sample="quota" bates="89301401" isource="ll" decade="1970" class="ui" date="19731031" Contents To Our Shareholders and Employees The fiscal year ended August 31, 1973 was eventual and successful. We achieved operating earnings during the past year of $51,232,000 equal to $3.61 per share (primary), the highest levels in our history. Last year's earnings from operations were $50,888,000, or $3.49 per share, before inclusion of the Company's equity in net earnings of Franklin New York Corp. Our shares of Franklin were sold in July of 1972. Security gains for the year were $11-885,000, or $.84 per share, compared with $13,522,000, or $.93 per share last year. Net earnings for the year were $63,117, 000, or $4.45 per share as opposed to $69,621,000, or $4.78 for the prior fiscal year, reflecting the difference in security gains and the inclusion last year of both the Company's equity in net earnings of Franklin New York Corp., amounting to @2,282,000, or $.16 per share and extraordinary items of $2,929,000 or $.20 per share. Gross sales and operating revenues for the fiscal year were $766,436,000 against $804,105,000 for last year. Fiscal 1973 revenues were less than last year due principally to the lease or sale of six hotel properties and the sale of 48 theatres during the last part of fiscal 1972. Between March 12, 1973 and September 7, 1973, the Company purchased in the open market 1,868,800 shares of its common stock. Earnings per share are based on the weighted average number of shares outstanding 14,190,000 shares for 1973 and 14,567,000 shares for 1972. In October 1973 the Board of Directors declared a quarterly dividend on the Company's common stock of $.29 per share payable November 1, 1973 to shareholders of record on October 15, 1973. An additional dividend of $.03 per share was also declared in order to bring the per share dividend for the calendar year 1973 to a total of $1.19, the allowable amount for 1973 under the Phase IV Guidelines for Dividends. In May 1973 we executed an agreement for acquisition of 72 percent of which the shares of Century Circuit, Inc., which operates 42 motion picture theatres located principally in the New York metropolitan area, looking toward acquisition of all of the outstanding shares. The transaction may be ap- proved by the United States District Court for the Southern District of New York; and preparation for a hearing on the matter, which has not yet been set, is progressing. In March and May of 1973 we made cash tender offers for Talcott National Corporation and Gimbel Brothers, Inc., respectively. Neither offer resulted in acquisition of control by Loews due to competing offers by other parties. We continue to regularly and actively seek acquisition opportunities; until applying funds for acquisition purposes or other development activities, we will continue to invest in marketable securities in order to seek a return on our funds. Our development program was evident in all divisions. The Lorillard Division, which serves as the principal contributor to our revenues and profits, further expanded its world-wide activities. This expansion was realized primarily through new licensing agreements, which significantly increased Lorillard's share of the overseas market. The Hotel Division opened new hotels in Washington, D.C., and Hamburg, West Germany, and concluded agreements for additional luxury hotels in key cities of Canada and Europe. The Hotel Division, which has attained an outstanding reputation, is directing its expansion toward operation for owners and developers under management agreements. In addition to the proposed Century Circuit acquisition, the Theatre Division continued construction of new theatres in important locations and divided existing large theatres into more efficient twin units, resulting in economies of operation and construction. The Loews/Snyder residential development joint venture expanded into the Midwest with two projects and commenced several new developments in California. The joint venture successfully entered the field of condominium conversion, acquiring rental apartment projects and converting them after renovation, to condominium ownership. It should be noted that the devaluation of the United States dollar as against other major currencies has had no material adverse affect on operating results. We have continued to limit total investment abroad with this in mind. The application of Lorillard's domestic production and quality control standards to brands manufactured overseas is also an important factor. The overall commitment of Lorillard to product research and development in the total tobacco field (including cigarettes, small cigars, and chewing tobacco) enables the Division to meet the varied and changing demands of the world market. Area management has been and continues to be an important contributor to Lorillard's