Turning Point Brands Announces Fourth Quarter and Full Year 2023 Results

February 28, 2024

-Net Sales for Q4 2023 Zig-Zag and Stoker’s Products Increased 5.9 Percent Year-Over-Year

-Adjusted EBITDA for Q4 2023 of $24.8 Million Increased 7.5 Percent Year-Over-Year

-FY 2023 Free Cash Flow of $61.2 Million

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, 2023.

Q4 2023 vs. Q4 2022

  • Total consolidated net sales decreased 6.1% to $97.1 million
    • Zig-Zag Products net sales decreased by 2.9%
    • Stoker’s Products net sales increased by 18.6%
    • Creative Distribution Solutions net sales decreased by 43.7%
  • Gross profit increased 1.9% to $50.5 million
  • Net income increased $26.4 million to $10.1 million
  • Adjusted net income increased 15.9% to $15.3 million (see Schedule B for a reconciliation to net income)
  • Adjusted EBITDA increased 7.5% to $24.8 million (see Schedule A for a reconciliation to net income)
  • Diluted EPS of $0.53 and Adjusted Diluted EPS of $0.79 compared to $(0.93) and $0.69 in the same period one year ago, respectively (see Schedule B for a reconciliation to Diluted EPS)

FY 2023 vs. FY 2022

  • Total consolidated net sales decreased 2.3% to $405.4 million
    • Zig-Zag Products net sales decreased by 5.2%
    • Stoker’s Products net sales increased by 10.5%
    • Creative Distribution Solutions net sales decreased by 14.3%
  • Gross profit decreased 1.1% to $203.2 million
  • Net income increased 230.4% to $38.5 million
  • Adjusted net income increased 1.1% to $56.8 million (see Schedule B for a reconciliation to net income)
  • Adjusted EBITDA decreased 2.4% to $95.3 million (see Schedule A for a reconciliation to net income)
  • Diluted EPS of $2.01 and Adjusted Diluted EPS of $2.91 compared to $0.64 and $2.83 in the same period one year ago, respectively (see Schedule B for a reconciliation to Diluted EPS)

Graham Purdy, President and CEO, commented: “Our fourth quarter results were at the high-end of our expectations. The Zig-Zag segment was stable from the previous year excluding the impact of a discontinued product line and is well positioned to return to growth in 2024. Stoker’s had an outstanding quarter posting its highest growth rate in over four years led by double-digit growth year-over-year in Stoker’s MST. We also had strong free cash flow generation during the year allowing us to build a cash balance to address the remaining principal amount of our convertible notes at maturity in July. Our outlook for 2024 is positive as we expect solid growth in our Zig-Zag and Stoker’s Products businesses.”

Zig-Zag Products Segment (46% of total net sales in the quarter)

For the fourth quarter, Zig-Zag Products net sales decreased 2.9% to $45.1 million due to the discontinuation of an unprofitable product line in Canada that impacted sales by $1.4 million.

For the quarter, the Zig-Zag Products segment gross profit decreased 1.0% to $25.5 million. Gross margin increased 100 basis points to 56.5% driven by product mix.

For the full year, net sales of Zig-Zag Products decreased 5.2% to $180.5 million due to the reduction of trade inventory earlier in the year and the discontinuation of an unprofitable product line in Canada that impacted sales by $4.9 million.

For the full year, Zig-Zag Products segment gross profit decreased 5.2% to $101.1 million. Gross margin was steady at 56.0%.

“Our US Zig-Zag papers and alternative channel business posted a strong quarter with double-digit growth to close the year,” said Purdy. “With the reduction of trade inventory through the year, Zig-Zag is now positioned to return to growth aided by industry secular growth trends and internal growth initiatives.”

Stoker’s Products Segment (39% of total net sales in the quarter)

For the fourth quarter, Stoker’s Products net sales increased 18.6% to $38.0 million on double-digit growth of MST and high-single-digit growth of loose-leaf. For the fourth quarter, total Stoker’s Products segment volume increased 14.2%, while price / mix increased 4.4%.

