Corning Reports Second-Quarter Results.Business Editors/High-Tech Writers 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 21, 2003 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 $752 million and that it incurred a net loss of $22 million or $0.02 per share. This net loss includes $47 million or $0.04 per share of 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. charges primarily related to the shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down of Corning Asahi Asahi (朝日 or 旭) means "morning sun" in Japanese. It is a name of several places in Japan:
(2) (Constant Angular Velocity) Rotating an optical disc or hard disk at a constant speed. Contrast with "constant linear velocity" (CLV), in which the platter rotates at varying speeds. ); the planned exit from its photonics photonics, the science and technology based on and concerned with the controlled flow of photons, or light particles. It is the optical equivalent of electronics, and the two technologies coexist in such innovations as optoelectronic integrated circuits. business; and a mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. adjustment to the portion of its asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. liability settlement to be paid in Corning common stock. "We are pleased that our results exceeded our second-quarter guidance. This performance gives us confidence that we will achieve our goals for the year. We continue to maintain our focus on managing costs, paying down debt and investing in future technologies," 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. Second-Quarter Charges Corning said its second-quarter results include net pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern charges of $75 million (net after-tax charges totaling $47 million or $0.04 per share). These include: -- 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. of $54 million related to the shutdown of CAV, $33 million related to the exit of its photonics business and $38 million related to other cost reduction programs primarily in the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. segment, offset by a 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 $76 million of liabilities relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc prior years' restructuring charges. These charges and credits total $49 million, which after tax of $18 million and minority interest of $28 million had a $3 million impact on Corning's second-quarter net loss. -- Charges to increase the deferred tax asset valuation allowance of $21 million and impair im·pair tr.v. im·paired, im·pair·ing, im·pairs To cause to diminish, as in strength, value, or quality: an injury that impaired my hearing; a severe storm impairing communications. equity investments of $7 million, both of which are directly related to the decision to exit the photonics business. -- A $39 million charge ($24 million after-tax) to reflect the increase in the market value of Corning common stock to be contributed to settle the asbestos 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. related to Pittsburgh Pittsburgh (pĭts`bərg), city (1990 pop. 369,879), seat of Allegheny co., SW Pa., at the confluence of the Allegheny and the Monongahela rivers, which there form the Ohio River; inc. 1816. Corning Corporation. -- A net gain of $13 million ($8 million after-tax) related to 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. as a result of the company's recently completed tender offer. In addition to these items, Corning recorded a $9 million inventory 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. in gross margin related to the closure of CAV. Second-Quarter Operating Results Second-quarter sales of $752 million exceeded the company's guidance range of $715 million to $745 million and increased from first-quarter sales of $746 million. Corning's technologies segment recorded sales of $400 million, an increase over first-quarter sales of $388 million. The increase was primarily driven by the continued strong performance of 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. (LCD (Liquid Crystal Display) A display technology that uses rod-shaped molecules (liquid crystals) that flow like liquid and bend light. Unenergized, the crystals direct light through two polarizing filters, allowing a natural background color to show. ) glass business that experienced sequential One after the other in some consecutive order such as by name or number. volume gains of more than 15 percent and stable pricing. The growing popularity of 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. and increasing market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" of LCD desktop monitors fueled the quarter's growth. In the second quarter, LCD desktop monitors outpaced cathode ray tube See CRT. (hardware) cathode ray tube - (CRT) An electrical device for displaying images by exciting phosphor dots with a scanned electron beam. CRTs are found in computer VDUs and monitors, televisions and oscilloscopes. monitors for the first time achieving a level of 52 percent of the U.S. market. These gains were partially offset by lower sales in the company's semiconductor business. Sales in Corning's environmental business were flat versus the first quarter, as an anticipated general slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in the automotive industry The automotive industry is the industry involved in the design, development, manufacture, marketing, and sale of motor vehicles. In 2006, more than 69 million motor vehicles, including cars and commercial vehicles were produced worldwide. did not materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. . Corning's telecommunications segment sales were $347 million, a slight decline from $352 million in sales for the first quarter. As expected, the quarterly sales decline was due to lower fiber and cable volumes in Asia, resulting from seasonal slowdowns in Japan. Fiber volume declined in the second quarter by 20 percent, slightly less than the company expected. Fiber pricing in the second quarter was down about 5 percent. The fiber and cable sales decline was partially offset by sequential increases in the hardware and equipment business. Corning's second-quarter results benefited from the receipt of $17 million in royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. at CAV, foreign exchange gains and a higher effective tax benefit rate. Corning's second-quarter results also included $25 million of equity earnings from Dow Corning Dow Corning is a multinational corporation headquartered in Midland, Michigan, USA. Dow Corning specializes in silicon and silicone-based technology, offering more than 7,000 products and services. Dow Corning is equally owned by The Dow Chemical Company and Corning, Inc. , which the company began to recognize effective January January: see month. 1, 2003. Liquidity Update Corning ended the second quarter with $1.5 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, a decline from $1.85 billion at the end of the first quarter. The decline was primarily due to financing transactions. In the quarter, Corning raised 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). of $267 million from the issuance of 50 million shares of common stock and used $623 million of cash to retire retire v. 1) to stop working at one's occupation. 2) to pay off a promissory note, and thus "retire" the loan. 3) for a jury to go into the jury room to decide on a verdict after all evidence, argument and jury instructions have been completed. $834 million aggregate principal amount of its outstanding 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. In July July: see month. , Corning repaid an additional $123 million of debt. Corning said that it might continue from time-to-time to retire its debt securities in open market, privately negotiated or other transactions. Corning ended the quarter with a debt-to-capital ratio of 40 percent compared with 45.6 percent at the end of the previous quarter. Corning's revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility includes one financial covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the limiting the ratio of total debt to total capital, as defined, to not greater than 60 percent. The company also said that it is considering increasing its voluntary contributions to its pension plans in 2003 from approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $60 million to approximately $160 million. In the first half of this year, Corning made $30 million in contributions to its U.S. pension plan. Third-Quarter Outlook Corning said it expects third-quarter sales to be in the range of $740 million to $765 million. The company anticipates earnings per share in the range of $0.01 to $0.03, excluding any remaining gains or losses related to the exit of CAV or its photonics business and any further adjustments to the asbestos settlement reserve required by movement in Corning's stock price. Corning anticipates sequential volume gains for its LCD glass business of about 5 percent to 10 percent in its consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: business and 10 percent to 15 percent at Samsung Corning Precision. The company plans to ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale Generation 5 and 6 glass production in the third quarter and move forward with its capacity expansion plans to meet accelerating global industry demand. Corning will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. start-up Start-up The earliest stage of a new business venture. costs with these expansions. Corning said it anticipates that sales in its environmental business will be consistent with the second quarter. The company also expects that a shift to more premium-priced thin-wall products will continue in the third quarter. Sales of diesel products are projected to continue growing with increased retrofits on emissions emissions npl → émissions fpl emissions npl → Emissionen pl systems for heavy-duty heav·y-dut·y adj. Made to withstand hard use or wear. heavy-duty Adjective made to withstand hard wear, bad weather, etc. Adj. 1. equipment and off-road vehicles off-road vehicle off n → véhicule m tout-terrain . The company's new diesel product manufacturing facility in Erwin, N.Y., will phase in limited production through the second half of this year. Third-quarter fiber volumes are expected to increase sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen in the range of 5 percent to10 percent due to renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. demand in Japan and a slight increase in North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. orders. Pricing pressure is anticipated to remain moderate, at a level consistent with the second quarter. Corning expects sales in its photonics and conventional TV glass businesses to decline modestly in the third quarter and then effectively cease in the fourth quarter with the final exit from these businesses. 