%		7.00%		7.00%	7.00%
First Lien Term Loan [Member]
Long-Term Debt [Abstract]
Face amount	$ 148,100		$ 151,700				170,000
Second Lien Term Loan [Member]
Long-Term Debt [Abstract]
Face amount	60,000	$ 20,000	80,000				$ 80,000
Fair Value [Member]
Foreign Exchange [Abstract]
Notional amount | €					€ 5.1
Fair Value [Member] | PIK Toggle Notes [Member]
Long-Term Debt [Abstract]
Long-term debt			60,100
Fair Value [Member] | 7% Senior Notes [Member]
Long-Term Debt [Abstract]
Long-term debt			12,600
Fair Value [Member] | First Lien Term Loan [Member]
Long-Term Debt [Abstract]
Long-term debt	148,100		151,700
Fair Value [Member] | Second Lien Term Loan [Member]
Long-Term Debt [Abstract]
Long-term debt	$ 60,000		$ 80,000

[1] Insignificant asset.

XML

Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventories [Abstract]
Percentage of LIFO inventories	58.00%
Raw materials and work in process	$ 2,289	$ 1,940
Leaf tobacco	26,268	20,839
Other	1,315	1,237
Inventory, gross	55,637	47,647
LIFO reserve	(3,881)	(3,308)
Inventory, net	51,756	44,339
Inventory valuation allowance	800	300
Smokeless Products [Member]
Inventories [Abstract]
Finished goods	4,364	3,615
Smoking Products [Member]
Inventories [Abstract]
Finished goods	14,589	14,077
Electronic / Vaporizer Products [Member]
Inventories [Abstract]
Finished goods	$ 6,812	$ 5,939

XML

Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Property, Plant and Equipment [Abstract]
Property, plant and equipment	$ 15,173	$ 14,314
Accumulated depreciation	(9,297)	(8,711)
Property, plant and equipment, net	5,876	5,603
Leasehold Improvements [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	2,215	2,196
Machinery and Equipment [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	9,776	8,997
Furniture and Fixtures [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	$ 3,182	$ 3,121

XML

Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Accrued Expenses [Abstract]
Accrued payroll and related items	$ 2,417	$ 3,659
Customer returns and allowances	1,937	2,015
Other	5,210	5,379
Total accrued expenses	$ 9,564	$ 11,053

XML

Notes Payable and Long-Term Debt, Summary of Notes Payable and Long-Term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2016	May 31, 2016	Dec. 31, 2015	Jan. 31, 2014	Jan. 13, 2014
Notes Payable and Long-Term Debt [Abstract]
Notes Payable and Long-Term Debt	$ 206,139		$ 298,679
Less deferred finance charges	(5,054)		(6,257)
Less current maturities	(1,650)		(1,650)
Total Notes Payable and Long-Term Debt	199,435		290,772
First Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes Payable and Long-Term Debt	147,134		150,555
Face amount	148,100		151,700		$ 170,000
Second Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes Payable and Long-Term Debt	59,005		78,882
Face amount	60,000	$ 20,000	80,000		80,000
PIK Toggle Notes [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes Payable and Long-Term Debt	0		58,882
Face amount			60,100		45,000
7% Senior Notes [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes Payable and Long-Term Debt	0		10,360
Face amount	12,600		$ 12,600	$ 11,000
Revolving Credit Facility [Member]
Notes Payable and Long-Term Debt [Abstract]
Maximum borrowing capacity	$ 40,000				$ 40,000

XML

Notes Payable and Long-Term Debt, First Lien Credit Agreement (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
	May 31, 2016	Mar. 31, 2016	Jun. 30, 2016	Jun. 30, 2015
Total Leverage Ratio [Abstract]
Voluntary prepayment	$ 20,200
First Lien Credit Agreement [Member]
Total Leverage Ratio [Abstract]
Voluntary prepayment			$ 3,563	$ 825
NATC [Member] | First Lien Credit Agreement [Member]
Notes Payable and Long-Term Debt [Abstract]
Weighted average interest rate			7.78%
Total Leverage Ratio [Abstract]
Voluntary prepayment		$ 2,700
NATC [Member] | First Lien Credit Agreement [Member] | Maximum [Member]
Total Leverage Ratio [Abstract]
Closing Date through March 31, 2015			6.50
April 1, 2015 through September 30, 2016			6.25
October 1, 2016 through September 30, 2017			6.00
October 1, 2017 through September 30, 2018			5.75
October 1, 2018 and thereafter			5.50
NATC [Member] | First Lien Credit Agreement LIBOR Rate Loans [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate			6.50%
NATC [Member] | First Lien Credit Agreement LIBOR Rate Loans [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate			1.25%
NATC [Member] | First Lien Credit Agreement Base Rate Loans [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate			2.25%
Margin on variable rate			5.50%
NATC [Member] | First Lien Credit Agreement Base Rate Loans [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate			1.00%
Term of variable rate			1 month
NATC [Member] | First Lien Credit Agreement Base Rate Loans [Member] | Federal Funds Rate [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate			0.50%

