Corning Incorporated (NYSE: GLW) today announced its results for
the fourth quarter and year-end of 2011.
Fourth-Quarter Highlights
- Sales were $1.9 billion, a decline of
9% sequentially, but a 7% increase year over year.
- Earnings per share were $0.31.
Excluding special items, earnings per share were $0.33*, a decline
from third-quarter EPS of $0.48 and $0.46 a year ago.
- Display Technologies’ wholly owned
business glass volume was in line with the company’s expectations.
Samsung Corning Precision Materials Co., Ltd.’s volume was higher
than the company’s revised guidance last November.
- Telecommunications segment sales
declined 13% sequentially as expected, while improving by 11% year
over year.
Full-Year Highlights
- Sales were $7.9 billion, a 19% increase
over $6.6 billion last year. This represents a record high annual
sales performance for the company.
- Each of Corning’s major business
segments recorded annual sales gains, led by Specialty Materials
nearly doubling in sales to $1.1 billion, and Telecommunications
improving to $2.1 billion compared to $1.7 billion last year.
- Earnings per share were $1.77, a 21%
decline from last year. Excluding special items, earnings per share
were $1.76*, a 15% decline from last year.
- Free cash flow for the year was $544
million*.
*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 website.
Quarter Four Financial
Comparisons
Q4 2011 Q3 2011 %
Change Q4 2010 % Change Net Sales
in millions
$1,887 $2,075
(9%) $1,765 7% Net Income in
millions
$491 $811 (39%)
$1,044
(53%)
Non-GAAP Net Income
in millions*
$513 $766 (33%)
$733 (30%) GAAP EPS
$0.31
$0.51 (39%) $0.66
(53%) Non-GAAP EPS*
$0.33 $0.48
(31%) $0.46 (28%)
Full-Year Financial Comparisons
2011 2010 % Change
Net Sales in millions
$7,890 $6,632
19% Net Income in millions
$2,805
$3,558 (21%) Non-GAAP Net Income
in millions*
$2,789 $3,276 (15%) GAAP
EPS
$1.77 $2.25 (21%)
Non-GAAP EPS*
$1.76 $2.07
(15%)
*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 website.
“This past year was a very successful one for Corning,” Wendell
P. Weeks, chairman, chief executive officer, and president, said.
“We had the strongest annual sales performance in our 161-year
history. We set new records for gross margin and operating income*
(before special items). The company generated positive free cash
flow* for the eighth consecutive year. We have a healthy balance
sheet, and we raised our shareholder dividend and initiated a share
repurchase program.
“Four of our business segments - Telecommunications,
Environmental Technologies, Life Sciences, and Specialty Materials
- had excellent performance in 2011. The aggregate sales and net
income* (before special items) of these segments grew 31% and 136 %
respectively. Sales of Corning® Gorilla® Glass almost tripled. Our
innovation investments paid off with the introduction of Corning
Lotus™ Glass for OLED displays and a new, improved cover glass,
Corning® Gorilla® Glass 2. Our outstanding performance came despite
the less-than-robust growth in economies around the world.”
Weeks pointed out that 2011 was not without its challenges. “In
the fourth quarter, we experienced significant LCD glass price
declines due to a confluence of factors in the display market. And
our equity venture, Dow Corning Corporation, experienced major
upheaval in the solar panel industry with lower demand and pricing
of polysilicon materials. These price declines will reset the
profitability of both Display Technologies and Dow Corning to lower
levels.”
He added, “It is important to remember the strengths of these
businesses. Dow Corning has the lowest cost and leading market
position in the polysilicon industry. Corning’s LCD business, which
remains very profitable, has the lowest cost and the leading market
position in the industry. It should continue to generate
significant cash in the future.”
Fourth-Quarter Segments Results
Sales in the Display Technologies segment were $780 million, a
decline of 4% sequentially, but a 4% increase compared to a year
ago. Glass price declines at both the wholly owned business and SCP
were significant.
Telecommunications segment sales were $490 million, a decline of
13% sequentially and in line with the company’s expectations. On a
year-over-year basis, sales increased 11%.
Environmental Technologies segment sales were $234 million, a 5%
quarter-over-quarter decline and basically even with last year’s
fourth-quarter results.
Specialty Materials segment sales were $238 million, a 20%
sequential decline and in line with Corning’s expectations.
Compared to last year, sales increased 21%.
Life Sciences segment sales were $143 million, a 7% sequential
decline and a 2% year-over-year gain.
Corning’s equity earnings were $321 million and included a
one-time gain of $89 million.
Corning ended the year with more than $5.8 billion in cash and
short-term investments. Capital spending for the year was $2.4
billion, in line with the company’s expectations.
