FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-3247
------
CORNING INCORPORATED
--------------------
(Registrant)
New York 16-0393470
----------------------- ------------
(State of incorporation) (I.R.S. Employer Identification No.)
One Riverfront Plaza, Corning, New York 14831
------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 607-974-9000
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
---- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
230,097,286 shares of Corning's Common Stock, $0.50 Par Value, were outstanding
as of July 11, 1996.
<PAGE>2
PART I - FINANCIALINFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
Index to consolidated financial statements of Corning Incorporated and
Subsidiary Companies filed as part of this report:
Page
---
- -
Consolidated Statements of Income for the six months and
three months ended June 30, 1996 and for the twenty-four
and twelve weeks ended June 18, 1995 3
Consolidated Balance Sheets at June 30, 1996
and December 31, 1995 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and for the twenty-four weeks
ended June 18, 1995 5
Notes to Consolidated Financial Statements 6
The consolidated financial statements reflect all adjustments which, in the
opinion of management, are necessary for a fair statement of the results of
operations and financial position for the interim periods presented. All such
adjustments are of a normal recurring nature. The consolidated financial
statements have been compiled without audit and are subject to such year-end
adjustments as may be considered appropriate by the registrant or its
independent accountants and should be read in conjunction with Corning's Annual
Report on Form 10-K for the year ended December 31, 1995.
<PAGE>3
<TABLE>
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per-share amounts)
<CAPTION>
Six Months Twenty-Four Three Months Twelve
Ended Weeks Ended Ended Weeks Ended
June 30, June 18, June 30, June 18,
1996 1995 1996 1995
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES
Net sales $1,751.3 $ 1,397.0 $ 913.7 $ 764.8
Royalty, interest, and dividend income 15.0 14.6 7.0 8.2
-------- --------- -------- -----
1,766.3 1,411.6 920.7 773.0
DEDUCTIONS
Cost of sales 1,085.7 867.2 568.7 474.8
Selling, general and administrative
expenses 306.8 241.0 148.4 124.9
Research and development expenses 90.2 77.4 44.9 39.9
Provision for restructuring and
other special charges 26.5 26.5
Interest expense 36.0 31.6 18.3 16.8
Other, net 11.2 9.7 4.1 1.8
-------- --------- ------- ----
Income from continuing operations before
taxes on income 236.4 158.2 136.3 88.3
Taxes on income from continuing operations 79.2 47.9 45.7 25.1
-------- --------- -------- -------
Income from continuing operations
before minority interest and
equity earnings 157.2 110.3 90.6 63.2
Minority interest in earnings of
subsidiaries (28.0) (28.3) (15.8) (17.3)
Dividends on convertible preferred
securities of subsidiary (6.9) (6.3) (3.5) (3.1)
Equity in earnings (losses) of
associated companies:
Other than Dow Corning Corporation 34.1 29.4 22.5 21.0
Dow Corning Corporation (348.0) (365.5)
-------- --------- -------- --------
Income (loss) from continuing operations 156.4 (242.9) 93.8 (301.7)
Income (loss) from discontinued operations,
net of income taxes (47.6) 25.1 (56.8) 4.5
-------- -------- -------- --------
NET INCOME (LOSS) $ 108.8 $ (217.8) $ 37.0 $ (297.2)
======== ========= ======== ========
PER COMMON SHARE:
Continuing operations $ 0.68 $ (1.08) $ 0.41 $ (1.34)
Discontinued operations (0.21) 0.11 (0.25) 0.02
-------- -------- -------- ---------
NET INCOME (LOSS) $ 0.47 $ (0.97) $ 0.16 $ (1.32)
======== ========= ======== =========
DIVIDENDS DECLARED $ 0.36 $ 0.36 $ 0.18 $ 0.18
======== ========= ======== =========
WEIGHTED AVERAGE SHARES OUTSTANDING 227.3 225.9 227.3 226.3
======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>4
<TABLE>
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(In millions, except shares and per-share amounts)
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
------ ---------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash $ 66.5 $ 72.4
Short-term investments, at cost which
approximates market value 55.7 115.2
Accounts receivable, net of doubtful
accounts and allowances - $22.4/1996;
$24.3/year-end 1995 550.9 479.5
Inventories 501.0 426.5
Deferred taxes on income and other current assets 136.5 102.8
-------- ---------
Total current assets 1,310.6 1,196.4
-------- ---------
INVESTMENTS
Associated companies, at equity 316.3 341.0
Others, at cost 23.6 23.9
-------- ---------
339.9 364.9
-------- ---------
PLANT AND EQUIPMENT, AT COST, NET OF
ACCUMULATED DEPRECIATION 1,769.2 1,599.6
GOODWILL AND OTHER INTANGIBLE ASSETS,
NET OF ACCUMULATED AMORTIZATION -
$77.2/1996; $68.3/year-end 1995 347.1 330.8
OTHER ASSETS 273.8 305.3
NET ASSETS OF DISCONTINUED OPERATIONS 1,736.7 1,664.7
-------- ---------
$5,777.3 $ 5,461.7
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Loans payable $ 415.0 $ 143.1
Accounts payable 166.2 202.6
Other accrued liabilities 431.6 396.3
-------- ---------
Total current liabilities 1,012.8 742.0
-------- ---------
OTHER LIABILITIES 634.7 618.3
LOANS PAYABLE BEYOND ONE YEAR 1,303.8 1,340.0
MINORITY INTEREST IN SUBSIDIARY COMPANIES 302.5 269.8
CONVERTIBLE PREFERRED SECURITIES OF
SUBSIDIARY 364.9 364.7
CONVERTIBLE PREFERRED STOCK 23.3 23.9
COMMON STOCKHOLDERS' EQUITY
Common stock, including excess over par value and
other capital - Par value $0.50 per share;
Shares authorized: 500 million; Shares issued:
259.4 million/1996 and 258.6 million/year-end 1995 1,155.8 1,113.0
Retained earnings 1,514.3 1,496.5
Less cost of 29.4 million/1996 and 28.8
million/year-end 1995 shares of common stock
in treasury (586.0) (563.0)
Cumulative translation adjustment 51.2 56.5
-------- ---------
Total common stockholders' equity 2,135.3 2,103.0
-------- ---------
$5,777.3 $ 5,461.7
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>5
<TABLE>
CORNING INCORPORATED AND SUBSIDIARY COMPANIESCONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<CAPTION>
