8,000,000 Shares
Filed pursuant to 424(b)(1)
File no. 33-51481
CORNING INCORPORATED
Common Stock
(par value $.50 per share)
The net proceeds from the offering will be used to finance the acquisition of
certain assets constituting the optical fiber business of Northern Telecom
Limited and the purchase of the shares of capital stock of Corning Vitro
Corporation held by Vitro, S.A. See "Business--Recent Developments".
The last reported sale price of the Common Stock on the New York Stock
Exchange on January 26, 1994 was $30.250 per share. See "Market Prices of
Common Stock and Dividends".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECU-
RITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus relates to an aggregate of 8,000,000 shares of Common Stock
of Corning Incorporated to be purchased from the Company by Goldman, Sachs &
Co. as the Underwriter at a price of $30.00 per share ($240,000,000 in the
aggregate), less a commission of $.90 per share ($7,200,000 in the
aggregate). The Company will pay the expenses of the offering estimated at
$280,000.
The shares may be offered by the Underwriter from time to time in one or more
transactions (which may involve block transactions) on the New York Stock
Exchange, in the over-the-counter market, through negotiated transactions or
otherwise at market prices prevailing at the time of the sale or at prices
otherwise negotiated, subject to prior sale, when, as and if delivered to and
accepted by the Underwriter. See "Underwriting".
Goldman, Sachs & Co.
The date of this Prospectus is January 26, 1994
2
<PAGE>
AVAILABLE INFORMATION
The Company (as defined below) is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information and the Registration Statement
referred to below may be inspected at the Commission's public reference
facilities, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as
well as the following regional offices: 7 World Trade Center, 13th floor, New
York, New York 10048, and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and copies of such materials may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, such
reports, proxy statements and other information concerning the Company and
such Registration Statement may also be inspected at the offices of the New
York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York
10005, upon which exchange certain securities of the Company are listed.
This Prospectus constitutes a part of the Registration Statement with respect
to the Offering (the "Offering") of 8,000,000 shares (the "Shares") of the
Common Stock, par value $.50 per share ("Common Stock"), of the Company filed
by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). As permitted by the rules issued by the
Commission under the Securities Act, this Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement and to the exhibits relating thereto for
further information with respect to the Company and the Common Stock. Any
statements contained herein concerning the provisions of any document filed
with the Commission are not necessarily complete, and each such statement is
qualified in its entirety by reference to the copy of such document filed
with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-3247) are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 3, 1993, filed pursuant to Section 13(a) of the Exchange Act.
2. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since January 3, 1993, consisting of the Company's
Quarterly Reports on Form 10-Q for the twelve weeks ended March 28, 1993, the
twenty-four weeks ended June 20, 1993 and the forty weeks ended October 10,
1993; and the Company's Current Reports on Form 8-K dated January 19, 1993,
January 25, 1993, April 6, 1993, June 29, 1993, August 4, 1993, August 13,
1993, August 27, 1993, September 14, 1993, September 21, 1993, October 19,
1993 and January 24, 1994, respectively. Certain historical financial
statements of Damon Corporation ("Damon") which was acquired in 1993 are
included in the Company's Current Reports on Form 8-K dated August 4, 1993
and August 13, 1993.
3. The description of the Company's Preferred Share Purchase Rights Plan
contained in the registration statement on Form 8-A filed by the Company on
July 8, 1986, including the amendment thereto on Form 8 filed by the Company
on October 9, 1989.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the dates of filing of such
documents.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon the written or oral request of any such person,
a copy of any or all of the documents incorporated by reference herein, other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents. Such request should be directed
to the Secretary, Corning Incorporated, One Riverfront Plaza, Corning, New
York 14831; telephone (607) 974-9000.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including the notes
thereto) appearing elsewhere or incorporated by reference in this Prospectus.
Unless otherwise specified, references herein to the "Company" or "Corning"
refer to Corning Incorporated and its consolidated subsidiaries. Prospective
investors should carefully read the entire Prospectus.
The Company
Corning traces its origins to a glass business established by the Houghton
family in 1851. The present corporation was incorporated in the State of New
York in December 1936, and its name was changed from Corning Glass Works to
Corning Incorporated on April 28, 1989.
Corning is an international corporation competing in four broadly-based
business segments: Specialty Materials, Communications, Laboratory Services
and Consumer Products. Corning is engaged principally in the manufacture and
sale of products made from specialty glasses and related inorganic materials
having special properties of chemical stability, electrical resistance, heat
resistance, light transmission and mechanical strength. Corning and its
subsidiaries annually produce some 60,000 different products at 46 plants in
eight countries. In addition, Corning, through subsidiaries and affiliates,
engages in laboratory services businesses, including life and environmental
sciences and clinical-laboratory testing, at 54 facilities in ten countries.
Corning has followed and will continue to follow a consistent strategy for
its businesses:
--to provide quality products and services to the four broad market
segments in which it chooses to compete,
--to be a market leader in each of its businesses, and
--to fully utilize the talents and capabilities of all its employees.
Corning utilizes various strategies and tactics appropriate to each business
and its specific markets. However, all strategies incorporate certain key
elements.
Technology has been at the core of Corning's historical success. Corning's
investment in research and development has been significant at $131 million
in 1991 and $151 million in 1992. Research and development spending has
enabled Corning to remain at the forefront of technological advances for
decades with new and improved products. Included among Corning's important
technological discoveries over the years are optical fiber for
telecommunications, ceramic substrates for automotive and stationary emission
control devices, photosensitive glasses for various markets and mass produced
television bulbs and incandescent light bulbs. Recent developments include an
electrically heated automotive pollution control substrate, an expanded line
of optical communications amplifiers, dispersion shifted optical fiber, a
glass ceramic magnetic memory disk and active matrix liquid-crystal display
glasses.
Alliances and acquisitions are utilized to leverage Corning's technologies
and market position. Corning's extensive experience with alliances spans more
than fifty years and includes jointly owned companies with The Dow Chemical
Company ("Dow") in silicones, PPG Industries Inc. in glass block and foam
glass, the Samsung Group and Asahi Glass in television bulbs, Siemens AG
("Siemens") in opto-electronics, and more recently with Mitsubishi Heavy
Industries Ltd. in stationary emission control devices.
Corning has recently completed two major strategic acquisitions, as described
under "Recent Developments". Management believes that the acquisition of
Damon will provide operating synergies with the MetPath division ("MetPath")
of its wholly owned subsidiary, Corning Lab Services Inc. ("CLSI"). Corning
has also acquired Costar Corporation ("Costar"), which markets plastic
labware for use in the life sciences industry. Management believes that
Costar's product development capabilities, when combined with Corning's
manufacturing capabilities, will provide innovative and high quality products
to this growing industry.
4
<PAGE>
Quality is an important element of all of Corning's business strategies. This
embodies an unwavering focus on satisfying the customer, continuous
improvement of the processes which deliver products and services to the
customer and creating an empowered workforce dedicated to serving the
customer.
Recent Developments
1993 Earnings Announcement
On January 24, 1994, Corning announced its fourth quarter and full year 1993
earnings. Including the restructuring and other special charges in the third
quarter and the Dow Corning charge in the fourth quarter, Corning reported a
net loss of $15.2 million, or $0.09 per share, in 1993 compared with a net
loss of $12.6 million, or $0.08 per share, in 1992. Excluding special
charges, the one time impact of accounting changes, extraordinary credits and
non operating gains in both years, net income for 1993 was $315.3 million, or
$1.63 per share, compared with net income of $314.4 million, or $1.66 per
share, in 1992.
Including the Dow Corning charge in the fourth quarter, Corning reported a
net loss of $120.9 million, or $0.64 per share, in the 1993 fourth quarter
compared with net income of $41.2 million, or $0.21 per share, in the 1992
fourth quarter. Excluding special charges and extraordinary credits in both
quarters, fourth quarter net income totaled $82.2 million, or $0.42 per
share, in 1993 compared with $79.9 million, or $0.42 per share, in 1992.
Sales for 1993 totaled $4.0 billion, up 8 percent over 1992. Fourth quarter
sales, at $1.1 billion, were up 9 percent compared with 1992. Sales growth
was primarily attributable to the Damon and Costar acquisitions in the second
half of the year.
The earnings release and summary financial statements are included in
Corning's Current Report on Form 8-K filed on January 24, 1994. See
"Incorporation of Certain Documents by Reference" and "Selected Consolidated
Financial Data."
Acquisition of NTL Assets
On December 14, 1993, Northern Telecom Limited ("NTL"), Siecor Corporation
("Siecor"), a consolidated corporation which manufactures and sells optical
cable, owned 50% by each of Siemens and the Company, and the Company reached
an agreement whereby the Company would purchase the net assets constituting
NTL's optical fiber business for $87 million in cash and Siecor would
purchase the net assets constituting NTL's optical cable business in
Saskatoon, Saskatchewan (referred to herein as the "optical cable business")
for $43 million in cash. Corning will finance the acquisition of NTL's
optical fiber business and an approximate $25 million capital contribution to
Siecor with a portion of the proceeds of the Offering. Siecor will finance
the acquisition of NTL's optical cable business with a capital contribution
from Siemens and the Company. Closing of both transactions is expected to
occur during the first quarter of 1994. See "Use of Proceeds".
Vitro Transaction
On December 14, 1993, Vitro, S.A. ("Vitro") and the Company reached an
agreement in principle whereby, in two separate transactions, Vitro purchased
in December 1993 the shares of capital stock of Vitro Corning, S.A. de C.V.
("Vitro Corning") owned by the Company and the Company will purchase in early
1994 the shares of capital stock of Corning Vitro Corporation ("Corning
Vitro") owned by Vitro. The net cost to Corning of the two transactions will
be $131 million. Corning and Vitro will continue their consumer products
alliance through cross distribution and supply agreements. Corning will
finance the payment to Vitro with a portion of the proceeds of the Offering.
See "Use of Proceeds".
Acquisition of Damon
On August 4, 1993, Corning, through a wholly owned subsidiary, acquired all
outstanding shares of common stock of Damon for approximately $405 million,
including acquisition expenses. Damon operates laboratories which provide the
medical profession with a full range of routine and esoteric testing services
similar to those provided by MetPath. Corning has financed the acquisition of
Damon and the refinancing of approximately $167 million of Damon's debt under
financing agreements entered into with certain commercial banks.
Approximately $200 million of such financing has been retired with proceeds
from the issuance of long-term debt of the Company. In January 1994, Corning
extended the terms of such financing agreements to December 31, 1995. Corning
intends to retire a significant portion of the remaining acquisition debt
with the proceeds of an offering of equity securities during 1994. See
"Business--Recent Developments--Acquisition of Damon".
5
<PAGE>
Acquisition of Costar
On September 8, 1993, Corning acquired Costar for approximately 5.5 million
shares of Corning Common Stock and options to purchase approximately 300,000
shares of Corning Common Stock. Costar is a manufacturer of a broad line of
innovative and high quality disposable plastic, filtration and other products
used by life science laboratories throughout the world. See "Business--Recent
Developments--Acquisition of Costar".
Restructuring and Other Special Charges in Third Quarter of 1993
In the third quarter of 1993, Corning recorded restructuring and other
special charges totalling $130 million aftertax. These charges included the
following:
MetPath Settlement
In September 1993, MetPath reached a compromise agreement with the Civil
Division of the Department of Justice ("DOJ") to settle claims brought on
behalf of the Inspector General, U.S. Department of Health and Human Services
(the "Inspector General"). The claims related to the marketing, sale, pricing
and billing of certain blood test series provided to Medicare patients.
MetPath recorded a charge of $36.5 million ($22.0 million after tax) to
reflect the settlement and related legal expenses during the third quarter
1993. The settlement does not constitute an admission by MetPath with respect
to any issue arising from the civil action.
Restructuring Charge
During the third quarter 1993, Corning recorded charges of $170.5 million
($98.5 million after tax of $64.6 million and minority interest of $7.4
million) as a result of costs to integrate the Damon and Costar acquisitions
and as a result of a planned company-wide restructuring program announced
October 6, 1993, to reduce overhead costs during the next 12 to 14 months.
Corning also recognized a $9.5 million reduction in equity earnings as a
result of a restructuring charge taken by Vitro Corning.
Dismissal from Federal Implant Cases
In December 1993, the Company was dismissed by the United States District
Court for the Northern District of Alabama from the more than 3,000
consolidated cases pending in federal courts nationwide which allege personal
injuries due to silicone-gel breast implants. The decision by the District
Court is non-appealable and, although the District Court noted that it was
"highly unlikely" that additional discovery would produce new evidence, the
decision is subject to reconsideration if additional information is
discovered or if there is a change in state law. The Company remains a
defendant in related lawsuits filed in various state courts. Dow Corning
Corporation ("Dow Corning"), a corporation owned 50% by each of Dow and the
Company, remains a defendant in both the federal and state litigation. The
implant products were manufactured or supplied by Dow Corning or a Dow
Corning subsidiary. See "Business--Recent Developments--Breast Implant
Litigation".
Dow Corning Charge in Fourth Quarter of 1993.
On January 14, 1994, Corning announced that as a result of Dow Corning's
announcement on that date that it would take a charge against Dow Corning's
1993 fourth quarter earnings of $640 million pre-tax ($415 million after-tax)
to reflect Dow Corning's estimate, as of that date, of the net present value
of its ultimate exposure in the pending breast implant litigation, Corning
would take a charge of $203 million after-tax against its equity in earnings
of associated companies for the fourth quarter of 1993 and against the
carrying value of its investment in Dow Corning at the end of fiscal 1993.
See "Business--Recent Developments--Breast Implant Litigation--Charges
Announced by Dow Corning and by Corning on January 14, 1994".
Reorganization of Laboratory Services
In December 1993, Corning contributed its ownership interest in CLSI to
Damon, the name of which was changed to Corning Lab Services Inc. on December
31, 1993. Also on December 31, 1993 CLSI's name was changed to MetPath Inc.
None of the references to CLSI, Damon or MetPath in this Prospectus have been
changed to reflect such organizational structure or name change.
6
<PAGE>
The Offering
<TABLE>
<CAPTION>
<S> <C>
Common Stock Offered 8,000,000 shares
Common Stock to be outstanding after the Offering(a) 208,491,721 shares
Use of Proceeds The Company intends to use the net
proceeds of the Offering to
finance the acquisition of the
optical fiber business from NTL
and the shares of capital stock of
Corning Vitro held by Vitro
NYSE symbol GLW
</TABLE>
(a) Amount is pro forma for the Offering based on the number of shares
outstanding as of January 2, 1994. Amount does not include, as of January 2,
1994, 12,461,581 shares of Common Stock which were issuable upon exercise of
stock options granted pursuant to Corning's employee stock option plans,
3,169,368 shares of which were issuable pursuant to options exercisable on
such date, 1,047,248 shares of Common Stock reserved for issuance pursuant to
conversion of outstanding shares of Series B Preferred Stock (as defined
herein), or 700,064 shares of Common Stock issuable upon the conversion of
the 6-1/2% Convertible Subordinated Debentures due May 2006 of Hazleton
Corporation ("Hazleton") which was acquired by the Company in 1987.
Summary Financial Information
The following is a summary of certain consolidated financial information that
has been derived from the consolidated financial statements of the Company.
The summary financial data set forth below for the Company for the 1988
through 1992 fiscal years are derived from its audited financial statements.
The summary financial data set forth below for the first forty weeks of 1993
and 1992 are derived from the Company's unaudited financial statements, which
in the opinion of management contain all adjustments (consisting only of
normal recurring items) necessary for the fair presentation of this
information. The financial data should be read in conjunction with the
information set forth in "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the Company's 1993 earnings release discussed under "Business--
1993 Earnings Announcement" and the historical financial information and
related notes incorporated by reference in this Prospectus.
The unaudited pro forma combined financial information set forth below
reflects the estimated impact on Corning's financial statements of the
acquisition of Damon, the acquisition of Costar, the pending NTL and Vitro
transactions (the "Pending Transactions"), and several other completed
transactions (collectively, the "Transactions"). Such pro forma data assume
the Transactions and the Offering had been completed on December 30, 1991,
for income statement data and by October 10, 1993, for balance sheet data.
