Corning Incorporated (NYSE: GLW) today announced second-quarter
sales of $1.26 billion and net income of $514 million, or $0.32 per
share. These results include net special gains of $93 million, or
$0.06 per share. Excluding these net special gains, Corning's
second-quarter net income would have been $421 million, or $0.26
per share. These are non-GAAP financial measures. These and all
non-GAAP financial measures are reconciled on the company's
investor relations Web site and in attachments to this news
release. Wendell P. Weeks, president and chief executive officer,
said, "We were pleased to meet our earnings-per-share (EPS)
guidance as we overcame the impact of the second-quarter panel
inventory correction on our Display Technologies segment. The
decline in Display Technologies' quarterly performance was offset
by strength in our Telecommunications segment and lower operating
expenses." Corning's second-quarter results included the following
special gains and charges: -- A $61 million gain primarily to
reflect the decrease in the market value of Corning common stock to
be contributed to settle the asbestos litigation related to
Pittsburgh Corning Corporation. -- A $10 million reduction in
income tax expense related to the release of the valuation
allowance on certain deferred tax assets in Australia. -- A gain of
$33 million in equity earnings related to Dow Corning Corporation's
settlement with the U.S. Internal Revenue Service regarding
liabilities for tax years 1992 to 2003. The settlement resolves all
federal tax issues related to Dow Corning's implant settlement. --
An $11 million charge related to Corning's ongoing debt-reduction
program. Second-Quarter Operating Results Corning's second-quarter
sales of $1.26 billion were even with first-quarter sales and
increased 11 percent over last year's second-quarter sales of $1.14
billion. As expected, gross margin for the second quarter was 43
percent, a slight decline from the previous quarter's gross margin
of 45 percent. Equity earnings for the second quarter were $256
million, including the $33 million tax gain from Dow Corning.
First-quarter equity earnings of $200 million included a $21
million impairment charge for Samsung Corning Company, Ltd.
(Samsung Corning), a producer of glass panels and funnels for
cathode ray tubes. Excluding the special items in both quarters,
Corning's second-quarter equity earnings were even with the first
quarter. Including the $33 million tax gain, our second-quarter
equity earnings in Dow Corning were $104 million. Second-quarter
sales for Corning's Display Technologies segment were $461 million,
an 11-percent increase over 2005 second-quarter sales of $415
million. Year-over-year liquid crystal display (LCD) glass volume
increased by 38 percent in the second quarter, but this was largely
offset by the change in foreign exchange rates and price declines.
Sequentially, second-quarter sales declined 16 percent from
first-quarter sales of $547 million, primarily due to volume
declines of 14 percent and lower prices. As expected, price
declines were less than those in the first quarter. Samsung Corning
Precision Glass Co., Ltd.'s (SCP) second-quarter volume increased
52 percent year-over-year and 3 percent sequentially. Equity
earnings from SCP were $133 million in the second quarter, compared
to $140 million in the previous quarter, which included about $7
million in nonrecurring gains. Total LCD glass volume, including
both Corning's wholly owned business and SCP, declined 6 percent
sequentially in the second quarter. Net income for the Display
Technologies segment was $344 million, down 18 percent from $417
million last quarter, but up 20 percent versus the second quarter
of 2005. "The quarterly sales decline in Display Technologies was
disappointing, but as we have warned in the past, supply-chain
issues can occur in any given quarter. Our LCD volume decline of 6
percent was consistent with our May 22 guidance change," Weeks
said. Second-quarter Telecommunications segment sales increased 19
percent to $472 million versus $397 million in the first quarter.
The increase was driven by strong demand from U.S. and European
carriers for the company's fiber and cable and hardware and
equipment products. Fiber-to-the-premises (FTTP) sales in the
second quarter increased significantly over the previous quarter's
performance. In the company's Environmental Technologies segment,
sales of $152 million were slightly lower than sales of $155
million in the first quarter. An increase in diesel retrofit sales
was offset by lower automotive sales, especially in North America.
