SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported) January 22, 2004
CORNING INCORPORATED
(Exact name of registrant as specified in its charter)
New York 1-3247 16-0393470
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Riverfront Plaza, Corning, New York 14831
(Address of principal executive offices) (Zip Code)
(607) 974-9000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Item 9. Regulation FD Disclosure
---------------------------------
Item 12. Results of Operations and Financial Condition
-------------------------------------------------------
The following information is furnished pursuant to Item 9, "Regulation FD
Disclosure" and Item 12, "Results of Operations and Financial Condition."
The Corning Incorporated press release dated January 22, 2004, regarding its
financial results for the quarter ended December 31, 2003 and full year 2003, is
attached hereto as Exhibit 99.1. This press release includes certain non-GAAP
financial measures. A reconciliation of those measures to the most directly
comparable GAAP measures is attached hereto as Exhibit 99.2.
Exhibit Index
99.1 Press Release dated January 22, 2004, issued by Corning Incorporated.
99.2 Reconciliation of non-GAAP financial measures.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORNING INCORPORATED
Registrant
Date: January 22, 2004 By /s/ KATHERINE A. ASBECK
------------------------------------
Katherine A. Asbeck
Senior Vice President and Controller
Exhibit 99.1
FOR RELEASE -- JANUARY 22, 2004
Media Relations Contact: Investor Relations Contact:
------------------------ ---------------------------
Daniel F. Collins Kenneth C. Sofio
(607) 974-4197 (607) 974-7705
collinsdf@corning.com sofiokc@corning.com
Corning Reports Fourth-Quarter Results
CORNING, N.Y. -- Corning Incorporated (NYSE: GLW) today announced that its
fourth-quarter sales were $820 million, and it incurred a net loss of $29
million or $0.02 per share. This net loss includes previously announced
after-tax charges totaling $81 million or $0.06 per share.
"We are pleased that our fourth-quarter results met our expectations and that
our sales increased for the fourth consecutive time this past year," James R.
Houghton, chairman and chief executive officer, said. "More importantly, our
goal at the beginning of the year was to restore profitability and, excluding
special items, we have accomplished what we set out to do," he said.
Fourth-Quarter Charges
Corning said its fourth-quarter results include pretax charges of $46 million
(after-tax charges of $81 million or $0.06 per share). These include:
.. Restructuring, impairment and other charges of $21 million ($2 million
after-tax credit), primarily related to the consolidation of Corning's high
purity fused silica and fluoride crystal materials manufacturing facilities.
.. A $25 million charge ($17 million after tax) to reflect the increase in the
market value of Corning common stock to be contributed to settle the asbestos
litigation related to Pittsburgh Corning Corporation.
.. Corning's equity earnings included an after-tax charge of $66 million for
Corning's share of an asset impairment charge recorded by Samsung Corning
Co., Ltd., a 50 percent-owned equity venture, which manufactures glass
funnels and panels for conventional television.
Fourth-Quarter Operating Results
Fourth-quarter sales of $820 million exceeded the company's guidance range of
$740 million to $765 million, and were $48 million higher than third-quarter
sales.
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Corning Reports Fourth-Quarter Results
Page Two
Corning's Technologies segment sales for the quarter were $457 million, compared
to sales of $396 million in the third quarter, driven primarily by strength in
the Display Technologies business. Sequential sales of liquid crystal display
(LCD) glass grew 39 percent, due to volume increases of more than 20 percent,
favorable foreign exchange rates and stable pricing.
Environmental Technologies sales were essentially flat with third-quarter sales,
but better than expected due to increased sales of thin-wall automotive
substrates and diesel products. Fourth-quarter profitability for this business
was impacted by weak manufacturing performance and start-up costs for its new
diesel facility.
Corning's Telecommunications segment sales were $357 million for the quarter, a
decline from third-quarter sales of $370 million, due to expected seasonal
slowdowns of optical fiber volume in North America and declines in Japan.
