SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported) April 17, 2000
CORNING INCORPORATED
(Exact name of registrant as specified in its charter)
New York 1-3247 16-0393470
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Riverfront Plaza, Corning, New York 14831
(Address of principal executive offices) (Zip Code)
(607) 974-9000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
<PAGE>
This Form 8-K/A amends Item 2 and Item 7 of the Form 8-K previously filed with
the Securities and Exchange Commission on February 2, 2000 by including a
description of the transaction and the financial statements and pro forma
financial information referred to below.
Item 2. Acquisition or Disposition of Assets
On February 2, 2000, pursuant to the terms of the Master Sale and Purchase
Agreement dated December 8, 1999 between Corning Incorporated, a New York
corporation ("Corning"), and Siemens A.G., Corning acquired the worldwide
optical cable and hardware businesses of Siemens A.G. which included Siemens'
optical cable and equipment businesses and the remaining 50% of Siecor
Corporation and Siecor GmbH for $1.4 billion (the Siemens transaction). This
purchase price includes $120 million of assumed debt and $145 million of
contingent performance payments payable, if earned, over a four-year period.
Corning financed the transaction through the issuance of euro-denominated debt
and common equity.
Assets in use by the businesses acquired consist of, and are not limited to,
accounts receivable, inventory, fixed and tangible property (including, without
limitation, all machinery, equipment, supplies, tools, furniture, fixtures,
hardware and spare parts), intangible assets and contracts. Corning currently
anticipates that substantially all of the assets acquired in the transaction
will continue to be used in Corning's ongoing operations.
Item 7. Financial Statements, Pro Forma Information and Exhibits
(a) Financial Statements of Businesses Acquired
Prior to the Siemens transaction, Corning consolidated Siecor Corporation in its
financial statements and recorded its investment in Siecor GmbH on the equity
method. The historical financial statements included in this filing represent
the combined operations of Siecor GmbH and the worldwide cable and equipment
business owned by Siemens A.G. as of and for its most recent fiscal year ended
September 30, 1999. The legal entity structure of these operations is described
in footnote 1 to the audited combined financial statements. These financial
statements have been prepared in accordance with German Generally Accepted
Accounting Principles and have been derived from the accounting records of
Siemens A.G.
(1) Report of Independent Auditors
(2) Combined balance sheet as of September 30, 1999 and statement of income
for the year ended September 30, 1999
(3) Notes to the combined financial statements
(b) Pro Forma Financial Information
(1) Unaudited pro forma combined statement of income for the year ended
December 31, 1999
(2) Unaudited pro forma combined balance sheet as of December 31, 1999
(3) Notes to unaudited pro forma combined financial statements
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities 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
Date: April 17, 2000 By /s/ KATHERINE A. ASBECK
Katherine A. Asbeck
Vice President and Controller
<PAGE>
Item 7(a)
Lichtwellenleiter Group of Siemens AG
Combined Financial
Statements
as of and for the year ended
30 September 1999
<PAGE>
Contents
Independent Auditors' Report
Combined Balance Sheet and Statement of Income
Notes to the Combined Financial Statements
<PAGE>
Independent Auditors' Report
The Management
Lichtwellenleiter Group of Siemens AG
We have audited the accompanying combined balance sheet of the Lichtwellenleiter
Group of Siemens AG ("LWL Group") as of September 30, 1999, and the related
combined statement of income for the year ended September 30, 1999. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in Germany, LWL Group's local standards, that are substantially equivalent to
auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the LWL Group as of
September 30, 1999, and the results of its operations for the year ended
September 30, 1999 in conformity with generally accepted accounting principles
in Germany.
As discussed in note 1, the combined financial statements represent the LWL
Group businesses of Siemens AG which were acquired by Corning Incorporated with
effect from February 2, 2000. The combined financial statements referred to
above have been prepared as if the LWL Group was a separate legal entity for the
period presented.
As discussed in note 21, accounting principles generally accepted in Germany
vary in certain significant respects from accounting principles generally
accepted in the United States.
Munich, Germany
March 31, 2000
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
Dr. Schramm Bauer
Wirtschaftsprufer Wirtschaftspruferin
<PAGE>
Lichwellenleiter Group of Siemens AG
Combined Balance Sheet
as of 30 September 1999 in thousands of Deutsche Mark
<TABLE>
<CAPTION>
NOTES
Combined Balance Sheet
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents 18.913
Marketable securities 1.259
Accounts receivable, trade (5) 359.136
Accounts receivable, other
affiliates (5) 29.600
Inventories, net (6) 146.350
Other current assets and
prepaid expenses (5) 20.849
Total current assets 576.107
Deferred taxes 821
Fixed assets (7)
Intangible assets 538
Tangible assets 275.091
Financial assets 28.174
Total non-current assets 304.624
Total assets 880.731
Liabilities and stockholders'
equity
Current liabilities
Notes payable to banks 928
Trade accounts payable 81.328
Income tax payable 21.595
Accounts payable other
affiliates 492
Accounts payable to
Siemens AG (8) 22.931
Accrued expenses (9) 87.290
Other current liabilities (8) 60.932
Total current liabilities 275.496
Long-term debt (8) 11.627
Pensions plan accrual 92.486
Total long-term liabilities 104.113
Total liabilities 379.609
Special reserves, to be taxed
in later years (10) 25.008
Stockholders' equity
Common stock 87.378
Additional paid-in capital 59.823
Revenue reserves 15.512
Minority interests (11) 54.032
216.745
ZF Konto (12) 219.775
Retained earnings brought
forward 4.079
Net income 35.349
Translation losses and gains 166
Retained earnings 39.594
Total stockholders' equity 476.114
Total liabilities and
stockholders' equity 880.731
</TABLE>
See accompanying notes to the combined financial statements.
