Corning Announces Second-Quarter Results.Business Editors CORNING Corning, city (1990 pop. 11,938), Steuben co., S N.Y., on the Chemung River, in a dairy and vineyard region; settled 1788, inc. as a city 1890. The glass industry for which the city is famous began in 1868. , N.Y.--(BUSINESS WIRE)--July 23, 2002 Company outlines restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). programs; Details debt repurchases Corning Incorporated Corning Incorporated NYSE: GLW is an American manufacturer of glass, ceramics and related materials, primarily for industrial and scientific applications. The company was known until 1989 as Corning Glass Works. (NYSE NYSE See: New York Stock Exchange : GLW GLW Glasgow Airport (UK) GLW Gross Laden Weight GLW Good Lady Wife (Australia) ) today announced that its second-quarter sales were $896 million and that it incurred a net loss of $370 million, or $0.39 per share. The loss included restructuring and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges of $494 million ($342 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ), or $0.36 per share, and a gain resulting from debt repurchases of $68 million ($42 million after-tax), or $0.04 per share. "Second-quarter revenues were in line with our expectations," said James R. Houghton James R. Houghton is the Retired Chairman of the Board of Corning Incorporated. Houghton has Bachelor of Arts and master of business administration degrees from Harvard University (A.B., 1958, MBA, 1962). , chairman and chief executive officer. He said that while sales in the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. sector continue to be severely depressed Depressed A description of a market, security, or product that is experiencing weak demand and lowering prices. Notes: A depressed market, security, or product implies that prices and volume are low. There are many reasons for a depressed market, security, or product. , most of Corning's businesses outside of telecommunications, such as the liquid crystal display liquid crystal display (LCD) Optoelectronic device used in displays for watches, calculators, notebook computers, and other electronic devices. Current passed through specific portions of the liquid crystal solution causes the crystals to align, blocking the passage of light. business, are profitable and experiencing solid growth. Houghton Hough·ton , Henry Oscar 1823-1895. American publisher who founded (1852) the printing office that became the Houghton Mifflin Company. Noun 1. said, "Excluding special items, our net loss was somewhat better than expected." Second-Quarter Operating Results Second-quarter sales of $896 million were essentially even with first-quarter sales of $898 million. Sales reflect increases in the advanced materials Advanced Materials is a leading peer-reviewed materials science journal published every two weeks. Advanced Materials includes Communications, Reviews, and Feature Articles from the cutting edge of materials science, including topics in chemistry, physics, and information display segments, offset by a 6% decline in the telecommunications segment. This sequential One after the other in some consecutive order such as by name or number. decline in telecommunications was primarily due to flat shipments and price declines of 10% to 15% in the optical fiber and cable business. The company said that fiber volume did not improve as expected due to lower-than-anticipated demand from North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. incumbent carriers See ILEC. and cable television operators. The increasing popularity of flat-panel desktop monitors, notebook computers A laptop computer that weighs in a range from five to seven pounds. The term originated when laptops were routinely more than 10 pounds, and those that became lighter were placed in a special "notebook" category. In practice, notebook computer and laptop computer are synonymous. , portable electronic devices and projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. televisions drove a 9% sequential sales improvement in Corning's information display segment. Sales in the advanced materials segment grew 4% primarily due to gains in the Environmental Technologies business. "We continue to be encouraged with the quarter-to-quarter growth in our information display segment and environmental technologies business," James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. B. Flaws, vice chairman and chief financial officer, said, "However, there is no question that the market turmoil caused by several customer bankruptcies and ongoing accounting controversies negatively impacted capital expenditures among our telecommunications customers in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. ." Corning reported that it had $1.3 billion in cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments at the end of the second quarter, down from $1.8 billion at the end of the first quarter. The decline in cash and short-term investments was due primarily to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $480 million of debt and commercial paper repayments. Flaws said, "We are pleased with the significant improvement in operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. compared to the first quarter. Our efforts to