FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
---------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________to____________
Commission file number 1-3247
CORNING INCORPORATED
(Registrant)
New York 16-0393470
- ----------------------------------------- ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
One Riverfront Plaza, Corning, New York 14831
- ----------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 607-974-9000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to the filing requirements for
at least the past 90 days.
Yes X No ____
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
931,640,718 shares of Corning's Common Stock, $0.50 Par Value, were outstanding
as of June 30, 2001.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Index to consolidated financial statements of Corning Incorporated and
Subsidiary Companies filed as part of this report:
Page
----
Consolidated Statements of Income for the three and
six months ended June 30, 2001 and 2000 3
Condensed Consolidated Balance Sheets at June 30, 2001
and December 31, 2000 4
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
The consolidated financial statements reflect all adjustments which, in the
opinion of management, are necessary for a fair statement of the results of
operations and financial position for the interim periods presented. All such
adjustments are of a normal recurring nature. The consolidated financial
statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and in accordance with generally accepted
accounting principles (GAAP), compiled without audit and are subject to such
year-end adjustments as may be considered appropriate by the registrant and
should be read in conjunction with Corning's Annual Report on Form 10-K for the
year ended December 31, 2000.
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,
-------------------------- -------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 1,868 $ 1,776 $ 3,789 $ 3,127
Cost of sales 1,332 1,030 2,444 1,818
--------- --------- --------- ---------
Gross margin 536 746 1,345 1,309
Operating Expenses
Selling, general and administrative expenses 271 258 532 458
Research, development and engineering
expenses 169 120 331 230
Amortization of purchased intangibles,
including goodwill 160 49 316 62
Acquisition-related charges 51 140
Provision for impairment and restructuring 4,772 4,772
--------- --------- --------- ---------
Operating (loss) income (4,836) 268 (4,606) 419
Interest income 11 19 35 35
Interest expense (34) (29) (68) (53)
Other expense, net (12) (4) (21) (17)
Nonoperating gain 7
--------- --------- --------- ---------
(Loss) income before income taxes (4,871) 254 (4,660) 391
(Benefit) provision for income taxes (77) 137 31 192
--------- --------- --------- ---------
(Loss) income before minority interest and
equity earnings (4,794) 117 (4,691) 199
Minority interest in earnings of subsidiaries (7) (7) (12) (10)
Equity in earnings of associated companies 46 39 80 73
Impairment of equity investment (36)
--------- --------- --------- ---------
Net (Loss) Income $ (4,755) $ 149 $ (4,623) $ 226
========= ========= ========= =========
Basic (Loss) Earnings Per Share $ (5.13) $ 0.18 $ (5.01) $ 0.27
========= ========= ========= =========
Diluted (Loss) Earnings Per Share $ (5.13) $ 0.17 $ (5.01) $ 0.27
========= ========= ========= =========
Dividends Declared $ 0.06 $ 0.06 $ 0.12 $ 0.12
========= ========= ========= =========
Shares used in computing per share amounts:
Basic earnings per share 926 845 923 828
========= ========= ========= =========
Diluted earnings per share 926 872 923 848
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
June 30, December 31,
ASSETS 2001 2000
------ --------------- ---------------
Current Assets
Cash $ 131 $ 138
Short-term investments, at cost, which approximates market value 1,180 1,656
Accounts receivable, net of doubtful accounts and allowances -
$42/2001; $47/year-end 2000 1,348 1,489
Inventories 977 1,040
Deferred taxes on income and other current assets 442 311
---------- ---------
Total current assets 4,078 4,634
---------- ---------
Investments 711 635
Plant and equipment, at cost, net of accumulated depreciation
$2,921/2001; $2,662/year-end 2000 5,301 4,679
Goodwill, net of accumulated amortization
$583/2001; $303/year-end 2000 1,874 6,779
Other intangible assets, net of accumulated amortization
$75/2001; $52/year-end 2000 409 561
Other assets 278 238
---------- ---------
Total Assets $ 12,651 $ 17,526
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Loans payable $ 473 $ 128
Accounts payable 512 855
Other accrued liabilities 910 966
---------- ---------
Total current liabilities 1,895 1,949
---------- ---------
Long-term debt 3,855 3,966
Deferred taxes on income 61
Other liabilities 812 769
Minority interest in subsidiary companies 144 139
Convertible preferred stock 8 9
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/2001 and 1.0 billion/year-end 2000 9,774 9,512
(Accumulated deficit) retained earnings (2,734) 2,001
Less cost of 77 million/2001 and 76 million/year-end 2000 shares
of common stock in treasury (804) (753)
Accumulated other comprehensive loss (299) (127)
---------- ---------
Total common shareholders' equity 5,937 10,633
---------- ---------
Total Liabilities and Shareholders' Equity $ 12,651 $ 17,526
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Six Months Ended June 30,
--------------------------------------
2001 2000
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES $ 690 $ 505
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,155) (563)
Acquisitions of businesses and leased assets, net of cash acquired (66) (1,245)
Other, net (63) 71
-------- -------
NET CASH USED IN INVESTING ACTIVITIES (1,284) (1,737)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 343 767
Repayments of loans (105) (602)
Proceeds from issuance of common stock 19 2,321
Redemption of common stock for income tax withholding (19) (47)
Dividends paid (112) (102)
-------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 126 2,337
-------- -------
Effect of exchange rates on cash (6) (4)
-------- -------
Cash used in discontinued operations (9) (2)
-------- -------
Net (decrease) increase in cash and cash equivalents (483) 1,099
Cash and cash equivalents at beginning of year 1,794 280
-------- -------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 1,311 $ 1,379
======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; in millions except per share amounts)
(1) Information by Operating Segment
Information about the performance of Corning's three operating segments for
the second quarter and first six months of 2001 and 2000 are presented
below. These amounts exclude revenues, expenses and equity earnings not
specifically identifiable to segments. Segment net income excludes
impairment and amortization of goodwill and other intangibles,
restructuring charges, purchased in-process research and development costs,
one-time acquisition costs and other nonrecurring items. This measure is
not in accordance with generally accepted accounting principles (GAAP) and
may not be consistent with measures used by other companies.
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. During the quarter ended March 31, 2001,
Corning realigned one product line from the Advanced Materials segment into
the Telecommunications segment. Segment results for 2000 have been restated
to conform to the current presentation.
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2001 2000 2001 2000
--------- -------- --------- ---------
Telecommunications
Net sales $ 1,393 $ 1,295 $ 2,826 $ 2,200
Research, development and engineering expenses $ 132 $ 86 $ 256 $ 164
Interest expense $ 23 $ 19 $ 48 $ 34
Segment (losses) earnings before minority interest
and equity earnings $ (1) $ 181 $ 185 $ 293
Minority interest in losses of subsidiaries 3
Equity in earnings (losses) of associated companies 8 (3) 11 (3)
--------- -------- --------- ---------
Segment net income $ 7 $ 178 $ 196 $ 293
========= ======== ========= =========
Advanced Materials
Net sales $ 251 $ 259 $ 533 $ 511
Research, development and engineering expenses $ 28 $ 28 $ 56 $ 54
Interest expense $ 5 $ 5 $ 10 $ 11
Segment earnings before equity earnings $ 11 $ 18 $ 37 $ 35
Equity in earnings of associated companies 7 6 13 12
--------- -------- --------- ---------
Segment net income $ 18 $ 24 $ 50 $ 47
========= ======== ========= =========
Information Display
Net sales $ 218 $ 216 $ 419 $ 404
Research, development and engineering expenses $ 9 $ 6 $ 19 $ 12
Interest expense $ 6 $ 5 $ 10 $ 8
Segment earnings before minority interest and
equity earnings $ 25 $ 32 $ 46 $ 52
Minority interest in earnings of subsidiaries (7) (7) (12) (13)
Equity in earnings of associated companies 29 35 54 62
--------- -------- --------- ---------
Segment net income $ 47 $ 60 $ 88 $ 101
========= ======== ========= =========
Total segments
Net sales $ 1,862 $ 1,770 $ 3,778 $ 3,115
Research, development and engineering expenses $ 169 $ 120 $ 331 $ 230
Interest expense $ 34 $ 29 $ 68 $ 53
Segment earnings before minority interest and
equity earnings $ 35 $ 231 $ 268 $ 380
Minority interest in earnings of subsidiaries (7) (7) (12) (10)
Equity in earnings of associated companies 44 38 78 71
--------- -------- --------- ---------
Segment net income $ 72 $ 262 $ 334 $ 441
========= ======== ========= =========
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is as follows:
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- --------
Net sales
Total segment net sales $ 1,862 $ 1,770 $ 3,778 $ 3,115
Non-segment net sales (a) 6 6 11 12
--------- --------- --------- --------
Total net sales $ 1,868 $ 1,776 $ 3,789 $ 3,127
========= ========= ========= ========
Net income
Total segment income (b) $ 72 $ 262 $ 334 $ 441
Unallocated items:
Non-segment loss and other (a) (2) (2) (3) (4)
Nonoperating gain 7
Amortization of purchased intangibles and goodwill (c) (160) (49) (316) (62)
Acquisition-related charges (51) (140)
Interest income (d) 11 19 35 34
Income tax (e) 94 (31) 97 (16)
Equity in earnings of associated companies (a) 2 1 2 2
Impairment of equity investment (36)
Provision for impairment and restructuring (f) (4,772) (4,772)
--------- --------- --------- --------
Net (loss) income $ (4,755) $ 149 $ (4,623) $ 226
========= ========= ========= ========
(a) Includes amounts derived from corporate investments.