The unaudited pro forma combined financial information set forth below is
derived from, and should be read in conjunction with, the unaudited pro forma
combined financial information included elsewhere in the Prospectus and the
historical financial statements of Corning and Damon incorporated by
reference into this Prospectus. The following pro forma financial information
is presented for informational purposes only, and is not necessarily
indicative of the results that would have occurred had the transactions been
completed on the dates indicated or the results that may be attained in the
future.
See "Selected Consolidated Financial Data", "Unaudited Pro Forma Combined
Financial Information", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Incorporation of Certain Documents
by Reference".
7
<PAGE>
<TABLE>
<CAPTION>
Forty
Weeks Ended Fiscal Year Ended
--------------------- -----------------------------------------------------
October October Dec. Dec. Dec.
10, 4, Jan. 3, 29, 30, 31, Jan. 1,
1993 1992 1993 1991 1990 1989 1989
--------- -------- ------- ------- ------- ------- ---------
(dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL:
Income Statement Data:
Net sales $2,921.8 $2,712.5 $3,708.7 $3,259.2 $2,940.5 $2,439.2 $2,121.5
Income before extraordinary credit
and cumulative effect of changes in
accounting methods(a) 105.7 231.7 266.3 311.2 289.1 259.4 292.4
Net income (loss)(a) 105.7 (53.8) (12.6) 316.8 292.0 261.0 210.7
Balance Sheet Data:
Total assets $5,419.5 $4,333.1 $4,286.3 $3,852.6 $3,512.0 $3,360.7 $2,897.9
Working capital 210.1 640.2 465.2 521.0 458.4 487.3 421.1
Loans payable beyond one year 1,208.2 853.5 815.7 700.0 611.2 624.5 499.0
Common stockholders' equity 1,844.4 1,909.6 1,803.8 2,018.8 1,850.3 1,711.2 1,560.7
Per Common Share Data:
Income before extraordinary credit
and cumulative effect of changes in
accounting methods(a) $ 0.55 $ 1.22 $ 1.40 $ 1.66 $ 1.53 $ 1.39 $ 1.63
Net income (loss)(a) 0.55 (0.29) (0.08) 1.69 1.55 1.40 1.17
Common dividends declared(b) 0.51 0.45 0.62 0.68 0.46 0.53 0.48
PRO FORMA: (c)
Income Statement Data:
Net sales $3,320.7 $4,318.2
Income before extraordinary credit
and cumulative effect of changes in
accounting methods 142.2 273.6
Income per share before extraordinary
credit and cumulative effect of
changes in accounting methods $ 0.69 $ 1.34
Balance Sheet Data:
Total assets $5,698.0
Working capital 209.0
Loans payable beyond one year 1,278.2
Common stockholders' equity 2,090.2
(a) Amounts for all periods are significantly impacted by certain
non-recurring gains and losses and the cumulative effect of changes in
accounting methods. See the Notes to Selected Consolidated Financial Data
contained elsewhere in this Prospectus.
(b) Includes special dividends of $0.15, $0.1125 and $0.10 per common share
in 1991, 1989 and 1988, respectively.
(c) See the Notes to Pro Forma Financial Information contained elsewhere in
this Prospectus.
</TABLE>
8
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock in the Offering are
estimated to be approximately $238.7 million. The Company intends to use all
of the net proceeds to acquire NTL's optical fiber business, make a related
capital contribution to Siecor and acquire the shares of capital stock of
Corning Vitro held by Vitro. For information concerning such transactions,
see "Prospectus Summary--Recent Developments" and "Business--Recent
Developments--Acquisition of NTL Assets" and "--Vitro Transaction". In the
event such transactions, or either of them, do not occur, the Company intends
to use the net proceeds to retire a portion of the remaining debt incurred in
connection with the Damon acquisition, which debt bears a variable interest
rate based on the London Interbank Offered Rate and matures on December 31,
1995. The Company intends to issue additional equity securities in 1994 in
order to retire a significant portion of the remaining Damon acquisition
debt. See "Prospectus Summary--Recent Developments--Acquisition of Damon" and
"Business--Recent Developments--Acquisition of Damon."
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at October 10, 1993, and (ii) the pro forma capitalization of the Company as
of such date after giving effect to the Offering and the Transactions. The
table should be read in conjunction with the financial statements of the
Company incorporated by reference in this Prospectus. See "Use of Proceeds",
"Selected Consolidated Financial Data", "Unaudited Pro Forma Combined
Financial Information", "Management's Discussion and Analysis of Financial
Condition and Results of Operations", and "Description of Capital Stock".
<TABLE>
<CAPTION>
October 10, 1993
--------------------
Actual Pro Forma
------ ----------
(dollars in
millions, except per
share data)
<S> <C> <C>
Short-Term Debt:
Total short-term debt $ 609.8 $ 601.6
---- --------
Long-Term Debt:
Total long-term debt 1,208.2 1,278.2
---- --------
Convertible Preferred Stock:
Par value $100 per share: 10,000,000 shares
authorized; 259,211 shares of 8% Series B
Preferred Stock outstanding 25.9 25.9
---- --------
Common Stockholders' Equity:
Common Stock, including excess over par value
and other capital: par value $0.50 per
share;
authorized 500,000,000 shares; 227,442,030
issued at October 10, 1993 618.9 857.6
Retained earnings 1,737.4 1,737.4
Less cost of 27,402,362 shares of common
stock in treasury (516.7) (516.7)
Cumulative translation adjustment 4.8 11.9
---- --------
Total common stockholders' equity 1,844.4 2,090.2
---- --------
Total capitalization $3,688.3 $3,995.9
==== ========
</TABLE>
9
<PAGE>
MARKET PRICES OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the NYSE under the symbol "GLW". At January 2,
1994, there were 18,953 holders of record of the Common Stock and 200,491,721
shares outstanding. The following table sets forth the high and low sale
prices for the Common Stock, as reported by the NYSE, and the cash dividends
declared per share on the Common Stock, for the periods indicated.
<TABLE>
<CAPTION>
Price Range(a)
----------------
Cash Dividends
Declared Per
High Low Share(a)
------- ----- --------------
<S> <C> <C> <C>
1991
First Quarter 31.000 21.063 .125
Second Quarter 31.750 28.375 .125
Third Quarter 35.750 31.250 .125
Fourth Quarter 43.125 33.563 .300(b)
1992
First Quarter 40.313 28.750 .15
Second Quarter 38.625 31.500 .15
Third Quarter 38.625 34.375 .15
Fourth Quarter 39.750 34.750 .17
1993
First Quarter 39.000 29.000 .17
Second Quarter 35.875 31.500 .17
Third Quarter 35.125 26.875 .17
Fourth Quarter 28.250 24.000 .17
1994
First Quarter (through January 26, 1994) 31.625 28.250
(a) Per share amounts have been adjusted for the 2-for-1 stock split
effective January 13, 1992.
(b) Includes a special dividend of $0.15 per common share in the fourth
quarter of 1991.
</TABLE>
The Company has regularly paid cash dividends since 1881 and expects to
continue to pay cash dividends. The Company's quarterly cash dividend is
currently $.17 per share of Common Stock. The payment of dividends is subject
to the preferential dividend rights of any outstanding Series Preferred Stock
(as defined herein). Since the declaration and payment of future dividends
will be based on a number of factors considered by the Company's Board of
Directors, including current and prospective earnings, financial condition
and capital requirements, and such other factors as the Board of Directors
may deem relevant, there can be no assurance that dividends will be paid in
the future. See "Description of Capital Stock".
SELECTED CONSOLIDATED FINANCIAL DATA
The following is a summary of certain consolidated financial information that
has been derived from the consolidated financial statements of the Company.
The summary financial data set forth below for the Company for the fiscal
years 1988 through 1992 are derived from its audited financial statements.
The selected consolidated financial data set forth below for the first forty
weeks of 1993 and 1992 are derived from the Company's unaudited financial
statements, which in the opinion of management contain all adjustments
(consisting only of normal recurring items) necessary for the fair
presentation of this information. The financial data should be read in
conjunction with the information set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operations", the Company's 1993
earnings release discussed under "Business--1993 Earnings Announcement" and the
historical financial information and related notes incorporated by reference
in this Prospectus. See "Incorporation of Certain Documents by Reference".
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Forty
Weeks Ended Fiscal Year Ended
---------------------- --------------------------------------------------------------
Dec.
Oct. 10, Oct. 4, Jan. 3, Dec. 29, 30, Dec. 31, Jan. 1,
1993 1992 1993 1991 1990 1989 1989
--------- --------- --------- ---------- ------- --------- -----------
(dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues
Net sales $2,921.8 $2,712.5 $3,708.7 $3,259.2 $2,940.5 $2,439.2 $2,121.5
Royalty, interest and dividend
income 21.8 28.4 35.3 27.6 39.9 29.6 30.8
Non-operating gains 4.2 7.0 7.0 8.1 69.2 107.1 149.2
------- ------- ------- -------- ----- ------- ---------
2,947.8 2,747.9 3,751.0 3,294.9 3,049.6 2,575.9 2,301.5
Deductions
Cost of sales 1,889.5 1,773.2 2,411.3 2,121.6 1,925.7 1,600.9 1,405.2
Selling, general and
administrative expenses 564.8 507.0 692.2 622.5 581.8 491.8 438.6
Research and development expenses 128.9 108.9 151.1 130.7 124.5 109.6 95.2
Provision for restructuring costs
and other special charges 207.0 63.3 54.4 32.0
Interest expense 63.9 45.9 62.6 58.1 54.0 44.5 41.0
Other, net 21.4 16.7 33.9 34.6 35.5 20.9 18.9
------- ------- ------- -------- ----- ------- ---------
Income before taxes on income 72.3 296.2 336.6 327.4 328.1 253.8 270.6
Taxes on income 13.5 86.0 92.5 110.6 136.1 116.9 103.2
------- ------- ------- -------- ----- ------- ---------
Income before minority interest
and equity earnings 58.8 210.2 244.1 216.8 192.0 136.9 167.4
Minority interest in earnings of
subsidiaries (9.5) (16.7) (21.6) (17.3) (10.4) (4.2) (2.2)
Equity in earnings of associated
companies before cumulative
effect of changes in accounting
methods 56.4 38.2 43.8 111.7 107.5 126.7 127.2
------- ------- ------- -------- ----- ------- ---------
Income before Extraordinary Credit
and Cumulative Effect of Changes
in Accounting Methods 105.7(a) 231.7(b) 266.3(d) 311.2(e) 289.1(f) 259.4(g,j)
292.4(h,j)
Tax benefit of loss carryforwards 1.1 7.7 5.6 2.9 1.6 2.2
Cumulative effect of changes in
accounting methods (286.6) (286.6) (83.9)
------- ------- ------- -------- ----- ------- ---------
Net Income (Loss) $ 105.7 $ (53.8)(c) $ (12.6)(c) $ 316.8 $ 292.0 $ 261.0 $ 210.7(i)
======= ======= ======= ======== ===== ======= =========
Balance Sheet Data:
Total assets $5,419.5 $4,333.1 $4,286.3 $3,852.6 $3,512.0 $3,360.7 $2,897.9
Working capital 210.1 640.2 465.2 521.0 458.4 487.3 421.1
Loans payable beyond one year 1,208.2 853.5 815.7 700.0 611.2 624.5 499.0
Common stockholders' equity 1,844.4 1,909.6 1,803.8 2,018.8 1,850.3 1,711.2 1,560.7
Per Common Share Data:(k)
Income before extraordinary credit
and cumulative effect of changes
in accounting methods $ 0.55 $ 1.22 $ 1.40 $ 1.66 $ 1.53 $ 1.39 $ 1.63
Net income (loss) 0.55 (0.29) (0.08) 1.69 1.55 1.40 1.17
Common dividends declared(l) 0.51 0.45 0.62 0.68 0.46 0.53 0.48
The accompanying notes are an integral part of these statements.
11
<PAGE>
(a) During the first forty weeks of 1993, Corning recognized net non-recurring losses from consolidated
operations totaling $202.8 ($117.9 after-tax and minority interest) including a non-operating gain totaling
$4.2 million ($2.6 million after-tax); a charge of $36.5 million ($22.0 million after-tax) to reflect the
settlement and related legal expenses incurred in the compromise agreement with the Civil Division of the DOJ
concerning the marketing, sale, pricing, and billing of certain laboratory tests; and a restructuring charge
totaling $170.5 million ($98.5 million after-tax and minority interest) as a result of costs to integrate the
Damon and Costar acquisitions and as a result of a planned company-wide restructuring program announced October
6, 1993, to reduce overhead costs during the next 12 to 14 months.
During the first forty weeks of 1993, Corning recognized a reduction in equity earnings of $9.5 million
resulting from a restructuring charge taken by Vitro Corning.
Effective January 4, 1993, Corning and its subsidiaries adopted Financial Accounting Standard No. 109,
"Accounting for Income Taxes" ("FAS 109") and Financial Accounting Standard No. 112, "Employers' Accounting for
Postemployment Benefits" ("FAS 112"). The impact of adopting FAS 109 and FAS 112 was not material to the first
forty weeks of 1993.
(b) During the first forty weeks of 1992, Corning recognized net non-operating gains from consolidated
operations totaling $7.0 million ($21.7 million after-tax), including a gain of $10.1 million (before- and
after-tax) from the sale of an additional equity interest in Corning Japan K.K. ("Corning Japan") and a pre-tax
loss of $7.3 million ($9.0 million after-tax gain) from the completion of the consumer housewares venture with
Vitro.
During the first forty weeks of 1992, Corning recognized a $24.5 million reduction in equity earnings
associated with Dow Corning's terminated breast implant products business.
(c) Effective December 30, 1991, Corning and its subsidiaries adopted Financial Accounting Standard No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions" ("FAS 106"). In the third quarter
year-to-date 1992, the cumulative effect of adopting FAS 106 resulted in a charge of $294.8 million (after-tax
and minority interest), or $1.56 per share. In addition, an $8.2 million gain, or $0.04 per share, from an
equity company's adoption of FAS 109 was recognized in the third quarter year-to-date 1992.
(d) In 1992, Corning recognized net non-operating gains from consolidated operations totaling $7.0 million
($21.7 million after- tax), including a gain of $10.1 million (before- and after-tax) from the sale of an
additional equity interest in Corning Japan and a pre-tax loss of $7.3 million ($9.0 million after-tax gain)
from the formation of the consumer housewares venture with Vitro. Corning also recorded a provision of $63.3
million ($32.1 million after-tax of $22.9 million and minority interest of $8.3 million) as a result of Corning
Vitro's decision to restructure its Brazilian operations.
Corning also recognized a $37.7 million reduction in equity earnings which included $24.5 million of costs
associated with Dow Corning's terminated breast implant business and $13.2 million of restructuring charges
associated with Dow Corning's exit from its Brazilian operations and other cost-reduction programs.
(e) In 1991, the Company recognized net non-operating gains from consolidated operations totaling $8.1 million
($14.6 million after-tax) which included a gain of $5.3 million (before- and after-tax) on the sale of a less
than 10% equity interest in Corning Japan. The Company also recognized an $8.2 million reduction in equity
earnings to reflect a charge recorded by Dow Corning for costs associated with its breast implant business.
(f) In 1990, the Company recognized non-operating gains totaling $69.2 million ($29.2 million after-tax) on the
sales of certain investments, including a gain on the sale of substantially all the Company's investment in
Iwaki Glass Company Ltd. ("Iwaki") totaling $51.1 million ($19.4 million after-tax).
(g) In 1989, the Company recognized non-operating gains totaling $107.1 million ($61.9 million after-tax),
including a gain on the sale of its 50% interest in Ciba Corning Diagnostics Corp. of $75.7 million ($41.0
million after-tax) and a gain of $21.7 million ($13.7 million after-tax) related to patent infringement matters
in the optical-fiber business.
