Corning Announces Third-Quarter Results and Fourth-Quarter Restructuring.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)--Oct. 30, 2002 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) ): Financial performance within guidance range Fourth-quarter 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). expected to be $550 to $650 million Corning proposes three optical fiber facility closures Corning Incorporated (NYSE:GLW) today announced that its third-quarter sales were $837 million and that it recorded a net loss to common shareholders of $260 million, or $0.25 per share. The company's third-quarter loss includes a previously announced 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. pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern charge of $125 million ($85 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. and minority interest), or $0.08 per share, and a $0.12 reduction in earnings per share as a result of the declaration of dividends on Corning's 7.00% Series C mandatory convertible Mandatory Convertible A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock. preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. offering completed in the quarter. Third-quarter results also include a gain from debt repurchases of $22 million ($13 million after-tax), or $0.01 per share. "Overall, we are pleased that our third-quarter financial performance is in line with the guidance we provided last July July: see month. ," 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, said. "We continue to reduce quarterly costs and we have done a good job of managing cash flow. However, we are not satisfied with quarterly losses; therefore we will take additional restructuring actions in the fourth quarter. These are designed to protect Corning's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. financial health and move us toward our goal of returning to profitability in 2003." The company said that it anticipates taking restructuring and asset impairment charges in the range of $550 to $650 million pretax in its fourth quarter. The charges would include the impact of the permanent closing of Corning's optical fiber factory in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. and the proposed closing of its German optical fiber facility, as well as the mothballing Mothballing The preservation of a production facility without using it to produce. Machinery in a mothballed facility is kept in working order so that production may be restored quickly if needed. of its optical fiber factory in Concord Concord, cities, United States Concord (kŏng`kərd, kŏn`kôrd'). 1 city (1990 pop. 111,348), Contra Costa co., W central Calif.; settled c.1852, inc. 1906. , N.C. The charges would also include the impact of proposed reductions in capacity and employment levels in the company's cable, hardware and equipment and photonic Dealing with light (photons). See photon and photonics. technologies businesses. Third-Quarter Operating Results Sales for the quarter of $837 million represent a sequential One after the other in some consecutive order such as by name or number. decline of 7% from second-quarter sales of $896 million. This sequential sales decline was primarily driven by continued lower demand across all the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. businesses. Volume in the optical fiber and cable business declined by 10% and optical fiber prices declined 10% to 15%. The information display segment, which was fueled by the continued popularity of flat screen monitors and increasing demand for 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, experienced a 7% sequential increase in sales, which was more than offset by the decline in the telecommunications segment. The company said its 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. glass shipments have increased quarter-to-quarter throughout the year and the company experienced record production in the third quarter. Corning said it continues to bring on additional manufacturing capacity to meet the increasing demand expected to continue in the fourth quarter. Flat panel glass pricing remained stable in the third quarter. On a sequential basis, Corning's net loss before special items was slightly lower than the second quarter as lower sales and margins were offset by significant reductions in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $20 million of the operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. reductions in the quarter are not expected to recur in the fourth quarter. In addition, Corning's results benefited by approximately $10 million from an increase in the tax benefit rate in the quarter. Liquidity Update Corning said that it had more than $1.6 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 third quarter, up from $1.3 billion at the end of the second quarter. This increase includes approximately $441 million raised in a preferred stock offering during the quarter. In addition, Corning continues to have access to its unused $2 billion revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. . The company's debt to capital ratio was 44% at the end of the third quarter. The company used $35 million in cash during the quarter to 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. $58 million of debt. Additionally, Corning has repurchased debentures with an accreted value accreted value The current value of an original-issue discount bond, taking into account imputed interest that has accumulated. of $204 million for $118 million in cash in the fourth quarter through October October: see month. 29, 2002. These additional repurchases will result in Corning recording a pretax gain of $83 million in the fourth quarter. Corning said it may from time to time continue repurchases of its debt securities in open market or privately negotiated transactions. Excluding financing activities and related investments, Corning used $110 million in cash and short-term investments during the quarter. This included $77 million in restructuring payments and a net $24 million related to the purchase of Lucent's optical fiber and cable assets in China. Fourth-Quarter 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. Corning said it will take fourth-quarter pretax restructuring charges in the range of $550 to $650 million for the following actions: - permanent abandonment of certain construction projects that had been stopped in 2001 in the fiber and cablebusiness within the Telecommunications Segment, - closure of minor manufacturing facilities, primarily in the Telecommunications Segment, - closure and consolidation of research facilities, - elimination of positions worldwide through voluntary and involuntary programs, and - divestiture of a portion of the controls and connectors business in the Telecommunications Segment. Corning said these restructuring actions will result in a reduction of approximately 2,200 employees. Of the total restructuring charge of $550 to $650 million, approximately 25% is expected to be paid in cash. 