Pricing of single-mode optical fiber continued its moderating trend with only
very slight sequential declines in the quarter.
Corning's display and environmental businesses and Telecommunications segment
all continued to benefit from favorable foreign exchange rates in the fourth
quarter. Of the $48 million sequential sales increase, approximately $20 million
was due to more favorable foreign exchange rates in the fourth quarter.
The company's equity earnings were $15 million and included the $66 million
impairment charge from Samsung Corning. Excluding this charge, fourth-quarter
equity earnings were $81 million, compared to $75 million in the third quarter,
due to stronger-than-expected earnings at Samsung Corning Precision Glass Co.,
Ltd., an equity venture which manufactures LCD glass in Korea. Corning's equity
earnings from Dow Corning Corporation were $18 million for the quarter, compared
to $22 million last quarter.
Full-Year Results
For the year, Corning recorded sales of $3.1 billion, a slight decline from a
year ago sales of $3.2 billion. The company's loss from continuing operations
for 2003 was $223 million, or $0.18 per share, compared to a loss from
continuing operations of $1.8 billion, or $1.85 per share, last year. Corning's
2003 full-year results include net charges totaling $505 million ($351 million
after tax or $0.28 per share) including:
.. Restructuring, impairment and other charges of $111 million ($26 million
after tax and minority interest).
.. The asbestos litigation charge for Pittsburgh Corning Corporation of $413
million ($263 million after tax).
(more)
Corning Reports Fourth-Quarter Results
Page Three
.. A $66 million after-tax asset impairment charge in equity earnings from
Samsung Corning and $8 million after-tax equity investment impairments,
primarily from the exit of the photonics product line.
.. Net gains on repurchases of debt of $19 million ($12 million after tax).
Cash Flow Update
Corning ended the year with $1.3 billion in cash and short-term investments, a
slight decline from the previous quarter's balance of $1.4 billion. The decline
included debt repayments of approximately $95 million, restructuring payments of
$32 million and an additional voluntary contribution of $60 million to the
company's pension fund. For the year, Corning paid off approximately $1.4
billion in total debt and reduced its debt-to-capital ratio to 33.8 percent, a
substantial decline from a year ago levels of 46.7 percent.
"This was a year of great progress for Corning," Houghton said. "We improved our
profitability by more than $500 million, before special items, by reducing
operating expenses more than 20 percent and making substantial gains in our
gross margins. We continued to invest in research and development, which has
Corning well-positioned for growth this year," he said.
Outlook
The company said that it expects first-quarter sales to be in the range of $770
million to $830 million, with earnings per share in the range of $0.04 to $0.05,
before special items. This estimate is a non-GAAP financial measure, and is
reconciled on our Investor Relations Web site. Corning expects that foreign
exchange rates will remain stable for the first quarter.
Telecommunications segment sales are anticipated to decline approximately 10
percent due to beginning-of-the-year normal optical fiber pricing reductions,
lower project and services sales and the final exit from photonics. Sequential
optical fiber volume for the first quarter is expected to be stable.
The environmental business is expected to see quarterly sales increases due to
seasonal trends in the automotive and diesel industries. The company's Life
Sciences business also expects first-quarter sales increases.
The company expects to continue to be sold out in LCD glass in the first
quarter, despite bringing on additional capacity. Sequential LCD glass volume
growth should be about 5 percent to 10 percent with current capacity
constraints. Pricing for the first quarter should remain stable.
(more)
Corning Reports Fourth-Quarter Results
Page Four
"We anticipate demand for flat-screen monitors to remain robust in 2004. LCD
television is now in the early stages of acceptance and continuing demand is
expected to double market penetration this year. We continue to invest in next
generation large panel manufacturing, and we will bring additional Generation 6
manufacturing capacity on line this quarter and Generation 7 production later
in the year," James B. Flaws, vice chairman and chief financial officer, said.
