2017 SHAREHOLDER MEETING Annual meeting of Annual meeting of - - PowerPoint PPT Presentation

2017 SHAREHOLDER MEETING

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Annual meeting of Annual meeting of

SHAREHOLDERS

• Introductions and call to order

Introductions and call to order

• Report of the Secretary of the Corporation

Report of the Secretary of the Corporation

• Procedure for conducting the meeting

Procedure for conducting the meeting

• Matters to be acted upon

Matters to be acted upon

Proposal 1— Nomination and Election of Directors Proposal 2—Ratification of the Appointment of the Company’s Independent Auditors

• Inspector report regarding voting results

Inspector report regarding voting results

• Adjournment

Adjournment

• Management report

Management report

MANAGEMENT REPORT

This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward- looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intend," "plan" and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. As a result, actual events may differ materially from those expressed in or suggested by the forward-looking statements. Factors that could cause these differences include, but are not limited to, the factors set forth in “Risk Factors” included in TPB’s annual report on Form 10-K and other reports filed with the Securities and Exchange Commission from time to

• time. Any forward-looking statement made by TPB in this presentation speaks only as of the date hereof. New risks and

uncertainties come up from time to time, and it is impossible for TPB to predict these events or how they may affect it. TPB has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws. This presentation includes industry and market data derived from internal analyses based upon publicly available data

• r proprietary research and analysis, surveys or studies conducted by third parties and industry and general

publications, including those by the Management Science Associates, Inc. (“MSAi”) and Nielsen Holdings, N.V. (“Nielsen”). Third-party industry and general publications, research, surveys and studies generally state that the information contained therein has been obtained from sources believed to be reliable. Although there can be no assurance as to the accuracy or completeness of the included information, we believe that this information is reliable. While we believe our internal analyses are reliable, they have not been verified by any independent sources. Any such data and analysis involve risks and uncertainties and are subject to change based on various factors, including those set forth in “Risk Factors” included in TPB’s annual report on Form 10-K and other reports filed with the Securities and Exchange Commission from time to time.

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Forward looking Forward looking INFORMATION INFORMATION

This presentation includes certain non-U.S. generally accepted accounting principles (“GAAP") financial measures, including EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin. Such non-GAAP financial measures are not in accordance with, or an alternative to, financial measures prepared in accordance with GAAP. Please refer to the Appendix of this presentation for a reconciliation of EBITDA and Adjusted EBITDA to net income. To supplement TPB’s and Smoke Free Technologies Inc. d/b/a Vapor Beast’s financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, TPB uses non-U.S. GAAP financial measures, including EBITDA and Adjusted EBITDA. TPB believes EBITDA and Adjusted EBITDA provide useful information to management and investors regarding certain financial and business trends relating to financial condition and results of

• perations. EBITDA and Adjusted EBITDA is used by management to compare performance to that of prior periods for

trend analyses and planning purposes and is presented to TPB’s board of directors. TPB believes that EBITDA and Adjusted EBITDA are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to business performance. Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. Adjusted EBITDA excludes significant expenses that are required by U.S. GAAP to be recorded in our financial statements and is subject to inherent limitations. In addition, other companies in TPB’s industry may calculate this non-U.S. GAAP measure differently than TPB does or may not calculate it at all, limiting its usefulness as a comparative measure.

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Non-GAAP Non-GAAP RECONCILIATION RECONCILIATION

• Improved our capital position
• Built our focus brands
• Closed two accretive acquisitions

2016 – A Year of 2016 – A Year of

ACCOMPLISHMENT

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• Improved our capital position
• Improved our capital position
• Built our focus brands
• Closed two accretive acquisitions

2016 – A Year of 2016 – A Year of

ACCOMPLISHMENT

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• Completed IPO
• Reduced leverage 33%
• Lowered pro forma interest expense

[a] Leverage calculated using net debt of $225.2 MM / pro forma adjusted EBITDA of $58.9 MM. (b) Pro forma annual interest expense is based on 3/31/17 debt balance and rates

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Reduced Leverage Reduced Leverage