<PAGE>
Lichwellenleiter Group of Siemens AG
Combined Statement of Income
for the year ended 30 September 1999 in thousands of Deutsche Mark
<TABLE>
<CAPTION>
NOTES
Combined Statement of Income
<S> <C> <C>
Net sales (16) 1.383.297
Cost of goods sold 1.094.897
Gross profit 288.400
Research and development expenses 51.435
Selling and marketing expenses 166.799
General and administration expenses 39.230
Amortization of goodwill 30
Other income (14) 88.549
Other expenses (15) 13.061
Earnings before interests and taxes 106.394
Interest income 3.730
Interest expense 6.596
Profit before tax 103.528
Income taxes 32.867
Net income before minority interests 70.661
Minority interests -35.312
Net income 35.349
</TABLE>
See accompanying notes to the combined financial statements.
<PAGE>
Lichtwellenleiter Group of Siemens AG
Notes to Combined Financial Statements as of 30 September 1999 and for the year
then ended
(1) Description of the Lichtwellenleiter Group
On 7/8 December 1999, Siemens AG, Berlin and Munich, as the seller and Corning
Incorporated, New York, USA, as the purchaser signed a Master Sale and Purchase
Agreement for the sale of the Lichtwellenleiter Group. The transaction was
completed on February 2, 2000.
The Lichtwellenleiter Group (herein after referred to as LWL Group) consists of
the following operations:
. optical fiber communications cable and related operations;
. copper cable communications cable and related operations;
. cable related hardware and equipment operations; and
. optical fiber operations.
The LWL Group is a business of Siemens AG and does not have a legal group
structure and no entity within the group controls the LWL Group.
The combined financial statements of LWL Group includes the following entities
directly or indirectly wholly owned by Siemens AG:
. the German LWL line of business and copper communication cable business of
Siemens AG, Germany (which has been transferred to SCC Special Communications
Cables GmbH & Co. KG as of 1 January 2000);
. RXS Kabelgarnituren GmbH, Hagen, Germany (which has been transferred to RXS
Kabelgarnituren GmbH & Co. KG);
. Norddeutsche Seekabelwerke GmbH, Nordenham, Germany (which has been
transferred to Norddeutsche Seekabelwerke GmbH & Co. KG);
. Teleco Cavi S.p.A., Italy;
. RXS Morel Accessoires de Cables S.A., France;
. LWL line of business of Siemens S.A. PCFO, Argentina;
. LWL line of business of Siemens Ltd., Australia and
. LWL line of business of NSW Corporation, USA.
Also included are
. Siecor Fertigungsgesellschaft fur Lichtwellenleiter mbH & Co. KG, Neustadt
bei Coburg, Germany and
. Siecor Gesellschaft fur Lichtwellenleiter mbH, Neustadt bei Coburg,
Germany.
Shareholders of these companies are Siemens AG and Corning Inc., New York, each
with 50% of equity, but Siemens AG holds the majority of the voting rights.
<PAGE>
The following companies are owned by Siemens AG or a subsidiary of Siemens AG
and are allocated to the LWL Group as investments only:
Shares
%
------
. Fibre Optic Cables and Accessories Ltd., Vietnam 51,0
. PT Siemens Kabel Optik, Indonesia 51,0
. Egyptech Telecom Cables & Networks Company S.A.E., Egypt 33,3
. Tele-Cables A.E. Hellenic Communication, Greece 49,0
. Siemens Fibre Optik Kabolari Ltd. Sirketi, Turkey 100,0
Although the investments in Vietnam, Indonesia and Turkey are investments over
50% shareholding, these companies are not combined according to section 296 Abs.
1 Nr. 2 respectively section 296 Abs. 2 of the German Commercial Code.
(2) Basis of Presentation
The accompanying combined financial statements have been prepared in accordance
with generally accepted accounting principles in Germany ("German GAAP") on a
basis which reflects the combined results of operations and financial position
of the LWL Group as if it was a separate entity for the period presented.
German GAAP does not provide specific guidance on the preparation of combined
financial statements. For the preparation of the combined financial information
the underlying financial statements of the LWL entities have been combined using
the historical costs of the combined entities.
