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 March 31, 2018

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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	☐
Emerging growth company	☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act   ☑

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

At May 3, 2018, there were 19,237,905 shares outstanding of the registrant’s voting common stock, par value $0.01 per share.

TURNING POINT BRANDS, INC.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION			Page No.
	ITEM 1	Financial Statements (Unaudited)
		Consolidated Balance Sheets as of March 31, 2018, and December 31, 2017	5
		Consolidated Statements of Income for the three months ended March 31, 2018 and 2017	6
		Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017	7
		Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017	8
		Notes to Consolidated Financial Statements	10
	ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	36
	ITEM 4	Controls and Procedures	36
PART II—OTHER INFORMATION
	ITEM 1	Legal Proceedings	37
	ITEM 1A	Risk Factors	37
	ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	37
	ITEM 3	Defaults Upon Senior Securities	37
	ITEM 4	Mine Safety Disclosures	37
	ITEM 5	Other Information	37
	ITEM 6	Exhibits	38
	Signatures		39

2

Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intend," "plan," and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events, and depend on circumstances, that may or may not occur in the future. As a result, actual events may differ materially from those expressed in, or suggested by, the forward-looking statements. Any forward-looking statement made by Turning Point Brands, Inc. (“TPB”), in this quarterly report on Form 10-Q speaks only as of the date hereof. New risks and uncertainties come up from time to time, and it is impossible for TPB to predict these events or how they may affect it. TPB has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws.  Factors that could cause these differences include, but are not limited to:

· 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, which has broad regulatory powers;

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

· possible significant increases in federal, state, and local municipal 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;

· our amount of indebtedness;

· the terms of our credit facilities, which may restrict our current and future operations;

· intense competition and our ability to compete effectively;

· uncertainty and continued evolution of markets containing our NewGen products;

· significant product liability litigation;

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

· requirement to maintain compliance with Master Settlement Agreement escrow account requirements;

· competition from illicit sources;

· our reliance on information technology;

· 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;

· failure to manage our growth;

· failure to successfully integrate our acquisitions or otherwise be unable to benefit from pursuing acquisitions;

· fluctuations in our results;

· exchange rate fluctuations;

· adverse U.S. and global economic conditions;

· sensitivity of end-customers to increased sales taxes and economic conditions;

· failure to comply with certain regulations;

· departure of key management personnel or our inability to attract and retain talent;

· imposition of significant tariffs on imports into the U.S.;

· reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors, potentially decreasing our stock price;

· failure to maintain our status as an emerging growth company before the five-year maximum time period a company may retain such status;

· our principal stockholders will be able to exert significant influence over matters submitted to our stockholders and may take certain actions to prevent takeovers;

3

· our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit acquisition bids or merger proposals which may adversely affect the market price of our common stock;

· our certificate of incorporation limits the ownership of our common stock by individuals and entities that are Restricted Investors. These restrictions may affect the liquidity of our common stock and may result in Restricted Investors being required to sell or redeem their shares at a loss or relinquish their voting, dividend, and distribution rights;

· future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us;

· we may issue preferred stock whose terms could adversely affect the voting power or value of our common stock; and

· our status as a “controlled company” could make our common stock less attractive to some investors or otherwise harm our stock price.

4

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Turning Point Brands, Inc.

Consolidated Balance Sheets

(dollars in thousands except share data)

ASSETS	(unaudited) March 31, 2018			December 31, 2017
Current assets:
Cash	$	3,792		$	2,607
Accounts receivable, net of allowances of $46 in 2018 and $17 in 2017		2,283			3,248
Inventories		58,059			63,296
Other current assets		12,387			10,342
Total current assets		76,521			79,493
Property, plant, and equipment, net		8,662			8,859
Deferred income taxes		-			450
Deferred financing costs, net		1,025			630
Goodwill		134,620			134,620
Other intangible assets, net		26,260			26,436
Master Settlement Agreement (MSA) escrow deposits		30,316			30,826
Other assets		1,021			963
Total assets	$	278,425		$	282,277
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	6,641		$	3,686
Accrued liabilities		13,586			18,694
Current portion of long-term debt		10,000			7,850
Revolving credit facility		-			8,000
Total current liabilities		30,227			38,230
Notes payable and long-term debt		188,165			186,190
Deferred income taxes		35			-
Postretirement benefits		3,968			3,962
Other long-term liabilities		1,138			571
Total liabilities		223,533			228,953
Commitments and contingencies
Stockholders' equity:
Preferred stock; $0.01 par value; authorized shares 40,000,000; issued and outstanding shares -0-		-			-
Common stock, voting, $0.01 par value; authorized shares, 190,000,000; issued and outstanding shares - 19,222,617 at March 31, 2018, and 19,210,633 at December 31, 2017		192			192
Common stock, nonvoting, $0.01 par value; authorized shares, 10,000,000;		-			-
issued and outstanding shares -0-
Additional paid-in capital		103,833			103,640
Accumulated other comprehensive loss		(3,829	)		(2,973	)
Accumulated deficit		(45,304	)		(47,535	)
Total stockholders' equity		54,892			53,324
Total liabilities and stockholders' equity	$	278,425		$	282,277

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

5

Turning Point Brands, Inc.

Consolidated Statements of Income

(dollars in thousands except share data)

(unaudited)

	Three Months Ended March 31,
	2018			2017
Net sales	$	73,942		$	66,788
Cost of sales		42,133			39,116
Gross profit		31,809			27,672
Selling, general, and administrative expenses		22,068			16,823
Operating income		9,741			10,849
Interest expense		3,654			4,933
Gain on investment		(95	)		(114	)
Loss on extinguishment of debt		2,384			6,116
Net periodic benefit expense (income), excluding service cost		(43	)		92
Income (loss) before income taxes		3,841			(178	)
Income tax expense (benefit)		809			(2,055	)
Consolidated net income	$	3,032		$	1,877
Basic income per common share:
Consolidated net income	$	0.16		$	0.10
Diluted income per common share:
Consolidated net income	$	0.15		$	0.10
Weighted average common shares outstanding:
Basic		19,221,892			18,734,393
Diluted		19,762,194			19,633,353

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)

	Three Months Ended March 31,
	2018			2017
Consolidated net income	$	3,032		$	1,877
Other comprehensive income (loss), net of tax
Amortization of unrealized pension and postretirement losses, net of tax of $10 in 2018 and $0 in 2017		30			120
Unrealized gain (loss) on investments, net of tax of $135 in 2018 and $43 in 2017		(384	)		71
Unrealized loss on interest rate swaps, net of tax of $185 in 2018		(526	)		-
		(880	)		191
Comprehensive income	$	2,152		$	2,068

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)

	Three Months Ended March 31,
	2018			2017
Cash flows from operating activities:
Consolidated net income	$	3,032		$	1,877
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on extinguishment of debt		2,384			6,116
Depreciation expense		560			354
Amortization of other intangible assets		176			175
Amortization of deferred financing costs		238			294
Amortization of original issue discount		-			66
Deferred income taxes		793			(2,564	)
Stock compensation expense		197			45
Changes in operating assets and liabilities:
Accounts receivable		965			(1,801	)
Inventories		5,237			1,299
Other current assets		(2,051	)		(1,420	)
Other assets		(23	)		26
Accounts payable		2,955			(1,597	)
Accrued liabilities and other		(6,029	)		(5,242	)
Accrued postretirement liabilities		(14	)		32
Net cash provided by (used in) operating activities	$	8,420		$	(2,340	)
Cash flows from investing activities:
Capital expenditures	$	(363	)	$	(368	)
Restricted cash, MSA escrow deposits		(530	)		1,192
Net cash provided by (used in) investing activities	$	(893	)	$	824

8

Turning Point Brands, Inc.

Consolidated Statements of Cash Flows (Cont.)

(dollars in thousands)

(unaudited)

	Three Months Ended March 31,
	2018			2017
Cash flows from financing activities:
Proceeds from 2018 first lien term loan	$	160,000		$	-
Proceeds from 2018 second lien term loan		40,000			-
Payments of 2017 first lien term loans		(140,613	)		-
Payments of 2017 second lien term loan		(55,000	)		-
Proceeds from (payments of) 2017 revolving credit facility		(8,000	)		29,550
Proceeds from 2017 first lien term loans		-			145,000
Proceeds from 2017 second lien term loan		-			55,000
Payments of first lien term loan		-			(147,312	)
Payments of second lien term loan		-			(60,000	)
Payments of revolving credit facility		-			(15,034	)
Payments of financing costs		(3,279	)		(4,792	)
Exercise of options		20			679
Surrender of options		-			(1,000	)
Net cash provided by (used in) financing activities	$	(6,872	)	$	2,091
Net increase in cash:	$	655		$	575
Cash, beginning of period:
Unrestricted		2,607			2,865
Restricted		4,709			3,889
Total cash at beginning of period		7,316			6,754
Cash, end of period:
Unrestricted		3,792			2,248
Restricted		4,179			5,081
Total cash at end of period	$	7,971		$	7,329
Supplemental schedule of noncash financing activities:
Accrued expenses incurred for financing costs	$	154		$	226

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. Organizations and Basis of Presentation

Organizations

Turning Point Brands, Inc. (the “Company), is a holding company which owns North Atlantic Trading Company, Inc. (“NATC”), and its subsidiaries and Turning Point Brands, LLC (“TPLLC”), and its subsidiaries. Except where the context indicates otherwise, references to the Company include the Company; NATC and its subsidiaries National Tobacco Company, L.P. (“NTC”), National Tobacco Finance, LLC (“NTFLLC”), North Atlantic Operating Company, Inc. (“NAOC”), North Atlantic Cigarette Company, Inc. (“NACC”), and RBJ Sales, Inc. (“RBJ”); and TPLLC and its subsidiaries Intrepid Brands, LLC (“Intrepid”), VaporBeast, LLC (“VaporBeast,” f/k/a Smoke Free Technologies, Inc.), and Vapor Shark, LLC, and its subsidiaries (collectively, “Vapor Shark,” f/k/a The Hand Media).

Basis of Presentation

The accompanying interim, condensed, consolidated financial statements have been prepared in accordance with the accounting practices described in the Company’s audited consolidated financial statements as of, and for the year ended, December 31, 2017, and are unaudited.In the opinion of management, the unaudited, interim, condensed, consolidated financial statements included herein contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods indicated. Such adjustments, other than nonrecurring adjustments separately disclosed, are of a normal and recurring nature. The operating results for interim periods are not necessarily indicative of results to be expected for a full year or 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, 2017. 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 (“GAAP”) with respect to annual financial statements.

Certain prior year amounts have been reclassified to conform to the current year’s presentation. The changes did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows in any of the periods presented.

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 adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP, on January 1, 2018. The Company recognizes revenues, net of sales incentives and sales returns, including shipping and handling charges billed to customers, upon delivery of goods to the customer at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five-step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied.

A further requirement of ASU 2014-09 is for entities to disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Company management views business performance through segments that closely resemble the performance of major product lines.  Thus, the primary, and most useful, disaggregation of the Company’s contract revenue for decision making purposes is the disaggregation by segment which can be found in Note 15 of Notes to Consolidated Financial Statements. An additional disaggregation of contract revenue by sales channel can be found within Note 15 as well.

10

Shipping Costs

The Company records shipping costs incurred as a component of selling, general, and administrative expenses. Shipping costs incurred were approximately $3.2 million and $2.2 million for the three months ending March 31, 2018 and 2017, respectively.

Fair Value

GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3).

The three levels of the fair value hierarchy under GAAP are described below:

· Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date.

· Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Derivative Instruments

Foreign Currency Forward Contracts: The Company enters into foreign currency forward contracts to hedge a portion of its exposure to changes in foreign currency exchange rates on inventory purchase commitments. The Company accounts for its forward contracts under the provisions of ASC 815, Derivatives and Hedging. Under the Company’s policy, the Company may hedge up to 100% of its anticipated purchases of inventory in the denominated invoice currency over a forward period not to exceed twelve months. The Company may also, from time to time, hedge up to ninety percent of its non-inventory purchases in the denominated invoice currency. Forward contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these forward contracts are transferred from other comprehensive income into net income as the related inventories are received. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Interest Rate Swap Agreements: The Company enters into interest rate swap contracts to manage interest rate risk and reduce the volatility of future cash flows. The Company accounts for its interest rate swap contracts under the provisions of ASC 815, Derivatives and Hedging. Swap contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these swap contracts are transferred from other comprehensive income into net income upon settlement of the derivative position or at maturity of the interest rate swap contract. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Risks and Uncertainties

Manufacturers and sellers of tobacco products are subject to regulation at the federal, state, and local levels. Such regulations include, among others, labeling requirements, limitations on advertising, and prohibition of sales to minors. The trend in recent years has been toward increased regulation of the tobacco industry. There can be no assurance as to the ultimate content, timing, or effect of any regulation of tobacco products by any federal, state, or local legislative or regulatory body, nor can there be any assurance that any such legislation or regulation would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

The tobacco industry has experienced, and is experiencing, significant product liability litigation. Most tobacco liability lawsuits have been brought against manufacturers and sellers of cigarettes for injuries allegedly caused by smoking or exposure to smoke. However, several lawsuits have been brought against manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. Typically, such claims assert that use of smokeless products is addictive and causes oral cancer. Additionally, several lawsuits have been brought against manufacturers and distributors of NewGen products due to malfunctioning devices. There can be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

11

Master Settlement Agreement (MSA):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 chose 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 March 31, 2018, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $30.3 million. At December 31, 2017, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $30.8 million. Effective in the third quarter of 2017, the Company no longer sells any product covered under the MSA. Thus, pending a change in legislation, the Company will no longer be required to make deposits to the MSA escrow account.

The Company has chosen to invest a portion of the MSA escrow deposits in U.S. Government securities including TIPS, Treasury Notes, and Treasury Bonds. These investments are classified as available-for-sale and carried at fair value. Realized losses are prohibited under the MSA; any investment in an unrealized loss position will be held until the value is recovered, or until maturity. The following shows the fair value of the MSA escrow account:

	As of March 31, 2018							As of December 31, 2017
	Cost		Gross Unrealized Losses			Estimated Fair Value		Cost		Gross Unrealized Losses			Estimated Fair Value
Cash and cash equivalents	$	3,072	$	-		$	3,072	$	3,602	$	-		$	3,602
U.S. Governmental agency obligations(unrealized loss position < 12 months)		27,739		(1,706	)		26,033		722		(17	)		705
U.S. Governmental agency obligations (unrealized loss position > 12 months)		1,247		(36	)		1,211		27,733		(1,214	)		26,519
	$	32,058	$	(1,742	)	$	30,316	$	32,057	$	(1,231	)	$	30,826

Fair value for the U.S. Governmental agency obligations are Level 2. The following shows the maturities of the U.S. Governmental agency obligations:

	As of
	March 31, 2018		December 31, 2017
Less than five years	$	7,114	$	7,114
Six to ten years		18,913		17,662
Greater than ten years		2,959		3,679
Total U.S. Governmental agency obligations	$	28,986	$	28,455

12

The following shows the amount of deposits by sales year for the MSA escrow account:

	Deposits as of
Sales Year	March 31, 2018		December 31, 2017
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,714		3,714
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		199		199
2013		173		173
2014		143		143
2015		101		101
2016		81		81
2017		71		70
Total	$	32,058	$	32,057

Food and Drug Administration (“FDA”): On June 22, 2009, the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) authorized the Food and Drug Administration (“FDA”) to immediately regulate the manufacturing, sale, and marketing of four categories of tobacco products – cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. On August 8, 2016, the FDA deeming regulation became effective. The deeming regulation gave the FDA the authority to additionally regulate cigars, pipe tobacco, electronic cigarettes (“e-cigarettes”), vaporizers, and e-liquids as “deemed” tobacco products under the FSPTCA.

The FDA assesses tobacco product user fees on six classes of regulated tobacco products and computes user fees using a methodology similar to the methodology used by the U.S Department of Agriculture to compute the Tobacco Transition Payment Program (“TTPP,” also known as the “Tobacco Buyout”) assessment. First, the total, annual, congressionally established user fee assessment is allocated among the various classes of tobacco products using the federal excise tax weighted market share of tobacco products subject to regulation. Then, the assessment for each class of tobacco products is divided among individual manufacturers and importers.

Prior to October 1, 2016, these FDA user fees applied only to those products then regulated by the FDA. Effective October 1, 2016, the FDA began additionally applying FDA user fees to newly deemed tobacco products subject to FDA user fees as described above, i.e., cigars and pipe tobacco.

On July 28, 2017, the FDA announced a new direction in regulating tobacco products, including the newly “deemed” markets such as cigars and vapor products. The FDA stated it intends to begin several new rulemaking processes, some of which will outline foundational rules governing the premarket application process for the deemed products, including Substantial Equivalence Applications and Premarket Tobacco Applications. Compliance and related costs could be significant and could increase the costs of operating in our NewGen segment. The original filing deadlines for newly “deemed” products on the market as of August 8, 2016, have been postponed until August 8, 2021, for “combustible” products (e.g., cigar and pipe) and August 8, 2022, for “non-combustible” products (e.g., vapor products). No other filing deadlines were altered. The FDA also acknowledged a “continuum of risk” among tobacco products (i.e., certain tobacco products pose a greater risk to individual and public health than others), that it intends to seek public comment on the role flavors play in attracting youth and the role flavors may play in helping some smokers switch to potentially less harmful forms of nicotine delivery, and that it would be increasing its focus on the regulation of cigarette products.

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Recent Accounting Pronouncements Adopted

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP, in the first quarter of 2018 using the modified retrospective method. This ASU requires the recognition of revenue to depict the transfer of goods to customers at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the following five-step analysis:  (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The adoption of this ASU had no effect on the timing or amount of revenue recognition, or on net income.

The Company adopted ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, in the first quarter of 2018 on a prospective basis. This ASU allows entities to make a one-time reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for the effects of remeasuring deferred tax liabilities and assets originally recorded in other comprehensive income as a result of the change in the federal tax rate by the Tax Cuts and Jobs Act (“TCJA”). The adoption of this ASU resulted in a reclassification of stranded tax effects related to the TCJA from accumulated other comprehensive income to retained earnings of less than $0.1 million.

The Company adopted ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, in the first quarter of 2018 using the full retrospective method. This ASU requires an entity to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The adoption of this ASU resulted in a reclassification of less than $0.1 million from cost of sales and selling, general, and administrative expenses to net periodic benefit expense (income), excluding service cost, for both periods presented.

The Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, in the first quarter of 2018 using the full retrospective method. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result of this ASU the Company’s statements of cash flows include changes in restricted cash, such as changes in the portion of the MSA escrow deposits held in cash.

Recent Accounting Pronouncements

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 (the lease 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 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.

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Note 3. Acquisitions

Vapor Shark

In March 2017, the Company entered into a strategic partnership with Vapor Shark in which the Company committed to make a deposit up to $2.5 million to Vapor Shark in exchange for a warrant to purchase 100% of the equity interest in Vapor Shark on or before April 15, 2018.  In the event the Company exercised the warrant, the Company granted Vapor Shark’s sole shareholder the option to purchase from Vapor Shark the retail stores it owns, effective as of January 1, 2018.  In April 2017, the Company entered into a management agreement with Vapor Shark whereby the Company obtained control of the operations. The Company exercised its warrant on June 30, 2017, and obtained 100% ownership of Vapor Shark as of that date for a nominal purchase price. In January 2018, the Company finalized an agreement to pay Vapor Shark’s former sole shareholder total consideration of $1.5 million in exchange for his option to purchase the company-owned stores. The Company paid Vapor Shark’s former sole shareholder $1.0 million in February 2018 with the remaining $0.5 million to be paid in 24 monthly installments.

Note 4. Derivative Instruments

Foreign Currency

The Company’s policy is to manage the risks associated with foreign exchange rate movements. The policy allows hedging up to 100% of its anticipated purchases of inventory over a forward period that will not exceed 12 rolling and consecutive months. The Company may, from time to time, hedge currency for non-inventory purchases, e.g., production equipment, not to exceed 90% of the purchase price. The Company executed various forward contracts during the three months ended March 31, 2018, none of which met hedge accounting requirements, for the purchase of €6.0 million. The Company executed no forward contracts during the three months ended March 31, 2017.  At March 31, 2018, and December 31, 2017, the Company had forward contracts for the purchase of €3.8 million and €0 million, respectively.

Interest Rate Swap

The Company’s policy is to manage interest rate risk by reducing the volatility of future cash flows associated with debt instruments bearing interest at variable rates. In March 2018, the Company executed various interest rate swap agreements for a notional amount of $70 million with an expiration of December 2022. The swap agreements fix LIBOR at 2.755%. The swap agreements met the hedge accounting requirements; thus, any change in fair value is recorded to other comprehensive income. The Company uses the Shortcut Method to account for the swap agreements. The Shortcut Method assumes the hedge to be perfectly effective; thus, there is no ineffectiveness to be recorded in earnings. The swap agreements’ fair values at March 31, 2018, resulted in a liability of $0.7 million included in other long-term liabilities.

Note 5. Fair Value of 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. Thus, the carrying amount is a reasonable estimate of fair value.

Accounts Receivable

The fair value of accounts receivable approximates their carrying value due to their short-term nature.

2018 Revolving Credit Facility

The fair value of the 2018 Revolving Credit Facility approximates its carrying value as the interest rate fluctuates with changes in market rates.

Long-Term Debt

As all of the Company’s long-term debt bears interest at variable rates that fluctuate with market rates, the carrying values of the long-term debt instruments approximate their respective fair values. As of March 31, 2018, the fair values of the 2018 First Lien Term Loan and the 2018 Second Lien Term Loan approximated $160.0 million and $40.0 million, respectively. As of December 31, 2017, the fair values of the 2017 First Lien Term Loans and the 2017 Second Lien Term Loan approximated $140.6 million and $56.1 million, respectively. See Note 9 of Notes to Consolidated Financial Statements for information regarding our current and past credit facilities.

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Foreign Exchange

The Company had forward contracts for the purchase of €3.8 million at March 31, 2018. The Company had no forward contracts outstanding as of December 31, 2017. The fair values of the foreign exchange contracts are based upon quoted market prices and resulted in an insignificant loss for the three months ended March 31, 2018.

Interest Rate Swap

The Company had swap contracts for a total notional amount of $70 million at March 31, 2018. The Company had no swap agreements outstanding at December 31, 2017. The fair values of the swap contracts are based upon quoted market prices and resulted in a liability of $0.7 million as of March 31, 2018.

Note 6. Inventories

The components of inventories are as follows:

	March 31, 2018			December 31, 2017
Raw materials and work in process	$	2,403		$	2,545
Leaf tobacco		29,300			30,308
Finished goods - smokeless products		6,503			5,834
Finished goods - smoking products		11,510			14,110
Finished goods - electronic/vaporizer products		12,910			14,532
Other		699			1,290
		63,325			68,619
LIFO reserve		(5,266	)		(5,323	)
	$	58,059		$	63,296

The inventory valuation allowance was $0.6 million and $0.5 million as of March 31, 2018, and December 31, 2017, respectively.

