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) January 23, 2002
CORNING INCORPORATED
(Exact name of registrant as specified in its charter)
New York 1-3247 16-0393470
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Riverfront Plaza, Corning, New York 14831
(Address of principal executive offices) (Zip Code)
(607) 974-9000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events
Item 7. Financial Statements
(c) Exhibits:
The Registrant's press release of January 23, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORNING INCORPORATED
Registrant
Date: January 23, 2002 By /s/ KATHERINE A. ASBECK
Katherine A. Asbeck
Senior Vice President and Controller
FOR RELEASE -- JANUARY 23, 2002
Corning Contacts:
Media Relations Investor Relations
Daniel F. Collins Katherine M. Dietz
(607) 974-4197 (607) 974-8217
collinsdf@corning.com dietzkm@corning.com
Corning Reports Fourth-Quarter Results
CORNING, N.Y. -- Corning Incorporated (NYSE:GLW) today reported a fourth-quarter
pro forma net loss of $261 million, or $0.28 per share, down significantly from
pro forma earnings of $307 million, or $0.33 per share, for the fourth quarter
of 2000. The quarter results include pre-tax operating charges, announced last
week, totaling $178 million ($109 million after-tax), or $0.12 per share.
"Over the course of the second half of 2001, we took a series of tough
restructuring actions that improved our competitive position," John W. Loose,
Corning's president and chief executive officer, said. "We lowered inventories
significantly, reduced our capital expenditures, resized our organization
through the elimination of 12,000 positions and idled and closed a number of
manufacturing operations. We are focused on returning Corning to profitability,"
Loose said.
Fourth-quarter Operating Results
Fourth-quarter sales were $974 million, less than half of the $2.1 billion
reported in the fourth-quarter of 2000. Sales and earnings declines were led by
the Telecommunications segment, which reported sales declines of 65% versus last
year and operated at a loss for the quarter. Optical fiber and cable sales
decreased significantly as demand for optical fiber was extremely weak in the
quarter. This prompted significant slowdowns in cable manufacturing operations
and the idling of most of the company's fiber manufacturing facilities in
November and December. The company announced earlier this month that it is
recalling some workers to resume manufacturing operations in its fiber
production facilities beginning this week.
(more)
Corning Reports Fourth-Quarter Results
Page Two
Weak global economic conditions also impacted Corning's other businesses.
Fourth-quarter sales and earnings of Corning's Advanced Materials segment
declined due primarily to weak sales in its environmental and semiconductor
businesses. The Information Display segment also recorded lower sales and
earnings in the fourth-quarter driven primarily by weakness in its conventional
television business.
With these fourth-quarter results, pro forma earnings per share for the full
year were $0.17, compared with $1.22 per share in 2000. Sales for the full year
totaled $6.3 billion, a decrease of 12% compared with $7.1 billion in 2000.
The company ended the year with $2.2 billion in cash and continues to have
additional liquidity with $2 billion of committed and unused revolving credit
lines.
Restructuring Actions
In the fourth quarter, Corning recorded a pre-tax charge of $614 million ($363
after-tax and minority interest) related to restructuring actions which were
part of the previously announced program totaling $961 million for the year.
Approximately one third of the total charges for the program will be paid in
cash. Corning expects to realize annualized savings from the program of
approximately $400 million.
Fourth-Quarter and Calendar Year Results
With the charges for restructuring actions and amortization of goodwill,
Corning's net loss for the quarter was $655 million, or $0.69 per share,
compared with a net loss of $58 million, or $0.08 per share, from continuing
operations for the fourth quarter of 2000.
Including charges for restructuring actions, amortization of goodwill, and the
second-quarter impairment of goodwill and intangible assets, Corning reported a
full-year 2001 loss of $5.5 billion, or $5.89 per share, compared to net income
from continuing operations of $409 million, or $0.46 per share in 2000.
Outlook
James B. Flaws, Corning's chief financial officer, said, "While we continue to
experience weakness in demand across our telecommunications businesses, we are
beginning to sense a settling in the market that suggests we may see improved
demand in the second half of this year." He also said the company will not
provide guidance for its 2002 financial performance at this time, but it will
discuss its expectations for the first quarter of 2002 at its investor meeting
on February 8, 2002 at the Plaza Hotel in New York City and simultaneously via
audio webcast.
