Delaware
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001-37763
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20-0709285
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(State or other Jurisdiction of Incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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5201 Interchange Way, Louisville, KY
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40229
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.01 par value
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TPB
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New York Stock Exchange
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☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02. |
Results of Operations and Financial Condition.
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Item 7.01. |
Regulation FD Disclosure.
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Item 9.01. |
Financial Statements and Exhibits.
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(d) |
Exhibits
|
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Press Release dated August 2, 2023
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|
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104
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Cover Page Interactive Data File (embedded within the Inline XBRL document)
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TURNING POINT BRANDS, INC.
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|
|
|
|
|
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Dated: August 2, 2023
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By:
|
/s/ Brittani N. Cushman
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|
|
|
Brittani N. Cushman
|
|
|
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Senior Vice President, General Counsel and Secretary
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• |
Total consolidated net sales increased 2.6% to $105.6 million
|
|
o |
Zig-Zag Products net sales increased by 1.1%
|
|
o |
Stoker’s Products net sales increased by 7.3%
|
|
o |
Creative Distribution Solutions net sales decreased by 1.3%
|
|
• |
Gross profit increased 2.0% to $52.5 million
|
|
• |
Net income increased 83.0% to $9.9 million
|
|
• |
Adjusted net income increased 8.4% to $15.3 million (see Schedule B for a reconciliation to net income)
|
|
• |
Adjusted EBITDA increased 2.2% to $25.3 million (see Schedule A for a reconciliation to net income)
|
|
• |
Diluted EPS of $0.53 and Adjusted Diluted EPS of $0.79 compared to $0.30 and $0.70 in the same period one year ago, respectively (see Schedule B for a reconciliation to Diluted EPS)
|
|
• |
$0.1 million of ERP / CRM duplicative system costs compared to $0.9 million of ERP / CRP scoping expenses in the previous year
|
|
• |
$2.1 million of stock options, restricted stock and incentive expense compared to $1.5 million in the year-ago period
|
|
• |
$0.7 million of FDA PMTA-related expenses for modern oral products compared to $2.0 million in the year-ago period
|
|
• |
$0.1 million of transaction expenses compared to $0.4 million in the year-ago period
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|
• |
$0.0 million of restructuring costs as compared to $0.3 million in the year-ago period
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Three Months Ended June 30,
|
||||||||
2023
|
2022
|
|||||||
Net sales
|
$
|
105,595
|
$
|
102,925
|
||||
Cost of sales
|
53,117
|
51,456
|
||||||
Gross profit
|
52,478
|
51,469
|
||||||
Selling, general, and administrative expenses
|
31,933
|
33,323
|
||||||
Operating income
|
20,545
|
18,146
|
||||||
Interest expense, net
|
4,019
|
5,144
|
||||||
Investment loss
|
4,080
|
6,227
|
||||||
Gain on extinguishment of debt
|
(600
|
)
|
-
|
|||||
Income before income taxes
|
13,046
|
6,775
|
||||||
Income tax expense
|
3,338
|
1,569
|
||||||
Consolidated net income
|
9,708
|
5,206
|
||||||
Net loss attributable to non-controlling interest
|
(217
|
)
|
(218
|
)
|
||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
9,925
|
$
|
5,424
|
||||
Basic income per common share:
|
||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
0.56
|
$
|
0.30
|
||||
Diluted income per common share:
|
||||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
0.53
|
$
|
0.30
|
||||
Weighted average common shares outstanding:
|
||||||||
Basic
|
17,584,241
|
18,063,259
|
||||||
Diluted
|
20,409,943
|
21,443,279
|
||||||
Supplemental disclosures of statements of income information:
|
||||||||
Excise tax expense
|
$
|
5,407
|
$
|
6,141
|
||||
FDA fees
|
$
|
116
|