Looking Forward
“The display industry is in a period of transition and we are in
the process of resetting expectations for its future growth and
profitability,” James B. Flaws, vice chairman and chief financial
officer, remarked. “We are working closely with our customers to
reduce glass prices to help them with their immediate financial
strains. To that end, price declines will be significant in the
first quarter of 2012, as they were in last year’s fourth quarter.
We expect significant double-digit price declines over the
cumulative two-quarter period. We are hopeful that our pricing
actions, combined with our capacity decisions, will help us get
back to more stable price declines in the coming quarters.
“We believe the actions we have taken to reduce capacity have
brought LCD glass supply closer to end market demand. If we
correctly estimated retail demand and supply chain dynamics, then
we believe worldwide glass supply will become balanced with glass
demand at some point during the year. We will be cautious on pace
and timing of bringing capacity back on line,” Flaws said.
Corning is not anticipating much sequential change in the
overall glass market in the first quarter. Volume at its wholly
owned business should be in line with the glass market. At SCP,
volume is expected to be flat to down in the double digits,
depending upon the outcome of negotiations with a key customer.
The company expects the retail market for LCD products to grow
from about 3.2 billion square feet to 3.6 billion square feet in
2012. “This represents the amount of glass contained in LCD-based
products sold to consumers, not the amount of glass shipped from
glass makers to panel makers. The amount of glass shipped will be
dependent upon panel maker utilization rates and supply chain
dynamics,” he explained.
In the company’s Telecommunications segment, Corning is
forecasting that demand for its fiber-to-the-home, enterprise
networks, and wireless products will remain strong worldwide. “For
the full year, we expect our telecom sales to be up significantly,”
Flaws said. In the first quarter, sales are expected to increase
between 5% and 10% sequentially and year over year.
Environmental Technologies segment sales are expected to grow in
2012, driven primarily by the global demand for the company’s
diesel emissions products. In the first quarter of this year, sales
are expected to increase slightly.
Specialty Materials segment sales will be led by Corning Gorilla
Glass. The company anticipates significant growth at retail for
devices with cover glass, driven primarily by tablet computers and
handheld IT devices. Flaws said, “We do expect further yield
improvements at our customers, as well as some price declines, this
year. These will impact our sales growth.” In the first quarter,
segment sales are anticipated to be up slightly.
In the Life Sciences segment, Corning expects another strong
year of sales, through a combination of organic growth and
acquisitions. For the first quarter, sales are expected to increase
10% sequentially, driven primarily by the acquisition of Mediatech,
Inc., which occurred late in fourth quarter of 2011.
Equity earnings in the first quarter are expected to decline in
the range of 5% to 20%, excluding special items, due to lower
earnings at both Dow Corning and Samsung Corning Precision
Materials.
Corning’s tax rate is likely to increase to 20% in the first
quarter and the full year, as expected.
Flaws remarked, “We believe Corning is approaching a new floor
in terms of profitability due to transitions in our LCD business
and Dow Corning’s polysilicon business. Moving forward, our plan is
to grow profits from this new level.”
“To that extent,” Flaws said, “we anticipate strong sales and
profit growth over the next several years in our
Telecommunications, Environmental Technologies, Specialty
Materials, and Life Sciences segments.” Sales in the company’s
Display Technologies segment are not expected to grow, but the
segment is expected to produce significant profits and cash going
forward.
“Overall, we anticipate generating strong free cash flow* over
the next several years. We plan to use the cash for acquisitions to
supplement growth, dividend payments, and our share repurchase
program.
“At Corning, we are not threatened by business transitions. We
have faced many in the past and weathered them successfully. We
believe our business portfolio is strong, we have a leading
competitive position in each market, and our innovation investments
will generate future growth,” Flaws said.
The company will provide additional details on its first-quarter
and full-year outlook at its annual investor meeting in New York on
Feb. 3.
Upcoming Events
Corning will host investors and provide more information on its
2012 outlook at its annual investor meeting in New York on Friday,
Feb. 3 beginning at 8 a.m. ET at Cipriani on 42nd Street. Corning
will showcase products and technologies prior to and following the
formal meeting at 9 a.m. ET. The company’s exhibits, including
hands-on Gorilla Glass product demonstrations, will be available
for viewing and senior management will also be available during the
exhibit periods to answer individual investor questions. Attendees
can register online at the company’s investor relations
website.
Corning will also be presenting at the Goldman Sachs Technology
and Internet Conference Feb. 14 and the Morgan Stanley Media and
Telecom Conference Feb. 28, both in San Francisco.
