View:
==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 7, 2003
----------------------------
LOEWS CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- ------------------------------------------------------------------------------
(State or other jurisdiction of Incorporation)
1-6541 13-2646102
- ------------------------------------------------------------------------------
(Commission (IRS Employer
File Number Identification No.)
667 Madison Avenue, New York, N.Y. 10021-8087
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 521-2000
---------------------------
NOT APPLICABLE
- ------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
==============================================================================
Page 1 of 2
Item 7. Financial Statements and Exhibits
(c) Exhibits:
Exhibit No. Description
99.1 Loews Corporation press release, issued
August 7, 2003, providing information on
second quarter 2003 results of operations.
99.2 Carolina Group press release, issued
August 7, 2003, providing information on
second quarter 2003 results of operations.
Item 12. Results of Operations and Financial Condition
The information in this Current Report is being furnished and shall not be
deemed "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934, as amended, or otherwise subject to the liabilities of that Section. The
information in this Current Report shall not be incorporated by reference into
any registration statement or other document pursuant to the Securities Act of
1933, as amended.
On August 7, 2003, Registrant issued a press release for Loews Corporation
and a separate press release for the Carolina Group providing information on
their results of operations for the second quarter of 2003. The press releases
are furnished as Exhibits 99.1 and 99.2 to this Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LOEWS CORPORATION
-----------------------------
(Registrant)
Dated: August 7, 2003 By: /s/ Gary W. Garson
-----------------------------
Gary W. Garson
Senior Vice President
General Counsel and Secretary
Page 2 of 2
Exhibit 99.1
Contact: Peter W. Keegan
Senior Vice President
(212) 521-2950
Candace Leeds
V.P. of Public Affairs
(212) 521-2416
Joshua E. Kahn
Investor Relations
(212) 521-2788
FOR IMMEDIATE RELEASE
- ---------------------
LOEWS CORPORATION REPORTS
-------------------------
NET INCOME FOR THE SECOND QUARTER OF 2003
-----------------------------------------
NEW YORK, August 7, 2003-Loews Corporation (NYSE:LTR;CG) today reported
consolidated net income (including both the Loews Group and Carolina Group)
for the 2003 second quarter of $214.8 million, compared to $198.8 million for
the second quarter of 2002.
The following table summarizes the revenues, net income and earnings per
share information:
June 30,
-----------------------------------------
Three Months Six Months
-----------------------------------------
(In millions) 2003 2002(a) 2003 2002(a)
-----------------------------------------
Consolidated:
Revenues (b) $ 4,250.3 $4,651.5 $8,199.5 $9,443.8
Net income $ 214.8 $ 198.8 $ 404.8 $ 411.6
Per Share: (c)
Income per share of Loews common stock:
Income from continuing operations $ 1.02 $ 0.84 $ 1.89 $ 2.23
Discontinued operations-net (0.16)
Cumulative effect of change in accounting
principle-net (0.21)
----------------------------------------
Net income per share of Loews common stock $ 1.02 $ 0.84 $ 1.89 $ 1.86
========================================
Net income per share of Carolina Group stock $ 0.63 $ 1.03 $ 1.34 $ 1.48
========================================
(a) Restated to reflect an adjustment to the Company's historical accounting
for CNA's investment in life settlement contracts and the related revenue
recognition. The impact of this adjustment on operating results in 2002
was insignificant.
(b) Revenue includes premiums of $535.0 and $1,151.0 for the three and six
months ended June 30, 2002, related to the National Postal Mail Handlers
contract at CNA which was transferred on July 1, 2002.
(c) The Company has two classes of common stock, Loews common stock and
Carolina Group stock, issued in February 2002.
Page 1 of 7
Consolidated net income in the second quarter of 2003 includes net
investment gains of $250.7 million, compared to losses of $117.9 million in
the second quarter of 2002.
Net income attributable to Loews common stock for the second quarter of 2003
amounted to $189.8 million or $1.02 per share, compared to $157.4 million or
$0.84 per share in the comparable period of the prior year. Net income in the
second quarter of 2003 includes net investment gains attributable to Loews
common stock of $251.0 million, compared to losses of $119.1 million in the
comparable period of the prior year.
