Corning“s Display Technologies segment was the star performer in the technology company“s 3Q 2005 results released 26 October 2005, registering a 49% increase in income on the previous quarter. “We …
Corning“s Display Technologies segment was the star performer in the technology company“s 3Q 2005 results released 26 October 2005, registering a 49% increase in income on the previous quarter. “We are delighted with the 3Q results of our Display Technologies segment and with the continued adoption of LCD technology in both the desktop monitor and television markets. Our quarterly glass volume for the combined wholly owned business and SCP is up 78% over last year,” Wendell P. Weeks, president and chief executive officer said. The Corning, New York-based firm announced total 3Q sales of USD 1.188 billion and net income of USD 203 million, or USD 0.13 per share. However, the net income includes special charges of USD 202 million, or USD 0.13 per share. Excluding the special charges, Corning“s earnings per share (EPS) would have been USD 0.26, exceeding the company“s previously announced EPS guidance range of USD 0.20 to USD 0.22 per share for the 3Q. This EPS is a non-GAAP financial measure. Weeks said, “We are very pleased with Corning“s overall performance in the 3Q. We experienced excellent sales growth, improved gross margins and strong equity earnings.” Corning“s 3Q net income was reduced by USD 202 million, or USD 0.13 per share, as a result of the following charges: Net restructuring charges of USD 28 million (pretax and after-tax) related to cost-reduction plans in the Telecommunications segment; a USD 68 million pretax and after-tax charge to reflect the increase in market value of Corning common stock to be contributed to settle the Pittsburgh Corning Corporation asbestos litigation; and, a previously announced reduction in equity earnings of USD 106 million reflecting Corning“s share of impairment and other charges taken by Samsung Corning Co., Ltd. Corning“s 3Q 2005 sales of USD 1.188 billion increased 18% over 3Q 2004 sales of USD 1.006 billion and 4% over the previous quarter“s sales of USD 1.141 billion. Gross margins for the 3Q 2005 improved to 46% versus 42% for the previous quarter. Equity earnings for the 3Q 2005 were USD 74 million and include the USD 106 million charge at Samsung Corning. Without this charge, Corning“s 3Q equity earnings improved sequentially, reflecting strong performance by Samsung Corning Precision Glass Co., Ltd. (SCP), offset by slightly lower results at Dow Corning Corporation. Corning“s 3Q 2005 net income benefited from a USD 14 million tax adjustment resulting from the conclusion of the IRS audit of the company“s 2001 and 2002 tax returns and from an overall lower effective tax rate. James B. Flaws, vice chairman and chief financial officer, said, “Lower taxes added USD 0.02 to our EPS in the quarter. However, even without this benefit, our results exceeded the top of our guidance range by USD 0.02 per share.” Third quarter sales for Corning“s Display Technologies segment were USD 489 million, an increase of 18% over the previous quarter“s sales of USD 415 million and a 66% increase from sales of USD 295 million in the 3Q of 2004. Liquid crystal display (LCD) glass volume increased 22% over 2Q 2005 volume and 73% over 3Q 2004 volume. Pricing for the quarter was flat sequentially, while exchange rates in the quarter had a 4% negative impact on sales versus the 2Q. Samsung Corning Precision (SCP), a 50% owned equity venture in Korea which makes LCD glass substrates, increased its volume by 22% sequentially. Equity earnings from SCP were up about 35% in the 3Q to USD 114 million versus USD 85 million in the 2Q 2005. Equity earnings for the 2Q 2005 at SCP had been hit by a number of non-recurring items. Net income for the Display Technologies segment, which includes results of Corning“s wholly owned business and equity earnings from SCP, grew 49% from USD 243 million in the 2Q to USD 363 million in the 3Q. Corning said these results reflect strong operating performance and the lower tax rate in the quarter. “We are also experiencing a rapid increase in market demand for large-size glass substrates. Generation 5 and larger substrates accounted for more than 75% of our total sales volume in the 3Q. We believe that the continued drop in retail pricing is enabling LCD televisions to gain market acceptance. Our preliminary data indicates that LCD televisions reached 10% penetration in the overall television market in the 3Q, which is double last year“s level,” Weeks said. Telecommunications segment sales declined 4% sequentially to USD 398 million versus USD 415 in the 2Q of 2005, due primarily to lower fiber-to-the-premises (FTTP) hardware and equipment sales. The segment experienced higher-than-anticipated optical fiber volume for the quarter, but this was more than offset by lower hardware and equipment sales. The Telecommunications segment recorded a net loss of USD 30 million compared to a net loss of USD 13 million in the 2Q 2005. The increased loss in the 3Q was primarily the result of the USD 28 million restructuring charge. In the 3Q 2005, Environmental Technologies segment sales were USD 144 million compared to USD 146 million in the 2Q. The Life Sciences segment had 3Q sales of USD 70 million compared to 2Q sales of USD 75 million. Corning finished the quarter with USD 2.4 billion in cash and short-term investments, a USD 300 million improvement over the 2Q 2005 balance of USD 2.1 billion. The increase was the result of strong operating cash flow which included the receipt of USD 144 million in net customer deposits in the Display Technologies segment. Flaws said, “We reached a new financial milestone in the 3Q as our cash and short-term investments exceeded our total debt by more than USD 300 million. Also during the quarter, Moody“s Investor Service upgraded our long-term debt rating and outlook to Baa3 and stable, respectively. We remain on track to reduce our total debt to below USD 2 billion by the end of this year”.