control our cash burn rate are paying off." In the second quarter of 2001, Corning reported sales of $1.9 billion and a loss of $4.8 billion or $5.13 per share. The loss included a $4.8 billion goodwill impairment charge. The year-to-year sales decline reflects the significant falloff fall·off n. A reduction or decrease: a falloff in car sales. Noun 1. falloff - a noticeable deterioration in performance or quality; "the team went into a slump"; "a gradual slack in in the fiber and cable business which began in the third quarter of last year. Restructuring and Impairment Charges In this year's second quarter, Corning recorded restructuring and impairment charges totaling $494 million ($342 million after-tax), or $0.36 per share. In April the company said that it expected to take total restructuring and impairment charges in the range of $600 million pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern spread over the second and third quarters of 2002. The second quarter pretax charges include: -- $418 million ($281 million after-tax) of restructuring and impairment charges related to workforce reductions and facility closures. -- $60 million ($37 million after-tax) impairment of cost investments in the telecommunications segment. -- $16 million ($10 million after-tax) loss on the divestiture of the appliance controls business. -- $14 million after-tax charge to impair an international cabling equity investment which is included in equity earnings. Corning expects third-quarter pretax restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. to be in the range of $125 million to $150 million based on actions already underway. Approximately one-third of the charges for the second and third quarters will be cash. As part of the company's restructuring and cost reduction efforts, Corning has planned workforce reductions of approximately 4,400 employees including 2,700 salaried positions. Additionally, the company has announced that it will close several manufacturing and research facilities as it consolidates and reduces cost in its global telecommunications businesses as well as in its corporate research and administrative staff organizations. In addition to the restructuring actions, Corning has implemented significant cost reduction programs across its existing businesses and staff functions. The company expects to realize annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. savings of approximately $265 million from both the restructuring and cost reduction programs by the beginning of 2003. Cost savings in the second half of 2002 should be approximately $55 million as these programs are implemented. "Corning is reviewing a number of other actions to further reduce both the cost structure and capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. of the businesses going forward," Flaws said. "This could include the potential sale or discontinuation dis·con·tin·u·a·tion n. A cessation; a discontinuance. Noun 1. discontinuation - the act of discontinuing or breaking off; an interruption (temporary or permanent) discontinuance of some non-core businesses. Additional consolidation of manufacturing capacity within our telecommunications segment is also possible." He said the exact timing or outcome of these reviews has not yet been determined but could result in additional charges this year. Gain on Debt Repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. Also in the second quarter, Corning recorded a gain of $68 million ($42 million after-tax), or $0.04 per share, due to the repurchase of $220 million in accreted value accreted value The current value of an original-issue discount bond, taking into account imputed interest that has accumulated. of its zero coupon A certificate evidencing the obligation to pay an installment of interest or a dividend that must be cut and presented to its issuer for payment when it is due. Coupons are usually attached to a document, such as a promissory note, bond, share of stock, or a bearer convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. due 2015 for $148 million in cash in a series of open market transactions. Corning said that it may, from time to time, repurchase certain additional Corning debt securities in open market or privately negotiated transactions. Third-Quarter Outlook Corning said it anticipates that third-quarter sales will be in the range of $825 million to $875 million and its net loss will be in the range of $0.07 to $0.10 per share, excluding previously announced restructuring and impairment charges. The primary driver of the range will be fiber and cable volume, which is expected to be flat to down 15%. Corning said continued price pressure will also impact revenues. Sales in the rest of the telecommunications businesses are also expected to remain at depressed levels. The company said it expects revenues from its advanced materials and information display segments to remain strong in the third quarter led by its liquid crystal display business, which continues to operate at full capacity. Third-quarter results are expected to reflect the positive impact of cost reduction programs; however implementation costs and continued weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. of the fiber and
cable business could largely offset these gains.
