- 45 -
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 SEPTEMBER 30, 1998
[ ] 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:
231,163,703 shares of Corning's Common Stock, $0.50 Par Value, were outstanding
as of October 16, 1998.
<PAGE>
PART I - FINANCIAL INFORMATION
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 nine months and
three months ended September 30, 1998 and 1997 3
Consolidated Balance Sheets at September 30, 1998 and
December 31, 1997 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997 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 and should be
read in conjunction with Corning's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended on July 8, 1998.
<PAGE>
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
Sept. 30, Sept. 30,
-------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Revenues
Net sales $2,557.2 $2,614.5 $906.5 $891.9
Royalty, interest and
dividend income 32.9 28.4 11.8 9.4
Non-operating gain 20.5
-------- -------- ------ ------
2,610.6 2,642.9 918.3 901.3
Deductions
Cost of sales 1,595.2 1,515.9 550.1 524.9
Selling, general and
administrative expenses 352.1 401.7 112.6 134.0
Provision for restructuring 84.6
Research and development
expenses 213.8 175.1 71.6 70.7
Interest expense 43.8 56.9 11.3 16.2
Other, net 40.4 10.4 10.7 5.4
-------- -------- ------ ------
Income from continuing
operations before taxes
on income 280.7 482.9 162.0 150.1
Taxes on income from
continuing operations 84.1 161.2 49.2 48.0
-------- -------- ------ ------
Income from continuing
operations before minority
interest and equity earnings 196.6 321.7 112.8 102.1
Minority interest in earnings
of subsidiaries (38.6) (56.2) (20.3) (22.9)
Dividends on convertible
preferred securities of
subsidiary (10.3) (10.3) (3.4) (3.4)
Equity in earnings of
associated companies 75.5 62.0 15.3 31.0
-------- -------- ------ ------
Income from continuing
operations 223.2 317.2 104.4 106.8
Income from discontinued
operations, net of income
taxes 66.5 14.1 5.5
-------- -------- ------ ------
Net Income $ 289.7 $ 331.3 $104.4 $112.3
======== ======== ====== ======
Basic Earnings Per Share
Continuing operations $ 0.97 $ 1.39 $ 0.45 $ 0.47
Discontinued operations 0.29 0.06 0.02
-------- -------- ------ ------
$ 1.26 $ 1.45 $ 0.45 $ 0.49
======== ======== ====== ======
Diluted Earnings Per Share
Continuing operations $ 0.95 $ 1.34 $ 0.44 $ 0.45
Discontinued operations 0.28 0.05 0.02
-------- -------- ------ ------
$ 1.23 $ 1.39 $ 0.44 $ 0.47
======== ======== ====== ======
Dividends Declared $ 0.54 $ 0.54 $ 0.18 $ 0.18
======== ======== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
------------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 23.8 $ 61.0
Short-term investments, at cost, which
approximates market value 69.2 36.0
Accounts receivable, net of doubtful
accounts and allowances - $10.4/1998;
$10.7/year-end 1997 593.5 559.7
Inventories 450.5 428.3
Deferred taxes on income and other
current assets 143.8 114.1
-------- --------
Total current assets 1,280.8 1,199.1
-------- --------
INVESTMENTS
Associated companies, at equity 347.9 292.9
Others, at cost or fair market value 53.9 17.1
-------- --------
401.8 310.0
-------- --------
PLANT AND EQUIPMENT, AT COST, NET OF
ACCUMULATED DEPRECIATION 2,457.2 2,267.9
GOODWILL AND OTHER INTANGIBLE ASSETS,
NET OF ACCUMULATED AMORTIZATION
$65.2/1998; $51.5/year-end 1997 283.2 294.2
OTHER ASSETS 337.3 263.1
NET ASSETS FROM DISCONTINUED OPERATIONS 357.6
-------- --------
$4,760.3 $4,691.9
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable $ 60.4 $ 213.0
Accounts payable 213.8 300.0
Other accrued liabilities 582.9 444.7
-------- --------
Total current liabilities 857.1 957.7
-------- --------
OTHER LIABILITIES 658.7 627.5
LOANS PAYABLE BEYOND ONE YEAR 1,093.3 1,125.8
MINORITY INTEREST IN SUBSIDIARY COMPANIES 362.1 349.3
CONVERTIBLE PREFERRED SECURITIES OF
SUBSIDIARY 365.5 365.3
CONVERTIBLE PREFERRED STOCK 18.4 19.8
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: 265.3 million/1998 and
264.3 million/year-end 1997 748.4 707.2
Retained earnings 1,459.5 1,296.0
Less cost of 34.2 million/1998 and 32.7
million/year-end 1997 shares of common
stock in treasury (781.0) (724.5)
Unrealized loss on marketable securities (0.5)
Cumulative translation adjustment (21.2) (32.2)
-------- --------
Total common stockholders' equity 1,405.2 1,246.5
-------- --------
$4,760.3 $4,691.9
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $289.7 $331.3
Adjustments to reconcile net income
to net cash provided by operating
activities from continuing operations:
Income from discontinued operations (66.5) (14.1)
Depreciation and amortization 233.0 230.2
Equity in earnings of associated companies
in excess of dividends received (57.6) (25.0)
Minority interest in earnings of
subsidiaries in excess of dividends paid 25.9 44.8
(Gain) loss on disposition of properties
and investments 6.6 (5.6)
Non-operating gain (20.5)
Provision for restructuring, net of cash spent 79.2
Deferred tax benefit (20.7) (19.7)
Other 67.2 53.6
Changes in operating assets and liabilities:
Accounts receivable (44.3) (78.7)
Inventory (19.1) (73.8)
Other current assets 5.2 (30.8)
Accounts payable and other current liabilities (73.7) (52.0)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES OF
CONTINUING OPERATIONS 404.4 360.2
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment (522.9) (406.0)
Acquisitions of businesses (5.7) (32.0)
Net proceeds from disposition of properties
and investments 100.5 55.9
Proceeds from divestiture of consumer housewares
business 593.1
Increase in long-term investments (101.3) (7.6)
Other, net 13.4 1.9
------ ------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES OF CONTINUING OPERATIONS 77.1 (387.8)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of loans 199.7 68.3
Repayments of loans (43.3) (27.6)
Repayments of loans with proceeds from
divestiture of consumer housewares business (343.0)
Proceeds from issuance of common stock 16.1 33.7
Repurchases of common stock (50.7) (41.5)
Dividends paid (126.3) (125.7)
------ ------
NET CASH USED IN FINANCING ACTIVITIES OF
CONTINUING OPERATIONS (347.5) (92.8)
------ ------
Effect of exchange rates on cash 4.3 3.6
------ ------
Cash used in discontinued operations (142.3) (20.7)
------ ------
Net change in cash and cash equivalents (4.0) (137.5)
Cash and cash equivalents at beginning of year 97.0 215.1
------ ------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 93.0 $ 77.6
====== ======
SUPPLEMENTAL DATA:
Income taxes paid, net $117.5 $121.6
====== ======
Interest paid $ 77.1 $ 82.4
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CORNING INCORPORATED AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basic earnings per share is computed by dividing net income less dividends
on Series B convertible preferred stock by the weighted average number of
common shares outstanding during each period. Diluted earnings per share
is computed by dividing net income, increased in 1998 by dividends on
convertible preferred stock, by the weighted average number of common
shares outstanding during the period after giving effect to dilutive stock
options and dilutive common shares assumed to be issued on conversion of
Corning's convertible securities, which in 1997 includes convertible
preferred stock.
Common dividends of $41.9 million and $125.2 million were declared in the
third quarter and third quarter year to date 1998, respectively, compared
with $41.6 million and $124.5 million for the same periods in 1997.
A reconciliation of the basic and diluted earnings per share computations
for the third quarter year to date and third quarters of 1998 and 1997 are
as follows (in millions, except per share amounts):
<TABLE>
<CAPTION>
For the nine months ended September 30,
-------------------------------------------------
1998 1997
---------------------- -----------------------
Weighted Per Weighted Per
Average share Average share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net income from
continuing operations $223.2 $317.2
Less: Preferred stock
dividends 1.2 1.2
------ ------
Basic earnings per
share 222.0 229.7 $0.97 316.0 227.7 $1.39
===== =====
Effect of Dilutive
Securities
Options 2.7 4.9
Convertible monthly
income preferred
securities 10.3 11.5 10.3 11.5
Convertible preferred
stock 1.2 1.0
------ ----- ------ -----
Diluted earnings per
share $232.3 243.9 $0.95 $327.5 245.1 $1.34
====== ===== ===== ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
For the three months ended September 30,
-------------------------------------------------
1998 1997
---------------------- -----------------------
Weighted Per Weighted Per
Average share Average share
Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net income from
continuing operations $104.4 $106.8
Less: Preferred stock
dividends 0.4 0.4
------ ------
Basic earnings per
share 104.0 229.5 $0.45 106.4 228.7 $0.47
===== =====
Effect of Dilutive
Securities
Options 1.2 5.3
Convertible monthly
income preferred
securities 3.4 11.5 3.4 11.5
Convertible preferred
stock 0.4 1.0
------ ----- ------ -----
Diluted earnings per
share $107.4 242.2 $0.44 $110.2 246.5 $0.45
====== ===== ===== ====== ===== =====
</TABLE>
<PAGE>
At September 30, 1998, Corning had convertible preferred stock which paid
dividends of $0.4 million and were convertible into 0.9 million shares of
common stock. These shares were not included in the calculation of
diluted earnings per share due to the anti-dilutive effect they would have
had on earnings per share if converted.
(2) On April 1, 1998, Corning completed the recapitalization and sale of a
controlling interest in its consumer housewares business to an affiliate of
Borden, Inc. (the Consumer transaction). Corning received cash proceeds of
$593 million and will continue to retain an 8 percent interest in the
Corning Consumer Products Company. In addition, Corning could receive an
additional payment of up to $15 million if certain financial targets are
met by Corning Consumer Products Company for the three year period 1998 -
2000.
Corning recorded an after-tax gain of $67.1 million, or $0.29 per share, in
the second quarter of 1998. Corning used approximately $350 million of the
proceeds to repay current borrowings and will use the remaining proceeds to
fund restructuring activities and invest in its future operations.
