-Net Sales for FY 2022 Zig-Zag and Stoker’s
Products Increased 6.8 Percent Year-Over-Year
Turning Point Brands, Inc. (“TPB” or “the Company”) (NYSE: TPB),
a manufacturer, marketer and distributor of branded consumer
products, including alternative smoking accessories and consumables
with active ingredients, announced today financial results for the
fourth quarter and full year ended December 31, 2022.
Q4 2022 vs. Q4 2021
- Total consolidated net sales decreased 1.8% to $103.4 million
- Combined net sales for Zig-Zag and Stoker’s Products increased
1.6% (increased 0.9% and 2.6%, respectively)
- NewGen net sales declined by 11.1%
- Gross profit decreased 1.5% to $49.6 million
- Net income decreased $27.8 million to $($16.3) million
primarily due to $34.8 million non-cash asset impairments
- Adjusted net income decreased $0.2 million to $13.2
million
- Adjusted EBITDA decreased 2.9% to $23.1 million (see Schedule A
for a reconciliation to net income)
- Diluted EPS of $(0.93) and Adjusted Diluted EPS of $0.69
compared to $0.57 and $0.66 in the same period one year ago,
respectively (see Schedule B for a reconciliation to Diluted
EPS)
FY 2022 vs. FY 2021
- Total consolidated net sales decreased 6.8% to $415.0 million
- Combined net sales for Zig-Zag and Stoker’s Products increased
6.8% (increased 7.9% and 5.3%, respectively)
- NewGen net sales declined by 35.2%
- Gross profit decreased 5.6% to $205.5 million
- Net income decreased $40.4 million to $11.6 million due in part
to $41.1 million non-cash asset impairments
- Adjusted net income decreased $7.4 million to $56.2
million
- Adjusted EBITDA decreased 9.7% to $97.6 million (see Schedule A
for a reconciliation to net income)
- Diluted EPS of $0.64 and Adjusted Diluted EPS of $2.83 as
compared to $2.52 and $3.03 in the same period one year ago,
respectively (see Schedule B for a reconciliation to Diluted
EPS)
Graham Purdy, President and CEO, commented: “The fourth quarter
operating results finished in-line with our expectations with solid
execution across our segments. The Zig-Zag segment grew during the
quarter despite the impact of a previously disclosed pull-forward
in the prior quarter, benefitting from continued market share gains
and the contribution from a full quarter of CLIPPER lighters. We
are pleased with the ongoing roll-out and strong channel
receptivity to the world’s #1 reusable lighter. Stoker’s MST
experienced strong share gains as consumer trade-downs to value
accelerated, consistent with the current inflationary and economic
backdrop. The challenging regulatory environment continues to
negatively affect the NewGen segment which was down materially vs.
2021, but with declines moderating in the back half of the year. In
addition to returning capital to our shareholders through share
repurchases, we opportunistically purchased $10 million notional of
our convertible notes during the fourth quarter while maintaining a
strong cash balance. Over the last few months since taking on the
CEO role, my primary objective has been to re-direct our focus and
energy towards driving organic long-term growth. This starts with
allocating resources to products, initiatives, and channels best
positioned towards this goal. Our organization is now better
aligned towards capitalizing on the opportunities in front of us
and we look forward to delivering against our long-term plans going
forward.”
Zig-Zag Products Segment (45% of total net sales in the
quarter)
For the fourth quarter, Zig-Zag Products net sales increased
0.9% to $46.4 million. Both of TPB’s Canadian and other smoking
accessories businesses saw strong growth during the quarter. This
was partially offset by anticipated declines in the U.S. rolling
papers and wraps businesses which were impacted by the previously
disclosed pull-forward of sales into the prior quarter due to the
timing of promotional programs. For the fourth quarter, total
Zig-Zag Products segment volume increased 0.8%, while price / mix
increased 0.1%.
For the quarter, the Zig-Zag Products segment gross profit
decreased 2.4% to $25.8 million. Gross margin declined 180 basis
points to 55.5% driven primarily by product mix including the ramp
of our CLIPPER lighters business which operates at lower gross
profit margins.
