Corning 2007 Annual Report

LIQUIDITY AND CAPITAL RESOURCES
Financing and Capital Structure
The following items were significant to Corning’s financing and capital structure during 2007:
• In the first quarter, we repurchased $223 million of our 6.25% Euro notes due in 2010. We recognized a $15 million loss upon the
early redemption of these notes.
• In the second quarter, all three of our rating agencies upgraded our debt ratings to BBB+ or the equivalent.
• Operating cash flow for the year was $2.1 billion which was considerably greater than our $1.3 billion of capital spending.
• In the third quarter of 2007, we began paying a quarterly dividend of $0.05 on the Company’s common stock. Dividend payments
of $79 million were made in both the third and fourth quarter of 2007.
• On July 18, 2007, Corning’s Board of Directors approved the repurchase of $500 million of common stock between the date of the
announcement and December 31, 2008. We repurchased 10.5 million shares of common stock for $250 million as part of this
repurchase program.
Refer to Note 11 (Debt) to the consolidated financial statements for further information.
In November 2006, we amended our revolving credit facility so that it now provides us access to a $1.1 billion unsecured multicurrency
revolving line of credit through March 2011. The facility includes two financial covenants: a leverage ratio and an interest
coverage ratio. At December 31, 2007, we were in compliance with both financial covenants.
Capital Spending
Capital spending totaled $1.3 billion, $1.2 billion and $1.6 billion in 2007, 2006, and 2005, respectively. Capital spending activity in
all three years primarily included expansion of LCD glass capacity in the Display Technologies segment and new capacity for diesel
products in the Environmental Technologies segment. Our 2008 capital spending program is expected to be in the range of $1.5
billion to $1.7 billion, with approximately $800 million to $1.0 billion used to expand manufacturing capacity for LCD glass
substrates in the Display Technologies segment. Additionally, approximately $200 million will be directed toward our Environmental
Technologies segment to support the emerging diesel emissions control products and approximately $70 million will be spent on the
expansion of the Company’s Sullivan Park Research and Development campus.
Short-Term Investments
Included in our $1.3 billion short-term investments at December 31, 2007, were $301 million of asset-backed securities. Asset-backed
securities are collateralized by credit card loans, auto loans, mortgages, and student loans. At December 31, 2007, our exposure to
sub-prime mortgages was $17 million. Unrealized losses on securities backed by sub-prime mortgages, which are rated as investment
grade, were approximately $1 million at December 31, 2007, and are expected to recover in the short-term. Realized losses on these
items amounted to $6 million in 2007.
Defined Benefit Pension Plans
We have defined benefit pension plans covering certain domestic and international employees. Our funding policy has been to
contribute, as necessary, an amount in excess of the minimum requirements in order to achieve the company’s long-term funding
targets. In 2007, we made voluntary cash contributions of $131 million to our domestic defined benefit pension plan and $18 million
to our international pension plans. In 2006, we made an incremental cash contribution of $15 million to our domestic and international
pension plans.
Customer Deposits
Certain customers of our Display Technologies segment have entered into long-term supply agreements and agreed to make advance
cash deposits to secure supply of large-size glass substrates. The deposits will be reduced through future product purchases, thus
reducing operating cash flows in later periods as credits are applied for cash deposits received in earlier periods.
Customer deposits have been received in the following periods (in millions):
2006 2007 Total
Customer deposits received $171 $105 $276
We do not expect to receive additional deposits related to these agreements.
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