(b) Includes royalty, interest and dividend income.
(c) Amortization of purchased intangibles and goodwill relates
primarily to the Telecommunications segment.
(d) Corporate interest income is not allocated to reportable
segments.
(e) Includes tax associated with unallocated items.
(f) Provision for impairment and restructuring relates to the
Telecommunications segment.
(2) Business Combinations
The transaction listed below was accounted for under the purchase method of
accounting. Management is responsible for estimating the fair value of the
assets and liabilities acquired. Management has made estimates and
assumptions that affect the reported amounts of assets, liabilities and
expenses resulting from such acquisitions.
Tropel
------
On March 16, 2001, Corning completed the acquisition of Tropel Corporation,
a manufacturer of precision optics and metrology instruments for the
semiconductor and other industries, for approximately $66 million in cash
and 1.95 million shares of Corning common stock for a total purchase price
of approximately $160 million. The excess of the purchase price over the
estimated fair value of tangible net assets acquired was allocated to
goodwill. Goodwill of approximately $155 million is being amortized on a
straight-line basis over 15 years.
(3) Impairment of Goodwill and Intangible Assets
During the first half of 2001, Corning experienced a significant decrease
in the rate of growth of its telecommunications segment, primarily in the
photonic technologies business, due to a dramatic decline in infrastructure
spending in the telecommunications industry. During the second quarter,
major customers in the photonic technologies business further reduced their
order forecasts and canceled orders already placed. Management now believes
that the growth prospects of this business are significantly less than
previously expected and those of historical periods.
Corning reviews the recoverability of its long-lived assets, including
goodwill and other intangible assets, when events or changes in
circumstances occur that indicate the carrying value of the asset may not
be recoverable. As a result of the business conditions noted above, Corning
concluded such an assessment was required for its photonics business in the
second quarter. Corning assesses recoverability of the carrying value based
upon cumulative expected future pre-tax cash flows (undiscounted and
without interest charges) of the related operations.
As a result of this test, Corning determined that the long-lived assets,
including goodwill and other intangibles acquired from Pirelli in December
2000 as well as those of the unit into which NetOptix Corporation (acquired
in May, 2000) has been integrated were not recoverable. Corning's policy is
to write-down long-lived assets to fair value in such circumstances.
Management estimated fair value using several techniques. While each method
generated comparable fair values, management adjusted the assets to
estimates based on average multiples of forecasted revenues and earnings of
comparable publicly traded companies with operations in the optical
component market segment.
In the second quarter, Corning recorded pre-tax charges of $4,648 million
to impair a significant portion of goodwill and $116 million to impair
intangible assets. Of the total charge of $4,764 million, $3,154 million
related to the acquisition of the Pirelli optical components business and
$1,610 million related to goodwill resulting from the acquisition of
NetOptix Corporation.
(4) Provision for Inventory
During the second quarter, major customers in the photonic technologies
business further reduced their order forecasts and canceled orders already
placed. As a result, management determined that certain products were not
likely to be sold in their product life cycle. Corning recorded a provision
for excess and obsolete inventory, including estimated purchase
commitments, of $273 million ($184 million after tax) in cost of sales in
the second quarter of 2001.
(5) Earnings Per Common Share
A reconciliation of the basic and diluted earnings per share computations
for the second quarter and first six months of 2001 and 2000 are as
follows:
For the three months ended June 30,
--------------------------------------------------------------------------------
2001 2000
-------------------------------------- ------------------------------------
Weighted Per share Weighted Per share
Income Average Shares Amount Income Average Shares Amount
--------- -------------- --------- ------ -------------- ---------
Basic earnings per share $ (4,755) 926 $(5.13) $ 149 845 $ 0.18
====== ======
Effect of Dilutive Securities
Options 20
Convertible preferred stock 1
Convertible subordinated notes 1 6
-------- ------ ----- ------
Diluted earnings per share $ (4,755) 926 $(5.13) $ 150 872 $ 0.17
======== ====== ====== ===== ====== ======
For the six months ended June 30,
--------------------------------------------------------------------------------
2001 2000
-------------------------------------- ------------------------------------
Weighted Per share Weighted Per share
Income Average Shares Amount Income Average Shares Amount
--------- -------------- --------- ------ -------------- ---------
Basic earnings per share $ (4,623) 923 $(5.01) $ 226 828 $ 0.27
====== ======
Effect of Dilutive Securities
Options 20
-------- ------ ----- ------
Diluted earnings per share $ (4,623) 923 $(5.01) $ 226 848 $ 0.27
======== ====== ====== ===== ====== ======
Diluted earnings per share for the quarter and six months ended June 30,
2001 exclude potentially dilutive securities due to the anti-dilutive
effect they would have had if converted. Those securities consisted of 7
million and 10 million, respectively, of potential common shares from
options, and 30 million convertible shares from the subordinated notes,
convertible preferred stock and the zero coupon convertible debentures. In
addition, 49 million potential common shares from options were excluded
since the option exercise price was greater than the average market price
of the common shares for the period.
Diluted earnings per share for the six months ended June 30, 2000 exclude 7
million shares from subordinated notes and convertible preferred stock, due
to the anti-dilutive effect they would have had if converted.
Common dividends of $56 million and $112 million were declared in the
second quarter and first six months of 2001 compared with $52 million and
$102 million for the same periods in 2000. Dividends per share were
comparable between years. On July 9, 2001, Corning announced it was
discontinuing the declaration and payment of future dividends on its common
stock.
(6) Depreciation and Amortization
Depreciation charged to operations for the second quarter and six months of
2001 totaled $163 million and $318 million, respectively. Depreciation
charged to operations for the second quarter and six months of 2000 totaled
$126 million and $238 million, respectively.
Amortization of purchased intangibles including goodwill charged to
operations for the second quarter and six months of 2001 totaled $160
million and $316 million, respectively. Amortization of purchased
intangibles including goodwill charged to operations for the second quarter
and six months of 2000 totaled $49 million and $62 million, respectively.
(7) (Benefit) Provision for Income Taxes
Corning's tax (benefit) provision for the second quarter and six months of
2001 was impacted by the significant impairment charge and amortization of
goodwill. Corning's effective tax rate for the second quarter and first six
months of 2000 was 53.8% and 49.0%, respectively. Excluding the impact of
the impairment of goodwill and other intangibles (which is mostly non-tax
deductible), amortization of purchased intangibles and goodwill, purchased
in-process research and development, one-time acquisition costs and other
nonrecurring items, the effective income tax rate for the second quarter
and six months of 2001 was 32.5%, which is comparable to rates of 32.4% in
both periods in 2000.
(8) Inventories
Inventories shown on the accompanying balance sheets were comprised of the
following:
June 30, December 31,
2001 2000
--------- ------------
Finished goods $ 310 $ 300
Work in process 243 263
Raw materials and accessories 308 377
Supplies and packing materials 116 100
-------- --------
Total inventories $ 977 $ 1,040
======== ========
(9) Comprehensive (Loss) Income
Comprehensive (loss) income, net of tax, for the second quarter and first
six months of 2001 and 2000 is as follows:
For the three months For the six months
ended June 30, ended June 30,
--------------------------- -------------------------
2001 2000 2001 2000
----------- --------- ---------- ---------
Net (loss) income $ (4,755) $ 149 $ (4,623) $ 226
Other comprehensive (loss) income:
Foreign currency translation adjustment (81) (53) (162) (56)
Unrealized (loss) gain on marketable securities 13 (4) (15) 36
Realized gains on securities (3) (3) (5)
Cumulative effect of adoption of FAS 133 3
Unrealized derivative losses on cash flow hedges 3
Reclassification adjustments on cash flow hedges 3 5
--------- ------- -------- -------
Total comprehensive (loss) income $ (4,820) $ 92 $ (4,795) $ 201
========= ======= ======== =======
(10) Pittsburgh Corning Corporation
Corning and PPG Industries, Inc. each own 50% of the capital stock of
Pittsburgh Corning Corporation (PCC). PCC and several other defendants have
been named in numerous lawsuits involving claims alleging personal injury
from exposure to asbestos. On April 16, 2000, PCC filed for Chapter 11
reorganization in the United States Bankruptcy Court for the Western
District of Pennsylvania. As of the bankruptcy filing, PCC had in excess of
240,000 open claims. At the time of its Chapter 11 filing, PCC sought and
obtained a temporary restraining order and filed a motion for a preliminary
injunction against the prosecution of asbestos actions against its two
shareholders to afford the parties a period of time (the "Injunction
Period") in which to negotiate a plan of reorganization for PCC. On April
4, 2001, the Bankruptcy Court extended the exclusive period for PCC to file
a plan of reorganization (the "Exclusivity Period") until July 9, 2001, and
extended the Injunction Period to August 23, 2001. At a July 25, 2001
hearing, the Bankruptcy Court entered an order upon consent of the parties
extending the Injunction Period to November 30, 2001 and terminating the
Exclusivity Period. Under the terms of the Bankruptcy Court's April 4, 2001
Order, PCC, PPG Industries and Corning will have 90 days following
expiration of the Injunction Period to seek removal and transfer of stayed
cases that have not been resolved through a plan of reorganization. As a
result of PCC's bankruptcy filing, Corning recorded an after tax charge of
$36 million in the first quarter of 2000 to impair its entire investment in
PCC and discontinued recognition of equity earnings. At the time PCC filed
for bankruptcy protection, there were approximately 12,400 claims pending
against Corning alleging various theories of liability based on exposure to
PCC's asbestos products. These cases are stayed pursuant to the injunction
of the bankruptcy court. Before PCC filed for bankruptcy protection,
Corning was dismissed from similar claims as cases against PCC proceeded to
trial. The Chapter 11 filing may lead to additional claims against Corning
with related costs of defense, charges and expenses. Although the outcome
of litigation and the bankruptcy case is uncertain, management believes
that the separate corporate status of PCC will continue to be upheld.