Six Months Twenty-Four
Ended Weeks Ended
June 30, June 18,
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 108.8 $ (217.8)
Adjustments to reconcile net income to net cash
provided by operating
activities from continuing operations:
(Income) loss from discontinued operations 47.6 (25.1)
Depreciation and amortization 141.8 120.2
Provision for restructuring and other special charges 26.5
Equity in earnings of associated companies,
other than Dow Corning Corporation, in excess
of dividends received (11.1) (4.1)
Equity in losses of Dow Corning Corporation 348.0
Minority interest in earnings of subsidiaries in excess
of dividends paid 15.8 27.9
Loss (gain) on disposition of properties and investments (7.4) 5.1
Deferred tax (benefit) provision (22.0) (6.2)
Other (7.7) 14.3
Changes in operating assets and liabilities:
Accounts receivable (56.1) 2.5
Inventory (72.1) (85.5)
Deferred taxes and other current assets 2.1 (18.9)
Accounts payable and other current liabilities (23.4) (115.3)
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES OF
CONTINUING OPERATIONS 116.3 71.6
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (224.7) (115.6)
Acquisitions of businesses, net (15.1)
Net proceeds from disposition of properties and investments 31.4 7.7
Increase in long-term investments (2.5) (10.2)
Other, net 7.5 2.0
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES OF
CONTINUING OPERATIONS (203.4) (116.1)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of loans 271.6 184.5
Repayments of loans (58.6) (10.6)
Proceeds from issuance of common stock 12.6 14.1
Repurchases of common stock (12.6) (9.1)
Dividends paid (83.3) (41.7)
-------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES OF
CONTINUING OPERATIONS 129.7 137.2
-------- ---------
Effect of exchange rates on cash (1.5) (3.9)
-------- ---------
Effect of accounting calendar change on cash (17.5)
-------- ---------
Cash used in discontinued operations (89.0) (67.1)
-------- ---------
Net change in cash and cash equivalents (65.4) 21.7
Cash and cash equivalents at beginning of year 187.6 141.1
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 122.2 $ 162.8
======== =========
SUPPLEMENTAL DATA:
Income taxes paid $ 81.7 $ 54.6
======== =========
Interest paid $ 52.6 $ 53.6
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>6
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Effective January 1, 1996, Corning made several changes to its
accounting calendar to make Corning's results more comparable with other
companies and to enable Corning to report results of certain
subsidiaries on a more current basis. First, Corning adopted an annual
reporting calendar. Previously Corning operated on a fiscal year ending
on the Sunday nearest December 31. As a result, Corning's 1996 quarters
will include results for three calendar months while Corning's quarters
previously included results for 12 weeks (16 weeks in the third quarter).
Second, Corning's 1996 quarters will include three months of
operations for all significant subsidiaries and affiliates.
Previously, certain subsidiaries reported two months of results in the
first quarter and four months of results in the third quarter.
Third, Corning Life Sciences Inc. and certain other consolidated
subsidiaries that previously reported on a fiscal year ending November
30 adopted a calendar year end. The December 1995 net loss of these
subsidiaries totaled $7.7 million and was recorded in retained
earnings in the first quarter of 1996.
This change will not affect the comparability of Corning's 1995 and 1996
annual results. It will, however, cause a shift in results between the
quarters, primarily increasing the first quarter and decreasing the
third quarter reported results. Corning did not restate its quarterly
historical financial statements for the calendar change because
financial information as of calendar quarter ends was not readily
available. Management's analysis of the impact of this change on
quarterly results is included in Management's Discussion and Analysis
beginning on page 10.
(2) Earnings per common share are computed by dividing net income less
dividends on Series B preferred stock by the weighted average of common
shares outstanding during each period. Series B preferred dividends
amounted to $0.5 million and $1.0 million in the second quarter and first
half, respectively, in both 1996 and 1995. The weighted average of common
shares outstanding for the second quarter and first half of 1996 was 227.3
million, and 226.3 million and 225.9 million, respectively, for the same
periods in 1995. The weighted average of common shares outstanding for
earnings per share calculations does not include shares held by the
Corning Stock Ownership Trust which totaled approximately 2.4 million and
2.7 million shares during 1996 and 1995, respectively. Common stock
equivalents are not included in the earnings per share computation because
they do not result in material dilution.
Common dividends of $41.4 million and $82.4 million were declared in the
second quarter and first half of 1996, respectively, compared with $41.3
million and $82.4 million for the same periods in 1995.
(3) In May 1996, Corning's Board of Directors approved a plan to distribute to
its shareholders on a pro rata basis all of the shares of Corning Clinical
Laboratories Inc. and Corning Pharmaceutical Services Inc. (the
"Distributions"). The result of the plan will be the creation of two
independent, publicly-owned (but as yet unnamed) companies. Corning has
submitted to the Internal Revenue Service a request for a ruling that the
Distributions will qualify as tax-free distributions under the Internal
Revenue Code of 1986. The final terms of the Distributions, which are
subject to approval by Corning's Board of Directors, will be set forth in
registration statements to be filed with the Securities and Exchange
Commission and in an Information Statement to be distributed to Corning's
shareholders. The Distributions are expected to occur by the end of 1996.
