(Dollars in Thousands, Except Per Share Amounts)




Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is designed to provide a reader of Vector Group Ltd.'s
financial statements with a narrative from our management's perspective. Our
MD&A is divided into the following sections:
•Overview
•Recent Developments
•Results of Operations
•Summary of Real Estate Investments
•Liquidity and Capital Resources

Please read this discussion along with our MD&A and audited financial statements
as of and for the year ended December 31, 2019 and Notes thereto, included in
our 2019 Annual Report on Form 10-K, and our Condensed Consolidated Financial
Statements and related Notes as of and for the quarterly period and six months
ended June 30, 2020 and 2019.

Overview

We are a holding company and are engaged principally in two business segments: • Tobacco: the manufacture and sale of cigarettes in the United States

through our Liggett Group LLC ("Liggett") and Vector Tobacco Inc. ("Vector

Tobacco") subsidiaries, and

• Real Estate: the real estate business through our subsidiary New Valley

LLC ("New Valley"), which (i) owns Douglas Elliman Realty, LLC ("Douglas

Elliman"), (ii) has interests in numerous real estate projects across the

United States and (iii) is seeking to acquire or invest in additional real


       estate properties or projects. Douglas Elliman operates the largest
       residential brokerage company in the New York metropolitan area and also
       conducts residential real estate brokerage operations in Florida,

California, Connecticut, Massachusetts, Colorado, New Jersey and Texas.






Recent Developments
COVID-19 Pandemic. The recent outbreak of the novel coronavirus, COVID-19, which
was declared a pandemic by the World Health Organization on March 11, 2020, has
led to adverse impacts on the U.S. and global economies and created economic
uncertainty. Although much uncertainty still surrounds the pandemic, including
its duration and ultimate overall impact on our operations and real estate
ventures, we are carefully evaluating potential outcomes and working to mitigate
risks. As with many other companies, our operations have been affected by
COVID-19. We have implemented remote working for many employees and adopted the
social distancing protocols recommended by public health authorities. The
following provides a summary of our actions in our two segments - Tobacco and
Real Estate - since COVID-19 was declared a pandemic.

Impact of COVID-19 on Tobacco Segment.  To date, we have not experienced any
material disruptions to our supply or distribution chains, and have not
experienced any material adverse effects associated with governmental actions to
restrict consumer movement or business operations. However, our suppliers and
members of our distribution chain may be subject to government action requiring
facility closures and remote working protocols. The majority of retail stores in
which our tobacco products are sold, including convenience stores, have been
deemed to be essential businesses by authorities and have remained open.  We
continue to monitor the risk that a supplier, a distributor or any other entity
within our supply and distribution chain closes temporarily or permanently.

Although our tobacco segment has not been negatively impacted to date by
COVID-19, there remains uncertainty as to how the pandemic may ultimately impact
the market. We continue to monitor the macro-economic risks of COVID-19 and the
effect on tobacco consumers, including purchasing behavior changes and changes
in sales volumes and mix within the discount category.  Our EAGLE 20's brand is
priced in the deep discount category and our other brands are primarily priced
in the traditional discount category.


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Impact of COVID-19 on Real Estate Segment.  Douglas Elliman is the largest
residential real estate broker in the New York metropolitan area and
approximately 70% of its revenues were derived from this region in 2018 and
2019. In addition, New Valley has investments in multiple real estate ventures
and properties in the New York metropolitan area, which had a carrying value of
$67,058 at June 30, 2020.  Published reports and data indicate that the New York
metropolitan area was initially impacted more than any other area in the United
States. Consequently, various governmental agencies in the New York metropolitan
area and in other markets where Douglas Elliman operates, instituted
quarantines, "pause" orders, "shelter-in-place" rules, restrictions on travel
and restrictions on the types of businesses that could operate. These
restrictions adversely impacted Douglas Elliman's ability to conduct business
during the three months ended June 30, 2020. For example, Douglas Elliman's
agents were restricted from performing in-person showings of properties or
conducting open houses in most of Douglas Elliman's markets from March 2020 to
June 2020. Douglas Elliman experienced a severe decline in closed sales volume
in New York City beginning in March 2020 which has continued. We anticipate that
sales volume in New York City may continue to be slow through the fall of 2020,
and possibly longer.

Beginning in April 2020, we made significant operating adjustments at Douglas
Elliman, including a reduction of personnel expense of approximately 25% and
reductions of other administrative expenses, as well as a reduction, deferral or
elimination of certain office lease expenses. While we continue to evaluate
other expense reduction measures, to the extent Douglas Elliman's business
improves in the third quarter, we will begin to relinquish, as appropriate, some
of the second quarter expense reductions, including advertising and personnel
expenses.

The COVID-19 pandemic could continue to have a material impact on our Real
Estate segment; the likelihood and magnitude of a material impact increases with
the amount of time the virus affects activity levels in locations in which
Douglas Elliman operates. Therefore, we are unable to predict the ultimate
impact of the COVID-19 pandemic on the future financial condition, results of
operations and cash flows from our Real Estate segment.

Ladenburg Thalmann Financial Services Inc. ("LTS"). On November 11, 2019, LTS
entered into an Agreement and Plan of Merger with Advisor Group. On February 14,
2020, the merger was completed, and each share of LTS common stock was converted
into a cash payment of $3.50 per share. We received proceeds of $53,169 from our
15,191,205 common shares of LTS, and we recorded a pre-tax gain of $53,052 from
the transaction in the first quarter of 2020. We also tendered 240,000 shares of
LTS's 8% Series A Cumulative Redeemable Preferred Stock for redemption and
received an additional $6,009 in March 2020. At the closing of the transaction,
our Executive Vice President resigned as Chairman, President and Chief Executive
Officer of LTS, and our management agreement with LTS was terminated.

Maturity of 5.5% Variable Interest Senior Convertible Debentures due 2020. In
April 2020, our 5.5% Variable Interest Senior Convertible Debentures due 2020
matured and we retired them with a cash payment for the principal balance of
$169,610.

Issuance of Common Stock. On May 14, 2020, we announced the pricing of our underwritten public offering (the "Offering") of 5,000,000 shares of our common stock. We received approximately $53,000 in proceeds from the offering.



Recent Developments in Litigation
The cigarette industry continues to be challenged on numerous fronts. New cases
continue to be commenced against Liggett and other cigarette manufacturers.
Liggett could be subjected to substantial liabilities and bonding requirements
from litigation relating to cigarette products. Adverse litigation outcomes
could have a negative impact on our ability to operate due to their impact on
cash flows. It is possible that there could be adverse developments in pending
cases including the certification of additional class actions. An unfavorable
outcome or settlement of pending tobacco-related litigation could encourage the
commencement of additional litigation. In addition, an unfavorable outcome in
any tobacco-related litigation could have a material adverse effect on our
consolidated financial position, results of operations or cash flows. Liggett
could face difficulties in obtaining a bond to stay execution of a judgment
pending appeal.

Critical Accounting Policies



There are no material changes except for the items listed below from the
critical accounting policies set forth in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," of our Annual Report
on Form 10-K, for the year ended December 31, 2019. Please refer to that section
and the information below for disclosures regarding the critical accounting
policies related to our business.


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Current Expected Credit Losses. On January 1, 2020, we adopted ASU No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments, therefore, our measurement of credit losses for most
financial assets and certain other instruments has been modified as discussed in
Note 3 to our condensed consolidated financial statements.

Goodwill and Indefinite Life Assets. Goodwill and intangible assets with
indefinite lives are not amortized, but instead are tested for impairment on an
annual basis, or whenever events or changes in business circumstances indicate
the carrying value of the assets may not be recoverable.

During the first quarter of 2020, we performed quantitative assessments of the
goodwill associated with the Douglas Elliman reporting unit and its trademark
intangible asset in conjunction with our quarterly review for indicators of
impairment.

