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) April 22, 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 April 22, 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: April 22, 2002 By /s/ KATHERINE A. ASBECK
Katherine A. Asbeck
Senior Vice President and Controller
FOR RELEASE: APRIL 22, 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 First-Quarter Results
CORNING, N.Y. - Corning Incorporated (NYSE:GLW) today announced that its
first-quarter net loss was $90 million or $0.10 per share, a decline from 2001
first quarter net earnings of $132 million, or $0.14 per share, which included
after-tax goodwill amortization of $136 million, or $0.15 per share.
"We are somewhat encouraged by the general direction of the results for the
quarter. Sales began to stabilize compared to the quarter-to-quarter declines
last year. Performance improved in our Environmental Technologies and Life
Sciences businesses and the Display Technologies business continued its strong
growth. Results were also favorably impacted by our cost savings actions.
Unfortunately, the telecommunications market remains weak and continues to
dampen our results," James B. Flaws, Corning's chief financial officer, said.
First-quarter Operating Results
First-quarter sales were $898 million, compared with $1.9 billion during the
same period last year primarily due to the major falloff in the
telecommunications segment. The rate of decline in Corning's sales slowed
substantially in the first quarter as sales were 8% below fourth quarter 2001
sales of $974 million. In comparison to 2001, fiber and cable sales continued to
be negatively impacted by the global slowdown in the telecommunications sector.
However, kilometer shipments of optical fiber to cablers grew 10% to 15% for the
first quarter of 2002 compared with the fourth quarter of 2001, in line with the
company's guidance, and shipments from Corning Cable Systems were also up in the
same range.
Continued demand for notebook computers and flat panel desktop monitors drove a
16% sequential increase in volume of liquid crystal glass in the quarter.
However, the translation impact of the weak yen resulted in consolidated sales
for the Display Technologies business consistent with the fourth quarter of
2001. First-quarter sales for the Environmental Technologies business increased
11% over last year's fourth- quarter sales as U.S. auto manufacturers
replenished inventory.
(more)
Corning Announces First-Quarter Results
Page Two
"We were very pleased to see the benefit of our restructuring actions from last
year show up in reduced operating expenses compared with the fourth quarter of
last year," Flaws said. Corning also noted that manufacturing cost reductions
and the resumption of fiber production in the first quarter resulted in the
sequential improvement in the company's gross margins.
Corning reported that it had $1.8 billion in cash and short-term investments at
the end of the first quarter, down from $2.2 billion at the end of last year.
The decline in cash and short-term investments includes approximately $140
million of net debt repayments and $60 million of restructuring payments.
Second-Quarter Outlook
The company expects second-quarter sales of approximately $900 to $925 million
and a net loss similar to the first quarter's results, excluding previously
announced restructuring charges. Corning said it anticipates continued growth in
its liquid crystal display business with the increase in the popularity of
flat-panel desktop monitors. The Advanced Materials segment is expected to post
modest gains in line with general economic improvements. Shipments of fiber are
expected to be consistent with the first quarter sequential volume growth of 10
to 15%. Price pressure is expected to erode these volume gains. Corning expects
revenues in the Photonics Technologies business to continue to be very weak.
Last week, the company announced that it plans a new series of restructuring
actions to further reduce costs that will result in total restructuring and
impairment charges in the range of $600 million pretax spread over the second
and third quarters. Flaws said, "While we have not reached any specific
decisions on our actions, we must adjust our cost structure to meet the new
realities of today's marketplace. We will be making specific announcements over
the course of the second quarter which will outline details of our restructuring
program."
James R. Houghton, chairman and chief executive officer, said, "At its core,
Corning is a technology company with a leadership position in telecommunications
and the optical revolution. We intend to strengthen our industry leadership
position and we will continue investing in technologies to build the next
generation of optical solutions. We also are committed to protecting and
extending our technological advantage as the world's leading producer of glass
substrates for flat panel displays, and leading-edge solutions for environmental
technologies."
