Corning Incorporated (NYSE:GLW) today announced its results for
the third quarter of 2010.
Third-Quarter Highlights
- Sales were $1.6 billion, a 6%
sequential decline, but an 8% increase year over year.
- Earnings per share were $0.50.
Excluding special items, earnings were $0.51,* a 12% sequential
decline, but 21% increase year over year.
- Display Technologies’ combined glass
volume, which includes its wholly owned business and Samsung
Corning Precision Materials Co., Ltd., declined 8% sequentially —
in line with the worldwide glass market — but increased 7% year
over year.
- Specialty Materials sales increased 26%
sequentially and 77% year over year driven by strong sales in
Corning® Gorilla® Glass and advanced optics.
- Gross margin was 45%, lower than
second-quarter gross margin of 48%, but an increase of 4% from a
year ago.
Quarter Three Financial
Comparisons
Q3 2010 Q2 2010
% Change Q3 2009 % Change
Net Sales inmillions
$1,602 $1,712 (6%)
$1,479 8%
Net Incomein millions
$785 $913 (14%)
$643 22%
Non-GAAPNet Incomein millions*
$808 $916 (12%)
$654 24% GAAP EPS
$0.50 $0.58 (14%)
$0.41 22%
Non-GAAPEPS*
$0.51 $0.58 (12%)
$0.42 21%
*These are non-GAAP financial measures. The reconciliation
between GAAP and non-GAAP measures is provided in the tables
following this news release, as well as on the company’s investor
relations Web site.
Remarking on the third-quarter performance, Wendell P. Weeks,
chairman and chief executive officer, said, “Nearly all of our
businesses had strong performances this past quarter. We are very
pleased with the expanding market pull for Corning® Gorilla® Glass,
the renewed strength in automotive and diesel emissions control
products sales, and the continued demand for fiber-to-the-home and
data center solutions from our telecommunications business
customers.
“And while our LCD glass business adjusted with the supply chain
correction that occurred in the third quarter, global retail demand
for LCD products continued to show year-over-year growth in all
markets other than televisions in the U.S.”
Third-Quarter Segment Results
Sales in the Display Technologies segment were $645 million,
declining 23% sequentially and 5% year over year. Volume at the
company’s wholly owned business declined about 25% sequentially and
5% year over year. Display Technologies’ performance benefited from
a favorable Japanese yen-to-U.S. dollar exchange rate in the
quarter. Glass price declines in the third quarter were comparable
to the second quarter.
Samsung Corning Precision Materials’ volume was up 5% on a
quarterly basis and 14% year over year.
Telecommunications segment sales were $464 million, an increase
of 5% sequentially and 3% year over year. The improved performance
was driven by continued demand for fiber-to-the-home products in
North America and enterprise data center solutions globally.
Environmental Technologies segment sales were $208 million, a
13% quarterly and 25% year-over-year improvement. The company saw
continued growth in both automotive and diesel emissions control
products. The business improved its manufacturing performance in
the quarter and continues to work toward increasing capacity to
meet higher product demand.
Specialty Materials segment sales were $159 million, a 26%
increase from the second quarter and 77% improvement year over
year. Corning’s Gorilla Glass drove much of the quarter increase,
but the segment also saw improved sales in its advanced optics
business.
Life Sciences segment sales were $125 million, even with the
previous quarter, and a 36% improvement year over year. This
improvement was driven mostly by the acquisition of Axygen
Biosciences, Inc. which occurred in September of last year.
Corning’s equity earnings totaled $504 million, compared with
$474 million in the previous quarter and $418 million a year
ago.
Looking Forward
“We have seen a modest increase in utilization rates at the
Taiwanese panel makers in October,” said James B. Flaws, vice
chairman and chief financial officer. “We believe this is in
response to lower panel inventory levels and expectations for good
worldwide retail demand during the upcoming holiday season. Our
glass demand forecast is based on the assumption panel maker
utilization rates will remain modestly higher the remainder of the
fourth quarter in comparison to a much weaker September.
“However, panel maker utilization rates this quarter may not
rebound to the level they were prior to the inventory correction.
As a result, we anticipate worldwide glass market demand could be
flat to down slightly quarter to quarter,” Flaws said.
The company expects the movement in combined glass volume at
both its wholly owned business and SCP to be in line with the
market in the fourth quarter.
