SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported) July 19, 2004
CORNING INCORPORATED
(Exact name of registrant as specified in its charter)
New York 1-3247 16-0393470
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Riverfront Plaza, Corning, New York 14831
(Address of principal executive offices) (Zip Code)
(607) 974-9000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Item 9. Regulation FD Disclosure
- ---------------------------------
Item 12. Results of Operations and Financial Condition
- -------------------------------------------------------
The following information is furnished pursuant to Item 9, "Regulation FD
Disclosure" and Item 12, "Results of Operations and Financial Condition."
The Corning Incorporated press release dated July 19, 2004, regarding its
financial results for the quarter ended June 30, 2004, is attached hereto as
Exhibit 99. This press release includes certain non-GAAP financial measures
along with a reconciliation to the most directly comparable GAAP financial
measures.
Exhibit Index
99 Press Release dated July 19, 2004 issued by Corning Incorporated
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORNING INCORPORATED
Registrant
Date: July 19, 2004 By /s/ KATHERINE A. ASBECK
------------------------------------
Katherine A. Asbeck
Senior Vice President and Controller
Exhibit 99
FOR RELEASE -- JULY 19, 2004
Media Relations Contact: Investor Relations Contact:
Daniel F. Collins Kenneth C. Sofio
(607) 974-4197 (607) 974-7705
collinsdf@corning.com sofiokc@corning.com
Corning Reports Second-Quarter Results
Company posts 15 percent sequential sales gain
CORNING, N.Y. -- Corning Incorporated (NYSE:GLW) today announced second-quarter
sales of $971 million and net income of $108 million, or $0.07 per share. Net
income includes net after-tax charges of $61 million, or $0.04 per share.
"We clearly exceeded our expectations for the quarter," James R. Houghton,
chairman and chief executive officer, said. "We saw very strong performance in
our Telecommunications and Display Technologies segments. In addition, this was
our sixth quarter of sequential revenue growth," he said.
Corning's second-quarter net after-tax charges of $61 million, or $0.04 per
share, include:
.. A $47 million charge ($45 million after-tax) to reflect the increase in the
market value of Corning common stock to be contributed to settle the
asbestos litigation related to Pittsburgh Corning Corporation.
.. A $34 million gain ($14 million after-tax and minority interest) from
restructuring activities, primarily related to the sale of Corning Asahi
Video Products Company assets.
.. A $9 million charge ($9 million after-tax) related to Corning's ongoing
debt reduction program.
.. Charges totaling $21 million in equity earnings related to restructuring
actions at Dow Corning Corporation and adjustments to interest liabilities
recorded on its emergence from bankruptcy.
Second-Quarter Operating Results
The company's second-quarter sales of $971 million increased 15 percent over
first-quarter sales of $844 million. The sales improvement was driven by
seasonal increases in the Telecommunications segment and continued growth in the
Display Technologies segment.
Corning's net income of $108 million almost doubled compared to first-quarter
net income of $55 million. The net income increase was primarily the result of
higher sales in the company's Telecommunications and Display Technologies
segments. In addition, equity earnings from Dow Corning Corporation and Samsung
Corning Precision Glass Co., Ltd. were strong in the quarter.
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Corning Reports Second-Quarter Results
Page Two
Segment Results
Display Technologies segment sales grew 20 percent to $277 million compared to
first-quarter sales of $230 million. This increase reflects 22 percent volume
growth in liquid crystal display (LCD) glass and stable prices. Second-quarter
volume growth was particularly strong in Taiwan. Segment net income increased 14
percent to $135 million compared to $118 million in the previous quarter.
Telecommunications segment sales were $392 million and net loss was $21 million
for the quarter, compared to first-quarter sales of $312 million and net loss of
$43 million. The improved quarterly performance was driven primarily by
sequential fiber and cable volume gains in North America and Europe, and strong
demand for the company's hardware and equipment products in part due to
Verizon's fiber-to-the-premises build-out. Fiber volume increased 31 percent
sequentially and price declines were moderate. Corning also said that the recent
anti-dumping preliminary determination in China is beginning to have an impact
on fiber exported to China. The company is continuing to cooperate with the
Chinese Ministry of Commerce to reach a final determination.
