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Edited Transcript of VGR earnings conference call or presentation 28-Feb-20 2:00pm GMT

Q4 2019 Vector Group Ltd Earnings Call

MIAMI Mar 19, 2020 (Thomson StreetEvents) -- Edited Transcript of Vector Group Ltd earnings conference call or presentation Friday, February 28, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Howard M. Lorber

Vector Group Ltd. - President, CEO & Director

* James Bryant Kirkland

Vector Group Ltd. - Senior VP, CFO & Treasurer

* Nicholas Anson

Vector Group Ltd. - Executive VP of Finance & Administration and CFO-Liggett Vector Brands

* Ronald J. Bernstein

Liggett Vector Brands LLC - CEO and President

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Conference Call Participants

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* David Levine;MidOcean Partners;Analyst

* Edward Arthur Brucker

Barclays Bank PLC, Research Division - Research Analyst

* Ian Alton Zaffino

Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst

* Jacqueline Elizabeth Crawford

Jefferies LLC, Fixed Income Research - Analyst

* Mary Ross Gilbert

Imperial Capital, LLC, Research Division - MD of Institutional Research Group

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Presentation

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Operator [1]

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Welcome to Vector Group Ltd. Fourth Quarter and Full Year 2019 Earnings Conference Call. During this call, the terms adjusted operating income, adjusted net income, adjusted EBITDA and tobacco adjusted operating income will be used. These terms are non-GAAP financial measures and should be considered in addition to, but not as a substitute for, other measures of financial performance prepared in accordance with GAAP. Reconciliations to adjusted operating income, adjusted net income, adjusted EBITDA and tobacco adjusted operating income are contained in the company's earnings release which can be -- which has been posted to the Investor Relations section of the company's website located at www.vectorgroupltd.com.

Before the call begins, I would like to read the safe harbor statement. The statements made during the conference call that are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in more detail in the company's Securities and Exchange Commission filings.

I would now like to turn the call over to President and Chief Executive Officer of Vector Group, Howard Lorber.

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [2]

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Thank you. Good morning, and thank you for joining us on Vector Group's Fourth Quarter and Full Year 2019 Earnings Conference Call. With me today are Ron Bernstein, the President and Chief Executive Officer of Liggett Vector Brands; Nick Anson, who will succeed Ron at Liggett Vector Brands on April 1, 2020; and Bryant Kirkland, Vector Group's Chief Financial Officer.

Before reviewing our quarter and full year results, I want to take a moment to acknowledge Ron's upcoming retirement and thank him for his contributions to Vector and Liggett over nearly 30 years of service. Ron joined Liggett in 1991. As Chief Financial Officer, he was instrumental in guiding the company through a challenging industry environment in the early '90s. In 1995, Ron was asked to take over Vector's Russian subsidiary, Liggett-Ducat. While there, he turned around a money-losing operation and built it into the largest cigarette manufacturer in Russia. Subsequently, he coordinated the $400 million sale of the business. Upon returning to the U.S. in 2000, Ron was named President and CEO of Liggett. Under his leadership, Liggett has been extraordinarily successful. Liggett's EBITDA has grown from $77 million in 2000 to more than $270 million in 2019. Its market share has increased from 1.5% to over 4% during the same period, and its volume today is higher than it was when he became Liggett's CEO. I'm very pleased that even in retirement, Ron will remain on the Board of Vector Group, will serve as Nonexecutive Chairman of Liggett and will serve as a senior adviser to both companies. On behalf of the Vector Group Board and the entire company, we all thank Ron for his -- what he has done over the years to make our company a success.

I'm also pleased to introduce Nick Anson as the incoming President and Chief Operating Officer of Liggett Vector Brands. Nick joined Liggett in 2001 and has served in various senior management positions over the years, including the last 7 as Chief Financial Officer. Ron and I have complete confidence that under Nick's leadership, the Liggett senior management team will continue to build on the long-term success of the company.

I will now turn to the review of our business for the fourth quarter and full year of 2019. Ron and Nick will then summarize the performance of the Tobacco business. Related to Vector Group's operations, I'll first review our liquidity and capital structure and update you for recent events. I will then review operations for the fourth quarter and full year ended December 31, 2019.

