2007'02.04.Sun
Corning Announces Second-Quarter Results Company Meets EPS Guidance

July 26, 2006

CORNING, N.Y., July 26 /Xinhua-PRNewswire/ -- Corning Incorporated (NYSE: GLW) on July 25, 2006 announced second-quarter sales of $1.26 billion and net income of $514 million, or $0.32 per share. These results include net special gains of $93 million, or $0.06 per share. Excluding these net special gains, Corning's second-quarter net income would have been $421 million, or $0.26 per share. These are non-GAAP financial measures. These and all non-GAAP financial measures are reconciled on the company's investor relations Web site and in attachments to this news release. Wendell P. Weeks, president and chief executive officer, said, "We were pleased to meet our earnings-per-share (EPS) guidance as we overcame the impact of the second-quarter panel inventory correction on our Display Technologies segment. The decline in Display Technologies' quarterly performance was offset by strength in our Telecommunications segment and lower operating expenses." Corning's second-quarter results included the following special gains and charges: -- A $61 million gain primarily to reflect the decrease in the market value of Corning common stock to be contributed to settle the asbestos litigation related to Pittsburgh Corning Corporation. -- A $10 million reduction in income tax expense related to the release of the valuation allowance on certain deferred tax assets in Australia. -- A gain of $33 million in equity earnings related to Dow Corning Corporation's settlement with the U.S. Internal Revenue Service regarding liabilities for tax years 1992 to 2003. The settlement resolves all federal tax issues related to Dow Corning's implant settlement. -- An $11 million charge related to Corning's ongoing debt-reduction program. Second-Quarter Operating Results Corning's second-quarter sales of $1.26 billion were even with first-quarter sales and increased 11 percent over last year's second-quarter sales of $1.14 billion. As expected, gross margin for the second quarter was 43 percent, a slight decline from the previous quarter's gross margin of 45 percent. Equity earnings for the second quarter were $256 million, including the $33 million tax gain from Dow Corning. First-quarter equity earnings of $200 million included a $21 million impairment charge for Samsung Corning Company, Ltd. (Samsung Corning), a producer of glass panels and funnels for cathode ray tubes. Excluding the special items in both quarters, Corning's second-quarter equity earnings were even with the first quarter. Including the $33 million tax gain, our second-quarter equity earnings in Dow Corning were $104 million. Second-quarter sales for Corning's Display Technologies segment were $461 million, an 11-percent increase over 2005 second-quarter sales of $415 million. Year-over-year liquid crystal display (LCD) glass volume increased by 38 percent in the second quarter, but this was largely offset by the change in foreign exchange rates and price declines. Sequentially, second-quarter sales declined 16 percent from first-quarter sales of $547 million, primarily due to volume declines of 14 percent and lower prices. As expected, price declines were less than those in the first quarter. Samsung Corning Precision Glass Co., Ltd.'s (SCP) second-quarter volume increased 52 percent year-over-year and 3 percent sequentially. Equity earnings from SCP were $133 million in the second quarter, compared to $140 million in the previous quarter, which included about $7 million in nonrecurring gains. Total LCD glass volume, including both Corning's wholly owned business and SCP, declined 6 percent sequentially in the second quarter. Net income for the Display Technologies segment was $344 million, down 18 percent from $417 million last quarter, but up 20 percent versus the second quarter of 2005. "The quarterly sales decline in Display Technologies was disappointing, but as we have warned in the past, supply-chain issues can occur in any given quarter. Our LCD volume decline of 6 percent was consistent with our May 22 guidance change," Weeks said. Second-quarter Telecommunications segment sales increased 19 percent to $472 million versus $397 million in the first quarter. The increase was driven by strong demand from U.S. and European carriers for the company's fiber and cable and hardware and equipment products. Fiber-to-the-premises (FTTP) sales in the second quarter increased significantly over the previous quarter's performance. In the company's Environmental Technologies segment, sales of $152 million were slightly lower than sales of $155 million in the first quarter. An increase in diesel retrofit sales was offset by lower automotive sales, especially in North America. Corning's Life Sciences segment sales increased $3 million to $75 million in the second quarter. Cash Flow/Liquidity Update Corning ended the second quarter with $2.48 billion in cash and short-term investments, consistent with the previous quarter. The company's debt level declined to $1.5 billion compared to $1.8 billion at the end of the first quarter. James B. Flaws, vice chairman and chief financial officer, said, "As we continue to focus on improving the company's overall financial health, you can expect us to opportunistically issue or refinance certain debt over the remainder of the year." In the second quarter Corning had positive free cash flow of $299 million and remains on track to be free cash flow positive for the year. Free cash flow is a non-GAAP financial measure. Flaws also noted that Moody's Investor Service recently raised Corning's overall debt rating to Baa2 with a stable outlook. Third-Quarter Outlook Corning expects third-quarter sales to be in the range of $1.26 billion to $1.33 billion, and EPS in the range of $0.22 to $0.26 before special items. This EPS estimate is a non-GAAP financial measure and excludes any special items. Gross margin for the third quarter is expected to be in the range of 41 percent to 43 percent. The third-quarter tax rate is expected to be between 15 percent and 20 percent. For its Display Technologies segment, Corning anticipates that third-quarter sequential volume