For the full year, net sales of Zig-Zag Products increased 7.9%
to $190.4 million with double-digit advances in the U.S. rolling
papers and e-commerce, other smoking accessories, and Canadian
businesses partially offset by a double-digit decline in the wraps
business. For the full year, total Zig-Zag Products segment volume
increased 6.4%, while price / mix increased 1.5%.
For the full year, Zig-Zag Products segment gross profit
increased 3.7% to $106.6 million. Gross margin contracted 220 basis
points to 56.0%, driven primarily by product mix including the
launch of our CLIPPER lighters business which operates at lower
gross profit margins.
“Zig-Zag papers demonstrated solid share growth for the year
while we continue to build our presence in the alternative
channel,” said Purdy. “Furthermore, we remain excited about our
continued roll-out of CLIPPER lighters in the U.S. and Canada.”
Stoker’s Products Segment (31% of total net sales in the
quarter)
For the fourth quarter, Stoker’s Products net sales increased
2.6% to $32.0 million on double-digit growth of MST partially
offset by a double-digit decline in loose-leaf chewing tobacco. For
the fourth quarter, total Stoker’s Products segment volume
decreased 6.1%, while price / mix increased 8.7%.
For the quarter, the Stoker’s Products segment gross profit
increased 1.6% to $17.2 million. Gross margin contracted 50 basis
points to 53.8% due to product mix shift.
For the full year, net sales of Stoker’s Products increased 5.3%
to $130.8 million on double-digit growth of MST partially offset by
a high single-digit decline of loose-leaf chewing tobacco. For the
full year, total Stoker’s Products segment volume decreased 2.6%,
while price / mix increased 7.9%.
For the full year, the Stoker’s Products segment gross profit
increased 4.7% to $71.3 million. Gross margin contracted 30 basis
points to 54.5% due to the impact of product mix shift including
growth in discount looseleaf products.
“Stoker’s saw strong market share gains in both the MST and
loose-leaf chewing tobacco categories during the quarter,”
continued Purdy. “Stoker’s strong value proposition continues to
resonate with consumers in the current inflationary environment
that has challenged their budgets.”
NewGen Products Segment (24% of total net sales in the
quarter)
For the fourth quarter, NewGen Products net sales decreased
11.1% to $24.9 million. The regulatory environment continues to
negatively impact sales.
For the quarter, NewGen Products segment gross profit decreased
5.8% to $6.6 million. Gross margin increased 150 basis points from
the previous year to 26.4% primarily due to higher inventory
write-downs in the previous year period.
For the full year, net sales of NewGen Products decreased 35.2%
to $93.8 million and gross profit decreased 41.1% to $27.7 million.
Gross margin contracted 300 basis points to 29.5% due to product
mix and the highly promotional environment.
“The regulatory environment for NewGen remains dynamic given the
uncertainty over the outcome of the PMTA process and the potential
for additional state and federal regulations,” concluded Purdy.
Recent Events
Creative Distribution Solutions
On December 21, 2022, Turning Point Brands contributed its
NewGen Products business to South Beach Holdings LLC doing business
as Creative Distribution Solutions ("CDS"), a newly-formed
wholly-owned subsidiary. CDS specializes in the distribution of
vapor and related products to B2B and B2C customers throughout the
United States. CDS will be overseen by an independent board of
management. “We believe this reorganization best positions CDS to
navigate the current regulatory environment, adapt to future
marketplace changes, and pursue further value maximizing
opportunities as they arise,” noted Mr. Purdy.
Performance Measures in the Fourth Quarter
Fourth quarter consolidated selling, general and administrative
(“SG&A”) expenses were $31.2 million compared to $31.6 million
in the fourth quarter of 2021.
