SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported) July 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>
Item 5. Other Events.
Item 7. Financial Statements.
Exhibits:
The Registrant's press release of July 17, 2000.
<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: July 17, 2000 By /s/ KATHERINE A. ASBECK
Katherine A. Asbeck
Vice President and Controller
<PAGE>
FOR RELEASE - JULY 17, 2000
Corning Contacts:
Media Relations Investor Relations
Monica L. Ott Katherine M. Dietz
(607) 974-8769 (607) 974-8217
[email protected] [email protected]
Corning Pro Forma Earnings Per Share Up 80% in Second Quarter
Strong Demand for Corning's High-Tech Products Drives Results,
Company's Full-Year Earnings Outlook Increases
CORNING, N.Y. Corning Incorporated (NYSE:GLW) reported today that its
second quarter pro forma earnings per share increased 80%. The
performance was driven by strong demand for Corning's high-technology
products, particularly its high-data rate optical fiber and cable, and
LCD flat-panel display glass.
The company reported second-quarter pro forma earnings of $0.94 per
share, compared with $0.52 per share in the same quarter of 1999. Pro
forma net income for the second quarter of 2000 totaled $271.1
million, approximately double the $136.5 million from the second
quarter of 1999. Pro forma net income excludes amortization of
purchased intangibles and goodwill, purchased in-process research and
development, one-time acquisition costs, discontinued operations and
other non-recurring items.
"Clearly, this is a blockbuster quarter for Corning," said Roger G.
Ackerman, Corning's chairman and chief executive officer. "We are
living in an increasingly bandwidth-intensive economy and our
financial performance is evidence that Corning has truly emerged as a
world-leading provider of technologies and products in the optical
layer, where fiber joins with photonic devices to power today's
optical networks."
The company also announced that it is raising its full-year pro forma
earnings per share outlook to a range of $3.15 - $3.25, an increase of
approximately 60% versus last year's $2.00.
(more)
<PAGE>
Corning Reports Q2 Earnings
Page 2
"This revised outlook reflects our very strong performance this
quarter and confidence for continued unprecedented demand for
Corning's market-leading products through year-end," said Ackerman.
"Our strategy is working. We are winning significant contracts,
making the right strategic acquisition decisions, investing in
capacity, and continuing with aggressive research and development to
ensure our future success."
Second quarter sales were $1.78 billion, an increase of 57% over 1999
second quarter sales of $1.13 billion. Excluding the impact of
acquisitions, sales increased 41%. Overall demand for optical fiber
increased with a year-over-year growth rate of approximately 40%.
Sales in Photonic Technologies nearly doubled, led by demand for the
company's optical amplifiers. Sales of flat-panel display glass used
primarily in computer monitors grew more than 70%.
Equity earnings were up 28% in the quarter due primarily to strong
results by Samsung Corning Precision Glass Company, Ltd., a Korean
manufacturer of flat-panel LCD display glass, and Samsung-Corning
Company Ltd., a Korean manufacturer of glass for conventional TV and
computer monitors.
Corning also recorded a second quarter charge of $50.7 million after
tax, or $0.17 per share, related to recent acquisitions. Including
this non-recurring item and the amortization of purchased intangibles
and goodwill, Corning's net income for the second quarter of 2000
totaled $149.2 million, or $0.52 per share. This compares with second
quarter 1999 net income of $131.0 million, or $0.50 per share.
Established in 1851, Corning Incorporated (www.corning.com) creates
leading-edge technologies for the fastest-growing markets of the
world's economy. Corning manufactures optical fiber, cable and
photonic products for the telecommunications industry; and high-
performance displays and components for television and other
communications-related industries. The company also uses advanced
materials to manufacture products for scientific, semiconductor and
environmental markets. Corning's revenues in 1999 were $4.7 billion.
###
Forward-Looking and Cautionary Statements
Except for historical information and discussions contained
herein, statements included in this release may constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve a number of
risks, uncertainties and other factors that could cause results to
differ materially, as discussed in the company's filings with the
Securities and Exchange Commission.