<PAGE>7
Corning's investment in equity and intercompany debt of the companies to be
distributed totaled $1.7 billion at June 30, 1996. Corning currently
estimates that, prior to the Distributions, the companies to be distributed
will borrow $600 million to $800 million from third-party lenders and repay
intercompany debt to Corning, reducing Corning's investment to
approximately $900 million to $1.1 billion. Corning's stockholders' equity
will be reduced by Corning's investment in these companies at the date of
the Distribution. Corning intends to use the proceeds from the repayment
of intercompany debt to repay third-party debt, repurchase shares or invest
for future strategic uses.
As a result of the plan to distribute the clinical-laboratory and
pharmaceutical-services businesses, Corning's consolidated financial
statements and notes thereto report these businesses, which comprised
Corning's Health Care Services segment, as discontinued operations. Prior
period consolidated financial statements and notes have been restated
accordingly.
Summarized results of Corning's discontinued operations for the first half
and second quarter of 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Six Months Twenty-Four Three Months Twelve
Ended Weeks Ended Ended Weeks Ended
June 30, 1996June 18, 1995 June 30, 1996June 18, 1995
----------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 515.0 $1,016.9 $ 533.0
======== ======== ========
Income before income taxes $ 20.5 $ 50.4 $ 12.7
Provision for income taxes 11.3 25.3 8.2
-------- -------- --------
Income from operations,
net of income taxes 9.2 25.1 4.5
Provision for loss on
Distributions, including
income taxes of $36.6 million (56.8) $ (56.8)
-------- -------- -------- --------
Discontinued operations,
net of income taxes $ (47.6) $ 25.1 $ (56.8) $ 4.5
======== ======= ======== ========
</TABLE>
The 1996 sales of $515.0 million and income from operations of $9.2 million
of the discontinued businesses only includes results through March 31,
1996. Income from operations of the discontinued businesses includes an
allocation of Corning's interest expense based on the ratio of net assets
of discontinued operations to consolidated net assets. The provision for
loss on Distributions in the second quarter 1996 includes a charge for the
estimated costs related to the Distributions and a charge to increase
reserves for government claims offset by the estimated results of
operations of the businesses to be distributed from April 1, 1996, through
December 31, 1996, the anticipated date of the Distributions. Income from
discontinued operations in the second quarter and first half of 1995
includes an after-tax restructuring charge of $24.4 million.
The provision for loss on Distributions includes management's best estimate
of the transaction costs and the estimated future results of operations of
the discontinued businesses. The actual loss could differ materially from
these estimates.
<PAGE>8
As disclosed in Corning's 1995 Annual Report on Form 10-K, government
investigations of certain practices by clinical laboratories acquired in
recent years are ongoing. In the second quarter, the U.S. Department of
Justice notified Corning Clinical Labs that it has taken issue with certain
payments received by Damon Corporation from federally funded healthcare
programs prior to its acquisition by Corning. Corning Clinical Labs
management has met with the U.S. Department of Justice several times to
evaluate the substance of the government's allegations. Discussions with
the U.S. Department of Justice are in a preliminary state and,
consequently, it is not possible to predict the outcome of this matter with
any certainty.
Corning Clinical Labs has established reserves equal to management's
estimate of the low end of the range of potential amounts which could be
required to satisfy the government's claims. However, it is possible that
the aggregate claim (which might include restitution, multiple damages,
other civil penalties or criminal fines) could be in excess of established
reserves by an amount which could be material to Corning's results of
operations and cash flows in the quarter in which such claim is settled.
Corning does not believe that this claim will have a material adverse
impact on Corning's overall financial condition.
Net assets of discontinued operations consist primarily of receivables,
plant and equipment, goodwill and other intangible assets, and accrued
liabilities.
(4) On May 15, 1995, Dow Corning Corporation (a fifty-percent owned equity
affiliate) voluntarily filed for protection under Chapter 11 of the
United States Bankruptcy Code as a result of several negative
developments related to the breast-implant litigation. Corning
management believes that it is impossible to predict if and when Dow
Corning will successfully emerge from the Chapter 11 proceedings. As a
result, Corning recorded an after-tax charge of $365.5 million in the
second quarter 1995 to fully reserve its investment in Dow Corning.
Corning also discontinued recognition of equity earnings from Dow
Corning beginning in the second quarter of 1995. Corning recognized
equity earnings from Dow Corning of $17.5 million in the first quarter
of 1995. Summarized income statement information for Dow Corning is not
presented because Corning has discontinued recognition of equity in
earnings.
(5) In the second quarter of 1995, Corning recorded a restructuring charge
of $26.5 million ($16.1 million after-tax). The charge included
severance for workforce reductions, primarily in corporate staff groups,
a curtailment loss in Corning's primary pension plan attributable to
workforce reductions and the write-off of production equipment caused by
the decision to exit the manufacturing facility for glass-ceramic
memory-disks. As described in Note 8 to Corning's 1995 consolidated
financial statements included in its Annual Report on Form 10-K, Corning
also recorded charges for restructuring plans in previous years.
Reserves related to the 1995 and previous years restructuring programs
totaled approximately $32.0 million and $24.1 million at December 31,
1995 and June 30, 1996, respectively. Management believes that the
costs of the restructuring plans will be financed through cash from
operations and does not anticipate any significant impact on its
liquidity as a result of the restructuring plans.
(6) Inventories shown on the accompanying balance sheets were comprised of the
following (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
<S> <C> <C>
Finished goods $ 250.1 $ 229.2
Work in process 180.9 138.4
Raw materials and accessories 98.6 86.9
Supplies and packing materials 66.0 57.6
--------- --------
Total inventories valued at current cost 595.6 512.1
Reduction to LIFO valuation (94.6) (85.6)
--------- --------
$ 501.0 $ 426.5
========= ========
</TABLE>
<PAGE>9
(7) Plant and equipment shown on the accompanying balance sheets were
comprised of the following (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
<S> <C> <C>
Land $ 52.4 $ 42.3
Buildings 726.4 674.1
Equipment 2,765.6 2,437.9
Accumulated depreciation (1,775.2) (1,554.7)
--------- --------
$ 1,769.2 $1,599.6
========= ========
</TABLE>
(8) In June 1996, the Board of Directors approved the renewal of the Preferred
Share Purchase Right Plan which entitles shareholders to purchase one-
hundredth of a share of Series A Junior Participating Preferred Stock upon
the occurrence of certain events. In addition, the rights entitle
shareholders to purchase shares of common stock at a 50 percent discount
in the event a person or group acquires 20 percent or more of Corning's
outstanding common stock. The preferred share purchase rights became
effective July 15, 1996 and will expire July 15, 2006. In connection with
the renewal of the Rights Plan the number of shares designated Series A
Preferred Stock was increased from 600,000 to 2,400,000.