$
|
171
|
(unaudited)
|
||||||||
June 30,
|
December 31,
|
|||||||
ASSETS
|
2023
|
2022
|
||||||
Current assets:
|
||||||||
Cash
|
$
|
100,507
|
$
|
106,403
|
||||
Accounts receivable, net of allowances of $103 in 2023 and $114 in 2022
|
7,920
|
8,377
|
||||||
Inventories
|
125,056
|
119,915
|
||||||
Other current assets
|
18,216
|
22,959
|
||||||
Total current assets
|
251,699
|
257,654
|
||||||
Property, plant, and equipment, net
|
24,128
|
22,788
|
||||||
Deferred income taxes
|
7,966
|
8,443
|
||||||
Right of use assets
|
10,923
|
12,465
|
||||||
Deferred financing costs, net
|
229
|
282
|
||||||
Goodwill
|
136,244
|
136,253
|
||||||
Other intangible assets, net
|
82,048
|
83,592
|
||||||
Master Settlement Agreement (MSA) escrow deposits
|
28,229
|
27,980
|
||||||
Other assets
|
18,208
|
22,649
|
||||||
Total assets
|
$
|
559,674
|
$
|
572,106
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
10,802
|
$
|
8,355
|
||||
Accrued liabilities
|
30,898
|
33,001
|
||||||
Other current liabilities
|
5
|
20
|
||||||
Total current liabilities
|
41,705
|
41,376
|
||||||
Notes payable and long-term debt
|
379,195
|
406,757
|
||||||
Lease liabilities
|
9,528
|
10,593
|
||||||
Total liabilities
|
430,428
|
458,726
|
||||||
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; 19,912,039 issued shares and 17,595,579 outstanding shares at June 30,
2023, and 19,801,623 issued shares and 17,485,163 outstanding shares at December 31, 2022
|
199
|
198
|
||||||
Common stock, nonvoting, $0.01 par value; authorized shares, 10,000,000; issued and outstanding shares -0-
|
-
|
-
|
||||||
Additional paid-in capital
|
115,272
|
113,242
|
||||||
Cost of repurchased common stock (2,316,460 shares at June 30, 2023 and December 31, 2022)
|
(78,093
|
)
|
(78,093
|
)
|
||||
Accumulated other comprehensive loss
|
(3,181
|
)
|
(2,393
|
)
|
||||
Accumulated earnings
|
93,873
|
78,691
|
||||||
Non-controlling interest
|
1,176
|
1,735
|
||||||
Total stockholders' equity
|
129,246
|
113,380
|
||||||
Total liabilities and stockholders' equity
|
$
|
559,674
|
$
|
572,106
|
Six Months Ended June 30,
|
||||||||
2023
|
2022
|
|||||||
Cash flows from operating activities:
|
||||||||
Consolidated net income
|
$
|
17,050
|
$
|
15,977
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Gain on extinguishment of debt
|
(1,377
|
)
|
-
|
|||||
Loss (gain) on sale of property, plant, and equipment
|
44
|
(8
|
)
|
|||||
Depreciation expense
|
1,535
|
1,750
|
||||||
Amortization of other intangible assets
|
1,542
|
919
|
||||||
Amortization of deferred financing costs
|
1,225
|
1,291
|
||||||
Deferred income tax expense (benefit)
|
659
|
(146
|
)
|
|||||
Stock compensation expense
|
2,836
|
2,661
|
||||||
Noncash lease income
|
(29
|
)
|
(6
|
)
|
||||
Loss on investments
|
8,989
|
6,258
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
456
|
(2,673
|
)
|
|||||
Inventories
|
(5,146
|
)
|
(27,499
|
)
|
||||
Other current assets
|
3,769
|
(598
|
)
|
|||||
Other assets
|
(4,548
|
)
|
624
|
|||||
Accounts payable
|
2,500
|
7,240
|
||||||
Accrued liabilities and other
|
(1,972
|
)
|
1,359
|
|||||
Net cash provided by operating activities
|
$
|
27,533
|
$
|
7,149
|
||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
$
|
(2,993
|
)
|
$
|
(5,694
|
)
|
||
Restricted cash, MSA escrow deposits
|
-
|
(10,078
|
)
|
|||||
Proceeds on the sale of property, plant and equipment
|
3
|
63
|
||||||
Net cash used in investing activities
|
$
|
(2,990
|
)
|
$
|
(15,709
|
)
|
||
Cash flows from financing activities:
|
||||||||
Repurchased Convertible Senior Notes
|
$
|
(27,357
|
)
|
$
|
-
|
|||
Proceeds from call options
|
70
|
-
|
||||||
Payment of dividends
|
(2,209
|
)
|
(2,181
|
)
|
||||
Exercise of options
|
406
|
475
|
||||||
Redemption of options
|
(346
|
)
|
(155
|
)
|
||||
Redemption of performance restricted stock units
|
(995
|
)
|
(1,228
|
)
|
||||
Common stock repurchased
|
-
|
(19,418
|
)
|
|||||
Net cash used in financing activities
|
$
|
(30,431
|
)
|
$
|
(22,507
|
)
|
||
Net decrease in cash
|
$
|
(5,888
|
)
|
$
|
(31,067
|
)
|
||
Effect of foreign currency translation on cash
|
$
|
(8
|
)
|
$
|
56
|
|||
Cash, beginning of period:
|
||||||||
Unrestricted
|
106,403
|
128,320
|
||||||
Restricted
|
4,929
|
15,155
|
||||||
Total cash at beginning of period
|
111,332
|
143,475
|
||||||
Cash, end of period:
|
||||||||
Unrestricted
|
100,507
|
107,429
|
||||||
Restricted
|
4,929
|
5,035
|
||||||
Total cash at end of period
|
$
|
105,436
|
$
|
112,464
|
|
Three Months Ended
June 30,
|
|||||||
|
||||||||
|
2023
|
2022
|
||||||
Net income attributable to Turning Point Brands, Inc.
