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) October 18, 2001
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
Item 7. Financial Statements
(c) Exhibits:
The Registrant's press release of October 18, 2001
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: October 18, 2001 By /s/ KATHERINE A. ASBECK
Katherine A. Asbeck
Senior Vice President and Controller
FOR RELEASE -- OCTOBER 18, 2001
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 Reports Third-Quarter Results
CORNING, N.Y. - Corning Incorporated (NYSE:GLW) reported today third-quarter pro
forma earnings per share of $0.09, a decrease of 74% compared with $0.35 per
share for the third quarter of 2000. Pro forma net income in the third quarter
of 2001 totaled $85 million, down from $317 million in the third quarter of
2000. These results are consistent with company expectations as announced on
Oct. 3. Pro forma results exclude the previously disclosed charge for
restructuring actions of $339 million ($222 million after-tax).
"As we announced two weeks ago, deteriorating global economic conditions have
affected all of our businesses. The downturn has been most pronounced within the
telecommunications market, where conditions changed so abruptly and with such
severity that the impact on our business is unprecedented," John W. Loose,
president and chief executive officer, said. "However, we have taken, and will
continue to take, decisive steps to restructure the company's businesses and
reduce our cost structure."
(more)
Corning Reports Third-Quarter Results
Page Two
Third-Quarter Operating Results
Third-quarter sales were $1.5 billion, down 21% from last year's third-quarter
sales of $1.9 billion, due primarily to declines in the telecommunications
segment. The company's steep profitability drop in the quarter was primarily
caused by significant losses in photonic technologies compared to modest
profitability in the third-quarter of 2000. In addition, Corning's optical fiber
and cable, hardware and equipment, environmental, semiconductor and information
display businesses reported weak profits. Corning's lower earnings also reflect
a higher level of manufacturing capacity and operating expenses that were added
in 2000 and early 2001 to meet the anticipated growth of the company, which did
not materialize.
Restructuring Actions
Corning recorded a third-quarter pre-tax charge of $339 million related to
actions undertaken in the quarter that are part of the broader restructuring
program expected to total up to $1 billion by the end of the year. The company
expects one-third of the $1 billion restructuring charge to be paid in cash.
Third-quarter charges include costs related to headcount reductions, primarily
in the telecommunications segment, and costs related to the closure of several
manufacturing facilities in Photonic Technologies. Including the charge for
restructuring actions and amortization of purchased intangibles and goodwill,
Corning's net loss for the third-quarter of 2001 totaled $220 million, or $0.24
per share. This compares with third-quarter 2000 net income of $254 million, or
$0.28 per share.
Corning has announced the following restructuring actions for the fourth
quarter:
- The closing of its photonic products manufacturing and development
operations in Henrietta, N.Y.
- The proposed closing of its optical fiber manufacturing facility in
Deeside, North Wales, United Kingdom
- The shutdown of manufacturing operations of glass tubing for lighting and
television applications by the third quarter of 2002
- The discontinuation of its initiative in Corning Microarray Technology
(CMT) products, part of Corning's Life Sciences business.
In addition, the company said it has begun other workforce reductions across
many of its businesses and staff functions, has implemented an early retirement
program and continues to look for ways to reduce operating expenses and control
costs. Workforce reductions related to all of these actions are part of the
company's previously announced plans to eliminate a total of 12,000 positions by
the end of the year.
(more)
Corning Reports Third-Quarter Results
Page Three
Outlook
Corning said that fourth-quarter earnings would be negatively impacted by the
previously announced idling of its optical fiber manufacturing operations, that
will begin next week and will continue through the remainder of the year. The
company expects fourth-quarter sales in the range of $1 billion and a
fourth-quarter pro forma loss in the range of $0.20 to $0.25 per share.
Corning also said it expects its fourth-quarter fiber volume to be less than
half of last year's comparable period. Premium fiber will represent about 10% of
the company's total fiber volume. Corning expects to experience pricing pressure
in its fiber and cable businesses in the fourth quarter.
Corning expects the cost savings resulting from the third-quarter charge and the
anticipated fourth-quarter actions to be approximately $400 million pre-tax on
an annualized basis. Approximately 50% of these savings will improve Corning's
gross margin and the remainder will reduce Corning's operating expense.