Houghton said, "We are disappointed that the issues affecting the telecommunications industry are resulting in reduced confidence and a new round of carrier capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. reductions. If this trend continues, we will take out more cost. Our commitment to achieving profitability in 2003 is unwavering. While we find the difficulties facing the telecommunications industry to be significant, we are fortunate to have growth opportunities in our information display and advanced materials segments. We plan on extending our market-leading positions in these segments and we are prepared to take advantage of our optical communications Optical communications The transmission of speech, data, video, and other information by means of the visible and the infrared portion of the electromagnetic spectrum. market leadership when increased capital spending returns to the telecom space." 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 Dealing with light (photons). See photon and photonics. products for the telecommunications industry; and high-performance Adj. 1. high-performance - modified to give superior performance; "a high-performance car" superior - of high or superior quality or performance; "superior wisdom derived from experience"; "superior math students" displays and components for television, information technology and other communications-related industries. The company also uses advanced materials to manufacture products for scientific, semiconductor and environmental markets. Corning revenues for 2001 were $6.3 billion. Conference Call Information The company will host a conference call at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on Wednesday Wednesday: see week. , July July: see month. 24, 2002. To access the call, dial (630) 395-0020. The password A secret word or code used to serve as a security measure against unauthorized access to data. It is normally managed by the operating system or DBMS. However, the computer can only verify the legitimacy of the password, not the legitimacy of the user. See NCSC. is Corning. The leader is Dietz Dietz is a surname, and may refer to:
abbr. post meridiem Usage Note: By definition, 12 a.m. on Tuesday Tuesday: see week. , August 6, 2002. To access the replay, dial (402) 220-3559; a password is not required. A live audio webcast will be available at www.corning.com/investor_relations/ and will remain there for 14 days following the call. Forward-Looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and Cautionary Statements This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. in commercial activities due to terrorist activity and armed conflict; ability to obtain financing and capital on commercially reasonable terms; acquisition and divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). activities; the level of excess or obsolete inventory Obsolete Inventory Term that refers to inventory that is at the end of its product life cycle and has not seen any sales or usage for a set period of time usually determined by the industry. This type of inventory has to be written down and can cause large losses for a company. ; the ability to enforce patents; product and components performance issues; and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . These and other risk factors are identified in Corning's filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the day that they are made, and Corning undertakes no obligation to update them in light of new information or future events.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in millions, except per share amounts)
For the three For the six
months ended months ended
June 30, June 30,
------------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net sales $ 896 $ 1,868 $ 1,794 $ 3,789
Cost of sales 682 1,339 1,376 2,444
---------- ----------- ---------- ----------
Gross margin 214 529 418 1,345
Operating expenses
Selling, general
and
administrative
expenses 190 262 380 532
Research,
development and
engineering
expenses 132 171 260 331
Amortization of
purchased
intangibles 11 10 22 23
Amortization of
goodwill 150 293
Restructuring,
impairment and
other charges 494 4,772 494 4,772
---------- ---------- ---------- ----------
Operating loss (613) (4,836) (738) (4,606)
Interest income 10 11 24 35
Interest expense (44) (34) (92) (68)
Gain on
repurchases of
debt 68 68
Other expense, net (12) (9) (21)
---------- ---------- ---------- ----------
Loss before income
taxes (579) (4,871) (747) (4,660)
(Benefit)
provision for
income taxes (178) (77) (220) 31
---------- ---------- ---------- ----------
Loss before
minority interest
and equity
earnings (401) (4,794) (527) (4,691)
Minority interest
in losses
(earnings) of
subsidiaries 6 (7) 12 (12)
Equity in earnings
of associated
companies 25 46 55 80
---------- ---------- ---------- ----------
Net loss $ (370) $ (4,755) $ (460) $ (4,623)
========== ========== ========== ==========
Basic and diluted
loss per share $ (0.39) $ (5.13) $ (0.49) $ (5.01)
========== ========== ========== ==========
Net loss adjusted
for the impact
of SFAS No. 142
in 2001 $ (370) $ (4,652) $ (460) $ (4,384)
========== ========== ========== ==========
Basic and diluted
loss per share
adjusted for
the impact of
SFAS No. 142 in
2001 $ (0.39) $ (5.02) $ (0.49) $ (4.75)
========== ========== ========== ==========
Dividends declared
per common
share $ $ 0.06 $ $ 0.12
========== ========== ========== ==========
