Turning Point Brands Announces Third Quarter 2022 Results
Turning Point Brands, Inc. (TPB) reported its Q3 2022 financial results, showing a 1.9% decrease in net sales to $107.8 million. The Zig-Zag and Stoker’s products drove a 17.7% increase in sales, while NewGen sales fell 40.3%. Gross profit declined 2.9% to $52.7 million, with net income down 14.3% to $11.5 million. Adjusted EBITDA also decreased 6.7% to $24.5 million. The company adjusted its full-year outlook, anticipating Zig-Zag sales between $186 million and $191 million.
- Zig-Zag net sales increased 23.3% to $52.1 million.
- Stoker’s Products net sales rose 10.0% to $33.5 million.
- Total Zig-Zag product volume increased 21.7%.
- Overall net sales decreased 1.9% to $107.8 million.
- NewGen net sales declined 40.3% to $22.2 million.
- Gross profit fell 2.9% to $52.7 million.
-
Q3 2022 vs. Q3 2021
-
Net sales decreased
1.9% to$107.8 million -
Combined net sales increased
17.7% for Zig-Zag and Stoker’s Products (increased23.3% and10.0% , respectively) -
NewGen net sales declined by
40.3% (declined3.9% sequentially)
-
Combined net sales increased
-
Gross profit decreased
2.9% to$52.7 million -
Net income decreased
14.3% to$11.5 million -
Adjusted EBITDA decreased
6.7% to (see Schedule A for a reconciliation to net income)$24.5 million -
Diluted EPS of
and Adjusted Diluted EPS of$0.60 compared to$0.72 and$0.65 in the same period one year ago, respectively (see Schedule B for a reconciliation to Diluted EPS)$0.72
“Zig-Zag and Stoker’s segments demonstrated strong double-digit growth during the quarter despite a challenging economic backdrop with inflationary pressures continuing to impact consumers. Zig-Zag benefitted from solid growth in the
Zig-Zag Products Segment (
For the third quarter, Zig-Zag Products net sales increased
For the quarter, the Zig-Zag Products segment gross profit increased
“New product offerings such as our paper cones and Zig-Zag’s fast growing alternative channel business continue to drive growth and market outperformance within our
Stoker’s Products Segment (
For the third quarter, Stoker’s Products net sales increased
For the quarter, the Stoker’s Products segment gross profit increased
“Stoker’s market share gains in both the MST and loose-leaf chewing tobacco categories continued during the quarter,” continued Purdy. “Stoker’s remains well-positioned within its categories as a leading value brand which we believe is helping drive sales due to consumer downtrading in the current economic environment. Our outlook for our MST business remains solid driven by continued growth in in-store market share, distribution gains, and favorable category pricing.”
NewGen Products Segment (
For the third quarter, NewGen Products net sales decreased
For the quarter, NewGen Products segment gross profit decreased
“The NewGen Products business had another challenging quarter but remained profitable as we await developments from the FDA on the PMTA process,” concluded Purdy.
Performance Measures in the Third Quarter
Third quarter consolidated selling, general and administrative (“SG&A”) expenses were
The third quarter SG&A included the following notable items:
-
of ERP / CRM scoping expenses and duplicative system costs compared to none in the previous year$0.4 million -
of stock options, restricted stock and incentive expense compared to$1.4 million in the year-ago period$1.8 million -
of FDA PMTA-related expenses compared to$1.2 million in the year-ago period$1.0 million -
Turning Point Brands Canada compared to$2.3 million in the year-ago period$1.5
Total gross debt as of
During the quarter, the Company spent
2022 Outlook
