CORNING, N.Y., Oct. 30 /Xinhua-PRNewswire/ -- Corning Incorporated (NYSE: GLW) on Oct. 29, 2008 announced results for the third quarter 2008.
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Third-Quarter Highlights
-- Sales were $1.56 billion, about even with last year's third quarter.
-- Earnings per share (EPS) were $0.49; including net special gains of $36
million or $0.03 per share.
-- Excluding special items, EPS was $0.46,* up 21% over last year's
results, due in part to favorable exchange-rate movements.
-- Display Technologies' combined LCD glass volume, including Corning's
wholly owned business and Samsung Corning Precision Glass Co., Ltd.
(SCP), was up 2% sequentially and 18% year over year. Volume from
Corning's wholly owned business decreased 10% sequentially and 2% year
over year. Samsung Corning Precision's volume increased 12%
sequentially and 38% year over year.
Fourth-Quarter Outlook Summary
-- Sales are expected in the range of $1.2 billion to $1.3 billion.
-- EPS before special items are expected in the range of $0.20 to $0.28.*
-- Combined LCD glass volume is expected to be down in the range of 10% to
20% sequentially, with the wholly owned business down 20% to 30% and
SCP down 5% to 15%. Year over year the combined glass volume is
expected to decrease by 2% to 13%
-- For the full year, combined LCD glass volume growth is expected to be
20% to 22%.
"During the third quarter we experienced the impact of a supply chain correction in our display business. We believe that worsening economic conditions are now affecting retail demand for several of our businesses and that this economic decline may be accelerating in the fourth quarter. In response, we have initiated actions to reduce capital spending, scale back some manufacturing operations, curb the rate of growth in research, development and engineering expenses and reduce overhead to manage costs," Wendell P. Weeks, chairman and chief executive officer, said. "If business conditions deteriorate further, we will consider additional capacity and operational adjustments," he added.
* 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.
Quarter Three Financial Comparisons
Q3 2008 Q2 2008 % Change Q3 2007 % Change
Net Sales in
millions $1,555 $1,692 (8)% $1,553 0 %
Net Income in
Millions $768 $3,211 (76)% $617 24 %
Non-GAAP Net
Income in
millions* $732 $782 (6)% $619 18 %
GAAP EPS $0.49 $2.01 (76)% $0.38 29 %
Non-GAAP EPS* $0.46 $0.49 (6)% $0.38 21 %
Overview of Third-Quarter Segment Results
Third-quarter sales for Corning's Display Technologies segment were $696 million, a 14% sequential decline and flat with the third quarter 2007. Glass volume from Corning's wholly owned business decreased by 2% year over year and 10% sequentially. Price declines were in line with previous quarters. Compared to the second quarter, sales were negatively impacted by a weaker Japanese yen-to-U.S. dollar exchange rate.
Equity earnings from SCP's LCD glass business were $259 million for the quarter, a 6% sequential gain and a 62% increase over third-quarter 2007 results. SCP's quarterly glass volume increased 12% sequentially and 38% year over year, reflecting continued strength in the Korean LCD market.
"Although our combined glass volume reflects strong year-over-year growth in the LCD glass market, we have seen lower demand in Taiwan and stronger demand in Korea. This trend is expected to continue in the fourth quarter," Weeks said.
Telecommunications segment sales in the third quarter were $496 million, a 4% sequential increase and a 5% increase over a year ago. The sequential increase was the result of higher demand for private network solutions.
Environmental Technologies segment sales were $177 million for the quarter, a 15% sequential decline and an 11% decrease from a year ago. Sales were lower than expected in the third quarter due to continued weak automotive products demand in North America and recent market softness in Europe and the rest of the world. Heavy-duty diesel product sales continue to be depressed due to the slowdown in the U.S. freight shipping industry.
Specialty Materials segment sales were $101 million, a slight sequential decline and a 6% increase over the third quarter last year. The Life Sciences segment had sales of $83 million in the quarter, a 5% sequential decline and a 6% year-over-year increase.
Corning's third-quarter equity earnings were $382 million, up 6% sequentially and 60% year over year due to strong performance at Dow Corning Corporation and SCP. The company's equity earnings from Dow Corning were $109 million, a 16% sequential increase and a 35% year-over-year improvement. Equity earnings in the third quarter of 2008 included an $18 million charge at Dow Corning due to losses on cash and short-term investments. Equity earnings in the third quarter of 2007 included an $18 million restructuring charge at Samsung Corning Corporation.
Special Items
The company's third-quarter results included net special gains of $36 million or $0.03 per share. Corning recognized a gain of $43 million from the settlement of a long-standing tax dispute and released an additional $70 million of U.S. deferred tax asset valuation allowances. These items were offset by a $6 million pretax and after-tax charge related to the pending Pittsburgh Corning Corporation bankruptcy proceeding; a $14 million pretax and after-tax loss on the sale of a business; a $39 million pretax and after-tax loss on cash and short-term investments; and an $18 million reduction of equity earnings from Dow Corning related to losses on cash and short-term investments.
"Our $3.2 billion of cash and short-term investments are conservatively invested. We did have minor exposure to certain financial industry securities which resulted in a small loss in the quarter," James B. Flaws, vice chairman and chief financial officer said. "Additionally, Dow Corning had exposure to certain Fannie Mae and Freddie Mac securities that were impaired as a result of the U.S. government intervention," he added.
Fourth-Quarter Outlook
"We are now seeing the impact of the global economic turmoil on several of our businesses, most notably our display business. Recent retail data, supplied by the NPD Group, revealed considerable slowing of U.S. consumer LCD television purchases in the second half of September and again in the first half of October. (The NPD Group is an independent consumer market research firm.)