(more)
Corning Reports Fourth-Quarter Results
Page Three
"This past year was extremely challenging for everyone in the telecommunications
industry," Loose said. "At Corning, we believe in our optical layer strategy and
will continue to invest in and build a product and business portfolio which will
make us an even stronger player in the optical networking market. We are also
excited about a number of emerging technologies in our Advanced Materials
segment and we believe our liquid crystal display business is poised for a
strong year," Loose said.
Conference Call Information
The company will host a conference call at 8:30 a.m. EST on Thursday, January
24, 2002. To access the call, dial 312-470-0014. The password is Corning. The
leader is Dietz. A replay of the call will begin at approximately 10:30 a.m. and
will run through 5:00 p.m. EST on Wednesday, February 6, 2002. To access the
replay, dial 402-220-3523; a password is not required. To listen to a live audio
webcast of the call, go to http://www.corning.com/investor_relations/ and follow
the instructions. The webcast will be archived on the
http://www.corning.com/investor_relations/ site for 14 days following the call.
Pro Forma Statement
Pro forma net income excludes impairment and amortization of 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.
###
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements that involve a variety of
business risks and other uncertainties that could cause actual results to differ
materially. These risks and uncertainties include the possibility of changes or
fluctuations in global economic conditions; currency exchange rates; product
demand and industry capacity; competitive products and pricing; availability and
costs of critical components and materials; new product development and
commercialization; order activity and demand from major customers; capital
spending by larger customers in the telecommunications industry and other
business segments; the mix of sales between premium and non-premium products;
possible disruption in commercial activities due to terrorist activity and armed
conflict; ability to obtain financing and capital on commercially reasonable
terms; acquisition and divestiture activities; the level of excess or obsolete
inventory; the ability to enforce patents; product and components performance
issues; and litigation. These and other risk factors are identified in Corning's
filings with the Securities and Exchange Commission. Forward-looking statements
speak only as of the day that they are made, and Corning undertakes no
obligation to update them in light of new information or future events.
Corning Incorporated and Subsidiary Companies
Pro Forma Consolidated Statements of Income
Excluding Impairment and Amortization of Goodwill, 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 year ended
December 31, December 31,
--------------------------- --------------------------
2001 2000 2001 2000
---------- --------- --------- ---------
Net sales $ 974 $ 2,084 $ 6,272 $ 7,127
Cost of sales 942 1,201 4,380 4,131
--------- --------- --------- ---------
Gross margin 32 883 1,892 2,996
Operating Expenses
Selling, general and administrative expenses 298 333 1,097 1,047
Research, development and engineering expenses 147 169 631 540
Amortization of intangible assets 40 15 76 29
--------- --------- --------- ---------
Operating (loss) income (453) 366 88 1,380
Interest income 18 50 68 105
Interest expense (48) (29) (153) (107)
Other income (expense), net 1 2 (26) (15)
--------- --------- --------- ---------
(Loss) income before income taxes (482) 389 (23) 1,363
(Benefit) provision for income taxes (181) 124 (32) 438
--------- --------- --------- ---------
(Loss) income before minority interest and equity earnings (301) 265 9 925
Minority interest in losses (earnings) of subsidiaries 11 (7) (24)
Equity in earnings of associated companies 29 49 148 174
--------- --------- --------- ---------
Pro Forma Net (Loss) Income $ (261) $ 307 $ 157 $ 1,075
========= ========= ========= =========
Pro Forma Basic (Loss) Earnings Per Share $ (0.28) $ 0.34 $ 0.17 $ 1.25
========= ========= ========= =========
Pro Forma Diluted (Loss) Earnings Per Share $ (0.28) $ 0.33 $ 0.17 $ 1.22
========= ========= ========= =========
Dividends Declared $ 0.06 $ 0.12 $ 0.24
========= ========= ========= =========
Shares used in computing pro forma
per share amounts:
Pro forma basic earnings per share 944 901 933 858
========= ========= ========= =========
Pro forma diluted earnings per share 944 944 939 891
========= ========= ========= =========
The above pro forma amounts for the quarter ended December 31, 2001 have been
adjusted to eliminate $35 million ($31 million after-tax) of amortization of
goodwill and $614 million ($363 million after-tax and minority interest) of
provision for impairment and restructuring.