<PAGE>
Corning Incorporated and Subsidiary Companies
Pro Forma Consolidated Statements of Income
Excluding Amortization of Purchased Intangibles and Goodwill, Purchased In-
Process Research and Development, Acquisition-Related Costs and Non-Recurring
Items
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Net sales $3,127.0 $2,126.7 $1,775.6 $1,129.7
Royalty, interest, and
dividend income 50.4 21.3 26.9 11.3
-------- -------- -------- --------
3,177.4 2,148.0 1,802.5 1,141.0
Deductions
Cost of sales 1,817.7 1,307.2 1,029.9 693.3
Selling, general and
administrative expenses 457.8 303.4 258.0 151.2
Research, development and
engineering expenses 230.2 171.9 120.1 88.5
Interest expense 52.7 40.1 28.5 20.4
Other, net 32.7 20.6 11.8 10.7
-------- -------- -------- --------
Income before taxes 586.3 304.8 354.2 176.9
Taxes on income 190.0 92.6 114.9 53.8
-------- -------- -------- --------
Income before minority
interest and equity earnings 396.3 212.2 239.3 123.1
Minority interest in earnings
of subsidiaries (10.1) (27.5) (7.5) (17.4)
Dividends on convertible
preferred securities of subsidiary (2.3)
Equity in earnings of associated
companies 73.2 52.0 39.3 30.8
-------- -------- -------- --------
Pro Forma Net Income $ 459.4 $ 234.4 $ 271.1 $ 136.5
======== ======== ======== ========
Pro Forma Basic Earnings Per Share $ 1.66 $ 0.92 $ 0.96 $ 0.53
======== ======== ======== ========
Pro Forma Diluted Earnings Per Share $ 1.62 $ 0.90 $ 0.94 $ 0.52
======== ======== ======== ========
Dividends Declared $ 0.36 $ 0.36 $ 0.18 $ 0.18
======== ======== ======== ========
Shares used in computing pro forma
earnings per share
Pro forma basic earnings
per share 275.9 252.8 281.5 257.3
======== ======== ======== ========
Pro forma diluted earnings
per share 282.7 263.5 290.7 265.3
======== ======== ======== ========
</TABLE>
The above pro forma amounts for the six months ended June 30, 2000 have been
adjusted to eliminate $62.3 million ($81.4 million after tax) or $0.29 per
share of amortization of purchased intangibles and goodwill, $92.7 million
($76.4 million after tax) or $0.27 per share of in-process research and
development charges, $47 million ($43.4 million after tax) or $0.15 per share
of transaction costs from the Oak acquisition, $36.3 million after tax or $0.13
per share for the impairment of the entire equity investment in Pittsburgh
Corning Corporation, and $6.8 million ($4.2 million after tax) or $0.01 per
share for a non-operating gain related to the sale of Quanterra Incorporated.
The above pro forma amounts for the quarter ended June 30, 2000 have been
adjusted to eliminate $49.2 million ($71.2 million after tax) or $0.25 per
share of amortization of purchased intangibles and goodwill and $50.7 million,
or $0.17 per share of in-process research and development charges.
The above pro forma amounts for the six months ended June 30, 1999 have been
adjusted to eliminate $13.9 million ($10.9 million after tax) or $0.04 per
share of amortization of purchased intangibles and goodwill.
The above pro forma amounts for the quarter ended June 30, 1999 have been
adjusted to eliminate $7.0 million ($5.5 million after tax) or $0.02 per share
of amortization of purchased intangibles and goodwill.
