Corning Reports First-Quarter Net Income Gains
Thursday April 22, 4:10 pm ET
Strong Performance in Display, Environmental and Life Sciences Company's 2004 LCD Volume Growth May Exceed 50 Percent
CORNING, N.Y.--(BUSINESS WIRE)--April 22, 2004--Corning Incorporated (NYSE: GLW - News) today announced that its first-quarter sales were $844 million and its net income was $55 million or $0.04 per share. Net income includes previously announced after-tax charges of $60 million or $0.04 per share.
James R. Houghton, chairman and chief executive officer, remarking on the quarter results said, "We are extremely pleased with our first-quarter performance. Our sales exceeded our expectations and we were pleased with our improved manufacturing performance that contributed to our gross margin improvement to more than 35 percent. In addition, we continued to experience strong equity earnings."
Corning said that its first-quarter results include previously announced pretax charges of $76 million ($60 million after-tax or $0.04 per share). These include:
Restructuring, impairment and other charges of $34 million ($21 million after-tax and minority interest) primarily related to the closure of Corning's high purity fused silica manufacturing facility in Charleston, S.C.
A $23 million charge ($21 million after-tax) related to Corning's ongoing debt reduction program.
A $19 million charge ($18 million after-tax) to reflect the increase in the market value of Corning common stock to be contributed to settle the asbestos litigation related to Pittsburgh Corning Corporation.
First-Quarter Operating Results
The company's first-quarter sales of $844 million exceeded its guidance range of $770 million to $830 million and increased $24 million compared to fourth-quarter sales of $820 million. The sales increase was driven by continued strong demand for liquid crystal display (LCD) glass in the Display Technologies segment and solid sales increases in the Environmental Technologies and Life Sciences segments, offset by an expected decline in Telecommunications segment sales.
The company's net income of $55 million increased sequentially by $84 million compared to a $29 million net loss in the fourth quarter. The net income increase was primarily the result of improved manufacturing in many of its businesses and the continued growth of LCD glass, which resulted in a total gross margin of 35.5 percent in the quarter compared to 29.5 percent in the fourth quarter; a significant increase in equity earnings driven by strong operating performance at Samsung Corning Precision Glass Co., Ltd. and Dow Corning Corporation; and a lower level of after-tax special charges in the first quarter.
Segment Results
Due to a change in its operating segments, Corning will now separately report four key operating segments beginning in the first quarter of this year.
Corning's Display Technologies segment sales were $230 million compared to sales of $199 million in the previous quarter. Sequential sales of LCD glass grew 16 percent due to volume increases of 14 percent, stable pricing and favorable foreign exchange rates. Display's strong manufacturing performance and the 30 percent increase in equity earnings from Samsung Corning Precision contributed to the quarterly results. The display segment recorded net income of $118 million in the quarter, compared to $81 million in the previous quarter.
The Environmental Technologies segment's quarterly sales were $141 million versus sales of $123 million in the previous quarter. The segment's record sales were driven by strong thin-wall and ultra thin-wall automotive substrate sales in all regions. Improved manufacturing performance in the quarter contributed to the segment's increased net income. In April of this year, Corning officially dedicated its $200 million diesel substrates facility to meet the anticipated demand of the emerging diesel emission control market.
The Life Sciences segment also experienced record sales of $79 million compared to the previous quarter sales of $66 million. Quarterly sales and net income gains were due to stronger than expected seasonal volume increases for life science products.
Corning's Telecommunications segment sales were $312 million and net loss was $43 million for the quarter, a decline from fourth-quarter sales of $357 million and a net loss of $18 million. The fourth-quarter loss included net credits related to restructuring of approximately $23 million after-tax. Quarterly fiber volume declined 7 percent sequentially, slightly better than the company's revised March guidance of 10 percent to 15 percent due to particularly strong March sales in North America. Price declines were again moderate.
Of the $24 million sequential sales increase for the company, approximately $10 million is related to more favorable foreign exchange rates in the first quarter.
Cash Flow/Liquidity Update
Corning ended the first quarter with approximately $1.5 billion in cash and short-term investments, an increase of about $200 million from year end. The increase was primarily due to proceeds of $400 million resulting from the company's debt offering, offset by $140 million of cash used to reduce debt. Corning's debt-to-capital ratio was 33.1 percent at the end of the quarter, an improvement from 33.8 percent at year end.
Second-Quarter Outlook
Corning said that it expects second-quarter sales to be in the range of $900 million to $950 million, with earnings per share in the range of $0.07 to $0.09 before special items. This estimate is a non-GAAP financial measure and is reconciled on the company's investor relations Web site. Corning anticipates that foreign exchange rates will remain stable in the second quarter and that gross margins will be in the range of 34 percent to 35 percent.