The above pro forma amounts for the quarter ended December 31, 2000 have been
adjusted to eliminate $86 million ($66 million after-tax) of amortization of
goodwill, $323 million of in-process research and development charges, $11
million after-tax for a nonoperating gain included in equity earnings, and $13
million after-tax of income from discontinued operations.
The above pro forma amounts for the year ended December 31, 2001 have been
adjusted to eliminate $363 million ($344 million after-tax) of amortization of
goodwill and $5,725 million ($5,311 million after-tax and minority interest) of
provision for impairment and restructuring.
The above pro forma amounts for the year ended December 31, 2000 have been
adjusted to eliminate $216 million ($202 million after-tax) of amortization of
goodwill, $416 million ($400 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, $7 million ($4 million
after-tax) for a nonoperating gain related to the sale of Quanterra
Incorporated, $11 million after-tax for a nonoperating gain included in equity
earnings, and $13 million after-tax of income from discontinued operations.
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 year ended
December 31, December 31,
-------------------------- ---------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 974 $ 2,084 $ 6,272 $ 7,127
Cost of sales 942 1,201 4,380 4,131
--------- --------- --------- ---------
Gross margin 32 883 1,892 2,996
Operating Expenses
Selling, general and administrative expenses 298 333 1,097 1,047
Research, development and engineering
expenses 147 169 631 540
Amortization of purchased intangibles,
including goodwill 75 101 439 245
Acquisition-related charges 323 463
Provision for impairment and restructuring 614 5,725
--------- --------- --------- ---------
Operating (loss) income (1,102) (43) (6,000) 701
Interest income 18 50 68 105
Interest expense (48) (29) (153) (107)
Other income (expense), net 1 2 (26) (15)
Nonoperating gain 7
--------- --------- --------- ---------
(Loss) income before income taxes (1,131) (20) (6,111) 691
(Benefit) provision for income taxes (423) 104 (452) 407
--------- --------- --------- ---------
(Loss) income before minority interest and
equity earnings (708) (124) (5,659) 284
Minority interest in losses (earnings) of subsidiaries 24 (7) 13 (24)
Equity in earnings of associated companies 29 60 148 185
Impairment of equity investment (36)
--------- --------- --------- ---------
(Loss) income from continuing operations (655) (71) (5,498) 409
Income from discontinued operations 13 13
--------- --------- --------- ---------
Net (Loss) Income $ (655) $ (58) $ (5,498) $ 422
========= ========= ========= =========
Basic (Loss) Earnings Per Share
Continuing operations $ (0.69) $ (0.08) $ (5.89) $ 0.48
Discontinued operations 0.02 0.01
--------- --------- --------- ---------
Net (Loss) Income $ (0.69) $ (0.06) $ (5.89) $ 0.49
========= ========= ========= =========
Diluted (Loss) Earnings Per Share
Continuing operations $ (0.69) $ (0.08) $ (5.89) $ 0.46
Discontinued operations 0.02 0.02
--------- --------- --------- ---------
Net (Loss) Income $ (0.69) $ (0.06) $ (5.89) $ 0.48
========= ========= ========= =========
Dividends Declared $ 0.06 $ 0.12 $ 0.24
========= ========= ========= =========
Shares used in computing per share amounts:
Basic earnings per share 944 901 933 858
========= ========= ========= =========
Diluted earnings per share 944 901 933 879
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
Corning Incorporated and Subsidiary Companies
Condensed Consolidated Balance Sheets
(Unaudited, in millions)
December 31, 2001 December 31, 2000
----------------- -----------------
Assets
Current Assets
Cash and short-term investments $ 2,219 $ 1,794
Trade accounts receivable, net 593 1,302
Inventories 725 1,040
Deferred taxes on income and other current assets 570 498
----------- -----------
Total current assets 4,107 4,634
Investments 778 650
Plant and equipment, net 5,097 4,679
Goodwill and other intangible assets, net 2,289 7,340
Other assets 522 223
----------- -----------
Total Assets $ 12,793 $ 17,526
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Loans payable $ 477 $ 128
Accounts payable 441 855
Other accrued liabilities 1,076 966
----------- -----------
Total current liabilities 1,994 1,949
Long-term debt 4,461 3,966
Other liabilities 798 830
Minority interest in subsidiary companies 119 139
Convertible preferred stock 7 9
Common shareholders' equity 5,414 10,633
----------- -----------
Total Liabilities and Shareholders' Equity $ 12,793 $ 17,526
=========== ===========
The accompanying notes are an integral part of these statements. Certain amounts
for 2000 have been reclassified to conform with 2001 classifications.