As of December 31, 2019, Vector group maintained significant liquidity, with cash and cash equivalents of $371 million, including cash of $71 million at Douglas Elliman and $27 million at Liggett and investment securities and investment partnership interests, including in-transit redemptions with a fair market value of $253 million. There have also been recent changes to our capital structure. In November 2019, we issued $230 million of 10.5% unsecured senior notes due 2026. The net proceeds remaining from this offering are included in the $371 million of cash and cash equivalents that I previously mentioned. In the fourth quarter of 2019, we used a portion of the proceeds to repurchase $62 million of our convertible notes due 2020 in the open market. We'll use the remainder of the proceeds to retire the remaining $170 million of convertible notes when they are due in April 2020.

We are also pleased that 2 of our investments have recently been monetized. Our 8% ownership interest in Castle Brands was inquired (sic) [acquired] in October 2019 for $16.4 million in cash. And our 10% ownership interest in Ladenburg Thalmann Financial Services was inquired -- acquired in February 2020 for $53.2 million in cash. These amounts are included in the balances of cash and investments I previously mentioned. We recorded a pretax gain of $16.4 million in the fourth quarter from the Castle transaction and anticipate recording a pretax gain of $52.7 million in 2020 from the disposal of Ladenburg.

Now turning to Vector Group's operations for the fourth quarter and full year ended December 31, 2019. As previously announced, our non-GAAP financial measures from 2018 have been adjusted to reflect our acquisition of the outstanding 29% interest in Douglas Elliman -- minority interest in Douglas Elliman, taking our ownership to 100%. These adjustments are described in greater detail in our earnings release.

For the 3 months ended December 31, 2019, Vector Group's revenues were $439.6 million compared to $445.9 million in the 2018 period. The company recorded adjusted EBITDA of $52.5 million compared to $54 million in the 2018 period. Adjusted net income was $17.8 million or $0.11 per diluted share compared to $31.8 million or $0.20 per diluted share in the 2018 period. The company recorded adjusted operating income of $45.7 million compared to $48.5 million in the 2018 period. For the fourth quarter of 2019, Douglas Elliman reported $178.1 million in revenues and a loss of adjusted EBITDA of $5.7 million compared to $177.6 million in revenues and a loss of adjusted EBITDA of $540,000 in the 2018 period.

For the full year ended December 31, 2019, Vector Group's revenues were $1.904 billion compared to $1.87 billion in the 2018 period. The company recorded adjusted EBITDA of $259.4 million compared to $245.3 million in the 2018 period. Adjusted net income was $110.1 million or $0.70 per diluted share compared to $88.2 million or $0.55 per diluted share in the 2018 period. The company recorded adjusted operating income of $232.1 million compared to $217.4 million in the 2018 period. For the full year ended December 31, 2019, Douglas Elliman reported $784.1 million in revenues and adjusted EBITDA of $5.3 million, respectively, compared to $754.1 million in revenues and adjusted EBITDA of $11.3 million in the 2018 period.

Now I will turn the call over to Ron and Nick to discuss our Tobacco business. Ron?

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Ronald J. Bernstein, Liggett Vector Brands LLC - CEO and President [3]

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Thank you, Howard. Good morning, everyone. I've had the privilege of leading Liggett, an extraordinary company with an incredibly talented workforce, for almost 20 years and have been a part of the company for almost 30 years. I want to acknowledge all of those who've supported me and made Liggett's success possible. That includes Ben LeBow and Howard Lorber, who provided me the benefits of their knowledge, experience and leadership; the Liggett senior management team for their creativity, knowledge and professionalism; and the entire team at Liggett, our factory, sales and administrative staff for all that they do each day to keep our company running at such a high level. Our success simply wouldn't have been possible but for the entire team working together in pursuit of the common objective. I am so thankful for the contributions made at every level of the organization. Finally, I want to say to our stockholders, analysts and bondholders that I've met with, worked with and who have participated on these calls over the years that it's been a pleasure working with all of you. You've been professional and diligent, and I wish you all the best.

