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What changed in Turning Point Brands, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Turning Point Brands, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+524 added−523 removedSource: 10-K (2025-03-06) vs 10-K (2024-02-28)

Top changes in Turning Point Brands, Inc.'s 2024 10-K

524 paragraphs added · 523 removed · 369 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

106 edited+13 added−29 removed67 unchanged
Biggest changeFor Zig-Zag Products, we have also developed a growing e-commerce business along with a sales team focused on serving alternative channels such as headshops and dispensaries. Our CDS sales efforts are focused on alternative channels and winning new stores, increasing our products share and store share and growing the B2C engine to capture a greater share of direct-to-consumer online sales.
Biggest changeOur Zig-Zag and Stoker’s Products sales efforts are focused on wholesale distributors and retail merchants in the independent and chain convenience store, tobacco outlet, food store, mass merchandising, drug store, and non-traditional retail channels. For Zig-Zag Products, we have also developed a growing e-commerce business along with a sales team focused on serving alternative channels such as headshops and dispensaries.
We extensively use data supported by leading technology, enabling our salesforce to analyze changing trends and effectively identify evolving consumer preferences at the store level and efficiently respond.
We extensively use data supported by leading technology, enabling our salesforce to analyze changing trends and effectively identify evolving consumer preferences at the store level and respond efficiently.
The PMTA process is a very expensive and resource-intensive process and there are currently hundreds of competitors in the market but very few have the capability and or the resources to get their products successfully through this process. In the years since, the FDA has rejected millions of applications.
The PMTA process is a very expensive and resource-intensive process and there are currently hundreds of competitors in the market but very few have the capability or the resources to get their products successfully through this process. In the years since, the FDA has rejected millions of applications.
We believe international sales represent a meaningful growth opportunity. Having established a strong infrastructure and negotiated relationships across multiple segments and products, we are pursuing an international growth strategy to broaden sales and strengthen margins. In 2021, we further invested in growth in Canada by increasing our ownership in Turning Point Brands Canada to 65%.
We believe international sales represent a meaningful growth opportunity. Having established a strong infrastructure and negotiated relationships across multiple segments and products, we are pursuing an international growth strategy to broaden sales and strengthen margins. We further invested in growth in Canada in 2021 by increasing our ownership in Turning Point Brands Canada to 65%.
Given the importance of contract manufacturing to our business, our quality control group ensures that established, written procedures and standards are adhered to by each of our contract manufacturers. Responsibilities related to process control, manufacturing activities, quality control, and inventory management with respect to our loose-leaf are allocated between us and Swedish Match under the manufacturing agreement.
Given the importance of contract manufacturing to our business, our quality control group ensures that established, written procedures and standards are adhered to by each of our contract manufacturers. Responsibilities related to process control, manufacturing activities, quality control, and inventory management with respect to our loose-leaf products are allocated between us and Swedish Match under the manufacturing agreement.
As a result, public health plays a central role in all of our product initiatives. We believe in, and work diligently to apply, harm reduction principles to all of our products, from development through distribution and marketing.
As a result, public health plays a central role in all our product initiatives. We believe in, and work diligently to apply, harm reduction principles to all our products, from development through distribution and marketing.
In evaluating acquisition opportunities, our focus is on identifying acquisitions that would leverage our distribution platform, regulatory infrastructure and product offerings or enable category expansion in areas with high growth potential to drive profit generation. The vast majority of our 2023 U.S. gross profit was derived from sales of products currently regulated by the FDA Center for Tobacco Products.
In evaluating acquisition opportunities, our focus is on identifying acquisitions that would leverage our distribution platform, regulatory infrastructure and product offerings or enable category expansion in areas with high growth potential to drive profit generation. The vast majority of our 2024 U.S. gross profit was derived from sales of products currently regulated by the FDA Center for Tobacco Products.
We have long-standing relationships in the core convenience store channel and wholesale distribution network with access to more than 217,000 retail outlets in North America. We are also increasing brand presence through non-traditional channels including headshops, dispensaries, and B2B e-commerce and are expanding our sales team dedicated to these channels.
We have long-standing relationships in the core convenience store channel and wholesale distribution network with access to more than 220,000 retail outlets in North America. We are also increasing brand presence through non-traditional channels including headshops, dispensaries, and B2B e-commerce and are expanding our sales team dedicated to these channels.
Item 1. Business Overview Turning Point Brands, Inc. (the “Company,” “we,” “our,” or “us”) is a leading manufacturer, marketer and distributor of branded consumer products. We sell a wide range of products to adult consumers consisting of staple products with our iconic brands Zig-Zag ® and Stoker’s ® and our next generation products to fulfill evolving consumer preferences.
Item 1. Business Overview Turning Point Brands, Inc. (the “Company,” “we,” “our,” or “us”) is a leading manufacturer, marketer and distributor of branded consumer products. We sell a wide range of products to adult consumers consisting of staple products with our iconic brands Zig-Zag® and Stoker’s® to fulfill evolving consumer preferences.
Food and Drug Administration (“FDA”) was given jurisdiction over cigarettes and smokeless tobacco, which expanded in 2016 to include all other tobacco products including vaping and cigars. This was further expanded in 2022 to cover non-tobacco nicotine products. We believe we have a competitive advantage due to our management team’s experience navigating the relevant regulatory environment.
Food and Drug Administration (“FDA”) was given jurisdiction over cigarettes and smokeless tobacco, which expanded in 2016 to include cigars and all other tobacco products. This was further expanded in 2022 to cover non-tobacco nicotine products. We believe we have a competitive advantage due to our management team’s experience navigating the relevant regulatory environment.
We adopted the following strategies to drive growth in our business and build stockholder value: Grow Share of Existing Product Lines, Domestically and Internationally We intend to remain a consumer centric organization with an innovative view and understanding of the alternative smoking accessories and OTP markets. We believe we have strong tailwinds for growth within our existing product lines.
We adopted the following strategies to drive growth in our business and build stockholder value: Grow Share of Existing Product Lines, Domestically and Internationally We intend to remain a consumer centered organization with an innovative view and understanding of the alternative smoking accessories and OTP markets. We believe we have strong tailwinds for growth within our existing product lines.
Expand into Adjacent Categories through Innovation and New Partnerships We continually evaluate opportunities to expand into adjacent product categories by leveraging our current portfolio and distribution platform, as well as by forming new partnerships. We believe there are meaningful opportunities for growth within the alternative smoking accessories and OTP markets.
Expand into Adjacent Categories through Innovation and New Partnerships We continually evaluate opportunities to expand into adjacent product categories by leveraging our current portfolio and distribution platform, as well as by forming new partnerships. We believe there are meaningful opportunities for growth within the alternative smoking accessories.
Within our Zig-Zag Products segment, we are benefitting from secular growth trends in the industry, driving market share gains in our traditional convenience store channel and expanding our presence into non-traditional channels including headshops, dispensaries and e-commerce to drive growth.
Within our Zig-Zag products segment, we are benefitting from secular growth trends in the industry, driving market share gains in our traditional convenience store channel and expanding our presence into non-traditional channels including headshops, dispensaries and e-commerce.
We subscribe to a sales tracking system provided by MSAi that measures OTP product shipments by all market participants, on a weekly basis, from approximately 600 wholesalers to over 250,000 traditional retail stores in the U.S.
We subscribe to a sales tracking system provided by MSAi that measures OTP product shipments by all market participants, on a weekly basis, from approximately 600 wholesalers to over 265,000 traditional retail stores in the U.S.
In 2023, approximately 75% of our net sales were derived from outsourced production operations and our capital expenditures have ranged between $4.8 million and $7.7 million per year over the previous five years. The stability of our cash flows is enhanced by the resilience of our Zig-Zag Products and Stoker’s Products business segments which we believe have recession-resistant end-markets.
In 2024, approximately 75% of our net sales were derived from outsourced production operations and our capital expenditures have ranged between $4.7 million and $7.7 million per year over the previous five years. The stability of our cash flows is enhanced by the resilience of our Zig-Zag Products and Stoker’s Products business segments which we believe have recession-resistant end-markets.
To ensure we have a steady supply of premium cigarette paper products, as well as cigarette tubes and injectors, RTI is required to maintain, at its expense, a two-month supply of inventory in a bonded, public warehouse in the U.S. 10 Table of Contents We obtain our MYO cigar wraps from our supplier in the Dominican Republic.
To ensure we have a steady supply of premium cigarette paper products, as well as cigarette tubes and injectors, RTI is required to maintain, at its expense, a two-month supply of inventory in a bonded, public warehouse in the U.S. We obtain our MYO cigar wraps from our supplier in the Dominican Republic.
For a number of years, RTI has been the outsourced manufacturer of cigarette papers, cigarette tubes, cigarette injector machines and certain other products bearing the Zig-Zag ® name. Swedish Match Manufacturing Agreement In 2008, we entered into a manufacturing and distribution agreement with Swedish Match whereby Swedish Match became the exclusive manufacturer of our loose-leaf chewing tobacco.
For a number of years, RTI has been the outsourced manufacturer of cigarette papers, cigarette tubes, cigarette injector machines and certain other products bearing the Zig-Zag ® name. 10 Table of Contents Swedish Match Manufacturing Agreement In 2008, we entered into a manufacturing and distribution agreement with Swedish Match whereby Swedish Match became the exclusive manufacturer of our loose-leaf chewing tobacco.
As discussed below, our ESG initiatives are led by our ESG Executive Committee, as well as subordinate committees that focus on specific initiatives. Public Health One key aspect of our ESG program, is our distinct focus on our role in public health. We market and sell products intended for adult use only, many containing nicotine.
As discussed below, our initiatives are led by our Nominating and Governance Executive Committee, as well as subordinate committees that focus on specific initiatives. Public Health One key aspect of our program is our distinct focus on our role in public health. We market and sell products intended for adult use only, many containing nicotine.
As of the end of 2023, 24 U.S. states and the District of Columbia had legalized cannabis for adult recreational use and a majority of states now have comprehensive public medical cannabis programs.
As of the end of 2024, 24 U.S. states and the District of Columbia had legalized cannabis for adult recreational use and a majority of states now have comprehensive public medical cannabis programs.
In late 2021, we extended our Zig-Zag ® MYO cigar wraps offering with entries into the growing hemp wraps and natural leaf wraps markets. • We extended the Zig-Zag ® brand into hemp rolling papers in 2018 and followed that with the launch of paper cones in 2019 with both products quickly establishing leading positions in their respective categories. • We leveraged the proud legacy and value of the Stoker’s ® brand to introduce a 12 oz.
In late 2021, we extended our Zig-Zag ® MYO cigar wraps offering with entries into the growing hemp wraps and natural leaf wraps markets. • We extended the Zig-Zag ® brand into hemp rolling papers in 2018 and followed that with the launch of paper cones in 2019 with both products quickly establishing leading positions in their respective categories. • We leveraged the proud legacy and value of the Stoker ’ s ® brand to introduce a 12 oz.
We make all such filings available free of charge as soon as reasonably practicable after filing. The information found on our website is not part of this or any other report we file with or furnish to the SEC. 16 Table of Contents
We make all such filings available free of charge as soon as reasonably practicable after filing. The information found on our website is not part of this or any other report we file with or furnish to the SEC.
We are now the market share leader for MYO cigar wraps with approximately a 55% share of the cigar wraps category and 76% of the share of the HTL cigar wraps sub-category. 1 We believe our success was driven by the Zig-Zag ® tobacco branding, which we feel is widely understood by consumers to represent a favorable, customizable experience ideally suited to MYO products.
We are now a market share leader for MYO cigar wraps with approximately a 48% share of the cigar wraps category and 71% of the share of the HTL cigar wraps sub-category. 1 We believe our success was driven by the Zig-Zag ® tobacco branding, which we feel is widely understood by consumers to represent a favorable, customizable experience ideally suited to MYO products.
Within our Stoker’s Products segment, there is ample runway to gain market share driven by same store sales growth and further distribution gains as Stoker’s ® MST continues to be one of the fastest growing brands in the category. In 2023, less than 10% of our revenues were generated outside of the U.S.
Within our Stoker’s products segment, there is ample runway to gain market share driven by same store sales growth and further distribution gains as Stoker ’ s ® MST continues to be one of the fastest growing brands in the category. In 2024, less than 10% of our revenues were generated outside of the U.S.
We plan to continue to engage in appropriately targeted marketing activity, consistent with all legal requirements, industry standards, and best practices. 15 Table of Contents Preventing youth access and use of our adult-use products is a key to our continued success.
We plan to continue to engage in appropriately targeted marketing activity, consistent with all legal requirements, industry standards, and best practices. Preventing youth access and use of our adult-use products is a key to our continued success.
Within our Stoker’s segment, we have seen a positive correlation between the frequency of store calls by our salesforce and our retail market share. Asset-light Business Model that Generates Resilient Free Cash Flow We have a lean, asset-light manufacturing and sourcing model which leverages outsourced supplier relationships and requires low capital expenditures.
Within our Stoker’s segment, we continue to see a positive correlation between the frequency of store calls by our salesforce and our retail market share. Asset-light Business Model that Generates Resilient Free Cash Flow We have a lean, asset-light manufacturing and sourcing model which leverages outsourced supplier relationships and requires low capital expenditures.
We believe our experienced salesforce, expansive distribution network, and leading market analytics put us in a strong position to swiftly execute new product launches in response to evolving consumer and market preferences. Strategically Pursue Acquisitions We believe there are meaningful acquisition opportunities in our fragmented markets. We regularly evaluate acquisition opportunities across our industries.
We believe our experienced salesforce, expansive distribution network and leading market analytics put us in a strong position to swiftly execute new product launches in response to evolving consumer and market preferences. 8 Table of Contents Strategically Pursue Acquisitions We believe there are meaningful acquisition opportunities in our fragmented markets. We regularly evaluate acquisition opportunities across our industries.
We acquired the U.S. and Canadian rolling papers distribution rights for Zig-Zag ® in 1997 and extended our product offerings including our entry into the MYO cigar wraps category in 2009. In 2003, we acquired the Stoker’s ® brand.
We acquired the U.S. and Canadian rolling papers distribution rights for Zig-Zag ® in 1997 and extended our product offerings including our entry into the MYO cigar wraps category in 2009. In 2003, we acquired the Stoker ’ s ® brand.
The following committees report to the ESG Executive Committee: • The Environmental Committee provides a platform to enhance and track the progress of our environmental practices within our business units. The committee is charged with recommending, implementing, and monitoring best practices in the areas of carbon emissions, waste, water, and biodiversity within our business units.
The following committees report to the Nominating and Governance Executive Committee: • The Environmental Committee provides a platform to enhance and track the progress of our environmental practices within our business units. The committee is charged with recommending, implementing, and monitoring best practices in the areas of carbon emissions, waste, water conservation, and biodiversity within our business units.
We believe there are meaningful opportunities to grow through investing in organic growth, acquisitions and joint ventures across all product categories. As of December 31, 2023, our products were available in approximately 197,000 U.S. retail locations which, with the addition of retail stores in Canada, brings our total North American retail presence to an estimated 217,000 points of distribution.
We believe there are meaningful opportunities to grow through investing in organic growth, acquisitions and joint ventures across all product categories. As of December 31, 2024, our products were available in approximately 200,000 U.S. retail locations which, with the addition of retail stores in Canada, brings our total North American retail presence to an estimated 220,000 points of distribution.
We have significant experience in complying with the FDA regulatory regime with a compliance infrastructure composed of legal and scientific professionals. We believe many smaller OTP manufacturers currently lack this infrastructure, which is necessary to comply with the broad scope of FDA regulations.
We have significant experience in complying with the FDA regulatory regime with a compliance infrastructure composed of legal and scientific professionals. We believe many smaller manufacturers currently lack this infrastructure, which is necessary for complying with the broad scope of FDA regulations.
Sales and Marketing We have grown the size and capacity of our salesforce and intend to continue strengthening the organization to advance our ability to deepen and broaden the retail availability of our products and brands. As of December 31, 2023, we had a nationwide sales and marketing organization of approximately 180 professionals.
Sales and Marketing We have grown the size and capacity of our salesforce and intend to continue strengthening the organization to advance our ability to deepen and broaden the retail availability of our products and brands. As of December 31, 2024, we had a nationwide sales and marketing organization of approximately 200 professionals.
We spent approximately $0.6 million, $0.6 million, and $1.1 million dollars on research and development and quality control efforts for the years ended December 31, 2023, 2022, and 2021, respectively. Human Capital As of December 31, 2023, we employed 373 full-time and part-time employees. None of our employees are represented by unions.
We spent approximately $1.3 million, $0.6 million, and $0.6 million dollars on research and development and quality control efforts for the years ended December 31, 2024, 2023, and 2022, respectively. Human Capital As of December 31, 2024, we employed 310 full-time and part-time employees. None of our employees are represented by unions.
We will continue to focus our research and development, scientific, policy, and product resources to increase the number of consumers choosing products that are lower risk. In September 2020 and again in May 2022, we submitted to the FDA PMTA covering a large number of noncombustible products, including both vaping products and novel oral nicotine products.
We will continue to focus our research and development, scientific, policy, and product resources to increase the number of consumers choosing products that are lower risk. In September 2020 and again in May 2022, we submitted to the FDA PMTA covering several noncombustible products, including novel oral nicotine products.
MST tub, a size that was not offered by any other market participant at the time of introduction. Stoker’s ® MST has been among the fastest growing moist snuff brands in the industry in terms of pounds sold.
MST tub, a size that was not offered by any other market participant at the time of introduction. Stoker ’ s ® MST has been among the fastest growing moist snuff brands in the industry in terms of pounds sold.
The remainder of Turning Point Brands Canada is owned by its management. 1 Brand ranking and market share percentages obtained from MSAi for the 52-week period ended December 30, 2023. 5 Table of Contents In July 2021, we acquired certain assets of Unitabac, LLC (“Unitabac”), a marketer of mass-market cigars.
The remainder of Turning Point Brands Canada is owned by its management. 1 Brand ranking and market share percentages obtained from MSAi for the 52-week period ended December 28, 2024. 4 Table of Contents In July 2021, we acquired certain assets of Unitabac, LLC (“Unitabac”), a marketer of mass-market cigars.