"In order to do so, the first priority of our new management team and the
employees of Corning will be to return this company to profitability in 2003,"
he concluded.
(more)
Corning Announces First-Quarter Results
Page Three
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.
###
Conference Call Information
The company will host a conference call at 8:30 a.m. EST on Tuesday, April 23,
2002. To access the call, dial 712-271-0936. The password is Earnings. The
leader is Dietz. A replay of the call will begin at approximately 10:30 a.m. and
will run through 5 p.m. EST on Monday, May 6, 2002. To access the replay, dial
402-998-0863; a password is not required. To listen to a live audio webcast of
the call, go to http://www.corning.com/investor_relations/ and follow the
instructions. The webcast will be archived on the
http://www.corning.com/investor_relations/ site 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
March 31,
----------------------------
2002 2001
---------- ----------
Net sales $ 898 $ 1,921
Cost of sales 694 1,105
--------- ---------
Gross margin 204 816
Operating expenses:
Selling, general and administrative expenses 190 270
Research, development and engineering expenses 128 160
Amortization of purchased intangibles 11 13
Amortization of goodwill 143
--------- ---------
Operating (loss) income (125) 230
Interest income 14 24
Interest expense (48) (34)
Other expense, net (9) (9)
--------- ---------
(Loss) income before income taxes (168) 211
(Benefit) provision for income taxes (42) 108
--------- ---------
(Loss) income before minority interest and equity earnings (126) 103
Minority interest in losses (earnings) of subsidiaries 6 (5)
Equity in earnings of associated companies 30 34
--------- ---------
Net (loss) income $ (90) $ 132
========= =========
Basic and diluted (loss) earnings per share $ (0.10) $ 0.14
========= =========
Net (loss) income adjusted for the impact of SFAS No. 142 in 2001 $ (90) $ 268
========= =========
Basic and diluted (loss) earnings per share adjusted for the
impact of SFAS No. 142 in 2001 $ (0.10) $ 0.29
========= =========
Shares used in computing per share amounts:
Basic 945 923
========= =========
Diluted 945 937
========= =========
Diluted - adjusted for SFAS No. 142 in 2001 945 943
========= =========
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 Unaudited
March 31, December 31, March 31,
2002 2001 2001
-------- ------------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 958 $ 1,037 $ 564
Short-term investments, at fair value 867 1,182 585
-------- --------- ---------
Total cash and short-term investments 1,825 2,219 1,149
Trade accounts receivable, net of doubtful
accounts and allowances - $54, $60 and $47 616 593 1,245
Inventories 717 725 1,215
Deferred income taxes 329 347 232
Other current assets 209 223 233
-------- --------- ---------
Total current assets 3,696 4,107 4,074
Investments:
Associated companies, at equity 616 636 474
Others, at cost or fair value 134 142 137
-------- --------- ---------
Total investments 750 778 611
Property, plant and equipment, at cost, net of accumulated
depreciation - $3,222, $3,067 and $2,785 4,967 5,097 4,939
Goodwill, net of accumulated amortization - $661, $661 and $445 1,941 1,937 6,720
Other intangible assets, net of accumulated
amortization - $99, $90 and $62 329 352 566
Other assets 605 522 263
-------- --------- ---------
Total Assets $ 12,288 $ 12,793 $ 17,173
======== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 385 $ 477 $ 197
Accounts payable 338 441 614
Other accrued liabilities 910 1,076 827
-------- --------- ---------
Total current liabilities 1,633 1,994 1,638
Long-term debt 4,418 4,461 3,838
Postretirement benefits other than pensions 613 608 594
Other liabilities 189 190 204
Minority interest in subsidiary companies 113 119 140
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 10,039 10,044 9,685
(Accumulated deficit) retained earnings (3,700) (3,610) 2,077
Less: cost of 77 million, 79 million and 76 million
shares of common stock in treasury (806) (827) (777)
Accumulated other comprehensive loss (218) (193) (234)
-------- --------- ---------
Total common shareholders' equity 5,315 5,414 10,751
