Corning Announces Second-Quarter Results Company Meets EPS Guidance

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 [phone].

    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 [phone].  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 [phone]. 
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:   [phone] x1900
     Email: [e-mail]

    US Corning
     Daniel F. Collins
     Tel:   [phone] 
     Email: [e-mail]

    Investor Relations Contact:
     Kenneth C. Sofio
     Tel:   [phone]
     Email: [e-mail]

SOURCE  Corning Incorporated