Now for an update on the cigarette industry and our business, it's my pleasure to turn the call over to Liggett's current CFO and next President and Chief Operating Officer, Nick Anson. Nick?

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Nicholas Anson, Vector Group Ltd. - Executive VP of Finance & Administration and CFO-Liggett Vector Brands [4]

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Thank you, Ron, and good morning, everyone. I'd like to start by saying that I'm extremely honored and grateful for the opportunity to lead Liggett following Ron's retirement. And I'd also like to take this opportunity to acknowledge Ron not only for all his years of service but also for his counsel and mentorship over these years. Thank you, Ron. I am very pleased to note that Liggett's outstanding performance continued in the fourth quarter. Once again, the company has increased its earnings and market share during the quarter as well as for the year.

As Ron noted on previous calls, we are in the income growth phase of our Eagle 20's business strategy and are extremely pleased with the results we have achieved thus far. Despite price increases that began in the fourth quarter of 2018, Eagle 20's volume and market share have continued to grow along with the brand's profitability. Market programs have proven successful, and we remain optimistic about them going forward.

I will now turn to the combined Tobacco financials for Liggett Group and Vector Tobacco. For the 3 months and full year ended December 31, 2019, Liggett revenues were $260.3 million and $1.115 billion, respectively, compared to $267.1 million and $1.111 billion for the corresponding 2018 period. Tobacco adjusted operating income for the 3 months and full year ended December 31, 2019, was $60.1 million and $262.6 million, respectively, compared to $57.5 million and $240.9 million for the corresponding periods a year ago. While the increase in Liggett's quarterly and full year earnings were primarily due to increased pricing, we continue to diligently manage our cost base across all areas of our business. As indicated during the last call, the timing of industry price increases led to inflated wholesale inventories at the end of the third quarter. As a result, approximately $5 million of Tobacco adjusted operating income shifted from the fourth quarter to the third quarter. Because the effect is similar to last year, there was no timing impact on the year-over-year comparison.

According to Management Science Associates, overall industry wholesale shipments for the fourth quarter were down 6.95%, while Liggett's wholesale shipments decreased by 5.6%. These declines were reflective of the timing issues I just mentioned. As we always note, we believe retail shipments are a better indicator of industry trends as various actions by manufacturers and wholesalers can impact wholesale shipments. These effects are far less pronounced with retail shipments. For the fourth quarter, Liggett's retail shipments decreased by 2.7%, while the industry retail shipments declined 5%. Liggett's retail share increased by 10 basis points over the prior year quarter to 4.24% for the market at year-end.

Eagle 20's fourth quarter retail unit volumes grew by approximately 6% compared to the prior year period, and it remains the third largest discount brand in the U.S. Eagle 20's is now sold in over 76,000 stores nationwide, and its growth continues to provide an effective volume and profit complement to Pyramid and other Liggett brands. Despite managed volume declines, we remain pleased with Pyramid's performance. The brand continues to deliver substantial profit and market presence for the company. Pyramid is the fifth largest discount brand in the U.S., has strong distribution and is currently sold in over 100,000 stores across the country. We continue to see little impact from premium economy brands such as Marlboro Special Blend, Newport Red and various Camel line extensions.

While our fourth quarter 2019 results had limited impact from smaller discount focused companies, some competing deep discount brands create pricing pressure as they seek to undercut the market in targeted geographic markets. As you are all aware, there continues to be a range of negative developments in the vapor category. We are pleased to have no exposure to that segment. To date, we have not seen any material impact to our business from vapor or other noncombustible products.

We are very pleased with our fourth quarter and full year 2019 Tobacco performance. Our results continue to validate our market strategy. And as we look ahead, we remain focused on generating operating income from the strong sales and distribution base of Pyramid, while delivering volume, share and profit growth from Eagle 20's. While we remain subject to industry risks, we are confident that we have implemented effective programs to support market share and profit growth.

Thanks for your attention, and back to you, Howard.