The company anticipates capital spending for 2001 to be $1.7 billion to $1.8
billion and it has reduced its 2002 capital spending plan to be in the range of
$700 million. The 2002 plan anticipates that all expansion projects in the
telecommunications segment are on hold indefinitely and that expansion of the
liquid crystal display glass business has slowed to keep pace with market
growth. The 2002 plan includes spending for the previously announced diesel
substrate plant and cost reduction capital projects across the company.
James B. Flaws, Corning's chief financial officer, said, "Over the short-term we
are focused on improving cash flow and restoring profitability. The company has
a healthy balance sheet with ample liquidity in the form of over $1 billion in
cash and committed credit lines of $2 billion."
Conference Call Information
The company will host a conference call at 8:30 a.m. EDT on Friday, Oct. 19. To
access the call, dial 630-395-0047 and use password: EARNINGS. The leader's name
is DIETZ. A replay of the call will begin at approximately 10:30 a.m. EDT and
will run through 5 p.m. EDT on Thursday, Nov. 1. To access the replay, dial
402-998-1664; a password is not required. To listen to a live audio webcast of
the call, go to www.corning.com/investor_relations/ and follow the instructions.
The webcast will be archived on the www.corning.com/investor_relations/ site for
14 days following the call.
(more)
Corning Reports Third-Quarter Results
Page Four
Pro Forma Statement
Pro forma net income excludes impairment and amortization of purchased
intangibles and goodwill, restructuring actions, purchased in-process research
and development, one-time acquisition costs, discontinued operations and other
non-recurring items.
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 2000 were $7.1
billion.
###
Forward-Looking and Cautionary Statements
Except for historical information and discussions contained herein, statements
included in this release may constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve a number of risks, uncertainties and other factors that could
cause results to differ materially, as discussed in the company's filings with
the Securities and Exchange Commission.
Corning Incorporated and Subsidiary Companies
Pro Forma Consolidated Statements of Income
Excluding Impairment and Amortization of Goodwill and Other Intangibles,
Restructuring Actions, Purchased In-Process Research and Development,
Acquisition-Related Costs and Non-Recurring Items
(Unaudited, in millions, except per share amounts)
For the three months ended For the nine months ended
September 30, September 30,
-------------------------- -------------------------
2001 2000 2001 2000
---------- --------- --------- --------
Net sales $ 1,509 $ 1,916 $ 5,298 $ 5,043
Cost of sales 994 1,112 3,438 2,930
--------- --------- --------- --------
Gross margin 515 804 1,860 2,113
Operating Expenses
Selling, general and administrative expenses 267 256 799 714
Research, development and engineering expenses 153 141 484 371
--------- --------- --------- --------
Operating income 95 407 577 1,028
Interest income 15 20 50 55
Interest expense (37) (25) (105) (78)
Other expense, net (6) (27) (17)
--------- --------- --------- --------
Income before income taxes 67 402 495 988
Provision for income taxes 22 130 161 320
--------- --------- --------- --------
Income before minority interest and equity earnings 45 272 334 668
Minority interest in losses (earnings) of subsidiaries 1 (7) (11) (17)
Equity in earnings of associated companies 39 52 119 125
--------- --------- --------- --------
Pro Forma Net Income $ 85 $ 317 $ 442 $ 776
========= ========= ========= ========
Pro Forma Basic Earnings Per Share $ 0.09 $ 0.36 $ 0.48 $ 0.92
========= ========= ========= ========
Pro Forma Diluted Earnings Per Share $ 0.09 $ 0.35 $ 0.47 $ 0.89
========= ========= ========= ========
Dividends Declared $ $ 0.06 $ 0.12 $ 0.18
========= ========= ========= ========
Shares used in computing pro forma
per share amounts:
Pro forma basic earnings per share 936 877 929 844
========= ========= ========= ========
Pro forma diluted earnings per share 947 907 944 873
========= ========= ========= ========
The above pro forma amounts for the quarter ended September 30, 2001 have been
adjusted to eliminate $48 million ($83 million after tax) of amortization of
purchased intangibles and goodwill and $339 million ($222 million after tax) of
provision for impairment and restructuring.
The above pro forma amounts for the quarter ended September 30, 2000 have been
adjusted to eliminate $82 million ($63 million after tax) of amortization of
purchased intangibles and goodwill.