Management is continuing to investigate Corning's options for defending
claims against it, which might include vigorously defending itself on all
fronts or exploring a global settlement through the bankruptcy process. It
is probable that there will be intensive negotiations throughout the third
quarter of 2001 concerning terms of PCC's plan of reorganization, including
whether or not Corning and its insurers may participate by making a
contribution in exchange for a release. Management cannot estimate the
probability that Corning will be able to secure such a release upon terms
and conditions satisfactory to Corning and its insurers. The range of cost
for these options (net of insurance) cannot be estimated at this time.
Although asbestos litigation is inherently difficult, and the outcome of
litigation is uncertain, management believes these matters will be resolved
without a materially adverse impact on Corning's financial position.
(11) Dow Corning Corporation
Corning and The Dow Chemical Company (Dow Chemical) each own 50% of the
common stock of Dow Corning Corporation (Dow Corning), a manufacturer of
silicones.
On May 15, 1995, Dow Corning sought protection under the reorganization
provisions of Chapter 11 of the United States Bankruptcy Code. At that
time, Corning management believed it was impossible to predict if and when
Dow Corning would successfully emerge from Chapter 11 proceedings. As a
result, Corning recorded an after tax charge of $366 million to fully
reserve its investment in Dow Corning and discontinued recognition of
equity earnings from Dow Corning in 1995. The bankruptcy proceeding is
pending in the United States Bankruptcy Court for the Eastern District of
Michigan, Northern Division (Bay City, Michigan). The bankruptcy filing
stayed the prosecution against Dow Corning of approximately 19,000
breast-implant product liability lawsuits, including 45 class actions. In
1998, Dow Corning and the Tort Claimants Committee engaged in extended
negotiations and reached certain compromises. On November 8, 1998, Dow
Corning and the Tort Claimants Committee jointly filed a revised Plan of
Reorganization (Joint Plan). Following a favorable vote from all but four
classes of creditors, a hearing to confirm the Joint Plan was held in mid
1999.
On November 30, 1999, the Bankruptcy Court entered an order confirming the
Joint Plan and indicated that certain written opinions would follow. On
December 21, 1999, the Bankruptcy Court issued an opinion that approved the
principal elements of the Joint Plan with respect to tort claimants, but
construed the Joint Plan as providing releases for third parties (including
Corning and Dow Chemical as shareholders) only with respect to tort
claimants who voted in favor of the Joint Plan. A number of parties
opposing the Joint Plan filed appeals on a variety of grounds to the United
States District Court for the Eastern District of Michigan. Dow Corning and
the Tort Claimants Committee filed a notice of appeal seeking review of the
ruling limiting the scope of the shareholder releases. On November 13,
2000, the District Court entered an Order affirming the Bankruptcy Court's
November 30, 1999 Order confirming the Joint Amended Plan and reversing the
Bankruptcy Court's December 21, 1999 Opinion on the release and injunction
provisions. On February 5, 2001, the District Court denied a Motion for
Reconsideration. Approximately 20 appeals from the District Court's Order
are pending in the Sixth Circuit Court of Appeals, which is expected to
rule in late 2001. Further appellate activity, which may include petitions
for review by the U.S. Supreme Court, could delay a final judgment until
late 2002 or possibly into 2003. After all appeals are exhausted, if the
Joint Plan is upheld but the shareholder releases are effective only for
those voting in favor of the Joint Plan, Corning would expect to defend any
remaining claims against it on the same grounds that led to a series of
orders and judgments dismissing all claims against Corning in the federal
courts and the state courts as described under the heading Implant Tort
Lawsuits in Part II, Item 1, Legal Proceedings. With respect to the
possibility of additional direct or indirect claims against Corning if the
full releases are not reinstated in the Joint Plan, management believes
that such claims lack merit and that the breast implant litigation against
Corning will be resolved without material impact on Corning's financial
statements.
Under the terms of the Joint Plan, Dow Corning would be required to
establish a Settlement Trust and a Litigation Facility to provide a means
for tort claimants to settle or litigate their claims. Dow Corning would
have the obligation to fund the Trust and the Facility, over a period of up
to 16 years, in an amount up to approximately $3.3 billion, subject to the
limitations, terms and conditions stated in the Joint Plan. Dow Corning
proposes to provide the required funding over the 16 year period through a
combination of cash, proceeds from insurance, and cash flow from
operations. Corning and Dow Chemical have each agreed to provide a credit
facility to Dow Corning of up to $150 million ($300 million in the
aggregate), subject to the terms and conditions stated in the Joint Plan.
The Joint Plan also provides for Dow Corning to make full payment, through
cash and the issuance of senior notes, to its commercial creditors. If and
when Dow Corning emerges from bankruptcy, Corning expects to resume the
recognition of equity earnings from Dow Corning. Corning does not expect to
receive dividends from Dow Corning in the foreseeable future.
(12) Adoption of New Accounting Standard - Derivative Financial Instruments -
FAS 133
Effective January 1, 2001, Corning adopted Financial Accounting Standards
Board Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," (FAS 133) as amended by FAS No. 137 and FAS No. 138. FAS 133
requires that all derivative financial instruments be recognized in the
financial statements and measured at fair value regardless of the purpose
or intent for holding them. Changes in the fair value of derivative
financial instruments are either recognized periodically in net earnings or
shareholders' equity, as a component of other comprehensive income,
depending on whether the derivative is being used to hedge changes in fair
value or cash flows. Changes in fair value of ineffective portions of
hedges are recognized in earnings in the current period. The adoption of
FAS 133 as of January 1, 2001, resulted in a cumulative after-tax credit to
comprehensive income of $3 million. For the six months ended June 30, 2001,
after-tax income under $1 million was recorded in other expense, net for
the ineffective portion of cash flow hedges.
(13) Subsequent Events
Restructuring
-------------
On July 9, 2001, Corning announced a downsizing of its photonic
technologies business. Corning's board of directors approved plans to close
three manufacturing plants, downsize the workforce and exit selected
products.
Management is continuing to evaluate the need for further personnel
reductions and other restructuring actions elsewhere in the company. Costs
related to these potential additional actions and the photonic
manufacturing facility closures already announced are expected to result in
a third quarter pre-tax charge of $300 million to $400 million. The charge
is expected to be predominantly noncash (up to 75%) and will include
impairments of fixed assets, severance costs associated with workforce
reductions and other exit costs including lease termination amounts.
Business Combinations
---------------------
On July 24, 2001, Corning announced it had reached an agreement with Lucent
Technologies to purchase Lucent's controlling equity interest in Shanghai
Fiber Optic Co., Ltd. (58%) and Beijing Fiber Optic Cable Co., Ltd. (68%)
for an aggregate purchase price of $225 million in cash. The transaction,
subject to certain conditions including government regulatory approval and
the approval of the minority equity shareholders, is expected to be
completed after December 31, 2001.
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net sales totaled $1.9 billion for the second quarter of 2001, an increase of 5%
over sales of $1.8 billion in the prior year quarter. Excluding the impact of
acquisitions, net sales for the quarter increased 3% over the prior year period.
Sales growth in the second quarter was most pronounced in the Telecommunications
Segment, where demand for Corning's optical fiber and cable products drove
quarter over quarter segment sales growth of 8%. Net sales for the first six
months of 2001 were $3.8 billion, an increase of 21% over the comparable period
of 2000. Excluding acquisitions, net sales for six months rose 13% over 2000.
The Telecommunications Segment drove the increase with sales growth of 28% over
the prior year.
Corning reported a net loss of $4,755 million in the second quarter of 2001
compared to net income of $149 million in the prior year quarter. Diluted loss
per share was $5.13 compared to diluted earnings per share of $0.17 in the
second quarter of 2000. The net loss for the first six months of 2001 was $4,623
million compared with net income of $226 million in 2000. Diluted loss per share
for the first six months of 2001 was $5.01 per share compared to diluted
earnings per share of $0.27 in 2000.
