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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: February 13, 2004
----------------------------
(Date of earliest event reported): February 12, 2004
----------------------------
LOEWS CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
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(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
February 12, 2004, providing information on
fourth quarter and full-year 2003 results of
operations.
99.2 Carolina Group press release, issued
by Loews Corporation February 12, 2004,
providing information on fourth quarter and
full-year 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 February 12, 2004, 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 fourth quarter and full-
year 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: February 13, 2004 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 2003
----------------
NEW YORK, February 12, 2004-Loews Corporation (NYSE:LTR;CG) today reported
consolidated net income (including both the Loews Group and Carolina Group)
for the 2003 fourth quarter of $367.4 million, compared to $261.3 million for
the fourth quarter of 2002. Consolidated net loss for the year ended December
31, 2003 amounted to $610.7 million, compared to net income of $912.0 million
in 2002.
The following table summarizes the revenues, net income (loss) and earnings
per share information:
December 31,
------------------------------------------
Three Months Year Ended
------------------------------------------
(In millions, except per share data) 2003 2002 2003 2002
------------------------------------------
Consolidated:
Revenues (a) $ 4,335.7 $3,960.1 $16,461.0 $17,456.5
Net income (loss) $ 367.4 $ 261.3 $ (610.7) $ 912.0
Per Share: (b)
Income (loss) per share of Loews common stock:
Income (loss) from continuing operations $ 1.79 $ 1.20 $ (4.21) $ 4.46
Discontinued operations-net 0.01 0.30 (0.14)
Cumulative effect of change in accounting
principle-net (0.21)
------------------------------------------
Net income (loss) per share of Loews common stock $ 1.79 $ 1.21 $ (3.91) $ 4.11
==========================================
Net income per share of Carolina Group stock $ 0.74 $ 0.92 $ 2.76 $ 3.50
==========================================
(a) Revenue includes premiums of $1,151.0 for the year ended December 31,
2002, related to the National Postal Mail Handlers contract at CNA which
was transferred on July 1, 2002.
(b) The Company has two classes of common stock, Loews common stock and
Carolina Group stock, issued in February 2002.
Page 1 of 7
Quarter Ended December 31, 2003 Compared With 2002
- --------------------------------------------------
Consolidated income from continuing operations for the fourth quarter of
2003 was $367.4 million, compared to $259.5 million in the comparable period
of the prior year. Income from continuing operations includes net investment
gains of $37.7 million (after tax and minority interest), compared to net
investment losses of $23.7 million (after tax and minority interest) in the
comparable period of the prior year.
Income from continuing operations attributable to Loews common stock for the
fourth quarter of 2003 amounted to $332.6 million or $1.79 per share, compared
to $222.6 million or $1.20 per share in the comparable period of the prior
year. Income from continuing operations in the fourth quarter of 2003 includes
net investment gains attributable to Loews common stock of $37.5 million,
compared to net investment losses of $24.2 million in the comparable period of
the prior year.
Net investment gains increased $61.7 million (after tax and minority
interest) in the fourth quarter of 2003 as compared with the same period in
2002. This increase was due primarily to a decrease in investment related
impairment charges for other-than-temporary declines in market values of fixed
maturity and equity securities recorded in 2002, partially offset by a loss of
$116.4 million (after tax and minority interest) from CNA's sale of its Group
Benefits business to Hartford Financial Services Group, Inc. Investment
related impairment losses were $10.9 million in the fourth quarter of 2003,
compared to $208.8 million (after tax and minority interest) for the same
period in 2002.
Net income attributable to Carolina Group stock for the fourth quarter of
2003 was $34.8 million or $0.74 per Carolina Group share, compared to $36.9
million, or $0.92 per Carolina Group share in the fourth 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 year ended December 31, 2003
and 2002.
Year Ended December 31, 2003 Compared With 2002
- -----------------------------------------------
Net loss of $610.7 million for 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 $27.0 million or $0.14 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.
