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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): November 12, 2003
----------------------------
LOEWS CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- ------------------------------------------------------------------------------
(State or other jurisdiction of Incorporation)
1-6541 13-2646102
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(Commission (IRS Employer
File Number Identification No.)
667 Madison Avenue, New York, N.Y. 10021-8087
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 521-2000
---------------------------
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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Page 1 of 2
Item 7. Financial Statements and Exhibits
(c) Exhibits:
Exhibit No. Description
99.1 Loews Corporation press release, issued
November 12, 2003, providing information on
third quarter 2003 results of operations.
99.2 Carolina Group press release, issued
by Loews Corporation November 12, 2003,
providing information on third 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 November 12, 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 third 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: November 13, 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
-------------------------
RESULTS FOR THE THIRD QUARTER OF 2003
-------------------------------------
NEW YORK, November 12, 2003-Loews Corporation (NYSE:LTR;CG) today
reported a consolidated net loss (including both the Loews Group and Carolina
Group) for the 2003 third quarter of $1,382.9 million, compared to net income
of $239.1 million for the third quarter of 2002. Consolidated net loss for the
nine months ended September 30, 2003 amounted to $978.1 million, compared to
net income of $650.7 million for the nine months ended September 30, 2002.
The 2003 third quarter results include significant charges by CNA
Financial Corporation, the Company's 90% owned subsidiary, following its
recently completed reserve reviews. CNA announced a plan to strengthen its
capital base, which includes significant financial support from Loews as
described below.
The third quarter of 2003 results include the following charges at CNA,
net of tax and minority interest:
. Net prior year development of $1,345.8 million, which includes premium
and claim and allocated claim adjustment expense development.
. Increase in bad debt reserves for insurance and reinsurance receivables
of $298.9 million.
The net prior year development consists of $880.4 million related to core
reserves and $465.4 million related to asbestos, environmental pollution and
mass tort ("APMT") reserves (after tax and minority interest). The primary
factors that led to the net prior year development were CNA's previously
announced third quarter of 2003 comprehensive reserve reviews, which include
construction defect and other volatile exposures, and a ground up analysis of
APMT exposures. The net prior year development also resulted in additional
cessions to CNA's reinsurance contracts, including the corporate aggregate
reinsurance treaties. These additional cessions resulted in $60.3 million of
interest expense (after tax and minority interest), which is recorded as a
reduction in investment income.
Page 1 of 8
To support statutory capital adversely impacted by the significant third
quarter charges, CNA has developed a capital plan, which includes substantial
support from Loews and possible sales or other dispositions of businesses and
assets. Under an agreement approved by a special committee of independent
members of CNA's Board of Directors, Loews has agreed to purchase $750 million
of a new series of CNA non-voting convertible preferred stock, having terms
that make it economically equivalent to CNA common stock. The conversion price
is based on current average market prices of CNA common stock. Proceeds from
the preferred stock sale will be applied by CNA to increase the statutory
surplus of CNA's principal insurance subsidiary, Continental Casualty Company
("CCC"). Under the agreement, Loews has also committed up to $500 million of
additional capital support, through the purchase of surplus notes of CCC, in
the event that certain additions to CCC's statutory capital are not achieved
by February 26, 2004 from business or asset sales and related actions. The
obligation of Loews to consummate this agreement is subject to certain
customary closing conditions. In addition, Loews has indicated its commitment
to provide up to an additional $150 million by March 31, 2004, in a form to be
determined, to support the statutory capital of CCC in the event of additional
shortfalls in relation to business and asset sales. Other elements of the
capital plan include the October of 2003 sale of CNA Re renewal rights and
withdrawal from the assumed reinsurance business, CNA's previously announced
initiative to reduce operating expenses by $200 million and planned changes in
the ownership structure of certain insurance subsidiaries to align statutory
capital more efficiently.