Both Environmental Technologies and Life Sciences segment sales and earnings
were about even with the first-quarter results. The Environmental Technologies
segment had sales of $141 million for the second quarter. The company said sales
of its diesel products increased sequentially and its automotive product sales
were down slightly from a record first-quarter performance. In the Life Sciences
segment, second-quarter sales were $79 million, keeping pace with
stronger-than-expected first-quarter sales.
Cash Flow/Liquidity Update
Corning ended the quarter with approximately $1.6 billion in cash and short-term
investments compared to $1.5 billion in the first quarter. The increase was
primarily due to strong operating cash flow, which more than offset the
company's capital spending. Corning's debt-to-capital ratio was 31.2 percent at
the end of the second quarter versus 33.1 percent in the first quarter.
Third-Quarter Outlook
Corning said that it expects third-quarter sales to be in the range of $950
million to $1 billion, with earnings per share in the range of $0.10 to $0.12
before special items. This estimate is a non-GAAP financial measure and excludes
the previously announced charge of approximately $25 million pretax for the sale
of the company's frequency control business and other potential gains and
charges. The non-GAAP financial estimate is reconciled on the company's Investor
Relations Web site and in the financial statements accompanying this release.
Corning expects that its gross margins will be in the range of 36 percent to 37
percent and foreign exchange rates will remain stable.
(more)
Corning Reports Second-Quarter Results
Page Three
Corning is increasing its estimate of capital spending for the year to $950
million to $1 billion. This increase reflects the company's intent to keep up
with the strong growth in the LCD market, as well as the faster-than-anticipated
cash outflows for its construction projects in Taiwan.
In the Telecommunications segment, Corning expects that sequential fiber volume
will decrease between 10 percent and 15 percent in the third quarter and pricing
declines will remain moderate. The company said that it expects seasonal gains
in fiber volume in North America and Europe to be offset by declines in China as
a result of the recent anti-dumping preliminary ruling. Corning also expects to
continue to see strong hardware and equipment sales in the quarter.
Corning expects that its Display Technologies segment will have another strong
quarter. Sequential volume is expected to increase approximately 10 percent for
the quarter and is being limited by the company's ability to bring on new
capacity. Pricing is expected to remain stable.
"We believe that we will remain sold out of LCD manufacturing capacity
throughout the year," James B. Flaws, vice chairman and chief financial officer,
said. "And we are adding capacity to meet the industry's demand for larger
generation state-of-the-market LCD substrates," he said.
Flaws also said that Corning is pleased with the improving performance of the
company's Telecommunications segment, but that it is too early to see a recovery
trend in the market. "We are encouraged by the sales we are experiencing for the
fiber-to-the-premises build-outs," he added.
Flaws remarked that, "We are making excellent progress on our key business
priorities, and we believe we can sustain this momentum into the third quarter.
It feels good to us right now. We see positive trends across many of our
businesses, and we are looking forward to the third quarter."
Presentation of Information in this News Release
Corning's earnings estimate for the third quarter is a non-GAAP financial
measure as it excludes any potential gains or losses arising from previously
announced restructuring actions; previously announced loss on the sale of the
frequency control business; any further adjustments to the asbestos settlement
reserve required by movement in Corning's stock price; and income from
discontinued operations. The company believes presenting earnings estimates that
exclude these items is helpful in understanding Corning's operating results.
This earnings estimate is reconciled in this press release.
(more)
Corning Reports Second-Quarter Results
Page Four
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, life
sciences and semiconductor industries.