(h) In 1988, Corning recognized non-operating gains totaling $149.2 million ($96.8 million after-tax),
including a gain of $22.2 million (before- and after-tax) on the sales of previously unissued stock of equity
affiliates (of this amount, $21.5 million related to the initial public offering in Japan of Iwaki stock); a
gain of $60.3 million ($36.6 million after-tax) on the sale of five million shares of Iwaki stock; a gain of
$18.4 million ($6.1 million after-tax) related to the formation of Corning Asahi Video Products Company
("Corning Asahi Video"); a gain of $18.3 million ($12.1 million after-tax) on the sale of its investment in
Corning Japan Inc.; and a gain of $30.0 million ($19.8 million after-tax) on the sale of three million shares
of International Clinical Laboratories Inc. stock.
(i) In 1988, the Company changed its method of accounting for postretirement health-care benefits. The
cumulative effect of this change on prior years decreased net income by $83.9 million ($0.47 per common share)
in 1988. Except for the cumulative effect, this change did not have a material effect on net income for the
year presented.
(j) In 1989, the Company provided $54.4 million ($45.0 million after-tax) for the repositioning of certain
businesses and facilities. The provision related primarily to consumer product operations worldwide, and to
certain other operations in Europe. In 1988, Corning provided $32.0 million ($19.1 million after-tax) to revise
estimates of previously established restructuring reserves related to consolidating and repositioning certain
manufacturing operations.
(k) Per share amounts have been adjusted for the 2-for-1 stock split effective January 13, 1992.
(l) Includes special dividends of $0.15, $0.1125 and $0.10 per common share in 1991, 1989 and 1988,
respectively.
</TABLE>
12
<PAGE>
CORNING UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Financial Information (the "Pro Forma
Information") is presented to reflect the estimated impact on Corning's
Financial Statements of the following proposed or completed transactions
(collectively, the "Transactions"):
* The acquisition of Damon in August 1993, at a total purchase price of
approximately $405 million, including acquisition expenses. The transaction
has been accounted for as a purchase.
* The merger with Costar in September 1993 in which Corning acquired all of
the outstanding shares of common stock and options to purchase common stock
of Costar for approximately 5.5 million shares of Corning Common Stock and
options to purchase approximately 300,000 shares of Corning Common Stock.
This acquisition has been accounted for as a pooling of interests. Corning's
consolidated financial statements for periods prior to the acquisition have
not been restated since the acquisition is not material to Corning's
financial position or results of operations.
* The proposed acquisition of the optical fiber and optical cable business of
NTL by Corning and Siecor for $130 million in cash and the proposed Vitro
transaction (collectively, the "Pending Transactions.") The NTL transaction
will be accounted for as a purchase. The Vitro transaction is described in
Note 4.
* The transaction with Unilab Corporation ("Unilab"),which was completed in
November 1993, and other completed acquisitions (collectively, the "Other
Completed Transactions") which individually and in the aggregate are not
significant. The Unilab transaction is described in Note 5.
* The issuance of 8.0 million shares of Corning Common Stock in the Offering
and the use of the net proceeds from the Offering to retire a portion of the
short-term debt incurred in connection with the Pending Transactions.
The Unaudited Pro Forma Combined Statements of Income for the year ended
January 3, 1993, and the forty weeks ended October 10, 1993, assume that the
Transactions had been completed on December 30, 1991. The Unaudited Pro Forma
Combined Balance Sheet at October 10, 1993, assumes that the Transactions had
been completed by that date.
The Pro Forma Information gives effect only to the adjustments set forth in
the accompanying notes and does not reflect any synergies anticipated by
Corning management as a result of these acquisitions. The Pro Forma
Information is not necessarily indicative of the results of operations or
financial position which would have been achieved had the Transactions been
completed as of the beginning of the earliest period presented, nor is it
necessarily indicative of Corning's future results of operations or financial
position.
The Pro Forma Information should be read in conjunction with the historical
financial statements of Corning and Damon incorporated by reference into this
Prospectus.
13
<PAGE>
Corning
Unaudited Pro Forma Combined Statement of Income
Year Ended January 3, 1993
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
---------------------------------------------
Other
Pending Completed As
Corning Damon Costar Transactions Transactions Adjustments Combined Adjustments Adjusted
(1) (2) (3) (4) (5) (6) (7) (8) (9)
--------- ------- -------- ------------- -------------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Net sales $3,708.7 $317.0 $74.9 $77.4 $140.2 $4,318.2 $4,318.2
Royalty, interest and
dividend income 35.3 35.3 35.3
Non-operating gains 7.0 $ 7.3(a) 14.3 14.3
-------- ------ ------- ------------ ------------- ------------ -------- ----------- ---------
3,751.0 317.0 74.9 77.4 140.2 7.3 4,367.8 4,367.8
Deductions
Cost of sales 2,411.3 203.1 39.8 59.4 109.6 16.6(b) 2,839.8 2,839.8
Selling, general and
administrative expenses 692.2 76.9 21.8 4.2 20.6 815.7 815.7
Research and development
expenses 151.1 3.0 1.8 155.9 155.9
Provision for
restructuring costs and
other special charges 63.3 63.3 63.3
Interest expense 62.6 10.2 0.7 3.8 31.7(d) 109.0 $ (8.4)(o) 100.6
Other, net 33.9 (0.7) (0.1) 3.4 36.5 36.5
-------- ------ ------- ------------ ------------- ------------ -------- ----------- ---------
Income before taxes on
income 336.6 27.5 9.7 12.0 2.8 (41.0) 347.6 8.4 356.0
Taxes on income 92.5 5.6 3.6 4.0 0.9 4.5(f) 111.1 2.8(p) 113.9
-------- ------ ------- ------------ ------------- ------------ -------- ----------- ---------
Income before minority
interest and equity
earnings 244.1 21.9 6.1 8.0 1.9 (45.5) 236.5 5.6 242.1
Minority interest in
earnings of subsidiaries (21.6) (3.9) (3.3) 1.6(g) (27.2) (27.2)
Equity in earnings of
associated companies
before cumulative effect
of changes in accounting
methods 43.8 6.3 8.6 58.7 58.7
-------- ------ ------- ------------ ------------- ------------ -------- ----------- ---------
Income Before
Extraordinary Credit and
Cumulative Effect of
Changes in Accounting
Methods $ 266.3 $ 18.0 $ 6.1 $11.0 $ 10.5 $(43.9) $ 268.0 $ 5.6 $ 273.6
======== ====== ======= ============ ============= ============ ======== =========== =========
Weighted Average Shares
Outstanding 188.589 5.500(h) 194.089 8.000(q) 202.089
======== ============ ======== =========== =========
Per Common Share
Income Before
Extraordinary Credit and
Cumulative Effect of
Changes in Accounting
Methods $ 1.40 $ 1.37 $ 1.34
======== ============ ======== =========== =========
(1) Represents the historical results of operations of the Company for the year ended January 3, 1993.
(2) Represents the historical results of operations of Damon for the year ended December 31, 1992.
(3) Represents the historical results of operations of Costar for the year ended December 31, 1992.
(4) Represents the historical results of operations of the business to be acquired in the NTL transaction and
the impact of the Vitro transaction for the year ended December 31, 1992 and January 3, 1993, respectively.
(5) Represents the historical results of operations of Other Completed Transactions and the impact of the
Unilab transaction for the year ended December 31, 1992.
(6) See Note 2 to the Pro Forma Information--Statement of Income.
(7) Reflects the results of operations of the Company on a pro forma basis assuming the Transactions had been
completed on December 30, 1991.
(8) See Note 2 to the Pro Forma Information--Adjustments to Reflect the Offering.
(9) Reflects the results of operations of the Company on a pro forma basis assuming the Transactions and the
Offering had been completed on December 30, 1991.
</TABLE>
14<PAGE>
Corning
Unaudited Pro Forma Combined Statement of Income
Forty Weeks Ended October 10, 1993
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
---------------------------------------------
Other
Pending Completed As
Corning Damon Costar Transactions Transactions Adjustments Combined Adjustments Adjusted
(1) (2) (3) (4) (5) (6) (7) (8) (9)
--------- ------- -------- ------------- -------------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Net sales $2,921.8 $199.9 $52.9 $ 52.9 $93.2 $3,320.7 $3,320.7
Royalty, interest and
dividend income 21.8 21.8 21.8
Non-operating gains 4.2 4.2 4.2
-------- ------ ------- ------------ ------------- ------------ -------- ----------- ---------
2,947.8 199.9 52.9 52.9 93.2 3,346.7 3.346.7
Deductions
Cost of sales 1,889.5 129.4 29.2 44.6 76.2 $ 12.3(b) 2,181.2 2,181.2
Selling, general and
administrative expenses 564.8 58.1 14.9 4.7 8.2 650.7 650.7
Research and development
expenses 128.9 2.2 1.3 132.4 132.4
Provision for
restructuring costs and
other special charges 207.0 (55.0)(c) 152.0 152.0
Interest expense 63.9 5.6 0.4 3.2 20.6 (d) 93.7 $ (6.4)(o) 87.3
Other, net 21.4 1.0 0.7 (0.1) (1.0)(e) 22.0 22.0
-------- ------ ------- ------------ ------------- ------------ -------- ----------- ---------
Income before taxes on
income 72.3 5.8 5.5 2.3 5.7 23.1 114.7 6.4 121.1
Taxes on income 13.5 2.1 1.7 0.8 2.1 12.2(f) 32.4 2.2(p) 34.6
-------- ------ ------- ------------ ------------- ------------ -------- ----------- ---------
Income before minority
interest and equity
earnings 58.8 3.7 3.8 1.5 3.6 10.9 82.3 4.2 86.5
Minority interest in
earnings of subsidiaries (9.5) (2.2) (11.8) 0.7(g) (22.8) (22.8)
Equity in earnings of
associated companies
before cumulative effect
of changes in accounting
methods 56.4 22.1 78.5 78.5
-------- ------ ------- ------------ ------------- ------------ -------- ----------- ---------
Income Before
Extraordinary Credit and
Cumulative Effect of
Changes in Accounting
Methods $ 105.7 $ 1.5 $ 3.8 $ 11.8 $ 3.6 $ 11.6 $ 138.0 $ 4.2 $ 142.2
======== ====== ======= ============ ============= ============ ======== =========== =========
Weighted Average Shares
Outstanding 190.562 4.950(h) 195.512 8.000(q) 203.512
======== ============ ======== =========== =========
Per Common Share
Income Before
Extraordinary Credit and
Cumulative Effect of
Changes in Accounting
Methods $ 0.55 $ 0.70 $ 0.69
======== ============ ======== =========== =========
(1) Represents the historical results of operations of the Company for the forty weeks ended October 10, 1993.
(2) Represents the historical results of operations of Damon for the seven months ended July 31, 1993.
(3) Represents the historical results of operations of Costar for the eight months ended August 31, 1993.
(4) Represents the historical results of operations of the business to be acquired in the NTL transaction for
the nine months ended September 30, 1993 and the impact of the Vitro transaction for the forty weeks ending
October 10, 1993.
(5) Represents the historical results of operations of Other Completed Transactions through the acquisition
date and the impact of the Unilab transaction for the nine months ended September 30, 1993.
(6) See Note 2 to the Pro Forma Information--Statement of Income.
(7) Reflects the results of operations of the Company on a pro forma basis assuming the Transactions had been
completed on December 30, 1991.
(8) See Note 2 to the Pro Forma Information--Adjustments to Reflect the Offering.
(9) Reflects the results of operations of the Company on a pro forma basis assuming the Transactions and the
Offering had been completed on December 30, 1991.
</TABLE>
15<PAGE>
Corning
Unaudited Pro Forma Combined Consolidated Balance Sheets
October 10, 1993
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
---------------------------------------------------------
Other
Pending Completed
Corning Transactions Transactions Adjustments Combined Adjustments As
(1) (2) (3) (4) (5) (6) Adjusted(7)
---------- ------------- ------------- -------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and short-term
Investments $ 121.2 $ 5.4 $ 126.6 $ 126.6
Receivables, net 793.6 $ 6.8 12.4 812.8 812.8
Inventories 415.7 7.5 0.8 424.0 424.0
Deferred taxes on income
and other current assets 275.8 (0.1) 275.7 275.7
--------- ------------ ------------ ------------- ---------- ------------- ----------
Total current assets 1,606.3 14.3 18.5 1,639.1 1,639.1
Investments 1,009.5 (42.6) (105.7) 861.2 861.2
Plant and Equipment, net 1,702.4 17.1 (18.7) 1,700.8 1,700.8
Goodwill and Intangible
Assets, net 801.0 203.3 $180.1(i) 1,184.4 1,184.4
Other Assets 300.3 0.2 12.0(j) 312.5 312.5
--------- ------------ ------------ ------------- ---------- ------------- ----------
$5,419.5 $(11.2) $ 97.6 $192.1 $5,698.0 $5,698.0
========= ============ ============ ============= ========== ============= ==========
Liabilities and
Stockholders' Equity
Current Liabilities
Loans payable $ 609.8 $ $ (5.5) $236.0(k) $ 840.3 $(238.7)(q) $ 601.6
Accounts payable 166.7 7.2 2.5 176.4 176.4
Other accrued liabilities 619.7 22.4 10.0(l) 652.1 652.1
--------- ------------ ------------ ------------- ---------- ------------- ----------
Total current liabilities 1,396.2 7.2 19.4 246.0 1,668.8 (238.7) 1,430.1
Other Liabilities 702.0 1.1 703.1 703.1
Loans Payable Beyond One
Year 1,208.2 70.0 1,278.2 1,278.2
Minority Interest in
Subsidiary Companies 242.8 (97.3) 25.0(m) 170.5 170.5
Convertible Preferred Stock 25.9 25.9 25.9
Common Stockholders' Equity 1,844.4 78.9 7.1 (78.9)(n) 1,851.5 238.7(q) 2,090.2
--------- ------------ ------------ ------------- ---------- ------------- ----------
$5,419.5 $(11.2) $ 97.6 $192.1 $5,698.0 $ $5,698.0
========= ============ ============ ============= ========== ============= ==========
(1) Represents the historical financial position of the Company at October 10, 1993.
(2) Represents the net assets of the business to be purchased in the NTL transaction and the impact of the
Vitro transaction at October 10, 1993.
(3) Represents the impact of the Unilab transaction at October 31, 1993.
(4) See Note 2 to Pro Forma Information--Balance Sheet.
(5) Reflects the financial position of the Company on a pro forma basis assuming the Transactions had been
completed by October 10, 1993.
(6) See Note 2 to Pro Forma Information--Adjustments to Reflect the Offering.
(7) Reflects the financial position of the Company on a pro forma basis assuming the Transactions and the
Offering had been completed on October 10, 1993.
</TABLE>
16
<PAGE>
Corning
Notes to Unaudited Pro Forma Combined Financial Information
Note 1--Basis of Presentation:
The Unaudited Pro Forma Combined Statements of Income reflect the Company's
results of operations for the year ended January 3, 1993, and the forty weeks
ended October 10, 1993, on a pro forma basis assuming the Transactions had
been completed as of December 30, 1991. The Unaudited Pro Forma Combined
Balance Sheet at October 10, 1993, assumes that the Transactions had been
completed by that date.
Corning management believes that the assumptions used in preparing the Pro
Forma Information provide a reasonable basis for presenting all of the
significant effects of the Transactions, that the pro forma adjustments give
appropriate effect to those assumptions and that the pro forma adjustments
are properly applied in the Pro Forma Information.
Note 2--Pro Forma Adjustments:
Statement of Income
(a) The pro forma adjustment to non-operating gains represents the reversal
of the $7.3 million pretax loss ($9.0 million after tax gain) on the
formation of Corning Vitro on January 2, 1992. The pro forma adjustment is
required as a result of the Vitro transaction described in Note 4.
(b) The pro forma adjustment to cost of sales represents the increase in
amortization of the excess of cost over fair value of tangible net assets
acquired in the Damon transaction, the Pending Transactions, and the Other
Completed Transactions of $8.1 million, $6.2 million, and $2.3 million,
respectively, for the year ended January 3, 1993, and $5.7 million, $4.8
million and $1.8 million, respectively, for the forty weeks ended October 10,
1993.
Including $40 million of anticipated costs to restructure Damon's facilities
as a result of the integration of Corning's and Damon's operations, the
excess of cost over fair value of tangible net assets acquired in the Damon
transaction is $552 million. The excess of cost over fair value of tangible
net assets acquired has been allocated to goodwill with a life of forty
years. Management believes that fair value approximates book value for all
tangible assets.