Shares used in
computing per
share amounts for
basic and
diluted loss per
share 948 926 947 923
========== ========== ========== ==========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
Unaudited December Unaudited
June 30, 31, June 30,
2002 2001 2001
---------- ---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 940 $ 1,037 $ 614
Short-term investments, at
fair value 383 1,182 697
---------- ---------- ----------
Total cash and short-term
investments 1,323 2,219 1,311
Trade accounts receivable,
net of doubtful accounts
and allowances - $63, $60
and $42 605 593 1,246
Inventories 671 725 977
Deferred income taxes 400 347 308
Other current assets 333 223 236
---------- ---------- ----------
Total current assets 3,332 4,107 4,078
Investments:
Associated companies, at equity 666 636 537
Others, at cost or fair value 74 142 190
---------- ---------- ----------
Total investments 740 778 727
Property, plant and equipment,
at cost, net of accumulated
depreciation - $3,302,
$3,101 and $2,921 4,757 5,097 5,301
Goodwill, net of accumulated
amortization - $661,
$661 and $583 2,000 1,937 1,874
Other intangible assets, net of
accumulated amortization -
$109, $90 and $75 390 352 409
Other assets 667 522 262
---------- ---------- ----------
Total Assets $ 11,886 $ 12,793 $ 12,651
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 57 $ 477 $ 473
Accounts payable 310 441 512
Other accrued liabilities 1,052 1,076 910
---------- ---------- ----------
Total current liabilities 1,419 1,994 1,895
Long-term debt 4,285 4,461 3,855
Postretirement benefits other
than pensions 614 608 600
Other liabilities 379 190 212
Commitments and contingencies
Minority interest in subsidiary
companies 107 119 144
Convertible preferred stock 7 7 8
Common shareholders' equity:
Common stock, including excess
over par value and other
capital - Par value $0.50 per
share; Shares authorized: 3.8
billion; Shares issued:
1.0 billion 10,028 10,044 9,774
Accumulated deficit (4,070) (3,610) (2,734)
Cost of 74 million, 79 million
and 77 million shares of
common stock in treasury (775) (827) (804)
Accumulated other comprehensive
loss (108) (193) (299)
---------- ---------- ----------
Total common shareholders'
equity 5,075 5,414 5,937
---------- ---------- ----------
Total Liabilities and
Shareholders' Equity $ 11,886 $ 12,793 $ 12,651
========== ========== ==========
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 six months ended
June 30,
-----------------------
2002 2001
---------- ----------
Cash flows from operating activities:
Net loss $ (460) $ (4,623)
Adjustments to reconcile net loss
to net cash (used in) provided
by operating activities:
Amortization of purchased intangibles 22 23
Amortization of goodwill 293
Depreciation 329 318
Restructuring, impairment and
other charges 494 4,772
Inventory write-down 273
Gain on repurchases of debt (68)
Stock compensation charges 2 27
Equity in earnings of associated
companies less than (in excess of)
dividends received 28 (23)
Minority interest, net of dividends paid (12) 5
Deferred tax benefit (107) (122)
Tax benefit on stock options 25
Interest expense on convertible
debentures 21 20
Restructuring payments (116) (5)
Changes in certain working capital
items (201) (306)
Other, net (80) 13
---------- ----------
Net cash (used in) provided by
operating activities (148) 690
---------- ----------
Cash flows from investing activities:
Capital expenditures (213) (1,155)
Acquisitions of businesses, net of
cash acquired (66)
Net proceeds from sale or disposal
of assets 36 27
Net increase in long-term investments
and other long-term assets (9) (90)
Short-term investments - acquisitions (847) (232)
Short-term investments - liquidations 1,648 250
Other, net (2)
---------- ----------
Net cash provided by (used in) investing
activities 613 (1,266)
---------- ----------
Cash flows from financing activities:
Net (repayments) borrowings of
short-term debt (474) 263
Proceeds from issuance of long-term debt 11 68
Repayments of long-term debt (155) (93)
Proceeds from issuance of common stock 33 19
Redemption of common stock for income
tax withholding (19)
Dividends paid (112)
---------- ----------
Net cash (used in) provided by financing
activities (585) 126
---------- ----------
Effect of exchange rates on cash 23 (6)
---------- ----------
Cash used in continuing operations (97) (456)
---------- ----------
Cash used in discontinued operations (9)
---------- ----------
Net decrease in cash and cash equivalents (97) (465)
Cash and cash equivalents at beginning
of year 1,037 1,079
---------- ----------
Cash and cash equivalents at end of
period $ 940 $ 614
========== ==========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter 2, 2002
1. Operating Segments
Corning's reportable operating segments consist of
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. In
the second quarter of 2002, Corning revised its definition of segment
net income. Prior to the second quarter, Corning disclosed
restructuring and impairment charges by segment but excluded this from
quantitative segment results. These charges have been included in
segment net income and historical periods have been conformed to this
presentation. Information about the performance of Corning's three
operating segments for the second quarter and six months of 2002 and
2001 is presented below. These amounts exclude revenues, expenses and
equity earnings not specifically identifiable to segments.