Corning Incorporated and Subsidiary Companies
Consolidated Statements of Cash Flows
(Unaudited; in millions)
For the three months ended For the year ended
December 31, December 31,
-------------------------- --------------------------
2001 2000 2001 2000
--------- -------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (655) $ (58) $ (5,498) $ 422
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations (13) (13)
Amortization of purchased intangibles, including goodwill 75 101 439 245
Depreciation 165 142 641 516
Impairment of goodwill and intangible assets 4,764
Provisions for restructuring actions, net of cash spent 559 884
Provisions for inventory write-off 60 333
Acquisition-related charges 323 463
Impairment of equity investment 36
Equity in earnings of associated companies in excess
of dividends received (36) (47) (94) (140)
Minority interest, net of dividends paid (24) 1 (22) (83)
Deferred tax (benefit) expense (274) 51 (456) (48)
Tax benefit on stock options 30 27 321
Interest expense on convertible debentures 11 41
Changes in certain working capital items 239 (57) 241 (402)
Other, net 101 72 145 104
-------- ------- -------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 221 545 1,445 1,421
-------- ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (268) (549) (1,800) (1,525)
Acquisitions of businesses, net of cash acquired (3,748) (66) (5,009)
Net proceeds from sale of assets 18 23 67 80
Net increase in long-term investments and other
noncurrent assets (20) (89) (113) (56)
Transaction costs related to pooling of interests (44)
Other, net 4 5 4 5
-------- ------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (266) (4,358) (1,908) (6,549)
--------- ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term debt 45 (9) 181 (386)
Proceeds from issuance of long-term debt 665 2,032 735 2,728
Repayments of long-term debt (11) (2) (104) (169)
Proceeds from issuance of common stock 1 2,400 247 4,744
Redemption of common stock for income tax withholding (17) (2) (42) (57)
Dividends paid (1) (55) (113) (211)
-------- ------- -------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 682 4,364 904 6,649
-------- ------- -------- --------
Effect of exchange rates on cash (13) 5 (7) (5)
-------- ------- -------- --------
Cash used in discontinued operations (9) (2)
-------- ------- -------- --------
Net increase in cash and cash equivalents 624 556 425 1,514
Cash and cash equivalents at beginning of quarter/year 1,595 1,238 1,794 280
-------- ------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF QUARTER $ 2,219 $ 1,794 $ 2,219 $ 1,794
======== ======= ======== ========
The accompanying notes are an integral part of these statements. Certain amounts
for 2000 have been reclassified to conform with 2001 classifications.
Corning Incorporated and Subsidiary Companies
Notes to Consolidated Financial Statements
Quarter 4, 2001
(Unaudited; in millions, except per share amounts)
(1) Information by Operating Segment Information about the performance of
Corning's three operating segments for the fourth quarter and year ended
December 31, 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, 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. Effective in the fourth quarter of 2001,
and as reported on Form 8-K filed on January 14, 2002, Corning
retroactively revised its segment net income definition to include the
amortization of intangible assets. Segment results for 2000 have been
restated to conform to the current presentation.
