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Corning Remains Confident in its Future

Post Time:Feb 10,2009Classify:Company NewsView:352

Sees LCD demand recovery starting in Q2

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Hard hit by slowing global economies, Corning Incorporated is prepared for a prolonged recession, “but well positioned in key growth markets to take advantage of opportunities when the economy turns,” Wendell P. Weeks, chairman and chief executive officer, will tell more than 200 analysts and investors attending the company’s annual investor conference at TheTimesCenter in New York. The meeting begins at 9 a.m. today.

“We are prepared for lower sales and earnings this year, with a conservative capital structure, ample liquidity, and a goal of generating positive free cash flow for the year,” Weeks will say. At the same time, he will explain that the company is continuing to invest in a portfolio of innovative products such as Gen 10 LCD glass, ClearCurve® optical fiber for next-generation data centers, DuraTrap® emissions-control solutions, and highly scratch-resistant Gorilla™ glass for computer and portable device applications.

“After all,” he will say, “we are in the midst of a recession, not an industry collapse. We believe we are on the right side of the technology substitution curve and the technology leader in all of our core markets. Liquid crystal display is the winning TV technology, optical fiber is the only choice for the expansion of high-speed telecommunications networks and there is no turning back in the demand for clean air.”

Rings of Defense

Peter F. Volanakis, president and chief operating officer, will remind investors that last month the company announced restructuring plans to bring about $150 million to $200 million in annual cost savings. “As economic uncertainty increased, we took decisive action to realign our operations beginning in the third quarter of last year,” he will point out. Volanakis will explain that in the third quarter, Corning implemented discretionary spending controls, implemented a hiring freeze, and adjusted manufacturing schedules to manage inventories. By the fourth quarter, the company implemented some workforce reductions and eliminated temporary and contract worker positions, extended manufacturing shutdowns, and implemented zero-based capital budgeting for 2009. In late January, Corning announced it would reduce its workforce by 3,500 full-time positions, suspend salaried merit increases, and begin consolidating some manufacturing operations.

“We are committed to preserving the financial health of the company,” he will say. “These actions will result in a $115 million to $165 million pretax restructuring charge in the first quarter this year, and we will take additional actions if we do not see an improvement in our sales in the second quarter.” He will point out that the company has already consolidated manufacturing in its Life Sciences, Environmental Technologies, and Telecommunications segments, and is considering further actions.

Technology Innovations

Corning plans to spend about $630 million on research, development, and engineering in 2009, Dr. Joseph A. Miller, executive vice president and chief technology officer, will add. “Even in these difficult times, our commitment to the development of technological breakthroughs continues,” Miller will explain. He will review progress made with Corning’s Gorilla glass for portable display devices and its extension into the notebook computer and desk-top monitor space; advances with Corning’s Epic® System and cell culture solutions; establishment of manufacturing processes for green lasers for microprojection in anticipation of 2009 sales; advances in mercury abatement for coal-fired power plants; and delivery of customer samples of thin-film photovoltaics for solar-powered energy solutions. “We have a number of promising new business opportunities on the cusp of commercialization while we continue to explore new ideas, technologies and opportunities in specialty glass and ceramics,” Miller will say.

Environmental Technologies

The company’s long-term prospects for success in the automotive and diesel emissions control markets remain strong, Thomas R. Hinman, senior vice president, Environmental Technologies, will remark. “We see the opportunity for significant growth when the economy recovers.” 

He will point out that Corning remains in a market-leading position with its deep experience and strong market access in sales of light-duty automotive substrates, adding, “However, even with an economic recovery, we do not expect to see a return to as robust a market as we have seen in recent years. We also believe that the recovery is likely to be led by growth in emerging markets, rather than in the U.S. or Europe.”