He said that the company's automotive and diesel emission products are sold out
in the first quarter. The business is ramping up production in its new diesel
facility and plans to have two manufacturing lines operating by the end of the
quarter. Flaws also noted that the environmental manufacturing performance is
improving in the first quarter.
Flaws also noted that the company was encouraged with the selection of Corning
as a leading supplier to Verizon for its fiber-to-the-premises initiative.
"When Verizon begins to implement its FTTP plan, we believe it will present a
long-term revenue opportunity for Corning," Flaws said.
"We are pleased with the improvements we have made in the company's financial
health over the past year. Our focus in 2004 remains on our three core
priorities of protecting our financial health, increasing profitability and
investing in future growth opportunities," he said.
The company will provide additional information about its 2004 financial
performance at its annual investor meeting on Feb. 6, 2004 at the Pierre Hotel
in New York City and simultaneously via audio webcast. Investors can register
for the event on line through the Investor Relations Web site at
www.corning.com.
Presentation of Information in this News Release
Corning's earnings estimate for the first quarter is a non-GAAP financial
measure as it excludes any potential gains or losses arising from previously
announced restructuring actions, any further adjustments to the asbestos
settlement reserve required by movement in Corning's stock price and income
from discontinued operations. The company believes presenting earnings
estimates that exclude these items is helpful in understanding Corning's
operating results. The company's comment about "...improved our profitability
by more than $500 million, before special items," is also a non-GAAP financial
measure that excludes the special items in the periods being compared. The
company believes presenting this comparison is helpful in understanding the
improvement in Corning's operating results including equity earnings.
Corning provides a reconciliation of the non-GAAP earnings per share estimate
to GAAP earnings per share estimate, as well as a reconciliation of
profitability, on our Investor Relations Web site at:
(www.corning.com/investor_relations).
(more)
Corning Reports Fourth-Quarter Results
Page Five
About Corning Incorporated
Corning Incorporated (www.corning.com) is a diversified technology company that
concentrates its efforts on high-impact growth opportunities. Corning combines
its expertise in specialty glass, ceramic materials, polymers and the
manipulation of the properties of light, with strong process and manufacturing
capabilities to develop, engineer and commercialize significant innovative
products for the telecommunications, flat panel display, environmental,
semiconductor, and life sciences industries.
Fourth-Quarter Conference Call Information
The company will host a fourth-quarter conference call at 8:30 a.m. EST on
Friday, Jan. 23. To access the call, dial (773) 756-4622. The password is
Earnings. 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, Friday, Feb. 6.
To listen, dial (402) 998-0771, no pass code is required. To listen to a live
audio webcast of the call at 8:30 a.m. on Friday, Jan. 23, please go to our
Web site and follow the instructions: http://www.corning.com/investor_relations.
The audio webcast will be archived for 14 days following the call.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements that involve a variety of
business risks and other uncertainties that could cause actual results to differ
materially. These risks and uncertainties include the possibility of changes or
fluctuations in global economic and political conditions; tariffs, import duties
and currency fluctuations; product demand and industry capacity; competitive
products and pricing; manufacturing efficiencies; cost reductions; availability
and costs of critical components and materials; new product development and
commercialization; order activity and demand from major customers; capital
spending by larger customers in the 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
in commercial activities due to terrorist activity, armed conflict, political