²

$43.0 $44.1 $34.3 $34.3 $26.6 $26.6 $18.0

$0 $10 $20 $30 $40

2012 2013 2014 2015 2016 2017

5.2x 5.2x 6.1x 5.7x 4.1x 4.1x 3.8x 3.8x

0.0x 2.0x 4.0x 6.0x 8.0x

2012 2013 2014 2015 2016 1Q 2017

Reduced Interest Expense Reduced Interest Expense (millions)

(millions)

Improved our Improved our

CAPITAL POSITION CAPITAL POSITION

Pro Forma

(a) (b)

Debt Repayment Debt Repayment 2.5x – 3.5x 2.5x – 3.5x Target Leverage Pursue Attractive, Pursue Attractive, Accretive Accretive Acquisitions Acquisitions Innovate & Innovate & Reinvest in the Reinvest in the Business Business

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Free cash Free cash fl flow

• w

USES USES

Invest in Sales Invest in Sales Force Expansion & Force Expansion & Brands Brands

• Improved our capital position
• Built our focus brands

Built our focus brands

• Closed two accretive acquisitions

2016 – A Year of 2016 – A Year of

ACCOMPLISHMENT

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Purchase Purchased d Stoker’s “chew” ( “chew” (2003 2003)

— Built to #2 Chew brand (17% share)

Extended Extended Stoker's to to moist snu moist snufff category category with 12 oz. tub (2009) with 12 oz. tub (2009)

— Market leader in tub format (>50% share) — Among fastest growing brands

Extended Extended Stoker's to to traditional 1.2 oz. traditional 1.2 oz. can (2015) & can (2015) & continuing rollout continuing rollout

— Targets >145,000 convenience stores selling 75% of all MST volumes CHEW CHEW MST TUBS MST TUBS MST CANS MST CANS

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2016 - Purchased Tennessee facility

Continued to build Continued to build

FOCUS BRANDS

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PAPERS PAPERS WRAPS WRAPS

Acquired Acquired Zig-Zag rights in US rights in US & Canada (1997) & Canada (1997)

— #1 premium cigarette paper brand

Extended brand into MYO Extended brand into MYO cigar wraps cigar wraps

— Achieved 50% share within two years — Current market leader for MYO cigar wraps (81% share)

Continued to build Continued to build

FOCUS BRANDS

• Improved our capital position
• Built our focus brands
• Closed two accretive acquisitions

Closed two accretive acquisitions 2016 – A Year of 2016 – A Year of

ACCOMPLISHMENT

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High

NewGen Smoking Smokeless

High Low Low

EBITDA Margin (%) EBITDA Margin (%)

Low High Low High

(1) The Company regularly evaluates acquisition opportunities across the OTP landscape and has identified attractive opportunities that it believes represent more than $250 million of combined net sales. The Company cannot assure you that any acquisitions will be completed.

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EBITDA ($) EBITDA ($)

• Plug-and-play
• Bolt-on infrastructure
• Leverage our existing

regulatory and sales/distribution capabilities

• Accretive to earnings

Over 300 OTP companies

Completed

Select M&A Targets Select M&A Targets (1)

(1)

$50 - $100 million Up to $50 million

Acquisition Acquisition

CRITERIA CRITERIA

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“Plug and Play” “Plug and Play”

• Acquired E-Commerce leader in

November 2016

• FY16 Revenue: $54.1M
• 4,500+ non-traditional retailers

and direct consumers

• Immediate access to new channel
• pportunities

“Bolt-on Infrastructure” “Bolt-on Infrastructure”

Closed two accretive Closed two accretive ACQUISITIONS

• Purchased Wind River chew brands

November 2016

• Adds 2% to TPB chew market share
• Opportunity to expand beyond

current 25% of U.S. market

2016 FINANCIAL HIGHLIGHTS

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2016 Segment sales 2016 Segment sales

GROWTH

$77.9 million $77.9 million $111.0 million $111.0 million $17.3 million $17.3 million

Smokeless Products up 4.9% to a RECORD Smoking Products grew 4.8% to NewGen increased to