The quarter and year to date loss is largely attributable to a charge of
approximately $4.8 billion ($4.7 billion after tax) to impair goodwill and
certain other intangible assets of the photonic technologies business. Further
discussion of the business conditions leading to the impairment charge and
measurement of the charge is provided in Impairment of Goodwill and Intangible
Assets on page 15.
Corning's results for the second quarter and six months of 2001 were also
impacted by a restructuring charge of $8 million ($5 million after tax).
Results for the first six months of 2000 were impacted by the following
nonrecurring items:
- - in-process research and development (IPRD) charges of $51 million (non-tax
deductible), in the second quarter of 2000 and $42 million ($26 million
after tax), in the first quarter of 2000,
- - a nonoperating gain related to the sale of Quanterra of $7 million ($4
million after tax), in the first quarter of 2000,
- - a charge for acquisition costs related to the merger of Oak Industries of
$47 million ($43 million after tax), in the first quarter of 2000, and
- - an after-tax charge of $36 million to impair Corning's investment in
Pittsburgh Corning Corporation, in the first quarter of 2000.
Amortization of purchased intangibles and goodwill totaled $160 million ($109
million after tax) and $316 million ($254 million after tax) in the second
quarter and six months of 2001 respectively, compared to $49 million ($71
million after tax) and $62 million ($81 million after tax) in the second quarter
and first six months of 2000, respectively. These increases primarily relate to
purchase business combinations in the Telecommunications Segment completed in
2000. The impairment of goodwill and other intangible assets will reduce pre-tax
amortization of purchased intangibles and goodwill charges approximately $100
million per quarter for the remainder of 2001.
Corning believes comparing its operating results on a pro forma basis excluding
impairment and amortization of purchased intangibles and goodwill and
nonrecurring items provides a better understanding of the changes in its
operating results. This measure is not in accordance with, or an alternative
for, generally accepted accounting principles (GAAP) and may not be consistent
with measures used by other companies. Corning's pro forma results include a
charge to write-off excess and obsolete inventory in the photonic technologies
business discussed in detail in the Telecommunications Review.
Pro forma net income is calculated from net (loss) income as follows (after tax
and in millions):
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2001 2000 2001 2000
----------- --------- ----------- ---------
Net income $ (4,755) $ 149 $ (4,623) $ 226
Impairment of goodwill and restructuring 4,726 4,726
Amortization of purchased intangibles, including goodwill 109 71 254 81
In-process research and development charges 51 77
Other acquisition-related charges 43
Nonoperating gain (4)
Impairment of equity investment 36
---------- -------- ---------- --------
Pro forma net income $ 80 $ 271 $ 357 $ 459
========== ======== ========== ========
Pro forma diluted earnings per share $ 0.09 $ 0.31 $ 0.38 $ 0.54
========== ======== ========== ========
The second quarter pro forma earnings results reflect declines in performance of
all three operating segments. Year to date Telecommunications and Information
Display segments are performing below last year while Advanced Materials
reflects a slight increase over 2000 year to date performance.
Outlook and Actions
Over the course of the first six months of 2001, Corning's outlook has declined
significantly due to a substantial reduction in capital spending in the
telecommunications industry and the general softening of the U.S. economy.
Corning's management believes the telecommunications industry may not show signs
of improvement until late 2002. Therefore, Corning expects pro forma earnings
per share to decrease significantly from last year. As a result of lower revenue
and earnings expectations, Corning announced the following actions on July 9,
2001, to adjust its cost structure:
- - Corning will close three manufacturing facilities within the photonic
technologies business by the end of 2001.
- - Approximately 1,000 positions in photonic technologies will be eliminated.
- - Corning will continue to evaluate further personnel reductions and
restructuring actions in businesses other than photonic technologies.
- - Costs related to these actions are expected to result in a third quarter
pre-tax charge of $300-400 million.
In addition, Corning has already undertaken the following action during the
first half of 2001:
- - In the first quarter, Corning reduced its workforce by approximately 3,300
permanent and temporary employees, primarily in the photonic technologies
and hardware and equipment businesses. These workforce reductions comprised
mostly hourly production workers and resulted in minimal severance charges.
In April, Corning completed an additional workforce reduction of
approximately 1,000 positions in photonic technologies, including both
hourly and salaried employees. The second quarter reductions resulted in a
restructuring charge of $8 million ($5 million after tax).
- - Corning decreased its capital spending forecast for 2001 from $2.5 billion
to approximately $2 billion, delaying some capital expansion to 2002
including its planned expansion of fiber capacity at Concord, NC.
Construction of a new fiber facility in Oklahoma City, OK will be delayed
12 to 18 months.
- - Corning's research and development spending in 2001 will be approximately
$650 million to $675 million, a decrease from an anticipated $700 million.
Corning will continue to review its internal cost structure and monitor the
industry trends throughout 2001, which may result in additional cost improvement
measures and targeted workforce reductions. Corning continues to believe in the
long term demand for bandwidth, optical transparency and the future of the
all-optical network. It is the foundation of Corning's optical layer strategy.
Therefore, Corning is still committed to invest in new product development,
targeted capacity expansion and external growth.
Impairment of Goodwill and Intangible Assets
During the first half of 2001, Corning experienced a significant decrease in the
rate of growth of its telecommunications segment, primarily in the photonic
technologies business, due to a dramatic decline in infrastructure spending in
the telecommunications industry. During the second quarter, major customers in
the photonic technologies business further reduced their order forecasts and
canceled orders already placed. Management now believes that the growth
prospects of this business are significantly less than previously expected and
those of historical periods.
Corning reviews the recoverability of its long-lived assets, including goodwill
and other intangible assets, when events or changes in circumstances occur that
indicate the carrying value of the asset may not be recoverable. As a result of
the business conditions noted above, Corning concluded such an assessment was
required for its photonics business in the second quarter. Corning assesses
recoverability of the carrying value based upon cumulative expected future
pre-tax cash flows (undiscounted and without interest charges) of the related
operations.
As a result of this test, Corning determined that the long-lived assets,
including goodwill and other intangibles acquired from Pirelli in December 2000
as well as those of the unit into which NetOptix Corporation (acquired in May,
2000) has been integrated were not recoverable. Corning's policy is to
write-down long-lived assets to fair value in such circumstances.
Management estimated fair value using several techniques. While each method
generated comparable fair values, management adjusted the assets to estimates
based on average multiples of forecasted revenues and earnings of comparable
publicly traded companies with operations in the optical component market
segment.
In the second quarter, Corning recorded pre-tax charges of $4,648 million to
impair a significant portion of goodwill and $116 million to impair intangible
assets. Of the total charge of $4,764 million, $3,154 million related to the
acquisition of the Pirelli optical components business and $1,610 million
related to goodwill resulting from the acquisition of NetOptix Corporation.
Operating Segments
Corning groups its products into three operating segments: 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. Information about the performance of Corning's three
operating segments for the second quarter and first six months of 2001 and 2000
are presented below. These amounts do not include revenues, expenses and equity
earnings not specifically identifiable to segments. Segment net income excludes
impairment and amortization of purchased intangibles and goodwill, purchased
IPRD costs, one-time acquisition costs, and other nonrecurring items. Note 1 to
the consolidated financial statements includes a reconciliation of segment
results to Corning's net income. This measure is not in accordance with GAAP and
may not be consistent with measures used by other companies.
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. During the quarter ended March 31, 2001, Corning realigned one product
line from the Advanced Materials Segment into the Telecommunications Segment.
Segment results for 2000 have been restated to conform to the current
presentation.
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Telecommunications Three Months Ended Six Months Ended
(In millions) June 30, June 30,
2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales $ 1,393 $ 1,295 $ 2,826 $ 2,200
Research, development and engineering expenses $ 132 $ 86 $ 256 $ 164
Interest expense $ 23 $ 19 $ 48 $ 34
Segment earnings before minority interest
and equity earnings $ (1) $ 181 $ 185 $ 293
Minority interest in losses of subsidiaries 3
Equity in earnings of associated companies 8 (3) 11 (3)
-------- --------- --------- ---------
Segment net income $ 7 $ 178 $ 196 $ 293
======== ========= ========= =========
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Segment earnings before minority interest and
equity earnings as a percentage of segment sales (0.1)% 14.0% 6.5% 13.3%
Segment net income as a percentage of segment sales 0.5% 13.8% 6.9% 13.3%
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The Telecommunications Segment produces optical fiber and cable, optical
hardware and equipment and photonic modules and components for the worldwide
telecommunications industry.
Telecommunications Review
Sales in the Telecommunications Segment increased 8% over the second quarter of
2000 to approximately $1.4 billion compared to $1.3 billion in the prior year
quarter. Excluding the impact of acquisitions, sales growth for the same period
in 2001 was 6%. The sales growth in the segment was led primarily by volume
gains in the optical fiber and cable business offset by a decrease in sales of
photonic technologies. These factors were also responsible for the six-month
sales increase of 28% to $2.8 billion. Excluding acquisitions, sales increased
18% for the six months ended June 30, 2001 over the prior year period. Segment
net income declined 96% to $7 million in second quarter 2001 compared to $178
million in second quarter 2000. Segment net income includes a charge of $273
million ($184 million after tax) to write-off excess and obsolete inventory
primarily in the photonic technologies business. Segment net income for six
months declined 33% to $196 million compared to $293 million in 2000. This
decrease was due to the provision for inventory and higher spending in research
and development.
