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Executives

Darren Daugherty - Director IR

James S. Tisch - CEO and President

Peter W. Keegan - CFO

Martin L. Orlowsky - Chairman and CEO, Lorillard Tobacco Company

Analysts

David Edelman - Morgan Stanley

Robert Glasspiegel - Langen McAlenney

Christine Farkas - Merrill Lynch

Judy Hong - Goldman Sachs

Filippe Goossens - Credit Suisse

Andrew S. Baker - Jefferies & Company

Anton Kawalsky - Canyon Capital

Michael Millman - Soleil Securities

Steven Errico - Locust Wood Capital

Loews Corp. (LTR) Q1 FY08 Earnings Call April 28, 2008 11:00 AM ET

Operator

Good day. My name is Jackie and I will be your conference operator today. At this time I would like to welcome everyone to the Loews First Quarter 2008 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be question-and-answer period. [Operator Instructions].

Thank you. It is now my pleasure to turn the floor over to Darren Daugherty, Director of Investor Relations. Sir, you may begin your conference.

Darren Daugherty - Director Investor Relations

Thank you, Jackie. Good morning everyone and welcome to Loews Corporations' first quarter 2008 earnings conference call. A copy of the earnings releases for Loews Corporation and Carolina Group maybe found on our website loews.com. On the call this morning are Jim Tisch, the Chief Executive Officer of Loews and Peter Keegan, the Chief Financial Officer of Loews. And they will be joined by Marty Orlowsky, Chief Executive Officer of Lorillard.

Before, we begin, I would like to make a few brief disclosures concerning forward-looking statements. This conference call will include the use of statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those projections made in any forward-looking statements. Forward-looking statements reflects circumstances at the time they are made and the company expressly disclaims any obligation to update or revise any forward-looking statements.

This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer. We urge you to read the full disclaimer, which is included in the company's 10-K and 10-Q filings with the SEC. I would also like to remind you that during this call today, we may discuss certain non-GAAP financial measures. Please refer to our security filings for reconciliations to the most comparable GAAP measures. After Jim, Peter, and Marty have discussed their results, we will have a question-and-answer session. If you would like to ask questions that are listening via the website please use the dial-in number to participate, 877-692-2592.

I'd now like to turn the call over to Loews' Chief Executive Officer, Jim Tisch.

James S. Tisch - Chief Executive Officer and President

Thank you, Darren and good morning and thank you for joining us today. Before, reviewing our first quarter results, I'd like to give an update on the progress we are making on our plans to spin-off our ownership in Lorillard, the holders of Carolina Group stock and Loews common stock. We are progressing well on this complex transaction. As you know, completion of this proposed transaction is subject to a number of conditions including receipt of a favorable ruling from the Internal Revenue Service, which I am pleased to report has been received.

We also need an opinion of tax counsel, SEC clearance, final approval by the Loews' Board and favorable market conditions in order to complete this transaction. We continue to expect that the transaction will be completed in mid '08.

With respect to our first quarter results, as you have seen by now there were a number of significant items highlighted in the press release that effected the quarter. Some positive and some negative. Overall however, declines in investment income of the parent company, at Carolina Group and CNA, out way the otherwise solid performances of our operating subsidiaries.

In the case of Carolina Group there was $14 million after tax short fall in investment income comparing to the prior year that resulted in a rejection in CG's investment partner, though resulted from a reduction in CG's investment partnership interest. A lower average invested asset balance and lower interest rate, this reduction in investment income along with one-time spin-off expenses which totaled $8 million after tax more than makes up for CG's $11 million shortfall in net income compared to last year. In a few movements Marty Orlowsky will discuss operating results for Lorillard in greater detail. But I would just like to briefly note that Lorillard has increased its domestic market share from 10.1% to 10.5%.

While CNA's net operating income for the quarter, comes as a disappointment the company is weathering well in a challenging price environment by maintaining its focus on underwriting discipline and expense management. The company's decline in net operating income, resulted primarily from reduced limited partnership investment income compared to last year's first quarter. Peter Keegan will provide some additional details in a few movements.

During the quarter, CNA bought in 2.6 million shares of its common stock at an average price of $26.53 per share. This action, along with a payment of $0.15 quarterly dividend was possible because of CNA's strong capital position and solid insurance operation. The company is well positioned operationally and financially to maintain its strength, despite tough market conditions.

Diamond Offshore posted another quarter of record revenues and earnings, reflecting the ongoing worldwide demand for midwater and deepwater semisubmersible rigs. Last week Diamond took delivery of its new build jack-up rig the Ocean Shield, which will go to work under contract commitment spanning 17 months. It's sister unit the Ocean Scepter is scheduled for completion in approximately five weeks, while a contract has not been announced Diamond is in advanced stages of negotiation for an international term job for that rig.

The final rig in our new build and upgrade program is the Ocean Monarch, which is already contracted for four years at an attractive day rate upon it's completion later on this year. We are quite pleased with the success of the new build and upgrade program and its contribution to Diamond's revenue backlog which currently stands at approximately $10.7 billion. Last week Diamond's Board of Directors declared another special quarterly dividend of a $1.25 per share in addition to the regular quarterly dividend of twelve and half cents per share. Together these dividends represent a cash payment to loads of almost $100 million per quarter.

HighMount Exploration & Production reported growth production volume and increased realized prices. To manage commodity price risk, HighMount had hedges in place at the end of the quarter for 70% of its remaining 2008 projected sales volume and 33% of its '09 projected sales volume.

This still allows some latitude to realize value based on the strength in natural gas prices that we have recently seen. Delight part of the successful E&P company is its drilling program. HighMount's drilling program focuses on low risk, long life natural gas reserves which we refer to as factory drilling. In the first quarter HighMount completed a 131 gas wells at a 100% success rate.

Boardwalk Pipeline had a good first quarter and the company began to see earnings contributions from the projects such as its East Texas to Mississippi Pipeline Expansion, and the Western Kentucky Storage Expansion. Earnings for the quarter benefited from strength in gas transportation pricing higher throughput and a favorable contract settlement gain.