Second-Quarter Conference Call Information
The company will host a second-quarter conference call at 8:30 a.m. EST on
Tuesday, July 20. To access the call, dial (517) 319-9285. The password is
Earnings. The leader is Sofio. A replay of the call will begin at approximately
10:30 a.m. EST and will run through 5 p.m. EST, Tuesday, Aug. 3. To listen, dial
(203) 369-0446, no pass code is required. To listen to a live audio webcast of
the call at 8:30 a.m. on Tuesday, July 20, please go to Corning's Web site and
follow the instructions: http://www.corning.com/investor_relations. The audio
webcast will be archived for one year following the call.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements that involve a variety of
business risks and other uncertainties that could cause actual results to differ
materially. These risks and uncertainties include the possibility of changes or
fluctuations in global economic and political conditions; tariffs, import duties
and currency fluctuations; product demand and industry capacity; competitive
products and pricing; manufacturing efficiencies; cost reductions; availability
and costs of critical components and materials; new product development and
commercialization; order activity and demand from major customers; capital
spending by larger customers in the liquid crystal display industry and other
businesses; changes in the mix of sales between premium and non-premium
products; facility expansions and new plant start-up costs; possible disruption
in commercial activities due to terrorist activity, armed conflict, political
instability or major health concerns; ability to obtain financing and capital on
commercially reasonable terms; adequacy and availability of insurance; capital
resource and cash flow activities; capital spending; equity company activities;
interest costs; acquisition and divestiture activities; the level of excess or
obsolete inventory; the rate of technology change; the ability to enforce
patents; product and components performance issues; changes in key personnel;
stock price fluctuations; and adverse litigation or regulatory developments.
These and other risk factors are identified in Corning's filings with the
Securities and Exchange Commission. Forward-looking statements speak only as of
the day that they are made, and Corning undertakes no obligation to update them
in light of new information or future events.
###
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
For the three months For the six months
ended June 30, ended June 30,
------------------------ ------------------------
2004 2003 2004 2003
--------- -------- --------- ---------
Net sales $ 971 $ 752 $ 1,815 $ 1,498
Cost of sales 625 571 1,169 1,117
--------- -------- --------- ---------
Gross margin 346 181 646 381
Operating expenses:
Selling, general and administrative expenses 166 148 326 300
Research, development and engineering expenses 85 85 169 178
Amortization of purchased intangibles 9 9 19 18
Restructuring, impairment and other charges and
(credits) (34) 49 100
Asbestos settlement 47 39 66 337
--------- -------- --------- ---------
Operating income (loss) 73 (149) 66 (552)
Interest income 4 9 10 17
Interest expense (37) (42) (73) (82)
(Loss) gain on repurchases and retirement
of debt, net (9) 13 (32) 17
Other income, net 5 20 1 6
--------- -------- --------- ---------
Income (loss) before income taxes 36 (149) (28) (594)
(Provision) benefit for income taxes (24) 34 (12) 178
--------- -------- --------- ---------
Income (loss) before minority interests and
equity earnings 12 (115) (40) (416)
Minority interests (11) 33 (11) 70
Equity in earnings of associated companies, net of
impairments 107 60 214 119
--------- -------- --------- ---------
Net income (loss) $ 108 $ (22) $ 163 $ (227)
========= ======== ========= =========
Basic earnings (loss) per common share $ 0.08 $ (0.02) $ 0.12 $ (0.19)
========= ======== ========= =========
Diluted earnings (loss) per common share $ 0.07 $ (0.02) $ 0.11 $ (0.19)
========= ======== ========= =========
Shares used in computing per share amounts for:
Basic earnings (loss) per common share 1,383 1,244 1,371 1,222
========= ======== ========= =========
Diluted earnings (loss) per common share 1,495 1,244 1,446 1,222
========= ======== ========= =========
Certain amounts for 2003 were reclassified to conform with 2004 classifications.
