LCD TV Drives Glass Volume Increases Company Reviews New Technology Opportunities
CORNING, N.Y., Feb. 13 /Xinhua-PRNewswire/ -- Growing demand for liquid crystal display (LCD) television, increased regulatory requirements for reduced diesel engine emissions and expanding broadband capabilities are critical drivers of Corning Incorporated's (NYSE: GLW) long-term growth strategy, Wendell P. Weeks, president and chief executive officer, will tell investors on Feb 9th, 2007.
Weeks and other senior executives will present Corning's view on the markets it serves at the company's annual investor relations meeting to be held at the Mandarin Oriental Hotel in New York City beginning at 9 a.m. on Feb 9, 2007. The presentations will also be broadcast live via the company's Web site.
In his opening remarks Weeks will say, "Last year at this meeting I said that 2006 would be a year of execution and a year that would tell us a lot about our business strategy. I think that our record performance for net income and earnings per share last year and progress in our key growth businesses demonstrates that we succeeded."
"As we look forward to 2007 and beyond," Weeks will say, "The future of Corning appears bright. We are committed to maintaining our global leadership in LCD glass, gaining the majority share of the emerging heavy-duty diesel emissions control market opportunity, and capturing the growth which is returning to the telecommunications industry. Our goal is to deliver another year of growth to our shareholders."
"Corning also has some very exciting growth opportunities well beyond those of 2007," Weeks will add. "We are pleased to be able to share with you today just a few of the many new technologies in development in our very robust innovation pipeline."
Growth Opportunities
Display Technologies
Peter F. Volanakis, chief operating officer, will explain to investors that the rapid decline in retail pricing and subsequent increase in consumer demand for LCD televisions will drive annual LCD glass market demand to nearly two billion square feet by 2008. "This represents a compound annual growth rate of about 30 percent," he will say. "It is our belief that LCD TV penetration should reach 33 percent of the global color television market this year, and 45 percent by 2008." Volanakis will point out that the majority of glass volume growth will be fueled by both the popularity of LCD televisions and the movement to larger screen sizes. The average LCD screen size will grow to nearly 32 inches in 2008 from the average 28 inches on Feb 9, 2007.
"We believe that by 2008, LCD glass demand for televisions alone will be nearly equal to the size of the entire glass market in 2006," Volanakis will say. Worldwide LCD glass demand reached 1.2 billion square feet last year. He will also tell investors that by 2010, LCD will be the leading television technology, surpassing the cathode ray tube in worldwide unit sales. "The penetration rate of LCD television in North America should reach 61 percent and in Japan, nearly 90 percent by 2008. We also expect to see significant penetration of LCD TVs in the developing Chinese market. In fact, we believe that by 2010, the Chinese LCD TV market will be about the size of the North American market," he will say.
Volanakis will also point out that LCD is rapidly gaining share in the 40-inch and larger TV segment as leading TV brands shift to LCD technology and as consumers recognize LCD's performance benefits in 1080p high-definition (full HD) format. And, Volanakis will outline Corning's abilities to address the seasonality inherent in the LCD TV market, encouraging investors to watch long-term end market trends rather than reacting to short-term supply chain news.
Corning expects notebook penetration to reach as much as 40 percent of total personal computers sold, and LCD monitors to exceed 90 percent of the desktop market by 2008, Volanakis will also note. Adding to this LCD glass demand will be an anticipated growth rate in excess of 20 percent from 2006 to 2008 for small handheld devices.
Diesel Products
"We are expecting significant growth in our diesel products business in 2007, driven by our leadership position in the U.S. heavy-duty vehicle market and continued expansion into the light-duty business," Thomas R. Hinman, senior vice president and general manager, Corning Diesel Technologies, will tell investors. "We believe we can grow our diesel products revenue by more than 60 percent this year and have the potential to realize $500 million to $600 million in revenue by 2010."
Hinman will remind investors that new U.S. diesel engine standards that went into effect on January 1, 2007 require all heavy-duty engines to utilize a filter system solution that will greatly reduce particulate matter (PM) and nitrogen oxides (NOx) emissions. "Global emissions regulations will continue to tighten and drive demand for our advanced diesel products solutions," he will say.
