The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from Business Wire

Corning Announces Third-Quarter Results

Wednesday, October 26, 2011

Corning Announces Third-Quarter Results07:10 EDT Wednesday, October 26, 2011 CORNING, N.Y. (Business Wire) -- Corning Incorporated (NYSE: GLW) today announced its results for the third quarter of 2011. Third-Quarter Highlights Sales were $2.1 billion, an increase of 3% sequentially and 30% year over year. Earnings per share were $0.51. Excluding special items, earnings per share were $0.48*, consistent with last quarter, but down 6% year over year. Display Technologies' wholly owned business volume increased in the mid-single digits sequentially and was up more than 30% year over year. Samsung Corning Precision Materials Co., Ltd.'s volume declined more than 20% sequentially and 25% year over year. The combined total glass volume of Corning's wholly owned business and SCP declined about 10% sequentially, in line with the overall glass market. The Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences business segments all experienced substantial year-over-year sales gains. Third-Quarter Financial Comparisons           Q3 2011         Q2 2011         % Change         Q3 2010         % Change Net Sales inmillions         $2,075         $2,005         3%         $1,602         30% Net Incomein millions         $811         $755         7%         $785         3% Non-GAAPNet Incomein millions*         $766         $758         1%         $808         (5%) GAAP EPS         $0.51         $0.47         9%         $0.50         2% Non-GAAPEPS*         $0.48         $0.48         0%         $0.51         (6%) *These are non-GAAP financial measures.The reconciliation between GAAP and non-GAAP measures is provided in the tables following this news release, as well as on the company's investor relations Web site. “We had a very respectable quarter with all of our segments showing double-digit percentage sales growth over last year,” said Wendell P. Weeks, chairman, chief executive officer and president. “Our results were in line with the revised forecast we provided in September, when we first explained that LCD glass volume would be lower than expected as a result of a slowing in panel maker utilization rates and some share loss at SCP.” He added, “We saw particularly robust performance in our Telecommunications segment with strong year-over-year growth in all product lines. Global demand for optical fiber remains healthy.” Weeks said that the business fundamentals in Corning's core markets remain solid, “We firmly believe that we are well positioned to achieve our goal of becoming a $10 billion company within the next several years.” Third-Quarter Segment Results Sales in the Display Technologies segment were $815 million, a 7% sequential and 26% year-over-year increase. Price declines in the quarter were in line with the company's expectations. Segment results also benefited from a stronger Japanese yen. “The display supply chain experienced a contraction in the third quarter as demand for LCD TVs remained strong worldwide while panel makers ran at lower utilization rates, especially in Korea. We believe the supply chain exited the third quarter with about 14 weeks of inventory, which is a level we have not seen since early 2009. The inventory contraction is a major factor in Corning revising its estimate of the worldwide glass market to 3.2 billion square feet for the year,” said James B. Flaws, vice chairman and chief financial officer. Telecommunications segment sales were $560 million, an increase of 2% sequentially and 21% year over year. Sales of enterprise network products increased 9% and fiber-to-the-home sales increased more than 30% year over year. Environmental Technologies segment sales were $247 million, a slight decline sequentially, but a 19% year-over-year increase. Specialty Materials segment sales were $299 million, an increase of 6% sequentially and nearly 90% over last year. The business continues to benefit from extremely strong market acceptance of its industry-leading cover glass, Corning® Gorilla® Glass, for handheld devices, tablets, and laptop computers. Life Sciences segment sales of $153 million were consistent sequentially and increased 22% year over year. Recent acquisitions contributed significantly to the sales