See Notes to Consolidated Financial Statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
June 30, December 31,
2004 2003
----------- -------------
Assets
Current assets:
Cash and cash equivalents $ 964 $ 833
Short-term investments, at fair value 623 433
--------- ---------
Total cash, cash equivalents and short-term investments 1,587 1,266
Trade accounts receivable, net 566 525
Inventories 501 467
Deferred income taxes 236 242
Other current assets 175 194
--------- ---------
Total current assets 3,065 2,694
Investments 1,132 1,045
Property, net 3,663 3,620
Goodwill 1,729 1,735
Other intangible assets, net 146 166
Deferred income taxes 1,278 1,225
Other assets 236 267
--------- ---------
Total Assets $ 11,249 $ 10,752
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Loans payable $ 312 $ 146
Accounts payable 377 333
Other accrued liabilities 1,065 1,074
--------- ---------
Total current liabilities 1,754 1,553
Long-term debt 2,448 2,668
Postretirement benefits other than pensions 610 619
Other liabilities 405 412
Commitments and contingencies
Minority interests 30 36
Shareholders' equity:
Preferred stock - Par value $100.00 per share; Shares authorized: 10 million
Series C mandatory convertible preferred stock - Shares issued: 5.75 million;
Shares outstanding: 637 thousand and 854 thousand 64 85
Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion;
Shares issued: 1,417 million and 1,401 million 708 701
Additional paid-in capital 10,350 10,298
Accumulated deficit (4,981) (5,144)
Treasury stock, at cost; Shares held: 23 million and 58 million (234) (574)
Accumulated other comprehensive income 95 98
--------- ---------
Total shareholders' equity 6,002 5,464
--------- ---------
Total Liabilities and Shareholders' Equity $ 11,249 $ 10,752
========= =========
Certain amounts for 2003 were reclassified to conform with 2004 classifications.
See Notes to Consolidated Financial Statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
For the three months ended For the six months ended
-------------------------- June 30,
June 30, March 31, -------------------------
2004 2004 2004 2003
--------- --------- --------- ---------
Cash flows from operating activities:
Net income (loss) $ 108 $ 55 $ 163 $ (227)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Amortization of purchased intangibles 9 10 19 18
Depreciation 120 120 240 250
Restructuring, impairment and other charges and credits (34) 34 100
Asbestos settlement 47 19 66 337
Loss (gain) on repurchases and retirement of debt, net 9 23 32 (17)
Undistributed earnings of associated companies (63) (29) (92) (24)
Minority interests, net of dividends paid 11 11 (70)
Deferred tax benefit 5 (40) (35) (234)
Interest expense on convertible debentures 1 2 3 13
Restructuring payments (22) (34) (56) (143)
Income tax refund 191
Tax benefit on stock options 5 6 11
Changes in certain working capital items:
Trade accounts receivable (26) (17) (43) 17
Inventories (1) (32) (33) 34
Other current assets 4 3 7 (4)
Accounts payable and other current liabilities,
net of restructuring payments 60 (66) (6) (173)
Other, net 29 (9) 20 (20)
-------- -------- -------- -------
Net cash provided by operating activities 262 45 307 48
-------- -------- -------- -------
Cash flows from investing activities:
Capital expenditures (168) (134) (302) (110)
Net proceeds from sale of precision lens business 9
Net proceeds from sale or disposal of assets 26 9 35 43
Net increase in long-term investments and other
long-term assets (4)
Short-term investments - acquisitions (404) (302) (706) (1,060)
Short-term investments - liquidations 230 284 514 956
Restricted investments - liquidations 3 2 5 6
-------- -------- -------- -------
Net cash used in investing activities (313) (141) (454) (160)
-------- -------- -------- -------
Cash flows from financing activities:
Net repayments of loans payable (7) (2) (9) (54)
Proceeds from issuance of long-term debt, net 396 396
Repayments of long-term debt (9) (141) (150) (823)
Proceeds from issuance of common stock, net 13 11 24 281
Cash dividends to preferred shareholders (3) (2) (5) (6)
Proceeds from the exercise of stock options 15 12 27
-------- -------- -------- -------
Net cash provided by (used in) financing activities 9 274 283 (602)
-------- -------- -------- -------
Effect of exchange rates on cash (4) (1) (5) 35
-------- -------- -------- -------
Net (decrease) increase in cash and cash equivalents (46) 177 131 (679)
Cash and cash equivalents at beginning of period 1,010 833 833 1,426
-------- -------- -------- -------
Cash and cash equivalents at end of period $ 964 $ 1,010 $ 964 $ 747
======== ======== ======== =======
Certain amounts for 2003 were reclassified to conform with 2004 classifications.