For the quarter, the Stoker’s Products segment gross profit increased 27.2% to $21.9 million. Gross margin expanded 380 basis points to 57.6% due to MST pricing gains and operating leverage.

For the full year, net sales of Stoker’s Products increased 10.5% to $144.6 million on double-digit growth of MST and low-single-digit growth of loose-leaf. For the full year, total Stoker’s Products segment volume increased 4.2%, while price / mix increased 6.3%.

For the full year, the Stoker’s Products segment gross profit increased 14.9% to $81.9 million. Gross margin increased 210 basis points to 56.6% due to MST pricing gains.

“Stoker’s had an exceptional quarter with strong market share gains in both the MST and loose-leaf categories as its value proposition continues to resonate with consumers,” continued Purdy. “We are excited about the planned expansion of our FRĒ white nicotine pouch product throughout the year.”

Performance Measures in the Fourth Quarter

Fourth quarter consolidated selling, general and administrative (“SG&A”) expenses were $30.9 million compared to $31.2 million in the fourth quarter of 2022.

Fourth quarter SG&A included the following notable items:

  • $1.9 million of stock options, restricted stock and incentive expense compared to $1.2 million in the year-ago period
  • $1.0 million of FDA PMTA-related expenses for modern oral products compared to $0.3 million in the year-ago period
  • $0.2 million of restructuring costs compared to $1.8 million in the year-ago period
  • $0.1 million of ERP / CRM duplicative system costs compared to $0.3 million of ERP / CRM scoping expenses in the year-ago period

Total gross debt as of December 31, 2023 was $368.5 million. Net debt (total gross debt less unrestricted cash) at December 31, 2023 was $250.7 million. The Company ended the quarter with total liquidity of $177.9 million, comprised of $117.9 million in cash and $60.0 million of revolving credit facility capacity.

During the quarter, the Company received a net federal excise tax refund of $4.3 million, which is included in other operating income and $0.8 million of interest income related to the refund, which is included in net interest expense. The Company also recorded $4.0 million in other income related to a legal settlement receivable and a $1.0 million impairment of a minority investment in a development stage venture.

2024 Outlook

Management expects full-year 2024 adjusted EBITDA to be $95 to $100 million. This excludes any contribution from our CDS business which contributed a little over $2 million of EBITDA in FY 2023.

Creative Distribution Solutions (“CDS”) (15% of total net sales in the quarter)

For the fourth quarter, CDS net sales were $14.1 million, gross profit was $3.1 million, and gross margin was 22.4%.

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 Wednesday, February 28, 2024. 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, Adjusted Operating Income (Loss) and Free Cash Flow. 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. TPB’s products are available in more than 215,000 retail outlets in North America, and on sites such as www.zigzag.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,

 

2023

 

 

 

2022

 

Net sales

$

97,120

 

$

103,392

 

Cost of sales

 

46,596

 

 

53,829

 

Gross profit

 

50,524

 

 

49,563

 

Selling, general, and administrative expenses

 

30,916

 

 

31,245

 

Other operating income, net

 

(4,345

)

 

-

 

Operating income

 

23,953

 

 

18,318

 

Interest expense, net

 

2,632

 

 

4,382

 

Investment loss

 

934

 

 

7,229

 

Other income

 

(4,000

)

 

-

 

Goodwill and intangible impairment loss

 

-

 

 

27,566

 

Loss (gain) on extinguishment of debt

 

194

 

 

(885

)

Income (loss) before income taxes

 

24,193

 

 

(19,974

)

Income tax expense (benefit)

 

14,328

 

 

(3,857

)

Consolidated net income (loss)

 

9,865

 

 

(16,117

)

Net (loss) income attributable to non-controlling interest

 

(244

)

 

200

 

Net income (loss) attributable to Turning Point Brands, Inc.

$

10,109

 

$

(16,317

)

 
Basic income (loss) per common share:
Net income (loss) attributable to Turning Point Brands, Inc.