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 activities; the level of excess or
obsolete inventory; 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 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 share and per share amounts)
For the three months ended For the year ended
December 31, December 31,
--------------------------- --------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net sales $ 820 $ 736 $ 3,090 $ 3,164
Cost of sales 578 631 2,241 2,562
--------- --------- --------- ---------
Gross margin 242 105 849 602
Operating expenses
Selling, general and administrative expenses 152 183 599 716
Research, development and engineering expenses 86 113 344 483
Amortization of purchased intangibles 9 10 37 43
Restructuring, impairment and other charges
and credits, net 21 1,461 111 2,080
--------- --------- --------- ---------
Operating loss (26) (1,662) (242) (2,720)
Interest income 8 7 32 41
Interest expense (36) (43) (154) (179)
Asbestos settlement (25) (413)
Gain on repurchases of debt, net 86 19 176
Other expense, net (12) (28) (1) (38)
--------- --------- --------- ---------
Loss from continuing operations before income taxes (91) (1,640) (759) (2,720)
Benefit for income taxes (46) (401) (254) (726)
--------- --------- --------- ---------
Loss from continuing operations before minority
interests and equity earnings (45) (1,239) (505) (1,994)
Minority interests 1 81 73 98
Equity in earnings of associated companies, net
of impairments 15 19 209 116
--------- --------- --------- ---------
Loss from continuing operations (29) (1,139) (223) (1,780)
Income from discontinued operations, net of
income taxes 430 478
--------- --------- --------- ---------
Net loss (29) (709) (223) (1,302)
Dividend requirements of preferred stock (128)
--------- --------- --------- ---------
Loss attributable to common shareholders $ (29) $ (709) $ (223) $ (1,430)
========= ========= ========= =========
Basic and diluted (loss) earnings per common
share from:
Continuing operations $ (0.02) $ (0.96) $ (0.18) $ (1.85)
Discontinued operations 0.36 0.46
--------- --------- --------- ---------
Basic and diluted loss per common share $ (0.02) $ (0.60) $ (0.18) $ (1.39)
========= ========= ========= =========
Shares used in computing per share amounts for
basic and diluted loss per common share 1,335 1,188 1,274 1,030
========= ========= ========= =========
See notes to consolidated financial statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except share and per share amounts)
December 31, December 31,
2003 2002
----------- -------------
Assets
Current assets:
Cash and cash equivalents $ 833 $ 1,426
Short-term investments, at fair value 433 664
--------- ---------
Total cash and short-term investments 1,266 2,090
Trade accounts receivable, net 525 470
Inventories 467 559
Deferred income taxes 242 296
Other accounts receivable 117 358
Prepaid expenses and other current assets 77 52
--------- ---------
Total current assets 2,694 3,825
Restricted cash and investments 66 82
Investments 1,045 769
Property, net 3,620 3,705
Goodwill 1,735 1,715
Other intangible assets, net 166 213
Deferred income taxes 1,225 887
Other assets 201 210
--------- ---------
Total assets $ 10,752 $ 11,406
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Loans payable $ 146 $ 204
Accounts payable 333 339
Other accrued liabilities 1,074 1,137
--------- ---------
Total current liabilities 1,553 1,680
Long-term debt 2,668 3,963
Postretirement benefits other than pensions 619 617
Other liabilities 412 396
Commitments and contingencies
Minority interests 36 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: 854 thousand and 1.55 million 85 155
Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion;
Shares issued: 1,401 million and 1,267 million 701 634
Additional paid-in capital 10,298 9,695
Accumulated deficit (5,144) (4,921)
Treasury stock, at cost; Shares held: 58 million and 70 million (574) (702)
Accumulated other comprehensive income (loss) 98 (170)
--------- ---------
Total shareholders' equity 5,464 4,691
--------- ---------
Total liabilities and shareholders' equity $ 10,752 $ 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 three months ended For the year ended
December 31, December 31,
