Standard Diversified Inc. Reports Financial Results for Its Third Quarter and Nine Months Ended September 30, 2019

Standard Diversified Inc. (the “Company”) (NYSE American: SDI) today announced its financial results for the third quarter and nine months ended September 30, 2019. In addition to its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission, the Company will also make available an updated Investor Presentation on its corporate website at www.standarddiversified.com.

2019 Third Quarter Highlights

Total revenues increased 13.6% to $104.1 million as a result of strong growth at Turning Point Brands, Inc. (NYSE: TPB) (“TPB”)
Net income attributable to SDI was $0.2 million, or $0.01 per diluted share

2019 Nine Month Highlights

Total revenues increased 16.3% to $305.8 million as a result of strong growth at TPB
Net loss attributable to SDI was $2.3 million, or $0.14 per diluted share

Operating Events

In its third quarter 2019 press release (Turning Point Brands - 2019 Third Quarter Financial Results), TPB presented strong quarterly results in the smokeless and smoking segments, producing overall increases (as compared to the same quarter last year) in net sales, gross profit, net income and adjusted EBITDA, all despite the impact of negative vaping headlines and the resulting decline in its third-party vaping distribution.

TPB is reviewing strategic alternatives for the third-party vaping distribution business, including a continuing effort to repurpose its infrastructure to support proprietary CBD sales, which continue to grow month over month. Additionally, in an attempt to mitigate the impact of declines in third-party vaping distribution, TPB will accelerate its SG&A cost reduction plans which are expected to deliver $8-10 million of annualized savings.

During the nine months ended September 30, 2019, the Company recorded impairment charges of $0.8 million and $2.0 million related to the full impairment of the goodwill and intangible asset balances, respectively, in its insurance company, Maidstone Insurance Company (“Maidstone”). During the quarter ended September 30, 2019, the Company provided the New York State Department of Financial Services (“NYSDFS”) its consent to the filing of a petition for the Entry of an Order of Liquidation and the Company is now awaiting the filing by the NYSDFS in the Supreme Court of the State of New York. Once the Order of Liquidation is entered by the Supreme Court of the State of New York, the Company shall be relieved of the assets and liabilities of Maidstone.

Corporate Headquarters Relocation

The Company relocated its corporate headquarters, effective September 2, 2019, to 767 5th Ave, 12th FL, New York NY 10153.

About Standard Diversified Inc.

Standard Diversified Inc. is a holding company that owns and operates subsidiaries in a variety of industries, including other tobacco products, outdoor advertising and insurance. For more information about the Company, please visit the Company’s website at www.standarddiversified.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, are forward-looking statements. These forward-looking statements address, among other things activities, events or developments that the Company expects, believes or anticipates will or may occur in the future. These forward-looking statements are subject to a number of risks that could cause actual results to differ materially from those contained in the forward-looking statements, including those risks described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Except as required by law, the Company assumes no obligation to update publicly any such forward-looking statements.

Standard Diversified Inc. and Subsidiaries

Consolidated Statements of Income (Loss)

(dollars in thousands except share and per share data)

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Revenues: Net sales

97,520

84,035

283,882

240,156

Insurance premiums earned

6,055

7,088

20,362

21,539

Net investment income

210

309

767

679

Other income

279

163

829

557

Total revenues

104,064

91,595

305,840

262,931

Operating costs and expenses: Cost of sales

54,636

47,742

159,217

136,147

Selling, general and administrative expenses

31,024

24,492

84,201

70,237

Incurred losses and loss adjustment expenses

4,790

5,790

20,506

17,007

Impairment loss on goodwill and other intangible assets

2,826

Other operating expenses

2,003

2,682

7,248

5,512

Total operating costs and expenses

92,453

80,706

273,998

228,903

Operating income

11,611

10,889

31,842

34,028

Interest expense, net

4,680

4,450

13,529

12,556

Interest and investment income

(777

)

(243

)

(1,115

)

(620

)

Loss on extinguishment of debt

2,117

2,267

2,384

Net periodic benefit (income) expense, excluding service cost

(12

)

(45

)

(34

)

176

Income before income taxes

5,603

6,727

17,195

19,532

Income tax expense

2,236

1,436

6,569

4,153

Net income

3,367

5,291

10,626

15,379

Net income attributable to noncontrolling interests

(3,133

)

(3,924

)

(12,973

)

(9,962

)

Net income (loss) attributable to Standard Diversified Inc.

234

1,367

(2,347

)

5,417

Net income (loss) attributable to SDI per Class A and Class B Common Share – Basic

0.01

0.08

(0.14

)

0.33

Net income (loss) attributable to SDI per Class A and Class B Common Share – Diluted

0.01

0.08

(0.14

)

0.31

Weighted Average Class A and Class B Common Shares Outstanding – Basic

16,830,132

16,677,412

16,816,158

16,618,823

Weighted Average Class A and Class B Common Shares Outstanding – Diluted

16,877,690

16,741,660

16,816,158

16,661,809

Standard Diversified Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands except share and per share data)

September 30,

December 31,

2019

2018

(Unaudited)

ASSETS Cash and cash equivalents

97,347

21,201

Fixed maturities available for sale, at fair value; amortized cost of $26,241 in 2019 and $32,474 in 2018

26,566

32,132

Equity securities, at fair value; cost: $1,099 in 2019 and $794 in 2018

1,115

693

Trade accounts receivable, net of allowances of $63 in 2019 and $44 in 2018

7,276

2,901

Premiums receivable

3,566

5,858

Inventories

98,719

91,237

Other current assets

16,401

15,045

Property, plant and equipment, net

29,759

27,741

Deferred income taxes

2,242

Right of use assets

13,755

Deferred financing costs, net

960

870

Intangible assets, net

33,180

38,325

Deferred policy acquisition costs

1,468

2,279

Goodwill

154,479

146,696

Master Settlement Agreement (MSA) escrow deposits

32,074

30,550

Other assets

6,891

6,415

Total assets

525,798

421,943

LIABILITIES AND EQUITY Reserves for losses and loss adjustment expenses

26,432

27,330

Unearned premiums

8,370

12,707

Advance premiums collected

326

500

Accounts payable

9,498

9,225

Accrued liabilities

21,571

23,883

Current portion of long-term debt

15,958

9,431

Revolving credit facility

26,000

Notes payable and long-term debt

330,150

208,616

Lease liabilities

12,280

Deferred income taxes

2,711

Postretirement benefits

3,096

Asset retirement obligations

2,100

2,028

Other long-term liabilities

3,554

1,687

Total liabilities

433,335

327,214

Commitments and contingencies Equity: Preferred stock, $0.01 par value; authorized shares 50,000,000; -0- issued and outstanding shares

Class A common stock, $0.01 par value; authorized shares, 300,000,000; 9,036,095 issued and 9,029,479 outstanding at September 30, 2019 and 9,156,293 issued and 9,052,801 outstanding at December 31, 2018

Class B common stock, $0.01 par value; authorized shares, 30,000,000; 7,722,564 and 7,801,995 issued and outstanding at September 30, 2019 and December 31, 2018, respectively; convertible into Class A shares on a one-for-one basis

Additional paid-in capital

72,955

81,260

Class A treasury stock, 6,616 and 103,492 common shares at cost as of September 30, 2019 and December 31, 2018, respectively

(70

)

(1,440

)

Accumulated other comprehensive loss

(1,243

)

(1,683