Flaws added, “We expect glass pricing at both our wholly owned
business and SCP to decline in the mid-single digit range in the
fourth quarter. This decline would be more than previous quarters
and reflects pricing pressure caused by the current imbalance of
glass supply and demand.”
Following a strong third quarter, Corning expects fourth-quarter
Telecommunications segment sales to experience a seasonal decline
of about 10%, consistent with historical fourth-quarter
performance. Environmental Technologies segment fourth-quarter
sales are expected to be similar to the third quarter as growth in
diesel offsets normal seasonal declines in the auto business.
Specialty Materials segment sales are expected to grow 10% to 20%
in the fourth quarter, driven primarily by continued strength in
Corning® Gorilla® Glass sales for smartphones, slates, and other
computing devices. Life Sciences segment sales, excluding the
impact of its recent acquisition, are expected to be down slightly,
due to seasonal adjustments.
“We typically experience seasonal declines in many of our
businesses in the fourth quarter which will reduce profits
somewhat,” Flaws said. “Overall, the global display business
continues to do quite well at the retail level and if this
continues, coupled with the current utilization rates at panel
makers, we expect the supply chain to exit the year with normal
inventories. Of course, we must remain cautious about the potential
negative impacts that global economic conditions could have on
future retail trends.”
Corning ended the third quarter with $5 billion in cash and
short-term investments, up from $4.3 billion last
quarter. Looking ahead, the company expects to repatriate
approximately $1.1 billion in cash from non-U.S. locations in the
fourth quarter. The company also revised its 2010 capital
expenditure guidance, from $1.2 billion to $1 billion this
year. The company made no changes to its expectations for 2011
capital spending, which is forecasted to be more than $2 billion.
“We expect to end the year with our balance sheet in great shape.
This will provide us with significant financial flexibility
for 2011," Flaws said.
In other matters, Corning has decided to discontinue its
development and commercialization of synthetic green lasers. Given
the rapid development of native green technology, the company
concluded that the market for synthetic green lasers is
limited.
“We have made excellent progress in a number of our businesses
this year. Corning® Gorilla® Glass sales for IT and handheld
devices are exceeding our expectations and we anticipate starting
shipments of TV cover glass this quarter. We are encouraged by the
strength of the telecommunications market, especially with regard
to our Pretium EDGE™ data center solutions and fiber-to-the-home
products. Additionally, we have made significant progress in our
thin-film photovoltaic development program. And we are improving
our manufacturing performance and capacity to meet the strengthened
demand we are seeing for our automotive and diesel engine emissions
control solutions,” Flaws concluded.
Upcoming Meetings
Corning will host an open luncheon for investors in Toronto,
Canada on Wednesday, Nov. 3. For information on how to attend the
luncheon, contact Corning’s Investor Relations Department. The
company will present at the Barclays Technology Conference in San
Francisco Dec. 8, and Corning will host its annual investor meeting
Friday, Feb. 4 beginning at 8 a.m. in New York.
Third-Quarter Conference Call Information
The company will host a third-quarter conference call on Monday,
Nov. 1 at 8:30 a.m. ET. To participate, please call toll free (800)
553-0288 or for international access call (612) 332-0630
approximately 10-15 minutes prior to the start of the call. The
password is ‘QUARTER THREE’. The host is ‘SOFIO’. To listen to a
live audio webcast of the call, go to Corning’s Web site at
www.corning.com/investor_relations and click Investor Events on the
left. A replay will be available beginning at 10:30 a.m. ET and
will run through 5:00 p.m. ET, Monday, Nov. 15, 2010. To listen,
dial (800) 475-6701 or for international access call (320)
365-3844. The access code is 174406. The 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
measures exclude restructuring, impairment and other charges and
adjustments to prior estimates for such charges. Additionally, the
company’s non-GAAP measures exclude adjustments to asbestos
settlement reserves, gains and losses arising from debt
retirements, charges or credits arising from adjustments to the
valuation allowance against deferred tax assets, equity method
charges resulting from impairments of equity method investments or
restructuring, impairment or other charges taken by equity method
companies and gains from discontinued operations. The company
believes presenting non-GAAP net income and EPS measures is helpful
to analyze financial performance without the impact of unusual
items that may obscure trends in the company’s underlying
performance. Reconciliation of these non-GAAP measures can be found
on the company’s Web site by going to
www.corning.com/investor_relations and clicking Financial Reports
on the left. Reconciliation also accompanies this news release.
