-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HOhAWxzsopezHtSqEKovndYg/pgZmXHpidhmTRvmmLsiVzDHrZgEfq+UhVMxRvJv Bh4A1C/eYLyO9v5tC+x/Vw== 0000024741-03-000005.txt : 20030123 0000024741-03-000005.hdr.sgml : 20030123 20030123160949 ACCESSION NUMBER: 0000024741-03-000005 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORNING INC /NY CENTRAL INDEX KEY: 0000024741 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 160393470 STATE OF INCORPORATION: NY FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03247 FILM NUMBER: 03522553 BUSINESS ADDRESS: STREET 1: ONE RIVERFRONT PLAZA CITY: CORNING STATE: NY ZIP: 14831 BUSINESS PHONE: 6079749000 MAIL ADDRESS: STREET 1: ONE RIVERFRONT PLAZA CITY: CORNING STATE: NY ZIP: 14831 FORMER COMPANY: FORMER CONFORMED NAME: CORNING GLASS WORKS DATE OF NAME CHANGE: 19890512 8-K 1 ye028k.txt CORNING INCORPORTED FORM 8K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: (Date of earliest event reported) January 23, 2003 CORNING INCORPORATED (Exact name of registrant as specified in its charter) New York 1-3247 16-0393470 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) One Riverfront Plaza, Corning, New York 14831 (Address of principal executive offices) (Zip Code) (607) 974-9000 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) Item 5. Other Events and Regulation FD Disclosure. Corning completed the divestiture of its precision lens business on December 13, 2002. This document includes schedules restating results for each quarter of 2002 with the precision lens business presented as a discontinued operation. Concurrent with this press release, Corning introduced its Technologies Operating Segment. Also included in this release is restated segment information for prior quarters of 2002. Item 7. Financial Statements and Exhibits. Exhibits: The Registrant's press release of January 23, 2003. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CORNING INCORPORATED Registrant Date: January 23, 2003 By /s/ KATHERINE A. ASBECK ------------------------------------ Katherine A. Asbeck Senior Vice President and Controller FOR RELEASE -- JANUARY 23, 2003 Corning Contacts: Media Relations Investor Relations Daniel F. Collins Kenneth C. Sofio (607) 974-4197 (607) 974-7705 collinsdf@corning.com sofiokc@corning.com Corning Announces Fourth Quarter Results $1.46 billion of charges in line with previous announcements LCD glass shipments remain strong CORNING, N.Y. -- Corning Incorporated (NYSE:GLW) today announced that its fourth-quarter 2002 sales from continuing operations were $736 million and sales from discontinued operations were $65 million. The company reported a loss from continuing operations of $1.14 billion, or $0.96 per share, for the quarter. This loss includes restructuring, impairment and other charges of $1.46 billion ($1.07 billion after-tax), or $0.90 per share, for the fourth quarter. In addition, Corning recognized a pretax gain of $86 million ($53 million after-tax), or $0.04 per share, on the repurchase of debt during the quarter. Corning's fourth-quarter income from discontinued operations of $430 million, or $0.36 per share, included the after-tax gain on the sale of its precision lens business of $415 million, or $0.35 per share. In total, Corning's net loss for the quarter was $709 million, or $0.60 per share. James R. Houghton, chairman and chief executive officer, said, "We achieved our goals for the fourth quarter. Our sales were in the range of our guidance for the quarter. We completed a significant portion of our previously announced restructuring actions and we bolstered our liquidity position with the sale of our precision lens business. We believe that these actions are important building blocks as we drive toward our goal of profitability in 2003." (more) Corning Announces Fourth Quarter Results Page Two Previously Announced Charges In the fourth quarter, Corning recorded restructuring and impairment charges totaling $1.46 billion ($1.07 billion after-tax). This included: .. Charges of $652 million ($536 million after-tax) related to restructuring actions for: the permanent closure of Corning's optical fiber factories in Australia and Germany; the mothballing of its optical fiber factory in Concord, N.C.; the reductions in capacity and employment in the company's cable, hardware and equipment and photonic technologies businesses; and the impairment of Corning's portfolio of cost investments in the telecommunications segment. The after-tax amount also included a $20 million reduction in equity earnings primarily related to restructuring and impairment charges at Samsung Corning Micro-Optics Company Limited. .. A charge of $409 million ($239 million after-tax and minority interest) to impair plant and equipment in the company's conventional television tube glass and photonic technologies businesses. .. A goodwill impairment charge of $400 million ($294 million after-tax) related to the telecommunications segment. Fourth-quarter Operating Results Sales from continuing operations were $736 million compared to the previous quarter's sales of $762 million. Telecommunications segment sales were even with the third quarter due to stronger-than-expected optical fiber shipments to Japan. Optical fiber volume increased sequentially by approximately 6%. In the Technologies segment, which combines the remainder of the Information Display businesses and the Advanced Materials businesses, sales declined from the third quarter primarily due to expected seasonal slowdowns in the environmental and life sciences businesses and lower sales in the conventional television business. Corning's Display Technologies business achieved record shipments of liquid crystal display glass with sequential volume gains of 6%. These volume increases were offset by the impact of 4% price declines and foreign exchange rates related to the Japanese yen. The company said that the dramatic increase in LCD monitor sales, steady growth in notebook computer purchases and emerging popularity of LCD-TV resulted in a 45% year-to-year increase in flat panel glass volume shipments. Corning said it would continue to bring on additional LCD manufacturing capacity in 2003 to meet anticipated market demand. (more) Corning Announces Fourth Quarter Results Page Three Full-Year Results Corning's 2002 sales from continuing operations were $3.16 billion. The year's losses from continuing operations were $1.78 billion, or $1.85 per share. This includes restructuring and impairment charges of $1.50 billion after-tax and minority interest, or $1.45 per share, and a $0.12 per share reduction for preferred dividends declared, offset by after-tax gains of $108 million from the repurchase of debt. Income from discontinued operations was $478 million, or $0.46 per share, and included the gain on sale of the precision lens business of $415 million after-tax. In total, Corning's net loss attributable to common shareholders for the year was $1.43 billion, or $1.39 per share. 