-------- --------- ---------
Total Liabilities and Shareholders' Equity $ 12,288 $ 12,793 $ 17,173
======== ========= =========
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 three months ended
March 31,
--------------------------
2002 2001
-------- ---------
Cash flows from operating activities:
Net (loss) income $ (90) $ 132
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Amortization of purchased intangibles 11 13
Amortization of goodwill 143
Depreciation 163 155
Stock compensation charges 1 12
Equity in earnings of associated companies less than
(in excess of) dividends received 23 (36)
Minority interest, net of dividends paid (6) 1
Deferred tax benefit (70) (11)
Tax benefit on stock options 24
Interest expense on convertible debentures 10 10
Restructuring payments (58)
Changes in certain working capital items (145) (271)
Other, net (10) 4
------- --------
Net cash (used in) provided by operating activities (171) 176
------- --------
Cash flows from investing activities:
Capital expenditures (102) (576)
Acquisitions of businesses, net of cash acquired (66)
Net proceeds from sale or disposal of assets 5 6
Net decrease (increase) in long-term investments and other
long-term assets 1 (47)
Short-term investments - acquisitions (603) (77)
Short-term investments - liquidations 919 207
Other, net (1)
------- --------
Net cash provided by (used in) investing activities 219 (553)
------- --------
Cash flows from financing activities:
Net repayments of short-term debt (143) (12)
Proceeds from issuance of long-term debt 11 38
Repayments of long-term debt (4) (85)
Proceeds from issuance of common stock 15 7
Redemption of common stock for income tax withholding (19)
Dividends paid (56)
------- --------
Net cash used in financing activities (121) (127)
------- --------
Effect of exchange rates on cash (6) (2)
------- --------
Cash used in continuing operations (79) (506)
------- --------
Cash used in discontinued operations (9)
------- --------
Net decrease in cash and cash equivalents (79) (515)
Cash and cash equivalents at beginning of year 1,037 1,079
------- --------
Cash and cash equivalents at end of period $ 958 $ 564
======= ========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter 1, 2002
1. Information by Operating Segment
Information about the performance of Corning's three operating segments for the
first quarter of 2002 and 2001 are 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 generally accepted accounting principles. Segment
net income may not be consistent with measures used by other companies.
Three months ended
(In millions) March 31,
----------------------------------------------------------------------------------------------------------
2002 2001
-------- ---------
Telecommunications
Net sales:
Optical fiber and cable $ 255 $ 875
Hardware and equipment 135 248
Photonic technologies 34 236
Controls and connectors 39 60
Optical networking devices 2 14
-------- ---------
Total net sales $ 465 $ 1,433
======== =========
Research, development and engineering expenses $ 86 $ 122
Interest expense $ 32 $ 25
Segment (loss) earnings before equity (losses) earnings $ (138) $ 177
Equity in (losses) earnings of associated companies (4) 3
-------- ---------
Segment net (loss) income $ (142) $ 180
======== =========
Advanced Materials
Net sales:
Environmental technologies $ 94 $ 108
Life sciences 70 70
Other advanced materials 69 104
-------- ---------
Total net sales $ 233 $ 282
======== =========
Research, development and engineering expenses $ 31 $ 28
Interest expense $ 8 $ 5
Segment earnings before equity earnings $ 1 $ 26
Equity in earnings of associated companies 8 6
-------- ---------
Segment net income $ 9 $ 32
======== =========
Information Display
Net sales:
Display technologies $ 93 $ 62
Conventional video components 43 86
Precision lens 59 53
-------- ---------
Total net sales $ 195 $ 201
======== =========
Research, development and engineering expenses $ 11 $ 10
Interest expense $ 8 $ 4
Segment earnings before minority interest and equity earnings $ 3 $ 21
Minority interest in losses (earnings) of subsidiaries 6 (5)
Equity in earnings of associated companies 25 25
-------- ---------
