Corning Reports Strong First-Quarter Earnings

Q1 2008 Q4 2007 % Change Q1 2007 % Change ---------------------------------------------------------------
------- Net Sales in millions $1,617 $1,582 2% $1,307 24% ------------------------------------------------------------------
---- Net Income in millions $1,029 $717 44% $327 215% -----------------------------------------------------------------
----- Non-GAAP Net Income in millions* $702 $643 9% $452 55% ------------------------------------------------------------------
---- GAAP EPS $0.64 $0.45 42% $0.20 220% -----------------------------------------------------------------
----- Non-GAAP EPS* $0.44 $0.40 10% $0.28 57% ------------------------------------------------------------------
----

CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited; in millions, except per share amounts) Three months ended March 31, --------------------- 2008 2007 --------- --------- Net sales $ 1,617 $ 1,307 Cost of sales 773 716 --------- --------- Gross margin 844 591 Operating expenses: Selling, general and administrative expenses 242 214 Research, development and engineering expenses 151 130 Amortization of purchased intangibles 2 3 Restructuring, impairment and other credits (1) Asbestos settlement (credit) charge (Note 1) (327) 110 --------- --------- Operating income 777 134 Interest income 30 37 Interest expense (18) (21) Loss on repurchase of debt (15) Other income, net 1 32 --------- --------- Income before income taxes 790 167 Provision for income taxes (66) (56) --------- --------- Income before minority interests and equity earnings 724 111 Minority interests 1 Equity in earnings of affiliated companies, net of impairments 304 216 --------- --------- Net income $ 1,029 $ 327 ========= ========= Basic earnings per common share (Note 2) $ 0.66 $ 0.21 ========= ========= Diluted earnings per common share (Note 2) $ 0.64 $ 0.20 ========= ========= Dividends declared per common share $ 0.05 ========= See accompanying notes to these financial statements.

CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited; in millions, except per share amounts) March 31, December 31, 2008 2007 ---------- ------------ Assets Current assets: Cash and cash equivalents $ 2,124 $ 2,216 Short-term investments, at fair value 1,185 1,300 ---------- ------------ Total cash, cash equivalents and short- term investments 3,309 3,516 Trade accounts receivable, net 988 856 Inventories 692 631 Deferred income taxes 47 54 Other current assets 303 237 ---------- ------------ Total current assets 5,339 5,294 Investments 3,098 3,036 Property, net of accumulated depreciation 6,837 5,986 Goodwill and other intangible assets, net 306 308 Deferred income taxes 229 202 Other assets 454 389 ---------- ------------ Total Assets $ 16,263 $ 15,215 ========== ============ Liabilities and Shareholders' Equity Current liabilities: Current portion of long-term debt $ 78 $ 23 Accounts payable 701 609 Other accrued liabilities 1,083 1,880 ---------- ------------ Total current liabilities 1,862 2,512 Long-term debt 1,503 1,514 Postretirement benefits other than pensions 743 744 Other liabilities 1,368 903 ---------- ------------ Total liabilities 5,476 5,673 ---------- ------------ Commitments and contingencies Minority interests 47 46 Shareholders' equity: Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion; Shares issued: 1,602 million and 1,598 million 801 799 Additional paid-in capital 12,349 12,281 Accumulated deficit (2,053) (3,002) Treasury stock, at cost; Shares held: 34 million and 30 million (588) (492) Accumulated other comprehensive income (loss) 231 (90) ---------- ------------ Total shareholders' equity 10,740 9,496 ---------- ------------ Total Liabilities and Shareholders' Equity $ 16,263 $ 15,215 ========== ============ See accompanying notes to these financial statements.

CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in millions) Three months ended March 31, ------------------- 2008 2007 --------- -------- Cash Flows from Operating Activities: Net income $ 1,029 $ 327 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 157 150 Amortization of purchased intangibles 2 3 Asbestos settlement (credit) charge (327) 110 Restructuring, impairment and other credits (1) Loss on repurchases of debt 15 Stock compensation charges 41 36 Undistributed earnings of affiliated companies (153) (67) Deferred tax benefit (2) Restructuring payments (7) (11) Customer deposits, net of (credits) issued (66) (33) Employee benefit payments in excess of expense (48) (92) Changes in certain working capital items: Trade accounts receivable (50) (28) Inventories (32) (42) Other current assets (21) (57) Accounts payable and other current liabilities, net of restructuring payments (232) (130) Other, net 5 12 --------- -------- Net cash provided by operating activities 295 193 --------- -------- Cash Flows from Investing Activities: Capital expenditures (467) (262) Short-term investments - acquisitions (724) (553) Short-term investments - liquidations 816 798 --------- -------- Net cash used in investing activities (375) (17) --------- -------- Cash Flows from Financing Activities: Net repayments of short-term borrowings and current portion of long-term debt (9) (8) Retirements of long-term debt (238) Proceeds from issuance of common stock, net 4 4 Proceeds from the exercise of stock options 18 22 Repurchase of common stock (62) Dividends paid (78) Other, net (2) --------- -------- Net cash used in financing activities (129) (220) --------- -------- Effect of exchange rates on cash 117 10 --------- -------- Net decrease in cash and cash equivalents (92) (34) Cash and cash equivalents at beginning of period 2,216 1,157 --------- -------- Cash and cash equivalents at end of period $ 2,124 $ 1,123 ========= ======== Certain amounts for 2007 were reclassified to conform to 2008 classifications.