The combined statement of income include charges from Siemens AG to the LWL
Group. These expenses include, but are not limited to, executive functions,
central EDP services, personnel administration, finance services, treasury
management services, litigation support services. Management believes that the
charges received from Siemens AG are reasonable and that the terms of these
services would not materially differ from those among unrelated parties.
For certain businesses which are not legal entities, certain of the assets,
liabilities, income and expenses included in the combined financial statements
cannot be derived in all cases directly from the accounting records and can only
be attributed to the LWL Group by means of allocation and other assumptions by
management. Allocations and other charges are based on either a direct
identification or an allocation of assets, liabilities or expenses based on
factors (i.e. sales, headcount). Management believes that the basis used for
the allocations is appropriate. The actual expenses that would have been
incurred may be different from those allocated amounts.
The accompanying combined financial statements may not necessarily reflect the
financial position and results of operations that would have occurred had the
LWL Group operated as a stand-alone entity on the date and for the period,
indicated.
The combined balance sheet and the combined income statement are presented in a
format similar to US GAAP.
The combined financial statements are presented in TDM, the German abbreviation
of thousand of Deutsche Mark.
(3) Principles of Combination
The financial statements of the entities included in the combined financial
statements are prepared according to uniform principles of accounting and
valuation. For this purpose, the separate financial statements prepared in
accordance with local or international regulations have been restated on a
consistent basis to conform in all material respects to the uniform principles
of accounting and valuation of the Siemens organization, which are in accordance
with German Commercial Code.
<PAGE>
Foreign Currency translation
The financial statements of entities within the LWL Group originally prepared in
currencies other than DM are translated using the year-end exchange rate for the
balance sheet and the average rates of exchange for the year for the income
statement.
Elimination of intercompany transactions
All significant intercompany balances and transactions have been eliminated in
combination.
Profits arising on assets purchased from other entities in the LWL Group and
held in inventories have been eliminated.
Sales between entities in the LWL Group and other income items have been
eliminated in full from the combined income statement by set-off with the
corresponding expenses of the related entity.
(4) Accounting and Valuation Policies
Non-current assets
Acquired intangible assets are recorded at acquisition cost and amortized on a
straight-line basis over periods not exceeding five years, or over the
contractual useful lives of the assets, if longer. Goodwill is amortized over
its estimated useful life or over periods up to 15 years. Goodwill is written
down whenever recovery of the recorded costs is permanently impaired.
Property, plant and equipment is stated at acquisition or production cost less
scheduled depreciation. A definition of production cost is provided under
inventories. Acquisition or production cost is recorded net of applicable
grants from third parties. Maintenance and repairs as well as interest cost are
not capitalized but charged to expense as incurred. Domestic companies
predominantly use the declining balance method of depreciation, switching to the
straight-line method as soon as the latter results in higher depreciation
charges. Depreciation of foreign companies' property, plant and equipment is
generally provided on a straight-line basis. Low value assets are fully
expensed in the year of acquisition.
Estimated useful lives of depreciable assets
- ---------------------------------------------------------------------
Factory and office buildings 20 to 50 years
Other buildings 5 to 10 years
Technical equipment and machinery generally 10 years
Other equipment, plant and office equipment generally 5 years
Equipment leased to customers generally 3 to 5 years
Exceptional depreciation is charged where a decline in value is other than
temporary.
Investments are stated at cost. The carrying amount is reduced to recognize a
decline other than temporary in the value of the investments at the balance
sheet date. Long-term interest-free loans or loans at interest rates which are
below market rates are stated at their discounted cash value.
Current assets
Inventories are carried at the lower of average acquisition or production cost
or current value. In addition to direct materials and direct labour, production
cost includes an appropriate proportion of material and production overheads as
well as production related depreciation charges. Interest on borrowings is not
capitalized within production cost. Inventories include reasonable and
sufficient allowance for risks relating to slow-moving items and technical
obsolescence and for the net realizable values associated with long-term
contracts.
Accounts receivable and miscellaneous assets are stated at their nominal amounts
or cost, or at their market values, if lower. Write-downs on accounts
receivable are provided according to the probability of counter party default
and for discernible country risks. Accounts receivable due after one year which
bear no interest or have interest rates which are below market rates have been
discounted.
Marketable securities included in liquid assets are reported at the lower of
cost or quoted market prices at the balance sheet date.
<PAGE>
Accruals and other liabilities
The accruals for pension plans and transition payments of domestic companies
that provide for the contractual retirement benefits of employees and retirees,
are set up according to actuarial principles under a projected benefit valuation
method pursuant to the German Income Tax Act.
This method assumes that employees earn entitlement to pension benefits from
their entry into employment until retirement, but not before attaining age
thirty, based on equal annual amounts distributed over the employees' present
and future service periods. As a result the accruals for pension plans are
derived using the present value of future pension benefits for which a firm
commitment exists at the balance sheet date, less the present value of
outstanding annual amounts until retirement.