increase. Corning's equity earnings were $324 million, a decrease of 24% sequentially and 36% year over year. The decline was driven by lower LCD glass volumes at SCP and lower demand for Dow Corning Corporation's silicone products. Gross margin for the quarter was 47% versus 44% in the previous quarter. The margin improvement was driven in part by strong operating performance in both Display Technologies and Specialty Materials business segments. Looking Forward The company expects LCD glass volume at its wholly owned business to be even or slightly down compared to last quarter. Glass volume at SCP is expected to increase at least 20% sequentially due primarily to the business regaining share lost in the previous quarter and higher panel maker utilization rates. The company also expects pricing pressure at both its wholly owned business and SCP to be more significant in the fourth quarter than in previous quarters. “We believe the Korean panel makers will run at higher utilization rates in the fourth quarter, which is typically a period of significant seasonal retail demand. Panel maker utilization rates outside of Korea will vary, but in aggregate will be comparable to the third quarter,” Flaws commented. “The display industry faced an unusual market dynamic this year. Retail demand for LCD products continues to be stronger than actual LCD glass demand. Retail demand should be up about 13% for the year. This gives us confidence that when the supply chain correction ends, glass demand will resume growth more in line with retail performance,” he said. In the Telecommunications segment, Corning expects fourth-quarter sales to decline in the range of 10% to 15%, the result of normal seasonality in the industry. Environmental Technologies segment sales also are expected to decline between 5% and 10% in the fourth quarter, due to typical seasonal slowdown. In the Specialty Materials segment, Corning anticipates fourth-quarter sales declines of about 15%, reflective across all product lines including Gorilla® Glass. In the Life Sciences segment, Corning expects a slight sales decline due to typical seasonal slowdown. Corning expects equity earnings to be down about 5% sequentially. The decline will be the result of lower earnings at Dow Corning, where demand for silicone products has slowed significantly. Dow Corning's Hemlock Semiconductors business may be negatively impacted by declining demand in the solar market. Finally, Flaws pointed out that Corning remains confident about its long-term business prospects and its good financial health. He noted that the company recently increased its quarterly common stock dividend, in line with its performance as a consistent cash generator, and authorized a $1.5 billion stock buyback program. Flaws said “The board's decision to repurchase shares reflects our belief that the long-term value of our businesses is substantially greater than our current share price.” Upcoming Meetings Corning executives will present at the UBS Technology Conference in New York on Nov. 15, and attend the CSFB Technology Conference in Scottsdale, Ariz., on Nov. 29. The company also will present at the Barclay's Technology Conference in San Francisco on Dec. 8. Third-Quarter Conference Call Information The company will host a third-quarter conference call on Wednesday, Oct. 26 at 8:30 a.m. ET. To participate, please call toll free (800) 230-1096 or for international access call (612) 332-0107 approximately 10-15 minutes prior to the start of the call. The password is ‘QUARTER THREE'. The host is ‘SOFIO'. To listen to a live audio webcast of the call, go to Corning's Web site at www.corning.com/investor_relations and click Investor Events on the left. A replay will be available beginning at 10:30 a.m. ET and will run through 5:00 p.m. ET, Wednesday, Nov. 9, 2011. To listen, dial (800) 475-6701 or for international access call (320) 365-3844. The access code is 219706. The 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 measures exclude restructuring, impairment and other charges and adjustments to prior estimates for such charges. Additionally, the company's non-GAAP measures exclude adjustments to asbestos settlement reserves, gains and losses arising from debt retirements, charges or credits arising from adjustments to the valuation allowance against deferred tax