☑ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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)
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☑
|
Non-accelerated filer
|
☐ (Do
not check if a smaller reporting company)
|
Smaller reporting company
|
☐
|
Emerging growth company
|
☑ |
Page No.
|
|||
PART I—FINANCIAL INFORMATION
|
|||
|
ITEM 1 |
Financial Statements (Unaudited)
|
|
5 | |||
6 | |||
7 | |||
8 | |||
10 | |||
11 | |||
|
ITEM 2
|
28 | |
|
ITEM 3
|
35 | |
|
ITEM 4
|
35 | |
PART II—OTHER INFORMATION
|
|||
|
ITEM 1
|
36 | |
|
ITEM 1A
|
36 | |
|
ITEM 2
|
36 | |
|
ITEM 3
|
36 | |
|
ITEM 4
|
36 | |
|
ITEM 5
|
36 | |
|
ITEM 6
|
37 | |
Signatures |
38 |
• |
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;
|
• |
our products are subject to developing and unpredictable regulation;
|
• |
our products contain nicotine which is considered to be a highly addictive substance;
|
• |
uncertainty related to the regulation and taxation of our NewGen products;
|
• |
possible significant increases in federal, state and local municipal tobacco- and vapor-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;
|
• |
some of our products are subject to developing and unpredictable regulations;
|
• |
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;
|
• |
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;
|
• |
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.
|
(unaudited)
|
|
|||||||
ASSETS
|
March 31,
2019 |
December 31,
2018 |
||||||
Current assets:
|
||||||||
Cash
|
$
|
1,741
|
$
|
3,306
|
||||
Accounts receivable, net of allowances of $47 in 2019 and $42 in 2018
|
4,343
|
2,617
|
||||||
Inventories
|
90,871
|
91,237
|
||||||
Other current assets
|
11,666
|
14,694
|
||||||
Total current assets
|
108,621
|
111,854
|
||||||
Property, plant, and equipment, net
|
10,942
|
10,589
|
||||||
Right of use assets
|
10,951
|
-
|
||||||
Deferred financing costs, net
|
818
|
870
|
||||||
Goodwill
|
145,961
|
145,939
|
||||||
Other intangible assets, net
|
34,979
|
35,339
|
||||||
Master Settlement Agreement (MSA) escrow deposits
|
31,045
|
30,550
|
||||||
Other assets
|
4,225
|
4,236
|
||||||
Total assets
|
$
|
347,542
|
$
|
339,377
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
15,070
|
$
|
6,841
|
||||
Accrued liabilities
|
20,419
|
22,925
|
||||||
Current portion of long-term debt
|
12,000
|
8,000
|
||||||
Revolving credit facility
|
14,000
|
26,000
|
||||||
Total current liabilities
|
61,489
|
63,766
|
||||||
Notes payable and long-term debt
|
180,900
|
186,715
|
||||||
Deferred income taxes
|
2,172
|
2,291
|
||||||
Postretirement benefits
|
3,092
|
3,096
|
||||||
Lease liabilities
|
9,504
|
-
|
||||||
Other long-term liabilities
|
1,544
|
886
|
||||||
Total liabilities
|
258,701
|
256,754
|
||||||
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 - 19,576,398 at March 31, 2019, and 19,553,857 at December 31, 2018
|
196
|
196
|
||||||
Common stock, nonvoting, $0.01 par value; authorized shares, 10,000,000; issued and outstanding shares -0-
|
-
|
-
|
||||||
Additional paid-in capital
|
111,089
|
110,466
|
||||||
Accumulated other comprehensive loss
|
(2,614
|
)
|
(2,536
|
)
|
||||
Accumulated deficit
|
(19,830
|
)
|
(25,503
|
)
|
||||
Total stockholders’ equity
|
88,841
|
82,623
|
||||||
Total liabilities and stockholders’ equity
|
$
|
347,542
|
$
|
339,377
|
Three Months Ended
March 31,
|
||||||||
2019
|
2018
|
|||||||
Net sales
|
$
|
91,628
|
$
|
73,942
|
||||
Cost of sales
|
51,164
|