The park and loan market however, continues to be challenging. Boardwalk has several pipeline expansion projects under way that will be placed into service over the next several quarters and are expected to contribute to the company's growth. To finance these projects Boardwalk has successfully raised capital through a number of debt and equity offerings and also has available a $1 billion revolving line of credit. Additionally, Loews has agreed to invest $700 million in Boardwalk, primarily through a newly created class fee limited partnership units.

We expect the transaction to be completed in June. Boardwalk has declared a distribution for the first quarter of forty six and half cents per unit, a $0.005 [ph] increase from the prior quarter and its ninth consecutive dividend increase since going public in '05.

Loews Hotels had another solid quarter matching last year's first quarter net income. RevPAR or revenue per available room increased by 3.5% driven by increases in room rates. As I said at the outset Loews' overall results were somewhat marred by the actions of the financial market in the first quarter.

Nevertheless for us the financial markets present a time of opportunity rather than a time of stress. And finally as many of you know this will probably be Marty Orlowsky's last Loews earnings call. Hopefully in July or August Marty will be hosting his own earnings conference call for a publicly traded low or alike [ph].

However, I can not let this moment pass, without making mention of how stellar Marty has been as a member of the Loews team. He has been the most extraordinary and successful tobacco executive in the recent memory, building enormous value for Loews and for Carolina Group shareholders. But success has gone not to Marty's head, he has been a pleasure to work with and always approaches issues with a can do attitude. Marty's good nature, work ethic and good humor will certainly be missed by all of us in the Loews family.

And with I'd now like to hand things over to Loews', CFO, Peter Keegan. Pete?

Peter W. Keegan - Chief Financial Officer

Thanks Jim and good morning everyone. Loews reported consolidated net income of $662 million in the first quarter of 2008 versus $768 million in the first quarter of last year. Net income for Loews' common stock was $555 million or $1.05 per share compared to $650 million or $1.20 per share in the first quarter of 2007. Net investment losses for the quarter of $29 million primarily consisted of other than temporary impairment losses in CNA's portfolio derived from securities for which CNA did not have an intent to hold until an anticipated recovery in value.

Investment gains of $75 million in the prior year first quarter included after tax gains of $89 million related to a reduction in ownership of Diamond Offshore. Net income for Carolina Group stock totaled $107 million or $0.98 per share compared to $118 million or $1.08 per share in the first quarter of 2007. Gross profit was essentially unchanged versus the prior year first quarter, as the increase in net sales was offset by higher cost related to the state settlement agreements. Administrative expenses related to the spin-off with Lorillard with $6 million after tax for management bonus and $2 million after tax for financial and legal fees associated with the transaction.

Additionally, legal expenses increased by $4 million after tax versus the first quarter of 2007. Lorillard's contribution to net income for Loews' common stock was $67 million during the quarter versus $84 million in the prior year first quarter. CNA's contribution to net income decreased to $200 million from $275 million in the prior year's first quarter.

CNA's results were negatively effected by reduced investment income, largely attributable to a reduction in limited partnership income of approximately $91 million before taxes versus the first quarter of 2007. Diamond Offshore's contribution to net income rose to $136 million from $107 million in the first quarter of 2007 and was driven by increased day rates for high specification floaters and midwater semisubmersible rigs. Year-over-year comparison of first quarter results is effected by a reduction in Loews' ownership interest from 54% to 51% during the first quarter of 2008.

HighMount reported revenue of $189 million and net income of $47 million for the first quarter of 2008. Production volumes during the quarter were as follows. Natural gas production was 19.7 billion cubic feet at an average realized price of $7.43 per 1000 cubic feet. Natural gas liquids production was 911,700 barrels at an average realized prize of $46.92 per barrel. And oil production was 84,500 barrels at an average prize of $94.85 per barrel.

Boardwalk Pipeline's contribution to net income of $39 million was unchanged versus the prior first quarter. Comparison of results between the first quarter's of 2008 and 2007 is effected by secondary equity offerings by Boardwalk during 2007 which has reduced Loews' total ownership interest to 70% from 75% and proportionately decreased Loews' share of net income.

Loews Hotels' net income of $11 million for the quarter was unchanged from the first quarter of last year. Average room rates for the quarter increased to $261.80 from $248.70 and occupancy for the quarter decreased to 70.8% from 72% in 2007. As of March 31, 2008 holding company's cash and investments totaled $4.4 billion. During the quarter we received $501 million of dividends from our subsidiaries and paid $82 million of dividends to shareholders. In January, we completed the sale of Bulova for approximately $250 million which is subject to adjustments and recorded a gain of approximately $126 million pre-tax or $82 million after tax.

At the end of the quarter, Lorillard's cash and investments totaled $1.7 billion. During April of 2008 Lorillard made a payment of $865 million related to the state settlement agreements including $72 million that was deposited into a disputed payments account. In the first quarter of 2007, Lorillard paid $579 million under the state settlement agreements and in April of 2007 an additional $111 million was deposited into the disputed payments account.

Carolina Group notional debt was $218 million at the end of the quarter. We expect that as a result of Lorillard's recent dividend to Carolina Group, sufficient cash will be available at Carolina Group including the use of the $100 million Carolina Group reserve, to pay the regular Carolina Group dividend of $0.455 per sharing in May, as well as to pay essentially all of the remaining notional debt balance. These possible action are subject to approve by the Loews Board.

And now I will turn the call over to Marty Orlowsky at Lorillard. Marty?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Thank you, Peter and thank you Jim for those very nice words maybe I should quit while I am ahead and not really--

James S. Tisch - Chief Executive Officer and President

Don't do that too many people will be disappointed.

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Okay then I'll read my comments. We believe that Lorillard's first quarter of 2008 performance was reasonably positive when taking into consideration some of the factors effecting our results. A comparison of the first quarter of '08 with the first quarter of '07 reveals the following differences. Wholesale shipments were negatively impacted by downward wholesale inventory adjustments taken during the first quarter of this year, as well as $200 million fewer promotion related units shipped in the first quarter of 2008 versus the same quarter a year ago. Excluding these effects the first quarter of '08 shipments would have compared favorably with the first quarter of 2007.