assets, equity method charges resulting from impairments of equity method investments or restructuring, impairment or other charges taken by equity method companies and gains from discontinued operations. The company believes presenting non-GAAP net income and EPS measures is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company's underlying performance. Reconciliation of these non-GAAP measures can be found on the company's Web site by going to www.corning.com/investor_relations and clicking Financial Reports on the left. Reconciliation also accompanies this news release. Forward-Looking and Cautionary Statements This press release contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995), which are based on current expectations and assumptions about Corning's financial results and business operations, that involve substantial risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: the effect of global political, economic and business conditions; conditions in the financial and credit markets; currency fluctuations; tax rates; product demand and industry capacity; competition; reliance on a concentrated customer base; manufacturing efficiencies; cost reductions; availability of critical components and materials; new product commercialization; pricing fluctuations and changes in the mix of sales between premium and non-premium products; new plant start-up or restructuring costs; possible disruption in commercial activities due to terrorist activity, armed conflict, political or financial instability, natural disasters, adverse weather conditions, or major health concerns; adequacy of insurance; equity company activities; 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; retention of key personnel; stock price fluctuations; and adverse litigation or regulatory developments. These and other risk factors are detailed 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. About Corning Incorporated Corning Incorporated (www.corning.com) is the world leader in specialty glass and ceramics. Drawing on 160 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. View Related Video: A Day Made of Glass Follow Corning: RSS Feeds | Facebook | Twitter | YouTube CORNING INCORPORATED AND SUBSIDIARY COMPANIESCONSOLIDATED STATEMENTS OF INCOME (Unaudited; in millions, except per share amounts)             Three months ended Nine months ended September 30, September 30, 2011 2010 2011 2010   Net sales $ 2,075 $ 1,602 $ 6,003 $ 4,867 Cost of sales   1,097     878     3,262     2,585     Gross margin 978 724 2,741 2,282   Operating expenses: Selling, general and administrative expenses (Note 1) 216 250 750 731 Research, development and engineering expenses 166 148 494 437 Amortization of purchased intangibles 4 2 11 6 Restructuring, impairment and other credits (1 ) (3 ) Asbestos litigation charge (credit) (Note 2)   5     6     15     (41 )   Operating income 587 319 1,471 1,152   Equity in earnings of affiliated companies 324 504 1,150 1,447 Interest income 6 3 15 8 Interest expense (23 ) (29 ) (72 ) (81 ) Other income, net   27     2     97     130     Income before income taxes 921 799 2,661 2,656 Provision for income taxes (Note 3)   (110 )   (14 )   (347 )   (142 )   Net income attributable to Corning Incorporated $ 811   $ 785   $ 2,314   $ 2,514     Earnings per common share attributable to Corning Incorporated: Basic (Note 4) $ 0.52   $ 0.50   $ 1.48   $ 1.61   Diluted (Note 4) $ 0.51   $ 0.50   $ 1.46   $ 1.59   Dividends declared per common share $ 0.05   $ 0.05   $ 0.15   $ 0.15     See accompanying notes to these financial statements. CORNING INCORPORATED AND SUBSIDIARY COMPANIESCONSOLIDATED BALANCE SHEETS (Unaudited; in millions, except per share amounts)     September 30, December 31, 2011 2010 Assets   Current assets: Cash and cash equivalents $ 4,901 $ 4,598 Short-term investments, at fair value   1,520     1,752   Total cash, cash equivalents and short-term investments 6,421 6,350 Trade accounts receivable, net of doubtful accounts and allowances 1,189 973 Inventories 939 738 Deferred income taxes 356 431 Other current assets   359     367   Total current assets 9,264 8,859   Investments 4,890 4,372 Property, net of accumulated depreciation 10,266 8,943 Goodwill and other intangible assets, net 881 716 Deferred income taxes 2,715 2,790 Other assets   157     153     