See Notes to Consolidated Financial Statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
Effective with the first quarter of 2004, we have revised our reportable
operating segments from Telecommunications and Technologies to
Telecommunications, Display Technologies, Environmental Technologies, and Life
Sciences. Prior year information has been restated to conform with this
revision.
Telecom- Display Environmental Life Unallocated Consolidated
munications Technologies Technologies Sciences and Other Total
----------- ------------ ------------- -------- ----------- ------------
For the three months ended June 30, 2004
Net sales $ 392 $ 277 $ 141 $ 79 $ 82 $ 971
Research, development and engineering
expenses (1) $ 23 $ 19 $ 21 $ 9 $ 13 $ 85
Restructuring, impairment and other charges
and (credits) (2) $ (1) $ (33) $ (34)
Interest expense (3) $ 16 $ 11 $ 5 $ 2 $ 3 $ 37
Benefit (provision) for income taxes $ 11 $ (32) $ (2) $ (2) $ 1 $ (24)
(Loss) income before minority interests and
equity (losses) earnings (4)(5) $ (21) $ 64 $ 4 $ 5 $ (40) $ 12
Minority interests (6) (11) (11)
Equity in earnings of associated
companies, net of impairments 71 36 107
------- ------- -------- -------- -------- --------
Net (loss) income $ (21) $ 135 $ 4 $ 5 $ (15) $ 108
======= ======= ======== ======== ======== ========
For the three months ended June 30, 2003
Net sales $ 347 $ 135 $ 117 $ 72 $ 81 $ 752
Research, development and engineering
expenses (1) $ 32 $ 12 $ 20 $ 7 $ 14 $ 85
Restructuring, impairment and other charges
and (credits) (2) $ (19) $ 68 $ 49
Interest expense (3) $ 22 $ 9 $ 5 $ 2 $ 4 $ 42
Benefit (provision) for income taxes $ 5 $ (11) $ (2) $ (2) $ 44 $ 34
(Loss) income before minority interests and
equity earnings (4)(5) $ (53) $ 22 $ 6 $ 4 $ (94) $ (115)
Minority interests (6) 33 33
Equity in (losses) earnings of associated
companies, net of impairments (7) (8) 31 (3) 40 60
------- ------- -------- -------- -------- --------
Net (loss) income $ (61) $ 53 $ 3 $ 4 $ (21) $ (22)
======= ======= ======== ======== ======== ========
For the six months ended June 30, 2004
Net sales $ 704 $ 507 $ 282 $ 158 $ 164 $ 1,815
Research, development and engineering
expenses (1) $ 48 $ 35 $ 41 $ 18 $ 27 $ 169
Restructuring, impairment and other charges
and (credits) (2) $ (5) $ 5
Interest expense (3) $ 32 $ 22 $ 10 $ 3 $ 6 $ 73
Benefit (provision) for income taxes $ 34 $ (58) $ (5) $ (5) $ 22 $ (12)
(Loss) income before minority interests
and equity (losses) earnings (4)(5) $ (68) $ 117 $ 10 $ 10 $ (109) $ (40)
Minority interests (6) 1 (12) (11)
Equity in earnings of associated
companies, net of impairments 3 136 75 214
------- ------- -------- -------- -------- --------
Net (loss) income $ (64) $ 253 $ 10 $ 10 $ (46) $ 163
======= ======= ======== ======== ======== ========
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
Telecom- Display Environmental Life Unallocated Consolidated
munications Technologies Technologies Sciences and Other Total
----------- ------------ ------------- -------- ----------- ------------
For the six months ended June 30, 2003
Net sales $ 699 $ 252 $ 232 $ 145 $ 170 $ 1,498
Research, development and engineering
expenses (1) $ 70 $ 24 $ 41 $ 14 $ 29 $ 178
Restructuring, impairment and other charges
and (credits) (2) $ (28) $ 128 $ 100
Interest expense (3) $ 43 $ 18 $ 10 $ 4 $ 7 $ 82
Benefit (provision) for income taxes $ 30 $ (17) $ (4) $ (6) $ 175 $ 178