42,133
|
||||||
Gross profit
|
40,464
|
31,809
|
||||||
Selling, general, and administrative expenses
|
28,429
|
22,068
|
||||||
Operating income
|
12,035
|
9,741
|
||||||
Interest expense, net
|
3,856
|
3,654
|
||||||
Investment income
|
(144
|
)
|
(95
|
)
|
||||
Loss on extinguishment of debt
|
-
|
2,384
|
||||||
Net periodic benefit income, excluding service cost
|
(11
|
)
|
(43
|
)
|
||||
Income before income taxes
|
8,334
|
3,841
|
||||||
Income tax expense
|
1,774
|
809
|
||||||
Consolidated net income
|
$
|
6,560
|
$
|
3,032
|
||||
Basic income per common share:
|
||||||||
Consolidated net income
|
$
|
0.34
|
$
|
0.16
|
||||
Diluted income per common share:
|
||||||||
Consolidated net income
|
$
|
0.33
|
$
|
0.15
|
||||
Weighted average common shares outstanding:
|
||||||||
Basic
|
19,559,596
|
19,221,892
|
||||||
Diluted
|
20,045,964
|
19,762,194
|
Three Months Ended
March 31, |
||||||||
2019
|
2018
|
|||||||
Consolidated net income
|
$
|
6,560
|
$
|
3,032
|
||||
Other comprehensive loss, net of tax
|
||||||||
Amortization of unrealized pension and postretirement gain (loss), net of tax of $1 in 2019 and $10 in 2018
|
(4
|
)
|
30
|
|||||
Unrealized gain (loss) on investments, net of tax of $93 in 2019 and $135 in 2018
|
402
|
(384
|
)
|
|||||
Unrealized loss on interest rate swaps, net of tax of $182 in 2019 and $185 in 2018
|
(476
|
)
|
(526
|
)
|
||||
(78
|
)
|
(880
|
)
|
|||||
Consolidated comprehensive income
|
$
|
6,482
|
$
|
2,152
|
Three Months ended March 31,
|
||||||||
2019
|
2018
|
|||||||
Cash flows from operating activities:
|
||||||||
Consolidated net income
|
$
|
6,560
|
$
|
3,032
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Loss on extinguishment of debt
|
-
|
2,384
|
||||||
Loss on disposal of property, plant, and equipment
|
23
|
-
|
||||||
Depreciation expense
|
531
|
560
|
||||||
Amortization of other intangible assets
|
359
|
176
|
||||||
Amortization of deferred financing costs
|
237
|
238
|
||||||
Deferred income taxes
|
(29
|
)
|
793
|
|||||
Stock compensation expense
|
466
|
197
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(1,726
|
)
|
965
|
|||||
Inventories
|
366
|
5,237
|
||||||
Other current assets
|
2,984
|
(2,051
|
)
|
|||||
Other assets
|
(427
|
)
|
(23
|
)
|
||||
Accounts payable
|
8,229
|
2,955
|
||||||
Accrued postretirement liabilities
|
(9
|
)
|
(14
|
)
|
||||
Accrued liabilities and other
|
(3,539
|
)
|
(6,029
|
)
|
||||
Net cash provided by operating activities
|
$
|
14,025
|
$
|
8,420
|
||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
$
|
(886
|
)
|
$
|
(363
|
)
|
||
Restricted cash, MSA escrow deposits
|
1,702
|
(530
|
)
|
|||||
Net cash provided by (used in) investing activities
|
$
|
816
|
$
|
(893
|
)
|
Three Months ended March 31, | ||||||||
2019
|
2018
|
|||||||
Cash flows from financing activities:
|
||||||||
Proceeds from 2018 first lien term loan
|
$
|
-
|
$
|
160,000
|
||||
Payments of 2018 first lien term loan
|
(2,000
|
)
|
-
|
|||||
Proceeds from 2018 second lien term loan
|
-
|
40,000
|
||||||
Payments of 2018 revolving credit facility
|
(12,000
|
)
|
-
|
|||||
Payment of dividends
|
(880
|
)
|
-
|
|||||
Payments of 2017 first lien term loan
|
-
|
(140,613
|
)
|
|||||
Payments of 2017 second lien term loan
|
-
|
(55,000
|
)
|
|||||
Proceeds from (payments of) 2017 revolving credit facility, net
|
-
|
(8,000
|
)
|
|||||
Payments of financing costs
|
-
|
(3,279
|
)
|
|||||
Exercise of options
|
187
|
20
|
||||||
Redemption of options
|
(12