<PAGE>10
ITEM 2.
- ------
Management's Discussion and Analysis of
----------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Results of Operations
--------------------
The comparability of Corning's second quarter and first half sales and earnings
to the prior year has been significantly impacted by the changes to Corning's
accounting calendar as discussed in Note (1) of the Notes to Consolidated
Financial Statements, Corning's decision to fully reserve its investment in and
discontinue recognition of equity earnings from Dow Corning Corporation in the
second quarter of 1995 as discussed in Note (4) of the Notes to Consolidated
Financial Statements, a restructuring charge recorded in the second quarter of
1995 as discussed in Note (5) of the Notes to Consolidated Financial
Statements, and losses recorded in the second quarter of 1996 related to the
planned Distribution of the Health Care Services segment as discussed in Note
(3) of the Notes to Consolidated Financial Statements.
To provide a basis against which to evaluate 1996 quarterly results, pro forma
estimates of 1995 quarterly results as if the calendar change had occurred at
the beginning of 1995 were prepared. The pro forma estimates were prepared by
prorating 1995 results for twelve or sixteen week periods into calendar month
quarters and by shifting monthly results of subsidiaries and affiliates between
quarters to reflect the new accounting calendar. Management believes that the
impact of the change on Corning's balance sheet and cash flow is not material.
The table on the following page presents unaudited pro forma estimates of
results for the second quarter of 1995 as if the accounting calendar changes had
occurred at the beginning of 1995 and summarizes the impact of the unusual items
noted above. Second quarter 1995 (twelve weeks) and second quarter 1996 (three
months) results are presented in the table for comparative purposes (in
millions, except per-share amounts).
<PAGE>11
<TABLE>
<CAPTION>
Twelve Three Three
Weeks Ended Months Ended Months Ended
June 18, 1995 June 30, 1995 June 30, 1996
(as reported) (pro forma) (as reported)
------------- ---------- -------------
<S> <C> <C> <C>
Sales $ 764.8 $ 801.3 $ 913.7
======== ======== ========
Net income (loss)
Before Dow Corning Corporation and
restructuring $ 79.9 $ 80.3 $ 93.8
Equity in losses of Dow Corning Corporation (365.5) (365.5)
Provision for restructuring (16.1) (16.1)
-------- -------- -------
Continuing operations (301.7) (301.3) 93.8
Discontinued operations 4.5 3.1 (56.8)
-------- ------- --------
Net income (loss) $ (297.2) $ (298.2) $ 37.0
======== ======== ========
Net income (loss) per common share
Before Dow Corning Corporation
and restructuring $ 0.35 $ 0.35 $ 0.41
Equity in losses of Dow Corning Corporation (1.62) (1.62)
Provision for restructuring (0.07) (0.07)
-------- -------- -------
Continuing operations (1.34) (1.34) 0.41
Discontinued operations 0.02 0.02 (0.25)
-------- -------- --------
Net income (loss) per common share $ (1.32) $ (1.32) $ 0.16
======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
The following table presents unaudited pro forma estimates of results for the first
half of 1995 as if the accounting calendar changes had occurred at the beginning of
1995 and summarizes the impact of the unusual items noted above. First half 1995
(twenty-four weeks) and the first half 1996 (six months) results are presented in the
table for comparative purposes
(in millions, except per-share amounts):
Twenty-four Six Six
Weeks Ended Months Ended Months Ended
June 18, 1995 June 30, 1995 June 30, 1996
(as reported) (pro forma) (as reported)
------------- ---------- -------------
<S> <C> <C> <C>
Sales $1,397.0 $1,568.8 $1,751.3
======== ======== ========
Net income (loss)
Before Dow Corning Corporation
and restructuring $ 121.2 $ 136.8 $ 156.4
Equity in losses of Dow Corning Corporation (348.0) (348.0)
Provision for restructuring (16.1) (16.1)
-------- -------- -------
Continuing operations (242.9) (227.3) 156.4
Discontinued operations 25.1 29.5 (47.6)
------- -------- --------
Net income (loss) $ (217.8) $ (197.8) $ 108.8
======== ======== ========
Net income (loss) per common share
Before Dow Corning Corporation
and restructuring $ 0.53 $ 0.60 $ 0.68
Equity in losses of Dow Corning Corporation (1.54) (1.54)
Provision for restructuring (0.07) (0.07)
-------- -------- -------
Continuing operations (1.08) (1.01) 0.68
Discontinued operations 0.11 0.13 (0.21)
------- -------- --------
Net income (loss) per common share $ (0.97) $ (0.88) $ 0.47
======== ======== ========
</TABLE>
<PAGE>12
The following discussion and analysis of the consolidated and segment results
and equity earnings are based on comparisons between the 1996 reported and the
1995 pro forma results shown in the above tables.
Continuing operations
- ---------------------
Second quarter and first half sales increased 14 percent and 12 percent,
respectively, due primarily to volume gains in the worldwide optical fiber,
cable and components businesses as a result of continued strong market demand.
Excluding the impact of Dow Corning Corporation and restructuring, Corning's net
income from continuing operations increased 17 percent and 14 percent in the
second quarter and first half of 1996, respectively, and earnings per share from
continuing operations increased 17 percent and 13 percent in the second quarter
and first half of 1996, respectively, due to strong performance in opto-
electronics and environmental products businesses.