Corning prepared the financial results for its three operating
segments on a basis that is consistent with the manner in which
Corning management internally disaggregates financial information to
assist in making internal operating decisions. Corning has allocated
some common expenses among segments differently than it would for
stand alone financial information prepared in accordance with GAAP.
Segment net income may not be consistent with measures used by other
companies.
Three Six
months ended months ended
June 30, June 30,
------------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Telecommunications
Net sales $ 437 $ 1,393 $ 902 $ 2,826
Research,
development and
engineering
expenses $ 86 $ 134 $ 172 $ 256
Interest expense $ 25 $ 23 $ 57 $ 48
Segment (loss)
earnings before
equity (losses)
earnings and
restructuring,
impairment and
other charges $ (139) $ (7) $ (277) $ 170
Equity in
(losses)
earnings of
associated
companies (3) 8 (7) 11
---------- ---------- ---------- ----------
Segment (loss)
earnings before
restructuring,
impairment and
other charges (142) 1 (284) 181
Restructuring,
impairment and
other charges,
net of tax (259) (4,726) (259) (4,726)
---------- ---------- ---------- ----------
Segment net loss $ (401) $ (4,725) $ (543) $ (4,545)
========== ========== ========== ==========
Advanced Materials
Net sales $ 242 $ 251 $ 475 $ 533
Research,
development and
engineering
expenses $ 32 $ 28 $ 63 $ 56
Interest expense $ 8 $ 5 $ 16 $ 10
Segment earnings
before equity
earnings and
restructuring
charges $ 9 $ 11 $ 10 $ 37
Equity in
earnings of
associated
companies 12 7 20 13
---------- ---------- ---------- ----------
Segment earnings
before
restructuring
charges 21 18 30 50
Restructuring
charges, net of
tax (1) (1)
---------- ---------- ---------- ----------
Segment net
income $ 20 $ 18 $ 29 $ 50
========== ========== ========== ==========
Information
Display
Net sales $ 212 $ 218 $ 407 $ 419
Research,
development and
engineering
expenses $ 14 $ 9 $ 25 $ 19
Interest expense $ 9 $ 6 $ 17 $ 10
Segment earnings
before minority
interest and
equity earnings $ 8 $ 25 $ 11 $ 46
Minority
interest in
losses
(earnings) of
subsidiaries 5 (7) 11 (12)
Equity in
earnings of
associated
companies 29 29 54 54
---------- ---------- ---------- ----------
Segment net
income $ 42 $ 47 $ 76 $ 88
========== ========== ========== ==========
Three Six
months ended months ended
June 30, June 30,
------------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Total Segments
Net sales $ 891 $ 1,862 $ 1,784 $ 3,778
Research,
development and
engineering
expenses $ 132 $ 171 $ 260 $ 331
Interest expense $ 42 $ 34 $ 90 $ 68
Segment (loss)
earnings
before minority
interest equity
earnings and
restructuring,
impairment and
other charges $ (122) $ 29 $ (256) $ 253
Minority
interest in
losses
(earnings) of
subsidiaries 5 (7) 11 (12)
Equity in
earnings of
associated
companies 38 44 67 78
---------- ---------- ---------- ----------
Segment (loss)
earnings before
restructuring,
impairment and
other charges (79) 66 (178) 319
Restructuring,
impairment
and other charges,
net of tax (260) (4,726) (260) (4,726)
---------- ---------- ---------- ----------
Segment net loss $ (339) $ (4,660) $ (438) $ (4,407)
========== ========== ========== ==========
A reconciliation of the totals reported for the operating segments
to the applicable line items in the consolidated financial statements
is as follows (in millions):
Three Six
months ended months ended
June 30, June 30,
------------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net sales
Total segment
net sales $ 891 $ 1,862 $ 1,784 $ 3,778
Non-segment net
sales (a) 5 6 10 11
---------- ---------- ---------- ----------
Total net
sales $ 896 $ 1,868 $ 1,794 $ 3,789
========== ========== ========== ==========
Net loss
Total segment
net loss (b) $ (339) $ (4,660) $ (438) $ (4,407)
Unallocated
items:
Non-segment
loss and
other (a) (1) (2) (2) (3)
Amortization of
goodwill (c) (150) (293)
Non-segment
restructuring,
impairment and
other
charges (d) (127) (127)
Interest
income (e) 10 11 24 35
Gain on
repurchases of
debt 68 68
Income tax (f) 16 44 11 43
Minority interest 1 1
Equity in earnings
of associated
companies (a) 2 2 3 2
---------- ---------- ---------- ----------
Net loss $ (370) $ (4,755) $ (460) $ (4,623)
========== ========== ========== ==========
(a) Includes amounts derived from corporate investments and
activities.
