Corning Incorporated (NYSE:GLW) today announced fourth-quarter
sales of $1.2 billion and a net loss of $32 million, or $0.02 per
share. The net loss includes net special charges of $371 million,
or $0.24 per share. Excluding these special charges, Corning's
fourth-quarter net income would have been $339 million, or $0.22
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, "Our solid fourth-quarter performance ended 2005 on a very
positive note for Corning. We again met our quarterly sales and EPS
guidance before special items, our gross margin remained strong and
equity earnings contributed significantly to our positive results."
Corning's fourth-quarter results were impacted by net after-tax
special charges of $371 million which primarily included the
following non-cash items: -- A $443 million tax-expense charge
primarily to increase the valuation allowance against Corning's
U.S. deferred tax assets. This charge reduced Corning's net
deferred tax assets to zero. -- A pretax and after-tax gain of $84
million related to the release of translation capital in the final
liquidation of a wholly owned foreign subsidiary. Full-Year
Operating Results For the full year, Corning recorded sales of
$4.58 billion, an increase of 19 percent over 2004 sales of $3.85
billion. The increase was the result of strong growth in Display
Technologies and more modest increases in the Telecommunications
and Environmental Technologies segments. The company had net income
of $585 million or $0.38 per share versus a net loss of $2.17
billion or $1.56 per share in 2004. Corning's 2005 and 2004 net
income included significant net special charges. Excluding these
charges, Corning's earnings for 2005 increased to $1.3 billion or
$0.85 per share compared to $674 million or $0.45 per share in
2004. These are non-GAAP financial measures. "This past year was
extremely gratifying for our shareholders, our employees and our
management team," Weeks said. "This was the third consecutive year
in which we improved our profitability before special items by half
a billion dollars. This increase in profitability - combined with
the improvement in our free cash flow, the strength of our balance
sheet and our ability to improve our market-leading positions in
liquid crystal display glass, diesel emissions products and
fiber-to-the-premises products - resulted in a 67-percent
year-over-year increase in the valuation of Corning common stock,"
he said. Profitability before special items and free cash flow are
non-GAAP financial measures. Fourth-Quarter Operating Results
Corning's fourth-quarter sales increased 16 percent to $1.2 billion
from $1.03 billion in 2004, and increased slightly over 2005
third-quarter sales of $1.19 billion. Fourth-quarter gross margins
for the company continued to be strong at 44 percent. Equity
earnings for the fourth quarter were $186 million reflecting growth
at Samsung Corning Precision Glass Co., Ltd. (SCP), and lower
results at Dow Corning Corporation due to expansion spending,
unfavorable foreign exchange rates and seasonality. Third-quarter
equity earnings included an impairment charge of $106 million at
Samsung Corning Co., Ltd. a Korean manufacturer of glass panels and
funnels for cathode ray tube (CRT) television and computer
monitors. Fourth-quarter sales for Corning's Display Technologies
segment were $518 million, a 67-percent increase over 2004
fourth-quarter sales of $311 million. Fourth-quarter year-over-year
liquid crystal display (LCD) glass volume increases of about 90
percent were partially offset by unfavorable exchange rates and
price declines of 5 percent. Sequentially, fourth-quarter sales
increased 6 percent over third-quarter sales of $489 million and
LCD glass volume increased 14 percent. Pricing was off slightly
from the third quarter while exchange rates in the fourth quarter
had a 6-percent negative impact on sales. Samsung Corning
Precision, a 50-percent owned equity venture in Korea which
manufactures LCD glass substrates, increased its volume by 9
percent sequentially. Equity earnings from SCP increased to $129
million versus $114 million in the third quarter. About half of the
increase was related to a dividend tax adjustment in the fourth
quarter. Net income for the Display Technologies segment, which
includes results of Corning's wholly owned business and equity
earnings from SCP, declined about 10 percent to $328 million in the
fourth quarter, compared to $363 million in the third quarter. This
was primarily due to a slightly lower gross margin percent, higher
effective tax rates and higher operating expenses offset by higher
earnings from SCP. Weeks said, "Sales of flat panel desktop
monitors and notebook computers have driven the industry growth for
several years. But the biggest dynamic to emerge this past year has
been LCD televisions, which appear to have captured more than 10
percent of the total TV market in 2005. Going forward, LCD TV will
increasingly impact the growth rate of the LCD industry."
Fourth-quarter Telecommunications segment sales declined by 4
percent to $383 million from $398 million in the third quarter. The
decline was due in part to normal seasonality, somewhat offset by
an increase in fiber-to-the-premises (FTTP) sales. In the fourth
quarter, Environmental Technologies segment sales of $142 million
were about even with third-quarter sales of $144 million. Life
Sciences segment fourth-quarter sales were $63 million, a decline
of 10 percent compared to the third quarter. The decline was due to
normal seasonality and a distributor inventory reduction during the
quarter. Cash Flow/Liquidity Update James B. Flaws, vice chairman
and chief financial officer, said, "We ended the year with $2.4
billion in cash and $1.8 billion in debt. Despite spending $1.55
billion in capital primarily to support LCD expansions, we had free
cash flow for the full year of $443 million, driven by strong
operating performance and customer deposits. Our debt-to-capital
ratio was 24 percent at the end of the year, driven primarily by a
reduction of $885 million in our outstanding debt balance. This was
a significant improvement compared to last year's ratio of 41
percent. "The overall operating performance of our businesses was
solid and we completed our balance sheet improvement program," he
said. "This was the first time in more than 25 years that Corning
was able to end the year with more cash on hand than debt on our
books." Free cash flow is a non-GAAP financial measure.