Corning's consolidated financial statements and notes thereto report the
consumer housewares business as a discontinued operation. Prior period
consolidated financial statements and notes have been restated accordingly.
Net assets of discontinued operations consist primarily of receivables,
inventory, plant and equipment, goodwill and other intangible assets, and
other accrued liabilities.
(3) In the second quarter of 1998, Corning recorded a restructuring charge of
$84.6 million ($49.2 million after tax and minority interest), or $0.21 per
share. The charge is comprised of early retirement incentives and
severance costs. As of September 30, 1998, $5.1 million of restructuring
and severance related costs have been incurred.
The restructuring charge relates to approximately 650 employees, of
which 527 have been terminated or notified of their termination at
September 30, 1998. Management believes that the workforce reductions
will significantly reduce operating costs and will be substantially
completed within one year. Management believes that the costs of
restructuring will be financed through operating cash flows and the
proceeds from the Consumer transaction and does not anticipate any
significant impact on its liquidity as a result of the restructuring
plan.
(4) In June, 1998, Molecular Simulations, Inc. (MSI) merged with Pharmacopeia,
Inc., a publicly traded company (NASDAQ: PCOP). Corning previously owned
35% of MSI and owns approximately 15% of the combined entity. Corning
realized a gain of $20.5 million ($13.2 million after tax), or $0.06 per
share, from this transaction.
(5) Inventories shown on the accompanying balance sheets were comprised of the
following (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Finished goods $186.2 $193.5
Work in process 116.9 107.3
Raw materials and accessories 95.3 84.3
Supplies and packing materials 70.2 64.0
------ ------
Total inventories valued at current cost 468.6 449.1
Reduction to LIFO valuation (18.1) (20.8)
------ ------
$450.5 $428.3
====== ======
</TABLE>
<PAGE>
(6) Plant and equipment shown on the accompanying balance sheets were
comprised of the following (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Land $ 53.0 $ 51.4
Buildings 867.0 842.6
Equipment 3,429.1 3,107.2
Accumulated depreciation (1,891.9) (1,733.3)
--------- ---------
$ 2,457.2 $ 2,267.9
========= =========
</TABLE>
(7) Corning's change in stockholders' equity from non-stockholder transactions
for the periods ended September 30, 1998 and 1997 was $300.2 million and
$307.0 million, and includes net income of $289.7 million and $331.3
million and foreign currency translation adjustments of $11.0 million and
($24.3) million, respectively. In addition, Corning recorded unrealized
losses on marketable securities of $0.5 million in the period ending
September 30, 1998.
(8) In January, 1998, Corning completed a financing transaction related to
certain production equipment which resulted in net cash proceeds of
approximately $15 million. There was no gain or loss recorded or material
change to the balance sheet as a result of this transaction.
(9) In October, 1998, Corning sold Corning Samco Corporation (SAMCO) to Sybron
Laboratory Products Corporation for approximately $39 million. Corning
expects to recognize a modest gain on the sale. SAMCO manufactures
disposable plastic products and was included in the science products
division of the Specialty Materials Segment.
(10) Dow Corning Corporation, in which Corning has a 50% interest, has reported
to the Federal Bankruptcy Court that agreements in principle have been
reached with the Tort Claimants' Committee and that it expects to file a
plan of reorganization during November, 1998. The plan of reorganization
will require a favorable vote by many classes of creditors, as well as
court approval, and may be subject to appeals. Confirmation hearings are
not likely to be scheduled before the second quarter of 1999 and appeals
may occur through the remainder of the year. The recent developments tend
to increase the probability that Dow Corning will successfully emerge from
Chapter 11 proceedings, but the timing and eventual outcome of these
proceedings are inherently uncertain.
(11) On December 31, 1996, Corning distributed all of the shares of Quest
Diagnostics Incorporated and Covance, Inc. to its shareholders on a pro
rata basis. As described in Note 19 to Corning's 1997 consolidated
financial statements included in its Annual Report of Form 10-K, as
amended on July 8, 1998, Corning has agreed to indemnify Quest Diagnostics
on an after-tax basis, for the settlement of certain governmental claims
and certain other claims that were pending at December 31, 1996. Corning
recorded a reserve of approximately $25 million which is equal to
management's best estimate of amounts which are probable of being paid by
Corning to Quest Diagnostics to satisfy the indemnified claims on an after-
tax basis.
Although management believes that established reserves for indemnified
claims are sufficient, it is possible that additional information may
become available to Quest Diagnostics' management which may cause the
final resolution of these matters to exceed established reserves by an
amount which could be material to Corning's results of operations and cash
flows in the period in which such claims are settled. Corning does not
believe that these issues will have a material adverse impact on Corning's
overall financial condition.
<PAGE>
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Continuing operations
Net sales for the third quarter and third quarter year-to-date 1998 totaled
$906.5 million and $2.58 billion, respectively, compared to 1997 net sales from
the same operations of $891.9 million and $2.61 billion, respectively. Net
income totaled $104.4 million in the third quarter 1998, compared with third
quarter net income from the same operations of $106.8 million in 1997. Net
income from continuing operations for the third quarter year-to-date 1998
totaled $223.3 million, compared to net income from the same operations of
$317.2 million in 1997.
In the second quarter of 1998, Corning recorded a restructuring charge of $84.6
million ($49.2 million after tax and minority interest) for early retirement
incentives and severance costs. In addition, Corning recorded a non-operating
gain of $20.5 million ($13.2 million after tax) in the second quarter of 1998 to
reflect the merger of Molecular Simulations, Inc. (MSI) and Pharmacopeia, Inc.
The following table summarizes the impact of these non-recurring items on
Corning's third quarter year-to-date 1998 net income and diluted earnings per
share (in millions, except per share amounts):
<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------
1998 1997
---- ----
<S> <C> <C>
Net income
Before special items $ 259.2 $ 317.2
Provision for restructuring (49.2)
Non-operating gain 13.2
------- -------
Net income from continuing operations $ 223.2 $ 317.2
======= =======
Diluted earnings per share
Before special items $ 1.10 $ 1.34
Provision for restructuring (0.21)
Non-operating gain 0.06
------- -------
Net income from continuing operations $ 0.95 $ 1.34
======= =======
</TABLE>
As shown, excluding these non-recurring items, Corning's diluted third quarter
year-to-date earnings per share and net income decreased 18% in comparison to
the same period in 1997. The following discussions of year-to-date earnings
exclude the effect of these non-recurring items.
Segment overview
Sales in the Communications segment increased in the third quarter of 1998,
primarily due to volume growth in the opto-electronic businesses, which was
partially offset by lower prices in the optical fiber business. Earnings in
this segment increased over last year primarily due to reduced research and
development spending in the information display business and improved sales mix
in the optical fiber business in the third quarter, which included an increase
in premium fiber sales. Sales and earnings in this segment for the third
quarter year-to-date decreased in comparison to the same period in 1997, as the
third quarter increases only partially offset significant declines in the first
half of 1998.
<PAGE>
Optical fiber and cable sales and earnings decreased significantly in the third
quarter year-to-date, as strong volume growth in the domestic fiber markets was
offset by pricing pressures, particularly within the international fiber
markets. Sales in the optical fiber and cable business decreased only slightly
in the third quarter, while earnings improved, reflecting improved sales mix due
to an increase in premium fiber sales. Volume growth within the international
fiber markets was up slightly in the third quarter, but down year to date
compared to 1997. Sales in the photonic technologies business increased
significantly in the third quarter and third quarter year to date reflecting
substantial volume growth. Earnings in this business were flat in the third
quarter and remained down for the year to date as the gains in volume were
offset by increased research and development spending and costs incurred with
the start-up of a new factory.
Sales in the information display business were up slightly, while earnings
increased substantially, in the third quarter of 1998 when compared to 1997.
Volume gains in the projection video component business were mostly offset by
pricing pressures within the conventional video components and advanced display
products businesses due to the continued impact of increased competition from
Asian markets. Third quarter year-to-date sales and earnings were lower in
comparison to 1997, primarily due to volume declines in the first half of 1998
caused by a scheduled glass furnace repair, which was completed in the second
quarter. Earnings in the third quarter and third quarter year-to-date were
favorably impacted by a significant reduction in the level of research and
development spending.
Sales in the Specialty Materials segment decreased in the third quarter of 1998,
as revenue gains in the environmental and science products businesses were more
than offset by a decline in volume within the high purity fused silica business,
where cutbacks in the semiconductor manufacturing equipment industry have
impacted demand. Sales of this segment for the third quarter year-to-date were
essentially flat as third quarter declines negated gains realized in the
advanced materials and science products businesses during the first half of the
year. Earnings in this segment for the third quarter and third quarter year to
date 1998 decreased primarily due to higher research and development spending
and expansion related costs in the advanced materials business and volume
declines in the optical products business. Third quarter year-to-date earnings
were also impacted by first half volume declines in the environmental products
business.
Taxes on Income
Corning's effective tax rate for continuing operations was 30.4% for the third
quarter and 31.5% third quarter year-to-date, excluding the impact of the second
quarter special items, compared to 32% and 33.4% for the same periods in 1997.
The lower 1998 rate is due to a higher percentage of Corning's earnings
resulting from consolidated entities with lower effective tax rates.
Equity in Earnings
Equity in earnings of associated companies decreased significantly in the third
quarter, from $31 million in 1997 to $15.3 million in 1998. For the third
quarter year-to-date, equity earnings increased from $62 million in 1997 to
$75.5 million in 1998. The decrease in earnings in the third quarter reflects
significant pricing pressures coupled with less favorable exchange rates from
those experienced in the first half of 1998 by Samsung Corning Co., Ltd. In
addition, earnings from optical fiber equity companies were negatively impacted
by price declines in both the third quarter and third quarter year-to-date.
Discontinued operations
On April 1, 1998, Corning completed the recapitalization and sale of a
controlling interest in its consumer housewares business to an affiliate of
Borden, Inc. (the Consumer transaction). The results of this business are
reported as a discontinued operation. Income from discontinued operations for
year-to-date 1998 totaled $66.5 million, or $0.28 per share, and includes an
after-tax gain of $67.1 million, or $0.29 per share. Income from discontinued
operations for the same period in 1997 totaled $14.1 million, or $0.05 per
share.