|
)
|
-
|
|||||
Net cash used in financing activities
|
$
|
(14,705
|
)
|
$
|
(6,872
|
)
|
||
Net increase in cash
|
$
|
136
|
$
|
655
|
||||
Cash, beginning of period:
|
||||||||
Unrestricted
|
3,306
|
2,607
|
||||||
Restricted
|
2,361
|
4,709
|
||||||
Total cash at beginning of period
|
$
|
5,667
|
$
|
7,316
|
||||
Cash, end of period:
|
||||||||
Unrestricted
|
$
|
1,741
|
$
|
3,792
|
||||
Restricted
|
4,062
|
4,179
|
||||||
Total cash at end of period
|
$
|
5,803
|
$
|
7,971
|
||||
Supplemental schedule of noncash financing activities:
|
||||||||
Accrued expenses incurred for financing costs
|
$
|
-
|
$
|
154
|
||||
Dividends declared not paid
|
$
|
887
|
$
|
-
|
Voting
Shares
|
Common
Stock,
Voting
|
Common
Stock,
Non-Voting
|
Additional
Paid-In
Capital
|
Accumulated
Other
Comprehensive
Loss
|
Accumulated
Deficit
|
Total
|
||||||||||||||||||||||
Beginning balance January 1, 2019
|
19,553,857
|
$
|
196
|
$
|
-
|
$
|
110,466
|
$
|
(2,536
|
)
|
$
|
(25,503
|
)
|
$
|
82,623
|
|||||||||||||
Unrecognized pension and postretirement cost adjustment, net of tax of $1
|
-
|
-
|
-
|
-
|
(4
|
)
|
-
|
(4
|
)
|
|||||||||||||||||||
Unrealized gain on MSA investments, net of tax of $93
|
-
|
-
|
-
|
-
|
402
|
-
|
402
|
|||||||||||||||||||||
Unrealized loss on other investments, net of tax of $0
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Unrealized loss on interest rate swaps, net of tax of $182
|
-
|
-
|
-
|
-
|
(476
|
)
|
-
|
(476
|
)
|
|||||||||||||||||||
Stock compensation expense
|
-
|
-
|
-
|
449
|
-
|
-
|
449
|
|||||||||||||||||||||
Restricted stock forfeitures
|
(47
|
)
|
-
|
-
|
(1
|
)
|
-
|
-
|
(1
|
)
|
||||||||||||||||||
Exercise of options
|
22,588
|
-
|
-
|
187
|
-
|
-
|
187
|
|||||||||||||||||||||
Redemption of options
|
-
|
-
|
-
|
(12
|
)
|
-
|
-
|
(12
|
)
|
|||||||||||||||||||
Dividends
|
-
|
-
|
-
|
-
|
-
|
(887
|
)
|
(887
|
)
|
|||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
-
|
6,560
|
6,560
|
|||||||||||||||||||||
Ending balance March 31, 2019
|
19,576,398
|
$
|
196
|
$
|
-
|
$
|
111,089
|
$
|
(2,614
|
)
|
$
|
(19,830
|
)
|
$
|
88,841
|
|||||||||||||
Beginning balance January 1, 2018
|
19,210,633
|
$
|
192
|
$
|
-
|
$
|
103,640
|
$
|
(2,973
|
)
|
$
|
(47,535
|
)
|
$
|
53,324
|
|||||||||||||
Unrecognized pension and postretirement cost adjustment
|
-
|
-
|
-
|
-
|
30
|
-
|
30
|
|||||||||||||||||||||
Unrealized loss on MSA investments, net of tax of $133
|
-
|
-
|
-
|
-
|
(379
|
)
|
-
|
(379
|
)
|
|||||||||||||||||||
Unrealized loss on other investments, net of tax of $2
|
-
|
-
|
-
|
-
|
(5
|
)
|
-
|
(5
|
)
|
|||||||||||||||||||
Unrealized loss on interest rate swaps, net of tax of $185
|
-
|
-
|
-
|
-
|
(526
|
)
|
-
|
(526
|
)
|
|||||||||||||||||||
Stock compensation expense
|
-
|
-
|
-
|
177
|
-
|
-
|
177
|
|||||||||||||||||||||
Restricted stock forfeitures
|
(517
|
)
|
-
|
-
|
(4
|
)
|
-
|
-
|
(4
|
)
|
||||||||||||||||||
Exercise of options
|
12,501
|
-
|
-
|
20
|
-
|
-
|
20
|
|||||||||||||||||||||
Dividends
|
-
|
-
|
-
|
-
|
-
|
(777
|
)
|
(777
|
)
|
|||||||||||||||||||
Reclassfication of tax effects from accumulated other comprehensive income
|
-
|
-
|
-
|
-
|
24
|
(24
|
)
|
-
|
||||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
-
|
3,032
|
3,032
|
|||||||||||||||||||||
Ending balance March 31, 2018
|
19,222,617
|
$
|
192
|
$
|
-
|
$
|
103,833
|
$
|
(3,829
|
)
|
$
|
(45,304
|
)
|
$
|
54,892
|
• |
Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets at the measurement date.