Based on the results of these assessments, we determined that the estimated fair
value of the Douglas Elliman reporting unit in our Real Estate segment, for
which the related goodwill had a carrying value of $78,008, exceeded the fair
value, resulting in a non-cash goodwill impairment charge of $46,252. In
addition, we recognized a non-cash impairment charge of $12,000 for intangible
assets related to the Douglas Elliman trademark. These non-cash impairment
charges are the result of consideration of potential impacts of COVID-19,
including the possibility of an economic recession, on Douglas Elliman's
business.

If we fail to meet the financial projections used in the quantitative
assessments of goodwill and trademark intangible asset in future periods or the
impacts of COVID-19 are more severe than expected, this would result in
additional impairment charges related to the Company's goodwill and trademark
intangible asset.


Results of Operations

The following discussion provides an assessment of our results of operations,
capital resources and liquidity and should be read in conjunction with our
condensed consolidated financial statements included elsewhere in this report.
The condensed consolidated financial statements include the accounts of Liggett,
Vector Tobacco, Liggett Vector Brands, New Valley and other less significant
subsidiaries.

For purposes of this discussion and other consolidated financial reporting, our
business segments for the three and six months ended June 30, 2020 and 2019 were
Tobacco and Real Estate. The Tobacco segment consisted of the manufacture and
sale of cigarettes. The Real Estate segment included our investment in New
Valley, which includes ownership of Douglas Elliman, investments in real estate
and investments in real estate ventures.
                              Three Months Ended                 Six Months Ended
                                   June 30,                          June 30,
                            2020             2019             2020             2019
Revenues:
Tobacco                  $ 312,510        $ 294,501        $ 599,579        $ 551,257
Real estate                133,250          243,931          300,669          408,099
Total revenues           $ 445,760        $ 538,432        $ 900,248        $ 959,356
Operating income (loss):
Tobacco                  $  79,309   (1)  $  68,651   (3)  $ 148,495   (4)  $ 128,795   (6)
Real estate                 (6,875 ) (2)     14,453          (74,350 ) (5)      4,044
Corporate and Other         (5,637 )         (6,860 )        (12,252 )        (14,005 )
Total operating income   $  66,797        $  76,244        $  61,893        $ 118,834


(1) Operating income includes $53 of litigation settlement and judgment expense.
(2) Operating loss includes $2,961 of restructuring charges.
(3) Operating income includes $655 of litigation settlement and judgment
expense.
(4) Operating income includes $53 of litigation settlement and judgment expense.
(5) Operating loss includes $58,252 of impairment charges related to the
impairments of goodwill and intangible assets and $2,961 of restructuring
charges.
(6) Operating income includes $655 of litigation settlement and judgment
expense.


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Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019
Revenues. Total revenues were $445,760 for the three months ended June 30, 2020
compared to $538,432 for the three months ended June 30, 2019. The $92,672
(17.2%) decline in revenues was primarily due to a $110,681 decline in Real
Estate revenues, which was primarily related to a decline in Douglas Elliman's
brokerage revenues, offset by a $18,009 increase in Tobacco revenues.
Cost of sales. Total cost of sales was $304,885 for the three months ended
June 30, 2020 compared to $368,174 for the three months ended June 30, 2019. The
$63,289 (17.2%) decline in cost of sales was primarily due to a $72,895 decline
in Real Estate cost of sales, which was primarily related to a decline in
Douglas Elliman's commissions. This was offset by a $9,606 increase in Tobacco
cost of sales.
Expenses. Operating expenses were $74,078 for the three months ended June 30,
2020 compared to $94,014 for the same period last year. The $19,936 (21.2%)
decline in operating expenses was due to a $16,458 decline in Real Estate
expenses, primarily at Douglas Elliman, including restructuring charges of
$2,961 for the three months ended June 30, 2020, a $2,255 decline in Tobacco
expenses, including a decline in litigation settlement and judgment expense of
$602, and a $1,223 decline in Corporate and Other expenses.
Operating income. Operating income was $66,797 for the three months ended
June 30, 2020 compared to $76,244 for the same period last year. The $9,447
(12.4%) decline in operating income was due to a $21,328 decline in Real Estate
operating income, primarily related to Douglas Elliman. This was offset by a
$10,658 increase in Tobacco operating income and a decline of $1,223 in
Corporate and Other operating loss.
Other expenses. Other expenses were $30,107 and $19,478 for the three months
ended June 30, 2020 and 2019, respectively. For the three months ended June 30,
2020, other expenses primarily consisted of interest expense of $29,358 and
equity in losses from real estate ventures of $12,260. This was offset by income
of $1,669 from changes in fair value of derivatives embedded within convertible
debt, other income of $7,635 and equity in earnings from investments of $2,207.
For the three months ended June 30, 2019, other expenses primarily consisted of
interest expense of $32,753 and equity in losses from investments of $1,685.
This was offset by income of $3,788 from changes in fair value of derivatives
embedded within convertible debt, other income of $4,781, and equity in earnings
from real estate ventures of $6,391.
Income before provision for income taxes. Income before income taxes was $36,690
and $56,766 for the three months ended June 30, 2020 and 2019, respectively.
Income tax expense. Income tax expense was $10,916 and $17,459 for the three
months ended June 30, 2020 and 2019, respectively. Our provision for income
taxes in interim periods is based on expected income, statutory rates, permanent
differences, valuation allowances against deferred tax assets, and any tax
planning opportunities available to us. For interim financial reporting, we
estimate the annual effective income tax rate based on full year projections and
apply the annual effective income tax rate against year-to-date pretax income to
record income tax expense, adjusted for discrete items, if any. We refine annual
estimates as new information becomes available. For the three months ended
June 30, 2020, the annual effective tax rate applied to year-to-date income
resulted in tax expense which was reduced by discrete items. The discrete items
of $32 primarily relates to changes in value of certain contingent consideration
and stock-based compensation.
Tobacco.
Tobacco revenues. Liggett increased the list price of EAGLE 20's by $0.11 per
pack on June 22, 2020, $0.08 per pack in February 2020, and $0.08 per pack in
October 2019. Liggett also increased the list price of PYRAMID, LIGGETT SELECT,
EVE and GRAND PRIX by $0.11 per pack on June 22, 2020, $0.08 per pack in
February 2020, $0.08 per pack in October 2019, and $0.06 per pack in June 2019.
All of our Tobacco sales were in the discount category in 2020 and 2019. For the
three months ended June 30, 2020, Tobacco revenues were $312,510 compared to
$294,501 for the three months ended June 30, 2019. Revenues increased by $18,009
(6.1%) due primarily to an increase in the average selling price of our brands
for the three months ended June 30, 2020 along with a 1.0% (24.5 million units)
increase in sales volume.

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Tobacco cost of sales. The major components of our Tobacco cost of sales were as
follows:
                                                                  Three Months Ended
                                                                       June 30,
                                                                  2020          2019

Manufacturing overhead, raw materials and labor                $   32,669    $  33,197
Customer shipping and handling                                      1,361        1,503
Federal Excise Taxes, net                                         121,170      119,943
FDA expense                                                         6,116        6,048
MSA expense, net of market share exemption                         52,751       43,770
Total cost of sales                                            $  214,067    $ 204,461