<PAGE>
Liquidity and Capital Resources
Corning's working capital increased from $241.4 million at the end of 1997 to
$423.7 million at September 30, 1998. The ratio of current assets to current
liabilities was 1.5 at the end of the third quarter of 1998 compared to 1.3 at
year-end 1997. The increase in working capital and the ratio of current assets
to current liabilities is due primarily to repayment of debt with proceeds from
the Consumer transaction, partially offset by investments in receivables and
inventory. Corning's long-term debt as a percentage of total capital was 34% at
the end of the third quarter 1998 compared to 36% at year-end 1997. The
decrease in the long-term debt percentage is primarily due to the increase in
stockholders' equity.
Cash and short-term investments decreased from year-end 1997 by $4.0 million, as
cash provided by operating and investing activities of $404.4 million and $77.1
million, respectively, was substantially offset by cash used in financing
activities and discontinued operations of $347.5 million and $142.3 million,
respectively. Net cash provided by operating activities increased in the third
quarter year-to-date 1998 compared to the same period in 1997 due to a decrease
in cash used for working capital, offset in part by lower earnings. Net cash
provided by investing activities in the third quarter year-to-date totaled $77.1
million, versus a use of cash of $387.8 million in 1997, reflecting the proceeds
received from the Consumer transaction offset in part by increased capital
spending. Corning used a portion of the Consumer proceeds to repay long-term
debt causing an increase in cash used in financing activities over the same
period in 1997. Net cash used in discontinued operations in the first half of
1998 increased over 1997 as a result of transaction costs and tax payments
related to the Consumer transaction.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (FAS 133), which
establishes accounting and reporting standards for derivative instruments and
hedging activities. FAS 133 requires an entity to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. Corning currently enters into derivatives in
the form of foreign currency hedge instruments to reduce its exposure to
exchange rate risk on foreign source income and purchases. Management believes
that its current foreign currency hedge instruments qualify as hedges under FAS
133. FAS 133 is effective for fiscal years beginning after June 15, 1999, and
is not expected to have a material effect on Corning's financial position or
results of operations.
In July, 1997, the Emerging Issues Task Force (EITF) issued EITF 96-16,
"Investor's Accounting for an Investee When the Investor Has a Majority of the
Voting Interest but the Minority Shareholder or Shareholders Have Certain
Approval or Veto Rights". Corning is currently assessing the impact of this
consensus on its various shareholder agreements and will comply with the new
requirements in the fourth quarter 1998. The consensus will have no effect on
the Company's reported net income but it is possible that application of the
consensus will result in the Company reporting lower consolidated revenues and
expenses offset by higher equity earnings in its income statement.
Year 2000
Corning has completed an assessment of required modifications or replacement of
its internal software to become Year 2000 compliant. This involved all areas of
concern, including business applications, manufacturing, engineering, research,
facilities systems, and third party suppliers and service providers.
Implementation, including testing, of required changes to mission critical
systems will be substantially completed by December 31, 1998, with the remainder
to be completed by the middle of 1999. In addition, an external study team is
reviewing documented remediation work and test results for mission critical
systems. Modifications to non-critical systems will be substantially completed
by December 31, 1999. Progress against these plans is monitored and reported to
management and to the Audit Committee of the Board of Directors on a regular
basis.
<PAGE>
Corning's current estimate of the total cost for Year 2000 compliance is
approximately $21 million, of which approximately $14 million has been spent to
date. This estimate includes incremental costs of approximately $9 million
comprised primarily of contractor costs to modify existing systems, of which
approximately 60% has been spent to date. Corning initiated a significant
project in 1995 to improve access to business information with integrated
enterprise-wide computer applications which are Year 2000 compliant.
Corning has initiated formal communications with all of its customers and
significant suppliers and other third parties to determine the extent to which
Corning is vulnerable to third parties' failures to remediate their own
potential problems related to the Year 2000. Risk assessments, readiness
evaluation and contingency plans to protect Corning's business from Year 2000-
related interruptions from these third parties and from key customers are
expected to be complete in advance of December 31, 1999. Contingency plans will
include, for example, stocking of additional inventory and identification of
alternative suppliers.
Corning's risk management program includes emergency backup and recovery
procedures to be followed in the event of failure of a mission-critical system.
These procedures will be expanded to include specific procedures for potential
Year 2000 issues. Corning is taking what it considers to be reasonable steps to
prevent major interruptions in its business due to Year 2000 issues. The
inability of Corning or significant third parties to adequately address Year
2000 issues could cause inefficiencies in Corning's business operations. The
effect, if any, on Corning's results of operations if Corning, its customers or
its suppliers are not fully Year 2000 compliant is not readily determinable at
this time.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
The statements in this Form 10-Q which are not historical facts or information
are forward-looking statements. These forward-looking statements are based on
expectations, estimates, and projections about the industries in which Corning
operates. These forward-looking statements are not guarantees of future
performance. They involve risks and uncertainties that may cause the outcome
to be materially different. Such risks and uncertainties include, but are not
limited to, global economic conditions, product demand and industry capacity,
reliance on large customers, competitive products and pricing, manufacturing
efficiencies, cost reductions, availability and costs of critical materials,
new product development and commercialization, manufacturing capacity, facility
expansions and new plant start-up costs, the effect of regulatory and legal
developments, capital resource and cash flow activities, capital spending,
equity company activities, interest costs, foreign exchange rates, divestiture
activity, the rate of technology change, ability to enforce patents and other
risks detailed in Corning's 1997 Form 10-K, as amended on July 8, 1998.
<PAGE>
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 and by several state governments
under similar state laws as a potentially responsible party at 14 active
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
$23.3 million for its estimated liability for environmental cleanup and
litigation at September 30, 1998.
Breast-implant Litigation. Dow Corning Bankruptcy: On May 15, 1995, Dow
Corning Corporation sought protection under the reorganization provisions of
Chapter 11 of the United States Bankruptcy Code. The bankruptcy proceeding is
pending in the United States Bankruptcy Court for the Eastern District of
Michigan, Northern Division (Bay City, Michigan). The effect of the bankruptcy
is to stay the prosecution against Dow Corning of approximately 19,000 breast-
implant product liability lawsuits, including 45 class actions. On December 2,
1996, Dow Corning filed its first Plan of Reorganization in the bankruptcy
case. On January 10, 1997, the Tort Claimants Committee and the Commercial
Creditors Committee filed a joint motion to modify Dow Corning's exclusivity
with respect to filing a plan of reorganization, requesting the right to file
their own competing plan. The motion was denied by the Bankruptcy Court in May
1997. On August 25, 1997, Dow Corning filed its First Amended Plan of
Reorganization in the bankruptcy case. After several days of hearings in
November 1997 to consider the disclosure statement pertaining to the Plan, the
Bankruptcy Court identified several potential issues with the Amended Plan and
set February 17, 1998 as the date for Dow Corning to file further amendments.
On February 17, 1998, Dow Corning filed its Second Amended Plan of
Reorganization. The Bankruptcy Court held hearings in April, 1998 to consider
the disclosure statement proposed by Dow Corning with this Plan and to consider
objections and motions made by the Tort Claimants. While the Bankruptcy Court
had these matters under consideration, Dow Corning and the Tort Claimants held
a series of meetings facilitated by a court-appointed mediator. On July 8,
1998, the Court announced that Dow Corning and the Tort Claimants had reached
an agreement in principle on the treatment of tort claims within a consensual
plan of reorganization. The agreement provides for a grid of settlement values
analogous to those in the Revised Global Settlement offered by other makers of
silicone breast implants and sets up a litigation facility to address the
claims of those claimants who decline the settlement and prefer a jury trial.
The parties have agreed upon a schedule of payments that Dow Corning must make
to fund the settlement and the litigation facility, subject to certain annual
limitations and an overall limit on the total funding to be provided by Dow
Corning. These agreements remain subject a number of contingencies, including:
the need to reach separate agreements with certain other creditor
constituencies; court approval of a revised disclosure statement; a favorable
vote within each creditor class; and court confirmation of the plan. Dow
Corning and the Tort Claimants have reported to the Bankruptcy Court that they
expect to file the documents for a jointly supported Plan of Reorganization
during November, 1998. While the agreement in principle and the plan between
Dow Corning and the Tort Claimants represents a significant milestone, the
confirmation hearings are not likely to be scheduled until the second quarter
of 1999, and appeals may take the balance of the year.
<PAGE>
The breast implant claims against Dow Corning's shareholders (Corning and The
Dow Chemical Company), which allege a variety of direct or indirect theories
why they should have liability for Dow Corning's implant products, were in 1997
(with a few exceptions) transferred to the United States District Court for the
Eastern District of Michigan, Southern District (the "Michigan Federal Court")
for coordinated proceedings with the similar cases against Dow Corning. These
transfers resulted from motions made to the Michigan Federal Court in mid-1995.
The Michigan Federal Court granted transfer as to claims against Dow Corning
only, and declined to order transfer of the claims against the shareholders.
The transfer motion as to the shareholders was later granted as a result of
appellate rulings by the United States Court of Appeals for the Sixth Circuit
entered in June 1996 and May 1997. As mandated by the Sixth Circuit, the
Michigan Federal Court entered the transfer order on May 13, 1997 to transfer
to it those breast implant cases against the shareholders pending in state
courts around the country or in federal court. As the single exception to
date, the Michigan Federal Court declined to order the transfer of a Louisiana
case, which was already in the midst of a lengthy trial against Dow Chemical.
At the end of the liability phase of that trial, the jury rendered a verdict
against Dow Chemical, finding it liable with respect to Dow Corning's implant
products. Dow Chemical has taken an appeal to a state appellate court in
Louisiana.