$

0.57

 

$

(0.93

)

Diluted income (loss) per common share:
Net income (loss) attributable to Turning Point Brands, Inc.

$

0.53

 

$

(0.93

)

Weighted average common shares outstanding:
Basic

 

17,604,313

 

 

17,530,278

 

Diluted

 

20,153,157

 

 

17,530,278

 

 
Supplemental disclosures of statement of income information:
Excise tax expense

$

5,137

 

$

5,771

 

FDA fees

$

138

 

$

158

 

Turning Point Brands, Inc.
Consolidated Statements of Income
(dollars in thousands except share data)
(unaudited)

For the year ended

December 31,

 

2023

 

 

 

2022

 

Net sales

$

405,393

 

$

415,013

 

Cost of sales

 

202,152

 

 

209,475

 

Gross profit

 

203,241

 

 

205,538

 

Selling, general, and administrative expenses

 

125,009

 

 

130,024

 

Other operating income, net

 

(4,345

)

 

-

 

Operating income

 

82,577

 

 

75,514

 

Interest expense, net

 

14,645

 

 

19,524

 

Investment loss

 

11,914

 

 

13,303

 

Other income

 

(4,000

)

 

-

 

Goodwill and intangible impairment loss

 

-

 

 

27,566

 

Gain on extinguishment of debt

 

(1,664

)

 

(885

)

Income before income taxes

 

61,682

 

 

16,006

 

Income tax expense

 

23,901

 

 

4,849

 

Consolidated net income

 

37,781

 

 

11,157

 

Net loss attributable to non-controlling interest

 

(681

)

 

(484

)

Net income attributable to Turning Point Brands, Inc.

$

38,462

 

$

11,641

 

 
Basic income per common share:
Net income attributable to Turning Point Brands, Inc.

$

2.19

 

$

0.65

 

Diluted income per common share:
Net income attributable to Turning Point Brands, Inc.

$

2.01

 

$

0.64

 

Weighted average common shares outstanding:
Basic

 

17,578,270

 

 

17,899,794

 

Diluted

 

20,467,406

 

 

18,055,015

 

 
Supplemental disclosures of statement of income information:
Excise tax expense

$

20,575

 

$

23,274

 

FDA fees

$

586

 

$

623

 

Turning Point Brands, Inc.
Consolidated Balance Sheets
(dollars in thousands except share data)
(unaudited)

December 31,

ASSETS

 

2023

 

 

 

2022

 

Current assets:
Cash

$

117,886

 

$

106,403

 

Accounts receivable, net of allowances of $78 in 2023 and $114 in 2022

 

9,989

 

 

8,377

 

Inventories, net

 

98,960

 

 

119,915

 

Other current assets

 

40,781

 

 

22,959

 

Total current assets

 

267,616

 

 

257,654

 

Property, plant, and equipment, net

 

25,300

 

 

22,788

 

Deferred income taxes

 

1,468

 

 

8,443

 

Right of use assets

 

11,480

 

 

12,465

 

Deferred financing costs, net

 

2,450

 

 

282

 

Goodwill

 

136,250

 

 

136,253

 

Other intangible assets, net

 

80,942

 

 

83,592

 

Master Settlement Agreement (MSA) escrow deposits

 

28,684

 

 

27,980

 

Other assets

 

15,166

 

 

22,649

 

Total assets

$

569,356

 

$

572,106

 

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

8,407

 

$

8,355

 

Accrued liabilities

 

33,635

 

 

33,001

 

Current portion of long-term debt, net

 

58,294

 

 

-

 

Other current liabilities

 

-

 

 

20

 

Total current liabilities

 

100,336

 

 

41,376

 

Notes payable and long-term debt

 

307,064

 

 

406,757

 

Lease liabilities

 

9,950

 

 

10,593

 

Total liabilities

 

417,350

 

 

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; 19,922,137 issued shares,
17,605,677 outstanding shares at December 31, 2023, and 19,801,623 issued shares, 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