(b) Includes royalty, interest and dividend income.
(c) Amortization of goodwill relates primarily to the
Telecommunications segment.
(d) Amount includes pension and postretirement benefit curtailment
charges of $30 million recorded in the second quarter of 2002.
The balance of the charge relates to restructuring and
impairment charges in the corporate research and
administrative staff organizations.
(e) Corporate interest income is not allocated to reportable
segments.
(f) Includes tax associated with unallocated items.
2. Restructuring, Impairment and Other Charges
2002 Restructuring Actions
During the second quarter, Corning undertook actions to reduce its
costs. The intent to do so was announced in April 2002. At that time,
it was estimated that restructuring, fixed asset impairments, and
impairments of investments could total approximately $600 million and
would be recorded over the second and third quarters.
Actions approved and initiated in the second quarter include the
following:
-- permanent abandonment of certain construction projects that
had been stopped in 2001 in the fiber business within the
Telecommunications Segment,
-- closure of minor manufacturing facilities, primarily in the
Telecommunications Segment,
-- closure and consolidation of research facilities,
-- elimination of 4,400 (includes 800 expected in Q3) positions
worldwide through voluntary and involuntary programs, and
-- divestiture of a portion of the controls and connectors
business in the Telecommunications Segment.
In addition, Corning impaired cost based investments in a number
of private telecommunications companies.
Certain of the costs associated with these activities (estimated
at approximately $120 million) will be recorded in the third quarter
as all conditions for recognition had not been satisfied at June 30,
2002. These third quarter charges relate primarily to severance and
fixed asset write-offs pertaining to facility closures outside the
United States and early retirement programs.
These second quarter actions resulted in a net pre-tax charge
totaling $494 million ($328 million after-tax) for the quarter ended
June 30, 2002. The charge includes restructuring costs of $204 million
offset by a $5 million reversal of the 2001 restructuring charge, $224
million for the impairment of plant and equipment offset by a $5
million reversal of the 2001 impairment charge, $60 million for the
impairment of cost investments and a $16 million loss on divestiture.
Approximately $174 million of the charge recorded in the second
quarter is expected to be paid in cash. As of June 30, 2002,
approximately 1,600 of the 4,400 employees had been separated under
the 2002 plans. Corning expects the remaining employees to be
separated by March 31, 2003. Certain obligations of the plans will be
paid in 2002 and beyond.
3. Gain on Repurchases of Debt
During the second quarter of 2002, Corning purchased and retired a
portion of its zero coupon convertible debentures with an accreted
value of $220 million for cash of $148 million in a series of open
market repurchases. Corning recorded a gain of $68 million on these
transactions, net of the write-off of the unamortized issuance costs.
4. Income Taxes
Corning's effective income tax benefit rate for the three and six
month periods ended June 30, 2002, was 30.7% and 29.5%, respectively.
The tax benefit rate in the second quarter of 2002 was impacted by
specific tax benefit calculations for restructuring, impairment and
other charges and the gain on repurchases of debt. The effective
benefit rate without consideration of these items was 25% in both 2002
periods. The effective tax benefit rate in the quarter and year to
date is lower than the U.S. statutory income tax rate of 35% due to
the impact of unusable tax credits and nondeductible expenses and
losses.
Federal tax legislation passed early in 2002 extended the net
operating loss carryback period from two to five years. Corning
anticipates incurring a federal tax net operating loss for 2002 and
this change in the tax legislation will allow Corning to carryback the
net operating loss to open tax years and claim a tax refund. Current
assets at June 30, 2002, include a receivable of $135 million as a
result of Corning availing itself of this opportunity.
The effective tax (benefit) rate for the three and six months
ended June 30, 2001, was 1.6% and (0.7)%. These tax rates are much
lower than the U.S. statutory income tax rate primarily due to non-tax
deductible impairment and amortization of acquired intangibles and
goodwill.