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, "We continue to be pleased by the strength of our LCD business. This business has certainly hit its stride and it is providing Corning with significant opportunity for growth and profitability." Flaws said that signs of stability across the telecommunications sector are giving the company some cause for optimism Optimism See also Hope. Bontemps, Roger personification of cheery contentment. [Fr. Lit.: “Roger Bontemps” in Walsh Modern, 66] Candide beset by inconceivable misfortunes, hero indifferently shrugs them off. [Fr. . "The preliminary FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. ruling on fiber deployments is also very promising for the industry and we have been further encouraged by the announcement of three Regional Bell Operating Companies The Regional Bell Operating Companies (RBOC) are the result of the U.S. Department of Justice antitrust suit against American Telephone & Telegraph. History to work together in developing standards for future fiber to the premises Fiber to the premises (FTTP) is a form of fiber-optic communication delivery in which an optical fiber is run directly onto the customers' premises. This contrasts with other fiber-optic communication delivery strategies such as fiber to the node (FTTN), fiber to the curb investments. However, we do not expect any significant revenue impact this year from these developments," Flaws 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, hardware and equipment in its Telecommunications segment. Corning's Technologies segment manufactures 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" display glass, and products for the environmental, life sciences, and semiconductor markets. Second-Quarter Conference Call Information The company will host a second quarter conference call at 8:30 a.m. ET on Tuesday Tuesday: see week. , July 22. To access the call, dial (773) 756-4618. 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. ET and will run through 5 p.m. ET, Tuesday, August 5. To listen, dial (402) 280-1652, no passcode is required. To listen to a live audio webcast of the call at 8:30 a.m. on Tuesday, July 22, please go to our website and follow the instructions: http://www.corning.com/investor_relations. The webcast will be archived 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 and political conditions; tariffs This is a list of tariffs and trade legislation:
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 liquid crystal display industry and other businesses; changes in the mix of sales between premium and non-premium products; facility expansions and new plant start-up costs; 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,armed conflict, political instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability. detrusor instability or major health concerns; ability to obtain financing and capital on commercially reasonable terms; adequacy and availability of insurance; capital resource and cash flow activities; capital spending; equity company activities; interest costs; 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 rate of technology change; the ability to enforce patents; product and components performance issues; changes in key personnel; stock price fluctuations; and adverse litigation or regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. developments. 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 OPERATIONS
(Unaudited; in millions, except per share amounts)
For the three For the six
months ended months ended
June 30, June 30,
-------------- --------------
2003 2002 2003 2002
------ ------ ------ ------
Net sales $ 752 $ 827 $1,498 $1,666
Cost of sales 571 643 1,117 1,298
------ ------ ------ ------
Gross margin 181 184 381 368
Operating expenses:
Selling, general and
administrative expenses 148 188 300 376
Research, development and
engineering expenses 85 131 178 257
Amortization of purchased
intangibles 9 11 18 22
Restructuring, impairment
and other charges and
credits 49 494 100 494
------ ------ ------ ------
Operating loss (110) (640) (215) (781)
Interest income 9 10 17 24
Interest expense (42) (44) (82) (92)
Asbestos settlement (39) (337)
Gain on repurchases of debt,
net of inducements 13 68 17 68
Other income (expense), net 20 6 (9)
------ ------ ------ ------
Loss from continuing operations
before income taxes (149) (606) (594) (790)
Benefit for income taxes (34) (184) (178) (234)
------ ------ ------ ------
Loss from continuing operations
before minority
interests and equity earnings (115) (422) (416) (556)
Minority interests 33 6 70 12
Equity in earnings of associated
companies 60 25 119 55
------ ------ ------ ------
Loss from continuing operations (22) (391) (227) (489)
Income from discontinued operations,
net of income taxes 21 29
------ ------ ------ ------
Net loss $ (22) $ (370) $ (227) $ (460)
====== ====== ====== ======
