Why did Loews's net income swing so much between 1992 and 1993?

The 1992 results included a loss before accounting changes of $22.1 million, reflecting a $1.5 billion asbestos reserve addition at CNA, and the company recorded a $144.7 million cumulative effect of accounting changes that year. In 1993, CNA added a further $500 million to asbestos reserves in the third quarter, but net income still rose to $594.1 million, helped by $862.8 million of realized investment gains and a $369.8 million increase in investment income. Underwriting losses at property and casualty insurance were $1.79 billion in 1993 versus $3.00 billion in 1992.

What is the status of the Fibreboard asbestos litigation?

In December 1993, Continental Casualty, Fibreboard, Pacific Indemnity and a negotiating committee of asbestos claimant attorneys executed a Global Settlement that would resolve future asbestos bodily injury claims. Continental and Pacific Indemnity would contribute an aggregate $1.525 billion to a trust fund, subject to court approval. The filing also describes a Trilateral Agreement that would apply if the Global Settlement is not approved. CNA states that if neither is approved, the range of its potential liability cannot be meaningfully estimated.

How are the cigarette operations and litigation exposure affecting Lorillard?

Lorillard, a wholly owned subsidiary, reported that virtually all of its sales are in the premium price segment. Its unit sales declined 10.4% from 1992. In August 1993, it cut premium brand wholesale prices by about 25% to maintain competitiveness, and the filing says this will substantially reduce its revenues and cash flow. Lorillard is a defendant in 14 of the 43 pending smoking-and-health cases, and a federal grand jury investigation and a Justice Department antitrust CID are pending. Management believes the outcome of pending litigation should not have a material adverse effect on the Company.

How much cash did Loews return to shareholders and how did it change its debt in 1993?

Loews paid $64.3 million in dividends ($1.00 per share) and repurchased 3,574,000 shares for about $336.3 million. It also sold $300 million of 7.6% senior notes due 2023 and $400 million of 7% senior notes due 2023, and redeemed its 10% subordinated notes, its 9% senior sinking fund debentures, and its zero coupon convertible notes for about $411 million. Consolidated long-term debt, less unamortized discount, rose to $2.20 billion at year end 1993 from $1.76 billion a year earlier.

What is the outlook for Diamond Offshore Drilling?

Diamond Offshore's revenues rose to $288.3 million in 1993 from $217.7 million in 1992, and its net loss narrowed to $16.6 million from $51.2 million. Gulf of Mexico jackup utilization reached nearly 98% on higher natural gas prices. However, the filing says the worldwide oversupply of rigs and low crude oil prices continue to depress conditions, and Diamond Offshore expects demand and compensation rates could remain at depressed levels in 1994 and continue to have a material adverse impact on its operations.

L 10-K FY1993 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 25, 1994. Cited figures are marked; the original filing is the authoritative source.

Loews Corporation, a holding company, reported 1993 net income of $594.1 million^a, or $9.27 per share, compared with net income of $122.6 million in 1992, which included a $144.7 million cumulative effect of accounting changes and a loss before accounting changes of $22.1 million.

Total revenues were $13.69 billion^b, essentially flat with 1992. Shareholders' equity rose to $6.13 billion from $5.53 billion, and book value per share was $99.59 compared with $84.90 a year earlier. The company's largest subsidiary, CNA Financial Corporation (83% owned), reported an operating loss of $251.7 million net of tax for 1993, compared with $897.8 million in 1992.

The results were weighed down by a $500 million^c third-quarter addition to asbestos claim reserves tied to the Fibreboard litigation, which resulted in a $270.1 million after-tax charge. CNA reported that a global settlement with Fibreboard was executed in December 1993 but remains subject to court approval. The other segments are mixed.

Lorillard, the wholly owned cigarette unit, saw revenues fall 12.7% to $1.91 billion^d (the filing states $276.5 million of decline) after Lorillard cut premium brand prices about 25% in August 1993, and the filing says the new pricing will substantially reduce its revenues, income and cash flow. Lorillard faces 43 pending smoking-and-health cases and a Justice Department antitrust civil investigative demand. Diamond Offshore Drilling, a wholly owned subsidiary, saw revenues rise to $288.3 million and reported a net loss of $16.6 million, though the filing says oversupply and low crude prices continue to depress its industry.

