Hi David - I agree with your observations. This is from GLW's latest 10Q dated May 7, 2002:
"...Liquidity and Capital Resources
At March 31, 2002, Corning had $1.8 billion in cash and short-term investments and an unused revolving credit facility of $2.0 billion. Cash and cash equivalents decreased $79 million from December 31, 2001, while short-term investments decreased $315 million for the quarter. The total decrease in cash and short-term investments of $400 million includes $136 million of net debt repayments and $58 million of restructuring payments. Cash and short-term investments increased $676 million from March 31, 2001, primarily due to the issuance of convertible debt for $665 million in November 2001...."
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Corning has all ready booked the bulk of their 2002 $600 million restructuring charge (40% to be paid in cash) with only about $115 million left for all of 2002. As of March 2002 Corning maintained a total debt to capital ratio of 47% even after reflecting almost 80% of the one time $600 million restructuring charges. (Note their short term credit line of $2 Bil includes a covenant requiring Corning to maintain a total debt to capital ratio not greater than 60%.). Their short term revolving credit facility is current and is used mainly to finance current day to day operations with an average period of 11 days.
It appears to me that the tough part is behind them. They plan to use $240 million of their banked cash to cover their restructure charge and this is the main reason for the rise in their debt to capital ratio (now 47%). IMO, there is more than enough padding to stay under that 60% bank covenant.
Finally, I believe the company has greater book value than as reported simply because all their real estate holdings are recorded at cost rather than at market. I assume for a 150 year old company, they have some booked real estate assets valued at $0.10 when in fact (just factoring for inflation) are worth $1.00.
To summarize, as long as their books are accurate and there are no out of the ordinary unforseen "aspetos type" liabilities, GLW becomes a great value play IMO. Many of their current business segments have huge potential for future growth. Even if you forget about the fibre business for the short term and look at their current operations, the company looks like a good keeper to me.
If I get the chance to buy any below $6, I may just load up the truck.
EKS |
