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Sales were $896M and the net loss was $370M, or $0.39 per share; company plans to lay off 4,400 employees, including 2,700 on salary
July 23, 2002
CORNING, N.Y. -- Corning Incorporated (NYSE: GLW - News) today announced that its second-quarter sales were $896 million and that it incurred a net loss of $370 million, or $0.39 per share. The loss included restructuring and impairment charges of $494 million ($342 million after-tax), or $0.36 per share, and a gain resulting from debt repurchases of $68 million ($42 million after-tax), or $0.04 per share. "Second-quarter revenues were in line with our expectations," said James R. Houghton, chairman and chief executive officer. He said that while sales in the telecommunications sector continue to be severely depressed, most of Corning's businesses outside of telecommunications, such as the liquid crystal display business, are profitable and experiencing solid growth. Houghton said, "Excluding special items, our net loss was somewhat better than expected." Second-quarter sales of $896 million were essentially even with first-quarter sales of $898 million. Sales reflect increases in the advanced materials and information display segments, offset by a 6% decline in the telecommunications segment. This sequential decline in telecommunications was primarily due to flat shipments and price declines of 10% to 15% in the optical fiber and cable business. The company said that fiber volume did not improve as expected due to lower-than-anticipated demand from North American incumbent carriers and cable television operators. "We continue to be encouraged with the quarter-to-quarter growth in our information display segment and environmental technologies business," James B. Flaws, vice chairman and chief financial officer, said, "However, there is no question that the market turmoil caused by several customer bankruptcies and ongoing accounting controversies negatively impacted capital expenditures among our telecommunications customers in North America." Corning reported that it had $1.3 billion in cash and short-term investments at the end of the second quarter, down from $1.8 billion at the end of the first quarter. The decline in cash and short-term investments was due primarily to approximately $480 million of debt and commercial paper repayments. Flaws said, "We are pleased with the significant improvement in operating cash flow compared to the first quarter. Our efforts to control our cash burn rate are paying off." In the second quarter of 2001, Corning reported sales of $1.9 billion and a loss of $4.8 billion or $5.13 per share. The loss included a $4.8 billion goodwill impairment charge. The year-to-year sales decline reflects the significant falloff in the fiber and cable business which began in the third quarter of last year. In this year's second quarter, Corning recorded restructuring and impairment charges totaling $494 million ($342 million after-tax), or $0.36 per share. In April the company said that it expected to take total restructuring and impairment charges in the range of $600 million pretax spread over the second and third quarters of 2002. The second quarter pretax charges include: $418 million ($281 million after-tax) of restructuring and impairment charges related to workforce reductions and facility closures. $60 million ($37 million after-tax) impairment of cost investments in the telecommunications segment. $16 million ($10 million after-tax) loss on the divestiture of the appliance controls business. $14 million after-tax charge to impair an international cabling equity investment which is included in equity earnings. Corning expects third-quarter pretax restructuring charges to be in the range of $125 million to $150 million based on actions already underway. Approximately one-third of the charges for the second and third quarters will be cash. As part of the company's restructuring and cost reduction efforts, Corning has planned workforce reductions of approximately 4,400 employees including 2,700 salaried positions. Additionally, the company has announced that it will close several manufacturing and research facilities as it consolidates and reduces cost in its global telecommunications businesses as well as in its corporate research and administrative staff organizations. In addition to the restructuring actions, Corning has implemented significant cost reduction programs across its existing businesses and staff functions. The company expects to realize annualized savings of approximately $265 million from both the restructuring and cost reduction programs by the beginning of 2003. Cost savings in the second half of 2002 should be approximately $55 million as these programs are implemented. "Corning is reviewing a number of other actions to further reduce both the cost structure and capital requirements of the businesses going forward," Flaws said. "This could include the potential sale or discontinuation of some non-core businesses. Additional consolidation of manufacturing capacity within our telecommunications segment is also possible." He said the exact timing or outcome of these reviews has not yet been determined but could result in additional charges this year. Gain on Debt Repurchase Also in the second quarter, Corning recorded a gain of $68 million ($42 million after-tax), or $0.04 per share, due to the repurchase of $220 million in accreted value of its zero coupon convertible debentures due 2015 for $148 million in cash in a series of open market transactions. Corning said that it may, from time to time, repurchase certain additional Corning debt securities in open market or privately negotiated transactions. Third-Quarter Outlook Corning said it anticipates that third-quarter sales will be in the range of $825 million to $875 million and its net loss will be in the range of $0.07 to $0.10 per share, excluding previously announced restructuring and impairment charges. The primary driver of the range will be fiber and cable volume, which is expected to be flat to down 15%. Corning said continued price pressure will also impact revenues. Sales in the rest of the telecommunications businesses are also expected to remain at depressed levels. The company said it expects revenues from its advanced materials and information display segments to remain strong in the third quarter led by its liquid crystal display business, which continues to operate at full capacity. Third-quarter results are expected to reflect the positive impact of cost reduction programs; however implementation costs and continued weakening of the fiber and cable business could largely offset these gains. Houghton said, "We are disappointed that the issues affecting the telecommunications industry are resulting in reduced confidence and a new round of carrier capital spending reductions. If this trend continues, we will take out more cost. Our commitment to achieving profitability in 2003 is unwavering. While we find the difficulties facing the telecommunications industry to be significant, we are fortunate to have growth opportunities in our information display and advanced materials segments. We plan on extending our market-leading positions in these segments and we are prepared to take advantage of our optical communications market leadership when increased capital spending returns to the telecom space." Corning Inc.
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