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, 2006
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
Item 7.01. Regulation FD Disclosure
The Corning Incorporated press release dated January 24, 2006, regarding its
financial results for the fourth quarter ended December 31, 2005 and its first
quarter 2006 earnings guidance, is attached hereto as Exhibit 99.
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 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, 2006, 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, 2006 By /s/ KATHERINE A. ASBECK
-------------------------------
Katherine A. Asbeck
Senior Vice President - Finance
Exhibit 99
FOR RELEASE -- JANUARY 24, 2006
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
CORNING, N.Y. -- Corning Incorporated (NYSE:GLW) today announced fourth-quarter
sales of $1.2 billion and a net loss of $32 million, or $0.02 per share. The net
loss includes net special charges of $371 million, or $0.24 per share.
Excluding these special charges, Corning's fourth-quarter net income would have
been $339 million, or $0.22 per share. These are non-GAAP financial measures.
These and all non-GAAP financial measures are reconciled on the company's
investor relations Web site and in attachments to this news release.
Wendell P. Weeks, president and chief executive officer, said, "Our solid
fourth-quarter performance ended 2005 on a very positive note for Corning. We
again met our quarterly sales and EPS guidance before special items, our gross
margin remained strong and equity earnings contributed significantly to our
positive results."
Corning's fourth-quarter results were impacted by net after-tax special charges
of $371 million which primarily included the following non-cash items:
. A $443 million tax-expense charge primarily to increase the valuation
allowance against Corning's U.S. deferred tax assets. This charge reduced
Corning's net deferred tax assets to zero.
. A pretax and after-tax gain of $84 million related to the release of
translation capital in the final liquidation of a wholly owned foreign
subsidiary.
Full-Year Operating Results
For the full year, Corning recorded sales of $4.58 billion, an increase of 19
percent over 2004 sales of $3.85 billion. The increase was the result of strong
growth in Display Technologies and more modest increases in the
Telecommunications and Environmental Technologies segments. The company had net
income of $585 million or $0.38 per share versus a net loss of $2.17 billion or
$1.56 per share in 2004. Corning's 2005 and 2004 net income included significant
net special charges. Excluding these charges, Corning's earnings for 2005
increased to $1.3 billion or $0.85 per share compared to $674 million or $0.45
per share in 2004. These are non-GAAP financial measures.
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Corning Announces Fourth-Quarter Results
Page Two
"This past year was extremely gratifying for our shareholders, our employees and
our management team," Weeks said. "This was the third consecutive year in which
we improved our profitability before special items by half a billion dollars.
This increase in profitability - combined with the improvement in our free cash
flow, the strength of our balance sheet and our ability to improve our
market-leading positions in liquid crystal display glass, diesel emissions
products and fiber-to-the-premises products - resulted in a 67-percent
year-over-year increase in the valuation of Corning common stock," he said.
Profitability before special items and free cash flow are non-GAAP financial
measures.
Fourth-Quarter Operating Results
Corning's fourth-quarter sales increased 16 percent to $1.2 billion from $1.03
billion in 2004, and increased slightly over 2005 third-quarter sales of $1.19
billion. Fourth-quarter gross margins for the company continued to be strong at
44 percent.
Equity earnings for the fourth quarter were $186 million reflecting growth at
Samsung Corning Precision Glass Co., Ltd. (SCP), and lower results at Dow
Corning Corporation due to expansion spending, unfavorable foreign exchange
rates and seasonality. Third-quarter equity earnings included an impairment
charge of $106 million at Samsung Corning Co., Ltd. a Korean manufacturer of
glass panels and funnels for cathode ray tube (CRT) television and computer
monitors.
Fourth-quarter sales for Corning's Display Technologies segment were $518
million, a 67-percent increase over 2004 fourth-quarter sales of $311 million.
Fourth-quarter year-over-year liquid crystal display (LCD) glass volume
increases of about 90 percent were partially offset by unfavorable exchange
rates and price declines of 5 percent. Sequentially, fourth-quarter sales
increased 6 percent over third-quarter sales of $489 million and LCD glass
volume increased 14 percent. Pricing was off slightly from the third quarter
while exchange rates in the fourth quarter had a 6-percent negative impact on
sales.