Segment overview
- ----------------
In the second quarter 1995, Corning recorded a restructuring charge of $26.5
million before tax. The following segment analysis excludes the impact of the
restructuring charge.
Sales of the Specialty Materials segment increased in the second quarter and
first half 1996 over the same periods in 1995 due primarily to the consolidation
of Quanterra beginning in the first quarter of 1996 and increased demand for
environmental products, particularly in Europe. Segment earnings in the second
quarter and first half of 1996 were up due to significant manufacturing
efficiency gains in the environmental and science products businesses. These
gains were reduced by losses, primarily in the first quarter, at Quanterra.
Sales and earnings in the Communications segment increased significantly in both
the second quarter and first half 1996 due primarily to continued volume gains
and a favorable mix in optical fiber and optical cable, and due in part to
strong growth in the fiber-optic components business. The strong results in the
opto-electronics businesses were offset somewhat by weak performance in the
information-display businesses. Sales in the information-display businesses
were flat in the second quarter and first half of 1996 as a result of market
softness. The flat sales volume, coupled with expansion-related manufacturing
inefficiencies, resulted in significantly decreased earnings in the second
quarter and first half of 1996. Management expects the information-display
businesses to improve in the second half of 1996; however, full year 1996
earnings will likely be lower than the 1995 levels.
Sales in the Consumer Products segment were up modestly in both the second
quarter and the first half of 1996. Second quarter and first half earnings were
essentially breakeven in 1996 compared to losses in the second quarter and first
half of 1995. The lower 1995 results were due to lower sales volume and several
scheduled glass furnace repairs.
Taxes on Income
- ---------------
Corning's effective tax rate for continuing operations was 33.5 percent for the
second quarter and first half of 1996. Excluding the impact of the
restructuring charge, the effective tax rate was 31 percent and 31.5 percent
for the second quarter and first half of 1995. The lower 1995 rate was due to
a higher percentage of Corning's earnings from consolidated entities with lower
effective tax rates.
Equity in Earnings
- ------------------
In the second quarter of 1995, Corning recorded a charge of $365.5 million to
fully reserve its investment in Dow Corning, as a result of Dow Corning's
voluntary filing for protection under Chapter 11 of the United States
Bankruptcy Code. In addition, Corning discontinued recognition of equity
earnings from Dow Corning beginning in the second quarter of 1995.
<PAGE>13
Excluding Dow Corning Corporation, second quarter and first half 1996 equity in
earnings of associated companies totaled $22.5 million and $34.1 million,
respectively. Equity in earnings of associated companies increased in the
second quarter of 1996 due primarily to solid results from the optical fiber
equity companies and Samsung-Corning Company Ltd. First half equity in
earnings of associated companies declined slightly as strong performance by
theoptical fiber equity companies was offset by lower results at
Samsung-Corning Company Ltd. in the first quarter of 1996 primarily due to
scheduled glass furnace repairs and continued spending on the global expansion
program.
Discontinued operations
- -----------------------
Corning incurred an after-tax loss of $56.8 million, or $0.25 per share, from
discontinued operations in the second quarter of 1996. The loss includes a
charge for the estimated costs related to the Distributions and a charge to
increase reserves for government claims, offset by the estimated results of
operations of the businesses to be distributed from April 1, 1996, through
December 31, 1996, the anticipated date of the Distributions.
As disclosed in Corning's 1995 Annual Report on Form 10-K, government
investigations of certain practices by clinical laboratories acquired in recent
years are ongoing. In the second quarter, the U.S. Department of Justice
notified Corning Clinical Labs that it has taken issue with certain payments
received by Damon Corporation from federally funded healthcare programs prior
to its acquisition by Corning. Corning Clinical Labs management has met with
the government several times to evaluate the substance of the government's
allegations. Discussions with the government are in a preliminary state and,
consequently, it is not possible to predict the outcome of this matter with any
certainty.
Corning Clinical Labs has established reserves equal to management's estimate
of the low end of the range of potential amounts which could be required to
satisfy the government's claims. However, it is possible that the aggregate
claim (which might include restitution, treble damages, other civil penalties
or criminal fines) could be in excess of established reserves by an amount
which could be material to Corning's results of operations and cash flows in
the quarter in which such claim is settled. Corning does not believe that
this claim will have a material adverse impact on Corning's overall financial
condition.
The loss from discontinued operations for the first half of 1996 totaled $47.6
or $0.21 per share and reflects the provision for loss on Distributions
recorded in the second quarter offset by first quarter income from discontinued
operations of $9.2 million or $0.04 per share.
Income from discontinued operations in the second quarter and first half of
1995 totaled $4.5 million or $0.02 per share and $25.1 million or $0.11 per
share, respectively. Results for the second quarter and first half of 1995
include a restructuring charge of $40.5 million ($24.4 million after tax).
Liquidity and Capital Resources
-------------------------------
Corning's working capital decreased from $454.4 million at the end of 1995 to
$297.8 million at June 30, 1996. The ratio of current assets to current
liabilities was 1.3 at the end of the first half 1996 compared to 1.6 at year-
end 1995. The decrease in working capital and the ratio of current assets to
current liabilities was due to an increase in short-term borrowings during the
first half of 1996 to fund capital expansion programs. Corning's long-term
debt as a percentage of total capital was 32 percent at the end of the second
quarter, compared to 33 percent at year-end 1995.
Corning's investment in equity and intercompany debt of the companies to be
distributed totaled $1.7 billion at June 30, 1996. Prior to the Distributions,
the companies to be distributed will borrow approximately $600 million to $800
million from third-party lenders and repay intercompany debt to Corning,
reducing Corning's investment to approximately $900 million to $1.1 billion.
Corning's stockholders' equity will be reduced by Corning's investment in
these companies at the date of the Distribution. Corning intends to use the
proceeds from the repayment of intercompany debt to repay third-party debt,
repurchase shares or invest for future strategic uses.
