Fitch Ratings Upgrades Corning to 'BBB+'; Outlook Stable.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has upgraded the following ratings on Corning Incorporated (Corning): --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) to 'BBB+' from 'BBB'; --Senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. rating to 'BBB+' from 'BBB'; --Senior unsecured credit facility to 'BBB+' from 'BBB'. The Rating Outlook is Stable. Approximately $2.6 billion of total debt is affected by Fitch's action, including the company's undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely $1.125 billion revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility. The upgrade reflects Fitch's expectations that: i) Corning's operating performance, which has consistently exceeded expectations over the past few years due primarily to strong demand for active matrix liquid crystal display liquid crystal display (LCD) Optoelectronic device used in displays for watches, calculators, notebook computers, and other electronic devices. Current passed through specific portions of the liquid crystal solution causes the crystals to align, blocking the passage of light. (LCD) glass, will remain strong and benefit from ongoing cost reductions, strengthened equity earnings (mostly from Samsung Corning Precision Glass  The of this article or section may be compromised by "peacock terms".You can help Wikipedia by removing peacock terms. Co., Ltd. and Dow Corning Corporation), and an improved telecommunications market and ii) the company will generate higher and more consistent free cash flow. Given these expectations, Fitch believes the ratings incorporate the flexibility for shareholder friendly actions and/or acquisitions approximating annual free cash flow on a combined basis. The ratings and Outlook are supported by Corning's: i) consistently strong operating performance, ii) solid liquidity position; iii) relatively conservative financial policies; iv) strong leadership positions within the LCD glass and telecommunications markets, and v) strong manufacturing footprint and intellectual property portfolio which increases barriers to entering Corning's various markets. Ratings concerns center on: i) the significant ongoing capital expenditures required to maintain its competitive position within the LCD glass business, particularly to support demand for ever-larger glass panels; ii) need to achieve constant annual manufacturing cost reductions to offset ongoing LCD average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. (ASP) declines; iii) substantial research and development (R&D) spending required for Corning to generate next-generation product technologies for future revenue streams; and iv) ongoing industry excess capacity and uneven demand patterns associated with the telecommunications market. Fitch expects solid industry conditions to continue, especially for LCD glass, driving further albeit more modest improvement in Corning's operating metrics and credit protection measures. While some quarterly demand fluctuations and pricing pressures are inevitable, Fitch anticipates Corning's free cash flow will become more consistent as the LCD glass market matures and the company's other businesses increase their contribution to consolidated operating results. Despite prospects for strong positive cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , Fitch expects Corning's capital spending will remain near current levels over the intermediate term, moderating free cash flow growth. Longer term, Fitch does not anticipate the Corning's capital spending to decrease significantly, given the capital intensity of the company's emerging businesses. For the latest 12 months (LTM LTM abbr. long-term memory ) ending March 31, 2007, leverage (total debt/operating EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) and interest coverage (operating EBITDA/gross interest expense) were approximately 0.9 times (x) and almost 15x, respectively, versus 1.3x and 11.1x, respectively, for the comparable prior year period. When including the cash dividends portion of Corning's significant and growing equity earnings, Fitch estimates leverage and interest coverage for the same period, were approximately 0.7x and 17x, respectively. While Fitch expects continued improvement in these metrics due to higher operating profitability, the ratings do not incorporate expectations for further debt reduction. Fitch believes Corning's liquidity was solid as of March 31, 2007 and consisted of approximately $2.9 billion of available cash and an undrawn $1.125 billion senior unsecured revolving credit facility expiring March 2011. Fitch's expectations for approximately $500 million of annual free cash flow also will support liquidity. Total debt as of March 31, 2007 was approximately $1.5 billion, primarily consisting of various tranches of senior unsecured notes and debentures. Total debt decreased from $1.7 billion at Dec. 31, 2006 following Corning's redemption of $233 million of the $270 million face value of 6.25% senior unsecured Euro notes due 2010. As a result, Corning's debt-to-capitalization ratio decreased to approximately 16% as of March 31, 2007 from a high of nearly 50% in 2002, providing the company with significant capacity under the 50% maximum debt-to-capitalization financial covenant in the company's bank credit agreement. The bank credit facility also requires Corning to maintain interest coverage greater than 3.5x. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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