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 24, 2007
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 Corning Incorporated press release dated January 24, 2007 regarding its
financial results for the fourth quarter ended December 31, 2006 and its first
quarter 2007 earnings guidance is attached hereto as Exhibit 99.
The information in this report, being furnished pursuant to Item 2.02 of Form
8-K, shall not be deemed to be "filed" for purposes of Section 18 of the
Securities and 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 9.01. Financial Statements and Exhibits
(d) Exhibit
99 Press Release dated January 24, 2007, 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: January 24, 2007 By /s/ KATHERINE A. ASBECK
-------------------------------
Katherine A. Asbeck
Senior Vice President - Finance
Exhibit 99
----------
FOR RELEASE -- January 24, 2007
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 Announces Fourth-Quarter Results
Company achieves record results in 2006
Highlights LCD and diesel products growth for 2007
CORNING, N.Y. -- Corning Incorporated (NYSE:GLW) today announced fourth-quarter
sales of $1.37 billion and net income of $646 million, or $0.41 per share. The
net income includes net after-tax special gains of $158 million, or $0.10 per
share.
Excluding these special gains, Corning's fourth-quarter net income would have
been $488 million, or $0.31 per share, which exceeded the company's guidance for
the quarter and also the consensus of Wall Street estimates as compiled by
Thomson/First Call. These are non-GAAP financial measures. These and all
non-GAAP financial measures are reconciled on the company's investor relations
Web site and in attachments to this news release.
"Our excellent fourth-quarter results capped an outstanding full-year
performance for Corning," Wendell P. Weeks, president and chief executive
officer, said. "This was the fourth consecutive year that we recorded
significant improvement in the company's profitability and we reached a new
all-time record for net income and earnings per share. We are extremely pleased
with our 2006 performance and we believe we are well positioned for continued
growth and success in 2007." These are non-GAAP financial measures.
Corning's fourth-quarter results included the following non-cash special gains
and charges:
.. A $139 million pretax and after-tax gain primarily to reflect the decrease
in the market value of Corning common stock to be contributed to settle the
asbestos litigation related to Pittsburgh Corning Corporation.
.. Restructuring and impairment pretax and after-tax charges of $44 million
related to the company's Telecommunications segment.
.. A $35 million reduction in income tax expense related to the release of the
valuation allowance on certain deferred tax assets in Germany.
.. A $28 million increase in equity earnings resulting from net nonrecurring
gains at Samsung Corning Co., Ltd., a Korean manufacturer of glass panels
and funnels for cathode ray tube (CRT) television and computer monitors.
(more)
Corning Announces Fourth-Quarter Results
Page Two
Full-Year Operating Results
For the full year, Corning recorded sales of $5.17 billion, an increase of 13
percent over 2005 sales of $4.58 billion. The sales increase was the result of
continuing strong growth in Display Technologies and improvements in most of the
company's other business segments. Corning had net income of $1.86 billion, or
$1.16 per share, versus $585 million, or $0.38 per share, in 2005.
Corning's net income for 2005 and 2006 included several special gains and
charges. Excluding these items, Corning's net income for 2006 increased 35
percent to $1.78 billion or $1.12 per share compared to $1.32 billion or $0.86
per share in 2005. These are non-GAAP financial measures. The company's 2006
results also include $81 million, or $0.05 per share, of stock compensation
expense resulting from the adoption of SFAS 123R at the beginning of 2006.
"Our Display Technologies business had an excellent year. Volume grew more than
50 percent on strong shipments of larger-generation glass substrates. We are
especially pleased that we held our gross margin percentage in 2006 compared to
2005 as strong cost reductions offset price declines that were higher than our
historical trend," Weeks said.
He added, "Year-over-year, our Telecommunications segment experienced sales
gains of 6 percent. Excluding the impact of the shift of our Japanese business
to an equity affiliate, sales increased 10 percent. The Telecommunications
segment also improved profitability, before special items, for a second
consecutive year. We sense that a broader recovery in the Telecommunications
industry may finally be underway." These are non-GAAP financial measures.
"We also had another excellent year at our equity affiliates, particularly Dow
Corning Corporation and Samsung Corning Precision Glass Co., Ltd. (SCP), which
drove a significant increase in equity earnings," Weeks said. Samsung Corning
Precision is a 50-percent owned equity company in Korea which manufactures LCD
glass substrates.
Fourth-Quarter Operating Results
Corning's fourth-quarter sales increased 7 percent over third-quarter sales of
$1.28 billion and by 14 percent over last year's fourth-quarter sales of $1.2
billion. Fourth-quarter gross margin for the company remained strong at 44
percent, comparable to the third quarter.
Including the $28 million net nonrecurring gains at Samsung Corning, equity
earnings for the fourth quarter were $272 million compared to third-quarter
equity earnings of $232 million. Absent this item, the fourth-quarter equity
earnings increase was the result of continued strong performance at both Dow
Corning and Samsung Corning Precision.
Fourth-quarter sales for Corning's Display Technologies segment were $619
million, a 19 percent increase over 2005 fourth-quarter sales of $518 million,
caused by volume growth of 48 percent which was partially offset by price
declines. Sequentially, fourth-quarter sales increased 22 percent from
third-quarter sales of $506 million as volume increases of 28 percent were
partly offset by price declines of 5 percent.
(more)
Corning Announces Fourth-Quarter Results
Page Three
Samsung Corning Precision's fourth-quarter glass volume increased 43 percent
year-over-year and 13 percent sequentially. Equity earnings from SCP were $147
million, up 14 percent over last year and up 9 percent compared with the third
quarter.
Total LCD glass volume, including both Corning's wholly owned business and SCP,
increased 46 percent year-over-year and 20 percent sequentially. Net income for
the Display Technologies segment, which includes results of Corning's wholly
owned business and equity earnings from SCP, increased 25 percent to $461
million in the fourth quarter compared to $368 million in the fourth quarter of
2005, and 17 percent compared to the third quarter.
Weeks said, "As the year went on it became apparent that television was becoming
the primary driver for LCD glass growth. We estimate that LCD television
penetration reached 22 percent of the world market in 2006, and preliminary
retail sales figures indicate that one out of every three TVs sold in the United
States last year was an LCD television.
"Greater than one-third of the total LCD glass manufactured last year, measured
in square footage, was used to produce LCD televisions." Weeks added, "In making
this transition toward an industry driven increasingly by television sales, we
have learned a lot about its seasonality patterns which should help us
effectively manage capacity in the future."
Fourth-quarter Telecommunications segment sales declined by 11 percent to $404
million from $456 million in the third quarter. This fourth-quarter seasonal
decline was much less than the company had previously expected due to strong
demand from European and North American telecommunications carriers.