[FEED_CR
LF] CORNING INCORPORATED AND SUBSIDIARY COMPANIES SEGMENT RESULTS (Unaudited; in millions) Our reportable operating segments include Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences. Dis- Environ- Spec- play Tele- mental ialty Techno- commun- Tech- Mater- Life All logies ications nologies ials Sciences Other Total -------------------------------------------------- ------- Three months ended March 31, 2008 Net sales $ 829 $ 421 $ 197 $ 83 $ 81 $ 6 $1,617 Depreciation (1) $ 90 $ 27 $ 24 $ 8 $ 4 $ 3 $ 156 Amortization of purchased intangible
s $ 2 $ 2 Research, development and engineering[
FEED_CRLF]expenses (2) $ 24 $ 24 $ 33 $ 9 $ 2 $ 36 $ 128 Restruct- uring, impairment and other credits (before related tax benefits and minority interest) $ (1) $ (1) Income tax (provision) benefit $ (57) $ (5) $ (5) $ (5) $ 2 $ (70) Earnings (loss) before minority[FEE
D_CRLF]interest and equity earnings (3) $ 476 $ 10 $ 12 $ (4) $ 10 $(45) $ 459 Minority interest $ 1 $ 1 Equity in earnings of affiliated companies $ 203 $ 1 $ 18 $ 222 -------- -------- -------- ------- --------- ----- ------- Net income (loss) $ 679 $ 11 $ 13 $ (4) $ 10 $(27) $ 682 ======== ======== ======== ======= ========= ===== ======= Three months ended March 31, 2007 Net sales $ 524 $ 439 $ 179 $ 84 $ 76 $ 5 $1,307 Depreciation (1) $ 81 $ 33 $ 21 $ 8 $ 4 $ 1 $ 148 Amortization of purchased intangible
s $ 3 $ 3 Research, development and engineering[
FEED_CRLF]expenses (2) $ 22 $ 19 $ 30 $ 9 $ 2 $ 26 $ 108 Income tax (provision) benefit $ (42) $ (11) $ (3) $ (4) $ 2 $ (58) Earnings (loss) before minority[FEE
D_CRLF]interest and equity earnings (loss) (3) $ 273 $ 31 $ 10 $ 10 $(32) $ 292 Equity in earnings of affiliated companies $ 113 $ 1 $ 9 $ 123 -------- -------- -------- ------- --------- ----- ------- Net income (loss) $ 386 $ 32 $ 10 0 $ 10 $(23) $ 415 ======== ======== ======== ======= ========= ===== ======= (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 expenses 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.

CORNING INCORPORATED AND SUBSIDIARY COMPANIES SEGMENT RESULTS (Unaudited; in millions) A reconciliation of reportable segment net income to consolidated net income follows (in millions): Three months ended March 31, ----------------------- 2008 2007 ----------- ---------- Net income of reportable segments $ 709 $ 438 Non-reportable segments (27) (23) Unallocated amounts: Net financing costs (1) 9 8 Stock-based compensation expense (41) (36) Exploratory research (18) (17) Corporate contributions (11) (14) Equity in earnings of affiliated companies, net of impairments (2) 82 93 Asbestos settlement charge (credit) (3) 327 (110) Other corporate items (4) (1) (12) ----------- ---------- Net income $ 1,029 $ 327 =========== ========== (1) Net financing costs include interest income, interest expense, and interest costs and investment gains associated with benefit plans. (2) Represents the equity earnings of Dow Corning Corporation. (3) In the first quarter of 2008, Corning reduced its liability for asbestos litigation as a result of the increase in the likelihood of a settlement under recently proposed terms and a corresponding decrease in the likelihood of a settlement under terms established in 2003. (4) Other corporate items include the tax impact of the unallocated amounts. In addition, the first quarter 2007 included a loss of $15 million from the repurchase of $223 million principal amount of our 6.25% Euro notes due 2010.

