8-KOther Events

CORNING INC /NY 8-K Report (Dec 5, 2002)

Filed December 5, 2002For Securities:GLW

Summary

Corning Incorporated (GLW) announced on December 5, 2002, that its fourth quarter 2002 results would include substantial additional pre-tax non-cash charges, estimated between $800 million and $825 million. These charges are primarily driven by goodwill impairment in the telecommunications segment ($400 million) and impairment charges for assets in the conventional television glass and photonic technologies businesses ($400 to $425 million). This announcement brings Corning's total projected restructuring and impairment charges for 2002 to approximately $2 billion, reflecting a challenging year marked by a prolonged downturn in the telecommunications industry. Despite these significant charges, Corning emphasized its strong financial position. The company highlighted its substantial cash and short-term investment balances, the expected proceeds from the sale of its precision lens business to 3M for $850 million (projected to close by year-end), and continued access to its revolving credit line. Management indicated that these measures are intended to help achieve profitability in 2003, though they remain prepared to take further action if necessary.

Key Highlights

  • 1Corning expects additional pre-tax non-cash charges of $800 - $825 million in Q4 2002.
  • 2Approximately $400 million is for goodwill impairment in the telecommunications segment.
  • 3An additional $400 - $425 million is for impairment of assets in conventional TV glass and photonic technologies.
  • 4These charges, combined with prior ones, bring total 2002 restructuring/impairment charges to approximately $2 billion.
  • 5The company anticipates a pre-tax gain of approximately $400 million from the sale of its precision lens business to 3M.
  • 6Corning maintains a strong financial position with significant cash, expected proceeds from the sale, and available credit.
  • 7The company aims for profitability in 2003, attributing difficulties to the telecommunications industry downturn.

Frequently Asked Questions

The primary reason for the substantial charges is the impairment of goodwill in Corning's telecommunications segment and impairment of tangible and intangible assets in its conventional television glass and photonic technologies businesses. These impairments are due to a prolonged downturn in the telecommunications industry capital spending and declines in expected future cash flows from the other businesses.

These additional charges, when added to previous ones, bring Corning's total projected restructuring and impairment charges for 2002 to approximately $2 billion. While this significantly impacts reported earnings, the company notes these are largely non-cash charges and emphasizes its strong underlying financial health.

Corning does not anticipate significant growth in the telecommunications segment until late 2004. However, they expect longer-term improvement driven by continued growth in bandwidth demand, potential industry consolidation, and the introduction of new broadband applications.

Corning is taking several steps, including recording these impairment charges, completing the sale of its precision lens business to 3M for $850 million, and maintaining a strong cash position and access to credit facilities. The company's restructuring efforts are aimed at achieving profitability in 2003.