|
• |
Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar
assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other
means.
|
• |
Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement
date.
|
As of March 31, 2019
|
As of December 31, 2018
|
|||||||||||||||||||||||||||||||
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair
Value
|
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair
Value
|
|||||||||||||||||||||||||
Cash and cash equivalents
|
$
|
4,062
|
$
|
-
|
$
|
-
|
$
|
4,062
|
$
|
2,361
|
$
|
-
|
$
|
-
|
$
|
2,361
|
||||||||||||||||
U.S. Governmental agency obligations (unrealized gain position < 12 months)
|
500
|
2
|
-
|
502
|
1,193
|
9
|
-
|
1,202
|
||||||||||||||||||||||||
U.S. Governmental agency obligations (unrealized loss position < 12 months)
|
-
|
-
|
-
|
-
|
1,000
|
-
|
(3
|
)
|
997
|
|||||||||||||||||||||||
U.S. Governmental agency obligations (unrealized loss position > 12 months)
|
27,511
|
-
|
(1,030
|
)
|
26,481
|
27,519
|
-
|
(1,529
|
)
|
25,990
|
||||||||||||||||||||||
$
|
32,073
|
$
|
2
|
$
|
(1,030
|
)
|
$
|
31,045
|
$
|
32,073
|
$
|
9
|
$
|
(1,532
|
)
|
$
|
30,550
|
As of
|
||||||||
March 31,
2019
|
December 31,
2018
|
|||||||
Less than one year
|
$
|
1,499
|
$
|
1,499
|
||||
One to five years
|
14,091
|
13,591
|
||||||
Five to ten years
|
9,453
|
11,152
|
||||||
Greater than ten years
|
2,968
|
3,470
|
||||||
Total U.S. Governmental agency obligations
|
$
|
28,011
|
$
|
29,712
|
|
Deposits as of
|
|||||||
Sales
Year
|
March 31,
2019 |
December 31,
2018
|
||||||
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
|
1,619
|
1,619
|
||||||
2010
|
406
|
406
|
||||||
2011
|
193
|
193
|
||||||
2012
|
199
|
199
|
||||||
2013
|
173
|
173
|
||||||
2014
|
143
|
143
|
||||||
2015
|
101
|
101
|
||||||
2016
|
91
|
91
|
||||||
2017
|
83
|
83
|
||||||
Total
|
$
|
32,073
|
$
|
32,073
|
Total consideration transferred
|
$
|
24,292
|
||
Adjustments to consideration transferred:
|
||||
Cash acquired, net of debt assumed
|
(221
|
)
|
||
Working capital
|
(245
|
)
|
||
Adjusted consideration transferred
|
23,826
|
|||
Assets acquired:
|
||||
Working capital (primarily inventory)
|
3,331
|
|||
Fixed assets
|
1,274
|
|||
Intangible assets
|
7,880
|
|||
Net assets acquired
|
12,485
|
|||
Goodwill
|
$
|
11,341
|
Fair Value
|