Year-over-year fourth-quarter Telecommunications sales increased 5 percent.
In the fourth quarter, Environmental Technologies segment sales increased
slightly to $155 million from $153 million in the third quarter. Life Sciences
segment fourth-quarter sales were $72 million, an increase over third-quarter
sales of $68 million.
Cash Flow/Liquidity Update
Corning ended the fourth quarter with $3.2 billion in cash and short-term
investments, an increase over the $2.8 billion at the end of the third quarter.
The company ended 2006 with total debt of $1.7 billion. "We had positive free
cash flow of $540 million in 2006," James B. Flaws, vice chairman and chief
financial officer, said. "Our board of directors has established a goal to
maintain a cash balance in excess of debt as a protection against volatility in
our markets. The board has also approved priorities for the use of any cash
beyond this level. First, we will repay debt maturities within the upcoming
three years. Second, we will earmark funds needed for potential major new
developments coming out of our laboratories. After these priorities are
achieved, the board will consider share repurchases or the reinstatement of
dividend payments," he said. Free cash flow is a non-GAAP financial measure.
(more)
Corning Announces Fourth-Quarter Results
Page Four
Weeks added, "We believe we may be on the cusp of a very productive decade of
innovation at Corning. It will be extremely important that we have enough
cash-on-hand to fund the development of emerging technologies in our
laboratories. Examples of such emerging technologies include green lasers for
mobile projection devices and micro reactors for chemical processing."
2007 Market Outlook
For 2007, Corning expects the overall LCD glass substrate market to grow in the
mid-30 percent range, with an increase of at least 400 million square feet of
glass over last year's total volume. The expected volume growth for the year
will be equal to or greater than the total amount of LCD glass added to the
market in 2006. Corning said that its LCD glass volume is expected to grow at
the upper end of this range, while SCP's volume may be slightly lower than the
range. Growth rates by region, and thus by Corning's wholly owned business and
SCP, may be different based on market dynamics.
Corning said that LCD televisions should reach 33 percent of the global
television market or approximately 68 million units in 2007. This would be a
significant increase over the estimated 22 percent penetration rate or 43
million units produced last year. "This nearly 60 percent increase in television
units produced, coupled with an increase in average screen size, may result in
almost half of all the LCD glass produced this year going to the television
market," Flaws said.
Corning also expects it will see significant growth in its heavy-duty diesel
products this year due to the new U.S. emissions regulations which became
effective on January 1, 2007. Diesel products are a part of Corning's
Environmental Technologies segment. The company expects that diesel product
sales should increase by more than 60 percent from the $164 million of sales in
2006. This sales ramp is expected to be stronger in the second half of the year.
First-Quarter Outlook
Corning said that it expects first-quarter sales to be in the range of $1.26
billion to $1.31 billion and earnings per share (EPS) in the range of $0.24 to
$0.27, before special items. This EPS estimate is a non-GAAP financial measure
and excludes any possible special items. The gross margin percent for the first
quarter is expected to be 43 percent to 45 percent. The company also expects
that its effective tax rate for the first quarter will be in the range of 15
percent to 18 percent.
In its Display Technologies segment, Corning said that first-quarter sequential
glass volume for both its wholly owned business and Samsung Corning Precision
will be down 10 percent to 15 percent compared to the fourth quarter. Flaws
said, "This sequential volume decline reflects the seasonality of the LCD TV
market as television becomes a larger part of the LCD industry. Historically,
the color television end market has seen 55 percent of total sales occur in the
second half of the year. Retail sales of LCD televisions are more weighted in
the second half due to the rapid increase in penetration.
(more)
Corning Announces Fourth-Quarter Results
Page Five
"We anticipate that this seasonality decline may fall more heavily on Corning in
quarter one due to our overall market share and our new pricing strategy. We
expect to see our total glass volume increase significantly as the market
expands in the second half of this year. Additionally, we are encouraged that
the LCD industry appears to be operating at lower levels during the first
quarter in order to avoid a repeat of last year's panel inventory buildup which
caused significant disruption in the LCD supply chain."
Price declines of one percent to two percent are expected in the first quarter
for Corning's wholly owned business. At SCP, first-quarter price declines are
anticipated to be higher and any subsequent declines are expected to be moderate
for the remainder of the year.
Flaws said there are a number of factors contributing to Corning's overall
belief that it will be able to achieve lower price declines this year than in
2006. "First," he said, "last year's first-quarter inventory buildup by panel
manufacturers and the subsequent inventory correction, along with the
introduction of significantly more Gen 6 and larger capacity by competitors,
were major contributors to the higher than historical price declines in 2006.
Second, we are using a new pricing strategy by offering lower price declines in
the first part of the year, when demand is seasonally weaker, in order to
maintain higher prices in the second half of the year, when we believe that LCD
glass will be in tight supply."
Corning said that lower first-half capacity requirements will allow the company
to make necessary melting tank repairs and improvements and accelerate its
transition to its environmentally green EAGLE XG (TM) glass composition.
Corning's Telecommunications segment first-quarter sales are expected to
increase modestly over the previous year and sequentially due to increased
demand in North America and Europe. "We are beginning to feel much better about
the growth opportunities in the telecommunications industry," Flaws said, "We
expect to see earnings improvement for the full year."
The company's Environmental Technologies segment sales are expected to increase
about 5 percent from the fourth quarter of last year due to seasonally stronger
automotive sales and a modest increase in diesel products sales. Sales for the
Life Sciences segment should be up slightly from the fourth quarter of 2006.
Equity earnings for the first quarter are expected to decline 25 percent to 30
percent due to the lower earnings from Samsung Corning Precision and the absence
of the fourth quarter nonrecurring gain at Samsung Corning.
"Seasonality factors across a number of our businesses will have an impact in
the first quarter but we believe that Corning is well-positioned to achieve
another full year of sales and earnings growth. At the same time, we will
continue to make the necessary investments in innovation and research that
should lead to the next generation of successful products to ensure the
long-term success of Corning," Weeks said.
(more)
Corning Announces Fourth-Quarter Results
Page Six
Fourth-Quarter Conference Call Information
The company will host a fourth-quarter conference call at 8:30 a.m. EDT on
Wednesday, Jan.24. To access the call, dial (210) 234-0002. The password is
QUARTER FOUR. The leader is SOFIO. A replay of the call will begin at
approximately 10:30 a.m. EDT, and will run through 5 p.m. EDT, Wednesday, Feb.