2002 Liquidity Corning ended the fourth quarter with $2.09 billion in cash and short-term investments, up from $1.60 billion at the end of the third quarter. The increase in cash balances quarter-to-quarter is primarily due to the net proceeds of approximately $800 million from the sale of the precision lens business. Corning used $125 million in cash during the fourth quarter to retire debt through open market purchases. Corning retired $788 million in short, and long-term debt in the past year and raised net proceeds of $442 million in connection with the issuance of a 7.00% mandatory convertible preferred stock offering. Corning ended the year with a debt-to-capital ratio of 46.7%. Corning continues to have complete access to its unused $2 billion revolving line of credit. In January 2003, Corning used $158 million of cash to repurchase debt through open-market purchase transactions. Outlook James B. Flaws, vice chairman and chief financial officer, said, "We are pleased that 2002 is behind us. It was a difficult and disappointing year for Corning's shareholders, our employees and the communities in which we operate. The restructuring actions we took throughout the past year have brought our cost structure in line with business expectations. These actions will help us achieve our goal of being profitable in 2003. We will continue to strengthen our balance sheet by reducing debt. We intend to invest in research and development in support of existing growth businesses such as LCD, as well as emerging opportunities including chemical processing and diesel emissions control." (more) Corning Announces Fourth Quarter Results Page Four Flaws said the company will provide first-quarter 2003 financial guidance at its annual investor conference at the Pierre Hotel in New York City on Friday, February 7, 2003 and simultaneously via audio webcast. Investors will hear from Houghton, Flaws, Corning's President and Chief Operating Officer Wendell P. Weeks and Corning Technologies President Peter F. Volanakis. Additional information on the conference can be found at the company's investor relations site at www.corning.com. About Corning Incorporated Established in 1851, Corning Incorporated (www.corning.com) creates leading-edge technologies that offer growth opportunities in markets that fuel the world's economy. Corning manufactures optical fiber, cable and photonic products in its Telecommunications segment. Corning's Technologies segment manufactures high-performance display glass, and products for the environmental, life sciences, and semiconductor markets. Conference Call Information The company will host a conference call at 8:30 a.m. EST on Friday, January 24, 2003. To access the call, dial (630) 395-0023. The password is Earnings. The leader is Sofio. A replay of the call will begin at approximately 10:30 a.m. EST and will run through 5 p.m. EST on Thursday, February 6, 2003. To access the replay, dial (402) 220-4612; a password is not required. A live audio webcast will be available at www.corning.com/investor_relations/ for 14 days following the call. Forward-Looking and Cautionary Statements This press release contains forward-looking statements that involve a variety of business risks and other uncertainties that could cause actual results to differ materially. These risks and uncertainties include the possibility of changes or fluctuations in global economic conditions; currency exchange rates; product demand and industry capacity; competitive products and pricing; availability and costs of critical components and materials; new product development and commercialization; order activity and demand from major customers; capital spending by larger customers in the telecommunications industry and other business segments; the mix of sales between premium and non-premium products; possible disruption in commercial activities due to terrorist activity and armed conflict; ability to obtain financing and capital on commercially reasonable terms; acquisition and divestiture activities; the level of excess or obsolete inventory; the ability to enforce patents; product and components performance issues; and litigation. These and other risk factors are identified 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. ####
CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited; in millions, except per share amounts) For the three months ended For the year ended December 31, December 31, -------------------------- ------------------------- 2002 2001 2002 2001 --------- --------- --------- --------- Net sales $ 736 $ 917 $ 3,164 $ 6,047 Cost of sales 631 896 2,562 4,227 --------- --------- --------- --------- Gross margin 105 21 602 1,820 Operating expenses: Selling, general and administrative expenses 183 296 716 1,090 Research, development and engineering expenses 113 145 483 622 Amortization of purchased intangibles 10 40 43 76 Amortization of goodwill 35 363 Restructuring, impairment and other charges 1,461 606 2,080 5,717 --------- --------- --------- --------- Operating loss (1,662) (1,101) (2,720) (6,048) Interest income 7 18 41 68 Interest expense (43) (48) (179) (153) Gain on repurchases of debt 86 176 Other (expense) income, net (28) 1 (38) (28) --------- --------- --------- --------- Loss from continuing operations before income taxes (1,640) (1,130) (2,720) (6,161) Benefit for income taxes (401) (411) (726) (468) --------- --------- --------- --------- Loss from continuing operations before minority interests and equity earnings (1,239) (719) (1,994) (5,693) Minority interests 81 24 98 13 Equity in earnings of associated companies, net of impairments 19 29 116 148 --------- --------- --------- --------- Loss from continuing operations (1,139) (666) (1,780) (5,532) Income from discontinued operations, net of income taxes 430 11 478 34 --------- --------- --------- --------- Net loss (709) (655) (1,302) (5,498) Dividend requirements of preferred stock (1) (128) (1) --------- --------- --------- --------- Loss attributable to common shareholders $ (709) $ (656) $ (1,430) $ (5,499) ========= ========= ========= ========= Basic and diluted (loss) earnings per common share from: Continuing operations $ (0.96) $ (0.71) $ (1.85) $ (5.93) Discontinued operations 0.36 0.02 0.46 0.04 --------- --------- --------- --------- Net loss per common share $ (0.60) $ (0.69) $ (1.39) $ (5.89) ========= ========= ========= ========= Shares used in computing per share amounts for basic and diluted loss per common share 1,188 944 1,030 933 ========= ========= ========= ========= The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited; in millions) December 31, 2002 December 31, 2001 ----------------- ----------------- Assets Current assets: Cash and cash equivalents $ 1,471 $ 1,037 Short-term investments, at fair value 619 1,182 ----------- ----------- Total cash and short-term investments 2,090 2,219 Trade accounts receivable, net of doubtful accounts and allowances - $59 and $60 470 593 Inventories 559 725 Deferred income taxes 296 347 Other current assets 410 223 ----------- ----------- Total current assets 3,825 4,107 ----------- ----------- Restricted cash and investments 82 Investments: Associated companies, at equity 746 636 Others, at cost or fair value 23 142 ----------- ----------- Total investments 769 778 ----------- ----------- Property, net of accumulated depreciation - $3,375 and $3,101 3,705 5,097 Goodwill, net of accumulated amortization - $661 1,715 1,937 Other intangible assets, net of accumulated amortization - $104 and $90 261 352 Deferred income taxes 887 313 Other assets 304 209 ----------- ----------- Total Assets $ 11,548 $ 12,793 =========== =========== Liabilities and Shareholders' Equity Current liabilities: Loans payable $ 204 $ 477 Accounts payable 339 441 Other accrued liabilities 1,137 1,076 ----------- ----------- Total current liabilities 1,680 1,994 ----------- ----------- Long-term