In related developments, a Panel of Scientific Experts appointed by Judge
Pointer in the coordinated federal implant cases in the Northern District of
Alabama was asked to address certain questions pertinent to the disease
causation issues in the cases against Dow Corning or its shareholders. The
Panel held hearings in 1997 and is expected to issue its report in the fall of
1998. In April 1997, Dow Corning filed in the Bankruptcy Court an omnibus
objection to all claims in the bankruptcy to the extent based on the alleged
causation of disease by silicones. Dow Corning also filed a motion for summary
judgment that asserts that the disease claims are not supported by any
admissible scientific evidence of disease causation. The Michigan Federal
Court has set a schedule for considering the objection and the related motion
after the Panel of Scientific Experts issues its report.
Implant Tort Lawsuits: As a result of its success in obtaining summary
judgment in the federal coordinating court, and through similar motions in
state courts, and through the transfer orders mentioned above, Corning has
substantially limited the number of breast implant cases pending against it.
From 1991 through August 1, 1998, Corning had been named in approximately
11,475 state and federal tort lawsuits, some of which were filed as class
actions or on behalf of multiple claimants. In 1992, the federal breast
implant cases were coordinated for pretrial purposes in the United States
District Court, Northern District of Alabama (Judge Sam C. Pointer, Jr.). In
1993, Corning obtained an interlocutory order of summary judgment, which was
made final in April 1995, thereby dismissing Corning from over 4,000 federal
court cases. On March 12, 1996, the U.S. Court of Appeals for the Eleventh
Circuit dismissed the plaintiffs' appeal from that judgment. The District
Court thereafter entered orders in May and June 1997 directing that Corning be
dismissed from each case pending in or later transferred to that Court. That
order dismissing Corning encompassed hundreds of state court cases that were
removed to federal court and transferred to the Northern District of Alabama
after Dow Corning filed for bankruptcy protection. In state court litigation,
Corning was awarded summary judgment in California, Connecticut, Illinois,
Indiana, Michigan, Mississippi, New Jersey, New York, Pennsylvania, Tennessee,
and Dallas, Harris and Travis Counties in Texas, thereby dismissing
approximately 7,000 state cases. On July 30, 1997, the judgment in California
became final when the Supreme Court of California dismissed further review as
improvidently granted as to Corning. In Louisiana, Corning was awarded summary
judgment dismissing all claims by plaintiffs and a cross-claim by Dow Chemical
on February 21, 1997. On February 11, 1998, this judgment was vacated as
premature by the intermediate appeals court in Louisiana. On July 2, 1998, the
Louisiana Supreme Court denied an application for a writ permitting early
review in that court. Corning expects to renew its motion for summary judgment
after additional pretrial proceedings. Approximately 1,500 additional
plaintiffs have sought to intervene in the pending Louisiana state action.
Both Dow Chemical and Corning have opposed intervention on the grounds, among
others, that all individual cases were transferred to the Michigan Federal
Court by the orders entered in May 1997. In the Michigan Federal Court,
Corning is named as a defendant in approximately 60 pending cases (including
some cases with multiple claimants), but Corning is not named as a defendant in
the Master Complaint, which contains claims against Dow Chemical only. Corning
has moved for summary judgment in the Michigan Federal Court to dismiss these
remaining cases by plaintiffs as well as the third party complaint and all
cross-claims by Dow Chemical. Plaintiffs have taken no position on that
Corning motion. The Michigan Federal Court heard Corning's motion for summary
judgment on February 27, 1998 but has not yet ruled.
<PAGE>
In March 1998, Dow Chemical served a third party complaint against Corning in a
class action previously filed in the Michigan Federal Court. Corning has
answered the complaint and denied the allegations.
Federal securities case: A federal securities class action lawsuit was filed
in 1992 against Corning and certain individual defendants by a class of
purchasers of Corning stock who allege misrepresentations and omissions of
material facts relative to the silicone gel breast implant business conducted
by Dow Corning. This action is pending in the United States District Court for
the Southern District of New York. The court in 1997 dismissed the individual
defendants from the case, but has permitted the case to proceed into discovery.
Quest Diagnostics: Government Investigations and Related Claims. On December
31, 1996, Corning completed the spin-off of its health care services businesses
by the distribution to its shareholders of the Common Stock of Quest
Diagnostics Incorporated ("Quest Diagnostics") and Covance Inc. ("Covance").
In connection with these distributions, Quest Diagnostics assumed financial
responsibility for the liabilities related to the clinical laboratory business
and Covance assumed financial responsibility for the liabilities related to the
contract research business. Corning agreed to indemnify Quest Diagnostics
against all monetary penalties, fines or settlements for any governmental
claims arising out of alleged violations of applicable federal fraud and health
care statutes and relating to billing practices of Quest Diagnostics and its
predecessors that were pending at December 31, 1996. Corning also agreed to
indemnify Quest Diagnostics for 50% of the aggregate of all judgment or
settlement payments made by Quest Diagnostics that are in excess of $42.0
million in respect of claims by private parties (i.e., nongovernmental parties
such as private insurers) that relate to indemnified or previously settled
governmental claims and that allege overbillings by Quest Diagnostics, or any
existing subsidiaries of Quest Diagnostics, for services provided prior to
December 31, 1996; provided, however, such indemnification is not to exceed
$25.0 million in the aggregate and that all amounts indemnified against by
Corning for the benefit of Quest Diagnostics are to be calculated on a net
after-tax basis. Such indemnification does not cover (i) any governmental
claims that arise after December 31, 1996 pursuant to service of subpoena or
other notice of such investigation after December 31, 1996, (ii) any
nongovernmental claims unrelated to the indemnified governmental claims or
investigations, (iii) any nongovernmental claims not settled prior to December
31, 2001, (iv) any consequential or incidental damages relating to the billing
claims, including losses of revenues and profits as a consequence of exclusion
for participation in federal or state health care programs or (v) the fees and
expenses of litigation.
<PAGE>
ITEM 5. OTHER INFORMATION
Any shareholder proposal intended to be presented at the 1999 Annual Meeting of
Shareholders and not included in Corning's Proxy Statement and Proxy relating
to such meeting must be received by Corning at One Riverfront Plaza, Corning,
New York 14831; attention: the Secretary no later than January 30, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See the Exhibit Index which is located on page 18.
(b) Reports on Form 8-K
A report on Form 8-K dated July 20, 1998, was filed in connection
with the Registrant's second quarter results.
Other items under Part II are not applicable.
<PAGE>
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)
November 10, 1998 /s/ ROGER G. ACKERMAN
- ----------------- ------------------------------------------------------------
Date Roger G. Ackerman
Chairman and Chief Executive Officer
November 10, 1998 /s/ JAMES B. FLAWS
- ----------------- ------------------------------------------------------------
Date James B. Flaws
Senior Vice President, Treasurer and Chief Financial Officer
November 10, 1998 /s/ KATHERINE A. ASBECK
- ----------------- ------------------------------------------------------------
Date Katherine A. Asbeck
Vice President and Controller
<PAGE>
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
3 (ii) By-Laws of Corning Incorporated,
as amended to and effective as
of October 6, 1998
12 Computation of ratio of earnings
to combined fixed charges and
preferred dividends 19
27 Financial Data Schedule
<PAGE>
CORNING INCORPORATED
___________
BY-LAWS
___________
ARTICLE I.
Offices of the Corporation
1. Principal Office. The principal office and place of business of the
corporation shall be located in the City of Corning, Steuben County, New York.
2. Other Offices. The Board of Directors may establish and discontinue, from
time to time, other offices and places of business as it deems advisable and
proper for the conduct of the company's business.
ARTICLE II.
Meetings of Stockholders
1. Place of Meeting. All meetings of stockholders of the corporation may be
held at such place, within or without the State of New York, as may be fixed
from time to time by the Board of Directors.
2. Annual Meeting. The annual meeting of stockholders for the election of
directors and consideration of such other business as may come before the
meeting shall be held on the last Thursday in April of each year, or on such
other day, which shall not be a legal holiday, as shall be determined by the
Board of Directors. Any previously scheduled annual meeting of stockholders may
be postponed by resolution of the Board of Directors upon public notice given
prior to the date previously scheduled for such annual meeting of stockholders.
3. Special Meetings. Special meetings of the stockholders may be called at
any time by the Chairman of the Board, the Chairman of the Executive Committee,
a Vice Chairman or the President and shall be called by the Secretary or an
Assistant Secretary upon order of the Board of Directors, the Chairman of the
Board of Directors or a majority of the directors.
4. Notice of Meetings. Notice of each annual or special meeting of the
stockholders shall be served either personally or by mail upon each stockholder
entitled to vote thereat. If served by mail, the notice shall be sent postpaid
addressed to the stockholder at his address as it appears on the stock record of
the corporation. Service of such notice shall be made not less than ten nor
more than sixty days before the meeting date, unless the meeting is to be held
elsewhere than at the principal office, in which case service of the notice
shall be made not less than twenty nor more than sixty days before the meeting.
5. Waiver of Notice. Notice of meeting need not be given to any stockholder
who submits a signed waiver of notice, in person or by proxy, either before or
after the meeting. The attendance of any stockholder at a meeting, in person or
by proxy, without protesting prior to the conclusion of the meeting the lack of
notice of such meeting, shall constitute a waiver of notice by him.
6. Chairman and Secretary of Meeting. The Chairman of the Board of Directors,
or, in his absence and in the order named, the Chairman of the Executive
Committee, a Vice Chairman or the President present at the meeting shall call to
order and preside at all meetings of stockholders, and the Secretary of the
corporation, or in his absence, the senior of the Assistant Secretaries
(determined by the order of their election) present at the meeting shall act as
secretary.
7. Stockholders Entitled to Vote. Unless otherwise provided in the
Preliminary Certificate of Consolidation forming this corporation or other
certificate filed pursuant to law, every stockholder of record shall be entitled
at every meeting of the corporation to one vote for every share of stock
standing in his name on the books of the corporation. The Board of Directors
may prescribe a period, not exceeding sixty days prior to the date of any
meeting of the stockholders or prior to the last day on which the consent or
dissent of a stockholder may be effectively expressed for any purpose without a
meeting, during which no transfer of stock on the books of the corporation may
be made; or in lieu of prohibiting the transfer of stock may fix a time not more
than sixty days prior to the date of any meeting of stockholders or prior to the
last day on which the consent or dissent of stockholders may be effectively
expressed for any purpose without a meeting as the time as of which stockholders
entitled to notice of and to vote at such a meeting or whose consent or dissent
is required or may be expressed for any purpose, as the case may be, shall be
determined, and all persons who were holders of record of voting stock at such
time and no others shall be entitled to notice of and to vote at such meeting or
to express their consent or dissent as the case may be.