Samsung Corning Precision, a 50-percent owned equity venture in Korea which
manufactures LCD glass substrates, increased its volume by 9 percent
sequentially. Equity earnings from SCP increased to $129 million versus $114
million in the third quarter. About half of the increase was related to a
dividend tax adjustment in the fourth quarter.
Net income for the Display Technologies segment, which includes results of
Corning's wholly owned business and equity earnings from SCP, declined about 10
percent to $328 million in the fourth quarter, compared to $363 million in the
third quarter. This was primarily due to a slightly lower gross margin percent,
higher effective tax rates and higher operating expenses offset by higher
earnings from SCP.
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Corning Announces Fourth-Quarter Results
Page Three
Weeks said, "Sales of flat panel desktop monitors and notebook computers have
driven the industry growth for several years. But the biggest dynamic to emerge
this past year has been LCD televisions, which appear to have captured more than
10 percent of the total TV market in 2005. Going forward, LCD TV will
increasingly impact the growth rate of the LCD industry."
Fourth-quarter Telecommunications segment sales declined by 4 percent to $383
million from $398 million in the third quarter. The decline was due in part to
normal seasonality, somewhat offset by an increase in fiber-to-the-premises
(FTTP) sales.
In the fourth quarter, Environmental Technologies segment sales of $142 million
were about even with third-quarter sales of $144 million. Life Sciences segment
fourth-quarter sales were $63 million, a decline of 10 percent compared to the
third quarter. The decline was due to normal seasonality and a distributor
inventory reduction during the quarter.
Cash Flow/Liquidity Update
James B. Flaws, vice chairman and chief financial officer, said, "We ended the
year with $2.4 billion in cash and $1.8 billion in debt. Despite spending $1.55
billion in capital primarily to support LCD expansions, we had free cash flow
for the full year of $443 million, driven by strong operating performance and
customer deposits. Our debt-to-capital ratio was 24 percent at the end of the
year, driven primarily by a reduction of $885 million in our outstanding debt
balance. This was a significant improvement compared to last year's ratio of 41
percent.
"The overall operating performance of our businesses was solid and we completed
our balance sheet improvement program," he said. "This was the first time in
more than 25 years that Corning was able to end the year with more cash on hand
than debt on our books." Free cash flow is a non-GAAP financial measure.
First-Quarter Outlook
Corning said that it expects first-quarter sales to be in the range of $1.2
billion to $1.25 billion and EPS in the range of $0.21 to $0.23 before special
items. This EPS estimate is a non-GAAP financial measure and it excludes any
possible special items. Corning said that it will begin expensing employee stock
options in 2006 and that the EPS range of $0.21 to $0.23 includes about $0.01
related to this new expense in the first quarter. The gross margin percent for
the first quarter is expected to be comparable to the fourth quarter of 2005.
The company also expects that its effective tax rate for the first quarter will
be in the range of 20 percent to 25 percent.
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Corning Announces Fourth-Quarter Results
Page Four
In the Display Technologies segment, the company is anticipating that its
first-quarter sequential volume growth will be in the range of 3 percent to 8
percent. The company expects its wholly owned business will see quarterly volume
growth in the range of 5 percent to 10 percent and Samsung Corning Precision's
volume growth will be in the range of flat to up 5 percent. Corning said that
price reductions in the first quarter will be more significant than the company
has experienced in recent quarters. The company expects sequential quarterly
price declines to be more in line with historical levels for the remainder of
the year.
"We believe that increased volume and manufacturing cost efficiencies could
allow us to offset the impact of price declines and lead to a first-quarter
gross margin percent comparable to the fourth quarter of last year," Flaws said.
Corning noted, as it has in the past, that industry supply chain fluctuations
could influence the company's results in any given quarter.