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [5]

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Thanks, Ron and Nick. We continue to believe that Vector Group is well positioned to generate long-term value for our shareholders. We have strong cash reserves, have consistently increased our tobacco unit volumes and profits and have taken the necessary steps to position our Real Estate business for continued success. As previously noted, we adjusted our quarterly cash dividend target from $0.40 per share to $0.20 per share, effective with the upcoming dividend payment. We are pleased with our long-standing history of paying a quarterly cash dividend. It remains an important component of our capital allocation strategy, and the Board will continue to regularly evaluate our dividend policy.

Now operator, would you please open the call for questions?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Ian Zaffino with Oppenheimer.

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Ian Alton Zaffino, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [2]

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Question would be to, I guess, Ron and Nick. Two things. I guess, can you talk about pricing both in the quarter, kind of what you've seen and also going forward. And then Nick, now the 2 franchise, you've been very successful under Ron. Is that something you plan to continue to do? Are there any type of tweaks that you intend to make? Maybe just a broader discussion on that.

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Nicholas Anson, Vector Group Ltd. - Executive VP of Finance & Administration and CFO-Liggett Vector Brands [3]

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Certainly, I'll go ahead and take those questions. Now we are -- you're absolutely correct. Those brand franchises have operated very successfully. We're feeling very good about where the company is right now. We had a very good and solid year last year, higher pricing, efficient promotional spending and diligent cost management, all combined to drive record earnings for us. As I mentioned, as I mentioned in my script, we started to take pricing back on Eagle 20's towards the end of 2018 and have been very, very pleased with this performance. And despite these price increases, the brand has proven resilient and has continued to grow. Along with that, Pyramid and our core brands are certainly performing within our expectations. Now having said that, as we continue to take pricing in, we certainly expect the growth on Eagle to temper, but -- and we saw that over the second half of this year. However, we remain confident where the brand is at the moment and the pricing levels it is, the Eagle brand can deliver both share growth and increased profits over the course of this year. So yes, feeling very good about where we are right now.

With respect to pricing specifically, last year, we saw strong pricing in the industry. The industry took 3 pricing increases in February, in June and in October, I think, for an aggregate of about $2.50 a carton over the course of the year. We anticipate that strong pricing to continue in this year as well. So I hope that answers your question.

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Ian Alton Zaffino, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [4]

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Yes, that's very helpful. And then just on the modeling side, Bryant, shares outstanding, if you could kind of talk about that.

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James Bryant Kirkland, Vector Group Ltd. - Senior VP, CFO & Treasurer [5]

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Sure. Shares outstanding for EPS are 146.6 million and for computing equity value, 148.1 million. And those do not -- yes?

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Ian Alton Zaffino, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [6]

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I'm sorry, go on.

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James Bryant Kirkland, Vector Group Ltd. - Senior VP, CFO & Treasurer [7]

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That does not include the convertible debt that we anticipate retiring in April.

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Operator [8]

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Our next question comes from Hale Holden with Barclays.

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Edward Arthur Brucker, Barclays Bank PLC, Research Division - Research Analyst [9]

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This is Ed Brucker on for Hale. First one is on the Real Estate segment. The New York real estate cycle seems to kind of still be at a low point. But the Real Estate revenues were up for the year. I was wondering what the driver of that is, if it's outside of New York. And then for -- on the EBITDA side, what's the driver of the EBITDA decline?

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [10]

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The driver of -- on the volume side is South Florida. The driver for the decline in EBITDA is that the best markets to make money in is New York. So New York was down, Florida was up, our volume looked good. While we made money in Florida, it's very hard to make up for New York City being the way it was during 2019.

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Edward Arthur Brucker, Barclays Bank PLC, Research Division - Research Analyst [11]

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And then maybe far off, but assuming there's any spread in the coronavirus or I guess, COVID-19, in the U.S., do you think there's going to be any potential impact, I guess, it could be for Tobacco or Real Estate, positive or negative?