international growth. Operations are directed from regional bases: New York City for the Western Hemisphere; Johannesburg for Africa; Hong Kong in the Far East; Brussels in Europe, and Beirut in the Middle East. Each region's management has sufficient authority to react to the specific needs of its particular market. Lorillard has a long record of success in manufacturing overseas through licensee and joint venture arrangements. Sales and earnings statistics attest to the effective use of these arrangements. In 1973 new licensing agreements were completed in Bolivia, Panama and Guatemala. Loews Hotels In 1973, Loews Hotels continued to expand in the United States and abroad, opening luxury hotels in two important cities and proceeding with projects for five additional luxury hotels in Canada, West Germany, Spain, Monaco and Greece. Loews Hamburg Plaza in Hamburg, West Germany, opened in March and was followed by Loews L'Enfant Plaza in Washington, D.C. two months later. The newly opened hotels brought the total number of guest rooms in the Loews chain to 5,089. Present projects will increase the number of Loews Hotel guest rooms to over 9,000 by the end of 1977. Loews Hamburg Plaza, the first Loews hotel on the European Continent, compliments the successful operation of the luxury Loews Churchill in London. In selecting Hamburg for its first "on-the-continent" venture, Loews has taken advantage of an opportunity to participate in the growing European travel and meeting business. Loews Hamburg Plaza adjoins the City of Hamburg's new Congress Hall, which is expected to become a major center for industrial and commercial meetings. Hamburg is one of Europe's major port cities and an important manufacturing center. In planning its new hotel in Hamburg, Loews recognized that Europeans are becoming increasingly attuned to the meeting and convention concept, and will respond positively to a modern facility technologically equipped to meet their needs. The new hotel offers luxurious facilities for dining, entertainment and relaxation, while also providing excellent meeting facilities for all size groups. Although the hotel is contemporary in design, it incorporates a strong feeling for the local sense of tradition. Loews L'Enfant Plaza, which opened in Washington, D.C. on May 30, 1973, has 372 rooms and excellent facilities for meetings and conventions. It is located at the heart of L'Enfant Plaza, one of the nation's largest private commercial developments with an underground shopping mall of over 40 shops, restaurants, a theatre, and parking for 2,4000 cars. Loews L'Enfant Plaza is close to a number of Government agencies including the Department of Housing and Urban Development, Health, Education and Welfare, the National Aeronautics and Space Administration and such private organizations as AMTRAK and COMSAT. The hotel is also within walking distance of the Capitol. The Loews reputation for management expertise was a major factor in the selection of Loews to operate the hotel under a management contract with the L'Enfant Plaza Corporation. Between 1974 and the end of 1977, expansion of Loews hotels will take place in cities where the Loews concept of service and sales can be combined with the needs of the particular market. Loews Le Concorde in Quebec City, Canada, is scheduled to open in May 1974 under a management agreement. Rising 30 stories above the historic Grande Allee at Place Montcalm, the luxury hotel will have 450 rooms. The hotel's architecture combines the sophistication of the viux regime with a bold, contemporary statement. The hotel is only a five-minute walk from the center of the old capital and just 20 minutes from Quebec Airport. Nearby are many museums, art galleries, cafes, boutiques, and some of the best ski resorts in the Northeast. Le Concorde is planned to appeal to both the tourist and the business traveler, offering a year-round heated swimming pool, seven restaurants and bars, a revolving roof-top restaurant and meeting and convention facilities. 7. SHAREHOLDERS' EQUITY Changes in shareholders' equity, exclusive of earnings retained in business, were as follows: At August 31, 1973, 6,275.000 shares of common stock were reserved for exercise of the warrants issued in connection with the acquisition of Lorillard. The warrants entitle the bearer to purchase for cash (or through application of the 67/8% of subordinated debentures at principal amount) a share of common stock at a current price of $37.50 increasing to $40 a share in 1976. The warrants expire on November 29, 1980. As of August 31, 1973, 795,000 shares were also reserved for exercise of stock options. A summary of stock option data for the fiscal year 1973 and 1972 follows: 8. EARNINGS PER SHARE Primary earnings per share are based upon the weighted average number of shares (1973, 14,190,000; 1972, 14,567,000) outstanding during each year. Earnings per share, assuming full dilution, give effect to assumed exercise of stock options and warrants computed, as applicable, through either (1) assumed application of the 67/8% subordinated debentures at par as payment of the exercise price of the warrants or (2) assumed repurchase of common stock of the Company with proceeds from exercise of stock options and warrants (limited to 20% repurchase of outstanding common stock) and use of the remaining proceeds to reduce various issues of debt. The remaining proceeds to reduce various issues of debt. The computation takes into consideration the effect of eliminating interest expense and debenture discount, net of tax effects, where debt is assumed to be reduced. 