(Loss) income before minority interests
and equity (losses) earnings (4)(5) $ (113) $ 35 $ 9 $ 12 $ (359) $ (416)
Minority interests (6) 70 70
Equity in (losses) earnings of associated
companies, net of impairments (7) (11) 55 (1) 76 119
------- ------- -------- -------- -------- --------
Net (loss) income $ (124) $ 90 $ 8 $ 12 $ (213) $ (227)
======= ======= ======== ======== ======== ========
(1) Non-direct research, development and engineering expenses are allocated
based upon direct project spending for each segment.
(2) Related tax (expense) benefit follows:
For the three months ended June 30, 2004: $0, $0, $0, $0, $(7) and $(7).
For the three months ended June 30, 2003: $2, $0, $0, $0, $16 and $18.
For the six months ended June 30, 2004: $(1), $0, $0, $0, $8 and $7.
For the six months ended June 30, 2003: $(2), $0, $0, $0, $28 and $26.
(3) Interest expense is allocated to segments based on a percentage of segment
net operating assets. Consolidated subsidiaries with independent capital
structures do not receive additional allocations of interest expense.
(4) 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.
(5) (Loss) income before minority interests and equity (losses) earnings
includes an allocation of depreciation of corporate property, plant and
equipment not specifically identifiable to a segment. Related depreciable
assets are not allocated to segment assets.
(6) (Loss) income before minority interests and equity (losses) earnings
includes the following restructuring, impairment and other charges and
(credits):
For the three and six months ended June 30, 2004, gains from the sale
of assets of Corning Asahi Video Products Company in excess of assumed
salvage value of $13 and $14, respectively.
For the three and six months ended June 30, 2003, charges related to
impairment of long-lived assets of Corning Asahi Video Products Company
of $28 and $59, respectively.
(7) Equity in (losses) earnings of associated companies, net of impairments
includes $7 related to impairments of equity investments in the
Telecommunications segment for the three and six months ended June 30,
2003.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
A reconciliation of reportable segment net income (loss) to consolidated net
income (loss) follows:
For the three months For the six months
ended June 30, ended June 30,
------------------------ ------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net income (loss) of reportable segments $ 123 $ (1) $ 209 $ (14)
Non-reportable operating segments net income (loss) (1) 19 (26) 1 (47)
Unallocated amounts:
Non-segment loss and other (2) (4) (14) (7) (29)
Non-segment restructuring, impairment and
other (charges) and credits 4 (10) 4 (10)
Asbestos settlement (47) (39) (66) (337)
Interest income 4 9 10 17
(Loss) gain on repurchases of debt (9) 13 (32) 17
Benefit for income taxes (3) 1 21 3 133
Equity in earnings of associated companies, net
of impairments (4) 17 25 41 43
--------- --------- --------- ---------
Net income (loss) $ 108 $ (22) $ 163 $ (227)
========= ========= ========= =========
(1) Non-reportable operating segments net income (loss) includes the results of
non-reportable operating segments.
(2) Non-segment loss and other includes the results of non-segment operations
and other corporate activities.
(3) Benefit for income taxes includes taxes associated with non-segment
restructuring, impairment and other charges.
