NEW YORK--(BUSINESS WIRE)--Feb. 11, 2008--Loews Corporation (NYSE:LTR) today reported Carolina Group net income for the 2007 fourth quarter of $206 million, compared to $220 million in the 2006 fourth quarter. The decrease in net income is primarily due to a charge of $46 million, after taxes, related to litigation, partially offset by a lower effective tax rate as compared to 2006 due primarily to the statutory increase in the tax benefit related to the manufacturer's deduction and resolution of certain state tax uncertainties.
Net income per share of Carolina Group stock (NYSE:CG) for the fourth quarter of 2007 was $1.18, compared to $1.26 in the comparable period of the prior year. Carolina Group stock represented a 62.4% and 62.3% economic interest in the Carolina Group for the three months ended December 31, 2007 and 2006, respectively.
Net sales for the Carolina Group were $957 million in the fourth quarter of 2007, compared to $937 million in the 2006 fourth quarter. Domestic unit volume decreased 4.3% in the 2007 fourth quarter compared to the 2006 fourth quarter. The fourth quarter of 2006 was favorably impacted by increased wholesale purchases in anticipation of an industry price increase.
Carolina Group net income for the year ended 2007 was $855 million, compared to $760 million for the year ended 2006. The increase in net income is primarily due to higher effective unit prices resulting from price increases in December 2006 and September 2007 and lower sales promotion expenses, and a lower effective tax rate, partially offset by an increase in expenses for the State Settlement Agreements and the fourth quarter charge related to litigation. The effective tax rate was lower in 2007, as compared to 2006, due to the statutory increase in the tax benefit related to the manufacturer's deduction and resolution of certain state tax uncertainties.
Net income per share of Carolina Group stock for the year ended 2007 was $4.91, compared to $4.46 in the prior year. Carolina Group stock represented a 62.4% and 54.8% economic interest in the Carolina Group for the years ended December 31, 2007 and 2006, respectively.
Net sales for the Carolina Group were $3.969 billion in 2007, compared to $3.755 billion in the prior year. Domestic unit volume decreased 0.8% in 2007 compared to 2006, whereas the industry declined by approximately 5%.
Results of operations of the Carolina Group include interest expense on notional intergroup debt of $9 million, $16 million, $48 million and $71 million, net of taxes, for the three months and years ended December 31, 2007 and 2006, respectively. At December 31, 2007, $424 million principal amount of notional intergroup debt was outstanding.
The Carolina Group stock, commonly called a tracking stock, is intended to reflect the economic performance of a defined group of the Company's assets and liabilities, referred to as the Carolina Group, principally consisting of the Company's subsidiary Lorillard, Inc. The Carolina Group, a notional group, is not a separate legal entity. The purpose of this financial information is to provide investors with additional information to use in analyzing the results of operations and financial condition of the Carolina Group, and this financial information should be read in conjunction with the consolidated financial information of Loews Corporation.
As of December 31, 2007 there were 108,459,141 shares of Carolina Group stock outstanding, representing a 62.4% economic interest. Depending on market conditions, the Company, for the account of the Carolina Group, from time to time may purchase shares of Carolina Group stock in the open market or otherwise.
On December 17, 2007, Loews announced that its Board of Directors has approved a plan to spin-off its entire ownership interest in Lorillard to holders of Carolina Group stock and Loews common stock in a tax-free transaction, as a result of which the Carolina Group, and all of the Carolina Group stock, would be eliminated and Lorillard would become a separate publicly traded company.
The transaction would be accomplished by Loews through its (i) redemption of all outstanding Carolina Group stock in exchange for shares of Lorillard common stock, with holders of Carolina Group stock receiving one share of Lorillard common stock for each share of Carolina Group stock they own, and (ii) disposition of its remaining Lorillard common stock in an exchange offer for shares of outstanding Loews common stock or as a pro rata dividend to the holders of Loews common stock.
Completion of the proposed transaction is subject to a number of conditions, as described in the Loews press release dated December 17, 2007, a copy of which is posted on Loews's website.
A separate press release reporting Loews Corporation's consolidated results for the fourth quarter and full year of 2007 is being issued contemporaneously with this report.
A conference call to discuss the fourth quarter results of Loews Corporation has been scheduled for 11:00 a.m. EST, Monday, February 11, 2008. A live webcast of the call will be available online at the Loews Corporation website (www.loews.com). Please go to the website at least ten minutes before the event begins to register and to download and install any necessary audio software. Those interested in participating in the question and answer session of the conference call should dial (877) 692-2592, or for international callers, (973) 582-2757. The conference ID number is 31845147.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual events to differ materially from those described. Important factors that could cause actual events to differ from those described include, but are not limited to, satisfaction of the conditions to completion of the proposed spin-off transaction noted herein. Therefore, no assurance can be given that the spin-off will be consummated on the currently proposed terms or otherwise. Loews expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.