Total Assets $ 28,173   $ 25,833     Liabilities and Equity   Current liabilities: Current portion of long-term debt $ 27 $ 57 Accounts payable 938 798 Other accrued liabilities   1,044     1,131   Total current liabilities 2,009 1,986   Long-term debt 2,282 2,262 Postretirement benefits other than pensions 891 913 Other liabilities   1,300     1,246   Total liabilities   6,482     6,407     Commitments and contingencies Shareholders' equity: Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion; Shares issued: 1,635 million and 1,626 million 818 813 Additional paid-in capital 13,014 12,865 Retained earnings 8,958 6,881 Treasury stock, at cost; Shares held: 66 million and 65 million (1,243 ) (1,227 ) Accumulated other comprehensive income   93     43   Total Corning Incorporated shareholders' equity   21,640     19,375   Noncontrolling interests   51     51   Total equity   21,691     19,426     Total Liabilities and Equity $ 28,173   $ 25,833     See accompanying notes to these financial statements. CORNING INCORPORATED AND SUBSIDIARY COMPANIESCONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in millions)               Three months ended Nine months ended September 30, September 30, 2011 2010 2011 2010 Cash Flows from Operating Activities: Net income $ 811 $ 785 $ 2,314 $ 2,514 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 241 212 699 624 Amortization of purchased intangibles 4 2 11 6 Asbestos litigation charges (credits) 5 6 15 (41 ) Restructuring, impairment and other credits (1 ) (3 ) Cash received from settlement of insurance claims 66 Loss on retirement of debt 30 30 Stock compensation charges 21 22 66 77 Undistributed earnings of affiliated companies (249 ) (438 ) (686 ) (1,096 ) Deferred tax provision (benefit) 22 (25 ) 118 (15 ) Restructuring payments (2 ) (8 ) (15 ) (58 ) Credits issued against customer deposits (7 ) (8 ) (21 ) (76 ) Employee benefit payments less than (in excess of) expense 37 (53 ) 105 (81 ) Changes in certain working capital items: Trade accounts receivable 61 131 (182 ) (62 ) Inventories (27 ) (85 ) (170 ) (147 ) Other current assets (7 ) (15 ) (49 ) 25 Accounts payable and other current liabilities, net of restructuring payments (64 ) 7 (107 ) 8 Other, net   67     (134 )   (132 )   38   Net cash provided by operating activities   913     428     2,032     1,743     Cash Flows from Investing Activities: Capital expenditures (640 ) (225 ) (1,666 ) (534 ) Acquisitions of businesses, net of cash received (148 ) Net proceeds from sale or disposal of assets 1 1 2 1 Short-term investments - acquisitions (348 ) (1,106 ) (2,193 ) (2,000 ) Short-term investments - liquidations 574 424 2,426 1,318 Other, net   (5 )   4     (1 )   6   Net cash used in investing activities   (418 )   (902 )   (1,580 )   (1,209 )   Cash Flows from Financing Activities: Net repayments of short-term borrowings and current portion of long-term debt (10 ) (9 ) (22 ) (70 ) Principal payments under capital lease obligations (1 ) (32 ) (1 ) Proceeds from issuance of long-term debt, net 34 689 34 689 Retirements of long-term debt, net (264 ) (264 ) Proceeds from issuance of common stock, net 15 Proceeds from the exercise of stock options 9 10 82 39 Dividends paid   (79 )   (79 )   (237 )   (235 ) Net cash (used in) provided by financing activities   (46 )   346     (175 )   173   Effect of exchange rates on cash   (157 )   216     26     54   Net increase in cash and cash equivalents 292 88 303 761 Cash and cash equivalents at beginning of period   4,609     3,214     4,598     2,541     Cash and cash equivalents at end of period $ 4,901   $ 3,302   $ 4,901   $ 3,302   CORNING INCORPORATED AND SUBSIDIARY COMPANIESSEGMENT RESULTS (Unaudited; in millions)                   Our reportable operating segments include Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences.     