(4) Equity in earnings of associated companies, net of impairments includes
amounts derived from corporate investments, primarily Dow Corning
Corporation.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Restructuring, Impairment and Other Charges and (Credits)
In the second quarter of 2004, we recorded credits of $34 million ($14 million
after-tax and minority interest) included in restructuring, impairment and other
charges and (credits). A summary of these credits follows:
.. a $25 million gain ($8 million after-tax and minority interest) related to
proceeds in excess of assumed salvage values for assets of Corning Asahi
Video Products Company that were previously impaired but later sold to a
third party in China; and
.. a $9 million credit ($6 million after-tax) comprised of reversals of
reserves related to prior years' restructuring charges.
2. Asbestos Settlement
On March 28, 2003, we announced that we had reached agreement with the
representatives of asbestos claimants for the settlement of all current and
future asbestos claims against us and Pittsburgh Corning Corporation ("PCC"),
which might arise from PCC products or operations. Accordingly, we recorded a
charge of $298 million ($192 million after-tax) in the first quarter of 2003.
The charge included the value of 25 million shares of Corning common stock that
we will contribute as part of the settlement. Also at that time, we indicated
that any changes in the value of our common stock contribution would be
recognized in our quarterly results through the date of contribution to the
settlement trust. As required, we recorded a mark-to-market charge of $47
million ($45 million after-tax) in the second quarter of 2004 reflecting the
increased fair value of Corning's common stock. Since the first quarter of 2003,
we have recorded total charges of $479 million ($327 million after-tax) to
reflect the settlement and to mark-to-market the value of our common stock.
3. Long-Term Debt
During the second quarter of 2004, we issued 10 million shares of common stock
and paid $9 million in cash in exchange for 3.5% convertible debentures with a
book value of $98 million. As a result of these transactions, we recorded a $9
million charge ($9 million after-tax) relating to the retirement of debt.
4. Dow Corning Corporation
In the second quarter of 2004, Corning's 50-percent owned equity company, Dow
Corning Corporation, recorded a restructuring charge and a charge to adjust
interest liabilities due to court rulings on its emergence from bankruptcy. Our
equity earnings in the second quarter of 2004 included $21 million related to
these charges.
5. Subsequent Event
On July 8, 2004, we announced the sale of our frequency control business, which
is part of our Telecommunications segment. The frequency control business had
2003 annual sales of approximately $70 million. We expect to close the
transaction and recognize a pretax loss approximating $25 million in the third
quarter of 2004.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
QUARTERLY SALES INFORMATION
(Unaudited; in millions)
2004
-------------------------------------
Three
Months Ended Six Months
---------------------- Ended
March 31 June 30 June 30
-------- ------- -------
Telecommunications
Fiber and cable $ 149 $ 192 $ 341
Hardware and equipment 163 200 363
-------- -------- -------
312 392 704
Display Technologies 230 277 507
Environmental Technologies 141 141 282
Life Sciences 79 79 158
Other
Conventional video components 2 2
Other businesses 80 82 162
-------- -------- -------
82 82 164
Total $ 844 $ 971 $ 1,815
======== ======== =======
2003
-------------------------------------------------------------
Three Months Ended
-----------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 Total
-------- -------- -------- ------- --------
Telecommunications
Fiber and cable $ 193 $ 178 $ 209 $ 180 $ 760
Hardware and equipment 141 154 151 166 612
Photonic technologies 18 15 10 11 54
-------- -------- ------- ------- --------
352 347 370 357 1,426
Display Technologies 117 135 144 199 595
Environmental Technologies 115 117 121 123 476
Life Sciences 73 72 70 66 281
Other
Conventional video components 25 24 14 2 65
Other businesses 64 57 53 73 247
-------- -------- ------- ------- --------
89 81 67 75 312
Total $ 746 $ 752 $ 772 $ 820 $ 3,090
======== ======== ======= ======= ========
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 June 30, 2004
(Unaudited; amounts in millions, except per share amounts)
- --------------------------------------------------------------------------------
Corning's earnings excluding certain items for the second quarter is a non-GAAP
financial measure within the meaning of Regulation G of the Securities and
Exchange Commission. The company believes presenting earnings estimates that
exclude these items is helpful in understanding Corning's operating results.