First-Quarter Outlook Corning said that it expects first-quarter
sales to be in the range of $1.2 billion to $1.25 billion and EPS
in the range of $0.21 to $0.23 before special items. This EPS
estimate is a non-GAAP financial measure and it excludes any
possible special items. Corning said that it will begin expensing
employee stock options in 2006 and that the EPS range of $0.21 to
$0.23 includes about $0.01 related to this new expense in the first
quarter. The gross margin percent for the first quarter is expected
to be comparable to the fourth quarter of 2005. The company also
expects that its effective tax rate for the first quarter will be
in the range of 20 percent to 25 percent. In the Display
Technologies segment, the company is anticipating that its
first-quarter sequential volume growth will be in the range of 3
percent to 8 percent. The company expects its wholly owned business
will see quarterly volume growth in the range of 5 percent to 10
percent and Samsung Corning Precision's volume growth will be in
the range of flat to up 5 percent. Corning said that price
reductions in the first quarter will be more significant than the
company has experienced in recent quarters. The company expects
sequential quarterly price declines to be more in line with
historical levels for the remainder of the year. "We believe that
increased volume and manufacturing cost efficiencies could allow us
to offset the impact of price declines and lead to a first-quarter
gross margin percent comparable to the fourth quarter of last
year," Flaws said. Corning noted, as it has in the past, that
industry supply chain fluctuations could influence the company's
results in any given quarter. "We expect to be able to build off
last year's very successful LCD glass performance and we anticipate
continued volume growth. Our new Taichung, Taiwan LCD facility is
now operating and we will continue to meet the rising volume demand
for larger-generation substrates. There are growing indications in
the marketplace that LCD TV retail prices will fall over time,
spurring increased demand for our larger-generation size
substrates," Flaws said. Corning's Telecommunications segment
first-quarter sales are expected to be comparable to 2005
fourth-quarter sales. First-quarter seasonal volume gains will be
offset by annual price declines. The company's Environmental
Technologies segment sales are expected to be up slightly on a
sequential basis and sales in the Life Sciences segment are
expected to increase in the first quarter. The company expects
equity earnings from Dow Corning to be up 20 percent to 30 percent
compared to the seasonally low fourth-quarter 2005 results. Weeks
said, "Our first-quarter performance should be in line with last
quarter's results, even as we factor in the impact of stock option
expensing this quarter. We expect 2006 to be another strong year
for Corning." Fourth-Quarter Conference Call Information The
company will host a fourth-quarter conference call at 8:30 a.m. EST
on Wednesday, Jan. 25. To access the call, dial (210) 234-0002. The
password is results. The leader is Sofio. A replay of the call will
begin at approximately 10:30 a.m. EST, and will run through 5:00
p.m. EST, Wednesday, Feb. 8. To listen, dial (402) 220-9657, no
pass code is required. To listen to a live audio webcast of the
call, please go to Corning's Web site and follow the instructions:
http://www.corning.com/investor_relations. The audio webcast will
be archived for one year following the call. Annual Investor
Meeting Corning will hold its annual investor meeting at the
Mandarin Oriental Hotel in New York City on Friday, Feb. 3.
Investors who are interested in attending should register prior to
the event at www.corning.com/investor_relations. 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 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. The
company believes presenting a non-GAAP EPS measure is helpful to
analyze financial performance without the impact of unusual items
that may obscure trends in the company's underlying performance.