The following table summarizes the revenues, net (loss) income and
earnings per share information:
September 30,
------------------------------------------
Three Months Nine Months
------------------------------------------
(In millions, except per share data) 2003 2002(a) 2003 2002(a)
------------------------------------------
Consolidated:
Revenues (b) $ 3,940.0 $4,071.3 $12,125.3 $13,496.4
Net (loss) income $(1,382.9) $ 239.1 $ (978.1) $ 650.7
Per Share: (c)
(Loss) income per share of Loews common stock:
(Loss) income from continuing operations $ (7.90) $ 1.05 $ (6.01) $ 3.26
Discontinued operations-net 0.30 0.30 (0.15)
Cumulative effect of change in accounting
principle-net (0.21)
------------------------------------------
Net (loss) income per share of Loews common stock $ (7.60) $ 1.05 $ (5,71) $ 2.90
==========================================
Net income per share of Carolina Group stock $ 0.67 $ 1.10 $ 2.01 $ 2.58
==========================================
(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 $1,151.0 for the nine months ended September
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 2 of 8
Three Months Ended September 30, 2003 Compared With 2002
- --------------------------------------------------------
Consolidated net loss in the third quarter of 2003 includes a gain from
discontinued operations of $55.8 million or $0.30 per share of Loews common
stock related to the sale of a hotel property, as compared to $0.4 million in
the prior year related to the operating results for that property.
Consolidated loss from continuing operations for the third quarter of
2003 was $1,438.7 million, compared to income of $238.7 million in the
comparable period of the prior year. Loss from continuing operations includes
net investment gains of $106.5 million (after tax and minority interest),
compared to $9.1 million (after tax and minority interest) in the comparable
period of the prior year. The net loss reflects the unfavorable net prior year
premium and loss development and increase in bad debt reserves recorded in the
third quarter of 2003 as discussed above and lower results from Lorillard,
partially offset by the improvement in net investment gains.
Loss from continuing operations attributable to Loews common stock for
the third quarter of 2003 amounted to $1,465.5 million or $7.90 per share,
compared to income of $194.3 million or $1.05 per share in the comparable
period of the prior year. Loss from continuing operations in the third quarter
of 2003 includes net investment gains attributable to Loews common stock of
$107.8 million, compared to $5.8 million in the comparable period of the prior
year.
Net investment gains increased $102.0 million (after tax and minority
interest) in the third quarter of 2003 as compared with the same period in
2002. This increase was due primarily to increased gains related to derivative
securities and a decrease in investment related impairment charges for other-
than-temporary declines in market values of fixed maturity and equity
securities, partially offset by decreased gains on sales of fixed maturity
securities. Investment related impairment losses (after tax and minority
interest) were $9.0 million for the third quarter of 2003 as compared with
$129.6 million for the same period in 2002.
Net income attributable to Carolina Group stock for the third quarter of
2003 was $26.8 million or $0.67 per Carolina Group share, compared to $44.4
million, or $1.10 per Carolina Group share in the third 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 nine months ended September
30, 2003 and 2002.
Nine Months Ended September 30, 2003 Compared With 2002
- -------------------------------------------------------
Net loss for the first nine months of 2003 includes a gain from
discontinued operations of $55.4 million or $0.30 per share of Loews common
stock related to the sale of a hotel property, as compared to a loss from
discontinued operations of $28.8 million or $0.15 per share of Loews common
stock in the prior year primarily related to CNA's sale of its life operations
in Chile. Net income in 2002 also included 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.
Page 3 of 8
Consolidated loss from continuing operations for the first nine months of
2003 was $1,033.5 million, compared to income of $719.1 million in the
comparable period of the prior year. Loss from continuing operations includes
net investment gains of $300.6 million (after tax and minority interest),
compared to a loss of $93.0 million (after tax and minority interest) in the
comparable period of the prior year. The net loss reflects the unfavorable net
prior year premium and loss development and increase in bad debt reserves
recorded in the third quarter of 2003 as discussed above and lower results
from Lorillard, partially offset by the improvement in net investment gains.