---------------------- -------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Cash flows from operating activities:
Loss from continuing operations $ (29) $ (1,139) $ (223) $(1,780)
Adjustments to reconcile loss from continuing
operations to net cash provided by (used in)
operating activities:
Amortization of purchased intangibles 9 10 37 43
Depreciation 117 147 480 618
Asbestos settlement 25 413
Restructuring, impairment and other charges and
credits, net 21 1,461 111 2,080
Gain on repurchases of debt, net of inducements (86) (19) (176)
Undistributed earnings of associated companies (13) (17) (97) (33)
Minority interests, net of dividends paid (1) (81) (77) (98)
Deferred tax benefit (4) (287) (263) (432)
Interest expense on convertible debentures 3 8 18 38
Restructuring payments (32) (85) (233) (278)
Increases in restricted cash (4) (33) (3) (53)
Income tax refund 191
Tax benefit on stock options 2 2
Employee benefit payments in excess of expense (49) (28) (142) (55)
Changes in certain working capital items 54 (42) (62) (233)
Other, net (32) 69 35
-------- -------- -------- -------
Net cash provided by (used in) operating activities 67 (103) 133 (324)
-------- -------- -------- -------
Cash flows from investing activities:
Capital expenditures (162) (78) (366) (357)
Acquisitions of businesses, net of cash acquired (7) (27) (6) (56)
Proceeds from sale of precision lens business 787 9 787
Net proceeds from sale or disposal of assets 7 30 46 92
Increase in long-term investments and other
long-term assets (6) (13) (10) (31)
Short-term investments - acquisitions (158) (665) (1,584) (2,222)
Short-term investments - liquidations 333 619 1,814 2,742
Restricted investments - acquisitions (117)
Restricted investments - liquidations 4 21 19 88
Other, net (2)
-------- -------- -------- -------
Net cash provided by (used in) investing activities 11 674 (78) 924
-------- -------- -------- -------
Cash flows from financing activities:
Net (repayments of) proceeds from loans payable (2) 12 (162) (490)
Proceeds from issuance of long-term debt 11
Repayments of long-term debt (93) (135) (1,193) (325)
Proceeds from issuance of Series C preferred stock, net (1) 557
Proceeds from issuance of common stock, net 15 5 667 52
Repurchases of common stock for treasury (23)
Cash dividends paid to preferred shareholders (4) (21) (19) (88)
Other, net (1) (8)
-------- -------- -------- -------
Net cash used in financing activities (84) (140) (708) (314)
-------- -------- -------- -------
Effect of exchange rates on cash 30 20 60 43
-------- -------- -------- -------
Cash provided by (used in) continuing operations 24 451 (593) 329
Cash (used in) provided by discontinued operations (8) 60
-------- -------- -------- -------
Net increase (decrease) in cash and cash equivalents 24 443 (593) 389
Cash and cash equivalents at beginning of period 809 983 1,426 1,037
-------- -------- -------- -------
Cash and cash equivalents at end of period $ 833 $ 1,426 $ 833 $ 1,426
======== ======== ======== =======
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)
Telecom- Non-segment/ Consolidated
munications Technologies Other items Total
----------- ------------ ------------ ------------
For the three months ended December 31, 2003
Net sales $ 357 $ 457 $ 6 $ 820
Research, development and engineering expenses $ 25 $ 62 $ (1) $ 86
Restructuring, impairment and other charges
and credits (1) $ (6) $ 27 $ 21
Interest expense $ 16 $ 20 $ 36
(Benefit) provision for income taxes $ (32) $ 4 $ (18) $ (46)
Loss before minority interests and equity earnings $ (17) $ (14) $ (14) $ (45)
Minority interests 1 1
Equity in earnings of associated companies,
net of impairments (1) (3) 19 15
-------- -------- ------- --------
Net (loss) income $ (18) $ (16) $ 5 $ (29)
======== ======== ======= ========
For the three months ended December 31, 2002
Net sales $ 363 $ 367 $ 6 $ 736
Research, development and engineering expenses $ 65 $ 50 $ (2) $ 113
Restructuring, impairment and other charges and
credits (1) $ 1,263 $ 141 $ 57 $ 1,461
Interest expense $ 15 $ 19 $ 9 $ 43
(Benefit) provision for income taxes $ (376) $ (33) $ 8 $ (401)
(Loss) income before minority interests and
equity earnings $ (1,123) $ (132) $ 16 $ (1,239)
Minority interests 1 80 81
Equity in earnings of associated companies,