Management states that the outcome of pending litigation should not have a material adverse effect on the Company. During 1993 Loews repurchased 3,574,000 shares for about $336.3 million, redeemed about $368 million of higher-coupon debt, issued $700 million of new senior notes, and redeemed its zero coupon convertible notes for about $411 million.

Long-term debt rose to $2.20 billion from $1.76 billion. The company paid $1.00 per share in dividends.

02—Key points

Key Highlights

Net income of $594.1 million ($9.27 per share) in 1993, versus $122.6 million in 1992, which was depressed by CNA's asbestos reserve charges
CNA Financial (83% owned) posted a $251.7 million after-tax operating loss in 1993, reflecting a $500 million third-quarter addition to asbestos claim reserves related to the Fibreboard litigation
Fibreboard global settlement executed December 1993, which CNA says removes a major source of financial uncertainty, but it remains subject to court approval
Lorillard's revenues fell 12.7% to $1.91 billion after an August 1993 premium-brand price cut of approximately 25%, which the filing says will substantially reduce revenues, income and cash flow
Shareholders' equity rose to $6.13 billion, or $99.59 book value per share, from $84.90 in 1992, partly reflecting a $367.9 million accounting change for SFAS No. 115
Shares repurchased for $336.3 million in 1993, and the company redeemed about $368 million of 10% and 9% debt and about $411 million of zero coupon convertible notes, while issuing $700 million of 7.6% and 7% senior notes
Diamond Offshore Drilling revenues increased to $288.3 million, but the company still reported a $16.6 million net loss and the filing says industry conditions remain depressed

03—Questions

Frequently Asked Questions

Why did Loews's net income swing so much between 1992 and 1993?
The 1992 results included a loss before accounting changes of $22.1 million, reflecting a $1.5 billion asbestos reserve addition at CNA, and the company recorded a $144.7 million cumulative effect of accounting changes that year. In 1993, CNA added a further $500 million to asbestos reserves in the third quarter, but net income still rose to $594.1 million, helped by $862.8 million of realized investment gains and a $369.8 million increase in investment income. Underwriting losses at property and casualty insurance were $1.79 billion in 1993 versus $3.00 billion in 1992.
What is the status of the Fibreboard asbestos litigation?
In December 1993, Continental Casualty, Fibreboard, Pacific Indemnity and a negotiating committee of asbestos claimant attorneys executed a Global Settlement that would resolve future asbestos bodily injury claims. Continental and Pacific Indemnity would contribute an aggregate $1.525 billion to a trust fund, subject to court approval. The filing also describes a Trilateral Agreement that would apply if the Global Settlement is not approved. CNA states that if neither is approved, the range of its potential liability cannot be meaningfully estimated.
How are the cigarette operations and litigation exposure affecting Lorillard?
Lorillard, a wholly owned subsidiary, reported that virtually all of its sales are in the premium price segment. Its unit sales declined 10.4% from 1992. In August 1993, it cut premium brand wholesale prices by about 25% to maintain competitiveness, and the filing says this will substantially reduce its revenues and cash flow. Lorillard is a defendant in 14 of the 43 pending smoking-and-health cases, and a federal grand jury investigation and a Justice Department antitrust CID are pending. Management believes the outcome of pending litigation should not have a material adverse effect on the Company.
How much cash did Loews return to shareholders and how did it change its debt in 1993?
Loews paid $64.3 million in dividends ($1.00 per share) and repurchased 3,574,000 shares for about $336.3 million. It also sold $300 million of 7.6% senior notes due 2023 and $400 million of 7% senior notes due 2023, and redeemed its 10% subordinated notes, its 9% senior sinking fund debentures, and its zero coupon convertible notes for about $411 million. Consolidated long-term debt, less unamortized discount, rose to $2.20 billion at year end 1993 from $1.76 billion a year earlier.
What is the outlook for Diamond Offshore Drilling?
Diamond Offshore's revenues rose to $288.3 million in 1993 from $217.7 million in 1992, and its net loss narrowed to $16.6 million from $51.2 million. Gulf of Mexico jackup utilization reached nearly 98% on higher natural gas prices. However, the filing says the worldwide oversupply of rigs and low crude oil prices continue to depress conditions, and Diamond Offshore expects demand and compensation rates could remain at depressed levels in 1994 and continue to have a material adverse impact on its operations.

04—Continue

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