The fourth quarter SG&A included the following notable
items:
- $0.3 million of ERP / CRM duplicative system costs compared to
none in the previous year
- $1.2 million of stock options, restricted stock and incentive
expense compared to $1.5 million in the year-ago period
- $0.3 million of FDA PMTA-related expenses compared to $0.7
million in the year-ago period
- $0.0 million of transaction expenses as compared to $0.2
million in the year-ago period
- $1.8 million of restructuring costs as compared to $0.9 million
in the year-ago period
Total gross debt as of December 31, 2022 was $412.5 million. The
corresponding net debt (total gross debt less cash) at December 31,
2022 was $306.1 million. The Company ended the quarter with total
liquidity of $127.8 million, comprised of $106.4 million in cash
and $21.4 million of revolving credit facility capacity.
During the quarter, the Company spent $2.2 million to repurchase
101,959 shares at an average price of $21.50 per share. During the
quarter, the Company also spent $9.0 million to purchase $10.0
million in aggregate principal amount of its 2.50% Convertible
Senior Notes due July 2024.
The Company recorded impairment charges of $34.8 million during
the quarter related to goodwill and intangible assets of the NewGen
segment and certain minority investments in development stage
ventures.
2023 Outlook
At this time, the Company expects full-year 2023 adjusted EBITDA
to be $88 to $94 million.
Earnings Conference Call
As previously disclosed, a conference call with the investment
community to review TPB’s financial results has been scheduled for
10:00 a.m. Eastern on Friday, February 24, 2023. Investment
community participants should dial in 10 minutes ahead of time
using the toll-free number 888-330-2502 (international participants
should call 240-789-2713), and follow the audio prompts after
typing in the event ID: 6640134. A live listen-only webcast of the
call will be available on the Events and Presentations section of
the investor relations portion of the Company website
(www.turningpointbrands.com). A replay of the webcast will be
available on the site two hours following the call.
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
generally accepted accounting principles in the United States
(GAAP), this press release includes certain non-GAAP financial
measures including EBITDA, Adjusted EBITDA, Adjusted Net Income,
Adjusted Diluted EPS and Adjusted Operating Income (Loss). A
reconciliation of these non-GAAP financial measures accompanies
this release.
About Turning Point Brands, Inc.
Turning Point Brands (NYSE: TPB) is a manufacturer, marketer and
distributor of branded consumer products including alternative
smoking accessories and consumables with active ingredients through
its iconic Zig-Zag® and Stoker’s® brands, and its emerging brands
within the NewGen segment. TPB’s products are available in more
than 215,000 retail outlets in North America, and on sites such as
www.zigzag.com and www.solacevapor.com. For the latest news and
information about TPB and its brands, please visit
www.turningpointbrands.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements may generally be identified by the use of words such as
"anticipate," "believe," "expect," "intend," "plan" and "will" or,
in each case, their negative, or other variations or comparable
terminology. These forward-looking statements include all matters
that are not historical facts. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. As a result, these statements are not guarantees of future
performance and actual events may differ materially from those
expressed in or suggested by the forward-looking statements. Any
forward-looking statement made by TPB in this press release, its
reports filed with the Securities and Exchange Commission (the
“SEC”) and other public statements made from time-to-time speak
only as of the date made. New risks and uncertainties come up from
time to time, and it is impossible for TPB to predict or identify
all such events or how they may affect it. TPB has no obligation,
and does not intend, to update any forward-looking statements after
the date hereof, except as required by federal securities laws.
Factors that could cause these differences include, but are not
limited to those included it the Company’s Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and other reports filed by the
Company with the SEC. These statements constitute the Company’s
cautionary statements under the Private Securities Litigation
Reform Act of 1995.
Financial Statements Follow:
Turning Point Brands, Inc. Consolidated Statements of
Income (dollars in thousands except share data) (unaudited)
Three Months Ended
December 31,
2022
2021
Net sales
$
103,392
$
105,283
Cost of sales
53,829
54,952
Gross profit
49,563
50,331
Selling, general, and administrative expenses
31,245
31,613
Operating income
18,318
18,718
Interest expense, net
4,382
5,094
Investment loss
7,229
6,965
Goodwill and intangible impairment loss
27,566
-
Gain on extinguishment of debt
(885
)
(7,485
)
Income (loss) before income taxes
(19,974
)
14,144
Income tax (benefit) expense
(3,857
)
2,889
Consolidated net income (loss)
(16,117
)
11,255
Net income (loss) attributable to non-controlling interest
200
(199
)
Net income (loss) attributable to Turning Point Brands, Inc.