Note 7. Property, Plant, and Equipment

Property, plant, and equipment consisted of the following:

	March 31, 2018			December 31, 2017
Land	$	22		$	22
Buildings and improvements		2,072			2,072
Leasehold improvements		1,873			1,873
Machinery and equipment		12,960			12,635
Furniture and fixtures		3,857			3,821
		20,784			20,423
Accumulated depreciation		(12,122	)		(11,564	)
	$	8,662		$	8,859

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Note 8. Accrued Liabilities

Accrued liabilities consisted of the following:

	March 31, 2018		December 31, 2017
Accrued payroll and related items	$	2,277	$	5,683
Customer returns and allowances		2,175		2,707
Other		9,134		10,304
	$	13,586	$	18,694

Note 9. Notes Payable and Long-Term Debt

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

	March 31, 2018			December 31, 2017
2018 First Lien Term Loan	$	160,000		$	-
2018 Second Lien Term Loan		40,000			-
2017 First Lien First Out Term Loan		-			105,875
2017 First Lien Second Out Term Loan		-			34,738
2017 Second Lien Term Loan		-			55,000
Note payable - VaporBeast		2,000			2,000
Total notes payable and long-term debt		202,000			197,613
Less deferred finance charges		(3,835	)		(3,573	)
Less current maturities		(10,000	)		(7,850	)
	$	188,165		$	186,190

2018 Credit Facility

On March 7, 2018, the Company entered into a $250 million credit facility consisting of a $160 million 2018 First Lien Term Loan with Fifth Third Bank, as administrative agent, and other lenders, and a $50 million 2018 Revolving Credit Facility (collectively, the “2018 First Lien Credit Facility”) in addition to a $40 million 2018 Second Lien Term Loan (together with the 2018 First Lien Credit Facility, the “2018 Credit Facility”) with Prospect Capital Corporation, as administrative agent, and other lenders. The 2018 Credit Facility retained the $40 million accordion feature of the 2017 Credit Facility. Proceeds from the 2018 Credit Facility were used to repay, in full, the 2017 Credit Facility. The Company incurred a loss on extinguishment of debt of $2.4 million in the first quarter of 2018 as a result of the refinancing.

The 2018 Credit Facility contains customary events of default including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, and change in control defaults. The 2018 Credit Facility also contains certain negative covenants customary for facilities of these types including covenants that, subject to exceptions described in the 2018 Credit Facility, restrict the ability of the Company and its subsidiary guarantors: (i) to pledge assets, (ii) to incur additional indebtedness, (iii) to pay dividends, (iv) to make distributions, (v) to sell assets, and (vi) to make investments. Refer to Note 16 of Notes to Consolidated Financial Statements for further information regarding dividend restrictions.

2018 First Lien Credit Facility: The 2018 First Lien Term Loan and the 2018 Revolving Credit Facility bear interest at LIBOR plus a spread of 2.75% to 3.50% based on the Company’s senior leverage ratio. The 2018 First Lien Term Loan has quarterly required payments of $2.0 million beginning June 30, 2018, increasing to $3.0 million on June 30, 2020, and increasing to $4.0 million on June 30, 2022. The 2018 First Lien Term Loan has a maturity date of March 7, 2023. The 2018 First Lien Credit Facility contains certain financial covenants including maximum senior leverage ratio of 3.50x with step-downs to 3.00x, a maximum total leverage ratio of 4.50x with step-downs to 4.00x, and a minimum fixed charge coverage ratio of 1.20x. The weighted average interest rate of the 2018 First Lien Term Loan was 5.13% at March 31, 2018. The Company had no borrowings outstanding under the 2018 Revolving Credit Facility at March 31, 2018.

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2018 Second Lien Credit Facility: The 2018 Second Lien Credit Facility bears interest at a rate of LIBOR plus 7.00% and has a maturity date of March 7, 2024. The 2018 Second Lien Credit Facility contains certain financial covenants including a maximum senior leverage ratio of 3.75x with step-downs to 3.50x, a maximum total leverage ratio of 4.75x with step-downs to 4.50x, and a minimum fixed charge coverage ratio of 1.10x. The weighted average interest rate of the 2018 Second Lien Term Loan was 8.70% at March 31, 2018.

2017 Credit Facility

On February 17, 2017, the Company and NATC, entered into a $250 million secured credit facility comprised of (i) a First Lien Credit Facility with Fifth Third Bank, as administrative agent, and other lenders (the “2017 First Lien Credit Facility”) and (ii) a Second Lien Credit Facility with Prospect Capital Corporation, as administrative agent, and other lenders (the “2017 Second Lien Credit Facility,” and together with the 2017 First Lien Credit Facility, the “2017 Credit Facility”). The Company used the proceeds of the 2017 Credit Facility to repay, in full, the Company’s First Lien Term Loan, Second Lien Term Loan, and Revolving Credit Facility and to pay related fees and expenses. As a result of this transaction, the Company incurred a loss on extinguishment of debt of $6.1 million during the first quarter of 2017.

The 2017 Credit Facility contained customary events of default including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, and change in control defaults. The 2017 Credit Facility also contained certain negative covenants customary for facilities of these types including covenants that, subject to exceptions described in the 2017 Credit Facility, restricted the ability of the Company and its subsidiary guarantors: (i) to pledge assets, (ii) to incur additional indebtedness, (iii) to pay dividends, (iv) to make distributions, (v) to sell assets, and (vi) to make investments.

2017 First Lien Credit Facility:  The 2017 First Lien Credit Facility consisted of: (i) a $50 million revolving credit facility (the “2017 Revolving Credit Facility”), (ii) a $110 million first out term loan facility (the “2017 First Out Term Loan”), and (iii) a $35 million second out term loan facility (the “2017 Second Out Term Loan”). The 2017 First Lien Credit Facility also included an accordion feature allowing the Company to borrow up to an additional $40 million upon the satisfaction of certain conditions, including obtaining commitments from one or more lenders. Borrowings under the 2017 Revolving Credit Facility could be used for general corporate purposes, including acquisitions.

The 2017 First Out Term Loan and the 2017 Revolving Credit Facility had a maturity date of February 17, 2022, and the 2017 Second Out Term Loan had a maturity date of May 17, 2022. The 2017 First Out Term Loan and the 2017 Revolving Credit Facility bore interest at LIBOR plus a spread of 2.5% to 3.5% based on the Company’s senior leverage ratio. The 2017 First Out Term Loan had quarterly required payments of $1.4 million beginning June 30, 2017, increasing to $2.1 million on June 30, 2019, and increasing to $2.8 million on June 30, 2021. The 2017 Second Out Term Loan bore interest at LIBOR plus 6% (subject to a floor of 1.00%). The 2017 Second Out Term Loan had quarterly required payments of $0.1 million beginning June 30, 2017.  The 2017 First Lien Credit Facility contained certain financial covenants including maximum senior leverage ratio of 3.75x with step-downs to 3.00x, a maximum total leverage ratio of 4.75x with step-downs to 4.00x, and a minimum fixed charge coverage ratio of 1.20x.  The weighted average interest rate at December 31, 2017, on the 2017 Revolving Credit Facility was 5.05%. The weighted average interest rate at December 31, 2017, on the 2017 First Out Term Loan was 4.61%.  The weighted average interest rate at December 31, 2017, on the 2017 Second Out Term Loan was 7.61%.

2017 Second Lien Credit Facility:  The 2017 Second Lien Credit Facility consisted of a $55 million second lien term loan (the “2017 Second Lien Term Loan”) having a maturity date of August 17, 2022. The 2017 Second Lien Term Loan bore interest at a fixed rate of 11%. The 2017 Second Lien Credit Facility contained certain financial covenants including a maximum senior leverage ratio of 4.25x with step-downs to 3.50x, a maximum total leverage ratio of 5.25x with step-downs to 4.50x, and a minimum fixed charge coverage ratio of 1.10x.

Note Payable – VaporBeast

On November 30, 2016, the Company issued a note payable to VaporBeast’s former shareholders (“VaporBeast Note”). The VaporBeast Note is $2.0 million principal with 6% interest compounded monthly and matures on May 30, 2018. The VaporBeast Note may be prepaid at any time without penalty and is subject to a late-payment penalty of 5% and a default rate of 13% per annum. The VaporBeast Note is subject to customary defaults, including defaults for nonpayment, nonperformance, any material breach under the purchase agreement, and bankruptcy or insolvency.

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First Lien Term Loan

Turning Point Brands, Inc. (“TPBI”), along with NATC and its subsidiaries, were guarantors under the First Lien Term Loan.  TPLLC and its sole subsidiary at the date of the agreement, Intrepid, were not guarantors of the First Lien Term Loan. The First Lien Term Loan was 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 or any guarantor, other than certain excluded assets (the “Collateral”).  The loans designated as LIBOR loans bore interest at the LIBOR then in effect (but not less than 1.25%) plus 6.50%, and the loans designated as base rate loans bore 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) 5.50%.

Second Lien Term Loan

The Second Lien Term Loan was secured by a second priority security interest in the Collateral and was guaranteed by the same entities as the First Lien Term Loan. Under the Second Lien Term Loan, the loans designated as LIBOR loans bore interest at LIBOR then in effect (but not less than 1.25%) plus 10.25%.  The loans designated as base rate loans bore 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%.

Revolving Credit Facility

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

Note 10. Income Taxes

In December 2017, the U.S. Congress passed the TCJA which reduced the corporate income tax rate to 21%, effective January 1, 2018. Other significant changes accompanying the corporate income tax rate reduction include eliminating the corporate alternative minimum tax, limiting the interest expense deduction to 30% of adjusted taxable income, and limiting net operating losses to 80% of taxable income for losses arising in tax years beginning after 2017. As a result of the TCJA, the Company was required to remeasure its deferred tax assets and liabilities at the newly enacted rate, resulting in $0.2 million of income tax expense for the three months ended December 31, 2017.

The Company’s effective income tax rate for the three months ended March 31, 2018, was 21%. The Company’s income tax benefit for the three months ended March 31, 2017 does not bear the normal relationship to loss before income taxes because of tax benefits of $2.0 million relating to stock options exercised during the quarter.

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 the Company 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 2014.

Note 11. Pension and Postretirement Benefit Plans

The Company has a defined benefit pension plan. Benefits for hourly employees were based on a stated benefit per year of service, reduced by amounts earned in a previous plan. Benefits for salaried employees were based on years of service and the employees’ final compensation. The defined benefit pension plan is frozen.  The Company’s policy is to make the minimum amount of contributions that can be deducted for federal income taxes. The Company expects to make no contributions to the pension plan in 2018.

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The Company 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. The Company’s policy is to make contributions equal to benefits paid during the year. The Company expects to contribute approximately $0.3 million to its postretirement plan in 2018 for the payment of benefits.

The following table provides the components of net periodic pension and postretirement benefit costs and total costs for the plans:

	Three Months Ended March 31,
	Pension Benefits						Postretirement Benefits
	2018			2017			2018			2017
Service cost	$	26		$	26		$	-		$	-
Interest cost		142			170			29			58
Expected return on plan assets		(254	)		(256	)		-			-
Amortization of (gains) losses		60			120			(20	)		-
Net periodic benefit cost (income)	$	(26	)	$	60		$	9		$	58

Note 12. 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”), pursuant to which awards 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 the Company’s voting common stock are reserved for issuance as awards to employees, non-employee directors, and consultants 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 vesting criteria for the awards, with such criteria to be specified in the award agreement. As of March 31, 2018, there were 20,727 shares of restricted stock, 184,000 performance-based restricted stock units, and 301,792 options outstanding under the 2015 Plan. There are 893,481 shares available for grant under the 2015 Plan.

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

On February 7, 2017, the Board of Directors of the Company approved stock option cash-out agreements with three Company officers and a director for the surrender of 83,400 expiring stock options in exchange for payment to the option holders of $11.99 per share. This payment equaled the difference between the exercise price of $1.06 and closing stock price of $13.05 on the approval date, or an aggregate of $1.0 million.

There are no shares available for grant under the 2006 Plan. Stock option activity for the 2006 and 2015 Plans is summarized below:

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	Stock Option Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Outstanding, December 31, 2016		1,637,762		$	2.41	$	1.23
Granted		133,819			14.69		4.41
Exercised		(923,708	)		1.55		0.83
Forfeited		(801	)		15.37		4.59
Surrendered		(83,400	)		1.06		0.54
Outstanding, December 31, 2017		763,672			5.73		2.36
Granted		124,100			21.27		6.39
Exercised		(12,501	)		1.61		0.87
Forfeited		(9,323	)		10.96		2.99
Outstanding, March 31, 2018		865,948		$	7.96	$	2.95

Under the 2006 Plan, the total intrinsic value of options exercised during the three months ended March 31, 2018 and 2017, was $0.3 million, and $4.7 million, respectively.  The total intrinsic value of options surrendered during the three months ended March 31, 2017, was $1.0 million.

At March 31, 2018, under the 2006 Plan, the outstanding stock options’ exercise price for 92,535 options is $1.06 per share, all of which are exercisable. The outstanding stock options’ exercise price for 471,621 options is $3.83 per share, all of which are exercisable. The weighted average of the remaining lives of the outstanding stock options is approximately 0.60 years for the options with the $1.06 exercise price and 5.06 years for the options with the $3.83 exercise price. The Company estimates the expected life of these 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, a risk-free interest rate of 4.37%, 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, a risk-free interest rate of 3.57%, 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.

At March 31, 2018, under the 2015 Plan, the risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. The expected volatility is based on the average long-term historical volatilities of peer companies. We intend to continue to consistently use the same group of publicly traded peer companies to determine expected volatility until sufficient information regarding volatility of our share price becomes available or until the selected companies are no longer suitable for this purpose. Due to our limited trading history, we are using the simplified method presented by SEC Staff Accounting Bulletin No. 107 to calculate expected holding periods, which represent the periods of time for which options granted are expected to be outstanding. We will continue to use this method until we have sufficient historical exercise experience to give us confidence in the reliability of our calculations. The fair values of these options were determined using the Black-Scholes option pricing model.

The following table outlines the assumptions based on the number of options granted under the 2015 Plan.

	August 10, 2016, Grant			February 10, 2017, Grant			May 17, 2017, Grant			March 7, 2018, Grant			March 13, 2018, Grant
Number of options granted		53,996			40,000			93,819			98,100			26,000
Options outstanding at March 31, 2018		47,247			40,000			90,445			98,100			26,000
Number exercisable at March 31, 2018		47,247			13,600			31,898			-			8,840
Exercise price	$	9.26		$	13.00		$	15.41		$	21.21		$	21.49
Remaining lives		0.18			8.87			9.13			9.94			9.96
Risk free interest rate		1.16	%		1.89	%		1.76	%		2.65	%		2.62	%
Expected volatility		25.40	%		27.44	%		26.92	%		28.76	%		28.76	%
Expected life		5.375			6.000			6.000			6.000			5.495
Dividend yield		-			-			-			0.83	%		0.82	%
Fair value at grant date	$	2.37		$	3.98		$	4.60		$	6.37		$	6.18

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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 related to the options of approximately $0.1 million for the three months ended March 31, 2018 and 2017. Total unrecognized compensation expense related to options at March 31, 2018, is $0.9 million, which will be expensed over 2.49 years.

Performance-Based Restricted Stock Units (“PRSUs”)

PRSUs are restricted stock units subject to both performance-based and service-based vesting conditions. The number of common stock shares a recipient will receive upon vesting of a PRSU will be calculated by reference to certain performance metrics related to the Company’s performance over a five-year period.  PRSUs will vest on the measurement date, which is no more than 65 days after the performance period (provided the applicable service and performance conditions are satisfied). On March 31, 2017, the Company’s Board of Directors granted 94,000 PRSUs to employees of the Company. On March 7, 2018, the Company’s Board of Directors granted an additional 96,000 PRSUs to employees of the Company. The fair values of the PRSUs granted on March 31, 2017, and March 7, 2018, are $15.60 and $21.21, respectively, the Company’s stock price on the date of grant. As of March 31, 2018, there are 184,000 PRSUs outstanding, all of which are unvested. The Company recorded compensation expense related to the PRSUs of approximately $0.1 million in the consolidated statements of income for the three months ended March 31, 2018, based on the probability of achieving the performance condition. Total unrecognized compensation expense related to these awards at March 31, 2018, is $3.1 million which will be expensed over the service periods based on the probability of achieving the performance condition.

Note 13. Contingencies

Other major tobacco companies are defendants in product liability claims. In a number of these cases, the amounts of punitive and compensatory damages sought are significant and could have a material adverse effect on our business and results of operations. The Company is a defendant in certain cases which have been dormant for many years. Plaintiffs’ counsel are in the process of voluntarily dismissing those claims.

The Company is subject to several lawsuits alleging personal injuries resulting from malfunctioning vaporizer devices and may be subject to claims in the future relating to other NewGen products. The Company is still evaluating these claims and the potential defenses to them.  For example, the Company did not design or manufacture the products at issue; rather, the Company was merely the distributor.  Nonetheless, there can be no assurance that the Company will prevail in these cases, and they could have a material adverse effect on the financial position, results of operations, or cash flows of the Company.

Note 14. Income 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 March 31,
	2018						2017
	Income		Shares		Per Share		Income		Shares		Per Share
Consolidated net income	$	3,032					$	1,877
Basic EPS:
Weighted average				19,221,892	$	0.16				18,734,393	$	0.10
Diluted EPS:
Effect of dilutive securities:
Stock options and warrants				540,302						898,960
				19,762,194	$	0.15				19,633,353	$	0.10

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Note 15. Segment Information

In accordance with ASC 280, Segment Reporting, the Company has three reportable segments: Smokeless products, Smoking products, and NewGen products. The Smokeless products segment (i) manufactures and markets moist snuff and (ii) contracts for and markets chewing tobacco products. The Smoking products segment (i) imports and markets cigarette papers, tubes, and related products; (ii) imports and markets finished cigars, MYO cigar tobaccos, and cigar wraps; and (iii) processes, packages, markets, and distributes traditional pipe tobaccos. The NewGen products segment (i) markets e-cigarettes, e-liquids, vaporizers, and other related products; (ii) distributes a wide assortment of vaping products to non-traditional retail outlets via VaporBeast and Vapor Shark, and (iii) distributes a wide assortment of vaping related products to individual consumers via Vapor Shark branded retail outlets. Smokeless and Smoking products are distributed primarily through wholesale distributors in the United States while NewGen products are distributed primarily through e-commerce to non-traditional retail outlets in the United States. The Other segment includes the costs and assets of the Company not assigned to one of the three reportable segments such as intercompany transfers, deferred taxes, deferred financing fees, and investments in subsidiaries.

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 gross 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:

	Three Months Ended March 31,
	2018			2017
Net sales
Smokeless products	$	20,747		$	20,248
Smoking products		26,996			27,177
NewGen products		26,199			19,363
	$	73,942		$	66,788
Operating income (loss)
Smokeless products	$	4,486		$	3,611
Smoking products		6,894			8,048
NewGen products		(1,496	)		(664	)
Other (1)		(143	)		(146	)
	$	9,741		$	10,849
Interest expense		(3,654	)		(4,933	)
Investment income		95			114
Loss on extinguishment of debt		(2,384	)		(6,116	)
Net periodic benefit income (expense), excluding service cost		43			(92	)
Income before income taxes	$	3,841		$	(178	)
Capital expenditures
Smokeless products	$	349		$	366
NewGen products		14			2
	$	363		$	368
Depreciation and amortization
Smokeless products	$	339		$	352
NewGen products		396			177
	$	735		$	529
(1) '"Other" includes the costs and assets that are not assigned to the three reportable segments, such as intercompany transfers, deferred taxes, and investments in subsidiaries. All goodwill has been allocated to the reportable segments.

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	March 31, 2018			December 31, 2017
Assets
Smokeless products	$	97,279		$	94,559
Smoking products		139,872			141,869
NewGen products		43,922			44,914
Other (1)		(2,648	)		935
	$	278,425		$	282,277
(1) '"Other" includes the costs and assets that are not assigned to the three reportable segments, such as intercompany transfers, deferred taxes, and investments in subsidiaries. All goodwill has been allocated to the reportable segments.

Revenue Disaggregation—Sales Channel

Revenues of the Smokeless and Smoking segments are 100% comprised of sales made to wholesalers while NewGen sales are made to wholesalers, retailers, and ultimate end-customers. NewGen net sales are broken out by sales channel below.

	Three Months Ended March 31,
	2018		2017
Wholesalers	$	2,330	$	2,474
Retail outlets		20,884		15,777
End-customers		2,935		1,112
Other		50		-
	$	26,199	$	19,363

Net Sales—Domestic vs. Foreign

The following table shows a breakdown of consolidated net sales between domestic and foreign customers.

	Three Months Ended March 31,
	2018		2017
Domestic	$	70,858	$	64,371
Foreign		3,084		2,417
Total	$	73,942	$	66,788

Note 16. Dividends

On November 9, 2017, the Company’s Board of Directors approved the initiation of a cash dividend to shareholders.  The initial quarterly dividend of $0.04 per common share was paid on December 15, 2017, to shareholders of record at the close of business on November 27, 2017. The most recent dividend of $0.04 per common share was paid on April 13, 2018, to shareholders of record at the close of business on March 26, 2018.

Dividends are classified as restricted payments within the 2018 Credit Facility. The Company is generally permitted to make restricted payments provided that, at the time of payment, or as a result of payment, the Company is not in default on its debt covenants. Additional restrictions limit the aggregate amount of restricted, quarterly dividends during a fiscal year to the aggregate amount of mandatory and voluntary principal payments made on the priority term loans during the fiscal year.

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Note 17. Subsequent Event

On April 30, 2018, the Company acquired the related assets of Vapor Supply, Vapor Supply.com, and some of its affiliates for total consideration of $4.8 million paid in cash.  The Company is in the process of assigning fair value to the assets acquired which primarily consist of inventory, fixed assets, and intangible assets.

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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 historical condensed consolidated financial statements and accompanying notes, which are included elsewhere in this Quarterly Report on Form 10-Q. In addition, this discussion includes forward-looking statements 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 discussed in “Risk Factors.”

The following discussion relates to the unaudited financial statements of Turning Point Brands, Inc., 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 its 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.

Organizational Structure

We, Turning Point Brands, Inc., are a holding company which owns North Atlantic Trading Company, Inc. (“NATC”), and its subsidiaries National Tobacco Company, L.P. (“NTC”), National Tobacco Finance, LLC (“NTFLLC”), North Atlantic Operating Company, Inc. (“NAOC”), North Atlantic Cigarette Company, Inc. (“NACC”), and RBJ Sales, Inc. (“RBJ”), and Turning Point Brands, LLC (“TPLLC”), and its subsidiaries Intrepid Brands, LLC (“Intrepid”), VaporBeast, LLC (“VaporBeast”, f/k/a Smoke Free Technologies, Inc.), and Vapor Shark, LLC, and its subsidiaries (collectively, “Vapor Shark”, f/k/a The Hand Media).

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 tobacco (“MST”), loose leaf chewing tobacco, premium cigarette papers, make-your-own (“MYO”) cigar wraps, cigars, liquid vapor products, and tobacco vaporizer products; but, we do not sell cigarettes. We estimate the OTP industry generated approximately $11 billion in manufacturer revenue in 2017. In contrast to manufactured cigarettes, which have been experiencing declining volumes for decades based on data published by the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), the OTP industry is demonstrating increased consumer appealwith low- to mid-single digit consumer unit growth as reported byManagement Science Associates, Inc. (“MSAi”), a third-party analytics and informatics company. Under the leadership of a senior management team with an average of 22 years of experience in the tobacco industry, we have grown and diversified our business through new product launches, category expansions, and acquisitions while concurrently improving operational efficiency.

Products

We operate in three segments: (i) Smokeless products, (ii) Smoking products and (iii) NewGen products. In our Smokeless products segment we manufacture and market moist snuff and contract for and market loose leaf chewing tobacco products. In our Smoking products segment, we (i) market and distribute cigarette papers and related products; (ii) market and distribute MYO cigar wraps, and cigars; and (iii) package, market, and distribute traditional pipe tobaccos. In our NewGen products segment, we (i) market and distribute liquid vapor products, tobacco vaporizer products, and certain other products without tobacco and/or nicotine; (ii) distribute a wide assortment of vaping related products to non-traditional retail via VaporBeast and Vapor Shark; and (iii) distribute a wide assortment of vaping related products to individual consumers via Vapor Shark branded retail outlets. Refer to the ‘Recent Developments’ section below for details regarding the VaporBeast and Vapor Shark acquisitions. Our portfolio of brands includes some of the most widely recognized names in the OTP industry such as Stoker’s^® in the Smokeless segment, Zig-Zag^® in the Smoking segment, and VaporBeast^® in the NewGen segment.