Fourth-Quarter Conference Call Information
The company will host a fourth-quarter conference call on
Wednesday, Jan. 25 at 8:30 a.m. ET. To participate, please call
toll free (800) 288-8961 or for international access call (612)
288-0340 approximately 10-15 minutes prior to the start of the
call. The password is ‘QUARTER FOUR’. The host is ‘SOFIO’. To
listen to a live audio webcast of the call, go to Corning’s website
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, Wednesday, Feb. 8, 2012. To listen,
dial (800) 475-6701 or for international access dial (320)
365-3844. The access code is 233477. 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 website 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 160 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.
View Related Video: A Day Made of Glass
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CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited; in millions, except per share
amounts)
Three months ended Year
ended December 31, December 31, 2011 2010 2011 2010 Net
sales $ 1,887 $ 1,765 $ 7,890 $ 6,632 Cost of sales 1,062
998 4,324 3,583
Gross margin 825 767 3,566 3,049 Operating expenses:
Selling, general and administrative expenses (Note 1) 283 284 1,033
1,015 Research, development and engineering expenses 177 166 671
603 Amortization of purchased intangibles 4 2 15 8 Restructuring,
impairment and other charges (credits) (Note 2) 129 (326 ) 129 (329
) Asbestos litigation charge (credit) (Note 3) 9
(8 ) 24 (49 ) Operating income
223 649 1,694 1,801 Equity in earnings of affiliated
companies (Note 4) 321 511 1,471 1,958 Interest income 4 3 19 11
Interest expense (17 ) (28 ) (89 ) (109 ) Other income, net
21 54 118 184
Income before income taxes 552 1,189 3,213 3,845 Provision
for income taxes (Note 5) (61 ) (145 ) (408 )
(287 ) Net income attributable to Corning
Incorporated $ 491 $ 1,044 $ 2,805 $ 3,558
Earnings per common share attributable to Corning
Incorporated: Basic (Note 6) $ 0.32 $ 0.67 $ 1.80
$ 2.28 Diluted (Note 6) $ 0.31 $ 0.66 $
1.77 $ 2.25 Dividends declared per common share $
0.08 $ 0.05 $ 0.23 $ 0.20 See
accompanying notes to these financial statements.
CORNING
INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share
amounts)
December 31, 2011 2010
Assets
Current assets: Cash and cash equivalents $ 4,661 $ 4,598
Short-term investments, at fair value 1,164
1,752 Total cash, cash equivalents and short-term
investments 5,825 6,350 Trade accounts receivable, net of doubtful
accounts and allowances 1,082 973 Inventories 975 738 Deferred
income taxes 448 431 Other current assets 347
367 Total current assets 8,677 8,859 Investments
4,726 4,372 Property, net of accumulated depreciation 10,671 8,943
Goodwill and other intangible assets, net 926 716 Deferred income
taxes 2,652 2,790 Other assets 196 153
Total Assets $ 27,848 $ 25,833
Liabilities and Equity Current liabilities: Current
portion of long-term debt $ 27 $ 57 Accounts payable 977 798 Other
accrued liabilities 1,093 1,131 Total
current liabilities 2,097 1,986 Long-term debt 2,364 2,262
Postretirement benefits other than pensions 897 913 Other
liabilities 1,361 1,246 Total
liabilities 6,719 6,407
Commitments and contingencies Shareholders’ equity: Common stock -
Par value $0.50 per share; Shares authorized: 3.8 billion; Shares
issued: 1,636 million and 1,626 million 818 813 Additional paid-in
capital 13,041 12,865 Retained earnings 9,332 6,881 Treasury stock,
at cost; Shares held: 121 million and 65 million (2,024 ) (1,227 )
Accumulated other comprehensive (loss) income (89 )
43 Total Corning Incorporated shareholders' equity
21,078 19,375 Noncontrolling interests
51 51 Total equity 21,129
19,426
Total Liabilities and Equity $ 27,848
$ 25,833 See accompanying notes to these
financial statements.