9. RETIREMENT PLANS The Company and its subsidiaries have non-contributory retirement plans for eligible salaried and production employees. The provision for pension costs under the plans was $1,839,000 and $1,816,000 for the years ended August 31, 1973 and 1972, respectively. It is the companies' policy to fund the accrued pension cost relating to the salaried employee plan and to maintain reserves for the accrued pension cost relating to the production employee plan. As of the most recent date for which computations are available, the actuarially computed value of vested benefits for the unfunded plan was $6,200,000 greater than the reserves for accrued pension costs and unfunded prior service cost, which approximates $9,300,000, is being amortized over a forty-year period. 10 LEASE COMMITMENTS Rent expense, lease commitments and other information relating to non-cancellable leases (principally hotels and theatres), exclusive of taxes and other charges payable by the lessees, were as follows: 11 CONTINGENCIES In March 1973 the Company had several transactions in the common stock of Equity Funding Corporation of America which have given rise to a lawsuit by the Company against the sellers seeking damages and rescission. The outcome of the lawsuit is not presently determinable. The Company has provided for potential losses of $5,283,000, less applicable tax effect of $2,536,000. Such provision is included under the caption "security gains" in the accompanying statement of consolidated earnings and earnings retained in business. Pending litigation also includes antitrust and other civil suits for damages incident to companies' businesses. The outcome of such actions will not, in the opinion of Management, materially affect the business or assets of the Company and its subsidiaries. OPINION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Haskins & Sells Two Broadway Certified Public Accountants New York, New York 10004 To the Board of Directors and Shareholders of Loews Corporation: We have examined the consolidated balance sheet of Loews Corporation and the Subsidiaries as of August 31, 1973 and 1972 and the related statements of consolidated earnings and earnings retained in the business and of changes in consolidated financial position for the years then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, such statements present fairly the financial position of the companies at August 31, 1973 and 1972 and the results of their operations and changes in their financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. October 31, 1973 Directory Directors Charles B. Benenson Benenson Realty Company James Bruce Director Curtis H. Judge President, Lorillard Division John F. Murphy Consultant Bernard Myerson* Executive Vice President; President, Loews Theatres *(Members of Executive Committee) Lester Pollack* Senior Vice President Simon H. Rifkind Member, Law Firm of Paul, Weiss, Rifkind Wharton & Garrison Laurence A. Tisch* Chairman of the Board and Chief Executive Officer Preston Robert Tisch* President and Chairman of the Executive Committee Loews Corporation Corporate Headquarters 666 Fifth Avenue, New York, N.Y. 10019 (212) 586-4400 Transfer Agent First National City Bank Registrar First National City Bank Independent Auditors Haskins & Sells The Annual Meeting of Shareholders will be held January 10, 1974, 11 A.M., at the Loews State I Theatre at 45th Street and Broadway, New York City. Officers Laurence A. Tisch Chairman of the Board and Chief Executive Officer Bernard Myerson Executive Vice President; President, Loews Theatres Arthur J. Raporte Vice President-Real Estate Roy Posner Vice President- Financial Services Barry Hirsch Secretary and General Counsel Seymour H. Smith Assistant Secretary William E. Duffy Assistant Secretary Charles Sposato, Jr. Assistant Treasurer Preston Robert Tisch President and Chairman of the Executive Committee Lester Pollack Senior Vice President Robert J. Hausman Vice President Gerald Diamond Vice President-Facilities Jacob Stillman Treasurer Leonard Pollack Assistant Treasurer Harry Katz Assistant Controller Robert J. McNamara Assistant Controller