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 at least $165 million from this latest round of restructuring and cost reduction programs. These cost savings are in addition to the $265 million in annual cost savings to be realized from the previously announced restructuring actions taken in the second and third quarter. "The challenge confronting the telecommunications industry is the most serious we have faced," said 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. "Telecom carriers continue to indicate that they will further reduce investments in 2003. As a result, we are taking decisive action to re-size our businesses to reflect today's economic realities. These actions will contribute to our plan to achieve profitability in 2003. We are also evaluating other restructuring actions and we may announce further charges later in the current quarter." Also, as part of its plan to restore profitability, the company announced that it would continue its merit freeze See abend. freeze - To lock an evolving software distribution or document against changes so it can be released with some hope of stability. Carries the strong implication that the item in question will "unfreeze" at some future date. for salaried employees into 2003 and also make certain benefit reductions including changes to its investment plan and retiree medical plan. Overview of 2002 Charges In July, Corning announced it would record a $600 million pretax restructuring and impairment charge spread over the second and third quarters, including a workforce reduction of 4,600. Today's announcement will bring the company's 2002 restructuring and impairment charges to approximately $1.3 billion pretax and headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. reductions totaling about 6,800 for the year. Last year, Corning announced the elimination of 12,000 positions. Corning's total headcount will approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. 23,500 upon completion of this latest round of restructuring. "These reductions are extremely painful. We are losing talented people who have made valuable contributions to Corning and we are acutely aware of the impact these actions have on the communities in which we operate," Flaws said. Fourth-Quarter Outlook Corning said it expects fourth-quarter sales will be in the range of $775 to $825 million and its net loss will be in the range of $0.08 to $0.12 per share, excluding restructuring and impairment charges announced today. The expected decline in fourth quarter sales compared to third quarter sales is primarily due to continued volume and price declines in the optical fiber and cable business, with some impact due to seasonality. Volume is expected to decline by 10% to 15% and the rate of decline in price is expected to be slightly less than the third quarter. Corning is expecting continued strong performance for its flat panel glass business in the fourth quarter. Sales are also expected to increase in the semiconductor business. These gains will be largely offset by seasonal declines in other businesses 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. "While we will significantly reduce our optical fiber and cable manufacturing capacity with the actions announced today, we will be in a position to quickly restart To resume computer operation after a planned or unplanned termination. See boot, warm boot and checkpoint/restart. our Concord factory when market conditions improve," Houghton Hough·ton , Henry Oscar 1823-1895. American publisher who founded (1852) the printing office that became the Houghton Mifflin Company. Noun 1. said. "We believe in the future of 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. . In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile , our diverse product portfolio, based on our commitment to technology and innovation, continues to serve us well. We are taking decisive actions to address the near-term near-term adj. Of, for, or involving a short period of time in the near future. challenges and we are protecting our market leading positions to assure future growth and profitability. We are committed to success," Houghton said. About Corning Incorporated Established in 1851, Corning Incorporated (www.corning.com) creates leading-edge technologies that offer growth opportunities in markets that fuel the world's economy. Corning manufactures optical fiber, cable and photonic 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. 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. , October 30, 2002. To access the call, dial (212) 547-0138. 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 Sofio. A replay of the call will begin at approximately 10:30 a.m. EST and will run through 5 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. on Wednesday, November November: see month. 13, 2002. To access the replay, dial (402) 220-9812; 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 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. 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 nine
months ended months ended
September 30, September 30,
--------------------- ---------------
2002 2001 2002 2001
-------- ------ ------ -------
Net sales $ 837 $ 1,509 $ 2,631 $ 5,298
Cost of sales 674 994 2,050 3,438
----------- ---------- ---------- ----------
Gross margin 163 515 581 1,860
Operating expenses
Selling, general and
administrative expenses 158 267 538 799
Research, development and
engineering expenses 115 153 375 484
Amortization of purchased
intangibles 11 13 33 36
Amortization of goodwill 35 328
Restructuring, impairment
and other charges 125 339 619 5,111
----------- ---------- ---------- ----------
Operating loss (246) (292) (984) (4,898)
Interest income 10 15 34 50
Interest expense (44) (37) (136) (105)
Gain on repurchases of debt 22 90
Other expense, net (1) (6) (10) (27)
----------- ---------- ---------- ----------
Loss before income taxes (259) (320) (1,006) (4,980)
Benefit for income taxes (79) (60) (299) (29)
----------- ---------- ---------- ----------
Loss before minority interest
and equity earnings (180) (260) (707) (4,951)