XML

Notes Payable and Long-Term Debt, Second Lien Credit Agreement (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	May 31, 2016	Dec. 31, 2015	Jan. 13, 2014
Second Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Face amount	$ 60,000	$ 20,000	$ 80,000	$ 80,000
NATC [Member] | Second Lien Credit Agreement [Member]
Notes Payable and Long-Term Debt [Abstract]
Weighted average interest rate	11.50%
NATC [Member] | Second Lien Credit Agreement [Member] | Maximum [Member]
Total Leverage Ratio [Abstract]
Closing Date through March 31, 2015	6.75
April 1, 2015 through September 30, 2016	6.50
October 1, 2016 through September 30, 2017	6.25
October 1, 2017 through September 30, 2018	6.00
October 1, 2018 and thereafter	5.75
NATC [Member] | Second Lien Credit Agreement LIBOR Rate Loans [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	10.25%
NATC [Member] | Second Lien Credit Agreement LIBOR Rate Loans [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate	1.25%
NATC [Member] | Second Lien Credit Agreement Base Rate Loans [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate	2.25%
Margin on variable rate	9.25%
NATC [Member] | Second Lien Credit Agreement Base Rate Loans [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	1.00%
Term of variable rate	1 month
NATC [Member] | Second Lien Credit Agreement Base Rate Loans [Member] | Federal Funds Rate [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	0.50%

XML

Notes Payable and Long-Term Debt, Revolving Credit Facility (Details) - Revolving Credit Facility [Member] - USD ($)	6 Months Ended
	Jun. 30, 2016	Jan. 13, 2014
Notes Payable and Long-Term Debt [Abstract]
Maximum borrowing capacity	$ 40,000,000	$ 40,000,000
Borrowing base	Borrowing base, which is the sum of (i) 85% of eligible accounts receivable, plus (ii) the lesser of (A) the product of 70% multiplied by the value of eligible inventory and (B) the product of 85% multiplied by the net recovery percentage identified in the most recent inventory appraisal multiplied by the value of eligible inventory, plus (iii) the lesser of (A) the product of 75% multiplied by the value of eligible inventory and (B) the product of 85% multiplied by the net recovery percentage identified in the most recent inventory appraisal multiplied by the value of the eligible finished goods inventory, minus (iv) the aggregate amount of reserves established by the administrative agent.
Balance outstanding	$ 6,600,000
Weighted average interest rate	5.00%
NATC [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Average excess availability	$ 15,000,000
NATC [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Average excess availability	$ 30,000,000
NATC [Member] | Base Rate [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	1.50%
NATC [Member] | Base Rate [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	1.25%
NATC [Member] | Base Rate [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	1.75%
NATC [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	2.50%
NATC [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	2.25%
NATC [Member] | LIBOR [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	2.75%

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Notes Payable and Long-Term Debt, PIK Toggle Notes (Details) $ / shares in Units, $ in Millions	1 Months Ended	6 Months Ended
	Apr. 30, 2016 shares	Jun. 30, 2016	Dec. 31, 2015 USD ($)	Jan. 13, 2014 USD ($) $ / shares shares
Notes Payable and Long-Term Debt [Abstract]
Stock split conversion ratio	10.43174381
PIK Toggle Notes [Member]
Notes Payable and Long-Term Debt [Abstract]
Face amount			$ 60.1	$ 45.0
Number of shares of TPB common stock that can be purchased with warrants (in shares) | shares	442,558			42,424
Purchase price of common stock (in dollars per unit) | $ / shares				$ 0.01
Original issue discount				$ 1.7
Issue price				$ 43.3
PIK Toggle Notes [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate		13.75%
PIK Toggle Notes [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate		1.25%