Operations

Our core tobacco business (Smokeless and Smoking segments) primarily generates revenues from the sale of our products to wholesale distributors who, in turn, resell the products to retail operations. Our acquisition of VaporBeast in November 2016 expanded our revenue streams as we began selling directly to non-traditional retail outlets and to ultimate consumers via non-traditional retail outlets as well. Our acquisition of Vapor Shark further expanded our selling network by allowing us to directly reach ultimate consumers through Vapor Shark branded retail outlets. Our net sales, which include federal excise taxes, consist of gross sales net of cash discounts, returns, and selling and marketing allowances.

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We rely on long-standing relationships with high-quality, established manufacturers to provide the majority of our produced products. Approximately 86% of our production, as measured by gross sales, is outsourced to suppliers. The remaining 14% represents our moist snuff tobacco operations located in Dresden, TN, the packaging of our pipe tobacco in Louisville, KY, and our Vapor Shark e-liquids operations located in Miami, FL. Our principal operating expenses include the cost of raw materials used to manufacture the limited number of our products which we produce in-house; the cost of finished products, which are generally purchased goods; federal excise taxes; legal expenses; and compensation expenses, including benefits and costs of salaried personnel. Our other principal expenses include interest expense among other expenses.

Key Factors Affecting Our Results of Operations

We consider the following 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 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;

· Currency fluctuations;

· Our ability to identify attractive acquisition opportunities in OTP; and

· Our ability to integrate acquisitions.

Recent Developments

On April 30, 2018, we acquired the related assets of Vapor Supply, Vapor Supply.com, and some of its affiliates for total consideration of $4.8 million paid in cash. We are in the process of assigning fair value to the assets acquired which primarily consist of inventory, fixed assets, and intangible assets.

Credit Facility Refinancing

On March 7, 2018, we entered into a $250 million credit facility consisting of a $160 million 2018 First Lien Term Loan with Fifth Third Bank, as administrative agent, and other lenders, and a $50 million 2018 Revolving Credit Facility (collectively, the “2018 First Lien Credit Facility”) in addition to a $40 million 2018 Second Lien Term Loan (together with the 2018 First Lien Credit Facility, the “2018 Credit Facility”) with Prospect Capital Corporation, as administrative agent, and other lenders. The 2018 Credit Facility retained the $40 million accordion feature of the 2017 Credit Facility. Proceeds from the 2018 Credit Facility were used to repay, in full, the 2017 Credit Facility. We incurred a loss on extinguishment of debt of $2.4 million in the first quarter of 2018 as a result of the refinancing. Refer to the ‘Long-Term Debt’ section for a more complete description of our credit facilities.

Other Developments

On November 9, 2017, our Board of Directors approved the initiation of a cash dividend to shareholders. The initial quarterly dividend of $0.04 per common share was paid on December 15, 2017, to shareholders of record at the close of business on November 27, 2017. The most recent dividend of $0.04 per common share was paid on April 13, 2018, to shareholders of record at the close of business on March 26, 2018.

On July 28, 2017, the U.S. Food and Drug Administration (“FDA”) announced a new direction in regulating tobacco products, including the newly “deemed” markets such as cigars and vapor products. FDA stated it intends to begin several new rulemaking processes, some of which will outline foundational rules governing the premarket application process for the deemed products, including Substantial Equivalence Applications and Premarket Tobacco Applications. Compliance and related costs could be significant and could increase the costs of operating in our NewGen Segment. Refer to Note 2 of Notes to Consolidated Financial Statements for further details regarding this new direction and other applicable FDA announcements.

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On June 30, 2017, we filed a Form S-3 Registration Statement with the Securities and Exchange Commission providing for the potential to offer up to $200 million in the aggregate of our common stock, preferred stock, depository shares, warrants, and units, as well as a secondary offering and sale of up to approximately 12.8 million shares of TPB common stock by selling shareholders. We currently have no plans to utilize the offering; however, we believe it provides future flexibility as we continue to drive our strategic organic growth and acquisition initiatives.

In March 2017, we entered into a strategic partnership with The Hand Media, d/b/a Vapor Shark (“Vapor Shark”), a leading distributor and manufacturer of premium vaping e-liquids with nationwide distribution through independent retail vape shops as well as Vapor Shark branded retail locations.  Refer to Note 3 of Notes to Consolidated Financial Statements for additional details regarding the Vapor Shark acquisition.

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 2017 Annual Report on Form 10-K with the exception of the items listed below.

Revenue Recognition

We adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP, on January 1, 2018. We recognize revenues, net of sales incentives and sales returns, including shipping and handling charges billed to customers, upon delivery of goods to the customer at an amount that we expect to be entitled to in exchange for those goods in accordance with the five-step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied.

A further requirement of ASU 2014-09 is for entities to disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Our management views business performance through segments that closely resemble the performance of major product lines. Thus, the primary, and most useful, disaggregation of our contract revenue for decision making purposes is the disaggregation by segment which can be found in Note 15 of Notes to Consolidated Financial Statements. An additional disaggregation of contract revenue by sales channel can be found within Note 15 as well.

Interest Rate Swaps

We enter into interest rate swap contracts to manage interest rate risk and reduce the volatility of future cash flows. We account for interest rate swap contracts under the provisions of ASC 815, Derivatives and Hedging. Swap contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these swap contracts are transferred from other comprehensive income into net income upon settlement of the derivative position or at maturity of the interest rate swap contract. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Recent Accounting Pronouncements Adopted

We adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP, in the first quarter of 2018 using the modified retrospective method. This ASU requires the recognition of revenue to depict the transfer of goods to customers at an amount that we expect to be entitled to in exchange for those goods in accordance with the following five-step analysis:  (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The adoption of this ASU had no effect on the timing or amount of revenue recognition, or on net income.

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We adopted ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, in the first quarter of 2018 on a prospective basis. This ASU allows entities to make a one-time reclassification from accumulated other comprehensive income (AOCI) to retained earnings for the effects of remeasuring deferred tax liabilities and assets originally recorded in other comprehensive income as a result of the change in the federal tax rate by the Tax Cuts and Jobs Act (“TCJA”). The adoption of this ASU resulted in a reclassification of stranded tax effects related to the TCJA from accumulated other comprehensive income to retained earnings of less than $0.1 million.

We adopted ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, in the first quarter of 2018 using the full retrospective method. This ASU requires an entity to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The adoption of this ASU resulted in a reclassification of less than $0.1 million from cost of sales and selling, general, and administrative expenses to net periodic benefit expense (income), excluding service cost, for both periods presented.

We adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, in the first quarter of 2018 using the full retrospective method. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result of this ASU our statements of cash flows include changes in restricted cash, such as changes in the portion of the MSA escrow deposits held in cash.

Recent Accounting Pronouncements

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 (the lease 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 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. We are currently evaluating the effect the adoption of this standard will have on our financial statements.

Results of Operations

Summary

The table and discussion set forth below displays our consolidated results of operations (in thousands):

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	Three Months Ended March 31,
	2018			2017			% Change
Consolidated Results of Operations Data:
Net sales
Smokeless products	$	20,747		$	20,248			2.5	%
Smoking products		26,996			27,177			-0.7	%
NewGen products		26,199			19,363			35.3	%
Total net sales		73,942			66,788			10.7	%
Cost of sales		42,133			39,116			7.7	%
Gross profit
Smokeless products		10,993			9,260			18.7	%
Smoking products		13,164			13,700			-3.9	%
NewGen products		7,652			4,712			62.4	%
Total gross profit		31,809			27,672			15.0	%
Selling, general, and administrative expenses		22,068			16,823			31.2	%
Operating income		9,741			10,849			-10.2	%
Interest expense		3,654			4,933			-25.9	%
Investment income		(95	)		(114	)		-16.7	%
Loss on extinguishment of debt		2,384			6,116			-61.0	%
Net periodic benefit expense (income), excluding service cost		(43	)		92			-146.7	%
Income (loss) before income taxes		3,841			(178	)		-2257.9	%
Income tax expense (benefit)		809			(2,055	)		-139.4	%
Consolidated net income	$	3,032		$	1,877			61.5	%

Comparison of the Three Months Ended March 31, 2018, to the Three Months Ended March 31, 2017

Net Sales:  For the three months ended March 31, 2018, consolidated net sales increased to $73.9 million from $66.8 million for the three months ended March 31, 2017, an increase of $7.2 million or 10.7%. The increase in net sales was primarily driven by volume growth in the NewGen segment which includes the acquisition of Vapor Shark in the second quarter of 2017.

For the three months ended March 31, 2018, net sales in the Smokeless products segment increased to $20.7 million from $20.2 million for the three months ended March 31, 2017, an increase of $0.5 million or 2.5%.  For the three months ended March 31, 2018, volume increased 0.4% and price/mix increased 2.1%. Net sales growth was primarily driven by the continuing growth of Stoker’s^® MST.

For the three months ended March 31, 2018, net sales in the Smoking products segment decreased to $27.0 million from $27.2 million for the three months ended March 31, 2017, a decrease of $0.2 million or 0.7%. For the three months ended March 31, 2018, Smoking products volumes decreased 0.3% while price/mix decreased 0.4%. The decrease in net sales is due to an increase in cigarette papers sales of $1.0 million offset by a $1.2 million decrease related to our decision to deemphasize the low margin cigar products business and the discontinuation of our MYO tobacco line.

For the three months ended March 31, 2018, net sales in the NewGen products segment increased to $26.2 million from $19.4 million for the three months ended March 31, 2017, an increase of $6.8 million or 35.3%. The increase in net sales was primarily driven by progress against our goal to grow sales in the existing store base and the acquisition of Vapor Shark in the second quarter of 2017.

Gross Profit:  For the three months ended March 31, 2018, consolidated gross profit increased to $31.8 million from $27.7 million for the three months ended March 31, 2017, an increase of $4.1 million or 15.0%, primarily due to increased net sales and a favorable LIFO impact when compared to the prior year period.  Gross margin increased to 43.0% for the three months ended March 31, 2018, from 41.4% for the three months ended March 31, 2017, primarily due to a favorable impact of LIFO when compared to the prior year period.

For the three months ended March 31, 2018, gross profit in the Smokeless products segment increased to $11.0 million from $9.3 million for the three months ended March 31, 2017, an increase of $1.7 million or 18.7%.  Gross profit as a percentage of net sales increased to 53.0% of net sales for the three months ended March 31, 2018, from 45.7% of net sales for the three months ended March 31, 2017. The increase in gross margin is due to a favorable LIFO impact when compared to the prior year period.

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For the three months ended March 31, 2018, gross profit in the Smoking products segment decreased to $13.2 million from $13.7 million for the three months ended March 31, 2017, a decrease of $0.5 million or 3.9%.  Gross profit as a percentage of net sales decreased to 48.8% of net sales for the three months ended March 31, 2018, from 50.4% of net sales for the three months ended March 31, 2017, primarily due to an adverse year-over-year Euro exchange rate impact.

For the three months ended March 31, 2018, gross profit in the NewGen products segment increased to $7.7 million from $4.7 million for the three months ended March 31, 2017, an increase of $2.9 million or 62.4%. Gross profit as a percentage of net sales increased to 29.2% of net sales for the three months ended March 31, 2018, from 24.3% of net sales for the three months ended March 31, 2017, primarily as a result of the inclusion of Vapor Shark in 2018, which generally has higher margins.

Selling, General, and Administrative Expenses:  For the three months ended March 31, 2018, selling, general, and administrative expenses increased to $22.1 million from $16.8 million for the three months ended March 31, 2017, an increase of $5.2 million or 31.2%, due primarily to the inclusion of Vapor Shark’s expenses in 2018, higher legal and litigation expenses associated with our anti-counterfeiting initiatives, non-recurring departmental reorganization expenses, and variable costs associated with increased sales at VaporBeast.

Interest Expense:  For the three months ended March 31, 2018, interest expense decreased to $3.7 million from $4.9 million for the three months ended March 31, 2017, as a result of lower interest rates from our February 2017 and March 2018 refinancings of our credit facilities.

Income Tax Expense (Benefit):  Our income tax expense of $0.8 million was 21.1% of income before income taxes for the three months ended March 31, 2018. Our income tax benefit for the three months ended March 31, 2017, is primarily a result of tax benefits from the exercise of stock options during the quarter.

Investment Income:  Investment income relating to investment of the MSA escrow deposits was approximately $0.1 million for the three months ended March 31, 2018 and 2017.

Loss on Extinguishment of Debt:  For the three months ended March 31, 2018, loss on extinguishment of debt was $2.4 million as the result of refinancing our credit facility in the first quarter of 2018.  For the three months ended March 31, 2017, loss on extinguishment of debt was $6.1 million as the result of refinancing our credit facility in the first quarter of 2017.

Consolidated Net Income:  Due to the factors described above, net income for the three months ended March 31, 2018 and 2017, was $3.0 million and $1.9 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 operating performance. In addition, our credit agreements contain financial covenants which use Adjusted EBITDA calculations.

We define “EBITDA” as net income before interest expense, loss on extinguishment of debt, provision for income taxes, depreciation, and amortization. We define “Adjusted EBITDA” as net income before interest expense, loss on extinguishment of debt, provision for income taxes, depreciation, amortization, other non-cash items, and other items 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 required to be recorded in our financial statements by U.S. GAAP and is subject to inherent limitations. 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 reconciliations between net income and Adjusted EBITDA.

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(in thousands)	Three Months Ended March 31,
	2018			2017
Consolidated net income	$	3,032		$	1,877
Add:
Interest expense		3,654			4,933
Loss on extinguishment of debt		2,384			6,116
Income tax expense (benefit)		809			(2,055	)
Depreciation expense		560			354
Amortization expense		175			175
EBITDA	$	10,614		$	11,400
Components of Adjusted EBITDA
LIFO adjustment (a)		(57	)		1,189
Pension/postretirement expense (b)		(17	)		118
Stock options, restricted stock, and incentives expense (c)		197			45
Foreign exchange hedging (d)		46			(69	)
Product line rationalizations (e)		1,008			-
Strategic initiatives (f)		599			327
New product launch costs (g)		682			628
Organizational development (h)		636			-
Adjusted EBITDA	$	13,708		$	13,638

(a) Represents 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 stock options, restricted stock and incentives expense.

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

(e) Represents costs associated with discontinued products related to product line rationalization.

(f) Represents the fees incurred for the study of strategic initiatives and acquisition expenses.

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

(h) Represents costs associated with departmental restructuring.

Liquidity and Capital Reserves

Our principal uses for cash are working capital, debt service, and capital expenditures. We believe our cash flows from operations and borrowing availability under our 2018 Revolving Credit Facility (as defined herein) are adequate to satisfy our operating cash requirements for the foreseeable future.

Our working capital, which we define as current assets less current liabilities, increased $5.0 million to $46.3 million at March 31, 2018, compared with $41.3 million at December 31, 2017. The increase in working capital is due to the paying down the balance of our 2018 Revolving Credit Facility and a reduction in accrued liabilities partially offset by a decrease in inventory, an increase in accounts payable, and an increase in the portion of our debt possessing current maturities due to our 2018 refinancing.

	As of
(in thousands)	March 31, 2018		December 31, 2017
Current assets	$	76,521	$	79,493
Current liabilities		30,227		38,230
Working capital	$	46,294	$	41,263

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Cash Flows from Operating Activities

For the three months ended March 31, 2018, net cash provided by operating activities was $8.4 million compared to net cash used in operating activities of $2.3 million for the three months ended March 31, 2017, an increase of $10.8 million or 460%, principally due to working capital changes.

Cash Flows from Investing Activities

For the three months ended March 31, 2018, net cash used in investing activities was $0.9 million compared to net cash provided by investing activities of $0.8 million for the three months ended March 31, 2017, a decrease of $1.7 million or 208%, primarily due to changes in restricted cash relating to our MSA escrow account.

Cash Flows from Financing Activities

For the three months ended March 31, 2018, net cash used in financing activities was $6.9 million compared to net cash provided by in financing activities of $2.1 million for the three months ended March 31, 2017, a decrease of $9.0 million or 429%, primarily due to payments on our 2017 Revolving Credit Facility in the first quarter of 2018.

Long-Term Debt

As of March 31, 2018, we were in compliance with the financial and restrictive covenants of the 2018 Credit Facility. The following table provides outstanding balances of our debt instruments.

(in thousands)	March 31,			December 31,
	2018			2017
2018 Revolving Credit Facility	$	-		$	-
2018 First Lien Term Loan		160,000			-
2018 Second Lien Term Loan		40,000			-
2017 Revolving Credit Facility		-			8,000
2017 First Lien First Out Term Loan		-			105,875
2017 First Lien Second Out Term Loan		-			34,738
2017 Second Lien Term Loan		-			55,000
Notes payable - VaporBeast		2,000			2,000
		202,000			205,613
Less deferred financing charges		(3,835	)		(3,573	)
Less revolving credit facility		-			(8,000	)
Less current maturities of long-term debt		(10,000	)		(7,850	)
Notes payable and long-term debt	$	188,165		$	186,190

2018 Credit Facility

The 2018 Credit Facility contains customary events of default including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, and change in control defaults. The 2018 Credit Facility also contains certain negative covenants customary for facilities of these types including covenants that, subject to exceptions described in the 2018 Credit Facility, restrict our ability: (i) to pledge assets, (ii) to incur additional indebtedness, (iii) to pay dividends, (iv) to make distributions, (v) to sell assets, and (vi) to make investments. Refer to Note 16 of Notes to Consolidated Financial Statements for further information regarding dividend restrictions.

2018 First Lien Credit Facility: The 2018 First Lien Term Loan and the 2018 Revolving Credit Facility bear interest at LIBOR plus a spread of 2.75% to 3.50% based on our senior leverage ratio. The 2018 First Lien Term Loan has quarterly required payments of $2.0 million beginning June 30, 2018, increasing to $3.0 million on June 30, 2020, and increasing to $4.0 million on June 30, 2022. The 2018 First Lien Term Loan has a maturity date of March 7, 2023. The 2018 First Lien Credit Facility contains certain financial covenants including maximum senior leverage ratio of 3.50x with step-downs to 3.00x, a maximum total leverage ratio of 4.50x with step-downs to 4.00x, and a minimum fixed charge coverage ratio of 1.20x. The weighted average interest rate of the 2018 First Lien Term Loan was 5.13% at March 31, 2018. We had no borrowings outstanding under the 2018 Revolving Credit Facility at March 31, 2018.

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2018 Second Lien Credit Facility: The 2018 Second Lien Credit Facility bears interest at a rate of LIBOR plus 7.00% and has a maturity date of March 7, 2024. The 2018 Second Lien Credit Facility contains certain financial covenants including a maximum senior leverage ratio of 3.75x with step-downs to 3.50x, a maximum total leverage ratio of 4.75x with step-downs to 4.50x, and a minimum fixed charge coverage ratio of 1.10x. The weighted average interest rate of the 2018 Second Lien Term Loan was 8.70% at March 31, 2018.

2017 Credit Facility

On February 17, 2017, Turning Point Brands, Inc., and NATC entered into a $250 million secured credit facility comprised of (i) a First Lien Credit Facility with Fifth Third Bank, as administrative agent, and other lenders (the “2017 First Lien Credit Facility”) and (ii) a Second Lien Credit Facility with Prospect Capital Corporation, as administrative agent, and other lenders (the “2017 Second Lien Credit Facility,” and together with the 2017 First Lien Credit Facility, the “2017 Credit Facility”). We used the proceeds of the 2017 Credit Facility to repay, in full, our First Lien Term Loan, Second Lien Term Loan, and Revolving Credit Facility and to pay related fees and expenses. As a result of this transaction, we incurred a loss on extinguishment of debt of $6.1 million during the first quarter of 2017.

The 2017 Credit Facility contained customary events of default including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, and change in control defaults. The 2017 Credit Facility also contained certain negative covenants customary for facilities of these types including covenants that, subject to exceptions described in the 2017 Credit Facility, restricted the ability of Turning Point Brands, Inc., and its subsidiary guarantors: (i) to pledge assets, (ii) to incur additional indebtedness, (iii) to pay dividends, (iv) to make distributions, (v) to sell assets, and (vi) to make investments.

2017 First Lien Credit Facility:  The 2017 First Lien Credit Facility consisted of: (i) a $50 million revolving credit facility (the “2017 Revolving Credit Facility”), (ii) a $110 million first out term loan facility (the “2017 First Out Term Loan”), and (iii) a $35 million second out term loan facility (the “2017 Second Out Term Loan”). The 2017 First Lien Credit Facility also included an accordion feature allowing us to borrow up to an additional $40 million upon the satisfaction of certain conditions, including obtaining commitments from one or more lenders. Borrowings under the 2017 Revolving Credit Facility could be used for general corporate purposes, including acquisitions.

The 2017 First Out Term Loan and the 2017 Revolving Credit Facility had a maturity date of February 17, 2022, and the 2017 Second Out Term Loan had a maturity date of May 17, 2022. The 2017 First Out Term Loan and the 2017 Revolving Credit Facility bore interest at LIBOR plus a spread of 2.5% to 3.5% based on our senior leverage ratio. The 2017 First Out Term Loan had quarterly required payments of $1.4 million beginning June 30, 2017, increasing to $2.1 million on June 30, 2019, and increasing to $2.8 million on June 30, 2021. The 2017 Second Out Term Loan bore interest at LIBOR plus 6% (subject to a floor of 1.00%). The 2017 Second Out Term Loan had quarterly required payments of $0.1 million beginning June 30, 2017.  The 2017 First Lien Credit Facility contained certain financial covenants including maximum senior leverage ratio of 3.75x with step-downs to 3.00x, a maximum total leverage ratio of 4.75x with step-downs to 4.00x, and a minimum fixed charge coverage ratio of 1.20x.  The weighted average interest rate at December 31, 2017, on the 2017 Revolving Credit Facility was 5.05%. The weighted average interest rate at December 31, 2017, on the 2017 First Out Term Loan was 4.61%.  The weighted average interest rate at December 31, 2017, on the 2017 Second Out Term Loan was 7.61%.

2017 Second Lien Credit Facility:  The 2017 Second Lien Credit Facility consisted of a $55 million second lien term loan (the “2017 Second Lien Term Loan”) having a maturity date of August 17, 2022. The 2017 Second Lien Term Loan bore interest at a fixed rate of 11%. The 2017 Second Lien Credit Facility contained certain financial covenants including a maximum senior leverage ratio of 4.25x with step-downs to 3.50x, a maximum total leverage ratio of 5.25x with step-downs to 4.50x, and a minimum fixed charge coverage ratio of 1.10x.

Note Payable – VaporBeast

On November 30, 2016, we issued a note payable to VaporBeast’s former shareholders (“VaporBeast Note”). The VaporBeast Note is $2.0 million principal with 6% interest compounded monthly and matures on May 30, 2018. The VaporBeast Note may be prepaid at any time without penalty and is subject to a late-payment penalty of 5% and a default rate of 13% per annum. The VaporBeast Note is subject to customary defaults, including defaults for nonpayment, nonperformance, any material breach under the purchase agreement, and bankruptcy or insolvency.

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First Lien Term Loan

Turning Point Brands, Inc. (“TPBI”), along with NATC and its subsidiaries, were guarantors under the First Lien Term Loan.  TPLLC and its sole subsidiary at the date of the agreement, Intrepid, were not guarantors of the First Lien Term Loan. The First Lien Term Loan was 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 or any guarantor, other than certain excluded assets (the “Collateral”).  The loans designated as LIBOR loans bore interest at the LIBOR then in effect (but not less than 1.25%) plus 6.50%, and the loans designated as base rate loans bore 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) 5.50%.