This non-GAAP measure is reconciled on the company's Web site at
www.corning.com/investor_relations and accompanies this news
release. About Corning Incorporated Corning Incorporated
(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 or
fluctuations in global economic and political conditions; tariffs,
import duties and currency fluctuations; product demand and
industry capacity; competitive products and pricing; manufacturing
efficiencies; cost reductions; availability and costs of critical
components and materials; new product development and
commercialization; order activity and demand from major customers;
capital spending by larger customers in the liquid crystal display
industry and other businesses; 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; ability to obtain financing and capital on
commercially reasonable terms; adequacy and availability of
insurance; capital resource and cash flow activities; capital
spending; equity company activities; interest costs; 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; changes in key
personnel; stock price fluctuations; and adverse litigation or
regulatory developments. These and other 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. -0- *T CORNING
INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited; in millions, except per share amounts) Three
months ended Year ended December 31, December 31,
----------------------- ----------------------- 2005 2004 2005 2004
----------- ----------- ----------- ----------- Net sales $ 1,200 $
1,033 $ 4,579 $ 3,854 Cost of sales 673 668 2,595 2,439 -----------
----------- ----------- ----------- Gross margin 527 365 1,984
1,415 Operating expenses: Selling, general and administrative
expenses 203 174 756 653 Research, development and engineering
expenses 123 98 443 355 Amortization of purchased intangibles 2 10
13 38 Restructuring, impairment and other (credits) charges (Note
1) (84) (5) (38) 1,789 Asbestos settlement (Note 2) 8 17 197 33
----------- ----------- ----------- ----------- Operating income
(loss) 275 71 613 (1,453) Interest income 21 9 61 25 Interest
expense (26) (32) (116) (141) Loss on repurchases and retirement of
debt, net (Note 3) (4) (16) (36) Other income, net 2 19 30 25
----------- ----------- ----------- ----------- Income (loss) from
continuing operations before income taxes 268 67 572 (1,580)
Provision for income taxes (Note 4) (487) (34) (578) (1,031)
----------- ----------- ----------- ----------- (Loss) income from
continuing operations before minority interests and equity earnings
(219) 33 (6) (2,611) Minority interests 1 (3) (7) (17) Equity in
earnings of associated companies, net of impairments 186 133 598
443 ----------- ----------- ----------- ----------- (Loss) income
from continuing operations (32) 163 585 (2,185) Income from
discontinued operation 20 ----------- ----------- -----------
----------- Net (loss) income $ (32) $ 163 $ 585 $ (2,165)
=========== =========== =========== =========== Basic (loss)
earnings per common share from: Continuing operations $ (0.02) $
0.12 $ 0.40 $ (1.57) Discontinued operation 0.01 -----------
----------- ----------- ----------- Basic (loss) earnings per
common share $ (0.02) $ 0.12 $ 0.40 $ (1.56) ===========
=========== =========== =========== Diluted (loss) earnings per
common share from: Continuing operations $ (0.02) $ 0.11 $ 0.38 $
(1.57) Discontinued operation 0.01 ----------- -----------
----------- ----------- Diluted (loss) earnings per common share $
(0.02) $ 0.11 $ 0.38 $ (1.56) =========== =========== ===========
=========== See accompanying notes to these financial statements.
*T -0- *T CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (Unaudited; in millions, except per
share amounts) December 31, ----------------------- 2005 2004
----------- ----------- Assets Current assets: Cash and cash
equivalents $ 1,342 $ 1,009 Short-term investments, at fair value
1,092 872 ----------- ----------- Total cash, cash equivalents and
short-term investments 2,434 1,881 Trade accounts receivable, net
629 585 Inventories 570 535 Deferred income taxes 44 92 Other
current assets 183 188 ----------- ----------- Total current assets
3,860 3,281 Investments 1,697 1,484 Property, net 4,675 3,941
Goodwill and other intangible assets, net 338 398 Deferred income
taxes 10 440 Other assets 595 166 ----------- ----------- Total
Assets $ 11,175 $ 9,710 =========== =========== Liabilities and
Shareholders' Equity Current liabilities: Short-term borrowings,
including current portion of long-term debt $ 18 $ 478 Accounts
payable 690 682 Other accrued liabilities 1,508 1,176 -----------
----------- Total current liabilities 2,216 2,336 Long-term debt
1,789 2,214 Postretirement benefits other than pensions 593 600
Other liabilities 925 715 ----------- ----------- Total liabilities
5,523 5,865 ----------- ----------- Commitments and contingencies
Minority interests 43 29 ----------- ----------- Shareholders'
equity: Preferred stock - Par value $100.00 per share; Shares
authorized: 10 million Series C mandatory convertible preferred
stock - Shares issued: 5.75 million; Shares outstanding: 0 and 637
thousand 64 Common stock - Par value $0.50 per share; Shares
authorized: 3.8 billion; Shares issued: 1,552 million and 1,424
million 776 712 Additional paid-in capital 11,548 10,363
Accumulated deficit (6,724) (7,309) Treasury stock, at cost; Shares
held: 16 million (168) (162) Accumulated other comprehensive income
177 148 ----------- ----------- Total shareholders' equity 5,609
3,816 ----------- ----------- Total Liabilities and Shareholders'
Equity $ 11,175 $ 9,710 =========== =========== See accompanying
notes to these financial statements. *T -0- *T CORNING INCORPORATED
AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions) Three months ended Year ended
------------------- Dec. 31, Sept. 30, December 31,
------------------- 2005 2005 2005 2004 --------- ---------
--------- --------- Cash Flows from Operating Activities: Net
(loss) income $ (32) $ 203 $ 585 $ (2,165) Adjustments to reconcile
net (loss) income to net cash provided by operating activities:
Depreciation 126 127 499 485 Amortization of purchased intangibles
2 3 13 38 Asbestos settlement 8 68 197 33 Gain on sale of
discontinued operation (20) Restructuring, impairment and other
(credits) and charges (84) 28 (38) 1,789 Loss on repurchases and
retirement of debt 4 16 36 Stock compensation charges 8 8 29 8
Undistributed earnings of associated companies (101) (70) (297)
(303) Deferred taxes 436 (18) 425 947 Interest expense on
convertible debentures (26) (23) 4 Restructuring payments (3) (6)
(25) (85) Decrease in restricted cash 13 22 34 Customer deposits,
net 55 144 428 204 Employee benefit payments (in excess of) less
than expense (10) 15 34 (19) Changes in certain working capital
items: Trade accounts receivable 1 11 (77) (40) Inventories (16)
(7) (62) (68) Other current assets 20 26 6 (7) Accounts payable and
other current liabilities, net of restructuring payments 204 38 113
143 Other, net 67 12 94 (5) --------- --------- --------- ---------
Net cash provided by operating activities 659 595 1,939 1,009
--------- --------- --------- --------- Cash Flows from Investing
Activities: Capital expenditures (477) (378) (1,553) (857) Net
proceeds from sale of businesses 100 Net proceeds from sale or
disposal of assets 1 18 49 Short-term investments - acquisitions
(355) (610) (1,668) (1,685) Short-term investments - liquidations
289 401 1,452 1,389 Other, net 27 2 39 12 --------- ---------
--------- --------- Net cash used in investing activities (516)
(584) (1,712) (992) --------- --------- --------- --------- Cash
Flows from Financing Activities: Net repayments of short-term
borrowings and current portion of long-term debt (253) (3) (451)
(115) Proceeds from issuance of long-term debt, net 147 442
Repayments of long-term debt (102) (154) Proceeds from issuance of
common stock, net 9 9 365 42 Proceeds from the exercise of stock
options 60 83 202 49 Other, net (2) (3) (14) 1 --------- ---------
--------- --------- Net cash (used in) provided by financing
activities (186) 86 147 265 --------- --------- --------- ---------
Effect of exchange rates on cash (10) (3) (41) 39 ---------
--------- --------- --------- Net (decrease) increase in cash and
cash equivalents (53) 94 333 321 Cash and cash equivalents at
beginning of period 1,395 1,301 1,009 688 --------- ---------
--------- --------- Cash and cash equivalents at end of period $
1,342 $ 1,395 $ 1,342 $ 1,009 ========= ========= =========
========= Certain amounts for 2004 were reclassified to conform to
2005 presentation. See accompanying notes to these financial
statements. *T -0- *T CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS (Unaudited; in millions) Our reportable operating
segments include Display Technologies, Telecommunications,
Environmental Technologies and Life Sciences. Environ- Un- Con-
Display mental allocated soli- Tech- Telecom- Tech- Life and dated
nologies munications nologies Sciences Other Total ---------
----------- --------- -------- --------- -------- Three months
ended December 31, 2005 Net sales $ 518 $ 383 $ 142 $ 63 $ 94 $
1,200 Research, development and engineering expenses (1) $ 37 $ 25
$ 30 $ 15 $ 16 $ 123 Restructuring, impairment and other (credits)
and charges $ (84) $ (84) Interest expense (2) $ 15 $ 5 $ 5 $ 1 $
26 (Provision) benefit for income taxes $ (57) $ 3 $ 5 $ 3 $ (441)
$ (487) Income (loss) before minority interests and equity earnings
(3) $ 197 $ 70 $ (15) $ (12) $ (459) $ (219) Minority interests (4)
1 1 Equity in earnings of associated companies, net of impairments
(5) 131 (1) 56 186 --------- ----------- --------- --------
--------- -------- Net income (loss) $ 328 $ 70 $ (15) $ (12) $
(403) $ (32) ========= =========== ========= ======== =========
======== Three months ended December 31, 2004 Net sales $ 311 $ 423
$ 130 $ 71 $ 98 $ 1,033 Research, development and engineering
expenses (1) $ 26 $ 21 $ 23 $ 11 $ 17 $ 98 Restructuring,
impairment and other charges and (credits) $ 1 $ (6) $ (5) Interest
expense (2) $ 15 $ 9 $ 5 $ 1 $ 2 $ 32 (Provision) benefit for
income taxes $ (49) $ 4 $ 5 $ 6 $ (34) Income (loss) before
minority interests and equity earnings (3) $ 67 $ (9) $ (7) $ (18)
$ 33 Minority interests (4) 1 (4) (3) Equity in earnings of
associated companies, net of impairments (5) 84 (1) 1 49 133
--------- ----------- --------- -------- --------- -------- Net
income (loss) $ 151 $ (9) $ (6) $ 0 $ 27 $ 163 =========
=========== ========= ======== ========= ======== Year ended
December 31, 2005 Net sales $ 1,742 $ 1,623 $ 580 $ 282 $ 352 $
4,579 Research, development and engineering expenses (1) $ 121 $ 96
$ 114 $ 53 $ 59 $ 443 Restructuring, impairment and other (credits)
and charges $ (47) $ 9 $ (38) Interest expense (2) $ 55 $ 30 $ 20 $
4 $ 7 $ 116 (Provision) benefit for income taxes $ (151) $ 4 $ 7 $
6 $ (444) $ (578) Income (loss) before minority interests and
equity earnings (3) $ 679 $ 29 $ (26) $ (25) $ (663) $ (6) Minority
interests (4) 2 (9) (7) Equity in earnings of associated companies,
net of impairments (5) 416 5 177 598 --------- -----------
--------- -------- --------- -------- Net income (loss) $ 1,095 $
36 $ (26) $ (25) $ (495) $ 585 ========= =========== =========
======== ========= ======== Year ended December 31, 2004 Net sales
$ 1,113 $ 1,539 $ 548 $ 304 $ 350 $ 3,854 Research, development and