Minority interest in losses
(earnings) of subsidiaries 5 1 17 (11)
Equity in earnings of
associated companies 42 39 97 119
----------- ---------- ---------- -----------
Net loss (133) (220) (593) (4,843)
Dividends and beneficial
conversion on
Series C preferred stock (127) (127)
----------- ---------- ---------- -----------
Loss attributable to common
shareholders $ (260) $ (220) $ (720) $ (4,843)
=========== ========== ========== ===========
Basic and diluted loss per
common share $ (0.25) $ (0.24) $ (0.74) $ (5.21)
=========== ========== ========== ===========
Net loss adjusted for the
impact of
SFAS No. 142 in 2001 $ (133) $ (145) $ (593) $ (4,529)
=========== ========== ========== ===========
Basic and diluted loss per
common share adjusted for
the impact of SFAS
No. 142 in 2001 $ (0.25) $ (0.15) $ (0.74) $ (4.88)
========== ========== ========== ===========
Dividends declared per
common share $ $ $ $ 0.12
========== ========== ========== ===========
Shares used in computing per
share amounts for basic and
diluted loss per common
share 1,036 936 977 929
========== ========== ========== ===========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(In millions)
Unaudited Unaudited
Sept. 30, Dec. 31, Sept. 30,
2002 2001 2001
---------- --------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 983 $ 1,037 $ 568
Short-term investments, at fair value 618 1,182 1,027
--------- --------- ----------
Total cash and short-term investments 1,601 2,219 1,595
Trade accounts receivable, net
of doubtful accounts
and allowances - $48, $60 and $63 541 593 904
Inventories 619 725 958
Deferred income taxes 380 347 263
Other current assets 374 223 228
--------- --------- ----------
Total current assets 3,515 4,107 3,948
Restricted cash and investments 70
Investments:
Associated companies, at equity 696 636 581
Others, at cost or fair value 74 142 143
--------- --------- ----------
Total investments 770 778 724
Property, plant and equipment,
at cost, net of accumulated
depreciation - $3,405, $3,101
and $3,072 4,592 5,097 5,300
Goodwill, net of accumulated
amortization - $661, $661 and $632 2,113 1,937 2,008
Other intangible assets, net of
accumulated amortization
- $120, $90 and $80 378 352 338
Other assets 744 522 366
--------- --------- ---------
Total Assets $12,182 $ 12,793 $12,684
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 213 $ 477 $ 347
Accounts payable 286 441 430
Other accrued liabilities 976 1,076 1,029
--------- --------- ---------
Total current liabilities 1,475 1,994 1,806
Long-term debt 4,171 4,461 3,901
Postretirement benefits other
than pensions 618 608 593
Other liabilities 383 190 204
Commitments and contingencies
Minority interest in subsidiary companies 138 119 141
Series B convertible preferred stock 7 8
Shareholders' equity:
Series C mandatory convertible
preferred stock 245
Common stock - Par value $0.50
per share; Shares authorized:
3.8 billion; Shares issued:
1,222 million, 1,023 million
and 1,023 million 611 512 512
Additional paid in capital 9,738 9,532 9,448
Accumulated deficit (4,330) (3,610) (2,954)
Cost of 74 million, 79 million
and 78 million shares of common
stock in treasury (736) (827) (811)
Accumulated other comprehensive loss (131) (193) (164)
--------- --------- ---------
Total shareholders' equity 5,397 5,414 6,031
--------- --------- ---------
Total Liabilities and Shareholders'
Equity $12,182 $ 12,793 $12,684
========= ========= =========
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 nine
months ended
September 30,
------------------
2002 2001
------- -------
Cash flows from operating activities:
Net loss $ (593) $ (4,843)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Amortization of purchased intangibles 33 36
Amortization of goodwill 328
Depreciation 489 476
Restructuring, impairment and other charges 619 5,111
Inventory write-down 273
Gain on repurchases of debt (90)
Stock compensation charges 2 36
Equity in earnings of associated companies
in excess of dividends received (4) (58)
Minority interest, net of dividends paid (17) 2
Deferred tax benefit (127) (182)
Tax (expense) benefit on stock options (1) 27
Interest expense on convertible debentures 30 30
Restructuring payments (193) (22)
Increases in restricted cash (20)
Changes in certain working capital items (204) 2
Other, net (73) 8
--------- ---------
Net cash (used in) provided by operating activities (149) 1,224
--------- ---------
Cash flows from investing activities:
Capital expenditures (283) (1,532)
Acquisitions of businesses, net of cash acquired (56) (66)
Net proceeds from sale or disposal of assets 62 49
Net increase in long-term investments and other
long-term assets (18) (93)
Short-term investments - acquisitions (1,557) (829)
Short-term investments - liquidations 2,123 517
Restricted investments - acquisitions (117)
Restricted investments - liquidations 67
Other, net (2)
-------- --------
Net cash provided by (used in) investing
activities 219 (1,954)
-------- --------
Cash flows from financing activities:
Net (repayments) borrowings of short-term debt (475) 136
Proceeds from issuance of long-term debt 11 70
Repayments of long-term debt (190) (93)
Redemption of Series B preferred stock (7)
Proceeds from issuance of Series C preferred
stock, net 558
Proceeds from issuance of common stock, net 47 246
Redemption of common stock for income
tax withholding (1) (25)
Repurchases of common stock for treasury (23)
Cash dividends paid to preferred/common
shareholders (67) (112)
-------- --------
Net cash (used in) provided by financing
activities (147) 222
-------- --------
Effect of exchange rate changes on cash
and cash equivalents 23 6
-------- --------
Cash used in continuing operations (54) (502)
-------- --------
Cash used in discontinued operations (9)
-------- --------
Net decrease in cash and cash equivalents (54) (511)
Cash and cash equivalents at beginning of year 1,037 1,079
-------- --------
Cash and cash equivalents at end of period $ 983 $ 568
======== ========
The accompanying notes are an integral part of these statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter 3, 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 now 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 third quarter and nine 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 differently than it would for stand-alone
financial information prepared in accordance with generally accepted
accounting principles. These expenses include interest, taxes and
corporate functions. Segment net income may not be consistent with
measures used by other companies.