The above pro forma amounts for the nine months ended September 30, 2001 have
been adjusted to eliminate $364 million ($337 million after tax) of amortization
of purchased intangibles and goodwill and $5,111 million ($4,948 million after
tax) of provision for impairment and restructuring.
The above pro forma amounts for the nine months ended September 30, 2000 have
been adjusted to eliminate $144 million ($144 million after tax) of amortization
of purchased intangibles and goodwill, $93 million ($77 million after tax) of
in-process research and development charges, $47 million ($43 million after tax)
of transaction costs from the Oak acquisition, $36 million after tax for the
impairment of the entire equity investment in Pittsburgh Corning Corporation,
and $7 million ($4 million after tax) for a nonoperating gain related to the
sale of Quanterra Incorporated.
Pro Forma
Corning Incorporated and Subsidiary Companies
Condensed Consolidated Statements of Income
(Unaudited, in millions, except per share amounts)
For the three months ended For the nine months ended
September 30, September 30,
-------------------------- --------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 1,509 $ 1,916 $ 5,298 $ 5,043
Cost of sales 994 1,112 3,438 2,930
--------- --------- --------- ---------
Gross margin 515 804 1,860 2,113
Operating Expenses
Selling, general and administrative expenses 267 256 799 714
Research, development and engineering
expenses 153 141 484 371
Amortization of purchased intangibles,
including goodwill 48 82 364 144
Acquisition-related charges 140
Provision for impairment and restructuring 339 5,111
--------- --------- --------- ---------
Operating (loss) income (292) 325 (4,898) 744
Interest income 15 20 50 55
Interest expense (37) (25) (105) (78)
Other expense, net (6) (27) (17)
Nonoperating gain 7
--------- --------- --------- ---------
(Loss) income before income taxes (320) 320 (4,980) 711
(Benefit) provision for income taxes (60) 111 (29) 303
--------- --------- --------- ---------
(Loss) income before minority interest and
equity earnings (260) 209 (4,951) 408
Minority interest in losses (earnings) of subsidiaries 1 (7) (11) (17)
Equity in earnings of associated companies 39 52 119 125
Impairment of equity investment (36)
--------- --------- --------- ---------
Net (Loss) Income $ (220) $ 254 $ (4,843) $ 480
========= ========= ========= =========
Basic (Loss) Earnings Per Share $ (0.24) $ 0.29 $ (5.21) $ 0.57
========= ========= ========= =========
Diluted (Loss) Earnings Per Share $ (0.24) $ 0.28 $ (5.21) $ 0.55
========= ========= ========= =========
Dividends Declared $ $ 0.06 $ 0.12 $ 0.18
========= ========= ========= =========
Shares used in computing per share amounts:
Basic earnings per share 936 877 929 844
========= ========= ========= =========
Diluted earnings per share 936 907 929 873
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
Corning Incorporated and Subsidiary Companies
Condensed Consolidated Balance Sheets
(Unaudited, in millions)
September 30, 2001 December 31, 2000
------------------ -----------------
Assets
Current Assets
Cash and short-term investments $ 1,595 $ 1,794
Accounts receivable, net 1,012 1,489
Inventories 958 1,040
Deferred taxes on income and other current assets 383 311
----------- -----------
Total current assets 3,948 4,634
Investments 712 635
Plant and equipment, net 5,300 4,679
Goodwill and other intangible assets, net 2,346 7,340
Other assets 378 238
----------- -----------
Total Assets $ 12,684 $ 17,526
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Loans payable $ 347 $ 128
Accounts payable 430 855
Other accrued liabilities 1,029 966
----------- -----------
Total current liabilities 1,806 1,949
Long-term debt 3,901 3,966
Other liabilities 797 830
Minority interest in subsidiary companies 141 139
Convertible preferred stock 8 9
Common shareholders' equity 6,031 10,633
----------- -----------
Total Liabilities and Shareholders' Equity $ 12,684 $ 17,526
=========== ===========
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 For the nine months ended
September 30, September 30,
-------------------------- -------------------------
2001 2000 2001 2000
--------- -------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (220) $ 254 $ (4,843) $ 480
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of purchased intangibles,
including goodwill 48 82 364 144
Depreciation 158 136 476 374
Impairment of goodwill and intangible assets 4,764
Provision for restructuring actions, net of cash spent 322 325
Provision for inventory write-off 273
Acquisition-related charges 140
Impairment of equity investment 36