Basic and diluted (loss) earnings
per common share from:
Continuing operations $(0.02) $(0.41) $(0.19) $(0.52)
Discontinued operations $ 0.02 $ 0.03
------ ------ ------ ------
Loss per common share $(0.02) $(0.39) $(0.19) $(0.49)
====== ====== ====== ======
Shares used in computing per share
amounts for basic and diluted
(loss) earnings per common share 1,244 948 1,222 947
====== ====== ====== ======
See notes to consolidated financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
Unaudited
June 30, December 31,
2003 2002
------- -------
Assets
Current assets:
Cash and cash equivalents $ 747 $ 1,426
Short-term investments, at fair value 766 664
------- -------
Total cash and short-term investments 1,513 2,090
Trade accounts receivable, net 482 470
Inventories 538 559
Deferred income taxes 379 296
Other accounts receivable 155 358
Prepaid expenses and other current assets 70 52
------- -------
Total current assets 3,137 3,825
Restricted cash and investments 97 82
Investments 842 769
Property, net 3,542 3,705
Goodwill 1,750 1,715
Other intangible assets, net 185 213
Deferred income taxes 1,081 887
Other assets 235 210
------- -------
Total assets $10,869 $11,406
======= =======
Liabilities and Shareholders' Equity
Current liabilities:
Loans payable $ 156 $ 204
Accounts payable 294 339
Other accrued liabilities 1,169 1,137
------- -------
Total current liabilities 1,619 1,680
Long-term debt 3,095 3,963
Postretirement benefits other than pensions 616 617
Other liabilities 668 396
Commitments and contingencies
Minority interests 40 59
Shareholders' equity:
Preferred stock - Par value $100.00 per
share; Shares authorized: 10 million
Series C mandatory convertible preferred
stock - Shares issued: 5.75 million;
Shares outstanding: 1.47 million and
1.55 million 147 155
Common stock - Par value $0.50 per share;
Shares authorized: 3.8 billion;
Shares issued: 1,322 million and
1,267 million 661 634
Additional paid-in capital 9,905 9,695
Accumulated deficit (5,148) (4,921)
Treasury stock, at cost; Shares held:
59 million and 70 million (592) (702)
Accumulated other comprehensive loss (142) (170)
------- -------
Total shareholders' equity 4,831 4,691
------- -------
Total liabilities and shareholders' equity $10,869 $11,406
======= =======
Certain amounts for 2002 were reclassified to conform with 2003
classifications.
See notes to consolidated financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
For the For the
three months ended six months ended
June 30, March 31, June 30,
------ ------ --------------
2003 2003 2003 2002
Cash flows from operating activities:
Loss from continuing operations $ (22) $ (205) $ (227) $ (489)
Adjustments to reconcile loss
from continuing operations
to net cash provided by (used
in)
operating activities:
Amortization of purchased
intangibles 9 9 18 22
Depreciation 132 118 250 317
Asbestos settlement 39 298 337
Restructuring, impairment and
other
charges and credits 49 51 100 494
Gain on repurchases of debt, net
of
inducements (13) (4) (17) (68)
Undistributed earnings of
associated
companies (25) 1 (24) 28
Minority interests, net of
dividends
paid (33) (37) (70) (12)
Deferred tax benefit (56) (178) (234) (125)
Interest expense on convertible
debentures 6 7 13 21
Restructuring payments (49) (94) (143) (116)
Increases in restricted cash (18) (3) (21)
Income tax refund 191 191
Changes in certain working
capital items:
Trade accounts receivable 30 (13) 17 26
Inventories 27 7 34 24
Other current assets (14) 10 (4) (56)
Accounts payable and other
current
liabilities, net of
restructuring payments (55) (118) (173) (181)
Other, net 18 (17) 1 (77)
------ ------ ------ ------
Net cash provided by (used in)
operating activities 25 23 48 (192)
------ ------ ------ ------
Cash flows from investing activities:
Capital expenditures (55) (55) (110) (210)
Net proceeds from sale of
precision
lens business 9 9
Net proceeds from sale or disposal
of assets 30 13 43 36
Net increase in long-term
investments
and other long-term assets (4) (4) (9)
Short-term investments -
acquisitions (633) (428) (1,061) (847)
Short-term investments -
liquidations 587 369 956 1,648
Restricted investments -
liquidations 3 3 6
Other, net 1 1 (2)
------ ------ ------ ------
Net cash (used in) provided by
investing
activities (72) (88) (160) 616
------ ------ ------ ------
Cash flows from financing activities:
Net proceeds from (repayments of)
loans payable 8 (62) (54) (474)
Proceeds from issuance of
long-term debt 11
Repayments of long-term debt (634) (189) (823) (155)
Proceeds from issuance of common
stock, net 278 3 281 33
Cash dividends paid to preferred
shareholders (3) (3) (6)
------ ------ ------ ------
Net cash used in financing activities (351) (251) (602) (585)
------ ------ ------ ------
Effect of exchange rates on cash 18 17 35 23
------ ------ ------ ------
Cash used in continuing operations (380) (299) (679) (138)
Cash provided by discontinued
operations 41
------ ------ ------ ------
Net decrease in cash and cash
equivalents (380) (299) (679) (97)
Cash and cash equivalents at
beginning of period 1,127 1,426 1,426 1,037
------ ------ ------ ------
Cash and cash equivalents at end
of period $ 747 $1,127 $ 747 $ 940
====== ====== ====== ======
Certain amounts for 2002 were reclassified to conform with 2003
classifications.