(c) The pro forma adjustment represents the elimination of one-time
restructuring costs of $47.1 million related to closing MetPath facilities as
a result of the integration of Damon and MetPath and $7.9 million of Costar
transaction costs recorded in Corning's results for the forty weeks ended
October 10, 1993.
(d) The pro forma adjustment to interest expense represents the interest on
the debt incurred in connection with the Damon transaction, the Pending
Transactions and the Other Completed Transactions of $20.5 million, $8.2
million and $3.0 million, respectively, for the year ended January 3, 1993,
and $11.9 million, $6.3 million and $2.4 million, respectively, for the forty
weeks ended October 10, 1993. The weighted average interest rate on the debt
incurred in connection with the Damon transaction is 4.9% and on the Pending
Transactions and Other Completed Transactions ranges from 3.5% to 6.7%.
Corning financed the Damon acquisition and the refinancing of approximately
$167 million of indebtedness of Damon under short-term financing agreements
entered into with certain banks to effect this transaction. During the third
quarter of 1993, Corning refinanced a portion of this short-term financing by
issuing approximately $200 million of longer-term debt. The pro forma
adjustment for interest expense related to the Damon transaction is
calculated as the weighted average of short-term and longer-term interest
rates.
(e) The pro forma adjustment represents the elimination of approximately $1
million of one-time costs incurred by Damon in connection with a terminated
merger agreement with National Health Laboratories Incorporated ("NHL") which
were charged to results of operations for the seven months ended July 31,
1993.
(f) The pro forma adjustment to tax expense represents the tax effect of the
adjustments detailed in notes (a), (b), (c), (d) and (e) above. This
adjustment is calculated at Corning's historical effective tax rate.
(g) The pro forma adjustment to minority interest represents the applicable
minority interest on the historical earnings and pro forma adjustments of the
Pending Transactions and Other Completed Transactions.
17
<PAGE>
(h) The pro forma adjustment to weighted average shares outstanding
represents the issuance of 5.5 million shares to complete the Costar merger
in September 1993.
Balance Sheet
(i) The pro forma adjustment to goodwill represents the incremental goodwill
and other intangibles arising from the Pending Transactions of $180.1
million.
(j) The pro forma adjustment to other assets primarily relates to deferred
tax assets arising in connection with the Pending Transactions.
(k) The pro forma adjustment to short-term debt represents the incremental
debt to finance the Pending Transactions.
(l) The pro forma adjustment to other liabilities primarily relates to
reserves for integration costs of the Pending Transactions.
(m) The pro forma adjustment to minority interest represents a capital
contribution by a partner to finance one of the Pending Transactions.
(n) The pro forma adjustment to common stockholders' equity represents the
elimination of the net assets of the Pending Transactions accounted for using
the purchase method of accounting.
Adjustments to Reflect the Offering
(o) The pro forma adjustment to interest expense reflects the decrease in
interest expense assuming the issuance on December 30, 1991 of 8.0 million
shares of Corning Common Stock at an assumed price of $31.00 per share (net
of $9.3 million of underwriting commissions), and the use of the net proceeds
thereof to retire the indebtedness incurred in connection with the Pending
Transactions.
(p) The pro forma adjustment to tax expense reflects the tax effects of the
adjustment detailed in note (o) above.
(q) The pro forma adjustment to short-term debt and common stockholders'
equity assumes the issuance on December 30, 1991 of 8.0 million shares of
Corning Common Stock at an assumed price of $31.00 per share (net of $9.3
million of underwriting commissions).
Note 3--Earnings Per Share:
Earnings per common share are computed by dividing net income less preferred
dividends by the weighted average of common shares outstanding during each
period. Preferred dividends amounted to $2.2 million and $1.6 million during
the year ended January 3, 1993, and the forty weeks ended October 10, 1993,
respectively.
Note 4--Vitro Transaction:
On January 2, 1992, Corning entered into an alliance with Vitro, by
transferring 49% of its consumer-housewares businesses to Vitro, in exchange
for 49% of Vitro's consumer-products businesses and approximately $137
million in cash. The alliance consists of two jointly owned companies.
Corning owns 51% of Corning Vitro and consolidates its financial statements.
Until December 21, 1993, Corning owned 49% of Vitro Corning and accounted for
its investment under the equity method.
On December 14, 1993, Vitro and the Company reached an agreement in principle
whereby, in two separate transactions, Vitro purchased in December, 1993, the
shares of capital stock of Vitro Corning owned by the Company and the Company
will purchase in early 1994 the shares of capital stock of Corning Vitro held
by Vitro. The net cost to Corning of the two transactions will be $131
million. Corning and Vitro will continue their consumer products alliance
through cross distribution and supply agreements. Corning will finance the
payment to Vitro with the proceeds of the Offering.
Note 5--Unilab Transaction:
Corning, through a wholly owned subsidiary, owned 43% of Unilab. In November
1993, Corning acquired 100 percent of certain Unilab facilities in exchange
for a majority of the Unilab shares owned by Corning, the assumption of
approximately $70 million of Unilab debt and Corning's investment in J.S.
Pathology PLC ("J.S. Pathology"). Corning retained a 12% equity investment in
Unilab.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1992 Performance
In 1992, Corning posted another year of record operating performance.
Consolidated sales rose 14% from 1991, as all segments recorded higher dollar
volumes. Gains in the Communications and Laboratory Services segments led
consolidated sales growth during 1992.
In 1992, Corning recorded a charge of $294.8 million ($1.56 per common share)
to reflect the cumulative effect of adoption of FAS 106 for all consolidated
and equity companies and a gain of $8.2 million ($0.04 per common share) to
reflect Corning's equity in the cumulative effect of adoption of FAS 109 by
an equity company. In addition, earnings were reduced by $21.3 million ($0.11
per common share) due to the increase in ongoing postretirement benefit
expense caused by the adoption of FAS 106. As a result of these charges,
Corning recorded a net loss of $12.6 million ($0.08 per common share) in 1992
compared with net income of $316.8 million ($1.69 per common share) in 1991.
Earnings from consolidated operations increased 12% in 1992 despite the
significant impact of a restructuring charge and the increased ongoing
postretirement benefit expense due to the adoption of FAS 106. Earnings
growth in consolidated operations, which was led by the Communications and
Laboratory Services segments, resulted from increased volume, improved
operating efficiencies and continued emphasis on effective cost control
programs. Acquisitions in the Laboratory Services segment also contributed to
the earnings improvement.
The increase in earnings from consolidated operations was substantially
offset by a decline in equity earnings. This decline was primarily
attributable to reduced earnings at Dow Corning and losses at both Vitro
Corning and Unilab partly offset by improved performance at Samsung-Corning
Company Ltd. ("Samsung-Corning") in Korea.
In 1992, Corning's earnings were significantly impacted by accounting changes
and, in both 1991 and 1992, by other unusual items. Excluding these items,
net income and earnings per share increased in both years.
1993 Performance
Consolidated sales for the forty weeks ended October 10, 1993 were $2,921.8
million, an increase of 8 percent over the same period in 1992. Approximately
one fourth of this increase resulted from acquisitions completed in the past
12 months. Net income for the 1993 forty week period totaled $105.7 million,
or $0.55 per share, and was significantly impacted by restructuring and other
special charges recorded in the third quarter. During the same period in
1992, the Company reported a loss of $53.8 million, or $0.29 per share,
primarily due to the one time impact of accounting changes in the first
quarter 1992 and charges associated with Dow Corning's terminated breast
implant business offset somewhat by net non-operating gains. Excluding the
impact of these items and extraordinary credits in both years, net income for
the first forty weeks totaled $233.1 million, or $1.21 per share, in 1993
compared to $234.5 million, or $1.24 per share, in 1992.
The restructuring and other special charges recorded in the third quarter
1993 included $207 million ($120.5 million after tax and minority interest)
of charges against consolidated operations and a $9.5 million reduction in
equity earnings as a result of a restructuring charge taken by Vitro Corning.
The consolidated charges included $36.5 million ($22 million after tax) of
settlement and related legal expenses incurred in the compromise agreement
between MetPath and the Civil Division of the DOJ concerning the marketing,
sale, pricing and billing of certain laboratory tests; and a restructuring
charge totaling $170.5 million ($98.5 million after tax and minority
interest) as a result of costs to integrate the Damon and Costar acquisitions
and a planned restructuring program announced October 6, 1993 to reduce
overhead costs during the next 12 to 14 months.
Earnings from consolidated operations for the first forty weeks of 1993,
excluding restructuring and other special charges and non-operating gains and
losses, declined 3 percent when compared to the same period last year
primarily due to weak third quarter results following modest growth in the
first half of 1993. The decline in third quarter earnings from consolidated
operations was principally due to weak performance in the consumer products
segment and other cyclical businesses, particularly in Europe. In addition,
lower prices reduced the rate of growth in both the MetPath blood testing
business and the optical fiber and cable businesses. Earnings were also
impacted by increased interest expense on debt incurred to finance the
acquisition of Damon and capital expansion programs.
19
<PAGE>
Excluding the 1993 restructuring charge at Vitro Corning and the 1992 charges
associated with Dow Corning's terminated breast implant business, equity
earnings for the first forty weeks of 1993 increased 5 percent over the first
forty weeks of 1992. The increase in equity earnings is primarily a result of
improved performance at Samsung Corning and Dow Corning. These gains were
offset somewhat by continued poor performance at Vitro Corning and a decline
in earnings from optical-fiber equity companies as a result of declining
fiber prices and the weak European economies.
Industry Segments
Corning's products and services are grouped into four industry segments:
Specialty Materials, Communications, Laboratory Services and Consumer
Products. The sales and earnings of equity affiliates are discussed in terms
of these same four industry segments. The 1992 results of certain businesses
transferred from Corning Vitro to the Specialty Materials segment of Corning
have been reclassified to conform to the current year's presentation. The
effect of this reclassification is to increase 1992 sales and income before
taxes of the Specialty Materials segment and decrease 1992 sales and income
before taxes of the Consumer Products segment by $16.2 million and $6.1
million, respectively.
Corning recorded a restructuring charge totaling $170.5 million pretax in the
third quarter of 1993. Included in this pretax charge is approximately $47
million of anticipated costs to close MetPath facilities as a result of the
integration of the Damon acquisition, approximately $8 million of transaction
expenses related to the Costar acquisition and approximately $40 million
related to restructuring programs already underway in the consumer products
segment. The remaining $75 million is primarily a reserve for a
corporate-wide restructuring program announced on October 6, 1993 to reduce
overhead expenses over the next 12 to 14 months. The following segment
overview excludes the entire $170.5 million restructuring charge.
Specialty Materials
(In millions)
<TABLE>
<CAPTION>
Forty weeks ended(a) Fiscal year ended
--------------------------- --------------------
October 10, October 4, Jan. 3, Dec. 29,
1993 1992 1993 1991
----------- ------------ -------- --------
<S> <C> <C> <C> <C>
Consolidated sales $569.4 $560.8 $750.1(b) $704.4
Income before taxes 75.2 70.1 93.8(b)(c) 92.2
(a) Both forty week periods include the incremental expense from the adoption
of FAS 106.
(b) Reclassified to conform to the current year presentation.
(c) Includes $8.5 million of incremental expense due to the adoption of FAS 106.
</TABLE>
Consolidated operations:
Consolidated sales of this segment increased in 1992. Earnings in this
segment increased despite the significant impact of weak worldwide economies
and the adoption of FAS 106 in 1992.
Worldwide sales and earnings in the environmental products division led the
growth in this segment during 1992. Legislation mandating the use of
pollution-control devices drove the increase in demand. Worldwide
manufacturing reconfiguration and benefits from Corning's quality programs,
such as "Partnership in the Workplace", resulted in manufacturing gains and
earnings improvement in this division in 1992.
Sales volume in 1992 in the science-products business increased at a moderate
pace over the prior year primarily due to the rapidly growing market for
plastic products and Corning's introduction of new products. Earnings gains
in the plastic-products business resulted from significantly improved
manufacturing efficiencies. This gain was partly offset by earnings declines
in the glass-products business. Glass manufacturing operations were
negatively impacted as a result of major tank-shutdown and rebuilding
projects.
Sales growth in the worldwide optical-products business was constrained in
1992 by weak worldwide economic conditions causing a decline in earnings of
this business. Sales and earnings in the lighting business increased in 1992.
Earnings grew in line with sales gains as the demand for new specialty and
commercial lighting products offset slowed growth in automobile lighting
components.
Consolidated sales for the first forty weeks of 1993 were up over the prior
year primarily due to a strong performance by the science-products business
which included one month of Costar sales. Year to date earnings of the
science-products business have exceeded last year's full year earnings due to
strong vol-
20
<PAGE>
umes and manufacturing efficiencies in both the plastic and glass product
lines. The environmental-products and optical businesses have experienced
solid sales and earnings growth in the United States, but have been
negatively impacted by weak European economies. The weak European economies
have also influenced sales and earnings of the process systems business.
Product mix changes in the advanced materials business resulted in reduced
sales but increased profitability.
Equity companies:
<TABLE>
<CAPTION>
(In millions) Forty weeks ended Fiscal year ended
--------------------------- ----------------------
October 10, October 4, Jan. 3, Dec. 29,
1993 1992 1993 1991
----------- ------------ ---------- --------
<S> <C> <C> <C> <C>
Net sales $1,718.3 $1,663.6 $2,230.6 $2,090.5
Corning's share of net income(a) 47.7 20.9 20.3 83.5
(a) Before equity in changes in accounting methods but including $24.5
million and $37.7 million of special charges in the first forty weeks and
full year 1992, respectively.
</TABLE>
Corning is an investor in and receives income from a number of equity
companies in the Specialty Materials segment, including Pittsburgh Corning
Corporation and Pittsburgh Corning Europe, N.V. (together, "Pittsburgh
Corning") and Dow Corning. Dow Corning's sales increased in 1992; however,
earnings declined in 1992 due primarily to charges associated with its
terminated breast implant business and restructuring charges. Dow Corning's
operating income also declined in 1992 as a result of the impact of weak
worldwide economies, losses incurred on terminated foreign-exchange related
contracts and the increase in postretirement benefit expense caused by the
adoption of FAS 106.
Corning also has equity investments in several developing businesses such as
stationary emission control devices and ceramic cooktops. Profitability in
these businesses in 1992 was impacted by continued investment in new
technologies and market development.
Dow Corning's sales for the first forty weeks of 1993 increased over the
prior year. Excluding the impact of the 1992 charges associated with Dow
Corning's terminated breast implant business, Dow Corning's earnings
increased. Dow Corning's results continue to be impacted by weak economies in
Europe and Japan.
In September 1993, Dow Corning announced that a proposal had been developed
to settle on a global basis matters involved in litigation over silicone-gel
breast implant products. The proposal, which is being reviewed by
representatives of the plaintiffs and defendants in such litigation,
contemplates that industry participants (including manufacturers, raw
material suppliers, insurance carriers, physicians and other health care
providers) would jointly fund $4.75 billion over a 30-year period. On January
14, 1994 Dow Corning announced that it would take a pre-tax charge against
earnings for the fourth quarter of 1993 of $640 million ($415 million
after-tax) to reflect its best estimate, as of that date, of the net present
value of its potential liability and costs, net of the recoveries it expects
to receive from its insurance carriers, as a result of its involvement in the
breast implant litigation. Dow Corning noted in this announcement that as
breast implant litigation settlement negotiations continue additional facts
and circumstances may develop which may require Dow Corning to revise this
estimate or to make additional provisions to reflect any additional costs of
resolving this matter.
On that same date, Corning announced that, as a result of Dow Corning's
decision to take this charge, Corning would record a charge of $203 million
after-tax against its equity in earnings of associated companies for the
fourth quarter of 1993 and against the carrying value of its investment in
Dow Corning at the end of fiscal 1993. Corning does not believe that its
share of any additional charge taken by Dow Corning resulting from the
proposed settlement will have a material adverse effect upon Corning's
overall financial condition. However, it is possible that Corning's share of
any such charge taken by Dow Corning will have a materially adverse effect
upon Corning's earnings in the quarter in which any such charge is recognized
by Dow Corning.