CORNING INCORPORATED AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Asbestos Settlement On March 28, 2003, Corning announced that it had reached agreement with the representatives of asbestos claimants for the settlement of all current and future asbestos claims against Corning and Pittsburgh Corning Corporation (PCC) which might arise from PCC products or operations (the 2003 Plan). On December 21, 2006, the Bankruptcy Court issued an order denying confirmation of the 2003 Plan. On January 10, 2008, some of the parties in the proceeding advised the Bankruptcy Court that they had made substantial progress on an amended plan of reorganization (the Amended PCC Plan) that resolved issues raised by the Court in denying the confirmation of the 2003 Plan. As a result of progress in the parties' continuing negotiations, Corning believes the Amended PCC Plan now represents the most probable outcome of this matter and the probability that the 2003 plan will become effective has diminished. The proposed settlement under the Amended PCC Plan requires Corning to contribute its equity interest in PCC and Pittsburgh Corning Europe, N.V. (PCE) and to contribute a fixed series of cash payments, recorded at present value on March 31, 2008. Corning will have the option to contribute shares rather than cash, but the liability is fixed by dollar value and not number of shares. As a result, the estimated asbestos settlement liability will no longer be impacted by movements in the value of Corning common stock. The Amended PCC Plan does not include non-PCC asbestos claims that may be or have been raised against Corning. Corning has recorded an additional amount for such claims in its estimated asbestos settlement liability. Accordingly, in the first quarter of 2008, Corning recorded an asbestos settlement credit of $327 million to adjust the asbestos settlement liability from $1 billion to $675 million, including the components of the Amended PCC Plan and the estimated liability for non-PCC asbestos claims. 2. Weighted Average Shares Outstanding Weighted average shares outstanding are as follows (in millions): Three months ended Three months ended March 31, December 31, ------------------ ------------------- 2008 2007 2007 --------- ------- ------------------- Basic 1,566 1,563 1,567 Diluted 1,598 1,600 1,602 Diluted used for non-GAAP measures 1,598 1,600 1,602

CORNING INCORPORATED AND SUBSIDIARY COMPANIES QUARTERLY SALES INFORMATION (Unaudited; in millions) 2008 2007 ------ ---------------------------------- Q1 Q1 Q2 Q3 Q4 Total ------ ------ ------ ------ ------ ------ Display Technologies $ 829 $ 524 $ 610 $ 705 $ 774 $2,613 Telecommunications Fiber and cable 214 211 219 237 213 880 Hardware and equipment 207 228 219 235 217 899 ------ ------ ------ ------ ------ ------ 421 439 438 472 430 1,779 Environmental Technologies Automotive 137 123 128 126 131 508 Diesel 60 56 63 72 58 249 ------ ------ ------ ------ ------ ------ 197 179 191 198 189 757 Specialty Materials 83 84 95 95 105 379 Life Sciences 81 76 78 78 73 305 Other 6 5 6 5 11 27 ------ ------ ------ ------ ------ ------ Total $1,617 $1,307 $1,418 $1,553 $1,582 $5,860 ====== ====== ====== ====== ====== ====== The above supplemental information is intended to facilitate analysis of Corning's businesses.

CORNING INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Three Months Ended March 31, 2008 (Unaudited; amounts in millions, except per share amounts) -------------------------------------------------------------
--------- Corning's net income and earnings per share (EPS) excluding special items for the first quarter of 2008 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 Net Share Income Taxes Income ------ ------------- -------- Earnings per share (EPS) and net income, excluding special items $ 0.44 $ 463 $ 702 Special items: Asbestos settlement (a) 0.20 327 327 ------ ----------- -------- Total EPS and net income $ 0.64 $ 790 $ 1,029 ====== =========== ======== (a)In the first quarter of 2008, Corning recorded an asbestos settlement credit of $327 million to adjust the asbestos liability from $1 billion to $675 million, including the components of the Amended PCC Plan and the estimated liability for non-PCC asbestos claims.