Segment net income $ 34 $ 41
======== =========
Three months ended
(In millions) March 31,
----------------------------------------------------------------------------------------------------------
2002 2001
-------- ---------
Total segments
Net sales $ 893 $ 1,916
Research, development and engineering expenses $ 128 $ 160
Interest expense $ 48 $ 34
Segment (loss) earnings before minority interest
and equity earnings $ (134) $ 224
Minority interest in losses (earnings) of subsidiaries 6 (5)
Equity in earnings of associated companies 29 34
-------- ---------
Segment net (loss) income $ (99) $ 253
======== =========
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
March 31,
2002 2001
-------- ---------
Net sales
Total segment net sales $ 893 $ 1,916
Non-segment net sales (a) 5 5
-------- ---------
Total net sales $ 898 $ 1,921
======== =========
Net income
Total segment net (loss) income $ (99) $ 253
Unallocated items:
Non-segment loss and other (a) (1) (1)
Amortization of goodwill (b) (143)
Interest income (c) 14 24
Income tax (d) (5) (1)
Equity in earnings of associated companies (a) 1
-------- ---------
Net (loss) income $ (90) $ 132
======== =========
(a) Includes amounts derived from corporate investments.
(b) Amortization of goodwill relates primarily to the Telecommunications
Segment.
(c) Corporate interest income is not allocated to reportable segments.
(d) Includes tax associated with unallocated items.
2. Income Taxes
Corning's effective income tax benefit rate for the three months ended March 31,
2002 was 25%. The effective tax benefit rate in the quarter 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.
3. Accounting Change
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and 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
would not be required.
The following table presents a reconciliation of reported net income and
earnings per share to adjusted net income and earnings per share, as if SFAS No.
142 had been in effect as follows:
For the three months ended
(In millions, except per share amounts) March 31, 2001
-------------------------------------------------------------------------------------------------------------
Reported net income $ 132
Addback: Amortization of goodwill, net of income taxes 136
---------
Adjusted net income $ 268
=========
Reported earnings per share - basic $ 0.14
Addback: Amortization of goodwill, net of income taxes 0.15
---------
Adjusted earnings per share - basic $ 0.29
=========
Reported earnings per share - diluted $ 0.14
Addback: Amortization of goodwill, net of income taxes 0.15
---------
Adjusted earnings per share - diluted $ 0.29
=========
4. Supplementary Statement of Cash Flows Data
Supplemental disclosure of cash flow information is as follows (in millions):
For the three months ended March 31,
------------------------------------
2002 2001
---------- -----------
Changes in certain working capital items:
Trade accounts receivable $ (33) $ 35
Inventories 5 (178)
Other current assets 34 135
Accounts payable and other current liabilities,
net of restructuring payments (151) (263)
-------- ---------
Total $ (145) $ (271)
======== =========
5. 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 $ $ $ $ 255
Hardware and equipment 135 135
Photonic technologies 34 34
Controls and connectors 39 39
Optical networking devices 2 2
-------- -------- ------- ------- --------
Segment net sales $ 465 $ $ $ $ 465
======== ======== ======= ======= ========
Advanced Materials
Environmental $ 94 $ $ $ $ 94
Life sciences 70 70
Other advanced materials 69 69
-------- -------- ------- ------- --------
Segment net sales $ 233 $ $ $ $ 233
======== ======== ======= ======= ========
Information Display
Display technologies $ 93 $ $ $ $ 93
Conventional video components 43 43
Precision lens 59 59
-------- -------- ------- ------- --------
Segment net sales $ 195 $ $ $ $ 195
======== ======== ======= ======= ========
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 236 158 69 46 509
Controls and connectors 60 55 47 43 205
Optical networking devices 14 10 7 7 38
-------- -------- ------- ------- --------
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
======== ======== ======= ======= ========