Loss from continuing operations attributable to Loews common stock for
the first nine months of 2003 amounted to $1,113.9 million or $6.01 per share,
compared to income of $615.3 million or $3.26 per share in the comparable
period of the prior year. Loss from continuing operations includes net
investment gains attributable to Loews common stock of $302.2 million,
compared to losses of $97.8 million in the comparable period of the prior
year.
Net income attributable to Carolina Group stock for the first nine months
of 2003 amounted to $80.4 million or $2.01 per Carolina Group share, compared
to $103.8 million or $2.58 per share in the comparable period of the prior
year.
Components of Net (Loss) Income
- -------------------------------
September 30,
----------------------------------------
Three Months Nine Months
----------------------------------------
(In millions) 2003 2002 2003 2002
----------------------------------------
(Loss) income before net investment gains (losses)
attributable to Loews common stock $(1,573.3) $ 188.5 $(1,416.1) $ 713.1
Net investment gains (losses) 107.8 5.8 302.2 (97.8)
----------------------------------------
(Loss) income from continuing operations (1,465.5) 194.3 (1,113.9) 615.3
Discontinued operations-net (a) 55.8 0.4 55.4 (28.8)
Cumulative effect of change in accounting
principle-net (b) (39.6)
-----------------------------------------
Net (loss) income attributable to Loews common stock $(1,409.7) $ 194.7 $(1,058.5) $ 546.9
=========================================
(a) Includes a gain of $56.7 in the quarter and nine months ended September
30, 2003 from the sale of a hotel property. The nine months ended
September 30, 2002 includes a $31.0 loss from CNA's sale of 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.
Page 4 of 8
# # #
At September 30, 2003, the book value per share of Loews common stock was
$57.48 per Loews common share compared to $61.68 per Loews common share at
December 31, 2002.
At September 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 September 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 third quarter results of Loews
Corporation has been scheduled for 10:00 a.m. EST, Wednesday, November 12,
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 third quarter results of CNA has been
scheduled for 8:00 a.m. EST, Wednesday, November 12, 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 (800) 967-7140. An online replay
will be available at CNA's website for one week following the call.
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 implementation of CNA's capital plan, regular and ongoing
insurance reserve reviews by CNA, ongoing state regulatory exams of
Page 5 of 8
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 6 of 8
Loews Corporation and Subsidiaries
Financial Review
September 30,
-------------------------------------------
Three Months Nine Months
-------------------------------------------
2003 2002 (g) 2003 2002 (g)
-------------------------------------------
(Amounts in millions, except per share data)
Revenues:
Insurance premiums and net investment income (a) $ 2,678.1 $ 2,684.7 $ 8,479.4 $ 9,177.6
Manufactured products (b) 880.1 1,004.4 2,578.4 3,077.2
Other 381.8 382.2 1,067.5 1,241.6
-------------------------------------------
Total 3,940.0 4,071.3 12,125.3 13,496.4
--------------------------------------------
Expenses:
Insurance claims & policyholders' benefits 4,032.2 1,850.1 7,968.9 6,542.4
Cost of manufactured products sold (b) 532.7 553.2 1,489.6 1,761.4
Other 1,925.7 1,255.9 4,632.4 3,965.1
--------------------------------------------
Total 6,490.6 3,659.2 14,090.9 12,268.9
--------------------------------------------
(2,550.6) 412.1 (1,965.6) 1,227.5
--------------------------------------------
Income tax (benefit) expense (916.4) 156.5 (735.3) 449.2
Minority interest (195.5) 16.9 (196.8) 59.2
--------------------------------------------
Total (1,111.9) 173.4 (932.1) 508.4
--------------------------------------------