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements” (within
the meaning of the Private Securities Litigation Reform Act of
1995), which are based on current expectations and assumptions
about Corning’s financial results and business operations, that
involve substantial risks and uncertainties that could cause actual
results to differ materially. These risks and uncertainties
include: the effect of global political, economic and business
conditions; conditions in the financial and credit
markets; currency fluctuations; tax rates; product demand
and industry capacity; competition; reliance on a concentrated
customer base; manufacturing efficiencies; cost reductions;
availability of critical components and materials; new product
commercialization; pricing fluctuations and changes in
the mix of sales between premium and non-premium products; new
plant start-up or restructuring costs; possible
disruption in commercial activities due to terrorist activity,
armed conflict, political or financial instability, natural
disasters, adverse weather conditions, or major health concerns;
adequacy of insurance; 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; retention of key
personnel; stock price fluctuations; and adverse litigation or
regulatory developments. These and other risk factors
are detailed 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.
About Corning Incorporated
Corning Incorporated (www.corning.com) is the world leader in
specialty glass and ceramics. Drawing on more than 150 years of
materials science and process engineering knowledge, Corning
creates and makes keystone components that enable high-technology
systems for consumer electronics, mobile emissions control,
telecommunications and life sciences. Our products include glass
substrates for LCD televisions, computer monitors and laptops;
ceramic substrates and filters for mobile emission control systems;
optical fiber, cable, hardware & equipment for
telecommunications networks; optical biosensors for drug discovery;
and other advanced optics and specialty glass solutions for a
number of industries including semiconductor, aerospace, defense,
astronomy and metrology.
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CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited; in millions, except per share
amounts)
Three months ended Nine months ended September 30,
September 30, 2010 2009 2010 2009
Net sales $ 1,602 $ 1,479 $ 4,867 $ 3,863 Cost of sales
878 880 2,585
2,419 Gross margin 724 599 2,282 1,444
Operating expenses: Selling, general and administrative expenses
250 219 731 637 Research, development and engineering expenses 148
131 437 418 Amortization of purchased intangibles 2 3 6 8
Restructuring, impairment and other (credits) and charges (1 ) 10
(3 ) 175 Asbestos litigation charge (credit) (Note 1) 6
6 (41 ) 15
Operating income 319 230 1,152 191 Equity in earnings of
affiliated companies 504 418 1,447 974 Interest income 3 4 8 16
Interest expense (29 ) (24 ) (81 ) (58 )
Other-than-temporary impairment (OTTI) losses: Changes in total
OTTI losses 2 (11 ) (4 ) (25 ) Changes in OTTI recognized in other
comprehensive income (before taxes) (2 ) 10
3 23 Net OTTI losses recognized in
earnings 0 (1 ) (1 ) (2 ) Other income, net (Note 2)
2 48 131 109
Income before income taxes 799 675 2,656 1,230 (Provision)
benefit for income taxes (14 ) (32 ) (142 )
38 Net income attributable to Corning
Incorporated $ 785 $ 643 $ 2,514 $ 1,268
Earnings per common share attributable to Corning
Incorporated: Basic (Note 3) $ 0.50 $ 0.41 $ 1.61
$ 0.82 Diluted (Note 3) $ 0.50 $ 0.41 $
1.59 $ 0.81 Dividends declared per common share $
0.05 $ 0.05 $ 0.15 $ 0.15 See
accompanying notes to these financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share
amounts)
September 30, December 31, 2010 2009
Assets Current assets: Cash and cash equivalents $
3,302 $ 2,541 Short-term investments, at fair value 1,727
1,042 Total cash, cash equivalents and