The Tobacco segment's MSA expense is included in cost of sales. Under the terms
of the MSA, we have no payment obligations except to the extent that our tobacco
subsidiaries' market share of the U.S. Cigarette market exceeds 1.92%. The
calculation of our benefit from the MSA is an estimate based on U.S. domestic
taxable cigarette shipments. As of June 30, 2020, we estimate taxable shipments
in the U.S. will decline by 4.5% in 2020. Our annual MSA liability changes by
approximately $1,700 for each percentage change in the estimated shipment
volumes in the U.S. market. For the three months ended June 30, 2020, the
estimated decline in taxable shipments in excess of the annual MSA inflation
adjustment resulted in an increase in cost of sales of approximately $470
because the value of Liggett's market share exemption declined compared to the
three months ended June 30, 2019.
Tobacco gross profit was $98,443 for the three months ended June 30, 2020
compared to $90,040 for the three months ended June 30, 2019. The increase in
gross profit for the three months ended June 30, 2020 is primarily attributable
to increased pricing associated with the EAGLE 20's and Pyramid brands. For the
three months ended June 30, 2020, EAGLE 20's remains Liggett's primary low-cost
cigarette brand and its percentage of Liggett's total unit volume sales has
increased from 61% in the three months ended June 30, 2019 to 63% for the three
months ended June 30, 2020. Pyramid, Liggett's second-largest brand, declined
from 26% of total unit volume sales in the three months ended June 30, 2019 to
24% for the three months ended June 30, 2020. As a percentage of revenue
(excluding Federal Excise Taxes), Tobacco gross profit declined from 51.6% in
the 2019 period to 51.4% in the 2020 period primarily as a result of the
continued growth of the lower-priced EAGLE 20's brand as well as a higher MSA
expense associated with the increases in unit volume above the market share
exemption.  This was offset by price increases.
Tobacco expenses. Tobacco operating, selling, general and administrative
expenses, excluding settlements and judgments, were $19,081 and $20,734 for the
three months ended June 30, 2020 and 2019, respectively. The decline of $1,653
is primarily due to decreased travel expenses incurred during the COVID-19
pandemic and the timing of compensation expenses. Total tobacco product
liability legal expenses, including settlements and judgments, were $1,641 and
$2,274 for the three months ended June 30, 2020 and 2019, respectively.
Tobacco operating income. Tobacco operating income was $79,309 for the three
months ended June 30, 2020 compared to $68,651 for the same period last year.
The increase in operating income for the three months ended June 30, 2020 of
$10,658 is primarily attributable to higher gross profit, as discussed above,
and lower operating, selling, general and administrative expenses.
Real Estate.
Real Estate revenues. Real Estate revenues were $133,250 and $243,931 for the
three months ended June 30, 2020 and 2019, respectively. Real Estate revenues
declined by $110,681 (45.4%), primarily related to a decline of $107,080 in
Douglas Elliman's commission income. We believe the decline was attributable to
two events: (i) the impact of the COVID-19 pandemic and (ii) the acceleration of
real estate closings in the New York City market during the three months ended
June 30, 2019 as a result of the increased transfer and "mansion" tax associated
with resales of homes of more than $1,000, effective July 1, 2019.

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Real Estate revenues and cost of sales for the three months ended June 30, 2020
and 2019 were as follows:
                                                     Three Months Ended
                                                          June 30,
                                                     2020          2019
Real Estate Revenues:
Commission and other brokerage income             $  123,254    $ 230,334
Property management revenue                            8,832       10,218
Title fees                                               843        2,400
Sales on facilities primarily from Escena                321          979
 Total real estate revenues                       $  133,250    $ 243,931

Real Estate Cost of Sales:
Real estate commissions                           $   90,116    $ 162,192

Cost of sales on facilities primarily from Escena 563 871 Title fees

                                               139          650
 Total real estate cost of sales                  $   90,818    $ 163,713

___________________________________


Brokerage cost of sales. Douglas Elliman real estate commissions decreased by
$72,076 for the three months ended June 30, 2020 as a result of a decline in
sales volume.
Douglas Elliman's gross margin on real estate brokerage income declined from
29.6% for the three months ended June 30, 2019 to 26.9% for the three months
ended June 30, 2020 primarily as a result of declines in revenues in its
development marketing division and existing-home sales in the New York City and
Northeast regions, which traditionally earn higher gross margin percentages than
the Southeast (Florida) and Western (primarily California) regions.
The COVID-19 pandemic has had a profound effect on the economy and, especially,
in the New York metropolitan area, where approximately 70% of Douglas Elliman's
commissions and other brokerage revenues were derived in 2018 and 2019. In
response to the pandemic, various governmental agencies in the New York
metropolitan area and in other markets where Douglas Elliman operates instituted
restrictions on individuals and on the types of businesses that are permitted to
operate from March 2020 to June 2020, which adversely impacted Douglas Elliman's
business. We anticipate that sales volume may continue to be slow through the
fall of 2020, and possibly longer.
Real Estate expenses. Real Estate expenses, which are primarily expenses at
Douglas Elliman, were $49,307 and $65,765 for the three months ended June 30,
2020 and 2019, respectively. For the three months ended June 30, 2020, Real
Estate expenses included restructuring charges of $2,961. The restructuring
charges were the result of Douglas Elliman realigning its administrative support
functions, and office locations as well as adjusting its business model to more
efficiently serve its clients. In response to the COVID-19 pandemic, we have
implemented significant expense reductions at Douglas Elliman, including a
reduction of personnel by approximately 25% as well as reduction, deferral or
elimination of leases across the country. As a result of the expense reductions,
in additional to personnel expenses, Douglas Elliman's professional services,
advertising, travel and other occupancy expenses were reduced during the three
months ended June 30, 2020. While we continue to evaluate other expense
reduction measures, to the extent Douglas Elliman's business improves in the
third quarter, we will begin to relinquish, as appropriate, some of the second
quarter expense reductions, including advertising and personnel expenses.
Real Estate operating (loss) income. The Real Estate segment had operating loss
of $6,875 for the three months ended June 30, 2020 and operating income of
$14,453 for the three months ended June 30, 2019. The decline in operating
income of $21,328 was primarily related to reduced operating income at Douglas
Elliman.
Corporate and Other.
Corporate and Other operating loss. The operating loss at the Corporate and
Other segment was $5,637 for the three months ended June 30, 2020 compared to
$6,860 for the same period in 2019 and the difference was due primarily to
decreased administrative costs related to professional fees and travel expenses.