"This is a milestone year as heavy duty represents the first significant growth opportunity for our diesel business," Hinman will point out. "We expect another wave of growth as the U.S., Europe and Japan implement more stringent emissions standards for light-duty and heavy-duty applications. Non-road vehicles represent a third revenue opportunity at the end of this decade. We believe Corning is well positioned to lead in all three areas," he will tell investors.
"We expect the market opportunity could reach $900 million for each of the heavy-duty and light-duty diesel application segments by 2012. In looking at this on a projected product value basis, the global opportunity for heavy duty is expected to be approximately $340 per vehicle this year, and may reach as much as $475 per vehicle by 2012," Hinman will add.
Telecommunications
Larry Aiello, president and chief executive officer, Corning Cable Systems, will tell investors that Corning has seen a steady improvement in its Telecommunications segment results over the past several years. "We expect this trend to continue in 2007," he will state. Aiello will say that the nearly universal goal of providing triple-play (voice, video and data) bundled services, along with the emergence of high-definition television and improved telephony offerings will drive network expansions and improvements through the remainder of the decade.
"Corning's core competencies and innovation track record position us well to solve key challenges in the access networks," Aiello will say. "We expect to introduce a suite of new optical fiber and cable, as well as hardware and equipment products this year that can dramatically reduce the labor costs for network installations in multi-dwelling units. This has the potential of creating a significant new revenue stream for our Telecommunications segment in the future," Aiello will tell investors. From 2003 to 2006, the introduction of numerous product innovations enabled the company to gain a strong position in the access market while providing more than $500 million of savings to Corning's telecommunications customers.
Emerging Technologies
Joseph A. Miller, chief technology officer, will review Corning's sustained investment in innovation to provide longer term growth for the company. "We believe that we are heading into one of the most promising periods of Corning innovation," Miller will say.
"The rich portfolio of research and development projects tied to the company's current growth platforms in display, diesel, telecommunications and life sciences are expected to provide significant growth over the next several years," Miller will say. "Reaching beyond these near-term growth areas, we have multiple emerging technologies that have the potential to provide Corning with its next wave of growth."
A few of these promising new technologies to be highlighted by Miller include microreactors, silicon on glass and synthetic green lasers. These technologies are still in the early stage of development and it is difficult to predict when or if the company will see commercial success, Miller will explain.
Corning has developed proprietary microreactor technology that is optimized for the manufacture of high-value specialty, fine, and pharmaceutical chemicals. These modular, uniquely formed glass structure assemblies are tailored to customer reaction specifications and enable key benefits to customers in the chemical reaction industry in terms of scalability, cost reduction and improved yields.
Still in the early stages of the company's innovation process is a technology known as silicon on glass or SiOG. In this area, Corning is evaluating various processes to deposit high-performance silicon films onto Corning display glass and transform the glass into an engineered substrate or electronic backplane onto which electronic circuits can be easily added by display glass customers.
Corning has also developed compact, high-speed, powerful and efficient green laser technology. The company's synthetic green laser is uniquely designed to enable ultra-compact and ultra-efficient projection capabilities for entirely new viewing experiences through mobile consumer electronic devices.
Financial Outlook
"Corning's strong balance sheet and cash flow provide ample liquidity to fund the current and next waves of growth opportunities that you have heard about today," James B. Flaws, vice chairman and chief financial officer, will note. "Our goal is to have free cash flow in excess of $400 million in 2007."
Corning's clearly defined priorities for the management of the company's strong balance sheet will be reiterated by Flaws. "Being mindful of lessons learned from the telecom bubble, we will continue to maintain significant cash balances. In the near term, our cash balance will be determined by our outlook for capital expenditures for our growth initiatives, investments in research and development and funding of new business opportunities. During 2007, our board of directors will evaluate whether to use any excess cash to initiate a stock repurchase program or to reinstate dividends on our common stock."
Flaws will tell investors that capital expenditures are expected to be in the range of $1.1 billion to $1.2 billion in 2007. He also will say that foreign exchange rates have the potential to impact the company's sales and net income, noting that 68 percent of the company's sales occur outside the United States and that all LCD glass sales are transacted in Japanese yen.