"We expect to be able to build off last year's very successful LCD glass
performance and we anticipate continued volume growth. Our new Taichung, Taiwan
LCD facility is now operating and we will continue to meet the rising volume
demand for larger-generation substrates. There are growing indications in the
marketplace that LCD TV retail prices will fall over time, spurring increased
demand for our larger-generation size substrates," Flaws said.
Corning's Telecommunications segment first-quarter sales are expected to be
comparable to 2005 fourth-quarter sales. First-quarter seasonal volume gains
will be offset by annual price declines. The company's Environmental
Technologies segment sales are expected to be up slightly on a sequential basis
and sales in the Life Sciences segment are expected to increase in the first
quarter.
The company expects equity earnings from Dow Corning to be up 20 percent to 30
percent compared to the seasonally low fourth-quarter 2005 results.
Weeks said, "Our first-quarter performance should be in line with last quarter's
results, even as we factor in the impact of stock option expensing this quarter.
We expect 2006 to be another strong year for Corning."
Fourth-Quarter Conference Call Information
The company will host a fourth-quarter conference call at 8:30 a.m. EST on
Wednesday, Jan. 25. To access the call, dial (210) 234-0002. The password is
results. The leader is Sofio. A replay of the call will begin at approximately
10:30 a.m. EST, and will run through 5:00 p.m. EST, Wednesday, Feb. 8. To
listen, dial (402) 220-9657, no pass code is required. To listen to a live audio
webcast of the call, 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.
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Corning Announces Fourth-Quarter Results
Page Five
Annual Investor Meeting
Corning will hold its annual investor meeting at the Mandarin Oriental Hotel in
New York City on Friday, Feb. 3. Investors who are interested in attending
should register prior to the event at www.corning.com/investor_relations.
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 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. The company believes
presenting a non-GAAP EPS measure is helpful to analyze financial performance
without the impact of unusual items that may obscure trends in the company's
underlying performance. This non-GAAP measure is reconciled on the company's Web
site at www.corning.com/investor_relations and accompanies 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 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
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Corning Announces Fourth-Quarter Results
Page Six
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)
Three months ended Year ended
December 31, December 31,
------------------------ ------------------------
2005 2004 2005 2004
--------- -------- --------- ---------
Net sales $ 1,200 $ 1,033 $ 4,579 $ 3,854
Cost of sales 673 668 2,595 2,439
--------- -------- --------- ---------
Gross margin 527 365 1,984 1,415
Operating expenses:
Selling, general and administrative expenses 203 174 756 653
Research, development and engineering expenses 123 98 443 355
Amortization of purchased intangibles 2 10 13 38
Restructuring, impairment and other (credits)
charges (Note 1) (84) (5) (38) 1,789
Asbestos settlement (Note 2) 8 17 197 33
--------- -------- --------- ---------
Operating income (loss) 275 71 613 (1,453)
Interest income 21 9 61 25
Interest expense (26) (32) (116) (141)
Loss on repurchases and retirement of debt, net (Note 3) (4) (16) (36)
Other income, net 2 19 30 25
--------- -------- --------- ---------
Income (loss) from continuing operations before
income taxes 268 67 572 (1,580)
Provision for income taxes (Note 4) (487) (34) (578) (1,031)
--------- -------- --------- ---------
(Loss) income from continuing operations before
minority interests and equity earnings (219) 33 (6) (2,611)
Minority interests 1 (3) (7) (17)
Equity in earnings of associated companies, net of
impairments 186 133 598 443
--------- -------- --------- ---------
(Loss) income from continuing operations (32) 163 585 (2,185)
Income from discontinued operation 20
--------- -------- --------- ---------
Net (loss) income $ (32) $ 163 $ 585 $ (2,165)
========= ======== ========= =========
Basic (loss) earnings per common share from:
Continuing operations $ (0.02) $ 0.12 $ 0.40 $ (1.57)
Discontinued operation 0.01
--------- -------- --------- ---------
Basic (loss) earnings per common share $ (0.02) $ 0.12 $ 0.40 $ (1.56)
========= ======== ========= =========
Diluted (loss) earnings per common share from:
Continuing operations $ (0.02) $ 0.11 $ 0.38 $ (1.57)
Discontinued operation 0.01