Approximately 41% of our total 2023 Zig-Zag ® branded net sales are under our own Zig-Zag ® marks rather than those we license from RTI under the Distribution and Licensing Agreements described below . • Stoker’s ® is among the fastest growing MST brands in the industry and is the #1 loose-leaf chewing tobacco brand. 1 We manufacture Stoker’s ® MST using only 100% American Leaf, utilizing a proprietary process to produce what we believe is a superior product. 1 Brand rankings and market share percentages obtained from MSAi for the 52-week period ended December 30, 2023. 6 Table of Contents Zig-Zag ® is an iconic brand and has strong, enduring brand recognition among a wide audience of consumers.
Approximately 42% of our total 2024 Zig-Zag ® branded net sales are under our own Zig-Zag ® marks rather than those we license from RTI under the Distribution and Licensing Agreements described below . • Stoker ’ s ® is among the fastest growing MST brands in the industry and is the #1 loose-leaf chewing tobacco brand. 1 We manufacture Stoker ’ s ® MST using only 100% American leaf, utilizing a proprietary process to produce what we believe is a superior product. 1 Brand rankings and market share percentages obtained from MSAi for the 52-week period ended December 28, 2024. 5 Table of Contents Zig-Zag ® is an iconic brand and has strong, enduring brand recognition among a wide audience of consumers.
In 2023, the Policies Committee developed several new policies, particularly aimed at cybersecurity, and held training sessions with our marketing teams related to prevention of youth appeal. Further information related to our ESG program can be found on our website. Available Information More information about Turning Point Brands is available on the Company’s website at www.turningpointbrands.com. The U.S.
In 2024, the Policies Committee introduced several new policies, particularly aimed at cybersecurity, and held training sessions with our marketing teams related to prevention of youth appeal. Further information related to our efforts can be found on our website. Available Information More information about Turning Point Brands is available on the Company’s website at www.turningpointbrands.com. The U.S.
Our investment in 2021 in Old Pal gives us increased exposure to the large and growing cannabinoid market. In 2021, we also acquired certain assets from Unitabac, providing a platform to re-enter the large and growing cigarillo category.
Our investment in 2021 in Old Pal Holding Company, LLC (“Old Pal”) gives us increased exposure to the large and growing cannabinoid market. In 2021, we also acquired certain assets from Unitabac, providing a platform to re-enter the large and growing cigarillo category.
We also obtain our Zig-Zag ® branded cigar products from the Dominican Republic. Stoker’s Products We produce our moist snuff and loose-leaf chewing tobaccos from air-cured and fire-cured leaf tobacco, respectively. We utilize recognized suppliers that generally maintain 12- to 24-month supplies of our various types of tobacco at their facilities.
We also obtain our Zig-Zag ® branded cigar products from the Dominican Republic. 9 Table of Contents Stoker ’ s Products We produce our moist snuff and loose-leaf chewing tobaccos from air-cured and fire-cured leaf tobacco, respectively. We utilize recognized suppliers that generally maintain 12- to 24-month supplies of our various types of tobacco at their facilities.
To date, we have spent approximately $26 million in order to file and supplement applications covering a broad portfolio of noncombustible products, including vaping products and novel oral nicotine products.
To date, we have spent approximately $30.0 million in order to file and supplement applications covering a broad portfolio of noncombustible products, including novel oral nicotine products.
The committee is charged with recommending and implementing best practices in the areas of health and safety, DE&I, Talent Development and Retention, and Community Engagement. • The Policies Committee provides a platform to review our governance practices and implement new or updated policies as our needs change.
The committee is charged with recommending and implementing best practices in health and safety, Talent Development and Retention, and Community Engagement. • The Policies Committee provides a platform to review our governance practices and implement new or updated policies as our needs evolve.
The OTP industry, which consists of non-cigarette tobacco products, exhibited low-single-digit consumer unit annualized growth over the four-year period ended 2023 as reported by Management Science Associates, Inc. (“MSAi”), a third-party analytics and information company.
The OTP industry, which consists of non-cigarette tobacco products, exhibited low-single-digit consumer unit annualized declines during the full year period ended 2024 as reported by Management Science Associates, Inc. (“MSAi”) a third-party analytics and information company.
Our goals include expanding our presence in the worldwide OTP industry on a targeted basis. For example, we are expanding Zig-Zag ® ’s retail penetration and product assortment in Canada including distributing CLIPPER® lighters, and selling our Stoker’s ® MST products in South America, Europe, Asia and Africa.
Our goals include expanding our presence in the worldwide OTP industry on a targeted basis. For example, we are expanding Zig-Zag ® ’s retail penetration and product assortment in Canada and selling our Stoker ’ s ® MST products in South America, Europe, Asia and Africa.
Stoker’s Products Our four principal competitors in the moist snuff category are Swedish Match (acquired in 2022 by Philip Morris International Inc.), the American Snuff Company, LLC (a unit of British American Tobacco p.l.c.), Swisher International Group, Inc. and U.S. Smokeless Tobacco Company (a division of Altria Group, Inc.).
Stoker ’ s Products Our four principal competitors in the moist snuff category are Swedish Match, the American Snuff Company, LLC (a unit of British American Tobacco p.l.c.), Swisher International Group, Inc. and U.S. Smokeless Tobacco Company (a division of Altria Group, Inc.).
Our Zig-Zag ® and Stoker’s ® brands are each well established and date back 144 and 83 years, respectively. • Zig-Zag ® is the #1 premium and #1 overall rolling paper brand in the U.S., with significant distribution in Canada as well.
Our Zig-Zag ® and Stoker ’ s ® brands are each well established and date back 145 and 84 years, respectively. • Zig-Zag ® is the #1 premium and #1 overall rolling paper brand in the U.S., with significant distribution in Canada as well.
We believe our ability to effectively compete and maintain strong market positions in our principal product lines are due to the high recognition of our brand names, the perceived quality of each of our products, and the efforts of our sales, marketing, and distribution teams. We compete against “big tobacco,” including Altria Group, Inc.
We believe our ability to effectively compete and maintain strong market positions in our principal product lines are due to the high recognition of our brand names, the perceived quality of each of our products, and the efforts of our sales, marketing, and distribution teams.
In 2023, the Company continued to make substantial investments around reducing energy consumption and environmental waste in our manufacturing operations. Additionally, we have reduced our total mileage through innovative dispatch and scheduling procedures. • The Social Committee provides a platform to achieve the objective of being the employer of choice.
In 2024, the Company continued to make substantial investments around reducing energy consumption and environmental waste in our manufacturing operations. Additionally, we have reduced our total fleet mileage through innovative dispatch and scheduling procedures. • The Social Committee provides a platform to help us become the employer of choice.
Our DE&I efforts are evidenced through programs like our veterans and women focused business inclusion groups. Our goal is to provide an injury-free workplace where every employee has a safe work environment and feels empowered to speak up.
We focus our efforts on fostering a supportive and safe work environment for our team. Our efforts are evidenced through programs like our veterans and women focused business inclusion groups. Our goal is to provide an injury-free workplace where every employee has a safe work environment and feels empowered to speak up.
The committee is charged with recommending and implementing appropriate best practices in the areas of business ethics, political engagement, supply chain processes, and cybersecurity. The committee additionally is charged with recommending and implementing best practices in the areas of public health, responsible marketing, and youth access prevention.
The committee is responsible for recommending and implementing appropriate best practices in business ethics, political engagement, supply chain processes, and cybersecurity. The committee is also responsible for recommending and implementing best practices in public health, responsible marketing, and youth access prevention.
In MST, Stoker’s ® remains among the fastest growing brands and holds a 10.7% share in the stores with distribution and a 6.9% share of the total U.S. MST non-pouch market.
In MST, Stoker ’ s ® remains among the fastest growing brands and holds a 11.2% share in the stores with distribution and a 7.4% share of the total U.S. MST non-pouch market.
See “Risks Related to Legal, Tax and Regulatory Matters” under Item 1A “Risk Factors” and Note 1, “Organizations and Basis of Presentation” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, for additional information. 8 Table of Contents In addition, we have been building and expanding an alternative logistics infrastructure across the U.S. to comply with the Prevent All Cigarette Trafficking Act (“PACT Act”) which was recently extended to prohibit the use of the U.S.
See “Risks Related to Legal, Tax and Regulatory Matters” under Item 1A “Risk Factors” for additional information. 7 Table of Contents In addition, we have been building and expanding an alternative logistics infrastructure across the U.S. to comply with the Prevent All Cigarette Trafficking Act (“PACT Act”) which was recently extended to prohibit the use of the U.S.
Our in-house manufacturing operations are principally limited to (i) the manufacturing of our moist snuff products, which occurs at our facility in Dresden, Tennessee; and (ii) the packaging of our moist snuff products at our facilities in Dresden, Tennessee and Louisville, Kentucky.
We currently manufacture less than 25% of our products as measured by net sales. Our in-house manufacturing operations are principally limited to (i) the manufacturing of our moist snuff products, which occurs at our facility in Dresden, Tennessee; and (ii) the packaging of our moist snuff products at our facilities in Dresden, Tennessee and Louisville, Kentucky.
In December 2023, a third-party warehouse that stores our tobacco was damaged by a tornado, leading to a loss of some of our leaf tobacco inventory. We believe the losses will be fully covered by insurance.
In December 2023, a third-party warehouse that stores our tobacco was damaged by a tornado, leading to a loss of some of our leaf tobacco inventory.
(formerly Philip Morris International Inc.); British American Tobacco p.l.c. (formerly R.J. Reynolds Tobacco Company); Swedish Match (now owned by Philip Morris International Inc.); Swisher International, Inc.; and manufacturers including U.K. based Imperial Brands, PLC, across our segments. “Big tobacco” has substantial resources and a customer base that has historically demonstrated loyalty to their brands.
We compete against “big tobacco,” including Altria Group, Inc.; British American Tobacco p.l.c.; Swedish Match; Swisher International, Inc.; and manufacturers including U.K. based Imperial Brands, PLC, across our segments. “Big tobacco” has substantial resources and a customer base that has historically demonstrated loyalty to their brands.
In 2023, we had 20 internal promotions within the organization. Retaining Talent: During the year ended December 31, 2023, our employee turnover rate was 18%. To retain our employees, we believe it is critical to continually focus on ensuring employees are highly engaged and feel valued.
The Company posts its openings internally to allow current employees to apply. In 2024, we had 38 internal promotions within the organization. Retaining Talent: During the year ended December 31, 2024, our employee voluntary turnover rate was 16.6%. To retain our employees, we believe it is critical to continually focus on ensuring employees are highly engaged and feel valued.
We subscribe to a sales tracking system from MSAi that records all traditional OTP product shipments (ours as well as those of our competitors) from approximately 600 wholesalers to over 250,000 traditional retail stores in the U.S.
In 2024, we derived more than 90% of our net sales from sales in the U.S., with the remainder primarily from sales in Canada. 11 Table of Contents We subscribe to a sales tracking system from MSAi that records all traditional OTP product shipments (ours as well as those of our competitors) from approximately 600 wholesalers to over 265,000 traditional retail stores in the U.S.
We have since built the brand to the #1 position in the chewing tobacco industry while successfully leveraging the brand’s value through our MST expansion where it remains among the fastest growing MST brands.
We have since built the brand to the #1 position in the chewing tobacco industry while successfully leveraging the brand’s value through our MST expansion where it remains among the fastest growing MST brands. Our investment in Turning Point Brands Canada in 2019 is accelerating Zig-Zag ® ’s growth through alternative channel penetration.
Stoker’s ® is a pioneer in the MST industry. 1 It was first to introduce the large 12 oz. tub packaging format and is manufactured using a proprietary process that we believe results in a superior product. Starting in 2015, we extended the Stoker’s ® MST franchise to include traditional 1.2 oz. cans to broaden retail availability.
Stoker ’ s ® is a pioneer in the MST industry. 1 It was first to introduce the large 12 oz. tub packaging format and is manufactured using a proprietary process that we believe results in a superior product.
Growth Strategies We are focused on building sustainable margins, expanding the availability of our products, developing innovative new products, and enhancing overall operating efficiencies with the goal of improving margins and cash flow.
Our management team also brings a proven track record of patient and selective capital deployment into value-enhancing transactions. Growth Strategies We are focused on building sustainable margins, expanding the availability of our products, developing innovative new products and enhancing overall operating efficiencies with the goal of improving margins and cash flow.
In the loose-leaf chewing tobacco market, our three principal competitors are Swedish Match (acquired in 2022 by Philip Morris International Inc.), the American Snuff Company, LLC (a unit of British American Tobacco p.l.c.), and Swisher International Group, Inc. We believe moist snuff products are used interchangeably with loose-leaf products by many consumers.
In the loose-leaf chewing tobacco market, our three principal competitors are Swedish Match, the American Snuff Company, LLC, and Swisher International Group, Inc. We believe moist snuff products are used interchangeably with loose-leaf products by many consumers. For modern oral nicotine products, our four principal competitors are Swedish Match, Modoral Brands Inc.
The components of inventories were as follows (in thousands): December 31, 2023 December 31, 2022 Raw materials and work in process $ 5,201 $ 7,283 Leaf tobacco 34,894 43,468 Finished goods - Zig-Zag Products 41,783 42,279 Finished goods - Stoker’s Products 8,090 9,667 Finished goods - Creative Distribution Solutions 7,281 15,431 Other 1,711 1,787 Inventories $ 98,960 $ 119,915 Zig-Zag Products Pursuant to the Zig-Zag ® distribution agreements, we are required to purchase from RTI all cigarette papers, cigarette tubes, and cigarette injecting machines that we sell, subject to RTI fulfilling its obligations under the Zig-Zag ® distribution agreements.
The components of inventories were as follows (in thousands): December 31, December 31, 2024 2023 Raw materials and work in process $ 7,699 $ 5,201 Leaf tobacco 35,622 34,894 Finished goods - Zig-Zag products 38,042 41,783 Finished goods - Stoker’s products 12,966 8,109 Other 1,924 1,711 Inventories $ 96,253 $ 91,698 Zig-Zag® Products Pursuant to the Zig-Zag ® distribution agreements, we are required to purchase from RTI all cigarette papers, cigarette tubes and cigarette injecting machines that we sell, subject to RTI fulfilling its obligations under the Zig-Zag ® distribution agreements.
Collectively, the Company is the #2 marketer of chewing tobacco with approximately 36% market share. 1 Our chewing tobacco operations are facilitated through our long-standing relationship with Swedish Match (now owned by Philip Morris International Inc.), the manufacturer of our loose-leaf chewing tobaccos. In 2023, the Company expanded its rollout of modern oral nicotine products, FRĒ ® white nicotine pouches.
Collectively, the Company is the #1 marketer of chewing tobacco with approximately 37.2% market share. 1 Our chewing tobacco operations are facilitated through our long-standing relationship with Swedish Match (a division of Philip Morris International Inc.), the manufacturer of our loose-leaf chewing tobaccos.
We believe that we will maximize shareholder returns by implementing strategies and establishing goals to address public health concerns, mitigate environmental risks, seek and integrate a diverse range of viewpoints, and display responsible behaviors to suppliers, customers, members of the organization and most of all to our consumers. Our Nominating and ESG Committee manages oversight of the Company’s ESG efforts.
Our operating principles focus on winning with accountability, integrity, and responsibility. We believe that we will maximize shareholder returns by implementing strategies and establishing goals to address public health concerns and display responsible behaviors to suppliers, customers, members of the organization and most of all to our consumers. Our Nominating and Governance Committee manages oversight of these efforts.
We train all employees on our business conduct policies. In addition, our governance program measures the diversity of our Board. We believe that Board diversity is critical to having a winning culture and strategy. We have established meaningful measures for our governance program and our targets and actions will allow us to achieve our goals in this area.
Acting with accountability, integrity and responsibility is at the core of our business conduct policy. We train all employees on our business conduct policies. We have established meaningful measures for our governance program and our targets and actions will allow us to achieve our goals in this area.
We own the Zig-Zag ® trademark with respect to its use in connection with products made with tobacco including, without limitation, cigarettes, cigars, and MYO cigar wraps in the U.S.
The Zig-Zag ® trade dress trademark for premium cigarette papers and related products are owned by RTI and have been exclusively licensed to us in the U.S. and Canada. We own the Zig-Zag ® trademark with respect to its use in connection with products made with tobacco including, without limitation, cigarettes, cigars and MYO cigar wraps in the U.S.
Rolling paper operations are aided by our sourcing relationship with Republic Technology International SAS (“RTI”). See “Distribution and Supply Agreements” below for our discussion of the Zig-Zag ® distribution agreement. In MYO cigar wraps, the Zig-Zag ® brand commands a majority of the market and continues to innovate in novel ways through additional product introductions.
See “Distribution and Supply Agreements” below for our discussion of the Zig-Zag ® distribution agreement. In MYO cigar wraps, the Zig-Zag ® brand remains the market leader and continues to innovate in novel ways through additional product introductions.
We also hold a right of first refusal to acquire the manufacturing plant as well as Swedish Match’s chewing tobacco unit. The agreement was automatically renewed for the first of five 10-year renewal periods in September 2018. In November 2022, Philip Morris International Inc., acquired Swedish Match.
We also hold a right of first refusal to acquire the manufacturing plant as well as Swedish Match’s chewing tobacco unit. The agreement was automatically renewed for the first of five 10-year renewal periods in September 2018. Production and Quality Control We primarily outsource our manufacturing and production processes and focus on packaging, marketing, and distribution.
Members of management have previous experience at other leading tobacco companies. Given the professional experience of the senior management team we are able to analyze risks and opportunities from a variety of perspectives.
Members of management have previous experience at other leading tobacco companies. Given the professional experience of our senior management team, we are able to analyze risks and opportunities from a variety of perspectives. Our senior leadership has embraced a collaborative culture which leverages experience, analytical rigor and creativity to assess opportunities and deliver products that satisfy consumers’ demands.