Results for the quarter ended June 30, 2003, included $277.3 million (after
tax and minority interest) of unfavorable net prior year reserve development
in CNA's property and casualty segment, of which approximately 80% relates to
accident year 2000 and prior. The significant unfavorable net prior year
premium and loss development was recorded primarily for workers compensation,
directors and officers coverages, and a recent adverse arbitration decision
involving a single large property and business interruption loss that occurred
in 1995. The results also included an increase in the bad debt reserves for
reinsurance and insurance receivables, catastrophe losses for the Texas
tornados and Midwest rain storms and decreased net investment income. These
adverse items were more than offset by increased net investment gains and
strong current accident year results. Results for the quarter were also
impacted by lower net income from Lorillard due to an increase in sales
promotion expenses and lower total sales unit volume.
Net investment gains increased $368.6 million (after tax and minority
interest) in the second quarter of 2003 as compared with the same period in
2002. This increase was due primarily to increased gains on sales of fixed
maturity securities and a decrease in investment related impairment charges in
the second quarter of 2003. Investment related impairment losses (after tax
and minority interest) were $18.0 million for the second quarter of 2003 as
compared with $169.2 million for the same period in 2002.
Net income attributable to Carolina Group stock for the second quarter of
2003 was $25.0 million or $0.63 per Carolina Group share, compared to $41.4
million, or $1.03 per Carolina Group share in the second quarter of 2002. The
Company is issuing a separate press release reporting the actual and pro forma
results of the Carolina Group for the quarter and six months ended June 30,
2003 and 2002.
Six Months Ended June 30, 2003 Compared With 2002
- -------------------------------------------------
Net income for the first half of 2002 included a loss from discontinued
operations at CNA of $31.0 million or $0.16 per share of Loews common stock
and a charge for accounting changes of $39.6 million or $0.21 per share of
Loews common stock, related to accounting for goodwill and other intangible
assets at CNA.
Consolidated income from continuing operations for the first half of 2003
was $404.8 million, compared to $482.2 million in the comparable period of the
prior year. Income from continuing operations includes net investment gains of
$194.1 million (after tax and minority interest), compared to a loss of $102.1
million (after tax and minority interest) in the comparable period of the
prior year. The lower results reflect the unfavorable net prior year premium
and loss development recorded in the second quarter of 2003 for the property
and casualty segment as discussed above and the lower results from Lorillard,
partially offset by the improvement in net investment gains.
Page 2 of 7
Income from continuing operations attributable to Loews common stock for the
first half of 2003 amounted to $351.2 million or $1.89 per share, compared to
$422.8 million or $2.23 per share in the comparable period of the prior year.
Income from continuing operations includes net investment gains attributable
to Loews common stock of $194.4 million, compared to losses of $103.6 million
in the comparable period of the prior year.
Net income attributable to Carolina Group stock for the first half of 2003
amounted to $53.6 million or $1.34 per Carolina Group share, compared to $59.4
million or $1.48 per share in the comparable period of the prior year.
Components of Net Income
- ------------------------
June 30,
----------------------------------------
Three Months Six Months
----------------------------------------
(In millions) 2003 2002 2003 2002
----------------------------------------
Income (loss) before net investment gains (losses)
attributable to Loews common stock $ (61.2) $ 276.5 $ 156.8 $ 526.4
Net investment gains (losses) 251.0 (119.1) 194.4 (103.6)
----------------------------------------
Income from continuing operations 189.8 157.4 351.2 422.8
Discontinued operations-net (a) (31.0)
Cumulative effect of change in accounting
principle-net (b) (39.6)
----------------------------------------
Net income attributable to Loews common stock $ 189.8 $ 157.4 $ 351.2 $ 352.2
========================================
(a) In the first quarter of 2002, CNA sold its life operations in Chile.
(b) Represents the effect of the adoption of SFAS No. 142, which was a change
in accounting for goodwill and other intangible assets at CNA.
Third Quarter Reserve Reviews
- -----------------------------
Adverse trends in both asbestos, environmental pollution and mass tort
claims ("APMT") and non-APMT property and casualty segments continue to impact
the property and casualty insurance industry. CNA reviews its property and
casualty claim and claim adjustment expense reserves ("reserves") on a regular
basis, and as part of these reviews, has noted an increase in reported
construction defect claims. CNA expects to complete a comprehensive reserve
review of construction defect exposures in the third quarter of 2003. In
addition, other volatile exposures will also be reviewed on a comprehensive
basis in the third quarter.