See notes to the consolidated financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
Non- Consoli-
Telecom- Techno- segment/ dated
munications logies Other Total
items
------ ------ ------ ------
For the three months
ended June 30, 2003
Net sales $ 347 $ 400 $ 5 $ 752
Research, development
and engineering
expenses $ 32 $ 55 $ (2) $ 85
Restructuring,
impairment and other
charges and credits
(related tax benefit
of $2, $12, $4 and $18) $ (19) $ 58 $ 10 $ 49
Interest expense $ 22 $ 20 $ 42
Benefit for income taxes $ (5) $ (8) $ (21) $ (34)
Loss before minority
interests and equity
(losses) earnings $ (53) $ (43) $ (19) $ (115)
Minority interests 33 33
Equity in (losses)
earnings of associated
companies (8) 43 25 60
------ ------ ------ ------
Net (loss) income $ (61) $ 33 $ 6 $ (22)
====== ====== ====== ======
For the three months
ended June 30, 2002
Net sales $ 437 $ 385 $ 5 $ 827
Research, development
and engineering
expenses $ 86 $ 45 $ 131
Restructuring, impairment
and other charges and
credits (related tax
benefit of $125, $1,
$40 and $166) $ 369 $ 3 $ 122 $ 494
Interest expense $ 25 $ 17 $ 2 $ 44
(Benefit) provision for
income taxes $ (191) $ 5 $ 2 $ (184)
Loss before minority
interests and equity
(losses) earnings $ (384) $ (4) $ (34) $ (422)
Minority interests 5 1 6
Equity in (losses)
earnings of associated
companies (17) 41 1 25
Income from discontinued
operations 21 21
------ ------ ------ ------
Net (loss) income $ (401) $ 42 $ (11) $ (370)
====== ====== ====== ======
For the six months
ended June 30, 2003
Net sales $ 699 $ 788 $ 11 $1,498
Research, development
and engineering
expenses $ 70 $ 110 $ (2) $ 178
Restructuring, impairment
and other charges and
credits (related tax
(expense) benefit of
$(2), $24, $4 and $26) $ (28) $ 118 $ 10 $ 100
Interest expense $ 43 $ 39 $ 82
Benefit for income taxes $ (30) $ (15) $ (133) $ (178)
Loss before minority
interests and equity
(losses) earnings $ (113) $ (98) $ (205) $ (416)
Minority interests 70 70
Equity in (losses)
earnings of associated
companies (11) 87 43 119
------ ------ ------ ------
Net (loss) income $ (124) $ 59 $ (162) $ (227)
====== ====== ====== ======
For the six months
ended June 30, 2002
Net sales $ 902 $ 754 $ 10 $1,666
Research, development
and engineering
expenses $ 172 $ 85 $ 257
Restructuring, impairment
and other charges and
credits (related tax
benefit of $125, $1,
$40 and $166) $ 369 $ 3 $ 122 $ 494
Interest expense $ 57 $ 33 $ 2 $ 92
(Benefit) provision for
income taxes $ (255) $ 4 $ 17 $ (234)
Loss before minority
interests and equity
(losses) earnings $ (522) $ (8) $ (26) $ (556)
Minority interests 11 1 12
Equity in (losses)
earnings of associated
companies (21) 74 2 55
Income from discontinued
operations 29 29
------ ------ ------ ------
Net (loss) income $ (543) $ 77 $ 6 $ (460)
====== ====== ====== ======
See notes to the consolidated financial statements.