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Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
Revenues. Total revenues were $900,248 for the six months ended June 30, 2020
compared to $959,356 for the six months ended June 30, 2019. The $59,108 (6.2%)
decline in revenues was primarily due to a $107,430 decline in Real Estate
revenues, which was primarily related to a decrease in Douglas Elliman's
brokerage revenues. This was offset by a $48,322 increase in Tobacco revenues
related to an increase in both unit volume and net pricing.
Cost of sales. Total cost of sales was $615,508 for the six months ended
June 30, 2020 compared to $654,194 for the six months ended June 30, 2019. The
$38,686 (5.9%) decline in cost of sales was primarily due to a $68,279 decline
in Real Estate cost of sales, which was primarily related to increases Douglas
Elliman's commissions. This was offset by a $29,593 increase in Tobacco cost of
sales primarily related to increased sales volume and higher MSA expense.
Expenses. Operating expenses were $222,847 for the six months ended June 30,
2020 compared to $186,328 for the same period last year. The $36,519 (19.6%)
increase was due to a $39,243 increase in Real Estate expenses, including
impairment of goodwill and intangible asset charge at Douglas Elliman of $58,252
and restructuring charges of $2,961 for the six months ended June 30, 2020. This
was offset by a $971 decline in Tobacco expenses, including a decline in
litigation settlement and judgment expense of $602, and a $1,753 decline in
Corporate and Other expense.
See Critical Accounting Policies - Goodwill and Indefinite Life Assets for
detail of the Douglas Elliman impairment charge.
Operating income. Operating income was $61,893 for the six months ended June 30,
2020 compared to $118,834 for the same period last year, a decline of $56,941
(47.9%). Real Estate operating income declined $78,394 primarily related to the
impairments of goodwill and intangible assets of $58,252 at Douglas Elliman and
restructuring charges of $2,961. This was offset by an increase in Tobacco
operating income of $19,700 and the Corporate and Other operating loss declined
$1,753.
Other expenses. Other expenses were $29,412 for the six months ended June 30,
2020 compared to $40,286 for the six months ended June 30, 2019. For the six
months ended June 30, 2020, other expenses primarily consisted of interest
expense of $64,985, equity in losses from real estate ventures of $18,765 and
other expenses of $3,020. This was offset by equity in earnings of investments
of $52,359 and income of $4,999 from changes in fair value of derivatives
embedded within convertible debt. For the six months ended June 30, 2019, other
expenses primarily consisted of interest expense of $70,273 and equity in losses
from investments of $323. This was offset by income of $14,137 from changes in
fair value of derivatives embedded within convertible debt, other income of
$12,221, and equity in earnings from real estate ventures of $3,952.
Income before provision for income taxes. Income before income taxes was $32,481
for the six months ended June 30, 2020 compared to $78,548 for the six months
ended June 30, 2019.
Income tax expense. Income tax expense was $9,938 for the six months ended
June 30, 2020 compared to $24,208 for the six months ended June 30, 2019. Our
provision for income taxes in interim periods is based on expected income,
statutory rates, permanent differences, valuation allowances against deferred
tax assets, and any tax planning opportunities available to us. For interim
financial reporting, we estimate the annual effective income tax rate based on
full year projections and apply the annual effective income tax rate against
year-to-date pretax income to record income tax expense, adjusted for discrete
items, if any. We refine annual estimates as new information becomes available.
Our income tax expense for the six months ended June 30, 2020 was increased by
discrete items related to income tax benefits on the goodwill and trademark
impairment charges, changes in value of certain contingent consideration and
stock-based compensation partially offset by the income tax expense related to
the equity in earnings from investments associated with the one-time gain on
sale of LTS. Our income tax expense for the six months ended June 30, 2019 was
decreased by discrete items related to an income tax benefit for stock-based
compensation.
Tobacco.
Tobacco revenues. Liggett increased the list price of EAGLE 20's by $0.11 per
pack on June 22, 2020, $0.08 per pack in February 2020, $0.08 per pack in
October 2019, and $0.11 per pack in February 2019. Liggett also increased the
list price of PYRAMID, LIGGETT SELECT, EVE and GRAND PRIX by $0.11 per pack on
June 22, 2020, $0.08 per pack in February 2020, $0.08 per pack in October 2019,
$0.06 per pack in June 2019, and $0.11 per pack in February 2019.
All of our Tobacco sales were in the discount category in 2020 and 2019. For the
six months ended June 30, 2020, Tobacco revenues were $599,579 compared to
$551,257 for the six months ended June 30, 2019. Revenues increased by $48,322
(8.8%) due primarily to an increase in the average selling price of our brands
for the six months ended June 30, 2020 along with a 4.4% (196 million units)
increase in unit sales volume.

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Tobacco cost of sales. The major components of our Tobacco cost of sales were as
follows:
                                                       Six Months Ended
                                                           June 30,
                                                       2020         2019

Manufacturing overhead, raw materials and labor $ 65,534 $ 61,672 Customer shipping and handling

                          2,833        2,995
Federal Excise Taxes, net                             234,309      224,576
FDA expense                                            12,466       12,393
MSA expense, net of market share exemption             96,215       80,128
    Total cost of sales                             $ 411,357    $ 381,764


The Tobacco segment's MSA expense is included in cost of sales. Under the terms
of the MSA, we have no payment obligations except to the extent that our tobacco
subsidiaries' market share of the U.S. Cigarette market exceeds 1.92%. The
calculation of our benefit from the MSA is an estimate based on U.S. domestic
taxable cigarette shipments. As of June 30, 2020, we estimate taxable shipments
in the U.S. will decline by 4.5% in 2020. Our annual MSA liability changes by
approximately $1,700 for each percentage change in estimated shipment volumes in
the U.S. market. For the six months ended June 30, 2020, the estimated decline
in taxable shipments in excess of the annual MSA inflation adjustment resulted
in an increase in cost of sales of approximately $900 because the value of
Liggett's market share exemption declined compared to the six months ended
June 30, 2019.
Tobacco gross profit was $188,222 for the six months ended June 30, 2020
compared to $169,493 for the six months ended June 30, 2019, an increase of
$18,729. The increase in gross profit for the six months ended June 30, 2020 was
primarily attributable to increased pricing on the EAGLE 20's and Pyramid brands
and increased EAGLE 20's volume. For the six months ended June 30, 2020, EAGLE
20's remains Liggett's primary low-cost cigarette brand and its percentage of
Liggett's total unit volume sales has increased from approximately 59% in the
six months ended June 30, 2019 to approximately 63% for the six months ended
June 30, 2020. Pyramid, Liggett's second largest brand, declined from
approximately 28% of total unit volume sales in the six months ended June 30,
2019 to 24% for the six months ended June 30, 2020. As a percentage of revenue
(excluding Federal Excise Taxes), Tobacco gross profit decreased from 51.9% in
the 2019 period to 51.5% in the 2020 period primarily as a result of the
continued growth of the lower-priced EAGLE 20's brand as well as a higher MSA
expense associated with the increases in unit volume above the market share
exemption. This was offset by price increases.
Tobacco expenses. Tobacco operating, selling, general and administrative
expenses, excluding settlements and judgments, were $39,674 for the six months
ended June 30, 2020 compared to $40,043 for the six months ended June 30, 2019.
The decline of $369 was mainly due to lower travel related expenses partially
offset by higher professional fees. Tobacco product liability legal expenses,
including settlements and judgments, were $3,191 and $3,737 for the six months
ended June 30, 2020 and 2019, respectively.
Tobacco operating income. Tobacco operating income was $148,495 for the six
months ended June 30, 2020 compared to $128,795 for the same period last year,
an increase of $19,700. The increase in operating income was primarily
attributable to higher gross profit, as discussed above.
Real Estate.
Real Estate revenues. Real Estate revenues were $300,669 and $408,099 for the
six months ended June 30, 2020 and 2019, respectively. Real Estate revenues
declined by $107,430 (26.3%), which was primarily related to a decline of
$103,427 in Douglas Elliman's Commission and other brokerage income, which we
believe was because of the impact of the COVID-19 pandemic as well as the impact
of the increased "mansion" tax in New York City for the six months ended June
30, 2019, which is discussed in Results of Operations - Three Months ended June
30, 2020 compared to Three Months ended June 30, 2019.
.

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Real Estate revenues and cost of sales for the six months ended June 30, 2020 and 2019, respectively, were as follows:


                                                     Six Months Ended
                                                         June 30,
                                                     2020         2019
Real Estate Revenues:
Commission and other brokerage income             $ 279,220    $ 382,647
Property management revenue                          17,611       18,569
Title fees                                            1,699        3,633
Sales on facilities primarily from Escena             2,139        3,250
 Total real estate revenues                       $ 300,669    $ 408,099

Real Estate Cost of Sales:
Real estate commissions                           $ 202,315    $ 269,542

Cost of sales on facilities primarily from Escena 1,559 1,958 Title fees

                                              277          930
 Total real estate cost of sales                  $ 204,151    $ 272,430


