This net loss includes previously announced after-tax charges totaling $81 million or $0.06 per share.
'We are pleased that our fourth-quarter results met our expectations and that our sales increased for the fourth consecutive time this past year,' James R. Houghton, chairman and chief executive officer, said. 'More importantly, our goal at the beginning of the year was to restore profitability and, excluding special items, we have accomplished what we set out to do,' he said.
Corning said its fourth-quarter results include pretax charges of $46 million (after-tax charges of $81 million or $0.06 per share). These include:
Restructuring, impairment and other charges of $21 million ($2 million after-tax credit), primarily related to the consolidation of Corning's high purity fused silica and fluoride crystal materials manufacturing facilities. A $25 million charge ($17 million after tax) to reflect the increase in the market value of Corning common stock to be contributed to settle the asbestos litigation related to Pittsburgh Corning Corporation.
Corning's equity earnings included an after-tax charge of $66 million for Corning's share of an asset impairment charge recorded by Samsung Corning Co., Ltd., a 50 percent-owned equity venture, which manufactures glass funnels and panels for conventional television.
Fourth-Quarter Operating Results
Fourth-quarter sales of $820 million exceeded the company's guidance range of $740 million to $765 million, and were $48 million higher than third-quarter sales.
Corning's Technologies segment sales for the quarter were $457 million, compared to sales of $396 million in the third quarter, driven primarily by strength in the Display Technologies business. Sequential sales of liquid crystal display (LCD) glass grew 39 percent, due to volume increases of more than 20 percent, favorable foreign exchange rates and stable pricing.
Environmental Technologies sales were essentially flat with third-quarter sales, but better than expected due to increased sales of thin-wall automotive substrates and diesel products. Fourth-quarter profitability for this business was impacted by weak manufacturing performance and start-up costs for its new diesel facility.
Corning's Telecommunications segment sales were $357 million for the quarter, a decline from third-quarter sales of $370 million, due to expected seasonal slowdowns of optical fiber volume in North America and declines in Japan. Pricing of single-mode optical fiber continued its moderating trend with only very slight sequential declines in the quarter.
Corning's display and environmental businesses and Telecommunications segment all continued to benefit from favorable foreign exchange rates in the fourth quarter. Of the $48 million sequential sales increase, approximately $20 million was due to more favorable foreign exchange rates in the fourth quarter.
The company's equity earnings were $15 million and included the $66 million impairment charge from Samsung Corning. Excluding this charge, fourth-quarter equity earnings were $81 million, compared to $75 million in the third quarter, due to stronger-than-expected earnings at Samsung Corning Precision Glass Co., Ltd., an equity venture which manufactures LCD glass in Korea. Corning's equity earnings from Dow Corning Corporation were $18 million for the quarter, compared to $22 million last quarter.
For the year, Corning recorded sales of $3.1 billion, a slight decline from a year ago sales of $3.2 billion. The company's loss from continuing operations for 2003 was $223 million, or $0.18 per share, compared to a loss from continuing operations of $1.8 billion, or $1.85 per share, last year. Corning's 2003 full-year results include net charges totaling $505 million ($351 million after tax or $0.28 per share) including:
Restructuring, impairment and other charges of $111 million ($26 million after tax and minority interest).
The asbestos litigation charge for Pittsburgh Corning Corporation of $413 million ($263 million after tax).
A $66 million after-tax asset impairment charge in equity earnings from Samsung Corning and $8 million after-tax equity investment impairments, primarily from the exit of the photonics product line.
Net gains on repurchases of debt of $19 million ($12 million after tax).
Cash Flow Update
Corning ended the year with $1.3 billion in cash and short-term investments, a slight decline from the previous quarter's balance of $1.4 billion. The decline included debt repayments of approximately $95 million, restructuring payments of $32 million and an additional voluntary contribution of $60 million to the company's pension fund. For the year, Corning paid off approximately $1.4 billion in total debt and reduced its debt-to-capital ratio to 33.8 percent, a substantial decline from a year ago levels of 46.7 percent.
'This was a year of great progress for Corning,' Houghton said. 'We improved our profitability by more than $500 million, before special items, by reducing operating expenses more than 20 percent and making substantial gains in our gross margins. We continued to invest in research and development, which has Corning well-positioned for growth this year,' he said.
The company said that it expects first-quarter sales to be in the range of $770 million to $830 million, with earnings per share in the range of $0.04 to $0.05, before special items. This estimate is a non-GAAP financial measure, and is reconciled on our Investor Relations Web site. Corning expects that foreign exchange rates will remain stable for the first quarter.
Telecommunications segment sales are anticipated to decline approximately 10 percent due to beginning-of-the-year normal optical fiber pricing reductions, lower project and services sales and the final exit from photonics. Sequential optical fiber volume for the first quarter is expected to be stable.
The environmental business is expected to see quarterly sales increases due to seasonal trends in the automotive and diesel industries. The company's Life Sciences business also expects first-quarter sales increases.
The company expects to continue to be sold out in LCD glass in the first quarter, despite bringing on additional capacity. Sequential LCD glass volume growth should be about 5 percent to 10 percent with current capacity constraints. Pricing for the first quarter should remain stable.
'We anticipate demand for flat-screen monitors to remain robust in 2004. LCD television is now in the early stages of acceptance and continuing demand is expected to double market penetration this year. We continue to invest in next generation large panel manufacturing, and we will bring additional Generation 6 manufacturing capacity on line this quarter and Generation 7 production later in the year,' James B. Flaws, vice chairman and chief financial officer, said.
He said that the company's automotive and diesel emission products are sold out in the first quarter. The business is ramping up production in its new diesel facility and plans to have two manufacturing lines operating by the end of the quarter. Flaws also noted that the environmental manufacturing performance is improving in the first quarter.
Flaws also noted that the company was encouraged with the selection of Corning as a leading supplier to Verizon for its fiber-to-the-premises initiative. 'When Verizon begins to implement its FTTP plan, we believe it will present a long-term revenue opportunity for Corning,' Flaws said.
'We are pleased with the improvements we have made in the company's financial health over the past year. Our focus in 2004 remains on our three core priorities of protecting our financial health, increasing profitability and investing in future growth opportunities,' he said.