Additional factors impacting our financial results as mentioned by both Jim and Peter in the first quarter of '08 versus the first quarter of '07 included to repeat again increased operating expenses related to the separation of Lorillard from Loews, investment income declined due to lower average invested cash balance and lower yields on investment income.

On the positive side, average unit pricing was slightly higher in first quarter of '08 compared with the first quarter of '07 but this is only partially offset the effects of the other factors mentioned. Lorillard's gross profit for the first quarter of '08 was essentially flat when compared with the gross profit achieved in the first quarter of '07.

Lorillard's operating and net incomes for the first quarter of '08 were $267 million and $174 million as compared with $287 million and $202 million respectively as compared with the first quarter of '07, reflecting declines of 7% and 14% respectively. Lorillard's domestic wholesale unit shipped in the first quarter of '08 resulted in a slight increase of three-tenths percent versus the first quarter of '07, outpacing the domestic industry's overall decline rate of 3.3% for the same period. Total Lorillard's wholesale unit shipped in the first quarter of this year were almost flat, posting a modest two-tenths of a percent decrease comparing the first quarter of '08 with the first quarter of '07 again due to the factors I mentioned earlier. Lorillard's domestic shipments market share for the first quarter of '08 was 10.47%, an improvement of 0.38 of a share point over the first quarter of '07.

Newport's domestic unit shipped reflected a decrease of 120 million units or 1.1% in the first quarter of '08 as compared with the first quarter of '07, again due to the factors I mentioned before. Newport's domestic shipment market share for the first quarter of '08 was 9.52%, an increase of 0.22 over the same quarter last year. Sequentially, Newport improved its domestic shipments market share in the first quarter of 2008 versus the fourth quarter of 2007 by almost six-tenths of a share point.

According to Lorillard's retail shipment database, Newport's market share for the first quarter of '08 was 9.85%, an increase of 0.28 over the first quarter of '07. Newport's share of the menthol segment was 33.5% in quarter one '08, an increase of six-tenths of a point over quarter one '07. The overall menthol segments of the industry was up slightly in the first quarter of 2008 at 28.4% compared with the same quarter last year.

Lorillard's core strategy of balancing profitability with Newport market share performance remains unchanged. We will continue to monitor market trends of Newport and its principal competitive brands to determine what is any promotion spending adjustments maybe appropriate consistent with our stated strategic objective. We will also closely monitor general economic conditions as they may impact consumer spending patterns and make appropriate adjustments to our promotional activity. Thank you.

Back to Darren.

Darren Daugherty - Director Investor Relations

Thank you, Marty. Operator, at this time, we will open it up for questions.

Question And Answer

Operator

[Operator Instructions]. Your first question is from David Edelman with Morgan Stanley. Please go ahead.

David Edelman - Morgan Stanley

Good morning, everyone.

James S. Tisch - Chief Executive Officer and President

Good morning.

David Edelman - Morgan Stanley

Marty, I wanted to ask you several questions, first, I think your net pricing in the quarter was only up about 1%, could you speak to the overall competitive environment and why at least in the short-term, you have seen a decline in the rate of net pricing you're generating?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Well, its obviously being effected by promotional spending, although I will say that our promotional spending in the first quarter of 2008 was about flat with the first quarter of 2007, but we did yield fewer shipment units and so that had some effect.

David Edelman - Morgan Stanley

I mean at this point in time, were you pushing a little harder on share than you had been over the last 12 or 18 months and if so, why?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

No, we were not consciously trying to generate improved share. We were really consistent with what I've said on a number of occasions, just said this morning about how to... just to maintain our positions competitively in the marketplace. So our... the fact, the most critical factor that guided our spending in the first quarter of this year, as it has in past quarters, was looking at the overall nature of competitive picture and the market itself.

David Edelman - Morgan Stanley

And Marty, as part of the, the pending transaction, three questions, when are you going to articulate capital structure plans, the amount of debt you would intend to take on, the scale of a buyback, or are you going to share with outsiders formal financial goals?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Well, I'm not going to, David, I'm not going to comment right now on anything pertaining to the separation other than to say that at the appropriate time in the filings and other commentary that we might make in the future, we will obviously be more specific.

David Edelman - Morgan Stanley

And Marty, can you quantify given the tax increase in the state of New York, either your market share in the state of New York or the percentage of your total volume?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Yes, our total volume in... based on our retail shipments into New York State is about 13% versus the industry of about 5%. But I will say this, over the three years ending 2007, if you go back to '05, '06 and '07, even in a high tax environment, that existed pretax increase, we did pretty well. Newport actually managed to increase share either modestly in the last couple of years and in '05 pretty substantially. So, we've remained pretty competitive on the share side and the volume side in New York State. In fact, I believe we've out performed on the share side, out performed the other menthol brands in New York State. Obviously, that's not a guarantee or an indication of what will happen in the future with an additional increase but we've more than held our own in the past. And that's about all I can say about it.

David Edelman - Morgan Stanley

Then two last things Marty, one is on the legal expense being higher. Is that tied inprincipally [ph] to the Engle progeny cases and if so, are some of those, sort of one-time in nature dealing with them as they came in?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

The $6 million increase in legal expense for the quarter, if you take it our of, that's distinct from the separation related expense to two factors. One, you're correct, the Engle progeny cases. We're in the midst of starting that process of discovery and various hearings related to it, as well we were effected in the first quarter by some increased legal expense related to the MSA dispute issue. And so, to what extent either of those will affect the future is hard to say. It will obviously depend on the timing of different elements that are either a part of the Engle progeny process, the litigation process and/or the factors that would relate to what the next steps will be relative to dealing with the MSA dispute issue.

David Edelman - Morgan Stanley

And then, Jim just one question for you actually related to Lorillard. What was the though process in awarding a, the one-time management bonus in cash as in... as opposed to stock and what's your general reactions to the fact that at Loews, there are some particular reasons why perhaps the non... certain members of the management team don't have large equity holdings but that at Lorillard coming out of the box, it appears as if the equity ownership by the management and the board will be relatively thin?