7. To listen, dial (203) 369-3852. No pass code is required. To listen to a live
audio webcast of the call, go to Corning's Web site:
www.corning.com/investor_relations, and follow the instructions. The audio
webcast will be archived for one year following the call.
Presentation of Information in this News Release
Non-GAAP financial measures are not in accordance with, or an alternative to,
GAAP. Corning's non-GAAP net income and EPS measure excludes restructuring,
impairment and other charges and adjustments to prior estimates for such
charges. Additionally, the company's non-GAAP measure excludes adjustments to
asbestos settlement reserves required by movements in Corning's common stock
price, gains and losses arising from debt retirements, charges resulting from
the impairment of equity or cost method investments, or adjustments to deferred
tax assets, and gains or losses recognized in equity earnings from
restructuring, impairment or other charges or credits taken by equity method
companies. Corning's free cash flow financial measures are also non-GAAP
measures. The company believes presenting non-GAAP free cash flow; net income
and EPS measures are helpful to analyze financial performance without the impact
of unusual items that may obscure trends in the company's underlying
performance. These non-GAAP measures are reconciled on the company's Web site at
www.corning.com/investor_relations and accompany this news release.
About Corning Incorporated
Corning Incorporated (www.corning.com) is a diversified technology company that
concentrates its efforts on high-impact growth opportunities. Corning combines
its expertise in specialty glass, ceramic materials, polymers and the
manipulation of the properties of light, with strong process and manufacturing
capabilities to develop, engineer and commercialize significant innovative
products for the telecommunications, flat panel display, environmental,
semiconductor, and life sciences industries.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements that involve a variety of
business risks and other uncertainties that could cause actual results to differ
materially. These risks and uncertainties include the possibility of changes in
global economic and political conditions; currency fluctuations; product demand
and industry capacity; competition; manufacturing efficiencies; cost reductions;
availability of critical components and materials; new product
commercialization; changes in the mix of sales between premium and non-premium
products; new plant start-up costs; possible disruption in commercial activities
due to terrorist activity, armed conflict, political instability or major health
concerns; adequacy of insurance; equity company activities; acquisition and
divestiture activities; the level of excess or obsolete inventory; the rate of
technology change; the ability to enforce patents; product and components
performance issues; stock price fluctuations; and adverse litigation or
regulatory developments. Additional risk factors are identified in Corning's
filings with the Securities and Exchange Commission. Forward-looking statements
speak only as of the day that they are made, and Corning undertakes no
obligation to update them in light of new information or future events.
###
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)
Three months ended Year ended
December 31, December 31,
------------------------ -------------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $ 1,369 $ 1,200 $ 5,174 $ 4,579
Cost of sales 766 673 2,891 2,595
--------- --------- --------- ---------
Gross margin 603 527 2,283 1,984
Operating expenses:
Selling, general and administrative expenses 222 203 857 756
Research, development and engineering expenses 138 123 517 443
Amortization of purchased intangibles 3 2 11 13
Restructuring, impairment and other charges
and (credits) (Note 1) 41 (84) 54 (38)
Asbestos settlement (Note 2) (139) 14 (2) 218
--------- --------- --------- ---------
Operating income 338 269 846 592
Interest income 36 21 118 61
Interest expense (20) (24) (76) (108)
Loss on repurchases and retirement of debt, net (4) (11) (16)
Other income, net 23 2 84 30
--------- --------- --------- ---------
Income before income taxes 377 264 961 559
Provision for income taxes (Note 3) (487) (55) (578)
--------- --------- --------- ---------
Income (loss) before minority interests and equity earnings 377 (223) 906 (19)
Minority interests (3) 1 (11) (7)
Equity in earnings of affiliated companies, net
of impairments (Note 4) 272 189 960 611
--------- --------- --------- ---------
Net income (loss) $ 646 $ (33) $ 1,855 $ 585
========= ========= ========= =========
Basic earnings (loss) per common share (Note 6) $ 0.42 $ (0.02) $ 1.20 $ 0.40
========= ========= ========= =========
Diluted earnings (loss) per common share (Note 6) $ 0.41 $ (0.02) $ 1.16 $ 0.38
========= ========= ========= =========
See accompanying notes to these financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
December 31,
---------------------------------
2006 2005
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 1,157 $ 1,342
Short-term investments, at fair value 2,010 1,092
--------- ---------
Total cash, cash equivalents and short-term investments 3,167 2,434
Trade accounts receivable, net 746 629
Inventories 639 570
Deferred income taxes 47 44
Other current assets 199 183
--------- ---------
Total current assets 4,798 3,860
Investments 2,522 1,729
Property, net 5,193 4,675
Goodwill and other intangible assets, net 316 338
Deferred income taxes 114 10
Other assets 122 595
--------- ---------
Total Assets $ 13,065 $ 11,207
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 20 $ 18
Accounts payable 631 690
Other accrued liabilities 1,668 1,662
--------- ---------
Total current liabilities 2,319 2,370
Long-term debt 1,696 1,789
Postretirement benefits other than pensions 739 593
Other liabilities 1,020 925
--------- ---------
Total liabilities 5,774 5,677
--------- ---------
Commitments and contingencies
Minority interests 45 43
Shareholders' equity:
Preferred stock - Par value $100.00 per share; Shares authorized: 10 million
Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion;
Shares issued: 1,576 million and 1,552 million 791 776
Additional paid-in capital 12,008 11,548
Accumulated deficit (4,992) (6,847)
Treasury stock, at cost; Shares held: 18 million (201) (168)
Accumulated other comprehensive income (360) 178
--------- ---------
Total shareholders' equity 7,246 5,487
--------- ---------
Total Liabilities and Shareholders' Equity $ 13,065 $ 11,207
========= =========
See accompanying notes to these financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Three months ended Year ended
------------------------ December 31,
Dec. 31, Sept. 30, ------------------------
2006 2006 2006 2005
--------- -------- --------- ---------
Cash Flows from Operating Activities:
Net income $ 646 $ 438 $ 1,855 $ 585
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 150 140 580 499
Amortization of purchased intangibles 3 2 11 13
Restructuring, impairment and other charges and (credits) 41 2 54 (38)
Asbestos settlement (139) 13 (2) 218
Stock compensation charges 32 33 127 29
Loss on repurchases and retirement of debt 11 16
Undistributed earnings of affiliated companies (213) (143) (597) (310)
Deferred taxes (37) 3 (101) 425
Interest expense on convertible debentures (23)
Restructuring payments (6) (3) (15) (25)
Decrease in restricted cash 22
Customer deposits, net of credits issued (41) 12 45 428
Employee benefit payments less than expense 1 3 27 34
Changes in certain working capital items:
Trade accounts receivable 14 (122) (105) (77)
Inventories 39 (11) (65) (62)
Other current assets (5) (10) 6
Accounts payable and other current liabilities,
net of restructuring payments 125 14 (56) 113
Other, net 13 35 44 86
-------- ------- -------- --------
Net cash provided by operating activities 628 411 1,803 1,939
-------- ------- -------- --------
Cash Flows from Investing Activities:
Capital expenditures (290) (338) (1,182) (1,553)
Acquisitions of businesses, net of cash received (16)
Net proceeds from sale or disposal of assets 1 3 12 18
Net increase in long-term investments and other
long-term assets (77)
Short-term investments - acquisitions (551) (838) (2,894) (1,668)
Short-term investments - liquidations 373 383 1,976 1,452
Other, net 39
-------- ------- -------- --------
Net cash used in investing activities (467) (790) (2,181) (1,712)
-------- ------- -------- --------
Cash Flows from Financing Activities:
Net repayments of short-term borrowings and current
portion of long-term debt (7) (14) (451)
Proceeds from issuance of long-term debt, net 246 246 147
Repayments of long-term debt (25) (9) (368) (102)
Proceeds from issuance of common stock, net 6 5 26 365
Proceeds from the exercise of stock options 23 29 303 202
Other, net (1) (4) (13) (14)
-------- ------- -------- --------
Net cash provided by financing activities 3 260 180 147
-------- ------- -------- --------
Effect of exchange rates on cash 14 13 (41)
-------- ------- -------- --------
Net increase (decrease) in cash and cash equivalents 178 (119) (185) 333
Cash and cash equivalents at beginning of period 979 1,098 1,342 1,009
-------- ------- -------- --------
Cash and cash equivalents at end of period $ 1,157 $ 979 $ 1,157 $ 1,342
======== ======= ======== ========
Certain amounts for 2005 were reclassified to conform to 2006 classifications.
