This investment will be used to fund the third phase of the Taichung facility, with the majority of the expenditure to be incurred during 2006 to 2007.
The construction of the third phase of the new Taichung facility will occur in stages over the next two years, following a modular construction plan that will be paced to market demand. Initial manufacturing from this third phase is projected to begin in late 2006, with production continuing to come online through 2007.
The Taichung facility will ultimately manufacture Generation 5.5, Generation 6, Generation 7.5 and larger glass substrates, suited to meet the continued strong demand for desktop monitors and the emerging market for LCD televisions.
This new investment will add significantly to Cornings large-size glass substrate melting and finishing capacity and it will continue to strengthen our position as a leading supplier of glass substrates to the growing LCD industry, said James P. Clappin, president, Display Technologies. Our goal is to keep pace with projected LCD industry demand. However, we will phase the timing of production lines within the Taichung facility to meet the pending supply agreements with customers in Japan and Taiwan.
James B. Flaws, vice chairman and chief financial officer, added, Previously announced expectations for the companys 2005 financial performance, including our $1.5 billion capital expenditure plan, are not affected by this announcement. We continue to be on track to achieve positive free cash flow this year. This third phase of the Taichung plant has been in our 2006 capital spending plan and our goal is to be free cash flow positive in 2006 also.
Cornings free cash flow financial measure is a non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, generally accepted accounting principles (GAAP).
Cornings announcement represents Cornings third phase of investment in the Taichung facility. Previously, the company announced:
In July 2004, a $750 million investment, primarily for the development of a new LCD manufacturing facility in Taichung.
In October 2004, a $326 million investment for the second phase expansion of the Taichung facility.
In addressing recent speculation regarding LCD industry inventory fluctuations, Flaws added, We continue to believe that worldwide sales of LCD televisions will double this year compared to 2004. We expect the LCD industry will need to build inventory to support the growing television market which is more back-half loaded than the monitor and notebook computer markets. Nevertheless, we continue to closely monitor industry inventory levels and will adjust our production should it be warranted.
Flaws also said, As we have reminded investors, supply chain fluctuations could influence our results in any given quarter. However, we remain delighted with the growth that we are currently seeing in LCD glass demand. Cornings sequential volume growth for LCD glass in our recently completed third quarter was about 22 percent for the combination of our wholly-owned LCD business and Samsung Corning Precision Glass Co., Ltd. This exceeds our guidance of 15 percent to 20 percent sequential growth for the quarter. Corning will discuss the quarter results in its third-quarter earnings release scheduled for October 26.