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) July 30, 2008

 

 

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 July 30, 2008 regarding its financial results for the second quarter ended June 30, 2008 and its third quarter 2008 earnings guidance is attached hereto as Exhibit 99.1.

 

The information in this report that is 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 8.01. Other Events

 

On July 30, 2008, Corning Incorporated also issued a press release announcing that its Board of Directors and Executive Committee approved a $1 billion share repurchase program. That press release is attached as Exhibit 99.2 and is incorporated herein by reference.

 

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 99.1

 

FOR RELEASE — JULY 30, 2008

 

 

 

Corning Announces Second-Quarter Results

 

Company releases U.S. deferred tax asset valuation allowances

 

CORNING, N.Y. –– Corning Incorporated (NYSE:GLW) today announced results for the second quarter of 2008.

 

Second-Quarter Highlights

 

Third-Quarter Outlook Highlights

 

*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.

 

 

 

 

Corning Announces Second-Quarter Results

Page Two

 

Remarking on the second quarter, Wendell P. Weeks, chairman and chief executive officer, said, “Despite concerns of a U.S. economic slowdown, Corning performed very well in the second quarter. We saw continued strong demand for our LCD glass substrates throughout the quarter. The U.S. retail data reported by the NPD Group’s retail tracking service for the month of June showed retail sales of LCD TV units up 35% year over year. This is consistent with what we’ve seen in the first half of the year where LCD TV units sold increased 37% over a year ago.” The NPD Group is an independent consumer market research firm.

 

“Additionally, we were very pleased with our Telecommunications segment performance, where sequential sales growth was 13%,” Weeks said.

 

Quarter Two Financial Comparisons

 

Overview of Business Segment Results

Second-quarter sales for Corning’s Display Technologies segment were $809 million, a 2% sequential decline, but a 33% increase over the second quarter 2007. Year-over-year glass volume increased by 26%. The display segment results were negatively impacted by an isolated manufacturing interruption which impacted shipments to one customer during the quarter. Excluding the impact of the interruption, sequential volume for the wholly owned business would have been within the original guidance of 2% to 5% growth. The manufacturing interruption reduced Corning’s second-quarter sales by $24 million and net income by $16 million. Also, second-quarter sales and net income were negatively impacted by the weaker-than-expected yen-to-U.S. dollar exchange rate in the quarter versus guidance. Normal price declines were within the anticipated range for the quarter.

 

Telecommunications segment sales in the second quarter were $477 million, a 13% sequential increase and a 9% increase over a year ago. The increase was driven by strong fiber-to-the-premises demand as well as overall strength in optical fiber sales.

 

Environmental Technologies segment sales were $209 million in the second quarter, a 6% sequential improvement and a 9% increase over a year ago. Diesel product sales were strong in the second quarter, offset somewhat by a decline in automotive product demand.

 

 

 

 

Corning Announces Second-Quarter Results

Page Three

 

Specialty Materials segment sales were $104 million, a 25% sequential increase and a 9% increase over second quarter 2007. The Life Sciences segment had sales of $87 million, a 7% sequential increase and a 12% increase over the second quarter last year. The positive year-over-year sales comparisons in the Telecommunications, Environmental Technologies, and Life Sciences segments reflected stronger euro-to-U.S. dollar exchange rates.

 

Corning’s second-quarter equity earnings were $360 million, an 18% sequential increase and a more than 50% increase over the second quarter 2007. The company’s equity earnings from Dow Corning were $94 million, compared to $80 million in the previous quarter and $88 million a year ago.

 

Special Items

The company’s second-quarter results included net special gains of $2.429 billion or $1.52 per share.  This amount includes a charge of $12 million pretax and after-tax to settle litigation in the company’s Display Technologies segment and a non-cash charge of $9 million pretax and after-tax related to the pending Pittsburgh Corning Corporation bankruptcy proceeding. In the quarter, the company also released U.S. deferred tax asset valuation allowances totaling $2.45 billion, a non-cash item.

 

As a result of the valuation allowance release, Corning expects that its ongoing effective tax rate will increase by about 10 percentage points in 2009. This will not affect the company’s 2008 ongoing tax rate. James B. Flaws, vice chairman and chief financial officer, said, “The most important factor behind the timing of the release of the U.S. valuation allowance is our increased confidence in sustained profitability in the U.S. The potential increase in next year’s tax rate has been previously disclosed and is in most analysts’ 2009 estimates.” Flaws added, “Corning continues to have a large U.S. net operating loss carryforward and does not expect to pay cash taxes in the U.S. for at least four to five years.”

 

Third-Quarter Outlook

“We have recently seen some panel makers, primarily in Taiwan, reduce their utilization rates due to what we believe is an inventory build at the set assembly level of the supply chain. Despite this normal supply chain correction, we continue to believe that the LCD glass market will grow at the upper end of our original guidance range of 25% to 30% this year because retail demand for LCD products has remained strong,” Flaws said.

