Turning Point Brands(TPB) - 2019 Q2 - Quarterly Report

Financial Performance - Consolidated net sales increased to $93.3 million for the three months ended June 30, 2019, up from $81.1 million in the same period of 2018, representing a 15.1% increase[146] - Operating income rose by 34.7% to $19.9 million for the three months ended June 30, 2019, compared to $14.8 million in the prior year[146] - Consolidated net income increased by 41.7% to $13.2 million for the three months ended June 30, 2019, compared to $9.3 million in 2018[146] - For the three months ended June 30, 2019, consolidated gross profit increased to $41.2 million, a 15.1% increase from $35.8 million in the same period of 2018[150] - For the six months ended June 30, 2019, consolidated net sales increased to $185.0 million, a 19.3% increase from $155.0 million in the same period of 2018[158] - Consolidated net income for the six months ended June 30, 2019, was $19.8 million, a 60.0% increase from $12.4 million in the same period of 2018[171] - Adjusted EBITDA for the six months ended June 30, 2019, was $34,324,000, compared to $30,933,000 in 2018, reflecting an increase of 11%[178] Segment Performance - NewGen products segment saw a significant growth of 52.8%, with net sales reaching $41.8 million compared to $27.4 million in 2018[146] - For the three months ended June 30, 2019, net sales in the Smokeless products segment increased to $26.2 million, a 7.2% increase from $24.4 million in the same period of 2018[147] - For the three months ended June 30, 2019, net sales in the Smoking products segment decreased to $25.4 million, a decline of 13.5% from $29.3 million in the same period of 2018[148] - For the six months ended June 30, 2019, net sales in the NewGen products segment increased to $85.4 million, a 59.4% increase from $53.6 million in the same period of 2018[161] - For the six months ended June 30, 2019, gross profit in the NewGen products segment increased to $28.3 million, a 79.8% increase from $15.7 million in the same period of 2018[165] Investments and Acquisitions - The acquisition of Solace Technologies for $10.56 million aims to enhance product development in alternative ingredients[137] - A 30% stake was obtained in ReCreation Marketing with a $3 million investment, with options to increase ownership to 50%[138] - The investment in Canadian American Standard Hemp Inc. positions the company to participate in the hemp-derived products market[131] Debt and Financing - The company issued $150 million in 2.50% convertible senior notes due July 15, 2024, to refinance existing debt and fund acquisitions[140] - Total notes payable and long-term debt as of June 30, 2019, was $204,511,000, down from $224,000,000 at December 31, 2018[189] - The weighted average interest rate of the 2018 First Lien Term Loan was 5.40% at June 30, 2019[191] - As of June 30, 2019, $70 million of the company's outstanding long-term debt with variable rates is covered by interest rate swap agreements, effectively bearing interest at a fixed rate[199] - A 1% increase in interest rates would result in a pre-tax income change of approximately $1.3 million per year[199] Cash Flow and Working Capital - Net cash provided by operating activities for the six months ended June 30, 2019, was $21.7 million, up from $6.0 million in the same period of 2018, an increase of $15.8 million[184] - Net cash used in investing activities decreased to $0.3 million for the six months ended June 30, 2019, from $14.0 million in 2018, a reduction of $13.7 million[185] - Working capital increased by $5.2 million to $53.3 million at June 30, 2019, compared to $48.1 million at December 31, 2018, primarily due to increased accounts receivable[182] Expenses and Compliance - Selling, general, and administrative expenses for the six months ended June 30, 2019, increased to $49.7 million, a 15.4% increase from $43.1 million in the same period of 2018[166] - Income tax expense for the six months ended June 30, 2019, was $4.8 million, representing 19.4% of income before income taxes[170] - The company was in compliance with the financial and restrictive covenants of the 2018 Credit Facility as of June 30, 2019[188] Shareholder Returns - The company paid a cash dividend of $0.045 per common share on July 12, 2019, to shareholders of record at the close of business on June 21, 2019[187] Risk Exposure - There have been no material changes in the company's exposure to exchange rate fluctuation risk during the reported period[197] - There have been no material changes in the company's exposure to credit risk during the three months ended June 30, 2019[198]