UNITED STATES
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) January 25, 2005
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)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
The January 25, 2005 press release announcing the financial results for the
Corning Incorporated 2004 fourth quarter and its first quarter 2005 earnings
guidance is attached as Exhibit 99 and is incorporated herein by reference.
The information in this report, being furnished pursuant to Item 2.02 and 7.01
of Form 8-K, shall not be deemed to be "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise
subject to the liabilities of that Section, and is not incorporated by reference
in any filing under the Securities Act of 1933, as amended, or the Exchange Act,
except as expressly set forth by specific reference in such filing.
Item 7.01. Regulation FD Disclosure.
Additional information concerning the Corning Incorporated ("Corning") 2004
fourth quarter earnings and 2005 first quarter guidance is being presented to
investors in a teleconference call on January 26, 2005. During that call,
management will state that we are terminating one of the distributors in the
life sciences segment, and that, although management plans to add additional
distribution channels to replace this volume, this may have a possible 10% to
20% impact on that segment's annual 2005 sales revenues and a slight potential
impact on Corning's first quarter 2005 revenues.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibit
99 Press release dated January 25, 2005.
Safe Harbor Statement
Statements contained in the Item 7.01 Regulation FD Disclosure and the exhibit
to this report that state the Company's or its management's expectations or
predictions of the future are forward-looking statements intended to be covered
by the safe harbor provisions of the Securities Act of 1933 and the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those projected in such forward-looking statements. Factors that could affect
those results include those mentioned in the documents that the Company has
filed with the Securities and Exchange Commission.
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: January 25, 2005 By /s/ KATHERINE A. ASBECK
-------------------------------------
Katherine A. Asbeck
Senior Vice President and Controller
Exhibit 99
----------
FOR RELEASE -- JANUARY 25, 2005
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 Fourth-Quarter Results
Quarterly sales up 26 percent versus prior year
2004 sales increase 25 percent
CORNING, N.Y.--Corning Incorporated (NYSE: GLW) today announced fourth-quarter
sales of $1.033 billion, with net income of $163 million, or $0.11 per share.
Net income includes net special charges of $14 million, or $0.01 per share.
Excluding these net charges, Corning's earnings per share (EPS) would have been
$0.12 and at the high end of previously-announced quarterly guidance. This EPS
is a non-GAAP financial measure. This and all non-GAAP financial measures are
reconciled on the company's investor relations Web site and in attachments to
this news release.
For the year, Corning recorded sales of $3.85 billion, an increase of 25 percent
over 2003 sales of $3.09 billion. The company had a net loss of $2.17 billion or
$1.56 per share. This compares to a 2003 net loss of $223 million or $0.18 per
share. Excluding special items, Corning had net income for the year of $674
million or $0.45 per share in 2004, compared to net income of $128 million or
$0.10 per share in 2003. This is a non-GAAP financial measure.
James R. Houghton, chairman and chief executive officer, said, "We had a solid
fourth quarter and a spectacular year. Three years ago we embarked on a
significant restructuring of the company. At that time, I said we knew there was
a light at the end of the tunnel, but we did not know how long it was. I am
pleased to say today that we have emerged from that tunnel, and we believe
Corning has a very bright future."
Houghton added, "This is the second consecutive year that we have achieved a
$500 million improvement in profitability before special items. I believe that
we have strong momentum across a number of our business segments going into
2005." Profitability before special items is a non-GAAP financial measure.
(more)
Corning Reports Fourth-Quarter Results
Page Two
Fourth-quarter Operating Results
Corning's fourth-quarter sales of $1.033 billion increased 3 percent over the
previous quarter's sales of $1.006 billion, and increased 26 percent over the
prior year's fourth-quarter sales of $820 million. Gross margin for the fourth
quarter declined to 35 percent versus 40 percent in the previous quarter, a
result of lower margins in the Telecommunications segment caused by a number of
adjustments not expected to reoccur in the first quarter, the write-off of
certain assets in the semiconductor product line, and weak manufacturing
performance in the Environmental Technologies segment.
The company recorded $311 million in fourth-quarter sales for its Display
Technologies segment, a 5 percent increase over third-quarter sales of $295
million. Sequential quarterly volume in liquid crystal display (LCD) glass
increased 2 percent, and movements in exchange rates resulted in a 3 percent
increase in sales. Pricing for the quarter again remained stable, and net income
for the segment increased 6 percent to $151 million from $142 million in the
previous quarter. For the full year, Corning's LCD glass volume increased by 65
percent.
Wendell P. Weeks, president and chief operating officer, said, "While our
Display Technologies segment experienced some Taiwanese customer slowdowns in
November, we had very strong performance in December. The slight slowdown in
orders has allowed us to rebuild our inventory levels to more efficiently manage
our customer requirements."
