Standard Diversified Inc. (the “Company”) (NYSE American: SDI) today announced its financial results for the third quarter and nine months ended September 30, 2019. In addition to its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission, the Company will also make available an updated Investor Presentation on its corporate website at www.standarddiversified.com.
2019 Third Quarter Highlights
- Total revenues increased 13.6% to $104.1 million as a result of strong growth at Turning Point Brands, Inc. (NYSE: TPB) (“TPB”)
- Net income attributable to SDI was $0.2 million, or $0.01 per diluted share
2019 Nine Month Highlights
- Total revenues increased 16.3% to $305.8 million as a result of strong growth at TPB
- Net loss attributable to SDI was $2.3 million, or $0.14 per diluted share
Operating Events
- In its third quarter 2019 press release (Turning Point Brands - 2019 Third Quarter Financial Results), TPB presented strong quarterly results in the smokeless and smoking segments, producing overall increases (as compared to the same quarter last year) in net sales, gross profit, net income and adjusted EBITDA, all despite the impact of negative vaping headlines and the resulting decline in its third-party vaping distribution.
- TPB is reviewing strategic alternatives for the third-party vaping distribution business, including a continuing effort to repurpose its infrastructure to support proprietary CBD sales, which continue to grow month over month. Additionally, in an attempt to mitigate the impact of declines in third-party vaping distribution, TPB will accelerate its SG&A cost reduction plans which are expected to deliver $8-10 million of annualized savings.
- During the nine months ended September 30, 2019, the Company recorded impairment charges of $0.8 million and $2.0 million related to the full impairment of the goodwill and intangible asset balances, respectively, in its insurance company, Maidstone Insurance Company (“Maidstone”). During the quarter ended September 30, 2019, the Company provided the New York State Department of Financial Services (“NYSDFS”) its consent to the filing of a petition for the Entry of an Order of Liquidation and the Company is now awaiting the filing by the NYSDFS in the Supreme Court of the State of New York. Once the Order of Liquidation is entered by the Supreme Court of the State of New York, the Company shall be relieved of the assets and liabilities of Maidstone.
Corporate Headquarters Relocation
The Company relocated its corporate headquarters, effective September 2, 2019, to 767 5th Ave, 12th FL, New York NY 10153.
About Standard Diversified Inc.
Standard Diversified Inc. is a holding company that owns and operates subsidiaries in a variety of industries, including other tobacco products, outdoor advertising and insurance. For more information about the Company, please visit the Company’s website at www.standarddiversified.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, are forward-looking statements. These forward-looking statements address, among other things activities, events or developments that the Company expects, believes or anticipates will or may occur in the future. These forward-looking statements are subject to a number of risks that could cause actual results to differ materially from those contained in the forward-looking statements, including those risks described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Except as required by law, the Company assumes no obligation to update publicly any such forward-looking statements.
Standard Diversified Inc. and Subsidiaries | ||||||||||||||||
Consolidated Statements of Income (Loss) | ||||||||||||||||
(dollars in thousands except share and per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
| Revenues: | ||||||||||||||||
| Net sales | $ | 97,520 | $ | 84,035 | $ | 283,882 | $ | 240,156 | ||||||||
| Insurance premiums earned | 6,055 | 7,088 | 20,362 | 21,539 | ||||||||||||
| Net investment income | 210 | 309 | 767 | 679 | ||||||||||||
| Other income | 279 | 163 | 829 | 557 | ||||||||||||
| Total revenues | 104,064 | 91,595 | 305,840 | 262,931 | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Cost of sales | 54,636 | 47,742 | 159,217 | 136,147 | ||||||||||||
| Selling, general and administrative expenses | 31,024 | 24,492 | 84,201 | 70,237 | ||||||||||||
| Incurred losses and loss adjustment expenses | 4,790 | 5,790 | 20,506 | 17,007 | ||||||||||||
| Impairment loss on goodwill and other intangible assets | - | - | 2,826 | - | ||||||||||||
| Other operating expenses | 2,003 | 2,682 | 7,248 | 5,512 | ||||||||||||
| Total operating costs and expenses | 92,453 | 80,706 | 273,998 | 228,903 | ||||||||||||
| Operating income | 11,611 | 10,889 | 31,842 | 34,028 | ||||||||||||