James S. Tisch - Chief Executive Officer and President

First of all, the view of cash versus stock was simply that Loews owns a 100% of Lorillard and it will be up to the Lorillard Board. We believe when Lorillard is public in order to give out cash or equity award. Number two, with respect to the ownership, where Lorillard management team does have a significant number of options in SARs in Carolina Group that will convert over to Lorillard shares. So, the Lorillard management team has performed phenomenally under Loews' leadership, with their ownership and I have no doubt that... in sense that that they have when they are part of the public company will be similar.

David Edelman - Morgan Stanley

Okay. Thank you.

Operator

Thank you. Your question is from Bob Glasspiegel with Langen McAlenney. Please go ahead.

Robert Glasspiegel - Langen McAlenney

Good morning. You teased us Jim in your intro that there is some investment opportunities here in today's market and I guess I am going probe on the one that we know that you are digging into, which is so prime relative at least to the CNA portfolio. I am not sure whether you have done more of that the Loews levels as well. But, what is the case that you see in that asset class today, what sort of yields are you getting on them and what other sort of areas of opportunity can we know that you have taken advantage of?

James S. Tisch - Chief Executive Officer and President

First of all, like they say on TV; do not try this at home. If you are going to invest in the sub-prime market, you have to have on your staff, people who are highly trained in analyzing mortgage-backed securities. It is not for the faint of heart and is not for the computer illiterate. It is a very difficult and meticulous craft. And what we have been doing is making very selective investments in specific traunches of sub-prime CDOs and structured products with the belief that these investments which we are making at say $0.60 or $0.70 on $1 will return our purchase price in full, very possibly will return at par over time, and where in the meantime we are collecting close to a double-digit current return based on interest payments.

Robert Glasspiegel - Langen McAlenney

The double-digits have market? I mean at cost or at your cost?

James S. Tisch - Chief Executive Officer and President

The double-digit is based on cost. Market prices will vary and from one point to the other we may have a loss in these securities. I told you, they are not for the faint of heart. But, we believe that we have done our analysis and we believe that based on our ability to hold these securities that they will generate very attractive returns for us. I know that the term sub-prime is a word that causes fears, fear in the hearts of the most hardened investors. But you can be sure, that we have done our work and our analysis in going into these securities.

Robert Glasspiegel - Langen McAlenney

Well the yield will come in through operating earnings this is all at the CAN level or do you have some additional ones at the Loews level?

James S. Tisch - Chief Executive Officer and President

It's primarily of the CNA level.

Robert Glasspiegel - Langen McAlenney

But there are some modest positions at Loews as well you say?

James S. Tisch - Chief Executive Officer and President

Yes, very modest.

Robert Glasspiegel - Langen McAlenney

Okay so the operate... the 10% yield will be in the operating earnings and the difference between the $0.60 to $0.70 in PAR, if you get it in PAR, you do a really good job but those will be capital gains?

James S. Tisch - Chief Executive Officer and President

That's right.

Robert Glasspiegel - Langen McAlenney

And so... but or losses if you are off the mark, but there is room for--?

James S. Tisch - Chief Executive Officer and President

Right, but the only thing I should tell you is that we are buying these but we are not going whole hog into that.

Robert Glasspiegel - Langen McAlenney

Right.

James S. Tisch - Chief Executive Officer and President

I mean we've brought a goodly [ph] amount but we are always careful to avoid too much concentration and too much risk to our capital.

Robert Glasspiegel - Langen McAlenney

What other sort of significant opportunities have you dipped into here that you can comment on?

James S. Tisch - Chief Executive Officer and President

We participated in... we bought some bank loans, some high yield bank loans... loans that have gone from PAR, a year ago to 85 just a few weeks ago, we have made purchases in note securities from time-to-time, we have been dabbling in the corporate bond market as well as the municipal bond market. These are all, markets where, where we see plenty of opportunity, amidst the stress that most of the market is feeling.

Robert Glasspiegel - Langen McAlenney

What's the general size of the portfolio that we are talking about?

James S. Tisch - Chief Executive Officer and President

The CNA portfolio is about $41 billion.

Robert Glasspiegel - Langen McAlenney

It's within CNA that you have done all this?

James S. Tisch - Chief Executive Officer and President

Yes.

Robert Glasspiegel - Langen McAlenney

Okay, I can dig through there. Okay and I missed what was the dividend you expect from Lorillard to... for Loews before the deal?

Peter W. Keegan - Chief Financial Officer

We didn't say exactly what it was but we said it was atrocious [ph] we thought it will be sufficient to pay the normal dividend plus essentially all of the remaining notional debt value.

Robert Glasspiegel - Langen McAlenney

So, Lorillard's balance sheet well post the deal will be... look pretty similar so before I guess I miss there is no--?

Peter W. Keegan - Chief Financial Officer

Well, the only point we made in the call was that the timing of the MSA payments were in April--

Robert Glasspiegel - Langen McAlenney

Right.

Peter W. Keegan - Chief Financial Officer

As March of that of last year. So at the end of the first quarter Lorillard had an usually high cash balance. But we are... there are no unusual dividends being made from Lorillard to CG these are normal quarterly dividend.

Robert Glasspiegel - Langen McAlenney

Right.

Peter W. Keegan - Chief Financial Officer

Dividend including the $100 million in the Carolina Group reserve will be sufficient we believe to pay the normal CG dividend this quarter plus retire the remaining notional debt balances.

Robert Glasspiegel - Langen McAlenney

Thank you very much.

Operator

Thank you. Your next question is from Christine Farkas with Merrill Lynch. Please go ahead.

Christine Farkas - Merrill Lynch

Thank you very much. Going back to Marty if I could you commented about looking at the overall nature of the competition and the promotional environment as well as monitoring the general economic conditions how would you categorize the current promotional environment here on the back of your result as well as what we saw from one of your competitors?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Well, in a certain sense it's relatively stable in looking at the totality of what some the competition has done as well us. As I said we were flat per pack in the first quarter spending wise in the first quarter this year versus last year, and there were some changes by some of our competitors one of them in particular but it was not in the shortly upward direction. So it's just a matter in one sense of maintaining almost a status quo kind of position with respect to the spending levels and the nature of the spending. So I wouldn't say there was a sort of wholesale change in any real sense.