Three months ended Nine months ended
September 30, September 30,
----------------- ----------------
2002 2001 2002 2001
------- ------ ---- ----
Telecommunications
Net sales $ 366 $ 1,089 $ 1,268 $ 3,915
Research, development and
engineering expenses $ 71 $ 110 $ 243 $ 366
Interest expense $ 27 $ 24 $ 84 $ 72
Segment (loss) earnings before
equity (losses) earnings
and restructuring, impairment
and other charges $ (132) $ 14 $ (409) $ 184
Equity in (losses) earnings
of associated companies (5) 4 (12) 15
-------- ------- -------- -------
Segment (loss) earnings before
restructuring, impairment
and other charges (137) 18 (421) 199
Restructuring, impairment and
other charges, net of tax (61) (222) (320) (4,948)
-------- ------- -------- -------
Segment net loss $ (198) $ (204) $ (741) $(4,749)
======== ======= ======== =======
Advanced Materials
Net sales $ 239 $ 234 $ 714 $ 767
Research, development and
engineering expenses $ 31 $ 31 $ 94 $ 87
Interest expense $ 9 $ 7 $ 25 $ 17
Segment earnings before equity
earnings and
restructuring charges $ 2 $ 2 $ 12 $ 39
Equity in earnings of
associated companies 11 6 31 19
-------- ------- -------- -------
Segment earnings before
restructuring charges 13 8 43 58
Restructuring charges, net of tax (3) (4)
-------- ------- -------- -------
Segment net income $ 10 $ 8 $ 39 $ 58
======== ======= ======== =======
Information Display
Net sales $ 228 $ 183 $ 635 $ 602
Research, development and
engineering expenses $ 13 $ 12 $ 38 $ 31
Interest expense $ 10 $ 6 $ 27 $ 16
Segment earnings before
minority interest, equity
earnings and restructuring
charges $ 17 $ 11 $ 28 $ 57
Minority interest in losses
(earnings) of subsidiaries 5 1 16 (11)
Equity in earnings of
associated companies 32 27 86 81
-------- ------- -------- -------
Segment earnings before
restructuring charges 54 39 130 127
Restructuring charges, net of tax (1) (1)
-------- ------- -------- -------
Segment net income $ 53 $ 39 $ 129 $ 127
======== ======= ======== =======
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2002 2001 2002 2001
------ ------- -------- ------
Total Segments
Net sales $ 833 $ 1,506 $ 2,617 $ 5,284
Research, development and
engineering expenses $ 115 $ 153 $ 375 $ 484
Interest expense $ 46 $ 37 $ 136 $ 105
Segment (loss) earnings
before minority interest,
equity earnings and
restructuring,
impairment and
other charges $ (113) $ 27 $ (369) $ 280
Minority interest in losses
(earnings) of subsidiaries 5 1 16 (11)
Equity in earnings of
associated companies 38 37 105 115
------ ------- ------ ------
Segment (loss) earnings before
restructuring, impairment
and other charges (70) 65 (248) 384
Restructuring, impairment and
other charges, net of tax (65) (222) (325) (4,948)
------ ------- ------ ------
Segment net loss $ (135) $ (157) $ (573) $(4,564)
====== ======= ====== ======
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 Nine
months ended months ended
September 30, September 30,
------------------- ---------------
2002 2001 2002 2001
------ ----- ------ ------
Net sales
Total segment net sales $ 833 $ 1,506 $ 2,617 $ 5,284
Non-segment net sales (a) 4 3 14 14
------ ------- ------ ------
Total net sales $ 837 $ 1,509 $ 2,631 $ 5,298
====== ======= ====== ======
Net loss
Total segment net
loss (b) $ (135) $ (157) $ (573) $(4,564)
Unallocated items:
Non-segment loss and
other (a) (2) (1) (4) (4)
Amortization of goodwill (c) (35) (328)
Non-segment restructuring,
impairment and
other charges (d) (28) (155)
Interest income (e) 10 15 34 50
Gain on repurchases of
debt (e) 22 90
Income tax (f) (3) (44) 8 (1)
Minority interest 1
Equity in earnings of
associated companies (a) 3 2 6 4
------ ------- ------ ------
Net loss $ (133) $ (220) $ (593) $(4,843)
====== ======= ====== ======
(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 special termination benefits of $5 million and
pension and postretirement benefit curtailment charges of $35
million recorded in the third quarter and nine months of 2002,
respectively. The balance of the charge relates to restructuring
and impairment charges in the corporate research and
administrative staff organizations.