CORNING INCORPORATED AND SUBSIDIARY
COMPANIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited; in millions)
Three
months ended Year ended December 31, December 31, 2011 2010 2011
2010
Cash Flows from Operating Activities: Net income $ 491
$ 1,044 $ 2,805 $ 3,558 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation 243 222
942 846 Amortization of purchased intangibles 4 2
15 8 Asbestos litigation charges (credits) 9 (8 )
24 (49 ) Restructuring, impairment and other credits 129 (326 ) 129
(329 ) Cash received from settlement of insurance claims 259 66 259
Loss on retirement of debt 30 Stock compensation charges 20 15
86 92
Earnings of affiliated companies less than
(in excess of) dividends received
35 850
(651 ) (246 ) Deferred tax (benefit) provision (3 ) 83
115 68 Restructuring payments (1 ) (8 )
(16 ) (66 ) Credits issued against customer deposits (7 ) (7 )
(28 ) (83 ) Employee benefit payments less than (in excess of)
expense 27 (184 )
132 (265 ) Changes in certain working capital items: Trade accounts
receivable 98 (100 )
(84 ) (162 ) Inventories (31 ) (13 )
(201 ) (160 ) Other current assets 29 17
(20 ) 42 Accounts payable and other current liabilities, net of
restructuring payments 80 184
(27 ) 192 Other, net 34 62
(98 ) 100
Net cash provided by operating
activities 1,157 2,092
3,189 3,835
Cash Flows from
Investing Activities: Capital expenditures (766 ) (473 )
(2,432 ) (1,007 ) Acquisitions of businesses, net of cash received
(67 ) (63 ) (215 ) (63 ) Net proceeds from sale or disposal of
assets 2 1 Short-term investments - acquisitions (389 ) (768 )
(2,582 ) (2,768 ) Short-term investments - liquidations 745 743
3,171 2,061 Other, net 1 1
7
Net cash used in investing activities
(476 ) (560 )
(2,056 ) (1,769 )
Cash Flows from Financing
Activities: Net repayments of short-term borrowings and current
portion of long-term debt (2 ) (5 )
(24 ) (75 ) Principal payments under capital lease obligations (8 )
(32 ) (9 ) Proceeds from issuance of long-term debt, net 86 120 689
Retirements of long-term debt, net (100 )
(364 ) Proceeds from issuance of common stock, net
15 Proceeds from the exercise of stock options 8 16
90 55 Repurchases of common stock for treasury (780 ) (780 )
Dividends paid (117 ) (78 ) (354 ) (313 )
Net cash used in financing activities (805 )
(175 )
(980 ) (2 ) Effect of exchange rates on cash (116 )
(61 )
(90 ) (7 ) Net increase in cash and cash equivalents (240 )
1,296
63 2,057 Cash and cash equivalents at beginning of period
4,901 3,302
4,598 2,541
Cash and cash
equivalents at end of period $ 4,661 $ 4,598 $
4,661 $ 4,598
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 December
31, 2011 Net sales $ 780 $ 490 $ 234 $ 238 $ 143 $ 2 $ 1,887
Depreciation (1) $ 133 $ 32 $ 28 $ 36 $ 9 $ 4 $ 242 Amortization of
purchased intangibles $ 2 $ 2 $ 4 Research, development and
engineering expenses (2) $ 18 $ 35 $ 23 $ 37 $ 7 $ 30 $ 150
Restructuring, impairment and other charges (3) $ (1 ) $ 130 $ 129
Equity in earnings of affiliated companies $ 192 $ (1 ) $ (9 ) $ 2
$ 184 Income tax (provision) benefit $ (126 ) $ (11 ) $ (14 ) $ 52
$ (5 ) $ 11 $ (93 ) Net income (loss) (5) $ 492
$ 26 $ 28 $ (105 ) $ 10 $ (26 ) $ 425
Three months ended December 31, 2010
Net sales $ 750 $ 443 $ 232 $ 197 $ 140 $ 3 $ 1,765 Depreciation
(1) $ 127 $ 29 $ 28 $ 29 $ 8 $ 3 $ 224 Amortization of purchased
intangibles $ 2 $ 2 Research, development and engineering expenses
(2) $ 24 $ 31 $ 26 $ 26 $ 3 $ 34 $ 144 Restructuring, impairment
and other credits (3) $ (324 ) $ (2 ) $ (326 ) Equity in earnings
of affiliated companies (4) $ 369 $ 2 $ 13 $ 384 Income tax
(provision) benefit $ (227 ) $ (8 ) $ (8 ) $ (1 ) $ (6 ) $ 16
$ (234 ) Net income (loss) (5) $ 886 $ 19 $ 16
$ (3 ) $ 12 $ (29 ) $ 901
Year
ended December 31, 2011 Net sales $ 3,145 $ 2,072 $ 998
$ 1,074 $ 595 $ 6 $ 7,890 Depreciation (1) $ 511 $ 123 $ 107 $ 156
$ 34 $ 12 $ 943 Amortization of purchased intangibles $ 7 $ 1 $ 7 $
15 Research, development and engineering expenses (2) $ 91 $ 125 $
96 $ 137 $ 19 $ 98 $ 566 Restructuring, impairment and other
charges (3) $ (1 ) $ 130 $ 129 Equity in earnings of affiliated
companies $ 1,027 $ 3 $ 1 $ 4 $ 15 $ 1,050 Income tax (provision)
benefit $ (501 ) $ (82 ) $ (58 ) $ 24 $ (29 ) $ 39 $
(607 ) Net income (loss) (5) $ 2,349 $ 195 $ 121