Communications
<TABLE>
<CAPTION>
(In millions) Forty weeks ended(a) Fiscal year ended
-------------------------- ---------------------
October 10, October 4, Jan. 3, Dec. 29,
1993 1992 1993 1991
----------- ----------- --------- --------
<S> <C> <C> <C> <C>
Consolidated sales $886.4 $763.7 $1,036.6 $901.8
Income before tax 198.6 170.5 230.1(b) 189.1
(a) Both forty week periods include the incremental expense due to the
adoption of FAS 106.
(b) Includes $9.1 million of incremental expense due to the adoption of FAS 106.
</TABLE>
21
<PAGE>
Consolidated operations:
Consolidated sales and earnings in this segment increased significantly in
1992. This performance was driven by continued strong growth in worldwide
demand for optical fiber and optical cable. Volume growth in the advanced
display products business also made a positive contribution.
Sales and earnings of Corning's optical-fiber and optical-cable businesses
increased significantly in 1992. Market growth was led by the increased use
of fiber-optic cable in the feeder portions of telephone networks and the
rapidly growing use of fiber in cable television systems. In 1992, Corning
completed the expansion of its Wilmington, N.C., optical-fiber manufacturing
facility which represents a vital investment in technological leadership in
this industry. Siecor also expanded its cable manufacturing capacity as its
volume continued to grow with the market. To provide additional revenue
growth in future years, Corning has invested substantially in the development
of several businesses in this segment. These businesses include primarily a
variety of optical components to bring optical fiber to the home.
Sales volume in the advanced display products business, which produces
liquid-crystal display glass, increased substantially in 1992 after doubling
in 1991. Profitability was impacted by continued significant investment into
research and development to enhance Corning's leadership position as the
largest supplier of this high purity glass. The primary application to date
for this material has been in color displays for personal computers. To
strengthen Corning's position in the Japanese marketplace and meet customer
demands, Corning sold an equity interest totaling approximately 20% in this
business to Japanese investors in 1992 and 1991.
Sales volume in the conventional-video components (primarily glass for
television bulbs) and projection-video businesses increased in 1992 following
relatively flat sales in 1991. Product mix continues to shift from medium to
larger size video components which contributed to the sales increase.
Earnings were up in 1992 after a slight decline in 1991 as a result of higher
volume and manufacturing efficiency gains.
In 1992, Corning acquired Biosym Technologies, Inc. ("Biosym"), a worldwide
scientific software company. Biosym specializes in the development, marketing
and support of computer-aided molecular design software which, using
information display technology, streamlines the processes of discovering,
developing and bringing to market new drugs, chemicals and materials through
research at the atomic level. For Corning, this acquisition represents an
entry into the molecular modeling industry and is consistent with Corning's
commitment to materials research and to the delivery of high-quality
scientific services.
Sales of optical fiber and optical cable for the first forty weeks of 1993
increased as worldwide demand continued to contribute to improved volumes
which more than offset price reductions. Although year to date earnings of
the optical fiber and optical cable businesses increased over the prior year,
the rate of growth slowed in the third quarter due to aggressive pricing to
secure long-term supply contracts.
Sales in the advanced display products business have grown significantly as
the demand for liquid-crystal display glass continues to grow. Solid
manufacturing gains have resulted in this business operating profitably in
the first forty weeks of 1993 despite continued strategic investments in
research and development. Sales and earnings in both the conventional-video
components and the projection video businesses increased in the first forty
weeks of 1993 as a result of increased demand and continued manufacturing
gains. The profitability of this segment continues to be impacted by
investments in developing businesses.
Equity companies:
(In millions)
<TABLE>
<CAPTION>
Forty weeks ended Fiscal year ended
------------------------- --------------------
October 10, October 4, Jan. 3, Dec. 29,
1993 1992 1993 1991
----------- ---------- ------- ---------
<S> <C> <C> <C> <C>
Net sales $509.2 $511.8 $685.8 $609.1
Corning's share of net income 28.0 27.4 37.4 25.8
</TABLE>
Samsung-Corning produces glass panels and funnels in Korea for entertainment
television and display monitors. Samsung-Corning's sales and earnings
increased substantially in 1992, primarily as a result of increased volume
and improved manufacturing performance. Sales and earnings of Corning's
optical-fiber equity companies remained level in 1992 following a significant
increase in 1991 primarily as a result of adverse market conditions in the
United Kingdom.
Sales and earnings of Samsung-Corning were up in the first forty weeks of
1993 due to modest sales growth which continues to reflect the recovery in
the Korean marketplace, the strength of the Japanese Yen and lower interest
costs. Sales and earnings of the optical-fiber equity companies for the first
forty weeks of 1993 declined from 1992 levels primarily as a result of
declining fiber prices and the weak European economies.
22
<PAGE>
Laboratory Services
(In millions)
<TABLE>
<CAPTION>
Forty weeks ended Fiscal year ended
------------------------- ---------------------
October 10, October 4, Jan. 3, Dec. 29,
1993 1992 1993 1991
----------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Consolidated sales $933.2 $845.0 $1,149.8 $884.3
Income before tax 122.9(a) 149.1 203.1 155.5
(a) Includes $36.5 million charge for the MetPath settlement.
</TABLE>
Consolidated operations:
Consolidated sales and earnings in this segment achieved record levels in
1992 reflecting the strong performance of existing businesses and growth from
strategic acquisitions. The impact of FAS 106 on this segment was not
material.
The laboratory-services businesses operate as a wholly owned subsidiary
called Corning Lab Services, Inc. ("CLSI"). CLSI competes in three different
areas of the laboratory services market; namely, clinical-laboratory testing
through its MetPath division, pharmaceutical testing, and
environmental-laboratory testing through its Enseco division ("Enseco").
MetPath, the clinical-laboratory testing business of CLSI, reported
significant sales and earnings growth in 1992. This growth reflected the
success of MetPath's continuing focus on regional markets and expansion
through acquisitions. Several laboratories were acquired in the last three
years, primarily in the Central and Eastern regions of the United States and
in Europe, accounting for approximately 25% of this business' growth in
revenues. In addition, emphasis on preventive medicine and changing
demographics, coupled with the introduction of new diagnostic tests,
contributed to the increased demand for clinical-laboratory testing services.
Sales in the pharmaceutical-testing businesses, consisting of Hazleton, G.H.
Besselaar Associates ("Besselaar") and SciCor, Inc. ("SciCor"), increased in
1992. Earnings also improved significantly in 1992 primarily as a result of
cost reduction actions taken by Hazleton in response to the previous year's
lower than expected volume. Sales and earnings at Besselaar increased in
1992. To complement and expand the existing contract research organization,
SciCor was acquired in 1991. SciCor performs clinical laboratory tests and
data management for patients in clinical trials of new drug compounds.
SciCor's sales and earnings showed strong improvement in 1992 over 1991.
Sales at Enseco, the environmental-laboratory testing business of CLSI,
increased in 1992 primarily due to the late 1991 acquisition of
Wadsworth/ALERT Laboratories Inc. Earnings increased substantially over 1991
as a result of improved operations and cost reduction programs.
MetPath accounted for the majority of the increased sales of this segment in
the first forty weeks of 1993. Approximately two-thirds of MetPath's growth
resulted from increased volume and one-third resulted from the acquisition of
Damon. Although volume was up, gains were not as high as expected due to the
current uncertainty in the health care industry. Pricing pressure has become
stronger in this business as a result of a higher mix of business from lower
priced managed care clients. Excluding the impact of the settlement with the
DOJ, MetPath's earnings for the first forty weeks of 1993 were up only
slightly when compared with 1992. Sales and earnings in the
pharmaceutical-testing businesses showed solid growth primarily due to strong
performance at Hazleton and SciCor. Sales and earnings in the
environmental-laboratory testing businesses declined slightly in the first
forty weeks of 1993 due to weak market conditions. Price pressures in this
segment are expected to continue and cost reduction actions are being
implemented.
In September 1993, MetPath recorded a charge of $36.5 million to reflect the
settlement and related legal expenses associated with its compromise
agreement with the DOJ to settle claims brought on behalf of the Inspector
General. The claims related to the marketing, sale, pricing, and billing of
certain blood test series provided to Medicare patients. The settlement does
not constitute an admission by MetPath with respect to any issue arising from
the civil action. In the third quarter 1993, MetPath, along with other major
clinical laboratories, received subpoenas for additional information relating
to certain other tests. In addition, certain payors are reviewing their
reimbursement practices for laboratory tests in response to recent
announcements by certain competitors and continued pressure by government
agencies. The outcome of these events is uncertain but could negatively
impact revenue and earnings growth.
23
<PAGE>
Equity companies:
(In millions)
<TABLE>
<CAPTION>
Forty weeks ended Fiscal year ended
------------------------- -------------------
October 10, October 4, Jan. 3, Dec. 29,
1993 1992 1993 1991
----------- ----------- ------- ---------
<S> <C> <C> <C>
Net sales $16.1 $117.9 $228.4 $198.7
Corning's share of net income
(loss) (0.3) (7.3) (8.5) 0.7
</TABLE>
Equity losses in 1992 in this segment are primarily related to Unilab which
is currently accounted for using the cost method of accounting for
investments. At year end 1992, Corning owned 43% of Unilab and accounted for
the investment using the equity method. In January 1993, Corning signed a
definitive agreement with Unilab which contemplated that Corning would
acquire 100% of certain Unilab facilities (with gross revenues of
approximately $85 million) in exchange for a majority of the Unilab shares
owned by Corning, the assumption of approximately $70 million of Unilab debt
and Corning's investment in J.S. Pathology. This transaction was approved by
the Unilab stockholders and completed on November 10, 1993. Corning retained
a 12% equity investment in Unilab.
Consumer Products
(In millions)
<TABLE>
<CAPTION>
Forty weeks ended(a) Fiscal year ended
------------------------- ----------------------
October 10, October 4, Jan. 3, Dec. 29,
1993 1992 1993 1991
----------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Consolidated sales $532.8 $542.9 $772.2(b) $768.7
Income (loss) before taxes 7.8 22.7 (20.3)(b)(c) 57.7
(a) Both forty week periods include the incremental expense due to the
adoption of FAS 106.
(b) Reclassified to conform to the current year presentation.
(c) Includes restructuring charge of $63.3 million and $6.3 million of
incremental expense due to the adoption of FAS 106.
</TABLE>
Consolidated operations:
Consolidated sales in the Consumer Products segment increased in 1992.
However, sales and earnings continue to be impacted by weak worldwide
economies. In 1992, the restructuring provision for this segment's Brazilian
operations and an increase in postretirement benefits expense due to the
adoption of FAS 106 resulted in a loss.
On January 2, 1992, Corning entered into an alliance with Vitro, a major
Mexican industrial group. The new alliance combined Corning's consumer
housewares businesses and Vitro's consumer businesses into two jointly owned
companies. The United States-based company, Corning Vitro, serves Corning's
worldwide markets and is led by Corning management. Corning owns 51% of this
company and consolidates its financial statements. The second company, Vitro
Corning, is based in Mexico and is led by Vitro management. Until December
21, 1993, Corning owned 49% of this company and accounted for its investment
under the equity method.
On December 14, 1993, Vitro and the Company reached an agreement in principle
whereby, in two separate transactions, Vitro purchased in December 1993, the
shares of capital stock of Vitro Corning owned by the Company and the Company
will purchase in early 1994 the shares of capital stock of Corning Vitro
currently owned by Vitro. The net cost to Corning of the two transactions
will be $131 million. Corning and Vitro will continue their consumer products
alliance through cross distribution and supply agreements. Corning will
finance the payment to Vitro with the proceeds of the Offering.
Sales volume increased in the United States and Asia Pacific in 1992. The
volume growth in the United States came primarily from the sale of Vitro
product lines. The sales volume increase was partially offset by a continued
slow-down in European consumer markets and significant declines in Brazil due
to unstable economic conditions. Continued weak worldwide economic
conditions, particularly in Brazil, affected all product lines equally with
the exception of Corelle(R) dinnerware which recorded volume increases around
the world, reflecting growth from new product introductions.
Earnings of this segment declined in 1992. Worldwide cost reduction programs
and manufacturing efficiency gains in the United States were offset by lower
than expected volumes in Brazil and Europe. In 1992, Corning Vitro decided to
restructure and discontinue operations in Brazil due to continued significant
losses. As a result, a restructuring provision of $63.3 million pre-tax was
recorded in 1992.
24
<PAGE>
Sales in the Serengeti(R) sunglass product lines increased in 1992 as new
product introductions contributed to international growth. Earnings in 1992
were reduced by promotions and marketing programs to support these new
product introductions.
Sales and earnings of the consumer products segment for the first forty weeks
of 1993 declined in comparison to 1992 due to the combined impact of a poor
worldwide economic and retail sales environment and the impact of reduced
manufacturing efficiencies caused by lower volume. Sales in the United States
and Canada, which were up slightly when compared with last year, continue to
be impacted by low consumer confidence. The recession in Europe continues to
impact sales volumes in all major markets. The profitability of all product
lines has been affected by promotional activities and reduced volumes.
Equity companies:
(In millions)
<TABLE>
<CAPTION>
Forty weeks ended Fiscal year ended
------------------------- -------------------
October 10, October 4, Jan. 3, Dec. 29,
1993 1992 1993 1991
----------- ----------- ------- --------
<S> <C> <C> <C> <C>
Net sales $212.0 $207.7 $273.4 $87.7
Corning's share of net income (loss) (19.0)(a) (2.7) (5.4) 1.7
(a) Includes a $9.5 million restructuring charge at Vitro Corning.
</TABLE>
Equity earnings declined in 1992 as the result of equity losses recorded from
the first year of operations of Vitro Corning, due primarily to adverse
retail market conditions in Mexico. Equity earnings from Corning's interest
in CALP S.p.A., an Italian manufacturer of crystal stemware, were relatively
unchanged in 1992.
Equity earnings in 1993 continue to be negatively impacted by the poor
operating results of Vitro Corning, due in part to an increase in foreign
competition in Mexico compounded by the strengthening of the Mexican Peso.
Other Revenues and Deductions
Non-operating gains and losses: During the first forty weeks and full year
1992, Corning recognized net non-operating gains from consolidated operations
totaling $7.0 million ($21.7 million after-tax), including a gain of $10.1
million (before- and after-tax) from the sale of an additional equity
interest in Corning Japan and a pre-tax loss of $7.3 million ($9.0 million
after-tax gain) from the formation of the consumer housewares venture with
Vitro.
In 1991, Corning recognized net non-operating gains from consolidated
operations totaling $8.1 million ($14.6 million after-tax) which included a
gain of $5.3 million (before- and after-tax) on the sale of an equity
interest in Corning Japan.
During the first forty weeks of 1993, Corning recognized a non-operating gain
totaling $4.2 million ($2.6 million after-tax).
Provision for restructuring and other special charges: In 1992, Corning
recorded a provision of $63.3 million ($32.1 million after tax of $22.9
million and minority interest of $8.3 million) as a result of Corning Vitro's
decision to restructure its Brazilian operations.
During the first forty weeks of 1993, Corning recorded a restructuring charge
of $170.5 million ($98.5 million after tax of $64.6 million and minority
interest of $7.4 million) as a result of costs to integrate the Damon and
Costar acquisitions and as a result of a planned company-wide restructuring
program announced October 6, 1993, to reduce overhead costs during the next
12 to 14 months.
Also during the first forty weeks of 1993, MetPath reached a compromise
agreement with the Civil Division to settle claims brought on behalf of the
Inspector General. The claims related to the marketing, sale, pricing and
billing of certain blood test series provided to Medicare patients. MetPath
recorded a charge of $36.5 million ($22.0 million after tax) to reflect the
settlement and related legal expenses. The settlement does not constitute an
admission by MetPath with respect to any issue arising from the civil action.
Equity earnings: In 1992, Corning recognized a $37.7 million reduction in
equity earnings which included $24.5 million of costs associated with Dow
Corning's terminated breast implant business in the
25
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first forty weeks of 1992 and $13.2 million of restructuring charges
associated with Dow Corning's exit from its Brazilian operations and other
cost reduction programs in the fourth quarter 1992.