debt 3,963 4,463 Postretirement benefits other than pensions 617 608 Pensions 455 92 Other liabilities 83 96 Commitments and contingencies Minority interests 59 119 Series B Convertible preferred stock 7 Shareholders' equity: Preferred stock - Par value $100.00 per share; Shares authorized: 10 million Series C mandatory convertible preferred stock - Shares issued: 5.75 million; Shares outstanding: 1.55 million 155 Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion; Shares issued: 1,267 million and 1,023 million 634 512 Additional paid-in capital 9,695 9,532 Accumulated deficit (4,921) (3,610) Treasury stock, at cost: 70 million and 79 million (702) (827) Accumulated other comprehensive loss (170) (193) ----------- ----------- Total shareholders' equity 4,691 5,414 ----------- ----------- Total Liabilities and Shareholders' Equity $ 11,548 $ 12,793 =========== =========== The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in millions) For the year ended December 31, ----------------------- 2002 2001 ---------- --------- Cash Flows from Operating Activities: Loss from continuing operations $ (1,780) $ (5,532) Adjustments to reconcile loss from continuing operations to net cash (used in) provided by operating activities: Amortization of purchased intangibles 43 76 Amortization of goodwill 363 Depreciation 618 621 Restructuring, impairment and other charges 2,080 5,717 Inventory write-down 333 Gain on repurchases of debt (176) Stock compensation charges 130 Equity in earnings of associated companies in excess of dividends received (25) (94) Minority interests, net of dividends paid (98) (22) Deferred tax benefit (624) (511) Interest expense on convertible debentures 38 41 Tax benefit on stock options 27 Restructuring payments (276) (77) Increases in restricted cash (53) Changes in certain working capital items (43) 240 Other, net (28) 70 -------- ------- Net cash (used in) provided by operating activities (324) 1,382 -------- ------- Cash Flows from Investing Activities: Capital expenditures (357) (1,741) Acquisitions of businesses, net of cash acquired (56) (66) Proceeds from sale or disposal of assets, net 92 67 Net increase in long-term investments and other long-term assets (31) (113) Proceeds from sale of precision lens business, net 787 Short-term investments - acquisitions (2,177) (1,320) Short-term investments - liquidations 2,742 853 Restricted investments - acquisitions (117) Restricted investments - liquidations 88 Other, net (2) 4 -------- ------- Net cash provided by (used in) investing activities 969 (2,316) -------- ------- Cash Flows from Financing Activities: Net (decrease) increase in loans payable (490) 181 Proceeds from issuance of long-term debt 11 735 Repayments of long-term debt (325) (104) Redemption of Series B preferred stock (7) Proceeds from issuance of Series C preferred stock, net 557 Proceeds from issuance of common stock, net 52 247 Repurchases of common stock (23) Redemption of common stock for income tax withholding (1) (42) Cash dividends paid to preferred and common shareholders (88) (113) -------- ------- Net cash (used in) provided by financing activities (314) 904 -------- ------- Effect of exchange rates on cash 43 (7) -------- ------- Cash provided by (used in) continuing operations 374 (37) Cash provided by (used in) discontinued operations 60 (5) -------- ------- Net increase (decrease) in cash and cash equivalents 434 (42) Cash and cash equivalents at beginning of year 1,037 1,079 -------- ------- Cash and cash equivalents at end of year $ 1,471 $ 1,037 ======== ======= The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Quarter 4, 2002 (Unaudited) 1. Discontinued Operations On December 13, 2002, Corning completed the sale of its precision lens business based in Cincinnati, OH to 3M Company. The cash proceeds from the sale approximated $800 million and the gain on the sale is approximately $415 million, net of tax. Also, in 2003 Corning could receive approximately $50 million of additional proceeds related to this transaction. The precision lens business is accounted for as a discontinued operation and therefore, its results of operations and cash flows have been removed from Corning's results of continuing operations for all periods presented. Summarized selected financial information related to the precision lens business is as follows: (Dollars in millions) For the For the three months ended year ended December 31, December 31, ---------------------- -------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $ 65 $ 57 $ 268 $ 225 ========= ========= ======== ========= Income (loss) before taxes $ 26 $ (1) $ 100 $ 50 Gain on sale before taxes 652 652 Income tax expense (benefit) 248 (12) 274 16 --------- --------- -------- --------- Net income $ 430 $ 11 $ 478 $ 34 ========= ========= ======== ========= 2. Restructuring Actions Fourth Quarter On October 30, 2002, Corning announced its intent to take additional measures to attain profitability in 2003. The continued decline in demand in the Telecommunications Segment required further restructuring to bring capacity in line with current revenues. The fourth quarter actions included: .. closings of two fiber manufacturing facilities and the mothballing of another, .. reductions in capacity and employment in Corning's cabling and hardware and equipment locations worldwide, and .. permanent closure of the photonic technologies thin film filter manufacturing facility in Marlborough, MA. In addition, Corning decided to divest its portfolio of cost investments in private telecommunications related businesses. As a result of these actions, Corning recorded a charge of $652 million ($516 million after-tax) impacting approximately 2,500 employees which included a restructuring charge of $190 million, a charge to impair plant and equipment of $415 million and a $47 million write-down of cost investments. Approximately one quarter of this charge is expected to be paid in cash. Corning recorded $1,271 million ($929 million after-tax and minority interest) for restructuring actions for the full year. Restructuring Charges - --------------------- During the fourth quarter, Corning recorded restructuring charges of $190 million. The charge included employee separation costs of $137 million (including curtailment losses related to pension and health care plans) and exit costs of $62 million offset by a $9 million reduction in the 2001 restructuring reserves. During the fourth quarter Corning paid employee related separation costs of $78 million and other exit costs of $5 million. For the full year Corning recorded charges of $376 million for employee separation costs and $85 million of exit costs offset by a $14 million reduction in reserves from the 2001 Restructuring Actions. As of December 31, 2002, approximately 5,100 of the 7,100 employees had been separated under the plans. Impairment of Plant and Equipment - --------------------------------- Corning recorded $421 million in the fourth quarter to impair plant and equipment relating to facilities to be shutdown or disposed, offset by a $6 million reduction in the impairments resulting from the 2001 Restructuring Actions. For the full year, Corning recorded $712 million for impairment charges related to plant and equipment, offset by an $11 million reduction in impairments related to 2001 Restructuring Actions. 