But it's still pretty active and I think as you know over the last few years the menthol segment has been more than active in terms of promotional activity than the rest of the industry.

Christine Farkas - Merrill Lynch

And when looking at the promotional activity in the menthol against the broader market would you say there's much differences there as well emerging or no?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Well, there has been I mean this is not new.

Christine Farkas - Merrill Lynch

Right.

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Over the last three or four years the menthol segments, menthol brands were receiving a greater amount of promotional activity or there was a greater degree of promotional support than there were for the non-menthol side of the business. It's not new though I mean it's been like that for the last as I said three or four years.

Christine Farkas - Merrill Lynch

Yes, certainly it's been promotional. Just a question on the other I guess the non-Newport proprietary business looking at the growth in Maverick as well as the big declines in Puerto Rico can you can just discuss the couple of those factors?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Sure, let me go to Puerto Rico first. Puerto Rico there was about some 5 million unit adjustment by the distributors we use in Puerto Rico and that was to rebalance their inventories and really had nothing to do with demand per se as far as we know. So, that had it obviously a fairly large impact on the Puerto Rico shipments we were down about 23% as a result of that quarter-over-quarter. Maverick was up about 58% in wholesale shipments in the first quarter of '08 or 162 million units and we haven't done anything unusual there.

In fact, we took a price increase a modest one, not too long ago on Maverick, but Maverick competes in the higher end of the ... of the lower end of the marketplace. And I think Maverick was benefited from some degree of price attractiveness if you will vis-à-vis the other discount brands, particularly the discount brands of the two major companies Philip Morris and Reynolds, because it is lower price. So there's nothing new there other than probably a shift in purchase interest to Maverick from some of the higher price discount brands.

Christine Farkas - Merrill Lynch

Okay, and that's great. And then just a final question Jim, if I could, in your comments you've mentioned that the spin going ahead unless there were some market conditions, I guess that you didn't like, what would characterize those unfavorable market conditions?

James S. Tisch - Chief Executive Officer and President

Christine, I'd prefer to leave that a mystery and not answer that question.

Christine Farkas - Merrill Lynch

All right. Thank you very much.

Operator

Thank you. Your next question is from Judy Hong with Goldman Sachs. Please go ahead.

Judy Hong - Goldman Sachs

Hi, everyone. Jim, I just wanted to back and just go back to Christine's question and clearly when you announced the spin-off in December, tyrannical stock prices that 88, around 88 Loews stock prices at 48, I'm just wondering just given the stock prices today, whether that has changed and sort of your propensity to go ahead an do the spin-off at this point?

James S. Tisch - Chief Executive Officer and President

What I want to do is, I want to treat spin-off questions and split-off questions the same way we treat share repurchase questions. And that is I don't want to give you a sense of what we're doing for the simple reason, that if we do there is a good possibility that people on the street will shoot against to whatever it is we're trying to accomplish. So, at this point in time I think it's better for us just to remain silent on what the ultimate plans are.

Judy Hong - Goldman Sachs

Okay. And then a few questions for you Marty. First, in terms of the industry volume is that it was down 3.3% in the first quarter. Do you think that's representative of the underlying consumption trends?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Yes I'd... as well to some extend yes, I mean we had as I explained some inventory adjustments that occurred in some shipment related to the promotional volumes from the first quarter of '07 versus this year. So to some extent I think the industry was effected by some degree of inventory factors. But I think clearly it does reflect in principle the consumption sort of trends that are taking place.

Judy Hong - Goldman Sachs

Okay. And then on that note in terms of your inventory adjustments because if I look back in the first quarter of last year I think you actually had some inventory de-load that depressed the Q1 '06 numbers--

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Yes.

Judy Hong - Goldman Sachs

'07 numbers so I am wondering in this quarter you actually saw additional de-stocking on top of what we saw?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Yes, and principally it was attributable to... for early shipments that we made mainly for Newport because several states are coming online for the Fire-Safe Cigarette regulations. And so wholesalers apparently because we shipped early in the first quarter for the effective date which would be more in the second quarter timeframe. We saw more of a cut back on the conventional product to make room for taking on the additional product that was being shipped into meet the fire safe requirements. So there was a bit of an aberration there of that effected our inventories.

Judy Hong - Goldman Sachs

Can you quantify how much that was?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Yes, it was about... something about like 65 millions units.

Judy Hong - Goldman Sachs

Okay. And then Marty just taking a step back I think clearly in the last few years the industry has really enjoyed pretty healthy and I am just wondering if you sort of look at the environment going forward, you've got pretty high prices of cigarettes, with tax increases and etcetera. You would feel that the ability to continue to take healthy price increases going forward is in some way limited just because of the approval price points or the economic conditions or whatever the competitive situations that sort of warrant that number to be a bit more limited?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Well to be very honest with you Judy, I think it would be premature for me to reach any kind of conclusion regarding the general nature of the economic situations as it might effect. Cigarettes purchases, obviously gas prices are going up and so there are a number of factors out there, which is one of the reasons I added the comment in my prepared remarks about the fact that we will be obviously be monitoring the nature of the general economy as it might effect the industry or our business. So to what extent it may or may not effect, pricing remains to be seen and I really can't answer that today because I honestly don't know.

Judy Hong - Goldman Sachs

Okay. And then just final question the investment in the limited partnership, should we just assume that you really have now come out of all these investments and going forward will rely, post to spin-off you wouldn't get any of these income from these limited partnership?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

We pretty much unwound from all of the limited partnership investments. But clearly the future in terms of our investment income will depend on cash available to the investors. So there maybe some, obviously some factors that would affect that. But, yes, we are essentially out of the limited partnership.

Judy Hong - Goldman Sachs

Okay. Thank you.

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Thank you.

Operator

Thank you. Your next question is from Filippe Goossens with Credit Suisse. Please go ahead.