short-term investments 5,029 3,583 Trade accounts receivable, net
of doubtful accounts and allowances 854 753 Inventories 712 579
Deferred income taxes 455 235 Other current assets 313
371 Total current assets 7,363 5,521
Investments 5,194 3,992 Property, net of accumulated depreciation
8,526 7,995 Goodwill and other intangible assets, net 668 676
Deferred income taxes 2,792 2,982 Other assets 127
129
Total Assets $ 24,670 $
21,295
Liabilities and Equity Current
liabilities: Current portion of long-term debt $ 25 $ 74 Accounts
payable 720 550 Other accrued liabilities 949
915 Total current liabilities 1,694 1,539 Long-term
debt 2,390 1,930 Postretirement benefits other than pensions 829
858 Other liabilities 1,290 1,373 Total
liabilities 6,203 5,700
Commitments and contingencies Shareholders’ equity:
Common stock - Par value $0.50 per
share;
Shares authorized: 3.8 billion;
Shares issued: 1,624 million and 1,617 million 812 808 Additional
paid-in capital 12,833 12,707 Retained earnings 5,916 3,636
Treasury stock, at cost; Shares held: 65 million and 64 million
(1,226 ) (1,207 ) Accumulated other comprehensive income (loss)
81 (401 ) Total Corning Incorporated
shareholders' equity 18,416 15,543
Noncontrolling interests 51 52 Total
equity 18,467 15,595
Total
Liabilities and Equity $ 24,670 $ 21,295
See accompanying notes to these financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited; in millions)
Three months ended Nine months ended
September 30, September 30, 2010 2009 2010
2009
Cash Flows from Operating Activities: Net income
$ 785 $ 643 $ 2,514 $ 1,268 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation 212 227
624 586 Amortization of purchased intangibles 2 3
6 8 Asbestos litigation charges (credits) 6 6
(41 ) 15 Restructuring, impairment and other (credits) charges (1 )
10 (3 ) 175 Loss on retirement of debt 30 30 Stock compensation
charges 22 30
77 97 Undistributed earnings of affiliated companies (438 ) (398 )
(1,096 ) (535 ) Deferred tax benefit (25 ) (30 )
(15 ) (169 ) Restructuring payments (8 ) (17 )
(58 ) (71 ) Credits issued against customer deposits (8 ) (42 )
(76 ) (207 ) Employee benefit payments (in excess of) less than
expense (53 ) (22 )
(81 ) 12 Changes in certain working capital items: Trade accounts
receivable 131 16
(62 ) (265 ) Inventories (85 ) 66
(147 ) 204 Other current assets (15 ) 55
25 13 Accounts payable and other current liabilities, net of
restructuring payments 7 45
8 24 Other, net (134 ) (60 )
38 9
Net cash provided by operating
activities 428 532
1,743 1,164
Cash Flows from
Investing Activities: Capital expenditures (225 ) (236 )
(534 ) (727 ) Acquisitions of business, net of cash received (410 )
(410 ) Net proceeds from sale or disposal of assets 1 1 15
Short-term investments - acquisitions (1,106 ) (471 ) (2,000 ) (876
) Short-term investments - liquidations 424 343
1,318 859 Other, net 4 6
Net cash used in investing activities
(902 ) (774 )
(1,209 ) (1,139 )
Cash Flows from Financing
Activities: Net repayments of short-term borrowings and current
portion of long-term debt (9 ) (18 )
(70 ) (84 ) Principal payments under capital lease obligations (1 )
(1 )
(1 ) (10 ) Proceeds from issuance of long-term debt, net 689 689
346 Retirements of long-term debt, net (264 ) (264 ) Proceeds from
issuance of common stock, net 6
15 18 Proceeds from the exercise of stock options 10 4
39 8 Dividends paid (79 ) (78 ) (235 ) (234 ) Other, net
3
Net cash provided by (used in) financing
activities 346 (87 )
173 47 Effect of exchange rates on cash
216 57
54 17 Net increase (decrease) in cash and cash
equivalents 88 (272 )
761 89 Cash and cash equivalents at beginning of period
3,214 2,234
2,541 1,873
Cash and cash
equivalents at end of period $ 3,302 $ 1,962 $
3,302 $ 1,962
CORNING INCORPORATED
AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
Our reportable operating segments include Display
Technologies, Telecommunications, Environmental Technologies,
Specialty Materials and Life Sciences.