3. Impairment of Long-Lived Assets Other Than Goodwill Photonic Technologies Business The photonic technologies business is a manufacturer of photonic modules and components for the worldwide telecommunications industry and is reported in the Telecommunications Segment. The telecommunications market is undergoing a dramatic decline in demand for telecommunication products as major buyers of network equipment in this industry have reduced their capital spending plans over the past two years and are expected to continue in the near future. This negative trend is expected to continue into the foreseeable future. Corning continues to evaluate strategic alternatives for this business. In the fourth quarter, Corning determined that a test for impairment of long-lived assets in this business was appropriate and that the carrying value of the long-lived assets of this business are not recoverable. As a result, Corning recorded a $269 million ($195 million after-tax) write-down of the assets, which was reflected in the line item "Restructuring, impairment and other charges" in the income statement. Conventional Video Components Business Corning Asahi Video Products Company, a 51% owned consolidated subsidiary, (conventional video components business) is a manufacturer of glass panels and funnels for use in conventional tube televisions and is reported in the Technologies Segment. The conventional tube television segment of the market in North America is very mature and the conventional tube market is undergoing intense competition and price pressure at this time. This market trend combined with cash losses in this business in the short-term indicated an evaluation for the recoverability of the long-lived assets of the business was required and management determined that the long-lived assets of the business have been impaired. This evaluation resulted in a $140 million ($44 million after-tax and minority interest) write-down of the assets, which was reflected in the line item "Restructuring, impairment and other charges" in the income statement. 4. Impairment of Goodwill Corning adopted Statement of Financial Accounting Standards (SFAS) No. 142, which requires that goodwill be reviewed for impairment upon adoption of SFAS No. 142 (January 1, 2002) and annually thereafter. Corning performed an initial benchmark assessment upon adoption at January 1, 2002, and determined that a transition charge was not required. Corning chose the fourth quarter to conduct its annual test for impairment. Upon completion of the annual assessment, Corning recorded an impairment charge of $400 million ($294 million after-tax) to reduce the carrying value of goodwill in the telecommunications reporting unit to its estimated fair value of $1.6 billion. The impairment charge is non-cash in nature. 5. Gain on Repurchases of Debt During the fourth quarter of 2002, Corning repurchased and retired a portion of its zero coupon convertible debentures with an accreted value of $215 million in exchange for cash of $125 million in a series of open-market repurchases. Corning recorded a gain of $86 million ($53 million after-tax) on these transactions, net of the write-off of the unamortized issuance costs. Corning repurchased and retired zero-coupon convertible debentures with an accreted value of $493 million in exchange for cash of $308 million for the year ended December 31, 2002. Corning has recorded gains of $176 million ($108 million after-tax) on these transactions for the year ended December 31, 2002. Through January 23, 2003, Corning spent $158 million of cash to repurchase and retire additional zero-coupon convertible debentures. 6. Income Taxes Corning's effective income tax benefit rate for the three and twelve month periods ended December 31, 2002, was 24.4% and 26.7%, respectively. The income tax benefit rate in the fourth quarter and the year end 2002 was impacted by restructuring, impairment and other charges and the gain on repurchases of debt. The effective income tax benefit rate without consideration of these items for the fourth quarter and the year end 2002 was 33.9% and 30.0%. The effective income tax benefit rate in the fourth quarter and the year ended is lower than the U.S. federal statutory income tax rate of 35% due to the impact of nondeductible expenses and losses. The effective income tax benefit rate for the three and twelve months ended December 31, 2001, was 36.4% and 7.6%. The effective income tax benefit rate for the full year is much lower than the U.S. federal statutory income tax rate primarily due to non-tax deductible impairment and amortization of acquired intangibles and goodwill. 7. Equity in Earnings of Associated Companies Equity earnings in the fourth quarter included charges of $20 million primarily due to an equity investee incurring restructuring and impairment charges. Equity earnings for the full year included $34 million of impairments as Corning impaired an international cabling venture for $14 million in the second quarter. These charges are included in the results of the Telecommunications Segment. 8. Supplementary Statement of Cash Flows Data Supplemental disclosure of cash flow information is as follows (in millions): For the year ended December 31, -------------------- 2002 2001 -------- -------- Changes in certain working capital items: Trade accounts receivable $ 153 $ 666 Inventories 135 (47) Other current assets (171) 92 Accounts payable and other current liabilities, net of restructuring payments (160) (471) -------- -------- Total $ (43) $ 240 ======== ======== 9. Operating Segments Corning previously grouped its products into three operating segments: Telecommunications, Advanced Materials and Information Display. Beginning in the fourth quarter of 2002, Corning's reportable segments consist of the following: Telecommunications and Technologies. As a result of the fourth quarter sale of the precision lens business and the reduced significance of the conventional video components business, management realigned the remainder of the Information Display Segment with the businesses previously reported in the Advanced Materials Segment to create the Technologies Segment. The precision lens business is reported as a discontinued operation and therefore its results have been excluded from segment reporting. Also, in the second quarter of 2002, Corning revised its definition of segment net income. Prior to the second quarter, Corning disclosed restructuring and impairment charges and acquisition-related charges by segment but excluded this from quantitative segment results. These charges have now been included in the segment net income and historical periods have been conformed to this presentation. Corning also includes the earnings of equity affiliates that are closely associated with Corning's operating segments in segment net income. Segment amounts exclude revenues, expenses and equity earnings not specifically identifiable to segments. Corning prepared the financial results for its operating segments on a basis that is consistent with the manner in which Corning management internally disaggregates financial information to assist in making internal operating decisions. Corning has allocated certain common expenses among segments differently than it would for stand alone financial information prepared in accordance with generally accepted accounting principles. These expenses include interest, taxes and corporate functions. Segment net income may not be consistent with measures used by other companies.