Telecommunications segment sales were $423 million, a 3 percent increase over
third-quarter sales of $412 million. Excluding the impact of the divestiture of
the frequency control product line, sales increased 6 percent. The segment
recorded a net loss of $9 million versus a net loss of $1.82 billion in the
third quarter. The third-quarter loss was primarily due to goodwill, fixed
assets and equity method investment impairment charges. Fourth-quarter fiber
volume was essentially flat compared to the third-quarter results and better
than the company expected. Fiber pricing was down only slightly in the quarter.
"Our fourth-quarter telecommunications results continue to reflect the strength
of hardware, cable and fiber sales in North America, particularly related to
Verizon's fiber-to-the-premises buildout, as well as higher than usual project
sales," Weeks said.
Environmental Technologies segment sales for the fourth quarter were $130
million, a decline of 4 percent from the previous quarter's sales of $136
million. Sales were impacted by the normal end-of-the-year slowdown in auto
production. Quarterly segment earnings were impacted by continued difficulties
in manufacturing performance at several facilities. Due to normal seasonality,
the Life Sciences segment sales and earnings declined slightly from the previous
quarter.
(more)
Corning Reports Fourth-Quarter Results
Page Three
"This was a very satisfying quarter for Corning. Our sales increased 26 percent
compared to this same period last year. Excluding special items, our net income
improved by $125 million, and our EPS was three times what it was last year,"
Weeks said. These are non-GAAP financial measures.
Special Items
Corning's fourth-quarter net special charges consisted of a $17 million charge
to reflect the increase in the fair market value of Corning common stock to be
contributed to settle the asbestos litigation related to Pittsburgh Corning
Corporation and $3 million of net credits related to adjustments to
restructuring reserves.
For the full year, the company's net income was reduced by $2.839 billion, or
$2.01 per share, of net charges comprising the following:
. Restructuring, impairment and other charges and credits of $1.789 billion
($1.802 billion after-tax and minority interest) primarily related to the
impairment of goodwill and fixed assets in the Telecommunications segment.
. An asbestos settlement charge of $33 million ($30 million after-tax) to
reflect the increase in the market value of Corning's common stock to be
contributed to settle the asbestos litigation related to Pittsburgh Corning
Corporation.
. A loss on repurchases and retirement of debt of $36 million ($34 million
after-tax) related to Corning's ongoing debt reduction program.
. A provision for income taxes of $937 million as a result of the company's
decision to increase its valuation allowance against a significant portion
of its deferred tax assets.
. Equity method charges of $56 million, included in equity earnings of
associated companies, net of impairments, of which $35 million related to
impairments of certain Telecommunications segment equity method investments
and $21 million related to restructuring actions and bankruptcy related
charges recorded by Dow Corning Corporation.
. Income from discontinued operations of $20 million related to the final
settlement of escrowed proceeds from the 2002 sale of Corning Precision
Lens.
Cash Flow/Liquidity Update
Corning ended the year with $1.9 billion in cash and short-term investments, an
increase from the previous quarter's balance of $1.7 billion. The cash increase
was primarily due to strong cash flow from operations, including the receipt of
a $102 million customer deposit. The company's debt-to-capital ratio was 41
percent, a slight decline from the previous quarter's ratio of 42 percent.
"We continue to make progress on our financial priorities. We met or exceeded
all of our expectations for the year. Our balance sheet continued to improve. We
reduced our overall debt level, and we had operating cash flow of over $1
billion," said James B. Flaws, vice chairman and chief financial officer.
(more)
Corning Reports Fourth-Quarter Results
Page Four
First-Quarter Outlook
Corning said that it expects first-quarter sales to be in the range of $980
million to $1.03 billion and EPS in the range of $0.11 to $0.13 before special
items. This EPS estimate is a non-GAAP financial measure and excludes any
possible special items. The company expects foreign exchange rates to remain
stable and that its gross margin will be in the range of 37 percent to 38
percent for the quarter.
In the Display Technologies segment, Corning expects that the sequential volume
growth will be in the range of 5 percent to 10 percent, including both its
wholly-owned business and Samsung Corning Precision Glass Co. Ltd., a 50 percent
owned equity company. The sequential volume growth in Corning's wholly-owned
business is expected to be flat to up 10 percent in the first quarter. Samsung
Corning Precision is anticipating sequential volume growth of 5 percent to 15
percent for the quarter. The rate of volume growth will be largely dependent
upon the industry's ability to efficiently bring on new panel manufacturing
capacity during the quarter, as well as continued strong market demand for LCD
products. Corning noted that its capacity expansion plans are modular and may be
adjusted if industry growth projections change. While the company anticipates
continued growth in the LCD glass market during the first quarter, it also noted
that the level of glass demand could differ by geographic region.
Pricing for LCD glass is expected to begin to decline after being stable to up
slightly over the last two years. As a result, the company anticipates that the
average price for LCD glass will be down approximately 5 percent sequentially in
the first quarter.