In July 2019, to extend our reach in Canada, we made a minority investment in Turning Point Brands Canada (formerly ReCreation Marketing) that we increased to a 65% ownership stake by July 2021. Turning Point Brands Canada is a specialty marketing and distribution firm focused on building brands in the Canadian cannabis accessories, tobacco and alternative products categories.
In July 2019, to extend our reach in Canada, we made a minority investment in Turning Point Brands Canada that we increased to a 65% ownership stake by July 2021. Our majority ownership stake leverages Turning Point Brands Canada’s significant expertise in marketing and distributing cannabis accessories and tobacco products throughout Canada.
We have expanded, and intend to continue to expand, the sales of our products into previously underdeveloped geographic markets and retail channels. In 2023, we derived more than 90% of our net sales from sales in the U.S., with the remainder primarily from sales in Canada.
We have expanded, and intend to continue to expand, the sales of our products into previously underdeveloped geographic markets and retail channels.
Our major areas of focus are lowering vehicle emissions produced by our fleet, incorporating energy savings initiatives at our facilities, reducing water consumption in our operations, and increasing our recycling efforts. Within each of these categories we are concentrating on developing and measuring progress with an aim to define metrics against which we can track our efforts.
Our major areas of focus are lowering vehicle emissions produced by our fleet, incorporating energy savings initiatives at our facilities, reducing water consumption in our operations, and increasing our recycling efforts.
The legal cannabis market in the U.S. is projected to grow from $29.6 billion in 2023 to $45 billion by 2027, representing an 11.0% compounded annual growth rate, according to a June 2023 report of BDSA, a market research firm focused on the legal cannabis market.
The legal cannabis market in the U.S. is projected to grow from approximately $32 billion in 2024 to approximately $46 billion by 2028 according to a June 2024 report of BDSA, a market research firm focused on the legal cannabis market.
This strategy allows new products to be tested with lower risk before we incorporate them into our wider brick and mortar distribution system. 9 Table of Contents Combining our different platforms, we have an expansive multi-channel distribution infrastructure that gives us a big competitive advantage when we introduce new products or acquire companies that we can integrate into our network.
Combining our different platforms, we have an expansive multi-channel distribution infrastructure that gives us a competitive advantage when we introduce new products or acquire companies that we can integrate into our network.
We also utilize a variety of suppliers for the sourcing of additives used in our smokeless products and for the supply of our packaging materials. Thus, we believe we are not dependent on a single supplier for these products. There are no current U.S. federal regulations that restrict tobacco flavor additives in smokeless products.
Thus, we believe we are not dependent on a single supplier for these products. There are no current U.S. federal regulations that restrict tobacco flavor additives in smokeless products. The additives that we use are food-grade, generally accepted ingredients. All of our moist snuff products are manufactured at our facility in Dresden, Tennessee.
We regularly monitor and provide training as part of our safety program and have active safety committees at each of our sites dedicated to implementing best practices. Corporate Governance Good corporate governance is critical to our operating principles of winning with accountability, integrity, and responsibility. Acting with accountability, integrity and responsibility is at the core of our business conduct policy.
We regularly monitor and provide training as part of our safety program and have active safety committees at each of our sites dedicated to implementing best practices. Being good stewards of the planet will support our business success.
The additives that we use are food-grade, generally accepted ingredients. All of our moist snuff products are manufactured at our facility in Dresden, Tennessee. Packaging occurs at the Dresden, Tennessee, location in addition to the facility in Louisville, Kentucky. All of our loose-leaf chewing tobacco production is fulfilled through our agreement with Swedish Match.
Packaging occurs at the Dresden, Tennessee, location in addition to the facility in Louisville, Kentucky. All of our loose-leaf chewing tobacco production is fulfilled through our agreement with Swedish Match. See “Distribution and Supply Agreements” below for our discussion of the Swedish Match Manufacturing Agreement.
The strength of the Zig-Zag ® brand drives our leadership position in both the rolling papers and MYO cigar wrap markets. Zig-Zag ® is the #1 premium and #1 overall rolling paper in the U.S. with approximately 34% total market share according to MSAi. 1 Management estimates that Zig-Zag ® is also the #1 brand in the promising Canadian market.
Zig-Zag ® is the #1 premium and #1 overall rolling paper in the U.S. with approximately 33% total market share according to MSAi. 1 Management estimates that Zig-Zag ® is also the #1 brand in the promising Canadian market. Rolling paper operations are aided by our sourcing relationship with Republic Technology International SAS (“RTI”).
Stoker’s ® chewing tobacco has grown its market share considerably over the last several years becoming the largest brand family in the industry and is presently the #1 discount and #1 overall brand in the industry, with approximately a 31% market share.
Stoker ’ s ® chewing tobacco has grown its market share considerably over the last several years becoming the largest brand family in the industry and is presently the #1 discount and #1 overall brand in the industry, with approximately a 32.3% market share. 1 Our status in the chewing tobacco market is further strengthened by Beech-Nut ® , the #3 premium brand and #7 overall, as well as Trophy ® , Durango ® and the five Wind River Brands.
Additionally, we verify B2B customers using business licenses in order to further prevent bulk sales to consumers, which we believe contributes to social sourcing by youth. Environmental Stewardship Being good stewards of the planet will support our business success.
Additionally, we verify B2B customers using business licenses in order to further prevent bulk sales to consumers, which we believe contributes to social sourcing by youth. Corporate Governance and Community Leadership Good corporate governance is critical to our operating principles of winning with accountability, integrity, and responsibility.
Our sales team targets widespread distribution to all traditional retail channels, including convenience stores, and we have a growing e-commerce business. In the fourth quarter of 2022, we contributed our NewGen Products business to South Beach Holdings LLC doing business as Creative Distribution Solutions (“CDS”), a newly-formed wholly-owned subsidiary.
Our sales team targets widespread distribution to all traditional retail channels, including convenience stores, and we have a growing e-commerce business. Discontinued Operations On January 2, 2025, the Company contributed 100% of its interest in South Beach Brands LLC (“SBB”), the subsidiary that owned and operated the Company’s Creative Distribution Solutions (“CDS”) reportable segment, to General Wireless Operations, Inc.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMaterial risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to: Risks Related to Our Business and Industry • declining sales of tobacco products, and expected continuing decline of sales in the tobacco industry overall; • our dependence on a small number of third-party suppliers and producers; • the possibility that we will be unable to identify or contract with new suppliers or producers in the event of a supply or product disruption, as well as other supply chain concerns, including delays in product shipments and increases in freight cost; • the possibility that our licenses to use certain brands or trademarks will be terminated, challenged or restricted; • failure to maintain consumer brand recognition and loyalty of our customers; • our reliance on relationships with several large retailers and national chains for distribution of our products; • intense competition and our ability to compete effectively; • competition from illicit sources and the damage caused by illicit products to our brand equity; • contamination of our tobacco supply or products; • uncertainty and continued evolution of the markets for our products; • complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations; Risks Related to Legal, Tax and Regulatory Matters • substantial and increasing regulation and changes in FDA enforcement priorities; • regulation or marketing denials of our products by the FDA, which has broad regulatory powers; • many of our products contain nicotine, which is considered to be a highly addictive substance; • requirement to maintain compliance with master settlement agreement escrow account; • possible significant increases in federal, state and local municipal tobacco- and nicotine-related taxes; • our products are marketed pursuant to a policy of FDA enforcement priorities which could change, and our products could become subject to increased regulatory burdens by the FDA; • our products are subject to developing and unpredictable regulation, such as court actions that impact obligations; • increase in state and local regulation of our products has been proposed or enacted; • increase in tax of our products could adversely affect our business; • sensitivity of end-customers to increased sales taxes and economic conditions, including as a result of inflation and other declines in purchasing power; • possible increasing international control and regulation; • failure to comply with environmental, health and safety regulations; • imposition of significant tariffs on imports into the U.S.; • the scientific community’s lack of information regarding the long-term health effects of certain substances contained in some of our products; • significant product liability litigation; Risks Related to Financial Results, Finances and Capital Structure • our amount of indebtedness; • the terms of our indebtedness, which may restrict our current and future operations; • our ability to establish and maintain effective internal controls over financial reporting; • identification of material weaknesses in our internal control over financial reporting, which, if not remediated appropriately or timely, could result in loss of investor confidence and adversely impact our stock price; 17 Table of Contents Risks Related to our Common Stock • our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit acquisition bids or merger proposals, which may adversely affect the market price of our common stock; • our certificate of incorporation limits the ownership of our common stock by individuals and entities that are Restricted Investors.
Biggest changeMaterial risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to: 15 Table of Contents Risks Related to Our Business and Industry • declining sales of tobacco products and expected continuing decline of sales in the tobacco industry overall; • our dependence on a small number of third-party suppliers and producers; • the possibility that we will be unable to identify or contract with new suppliers or producers in the event of a supply or product disruption, as well as other supply chain concerns, including delays in product shipments and increases in freight cost; • the possibility that our licenses to use certain brands or trademarks will be terminated, challenged or restricted; • failure to maintain consumer brand recognition and loyalty of our customers and in anticipating and responding to changes in consumer preferences and purchase behavior; • our reliance on relationships with several large retailers and national chains for distribution of our products; • intense competition and our ability to compete effectively; • competition from illicit sources and the damage caused by illicit products to our brand equity; • contamination of our tobacco supply or products; • uncertainty and continued evolution of the markets for our products; • complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations; • recalls of our products; Risks Related to Legal, Tax and Regulatory Matters • substantial and increasing regulation and changes in FDA enforcement priorities; • regulation or marketing denials of our products by the FDA, which has broad regulatory powers; • many of our products contain nicotine, which is considered to be a highly addictive substance; • requirement to maintain compliance with master settlement agreement escrow account; • possible significant increases in federal, state and local municipal tobacco- and nicotine-related taxes; • our products are marketed pursuant to a policy of FDA enforcement priorities which could change, and our products could become subject to increased regulatory burdens by the FDA; • our products are subject to developing and unpredictable regulation, such as court actions that impact obligations; • increase in tax of our products could adversely affect our business; • sensitivity of end-customers to increased sales taxes and economic conditions, including as a result of inflation and other declines in purchasing power; • possible increasing international control and regulation; • failure to comply with environmental, health and safety regulations; • imposition of significant tariffs on imports into the U.S.; • the scientific community’s lack of information regarding the long-term health effects of certain substances contained in some of our products; • significant product liability litigation; Risks Related to Financial Results, Finances and Capital Structure • our amount of indebtedness; • our credit rating and ability to access well-functioning capital markets; • the terms of our indebtedness, which may restrict our current and future operations; • our ability to establish and maintain effective internal controls over financial reporting; • identification of material weaknesses in our internal control over financial reporting, which, if not remediated appropriately or timely, could result in loss of investor confidence and adversely impact our stock price; 16 Table of Contents Risks Related to our Common Stock • our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit acquisition bids or merger proposals, which may adversely affect the market price of our common stock; • our certificate of incorporation limits the ownership of our common stock by individuals and entities that are Restricted Investors (as defined in our Certificate of Incorporation).
Regulations may be enacted in the future, particularly in light of increasing restrictions on the form and content of marketing of tobacco products, that would make it more difficult to appeal to our consumers or to leverage existing recognition of the brands that we own or license.
Regulations may be enacted in the future, particularly in light of increasing restrictions on the form and content of the marketing of tobacco products, that would make it more difficult to appeal to our consumers and to leverage existing recognition of the brands that we own or license.
Novel nicotine and cannabinoid products, having been introduced to the market over the past fifteen years, are at a relatively early stage of development compared to “traditional” tobacco products, and represent core components of a market that is evolving rapidly, highly regulated and characterized by a number of market participants.
Novel nicotine and cannabinoid products, having been introduced to the market over the past fifteen years, are at a relatively early stage of development compared to “traditional” tobacco products and represent the core components of a market that is evolving rapidly, highly regulated and characterized by a number of market participants.
Rapid growth in the use of, and interest in, these products is recent, and may not continue on a lasting basis. The long-term demand trends and market acceptance for these products is subject to a high level of uncertainty. Therefore, we are subject to all of the business risks associated with a new enterprise in an evolving market.
Rapid growth in the use of, and the interest in, these products is recent and may not continue on a lasting basis. The long-term demand trends and market acceptance for these products are subject to a high level of uncertainty. Therefore, we are subject to all of the business risks associated with a new enterprise in an evolving market.
If the U.S. were to impose additional tariffs on goods we import, it is likely to make it more costly for us to import goods from other countries. While the current or future administrations may have a desire to repeal some or all of these tariffs no assurance can be given that they will do so.
If the U.S. were to impose additional tariffs on goods we import, it is likely to make it more costly for us to import goods from other countries. While the future administrations may have a desire to repeal some or all of these tariffs, no assurance can be given that they will do so.
We may not be able to sustain these relationships or establish other relationships with such entities, which could have a material adverse effect on our ability to execute our branding strategies, our ability to access the end-user markets with our products or our ability to maintain our relationships with the producers of our products.
We may not be able to sustain these relationships or establish other relationships with such entities, which could have a material adverse effect on our ability to execute our branding strategies, our ability to access the end-user markets with our products and our ability to maintain our relationships with the producers of our products.
The first of these governs licensing, sourcing and the use of the Zig-Zag ® name with respect to cigarette papers, cigarette tubes, and cigarette injector machines, the second of which governs licensing, sourcing and the use of the Zig-Zag ® name with respect to e-cigarettes, vaporizers, and e-liquids, and the third of which governs the licensing, sourcing and use of the Zig-Zag trademark on paper cones.
The first of these governs licensing, sourcing and the use of the Zig-Zag ® name with respect to cigarette papers, cigarette tubes, and cigarette injector machines, the second governs licensing, sourcing and the use of the Zig-Zag ® name with respect to e-cigarettes, vaporizers, and e-liquids, and the third governs the licensing, sourcing and use of the Zig-Zag trademark on paper cones.
Due to the impact of these factors, as well as higher state and local excise taxes and the market share of deep discount brands, the tobacco industry has become increasingly price competitive.
Due to the impact of these factors, as well as higher state and local excise taxes and the increased market share of deep discount brands, the tobacco industry has become increasingly price competitive.
Regulatory initiatives that have been proposed, introduced or enacted include: • the levying of substantial and increasing tax and duty charges; • restrictions or bans on advertising, marketing and sponsorship; • the display of larger health warnings, graphic health warnings and other labeling requirements; • restrictions on packaging design, including the use of colors and generic packaging; • restrictions or bans on the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines; • requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents levels; • requirements regarding testing, disclosure and use of tobacco product ingredients; • increased restrictions on smoking in public and workplaces and, in some instances, in private places and outdoors; • elimination of duty-free allowances for travelers; and • encouraging litigation against tobacco companies.
Regulatory initiatives that have been proposed, introduced or enacted include: • the levying of substantial and increasing tax and duty charges; • restrictions or bans on advertising, marketing and sponsorship; 26 Table of Contents • the display of larger health warnings, graphic health warnings and other labeling requirements; • restrictions on packaging design, including the use of colors and generic packaging; • restrictions or bans on the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines; • requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents levels; • requirements regarding testing, disclosure and use of tobacco product ingredients; • increased restrictions on smoking in public and workplaces and, in some instances, in private places and outdoors; • elimination of duty-free allowances for travelers; and • encouraging litigation against tobacco companies.
Additionally, in connection with the preparation of our consolidated financial statements, management identified a material weakness in internal control related to ineffective ITGCs in the areas of user access and program change-management over certain IT systems that support the Company’s financial reporting processes. See Part II, Item 9A of this Annual Report on Form 10-K for additional information.
Additionally, in connection with the preparation of our consolidated financial statements, management identified a material weakness in internal control related to ineffective ITGCs in the areas of user access and program change-management over certain information technology systems that support the Company’s financial reporting processes. See Part II, Item 9A of this Annual Report on Form 10-K for additional information.
Security and privacy breaches may expose us to liability and cause us to lose customers. Federal and state laws require us to safeguard our wholesalers’, retailers’ and consumers’ financial information, including credit information.
Security and privacy breaches may expose us to liability and cause us to lose customers. Federal and state laws require us to safeguard our wholesalers’, retailers’ and consumers’ financial information, including credit card information.
In the event that one or more of these Licensing Agreements are not renewed, the terms of the agreements bind us under a five-year non-compete clause, under which we cannot engage in direct or indirect manufacturing, selling, distributing or otherwise promoting of cigarette papers of a competitor to Zig-Zag® without RTI’s consent, except in limited instances.
In the event that one or more of these License Agreements are not renewed, the terms of the agreements bind us under a five-year non-compete clause, under which we cannot engage in direct or indirect manufacturing, selling, distributing or otherwise promoting cigarette papers of a competitor to Zig-Zag ® without RTI’s consent, except in limited instances.
Imposition of significant tariffs on imports into the U.S., could have a material adverse effect on our business. We are required to purchase all our cigarette papers, cigarette tubes and cigarette injector machines under the Distribution Agreements from the supplier in France. Additionally, a substantial portion of our Creative Distribution Solutions products are sourced from China.
Imposition of significant tariffs on imports into the U.S. could have a material adverse effect on our business. We are required to purchase all our cigarette papers, cigarette tubes and cigarette injector machines under the Distribution Agreements from the supplier in France. Additionally, a substantial portion of the Creative Distribution Solutions joint venture’s products are sourced from China.
For a description of current material litigation to which we or our subsidiaries are a party, see Item 3 “Legal Proceedings” and Note 18 “Contingencies” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, for additional information.
For a description of current material litigation to which we or our subsidiaries are a party, see Item 3 “Legal Proceedings” and Note 19 “Contingencies” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, for additional information.
There could be a material adverse impact on our business development efforts if the FDA determines that our products are not subject to this compliance policy, or if our products become subject to increased regulatory enforcement burdens imposed by the FDA and other regulatory or legislative bodies” below for further details.
There could be a material adverse impact on our business development efforts if the FDA determines that our products are not subject to this compliance policy, or if our products become subject to increased regulatory enforcement burdens imposed by the FDA and other regulatory or legislative bodies" below for further details.
We may be unable to identify, negotiate, and complete suitable acquisition opportunities on reasonable terms. There can be no assurance that any business acquired by us will be successfully integrated with our operations or prove to be profitable to us. We may incur future liabilities related to acquisitions.