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2016 2016

Pro Forma* Pro Forma*

* Pro Forma Net Sales assumes VaporBeast acquisiWon on January 1, 2016

2016 total 2016 total NET SALES

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$256M $256M

2016 2016

Actual Actual

Smokeless

38%

NewGen

8%

Smoking

54%

$206.2M $206.2M

Smoking

43%

Smokeless

31%

NewGen

26%

Comparative fiscal

PERFORMANCE PERFORMANCE

48.7% 48.7% $100.4 $100.4 $26.9 $26.9

GROSS MARGIN 49.7% 49.7% $96.3 $96.3

$9.1 $9.1

FY 2016 FY 2015

GROSS PROFIT

(millions)

NET INCOME

(millions) 19

$206.2 $206.2

$197.3 $197.3 NET SALES

(millions)

TPB market TPB market

PERFORMANCE

$0.00 $4.00 $8.00 $12.00 $16.00 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17

$15.45

May 15, 2017

$10.00

May 2016 IPO

Closing stock price as of the last day of each month, except May 2017. 20

First quarter 2017 First quarter 2017

HIGHLIGHTS

• Refinanced debt
• Grew focus brand market share
• Stoker’s MST
• Zig-Zag cigarette papers
• Vapor Shark strategic partnership

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First quarter RESULTS RESULTS 41.4% 41.4% $27.7 $27.7 $1.9 $1.9

GROSS MARGIN 49.4% 49.4% $24.7 $24.7

$2.2 $2.2

1Q 2017 1Q 2016

GROSS PROFIT

(millions)

NET INCOME

(a)

(millions) 22

$66.8

$49.9 $49.9 NET SALES

(millions)

$13.6 $13.6 $12.5 $12.5

• ADJ. EBITDA

(b)

(millions) (a) Includes after-tax loss on extinguishment of debt of $3.8 million. (b) See reconciliation of GAAP Net Income to Adjusted EBITDA.

• Improved capital structure and

flexibility

• Strong market position of focus brands

with organic growth opportunities

• Upside potential of two acquisitions
• Attractive landscape for accretive

acquisitions Positioned for Positioned for

FUTURE GROWTH

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THANK YOU

APPENDIX

Summary Historical Financials Summary Historical Financials

(1) EBITDA is defined as net income before interest expense, loss on extinguishment of debt, provision for income taxes, depreciation and amortization. (2) Adjusted EBITDA is calculated as EBITDA adjusted for non-cash expense related to an inventory valuation allowance for last-in, first-out (‘‘LIFO’’) reporting, pension/post-retirement expense, non-cash stock option, restricted stock and incentives expense, foreign exchange hedging and other items. (3) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by Net sales. (4) Net debt is defined as Total debt less cash (5) Leverage is defined as Net debt divided by Adjusted EBITDA. Management believes that its leverage ratio is an important indicator of its ability to service indebtedness and is indicative of its compliance with the leverage covenants in its Credit Facility.

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Summary Historical Consolidated Financial and Other Data Summary Historical Consolidated Financial and Other Data

($ thousands) FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 YTD 3/31/17 YTD 3/31/16 Net sales 186,741 $ 193,304 $ 200,329 $ 197,256 $ 206,228 $ 66,788 $ 49,866 $ Cost of sales 100,856 103,043 107,165 100,960 105,872 39,122 25,219 Gross profit 85,885 90,261 93,164 96,296 100,356 27,666 24,647 % margin 46.0% 46.7% 46.5% 48.8% 48.7% 41.4% 49.4% Selling, general and administrative expenses 41,429 46,849 45,108 51,785 56,771 16,909 13,738 Operating income 44,456 43,412 48,056 44,511 43,585 10,757 10,909 Interest expense and financing costs 43,048 44,094 34,311 34,284 26,621 4,933 8,462 Investment income

• (768)

(114)

