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) July 23, 2002
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.
Item 7. Financial Statements and Exhibits.
Exhibits:
The Registrant's press release of July 23, 2002.
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: July 23, 2002 By /s/ KATHERINE A. ASBECK
Katherine A. Asbeck
Senior Vice President and Controller
FOR RELEASE: July 23, 2002
Corning Contacts:
Media Relations Investor Relations
Daniel F. Collins Katherine M. Dietz
(607) 974-4197 (607) 974-8217
collinsdf@corning.com dietzkm@corning.com
Corning Announces Second-Quarter Results
Company outlines restructuring programs
Details debt repurchases
CORNING, N.Y. -- Corning Incorporated (NYSE: GLW) today announced that its
second-quarter sales were $896 million and that it incurred a net loss of $370
million, or $0.39 per share. The loss included restructuring and impairment
charges of $494 million ($342 million after-tax), or $0.36 per share, and a gain
resulting from debt repurchases of $68 million ($42 million after-tax), or $0.04
per share.
"Second-quarter revenues were in line with our expectations," said James R.
Houghton, chairman and chief executive officer. He said that while sales in the
telecommunications sector continue to be severely depressed, most of Corning's
businesses outside of telecommunications, such as the liquid crystal display
business, are profitable and experiencing solid growth. Houghton said,
"Excluding special items, our net loss was somewhat better than expected."
Second-Quarter Operating Results
Second-quarter sales of $896 million were essentially even with first-quarter
sales of $898 million. Sales reflect increases in the advanced materials and
information display segments, offset by a 6% decline in the telecommunications
segment. This sequential decline in telecommunications was primarily due to flat
shipments and price declines of 10% to 15% in the optical fiber and cable
business. The company said that fiber volume did not improve as expected due to
lower-than-anticipated demand from North American incumbent carriers and cable
television operators.
(more)
Corning Announces Second-Quarter Results
Page Two
The increasing popularity of flat-panel desktop monitors, notebook computers,
portable electronic devices and projection televisions drove a 9% sequential
sales improvement in Corning's information display segment. Sales in the
advanced materials segment grew 4% primarily due to gains in the Environmental
Technologies business.
"We continue to be encouraged with the quarter-to-quarter growth in our
information display segment and environmental technologies business," James B.
Flaws, vice chairman and chief financial officer, said, "However, there is no
question that the market turmoil caused by several customer bankruptcies and
ongoing accounting controversies negatively impacted capital expenditures among
our telecommunications customers in North America."
Corning reported that it had $1.3 billion in cash and short-term investments at
the end of the second quarter, down from $1.8 billion at the end of the first
quarter. The decline in cash and short-term investments was due primarily to
approximately $480 million of debt and commercial paper repayments. Flaws said,
"We are pleased with the significant improvement in operating cash flow compared
to the first quarter. Our efforts to control our cash burn rate are paying off."
In the second quarter of 2001, Corning reported sales of $1.9 billion and a loss
of $4.8 billion or $5.13 per share. The loss included a $4.8 billion goodwill
impairment charge. The year-to-year sales decline reflects the significant
falloff in the fiber and cable business which began in the third quarter of last
year.
Restructuring and Impairment Charges
In this year's second quarter, Corning recorded restructuring and impairment
charges totaling $494 million ($342 million after-tax), or $0.36 per share. In
April the company said that it expected to take total restructuring and
impairment charges in the range of $600 million pretax spread over the second
and third quarters of 2002. The second quarter pretax charges include:
.. $418 million ($281 million after-tax) of restructuring and impairment
charges related to workforce reductions and facility closures.
.. $60 million ($37 million after-tax) impairment of cost investments in the
telecommunications segment.
.. $16 million ($10 million after-tax) loss on the divestiture of the
appliance controls business.
.. $14 million after-tax charge to impair an international cabling equity
investment which is included in equity earnings.
(more)
Corning Announces Second-Quarter Results
Page Three
Corning expects third-quarter pretax restructuring charges to be in the range of
$125 million to $150 million based on actions already underway. Approximately
one-third of the charges for the second and third quarters will be cash.
As part of the company's restructuring and cost reduction efforts, Corning has
planned workforce reductions of approximately 4,400 employees including 2,700
salaried positions. Additionally, the company has announced that it will close
several manufacturing and research facilities as it consolidates and reduces
cost in its global telecommunications businesses as well as in its corporate
research and administrative staff organizations.
