SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2001
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File number 1-3247
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
CORNING CABLE SYSTEMS
INVESTMENT PLAN
489 Siecor Park
P. O. Box 489
Hickory, NC 28603-0489
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
CORNING INCORPORATED
ONE RIVERFRONT PLAZA
CORNING, NY 14831
Documents filed as part of this report:
(a) Index to financial statements filed as part of this report:
The Statements of Net Assets Available for Benefits as at December 31,
2001 and 2000, the Statements of Changes in Net Assets Available for
Benefits years ended December 31, 2001 and 2000 and supplementary
information, together with the report thereon of
PricewaterhouseCoopers LLP dated May 10, 2002, except for the last
paragraph of Note 3 as to which the date is June 14, 2002. The
required financial statement schedules are included in the
supplementary information referred to above and should be read in
conjunction with the above financial statements.
(b) Exhibits - The consent of PricewaterhouseCoopers LLP is attached
hereto as Exhibit 23.1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Corning
Cable Systems Investment Plan Committee has duly caused this annual report to be
signed by the undersigned thereunto duly authorized.
CORNING CABLE SYSTEMS
INVESTMENT PLAN
By: /s/ Deborah G. Lauper
----------------------
Deborah G. Lauper
Member
Corning Cable Systems
Investment Plan Committee
Date: June 28, 2002
CORNING CABLE SYSTEMS
INVESTMENT PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
DECEMBER 31, 2001 AND 2000
CORNING CABLE SYSTEMS INVESTMENT PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
DECEMBER 31, 2001 AND 2000
PAGE
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000 2
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 2001 and 2000 3
Notes to Financial Statements 4 - 9
Supplemental Schedules:
Schedule of Assets (Held at End of Year)
December 31, 2001 10
Schedule of Reportable Transactions
Year Ended December 31, 2001 11
Note: Other schedules required by Section 2520.130-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 have been omitted as
they are not applicable.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of the
Corning Cable Systems Investment Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits,
present fairly, in all material respects, the net assets available for benefits
of the Corning Cable Systems Investment Plan (the "Plan") at December 31, 2001
and 2000, and the changes in net assets available for benefits for the year
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) at December 31, 2001 and the Schedule of Reportable Transactions
for the year ended December 31, 2001 are presented for purposes of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Charlotte, North Carolina
May 10, 2002, except for the last paragraph of
Note 3, as to which the date is June 14, 2002
1
CORNING CABLE SYSTEMS INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001 AND 2000
2001 2000
ASSETS
Investment in Master Trust (Note 7) $ 12,842,153 $ 11,735,065
Investments, at fair value (Notes 2, 3 and 4) 58,440,851 127,626,807
------------ ------------
Total investments 71,283,004 139,361,872
Receivables:
Participants' contributions 420,165 124,324
Employer contributions, net of forfeitures 121,368 85,038
------------ ------------
Net assets available for benefits $ 71,824,537 $139,571,234
============ ============
The accompanying notes are an integral part of these financial statements.
2
CORNING CABLE SYSTEMS INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
ADDITIONS (DEDUCTIONS):
Additions (deductions) to net assets attributed to:
Investment income:
Net appreciation (depreciation) in fair value of investments $ (80,313,488) $ 7,750,459
Interest and dividend income 628,225 1,484,729
Interest from participant loans 502,644 475,603
Equity in earnings of master trust 735,194 822,699
Contributions:
Participant 11,929,754 12,446,005
Employer 3,895,811 3,728,905
--------------- -------------
Total additions (deductions) (62,621,860) 26,708,400
--------------- -------------
DEDUCTIONS:
Deductions from net assets attributed to:
Benefits paid to participants (5,367,527) (11,227,744)
--------------- -------------
Total deductions (5,367,527) (11,227,744)
--------------- -------------
Transfers into the Plan (Note 2) 242,690 -
--------------- -------------
Net increase (decrease) (67,746,697) 15,480,656
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 139,571,234 124,090,578
--------------- -------------
End of year $ 71,824,537 $ 139,571,234
=============== =============
The accompanying notes are an integral part of these financial statements.
3
CORNING CABLE SYSTEMS INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
1. ORGANIZATION AND DESCRIPTION OF THE PLAN
The following brief description of the Corning Cable Systems Investment
Plan (the "Plan") provides only general information. Participants should
refer to the Plan agreement for a more complete description of the Plan's
provisions. CCS Holdings, the Plan sponsor (the "Company"), formerly
Corning Cable Systems, is a corporation 100% owned by Corning Incorporated
("Corning").