Corning's Life Sciences segment sales increased $3 million to $75
million in the second quarter. Cash Flow/Liquidity Update Corning
ended the second quarter with $2.48 billion in cash and short-term
investments, consistent with the previous quarter. The company's
debt level declined to $1.5 billion compared to $1.8 billion at the
end of the first quarter. James B. Flaws, vice chairman and chief
financial officer, said, "As we continue to focus on improving the
company's overall financial health, you can expect us to
opportunistically issue or refinance certain debt over the
remainder of the year." In the second quarter Corning had positive
free cash flow of $299 million and remains on track to be free cash
flow positive for the year. Free cash flow is a non-GAAP financial
measure. Flaws also noted that Moody's Investor Service recently
raised Corning's overall debt rating to Baa2 with a stable outlook.
Third-Quarter Outlook Corning expects third-quarter sales to be in
the range of $1.26 billion to $1.33 billion, and EPS in the range
of $0.22 to $0.26 before special items. This EPS estimate is a
non-GAAP financial measure and excludes any special items. Gross
margin for the third quarter is expected to be in the range of 41
percent to 43 percent. The third-quarter tax rate is expected to be
between 15 percent and 20 percent. For its Display Technologies
segment, Corning anticipates that third-quarter sequential volume
growth for its wholly owned business will be in the range of 5
percent to 15 percent as the supply-chain correction begins to ease
and the LCD industry gears up for the holiday buying season.
Samsung Corning Precision should also see sequential volume
increases in the range of 5 percent to 15 percent. Corning expects
third-quarter price declines in its wholly owned business to be in
line with the previous quarter. "As we start the third quarter, we
believe there will be inventory adjustments by some panel
manufacturers, while others are beginning to increase production
levels," Flaws said. "However, the long-term LCD market dynamics
remain positive. We have not changed our expectation that the
overall glass market volume growth will be between 40 percent and
50 percent in 2006. We believe that LCD TV penetration will reach
about 20 percent of the global television market this year, nearly
doubling that of 2005." Corning's Telecommunications segment
third-quarter sales are expected to be flat to down slightly.
Third-quarter sales in the company's Environmental Technologies
segment are also expected to be flat. Excluding the impact of the
$33 million second-quarter tax gain at Dow Corning, third-quarter
equity earnings are expected to be down 5 to 10 percent, as
stronger earnings at Dow Corning may be offset by lower earnings at
SCP and nonrecurring charges at Samsung Corning. Weeks said, "While
our first-half 2006 performance met our expectations, we need to be
cautious about the potential negative impact that economic
conditions and political tensions could have on consumer sentiment.
The LCD TV market is strongly weighted towards the fourth quarter
and we need a robust retail holiday season to achieve our goals.
The good news is that retail prices for LCD TVs have declined
substantially and that should accelerate consumer demand."
Separately, the company also announced that it will be meeting with
Boston-area investors on Tuesday, August 1 and will host a luncheon
at 12:30 p.m. Investors interested in attending the luncheon should
contact Corning's investor relations department at (607) 974-8764.
Second-Quarter Conference Call Information The company will host a
second-quarter conference call at 8:30 a.m. EDT on Wednesday, July
26. To access the call, dial (210) 234-0003. The password is
QUARTER TWO. The leader is SOFIO. A replay of the call will begin
at approximately 10:30 a.m. EDT, and will run through 5 p.m. EDT,
Wednesday, August 9. To listen, dial (402) 220-9709. No pass code
is required. To listen to a live audio webcast of the call, go to
Corning's Web site: http://www.corning.com/investor_relations, and
follow the instructions. The audio webcast will be archived for one
year following the call. Presentation of Information in this News
Release Non-GAAP financial measures are not in accordance with, or
an alternative to, GAAP. Corning's non-GAAP net income and EPS
measure excludes restructuring, impairment and other charges and
adjustments to prior estimates for such charges. Additionally, the
company's non-GAAP measure excludes adjustments to asbestos
settlement reserves required by movements in Corning's common stock
price, gains and losses arising from debt retirements, charges
resulting from the impairment of equity or cost method investments,
or adjustments to deferred tax assets, and gains or losses
recognized in equity earnings from restructuring, impairment or
other charges or credits taken by equity method companies.