In addition to the restructuring actions, Corning has implemented significant
cost reduction programs across its existing businesses and staff functions. The
company expects to realize annualized savings of approximately $265 million from
both the restructuring and cost reduction programs by the beginning of 2003.
Cost savings in the second half of 2002 should be approximately $55 million as
these programs are implemented.
"Corning is reviewing a number of other actions to further reduce both the cost
structure and capital requirements of the businesses going forward," Flaws said.
"This could include the potential sale or discontinuation of some non-core
businesses. Additional consolidation of manufacturing capacity within our
telecommunications segment is also possible." He said the exact timing or
outcome of these reviews has not yet been determined but could result in
additional charges this year.
Gain on Debt Repurchase
Also in the second quarter, Corning recorded a gain of $68 million ($42 million
after-tax), or $0.04 per share, due to the repurchase of $220 million in
accreted value of its zero coupon convertible debentures due 2015 for $148
million in cash in a series of open market transactions. Corning said that it
may, from time to time, repurchase certain additional Corning debt securities in
open market or privately negotiated transactions.
(more)
Corning Announces Second-Quarter Results
Page Four
Third-Quarter Outlook
Corning said it anticipates that third-quarter sales will be in the range of
$825 million to $875 million and its net loss will be in the range of $0.07 to
$0.10 per share, excluding previously announced restructuring and impairment
charges. The primary driver of the range will be fiber and cable volume which is
expected to be flat to down 15%. Corning said continued price pressure will also
impact revenues. Sales in the rest of the telecommunications businesses are also
expected to remain at depressed levels. The company said it expects revenues
from its advanced materials and information display segments to remain strong in
the third quarter led by its liquid crystal display business, which continues to
operate at full capacity. Third-quarter results are expected to reflect the
positive impact of cost reduction programs; however implementation costs and
continued weakening of the fiber and cable business could largely offset these
gains.
Houghton said, "We are disappointed that the issues affecting the
telecommunications industry are resulting in reduced confidence and a new round
of carrier capital spending reductions. If this trend continues, we will take
out more cost. Our commitment to achieving profitability in 2003 is unwavering.
While we find the difficulties facing the telecommunications industry to be
significant, we are fortunate to have growth opportunities in our information
display and advanced materials segments. We plan on extending our market-leading
positions in these segments and we are prepared to take advantage of our optical
communications market leadership when increased capital spending returns to the
telecom space."
About Corning Incorporated
Established in 1851, Corning Incorporated (www.corning.com) creates leading-edge
technologies for the fastest-growing markets of the world's economy. Corning
manufactures optical fiber, cable and photonic products for the
telecommunications industry; and high-performance displays and components for
television, information technology and other communications-related industries.
The company also uses advanced materials to manufacture products for scientific,
semiconductor and environmental markets. Corning revenues for 2001 were $6.3
billion.
###
Corning Announces Second-Quarter Results
Page Five
Conference Call Information
The company will host a conference call at 8:30 a.m. EST on Wednesday, July 24,
2002. To access the call, dial (630) 395-0020. The password is Corning. The
leader is Dietz. A replay of the call will begin at approximately 10:30 a.m. EST
and will run through 5 p.m. EST on Tuesday, August 6, 2002. To access the
replay, dial (402) 220-3559; a password is not required. A live audio webcast
will be available at www.corning.com/investor_relations/ and will remain there
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 six months ended
June 30, June 30,
-------------------------- -------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Net sales $ 896 $ 1,868 $ 1,794 $ 3,789
Cost of sales 682 1,339 1,376 2,444
--------- --------- --------- ---------
Gross margin 214 529 418 1,345
Operating expenses
Selling, general and administrative expenses 190 262 380 532
Research, development and engineering