In 1991, Corning recognized an $8.2 million reduction in equity earnings to
reflect a charge recorded by Dow Corning for costs associated with its
terminated breast implant business.
In the first forty weeks of 1993, Corning recognized a $9.5 million reduction
in equity earnings as a result of a restructuring charge taken by Vitro
Corning.
Taxes
Corning's effective tax rate varies between years due primarily to the impact
of certain non-operating gains and losses and restructuring and other special
charges. The effective tax rates, excluding these items, were 33 percent and
37 percent in 1992 and 1991 respectively, and 33 percent and 34 percent for
the first forty weeks of 1993 and 1992, respectively. The lower 1992 and 1993
rates primarily result from repatriation programs and the increased
utilization of tax credits.
On August 11, the Revenue Reconciliation Act of 1993 (the "Act") was signed
into law. The Act increased the U.S. corporate statutory tax rate from 34
percent to 35 percent for years beginning after December 31, 1992, changed
the deductibility of certain expenses, and extended certain tax credits. The
increase in the statutory tax rate resulted in a gain from the revaluation of
Corning's net deferred tax assets in the third quarter which lowered the 1993
effective tax rate somewhat. Excluding this gain, the Act should not have a
material impact on Corning's annual tax rate.
Liquidity and Capital Resources
Corning's working capital declined to $465.2 million at the end of 1992 from
$521.0 million at the end of 1991. The ratio of current assets to current
liabilities was 1.6 at the end of 1992 compared with 1.7 at the end of 1991.
During 1992, Corning issued $155 million of long-term debt. Corning's ratio
of long-term debt to total capital increased to 28% at the end of 1992 from
24% at the end of 1991. The increase in this ratio is primarily a result of
the reduction in equity associated with the adoption of FAS 106.
Corning's working capital position at January 3, 1993 was reinforced by
available bank credit lines of $455 million and the ability to issue up to
$150 million of medium- and long-term debt under existing shelf-registration
statements filed with the Commission. During the first half 1993, Corning
issued $100 million of medium-term notes under such registration statements.
Corning's working capital decreased from $465.2 million at the end of 1992 to
$210.1 million at October 10, 1993. The ratio of current assets to current
liabilities was 1.2 at October 10, 1993 compared to 1.6 at year-end 1992.
Corning's long-term debt as a percentage of total capital was 36 percent at
the end of the third quarter, compared to 28 percent at year-end 1992. The
variance in these ratios is primarily due to the financing of the Damon
acquisition.
In July 1993, Corning increased its available bank credit lines by $100
million and borrowed $600 million under short-term financing agreements with
two banks to finance the acquisition of Damon for approximately $405 million
in cash and the refinancing of approximately $167 million of Damon's debt. In
August 1993, Corning filed a shelf registration statement with the Commission
to increase the amount of registered debt securities from $50 million to $500
million. During the third quarter, Corning issued $200 million of debt
securities in public offerings and used the proceeds of such offerings to
repay a portion of the acquisition debt. Corning intends to refinance a
significant portion of the remaining acquisition debt with the proceeds of an
offering of equity securities in 1994.
Cash Flows
Cash and short-term investments declined during 1992 by $74.5 million
primarily due to investing activities and financing activities which used
cash of $418.6 million and $146.1 million, respectively, offset by operating
activities which provided cash of $495.1 million. Cash and short-term
investments increased in 1991 by $74.6 million primarily as a result of
operating activities which provided cash of $471.0 million offset by
investing and financing activities which used cash of $359.6 million and
$34.3 million, respectively. Cash flows from operating activities were
relatively unchanged in comparison to 1991.
Cash used in investing activities increased in 1992 over 1991 primarily due
to increased investments in plant and equipment and acquisitions in the
Laboratory Services segment, partially offset by the receipt of approximately
$137 million of net proceeds from the formation of Corning Vitro and Vitro
Corning. Capital additions increased in 1992 primarily due to the continued
expansion of the Wilmington, N.C., optical-
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fiber manufacturing facility, the construction of additional facilities to
support MetPath's growth and the construction of a new corporate headquarters
building. The Company's 1993 capital expenditures are expected to increase,
primarily due to a significant expansion of the liquid-crystal display
manufacturing facility in Japan.
In 1992, cash used in financing activities increased significantly due to
higher levels of Common Stock repurchases and dividend payments. Corning
repurchased 2,910,500 and 1,989,000 shares of its Common Stock in 1992 and
1991, respectively, pursuant to a systematic plan authorized by the Board of
Directors. This activity is designed to provide shares for Corning's various
employee-benefit programs. Corning suspended its share repurchase program in
May 1993 to conserve cash for acquisition purposes.
Dividends paid to holders of Common Stock in 1992 totaled $176.7 million,
compared with $92.6 million in 1991. The higher 1992 payment resulted from a
$0.15 per share special dividend declared in 1991 and paid in 1992 and the
payment of the fourth quarter 1992 dividend prior to the end of fiscal 1992.
Excluding these special payments, the increase in dividends paid was caused
by an increase in the dividend rate of 17% in 1992 and an increase in the
number of shares of Common Stock outstanding.
Cash and short-term investments declined by $11.9 million and $98.6 million
during the first forty weeks of 1993 and 1992, respectively. The $11.9
million decline in the first forty weeks of 1993 is primarily due to
investing activities which used cash of $714.6 million offset by operating
and financing activities which provided cash of $157.5 and $542.9 million,
respectively. The $98.6 million decline in the first forty weeks of 1992 was
caused by investing and financing activities which used cash of $303.4
million and $21.5 million, respectively, offset by cash provided by operating
activities of $223.5 million.
Net cash provided by operating activities decreased in the first forty weeks
of 1993 from the comparable period in 1992 primarily due to the payment by
MetPath to the DOJ and the suspension of dividend payments from Dow Corning.
Net cash used in investing activities increased significantly in the first
forty weeks of 1993 compared with the same period in 1992 primarily due to
the acquisition of Damon for approximately $405 million and the
telecommunications business of GTE Control Devices Incorporated for
approximately $45 million. Capital spending increased only slightly in the
first forty weeks of 1993 compared with the same period in 1992 due to the
timing of payments on several large projects. Total 1993 capital spending is
expected to exceed 1992 levels. Investing activities in the first forty weeks
of 1992 included the receipt of approximately $137 million in net proceeds
from the formation of Corning Vitro and Vitro Corning, offset by the
investment of approximately $175 million in the laboratory services segment.
Net cash provided by financing activities increased significantly during the
first forty weeks of 1993 over the comparable period in 1992 primarily as a
result of increased borrowings to finance the acquisition of Damon and the
telecommunications business of GTE Control Devices Incorporated and to
finance continued capital expansion programs. Cash provided by financing
activities also increased as a result of reduced dividend payments and common
stock repurchases. Corning's dividend rate increased from $0.15 to $0.17 per
share in the fourth quarter of 1992; however, dividend payments declined in
1993 compared to 1992 due primarily to the timing of dividend payments.
Corning suspended its share repurchase program in May 1993 to conserve cash
for acquisition purposes.
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BUSINESS
General
Corning traces its origin to a glass business established by the Houghton
family in 1851. The present corporation was incorporated in the State of New
York in December 1936, and its name was changed from Corning Glass Works to
Corning Incorporated on April 28, 1989.
Corning is an international corporation competing in four broadly-based
business segments: Specialty Materials, Communications, Laboratory Services
and Consumer Products. Corning is engaged principally in the manufacture and
sale of products made from specialty glasses and related inorganic materials
having special properties of chemical stability, electrical resistance, heat
resistance, light transmission and mechanical strength. Corning and its
subsidiaries annually produce some 60,000 different products at 46 plants in
eight countries. In addition, Corning, through subsidiaries and affiliates,
engages in laboratory services businesses, including life and environmental
sciences and clinical-laboratory testing at 54 facilities in ten countries.
Specialty Materials
Corning's Specialty Materials segment sells more than 40,000 products and has
evolved from Corning's historical business base in materials development. The
major business units within the Specialty Materials segment are: automotive
substrates, ophthalmic and optical products, automotive lighting, science
products, and other advanced materials. Products manufactured by these
businesses include cellular ceramics for automotive and stationary
emission-control devices, plastic and glass ware for laboratory applications
and glass optical lenses.
Corning's long standing commitment to research, development and engineering
has driven the introduction of new products and technologies. In the 1970's
Corning developed the technology and created products for the substrates used
in emission control systems. Today the environmental products business
continues to be a driving force within the Specialty Materials segment.
Corning continues to develop new products and technologies to meet increasing
demand as a result of tightened regulations in the United States and Europe
and new regulations in other parts of the world. For example, to meet
tightening clean air standards, Corning has developed as a prototype an
electrically heated automotive catalytic converter substrate that begins
working within seconds of ignition, which is when most of the pollutants are
generated. Corning has developed a new family of materials, glass-polymers,
the properties of which make them well suited for components in automobiles,
aircraft, lighting systems and electronic devices.
Corning's equity company investments in this segment include Dow Corning,
Pittsburgh Corning and Cormetech, Inc., an equity company which manufactures
and sells stationary emission control devices for power plants.
Communications
Corning's Communications segment consists of the following major product
lines: optical fiber, optical cable, optical components, liquid-crystal
display glass, television bulbs, lenses for projection television, and
magnetic memory disks.
Corning's Communications segment also originates from Corning's commitment to
research and development in new materials. Corning led the development of the
modern opto-electronics market with its invention of optical fiber in the
late 1960's and is the leading supplier of optical fiber and such supporting
components as couplers and signal splitters. Corning is also a leading
supplier of optical cable through its 50% ownership of Siecor. In addition,
Corning has several equity investments in companies that produce optical
fiber internationally.
Approximately two-thirds of the revenues in the Communications segment are
generated by sales of opto-electronic products. Today, optical fiber is
penetrating the communications market as optical fiber is rapidly becoming
the preferred way to transmit telephone, cable-TV and computer data
worldwide. Optical fiber permits the transmission of substantially more data
over greater distances with less distortion than does copper, the product it
is principally replacing. As users of optical fiber increase applications and
expand services, Corning continues to provide new and improved optical-fiber
products and corollary components to an expanding market. During the next few
years, management believes that more fiber will be deployed in distribution
cables and that utilization of fiber to the home will increase.
Corning continues to be a leading producer of glass panels and funnels for
television picture tubes through Corning Asahi Video, and is also a world
leader in the production of projection television lenses through its wholly
owned subsidiary, U.S. Precision Lens Inc.
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The market for liquid-crystal display glass continues to grow, currently
driven by notebook computer and portable-TV sales. Future applications are
expected to include desktop-computer displays, projection-TV systems, video
phones and automotive applications. Corning is the world's leading supplier
in this market.
Another Corning invention, the MemCor(tm) glass-ceramic memory disk for
high-performance hard-disk drives in computers, significantly increases
storage capacity and improves reliability. The first major customer shipments
began in the first half 1993.
Also included in this segment is Biosym, which develops and markets
computer-aided molecular design software.
Laboratory Services
Corning entered the laboratory services market in the early 1970's with its
initial investment in MetPath, a regional U.S. clinical laboratory which
Corning acquired in 1982. Since 1982, Corning has made several other
acquisitions in the clinical, biological, pharmaceutical and
environmental-services industries. In 1991 Corning combined its
laboratory-service business units into a wholly owned subsidiary, CLSI, to
better manage the development of its business in this rapidly growing area.
Today CLSI operates 54 major facilities in ten countries that provide
clinical, pharmaceutical and environmental testing services.
CLSI's testing division, MetPath, performs more than 1,400 different clinical
tests for physicians, hospitals, laboratories, industries, health-maintenance
organizations and other managed-care providers through a quick-response
network of regional U.S. laboratories. MetPath is a leader in providing
cost-effective and reliable clinical diagnostic testing services. See
"--Recent Developments--Department of Justice Investigation."
Corning's pharmaceutical-testing businesses are conducted by CLSI's wholly
owned subsidiaries, Besselaar, Hazelton and SciCor. These businesses perform
chemical and biological testing, clinical research and data management
services primarily for the pharmaceutical industry. Corning's
environmental-laboratory testing business is conducted by CLSI's Enseco
division and provides tests for environmental contaminants in soil, water and
air for industry and government.
Corning's Laboratory Services segment is being affected by new Federal
legislation to be implemented in January 1994. The new legislation will
reduce Medicare reimbursement rates and will limit future laboratory fee
increases. In addition, the Clinton Administration's health-care plan calls
for managed competition with limitations on total national health-care
expenditures and on the annual growth of such expenditures. A health-care
reform model based on managed competition will likely reduce reimbursements
for clinical laboratory services as managed care networks continue to
proliferate. As the plan also calls for insurance coverage for some 37
million people who currently have no such coverage, it is expected that
demand for such services will increase. Demand should also increase as a
result of a stronger emphasis on testing as a preventative measure. It is not
clear how quickly or to what extent Medicare and Medicaid programs will be
incorporated into the health reform system. Management believes that while
the entire health-care industry faces dramatic challenges to build a more
effective means of delivery of services, MetPath's leading market position in
major geographic areas will allow Corning to continue to benefit from the
ongoing and increasing consolidation in the industry.
Consumer Products
Corning is well known for its line of consumer housewares with strong brand
names and consumer franchise. Key product lines are Pyrex(R) glassware,
Corelle(R) tableware, Corning Ware(R), Visions(R) cookware, and Revere
Ware(R) cookware. Other Corning consumer products include the prestigious
Steuben(R) crystal and Serengeti(R) sunglasses.
Corning's executive offices are located at One Riverfront Plaza, Corning, New
York 14831, and its telephone number at such offices is (607) 974-9000.
Recent Developments
1993 Earnings Announcement. On January 24, 1994, Corning announced its fourth
quarter and full year 1993 earnings. Including the restructuring and other
special charges in the third quarter and the Dow Corning charge in the fourth
quarter, Corning reported a net loss of $15.2 million, or $0.09 per share, in
1993 compared with a net loss of $12.6 million, or $0.08 per share, in 1992.
Excluding special charges, the one time impact of accounting changes,
extraordinary credits and non operating gains in both years, net income for
1993 was $315.3 million, or $1.63 per share, compared with net income of
$314.4 million, or $1.66 per share, in 1992.
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Including the Dow Corning charge in the fourth quarter, Corning reported a
net loss of $120.9 million, or $0.64 per share, in the 1993 fourth quarter
compared with net income of $41.2 million, or $0.21 per share, in the 1992
fourth quarter. Excluding special charges and extraordinary credits in both
quarters, fourth quarter net income totaled $82.2 million, or $0.42 per
share, in 1993 compared with $79.9 million, or $0.42 per share, in 1992.
Sales for 1993 totaled $4.0 billion, up 8 percent over 1992. Fourth quarter
sales, at $1.1 billion, were up 9 percent compared with 1992. Sales growth
was primarily attributable to the Damon and Costar acquisitions in the second
half of the year.
The earnings release and summary financial statements are included in
Corning's Current Report on Form 8-K filed on January 24, 1994. See
"Incorporation of Certain Documents by Reference" and "Selected Consolidated
Financial Data."
Acquisition of NTL Assets. On December 14, 1993, NTL, Siecor and the Company
reached an agreement whereby the Company would purchase the net assets
constituting NTL's optical fiber business for $87 million in cash and Siecor
would purchase the net assets constituting NTL's optical cable business for
$43 million in cash. Corning will finance the acquisition of NTL's optical
fiber business and an approximate $25 million capital contribution to Siecor
with a portion of the proceeds of the Offering. Siecor will finance the
acquisition of NTL's optical cable business with a capital contribution from
Siemens and the Company. Closing of both transactions is expected to occur
during the first quarter of 1994.
The acquisition of the optical fiber and optical cable assets of NTL will
provide Corning and Siecor access to the expanding optical fiber cable
markets in Canada.
Vitro Transaction. On December 14, 1993, Vitro and the Company reached an
agreement in principle whereby, in two separate transactions, Vitro purchased
in December 1993 the shares of capital stock of Vitro Corning owned by the
Company and the Company will purchase in early 1994 the shares of capital
stock of Corning Vitro owned by Vitro. The net cost to Corning of the two
transactions will be $131 million. Corning and Vitro will continue their
consumer products alliance through cross distribution and supply agreements.