As previously disclosed in our
-
Zig-Zag Products sales of
to$186 (compared to previous outlook of$191 million to$193 )$200 million -
Stoker's Products sales of
to$128 (compared to previous outlook of$132 million to$127 )$133 million -
Consolidated adjusted EBITDA of
to$96 (compared to previous outlook of$99 million to$97 )$103 million
Earnings Conference Call
As previously disclosed, a conference call with the investment community to review TPB’s financial results has been scheduled for
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with generally accepted accounting principles in
About
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
Financial Statements Follow:
|
|||||||
Consolidated Statements of Income |
|||||||
(dollars in thousands except share data) |
|||||||
(unaudited) |
|||||||
Three Months Ended |
|||||||
2022 |
2021 |
||||||
Net sales | $ |
107,802 |
|
$ |
109,904 |
|
|
Cost of sales |
|
55,090 |
|
|
55,635 |
|
|
Gross profit |
|
52,712 |
|
|
54,269 |
|
|
Selling, general, and administrative expenses |
|
32,891 |
|
|
31,894 |
|
|
Operating income |
|
19,821 |
|
|
22,375 |
|
|
Interest expense, net |
|
4,802 |
|
|
5,397 |
|
|
Investment income |
|
(75 |
) |
|
(157 |
) |
|
Gain on extinguishment of debt |
|
- |
|
|
(375 |
) |
|
Income before income taxes |
|
15,094 |
|
|
17,510 |
|
|
Income tax expense |
|
3,797 |
|
|
4,073 |
|
|
Consolidated net income |
|
11,297 |
|
|
13,437 |
|
|
Net loss attributable to non-controlling interest |
|
(239 |
) |
|
(31 |
) |
|
Net income attributable to |
$ |
11,536 |
|
$ |
13,468 |
|
|
Basic income per common share: | |||||||
Net income attributable to |
$ |
0.65 |
|
$ |
0.71 |
|
|
Diluted income per common share: | |||||||
Net income attributable to |
$ |
0.60 |
|
$ |
0.65 |
|
|
Weighted average common shares outstanding: | |||||||
Basic |
|
17,749,294 |
|
|
18,897,974 |
|
|
Diluted |
|
21,102,006 |
|
|
22,364,807 |
|
|
Supplemental disclosures of statements of income information: | |||||||
Excise tax expense | $ |
5,747 |
|
$ |
6,040 |
|
|
FDA fees | $ |
170 |
|
$ |
163 |
|
Consolidated Balance Sheets | |||||||
(dollars in thousands except share data) | |||||||
(unaudited) | |||||||
ASSETS | 2022 |
2021 |
|||||
Current assets: | |||||||
Cash | $ |
105,672 |
|
$ |
128,320 |
|
|
Accounts receivable, net of allowances of |
|
11,453 |
|
|
6,496 |
|
|
Inventories |
|
113,928 |
|
|
87,607 |
|
|
Other current assets |
|
24,729 |
|
|
26,746 |
|
|
Total current assets |
|
255,782 |
|
|
249,169 |
|
|
Property, plant, and equipment, net |
|
22,512 |
|
|
18,650 |
|
|
Deferred income taxes |
|
2,795 |
|
|
1,363 |
|
|
Right of use assets |
|
13,185 |
|
|
15,053 |
|
|
Deferred financing costs, net |
|
309 |
|
|
388 |
|
|
|
162,120 |
|
|
162,333 |
|
||
Other intangible assets, net |
|
86,112 |
|
|
87,485 |
|
|
Master Settlement Agreement (MSA) escrow deposits |
|
27,845 |
|
|
31,720 |
|
|
Other assets |
|
29,129 |
|
|
35,399 |
|
|
Total assets | $ |
599,789 |
|
$ |
601,560 |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ |
9,247 |
|
$ |
7,361 |
|
|
Accrued liabilities |
|
32,613 |
|
|
32,937 |
|
|
Other current liabilities |
|
21 |
|
|
38 |
|
|
Total current liabilities |
|
41,881 |
|
|
40,336 |
|
|
Notes payable and long-term debt |
|
416,029 |
|
|
414,172 |
|
|
Lease liabilities |
|
11,299 |
|
|
13,336 |
|
|
Total liabilities |
|
469,209 |
|
|
467,844 |
|
|
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Preferred stock; |
|
- |
|
|
- |
|
|
Common stock, voting, |
|
198 |
|
|
197 |
|
|
Common stock, nonvoting, |
|
- |
|
|
- |
|
|
Additional paid-in capital |
|
112,034 |
|
|
108,811 |
|
|
Cost of repurchased common stock (2,214,501 shares at |