expenses 132 171 260 331
Amortization of purchased intangibles 11 10 22 23
Amortization of goodwill 150 293
Restructuring, impairment and other charges 494 4,772 494 4,772
--------- --------- --------- ---------
Operating loss (613) (4,836) (738) (4,606)
Interest income 10 11 24 35
Interest expense (44) (34) (92) (68)
Gain on repurchases of debt 68 68
Other expense, net (12) (9) (21)
--------- --------- --------- ---------
Loss before income taxes (579) (4,871) (747) (4,660)
(Benefit) provision for income taxes (178) (77) (220) 31
--------- --------- --------- ---------
Loss before minority interest and
equity earnings (401) (4,794) (527) (4,691)
Minority interest in losses (earnings) of subsidiaries 6 (7) 12 (12)
Equity in earnings of associated companies 25 46 55 80
--------- --------- --------- ---------
Net loss $ (370) $ (4,755) $ (460) $ (4,623)
========= ========= ========= =========
Basic and diluted loss per share $ (0.39) $ (5.13) $ (0.49) $ (5.01)
========= ========= ========= =========
Net loss adjusted for the impact of
SFAS No. 142 in 2001 $ (370) $ (4,652) $ (460) $ (4,384)
========= ========= ========= =========
Basic and diluted loss per share
adjusted for the impact of SFAS No. 142 in 2001 $ (0.39) $ (5.02) $ (0.49) $ (4.75)
========= ========= ========= =========
Dividends declared per common share $ $ 0.06 $ $ 0.12
========= ========= ========= =========
Shares used in computing per share amounts for
basic and diluted loss per share 948 926 947 923
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
Unaudited December 31, Unaudited
June 30, 2002 2001 June 30, 2001
------------- ------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 940 $ 1,037 $ 614
Short-term investments, at fair value 383 1,182 697
--------- --------- ---------
Total cash and short-term investments 1,323 2,219 1,311
Trade accounts receivable, net of doubtful accounts
and allowances - $63, $60 and $42 605 593 1,246
Inventories 671 725 977
Deferred income taxes 400 347 308
Other current assets 333 223 236
--------- --------- ---------
Total current assets 3,332 4,107 4,078
Investments:
Associated companies, at equity 666 636 537
Others, at cost or fair value 74 142 190
--------- --------- ---------
Total investments 740 778 727
Property, plant and equipment, at cost, net of accumulated
depreciation - $3,302, $3,101 and $2,921 4,757 5,097 5,301
Goodwill, net of accumulated amortization - $661, $661 and $583 2,000 1,937 1,874
Other intangible assets, net of accumulated amortization
- $109, $90 and $75 390 352 409
Other assets 667 522 262
--------- --------- ---------
Total Assets $ 11,886 $ 12,793 $ 12,651
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 57 $ 477 $ 473
Accounts payable 310 441 512
Other accrued liabilities 1,052 1,076 910
--------- --------- ---------
Total current liabilities 1,419 1,994 1,895
Long-term debt 4,285 4,461 3,855
Postretirement benefits other than pensions 614 608 600
Other liabilities 379 190 212
Commitments and contingencies
Minority interest in subsidiary companies 107 119 144
Convertible preferred stock 7 7 8
Common shareholders' equity:
Common stock, including excess over par value and other capital -
Par value $0.50 per share; Shares authorized: 3.8 billion;
Shares issued: 1.0 billion 10,028 10,044 9,774
Accumulated deficit (4,070) (3,610) (2,734)
Cost of 74 million, 79 million and 77 million
shares of common stock in treasury (775) (827) (804)
Accumulated other comprehensive loss (108) (193) (299)
--------- --------- ---------
Total common shareholders' equity 5,075 5,414 5,937
--------- --------- ---------
Total Liabilities and Shareholders' Equity $ 11,886 $ 12,793 $ 12,651
========= ========= =========
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 six months ended
June 30,
--------------------------
2002 2001
-------- ---------
Cash flows from operating activities:
Net loss $ (460) $ (4,623)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Amortization of purchased intangibles 22 23
Amortization of goodwill 293
Depreciation 329 318
Restructuring, impairment and other charges 494 4,772
Inventory write-down 273
Gain on repurchases of debt (68)
Stock compensation charges 2 27
Equity in earnings of associated companies less than
(in excess of) dividends received 28 (23)
Minority interest, net of dividends paid (12) 5
Deferred tax benefit (107) (122)
Tax benefit on stock options 25
Interest expense on convertible debentures 21 20
Restructuring payments (116) (5)
Changes in certain working capital items (201) (306)
Other, net (80) 13
-------- ---------
Net cash (used in) provided by operating activities (148) 690
-------- ---------