Brokerage cost of sales. Douglas Elliman real estate commissions declined by
$67,227 as a result of lower commission and other brokerage income.
Douglas Elliman's gross margin on real estate brokerage income declined from
29.6% for the six months ended June 30, 2019 to 27.5% for the six months ended
June 30, 2020, primarily as a result of declines in revenues in its development
marketing division and existing-home sales in the New York City and Northeast
regions, which traditionally earn higher gross margin percentages than the
Southeast (Florida) and West (primarily California) regions.
See Results of Operations - Three Months ended June 30, 2020 compared to Three
Months ended June 30, 2019 for a discussion of the impact of the COVID-19
pandemic on the Real Estate segment.
Real Estate expenses. Real Estate expenses were $170,868 and $131,625 for the
six months ended June 30, 2020 and 2019. These expenses included the non-cash
impairment of goodwill and intangible assets of $58,252 and restructuring
charges of $2,961 at Douglas Elliman for the six months ended June 30, 2020. The
non-cash impairment related to the evaluation of potential impacts of the
COVID-19 pandemic, including the possibility of an economic recession, on
Douglas Elliman's business. The restructuring charges were the result of Douglas
Elliman realigning its administrative support functions, and office locations as
well as adjusting its business model to more efficiently serve its clients. In
response to the current COVID-19 pandemic, we have implemented significant
expense reductions at Douglas Elliman, including a reduction of personnel by
approximately 25%, as well as reduction, deferral or elimination of leases
across the country. As a result of the expense reductions, in additional to
personnel expenses, Douglas Elliman's professional services, advertising, travel
and other occupancy expenses were reduced during the six months ended June 30,
2020. While we continue to evaluate other expense reduction measures, to the
extent Douglas Elliman's business improves in the third quarter, we will begin
to relinquish, as appropriate, some of the second quarter expense reductions,
including advertising and personnel expenses.
Real Estate operating (loss) income. The Real Estate segment had operating loss
of $74,350 and operating income of $4,044 for the six months ended June 30, 2020
and 2019, respectively. The increase in the Real Estate segment's operating loss
was caused by the decreased gross margin discussed above, the impairment of
goodwill and intangible assets of $58,252 at Douglas Elliman and restructuring
charges of $2,961 at Douglas Elliman offset by the impact of expense-reduction
initiatives at Douglas Elliman in 2020.
Corporate and Other.
Corporate and Other loss. The operating loss at the Corporate and Other segment
was $12,252 for the six months ended June 30, 2020 compared to $14,005 for the
same period in 2019 and the difference was due primarily to decreased
administrative costs related to professional fees and travel expenses.

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Summary of Real Estate Investments
We own and seek to acquire investment interests in various domestic and
international real estate projects through debt and equity investments. Our real
estate investments primarily include the following projects as of June 30, 2020:
                                                                                              (Dollars in Thousands. Area and Unit Information in Ones)
                                                                                                                                    Future
                                                                                                                                    Capital                                    Projected Number
                                                                                                                                    Commit-                                     of Residential
                                                  Date of                                                                         ments from       Projected       Projected     Lots, Units    Actual/Projected  Projected
                                                  Initial    Percentage   Net Cash Invested     Cumulative     Carrying Value as  New Valley      Residential     Commercial     and/or Hotel     Construction   Construction
                                Location         Investment   Owned (1)      (Returned)     Earnings (Losses)  of June 30, 2020       (2)      and/or Hotel Area     Space          Rooms          Start Date      End Date

Sagaponack               Sagaponack, NY          April 2015      100 %    $     19,024      $           -      $     19,024      $         -         TBD              N/A            1     R          N/A            N/A
                         Master planned
                         community, golf course,
                         and club house in Palm                                                                                                                                    667   R Lots
Escena, net              Springs, CA             March 2008      100 %           2,243              7,609             9,852                -         450   Acres        -          450     H          N/A            N/A
Investments in real
estate, net                                                               $     21,267      $       7,609      $     28,876      $         -

Investments in real
estate ventures:
                         Flatiron District/NoMad
10 Madison Square West   neighborhood,            October
(1107 Broadway)          Manhattan, NY              2011         5.0 %    $    (43,671 )    $      43,671      $          -      $         -     260,000   SF      20,000   SF     124     R      August 2012     Completed
11 Beach Street          TriBeCa, Manhattan, NY  June 2012      49.5 %           4,090              5,600             9,690                -      97,000   SF           -           27     R        May 2014      Completed
20 Times Square (701     Times Square,             August
Seventh Avenue)          Manhattan, NY              2012         7.9 %          (7,827 )            7,827                 -                -    

252,000 SF 80,000 SF 452 H September 2013 Completed 111 Murray Street TriBeCa, Manhattan, NY May 2013 9.5 %

           6,393             (4,413 )           1,980                -     

330,000 SF 1,700 SF 157 R September 2014 Completed


                         West Greenwich Village,
160 Leroy Street         Manhattan, NY           March 2013      3.1 %          (1,075 )            1,075                 -                -     130,000   SF           -           57     R       Fall 2015      Completed
The Dutch (25-19 43rd
Avenue)                  Long Island City, NY     May 2014       9.9 %          (1,247 )            1,385               138                       65,000   SF           -           86     R     September 2014   Completed
87 Park (8701 Collins                             December
Avenue)                  Miami Beach, FL            2013        15.0 %          13,138              3,317            16,455                -     160,000   SF         TBD           70     R      October 2015    Completed
                         Financial District,       August
125 Greenwich Street     Manhattan, NY              2014        13.4 %           7,992             (7,992 )               -                -     306,000   SF      16,000   SF     273     R       March 2015        TBD
West Hollywood Edition
(9040 Sunset Boulevard)                           October                                                                                                                           20     R
(4)                      West Hollywood, CA         2014        48.5 %           3,949             (6,153 )          (2,204 )              -     210,000   SF           -          190     H        May 2015      Completed
The XI (76 Eleventh      West Chelsea,                                                                                                                                             236     R
Avenue)                  Manhattan, NY            May 2015       5.1 %          17,000            (17,000 )               -                -     630,000   SF      85,000   SF     137     H     September 2016   March 2021
                                                                                                                                                                                                                  September
Monad Terrace            Miami Beach, FL          May 2015      19.6 %           7,635             (4,831 )           2,804                -     160,000   SF           -           59     R        May 2016         2020
Takanasee (805 Ocean                              December
Ave)                     Long Branch, NJ            2015        22.8 %           6,144             (2,306 )           3,838                -      63,000   SF           -           13     R       June 2017         TBD
Brookland (15 East 19th
St)                      Brooklyn, NY            April 2017      9.8 %             402                 45               447                -      24,000   SF           -           33     R      August 2017     Completed
                                                  November                                                                                                                                                        September
Dime (209 Havemeyer St)  Brooklyn, NY               2017        16.5 %           9,145              2,331            11,476                -     100,000   SF     150,000   SF     177     R        May 2017         2020
                                                  February                                                                                                                                                         December
352 6th Avenue           Brooklyn, NY               2019        37.0 %             500                 61               561                -       5,200   SF           -            4     R     September 2019      2020
                         Meatpacking District,
Meatpacking Plaza        NY                      April 2019     16.9 %          10,692             (1,515 )           9,177                -         TBD   -          TBD   -      TBD     -          TBD            TBD
                                                 September
The Park on Fifth        Miami Beach, FL            2019        38.9 %          14,132                723            14,855                -     434,000   SF      15,000   SF     302     R       April 2020    August 2023
9 DeKalb                 Brooklyn, NY            April 2019      4.2 %           5,000                544             5,544                -     450,000   SF     120,000   SF     540     R       March 2019     June 2022
                                                  December                                                                                                                                                         February
West Hialeah             Miami, FL                  2019        77.8 %          12,522                536            13,058                -   1,400,000   SF           -        1,369     R     December 2019       2024
Condominium and Mixed
Use Development                                                           $     64,914      $      22,905      $     87,819      $         -

                         Primarily Baltimore
Maryland Portfolio       County, MD              July 2012       7.6 %             774               (774 )               -                -         N/A              N/A        5,517     R          N/A            N/A
Apartment Buildings                                                       $        774      $        (774 )    $          -      $         -

Park Lane Hotel (36      Central Park South,      November
Central Park South)      Manhattan, NY              2013         1.0 %    $      8,682      $      (6,519 )    $      2,163      $         -     446,000   SF           -          628     H          N/A            N/A
                         Lower East Side,         December
215 Chrystie Street (4)  Manhattan, NY              2012        18.4 %          (4,551 )            4,257              (294 )              -     246,000   SF           -          367     H       June 2014      Completed
Coral Beach and Tennis                            December
Club                     Coral Beach, Bermuda       2013        49.0 %           6,048             (4,438 )           1,610                -          52   Acres        -          101     H          N/A            N/A
                         Central Park South,                                                                                                                                       589     H                       February
Parker New York          Manhattan, NY           July 2019       1.0 %           1,000                (56 )             944                -         TBD                -           99     R        May 2020         2022
Hotels                                                                    $     11,179      $      (6,756 )    $      4,423      $         -