"Last week, we introduced the first successful commercial application of
Generation 7 LCD glass substrates at Samsung Corning Precision. This larger size
glass substrate is designed to support the LCD TV market, which we continue to
believe will be a significant driver of LCD glass volume increases for the next
several years," Flaws said.
In the Telecommunications segment, the company is anticipating first-quarter
sequential fiber volume will be flat to down 10 percent against an unusually
strong fourth quarter. First-quarter fiber price declines are expected to be
around 5 percent.
The company noted that at the end of the fourth quarter it received final
notification from the People's Republic of China's Ministry of Commerce that it
had removed its preliminary fiber dumping determination which had placed a 16
percent duty on Corning fiber imports. Previously, the company said that its
fiber exports to China had been impacted by the preliminary determination. "We
are very pleased with the final ruling," Flaws said. "It alleviates any
uncertainty about our ability to compete in the very important and growing China
region. We are hopeful about regaining lost market share in this dynamic fiber
market," he said.
(more)
Corning Reports Fourth-Quarter Results
Page Five
Flaws added "We are entering the first quarter with excellent momentum in our
major businesses. Corning's management team will be discussing the outlook for
our businesses in more depth at our annual investor meeting in New York City on
Feb. 4."
Fourth-Quarter Earnings and Conference Call Information
The company will host a fourth-quarter conference call at 8:30 a.m. EST on
Wednesday, Jan. 26. To access the call, dial (630) 395-0018. 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, Wednesday, Feb. 9, 2005. To
listen, dial (203) 369-0275, no pass code is required. To listen to a live audio
webcast of the call at 8:30 a.m. on Wednesday, Jan. 26, please go to Corning's
Web site and follow the instructions: http://www.corning.com/investor_relations.
The audio webcast will be archived for one year following the call.
Annual Investor Meeting
Corning will host its annual investor meeting in New York City on Friday, Feb.
4. Investors who are interested in attending should register prior to the event
at http://www.shareholder.com/corning/registration.cfm.
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 required by movements in Corning's common stock
price, 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. 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.
(more)
Corning Reports Fourth-Quarter Results
Page Six
Forward-Looking and Cautionary Statements
This news 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 ended For the year ended
December 31, December 31,
--------------------------- --------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net sales $ 1,033 $ 820 $ 3,854 $ 3,090
Cost of sales 668 578 2,439 2,241
--------- --------- --------- ---------
Gross margin 365 242 1,415 849
Operating expenses:
Selling, general and administrative expenses 174 152 653 599
Research, development and engineering expenses 98 86 355 344
Amortization of purchased intangibles 10 9 38 37
Restructuring, impairment and other charges
and (credits) (5) 21 1,789 111
Asbestos settlement 17 25 33 413
--------- --------- --------- ---------
Operating income (loss) 71 (51) (1,453) (655)
Interest income 9 8 25 32
Interest expense (32) (36) (141) (154)
(Loss) gain on repurchases and retirement of debt, net (36) 19
Other income (expense), net 19 (12) 25 (1)
--------- --------- --------- ---------
Income (loss) before income taxes 67 (91) (1,580) (759)
(Provision) benefit for income taxes (34) 46 (1,031) 254
--------- --------- ---------- ---------
Income (loss) before minority interests and
equity earnings 33 (45) (2,611) (505)
Minority interests (3) 1 (17) 73
Equity in earnings of associated companies,
net of impairments 133 15 443 209
--------- --------- --------- ---------
Income (loss) from continuing operations 163 (29) (2,185) (223)
Income from discontinued operations 20
--------- --------- --------- ---------
Net income (loss) $ 163 $ (29) $ (2,165) $ (223)
========= ========= ========= =========
Basic earnings (loss) per common share from:
Continuing operations $ 0.12 $ (0.02) $ (1.57) $ (0.18)
Discontinued operations 0.01
--------- --------- --------- ---------
Basic earnings (loss) per common share $ 0.12 $ (0.02) $ (1.56) $ (0.18)
========= ========= ========= =========
Diluted earnings (loss) per common share from:
Continuing operations $ 0.11 $ (0.02) $ (1.57) $ (0.18)
Discontinued operations 0.01