Cash flows from investing activities:
Capital expenditures (213) (1,155)
Acquisitions of businesses, net of cash acquired (66)
Net proceeds from sale or disposal of assets 36 27
Net increase in long-term investments and other
long-term assets (9) (90)
Short-term investments - acquisitions (847) (232)
Short-term investments - liquidations 1,648 250
Other, net (2)
-------- ---------
Net cash provided by (used in) investing activities 613 (1,266)
-------- ---------
Cash flows from financing activities:
Net (repayments) borrowings of short-term debt (474) 263
Proceeds from issuance of long-term debt 11 68
Repayments of long-term debt (155) (93)
Proceeds from issuance of common stock 33 19
Redemption of common stock for income tax withholding (19)
Dividends paid (112)
-------- ---------
Net cash (used in) provided by financing activities (585) 126
-------- ---------
Effect of exchange rates on cash 23 (6)
-------- ---------
Cash used in continuing operations (97) (456)
-------- ---------
Cash used in discontinued operations (9)
-------- ---------
Net decrease in cash and cash equivalents (97) (465)
Cash and cash equivalents at beginning of year 1,037 1,079
-------- ---------
Cash and cash equivalents at end of period $ 940 $ 614
======== =========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter 2, 2002
1. Operating Segments
Corning's reportable operating segments consist of Telecommunications, Advanced
Materials and Information Display. Corning includes the earnings of equity
affiliates that are closely associated with Corning's operating segments in
segment net income. 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 by segment but excluded this from
quantitative segment results. These charges have been included in segment net
income and historical periods have been conformed to this presentation.
Information about the performance of Corning's three operating segments for the
second quarter and six months of 2002 and 2001 is presented below. These amounts
exclude revenues, expenses and equity earnings not specifically identifiable to
segments.
Corning prepared the financial results for its three 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 some common expenses among segments differently
than it would for stand alone financial information prepared in accordance with
GAAP. Segment net income may not be consistent with measures used by other
companies.
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2002 2001 2002 2001
--------- -------- --------- ---------
Telecommunications
Net sales $ 437 $ 1,393 $ 902 $ 2,826
Research, development and engineering expenses $ 86 $ 134 $ 172 $ 256
Interest expense $ 25 $ 23 $ 57 $ 48
Segment (loss) earnings before
equity (losses) earnings and restructuring, impairment
and other charges $ (139) $ (7) $ (277) $ 170
Equity in (losses) earnings of associated companies (3) 8 (7) 11
--------- -------- --------- ---------
Segment (loss) earnings before restructuring, impairment
and other charges (142) 1 (284) 181
Restructuring, impairment and other charges, net of tax (259) (4,726) (259) (4,726)
--------- -------- --------- ---------
Segment net loss $ (401) $ (4,725) $ (543) $ (4,545)
========= ======== ========= =========
Advanced Materials
Net sales $ 242 $ 251 $ 475 $ 533
Research, development and engineering expenses $ 32 $ 28 $ 63 $ 56
Interest expense $ 8 $ 5 $ 16 $ 10
Segment earnings before equity earnings and
restructuring charges $ 9 $ 11 $ 10 $ 37
Equity in earnings of associated companies 12 7 20 13
--------- -------- --------- ---------
Segment earnings before restructuring charges 21 18 30 50
Restructuring charges, net of tax (1) (1)
--------- -------- --------- ---------
Segment net income $ 20 $ 18 $ 29 $ 50
========= ======== ========= =========
Information Display
Net sales $ 212 $ 218 $ 407 $ 419
Research, development and engineering expenses $ 14 $ 9 $ 25 $ 19
Interest expense $ 9 $ 6 $ 17 $ 10
Segment earnings before minority interest and
equity earnings $ 8 $ 25 $ 11 $ 46
Minority interest in losses (earnings) of subsidiaries 5 (7) 11 (12)
Equity in earnings of associated companies 29 29 54 54
--------- -------- --------- ---------
Segment net income $ 42 $ 47 $ 76 $ 88
========= ======== ========= =========
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2002 2001 2002 2001
--------- -------- --------- ---------
Total Segments
Net sales $ 891 $ 1,862 $ 1,784 $ 3,778
Research, development and engineering expenses $ 132 $ 171 $ 260 $ 331
Interest expense $ 42 $ 34 $ 90 $ 68
Segment (loss) earnings before minority interest
equity earnings and restructuring, impairment and
other charges $ (122) $ 29 $ (256) $ 253