While CNA continues to monitor and evaluate its APMT exposures on a regular
basis, the completion of a comprehensive ground up analysis of its APMT
exposures, previously scheduled for the second quarter, will be completed in
the third quarter of 2003. Significant resources were dedicated to the
proposed national asbestos reform legislation and to support the regulatory
reviews described below. As such, CNA plans to complete its more formal and
comprehensive analysis in the third quarter of 2003.
In addition, in connection with routine state regulatory exams of
Continental Casualty Company ("CCC") and Continental Insurance Company
("CIC"), an independent actuarial firm is in the process of reviewing CNA's
reserves as of December 31, 2001. CNA intends to have the independent
actuarial firm update its review to include an assessment of its December 31,
Page 3 of 7
2002 reserves using more recent data. These independent reviews are expected
to be completed by December 31, 2003. CNA will consider the results of these
independent actuarial reviews in the reserving process.
While management believes that CNA's reserves as of June 30, 2003 are
appropriate based on information known at this time, CNA, as a result of the
third quarter reviews by CNA and the independent actuarial firm and other
factors deemed relevant by CNA, may in the future determine that its recorded
reserves are not sufficient and may increase its reserves by amounts that may
be material, which could adversely affect CNA's business, insurer financial
strength and debt ratings and the Company's results of operations and equity.
Adjustments to prior year reserve estimates, if necessary, are reflected in
the results of operations in the period that the need for such adjustments is
determined.
# # #
At June 30, 2003, the book value per share of Loews common stock was $66.96
per Loews common share compared to $61.68 per Loews common share at December
31, 2002.
At June 30, 2003, there were 185,447,050 shares of Loews common stock
outstanding and 39,910,000 shares of Carolina Group stock outstanding.
Depending on market conditions, the Company from time to time purchases shares
of its, and its subsidiaries', outstanding common stock in the open market or
otherwise.
In February 2002 the Company created a class of common stock, called
Carolina Group stock, a tracking stock intended to reflect the economic
performance of a group of the Company's assets and liabilities, called the
Carolina Group, principally consisting of the Company's subsidiary Lorillard,
Inc. In an initial public offering, the Company issued shares of Carolina
Group Stock representing an interest in the economic performance of the
Carolina Group. Loews common stock represents the economic performance of the
Company's remaining assets, including the interest in the Carolina Group not
represented by Carolina Group Stock. At June 30, 2003, the outstanding
Carolina Group stock represents a 23.01% economic interest in the economic
performance of the Carolina Group.
A conference call to discuss the second quarter results of Loews Corporation
has been scheduled for 9:00 a.m. EDT, Thursday, August 7, 2003. A live
broadcast 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. An online replay will be
available at the Company's website for one week following the call.
A conference call to discuss the second quarter results of CNA has been
scheduled for 8:00 a.m. EDT, Thursday, August 7, 2003. A live broadcast of the
call will be available online at the CNA website (http://investors.cna.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 (888) 203-1112, passcode 160543. An online replay
will be available at CNA's website until the date of the next conference call.
Page 4 of 7
FORWARD-LOOKING STATEMENTS
Statements contained in this press release which are not historical facts
are "forward-looking statements" within the meaning of the federal securities
laws. When included in this press release, the words "believes," "expects,"
"plans," "intends," "anticipates," "estimates," "should," and similar
expressions, and other statements concerning the Company's future plans,
objectives, and expected performance are intended to identify forward-looking
statements. Forward-looking statements contained in this release include
statements regarding the insurance business of the Company's CNA subsidiary,
including the insurance reserve reviews being conducted by CNA and an
independent actuarial firm, the ongoing state regulatory exams of CNA's
primary insurance company subsidiaries, and CNA's responses to the results of
those reviews and exams. These matters are highly complex and their outcome is
inherently uncertain. Therefore, forward-looking statements in this release
regarding these matters are inherently uncertain and subject to a variety of
risks that could cause actual results to differ materially from those expected
by management of the Company and CNA.
A discussion of the important risk factors and other considerations that
could materially impact these matters as well as the Company's overall
business and financial performance can be found in the Company's reports filed
with the Securities and Exchange Commission and readers of this release are
urged to review those reports carefully when considering these forward-looking
statements. Copies of these reports are available through the Company's
website (www.loews.com). Given these risk factors, investors and analysts
should not place undue reliance on forward-looking statements.