$
(16,317
)
$
11,454
Basic income (loss) per common share: Net income (loss)
attributable to Turning Point Brands, Inc.
$
(0.93
)
$
0.61
Diluted income (loss) per common share: Net income (loss)
attributable to Turning Point Brands, Inc.
$
(0.93
)
$
0.57
Weighted average common shares outstanding: Basic
17,530,278
18,707,286
Diluted
17,530,278
22,153,988
Supplemental disclosures of statement of income information:
Excise tax expense
$
5,771
$
6,212
FDA fees
$
158
$
166
Turning Point Brands, Inc. Consolidated Statements
of Income (dollars in thousands except share data) (unaudited)
For the year ended
December 31,
2022
2021
Net sales
$
415,013
$
445,471
Cost of sales
209,475
227,637
Gross profit
205,538
217,834
Selling, general, and administrative expenses
130,024
127,513
Operating income
75,514
90,321
Interest expense, net
19,524
20,500
Investment loss
13,303
6,673
Goodwill and intangible impairment loss
27,566
-
Gain on extinguishment of debt, net
(885
)
(2,154
)
Income before income taxes
16,006
65,302
Income tax expense
4,849
14,040
Consolidated net income
11,157
51,262
Net loss attributable to non-controlling interest
(484
)
(797
)
Net income attributable to Turning Point Brands, Inc.
$
11,641
$
52,059
Basic income per common share: Net income attributable to
Turning Point Brands, Inc.
$
0.65
$
2.75
Diluted income per common share: Net income attributable to Turning
Point Brands, Inc.
$
0.64
$
2.52
Weighted average common shares outstanding: Basic
17,899,794
18,917,570
Diluted
18,055,015
22,381,994
Supplemental disclosures of statement of income information:
Excise tax expense
$
23,274
$
27,353
FDA fees
$
623
$
679
Turning Point Brands, Inc. Consolidated Balance
Sheets (dollars in thousands except share data) (unaudited)
December 31, ASSETS
2022
2021
Current assets: Cash
$
106,403
$
128,320
Accounts receivable, net of allowances of $114 in 2022 and $262 in
2021
8,377
6,496
Inventories
119,915
87,607
Other current assets
21,800
26,746
Total current assets
256,495
249,169
Property, plant, and equipment, net
22,788
18,650
Deferred income taxes
9,602
1,363
Right of use assets
12,465
15,053
Deferred financing costs, net
282
388
Goodwill
136,253
162,333
Other intangible assets, net
83,592
87,485
Master Settlement Agreement (MSA) escrow deposits
27,980
31,720
Other assets
22,649
35,399
Total assets
$
572,106
$
601,560
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable
$
8,355
$
7,361
Accrued liabilities
33,001
32,937
Current portion of long-term debt
-
-
Other current liabilities
20
38
Total current liabilities
41,376
40,336
Notes payable and long-term debt
406,757
414,172
Lease liabilities
10,593
13,336
Total liabilities
458,726
467,844
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; 19,801,623 issued shares,
17,485,163 outstanding shares at December 31, 2022, and 19,690,884
issued shares, 18,395,476 outstanding shares at December 31,
2021
198
197
Common stock, nonvoting, $0.01 par value; authorized shares,
10,000,000; issued and outstanding shares -0-
-
-
Additional paid-in capital
113,242
108,811
Cost of repurchased common stock
(2,316,460 shares at December 31, 2022 and 1,295,408 shares at
December 31, 2021)
(78,093
)
(48,869
)
Accumulated other comprehensive loss
(2,393
)
(195
)
Accumulated earnings
78,691
71,460
Non-controlling interest
1,735
2,312
Total stockholders' equity
113,380
133,716
Total liabilities and stockholders' equity
$
572,106
$
601,560
Turning Point Brands, Inc. Consolidated Statements
of Cash Flows (dollars in thousands) (unaudited)
For the Year Ended
December 31,
2022
2021
Cash flows from operating activities: Consolidated net income
$
11,157
$
51,262
Adjustments to reconcile net income to net cash provided by
operating activities: Gain on extinguishment of debt
(885
)
(2,154
)
Gain on disposal of property, plant, and equipment
(9
)
