Corning Incorporated announced on 25 January 2005 that its sales for the 4Q 2004 were USD 1.033 billion, with net income of USD 163 million, or USD 0.11 per share. Net income includes net special char…
Corning Incorporated announced on 25 January 2005 that its sales for the 4Q 2004 were USD 1.033 billion, with net income of USD 163 million, or USD 0.11 per share. Net income includes net special charges of USD 14 million, or USD 0.01 per share. Excluding these net charges, Corning said its earnings per share (EPS) would have been USD 0.12 and at the high end of previously-announced quarterly guidance. The EPS is a non-GAAP financial measure, which, together with all non-GAAP financial measures is reconciled on the company“s investor relations Web site. For the year, Corning recorded sales of USD 3.85 billion, an increase of 25% over 2003 sales of USD 3.09 billion. The company recorded a net loss of USD 2.17 billion or USD 1.56 per share. This compares to a 2003 net loss of USD 223 million or USD 0.18 per share. Excluding special items, Corning had net income for the year of USD 674 million or USD 0.45 per share in 2004, compared to net income of USD 128 million or USD 0.10 per share in 2003. This is a non-GAAP financial measure. James R. Houghton, chairman and chief executive officer, said, “We had a solid 4Q and a spectacular year. Three years ago we embarked on a significant restructuring of the company. At that time, I said we knew there was a light at the end of the tunnel, but we did not know how long it was. I am pleased to say today that we have emerged from that tunnel, and we believe Corning has a very bright future.” Houghton added, “This is the second consecutive year that we have achieved a USD 500 million improvement in profitability before special items. I believe that we have strong momentum across a number of our business segments going into 2005.” Profitability before special items is a non-GAAP financial measure. 4Q OPERATING RESULTS Corning“s 4Q 2004 sales of USD 1.033 billion increased 3% over the previous quarter“s sales of USD 1.006 billion, and 26% over the prior year“s 4Q sales of USD 820 million. Gross margin for the 4Q declined to 35% versus 40% in the previous quarter, a result of lower margins in the Telecommunications segment caused by a number of adjustments not expected to reoccur in the 1Q 2005, the write-off of certain assets in the semiconductor product line, and weak manufacturing performance in the Environmental Technologies segment. The company recorded USD 311 million in 4Q 2004 sales for its Display Technologies segment, a 5% increase over 3Q sales of USD 295 million. Sequential quarterly volume in liquid crystal display (LCD) glass increased 2%, and movements in exchange rates resulted in a 3% increase in sales. Pricing for the quarter again remained stable, and net income for the segment increased 6% to USD 151 million from USD 142 million in the previous quarter. For the full year, Corning“s LCD glass volume increased by 65 %. Wendell P. Weeks, president and chief operating officer, said, “While our Display Technologies segment experienced some Taiwanese customer slowdowns in November, we had very strong performance in December. The slight slowdown in orders has allowed us to rebuild our inventory levels to more efficiently manage our customer requirements.” Telecommunications segment sales were USD 423 million, a 3% increase over 3Q sales of USD 412 million. Excluding the impact of the divestiture of the frequency control product line, sales increased 6%. The segment recorded a net loss of USD 9 million versus a net loss of USD 1.82 billion in the 3Q. The 3Q loss was primarily due to goodwill, fixed assets and equity method investment impairment charges. Fiber volume in the 4Q was essentially flat compared to the 3Q results and better than the company expected. Fiber pricing was down only slightly in the quarter. “Our 4Q telecommunications results continue to reflect the strength of hardware, cable and fiber sales in North America, particularly related to Verizon“s fiber-to-the-premises buildout, as well as higher than usual project sales,” Weeks said. Environmental Technologies segment sales for the 4Q were USD 130 million, a decline of 4% from the previous quarter“s sales of USD 136 million. “This was a very satisfying quarter for Corning. Our sales increased 26% compared to this same period last year. Excluding special items, our net income improved by USD 125 million, and our EPS was three times what it was last year,” Weeks said. SPECIAL ITEMS Corning“s 4Q 2004 net special charges consisted of a USD 17 million charge to reflect the