Display Telecom- Environmental
Specialty Life All Technologies munications Technologies Materials
Sciences Other Total
Three months ended September
30, 2010 Net sales $ 645 $ 464 $ 208 $ 159 $ 125 $ 1 $ 1,602
Depreciation (1) $ 129 $ 27 $ 26 $ 20 $ 8 $ 3 $ 213 Amortization of
purchased intangibles $ 2 $ 2 Research, development and engineering
expenses (2) $ 22 $ 27 $ 24 $ 25 $ 5 $ 24 $ 127 Restructuring,
impairment and other credits $ (1 ) $ (1 ) Equity in earnings of
affiliated companies $ 386 $ 1 $ 16 $ 403 Income tax (provision)
benefit $ (108 ) $ (20 ) $ (5 ) $ 2 $ (7 ) $ 10 $
(128 ) Net income (loss) (3) $ 648 $ 41 $ 11 $
(5 ) $ 13 $ (12 ) $ 696
Three months
ended September 30, 2009 Net sales $ 679 $ 450 $ 167 $
90 $ 92 $ 1 $ 1,479 Depreciation (1) $ 146 $ 35 $ 25 $ 13 $ 5 $ 3 $
227 Amortization of purchased intangibles $ 3 $ 3 Research,
development and engineering expenses (2) $ 19 $ 21 $ 30 $ 17 $ 3 $
20 $ 110 Restructuring, impairment and other (credits) charges $ (5
) $ 3 $ (1 ) $ 1 $ (2 ) Equity in earnings of affiliated companies
$ 317 $ 2 $ 3 $ 322 Income tax (provision) benefit $ (83 ) $ (11 )
$ 3 $ 6 $ (6 ) $ 7 $ (84 ) Net income (loss)
(3) $ 600 $ 21 $ (4 ) $ (11 ) $ 12 $ (17 ) $
601
Nine months ended September 30,
2010 Net sales $ 2,261 $ 1,269 $ 584 $ 381 $ 368 $ 4 $ 4,867
Depreciation (1) $ 386 $ 89 $ 77 $ 43 $ 24 $ 9 $ 628 Amortization
of purchased intangibles $ 1 $ 5 $ 6 Research, development and
engineering expenses (2) $ 66 $ 84 $ 70 $ 61 $ 13 $ 80 $ 374
Restructuring, impairment and other credits $ (1 ) $ (2 ) $ (3 )
Equity in earnings of affiliated companies $ 1,083 $ 1 $ 5 $ 32 $
1,121 Income tax (provision) benefit $ (391 ) $ (38 ) $ (12 ) $ 14
$ (24 ) $ 34 $ (417 ) Net income (loss) (3) $ 2,107
$ 79 $ 27 $ (29 ) $ 48 $ (46 ) $ 2,186
Nine months ended September 30, 2009
Net sales $ 1,709 $ 1,272 $ 409 $ 221 $ 249 $ 3 $ 3,863
Depreciation (1) $ 359 $ 99 $ 74 $ 35 $ 13 $ 9 $ 589 Amortization
of purchased intangibles $ 8 $ 8 Research, development and
engineering expenses (2) $ 60 $ 68 $ 87 $ 40 $ 8 $ 90 $ 353
Restructuring, impairment and other charges $ 29 $ 15 $ 22 $ 17 $ 8
$ 4 $ 95 Equity in earnings (loss) of affiliated companies $ 781 $
(4 ) $ 6 $ 31 $ 814 Income tax (provision) benefit $ (184 ) $ (24 )
$ 31 $ 25 $ (14 ) $ 32 $ (134 ) Net income
(loss) (3) $ 1,373 $ 38 $ (57 ) $ (48 ) $ 29 $
(51 ) $ 1,284 (1) Depreciation expense for Corning’s
reportable segments includes an allocation of depreciation of
corporate property not specifically identifiable to a segment.
(2) Research, development, and engineering expense includes
direct project spending which is identifiable to a segment.