--------- --------- --------- ---------
Diluted earnings (loss) per common share $ 0.11 $ (0.02) $ (1.56) $ (0.18)
========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
December 31,
-------------------------
2004 2003
---- ----
Assets
Current assets:
Cash and cash equivalents $ 1,224 $ 833
Short-term investments, at fair value 657 433
--------- ---------
Total cash, cash equivalents and short-term investments 1,881 1,266
Trade accounts receivable, net 585 525
Inventories 535 467
Deferred income taxes 92 242
Other current assets 188 194
--------- ---------
Total current assets 3,281 2,694
--------- ---------
Investments 1,484 1,045
Property, net 3,941 3,620
Goodwill and other intangible assets, net 398 1,901
Deferred income taxes 440 1,225
Other assets 166 267
--------- ---------
Total Assets $ 9,710 $ 10,752
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Loans payable $ 478 $ 146
Accounts payable 682 333
Other accrued liabilities 1,176 1,074
--------- ---------
Total current liabilities 2,336 1,553
--------- ---------
Long-term debt 2,214 2,668
Postretirement benefits other than pensions 600 619
Other liabilities 715 412
Commitments and contingencies
Minority interests 29 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: 1,424 million and 1,401 million 712 701
Additional paid-in capital 10,363 10,298
Accumulated deficit (7,309) (5,144)
Treasury stock, at cost; Shares held: 16 million and 58 million (162) (574)
Accumulated other comprehensive income 148 98
--------- ---------
Total shareholders' equity 3,816 5,464
--------- ---------
Total Liabilities and Shareholders' Equity $ 9,710 $ 10,752
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
For the three months ended For the year ended Dec. 31,
----------------------------- ---------------------------
Dec. 31, 2004 Sept. 30, 2004 2004 2003
------------- -------------- --------- ---------
Cash flows from operating activities:
Income (loss) from continuing operations $ 163 $ (2,511) $ (2,185) $ (223)
Adjustments to reconcile loss from continuing operations
to net cash provided by operating activities:
Depreciation 126 119 485 480
Amortization of purchased intangibles 10 9 38 37
Asbestos settlement 17 (50) 33 413
Restructuring, impairment and other charges and (credits) (5) 1,794 1,789 111
Loss (gain) on repurchases and retirement of debt 4 36 (19)
Undistributed earnings of associated companies (122) (107) (321) (97)
Minority interests, net of dividends paid 3 3 17 (77)
Deferred taxes 8 974 947 (263)
Interest expense on convertible debentures 1 4 18
Restructuring payments (10) (18) (85) (233)
Income tax refund 191
Customer deposits 104 100 204
Employee benefit payments in excess of expense (7) (4) (19) (142)
Changes in certain working capital items:
Trade accounts receivable (11) 14 (40)
Inventories (16) (19) (68) 108
Other current assets 18 (32) (7) 49
Accounts payable and other current liabilities, net of
restructuring payments 132 35 161 (219)
Other, net (44) 24 20 (1)
-------- -------- -------- -------
Net cash provided by operating activities 366 336 1,009 133
-------- -------- -------- -------
Cash Flows from Investing Activities:
Capital expenditures (301) (254) (857) (366)
Net proceeds from sale of businesses 100 100 9
Net proceeds from sale or disposal of assets 3 11 49 46
Short-term investments - acquisitions (284) (263) (1,253) (1,584)
Short-term investments - liquidations 217 296 1,027 1,814
Other, net 6 1 12 3
-------- -------- -------- -------
Net cash used in investing activities (359) (109) (922) (78)
-------- --------- -------- -------
Cash Flows from Financing Activities:
Net repayments of loans payable (4) (102) (115) (162)
Proceeds from issuance of long-term debt, net 46 442
Repayments of long-term debt (4) (154) (1,208)
Proceeds from issuance of common stock, net 9 9 42 657
Cash dividends to preferred shareholders (1) (1) (7) (19)
Proceeds from the exercise of stock options 15 7 49 9
Other, net 8 8 15
-------- -------- -------- -------
Net cash provided by (used in) financing activities 27 (45) 265 (708)
-------- --------- -------- -------
Effect of exchange rates on cash 43 1 39 60
-------- -------- -------- -------
Net increase (decrease) in cash and cash equivalents 77 183 391 (593)
Cash and cash equivalents at beginning of period 1,147 964 833 1,426
-------- -------- -------- -------
Cash and cash equivalents at end of period $ 1,224 $ 1,147 $ 1,224 $ 833
======== ======== ======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
Our reportable operating segments include Display Technologies,
Telecommunications, Environmental Technologies and Life Sciences.