XML

Notes Payable and Long-Term Debt, 7% Senior Notes (Details) - USD ($) $ / shares in Units, $ in Millions	Jun. 30, 2016	Dec. 31, 2015	Jan. 31, 2014
Intrepid Brands, LLC [Member]
Notes Payable and Long-Term Debt [Abstract]
Number of membership units in Intrepid that can be purchased with warrants (in shares)			11,000,000
Percentage of Common Units called by warrants to total Common Units outstanding			40.00%
Purchase price of common unit (in dollars per unit)			$ 1.00
7% Senior Notes [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate	7.00%	7.00%	7.00%
Face amount	$ 12.6	$ 12.6	$ 11.0
Original issue discount			2.8
Issue price			$ 8.2

XML

Notes Payable and Long-Term Debt, Restricted/Non-Restricted Consolidating Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
Current assets [Abstract]
Cash	$ 3,612		$ 4,835	$ 5,332	$ 8,467
Accounts receivable	5,209		3,940
Inventories	51,756		44,339
Other current assets	9,895		10,838
Total current assets	70,472		63,952
Property, plant and equipment, net	5,876		5,603
Deferred income taxes	0
Deferred financing costs, net	174		208
Goodwill	128,697		128,697
Investment in subsidiaries	0		0
Note receivable	0
Other intangible assets, net	8,553		8,553
Master Settlement Agreement - escrow deposits	31,904	$ 31,842	31,842
Other assets	701		3,608
Total assets	246,377		242,463	249,824
Current liabilities [Abstract]
Accounts payable	5,321		4,087
Accrued expenses	9,564		11,053
Accrued interest expense	629		4,329
Accrued income taxes	295
First lien term loan	1,650		1,650
Note payable	0
Revolving credit facility	6,621		18
Total current liabilities	24,080		21,137
Notes payable and long-term debt	199,435		290,772
Deferred income taxes	7,063		7,013
Postretirement benefits	4,607		4,666
Pension benefits	372		487
Total liabilities	235,557		324,075
Stockholders' equity (deficit) [Abstract]
Additional paid-in capital	104,759		12,628
Advance to TPB	0		0
Accumulated other comprehensive loss	(3,266)		(3,512)
Retained earnings (accumulated deficit)	(90,852)		(90,800)
Total stockholders' equity (deficit)	10,820		(81,612)
Total liabilities and stockholders' equity (deficit)	246,377		242,463
Eliminations [Member]
Current assets [Abstract]
Cash	0		0
Accounts receivable	0		0
Inventories	0		0
Other current assets	0		0
Total current assets	0		0
Property, plant and equipment, net	0		0
Deferred income taxes	(1,864)
Deferred financing costs, net	0		0
Goodwill	0		0
Investment in subsidiaries	(39,922)		(31,489)
Note receivable	(2,000)
Other intangible assets, net	0		0
Master Settlement Agreement - escrow deposits	0		0
Other assets	0		0
Total assets	(43,786)		(31,489)
Current liabilities [Abstract]
Accounts payable	0		0
Accrued expenses	0		0
Accrued interest expense	0		0
Accrued income taxes	0
First lien term loan	0		0
Note payable	(2,000)
Revolving credit facility	0		0
Total current liabilities	(2,000)		0
Notes payable and long-term debt	0		0
Deferred income taxes	(1,864)		0
Postretirement benefits	0		0
Pension benefits	0		0
Total liabilities	(3,864)		0
Stockholders' equity (deficit) [Abstract]
Additional paid-in capital	(74,995)		(74,995)
Advance to TPB	0		0
Accumulated other comprehensive loss	0		0
Retained earnings (accumulated deficit)	35,073		43,506
Total stockholders' equity (deficit)	(39,922)		(31,489)
Total liabilities and stockholders' equity (deficit)	(43,786)		(31,489)
Issuer/Restricted [Member]
Current assets [Abstract]
Cash	1,384		3,267	5,220	8,014