engineering expenses (1) $ 83 $ 90 $ 87 $ 38 $ 57 $ 355
Restructuring, impairment and other charges and (credits) $ 1,798 $
(9) $ 1,789 Interest expense (2) $ 52 $ 50 $ 22 $ 5 $ 12 $ 141
(Provision) benefit for income taxes $ (146) $ 29 $ (6) $ (908)
$(1,031) Income (loss) before minority interests and equity
earnings (3) $ 258 $ (1,862) $ 3 $ 12 $(1,022) $(2,611) Minority
interests (4) 2 (19) (17) Equity in earnings of associated
companies, net of impairments (5) 288 (33) 1 187 443 Income from
discontinued operations 20 20 --------- ----------- ---------
-------- --------- -------- Net income (loss) $ 546 $ (1,893) $ 4 $
12 $ (834) $(2,165) ========= =========== ========= ========
========= ======== (1) Non-direct research, development and
engineering expenses are allocated to segments based upon direct
project spending for each segment. (2) Interest expense is
allocated to segments based on a percentage of segment net
operating assets. (3) Many of Corning's administrative and staff
functions are performed on a centralized basis. Where practicable,
Corning charges these expenses to segments based upon the extent to
which each business uses a centralized function. Other staff
functions, such as corporate finance, human resources and legal are
allocated to segments, primarily as a percentage of sales. (4)
Minority interests reflect the following restructuring, impairment
and other charges and (credits): -- In 2005, gains of $4 million
for adjustments to prior years' restructuring and impairment
reserves associated with Corning Asahi Video Products Company
(CAV). -- In 2004, gains from the sale of CAV assets in excess of
assumed salvage value of $17 million, and reversals of CAV
severance reserves of $2 million. (5) Equity in earnings of
associated companies includes the following restructuring and
impairment charges: -- In 2005, a $106 million charge representing
Corning's share of Samsung Corning's impairment of certain
manufacturing assets and other charges. -- In the second quarter of
2005, Dow Corning Corporation recorded a gain on the issuance of
subsidiary stock. Our equity earnings included $11 million related
to this gain. -- In 2004, $35 million of charges to impair equity
method investments in the Telecommunications segment to their
estimated fair value. -- In 2004, Dow Corning Corporation recorded
charges related to restructuring actions and adjustments to
interest liabilities recorded on its emergence from bankruptcy. Our
equity earnings included $21 million related to these charges. *T
-0- *T CORNING INCORPORATED AND SUBSIDIARY COMPANIES SEGMENT
RESULTS (Unaudited; in millions) A reconciliation of reportable
segment net income (loss) to consolidated net income (loss) follows
(in millions): Three months Year ended ended December 31, December
31, ------------------ ----------------- 2005 2004 2005 2004
-------- -------- -------- -------- Net income (loss) of reportable
segments $ 371 $ 136 $ 1,080 $(1,331) Non-reportable operating
segments net (loss) income (1) (4) 6 (100) 16 Unallocated amounts:
Non-segment loss and other (2) (14) (3) (21) (13) Non-segment
restructuring, impairment and other (charges) and credits (3) (1)
(25) 4 Asbestos settlement (8) (17) (197) (33) Interest income 21 9
61 25 Loss on repurchases of debt (4) (16) (36) Provision for
income taxes (4) (444) (2) (451) (933) Equity in earnings of
associated companies (5) 50 35 254 116 Income from discontinued
operations 20 -------- -------- -------- -------- Net (loss) income
$ (32) $ 163 $ 585 $(2,165) ======== ======== ======== ======== (1)
Non-reportable operating segments net (loss) income includes the
results of non-reportable operating segments. In 2005, we recorded
a charge of $106 million for our share of Samsung Corning's
impairment of certain manufacturing assets and other charges for
severance and exit costs. (2) Non-segment loss and other includes
the results of non-segment operations and other corporate
activities. (3) For 2005, non-segment restructuring, impairment and
other (charges) and credits includes impairment charges for the
other than temporary decline in the market value of Avanex shares.
(4) Provision for income taxes includes tax associated with
non-segment restructuring, impairment and other (charges) and
credits. We recognized a net $443 million charge to tax expense in
2005 which was primarily to increase the valuation allowance
against deferred tax assets. In 2004, we increased our valuation
allowance by $937 million. Refer to Note 4 (Provision for Income
Taxes). (5) Equity in earnings of associated companies includes
equity earnings in Dow Corning Corporation. *T -0- *T CORNING
INCORPORATED AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited) 1. Restructuring, Impairment and
Other Charges and (Credits) In the fourth quarter of 2005, we
recorded a gain of $84 million (pretax and after-tax) for the
reversal of the cumulative translation account of O.T.I. S.r.l.
(OTI), a wholly-owned foreign subsidiary of Corning, upon OTI's
substantial liquidation. The photonics' business in Milan, Italy,
was the sole operation of OTI, whose results were included in the
Telecommunications segment. Subsequent to Corning's agreement to
sell its photonics business operations to Avanex in 2003, Corning
began liquidating OTI. In October 2005, the assets were
substantially liquidated and OTI's cumulative translation account
was reversed. 2. Asbestos Settlement On March 28, 2003, we
announced that we had reached agreement with the representatives of
asbestos claimants for the settlement of all current and future
asbestos claims against us and Pittsburgh Corning Corporation
(PCC), which might arise from PCC products or operations.