Equity in earnings of associated companies in excess
of dividends received (35) (51) (58) (93)
Minority interest in earnings of subsidiaries in excess
of (less than) dividends paid (3) 6 2 (84)
Deferred tax (benefit) expense (60) 9 (182) (99)
Tax benefit on stock options 16 77 41 291
Noncash interest expense 10 30
Changes in certain working capital items 308 (179) 2 (345)
Other, net (10) 37 30 32
-------- ------- -------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 534 371 1,224 876
-------- ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (377) (413) (1,532) (976)
Acquisitions of businesses and leased assets, net of
cash acquired (16) (66) (1,261)
Net proceeds from disposition of properties and
investments 22 4 49 57
Net (increase) decrease in long-term investments
and other noncurrent assets (3) (28) (93) 33
Transaction costs related to pooling of interests (3) (44)
Other, net 2
-------- ------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (358) (454) (1,642) (2,191)
-------- ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term debt (127) (14) 136 (377)
Proceeds from issuance of long-term debt 2 19 70 707
Repayments of long-term debt (18) (93) (178)
Proceeds from issuance of common stock 227 23 246 2,344
Redemption of common stock for income tax withholding (6) (8) (25) (55)
Dividends paid (54) (112) (156)
-------- ------- -------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 96 (52) 222 2,285
-------- ------- -------- --------
Effect of exchange rates on cash 12 (6) 6 (10)
-------- ------- -------- --------
Cash used in discontinued operations (9) (2)
-------- ------- -------- --------
Net (decrease) increase in cash and cash equivalents 284 (141) (199) 958
Cash and cash equivalents at beginning of quarter/year 1,311 1,379 1,794 280
-------- ------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF QUARTER $ 1,595 $ 1,238 $ 1,595 $ 1,238
======== ======= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
Corning Incorporated and Subsidiary Companies
Notes to Consolidated Financial Statements
Quarter 3, 2001
(1) Information by Operating Segment
Information about the performance of Corning's three operating segments for
the third quarter and first nine 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 actions, 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 Nine months ended
September 30, September 30,
---------------------- ----------------------
2001 2000 2001 2000
--------- -------- --------- ---------
Telecommunications
Net sales $ 1,089 $ 1,422 $ 3,915 $ 3,622
Research, development and engineering expenses $ 110 $ 103 $ 366 $ 267
Interest expense $ 24 $ 16 $ 72 $ 50
Segment earnings before minority interest
and equity earnings $ 23 $ 203 $ 208 $ 496
Minority interest in losses of subsidiaries 3
Equity in earnings (losses) of associated companies 4 15 (3)
--------- -------- --------- ---------
Segment net income $ 27 $ 203 $ 223 $ 496
========= ======== ========= =========
Advanced Materials
Net sales $ 234 $ 253 $ 767 $ 764
Research, development and engineering expenses $ 31 $ 32 $ 87 $ 86
Interest expense $ 7 $ 4 $ 17 $ 15
Segment earnings before equity earnings $ 2 $ 20 $ 39 $ 55
Equity in earnings of associated companies 6 5 19 17
--------- -------- --------- ---------
Segment net income $ 8 $ 25 $ 58 $ 72
========= ======== ========= =========
Information Display
Net sales $ 183 $ 236 $ 602 $ 640
Research, development and engineering expenses $ 12 $ 6 $ 31 $ 18
Interest expense $ 6 $ 5 $ 16 $ 13
Segment earnings before minority interest and
equity earnings $ 11 $ 36 $ 57 $ 88
Minority interest in losses (earnings) of
subsidiaries 1 (7) (11) (20)
Equity in earnings of associated companies 27 45 81 107
--------- -------- --------- ---------
Segment net income $ 39 $ 74 $ 127 $ 175
========= ======== ========= =========
Total segments
Net sales $ 1,506 $ 1,911 $ 5,284 $ 5,026
Research, development and engineering expenses $ 153 $ 141 $ 484 $ 371
Interest expense $ 37 $ 25 $ 105 $ 78
Segment earnings before minority interest and
equity earnings $ 36 $ 259 $ 304 $ 639
Minority interest in losses (earnings) of
subsidiaries 1 (7) (11) (17)
Equity in earnings of associated companies 37 50 115 121
--------- -------- --------- ---------
Segment net income $ 74 $ 302 $ 408 $ 743
========= ======== ========= =========
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 Nine months ended
September 30, September 30,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- -------- ---------
Net sales
Total segment net sales $ 1,506 $ 1,911 $ 5,284 $ 5,026
Non-segment net sales (a) 3 5 14 17
--------- --------- -------- ---------
Total net sales $ 1,509 $ 1,916 $ 5,298 $ 5,043
