Turning Point Brands Announces Fourth Quarter and Full Year 2023 Results

-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

LOUISVILLE, Ky., February 28, 2024–(BUSINESS WIRE)–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.

(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.

(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

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

12,533

12,794

(646

)

134

Adjustments:

Transactional expenses and strategic initiatives

–

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

20,968

17,362

8,188

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

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

58,180

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

68,280

73,342

53,835

53,331

(193

)

1,506

View source version on businesswire.com: https://www.businesswire.com/news/home/20240228612689/en/

Contacts

Investor Contacts
Turning Point Brands, Inc.:
Louie Reformina, Senior Vice President, CFO
Turning Point Brands, Inc.
502.774.9238
ir@tpbi.com

Turning Point Brands Announces Fourth Quarter and Full Year 2023 Results

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Turning Point Brands Announces Fourth Quarter and Full Year 2023 Results

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