(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.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
A reconciliation of reportable segment net income to
consolidated net income follows (in millions): Three
months ended Nine months ended September 30, September 30,
2010 2009 2010 2009 Net income
of reportable segments $ 708 $ 618 $ 2,232 $ 1,335
Non-reportable segments (12 ) (17 ) (46 ) (51 ) Unallocated
amounts: Net financing costs (1) (47 ) (35 ) (137 ) (86 )
Stock-based compensation expense (22 ) (30 ) (77 ) (97 )
Exploratory research (15 ) (15 ) (44 ) (46 ) Corporate
contributions (7 ) (8 ) (26 ) (23 ) Equity in earnings of
affiliated companies, net of impairments (2) 101 96 326 160
Asbestos litigation (3) (6 ) (6 ) 41 (15 ) Other corporate items
(4) 85 40
245 91 Net income $ 785
$ 643 $ 2,514 $ 1,268
(1) Net financing costs include interest income, interest
expense, and interest costs and investment gains associated with
benefit plans. (2) Primarily represents the equity earnings
of Dow Corning Corporation. In the nine months ended September 30,
2010 equity earnings of affiliated companies, net of impairments,
includes a credit of $21 million for our share of U.S. advanced
energy manufacturing tax credits at Dow Corning Corporation. In the
nine months ended September 30, 2009, equity earnings of affiliated
companies, net of impairments includes a charge of $29 million
representing our share of restructuring charges at Dow Corning
Corporation. (3) In the three and nine months ended
September 30, 2010, Corning recorded a charge of $6 million and a
net credit of $41 million, respectively, primarily reflecting the
change in the terms of the proposed asbestos settlement. In the
three and nine months ended September 30, 2009, Corning recorded
charges of $6 million and $15 million, respectively, to adjust the
asbestos liability for the change in value of certain components of
the Amended PCC Plan and the estimated liability for non-PCC
asbestos claims. (4) In the three months ended September 30,
2010, Corning recorded a loss of $30 million ($19 million
after-tax) from the repurchase of $126 million principal amount of
our 6.2% senior unsecured notes due March 15, 2016 and $100 million
principal amount of our 5.9% senior unsecured notes due March 15,
2014. In the nine months ended September 30, 2010, other corporate
items included a tax charge of $56 million from the reversal of the
deferred tax asset associated with a Medicare subsidy. In the three
and nine months ended September 30, 2009, other corporate items
included $12 million ($8 million after-tax) and $80 million ($52
million after-tax) of restructuring charges, respectively.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
1. Asbestos Litigation On March 28,
2003, Corning announced that it had reached agreement with the
representatives of asbestos claimants for the settlement of all
current and future asbestos claims against Corning and Pittsburgh
Corning Corporation (PCC) which might arise from PCC products or
operations (the 2003 Plan). On December 21, 2006, the Bankruptcy
Court issued an order denying confirmation of the 2003 Plan. On
January 10, 2008, some of the parties in the proceeding advised the
Bankruptcy Court that they had made substantial progress on an
amended plan of reorganization (the Amended PCC Plan) that resolved
issues raised by the Court in denying the confirmation of the 2003
Plan.
As a result of progress in the parties’
continuing negotiations, Corning believes the Amended PCC Plan,
modified as indicated below, now represents the most probable
outcome of this matter and the probability that the 2003 plan will
become effective has diminished. The proposed settlement
under the Amended PCC Plan requires Corning to contribute its
equity interest in PCC and Pittsburgh Corning Europe, N.V. (PCE)
and to contribute a fixed series of cash payments recorded at
present value. Corning will have the option to
contribute shares rather than cash, but the liability is fixed by
dollar value and not number of shares. The Amended PCC
Plan does not include certain non-PCC asbestos claims that may be
or have been raised against Corning. Corning has
recorded an additional amount for such claims in its estimated
asbestos litigation liability. In the first quarter of
2010, several of the parties in the bankruptcy proceedings filed a
modification of the Amended PCC Plan with the Bankruptcy Court
which reduced the amount of cash expected to be contributed by
Corning to the settlement.
In the third quarter of 2010, we recorded a charge of $6
million ($4 million after-tax) to adjust the asbestos litigation
liability for the change in value of the components of the modified
PCC Plan.
2. Loss on Repurchase of Debt
In the third quarter of 2010, we recognized a loss of $30 million
($19 million after-tax) upon the repurchase of $126 million
principal amount of our 6.2% senior unsecured notes due March 15,
2016 and $100 million principal amount of our 5.9% senior unsecured
notes due March 15, 2014.