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 All
Technologies munications Technologies Sciences Other Total
------------ ----------- ------------- -------- -------- --------
Three months ended December 31, 2006
Net sales $ 619 $ 404 $ 155 $ 72 $ 119 $ 1,369
Depreciation (1) $ 77 $ 36 $ 21 $ 5 $ 8 $ 147
Amortization of purchased intangibles $ 3 $ 3
Research, development and engineering
expenses (2) $ 30 $ 24 $ 30 $ 12 $ 11 $ 107
Restructuring, impairment and other charges
(before-tax and minority interest) (3) $ 42 $ 1 $ 43
Income tax (provision) benefit $ (45) $ 3 $ 1 $ 1 $ 2 $ (38)
Earnings (loss) before minority interest
and equity earnings (4) $ 311 $ (53) $ (8) $ (2) $ 10 $ 258
Minority interests (2) (1) (3)
Equity in earnings of affiliated companies (5) 150 1 31 182
------- ------- -------- -------- -------- --------
Net income (loss) $ 461 $ (54) $ (8) $ (2) $ 40 $ 437
======= ======= ======== ======== ======== ========
Three months ended December 31, 2005
Net sales $ 518 $ 383 $ 142 $ 63 $ 94 $ 1,200
Depreciation $ 52 $ 42 $ 17 $ 5 $ 9 $ 125
Amortization of purchased intangibles $ 3 $ 3
Research, development and engineering
expenses (2) $ 33 $ 19 $ 27 $ 12 $ 8 $ 99
Restructuring, impairment and other credits
(before-tax and minority interest) (3) $ (84) $ (84)
Income tax provision $ (46) $ (2) $ (48)
Earnings (loss) before minority interest
and equity earnings (loss) (4) $ 237 $ 76 $ (7) $ (8) $ (2) $ 296
Minority interests 1 1
Equity in earnings (loss) of affiliated
companies (5) 131 (1) 6 136
------- ------- -------- -------- -------- --------
Net income (loss) $ 368 $ 75 $ (7) $ (8) $ 4 $ 432
======= ======= ======== ======== ======== ========
Year ended December 31, 2006
Net sales $ 2,133 $ 1,729 $ 615 $ 287 $ 410 $ 5,174
Depreciation (1) $ 276 $ 157 $ 80 $ 20 $ 37 $ 570
Amortization of purchased intangibles $ 11 $ 11
Research, development and engineering
expenses (2) $ 126 $ 82 $ 121 $ 49 $ 36 $ 414
Restructuring, impairment and other charges
(before-tax and minority interest) (3) $ 44 $ 6 $ 6 $ 56
Income tax (provision) benefit $ (117) $ (27) $ (5) $ 1 $ (3) $ (151)
Earnings (loss) before minority interest
and equity earnings (loss) (4) $ 1,052 $ 9 $ 8 $ (17) $ 12 $ 1,064
Minority interests (7) (4) (11)
Equity in earnings (loss) of affiliated
companies (5) 565 5 (1) 39 608
------- ------- -------- -------- -------- --------
Net income (loss) $ 1,617 $ 7 $ 7 $ (17) $ 47 $ 1,661
======= ======= ======== ======== ======== ========
Year ended December 31, 2005
Net sales $ 1,742 $ 1,623 $ 580 $ 282 $ 352 $ 4,579
Depreciation $ 185 $ 180 $ 70 $ 20 $ 35 $ 490
Amortization of purchased intangibles $ 13 $ 13
Research, development and engineering
expenses (2) $ 107 $ 76 $ 102 $ 40 $ 28 $ 353
Restructuring, impairment and other
net credits (before-tax and
minority interest) (3) $ (47) $ (16) $ (63)
Income tax provision $ (122) $ (15) $ (5) $ (2) $ (3) $ (147)
Earnings (loss) before minority interest
and equity earnings (loss) (4) $ 823 $ 61 $ 15 $ (4) $ 19 $ 914
Minority interests 2 (9) (7)
Equity in earnings (loss) of affiliated
companies (5) 416 5 (76) 345
------- ------- -------- -------- -------- --------
Net income (loss) $ 1,239 $ 68 $ 15 $ (4) $ (66) $ 1,252
======= ======= ======== ======== ======== ========
(1) Depreciation expense for Corning's reportable segments is recorded based on
the assets of each segment and also includes an allocation of depreciation
of corporate property not specifically identifiable to a segment.
(2) Research, development, and engineering expenses includes direct project
spending which is identifiable to a segment.
