Corning earnings part 2:
See Notes to Consolidated Financial Statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except per share amounts)
March 31, December 31,
2004 2003
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 1,010 $ 833
Short-term investments, at fair value 451 433
------------ ------------
Total cash, cash equivalents and
short-term investments 1,461 1,266
Trade accounts receivable, net 544 525
Inventories 504 467
Deferred income taxes 242 242
Other current assets 190 194
------------ ------------
Total current assets 2,941 2,694
Investments 1,065 1,045
Property, net 3,640 3,620
Goodwill 1,730 1,735
Other intangible assets, net 155 166
Deferred income taxes 1,277 1,225
Other assets 265 267
------------ ------------
Total Assets $ 11,073 $ 10,752
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Loans payable $ 313 $ 146
Accounts payable 376 333
Other accrued liabilities 1,008 1,074
------------ ------------
Total current liabilities 1,697 1,553
Long-term debt 2,553 2,668
Postretirement benefits other
than pensions 609 619
Other liabilities 414 412
Commitments and contingencies
Minority interests 30 36
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: 789 thousand
and 854 thousand 79 85
Common stock - Par value $0.50 per share;
Shares authorized: 3.8 billion;
Shares issued: 1,407 million and
1,401 million 703 701
Additional paid-in capital 10,323 10,298
Accumulated deficit (5,089) (5,144)
Treasury stock, at cost; Shares held:
35 million and 58 million (346) (574)
Accumulated other comprehensive income 100 98
------------ ------------
Total shareholders' equity 5,770 5,464
------------ ------------
Total Liabilities and
Shareholders' Equity $ 11,073 $ 10,752
============ ============
Certain amounts for 2003 were reclassified to conform with 2004
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
March 31,
2004 2003
---------- ----------
Cash flows from operating activities:
Net income (loss) $ 55 $ (205)
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Amortization of purchased intangibles 10 9
Depreciation 120 118
Restructuring, impairment and other
charges and credits 34 51
Asbestos settlement 19 298
Loss (gain) on repurchases and retirement
of debt, net 23 (4)
Undistributed earnings of associated
companies (29) 7
Minority interests, net of dividends paid (37)
Deferred tax benefit (40) (178)
Interest expense on convertible debentures 2 7
Restructuring payments (34) (94)
Income tax refund 191
Tax benefit on stock options 6
Changes in certain working capital items:
Trade accounts receivable (17) (13)
Inventories (32) 7
Other current assets 3 10
Accounts payable and other current
liabilities, net of restructuring
payments (66) (118)
Other, net (9) (26)
---------- ----------
Net cash provided by operating activities 45 23
---------- ----------
Cash flows from investing activities:
Capital expenditures (134) (55)
Net proceeds from sale of precision
lens business 9
Proceeds from sale or disposal of assets 9 13
Short-term investments - acquisitions (302) (427)
Short-term investments - liquidations 284 369
Restricted investments - liquidations 2 3
---------- ----------
Net cash used in investing activities (141) (88)
---------- ----------
Cash flows from financing activities:
Net repayments of loans payable (2) (62)
Proceeds from issuance of long-term
debt, net 396
Repayments of long-term debt (141) (189)
Proceeds from issuance of common
stock, net 11 3
Cash dividends paid to preferred
shareholders (2) (3)
Proceeds from the exercise of stock
options 12
---------- ----------
Net cash provided by (used in) financing
activities 274 (251)
---------- ----------
Effect of exchange rates on cash (1) 17
---------- ----------
Net increase (decrease) in cash and cash
equivalents 177 (299)
Cash and cash equivalents at beginning
of period 833 1,426
---------- ----------
Cash and cash equivalents at end of period $ 1,010 $ 1,127
========== ==========
Certain amounts for 2003 were reclassified to conform with 2004
classifications.