The 2003 results reflect the charges at CNA Financial Corporation, the
Company's 90% owned subsidiary, for net prior year development of $1,667.4
million, net of tax and minority interest, which includes premium and claim
and allocated claim adjustment expense development. Results for 2003 also
include charges to increase bad debt reserves for insurance and reinsurance
receivables of $356.9 million.
Page 2 of 7
The net prior year development consists of $1,202.0 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 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.
As previously reported, in order to assist CNA in replenishing statutory
capital adversely impacted by the 2003 charges discussed above, in November of
2003 Loews purchased $750 million of a new series of CNA convertible preferred
stock. Loews committed additional capital support of up to $500 million by
February 27, 2004 through the purchase of surplus notes of Continental
Casualty Company ("CCC"), CNA's principal insurance subsidiary, in the event
certain additions to CCC's statutory capital are not achieved through asset
sales. In addition, Loews committed to an additional $150 million of capital
support by March 31, 2004, in a form to be determined.
As a result of CNA's sale of its group benefits business, Loews expects that
it will be obligated to purchase $45 million of CCC surplus notes pursuant to
such commitment. In addition, CNA has recently announced that it has entered
into an agreement to sell its individual life business and has estimated that
this sale will result in an addition to CCC's statutory surplus in excess of
$400 million. However, this sale, which is subject to customary closing
conditions and regulatory approvals, is not expected to be consummated by
February 26, 2004. As a result, Loews will be obligated to purchase $300
million of additional CCC surplus notes. CNA has stated that, following the
consummation of the individual life sale, it plans to seek approval from the
insurance regulatory authority for the repayment of the surplus notes
purchased in relation to such sale, although no assurance can be given that
sale of the individual life business will be consummated or that the
regulatory approval will be obtained.
Consolidated loss from continuing operations for the year ended 2003 was
$666.1 million, compared to income of $978.6 million in the comparable period
of the prior year. Loss from continuing operations includes net investment
gains of $338.3 million (after tax and minority interest), compared to a loss
of $116.7 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
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
year ended 2003 amounted to $781.3 million or $4.21 per share, compared to
income of $837.9 million or $4.46 per share in the comparable period of the
prior year. Loss from continuing operations includes net investment gains
attributable to Loews common stock of $339.7 million, compared to losses of
$122.0 million in the comparable period of the prior year.
Net income attributable to Carolina Group stock for the year ended 2003
amounted to $115.2 million or $2.76 per Carolina Group share, compared to
$140.7 million or $3.50 per share in the prior year.
Page 3 of 7
Components of Net Income (Loss)
- -------------------------------
December 31,
----------------------------------------
Three Months Year Ended
----------------------------------------
(In millions) 2003 2002 2003 2002
----------------------------------------
Income (loss) before net investment gains (losses)
attributable to Loews common stock $ 295.1 $ 246.8 $(1,121.0) $ 959.9
Net investment gains (losses) 37.5 (24.2) 339.7 (122.0)
-----------------------------------------
Income (loss) from continuing operations 332.6 222.6 (781.3) 837.9
Discontinued operations-net (a) 1.8 55.4 (27.0)
Cumulative effect of change in accounting
principle-net (b) (39.6)
-----------------------------------------
Net income (loss) attributable to Loews common stock $ 332.6 $ 224.4 $ (725.9) $ 771.3
=========================================
(a) Includes a gain of $56.7 in the year ended December 31, 2003 from the
sale of a hotel property. The year ended December 31, 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.
# # #
At December 31, 2003, the book value per share of Loews common stock was
$60.92 per Loews common share compared to $61.68 per Loews common share at
December 31, 2002.
At December 31, 2003, there were 185,447,050 shares of Loews common stock
outstanding and 57,965,000 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 40,250,000 shares of
Carolina Group stock representing an interest in the economic performance of
the Carolina Group. On November 25, 2003, the Company sold 18,055,000 shares
of Carolina Group stock. 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 December 31, 2003,
the outstanding Carolina Group stock represents a 33.43% economic interest in
the economic performance of the Carolina Group.