Second Lien Term Loan

The Second Lien Term Loan was secured by a second priority security interest in the Collateral and was guaranteed by the same entities as the First Lien Term Loan. Under the Second Lien Term Loan, the loans designated as LIBOR loans bore interest at LIBOR then in effect (but not less than 1.25%) plus 10.25%.  The loans designated as base rate loans bore 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%.

Revolving Credit Facility

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

Off-balance Sheet Arrangements

During the first quarter of 2018 we executed various forward contracts, none of which met hedge accounting requirements, for the purchase of €6.0 million with maturity dates ranging from March 2018 to July 2018. During 2017, we executed no forward contracts. At March 31, 2018, and December 31, 2017, we had forward contracts for the purchase of €3.8 million and €0 million, respectively.

Contractual Obligations

As of March 31, 2018, there had been no material changes outside the ordinary course of business to our contractual obligations as of December 31, 2017, as reported in our Annual Report on Form 10-K, with the exception of changes to our long-term debt obligations due to the refinancing discussed in the ‘Long-Term Debt’ section.

The following tables summarize our contractual obligations (in thousands):

	Payments due by period as of March 31, 2018
	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Long-term debt obligations, including interest	$	260,575	$	19,730	$	41,031	$	155,694	$	44,119

	Payments due by period as of December 31, 2017
	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Long-term debt obligations, including interest	$	266,052	$	29,803	$	42,444	$	193,805	$	-

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Inflation

We believe 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 with regard to our tobacco products and, in part, to our existing contractual agreement for the purchase of our premium cigarette papers.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Sensitivity

Although we engaged in hedging inventory purchases in the three months ended March 31, 2018, there have been no material changes in our exposure to exchange rate fluctuation risk, as reported within our 2017 Annual Report on Form 10-K, during the period. Please refer to our ‘Quantitative and Qualitative Disclosures about Market Risk’ included in our 2017 Annual Report on Form 10-K filed with the SEC.

Credit Risk

There have been no material changes in our exposure to credit risk, as reported within our 2017 Annual Report on Form 10-K, during the three months ended March 31, 2018. Please refer to our ‘Quantitative and Qualitative Disclosures about Market Risk’ included in our 2017 Annual Report on Form 10-K filed with the SEC.

Interest Rate Sensitivity

Our March 2018 refinancing resulted in all of our debt instruments, with the exception of the VaporBeast Note Payable, having variable interest rates that fluctuate with market rates. To reduce the volatility of future cash flows, we entered into interest rate swap agreements with lenders under the 2018 Credit Facility. At March 31, 2018, $70 million of our $188.2 million outstanding long-term debt carrying variable rates is covered by the interest rate swap agreements and, thus, effectively bears interest at a fixed rate. We believe the effect, if any, of reasonably possible near-term changes in interest rates on our consolidated financial position, results of operations, of cash flows would not be significant. A 1% increase in the interest rate would change pre-tax income by approximately $0.6 million per year. Refer to Note 4 for additional information regarding the interest rate swap.

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 (“CEO), Chief Financial Officer (“CFO”), and Chief Accounting Officer (“CAO”), 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 March 31, 2018. Based upon the evaluation, our CEO, CFO, and CAO concluded our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports 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.

On March 13, 2018, our former CFO Mark Stegeman resigned, Robert Lavan was named CFO, and Brian Wigginton was appointed CAO. Outside of these actions, there were no changes in our internal controls over financial reporting during the most recent fiscal quarter. Due to the consistency of other personnel surrounding the financial reporting process and the lack of change in control activities surrounding financial reporting process, the change in our principal financial officer has not materially affected, and is not reasonably likely to materially affect, our internal controls over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are a party from time to time to various proceedings in the ordinary course of business. For a description of the Master Settlement Agreement, to which we are a party, see “Financial Statements and Supplementary Data - Note 2 Summary of Significant Accounting Policies: Risk and Uncertainties.” Other than the proceedings mentioned below, there is no material litigation, arbitration or governmental proceeding currently pending against us or any of our officers or directors in their capacity as such, and we and our officers and directors have not been subject to any such proceeding.

Other major tobacco companies are defendants in a number of product liability claims. In a number of these cases, the amounts of punitive and compensatory damages sought are significant, and could have a material adverse effect on our business and results of operations. We are a defendant in certain cases which have been dormant for many years. Plaintiffs’ counsel are in the process of voluntarily dismissing those claims.

We are subject to several lawsuits alleging personal injuries resulting from malfunctioning vaporizer devices and may be subject to claims in the future relating to our other NewGen products. We are still evaluating these claims and the potential defenses to them.  For example, we did not design or manufacture the products at issue; rather, we were merely the distributor.  Nonetheless, there can be no assurance that we will prevail in these cases, and they could have a material adverse effect on our business and results of operations.  As a result of their relative novelty, electronic cigarette and vaporizer product manufacturers and sellers have only recently become subject to litigation.

See ‘Risk Factors—We may become subject to significant product liability litigation’ within our 2017 Annual Report on Form 10-K for additional details.

Item 1A. Risk Factors

In addition to the other information set forth in this report, carefully consider the factors discussed in the ‘Risk Factors’ section contained in our 2017 Annual Report on Form 10-K.  There have been no material changes to the Risk Factors set forth in the 2017 Annual Report on Form 10-K.

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

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit No.	Description
10.1	Amended and Restated First Lien Credit Agreement, dated as of March 7, 2018, by and among Turning Point Brands, Inc. and its subsidiaries, as the obligors, Fifth Third Bank, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 8, 2018).
10.2	Amended and Restated Second Lien Credit Agreement, dated as of March 7, 2018, by and among Turning Point Brands, Inc. and its subsidiaries, as obligors, Prospect Capital Corporation, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 8, 2018).
10.3	Omnibus Amendment, Reaffirmation Agreement and Joinder dated as of March 7, 2018, by and among Turning Point Brands, Inc. and its subsidiaries, as the Grantors, Fifth Third Bank, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on March 8, 2018).
10.4	Second Lien Omnibus Amendment, Reaffirmation Agreement and Joinder dated as of March 7, 2018, by and among Turning Point Brands, Inc. and its subsidiaries, as the Grantors, Fifth Third Bank, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on March 8, 2018).
10.5	First Amendment to Second Lien Intercreditor Agreement, dated as of March 7, 2018, by and among Turning Point Brands, Inc., and the other grantors party thereto, Fifth Third Bank, as first lien collateral agent, and Prospect Capital Corporation, as second lien collateral agent (incorporated by reference to Exhibit 10.1 to5the Registrant’s Current Report on Form 8-K filed on March 8, 2018).
10.6	Employment Agreement between Turning Point Brands, Inc. and Robert M. Lavan, dated March 13, 2018 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 19, 2018).
10.7	Release and Severance Agreement dated as of May 2, 2018, between Turning Point Brands, Inc. and Mark A. Stegeman.*
10.8	Amendment to the Non-Qualified Stock Option Award Agreement dated as of May 3, 2018, between Turning Point Brands, Inc. and Mark A. Stegeman.*
31.1	Rule 13a-14(a)/15d-14(a) Certification of Lawrence S. Wexler.*
31.2	Rule 13a-14(a)/15d-14(a) Certification of Robert Lavan.*
31.3	Rule 13a-14(a)/15d-14(a) Certification of Brian Wigginton.*
32.1	Section 1350 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101	XBRL (eXtensible Business Reporting Language). The following materials from Turning Point Brands, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed on May 9, 2018, formatted in XBRL: (i) consolidated balance sheets, (ii) consolidated statements of income, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of cash flows, and (v) the notes to consolidated financial statements.*

* Filed herewith

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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:  President and Chief Executive Officer
	By: /s/ Robert Lavan
	Name: Robert Lavan
	Title:  Chief Financial Officer
	By: /s/ Brian Wigginton
	Name: Brian Wigginton
	Title:  Chief Accounting Officer
Dated: May 9, 2018

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EX-10.7

Exhibit 10.7

RELEASE AND SEVERANCE AGREMENT

This Release and Severance Agreement (this "Release") is entered into by and between Mark Stegeman ("Employee") and Turning Point Brands, Inc. ("Turning Point" and, collectively with its parent(s), subsidiary(ies), and all other related companies, the "Company").  Employee and Turning Point are referred to herein as the "Parties."

RECITALS

A. Employee and Turning Point are parties to an Employment Letter and Agreement, signed by Employee on November 23, 2015, with an effective date of May 13, 2016 (the "Employment Agreement"), which provides for severance after termination in certain circumstances, conditioned upon Employee first signing a general release of claims following termination of Employee's employment, which release becomes irrevocable in accordance with its terms.

B. This Release is the contemplated release of claims under the Employment Agreement, and Employee has had notice of this Release since the Employment Agreement was executed as a copy was attached thereto (the "Presentation Date").

C. Employee's employment with the Company ended on March 13, 2018 (the "Separation Date").

D. The Parties desire to settle any and all claims that Employee may have against the Company or any of its current or former employees that are releasable by law.

AGREEMENT

NOW, THEREFORE, in consideration for the covenants and mutual promises contained in the Employment Agreement and this Release, the Parties agree as follows:

PART I

For and in consideration of the promises made herein by Employee in Part II and Part III of this Release, and his performance thereof, the sufficiency of which, either separately or combined, is hereby acknowledged, Turning Point agrees as follows:

1.1          Severance Benefits to Employee. In exchange for Employee signing this Release, complying with its terms, and not revoking this Release, the Company will pay to Employee the following "Severance Benefits" if, and only if, (i) Employee signs this Release and returns it to the Company; and (ii) the seven (7) day revocation period in Part II, Section 2.4 below has expired on or before the 55^th day after Separation Date, and Employee has not exercised his right to revoke this Release in accordance with Part II, Section 2.4 below:

(a)          Severance Pay – The Company will continue to pay your annual salary for a period of twelve (12) months. The Severance Pay will be paid to you incrementally, in accordance with the Company’s regular payroll cycle, with the first such payment beginning on the 60^th day following your Separation Date, and the first such payment will include all accrued amounts during the 60-day period from your Separation Date until the 60^th day following your Separation date.

(b)          Severance bonus – The Company will also pay you a severance bonus equal to the average of the annual cash bonuses received by you for the 24 months prior to your Separation Date. The Severance Bonus will be paid in two equal installments – the first installment on the later of (i) when all other Company annual bonuses, if awarded, are next paid, or, if not awarded, when such bonuses would have next been paid in April of the year following the year of services, and (ii) the 60^th day following your Separation Date, and the second installment at the end of the Restricted Period defined in the Employment Agreement.

(c)          Severance Pay and Severance Bonus payment timing shall also be subject to the “specified employee” delay in Paragraph 4 of the Employment Agreement for any portion of such amounts that are subject to Section 409A of the Code. Normal payroll taxes and deductions will be withheld from any Severance Pay and Severance Bonus payments.

(d)          Health Care Stipend – The Company will also make a lump sum payment to you in an amount equal to the cost of COBRA coverage for continued medical coverage for you and your dependents for twelve (12) months, payable on the 60^th day following the Separation Date.

(e)          The Company will also within 10 days after the 7-Day Revocation Period discussed at Section 2.4 recommend to the Compensation Committee of the Company’s Board of Directors that it agree to amend Employee’s Non-Qualified Stock Option Award dated August 10, 2016 to accelerate the vesting of an additional 6,750 option awards granted thereunder, such that an aggregate 47,247 of the options granted pursuant to that award would be fully vested and exercisable, and which must be exercised within 90 days of the Separation Date. If the Compensation Committee does not approve the acceleration of the 6,750 option awards before May 15, 2018, the Company will pay you an amount equal to $80,730, subject in all respects to the same timing and withholding requirements set forth at Section 1.1(c), on or before May 31, 2018.

1.2          Separate and Adequate Age Claim Consideration.The Parties expressly agree and acknowledge that a portion of the Severance Benefits in Section 1.1 above represents separate and adequate consideration, to which Employee is not otherwise entitled, in exchange for Employee's Age Claim Waiver, set out below in Part II. Turning Point's present promise to provide this consideration is exchanged for Employee's present release of any Age Claims at the time of the execution of this Release.

PART II

For and in consideration of the promises made herein by Turning Point in Part I of this Release, and its performance thereof, the sufficiency of which is hereby acknowledged, Employee agrees as follows:

2.1          General Release and Waiver of All Claims and Potential Claims.  Employee hereby releases all claims and potential claims, known and unknown, against the Company and its current and/or former employees that are releasable by law.  More specifically, for and on behalf of himself and his family, dependents, heirs, executors, administrators and assigns, Employee hereby irrevocably and unconditionally releases the Company and its respective predecessors, successors, and all their past, present or future assigns, parents, subsidiaries, affiliates, insurers, attorneys, divisions, subdivisions and affiliated entities, together with their respective current and former officers, directors, shareholders, fiduciaries, administrators, trustees, agents, servants, employees, attorneys, insurers and/or representatives, and their respective predecessors, successors and assigns, heirs, executors, administrators, and any and all other affiliated persons, firms, plans or corporations which may have an interest by or through them (collectively "Releasees"), both jointly and individually, from any and all claims, actions, arbitrations, and lawsuits, of any nature whatsoever, known or unknown to Employee, accrued or unaccrued, which he ever had, now has or may have had against Releasees since the beginning of time through the date of execution of this Release.  This general release and waiver of claims includes, but is not limited to, any and all claims, demands, causes of action, suits, debts, complaints, liabilities, obligations, promises, agreements, controversies, damages and expenses that are releasable by law (including, without limitation, attorneys fees and costs actually incurred or to be incurred) of any nature or description whatsoever, in law or equity, whether known or unknown, in connection with or arising out of his employment with the Company and/or termination of said employment.  Claims being released include, without limitation, any and all employment-related claims that are releasable by law arising under federal, state or local statutes, ordinances, resolutions, regulations or constitutional provisions prohibiting discrimination in employment on the basis of sex, race, religion, national origin, age, disability and/or veterans' status, including, but not limited to, claims arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 1981, 1981a, 1983 and 1985, the Civil Rights Act of the State in which Employee resides and works, the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, et seq., the Americans With Disabilities Act, the Age Discrimination in Employment Act, the Pregnancy Discrimination Act, the Federal Rehabilitation Act of 1973, Executive Order 11246, the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq., the Family and Medical Leave Act, 29 U.S.C. §§ 2601, et seq., the Genetic Information Non-Discrimination Act, 42 U.S.C. §§ 2000ff et seq,the minimum wage act, wage payment law and wage discrimination statutes and workers compensation statutes and similar state laws of the state in which Employee has provided services, in all instances as amended.  This general release and waiver of claims also includes, but is not limited to, any and all claims for unpaid benefits or entitlements asserted under any plan, policy, benefits offering or program (except as otherwise required by law), any and all contract or tort claims, including, without limitation, claims of wrongful discharge, assault, battery, intentional infliction of emotional distress, negligence, and/or defamation against Releasees.

Nothing in this Section 2.1, Section 2.2, or any other provision in the remainder of this Release shall be construed to prevent Employee from making a claim for indemnity under law or governance documents providing for indemnity or insurance against claims for acts or omissions in his capacity acting as an officer or director of the Company.  Furthermore, nothing in this Section 2.1, Section 2.2, or any other provision in the remainder of this Release shall be construed to prohibit Employee from talking to, cooperating in any investigation by, and/or filing a charge with a government agency, including but not limited to the U.S. Equal Employment Opportunity Commission (the “EEOC”), any similar state or local fair employment practices administrative agency, or the Securities and Exchange Commission (the “SEC”). However, by signing this Release, Employee hereby waives the right to recover from Releasees any relief from any charge or claim pursued or otherwise prosecuted by him, or by persons or entities like the EEOC acting by or through him, including, without limitation, the right to attorneys' fees, costs, and any other relief, whether legal or equitable, sought in such charge, claim, or other proceeding.

2.2          Age Claim Waiver. Employee further agrees that his full general release includes a waiver of his rights, if any, to assert or allege discrimination based upon age pursuant to the Age Discrimination in Employment Act or any and all other federal, state or local laws or regulations prohibiting discrimination on the basis of age (collectively, "Age Claim Waiver").

2.3          Adequate Consideration Period/Consult an Attorney. Employee acknowledges that on March 13, 2018: (a) he was instructed that he may and should consult an attorney of his own choosing regarding the terms of this Release, and specifically including the Age Claim Waiver, and (2) he received this Release and was told the Severance Benefits would include only those benefits contained in Section 1.1(a) through (d), later amended to include 1.1(e). Employee, therefore, acknowledges and agrees that he has already been given at least twenty-one (21) days to consider all the terms in this Release and whether to sign this Release. The Parties agree that if Employee fails to execute this Release prior to the deadline set forth in Section 1.1 hereof, then this Release will be null and void.

2.4          Seven (7) Day Revocation Period. Employee further agrees that he is hereby instructed by the Company that, following his signing of this Release, Employee shall have up to seven (7) days to withdraw, rescind or revoke this Release by providing written notice to James Dobbins, General Counsel, at Turning Point Brands, Inc., 5201 Interchange Way, Louisville, Kentucky 40232, (fax) 502-774-9235, but that, in the event Employee exercises his right to withdraw or rescind this Release, all terms of this Release, including, without limitation, Turning Point's duty to provide the Severance Benefits provided in Part I, Section 1.1, above, shall be void and of no effect.

2.5          Permanent Waiver of Re-employment. In order to effect the degree of separation contemplated by the Parties, Employee acknowledges his present intent to permanently remove himself from the labor pool of Releasees as of the Separation Date and forever thereafter.  In order to accomplish this present permanent removal from Releasees' labor pool, Employee agrees that he will not seek and will not accept hiring, rehiring, placement, or reinstatement with Releasees, either as an employee, an independent contractor, a temporary worker, or in any other capacity.

2.6          No Change of Control. Employee agrees and acknowledges that the consummation of the transactions contemplated by that certain Contribution and Exchange Agreement by and among Special Diversified Opportunities, Inc. (n/k/a Standard Diversified Opportunities, Inc.), Standard General Master Fund L.P., P Standard General Ltd. and Standard General Focus Fund L.P., dated as of November 26, 2017 (the “SDOI Transaction”) did not constitute a “Change of Control” of Turning Point, as that term is defined in the Employment Agreement or in Turning Point’s 2015 Equity Incentive Plan (the “2015 Plan”). Employee further agrees and acknowledges that the vesting of any awards granted to the Employee pursuant to the 2015 Plan (including the stock options granted to the Employee in connection with the Employment Agreement) was not accelerated as a result of or in connection with the SDOI Transaction or otherwise, and that the vesting schedule of such awards described in Employee’s Statement of Change in Beneficial Ownership on Form 4 dated May 17, 2017 was accurate on and after the Separation Date.

PART III

Other Agreements

3.1          Additional Covenants by Employee. Employee represents, warrants and covenants that, as of the date he signs this Release, (1) he is unaware of any wages (as that term is defined by applicable state  law) that are owed to him by the Company and that have not been paid; (2) he is unaware of any request for leave under the Family and Medical Leave Act that was denied; (3) he has no known work-related injury, disability, or illness, and has not requested any accommodation under the Americans With Disabilities Act or similar state law that has not been satisfied; and (4) he is unaware of any document, circumstance, occurrence, or any conduct on behalf of the Company or any of its agents, employees, officers or directors, or any Releasee, which evidence, contain, or constitute a violation of any law, standard, or regulation, including but not limited to a violation of federal or state securities laws, upon which representations the Company expressly relies in entering into this Release.

3.2          Knowing and Voluntary Agreement.  Employee agrees and acknowledges that he has been advised to consult an attorney regarding the terms of this Release and that he has carefully reviewed, studied and thought over the terms of this Release.  Employee further acknowledges and agrees that he knowingly and voluntarily entered into and signed this Release after deliberate consideration and review of all of its terms and provisions, that he was not coerced, pressured or forced in any way by the Company, any Releasee or anyone else to accept the terms of this Release, and that the decision to accept the terms of this Release was entirely his own.

3.3          No Wrongdoing By the Parties.  The Parties further agree that they have entered this Release to resolve any and all claims, if any, Employee may have against the Company or any other Releasee, and that this Release does not constitute an admission of, or is to be used as evidence of, any liability, violation or wrongdoing of any kind.

3.4          Choice of Law; Interpretation; Captions.  The Parties understand and agree that this Release shall in all respects be interpreted, enforced and governed under the laws of the State of Kentucky and the language of this Release shall in all cases be interpreted as a whole, according to its fair meaning and not strictly for or against either of the Parties, regardless of which is the drafter of this Release.  Captions and headings used herein are for convenience of reference only.

3.5          Exclusive Jurisdiction; Venue.  The Parties understand and agree that the federal and/or state courts located in the State of Kentucky shall have exclusive jurisdiction with regard to any litigation relating to this Release and that venue shall be proper only in the State of Kentucky and any federal court whose judicial district encompasses the State of Kentucky, and that any objection to this jurisdiction or venue is specifically waived.

3.6          Entire Agreement. The Parties agree that this Release sets forth the entire agreement between the Parties on the subject matter herein and fully supersedes any and all other prior agreements or understandings between them, except for the terms in the Employment Agreement referred to herein and any agreements between Employee and the Company regarding non-disclosure of confidential information, intellectual property, non-solicitation of customers, employees or contractors, non-competition, and/or other restrictive covenant obligations, which agreements, if any, shall be enforced according to their terms.  This includes, without limitation, Employee’s continuing obligations under Sections 7-12 of the Employment Agreement.  This Release may be amended or superseded only by a subsequent writing, executed by the Party against whom enforcement is sought.

3.7          Agreement to Indemnify. The Parties agree that should Employee seek to overturn, set aside, or legally challenge any release of claims, promise or covenant made by him under this Release, by judicial action or otherwise, the Company and/or Releasees shall be entitled to recover from Employee its costs of defending and enforcing the terms of this Release and/or any other claim brought by or against the Company or Releasees, including, without limitation, reasonable attorneys' fees.  The Parties acknowledge and agree that each Releasee is an intended third-party beneficiary of this Release and may enforce the terms of this Release accordingly.

I, MARK STEGEMAN, UNDERSTAND AND AGREE THAT THIS RELEASE CONSTITUTES A FULL AND FINAL RELEASE OF ALL CLAIMS THAT ARE RELEASEABLE BY LAW.

	/s/ Mark Stegeman
Mark Stegeman
Date:	5/2/18
-- and --
TURNING POINT BRANDS, INC.
By:	/s/ James Dobbins
Title:	SVP, General Counsel
Date:	5/2/18

EX-10.8

Exhibit 10.8

AMENDMENT

TO THE

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

This is an Amendment to the Non-Qualified Stock Option Award Agreement (the "Agreement") between Turning Point Brands, Inc., a Delaware corporation (the "Company"), and Mark Stegeman (the "Participant"), which was made as of August 10, 2016 (the "Grant Date") and pursuant to the terms of the Company's 2015 Equity Incentive Plan (the "Plan").  This Amendment shall be effective as of March 13, 2018.

RECITALS

A. The Company maintains the Plan and has authorized the Compensation Committee of the Board ("Committee") in Section 12(b) of the Plan to waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any award granted under the Plan.

B. Pursuant to Section 12 of the Agreement, any amendment to the Agreement shall be, subject to the terms of the Plan, in writing and signed by both parties to the Agreement.

C. The Committee and the Participant wish to amend the vesting requirements set forth in the Agreement to accelerate the vesting of half of the Participant's unvested Shares, giving him the right and option (the "Option") to purchase 47,247 Shares at a price per Share equal to $9.26 (the "Exercise Price") within 90 days of his termination from the Company as set forth in Section 3(d) of the Agreement.