Accordingly, we recorded a charge of $298 million in the first
quarter of 2003. The charge included the value of 25 million shares
of Corning common stock that we will contribute as part of the
settlement if the PCC plan of reorganization is approved and
becomes effective. Also at that time, we indicated that any changes
in the value of our common stock contribution would be recognized
in our quarterly results through the date of contribution to the
settlement trust. As required, we recorded a mark-to-market charge
of $8 million (pretax and after-tax) in the fourth quarter of 2005
reflecting the increase in Corning's common stock from September
30, 2005 to December 31, 2005. Beginning with the first quarter of
2003, we have recorded total net charges of $643 million to reflect
the initial settlement and to mark-to-market the value of our
common stock. 3. Loss on Repurchases and Retirement of Debt, Net In
the fourth quarter of 2005, we redeemed for cash the $277 million
principal amount of our zero coupon convertible debentures. We
recognized a loss of $4 million (pretax and after-tax) on this
transaction. 4. Provision for Income Taxes In the fourth quarter of
2005, we recognized a net $443 million tax expense charge which was
primarily to increase the valuation allowance against deferred tax
assets. This adjustment resulted primarily from our conclusion that
the sale of an appreciated asset was no longer prudent, and
correspondingly, no longer met the criteria for a viable tax
planning strategy in Statement of Financial Accounting Standard No.
109, Accounting for Income Taxes. In 2004, we increased our
valuation allowance by $937 million. 5. Weighted Average Shares
Outstanding Our weighted average shares outstanding are as follows
(in millions): Three months ended Year ended December 31, December
31, ------------------ ------------------ 2005 2004 2005 2004
-------- -------- -------- -------- Basic 1,524 1,404 1,464 1,386
Diluted 1,524 1,510 1,535 1,386 Diluted used for non-GAAP measures
1,571 1,510 1,539 1,497 *T -0- *T CORNING INCORPORATED AND
SUBSIDIARY COMPANIES QUARTERLY SALES INFORMATION (Unaudited; in
millions) 2005 ----------------------------------------- Three
Months Ended --------------------------------- March 31 June 30
Sept. 30 Dec. 31 Total -------- ------- -------- ------- -------
Display Technologies $ 320 $ 415 $ 489 $ 518 $1,742
Telecommunications Fiber and cable 212 213 216 193 834 Hardware and
equipment 215 202 182 190 789 -------- ------- -------- -------
------- 427 415 398 383 1,623 Environmental Technologies Automotive
127 125 121 109 482 Diesel 21 21 23 33 98 -------- ------- --------
------- ------- 148 146 144 142 580 Life Sciences 74 75 70 63 282
Other 81 90 87 94 352 -------- ------- -------- ------- -------
Total $ 1,050 $1,141 $ 1,188 $1,200 $4,579 ======== =======
======== ======= ======= 2004
----------------------------------------- Three Months Ended
--------------------------------- March 31 June 30 Sept. 30 Dec. 31
Total -------- ------- -------- ------- ------- Display
Technologies $ 230 $ 277 $ 295 $ 311 $1,113 Telecommunications
Fiber and cable 149 192 202 212 755 Hardware and equipment 163 200
210 211 784 -------- ------- -------- ------- ------- 312 392 412
423 1,539 Environmental Technologies Automotive 125 121 120 113 479
Diesel 16 20 16 17 69 -------- ------- -------- ------- ------- 141
141 136 130 548 Life Sciences 79 79 75 71 304 Other 82 82 88 98 350
-------- ------- -------- ------- ------- Total $ 844 $ 971 $ 1,006
$1,033 $3,854 ======== ======= ======== ======= ======= The above
supplemental information is intended to facilitate analysis of
Corning's businesses. *T -0- *T CORNING INCORPORATED AND SUBSIDIARY
COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP
FINANCIAL MEASURE Three Months Ended December 31, 2005 (Unaudited;
amounts in millions, except per share amounts)
----------------------------------------------------------------------
Corning's net income and earnings per share (EPS) excluding special
items for the fourth quarter of 2005 are non-GAAP financial
measures within the meaning of Regulation G of the Securities and
Exchange Commission. Non-GAAP financial measures are not in
accordance with, or an alternative to, generally accepted
accounting principles (GAAP). The company believes presenting
non-GAAP net income and EPS is helpful to analyze financial
performance without the impact of unusual items that may obscure
trends in the company's underlying performance. A detailed
reconciliation is provided below outlining the differences between
these non-GAAP measures and the directly related GAAP measure.
----------------------------------------------------------------------
Per Income Before Net Share Income Taxes Income (Loss) -------
------------- ------------- Earnings per share (EPS) and net
income, excluding special items $ 0.22 $ 196 $ 339 Special items:
Restructuring, impairment and other (charges) and credits (a) 0.05
84 84 Asbestos settlement (b) (0.01) (8) (8) Loss on repurchases
and retirements of debt, net (c) (4) (4) Provision for taxes (d)
(0.28) (443) ------- ----------- ------------ Total EPS and net
income (loss) $(0.02) $ 268 $ (32) ======= =========== ============
(a) Corning recorded a gain of $84 million (before- and after-tax)
for the reversal of the cumulative translation account of a wholly-
owned foreign subsidiary that was substantially liquidated. (b) As
part of Corning's asbestos settlement arrangement to be
incorporated into the Pittsburgh Corning Corporation reorganization
plan, Corning will contribute, when the reorganization plan becomes
effective, 25 million shares of Corning common stock to a trust.