(54
)
Loss on goodwill impairment
25,585
-
Loss on intangible asset impairment
1,982
-
Loss on investments
13,570
7,100
Depreciation expense
3,388
3,105
Amortization of other intangible assets
1,911
1,907
Amortization of deferred financing costs
2,576
2,541
Deferred income taxes
(7,665
)
(1,485
)
Stock compensation expense
5,273
7,557
Noncash lease income
(29
)
(167
)
Gain on MSA escrow deposits
(54
)
(255
)
Changes in operating assets and liabilities: Accounts receivable
(2,103
)
3,317
Inventories
(32,653
)
(9
)
Other current assets
5,739
(134
)
Other assets
420
996
Accounts payable
1,240
(2,367
)
Accrued liabilities and other
830
(2,943
)
Net cash provided by operating activities
30,273
68,217
Cash flows from investing activities: Capital expenditures
$
(7,685
)
$
(6,156
)
Acquisitions, net of cash acquired
-
(16,416
)
Payments for investments
(1,000
)
(16,657
)
Restricted cash, MSA escrow deposits
(10,170
)
(19,664
)
Proceeds on the sale of property, plant and equipment
62
54
Net cash used in investing activities
(18,793
)
(58,839
)
Turning Point Brands, Inc. Consolidated Statements
of Cash Flows (Cont.) (dollars in thousands) (unaudited)
For the Year Ended
December 31,
2022
2021
Cash flows from financing activities: Proceeds from Senior Notes
$
-
$
250,000
Payments of 2018 first lien term loan
-
(130,000
)
Settlement of interest rate swaps
-
(3,573
)
Payments of Convertible Senior Notes
(9,000
)
-
Proceeds from call options
51
-
Payment of promissory note
-
(9,625
)
Payment of dividends
(4,250
)
(4,096
)
Payments of financing costs
-
(6,921
)
Exercise of options
504
2,071
Redemption of options
(155
)
(2,111
)
Redemption of restricted stock
(1,229
)
-
Common stock repurchased
(29,224
)
(38,678
)
Net cash provided by (used in) financing activities
$
(43,303
)
$
57,067
Net increase (decrease) in cash
$
(31,823
)
$
66,445
Effect of foreign currency translation on cash
$
(320
)
$
191
Cash, beginning of period: Unrestricted
$
128,320
$
41,765
Restricted
15,155
35,074
Total cash at beginning of period
$
143,475
$
76,839
Unrestricted
$
106,403
$
128,320
Restricted
4,929
15,155
Total cash at end of period
$
111,332
$
143,475
Non-GAAP Financial Measures
To supplement our financial information presented in accordance
with generally accepted accounting principles in the United States,
or U.S. GAAP, we use non-U.S. GAAP financial measures, including
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS,
Adjusted Gross Profit and Adjusted Operating Income (Loss). We
believe Adjusted EBITDA provides useful information to management
and investors regarding certain financial and business trends
relating to our financial condition and results of operations.
Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS,
Adjusted Gross Profit and Adjusted Operating Income (Loss) are used
by management to compare our performance to that of prior periods
for trend analyses and planning purposes and are presented to our
board of directors. We believe that EBITDA, Adjusted EBITDA,
Adjusted Net Income, Adjusted Diluted EPS, Adjusted Gross Profit
and Adjusted Operating Income (Loss) are appropriate measures of
operating performance because they eliminate the impact of expenses
that do not relate to business performance.
We define “EBITDA” as net income before interest expense, loss
on extinguishment of debt, provision for income taxes, depreciation
and amortization. We define “Adjusted EBITDA” as net income before
interest expense, loss on extinguishment of debt, provision for
income taxes, depreciation, amortization, other non-cash items and
other items that we do not consider ordinary course in our
evaluation of ongoing operating performance. We define “Adjusted
Net Income” as net income excluding items that we do not consider
ordinary course in our evaluation of ongoing operating performance.