$ (36 ) $ 61 $ (78 ) $ 2,612
Year
ended December 31, 2010 Net sales $ 3,011 $ 1,712 $ 816
$ 578 $ 508 $ 7 $ 6,632 Depreciation (1) $ 513 $ 118 $ 105 $ 72 $
32 $ 12 $ 852 Amortization of purchased intangibles $ 1 $ 7 $ 8
Research, development and engineering expenses (2) $ 90 $ 115 $ 96
$ 87 $ 16 $ 114 $ 518 Restructuring, impairment and other credits
(3) $ (324 ) $ (3 ) $ (2 ) $ (329 ) Equity in earnings of
affiliated companies (4) $ 1,452 $ 3 $ 5 $ 45 $ 1,505 Income tax
(provision) benefit $ (618 ) $ (46 ) $ (20 ) $ 13 $ (30 ) $
50 $ (651 ) Net income (loss) (5) $ 2,993 $ 98
$ 43 $ (32 ) $ 60 $ (75 ) $ 3,087 (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) In the three months and the
year ended December 31, 2011, restructuring, impairment and other
charges includes $130 million impairment charge in the Specialty
Materials segment related to certain long-lived assets. In the
three months and year ended December 31, 2010, restructuring,
impairment and other credits includes $324 million on the
settlement of business interruption and property damage insurance
claims in the Display Technologies segment resulting from
earthquake activity near the Shizuoka, Japan facility and a power
disruption at the Taichung, Taiwan facility in 2009. (4) In
the three months and year ended December 31, 2010, equity in
earnings of affiliated companies includes a $61 million credit in
the Display Technologies segment for our share of a revised Samsung
Corning Precision tax holiday calculation agreed to by the Korean
National Tax service. (5) 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 Year ended December 31, December 31,
2011 2010 2011 2010 Net income of reportable
segments $ 451 $ 930 $ 2,690 $ 3,162 Non-reportable segments (26 )
(29 ) (78 ) (75 ) Unallocated amounts: Net financing costs (1) (44
) (46 ) (190 ) (183 ) Stock-based compensation expense (20 ) (15 )
(86 ) (92 ) Exploratory research (20 ) (15 ) (79 ) (59 ) Corporate
contributions (10 ) (7 ) (48 ) (33 ) Equity in earnings of
affiliated companies, net of impairments (2) 137 127 421 453
Asbestos litigation (3) (9 ) 8 (24 ) 49 Other corporate items (4)
32 91 199
336 Net income $ 491
$ 1,044 $ 2,805 $ 3,558
(1) Net financing costs include interest income, interest
expense, and interest costs and investment gains and losses
associated with benefit plans. (2) Equity in earnings of
affiliated companies, net of impairments, is primarily equity in
earnings of Dow Corning Corporation which includes the following
items:
•
In the three months and year ended December 31, 2011, Corning
recorded an $89 million credit for our share of Dow Corning
Corporation’s settlement of a dispute related to long term supply
agreements.
•
In the three months and year ended December 31, 2010, Corning
recorded a $26 million credit for our share of a valuation
allowance on foreign deferred tax assets. Corning also recorded a
$16 million credit for our share of excess foreign tax credits from
foreign dividends of Dow Corning Corporation.
•
In the year ended December 31, 2010, a $21
million credit for our share of U.S. advanced energy manufacturing
tax credits.
(3) In the three months and year ended December 31, 2011,
Corning recorded charges of $9 million and $24 million,
respectively, to adjust the asbestos liability for the change in
value of certain components of the Modified PCC Plan. In the three
months and year ended December 31, 2010, Corning recorded a net
credit of $8 million and a net credit of $49 million, respectively,
to adjust the asbestos liability for the change in value of certain
components of the modified PCC Plan. (4) Other corporate
items include the tax impact of the unallocated amounts and the
following significant items:
•
In the year ended December 31, 2011, Corning recorded a $41 million
tax benefit from the filing of an amended 2006 U.S. Federal Tax
return to claim foreign tax credits.
•
In the year ended December 31, 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.
CORNING INCORPORATED AND SUBSIDIARY
COMPANIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
1. Contingent Liability
In the fourth quarter of 2011, we recognized a credit of $5
million resulting from a reduction in a contingent liability
associated with an acquisition recorded in the first quarter of
2011.