The present value is based on discounted amounts using an assumed rate of
interest of 6%. Increases in pension commitments are reflected in pension
accruals at the present value of benefits earned.
The Company used the updated 1998 mortality tables as a basis for determining
pension accruals. The effects of adopting the new mortality assumptions have
been fully provided for in fiscal year 1999.
Foreign subsidiaries establish accruals for retirement benefits of employees and
retirees according to comparable actuarial principles using applicable local
interest rates, unless the obligations are covered by pension funds.
Other accrued liabilities include reasonable and sufficient allowance for all
perceived risks resulting from uncertain liabilities and for anticipated losses
on uncompleted transactions.
Debt and other liabilities are reported at their repayment amounts.
Taxes
All liabilities or claims relating to current taxes on earnings, capital and
property are reflected in the combined financial statements pursuant to the
relevant tax laws applicable to the individual companies.
To present the LWL Group on a stand alone basis, income taxes were considered on
the basis of a notional tax charge of the respective country.
Deferred taxes for legal entities are provided for the tax effects of temporary
differences between the tax basis of an asset or liability and its reported
amount in the combined financial statements, where appropriate. No deferred
taxes are considered for combined operations which are not legal entities as
these cannot be recovered in the case of a transfer of the business into a new
separate legal company.
Deferred taxes have not been calculated on combination adjustments.
Exchange rate risks
In order to protect itself from exchange rate fluctuation risks, the Siemens
Group enters into forward currency agreements (for hedging purposes only) via
the Corporate Financial Service department of Siemens AG. All balance sheet
items denominated in foreign currency are hedged in full on a Siemens Group
basis, and contracted and planned transactions are hedged up to pre-defined
limits.
Monetary balance sheet items in a foreign currency are stated at the closing
(middle) rate, and the related hedging transactions are valued at their fair
market value. Forward currency agreements entered into for planned sales in the
following year and for other contractual commitments are calculated at their
fair market value. Where forward currency agreements are in an unrealised loss
position, a provision for loss is made. No adjustment is recognized when the
forward currency agreements are in an unrealised profit position.
<PAGE>
Recognition of revenues and expenses
Revenue is recognized when goods are shipped or services are provided and title
passes to the customer. Revenue relating to long-term contracts are recorded
when the contract has been completed (completed contract method) or the customer
has taken delivery of defined part or service (performance milestones).
All research and development costs are expensed as incurred.
Notes to the balance sheet
(5) Accounts receivable and other assets
Accounts receivable and other assets include an amount of TDM 33.254 which is
due in more than one year.
Other assets and prepaid expenses includes primarily tax refund claims,
receivables due from suppliers, and prepaid expenses. Prepaid expenses include
TDM 344 which was paid by Teleco Cavi S.p.A. as a debt discount on a long term
loan.
(6) Inventories
30.09.1999
TDM
----------
Finished goods and merchandise 66.106
Work in process 45.540
Cost of unbilled contracts 77.380
Raw material and supplies 39.970
Advances to suppliers 14.999
Advances received from customers 97.645
-------
146.350
<PAGE>
(7) Fixed assets
<TABLE>
<CAPTION>
At At Net Net
cost cost Accumu- book book Depre-
value Reclassi- value lated value value cia-
01.10. Addi- fica- Dis- 30.09. depreci- 30.09. 30.09. tion
in TDM 1998 tions tions posals 1999 ation 1999 1998 98/99
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Intangible
Assets
1.Licences,
trade marks
and patents,
etc. as well
as licences
to such
rights
and assets 2.282 1.405 0 16 3.671 3.133 538 969 1.836
2.Goodwill 66.737 0 0 0 66.737 66.737 0 30 30
3.Advances
paid on
intangible
assets 574 0 0 574 0 0 0 0 0
--------------------------------------------------------------------
69.593 1.405 0 590 70.408 69.870 538 999 1.866
--------------------------------------------------------------------
Tangible
Assets
1.Land, rights
similar to
land, and
buildings,
including
buildings
on property
owned by
others 148.334 7.318 6.708 1.091 161.269 75.198 86.071 75.307 5.513
2.Technical
equipment
and
machinery 467.601 18.224 15.729 43.508 458.046 347.665 110.381 119.434 38.459
3.Other
equipment,
office
furniture
and
equipment 174.330 22.057 7.890 20.665 183.612 142.655 40.957 37.544 21.882
4.Advances
paid on
fixed
assets,
and
assets
under
construc-
tion 49.854 21.748 -30.327 3.593 37.682 0 37.682 48.260 0
--------------------------------------------------------------------
840.119 69.347 0 68.857 840.609 565.518 275.091 280.545 65.854
--------------------------------------------------------------------
III. Financial
Assets
1.Shares in
group
companies 21.931 526 0 0 22.457 50 22.407 21.881 0
2.Loans in
group
companies 0 0 0 0 0 0 0 0 0
3.Investments
(shares) 4.991 1 0 0 4.992 465 4.527 4.525 0
4.Other
investments
- long term 0 0 0 0 0 0 0 0 0
5.Other
loans 1.189 366 0 249 1.306 66 1.240 1.161 40
-------------------------------------------------------------------
28.111 893 0 249 28.755 581 28.174 27.567 40
-------------------------------------------------------------------
Total 937.823 71.645 0 69.696 939.772 635.969 303.803 309.111 67.760
-------------------------------------------------------------------
</TABLE>
<PAGE>
(8) Liabilities
Long term debt of TDM 11.627 includes an amount of TDM 7.874, which is due after
more than one year. All trade accounts payable and other liabilities are due
within one year.