<PAGE>14
Corning's long-term debt as a percentage of total capital is expected to
increase from the current 32 percent to between 38 percent and 42 percent at
the end of 1996 when the Distributions are completed.
Cash and short-term investments decreased from year-end 1995 by $65.4 million
primarily due to operating and financing activities which provided cash of
$116.3 million and $129.7 million, respectively, offset by investing activities
and discontinued operations which used cash of $203.4 million and $89.0
million, respectively. Net cash provided by operating activities increased in
the first half of 1996 compared to the same period in 1995 primarily due to a
lower use of cash for working capital changes. Net cash used in investing
activities increased in the first half of 1996 due to a higher level of capital
spending for expansions of manufacturing facilities. Net cash provided by
financing activities in the first half of 1996 was slightly lower than 1995 as
higher net borrowings were offset by the payment of two quarterly dividends in
the 1996 period. Net cash used by discontinued operations in the first half of
1996 increased over 1995 primarily due to the repayment of a capital lease
obligation.
<PAGE>15
Part II - Other Information
--------------------------
ITEM 1. LEGAL PROCEEDINGS
- ------ -----------------
There are no pending legal proceedings to which Corning or any of its
subsidiaries is a party or of which any of their property is the subject which
are material in relation to the consolidated financial statements.
ENVIRONMENTAL LITIGATION. Corning has been named by the Environmental
Protection Agency under the Superfund Act, or by state governments under similar
state laws, as a potentially responsible party for 18 hazardous waste sites.
Under the Superfund Act, all parties who may have contributed any waste to a
hazardous waste site, identified by such Agency, are jointly and severally
liable for the cost of cleanup unless the Agency agrees otherwise. It is
Corning's policy to accrue for its estimated liability related to Superfund
sites and other environmental liabilities related to property owned by Corning
based on expert analysis and continual monitoring by both internal and external
consultants. Corning has accrued approximately $21 million for its estimated
liability for environmental cleanup and litigation at June 30, 1996.
BREAST-IMPLANT LITIGATION. On May 15, 1995, Dow Corning Corporation sought
protection under the reorganization provisions of Chapter 11 of the United
States Bankruptcy Code. The effect of the bankruptcy, which is pending in the
United States Bankruptcy Court for the Eastern District of Michigan, Northern
Division (Bay City, Michigan), is to stay the prosecution against Dow Corning of
the 45 purported breast-implant product liability class action lawsuits and its
approximately 19,000 breast-implant product liability lawsuits. In June 1995,
Dow Corning and its shareholders (Corning and The Dow Chemical Company)
attempted to remove various state court implant lawsuits against itself and its
shareholders to federal court, and to transfer these cases to the United States
District Court for the Eastern District of Michigan, Southern District (the
"Michigan Federal Court"). The transfer motion also contemplated a trial of the
consolidated, transferred cases on the "common issue" of whether silicones cause
diseases as alleged by plaintiffs. On September 12, 1995 Judge Hood of the
Michigan Federal Court issued an order granting the motion to transfer the Dow
Corning cases to federal court, but denying the motion to the extent it
requested the transfer of cases against Dow Corning's shareholders to her court.
Judge Hood also denied the motion for the purpose of holding one causation trial
prior to the estimation process by the Bankruptcy Court, but without prejudice
to subsequent motions for one or more such trials to assist in the bankruptcy
estimation process. Subsequently Dow Corning, Corning and Dow Chemical filed an
appeal from Judge Hood's order to the United States Court of Appeals for the
Sixth Circuit. On April 9, 1996, the Sixth Circuit ruled that the Michigan
Federal Court had "related to" jurisdiction over the cases against Dow Corning's
shareholders and remanded the case to Judge Hood for further proceedings on the
issue of abstention.
In March 1994, Dow Corning along with other defendants and representatives of
breast-implant litigation plaintiffs signed a breast-implant litigation
settlement agreement (the "Global Settlement") under which industry participants
would contribute $4.2 billion over a period of more than thirty years to
establish several special purpose funds. Corning was not a signatory or
contributor to the Global Settlement. The Global Settlement, if implemented,
would have provided for a claims-based structured resolution of claims arising
out of silicone breast-implants and defined periods during which breast-implant
plaintiffs could "opt out" of the settlement and instead continue their
individual breast-implant litigation against manufacturers and other defendants.
On October 10, 1995, the United States District Court for the Northern District
of Alabama entered an order declaring that claimants participating in the Global
Settlement would have an additional right to opt-out of that settlement after
November 30, 1995. Those who do opt-out will have the right to pursue
individual lawsuits. The Global Settlement has been effectively terminated.
Another, more limited settlement involving other defendant manufacturers is
being considered by the plaintiffs.
<PAGE>16
Despite the bankruptcy filing of Dow Corning, Corning continues to be 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
federal securities class action lawsuits and shareholder derivative lawsuits
filed in the United States District Court for the Southern District of New York
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) multiple 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 the state court suits have been styled as class actions and others
involve multiple plaintiffs.
As of June 30, 1996, Corning had been named in approximately 11,400 state and
federal tort lawsuits. More than 4,300 tort lawsuits filed against Corning in
federal courts were consolidated in the United States District Court, Northern
District of Alabama. On April 25, 1995 that District Court issued a final order
dismissing Corning from those federal consolidated breast-implant cases. The
plaintiffs appealed the dismissal order but on January 17, 1996 voluntarily
withdrew their appeal. Certain state court tort cases against Corning were also
consolidated in various states for the purposes of discovery and pretrial
matters. Corning has made several motions for summary judgment in state courts
and judges have dismissed Corning from over 6,500 tort cases filed in
California, Connecticut, Illinois, Indiana, Michigan, Mississippi, New Jersey,
New Mexico, New York, Pennsylvania, Tennessee and Dallas, Harris and Travis
Counties in Texas, some of which are on appeal. Corning's motions seeking
dismissal remain pending, and continue to be filed, in various other states.