Three months ended Year ended
December 31, December 31,
---------------------- ----------------------
2001 2000 2001 2000
--------- -------- --------- ---------
Telecommunications
Net sales $ 543 $ 1,564 $ 4,458 $ 5,186
Research, development and engineering expenses $ 108 $ 128 $ 474 $ 395
Interest expense $ 32 $ 20 $ 104 $ 70
Segment (losses) earnings before minority interest
and equity (losses) earnings $ (277) $ 204 $ (93) $ 692
Minority interest in losses of subsidiaries 3
Equity in earnings (losses) of associated companies (3) 4 12 1
--------- -------- --------- ---------
Segment net (loss) income $ (280) $ 208 $ (81) $ 696
========= ======== ========= =========
Advanced Materials
Net sales $ 226 $ 257 $ 993 $ 1,021
Research, development and engineering expenses $ 33 $ 30 $ 120 $ 116
Interest expense $ 8 $ 3 $ 25 $ 18
Segment (losses) earnings before equity earnings $ (20) $ 3 $ 19 $ 58
Equity in earnings of associated companies 8 5 27 22
--------- -------- --------- ---------
Segment net (loss) income $ (12) $ 8 $ 46 $ 80
========= ======== ========= =========
Information Display
Net sales $ 198 $ 254 $ 800 $ 894
Research, development and engineering expenses $ 9 $ 11 $ 40 $ 29
Interest expense $ 7 $ 6 $ 23 $ 19
Segment (losses) earnings before minority interest
and equity earnings $ (13) $ 26 $ 44 $ 114
Minority interest in losses (earnings) of
subsidiaries 11 (7) (27)
Equity in earnings of associated companies 24 38 105 145
--------- -------- --------- ---------
Segment net income $ 22 $ 57 $ 149 $ 232
========= ======== ========= =========
Total segments
Net sales $ 967 $ 2,075 $ 6,251 $ 7,101
Research, development and engineering expenses $ 150 $ 169 $ 634 $ 540
Interest expense $ 47 $ 29 $ 152 $ 107
Segment (losses) earnings before minority interest
and equity earnings $ (310) $ 233 $ (30) $ 864
Minority interest in losses (earnings) of
subsidiaries 11 (7) (24)
Equity in earnings of associated companies 29 47 144 168
--------- -------- --------- ---------
Segment net (loss) income $ (270) $ 273 $ 114 $ 1,008
========= ======== ========= =========
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 Year ended
December 31, December 31,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- -------- ---------
Net sales
Total segment net sales $ 967 $ 2,075 $ 6,251 $ 7,101
Non-segment net sales (a) 7 9 21 26
--------- --------- -------- ---------
Total net sales $ 974 $ 2,084 $ 6,272 $ 7,127
========= ========= ======== =========
Net income
Total segment income (b) $ (270) $ 273 $ 114 $ 1,008
Unallocated items:
Non-segment loss and other (a) (1) (1) (5) (6)
Nonoperating gain 7
Amortization of goodwill (c) (35) (86) (363) (216)
Acquisition-related charges (323) (463)
Provisions for impairment and restructuring (d) (614) (5,725)
Interest income (e) 18 50 68 104
Income tax (f) 247 4 409 (5)
Equity in earnings of associated companies (a) 1 4 5
Impairment of equity investment (36)
Nonoperating gain in equity earnings 11 11
--------- --------- -------- ---------
Net (loss) income $ (655) $ (71) $ (5,498) $ 409
========= ========= ======== =========
(a) Includes amounts derived from corporate investments.
(b) Includes royalty, interest and dividend income.
(c) Amortization of goodwill relates primarily to the Telecommunications
segment.
(d) Provisions for impairment and restructuring. See Note 2 and Note 5.
(e) Corporate interest income is not allocated to reportable segments.
(f) Includes tax associated with unallocated items.
(2) Restructuring Actions
During the fourth quarter, Corning approved and began executing plans to
close additional facilities and downsize its workforce in an effort to
reduce capacity to meet future expected revenue levels. As a result of
these actions, Corning recorded a charge of $614 million ($363 million
after-tax and minority interest) which includes a restructuring charge of
$308 million and a charge to impair plant and equipment of $306 million.
Corning has recorded $961 million ($590 million after-tax and minority
interest) for restructuring actions in 2001.
Restructuring Charges
During the fourth quarter, Corning recorded restructuring charges of $308
million. The charge includes employee separation costs of $245 million
(including curtailment losses related to pension and health care plans) and
exit costs of $63 million (principally lease termination and contract
cancellation payments). The plans comprehend the elimination of an
additional 4,000 positions worldwide for a total of approximately 12,000
announced in 2001. 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 programs. During the
fourth quarter Corning paid employee related separation costs of $48
million and other exit costs of $14 million. For the full year Corning
recorded charges of $324 million and $95 million and paid $60 million and
$17 million respectively, for employee related separation and exit costs.
As of December 31, 2001, approximately 10,100 of the 12,000 employees had
been separated under the plans.