Accounts payable due to Siemens AG primarily represents financing of the legal
entities of the Siemens LWL Group resulting from cash pooling.
Other current liabilities include primarily wages and salaries of TDM 22.290,
taxes of TDM 14.864 and amounts in respect of social security of TDM 6.245.
(9) Accrued expenses
Accrued expenses include the following:
30.09.1999
TDM
----------
Personnel costs 30.935
Commitments from warranty contracts 4.245
Commitments from completion guarantees 1.167
Delayed performance and contractual penalties 11.137
Warranties 18.248
Losses from contracts 4.096
Licences 1.500
Outstanding invoices 3.160
Severance payments 3.167
Other accruals 9.635
------
87.290
(10) Special reserves, to be taxed in later years
The special reserves represent an adjustment to the fixed assets balance
according to German tax law due to higher depreciation rates for tax purposes
than in the statutory accounts. As the higher depreciation expenses for tax
purposes only result in a reduction of taxable income, if a corresponding
depreciation is also considered in the statutory accounts, it is allowed under
German Commercial Code to show the difference between the depreciation expenses
according to German tax law and statutory accounts as a special reserve, to be
taxed in later years. This reserve is reversed against income over the useful
life of the fixed assets.
The special reserves are set up according to Zonenrandfordergesetz and
Fordergebietsgesetz. The current year income from reversal of special reserves
amounts to TDM 2.902.
(11) Minority interests
Minority interests represent the minority shareholder's proportional share of
equity of the combined subsidiaries SIECOR Gesellschaft fur Lichtwellenleiter
mbH, Neustadt bei Coburg, and SIECOR Fertigungsgesellschaft fur
Lichtwellenleiter mbH & Co. KG, Neustadt bei Coburg.
<PAGE>
(12) Equity
For the LWL lines of business of Siemens AG, Germany, Siemens Ltd., Australia,
Siemens S.A., Argentina, and NSW Corp., USA, which are not separate legal
entities and are considered on the basis of carve out financial statements, no
equity portion was allocated to the LWL business units. Instead a suspense
account (ZF Konto) is maintained which contains both payment and financing
transactions as well as changes in equity. Retained earnings from prior years
are recorded against the ZF Konto.
In the combined financial statements ZF Konto is included as part of equity.
(13) Commitments and Contingencies
30.09.1999
TDM
----------
Guarantees 50.909
Obligations from
leasing contracts (over 1 year) 8.918
rent contracts (over 1 year) 6.097
long term purchase contracts 46.500
purchase commitment for fixed assets 15.000
Various legal actions, proceedings and claims are pending or may be instituted
or asserted in the future, including those arising out of alleged defects in the
LWL Group's products and product warranties.
Litigation is subject to many uncertainties; the outcome of individual litigated
matters is not predictable with assurance; and it is reasonably possible that
individual claims may be decided unfavourably for the LWL group. Identifiable
risks are covered by corresponding provisions.
The pension fund NSW-Hilfe GmbH (investment of NSW GmbH) is funded according to
German Tax Law (section 4 d EStG). Under consideration of the valuation method
used for pension accruals, the pension fund is underfunded by DM 4,2 Mio.
Notes to the income statement
(14) Other income
The major components of other income are income from the change in provisions
and the reversal of accruals.
(15) Other expenses
This position primarily includes the increase of pension accruals due to the
calculation of the pension liability by applying new mortality tables of TDM
4.442 and the elimination of differences between statutory accounts and the
conversion to German Commercial Code at Teleco Cavi S.p.A. of TDM 3.737
resulting from prior years.