This non-GAAP measure is not in accordance with and should not be considered an
alternative of measurements required under generally accepted accounting
principles (GAAP). A detailed reconciliation is provided below outlining the
differences between this non-GAAP measure and the directly related GAAP measure.
- --------------------------------------------------------------------------------
Per Income Before Net
Share Income Taxes Income
-------- ------------- --------
Earnings per share (EPS) and net income,
excluding certain items $ 0.11 $ 58 $ 169
Certain items:
Asbestos settlement (a) (0.03) (47) (45)
Restructuring, impairment and other charges and (credits) (b) 0.01 34 14
Loss on repurchases and retirement of debt, net (c) (0.01) (9) (9)
Equity in earnings of associated companies (d) (0.01) (21)
------- ------- --------
Total EPS and net income $ 0.07 $ 36 $ 108
======= ======= ========
(a) 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 is currently
expected to be contributed to the trust in 2004, 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 the common stock price prior to
contribution of the shares to the trust. At the end of the second quarter,
we recorded a pretax charge of $47 million ($45 million after-tax) to
reflect the increase in Corning's stock price over the past quarter from
$11.18 to $13.06.
(b) This gain relates to restructuring activities, which is primarily comprised
of the sale of Corning Asahi Video Products Company assets during the
second quarter of 2004.
(c) From time to time, Corning may repurchase or retire debt, which could
result in a gain or loss during a quarter. In the second quarter of 2004,
Corning retired certain amounts of its 3.5% convertible bonds due 2008,
resulting in a pretax and after-tax loss of $9 million.
(d) This amount reflects charges of $21 million in equity earnings related to
restructuring actions and adjustments to interest liabilities recorded by
Dow Corning Corporation on its emergence from bankruptcy.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended September 30, 2004
(Unaudited; amounts in millions, except per share amounts)
- --------------------------------------------------------------------------------
Corning's earnings estimate excluding certain items for the third quarter is a
non-GAAP financial measure within the meaning of Regulation G of the Securities
and Exchange Commission. The company believes presenting earnings estimates that
exclude these items is helpful in understanding Corning's operating results.
This non-GAAP measure is not in accordance with and should not be considered an
alternative of measurements required under generally accepted accounting
principles (GAAP). A detailed reconciliation is provided below outlining the
differences between this non-GAAP measure and the directly related GAAP measure.
- --------------------------------------------------------------------------------
Range
----------------------
Guidance: Earnings per share (EPS) excluding certain items $0.10 $0.12
Certain items excluded from guidance:
Asbestos settlement (a)
Restructuring, impairment and other charges and (credits) (b)
Gain (loss) on repurchases and retirements of debt, net (c)
----- -----
Earnings per share
----------------------------------------------------------------
This schedule will be updated as additional announcements occur.
----------------------------------------------------------------
(a) 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 is currently
expected to be contributed to the trust in 2004, 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 the common stock price prior to
contribution of the shares to the trust. In the third quarter of 2004,
Corning will record a charge for the change in its common stock price as of
September 30, 2004 compared to $13.06, the common stock price at June 30,
2004.
(b) Corning expects to record pretax charges approximating $18 million in the
third quarter of 2004. In the third quarter of 2004, Corning announced that
it reached an agreement to sell its Frequency Controls business, the sale
of which is expected to generate a pretax loss approximating $25 million.
Also in the third quarter of 2004, Corning will complete the sale of
Corning Asahi Video Products Company assets to Henan Anyang CPT Glass Bulb
Group, Xinyi Electronic Glass., Co., LTD. and record a pretax gain
approximating $7 million.
(c) From time to time, Corning may repurchase or retire debt, which could
result in a gain or loss during the quarter.
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 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.