||||
Working capital
|
$
|
2,500
|
||
Fixed assets
|
272
|
|||
Trade name
|
2,028
|
|||
Total consideration transferred
|
$
|
4,800
|
March 31,
2019
|
December 31,
2018
|
|||||||
Raw materials and work in process
|
$
|
3,967
|
$
|
2,722
|
||||
Leaf tobacco
|
35,929
|
34,977
|
||||||
Finished goods - Smokeless products
|
6,540
|
6,321
|
||||||
Finished goods - Smoking products
|
15,079
|
14,666
|
||||||
Finished goods - NewGen products
|
33,810
|
37,194
|
||||||
Other
|
903
|
738
|
||||||
96,228
|
96,618
|
|||||||
LIFO reserve
|
(5,357
|
)
|
(5,381
|
)
|
||||
$
|
90,871
|
$
|
91,237
|
March 31,
2019 |
December 31,
2018 |
|||||||
Land
|
$
|
22
|
$
|
22
|
||||
Buildings and improvements
|
2,320
|
2,320
|
||||||
Leasehold improvements
|
2,101
|
2,101
|
||||||
Machinery and equipment
|
14,214
|
13,292
|
||||||
Furniture and fixtures
|
5,003
|
5,045
|
||||||
23,660
|
22,780
|
|||||||
Accumulated depreciation
|
(12,718
|
)
|
(12,191
|
)
|
||||
$
|
10,942
|
$
|
10,589
|
March 31,
2019 |
December 31,
2018 |
|||||||
Inventory deposits
|
$
|
7,134
|
$
|
9,739
|
||||
Other
|
4,532
|
4,955
|
||||||
$
|
11,666
|
$
|
14,694
|
March 31,
2019 |
December 31,
2018 |
|||||||
Accrued payroll and related items
|
$
|
3,093
|
$
|
6,063
|
||||
Customer returns and allowances
|
3,082
|
3,634
|
||||||
Taxes payable
|
3,758
|
2,138
|
||||||
Lease liabilities
|
1,700
|
-
|
||||||
Other
|
8,786
|
11,090
|
||||||
$
|
20,419
|
$
|
22,925
|
March 31,
2019 |
December 31,
2018 |
|||||||
2018 First Lien Term Loan
|
$
|
152,000
|
$
|
154,000
|
||||
2018 Second Lien Term Loan
|
40,000
|
40,000
|
||||||
Note payable - IVG
|
4,000
|
4,000
|
||||||
Total notes payable and long-term debt
|
196,000
|
198,000
|
||||||
Less deferred finance charges
|
(3,100
|
)
|
(3,285
|
)
|
||||
Less current maturities
|
(12,000
|
)
|
(8,000
|
)
|
||||
$
|
180,900
|
$
|
186,715
|
Three months ended
|
March 31,
2019 |
|||
Operating lease cost
|
||||
Cost of sales
|
$
|
192
|
||
Selling, general and administrative
|
555
|
|||
Variable lease cost (1)
|
245
|
|||
Short-term lease cost
|
54
|
|||
Sublease income
|
(30
|
)
|
||
Total operating lease cost
|
$
|
1,016
|
(1) Variable lease expense includes elements of a contract that do not represent a good or service but for which the lessee is responsible
for paying.