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [12]

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Well, on Real Estate -- I mean I would just say on Real Estate, there may be issues where the virus is, that would generally be sort of, hopefully, God willing, temporary. I always used to say, like, people in this country generally have a pretty short-term thinking as it relates to bad events. They sort of forget about them. And we've been going back to 9/11, New York City, basically, did no business in real estate from September 11 until December 31 and then starting January 1, it was like nothing ever happened before. So we made up for everything that didn't happen for the months before and ended up going into a very strong market. So I don't think there's going to be a really big long-term effect on the -- in most of the markets that we're in real-estate-wise.

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Ronald J. Bernstein, Liggett Vector Brands LLC - CEO and President [13]

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Relative to Tobacco, I think that, historically, we -- when there is some sort of anxiety in society that smoking tends to go up rather than down. And I think, obviously, for us as domestic producers, I think that -- I don't want to say that it's an advantage for us. But certainly, we don't have some of the risks that maybe some of the foreign exporters have. So I would be surprised if there was any material impact on that.

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [14]

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Yes. And we surely don't wish for the anxiety to sell more cigarettes, that's for sure.

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Edward Arthur Brucker, Barclays Bank PLC, Research Division - Research Analyst [15]

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Great. Understood. Last question. I was wondering if, given some of the lower gas prices we've seen, you think there could be some volume increases at gas stations. Or I guess, have you seen that? And -- or do you expect that in the first half?

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [16]

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Ron?

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Ronald J. Bernstein, Liggett Vector Brands LLC - CEO and President [17]

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Nick, you talk...

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Nicholas Anson, Vector Group Ltd. - Executive VP of Finance & Administration and CFO-Liggett Vector Brands [18]

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I'll be happy to take. Yes, I think that historically, there has been an advantage for our company. The industry has actually started very strongly this year. Suddenly, there's been some anticipatory buying as it relates to pricing. But we're still -- like the other consensus is, we're still anticipating volumes this year to be down in the 5% to 6% market range. There's -- we certainly anticipate on the broader scale that the industry could see a balance with the continued concerns around the -- around vapor and e-cigarettes. But the market is going to continue to be pressured by the pricing. So we're seeing and anticipating the market to be down in that 5% to 6% range this year.

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Operator [19]

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Our next question will come from Jacqueline Crawford with Jefferies.

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Jacqueline Elizabeth Crawford, Jefferies LLC, Fixed Income Research - Analyst [20]

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Two of your equity method investments recently being acquired and having priced the add-on to your '26 notes, can you talk about, really, if there -- you're seeing any changes in your capital allocation strategy moving forward, just given the runway that you do have until your next debt maturity?

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [21]

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Well, obviously, we definitely have room and that was one of the reasons that also, we decided it was time to lower the dividend, maybe pare down our debt a little bit as we go along. But having said that, I think there will be opportunities with the problems that we've seen in certain of our markets, like especially in New York City. New York City was probably down price-wise anywhere from 10% to 20% last year. So I think that there will be chances to invest at some point. I think we're very bullish on the low tax state or no tax states as it relates to real estate investments. So we've opened an office in Houston, we're probably going to open in Dallas and maybe Austin in the near future, and we're looking at some projects there. And that seems to be where the money is going. And it seems that the Northeasterners sort of come to Florida, spend their money. And the West Coast people either go to Texas or sometimes Nevada or Colorado, it doesn't necessarily have to be in no tax state but a low tax state. So I think all that moving around will put us in pretty good position to find some interesting opportunities to invest.

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Jacqueline Elizabeth Crawford, Jefferies LLC, Fixed Income Research - Analyst [22]

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Okay. And then I was just hoping that you could talk a little bit more about where you're seeing the Eagle 20's as a brand today. Do you think you can take some more incremental pricing there? Or do you think it's really kind of reached the higher end of your targeted level of pricing there and you'll look to transition to more stable price environment? And then just following that, where do you see yourself in the broader kind of brand building and development strategy? Should we expect to see looking to build out any other brands anytime soon or continue to look to gain share in Eagle 20's?

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Ronald J. Bernstein, Liggett Vector Brands LLC - CEO and President [23]

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Nick?

