Corning Incorporated (NYSE:GLW) Chairman and Chief Executive Officer Wendell P. Weeks reaffirmed the leadership team’s priorities of protecting Corning’s financial health, improving profitability, investing in the future, and “always living our values” at the company’s annual meeting today. Addressing an audience of more than 500 shareholders, he declared, “We stick with these priorities because they work.”
Weeks reviewed the company’s record-breaking performance in 2007, but also emphasized, “Our goal as a leadership team is not peak performance during our brief time at the helm of this great company, but rather, sustainable performance.” He reminded shareholders that Corning’s objective is “another 150 years of innovation and independence.”
Acknowledging the risks inherent in Corning’s strategy of growth through global innovation, Weeks explained how Corning mitigates those risks by proactively working to provide balance and stability to the company. He also devoted a portion of his remarks to addressing likely questions on the audience’s minds, based on conversations the management committee regularly has with stakeholders.
Most Significant Period of Sustained Performance in Corning’s History
Weeks noted that 2007 was Corning’s fifth straight year of improved financial performance, including record net profit after taxes of $2.3 billion*; record earnings per share of $1.41*; record cash flow of $2 billion; and record gross margins of 47%. Weeks observed that Corning has improved profits by approximately $500 million* each year since 2003, adding up to “the most significant period of sustained performance in the history of the company.”
Weeks underscored several indicators of the company’s financial health, including the 2007 upgrades to Corning’s debt rating by all three major U.S. credit agencies (to the equivalent of BBB+), and the board of directors’ decision to reinstate a quarterly cash dividend at $0.05 per share.
Citing the display business’s “excellent results” in 2007, Weeks credited the company’s successful implementation of its pricing strategy and continued manufacturing cost reduction. He noted that Corning has also made progress on its goal of creating more balance in the company, more than doubling gross margins of non-display businesses from 16% in 2002 to 33% in 2007.
Weeks pointed out that Corning achieved these record results while continuing to invest strongly in its future, allocating 10% of revenues to research and development and launching a $300 million expansion of the Sullivan Park science and technology center. He noted several significant milestones in Corning’s “Invest in the Future” initiatives, including converting all of the company’s liquid crystal display (LCD) customers to EAGLE XG™ environmentally friendly glass; introducing the revolutionary ClearCurve™ product suite for fiber-to-the-home applications in multiple dwelling units; and securing the first sales of the Epic® System drug discovery tool.
The Year Ahead
Weeks told shareholders that Corning intends to extend its track record of financial performance, cost and technology leadership, and innovation in 2008. He identified several factors necessary to deliver another year of growth and improvement for Corning, including continuing to execute the pricing strategy in display; growing the diesel products business; realizing the potential of the ClearCurve™ innovations; and growing the base business for the Epic® System. Acknowledging more economic uncertainty than in recent years, Weeks also underscored his commitment to keep the balance sheet strong, “to ensure that we can weather any economic headwinds that come our way.”
“Questions that May Be on Your Minds”
Turning his attention to “questions that may be on your minds,” Weeks began by addressing concerns about future growth in the LCD market. He told the audience “we’re still in the early days of this business,” and noted that LCD has emerged as the winning TV technology over plasma and rear projection. He also observed that the LCD TV market has grown faster than Corning has predicted and that the company’s market forecast model may be too conservative. Weeks noted several trends that could lead to increased demand, including a faster-than-expected technology substitution of LCD over traditional cathode ray technology and an increase in the number of TVs per household.
Responding to the question of whether Corning’s technology portfolio would deliver, Weeks acknowledged that innovation always involves uncertainty, but remarked that Corning’s track record should give shareholders confidence.
Weeks was emphatic on the subject of Corning’s commitment to its heritage. He noted that Corning has retained its distinctive identity throughout its 157-year history, despite changes in the company’s growth drivers: “We don’t define ourselves by the markets that we’re in, but by our identity as the world leader in specialty glass and ceramics, and by our sustained investment in research and development.” He explained, “Our markets and products will continue to change over time, but our commitment to innovation is unwavering.” He cited this year’s milestone 100th anniversary of corporate R&D as evidence of Corning’s unique heritage: “Very few companies can lay claim to a century-old culture of scientific research, collaborative problem-solving, and life-changing innovation.”
Community Investment
Weeks also reassured the audience that Corning, N.Y., would remain the company’s home, and noted Corning’s long history of partnership and investment in the community. He described several strategic initiatives by Corning Enterprises and the Corning Incorporated Foundation, which are both funded by the company. They include:
- helping to secure government funding of more than $10 million in property development projects over the past two years;
- providing a significant share of the annual operating budget for the world-renowned Corning Museum of Glass; and
- contributing $3.2 million over the past five years to the Corning-Painted Post School District for improved educational programs.