Accounts receivable	5,014		3,828
Inventories	44,623		38,065
Other current assets	7,050		5,590
Total current assets	58,071		50,750
Property, plant and equipment, net	5,751		5,603
Deferred income taxes	1,864
Deferred financing costs, net	174		208
Goodwill	128,697		128,697
Investment in subsidiaries	39,922		31,489
Note receivable	2,000
Other intangible assets, net	8,553		8,553
Master Settlement Agreement - escrow deposits	31,904		31,842
Other assets	271		3,178
Total assets	277,207		260,320
Current liabilities [Abstract]
Accounts payable	5,120		4,038
Accrued expenses	8,537		9,956
Accrued interest expense	629		4,329
Accrued income taxes	295
First lien term loan	1,650		1,650
Note payable	0
Revolving credit facility	6,621		18
Total current liabilities	22,852		19,991
Notes payable and long-term debt	199,435		290,772
Deferred income taxes	8,927		7,013
Postretirement benefits	4,607		4,666
Pension benefits	372		487
Total liabilities	236,193		322,929
Stockholders' equity (deficit) [Abstract]
Additional paid-in capital	168,854		76,410
Advance to TPB	2,323		793
Accumulated other comprehensive loss	(3,266)		(3,512)
Retained earnings (accumulated deficit)	(127,076)		(136,372)
Total stockholders' equity (deficit)	41,014		(62,609)
Total liabilities and stockholders' equity (deficit)	277,207		260,320
Non-Restricted [Member]
Current assets [Abstract]
Cash	2,228		1,568	$ 112	$ 453
Accounts receivable	195		112
Inventories	7,133		6,274
Other current assets	2,845		5,248
Total current assets	12,401		13,202
Property, plant and equipment, net	125		0
Deferred income taxes	0
Deferred financing costs, net	0		0
Goodwill	0		0
Investment in subsidiaries	0		0
Note receivable	0
Other intangible assets, net	0		0
Master Settlement Agreement - escrow deposits	0		0
Other assets	430		430
Total assets	12,956		13,632
Current liabilities [Abstract]
Accounts payable	201		49
Accrued expenses	1,027		1,097
Accrued interest expense	0		0
Accrued income taxes	0
First lien term loan	0		0
Note payable	2,000
Revolving credit facility	0		0
Total current liabilities	3,228		1,146
Notes payable and long-term debt	0		0
Deferred income taxes	0		0
Postretirement benefits	0		0
Pension benefits	0		0
Total liabilities	3,228		1,146
Stockholders' equity (deficit) [Abstract]
Additional paid-in capital	10,900		11,213
Advance to TPB	(2,323)		(793)
Accumulated other comprehensive loss	0		0
Retained earnings (accumulated deficit)	1,151		2,066
Total stockholders' equity (deficit)	9,728		12,486
Total liabilities and stockholders' equity (deficit)	12,956		13,632
Voting Common Stock [Member]
Stockholders' equity (deficit) [Abstract]
Common stock	179		63
Voting Common Stock [Member] | Eliminations [Member]
Stockholders' equity (deficit) [Abstract]
Common stock	0		0
Voting Common Stock [Member] | Issuer/Restricted [Member]
Stockholders' equity (deficit) [Abstract]
Common stock	179		63
Voting Common Stock [Member] | Non-Restricted [Member]
Stockholders' equity (deficit) [Abstract]
Common stock	0		0
Common Stock, Nonvoting [Member]
Stockholders' equity (deficit) [Abstract]
Common stock	$ 0		9
Common Stock, Nonvoting [Member] | Eliminations [Member]
Stockholders' equity (deficit) [Abstract]
Common stock			0
Common Stock, Nonvoting [Member] | Issuer/Restricted [Member]
Stockholders' equity (deficit) [Abstract]
Common stock			9
Common Stock, Nonvoting [Member] | Non-Restricted [Member]
Stockholders' equity (deficit) [Abstract]
Common stock			$ 0