========= ========= ======== =========
Net income
Total segment income (b) $ 74 $ 302 $ 408 $ 743
Unallocated items:
Non-segment loss and other (a) (1) (1) (4) (5)
Nonoperating gain 7
Amortization of purchased intangibles
and goodwill (c) (48) (82) (364) (144)
Acquisition-related charges (140)
Interest income (d) 15 20 50 54
Income tax (e) 77 13 174 (3)
Equity in earnings of associated
companies (a) 2 2 4 4
Impairment of equity investment (36)
Provisions for impairment and restructuring (f) (339) (5,111)
--------- --------- -------- ---------
Net (loss) income $ (220) $ 254 $ (4,843) $ 480
========= ========= ======== =========
(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) Provisions for impairment and restructuring relates primarily to the
Telecommunications segment.
(2) Impairment of Goodwill and Other 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.
As a result of these events and changes in circumstances, Corning assessed
the recoverability of certain long-lived assets related to the photonic
technologies business, including goodwill and other intangibles and
concluded that these assets were impaired. Corning recorded a charge equal
to the difference between the carrying value and fair value of these
assets. Management's estimate of fair value was based on multiples of
forecasted revenue and earnings of publicly traded companies with
operations in the optical component market segment.
Corning recorded pretax charges of $4.7 billion to impair a significant
portion of the goodwill and approximately $100 million to impair intangible
assets associated with certain business combinations completed in 2000. Of
the total charge of $4.8 billion, $3.2 billion related to the acquisition
of the Pirelli optical components business and $1.6 billion related to
goodwill resulting from the acquisition of NetOptix Corporation.
(3) Restructuring Actions
During the first half of 2001, Corning eliminated 4,300 positions with
minimal costs and recorded an $8 million ($5 million after tax)
restructuring charge in the second quarter.
In the third quarter of 2001, Corning approved and began executing formal
plans to close three manufacturing facilities in the Photonic Technologies
business and downsize its workforce, primarily in the Telecommunications
segment prior to year end. As a result of these actions, Corning recorded a
charge of $339 million ($222 million after-tax) which includes a
restructuring charge of $103 million and a charge to impair property, plant
and equipment of $236 million.
Restructuring Charges
---------------------
The third quarter restructuring charge of $103 million includes $71 million
of employee costs (including curtailment losses related to pension and
postretirement health care plans) and $32 million in other exit costs
(principally lease termination and contract cancellation payments). The
plans entail the elimination of approximately 3,700 positions worldwide.
Employees have been informed of the restructuring initiatives and benefits
available to them under applicable benefit plans or related contractual
provisions. These benefits include voluntary and involuntary separation,
early retirement, and social plan programs. Corning expects to pay
approximately $97 million in cash related to these restructuring plans.
During the third quarter of 2001, Corning paid employee related separation
costs of $12 million and other exit costs of $3 million. As of September
30, 2001, approximately 2,500 of the 3,700 employees had been separated
under the plans.
Impairment of Property, Plant and Equipment
-------------------------------------------
Corning recorded $236 million to impair property, plant and equipment
relating to facilities to be shutdown or disposed, primarily in the
Photonic Technologies business. The impairment charges were determined
based on the amount by which the carrying value exceeded the fair market
value of the asset.
Subsequent Actions
------------------
In the fourth quarter of 2001, Corning announced that it expects to
undertake further actions that will result in additional charges in the
range of $550 million to $650 million in the fourth quarter. Corning will
offer certain employees in the United States a voluntary early retirement
program. In addition to the third quarter plant closings, Corning will
close or consolidate several other manufacturing locations as well as
smaller businesses in the telecommunications and advanced materials
segments. As a result of these actions, Corning expects to eliminate an
additional 4,000 positions across the company bringing the total positions
eliminated to approximately 12,000 for the full year ended December 31,
2001.