We may be unable to identify, negotiate, and complete suitable acquisition opportunities on reasonable terms in the future. There can be no assurance that any business acquired by us will be successfully integrated with our operations or prove to be profitable to us. We may incur future liabilities related to acquisitions.
These third-party suppliers, however, may not continue to produce products that are consistent with our standards or that are in compliance with applicable laws, and we cannot guarantee that we will be able to identify instances in which our third-party suppliers fail to comply with our standards or applicable laws.
These third-party suppliers and co-manufacturers, however, may not continue to produce products that are consistent with our standards or that are in compliance with applicable laws, and we cannot guarantee that we will be able to identify instances in which our third-party suppliers or co-manufacturers fail to comply with our standards or applicable laws.
The vast majority of our 2023 U.S. net sales are derived from the sale of products that are currently regulated by the FDA. The Tobacco Control Act grants the FDA broad regulatory authority over the design, manufacture, sale, marketing and packaging of tobacco products.
The vast majority of our 2024 U.S. net sales are derived from the sale of products that are currently regulated by the FDA. The Tobacco Control Act grants the FDA broad regulatory authority over the design, manufacture, sale, marketing and packaging of tobacco products.
Loss of demand for our product, product liability claims and increased regulation stemming from unfavorable scientific studies on these products could have a material adverse effect on our business, results of operations and financial condition. We are subject to significant product liability litigation. The tobacco industry has experienced, and continues to experience, significant product liability litigation.
Loss of demand for our product, product liability claims and increased regulation stemming from unfavorable scientific studies on these products could have a material adverse effect on our business, results of operations and financial condition. 27 Table of Contents We are subject to significant product liability litigation. The tobacco industry has experienced, and continues to experience, significant product liability litigation.
Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock. General Risks Our business may be damaged by events outside of our or our suppliers’ control, such as the impact of epidemics, political upheavals, or natural disasters.
Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock. General Risks Our business may be damaged by events outside of our or our suppliers ’ control, such as the impact of epidemics, political upheavals, or natural disasters.
The rapid evolution and increased adoption of AI technology and other evolving technology may also increase the prevalence and impact of cyber-attacks and might also intensify our cybersecurity risk. 33 Table of Contents We cannot guarantee that a future breach would not result in material liability or otherwise harm our business.
The rapid evolution and increased adoption of AI technology and other evolving technology may also increase the prevalence and impact of cyber-attacks and might also intensify our cybersecurity risk. We cannot guarantee that a future breach would not result in material liability or otherwise harm our business.
In such an event, we may ultimately be forced to pursue and rely on local and more fragmented sales channels, which will have a material adverse effect on our business, results of operations and financial condition. 20 Table of Contents We face intense competition and may fail to compete effectively.
In such an event, we may ultimately be forced to pursue and rely on local and more fragmented sales channels, which will have a material adverse effect on our business, results of operations and financial condition. We face intense competition and may fail to compete effectively.
In addition, consumers may lose confidence in the affected product. Under the terms of our contracts, we impose requirements on our major suppliers to maintain quality and comply with product specifications and requirements, and on our third-party co-manufacturer to comply with all federal, state and local laws.
In addition, consumers may lose confidence in the affected product. 20 Table of Contents Under the terms of our contracts, we impose requirements on our major suppliers to maintain quality and comply with product specifications and requirements and on our third-party co-manufacturer to comply with all federal, state and local laws.
Marketing authorizations will be necessary in order for us to continue our distribution of certain of our Creative Distribution Solutions, cigar, and other novel nicotine products, such as our nicotine pouches.
Marketing authorizations will be necessary in order for us to continue our distribution of certain of our cigar and other novel nicotine products, such as our nicotine pouches.
Our tobacco products comprised approximately 52% of our total 2023 net sales and, while some of our sales volume declines have been offset by higher prices or by increased sales in other product categories, there can be no assurance that these price increases or increased sales can be sustained, especially in an environment of increased regulation, product characteristic restrictions, and taxation and changes in consumer spending habits.
Our tobacco products comprised approximately 47% of our total 2024 net sales and, while some of our sales volume declines have been offset by higher prices or by increased sales in other product categories, there can be no assurance that these price increases or increased sales can be sustained, especially in an environment of increased regulation, product characteristic restrictions, and taxation and changes in consumer spending habits.
While we maintain cyber errors and omissions insurance that covers certain cyber risks, our insurance coverage may be insufficient to cover all claims or losses.
While we maintain cyber errors and omissions ("E&O") insurance that covers certain cyber risks, our insurance coverage may be insufficient to cover all claims or losses.
If our fluctuations obscure our ability to track important trends in our key markets, it may have a material adverse effect on our business, results of operations and financial condition. 34 Table of Contents We are subject to the risks of exchange rate fluctuations.
If our fluctuations obscure our ability to track important trends in our key markets, it may have a material adverse effect on our business, results of operations and financial condition. We are subject to the risks of exchange rate fluctuations.
See Item 1 – “Business - Distribution and Supply Agreements” for a discussion of these agreements and their major provisions. We have a number of Licensing Agreements with RTI.
See Item 1 – “Business - Distribution and Supply Agreements” for a discussion of these agreements and their major provisions. We have a number of License Agreements with RTI.
To the extent our existing or future products become subject to international regulatory regimes that we are unable to comply with or fail to comply with, they may have a material adverse effect on our business, results of operations and financial condition. Our failure to comply with certain environmental, health and safety regulations could adversely affect our business.
To the extent our existing or future products become subject to international regulatory regimes that we are unable to comply with or fail to comply with, they may have a material adverse effect on our business, financial position, results of operations and cash flows. Our failure to comply with certain environmental, health and safety regulations could adversely affect our business.
Our failure to comply with these laws and regulations could cause a disruption in our business, an inability to maintain our manufacturing resources, and additional and potentially significant remedial costs and damages, fines, sanctions or other legal consequences that could have a material adverse effect on our business, results of operations and financial condition.
Our failure to comply with these laws and regulations could cause a disruption in our business, an inability to maintain our manufacturing resources, and additional and potentially significant remedial costs and damages, fines, sanctions or other legal consequences that could have a material adverse effect on our business, financial position, results of operations and cash flows.
Additional federal or state regulation relating to the manufacture, sale, distribution, advertising, labeling, mandatory ingredients disclosure and nicotine yield information disclosure of tobacco products could reduce sales, increase costs, and have a material adverse effect on our business, results of operations, and financial condition.
Additional federal or state regulation relating to the manufacture, sale, distribution, advertising, labeling, mandatory ingredients disclosure and nicotine yield information disclosure of tobacco products could reduce sales, increase costs, and have a material adverse effect on our business, financial position, results of operations and cash flows.
That law subjects NTN Products to the same requirements as tobacco-derived products. 25 Table of Contents The deeming regulations require us to (i) register with the FDA and report product and ingredient listings; (ii) market newly deemed products only after FDA review and approval; (iii) only make direct and implied claims of reduced risk if the FDA approves after finding that scientific evidence supports the claim and that marketing the product will benefit public health as a whole; (iv) refrain from distributing free samples; (v) implement minimum age and identification restrictions to prevent sales to individuals under age 18; (vi) develop an approved warning plan and include prescribed health warnings on packaging and advertisements; and (vii) refrain from selling the products in vending machines, unless the machine is located in a facility that never admits youth.
The deeming regulations require us to (i) register with the FDA and report product and ingredient listings; (ii) market newly deemed products only after FDA review and approval; (iii) only make direct and implied claims of reduced risk if the FDA approves after finding that scientific evidence supports the claim and that marketing the product will benefit public health as a whole; (iv) refrain from distributing free samples; (v) implement minimum age and identification restrictions to prevent sales to individuals under age 18; (vi) develop an approved warning plan and include prescribed health warnings on packaging and advertisements; and (vii) refrain from selling the products in vending machines, unless the machine is located in a facility that never admits youth.
In addition, failure to comply with new or existing tobacco laws under which the FDA imposes regulatory requirements could result in significant financial penalties and government investigations of us. To the extent we are unable to respond to, or comply with, new FDA regulations it could have a material adverse effect on our business, results of operations and financial condition.
Failure to comply with new or existing tobacco laws under which the FDA imposes regulatory requirements could result in significant financial penalties and government investigations of us. To the extent we are unable to respond to, or comply with, new FDA regulations it could have a material adverse effect on our business, financial position, results of operations and cash flows.
Any failure to track and prevent counterfeiting of our products could have a material adverse effect on our ability to maintain or effectively compete for the products we distribute under our brand names, which would have a material adverse effect on our business, results of operations and financial condition.
Any failure to track and prevent counterfeiting of our products could have a material adverse effect on our ability to maintain or effectively compete for the products we distribute under our brand names, which would have a material adverse effect on our business, financial position, results of operations and cash flows.
See “—Many of our products have not obtained premarket authorization from the FDA and are currently marketed pursuant to a policy of FDA enforcement priorities, which could change.
See Item 1A - "Many of our products have not obtained premarket authorization from the FDA and are currently marketed pursuant to a policy of FDA enforcement priorities, which could change.
While Swedish Match continues to honor all obligations to us and has indicated that they will continue to do so in the future, relationship dynamics may change over time in light of their new owners. 18 Table of Contents All of our Zig-Zag ® premium cigarette papers, cigarette tubes, and injectors are sourced from RTI, pursuant to the Distribution Agreements.
While Swedish Match continues to honor all obligations to us and has indicated that it will continue to do so in the future, relationship dynamics may change over time in light of its new owners. 17 Table of Contents All of our Zig-Zag ® premium cigarette papers, cigarette tubes and injectors are sourced from RTI, pursuant to the Distribution Agreements.
If the U.S. becomes a signatory to the FCTC and/or national laws are enacted in the U.S. that reflect the major elements of the FCTC, our business, results of operations and financial condition could be materially and adversely affected.
If the U.S. becomes a signatory to the FCTC and/or national laws are enacted in the U.S. that reflect the major elements of the FCTC, our business, financial position, results of operations and cash flows could be materially and adversely affected.
Such a contamination event could have a material adverse effect on our business, results of operations and financial condition. The market for certain of our products is subject to a great deal of uncertainty and is still evolving.
Such a contamination event could have a material adverse effect on our business, financial position, results of operations and cash flows. The market for certain of our products is subject to a great deal of uncertainty and is still evolving.
There can be no assurance that we will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on our business, results of operations and financial condition.
There can be no assurance that we will not sustain losses in connection with such lawsuits and that such losses will not have a material adverse effect on our business, financial position, results of operations and cash flows.
We may be unable to identify or contract with new suppliers or producers in the event of a disruption to our supply of products. In order to continue selling our products in the event of a disruption to our supply, we would have to identify new suppliers or producers that would be required to satisfy significant regulatory requirements.
In order to continue selling our products in the event of a disruption to our supply, we would have to identify new suppliers or producers that would be required to satisfy significant regulatory requirements.
We have been in the past and may again in the future be subject to cyberattacks, including attacks that have resulted in the theft of customer financial information, such as credit card information; however, no cyberattack we have suffered to date has resulted in material liability to us.
We have been in the past and may again in the future be subject to cyberattacks, including attacks that have resulted in the theft of customer financial information, such as credit card information; however, no cyberattack on our systems to date has resulted in material liability for us.
These deeming regulations apply to all products made or derived from tobacco intended for human consumption, but excluding accessories of tobacco products (such as lighters). Subsequently, on April 14, 2022, the FDA Center for Tobacco Products also obtained jurisdiction over non-tobacco nicotine products (“NTN Products”), including synthetic nicotine.
These deeming regulations apply to all products made or derived from tobacco intended for human consumption, but excluding accessories of tobacco products (such as lighters). Subsequently, on April 14, 2022, the FDA Center for Tobacco Products also obtained jurisdiction over non-tobacco nicotine products (“NTN Products”), including synthetic nicotine. That law subjects NTN Products to the same requirements as tobacco-derived products.
See Item 1 – “Business – Distribution and Supply Agreements”. Many of our suppliers compete with us in one or more product categories.
See Item 1 – “Business – Distribution and Supply Agreements.” Many of our suppliers compete with us in one or more product categories.
Some of our currently marketed products that are subject to FDA regulation will require marketing authorizations from the FDA for us to continue marketing them (e.g., pre-market or substantial equivalence marketing authorizations, as applicable to the product), which we cannot guarantee we will be able to obtain.
Some of our currently marketed products that are subject to FDA regulation will require marketing authorizations from the FDA for us to continue marketing them (e.g., pre-market or substantial equivalence marketing authorizations, as applicable to the product), which we cannot guarantee we will be able to obtain. In addition, as a result of the U.S.
The competitive environment and our competitive position are also significantly influenced by economic conditions, the state of consumer confidence, competitors’ introduction of low-priced products or innovative products, higher taxes, higher absolute prices and larger gaps between price categories and product regulation that diminishes the consumer’s ability to differentiate tobacco products.
The competitive environment and our competitive position are also significantly influenced by economic conditions, the state of consumer confidence, competitors’ introduction of low-priced products or innovative products, higher taxes, higher absolute prices and larger gaps between price categories, reliance on competitors for certain raw materials and product regulation that diminishes the consumer’s ability to differentiate tobacco products.
Our remediation measures will result in additional technology, new personnel, the creation of training programs and other expenses.
Our remediation measures have and will continue to result in additional technology, new personnel, the creation of training programs and other expenses.
The Distribution Agreements were most recently renewed in 2012 and pursuant to such agreements, we renegotiate pricing terms every five years. Pursuant to agreements with certain suppliers, we have agreed to store tobacco inventory purchased on our behalf and generally maintain a 12- to 24-month supply of our various tobacco products at their facilities.
The Distribution Agreements were most recently renewed in 2012, with pricing terms subject to renegotiation every five years, the most recent of which occurred in 2022. Pursuant to agreements with certain suppliers, we have agreed to store tobacco inventory purchased on our behalf and generally maintain a 12- to 24-month supply of our various tobacco products at their facilities.
We acquired the Stoker’s ® brand in 2003 and have continued to develop it through the introduction of new products, such as moist snuff.
We acquired the Stoker ’ s ® brand in 2003 and have continued to develop it through the introduction of new products, such as moist snuff.
The indenture governing the Senior Secured Notes and our 2023 ABL Facility each contain, and any future indebtedness of ours would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: • incur additional debt, disqualified stock and preferred stock; • pay dividends and make other restricted payments; • create liens; • make investments and acquisitions; • engage in sales of assets and subsidiary stock; • enter into sale-leaseback transactions; • enter into transactions with affiliates; and • transfer all or substantially all of our assets or enter into merger or consolidation transactions.
The indenture governing the 2026 Notes and our 2023 ABL Facility each contain, and any future indebtedness of ours would likely contain, a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things • incur additional debt, disqualified stock and preferred stock; • pay dividends and make other restricted payments; • create liens; • make investments and acquisitions; • engage in sales of assets and subsidiary stock; • enter into sale-leaseback transactions; • enter into transactions with affiliates; and • transfer all or substantially all of our assets or enter into merger or consolidation transactions. 28 Table of Contents Our 2023 ABL Facility also requires us to maintain certain financial ratios under certain limited circumstances.
As a result, we may face substantial costs due to increased product liability litigation relating to new regulations or other potential defects associated with Creative Distribution Solutions products we ship, which could have a material adverse effect on our business, results of operations and financial condition.
As a result, we may face substantial costs due to increased product liability litigation relating to new regulations or other potential defects associated with the products we ship, which could have a material adverse effect on our business, financial position, results of operations and cash flows.
These additional tariffs apply to a significant portion of our Creative Distribution Solutions products and may result in increased prices for our customers and in turn, reduced demand where customers are unable to absorb the increased prices or successfully pass them onto the end-user. Future administrations could impose additional tariffs.
These additional tariffs apply to a significant portion of the Creative Distribution Solutions joint venture’s products and may result in increased prices for its customers and in turn, reduced demand where customers are unable to absorb the increased prices or successfully pass them onto the end-user.
At present, we are not able to predict whether the Tobacco Control Act will impact our products to a greater degree than competitors in the industry, which would affect our competitive position. Furthermore, in addition to the FDA, there are restrictions being proposed or in effect at the federal, state, and local level related to our products.
At present, we are not able to predict whether the Tobacco Control Act will impact our products to a greater degree than competitors in the industry, which would affect our competitive position. Furthermore, in addition to the FDA, federal, state and local government entities have also proposed or effectuated restrictions related to our products.
Our 2023 ABL Facility also requires us to maintain certain financial ratios under certain limited circumstances. A failure by us to comply with the covenants or financial ratios in our debt instruments could result in an event of default under the facility, which could adversely affect our ability to respond to changes in our business and manage our operations.
A failure by us to comply with the covenants or financial ratios in our debt instruments could result in an event of default under the facility, which could adversely affect our ability to respond to changes in our business and manage our operations.
In 2023, our two most important suppliers and producers were: (i) Swedish Match (acquired in 2022 by Philip Morris International Inc.), which produces all of our loose-leaf chewing tobacco in the U.S.; and (ii) RTI, which provides us with exclusive access to the Zig-Zag ® cigarette paper and related accessories in the U.S. and Canada.
In 2024, our two most important suppliers and producers were: (i) Swedish Match, which produces all of our loose-leaf chewing tobacco in the U.S.; and (ii) RTI, which provides us with exclusive access to the Zig-Zag ® cigarette paper and related accessories in the U.S. and Canada.
The OTP industry is characterized by brand recognition and loyalty, with product quality, price, marketing and packaging constituting the primary methods of competition. Substantial marketing support, merchandising display, competitive pricing and other financial incentives generally are required to introduce a new brand or to improve or maintain a brand’s market position. Our principal competitors are “big tobacco,” Altria Group, Inc.
The OTP industry is characterized by brand recognition and loyalty, with product quality, price, marketing and packaging constituting the primary methods of competition. Substantial marketing support, merchandising display, competitive pricing and other financial incentives generally are required to introduce a new brand and to improve and maintain a brand’s market position.