Corning's free cash flow financial measures are also non-GAAP
measures. The company believes presenting non-GAAP free cash flow;
net income and EPS measures are helpful to analyze financial
performance without the impact of unusual items that may obscure
trends in the company's underlying performance. These non-GAAP
measures are reconciled on the company's Web site at
www.corning.com/investor_relations and accompany 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 in global economic and political
conditions; tariffs, import duties and currency fluctuations;
product demand and industry capacity; competition; manufacturing
efficiencies; cost reductions; availability and costs of critical
components and materials; new product development and
commercialization; order activity and demand from major customers;
changes in the mix of sales between premium and non-premium
products; facility expansions and new plant start-up costs;
possible disruption in commercial activities due to terrorist
activity, armed conflict, political instability or major health
concerns; adequacy and availability of insurance; capital spending;
equity company activities; acquisition and divestiture activities;
the level of excess or obsolete inventory; the rate of technology
change; the ability to enforce patents; product and components
performance issues; stock price fluctuations; and adverse
litigation or regulatory developments. Additional risk factors are
identified in Corning's filings with the Securities and Exchange
Commission. Forward-looking statements speak only as of the day
that they are made, and Corning undertakes no obligation to update
them in light of new information or future events. -0- *T CORNING
INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited; in millions, except per share amounts) Three
months Six months ended June 30, ended June 30,
-------------------- -------------------- 2006 2005 2006 2005
--------- --------- --------- --------- Net sales $ 1,261 $ 1,141 $
2,523 $ 2,191 Cost of sales 720 658 1,409 1,279 --------- ---------
--------- --------- Gross margin 541 483 1,114 912 Operating
expenses: Selling, general and administrative expenses 194 191 417
375 Research, development and engineering expenses 128 104 252 202
Amortization of purchased intangibles 3 3 6 8 Restructuring,
impairment and other charges and (credits) 5 (1) 11 18 Asbestos
settlement (Note 1) (61) 143 124 131 --------- --------- ---------
--------- Operating income 272 43 304 178 Interest income 26 13 50
23 Interest expense (18) (26) (38) (61) Loss on repurchases and
retirement of debt, net (Note 2) (11) (12) (11) (12) Other income,
net 14 20 34 11 --------- --------- --------- --------- Income
before income taxes 283 38 339 139 Provision for income taxes (Note
3) (24) (44) (22) (63) --------- --------- --------- ---------
Income (loss) before minority interests and equity earnings 259 (6)
317 76 Minority interests (1) (5) (2) (6) Equity in earnings of
associated companies, net of impairments (Note 4) 256 176 456 345
--------- --------- --------- --------- Net income $ 514 $ 165 $
771 $ 415 ========= ========= ========= ========= Basic earnings
per common share (Note 5) $ 0.33 $ 0.11 $ 0.50 $ 0.29 =========
========= ========= ========= Diluted earnings per common share
(Note 5) $ 0.32 $ 0.11 $ 0.48 $ 0.28 ========= ========= =========
========= 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)
June 30, December 31, 2006 2005 ------------ ------------ Assets
Current assets: Cash and cash equivalents $ 1,098 $ 1,342
Short-term investments, at fair value 1,377 1,092 ------------
------------ Total cash, cash equivalents and short-term
investments 2,475 2,434 Trade accounts receivable, net 633 629
Inventories 664 570 Deferred income taxes 65 44 Other current
assets 198 183 ------------ ------------ Total current assets 4,035
3,860 Investments 2,150 1,729 Property, net 5,032 4,675 Goodwill
and other intangible assets, net 333 338 Deferred income taxes 51
10 Other assets 598 595 ------------ ------------ Total Assets $
12,199 $ 11,207 ============ ============ Liabilities and
Shareholders' Equity Current liabilities: Current portion of
long-term debt $ 22 $ 18 Accounts payable 705 690 Other accrued