In the Telecommunications segment, Corning expects a sequential fiber volume increase between 10 percent and 15 percent due to typical seasonality in North America and greater Europe, along with incremental volume increases in Japan. Pricing declines are again expected to be moderate at less than 5 percent in the quarter.
Corning anticipates second quarter revenues for both its environmental and life sciences segments to be consistent with the first quarter.
The company expects to remain sold out of LCD glass in the quarter, and it plans to bring on additional capacity throughout the year, expanding larger-generation manufacturing capabilities. Corning remains the only commercial supplier of Generation 6 glass to date and Samsung Corning Precision is expected to ship samples of Generation 7 glass in the third quarter. Sequential volume is expected to increase by 10 percent to 15 percent for the quarter. Pricing for the second quarter should remain stable.
James B. Flaws, vice chairman and chief financial officer, said, "The continued demand for flat screen monitors and notebook computers will drive strong second-quarter growth for our display segment. While we do not yet have updated industry growth estimates for the full year, we are now optimistic that the overall LCD glass market growth will be near 50 percent. Corning's first-quarter results and second quarter forecast suggest that volume growth for our wholly-owned business may likely exceed 50 percent. This increase appears to be the result of the market's movement to larger-size glass and Corning's leadership in the production of Generation 5 and 6 size glass substrates."
Flaws said that the popularity of LCD televisions also continues to grow, noting that in the first quarter alone the industry shipped more than 2 million LCD televisions. "This is almost half of the entire LCD television market shipments of 4.5 million televisions last year," he said. "Based on market experience, and assuming a drop in retail prices and a healthy economy, we remain confident that this will be a robust market for the foreseeable future," he said.
Corning said that its equity venture, Dow Corning, will take a charge in the second quarter as a result of some restructuring and cost reductions. Corning's share of these charges will be approximately $10 million and will be reported as a special charge for the quarter.
"Overall, we are very pleased with our progress in the first quarter," Flaws said, "And we are excited about our potential revenue growth for the second quarter. We are gaining momentum and we look forward to delivering on our three priorities: maintaining our financial health, improving the company's profitability and continuing to invest in future growth opportunities."
Presentation of Information in this News Release
Corning's earnings estimate for the second quarter is a non-GAAP financial measure as it excludes any potential gains or losses arising from previously announced restructuring actions, any further adjustments to the asbestos settlement reserve required by movement in Corning's stock price and income from discontinued operations. The company believes presenting earnings estimates that exclude these items is helpful in understanding Corning's operating results. This earnings estimate is reconciled on the company's investor relations Web site.
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, life sciences and semiconductor industries.
First-Quarter Conference Call Information
The company will host a first-quarter conference call at 8:30 a.m. EST on Friday, April 23. To access the call, dial (773) 756-4621. The password is Earnings. The leader is Sofio. A replay of the call will begin at approximately 10:30 a.m. EST and will run through 5 p.m. EST, Friday, May 7. To listen, dial (402) 998-0521, no pass code is required. To listen to a live audio webcast of the call at 8:30 a.m. on Friday, April 23, please go to our Web site and follow the instructions: corning.com. The audio webcast will be archived for one year following the call.
Forward-Looking and Cautionary Statements
This news 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 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)
For the three months ended
March 31,
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2004 2003
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Net sales $ 844 $ 746
Cost of sales 544 546
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Gross margin 300 200
Operating expenses:
Selling, general and administrative
expenses 160 152
Research, development and engineering
expenses 84 93
Amortization of purchased intangibles 10 9
Restructuring, impairment and other
charges and (credits) 34 51
Asbestos settlement 19 298
------------ ------------
Operating loss (7) (403)
Interest income 6 8
Interest expense (36) (40)
(Loss) gain on repurchases and
retirement of debt, net (23) 4
Other expense, net (4) (14)
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Loss before income taxes (64) (445)
Benefit for income taxes (12) (144)
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Loss before minority interests and
equity earnings (52) (301)
Minority interests 37
Equity in earnings of associated
companies 107 59
------------ ------------
Net income (loss) $ 55 $ (205)
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Basic and diluted earnings (loss)
per common share $ 0.04 $ (0.17)
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Shares used in computing per share
amounts for:
Basic earnings (loss) per
common share 1,358 1,200
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Diluted earnings (loss)
per common share 1,437 1,200
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Certain amounts for 2003 were reclassified to conform with 2004
classifications. |