Incertain Texas tort cases, Dow Chemical and Corning have each filed cross
claims against each other and against Dow Corning.
DEPARTMENT OF JUSTICE INVESTIGATIONS. 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 "MetPath Settlement Agreement") with the Department of Justice ("DOJ") and
the Inspector General of the Department of Health and Human Services (the
"Inspector General") in settlement of civil claims by the DOJ and the Inspector
General that MetPath and MetWest had wrongfully induced physicians to order
certain laboratory tests without realizing that such tests would be billed to
Medicare at rates higher than those the physicians believed were applicable.
Several state and private insurers have made claims based on the practices
covered by the MetPath Settlement Agreement. Several have settled but it is
not clear at this time what, if any, additional exposure Corning may have to
these entities and to other persons who may assert claims on the basis of
these or other practices.
During August 1993, MetPath, MetWest and Damon (which was acquired by Corning
earlier 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
automatic chemical test panels. MetPath, MetWest and Damon submitted
information pursuant to these subpoenas and the investigation into MetPath and
MetWest has been closed. Damon was also served with two additional subpoenas in
November 1994 and January 1995 from the Inspector General and was directed by
the U.S. Attorney's office in Boston, to which its investigation has been
referred, to submit additional information in response to the August 1993
subpoena. The November subpoena supplements the August 1993 subpoena and
requires the submission of supplemental information. The January subpoena seeks
information regarding the addition of the 14 enumerated tests to organ function
profiles rather than the automated multichannel chemistry profiles as in
earlier subpoenas. Damon has completed its production to each of the foregoing
subpoenas. In March 1995, Damon received a subpoena from the Department of
Defense Criminal Investigative Service on behalf of CHAMPUS, apparently covering
the same practices as the earlier subpoenas. Compliance with that subpoena has
been completed. In August 1995, Corning Clinical Laboratories Inc. ("CCL",
previously MetPath) and Damon received subpoenas from the Inspector General
seeking documents with regard to 14 current procedural terminology, or CPT,
codes used to bill Medicare, Medicaid and other payers for certain hematology
tests. CCL and Damon have completed production pursuant to these subpoenas. In
April 1996, Damon received a letter from the Unites States Attorney's Office in
Boston designating Damon as a target of a criminal investigation involving the
alleged submission of false claims to the Medicare program prior to August 1993
and indicating that the United States Attorney's Office will recommend
prosecution of Damon for those offenses. It is too early to predict the outcome
of this matter.
<PAGE>17
In August 1993, Nichols Institute (which Corning acquired in August 1994)
received a subpoena from the Inspector General comparable to those received by
MetPath, MetWest and Damon. Compliance with that subpoena has been completed.
However, the Inspector General has requested additional documents pursuant to
that subpoena, and identification and production of these additional documents
is ongoing. In January 1996, Nichols received a subpoena from the Inspector
General relating to specific individuals who had tests performed at the Nichols
laboratory in Portland, Oregon. Compliance with that subpoena is ongoing.
In May 1994, MetPath received a subpoena from the Inspector General and a
subpoena from a federal grand jury, both investigating billing for tests not
performed or reported for which MetPath had voluntarily made corrective
payments in 1993. The civil matter was concluded by a payment by Corning Life
Sciences Inc. of $8.6 million, and the criminal investigation was closed. The
possibility of additional action by the Inspector General or other federal
agencies and claims or settlements with parties other than DOJ and the
Inspector General cannot be excluded. In September 1995, CCL began voluntarily
providing documents and information to the DOJ concerning CCL's efforts to
detect and correct billings for tests not reported or performed. As part of
these activities, which are ongoing, CCL made certain payments to the United
States in August 1995 and in March 1996. In December 1995, CCL received a
subpoena from the Inspector General seeking information as to CCL policies in
instances in which specimens were received by the laboratory without specific
test requisitions. Compliance with the subpoena is ongoing. In June 1996,
Corning Life Sciences Inc. received a federal grand jury subpoena from Boston
seeking documents from CCL's Florida facilities concerning new and terminated
clients of that facility and sales of testing services to such clients.
Compliance with that subpoena is ongoing. During the past quarter, CCL
voluntarily self-reported to the government a few isolated events that may have
resulted in overpayments by Medicare and Medicaid to CCL facilities. It is too
early to predict the outcome of these disclosures.
<PAGE>18
- --------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
- ---------------------------------------
(a) The annual meeting of stockholders of the registrant was held on
April 25, 1996.
(b) The following nominees for the office of director, provided in the
registrant's proxy statement dated March 6, 1996, which appears as
Exhibit #22 to this report, were elected by the following number of
shareholder votes for and withheld:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
John Seely Brown 199,171,079 2,113,672
Lawrence S. Eagleburger 198,757,053 2,527,698
Gordon Gund 199,150,677 2,134,074
John M. Hennessy 199,185,959 2,098,792
Henry Rosovsky 199,066,592 2,218,159
H. Onno Ruding 199,177,642 2,107,109
</TABLE>
The following persons continue as directors:
Roger G. Ackerman
Robert Barker
Mary L. Bundy
Van C. Campbell
John H. Foster
James R. Houghton
James W. Kinnear
James J. O'Connor
Catherine A. Rein
William D. Smithburg
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits
See the Exhibit Index which is located on page 20.
(b) Reports on Form 8-K
A report on Form 8-K dated April 15, 1996, was filed in connection
with the Registrant's medium-term notes facility. The Registrant's
first quarter earnings press release of April 15, 1996 was filed as
an exhibit to this Form 8-K.
A report on Form 8-K dated May 14, 1996 was filed which included the
Registrant's press release announcing the plan to distribute to its
shareholders on a pro rata basis all of the shares of Corning
Clinical Laboratories Inc. and Corning Pharmaceutical Services Inc.
Other items under Part II are not applicable.