Describing Corning’s management committee as “exceptional as individuals and outstanding as a team,” Weeks stated, “Our goal is to ensure that we leave Corning in strong shape for the next generation.” He concluded by telling shareholders, “You can count on our commitment to the long-term success of this company.”
Formal Business
In other business during the annual meeting, shareholders elected the following four directors to three-year terms: John Seely Brown, 68, retired chief scientist for Xerox Corporation; Gordon Gund, 68, chairman and chief executive officer of Gund Investment Corporation; Kurt M. Landgraf, 61, president and chief executive officer of Educational Testing Service; and H. Onno Ruding, 68, retired vice chairman of Citicorp and Citibank, N.A.
Shareholders approved amendment of the 2005 Employee Equity Participation Program, extending its term for three years to May 1, 2013. They also ratified the Corning Board audit committee’s appointment of PricewaterhouseCoopers LLP as independent auditors for the 2008 fiscal year.
Weeks recognized John M. Hennessy, 71, independent senior advisor of Credit Suisse First Boston, and Padmasree Warrior, 47, chief technology officer of Cisco Systems, Inc., and thanked them for their contributions as they stepped down from Corning’s Board on April 24th at the end of their elected terms. Warrior has been a director since 2005, and Hennessy since 1989. Hennessy was named an honorary director emeritus by the Board.
100 Years of Research and Development
Immediately following the formal business meeting, Corning’s Chief Technology Officer
Dr. Joseph A. Miller delivered a presentation titled “A Century of R&D,” which examined Corning’s 100 years of formalized research. Dr. Miller described Corning’s track record of innovation as “remarkable.” He told shareholders, “You can be assured that we will sustain the long tradition of innovation for which Corning is so well known.”
Webcast Information
The company hosted a live audio webcast of the 2008 annual meeting of shareholders in Corning, N.Y., at 11 a.m. EDT, April 24, 2008. To access the webcast, please go to www.corning.com/investor_relations and click on the investor events link. No password or registration is required. The audio webcast will be archived on the Web site for one year following the broadcast.
Presentation of Information in this News Release
Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP. Corning’s non-GAAP net income and EPS measures exclude restructuring, impairment and other charges and adjustments to prior estimates for such charges. Additionally, the company’s non-GAAP measures exclude adjustments to asbestos settlement reserves required by movements in Corning’s common stock price, gains and losses arising from debt retirements, charges or credits arising from adjustments to the valuation allowance against deferred tax assets, equity method charges resulting from impairments of equity method investments or restructuring, impairment or other charges taken by equity method companies, and gains from discontinued operations. The company believes presenting non-GAAP net income and EPS measures is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. These non-GAAP measures are reconciled on the company’s Web site at www.corning.com/investor_relations and accompanies this news release.
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.
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 |
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE |
| Five Years Ended December 31, 2007 |
| (Unaudited; amounts in millions) |
Corning's comment, "Corning has improved profits by approximately $500 million each year since 2003..." 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. |
| Improvement in Net Income | ||||||||||
| 2007 vs. 2006 | 2006 vs. 2005 | 2005 vs. 2004 | 2004 vs. 2003 | 2003 vs. 2002 | ||||||
| Net income, excluding special items | $475 | $462 | $631 | $552 | $532 | |||||
| Net Income | ||||||||||||||||||||||
| For the years ended December 31, | ||||||||||||||||||||||
| 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||||||||||||
| Net income, excluding special items | $ | 2,260 | $ | 1,785 | $ | 1,323 | $ | 692 | $ | 140 | $ | (392 | ) | |||||||||
| Special items: | ||||||||||||||||||||||
| Restructuring, impairment, and other (charges) and credits (a) | (44 | ) | 34 | (1,802 | ) | (26 | ) | (1,462 | ) | |||||||||||||
| Asbestos settlement (b) | (185 | ) | 2 | (218 | ) | (59 | ) | (332 | ) | |||||||||||||
| (Loss) gain on repurchases and retirement of debt, net (c) | (15 | ) | (11 | ) | (16 | ) | (34 | ) | 12 | 108 | ||||||||||||
| Gain on sale of business, net (d) | 19 | |||||||||||||||||||||
| (Provision) benefit for income taxes (e) | 103 | 83 | (443 | ) | (992 | ) | ||||||||||||||||
| Equity in earnings of affiliated companies, net of impairments (f) | (32 | ) | 40 | (95 | ) | (56 | ) | (74 | ) | (34 | ) | |||||||||||
| Income from discontinued operations (g) | 20 | 478 | ||||||||||||||||||||
| Net income (loss) | $ | 2,150 | $ | 1,855 | $ | 585 | $ | (2,231 | ) | $ | (280 | ) | $ | (1,302 | ) | |||||||
2007 Special Items: | ||
| (b) | Between 2003 and 2007, changes in the estimated fair value of the components of the proposed settlement agreement were recognized in Corning's quarterly results. During that time, the components of the proposed asbestos settlement included 25 million shares of Corning common stock and certain other items. For 2007, Corning recorded a charge of $185 million (before- and after-tax) including a charge of $132 million for the change in Corning's common stock price of $23.99 at December 31, 2007, compared to $18.71 at December 31, 2006 and a $53 million charge for the change in estimated fair value of certain other components of the proposed asbestos settlement liability. | |