D. The Committee and the Participant wish to eliminate in its entirety the termination of service provision set forth in this Agreement, which requires the unvested portion of the Option to be forfeited and cancelled upon the Participant's termination from service or employment with the Company and its Affiliates.

AMENDMENTS

The Agreement is hereby amended as follows:

1. Effective as of the date of this Amendment, Section 2(a) of the Agreement is amended to read as:

(a)          Generally.  Except as otherwise provided herein, 50% of this Option shall be vested and exercisable as of the Grant Date, 25% shall vest and become exercisable as of the first anniversary of the Grant Date (each such date, a “Vesting Date”), and one half of the remaining 25% shall vest and become exercisable as of the effective date of the Amendment to this Agreement.  Any unvested portion of this Option shall be cancelled and forfeited as of the effective date of the Amendment to this Agreement.

2. Effective as of the date of this Amendment, Section 2(b) of the Agreement is deleted in its entirety.

IN WITNESS WHEREOF, this Amendment has been executed this 3rd day of May, 2018.

TURNING POINT BRANDS, INC.
By:	/s/ James Dobbins
Name:	James Dobbins
Title:	SVP, General Counsel

PARTICIPANT
/s/ Mark A. Stegeman	5/3/18
Participant’s Signature	Date

Name: Mark A. Stegeman

EX-31.1

Exhibit 31.1

CERTIFICATIONS

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 officers 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)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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 officers 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: May 9, 2018	By:	/s/  LAWRENCE S. WEXLER
		Lawrence S. Wexler
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Robert Lavan, 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 officers 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)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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 officers 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: May 9, 2018	By:	/s/  ROBERT LAVAN
		Robert Lavan
		Chief Financial Officer (Principal Financial Officer)

EX-31.3

Exhibit 31.3

CERTIFICATIONS

I, Brian Wigginton, 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 officers 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)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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

(d) 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 officers 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: May 9, 2018	By:	/s/  BRIAN WIGGINTON
		Brian Wigginton
		Chief Accounting Officer

EX-32.1

Exhibit 32.1

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

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Turning Point Brands, Inc. (the "Company") for the quarterly period ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Lawrence S. Wexler, President and Chief Executive Officer, Robert Lavan, Chief Financial Officer, and Brian Wigginton, Chief Accounting 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: May 9, 2018	By:	/s/  LAWRENCE S. WEXLER
		Lawrence S. Wexler
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 9, 2018	By:	/s/ ROBERT LAVAN
		Robert Lavan
		Chief Financial Officer
		(Principal Financial Officer)

Date: May 9, 2018	By:	/s/ BRIAN WIGGINTON
		Brian Wigginton
		Chief Accounting Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	May 03, 2018
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	Accelerated Filer
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2018
Voting Common Stock [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		19,237,905

XML

Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Cash	$ 3,792	$ 2,607
Accounts receivable, net of allowances of $46 in 2018 and $17 in 2017	2,283	3,248
Inventories	58,059	63,296
Other current assets	12,387	10,342
Total current assets	76,521	79,493
Property, plant, and equipment, net	8,662	8,859
Deferred income taxes	0	450
Deferred financing costs, net	1,025	630
Goodwill	134,620	134,620
Other intangible assets, net	26,260	26,436
Master Settlement Agreement (MSA) escrow deposits	30,316	30,826
Other assets	1,021	963
Total assets	278,425	282,277
Current liabilities:
Accounts payable	6,641	3,686
Accrued liabilities	13,586	18,694
Current portion of long-term debt	10,000	7,850
Revolving credit facility	0	8,000
Total current liabilities	30,227	38,230
Notes payable and long-term debt	188,165	186,190
Deferred income taxes	35	0
Postretirement benefits	3,968	3,962
Other long-term liabilities	1,138	571
Total liabilities	223,533	228,953
Commitments and contingencies
Stockholders' equity:
Preferred stock; $0.01 par value; authorized shares 40,000,000; issued and outstanding shares -0-	0	0
Additional paid-in capital	103,833	103,640
Accumulated other comprehensive loss	(3,829)	(2,973)
Accumulated deficit	(45,304)	(47,535)
Total stockholders' equity	54,892	53,324
Total liabilities and stockholders' equity	278,425	282,277
Common Stock, Voting [Member]
Stockholders' equity:
Common stock	192	192
Common Stock, Nonvoting [Member]
Stockholders' equity:
Common stock	$ 0	$ 0

XML

Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Current assets:
Accounts receivable, allowance	$ 46	$ 17
Stockholders' equity:
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
Preferred stock, shares outstanding (in shares)	0	0
Common Stock, Voting [Member]
Stockholders' equity:
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)	19,222,617	19,210,633
Common stock, shares outstanding (in shares)	19,222,617	19,210,633
Common Stock, Nonvoting [Member]
Stockholders' equity:
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
Common stock, shares outstanding (in shares)	0	0

XML

Consolidated Statements of Income (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Consolidated Statements of Income (unaudited) [Abstract]
Net sales	$ 73,942	$ 66,788
Cost of sales	42,133	39,116
Gross profit	31,809	27,672
Selling, general, and administrative expenses	22,068	16,823
Operating income	9,741	10,849
Interest expense	3,654	4,933
Gain on investment	(95)	(114)
Loss on extinguishment of debt	2,384	6,116
Net periodic benefit expense (income), excluding service cost	(43)	92
Income (loss) before income taxes	3,841	(178)
Income tax expense (benefit)	809	(2,055)
Consolidated net income	$ 3,032	$ 1,877
Basic income per common share:
Consolidated net income (in dollars per share)	$ 0.16	$ 0.10
Diluted income per common share:
Consolidated net income (in dollars per share)	$ 0.15	$ 0.10
Weighted average common shares outstanding:
Basic (in shares)	19,221,892	18,734,393
Diluted (in shares)	19,762,194	19,633,353

XML

Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Consolidated net income	$ 3,032	$ 1,877
Other comprehensive income (loss), net of tax
Amortization of unrealized pension and postretirement losses, net of tax of $10 in 2018 and $0 in 2017	30	120
Unrealized gain (loss) on investments, net of tax of $135 in 2018 and $43 in 2017	(384)	71
Unrealized loss on interest rate swaps, net of tax of $185 in 2018	(526)	0
Other comprehensive income (loss), net of tax	(880)	191
Comprehensive income	$ 2,152	$ 2,068

XML

Consolidated Statements of Comprehensive Income (unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Other comprehensive income (loss), net of tax
Amortization of unrealized pension and postretirement losses, tax	$ 10	$ 0
Unrealized gain (loss) on investments, tax	135	$ 43
Unrealized loss on interest rate swaps, tax	$ 185

XML

Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities:
Consolidated net income	$ 3,032	$ 1,877
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on extinguishment of debt	2,384	6,116
Depreciation expense	560	354
Amortization of other intangible assets	176	175
Amortization of deferred financing costs	238	294
Amortization of original issue discount	0	66
Deferred income taxes	793	(2,564)
Stock compensation expense	197	45
Changes in operating assets and liabilities:
Accounts receivable	965	(1,801)
Inventories	5,237	1,299
Other current assets	(2,051)	(1,420)
Other assets	(23)	26
Accounts payable	2,955	(1,597)
Accrued liabilities and other	(6,029)	(5,242)
Accrued postretirement liabilities	(14)	32
Net cash provided by (used in) operating activities	8,420	(2,340)
Cash flows from investing activities:
Capital expenditures	(363)	(368)
Restricted cash, MSA escrow deposits	(530)	1,192
Net cash provided by (used in) investing activities	(893)	824
Cash flows from financing activities:
Payments of financing costs	(3,279)	(4,792)
Exercise of options	20	679
Surrender of options	0	(1,000)
Net cash provided by (used in) financing activities	(6,872)	2,091
Net increase in cash:	655	575
Cash, beginning of period:
Unrestricted	2,607	2,865
Restricted	4,709	3,889
Total cash at beginning of period	7,316	6,754
Cash, end of period:
Unrestricted	3,792	2,248
Restricted	4,179	5,081
Total cash at end of period	7,971	7,329
Supplemental schedule of noncash financing activities:
Accrued expenses incurred for financing costs	154	226
2018 First Lien Term Loan [Member]
Cash flows from financing activities:
Proceeds from term loans	160,000	0
2018 Second Lien Term Loan [Member]
Cash flows from financing activities:
Proceeds from term loans	40,000	0
2017 First Lien Term Loans [Member]
Cash flows from financing activities:
Proceeds from term loans	0	145,000
Payments of term loans	(140,613)	0
2017 Second Lien Term Loan [Member]
Cash flows from financing activities:
Proceeds from term loans	0	55,000
Payments of term loans	(55,000)	0
2017 Revolving Credit Facility [Member]
Cash flows from financing activities:
Proceeds from (payments of) revolving credit facility	(8,000)	29,550
First Lien Term Loan [Member]
Cash flows from financing activities:
Payments of term loans	0	(147,312)
Second Lien Term Loan [Member]
Cash flows from financing activities:
Payments of term loans	0	(60,000)
Revolving Credit Facility [Member]
Cash flows from financing activities:
Proceeds from (payments of) revolving credit facility	$ 0	$ (15,034)

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Organizations and Basis of Presentation

3 Months Ended

Mar. 31, 2018

Organizations and Basis of Presentation [Abstract]

Basis of Presentation

Note 1. Organizations and Basis of Presentation

Organizations

Turning Point Brands, Inc. (the “Company), is a holding company which owns North Atlantic Trading Company, Inc. (“NATC”), and its subsidiaries and Turning Point Brands, LLC (“TPLLC”), and its subsidiaries. Except where the context indicates otherwise, references to the Company include the Company; NATC and its subsidiaries National Tobacco Company, L.P. (“NTC”), National Tobacco Finance, LLC (“NTFLLC”), North Atlantic Operating Company, Inc. (“NAOC”), North Atlantic Cigarette Company, Inc. (“NACC”), and RBJ Sales, Inc. (“RBJ”); and TPLLC and its subsidiaries Intrepid Brands, LLC (“Intrepid”), VaporBeast, LLC (“VaporBeast,” f/k/a Smoke Free Technologies, Inc.), and Vapor Shark, LLC, and its subsidiaries (collectively, “Vapor Shark,” f/k/a The Hand Media).

Basis of Presentation

The accompanying interim, condensed, consolidated financial statements have been prepared in accordance with the accounting practices described in the Company’s audited consolidated financial statements as of, and for the year ended, December 31, 2017, and are unaudited.In the opinion of management, the unaudited, interim, condensed, consolidated financial statements included herein contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods indicated. Such adjustments, other than nonrecurring adjustments separately disclosed, are of a normal and recurring nature. The operating results for interim periods are not necessarily indicative of results to be expected for a full year or 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, 2017. 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 (“GAAP”) with respect to annual financial statements.

Certain prior year amounts have been reclassified to conform to the current year’s presentation. The changes did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows in any of the periods presented.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

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 adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP, on January 1, 2018. The Company recognizes revenues, net of sales incentives and sales returns, including shipping and handling charges billed to customers, upon delivery of goods to the customer at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five-step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied.

A further requirement of ASU 2014-09 is for entities to disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Company management views business performance through segments that closely resemble the performance of major product lines.  Thus, the primary, and most useful, disaggregation of the Company’s contract revenue for decision making purposes is the disaggregation by segment which can be found in Note 15 of Notes to Consolidated Financial Statements. An additional disaggregation of contract revenue by sales channel can be found within Note 15 as well.

Shipping Costs

The Company records shipping costs incurred as a component of selling, general, and administrative expenses. Shipping costs incurred were approximately $3.2 million and $2.2 million for the three months ending March 31, 2018 and 2017, respectively.

Fair Value

GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3).

The three levels of the fair value hierarchy under GAAP are described below:

· Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date.

· Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Derivative Instruments

Foreign Currency Forward Contracts: The Company enters into foreign currency forward contracts to hedge a portion of its exposure to changes in foreign currency exchange rates on inventory purchase commitments. The Company accounts for its forward contracts under the provisions of ASC 815, Derivatives and Hedging. Under the Company’s policy, the Company may hedge up to 100% of its anticipated purchases of inventory in the denominated invoice currency over a forward period not to exceed twelve months. The Company may also, from time to time, hedge up to ninety percent of its non-inventory purchases in the denominated invoice currency. Forward contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these forward contracts are transferred from other comprehensive income into net income as the related inventories are received. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Interest Rate Swap Agreements: The Company enters into interest rate swap contracts to manage interest rate risk and reduce the volatility of future cash flows. The Company accounts for its interest rate swap contracts under the provisions of ASC 815, Derivatives and Hedging. Swap contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these swap contracts are transferred from other comprehensive income into net income upon settlement of the derivative position or at maturity of the interest rate swap contract. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Risks and Uncertainties

Manufacturers and sellers of tobacco products are subject to regulation at the federal, state, and local levels. Such regulations include, among others, labeling requirements, limitations on advertising, and prohibition of sales to minors. The trend in recent years has been toward increased regulation of the tobacco industry. There can be no assurance as to the ultimate content, timing, or effect of any regulation of tobacco products by any federal, state, or local legislative or regulatory body, nor can there be any assurance that any such legislation or regulation would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

The tobacco industry has experienced, and is experiencing, significant product liability litigation. Most tobacco liability lawsuits have been brought against manufacturers and sellers of cigarettes for injuries allegedly caused by smoking or exposure to smoke. However, several lawsuits have been brought against manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. Typically, such claims assert that use of smokeless products is addictive and causes oral cancer. Additionally, several lawsuits have been brought against manufacturers and distributors of NewGen products due to malfunctioning devices. There can be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Master Settlement Agreement (MSA):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 chose 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 March 31, 2018, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $30.3 million. At December 31, 2017, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $30.8 million. Effective in the third quarter of 2017, the Company no longer sells any product covered under the MSA. Thus, pending a change in legislation, the Company will no longer be required to make deposits to the MSA escrow account.

The Company has chosen to invest a portion of the MSA escrow deposits in U.S. Government securities including TIPS, Treasury Notes, and Treasury Bonds. These investments are classified as available-for-sale and carried at fair value. Realized losses are prohibited under the MSA; any investment in an unrealized loss position will be held until the value is recovered, or until maturity. The following shows the fair value of the MSA escrow account:

	As of March 31, 2018							As of December 31, 2017
	Cost		Gross Unrealized Losses			Estimated Fair Value		Cost		Gross Unrealized Losses			Estimated Fair Value
Cash and cash equivalents	$	3,072	$	-		$	3,072	$	3,602	$	-		$	3,602
U.S. Governmental agency obligations(unrealized loss position < 12 months)		27,739		(1,706	)		26,033		722		(17	)		705
U.S. Governmental agency obligations (unrealized loss position > 12 months)		1,247		(36	)		1,211		27,733		(1,214	)		26,519
	$	32,058	$	(1,742	)	$	30,316	$	32,057	$	(1,231	)	$	30,826

Fair value for the U.S. Governmental agency obligations are Level 2. The following shows the maturities of the U.S. Governmental agency obligations:

	As of
	March 31, 2018		December 31, 2017
Less than five years	$	7,114	$	7,114
Six to ten years		18,913		17,662
Greater than ten years		2,959		3,679
Total U.S. Governmental agency obligations	$	28,986	$	28,455

The following shows the amount of deposits by sales year for the MSA escrow account:

	Deposits as of
Sales Year	March 31, 2018		December 31, 2017
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,714		3,714
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		199		199
2013		173		173
2014		143		143
2015		101		101
2016		81		81
2017		71		70
Total	$	32,058	$	32,057

Food and Drug Administration (“FDA”): On June 22, 2009, the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) authorized the Food and Drug Administration (“FDA”) to immediately regulate the manufacturing, sale, and marketing of four categories of tobacco products – cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. On August 8, 2016, the FDA deeming regulation became effective. The deeming regulation gave the FDA the authority to additionally regulate cigars, pipe tobacco, electronic cigarettes (“e-cigarettes”), vaporizers, and e-liquids as “deemed” tobacco products under the FSPTCA.

The FDA assesses tobacco product user fees on six classes of regulated tobacco products and computes user fees using a methodology similar to the methodology used by the U.S Department of Agriculture to compute the Tobacco Transition Payment Program (“TTPP,” also known as the “Tobacco Buyout”) assessment. First, the total, annual, congressionally established user fee assessment is allocated among the various classes of tobacco products using the federal excise tax weighted market share of tobacco products subject to regulation. Then, the assessment for each class of tobacco products is divided among individual manufacturers and importers.

Prior to October 1, 2016, these FDA user fees applied only to those products then regulated by the FDA. Effective October 1, 2016, the FDA began additionally applying FDA user fees to newly deemed tobacco products subject to FDA user fees as described above, i.e., cigars and pipe tobacco.

On July 28, 2017, the FDA announced a new direction in regulating tobacco products, including the newly “deemed” markets such as cigars and vapor products. The FDA stated it intends to begin several new rulemaking processes, some of which will outline foundational rules governing the premarket application process for the deemed products, including Substantial Equivalence Applications and Premarket Tobacco Applications. Compliance and related costs could be significant and could increase the costs of operating in our NewGen segment. The original filing deadlines for newly “deemed” products on the market as of August 8, 2016, have been postponed until August 8, 2021, for “combustible” products (e.g., cigar and pipe) and August 8, 2022, for “non-combustible” products (e.g., vapor products). No other filing deadlines were altered. The FDA also acknowledged a “continuum of risk” among tobacco products (i.e., certain tobacco products pose a greater risk to individual and public health than others), that it intends to seek public comment on the role flavors play in attracting youth and the role flavors may play in helping some smokers switch to potentially less harmful forms of nicotine delivery, and that it would be increasing its focus on the regulation of cigarette products.

Recent Accounting Pronouncements Adopted

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP, in the first quarter of 2018 using the modified retrospective method. This ASU requires the recognition of revenue to depict the transfer of goods to customers at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the following five-step analysis:  (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The adoption of this ASU had no effect on the timing or amount of revenue recognition, or on net income.

The Company adopted ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, in the first quarter of 2018 on a prospective basis. This ASU allows entities to make a one-time reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for the effects of remeasuring deferred tax liabilities and assets originally recorded in other comprehensive income as a result of the change in the federal tax rate by the Tax Cuts and Jobs Act (“TCJA”). The adoption of this ASU resulted in a reclassification of stranded tax effects related to the TCJA from accumulated other comprehensive income to retained earnings of less than $0.1 million.

The Company adopted ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, in the first quarter of 2018 using the full retrospective method. This ASU requires an entity to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The adoption of this ASU resulted in a reclassification of less than $0.1 million from cost of sales and selling, general, and administrative expenses to net periodic benefit expense (income), excluding service cost, for both periods presented.

The Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, in the first quarter of 2018 using the full retrospective method. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result of this ASU the Company’s statements of cash flows include changes in restricted cash, such as changes in the portion of the MSA escrow deposits held in cash.

Recent Accounting Pronouncements

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 (the lease 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 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.

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Acquisitions

3 Months Ended

Mar. 31, 2018

Acquisitions [Abstract]

Acquisitions

Note 3. Acquisitions

Vapor Shark

In March 2017, the Company entered into a strategic partnership with Vapor Shark in which the Company committed to make a deposit up to $2.5 million to Vapor Shark in exchange for a warrant to purchase 100% of the equity interest in Vapor Shark on or before April 15, 2018.  In the event the Company exercised the warrant, the Company granted Vapor Shark’s sole shareholder the option to purchase from Vapor Shark the retail stores it owns, effective as of January 1, 2018.  In April 2017, the Company entered into a management agreement with Vapor Shark whereby the Company obtained control of the operations. The Company exercised its warrant on June 30, 2017, and obtained 100% ownership of Vapor Shark as of that date for a nominal purchase price. In January 2018, the Company finalized an agreement to pay Vapor Shark’s former sole shareholder total consideration of $1.5 million in exchange for his option to purchase the company-owned stores. The Company paid Vapor Shark’s former sole shareholder $1.0 million in February 2018 with the remaining $0.5 million to be paid in 24 monthly installments.

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Derivative Instruments

3 Months Ended

Mar. 31, 2018

Derivative Instruments [Abstract]

Derivative Instruments

Note 4. Derivative Instruments

Foreign Currency

The Company’s policy is to manage the risks associated with foreign exchange rate movements. The policy allows hedging up to 100% of its anticipated purchases of inventory over a forward period that will not exceed 12 rolling and consecutive months. The Company may, from time to time, hedge currency for non-inventory purchases, e.g., production equipment, not to exceed 90% of the purchase price. The Company executed various forward contracts during the three months ended March 31, 2018, none of which met hedge accounting requirements, for the purchase of €6.0 million. The Company executed no forward contracts during the three months ended March 31, 2017.  At March 31, 2018, and December 31, 2017, the Company had forward contracts for the purchase of €3.8 million and €0 million, respectively.

Interest Rate Swap

The Company’s policy is to manage interest rate risk by reducing the volatility of future cash flows associated with debt instruments bearing interest at variable rates. In March 2018, the Company executed various interest rate swap agreements for a notional amount of $70 million with an expiration of December 2022. The swap agreements fix LIBOR at 2.755%. The swap agreements met the hedge accounting requirements; thus, any change in fair value is recorded to other comprehensive income. The Company uses the Shortcut Method to account for the swap agreements. The Shortcut Method assumes the hedge to be perfectly effective; thus, there is no ineffectiveness to be recorded in earnings. The swap agreements’ fair values at March 31, 2018, resulted in a liability of $0.7 million included in other long-term liabilities.

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2018

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 5. Fair Value of 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. Thus, the carrying amount is a reasonable estimate of fair value.

Accounts Receivable

The fair value of accounts receivable approximates their carrying value due to their short-term nature.

2018 Revolving Credit Facility

The fair value of the 2018 Revolving Credit Facility approximates its carrying value as the interest rate fluctuates with changes in market rates.

Long-Term Debt

As all of the Company’s long-term debt bears interest at variable rates that fluctuate with market rates, the carrying values of the long-term debt instruments approximate their respective fair values. As of March 31, 2018, the fair values of the 2018 First Lien Term Loan and the 2018 Second Lien Term Loan approximated $160.0 million and $40.0 million, respectively. As of December 31, 2017, the fair values of the 2017 First Lien Term Loans and the 2017 Second Lien Term Loan approximated $140.6 million and $56.1 million, respectively. See Note 9 of Notes to Consolidated Financial Statements for information regarding our current and past credit facilities.

Foreign Exchange

The Company had forward contracts for the purchase of €3.8 million at March 31, 2018. The Company had no forward contracts outstanding as of December 31, 2017. The fair values of the foreign exchange contracts are based upon quoted market prices and resulted in an insignificant loss for the three months ended March 31, 2018.

Interest Rate Swap

The Company had swap contracts for a total notional amount of $70 million at March 31, 2018. The Company had no swap agreements outstanding at December 31, 2017. The fair values of the swap contracts are based upon quoted market prices and resulted in a liability of $0.7 million as of March 31, 2018.

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Inventories

3 Months Ended

Mar. 31, 2018

Inventories [Abstract]

Inventories

Note 6. Inventories

The components of inventories are as follows:

	March 31, 2018			December 31, 2017
Raw materials and work in process	$	2,403		$	2,545
Leaf tobacco		29,300			30,308
Finished goods - smokeless products		6,503			5,834
Finished goods - smoking products		11,510			14,110
Finished goods - electronic/vaporizer products		12,910			14,532
Other		699			1,290
		63,325			68,619
LIFO reserve		(5,266	)		(5,323	)
	$	58,059		$	63,296

The inventory valuation allowance was $0.6 million and $0.5 million as of March 31, 2018, and December 31, 2017, respectively.