Non-segment/other items net income (loss) is detailed below:
Three months ended Six months ended
June 30, June 30,
--------------- ----------------
2003 2002 2003 2002
------ ------ ------ ------
Non-segment (loss) income
and other (1) $ (13) $ 12 $ (25) $ 21
Non-segment restructuring,
impairment and other charges (10) (122) (10) (122)
Interest income 9 10 17 24
Asbestos settlement (39) (337)
Gain on repurchases of debt,
net of inducements 13 68 17 68
Benefit (provision) for
income taxes 21 (2) 133 (17)
Minority interests 1 1
Equity in earnings of
associated companies (2) 25 1 43 2
Income from discontinued
operations 21 29
------ ------ ------ ------
Net income (loss) $ 6 $ (11) $ (162) $ 6
====== ====== ====== ======
(1) Includes non-segment operations and other corporate
activities.
(2) Includes amounts derived from corporate investments and
activities, primarily Dow Corning Corporation in 2003.
See notes to the consolidated financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Restructuring, Impairment and Other Charges and Credits
In the second quarter of 2003, Corning recorded restructuring,
impairment and other charges of $125 million ($62 million after-tax
and minority interest), offset by credits of $76 million ($59 million
after-tax) resulting in a net pre-tax charge of $49 million ($3
million after-tax and minority interest). These charges relate to
Corning's previously announced decisions to exit its conventional
video components business and its photonic technologies business. The
charges also reflect certain restructuring actions taken during the
second quarter of 2003 relating to other Corning businesses. Corning
also reversed $76 million of liabilities relating to prior years'
restructuring charges. A summary of these charges and credits follow:
Conventional Video Components
Corning Asahi Video Products Company (conventional video
components business, or CAV), a 51 percent owned consolidated
subsidiary, is a manufacturer of glass panels and funnels for use in
conventional tube televisions and is reported in the Technologies
segment.
On April 15, 2003, Corning announced that CAV would cease
production. Corning impaired the long-lived assets of this business to
estimated salvage value and recorded a first quarter charge of $62
million, ($19 million after-tax and minority interest). In the second
quarter of 2003, Corning recorded a restructuring charge of $54
million ($15 million after-tax and minority interest). The charge
included $18 million for employee separation costs, $19 million for
exit costs and $17 million for curtailments related to pension and
postretirement health care benefits.
In connection with the cessation of operations, Corning and Asahi
Glass of America (the 49% owner of CAV) have reached agreement on the
shared funding of CAV's obligations. Corning expects the restructuring
costs to require $45 million to $60 million in cash spending. In June,
CAV announced that it had signed a definitive agreement to sell assets
to Henan Anyang CPT Glass Bulb Group, Electronic Glass Co., Ltd.,
located in China. The proceeds from this sale may offset a significant
portion of the cash spending.
Photonic Technologies
On May 12, 2003, Corning announced that it would exit its photonic
technologies business and had reached an agreement to sell a
significant portion of the business to Avanex Corporation ("Avanex")
in exchange for common stock valued at approximately $85 million at
June 30, 2003. The agreement allows Avanex to acquire assets related
to the optical amplifier facility in Erwin, NY and the optical
component plant in Milan, Italy. Corning expects approximately 400
employees of photonic technologies to transition to Avanex by the time
the transaction closes sometime in the third quarter. Corning also
expects to close its pump laser facility in Bedford, MA by the end of
the year.
In the second quarter of 2003, Corning recorded a charge of $33
million ($22 million after-tax) related to the exit of the photonics
business. The charge included $7 million for employee separation
costs, $14 million for exit costs, $7 million for curtailments related
to pension and postretirement benefits and $5 million to impair the
remaining assets.
Also in the second quarter, Corning increased the deferred tax
valuation allowance by $21 million as it does not expect to realize
certain deferred tax assets in Italy related to the photonics
business. This charge is reflected in the statement of operations
under "Benefit for income taxes."
Finally, Corning impaired $7 million of equity investments in this
business that will be abandoned as part of the exit from the business.
This charge is reflected in the statement of operations under the line
item, "Equity in earnings of associated companies."
Other
Corning also recorded $38 million of restructuring and impairment
charges primarily related to its telecommunications businesses and
administrative (note many reductions will actually be in the
businesses) staffs. The charge included $17 million for employee
separation costs, $2 million for curtailments related to pension and
postretirement benefits and $19 million for asset impairments.