<PAGE>
Additional information
(16) Net Sales by destination
1998/99
TDM
----------
Germany 552.528
Other European countries 419.465
United States of America 118.702
Asia/ Pacific countries 160.006
Other countries 132.596
---------
Total 1.383.297
---------
(17) Personnel costs
1998/99
TDM
---------
Wages and salaries 261.502
Social security and pension costs 57.181
thereof pensions 10.966
(18) Average number of employees
The annual average number of employees was as follows:
1998/99
TDM
-------
Production 1.969
Selling 468
Research and development 203
General and administration 339
------
2.979
<PAGE>
(19) Listing of investments held
<TABLE>
<CAPTION>
Total Result of the
Share in Equity last fiscal year
Name of company and location % TDM TDM
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Teleco Cables - Tunis 50,0% 8.980 835
NSW-Hilfe GmbH Unterstutzungseinrich-tung
der NSW AG, Nordenham, Germany 100,0% 16.110 986
NSW Technology Ltd., Aberdeen,
Great Britain 99,99% 1.055 266
XL Telecom Limited, Chandralok, India 29,7% 3.958 59
Egyptech Telecom Cables Co. SAE, Egypt 33,3% 35.639 9.806
TELE-CABLES A.E. Hellenic
Telecommunication, Greece 49,0% 18.125 3.764
PT Siemens Kabel Optic, Indonesia 51,0% 1.684 315
Fibre Optic Cable and Accessories Ltd.,
Vietnam 51,0% 7.168 6
Siemens Fiber Optic Kablolar Sirketi,
Turkey* 100,0% 2.689 -
</TABLE>
* established in 1999
(20) Supervisory board and Managing Board remuneration and loans granted
Due to the nature of combined operations no specific supervisory board and
managing board exists.
(21) Significant differences between German and United States Generally Accepted
Accounting Principles
The LWL Group combined financial statements comply with German GAAP, which
differ in certain significant respects from US GAAP. The significant differences
that affect the combined net income and shareholders' equity of the LWL Group
are set out below:
a) General recording of provisions, reserves and valuation adjustments
Under German tax law a company's financial statements prepared under German
Commercial Code are also the basis of its tax balance sheet and therefore, tax
considerations influence their preparation. Companies therefore may tend to
apply more conservative valuation methods in their financial statements than
they might otherwise. German GAAP permits the recognition of accruals or
provisions for uncertain liabilities and loss contingencies. The amount of such
accruals or provisions represents the anticipated expense of the company.
Under US GAAP, an accrual for a loss contingency is recorded by a charge to
income if it is both probable that an asset has been impaired or a liability has
been incurred and at the same time the minimum amount of the loss can be
reasonably estimated. Less precisely determinable reserves for future losses,
cost or risks do not meet the condition for accrual under US GAAP, but may be
required according to German GAAP based on the application of the prudence
principle.
b) Trade accounts receivable and other receivables
Under German GAAP, accounts receivable are reported net of the allowance for bad
debts. Allowances for bad debts are set up in order to reserve specific
receivable balances determined to be uncollectible. Provisions for rebates and
discounts are also established in those entities where these expenses are
actually incurred. Additionally, the LWL Group has set up general provisions as
well as provisions for bad debts on basis of specific rates for each country
(country risk provision).
Under US GAAP the individual, general and country risk provisions have to be
restated to reflect the actual expected losses from the non-recovery of
receivables.
<PAGE>
c) Inventories
For German GAAP purposes, finished and unfinished goods are valued at production
cost, as defined by the applicable tax regulations. To comply with US GAAP, the
cost of finished and unfinished goods have to be restated to the fully absorbed
production cost.
Under German GAAP, work in process (projects) are recorded at cost. Income is
not realized before completion of the project. For US GAAP purposes, work in
process for projects over one year, under certain circumstances, should be
accounted for by using the percentage of completion method.
d) Intangible assets
German GAAP does not allow capitalization of self-developed software. Under US
GAAP, software development costs (net of amortization) have to be capitalized in
accordance with SOP 98-1.
e) Property, Plant and Equipment
Under German GAAP, depreciation is calculated using the declining balance method
switching to the straight line method when the resulting depreciation expense
for the individual asset is higher as allowed by German tax legislation. Under
US GAAP, either the straight line method or an accelerated method should be
used.
For German GAAP purposes, the office buildings of RXS GmbH are depreciated in
line with the rules of the German Tax Code (section 7 EStG). For US GAAP
purposes, straight line depreciation should be calculated over the estimated
useful lives of the buildings. Additionally, special tools used by RXS GmbH are
depreciated for German GAAP purposes with changing percentages from year to
year. To comply with US GAAP, this depreciation has to be replaced by straight
line or accelerated depreciation calculated over the estimated useful life.
In addition, US GAAP requires the capitalization of interest costs as part of
the historical cost of assets requiring a period of time to construct. German
GAAP has no such requirement. For the year ended 30 September 1999 interest
capitalization for self constructed assets is not applicable.
The entities in the LWL Group do not have material lease or rental contracts
which would require capitalization under US GAAP.
f) Exchange rate risk
Under German GAAP, a provision for losses is recorded, if unrealised losses from
forward currency agreements exist. Unrealized gains on forward currency
agreements are not taken to income. For US GAAP purposes, unrealised losses and
gains are generally reflected in income (except in certain circumstances that
the forward currency agreement qualifies as a hedge).
g) Deferred Taxes
Under German GAAP, deferred tax assets and liabilities are not generally
recognized for all differences between the book carrying values and tax bases of
the assets and liabilities. Under US GAAP, with some exceptions deferred tax
assets and liabilities are recognized for all differences between the book
carrying values and tax bases of the assets and liabilities and net operating
loss carry forwards using future statutory tax rates. In addition, a valuation
allowance is established when it is more likely than not that deferred tax
assets will not be realized.
h) Accrued Expenses
Other accruals, especially accruals for losses from warranty obligations and for
potential claims arising from patent/license infringements have to be adjusted
to comply to the criteria for accruals under US GAAP as mentioned above.
