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Corning Announces Fourth-Quarter Results

Plans restructuring actions in first quarter 2009

CORNING, N.Y., January 27, 2009 – Corning Incorporated (NYSE:GLW) today announced results for the fourth quarter and full year 2008, along with the company’s planned restructuring actions.

Fourth-Quarter Highlights

  • Sales were $1.1 billion, down about 30% both sequentially and year over year.
  • Earnings per share were $0.16. Excluding special items, earnings per share were $0.13*, down about 70% both sequentially and year over year.
  • Display Technologies’ combined LCD glass volume, including Corning’s wholly owned business and Samsung Corning Precision Glass Co., Ltd. (SCP), was down 35% sequentially and 28% year over year. Volume in the company’s wholly owned business was down about 50% sequentially and year over year, while volume at SCP was down 26% sequentially and only 4% year over year.
  • Gross margin was 28%, reflecting lower volumes in all segments and the cost of capacity reductions.
  • At the end of the fourth quarter the company had $2.8 billion in cash and short-term investments, $1.2 billion greater than debt.

Full Year Highlights

  • Sales were $5.9 billion, up 1.5% from 2007.
  • Earnings per share were $3.32. Excluding special items, earnings per share were $1.53*, up 9% versus 2007.
  • Display Technologies’ combined LCD glass volume was up 14%, including volume increases of 1% in the wholly owned business and 28% at SCP. Price declines were approximately 8% in both the wholly owned business and at SCP.

Quarter Four Financial Comparisons

 

Q4 2008

Q3 2008

% Change

Q4 2007

% Change

Net Sales in millions

$ 1,084

$ 1,555

(30%)

$1,582

(31%)

Net Income in millions

$249

$768

(68%)

$717

(65%)

Non-GAAP Net Income in millions*

$208

$732

(72%)

$643

(68%)

GAAP EPS

$0.16

$0.49

(67%)

$0.45

(64%)

Non-GAAP EPS*

$0.13

$0.46

(72%)

$0.40

(68%)


*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.

Restructuring Plans

  • Planned corporate-wide restructuring actions will result in first-quarter charges in the range of $115 million to $165 million pretax, in addition to the fourth-quarter restructuring charges of $22 million. About 90% of the charge is for cash termination benefits, most of which will be paid in 2009. Certain of Corning’s equity companies are also evaluating restructuring actions in the first quarter.
  • In total, Corning plans to reduce its workforce by about 3,500 employees, or 13%, before the end of the year. About 1,500 of the reductions are salaried employees. The company is also in the process of reducing more than 1,400 temporary workers.
  • The restructuring program will include a selective early retirement program, global workforce reductions and consolidation of manufacturing facilities. The company also suspended merit increases for its salaried employees.
  • Annualized savings of $150 million to $200 million are expected as a result of the restructuring actions.

“We experienced a significant momentum shift in many of our core businesses in the fourth quarter as the recession took hold,” Wendell P. Weeks, chairman and chief executive officer, said. “As a result, we are adjusting our operations to reflect anticipated lower sales in 2009. We are also moving aggressively to reduce operating expenses and capital spending to continue to meet our goals of positive free cash flow and a healthy balance sheet.”

Fourth-Quarter Segment Results
Sales in the Display Technologies segment were $390 million, down 44% sequentially and 50% year over year. This significant decline resulted primarily from the supply chain’s inventory reduction and lower retail sales of LCD products. Sequential price declines were slightly higher than the previous quarter. Positive foreign exchange rate movements partially offset the volume declines.

Telecommunications segment sales were $405 million, down 18% sequentially and 6% compared to the fourth quarter of 2007.

Environmental Technologies segment sales were $128 million, down 28% sequentially and 32% year over year. Fourth-quarter sales of automotive products declined sharply reflecting the global decline in the automotive industry. Heavy-duty diesel sales remained weak.

Corning’s equity earnings from Dow Corning Corporation were $86 million, down sequentially as the recession began to impact the demand for silicone products, but up slightly year over year.

Looking Forward
James B. Flaws, vice chairman and chief financial officer, said, “We anticipate a slow start to 2009 with first-quarter combined display volume down 20% to 25% as the supply chain continues to reduce inventory during the seasonally weaker retail sales quarter. As we announced last December, we will also have high-single-digit price declines in the first quarter. As a result, sales, gross margin and net income will be sequentially lower. We expect earnings per share*, before special items, to be about break-even in the first quarter.”

“On the other hand, recent news about the display supply chain and end market is encouraging. Retail sales of LCD TV were stronger in December than we anticipated and this trend is continuing into early January. We estimate that the display supply chain has reduced total inventory levels to be close to year-end 2007 levels. This reduction, while painful for us in the fourth quarter, moves us closer to the day that glass demand rebounds. We are currently anticipating a significant increase in glass demand in the second quarter.

“During these tough times, our three priorities are preserving cash, restructuring the company to be profitable at a lower sales level, and accelerating new products while maintaining our focus on long-term growth opportunities,” he said.

The company is concentrating on its short-term growth opportunities by investing in Gen 10 LCD manufacturing, extending its bend-insensitive ClearCurve® optical fiber products into new markets, introducing next-generation advanced diesel engine substrates and filters, expanding applications for its Gorilla™ glass and pursuing new initiatives in thin-film photovoltaics.

As previously announced, the company has reduced its 2009 capital spending to $1.1 billion, of which about $525 million relates to construction completed in 2008. “We have a goal of being free cash flow positive for the year, but expect our first-half free cash flow to be negative,” he said.

Flaws said that Corning is sizing the company’s cost structure for about $5 billion of sales in 2009. “This level is above our first-quarter run rate and reflects our belief that the display supply chain contraction will end in the second quarter. If we do not see this improvement, we will consider further consolidation of manufacturing facilities and additional workforce reductions.”

Flaws concluded by noting that, “despite the current impact of the global recession, we remain well positioned in our core businesses for the long term. This recession will end. The exact timing is difficult to predict but we know that the world is not going backwards. Optical fiber solutions will continue to replace older copper lines and LCD televisions are making CRT models obsolete. And stronger environmental regulations will soon be taking effect. Demand for our products will increase as the economy improves.”

Corning will provide more information on its 2009 outlook at its annual investor relations meeting in New York on Friday, Feb. 6 at 9 a.m. ET at the Times Center. Attendees can register online at the company’s investor relations web site. The company also will be presenting at the Thomas Weisel Telecom and Technology Conference on Feb. 10 in San Francisco.

Fourth-Quarter Conference Call Information
The company will host a fourth-quarter conference call on Tuesday, Jan. 27 at 8:30 a.m. ET. To access the call, dial (866) 233-3843 or international access call (612) 332-0530 approximately 10-15 minutes prior to the start of the call. The password is ‘Corning Incorporated Quarter Four Results’. 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. ET and will run through 5:00 p.m. ET, Tuesday, Feb. 10, 2009. To listen, dial (800) 475-6701 or international access call (320) 365-3844. The access code is 981250. 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 

Media Relations Contact:
Daniel F. Collins
(607) 974-4197
collinsdf@corning.com 

Investor Relations Contact:
Kenneth C. Sofio
(607) 974-7705
sofiokc@corning.com