($ in millions) For the For the three months ended year ended December 31, December 31, ---------------------- ---------------------- 2002 2001 2002 2001 --------- -------- --------- --------- Telecommunications Net sales $ 363 $ 543 $ 1,631 $ 4,458 Research, development and engineering expenses $ 65 $ 108 $ 308 $ 474 Restructuring, impairment and other charges (related tax benefit, $299, $119, $452, $282, respectively) $ 1,263 $ 293 $ 1,722 $ 5,404 Interest expense $ 15 $ 32 $ 99 $ 104 Income tax benefit $ (376) $ (249) $ (722) $ (336) Segment loss before minority interests and equity earnings $ (1,123) $ (451) $ (1,838) $ (5,215) Minority interests 1 1 Equity in (losses) earnings of associated companies, net of impairments (a) (34) (3) (60) 12 --------- -------- --------- --------- Segment net loss $ (1,156) $ (454) $ (1,897) $ (5,203) ========= ======== ========= ========= Technologies Net sales $ 367 $ 367 $ 1,513 $ 1,568 Research, development and engineering expenses $ 50 $ 40 $ 177 $ 151 Restructuring, impairment and other charges (related tax benefit, $27, $48, $30, $48, respectively) $ 141 $ 122 $ 150 $ 122 Interest expense $ 19 $ 15 $ 71 $ 48 Income tax benefit $ (33) $ (53) $ (28) $ (38) Segment loss before minority interests and equity earnings $ (132) $ (126) $ (145) $ (53) Minority interests (includes $68, $0, $70, $0, respectively, related to impairment and restructuring charges) 80 24 96 13 Equity in earnings of associated companies 51 32 168 132 --------- -------- --------- --------- Segment net (loss) income $ (1) $ (70) $ 119 $ 92 ========= ======== ========= ========= Total Segments Net sales $ 730 $ 910 $ 3,144 $ 6,026 Research, development and engineering expenses $ 115 $ 148 $ 485 $ 625 Restructuring, impairment and other charges (related tax benefit, $326, $167, $482, $330, respectively) $ 1,404 $ 415 $ 1,872 $ 5,526 Interest expense $ 34 $ 47 $ 170 $ 152 Income tax benefit $ (409) $ (302) $ (750) $ (374) Segment loss before minority interests and equity earnings $ (1,255) $ (577) $ (1,983) $ (5,268) Minority interests 81 24 97 13 Equity in earnings of associated companies, net of impairments (a) 17 29 108 144 --------- -------- --------- --------- Segment net loss $ (1,157) $ (524) $ (1,778) $ (5,111) ========= ======== ========= =========
A reconciliation of the totals reported for the operating segments to the applicable line items in the consolidated financial statements is as follows (in millions):
For the For the three months ended year ended December 31, December 31, ---------------------- ---------------------- 2002 2001 2002 2001 --------- -------- --------- --------- Net Sales Total segment net sales $ 730 $ 910 $ 3,144 $ 6,026 Non-segment net sales (b) 6 7 20 21 --------- -------- --------- --------- Total net sales $ 736 $ 917 $ 3,164 $ 6,047 ========= ======== ========= ========= Loss from Continuing Operations Total segment net loss (c) $ (1,157) $ (524) $ (1,778) $ (5,111) Unallocated items: Non-segment income (loss) and other (b) (12) (43) 4 (33) Amortization of goodwill (d) (35) (363) Non-segment restructuring, impairment and other charges (e) (57) (191) (208) (191) Interest income (f) 7 18 41 68 Gain on repurchases of debt (f) 86 176 Income tax (expense) benefit (g) (8) 109 (24) 94 Minority interests 1 Equity in earnings of associated companies (b) 2 8 4 --------- -------- --------- --------- Loss from continuing operations $ (1,139) $ (666) $ (1,780) $ (5,532) ========= ======== ========= =========
(a) Equity losses in 2002 include $20 million of charges primarily related to restructuring and impairments recorded in the fourth quarter. See Note 7. (b) Includes amounts derived from corporate investments and activities. (c) Includes royalty, interest and dividend income. (d) Amortization of goodwill relates primarily to the Telecommunications Segment. (e) Amount includes special termination benefits and pension and postretirement benefit curtailment charges of $5 million and $40 million recorded in the fourth quarter and full year of 2002, respectively. The balance of the charge relates to restructuring and impairment charges in the corporate research and administrative staff organizations. (f) Corporate interest income and gain on repurchases of debt is not allocated to reportable segments. (g) Includes tax associated with unallocated items. 10. Accounting Change In June 2001, the Financial Accounting Standards Board issued SFAS No. 142, "Goodwill and Other Intangible Assets." Among other provisions, goodwill will no longer be amortized but will be subject to impairment tests at least annually. SFAS No. 142 was effective for Corning on January 1, 2002. Corning completed its initial impairment review during the first quarter and concluded a transitional impairment charge from the adoption of the standard was not required. Corning has selected the fourth quarter to conduct annual impairment tests. See Note 4 for the results of the impairment test. The goodwill related to the Telecommunications Segment is $1.6 billion at December 31, 2002. The following table presents a reconciliation of reported net loss and loss per share to adjusted net loss and loss per share, as if SFAS No. 142 had been in effect as follows:
For the three For the months ended year ended (In millions, except per share amounts) December 31, 2001 December 31, 2001 - -------------------------------------------------------------------------------------------------------------------- Reported net loss $ (655) $ (5,498) Addback: Amortization of goodwill, net of income taxes 31 345 --------- --------- Adjusted net loss $ (624) $ (5,153) ========= ========= Reported loss per share - basic and diluted $ (0.69) $ (5.89) Addback: Amortization of goodwill, net of income taxes 0.03 0.37 --------- --------- Adjusted loss per share - basic $ (0.66) $ (5.52) ========= =========
11. Reclassifications Certain amounts in 2001 have been reclassified to conform with 2002 classifications.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME RESTATED FOR PRESENTATION OF PRECISION LENS AS A DISCONTINUED OPERATION (Unaudited; in millions, except per share amounts) For the three For the three For the three For the nine months ended months ended months ended months ended March 31, June 30, Sept. 30, Sept. 30, 2002 2002 2002 2002 ------------- ------------- ------------- ------------ Net sales $ 839 $ 827 $ 762 $ 2,428 Cost of sales 655 643 633 1,931 --------- --------- --------- --------- Gross margin 184 184 129 497 Operating expenses: Selling, general and administrative expenses 188 188 157 533 Research, development and engineering expenses 126 131 113 370 Amortization of purchased intangibles 11 11 11 33 Restructuring, impairment and other charges 494 125 619 --------- --------- --------- --------- Operating loss (141) (640) (277) (1,058) Interest income 14 10 10 34 Interest expense (48) (44) (44) (136) Gain on repurchases of debt 68 22 90 Other expense, net (9) (1) (10) --------- --------- --------- --------- Loss from continuing operations before income taxes (184) (606) (290) (1,080) Income tax benefit (50) (184) (91) (325) --------- --------- --------- --------- Loss from continuing operations before minority (134) (422) (199) (755) interests and equity earnings Minority interests 6 6 5 17 Equity in earnings of associated companies, net of impairments 30 25 42 97 --------- --------- --------- --------- Loss from continuing operations (98) (391) (152) (641) Income from discontinued operations, net of income taxes 8 21 19 48 --------- --------- --------- --------- Net loss (90) (370) (133) (593) Dividend requirements of preferred stock (128) (128) --------- --------- --------- --------- Loss attributable to common shareholders $ (90) $ (370) $ (261) $ (721) ========= ========= ========= ========= Basic and diluted (loss) earnings per common share Continuing operations $ (0.10) $ (0.41) $ (0.27) $ (0.79) Discontinued operations 0.02 0.02 0.05 --------- --------- --------- --------- Net loss per common share $ (0.10) $ (0.39) $ (0.25) $ (0.74) ========= ========= ========= ========= Shares used in computing per share amounts for basic and diluted loss per common share 945 948 1,036 977 ========= ========= ========= ========= The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES OPERATING SEGMENTS RESTATED FOR NEW SEGMENT AND DISCONTINUED OPERATIONS PRESENTATION (Unaudited, in millions) For the three For the three For the three For the nine months ended months ended months ended months ended March 31, June 30, Sept. 30, Sept. 30, 2002 2002 2002 2002 ------------- ------------- ------------- ------------ Telecommunications Net sales $ 465 $ 437 $ 366 $ 1,268 Research, development and engineering expenses $ 86 $ 86 $ 71 $ 243 Restructuring, impairment and other charges (related tax benefit, $0, $125, $28 and $153, respectively) $ 369 $ 90 $ 459 Interest expense $ 32 $ 25 $ 27 $ 84 Income tax benefit $ (64) $ (191) $ (91) $ (346) Segment loss before equity earnings $ (138) $ (384) $ (193) $ (715) Equity in losses of associated companies (4) (17) (5) (26) --------- --------- --------- --------- Segment net loss $ (142) $ (401) $ (198) $ (741) ========= ========= ========= ========= Technologies Net sales $ 369 $ 385 $ 392 $ 1,146 Research, development and engineering expenses $ 40 $ 45 $ 42 $ 127 Restructuring, impairment and other charges (related tax benefit, $0, $1, $2 and $3, respectively) $ 3 $ 6 $ 9 Interest expense $ 16 $ 17 $ 19 $ 52 Income tax (benefit) expense $ (1) $ 5 $ 1 $ 5 Segment loss before minority interests and equity earnings $ (4) $ (4) $ (5) $ (13) Minority interests 6 5 5 16 Equity in earnings of associated companies 33 41 43 117 --------- --------- --------- --------- Segment net income $ 35 $ 42 $ 43 $ 120 ========= ========= ========= ========= Total Segments Net sales $ 834 $ 822 $ 758 $ 2,414 Research, development and engineering expenses $ 126 $ 131 $ 113 $ 370 Restructuring, impairment and other charges (related tax benefit, $0, $126, $30 and $156, respectively) $ 372 $ 96 $ 468 Interest expense $ 48 $ 42 $ 46 $ 136 Income tax benefit $ (65) $ (186) $ (90) $ (341) Segment loss before minority interests and equity earnings $ (142) $ (388) $ (198) $ (728) Minority interests 6 5 5 16 Equity in earnings of associated companies 29 24 38 91 --------- --------- --------- --------- Segment net loss $ (107) $ (359) $ (155) $ (621) ========= ========= ========= =========