 

119,075

 

 

113,242

 

Cost of repurchased common stock
(2,316,460 shares at December 31, 2023 and 2022)

 

(78,093

)

 

(78,093

)

Accumulated other comprehensive loss

 

(2,648

)

 

(2,393

)

Accumulated earnings

 

112,443

 

 

78,691

 

Non-controlling interest

 

1,030

 

 

1,735

 

Total stockholders' equity

 

152,006

 

 

113,380

 

Total liabilities and stockholders' equity

$

569,356

 

$

572,106

 

Turning Point Brands, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)

For the Year Ended

December 31,

 

2023

 

 

 

2022

 

Cash flows from operating activities:
Consolidated net income

$

37,781

 

$

11,157

 

Adjustments to reconcile net income to net cash provided by operating activities:
Gain on extinguishment of debt

 

(1,664

)

 

(885

)

Loss (gain) on sale of property, plant, and equipment

 

90

 

 

(9

)

Loss on goodwill impairment

 

-

 

 

25,585

 

Loss on intangible asset impairment

 

-

 

 

1,982

 

Gain on insurance recovery of inventory loss

 

(15,181

)

 

-

 

Loss on investments

 

12,177

 

 

13,570

 

Depreciation and other amortization expense

 

3,262

 

 

3,388

 

Amortization of other intangible assets

 

3,096

 

 

1,911

 

Amortization of deferred financing costs

 

2,445

 

 

2,576

 

Deferred income tax expense (benefit)

 

7,024

 

 

(6,506

)

Stock compensation expense

 

6,561

 

 

5,273

 

Noncash lease income

 

(82

)

 

(29

)

Gain on MSA escrow deposits

 

-

 

 

(54

)

Changes in operating assets and liabilities:
Accounts receivable

 

(1,609

)

 

(2,103

)

Inventories

 

20,977

 

 

(32,653

)

Other current assets

 

(3,533

)

 

4,581

 

Other assets

 

(4,835

)

 

420

 

Accounts payable

 

(14

)

 

1,240

 

Accrued liabilities and other

 

386

 

 

830

 

Net cash provided by operating activities

 

66,881

 

 

30,273

 

 
Cash flows from investing activities:
Capital expenditures

$

(5,707

)

$

(7,685

)

Payments for investments

 

(202

)

 

(1,000

)

Restricted cash, MSA escrow deposits

 

-

 

 

(10,170

)

Proceeds on the sale of property, plant and equipment

 

3

 

 

62

 

Net cash used in investing activities

 

(5,906

)

 

(18,793

)

Turning Point Brands, Inc.
Consolidated Statements of Cash Flows (Cont.)
(dollars in thousands)
(unaudited)

For the Year Ended

December 31,

 

2023

 

 

 

2022

 

Cash flows from financing activities:
Convertible Senior Notes repurchased

 

(41,794

)

 

(9,000

)

Proceeds from call options

 

114

 

 

51

 

Payment of dividends

 

(4,497

)

 

(4,250

)

Payments of financing costs

 

(2,437

)

 

-

 

Exercise of options

 

450

 

 

504

 

Redemption of options

 

(346

)

 

(155

)

Redemption of restricted stock units

 

(995

)

 

(1,229

)

Common stock repurchased

 

-

 

 

(29,224

)

Net cash used in financing activities

$

(49,505

)

$

(43,303

)

 
Net increase (decrease) in cash

$

11,470

 

$

(31,823

)

Effect of foreign currency translation on cash

$

13

 

$

(320

)

 
Cash, beginning of period:
Unrestricted

$

106,403

 

$

128,320

 

Restricted

 

4,929

 

 

15,155

 

Total cash at beginning of period

$

111,332

 

$

143,475

 

 
 
Unrestricted

$

117,886

 

$

106,403

 

Restricted

 

4,929

 

 

4,929

 

Total cash at end of period

$

122,815

 

$

111,332

 

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 (loss) before interest expense, gain (loss) on extinguishment of debt, provision for (benefit from) income taxes, depreciation and amortization. We define “Adjusted EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for (benefit from) 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 excluding other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define “Free Cash Flow” as “Net Cash provided by operating activities” less Capital expenditures.