(3) In the three months and year ended December 31, 2006, restructuring,
impairment and other charges and (credits) includes a charge of $44 million
for certain assets in our Telecommunications segment. In the three months
and year ended December 31, 2005, restructuring, impairment and other
charges and (credits) includes a gain of $84 million for the reversal of
the cumulative translation account of a wholly-owned subsidiary that was
substantially liquidated. Amounts for the year ended December 31, 2005,
also include a charge of $28 million for a restructuring plan in the
Telecommunications segment.
(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) In the three months and year ended December 31, 2006, equity in earnings
(loss) of affiliated companies includes gains of $28 million and $7
million, respectively, in All Other related to impairments and other
charges and credits for Samsung Corning. In the three months and year ended
December 31, 2005, equity in earnings (loss) of affiliated companies
includes a charge of $106 million for Corning's share of Samsung Corning's
impairment of certain manufacturing assets and other charges.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
A reconciliation of reportable segment net income to consolidated net income
(loss) follows (in millions):
Three months ended Year ended
December 31, December 31,
------------------------ ------------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Net income of reportable segments $ 437 $ 432 $ 1,661 $ 1,252
Unallocated amounts:
Net financing costs (1) 6 (15) 1 (93)
Stock-based compensation expense (32) (10) (127) (37)
Exploratory research (27) (22) (89) (77)
Corporate contributions (6) (6) (30) (24)
Equity in earnings of affiliated companies,
net of impairments (2) 90 53 352 266
Asbestos settlement (3) 139 (14) 2 (218)
Other corporate items (4) 39 (451) 85 (484)
------ ------- -------- -------
Net income (loss) $ 646 $ (33) $ 1,855 $ 585
====== ======= ======== =======
(1) Net financing costs include interest expense, interest income, and interest
costs and investment gains associated with benefit plans.
(2) Equity in earnings of affiliated companies, net of impairments includes the
following items:
. In the year ended December 31, 2006, a $33 million gain representing
our share of a tax settlement relating to an IRS examination at Dow
Corning.
. In the year ended December 31, 2005, a gain of $11 million for our
share of a gain on the issuance of subsidiary stock at Dow Corning.
(3) The asbestos settlement arrangement to be incorporated into the Pittsburgh
Corning Corporation (PCC) reorganization plan, when the reorganization plan
becomes effective, will require Corning to relinquish its equity interest
in PCC, contribute its equity interest in Pittsburgh Corning Europe (PCE),
and 25 million shares of Corning common stock to a trust. Corning also
agreed to make cash payments over the six years from the effective date of
the settlement and to assign certain insurance policy proceeds from its
primary insurance and a portion of its excess insurance at the time of the
settlement. The asbestos liability requires adjustment to fair value based
upon movements in Corning's common stock price prior to contribution of the
shares to the trust as well as change in the estimated fair value of the
other components of the settlement offer. In the fourth quarter of 2006 and
2005, Corning recorded a credit of $139 million and a charge of $14
million, respectively, to reflect changes in the estimated fair value of
the components of the settlement offer. In the twelve months ended December
31, 2006, and 2005, Corning recorded a credit of $2 million and a charge of
$218 million, respectively, to reflect the changes in the estimated fair
value of the components of the settlement offer.
(4) Other corporate items include the tax impact of the unallocated amounts. In
addition, the following items are also included:
. In the three and twelve months ended December 31, 2006, tax benefits
of $35 million and $83 million, respectively, from the release of
valuation allowances for certain foreign locations.
. In the three and twelve months ended December 31, 2005, a net $443
million charge to tax expense which was primarily to increase the
valuation allowance against deferred tax assets resulting from our
conclusion that the sale of an appreciated asset no longer met the
criteria for a viable tax planning strategy.
. In the twelve months ended December 31, 2005, an impairment charge of
$25 million for the other-than-temporary decline in our investment in
Avanex below its cost basis and a loss of $16 million associated with
redemption or retirement of debt.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Restructuring, Impairment, and Other Charges (Credits)
In the fourth quarter of 2006, Corning recorded a $44 million asset impairment
charge for certain long-lived assets in our Telecommunications segment.
2. Asbestos Settlement
On March 28, 2003, Corning announced that it had reached agreement with the
representatives of asbestos claimants for the settlement of all current and
future asbestos claims against Corning and Pittsburgh Corning Corporation (PCC),
which might arise from PCC products or operations. The proposed settlement, if
approved, will require Corning to relinquish its equity interest in PCC,
contribute its equity interest in Pittsburgh Corning Europe N.V. (PCE), a
Belgian corporation, and contribute 25 million shares of Corning common stock.
Corning also agreed to make cash payments with a value of $131 million, in March
2003, over six years from the effective date of the settlement and to assign
insurance policy proceeds from its primary insurance and a portion of its excess
insurance at the time of the settlement.
As a result of the proposed asbestos settlement, any changes in the estimated
fair value of the components of the proposed settlement agreement will be
recognized in Corning's quarterly results until the date of the contribution to
the settlement trust. In the fourth quarter of 2006, Corning recorded a gain of
$139 million (pretax and after-tax) including a mark-to-market gain of $143
million reflecting the decrease in Corning's common stock from September 30,
2006 to December 31, 2006 and a $4 million charge to adjust the estimated fair
value of certain other components of the proposed asbestos settlement.
Beginning with the first quarter of 2003, Corning has recorded total net charges
of $816 million to reflect the estimated fair value of our asbestos liability.
3. Provision for Income Taxes
In the fourth quarter of 2006, Corning recorded a $35 million tax benefit from
the release of a valuation allowance on German trade taxes due to sustained
profitability of the Company's German entities.
4. Equity in Earnings of Affiliated Companies
In the fourth quarter of 2006, equity in earnings of affiliated companies
includes the following items associated with Samsung Corning: an impairment
charge for certain long-lived assets; the establishment of a valuation allowance
against certain deferred tax assets; and a gain on the sale of land. These items
increased Corning's equity earnings by $28 million (net) in the fourth quarter
of 2006.
5. Adoption of SFAS 158
Corning adopted Statement of Financial Accounting Standards No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106, and 132(R)" (SFAS 158) on December
31, 2006. SFAS 158 requires employers to recognize the overfunded or underfunded
status of a defined benefit postretirement plan as an asset or liability in its
balance sheet and to recognize changes in that funded status in comprehensive
income in the year in which the changes occur. The impact of adopting SFAS 158
resulted in a reduction to stockholders' equity of $669 million after tax. Dow
Corning's adoption of this standard resulted in a reduction to our investment in
Dow Corning and a decrease to stockholders' equity of $94 million after tax.