net of impairments (34) 51 2 19
Income from discontinued operations 430 430
-------- -------- ------- --------
Net (loss) income $ (1,156) $ (1) $ 448 $ (709)
======== ======== ======= ========
For the year ended December 31, 2003
Net sales $ 1,426 $ 1,641 $ 23 $ 3,090
Research, development and engineering expenses $ 120 $ 227 $ (3) $ 344
Restructuring, impairment and other charges
and credits (1) $ (36) $ 134 $ 13 $ 111
Interest expense $ 75 $ 79 $ 154
Benefit for income taxes $ (78) $ (6) $ (170) $ (254)
Loss before minority interests and equity earnings $ (158) $ (98) $ (249) $ (505)
Minority interests 73 73
Equity in earnings of associated companies,
net of impairments (11) 137 83 209
-------- -------- ------- --------
Net (loss) income $ (169) $ 112 $ (166) $ (223)
======== ======== ======= ========
For the year ended December 31, 2002
Net sales $ 1,631 $ 1,513 $ 20 $ 3,164
Research, development and engineering expenses $ 308 $ 177 $ (2) $ 483
Restructuring, impairment and other charges
and credits (1) $ 1,722 $ 150 $ 208 $ 2,080
Interest expense $ 99 $ 71 $ 9 $ 179
(Benefit) provision for income taxes $ (722) $ (28) $ 24 $ (726)
Loss before minority interests and equity earnings $ (1,838) $ (145) $ (11) $ (1,994)
Minority interests 1 96 1 98
Equity in earnings of associated companies,
net of impairments (60) 168 8 116
Income from discontinued operations 478 478
-------- -------- ------- --------
Net (loss) income $ (1,897) $ 119 $ 476 $ (1,302)
======== ======== ======= ========
(1) Related tax benefit:
Three months ended December 31, 2003: $17, $6, $0 and $23.
Three months ended December 31, 2002: $299, $27, $17 and $343.
Year ended December 31, 2003: $17, $28, $4 and $49.
Year ended December 31, 2002: $452, $30, $66 and $548.
See notes to the consolidated financial statements.
Non-segment/other items net income (loss) is detailed below:
Three months ended Year ended
December 31, December 31,
----------------------- -----------------------
2003 2002 2003 2002
---------- --------- ---------- ----------
Non-segment (loss) income and other (1) $ (15) $ (12) $ (44) $ 4
Non-segment restructuring, impairment and other
charges and credits (57) (13) (208)
Interest income 8 7 32 41
Asbestos settlement (25) (413)
Gain on repurchases of debt, net 86 19 176
Benefit (provision) for income taxes 18 (8) 170 (24)
Minority interests 1
Equity in earnings of associated companies (2) 19 2 83 8
Income from discontinued operations 430 478
--------- -------- --------- ---------
Net income (loss) $ 5 $ 448 $ (166) $ 476
========= ======== ========= =========
(1) Includes non-segment operations and other corporate activities.
(2) Includes amounts derived from corporate investments and activities,
primarily Dow Corning Corporation in 2003.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; in millions except headcount)
When used in these notes, the terms "we," "our" or "us" refer to Corning
Incorporated and its consolidated subsidiaries.
1. Restructuring, Impairment and Other Charges and Credits
In the fourth quarter of 2003, we recorded restructuring, impairment and other
charges of $34 ($26 after tax), offset by credits of $13 ($28 after tax),
resulting in a net charge of $21 ($2 after-tax credit). A summary of these
charges and credits follow:
Specialty Materials
On December 4, 2003, we announced our plans to consolidate our high purity fused
silica and fluoride crystal manufacturing operations into other locations. These
actions resulted in the closure of our North Brookfield, MA facility at December
31, 2003 and the planned closure of our Charleston, SC facility by March 31,
2004. Approximately 100 employees will be affected.
In connection with these actions, we will record a total charge of $63, of which
$27 ($22 after tax) was recorded in the fourth quarter. We recorded a charge of
$4 related to exit and employee separation costs and a fixed asset impairment
charge of $11 in the fourth quarter. In addition, we are accelerating $48 of
depreciation on assets to be disposed of following the closure of our Charleston
plant, of which $12 was recorded in the fourth quarter of 2003 and included in
restructuring, impairment and other charges and credits. The remaining $36 will
be recorded in the first quarter of 2004.