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 are subject to inherent limitations. In addition, other companies in our industry may calculate these non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting their usefulness as comparative measures.

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,

 

2023

 

 

 

2022

 

Net income (loss) attributable to Turning Point Brands, Inc.

$

10,109

 

$

(16,317

)

Add:
Interest expense, net

 

2,632

 

 

4,382

 

Loss (gain) on extinguishment of debt

 

194

 

 

(885

)

Income tax expense (benefit)

 

14,328

 

 

(3,857

)

Depreciation expense

 

804

 

 

777

 

Amortization expense

 

851

 

 

538

 

EBITDA

$

28,918

 

$

(15,362

)

Components of Adjusted EBITDA
Corporate and CDS restructuring (a)

 

199

 

 

1,825

 

ERP/CRM (b)

 

138

 

 

336

 

Stock options, restricted stock, and incentives expense (c)

 

1,901

 

 

1,170

 

Transactional expenses and strategic initiatives(d)

 

3

 

 

12

 

FDA PMTA (e)

 

1,003

 

 

289

 

Non-cash asset impairment (f)

 

1,015

 

 

34,836

 

FET refund (g)

 

(4,345

)

 

-

 

Legal settlement (h)

 

(4,000

)

 

-

 

Adjusted EBITDA

$

24,832

 

$

23,106

 

(a) Represents costs associated with corporate and CDS 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.
(g) Represents federal excise tax refund included in other operating income, net.
(h) Represents other income from litigation settlement.
Schedule A
 
 
 
Turning Point Brands, Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
(dollars in thousands)
(unaudited)

For the Year Ended

December 31,

 

2023

 

 

 

2022

 

Net income attributable to Turning Point Brands, Inc.

$

38,462

 

$

11,641

 

Add:
Interest expense, net

 

14,645

 

 

19,524

 

Gain on extinguishment of debt

 

(1,664

)

 

(885

)

Income tax expense

 

23,901

 

 

4,849

 

Depreciation expense

 

3,121

 

 

3,388

 

Amortization expense

 

3,237

 

 

1,911

 

EBITDA

$

81,702

 

$

40,428

 

Components of Adjusted EBITDA
Corporate and CDS restructuring (a)

 

389

 

 

3,444

 

ERP/CRM (b)

 

552

 

 

1,962

 

Stock options, restricted stock, and incentives expense (c)

 

6,561

 

 

5,273

 

Transactional expenses and strategic initiatives (d)

 

165

 

 

801

 

FDA PMTA (e)

 

2,098

 

 

4,554

 

Non-cash asset impairment (f)

 

12,177

 

 

41,136

 

FET refund (g)

 

(4,345

)

 

-

 

Legal settlement (h)

 

(4,000

)

 

-

 

Adjusted EBITDA

$

95,299

 

$

97,598

 

(a) Represents costs associated with corporate and CDS 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.
(g) Represents federal excise tax refund included in other operating income, net.
(h) Represents other income from litigation settlement.
Schedule B
 
Turning Point Brands, Inc.
Reconciliation of GAAP Net Income (Loss) 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, 2023

 

December 31, 2022

Net Income

 

Diluted EPS

 

Net Income (Loss)

 

Diluted EPS

GAAP

$

10,109

 

$

0.53

 

$

(16,317

)

$

(0.93

)

Anti-dilutive impact (a)

 

-

 

 

0.00

 

 

-

 

 

0.20

 

Gain on extinguishment of debt (b)

 

146

 

 

0.01

 

 

(714

)

 

(0.03

)

Corporate and CDS restructuring (c)

 

150

 

 

0.01

 

 

1,473

 

 

0.07

 

ERP/CRM (d)

 

104

 