CORNING INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Three Months Ended December 31, 2007 (Unaudited; amounts in millions, except per share amounts) -------------------------------------------------------------
--------- Corning's net income and earnings per share (EPS) excluding special items for the fourth quarter of 2007 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. ------------------------------------------------------------
---------- Income (Loss) Before Net Income Income Per Share Taxes (Loss) --------- -------- --------- Earnings per share (EPS) and net income, excluding special items $ 0.40 $ 466 $643 Special items: Asbestos settlement (a) (0.01) (15) (15) Provision for income taxes (b) 0.07 103 Equity in earnings of affiliated companies (c) (0.01) (14) --------- ------- ----- Total EPS and net income $ 0.45 $ 451 $717 ========= ======= ===== (a)Between 2003 and 2007, any changes in the estimated fair value of the components of the proposed settlement agreement were recognized in Corning's quarterly results. During that time, the components of the proposed asbestos settlement included 25 million shares of Corning common stock and certain other items. In the fourth quarter of 2007, Corning recorded a charge of $15 million (before- and after-tax) including a credit of $17 million for the change in Corning's common stock price of $23.99 at December 31, 2007, compared to $24.65 at September 30, 2007 and a $32 million charge for the change in the estimated fair value of certain other components of the proposed asbestos settlement liability. (b)Amount reflects a $103 million tax benefit from the release of our valuation allowance on certain deferred tax assets in Germany. (c)Amount reflects Corning's share of the following items associated with Samsung Corning: an impairment charge for certain long-lived assets; dividend withholding tax; and a gain on metal and scrap sales. These items decreased Corning's equity earnings by $14 million (net) in the fourth quarter of 2007.

CORNING INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Three Months Ended March 31, 2007 (Unaudited; amounts in millions, except per share amounts) -------------------------------------------------------------
--------- Corning's net income and earnings per share (EPS) excluding special items for the first quarter of 2007 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. ------------------------------------------------------------
---------- Income (Loss) Before Net Income Income Per Share Taxes (Loss) --------- ----------- -------- Earnings per share (EPS) and net income, excluding special items $ 0.28 $ 292 $ 452 Special items: Asbestos settlement (a) (0.07) (110) (110) Loss on repurchase of debt, net (b) (0.01) (15) (15) --------- --------- ------ Total EPS and net income $ 0.20 $ 167 $ 327 ========= ========= ====== (a)Between 2003 and 2007, changes in the estimated fair value of the components of the proposed settlement agreement were recognized in Corning's quarterly results. During that time, the components of the proposed asbestos settlement included 25 million shares of Corning common stock and certain other items. In the first quarter of 2007, Corning recorded a charge of $110 million (before- and after-tax) including a charge of $101 million for the change in Corning's common stock price of $22.74 at March 31, 2007, compared to $18.71 at December 31, 2006 and a $9 million charge for the change in the estimated fair value of certain other components of the proposed asbestos settlement liability. (b)Amount reflects a $15 million loss on the repurchase of $223 million principal amount of our 6.25% Euro notes due 2010.

CORNING INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Telecommunications Segment (Unaudited; amounts in millions) ------------------------------------------------------------
---------- Corning's comment, "Excluding the impact of last year's divestiture of Corning's submarine cabling business, quarter one sales increased 3% versus last year." includes 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 this non-GAAP improvement in segments sales 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. ------------------------------------------------------------
---------- Sales vs. Prior Quarter Three months ended ------------------------ March 31, March 31, % 2008 2007 Change ------------ ----------- ------- Telecommunications segment sales excluding sales from the Company's European submarine cabling business $ 421 $ 409 3% Sales of the European submarine cabling business 0 30 ------------ ----------- ------- Telecommunications segment sales $ 421 $ 439 (4%) ============ =========== =======

CORNING INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Three Months Ended March 31, 2008 and December 31, 2007 (Unaudited; amounts in millions) ------------------------------------------------------------
---------- Corning's free cash flow financial measure for the three months ended March 31, 2008 and December 31, 2007 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 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 Three months ended months ended March 31, 2008 December 31, 2007 ---------------- ------------------ Cash flows from operating activities $ 295 $ 732 Less: Cash flows from investing activities (375) (235) Plus: Short-term investments - acquisitions 724 570 Less: Short-term investments - liquidations (816) (721) ---------------- ------------------ Free cash flow $ (172) $ 346 ================ ==================

CORNING INCORPORATED AND SUBSIDIARY COMPANIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURE TO GAAP FINANCIAL MEASURE Three Months Ended June 30, 2008 (Unaudited; amounts in millions, except per share amounts) -------------------------------------------------------------
--------- Corning's earnings per share (EPS) excluding special items for the second quarter of 2008 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 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 this non-GAAP measure and the directly related GAAP measure. -------------------------------------------------------------
--------- Range ------------------------- Guidance: EPS excluding special items $ 0.47 $ 0.50 Special items (a) ------------ --------- Earnings per share ----------------------------------------------------------------
------ This schedule will be updated as additional announcements occur. ---------------------------------------------------------------
------- (a) From time to time, Corning may record special items which could result in a gain or loss during the quarter. Please note that the company may pursue other financing, restructuring and divestiture activities at any time in the future, and that the potential impact of these events is not included within Corning's second quarter 2008 guidance. This schedule contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements are based on current expectations and involve certain risks and uncertainties. Actual results may differ from those projected in the forward looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in the Securities and Exchange Commission filings of this Company.