These forward-looking statements speak only as of the date of this press
release. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any forward-looking
statement is based.
Page 5 of 7
Loews Corporation and Subsidiaries
Financial Review
June 30,
--------------------------------------------
Three Months Six Months
--------------------------------------------
2003 2002(h) 2003 2002(h)
--------------------------------------------
(Amounts in millions, except per share data)
Revenues:
Insurance premiums and net investment income (a) $3,060.1 $3,170.2 $5,801.3 $6,492.9
Manufactured products (b) 814.3 1,068.0 1,698.3 2,072.8
Other (c) 375.9 413.3 699.9 878.1
--------------------------------------------
Total 4,250.3 4,651.5 8,199.5 9,443.8
============================================
Expenses:
Insurance claims & policyholders' benefits 2,066.9 2,382.2 3,936.7 4,692.3
Cost of manufactured products sold (b) 475.7 600.5 956.9 1,208.2
Other (d) 1,405.3 1,333.1 2,721.6 2,725.0
--------------------------------------------
Total 3,947.9 4,315.8 7,615.2 8,625.5
--------------------------------------------
302.4 335.7 584.3 818.3
--------------------------------------------
Income tax expense 87.9 122.6 180.8 293.8
Minority interest (0.3) 14.3 (1.3) 42.3
--------------------------------------------
Total 87.6 136.9 179.5 336.1
--------------------------------------------
Income from continuing operations 214.8 198.8 404.8 482.2
Discontinued operations-net (31.0)
Cumulative effect of change in accounting
principles-net (e) (39.6)
--------------------------------------------
Net income $ 214.8 $ 198.8 $ 404.8 $ 411.6
============================================
Net income attributable to:
Loews common stock:
Income from continuing operations $ 189.8 $ 157.4 $ 351.2 $ 422.8
Discontinued operations-net (31.0)
Cumulative effect of change in accounting
principles-net (e) (39.6)
--------------------------------------------
Loews common stock 189.8 157.4 351.2 352.2
Carolina Group stock (f) 25.0 41.4 53.6 59.4
--------------------------------------------
$ 214.8 $ 198.8 $ 404.8 $ 411.6
============================================
Income per share of Loews common stock (g):
Income from continuing operations $ 1.02 $ 0.84 $ 1.89 $ 2.23
Discontinued operations-net (0.16)
Cumulative effect of changes in accounting
principles-net (e) (0.21)
--------------------------------------------
Net income $ 1.02 $ 0.84 $ 1.89 $ 1.86
============================================
Net income per share of Carolina Group stock (g) $ 0.63 $ 1.03 $ 1.34 $ 1.48
============================================
Weighted number of shares outstanding:
Loews common stock 185.45 188.19 185.45 189.63
Carolina Group stock 39.91 40.25 39.91 40.25
(a) Includes investment gains (losses) of $419.3, $(195.0), $323.7 and
$(171.5) for the respective periods.
(b) Includes excise taxes of $163.4, $176.1, $320.3 and $356.5 paid on sales
of manufactured products for the respective periods.
(c) Revenue for 2002 has been restated for comparative purposes to reflect
the adoption of new accounting principles related to reimbursements
received by Diamond Offshore for "Out-of-Pocket" expenses incurred.
(d) Includes a $26.0 charge in the three and six months ended June 30, 2003
($16.8 after taxes) to settle litigation with tobacco growers and a $28.0
charge in the six months ended June 30, 2003 ($17.1 after taxes) to
resolve indemnification claims and trademark matters in connection with
the 1977 sale by Lorillard of its international business.
(e) Adoption of SFAS No. 142, accounting for goodwill and other intangible
assets at the CNA subsidiary.
(f) Represents 23.01% and 23.17% of the economic interest in the Carolina
Group for 2003 and 2002.
(g) Earnings per common share-assuming dilution is not presented because
securities that could potentially dilute basic earnings per common share
in the future would have been insignificant or antidilutive for the
periods presented.
(h) Restated to reflect an adjustment to the Company's historical accounting
for CNA's investment in life settlement contracts and the related revenue
recognition.