|
$
|
9,925
|
$
|
5,424
|
||||
Add:
|
||||||||
Interest expense, net
|
4,019
|
5,144
|
||||||
Gain on extinguishment of debt
|
(600
|
)
|
-
|
|||||
Income tax expense
|
3,338
|
1,569
|
||||||
Depreciation expense
|
759
|
879
|
||||||
Amortization expense
|
771
|
456
|
||||||
EBITDA
|
$
|
18,212
|
$
|
13,472
|
||||
Components of Adjusted EBITDA
|
||||||||
Corporate restructuring (a)
|
-
|
270
|
||||||
ERP/CRM (b)
|
138
|
861
|
||||||
Stock options, restricted stock, and incentives expense (c)
|
2,093
|
1,502
|
||||||
Transactional expenses (d)
|
82
|
364
|
||||||
FDA PMTA (e)
|
662
|
1,957
|
||||||
Non-cash asset impairment (f)
|
4,092
|
6,300
|
||||||
Adjusted EBITDA
|
$
|
25,279
|
$
|
24,726
|
(a)
|
Represents costs associated with corporate restructuring, including severance.
|
(b)
|
Represents cost assosicated 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
("PRSUs").
|
(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 investment assets.
|
(unaudited)
|
Three Months Ended
|
Three Months Ended
|
||||||||||||||
|
June 30, 2023
|
June 30, 2022
|
||||||||||||||
|
Net Income
|
Diluted EPS
|
Net Income
|
Diluted EPS
|
||||||||||||
GAAP EPS
|
$
|
9,925
|
$
|
0.53
|
$
|
5,424
|
$
|
0.30
|
||||||||
Gain on extinguishment of debt (a)
|
(446
|
)
|
(0.02
|
)
|
-
|
-
|
||||||||||
Corporate restructuring (b)
|
-
|
-
|
207
|
0.01
|
||||||||||||
ERP/CRM (c)
|
103
|
0.01
|
662
|
0.03
|
||||||||||||
Stock options, restricted stock, and incentives expense (d)
|
1,557
|
0.08
|
1,154
|
0.05
|
||||||||||||
Transactional expenses (e)
|
61
|
0.00
|
280
|
0.01
|
||||||||||||
FDA PMTA (f)
|
493
|
0.02
|
1,504
|
0.07
|
||||||||||||
Non-cash asset impairment (g)
|
3,045
|
0.15
|
4,841
|
0.23
|
||||||||||||
Tax (expense) benefit (h)
|
560
|
0.03
|
35
|
0.00
|
||||||||||||
Adjusted
|
$
|
15,297
|
$
|
0.79
|
$
|
14,106
|
$
|
0.70
|
(a)
|
Represents gain on extinguishment of debt tax effected at the quarterly tax rate.
|
(b)
|
Represents costs associated with corporate restructuring, including severance, tax effected at the quarterly tax rate.
|
(c)
|
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.
|
(d)
|
Represents non-cash stock options, restricted stock, incentives expense and Solace PRSUs tax effected at the quarterly tax rate.
|
(e)
|
Represents the fees incurred for transaction expenses tax effected at the quarterly tax rate.
|
(f)
|
Represents costs associated with applications related to the FDA PMTA tax effected at the quarterly tax rate.
|
(g)
|
Represents impairment of investment assets tax effected at the quarterly tax rate.
|
(h)
|
Represents adjustment from quarterly tax rate to annual projected tax rate of 23% in 2023 and 2022.
|
|
Consolidated
|
Zig-Zag Products
|
Stoker's Products
|
Creative Distribution Solutions
|
||||||||||||||||||||||||||||
|
2nd Quarter
|
2nd Quarter
|
2nd Quarter
|
2nd Quarter
|
2nd Quarter
|
2nd Quarter
|
2nd Quarter
|
2nd Quarter
|
||||||||||||||||||||||||
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
2023
|
2022
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Net sales
|
$
|
105,595
|
$
|
102,925
|
$
|
46,722
|
$
|
46,226
|
$
|
36,056
|
$
|
33,588
|
$
|
22,817
|
$
|
23,111
|
||||||||||||||||
|
||||||||||||||||||||||||||||||||
Gross profit
|
$
|
52,478
|
$
|
51,469
|
$
|
26,422
|
$
|
26,430
|
$
|
19,968
|
$
|
18,079
|
$
|
6,088
|
$
|
6,960
|
||||||||||||||||
|
||||||||||||||||||||||||||||||||
Operating income
|
$
|
20,545
|
$
|
18,146
|
$
|
17,000
|
$
|
18,503
|
$
|
15,110
|
$
|
13,378
|
$
|
460
|
$
|
552
|
||||||||||||||||
Adjustments:
|
||||||||||||||||||||||||||||||||
Corporate restructuring
|
-
|
270
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
ERP/CRM
|
138
|
861
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
Transactional expenses
|
82
|
364
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
FDA PMTA
|
662
|
1,957
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
Adjusted operating income
|
$
|
21,427
|
$
|
21,598
|
$
|
17,000
|
$
|
18,503
|
$
|
15,110
|
$
|
13,378
|
$
|
460
|
$
|
552
|
10 |
Turning Point Brands, Inc. | www.turningpointbrands.com | ir@tpbi.com | 502.774.9238
|