The Plaza at Harmon
Meadow                   Secaucus, NJ            March 2015     49.0 %    $ 

4,797 $ (2,721 ) $ 2,076 $ - - - 219,000 SF - - N/A

            N /A
                                                  December
Wynn Las Vegas Retail    Las Vegas, NV              2016         1.6 %           4,798              2,769             7,567                -           -   -      160,000   SF       -     -          N/A            N/A
Commercial                                                                $ 

9,595 $ 48 $ 9,643 $ -

Witkoff GP Partners (3)  Multiple                March 2017     15.0 %    $     11,082      $      (1,038 )    $     10,044      $     4,911         N/A              N/A          N/A                N/A            N/A
1 QPS Tower (23-10                                December
Queens Plaza South)      Long Island City, NY       2012        45.4 %         (14,406 )           14,406                 -                -         N/A              N/A          N/A             March 2014     Completed
Witkoff EB-5 Capital                              September
Partners                 Multiple                      2018     49.0 %             516                434               950            8,735         N/A              N/A          N/A                N/A            N/A
Diverse Real Estate
Portfolio                                                                 $     (2,808 )    $      13,802      $     10,994      $    13,646

Investments in real
estate ventures                                                           $     83,654      $      29,225      $    112,879      $    13,646

Total Carrying Value                                                      $    104,921      $      36,834      $    141,755
(1) The Percentage Owned reflects our estimated current ownership percentage. Our actual ownership percentage as well as the percentage of earnings and cash distributions may ultimately differ as a result of a number of
factors including potential dilution, financing or admission of additional partners.
(2) This column only represents capital commitments required under the various joint venture agreements. However, many of the operating agreements provide for the operating partner to call capital. If a joint venture
partner, such as New Valley, declines to fund the capital call, then the partner's ownership percentage could either be diluted or, in some situations, the character of a funding member's contribution would be converted
from a capital contribution to a member loan.
(3) The Witkoff GP Partners venture includes a $2,471 investment in 500 Broadway and a $7,573 investment in Fontainebleau Las Vegas.
(4) Equity in losses in excess of the joint ventures' carrying value were $2,498 as of June 30, 2020, and are classified in Other current liabilities.



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N/A - Not
applicable    SF - Square feet H - Hotel rooms         TBD -To be determined         R - Residential Units         R Lots - Residential lots


New Valley capitalizes net interest expense into the carrying value of its
ventures whose projects were under development. Net capitalized interest costs
included in Carrying Value as of June 30, 2020 were $7,547. This amount is
included in the "Cumulative Earnings (Losses)" column in the table above. During
the six months ended June 30, 2020, New Valley capitalized $2,257 of interest
costs and utilized (reversed) $5,307 of previously capitalized interest in
connection with the recognition of equity in (losses) earnings, gains and
liquidations from various ventures.



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Liquidity and Capital Resources



Cash, cash equivalents and restricted cash increased by $169,658 for the six
months ended June 30, 2020 and decreased by $258,325 for the six months ended
June 30, 2019.
Cash provided from operations was $341,329 and $98,102 for the six months ended
June 30, 2020 and 2019, respectively. The increase primarily related to
increases in working capital, particularly in increased excise tax payables,
income tax payables and promotional accruals in the tobacco segment, at June 30,
2020 as well as the proceeds received from the sale of LTS in the 2020 period
offset by lower operating income in 2020. The increases in excise tax payables
related to the 90-day postponement of the payment due dates of U.S. excise taxes
from March 1, 2020 to July 1, 2020. We expect this postponement resulted in an
increase to the liquidity of our tobacco segment in the second quarter of 2020
of approximately $131,700 and will result in a corresponding decline in the
third quarter of 2020.
Cash provided by investing activities was $46,575 for the six months ended
June 30, 2020 and cash used in investing activities was $9,087 for the six
months ended June 30, 2019. In the first six months of 2020, cash provided by
investing activities was from the sale of investment securities of $19,555, pay
downs of investment securities of $415, maturities of investment securities of
$31,574, distributions from investments in real estate ventures of $5,172, a
decrease in restricted assets of $87, and proceeds from the sale or liquidation
of long-term investments of $23,407. This was offset by the purchase of
investment securities of $16,867, investments in real estate ventures of $3,858,
capital expenditures of $6,242, investments in real estate, net of $679, an
increase in cash surrender value of life insurance policies of $751, and
purchase of long-term investments of $5,238. In the first six months of 2019,
cash used in investing activities was for the purchase of investment securities
of $44,222, investments in real estate ventures of $21,908, capital expenditures
of $6,320, investments in real estate, net of $1,153, an increase in cash
surrender value of life insurance policies of $789, and purchase of subsidiaries
of $668. This was offset by the sale of investment securities of $12,942, pay
downs of investment securities of $545, maturities of investment securities of
$28,610, and distributions from investments in real estate ventures of $23,200,
a decrease in restricted assets of $668, and proceeds from the sale of fixed
assets of $8.
Cash used in financing activities was $218,246 and $347,340 for the six months
ended June 30, 2020 and 2019, respectively. In the first six months of 2020,
cash was used for the dividends and distributions on common stock of $63,478,
repayments of debt of $172,467, distributions to non-controlling interest of
$448, and net repayments of debt under the revolver of $34,952. This was offset
by proceeds from issuance of common stock of $52,563, proceeds from debt
issuance of $531 and other of $5. In the first six months of 2019, cash was used
for the dividends and distributions on common stock of $118,748, repayments of
debt of $230,771, distributions to non-controlling interest of $285, deferred
financing costs of $33, offset by net borrowings of debt under the revolver of
$2,497.
The terms of our 10.5% Senior Notes due 2026 contain covenants that place
significant limitations on our ability to pay dividends and distributions in the
future. See "10.5% Senior Notes due 2026" below. For the next twelve months
beginning June 30, 2020, we have significant liquidity commitments at the
corporate level (not including our tobacco and real estate operations) that
require the use of existing cash resources. These include cash interest expense
of approximately $110,300 on our other debt and other corporate expenses and
taxes. In addition, the board continues to evaluate our dividend policy on a
quarterly basis. Based on the $0.20 per share quarterly dividend rate in 2020,
payment of our quarterly dividend would require cash payments of approximately
$128,900 over the next twelve months.

In order to meet these liquidity requirements as well as other liquidity needs
in the normal course of business, we have in the past used cash flows from
operations as well as existing cash and cash equivalents, which have, in the
past, been generated from operations, monetization of investments and proceeds
from debt issuances. Should these resources be insufficient to meet upcoming
liquidity needs, we may also liquidate investment securities and other long-term
investments, or, if available, draw on Liggett's credit facility. While there
are actions we can take to reduce our liquidity needs, there can be no assurance
that such measures will be successful. As of June 30, 2020, we had cash and cash
equivalents of $540,363 (including $60,921 of cash at Douglas Elliman and
$217,590 of cash at Liggett), investment securities, which were carried at
$88,643 (see Note 6 to condensed consolidated financial statements), and
long-term investments, which were carried at $33,232 (and, including in-transit
redemptions at June 30, 2020, with a fair value of $35,380). As discussed
elsewhere, we used $169,610 of cash to retire the convertible notes due in April
2020. As of June 30, 2020, our investments in real estate ventures were carried
at $115,377 and our investments in real estate, net of accumulated depreciation,
were carried at $28,876.

