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

 

 

 

 

 

CORNING INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

 

 

 

(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:

 

 

 

 

 

Item 2.02. Results of Operations and Financial Condition

 

The Corning Incorporated press release dated April 28, 2010 regarding its financial results for the first quarter ended March 31, 2010 are 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

 

 

 

 

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.

 

 

 

 

 

 

 

 

Exhibit 99

 

 

FOR RELEASE –– APRIL 28, 2010

 

 

 

Corning Announces First-Quarter Results

 

Sales and EPS were strong

LCD demand remains robust

 

CORNING, N.Y. — Corning Incorporated (NYSE: GLW) today announced its results for the first quarter 2010.

 

First-Quarter Highlights

 

Quarter One Financial Comparisons

*These are non-GAAP financial measures. The reconciliation between GAAP and non-GAAP measures is provided in the tables following this news release, as well as on the company’s investor relations Web site.

 

 

 

 

Corning Announces First-Quarter Results

Page Two

 

Wendell P. Weeks, chairman and chief executive officer, said, “Our first quarter was outstanding, driven by excellent results across nearly all of our major business units. We were particularly pleased with the performance in Display Technologies where we were essentially sold out. We are also encouraged by the growing market demand for Corning® Gorilla® glass for handheld and other electronic devices.”

 

First-Quarter Segment Results

Sales in the Display Technologies segment were $782 million, increasing 9% sequentially and 119% year over year. Glass prices for the quarter were down slightly and in line with expectations. Corning benefited from improved display manufacturing performance.

 

Telecommunications segment sales were $364 million, a sequential decline of 10% and in line with the company’s previous expectations. Year-over-year sales declined 5% in the quarter. Despite the quarterly sales decline, the company saw improved profitability in this segment as it began realizing operational improvements from restructuring actions taken last year. Corning had a telecommunications restructuring charge in last year’s fourth quarter.

 

Environmental Technologies segment sales were $192 million, an increase of 6% sequentially and 75% from a year ago. Sales were better than expected, resulting from higher-than-anticipated demand for auto emissions products around the world, particularly in North America and China. Profitability in the quarter was negatively impacted by higher transportation costs and manufacturing inefficiencies associated with restarting production to meet the increased demand.

 

Specialty Materials segment sales of $96 million decreased 13% sequentially, but increased 60% year over year. The business benefited by the continued popularity of Gorilla glass, now designed into 80 consumer devices across 17 major brands.

 

Life Sciences segment sales were $118 million, consistent with the previous quarter and a 55% improvement year over year. First-quarter 2009 sales do not reflect results from Axygen Bioscience, Inc., which Corning acquired in September of last year.

 

Corning’s equity earnings totaled $469 million compared to $461 million in the previous quarter and $195 million a year ago. Equity earnings from Dow Corning Corporation were $112 million versus $133 million last quarter and $5 million in the first quarter of 2009. Equity earnings included special gains of $21 million in the first quarter of 2010 and $29 million in the fourth quarter of 2009, due primarily to tax credits. Equity earnings for Samsung Corning Precision were $350 million, a sequential increase of 10% and a year-over-year improvement of 87%.

 

 

 

 

Corning Announces First-Quarter Results

Page Three

 

Corning’s first-quarter results were also positively impacted by the company’s decision to repatriate approximately $1 billion of current year earnings from certain foreign subsidiaries. This decision allows Corning to record the benefit of excess foreign tax credits which reduced the company’s effective tax rate in the quarter to 2% versus an original expectation of 10%. The difference between the new rate and the expected rate was worth approximately $64 million. Corning expects its full-year effective tax rate to be 2% as well.

 

James B. Flaws, vice chairman and chief financial officer, said, “We were very pleased with our first-quarter results. Even without the lower tax rate, EPS was significantly better than Wall Street’s expectations.” Corning generated $472 million of free cash flow* after capital expenditures of $173 million in the first quarter, versus break even a year ago. “Historically, the first quarter of the year is Corning’s worst for free cash flow, so we are delighted with this result,” he added.