XML

Notes Payable and Long-Term Debt, Restricted/Non-Restricted Consolidating Statement of Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Consolidating Statement of Income [Abstract]
Net sales	$ 51,581	$ 47,999	$ 101,447	$ 99,085
Cost of sales	26,707	25,388	51,926	51,819
Gross profit	24,874	22,611	49,521	47,266
Selling, general and administrative expenses	14,098	14,875	27,836	27,546
Operating income (loss)	10,776	7,736	21,685	19,720
Interest expense and financing costs	6,876	8,574	15,338	17,056
Investment income	(332)	0	(332)	0
Loss on extinguishment of debt	2,824	0	2,824	0
Income (loss) before income taxes	1,408	(838)	3,855	2,664
Income tax expense	609	583	822	658
Net income (loss)	799	(1,421)	3,033	2,006
Issuer/Restricted [Member]
Consolidating Statement of Income [Abstract]
Net sales	48,480	43,290	94,704	88,893
Cost of sales	23,917	21,788	46,623	44,787
Gross profit	24,563	21,502	48,081	44,106
Selling, general and administrative expenses	13,143	12,685	25,868	24,081
Operating income (loss)	11,420	8,817	22,213	20,025
Interest expense and financing costs	6,852	8,550	15,321	17,000
Investment income	(332)		(332)
Loss on extinguishment of debt	2,824		2,824
Income (loss) before income taxes	2,076	267	4,400	3,025
Income tax expense	609	583	822	658
Net income (loss)	1,467	(316)	3,578	2,367
Non-Restricted [Member]
Consolidating Statement of Income [Abstract]
Net sales	3,101	4,709	6,743	10,192
Cost of sales	2,790	3,600	5,303	7,032
Gross profit	311	1,109	1,440	3,160
Selling, general and administrative expenses	955	2,190	1,968	3,465
Operating income (loss)	(644)	(1,081)	(528)	(305)
Interest expense and financing costs	24	24	17	56
Investment income	0		0
Loss on extinguishment of debt	0		0
Income (loss) before income taxes	(668)	(1,105)	(545)	(361)
Income tax expense	0	0	0	0
Net income (loss)	$ (668)	$ (1,105)	$ (545)	$ (361)