Impairment of Plant and Equipment
Corning recorded a fourth quarter charge of $306 million to impair plant
and equipment relating to facilities to be shutdown or disposed across all
three operating segments. The impairment charges were determined based on
the amount by which the carrying value exceeded the fair market value of
the asset. For the full year Corning recorded impairment charges totaling
$542 million related to plant and equipment, primarily in the
telecommunications operating segment.
The charges relate to the operating segments as follows:
Restructuring Actions
---------------------------------------
Three months ended Year ended
December 31, December 31,
2001 2001
------------------ ------------
Telecommunications $ 293 $ 640
Advanced Materials 94 94
Information Display 36 36
Corporate functions including Research 191 191
-------- --------
$ 614 $ 961
======== ========
(3) Provisions for Inventory Write-Off
During the second quarter, major customers in the photonic technologies
business 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. In the fourth quarter, Corning recorded an additional
provision of $60 million ($37 million after-tax) in cost of sales primarily
for excess and obsolete inventory in the photonic technologies business in
response to continued weak demand.
(4) Stock Compensation
In the fourth quarter, Corning's Board of Directors released restrictions
on 4.8 million shares of Corning common stock held by employees. The
unamortized expense associated with the grants totaled $90 million. This
charge is included in selling, general and administrative expense.
(5) 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 determined
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 pre-tax 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.
(6) (Benefit) Provision for Income Taxes
Corning's tax rates for the fourth quarter and the full year 2001 were
37.4% and 7.4%, respectively. The full year rate is significantly impacted
by nondeductible amortization of goodwill and other one-time charges.
Excluding the impact of these items, the fourth quarter tax rate was 37.5%.
The comparable rate for the fourth quarter 2000 was 32%. The fourth quarter
of 2001 rate reflects certain one-time benefits attributable to the period.
(7) Financing Transaction
In November 2001, Corning completed a convertible debt offering of $665
million due November 1, 2008 and convertible into approximately 69 million
shares of common stock. Each $1,000 debenture was issued at par and pays
interest of 3.5% semiannually. The proceeds will be used for general
corporate purposes.
(8) Supplementary Cash Flow Data
Supplemental disclosure of cash flow information is as follows:
Three months ended Year ended
December 31, December 31,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Changes in certain working capital items:
Accounts receivable $ 293 $ (43) $ 677 $ (249)
Inventories 147 (81) (51) (280)
Other current assets (35) (165) 92 (192)
Accounts payable and other current liabilities (166) 232 (477) 319
--------- --------- --------- ---------
Total $ 239 $ (57) $ 241 $ (402)
========= ========= ========= =========
Corning Incorporated
Quarterly Sales Information
(in millions)
2001
--------------------------------------------------------------
Q1 Q2 Q3 Q4 Total
--------- --------- -------- -------- ---------
Telecommunications
Fiber and Cable $ 875 $ 939 $ 779 $ 296 $ 2,889
Hardware and Equipment 248 231 187 151 817
Photonic Technologies 236 158 69 46 509
Optical Networking Devices 14 10 7 7 38
Controls and Connectors 60 55 47 43 205
-------- -------- ------- ------- --------
Segment net sales $ 1,433 $ 1,393 $ 1,089 $ 543 $ 4,458
======== ======== ======= ======= ========
Advanced Materials
Environmental $ 108 $ 96 $ 90 $ 85 $ 379
Life Sciences 70 69 65 63 267
Other Advanced Materials 104 86 79 78 347
-------- -------- ------- ------- --------
Segment net sales $ 282 $ 251 $ 234 $ 226 $ 993
======== ======== ======= ======= ========
Information Display
Display Technologies $ 62 $ 87 $ 79 $ 95 $ 323
Conventional Video Components 86 73 47 46 252
Precision Lens 53 58 57 57 225
-------- -------- ------- ------- --------
Segment net sales $ 201 $ 218 $ 183 $ 198 $ 800
======== ======== ======= ======= ========
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
======== ======== ======= ======= ========
Information Display
Display Technologies $ 61 $ 76 $ 88 $ 108 $ 333
Conventional Video Components 83 87 94 90 354
Precision Lens 44 53 54 56 207
-------- -------- ------- ------- --------
Segment net sales $ 188 $ 216 $ 236 $ 254 $ 894
======== ======== ======= ======= ========