Sales in the fiber and cable business improved 30% in the second quarter of 2001
to $939 million compared with $722 million in the prior year quarter. The
increase resulted primarily from volume gains of approximately 25%, reflecting
continued strong demand for Corning's single mode fiber products. While volume
for single mode increased, volume of premium fiber and cable products, including
Corning's LEAF(R) and MetroCor(TM) optical fiber, decreased almost 35% from the
prior year quarter. The average price for Corning's optical fiber and cable
products remained relatively stable in comparison with last year's second
quarter.
Sales in the fiber and cable business increased 51% to $1,814 million for the
first six months of 2001 compared to the prior year period in 2000 of $1,201
million. The increase in sales resulted primarily from the impact of
acquisitions and volume gains in single-mode fiber. Excluding acquisitions,
sales in the fiber and cable business increased 40% year to date over 2000. The
average price for optical fiber and cable products increased slightly in
comparison with last year's first six months as a change in mix of customers
more than offset a lower mix of premium products. Corning does not expect this
upward pricing trend to continue throughout 2001. Premium fiber as a percentage
of total fiber demand decreased from approximately 35% in the first quarter to
approximately 25% at the end of six months and may average 20% or somewhat less
for the entire year of 2001.
Net income from the fiber and cable business increased more than 50% in the
second quarter and six months of 2001 compared to the prior year periods. The
strong performance in both periods was due to overall volume growth.
Sales in the telecommunications hardware and equipment business decreased 16% in
the second quarter of 2001 to $231 million compared with $276 million in the
prior year quarter. Excluding acquisitions, second quarter 2001 sales decreased
19% compared to the prior year quarter. The decrease resulted primarily from
lower volume of existing products including original equipment manufacturers in
the optical space and optical manufacturing services and a 53% decrease in
revenues at Gilbert Engineering due to growing weakness in cable television
industry spending. Sales for six months of 2001 improved 4% as sales rose from
$459 million in 2000 to $479 million in 2001. Excluding acquisitions, sales
decreased 11% for the six months ended June 30, 2001 versus the comparable prior
year period. Overall, quarterly net income decreased approximately 75% compared
to the prior year quarter, primarily due to the loss of volume at Gilbert
Engineering. This also contributed to the 62% decrease in net income for the six
months ended June 30, 2001, compared to June 30, 2000. The business has reduced
its hourly workforce by approximately 1,175 employees to date.
Sales in the photonic technologies business decreased 33% in the second quarter
of 2001 to $158 million compared to approximately $238 million in the prior year
quarter. This is also a 33% decrease from first quarter sales. Excluding
acquisitions, sales decreased 38% over the prior year quarter. The sales
decrease reflects significant declines in orders from major customers caused by
the decrease in capital spending in the telecommunications industry. This
decline in orders is a continuation of a trend begun in the first quarter. Sales
for the first six months were $394 million compared with $424 million in 2000, a
decline of 7%. Excluding acquisitions, sales decreased 13% for the first six
months of 2001 compared to the prior comparable period. The business incurred a
significant operating loss in the second quarter and six months of 2001 as a
result of a charge for excess and obsolete inventory, lower volumes, excess
capacity and a higher fixed cost structure.
Corning now expects revenues in photonic technologies to be significantly below
2000 versus original expectations that revenues would increase significantly due
to growth in demand for photonic technology devices. Corning is making
significant cost and workforce reductions to reflect the lower revenue
expectations. The business reduced its workforce through July 31, 2001 by
approximately 3,500 employees this year which includes hourly, salaried and
temporary positions.
During the second quarter, major customers in the photonic technologies business
further reduced their order forecasts and cancelled orders already placed. As a
result, management determined that certain products were not likely to be sold
in their product life cycle. Corning recorded a provision for excess and
obsolete inventory, including estimated purchase commitments, of $273 million
($184 million after tax) in cost of sales in the second quarter of 2001.
Corning will retain inventory on hand and reserved at June 30, 2001 totaling
approximately $70 million and dispose of the other inventory reserved. The
inventory reserved and retained represents amounts in excess of one year's
estimated demand and thus will not likely be sold. As this inventory is for
newer product configurations, however, it will be retained so that it can be
available if the market improves sooner than anticipated. Corning plans to
physically segregate this reserved inventory and in the unlikely event this
product is sold, Corning will fully disclose the impact on its margins.
Corning has announced a downsizing of the photonic technologies business and
will close three manufacturing facilities by the end of 2001. Those facilities
are as follows:
- - Photonic Technologies Benton Park facility in Benton Township, PA,
- - Corning Lasertron's facility in Nashua, NH, and
- - Corning NetOptix's operation in Natick, MA.
In addition, Corning will scale back its photonic technologies operations in
Erwin Park, NY and the remainder of its photonic facilities. Other previously
announced capacity expansions in the business have been delayed, or postponed
until business conditions improve.
Sales in the controls and connectors business decreased 7% to $55 million in the
second quarter of 2001 compared to $59 million in the prior year quarter. The
decrease was primarily due to weak customer demand, particularly in U.S.
markets. Sales of $115 million for six months were flat compared to six month
sales of $116 million in 2000, also due to weak customer demand. Net income from
this business was essentially at breakeven in the second quarter compared to
2000 due to lower sales volumes. Six-month net income was up slightly compared
to the comparable period in 2000. The business reduced its workforce by
approximately 525 employees this year in response to current revenue forecasts.
The optical networking devices business, which is developing wavelength
management products and optical switch modules, began making shipments of its
wavelength management products to customers in the third quarter of 2000. The
business had sales of $10 million in the second quarter of 2001 and $24 million
for six months. This business is also seeing some softening in expected demand
for its products. Corning is investing significant research and development
spending in this business.
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Advanced Materials Three Months Ended Six Months Ended
(In millions) June 30, June 30,
2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales $ 251 $ 259 $ 533 $ 511
Research, development and engineering expenses $ 28 $ 28 $ 56 $ 54
Interest expense $ 5 $ 5 $ 10 $ 11
Segment earnings before equity earnings $ 11 $ 18 $ 37 $ 35
Equity in earnings of associated companies 7 6 13 12
-------- --------- --------- ---------
Segment net income $ 18 $ 24 $ 50 $ 47
======== ========= ========= =========
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Segment earnings before equity earnings as a
percentage of segment sales 4.4% 7.0% 6.9% 6.9%
Segment net income as a percentage of segment sales 7.2% 9.3% 9.4% 9.2%
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The Advanced Materials Segment manufactures specialized products with unique
applications utilizing glass, glass ceramic and polymer technologies. The
largest businesses in this segment are environmental technologies and life
sciences.
Advanced Materials Review
Sales in the Advanced Materials Segment decreased slightly in the second quarter
of 2001 to $251 million compared to $259 million in the prior year quarter,
primarily due to a softening market in the environmental technologies business.
Six-month sales for this segment are up somewhat over the comparable period in
2000 primarily due to growth in the semiconductor business offset by the
softening market in environmental technologies. Segment net income decreased 25%
in the second quarter of 2001 as all businesses, excluding life sciences and
ophthalmic glass, experienced declines. Segment net income for six months
increased slightly due to an increase in life sciences partially offset by lower
margins in environmental technologies.
Sales in the environmental technologies business decreased 7% in the second
quarter of 2001 to $96 million compared with $103 million in the prior year
period. The sales decline is due to a growing weakness in sales to the
automotive industry. Sales in the environmental technologies business for the
first six months of 2001 were flat at $204 million compared with $206 million in
the comparable period of 2000 as continued strong demand for Corning's thin wall
and ultra thin wall products was offset by the downward trend in the North
American automotive industry. Earnings for the second quarter and first half of
2001 were down 33% and 20%, respectively, primarily due to start-up costs in
South Africa and China, lower sales volumes in the U.S. automotive market and
manufacturing inefficiencies related to the introduction of new ultra thin wall
products.
Sales in the life sciences business of $69 million in the second quarter of 2001
increased 5% compared to second quarter 2000 sales of $66 million. Six-month
sales in 2001 were up 8% to $139 million compared with $129 million in the
comparable period of 2000 due to increased volumes of microplates. Earnings in
the base business improved in the second quarter and first half of 2001 due to a
sales mix shift to higher margin products and fixed cost reductions. However,
continued investment in microarrays technology partially offset these
improvements resulting in a slight increase for the quarter and year to date
compared to the prior year.