8. Quorum and Adjournment. Holders of a majority of the issued and
outstanding stock entitled to vote at the meeting shall constitute a quorum at
all meetings, except as otherwise provided by law, by the Preliminary
Certificate of Consolidation forming this corporation or by these By-Laws. If,
however, such majority, represented either in person or by proxy, be not present
at any meeting, the stockholders entitled to vote thereat, present in person or
by proxy, shall have power to adjourn the meeting from time to time, without
other notice than announcement at the meeting, until the requisite amount of
voting stock shall be present; provided, however, that any stockholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the Chairman of the meeting. When the requisite amount of
voting stock is present at an adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally called.
9. Vote of Stockholders. At each meeting of stockholders, every stockholder
entitled to vote shall have the right to vote in person or by proxy duly
appointed by an appropriate instrument, such as a writing, a telegram, a
cablegram or other means of electronic transmission, in each case subscribed by
or on behalf of such stockholder, and dated not more than eleven months prior to
the meeting, unless such instrument provides for a longer period. The vote for
directors shall be by ballot. In a vote by ballot each ballot shall state the
number of shares voted and the name of the shareholder or proxy voting. Except
as otherwise provided by law, or by the Preliminary Certificate of Consolidation
forming this corporation or other certificate filed pursuant to law, all
elections and all questions shall be decided by a majority vote of the stock
present.
ARTICLE III.
Directors
1. Election and Term.
(a) At the 1985 annual meeting of stockholders, the directors shall be divided
into three classes, as nearly equal in number as possible, with the term of
office of the first class to expire at the 1986 annual meeting of stockholders,
the term of office of the second class to expire at the 1987 annual meeting of
stockholders and the term of office of the third class to expire at the 1988
annual meeting of stockholders. Commencing with the 1986 annual meeting of
stockholders, directors elected to succeed those directors whose terms have
thereupon expired shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election. If the number
of directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain or attain, if possible, the equality of the number of
directors in each class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. If such equality is not
possible, the increase or decrease shall be apportioned among the classes in
such a way that the difference in the number of directors in any two classes
shall not exceed one.
(b) Whenever the holders of any one or more series of Preferred Stock issued by
the corporation shall have the right, voting separately by series, to elect
directors at an annual or a special meeting of stockholders, the election, term
of office, filling of vacancies and other features of such directorships shall
be governed by Sections 1(a), 5 and 6 of this Article III unless expressly
otherwise provided by the resolution or resolutions providing for the creation
of such series.
2. Nominations and Stockholder Business.
(a) Annual Meeting of Stockholders.
(1) Nominations of persons for election to the Board of Directors of the
corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (i) pursuant to the
corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the corporation who was a stockholder
of record at the time of giving of notice provided for in this Section 2, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this Section 2.
(2) For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this
Section 2, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the corporation
not less than 90 days nor more than 120 days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the 120th day prior to such annual
meeting and not later than the close of business on the later of the 90th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); (ii)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (iii) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (A) the name and address of such stockholder, as
they appear on the corporation's books, and of such beneficial owner and (B) the
class and number of shares of the corporation which are owned beneficially and
of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (a)(2) of this
Section 2 to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the corporation is increased and there is
no public announcement naming all of the nominees for Director or specifying the
size of the increased Board of Directors made by the corporation at least 90
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 2 shall also be considered timely,
but only with respect to nominees for any new position created by such increase,
if it shall be delivered to the Secretary at the principal executive offices of
the corporation not later than the close of business on the 10th day following
the day on which such public announcement is first made by the corporation.
(b) Special Meetings of Stockholders. Only such business shall be conducted at
a special meeting of stockholders as shall have been brought before the meeting
pursuant to the corporation's notice of meeting. Nominations of persons for
election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the corporation's
notice of meeting (i) by or at the direction of the Board of Directors or (ii)
by any stockholder of the corporation who is a stockholder of record at the time
of giving of notice provided for in this Section 2, who shall be entitled to
vote at the meeting and who complies with the notice procedures set forth in
this Section 2. Nominations by stockholders of persons for election to the
Board of Directors may be made at such a special meeting of stockholders if the
stockholder's notice required by paragraph (a)(2) of this Section 2 shall be
delivered to the Secretary at the principal executive offices of the corporation
not earlier than the 120th day prior to such special meeting and not later than
the close of business on the later of the 90th day prior to such special meeting
or the 10th day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
(c) General.
(1) Only such persons who are nominated in accordance with the procedures set
forth in this Section 2 shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section 2. The Chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in this Section 2
and, if any proposed nomination or business is not in compliance with this
Section 2, to declare that such defective proposal shall be disregarded.
(2) For purposes of this Section 2, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Sections 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 2, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
Section 2. Nothing in this Section 2 shall be deemed to affect any rights of
(i) stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) the holders of
any Series Preferred Stock to elect Directors under specific circumstances.
3. Qualification. Directors need not be stockholders. Acceptance of the
office may be expressed orally or in writing, except as otherwise provided in
these By-Laws.
4. Number. The number of directors constituting the Board of Directors of the
corporation shall be not less than nine nor more than twenty-four, the exact
number within such minimum and maximum limitations to be fixed from time to time
by the Board of Directors pursuant to a resolution adopted by the affirmative
vote of a majority of the whole Board of Directors; and such exact number shall
be twenty-one unless otherwise determined by a resolution so adopted by a
majority of the whole Board of Directors. As used in these By-Laws, the terms
"whole Board of Directors" and "whole Board" mean the total authorized number of
directors which the corporation would have if there were no vacancies.
5. Vacancies. Subject to the rights of the holders of any series of Preferred
Stock or any other class of capital stock of the corporation (other than the
Common Stock) then outstanding, vacancies in any class of directors resulting
from death, resignation, retirement, disqualification, removal from office or
other cause shall, if occurring prior to the expiration of the term of office of
such class, be filled only by the affirmative vote of a majority of the
remaining directors of the whole Board of Directors then in office, although
less than a quorum or by the sole remaining director. Any director so elected
shall hold office until the next annual meeting of stockholders and until his
successor is elected and qualified.
6. Removal of Directors. Subject to the rights of the holders of any series
of Preferred Stock or any other class of capital stock of the corporation (other
than the Common Stock) then outstanding, (i) any director, or the whole Board of
Directors, may be removed by the stockholders from office at any time prior to
the expiration of his term of office, but only for cause and only by the
affirmative vote of the holders of record of outstanding shares representing a
majority of the voting power of all of the outstanding shares of capital stock
of the corporation entitled to vote generally in the election of directors, and
(ii) any director may be removed from office by the affirmative vote of a
majority of the whole Board of Directors, at any time prior to the expiration of
his term of office, but only for cause.
7. General Powers. The business, properties and affairs of the corporation
shall be managed by the Board of Directors. Notwithstanding any other provision
of the Preliminary Certificate of Consolidation and these By-Laws and subject to
the other provisions of Sections 1(a) and (b), 4, 5 and 6 of this Article III,
the Board of Directors shall determine the rules and procedures that shall
affect the directors' power to manage and direct the business and affairs of the
corporation. Without limiting the foregoing, the Board of Directors shall
designate and empower committees of the Board of Directors, shall elect and
empower the officers of the corporation and fix their salaries and other
compensation, may appoint and empower other officers and agents of the
corporation, may grant general or limited authority to its Chairman, the
Chairman of the Executive Committee, the Vice Chairmen, the President and the
Sector Presidents and other officers and agents of the corporation to make,
execute and deliver contracts and other instruments and documents in the name
and on behalf of the corporation and under its seal without specific authority
in each case, and shall determine to the extent not inconsistent with these By-
Laws the time and place of, and the notice requirements for, Board meetings, as
well as quorum and voting requirements for, and the manner of taking, Board
action. In addition, the Board may exercise all of the powers of the corporation
and do all lawful acts and things which are not reserved to the stockholders by
statute, the Preliminary Certificate of Consolidation or the By-Laws.
8. Executive Committee. The Board of Directors may, by resolution adopted by
vote of a majority of the whole Board, appoint an Executive Committee, to
consist of the Chairman of the Board of Directors ex officio, and two or more
other Directors, which shall be empowered to perform such functions as may be
delegated to it by the Board. The Chairman of the Board of Directors shall act
as chairman of the Executive Committee unless another member shall have been
appointed chairman by the Board of Directors.
9. Audit Committee. The Board of Directors, not later than April 30 in each
year, shall by resolution adopted by vote of a majority of the whole Board
appoint an Audit Committee to consist of three or more Directors (none of whom
shall be an officer of the corporation or of any of its subsidiary companies)
and may appoint one of the members of such Committee to be its Chairman. The
Committee shall recommend, annually, a firm of certified public accountants to
be appointed by the Board of Directors to audit the books and accounts of the
corporation and its subsidiary companies and to report to the Committee. The
Committee shall confer with such accountants and shall determine the scope of
the audits of the books and accounts of the corporation and its subsidiary
companies and shall bring to the attention of the Board of Directors those items
relating to the audits or the corporation's accounting practices which the
Committee and the auditors believe to merit Board review. As soon as
practicable after the close of each fiscal year the Committee shall transmit to
the Board of Directors the consolidated balance sheet of the corporation and its
subsidiary companies as at the end of each such fiscal year and related
statements of consolidated income and surplus for such year, with the
certificate of the accountants with respect thereto; and such financial
statements and certificate shall be incorporated in the Annual Report to the
stockholders of the corporation. The Audit Committee shall establish the rules
for the conduct of its meetings; shall keep minutes of its acts and proceedings,
which in each instance shall be reported at the next meeting of the Board of
Directors; and shall appoint one of its members to act as its Secretary.