These restrictions may affect the liquidity of our common stock and may result in Restricted Investors (as defined in our Certificate of Incorporation) being required to sell or redeem their shares at a loss or relinquish their voting, dividend and distribution rights; • future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us; • we may issue preferred stock whose terms could adversely affect the voting power or value of our common stock; General Risks • our business may be damaged by events outside of our or our suppliers’ control, such as the impact of epidemics (e.g., coronavirus), political upheavals, or natural disasters; • adverse impact of climate change; • our reliance on information technology; • cybersecurity and privacy breaches, which have increased in part due to artificial intelligence; • failure to manage our growth; • failure to successfully integrate our acquisitions or otherwise be unable to benefit from pursuing acquisitions; • fluctuations in our results; • exchange rate fluctuations; • adverse U.S. and global economic conditions; • departure of key management personnel or our inability to attract and retain talent; • infringement on or misappropriation of our intellectual property; • third-party claims that we infringe on their intellectual property; and • failure to meet expectations relating to environmental, social and governance factors Risks Related to Our Business and Industry Sales of tobacco products are generally expected to continue to decline.
These restrictions may affect the liquidity of our common stock and may result in Restricted Investors being required to sell or redeem their shares at a loss or relinquish their voting, dividend and distribution rights; • future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us; • we may issue preferred stock whose terms could adversely affect the voting power or value of our common stock; General Risks • our business may be damaged by events outside of our or our suppliers’ control, such as the impact of epidemics or pandemics, political upheavals, or natural disasters; • adverse impact of climate change and legal and regulatory requirements related to climate change and environmental sustainability; • our reliance on information technology; • cybersecurity and privacy breaches, including due to artificial intelligence; • failure to manage our growth; • failure to successfully identify, negotiate and complete suitable acquisition opportunities, integrate our acquisitions or otherwise be unable to benefit from pursuing acquisitions; • fluctuations in our results; • exchange rate fluctuations; • adverse U.S. and global economic conditions; • departure of key management personnel or our inability to attract and retain talent; • infringement on or misappropriation of our intellectual property; • third-party claims that we infringe on their intellectual property; and • impairment of intangible assets, including trademarks and goodwill Risks Related to Our Business and Industry Sales of tobacco products are generally expected to continue to decline.
Future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute our stockholders.
Future sales of our common stock in the public market could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute our stockholders. We may sell additional shares of common stock in public or private offerings and may also sell securities convertible to common stock.
The application of these types of restrictions, and of any new laws or regulations which may be adopted in the future, to these products could result in additional expenses and require us to change our advertising and labeling, and methods of marketing and distribution of our products, any of which could have a material adverse effect on our business, results of operations and financial condition. 26 Table of Contents Some products we sell are subject to developing and unpredictable regulation.
The application of these types of restrictions, and of any new laws or regulations which may be adopted in the future, to these products could result in additional expenses and require us to change our advertising and labeling, and methods of marketing and distribution of our products, any of which could have a material adverse effect on our business, results of operations and financial condition.
Electronic cigarettes, vaporizers and many of our Creative Distribution Solutions products were recently developed and therefore the scientific community has not had a sufficient period of time to study the long-term health effects of their use. Currently, there is no way of knowing whether these products are safe for their intended use.
Electronic cigarettes, vaporizers and modern oral nicotine/white pouch products were recently developed and therefore the scientific community has not had a sufficient period of time to study the long-term health effects of their use. Currently, there is no way of knowing whether these products are safe for their intended use.
For example, if we are unable to meet benchmarking provisions in contracts or if we are unable to maintain and leverage our retail relationships on a scale sufficient to make us an attractive distributor, it would have a material adverse effect on our ability to source products, and on our business, results of operations and financial condition.
For example, our inability to meet benchmarking provisions in contracts or maintain and leverage our retail relationships on a scale sufficient to make us an attractive distributor would have a material adverse effect on our business, results of operations and financial condition.
If we are not able to comply with the requirements of Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses: • our reputation may be adversely affected and our business and operating results could be harmed; • the market price of our stock could decline; • we could fail to meet our financial reporting obligations; and • we could be subject to litigation and/or investigations or sanctions by the SEC, the New York Stock Exchange or other regulatory authorities. 30 Table of Contents We identified a material weakness in our internal control over financial reporting which, if not remediated appropriately or in a timely manner, could result in loss of investor confidence and adversely impact our stock price.
If we are not able to comply with the requirements of Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses: • our reputation may be adversely affected and our business and operating results could be harmed; • the market price of our stock could decline; • we could fail to meet our financial reporting obligations; and • we could be subject to litigation and/or investigations or sanctions by the SEC, the New York Stock Exchange or other regulatory authorities.
These requirements are in addition to any increased regulation of internet sales that may be in effect or passed legislatively at the federal, state, or local levels, or promulgated via rulemaking by a government agency.
These requirements are in addition to any increased regulation of internet sales that may be in effect or passed legislatively at the federal, state, or local levels, or promulgated via rulemaking by a government agency. Increased regulation of additives in tobacco products through federal, state, or local governments may also adversely affect our products.
Material inflation may also lead to significant increases in property, E&O and other insurance premiums which could affect our results of operations and liquidity and may also result in us self-insuring if the premiums become uneconomical.
Material inflation may also lead to significant increases in property, E&O and other insurance premiums which could affect our results of operations and liquidity and may also result in us self-insuring if the premiums become uneconomical. We currently self-insure a portion of our risk through our captive insurance company.
If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire us.
Our certificate of incorporation authorizes our board of directors to issue preferred stock without stockholder approval. If our board of directors elects to issue preferred stock, it could be more difficult for a third party to acquire us.
These taxes apply to our online sales of Creative Distribution Solutions products into those states and may result in reduced demand from the independent wholesalers who may not be able to absorb the increased taxes or successfully pass them onto the end-user without experiencing reduced demand.
In addition, some states have begun collecting taxes on internet sales. These taxes apply to our online sales of FRE products into those states and may result in reduced demand from the independent wholesalers who may not be able to absorb the increased taxes or successfully pass them onto the end-user without experiencing reduced demand.
Effective August 8, 2016, FDA’s regulatory authority under the Tobacco Control Act was extended to all remaining tobacco-derived products, including: (i) certain Creative Distribution Solutions products (such as electronic cigarettes, vaporizers and e-liquids) and their components or parts (such as tanks, coils and batteries); (ii) cigars and their components or parts (such as cigar tobacco); (iii) pipe tobacco; (iv) hookah products; or (v) any other tobacco product “newly deemed” by the FDA.
Effective August 8, 2016, FDA’s regulatory authority under the Tobacco Control Act was extended to all remaining tobacco-derived products, including: (i) cigars and their components or parts (such as cigar tobacco); (ii) pipe tobacco; (iii) hookah products; or (iv) any other tobacco product “newly deemed” by the FDA.
(formerly Phillip Morris) and British American Tobacco p.l.c. (formerly Reynolds) as well as Swedish Match (purchased by Philip Morris International Inc.), Swisher International and manufacturers of electronic cigarettes, including U.K.-based Imperial Brands PLC. These competitors are significantly larger than us and aggressively seek to limit the distribution or sale of other companies’ products, both at the wholesale and retail levels.
Our principal competitors are “big tobacco,” which includes Altria Group, Inc. and British American Tobacco p.l.c., as well as Swedish Match, Swisher International and manufacturers of electronic cigarettes, including U.K.-based Imperial Brands PLC. These competitors are significantly larger than us and aggressively seek to limit the distribution or sale of other companies’ products, at both wholesale and retail levels.
While the decline has not as of yet, led to a decrease in sales of our products, continued economic pressures in our target consumer market could lead to a decrease in discretionary purchases which could have a material adverse impact on our business results of operations and financial conditions. 27 Table of Contents In addition, some states have begun collecting taxes on internet sales.
While the decline in consumer purchasing power has not as of yet, led to a decrease in sales of our products, continued economic pressures in our target consumer market could lead to a decrease in discretionary purchases which could have a material adverse impact on our business results of operations and financial conditions.
Any loss in our brand-name appeal to our existing customers as a result of the lapse or termination of our licenses could have a material adverse effect on our business, results of operations, and financial condition. We may not be successful in maintaining the consumer brand recognition and loyalty of our products.
Any loss in our brand-name appeal to our existing customers as a result of the lapse or termination of our licenses could have a material adverse effect on our business, results of operations, and financial condition.
Our substantial amount of indebtedness could limit our ability to: • obtain necessary additional financing for working capital, capital expenditures or other purposes in the future; • plan for, or react to, changes in our business and the industries in which we operate; • make future acquisitions or pursue other business opportunities; • react in an extended economic downturn; • pay dividends; and • repurchase stock. 29 Table of Contents The terms of the agreement governing our indebtedness may restrict our current and future operations, which would adversely affect our ability to respond to changes in our business and to manage our operations.
Our substantial amount of indebtedness could limit our ability to: • obtain necessary additional financing for working capital, capital expenditures or other purposes in the future; • plan for, or react to, changes in our business and the industries in which we operate; • make future acquisitions or pursue other business opportunities; • react in an extended economic downturn; • pay dividends; and • repurchase stock.
The liquidity or market value of the shares of our common stock may be adversely impacted by such transfer restrictions. 31 Table of Contents As a result of the above provisions, a proposed transferee of our common stock that is a Restricted Investor may not receive any return on its investment in shares it purchases or owns, as the case may be, and it may sustain a loss.
As a result of the above provisions, a proposed transferee of our common stock that is a Restricted Investor may not receive any return on its investment in shares it purchases or owns, as the case may be, and it may sustain a loss.
Such events have the potential to disrupt our operations, cause manufacturing facility closures, disrupt the business of our third-party suppliers and impact our customers, all of which may cause us to suffer losses and additional costs to maintain or resume operations. Reliance on information technology means a significant disruption could affect our communications and operations.
Such events have the potential to disrupt our operations, cause manufacturing facility closures, disrupt the business of our third-party suppliers and impact our customers, all of which may cause us to suffer losses and additional costs to maintain or resume operations.
Since the State Children’s Health Insurance Program (“S-CHIP”) reauthorization in early 2009, which utilizes, among other things, taxes on tobacco products to fund health insurance coverage for children, the federal excise tax increases adopted have been substantial and have materially reduced sales in the RYO/MYO cigarette smoking products market, and also caused volume declines in other markets.
Federally, smokeless products are taxed by weight (in pounds or fractional parts thereof) manufactured or imported. 23 Table of Contents Since the State Children’s Health Insurance Program (“S-CHIP”) reauthorization in early 2009, which utilizes, among other things, taxes on tobacco products to fund health insurance coverage for children, the federal excise tax increases adopted have been substantial and have materially reduced sales in the RYO/MYO cigarette smoking products market, and also caused volume declines in other markets.
As a result, our business, financial condition and results of operations could be materially adversely affected. 28 Table of Contents The scientific community has not yet studied extensively the long-term health effects of certain substances contained in some of our products.
As a result, our business, financial condition and results of operations could be materially adversely affected. The scientific community has not yet studied extensively the long-term health effects of certain substances contained in some of the products we previously sold and some products sold by joint ventures in which we have invested .
Although we have insurance coverage for these events, including Company’s stock throughput insurance, which in the above case allowed the Company to book a $15.2 million insurance recovery receivable, a prolonged interruption in our operations, as well as those of our producers, suppliers, or vendors, could have a material adverse effect on our business, results of operations, and financial condition.
Although we have insurance coverage for these events, including Company’s stock throughput insurance, a prolonged interruption in our operations, as well as those of our producers, suppliers or vendors could have a material adverse effect on our business, results of operations, and financial condition.
Any disruptions in our relationships with RTI or Swedish Match or any other significant supplier, a failure to renew any of our agreements, an inability or unwillingness by any supplier to produce sufficient quantities of our products in a timely manner or finding a new supplier would have a significant impact on our ability to continue distributing the same volume and quality of products and maintain our market share, even during a temporary disruption, which could have a material adverse effect on our business, results of operations and financial condition.
Any disruptions in our relationships with RTI, Swedish Match or any other significant supplier, a failure to renew any of our agreements or an inability or unwillingness by any supplier to produce sufficient quantities of our products in a timely manner and our failure to find a replacement supplier would have a significant impact on our ability to continue distributing the same volume and quality of products and maintain our market share, even if the disruption were temporary.
Such taxes have frequently been increased or proposed to be increased, in some cases significantly, to fund various legislative initiatives or further disincentivize tobacco usage. Since 1986, smokeless products have been subject to federal excise tax. Federally, smokeless products are taxed by weight (in pounds or fractional parts thereof) manufactured or imported.
Such taxes have frequently been increased or proposed to be increased, in some cases significantly, to fund various legislative initiatives or further disincentivize tobacco usage. Since 1986, smokeless products have been subject to federal excise tax.
If we are unable to remediate the material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and in turn, adversely impact our stock price.
If we are unable to remediate the material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and in turn, adversely impact our stock price. 29 Table of Contents Risks Related to our Common Stock Our certificate of incorporation and bylaws, as well as Delaware law and certain regulations, could discourage or prohibit acquisition bids or merger proposals, which may adversely affect the market price of our common stock.
If we are unable to compete against these products, our sales volumes may be negatively materially impacted until and after the implementation of stronger enforcement activity. 21 Table of Contents Although we combat counterfeiting of our products by engaging in certain tactics, such as requiring all sales force personnel to randomly collect our products from retailers in order to be reviewed for authenticity and using a private investigation firm to help perform surveillance of retailers we suspect are selling counterfeit products, no assurance can be given that we will be able to detect or stop sales of all counterfeit products.
Although we combat counterfeiting of our products by engaging in certain tactics, such as requiring all sales force personnel to randomly collect our products from retailers in order to be reviewed for authenticity and using a private investigation firm to help perform surveillance of retailers we suspect are selling counterfeit products, no assurance can be given that we will be able to detect or stop sales of all counterfeit products.
In 2023, we generated approximately $180.5 million in net sales of Zig-Zag ® products, of which approximately $75.4 million was generated from products sold through the License Agreements.
In 2024, we generated approximately $192.4 million in net sales of Zig-Zag ® products, of which approximately $131.6 million was generated from products sold through the License Agreements.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Chief Information Security Officer reports to our Security Leader and has over 25 years of IT, cybersecurity, data security and regulatory compliance experience. Our Security Leader reports to our Chief Information Officer, and is responsible for the operation of our cybersecurity program and management of our cybersecurity team.
Biggest changeOur Head of IT has over 20 years of IT experience, including over 10 years experience in cybersecurity, data security and regulatory compliance. Our Security Leader reports to our Head of IT and is responsible for the operation of our cybersecurity program and management of our cybersecurity team. Our Security Leader has 20 years of IT experience.
Our Cybersecurity Steering Committee also has effected comprehensive incident response plans that outline the appropriate communication flow and response for certain categories of potential cybersecurity incidents. The Cybersecurity Steering Committee escalates events, including to the Chief Financial Officer and Board of Directors, as relevant, according to pre-defined criteria.
Our Cybersecurity Steering Committee also has effected comprehensive incident response plans that outline the appropriate communication flow and response for certain categories of potential cybersecurity incidents. The Cybersecurity Steering Committee escalates events, including to the Chief Financial Officer, Audit Committee and Board of Directors, as relevant, according to pre-defined criteria.
We expect that sophistication of cyber-threats will continue to evolve as threat actors increase their use of AI and machine-learning technologies. We have implemented robust processes to assess, identify, and manage cybersecurity risks, including potentially material risks, related to our internal information systems and our products.
We expect that sophistication of cyber-threats will continue to evolve as threat actors increase their use of AI and machine-learning technologies. 34 Table of Contents We have implemented robust processes to assess, identify, and manage cybersecurity risks, including potentially material risks, related to our internal information systems and our products.
In response to the increasing threats presented by cyber incidents, in 2023 we established a Cybersecurity Steering Committee, which meets bimonthly. This committee is comprised of our Chief Information Officer, Head of IT and Security Leader, along with our Deputy General Counsel who reports to our General Counsel.
In response to the increasing threats presented by cyber incidents, in 2023 we established a Cybersecurity Steering Committee, which meets bimonthly. This committee is comprised of our Head of IT and Security Leader, along with our Deputy General Counsel who reports to our General Counsel.
Our Chief Information Officer, reporting to our Chief Financial Officer, has principal responsibility for assessing and managing cybersecurity risks and threats, implementing the activities and systems necessary to address such risks and threats and preparing updates for the Board of Directors.
Our Head of IT, reporting to our Chief Financial Officer, has principal responsibility for assessing and managing cybersecurity risks and threats, implementing the activities and systems necessary to address such risks and threats and preparing updates for the Board of Directors.
See Item 1A “Risk Factors – Security and privacy breaches may expose us to liability and cause us to lose customers”. A cybersecurity incident could materially harm our reputation and financial condition and cause us to incur legal liability and increased costs when responding to such events.
See Item 1A “Risk Factors – Security and privacy breaches may expose us to liability and cause us to lose customers”. A cybersecurity incident could materially harm our reputation and financial condition and cause us to incur legal liability and increased costs when responding to such events. 35 Table of Contents
Our Security Leader has 20 years of IT experience. 36 Table of Contents We have adopted the National Institute of Standards and Technology Cybersecurity Framework and the Center for Internet Security Critical Security Controls to continually evaluate and enhance our cybersecurity.
We have adopted the National Institute of Standards and Technology Cybersecurity Framework and the Center for Internet Security Critical Security Controls to continually evaluate and enhance our cybersecurity.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties As of December 31, 2023, we operated manufacturing, distribution, office, and warehouse space in the U.S., all of which is leased with the exception of our Dresden, Tennessee manufacturing facility, which is owned. To provide a cost-efficient supply of products to our customers, we maintain centralized management of internal manufacturing and nationwide distribution facilities.
Biggest changeItem 2. Properties As of December 31, 2024, we operated manufacturing, distribution, office, and warehouse space in the U.S., all of which is leased with the exception of our Dresden, Tennessee manufacturing facility, which is owned. To provide a cost-efficient supply of products to our customers, we maintain centralized management of internal manufacturing and nationwide distribution facilities.