This portion of the asbestos liability requires quarterly
adjustment based upon movements in Corning's common stock price
prior to contribution of the shares to the trust. In the fourth
quarter of 2005, Corning recorded a charge of $8 million for the
change in its common stock price of $19.66 at December 31, 2005
compared to $19.33 the common stock price at September 30, 2005.
(c) Corning recorded a loss of $4 million (before- and after-tax)
for the cash redemption of $277 million principal amount of zero-
coupon convertible debentures. (d) Amount reflects a net $443
million charge to tax expense in 2005 which was primarily to
increase the valuation allowance against deferred tax assets
resulting from our conclusion that the sale of an appreciated asset
no longer met the criteria for a viable tax planning strategy. *T
-0- *T CORNING INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION
OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Year Ended
December 31, 2005 (Unaudited; amounts in millions, except per share
amounts)
----------------------------------------------------------------------
Corning's net income and earnings per share (EPS) excluding special
items for the year ended December 31, 2005 are non-GAAP financial
measures within the meaning of Regulation G of the Securities and
Exchange Commission. Non-GAAP financial measures are not in
accordance with, or an alternative to, generally accepted
accounting principles (GAAP). The company believes presenting
non-GAAP net income and EPS is helpful to analyze financial
performance without the impact of unusual items that may obscure
trends in the company's underlying performance. A detailed
reconciliation is provided below outlining the differences between
these non-GAAP measures and the directly related GAAP measures.
----------------------------------------------------------------------
Per Income (Loss) Before Net Share Income Taxes Income (Loss)
------- -------------------- ------------- Earnings per share (EPS)
and net income, excluding special items $ 0.85 $ 747 $ 1,302
Special items: Restructuring, impairment and other (charges) and
credits (a) 0.02 38 34 Asbestos settlement (b) (0.13) (197) (197)
Loss on repurchases and retirement of debt, net (c) (0.01) (16)
(16) (Provision) benefit for income taxes (d) (0.29) (443) Equity
in earnings of associated companies, net of impairments (e) (0.06)
(95) ------- ------------------ ------------ Total EPS and net loss
$ 0.38 $ 572 $ 585 ======= ================== ============ (a)
Amount reflects the following items: a gain of $84 million (before-
and after-tax) for the reversal of the cumulative translation
account of a wholly-owned foreign subsidiary that was substantially
liquidated; an impairment charge of $25 million (before- and
after-tax) for the other-than-temporary decline in our investment
in Avanex below its cost basis; and net charges of $38 million ($34
million after-tax and minority interest) for restructuring costs
primarily associated with the telecommunications segment. (b) As
part of Corning's asbestos settlement arrangement to be
incorporated into the Pittsburgh Corning Corporation reorganization
plan, Corning will contribute, when the reorganization plan becomes
effective, 25 million shares of Corning common stock to a trust.
This portion of the asbestos liability requires quarterly
adjustment based upon movements in Corning's common stock price
prior to contribution of the shares to the trust. For 2005, Corning
recorded a charge of $197 million (before- and after-tax) for the
change in its common stock price of $19.66 at December 31, 2005
compared to $11.77, the common stock price at December 31, 2004.
(c) Corning recorded a loss of $16 million (before- and after-tax)
associated with the cash redemption of $377 million principal
amount of debentures. (d) Amount reflects a net $443 million charge
to tax expense in 2005 which was primarily to increase the
valuation allowance against deferred tax assets resulting from our
conclusion that the sale of an appreciated asset no longer met the
criteria for a viable tax planning strategy. (e) Amount is
primarily the result of Corning's $106 million share of an
impairment charge taken by Samsung Corning Co., Ltd., a South
Korea-based manufacturer of glass panels and funnels for cathode
ray tube television and display monitors, for certain of its
manufacturing assets and severance and exit costs. *T -0- *T
CORNING INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION OF
NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Year Ended
December 31, 2004 (Unaudited; amounts in millions, except per share
amounts)
----------------------------------------------------------------------
Corning's net income and earnings per share (EPS) excluding special
items for the year ended December 31, 2004 are non-GAAP financial
measures within the meaning of Regulation G of the Securities and
Exchange Commission. Non-GAAP financial measures are not in
accordance with, or an alternative to, generally accepted
accounting principles (GAAP). The company believes presenting
non-GAAP net income and EPS is helpful to analyze financial
performance without the impact of unusual items that may obscure
trends in the company's underlying performance. A detailed
reconciliation is provided below outlining the differences between
these non-GAAP measures and the directly related GAAP measures.