2. Restructuring, Impairment, and Other Charges
(Credits)
In the fourth quarter of 2011, Corning recorded a $130 million
asset impairment charge for certain long-lived assets in our
Specialty Materials segment.
3. Asbestos Litigation
Pittsburgh Corning Corporation (PCC) was named in numerous
lawsuits alleging personal injury from exposure to asbestos and, on
April 16, 2000, PCC filed for Chapter 11 reorganization. Corning,
with other relevant parties, proposed a Plan of Reorganization of
PCC in 2003, which has not yet been confirmed. Under this PCC Plan,
Corning would contribute certain payments and assets. In the fourth
quarter of 2011, we recorded a charge of $9 million ($5 million
after-tax) to adjust the asbestos litigation liability for the
change in value of the components to be contributed by Corning
under this PCC Plan.
4. Equity in Earnings of Affiliated Companies
In the fourth quarter of 2011, equity in earnings of affiliated
companies included an $89 million ($83 million after-tax) credit
for Corning’s share of Dow Corning Corporation’s settlement of a
dispute related to long term supply agreements.
5. Provision for Income Taxes
In the fourth quarter of 2011, we recorded a $13 million net tax
provision related to the adjustment of deferred taxes as a result
of enacted tax rate reductions primarily in Japan.
6. Weighted Average Shares Outstanding
Weighted average shares outstanding are as follows (in
millions):
Three months ended
Year ended December 31, December 31,
2011 2010 2011 2010 Basic 1,546
1,560 1,562 1,558 Diluted 1,564 1,584 1,583 1,581 Dilued used for
non-GAAP measures 1,564 1,584 1,583 1,581
CORNING
INCORPORATED AND SUBSIDIARY COMPANIES
QUARTERLY SALES INFORMATION
(Unaudited; in millions)
2011 Q1 Q2
Q3 Q4 Total Display
Technologies $ 790 $ 760 $ 815 $ 780 $ 3,145
Telecommunications Fiber and cable 248 265 276 262 1,051
Hardware and equipment 226 283 284 228
1,021 474 548 560 490 2,072
Environmental
Technologies Automotive 123 121 119 113 476 Diesel 136
137 128 121 522 259 258 247 234 998
Specialty Materials 254 283 299 238 1,074
Life Sciences 144 155 153 143 595
Other
2 1 1 2 6
Total $ 1,923 $
2,005 $ 2,075 $ 1,887 $ 7,890
2010 Q1
Q2 Q3 Q4 Total Display
Technologies $ 782 $ 834 $ 645 $ 750 $ 3,011
Telecommunications Fiber and cable 190 227 232 229 878
Hardware and equipment 174 214 232 214
834 364 441 464 443 1,712
Environmental
Technologies Automotive 117 109 119 117 462 Diesel 75
75 89 115 354 192 184 208 232 816
Specialty Materials 96 126 159 197 578
Life
Sciences 118 125 125 140 508
Other 1
2 1 3 7
Total $ 1,553 $
1,712 $ 1,602 $ 1,765 $ 6,632 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 December 31,
2011
(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 2011 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 $ 0.33 $ 606 $
513 Special items: Contingent liability (a) - 5 5
Restructuring, impairment, and other charges (b) (0.05) (130) (83)
Asbestos settlement (c) - (9) (5) Equity in earnings
of affiliated companies (d) 0.04 80 74 Provision for income
taxes (e) (0.01) - (13) Total EPS and
net income $ 0.31 $ 552 $ 491 (a) In the fourth quarter of
2011, Corning recognized a credit of $5 million resulting from a
reduction in a contingent liability associated with an acquisition
recorded in the first quarter of 2011. (b) In the fourth
quarter of 2011, Corning recorded a $130 million ($83 million
after-tax) asset impairment charge for certain long-lived assets in
our Specialty Materials segment. (c) In the fourth quarter
of 2011, Corning recorded a charge of $9 million ($5 million
after-tax) to adjust the asbestos liability for the change in value
of the components of the modified PCC Plan. (d) In the
fourth quarter of 2011, equity in earnings of affiliated companies
included a $80 million ($74 million after-tax) credit for Corning’s
share of the future portion of Dow Corning Corporation’s settlement
of a dispute related to long term supply agreements. (e) In
the fourth quarter of 2011, Corning recorded a $13 million net tax
provision related to the adjustment of deferred taxes as a result
of enacted tax rate reductions primarily in Japan.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended December 31,
2010
(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 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 $ 0.46 $ 754 $
733 Special items: Insurance settlement (a) 0.13 324 206
Asbestos settlement (b) - 8 5 Equity in earnings of
affiliated companies (c) 0.07 103 100
Total EPS and net income $ 0.66 $ 1,189 $ 1,044 (a) In the
fourth quarter of 2010, Corning recorded $324 million ($206 million
after-tax) on the settlement of business interruption and property
damage insurance claims in the Display Technologies segment
resulting from earthquake activity near the Shizuoka, Japan
facility and a power disruption at the Taichung, Taiwan facility in
2009. (b) In the fourth quarter of 2010, Corning recorded a
net credit of $8 million ($5 million after-tax) to adjust the