A conference call to discuss the fourth quarter results of Loews Corporation
has been scheduled for 11:00 a.m. EST, Thursday, February 12, 2004. 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
Page 4 of 7
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 fourth quarter results of CNA has been
scheduled for 10:00 a.m. EST, Thursday, February 12, 2004. 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) 818-5264. 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 implementation of CNA's capital plan and the impact
on statutory capital, including the sale of CNA's individual life business and
the purchase by, and repayment to, the Company of surplus notes.
Forward-looking statements 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
December 31,
-------------------------------------------
Three Months Year Ended
-------------------------------------------
2003 2002 2003 2002
-------------------------------------------
(Amounts in millions, except per share data)
Revenues:
Insurance premiums and net investment income (a) $ 3,044.4 $ 2,690.5 $11,523.8 $ 11,868.1
Manufactured products (b) 840.4 886.3 3,418.8 3,963.5
Other 450.9 383.3 1,518.4 1,624.9
--------------------------------------------
Total 4,335.7 3,960.1 16,461.0 17,456.5
--------------------------------------------
Expenses:
Insurance claims & policyholders' benefits 1,946.7 1,849.6 9,915.6 8,392.0
Cost of manufactured products sold (b) 483.2 465.1 1,972.8 2,226.5
Other 1,318.6 1,232.2 5,951.0 5,197.3
--------------------------------------------
Total 3,748.5 3,546.9 17,839.4 15,815.8
--------------------------------------------
587.2 413.2 (1,378.4) 1,640.7
--------------------------------------------
Income tax expense (benefit) 201.2 130.6 (534.1) 579.8
Minority interest 18.6 23.1 (178.2) 82.3
--------------------------------------------
Total 219.8 153.7 (712.3) 662.1
--------------------------------------------
Income (loss) from continuing operations 367.4 259.5 (666.1) 978.6
Discontinued operations-net (c) 1.8 55.4 (27.0)
Cumulative effect of change in accounting
principles-net (d) (39.6)
--------------------------------------------
Net income (loss) $ 367.4 $ 261.3 $ (610.7) $ 912.0
============================================
Net income (loss) attributable to:
Loews common stock:
Income (loss) from continuing operations $ 332.6 $ 222.6 $ (781.3) $ 837.9
Discontinued operations-net (c) 1.8 55.4 (27.0)
Cumulative effect of change in accounting
principles-net (d) (39.6)
--------------------------------------------
Loews common stock 332.6 224.4 (725.9) 771.3
Carolina Group stock (e) 34.8 36.9 115.2 140.7
--------------------------------------------
$ 367.4 $ 261.3 $ (610.7) $ 912.0
============================================
Income (loss) per share of Loews common stock (f):
Income (loss) from continuing operations $ 1.79 $ 1.20 $ (4.21) $ 4.46
Discontinued operations-net (c) 0.01 0.30 (0.14)
Cumulative effect of changes in accounting
principles-net (d) (0.21)
--------------------------------------------
Net income (loss) $ 1.79 $ 1.21 $ (3.91) $ 4.11
============================================
Net income per share of Carolina Group stock (f) $ 0.74 $ 0.92 $ 2.76 $ 3.50
============================================
Weighted number of shares outstanding:
Loews common stock 185.45 185.44 185.45 187.59
Carolina Group stock 47.17 39.91 41.74 40.15
(a) Includes investment gains (losses) of $78.7, $(63.7), $581.9 and $(208.7)
for the respective periods.
(b) Includes excise taxes of $158.0, $149.6, $651.4 and $667.6 paid on sales
of manufactured products for the respective periods.
(c) Includes a gain of $56.7 in the year ended December 31, 2003 from the
sale of a hotel property. The year ended December 31, 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 29.23% and 24.59% of the economic interest in the Carolina
Group for the three months and year ended 2003 and 23.01% and 23.12% for
the three and eleven months ended December 31, 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.