Page 6 of 7
Loews Corporation and Subsidiaries
Additional Financial Information
June 30,
-------------------------------------------
Three Months Six Months
-------------------------------------------
2003 2002(f) 2003 2002(f)
-------------------------------------------
(In millions)
Revenues:
CNA Financial $2,719.6 $3,474.6 $5,641.2 $6,919.3
Lorillard (a) 791.5 1,037.9 1,643.4 2,022.2
Loews Hotels 85.4 82.0 161.8 159.2
Diamond Offshore (b) 167.9 195.8 319.9 407.7
Texas Gas 23.1 23.1
Bulova 33.7 41.4 74.8 74.1
Investment income-net and other (c) 9.8 14.8 11.6 32.8
-------------------------------------------
3,831.0 4,846.5 7,875.8 9,615.3
-------------------------------------------
Investment gains (losses):
CNA Financial 388.7 (162.3) 312.6 (161.3)
Corporate and other 30.6 (32.7) 11.1 (10.2)
-------------------------------------------
419.3 (195.0) 323.7 (171.5)
-------------------------------------------
Total $4,250.3 $4,651.5 $8,199.5 $9,443.8
===========================================
Income Before Taxes:
CNA Financial $ (297.1) $ 205.0 $ (113.0) $ 376.6
Lorillard (d) 177.7 271.1 381.6 514.8
Loews Hotels 9.0 10.3 17.0 19.8
Diamond Offshore (18.9) 8.6 (47.7) 36.3
Texas Gas 2.6 2.6
Bulova 2.9 4.6 7.2 7.6
Investment income-net and other (c) (31.9) (35.7) (73.0) (60.9)
-------------------------------------------
(155.7) 463.9 174.7 894.2
===========================================
Investment gains (losses):
CNA Financial 388.7 (162.3) 312.6 (161.3)
Corporate and other 30.8 (34.5) 11.6 (12.5)
-------------------------------------------
419.5 (196.8) 324.2 (173.8)
===========================================
Loews common stock 263.8 267.1 498.9 720.4
Carolina Group stock (e) 38.6 68.6 85.4 97.9
-------------------------------------------
Total $ 302.4 $ 335.7 $ 584.3 $ 818.3
===========================================
Net Income:
CNA Financial $ (156.1) $ 124.7 $ (32.7) $ 225.6
Lorillard (d) 114.5 163.7 239.3 312.7
Loews Hotels 5.7 6.7 10.8 12.7
Diamond Offshore (9.3) 1.7 (21.4) 10.4
Texas Gas 1.6 1.6
Bulova 1.9 2.6 4.9 4.2
Investment income-net and other (c) (19.5) (22.9) (45.7) (39.2)
-------------------------------------------
(61.2) 276.5 156.8 526.4
===========================================
Investment gains (losses):
CNA Financial 230.4 (93.9) 186.5 (91.7)
Corporate and other 20.6 (25.2) 7.9 (11.9)
-------------------------------------------
251.0 (119.1) 194.4 (103.6)
===========================================
Income from continuing operations 189.8 157.4 351.2 422.8
Discontinued operations-net (31.0)
Cumulative effect of changes in accounting
principles-net (39.6)
-------------------------------------------
Loews common stock 189.8 157.4 351.2 352.2
Carolina Group stock (e) 25.0 41.4 53.6 59.4
-------------------------------------------
Total $ 214.8 $ 198.8 $ 404.8 $ 411.6
===========================================
(a) Includes excise taxes of $163.4, $176.1, $320.3 and $356.5 paid on sales
of manufactured products for the respective periods.
(b) Revenue for 2002 has been restated for comparative purposes to reflect
the adoption of new accounting principles related to reimbursements
received by Diamond Offshore for "Out-of-Pocket" expenses incurred.
(c) Consists primarily of corporate investment income, interest expenses and
other unallocated expenses.
(d) Represents the Loews Group's intergroup interest in the earnings of the
Carolina Group.
(e) Represents 23.01% and 23.17% of the economic interest in the Carolina
Group for 2003 and 2002.
(f) Restated to reflect an adjustment to the Company's historical accounting
for CNA's investment in life settlement contracts and the related revenue
recognition.