Filippe Goossens - Credit Suisse

Yes good morning Marty. Just as a follow-up on Judy's question here, what would you view your minimum cash that you would need to operate the business? If I turn the accruals from MSA, would it be $100 million, would it be $200 million that you kind of see as the necessary amount?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Well, I really would rather not say that at this point. I don't think there is going to be any... there is no change in terms of our cash requirements versus the past. So, I don't think it's a particularly significant factor.

Filippe Goossens - Credit Suisse

Okay. Then in terms of the Fire-Safe Cigarettes, is that going to be all at once for all the states or only a select group of states that are kicking it off in Q2, Marty?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

No, Filippe it's only a limited number of states that are coming online with effective dates for their legislation to put it in motion. So no, it's not going to be every state, it's a limited number.

Filippe Goossens - Credit Suisse

Okay. Then with your history in the industry Marty, you are one probably one of the best people to comment on this. Obviously--

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

I am not invincible any more.

Filippe Goossens - Credit Suisse

Sorry?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

I said I am not invincible any more.

Filippe Goossens - Credit Suisse

You are still one of the best if not the best.

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Thank you.

Filippe Goossens - Credit Suisse

So, it's just a little bit... in terms of down trading Marty, obviously a question on everybody's minds is should we make a distinct difference in terms of the question about down trading menthol versus non-menthol cigarettes. In other words, which you say that given the available competition, obviously two big brands out there including... and then including yourself but, that there fewer options for people within the menthol category to down trade. Therefore, if we look at Lorillard, we should be less concerned as compared to let's say a general cigarette type question.

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Well, I'll answer that very cautiously. I don't want to mislead anyone. I will say that you are correct in your statements that there are fewer options available particularly for standalone menthol brands in the lower end of the market. So that... while in the past when there has been a shift in the dynamic between premium price and low price brands, we've tended to historically be less effective. That doesn't mean we are impervious to the effects of that type of dynamic change. But, I would say that menthol tends to be generally speaking little less affected. But, it's still... can't be affected, obviously.

Filippe Goossens - Credit Suisse

Okay. Then, the other question I had is you made reference when you talk about the promotional activities by the industry, you made reference to one particular player stepping up promotional activities. I have my own idea who it might be but, didn't one other player last year say or in this year commenting about fourth quarter results that they would actually lower their promotional activities for their menthol product. In other words, are we seeing two diverging paths taken by players or am I reading that wrong?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

No, you are basically correct, but I don't know the degree to which one of the companies actually in fact lowered their promotional spending. But clearly, yes, one company did announce that they were going to cut back on certain types of promotions and one of our other competitors stepped it up slightly. So, but I don't know the degree to which the other one decreased their spending. But that's correct, yes.

Filippe Goossens - Credit Suisse

Okay. And then, just a last point on this particular topic. The other player who stepped up their promotional spending, would you view that more as offensive in nature Marty or more of defensive?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Yes, I take it offensively. I would say... I guess you would categorize it to some degree as being more offensive, more aggressive than it has been. But, it's been like that of and on for the last few years. So, either through the form of line extending or spending additional dollars on a per pact basis, it's been a combination of the two.

Filippe Goossens - Credit Suisse

Okay. And then my final question, Marty. In terms of the amount that has been deposited in the Escrow [ph] amounts. One, what's the total amount so far and number two, any idea... I know it is always right to even try to guestimate this. But, any idea whether in 2008 we might see some beginnings of the arbitration proceedings or at this moment it's very fluid?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

It's very fluid. It's hard to say Filippe. We go up and down on this issue and so I really don' think... I can't tell you anything specific about it. As far as how much we tell back, I don't really know, I think maybe a couple 100 million, somewhere in that range. Well, now hold that, we paid into the disputed account.

Filippe Goossens - Credit Suisse

Correct. That's what I meant, yes, okay. Wonderful, well, thanks so much Marty and we look very much forward to talking with you as part of the new Lorillard Company.

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Thank you, Filippe.

Operator

Thank you. Your next question is from Andy Baker with Jefferies & Company. Please go ahead.

Andrew S. Baker - Jefferies & Company

Thanks for taking the question. Couple of questions here, first on, HighMount, any chance, can you give us any detail on the reserves there, how they are looking?

James S. Tisch - Chief Executive Officer and President

Yes, the reserves are... total reserves are that 2.520 trillion cubic feet.

Andrew S. Baker - Jefferies & Company

Okay. In terms of the HighMount, I mean you had this now since last summer and things seem to be going very well. A couple of questions, one, how much capital does it take to run this business in terms of CapEx? And two, the cash flow that's been generated from the business, I mean that's going at the general corporate cash are you are still using this to expand this business, I think you have got your head off [ph] time, gotten your feet wet and that properties do come up, you look to get bigger?

James S. Tisch - Chief Executive Officer and President

Well, this year we are using the capital to reinvesting the business, drilling in parts and other wealth and we expect some modest cash flow to lows.

Andrew S. Baker - Jefferies & Company

Can you tell us what's the CapEx was in the quarter for HighMount?

James S. Tisch - Chief Executive Officer and President

The CapEx was $125 million.

Andrew S. Baker - Jefferies & Company

Great. And Jim just... it's very often in the case, just switching gears here to this put-off, very often these cases, management to board and the large shareholders disclose that they do it and have intention to participate, do you have any, I haven't seen anything, do you have plans to comment on that?

James S. Tisch - Chief Executive Officer and President

We will make the comments when we make the comments, and we don't want to comment before that. We let all of our filings speak for themselves.

Andrew S. Baker - Jefferies & Company

It's fair enough. And this question is for Peter, I guess, can you just give us some breakdown on what the lowest corporate cash and investments is, just sort of how that's invested, I mean when you make decision, when you see this $0.85 of a $1 bank loans and stuff at CNA, you see those at Loews' corporate too and they seem like good investment in these, you see much of that?

James S. Tisch - Chief Executive Officer and President

Most of the loans investments are in more liquid securities than things like bank loans. And so, the one share, the majority of our investments are in cash and cash equivalents and treasuries... we have a modest equity portfolio and then other arguments. But for the most part, the test for putting something into the Loews' portfolio is that it would be very liquid.

Andrew S. Baker - Jefferies & Company

Great. Okay, thanks a lot.