- Pro Forma -
<PAGE>
Corning Incorporated and Subsidiary Companies
Condensed Consolidated Statements of Income
(Unaudited; in millions, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------ -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Net sales $3,127.0 $2,126.7 $1,775.6 $1,129.7
Royalty, interest, and
dividend income 50.4 21.3 26.9 11.3
Non-operating gains 6.8
-------- -------- -------- --------
3,184.2 2,148.0 1,802.5 1,141.0
Deductions
Cost of sales 1,817.7 1,307.2 1,029.9 693.3
Selling, general and
administrative expenses 457.8 303.4 258.0 151.2
Research, development and
engineering expenses 230.2 171.9 120.1 88.5
Amortization of purchased
intangibles including
goodwill 62.3 13.9 49.2 7.0
Interest expense 52.7 40.1 28.5 20.4
Acquisition-related charges 139.7 50.7
Other, net 32.7 20.6 11.8 10.7
-------- -------- -------- --------
Income before taxes 391.1 290.9 254.3 169.9
Taxes on income 191.8 89.6 136.9 52.3
-------- -------- -------- --------
Income before minority interest
and equity earnings 199.3 201.3 117.4 117.6
Minority interest in earnings
of subsidiaries (10.1) (27.5) (7.5) (17.4)
Dividends on convertible preferred
securities of subsidiary (2.3)
Equity in earnings of associated
companies 73.2 52.0 39.3 30.8
Impairment of equity investment (36.3)
-------- -------- -------- --------
Net Income $ 226.1 $ 223.5 $ 149.2 $ 131.0
======== ======== ======== ========
Basic Earnings Per Share $ 0.82 $ 0.88 $ 0.53 $ 0.51
======== ======== ======== ========
Diluted Earnings Per Share $ 0.80 $ 0.86 $ 0.52 $ 0.50
======== ======== ======== ========
Dividends Declared $ 0.36 $ 0.36 $ 0.18 $ 0.18
======== ======== ======== ========
Shares used in computing
earnings per share
Basic earnings per share 275.9 252.8 281.5 257.3
======== ======== ======== ========
Diluted earnings per share 282.7 263.5 290.7 265.3
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Corning Incorporated and Subsidiary Companies
Condensed Consolidated Balance Sheets
(Unaudited; in millions)
<TABLE>
<CAPTION>
June 30, 2000 Dec. 31, 1999
------------- -------------
<S> <C> <C>
Assets
Current Assets
Cash and short-term investments $ 1,379.5 $ 280.4
Accounts receivable, net 1,219.6 872.4
Inventories 839.8 602.2
Deferred taxes on income and
other current assets 207.6 229.2
--------- --------
Total current assets 3,646.5 1,984.2
Investments 515.7 504.4
Plant and equipment, net 3,856.5 3,201.7
Goodwill and other intangible
assets, net 3,586.3 506.7
Other assets 328.9 329.0
--------- --------
Total Assets $11,933.9 $6,526.0
========= ========
Liabilities and Shareholders' Equity
Current Liabilities
Loans payable $ 126.3 $ 420.7
Accounts payable 445.0 418.0
Other accrued liabilities 835.4 715.3
--------- --------
Total current liabilities 1,406.7 1,554.0
Other liabilities 802.4 720.6
Loans payable beyond one year 1,977.3 1,490.4
Minority interest in subsidiary
companies 132.6 284.8
Convertible preferred stock 9.6 13.5
Common shareholders' equity 7,605.3 2,462.7
--------- --------
Total Liabilities and
Shareholders' Equity $11,933.9 $6,526.0
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Corning Incorporated and Subsidiary Companies
Notes to Consolidated Financial Statements
Quarter 2, 2000
(1) Information by Operating Segment
Information about the performance of Corning's three operating segments for
the second quarter and six months of 2000 and 1999 is presented below.
These amounts exclude revenues, expenses and equity earnings not
specifically identifiable to segments. In the first quarter of 2000,
Corning changed the performance measurement of its operating segments to a
new metric - net income excluding amortization of purchased intangibles and
goodwill, purchased in-process research and development costs, one-time
acquisition costs and other non-recurring items. This measure is not in
accordance with generally accepted accounting principles (GAAP) and may not
be consistent with measures used by other companies. The segment results
for 1999 have been restated to conform to the new measure.