Sales in Corning's other Advanced Materials businesses decreased slightly from
second quarter 2000 to $86 million in the second quarter of 2001 compared to $90
million in the prior year quarter. The decrease was due to softness in the
market for ophthalmic products. Sales for the first six months of 2001 were $190
million compared with $176 million in the comparable period of 2000 for an 8%
increase. Excluding the impact of the divestiture of Quanterra in the first
quarter of 2000, sales improved 12% for six months. This increase was led by
higher sales of high purity fused silica products in the semiconductor materials
business. Earnings for the second quarter were flat compared to second quarter
2000 as margins were lower due to production slowdowns. Earnings from these
businesses for six months 2001 more than doubled over six months 2000 primarily
due to increased volumes in the first quarter partially offset by production
slowdowns in the second quarter.
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Information Display Three Months Ended Six Months Ended
(In millions) June 30, June 30,
2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------------
Net sales $ 218 $ 216 $ 419 $ 404
Research, development and engineering expenses $ 9 $ 6 $ 19 $ 12
Interest expense $ 6 $ 5 $ 10 $ 8
Segment earnings before minority interest
and equity earnings $ 25 $ 32 $ 46 $ 52
Minority interest in earnings of subsidiaries (7) (7) (12) (13)
Equity in earnings of associated companies 29 35 54 62
-------- --------- --------- ---------
Segment net income $ 47 $ 60 $ 88 $ 101
======== ========= ========= =========
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Segment earnings before minority interest and
equity earnings as a percentage of segment sales 11.5% 14.8% 11.0% 12.9%
Segment net income as a percentage of segment sales 21.6% 27.8% 21.0% 25.0%
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The Information Display Segment manufactures glass panels and funnels for
televisions and CRTs (conventional video components), liquid crystal display
glass for flat panel display (display technologies) and precision lens
assemblies for projection video systems.
Information Display Review
Sales in the Information Display Segment were flat in the second quarter of 2001
at $218 million compared to $216 million in the second quarter 2000, as growth
in the display technology and precision lens businesses was offset by lower
sales in the conventional video components businesses. Six-month sales were up
slightly as sales increases in precision lens and display technologies were
offset by lagging sales in the conventional video business. Segment net income
in the second quarter and year to date 2001 was down 22% and 13%, respectively,
compared to the prior period of 2000 due to decreased margins, higher spending
on research and development and lower equity earnings due in part to ownership
change.
Sales in the conventional video components business decreased 16% to $73 million
in second quarter 2001 compared to $87 million in second quarter 2000 primarily
due to competitive pricing pressure and a softening market. These factors also
contributed to the 6% decline in sales for the six months ended June 30, 2001 at
$159 million compared to $170 million in the comparable period of 2000. Earnings
in this business for the quarter decreased 28% from second quarter 2000 as
improved margins due to cost reductions were more than offset by lower equity
earnings from Samsung Corning Company Ltd., a manufacturer of glass panels and
funnels for televisions and display monitors. Year to date earnings in the
business decreased 10% compared to the prior year primarily due to lower equity
earnings at Samsung Corning.
Sales in the display technologies business in second quarter 2001 increased 14%
to $87 million compared to second quarter 2000 sales of $76 million. Volume
increases of 45% were somewhat offset by pricing pressure and the impact of the
weak yen on translated sales. These factors also contributed to the 9% increase
in sales to $149 million for the six months ended June 30, 2001 compared to $137
million for the prior six-month period. Earnings in this business for the
quarter were down slightly compared to the same quarter in 2000 primarily due to
lower operating margins driven by pricing pressures and increased manufacturing
costs due to additional capacity, higher spending in research and development
and lower equity earnings at Samsung Corning Precision Glass Company Ltd., a
Korean manufacturer of liquid crystal display glass, the result of last year's
sale by Samsung Corning of 40% of its interest in Samsung Corning Precision.
These factors also contributed to the 12% decrease in earnings for the six
months ended June 30, 2001 compared to the prior year six-month period.
Sales in the precision lens business increased 9% to $58 million in second
quarter 2001 compared to $53 million in second quarter 2000 as a result of
continued volume increases driven by demand for larger size televisions in the
entertainment market sector. This volume growth was also responsible for a 14%
increase in sales for the six-month period as sales increased to $111 million in
2001 compared with $97 million in 2000. Despite the increases in sales, earnings
for the quarter and year to date were lower than 2000 due to start up costs of
capacity to be online in the second half of 2001.
(Benefit) Provision for Income Tax
Corning's tax (benefit) provision for the second quarter and six months of 2001
was impacted by the significant impairment charge and amortization of goodwill.
Corning's effective tax rate for the second quarter and first six months of 2000
was 53.8% and 49.0%, respectively. Excluding the impact of the impairment of
goodwill and other intangibles (which is mostly non-tax deductible),
amortization of purchased intangibles and goodwill, purchased IPRD costs,
one-time acquisition costs and other nonrecurring items, the effective income
tax rate for the quarter and six months ended June 30, 2001, was 32.5%, which is
comparable with rates of 32.4% in both periods of 2000.
Liquidity and Capital Resources
In March 2001, Corning filed a universal shelf registration statement with the
Securities and Exchange Commission that became effective in the first quarter.
The shelf permits the issuance of up to $5 billion of various debt and equity
securities.
Corning's working capital decreased from $2,685 million at December 31, 2000 to
$2,183 million at June 30, 2001. The ratio of current assets to current
liabilities was 2.2 at June 30, 2001 compared to a current ratio of 2.4 at
December 31, 2000. The decrease in working capital is due primarily to capital
spending. Corning's long-term debt as a percentage of total capital increased
from 27% at December 31, 2000 to 39% at June 30, 2001 due to the reduction in
shareholders' equity arising from the $4.8 billion impairment charge in the
second quarter.
On July 9, 2001, in conjunction with Corning's announcement of the special
charges described earlier, Standard and Poor's (S&P) lowered Corning's long-term
credit rating from A to A- and its short-term rating from A-1 to A-2. S&P also
maintained Corning on Negative Outlook status. The company's ratings from
Moody's and Fitch IBCA were unaffected by the announcement, though in both cases
the outlook was changed from Stable to Negative. The combined effect of these
actions is not material to Corning's liquidity profile.
Commercial paper borrowings outstanding at June 30, 2001 totaled $274 million
with a weighted average maturity of 36 days. Corning's commercial paper program
is supported by a previously disclosed $2 billion revolving credit facility
expiring in 2005. Corning is not in the commercial paper market to fund cash
requirements, but rather to maintain a presence in the market.
Corning believes that its financial condition is strong and that its cash,
short-term investments, operating cash flows, access to equity capital markets
and borrowing capacity, collectively, provide adequate resources to fund ongoing
operating requirements and future capital expenditures related to the expansion
of existing businesses and acquisitions.
Cash Flows
Cash and short-term investments at June 30, 2001 decreased from December 31,
2000 by $483 million. This decrease is the result of investing activities which
used cash of $1,284 million offset by operating activities which generated cash
of $690 million and financing activities which provided cash of $126 million.
Net cash provided by operating activities was $690 million during the six months
ended June 30, 2001 compared with cash provided of $505 million for the prior
year period. This trend is primarily due to increased operating results after
adjustment for depreciation, amortization of purchased intangibles and goodwill
along with large noncash charges including the impairment of goodwill and
purchased intangibles and the provision for inventory partially offset by a
larger investment in working capital during 2001.
Net cash used in investing activities amounted to $1,284 million during the six
months ended June 30, 2001 compared with $1,737 million in the prior year period
as higher capital spending was more than offset by a decrease in acquisition
activity.
Corning continues to invest significant cash in capacity expansions to support
growth in operations. Capital spending for the six months ended June 30, 2001
totaled $1,155 million compared to $563 million in the prior year period. As
disclosed in the first quarter Form 10-Q, Corning revised its capital spending
plan due to the decrease in forecasted revenues and profits for 2001. Corning
still expects its capital spending for the full year to be in the range of $2
billion.
Net cash provided by financing activities was $126 million during the six months
ended June 30, 2001 compared with cash provided of $2,337 million in the prior
year period. The substantial decrease is due primarily to the timing of
financing transactions in 2000 that included an equity offering which generated
cash proceeds of $2.2 billion and the euro-debt offering which provided an
additional $485 million in 2000. These proceeds were largely used to fund
acquisitions.
Dividends paid to common shareholders for the second quarter and six months
totaled $56 million and $112 million, respectively, compared with $52 million
and $102 million in the same periods of 2000. On July 9, 2001, Corning's board
of directors announced that the company is discontinuing the payment of
dividends on its common stock and will reinvest all cash generated by Corning's
businesses in future growth.
In Process Research and Development
On December 12, 2000, Corning completed the acquisition of Pirelli's optical
components and devices business based in Milan, Italy. For a complete history of
the acquisition see Corning's Form 10-K for 2000. This business had significant
research and development projects ongoing at the time of the acquisition and as
a result, 12 of these projects were valued as IPRD projects. Those projects
included development of submarine products which consisted of pump laser chips
and modules as well as gratings. At the time of acquisition Corning recorded
non-tax deductible charges of $26 million and $17 million, respectively for the
submarine and grating projects.
As part of the downsizing of the photonic technologies business announced on
July 9, 2001, Corning will abandon the projects underway related to submarine
products and gratings. This action will not have a material impact to cash flow,
or the results of operations.