Page 6 of 7
Loews Corporation and Subsidiaries
Additional Financial Information
December 31,
-------------------------------------------
Three Months Years Ended
-------------------------------------------
2003 2002 2003 2002
-------------------------------------------
(In millions)
Revenues:
CNA Financial $ 3,053.3 $ 2,856.2 $11,256.0 $12,538.8
Lorillard (a) 798.0 843.8 3,295.4 3,843.8
Loews Hotels 72.5 64.1 286.0 266.4
Diamond Offshore 190.0 189.9 694.9 783.9
Texas Gas 75.1 143.2
Bulova 54.4 51.3 166.8 166.6
Investment income-net and other (b) 13.7 18.5 36.8 65.7
-------------------------------------------
4,257.0 4,023.8 15,879.1 17,665.2
-------------------------------------------
Investment gains (losses):
CNA Financial (c) (3.5) (114.8) 473.4 (252.2)
Corporate and other 82.2 51.1 108.5 43.5
-------------------------------------------
78.7 (63.7) 581.9 (208.7)
-------------------------------------------
Total $ 4,335.7 $ 3,960.1 $16,461.0 $ 17,456.5
===========================================
Income (Loss) Before Taxes:
CNA Financial $ 264.3 $ 175.1 $(2,789.6) $ 607.6
Lorillard (d) (e) 176.6 246.7 755.1 1,038.5
Loews Hotels 1.0 (1.6) 18.6 14.2
Diamond Offshore 2.9 9.6 (53.2) 54.2
Texas Gas 30.9 37.6
Bulova 8.4 9.4 18.0 21.5
Investment income-net and other (b) (31.5) (21.4) (133.9) (109.8)
-------------------------------------------
452.6 417.8 (2,147.4) 1,626.2
-------------------------------------------
Investment gains (losses):
CNA Financial (c) (3.5) (114.8) 473.4 (252.2)
Corporate and other 82.0 50.3 110.7 35.3
-------------------------------------------
78.5 (64.5) 584.1 (216.9)
-------------------------------------------
Loews common stock 531.1 353.3 (1,563.3) 1,409.3
Carolina Group stock (f) 56.1 59.9 184.9 231.4
-------------------------------------------
Total $ 587.2 $ 413.2 $(1,378.4) $ 1,640.7
===========================================
Net Income (Loss):
CNA Financial $ 184.3 $ 102.2 $(1,523.9) $ 363.4
Lorillard (d) (e) 109.7 151.8 470.9 630.4
Loews Hotels (1.7) 11.2 8.7
Diamond Offshore (0.7) 0.9 (27.2) 14.1
Texas Gas 18.7 22.5
Bulova 5.3 5.3 11.8 11.8
Investment income-net and other (b) (22.2) (11.7) (86.3) (68.5)
-------------------------------------------
295.1 246.8 (1,121.0) 959.9
-------------------------------------------
Investment gains (losses):
CNA Financial (c) (15.5) (56.1) 265.7 (133.0)
Corporate and other 53.0 31.9 74.0 11.0
-------------------------------------------
37.5 (24.2) 339.7 (122.0)
-------------------------------------------
Income (loss) from continuing operations 332.6 222.6 (781.3) 837.9
Discontinued operations-net (g) 1.8 55.4 (27.0)
Cumulative effect of changes in accounting
principles-net (39.6)
-------------------------------------------
Loews common stock 332.6 224.4 (725.9) 771.3
Carolina Group stock (f) 34.8 36.9 115.2 140.7
-------------------------------------------
Total $ 367.4 $ 261.3 $ (610.7) $ 912.0
===========================================
(a) Includes excise taxes of $158.0, $149.6, $651.4 and $667.6 paid on sales
of manufactured products for the respective periods.
(b) Consists primarily of corporate investment income, interest expenses and
other unallocated expenses.