Other
We also recorded a $7 ($4 after tax) restructuring charge relating to our
Telecommunications segment. This charge included $4 of employee separation costs
and $3 of exit costs.
Credits
In the fourth quarter of 2003, we reversed $13 ($28 after tax) of reserves
related to prior years' restructuring charges, primarily in the
Telecommunications segment. The reversals included $3 related to employee
separation costs which were less than estimated, $1 related to exit costs which
were less than estimated, and $9 related to assets that were previously
impaired. We also recorded a $20 foreign deferred tax benefit adjustment related
to restructuring and impairment charges recorded in the fourth quarter of 2002.
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.
2. Asbestos Settlement
On March 28, 2003, we announced that we had reached agreement with the
representatives of asbestos claimants for the settlement of all current and
future asbestos claims against us and Pittsburgh Corning Corporation (PCC),
which might arise from PCC products or operations. Accordingly, we recorded a
charge of $298 ($192 after tax) in the first quarter. The charge included the
value of 25 shares of Corning common stock which we will contribute as part of
the settlement. Also at that time, we indicated that any changes in the value of
our common stock contribution would be recognized in our quarterly results
through the date of contribution to the settlement trust. As required, we
recorded a mark-to-market charge of $25 ($17 after tax) in the fourth quarter
reflecting the increased fair value of the shares to its common stock
contribution. We have recorded total charges of $413 ($263 after tax) to reflect
the settlement and to mark-to-market the value of our common stock for the year
ended December 31, 2003.
3. Samsung Corning Co., Ltd.
As a result of a weaker outlook for the conventional television and monitor
markets, Corning's 50 percent owned equity venture, Samsung Corning Co., Ltd.,
recorded an impairment charge in the fourth quarter related to its long-lived
assets. Our equity earnings in the fourth quarter included $66 after-tax related
to this impairment charge.
4. Funding of the Corning Pension Plan
We sponsor defined benefit pension plans covering certain hourly and salaried
employees in the United States. Although we are not required by employee benefit
and tax laws to make contributions to our pension plans prior to 2005, we
contributed $60 in the fourth quarter and $160 in 2003 to our U.S. pension plans
to improve these plans' funded status.
5. Supplementary Statements of Cash Flows Data
Supplemental disclosure of cash flow data follows:
For the three months ended For the year ended
December 31, December 31,
-------------------------- ------------------------
2003 2002 2003 2002
---- ---- ---- ----
Changes in certain working capital items:
Trade accounts receivable $ (5) $ 56 $ 153
Inventories 35 47 $ 108 135
Other current assets 15 (246) 49 (363)
Accounts payable and other current liabilities,
net of restructuring payments 9 101 (219) (158)
----- ------ ----- -------
Total $ 54 $ (42) $ (62) $ (233)
===== ====== ===== =======
6. Income Tax
In the fourth quarter of 2003, the effective tax benefit rate was impacted by
certain items such as restructuring, impairment and other charges and credits,
the asbestos settlement and debt transactions. Excluding these items, the rate
was 33 percent for the quarter and year ended December 31, 2003.