New Accounting Pronouncements
On July 20, 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FAS) No. 141 "Business Combinations" and No. 142
"Goodwill and Other Intangible Assets". Among other provisions, all future
business combinations will be accounted for using the purchase method of
accounting and the use of the pooling-of-interest method is prohibited for
transactions initiated after July 1, 2001. In addition, goodwill will no longer
be amortized but will be subject to impairment tests at least annually. FAS 142
will be effective for Corning on January 1, 2002. At June 30, 2001 goodwill
approximated $1.9 billion. Goodwill amortization was $148 million and $289
million for the three and six months ended June 30, 2001, respectively.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
The statements in this Form 10-Q which are not historical facts or information
are forward-looking statements. These forward-looking statements involve risks
and uncertainties that may cause the outcome to be materially different. Such
risks and uncertainties include, but are not limited to:
- - global economic conditions,
- - currency fluctuations,
- - product demand and industry capacity,
- - competitive products and pricing,
- - sufficiency of manufacturing capacity and efficiencies,
- - cost reductions,
- - availability and costs of critical materials,
- - new product development and commercialization,
- - attracting and retaining key personnel,
- - facility expansions and new plant start-up costs,
- - the effect of regulatory and legal developments,
- - capital resource and cash flow activities,
- - capital spending,
- - equity company activities,
- - interest costs,
- - acquisition and divestiture activity,
- - the rate of technology change,
- - the ability to enforce patents,
- - stock price fluctuations, and
- - other risks detailed in Corning's Securities and Exchange Commission filings.
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
There are no pending legal proceedings to which Corning or any of its
subsidiaries is a party or of which any of their property is the subject which
are material in relation to the consolidated financial statements.
Environmental Litigation. Corning has been named by the Environmental Protection
Agency under the Superfund Act, or by state governments under similar state
laws, as a potentially responsible party at 12 active hazardous waste sites.
Under the Superfund Act, all parties who may have contributed any waste to a
hazardous waste site, identified by such Agency, are jointly and severally
liable for the cost of cleanup unless the Agency agrees otherwise. It is
Corning's policy to accrue for its estimated liability related to Superfund
sites and other environmental liabilities related to property owned by Corning
based on expert analysis and continual monitoring by both internal and external
consultants. Corning has accrued approximately $23 million for its estimated
liability for environmental cleanup and litigation at June 30, 2001. Based upon
the information developed to date, management believes that the accrued reserve
is a reasonable estimate of the Company's estimated liability and that the risk
of an additional loss in an amount materially higher than that accrued is
remote.
Dow Corning Bankruptcy. Corning and The Dow Chemical Company each own 50% of the
common stock of Dow Corning Corporation. On May 15, 1995, Dow Corning sought
protection under the reorganization provisions of Chapter 11 of the United
States Bankruptcy Code. The bankruptcy proceeding is pending in the United
States Bankruptcy Court for the Eastern District of Michigan, Northern Division
(Bay City, Michigan). The bankruptcy filing stayed the prosecution against Dow
Corning of approximately 19,000 breast-implant product liability lawsuits,
including 45 class actions. In 1998, Dow Corning and the Tort Claimants
Committee engaged in extended negotiations and reached certain compromises. On
November 8, 1998, Dow Corning and the Tort Claimants Committee jointly filed a
revised Plan of Reorganization (Joint Plan). Following a favorable vote from all
but four classes of creditors, a hearing to confirm the Joint Plan was held in
mid 1999. On November 30, 1999, the Bankruptcy Court entered an order confirming
the Joint Plan and indicated that certain written opinions would follow. On
December 21, 1999, the Bankruptcy Court issued an opinion that approved the
principal elements of the Joint Plan with respect to tort claimants, but
construed the Joint Plan as providing releases for third parties (including
Corning and Dow Chemical as shareholders) only with respect to tort claimants
who voted in favor of the Joint Plan. A number of parties opposing the Joint
Plan filed appeals on a variety of grounds to the United States District Court
for the Eastern District of Michigan. Dow Corning and the Tort Claimants
Committee filed a notice of appeal seeking review of the ruling limiting the
scope of the shareholder releases. On November 13, 2000, the District Court
entered an Order affirming the Bankruptcy Court's November 30, 1999 Order
confirming the Joint Amended Plan and reversing the Bankruptcy Court's December
21, 1999 Opinion on the release and injunction provisions. On February 5, 2001,
the District Court denied a Motion for Reconsideration. Approximately 20 appeals
from the District Court's Order are pending in the Sixth Circuit Court of
Appeals, which is expected to rule in late 2001. Further appellate activity,
which may include petitions for review by the U.S. Supreme Court, could delay a
final judgment until late 2002 or possibly into 2003. After all appeals are
exhausted, if the Joint Plan is upheld but the shareholder releases are
effective only for those voting in favor of the Joint Plan, Corning would expect
to defend any remaining claims against it on the same grounds that led to a
series of orders and judgments dismissing all claims against Corning in the
federal courts and the state courts as described under the heading Implant Tort
Lawsuits immediately hereafter. With respect to the possibility of additional
direct or indirect claims against Corning if the full releases are not
reinstated in the Joint Plan, management believes that such claims lack merit
and that the breast implant litigation against Corning will be resolved without
material impact on Corning's financial statements.
Under the terms of the Joint Plan, Dow Corning would be required to establish a
Settlement Trust and a Litigation Facility to provide a means for tort claimants
to settle or litigate their claims. Dow Corning would have the obligation to
fund the Trust and the Facility, over a period of up to 16 years, in an amount
up to approximately $3.3 billion, subject to the limitations, terms and
conditions stated in the Joint Plan. Dow Corning proposes to provide the
required funding over the 16 year period through a combination of cash, proceeds
from insurance, and cash flow from operations. Corning and Dow Chemical have
each agreed to provide a credit facility to Dow Corning of up to $150 million
($300 million in the aggregate), subject to the terms and conditions stated in
the Joint Plan. The Joint Plan also provides for Dow Corning to make full
payment, through cash and the issuance of senior notes, to its commercial
creditors. If and when Dow Corning emerges from bankruptcy, Corning expects to
resume the recognition of equity earnings from Dow Corning. Corning does not
expect to receive dividends from Dow Corning in the foreseeable future.
Implant Tort Lawsuits. Corning and Dow Chemical, the shareholders of Dow Corning
Corporation, have been named in a number of state and federal tort lawsuits
alleging injuries arising from Dow Corning's implant products. The claims
against the shareholders allege a variety of direct or indirect theories of
liability. From 1991 through June 30, 2001, Corning was named in approximately
11,470 state and federal tort lawsuits, some of which were filed as class
actions or on behalf of multiple claimants. In 1992, the federal breast implants
cases were coordinated for pretrial purposes in the United States District
Court, Northern District of Alabama (Judge Sam C. Pointer, Jr.). In 1993,
Corning obtained an interlocutory order for summary judgment, which was made
final in April 1995, dismissing Corning from over 4,000 federal court cases. On
March 12, 1996, the U.S. Court of Appeals for the Eleventh Circuit dismissed the
plaintiffs' appeal from that judgment. The District Court entered several orders
directing that Corning be dismissed from each case pending in or later
transferred to the Northern District of Alabama after Dow Corning filed for
bankruptcy protection. In state court legislation, Corning was awarded summary
judgment in California, Connecticut, Illinois, Indiana, Michigan, Mississippi,
New Jersey, New York, Pennsylvania, Tennessee, and Dallas, Harris and Travis
Counties in Texas, thereby dismissing approximately 7,000 state cases. On July
30, 1997, the judgment in California became final when the Supreme Court of
California dismissed further review as to Corning. In Louisiana, Corning was
awarded summary judgment dismissing all claims by plaintiffs and a cross-claim
by Dow Chemical on February 21, 1997. On February 11, 1998, the intermediate
appeals court in Louisiana vacated this judgment as premature. The Louisiana
cases were transferred to the United States District Court for the Eastern
District of Michigan, Southern Division (Michigan Federal Court) to which
substantially all breast implant cases were transferred in 1997. In the Michigan
Federal Court, Corning is named as a defendant in approximately 70 pending cases
(including some cases with multiple claimants), in addition to the transferred
Louisiana cases. In the fourth quarter of 1997, Corning moved for summary
judgment in the Michigan Federal Court to dismiss these remaining cases by
plaintiffs as well as the third party complaint and all cross-claims by Dow
Chemical. The Michigan Federal Court heard Corning's motion for summary judgment
on February 27, 1998, but has not ruled. Based upon the information developed to
date and recognizing that the outcome of complex litigation is uncertain,
management believes that the risk of a materially adverse result in the implant
litigation against Corning is remote and believes the implant litigation against
Corning will be resolved without material impact on Corning's financial
statements.
Federal securities case. A federal securities class action lawsuit was filed in
1992 against Corning and certain individual defendants by a class of purchasers
of Corning stock who allege misrepresentations and omissions of material facts
relative to the silicone gel breast implant business conducted by Dow Corning.