Credits
The current restructuring reserve continues to be evaluated as
plans are being executed. In addition, since the restructuring program
is an aggregation of many individual plans currently being executed,
actual costs have differed from estimated amounts. As a result, there
may be additional charges or reversals.
In the second quarter of 2003, Corning reversed $76 million ($59
million after-tax) of restructuring reserves related to prior years
restructuring charges, primarily in the Telecommunications segment.
The reversals included $27 million related to employee separation
costs which were less than estimated, $25 million related to a
decision to change the restructuring plans and not exit a certain
telecommunications business and $24 million related to proceeds in
excess of assumed salvage values for assets that were previously
impaired and certain assets management decided to retain as abandoned
factories were being dismantled.
2. Asbestos Settlement
On March 28, 2003, Corning announced that it had reached agreement
with the representatives of asbestos claimants for the settlement of
all current and future asbestos claims against Corning and Pittsburgh
Corning Corporation (PCC), which might arise from PCC products or
operations. Accordingly, Corning recorded a charge of $298 million
($192 million after-tax) in the first quarter. The charge included the
value of 25 million shares of Corning common stock which Corning will
contribute as part of the settlement. Also at that time, Corning
indicated that any changes in the value of its common stock
contribution would be recognized in Corning's quarterly results
through the date of contribution to the settlement trust. As required,
Corning recorded a mark-to-market charge of $39 million ($24 million
after-tax) in the second quarter reflecting the increased fair value
of the shares to its common stock contribution.
3. Gain on Repurchases of Debt, Net
During the second quarter of 2003, Corning repurchased and retired
834,000 zero coupon convertible debentures with an accreted value of
$652 million in exchange for cash of $623 million in a modified Dutch
tender offer. Corning recorded a net gain of $13 million ($8 million
after-tax) associated with retirements of its zero coupon convertible
debentures in the second quarter.
4. Income Tax
In the second quarter of 2003, the effective tax benefit rate
excluding certain items such as restructuring, impairment, asbestos
settlement and debt transactions was 37 percent for the quarter and 33
percent for the six months ended June 30, 2003.
5. Subsequent Event
On July 16, 2003, Corning repurchased and retired zero coupon
convertible debentures with a face value of $71 million in exchange
for cash of $53 million. In addition, Corning repurchased and retired
60 million of euro-denominated notes in exchange for cash of 62
million euros, or $70 million.
CORNING INCORPORATED
QUARTERLY SALES INFORMATION
(In millions)
2003
--------------------
Q1 Q2 6 Months
------ ------ ------
Telecommunications
Fiber and cable $ 193 $ 178 $ 371
Hardware and equipment 122 136 258
Photonic technologies 18 15 33
Controls and connectors 19 18 37
------ ------ ------
Segment net sales $ 352 $ 347 $ 699
====== ====== ======
Technologies
Display technologies $ 117 $ 135 $ 252
Environmental 115 117 232
Life sciences 73 72 145
Conventional video components 25 24 49
Other technologies businesses 58 52 110
------ ------ ------
Segment net sales $ 388 $ 400 $ 788
====== ====== ======
2002
----------------------------------
Q1 Q2 Q3 Q4 Total
------ ------ ------ ------ ------
Telecommunications
Fiber and cable $ 255 $ 212 $ 195 $ 197 $ 859
Hardware and equipment 135 153 136 128 552
Photonic technologies 36 39 17 19 111
Controls and connectors 39 33 18 19 109
------ ------ ------ ------ ------
Segment net sales $ 465 $ 437 $ 366 $ 363 $1,631
====== ====== ====== ====== ======
Technologies
Display technologies $ 93 $ 102 $ 106 $ 104 $ 405
Environmental 94 102 102 96 394
Life sciences 70 74 71 65 280
Conventional video components 43 41 47 35 166
Other technologies businesses 69 66 66 67 268
------ ------ ------ ------ ------
Segment net sales $ 369 $ 385 $ 392 $ 367 $1,513
====== ====== ====== ====== ======
The above supplemental information is intended to facilitate
analysis of Corning's businesses.
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