|
March 31,
2019 |
||||
Assets:
|
||||
Right of use assets
|
$
|
10,951
|
||
Total leased assets
|
$
|
10,951
|
||
Liabilities:
|
||||
Current lease liabilities (2)
|
$
|
1,700
|
||
Long-term lease liabilities
|
9,504
|
|||
Total Lease Liabilities
|
$
|
11,204
|
(2) Reported within accrued liabilities on the balance sheet
|
As of March 31, 2019
|
||||
Weighted-average remaining lease term - operating leases
|
9.0 years
|
|||
Weighted-average discount rate - operating leases
|
6.49
|
%
|
March 31,
2019
|
||||
Remaining nine months of 2019
|
$
|
1,736
|
||
2020
|
2,167
|
|||
2021
|
1,788
|
|||
2022
|
1,144
|
|||
2023
|
973
|
|||
Years thereafter
|
7,245
|
|||
Total lease payments
|
$
|
15,053
|
||
Less: Imputed interest
|
3,849
|
|||
Present value of lease liabilities
|
$
|
11,204
|
Three Months Ended March 31, | ||||||||||||||||
Pension
Benefits
|
Postretirement
Benefits
|
|||||||||||||||
2019
|
2018
|
2019
|
2018
|
|||||||||||||
Service cost
|
$
|
26
|
$
|
26
|
$
|
-
|
$
|
-
|
||||||||
Interest cost
|
130
|
142
|
25
|
29
|
||||||||||||
Expected return on plan assets
|
(161
|
)
|
(254
|
)
|
-
|
-
|
||||||||||
Amortization of (gains) losses
|
37
|
60
|
(42
|
)
|
(20
|
)
|
||||||||||
Net periodic benefit (income) cost
|
$
|
32
|
$
|
(26
|
)
|
$
|
(17
|
)
|
$
|
9
|
Stock
Option
Shares |
Weighted
AverageExercise
Price |
Weighted
Average
Grant Date
Fair Value
|
||||||||||
Outstanding, December 31, 2017
|
763,672
|
5.73
|
2.36
|
|||||||||
Granted
|
124,100
|
21.27
|
6.33
|
|||||||||
Exercised
|
(209,943
|
)
|
3.97
|
1.47
|
||||||||
Forfeited
|
(18,255
|
)
|
13.46
|
3.90
|
||||||||
Outstanding, December 31, 2018
|
659,574
|
$
|
9.00
|
$
|
3.34
|
|||||||
Granted
|
155,780
|
47.58
|
15.63
|
|||||||||
Exercised
|
(22,892
|
)
|
8.16
|
3.08
|
||||||||
Forfeited
|
(912
|
)
|
44.69
|
14.64
|
||||||||
Outstanding, March 31, 2019
|
791,550
|
$
|
16.58
|
$
|
5.75
|
February 10,
2017
|
May 17,
2017
|
March 7,
2018
|
March 13,
2018
|
March 20,
2019
|
||||||||||||||||
Number of options granted
|
40,000
|
93,819
|
98,100
|
26,000
|
155,780
|
|||||||||||||||
Options outstanding at March 31, 2019
|
30,700
|
79,874
|
94,730
|
26,000
|
154,950
|
|||||||||||||||
Number exercisable at March 31, 2019
|
19,150
|
53,511
|
33,746
|
17,420
|
-
|
|||||||||||||||
Exercise price
|
$
|
13.00
|
$
|
15.41
|
$
|
21.21
|
$
|
21.49
|
$
|
47.58
|
||||||||||
Remaining lives
|
7.87
|
8.13
|
8.94
|
8.96
|
9.98
|
|||||||||||||||
Risk free interest rate
|
1.89
|
%
|
1.76
|
%
|
2.65
|
%
|
2.62
|
%
|
2.34
|
%
|
||||||||||
Expected volatility
|
27.44
|
%
|
26.92
|
%
|
28.76
|
%
|
28.76
|
%
|
30.95
|
%
|
||||||||||
Expected life
|
6.000
|
6.000
|
6.000
|
5.495
|
6.000
|
|||||||||||||||
Dividend yield
|
-
|
-
|
0.83
|
%
|
0.82
|
%
|
0.42
|
%
|
||||||||||||
Fair value at grant date
|
$
|
3.98
|
$
|
4.60
|
$
|
6.37
|
$
|
6.18
|
$
|
15.63
|
Three Months Ended March 31, | ||||||||||||||||||||||||
2019
|
2018
|
|||||||||||||||||||||||
Income
|
Shares
|
Per
Share
|
Income
|
Shares
|
Per
Share
|
|||||||||||||||||||
Consolidated net income
|
$
|
6,560
|
$
|
3,032
|
||||||||||||||||||||
Basic EPS:
|
||||||||||||||||||||||||
Weighted average
|
19,559,596
|
$
|
0.34
|
19,221,892
|
$
|
0.16
|
||||||||||||||||||
Diluted EPS:
|