We define “Adjusted Diluted EPS” as diluted earnings per share
excluding items that we do not consider ordinary course in our
evaluation of ongoing operating performance. We define “Adjusted
Gross Profit: as gross profit excluding other non-cash items and
other items that we do not consider ordinary course in our
evaluation of ongoing operating performance. We define “Adjusted
Operating Income (Loss)” as operating income (loss) excluding other
non-cash items and other items that we do not consider ordinary
course in our evaluation of ongoing operating performance.
Non-U.S. GAAP measures should not be considered a substitute
for, or superior to, financial measures calculated in accordance
with U.S. GAAP. EBITDA, Adjusted Net Income, Adjusted EBITDA
Adjusted Diluted EPS, Adjusted Gross Profit and Adjusted Operating
Income (Loss) exclude significant expenses that are required by
U.S. GAAP to be recorded in our financial statements and is subject
to inherent limitations. In addition, other companies in our
industry may calculate this non-U.S. GAAP measure differently than
we do or may not calculate it at all, limiting its usefulness as a
comparative measure.
In accordance with SEC rules, we have provided, in the
supplemental information attached, a reconciliation of the non-GAAP
measures to the next directly comparable GAAP measures.
Schedule A Turning Point Brands, Inc.
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA
(dollars in thousands) (unaudited)
Three Months Ended
December 31,
2022
2021
Net income (loss) attributable to Turning Point Brands, Inc.
$
(16,317
)
$
11,454
Add: Interest expense, net
4,382
5,094
Gain on extinguishment of debt
(885
)
(7,485
)
Income tax (benefit) expense
(3,857
)
2,889
Depreciation expense
777
792
Amortization expense
538
476
EBITDA
$
(15,362
)
$
13,220
Components of Adjusted EBITDA Corporate restructuring (a)
1,825
1,026
ERP/CRM (b)
336
-
Stock options, restricted stock, and incentives expense (c)
1,170
1,542
Transactional expenses (d)
12
190
FDA PMTA (e)
289
708
Non-cash asset impairment (f)
34,836
7,100
Adjusted EBITDA
$
23,106
$
23,786
(a) Represents costs associated with corporate and
vape restructuring, including severance. (b) Represents cost
associated with scoping and mobilization of new ERP and CRM systems
and cost of duplicative ERP licenses. (c) Represents non-cash stock
options, restricted stock, incentives expense and Solace
performance stock units. (d) Represents the fees incurred for
transaction expenses. (e) Represents costs associated with
applications related to FDA premarket tobacco product application
("PMTA"). (f) Represents impairment of goodwill, intangible and
investment assets.
Schedule A Turning Point
Brands, Inc. Reconciliation of GAAP Net Income to Adjusted
EBITDA (dollars in thousands) (unaudited)
For the Year Ended
December 31,
2022
2021
Net income attributable to Turning Point Brands, Inc.
$
11,641
$
52,059
Add: Interest expense, net
19,524
20,500
Gain on extinguishment of debt
(885
)
(2,154
)
Income tax expense
4,849
14,040
Depreciation expense
3,388
3,105
Amortization expense
1,911
1,907
EBITDA
$
40,428
$
89,457
Components of Adjusted EBITDA Corporate restructuring (a)
3,444
1,026
ERP/CRM (b)
1,962
-
Stock options, restricted stock, and incentives expense (c)
5,273
7,557
Transactional expenses (d)
801
1,267
FDA PMTA (e)
4,554
1,668
Non-cash asset impairment (f)
41,136
7,100
Adjusted EBITDA
$
97,598
$
108,075
(a) Represents costs associated with corporate and
vape restructuring, including severance. (b) Represents cost
associated with scoping and mobilization of new ERP and CRM systems
and cost of duplicative ERP licenses. (c) Represents non-cash stock
options, restricted stock, incentives expense and Solace
performance stock units. (d) Represents the fees incurred for
transaction expenses. (e) Represents costs associated with
applications related to FDA premarket tobacco product application
("PMTA"). (f) Represents impairment of goodwill, intangible and
investment assets.