----------------------------------------------------------------------
Per Income (Loss) Before Net Share Income Taxes Income (Loss)
------- -------------------- ------------- Earnings per share (EPS)
and net income, excluding special items $ 0.45 $ 278 $ 674 Special
items: Restructuring, impairment and other (charges) and credits
(a) (1.29) (1,789) (1,802) Asbestos settlement (b) (0.01) (33) (30)
Loss on repurchases and retirement of debt, net (c) (0.02) (36)
(34) (Provision) benefit for income taxes (d) (0.67) (937) Equity
in earnings of associated companies, net of impairments (e) (0.03)
(56) Income from discontinued operations (f) 0.01 20 -------
-------------- ------------ Total EPS and net loss $(1.56) $
(1,580) $ (2,165) ======= ============== ============ (a) Corning
recorded charges of $1.789 billion ($1.802 billion after- tax and
minority interest) primarily related to the impairment of goodwill
and fixed assets in the Telecommunications segment. (b) As part of
Corning's asbestos settlement arrangement to be incorporated into
the Pittsburgh Corning Corporation reorganization plan, Corning
will contribute, when the reorganization plan becomes effective, 25
million shares of Corning common stock to a trust. This portion of
the asbestos liability requires quarterly adjustment based upon
movements in Corning's common stock price prior to contribution of
the shares to the trust. For 2004, Corning recorded a charge of $33
million ($30 million after-tax) for the change in its common stock
price of $11.77 at December 31, 2004 compared to $10.43, the common
stock price at December 31, 2003. (c) During 2004, Corning retired
a significant portion of long-term debt, resulting in a loss of $36
million ($34 million after-tax). (d) In the third quarter of 2004,
Corning increased income tax expense by $937 million as a result of
the company's decision to provide a valuation allowance against a
significant portion of its deferred tax assets. (e) This amount
reflects charges of $35 million for impairments of certain
non-strategic equity method investments in Corning's
Telecommunications segment and $21 million related to restructuring
actions and bankruptcy actions and bankruptcy related charges
recorded by Dow Corning Corporation. (f) This gain relates to the
final settlement of escrowed proceeds from the 2002 sale of
Corning's precision lens business to 3M Company. *T -0- *T CORNING
INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP
FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Three Months Ended
March 31, 2006 (Unaudited; amounts in millions, except per share
amounts)
----------------------------------------------------------------------
Corning's earnings per share (EPS) excluding special items for the
first quarter of 2006 is a non-GAAP financial measure within the
meaning of Regulation G of the Securities and Exchange Commission.
Non-GAAP financial measures are not in accordance with, or an
alternative to, generally accepted accounting principles (GAAP).
The company believes presenting non-GAAP EPS is helpful to analyze
financial performance without the impact of unusual items that may
obscure trends in the company's underlying performance. A detailed
reconciliation is provided below outlining the differences between
this non-GAAP measure and the directly related GAAP measure.
----------------------------------------------------------------------
Range ------------- Guidance: EPS excluding special items $ 0.21 $
0.23 Special items: Restructuring, impairment and other (charges)
and credits (a) Asbestos settlement (b) (Loss) gain on repurchases
and retirements of debt, net ------ ------ Earnings per share
----------------------------------------------------------------
This schedule will be updated as additional announcements occur.
----------------------------------------------------------------
(a) From time to time, Corning may need to make adjustments to
estimates used in the determination of prior year restructuring and
impairment charges, which could result in a gain or loss during the
quarter. (b) As part of Corning's asbestos settlement arrangement
to be incorporated into the Pittsburgh Corning Corporation
reorganization plan, Corning will contribute, when the
reorganization plan becomes effective, 25 million shares of Corning
common stock to a trust. The common stock will be contributed to
the trust, after the plan has been approved by the asbestos
claimants and bankruptcy court. The portion of the asbestos
liability to be settled in common stock requires adjustment each
quarter based upon movements in Corning's common stock price prior
to contribution of the shares to the trust. In the first quarter of
2006, Corning will record a charge or credit for the change in its
common stock price as of March 31, 2006 compared to $19.66, the
common stock price at December 31, 2005. Please note that the
company may pursue other financing, restructuring and divestiture
activities at any time in the future, and that the potential impact
of these events is not included within Corning's first quarter 2006
guidance. This schedule contains forward looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Such forward looking statements are based on current
expectations and involve certain risks and uncertainties. Actual
results may differ from those projected in the forward looking
statements. Additional information concerning factors that could
cause actual results to materially differ from those in the forward
looking statements is contained in the Securities and Exchange
Commission filings of this company. *T -0- *T CORNING INCORPORATED
AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE Three Months and Year Ended
December 31, 2005 (Unaudited; amounts in millions)
----------------------------------------------------------------------
Corning's free cash flow financial measure for the three months and
year ended December 31, 2005 are non-GAAP financial measures within
the meaning of Regulation G of the Securities and Exchange
Commission. Non-GAAP financial measures are not in accordance with,
or an alternative to, generally accepted accounting principles
(GAAP). The company believes presenting non-GAAP financial measures
is helpful to analyze financial performance without the impact of
unusual items that may obscure trends in the company's underlying
performance. A detailed reconciliation is provided below outlining
the differences between these non-GAAP measures and the directly
related GAAP measures.
----------------------------------------------------------------------
Three months ended Year ended December 31, 2005 December 31, 2005
------------------ ----------------- Operating cash flow $ 659 $
1,939 Less: Investing cash flow (516) (1,712) Plus: Short-term
investments - acquisitions 355 1,668 Less: Short-term investments -
liquidations (289) (1,452) ------------- ------------- Free cash
flow $ 209 $ 443 ============= ============= *T
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