 

0.01

 

 

271

 

 

0.01

 

Stock options, restricted stock, and incentives expense (e)

 

1,434

 

 

0.07

 

 

944

 

 

0.05

 

Transactional expenses and strategic initiatives (f)

 

2

 

 

0.00

 

 

10

 

 

0.00

 

FDA PMTA (g)

 

757

 

 

0.04

 

 

233

 

 

0.01

 

Non-cash asset impairment (h)

 

766

 

 

0.04

 

 

28,109

 

 

1.35

 

FET refund (i)

 

(3,843

)

 

(0.19

)

 

-

 

 

-

 

Legal settlement (j)

 

(3,017

)

 

(0.15

)

 

-

 

 

-

 

Deferred tax valuation allowance (k)

 

8,383

 

 

0.42

 

 

-

 

 

-

 

Impact of quarterly tax items to effective tax rate (l)

 

311

 

 

0.02

 

 

(804

)

 

(0.04

)

Adjusted

$

15,302

 

$

0.79

 

$

13,205

 

$

0.69

 

Total may not foot due to rounding
Note: Quarterly tax rate used excludes impact of deferred tax valuation allowance.
(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 and CDS 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 federal excise tax refund and related interest income effected at the quarterly tax rate.
(j) Represents receivable from legal settlement tax effected at the quarterly tax rate.
(k) Represents deferred tax valuation allowance.
(l) Represents adjustment from quarterly tax rate to annual projected tax rate of 23% in 2023 and 2022.
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, 2023 December 31, 2022
Net Income Diluted EPS Net Income Diluted EPS
GAAP

$

38,462

 

$

2.01

 

$

11,641

 

$

0.64

 

Anti-dilutive impact (a)

 

-

 

 

(0.00

)

 

-

 

 

0.09

 

Gain on extinguishment of debt (b)

 

(1,245

)

 

(0.06

)

 

(617

)

 

(0.03

)

Corporate and CDS restructuring (c)

 

291

 

 

0.01

 

 

2,401

 

 

0.11

 

ERP/CRM (d)

 

413

 

 

0.02

 

 

1,368

 

 

0.06

 

Stock options, restricted stock, and incentives expense (e)

 

4,910

 

 

0.24

 

 

3,676

 

 

0.17

 

Transactional expenses and strategic initiatives (f)

 

123

 

 

0.01

 

 

558

 

 

0.03

 

FDA PMTA (g)

 

1,570

 

 

0.08

 

 

3,174

 

 

0.15

 

Non-cash asset impairment (h)

 

9,114

 

 

0.45

 

 

28,674

 

 

1.35

 

FET refund (i)

 

(3,813

)

 

(0.19

)

 

-

 

 

-

 

Legal settlement (j)

 

(2,994

)

 

(0.15

)

 

-

 

 

-

 

Deferred tax valuation allowance (k)

 

8,383

 

 

0.41

 

 

-

 

 

-

 

Impact of annual tax items to effective tax rate (l)

 

1,587

 

 

0.08

 

 

5,309

 

 

0.25

 

Adjusted

$

56,802

 

$

2.91

 

$

56,183

 

$

2.83

 

Total may not foot due to rounding
Note: Annual tax rate used excludes impact of deferred tax valuation allowance.
(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 annual tax rate.
(c) Represents costs associated with corporate and CDS restructuring, including severance tax effected at the annual 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 annual tax rate.
(e) Represents non-cash stock options, restricted stock, incentives expense and Solace PRSUs tax effected at the annual tax rate.
(f) Represents the fees incurred for transaction expenses tax effected at the annual tax rate.
(g) Represents costs associated with applications related to the FDA PMTA tax effected at the annual tax rate.
(h) Represents impairment of goodwill, intangible and investment assets tax effected at the annual tax rate.
(i) Represents federal excise tax refund and related interest income effected at the annual tax rate.
(j) Represents receivable from legal settlement tax effected at the annual tax rate.
(k) Represents deferred tax valuation allowance.
(l) Represents adjustment from annual tax rate to annual projected tax rate of 23% in 2023 and 2022.
Schedule C
 