"As a result, we expect our fourth-quarter results to reflect appreciably lower sales as well as increased costs from capacity reductions in several of our businesses," Flaws said. Corning expects its consolidated gross margin to be in the range of 31% to 36%, reflecting lower margins in the display, telecommunications and environmental segments.
Display Segment Outlook
-- Combined glass volume in the Display Technologies segment is expected
to decline 10% to 20% sequentially, with the wholly owned business down
20% to 30% and SCP down 5% to 15%.
-- Price declines are expected to be consistent with previous quarters.
Flaws said, "We now expect Taiwanese panel makers to run at much lower utilization rates through the fourth quarter as they prepare for a seasonally lower first quarter and potentially slower consumer demand for LCD televisions and monitors in 2009. Although utilization rates in Korea remain higher, we are starting to see softness in that market as well."
Gross margin in Corning's wholly owned display business will be significantly impacted by lower sales and capacity reductions in the fourth quarter to match reduced demand. Display gross margin will be reduced by 20 to 30 percentage points, including 5 percentage points of one-time costs for the shutdown of glass tanks with the balance related to the lower utilization of remaining capacity.
Corning expects to maintain its current pricing strategy in the quarter. The company's fourth-quarter guidance assumes a Japanese yen-to-U.S. dollar exchange rate of 101, which should positively impact sales and earnings by about $35 million compared to the third quarter. Further strength in the Japanese yen-to-U.S. dollar exchange rate could improve sales and earnings.
Other Segment Highlights
-- Corning's Telecommunications segment sales are expected to be down
about 20% sequentially, driven by seasonality and the impact of a
slowing economy.
-- Environmental Technologies segment sales are anticipated to decline
about 20% sequentially, the result of normal seasonality augmented by a
depressed global automotive market and prolonged slump in the U.S.
trucking industry.
-- Specialty Materials segment sales are expected to be flat and sales in
the Life Sciences segment are expected to decline about 15%.
-- The Telecommunications, Environmental and Life Sciences segment sales
guidance assumes a U.S. dollar-to-euro exchange rate of 1.27. The
impact of a stronger dollar is included in this guidance and reduces
fourth-quarter sales of these three segments by about $35 million
sequentially.
-- Dow Corning's equity earnings are expected to be in the range of $100
million to $107 million.
2009 Outlook
"During this time of economic volatility, it is difficult for us to assess the potential impact on the full-year 2009 glass market," Flaws said. "We are seeing rapid shifts in our display glass customer ordering patterns as they react to changes in their demand. We have seen some slowing in consumer demand for LCD televisions in the early fall, but it is difficult to know how prolonged any slowdown may be. As a result, we think that it is prudent to lower our 2009 glass market forecasts and plan our capacity accordingly. As such, we have revised our LCD glass market growth estimate to 5% to 15% to better reflect the potential impact of continued weak economic conditions.
"The worldwide automotive industry is also experiencing significant declines and faces great uncertainty. We anticipate 2009 worldwide auto volume could be down 5% to 8% and we are adjusting our capacity to prepare for these levels. We are also expecting the heavy-duty diesel market will remain very weak in 2009. These dynamics underscore our need to be very agile in managing our businesses and controlling expenses to effectively address changing product demand and market conditions," Flaws said.
As previously announced, Corning plans to slow its rate of capital spending in the Display Technologies segment for the remainder of this year and 2009. Corning's total 2008 capital spending is now expected to be between $1.8 billion and $1.9 billion. "We are also planning further reductions to our previously disclosed 2009 capital spending range of $1.6 billion to $1.7 billion, and potential restructuring charges in the fourth quarter. And, we are carefully managing our research and development spending while maintaining a commitment to investments in new business opportunities," Flaws said.
Speaking to the company's financial position, Flaws said, "We believe Corning's strong financial position can endure a prolonged downturn in the economy. We have $3.2 billion in cash and short-term investments and $1.5 billion of debt, only $250 million of which is due in the next four years. The majority of the company's cash and short-term investments are in U.S treasury bills, treasury-backed securities, government money market funds and bank deposits. We expect to continue to have full access to a $1.125 billion unused revolving credit facility which doesn't expire until 2011," Flaws said.
Weeks added, "We do believe the present market uncertainty is not changing the long-term fundamentals which drive our business segments. While the economy is clearly impacting us in the short run, we believe LCD televisions will continue to penetrate the worldwide TV market and demand will increase for cleaner environmental solutions and faster information delivery systems, all made possible through Corning's products and technologies."
Upcoming Investor Meetings
Peter F. Volanakis, president and chief operating officer, will be presenting at the UBS Technology Conference in New York on November 18, and James B. Flaws, vice chairman and chief financial officer, will present at the Barclays Capital Global Technology Conference in San Francisco on December 10.
Third-Quarter Conference Call Information
The company will host a third-quarter conference call on Wednesday, October 29 at 8:30 a.m. EDT. To access the call, dial (800) 230-1093 or international access call (612) 288-0337 approximately 10-15 minutes prior to the start of the call. The password is QUARTER THREE. The host is SOFIO. To listen to a live audio webcast of the call, go to Corning's website at www.corning.com/investor_relations and follow the instructions. A replay will be available beginning at 10:30 a.m. EDT and will run through 5:00 p.m. EST, Wednesday, November 12, 2008. To listen, dial (800) 475-6701 or international access call (320) 365-3844. The access code is 963272. 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. These non-GAAP measures are reconciled on the company's Web site at www.corning.com/investor_relations and accompany 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" (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 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. 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.
Attached File:
CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME: http://www.corning.com/docs/pdfs/2008102901_Q3.pdf