<PAGE>19
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORNING INCORPORATED
-------------------------------------
(Registrant)
July 22, 1996 /s/ ROGER G. ACKERMAN
--------------------- -------------------------------------
Date R. G. Ackerman
Chairman and Chief Executive Officer
July 22, 1996 /s/ VAN C. CAMPBELL
--------------------- -------------------------------------
Date V. C. Campbell
Vice Chairman and Chief Financial Officer
July 22, 1996 /s/ KATHERINE A. ASBECK
--------------------- ---------------------------------------
Date K. A. Asbeck
Chief Accounting Officer
<PAGE>20
CORNING INCORPORATED
--------------------
EXHIBIT INDEX
-------------
This exhibit is numbered in accordance
with Exhibit Table I of Item 601 of Regulation S-K
Page number
in manually
Exhibit # Description signed original
-------- ----------- ---------------
12 Computation of ratio of earnings to combined
fixed charges and preferred dividends 21
22 Registrant's proxy statement dated
March 6, 1996, filed with the
Securities and Exchange Commission
as a definitive proxy statement on
March 5, 1996, is incorporated herein
<TABLE>
CORNING INCORPORATED AND SUBSIDIARY COMPANIES EXHIBIT #12
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(Dollars in millions, except ratios)
<CAPTION>
Six MonthsTwenty-Four
Ended Weeks Ended Fiscal Year Ended
------------------------------------------------
June 30, June 18, Dec. 31, Jan. 1, Jan. 2, Jan. 3, Dec. 29,
1996 1995 1995 1995 1994 1993 1991
------- ------- ------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Income from continuing operations before
taxes on income $236.4 $158.2 $406.1 $343.8 $ 74.3 $156.2 $182.5
Adjustments:
Share of earnings (losses) before taxes
of 50% owned companies 52.3 41.6 95.2 89.0 (137.0) 103.2 165.4
Earnings (losses) before taxes of greater
than 50% owned unconsolidated
subsidiary (1.1) (2.6) (3.1) (4.0) (3.1) (2.1) (2.2)
Distributed income of less than 50% owned
companies and share of loss if debt
is guaranteed 2.1 4.5 (4.3) 6.6
Amortization of capitalized interest 2.9 4.6 9.6 13.3 13.0 11.8 10.2
Fixed charges net of capitalized interest 60.4 51.7 102.3 148.5 110.1 103.5 104.8
------ ------ ----- ----- ----- ----- ------
Earnings before taxes and fixed charges
as adjusted $350.9 $253.5 $610.1 $592.7 $ 61.8 $368.3 $467.3
====== ====== ====== ====== ====== ====== ======
Fixed charges:
Interest incurred $ 42.8 $ 35.5 $ 79.7 $77.5 $ 63.3 $ 53.1 $49.2
Share of interest incurred of 50% owned
companies and interest
on guaranteed debt of less than 50% owned
companies 14.3 9.3 10.2 60.8 40.9 42.0 47.5
Interest incurred by greater than 50%
owned unconsolidated subsidiary 0.3 0.7 0.8 0.8 0.9 0.9
Portion of rent expense which represents
interest factor 10.2 9.0 19.3 17.5 13.4 15.8 12.6
Share of portion of rent expense which
represents interest factor for 50% owned
companies 0.7 1.2 2.7 9.4 9.1 9.2 9.0
Portion of rent expense which represents
interest factor for
greater than 50% owned unconsolidated
subsidiary 0.1 0.1 0.1 0.1
Amortization of debt costs 0.7 0.4 0.9 2.0 1.8 1.5 0.4
------ ------ ------ ----- ------ ------ -----
Total fixed charges 68.7 55.7 113.5 168.1 129.4 122.6 119.7
Capitalized interest (8.3) (4.0) (11.2) (19.6) (19.3) (19.1) (14.9)
------ ------ ------ ----- ------ ------ -----
Total fixed charges net of capitalized interest $ 60.4 $ 51.7 $102.3 $148.5 $110.1 $103.5 $104.8
====== ====== ====== ====== ====== ====== ======
Preferred dividends:
Preferred dividend requirements $ 7.9 $ 7.3 $ 15.7 $ 8.2 $ 2.1 $ 2.2 $ 2.4
Ratio of pre-tax income to income before
minority interest and equity earnings 1.5 1.4 1.4 1.5 0.9 1.2 1.4
------ ------ ------ ----- ------ ------ -----
Pre-tax preferred dividend requirement 11.9 10.2 22.0 12.3 1.9 2.6 3.4
Total fixed charges 68.7 55.7 113.5 168.1 129.4 122.6 119.7
------ ------ ------ ----- ------ ------ -----
Fixed charges and pre-tax preferred
dividend requirement $ 80.6 $ 65.9 $135.5 $180.4 $131.3 $125.2 $123.1
====== ====== ====== ====== ====== ====== ======
Ratio of earnings to combined fixed charges
and preferred dividends 4.4x 3.8x 4.5x 3.3x - 2.9x 3.8x
====== ====== ====== ===== ====== ====== =====
Earnings did not cover combined fixed charges and preferred dividends by $69.5 in the fiscal year ended January 2, 1994.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 66,500
<SECURITIES> 55,700
<RECEIVABLES> 550,900
<ALLOWANCES> 22,400
<INVENTORY> 501,000
<CURRENT-ASSETS> 1,310,600
<PP&E> 4,213,200
<DEPRECIATION> 2,097,500
<TOTAL-ASSETS> 5,777,300
<CURRENT-LIABILITIES> 1,012,800
<BONDS> 1,303,800
364,900
23,300
<COMMON> 1,155,800
<OTHER-SE> 979,500
<TOTAL-LIABILITY-AND-EQUITY> 5,777,300
<SALES> 1,751,300
<TOTAL-REVENUES> 1,766,300
<CGS> 1,085,700
<TOTAL-COSTS> 1,085,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,447
<INTEREST-EXPENSE> 36,000
<INCOME-PRETAX> 236,400
<INCOME-TAX> 79,200
<INCOME-CONTINUING> 108,800
<DISCONTINUED> (47,600)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,800
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