6. Weighted Average Shares Outstanding
Weighted average shares outstanding are as follows (in millions):
Three months ended Year ended
December 31, December 31,
------------------ ---------------
2006 2005 2006 2005
---- ---- ---- ----
Basic 1,557 1,524 1,550 1,464
Diluted 1,596 1,524 1,594 1,535
Diluted used for non-GAAP measures 1,596 1,571 1,594 1,539
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
QUARTERLY SALES INFORMATION
(Unaudited; in millions)
2006
--------------------------------------------------------------
Q1 Q2 Q3 Q4 Total
-------- -------- ------- ------- --------
Display Technologies $ 547 $ 461 $ 506 $ 619 $ 2,133
Telecommunications
Fiber and cable 205 234 241 197 877
Hardware and equipment 192 238 215 207 852
-------- -------- ------- ------- --------
397 472 456 404 1,729
Environmental Technologies
Automotive 121 113 112 105 451
Diesel 34 39 41 50 164
-------- -------- ------- ------- --------
155 152 153 155 615
Life Sciences 72 75 68 72 287
Other 91 101 99 119 410
-------- -------- ------- ------- --------
Total $ 1,262 $ 1,261 $ 1,282 $ 1,369 $ 5,174
======== ======== ======= ======= ========
2005
--------------------------------------------------------------
Q1 Q2 Q3 Q4 Total
-------- -------- ------- ------- --------
Display Technologies $ 320 $ 415 $ 489 $ 518 $ 1,742
Telecommunications
Fiber and cable 212 213 216 193 834
Hardware and equipment 215 202 182 190 789
-------- -------- ------- ------- --------
427 415 398 383 1,623
Environmental Technologies
Automotive 127 125 121 109 482
Diesel 21 21 23 33 98
-------- -------- ------- ------- --------
148 146 144 142 580
Life Sciences 74 75 70 63 282
Other 81 90 87 94 352
-------- -------- ------- ------- --------
Total $ 1,050 $ 1,141 $ 1,188 $ 1,200 $ 4,579
======== ======== ======= ======= ========
The above supplemental information is intended to facilitate analysis of
Corning's businesses.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended December 31, 2006
(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 2006 are non-GAAP financial measures within the meaning of
Regulation G of the Securities and Exchange Commission. Non-GAAP financial
measures are not in accordance with, or an alternative to, generally accepted
accounting principles (GAAP). The company believes presenting non-GAAP net
income and EPS is helpful to analyze financial performance without the impact of
unusual items that may obscure trends in the company's underlying performance. A
detailed reconciliation is provided below outlining the differences between
these non-GAAP measures and the directly related GAAP measures.
--------------------------------------------------------------------------------
Per Income (Loss) Before Net
Share Income Taxes Income (Loss)
------- -------------------- -------------
Earnings per share (EPS) and net income,
excluding special items $ 0.31 $ 282 $ 488
Special items:
Restructuring, impairment, and other (charges) and credits (a) (0.03) (44) (44)
Asbestos settlement (b) 0.09 139 139
Provision for income taxes (c) 0.02 35
Equity in earnings of affiliated companies (d) 0.02 28
------- ------- -------
Total EPS and net income $ 0.41 $ 377 $ 646
======= ======= =======
(a) Amount represents a $44 million asset impairment charge for certain
long-lived assets in our Telecommunications segment.
(b) As a result of Corning's proposed asbestos settlement, any changes in the
estimated fair value of the components of the proposed settlement agreement
will be recognized in Corning's quarterly results until the date of the
contribution to the settlement trust. In the fourth quarter of 2006,
Corning recorded a credit of $139 million (before- and after-tax) including
a credit of $143 million for the change in Corning's common stock price of
$18.71 at December 31, 2006, compared to $24.41 at September 30, 2006 and a
$4 million charge for the change in the estimated fair value of certain
other components of the proposed asbestos settlement liability.
(c) Amount reflects a $35 million tax benefit from the release of our valuation
allowance on certain deferred tax assets in Germany.
(d) Amount reflects Corning's share of the following items associated with
Samsung Corning: an impairment charge for certain long-lived assets; the
impact of establishing a valuation allowance against certain deferred tax
assets; and a gain on the sale of land. These items increased Corning's
equity earnings by $28 million (net) in the fourth quarter of 2006.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Year Ended December 31, 2006
(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, 2006 are non-GAAP financial measures within the
meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP
financial measures are not in accordance with, or an alternative to, generally
accepted accounting principles (GAAP). The company believes presenting non-GAAP
net income and EPS is helpful to analyze financial performance without the
impact of unusual items that may obscure trends in the company's underlying
performance. A detailed reconciliation is provided below outlining the
differences between these non-GAAP measures and the directly related GAAP
measures.
--------------------------------------------------------------------------------
Per Income (Loss) Before Net
Share Income Taxes Income (Loss)
------- -------------------- -------------
Earnings per share (EPS) and net income, excluding special items $ 1.12 $ 1,014 $ 1,785
Special items:
Restructuring, impairment, and other (charges) and credits (a) (0.03) (44) (44)
Asbestos settlement (b) 2 2
Loss on repurchases of debt, net (0.01) (11) (11)
Provision for income taxes (c) 0.05 83
Equity in earnings of affiliated companies (d) 0.03 40
------- -------- --------
Total EPS and net income $ 1.16 $ 961 $ 1,855
======= ======== ========
(a) Amount represents a $44 million asset impairment charge for certain
long-lived assets in our Telecommunications segment.
(b) As a result of Corning's proposed asbestos settlement, any changes in the
estimated fair value of the components of the proposed settlement agreement
will be recognized in Corning's quarterly results until the date of the
contribution to the settlement trust. For 2006, Corning recorded a credit
of $2 million (before- and after-tax) including a credit of $24 million for
the change in Corning's common stock price of $18.71 at December 31, 2006,
compared to $19.66 at December 31, 2005 and a $22 million charge for the
change in estimated fair value of certain other components of the proposed
asbestos settlement liability.
(c) Amount reflects a $73 million tax benefit from the release of our valuation
allowance on certain deferred tax assets in Germany and a $10 million tax
benefit from the release of our valuation allowance on Australian tax
benefits.
(d) Amount reflects the following items which increased Corning's equity
earnings by $40 million (net) in 2006: an impairment charge for certain
long-lived assets of Samsung Corning; the impact of Samsung Corning's
establishment of a valuation allowance against certain deferred tax assets;
a gain on the sale of land at Samsung Corning; and Corning's share of a
favorable tax settlement from the completion of an IRS examination at Dow
Corning.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Year Ended December 31, 2005
(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, 2005 are non-GAAP financial measures within the
meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP
financial measures are not in accordance with, or an alternative to, generally
accepted accounting principles (GAAP). The company believes presenting non-GAAP
net income and EPS is helpful to analyze financial performance without the
impact of unusual items that may obscure trends in the company's underlying
performance. A detailed reconciliation is provided below outlining the
differences between these non-GAAP measures and the directly related GAAP
measure.
