Turning Point Brands(US:TPB)2025-03-06 22:11Financial Performance - For the year ended December 31, 2024, consolidated net sales increased by $35.6 million, or 11.0%, compared to the prior year, driven by growth in both Zig-Zag and Stoker's product segments [282]. - Zig-Zag products segment net sales increased by $11.9 million, or 6.6%, primarily due to $11.5 million growth in papers, wraps, and accessories, and $5.6 million growth in cigars [283]. - Stoker's products segment net sales increased by $23.7 million, or 16.4%, with a sales volume increase of 6.8% contributing $9.9 million and price/product mix contributing $13.8 million [284]. - For the year ended December 31, 2024, net income from continuing operations attributable to Turning Point Brands, Inc. was $47.3 million for the year ended December 31, 2024, compared to $38.7 million in the prior year [300]. - Consolidated net income for 2024 was $40.51 million, up from $37.78 million in 2023, reflecting a growth of 1.9% [427]. - Basic earnings per share for continuing operations increased to $2.67 in 2024 from $2.20 in 2023, marking a rise of 21.4% [425]. - The company’s accumulated earnings increased to $147.16 million in 2024 from $112.44 million in 2023, an increase of 30.9% [423]. - The company’s total stockholders' equity rose to $190.38 million in 2024, compared to $152.01 million in 2023, reflecting a growth of 25.3% [423]. Profitability and Margins - Consolidated gross profit increased by $18.6 million, or 10.2%, but gross profit margin decreased to 55.9% of net sales from 56.3% in the prior year [286]. - Zig-Zag products segment gross profit increased by $5.5 million, or 5.5%, with gross profit margin decreasing to 55.4% due to growth in lower-margin cigar products [287]. - For the year ended December 31, 2024, gross profit in the Stoker's products segment increased by $13.1 million, or 16.0%, compared to the prior year, while gross profit as a percentage of net sales decreased to 56.4% from 56.6% [288]. - The company’s operating income for the year ended December 31, 2024, was $80.832 million, indicating strong operational performance [362]. Expenses and Costs - Selling, general and administrative expenses increased by $18.1 million, or 17.3%, for the year ended December 31, 2024, including $7.2 million related to stock options and $4.6 million for corporate restructuring [289]. - Operating income in the Zig-Zag products segment decreased by $1.6 million, or 2.3%, for the year ended December 31, 2024, with operating income as a percentage of net sales decreasing to 34.7% from 37.8% [292]. - Operating income in the Stoker's products segment increased by $6.1 million, or 9.7%, for the year ended December 31, 2024, while operating income as a percentage of net sales decreased to 40.6% from 43.0% [293]. - Unallocated costs increased to $54.1 million for the year ended December 31, 2024, compared to $47.5 million in the prior year, marking a 13.9% increase [294]. Cash Flow and Financing - Cash provided by operating activities for the year ended December 31, 2024, was $60,958 thousand, an increase of $4.7 million compared to the prior year [336]. - For the year ended December 31, 2024, net cash used in financing activities was $128.3 million, an increase of $78.8 million primarily due to the retirement of Convertible Senior Notes [341]. - The company had restricted assets of $30.7 million and $33.6 million as of December 31, 2024, and 2023, respectively [334]. - The company’s adjusted working capital increased by $57.3 million compared to the prior year end, primarily due to a $58.3 million decrease in current liabilities [333]. - The company recorded a non-cash charge of $8.8 million to reduce the carrying value of the disposal group to fair value upon meeting the criteria for held for sale classification [323]. Debt and Interest - The company’s long-term debt was $248.604 million, down from $307.064 million in 2023, representing a decrease of approximately 19% [347]. - Interest expense for the year ended December 31, 2024, was $13.983 million, reflecting the company's debt obligations [362]. - Interest expense, net decreased by $0.7 million for the year ended December 31, 2024, due to the maturity of Convertible Senior Notes and increased interest income on cash [295]. Market and Regulatory Environment - The alternative smoking accessories market is experiencing robust growth driven by cannabinoid legalization in the U.S. and Canada [269]. - The FDA has proposed regulations that could significantly impact the company's products and premarket filings [379]. - The company is subject to federal and state excise taxes, which may increase and affect product demand [372][373]. Asset Management - Total assets as of December 31, 2024, amounted to $493.353 million, with current assets totaling $198.205 million [363]. - The company reported total liabilities of $302.973 million, including long-term debt of $248.604 million [363]. - Stockholders' equity reached $190.380 million, with unrestricted subsidiaries contributing $187.981 million [363]. Stock and Shareholder Activity - In 2024, the company repurchased 154,945 shares of common stock for a total cost of $5.1 million, averaging $32.60 per share [370]. - The company has $100 million remaining under its Board-approved stock repurchase program as of December 31, 2024 [370]. Internal Controls and Compliance - The company has not maintained effective internal control over financial reporting as of December 31, 2024, due to identified material weaknesses [414]. - The company reported a material weakness in internal control over financial reporting related to information technology general controls [416]. Research and Development - Research and development and quality assurance costs were approximately $1.3 million in 2024, up from $0.6 million in both 2023 and 2022, indicating a significant increase in investment in these areas [450]. - Advertising and promotion costs amounted to $12.0 million in 2024, compared to $7.6 million in 2023 and $6.2 million in 2022, representing a 57.9% increase from 2023 to 2024 [466].