• Loss on extinguishment of debt
• 441

42,780

• 2,824

6,116

• Income (loss) before income taxes

1,408 (1,123) (29,035) 10,227 14,908 (178) 2,447 Income tax expense 978 486 370 1,078 (12,005) (2,005) 213 Net income (loss) 430 $ (1,609) $ (29,405) $ 9,149 $ 26,913 $ 1,827 $ 2,234 $ Consolidated statement of cash flows data: Net cash provided by (used in): Operating activities 2,465 $ 3,026 $ 6,025 $ 24,430 $ 9,128 $ (2,340) $ 977 $ Investing activities 6,287 (723) (1,314) (2,030) (26,832) (368) (454) Financing activities (914) 10,641 (31,623) (26,032) 15,734 2,091 (2,418) Other financial data: EBITDA (1) 45,462 $ 44,344 $ 48,989 $ 45,570 $ 45,638 $ 11,400 $ 11,202 $ Adjusted EBITDA (2) 48,699 49,609 48,792 50,604 52,449 13,638 12,453 Adjusted EBITDA margin (3) 26.1% 25.7% 24.4% 25.7% 25.4% 20.4% 25.0% Capital expenditures (739) $ (729) $ (1,314) $ (1,602) $ (3,207) $ (368) $ (454) $ Cash 22,435 $ 35,379 $ 8,467 $ 4,835 $ 2,865 $ 2,248 $ 2,940 $ Total debt 274,542 294,007 304,916 292,440 218,225 227,396 293,148 Net debt (4) 252,107 $ 258,628 $ 296,449 $ 287,605 $ 215,360 $ 225,148 $ 290,208 $ Leverage (5) 5.2x 5.2x 6.1x 5.7x 4.1x 4.2x 5.6x For the Period Ended

(1) Represents non-cash expense related to an inventory valuation allowance for last-in, first-out ("LIFO") reporting. (2) Represents our pension and postretirement expense. (3) Represents non-cash stock option, restricted stock and incentive expenses (4) Represents non-cash gain and loss stemming from our foreign exchange hedging activities. (5) Represents non-recurring compensation expenses incurred in connection with our IPO. (6) Other items: (a) Year ended December 31, 2016: fees incurred for the study of strategic initiatives and product launch costs of our new product lines. (b) Year ended December 31, 2015: an expense related to a one-time relocation of finished product for improved logistical services from three third-party distribution warehouses to a new third-party distribution warehouse, fees for the study of strategic initiatives and product launch costs of our new product lines, including our vaporizers within the NewGen segment. (c) Year ended December 31, 2013: an expense related to the settlement of a contractual dispute regarding Gordian Group, LLC's alleged right to remuneration under the terms of a 2009 engagement letter, legal expenses and a reimbursement from our insurance company relating to the Langston Complaint (as described below) that was paid in 2013, and an expense relating to product launch costs of our new product lines, including our e-cigarettes and cartomizers within our NewGen

• segment. (d) Year ended December 31, 2012: the receipt of approximately $1.2 million that had been reserved in relation to promissory notes held by Mr. Thomas F. Helms, Jr. and an expense related to the

settlement of a shareholder litigation concerning the use of corporate assets to extend the loans to Mr. Helms, among other things (the "Langston Complaint").

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Adjusted EBITDA Reconciliation Adjusted EBITDA Reconciliation

Reconciliation of EBITDA and Adjusted EBITDA from Net Income Reconciliation of EBITDA and Adjusted EBITDA from Net Income

YTD YTD ($ thousands) 2012 2013 2014 2015 2016 3/31/2017 3/31/2016 Reconciliation of EBITDA and Adjusted EBITDA to Net Income: Net income (loss) 430 $ (1,609) $ (29,405) $ 9,149 $ 26,913 $ 1,877 $ 2,234 $ Add: Interest expense 43,048 44,094 34,311 34,284 26,621 4,933 8,462 Loss on extinguishment of debt

• 441

42,780

• 2,824

6,116

• Income tax expense (benefit)

978 486 370 1,078 (12,005) (2,055) 213 Depreciation expense 968 905 933 1,059 1,227 354 293 Amortization expense 38 27

• 58

175

• EBITDA

45,462 $ 44,344 $ 48,989 $ 45,570 $ 45,638 $ 11,400 $ 11,202 $ Components of Adjusted EBITDA: LIFO adjustment (1) 2,526 716 (798) (56) 889 1,189 309 Pension/Postretirement expense (2) 623 407 16 341 437 118 117 Stock option, restricted stock and incentives expense (3) 150 234 585 234 180 45 22 Foreign exchange hedging (4) (65)

• (35)

125 (69) (21) IPO related compensation costs (5)

• 915
• Other items (6)

3 3,908

• 4,550

4,265 955 824 Adjusted EBITDA 48,699 $ 49,609 $ 48,792 $ 50,604 $ 52,449 $ 13,638 $ 12,453 $ Fiscal Years Ended