This action is pending in the United States District Court for the Southern
District of New York. The class consists of those purchasers of Corning stock in
the period from June 14, 1989 to January 13, 1992 who allegedly purchased at
inflated prices due to the non-disclosure or concealment of material information
and were damaged when Corning's stock price declined in January 1992 after the
Food and Drug Administration (FDA) requested a moratorium on Dow Corning's sale
of silicone gel implants. No amount of damages is specified in the complaint. In
1997, the Court dismissed the individual defendants from the case. In December
1998, Corning filed a motion for summary judgment requesting that all claims
against it be dismissed. Plaintiffs requested the opportunity to take
depositions before responding to the motion for summary judgment. The Court
permitted limited additional discovery of certain Dow Corning, Corning and Dow
Chemical officers and directors. These depositions were completed in the second
quarter of 1999. On September 23, 1999, the Court granted in part the request by
plaintiffs for certain additional documentary discovery. In April 2000, the
District Court ordered two additional depositions, one of which would be that of
Dow Corning's former General Counsel. Dow Corning filed a petition with the
United States Court of Appeals for the Second Circuit seeking relief from this
Order. The Second Circuit ruling is expected in the third quarter of 2001. The
discovery process is continuing and the Court has set no schedule to address the
still pending summary judgment motion. Corning intends to continue to defend
this action vigorously. Based upon the information developed to date and
recognizing that the outcome of litigation is uncertain, management believes
that the possibility of a materially adverse verdict is remote.
Shin Etsu Quartz Products Company. In July 1999 and February 2000, Shin Etsu
Quartz Products Company filed two patent suits in Japan against Corning for
alleged patent infringement of two patents relating to the properties of fused
silica materials used in the optical components of stepper machines. The suits
request damages and an injunction preventing sales of infringing products in
Japan. Corning has denied infringement, has argued that the patents are invalid
or unenforceable, and has filed a separate action to invalidate the second of
the two patents. In June 2001, the Japanese court ordered settlement discussions
involving both patents in suit. Corning and Shin Etsu are currently involved in
these discussions in an effort to reach an amicable resolution. Corning intends
to defend these suits vigorously. While recognizing that litigation is
inherently uncertain, based upon the information developed to date, management
believes that Corning has good defenses to Shin Etsu's claims.
Hereaus Quarzglass GmbH. In July 2001, Hereaus Quarzglass GmbH filed a patent
infringement suit in Germany against Corning for alleged patent infringement of
a European patent relating to certain properties of fused silica glass used in
the optical components of stepper machines. The suit requests damages and for
Corning to refrain from importing or selling infringing products in Germany.
Since receiving the complaint, Corning is in discussions with Hereaus in an
effort to reach an amicable resolution. Management believes that the Hereaus
patent is either not infringed or is invalid. Management is prepared to defend
this action vigorously and, recognizing that the outcome of litigation is
uncertain, believes it has strong defenses to the Hereaus claims.
Sumitomo Electric Industries, Inc. In December 2000, Sumitomo Electric
Industries, Inc. served a patent infringement complaint in the U.S. District
Court in North Carolina which asserts that Corning has infringed four Sumitomo
U.S. patents relating to optical fiber. The complaint also asserts that a
Corning patent relating to optical fiber was invalid. The suit seeks damages in
an unspecified amount for the alleged infringement of the Sumitomo patents, an
injunction restraining infringement, and a declaration that the Corning patent
is invalid. Since filing the complaint, Corning has met with Sumitomo. In an
effort to reach an amicable resolution, these discussions continue. Management
believes that the four Sumitomo patents are either not infringed or are invalid
and there is no basis for a holding that the Corning patent is invalid.
Management is prepared to defend this action vigorously and, recognizing that
the outcome of litigation is uncertain, believes it has strong defenses to
Sumitomo's claims.
Pittsburgh Corning Corporation. Corning and PPG Industries, Inc. each own 50% of
the capital stock of Pittsburgh Corning Corporation (PCC). PCC and several other
defendants have been named in numerous lawsuits involving claims alleging
personal injury from exposure to asbestos. On April 16, 2000, PCC filed for
Chapter 11 reorganization in the United States Bankruptcy Court for the Western
District of Pennsylvania. As of the bankruptcy filing, PCC had in excess of
240,000 open claims. At the time of its Chapter 11 filing, PCC sought and
obtained a temporary restraining order and filed a motion for a preliminary
injunction against the prosecution of asbestos actions against its two
shareholders to afford the parties a period of time (the "Injunction Period") in
which to negotiate a plan of reorganization for PCC. On April 4, 2001, the
Bankruptcy Court extended the exclusive period for PCC to file a plan of
reorganization (the "Exclusivity Period") until July 9, 2001, and extended the
Injunction Period to August 23, 2001. At a July 25, 2001 hearing, the Bankruptcy
Court entered an order upon consent of the parties extending the Injunction
Period to November 30, 2001 and terminating the Exclusivity Period. Under the
terms of the Bankruptcy Court's April 4, 2001 Order, PCC, PPG Industries and
Corning will have 90 days following expiration of the Injunction Period to seek
removal and transfer of stayed cases that have not been resolved through a plan
of reorganization. As a result of PCC's bankruptcy filing, Corning recorded an
after tax charge of $36 million in the first quarter of 2000 to impair its
entire investment in PCC and discontinued recognition of equity earnings. At the
time PCC filed for bankruptcy protection, there were approximately 12,400 claims
pending against Corning alleging various theories of liability based on exposure
to PCC's asbestos products. These cases are stayed pursuant to the injunction of
the bankruptcy court. Before PCC filed for bankruptcy protection, Corning was
dismissed from similar claims as cases against PCC proceeded to trial. The
Chapter 11 filing may lead to additional claims against Corning with related
costs of defense, charges and expenses. Although the outcome of litigation and
the bankruptcy case is uncertain, management believes that the separate
corporate status of PCC will continue to be upheld. Management is continuing to
investigate Corning's options for defending claims against it, which might
include vigorously defending itself on all fronts or exploring a global
settlement through the bankruptcy process. It is probable that there will be
intensive negotiations throughout the third quarter of 2001 concerning terms of
PCC's plan of reorganization, including whether or not Corning and its insurers
may participate by making a contribution in exchange for a release. Management
cannot estimate the probability that Corning will be able to secure such a
release upon terms and conditions satisfactory to Corning and its insurers. The
range of cost for these options (net of insurance) cannot be estimated at this
time. Although asbestos litigation is inherently difficult, and the outcome of
litigation is uncertain, management believes these matters will be resolved
without a materially adverse impact on Corning's financial position.
Astrium. In December of 2000, Astrium, SAS and Astrium, Ltd. filed a complaint
for negligence in the United States District Court for the Central District of
California against TRW, Inc., Pilkington Optronics Inc., Corning NetOptix, Inc.,
OFC Corporation and Optical Filter Corporation claiming damages in excess of
$150 million. The complaint alleges that certain cover glasses for solar arrays
used to generate electricity from solar energy on satellites sold by Astrium's
corporate successor were negligently coated by NetOptix or its subsidiaries
(prior to Corning's acquisition of NetOptix) in such a way that the amount of
electricity the satellite can produce and their effective life were materially
reduced. Corning has denied that the coatings produced by NetOptix or its
subsidiaries caused the damage alleged in the complaint or that it is legally
liable for any damages which Astrium may have experienced. Formal discovery has
just begun, no depositions have been taken, and it is too early to form a
definitive opinion about the outcome of the litigation. Based upon the
information developed to date and recognizing that the outcome of litigation is
uncertain, management believes that there are good defenses to these claims and
believes they will be resolved without material impact on Corning's financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
(a) The annual meeting of shareholders of the registrant was held on
June 21, 2001.
(b) The following nominees for the office of director, provided in
the registrant's proxy statement dated April 23, 2001 were
elected by the following number of shareholder votes for and
withheld:
For Withheld
----------- ---------
James B. Flaws 808,779,317 7,707,180
John H. Foster 809,155,279 7,331,218
Catherine A. Rein 808,919,340 7,567,157
William D. Smithburg 808,588,508 7,897,989
Hansel E. Tookes, II 808,276,156 8,210,344
Peter F. Volanakis 808,936,033 7,550,464
Wendell P. Weeks 808,501,610 7,984,887
The following persons continue as Directors:
Roger G. Ackerman*
John Seely Brown
Gordon Gund
John M. Hennessy
James R. Houghton
John W. Loose
James J. O'Connor
Deborah D. Rieman
H. Onno Ruding
*Roger Ackerman was elected a Director for a one-year term until
the next Annual Meeting by the Board after the shareholders
meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
No exhibits included in this filing.
(b) Reports on Form 8-K
A report on Form 8-K dated April 18, 2001, was filed in
connection with the registrant's realignment of a product line
between segments.
A report on Form 8-K dated April 26, 2001, was filed in
connection with the registrant's first quarter results.
Other items under Part II are not applicable.
SIGNATURES
Pursuant to the requirements of the Securities and 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
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(Registrant)
August 3, 2001 /s/ JAMES B. FLAWS
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Date James B. Flaws
Executive Vice President and Chief Financial Officer
August 3, 2001 /s/ KATHERINE A. ASBECK
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Date Katherine A. Asbeck
Senior Vice President and Controller