liabilities 1,645 1,662 ------------ ------------ Total current
liabilities 2,372 2,370 Long-term debt 1,475 1,789 Postretirement
benefits other than pensions 596 593 Other liabilities 1,032 925
------------ ------------ Total liabilities 5,475 5,677
------------ ------------ Commitments and contingencies Minority
interests 40 43 Shareholders' equity: Preferred stock - Par value
$100.00 per share; Shares authorized: 10 million Common stock - Par
value $0.50 per share; Shares authorized: 3.8 billion; Shares
issued: 1,569 million and 1,552 million 787 776 Additional paid-in
capital 11,872 11,548 Accumulated deficit (6,076) (6,847) Treasury
stock, at cost; Shares held: 17 million (191) (168) Accumulated
other comprehensive income 292 178 ------------ ------------ Total
shareholders' equity 6,684 5,487 ------------ ------------ Total
Liabilities and Shareholders' Equity $ 12,199 $ 11,207 ============
============ 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 Six months ended ------------------- June 30,
June 30, March 31, ------------------- 2006 2006 2006 2005
--------- --------- --------- --------- Cash Flows from Operating
Activities: Net income $ 514 $ 257 $ 771 $ 415 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation 149 141 290 246 Amortization of purchased intangibles
3 3 6 8 Restructuring, impairment and other charges and (credits) 5
6 11 18 Asbestos settlement (61) 185 124 131 Stock compensation
charges 30 32 62 13 Loss on repurchases and retirement of debt, net
11 11 12 Undistributed earnings of affiliated companies (169) (70)
(239) (133) Deferred taxes (5) (62) (67) 7 Restructuring payments
(2) (4) (6) (16) Customer deposits, net 82 (8) 74 232 Employee
benefit payments less than expense 8 15 23 29 Changes in certain
working capital items: Trade accounts receivable 68 (65) 3 (89)
Inventories (47) (46) (93) (39) Other current assets 3 (8) (5) (40)
Accounts payable and other current liabilities, net of
restructuring payments 1 (196) (195) (129) Other, net (9) 1 (8) 20
--------- --------- --------- --------- Net cash provided by
operating activities 581 181 762 685 --------- --------- ---------
--------- Cash Flows from Investing Activities: Capital
expenditures (274) (280) (554) (698) Acquisitions of businesses,
net of cash acquired (16) (16) Net proceeds from sale or disposal
of assets 8 8 17 Net increase in long-term investments and other
long-term assets (77) (77) Short-term investments - acquisitions
(647) (858) (1,505) (703) Short-term investments - liquidations 485
735 1,220 762 Other, net 10 --------- --------- --------- ---------
Net cash used in investing activities (444) (480) (924) (612)
--------- --------- --------- --------- Cash Flows from Financing
Activities: Repayments of short-term borrowings and current portion
of long-term debt (3) (4) (7) (195) Proceeds from issuance of
long-term debt, net 147 Retirements of long-term debt (334) (334)
(102) Proceeds from issuance of common stock, net 9 6 15 344
Proceeds from the exercise of stock options 32 219 251 59 Other,
net (6) (2) (8) (6) --------- --------- --------- --------- Net
cash provided by (used in) financing activities (302) 219 (83) 247
--------- --------- --------- --------- Effect of exchange rates on
cash 1 1 (28) --------- --------- --------- --------- Net increase
(decrease) in cash and cash equivalents (164) (80) (244) 292 Cash
and cash equivalents at beginning of period 1,262 1,342 1,342 1,009
--------- --------- --------- --------- Cash and cash equivalents
at end of period $ 1,098 $ 1,262 $ 1,098 $ 1,301 =========
========= ========= ========= Certain amounts for 2005 were
reclassified to conform to 2006 classifications. *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- Display mental Tech- Telecom- Tech- Life
All nologies munications nologies Sciences Other Total ---------
----------- --------- -------- ------- ------- Three months ended
June 30, 2006 Net sales $ 461 $ 472 $ 152 $ 75 $ 101 $1,261
Depreciation (1) $ 68 $ 43 $ 20 $ 5 $ 10 $ 146 Amortization of
purchased intangibles $ 3 $ 3 Research, development and engineering
expenses (2) $ 36 $ 18 $ 31 $ 12 $ 8 $ 105 Restructuring,