CORNING INCORPORATED AND SUBSIDIARY COMPANIES OPERATING SEGMENTS RESTATED FOR NEW SEGMENT AND DISCONTINUED OPERATIONS PRESENTATION (Unaudited, in millions) For the three For the three For the three For the nine months ended months ended months ended months ended March 31, June 30, Sept. 30, Sept. 30, 2002 2002 2002 2002 ------------- ------------- ------------- ------------ Reconciliation: Net sales Total segment net sales $ 834 $ 822 $ 758 $ 2,414 Non-segment net sales 5 5 4 14 --------- --------- --------- --------- Total net sales $ 839 $ 827 $ 762 $ 2,428 ========= ========= ========= ========= Loss from Continuing Operations Total segment loss $ (107) $ (359) $ (155) $ (621) Unallocated items: Non-segment income (loss) and other 9 12 (5) 16 Non-segment restructuring, impairment and other charges (122) (29) (151) Interest income 14 10 10 34 Gain on repurchases of debt 68 22 90 Income tax (expense) benefit (15) (2) 1 (16) Minority interests 1 1 Equity in earnings of associated companies 1 1 4 6 --------- --------- --------- --------- Loss from continuing operations $ (98) $ (391) $ (152) $ (641) ========= ========= ========= =========
CORNING INCORPORATED AND SUBSIDIARY COMPANIES QUARTERLY SEGMENT SALES INFORMATION (Unaudited; in millions) 2002 ------------------------------------------------------------- Q1 Q2 Q3 Q4 Total -------- -------- ------- ------- -------- Telecommunications Fiber and cable $ 255 $ 212 $ 195 $ 197 $ 859 Hardware and equipment 135 153 136 128 552 Photonic technologies (a) 36 39 17 19 111 Controls and connectors 39 33 18 19 109 -------- -------- ------- ------- -------- Segment net sales $ 465 $ 437 $ 366 $ 363 $ 1,631 ======== ======== ======= ======= ======== Technologies Display technologies $ 93 $ 102 $ 106 $ 104 $ 405 Environmental 94 102 102 96 394 Life sciences 70 74 71 65 280 Conventional video components 43 41 47 35 166 Other technologies businesses 69 66 66 67 268 -------- -------- ------- ------- -------- Segment net sales $ 369 $ 385 $ 392 $ 367 $ 1,513 ======== ======== ======= ======= ========
2001 ------------------------------------------------------------- Q1 Q2 Q3 Q4 Total -------- -------- ------- ------- -------- Telecommunications Fiber and cable $ 875 $ 939 $ 779 $ 296 $ 2,889 Hardware and equipment 248 231 187 151 817 Photonic technologies 250 168 76 53 547 Controls and connectors 60 55 47 43 205 -------- -------- ------- ------- -------- Segment net sales $ 1,433 $ 1,393 $ 1,089 $ 543 $ 4,458 ======== ======== ======= ======= ======== Technologies Display technologies $ 62 $ 87 $ 79 $ 95 $ 323 Environmental 108 96 90 85 379 Life sciences 70 69 65 63 267 Conventional video components 86 73 47 46 252 Other technologies businesses 104 86 79 78 347 -------- -------- ------- ------- -------- Segment net sales $ 430 $ 411 $ 360 $ 367 $ 1,568 ======== ======== ======= ======= ========
(a) Optical network devices business has been combined with photonics technologies for all periods presented.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited; in millions, except per share amounts) Q4 '02 vs. Q3 `02 For the three months ended December 31, September 30, 2002 2002 ------------ ------------- Net sales $ 736 $ 762 Cost of sales 631 633 --------- --------- Gross margin 105 129 Operating expenses: Selling, general and administrative expenses 183 157 Research, development and engineering expenses 113 113 Amortization of purchased intangibles 10 11 Restructuring, impairment and other charges 1,461 125 --------- --------- Operating loss (1,662) (277) Interest income 7 10 Interest expense (43) (44) Gain on repurchases of debt 86 22 Other expense, net (28) (1) --------- --------- Loss from continuing operations before income taxes (1,640) (290) Benefit for income taxes (401) (91) --------- --------- Loss from continuing operations before minority interests and equity earnings (1,239) (199) Minority interests 81 5 Equity in earnings of associated companies, net of impairments 19 42 --------- --------- Loss from continuing operations (1,139) (152) Income from discontinued operations, net of income taxes 430 19 --------- --------- Net loss (709) (133) Dividend requirements of preferred stock (128) --------- --------- Net loss attributable to common shareholders $ (709) $ (261) ========= ========= Basic and diluted loss per common share Continuing operations (0.96) (0.27) Discontinued operations 0.36 0.02 --------- --------- Net loss per common share $ (0.60) $ (0.25) ========= ========= Shares used in computing per share amounts for basic and diluted loss per common share 1,188 1,036 ========= =========
CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited; in millions) Q4 '02 vs. Q3 `02 December 31, September 30, 2002 2002 ------------ ------------- Assets Current assets: Cash and cash equivalents $ 1,471 $ 983 Short-term investments, at fair value 619 618 --------- --------- Total cash and short-term investments 2,090 1,601 Trade accounts receivable, net of doubtful accounts and allowances - $59 and $48 470 541 Inventories 559 619 Deferred income taxes 296 380 Other current assets 410 374 --------- --------- Total current assets 3,825 3,515 --------- --------- Restricted cash and investments 82 70 Investments: Associated companies, at equity 746 696 Others, at cost or fair value 23 74 --------- --------- Total investments 769 770 --------- --------- Property, net of accumulated depreciation - $3,375 and $3,405 3,705 4,592 Goodwill, net of accumulated amortization - $661 1,715 2,113 Other intangible assets, net of accumulated amortization - $104 and $120 261 378 Deferred income taxes 887 478 Other assets 304 266 --------- --------- Total Assets $ 11,548 $ 12,182 ========= ========= Liabilities and Shareholders' Equity Current liabilities: Loans payable $ 204 $ 213 Accounts payable 339 286 Other accrued liabilities 1,137 976 --------- --------- Total current liabilities 1,680 1,475 Long-term debt 3,963 4,173 Postretirement benefits other than pensions 617 618 Pensions 455 287 Other liabilities 83 94 Commitments and contingencies Minority interests 59 138 Series B convertible preferred stock Shareholders' equity: Preferred stock - Par value $100.00 per share; Shares authorized: 10 million Series C mandatory convertible preferred stock - Shares issued: 5.75 million; Shares outstanding: 1.55 million and 2.45 million 155 245 Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion; Shares issued: 1,267 million and 1,222 million 634 611 Additional paid in capital 9,695 9,620 Accumulated deficit (4,921) (4,212) Cost of 70 million and 74 million shares of common stock in treasury (702) (736) Accumulated other comprehensive loss (170) (131) --------- --------- Total shareholders' equity 4,691 5,397 --------- --------- Total Liabilities and Shareholders' Equity $ 11,548 $ 12,182 ========= =========
CORNING INCORPORATED AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in millions) Q4 '02 vs. Q3 `02 For the three months ended December 31, September 30, 2002 2002 ---------------- --------------- Cash Flows from Operating Activities: Loss from continuing operations $(1,139) $ (153) Adjustments to reconcile loss from continuing operations to net cash used in operating activities: Amortization of purchased intangibles 10 11 Depreciation 147 154 Restructuring, impairment and other charges 1,461 125 Gain on repurchases of debt (86) (22) Equity in earnings of associated companies in excess of dividends received (21) (32) Minority interests, net of dividends paid (81) (5) Deferred tax benefit (479) (20) Interest expense on convertible debentures 8 9 Restructuring payments (83) (77) Increases in restricted cash (33) (20) Changes in certain working capital items 148 (4) Other, net 45 5 ------- -------- Net cash used in operating activities (103) (29) ------- -------- Cash Flows from Investing Activities: Capital expenditures (78) (69) Acquisitions of businesses, net of cash acquired (27) (29) Proceeds from sale or disposal of assets, net 30 26 Net increase in long-term investments and other long-term assets (13) (9) Proceeds from sale of precision lens business, net 787 Short-term investments - acquisitions (620) (710) Short-term investments - liquidations 619 475 Restricted investments - acquisitions (117) Restricted investments - liquidations 21 67 ------- -------- Net cash provided by (used in) investing activities 719 (366) ------- -------- Cash Flows from Financing Activities: Net increase (decrease) in loans payable 12 (28) Repayments of long-term debt (135) (35) Redemption of Series B preferred stock (7) Proceeds from issuance of Series C preferred stock, net (1) 558 Proceeds from issuance of common stock, net 5 14 Redemption of common stock for income tax withholding (1) Repurchases of common stock (23) Cash dividends paid to preferred shareholders (21) (67) ------- -------- Net cash (used in) provided by financing activities (140) 411 ------- -------- Effect of exchange rate changes on cash and cash equivalents 20 ------- -------- Cash provided by continuing operations 496 16 Cash (used in) provided by discontinued operations (8) 27 ------- -------- Net increase in cash and cash equivalents 488 43 Cash and cash equivalents at beginning of period 983 940 ------- -------- Cash and cash equivalents at end of period $ 1,471 $ 983 ======= ========
CORNING INCORPORATED AND SUBSIDIARY COMPANIES OPERATING SEGMENTS (Unaudited; in millions) Q4 '02 vs. Q3 `02 For the For the three months ended three months ended December 31, 2002 September 30, 2002 ---------------------- ---------------------- Telecommunications Net sales $ 363 $ 366 Research, development and engineering expenses $ 65 $ 71 Restructuring, impairment and other charges (related tax benefit, $299, $28, respectively) $ 1,263 $ 90 Interest expense $ 15 $ 27 Income tax benefit $ (376) $ (91) Segment loss before minority interests and equity losses $ (1,123) $ (193) Minority interests 1 Equity in losses of associated companies, net of impairments (34) (5) --------- -------- Segment net loss $ (1,156) $ (198) ========= ======== Technologies Net sales $ 367 $ 392 Research, development and engineering expenses $ 50 $ 42 Restructuring, impairment and other charges (related tax benefit, $27, $2, respectively) $ 141 $ 6 Interest expense $ 19 $ 19 Income tax (benefit) expense $ (33) $ 1 Segment loss before minority interests and equity earnings $ (132) $ (5) Minority interests (includes $68, $2 related to impairment and restructuring charges) 80 5 Equity in earnings of associated companies 51 43 --------- -------- Segment net (loss) income $ (1) $ 43 ========= ======== Total Segments Net sales $ 730 $ 758 Research, development and engineering expenses $ 115 $ 113 Restructuring, impairment and other charges (related tax benefit, $326, $30, respectively) $ 1,404 $ 96 Interest expense $ 34 $ 46 Income tax benefit $ (409) $ (90) Segment loss before minority interests and equity earnings $ (1,255) $ (198) Minority interests 81 5 Equity in earnings of associated companies, net of impairments 17 38 --------- -------- Segment net loss $ (1,157) $ (155) ========= ========
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