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Property, Plant and Equipment

3 Months Ended

Mar. 31, 2018

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Note 7. Property, Plant, and Equipment

Property, plant, and equipment consisted of the following:

	March 31, 2018			December 31, 2017
Land	$	22		$	22
Buildings and improvements		2,072			2,072
Leasehold improvements		1,873			1,873
Machinery and equipment		12,960			12,635
Furniture and fixtures		3,857			3,821
		20,784			20,423
Accumulated depreciation		(12,122	)		(11,564	)
	$	8,662		$	8,859

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Accrued Liabilities

3 Months Ended

Mar. 31, 2018

Accrued Liabilities [Abstract]

Accrued Liabilities

Note 8. Accrued Liabilities

Accrued liabilities consisted of the following:

	March 31, 2018		December 31, 2017
Accrued payroll and related items	$	2,277	$	5,683
Customer returns and allowances		2,175		2,707
Other		9,134		10,304
	$	13,586	$	18,694

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Notes Payable and Long-Term Debt

3 Months Ended

Mar. 31, 2018

Notes Payable and Long-Term Debt [Abstract]

Notes Payable and Long-Term Debt

Note 9. Notes Payable and Long-Term Debt

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

	March 31, 2018			December 31, 2017
2018 First Lien Term Loan	$	160,000		$	-
2018 Second Lien Term Loan		40,000			-
2017 First Lien First Out Term Loan		-			105,875
2017 First Lien Second Out Term Loan		-			34,738
2017 Second Lien Term Loan		-			55,000
Note payable - VaporBeast		2,000			2,000
Total notes payable and long-term debt		202,000			197,613
Less deferred finance charges		(3,835	)		(3,573	)
Less current maturities		(10,000	)		(7,850	)
	$	188,165		$	186,190

2018 Credit Facility

On March 7, 2018, the Company entered into a $250 million credit facility consisting of a $160 million 2018 First Lien Term Loan with Fifth Third Bank, as administrative agent, and other lenders, and a $50 million 2018 Revolving Credit Facility (collectively, the “2018 First Lien Credit Facility”) in addition to a $40 million 2018 Second Lien Term Loan (together with the 2018 First Lien Credit Facility, the “2018 Credit Facility”) with Prospect Capital Corporation, as administrative agent, and other lenders. The 2018 Credit Facility retained the $40 million accordion feature of the 2017 Credit Facility. Proceeds from the 2018 Credit Facility were used to repay, in full, the 2017 Credit Facility. The Company incurred a loss on extinguishment of debt of $2.4 million in the first quarter of 2018 as a result of the refinancing.

The 2018 Credit Facility contains customary events of default including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, and change in control defaults. The 2018 Credit Facility also contains certain negative covenants customary for facilities of these types including covenants that, subject to exceptions described in the 2018 Credit Facility, restrict the ability of the Company and its subsidiary guarantors: (i) to pledge assets, (ii) to incur additional indebtedness, (iii) to pay dividends, (iv) to make distributions, (v) to sell assets, and (vi) to make investments. Refer to Note 16 of Notes to Consolidated Financial Statements for further information regarding dividend restrictions.

2018 First Lien Credit Facility: The 2018 First Lien Term Loan and the 2018 Revolving Credit Facility bear interest at LIBOR plus a spread of 2.75% to 3.50% based on the Company’s senior leverage ratio. The 2018 First Lien Term Loan has quarterly required payments of $2.0 million beginning June 30, 2018, increasing to $3.0 million on June 30, 2020, and increasing to $4.0 million on June 30, 2022. The 2018 First Lien Term Loan has a maturity date of March 7, 2023. The 2018 First Lien Credit Facility contains certain financial covenants including maximum senior leverage ratio of 3.50x with step-downs to 3.00x, a maximum total leverage ratio of 4.50x with step-downs to 4.00x, and a minimum fixed charge coverage ratio of 1.20x. The weighted average interest rate of the 2018 First Lien Term Loan was 5.13% at March 31, 2018. The Company had no borrowings outstanding under the 2018 Revolving Credit Facility at March 31, 2018.

2018 Second Lien Credit Facility: The 2018 Second Lien Credit Facility bears interest at a rate of LIBOR plus 7.00% and has a maturity date of March 7, 2024. The 2018 Second Lien Credit Facility contains certain financial covenants including a maximum senior leverage ratio of 3.75x with step-downs to 3.50x, a maximum total leverage ratio of 4.75x with step-downs to 4.50x, and a minimum fixed charge coverage ratio of 1.10x. The weighted average interest rate of the 2018 Second Lien Term Loan was 8.70% at March 31, 2018.

2017 Credit Facility

On February 17, 2017, the Company and NATC, entered into a $250 million secured credit facility comprised of (i) a First Lien Credit Facility with Fifth Third Bank, as administrative agent, and other lenders (the “2017 First Lien Credit Facility”) and (ii) a Second Lien Credit Facility with Prospect Capital Corporation, as administrative agent, and other lenders (the “2017 Second Lien Credit Facility,” and together with the 2017 First Lien Credit Facility, the “2017 Credit Facility”). The Company used the proceeds of the 2017 Credit Facility to repay, in full, the Company’s First Lien Term Loan, Second Lien Term Loan, and Revolving Credit Facility and to pay related fees and expenses. As a result of this transaction, the Company incurred a loss on extinguishment of debt of $6.1 million during the first quarter of 2017.

The 2017 Credit Facility contained customary events of default including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, certain ERISA events, judgments in excess of specified amounts, and change in control defaults. The 2017 Credit Facility also contained certain negative covenants customary for facilities of these types including covenants that, subject to exceptions described in the 2017 Credit Facility, restricted the ability of the Company and its subsidiary guarantors: (i) to pledge assets, (ii) to incur additional indebtedness, (iii) to pay dividends, (iv) to make distributions, (v) to sell assets, and (vi) to make investments.

2017 First Lien Credit Facility:  The 2017 First Lien Credit Facility consisted of: (i) a $50 million revolving credit facility (the “2017 Revolving Credit Facility”), (ii) a $110 million first out term loan facility (the “2017 First Out Term Loan”), and (iii) a $35 million second out term loan facility (the “2017 Second Out Term Loan”). The 2017 First Lien Credit Facility also included an accordion feature allowing the Company to borrow up to an additional $40 million upon the satisfaction of certain conditions, including obtaining commitments from one or more lenders. Borrowings under the 2017 Revolving Credit Facility could be used for general corporate purposes, including acquisitions.

The 2017 First Out Term Loan and the 2017 Revolving Credit Facility had a maturity date of February 17, 2022, and the 2017 Second Out Term Loan had a maturity date of May 17, 2022. The 2017 First Out Term Loan and the 2017 Revolving Credit Facility bore interest at LIBOR plus a spread of 2.5% to 3.5% based on the Company’s senior leverage ratio. The 2017 First Out Term Loan had quarterly required payments of $1.4 million beginning June 30, 2017, increasing to $2.1 million on June 30, 2019, and increasing to $2.8 million on June 30, 2021. The 2017 Second Out Term Loan bore interest at LIBOR plus 6% (subject to a floor of 1.00%). The 2017 Second Out Term Loan had quarterly required payments of $0.1 million beginning June 30, 2017.  The 2017 First Lien Credit Facility contained certain financial covenants including maximum senior leverage ratio of 3.75x with step-downs to 3.00x, a maximum total leverage ratio of 4.75x with step-downs to 4.00x, and a minimum fixed charge coverage ratio of 1.20x.  The weighted average interest rate at December 31, 2017, on the 2017 Revolving Credit Facility was 5.05%. The weighted average interest rate at December 31, 2017, on the 2017 First Out Term Loan was 4.61%.  The weighted average interest rate at December 31, 2017, on the 2017 Second Out Term Loan was 7.61%.

2017 Second Lien Credit Facility:  The 2017 Second Lien Credit Facility consisted of a $55 million second lien term loan (the “2017 Second Lien Term Loan”) having a maturity date of August 17, 2022. The 2017 Second Lien Term Loan bore interest at a fixed rate of 11%. The 2017 Second Lien Credit Facility contained certain financial covenants including a maximum senior leverage ratio of 4.25x with step-downs to 3.50x, a maximum total leverage ratio of 5.25x with step-downs to 4.50x, and a minimum fixed charge coverage ratio of 1.10x.

Note Payable – VaporBeast

On November 30, 2016, the Company issued a note payable to VaporBeast’s former shareholders (“VaporBeast Note”). The VaporBeast Note is $2.0 million principal with 6% interest compounded monthly and matures on May 30, 2018. The VaporBeast Note may be prepaid at any time without penalty and is subject to a late-payment penalty of 5% and a default rate of 13% per annum. The VaporBeast Note is subject to customary defaults, including defaults for nonpayment, nonperformance, any material breach under the purchase agreement, and bankruptcy or insolvency.

First Lien Term Loan

Turning Point Brands, Inc. (“TPBI”), along with NATC and its subsidiaries, were guarantors under the First Lien Term Loan.  TPLLC and its sole subsidiary at the date of the agreement, Intrepid, were not guarantors of the First Lien Term Loan. The First Lien Term Loan was 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 or any guarantor, other than certain excluded assets (the “Collateral”).  The loans designated as LIBOR loans bore interest at the LIBOR then in effect (but not less than 1.25%) plus 6.50%, and the loans designated as base rate loans bore 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) 5.50%.

Second Lien Term Loan

The Second Lien Term Loan was secured by a second priority security interest in the Collateral and was guaranteed by the same entities as the First Lien Term Loan. Under the Second Lien Term Loan, the loans designated as LIBOR loans bore interest at LIBOR then in effect (but not less than 1.25%) plus 10.25%.  The loans designated as base rate loans bore 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%.

Revolving Credit Facility

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

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Income Taxes

3 Months Ended

Mar. 31, 2018

Income Taxes [Abstract]

Income Taxes

Note 10. Income Taxes

In December 2017, the U.S. Congress passed the TCJA which reduced the corporate income tax rate to 21%, effective January 1, 2018. Other significant changes accompanying the corporate income tax rate reduction include eliminating the corporate alternative minimum tax, limiting the interest expense deduction to 30% of adjusted taxable income, and limiting net operating losses to 80% of taxable income for losses arising in tax years beginning after 2017. As a result of the TCJA, the Company was required to remeasure its deferred tax assets and liabilities at the newly enacted rate, resulting in $0.2 million of income tax expense for the three months ended December 31, 2017.

The Company’s effective income tax rate for the three months ended March 31, 2018, was 21%. The Company’s income tax benefit for the three months ended March 31, 2017 does not bear the normal relationship to loss before income taxes because of tax benefits of $2.0 million relating to stock options exercised during the quarter.

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 the Company 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 2014.

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Pension and Postretirement Benefit Plans

3 Months Ended

Mar. 31, 2018

Pension and Postretirement Benefit Plans [Abstract]

Pension and Postretirement Benefit Plans

Note 11. Pension and Postretirement Benefit Plans

The Company has a defined benefit pension plan. Benefits for hourly employees were based on a stated benefit per year of service, reduced by amounts earned in a previous plan. Benefits for salaried employees were based on years of service and the employees’ final compensation. The defined benefit pension plan is frozen.  The Company’s policy is to make the minimum amount of contributions that can be deducted for federal income taxes. The Company expects to make no contributions to the pension plan in 2018.

The Company 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. The Company’s policy is to make contributions equal to benefits paid during the year. The Company expects to contribute approximately $0.3 million to its postretirement plan in 2018 for the payment of benefits.

The following table provides the components of net periodic pension and postretirement benefit costs and total costs for the plans:

	Three Months Ended March 31,
	Pension Benefits						Postretirement Benefits
	2018			2017			2018			2017
Service cost	$	26		$	26		$	-		$	-
Interest cost		142			170			29			58
Expected return on plan assets		(254	)		(256	)		-			-
Amortization of (gains) losses		60			120			(20	)		-
Net periodic benefit cost (income)	$	(26	)	$	60		$	9		$	58

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Share Incentive Plans

3 Months Ended

Mar. 31, 2018

Share Incentive Plans [Abstract]

Share Incentive Plans

Note 12. 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”), pursuant to which awards 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 the Company’s voting common stock are reserved for issuance as awards to employees, non-employee directors, and consultants 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 vesting criteria for the awards, with such criteria to be specified in the award agreement. As of March 31, 2018, there were 20,727 shares of restricted stock, 184,000 performance-based restricted stock units, and 301,792 options outstanding under the 2015 Plan. There are 893,481 shares available for grant under the 2015 Plan.

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

On February 7, 2017, the Board of Directors of the Company approved stock option cash-out agreements with three Company officers and a director for the surrender of 83,400 expiring stock options in exchange for payment to the option holders of $11.99 per share. This payment equaled the difference between the exercise price of $1.06 and closing stock price of $13.05 on the approval date, or an aggregate of $1.0 million.

There are no shares available for grant under the 2006 Plan. Stock option activity for the 2006 and 2015 Plans is summarized below:

	Stock Option Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Outstanding, December 31, 2016		1,637,762		$	2.41	$	1.23
Granted		133,819			14.69		4.41
Exercised		(923,708	)		1.55		0.83
Forfeited		(801	)		15.37		4.59
Surrendered		(83,400	)		1.06		0.54
Outstanding, December 31, 2017		763,672			5.73		2.36
Granted		124,100			21.27		6.39
Exercised		(12,501	)		1.61		0.87
Forfeited		(9,323	)		10.96		2.99
Outstanding, March 31, 2018		865,948		$	7.96	$	2.95

Under the 2006 Plan, the total intrinsic value of options exercised during the three months ended March 31, 2018 and 2017, was $0.3 million, and $4.7 million, respectively.  The total intrinsic value of options surrendered during the three months ended March 31, 2017, was $1.0 million.

At March 31, 2018, under the 2006 Plan, the outstanding stock options’ exercise price for 92,535 options is $1.06 per share, all of which are exercisable. The outstanding stock options’ exercise price for 471,621 options is $3.83 per share, all of which are exercisable. The weighted average of the remaining lives of the outstanding stock options is approximately 0.60 years for the options with the $1.06 exercise price and 5.06 years for the options with the $3.83 exercise price. The Company estimates the expected life of these 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, a risk-free interest rate of 4.37%, 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, a risk-free interest rate of 3.57%, 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.

At March 31, 2018, under the 2015 Plan, the risk-free interest rate is based on the U.S. Treasury rate for the expected life at the time of grant. The expected volatility is based on the average long-term historical volatilities of peer companies. We intend to continue to consistently use the same group of publicly traded peer companies to determine expected volatility until sufficient information regarding volatility of our share price becomes available or until the selected companies are no longer suitable for this purpose. Due to our limited trading history, we are using the simplified method presented by SEC Staff Accounting Bulletin No. 107 to calculate expected holding periods, which represent the periods of time for which options granted are expected to be outstanding. We will continue to use this method until we have sufficient historical exercise experience to give us confidence in the reliability of our calculations. The fair values of these options were determined using the Black-Scholes option pricing model.

The following table outlines the assumptions based on the number of options granted under the 2015 Plan.

	August 10, 2016, Grant			February 10, 2017, Grant			May 17, 2017, Grant			March 7, 2018, Grant			March 13, 2018, Grant
Number of options granted		53,996			40,000			93,819			98,100			26,000
Options outstanding at March 31, 2018		47,247			40,000			90,445			98,100			26,000
Number exercisable at March 31, 2018		47,247			13,600			31,898			-			8,840
Exercise price	$	9.26		$	13.00		$	15.41		$	21.21		$	21.49
Remaining lives		0.18			8.87			9.13			9.94			9.96
Risk free interest rate		1.16	%		1.89	%		1.76	%		2.65	%		2.62	%
Expected volatility		25.40	%		27.44	%		26.92	%		28.76	%		28.76	%
Expected life		5.375			6.000			6.000			6.000			5.495
Dividend yield		-			-			-			0.83	%		0.82	%
Fair value at grant date	$	2.37		$	3.98		$	4.60		$	6.37		$	6.18

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 related to the options of approximately $0.1 million for the three months ended March 31, 2018 and 2017. Total unrecognized compensation expense related to options at March 31, 2018, is $0.9 million, which will be expensed over 2.49 years.

Performance-Based Restricted Stock Units (“PRSUs”)

PRSUs are restricted stock units subject to both performance-based and service-based vesting conditions. The number of common stock shares a recipient will receive upon vesting of a PRSU will be calculated by reference to certain performance metrics related to the Company’s performance over a five-year period.  PRSUs will vest on the measurement date, which is no more than 65 days after the performance period (provided the applicable service and performance conditions are satisfied). On March 31, 2017, the Company’s Board of Directors granted 94,000 PRSUs to employees of the Company. On March 7, 2018, the Company’s Board of Directors granted an additional 96,000 PRSUs to employees of the Company. The fair values of the PRSUs granted on March 31, 2017, and March 7, 2018, are $15.60 and $21.21, respectively, the Company’s stock price on the date of grant. As of March 31, 2018, there are 184,000 PRSUs outstanding, all of which are unvested. The Company recorded compensation expense related to the PRSUs of approximately $0.1 million in the consolidated statements of income for the three months ended March 31, 2018, based on the probability of achieving the performance condition. Total unrecognized compensation expense related to these awards at March 31, 2018, is $3.1 million which will be expensed over the service periods based on the probability of achieving the performance condition.

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Contingencies

3 Months Ended

Mar. 31, 2018

Contingencies [Abstract]

Contingencies

Note 13. Contingencies

Other major tobacco companies are defendants in product liability claims. In a number of these cases, the amounts of punitive and compensatory damages sought are significant and could have a material adverse effect on our business and results of operations. The Company is a defendant in certain cases which have been dormant for many years. Plaintiffs’ counsel are in the process of voluntarily dismissing those claims.

The Company is subject to several lawsuits alleging personal injuries resulting from malfunctioning vaporizer devices and may be subject to claims in the future relating to other NewGen products. The Company is still evaluating these claims and the potential defenses to them.  For example, the Company did not design or manufacture the products at issue; rather, the Company was merely the distributor.  Nonetheless, there can be no assurance that the Company will prevail in these cases, and they could have a material adverse effect on the financial position, results of operations, or cash flows of the Company.

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Income Per Share

3 Months Ended

Mar. 31, 2018

Income Per Share [Abstract]

Income Per Share

Note 14. Income 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 March 31,
	2018						2017
	Income		Shares		Per Share		Income		Shares		Per Share
Consolidated net income	$	3,032					$	1,877
Basic EPS:
Weighted average				19,221,892	$	0.16				18,734,393	$	0.10
Diluted EPS:
Effect of dilutive securities:
Stock options and warrants				540,302						898,960
				19,762,194	$	0.15				19,633,353	$	0.10

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Segment Information

3 Months Ended

Mar. 31, 2018

Segment Information [Abstract]

Segment Information

Note 15. Segment Information

In accordance with ASC 280, Segment Reporting, the Company has three reportable segments: Smokeless products, Smoking products, and NewGen products. The Smokeless products segment (i) manufactures and markets moist snuff and (ii) contracts for and markets chewing tobacco products. The Smoking products segment (i) imports and markets cigarette papers, tubes, and related products; (ii) imports and markets finished cigars, MYO cigar tobaccos, and cigar wraps; and (iii) processes, packages, markets, and distributes traditional pipe tobaccos. The NewGen products segment (i) markets e-cigarettes, e-liquids, vaporizers, and other related products; (ii) distributes a wide assortment of vaping products to non-traditional retail outlets via VaporBeast and Vapor Shark, and (iii) distributes a wide assortment of vaping related products to individual consumers via Vapor Shark branded retail outlets. Smokeless and Smoking products are distributed primarily through wholesale distributors in the United States while NewGen products are distributed primarily through e-commerce to non-traditional retail outlets in the United States. The Other segment includes the costs and assets of the Company not assigned to one of the three reportable segments such as intercompany transfers, deferred taxes, deferred financing fees, and investments in subsidiaries.

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 gross 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:

	Three Months Ended March 31,
	2018			2017
Net sales
Smokeless products	$	20,747		$	20,248
Smoking products		26,996			27,177
NewGen products		26,199			19,363
	$	73,942		$	66,788
Operating income (loss)
Smokeless products	$	4,486		$	3,611
Smoking products		6,894			8,048
NewGen products		(1,496	)		(664	)
Other (1)		(143	)		(146	)
	$	9,741		$	10,849
Interest expense		(3,654	)		(4,933	)
Investment income		95			114
Loss on extinguishment of debt		(2,384	)		(6,116	)
Net periodic benefit income (expense), excluding service cost		43			(92	)
Income before income taxes	$	3,841		$	(178	)
Capital expenditures
Smokeless products	$	349		$	366
NewGen products		14			2
	$	363		$	368
Depreciation and amortization
Smokeless products	$	339		$	352
NewGen products		396			177
	$	735		$	529
(1) '"Other" includes the costs and assets that are not assigned to the three reportable segments, such as intercompany transfers, deferred taxes, and investments in subsidiaries. All goodwill has been allocated to the reportable segments.

	March 31, 2018			December 31, 2017
Assets
Smokeless products	$	97,279		$	94,559
Smoking products		139,872			141,869
NewGen products		43,922			44,914
Other (1)		(2,648	)		935
	$	278,425		$	282,277
(1) '"Other" includes the costs and assets that are not assigned to the three reportable segments, such as intercompany transfers, deferred taxes, and investments in subsidiaries. All goodwill has been allocated to the reportable segments.

Revenue Disaggregation—Sales Channel

Revenues of the Smokeless and Smoking segments are 100% comprised of sales made to wholesalers while NewGen sales are made to wholesalers, retailers, and ultimate end-customers. NewGen net sales are broken out by sales channel below.

	Three Months Ended March 31,
	2018		2017
Wholesalers	$	2,330	$	2,474
Retail outlets		20,884		15,777
End-customers		2,935		1,112
Other		50		-
	$	26,199	$	19,363

Net Sales—Domestic vs. Foreign

The following table shows a breakdown of consolidated net sales between domestic and foreign customers.

	Three Months Ended March 31,
	2018		2017
Domestic	$	70,858	$	64,371
Foreign		3,084		2,417
Total	$	73,942	$	66,788

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Dividends

3 Months Ended

Mar. 31, 2018

Dividends [Abstract]

Dividends

Note 16. Dividends

On November 9, 2017, the Company’s Board of Directors approved the initiation of a cash dividend to shareholders.  The initial quarterly dividend of $0.04 per common share was paid on December 15, 2017, to shareholders of record at the close of business on November 27, 2017. The most recent dividend of $0.04 per common share was paid on April 13, 2018, to shareholders of record at the close of business on March 26, 2018.

Dividends are classified as restricted payments within the 2018 Credit Facility. The Company is generally permitted to make restricted payments provided that, at the time of payment, or as a result of payment, the Company is not in default on its debt covenants. Additional restrictions limit the aggregate amount of restricted, quarterly dividends during a fiscal year to the aggregate amount of mandatory and voluntary principal payments made on the priority term loans during the fiscal year.

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Subsequent Event

3 Months Ended

Mar. 31, 2018

Subsequent Event [Abstract]

Subsequent Event

Note 17. Subsequent Event

On April 30, 2018, the Company acquired related assets of Vapor Supply, Vapor Supply.com, and some of its affiliates for total consideration of $4.8 million paid in cash.  The Company is in the process of assigning fair value to the assets acquired which primarily consist of inventory, fixed assets, and intangible assets.

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Organizations and Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2018

Organizations and Basis of Presentation [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying interim, condensed, consolidated financial statements have been prepared in accordance with the accounting practices described in the Company’s audited consolidated financial statements as of, and for the year ended, December 31, 2017, and are unaudited.In the opinion of management, the unaudited, interim, condensed, consolidated financial statements included herein contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods indicated. Such adjustments, other than nonrecurring adjustments separately disclosed, are of a normal and recurring nature. The operating results for interim periods are not necessarily indicative of results to be expected for a full year or 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, 2017. 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 (“GAAP”) with respect to annual financial statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year’s presentation. The changes did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows in any of the periods presented.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

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 adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP, on January 1, 2018. The Company recognizes revenues, net of sales incentives and sales returns, including shipping and handling charges billed to customers, upon delivery of goods to the customer at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the five-step analysis outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied.