--------- -------- --------- ---------
Diluted (loss) earnings per common share $ (0.02) $ 0.11 $ 0.38 $ (1.56)
========= ======== ========= =========
See accompanying notes to these financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
December 31,
--------------------------------
2005 2004
----------- -------------
Assets
Current assets:
Cash and cash equivalents $ 1,342 $ 1,009
Short-term investments, at fair value 1,092 872
--------- ---------
Total cash, cash equivalents and short-term investments 2,434 1,881
Trade accounts receivable, net 629 585
Inventories 570 535
Deferred income taxes 44 92
Other current assets 183 188
--------- ---------
Total current assets 3,860 3,281
Investments 1,697 1,484
Property, net 4,675 3,941
Goodwill and other intangible assets, net 338 398
Deferred income taxes 10 440
Other assets 595 166
--------- ---------
Total Assets $ 11,175 $ 9,710
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings, including current portion of long-term debt $ 18 $ 478
Accounts payable 690 682
Other accrued liabilities 1,508 1,176
--------- ---------
Total current liabilities 2,216 2,336
Long-term debt 1,789 2,214
Postretirement benefits other than pensions 593 600
Other liabilities 925 715
--------- ---------
Total liabilities 5,523 5,865
--------- ---------
Commitments and contingencies
Minority interests 43 29
--------- ---------
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: 0 and 637 thousand 64
Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion;
Shares issued: 1,552 million and 1,424 million 776 712
Additional paid-in capital 11,548 10,363
Accumulated deficit (6,724) (7,309)
Treasury stock, at cost; Shares held: 16 million (168) (162)
Accumulated other comprehensive income 177 148
--------- ---------
Total shareholders' equity 5,609 3,816
--------- ---------
Total Liabilities and Shareholders' Equity $ 11,175 $ 9,710
========= =========
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 Dec. 31,
---------------------------- ------------------------
Dec. 31, 2005 Sept. 30, 2005 2005 2004
------------- -------------- --------- ---------
Cash Flows from Operating Activities:
Net (loss) income $ (32) $ 203 $ 585 $(2,165)
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation 126 127 499 485
Amortization of purchased intangibles 2 3 13 38
Asbestos settlement 8 68 197 33
Gain on sale of discontinued operation (20)
Restructuring, impairment and other (credits) and charges (84) 28 (38) 1,789
Loss on repurchases and retirement of debt 4 16 36
Stock compensation charges 8 8 29 8
Undistributed earnings of associated companies (101) (70) (297) (303)
Deferred taxes 436 (18) 425 947
Interest expense on convertible debentures (26) (23) 4
Restructuring payments (3) (6) (25) (85)
Decrease in restricted cash 13 22 34
Customer deposits, net 55 144 428 204
Employee benefit payments (in excess of)
less than expense (10) 15 34 (19)
Changes in certain working capital items:
Trade accounts receivable 1 11 (77) (40)
Inventories (16) (7) (62) (68)
Other current assets 20 26 6 (7)
Accounts payable and other current liabilities, net of
restructuring payments 204 38 113 143
Other, net 67 12 94 (5)
-------- -------- -------- -------
Net cash provided by operating activities 659 595 1,939 1,009
-------- -------- -------- -------
Cash Flows from Investing Activities:
Capital expenditures (477) (378) (1,553) (857)
Net proceeds from sale of businesses 100
Net proceeds from sale or disposal of assets 1 18 49
Short-term investments - acquisitions (355) (610) (1,668) (1,685)
Short-term investments - liquidations 289 401 1,452 1,389
Other, net 27 2 39 12
-------- -------- -------- -------
Net cash used in investing activities (516) (584) (1,712) (992)
-------- -------- -------- -------
Cash Flows from Financing Activities:
Net repayments of short-term borrowings and current
portion of long-term debt (253) (3) (451) (115)
Proceeds from issuance of long-term debt, net 147 442
Repayments of long-term debt (102) (154)
Proceeds from issuance of common stock, net 9 9 365 42
Proceeds from the exercise of stock options 60 83 202 49
Other, net (2) (3) (14) 1
-------- -------- -------- -------
Net cash (used in) provided by financing activities (186) 86 147 265
-------- -------- -------- -------
Effect of exchange rates on cash (10) (3) (41) 39
-------- -------- -------- -------
Net (decrease) increase in cash and cash equivalents (53) 94 333 321
Cash and cash equivalents at beginning of period 1,395 1,301 1,009 688
-------- -------- -------- -------
Cash and cash equivalents at end of period $ 1,342 $ 1,395 $ 1,342 $ 1,009
======== ======== ======== =======
Certain amounts for 2004 were reclassified to conform to 2005 presentation.