XML

Notes Payable and Long-Term Debt, Restricted/Non-Restricted Consolidating Statement of Cash Flows (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	May 31, 2016	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities [Abstract]
Net income (loss)		$ 799	$ (1,421)	$ 3,033	$ 2,006
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities [Abstract]
Loss on extinguishment of debt		2,824	0	2,824	0
Gain on sale of fixed assets				0	(1)
Depreciation expense				586	519
Amortization of deferred financing costs				719	724
Amortization of original issue discount				459	524
Interest paid on PIK Toggle Notes				(9,893)
Deferred income taxes				50	(9)
Stock compensation expense				25	92
Restricted stock compensation expense				8	0
Member unit compensation expense				13	57
Changes in operating assets and liabilities [Abstract]
Accounts receivable				(1,269)	(1,010)
Inventories				(7,417)	(3,962)
Other current assets				943	(4,815)
Other assets				(62)	(87)
Accounts payable				1,234	2,355
Accrued pension liabilities				131	82
Accrued postretirement liabilities				(59)	(63)
Accrued expenses and other				(4,188)	(2,256)
Net cash provided by (used in) operating activities				(9,112)	(1,455)
Cash flows from investing activities [Abstract]
Capital expenditures				(859)	(641)
Proceeds from sale of fixed assets				0	2
Note receivable				0	(430)
Net cash used in investing activities				(859)	(1,069)
Cash flows from financing activities [Abstract]
Proceeds from revolving credit facility, net				6,603	213
Proceeds from (payments for) note receivable				0	0
Proceeds from (payment to) parent, net				0
Payment of financing costs				(200)	0
Payment for lien term loan	$ (20,200)
Payment of PIK Toggle Notes	(34,000)			(24,107)	0
Redemption of Intrepid options				(661)	0
Redemption of Intrepid warrants	(5,500)			(5,500)	0
Stock options exercised				8	0
Proceeds from issuance of stock				56,168	1
Net cash provided by (used in) financing activities				8,748	(611)
Net decrease in cash	$ 83			(1,223)	(3,135)
Cash, beginning of period				4,835	8,467
Cash, end of period		3,612	5,332	3,612	5,332
PIK Toggle Notes [Member]
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities [Abstract]
Interest incurred but not paid on Notes				3,422	3,963
7% Senior Notes [Member]
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities [Abstract]
Interest incurred but not paid on Notes				329	426
First Lien Term Loan [Member]
Cash flows from financing activities [Abstract]
Payment for lien term loan				(3,563)	(825)
Second Lien Term Loan [Member]
Cash flows from financing activities [Abstract]
Payment for lien term loan				(20,000)	0
Issuer/Restricted [Member]
Cash flows from operating activities [Abstract]
Net income (loss)		1,467	(316)	3,578	2,367
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities [Abstract]
Loss on extinguishment of debt		2,824		2,824
Gain on sale of fixed assets					(1)
Depreciation expense				586	519
Amortization of deferred financing costs				719	724
Amortization of original issue discount				459	524
Interest paid on PIK Toggle Notes				(9,893)
Deferred income taxes				50	(9)
Stock compensation expense				25	92
Restricted stock compensation expense				8
Member unit compensation expense				0	0
Changes in operating assets and liabilities [Abstract]
Accounts receivable				(1,186)	(791)
Inventories				(6,558)	(7,711)
Other current assets				(1,460)	(997)
Other assets				(62)	(87)
Accounts payable				1,082	3,271
Accrued pension liabilities				131	82
Accrued postretirement liabilities				(59)	(63)
Accrued expenses and other				(4,118)	(1,553)
Net cash provided by (used in) operating activities				(10,123)	756
Cash flows from investing activities [Abstract]
Capital expenditures				(734)	(641)
Proceeds from sale of fixed assets					2
Note receivable					0
Net cash used in investing activities				(734)	(639)
Cash flows from financing activities [Abstract]
Proceeds from revolving credit facility, net				6,603	213
Proceeds from (payments for) note receivable				(2,000)	(2,300)
Proceeds from (payment to) parent, net				1,565
Payment of financing costs				(200)
Payment of PIK Toggle Notes				(24,107)
Redemption of Intrepid options				0
Redemption of Intrepid warrants				(5,500)
Stock options exercised				8
Proceeds from issuance of stock				56,168	1
Net cash provided by (used in) financing activities				8,974	(2,911)
Net decrease in cash				(1,883)	(2,794)
Cash, beginning of period				3,267	8,014
Cash, end of period		1,384	5,220	1,384	5,220
Issuer/Restricted [Member] | PIK Toggle Notes [Member]
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities [Abstract]
Interest incurred but not paid on Notes				3,422	3,963
Issuer/Restricted [Member] | 7% Senior Notes [Member]
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities [Abstract]
Interest incurred but not paid on Notes				329	426
Issuer/Restricted [Member] | First Lien Term Loan [Member]
Cash flows from financing activities [Abstract]
Payment for lien term loan				(3,563)	(825)
Issuer/Restricted [Member] | Second Lien Term Loan [Member]
Cash flows from financing activities [Abstract]
Payment for lien term loan				(20,000)
Non-Restricted [Member]
Cash flows from operating activities [Abstract]
Net income (loss)		(668)	(1,105)	(545)	(361)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities [Abstract]
Loss on extinguishment of debt		0		0
Gain on sale of fixed assets					0
Depreciation expense				0	0
Amortization of deferred financing costs				0	0
Amortization of original issue discount				0	0
Interest paid on PIK Toggle Notes				0
Deferred income taxes				0	0
Stock compensation expense				0	0
Restricted stock compensation expense				0
Member unit compensation expense				13	57
Changes in operating assets and liabilities [Abstract]
Accounts receivable				(83)	(219)
Inventories				(859)	3,749
Other current assets				2,403	(3,818)
Other assets				0	0
Accounts payable				152	(916)
Accrued pension liabilities				0	0
Accrued postretirement liabilities				0	0
Accrued expenses and other				(70)	(703)
Net cash provided by (used in) operating activities				1,011	(2,211)
Cash flows from investing activities [Abstract]
Capital expenditures				(125)	0
Proceeds from sale of fixed assets					0
Note receivable					(430)
Net cash used in investing activities				(125)	(430)
Cash flows from financing activities [Abstract]
Proceeds from revolving credit facility, net				0	0
Proceeds from (payments for) note receivable				2,000	2,300
Proceeds from (payment to) parent, net				(1,565)
Payment of financing costs				0
Payment of PIK Toggle Notes				0
Redemption of Intrepid options				(661)
Redemption of Intrepid warrants				0
Stock options exercised				0
Proceeds from issuance of stock				0	0
Net cash provided by (used in) financing activities				(226)	2,300
Net decrease in cash				660	(341)
Cash, beginning of period				1,568	453
Cash, end of period		$ 2,228	$ 112	2,228	112
Non-Restricted [Member] | PIK Toggle Notes [Member]
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities [Abstract]
Interest incurred but not paid on Notes				0	0
Non-Restricted [Member] | 7% Senior Notes [Member]
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities [Abstract]
Interest incurred but not paid on Notes				0	0
Non-Restricted [Member] | First Lien Term Loan [Member]
Cash flows from financing activities [Abstract]
Payment for lien term loan				0	$ 0
Non-Restricted [Member] | Second Lien Term Loan [Member]
Cash flows from financing activities [Abstract]
Payment for lien term loan				$ 0