(e) Corporate interest income and gain on repurchases of debt 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 and cablebusiness within the Telecommunications Segment, - closure of minor manufacturing facilities, primarily in the Telecommunications Segment, - closure and consolidation of research facilities, - elimination of 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 See assistive technology. cost based investments in a number of private telecommunications companies See telecom company. . These second quarter actions resulted in a net pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge totaling $494 million ($328 million after-tax) for the quarter ended June June: see month. 30, 2002. The charge includes restructuring costs of $204 million offset by a $5 million reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its 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. The third quarter charges resulted in a pre-tax charge totaling $125 million ($85 million after-tax and minority interest) for the quarter ended September September: see month. 30, 2002. The charge includes restructuring costs of $58 million and $67 million for the impairment of plant and equipment. Approximately $53 million of the charge recorded in the third quarter is expected to be paid in cash. As of September 30, 2002, approximately 3,000 of the 4,600 employees had been separated under the 2002 plans. Corning expects the remaining employees to be separated by September 30, 2003. Certain obligations of the plans will be paid in 2003 and beyond. Fourth Quarter On October 30, 2002, Corning announced its intent to take additional measures to attain profitability in 2003. The continued decline in demand in the Telecommunications Segment requires further restructuring to bring capacity in line with current revenues. The fourth quarter pre-tax charge is expected to approximate $550 million to $650 million and impact approximately 2,200 employees. Approximately one quarter of this charge is expected to be paid in cash. The fourth quarter actions will include: - the permanent closing of its optical fiber manufacturing facility in Noble Park, Victoria Noble Park is a suburb of Melbourne, Victoria, Australia approximately 30 km south-east of the central business district. It has a mixture of residential, commercial and industrial zones and is home to a highly multicultural population, with residents who have immigrated from , Australia, and the proposed closing of its Neustadt Neustadt (German for new city) may refer to: Places Germany
 rk), city (1994 pop. 45,980), Bavaria, central W Germany, on the Itz River. , Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). plant. Theseclosures are proposed to be completed by early 2003. Corning will also mothball moth·ball n. 1. A marble-sized ball, originally of camphor but now of naphthalene, stored with clothes to repel moths. 2. mothballs a. its optical fiber manufacturing facility in Concord, N.C., and transfer certain capabilities to its Wilmington Wilmington. 1 City (1990 pop. 71,529), seat of New Castle co., NE Del., on the Delaware River and tributary streams, the Christina and the Brandywine; settled 1638, inc. as a city 1832. , N.C., facility. Corning believes that the Concord facility can be returned to productive capacity within six to nine months of a decision to reopen re·o·pen tr. & intr.v. re·o·pened, re·o·pen·ing, re·o·pens 1. To open or be opened again: Officials reopened the airport after the snow was cleared. Schools reopen in September. , - proposed reductions in capacity and employment in Corning's cabling and hardware and equipment locations worldwide to reduce costs, and - permanent closure of its photonic technologies thin film filter manufacturing facility in Marlborough Marl·bor·ough or Marl·bo·ro A city of east-central Massachusetts east-northeast of Worcester. Settled in 1657, it was nearly destroyed in 1676 during King Philip's War. Population: 38,100. , Mass., by the end of 2002. 3. Gain on Repurchases of Debt During the third quarter of 2002, Corning repurchased and retired a portion 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. with an accreted value of $58 million in exchange for cash of $35 million in a series of open market repurchases. Corning recorded a gain of $22 million ($13 million after-tax) on these transactions, net of the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of the unamortized issuance costs. Corning repurchased and retired zero-coupon convertible Zero-Coupon Convertible A zero-coupon bond issued by a corporation that can be converted into that corporation's common stock. Also known as a split coupon bond. Notes: debentures with an accreted value of $278 million in exchange for cash of $183 million for the nine months ended September 30, 2002. Corning has recorded gains of $90 million ($55 million after-tax) on these transactions for the nine months ended September 30, 2002. 4. Income Taxes Corning's effective income tax benefit rate for the three and nine month periods ended September 30, 2002, was 30.3% and 29.7%, respectively. The income tax benefit rate in the third quarter and nine months 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 31.1% and 27%, respectively, for the quarter and nine months of 2002. The effective income 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 non·de·duct·i·ble adj. Not deductible, especially for income-tax purposes. Adj. 1. nondeductible - not allowable as a deduction deductible - acceptable as a deduction (especially as a tax deduction) expenses and losses. In 2002, the U.S. enacted tax legislation that extended the net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. carryback carryback n. in taxation accounting, using a current tax year's deductions, business losses or credits to refigure and amend a previously filed tax return to reduce the tax liability. (See: carryover) period from two to five years. Due to this legislation change, Corning will be able to carryback the anticipated 2002 U.S. federal net operating loss and claim a refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies which would not have otherwise been available. Current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. at September 30, 2002, include a receivable of $185 million as a result of Corning availing itself of this opportunity. The effective income tax benefit rate for the three and nine months ended September 30, 2001, was 18.8% and 0.6%. These tax rates are much lower than the U.S. statutory income tax rate primarily due to non-tax deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). impairment and amortization of acquired intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and goodwill. 5. Supplementary Statement of Cash Flows Data Supplemental disclosure of cash flow information is as follows (in millions):