(Loss) income from continuing operations (1,438.7) 238.7 (1,033.5) 719.1
Discontinued operations-net (c) 55.8 0.4 55.4 (28.8)
Cumulative effect of change in accounting
principles-net (d) (39.6)
--------------------------------------------
Net (loss) income $(1,382.9) $ 239.1 $ (978.1) $ 650.7
============================================
Net (loss) income attributable to:
Loews common stock:
(Loss) income from continuing operations $(1,465.5) $ 194.3 $(1,113.9) $ 615.3
Discontinued operations-net (c) 55.8 0.4 55.4 (28.8)
Cumulative effect of change in accounting
principles-net (d) (39.6)
--------------------------------------------
Loews common stock (1,409.7) 194.7 (1,058.5) 546.9
Carolina Group stock (e) 26.8 44.4 80.4 103.8
--------------------------------------------
$(1,382.9) $ 239.1 $ (978.1) $ 650.7
============================================
(Loss) income per share of Loews common stock (f):
(Loss) income from continuing operations $ (7.90) $ 1.05 $ (6.01) $ 3.26
Discontinued operations-net (c) 0.30 0.30 (0.15)
Cumulative effect of changes in accounting
principles-net (d) (0.21)
--------------------------------------------
Net (loss) income $ (7.60) $ 1.05 $ (5.71) $ 2.90
============================================
Net income per share of Carolina Group stock (f) $ 0.67 $ 1.10 $ 2.01 $ 2.58
============================================
Weighted number of shares outstanding:
Loews common stock 185.45 185.71 185.45 188.31
Carolina Group stock 39.91 40.19 39.91 40.23
(a) Includes investment gains (losses) of $179.5, $26.5, $503.2 and $(145.0)
for the respective periods.
(b) Includes excise taxes of $173.1, $161.5, $493.4 and $518.0 paid on sales
of manufactured products for the respective periods.
(c) Includes a gain of $56.7 in the quarter and nine months ended September
30, 2003 from the sale of a hotel property. The nine months ended
September 30, 2002 includes a $31.0 loss from CNA's sale of its life
operations in Chile.
(d) Adoption of SFAS No. 142, accounting for goodwill and other intangible
assets at the CNA subsidiary.
(e) Represents 23.01% of the economic interest in the Carolina Group for 2003
and 23.14% and 23.16% for the three and eight months ended September 30,
2002.
(f) 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.
(g) 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 8
Loews Corporation and Subsidiaries
Additional Financial Information
September 30,
-------------------------------------------
Three Months Nine Months
-------------------------------------------
2003 2002 (g) 2003 2002 (g)
-------------------------------------------
(In millions)
Revenues:
CNA Financial $ 2,561.5 $ 2,763.3 $ 8,202.7 $ 9,682.6
Lorillard (a) 854.0 977.8 2,497.4 3,000.0
Loews Hotels 65.9 61.8 213.5 202.3
Diamond Offshore (b) 185.0 186.3 504.9 594.0
Texas Gas 45.0 68.1
Bulova 37.6 41.2 112.4 115.3
Investment income-net and other (c) 11.5 14.4 23.1 47.2
-------------------------------------------
3,760.5 4,044.8 11,622.1 13,641.4
-------------------------------------------
Investment gains (losses):
CNA Financial 164.3 23.9 476.9 (137.4)
Corporate and other 15.2 2.6 26.3 (7.6)
-------------------------------------------
179.5 26.5 503.2 (145.0)
-------------------------------------------
Total $ 3,940.0 $ 4,071.3 $12,125.3 $13,496.4
===========================================
(Loss) Income Before Taxes:
CNA Financial $ (2,940.9) $ 55.9 $(3,053.9) $ 432.5
Lorillard (d)(e) 196.9 277.0 578.5 791.8
Loews Hotels (0.1) (1.1) 17.6 15.8
Diamond Offshore (8.4) 8.3 (56.1) 44.6
Texas Gas 4.1 6.7
Bulova 2.4 4.5 9.6 12.1
Investment income-net and other (c) (29.4) (27.5) (102.4) (88.4)
--------------------------------------------
(2,775.4) 317.1 (2,600.0) 1,208.4
--------------------------------------------
Investment gains (losses):
CNA Financial 164.3 23.9 476.9 (137.4)
Corporate and other 17.1 (2.5) 28.7 (15.0)
--------------------------------------------
181.4 21.4 505.6 (152.4)
--------------------------------------------