 

Looking Forward

Flaws said higher-than-expected retail demand for LCD televisions, laptops, and desktop computers in quarter one, along with an improved outlook for these consumer electronic products through the remainder of the year, “have led us to increase our expectations for the annual growth of the LCD glass market. We now forecast a range of 2.9 billion square feet to 3.1 billion square feet of glass this year, up from our original expectation of 2.8 billion to 3.0 billion square feet.” This represents a year-over-year growth rate of 18% to 27%.

 

In its Display Technologies segment, Corning expects second-quarter volume will increase in the mid-single digits for both its wholly owned business and SCP. Glass price declines in the quarter should be similar to the first quarter. The company said it plans on running all available capacity by the end of quarter two to meet panel maker demand.

 

The company anticipates its second-quarter Telecommunications segment sequential sales will increase by 10% to 15%. Optical fiber and cable sales are expected to show strength across North America and China throughout the quarter. Sales of hardware and equipment and private network products are also expected to remain strong.

 

Environmental Technologies segment sequential sales will be comparable to the first quarter. Specialty Materials segment sales are anticipated to increase in the range of 15% to 25% sequentially, driven by continued growth in Gorilla glass. In the Life Sciences segment sequential sales are expected to be up 5%.

 

Equity earnings are expected to be down 3% to 5% in the second quarter, excluding the Dow Corning tax gain. Dow Corning’s equity earnings will be comparable to the first quarter despite higher costs, which include amounts for the start up of their new China operations. Samsung Corning Precision’s equity earnings could be lower by about 5% in the quarter due to fluctuations in foreign exchange rates.

 

The company’s second-quarter results could be affected by changes in the Japanese yen to U.S. dollar exchange rate. A one-point move in the yen is worth approximately $9 million in net profit after tax.

 

 

Corning Announces First-Quarter Results

Page Four

 

Corning has increased its forecast of capital expenditures to $1 billion for 2010 from the previously announced level of $600 million to $700 million. The company has restarted expansion at its Taichung (Taiwan) LCD glass facility, which was halted in late 2008 as a result of an industry-wide slowdown. Additionally, Corning is preparing to retrofit a section of its Shizuoka (Japan) LCD glass plant to meet the emerging demand for LCD TV cover glass. “We expect to secure our first customer agreement in the second quarter for this new product,” Flaws said.

 

“We are off to a very good start in 2010,” Flaws said. “However, we will remain cautious and continue to exercise tight control over spending. Our strategy of protecting the company’s long-term financial health and maintaining a high level of investment in our future through research and development has us well-positioned to capitalize on the economic recovery that appears to be taking shape,” he concluded.

 

Upcoming Meetings

Corning will present at 8:40 a.m. at the 38^th annual J.P. Morgan Global Technology, Media and Telecom Conference on May 17 at the Westin Boston Waterfront hotel, Boston, Mass.

 

First-Quarter Conference Call Information

The company will host a first-quarter conference call on Wednesday, April 28 at 8:30 a.m. ET. To participate, please call toll free (800) 230-1059 or for international access call (612) 234-9959 approximately 10-15 minutes prior to the start of the call. The password is ‘QUARTER ONE’. The host is ‘SOFIO’. To listen to a live audio webcast of the call, go to Corning’s Web site at www.corning.com/investor_relations and click Investor Events on the left. A replay will be available beginning at 10:30 a.m. ET and will run through 5:00 p.m. ET, Wednesday, May 12, 2010. To listen, dial (800) 475-6701 or for international access call (320) 365-3844. The access code is 152579. The 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 measures exclude restructuring, impairment and other charges and adjustments to prior estimates for such charges. Additionally, the company’s non-GAAP measures exclude adjustments to asbestos settlement reserves, gains and losses arising from debt retirements, charges or credits arising from adjustments to the valuation allowance against deferred tax assets, equity method charges resulting from impairments of equity method investments or restructuring, impairment or other charges taken by equity method companies and gains from discontinued operations. The company believes presenting non-GAAP net income and EPS measures is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. Reconciliation of these non-GAAP measures can be found on the company’s Web site by going to www.corning.com/investor_relations and clicking Financial Reports on the left. Reconciliation also accompanies this news release.