Display Telecom- Environmental Life Unallocated Consolidated
Technologies munications Technologies Sciences and Other Total
------------ ----------- ------------- -------- ----------- ------------
For the three months ended December 31, 2004
Net sales $ 311 $ 423 $ 130 $ 71 $ 98 $ 1,033
Research, development and engineering
expenses (1) $ 26 $ 21 $ 23 $ 11 $ 17 $ 98
Restructuring, impairment and other charges
and (credits) $ 1 $ (6) $ (5)
Interest expense (2) $ 15 $ 9 $ 5 $ 1 $ 2 $ 32
(Provision) benefit for income taxes $ (49) $ 4 $ 5 $ 6 $ (34)
Income (loss) before minority interests and
equity earnings (3) $ 67 $ (9) $ (7) $ (18) $ 33
Minority interests (4) 1 (4) (3)
Equity in earnings of associated companies,
net of impairments (5) 84 (1) 1 49 133
------- ------- -------- -------- -------- --------
Net income (loss) $ 151 $ (9) $ (6) $ 0 $ 27 $ 163
======= ======= ======== ======== ======== ========
For the three months ended December 31, 2003
Net sales $ 199 $ 357 $ 123 $ 66 $ 75 $ 820
Research, development and engineering
expenses (1) $ 19 $ 25 $ 24 $ 7 $ 11 $ 86
Restructuring, impairment and other charges
and (credits) $ (6) $ 27 $ 21
Interest expense (2) $ 12 $ 16 $ 4 $ 1 $ 3 $ 36
(Provision) benefit for income taxes $ (15) $ 32 $ 1 $ 28 $ 46
Income (loss) before minority interests and
equity earnings (3) $ 31 $ (17) $ (2) $ (1) $ (56) $ (45)
Minority interests (4) 1 1
Equity in earnings of associated companies,
net of impairments (5) 50 (1) (34) 15
------- ------- -------- -------- -------- --------
Net income (loss) $ 81 $ (18) $ (2) $ (1) $ (89) $ (29)
======= ======= ======== ======== ======== ========
Display Telecom- Environmental Life Unallocated Consolidated
Technologies munications Technologies Sciences and Other Total
------------ ----------- ------------- -------- ----------- ------------
For the year ended December 31, 2004
Net sales $ 1,113 $ 1,539 $ 548 $ 304 $ 350 $ 3,854
Research, development and engineering
expenses (1) $ 83 $ 90 $ 87 $ 38 $ 57 $ 355
Restructuring, impairment and other charges
and (credits) $ 1,798 $ (9) $ 1,789
Interest expense (2) $ 52 $ 50 $ 22 $ 5 $ 12 $ 141
(Provision) benefit for income taxes $ (146) $ 29 $ (6) $ (908) $ (1,031)
Income (loss) before minority interests and
equity earnings (3) $ 258 $(1,862) $ 3 $ 12 $ (1,022) $ (2,611)
Minority interests (4) 2 (19) (17)
Equity in earnings of associated companies,
net of impairments (5) 288 (33) 1 187 443
Income from discontinued operations 20 20
------- ------- -------- -------- -------- --------
Net income (loss) $ 546 $(1,893) $ 4 $ 12 $ (834) $ (2,165)
======= ======= ======== ======== ======== ========
For the year ended December 31, 2003
Net sales $ 595 $ 1,426 $ 476 $ 281 $ 312 $ 3,090
Research, development and engineering
expenses (1) $ 55 $ 120 $ 87 $ 28 $ 54 $ 344
Restructuring, impairment and other charges
and (credits) $ (36) $ 147 $ 111
Interest expense (2) $ 39 $ 75 $ 19 $ 5 $ 16 $ 154
(Provision) benefit for income taxes $ (45) $ 78 $ (5) $ (7) $ 233 $ 254
Income (loss) before minority interests and
equity earnings (3) $ 91 $ (158) $ 9 $ 14 $ (461) $ (505)
Minority interests (4) 73 73
Equity in earnings of associated companies,
net of impairments (5) 144 (11) 76 209
------- ------- -------- -------- -------- --------
Net income (loss) $ 235 $ (169) $ 9 $ 14 $ (312) $ (223)
======= ======= ======== ======== ======== ========
(1) Non-direct research, development and engineering expenses are allocated to
segments based upon direct project spending for each segment.
(2) Interest expense is allocated to segments based on a percentage of segment
net operating assets. Consolidated subsidiaries with independent capital
structures do not receive additional allocations of interest expense.
(3) Many of Corning's administrative and staff functions are performed on a
centralized basis. Where practicable, Corning charges these expenses to
segments based upon the extent to which each business uses a centralized
function. Other staff functions, such as corporate finance, human resources
and legal are allocated to segments, primarily as a percentage of sales.
(4) Minority interests include the following restructuring, impairment and
other charges and (credits):
. For 2004, gains from the sale of Corning Asahi Video Products Company
(CAV) assets in excess of assumed salvage value of $17 million, and
reversals of CAV severance reserves of $2 million.
. For 2003, impairment charges for long-lived assets of CAV and exit
costs of $57 million.
(5) Equity in earnings of associated companies, net of impairments includes the
following restructuring and impairment charges:
. $35 million and $7 million of charges to impair equity method
investments in the Telecommunications segment to their estimated fair
value in 2004 and 2003, respectively.
. In 2004, Dow Corning Corporation recorded charges related to
restructuring actions and adjustments to interest liabilities recorded
on its emergence from bankruptcy. Our equity earnings included $21
million related to these charges.
. In 2003, Samsung Corning Co., Ltd. recorded asset impairment charges.
Our equity earnings included $66 million related to these charges.