For the nine months ended
September 30,
-------------------------
2002 2001
--------- --------
Changes in certain working capital items:
Trade accounts receivable $ 81 $ 384
Inventories 87 (198)
Other current assets (118) 127
Accounts payable and other current
liabilities, net of restructuring payments (254) (311)
--------- ----------
Total $ (204) $ 2
========= ==========
6. 7% Series C Mandatory Convertible Preferred Stock and Series B Convertible Preferred Stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". In August 2002, Corning issued 5.75 million shares of 7% Series C mandatory convertible preferred stock resulting in proceeds of $558 million. Upon issuance, a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. dividend of $117 million was declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. for all dividends that will be payable from issuance through the mandatory Peremptory; obligatory; required; that which must be subscribed to or obeyed. Mandatory statutes are those that require, as opposed to permit, a particular course of action. conversion date of August 16, 2005. Corning purchased $117 million of U.S. treasury securities U.S. Treasury securities Interest-bearing obligations if the U.S. government issued by the U.S. Department of the Treasury as a means of borrowing money to meet government expenditures not covered by tax revenues. to secure the payment of dividends resulting in net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). to the company of $441 million. In addition, Corning redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. the remaining 69 thousand shares of Series B preferred stock for $7 million in August. At September 30, 2002, approximately 3.3 million shares of the Series C preferred stock had been converted into 167.9 million common shares. 7. Business Combination In September 2002, Corning completed the acquisition of Lucent Technologies Shanghai Shanghai (shăng`hī`, shäng`hī`), city (1994 est. pop. 12,980,000), in, but independent of, Jiangsu prov., E China, on the Huangpu (Whangpoo) River where it flows into the Chang (Yangtze) estuary. Fiber Optic optic /op·tic/ (op´tik) ocular (1). op·tic or op·ti·cal adj. 1. Of or relating to the eye or vision. 2. Co., Ltd. and Lucent Technologies Beijing Beijing (bā-jĭng) or Peking (pē-kĭng, pā–), city (1994 est. urban pop. 6,093,300; 1994 est. total pop. 7,240,700), capital of the People's Republic of China. It is in central Hebei prov. Fiber Optic Cable Noun 1. fiber optic cable - a cable made of optical fibers that can transmit large amounts of information at the speed of light fibre optic cable transmission line, cable, line - a conductor for transmitting electrical or optical signals or electric power Co., Ltd. In connection with an amendment dated September 30, 2002, the consideration paid to Lucent by Corning was changed from cash to a combination of cash and stock. Corning paid approximately $123 million in cash, $27 million in a note payable in the fourth quarter and issued $48 million in Corning common stock in consideration. In addition, the transaction requires a contingent Fortuitous; dependent upon the possible occurrence of a future event, the existence of which is not assured. The word contingent denotes that there is no present interest or right but only a conditional one which will become effective upon the happening of the performance payment of $25 million if certain milestones are achieved. Corning acquired $100 million in cash and owes a dividend of $15 million payable to minority shareholders in the fourth quarter. 8. Accounting Change In June 2001, the Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). issued Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ." Among other provisions, goodwill will no longer be amortized but will be subject to impairment tests at least annually. SFAS No. 142 was effective for Corning on January January: see month. 1, 2002. Corning completed its initial impairment review during the first quarter and concluded a transitional impairment charge from the adoption of the standard was not required. Corning has selected the fourth quarter to conduct annual impairment tests. The outcome of the impairment test is primarily dependent upon the fair value of the reporting units. Business conditions in the telecommunications industry have deteriorated during the year and are 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. such that it appears the fair value of Corning's telecommunications reporting unit is currently lower than at the benchmark A performance test of hardware and/or software. There are various programs that very accurately test the raw power of a single machine, the interaction in a single client/server system (one server/multiple clients) and the transactions per second in a transaction processing system. assessment date of January 2002. As part of the annual impairment test, management is currently studying short and long-term market indicators and alternative growth patterns. Based on the work performed to date, it appears reasonably possible that a portion, but not all of the company's goodwill is impaired, however, the amount of impairment, if any, is not reasonably estimable es·ti·ma·ble adj. 1. Possible to estimate: estimable assets; an estimable distance. 2. Deserving of esteem; admirable: an estimable young professor. at this time. Management will complete the impairment test in the fourth quarter and record any required goodwill impairment charge. The goodwill related to the Telecommunications Segment is $1.9 billion at September 30, 2002. Management believes there are a range of possible outcomes and no assurance can be given that an impairment charge will not be required. The following table presents a reconciliation of reported net loss and loss per share to adjusted net loss and loss per share, as if SFAS No. 142 had been in effect as follows:
For the three For the nine
months ended months ended
September 30, September 30,
(In millions, except per share amounts) 2001 2001
----------------------------------------------------------------------
Reported net loss $ (220) $ (4,843)
Addback: Amortization of goodwill,
net of income taxes 75 314
----------- -------------
Adjusted net loss $ (145) $ (4,529)
=========== =============
Reported loss per share - basic $ (0.24) $ (5.21)
Addback: Amortization of goodwill,
net of income taxes 0.09 0.33
----------- -------------
Adjusted loss per share - basic $ (0.15) $ (4.88)
=========== =============
Reported loss per share - diluted $ (0.24) $ (5.21)
Addback: Amortization of goodwill,
net of income taxes 0.09 0.33
----------- -------------
Adjusted loss per share - diluted $ (0.15) $ (4.88)
=========== =============
9. 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 $ 195 $ $ 662
Hardware and equipment 135 153 136 424
Photonic technologies(a) 36 39 17 92
Controls and connectors 39 33 18 90
------- ------- ------- ------- -------
Segment net sales $ 465 $ 437 $ 366 $ $ 1,268
======= ======= ======= ======= =======
Advanced Materials
Environmental $ 94 $ 102 $ 102 $ $ 298
Life sciences 70 74 71 215
Other advanced materials 69 66 66 201
------- ------- ------- ------- -------
Segment net sales $ 233 $ 242 $ 239 $ $ 714
======= ======= ======= ======= =======
Information Display
Display technologies $ 93 $ 102 $ 106 $ $ 301
Conventional video
components 43 41 47 131
Precision lens 59 69 75 203
------- ------- ------- ------- -------
Segment net sales $ 195 $ 212 $ 228 $ $ 635
======= ======= ======= ======= =======
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)
Q3 '02 vs. Q2 '02
For the three months ended
September 30, June 30,
2002 2002
-------- --------
Net sales $ 837 $ 896
Cost of sales 674 682
------- -------
Gross margin 163 214
Operating expenses:
Selling, general and administrative
expenses 158 190
Research, development and engineering
expenses 115 132
Amortization of purchased intangibles 11 11
Restructuring, impairment and other
charges 125 494
------- -------
Operating loss (246) (613)
Interest income 10 10
Interest expense (44) (44)
Gain on repurchases of debt 22 68
Other expense, net (1)
------- -------
Loss before income taxes (259) (579)
Benefit for income taxes (79) (178)
------- -------
Loss before minority interest and
equity earnings (180) (401)
Minority interest in losses of
subsidiaries 5 6
Equity in earnings of associated
companies 42 25
------- -------
Net loss (133) (370)
Dividends and beneficial conversion
on Series C preferred stock (127)
------- -------
Net loss attributable to common
shareholders $ (260) $ (370)
======= =======
Basic and diluted loss per common
share $ (0.25) $ (0.39)
======= =======
Shares used in computing per share
amounts for basic and diluted
loss per common share 1,036 948
======= =======
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions)
Q3 '02 vs. Q2 `02
Sept. 30, June 30,
2002 2002
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 983 $ 940
Short-term investments, at fair value 618 383
-------- --------
Total cash and short-term investments 1,601 1,323
Trade accounts receivable, net of
doubtful accounts
and allowances - $48 and $63 541 605
Inventories 619 671
Deferred income taxes 380 400
Other current assets 374 333
-------- --------
Total current assets 3,515 3,332
Restricted cash and investments 70
Investments:
Associated companies, at equity 696 666
Others, at cost or fair value 74 74
-------- --------
Total investments 770 740
Property, plant and equipment, at cost,
net of accumulated
depreciation - $3,405 and $3,302 4,592 4,757
Goodwill, net of accumulated
amortization - $661 and $661 2,113 2,000
Other intangible assets, net of
accumulated amortization
- $120 and $109 378 390
Other assets 744 667
-------- --------
Total Assets $ 12,182 $ 11,886
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 213 $ 57
Accounts payable 286 310
Other accrued liabilities 976 1,052
-------- --------
Total current liabilities 1,475 1,419
Long-term debt 4,171 4,285
Postretirement benefits other
than pensions 618 614
Other liabilities 383 379
Commitments and contingencies
Minority interest in subsidiary companies 138 107
Series B convertible preferred stock 7
Shareholders' equity:
Series C mandatory convertible
preferred stock 245
Common stock - Par value $0.50
per share; Shares authorized:
3.8 billion; Shares issued:
1,222 million and 1,024 million 611 512
Additional paid in capital 9,738 9,516
Accumulated deficit (4,330) (4,070)
Cost of 74 million and 74 million
shares of common stock in treasury (736) (775)
Accumulated other comprehensive loss (131) (108)
-------- --------
Total shareholders' equity 5,397 5,075
-------- --------
Total Liabilities and Shareholders' Equity $ 12,182 $ 11,886
======== ========
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Q3 '02 vs. Q2 `02
For the three months ended
September 30, June 30,
2002 2002
----------- -----------
Cash flows from operating activities:
Net loss $ (133) $ (370)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Amortization of purchased intangibles 11 11
Depreciation 160 166
Restructuring, impairment and other charges 125 494
Gain on repurchases of debt (22) (68)
Stock compensation charges 1
