Loews Corporation Earnings Call Nuggets: HighMount, Share Repurchases

On Monday, Loews Corporation (NYSE:L) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-Suite revealed.

HighMount

Robert Glasspiegel – Langen McAlenney: Is your carrying value for HighMount $2 billion now after the write-down?

James S. Tisch – Office of the President, President and CEO: Pete’s looking that up.

Robert Glasspiegel – Langen McAlenney: Second bookkeeping question, how do we get from what Boardwalk reports to what you report? The $285 billion which I guess was assumed that they had it for all three months on their books, was there any sort of implied interest that goes to Loews (NYSE:L) or is it just – it never happened for the quarter? I’m just wondering how that sidecar earnings went through the numbers?

Peter W. Keegan – SVP and CFO: We did not pick up any interest from that expense. We just picked up earnings during the period in which we held it.

Robert Glasspiegel – Langen McAlenney: But, on their books, they owned it for the whole quarter. I think it’s…

Peter W. Keegan – SVP and CFO: It’s purchasing accounting which pushed it back to January 1 and obviously whatever duplication there is, is eliminated in consolidation.

A Closer Look: Loews Earnings Cheat Sheet>>

Robert Glasspiegel – Langen McAlenney: So how do we get from what they – just roughly how do we get from the earnings they reported…

Peter W. Keegan – SVP and CFO: You’re talking about a very minor adjustment Bob. Just take their numbers. It’s not a big deal.

Robert Glasspiegel – Langen McAlenney: Okay. When the hedges run out for HighMount, is it sort of roughly a breakeven operation to you on a reported basis? What’s the rough earnings power?

James S. Tisch – Office of the President, President and CEO: I am not exactly sure. I’ll have to get back to you on that.

Robert Glasspiegel – Langen McAlenney: I guess the question is does it make money or lose money is the question?

James S. Tisch – Office of the President, President and CEO: Let me put it to you this way. It does not make sense for us to drill for natural gas at $2 an MCF. And in fact we are not drilling in the Permian Basin for dry gas nor are we drilling anywhere for dry gas. The only drilling that is going on now is looking for wet gas and also oil.

Robert Glasspiegel – Langen McAlenney: And just for modeling purposes I just want to know how we think about this unit looking out to next year?

Peter W. Keegan – SVP and CFO: To answer your question, at the end of the first quarter HighMount’s total assets were $2.8 billion.

Robert Glasspiegel – Langen McAlenney: I was actually looking for carrying value, which I think is around $2 billion.

Peter W. Keegan – SVP and CFO: Well our equity is $2 billion. The equity is $2 billion.

Robert Glasspiegel – Langen McAlenney: That’s what I was looking for.

Share Repurchases

David Adelman – Morgan Stanley: Jim, will you make any comment about the pacing of share repurchases looking backwards over say the last six months they’ve been pretty modest?

James S. Tisch – Office of the President, President and CEO: As you know, I am not going to comment on that.

David Adelman – Morgan Stanley: Then secondly, at HighMount, will these non-cash impairments be reversed if natural gas prices were substantially higher?

James S. Tisch – Office of the President, President and CEO: No, but what will happen is the amortization that we will have going forward on gas that’s produced will be lower. So, in essence, it will come back invisibly into earnings over time as the gas is produced.