(c) Includes a loss of $116.4 (after tax and minority interest) for CNA's
sale of its Group Benefits business to Hartford Financial Services Group,
Inc.
(d) Represents the Loews Group's intergroup interest in the earnings of the
Carolina Group.
(e) Includes a $27.5 charge in the year ended December 31, 2003 ($17.1 after
taxes) to settle litigation with tobacco growers and a $28.0 charge in
the year ended December 31, 2003 ($17.5 after taxes) to resolve
indemnification claims and trademark matters in connection with the 1977
sale by Lorillard of its international business.
(f) Represents 29.23% and 24.59% of the economic interest in the Carolina
Group for the three months and year ended 2003 and 23.01% and 23.12% for
the three and eleven months ended December 31, 2002.
(g) Includes a gain of $56.7 in the year ended December 31, 2003 from the
sale of a hotel property. The year ended December 31, 2002 includes a
$31.0 loss from CNA's sale of its life operations in Chile.
Page 7of 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 2003
-------------------
NEW YORK, February 12, 2004-Loews Corporation (NYSE:LTR) reported today
Carolina Group net income for the 2003 fourth quarter of $119.1 million,
compared to $160.3 million in the 2002 fourth quarter. Net income attributable
to the Loews Group intergroup interest for the fourth quarter of 2003 amounted
to $84.3 million, compared to $123.4 million in the comparable period of the
prior year. Net income attributable to Carolina Group stock (NYSE:CG) for the
fourth quarter of 2003 was $34.8 million, or $0.74 per share of Carolina Group
stock, compared to $36.9 million, or $0.92 per share in the prior year.
Carolina Group net income for the 2003 fourth quarter includes net
investment gains of $0.6 million, compared to $2.2 million in the prior year.
Net investment gains attributable to Carolina Group stock in the fourth
quarter of 2003 and 2002 were $0.2 million and $0.5 million.
Net sales for the Carolina Group were $787.7 million in the fourth quarter
of 2003, compared to $834.3 million in 2002. The decline in net sales reflects
increased sales promotion expenses, partially offset by improved unit sales
volume of 6.9%.
Carolina Group net income for the year ended 2003 was $468.3 million,
compared to $681.5 million in the comparable period of the prior year. Net
income for 2003 was reduced by after-tax charges of $17.1 million to settle
litigation with tobacco growers and $17.5 million 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 year
ended 2003 amounted to $353.1 million, compared to $540.8 million in the
comparable period of the prior year. Net income attributable to Carolina Group
stock for the year ended 2003 was $115.2 million or $2.76 per share of
Carolina Group stock, compared to $140.7 million or $3.50 per share of
Carolina Group stock in 2002, and reflects eleven 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 year ended 2003 includes net investment
losses of $6.3 million, compared to gains of $23.4 million in the prior year.
Net investment (losses) gains attributable to Carolina Group stock for the
years ended 2003 and 2002 were $(1.4) million and $5.3 million.
Net sales for the Carolina Group were $3.256 billion in 2003 compared to
$3.798 billion in 2002. The decline in net sales reflects lower unit sales
volume of 2.8% 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 year
ended 2002 would have been $154.7 million or $3.85 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 December 31, 2003, the
outstanding balance of notional debt was $2.032 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.
On November 25, 2003, Loews Corporation sold 18,055,000 shares of Carolina
Group stock for net proceeds of $399.5 million. As of December 31, 2003, there
were 57,965,000 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 fourth quarter and full-year of 2003, which
accompanies this press release.
A conference call to discuss the fourth quarter and full-year results of
Loews Corporation has been scheduled for 11:00 a.m. EST, Thursday, February
12, 2004. 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.