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 year
ended December 31, ended December 31,
------------------ ------------------
2004 2003 2004 2003
---- ---- ---- ----
Net income (loss) of reportable segments $ 136 $ 60 $ (1,331) $ 89
Non-reportable operating segments net income (loss) (1) 6 (91) 16 (139)
Unallocated amounts:
Non-segment loss and other (2) (3) (18) (13) (51)
Non-segment restructuring, impairment and
other (charges) and credits (1) 4 (13)
Asbestos settlement (17) (25) (33) (413)
Interest income 9 8 25 32
(Loss) gain on repurchases of debt (36) 19
(Provision) benefit for income taxes (3) (2) 18 (933) 170
Equity in earnings of associated companies,
net of impairments (4) 35 19 116 83
Income from discontinued operations 20
------- -------- --------- -------
Net income (loss) $ 163 $ (29) $ (2,165) $ (223)
======= ======== ========= =======
(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) (Provision) benefit for income taxes includes tax associated with
non-segment restructuring, impairment and other (charges) and credits.
(4) Equity in earnings of associated companies, net of impairments includes
amounts derived from corporate investments, primarily Dow Corning
Corporation in 2004 and 2003.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Restructuring, Impairment and Other Charges and (Credits)
We recorded net credits of $5 million ($3 million after-tax and minority
interest) for adjustments to prior periods' restructuring and impairment
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 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 $17 million in the fourth quarter of 2004
reflecting the increase in Corning's common stock from September 30 to December
31, 2004. Beginning with the first quarter of 2003, we have recorded total net
charges of $446 million to reflect the initial settlement and to mark-to-market
the value of our common stock. We will make our contributions to the settlement
trust under the agreement after the plan is approved, becomes effective and is
no longer subject to appeal.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
QUARTERLY SALES INFORMATION
(Unaudited; in millions)
2004
-------------------------------------------------------------
Three Months Ended
------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 Total
--------- ---------- -------- -------- --------
Display Technologies $ 230 $ 277 $ 295 $ 311 $ 1,113
Telecommunications
Fiber and cable 149 192 202 212 755
Hardware and equipment 163 200 210 211 784
-------- -------- ------- ------- --------
312 392 412 423 1,539
Environmental Technologies 141 141 136 130 548
Life Sciences 79 79 75 71 304
Other
Conventional video components 2 2
Other businesses 80 82 88 98 348
-------- -------- ------- ------- --------
82 82 88 98 350
Total $ 844 $ 971 $ 1,006 $ 1,033 $ 3,854
======== ======== ======= ======= ========
2003
-------------------------------------------------------------
Three Months Ended
------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 Total
--------- --------- -------- -------- --------
Display Technologies $ 117 $ 135 $ 144 $ 199 $ 595
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
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 December 31, 2004
(Unaudited; amounts in millions, except per share amounts)
--------------------------------------------------------------------------------
Corning's net income and earnings per share (EPS) excluding special items for
the fourth quarter of 2004 are non-GAAP financial measures within the meaning of
Regulation G of the Securities and Exchange Commission. Non-GAAP financial
measures are not in accordance with, or an alternative to, generally accepted
accounting principles (GAAP). The company believes presenting non-GAAP net
income and EPS is helpful to analyze financial performance without the impact of
unusual items that may obscure trends in the company's underlying performance. A
detailed reconciliation is provided below outlining the differences between
these non-GAAP measures and the directly related GAAP measure.
--------------------------------------------------------------------------------
Per Income Before Net
Share Income Taxes Income
------- ------------- -------
Earnings per share (EPS) and net income,
excluding special items $ 0.12 $ 79 $ 177
Special items:
Restructuring, impairment and other (charges) and credits (a) 5 3
Asbestos settlement (b) (0.01) (17) (17)
------- ------- -------
Total EPS and net income $ 0.11 $ 67 $ 163
======= ======= =======
(a) Corning recorded net credits of $5 million ($3 million after-tax and
minority interest) for adjustments to prior periods' restructuring and
impairment charges, primarily in the Telecommunications segment.
(b) As part of Corning's asbestos settlement arrangement to be incorporated
into the Pittsburgh Corning Corporation reorganization plan, Corning will
contribute, when the reorganization plan becomes effective, 25 million
shares of Corning common stock to a trust. This portion of the asbestos
liability requires quarterly adjustment based upon movements in Corning's
common stock price prior to contribution of the shares to the trust. In the
fourth quarter of 2004, Corning recorded a charge of $17 million for the
change in its common stock price of $11.77 at December 31, 2004 compared to
$11.08, the common stock price at September 30, 2004.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Year Ended December 31, 2004
(Unaudited; amounts in millions, except per share amounts)
--------------------------------------------------------------------------------
Corning's net income and earnings per share (EPS) excluding special items for
the year ended December 31, 2004 are non-GAAP financial measures within the
meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP
financial measures are not in accordance with, or an alternative to, generally
accepted accounting principles (GAAP). The company believes presenting non-GAAP
net income and EPS is helpful to analyze financial performance without the
impact of unusual items that may obscure trends in the company's underlying
performance. A detailed reconciliation is provided below outlining the
differences between these non-GAAP measures and the directly related GAAP
measures.