10. May Adopt Savings Plans and Sell Stock to Employees. The Board may, from
time to time, adopt, modify and discontinue savings plans for the promotion of
saving and thrift among the company's employees and make reasonable
contributions on behalf of the corporation for such purposes. It may also sell
Preferred stock to the employees on an installment basis whereby payments
therefor are deducted from salaries and wages. In addition it may, from time to
time, issue and sell over a period of time and on a deferred payment basis
unissued common stock, for not less than the par value thereof but for less than
its market value, to employees of the company, as it may deem advisable for the
best interests of the corporation. The term "employees" as used in this section
shall include officers and directors.
11. May Make Provision for the Payment of Retirement Annuities or Pensions to
Employees. The Board may from time to time make such provision for the payment
of retirement annuities or pensions to the employees of the company including
officers of the company, as in its discretion the Board may deem advisable and
the Board may from time to time adopt and carry out any plan or plans of
providing such annuities or pensions or modify, discontinue or terminate any
such plan as may then be in force. If any such retirement annuity or pension
plan entitles members of the Board to participate as employees of the company,
every member of the Board shall be entitled to vote upon any matter relating to
the adoption, administration, carrying out, modification, discontinuance or
termination of any such plan. The Board shall have power to appropriate funds
of the company to defray, in whole or in part, the cost of providing any such
retirement annuities or pensions which may be based upon services rendered by
employees prior to the date of establishment or modification of such plan and
upon services to be rendered thereafter prior to the retirement date provided
therein and may obligate the company to make payments toward defraying any such
expenses over a period of years, subject always to the power of the Board in its
discretion to modify, discontinue and terminate any such plan to the extent then
permitted in existing tax or other laws. The Board shall have full power in its
discretion to provide for the administration of any such retirement annuity or
pension plan and the investment and reinvestment of funds therein by an
insurance company, trustee, or other agency under such terms and conditions as
the Board may deem advisable or to provide for the administration of such plan
and the investment and reinvestment of the funds therein by the company. The
Board shall have full power in its discretion to delegate to such committees,
individuals or independent consultants such part of the carrying out of such
plan as in its discretion it may deem advisable.
12. Meetings of the Board; Quorum and Manner of Acting. The Board of
Directors may meet and organize immediately after and at the place where the
annual meeting of stockholders is held, without notice of such meeting, provided
a majority of the whole Board shall be present. Regular meetings of the Board
may be held without notice at such time and place as from time to time may be
determined by the Board. Special meetings of the Board or of any Committee
thereof may be called by the Chairman of the Board of Directors, the Chairman of
the Executive Committee, a Vice Chairman or the President and shall be called by
the Secretary or, in his absence, an Assistant Secretary, on the written request
of any two directors. Notice of any special meeting of the Board or any
Committee thereof shall be mailed to each director, or each Committee member,
including alternates as the case may be, addressed to him at his residence or
usual place of business, not later than the second day before the day on which
the meeting is to be held, or shall be sent to him at such place by telegraph,
or be delivered personally, or by telephone, not later than the day before the
day on which the meeting is to be held. Notice of any meeting of the Board or
of any Committee need not be given, however, to any director, if waived by him
in writing, either before or after such meeting be held, or if he shall be
present at the meeting; and any meeting of the Board of Directors or of any
Committee shall be a legal meeting without any notice thereof having been given,
if all the members shall be present thereat. A majority of the directors in
office at the time of any regular or special meeting of the Board or any
Committee thereof shall be present in person at such meeting in order to
constitute a quorum for the transaction of business. Any one or more directors
or Committee members may participate in any meeting of the Board or any
Committee thereof by means of a conference telephone or similar communications
equipment permitting all persons participating in such meeting to hear each
other at the same time, participation by such means to constitute presence in
person at such meeting. Except as otherwise required by statute or by the
Preliminary Certificate of Consolidation forming this corporation or other
certificate filed pursuant to law or by the By-Laws, the act of a majority of
the directors or Committee members present at any such meeting at which a quorum
is present shall be the act of the Board of Directors or any Committee thereof.
In the absence of a quorum, a majority of the directors or Committee members
present may adjourn the meeting from time to time until a quorum be had. Notice
of any adjourned meeting need not be given. Action by the Board or any
Committee thereof may be taken without a meeting provided that all members of
the Board or Committee consent in writing to the adoption of a resolution
authorizing such action, such resolution and written consent thereto by the
directors or Committee members to be filed with the minutes of the proceedings
of the Board or Committee.
13. Directors' Fees. In consideration of his serving in such capacity, each
director of the corporation, other than directors who are officers of the
corporation or any of its subsidiary companies, shall be entitled to receive an
annual fee in such amount and payable in such installments, as the Board of
Directors, by vote of a majority of the whole Board, may from time to time
determine. The Board of Directors shall also have authority to determine, from
time to time, the amount of compensation which shall be paid to its members for
attendance at meetings of any committee of the Board as well as to any director
rendering special services to the corporation.
ARTICLE IV.
Officers
1. Officers. The elected officers of the corporation shall be a Chairman of
the Board of Directors (who shall be a director), a Chairman of the Executive
Committee, one or more Vice Chairmen, a President or one or more Sector
Presidents, a Controller, a General Counsel, a Secretary and a Treasurer. The
Board of Directors may elect or appoint an Honorary Chairman of the Board of
Directors, an Honorary Vice Chairman of the Board of Directors, an Honorary
Chairman of the Executive Committee, one or more Honorary Vice Presidents, and
corresponding Officers Emeriti: and either the Board of Directors or the
Executive Committee may elect or appoint one or more Executive Vice Presidents,
one or more Senior Vice Presidents, one or more Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, one or more Assistant
Controllers, and such other assistant officers and agents as, from time to time,
may appear to be necessary or advisable in the conduct of the affairs of the
Corporation. Either the Board of Directors or the Executive Committee may
designate one or more officers or assistant officers as the principal financial
officer of the corporation or the principal accounting officer of the
corporation. The same person may be elected or appointed to two or more offices
except that no person shall simultaneously hold the offices of President or
Sector President and Secretary. So far as practicable, all elected officers
shall be elected at the organization meeting of the Board, in each year, and
shall hold office until the organization meeting of the Board in the next
subsequent year and until their respective successors are chosen; but any
officer, elected or appointed, may be removed at any time, either for or without
cause, by vote of a majority of the whole Board of Directors, at any meeting.
All officers shall hold office during the pleasure of the Board. If any vacancy
occurs in any office, the Board of Directors or the Executive Committee, as
provided above, may elect or appoint a successor to fill such vacancy for the
remainder of the term.
2. Chairman of the Board of Directors. The Chairman of the Board of Directors
shall preside, when present, at all meetings of the Board of Directors and of
the shareholders and at all meetings of the Executive Committee in the absence
of a chairman of such Committee appointed by the Board. The Chairman of the
Board of Directors shall be the chief executive officer of the corporation and,
under the direction of the Board of Directors, shall have general management,
direction and superintendence of the business and affairs of the corporation.
He shall have such further powers and duties as may be given to him by the Board
of Directors or the Executive Committee.
3. Chairman of the Executive Committee. The Chairman of the Executive
Committee shall preside, when present, at all meetings of the Executive
Committee. He shall act in a general consultative and advisory capacity to the
Chairman of the Board of Directors and shall have such further powers and duties
as may be given to him by the Board of Directors, the Executive Committee, or
the Chairman of the Board of Directors.
4. Vice Chairmen. The Vice Chairmen shall perform, in the absence or
incapacity of the Chairman of the Board of Directors and the Chairman of the
Executive Committee or when so directed by either, the duties of such officer.
They shall have such further powers and duties as may be given them by the Board
of Directors, the Executive Committee, the Chairman of the Board of Directors or
the Chairman of the Executive Committee.
5. President. The President shall be the principal operating officer of the
corporation and, under the direction of the Chairman of the Board of Directors,
shall have superintendence of the business, properties and affairs of the
corporation. He shall have such further powers and duties as may be given him by
the Board of Directors, the Executive Committee, or the Chairman of the Board of
Directors. In the absence or incapacity of the Chairman of the Board of
Directors, the Chairman of the Executive Committee and the Vice Chairmen, he
shall perform the duties of those officers.
6. Sector President. A Sector President shall, under the direction of the
Chairman of the Board of Directors, have superintendence of such segments of the
business, properties and affairs of the Corporation and such further powers and
duties as may be given or assigned to him by the Board of Directors, the
Executive Committee, the Chairman of the Board of Directors or the Chairman of
the Executive Committee. The Sector Presidents acting together shall constitute
the office of the President and in the absence of a President shall be the chief
operating officers of the Corporation.
7. Executive Vice Presidents. The Executive Vice Presidents shall perform
such duties and shall have such powers as may be given them by the Board of
Directors, the Executive Committee, the Chairman of the Board of Directors, the
Chairman of the Executive Committee, a Vice Chairman or the President or a
Sector President.
8. Senior Vice Presidents. The Senior Vice Presidents shall perform such
duties and shall have such powers as may be given them by the Board of
Directors, the Executive Committee, the Chairman of the Board of Directors, the
Chairman of the Executive Committee, the Vice Chairmen or the President or a
Sector President. From time to time one of the Senior Vice Presidents may be
designated as the Senior Vice President for Finance. The Senior Vice President
for Finance may hold any other office in the corporation.
9. Vice Presidents. The Vice Presidents shall perform such duties and shall
have such powers as may be given them by the Board of Directors, the Executive
Committee, the Chairman of the Board of Directors, the Chairman of the Executive
Committee, the Vice Chairmen, the President or a Sector President, or an
Executive Vice President.
10. Treasurer. The Treasurer shall have the care and custody of the corporate
funds and securities. He shall deposit all moneys and other valuable effects in
the name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation in the manner ordered by the Board He shall upon request render an
account of all his transactions as Treasurer to the Board of Directors. He
shall, at all reasonable hours, exhibit his books and accounts to any director
upon application. He or an Assistant Treasurer or such other officers,
directors or agents as may be designated by the Board of Directors shall endorse
checks, notes or drafts payable to the order of the corporation and sign and
countersign checks, drafts and orders for the payment or withdrawal of moneys or
securities on deposit in the corporate accounts in such manner as the Board may
direct. He shall have such further powers and duties as may be given him by the
Board of Directors, the Executive Committee, the Chairman of the Board of
Directors, the Chairman of the Executive Committee, a Vice Chairman, or the
President.