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Carolina Group
Financial Review
December 31,
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Three Months Year Ended
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2003 2002 2003 2002 2002(e)
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(Amounts in millions, except per share data)
Pro Forma
Net sales (a) $ 787.7 $ 834.3 $3,255.6 $3,797.7 $3,797.7
Cost of sales (a) (b) 457.7 445.5 1,893.1 2,172.4 2,172.4
Selling, advertising and administrative (c) 107.8 92.6 460.6 409.3 409.3
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Total operating costs and expenses 565.5 538.1 2,353.7 2,581.7 2,581.7
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Operating income 222.2 296.2 901.9 1,216.0 1,216.0
Investment income (d) 11.5 13.5 32.1 83.0 83.0
Interest expense (42.1) (49.4) (182.8) (178.4) (199.4)
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Income before income taxes 191.6 260.3 751.2 1,120.6 1,099.6
Income taxes 72.5 100.0 282.9 439.1 430.9
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Net income 119.1 160.3 468.3 681.5 668.7
Earnings attributable to the Loews Group
intergroup interest (f) 84.3 123.4 353.1 540.8 514.0
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Income attributable to Carolina Group
shareholders (g) $ 34.8 $ 36.9 $ 115.2 $ 140.7 $ 154.7
====================================================
Per share of Carolina Group stock (h) $ 0.74 $ 0.92 $ 2.76 $ 3.50 $ 3.85
====================================================
Weighted number of shares outstanding 47.17 39.91 41.74 40.15 40.15
====================================================
(a) Includes excise taxes of $158.0, $149.6, $651.4 and $667.6 for the
respective periods.
(b) Includes charges of $193.0, $219.3, $785.2 and $1,062.2 ($119.9, $135.5,
$489.5 and $646.1 after taxes) to accrue obligations under the State
Settlement Agreements for the respective periods.
(c) Includes a $27.5 charge in the year ended December 31, 2003 ($17.1 after
taxes) to settle litigation with tobacco growers and a $28.0 charge in
the year ended December 31, 2003 ($17.5 after taxes) to resolve
indemnification claims and trademark matters in connection with the 1977
sale by Lorillard of its international business.
(d) Includes $1.0, $3.4, ($9.7) and $36.1 of investment gains (losses) 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) Prior to November 25, 2003, the Loews Group's intergroup interest in the
earnings of the Carolina Group reflected share equivalents amounting to
133,500,000 shares of 173,750,000 share and share equivalents
outstanding. Subsequent to the Loews Group's sale of 18,055,000 shares of
Carolina Group stock, the Loews Group's intergroup interest in the
earnings of the Carolina Group reflected share equivalents amounting to
115,445,000 shares of 173,410,000 share and share equivalents
outstanding. As of December 31, 2003, there were 57,965,000 shares of
Carolina Group stock outstanding.
(g) Represents 29.23% and 24.59% of the economic interest in the Carolina
Group for the three months and year ended December 31, 2003 and 23.01%
and 23.12% for the three and eleven months ended December 31, 2002. On a
pro forma basis, the economic interest is 23.13%.
(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
Domestic U.S. unit volume shipped by Lorillard Tobacco Company to its direct
buying customers by brand (all units in thousands):
December 31,
---------------------------------------------
Three Months Years Ended
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2003 2002 2003 2002
---------------------------------------------
Premium Brands
Total Newport 7,508,067 6,896,141 30,976,222 31,171,947
Total Kent Family 246,522 303,624 1,063,534 1,344,233
Total True 183,297 214,940 777,681 936,212
Total Max 12,471 15,303 53,970 66,192
Total Satin 2,496 3,084 10,830 14,000
Total Triumph 771 1,116 3,726 4,743
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Total Premium Brands 7,953,624 7,434,208 32,885,963 33,537,327
---------------------------------------------
Discount Brands
Total Old Gold 243,108 281,147 1,030,580 1,297,404
Total Maverick 151,590 94,880 514,341 596,938
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Total Discount Brands 394,698 376,027 1,544,921 1,894,342
---------------------------------------------
Total Domestic Cigarettes 8,348,322 7,810,235 34,430,884 35,431,669
=============================================
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.
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