A further requirement of ASU 2014-09 is for entities to disaggregate revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Company management views business performance through segments that closely resemble the performance of major product lines.  Thus, the primary, and most useful, disaggregation of the Company’s contract revenue for decision making purposes is the disaggregation by segment which can be found in Note 15 of Notes to Consolidated Financial Statements. An additional disaggregation of contract revenue by sales channel can be found within Note 15 as well.

Shipping Costs

Shipping Costs

The Company records shipping costs incurred as a component of selling, general, and administrative expenses. Shipping costs incurred were approximately $3.2 million and $2.2 million for the three months ending March 31, 2018 and 2017, respectively.

Fair Value

Fair Value

GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3).

The three levels of the fair value hierarchy under GAAP are described below:

· Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date.

· Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

Derivative Instruments

Derivative Instruments

Foreign Currency Forward Contracts: The Company enters into foreign currency forward contracts to hedge a portion of its exposure to changes in foreign currency exchange rates on inventory purchase commitments. The Company accounts for its forward contracts under the provisions of ASC 815, Derivatives and Hedging. Under the Company’s policy, the Company may hedge up to 100% of its anticipated purchases of inventory in the denominated invoice currency over a forward period not to exceed twelve months. The Company may also, from time to time, hedge up to ninety percent of its non-inventory purchases in the denominated invoice currency. Forward contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these forward contracts are transferred from other comprehensive income into net income as the related inventories are received. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Interest Rate Swap Agreements: The Company enters into interest rate swap contracts to manage interest rate risk and reduce the volatility of future cash flows. The Company accounts for its interest rate swap contracts under the provisions of ASC 815, Derivatives and Hedging. Swap contracts that qualify as hedges are adjusted to their fair value through other comprehensive income as determined by market prices on the measurement date, except any hedge ineffectiveness which is recognized currently in income. Gains and losses on these swap contracts are transferred from other comprehensive income into net income upon settlement of the derivative position or at maturity of the interest rate swap contract. Changes in fair value of any contracts that do not qualify for hedge accounting or are not designated as hedges are recognized currently in income.

Risks and Uncertainties

Risks and Uncertainties

Manufacturers and sellers of tobacco products are subject to regulation at the federal, state, and local levels. Such regulations include, among others, labeling requirements, limitations on advertising, and prohibition of sales to minors. The trend in recent years has been toward increased regulation of the tobacco industry. There can be no assurance as to the ultimate content, timing, or effect of any regulation of tobacco products by any federal, state, or local legislative or regulatory body, nor can there be any assurance that any such legislation or regulation would not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

The tobacco industry has experienced, and is experiencing, significant product liability litigation. Most tobacco liability lawsuits have been brought against manufacturers and sellers of cigarettes for injuries allegedly caused by smoking or exposure to smoke. However, several lawsuits have been brought against manufacturers and sellers of smokeless products for injuries to health allegedly caused by use of smokeless products. Typically, such claims assert that use of smokeless products is addictive and causes oral cancer. Additionally, several lawsuits have been brought against manufacturers and distributors of NewGen products due to malfunctioning devices. There can be no assurance the Company will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Master Settlement Agreement (MSA):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 chose 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 March 31, 2018, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $30.3 million. At December 31, 2017, the Company had on deposit approximately $32.1 million, the fair value of which was approximately $30.8 million. Effective in the third quarter of 2017, the Company no longer sells any product covered under the MSA. Thus, pending a change in legislation, the Company will no longer be required to make deposits to the MSA escrow account.

The Company has chosen to invest a portion of the MSA escrow deposits in U.S. Government securities including TIPS, Treasury Notes, and Treasury Bonds. These investments are classified as available-for-sale and carried at fair value. Realized losses are prohibited under the MSA; any investment in an unrealized loss position will be held until the value is recovered, or until maturity. The following shows the fair value of the MSA escrow account:

	As of March 31, 2018							As of December 31, 2017
	Cost		Gross Unrealized Losses			Estimated Fair Value		Cost		Gross Unrealized Losses			Estimated Fair Value
Cash and cash equivalents	$	3,072	$	-		$	3,072	$	3,602	$	-		$	3,602
U.S. Governmental agency obligations(unrealized loss position < 12 months)		27,739		(1,706	)		26,033		722		(17	)		705
U.S. Governmental agency obligations (unrealized loss position > 12 months)		1,247		(36	)		1,211		27,733		(1,214	)		26,519
	$	32,058	$	(1,742	)	$	30,316	$	32,057	$	(1,231	)	$	30,826

Fair value for the U.S. Governmental agency obligations are Level 2. The following shows the maturities of the U.S. Governmental agency obligations:

	As of
	March 31, 2018		December 31, 2017
Less than five years	$	7,114	$	7,114
Six to ten years		18,913		17,662
Greater than ten years		2,959		3,679
Total U.S. Governmental agency obligations	$	28,986	$	28,455

The following shows the amount of deposits by sales year for the MSA escrow account:

	Deposits as of
Sales Year	March 31, 2018		December 31, 2017
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,714		3,714
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		199		199
2013		173		173
2014		143		143
2015		101		101
2016		81		81
2017		71		70
Total	$	32,058	$	32,057

Food and Drug Administration (“FDA”): On June 22, 2009, the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) authorized the Food and Drug Administration (“FDA”) to immediately regulate the manufacturing, sale, and marketing of four categories of tobacco products – cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. On August 8, 2016, the FDA deeming regulation became effective. The deeming regulation gave the FDA the authority to additionally regulate cigars, pipe tobacco, electronic cigarettes (“e-cigarettes”), vaporizers, and e-liquids as “deemed” tobacco products under the FSPTCA.

The FDA assesses tobacco product user fees on six classes of regulated tobacco products and computes user fees using a methodology similar to the methodology used by the U.S Department of Agriculture to compute the Tobacco Transition Payment Program (“TTPP,” also known as the “Tobacco Buyout”) assessment. First, the total, annual, congressionally established user fee assessment is allocated among the various classes of tobacco products using the federal excise tax weighted market share of tobacco products subject to regulation. Then, the assessment for each class of tobacco products is divided among individual manufacturers and importers.

Prior to October 1, 2016, these FDA user fees applied only to those products then regulated by the FDA. Effective October 1, 2016, the FDA began additionally applying FDA user fees to newly deemed tobacco products subject to FDA user fees as described above, i.e., cigars and pipe tobacco.

On July 28, 2017, the FDA announced a new direction in regulating tobacco products, including the newly “deemed” markets such as cigars and vapor products. The FDA stated it intends to begin several new rulemaking processes, some of which will outline foundational rules governing the premarket application process for the deemed products, including Substantial Equivalence Applications and Premarket Tobacco Applications. Compliance and related costs could be significant and could increase the costs of operating in our NewGen segment. The original filing deadlines for newly “deemed” products on the market as of August 8, 2016, have been postponed until August 8, 2021, for “combustible” products (e.g., cigar and pipe) and August 8, 2022, for “non-combustible” products (e.g., vapor products). No other filing deadlines were altered. The FDA also acknowledged a “continuum of risk” among tobacco products (i.e., certain tobacco products pose a greater risk to individual and public health than others), that it intends to seek public comment on the role flavors play in attracting youth and the role flavors may play in helping some smokers switch to potentially less harmful forms of nicotine delivery, and that it would be increasing its focus on the regulation of cigarette products.

Recent Accounting Pronouncements Adopted

Recent Accounting Pronouncements Adopted

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP, in the first quarter of 2018 using the modified retrospective method. This ASU requires the recognition of revenue to depict the transfer of goods to customers at an amount that the Company expects to be entitled to in exchange for those goods in accordance with the following five-step analysis:  (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The adoption of this ASU had no effect on the timing or amount of revenue recognition, or on net income.

The Company adopted ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, in the first quarter of 2018 on a prospective basis. This ASU allows entities to make a one-time reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for the effects of remeasuring deferred tax liabilities and assets originally recorded in other comprehensive income as a result of the change in the federal tax rate by the Tax Cuts and Jobs Act (“TCJA”). The adoption of this ASU resulted in a reclassification of stranded tax effects related to the TCJA from accumulated other comprehensive income to retained earnings of less than $0.1 million.

The Company adopted ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, in the first quarter of 2018 using the full retrospective method. This ASU requires an entity to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The adoption of this ASU resulted in a reclassification of less than $0.1 million from cost of sales and selling, general, and administrative expenses to net periodic benefit expense (income), excluding service cost, for both periods presented.

The Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, in the first quarter of 2018 using the full retrospective method. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result of this ASU the Company’s statements of cash flows include changes in restricted cash, such as changes in the portion of the MSA escrow deposits held in cash.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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 (the lease 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 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.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Summary of Significant Accounting Policies [Abstract]

Fair Value of MSA Escrow Account

The following shows the fair value of the MSA escrow account:

	As of March 31, 2018							As of December 31, 2017
	Cost		Gross Unrealized Losses			Estimated Fair Value		Cost		Gross Unrealized Losses			Estimated Fair Value
Cash and cash equivalents	$	3,072	$	-		$	3,072	$	3,602	$	-		$	3,602
U.S. Governmental agency obligations(unrealized loss position < 12 months)		27,739		(1,706	)		26,033		722		(17	)		705
U.S. Governmental agency obligations (unrealized loss position > 12 months)		1,247		(36	)		1,211		27,733		(1,214	)		26,519
	$	32,058	$	(1,742	)	$	30,316	$	32,057	$	(1,231	)	$	30,826

Maturities of U.S. Governmental Agency Obligations

The following shows the maturities of the U.S. Governmental agency obligations:

	As of
	March 31, 2018		December 31, 2017
Less than five years	$	7,114	$	7,114
Six to ten years		18,913		17,662
Greater than ten years		2,959		3,679
Total U.S. Governmental agency obligations	$	28,986	$	28,455

Deposits by Sales Year for MSA Escrow Account

The following shows the amount of deposits by sales year for the MSA escrow account:

	Deposits as of
Sales Year	March 31, 2018		December 31, 2017
1999	$	211	$	211
2000		1,017		1,017
2001		1,673		1,673
2002		2,271		2,271
2003		4,249		4,249
2004		3,714		3,714
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		199		199
2013		173		173
2014		143		143
2015		101		101
2016		81		81
2017		71		70
Total	$	32,058	$	32,057

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Inventories (Tables)

3 Months Ended

Mar. 31, 2018

Inventories [Abstract]

Inventories

The components of inventories are as follows:

	March 31, 2018			December 31, 2017
Raw materials and work in process	$	2,403		$	2,545
Leaf tobacco		29,300			30,308
Finished goods - smokeless products		6,503			5,834
Finished goods - smoking products		11,510			14,110
Finished goods - electronic/vaporizer products		12,910			14,532
Other		699			1,290
		63,325			68,619
LIFO reserve		(5,266	)		(5,323	)
	$	58,059		$	63,296

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Property, Plant and Equipment (Tables)

3 Months Ended

Mar. 31, 2018

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, plant, and equipment consisted of the following:

	March 31, 2018			December 31, 2017
Land	$	22		$	22
Buildings and improvements		2,072			2,072
Leasehold improvements		1,873			1,873
Machinery and equipment		12,960			12,635
Furniture and fixtures		3,857			3,821
		20,784			20,423
Accumulated depreciation		(12,122	)		(11,564	)
	$	8,662		$	8,859

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Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

Accrued Liabilities [Abstract]

Accrued Liabilities

Accrued liabilities consisted of the following:

	March 31, 2018		December 31, 2017
Accrued payroll and related items	$	2,277	$	5,683
Customer returns and allowances		2,175		2,707
Other		9,134		10,304
	$	13,586	$	18,694

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Notes Payable and Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2018

Notes Payable and Long-Term Debt [Abstract]

Notes Payable and Long-Term Debt

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

	March 31, 2018			December 31, 2017
2018 First Lien Term Loan	$	160,000		$	-
2018 Second Lien Term Loan		40,000			-
2017 First Lien First Out Term Loan		-			105,875
2017 First Lien Second Out Term Loan		-			34,738
2017 Second Lien Term Loan		-			55,000
Note payable - VaporBeast		2,000			2,000
Total notes payable and long-term debt		202,000			197,613
Less deferred finance charges		(3,835	)		(3,573	)
Less current maturities		(10,000	)		(7,850	)
	$	188,165		$	186,190

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Pension and Postretirement Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2018

Pension and Postretirement Benefit Plans [Abstract]

Components of Net Periodic Benefit Cost

The following table provides the components of net periodic pension and postretirement benefit costs and total costs for the plans:

	Three Months Ended March 31,
	Pension Benefits						Postretirement Benefits
	2018			2017			2018			2017
Service cost	$	26		$	26		$	-		$	-
Interest cost		142			170			29			58
Expected return on plan assets		(254	)		(256	)		-			-
Amortization of (gains) losses		60			120			(20	)		-
Net periodic benefit cost (income)	$	(26	)	$	60		$	9		$	58

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Share Incentive Plans (Tables)

3 Months Ended

Mar. 31, 2018

Share Incentive Plans [Abstract]

Stock Option Activity

There are no shares available for grant under the 2006 Plan. Stock option activity for the 2006 and 2015 Plans is summarized below:

	Stock Option Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Outstanding, December 31, 2016		1,637,762		$	2.41	$	1.23
Granted		133,819			14.69		4.41
Exercised		(923,708	)		1.55		0.83
Forfeited		(801	)		15.37		4.59
Surrendered		(83,400	)		1.06		0.54
Outstanding, December 31, 2017		763,672			5.73		2.36
Granted		124,100			21.27		6.39
Exercised		(12,501	)		1.61		0.87
Forfeited		(9,323	)		10.96		2.99
Outstanding, March 31, 2018		865,948		$	7.96	$	2.95

Assumptions for Options Granted Under 2015 Plan

The following table outlines the assumptions based on the number of options granted under the 2015 Plan.

	August 10, 2016, Grant			February 10, 2017, Grant			May 17, 2017, Grant			March 7, 2018, Grant			March 13, 2018, Grant
Number of options granted		53,996			40,000			93,819			98,100			26,000
Options outstanding at March 31, 2018		47,247			40,000			90,445			98,100			26,000
Number exercisable at March 31, 2018		47,247			13,600			31,898			-			8,840
Exercise price	$	9.26		$	13.00		$	15.41		$	21.21		$	21.49
Remaining lives		0.18			8.87			9.13			9.94			9.96
Risk free interest rate		1.16	%		1.89	%		1.76	%		2.65	%		2.62	%
Expected volatility		25.40	%		27.44	%		26.92	%		28.76	%		28.76	%
Expected life		5.375			6.000			6.000			6.000			5.495
Dividend yield		-			-			-			0.83	%		0.82	%
Fair value at grant date	$	2.37		$	3.98		$	4.60		$	6.37		$	6.18

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Income Per Share (Tables)

3 Months Ended

Mar. 31, 2018

Income Per Share [Abstract]

Basic and Diluted Net Income 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 March 31,
	2018						2017
	Income		Shares		Per Share		Income		Shares		Per Share
Consolidated net income	$	3,032					$	1,877
Basic EPS:
Weighted average				19,221,892	$	0.16				18,734,393	$	0.10
Diluted EPS:
Effect of dilutive securities:
Stock options and warrants				540,302						898,960
				19,762,194	$	0.15				19,633,353	$	0.10

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2018

Segment Information [Abstract]

Financial Information of Reported Segments

The tables below present financial information about reported segments:

	Three Months Ended March 31,
	2018			2017
Net sales
Smokeless products	$	20,747		$	20,248
Smoking products		26,996			27,177
NewGen products		26,199			19,363
	$	73,942		$	66,788
Operating income (loss)
Smokeless products	$	4,486		$	3,611
Smoking products		6,894			8,048
NewGen products		(1,496	)		(664	)
Other (1)		(143	)		(146	)
	$	9,741		$	10,849
Interest expense		(3,654	)		(4,933	)
Investment income		95			114
Loss on extinguishment of debt		(2,384	)		(6,116	)
Net periodic benefit income (expense), excluding service cost		43			(92	)
Income before income taxes	$	3,841		$	(178	)
Capital expenditures
Smokeless products	$	349		$	366
NewGen products		14			2
	$	363		$	368
Depreciation and amortization
Smokeless products	$	339		$	352
NewGen products		396			177
	$	735		$	529
(1) '"Other" includes the costs and assets that are not assigned to the three reportable segments, such as intercompany transfers, deferred taxes, and investments in subsidiaries. All goodwill has been allocated to the reportable segments.

	March 31, 2018			December 31, 2017
Assets
Smokeless products	$	97,279		$	94,559
Smoking products		139,872			141,869
NewGen products		43,922			44,914
Other (1)		(2,648	)		935
	$	278,425		$	282,277
(1) '"Other" includes the costs and assets that are not assigned to the three reportable segments, such as intercompany transfers, deferred taxes, and investments in subsidiaries. All goodwill has been allocated to the reportable segments.

Revenue Disaggregation - Sales Channel

NewGen net sales are broken out by sales channel below.

	Three Months Ended March 31,
	2018		2017
Wholesalers	$	2,330	$	2,474
Retail outlets		20,884		15,777
End-customers		2,935		1,112
Other		50		-
	$	26,199	$	19,363

Net Sales - Domestic vs. Foreign

The following table shows a breakdown of consolidated net sales between domestic and foreign customers.

	Three Months Ended March 31,
	2018		2017
Domestic	$	70,858	$	64,371
Foreign		3,084		2,417
Total	$	73,942	$	66,788

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Summary of Significant Accounting Policies, Shipping Costs (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Shipping Costs [Abstract]
Shipping costs	$ 3.2	$ 2.2

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Summary of Significant Accounting Policies, Derivative Instruments (Details) - Maximum [Member]	3 Months Ended
	Mar. 31, 2018
Derivative [Line Items]
Percentage of anticipated purchases of inventory that may be hedged	100.00%
Term of hedge	12 months
Percentage of non-inventory purchases that may be hedged	90.00%

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Summary of Significant Accounting Policies, Master Settlement Agreement (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Fair Value of MSA Escrow Account [Abstract]
Cost	$ 32,058	$ 32,057
Gross unrealized losses	(1,742)	(1,231)
Estimated fair value	30,316	30,826
Maturities of U.S. Governmental Agency Obligations [Abstract]
Less than five years	7,114	7,114
Six to ten years	18,913	17,662
Greater than ten years	2,959	3,679
Total U.S. Governmental agency obligations	28,986	28,455
Master Settlement Agreement Escrow Account by Sales Year [Abstract]
1999	211	211
2000	1,017	1,017
2001	1,673	1,673
2002	2,271	2,271
2003	4,249	4,249
2004	3,714	3,714
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	199	199
2013	173	173
2014	143	143
2015	101	101
2016	81	81
2017	71	70
Total	32,058	32,057
Cash and Cash Equivalents [Member]
Fair Value of MSA Escrow Account [Abstract]
Cost	3,072	3,602
Gross unrealized losses	0	0
Estimated fair value	3,072	3,602
U. S. Governmental Agency Obligations (Unrealized Loss Position less than 12 Months) [Member]
Fair Value of MSA Escrow Account [Abstract]
Cost	27,739	722
Gross unrealized losses	(1,706)	(17)
Estimated fair value	26,033	705
U. S. Governmental Agency Obligations (Unrealized Loss Position more than 12 Months) [Member]
Fair Value of MSA Escrow Account [Abstract]
Cost	1,247	27,733
Gross unrealized losses	(36)	(1,214)
Estimated fair value	$ 1,211	$ 26,519

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Summary of Significant Accounting Policies, Food and Drug Administration (Details)	3 Months Ended
	Mar. 31, 2018 Category Class
Food and Drug Administration [Abstract]
Number of categories of tobacco products regulated by the FDA | Category	4
Number of classes of regulated tobacco products on which user fees are assessed by the FDA | Class	6

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Summary of Significant Accounting Policies, Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Recent Accounting Pronouncements Adopted [Abstract]
Net periodic benefit expense (income), excluding service cost	$ (43)	$ 92
ASU 2017-07 [Member] | Maximum [Member]
Recent Accounting Pronouncements Adopted [Abstract]
Cost of sales and selling, general, and administrative expenses	(100)	(100)
Net periodic benefit expense (income), excluding service cost	100	$ 100
Accumulated Other Comprehensive Income [Member] | ASU 2018-02 [Member] | Maximum [Member]
Recent Accounting Pronouncements Adopted [Abstract]
Reclassification of stranded tax effects related to the TCJA	100
Retained Earnings [Member] | ASU 2018-02 [Member] | Maximum [Member]
Recent Accounting Pronouncements Adopted [Abstract]
Reclassification of stranded tax effects related to the TCJA	$ (100)

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Acquisitions, Vapor Shark (Details) - Vapor Shark [Member] $ in Millions	1 Months Ended
	Feb. 28, 2018 USD ($) Intallment	Jan. 31, 2018 USD ($)	Jun. 30, 2017	Mar. 31, 2017 USD ($)
Acquisitions [Abstract]
Committed deposit in exchange for warrant				$ 2.5
Equity interest to be purchased upon exercise of warrant				100.00%
Equity interest acquired			100.00%
Consideration paid in exchange for option to purchase owned stores		$ 1.5
Cash paid to former shareholder in exchange for option to purchase branded company-owned stores	$ 1.0
Liability to former shareholder in exchange for option to purchase branded company-owned stores	$ 0.5
Number of monthly installments for the remaining amount | Intallment	24

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Derivative Instruments (Details) € in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2018 EUR (€)	Mar. 31, 2017 EUR (€)	Mar. 31, 2018 USD ($)	Mar. 31, 2018 EUR (€)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 EUR (€)
Maximum [Member]
Derivative Instruments [Abstract]
Percentage of anticipated purchases of inventory that may be hedged	100.00%
Term of hedge	12 months
Percentage of non-inventory purchases that may be hedged	90.00%
Foreign Exchange Contracts [Member]
Derivative Instruments [Abstract]
Notional amount of contracts purchased | €	€ 6.0	€ 0.0
Notional amount | €				€ 3.8		€ 0.0
Interest Rate Swap [Member]
Derivative Instruments [Abstract]
Notional amount | $			$ 70.0		$ 0.0
Fair value | $			$ 0.7
Interest Rate Swap [Member] | LIBOR [Member]
Derivative Instruments [Abstract]
Interest rate percentage			2.755%	2.755%

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Fair Value of Financial Instruments (Details) € in Millions, $ in Millions	Mar. 31, 2018 USD ($)	Mar. 31, 2018 EUR (€)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 EUR (€)
Foreign Exchange Contracts [Member]
Fair Value of Financial Instruments [Abstract]
Notional amount | €		€ 3.8		€ 0.0
Interest Rate Swap [Member]
Fair Value of Financial Instruments [Abstract]
Notional amount	$ 70.0		$ 0.0
Fair value	0.7
Fair Value [Member] | 2018 First Lien Term Loan [Member]
Fair Value of Financial Instruments [Abstract]
Long-term debt	160.0
Fair Value [Member] | 2018 Second Lien Term Loan [Member]
Fair Value of Financial Instruments [Abstract]
Long-term debt	$ 40.0
Fair Value [Member] | 2017 First Lien Term Loans [Member]
Fair Value of Financial Instruments [Abstract]
Long-term debt			140.6
Fair Value [Member] | 2017 Second Lien Term Loan [Member]
Fair Value of Financial Instruments [Abstract]
Long-term debt			$ 56.1