XML

Pension and Postretirement Benefit Plans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
NATC [Member]
Plan Contributions [Abstract]
Plan contributions			$ 164	$ 167
Pension Benefits [Member]
Net Periodic Benefit Cost [Abstract]
Service cost	$ 26	$ 31	52	62
Interest cost	175	174	350	348
Expected return on plan assets	(258)	(296)	(517)	(591)
Amortization of gains and losses	123	131	246	263
Net periodic benefit cost	66	40	131	82
Pension Benefits [Member] | NATC [Member]
Plan Contributions [Abstract]
Expected contribution to plan in 2016			0
Postretirement Benefits [Member]
Net Periodic Benefit Cost [Abstract]
Service cost	0	0	0	0
Interest cost	53	52	105	104
Expected return on plan assets	0	0	0	0
Amortization of gains and losses	0	0	0	0
Net periodic benefit cost	$ 53	$ 52	105	$ 104
Postretirement Benefits [Member] | NATC [Member]
Plan Contributions [Abstract]
Expected contribution to plan in 2016			$ 300

XML

Share Incentive Plans (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015	Apr. 28, 2016
Compensation Expense [Abstract]
Stock compensation expense	$ 13	$ 46	$ 25	$ 92
2006 Plan [Member]
Share Incentive Plans [Abstract]
Number of shares available for grant (in shares)	0		0
2006 Plan [Member] | Stock Options [Member]
Incentive Shares [Roll Forward]
Outstanding, beginning balance (in shares)			1,667,671	1,692,051	1,692,051
Exercised (in shares)			(6,652)		(1,043)
Forfeited (in shares)			(6,262)		(23,337)
Outstanding, ending balance (in shares)	1,654,757		1,654,757		1,667,671
Weighted Average Exercise Price [Abstract]
Outstanding, beginning balance (in dollars per share)			$ 2.19	$ 2.17	$ 2.17
Exercised (in dollars per share)			1.22		1.06
Forfeited (in dollars per share)			3.83		1.06
Outstanding, ending balance (in dollars per share)	$ 2.19		2.19		2.19
Weighted Average Grant Date Fair Value [Abstract]
Outstanding, beginning balance (in dollars per share)			1.20	$ 1.19	1.19
Exercised (in dollars per share)			0.64		0.54
Forfeited (in dollars per share)			2.17		0.54
Outstanding, ending balance (in dollars per share)	$ 1.20		$ 1.20		$ 1.20
Intrinsic value of options exercised and vested	$ 58	$ 0	$ 58	$ 7
Fair Value Assumptions [Abstract]
Expected life of stock options			10 years
2006 Plan [Member] | Stock Options [Member] | Exercise Price $1.06 [Member]
Incentive Shares [Roll Forward]
Outstanding, ending balance (in shares)	980,096		980,096
Weighted Average Exercise Price [Abstract]
Outstanding, ending balance (in dollars per share)	$ 1.06		$ 1.06
Weighted Average Grant Date Fair Value [Abstract]
Outstanding, ending balance (in dollars per share)	$ 0.54		$ 0.54
Number of options exercisable (in shares)	980,096		980,096
Weighted average remaining contractual term			1 year 4 months 24 days
Fair Value Assumptions [Abstract]
Expected life of stock options			10 years
Assumed exercise price (in dollars per share)	$ 1.06		$ 1.06
Risk-free interest rate			4.366%
Volatility			30.00%
Dividend yield			0.00%
2006 Plan [Member] | Stock Options [Member] | Exercise Price $3.83 [Member]
Incentive Shares [Roll Forward]
Outstanding, ending balance (in shares)	674,661		674,661
Weighted Average Exercise Price [Abstract]
Outstanding, ending balance (in dollars per share)	$ 3.83		$ 3.83
Weighted Average Grant Date Fair Value [Abstract]
Outstanding, ending balance (in dollars per share)	$ 2.17		$ 2.17
Number of options exercisable (in shares)	622,718		622,718
Weighted average remaining contractual term			6 years 2 months 12 days
Fair Value Assumptions [Abstract]
Expected life of stock options			10 years
Assumed exercise price (in dollars per share)	$ 3.83		$ 3.83
Risk-free interest rate			3.57%
Volatility			40.00%
Dividend yield			0.00%
2015 Plan [Member]
Share Incentive Plans [Abstract]
Number of shares authorized for issuance (in shares)						1,400,000
Number of shares available for grant (in shares)	1,372,223		1,372,223
2015 Plan [Member] | Restricted Stock [Member]
Share Incentive Plans [Abstract]
Number of awards granted (in shares)	27,777		27,777