Schedule B Turning Point
Brands, Inc. Reconciliation of GAAP Net Income to Adjusted
Net Income and Diluted EPS to Adjusted Diluted EPS (dollars in
thousands except share data) (unaudited)
Three Months Ended
Three Months Ended December 31, 2022 December 31,
2021 Net Income Diluted EPS Net Income
Diluted EPS GAAP
$
(16,317
)
$
(0.93
)
$
11,454
$
0.57
Anti-dilutive impact (a)
-
0.20
-
-
Gain on extinguishment of debt (b)
(714
)
(0.03
)
(5,956
)
(0.27
)
Corporate restructuring (c)
1,473
0.07
816
0.04
ERP/CRM (d)
271
0.01
-
-
Stock options, restricted stock, and incentives expense (e)
944
0.05
1,227
0.06
Transactional expenses (f)
10
0.00
151
0.01
FDA PMTA (g)
233
0.01
563
0.03
Non-cash asset impairment (h)
28,109
1.35
5,650
0.26
Impact of quarterly tax items to effective tax rate (i)
(804
)
(0.04
)
(540
)
(0.02
)
Adjusted (j)
$
13,205
$
0.69
$
13,366
$
0.66
Total may not foot due to rounding (a) Represents
dilution of options and debt conversion that is anti-dilutive and
not included for GAAP. (b) Represents gain on extinguishment of
debt tax effected at the quarterly tax rate. (c) Represents costs
associated with corporate restructuring, including severance tax
effected at the quarterly tax rate. (d) Represents cost associated
with scoping and mobilization of new ERP and CRM systems and cost
of duplicative ERP licenses tax effected at the quarterly tax rate.
(e) Represents non-cash stock options, restricted stock, incentives
expense and Solace PRSUs tax effected at the quarterly tax rate.
(f) Represents the fees incurred for transaction expenses tax
effected at the quarterly tax rate. (g) Represents costs associated
with applications related to the FDA PMTA tax effected at the
quarterly tax rate. (h) Represents impairment of goodwill,
intangible and investment assets tax effected at the quarterly tax
rate. (i) Represents adjustment from quarterly tax rate to annual
projected tax rate of 23% in 2022 and 2021. (j) Diluted shares
outstanding includes the full 3.2 million share dilution of debt
conversion without a 1.1 million share offsetting impact from
capped call transactions.
Schedule B Turning Point
Brands, Inc. Reconciliation of GAAP Net Income to Adjusted
Net Income and Diluted EPS to Adjusted Diluted EPS (dollars in
thousands except share data) (unaudited)
For the Year Ended
For the Year Ended December 31, 2022 December 31,
2021 Net Income Diluted EPS Net Income
Diluted EPS GAAP
$
11,641
$
0.64
$
52,059
$
2.52
Anti-dilutive impact (a)
-
0.09
-
-
Gain on extinguishment of debt (b)
(617
)
(0.03
)
(1,691
)
(0.08
)
Corporate restructuring (c)
2,401
0.11
805
0.04
ERP/CRM (d)
1,368
0.06
-
-
Stock options, restricted stock, and incentives expense (e)
3,676
0.17
5,932
0.27
Transactional expenses (f)
558
0.03
995
0.04
FDA PMTA (g)
3,174
0.15
1,309
0.06
Non-cash asset impairment (h)
28,674
1.35
5,573
0.25
Impact of quarterly tax items to effective tax rate (i)
5,309
0.25
(1,432
)
(0.06
)
Adjusted (j)
$
56,183
$
2.83
$
63,551
$
3.03
Total may not foot due to rounding (a) Represents
dilution of debt conversion that is anti-dilutive and not included
for GAAP. (b) Represents gain on extinguishment of debt tax
effected at the quarterly tax rate. (c) Represents costs associated
with corporate restructuring, including severance tax effected at
the quarterly tax rate. (d) Represents cost associated with scoping
and mobilization of new ERP and CRM systems and cost of duplicative
ERP licenses tax effected at the quarterly tax rate. (e) Represents
non-cash stock options, restricted stock, incentives expense and
Solace PRSUs tax effected at the quarterly tax rate. (f) Represents
the fees incurred for transaction expenses tax effected at the
quarterly tax rate. (g) Represents costs associated with
applications related to the FDA PMTA tax effected at the quarterly
tax rate. (h) Represents impairment of goodwill, intangible and
investment assets tax effected at the quarterly tax rate. (i)
Represents adjustment from quarterly tax rate to annual projected
tax rate of 23% in 2022 and 2021. (j) Diluted shares outstanding
includes the full 3.2 million share dilution of debt conversion
without a 1.1 million share offsetting impact from capped call
transactions.