Hinman will note that while overall heavy-duty truck production remains at historically low levels, future emissions regulations coming into effect in the U.S., Europe, and Japan could create a $600 million to $700 million global market for heavy-duty emissions controls (commercial trucks and buses) by 2012. “We believe we have a competitive edge with our Corning DuraTrap® aluminum titanate and advanced cordierite filters. Additionally, there is broad market acceptance for our DuraTrap aluminum titanate filters in the light-duty diesel market,” he will comment. Finally, he will point out that the light-duty diesel (passenger cars and trucks) global market could be a $1 billion opportunity by 2012, driven by increased regulations and consumer interest in clean engine solutions.

Telecommunications

Expecting a smaller optical fiber, cable, and hardware and equipment market in 2009 compared to last year, the company believes that continued innovation will enable future growth for Corning. “Optical fiber is winning,” Clark S. Kinlin, president and chief executive officer of Corning Cable Systems, will state. “The substitution of fiber over copper lines continues as bandwidth requirements in individual homes grow. Our ClearCurve product portfolio provides solutions for delivering high-speed bandwidth into the most challenging locations such as high-rise apartments and, soon, tight-fitting data center applications. These revolutionary technologies allow us to expand our leadership in the growing fiber to the home and enterprise network markets.”

Display Technologies

Corning expects that the contraction in the global LCD supply chain will ease by the end of the first quarter and overall demand will increase in the second quarter, leading to a stronger second half of the year. “We expect volume in the first quarter to decline 20% to 25% sequentially as the supply chain contraction continues,” James P. Clappin, president, Display Technologies Asia, will say. He’ll also note that Corning has reduced its own glass production by more than 50% and its equity venture, Samsung Corning Precision Glass Co., Ltd., has idled more than 25% of its capacity.

“We believe that the 2009 LCD glass market will be about two billion square feet, flat with last year,” he will note. Corning expects that there will be an overall decline this year in LCD monitor sales driven by the lower economy and notebook computers gaining market share. He will explain that LCD televisions will continue to gain share in the global TV market as CRT popularity and availability decline. Overall, LCD televisions will exceed 50% of annual TV sales in 2009, the company believes. Clappin will point out that the worldwide installed base of televisions is about two billion sets and less than 15% are LCD, “so there remains a very large substitution base and future opportunity. A 1% increase in global market penetration for LCD televisions represents more than 200 million square feet in additional glass demand,” he will add.

Financial Outlook

James B. Flaws, vice chairman and chief financial officer, will tell investors that the company has designed its financial plan on a sales cycle that would result in about $5 billion of sales in 2009. “Our first-quarter run rate will be less than $1 billion as we continue to grapple with the realities of the recession,” he will say. “As we explained, we are expecting significant improvement in LCD glass demand in the second quarter, leading to stronger demand in the second half of this year. If this improvement doesn’t occur, we are prepared to take additional restructuring actions to ensure the financial health of the company.”

He will point out that the company has prepared for the possibility of a prolonged recession with $2.8 billion in cash and short-term investments at yearend 2008, compared to only $1.6 billion in debt, 15% which is due in the next four years. The company has also significantly reduced its capital spending and suspended share repurchases to preserve cash.

“This will be a challenging year;” Flaws will tell investors, “but the long-term growth drivers for our business are intact. We believe the new technologies in our labs today will provide exciting future commercial opportunities for Corning.”

Conference Broadcast Information

Corning will make the presentation at its annual investor conference available to the public through a video and audio webcast and telephone access. The broadcast will begin Friday, Feb. 6, 2009 at 9 a.m. ET. The dial-in number is (800) 230-1766 (U.S.) or (612) 332-0107 (International). The password is 09 Analyst Meeting. The leader is Sofio. A replay of the call will be available at 1 p.m. ET and will run through 5 p.m. ET on Friday, Feb. 27, 2009. To access the replay, dial (800) 475-6701 (U.S.) or (320) 365-3844 (International). The passcode is 984725. The audio webcast will be archived for one year following the call.

Source: Corning IncorporatedAuthor: shangyi

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