5. Supplementary Statement of Cash Flows Data
Supplemental disclosure of cash flow information is as follows (in
millions):
For the six months
ended June 30,
-----------------------
2002 2001
---------- ----------
Changes in certain working capital items:
Trade accounts receivable $ 10 $ 10
Inventories 27 (231)
Other current assets (56) 124
Accounts payable and other current
liabilities, net of restructuring payments (182) (209)
---------- ----------
Total $ (201) $ (306)
========== ==========
6. Reclassifications
Certain amounts in 2001 have been reclassified to conform with
2002 classifications.
CORNING INCORPORATED
QUARTERLY SALES INFORMATION
(In millions)
2002
--------------------------------------------
Q1 Q2 Q3 Q4 Total
------- ------- ------- ------- --------
Telecommunications
Fiber and cable $ 255 $ 212 $ $ $ 467
Hardware and equipment 135 153 288
Photonic technologies(a) 36 39 75
Controls and connectors 39 33 72
------- ------- ------- ------- --------
Segment net sales $ 465 $ 437 $ $ $ 902
======= ======= ======= ======= ========
Advanced Materials
Environmental $ 94 $ 102 $ $ $ 196
Life sciences 70 74 144
Other advanced
materials 69 66 135
------- ------- ------- ------- --------
Segment net sales $ 233 $ 242 $ $ $ 475
======= ======= ======= ======= ========
Information Display
Display technologies $ 93 $ 102 $ $ $ 195
Conventional video
components 43 41 84
Precision lens 59 69 128
------- ------- ------- ------- --------
Segment net sales $ 195 $ 212 $ $ $ 407
======= ======= ======= ======= ========
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 250 168 76 53 547
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
======= ======= ======= ======= ========
(a) Optical network devices business has been combined with
photonics technologies for all periods presented.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in millions, except per share amounts)
Q2 '02 vs. Q1 `02
For the three months ended
June 30, March 31,
2002 2002
------- -------
Net sales $ 896 $ 898
Cost of sales 682 694
------- -------
Gross margin 214 204
Operating expenses:
Selling, general and administrative
expenses 190 190
Research, development and engineering
expenses 132 128
Amortization of purchased intangibles 11 11
Restructuring, impairment and other
charges 494
------- -------
Operating loss (613) (125)
Interest income 10 14
Interest expense (44) (48)
Gain on repurchases of debt 68
Other expense, net (9)
------- -------
Loss before income taxes (579) (168)
Benefit for income taxes (178) (42)
------- -------
Loss before minority interest and equity
earnings (401) (126)
Minority interest in losses of
subsidiaries 6 6
Equity in earnings of associated
companies 25 30
------- -------
Net loss $ (370) $ (90)
======= =======
Basic and diluted loss per share $ (0.39) $ (0.10)
======= =======
Shares used in computing per share
amounts for basic and diluted loss per
share 948 945
======= =======
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Q2 '02 vs. Q1 `02
For the three
months ended
June 30, March 31,
2002 2002
------- -------
Cash flows from operating activities:
Net loss $ (370) $ (90)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Amortization of purchased intangibles 11 11
Depreciation 166 163
Restructuring, impairment and
other charges 494
Stock compensation charges 1 1
Gain on repurchases of debt (68)
Equity in earnings of associated
companies less than dividends
received 5 23
Minority interest, net of dividends
paid (6) (6)
Deferred tax benefit (37) (70)
Interest expense on convertible
debentures 11 10
Restructuring payments (58) (58)
Changes in certain working capital
items (56) (145)
Other, net (70) (10)
------- -------
Net cash provided by (used in) operating
activities 23 (171)
------- -------
Cash flows from investing activities:
Capital expenditures (111) (102)
Net proceeds from sale or disposal of
assets 31 5
Net (increase) decrease in long-term
investments and other long-term assets (10) 1
Short-term investments - acquisitions (244) (603)
Short-term investments - liquidations 729 919
Other, net (1) (1)
------- -------
Net cash provided by investing activities 394 219
------- -------
Cash flows from financing activities:
Net repayments of short-term debt (331) (143)
Proceeds from issuance of long-term debt 11
Repayments of long-term debt (151) (4)
Proceeds from issuance of common stock 18 15
------- -------
Net cash used in financing activities (464) (121)
------- -------
Effect of exchange rates on cash 29 (6)
------- -------
Net decrease in cash and cash equivalents (18) (79)
Cash and cash equivalents at beginning
of period 958 1,037
------- -------
Cash and cash equivalents at end of period $ 940 $ 958
======= =======
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