Loews common stock (2,594.0) 338.5 (2,094.4) 1,056.0
Carolina Group stock (f) 43.4 73.6 128.8 171.5
--------------------------------------------
Total $ (2,550.6) $ 412.1 $(1,965.6) $ 1,227.5
============================================
Net (Loss) Income:
CNA Financial $ (1,675.5) $ 35.6 $(1,708.2) $ 261.2
Lorillard (d)(e) 121.9 165.9 361.2 478.6
Loews Hotels (0.5) 11.2 10.4
Diamond Offshore (5.1) 2.8 (26.5) 13.2
Texas Gas 2.2 3.8
Bulova 1.6 2.3 6.5 6.5
Investment income-net and other (c) (18.4) (17.6) (64.1) (56.8)
--------------------------------------------
(1,573.3) 188.5 (1,416.1) 713.1
--------------------------------------------
Investment gains (losses):
CNA Financial 94.7 14.8 281.2 (76.9)
Corporate and other 13.1 (9.0) 21.0 (20.9)
--------------------------------------------
107.8 5.8 302.2 (97.8)
---------------------------------------------
(Loss) income from continuing operations (1,465.5) 194.3 (1,113.9) 615.3
Discontinued operations-net (g) 55.8 0.4 55.4 (28.8)
Cumulative effect of changes in accounting
principles-net (39.6)
---------------------------------------------
Loews common stock (1,409.7) 194.7 (1,058.5) 546.9
Carolina Group stock (f) 26.8 44.4 80.4 103.8
---------------------------------------------
Total $ (1,382.9) $ 239.1 $ (978.1) $ 650.7
=============================================
(a) Includes excise taxes of $173.1, $161.5, $493.4 and $518.0 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) Includes a $26.0 charge in the nine months ended September 30, 2003
($16.8 after taxes) to settle litigation with tobacco growers and a $28.0
charge in the nine months ended September 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.
(f) Represents 23.01% of the economic interest in the Carolina Group for 2003
and 23.14% and 23.16% for the three and eight months ended September 30,
2002.
(g) Includes a gain of $56.7 in the quarter and nine months ended September
30, 2003 from the sale of a hotel property. The nine months ended
September 30, 2002 includes a $31.0 loss from CNA's sale of its life
operations in Chile.
(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 8 of 8
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 THIRD QUARTER OF 2003
----------------------------------------
NEW YORK, November 12, 2003-Loews Corporation (NYSE:LTR) reported today
Carolina Group net income for the 2003 third quarter of $116.4 million,
compared to $191.7 million in the 2002 third quarter. Net income attributable
to the Loews Group intergroup interest for the third quarter of 2003 amounted
to $89.6 million, compared to $147.3 million in the comparable period of the
prior year. Net income attributable to Carolina Group stock (NYSE:CG) for the
third quarter of 2003 was $26.8 million, or $0.67 per share of Carolina Group
stock, compared to $44.4 million, or $1.10 per share in the prior year.
Carolina Group net income for the 2003 third quarter includes net
investment losses of $5.7 million, compared to gains of $14.3 million in the
prior year. Net investment (losses) gains attributable to Carolina Group stock
in the third quarter of 2003 and 2002 were $(1.3) million and $3.3 million.
Net sales for the Carolina Group were $842.8 million in the third quarter
of 2003, compared to $963.4 million in 2002. The decline in net sales reflects
increased sales promotion expenses, partially offset by improved unit sales
volume of 5.9%.
Carolina Group net income for the first nine months of 2003 was $349.2
million, compared to $521.2 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 nine months of 2003 amounted to $268.8 million, compared to $417.4
million in the comparable period of the prior year. Net income attributable to
Carolina Group stock for the first nine months of 2003 was $80.4 million or
$2.01 per share of Carolina Group stock, compared to $103.8 million or $2.58
per share of Carolina Group stock and reflects eight months of actual results,
commencing with the initial issuance of Carolina Group stock by Loews
Corporation in February 2002.