|
(75,901 |
) |
|
(48,869 |
) |
|
Accumulated other comprehensive loss |
|
(3,424 |
) |
|
(195 |
) |
|
Accumulated earnings |
|
96,088 |
|
|
71,460 |
|
|
Non-controlling interest |
|
1,585 |
|
|
2,312 |
|
|
Total stockholders' equity |
|
130,580 |
|
|
133,716 |
|
|
Total liabilities and stockholders' equity |
$ |
599,789 |
|
$ |
601,560 |
|
Consolidated Statements of Cash Flows | |||||||
(dollars in thousands) | |||||||
(unaudited) | |||||||
Nine Months Ended |
|||||||
2022 |
|
2021 |
|||||
Cash flows from operating activities: | |||||||
Consolidated net income | $ |
27,274 |
|
$ |
40,007 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Loss on extinguishment of debt |
|
- |
|
|
5,331 |
|
|
Gain on sale of property, plant, and equipment |
|
(8 |
) |
|
(2 |
) |
|
Depreciation expense |
|
2,611 |
|
|
2,313 |
|
|
Amortization of other intangible assets |
|
1,373 |
|
|
1,431 |
|
|
Amortization of deferred financing costs |
|
1,936 |
|
|
1,895 |
|
|
Deferred income tax (benefit) expense |
|
(431 |
) |
|
1,528 |
|
|
Stock compensation expense |
|
4,103 |
|
|
6,015 |
|
|
Noncash lease income |
|
- |
|
|
(49 |
) |
|
Loss (gain) on investments |
|
6,244 |
|
|
(144 |
) |
|
Changes in operating assets and liabilities: | |||||||
Accounts receivable |
|
(5,030 |
) |
|
1,324 |
|
|
Inventories |
|
(26,467 |
) |
|
(10,970 |
) |
|
Other current assets |
|
1,891 |
|
|
(491 |
) |
|
Other assets |
|
1,211 |
|
|
685 |
|
|
Accounts payable |
|
2,074 |
|
|
3,488 |
|
|
Accrued liabilities and other |
|
(392 |
) |
|
(2,796 |
) |
|
Net cash provided by operating activities | $ |
16,389 |
|
$ |
49,565 |
|
|
Cash flows from investing activities: | |||||||
Capital expenditures | $ |
(6,662 |
) |
$ |
(4,391 |
) |
|
Acquisitions, net of cash acquired |
|
- |
|
|
(16,416 |
) |
|
Payments for investments |
|
(1,000 |
) |
|
(16,657 |
) |
|
Restricted cash, MSA escrow deposits |
|
(10,169 |
) |
|
(14,783 |
) |
|
Proceeds on the sale of property, plant and equipment |
|
63 |
|
|
2 |
|
|
Net cash used in investing activities | $ |
(17,768 |
) |
$ |
(52,245 |
) |
|
Cash flows from financing activities: | |||||||
Proceeds from Senior Secured Notes | $ |
- |
|
$ |
250,000 |
|
|
Payments of 2018 first lien term loan |
|
- |
|
|
(130,000 |
) |
|
Settlement of interest rate swaps |
|
- |
|
|
(3,573 |
) |
|
Payment of promissory note |
|
- |
|
|
(9,625 |
) |
|
Payment of dividends |
|
(3,259 |
) |
|
(3,056 |
) |
|
Payments of financing costs |
|
- |
|
|
(6,921 |
) |
|
Exercise of options |
|
504 |
|
|
2,071 |
|
|
Redemption of options |
|
(155 |
) |
|
(2,111 |
) |
|
Redemption of stock units |
|
(1,228 |
) |
|
- |
|
|
Common stock repurchased |
|
(27,032 |
) |
|
(20,481 |
) |
|
Net cash (used in) provided by financing activities | $ |
(31,170 |
) |
$ |
76,304 |
|
|
Net (decrease) increase in cash | $ |
(32,549 |
) |
$ |
73,624 |
|
|
Effect of foreign currency translation on cash | $ |
(324 |
) |
$ |
235 |
|
|
Cash, beginning of period: | |||||||
Unrestricted |
|
128,320 |
|
|
41,765 |
|
|
Restricted |
|
15,155 |
|
|
35,074 |
|
|
Total cash at beginning of period |
|
143,475 |
|
|
76,839 |
|
|
Cash, end of period: | |||||||
Unrestricted |
|
105,672 |
|
|
130,551 |
|
|
Restricted |
|
4,930 |
|
|
20,147 |
|
|
Total cash at end of period | $ |
110,602 |
|
$ |
150,698 |
|
Non-GAAP Financial Measures
To supplement our financial information presented in accordance with generally accepted accounting principles in
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 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 Operating Income” as operating income excluding other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance.