| Interest expense, net | 4,680 | 4,450 | 13,529 | 12,556 | ||||||||||||
| Interest and investment income | (777 | ) | (243 | ) | (1,115 | ) | (620 | ) | ||||||||
| Loss on extinguishment of debt | 2,117 | - | 2,267 | 2,384 | ||||||||||||
| Net periodic benefit (income) expense, excluding service cost | (12 | ) | (45 | ) | (34 | ) | 176 | |||||||||
| Income before income taxes | 5,603 | 6,727 | 17,195 | 19,532 | ||||||||||||
| Income tax expense | 2,236 | 1,436 | 6,569 | 4,153 | ||||||||||||
| Net income | 3,367 | 5,291 | 10,626 | 15,379 | ||||||||||||
| Net income attributable to noncontrolling interests | (3,133 | ) | (3,924 | ) | (12,973 | ) | (9,962 | ) | ||||||||
| Net income (loss) attributable to Standard Diversified Inc. | $ | 234 | $ | 1,367 | $ | (2,347 | ) | $ | 5,417 | |||||||
| Net income (loss) attributable to SDI per Class A and Class B Common Share – Basic | $ | 0.01 | $ | 0.08 | $ | (0.14 | ) | $ | 0.33 | |||||||
| Net income (loss) attributable to SDI per Class A and Class B Common Share – Diluted | $ | 0.01 | $ | 0.08 | $ | (0.14 | ) | $ | 0.31 | |||||||
| Weighted Average Class A and Class B Common Shares Outstanding – Basic | 16,830,132 | 16,677,412 | 16,816,158 | 16,618,823 | ||||||||||||
| Weighted Average Class A and Class B Common Shares Outstanding – Diluted | 16,877,690 | 16,741,660 | 16,816,158 | 16,661,809 | ||||||||||||
Standard Diversified Inc. and Subsidiaries | |||||||||
Consolidated Balance Sheets | |||||||||
(dollars in thousands except share and per share data) | |||||||||
September 30, | December 31, | ||||||||
2019 | 2018 | ||||||||
(Unaudited) |
|
| |||||||
| ASSETS | |||||||||
| Cash and cash equivalents | $ | 97,347 | $ | 21,201 | |||||
| Fixed maturities available for sale, at fair value; amortized cost of $26,241 in 2019 and $32,474 in 2018 | 26,566 | 32,132 | |||||||
| Equity securities, at fair value; cost: $1,099 in 2019 and $794 in 2018 | 1,115 | 693 | |||||||
| Trade accounts receivable, net of allowances of $63 in 2019 and $44 in 2018 | 7,276 | 2,901 | |||||||
| Premiums receivable | 3,566 | 5,858 | |||||||
| Inventories | 98,719 | 91,237 | |||||||
| Other current assets | 16,401 | 15,045 | |||||||
| Property, plant and equipment, net | 29,759 | 27,741 | |||||||
| Deferred income taxes | 2,242 | - | |||||||
| Right of use assets | 13,755 | - | |||||||
| Deferred financing costs, net | 960 | 870 | |||||||
| Intangible assets, net | 33,180 | 38,325 | |||||||
| Deferred policy acquisition costs | 1,468 | 2,279 | |||||||
| Goodwill | 154,479 | 146,696 | |||||||
| Master Settlement Agreement (MSA) escrow deposits | 32,074 | 30,550 | |||||||
| Other assets | 6,891 | 6,415 | |||||||
| Total assets | $ | 525,798 | $ | 421,943 | |||||
| LIABILITIES AND EQUITY | |||||||||
| Reserves for losses and loss adjustment expenses | $ | 26,432 | $ | 27,330 | |||||
| Unearned premiums | 8,370 | 12,707 | |||||||
| Advance premiums collected | 326 | 500 | |||||||
| Accounts payable | 9,498 | 9,225 | |||||||
| Accrued liabilities | 21,571 | 23,883 | |||||||
| Current portion of long-term debt | 15,958 | 9,431 | |||||||
| Revolving credit facility | - | 26,000 | |||||||
| Notes payable and long-term debt | 330,150 | 208,616 | |||||||
| Lease liabilities | 12,280 | - | |||||||
| Deferred income taxes | - | 2,711 | |||||||
| Postretirement benefits | 3,096 | 3,096 | |||||||
| Asset retirement obligations | 2,100 | 2,028 | |||||||
| Other long-term liabilities | 3,554 | 1,687 | |||||||
| Total liabilities | 433,335 | 327,214 | |||||||
| Commitments and contingencies | |||||||||
| Equity: | |||||||||
| Preferred stock, $0.01 par value; authorized shares 50,000,000; -0- issued and outstanding shares | - | - | |||||||
| Class A common stock, $0.01 par value; authorized shares, 300,000,000; 9,036,095 issued and 9,029,479 outstanding at September 30, 2019 and 9,156,293 issued and 9,052,801 outstanding at December 31, 2018 | 90 | 92 | |||||||
| Class B common stock, $0.01 par value; authorized shares, 30,000,000; 7,722,564 and 7,801,995 issued and outstanding at September 30, 2019 and December 31, 2018, respectively; convertible into Class A shares on a one-for-one basis | 77 | 78 | |||||||
| Additional paid-in capital | 72,955 | 81,260 | |||||||
| Class A treasury stock, 6,616 and 103,492 common shares at cost as of September 30, 2019 and December 31, 2018, respectively | (70 | ) | (1,440 | ) | |||||
| Accumulated other comprehensive loss | (1,243 | ) | (1,683 | ) | |||||
| Accumulated deficit | (26,960 | ) | (24,613 | ) | |||||
| Total stockholders' equity | 44,849 | 53,694 | |||||||
| Noncontrolling interests | 47,614 | 41,035 | |||||||
| Total equity | 92,463 | 94,729 | |||||||
| Total liabilities and equity | $ | 525,798 | $ | 421,943 | |||||
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