asbestos liability for the change in value of the components of the
modified PCC Plan. (c) In the fourth quarter of 2010, equity
in earnings of affiliated companies included a credit of $26
million ($24 million after-tax) for our share of a release of
valuation allowance on foreign deferred tax assets, a $16 million
($15 million after-tax) credit for our share of excess foreign tax
credits from foreign dividends and a $61 million credit for our
share of a revised Samsung Corning Precision tax holiday
calculation agreed to by the Korean National Tax Service.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended September 30,
2011
(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 2011 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 $ 0.48 $ 904 $ 766 Special items:
Contingent liability (a) 0.01 22 22 Restructuring settlement
(b) - (5) (3) Provision for income taxes (c) 0.02
- 26 Total EPS and net income $ 0.51 $ 921 $
811 (a) In the third quarter of 2011, Corning recognized a
credit of $22 million resulting from a reduction to a contingent
liability associated with an acquisition recorded in the first
quarter of 2011. (b) In the third quarter of 2011, 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. (c) In the third quarter of 2011,
Corning recorded a $26 million net tax benefit related to prior
year foreign tax credits and other tax adjustments.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Year Ended December 31, 2011
(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, 2011 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 $ 1.76 $ 3,260
$ 2,789 Special items: Contingent liability (a) 0.02 27 27
Restructuring, impairment and other credits (b) (0.05) (130)
(83) Asbestos settlement (c) (0.01) (24) (15) Equity
in earnings of affiliated companies (d) 0.04 80 74 Provision
for income taxes (e) 0.01 - 13 Total
EPS and net income $ 1.77 $ 3,213 $ 2,805 (a) In 2011,
Corning recognized a credit of $27 million resulting from a
reduction to a contingent liability associated with an acquisition
recorded in the first quarter of 2011. (b) In 2011, Corning
recorded a $130 million ($83 million after-tax) asset impairment
charge for certain long-lived assets in our Specialty Materials
segment. (c) In 2011, Corning recorded a charge of $24
million ($15 million after-tax) to adjust the asbestos liability
for the change in value of the components of the Modified PCC Plan.
(d) In 2011, equity in earnings of affiliated companies
included an $80 million credit ($74 million after-tax) for
Corning’s share of the future portion of Dow Corning Corporation’s
settlement of a dispute related to long term supply agreements.
(e) In 2011, Corning recorded a $26 million net tax benefit
related to prior year foreign tax credits and other tax
adjustments. Also in 2011, Corning recorded a $13 million net tax
provision related to the adjustment of deferred taxes as a result
of enacted tax rate reductions primarily in Japan.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Year Ended December 31, 2010
(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, 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 $ 2.07 $ 3,376
$ 3,276 Special items: Restructuring, impairment and other
charges (a) - 2 1 Insurance settlement (b) 0.13 324 206
Asbestos settlement (c) 0.02 49 30 Equity in earnings
of affiliated companies (d) 0.08 124 120 Loss on repurchase
of debt (e) (0.01) (30) (19) Provision for income taxes (f)
(0.04) - (56) Total EPS and net income
$ 2.25 $ 3,845 $ 3,558 (a) In 2010, Corning recorded a
credit of $2 million ($1 million after-tax) for adjustments to
restructuring reserves. (b) In 2010, Corning recorded $324
million ($206 million after-tax) on the settlement of business
interruption and property damage insurance claims in the Display
Technologies segment resulting from earthquake activity near the
Shizuoka, Japan facility and a power disruption at the Taichung,
Taiwan facility in 2009. (c) In 2010, Corning recorded a net
credit of $49 million ($30 million after-tax) to adjust the
asbestos liability for change in value of the components of the
modified PCC Plan. (d) In 2010, equity in earnings of
affiliated companies included a credit of $21 million ($20 million
after-tax) primarily for Corning’s share of advanced energy
manufacturing tax credits at Dow Corning Corporation. Also,
included is a credit of $26 million ($24 million after-tax) for our
share of a release of valuation allowance on foreign deferred tax
assets, a $16 million ($15 million after-tax) credit for our share
of excess foreign tax credits from foreign dividends at Dow Corning
Corporation and a $61 million credit for our share of a revised
Samsung Corning Precision tax holiday calculation agreed to by the
Korean National Tax Service. (e) In 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. (f) In 2010, Corning
recorded a $56 million tax charge from the reversal of the deferred
tax asset associated with a Medicare subsidy.