GENERAL
The Plan is a defined contribution plan covering substantially all
full-time U.S. employees of the Company who have at least one year of
service. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"). The Plan is administered by the Corning
Cable Systems Investment Plan Advisory Committee (the "Committee").
Putnam Mutual Funds Corp. (the "Trustee") serves as trustee of the Plan
assets, excluding the Corning Stock Fund, for which Reliance Trust Company
serves as trustee.
CONTRIBUTIONS
Participants may contribute from 1% to 12% of their eligible covered
compensation on a before-tax or after-tax basis; however, pretax
contributions cannot exceed $10,500 in both 2001 and 2000 due to tax
regulations. The Company matches 50% of the first 5% of participant salary
contributed for employees with less than 19 years of service, 75% of the
first 5% for employees with 19 years of service (but less than 24 years of
service) and 100% of the first 5% for employees with 24 or more years of
service.
Participants may elect to have their contributions invested in the
investment options provided by the Committee. The investment options
include mutual funds and the Corning Stock Fund. All Company matching funds
are invested in the Corning Stock Fund, which invests solely in Corning
Inc. stock. Upon enrollment in the Plan, a participant may direct
contributions in 10 percent increments in any of the available investment
options.
PARTICIPANT ACCOUNTS
Separate accounts are maintained for each participant. Each participant's
account is credited with the participant's contribution, the Company's
matching contribution and an allocation of Plan earnings. Allocations are
based on participants' vested and unvested account balances.
VESTING PROVISIONS
Participants are immediately vested in their voluntary contributions plus
actual earnings thereon. Vesting in the remainder of their account is based
on years of continuous service. A participant begins vesting after 3 years
of credited service at 20% per year and is fully vested after 7 years of
credited service.
PARTICIPANT LOANS
Participants may borrow from their vested fund accounts a minimum of $1,000
up to a maximum equal to the lesser of $50,000 or 50 percent of their
account balance. Loan terms range from 1-5 years or up to 10 years for the
purchase of a primary residence. The loans are secured by the balance in
the participant's account and bear interest at prime rate stated in THE
WALL STREET JOURNAL plus 1%. Principal and interest are generally paid
through direct, after-tax payroll deductions.
4
CORNING CABLE SYSTEMS INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
PAYMENT OF BENEFITS
Distributions are made upon retirement, or in the event of a participant's
total and permanent disability, death or other termination of employment. A
participant, with the consent of the Committee, can elect to receive
distributions in a lump sum payment, equal to the value of the
participant's vested interest, or in installments. The Plan also provides
for withdrawals by participants prior to termination.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of Plan
termination, participants will become 100% vested in their accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The more significant accounting principles and practices of the Plan are
summarized as follows:
METHOD OF ACCOUNTING
The Plan's financial statements are prepared on the accrual basis of
accounting.
INVESTMENTS
The Plan's investments in the Corning Stock Fund and mutual funds are
stated at fair value based on quoted market prices in an active market less
administrative expenses deducted directly from the funds as described
below. The Stable Value Fund is stated at fair value as determined by the
Trustee in the absence of readily ascertainable market values. Because of
the inherent uncertainty of the valuation, those estimated values may
differ from the values that would have been used had a ready market value
for the securities existed. Some of these differences may be significant.
Investments in guaranteed investment contracts held by the Stable Value
Fund are valued at contract value, which represents contributions made
under the contract plus interest at the guaranteed rate, which approximates
fair value.
The Trustee includes dividends and interest earned by the Plan's investment
funds directly in the funds' net asset values. Such earnings are reflected
in the financial statements as interest and dividend income.
CONTRIBUTIONS
Participant contributions are recorded in the period during which the
Company makes payroll deductions from the Plan participants' earnings.
Matching Company contributions are recorded in the same period.
EARNINGS ALLOCATION
Each participant's account is credited with an allocation of the earnings
of the funds in which the participant has directed investments on a daily
basis.
FORFEITURES
At December 31, 2001 and 2000, forfeited, nonvested accounts totaled
approximately $292,000 and $45,000, respectively. These accounts are
invested in the Stable Value Fund until used to offset the Company's
matching contributions. The employer contributions were reduced by $124,651
and $264,551 in 2001 and 2000, respectively.
ADMINISTRATIVE EXPENSES
All administrative expenses incurred by the Plan are paid for by the
Company.
5
CORNING CABLE SYSTEMS INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
EQUITY IN EARNINGS OF MASTER TRUST
Investment income, the difference between proceeds received and the cost of
investments sold and the changes in the difference between fair value and
the cost of investments, is reflected in the statement of changes in net
assets available for plan benefits as equity in earnings of master trust.
Such amounts are allocated to each participating plan based on its
percentage of the master trust assets held at the time the investment
income is recorded.