Page 7 of 7
Exhibit 99.2
Contact: Peter W. Keegan
Senior Vice President
(212) 521-2950
Candace Leeds
V.P. of Public Affairs
(212) 521-2416
Joshua E. Kahn
Investor Relations
(212) 521-2788
FOR IMMEDIATE RELEASE
- ---------------------
CAROLINA GROUP REPORTS
----------------------
NET INCOME FOR THE SECOND QUARTER OF 2003
-----------------------------------------
NEW YORK, August 7, 2003-Loews Corporation (NYSE:LTR) reported today
Carolina Group net income for the 2003 second quarter of $108.4 million,
compared to $178.8 million in the 2002 second quarter. Net income for the
second quarter of 2003 was reduced by an after-tax charge of $16.8 million to
settle litigation with tobacco growers. Net income attributable to the Loews
Group intergroup interest for the second quarter of 2003 amounted to $83.4
million, compared to $137.4 million in the comparable period of the prior
year. Net income attributable to Carolina Group stock (NYSE:CG) for the second
quarter of 2003 was $25.0 million, or $0.63 per share of Carolina Group stock,
compared to $41.4 million, or $1.03 per share in the prior year.
Carolina Group net income for the 2003 second quarter includes net
investment losses of $1.4 million, compared to gains of $5.0 million in the
prior year. Net investment (losses) gains attributable to Carolina Group stock
in the second quarter of 2003 and 2002 were $(0.3) million and $1.2 million.
Net sales for the Carolina Group were $780.9 million in the second quarter
of 2003, compared to $1,026.9 million in 2002. The decline in net sales
reflects lower unit sales volume of 5.7% and increased sales promotion
expenses.
Carolina Group net income for the first half of 2003 was $232.8 million,
compared to $329.5 million in the comparable period of the prior year. Net
income for 2003 was reduced by after-tax charges of $16.8 million in the
second quarter and $17.1 million in the first quarter to settle litigation
with tobacco growers and to resolve indemnification claims and trademark
matters in connection with the 1977 sale by Lorillard of its international
business.
Net income attributable to the Loews Group intergroup interest for the first
half of 2003 amounted to $179.2 million, compared to $270.1 million in the
comparable period of the prior year. Net income attributable to Carolina Group
stock for the first half of 2003 was $53.6 million or $1.34 per share of
Carolina Group stock, compared to $59.4 million or $1.48 per share of
Page 1 of 4
Carolina Group stock and reflects five months of actual results, commencing
with the initial issuance of Carolina Group stock by Loews Corporation in
February 2002.
Carolina Group net income for the first half of 2003 includes net investment
losses of $1.2 million, compared to gains of $6.9 million in the prior year.
Net investment (losses) gains attributable to Carolina Group stock in the
first half of 2003 and 2002 were $(0.3) million and $1.5 million.
Net sales for the Carolina Group in the first half of 2003 were $1.625
billion compared to $2.000 billion in the comparable 2002 period. The decline
in net sales reflects lower unit sales volume of 8.2% and increased sales
promotion expenses.
On a pro forma basis, assuming the Carolina Group stock had been issued at
January 1, 2002, net income attributable to Carolina Group stock for the first
six months of 2002 would have been $73.4 million or $1.82 per share of
Carolina Group stock.
This pro forma information is based on the historical results of operations
of the Carolina Group, adjusted to accrue interest expense at 8% per annum on
$2.500 billion of notional intergroup debt and an adjustment to income taxes
for the impact of the interest expense. Per share amounts are based on income
available to Carolina Group shareholders. At June 30, 2003, the outstanding
balance of notional debt was $2.336 billion.
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 June 30, 2003, there were 39,910,000 shares of Carolina Group stock
outstanding. 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.
# # #
Loews Corporation has issued a separate press release reporting its
consolidated results for the second quarter of 2003, which accompanies this
press release.
A conference call to discuss the second quarter results of Loews Corporation
has been scheduled for 9:00 a.m. EDT, Thursday, August 7, 2003. A live
broadcast 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. An online replay will be
available at the Company's website for one week following the call.