Corning will finance the payment to Vitro with a portion of the proceeds of
the Offering.
The change in the ownership structure of Corning Vitro and Vitro Corning will
allow each such company to concentrate on its respective businesses without
the complexities of managing two different operations in rapidly changing
markets. The positive aspects of the Vitro and Corning alliance will be
continued through cross distribution and supply agreements.
Acquisition of Damon. In August 1993 Corning acquired all of the outstanding
shares of common stock of Damon in a transaction accounted for as a purchase.
The total purchase price of this transaction was approximately $405 million,
including acquisition expenses. In addition, approximately $167 million of
indebtedness of Damon has been refinanced. Corning has financed the
acquisition of Damon and the refinancing of Damon's debt with short-term
financing agreements entered into with certain commercial banks.
Approximately $200 million of such short-term financing has been retired with
the proceeds from the issuance of long-term debt of the Company. Corning
intends to retire a significant portion of the remaining acquisition debt
with the net proceeds of an offering of equity securities during 1994.
Damon's principal line of business is clinical-laboratory testing, providing
to the medical profession a full range of routine and esoteric testing
services that are used in the diagnosis, monitoring and treatment of disease.
Damon provides its services to physicians, hospitals, nursing homes, managed
care institutions, corporations and governmental agencies, including agencies
of the United States of America.
For the year ended December 31, 1992 Damon reported total sales of $317
million and net income of $18 million. For the first half 1993 Damon
announced total sales of $170.8 million and net income of $2.4 million. The
lower first half 1993 net income was primarily due to the increase in
operating expenses caused by two late 1992 acquisitions and severe weather in
February and March 1993. Certain historical financial statements of Damon are
included in Corning's Current Reports on Form 8-K dated August 4, 1993 and
August 13, 1993 which are incorporated herein by reference. See
"Capitalization" and "Unaudited Pro Forma Combined Financial Information".
Acquisition of Costar. In September 1993 Corning acquired Costar for
approximately 5.5 million shares of Corning Common Stock and options to
purchase approximately 300,000 shares of Corning Common Stock. The Costar
merger has been accounted for as a pooling of interests for accounting and
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financial reporting purposes. Corning's consolidated financial statements
have not been restated because the acquisition is not material to Corning's
financial position or results of operations.
Costar is a developer, manufacturer and marketer of disposable plastic,
filtration and other products used in life science laboratories throughout
the world, primarily for cell culture, immunology/molecular biology,
filtration and other basic laboratory procedures. Costar's laboratory
products, which currently account for more than 80% of net sales, are used
principally in life science research laboratories in colleges, universities,
medical schools, teaching hospitals, government agencies, private research
foundations and pharmaceutical and biotechnology companies. In addition to
its laboratory products business, Costar develops, manufactures and sells
process filtration products used primarily in the semiconductor industry for
the purification of deionized water. Costar is also engaged in the
distribution in Europe of laboratory-related products manufactured by others.
For the year ended December 31, 1992, Costar reported total sales of $74.9
million and net income of $6.1 million. For the first half 1993 Costar has
announced total sales of $40.2 million and net income of $3.1 million. See
"Capitalization" and "Unaudited Pro Forma Combined Financial Information".
Unilab Reorganization. Prior to November 1993, Corning, through a wholly
owned subsidiary, owned 43% of Unilab. In November 1993, Corning acquired 100
percent of certain Unilab facilities in exchange for a majority of the Unilab
shares owned by Corning, the assumption of approximately $70 million of
Unilab debt and Corning's investment in J.S. Pathology. Corning retained a
12% equity investment in Unilab.
Breast Implant Litigation. Corning continues to be named as a defendant in
two types of cases previously reported involving the silicone-gel breast
implant products or materials formerly manufactured or supplied by Dow
Corning or a Dow Corning subsidiary. These cases include (1) several
purported securities class action lawsuits and shareholder derivative
lawsuits filed against Corning by shareholders of Corning alleging, among
other things, misrepresentations and omissions of material facts, breach of
duty to shareholders and waste of corporate assets relative to the
silicone-gel breast implant business conducted by Dow Corning and (2) as of
December 13, 1993 over 4,000 lawsuits filed in various state courts against
Corning and others (including Dow Corning) by persons claiming injury from
the silicone-gel breast implant products or materials formerly manufactured
by Dow Corning or a Dow Corning subsidiary. Several of such suits have been
styled as class actions and others involve multiple plaintiffs. All of the
tort lawsuits filed against Corning in federal courts had been ordered
consolidated in the United States District Court, Northern District of
Alabama. In early December 1993, Corning was dismissed from the more than
3,000 cases pending in such federal courts. The decision by the District
Court is non-appealable and, although the District Court noted that it was
"highly unlikely" that additional discovery would produce new evidence, the
decision is subject to reconsideration if additional information is
discovered or if there is a change in state law. Certain state court cases
against Corning have been consolidated, for the purposes of discovery and
pretrial matters. The securities suits are all pending in the United States
District Court for the Southern District of New York.
Corning's management does not believe that the purported securities class
action lawsuits or the purported shareholder derivative lawsuits or the tort
actions filed against Corning described above will have a material adverse
effect on Corning's financial condition or the results of its operations.
Dow Corning has informed Corning that as of October 15, 1993, Dow Corning has
been named in 41 purported breast implant product liability class action
lawsuits and approximately 9,000 individual breast implant product liability
lawsuits (which number includes all or substantially all of the 4,000
lawsuits referred to above) and that Dow Corning anticipates that it will be
named as a defendant in additional breast implant lawsuits in the future. Dow
Corning has also stated that it is vigorously defending this litigation.
Verdicts in breast implant litigation against Dow Corning and other
defendants which have gone to judgment have varied widely, ranging from
dismissal to the award of significant compensatory and punitive damages.
Dow Corning has also informed Corning that Dow Corning believes that a
substantial portion of the indemnity and defense costs related to the breast
implant litigation brought and to be brought against it is and will be
covered by product liability insurance available to it but that the insurance
companies issuing the policies in question have reserved the right to deny
coverage under various theories and in many cases have refused to pay defense
and indemnity costs which have been incurred by Dow Corning. In this regard,
on June 30, 1993, Dow Corning instituted litigation in California against
certain insurance companies
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which had issued product liability insurance policies to it from 1962 through
1985 seeking declaratory judgments that the insurance company defendants are
liable to indemnify Dow Corning for such liabilities and costs and, in the
case of certain insurance company defendants, damages including punitive
damages. In September, 1993, several of Dow Corning's insurers filed a
complaint against Dow Corning and other insurers for declaratory relief in
Michigan and moved for the action brought by Dow Corning in California to be
dismissed in favor of the Michigan litigation. On October 1, 1993, this
motion was granted. Corning understands that, in light of this ruling, Dow
Corning has elected to litigate coverage issues on breast implant product
liability lawsuits and claims in the Michigan proceeding. Notwithstanding the
pendency of this litigation, Dow Corning expects to continue negotiations
with such insurance companies to obtain an agreement on a formula for the
allocation among these insurers of payments of defense and indemnity expenses
related to breast implant products liability lawsuits and claims.
On September 9, 1993, Dow Corning announced that representatives of
plaintiffs and defendants involved with silicone breast implant litigation
have developed a "Statement of Principles for Global Resolution of Breast
Implant Claims" (the "Statement of Principles"). The Statement of Principles
summarizes a proposed resolution of all claims arising out of breast implants
which have been or could be asserted against various implant manufacturers,
suppliers, physicians and hospitals (the "Proposed Settlement").
The Statement of Principles does not constitute an agreement and a number of
issues remain to be resolved before a tentative settlement agreement can be
reached.
Under the Proposed Settlement, if implemented, industry participants,
including manufacturers, raw materials suppliers, physicians, hospitals and
other health care providers (the "Funding Participants") would contribute up
to $4.75 billion over a period of thirty years to establish several special
purpose funds. The specific participants and their respective contributions
to this fund are currently under negotiation. The Proposed Settlement, if
implemented, would be a claims-based structured resolution of all claims
arising out of silicone breast implants. The Proposed Settlement, if
implemented, would establish several special purpose funds and define the
circumstances under which payments from the funds would be made. The Proposed
Settlement includes provisions for (a) class membership and the ability of
plaintiffs to opt out of the class, (b) the establishment of defined funds
for medical diagnostic/evaluation procedures, explanation, ruptures,
compensation for specific diseases and administration, (c) payment terms and
timing and (d) claims administration. The Proposed Settlement defines periods
during which breast implant plaintiffs may elect not to settle their claims
by way of the Proposed Settlement and continue their individual breast
implant litigation against manufacturers and other defendants (the "Opt Out
Plaintiffs"). In certain circumstances, if any defendant who is a Funding
Participant considers the number of Opt Out Plaintiffs maintaining lawsuits
against such defendant to be excessive, such defendant can withdraw from
participation in the Proposed Settlement. Dow Corning is currently
negotiating with other potential parties to the Proposed Settlement to reach
a tentative settlement agreement conceptually similar to the Statement of
Principles.
Corning has been informed that Dow Corning's management believes that a
settlement incorporating concepts underlying the Statement of Principles
would be a responsible and cost efficient approach to resolving breast
implant litigation against Dow Corning. Corning understands that Dow Corning
is currently evaluating the Proposed Settlement in that light and believes
that it would be viable only if, among other things, (a) an acceptable
agreement as to allocation of liability under the Proposed Settlement among
Funding Participants can be reached, (b) adequate insurance support is
provided to Funding Participants by their insurance carriers and (c) the
number of Opt Out Plaintiffs is minimal.
If the tort actions filed against Dow Corning or any settlement of the breast
implant controversy should require Dow Corning to record any charges against
income in addition to the charge described in the following paragraph, the
effect on Corning of any such charges would be limited to its consequent
impact (in the amount of approximately 50% of the amount thereof) on
Corning's reported equity in earnings of associated companies for the period
such loss is recognized, on the book value of Corning's equity investment in
Dow Corning and on Corning's retained earnings. Corning does not believe that
its share of any additional charge taken by Dow Corning resulting from the
proposed settlement will have a material adverse effect upon Corning's
financial condition. However, it is possible that Corning's share of any such
charge taken by Dow Corning will have a material adverse effect upon
Corning's earnings in the quarter in which any such charge is recognized by
Dow Corning.
Charges Announced by Dow Corning and by Corning on January 14, 1994. On
January 14, 1994, Dow Corning announced that it would take a pre-tax charge
against earnings for the fourth quarter of
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1993 of $640 million ($415 million after-tax) to reflect its best estimate,
as of that date, of the net present value of its potential liability and
costs, net of the recoveries it expects to receive from its insurance
carriers, as a result of its involvement in the breast implant litigation.
Dow Corning noted in this announcement that as breast implant litigation
settlement negotiations continue additional facts and circumstances may
develop which may require Dow Corning to revise this estimate or to make
additional provisions to reflect any additional costs of resolving this
matter.
On that same date, Corning announced that, as a result of Dow Corning's
decision to take this charge, Corning would record a charge of $203 million
after-tax against its equity in earnings of associated companies for the
fourth quarter of 1993 and against the carrying value of its investment in
Dow Corning at the end of fiscal 1993.
Other Dow Corning Matters. Dow Corning received a request dated July 9, 1993
from the Boston Regional Office of the Commission for certain documents and
information related to silicone breast implants. The request states that the
Boston Regional Office is conducting an informal investigation which
"concerns Dow Corning, its subsidiary Dow Corning Wright and parent
corporations, Dow Chemical Co. and Corning Inc." Dow Corning has informed
Corning that Dow Corning has responded to this request enclosing the
documents and information requested along with related information.
During the first quarter of 1993, Dow Corning received two federal grand jury
subpoenas initiated by the DOJ seeking documents and information related to
silicone breast implants. Dow Corning has informed Corning that it has
delivered the documents and information requested.
Department of Justice Investigation. In September, 1993, MetPath and MetWest
Inc. ("MetWest"), a wholly-owned subsidiary of Unilab, in which Corning had
at the time an interest of approximately 43%, entered into a Settlement
Agreement (the "Settlement Agreement") with the DOJ and the Inspector
General. Pursuant to the Settlement Agreement, MetPath and MetWest paid to
the United States a total of $39.8 million in settlement of civil claims by
the DOJ and the Inspector General that MetPath and MetWest had fraudulently
induced physicians to order certain laboratory tests from them without
realizing that such tests would be billed to Medicare at rates higher than
those such physicians believed were applicable.
Unilab's portion of the total payment under the Settlement Agreement was
approximately $4.8 million. In November of 1993, Unilab was reorganized into
two companies; one wholly-owned by CLSI which continues to own MetWest and
one publicly-owned in which CLSI retains an interest of approximately 12%. Of
the total of approximately $4.8 million paid by Unilab under the Settlement
Agreement, responsibility for approximately $2.4 million was allocated in
this reorganization to the successor company which is wholly owned by CLSI.
Certain state and private insurers, as well as the Federal Civilian Health
and Medical Program for the Uniformed Services, have questioned the practices
which were covered by the Settlement Agreement and it is not clear at this
time what, if any, additional exposure Corning may have to these entities and
to other persons which may assert claims on the basis of these or other
practices.
During August, 1993, MetPath, MetWest and Damon (which was acquired by
Corning in that month) together with other participants in the industry
received subpoenas from the Inspector General seeking information regarding
their practices with respect to 14 enumerated tests offered in conjunction
with automated chemical test panels. Of these 14 tests, 5 were covered by the
Settlement Agreement and consequently MetPath and MetWest are not being
required to provide further information with regard to them. MetPath, MetWest
and Damon are in the process of complying with these subpoenas. The results
of these investigations cannot currently be predicted but the possibility
that they may result in additional claims by or settlements with parties
other than the DOJ and the Inspector General cannot be excluded.
Other Legal Proceedings. During September, 1993, two individuals filed in the
Supreme Court of the State of New York (one in New York County and one in
Suffolk County) separate purported derivative actions against Corning, as
nominal defendant, and Corning's Directors and certain of its officers
seeking on behalf of Corning compensatory and punitive damages in unspecified
amounts (and plaintiff's costs and disbursements including attorneys' and
experts' fees) by reason of the alleged responsibility of the actual
defendants for the conduct which gave rise to the settlement in the MetPath
litigation described above and their alleged failure to cause Corning to make
timely disclosure thereof.
Corning understands that the plaintiffs in these two actions have agreed to
consolidate them in a single action before the Supreme Court of the State of
New York in New York County.
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During October, 1993, two individuals instituted in the United States
District Court for the Southern District of New York purported class actions
on behalf of purchasers of Corning securities in the open market during the
period from September 17 to October 6, 1993 against Corning, certain of its
Directors and officers and the underwriters of Corning's offering, on
September 17, 1993, of $100 million of 6.75% Debentures due on September 15,
2013. The complaints generally allege that the defendants failed to make
timely disclosures of adverse developments in Corning's business and seek
compensatory and punitive damages in unspecified amounts (and plaintiff's
costs and expenses including attorney's fees and disbursements).
Corning understands that the plaintiffs in these two actions have agreed to
consolidate them.
Corning's management does not believe that the purported class action
lawsuits or the purported shareholder derivative lawsuits described above
will have a material adverse effect on Corning's financial condition or the
results of its operations.
DESCRIPTION OF CAPITAL STOCK
General
The following is a brief summary of certain provisions of the Company's
Restated Certificate of Incorporation, as amended (the "Restated
Certificate"), and does not relate to or give effect to provisions of
statutory or other law except as specifically stated. The Restated
Certificate authorizes the issuance of 500,000,000 shares of Common Stock and
10,000,000 shares of Series Preferred Stock, par value $100 per share (the
"Series Preferred Stock"). Of the Series Preferred Stock, 600,000 shares have
been designated Series A Junior Participation Preferred Stock (the "Series A
Preferred Stock") and 316,822 shares have been designated Series B Cumulative
Convertible Preferred Stock (the "Series B Preferred Stock"). As of January
2, 1994, 200,491,721 shares of Common Stock, no shares of Series A Preferred
Stock and 261,812 shares of Series B Preferred Stock were outstanding.
Common Stock
The rights of holders of Common Stock are governed by the Restated
Certificate and the Company's By-Laws and by the New York Business
Corporation Law (the "NYBCL").