Limitation of interest expense deductible for income taxes. Since 2018, our
interest expense that is deductible in the computation of our income tax
liability has been limited to a percentage of adjusted taxable income, as
defined, with certain exceptions. In 2019 and 2020, the amount is limited to
50% of taxable income before interest, depreciation and amortization and, in
2021, the amount is limited to 30% of taxable income before interest,
depreciation and amortization. Beginning in 2022, the amount is limited to 30%
of taxable income before interest thereafter for non-excepted trade or
businesses. One such excepted trade or

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business is any electing real property trade or business, which portions of our
real estate business may qualify. Interest expense allocable to an excepted
trade or business is not subject to limitation. If any interest expense is
disallowed, we are permitted to carry forward the disallowed interest expense
indefinitely. Nonetheless, due to our high degree of leverage, a portion of our
interest expense in future years may not be deductible, which could increase the
after-tax cost of any new debt financings as well as the refinancing of our
existing debt.
Tobacco Litigation. Adverse verdicts have been entered in 16 Engle progeny cases
against Liggett. Liggett has paid $39,773, including interest and attorney's
fees, to satisfy the final judgments entered against it. It is possible that
additional cases could be decided unfavorably.
Notwithstanding the comprehensive nature of the Engle progeny settlements, 42
Engle progeny cases remain pending. In addition, 54 individual actions are
pending. Therefore, we and Liggett may still be subject to periodic adverse
judgments which could have a material adverse effect on our consolidated
financial position, results of operations and cash flows.
Management cannot predict the cash requirements related to any future
settlements or judgments, including cash required to bond any appeals, and there
is a risk that those requirements will not be able to be met. Management is
unable to make a reasonable estimate of the amount or range of loss that could
result from an unfavorable outcome of the cases pending against Liggett or the
costs of defending such cases. It is possible that our consolidated financial
position, results of operations or cash flows could be materially adversely
affected by an unfavorable outcome in any such tobacco-related litigation.
Vector.
6.125% Senior Secured Notes due 2025. In January 2017, we issued $850,000 of our
6.125% Senior Secured Notes due 2025 ("6.125% Senior Secured Notes"). The
indenture governing our 6.125% Senior Secured Notes (the "2025 Indenture")
contains covenants that restrict the payment of dividends if our consolidated
earnings before interest, taxes, depreciation and amortization ("Consolidated
EBITDA"), as defined in the 2025 Indenture, for the most recently ended four
full quarters is less than $75,000. The 2025 Indenture also restricts the
incurrence of debt if our Leverage Ratio and our Secured Leverage Ratio, as
defined in the 2025 Indenture, exceed 3.0 and 1.5, respectively. Our Leverage
Ratio is defined in the 2025 Indenture as the ratio of our guaranteeing
subsidiaries' total debt less the fair market value of our cash, investment
securities and long-term investments to Consolidated EBITDA, as defined in the
2025 Indenture. Our Secured Leverage Ratio is defined in the 2025 Indenture in
the same manner as the Leverage Ratio, except that secured indebtedness is
substituted for indebtedness. The following table summarizes the requirements of
these financial covenants and the results of the calculation, as defined in the
2025 Indenture.
                                      Indenture    June 30,
             Covenant                Requirement     2020

Consolidated EBITDA, as defined $75,000 $367,357 Leverage ratio, as defined

<3.0 to 1    2.08 to 1

Secured leverage ratio, as defined <1.5 to 1 0.61 to 1




As of June 30, 2020 and December 31, 2019, we were in compliance with all debt
covenants related to the 2025 Indenture.
10.5% Senior Notes due 2026. On November 2, 2018 and November 18, 2019,
respectively, we sold $325,000 and $230,000 of our 10.5% Senior Notes due 2026
in private offerings exempt from the registration requirements of the Securities
Act to qualified institutional buyers in accordance with Rule 144A of the
Securities Act.
The indenture governing our 10.5% Senior Notes due 2026 (the "2026 Indenture")
restricts our ability to pay dividends and make certain other distributions
subject to certain exceptions, including exceptions for (1) dividends and other
distributions in an amount up to 50% of our consolidated net income, plus
certain specified proceeds received us, if no event of default has occurred, and
we are in compliance with a Fixed Charge Coverage Ratio (as defined in the 2026
Indenture) of at least 2.0x, and (2) dividends and other distributions in an
unlimited amount, if no event of default has occurred and we are in compliance
with a Net Leverage Ratio (as defined in the 2026 Indenture) no greater than
4.0x. As a result, absent an event of default, we can pay dividends if the Net
Leverage ratio is below 4.0x, regardless of the value of the Fixed Charge
Coverage Ratio at the time. The 2026 Indenture also restricts our ability to
incur debt if our Fixed Charge Coverage Ratio is less than 2.0x, and restricts
our ability to secure debt other than secured debt incurred pursuant to a
Secured Leverage Ratio no greater than 3.75x, unless the 10.5% Senior Notes are
secured on an equal and ratable basis. In addition, the 2026 Indenture restricts
our ability to spin-off or transfer New Valley and its subsidiaries as a whole,
or DER Holdings LLC and its subsidiaries (including Douglas Elliman) as a whole,
unless (1) such spin-off or transfer complies with the covenants restricting
mergers and asset sales, or (2) our Net Leverage Ratio is no greater than 4.0x.
Our Fixed Charge Coverage Ratio is defined in the 2026 Indenture as the ratio of
our Consolidated EBITDA to our Fixed Charges (each as defined in the 2026
Indenture). Our Net Leverage Ratio is defined in the 2026 Indenture as the ratio
of our and our guaranteeing subsidiaries' total debt less our cash, cash
equivalents, and the fair market value of our investment securities, long-term
investments, investments in real estate, net, and investments in real estate
ventures, to Consolidated EBITDA, as defined

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in the 2026 Indenture. Our Secured Leverage Ratio is defined in the 2026 Indenture as the ratio of our and our guaranteeing subsidiaries' total secured debt, to Consolidated EBITDA, as defined in the 2026 Indenture.


                                                                  June 30,
               Covenant                   Indenture Requirement     2020
Consolidated EBITDA, as defined                    N/A            $270,637

Fixed charge coverage ratio, as defined >2.0 to 1 2.68 to 1 Net leverage ratio, as defined

<4.0 to 1         2.16 to 1
Secured leverage ratio, as defined             <3.75 to 1         3.21 to 1


As of June 30, 2020 and December 31, 2019, we were in compliance with all of the
debt covenants related to the 2026 Indenture.
Liggett Credit Facility and Liggett Term Loan Under Credit Facility. As of
June 30, 2020, there was no outstanding balance under the Credit Agreement,
which was primarily the result of the 90-day postponement of U.S. excise taxes
due between March 1, 2020 and June 30, 2020. Availability as determined under
the Credit Agreement was $60,000 based on eligible collateral at June 30, 2020.
At June 30, 2020, Liggett was in compliance with all covenants under the Credit
Agreement; Liggett's EBITDA, as defined, were $243,545 for the last twelve
months ended June 30, 2020.
Anticipated Liquidity Obligations. We and our subsidiaries have significant
indebtedness and debt service obligations. As of June 30, 2020, we and our
subsidiaries had total outstanding indebtedness of approximately $1,433,200. Of
this amount, $850,000 comprised of the outstanding amount under our 6.125%
Senior Secured Notes due 2025, and $555,000 comprised of the outstanding amount
under our 10.5% Senior Notes due 2026. There is a risk that we will not be able
to generate sufficient funds to repay our debt. If we cannot service our fixed
charges, it would have a material adverse effect on our business and results of
operations.
We currently believe that our tobacco segment will be a positive
cash-flow-generating unit and will continue to be able to sustain its operations
in 2020 without any significant liquidity concerns. Our real estate segment has
historically been a positive cash-flow generating segment, but we do not
currently expect our real estate operations to generate positive cash-flow in
2020, primarily due to the COVID-19 pandemic and related economic disruption.
In order to meet the above liquidity requirements as well as other anticipated
liquidity needs in the normal course of business, we had cash and cash
equivalents of approximately $540,400, investment securities at fair value of
approximately $88,600, long-term investments with an estimated value of
approximately $35,400, and availability under Liggett's credit facility of
approximately $60,000 at June 30, 2020. Management currently anticipates that
these amounts, as well as expected cash flows from our operations, proceeds from
public and/or private debt and equity financing to the extent available,
management fees and other payments from subsidiaries should be sufficient to
meet our liquidity needs over the next 12 months. Depending on market
conditions, we may utilize our cash, investment securities and long-term
investments to repurchase our 6.125% Senior Secured Notes due 2025 and 10.5%
Senior Notes due 2026 in open-market purchases or privately negotiated
transactions. We may acquire or seek to acquire additional operating businesses
through merger, purchase of assets, stock acquisition or other means, or to make
other investments, which may limit our liquidity otherwise available.