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Nicholas Anson, Vector Group Ltd. - Executive VP of Finance & Administration and CFO-Liggett Vector Brands [24]

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Yes, certainly. As I mentioned in my script, we've only just recently started the income growth phase of Eagle 20's. So there's certainly more capacity for us to take pricing. We've taken the last 4 or 5 years to invest heavily in the brand and build it and build that core volume base to be able to monetize it. So we certainly anticipate that there's room and capacity over the next few years to start taking pricing. We'll need to do it prudently. It's -- we're obviously operating in a deep discount market there. So when we make those assessments, if there's a need to spend some of those price increases back to defend share, we'll be prepared to do that. But there's -- again, we've only really just started with the income growth phase of the brand. So there's certainly capacity there to take pricing and start growing profits on the brand.

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Ronald J. Bernstein, Liggett Vector Brands LLC - CEO and President [25]

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To add to Nick's answer, as we've done, we'll continue to constantly evaluate the market and opportunities that occur in the marketplace. We've been opportunistic over the years. As it was mentioned on another question before, the 2-brand strategy that we've employed effectively for the last 12 years has been proven out, and we continue to build off of that. And I think there's every expectation that -- as Nick said, that there's earnings and growth capacity left in Eagle, and we look forward to realizing that and making any adjustments as the opportunities warrant.

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Operator [26]

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Our next question comes from Mary Gilbert with Imperial Capital.

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Mary Ross Gilbert, Imperial Capital, LLC, Research Division - MD of Institutional Research Group [27]

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I had a couple of questions. One, what is the white space opportunity for the Eagle brand, just when I think about the distribution and compare it to the distribution at Pyramid. So wanted to understand that more. And so as we think about the growth in the Eagle brand, how much of it is related to that versus sort of an increase in gaining more customers. And then also, based on what you just discussed, it sounds like this infers that as we look at the Tobacco segment, that we're -- we should see EBITDA expand over the next few years as a result of these strategies. So wanted to confirm that. And then finally, if you could just talk about, again, the capital allocation strategy. It sounds like it's -- you're seeing some opportunities on the Real Estate side. Does that infer anything in terms of just maintaining the existing dividend? Or would there be an opportunity to increase that dividend in the future?

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Ronald J. Bernstein, Liggett Vector Brands LLC - CEO and President [28]

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I'll take the Tobacco side first. The -- so as we've talked about on different calls, the marketplace when we introduce a brand is typically different than from the prior brands. So when we introduced Pyramid in 2009, we had a wide open market because of the large federal excise tax increase that occurred that year and our competitors moving all to take profit in the short term. We took a different strategy. We invested over a couple of years to build up that base, and we had ready access to the full market, including large retail chains and medium-sized retail chains. When Eagle was introduced, the marketplace had shifted. And as a result, the chain environment was being tied up by Reynolds', what we believe, anticompetitive EDLP program.

And as a result, Eagle 20's was built up in -- largely in the independent retail market. And as its strength has grown in the marketplace, and remember, it is the #3 discount brand in the country. And #1 and #2 are Reynolds' Pall Mall and Altria's L&M. So as Eagle has gained in strength, we've been able to start to pick up business in those chain accounts. So Eagle continues to grow. It grows beyond the scope of the outlets that it was in before. So that -- in essence, we believe that that's why there is still growth opportunity. And what was the second part of your question?

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [29]

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I think the second was on the dividend. Was that correct, yes?

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Mary Ross Gilbert, Imperial Capital, LLC, Research Division - MD of Institutional Research Group [30]

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Well, also, the expansion of EBITDA given the strategies that you have in place, it sounds like we have a -- we saw the lift in 2019 and that we should expect it again in at least '20 and '21. Is that sort of how we should think about it?

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Ronald J. Bernstein, Liggett Vector Brands LLC - CEO and President [31]

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We don't give guidance. But as we've talked about, and as Nick just mentioned, we've invested in Eagle 20's over a number of years. Our expectation is that we will derive benefits from that though not to give you any guidance relative to how much or how long. But obviously, the reason that we make investments like we did in Pyramid, and just to go back to that for a second, we invested $35 million over a 2-year period in Pyramid. That brand over the last 12 years has delivered about $600 million of margin to the company. So our expectation is that the investment in Eagle 20's will pay dividends to us for some time.