3. Weighted Average
Shares Outstanding Weighted average shares outstanding
are as follows (in millions):
Three months
ended Three months September 30,
ended 2010 2009 June 30, 2010
Basic 1,557 1,550 1,558 Diluted 1,580 1,569 1,581
Diluted used for non-GAAP measures
1,580 1,569 1,581
CORNING INCORPORATED AND
SUBSIDIARY COMPANIES
QUARTERLY SALES INFORMATION
(Unaudited; in millions)
2010 Nine Months Three Months
Ended Ended Q1 Q2 Q3
Sept. 30 Display Technologies $ 782 $ 834 $
645 $ 2,261
Telecommunications Fiber and cable 190
227 232 649 Hardware and equipment 174 214 232
620 364 441 464 1,269
Environmental
Technologies Automotive 117 109 119 345 Diesel 75
75 89 239 192 184 208 584
Specialty
Materials 96 126 159 381
Life Sciences 118 125
125 368
Other 1 2 1 4
Total $ 1,553 $ 1,712 $ 1,602 $ 4,867
2009
Q1
Q2 Q3 Q4 Total Display
Technologies $ 357 $ 673 $ 679 $ 717 $ 2,426
Telecommunications Fiber and cable 192 235 251 231 909
Hardware and equipment 193 202 199 174
768 385 437 450 405 1,677
Environmental
Technologies Automotive 64 85 103 108 360 Diesel 46
47 64 73 230 110 132 167 181 590
Specialty Materials 60 71 90 110 331
Life
Sciences 76 81 92 117 366
Other 1 1
1 2 5
Total $ 989 $ 1,395 $
1,479 $ 1,532 $ 5,395 The above supplemental information is
intended to facilitate analysis of Corning’s businesses.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended September 30,
2010
(Unaudited; amounts in millions, except
per share amounts)
Corning’s net income and earnings per share (EPS)
excluding special items for the third quarter of 2010 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 Before
Net Share Income Taxes Income
Earnings per share (EPS) and net income, excluding special items $
0.51 $ 835 $ 808 Special items: Asbestos settlement (a) (6)
(4) Loss on repurchase of debt (b) (0.01) (30)
(19) Total EPS and net income $ 0.50 $ 799 $ 785 (a)
In the third quarter of 2010, Corning recorded a charge of
$6 million ($4 million after-tax) to adjust the asbestos liability
for the change in value of the components of the modified PCC Plan.
(b) In the third quarter of 2010, Corning recorded a $30
million loss ($19 million after-tax) on the repurchase of $126
million principal amount of our 6.2% senior unsecured notes due
March 15, 2016 and $100 million principal amount of our 5.9% senior
unsecured notes due March 15, 2014.
CORNING
INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended June 30,
2010
(Unaudited; amounts in millions, except
per share amounts)
Corning’s net income and earnings per share (EPS)
excluding special items for the second quarter of 2010 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 Before
Net Share Income Taxes Income
Earnings per share (EPS) and net income, excluding special
items $ 0.58 $ 949 $ 916 Special items: Asbestos litigation
(a) - (5 ) (3 ) Total EPS and net
income $ 0.58 $ 944 $ 913
(a) In the second quarter of 2010, Corning recorded a charge
of $5 million ($3 million after-tax) to adjust the asbestos
liability for the change in value of the components of the modified
PCC Plan.
CORNING INCORPORATED AND SUBSIDIARY
COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended September 30,
2009
(Unaudited; amounts in millions, except
per share amounts)
Corning’s net income and earnings per share (EPS)
excluding special items for the third quarter of 2009 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 Before
Net Share Income Taxes Income
Earnings per share (EPS) and net income, excluding special items $
0.42 $ 691 $ 654 Special items: Restructuring charges (a)
(0.01) (10) (7) Asbestos settlement (b) - (6)
(4) Total EPS and net income $ 0.41 $ 675 $ 643
(a) In the third quarter of 2009, Corning recorded a charge
of $10 million ($7 million after-tax), which was comprised of
severance costs for a restructuring plan in the Environmental
Technologies segment and asset disposal costs in other segments.
(b) In the third quarter of 2009, Corning recorded a charge
of $6 million ($4 million after-tax) to adjust the asbestos
liability for change in value of the components of the Amended PCC
Plan.
CORNING INCORPORATED AND SUBSIDIARY
COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended September 30,
2010
(Unaudited; amounts in millions)
Corning’s free cash flow financial measure for the
three months ended September 30, 2010 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 financial measures are 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 measures.
Three months Nine months
ended ended September 30, September 30,
2010 2010 Cash flows from operating
activities $ 428 $ 1,743 Less: Cash flows from investing
activities (902 ) (1,209 ) Plus: Short-term investments -
acquisitions 1,106 2,000 Less: Short-term investments -
liquidations (424 ) (1,318 ) Free cash flow $
208 $ 1,216
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