01—Abstract
Summary
Summary of the 10-K filed February 15, 2018. Cited figures are marked; the original filing is the authoritative source.
Loews Corporation (L) reported net income attributable to Loews Corporation of $1.16 billiona, or $3.45 per diluted share, for 2017, compared with $654 million, or $1.93 per share, in 2016.
The filing states that net income includes a net benefit of $200 millionb, or $0.59 per share, from the Tax Cut and Jobs Act of 2017; excluding that impact, net income would have been $964 million. Total revenues were $13.74 billion in 2017 versus $13.11 billion in 2016. Loews is a holding company whose operating subsidiaries are CNA Financial (89% owned, commercial property and casualty insurance), Diamond Offshore Drilling (53% owned), Boardwalk Pipeline Partners (51% owned), Loews Hotels Holding Corporation (wholly owned), and Consolidated Container Company (99% owned).
The most significant 2017 event was the $1.2 billionc acquisition of CCC Acquisition Holdings, Inc. (Consolidated Container), completed May 22, 2017, funded with about $620 million of Parent Company cash and $600 million of debt financing at the subsidiary. Consolidated Container contributed $498 million of revenue from the acquisition date through year-end. Diamond Offshore remained under pressure, recording asset impairment charges of $100 million in 2017 versus $680 million in 2016, and its contract drilling revenues fell to $1.45 billion from $1.53 billion.
Parent Company cash and investments totaled $4.9 billiond at December 31, 2017. At year-end, total assets were $79.59 billion, debt was $11.53 billion, and shareholders' equity was $19.20 billion.
Diamond Offshore's contract backlog was $2.4 billion as of January 1, 2018, and the filing describes ongoing oversupply and weak demand in the offshore drilling market. Boardwalk Pipeline expects lower firm transportation revenues in 2018 as expansion contracts expire.
02—Key points
Key Highlights
- Net income attributable to Loews Corporation rose to $1.16 billion ($3.45 per diluted share) in 2017 from $654 million ($1.93 per share) in 2016.
- The Tax Cut and Jobs Act added a net $200 million ($0.59 per share) benefit to 2017 net income; excluding it, net income would have been $964 million.
- Loews acquired Consolidated Container for $1.2 billion on May 22, 2017, funded with about $620 million of Parent Company cash and $600 million of subsidiary debt financing.
- Consolidated revenues were $13.74 billion in 2017 versus $13.11 billion in 2016.
- CNA Financial net income attributable to Loews was $801 million in 2017 versus $774 million in 2016, with Boardwalk Pipeline increasing to $380 million from $89 million.
- Diamond Offshore's net loss attributable to Loews narrowed to $27 million from $186 million, with impairments falling to $100 million from $680 million; its backlog was $2.4 billion as of January 1, 2018.
- Shareholders' equity rose to $19.20 billion and total debt reached $11.53 billion at December 31, 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 15, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $13.73B$13.11B | +4.8% |
| Cost of Revenue | $299.00M$271.00M | +10.3% |
| Gross Profit | $13.44B$12.83B | +4.7% |
| Interest Expense | $646.00M$536.00M | +20.5% |
| Net Income | $1.16B$654.00M | +78.0% |
| EPS (Basic) | $3.46$1.93 | +79.3% |
| EPS (Diluted) | $3.45$1.93 | +78.8% |
| Shares Outstanding (Basic) | 336.61M337.95M | −0.4% |
| Shares Outstanding (Diluted) | 337.50M338.31M | −0.2% |
05—Questions
Frequently Asked Questions
How much of Loews' 2017 earnings growth came from the Tax Act?
The filing states that net income included a net benefit of $200 million, or $0.59 per share, from the Tax Act, mainly from remeasuring the net deferred tax liability after the federal corporate rate fell from 35% to 21%. Excluding this impact, 2017 net income would have been $964 million, compared with $654 million in 2016.
What was the purpose and cost of the Consolidated Container acquisition?
Loews completed the acquisition of CCC Acquisition Holdings, Inc. on May 22, 2017, for $1.2 billion, subject to post-closing adjustments. Consolidated Container manufactures rigid plastic packaging and recycled resins across North America. The filing says it was funded with about $620 million of Parent Company cash and $600 million of debt financing at Consolidated Container, and its results are reported in the Corporate segment.
How is Diamond Offshore performing?
Diamond Offshore's contract drilling revenues were $1.45 billion in 2017 versus $1.53 billion in 2016, and its loss attributable to Loews narrowed to $27 million from $186 million. Asset impairments were $100 million in 2017 compared with $680 million in 2016. The filing describes continued oversupply of rigs and depressed market conditions, and its contract backlog was $2.4 billion as of January 1, 2018.
What is Loews' capital position and dividend policy?
At December 31, 2017, Loews reported total shareholders' equity of $19.20 billion and debt of $11.53 billion. Parent Company cash and investments, net of receivables and payables, totaled $4.9 billion. Loews paid a regular quarterly dividend of $0.0625 per share ($0.25 annually) in 2017, and repurchased $216 million of treasury stock during the year.
What risks does the filing highlight for Boardwalk Pipeline and CNA?
The filing notes that Boardwalk Pipeline expects expansion contracts on its Gulf South, Texas Gas and Gulf Crossing systems to expire in 2018 through 2020, with renewals likely at lower rates and shorter terms; committed firm transportation revenues for 2018 are expected to be $970 million versus $1.07 billion for 2017. For CNA, the filing cites reserve adequacy risk, catastrophe losses (net catastrophe losses were $380 million in 2017), and exposure to asbestos and environmental pollution claims, partly mitigated by a loss portfolio transfer to National Indemnity Company.
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