Accrued losses on sales contracts have to be calculated on a variable cost basis
for US GAAP, which would result in lower accruals.
<PAGE>
i) Pensions
Pension accruals and similar obligations are based upon the actuarial
calculations using the entry age method as defined in the German tax code. US
GAAP is more prescriptive particularly as to the use of actuarial assumptions
and requires a different actuarial method (the projected unit credit method) to
be used. Under US GAAP, pension costs and similar obligations have to be
accounted for in accordance with SFAS No. 87 "Employers' Accounting for
Pensions".
Furthermore, the pension liability of NSW Hilfe GmbH, the pension fund of
Norddeutsche Seekabelwerke GmbH, is not reflected in the balance sheet according
to German GAAP. Under US GAAP, the pension fund has to be considered in the
combined financial statements of the LWL Group and the corresponding pension
liability has to be calculated in accordance with SFAS No.87.
j) Special reserves, to be taxed in later years
German GAAP allows for special tax depreciation. Special reserves booked in
accordance with the German Tax Code have to be reversed for US GAAP purposes
against retained earnings and the current year income effect of the reversal of
the special reserves has to be eliminated from the income statement.
Munich, 31 March 2000
Lichtwellenleiter Group of Siemens AG
Joachim Beninde Manfred Heier
<PAGE>
Item 7. Financial Statements, Pro Forma Information and Exhibits (Continued)
(b) Pro Forma Financial Information
The following unaudited pro forma combined supplemental financial information
and accompanying notes should be read in conjunction with the historical
financial statements and related notes of Corning.
The unaudited pro forma combined supplemental financial information is provided
for informational purposes only and does not purport to represent what the
combined financial position and results of operations would actually have been
had the Siemens transaction in fact occurred at the dates indicated. The
following unaudited pro forma supplemental combined statement of income and
unaudited pro forma combined supplemental balance sheet illustrate the estimated
effects of the merger as if that transaction had occurred at the beginning of
the period presented for the statement of income and at the end of the period
for the balance sheet. The following unaudited pro forma combined supplemental
information was derived using the following:
. Corning's consolidated year end financial statements as filed in Amendment
2 to Form 10-K as of and for the year ended December 31, 1999
. Siecor GmbH's financial information as of and for the year ended September
30, 1999
. Siemens A.G.'s worldwide optical fiber, cable and equipment businesses'
financial information as of and for the year ended September 30, 1999
Adjustments have been made to reclassify the presentation of the historical
financial statements of the businesses obtained in the Siemens transaction to be
consistent with Corning's presentation. The financial position and results of
Siecor GmbH and Siemens A.G.'s worldwide cable and equipment businesses are
presented in the column labeled "Siemens Transaction" in the pro forma combined
supplemental financial information. The amounts presented have been adjusted
for differences between German generally accepted accounting principles and
those of the United States.
<PAGE>
Unaudited Pro Forma Combined Supplemental Balance Sheet
December 31, 1999
(In millions)
<TABLE>
<CAPTION>
Siemens Pro Forma Combined
Corning Transaction Adjustments Pro Forma
------- ----------- ----------- ---------
Assets
<S> <C> <C> <C> <C>
Current assets
Cash $ 121.8 $ 9.8 $1,135.0(B) $ 131.6
(1,135.0)(B)
Short-term investments, at cost
which approximates market value 158.6 5.9 265.0(D) 429.5
Accounts receivable, net of
doubtful accounts and allowances 872.4 236.3 1,108.7
Inventories 602.2 106.4 708.6
Deferred taxes on income and
other current assets 229.2 6.3 235.5
-------- ------- -------- --------
Total current assets 1,984.2 364.7 265.0 2,613.9
-------- ------- -------- --------
Investments
Associated companies, at equity 421.9 30.3 (20.3)(C) 431.9
Others, at cost 82.5 82.5
-------- ------- -------- --------
504.4 30.3 (20.3) 514.4
-------- ------- -------- --------
Plant and equipment
net of accumulated depreciation 3,201.7 151.5 107.3(A) 3,460.5
Goodwill and intangible assets
net of accumulated amortization 506.7 1.1 723.9(A) 1,231.7
Other assets 329.0 19.6 348.6
-------- ------- -------- --------
$6,526.0 $ 567.2 $1,075.9 $8,169.1
======== ======= ======== ========
Liabilities and Shareholders' Equity
Current liabilities
Loans payable $ 420.7 $ 2.3 $ 423.0