increase in the fair market value of Corning common stock to be contributed to settle the asbestos litigation related to Pittsburgh Corning Corporation and USD 3 million of net credits related to adjustments to restructuring reserves. For the full year, the company“s net income was reduced by USD 2.839 billion, or USD 2.01 per share, of net charges comprising the following: USD 1.789 billion (USD 1.802 billion after-tax and minority interest) primarily related to the impairment of goodwill and fixed assets in the Telecommunications segment; USD 33 million (USD 30 million after-tax) to reflect the increase in the fair market value of Corning common stock to settle the Pittsburgh Corning Corp. asbestos litigation; USD 36 million (USD 34 million after-tax) related to Corning“s ongoing debt reduction program; provision for income taxes of USD 937 million; equity method charges of USD 56 million; and income from discontinued operations of USD 20 million related to the 2002 sale of Corning Precision Lens. CASH FLOW/LIQUIDITY UPDATE Corning ended the year with USD 1.9 billion in cash and short-term investments, an increase from the previous quarter“s balance of USD 1.7 billion. The cash increase was primarily due to strong cash flow from operations, including the receipt of a USD 102 million customer deposit. The company“s debt-to-capital ratio was 41%, a slight decline from the previous quarter“s ratio of 42%. “We continue to make progress on our financial priorities. We met or exceeded all of our expectations for the year. Our balance sheet continued to improve. We reduced our overall debt level, and we had operating cash flow of over USD 1 billion,” said James B. Flaws, vice chairman and chief financial officer. OUTLOOK FOR 1Q 2005 Corning said that it expects 1Q 2005 sales to be in the range of USD 980 million to USD 1.03 billion and EPS in the range of USD 0.11 to USD 0.13 before special items. The company expects foreign exchange rates to remain stable and that its gross margin will be in the range of 37% to 38% for the quarter. In the Display Technologies segment, Corning expects that the sequential volume growth will be in the range of 5% to10 %, including both its wholly-owned business and Samsung Corning Precision Glass Co. Ltd., a 50% owned equity company. The sequential volume growth in Corning“s wholly-owned business is expected to be flat to up 10% in the 1Q. Samsung Corning Precision is anticipating sequential volume growth of 5% to 15% for the quarter. The rate of volume growth will be largely dependent upon the industry“s ability to efficiently bring on new panel manufacturing capacity during the quarter, as well as continued strong market demand for LCD products. Corning noted that its capacity expansion plans are modular and may be adjusted if industry growth projections change. While the company anticipates continued growth in the LCD glass market during the 1Q, it also noted that the level of glass demand could differ by geographic region. Pricing for LCD glass is expected to begin to decline after being stable to up slightly over the last two years. As a result, the company anticipates that the average price for LCD glass will be down approximately 5% sequentially in the 1Q. “Last week, we introduced the first successful commercial application of Generation 7 LCD glass substrates at Samsung Corning Precision. This larger size glass substrate is designed to support the LCD TV market, which we continue to believe will be a significant driver of LCD glass volume increases for the next several years,” Flaws said. In the Telecommunications segment, the company is anticipating 1Q sequential fiber volume will be flat to down 10% against an unusually strong 4Q. First-quarter fiber price declines are expected to be around 5%. The company noted that at the end of the 4Q it received final notification from the People“s Republic of China“s Ministry of Commerce that it had removed its preliminary fiber dumping determination which had placed a 16% duty on Corning fiber imports. Previously, the company said that its fiber exports to China had been impacted by the preliminary determination. “We are very pleased with the final ruling,” Flaws said. “It alleviates any uncertainty about our ability to compete in the very important and growing China region. We are hopeful about regaining lost market share in this dynamic fiber market,” he said. Flaws added “We are entering the 1Q with excellent momentum in our major businesses. Corning“s management team will be discussing the outlook for our businesses in more depth at our annual investor meeting in New York City on 4 February 2005.”