NET APPRECIATION (DEPRECIATION) IN FAIR VALUE OF ASSETS
The Plan presents in the statement of changes in net assets available for
benefits the net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains and losses and the
unrealized appreciation (depreciation) on these investments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of additions
to and deductions from the Plan's net assets during the reporting period.
Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES
The Plan provides for various mutual fund investment options in stocks,
bonds and fixed income securities. Investments are exposed to various
risks, such as interest rate, market and credit. Due to the level of risk
associated with certain investment securities and the level of uncertainty
related to changes in the value of investment securities, it is at least
reasonably possible that changes in risks in the near term would materially
affect participants' account balances and the amounts reported in the
statements of net assets available for plan benefits and the statements of
changes in net assets available for plan benefits.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current presentation.
TRANSFERS INTO THE PLAN
In 2000, CCS Holdings, the Plan sponsor, acquired Omega One Communications.
On January 1, 2001, the deferred contribution retirement plans of the
Company and Omega One were merged. As a result, all participants of the
Omega One defined contribution retirement plan became participants in the
Plan. Net assets in the amount of $242,690 were transferred into the Plan.
3. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's
net assets at December 31:
2001 2000
Stable Value Fund (Note 7) $ 12,842,153 $ 11,735,064
Corning Stock Fund 20,733,054 84,981,274
Putnam S&P 500 Index Fund 12,967,830 14,940,625
Putnam Fund for Growth and Income 7,171,349 7,992,236
Loans to participants 5,316,775 6,847,294
A portion of the Corning Stock Fund is nonparticipant-directed (see Notes 1
and 4).
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value as follows:
2001
Common stock $ (75,887,377)
Mutual funds (4,426,111)
-------------
$ (80,313,488)
=============
The Corning Stock Fund consists exclusively of shares of Corning Inc. As of
December 31, 2001, the fair market value of one Corning Inc. share amounted
to $8.92. The number and aggregate fair
6
CORNING CABLE SYSTEMS INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
market value of shares held by the Corning Stock Fund as of December 31,
2001 amounted to 2,324,333 and $20,733,054, respectively. During the period
between January 1, 2002 and June 14, 2002, the fair market value of
Corning, Inc. stock has decreased to $3.89. The number and aggregate fair
market value of shares held by the Corning Stock Fund as of June 14, 2002
amounted to 2,745,888 and $10,681,504.
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Nonparticipant-directed investments relate to the employer matching
contributions to the Corning Stock Fund. Information about the net assets
and the significant components of the changes in net assets relating to
these nonparticipant-directed investments, is as follows:
DECEMBER 31,
-------------------------------
2001 2000
Net assets:
Corning Stock Fund $ 16,886,010 $ 57,521,748
YEAR ENDED DECEMBER 31,
-------------------------------
2001 2000
Changes in net assets:
Net appreciation (depreciation) $(42,583,963) $ 11,630,259
Contributions 3,736,343 3,379,360
Transfers (to) from other funds (456,682) 1,499,999
Benefits paid directly to participants (1,703,817) (5,493,905)
Loans 372,381 (1,234,840)
------------ ------------
$(40,635,738) $ 9,780,873
============ ============
5. INCOME TAX BASIS
The Company has filed with the Internal Revenue Service for exemption from
federal income taxes under Section 401(a) of the Internal Revenue Code and
has received a favorable determination. Accordingly, no provision for
income taxes has been made in the accompanying financial statements. Income
of the Plan is taxable to participants only upon distribution. The Company
has asserted the Plan has been and continues to be operated in accordance
with all applicable provisions of the Internal Revenue Code and ERISA.
6. RELATED PARTY TRANSACTIONS
Certain plan investments are shares of mutual funds managed by Putnam
Mutual Funds Corp. Putnam Mutual Funds Corp. is the trustee as defined by
the Plan and, therefore, these transactions qualify as party-in-interest
transactions.
7. MASTER TRUST
The Stable Value Fund is a master trust that pools assets from the Plan and
the Corning Cable Systems Retirement Plan. Stable Value Fund investments
and related investment income represent the Plan's pro rata interest in the
fair value and income of the net assets of the master trust to the Plan as
determined by the Trustee (18.7548% and 19.0252% at December 31, 2001 and
2000, respectively). The Trustee allocates the net assets and income of the
master trust to the Plan based on the Plan's average daily balance compared
to the average daily balance of the master trust as adjusted by
contributions, benefit payments and earnings related specifically to the
operation of the Plan.