CORNING
INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Years Ended December 31, 2011 and
2010
(Unaudited; amounts in millions)
Corning’s net income excluding special items 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.
Total Telecommunications
EnvironmentalTechnologies
Specialty Materials Life Sciences
2011 2010 Change 2011
2010 Change 2011
2010 Change 2011 2010
Change 2011 2010
Change Net income, excluding special items $
397 $ 168 136% $ 168 $ 98 71% $ 121 $ 43 181% $ 47 $ (33) * $ 61 $
60 2% Contingent liability (a) 27 27
Restructuring, impairment,and other
credits (b)
(83) 1
(83) 1
Net income $ 341 $ 169 102% $
195 $ 98 99% $ 121 $ 43 181% $ (36) $ (32) 13% $ 61 $ 60 2% *
The percentage change calculation is not meaningful.
(a) In 2011, Corning recognized a credit of $27 million resulting
from a reduction to a contingent liability associated with an
acquisition recorded in the first quarter of 2011. (b) In
2011, Corning recorded a $83 million, net of tax, asset impairment
charge for certain long-lived assets in our Specialty Materials
segment. In 2010, Corning recorded a credit of $1 million, net of
tax, for adjustments to restructuring reserves.
CORNING
INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Years Ended December 31, 2011 and
2010
(Unaudited; amounts in millions, except
per share amounts)
Corning’s comment, “We set new records for … operating income”
includes 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 operating income 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.
2011 2010 Operating income, excluding
special items $ 1,821 $ 1,426 Special items: Contingent
liability (a) 27 Restructuring, impairment, and other
credits (b) (130 ) 2 Insurance settlement (c) 324
Asbestos settlement (d) (24 ) 49 Operating
income $ 1,694 $ 1,801 (a) In 2011, Corning
recognized a credit of $27 million resulting from a reduction to a
contingent liability associated with an acquisition recorded in the
first quarter of 2011. (b) In 2011, Corning recorded a $130
million asset impairment charge for certain long-lived assets in
our Specialty Materials segment. In 2010, Corning recorded a credit
of $2 million for adjustments to restructuring reserves. (c)
In 2010, Corning recorded $324 million on the settlement of
business interruption and property damage insurance claims in the
Display Technologies segment resulting from earthquake activity
near the Shizuoka, Japan facility and a power disruption at the
Taichung, Taiwan facility in 2009. (d) In 2011, Corning
recorded a charge of $24 million to adjust the asbestos liability
for the change in value of the components of the Modified PCC Plan.
In 2010, Corning recorded a net credit of $49 million to adjust the
asbestos liability for 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 and Year Ended December
31, 2011
(Unaudited; amounts in millions)
Corning’s free cash flow financial measure for the three months and
year ended December 31, 2011 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 ended Year ended December 31,
December 31, 2011 2011 Cash
flows from operating activities $ 1,157 $ 3,189 Less: Cash
flows from investing activities (476 ) (2,056 ) Plus:
Short-term investments - acquisitions 389 2,582 Less:
Short-term investments - liquidations (745 ) (3,171 )
Free cash flow $ 325 $ 544
CORNING
INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE
Years Ended December 31
(Unaudited; amounts in millions)
Corning’s comment, “The Company generated positive free cash flow
for the eighth consecutive year.” includes 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.
Year Year Year
Year Year Year
Year Year ended ended
ended ended ended ended ended
ended Dec. 31, Dec. 31, Dec. 31,
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Dec. 31, 2004 2005 2006 2007
2008 2009 2010 2011
Cash flows from operatingactivities
$ 1,009 $ 1,939 $ 1,803 $ 2,077 $ 2,128 $ 2,077 $ 3,835 $ 3,189
Less: Cash flows frominvesting
activities
(922 ) (1,712 ) (2,181 ) (561 ) (1,699 ) (1,370 ) (1,769 ) (2,056 )
Plus: Short-terminvestments -
acquisitions
1,685 1,668 2,894 2,152 1,865 1,372 2,768 2,582
Less: Short-terminvestments -
liquidations
(1,389 ) (1,452 ) (1,976 ) (2,862 )
(2,083 ) (1,281 ) (2,061 ) (3,171 )
Free cash flow $ 383 $ 443 $ 540 $ 806
$ 211 $ 798 $ 2,773 $ 544
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