11. Secretary. The Secretary shall keep the minutes of the meetings of the
Board of Directors and of the Executive Committee and of the stockholders. He
shall attend to the giving and serving of all notices of the corporation. He
shall affix the seal of the corporation to all certificates of stock, except in
cases where the transfer agent of the corporation is authorized to affix the
seal. He shall have charge of the stock certificate books, other than those in
the hands of the transfer agent, and such other books and papers as the Board
may direct. He shall attend to such correspondence as may be assigned to him,
and perform all other duties incidental to his office. He shall keep a stock
record containing the names, alphabetically arranged, of all persons who are
stockholders of the corporation, showing their places of residence, the number
of shares of stock held by them respectively, and the time when they became
owners. He shall have such further powers and duties as may be given him by the
Board of Directors, the Executive Committee, the Chairman of the Board of
Directors, the Chairman of the Executive Committee, a Vice Chairman or the
President.
12. General Counsel. The General Counsel shall be the legal adviser of the
corporation. The General Counsel may hold any other office in the corporation.
13. Controller. The Controller shall be responsible for and have active
control of all matters pertaining to the accounts of the corporation. He shall
audit all payrolls and vouchers and shall direct the manner of certifying the
same; shall supervise the manner of keeping all vouchers for payments and all
other documents relating to such payments; shall receive, audit and consolidate
all operating and financial statements of the corporation and its subsidiaries;
and shall have the care, custody and supervision of the books of account of the
corporation. He shall, at all reasonable hours, exhibit his books and accounts
to any director upon application. He shall, upon request, render an account of
the financial condition of the corporation to the Board of Directors. He shall
have such further powers and duties as may be given him by the Board of
Directors, the Executive Committee, the Chairman of the Board of Directors, the
Chairman of the Executive Committee, a Vice Chairman or the President.
14. Assistant Secretaries. Assistant Secretaries shall perform the duties of
the Secretary in the absence of the Secretary, and shall have such further
powers and duties as may be given to them by the Board of Directors, the
Executive Committee, the Chairman, the Chairman of the Executive Committee, a
Vice Chairman, the President or the Secretary.
15. Assistant Treasurers. Assistant Treasurers shall perform the duties of the
Treasurer in the absence of the Treasurer, and shall have such further powers
and duties as may be given to them by the Board of Directors, the Executive
Committee, the Chairman, the Chairman of the Executive Committee, a Vice
Chairman, the President or the Treasurer.
16. Assistant Controllers. Assistant Controllers shall perform the duties of
the Controller in the absence of the Controller, and shall have such further
powers and duties as may be given to them by the Board of Directors the
Executive Committee, the Chairman, the Chairman of the Executive Committee, a
Vice Chairman, the President or the Controller.
17. Emeriti and Honorary Officers. No individual elected or appointed to an
Honorary Office or an Emeritus Office pursuant to this Article IV shall have as
a result of such election or appointment any rights, duties or responsibilities
with respect to the business or affairs of this corporation as determined by law
or the By-Laws of this corporation.
ARTICLE V.
Capital Stock
1. Payments. All payments for stock of the corporation shall be received by
the Treasurer. Failure to pay an installment upon a stock subscription when
required to be paid by the Board of Directors shall work a forfeiture of the
shares of stock in arrears, pursuant to Section 503 of the Business Corporation
Law of the State of New York.
2. Certificates of Stock. The stock of the corporation shall be represented
by certificates signed by the Chairman of the Board of Directors, the Chairman
of the Executive Committee, a Vice Chairman or the President and the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the corporation or a facsimile thereof. Where any such
certificate is manually countersigned by either a transfer agent or a registrar
(other than the corporation itself or its employee) any other signature on such
certificate may be a facsimile, engraved, stamped or printed. In case any
officer who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer before such certificate was
issued, it may be issued by the corporation with the same effect as if he were
such officer at the date of issue.
3. Transfer Agents and Registrars. The Board of Directors may, in its
discretion, appoint responsible banks or trust companies in the Borough of
Manhattan, in the City of New York and in such other cities or states as the
Board may deem advisable, to act as transfer agents or registrars of the stock
of the corporation; and, upon such appointments being made, no stock
certificates shall be valid until countersigned by one of such transfer agents
and registered by one of such registrars.
4. Transfers. Transfers of stock shall be made on the books of the
corporation only by the person named in the certificate or by attorney lawfully
constituted in writing and upon surrender and cancellation of a certificate or
certificates for a like number of shares of the same class of stock, with duly
executed assignment and power of transfer endorsed thereon or attached thereto,
and with such proof of the authenticity of the signatures as the corporation or
its agents may reasonably require.
5. Determination of Stockholders of Record for Certain Purposes. The Board of
Directors may fix a time, not exceeding sixty days preceding the date fixed for
the payment of any dividend, or the making of any distribution or for the
delivery of evidences of rights or evidences of interest arising out of any
change, conversion or exchange of capital stock, as a record time for the
determination of the stockholders entitled to receive any such dividend,
distribution, rights or interest. The Board of Directors at its option, in lieu
of so fixing a record time, may prescribe a period not exceeding sixty days
prior to the date for such payment, distribution or delivery during which no
transfer of stock on the books of the corporation may be made.
6. Stockholders of Record Recognized. The corporation shall be entitled to
treat the holder of record of any stock certificate as the holder in fact and
owner of the shares represented thereby and shall not be bound to recognize any
equitable claim to or interest in such stock on the part of any other person,
whether or not it shall have express or other notice thereof save as expressly
provided by the laws of New York.
6. Lost Certificate. In case any certificate of stock shall be lost or
destroyed, the Board of Directors, in its discretion, may authorize the issue of
a substitute certificate in place of the certificate so lost or destroyed, and
may cause such substitute certificate to be countersigned by the appropriate
transfer agent and registered by the appropriate registrar; provided, that, in
each such case, the applicant for a substitute certificate shall furnish to the
corporation and to such of its transfer agents and registrars as may require the
same, evidence to their satisfaction, in their discretion, of the loss or
destruction of such certificate and of the ownership thereof and also such
security and indemnity as may by them be required.
ARTICLE VI.
Inspectors of Election
1. Inspectors of Election. At every meeting of stockholders the vote shall be
conducted by two inspectors of election elected at the last annual meeting of
stockholders or, if not so elected, appointed for that purpose by the Board of
Directors or, if not so elected or appointed, elected by a per capita vote of
the stockholders present at the meeting in person or by proxy; and all questions
respecting the qualification of voters, the validity of the proxies and the
acceptance or rejection of votes shall be decided by such inspectors who, before
entering upon the discharge of their duties, shall be duly sworn faithfully to
execute the duties of inspectors at such meeting with strict impartiality, and
according to the best of their ability. If any inspector elected or appointed to
act at any meeting shall be absent or refuse to act, or if his office shall
become vacant, the stockholders present at the meeting in person or by proxy
shall, by a per capita vote, appoint another inspector to act in his place.
ARTICLE VII.
Seal
1. Seal. The seal of the corporation shall be in the form of a circle and
shall bear the name of the corporation followed by the words "Corning, NY", the
year of its incorporation, and in the center of the circle the words "Founded
1851".
2. Affixing and Attesting. The seal of the corporation shall be in the
custody of the Secretary, who shall have power to affix it to the proper
corporate instruments and documents, and who shall attest it. In his absence it
may be affixed and attested by an Assistant Secretary or affixed and attested by
the Treasurer or an Assistant Treasurer. The transfer agent of the stock of the
corporation may have a facsimile thereof and affix the same to stock
certificates issued by it.
ARTICLE VIII.
Miscellaneous
1. Signatures to Negotiable Paper. All checks, drafts, notes and other
negotiable instruments of the corporation shall be signed, countersigned and
endorsed by such directors, officers and agents as the Board of Directors may
designate from time to time.
2. Delegation of Duties. In the absence of any officer, or for any other
reason, the Board of Directors may delegate the powers or duties of an officer
to another officer or director.
3. Dividends. Dividends upon the shares of the capital stock of the
corporation may be declared and paid out of the net assets of the corporation in
excess of its capital, as often and at such times as the Board of Directors may
determine, subject to the limitations set forth in the Preliminary Certificate
of Consolidation forming this corporation or any certificate filed pursuant to
law.
4(a). Indemnification of Directors and Officers. To the full extent authorized
or permitted by law, the corporation shall indemnify any person made, or
threatened to be made, a defendant to an action or proceeding, whether civil or
criminal, including an action by or in the right of the corporation, by reason
of the fact that he, his testator or intestate, is or was a director or officer
of the corporation, or is serving or served as an officer or director of any
other corporation, joint venture, trust, employee benefit plan or other
enterprise, in which the corporation has a financial interest as an investor or
creditor, and such person is serving or served at the express request of and on
behalf of this corporation. Without limitation of the foregoing, such
indemnification shall include indemnification against all judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees
and costs of investigation or defense, reasonably incurred by any such person in
connection with any such action or proceeding or any appeal therein, and which
expenses have not been recouped by him in any other manner, unless a judgment or
other final adjudication adverse to the director or officer establishes that his
acts were committed in bad faith, or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated, or that he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled; provided that no such indemnification shall be required
with respect to any settlement or other nonadjudicated disposition of any
threatened or pending action or proceeding unless the corporation has given its
prior consent to such settlement or other disposition. If any unexhausted right
of recoupment shall exist, payment of this indemnification shall be conditioned
upon its release or assignment to the corporation.