--------------------------------------------------------------------------------
Per Income (Loss) Before Net
Share Income Taxes Income (Loss)
------- -------------------- -------------
Earnings per share (EPS) and net income,
excluding special items $ 0.45 $ 278 $ 674
Special items:
Restructuring, impairment and other (charges) and credits (a) (1.29) (1,789) (1,802)
Asbestos settlement (b) (0.01) (33) (30)
Loss on repurchases and retirement of debt, net (c) (0.02) (36) (34)
(Provision) benefit for income taxes (d) (0.67) (937)
Equity in earnings of associated companies, net of impairments (e) (0.03) (56)
Income from discontinued operations (f) 0.01 20
------- -------- --------
Total EPS and net loss $ (1.56) $ (1,580) $ (2,165)
======= ======== ========
(a) Corning recorded charges of $1.789 billion ($1.802 billion after-tax and
minority interest) primarily related to the impairment of goodwill and
fixed assets in the Telecommunications segment.
(b) As part of Corning's asbestos settlement arrangement to be incorporated
into the Pittsburgh Corning Corporation reorganization plan, Corning will
contribute, when the reorganization plan becomes effective, 25 million
shares of Corning common stock to a trust. This portion of the asbestos
liability requires quarterly adjustment based upon movements in Corning's
common stock price prior to contribution of the shares to the trust. For
2004, Corning recorded a charge of $33 million ($30 million after-tax) for
the change in its common stock price of $11.77 at December 31, 2004
compared to $10.43, the common stock price at December 31, 2003.
(c) During 2004, Corning retired a significant portion of long-term debt,
resulting in a loss of $36 million ($34 million after-tax).
(d) In the third quarter of 2004, Corning increased income tax expense by $937
million as a result of the company's decision to provide a valuation
allowance against a significant portion of its deferred tax assets.
(e) This amount reflects charges of $35 million for impairments of certain
non-strategic equity method investments in Corning's Telecommunications
segment and $21 million related to restructuring actions and bankruptcy
related charges recorded by Dow Corning Corporation.
(f) This gain relates to the final settlement of escrowed proceeds from the
2002 sale of Corning's precision lens business to 3M Company.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Year Ended December 31, 2003
(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, 2003 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 Loss Before Net
Share Income Taxes Income (Loss)
------- ------------ -------------
Earnings per share (EPS) and net income,
excluding special items $ 0.10 $ (254) $ 128
Special items:
Restructuring, impairment and other (charges) and credits (a) (0.02) (111) (26)
Asbestos settlement (b) (0.21) (413) (263)
Gain on repurchases and retirement of debt, net (c) 0.01 19 12
Equity in earnings of associated companies, net of impairments (d) (0.06) (74)
------- -------- --------
Total EPS and net loss $ (0.18) $ (759) $ (223)
======= ======== ========
(a) Corning recorded net charges of $111 million ($26 million after-tax) for
our decision to shutdown Corning Asahi Video Products Company, exit the
photonics technologies business within our Telecommunications segment, and
shutdown two of our Specialty Materials manufacturing facilities. The
charges for these actions were partially offset by credits to prior
periods' restructuring plans, most notably for our decision not to exit two
cabling sites previously marked for shutdown in 2002.
(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 and our investment in Pittsburgh Corning
Europe to a trust. This charge represents recording the initial liability
based on the terms of the settlement agreement ($298 million) plus the
charge to reflect movements in Corning's common stock price from the
settlement arrangement date and December 31, 2003 ($115 million).
(c) During 2004, Corning retired a significant portion of long-term debt,
resulting in a gain of $19 million ($12 million after-tax).
(d) This amount primarily reflects our portion of asset impairment charges
recorded by our equity method investment, Samsung Corning Co., Ltd.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Year Ended December 31, 2004
(Unaudited; amounts in millions)
--------------------------------------------------------------------------------
Corning's comment, "This is the second consecutive year that we have achieved a
$500 million improvement in profitability before 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 a non-GAAP improvement in net 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 this non-GAAP measure and the
directly related GAAP measure.
--------------------------------------------------------------------------------
Net Income Improvement
For the years ended December 31, ----------------------
---------------------------------------- 2004 2003
2004 (a) 2003 (a) 2002 vs. 2003 vs. 2002
----------- ----------- ----------- --------- ---------
Net income, excluding special items $ 674 $ 128 $ (392) $ 546 $ 520
========= =========
Special items:
Restructuring, impairment and other (charges)
and credits (b) (1,802) (26) (1,462)
Asbestos settlement (30) (263)
(Loss) gain on repurchases and retirement of
debt, net (c) (34) 12 108
(Provision) benefit for income taxes (937)
Equity in earnings of associated companies,
net of impairments (d) (56) (74) (34)
Income from discontinued operations (e) 20 478
--------- --------- --------
Net loss $ (2,165) $ (223) $ (1,302)
========= ========= ========
(a) For 2004 and 2003, refer to separate reconciliations of non-GAAP financial
measure to the comparable GAAP measure for an explanation of the special
items being excluded.
