Does Turning Point Brands Inc. (NYSE:TPB) Have Adequate Liquidity?


If you listen to the management of Turning Point Brands Inc. (NYSE: TPB), you get the assurance that the company is standing on solid financial grounds. In a recent update on liquidity and capital position, the management said the company has enough cash that can fund its operations for the foreseeable future.

At the end of the last quarter (1Q2016), working capital was quoted as $44.8 million. That was an increase over working capital of $42.8 million at the end of the previous quarter. According to Turning Point Brands Inc. (NYSE:TPB), the increase in working capital amount in the latest quarter was caused by a drop in accrued interest.

The clarification on liquidity should put to rest any concerns that investors may have had about TPB’s cash position and the fate of future programs.

IPO proceeds

Besides the cash flow from operations feeding the liquidity basket, TPB also noted that it generated net proceeds of $58.2 million from its IPO last month. It used the IPO funds to strengthen its balance sheet through retirement of certain notes and repurchase of outstanding warrants.IPO proceeds

Where sales come from

Turning Point Brands Inc. (NYSE:TPB) is a player in the Other Tobacco Products (OTPs) industry. According to TPB, manufacturing revenue in the industry was more than $10 billion in 2014. The OTPs industry stands in sharp contrast with the legacy tobacco cigarette industry, which has seen a steady decline in revenues in the recent years. The tightening regulatory framework and shifted consumer perception are some of the factors hurting tobacco cigarette business, but OTP industry continues to see growth and TPB hopes to ride the wave.

Between 2013 and 2014, TPB notes that shipment of OTPs to retailers rose 2%. The shipment further increased about 3% from 2014 to 2015.

Factors affecting Turning Point Brands Inc. (NYSE: TPB) results

Besides the hope of continued industry growth, Turning Point Brands Inc. (NYSE:TPB) sees its operating results being affected by an array of factors such as ability to penetrate new markets with its existing products. Growing consumer rebelling against tobacco products also presents a major headwind for TPB. The rise of counterfeits could also narrow sales opportunities, the management of the company noted.


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