Display Telecom- Environmental Specialty Life All Technologies munications Technologies Materials Sciences Other Total   Three months endedSeptember 30, 2011 Net sales $ 815 $ 560 $ 247 $ 299 $ 153 $ 1 $ 2,075 Depreciation (1) $ 131 $ 31 $ 27 $ 41 $ 8 $ 3 $ 241 Amortization of purchased intangibles $ 2 $ 1 $ 3 Research, development and engineering expenses (2) $ 21 $ 29 $ 27 $ 35 $ 3 $ 22 $ 137 Equity in earnings of affiliated companies $ 222 $ 5 $ 4 $ 231 Income tax (provision) benefit $ (118 ) $ (30 ) $ (15 ) $ (16 ) $ (10 ) $ 9   $ (180 ) Net income (loss) (3) $ 593   $ 82   $ 32   $ 38   $ 21   $ (17 ) $ 749     Three months endedSeptember 30, 2010 Net sales $ 645 $ 464 $ 208 $ 159 $ 125 $ 1 $ 1,602 Depreciation (1) $ 129 $ 27 $ 26 $ 20 $ 8 $ 3 $ 213 Amortization of purchased intangibles $ 2 $ 2 Research, development and engineering expenses (2) $ 22 $ 27 $ 24 $ 25 $ 5 $ 24 $ 127 Restructuring, impairment and other credits $ (1 ) $ (1 ) Equity in earnings of affiliated companies $ 386 $ 1 $ 16 $ 403 Income tax (provision) benefit $ (108 ) $ (20 ) $ (5 ) $ 2   $ (7 ) $ 10   $ (128 ) Net income (loss) (3) $ 648   $ 41   $ 11   $ (5 ) $ 13   $ (12 ) $ 696     Nine months endedSeptember 30, 2011 Net sales $ 2,365 $ 1,582 $ 764 $ 836 $ 452 $ 4 $ 6,003 Depreciation (1) $ 378 $ 91 $ 79 $ 120 $ 25 $ 8 $ 701 Amortization of purchased intangibles $ 5 $ 5 $ 10 Research, development and engineering expenses (2) $ 73 $ 90 $ 73 $ 100 $ 12 $ 68 $ 416 Equity in earnings of affiliated companies $ 835 $ 4 $ 1 $ 13 $ 13 $ 866 Income tax (provision) benefit $ (375 ) $ (71 ) $ (44 ) $ (28 ) $ (24 ) $ 28   $ (514 ) Net income (loss) (3) $ 1,857   $ 169   $ 93   $ 69   $ 51   $ (52 ) $ 2,187     Nine months endedSeptember 30, 2010 Net sales $ 2,261 $ 1,269 $ 584 $ 381 $ 368 $ 4 $ 4,867 Depreciation (1) $ 386 $ 89 $ 77 $ 43 $ 24 $ 9 $ 628 Amortization of purchased intangibles $ 1 $ 5 $ 6 Research, development and engineering expenses (2) $ 66 $ 84 $ 70 $ 61 $ 13 $ 80 $ 374 Restructuring, impairment and other credits $ (1 ) $ (2 ) $ (3 ) Equity in earnings of affiliated companies $ 1,083 $ 1 $ 5 $ 32 $ 1,121 Income tax (provision) benefit $ (391 ) $ (38 ) $ (12 ) $ 14   $ (24 ) $ 34   $ (417 ) Net income (loss) (3) $ 2,107   $ 79   $ 27   $ (29 ) $ 48   $ (46 ) $ 2,186   (1)   Depreciation expense for Corning's reportable segments includes an allocation of depreciation of corporate property not specifically identifiable to a segment. (2) Research, development, and engineering expense includes direct project spending which is identifiable to a segment. (3) Many of Corning's administrative and staff functions are performed on a centralized basis. Where practicable, Corning charges these expenses to segments based upon the extent to which each business uses a centralized function. Other staff functions, such as corporate finance, human resources and legal are allocated to segments, primarily as a percentage of sales. In the three and nine months ended September 30, 2011, the Telecommunications segment included a credit of $22 million on the decrease in a contingent liability associated with an acquisition recorded in the first quarter of 2011. CORNING INCORPORATED AND SUBSIDIARY COMPANIESSEGMENT RESULTS (Unaudited; in millions)             A reconciliation of reportable segment net income to consolidated net income follows (in millions): Three months ended Nine months ended September 30, September 30,         2011   2010   2011   2010 Net income of reportable segments $ 766 $ 708 $ 2,239 $ 2,232 Non-reportable segments (17 ) (12 ) (52 ) (46 ) Unallocated amounts: Net financing costs (1) (47 ) (47 ) (146 ) (137 ) Stock-based compensation expense (21 ) (22 ) (66 ) (77 ) Exploratory research (23 ) (15 ) (59 ) (44 ) Corporate contributions (6 ) (7 ) (38 ) (26 ) Equity in earnings of affiliated companies, net of impairments (2) 93 101 284 326 Asbestos settlement (3) (5 ) (6 ) (15 ) 41 Other corporate items (4)     71       85       167       245   Net income   $ 811     $ 785     $ 2,314     $ 2,514   (1)   Net financing costs include interest income, interest expense, and interest costs and investment gains associated with benefit plans.   (2) Primarily represents the equity earnings of Dow Corning Corporation. In the nine months ended September 30, 2010, equity earnings of affiliated companies, net of impairments, includes a credit of $21 million for our share of U.S. advanced energy manufacturing tax credits at Dow Corning Corporation.   (3) In the three and nine months ended September 30, 2011, Corning recorded a charge of $5 million and $15 million, respectively, to adjust the asbestos liability for the change in value of the components of the Modified PCC Plan. In the three and nine months ended September 30, 2010, Corning recorded a charge of $6 million and a net credit of $41 million, respectively, primarily to reflect the change in the terms of the proposed asbestos settlement.   (4) In the three months ended September 30, 2011, Corning recorded a $41 million tax benefit from the filing of an amended 2006 U.S. Federal Tax return to claim foreign tax credits. In the three months ended September 30, 2010, Corning recorded a loss of $30 million ($19 million after-tax) from the repurchase of $126 million principal amount of our 6.2% senior unsecured notes due March 15, 2016 and $100 million principal amount of our 5.9% senior unsecured notes due March 15, 2014. In the nine months ended September 30, 2010, other corporate items included a tax charge of $56 million from the reversal of the deferred tax asset associated with a Medicare subsidy. CORNING INCORPORATED AND SUBSIDIARY COMPANIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)     1. Contingent Liability   In the third quarter of 2011, we recognized a credit of $22 million resulting from a reduction in a contingent liability associated with an acquisition recorded in the first quarter of 2011.   2. Asbestos Litigation   Pittsburgh Corning Corporation (PCC) was named in numerous lawsuits alleging personal injury from exposure to asbestos and, on April 16, 2000, PCC filed for Chapter 11 reorganization. Corning, with other relevant parties, proposed a Plan of Reorganization of PCC in 2003, which has not yet been confirmed. Under this PCC Plan, Corning would contribute certain payments and assets. In the third quarter of 2011, we recorded a charge of $5 million ($3 million after-tax) to adjust the asbestos litigation liability for the change in value of the components to be contributed by Corning under this PCC Plan.   3. Provision for Income Taxes   In the third quarter of 2011, we recorded a $26 million net tax benefit related to prior year foreign tax credits and other tax adjustments.   4. Weighted Average Shares Outstanding Weighted average shares outstanding are as follows (in millions):                       Three months ended   Three monthsSeptember 30,   ended20112010   June 30, 2011   Basic 1,569 1,557 1,568 Diluted 1,588 1,580 1,591 Diluted used for non-GAAP measures 1,588 1,580 1,591 CORNING INCORPORATED AND SUBSIDIARY COMPANIESQUARTERLY SALES INFORMATION (Unaudited; in millions)             2011Q1Q2Q3NineMonthsEndedSept. 30   Display Technologies $ 790 $ 760 $ 815 $ 2,365   Telecommunications Fiber and cable 248 265 276 789 Hardware and equipment   226   283   284   793 474 548 560 1,582   Environmental Technologies Automotive 123 121 119 363 Diesel   136   137   128   401 259 258 247 764   Specialty Materials 254 283 299 836   Life Sciences 144 155 153 452   All Other   2   1   1   4   Total $ 1,923 $ 2,005 $ 2,075 $ 6,003       2010Q1Q2Q3Q4Total   Display Technologies $ 782 $ 834 $ 645 $ 750 $ 3,011   Telecommunications Fiber and cable 190 227 232 229 878 Hardware and equipment   174   214   232   214   834 364 441 464 443 1,712   Environmental Technologies Automotive 117 109 119 117 462 Diesel   75   75   89   115   354 192 184 208 232 816   Specialty Materials 96 126 159 197 578   Life Sciences 118 125 125 140 508   All Other   1   2   1   3   7   Total $ 1,553 $ 1,712 $ 1,602 $ 1,765 $ 6,632   The above supplemental information is intended to facilitate analysis of Corning's businesses. CORNING INCORPORATED AND SUBSIDIARY COMPANIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASUREThree Months Ended September 30, 2011 (Unaudited; amounts in millions, except per share amounts)   Corning's net income and earnings per share (EPS) excluding special items for the third quarter of 2011 are non-GAAP financial measures 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). The company believes presenting non-GAAP net income and EPS is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company's underlying performance. A detailed reconciliation is provided below outlining the differences between these non-GAAP measures and the directly related GAAP measures.             Per           Income Before           NetShareIncome TaxesIncome   Earnings per share (EPS) and net income, excluding special items $ 0.48 $ 904 $ 766   Special items: Contingent liability (a) 0.01 22 22   Asbestos settlement (b) (5 ) (3 )   Provision for income taxes (c)   0.02       26     Total EPS and net income $ 0.51 $ 921   $ 811     (a) In the third quarter of 2011, Corning recognized a credit of $22 million resulting from a reduction in a contingent liability associated with an acquisition recorded in the first quarter of 2011.     (b) In the third quarter of 2011, Corning recorded a charge of $5 million ($3 million after-tax) to adjust the asbestos liability for the change in value of the components of the Modified PCC Plan.     (c) In the third quarter of 2011, Corning recorded a $26 million net tax benefit related to prior year foreign tax credits and other tax adjustments. CORNING INCORPORATED AND SUBSIDIARY COMPANIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASUREThree Months Ended June 30, 2011 (Unaudited; amounts in millions, except per share amounts)   Corning's net income and earnings per share (EPS) excluding special items for the second quarter of 2011 are non-GAAP financial measures 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). The company believes presenting non-GAAP net income and EPS is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company's underlying performance. A detailed reconciliation is provided below outlining the differences between these non-GAAP measures and the directly related GAAP measures.             Per           Income Before           NetShareIncome TaxesIncome   Earnings per share (EPS) and net income, excluding special items $ 0.48 $ 883 $ 758   Special items: Asbestos settlement (a)   -   (5)   (3)   Total EPS and net income $ 0.47 $ 878 $ 755 (a)   In the second quarter of 2011, Corning recorded a charge of $5 million ($3 million after-tax) to adjust the asbestos liability for the change in value of the components of the Modified PCC Plan. CORNING INCORPORATED AND SUBSIDIARY COMPANIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASUREThree Months Ended September 30, 2010 (Unaudited; amounts in millions, except per share amounts)   Corning's net income and earnings per share (EPS) excluding special items for the third quarter of 2010 are non-GAAP financial measures 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). The company believes presenting non-GAAP net income and EPS is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company's underlying performance. A detailed reconciliation is provided below outlining the differences between these non-GAAP measures and the directly related GAAP measures.             Per           Income Before           NetShareIncome TaxesIncome   Earnings per share (EPS) and net income, excluding special items $ 0.51 $ 835 $ 808   Special items: Asbestos settlement (a) (6 ) (4 )   Loss on repurchase of debt (b)   (0.01 )   (30 )   (19 )   Total EPS and net income $ 0.50   $ 799   $ 785   (a)   In the third quarter of 2010, Corning recorded a charge of $6 million ($4 million after-tax) to adjust the asbestos liability for the change in value of the components of the modified PCC Plan.     (b) In the third quarter of 2010, Corning recorded a $30 million loss ($19 million after-tax) on the repurchase of $126 million principal amount of our 6.2% senior unsecured notes due March 15, 2016 and $100 million principal amount of our 5.9% senior unsecured notes due March 15, 2014. CORNING INCORPORATED AND SUBSIDIARY COMPANIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASUREThree Months Ended September 30, 2011 (Unaudited; amounts in millions)   Corning's free cash flow financial measure for the three months ended September 30, 2011 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). The company believes presenting non-GAAP financial measures are helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company's underlying performance. A detailed reconciliation is provided below outlining the differences between this non-GAAP measure and the directly related GAAP measures.                       Three           Nine   months ended   months ended   September 30,   September 30,   2011   2011   Cash flows from operating activities $ 913 $ 2,032   Less: Cash flows from investing activities (418 ) (1,580 )   Plus: Short-term investments - acquisitions 348 2,193   Less: Short-term investments - liquidations   (574 )   (2,426 )   Free cash flow $ 269   $ 219   Corning IncorporatedMedia Relations:Daniel F. Collins, (607) 974-4197collinsdf@corning.comorInvestor Relations:Kenneth C. Sofio, (607) 974-7705sofiokc@corning.com