Market Risk
We are exposed to market risks principally from fluctuations in interest rates,
foreign currency exchange rates and equity prices. We seek to minimize these
risks through our regular operating and financing activities and our long-term
investment strategy. Our market risk management procedures cover all market risk
sensitive financial instruments.
As of June 30, 2020, approximately $27,500 of our outstanding debt at face value
had variable interest rates determined by various interest rate indices, which
increases the risk of fluctuating interest rates. Our exposure to market risk
includes interest rate fluctuations in connection with our variable rate
borrowings, which could adversely affect our cash flows. As of June 30, 2020,
there was no outstanding balance on the Liggett Credit Facility which also has
variable interest rates. As of June 30, 2020, we had no interest rate caps or
swaps. Based on a hypothetical 100 basis point increase or decrease in interest
rates (1%), our annual interest expense could increase or decrease by
approximately $300.
We held debt securities available for sale totaling $54,885 as of June 30, 2020.
See Note 6 to our condensed consolidated financial statements. Adverse market
conditions could have a significant effect on the value of these investments.
On a quarterly basis, we evaluate our debt securities available for sale and
equity securities without readily determinable fair values that do not qualify
for the NAV practical expedient to determine whether an impairment has occurred.
If so, we also make a determination if such impairment is considered temporary
or other-than-temporary. We believe that the assessment of temporary or
other-than-temporary impairment is facts-and-circumstances driven. The
impairment indicators that are taken into consideration

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as part of our analysis include (a) a significant deterioration in the earnings
performance, credit rating, asset quality, or business prospects of the
investee, (b) a significant adverse change in the regulatory, economic, or
technological environment of the investee, (c) a significant adverse change in
the general market condition of either the geographical area or the industry in
which the investee operates, and (d) factors that raise significant concerns
about the investee's ability to continue as a going concern, such as negative
cash flows from operations, working capital deficiencies, or noncompliance with
statutory capital requirements or debt covenants.

Equity Security Price Risk



As of June 30, 2020, we held various investments in equity securities with a
total fair value of $66,990, of which $33,758 represents equity securities at
fair value and $33,232 represents long-term investment securities at fair value.
The latter securities represent long-term investments in various investment
partnerships. These investments are illiquid and their ultimate realization is
subject to the performance of the underlying entities. See Note 6 to our
condensed consolidated financial statements, respectively, for more details on
equity securities at fair value and long-term investment securities at fair
value. The impact to our condensed consolidated statement of operations related
to equity securities fluctuates based on changes in their fair value.
We record changes in the fair value of equity securities in net income. To the
extent that we continue to hold equity securities, our operating results may
fluctuate significantly. Based on our equity securities held as of June 30,
2020, a hypothetical decrease of 10% in the price of these equity securities
would reduce the fair value of the investments and, accordingly, our net income
by approximately $6,699.

New Accounting Pronouncements

Refer to Note 1, Summary of Significant Accounting Policies, to our financial statements for further information on New Accounting Pronouncements.



Legislation and Regulation
There are no material changes from the Legislation and Regulation section set
forth in Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," of our Annual Report on Form 10-K for the year ended
December 31, 2019, except as follows. The following paragraph of "Item.
1. Business--Legislation and Regulation-Advertising and Warnings on Packaging"
from our Annual Report on Form 10-K, which is referenced therein, is amended and
restated in its entirety:
On March 18, 2020, FDA issued a final rule to require new health warnings on
cigarette packages and in cigarette advertisements. This rule requires each
cigarette package and advertisement to bear one of eleven textual warning
statements accompanied by a corresponding graphic image covering 50% of the area
of the front and rear panels of cigarette packages and at least 20% of the area
at the top of cigarette advertisements. The rule establishes marketing
requirements that include the random and equal display and distribution of the
required warnings for cigarette packages and quarterly rotation of the required
warnings for cigarette advertisements. The final rule provided for an effective
date of June 18, 2021, 15 months after issuance of the final rule. The inclusion
of new warnings and rotation requirements pursuant to the final rule would
likely increase Liggett's production costs. On April 3, 2020, Liggett, along
with other tobacco companies, commenced an action against the FDA in the United
States District Court, District of Texas (Tyler Division) challenging the
legality of the graphic warning final rule. On May 8, 2020, the court issued an
updated scheduling order and granted a joint motion to postpone the effective
date of the final rule by 120 days to October 16, 2021.
We cannot predict whether the court will delay the effective date and/or
determine that some or all of the proposed textual and/or graphic warnings, or
proposed prominence of the warnings, violate the First Amendment, Administrative
Procedure Act, or other legal requirements, or what the impact of such a court
ruling would have on the compliance timeline or requirements imposed on
industry.


               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical information, this report contains "forward-looking
statements" within the meaning of the federal securities law. Forward-looking
statements include information relating to our intent, belief or current
expectations, primarily with respect to, but not limited to:
• economic outlook,


• capital expenditures,


• cost reduction,



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• legislation and regulations,




• cash flows,


• operating performance,


• litigation, and

• related industry developments (including trends affecting our business,

financial condition and results of operations).




We identify forward-looking statements in this report by using words or phrases
such as "anticipate," "believe," "estimate," "expect," "intend," "may be,"
"objective," "plan," "seek," "predict," "project" and "will be" and similar
words or phrases or their negatives.
The forward-looking information involves important risks and uncertainties that
could cause our actual results, performance or achievements to differ materially
from our anticipated results, performance or achievements expressed or implied
by the forward-looking statements. Factors that could cause actual results to
differ materially from those suggested by the forward-looking statements
include, without limitation, the following:
•      general economic and market conditions and any changes therein, due to

acts of war and terrorism or otherwise,

• governmental regulations and policies,

• adverse changes in global, national, regional and local economic and

market conditions, including those related to pandemics and health crises,

such as the recent outbreak of COVID-19,

• significant changes in the price, availability or quality of tobacco,


       other raw materials or component parts, including as a result of the
       COVID-19 pandemic,


•      potential dilution to our holders of or common stock as a result of
       issuances of additional shares of common stock to fund our financial
       obligations and other financing activities,


•      the impacts of the Tax Cuts and Jobs Act of 2017, including the
       deductibility of interest expense and the impact of the markets on our
       Real Estate segment,

• effects of industry competition,

• impact of business combinations, including acquisitions and divestitures,

both internally for us and externally in the tobacco industry,

• impact of legislation on our results of operations and product costs, i.e.

the impact of federal legislation providing for regulation of tobacco

products by FDA,

• impact of substantial increases in federal, state and local excise taxes,

• uncertainty related to product liability and other tobacco-related

litigations including the Engle progeny cases pending in Florida and other

individual and class action cases where certain plaintiffs have alleged


       compensatory and punitive damage amounts ranging into the hundreds of
       million and even billions of dollars; and,


•      potential additional payment obligations for us under the MSA and other
       settlement agreements with the states.



Further information on the risks and uncertainties to our business include the
risk factors discussed above in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and under Item 1A, "Risk Factors"
in our Annual Report on Form 10-K for the year ended December 31, 2019 filed
with the Securities and Exchange Commission.
Although we believe the expectations reflected in these forward-looking
statements are based on reasonable assumptions, there is a risk that these
expectations will not be attained and that any deviations will be material. The
forward-looking statements speak only as of the date they are made.

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