impairment and other charges and (credits) (before-tax and minority
interest) $ (1) $ 2 $ 4 $ 5 Income tax provision $ (21) $ (13) $
(3) $ (1) $ (38) Earnings (loss) before minority interests and
equity earnings (loss) (3) $ 209 $ 40 $ 9 $ (2) $ 1 $ 257 Minority
interests (1) (1) Equity in earnings (loss) of affiliated companies
(4) 135 1 12 148 --------- ----------- --------- -------- -------
------- Net income (loss) $ 344 $ 40 $ 9 $ (2) $ 13 $ 404 =========
=========== ========= ======== ======= ======= Three months ended
June 30, 2005 Net sales $ 415 $ 415 $ 146 $ 75 $ 90 $1,141
Depreciation (1) $ 44 $ 46 $ 18 $ 5 $ 9 $ 122 Amortization of
purchased intangibles $ 2 $ 2 Research, development and engineering
expenses (2) $ 24 $ 19 $ 26 $ 9 $ 6 $ 84 Restructuring, impairment
and other charges and (credits) (before-tax and minority interest)
$ 8 $ (15) $ (7) Income tax provision $ (33) $ (7) $ (3) $ (1) $
(2) $ (46) Earnings (loss) before minority interest and equity
earnings (loss) (3) $ 199 $ (10) $ 4 $ 1 $ 17 $ 211 Minority
interests (5) (5) Equity in earnings (loss) of affiliated companies
87 1 8 96 --------- ----------- --------- -------- ------- -------
Net income (loss) $ 286 $ (8) $ 4 $ 1 $ 20 $ 303 =========
=========== ========= ======== ======= ======= Six months ended
June 30, 2006 Net sales $1,008 $ 869 $ 307 $ 147 $ 192 $2,523
Depreciation (1) $ 130 $ 85 $ 40 $ 10 $ 20 $ 285 Amortization of
purchased intangibles $ 6 $ 6 Research, development and engineering
expenses (2) $ 66 $ 38 $ 61 $ 25 $ 16 $ 206 Restructuring,
impairment and other charges and (credits) (before-tax and minority
interest) $ 6 $ 2 $ 3 $ 11 Income tax provision $ (50) $ (19) $ (3)
$ (4) $ (76) Earnings (loss) before minority interest and equity
earnings (loss) (3) $ 484 $ 38 $ 9 $ (7) $ 3 $ 527 Minority
interests (2) (2) Equity in earnings (loss) of affiliated companies
(4) 277 3 (1) (1) 278 --------- ----------- --------- --------
------- ------- Net income (loss) $ 761 $ 41 $ 8 $ (7) $ $ 803
========= =========== ========= ======== ======= ======= Six months
ended June 30, 2005 Net sales $ 735 $ 842 $ 294 $ 149 $ 171 $2,191
Depreciation (1) $ 85 $ 92 $ 35 $ 10 $ 18 $ 240 Amortization of
purchased intangibles $ 7 $ 7 Research, development and engineering
expenses (2) $ 45 $ 36 $ 49 $ 17 $ 13 $ 160 Restructuring,
impairment and other charges and (credits) (before-tax and minority
interest) $ 8 $ (15) $ (7) Income tax provision $ (41) $ (15) $ (6)
$ (2) $ (4) $ (68) Earnings (loss) before minority interest and
equity earnings (loss) (3) $ 318 $ 8 $ 13 $ 5 $ 20 $ 364 Minority
interests (7) (7) Equity in earnings (loss) of affiliated companies
168 1 25 194 --------- ----------- --------- -------- -------
------- Net income (loss) $ 486 $ 9 $ 13 $ 5 $ 38 $ 551 =========
=========== ========= ======== ======= ======= (1) Depreciation
expense for Corning's reportable segments is recorded based on the
assets of each segment and also includes an allocation of
depreciation of corporate property not specifically identifiable to
a segment. (2) Research, development, and engineering expenses
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. (4) In the three
and six months ended June 30, 2006, equity in earnings (loss) of
affiliated companies includes charges of $3 million and $24
million, respectively, in All Other related to impairments for
Samsung Corning. *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 Six months ended June
30, ended June 30, ----------------- ----------------- 2006 2005
2006 2005 -------- -------- -------- -------- Net income of
reportable segments $ 404 $ 303 $ 803 $ 551 Unallocated amounts:
Net financing costs (1) (2) (24) (10) (61) Stock-based compensation
expense (30) (9) (62) (15) Exploratory research (19) (17) (40) (36)
Corporate contributions (9) (7) (17) (12) Equity in earnings of
associated companies, net of impairments (2) 70 81 140 152 Asbestos
settlement (3) 61 (143) (124) (131) Other corporate items (4) 39
(19) 81 (33) -------- -------- -------- -------- Net income $ 514 $
165 $ 771 $ 415 ======== ======== ======== ======== (1) Net
financing costs include interest expense, interest income, and
interest costs and investment gains associated with benefit plans.