See Notes to Consolidated Financial Statements.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
Our segments were previously reported as Telecommunications and
Technologies. Due to a change in our operating segments in the first
quarter, effective January 1, 2004, we will report Telecommunications,
Display Technologies, Environmental Technologies and Life Sciences as
separate operating segments. Prior year information has been restated
to conform to this new presentation.
Environ- Un-
Display mental allocated Consoli-
Telecom- Tech- Tech- Life and dated
munications nologies nologies Sciences Other Total
----------- -------- -------- -------- -------- --------
For the three
months ended
March 31,
2004
Net sales $ 312 $ 230 $ 141 $ 79 $ 82 $ 844
Research,
development
and
engineering
expenses (1) $ 25 $ 16 $ 20 $ 9 $ 14 $ 84
Restructuring,
impairment and
other charges
and (credits)
(2) $ (4) $ 38 $ 34
Interest
expense (3) $ 16 $ 11 $ 5 $ 1 $ 3 $ 36
(Benefit)
provision for
income taxes $ (23) $ 26 $ 3 $ 3 $ (21) $ (12)
(Loss) income
before
minority
interests and
equity
earnings
(4)(5) $ (47) $ 53 $ 6 $ 5 $ (69) $ (52)
Minority
interests 1 (1)
Equity in
earnings of
associated
companies 3 65 39 107
-------- -------- -------- -------- -------- --------
Net (loss)
income $ (43) $ 118 $ 6 $ 5 $ (31) $ 55
======== ======== ======== ======== ======== ========
For the three
months ended
March 31,
2003
Net sales $ 352 $ 117 $ 115 $ 73 $ 89 $ 746
Research,
development
and
engineering
expenses (1) $ 38 $ 12 $ 21 $ 7 $ 15 $ 93
Restructuring,
impairment
and other
charges and
(credits) (2) $ (9) $ 60 $ 51
Interest
expense (3) $ 21 $ 9 $ 5 $ 2 $ 3 $ 40
(Benefit)
provision for
income taxes $ (25) $ 6 $ 2 $ 4 $ (131) $ (144)
(Loss) income
before
minority
interests and
equity
(losses)
earnings
(4)(5) $ (60) $ 13 $ 3 $ 8 $ (265) $ (301)
Minority
interests (6) 37 37
Equity in
(losses)
earnings of
associated
companies (3) 24 2 36 59
-------- -------- -------- -------- -------- --------
Net (loss)
income $ (63) $ 37 $ 5 $ 8 $ (192) $ (205)
======== ======== ======== ======== ======== ========
For the three
months ended
June 30, 2003
Net sales $ 347 $ 135 $ 117 $ 72 $ 81 $ 752
Research,
development
and
engineering
expenses (1) $ 32 $ 12 $ 20 $ 7 $ 14 $ 85
Restructuring,
impairment and
other charges
and (credits)
(2) $ (19) $ 68 $ 49
Interest
expense (3) $ 22 $ 9 $ 5 $ 2 $ 4 $ 42
(Benefit)
provision for
income taxes $ (5) $ 11 $ 2 $ 2 $ (44) $ (34)
(Loss) income
before
minority
interests and
equity
(losses)
earnings
(4)(5) $ (53) $ 22 $ 6 $ 4 $ (94) $ (115)
Minority
interests 33 33
Equity in
(losses)
earnings of
associated
companies,
net of
impairments
(7) (8) 31 (3) 40 60
-------- -------- -------- -------- -------- --------
Net (loss)
income $ (61) $ 53 $ 3 $ 4 $ (21) $ (22)
======== ======== ======== ======== ======== ========
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
Environ- Un-
Display mental allocated Consoli-
Telecom- Tech- Tech- Life and dated
munications nologies nologies Sciences Other Total
----------- -------- -------- -------- -------- --------
For the three
months ended
Sept. 30,
2003
Net sales $ 370 $ 144 $ 121 $ 70 $ 67 $ 772
Research,
development
and
engineering
expenses (1) $ 25 $ 12 $ 22 $ 7 $ 14 $ 80
Restructuring,
impairment and
other charges
and (credits)
(2) $ (2) $ (8) $ (10)
Interest
expense (3) $ 16 $ 9 $ 5 $ 6 $ 36
(Benefit)
provision for
income taxes $ (16) $ 13 $ 2 $ 1 $ (30) $ (30)
(Loss) income
before
minority
interests and
equity
earnings
(4)(5) $ (28) $ 25 $ 2 $ 3 $ (46) $ (44)
Minority
interests 2 2