Minority interest in losses (earnings) of subsidiaries 5 (7) 11 (12)
Equity in earnings of associated companies 38 44 67 78
--------- -------- --------- ---------
Segment (loss) earnings before restructuring, impairment
and other charges (79) 66 (178) 319
Restructuring, impairment and other charges, net of tax (260) (4,726) (260) (4,726)
--------- -------- --------- ---------
Segment net loss $ (339) $ (4,660) $ (438) $ (4,407)
========= ======== ========= =========
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):
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2002 2001 2002 2001
--------- -------- --------- ---------
Net sales
Total segment net sales $ 891 $ 1,862 $ 1,784 $ 3,778
Non-segment net sales (a) 5 6 10 11
--------- -------- --------- ---------
Total net sales $ 896 $ 1,868 $ 1,794 $ 3,789
========= ======== ========= =========
Net loss
Total segment net loss (b) $ (339) $ (4,660) $ (438) $ (4,407)
Unallocated items:
Non-segment loss and other (a) (1) (2) (2) (3)
Amortization of goodwill (c) (150) (293)
Non-segment restructuring, impairment and
other charges (d) (127) (127)
Interest income (e) 10 11 24 35
Gain on repurchases of debt 68 68
Income tax (f) 16 44 11 43
Minority interest 1 1
Equity in earnings of associated companies (a) 2 2 3 2
--------- -------- --------- ---------
Net loss $ (370) $ (4,755) $ (460) $ (4,623)
========= ======== ========= =========
(a) Includes amounts derived from corporate investments and activities.
(b) Includes royalty, interest and dividend income.
(c) Amortization of goodwill relates primarily to the Telecommunications
segment.
(d) Amount includes pension and postretirement benefit curtailment charges of
$30 million recorded in the second quarter of 2002. The balance of the
charge relates to restructuring and impairment charges in the corporate
research and administrative staff organizations.
(e) Corporate interest income is not allocated to reportable segments.
(f) Includes tax associated with unallocated items.
2. Restructuring, Impairment and Other Charges
2002 Restructuring Actions
--------------------------
During the second quarter, Corning undertook actions to reduce its costs. The
intent to do so was announced in April 2002. At that time, it was estimated that
restructuring, fixed asset impairments, and impairments of investments could
total approximately $600 million and would be recorded over the second and third
quarters.
Actions approved and initiated in the second quarter include the following:
.. permanent abandonment of certain construction projects that had been
stopped in 2001 in the fiber business within the Telecommunications
Segment,
.. closure of minor manufacturing facilities, primarily in the
Telecommunications Segment,
.. closure and consolidation of research facilities,
.. elimination of 4,400 (includes 800 expected in Q3) positions worldwide
through voluntary and involuntary programs, and
.. divestiture of a portion of the controls and connectors business in the
Telecommunications Segment.
In addition, Corning impaired cost based investments in a number of private
telecommunications companies.
Certain of the costs associated with these activities (estimated at
approximately $120 million) will be recorded in the third quarter as all
conditions for recognition had not been satisfied at June 30, 2002. These third
quarter charges relate primarily to severance and fixed asset write-offs
pertaining to facility closures outside the United States and early retirement
programs.
These second quarter actions resulted in a net pre-tax charge totaling $494
million ($328 million after-tax) for the quarter ended June 30, 2002. The charge
includes restructuring costs of $204 million offset by a $5 million reversal of
the 2001 restructuring charge, $224 million for the impairment of plant and
equipment offset by a $5 million reversal of the 2001 impairment charge, $60
million for the impairment of cost investments and a $16 million loss on
divestiture. Approximately $174 million of the charge recorded in the second
quarter is expected to be paid in cash. As of June 30, 2002, approximately 1,600
of the 4,400 employees had been separated under the 2002 plans. Corning expects
the remaining employees to be separated by March 31, 2003. Certain obligations
of the plans will be paid in 2002 and beyond.
3. Gain on Repurchases of Debt
During the second quarter of 2002, Corning purchased and retired a portion of
its zero coupon convertible debentures with an accreted value of $220 million
for cash of $148 million in a series of open market repurchases. Corning
recorded a gain of $68 million on these transactions, net of the write-off of
the unamortized issuance costs.