Accounts payable 418.0 39.7 457.7
Other accrued liabilities 715.3 124.9 145.0(E) 985.2
-------- ------- -------- --------
Total current liabilities 1,554.0 166.9 145.0 1,865.9
-------- ------- -------- --------
Other liabilities 720.6 88.2 808.8
Loans payable beyond one year 1,490.4 3.9 488.7(B) 1,983.0
Minority interest in subsidiary
companies 284.8 (160.9)(F) 123.9
Convertible preferred stock 13.5 13.5
Common shareholders' equity
Common stock, including
excess over par value
and other capital 1,359.3 121.0 911.3(B) 2,270.6
(121.0)
Retained earnings 1,790.0 187.2 (187.2) 1,790.0
Less cost of common stock in
treasury (656.0) (656.0)
Accumulated other comprehensive
income (30.6) (30.6)
-------- ------- -------- --------
Common shareholders' equity 2,462.7 308.2 603.1 3,374.0
-------- ------- -------- --------
$6,526.0 $ 567.2 $1,075.9 $8,169.1
======== ======= ======== ========
</TABLE>
<PAGE>
Unaudited Pro Forma Combined Supplemental Statement of Income
For the year ended December 31, 1999
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Siemens Pro Forma Combined
Corning Transaction Adjustments Pro Forma
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Net Sales $4,741.1 $ 758.6 $ $5,499.7
Royalty, interest and
dividend income 41.4 1.2 42.6
Non-operating gain 30.0 30.0
-------- ------- ------- --------
4,812.5 759.8 5,572.3
Deductions
Cost of sales 2,930.3 586.9 8.8(A) 3,526.0
Selling, general and
administrative expenses 667.4 115.0 782.4
Research, development and
engineering expenses 378.2 29.8 408.0
Provision for restructuring and
impairment 1.4 1.4
Amortization of purchased
intangibles
including goodwill 27.8 56.2(A) 84.0
Interest expense 93.2 1.8 30.2(B) 125.2
Other, net 39.3 0.4 39.7
-------- ------- ------- --------
Income from continuing operations
before taxes on income 674.9 25.9 (95.2) 605.6
Taxes on income from continuing
operations 207.1 3.9 (26.8) 184.2
-------- ------- ------- --------
Income before minority interest
and equity earnings 467.8 22.0 (68.4) 421.4
Minority interest in earnings of
subsidiaries (66.8) 45.0(F) (21.8)
Dividends on convertible preferred
securities of subsidiary (2.3) (2.3)
Equity in earnings of associated
companies 112.3 (14.6)(C) 97.7
-------- ------- ------- --------
Income from continuing operations $ 511.0 $ 22.0 $ (38.0) $ 495.0
======== ======= ======= ========
Basic earnings per share from
continuing operations $ 2.00 $ 1.89
Diluted earnings per share from
continuing operations $ 1.95 $ 1.85
Weighted average shares
outstanding-basic 255.1 6.0(B) 261.1
Weighted average shares
outstanding-diluted 265.1 6.0(B) 271.1
</TABLE>
<PAGE>
Notes to Unaudited Pro Forma Combined Supplemental Financial Statements
(A) The total purchase price of the Siemens transaction approximates $1.4
billion, which includes $120 million of assumed debt and $145 million in
contingent performance payments. Portions of the Siemens transaction are
expected to close at future dates into 2001. The pro forma presentation
assumes all portions of the transaction have been closed. The excess of the
purchase price over the fair value of net assets acquired was allocated as
follows (amounts in millions):
Annual
Depreciation or Useful
Amount Amortization Lives
------ --------------- ----------
Property, plant and equipment $107.3 $ 8.8 5-20 years
Goodwill and other intangibles $723.9 $56.2 5-20 years
(B) Corning financed the Siemens transaction with a combination of
euro-denominated debt and common equity. In the first quarter of 2000,
Corning completed a debt offering generating net proceeds of $488.7 million
and consisting of 200 million EURO bonds with an interest rate of 4.25%
maturing in 5 years and 300 million EURO bonds with an interest rate of
5.375% maturing in 10 years. In addition, Corning completed an equity
offering of approximately 14.9 million shares of common stock which
generated net proceeds of approximately $2.2 billion. This pro forma
presentation reflects a portion of this offering (6 million shares with
proceeds of $911.3 million) being used to fund the remaining portion of the
$1.4 billion acquisition.
(C) Reflects the elimination of Corning's 50% investment in and equity earnings
from Siecor GmbH which was previously accounted for under the equity method.
(D) The increase to marketable securities reflects liquid assets from financing
transactions that will be used to repay assumed debt and fund contingent
performance payments.
(E) Includes the assumption that contingent purchase price of approximately $145
million will be earned.
(F) Reflects the elimination of minority interest related to Siemens' 50%
ownership of Siecor Corporation, which is consolidated in Corning's
historical financial statements.
