Summary
Corning Incorporated (GLW) filed an 8-K on September 21, 2005, detailing significant events impacting its financial performance, primarily related to restructuring and impairments. The company announced a $30 million restructuring charge expected in the third quarter for its Telecommunications segment, aimed at cost reduction and involving cash severance expenses. While additional related expenses are not expected to be material, they will be expensed as incurred. More significantly, Corning reported an impairment event within its 50%-owned equity company, Samsung Corning Co., Ltd. (Samsung Corning), which manufactures cathode ray tube (CRT) glass. Due to the accelerating decline in the CRT market and strong growth in the Liquid Crystal Display (LCD) market, Samsung Corning anticipates impairment and other charges of at least $200 million to $300 million. This will translate to a reduction in Corning's equity earnings by $100 million to $150 million in the third and fourth quarters. Importantly, these charges are not expected to result in cash expenditures for Corning, and its remaining investment in Samsung Corning is estimated to be between $200 million and $250 million, with further evaluation for impairment of this residual investment underway.
Key Highlights
- 1Corning expects to record a $30 million restructuring charge in Q3 2005 for its Telecommunications segment, primarily for cash severance costs.
- 2Samsung Corning Co., Ltd., a 50% owned equity company, is taking impairment and restructuring charges estimated at $200 million to $300 million due to the decline in its CRT glass business.
- 3Corning's equity earnings will be reduced by at least $100 million to $150 million in Q3 and Q4 2005 as a result of Samsung Corning's charges.
- 4These impairment charges by Samsung Corning are not expected to involve cash expenditures from Corning.
- 5Corning's investment in Samsung Corning will be approximately $200 million to $250 million after the announced charges, and the company is evaluating further impairment on this remaining investment.
- 6Corning reaffirmed its third-quarter guidance for sales ($1.14 billion to $1.19 billion) and non-GAAP EPS ($0.20 to $0.22), excluding special items.
- 7Third-quarter volume guidance for Display Technologies was narrowed to the upper end of previous guidance, with segment volume expected to grow 15-20% sequentially.
- 8Optical fiber volume guidance for Q3 was revised upwards to 15-20% sequential growth from flat to down 5%, driven by strengthened North American demand.