4. Income Taxes
Corning's effective income tax benefit rate for the three and six month periods
ended June 30, 2002, was 30.7% and 29.5%, respectively. The tax benefit rate in
the second quarter of 2002 was impacted by specific tax benefit calculations for
restructuring, impairment and other charges and the gain on repurchases of debt.
The effective benefit rate without consideration of these items was 25% in both
2002 periods. The effective tax benefit rate in the quarter and year to date is
lower than the U.S. statutory income tax rate of 35% due to the impact of
unusable tax credits and nondeductible expenses and losses.
Federal tax legislation passed early in 2002 extended the net operating loss
carryback period from two to five years. Corning anticipates incurring a federal
tax net operating loss for 2002 and this change in the tax legislation will
allow Corning to carryback the net operating loss to open tax years and claim a
tax refund. Current assets at June 30, 2002, include a receivable of $135
million as a result of Corning availing itself of this opportunity.
The effective tax (benefit) rate for the three and six months ended June 30,
2001, was 1.6% and (0.7)%. These tax rates are much lower than the U.S.
statutory income tax rate primarily due to non-tax deductible impairment and
amortization of acquired intangibles and goodwill.
5. Supplementary Statement of Cash Flows Data
Supplemental disclosure of cash flow information is as follows (in millions):
For the six months
ended June 30,
2002 2001
--------- ---------
Changes in certain working capital items:
Trade accounts receivable $ 10 $ 10
Inventories 27 (231)
Other current assets (56) 124
Accounts payable and other current liabilities,
net of restructuring payments (182) (209)
--------- ---------
Total $ (201) $ (306)
========= =========
6. Reclassifications
Certain amounts in 2001 have been reclassified to conform with 2002
classifications.
CORNING INCORPORATED
QUARTERLY SALES INFORMATION
(In millions)
2002
--------------------------------------------------------------
Q1 Q2 Q3 Q4 Total
--------- --------- -------- -------- ---------
Telecommunications
Fiber and cable $ 255 $ 212 $ $ $ 467
Hardware and equipment 135 153 288
Photonic technologies (a) 36 39 75
Controls and connectors 39 33 72
-------- -------- ------- ------- --------
Segment net sales $ 465 $ 437 $ $ $ 902
======== ======== ======= ======= ========
Advanced Materials
Environmental $ 94 $ 102 $ $ $ 196
Life sciences 70 74 144
Other advanced materials 69 66 135
-------- -------- ------- ------- --------
Segment net sales $ 233 $ 242 $ $ $ 475
======== ======== ======= ======= ========
Information Display
Display technologies $ 93 $ 102 $ $ $ 195
Conventional video components 43 41 84
Precision lens 59 69 128
-------- -------- ------- ------- --------
Segment net sales $ 195 $ 212 $ $ $ 407
======== ======== ======= ======= ========
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
======== ======== ======= ======= ========
Advanced Materials
Environmental $ 108 $ 96 $ 90 $ 85 $ 379
Life sciences 70 69 65 63 267
Other advanced materials 104 86 79 78 347
-------- -------- ------- ------- --------
Segment net sales $ 282 $ 251 $ 234 $ 226 $ 993
======== ======== ======= ======= ========
Information Display
Display technologies $ 62 $ 87 $ 79 $ 95 $ 323
Conventional video components 86 73 47 46 252
Precision lens 53 58 57 57 225
-------- -------- ------- ------- --------
Segment net sales $ 201 $ 218 $ 183 $ 198 $ 800
======== ======== ======= ======= ========
(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)
Q2 '02 vs. Q1 `02
For the three months ended
June 30, March 31,
2002 2002
--------- ---------
Net sales $ 896 $ 898
Cost of sales 682 694
--------- ---------
Gross margin 214 204
Operating expenses:
Selling, general and administrative expenses 190 190
Research, development and engineering expenses 132 128
Amortization of purchased intangibles 11 11
Restructuring, impairment and other charges 494
--------- ---------
Operating loss (613) (125)
Interest income 10 14
Interest expense (44) (48)
Gain on repurchases of debt 68
Other expense, net (9)
--------- ---------
Loss before income taxes (579) (168)
Benefit for income taxes (178) (42)
--------- ---------