CORNING INCORPORATED
QUARTERLY SEGMENT SALES INFORMATION
(Unaudited; in millions)
2003
-------------------------------------------------------------
Q1 Q2 Q3 Q4 Total
-------- -------- ------- ------- --------
Telecommunications
Fiber and cable $ 193 $ 178 $ 209 $ 180 $ 760
Hardware and equipment 122 136 134 143 535
Photonic technologies 18 15 10 11 54
Controls and connectors 19 18 17 23 77
-------- -------- ------- ------- --------
Segment net sales $ 352 $ 347 $ 370 $ 357 $ 1,426
======== ======== ======= ======= ========
Technologies
Display technologies $ 117 $ 135 $ 144 $ 199 $ 595
Environmental 115 117 121 123 476
Life sciences 73 72 70 66 281
Conventional video components 25 24 14 2 65
Other technologies businesses 58 52 47 67 224
-------- -------- ------- ------- --------
Segment net sales $ 388 $ 400 $ 396 $ 457 $ 1,641
======== ======== ======= ======= ========
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.
Exhibit 99.2
------------
Reconciliation of Non-GAAP Financial Measures
---------------------------------------------
GAAP Reconciliation
Q1 2004
Corning's earnings estimate for the first quarter is a non-GAAP financial
measure as it excludes certain items listed below. The company believes
presenting earnings estimates that exclude these items is helpful in
understanding Corning's operating results.
Range
-------------------------
Guidance: EPS excluding certain items $0.04 $0.05
Items not included within guidance:
Gain on sale of CAV equipment(1)
Mark to market for asbestos litigation (2)
Restructuring and impairment charges (3)
(1) Corning expects to record a gain from the sale of CAV equipment to the
Henan Anyang CPT Glass Bulb Group, Xinyi Electronic Glass, Co., LTD. The sale
is expected to be completed in the first half of 2004, as certain government
approvals and other customary asset purchase conditions are met. As these
conditions are met and the purchase price is received, Corning will record the
gain. The total pre-tax gain is estimated to be $40 million, $13 million
after-tax and minority interest. Corning recorded $5 million of the expected
gain in the third quarter of 2003. Corning expects to record the remaining
gain during the first half of 2004.
(2) As part of Corning's asbestos settlement for Pittsburgh Corning, the
company will be contributing 25 million shares of Corning common stock to the
trust, along with some cash. The common stock is expected to be contributed to
the trust in mid-2004, after the claimants have approved the plan and all
appeals have been resolved. Until the common stock is contributed to the
trust, the change in Corning's stock price from the closing price of $10.43 on
12/31/03 to the closing price on 3/31/04 will be recognized in our first
quarter results.
(3) Corning expects to record $36 million of pre-tax restructuring, impairment
and other charges announced in the fourth quarter related to its decision to
consolidate its high purity fused silica and flouride crystal manufacturing
operations into other locations.
Please note that the company may pursue other financing, restructuring and
divestiture activities at any time in the future, and that the potential
impact of these events is not included within Corning's fourth quarter
guidance.
This schedule contains forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward looking
statements are based on current expectations and involve certain risks and
uncertainties. Actual results may differ from those projected in the forward
looking statements. Additional information concerning factors that could cause
actual results to materially differ from those in the forward looking
statements is contained in the Securities and Exchange Commission filings of
this Company.
Reconciliation of Non-GAAP Financial Measures
---------------------------------------------
GAAP Reconciliation
Years Ended December 31, 2003 and 2002
(Unaudited; amounts in millions, except per share amounts)
After tax and Minority Interest
For the years ended
December 31,
-------------------------------
2003 2002 Improvement
--------- --------- -----------
Income (loss) from continuing operations,
excluding special items $ 128 $ (392) $ 520
========
Special items:
Restructuring, impairment and other charges and
credits, net ($111 and $2,080 pretax) (26) (1,462)
Asbestos settlement ($413 pre-tax) (263)
Samsung Corning Co., Ltd. asset impairment charge (66)
Other equity company impairments (8) (34)
Gain on repurchases of debt, net ($19 and $176 pre-tax) 12 108
--------- --------
Loss from continuing operations $ (223) $ (1,780)
========= ========
The company's comment about "...improved our profitability by more than $500
million, before special items," is a non-GAAP financial measure that excludes
the special items in the periods being compared. The company believes presenting
this comparison is helpful in understanding the improvement in Corning's
operating results including equity earnings.