--------------------------------------------------------------------------------
Per Income (Loss) Before Net
Share Income Taxes Income (Loss)
------- -------------------- -------------
Earnings per share (EPS) and net income,
excluding special items $ 0.86 $ 755 $ 1,323
Special items:
Restructuring, impairment, and other (charges) and credits (a) 0.02 38 34
Asbestos settlement (b) (0.14) (218) (218)
Loss on repurchases and retirement of debt, net (c) (0.01) (16) (16)
(Provision) benefit for income taxes (d) (0.29) (443)
Equity in earnings of affiliated companies, net of impairments (e) (0.06) (95)
------- ------- --------
Total EPS and net income $ 0.38 $ 559 $ 585
======= ======= ========
(a) Amount reflects the following items: a gain of $84 million (before- and
after-tax) for the reversal of the cumulative translation account of a
wholly-owned foreign subsidiary that was substantially liquidated; an
impairment charge of $25 million (before- and after-tax) for the
other-than-temporary decline in our investment in Avanex below its cost
basis; and net charges of $38 million ($34 million after-tax and minority
interest) for restructuring costs primarily associated with the
Telecommunications segment.
(b) As a result of Corning's proposed asbestos settlement, any changes in the
estimated fair value of the components of the proposed settlement agreement
will be recognized in Corning's quarterly results until the date of the
contribution to the settlement trust. For 2005, Corning recorded a charge
of $218 million (before- and after-tax) including $197 million for the
change in Corning's common stock price of $19.66 at December 31, 2005,
compared to $11.77 at December 31, 2004, and a $21 million charge for the
change in estimated fair value of certain other components of the proposed
asbestos settlement liability.
(c) Corning recorded a loss of $16 million (before- and after-tax) associated
with the cash redemption of $377 million principal amount of debentures.
(d) Amount reflects a net $443 million charge to tax expense in 2005 which was
primarily to increase the valuation allowance against deferred tax assets
resulting from our conclusion that the sale of an appreciated asset no
longer met the criteria for a viable tax planning strategy.
(e) Amount is primarily the result of Corning's $106 million share of an
impairment charge taken by Samsung Corning Co., Ltd., a South Korea-based
manufacturer of glass panels and funnels for cathode ray tube television
and display monitors, for certain of its manufacturing assets and severance
and exit costs.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Five Years Ended December 31, 2006
(Unaudited; amounts in millions)
--------------------------------------------------------------------------------
Corning's comment, "This was fourth consecutive year that we recorded
significant improvement in the company's profitability..." includes a non-GAAP
financial measure within the meaning of Regulation G of the Securities and
Exchange Commission. Non-GAAP financial measures are not in accordance with, or
an alternative to, generally accepted accounting principles (GAAP). The company
believes presenting non-GAAP 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, -----------------------------------
-------------------------------------------- 2006 2005 2004 2003
2006 2005 2004 2003 2002 vs. 2005 vs. 2004 vs. 2003 vs. 2002
---- ---- ---- ---- ---- -------- -------- -------- --------
Net income, excluding special items $1,785 $1,323 $ 692 $ 140 $ (392) $ 462 $631 $552 $532
===== ==== ==== ====
Special items:
Restructuring, impairment, and
other (charges) and credits (a) (44) 34 (1,802) (26) (1,462)
Asbestos settlement (b) 2 (218) (59) (332)
(Loss) gain on repurchases and
retirement of debt, net (c) (11) (16) (34) 12 108
(Provision) benefit for income taxes (d) 83 (443) (992)
Equity in earnings of affiliated
companies, net of impairments (e) 40 (95) (56) (74) (34)
Income from discontinued operations (f) 20 478
------ ------ -------- ------ -------
Net income (loss) $1,855 $ 585 $ (2,231) $ (280) $(1,302)
====== ====== ======== ====== =======
2006 Special Items:
(a) Amount represents a $44 million asset impairment charge for certain
long-lived assets in our Telecommunications segment.
(b) As a result of Corning's proposed asbestos settlement, any changes in the
estimated fair value of the components of the proposed settlement agreement
will be recognized in Corning's quarterly results until the date of the
contribution to the settlement trust. For 2006, Corning recorded a credit
of $2 million (before- and after-tax) including a credit of $24 million for
the change in Corning's common stock price of $18.71 at December 31, 2006,
compared to $19.66 at December 31, 2005 and a $22 million charge for the
change in estimated fair value of certain other components of the proposed
asbestos settlement liability.
(d) Amount reflects a $73 million tax benefit from the release of our valuation
allowance on certain deferred tax assets in Germany and a $10 million tax
benefit from the release of our valuation allowance on Australian tax
benefits.
(e) Amount reflects the following items which increased Corning's equity
earnings by $40 million (net) in 2006: an impairment charge for certain
long-lived assets of Samsung Corning; the impact of Samsung Corning's
establishment of a valuation allowance against certain deferred tax assets;
a gain on the sale of land at Samsung Corning; and Corning's share of a
favorable tax settlement from the completion of an IRS examination at Dow
Corning.
2005 Special Items:
(a) Amount reflects the following items: a gain of $84 million (before- and
after-tax) for the reversal of the cumulative translation account of a
wholly-owned foreign subsidiary that was substantially liquidated; an
impairment charge of $25 million (before- and after-tax) for the
other-than-temporary decline in our investment in Avanex below its cost
basis; and net charges of $38 million ($34 million after-tax and minority
interest) for restructuring costs primarily associated with the
Telecommunications segment.
(b) As a result of Corning's proposed asbestos settlement, any changes in the
estimated fair value of the components of the proposed settlement agreement
will be recognized in Corning's quarterly results until the date of the
contribution to the settlement trust. For 2005, Corning recorded a charge
of $218 million (before- and after-tax) including $197 million for the
change in Corning's common stock price of $19.66 at December 31, 2005,
compared to $11.77 at December 31, 2004, and a $21 million charge for the
change in estimated fair value of certain other components of the proposed
asbestos settlement liability.
(c) Corning recorded a loss of $16 million (before- and after-tax) associated
with the cash redemption of $377 million principal amount of debentures.
(d) Amount reflects a net $443 million charge to tax expense in 2005 which was
primarily to increase the valuation allowance against deferred tax assets
resulting from our conclusion that the sale of an appreciated asset no
longer met the criteria for a viable tax planning strategy.
