Company Releases U.S. Deferred Tax Asset Valuation Allowances
CORNING, N.Y., July 31 /Xinhua-PRNewswire/ -- Corning Incorporated (NYSE: GLW) on July 30 announced results for the second quarter of 2008.
(Logo: http://www.prnasia.com/sa/200708141205.jpg )
Second-Quarter Highlights
-- Sales reached $1.69 billion, up 19% year over year.
-- Earnings per share were $2.01, including a $2.429 billion net special
gain primarily related to the release of U.S. deferred tax asset
valuation allowances.
-- Excluding special items, earnings per share were $0.49,* within the
company’s previously announced guidance for the quarter of $0.47 to
$0.50, and up 44% from last year.
-- Display Technologies combined glass volume (including Corning’s wholly
owned business and Samsung Corning Precision Glass Co., Ltd.) increased
8% sequentially and 33% year over year. Corning’s wholly owned business
increased 1% sequentially and 26% year over year. Sequential growth
was negatively impacted by an isolated manufacturing interruption in
the second quarter. Samsung Corning Precision’s (SCP) volume increased
15% sequentially and 40% year over year.
Third-Quarter Outlook Highlights
-- Sales are expected in the range of $1.65 billion to $1.72 billion, up
6% to 11% compared to the third quarter last year.
-- Earnings per share, excluding special items, are anticipated in the
range of $0.48 to $0.51*, an increase of 26% to 34% over last year.
-- Third-quarter guidance assumes a yen-to-U.S. dollar exchange rate of
108, compared to an exchange rate of 105 experienced in the second
quarter. In comparison to the second quarter, the weaker yen is
expected to reduce both third-quarter sales and net income by
approximately $30 million.
-- Combined LCD glass volume is expected to increase 4% to 9% sequentially,
with the wholly owned business flat to up 5% and SCP up 8% to 13%.
Year over year, the combined glass volume in the third quarter is
expected to increase by more than 21%.
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.
* 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.
"Additionally, we were very pleased with our Telecommunications segment performance, where sequential sales growth was 13%," Weeks said.
Quarter Two Financial Comparisons
Q2 2008 Q1 2008 % Change Q2 2007 % Change
Net Sales in millions $1,692 $1,617 5 % $1,418 19 %
Net Income in millions $3,211 $1,029 212 % $489 557 %
Non-GAAP Net Income in millions* $782 $702 11 % $546 43 %
GAAP EPS $2.01 $0.64 214 % $0.30 570 %
Non-GAAP EPS* $0.49 $0.44 11 % $0.34 44 %
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.
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.
Business Segment Highlights
-- Combined glass volume in the Display Technologies segment is expected
to increase 4% to 9% sequentially, with the wholly owned business flat
to up 5% and Samsung Corning Precision up 8% to 13%. Normal price
declines in the quarter are expected to be around 2%.
-- Corning’s Telecommunications segment sales are expected to be flat to
up 5%, primarily due to improved private networks sales.
-- Environmental Technologies segment sales are expected to be flat for
the quarter.
-- Specialty Materials segment sales are expected to be flat and sales in
the Life Sciences segment are expected to be consistent with the
previous quarter due to normal seasonality patterns.
-- Dow Corning Corporation earnings are expected to increase between 20%
and 30% for the quarter. Samsung Corning Precision earnings are
expected to be flat to up slightly sequentially, as volume gains are
expected to be offset by the assumed unfavorable exchange rates and
price declines.
"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 price 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 http://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.
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 http://www.corning.com/investor_relations and accompanies this news release.
About Corning Incorporated
Corning Incorporated ( http://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.
Attached File:
CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME: http://www.corning.com/WorkArea/showcontent.aspx?id=13279