Equity in earnings of associated companies
(in excess of) less than dividends received (32) 5
Minority interest, net of dividends paid (5) (6)
Deferred tax benefit (20) (37)
Tax expense on stock options (1)
Interest expense on convertible debentures 9 11
Restructuring payments (77) (58)
Increases in restricted cash (20)
Changes in certain working capital items (3) (56)
Other, net 7 (70)
------- -------
Net cash (used in) provided by operating activities (1) 23
------- -------
Cash flows from investing activities:
Capital expenditures (70) (111)
Acquisitions of businesses, net of cash acquired (56)
Net proceeds from sale or disposal of assets 26 31
Net increase in long-term
investments and other long-term assets (9) (10)
Short-term investments - acquisitions (710) (244)
Short-term investments - liquidations 475 729
Restricted investments - acquisitions (117)
Restricted investments - liquidations 67
Other, net (1)
------- -------
Net cash (used in) provided by investing activities (394) 394
------- -------
Cash flows from financing activities:
Net repayments of short-term debt (1) (331)
Repayments of long-term debt (35) (151)
Redemption of Series B preferred stock (7)
Proceeds from issuance
Series C preferred stock, net 558
Proceeds from issuance of common stock, net 14 18
Redemption of common stock
for income tax withholding (1)
Repurchases of common stock for treasury (23)
Cash dividends paid to preferred shareholders (67)
------- -------
Net cash provided by (used in) financing activities 438 (464)
------- -------
Effect of exchange rate
changes on cash and cash equivalents 29
------- -------
Net increase (decrease)
in cash and cash equivalents 43 (18)
Cash and cash equivalents at beginning of period 940 958
------- -------
Cash and cash equivalents at end of period $ 983 $ 940
======= =======
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
OPERATING SEGMENTS
(Unaudited; in millions)
Q3 '02 vs. Q2 `02
Three Three
months ended months ended
September 30, June 30,
2002 2002
------------- -----------
Telecommunications
Net sales $ 366 $ 437
Research, development and engineering expenses $ 71 $ 86
Interest expense $ 27 $ 25
Segment loss before equity losses and
restructuring, impairment and other charges $ (132) $ (139)
Equity in losses of associated companies (5) (3)
-------- --------
Segment loss before
restructuring, impairment and other charges (137) (142)
Restructuring, impairment
and other charges, net of tax (61) (259)
-------- --------
Segment net loss $ (198) $ (401)
======== ========
Advanced Materials
Net sales $ 239 $ 242
Research, development and engineering expenses $ 31 $ 32
Interest expense $ 9 $ 8
Segment earnings before equity
earnings and restructuring charges $ 2 $ 9
Equity in earnings of associated companies 11 12
-------- --------
Segment earnings before restructuring charges 13 21
Restructuring charges, net of tax (3) (1)
-------- --------
Segment net income $ 10 $ 20
======== ========
Information Display
Net sales $ 228 $ 212
Research, development and engineering expenses $ 13 $ 14
Interest expense $ 10 $ 9
Segment earnings before minority interest,
equity earnings and restructuring charges $ 17 $ 8
Minority interest in losses of subsidiaries 5 5
Equity in earnings of associated companies 32 29
-------- --------
Segment earnings before restructuring charges 54 42
Restructuring charges, net of tax (1)
-------- --------
Segment net income $ 53 $ 42
======== ========
Total Segments
Net sales $ 833 $ 891
Research, development and engineering expenses $ 115 $ 132
Interest expense $ 46 $ 42
Segment loss before minority interest,
equity earnings and restructuring,
impairment and other charges $ (113) $ (122)
Minority interest in losses of subsidiaries 5 5
Equity in earnings of associated companies 38 38
-------- --------
Segment loss before restructuring,
impairment and other charges (70) (79)
Restructuring, impairment
and other charges, net of tax (65) (260)
-------- --------
Segment net loss $ (135) $ (339)
======== ========
CORNING INCORPORATED
Schedule conforming historical segment
results to current presentation
For the quarters of 2001
For the quarter ended,
------------------------------------ Total
March 31 June 30 Sept. 30 Dec. 31 2001
-------- ------- -------- ------- ------
Telecommunications Segment
Segment earnings (loss)
before restructuring
and impairment $ 180 $ 1 $ 18 $ (280)$ (81)
Restructuring and
impairment, net of tax (4,726) (222) (174) (5,122)
-------- ------- ------- ------- -------
Segment net income (loss) $ 180 $(4,725) $ (204) $ (454)$(5,203)
-------- ------- ------- ------- -------
Advanced Materials Segment
Segment earnings (loss)
before restructuring
and impairment $ 32 $ 18 $ 8 $ (12)$ 46
Restructuring and
impairment, net of tax (59) (59)
-------- ------- ------- ------- -------
Segment net income (loss) $ 32 $ 18 $ 8 $ (71)$ (13)
-------- ------- ------- ------- -------
Information Display Segment
Segment earnings before
restructuring
and impairment $ 41 $ 47 $ 39 $ 22 $ 149
Restructuring and
impairment, net of tax (10) (10)
-------- ------- ------- ------- -------
Segment net income $ 41 $ 47 $ 39 $ 12 $ 139
-------- ------- ------- ------- -------
Total Segments
Segment earnings (loss)
before restructuring
and impairment $ 253 $ 66 $ 65 $ (270)$ 114
Restructuring and
impairment, net of tax (4,726) (222) (243) (5,191)
-------- ------- ------- ------- -------
Segment net income (loss) $ 253 $(4,660) $ (157) $ (513)$(5,077)
-------- ------- ------- ------- -------
Reconciliation:
Total segment
net income (loss) $ 253 $(4,660) $ (157) $ (513)$(5,077)
Non-segment loss (1) (2) (1) (1) (5)
Amortization of goodwill (143) (150) (35) (35) (363)
Non-segment restructuring
and impairment (191) (191)
Interest income 24 11 15 18 68
Income tax (1) 44 (44) 67 66
Equity in earnings of
associated companies 2 2 4
-------- ------- ------- ------- -------
Net income (loss) $ 132 $(4,755) $ (220) $ (655)$(5,498)
======== ======= ======= ======= =======
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