4(b). Indemnification Procedure; Expenses. A person who has been successful,
on the merits or otherwise, in the defense of a civil or criminal action or
proceeding of the character described in Section 4(a) of this Article VIII shall
be entitled to indemnification as provided therein. Except as provided in the
preceding sentence and unless ordered by a court, indemnification hereunder
shall be made by the corporation if, and only if, authorized in the specific
case: (i) by the board of directors of the corporation acting by a quorum
consisting of directors who are not parties to such action or proceeding upon a
finding that the director or officer has met the standard of conduct set forth
in Section 4(a) of this Article VIII, or (ii) if such a quorum is not obtainable
or, even if obtainable, a quorum of disinterested directors so directs: (a) by
the board of directors of the corporation upon the opinion in writing of
independent legal counsel that indemnification is proper in the circumstances
because the standard of conduct set forth in Section 4(a) of this Article VIII
has been met by such director or officer, or (b) by the shareholders upon a
finding that the director or officer has met the applicable standard of conduct
set forth in such Section. Upon the request of any person entitled to
indemnification pursuant to Section 4 of this Article VIII, the corporation
shall pay promptly to such person all expenses reasonably incurred by such
person in connection with an action or proceeding with respect to which such
person is, in the absence of a final adjudication adverse to such person,
entitled to indemnification hereunder; provided that such payment shall be
subject to the receipt by the corporation of that person's undertaking to repay
the portion of such expenses to which it is finally determined that such person
is not entitled; and provided further that no such payment shall be made if a
majority of disinterested directors of the corporation, provided such majority
constitutes a quorum of the Board, or if there is not a quorum of disinterested
directors, independent legal counsel not a party to such action or proceeding
and not regular counsel to the corporation, determines in good faith that it is
likely that such person will be found not to be entitled to such indemnification
and will not in that event fulfill his undertaking to repay such advances. A
person entitled to indemnification shall cooperate in good faith with any
request by the corporation that common counsel be utilized by parties to an
action or proceeding who are similarly situated unless to do so would be
inappropriate due to actual or potential differing interests between or among
such parties.
4(c). Contractual Article. Section 4 of this Article VIII shall be deemed to
constitute a contract between the corporation and a person entitled to
indemnification and may not, without the consent of such person, be amended to
effect adversely such person with respect to any event, act or omission
occurring or allegedly occurring prior to the end of the term of office he is
serving when such amendment is adopted. The corporation is authorized to enter
into agreements with any of its directors or officers extending rights to
indemnification and advancement of expenses to such person to the fullest extent
permitted by applicable law, but the failure to enter into any such agreement
shall not affect or limit the rights of such person pursuant to Section 4 of
this Article VIII, it being expressly recognized that all directors and officers
of the corporation, by serving as such after the adoption hereof, are acting in
reliance hereon and the corporation is estopped to contend otherwise.
4(d). Insurance. The corporation may, but need not, maintain insurance at its
expense insuring persons entitled to indemnification under Section 4 of this
Article VIII against liabilities whether or not such liabilities are
indemnifiable pursuant to Section 4 of this Article VIII.
4(e). Non-exclusivity. The indemnification provided by Section 4 of this
Article VIII shall not be deemed exclusive of any other rights to which a
director or officer of the corporation may be entitled.
4(f). Amendment to Conform to Business Corporation Law. If and to the extent
that any provision of Section 4 of this Article VIII is inconsistent with
Article 7 of the Business Corporation Law of the State of New York, such
provision shall be deemed to have been amended to the extent necessary to make
it consistent with such Article 7.
5. Signatures to Contracts. Except as otherwise prescribed by the Board of
Directors, the Chairman of the Board of Directors, the Chairman of the Executive
Committee, the Vice Chairmen, the President, any Sector President, any Executive
Vice President, any Senior Vice President or any other Vice President shall sign
and execute all contracts, instruments and documents in the name of the
corporation.
ARTICLE IX.
Amendments
1. Amendments.
(a) The affirmative vote of the holders of record of outstanding shares
representing at least eighty percent (80%) of the voting power of all the
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors shall be required to amend, alter or
repeal, or adopt any provision or provisions inconsistent with, any provision of
Sections 1(a) and (b), 4, 5, 6 and 7 of Article III of these By-Laws and this
Section 1(a); provided, however, that this Section 1(a) shall not apply to, and
such eighty percent (80%) vote shall not be required for, any amendment,
alteration, repeal, or adoption of any inconsistent provision or provisions,
declared advisable by the Board of Directors by the affirmative vote of two-
thirds of the whole Board of Directors.
(b) Subject to the provisions of Section 1(a) of this Article IX, these By-Laws
may be altered or repealed, in any particular, and new By-Laws, not inconsistent
with any provision of the Preliminary Certificate of Consolidation forming this
corporation or any certificate filed pursuant to law or any provision of law,
may be adopted, either by the affirmative vote of the holders of record of a
majority in number of the outstanding shares of stock entitled to vote, given at
an annual meeting, or at any special meeting the notice of which shall include
the form of the proposed amendment or repeal or of the proposed new By-Laws, or
a summary thereof, or by vote of a majority of the whole Board of Directors,
given at any meeting thereof, the notice of which shall include the form of the
proposed amendment or repeal or of the proposed new By-Laws, or a summary
thereof.
2. Repeal of Old By-Laws. All prior By-Laws of the Company are hereby
repealed.
- - - - - - - - - - - - - - - - - - - - -
The undersigned Secretary of CORNING INCORPORATED, a corporation of the
State of New York, HEREBY CERTIFIES that the foregoing is a true and complete
copy of the By-Laws of the said corporation, as at present in force and effect.
WITNESS, the hand of the undersigned and the seal of the said corporation,
this ___ day of ______________________________.
______________________________________
Secretary
<TABLE>
<CAPTION>
CORNING INCORPORATED AND SUBSIDIARY COMPANIES Exhibit #12
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
DIVIDENDS
(Dollars in millions, except ratios)
Nine Months Ended Fiscal Year Ended
------------------- ------------------------------------------
Sept. 30, Sept. 30, Dec. 31, Dec. 31, Dec. 31, Jan. 1, Jan. 2,
1998 1997 1997 1996 1995 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income before taxes on income $280.7 $482.9 $629.2 $455.9 $389.4 $286.3 $ 93.7
Adjustments:
Share of earnings (losses)
before taxes of 50% owned
companies 110.5 94.0 111.5 130.3 95.2 89.0 (137.0)
Gain (loss) before taxes
of greater than 50% owned
unconsolidated subsidiary 0.7 (3.1) (4.0) (3.1)
Distributed income of less
than 50% owned companies
and share of loss if debt
is guaranteed (0.3) 2.1 4.5
Amortization of capitalized
interest 10.8 10.8 16.6 11.8 9.6 13.3 13.0
Fixed charges net of
capitalized interest 75.3 109.2 141.9 105.9 82.6 128.8 91.4
------ ------ ------ ------ ------ ------ ------
Earnings before taxes and
fixed charges as adjusted $477.0 $696.9 $899.2 $704.6 $573.7 $515.5 $ 62.5
====== ====== ====== ====== ====== ====== ======
Fixed charges:
Interest incurred $ 77.4 $ 73.2 $ 96.7 $ 73.6 $ 65.4 $ 64.9 $ 51.1
Share of interest incurred
of 50% owned companies and
interest on guaranteed
debt of less than 50%
owned companies 12.5 39.8 51.0 38.7 10.2 60.8 40.9
Interest incurred by greater
than 50% owned unconsolidated
subsidiary 0.7 0.8 0.8
Portion of rent expense which
represents interest factor 14.0 12.1 15.9 12.1 13.3 10.8 7.3
Share of portion of rent
expense which represents
interest factor for 50%
owned companies 4.2 2.7 3.8 1.4 2.7 9.4 9.1
Portion of rent expense which
represents interest factor
for greater than 50% owned
unconsolidated subsidiary 0.1 0.1
Amortization of debt costs 2.2 1.6 1.6 2.2 (0.1) 0.6 0.4
------ ------ ------ ------ ------ ------ ------
Total fixed charges 110.3 129.4 169.0 128.0 92.2 147.4 109.7
Capitalized interest (35.0) (20.2) (27.1) (22.1) (9.6) (18.6) (18.3)
------ ------ ------ ------ ------ ------ ------
Total fixed charges net of
capitalized interest $ 75.3 $109.2 $141.9 $105.9 $ 82.6 $128.8 $ 91.4
====== ====== ====== ====== ====== ====== ======
Preferred dividends:
Preferred dividend
requirements $ 11.5 $ 11.5 $ 15.3 $ 15.7 $ 15.7 $ 8.2 $ 2.1
Ratio of pre-tax income to
income before minority
interest and equity
earnings 1.4 1.5 1.5 1.5 1.4 1.4 1.0
------ ------ ------ ------ ------ ------ ------
Pre-tax preferred dividend
requirement 16.1 17.3 23.0 23.6 22.0 11.5 2.1
Total fixed charges 110.3 129.4 169.0 128.0 92.2 147.4 109.7
------ ------ ------ ------ ------ ------ ------
Fixed charges and pre-tax
preferred dividend
requirement $126.4 $146.7 $192.0 $151.6 $114.2 $158.9 $111.8
====== ====== ====== ====== ====== ====== ======
Ratio of earnings to combined
fixed charges and preferred
dividends 3.8x 4.8x 4.7x 4.7x 5.0x 3.2x -
====== ====== ====== ====== ====== ====== ======
Earnings did not cover combined fixed charges and preferred dividends by $49.4
in the fiscal year ended January 2, 1994.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 23,800
<SECURITIES> 69,200
<RECEIVABLES> 593,500
<ALLOWANCES> 10,400
<INVENTORY> 450,500
<CURRENT-ASSETS> 1,280,800
<PP&E> 2,457,200
<DEPRECIATION> 1,891,900
<TOTAL-ASSETS> 4,760,300
<CURRENT-LIABILITIES> 857,100
<BONDS> 1,093,300
365,500
18,400
<COMMON> 748,400
<OTHER-SE> 656,800
<TOTAL-LIABILITY-AND-EQUITY> 4,760,300
<SALES> 2,557,200
<TOTAL-REVENUES> 2,610,600
<CGS> 1,595,200
<TOTAL-COSTS> 1,595,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15,299
<INTEREST-EXPENSE> 43,800
<INCOME-PRETAX> 280,700
<INCOME-TAX> 84,100
<INCOME-CONTINUING> 223,200
<DISCONTINUED> 66,500
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 289,700
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.95
</TABLE>