 

 

 

 

Corning Announces First-Quarter Results

Page Five

 

Forward-Looking and Cautionary Statements

This press release contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995), which are based on current expectations and assumptions about Corning’s financial results and business operations, that involve substantial risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: the effect of global political, economic and business conditions; conditions in the financial and credit markets; currency fluctuations; tax rates; product demand and industry capacity; competition; reliance on a concentrated customer base; manufacturing efficiencies; cost reductions; availability of critical components and materials; new product commercialization; pricing fluctuations and changes in the mix of sales between premium and non-premium products; new plant start-up or restructuring costs; possible disruption in commercial activities due to terrorist activity, armed conflict, political or financial instability, natural disasters, adverse weather conditions, 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; retention of key personnel; stock price fluctuations; and adverse litigation or regulatory developments. These and other risk factors are detailed 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.

About Corning Incorporated

Corning Incorporated (www.corning.com) is the world leader in specialty glass and ceramics. Drawing on more than 150 years of materials science and process engineering knowledge, Corning creates and makes keystone components that enable high-technology systems for consumer electronics, mobile emissions control, telecommunications and life sciences. Our products include glass substrates for LCD televisions, computer monitors and laptops; ceramic substrates and filters for mobile emission control systems; optical fiber, cable, hardware & equipment for telecommunications networks; optical biosensors for drug discovery; and other advanced optics and specialty glass solutions for a number of industries including semiconductor, aerospace, defense, astronomy and metrology.

 

 

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; in millions, except per share amounts)

 

 

 

See accompanying notes to these financial statements.

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except per share amounts)

 

 

See accompanying notes to these financial statements.

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

 

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

SEGMENT RESULTS

(Unaudited; in millions)

 

Our reportable operating segments include Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences.

 

 

 

A reconciliation of reportable segment net income to consolidated net income follows (in millions):

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

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 2003 Plan). On December 21, 2006, the Bankruptcy Court issued an order denying confirmation of the 2003 Plan. On January 10, 2008, some of the parties in the proceeding advised the Bankruptcy Court that they had made substantial progress on an amended plan of reorganization (the Amended PCC Plan) that resolved issues raised by the Court in denying the confirmation of the 2003 Plan.

 

As a result of progress in the parties’ continuing negotiations, Corning believes the Amended PCC Plan, modified as indicated below, now represents the most probable outcome of this matter and the probability that the 2003 plan will become effective has diminished. The proposed settlement under the Amended PCC Plan requires Corning to contribute its equity interest in PCC and Pittsburgh Corning Europe, N.V. (PCE) and to contribute a fixed series of cash payments recorded at present value. Corning will have the option to contribute shares rather than cash, but the liability is fixed by dollar value and not number of shares. The Amended PCC Plan does not include non-PCC asbestos claims that may be or have been raised against Corning. Corning has recorded an additional amount for such claims in its estimated asbestos litigation liability.

 

Several of the parties in the bankruptcy proceedings are anticipating that they will file a modification of the Amended PCC Plan with the Bankruptcy Court which will reduce the amount of cash expected to be contributed to the settlement. In the first quarter of 2010, we recorded a net credit of $52 million ($33 million after-tax) due largely to the change in terms of the proposed settlement.

 

 

In the first quarter of 2010, equity in earnings of affiliated companies included a credit of $21 million ($20 million after-tax) primarily for Corning’s share of advanced energy manufacturing tax credits at Dow Corning Corporation.

 

 

In the first quarter of 2010, we recorded a $56 million tax charge from the reversal of the deferred tax asset associated with a Medicare subsidy.

 

 

Weighted average shares outstanding are as follows (in millions):

 

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

QUARTERLY SALES INFORMATION

(Unaudited; in millions)

 

 

 

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 March 31, 2010

(Unaudited; amounts in millions, except per share amounts)

 

Corning’s net income and earnings per share (EPS) excluding special items for the first quarter of 2010 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.

 

 

 

 

 

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE

Three Months Ended March 31, 2009

(Unaudited; amounts in millions, except per share amounts)

 

Corning’s net income and earnings per share (EPS) excluding special items for the first quarter of 2009 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.

 

 

 

 

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE

Three Months Ended December 31, 2009

(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 2009 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.

 

 

 

 

 

 

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE

Three Months Ended March 31, 2010 and December 31, 2009

(Unaudited; amounts in millions)

 

Corning’s free cash flow financial measure for the three months ended March 31, 2010 and December 31, 2009 are 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 measures.