Turning Point Brands, Inc. (TPB) Reports In-Line Q4 EPS, Beats on Revenues

Note: EPS may not be comparable

Turning Point Brands, Inc. (NYSE: TPB) reported Q4 EPS of $0.23, in-line with the analyst estimate of $0.23. Revenue for the quarter came in at $73.6 million versus the consensus estimate of $72.35 million.

Fourth Quarter 2017(Comparisons vs. same period year-ago)

• Net sales increased 36.7% to a record $73.6 million
• Gross profit increased 23.1% to $32.3 million
• Income before income taxes increased $2.5 million to $6.9 million
• Net income was $3.5 million
• Diluted EPS of $0.18 and Adjusted diluted EPS of $0.23(see Schedule D for a reconciliation to diluted EPS)
• Adjusted EBITDA increased 9.6% to $14.8 million(see Schedule A for a reconciliation to net income)
• Other highlights from the fourth quarter:
  • Stoker’s increased retail market share in both Moist Snuff Tobacco (“MST”) and chewing tobacco, according to MSAi. Management Science Associates, Inc., (“MSAi”) administers a proprietary information system that captures sales from approximately 1,000 wholesalers to over 250,000 retailers.
  • Zig-Zag maintained strong, industry leading shares in both Make-Your-Own (“MYO”) cigar wraps and premium cigarette papers
  • In the promising Canadian market, Zig-Zag introduced new cigarette papers in late fourth quarter
  • The quarter had one more shipping day to the trade versus 2016

2018 Outlook

Based upon our current understanding of the 2018 FDA schedule, the company expects to continue its SKU rationalization efforts to sharpen focus on key growth areas while discontinuing products that do not warrant the expense required to achieve FDA compliance, including specific mid-year 2018 packaging requirements. At the present time, the company has identified products for 2018 rationalization and estimates that SKU discontinuations will unfavorably impact year-over-year net sales by approximately $3.5 million.

Absent any acquisitions and net of the above-mentioned SKU rationalizations, the company anticipates 2018 volume growth of 4% to 6% with price/mix contributing another 2% to 4%. SG&A expenses as a percent of net sales are expected to be in the 25% to 27% range. Interest expense is currently expected to be $14 to $15 million.

The California state excise tax on MYO cigar wraps is anticipated to continue impacting state volume comparisons to year ago through the second quarter of 2018, offset to some degree by sales volumes in adjacent states and new product and promotional initiatives.

The company expects a 2018 effective income tax rate of 26% to 27%. Net operating losses, or NOLs, available to offset federal income taxes amounted to approximately $17.8 million at year end 2017. We expect to fully utilize these NOLs during 2018 when we will begin paying cash federal income taxes.

Capital expenditures for 2018 are expected to be $2 to $3 million, which includes one-time expenditures associated with logistics efficiency and integration activities including the Vapor Shark distribution and e-liquid manufacturing facility relocation.

For earnings history and earnings-related data on Turning Point Brands, Inc. (TPB) click here.

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