See accompanying notes to these 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
------------ ----------- ------------- -------- ----------- ------------
Three months ended December 31, 2005
Net sales $ 518 $ 383 $ 142 $ 63 $ 94 $ 1,200
Research, development and engineering
expenses (1) $ 37 $ 25 $ 30 $ 15 $ 16 $ 123
Restructuring, impairment and other (credits)
and charges $ (84) $ (84)
Interest expense (2) $ 15 $ 5 $ 5 $ 1 $ 26
(Provision) benefit for income taxes $ (57) $ 3 $ 5 $ 3 $ (441) $ (487)
Income (loss) before minority interests and
equity earnings (3) $ 197 $ 70 $ (15) $ (12) $ (459) $ (219)
Minority interests (4) 1 1
Equity in earnings of associated companies,
net of impairments (5) 131 (1) 56 186
------- ------- -------- -------- -------- --------
Net income (loss) $ 328 $ 70 $ (15) $ (12) $ (403) $ (32)
======= ======= ======== ======== ======== ========
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
======= ======= ======== ======== ======== ========
Year ended December 31, 2005
Net sales $ 1,742 $ 1,623 $ 580 $ 282 $ 352 $ 4,579
Research, development and engineering
expenses (1) $ 121 $ 96 $ 114 $ 53 $ 59 $ 443
Restructuring, impairment and other (credits)
and charges $ (47) $ 9 $ (38)
Interest expense (2) $ 55 $ 30 $ 20 $ 4 $ 7 $ 116
(Provision) benefit for income taxes $ (151) $ 4 $ 7 $ 6 $ (444) $ (578)
Income (loss) before minority interests and
equity earnings (3) $ 679 $ 29 $ (26) $ (25) $ (663) $ (6)
Minority interests (4) 2 (9) (7)
Equity in earnings of associated companies,
net of impairments (5) 416 5 177 598
------- ------- -------- -------- -------- --------
Net income (loss) $ 1,095 $ 36 $ (26) $ (25) $ (495) $ 585
======= ======= ======== ======== ======== ========
Display Telecom- Environmental Life Unallocated Consolidated
Technologies munications Technologies Sciences and Other Total
------------ ----------- ------------- -------- ----------- ------------
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)
======= ======= ======== ======== ======== ========
(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.
(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 reflect the following restructuring, impairment and
other charges and (credits):
. In 2005, gains of $4 million for adjustments to prior years'
restructuring and impairment reserves associated with Corning Asahi
Video Products Company (CAV).
. In 2004, gains from the sale of CAV assets in excess of assumed
salvage value of $17 million, and reversals of CAV severance reserves
of $2 million.
(5) Equity in earnings of associated companies includes the following
restructuring and impairment charges:
. In 2005, a $106 million charge representing Corning's share of Samsung
Corning's impairment of certain manufacturing assets and other
charges.
. In the second quarter of 2005, Dow Corning Corporation recorded a gain
on the issuance of subsidiary stock. Our equity earnings included $11
million related to this gain.
. In 2004, $35 million of charges to impair equity method investments in
the Telecommunications segment to their estimated fair value.