||||||||||||||||||||||||
Effect of dilutive securities:
|
||||||||||||||||||||||||
Stock options
|
486,368
|
540,302
|
||||||||||||||||||||||
20,045,964
|
$
|
0.33
|
19,762,194
|
$
|
0.15
|
Three Months Ended
March 31,
|
||||||||
2019
|
2018
|
|||||||
Net sales
|
||||||||
Smokeless products
|
$
|
22,544
|
$
|
20,747
|
||||
Smoking products
|
25,519
|
26,996
|
||||||
NewGen products
|
43,565
|
26,199
|
||||||
$
|
91,628
|
$
|
73,942
|
|||||
Gross profit
|
||||||||
Smokeless products
|
$
|
12,073
|
$
|
10,993
|
||||
Smoking products
|
13,484
|
13,164
|
||||||
NewGen products
|
14,907
|
7,652
|
||||||
$
|
40,464
|
$
|
31,809
|
|||||
Operating income (loss)
|
||||||||
Smokeless products
|
$
|
7,487
|
$
|
6,805
|
||||
Smoking products
|
9,946
|
9,544
|
||||||
NewGen products
|
2,838
|
1,010
|
||||||
Corporate unallocated (1)
|
(8,236
|
)
|
(7,618
|
)
|
||||
$
|
12,035
|
$
|
9,741
|
|||||
Interest expense, net
|
3,856
|
3,654
|
||||||
Investment Income
|
(144
|
)
|
(95
|
)
|
||||
Loss on extinguishment of debt
|
-
|
2,384
|
||||||
Net periodic benefit income, excluding service cost
|
(11
|
)
|
(43
|
)
|
||||
Income before income taxes
|
$
|
8,334
|
$
|
3,841
|
||||
Capital expenditures
|
||||||||
Smokeless products
|
$
|
577
|
$
|
349
|
||||
Smoking products
|
-
|
-
|
||||||
NewGen products
|
309
|
14
|
||||||
$
|
886
|
$
|
363
|
|||||
Depreciation and amortization
|
||||||||
Smokeless products
|
$
|
357
|
$
|
339
|
||||
Smoking products
|
-
|
-
|
||||||
NewGen products
|
533
|
396
|
||||||
$
|
890
|
$
|
735
|
|||||
(1) Includes corporate costs that are not allocated to any of the three reportable segments.
|
March 31,
2019 |
December 31,
2018 |
|||||||
Assets
|
||||||||
Smokeless products
|
$
|
108,762
|
$
|
99,441
|
||||
Smoking products
|
143,108
|
142,520
|
||||||
NewGen products
|
93,990
|
95,397
|
||||||
Corporate unallocated (1)
|
1,682
|
2,019
|
||||||
|
$
|
347,542
|
$
|
339,377
|
(1) Includes assets not assigned to the three reportable segments. All goodwill has been allocated to the
reportable segments.
|
|
|
NewGen Segment
|
||||||
|
|
Three Months Ended
March 31,
|
||||||
|
|
2019
|
|
|
2018
|
|||
Wholesalers
|
$
|
2,197
|
$
|
2,330
|
||||
Retail outlets
|
28,645
|
20,884
|
||||||
End-customers
|
12,673
|
2,935
|
||||||
Other
|
50
|
50
|
||||||
$
|
43,565
|
$
|
26,199
|
Three Months Ended
March 31, |
||||||||
2019
|
2018
|
|||||||
Domestic
|
$
|
88,769
|
$
|
70,858
|
||||
Foreign
|
2,859
|
3,084
|
||||||
Total
|
$
|
91,628
|
$
|
73,942
|
• |
Our ability to further penetrate markets with our existing products;
|
• |
Our ability to introduce new products and product lines that complement our core business;
|
• |
Decreasing interest in some tobacco products among consumers;
|
• |
Price sensitivity in our end-markets;
|
• |
Marketing and promotional initiatives, which cause variability in our results;
|
• |
General economic conditions, including consumer access to disposable income;
|
• |
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.
|
Three Months Ended March 31,
|
||||||||||||
2019
|
2018
|
% Change
|
||||||||||
Consolidated Results of Operations Data:
|
||||||||||||
Net sales
|
||||||||||||
Smokeless products
|
$
|
22,544
|
$
|
20,747
|
8.7
|
%
|
||||||
Smoking products
|