Non-
In accordance with
Schedule A | ||||||
Reconciliation of GAAP Net Income to Adjusted EBITDA | ||||||
(dollars in thousands) | ||||||
(unaudited) | ||||||
Three Months Ended |
||||||
|
||||||
2022 |
|
2021 |
||||
Net income attributable to |
$ |
11,536 |
$ |
13,468 |
|
|
Add: | ||||||
Interest expense, net |
|
4,802 |
|
5,397 |
|
|
Gain on extinguishment of debt |
|
- |
|
(375 |
) |
|
Income tax expense |
|
3,797 |
|
4,073 |
|
|
Depreciation expense |
|
861 |
|
767 |
|
|
Amortization expense |
|
454 |
|
477 |
|
|
EBITDA | $ |
21,450 |
$ |
23,807 |
|
|
Components of Adjusted EBITDA | ||||||
Corporate restructuring (a) |
|
17 |
|
- |
|
|
ERP/CRM (b) |
|
435 |
|
- |
|
|
Stock options, restricted stock, and incentives expense (c) |
|
1,442 |
|
1,752 |
|
|
Transactional expenses (d) |
|
- |
|
(232 |
) |
|
FDA PMTA (e) |
|
1,169 |
|
960 |
|
|
Adjusted EBITDA | $ |
24,513 |
$ |
26,287 |
|
|
(a) Represents costs associated with corporate 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"). |
Schedule B | ||||||
Reconciliation of GAAP diluted EPS to Adjusted diluted EPS | ||||||
(dollars in thousands except share data) | ||||||
(unaudited) | ||||||
Three Months Ended |
||||||
|
||||||
2022 |
|
2021 |
||||
GAAP EPS | $ |
0.60 |
$ |
0.65 |
|
|
Gain on extinguishment of debt (a) |
|
- |
|
(0.01 |
) |
|
Corporate restructuring (b) |
|
0.00 |
|
- |
|
|
ERP/CRM (c) |
|
0.02 |
|
- |
|
|
Stock options, restricted stock, and incentives expense (d) |
|
0.05 |
|
0.06 |
|
|
Transactional expenses (e) |
|
- |
|
(0.01 |
) |
|
FDA PMTA (f) |
|
0.04 |
|
0.03 |
|
|
Tax (expense) benefit (g) |
|
0.01 |
|
0.00 |
|
|
Adjusted diluted EPS | $ |
0.72 |
$ |
0.72 |
|
|
Totals may not foot due to rounding |
(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 adjustment from quarterly tax rate to annual projected tax rate of |
Schedule C | ||||||||||||||||||||||||
Reconciliation of GAAP Operating Income to Adjusted Operating Income | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Consolidated |
|
Zig-Zag Products |
|
Stoker's Products |
|
NewGen Products |
||||||||||||||||||
3rd Quarter |
|
3rd Quarter |
|
3rd Quarter |
|
3rd Quarter |
|
3rd Quarter |
|
3rd Quarter |
|
3rd Quarter |
|
3rd Quarter |
||||||||||
2022 |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||||
Net sales | $ |
107,802 |
$ |
109,904 |
|
$ |
52,061 |
$ |
42,234 |
$ |
33,525 |
$ |
30,472 |
$ |
22,216 |
$ |
37,198 |
|||||||
Gross profit | $ |
52,712 |
$ |
54,269 |
|
$ |
28,035 |
$ |
23,703 |
$ |
18,279 |
$ |
17,104 |
$ |
6,398 |
$ |
13,462 |
|||||||
Operating income | $ |
19,821 |
$ |
22,375 |
|
$ |
18,740 |
$ |
17,122 |
$ |
13,653 |
$ |
13,305 |
$ |
142 |
$ |
2,027 |
|||||||
Adjustments: | ||||||||||||||||||||||||
Corporate restructuring |
|
17 |
|
- |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|||||||
ERP/CRM |
|
435 |
|
- |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|||||||||
Transactional expenses |
|
- |
|
(232 |
) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|||||||
FDA PMTA |
|
1,169 |
|
960 |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|||||||
Adjusted operating income | $ |
21,442 |
$ |
23,103 |
|
$ |
18,740 |
$ |
17,122 |
$ |
13,653 |
$ |
13,305 |
$ |
142 |
$ |
2,027 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20221026005212/en/
Investor Contacts
502.774.9238
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Source:
FAQ
What were the financial results for TPB in Q3 2022?
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