. 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.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
A reconciliation of reportable segment net income (loss) to consolidated net income (loss) follows (in millions):
Three months ended Year ended
December 31, December 31,
------------------------ ------------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Net income (loss) of reportable segments $ 371 $ 136 $ 1,080 $ (1,331)
Non-reportable operating segments net (loss) income (1) (4) 6 (100) 16
Unallocated amounts:
Non-segment loss and other (2) (14) (3) (21) (13)
Non-segment restructuring, impairment and
other (charges) and credits (3) (1) (25) 4
Asbestos settlement (8) (17) (197) (33)
Interest income 21 9 61 25
Loss on repurchases of debt (4) (16) (36)
Provision for income taxes (4) (444) (2) (451) (933)
Equity in earnings of associated companies (5) 50 35 254 116
Income from discontinued operations 20
--------- --------- --------- ---------
Net (loss) income $ (32) $ 163 $ 585 $ (2,165)
========= ========= ========= =========
(1) Non-reportable operating segments net (loss) income includes the results of
non-reportable operating segments. In 2005, we recorded a charge of $106
million for our share of Samsung Corning's impairment of certain
manufacturing assets and other charges for severance and exit costs.
(2) Non-segment loss and other includes the results of non-segment operations
and other corporate activities.
(3) For 2005, non-segment restructuring, impairment and other (charges) and
credits includes impairment charges for the other than temporary decline in
the market value of Avanex shares.
(4) Provision for income taxes includes tax associated with non-segment
restructuring, impairment and other (charges) and credits. We recognized a
net $443 million charge to tax expense in 2005 which was primarily to
increase the valuation allowance against deferred tax assets. In 2004, we
increased our valuation allowance by $937 million. Refer to Note 4
(Provision for Income Taxes).
(5) Equity in earnings of associated companies includes equity earnings in Dow
Corning Corporation.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Restructuring, Impairment and Other Charges and (Credits)
In the fourth quarter of 2005, we recorded a gain of $84 million (pretax and
after-tax) for the reversal of the cumulative translation account of O.T.I.
S.r.l. (OTI), a wholly-owned foreign subsidiary of Corning, upon OTI's
substantial liquidation. The photonics' business in Milan, Italy, was the sole
operation of OTI, whose results were included in the Telecommunications segment.
Subsequent to Corning's agreement to sell its photonics business operations to
Avanex in 2003, Corning began liquidating OTI. In October 2005, the assets were
substantially liquidated and OTI's cumulative translation account was reversed.
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 if the PCC plan of reorganization is approved and becomes
effective. 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 $8 million (pretax and after-tax) in the fourth quarter
of 2005 reflecting the increase in Corning's common stock from September 30,
2005 to December 31, 2005. Beginning with the first quarter of 2003, we have
recorded total net charges of $643 million to reflect the initial settlement and
to mark-to-market the value of our common stock.
3. Loss on Repurchases and Retirement of Debt, Net
In the fourth quarter of 2005, we redeemed for cash the $277 million principal
amount of our zero coupon convertible debentures. We recognized a loss of $4
million (pretax and after-tax) on this transaction.
4. Provision for Income Taxes
In the fourth quarter of 2005, we recognized a net $443 million tax expense
charge which was primarily to increase the valuation allowance against deferred
tax assets. This adjustment resulted primarily from our conclusion that the sale
of an appreciated asset was no longer prudent, and correspondingly, no longer
met the criteria for a viable tax planning strategy in Statement of Financial
Accounting Standard No. 109, Accounting for Income Taxes. In 2004, we increased
our valuation allowance by $937 million.