Our two manufacturing and distribution facilities located in Louisville, Kentucky and Shepherdsville, Kentucky are used by all our segments. Our third manufacturing and distribution facility located in Dresden, Tennessee is used by our Stoker’s Product segment. We believe our facilities are adequate for our current and anticipated future use.
Our two manufacturing and distribution facilities located in Louisville, Kentucky and Shepherdsville, Kentucky are used by both our segments. Our third manufacturing and distribution facility located in Dresden, Tennessee is used by our Stoker’s Product segment. We believe our facilities are adequate for our current and anticipated future use.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings For a description of our material pending legal proceedings, see Note 18, “Contingencies” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. Also see Item 1A “Risk Factors - We are subject to significant product liability litigation” for additional details.
Biggest changeItem 3. Legal Proceedings For a description of our material pending legal proceedings, see Note 19, “Contingencies” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. Also see Item 1A “Risk Factors - We are subject to significant product liability litigation” for additional details.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeIn addition, he is an Adjunct Professor at Columbia Business School. Mr. Glazek holds a Bachelor of Arts from the University of Michigan and a J.D. from Columbia Law School . Luis Reformina , age 46, was appointed Chief Financial Officer in May 2021 after serving as the Company’s Chief Business Development Officer since October 2020.
Biggest changeIn addition, he is an Adjunct Professor at Columbia Business School. Mr. Glazek holds a Bachelor of Arts from the University of Michigan and a J.D. from Columbia Law School . Andrew Flynn , age 49, joined the Company as our Chief Financial Officer in April 2024. Mr.
Purdy spent 7 years at Philip Morris, USA where he served in senior sales and sales management positions. Mr. Purdy holds a Bachelor of Arts from California State University, Chico. David Glazek, age 46, was appointed Executive Chair of the Board in January 2023. Mr.
Purdy spent 7 years at Philip Morris, USA where he served in senior sales and sales management positions. Mr. Purdy holds a Bachelor of Arts from California State University, Chico. David Glazek, age 47, was appointed Executive Chair of the Board in January 2023. Mr.
There are no family relationships between any of the executive officers, and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected. Graham Purdy, age 52, has served as our President and CEO since October 2022. Prior to October 2022, Mr.
There are no family relationships between any of the executive officers, and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected. Graham Purdy, age 53, has served as our President and CEO since October 2022. Prior to October 2022, Mr.
Cushman , age 39, has been our Senior Vice President, General Counsel, and Secretary since November 2020 and has served in various roles in our legal department since joining the Company in October 2014, most recently serving as Senior Vice President of External Affairs. Prior to joining the Company, Ms.
Cushman , age 40, has been our Senior Vice President, General Counsel, and Secretary since November 2020 and has served in various roles in our legal department since joining the Company in October 2014, most recently serving as Senior Vice President of External Affairs. Prior to joining the Company, Ms.
Cushman holds a Bachelor of Science in Business Administration, magna cum laude , in business management from the University of Tulsa and a J.D. from Washington and Lee University School of Law. 38 Table of Contents PART II
Cushman holds a Bachelor of Science in Business Administration, magna cum laude , in business management from the University of Tulsa and a J.D. from Washington and Lee University School of Law. 36 Table of Contents PART II
Item 4. Mine Safety Disclosures Not applicable. 37 Table of Contents Information about our Executive Officers Listed below are the executive officers of the Company. Our executive officers are appointed by, and serve at the discretion of, our board of directors.
Item 4. Mine Safety Disclosures Not applicable. Information about our Executive Officers Listed below are the executive officers of the Company. Our executive officers are appointed by, and serve at the discretion of, our board of directors.
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He joined the Company as Vice President of Business Development in 2019. Prior to joining the Company, Mr. Reformina spent nearly two decades in the finance and investment industry working at Point72 Asset Management, Waterfront Capital Partners, Perella Weinberg Partners and Vestar Capital Partners in various roles deploying capital across different industries.
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Flynn previously served as the CFO of Connected Cannabis Co. from September 2021 until March 2024. Prior to joining Connected, from June 2019 until September 2021, Mr. Flynn served in various positions at Juul Labs, including as Senior Vice President. Earlier in his career, Mr.
Removed
He began his career as an investment banker at Goldman Sachs & Co. Mr. Reformina holds a B.S, summa cum laude , in Electrical Engineering from Cornell University and an M.B.A from Stanford Graduate School of Business where he was an Arjay Miller Scholar. Brittani N.
Added
Flynn served as Vice President of Finance at James Hardie Building Products, and Vice President of Finance at Arrow Electronics. Mr. Flynn holds a BS from Indiana University and an MBA from the University of Colorado, Denver. Brittani N.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn February 25, 2020, the Company’s Board of Directors approved a $50.0 million share repurchase program, which is intended for opportunistic execution based upon a variety of factors including market dynamics.
Biggest changeOn February 25, 2020, the Company’s Board of Directors approved a $50.0 million share repurchase program, which is intended for opportunistic execution based upon a variety of factors including market dynamics. On October 25, 2021, the Board of Directors increased the approved share repurchase program by $30.7 million, and by an additional $24.6 million on February 24, 2022.
The information presented assumes the investment of $100 in common stock and each of the indices as of the market close on December 31, 2018 and the reinvestment of all dividends on a quarterly basis. Issuer purchases of equity securities.
The information presented assumes the investment of $100 in common stock and each of the indices as of the market close on December 31, 2019 and the reinvestment of all dividends on a quarterly basis. 37 Table of Contents Issuer purchases of equity securities.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The principal stock exchange on which Turning Point Brands, Inc.’s common stock, par value $0.01 per share, (the “Common Stock”) is listed is the New York Stock Exchange under the symbol “TPB.” At February 21, 2024, there were 124 holders of record of the Company’s Common Stock.
Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The principal stock exchange on which Turning Point Brands, Inc.’s common stock, par value $0.01 per share, (the “Common Stock”) is listed is the New York Stock Exchange under the symbol “TPB.” At February 28, 2025, there were 133 holders of record of the Company’s Common Stock.
The last reported sales price of the Company’s Common Stock on February 21, 2024 was $22.88. Dividends. We have a history of paying cash dividends. Future dividend amounts will be considered after reviewing financial results and capital needs and will be declared at the discretion of our Board of Directors. Performance graph.
The last reported sales price of the Company’s Common Stock on February 28, 2025 was $70.30. Dividends. We have a history of paying cash dividends. Future dividend amounts will be considered after reviewing financial results and capital needs and will be declared at the discretion of our Board of Directors. Equity Compensation Plan Information.
This share repurchase program has no expiration date and is subject to the ongoing discretion of the Board of Directors. All repurchases to date under our stock repurchase programs have been made through open market transactions, but in the future, we may also purchase shares through privately negotiated transactions or 10b5-1 repurchase plans.
All repurchases to date under our stock repurchase programs have been made through open market transactions, but in the future, we may also purchase shares through privately negotiated transactions or 10b5-1 repurchase plans.
Removed
On October 25, 2021, the Board of Directors increased the approved share repurchase program by $30.7 million bringing the authority at the time back to $50.0 million (including approximately $19.3 million available for repurchases under the Board of Directors’ previous authorization).
Added
For certain information concerning securities authorized for issuance under the Company’s equity compensation plans, see “Item 12.
Removed
On February 24, 2022, the Board of Directors increased the approved share repurchase program by $24.6 million bringing total authority at that time to $50.0 million. As of December 31, 2023, we had $27.2 million of remaining authority under the repurchase program.
Added
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder matters,” which notes that the information required by this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2025 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2024. Performance graph.
Removed
For the quarter ended December 31, 2023, the Company made no purchases of its common stock in connection with the repurchase program described above. 39 Table of Contents
Added
On November 6, 2024, the Board of Directors of the Company increased the Company’s share repurchase authorization by $77.9 million to an aggregate amount of $100.0 million. This share repurchase program has no expiration date and is subject to the ongoing discretion of the Board of Directors.
Added
The following table includes information regarding purchases of our common stock made by us during the three months ended December 31, 2024 in connection with the repurchase program described above: Maximum Number (or Approximate Total Number of Dollar Value) Shares Purchased of Shares that Total Number Average as Part of Publicly May Yet Be of Shares Price Paid Announced Plans Purchased Under the Period Purchased (1) per Share or Programs Plans or Programs October 1 to October 31 21,072 $ 41.83 21,072 $ 22,147,035 November 1 to November 30 512 $ 62.30 - $ 100,000,000 December 1 to December 31 2,542 $ 60.10 - $ 100,000,000 Total 24,126 21,072 (1) The total number of shares purchased includes shares withheld by the Company in an amount equal to the statutory withholding taxes for holders who vested in stock-based awards, which totaled 512 shares in November and 2,542 shares in December.
Added
Shares withheld by the Company to cover statutory withholdings taxes are repurchased pursuant to the applicable plan and not the authorization under the share repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeLevel Historical Excess Availability Applicable Margin for SOFR Loans Applicable Margin for Base Rate Loans I Greater than or equal to 66.66% 1.75% 0.75% II Less than 66.66%, but greater than or equal to 33.33% 2.00% 1.00% III Less than 33.33% 2.25% 1.25% The 2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four consecutive fiscal quarters if excess availability shall be less than the greater of (a) 12.5% of the line cap and (b) $9.4 million, at any time and continuing until excess availability is equal to or exceeds the greater of (i) 12.5% of the line and (ii) $9.4 million for thirty (30) consecutive calendar days; provided that such $9.4 million level shall automatically increase in proportion to the amount of any increase in the aggregate revolving credit commitments thereunder in connection with any incremental facility.
Biggest changeApplicable Margin Applicable Margin Level Historical Excess Availability for SOFR Loans or Base Rate Loans I Greater than or equal to 66.66% 1.75 % 0.75 % II Less than 66.66%, but greater than or equal to 33.33% 2.00 % 1.00 % III Less than 33.33% 2.25 % 1.25 % The 2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four consecutive fiscal quarters if excess availability is less than the greater of (a) 12.5% of the line cap and (b) $9.4 million, at any time and continuing until excess availability is equal to or exceeds the greater of (i) 12.5% of the line and (ii) $9.4 million for thirty (30) consecutive calendar days with the $9.4 million level automatically increased in proportion to the amount of any increase in the aggregate revolving credit commitments thereunder in connection with any incremental facility. 48 Table of Contents The 2023 ABL Facility will mature on the earlier of (x) November 7, 2027 and (y) the date that is 91 days prior to the maturity date of any material debt of the ABL Borrower or the Company or any of its restricted subsidiaries (subject to customary extensions agreed by the lenders thereunder); provided that clause (y) will not apply to the extent that on any applicable date of determination (on any date prior to the date set forth in clause (y)), (A) the sum of (x) cash that is held in escrow for the repayment of such material debt pursuant to arrangements satisfactory to the Administrative Agent, (y) cash that is held in accounts with the Administrative Agent and/or the Additional Collateral Agent, plus (z) excess availability, is sufficient to repay such material debt and (B) the ABL Borrower has excess availability of at least $15.0 million after giving effect to such repayment of material debt, including any borrowings under the commitments in connection therewith.
Gross profit as a percentage of net sales increased to 56.6% of net sales for the year ended December 31, 2023, from 54.5% of net sales for the year ended December 31, 2022, primarily as a result of the strong incremental margin contribution of MST.
Gross profit as a percentage of net sales increased to 56.6% of net sales for the year ended December 31, 2023, from 54.5% of net sales for the year ended December 31, 2022, as a result of strong incremental margin contribution of MST.
These required taxes may increase over time or be expanded to cover additional product categories and may in some cases impact the consumer demand of the products. In addition, there are several local taxing jurisdictions requiring taxes and/or licensing. Several states have also implemented or are considering implementing additional regulations on our products, including sales restrictions and registry requirements.
These required taxes may increase over time or be expanded to cover additional product categories and may in some cases impact the consumer demand of the products. In addition, there are several local taxing jurisdictions requiring taxes and/or licensing. Several states have also implemented or are considering implementing additional regulations on our products, including sales restrictions.
This system enables us to understand individual product share and volume trends across multiple categories down to the individual retail store level, allowing us to allocate field salesforce coverage to the highest opportunity stores. Our sales and marketing group of approximately 180 professionals utilize the MSAi system to efficiently target markets and sales channels with the highest sales potential.
This system enables us to understand individual product share and volume trends across multiple categories down to the individual retail store level, allowing us to allocate field salesforce coverage to the highest opportunity stores. Our sales and marketing group of approximately 200 professionals utilize the MSAi system to efficiently target markets and sales channels with the highest sales potential.
The Senior Secured Notes Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to: (i) grant or incur liens; (ii) incur, assume or guarantee additional indebtedness; (iii) sell or otherwise dispose of assets, including capital stock of subsidiaries; (iv) make certain investments; (v) pay dividends, make distributions or redeem or repurchase capital stock; (vi) engage in certain transactions with affiliates; and (vii) consolidate or merge with or into, or sell substantially all of our assets to another entity.
The 2032 Notes Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to: (i) grant or incur liens; (ii) incur, assume or guarantee additional indebtedness; (iii) sell or otherwise dispose of assets, including capital stock of subsidiaries; (iv) make certain investments; (v) pay dividends, make distributions or redeem or repurchase capital stock; (vi) engage in certain transactions with affiliates; and (vii) consolidate or merge with or into, or sell substantially all of our assets to another entity.
The OTP industry, which consists of non-cigarette tobacco products, exhibited low-single-digit consumer unit annualized growth over the four-year period ended 2023 as reported by Management Science Associates, Inc., a third-party analytics and information company.
The OTP industry, which consists of non-cigarette tobacco products, exhibited low-single-digit consumer unit annualized growth over the four-year period ended 2024 as reported by Management Science Associates, Inc. a third-party analytics and information company.
For information regarding our long-term debt obligations and cash payment obligations thereunder, please see Note 13, “Notes Payable and Long-Term Debt” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
For information regarding our long-term debt obligations and cash payment obligations thereunder, please see Note 14, “Notes Payable and Long-Term Debt” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
Investment Loss . For the year ended December 31, 2023, investment loss decreased to $11.9 million compared to $13.3 million of investment loss for the year ended December 31, 2022.
Investment Loss : For the year ended December 31, 2023, investment loss decreased to $11.9 million compared to $13.3 million for the year ended December 31, 2022.
The change is primarily a result of the 2023 impairment charges recognized on our investments in Docklight, Wild Hemp and Old Pal of $8.7 million, $2.3 million and $1.3 million, respectively, in 2023 compared to impairment charges of $7.9 million, $4.3 million and $1.4 million in 2022 related to our investments in Dosist, Real Brands and Old Pal, respectively.
The change is primarily a result of the 2023 impairment charges recognized on our investments in Docklight, Wild Hempettes and Old Pal of $8.7 million, $2.3 million and $1.3 million, respectively, in 2023, compared to impairment charges of $7.9 million, $4.3 million and $1.4 million in 2022 related to our investments in Dosist, Real Brands and Old Pal, respectively.
We subscribe to a sales tracking system from MSAi that records all OTP product shipments (ours as well as those of our competitors) from approximately 600 wholesalers to over 250,000 traditional retail stores in the U.S.
We subscribe to a sales tracking system from MSAi that records all OTP product shipments (ours as well as those of our competitors) from approximately 600 wholesalers to over 265,000 traditional retail stores in the U.S.
Interest on the Senior Secured Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2021.We used the proceeds from the Offering (i) to repay all obligations under and terminate the 2018 First Lien Credit Facility, (ii) to pay related fees, costs, and expenses and (iii) for general corporate purposes.
Interest on the 2026 Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2021.We used the proceeds from the offering (i) to repay all obligations under and terminate the 2018 First Lien Credit Facility, (ii) to pay related fees, costs and expenses and (iii) for general corporate purposes.
As of December 31, 2023, federal excise taxes are not assessed on certain novel nicotine products, including nicotine pouches, e-cigarettes and related products. State and Local Regulation As of December 31, 2023, the states require excise tax payments on most of our products.
As of December 31, 2024, federal excise taxes are not assessed on certain novel nicotine products, including nicotine pouches, e-cigarettes and related products. State and Local Regulation As of December 31, 2024, the states require excise tax payments on most of our products.
The FDA has indicated its enforcement priority is those applicants who have received negative action on their application, such as a Marketing Denial Order or Refuse to File notification and who continue to illegally sell those unauthorized products, as well as products for which manufacturers failed to submit a marketing application.
Currently, the FDA has indicated its enforcement priority is those applicants who have received negative action on their application, such as a Marketing Denial Order or Refuse to File notification and who continue to illegally sell those unauthorized products, as well as products for which manufacturers failed to submit a premarket filing.
Our principal operating expenses include the cost of raw materials used to manufacture the limited number of our products which we produce in-house; the cost of finished products, which are generally purchased goods; federal excise taxes; legal expenses; and compensation expenses, including benefits and costs of salaried personnel. Our other principal expenses include interest expense and other expenses.
Our principal operating expenses include the cost of raw materials used to manufacture the limited number of our products which we produce in-house; the cost of finished products, which are generally purchased goods; federal excise taxes; legal expenses; and compensation expenses, including benefits and costs of salaried personnel.
In addition, we have been able to maintain a relatively stable variable cost structure for our products due, in part, to our successful procurement with regard to our tobacco products and, in part, to our existing contractual agreement for the purchase of our premium cigarette papers. 56 Table of Contents
In addition, we have been able to maintain a relatively stable variable cost structure for our products due, in part, to our successful procurement with regard to our tobacco products and, in part, to our existing contractual agreement for the purchase of our premium cigarette papers.
See “Cautionary Note Regarding Forward-Looking Statements.” Factors that could cause actual results to differ include those risks and uncertainties discussed in Item 1A “Risk Factors.” The following discussion relates to the audited financial statements of Turning Point Brands, Inc., included elsewhere in this Annual Report on Form 10-K.
See “ Cautionary Note Regarding Forward-Looking Statements. ” Factors that could cause actual results to differ include those risks and uncertainties discussed in Item 1A “ Risk Factors. ” The following discussion relates to the audited financial statements of Turning Point Brands, Inc., included elsewhere in this Annual Report on Form 10-K.
