2.2.0.25falsefalse0201 - Disclosure - Summary of Significant Accounting Policiestruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
USD ($)
USD ($) / shares
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b>
</b>
<u><b></b></u>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="2%" nowrap="nowrap" align="left"><b>1.</b></td>
<td width="1%"> </td>
<td><u><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></u></td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">(a) <u>Basis of Presentation</u>:
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The condensed consolidated financial statements of Vector Group Ltd. (the “Company” or
“Vector”) include the accounts of VGR Holding LLC (“VGR Holding”), Liggett Group LLC
(“Liggett”), Vector Tobacco Inc. (“Vector Tobacco”), Liggett Vector Brands LLC (“Liggett
Vector Brands”), New Valley LLC (“New Valley”) and other less significant subsidiaries. All
significant intercompany balances and transactions have been eliminated.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Liggett and Vector Tobacco are engaged in the manufacture and sale of cigarettes in the
United States. New Valley is engaged in the real estate business and is seeking to acquire
additional operating companies and real estate properties.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The interim condensed consolidated financial statements of the Company are unaudited and,
in the opinion of management, reflect all adjustments necessary (which are normal and
recurring) to state fairly the Company’s consolidated financial position, results of
operations and cash flows. These condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and the notes thereto included in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the
Securities and Exchange Commission. The consolidated results of operations for interim
periods should not be regarded as necessarily indicative of the results that may be expected
for the entire year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">(b) <u>Distributions and Dividends on Common Stock:</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company records distributions on its common stock as dividends in its condensed
consolidated statement of stockholders’ equity to the extent of retained earnings and
accumulated paid-in capital. Any amounts exceeding retained earnings are recorded as a
reduction to additional paid-in capital. Any amounts then exceeding accumulated paid-in
capital are recorded as an increase to accumulated deficit.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">(c) <u>Earnings Per Share</u> (“EPS”):
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Information concerning the Company’s common stock has been adjusted to give retroactive
effect to the 5% stock dividend paid to Company stockholders on September 29, 2010. All per
share amounts have been presented as if the stock dividends had occurred on January 1, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Net income for purposes of determining basic EPS was as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three Months</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three Months</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,373</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,938</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to
participating securities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(397</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(263</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income available to
common stockholders
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">18,976</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,675</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: Helvetica,Arial,sans-serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
<u>
<b>
</b>
</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Net income for purposes of determining diluted EPS was as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three Months</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three Months</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,373</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,938</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable
to 6.75% Variable Interest Senior
Convertible Exchange Notes
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(257</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income attributable to
participating securities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(397</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(263</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income available to
common stockholders
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">18,976</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,418</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Basic and diluted EPS were calculated using the following shares:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three Months</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three Months</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average shares for basic EPS
</div></td>
<td> </td>
<td> </td>
<td align="right">74,491,590</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">74,258,591</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Plus incremental shares related to
stock options
</div></td>
<td> </td>
<td> </td>
<td align="right">268,584</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">155,188</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Plus incremental shares related to
convertible debt
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,948,142</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average shares for fully diluted EPS
</div></td>
<td> </td>
<td> </td>
<td align="right">74,760,174</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">81,361,921</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The following stock options, non-vested restricted stock and shares issuable upon the
conversion of convertible debt were outstanding during the three months ended March 31, 2011
and 2010 but were not included in the computation of diluted EPS.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three Months</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Three Months</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Ended</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Number of stock options
</div></td>
<td> </td>
<td> </td>
<td align="right">183,411</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">534,914</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average exercise price
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">23.36</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">17.28</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average shares of non-
vested restricted stock
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,212</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average expense per share
</div></td>
<td> </td>
<td> </td>
<td align="right">N/A</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">16.30</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average number of shares
issuable upon conversion of debt.
</div></td>
<td> </td>
<td> </td>
<td align="right">17,143,180</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,195,039</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average conversion price.
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">15.61</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15.70</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
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<div style="font-family: Helvetica,Arial,sans-serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
<u>
<b>
</b>
</u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">(d) <u>Comprehensive Income</u>:
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Other comprehensive income is a component of stockholders’ equity and includes such items as
the unrealized gains and losses on investment securities available for sale, forward foreign
contracts and minimum pension liability adjustments. The Company’s comprehensive income was
$14,850 and $19,645 for the three months ended
March 31, 2011 and 2010, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">(e) <u>Fair Value of Derivatives Embedded within Convertible Debt</u>:
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company has estimated the fair market value of the embedded derivatives based principally
on the results of a valuation model. The estimated fair value of the derivatives embedded
within the convertible debt is based principally on the present value of future dividend
payments expected to be received by the convertible debt holders over the term of the debt.
The discount rate applied to the future cash flows is estimated based on a spread in the yield
of the Company’s debt when compared to risk-free securities with the same duration; thus, a
readily determinable fair market value of the embedded derivatives is not available. The
valuation model assumes future dividend payments by the Company and utilizes interest rates and
credit spreads for secured to unsecured debt, unsecured to subordinated debt and subordinated
debt to preferred stock to determine the fair value of the derivatives embedded within the
convertible debt. The valuation also considers other items, including current and future
dividends and the volatility of Vector’s stock price. The range of estimated fair market
values of the Company’s embedded derivatives was between $145,023 and $139,220. The Company
recorded the fair market value of its embedded derivatives at the midpoint of the inputs at
$142,067 as of March 31, 2011. At December 31, 2010, the range of estimated fair market values
of the Company’s embedded derivatives was between $138,701 and $144,391. The Company recorded
the fair market value of its embedded derivatives at the midpoint of the inputs at $141,492 as
of December 31, 2010. The estimated fair market value of the Company’s embedded derivatives
could change significantly based on future market conditions. (See Note 4.)
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">(f) <u>New Accounting Pronouncements</u>:
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In January 2010, the FASB issued authoritative guidance intended to improve disclosure about
fair value measurements. The guidance requires entities to disclose significant transfers in
and out of fair value hierarchy levels and the reasons for the transfers and to present
information about purchases, sales, issuances, and settlements separately in the reconciliation
of fair value measurements using significant unobservable inputs (Level 3). Additionally, the
guidance clarifies that a reporting entity should provide fair value measurements for each
class of assets and liabilities and disclose the inputs and valuation techniques used for fair
value measurements using significant other observable inputs (Level 2) and significant
unobservable inputs (Level 3). This guidance is effective for interim and annual periods
beginning after December 15, 2009 except for the disclosure about purchases, sales, issuances
and settlements in the Level 3 reconciliation, which will be effective for interim and annual
periods beginning after December 15, 2010. As this guidance provides only disclosure
requirements, the adoption of this guidance did not impact the Company’s condensed consolidated
financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">In April 2011, the FASB issued authoritative guidance to clarify when a restructuring
constitutes a troubled debt restructuring. In evaluating whether a restructuring constitutes a
troubled debt restructuring, a creditor must separately conclude that two conditions exist: (1)
the restructuring constitutes a concession and (2) the debtor is experiencing financial
difficulties. The guidance will be effective for our interim and annual reporting periods
beginning after June 15, 2011 and will be applied retrospectively to the beginning of the
annual period of adoption. The Company does not anticipate that the guidance will have an
impact on the Company’s condensed consolidated financial statements.
</div>
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-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 22
-Paragraph 8
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