5. Weighted Average Shares Outstanding
Our weighted average shares outstanding are as follows (in millions):
Three months ended Year ended
December 31, December 31,
------------------ ---------------
2005 2004 2005 2004
---- ---- ---- ----
Basic 1,524 1,404 1,464 1,386
Diluted 1,524 1,510 1,535 1,386
Diluted used for non-GAAP measures 1,571 1,510 1,539 1,497
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
QUARTERLY SALES INFORMATION
(Unaudited; in millions)
2005
-------------------------------------------------------------
Three Months Ended
------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31 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
======== ======== ======= ======= ========
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
Automotive 125 121 120 113 479
Diesel 16 20 16 17 69
-------- -------- ------- ------- --------
141 141 136 130 548
Life Sciences 79 79 75 71 304
Other 82 82 88 98 350
-------- -------- ------- ------- --------
Total $ 844 $ 971 $ 1,006 $ 1,033 $ 3,854
======== ======== ======= ======= ========
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, 2005
(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 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 Before Net
Share Income Taxes Income (Loss)
------- ------------- -------------
Earnings per share (EPS) and net income,
excluding special items $ 0.22 $ 196 $ 339
Special items:
Restructuring, impairment and other (charges) and credits (a) 0.05 84 84
Asbestos settlement (b) (0.01) (8) (8)
Loss on repurchases and retirements of debt, net (c) (4) (4)
Provision for taxes (d) (0.28) (443)
------- ------- -------
Total EPS and net income (loss) $ (0.02) $ 268 $ (32)
======= ======= =======
(a) Corning recorded 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.
(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 2005, Corning recorded a charge of $8 million for the
change in its common stock price of $19.66 at December 31, 2005 compared to
$19.33 the common stock price at September 30, 2005.
(c) Corning recorded a loss of $4 million (before- and after-tax) for the cash
redemption of $277 million principal amount of zero-coupon convertible
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.
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
measures.
--------------------------------------------------------------------------------
Per Income (Loss) Before Net
Share Income Taxes Income (Loss)
------- -------------------- -------------
Earnings per share (EPS) and net income,
excluding special items $ 0.85 $ 747 $ 1,302
Special items:
Restructuring, impairment and other (charges) and credits (a) 0.02 38 34
Asbestos settlement (b) (0.13) (197) (197)
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 associated companies, net of impairments (e) (0.06) (95)
------- -------- --------
Total EPS and net loss $ 0.38 $ 572 $ 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 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
2005, Corning recorded a charge of $197 million (before- and after-tax) for
the change in its common stock price of $19.66 at December 31, 2005
compared to $11.77, the common stock price at December 31, 2004.
(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
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
Three Months Ended March 31, 2006
(Unaudited; amounts in millions, except per share amounts)
--------------------------------------------------------------------------------
Corning's earnings per share (EPS) excluding special items for the first quarter
of 2006 is a non-GAAP financial measure within the meaning of Regulation G of
the Securities and Exchange Commission. Non-GAAP financial measures are not in
accordance with, or an alternative to, generally accepted accounting principles
(GAAP). The company believes presenting non-GAAP EPS is helpful to analyze
financial performance without the impact of unusual items that may obscure
trends in the company's underlying performance. A detailed reconciliation is
provided below outlining the differences between this non-GAAP measure and the
directly related GAAP measure.
--------------------------------------------------------------------------------
Range
-----------------------
Guidance: EPS excluding special items $0.21 $0.23
Special items:
Restructuring, impairment and other
(charges) and credits (a)
Asbestos settlement (b)
(Loss) gain on repurchases and
retirements of debt, net
------ ------
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 2006, Corning will record a
charge or credit for the change in its common stock price as of March 31,
2006 compared to $19.66, the common stock price at December 31, 2005.
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 2006 guidance.
This schedule contains forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward looking
statements are based on current expectations and involve certain risks and
uncertainties. Actual results may differ from those projected in the forward
looking statements. Additional information concerning factors that could cause
actual results to materially differ from those in the forward looking statements
is contained in the Securities and Exchange Commission filings of this Company.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE
Three Months and Year Ended December 31, 2005
(Unaudited; amounts in millions)
--------------------------------------------------------------------------------
Corning's free cash flow financial measures for the three months and 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 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.
--------------------------------------------------------------------------------
Three months ended Year ended
December 31, 2005 December 31, 2005
------------------ -----------------
Operating cash flow $ 659 $ 1,939
Less: Investing cash flow (516) (1,712)
Plus: Short-term investments - acquisitions 355 1,668
Less: Short-term investments - liquidations (289) (1,452)
--------- ---------
Free cash flow $ 209 $ 443
========= =========