2002 Special Items:
(b) Corning recorded total net charges of $2.08 billion ($1.462 billion
after-tax and minority interest) related to the following significant
actions: restructuring charges of $1.271 billion ($929 million after-tax
and minority interest) for the closure of facilities, workforce reductions
and abandonment of certain construction projects, mostly in our
Telecommunications segment; $400 million ($294 million after-tax) for the
impairment of goodwill in our Telecommunications segment; and $409 million
($239 million after-tax) for the impairment of assets of our photonic
technologies and conventional video components businesses.
(c) During 2002, Corning retired a significant portion of long-term debt
resulting in a gain of $176 million ($108 million after-tax).
(d) This amount reflects charges for impairments of certain equity method
investments in Corning's Telecommunications segment.
(e) On December 13, 2002, Corning completed the sale of our precision lens
business to 3M Company for approximately $800 million in cash and recorded
a gain on the sale of $652 million ($415 million after-tax) included in
income from discontinued operations. The remaining $63 million, net of tax,
of income from discontinued operations represents the 2002 operating
results of the precision lens business prior to the sale to 3M Company.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Three months ended December 31, 2004
(Unaudited; amounts in millions)
--------------------------------------------------------------------------------
Corning's comment, "...Excluding special items, our net income improved by $125
million, and our EPS was three times what it was last year" 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 a non-GAAP improvement in net 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 this non-GAAP measure and the
directly related GAAP measure.
--------------------------------------------------------------------------------
Net Income (Loss)
for the three months
ended December 31, Improvement - 2004 vs. 2003
----------------------- ----------------------------
2004 2003 Net Income EPS
--------- --------- ---------- ----------
Net income, excluding special items $ 177 $ 52 $ 125 3 times (a)
======== =======
Special items:
Restructuring, impairment and other (charges)
and credits 3 2
Asbestos settlement (17) (17)
Equity in earnings of associated companies,
net of impairments (66)
--------- ---------
Net income (loss) $ 163 $ (29)
========= =========
(a) For the fourth quarter of 2004, Corning's earnings per share (EPS)
excluding special items was $0.12 (refer to separate reconciliation to the
comparable GAAP EPS measure of $0.11). For the fourth quarter of 2003,
Corning had a net loss of ($29) million, or $(0.02) per share. Excluding
net special charges of $81 million, Corning's EPS would have been $0.04.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended March 31, 2005
(Unaudited; amounts in millions, except per share amounts)
--------------------------------------------------------------------------------
Corning's earnings per share (EPS) excluding special items for the first quarter
of 2005 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 $0.11 $0.13
Special items:
Restructuring, impairment and other (charges) and credits (a)
Asbestos settlement (b)
(Loss) gain on repurchases and retirements of debt, net (c) ----- -----
Earnings per share
----------------------------------------------------------------
This schedule will be updated as additional announcements occur.
----------------------------------------------------------------
(a) From time to time, Corning may need to make adjustments to estimates used
in the determination of prior year restructuring and impairment charges,
which could result in a gain or loss during the quarter.
(b) As part of Corning's asbestos settlement arrangement to be incorporated
into the Pittsburgh Corning Corporation reorganization plan, Corning will
contribute, when the reorganization plan becomes effective, 25 million
shares of Corning common stock to a trust. The common stock will be
contributed to the trust, after the plan has been approved by the asbestos
claimants and bankruptcy court. The portion of the asbestos liability to be
settled in common stock requires adjustment each quarter based upon
movements in Corning's common stock price prior to contribution of the
shares to the trust. In the first quarter of 2005, Corning will record a
charge or credit for the change in its common stock price as of March 31,
2005 compared to $11.77, the common stock price at December 31, 2004.
(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 first quarter 2005 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.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Three Months and Year Ended December 31, 2004
(Unaudited; amounts in millions)
--------------------------------------------------------------------------------
Corning's free cash flow financial measures for the three months and year ended
December 31, 2004 are non-GAAP financial measures within the meaning of
Regulation G of the Securities and Exchange Commission. Non-GAAP financial
measures are not in accordance with, or an alternative to, generally accepted
accounting principles (GAAP). The company believes presenting non-GAAP financial
measures is helpful to analyze financial performance without the impact of
unusual items that may obscure trends in the company's underlying performance. A
detailed reconciliation is provided below outlining the differences between
these non-GAAP measures and the directly related GAAP measures.
--------------------------------------------------------------------------------
For the three For the
months ended year ended
December 31, 2004 December 31, 2004
----------------- -----------------
Operating cash flow $ 366 $ 1,009
Less: Investing cash flow (359) (922)
Plus: Short-term investments - acquisitions 284 1,253
Less: Short-term investments - liquidations (217) (1,027)
--------- ---------
Free cash flow $ 74 $ 313
========= =========