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Corning Annual Report, Year Ended Dec 31, 2001

Filing Date
Filed March 4, 2002
Period End
December 31, 2001
Security
GLW
In the record · 2016–202610-K1110-Q338-K111

GLW filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 111 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jul ’16Jul ’16
  2. FY2018 annual report10-K · Feb ’19Feb ’19
  3. Leadership change8-K · Dec ’21Dec ’21
  4. Leadership change8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K filed March 4, 2002. Cited figures are marked; the original filing is the authoritative source.

Corning's 2001 10-K shows a sharp downturn.

Net sales fell 12% to $6.27 billiona from $7.13 billion, and the company posted a net loss of $5.5 billion ($5.89 per share), driven mainly by a $4.76 billion second-quarter impairment of goodwill and intangibles tied to the Pirelli and NetOptix acquisitions in the photonic technologies business. Restructuring and impairment charges totaled $961 million, inventory write-downs were $333 million, and the company is eliminating about 12,000 positions and closing seven major plants. Pro forma net income (a non-GAAP measure that excludes these items) fell 85% to $157 million, or $0.17 per share.

Management expects 2002 sales to be significantly below 2001 levels, with losses continuing in the short term and no recovery in telecom demand until late 2002 or early 2003. Liquidity looks adequate, with $2.2 billionb in cash and short-term investments and an undrawn $2.0 billion revolver, but the balance sheet weakened considerably: long-term debt rose to 45% of total capital from 27%, shareholders' equity fell to $5.4 billion from $10.6 billion, and the common dividend was discontinued in July 2001. Credit ratings were cut across all three agencies (Fitch to BBB- in February 2002, S&P to BBB, Moody's to Baa1), all with negative outlooks, and Corning's earnings did not cover fixed charges in 2001.

The filing also details significant contingent exposures, including the Dow Corning bankruptcy and breast implant litigation, the Pittsburgh Corning asbestos bankruptcy (over 240,000 open claims), a securities class action tied to the 2000 convertible debenture offering, and patent suits from Shin Etsu and Hereaus. Management says it believes the claims lack merit, but the outcomes are uncertain. Investors should weigh the depressed earnings outlook and credit pressure against the company's liquidity position and the cost savings expected from restructuring (roughly $400 millionc annually starting in 2002).

02—Key points

Key Highlights

  1. Net sales declined 12% to $6.27 billion in 2001 (from $7.13 billion), with Telecommunications sales down 14% and sales declining in all three segments.
  2. Net loss of $5.5 billion ($5.89 per share), driven by a $4.76 billion goodwill and intangible impairment in the photonic technologies business and $961 million in restructuring and impairment charges.
  3. Pro forma net income fell 85% to $157 million ($0.17 per diluted share); management expects 2002 sales to be significantly below 2001 with continued losses.
  4. Liquidity remains adequate: $2.2 billion in cash and short-term investments and a $2.0 billion undrawn revolving credit facility (expiring August 2005).
  5. Credit ratings downgraded across all three agencies (Fitch BBB-, S&P BBB, Moody's Baa1), all with negative outlooks; long-term debt rose to 45% of total capital from 27%.
  6. Dividend discontinued in July 2001; 2001 capital spending cut to $1.8 billion from a planned $2.5 billion, with the 2002 budget below $500 million.
  7. Significant legal exposures include Dow Corning bankruptcy and breast implant claims, Pittsburgh Corning asbestos bankruptcy, and securities class actions related to the 2000 convertible debentures.

03—Questions

Frequently Asked Questions

  1. Why did Corning post such a large net loss in 2001?

    The loss was mainly non-cash. In the second quarter, Corning recorded a pre-tax charge of about $4.76 billion to impair goodwill and intangibles from the Pirelli optical components and NetOptix acquisitions, after demand for photonic products collapsed. It also took $961 million in restructuring and impairment charges and $333 million in inventory write-downs.

  2. Is Corning's liquidity at risk?

    Management says liquidity is ample, citing $2.2 billion in cash and short-term investments and an undrawn $2.0 billion revolver. However, the ratings downgrades could raise borrowing costs and limit commercial paper access, and the company expects lower operating cash flow in 2002 and says 2001 earnings did not cover fixed charges.

  3. What is the outlook for 2002?

    Management expects 2002 sales to be significantly below 2001 levels, with Q1 revenue near Q4 2001's $974 million and continued losses in the short term. It does not expect a telecom recovery until late 2002 or early 2003, and it targets cost savings of about $400 million annually from the restructuring.

  4. What are the major litigation risks?

    The main risks are the Dow Corning bankruptcy (up to $3.3 billion in trust funding obligations shared with Dow Chemical, with uncertainty after the Sixth Circuit remand), the Pittsburgh Corning asbestos bankruptcy (over 240,000 open claims), and securities class actions over the 2000 convertible debentures. Management believes the claims lack merit and that the outcomes will not be materially adverse, but the results are uncertain.

  5. Has Corning changed its dividend policy?

    Yes. Corning announced on July 9, 2001 that it was discontinuing its common stock dividend. Dividends paid in 2001 totaled $112 million, down from $210 million in 2000.

04—Continue

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