(2) Equity in earnings of affiliated companies, net of impairments,
includes the following items: -- In the three and six months ended
June 30, 2006, a $33 million gain representing our share of a tax
settlement relating to an IRS examination at Dow Corning. -- In the
three and six months ended June 30, 2005, a gain of $11 million for
our share of a gain on the issuance of subsidiary stock at Dow
Corning. (3) The asbestos settlement arrangement to be incorporated
into the Pittsburgh Corning Corporation (PCC) reorganization plan,
when the reorganization plan becomes effective, will require
Corning to relinquish its equity interest in PCC, contribute its
equity interest in Pittsburgh Corning Europe (PCE), and 25 million
shares of Corning common stock to a trust. Corning also agreed to
make cash payments over the six years from the effective date of
the settlement and to assign certain insurance policy proceeds from
its primary insurance and a portion of its excess insurance at the
time of the settlement. The asbestos liability requires adjustment
to fair value based upon movements in Corning's common stock price
prior to contribution of the shares to the trust as well as changes
in the estimated fair value of the other components of the
settlement offer. In the second quarter of 2006 and 2005, Corning
recorded a credit of $68 million and a charge of $137 million,
respectively, to reflect the movement in Corning's common stock
price in each year and charges of $7 million and $6 million,
respectively, to reflect changes in the estimated fair value of
other components of the settlement offer. In the six months ended
June 30, 2006 and 2005, Corning recorded charges of $114 million
and $121 million, respectively, to reflect the movement in
Corning's common stock price in each year and charges of $10
million in each year to reflect changes in the estimated fair value
of other components of the settlement offer. (4) Other corporate
items include the tax impact of the unallocated amounts plus the
following items: -- In the three and six months ended June 30,
2006, tax benefits of $10 million and $48 million, respectively,
from the release of valuation allowances for certain foreign
locations. -- In the three and six months ended June 30, 2005,
impairment charges of $6 million and $25 million, respectively, for
an other-than-temporary decline in our investment in Avanex below
its cost basis. -- In the three and six months ended June 30, 2005,
restructuring credits of $7 million for adjustments to prior years'
reserves. *T -0- *T CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Asbestos
Settlement 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 proposed settlement, when the
plan becomes effective, will require Corning to relinquish its
equity interest in PCC, contribute its equity interest in
Pittsburgh Corning Europe N.V. (PCE), a Belgian corporation, and
contribute 25 million shares of Corning common stock. Corning also
agreed to make cash payments with a value of $131 million, in March
2003, over six years from the effective date of the settlement and
to assign insurance policy proceeds from its primary insurance and
a portion of its excess insurance at the time of the settlement. As
a result of the proposed asbestos settlement, any changes in the
estimated fair value of the components of the proposed settlement
agreement will be recognized in Corning's quarterly results until
the date of the contribution to the settlement trust. In the second
quarter of 2006, Corning recorded a credit of $61 million (pretax
and after-tax) including a mark-to-market credit of $68 million
reflecting the decrease in Corning's common stock from March 31,
2006 to June 30, 2006 and a $7 million charge to adjust the
estimated fair value of certain other components of the proposed
asbestos settlement. Beginning with the first quarter of 2003, we
have recorded total net charges of $942 million to reflect the
estimated fair value of our asbestos liability. 2. Debt In the
second quarter of 2006, we redeemed $315 million principal amount
of our outstanding notes in three separate transactions resulting
in losses of $11 million. 3. Provision for Income Taxes In the
second quarter of 2006, Corning recorded a $10 million tax benefit
from the release of a valuation allowance on Australian tax
benefits due to sustained profitability of Corning's Australian
entities and positive future earnings projections for the
Australian consolidated group. 4. Equity in Earnings of Associated
Companies In the second quarter of 2006, equity in earnings of
associated companies includes a gain of $33 million related to Dow
Corning's settlement with the IRS regarding liabilities for tax
years 1992 to 2003. This settlement resolves all Federal tax issues