(e) Amount is primarily the result of Corning's $106 million share of an
impairment charge taken by Samsung Corning Co., Ltd., a South Korea-based
manufacturer of glass panels and funnels for cathode ray tube television
and display monitors, for certain of its manufacturing assets and severance
and exit costs.
2004 Special Items:
(a) Corning recorded charges $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 a result of Corning's proposed asbestos settlement, any changes in the
estimated fair value of the components of the proposed settlement agreement
will be recognized in Corning's quarterly results until the date of the
contribution to the settlement trust. For 2004, Corning recorded a charge
of $65 million ($59 million after-tax) including $33 million ($30 million
after-tax) for the change in Corning's common stock price of $11.77 at
December 31, 2004, compared to $10.43 at December 31, 2003, and a $32
million ($29 million after-tax) charge for the change in estimated fair
value of certain other components of the proposed asbestos settlement
liability.
(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 $992
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.
2003 Special Items:
(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 a result of Corning's proposed asbestos settlement, any changes in the
estimated fair value of the components of the proposed settlement agreement
will be recognized in Corning's quarterly results until the date of the
contribution to the settlement trust. For 2003, this charge includes the
initial liability based on the terms of the settlement agreement ($298
million or $190 million after-tax) plus a charge of $115 million pre-tax
($73 million after-tax) for the change in Corning's common stock price of
$10.43 at December 31, 2003, compared to $5.84 at the settlement
arrangement date, and a $122 million pre-tax ($69 million after-tax) charge
for the change in estimated fair value of certain other components of the
proposed asbestos settlement liability from the settlement arrangement
date.
(c) During 2003, Corning retired a significant portion of long-term debt,
resulting in a gain of $19 million ($12 million after-tax).
(e) This amount primarily reflects our portion of asset impairment charges
recorded by our equity method investment, Samsung Corning Co., Ltd.
2002 Special Items:
(a) 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).
(e) This amount reflects charges for impairments of certain equity method
investments in Corning's Telecommunications segment.
(f) 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
Year Ended December 31, 2006 - Impact of Adoption of Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R)
(Unaudited; amounts in millions, except per share amounts)
--------------------------------------------------------------------------------
Corning's stock compensation expense resulting from the adoption of SFAS 123R
for the fourth quarter of 2006 is a non-GAAP financial measure within the
meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP
financial measures are not in accordance with, or an alternative to, generally
accepted accounting principles (GAAP). The company believes presenting this
non-GAAP measure 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.
--------------------------------------------------------------------------------
Expense Per Share
------- ---------
Stock compensation expense resulting from the
adoption of SFAS 123R $ 81 $ 0.05
Other stock compensation, the measurement of which
was not impacted by the adoption of SFAS 123R 46 N/A
-----
Total stock compensation $ 127 N/A
=====
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Telecommunications Segment
(Unaudited; amounts in millions)
--------------------------------------------------------------------------------
Corning's comment, "The Telecommunications segment also improved profitability,
before special items, for a second consecutive year." includes a non-GAAP
financial measure within the meaning of Regulation G of the Securities and
Exchange Commission. Non-GAAP financial measures are not in accordance with, or
an alternative to, generally accepted accounting principles (GAAP). The company
believes presenting 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.
--------------------------------------------------------------------------------
Telecommunications Segment Net Income Improvement
For the years ended December 31, --------------------
-------------------------------------- 2006 2005
2006 2005 2004 vs. 2005 vs. 2004
---- ---- ---- -------- --------
Net income (loss), excluding special items $ 51 $ 21 $ (39) $30 $60
=== ===
Special items:
Restructuring, impairment, and other
(charges) and credits (a) (44) 47 (1,800)
Equity in earnings of affiliated
companies, net of impairments (b) (35)
------ ------- --------
Telecommunications segment net income (loss) $ 7 $ 68 $ (1,874)
====== ======= ========
2006 Special Items:
(a) Amount represents a $44 million asset impairment charge for certain
long-lived assets in our Telecommunications segment.
2005 Special Items:
(a) Amount reflects the following items: a gain of $84 million (before- and
after-tax) for the reversal of the cumulative translation account of a
wholly-owned foreign subsidiary that was substantially liquidated and net
charges of $37 million (pretax and after-tax and minority interest) for
restructuring costs associated with the Telecommunications segment.
2004 Special Items:
(a) Corning recorded charges $1.798 billion ($1.800 billion after-tax and
minority interest) related to the impairment of goodwill and fixed assets
in the Telecommunications segment.
(b) This amount reflects charges of $35 million for impairments of certain
non-strategic equity method investments in Corning's Telecommunications
segment.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Three Months and Year Ended December 31, 2006
(Unaudited; amounts in millions)
--------------------------------------------------------------------------------
Corning's free cash flow financial measure for the three months and year ended
December 31, 2006 is a non-GAAP financial measure within the meaning of
Regulation G of the Securities and Exchange Commission. Non-GAAP financial
measures are not in accordance with, or an alternative to, generally accepted
accounting principles (GAAP). The company believes presenting non-GAAP financial
measures are helpful to analyze financial performance without the impact of
unusual items that may obscure trends in the company's underlying performance. A
detailed reconciliation is provided below outlining the differences between this
non-GAAP measure and the directly related GAAP measure.
--------------------------------------------------------------------------------
Three
months ended Year ended
December 31, 2006 December 31, 2006
----------------- -----------------
Cash flows from operating activities $ 628 $ 1,803
Less: Cash flows from investing activities (467) (2,181)
Plus: Short-term investments - acquisitions 551 2,894
Less: Short-term investments - liquidations (373) (1,976)
----------- ------------
Free cash flow $ 339 $ 540
=========== ============
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Three Months Ended March 31, 2007
(Unaudited; amounts in millions, except per share amounts)
--------------------------------------------------------------------------------
Corning's earnings per share (EPS) excluding special items for the first quarter
of 2007 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 $0.24 $0.27
Special items:
Restructuring, impairment, and other
(charges) and credits (a)
Asbestos settlement (b)
----- -----
Earnings per share
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This schedule will be updated as additional announcements occur.
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(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, if the reorganization plan is approved, 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 2007, Corning will record a charge or credit
for the change in its common stock price as of March 31, 2007 compared to
$18.71, the common stock price at December 31, 2006. In addition, Corning
will record an adjustment to the asbestos liability to reflect the change
in fair value of any of the other components of the proposed asbestos
settlement.
Please note that the company may pursue other financing, restructuring and
divestiture activities at any time in the future, and that the potential impact
of these events is not included within Corning's first quarter 2007 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.