Corning prepared the financial results for its three operating segments on
a basis that is consistent with the manner in which Corning management
internally disaggregates financial information to assist in making internal
operating decisions. Corning has allocated some common expenses among
segments differently than it would for stand alone financial information
prepared in accordance with GAAP.
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
----------------- ------------------
2000 1999 2000 1999
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Telecommunications
Net sales $2,175.6 $1,285.8 $1,282.2 $ 692.5
Research, development and
engineering expenses $ 161.3 $ 115.7 $ 84.2 $ 59.6
Interest expense $ 33.7 $ 25.2 $ 18.5 $ 12.8
Segment earnings before minority
interest and equity earnings $ 282.2 $ 141.8 $ 174.4 $ 81.4
Minority interest in earnings
of subsidiaries 3.0 (13.0) (8.7)
Equity in earnings of
associated companies (3.2) 6.6 (2.8) 2.6
-------- -------- -------- --------
Segment net income $ 282.0 $ 135.4 $ 171.6 $ 75.3
======== ======== ======== ========
Advanced Materials
Net sales $ 536.3 $ 516.8 $ 272.1 $ 264.7
Research, development and
engineering expenses $ 57.3 $ 45.1 $ 30.1 $ 23.2
Interest expense $ 11.2 $ 9.2 $ 5.7 $ 4.9
Segment earnings before minority
interest and equity earnings $ 45.8 $ 48.0 $ 23.9 $ 28.0
Minority interest in earnings
of subsidiaries 0.1
Equity in earnings of
associated companies 11.8 7.6 5.3 3.5
-------- -------- -------- --------
Segment net income $ 57.6 $ 55.7 $ 29.2 $ 31.5
======== ======== ======== ========
Information Display
Net sales $ 403.5 $ 311.7 $ 215.6 $ 166.0
Research, development and
engineering expenses $ 11.6 $ 11.1 $ 5.8 $ 5.7
Interest expense $ 7.5 $ 5.3 $ 4.1 $ 2.7
Segment earnings before minority
interest and equity earnings $ 52.4 $ 27.2 $ 33.1 $ 17.8
Minority interest in earnings
of subsidiaries (13.1) (14.7) (7.5) (8.8)
Equity in earnings of
associated companies 62.1 34.6 35.3 22.2
-------- -------- -------- --------
Segment net income $ 101.4 $ 47.1 $ 60.9 $ 31.2
======== ======== ======== ========
Total segments
Net sales $3,115.4 $2,114.3 $1,769.9 $1,123.2
Research, development and
engineering expenses $ 230.2 $ 171.9 $ 120.1 $ 88.5
Interest expense $ 52.4 $ 39.7 $ 28.3 $ 20.4
Segment earnings before minority
interest and equity earnings $ 380.4 $ 217.0 $ 231.4 $ 127.2
Minority interest in earnings
of subsidiaries (10.1) (27.6) (7.5) (17.5)
Equity in earnings of
associated companies 70.7 48.8 37.8 28.3
-------- -------- -------- --------
Segment net income $ 441.0 $ 238.2 $ 261.7 $ 138.0
======== ======== ======== ========
</TABLE>
<PAGE>
A reconciliation of the totals reported for the operating segments to the
applicable line items in the consolidated financial statements is as follows:
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Total segment net sales $3,115.4 $2,114.3 $1,769.9 $1,123.2
Non-segment net sales (a) 11.6 12.4 5.7 6.5
Royalty, interest and dividend
income 50.4 21.3 26.9 11.3
Non-operating gain 6.8
-------- -------- -------- --------
Total revenues $3,184.2 $2,148.0 $1,802.5 $1,141.0
======== ======== ======== ========
Net income
Total segment income (b) $ 441.0 $ 238.2 $ 261.7 $ 138.0
Unallocated items:
Non-segment loss and other (a) (3.6) (6.4) (1.4) (5.8)
Non-operating gain 6.8
Amortization of purchased
intangibles and goodwill (c) (62.3) (13.9) (49.2) (7.0)
Acquisition-related charges (139.7) (50.7)
Interest income (d) 34.2 19.0
Interest expense (0.3) (0.4) (0.2)
Income tax (e) (16.2) 5.1 (31.5) 3.3
Equity in earnings of
associated companies (a) 2.5 3.2 1.5 2.5
Impairment of equity investment (36.3)
Dividends on convertible preferred
securities of subsidiary (2.3)
-------- -------- -------- --------
Net income $ 226.1 $ 223.5 $ 149.2 $ 131.0
======== ======== ======== ========
</TABLE>
(a) Includes amounts derived from corporate investments.