related to Dow Corning's implant settlement. 5. Weighted Average
Shares Outstanding Our weighted average shares outstanding are as
follows (in millions): Three months Three months ended ended June
30, March 31, ---------------------- ------------ 2006 2005 2006
---------- ---------- ------------ Basic 1,549 1,438 1,541 Diluted
1,597 1,517 1,592 Diluted used for non-GAAP measures 1,597 1,523
1,592 *T -0- *T CORNING INCORPORATED AND SUBSIDIARY COMPANIES
QUARTERLY SALES INFORMATION (Unaudited; in millions) 2006
-------------------------- Three Six Months Ended Months
----------------- Ended March 31 June 30 June 30 -------- --------
-------- Display Technologies $ 547 $ 461 $ 1,008
Telecommunications Fiber and cable 205 234 439 Hardware and
equipment 192 238 430 -------- -------- -------- 397 472 869
Environmental Technologies Automotive 121 113 234 Diesel 34 39 73
-------- -------- -------- 155 152 307 Life Sciences 72 75 147
Other 91 101 192 -------- -------- -------- Total $ 1,262 $ 1,261 $
2,523 ======== ======== ======== 2005
-------------------------------------------- Q1 Q2 Q3 Q4 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 ======== ======== ======== ========
======== 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 June
30, 2006 (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 2006 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.
----------------------------------------------------------------------
Income Before Per Income Net Share Taxes Income --------- ---------
--------- Earnings per share (EPS) and net income, excluding
special items $ 0.26 $ 233 $ 421 Special items: Asbestos settlement
(a) 0.04 61 61 Loss on repurchases of debt, net (0.01) (11) (11)
Provision for income taxes (b) 0.01 10 Equity in earnings of
associated companies (c) 0.02 33 --------- --------- ---------
Total EPS and net income $ 0.32 $ 283 $ 514 ========= =========
========= (a) As a result of Corning's proposed asbestos
settlement, any changes in the estimated fair value of the
components of the proposed settlement agreement will be recognized
in Corning's quarterly results until the date of the contribution
to the settlement trust. In the second quarter of 2006, Corning
recorded a gain of $61 million (before- and after-tax) including
$68 million for the change in Corning's common stock price of
$24.19 at June 30, 2006, compared to $26.92 at March 31, 2006 and a
$7 million charge for the change in estimated fair value of certain
other components of the proposed asbestos settlement liability. (b)
Amount reflects a $10 million tax benefit from the release of
Corning's valuation allowance on Australian tax benefits. (c)
Amount reflects a $33 million increase in equity earnings
representing Corning's share of a favorable tax settlement from the
completion of an IRS examination at Dow Corning. *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 net income and earnings per share (EPS) excluding special
items for the first quarter of 2006 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.
----------------------------------------------------------------------
Income Before Per Income Net Share Taxes Income --------- ---------
--------- Earnings per share (EPS) and net income, excluding
special items $ 0.27 $ 241 $ 425 Special items: Asbestos settlement
(a) (0.12) (185) (185) Provision for income taxes (b) 0.02 38
Equity in earnings of associated companies (c) (0.01) (21)
--------- --------- --------- Total EPS and net income $ 0.16 $ 56
$ 257 ========= ========= ========= (a) As a result of Corning's
proposed asbestos settlement, any changes in the estimated fair
value of the components of the proposed settlement agreement will
be recognized in our quarterly results until the date of the
contribution to the settlement trust. In the first quarter of 2006,
Corning recorded a charge of $185 million (before- and after-tax)
including $182 million for the change in its common stock price of
$26.92 at March 31, 2006, compared to $19.66 at December 31, 2005
and $3 million for the change in estimated fair value of certain
other components of the proposed asbestos settlement liability. (b)
Amount reflects a $38 million tax benefit from the release of our
valuation allowance on certain deferred tax assets in Germany. (c)
Amount reflects a charge of $21 million to reflect Corning's share
of an impairment charge at Samsung Corning Co., Ltd., a South
Korea-based manufacturer of glass panels and funnels for cathode
ray tube television and display monitors. *T -0- *T CORNING
INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP
FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Three Months Ended June
30, 2005 (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 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.