Schedule C Turning Point Brands,
Inc. Reconciliation of GAAP Gross Profit to Adjusted Gross
Profit and GAAP Operating Income to Adjusted Operating Income
(Loss) (dollars in thousands) (unaudited)
Consolidated
Zig-Zag Stoker's NewGen 4th Quarter
4th Quarter 4th Quarter 4th Quarter 4th
Quarter 4th Quarter 4th Quarter 4th
Quarter
2022
2021
2022
2021
2022
2021
2022
2021
Net sales
$
103,392
$
105,283
$
46,444
$
46,051
$
32,010
$
31,184
$
24,938
$
28,048
Gross profit
$
49,563
$
50,331
$
25,768
$
26,397
$
17,210
$
16,942
$
6,585
$
6,992
Adjustments: Corporate and vapor restructuring
-
90
-
-
-
-
-
90
Adjusted gross profit
$
49,563
$
50,421
$
25,768
$
26,397
$
17,210
$
16,942
$
6,585
$
7,082
Operating income (loss)
$
18,318
$
18,718
$
17,362
$
19,212
$
12,794
$
12,687
$
134
$
(3,427
)
Adjustments: Transaction costs
12
190
-
-
-
-
-
-
FDA PMTA
289
708
-
-
-
-
-
-
Corporate and vapor restructuring
1,825
1,026
-
-
-
-
-
1,026
Adjusted operating income (loss)
$
20,444
$
20,642
$
17,362
$
19,212
$
12,794
$
12,687
$
134
$
(2,401
)
Schedule C Turning Point Brands, Inc.
Reconciliation of GAAP Gross Profit to Adjusted Gross Profit and
GAAP Operating Income to Adjusted Operating Income (dollars in
thousands) (unaudited)
Consolidated Zig-Zag
Stoker's NewGen YTD YTD YTD
YTD YTD YTD YTD YTD
2022
2021
2022
2021
2022
2021
2022
2021
Net sales
$
415,013
$
445,471
$
190,403
$
176,491
$
130,826
$
124,280
$
93,784
$
144,700
Gross profit
$
205,538
$
217,834
$
106,576
$
102,739
$
71,254
$
68,084
$
27,708
$
47,011
Adjustments: Corporate and vapor restructuring
-
90
-
-
-
-
-
90
Adjusted gross profit
$
205,538
$
217,924
$
106,576
$
102,739
$
71,254
$
68,084
$
27,708
$
47,101
Operating income
$
75,514
$
90,321
$
73,342
$
77,109
$
51,929
$
52,073
$
1,506
$
2,263
Adjustments: Transaction costs
801
1,267
-
-
-
-
-
-
FDA PMTA
4,554
1,668
-
-
-
-
-
-
Corporate and vapor restructuring
3,444
1,026
-
-
-
-
-
1,026
Adjusted operating income
$
84,313
$
94,282
$
73,342
$
77,109
$
51,929
$
52,073
$
1,506
$
3,289
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version on businesswire.com: https://www.businesswire.com/news/home/20230224005079/en/
Investor Contacts Turning Point Brands, Inc.: Louie
Reformina, Senior Vice President, CFO Turning Point Brands, Inc.
502.774.9238 ir@tpbi.com
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