Turning Point Brands, Inc.
Reconciliation of GAAP Operating Income (Loss) to Adjusted Operating Income (Loss)
(dollars in thousands)
(unaudited)

Consolidated

 

Zig-Zag

 

Stoker's

 

Creative Distribution Solutions

4th Quarter

 

4th Quarter

 

4th Quarter

 

4th Quarter

 

4th Quarter

 

4th Quarter

 

4th Quarter

 

4th Quarter

 

2023

 

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

 

2022

 

 

2023

 

 

 

2022

 
Net sales

$

97,120

 

$

103,392

$

45,092

$

46,444

$

37,976

 

$

32,010

$

14,052

 

$

24,938

 
Gross profit

$

50,524

 

$

49,563

$

25,499

$

25,768

$

21,883

 

$

17,210

$

3,142

 

$

6,585

 
Operating income (loss)

$

23,953

 

$

18,318

$

20,968

$

17,362

$

16,832

 

$

12,794

$

(646

)

$

134

Adjustments:
Transactional expenses and strategic initiatives

 

3

 

 

12

 

-

 

-

 

-

 

 

-

 

-

 

 

-

FDA PMTA

 

1,003

 

 

289

 

-

 

-

 

-

 

 

-

 

-

 

 

-

Corporate and CDS restructuring

 

199

 

 

1,825

 

-

 

-

 

-

 

 

-

 

-

 

 

-

ERP/CRM

 

138

 

 

336

 

-

 

-

 

-

 

 

-

 

-

 

 

-

FET refund

 

(4,345

)

 

-

 

(4,345)

 

-

 

-

 

-

 

-

 

 

-

Adjusted operating income (loss)

$

20,951

 

$

20,780

$

16,623

$

17,362

$

16,832

 

$

12,794

$

(646

)

$

134

Schedule C
 
Turning Point Brands, Inc.
Reconciliation of GAAP Operating Income (Loss) to Adjusted Operating Income (Loss)
(dollars in thousands)
(unaudited)

Consolidated

 

Zig-Zag

 

Stoker's

 

Creative Distribution Solutions

YTD

 

YTD

 

YTD

 

YTD

 

YTD

 

YTD

 

YTD

 

YTD

 

2023

 

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

 

 

2022

 

 

2023

 

 

 

2022

 
Net sales

$

405,393

 

$

415,013

$

180,455

$

190,403

$

144,609

 

$

130,826

$

80,329

 

$

93,784

 
Gross profit

$

203,241

 

$

205,538

$

101,055

$

106,576

$

81,887

 

$

71,254

$

20,299

 

$

27,708

 
Operating income (loss)

$

82,577

 

$

75,514

$

68,280

$

73,342

$

62,208

 

$

53,331

$

(383

)

$

1,506

Adjustments:
Transactional expenses and strategic initiatives

 

165

 

 

801

 

-

 

-

 

-

 

 

-

 

-

 

 

-

FDA PMTA

 

2,098

 

 

4,554

 

-

 

-

 

-

 

 

-

 

-

 

 

-

Corporate and CDS restructuring

 

389

 

 

3,444

 

-

 

-

 

-

 

 

-

 

190

 

 

-

ERP/CRM

 

552

 

 

1,962

 

-

 

-

 

-

 

 

-

 

-

 

 

-

FET refund

 

(4,345

)

 

-

 

(4,345)

 

-

 

-

 

-

 

-

 

 

-

Adjusted operating income (loss)

$

81,436

 

$

86,275

$

63,935

$

73,342

$

62,208

 

$

53,331

$

(193

)

$

1,506

 

Investor Contacts

Turning Point Brands, Inc.:

Louie Reformina, Senior Vice President, CFO

Turning Point Brands, Inc.

502.774.9238

ir@tpbi.com

Source: Turning Point Brands, Inc.