----------------------------------------------------------------------
Income Before Per Income Net Share Taxes Income --------- ---------
--------- EPS and net income, excluding special items $ 0.20 $ 192
$ 312 Special items: Restructuring, impairment and other (charges)
and credits (a) 1 (3) Asbestos settlement (b) (0.09) (143) (143)
Loss on repurchases and retirement of debt, net (c) (0.01) (12)
(12) Equity in earnings of associated companies (d) 0.01 11
--------- --------- --------- Total EPS and net income $ 0.11 $ 38
$ 165 ========= ========= ========= (a) In the second quarter of
2005, Corning recorded net credits of $1 million (net charge of $3
million after-tax and minority interest) included in restructuring,
impairment and other charges and (credits). A summary of these
credits and charges follows: -- We recorded net credits of $7
million ($3 million after-tax and minority interest), primarily for
adjustments to prior years' restructuring and impairment reserves.
-- We recorded an additional impairment charge of $6 million
(pretax and after-tax) for an other than temporary decline in the
fair value of our investment in Avanex Corporation (Avanex) below
its adjusted cost basis. Our investment in Avanex is accounted for
as an available-for-sale security under SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." At June 30,
2005, shares of Avanex stock were trading at $0.90 per share
compared to our adjusted cost basis of $1.30 per share (after
adjusting for the first quarter of 2005 impairment charge). We
intend to sell our shares of Avanex and, subject to restrictions
and the trading volume in Avanex stock, we expect to complete this
activity in early 2006. As we do not expect the market value of the
Avanex shares to recover in this timeframe, the additional
impairment in the second quarter was required. (b) As a result of
Corning's proposed asbestos settlement, any changes in the
estimated fair value of the components of the proposed settlement
agreement will be recognized in Corning's quarterly results until
the date of the contribution to the settlement trust. In the second
quarter of 2005, Corning recorded a charge of $143 million (before-
and after-tax) including $137 million for the change in Corning's
common stock price of $16.62 at June 30, 2005, compared to $11.13
at March 31, 2005 and a $6 million charge for the change in
estimated fair value of certain other components of the proposed
asbestos settlement liability. (c) In the second quarter of 2005,
we redeemed for cash the $100 million principal amount of our 7%
debentures due March 15, 2007. We recognized a $12 million loss
upon the early redemption of these debentures. (d) 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. *T -0- *T CORNING INCORPORATED AND
SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
TO GAAP FINANCIAL MEASURE Three Months Ended June 30, 2006
(Unaudited; amounts in millions)
----------------------------------------------------------------------
Corning's free cash flow financial measure for the three months
ended June 30, 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 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 measure.
----------------------------------------------------------------------
Three months ended June 30, 2006 --------------- Cash flows from
operating activities $ 581 Less: Cash flows from investing
activities (444) Plus: Short-term investments - acquisitions 647
Less: Short-term investments - liquidations (485) ---------------
Free cash flow $ 299 =============== *T -0- *T CORNING INCORPORATED
AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE TO GAAP FINANCIAL MEASURE Three Months Ended September 30,
2006 (Unaudited; amounts in millions, except per share amounts)
----------------------------------------------------------------------
Corning's earnings per share (EPS) excluding special items for the
third 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 $ 0.22 $ 0.26 Special items: Restructuring, impairment and
other (charges) and credits (a) Asbestos settlement (b)
------------- ------------- 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 third quarter of
2006, Corning will record a charge or credit for the change in its
common stock price as of September 30, 2006 compared to $24.19, the
common stock price at June 30, 2006. In addition, Corning will
record an adjustment to the asbestos liability to reflect the
change in fair value of any of the other components of the proposed
asbestos settlement. 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 third 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
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