Loss before minority interest and equity earnings (401) (126)
Minority interest in losses of subsidiaries 6 6
Equity in earnings of associated companies 25 30
--------- ---------
Net loss $ (370) $ (90)
========= =========
Basic and diluted loss per share $ (0.39) $ (0.10)
========= =========
Shares used in computing per share amounts for
basic and diluted loss per share 948 945
========= =========
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Q2 '02 vs. Q1 `02
For the three months ended
June 30, March 31,
2002 2002
-------- ---------
Cash flows from operating activities:
Net loss $ (370) $ (90)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization of purchased intangibles 11 11
Depreciation 166 163
Restructuring, impairment and other charges 494
Stock compensation charges 1 1
Gain on repurchases of debt (68)
Equity in earnings of associated companies less than
dividends received 5 23
Minority interest, net of dividends paid (6) (6)
Deferred tax benefit (37) (70)
Interest expense on convertible debentures 11 10
Restructuring payments (58) (58)
Changes in certain working capital items (56) (145)
Other, net (70) (10)
------- --------
Net cash provided by (used in) operating activities 23 (171)
------- --------
Cash flows from investing activities:
Capital expenditures (111) (102)
Net proceeds from sale or disposal of assets 31 5
Net (increase) decrease in long-term investments and other
long-term assets (10) 1
Short-term investments - acquisitions (244) (603)
Short-term investments - liquidations 729 919
Other, net (1) (1)
------- --------
Net cash provided by investing activities 394 219
------- --------
Cash flows from financing activities:
Net repayments of short-term debt (331) (143)
Proceeds from issuance of long-term debt 11
Repayments of long-term debt (151) (4)
Proceeds from issuance of common stock 18 15
------- --------
Net cash used in financing activities (464) (121)
------- --------
Effect of exchange rates on cash 29 (6)
------- --------
Net decrease in cash and cash equivalents (18) (79)
Cash and cash equivalents at beginning of period 958 1,037
------- --------
Cash and cash equivalents at end of period $ 940 $ 958
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CORNING INCORPORATED
Schedule conforming historical segment
results to current presentation
For the quarters of 2001
For the quarter ended,
---------------------------------------------------- Total
March 31 June 30 Sept. 30 Dec. 31 2001
-------- ------- -------- ------- ----------
Telecommunications Segment
Segment earnings (loss) before
restructuring and impairment $ 180 $ 1 $ 18 $ (280) $ (81)
Restructuring and impairment, net of tax (4,726) (222) (174) (5,122)
------- --------- ------ ------ ---------
Segment net income (loss) $ 180 $ (4,725) $ (204) $ (454) $ (5,203)
------- --------- ------ ------ ---------
Advanced Materials Segment
Segment earnings (loss) before
restructuring and impairment $ 32 $ 18 $ 8 $ (12) $ 46
Restructuring and impairment, net of tax (59) (59)
------- --------- ------ ------ ---------
Segment net income (loss) $ 32 $ 18 $ 8 $ (71) $ (13)
------- --------- ------ ------ ---------
Information Display Segment
Segment earnings before
restructuring and impairment $ 41 $ 47 $ 39 $ 22 $ 149
Restructuring and impairment, net of tax (10) (10)
------- --------- ------ ------ ---------
Segment net income $ 41 $ 47 $ 39 $ 12 $ 139
------- --------- ------ ------ ---------
Total Segments
Segment earnings (loss) before
restructuring and impairment $ 253 $ 66 $ 65 $ (270) $ 114
Restructuring and impairment, net of tax (4,726) (222) (243) (5,191)
------- --------- ------ ------ ---------
Segment net income (loss) $ 253 $ (4,660) $ (157) $ (513) $ (5,077)
------- --------- ------ ------ ---------
Reconciliation:
Total segment net income (loss) $ 253 $ (4,660) $ (157) $ (513) $ (5,077)
Non-segment loss (1) (2) (1) (1) (5)
Amortization of goodwill (143) (150) (35) (35) (363)
Restructuring and impairment (191) (191)
Interest income 24 11 15 18 68
Income tax (1) 44 (44) 67 66
Equity in earnings of associated companies 2 2 4
------- --------- ------ ------ ---------
Net income (loss) $ 132 $ (4,755) $ (220) $ (655) $ (5,498)
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