(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) (Benefit) Provision for Income Taxes
Corning's tax benefit for the third quarter and nine months of 2001 was
impacted by the significant impairment charge and amortization of goodwill.
Corning's effective tax rate for the third quarter and first nine months of
2001 was 18.8% and 0.6%, respectively. Excluding the impact of the
impairment of goodwill and other intangibles (which is mostly not tax
deductible), amortization of purchased intangibles and goodwill,
restructuring actions, purchased in-process research and development,
one-time acquisition costs and other nonrecurring items, the effective
income tax rate for the third quarter and nine months of 2001 was 32.5%,
which is comparable to rates of 32.4% in both periods in 2000.
(6) Financing Transaction
On August 16, 2001, Corning completed an equity offering of approximately
14 million shares of common stock generating net proceeds to Corning of
approximately $225 million. The proceeds will be used to finance the
previously announced acquisition of Lucent Technologies' controlling equity
interests in Shanghai Fiber Optic Co., Ltd. and Beijing Fiber Optic Cable
Co., Ltd. expected to close in the first quarter of 2002.
Supplementary Information
Borrowing Capacity
Corning continues to have available a $2.0 billion senior unsecured revolving
credit facility which expires in August, 2005. This agreement contains one
financial covenant requiring Corning's total debt to total capital ratio, as
defined, to be no more than 60%. At September 30, 2001, this ratio was 41.6%.
Corning's debt could increase approximately $4.0 billion within the constraints
of this provision.
As of September 30, 2001, Corning has available capacity of $4,775 million under
its existing universal shelf registration filed in March 2001.
Corning Incorporated
Quarterly Sales Information
(in millions)
2001
--------------------------------------------------------------
Q1 Q2 Q3 Q4 Total
--------- --------- -------- -------- ---------
Telecommunications
Fiber and Cable $ 875 $ 939 $ 779 $ $ 2,593
Hardware and Equipment 248 231 187 666
Photonic Technologies 236 158 69 463
Optical Networking Devices 14 10 7 31
Controls and Connectors 60 55 47 162
-------- -------- ------- ------- --------
Segment net sales $ 1,433 $ 1,393 $ 1,089 $ $ 3,915
======== ======== ======= ======= ========
Advanced Materials
Environmental $ 108 $ 96 $ 90 $ $ 294
Life Sciences 70 69 65 204
Other Advanced Materials 104 86 79 269
-------- -------- ------- ------- --------
Segment net sales $ 282 $ 251 $ 234 $ $ 767
======== ======== ======= ======= ========
Information Display
Display Technologies $ 62 $ 87 $ 79 $ $ 228
Conventional Video 86 73 47 206
Precision Lens 53 58 57 168
-------- -------- ------- ------- --------
Segment net sales $ 201 $ 218 $ 183 $ $ 602
======== ======== ======= ======= ========
2000
--------------------------------------------------------------
Q1 Q2 Q3 Q4 Total
--------- --------- -------- -------- ---------
Telecommunications
Fiber and Cable $ 479 $ 722 $ 795 $ 879 $ 2,875
Hardware and Equipment 183 276 288 273 1,020
Photonic Technologies 186 238 273 342 1,039
Optical Networking Devices 5 6 11
Controls and Connectors 57 59 61 64 241
-------- -------- ------- ------- --------
Segment net sales $ 905 $ 1,295 $ 1,422 $ 1,564 $ 5,186
======== ======== ======= ======= ========
Advanced Materials
Environmental $ 103 $ 103 $ 101 $ 104 $ 411
Life Sciences 63 66 62 57 248
Other Advanced Materials 86 90 90 96 362
-------- -------- ------- ------- --------
Segment net sales $ 252 $ 259 $ 253 $ 257 $ 1,021
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Information Display
Display Technologies $ 61 $ 76 $ 88 $ 108 $ 333
Conventional Video 83 87 94 90 354
Precision Lens 44 53 54 56 207
-------- -------- ------- ------- --------
Segment net sales $ 188 $ 216 $ 236 $ 254 $ 894
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