Carolina Group
Financial Review
December 31,
----------------------------------
Three Months Year Ended
----------------------------------
2007 2006 2007 2006
----------------------------------
(Amounts in millions, except per
share data)
Net sales (a) $ 957 $ 937 $ 3,969 $3,755
Cost of sales (a) (b) 535 522 2,307 2,160
Selling, advertising and
administrative (c) 142 69 388 354
----------------------------------
Total operating costs and expenses 677 591 2,695 2,514
----------------------------------
Operating income 280 346 1,274 1,241
Investment income and other (d) 21 35 118 112
Interest expense (8) (26) (74) (116)
----------------------------------
Income before income taxes 293 355 1,318 1,237
Income taxes 87 135 463 477
----------------------------------
Net income 206 220 855 760
Earnings attributable to the Loews
Group intergroup interest (e) 78 83 322 344
----------------------------------
Income attributable to Carolina
Group shareholders (f) $ 128 $ 137 $ 533 $ 416
==================================
Per share of Carolina Group stock $ 1.18 $ 1.26 $ 4.91 $ 4.46
==================================
Weighted diluted number of shares 108.61 108.44 108.57 93.47
==================================
Notional, intergroup debt owed by the Carolina Group to the
Loews Group
December 31, 2007 $ 424
December 31, 2006 1,230
(a)Includes excise taxes of $165, $172, $688 and $699 for the
respective periods.
(b)Includes charges of $247, $215, $1,048 and $911 ($172, $134, $680
and $560 after taxes) to accrue obligations under the State
Settlement Agreements for the respective periods.
(c)Includes a $66 charge for the three months and year ended December
31, 2007 related to litigation, and restructuring costs of $4 and
$20 for the three months and year ended December 31, 2006 related
to early retirement and curtailment charges for Lorillard's
pension and other post-retirement benefit plans.
(d)Includes income from limited partnership investments of $3, $9, $34
and $26 ($2, $6, $22 and $16 after taxes) for the respective
periods.
(e)The Loews Group's intergroup interest in the earnings of the
Carolina Group reflected share equivalents amounting to 65.45
million shares of 173.90 million share and share equivalents
outstanding as of December 31, 2007 and share equivalents
amounting to 65.45 million shares of 173.77 million share and
share equivalents outstanding as of December 31, 2006. As of
December 31, 2007, there were 108.46 million shares of Carolina
Group stock outstanding.
(f)Represents 62.4%, 62.3%, 62.4% and 54.8% of the economic interest
in the Carolina Group for the respective periods.
Carolina Group
Supplemental Information
The following information regarding unit volume shipped by Lorillard
Tobacco Company to its direct buying customers by brand follows (all
units in thousands):
December 31,
-----------------------------------------
Three Months Year Ended
-----------------------------------------
2007 2006 2007 2006
-----------------------------------------
Full Price Brands
Total Newport 7,716,510 8,148,465 32,838,856 33,105,422
Total Kent Family 111,024 140,499 481,842 600,519
Total True 100,494 120,600 435,407 509,831
Total Max 6,992 8,172 29,012 33,723
Total Satin 993 72 4,887
-----------------------------------------
Total Full Price Brands 7,935,020 8,418,729 33,785,189 34,254,382
-----------------------------------------
Price/Value Brands
Total Old Gold 147,162 196,010 616,640 803,669
Total Maverick 433,331 283,884 1,440,339 1,072,811
-----------------------------------------
Total Price/Value Brands 580,493 479,894 2,056,979 1,876,480
-----------------------------------------
Total Domestic Cigarettes 8,515,513 8,898,623 35,842,168 36,130,862
Total Puerto Rico and U.S.
Possessions 201,882 224,196 794,676 813,576
-----------------------------------------
Grand Total 8,717,395 9,122,819 36,636,844 36,944,438
=========================================
Notes:
1.This information is not adjusted for returns.
2.Domestic unit volume includes units sold as well as promotional
units, and excludes volumes for Puerto Rico and U.S. Possessions.
3.Unit volume for a quarter is not necessarily indicative of unit
volume for any subsequent period.
4.Unit volume is not necessarily indicative of the level of revenues
for any period.
CONTACT: Loews Corporation Peter W. Keegan, 212-521-2950 Chief Financial Officer or Darren Daugherty, 212-521-2788 Investor Relations or Candace Leeds, 212-521-2416 Public Affairs SOURCE: Carolina Group