"Dow Corning Corporation, our 50-percent equity company, will continue to be a strong contributor to Corning's overall growth," he will say. "Dow Corning recorded more than $4 billion in sales last year and they expect to grow at a rate of 6 percent to 8 percent in 2007. We believe Dow Corning will provide Corning with a strong base of equity earnings and flow of dividends going forward," he will say.
First-Quarter Outlook
Corning will reaffirm its first-quarter guidance for sales in the range of $1.26 billion to $1.31 billion and earnings per share of $0.24 to $0.27 before special items. This is a non-GAAP financial measure. This and all non-GAAP financial measures are reconciled on the company's investor relations Web site and in attachments to this news release.
The company expects first-quarter gross margin to be in the range of 43 percent to 45 percent. Equity earnings in the first quarter are expected to be down 25 percent to 30 percent, due primarily to seasonally lower demand and lower prices at Samsung Corning Precision Glass Co., Ltd. Samsung Corning Precision is a 50-percent owned equity company in Korea which manufactures LCD glass substrates.
In detailing first-quarter business expectations, Flaws will note that Corning expects its total LCD glass volume to decline sequentially between 10 percent and 15 percent. He will explain that the decline is due primarily to the seasonality of the LCD TV market, which is becoming a significantly larger portion of the overall LCD glass business. The company will remind investors that it expects first-quarter LCD glass pricing to decline one percent to two percent for its wholly owned business. Pricing at Samsung Corning Precision Glass Co., Ltd is expected to be down more than Corning's wholly owned business.
Corning anticipates that first-quarter sales in its Telecommunications, Environmental Technologies and Life Sciences segments will increase slightly compared to last year's fourth-quarter sales.
Concluding his remarks, Flaws will say that, "Corning has long-term financial goals to grow the company significantly faster than the economy. However, as a technology company that places big bets on research and development, we caution that this growth may not be smooth. We intend to invest wisely as we pursue this growth and have our return on invested capital exceed our cost of capital. We believe that our strategy will bring excellent returns to our shareholders over time."
Conference Broadcast Information
Corning will make the presentation at its annual investor conference available to the public by webcast and telephone access. The broadcast will be held Friday, Feb. 9, 2007 at 9 a.m. EST. The dial-in number is (210) 234-0003. The password is investor. The leader is Mr. Ken Sofio. A replay of the call will begin at approximately 1:30 p.m. and will run through 5 p.m. EST on Friday, Feb. 23, 2007. To access the replay, dial (402) 220-9718; a password is not required. A live audio webcast will be available at http://www.corning.com/investor_relations . The audio 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 measure excludes restructuring, impairment and other charges and adjustments to prior estimates for such charges. Additionally, the company's non-GAAP measure excludes adjustments to asbestos settlement reserves required by movements in Corning's common stock price, gains and losses arising from debt retirements, charges resulting from the impairment of equity or cost method investments, or adjustments to deferred tax assets, and gains or losses recognized in equity earnings from restructuring, impairment or other charges or credits taken by equity method companies. Corning's free cash flow financial measures are also non-GAAP measures. The company believes presenting non-GAAP free cash flow; net income and EPS measures are 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 http://www.corning.com/investor_relations and accompany this news release.
About Corning Incorporated
Corning Incorporated ( http://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 that involve a variety of business risks and other uncertainties that could cause actual results to differ materially. These risks and uncertainties include the possibility of changes or fluctuations in global economic and political conditions; tariffs, import duties and currency fluctuations; product demand and industry capacity; competitive products and pricing; manufacturing efficiencies; cost reductions; availability and costs of critical components and materials; new product development and commercialization; order activity and demand from major customers; capital spending by larger customers in the liquid crystal display industry and other businesses; changes in the mix of sales between premium and non-premium products; facility expansions and new plant start-up costs; possible disruption in commercial activities due to terrorist activity, armed conflict, political instability or major health concerns; ability to obtain financing and capital on commercially reasonable terms; adequacy and availability of insurance; capital resource and cash flow activities; capital spending; equity company activities; interest costs; 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; changes in key personnel; stock price fluctuations; and adverse litigation or regulatory developments. These and other risk factors are identified 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 RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE ( http://www.corning.com/media_center/press_releases/2007/Non-GAAP_for_IR_2007020901.pdf )