Operator

Thank you. Your next question is from Blain Marter with Lu Partners [ph]. Please go ahead.

Unidentified Analyst

Hi, guys, I'm new to your call but I'm wondering if you could share with us your capital allocation strategies stemming around CNA either at the Loews' levels or CNA level, I mean you've got an asset here, trading at 70% of book value and honestly, from a public market perspective, it's not an attractive investment I mean it's not growing. They've got exposure to asset bags on the balance sheet and its controlled entities. So, what are the thoughts, would you consider taking this asset and to take advantage of discount-to-book or what are your thoughts?

James S. Tisch - Chief Executive Officer and President

Blain, I feel this is your first time to the call, because you talked about the how being a controlled entity makes us an... makes CNA a uninteresting investment. Well, by the same talking, you wouldn't import Carolina Group, when it went from $25 a share and at one point, more than triple. We manage our subsidiaries, our public subsidiaries; the way you would hold management would mange their own public company.

We have a focus on creating value for all the shareholders and we believe that overtime; the market will recognize that value. With respect to CNA, you are right, there are lots of problems in the industry. But the question that you have to ask yourself is whether or not the market reflects those issues. I personally I am comfortable with our mortgage-backed portfolio and I'm comfortable with the other assets that we have on the CNA balance sheet. And the fact that CNA doesn't trade at a premium to book value was a reason why CNA selected to buy in shares this quarter.

But having said that, I should also say that, having CNA as a public company, even if it's priced at a discount to what we might think its real value is nonetheless positive, because it does provide a bench mark for all investors to be able to determine the value and work of CNA to Loews.

Unidentified Analyst

Fair enough, by effecting the share repurchase at CNA essentially, you're sort of increasing your pro-rata ownership of the company on a sort of creeping basis?

James S. Tisch - Chief Executive Officer and President

Yes, you can see that, but I would argue that it's beneficial for all shareholders that CNA is able to buy its stock in at a substantial discount to book value. The fact that Loews benefit, yes, it's an interesting fact, but the point is that all shareholders benefit from that.

Unidentified Analyst

Thanks a lot

Operator

Thank you. Your next is from Anton Kawalsky with Canyon Capital. Please go ahead.

Anton Kawalsky - Canyon Capital

Hi, guys, I had a question about, HighMount E&P I am just wondering do they have any exposure to the Haynesville Shale or Pierre Shale [ph] or any of the other shale place that the other E&P companies are talking about?

James S. Tisch - Chief Executive Officer and President

No, we are primarily in three areas and those shales that you mentioned are not where we are.

Anton Kawalsky - Canyon Capital

Okay. And would you mind commenting on what price you have hedged at this year?

James S. Tisch - Chief Executive Officer and President

Hold on for a second, we have hedged 70% of our volume... so this year there's the hedge for our '08 for all of our '08 hedges going back from the beginning when we started hedging and that goes back into '07, is $8.42 and for our '09 hedges the average price is about $9.05.

Anton Kawalsky - Canyon Capital

Great. Thanks so much.

Operator

Thank you. Your next question is from Michael Millman with Soleil Securities. Please go ahead.

Michael Millman - Soleil Securities

Thank you. I think you said that on Loews that the cash was $4.4 billion did you give us what the debt was?

James S. Tisch - Chief Executive Officer and President

That's again $865 million.

Michael Millman - Soleil Securities

The $865 million?

James S. Tisch - Chief Executive Officer and President

Yes.

Michael Millman - Soleil Securities

And that $4.4 million is before the $700 million investment in HighMount?

James S. Tisch - Chief Executive Officer and President

No, $700 million investment in Boardwalk.

Michael Millman - Soleil Securities

In Boardwalk, all right that's before it.

James S. Tisch - Chief Executive Officer and President

Yes, correct.

Michael Millman - Soleil Securities

Also I think last quarter, you said that economic conditions were too cloudy for acquisitions of some of this cash, is that still the operative strategy?

James S. Tisch - Chief Executive Officer and President

My crystal ball is still pretty cloudy, yes.

Michael Millman - Soleil Securities

And on the hotel business, the luxury hotels even in the first quarter seem to have higher RevPAR and increased earnings, could you talk about why Loews' RevPAR was sort of modest for luxury hotels and earnings were only flat?

James S. Tisch - Chief Executive Officer and President

Well, first of all, we are not a large hotel company. So a lot of... what drives us, is based on a few markets. Primarily, the Florida market and secondarily the New York market. Those markets have been reasonably good for us, but it doesn't reflect the full national trend. And I don't know what the other companies have experienced in the first quarter but I thought that in view of what's going on in the economy and the financial markets that the hotel business actually turned in pretty good results.

Michael Millman - Soleil Securities

Okay, thank you.

Operator

Thank you. Your next question is from Steven Errico with Locust Wood Capital. Please go ahead.

Steven Errico - Locust Wood Capital

Actually my questions were answered on the spin-off but I do have one on your E&P business. Have you ever thought about or spoken about the fact, would those assets be suitable to drop down into an upstream MLP be HighMount assets?

James S. Tisch - Chief Executive Officer and President

Maybe yes, maybe no. Investment bankers would love for us to do it because it generates lots of fees. We look at it from time-to-time but the only way we would do it is if number one it creates value for low shareholders and number two if it's a transaction that is also a value to whoever will be buying this paper. And right now we've not convinced ourselves of either one of those two facts so we have done nothing.

Steven Errico - Locust Wood Capital

Thank you.

Operator

Thank you. Your next question is from Bob Glasspiegel with Langen McAlenney. Please go ahead.

Robert Glasspiegel - Langen McAlenney

Since we're going to have to do the work to try to value HighMount I need a little bit of help just on what would be good peers I've been looking of XDO and obviously there is EOG, NHK and COG, but just to see how the $4 billion investment has done since July. Is your company that's best matched up?

James S. Tisch - Chief Executive Officer and President

I am not going to let you do those benchmark valuation yourselves and I don't want to deciding who I think are our peers in this business.