Equity in
earnings of
associated
companies 1 39 1 34 75
-------- -------- -------- -------- -------- --------
Net (loss)
income $ (27) $ 64 $ 3 $ 3 $ (10) $ 33
======== ======== ======== ======== ======== ========
For the three
months ended
Dec. 31, 2003
Net sales $ 357 $ 199 $ 123 $ 66 $ 75 $ 820
Research,
development
and
engineering
expenses (1) $ 25 $ 19 $ 24 $ 7 $ 11 $ 86
Restructuring,
impairment and
other charges
and (credits)
(2) $ (6) $ 27 $ 21
Interest
expense (3) $ 16 $ 12 $ 4 $ 1 $ 3 $ 36
(Benefit)
provision for
income taxes $ (32) $ 15 $ (1) $ (28) $ (46)
(Loss) income
before
minority
interests and
equity
(losses)
earnings
(4)(5) $ (17) $ 31 $ (2) $ (1) $ (56) $ (45)
Minority
interests 1 1
Equity in
(losses)
earnings of
associated
companies (1) 50 (34) 15
-------- -------- -------- -------- -------- --------
Net (loss)
income $ (18) $ 81 $ (2) $ (1) $ (89) $ (29)
======== ======== ======== ======== ======== ========
(1) Non-direct research, development and engineering expenses are
allocated based upon direct project spending for each segment.
(2) Related tax (expense) benefit:
Three months ended March 31, 2004: $(1), $0, $0, $0, $15
and $14.
Three months ended March 31, 2003: $(4), $0, $0, $0, $12
and $8.
Three months ended June 30, 2003: $2, $0, $0, $0, $16
and $18.
Three months ended September 30, 2003: $2, $0, $0, $0, $(2)
and $0.
Three months ended December 31, 2003: $17, $0, $0, $0, $6
and $23.
(3) Interest expense is allocated to segments based on a percentage of
segment net operating assets. Consolidated subsidiaries with
independent capital structures do not receive additional
allocations of interest expense.
(4) Many of Corning's administrative and staff functions are performed
on a centralized basis. Where practicable, Corning charges these
expenses to segments based upon the extent to which each business
uses a centralized function. Other staff functions, such as
corporate finance, human resources and legal are allocated to
segments, primarily as a percentage of sales.
(5) Includes an allocation of depreciation of corporate property,
plant and equipment not specifically identifiable to a segment.
Related depreciable assets are not allocated to segment assets.
(6) Includes $30 related to impairment of long-lived assets of Corning
Asahi Video for the three months ended March 31, 2003.
(7) Includes $7 related to impairments of equity investments in the
Telecommunications segment for the three months ended June 30,
2003.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
SEGMENT RESULTS
(Unaudited; in millions)
A reconciliation of reportable segment net income (loss) to
consolidated net income (loss) follows:
Three months ended
---------------------------------------
March 31, March 31, June 30, Sept. 30, Dec. 31,
2004 2003 2003 2003 2003
--------- --------- --------- --------- ---------
Net income (loss) of
reportable segments $ 86 $ (13) $ (1) $ 43 $ 60
Non-reportable
operating segments
net loss (1) (18) (21) (26) (1) (91)
Unallocated amounts:
Non-segment loss
and other (2) (3) (15) (14) (4) (18)
Non-segment
restructuring,
impairment and
other (charges)
and credits (10) (3)
Asbestos settlement (19) (298) (39) (51) (25)
Interest income 6 8 9 7 8
(Loss) gain on
repurchases of
debt (23) 4 13 2
Benefit for income
taxes (3) 2 112 21 19 18
Equity in earnings
of associated
companies (4) 24 18 25 21 19
--------- --------- --------- --------- ---------
Net income (loss) $ 55 $ (205) $ (22) $ 33 $ (29)
========= ========= ========= ========= =========
(1) Includes the results of non-reportable operating segments.