 

 

 

 

 

 

 

 

Corning Announces Second-Quarter Results

Page Four

 

Business Segment Highlights

 

“Overall, we believe Corning is more resistant to materials and energy inflation than it has been in the past due to cost reduction and changes in business mix. However, our Life Sciences segment and Corning Cable Systems business have seen significant material cost increases and will be implementing prices increases to offset these costs. Dow Corning is also experiencing significant inflation in certain raw materials costs and has implemented price increases as a result,” Flaws added.

 

“While there are economic and supply-chain risks facing us in the second half of the year, we remain optimistic about our key areas of opportunity,” Flaws said. “LCD TV sales have been globally strong this year and this trend continued through June in the U.S. and other regions. Despite fears of a continued impact of the earthquake in China, preliminary June retail data shows LCD TV sales up over 60% over the prior year,” he remarked. The preliminary retail data was supplied by a private Chinese-based market research company.

 

“The continued retail strength is very encouraging as we enter the second half of the year, which is typically the more robust retail season for electronic goods,” Flaws said.

 

Separately, Corning announced earlier today that its board of directors and executive committee approved a new stock repurchase plan of up to $1 billion that will run through 2009. This is in addition to last year’s $500 million repurchase authorization of which $125 million remains.

 

Second-Quarter Conference Call Information

The company will host a second-quarter conference call on Wednesday, July 30 at 8:30 a.m. EDT.  To access the call, dial (800) 700-8174 or international access call (651) 291-0900 approximately 10-15 minutes prior to the start of the call.  The password is QUARTER TWO.  The leader 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 follow the instructions.  A replay of the call will begin at approximately 10:30 a.m. EDT, and will run through 5 p.m. EDT, Wednesday, August 13.  To listen, dial (800) 475-6701 or international access call (320) 365-3844.  The access code is 935096.  The webcast will be archived for one year following the call.

 

 

Corning Announces Second-Quarter Results

Page Five

 

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

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)

 

 

 

Certain amounts for 2007 were reclassified to conform to 2008 classifications.

 

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.

 

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

SEGMENT RESULTS

(Unaudited; in millions)

 

 

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 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 on June 30, 2008. Corning will have the option to contribute shares rather than cash, but the liability is fixed by dollar value and not number of shares. As a result, the estimated asbestos settlement liability is no longer impacted by movements in the value of Corning common stock. 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 settlement liability.

 

In the first quarter of 2008, we recorded a $327 million reduction to our estimated liability for asbestos litigation as a result of the increase in the likelihood of a settlement under the Amended PCC Plan and a corresponding decrease in the likelihood of a settlement under terms of the 2003 Plan. In the second quarter of 2008, we recorded an asbestos settlement charge of $9 million to adjust the asbestos settlement liability for the change in value of the components of the Amended PCC Plan and the estimated liability for non-PCC asbestos claims.

 

 

In the second quarter of 2008, Corning recorded a charge of $12 million to settle litigation associated with our Display Technologies segment.

 

 

In the second quarter of 2008, Corning concluded that it is more likely than not that the Company will realize substantially all of its U.S. deferred tax assets because the Company expects to generate sufficient levels of income in the U.S. As a result, Corning released $2.45 billion of valuation allowances on its U.S. deferred tax assets.

 

 

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 June 30, 2008

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

 

Corning’s net income and earnings per share (EPS) excluding special items for the second quarter of 2008 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, 2008

(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 2008 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 June 30, 2007

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

 

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

 

 

 

 

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE

Three Months Ended June 30, 2008

(Unaudited; amounts in millions)

 

Corning’s free cash flow financial measure for the three and six months ended June 30, 2008 is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, generally accepted accounting principles (GAAP). The company believes presenting non-GAAP financial measures are helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. A detailed reconciliation is provided below outlining the differences between this non-GAAP measure and the directly related GAAP measures.

 

 

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE

Three Months Ended September 30, 2008

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

 

Corning’s earnings per share (EPS) excluding special items for the third quarter of 2008 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.

 

 

 

This schedule will be updated as additional announcements occur.

 

 

 

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 third quarter 2008 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.

 

Exhibit 99.2

 

FOR RELEASE — JULY 30, 2008

 

 

 

Corning Announces $1 Billion Stock Repurchase Plan

 

CORNING, N.Y. –– Corning Incorporated (NYSE:GLW) announced today that its board of directors and executive committee have approved the repurchase of up to $1 billion of common stock between now and the end of 2009. This is in addition to last year’s $500 million repurchase authorization of which $125 million remains.

 

Wendell P. Weeks, chairman and chief executive officer, said, “This decision is consistent with our strategy to use free cash flow first to protect our financial health and second to fund growth opportunities. With the strength of our balance sheet and our sustained positive business performance, we can also increase the amount of share repurchases and maintain our common stock dividends.”

 

In total, Corning’s share repurchase programs authorize the purchase of up to $1.125 billion of the company’s common stock from time to time through open market or private transactions, depending on market conditions between now and the end of 2009.

 

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 Announces $1 Billion Stock Repurchase Plan

Page Two

 

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.