Voting Rights
Subject to the voting of any shares of Series Preferred Stock that may be
outstanding, voting power is vested in the Common Stock, each share having
one vote.
Preemptive Rights
The Restated Certificate provides that no holder of Common Stock or Series
Preferred Stock of the Company shall have any preemptive rights except as the
Board of Directors of the Company may determine from time to time. No such
rights have been granted by the Board of Directors of the Company.
Liquidation Rights
Subject to the preferential rights of any outstanding Series Preferred Stock,
in the event of any liquidation of the Company, holders of Common Stock then
outstanding are entitled to share ratably in the assets of the Company
available for distribution to such holders.
Dividend Rights and Restrictions
Subject to any preferential rights of any outstanding Series Preferred Stock,
such dividends as may be determined by the Board of Directors may be declared
and paid on the Common Stock from time to time out of any funds legally
available therefor. The Company has regularly paid cash dividends since 1881
and currently expects to continue to pay cash dividends. The Company's
current quarterly cash dividend is $.17 per share of Common Stock. The
continued declaration of dividends by the Board of Directors of the Company
is subject to, among other things, the Company's current and prospective
earnings, financial condition and capital requirements and such other factors
as the Board of Directors may deem relevant.
Other Provisions
The Common Stock has no redemption, sinking fund or conversion privileges
applicable thereto and holders of Common Stock are not liable to assessments
or to further call.
Series Preferred Stock
The Restated Certificate authorizes the issuance of up to 10,000,000 shares
of Series Preferred Stock. The Company's Board of Directors has the authority
to issue such shares from time to time, without stockholder approval, and the
authority to determine the designations, preferences, rights, including
voting
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rights, and restrictions of such shares, subject to the NYBCL. Pursuant to
this authority, the Board of Directors has designated 600,000 shares of
Series Preferred Stock as Series A Preferred Stock, and 500,000 shares of
Series Preferred Stock as Series B Preferred Stock. No other class of Series
Preferred Stock has been designated by the Board of Directors.
Series B Preferred Stock
Cumulative cash dividends at the rate of 8% per annum are payable on shares
of Series B Preferred Stock which have been issued. The Company has regularly
paid dividends on the Series B Preferred Stock. No dividends may be paid or
declared on the Series A Preferred Stock or the Common Stock unless all
dividends for all prior dividend periods have been paid or declared on the
Series B Preferred Stock.
Holders of Series B Preferred Stock are entitled to vote, voting together
with the Common Stock and not as a separate class, on all matters submitted
to holders of the Common Stock, each share of Series B Preferred Stock having
four votes, subject to adjustment.
Holders of Series B Preferred Stock have no preemptive rights. In the event
of a liquidation, dissolution or winding up of the Company, holders of Series
B Preferred Stock shall be entitled to receive a distribution in the amount
of $100 per share, plus accrued and unpaid dividends, before any distribution
on the Common Stock or Series A Preferred Stock.
The Series B Preferred Stock is redeemable, in whole or in part, at the
election of the Company, at any time, at the following redemption prices per
share:
During the Twelve-
Month Period Price Per
Beginning October 1, Share
- -------------------- ---------
1993 $104.00
1994 $103.00
1995 $102.00
1996 $101.00
and thereafter at $100.00 per share and, in each case, plus accrued and
unpaid dividends.
The Series B Preferred Stock is subject to mandatory redemption, at the
option of the holder, at any time upon five business days notice, at a
redemption price equal to $100 plus accrued and unpaid dividends, if the
proceeds are necessary (i) to make a distribution pursuant to an investment
election made under the employee benefit plan or (ii) to satisfy any
indebtedness to which the employee benefit plan is subject provided that such
payment is necessary to remedy or prevent a default under such indebtedness.
The Company, at its option, may make payment of the redemption price required
upon redemption of shares of Series B Preferred Stock in cash or in shares of
Common Stock, or in any combination of such shares and cash.
The Series B Preferred Stock is convertible at the option of the holder, at
any time, into Common Stock at a conversion price of $25 per share of Common
Stock, each share of Series B Preferred Stock being valued at $100 for the
purpose of such conversion, producing a conversion ratio equal to four shares
of Common Stock for each share of Series B Preferred Stock so converted,
subject to certain adjustments to prevent dilution.
Preferred Share Purchase Rights
Attached to each share of Common Stock sold in the Offering will be one
preferred share purchase right (a "Right") for each outstanding share of
Common Stock. Each Right entitles the registered holder to purchase from the
Company one four-hundredth of a share of Series A Preferred Stock at a price
of $62.50 per one four-hundredth of a share of Series A Preferred Stock (the
"Exercise Price"), subject to adjustment. The Rights will expire on July 15,
1996 (the "Final Expiration Date"), unless the Final Expiration Date is
extended or unless the Rights are earlier redeemed by the Company.
The Rights will be represented by the certificates for Common Stock, will not
be exercisable, and will not be transferable apart from the Common Stock,
until the earlier of (i) ten days following the public announcement by the
Company or an Acquiring Person, as defined below, that a person or group has
acquired beneficial ownership of 20% or more of the Company's Common Stock
(an "Acquiring Person") or (ii) ten business days (or such later date as the
Board of Directors may determine) after the commencement or first public
announcement of a tender or exchange offer that would result in a person or
group
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beneficially owning 20% or more of the Company's outstanding Common Stock
(the earlier of such dates being called the "Distribution Date"). Separate
certificates for the Rights will be mailed to holders of record of the Common
Stock as of such date. The Rights could then begin trading separately from
the Common Stock.
Generally, in the event that a person or group becomes an Acquiring Person,
each Right, other than the Rights owned by the Acquiring Person, will
thereafter entitle the holder to receive, upon exercise of the Right, Common
Stock having a value equal to two times the Exercise Price of the Right. In
the event that the Company is acquired in a merger, consolidation, or other
business combination transaction or more than 50% of the Company's assets,
cash flow or earning power is sold or transferred, each Right, other than the
Rights owned by an Acquiring Person, will thereafter entitle the holder
thereof to receive, upon the exercise of the Right, common stock of the
surviving corporation having a value equal to two times the Exercise Price of
the Right.
The Rights are redeemable in whole, but not in part, at $.0125 per Right at
any time on or prior to any person or group becoming an Acquiring Person,
provided that the Rights may no longer be redeemed if such person or group
shall have acquired beneficial ownership of 90% or more of the Common Stock.
The right to exercise the Rights terminates at the time that the Board of
Directors elects to redeem the Rights. Notice of redemption shall be given by
mailing such notice to the registered holders of the Rights. At no time will
the Rights have any voting rights. The Rights Agent is Harris Trust and
Savings Bank (the "Rights Agent").
The exercise price payable, and the number of shares of Series A Preferred
Stock or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or
reclassification of, the shares of Series A Preferred Stock, (ii) upon the
grant to holders of the shares of Series A Preferred Stock of certain rights
or warrants to subscribe for or purchase shares of Series A Preferred Stock
at a price, or securities convertible into shares of Series A Preferred Stock
with a conversion price, less than the then current market price of the
shares of Series A Preferred Stock or (iii) upon the distribution to holders
of the shares of Series A Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in shares of Series A Preferred Stock)
or of subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one four-hundredths of a
share of Series A Preferred Stock issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of, or stock
dividend on, or subdivision, consolidation or combination of, the Common
Stock prior to the Distribution Date. With certain exceptions, no adjustment
in the exercise price will be required until cumulative adjustments require
an adjustment of at least 1% in such exercise price.
Upon exercise of the Rights, no fractional shares of Series A Preferred Stock
will be issued (other than fractions which are integral multiples of one
four-hundredth of a share, which may, at the election of the Company, be
evidenced by depositary receipts) and in lieu thereof an adjustment in cash
will be made.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Board of Directors of the Company,
except pursuant to an offer conditioned on a substantial number of Rights
being acquired. The Rights should not interfere with any merger or other
business combination approved by the Board of Directors since the Rights may
be redeemed by the Company at $.0125 per Right prior to the fifteenth day
after the acquisition by a person or group of beneficial ownership of 20% or
more of the Common Stock (subject to certain exceptions).
The shares of Series A Preferred Stock purchasable upon exercise of the
Rights will rank junior to all other series of the Company's Preferred Stock
or any similar stock that specifically provide that they shall rank prior to
the shares of Series A Preferred Stock. The shares of Series A Preferred
Stock will be nonredeemable. Each share of Series A Preferred Stock will be
entitled to a minimum preferential quarterly dividend of $10 per share, but
will be entitled to an aggregate dividend of 100 times the dividend declared
per share of Common Stock. In the event of liquidation, the holders of the
shares of Series A Preferred Stock will be entitled to a minimum preferential
liquidation payment of $100 per share, but will be entitled to an aggregate
payment of 100 times the payment made per share of Common Stock. Each share
of Series A Preferred Stock will have 100 votes, voting together with the
Common Stock. In the event of any
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merger, consolidation or other transaction in which Common Stock is
exchanged, each share of Series A Preferred Stock will be entitled to receive
100 times the amount and type of consideration received per share of Common
Stock. These rights are protected by customary antidilution provisions.
Because of the nature of the Series A Preferred Stock's dividend, liquidation
and voting rights, the value of the interest in a share of Series A Preferred
Stock purchasable upon the exercise of each Right should approximate the
value of one share of Common Stock.
The foregoing description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the description of the Rights
contained in the Rights Agreement, dated as of July 2, 1986 between the
Company and the Rights Agent, as amended by the Amended Rights Agreement,
dated as of October 4, 1989, included as an exhibit to this Registration
Statement.
Corning's Fair Price Amendment
In 1985, the Company's stockholders adopted an amendment (the "Fair Price
Amendment") to the Company's Restated Certificate that, in general, requires
the approval by the holders of at least 80% of the voting power of the
outstanding capital stock of the Company entitled to vote generally in the
election of directors (the "Voting Stock") as a condition for mergers and
certain other business combinations with any beneficial owner of more than
10% of such voting power unless (1) the transaction is approved by at least a
majority of the Continuing Directors or (2) certain minimum price, form of
consideration and procedural requirements are met. Certain terms used herein
are defined in the Company's Restated Certificate.
Amendment or repeal of this provision or the adoption of any provision
inconsistent therewith would require the affirmative vote of at least 80% of
the Voting Stock unless the proposed amendment or repeal or the adoption of
the inconsistent provisions were approved by two-thirds of the entire Board
of Directors and a majority of the Continuing Directors.
Certain Other Provisions of the Restated Certificate and By-Laws
In addition to the Preferred Share Purchase Rights and the Fair Price
Amendment, the Restated Certificate and By-Laws contain other provisions that
may discourage a third party from seeking to acquire the Company or to
commence a proxy contest or other takeover-related action. The Company has
classified its Board of Directors such that one-third of the Board is elected
each year to three-year terms of office. In addition, holders of Common Stock
may remove a Director from office at any time prior to the expiration of his
or her term only with cause and by vote of a majority of Common Stock
outstanding. These provisions, together with provisions concerning the size
of the Board and requiring that premature vacancies on the Board be filled
only by a majority of the entire Board, may not be amended, altered or
repealed, nor may the Company adopt any provisions inconsistent therewith,
without the affirmative vote of at least 80% of the Voting Stock of the
Company or the approval of two-thirds of the entire Board of Directors.
The Company's By-Laws contain certain procedural requirements with respect to
the nomination of directors by stockholders that require, among other things,
delivery of notice by such stockholders to the Secretary of the Company not
later than 60 days nor more than 90 days prior to the date of the
stockholders meeting at which such nomination is to be considered. The
By-Laws do not provide that a meeting of the Board of Directors may be called
by stockholders.
The Restated Certificate provides that no director will be liable to the
Company or its stockholders for a breach of duty as a director except as
provided by the NYBCL.
The effect of these provisions may be to deter attempts either to obtain
control of the Company or to acquire a substantial amount of its stock, even
if such a proposed transaction were at a significant premium over the
then-prevailing market value of the Common Stock, or, to deter attempts to
remove the Board of Directors and management of the Company, even though some
or a majority of the holders of Common Stock may believe such actions to be
beneficial.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to Goldman, Sachs & Co. ("Goldman Sachs"), and
Goldman Sachs has agreed to purchase all of the shares of Common Stock
offered hereby.
Under the terms and conditions of the Underwriting Agreement, Goldman Sachs
is committed to take and to pay for all of the shares offered hereby, if any
are taken.
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It is expected that all or a substantial portion of the shares of Common
Stock may be sold by Goldman Sachs to institutional purchasers in one or more
transactions (which may involve block transactions) on the NYSE or otherwise.
The distribution of the shares of Common Stock may also be effected from time
to time in special offerings, exchange distributions and/or secondary
distributions in accordance with the rules of the NYSE, in the
over-the-counter market, in negotiated transactions through the writing of
options on shares of Common Stock (whether such options are listed on an
options exchange or otherwise) or otherwise, or in a combination of such
methods of sale, in each case at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. Goldman Sachs may effect such transactions by selling shares of
Common Stock to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commission from Goldman Sachs and/or
the purchasers of such shares of Common Stock for whom they may act as agent
or to whom they may sell as principal.
In connection with the sale of the shares of Common Stock, Goldman Sachs will
receive compensation from the Company in the form of commissions and may
receive compensation from purchasers of the shares of Common Stock for whom
they may act as agents or to whom they may sell as principals in the form of
commissions or discounts, in each case in amounts which will not exceed those
customary in the types of transactions involved. Underwriters and dealers
that participate in the distribution of the shares of Common Stock may be
deemed to be underwriters, and any discounts or commissions received by them
from the Company and any compensation received by them on the resale of the
shares of Common Stock by them may be deemed to be underwriting discounts and
commissions under the Securities Act.
For a period of 90 days after the date of this Prospectus, the Company has
agreed not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock of the Company or any security substantially similar
thereto, or any other security convertible into, or exchangeable for, shares
of Common Stock of the Company or any security substantially similar thereto,
without the prior written consent of Goldman Sachs, except for any securities
issued by the Company pursuant to employee benefit plans, dividend
reinvestment plans, mergers, acquisitions or similar transactions, or upon
the conversion of convertible or exchangeable securities currently
outstanding.
Goldman Sachs is a defendant in lawsuits with respect to the offering by
Corning of $100 million of 6.75% Debentures due September 15, 2013. See
"Business--Recent Developments--Other Legal Proceedings".
The Company has agreed to indemnify Goldman Sachs against certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby is being passed
upon for the Company by William C. Ughetta, Esq., Senior Vice President and
General Counsel of the Company, and for the Underwriter by Sullivan &
Cromwell, New York, New York. Mr. Ughetta owns substantially less than 1% of
the outstanding shares of Common Stock.
EXPERTS
The consolidated financial statements of the Company and of Dow Corning
incorporated in this Prospectus by reference to the Company's 1992 Annual
Report on Form 10-K for the year ended January 3, 1993, have been so
incorporated in reliance on the reports of Price Waterhouse, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Damon, as of December 31, 1992 and
1991, and for each of the three years ended December 31, 1992, incorporated
by reference in this Prospectus by reference to Corning's Current Report on
Form 8-K dated August 4, 1993 have been so incorporated in reliance on the
report of Arthur Andersen & Co., independent public accountants, given on the
authority of said firm as experts in accounting and auditing.
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given
or made, such information or representations must not be relied upon as
having been authorized. This Prospectus does not constitute an offer to sell
or the solicitation of an offer to buy any securities other than the
securities to which it relates or an offer to sell or the solicitation of an
offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or that the information contained herein is correct as of any time
subsequent to its date.
TABLE OF CONTENTS
Page
-----
Available Information 2
Incorporation of Certain Documents by
Reference 2
Prospectus Summary 3
Use of Proceeds 8
Capitalization 8
Market Prices of Common Stock and
Dividends 9
Selected Consolidated Financial Data 9
Unaudited Pro Forma Combined Financial
Information 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 18
Business 27
Description of Capital Stock 33
Underwriting 36
Validity of Common Stock 37
Experts 37
8,000,000 Shares
Corning Incorporated
Common Stock
(par value $.50 per share)
Goldman, Sachs & Co.
39