Page 1 of 4
Carolina Group net income for the first nine months of 2003 includes net
investment losses of $6.9 million, compared to gains of $21.2 million in the
prior year. Net investment (losses) gains attributable to Carolina Group stock
in the 2003 and 2002 year to date periods were $(1.6) million and $4.8
million.
Net sales for the Carolina Group in the first nine months of 2003 were
$2.468 billion compared to $2.963 billion in the comparable 2002 period. The
decline in net sales reflects lower unit sales volume of 4.4% 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 nine months of 2002 would have been $117.8 million or $2.93 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 September 30,
2003, the outstanding balance of notional debt was $2.163 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 September 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 third quarter of 2003, which accompanies this
press release.
A conference call to discuss the third quarter results of Loews
Corporation has been scheduled for 10:00 a.m. EST, Wednesday, November 12,
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
September 30,
----------------------------------------------------
Three Months Nine Months Ended
----------------------------------------------------
2003 2002 2003 2002 2002(e)
----------------------------------------------------
(Amounts in millions, except per share data)
Pro Forma
Net sales (a) $ 842.8 $ 963.4 $2,467.9 $2,963.4 $2,963.4
Cost of sales (a)(b) 514.0 539.1 1,435.4 1,726.9 1,726.9
Selling, advertising and
administrative (c) 98.0 93.3 352.8 316.7 316.7
-----------------------------------------------------
Total operating costs and expenses 612.0 632.4 1,788.2 2,043.6 2,043.6
-----------------------------------------------------
Operating income 230.8 331.0 679.7 919.8 919.8
Investment income (d) 2.9 37.1 20.6 69.5 69.5
Interest expense (45.2) (50.0) (140.7) (129.0) (150.0)
-----------------------------------------------------
Income before income taxes 188.5 318.1 559.6 860.3 839.3
Income taxes 72.1 126.4 210.4 339.1 330.9
-----------------------------------------------------
Net income 116.4 191.7 349.2 521.2 508.4
Earnings attributable to the
Loews Group intergroup interest (f) 89.6 147.3 268.8 417.4 390.6
-----------------------------------------------------
Income attributable to Carolina Group
shareholders (g) $ 26.8 $ 44.4 $ 80.4 $ 103.8 $ 117.8
=====================================================
Per share of Carolina Group stock (h) $ 0.67 $ 1.10 $ 2.01 $ 2.58 $ 2.93
=====================================================
Weighted number of shares outstanding 39.91 40.19 39.91 40.23 40.23
(a) Includes excise taxes of $173.1, $161.5, $493.4 and $518.0 for the
respective periods.
(b) Includes charges of $214.6, $255.2, $592.2 and $842.9 ($132.5, $153.7,
$369.6 and $510.6 after taxes) to accrue obligations under the State
Settlement Agreements for the respective periods.
(c) Includes a $26.0 charge in the nine months ended September 30, 2003
($16.8 after taxes) to settle litigation with tobacco growers and a $28.0
charge in the nine months ended September 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 $(8.8), $22.1, $(10.6) and $32.7 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 September 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 23.14% and 23.16% for the three and eight months ended September 30,
2002. On a pro forma basis, the economic interest is 23.17%.
(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):
September 30,
---------------------------------------
Three Months Nine Months
---------------------------------------
2003 2002 2003 2002
---------------------------------------
Premium Brands
Total Newport 8.296 7.626 23.468 24.276
Total Kent Family 0.268 0.330 0.817 1.041
Total True 0.198 0.233 0.594 0.721
Total Max 0.013 0.017 0.041 0.051
Total Satin 0.003 0.004 0.009 0.011
Total Triumph 0.001 0.001 0.003 0.004
---------------------------------------
Total Premium Brands 8.779 8.211 24.932 26.104
---------------------------------------
Discount Brands
Total Old Gold 0.269 0.339 0.787 1.016
Total Maverick 0.162 0.134 0.363 0.502
---------------------------------------
Total Discount Brands 0.431 0.473 1.150 1.518
---------------------------------------
Total Domestic Cigarettes 9.210 8.684 26.082 27.622
=======================================
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