(b) Includes royalty, interest and dividend income.
(c) Amortization of purchased intangibles and goodwill relates primarily
to the Telecommunications segment.
(d) Corporate interest income is not allocated to reportable segments.
(e) Includes tax associated with unallocated items.
(2) Business Combinations
On June 12, 2000, Corning completed the acquisition of its remaining 67%
interest in IntelliSense Corporation, a manufacturer of micro-electro-
mechanical devices in exchange for 2,016,755 shares of Corning common stock
and the assumption of stock options convertible into 656,104 shares of
Corning common stock. This consideration was valued at approximately $410
million. An additional 339,921 shares may be issued assuming the
achievement of certain product milestones in 2001. The acquisition was
accounted for as a purchase. The excess of the purchase price over the
estimated fair value of tangible assets acquired was allocated primarily to
goodwill and in-process research and development. Goodwill of
approximately $388 million will be amortized on a straight-line basis over
thirteen years. Corning recorded a charge of $6.7 million, or $0.02 per
share for in-process research and development.
<PAGE>
On May 12, 2000, Corning completed the acquisition of NetOptix Corporation
for 11,239,689 shares of Corning common stock and the assumption of stock
options convertible into 829,080 Corning shares in a transaction valued at
approximately $2.1 billion. NetOptix manufactures thin film filters for
use in dense wavelength division multiplexing components. The acquisition
was accounted for as a purchase. The excess of the purchase price over the
estimated fair value of tangible assets acquired was allocated to goodwill.
Goodwill of approximately $2.065 billion will be amortized on a straight-
line basis over ten years.
On May 5, 2000, Corning completed the acquisition of its remaining 84%
interest in NZ Applied Technologies (NZAT), a developer and manufacturer of
photonic components for optical telecommunications applications including
the optical data networks industry, in exchange for Corning common stock.
Corning issued 440,583 shares of common stock at closing with a value of
approximately $75 million, and placed an additional 440,583 shares in
escrow to be issued over the next three years contingent upon NZAT
achieving certain product development and sales milestones. The contingent
proceeds, if earned, will be recorded at the current fair value of Corning
common stock at the time of achievement. The acquisition was accounted for
as a purchase. The excess of the purchase price over the estimated fair
value of tangible assets acquired was allocated to goodwill and in-process
research and development. Goodwill of approximately $30 million will be
amortized on a straight-line basis over ten years. Corning recorded a
charge of $44.0 million, or $0.15 per share for in-process research and
development.
(3) Depreciation and Amortization
Depreciation and amortization charged to operations for the second quarters
of 2000 and 1999 totaled $176.4 million and $102.1 million, respectively.
Depreciation and amortization charged to operations for the first six
months of 2000 and 1999 totaled $302.0 million and $203.7 million,
respectively.
(4) Taxes on Income
Corning's effective income tax rate for the quarter and six months of 2000
was 53.8% and 49.0%, an increase from 30.8% and 30.8%, respectively. The
increase in the quarter and six months was primarily due to the large
amounts of non deductible purchased intangibles and goodwill acquired in
the second quarter along with non deductible purchased in-process research
and development costs associated with acquisitions and other acquisition-
related items. Excluding the impact of the amortization of purchased
intangibles and goodwill, purchased in-process research and development
costs, one-time acquisition costs and other non-recurring items, the
effective income tax rate for the quarter and six months of 2000 was 32.4%
and 32.4%, an increase from 30.4% and 30.4%, respectively.