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Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Inventories [Abstract]
Raw materials and work in process	$ 2,403	$ 2,545
Leaf tobacco	29,300	30,308
Other	699	1,290
Inventory	63,325	68,619
LIFO reserve	(5,266)	(5,323)
Inventory, net	58,059	63,296
Inventory valuation allowance	600	500
Smokeless Products [Member]
Inventories [Abstract]
Finished goods	6,503	5,834
Smoking Products [Member]
Inventories [Abstract]
Finished goods	11,510	14,110
Electronic / Vaporizer Products [Member]
Inventories [Abstract]
Finished goods	$ 12,910	$ 14,532

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Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Abstract]
Property, plant and equipment	$ 20,784	$ 20,423
Accumulated depreciation	(12,122)	(11,564)
Property, plant and equipment, net	8,662	8,859
Land [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	22	22
Buildings and Improvements [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	2,072	2,072
Leasehold Improvements [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	1,873	1,873
Machinery and Equipment [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	12,960	12,635
Furniture and Fixtures [Member]
Property, Plant and Equipment [Abstract]
Property, plant and equipment	$ 3,857	$ 3,821

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Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Accrued Liabilities [Abstract]
Accrued payroll and related items	$ 2,277	$ 5,683
Customer returns and allowances	2,175	2,707
Other	9,134	10,304
Total accrued liabilities	$ 13,586	$ 18,694

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Notes Payable and Long-Term Debt, Summary of Notes Payable and Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Notes Payable and Long-Term Debt [Abstract]
Notes payable and long-term debt	$ 202,000	$ 197,613
Less deferred finance charges	(3,835)	(3,573)
Less current maturities	(10,000)	(7,850)
Long-term debt	188,165	186,190
2018 First Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes payable and long-term debt	160,000	0
2018 Second Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes payable and long-term debt	40,000	0
2017 First Lien First Out Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes payable and long-term debt	0	105,875
2017 First Lien Second Out Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes payable and long-term debt	0	34,738
2017 Second Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes payable and long-term debt	0	55,000
Note Payable - VaporBeast [Member]
Notes Payable and Long-Term Debt [Abstract]
Notes payable and long-term debt	$ 2,000	$ 2,000

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Notes Payable and Long-Term Debt, 2018 Credit Facility (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 07, 2018
Notes Payable and Long-Term Debt [Abstract]
Loss on extinguishment of debt	$ (2,384)	$ (6,116)
2018 Credit Facility [Member]
Notes Payable and Long-Term Debt [Abstract]
Secured credit facility			$ 250,000
Additional borrowing capacity under accordion feature			40,000
2018 First Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Face amount			160,000
2018 Revolving Credit Facility [Member]
Notes Payable and Long-Term Debt [Abstract]
Maximum borrowing capacity			50,000
2018 Second Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Face amount			$ 40,000

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Notes Payable and Long-Term Debt, 2018 First Lien Credit Facility (Details) $ in Millions		3 Months Ended
	Mar. 07, 2018 USD ($)	Mar. 31, 2018 USD ($)
2018 First Lien Credit Facility [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Senior leverage ratio	3.00
Total leverage ratio	4.00
Fixed charge coverage ratio	1.20
2018 First Lien Credit Facility [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Senior leverage ratio	3.50
Total leverage ratio	4.50
2018 Revolving Credit Facility [Member]
Notes Payable and Long-Term Debt [Abstract]
Outstanding borrowings		$ 0.0
2018 Revolving Credit Facility [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	2.75%
2018 Revolving Credit Facility [Member] | LIBOR [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	3.50%
2018 First Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Frequency of required payment		Quarterly
Maturity date		Mar. 07, 2023
Weighted average interest rate		5.13%
2018 First Lien Term Loan [Member] | June 30, 2018 through March 31, 2020 [Member]
Notes Payable and Long-Term Debt [Abstract]
Required payment	$ 2.0
2018 First Lien Term Loan [Member] | June 30, 2020 through March 31, 2022 [Member]
Notes Payable and Long-Term Debt [Abstract]
Required payment	3.0
2018 First Lien Term Loan [Member] | June 30, 2022 and after [Member]
Notes Payable and Long-Term Debt [Abstract]
Required payment	$ 4.0
2018 First Lien Term Loan [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	2.75%
2018 First Lien Term Loan [Member] | LIBOR [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	3.50%

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Notes Payable and Long-Term Debt, 2018 Second Lien Credit Facility (Details)		3 Months Ended
	Mar. 07, 2018	Mar. 31, 2018
2018 Second Lien Credit Facility [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Senior leverage ratio	3.50
Total leverage ratio	4.50
Fixed charge coverage ratio	1.10
2018 Second Lien Credit Facility [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Senior leverage ratio	3.75
Total leverage ratio	4.75
2018 Second Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Maturity date		Mar. 07, 2024
Weighted average interest rate		8.70%
2018 Second Lien Term Loan [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	7.00%

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Notes Payable and Long-Term Debt, 2017 Credit Facility (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Feb. 17, 2017
Notes Payable and Long-Term Debt [Abstract]
Loss on extinguishment of debt	$ (2,384)	$ (6,116)
2017 Credit Facility [Member]
Notes Payable and Long-Term Debt [Abstract]
Face amount			$ 250,000

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Notes Payable and Long-Term Debt, 2017 First Lien Credit Facility (Details) $ in Millions		3 Months Ended
	Feb. 17, 2017 USD ($) Counterparty	Mar. 31, 2018	Dec. 31, 2017
2017 First Lien Credit Facility [Member]
Notes Payable and Long-Term Debt [Abstract]
Additional borrowing capacity under accordion feature	$ 40.0
2017 First Lien Credit Facility [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Number of lenders that can provide additional borrowing capacity | Counterparty	1
Senior leverage ratio	3.00
Total leverage ratio	4.00
Fixed charge coverage ratio	1.20
2017 First Lien Credit Facility [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Senior leverage ratio	3.75
Total leverage ratio	4.75
2017 Revolving Credit Facility [Member]
Notes Payable and Long-Term Debt [Abstract]
Maximum borrowing capacity	$ 50.0
Maturity date		Feb. 17, 2022
Weighted average interest rate			5.05%
2017 Revolving Credit Facility [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	2.50%
2017 Revolving Credit Facility [Member] | LIBOR [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	3.50%
2017 First Out Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Face amount	$ 110.0
Maturity date		Feb. 17, 2022
Frequency of required payment		Quarterly
Weighted average interest rate			4.61%
2017 First Out Term Loan [Member] | June 30, 2017 through March 31, 2019 [Member]
Notes Payable and Long-Term Debt [Abstract]
Required payment	1.4
2017 First Out Term Loan [Member] | June 30, 2019 through March 31, 2021 [Member]
Notes Payable and Long-Term Debt [Abstract]
Required payment	2.1
2017 First Out Term Loan [Member] | June 30, 2021 and After [Member]
Notes Payable and Long-Term Debt [Abstract]
Required payment	$ 2.8
2017 First Out Term Loan [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	2.50%
2017 First Out Term Loan [Member] | LIBOR [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	3.50%
2017 Second Out Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Face amount	$ 35.0
Maturity date		May 17, 2022
Frequency of required payment		Quarterly
Required payment	$ 0.1
Weighted average interest rate			7.61%
2017 Second Out Term Loan [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	6.00%
Floor interest rate	1.00%

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Notes Payable and Long-Term Debt, 2017 Second Lien Credit Facility (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Feb. 17, 2017
2017 Second Lien Credit Facility [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Senior leverage ratio		3.50
Total leverage ratio		4.50
Fixed charge coverage ratio		1.10
2017 Second Lien Credit Facility [Member] | Maximum [Member]
Notes Payable and Long-Term Debt [Abstract]
Senior leverage ratio		4.25
Total leverage ratio		5.25
2017 Second Lien Term Loan [Member]
Notes Payable and Long-Term Debt [Abstract]
Face amount		$ 55
Maturity date	Aug. 17, 2022
Interest rate		11.00%

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Notes Payable and Long-Term Debt, Note Payable - VaporBeast (Details) - Note Payable - VaporBeast [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Nov. 30, 2016
Notes Payable and Long-Term Debt [Abstract]
Face amount		$ 2.0
Interest rate		6.00%
Maturity date	May 30, 2018
Late payment fee percentage		5.00%
Default interest rate		13.00%

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Notes Payable and Long-Term Debt, First Lien Term Loan (Details) - NATC [Member]	2 Months Ended	3 Months Ended
	Feb. 17, 2017	Mar. 31, 2018
First Lien Term Loan LIBOR Rate Loans [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	6.50%
First Lien Term Loan LIBOR Rate Loans [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate	1.25%
First Lien Term Loan Base Rate Loans [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate	2.25%
Margin on variable rate	5.50%
First Lien Term Loan 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
First Lien Term Loan Base Rate Loans [Member] | Federal Funds Rate [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	0.50%

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Notes Payable and Long-Term Debt, Second Lien Term Loan (Details) - NATC [Member]	2 Months Ended	3 Months Ended
	Feb. 17, 2017	Mar. 31, 2018
Second Lien Term Loan LIBOR Rate Loans [Member] | LIBOR [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	10.25%
Second Lien Term Loan LIBOR Rate Loans [Member] | LIBOR [Member] | Minimum [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate	1.25%
Second Lien Term Loan Base Rate Loans [Member]
Notes Payable and Long-Term Debt [Abstract]
Interest rate	2.25%
Margin on variable rate	9.25%
Second Lien Term Loan 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
Second Lien Term Loan Base Rate Loans [Member] | Federal Funds Rate [Member]
Notes Payable and Long-Term Debt [Abstract]
Margin on variable rate	0.50%

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Notes Payable and Long-Term Debt, Revolving Credit Facility (Details) - Revolving Credit Facility [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Feb. 17, 2017
Notes Payable and Long-Term Debt [Abstract]
Maximum borrowing capacity		$ 40
NATC [Member]
Notes Payable and Long-Term Debt [Abstract]
Borrowing base	Borrowing base, which was calculated as the sum of (i) 85% of eligible accounts receivable, plus (ii) the lesser of (a) the product of 70% and the value of eligible inventory or (b) the product of 85%, the net recovery percentage identified in the most recent inventory appraisal, and the value of eligible inventory, plus (iii) the lesser of (a) the product of 75% and the value of eligible inventory or (b) the product of 85%, the net recovery percentage identified in the most recent inventory appraisal, and the value of the eligible finished goods inventory, minus (iv) the aggregate amount of reserves established by the administrative agent.

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017
Income Taxes [Abstract]
Federal statutory rate	21.00%
Income tax expense related to remeasurement of deferred tax assets and liabilities at the newly enacted federal statutory rate		$ 0.2
Effective income tax rate	21.00%
Tax benefits relating to stock options exercised			$ 2.0

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Pension and Postretirement Benefit Plans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Pension Benefits [Member]
Net Periodic Benefit Cost [Abstract]
Service cost	$ 26	$ 26
Interest cost	142	170
Expected return on plan assets	(254)	(256)
Amortization of (gains) losses	60	120
Net periodic benefit cost (income)	(26)	60
Plan Contributions [Abstract]
Expected contributions in 2018	0
Postretirement Benefits [Member]
Net Periodic Benefit Cost [Abstract]
Service cost	0	0
Interest cost	29	58
Expected return on plan assets	0	0
Amortization of (gains) losses	(20)	0
Net periodic benefit cost (income)	9	$ 58
Plan Contributions [Abstract]
Expected contributions in 2018	$ 300

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Share Incentive Plans, Equity Incentive Plans (Details) $ / shares in Units, $ in Thousands		3 Months Ended
	Feb. 07, 2017 USD ($) Individual $ / shares shares	Mar. 31, 2018 USD ($) shares	Mar. 31, 2017 USD ($)	Apr. 28, 2016 shares
Share Incentive Plans [Abstract]
Surrender of options | $		$ 0	$ 1,000
Officer [Member]
Share Incentive Plans [Abstract]
Number of individuals receiving cash-out agreements for surrender of expiring stock options | Individual	3
Director [Member]
Share Incentive Plans [Abstract]
Number of individuals receiving cash-out agreements for surrender of expiring stock options | Individual	1
Stock Options [Member]
Share Incentive Plans [Abstract]
Options surrendered (in shares)	83,400
Surrender price (in dollars per share) | $ / shares	$ 11.99
Exercise price (in dollars per share) | $ / shares	1.06
Share price (in dollars per share) | $ / shares	$ 13.05
Surrender of options | $	$ 1,000
2015 Plan [Member]
Share Incentive Plans [Abstract]
Number of shares available for grant (in shares)		893,481
2015 Plan [Member] | Restricted Stock [Member]
Share Incentive Plans [Abstract]
Number of awards granted (in shares)		20,727
2015 Plan [Member] | Performance-Based Restricted Stock Units [Member]
Share Incentive Plans [Abstract]
Number of awards granted (in shares)		184,000
2015 Plan [Member] | Stock Options [Member]
Share Incentive Plans [Abstract]
Number of awards granted (in shares)		301,792
2006 Plan [Member]
Share Incentive Plans [Abstract]
Number of shares available for grant (in shares)		0
Voting Common Stock [Member] | 2015 Plan [Member]
Share Incentive Plans [Abstract]
Number of shares authorized for issuance (in shares)				1,400,000

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Share Incentive Plans, Stock Option Activity (Details) - Stock Options [Member] - $ / shares		3 Months Ended	12 Months Ended
	Feb. 07, 2017	Mar. 31, 2018	Dec. 31, 2017
Incentive Shares [Roll Forward]
Surrendered (in shares)	(83,400)
2006 and 2015 Plans [Member]
Incentive Shares [Roll Forward]
Outstanding, beginning balance (in shares)		763,672	1,637,762
Granted (in shares)		124,100	133,819
Exercised (in shares)		(12,501)	(923,708)
Forfeited (in shares)		(9,323)	(801)
Surrendered (in shares)			(83,400)
Outstanding, ending balance (in shares)		865,948	763,672
Weighted Average Exercise Price [Abstract]
Outstanding, beginning balance (in dollars per share)		$ 5.73	$ 2.41
Granted (in dollars per share)		21.27	14.69
Exercised (in dollars per share)		1.61	1.55
Forfeited (in dollars per share)		10.96	15.37
Surrendered (in dollars per share)			1.06
Outstanding, ending balance (in dollars per share)		7.96	5.73
Weighted Average Grant Date Fair Value [Abstract]
Outstanding, beginning balance (in dollars per share)		2.36	1.23
Granted (in dollars per share)		6.39	4.41
Exercised (in dollars per share)		0.87	0.83
Forfeited (in dollars per share)		2.99	4.59
Surrendered (in dollars per share)			0.54
Outstanding, ending balance (in dollars per share)		$ 2.95	$ 2.36

XML

Share Incentive Plans, Assumptions for Options Granted Under 2006 Plan (Details) - 2006 Plan [Member] - Stock Options [Member] - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Share Incentive Plans [Abstract]
Intrinsic value of options exercised	$ 0.3	$ 4.7
Intrinsic value of options surrendered		$ 1.0
Expected life	10 years
Exercise Price $1.06 [Member]
Share Incentive Plans [Abstract]
Number of options (in shares)	92,535
Exercise price (in dollars per share)	$ 1.06
Number of options exercisable (in shares)	92,535
Remaining lives	7 months 6 days
Expected life	10 years
Exercise price (in dollars per share)	$ 1.06
Risk free interest rate	4.37%
Expected volatility	30.00%
Dividend yield	0.00%
Fair value at grant date (in dollars per share)	$ 0.54
Exercise Price $3.83 [Member]
Share Incentive Plans [Abstract]
Number of options (in shares)	471,621
Exercise price (in dollars per share)	$ 3.83
Number of options exercisable (in shares)	471,621
Remaining lives	5 years 22 days
Expected life	10 years
Exercise price (in dollars per share)	$ 3.83
Risk free interest rate	3.57%
Expected volatility	40.00%
Dividend yield	0.00%
Fair value at grant date (in dollars per share)	$ 2.17

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Share Incentive Plans, Assumptions for Options Granted Under 2015 Plan (Details) - 2015 Plan [Member] - Stock Options [Member] - $ / shares						3 Months Ended
	Mar. 13, 2018	Mar. 07, 2018	May 17, 2017	Feb. 10, 2017	Aug. 07, 2016	Mar. 31, 2018
August 10, 2016 Grant [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)					53,996
Options outstanding (in shares)						47,247
Number exercisable (in shares)						47,247
Exercise price (in dollars per share)						$ 9.26
Remaining lives						2 months 5 days
Risk free interest rate						1.16%
Expected volatility						25.40%
Expected life						5 years 4 months 15 days
Dividend yield						0.00%
Fair value at grant date (in dollars per share)						$ 2.37
February 10, 2017 Grant [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)				40,000
Options outstanding (in shares)						40,000
Number exercisable (in shares)						13,600
Exercise price (in dollars per share)						$ 13.00
Remaining lives						8 years 10 months 13 days
Risk free interest rate						1.89%
Expected volatility						27.44%
Expected life						6 years
Dividend yield						0.00%
Fair value at grant date (in dollars per share)						$ 3.98
May 17, 2017 Grant [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)			93,819
Options outstanding (in shares)						90,445
Number exercisable (in shares)						31,898
Exercise price (in dollars per share)						$ 15.41
Remaining lives						9 years 1 month 17 days
Risk free interest rate						1.76%
Expected volatility						26.92%
Expected life						6 years
Dividend yield						0.00%
Fair value at grant date (in dollars per share)						$ 4.60
March 7, 2018 Grant [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)		98,100
Options outstanding (in shares)						98,100
Number exercisable (in shares)						0
Exercise price (in dollars per share)						$ 21.21
Remaining lives						9 years 11 months 8 days
Risk free interest rate						2.65%
Expected volatility						28.76%
Expected life						6 years
Dividend yield						0.83%
Fair value at grant date (in dollars per share)						$ 6.37
March 13, 2018 Grant [Member]
Share Incentive Plans [Abstract]
Number of options granted (in shares)	26,000
Options outstanding (in shares)						26,000
Number exercisable (in shares)						8,840
Exercise price (in dollars per share)						$ 21.49
Remaining lives						9 years 11 months 16 days
Risk free interest rate						2.62%
Expected volatility						28.76%
Expected life						5 years 5 months 28 days
Dividend yield						0.82%
Fair value at grant date (in dollars per share)						$ 6.18

XML

Share Incentive Plans, Compensation Expense (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Compensation Expense [Abstract]
Compensation expense related to options	$ 0.1	$ 0.1
Unrecognized compensation expense related to options	$ 0.9
Period over which unrecognized compensation expense will be expensed	2 years 5 months 26 days

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Share Incentive Plans, Performance-Based Restricted Stock Units (Details) - Performance-Based Restricted Stock Units [Member] - USD ($) $ / shares in Units, $ in Millions			3 Months Ended
	Mar. 07, 2018	Mar. 31, 2017	Mar. 31, 2018
Share Incentive Plans [Abstract]
Performance period			5 years
Period between performance period and measurement date for vesting			65 days
Number of units granted (in shares)	96,000	94,000
Fair value (in dollars per share)	$ 21.21	$ 15.60
Unvested units outstanding (in shares)			184,000
Compensation expense			$ 0.1
Unrecognized compensation expense			$ 3.1

XML

Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Per Share [Abstract]
Consolidated net income	$ 3,032	$ 1,877
Basic EPS [Abstract]
Basic weighted average shares (in shares)	19,221,892	18,734,393
Basic EPS (in dollars per share)	$ 0.16	$ 0.10
Effect of Dilutive Securities [Abstract]
Stock options and warrants (in shares)	540,302	898,960
Diluted weighted average shares (in shares)	19,762,194	19,633,353
Diluted EPS (in dollars per share)	$ 0.15	$ 0.10

XML

Segment Information, Financial Information of Reportable Segments (Details) $ in Thousands		3 Months Ended
		Mar. 31, 2018 USD ($) Segment	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)
Segment Information [Abstract]
Number of reportable segments | Segment		3
Segment Information [Abstract]
Net sales		$ 73,942	$ 66,788
Operating income (loss)		9,741	10,849
Interest expense		(3,654)	(4,933)
Investment income		95	114
Loss on extinguishment of debt		(2,384)	(6,116)
Net periodic benefit income (expense), excluding service cost		43	(92)
Income (loss) before income taxes		3,841	(178)
Capital expenditures		363	368
Depreciation and amortization		735	529
Assets		278,425		$ 282,277
NewGen Products [Member]
Segment Information [Abstract]
Net sales		26,199	19,363
Reportable Segments [Member] | Smokeless Products [Member]
Segment Information [Abstract]
Net sales		20,747	20,248
Operating income (loss)		4,486	3,611
Capital expenditures		349	366
Depreciation and amortization		339	352
Assets		97,279		94,559
Reportable Segments [Member] | Smoking Products [Member]
Segment Information [Abstract]
Net sales		26,996	27,177
Operating income (loss)		6,894	8,048
Assets		139,872		141,869
Reportable Segments [Member] | NewGen Products [Member]
Segment Information [Abstract]
Net sales		26,199	19,363
Operating income (loss)		(1,496)	(664)
Capital expenditures		14	2
Depreciation and amortization		396	177
Assets		43,922		44,914
Other [Member]
Segment Information [Abstract]
Operating income (loss)	[1]	(143)	$ (146)
Assets	[1]	$ (2,648)		$ 935

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

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Segment Information, Revenue Disaggregation - Sales Channel (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net Sales by Sales Channel [Abstract]
Net sales	$ 73,942	$ 66,788
Smokeless Products [Member] | Net Sales [Member] | Wholesalers [Member]
Net Sales by Sales Channel [Abstract]
Concentration percentage	100.00%
Smoking Products [Member] | Net Sales [Member] | Wholesalers [Member]
Net Sales by Sales Channel [Abstract]
Concentration percentage	100.00%
NewGen Products [Member]
Net Sales by Sales Channel [Abstract]
Net sales	$ 26,199	19,363
NewGen Products [Member] | Wholesalers [Member]
Net Sales by Sales Channel [Abstract]
Net sales	2,330	2,474
NewGen Products [Member] | Retail Outlets [Member]
Net Sales by Sales Channel [Abstract]
Net sales	20,884	15,777
NewGen Products [Member] | End-customers [Member]
Net Sales by Sales Channel [Abstract]
Net sales	2,935	1,112
NewGen Products [Member] | Other [Member]
Net Sales by Sales Channel [Abstract]
Net sales	$ 50	$ 0

XML

Segment Information, Net Sales - Domestic vs. Foreign (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Segment Information [Abstract]
Net sales	$ 73,942	$ 66,788
Reportable Geographical Component [Member] | Domestic [Member]
Segment Information [Abstract]
Net sales	70,858	64,371
Reportable Geographical Component [Member] | Foreign [Member]
Segment Information [Abstract]
Net sales	$ 3,084	$ 2,417

XML

Dividends (Details) - $ / shares			3 Months Ended
	Apr. 13, 2018	Dec. 15, 2017	Mar. 31, 2018
Dividend Declared Q4-2017 [Member]
Dividends [Abstract]
Dividend payable, date declared			Nov. 09, 2017
Cash dividend paid (in dollars per share)		$ 0.04
Dividend payable, date to be paid			Dec. 15, 2017
Dividend payable, date of record			Nov. 27, 2017
Dividend Declared Q1-2018 [Member] | Subsequent Event [Member]
Dividends [Abstract]
Cash dividend paid (in dollars per share)	$ 0.04
Dividend payable, date to be paid	Apr. 13, 2018
Dividend payable, date of record	Mar. 26, 2018

XML

Subsequent Event (Details) $ in Millions	Apr. 30, 2018 USD ($)
Subsequent Event [Member] | Vapor Supply, Vapor Supply.com, and Some of its Affiliates [Member]
Subsequent Events [Abstract]
Total consideration paid in cash	$ 4.8