Robert Glasspiegel - Langen McAlenney

Okay. But is it fair to say that you have a quite significant gain which you not recognized in mark-to-market and when you come and make your presentation in the next yesterday I assume you are going to give us your view what do you think it's worth then. If he do give us some of the parts [ph]?

James S. Tisch - Chief Executive Officer and President

All the more reason for you to come to investor conference.

Robert Glasspiegel - Langen McAlenney

Okay. And just for modulate earnings what sort of drives earnings growth you sort of say what you've blocked in as far as pricing how much leverage is there in the earnings?

James S. Tisch - Chief Executive Officer and President

Well the company produces about a 120 billion cubit feet per year, but there are some what we call VPP, volumetric production payments that we have to pay that. I think this year it's about 8 or 10 b, after that there won't be any VPPs at all. So you can compute the revenues by multiplying the net volume by whatever price you want to assume.

Robert Glasspiegel - Langen McAlenney

Right.

James S. Tisch - Chief Executive Officer and President

And we gave you the prices for the hedged amounts and then you can compute the returns for the other amounts making sure of course that you add or subtract what we call the basis, which is the cost to get our hedged product or any product to a major market.

Robert Glasspiegel - Langen McAlenney

Okay. Thank you very much.

James S. Tisch - Chief Executive Officer and President

My pleasure.

Operator

Thank you. Your next question is from Andy Baker with Jefferies & Company. Please go ahead.

Andrew S. Baker - Jefferies & Company

Hi, can you hear me?

James S. Tisch - Chief Executive Officer and President

Yes, we can. Now we can.

Andrew S. Baker - Jefferies & Company

All right. Thanks for taking the follow-up. I just wanted to talk on this, how you feel about so far about the HighMount business? Its look like you've given the numbers that you gave me before. You effectively had 2.474 Tcfe at the end of the year 2.52 Tcfe now. So it's up about 46 Tcfe. You produced 25 so I mean is that sort of in line with your expectation in terms of what your exploration with your yield free and in terms of a good return on investments for the capital, the CapEx you talked about before?

James S. Tisch - Chief Executive Officer and President

Andy, I have to be honest with you, I am sorry you asked the question. A portion of the increase in reserves is the result of revision that came about because the natural gas prices are higher than they were before. But as to drill this, I don't think I have the number right here. I mean just going to see exactly how much we replaced at the drill business and how much was revision.

Andrew S. Baker - Jefferies & Company

And that's the revision as prices go up, there is more that's economical for you to go after and therefore get's put into reserves. Is that--?

James S. Tisch - Chief Executive Officer and President

That's, correct, yes.

Andrew S. Baker - Jefferies & Company

Okay. And then, just on BWP, just how do you feel about seeing the dividend obviously continues go up and that's great. I know you are in the peak period where you share a greater portion of that cash flow. On the dividend, obviously this quarter, the growth is only 0.5% versus the penny we have been getting every other corner. Is that... do you feel this trend is somewhat slowing there, its going to take longer to get to the higher levels of participation on your part than maybe we should have expected a year ago?

James S. Tisch - Chief Executive Officer and President

Well, the Boardwalk as you know has a very significant construction plan in progress that hopefully will be completed within 12 months from now. But, Boardwalk also has a need for cash to help finance that plan. I am just... I am pleased that the company is able to continue growing the dividend. As I said in my remarks that was the ninth consecutive time, had its increased its dividend and the earnings have been improving. So, I am sort of very pleased with the performance that Boardwalk has provided.

Andrew S. Baker - Jefferies & Company

Okay, great. Thank you very much.

Operator

Thank you. Your final question is from David Edelman with Morgan Stanley. Please go ahead.

David Edelman - Morgan Stanley

Marty, I wanted to ask you three quick follow-up questions if I could. First, you mentioned the economic dynamic. Do you think the economy to-date having any impact on the business or general consumer down trading in the category?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

I think there might be some slight pressure there, yes.

David Edelman - Morgan Stanley

Okay, secondly Marty indicating that there wasn't a greater relative emphasis on share versus profitability how do you reconcile that with the facts that the net price realization pace had moderated in that Newport retail share versus year ago. I think was up 30 basis points which has to be one of the brands, largest year-on-year share gains in some time?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Yes, it was large I don't know if it was the largest. But as I said on a number of occasions our actions are really geared towards long terms sustaining long terms strength in Newport primarily. So, we are not reacting to anything in particular we are not... we didn't make any kind conscious decision going into the first quarter that we were going to spend a X level to boost the share. I think that there was some competitive factors that were taking place there, for example, one of our principle competitive brand did not experience a very positive first quarter. So we may have gained some businesses as a result of that which really wasn't affected directly by promotional spending per se.

David Edelman - Morgan Stanley

Okay. And then one last thing Marty, clearly in this quarter and in the fourth quarter whether it was inventory movements or one-off cost there were lot of unusual items but if you strip all of that out I think its fair to say that there has been a moderation in the rate of Lorillard's operating profit growth versus the rates of prior years and if you just step back and look at the big picture what do you attribute that change in dynamic?

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

Well, the principle factor is in the past our operating profit was obviously directly affected by our ability and decisions we made to lower our promotion spending and that's the key our driver obviously. Since we have maintained a flat position essentially on promotion spending particularly in the first quarter this year versus last year, that has an impact on operating income. If you, carve out all the other stuff that went on.

So, I think the issue is, the growth that we experienced was obviously very, very positive but it was also unique obviously to the industry itself in many respects. We may... so I think right now we maybe entering more of a period of a more normal kind of balance in terms of operating profit opportunities for growth than maybe we have seen in the past. Although I still feel we are in a very, relatively positive position basically.

David Edelman - Morgan Stanley

Okay, thank you.

Martin L. Orlowsky - Chairman and Chief Executive Officer, Lorillard Tobacco Company

All right, thanks.

Operator

Thank you. I would like to turn the floor over to management for any further or closing remarks.

Darren Daugherty - Director Investor Relations

Thank you for joining us on the call today. A replay will be available on our website loews.com in approximately two hours. That concludes today's call.

Operator

Thank you. This concludes today's Loews first quarter 2008 earnings conference call. You may now disconnect your lines and have a wonderful day.

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