| (c) | Amount reflects a $15 million loss on the repurchase of $223 million principal amount of our 6.25% Euro notes due 2010. | |
| (d) | Amount reflects a $19 million gain on the sale of the European submarine cabling business. | |
| (e) | Amount reflects a $103 million tax benefit from the release of our valuation allowance on certain deferred tax assets in Germany. | |
| (f) | In 2007, equity in earnings of affiliated companies includes a $32 million charge (net of tax) for Corning's share of restructuring, impairment and other charges at Samsung Corning Co. Ltd. (Samsung Corning). On December 31, 2007, Samsung Corning Precision Glass Co. Ltd. (Samsung Corning Precision) acquired all of the assets of Samsung Corning. Corning's 50% interest in Samsung Corning Precision was unchanged by this transaction. | |
2006 Special Items: | ||
| (a) | Amount represents a $44 million asset impairment charge for certain long-lived assets in our Telecommunications segment. | |
| (b) | Between 2003 and 2007, changes in the estimated fair value of the components of the proposed settlement agreement were recognized in Corning's quarterly results. During that time, the components of the proposed asbestos settlement included 25 million shares of Corning common stock and certain other items. 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. | |
| (e) | 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. | |
| (f) | 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) | Between 2003 and 2007, changes in the estimated fair value of the components of the proposed settlement agreement were recognized in Corning's quarterly results. During that time, the components of the proposed asbestos settlement included 25 million shares of Corning common stock and certain other items. 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. | |
| (e) | 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. | |
| (f) | 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) | Between 2003 and 2007, changes in the estimated fair value of the components of the proposed settlement agreement were recognized in Corning's quarterly results. During that time, the components of the proposed asbestos settlement included 25 million shares of Corning common stock and certain other items. 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). | |
| (e) | In 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. | |
| (f) | 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. | |
| (g) | 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) | Between 2003 and 2007, changes in the estimated fair value of the components of the proposed settlement agreement were recognized in Corning's quarterly results. During that time, the components of the proposed asbestos settlement included 25 million shares of Corning common stock and certain other items. 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). | |
| (f) | 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). | |
| (f) | This amount reflects charges for impairments of certain equity method investments in Corning's Telecommunications segment. | |
| (g) | 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, 2007 |
| (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, 2007 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 Share | Income (Loss) Before Income Taxes | Net Income (Loss) | ||||||
| Earnings per share (EPS) and net income, excluding special items | $ | 1.41 | $ | 1,392 | $ | 2,260 | ||
| Special items: | ||||||||
| Asbestos settlement (a) | (0.12) | (185) | (185) | |||||
| Loss on repurchases of debt, net (b) | (0.01) | (15) | (15) | |||||
| Gain on sale of business, net (c) | 0.01 | 19 | 19 | |||||
| Provision for income taxes (d) | 0.07 | 103 | ||||||
| Equity in earnings of affiliated companies (e) | (0.02) | (32) | ||||||
| Total EPS and net income | $ | 1.34 | $ | 1,211 | $ | 2,150 | ||
| (a) | Between 2003 and 2007, changes in the estimated fair value of the components of the proposed settlement agreement were recognized in Corning's results. During that time, the components of the proposed asbestos settlement included 25 million shares of Corning common stock and certain other items. For 2007, Corning recorded a charge of $185 million (before- and after-tax) including a charge of $132 million for the change in Corning's common stock price of $23.99 at December 31, 2007, compared to $18.71 at December 31, 2006 and a $53 million charge for the change in estimated fair value of certain other components of the proposed asbestos settlement liability. | |
| (b) | Amount reflects a $15 million loss on the repurchase of $223 million principal amount of our 6.25% Euro notes due 2010. | |
| (c) | Amount reflects a $19 million gain on the sale of the European submarine cabling business. | |
| (d) | Amount reflects a $103 million tax benefit from the release of our valuation allowance on certain deferred tax assets in Germany. | |
| (e) | In 2007, equity in earnings of affiliated companies includes a $32 million charge (net of tax) for Corning's share of restructuring, impairment and other charges at Samsung Corning Co. Ltd. (Samsung Corning). On December 31, 2007, Samsung Corning Precision Glass Co. Ltd. (Samsung Corning Precision) acquired all of the assets of Samsung Corning. Corning's 50% interest in Samsung Corning Precision was unchanged by this transaction. | |
*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 website.
Contacts:
Media Relations:
Daniel F. Collins,
607-974-4197
collinsdf@corning.com
or
Investor
Relations:
Kenneth C. Sofio, 607-974-7705
sofiokc@corning.com