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [32]

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And let me answer the question now as it relates to capital allocation and dividends. There is nothing we like more than to pay dividends to our shareholders. We're -- pretty much all of us senior management executives are substantial shareholders in the company. And we love getting the dividends as much as anyone else. But as you know, dividends is decided on a quarter-by-quarter basis, and there's lots of different circumstances. So having the fact that we just have cut it after paying it for 18 years, I think, B.K., the last...

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James Bryant Kirkland, Vector Group Ltd. - Senior VP, CFO & Treasurer [33]

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20.

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [34]

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18 -- 20 -- almost 20 years.

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James Bryant Kirkland, Vector Group Ltd. - Senior VP, CFO & Treasurer [35]

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19 years, yes.

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [36]

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19 years. We didn't take it lightly to cut the dividend. So -- but again, we talk about it at every meeting. And if we ever have the opportunity to increase it, we think -- and if it's the best use of our money at that time, we're going to all be very happy if we can do it.

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Operator [37]

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Our next question comes from David Levine with MidOcean.

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David Levine;MidOcean Partners;Analyst, [38]

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I have 2, one on Tobacco then one on Real Estate. On Tobacco, it looks like margins while up were down, the increase was lower this quarter than the last couple of quarters just on a year-over-year basis. Any kind of color around why Tobacco margins were lower?

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Ronald J. Bernstein, Liggett Vector Brands LLC - CEO and President [39]

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Nick?

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Nicholas Anson, Vector Group Ltd. - Executive VP of Finance & Administration and CFO-Liggett Vector Brands [40]

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Yes. I think it's primarily to do with the mix. Eagle 20's is a lower-priced brand. And as we've invested to grow that brand, the volume mix has shifted. So that's purely a reflection of the sales mix and Eagle 20's becoming a greater percentage of the overall volume.

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David Levine;MidOcean Partners;Analyst, [41]

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Got it. Okay. And then on the Real Estate side, obviously, negative EBITDA quarter, not a very profitable segment currently, although, clearly, you guys have talked about how you're encouraged on a go-forward basis, and you might want to invest in it. But just as we currently sit, it's not very profitable. So what kind of measures have you taken? Or are you planning to take on the cost-cutting side to get more profitability out of this brand, particularly if we enter -- if pricing in New York continues to come down and we enter kind of a weaker time just generally for Real Estate, what kind of cost-cutting measures can you guys enact?

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [42]

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Well, we're constantly looking at our overhead, and we're doing that again now. And we'll make the cuts where we see. Look, we still want to be in a position to try to grow the company. It's very hard in these type of businesses to just cut and cut, and then you have -- all of a sudden, you have nothing left. We're still doing a good job in recruiting new brokers, good brokers, pretty much in all the regions that we're in. And we're going to continue to look at our overhead and look at our costs. We spend a lot in marketing. There's probably some money that can be cut out of marketing. Some of our additional costs were on new accounting systems. B.K., maybe you can talk about that for a minute.

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James Bryant Kirkland, Vector Group Ltd. - Senior VP, CFO & Treasurer [43]

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Sure. And before I speak about that, I think one of the big stories here is, is Elliman's revenue since 2014 have grown from $509 million to [$782 million]. But more importantly, the company dollar has -- or our gross margin has increased from $170 million to $217 million. So all of these investments we've made in helping Elliman grow, and these truly are investments, have really paid dividends on the company dollar line. And that gives us a lot of ability to scale in the future.

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [44]

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You want to talk about the accounting, the cost -- the additional cost.

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James Bryant Kirkland, Vector Group Ltd. - Senior VP, CFO & Treasurer [45]

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Yes. The accounting was about $4 million this year of incremental cost. And that's basically taking Elliman's accounting department to a public company accounting department.

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Operator [46]

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Thank you. Ladies and gentlemen, those are all the questions that we have for today. Thank you for joining us on Vector Group's Earnings Conference Call. That concludes our call. Thank you for your participation. You may now disconnect.

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Howard M. Lorber, Vector Group Ltd. - President, CEO & Director [47]

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Thank you, everyone.