(2) Includes the results of non-segment operations and other corporate
activities.
(3) Includes tax associated with non-segment restructuring, impairment
and other charges.
(4) Includes amounts derived from corporate investments, primarily Dow
Corning Corporation.
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Restructuring, Impairment and Other Charges and Credits
In the first quarter of 2004, we recorded net restructuring, impairment and other charges and credits totaling $34 million ($21 million after tax and minority interest). A summary of these charges and credits follow:
We recorded $39 million of accelerated depreciation and $1 million of exit costs relating to the final shutdown of our semiconductor materials manufacturing facility in Charleston, South Carolina, which we previously announced in the fourth quarter of 2003.
We recorded credits of $6 million primarily related to proceeds in excess of assumed salvage values for assets that were previously impaired.
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 million ($192 million after tax) in the first quarter of 2003. The charge included the value of 25 million 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 $19 million ($18 million after tax) in the first quarter of 2004 reflecting the increased fair value of Corning's common stock. Since the first quarter of 2003, we have recorded total charges of $432 million ($282 million after tax) to reflect the settlement and to mark-to-market the value of our common stock.
3. Long-Term Debt
In March 2004, we issued $400 million of senior unsecured notes, of which $200 million aggregate principal amount of 5.90% notes mature on March 15, 2014 and $200 million aggregate principal amount of 6.20% notes mature on March 15, 2016. These senior unsecured notes were issued under our existing $5 billion universal shelf registration statement, which became effective in March 2001. We realized net proceeds of approximately $396 million from the issuance of these notes. We will pay interest on these senior unsecured notes on each March 15 and September 15. These senior unsecured notes are redeemable in whole or in part at any time.
During the first quarter of 2004, we issued 22 million shares of common stock and paid $24 million in cash in exchange for 3.5% convertible debentures with a book value of $213 million. In addition, we repurchased 150 thousand of our zero coupon convertible debentures with a book value of $119 million for $117 million in cash. As a result of these transactions, we recorded a loss of $23 million ($21 million after tax) in first quarter 2004.
4. Income Tax
In the first quarter of 2004, the effective tax benefit rate excluding restructuring, impairment, and other charges and credits, the asbestos settlement, and loss on repurchases and retirement of debt transactions was 33%.
CORNING INCORPORATED
QUARTERLY SALES INFORMATION
(Unaudited; in millions)
2004 2003
Q1 Q1 Q2 Q3 Q4 Total
-------- -------- -------- -------- -------- --------
Telecommunications
Fiber and
cable $ 149 $ 193 $ 178 $ 209 $ 180 $ 760
Hardware and
equipment 163 141 154 151 166 612
Photonic
technologies 18 15 10 11 54
-------- -------- -------- -------- -------- --------
312 352 347 370 357 1,426
Display
Technologies 230 117 135 144 199 595
Environmental
Technologies 141 115 117 121 123 476
Life Sciences 79 73 72 70 66 281
Other
Conventional
video
components 2 25 24 14 2 65
Other
businesses 75 58 52 47 67 224
Steuben 5 6 5 6 6 23
-------- -------- -------- -------- -------- --------
82 89 81 67 75 312
Total Corning $ 844 $ 746 $ 752 $ 772 $ 820 $ 3,090
======== ======== ======== ======== ======== ========
The above supplemental information is intended to facilitate analysis
of Corning's businesses.
--------------------------------------------------------------------------------
Contact:
Corning Incorporated
Media Relations Contact:
Daniel F. Collins, 607-974-4197
collinsdf@corning.com
or
Investor Relations Contact:
Kenneth C. Sofio, 607-974-7705
sofiokc@corning.com
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