The Company’s income tax expense was $23.9 million, or 38.7% of income before income taxes, for the year ended December 31, 2023, and included $6.4 million of valuation allowance for the deferred tax asset related to unrealized loss on investments and $1.7 million valuation allowance for foreign net operating losses.
Income Tax Expense: The Company’s income tax expense was $24.0 million, or 38.7% of income before income taxes for the year ended December 31, 2023, and included $6.4 million of valuation allowance for the deferred tax asset related to unrealized loss on investments and $1.7 million valuation allowance for foreign net operating losses.
Inflation Inflation in general and the recent rapid increases in costs of goods and services, such as food and gas prices have had a substantial negative effect on the purchasing power of consumers.
Inflation Inflation in general and the continued increases in costs of goods and services, such as food and gas prices, have had a substantial negative effect on the purchasing power of consumers.
For the year ended December 31, 2023, gain on extinguishment of debt was $1.7 million as a result of the repurchase of $44.0 million in aggregate principal amount of our Convertible Senior Notes at a discount.
Gain on Extinguishment of Debt: For the year ended December 31, 2024, gain on extinguishment of debt was zero compared to $1.7 million for the year ended December 31, 2023, as a result of the repurchase of $44.0 million in aggregate principal amount of our Convertible Senior Notes at a discount in 2023.
Under the 2023 ABL Facility, the ABL Borrower may draw up to $75.0 million under Revolving Credit Loans and Last In Last Out (“LILO”) Loans. The 2023 ABL Facility includes a $40.0 million accordion feature. In connection with the 2023 ABL Facility, Turning Point Brands contributed certain existing inventory to the ABL Borrower.
Under the 2023 ABL Facility, the ABL Borrower may draw up to $75.0 million under Revolving Credit Loans and Last In Last Out (“LILO”) Loans. The 2023 ABL Facility includes a $40.0 million accordion feature. In connection with the 2023 ABL Facility, certain existing inventory was contributed to the ABL Borrower.
In addition, our debt instruments contain covenants which use Adjusted EBITDA calculations. We define “EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for income taxes, depreciation, and amortization.
In addition, our debt instruments contain covenants which use Adjusted EBITDA calculations. We define “EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation, and amortization.
Selling, general, and administrative expenses for the year ended December 31, 2022, included $5.3 million of stock options, restricted stock and incentives expense, $0.8 million of transaction expenses, $3.4 million of restructuring expenses, $2.0 million of ERP/CRM expenses and $4.6 million of expense related to PMTA.
Selling, general and administrative expenses for the year ended December 31, 2022, included $5.3 million of stock options, restricted stock and incentives expense, $4.6 million of expense related to PMTA, $3.3 million of expense related to corporate restructuring, $2.0 million of expense related to the implementation of the new ERP and CRM systems and $0.8 million related to transaction costs.
GAAP financial measures including EBITDA and Adjusted EBITDA. 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.
GAAP, we use non-U.S. GAAP financial measures including EBITDA and Adjusted EBITDA. 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.
The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $0.3 million included in Other current assets and liability of $0.1 million included in Accrued liabilities at December 31, 2023. We had no interest rate swap contracts at December 31, 2023 and 2022.
The fair value of the foreign currency contracts was based on quoted market prices and resulted in an asset of $0.0 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities at December 31, 2024. We had no interest rate swap contracts at December 31, 2024 and 2023.
(b) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses. (c) Represents non-cash stock options, restricted stock, incentives expense and Solace performance stock units. (d) Represents the fees incurred for transaction expenses. (e) Represents costs associated with applications related to FDA premarket tobacco product application (“PMTA”).
(b) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses. (c) Represents non-cash stock options, restricted stock, PSRUs, etc. (d) Represents the fees incurred for transaction expenses. (e) Represents costs associated with applications related to FDA premarket tobacco product application (“PMTA”).
Obligations under the Senior Secured Notes are guaranteed by the Company’s existing and future wholly-owned domestic subsidiaries (the “Guarantors”) that guarantee any credit facility (as defined in the indenture governing the Senior Secured Notes or the “Senior Secured Notes Indenture”) or capital markets debt securities of the Company or Guarantors in excess of $15.0 million.
Obligations under the 2026 Notes were guaranteed by the Company’s existing and future wholly-owned domestic subsidiaries (the “Guarantors”) that guarantee any credit facility (as defined in the indenture governing the 2026 Notes or the “2026 Notes Indenture”) or capital markets debt securities of the Company or Guarantors in excess of $15.0 million.
Selling, general, and administrative expenses for the year ended December 31, 2023, included $6.6 million of stock options, restricted stock and incentives expense, $0.2 million of transaction expenses, $0.4 million of restructuring expenses, $0.6 million of ERP/CRM expenses and $2.1 million of expense related to PMTA.
Selling, general and administrative expenses for the year ended December 31, 2023, included $6.6 million of stock options, restricted stock and incentives expense, $2.1 million of expense related to PMTA, $0.6 million of expense related to the implementation of the new ERP and CRM systems, $0.2 million of expense related to corporate restructuring and $0.2 million related to transaction costs.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion is intended to help the reader understand the results of operations and financial condition of the Company.
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations The following discussion is intended to help the reader understand the results of operations and financial condition of the Company.
On November 4, 2015, we changed our name to Turning Point Brands, Inc. Many of the amounts and percentages in this discussion have been rounded for convenience of presentation. Overview Turning Point Brands, Inc. is a leading manufacturer, marketer and distributor of branded consumer products.
We were incorporated in 2004 under the name North Atlantic Holding Company, Inc. On November 4, 2015, we changed our name to Turning Point Brands, Inc. Many of the amounts and percentages in this discussion have been rounded for convenience of presentation. Overview Turning Point Brands, Inc. is a leading manufacturer, marketer and distributor of branded consumer products.
The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $1.2 million included in Other current assets and liability of $0.0 million included in Accrued liabilities at December 31, 2022.
The fair value of the foreign currency contracts was based on quoted market prices and resulted in an asset of $0.3 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities at December 31, 2023.
On May 4, 2022, the FDA proposed two tobacco product standards related to combusted tobacco products: (1) a ban on menthol as a characterizing flavor in cigarettes; and (2) a ban on all characterizing flavors (including menthol) in cigars.
Customs and Border Protection. 52 Table of Contents On May 4, 2022, the FDA proposed two tobacco product standards related to combusted tobacco products: (1) a ban on menthol as a characterizing flavor in cigarettes; and (2) a ban on all characterizing flavors (including menthol) in cigars.
At December 31, 2023, we had foreign currency contracts outstanding for the purchase of €15.2 million and sale of €15.2 million.
At December 31, 2024, we had foreign currency contracts outstanding for the purchase of €2.1 million and sale of €2.1 million.
Goodwill is tested for impairment annually on December 31, or more frequently if certain indicators are present, in accordance with ASC 350-20-35 and ASC 350-30-35, respectively.
Indefinite-lived intangible assets are tested for impairment annually on December 31, or more frequently if certain indicators are present, in accordance with ASC 350-20-35 and ASC 350-30-35, respectively.
For the year ended December 31, 2023, other operating income, net was $4.3 million as a result of a $4.3 million gain from a federal excise tax refund and a $15.2 million gain related to insurance, partially offset by a $15.2 million reduction in inventory due to storm damage.
Other Operating Income: For the year ended December 31, 2023, other operating income was $4.3 million, resulting from a federal excise tax refund and a $15.2 million gain related to insurance, partially offset by a $15.2 million reduction in inventory due to storm damage. For the year ended December 31, 2022, there was no other operating (income) expense.
For the year ended December 31, 2023, interest expense, net decreased to $14.6 million from $19.5 million for the year ended December 31, 2022, primarily as a result of the repurchases of $44.0 million and $10.0 million in aggregate principal amount of Convertible Senior Notes in 2023 and 2022, respectively, and increased interest income on cash as a result of rising interest rates.
Interest Expense, net: For the year ended December 31, 2023, interest expense, net decreased $4.9 million compared to the prior year period primarily as a result of the repurchases of $44.0 million and $10.0 million in aggregate principal amount of Convertible Senior Notes in 2023 and 2022, respectively, and increased interest income on cash as a result of rising interest rates.
The Company’s income tax expense was $4.8 million, or 30.3% of income before income taxes, for the year ended December 31, 2022. Net Loss Attributable to Non-Controlling Interest. Net loss attributable to non-controlling interest was $0.7 million for the year ended December 31, 2023, compared to $0.5 million for the year ended December 31, 2022.
The Company's income tax expense was $11.0 million, or 26.1% of income before income taxes for the year ended December 31, 2022. Net Income (Loss) Attributable to Non-Controlling Interest: Net loss attributable to non-controlling interest was $0.7 million for the year ended December 31, 2023, compared to a $0.5 million loss for the year ended December 31, 2022.
Cash Flows from Financing Activities For the year ended December 31, 2023, net cash used in financing activities increased to $49.5 million from $43.3 million for the year ended December 31, 2022, an increase of $6.2 million or 14%, primarily due to $41.8 million in repurchases of Convertible Senior Notes during the period, offset by a decrease in repurchases of common stock of $29.2 million during 2023.
For the year ended December 31, 2023, net cash used in financing activities was $49.5 million, an increase of $6.2 million compared to the prior year period, primarily due to $41.8 million in repurchases of Convertible Senior Notes during the period, partially offset by a decrease in repurchases of common stock of $29.2 million during 2023.
Under the leadership of a senior management team with extensive experience in the consumer products, alternative smoking accessories and tobacco industries, we have grown and diversified our business through new product launches, category expansions, and acquisitions while concurrently improving operational efficiency. We believe there are meaningful opportunities to grow through acquisitions and joint ventures across all product categories.
Under the leadership of a senior management team with extensive experience in the consumer products, alternative smoking accessories and tobacco industries, we have grown and diversified our business through new product launches, category expansions and acquisitions while concurrently improving operational efficiency.
For the year ended December 31, 2022, gain on extinguishment of debt was $0.9 million as a result of the repurchase of $10.0 million principal of our Convertible Senior Notes at a discount.
For the year ended December 31, 2022, gain on extinguishment of debt resulted from the repurchase of $10.0 million in aggregate principal of our Convertible Senior Notes at a discount.
The following table sets forth the market share and category rank of our core products and demonstrates their industry positions within measured distribution channels: Brand Product TPB Segment Market Share (1) Category Rank (1) Zig-Zag ® Cigarette Papers Zig-Zag Products 34.4% #1 premium, #1 overall Zig-Zag ® MYO Cigar Wraps Zig-Zag Products 55.1% #1 overall Stoker’s ® Moist Snuff Stoker’s Products 6.9% #3 discount, #6 overall Stoker’s ® Chewing Tobacco Stoker’s Products 30.5% #1 discount, #1 overall (1) Market share and category rank data for all products are derived from MSAi data 2023 52 weeks ended 12/30/23.
The following table sets forth the market share and category rank of our core products and demonstrates their industry positions within measured distribution channels: Brand Product TPB Segment Market Share (1) Category Rank (1) Zig-Zag ® Cigarette Papers Zig-Zag Products 32.8 % #1 premium, #1 overall Zig-Zag ® MYO Cigar Wraps Zig-Zag Products 47.8 % #1 overall Stoker’s ® Moist Snuff Stoker’s Products 7.4 % #2 discount, #5 overall Stoker’s ® Chewing Tobacco Stoker’s Products 32.3 % #1 discount, #1 overall (1) Market share and category rank data for all products are derived from MSAi data for the 52 week period ended December 28, 2024.
Selling, general, and administrative expenses for the year ended December 31, 2021, included $7.6 million of stock options, restricted stock and incentives expense, $1.3 million of transaction expenses, $0.9 million of restructuring expenses and $1.7 million of expense related to PMTA.
Selling, general and administrative expenses for the year ended December 31, 2024, included $7.2 million of stock options, restricted stock and incentives expense, $4.6 million of expense related to corporate restructuring, $3.6 million of expense related to PMTA, $2.1 million related to transaction costs and $0.9 million of expense related to the implementation of the new ERP and CRM systems.
We define “Adjusted EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for income taxes, depreciation, amortization, other non-cash items, and other items we do not consider the ordinary course in our evaluation of ongoing operating performance noted in the reconciliation below. 48 Table of Contents Non-U.S.
We define “Adjusted EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation, amortization, other non-cash items, and other items we do not consider the ordinary course in our evaluation of ongoing operating performance noted in the reconciliation below. Among other items that we adjust Adjusted EBITDA for is FDA PMTA expense.
The following table summarizes our escrow deposit balances (in thousands) by sales year as of: Sales Deposits as of December 31, Year 2023 2022 1999 $ 211 $ 211 2000 1,017 1,017 2001 1,673 1,673 2002 2,271 2,271 2003 4,249 4,249 2004 3,714 3,714 2005 4,553 4,553 2006 3,847 3,847 2007 4,167 4,167 2008 3,364 3,364 2009 1,619 1,619 2010 406 406 2011 193 193 2012 199 199 2013 173 173 2014 143 143 2015 101 101 2016 91 91 2017 82 82 Total $ 32,073 $ 32,073 Off-Balance Sheet Arrangements During 2023, we executed various foreign exchange contracts for the purchase of €20.1 million and sale of €15.2 million with maturity dates ranging from July 2023 to September 2024.
Pending a change in MSA legislation, we have no remaining product lines covered by the MSA and will not be required to make future escrow deposits and, therefore, do not expect to accrue any loss contingencies subject to the MSA in the future. 50 Table of Contents The following table summarizes our escrow deposit balances (in thousands) by sales year as of: Deposits as of December 31, Sales Year 2024 2023 1999 $ 211 $ 211 2000 1,017 1,017 2001 1,673 1,673 2002 2,271 2,271 2003 4,249 4,249 2004 3,714 3,714 2005 4,553 4,553 2006 3,847 3,847 2007 4,167 4,167 2008 3,364 3,364 2009 1,619 1,619 2010 406 406 2011 193 193 2012 199 199 2013 173 173 2014 143 143 2015 101 101 2016 91 91 2017 82 82 Total $ 32,073 $ 32,073 Off-Balance Sheet Arrangements During 2024, we executed various foreign exchange contracts for the purchase of €3.6 million and sale of €3.6 million with maturity dates ranging from October 2024 to June 2025.
Subsequently, on April 14, 2022, the FDA Center for Tobacco Products also obtained jurisdiction over non-tobacco nicotine products (“NTN Products”), including synthetic nicotine.
Subsequently, on April 14, 2022, the FDA Center for Tobacco Products also obtained jurisdiction over non-tobacco nicotine products (“NTN Products”), including synthetic nicotine. That law subjects NTN Products to the same requirements as tobacco-derived products.
For the year ended December 31, 2023, gross profit in the Zig-Zag Products segment decreased to $101.1 million from $106.6 million for the year ended December 31, 2022, a decrease of $5.5 million or 5.2%. Gross profit as a percentage of net sales remained steady at 56.0% of net sales for the years ended December 31, 2023 and 2022.
For the year ended December 31, 2023, gross profit in the Zig-Zag products segment decreased $5.5 million, or 5.2%, compared to the prior year period. Gross profit as a percentage of net sales remained unchanged at 56.0% of net sales for the years ended December 31, 2024 and 2023, respectively.
The FDA’s policy on these and other regulated products may change or expand over time in ways not yet known and may significantly impact our products or our premarket filings. On March 8, 2023, the FDA proposed requirements for tobacco product manufacturing practice (“TPMPs”).
The FDA’s policy on these and other regulated products may change or expand over time in ways not yet known and may significantly impact our products or our premarket filings.
For the year ended December 31, 2022, gain on extinguishment of debt was $0.9 million as a result of the repurchase of $10.0 million in aggregate principal of our Convertible Senior Notes at a discount. 46 Table of Contents Income Tax Expense.
Gain on Extinguishment of Debt: For the year ended December 31, 2023, gain on extinguishment of debt was $1.7 million compared to $0.9 million for the year ended December 31, 2022, as a result of the repurchase of $44.0 million in aggregate principal amount of our Convertible Senior Notes at a discount.
For the year ended December 31, 2023, gross profit in the Stoker’s Products segment increased to $81.9 million from $71.3 million for the year ended December 31, 2022, an increase of $10.6 million or 14.9%.
For the year ended December 31, 2023, gross profit in the Stoker’s products segment increased $10.6 million, or 14.9%, compared to the prior year period.
Other Income. For the year ended December 31, 2023, other income was $4.0 million as a result of a $4.0 million gain related to a legal settlement. Goodwill and Intangible Impairment Loss. For the year ended December 31, 2023 there was no goodwill and intangible impairment loss.
Other Income: For the year ended December 31, 2023, other income was $4.0 million compared to zero in the prior year period as a result of a $4.0 million gain related to a legal settlement.
We incurred debt issuance costs attributable to the issuance of the Amended Revolving Credit Facility of $0.5 million, with a remaining $0.2 million written off to gain on debt extinguishment upon termination of the facility. 2023 ABL Facility On November 7, 2023, TPB Specialty Finance, LLC, a wholly-owned subsidiary of the Company (the “ABL Borrower”), entered into a new $75.0 million asset-backed revolving credit facility (the “2023 ABL Facility”), with the several lenders thereunder, and Barclays Bank Plc, as administrative agent (the “Administrative Agent”) and as collateral agent (the “Collateral Agent”) and First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”).
The 2032 Notes Indenture provides for customary events of default. 47 Table of Contents 2023 ABL Facility On November 7, 2023, TPB Specialty Finance, LLC, a wholly-owned subsidiary of the Company (the “ABL Borrower”), entered into a new $75.0 million asset-backed revolving credit facility (the “2023 ABL Facility”), with the several lenders thereunder, and Barclays Bank PLC, as administrative agent (the “Administrative Agent”) and as collateral agent (the “Collateral Agent”) and First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”).
Selling, general, and administrative expenses for the year ended December 31, 2022, included $5.3 million of stock options, restricted stock and incentives expense, $0.8 million of transaction expenses, $3.4 million of restructuring expenses, $2.0 million of ERP/CRM expenses and $4.6 million of expense related to PMTA. Other Operating Income, net.