growth for its wholly owned business will be in the range of 5 percent to 15 percent as the supply-chain correction begins to ease and the LCD industry gears up for the holiday buying season. Samsung Corning Precision should also see sequential volume increases in the range of 5 percent to 15 percent. Corning expects third-quarter price declines in its wholly owned business to be in line with the previous quarter. "As we start the third quarter, we believe there will be inventory adjustments by some panel manufacturers, while others are beginning to increase production levels," Flaws said. "However, the long-term LCD market dynamics remain positive. We have not changed our expectation that the overall glass market volume growth will be between 40 percent and 50 percent in 2006. We believe that LCD TV penetration will reach about 20 percent of the global television market this year, nearly doubling that of 2005." Corning's Telecommunications segment third-quarter sales are expected to be flat to down slightly. Third-quarter sales in the company's Environmental Technologies segment are also expected to be flat. Excluding the impact of the $33 million second-quarter tax gain at Dow Corning, third-quarter equity earnings are expected to be down 5 to 10 percent, as stronger earnings at Dow Corning may be offset by lower earnings at SCP and nonrecurring charges at Samsung Corning. Weeks said, "While our first-half 2006 performance met our expectations, we need to be cautious about the potential negative impact that economic conditions and political tensions could have on consumer sentiment. The LCD TV market is strongly weighted towards the fourth quarter and we need a robust retail holiday season to achieve our goals. The good news is that retail prices for LCD TVs have declined substantially and that should accelerate consumer demand." Separately, the company also announced that it will be meeting with Boston-area investors on Tuesday, August 1 and will host a luncheon at 12:30 p.m. Investors interested in attending the luncheon should contact Corning's investor relations department at (607) 974-8764. Second-Quarter Conference Call Information The company will host a second-quarter conference call at 8:30 a.m. EDT on Wednesday, July 26. To access the call, dial (210) 234-0003. The password is QUARTER TWO. The leader is SOFIO. A replay of the call will begin at approximately 10:30 a.m. EDT, and will run through 5 p.m. EDT, Wednesday, August 9. To listen, dial (402) 220-9709. No pass code is required. To listen to a live audio webcast of the call, go to Corning's Web site: http://www.corning.com/investor_relations , and follow the instructions. The audio webcast will be archived for one year following the call. Presentation of Information in this News Release Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP. Corning's non-GAAP net income and EPS measure excludes restructuring, impairment and other charges and adjustments to prior estimates for such charges. Additionally, the company's non-GAAP measure excludes adjustments to asbestos settlement reserves required by movements in Corning's common stock price, gains and losses arising from debt retirements, charges resulting from the impairment of equity or cost method investments, or adjustments to deferred tax assets, and gains or losses recognized in equity earnings from restructuring, impairment or other charges or credits taken by equity method companies. Corning's free cash flow financial measures are also non-GAAP measures. The company believes presenting non-GAAP free cash flow; net income and EPS measures are helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company's underlying performance. These non-GAAP measures are reconciled on the company's Web site at http://www.corning.com/investor_relations and accompany this news release. About Corning Incorporated Corning Incorporated ( http://www.corning.com ) is a diversified technology company that concentrates its efforts on high-impact growth opportunities. Corning combines its expertise in specialty glass, ceramic materials, polymers and the manipulation of the properties of light, with strong process and manufacturing capabilities to develop, engineer and commercialize significant innovative products for the telecommunications, flat panel display, environmental, semiconductor, and life sciences industries. Forward-Looking and Cautionary Statements This press release contains forward-looking statements that involve a variety of business risks and other uncertainties that could cause actual results to differ materially. These risks and uncertainties include the possibility of changes in global economic and political conditions; tariffs, import duties and currency fluctuations; product demand and industry capacity; competition; manufacturing efficiencies; cost reductions; availability and costs of critical components and materials; new product development and commercialization; order activity and demand from major customers; changes in the mix of sales between premium and non-premium products; facility expansions and new plant start-up costs; possible disruption in commercial activities due to terrorist activity, armed conflict, political instability or major health concerns; adequacy and availability of insurance; capital spending; equity company activities; acquisition and divestiture activities; the level of excess or obsolete inventory; the rate of technology change; the ability to enforce patents; product and components performance issues; stock price fluctuations; and adverse litigation or regulatory developments. Additional risk factors are identified in Corning's filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the day that they are made, and Corning undertakes no obligation to update them in light of new information or future events. For more information, please contact: Corning China Lydia Lu Tel: +86-21-5467-4666 x1900 Email: lulr@corning.com US Corning Daniel F. Collins Tel: +1-607-974-4197 Email: collinsdf@corning.com Investor Relations Contact: Kenneth C. Sofio Tel: +1-607-974-7705 Email: sofiokc@corning.com SOURCE Corning Incorporated
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