Page 2 of 4
Carolina Group
Financial Review
June 30,
----------------------------------------------------
Three Months Six Months Ended
----------------------------------------------------
2003 2002 2003 2002 2002(e)
----------------------------------------------------
(Amounts in millions, except per share data)
Pro Forma
Net sales (a) $ 780.9 $1,026.9 $1,625.1 $2,000.0 $2,000.0
Cost of sales (a)(b) 454.9 587.6 921.4 1,187.8 1,187.8
Selling, advertising and administrative (c) 120.1 111.6 254.8 223.4 223.4
----------------------------------------------------
Total operating costs and expenses 575.0 699.2 1,176.2 1,411.2 1,411.2
----------------------------------------------------
Operating income 205.9 327.7 448.9 588.8 588.8
Investment income (d) 8.9 18.2 17.7 32.4 32.4
Interest expense (47.3) (50.0) (95.5) (79.0) (100.0)
----------------------------------------------------
Income before income taxes 167.5 295.9 371.1 542.2 521.2
Income taxes 59.1 117.1 138.3 212.7 204.5
----------------------------------------------------
Net income 108.4 178.8 232.8 329.5 316.7
Earnings attributable to the Loews
Group intergroup interest (f) 83.4 137.4 179.2 270.1 243.3
----------------------------------------------------
Income attributable to Carolina Group
shareholders (g) $ 25.0 $ 41.4 $ 53.6 $ 59.4 $ 73.4
====================================================
Per share of Carolina Group stock (h) $ 0.63 $ 1.03 $ 1.34 $ 1.48 $ 1.82
====================================================
Weighted number of shares outstanding 39.91 40.25 39.91 40.25 40.25
====================================================
(a) Includes excise taxes of $163.4, $176.1, $320.3 and $356.5 for the
respective periods.
(b) Includes charges of $180.1, $291.9, $377.6 and $587.7 ($116.3, $176.5,
$236.9 and $357.2 after taxes) to accrue obligations under the State
Settlement Agreements for the respective periods.
(c) Includes a $26.0 charge in the three and six months ended June 30, 2003
($16.8 after taxes) to settle litigation with tobacco growers and a $28.0
charge in the six months ended June 30, 2003 ($17.1 after taxes) to
resolve indemnification claims and trademark matters in connection with
the 1977 sale by Lorillard of its international business.
(d) Includes $(2.1), $7.8, $(1.8) and $10.7 of investment (losses) gains for
the respective periods.
(e) Includes pro forma adjustment to accrue interest expense at 8% per annum
on $2,500.0 of notional intergroup debt and an adjustment to income taxes
for the impact of the interest expense for the period prior to the
issuance of Carolina Group stock.
(f) Adjusted to reflect the Loews Group's intergroup interest in the earnings
of the Carolina Group after completion of the February 1, 2002 offering
of 40,250,000 shares of Carolina Group stock. The Loews Group's economic
interest is expressed in share equivalents amounting to 133,500,000
shares for a total of 173,750,000 shares and share equivalents
outstanding after the offering. As of June 30, 2003, there were
39,910,000 shares of Carolina Group stock outstanding.
(g) Represents 23.01% of the economic interest in the Carolina Group for 2003
and 23.17% for 2002.
(h) Earnings per common share-assuming dilution is not presented because
securities that could potentially dilute basic earnings per share in the
future would have been insignificant or antidilutive for the periods
presented. Pro forma earnings per share of Carolina Group stock assumes
the Carolina Group was a separate group as of January 1, 2002.
Page 3 of 4
Carolina Group
Supplemental Information
The following information regarding domestic U.S. unit volume shipped by
Lorillard Tobacco Company to its direct buying customers by brand as follows
(all units in billions):
June 30,
---------------------------------------
Three Months Six Months
---------------------------------------
2003 2002 2003 2002
---------------------------------------
Premium Brands
Total Newport 7.700 8.255 15.172 16.650
Total Kent Family 0.281 0.348 0.549 0.711
Total True 0.203 0.241 0.396 0.488
Total Max 0.014 0.017 0.028 0.034
Total Satin 0.003 0.003 0.006 0.007
Total Triumph 0.001 0.002 0.002 0.003
---------------------------------------
Total Premium Brands 8.202 8.866 16.153 17.893
---------------------------------------
Discount Brands
Total Old Gold 0.272 0.348 0.518 0.677
Total Maverick 0.118 0.166 0.201 0.368
--------------------------------------
Total Discount Brands 0.390 0.514 0.719 1.045
--------------------------------------
Total Domestic Cigarettes 8.592 9.380 16.872 18.938
======================================
Notes:
1. This information is unaudited and 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.
Page 4 of 4