Selling, general and administrative expenses for the year ended December 31, 2023, included $6.6 million of stock options, restricted stock and incentives expense, $2.1 million of expense related to PMTA, $0.6 million of expense related to the implementation of the new ERP and CRM systems, $0.2 million of expense related to corporate restructuring and $0.2 million related to transaction costs.
Gross profit as a percentage of net sales decreased to 56.0% of net sales for the year ended December 31, 2022, from 58.2% of net sales for the year ended December 31, 2021.
Gross profit as a percentage of net sales decreased to 55.9% of net sales for the year ended December 31, 2024, from 56.3% of net sales for the year ended December 31, 2023.
The Company incurred debt issuance costs attributable to the 2023 ABL Facility of $2.6 million which are amortized to interest expense using the straight-line method over the expected life of the 2023 ABL Facility.
The Company incurred debt issuance costs attributable to the 2023 ABL Facility of $2.6 million which are amortized to interest expense using the straight-line method over the expected life of the 2023 ABL Facility. Convertible Senior Notes The Company's 2.5% convertible senior notes matured and were retired with cash on July 1, 2024.
During 2022, we executed various foreign exchange contracts for the purchase of €28.9 million and sale of €28.9 million with maturity dates ranging from August 2022 to June 2023. At December 31, 2022, we had foreign currency contracts for the purchase of €18.5 million and sale of €18.5 million.
During 2023, we executed various foreign exchange contracts for the purchase of €20.1 million and sale of €15.2 million with maturity dates ranging from July 2023 to September 2024. At December 31, 2023, we had foreign currency contracts outstanding for the purchase of €15.2 million and sale of €15.2 million.
We base these estimates on our historical experience and other assumptions we believe are appropriate under the circumstances. In preparing these consolidated financial statements, we have made our best estimates and judgments of the amounts and disclosures included in the consolidated financial statements.
In preparing these consolidated financial statements, we have made our best estimates and judgments of the amounts and disclosures included in the consolidated financial statements.
The Senior Secured Notes and the related guarantees are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions.
The 2026 Notes and the related guarantees are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. We were in compliance with all covenants under the 2026 Notes as of December 31, 2024.
Approximately 75% of our production, as measured by net sales, is outsourced to suppliers. The remaining production consists primarily of our moist snuff tobacco operations located in Dresden, Tennessee and Louisville, Kentucky.
We rely on long-standing relationships with high-quality, established manufacturers to provide the majority of our produced products. Approximately 70% of our production, as measured by net sales, is outsourced to suppliers. The remaining production consists primarily of our moist snuff tobacco operations located in Dresden, Tennessee and Louisville, Kentucky.
(f) Represents impairment of goodwill, intangible and investment assets. (g) Represents a federal excise tax refund included in other operating income, net. (h) Represents other income from litigation settlement. Liquidity and Capital Resources Our principal uses for cash are working capital, debt service, and capital expenditures.
(g) Represents a federal excise tax refund included in other operating income. (h) Represents other income from litigation settlement. (i) Represents a mark-to-market loss attributable to foreign exchange fluctuation. 45 Table of Contents Liquidity and Capital Resources Our principal uses for cash are working capital, debt service and capital expenditures.
The increase in net sales was driven primarily by double-digit growth of Stoker’s ® MST. MST represented 68% of Stoker’s Products revenue in 2023, up from 66% for the same period in 2022.
The increase in net sales was driven primarily by double-digit growth of Stoker’s® MST. MST represented 68% of Stoker’s products revenue in 2023, up from 66% for the same period in 2022. Gross Profit: For the year ended December 31, 2023, consolidated gross profit increased $5.1 million, or 2.9%, compared to the prior year period.
For the year ended December 31, 2023, net sales in the Stoker’s Products segment increased to $144.6 million from $130.8 million for the year ended December 31, 2022, an increase of $13.8 million or 10.5%. For the year ended December 31, 2023, Stoker’s Products volume increased 4.2% and price/mix increased 6.3%.
Additionally, the discontinuation of an unprofitable product line negatively impacted Canadian sales by $4.9 million against the previous year. For the year ended December 31, 2023, net sales in the Stoker’s products segment increased $13.8 million, or 10.5%, compared to the prior year period. For the year ended December 31, 2023, Stoker’s products volume increased 4.2% and price/mix increased 6.3%.
In this discussion, unless the context requires otherwise, references to “the Company” “we,” “our,” or “us” refer to Turning Point Brands, Inc., and its consolidated subsidiaries. References to “TPB” refer to Turning Point Brands, Inc., without any of its subsidiaries. We were incorporated in 2004 under the name North Atlantic Holding Company, Inc.
In this discussion, unless the context requires otherwise, references to “ the Company ” “ we, ” “ our, ” or “ us ” refer to Turning Point Brands, Inc., and its consolidated subsidiaries. References to “ TPB ” refer to Turning Point Brands, Inc., without any of its subsidiaries.
In our Zig-Zag Products segment, we principally market and distribute (i) rolling papers, tubes, and related products; (ii) finished cigars and make-your-own (“MYO”) cigar wraps and (iii) lighters and other accessories. In addition, we have a majority stake in Turning Point Brands Canada which markets and distributes cannabis accessories and tobacco products throughout Canada.
Products We operate in two segments: Zig-Zag products and Stoker’s products segments. In our Zig-Zag products segment, we principally market and distribute (i) rolling papers, tubes, and related products; (ii) finished cigars and make-your-own (“MYO”) cigar wraps; and (iii) lighters and other accessories.
Gross profit as a percentage of net sales increased to 50.1% of net sales for the year ended December 31, 2023, from 49.5% of net sales for the year ended December 31, 2022. The overall decrease in gross profit was driven by decreased margins in the Creative Distribution Solutions segment partially offset by increased margin in the Stoker’s Products segment.
Gross profit as a percentage of net sales increased to 56.3% of net sales for the year ended December 31, 2023, from 55.4% of net sales for the year ended December 31, 2022. T he overall increase in gross profit margin was driven primarily by increased margins in the Stoker’s products segment.
For information regarding our lease obligations and cash payment obligations thereunder, please see Note 16, “Lease Commitments” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. 54 Table of Contents In 2023, we made no repurchases of our common stock and have $27.2 million of authorization remaining under our Board approved repurchase program.
For information regarding our lease obligations and cash payment obligations thereunder, please see Note 17, “Lease Commitments” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
Net loss attributable to non-controlling interest was $0.5 million for the year ended December 31, 2022, compared to $0.8 million for the year ended December 31, 2021. Net Income Attributable to Turning Point Brands, Inc .
Net Income (Loss) Attributable to Non-Controlling Interest: Net income attributable to non-controlling interest was $0.7 million for the year ended December 31, 2024, compared to a net loss of $0.7 million for the year ended December 31, 2023.
These “deeming regulations” apply to all products made or derived from tobacco intended for human consumption, but excluding accessories of tobacco products (such as lighters). Accordingly, the FDA has since regulated our cigar and cigar wrap products as well as our liquid nicotine products containing tobacco-derived nicotine and products intended or reasonably expected to be used to consume such e-liquids.
The deeming regulation gave the FDA the authority to also regulate all products made or derived from tobacco intended for human consumption, but excluding accessories of tobacco products (such as lighters). Accordingly, the FDA has since regulated our cigar and cigar wrap products.
NTN Products subject of a timely-filed PMTA, and not in receipt of a negative action, were allowed to remain on the market until July 13, 2022, at which time these products became subject to enforcement, similar to tobacco-derived products remaining under review. 55 Table of Contents A successful PMTA must demonstrate that the subject product is “appropriate for the protection of public health,” taking into account the effect of the marketing of the product on all sub-populations while a Substantial Equivalence Report must demonstrate that a new product either has the same characteristics as its predicate product or different characteristics but does not raise different questions of public health.
A successful PMTA must demonstrate that the subject product is “appropriate for the protection of public health,” taking into account the effect of the marketing of the product on all sub-populations while a Substantial Equivalence Report must demonstrate that a new product either has the same characteristics as its predicate product or different characteristics but does not raise different questions of public health.
For the year ended December 31, 2022, selling, general and administrative expenses increased to $130.0 million from $127.5 million for the year ended December 31, 2021, an increase of $2.5 million or 2.0%.
Selling, General and Administrative Expenses : For the year ended December 31, 2023, selling, general, and administrative expenses increased $0.5 million, or 0.5% compared to the prior year period.
The Company’s income tax expense was $4.8 million, or 30.3% of income before income taxes, for the year ended December 31, 2022.
Income Tax Expense: The Company’s income tax expense was $16.9 million, or 26.1% of income from continuing operations before income taxes for the year ended December 31, 2024.
For the year ended December 31, 2022, net cash provided by operating activities decreased to $30.3 million from $68.2 million for the year ended December 31, 2021, a decrease of $37.9 million or 56%, primarily due to changes in working capital including an increase in inventory.
For the year ended December 31, 2023, net cash provided by operating activities was $56.2 million, an increase of $34.9 million compared to the prior year period, primarily due to an increase in the change in working capital of $35.2 million (net of inventory reserve), partially offset by a decrease in the change in other assets of $5.3 million.
The decrease in net sales was driven by anticipated declines in the U.S. rolling papers and wraps businesses which were impacted by a reduction of trade inventory, partially offset by growth in our Clipper products. Additionally, a discontinuation of an unprofitable product line negatively impacted Canadian sales by $4.9 million against the previous year.
For the year ended December 31, 2023, net sales in the Zig-Zag products segment decreased $9.9 million, or 5.2%, compared to the prior year period. The decrease in net sales was driven by declines in the U.S. rolling papers and wraps businesses which were impacted by a reduction of trade inventory, partially offset by growth in our Clipper products.
For the year ended December 31, 2022, net cash used in financing activities was $43.3 million compared to net cash provided by financing activities of $57.1 million for the year ended December 31, 2021, a decrease of $100.4 million or 176%, primarily due to the net proceeds from the Senior Secured Notes partially offset by the repayment in full of the 2018 First Lien Term Loan in the first quarter of 2021. 50 Table of Contents Long-Term Debt Notes payable and long-term debt consisted of the following at December 31, 2023 and 2022, in order of preference: December 31, 2023 December 31, 2022 Senior Secured Notes $ 250,000 $ 250,000 Convertible Senior Notes 118,541 162,500 Gross notes payable and long-term debt 368,541 412,500 Less deferred finance charges (3,183 ) (5,743 ) Less current maturities (58,294 ) – Notes payable and long-term debt $ 307,064 $ 406,757 Senior Secured Notes On February 11, 2021, we closed a private offering (the “Offering”) of $250 million aggregate principal amount of our 5.625% senior secured notes due 2026 (the “Senior Secured Notes”).
Long-Term Debt Notes payable and long-term debt consisted of the following at December 31, 2024 and 2023, in order of preference: December 31, December 31, 2024 2023 2026 Notes $ 250,000 $ 250,000 Convertible Senior Notes - 118,541 Gross notes payable and long-term debt 250,000 368,541 Less deferred financing costs (1,396 ) (3,183 ) Less current maturities - (58,294 ) Notes payable and long-term debt $ 248,604 $ 307,064 Senior Secured Notes On February 11, 2021, we closed a private offering of $250.0 million aggregate principal amount of our 5.625% senior secured notes due 2026 (the “2026 Notes”).
On June 21, 2022, the FDA also issued a proposed product standard related to restricting the level of nicotine in traditional cigarettes. These product standards are required to go through the formal rulemaking process where we have had the opportunity to provide comments with regard to the impact such standards would have on our products. These proposed rules remain pending.
These regulations are required to go through the formal rulemaking process where we have had the opportunity to provide comments with regard to the impact such standards would have on our products. As of January 2025, these proposed rules were withdrawn or otherwise delayed.
See Note 10, “Goodwill and Other Intangible Assets” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further information on goodwill and intangible assets. Gain on Extinguishment of Debt.
Refer to Note 3, "Assets and Liabilities Held for Sale and Discontinued Operations" and Note 24, "Subsequent Events" in Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion regarding the divestiture.
Distribution Agreements For a description of our material distribution agreements, see Item 1 “Business - Distribution and Supply Agreements.” 53 Table of Contents Master Settlement Agreement On November 23, 1998, the major U.S. cigarette manufacturers, Philip Morris USA, Inc., Brown & Williamson Tobacco Corporation, Lorillard Tobacco Company and R.J.
“Business - Distribution and Supply Agreements.” Master Settlement Agreement On November 23, 1998, the major U.S. cigarette manufacturers, Philip Morris USA, Inc., Brown & Williamson Tobacco Corporation, Lorillard Tobacco Company and R.J. Reynolds Tobacco Company, entered into the MSA with attorneys general representing states that agreed to settle certain recovery actions (the “Settling States”).
For the year ended December 31, 2023, net sales in the Zig-Zag Products segment decreased to $180.5 million from $190.4 million for the year ended December 31, 2022, a decrease of $9.9 million or 5.2%.
For the year ended December 31, 2023, operating income in the Zig-Zag products segment decreased $5.1 million, or 6.9%, compared to the prior year period.
For the year ended December 31, 2022, gross profit in the Zig-Zag Products segment increased to $106.6 million from $102.7 million for the year ended December 31, 2021, an increase of $3.8 million or 3.7%.
For the year ended December 31, 2024, gross profit in the Zig-Zag products segment increased $5.5 million, or 5.5%, compared to the prior year period.
The Senior Secured Notes bear interest at a rate of 5.625% and will mature on February 15, 2026.
The 2026 Notes incurred interest at a rate of 5.625%.
In 2022, we spent $29.2 million to repurchase 1,021,052 shares at an average price of $28.62 per share. Regulation and Legislation While we are subject to several regulatory regimes and requirements, the following may meaningfully impact operations or resources: Federal Regulation Tobacco products, cigarette papers, and cigarette tubes are subject to federal excise taxes.
In 2023, we made no repurchases of our common stock. 51 Table of Contents Regulation and Legislation While we are subject to several regulatory regimes and requirements, the following may meaningfully impact operations or resources: Federal Regulation Certain tobacco and nicotine products, cigarette papers, and cigarette tubes are subject to federal excise taxes.
These covenants are subject to a number of limitations and exceptions set forth in the Senior Secured Notes Indenture. The Senior Secured Notes Indenture provides for customary events of default. We were in compliance with all covenants as of December 31, 2023.
These covenants are subject to a number of several limitations and exceptions set forth in the 2032 Notes Indenture.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−1 removed2 unchanged
Biggest changeWe carry the Senior Secured Notes and Convertible Senior Notes at face value. Since the Senior Secured Notes and Convertible Senior Notes bear interest at a fixed rate, we have no financial statement risk associated with changes in interest rates.
Biggest changeSince the 2032 Notes bear interest at a fixed rate, we have no financial statement risk associated with increases in interest rates. However, the fair value of the 2023 Notes changes when the market price of our stock fluctuates, or interest rates change. Our remaining debt instrument is the 2023 ABL Facility, which has no borrowing outstanding.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Sensitivity Our inventory purchases from RTI and Clipper are denominated in euros. Accordingly, we have exposure to potentially adverse movements in the euro exchange rate. In addition, RTI provides a contractual hedge against catastrophic currency fluctuation in our agreement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Sensitivity Our inventory purchases from RTI are denominated in euros. Accordingly, we have exposure to potentially adverse movements in the euro exchange rate. In addition, RTI provides a contractual hedge against catastrophic currency fluctuation in our agreement.
The 2023 ABL Facility is subject to a floating rate. Accordingly, if we make borrowings under the 2023 ABL Facility, we will be exposed to fluctuations in interest rates. 57 Table of Contents
The 2023 ABL Facility is subject to a floating rate. Accordingly, if we make borrowings under the 2023 ABL Facility, we will be exposed to fluctuations in interest rates. 55 Table of Contents
In 2023, 2022, and 2021, we had no customers that accounted for more than 10% of our net sales. We perform periodic credit evaluations of our customers and generally do not require collateral on trade receivables. Historically, we have not experienced significant losses due to customer credit issues.
In 2024, we had one customer that accounted for 10.2% of our net sales. In 2023and 2022, we had no customers that accounted for more than 10% of our net sales. We perform periodic credit evaluations of our customers and generally do not require collateral on trade receivables. Historically, we have not experienced significant losses due to customer credit issues.
A 10% change in the euro to U.S. dollars exchange rate would change pre-tax income by approximately $2.6 million per year. Credit Risk At December 31, 2023 and 2022, we had bank deposits, including MSA escrows, in excess of federally insured limits of approximately $119.0 million and $105.2 million, respectively.
A 10% change in the euro to U.S. dollars exchange rate would change our pre-tax income by approximately $1.5 million per year. Credit Risk At December 31, 2024 and 2023, we had bank deposits, including MSA escrows, in excess of federally insured limits of approximately $47.4 million and $119.0 million, respectively.
During 2023, we executed various foreign exchange contracts for the purchase of €20.1 million and sale of €15.2 million with maturity dates ranging from July 2023 to September 2024. At December 31, 2023, we had foreign currency contracts outstanding for the purchase of €15.2 million and sale of €15.2 million.
During 2024, we executed various foreign exchange contracts for the purchase of €3.6 million and sale of €3.6 million with maturity dates ranging from October 2024 to June 2025. At December 31, 2024, we had foreign currency contracts outstanding for the purchase of €2.1 million and sale of €2.1 million.
Interest Rate Sensitivity In February 2021, we issued the Senior Secured Notes in an aggregate principal amount of $250 million. In July 2019, we issued Convertible Senior Notes in an aggregate principal amount of $172.5 million, which after total repurchases of $54 million, results in an outstanding principal balance of $118.5 million.
Interest Rate Sensitivity In February 2021, we issued the 2026 Notes in an aggregate principal amount of $250 million. In February 2025, we issued the 2032 Notes in an aggregate principal amount of $300 million and utilized a portion of the proceeds to retire the 2026 Notes. We carry the 2032 Notes at face value.
Removed
However, the fair value of the Senior Secured Notes and Convertible Senior Notes change when the market price of our stock fluctuates, or interest rates change. In November 2023, the ABL Borrower entered into the 2023 ABL Facility to refinance a portion of the Convertible Senior Notes at or before maturity.

Other TPB 10-K year-over-year comparisons