As discussed in Note 2, a portion of the assets of the Stable Value Fund
are invested in guaranteed investment contracts with various insurance
companies. The contracts are included in the financial statements at
contract value, which equals fair value (which represents contributions
made under the contracts, plus earnings, less withdrawals and
administrative expenses), because they are fully benefit responsive. For
example, participants may ordinarily direct the withdrawal or transfer of
all or a portion of their investments at contract value. There are no
reserves against contract values for credit risk of the contract issuers or
otherwise. The average yields and crediting interest rates for 2001 ranged
from 5.3% to 7.4%. The crediting interest rate is based on all the
contracts in the Stable Value Fund.
7
CORNING CABLE SYSTEMS INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
The following table presents the fair value of the master trust's
investments at December 31, 2001 and 2000, respectively.
2001 2000
Investments at estimated fair value:
Fixed income investments $ 9,470,919 $ 7,880,882
Investments at contract value:
Guaranteed investment contracts 59,002,885 53,800,870
------------ ------------
Total master trust investments $ 68,473,804 $ 61,681,752
============ ============
The following table presents the investment income of the master trust for
years ended December 31, 2001 and 2000, respectively:
2001 2000
Investment income:
Fixed income investments $ 524,653 $ 475,386
Guaranteed investment contracts 3,317,278 3,698,547
------------ ------------
Net appreciation in fair value of
investments $ 3,841,931 $ 4,173,933
============ ============
8. BENEFIT PAYMENTS
As of December 31, 2001, there were no benefit claims processed and
approved for payment but not yet paid as of that date.
9. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
according to the financial statements to the Form 5500:
2001 2000
Net assets available for benefits per the
financial statements $ 71,824,537 $139,571,234
Current year-end contributions receivable - (209,362)
------------ ------------
Net assets available for benefits per
Form 5500 $ 71,824,537 $139,361,872
============ ============
The following is a reconciliation of the contributions according to the
financial statements to the Form 5500:
2001 2000
Contributions per the financial statements $ 15,825,565 $ 16,174,910
Current year-end contributions receivable - (209,362)
Prior year-end contributions receivable 209,362 -
------------ ------------
Contributions per Form 5500 $ 16,034,927 $ 15,965,548
============ ============
8
SUPPLEMENTAL SCHEDULES
CORNING CABLE SYSTEMS INVESTMENT PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2001
(a) (b) (c) (d)
IDENTITY OF ISSUE, DESCRIPTION OF INVESTMENT INCLUDING CURRENT
BORROWER, LESSOR OR MATURITY DATE, RATE OF INTEREST, VALUE
SIMILAR PARTY COLLATERAL, PAR, OR MATURITY VALUE
* Reliance Trust Company Corning Stock Fund (cost of asset $56,423,058) $ 20,733,054
* Putnam Mutual Funds Corp. Lord Abbett Developing Growth Fund 1,291,655
* Putnam Mutual Funds Corp. American Century Ultra Fund 2,546,018
* Putnam Mutual Funds Corp. Putnam International Growth Fund 2,624,449
* Putnam Mutual Funds Corp. Putnam Investors Fund 1,514,460
* Putnam Mutual Funds Corp. Putnam S&P 500 Index Fund 12,967,830
* Putnam Mutual Funds Corp. Putnam Fund for Growth and Income 7,171,349
* Putnam Mutual Funds Corp. George Putnam Fund of Boston 2,891,656
* Putnam Mutual Funds Corp. PIM Total Return Fund 1,383,605
Participant loans Bearing interest at 6-10.5% with maturity dates
from 2002 through 2011 5,316,775
------------
$ 58,440,851
============
* Denotes party-in-interest
10
IDENTITY OF PARTY INVOLVED AND PURCHASE SELLING COST OF NET GAIN
DESCRIPTION OF ASSETS TRANSACTIONS PRICE (B) PRICE (B) ASSET (LOSS)
I. Any single transaction within the Plan
year in securities involving an amount
in excess of 5% of the current value of
Plan assets: None
II. Any series of transactions with respect to
any plan asset other than securities in excess
of 5% None
III. Any series of transactions within the Plan
year in securities, of the same issue or by
broker, when aggregated, involves an
amount in excess of 5% of the current value
of Plan assets (A):
Corning Stock Fund 598 purchases $18,358,715 $18,358,715 $ -
Corning Stock Fund 652 sales $ 6,720,874 11,975,017 (5,254,134)
IV. Any transaction with respect to securities
with a person, if any, prior or subsequent
transactions with such person exceeded 5%: None
(A) Purchases and sales transactions made on various occasions during the
Plan year are aggregated here. Transactions shown include both
participant and non-participant directed transactions.
(B) Fair value at date of transaction is equal to purchase or sale price.