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Unit Incentive Plans and Warrants for Intrepid Brands, LLC (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	6 Months Ended
	May 31, 2016	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015	Jan. 31, 2014
Purchase of Options [Abstract]
Payments to repurchase and retire options to buy Intrepid Common Units	$ 683
Payroll taxes related to payments for repurchase of options	22
Warrants [Abstract]
Payment to purchase and retire Intrepid Warrants	$ 5,500	$ 5,500	$ 0
7% Senior Notes [Member]
Warrants [Abstract]
Interest rate		7.00%		7.00%	7.00%
Intrepid [Member]
Warrants [Abstract]
Number of membership units in Intrepid that can be purchased with warrants (in shares)					11,000,000
Percentage of Common Units called by warrants to total Common Units outstanding					40.00%
Purchase price of common unit (in dollars per unit)					$ 1.00

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Net income (loss)	$ 799	$ (1,421)	$ 3,033	$ 2,006
Basic EPS [Abstract]
Basic weighted average shares (in shares)	15,274,446	7,198,337	12,476,719	7,197,928
Basic EPS (in dollars per share)	$ 0.05	$ (0.20)	$ 0.24	$ 0.28
Effect of Dilutive securities [Abstract]
Stock options and warrants (in shares)	1,602,845	0	1,447,907	1,136,209
Diluted weighted average shares (in shares)	16,877,291	7,198,337	13,924,626	8,334,137
Diluted EPS (in dollars per share)	$ 0.05	$ (0.20)	$ 0.22	$ 0.24
Stock Options [Member]
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings (in shares)				663,459

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Parent-Only Financial Information (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Parent-Only Financial Information [Abstract]
Restricted assets of consolidated subsidiaries	$ 233,421

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Segment Information, Financial Information of Reportable Segments (Details) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) Segment	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Segment Information [Abstract]
Number of reportable segments | Segment				3
Segment Information [Abstract]
Net sales		$ 51,581	$ 47,999	$ 101,447	$ 99,085
Operating income		10,776	7,736	21,685	19,720
Interest expense and financing costs		(6,876)	(8,574)	(15,338)	(17,056)
Investment income		332	0	332	0
Loss on extinguishment of debt		(2,824)	0	(2,824)	0
Income (loss) before income taxes		1,408	(838)	3,855	2,664
Assets		246,377	249,824	246,377	249,824	$ 242,463
Other [Member]
Segment Information [Abstract]
Operating income	[1]	(22)	(22)	(178)	(152)
Assets	[1]	32,605	32,438	32,605	32,438
Reportable Segments [Member]
Segment Information [Abstract]
Operating income		11,383	8,244	22,442	20,398
Assets		663,155	634,266	663,155	634,266
Reportable Segments [Member] | Smokeless Products [Member]
Segment Information [Abstract]
Net sales		21,691	18,678	40,030	36,194
Operating income		4,843	3,699	8,402	8,222
Assets		85,175	84,404	85,175	84,404
Reportable Segments [Member] | Smoking Products [Member]
Segment Information [Abstract]
Net sales		26,789	24,612	54,674	52,699
Operating income		7,206	5,648	14,746	12,633
Assets		532,419	501,213	532,419	501,213
Reportable Segments [Member] | NewGen Products [Member]
Segment Information [Abstract]
Net sales		3,101	4,709	6,743	10,192
Operating income		(644)	(1,081)	(528)	(305)
Assets		12,956	16,211	12,956	16,211
Eliminations [Member]
Segment Information [Abstract]
Operating income	[2]	(607)	(508)	(757)	(678)
Assets	[2]	$ (416,778)	$ (384,442)	$ (416,778)	$ (384,442)

[1] "Other" includes our assets that are not assigned to our three reportable segments, such as intercompany transfers and investments in subsidiaries. All goodwill has been allocated to our reportable segments.

[2] "Elimination" includes the elimination of intercompany accounts between segments and investments in subsidiaries.

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Segment Information, Net Sales - Domestic and Foreign (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Segment Information [Abstract]
Net sales	$ 51,581	$ 47,999	$ 101,447	$ 99,085
Reportable Geographical Components [Member] | Domestic [Member]
Segment Information [Abstract]
Net sales	49,126	46,273	96,100	95,046
Reportable Geographical Components [Member] | Foreign [Member]
Segment Information [Abstract]
Net sales	$ 2,455	$ 1,726	$ 5,347	$ 4,039