UNITED STATES
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) October 7, 2004
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)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.05 Costs Associated with Exit or Disposal Activities
-----------------------------------------------------------
Item 2.06 Material Impairments
------------------------------
The following information is filed pursuant to Item 2.05, "Costs Associated with
Exit or Disposal Activities" and Item 2.06, "Material Impairments."
On October 6, 2004, Corning Incorporated issued a press release announcing that
Corning will recognize certain non-cash charges against its results for the
third quarter ended September 30, 2004. A copy of the press release is attached
as Exhibit 99, the contents of which are incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
-------------------------------------------
(c) Exhibits
99 Press Release dated October 6, 2004 issued by Corning Incorporated
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: October 7, 2004 By /s/ KATHERINE A. ASBECK
-----------------------------------
Katherine A. Asbeck
Senior Vice President and Controller
Exhibit 99
----------
FOR RELEASE -- OCTOBER 6, 2004
Media Relations: Investor Relations Contact:
Daniel F. Collins Kenneth C. Sofio
607-974-4197 607-974-7705
collinsdf@corning.com sofiokc@corning.com
Corning To Take Third-Quarter Charges
CORNING, N.Y. -- Corning Incorporated (NYSE: GLW) announced today that it
will take non-cash charges in the range of $2.8 billion to $2.9 billion
against its third-quarter results. The charges will include approximately
$1.4 billion to impair goodwill related to its Telecommunications segment;
approximately $420 million to impair fixed assets and equity method
investments in its Telecommunications segment; and up to $1 billion to
establish a valuation allowance against certain deferred tax assets.
The company determined its goodwill charge in accordance with Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets." At the end of the second quarter, Corning had $1.7
billion in goodwill, with approximately $1.6 billion related to the
Telecommunications segment.
The goodwill recoverability assessment included reviewing the company's
long-term view of the telecommunications market, projections of future cash
flows, and the estimated fair market value of the overall business segment.
The company completed this assessment today after a process concluding with
review by Corning's board of directors.
James B. Flaws, vice chairman and chief financial officer, said, "Although
our results in the Telecommunications segment in 2003 and 2004 have been on
track with our projections, we are not seeing significant signs of the
broad uplift in industry conditions previously projected for 2005 and
beyond. As a result, we have updated and lowered our estimates of future
cash flows for the Telecommunications segment. Our revised cash flow
projections no longer support the goodwill related to this segment.
Therefore, it is appropriate that we take an impairment charge."
(more)
Corning To Take Third-Quarter Charges
Page 2
Telecommunications pricing and mix remains depressed
Flaws said, "The primary changes in our projections for this segment
include lower estimates of future pricing and a lower mix of premium fiber
products. These revised forecasts reflect new estimates of industry growth
patterns, competitive conditions, and future customer demand. We now
estimate that depressed pricing and low demand for premium fiber may
persist well beyond 2005, and the industry rebound from depressed
conditions may be slower and less robust than previously forecast."
Flaws said the company remains pleased with the current strength in North
American telecommunications sales, due in large part to Corning's
participation in Verizon Communications fiber-to-the-premises build out.
However, it is not enough to signal a broad recovery in the global
telecommunications market.
In addition to the goodwill impairment charge, Corning will record fixed
asset and equity investment impairment charges approximating $420 million.
These charges primarily relate to the phase II expansion of its Concord,
N.C. optical fiber facility, which was only partially completed before the
entire complex was mothballed in October 2002. "We no longer believe that
the global optical fiber market will ever reach a demand level that would
justify completing this facility," Flaws said.
Corning will continue to mothball and depreciate the separate, previously
operated portion of the Concord facility. Flaws said, "If current fiber
demand remains on the pace now forecast, we could begin to reopen the
original portion of our Concord facility as early as 2006."
Flaws also said that Corning is currently operating its Wilmington, N.C.
optical fiber facility at less than full capacity, and the addition of the
Concord manufacturing plant would result in Corning having the capacity to
produce more than double today's fiber volumes.
Deferred tax assets
In addition, Corning said that it would record a charge of up to $1 billion
to establish a valuation allowance against certain deferred tax assets in
accordance with SFAS No. 109, "Accounting for Income Taxes." This valuation
allowance primarily relates to Corning's U.S. deferred tax assets. "As a
result of the impairment charges and our lowered projections for the
Telecommunications segment, our largest U.S.-based business, we have
concluded that we must provide a valuation allowance against our deferred
tax assets at this time," Flaws said.
(more)
Corning To Take Third-Quarter Charges
Page 3
SFAS 109 requires that greater weight be given to previous cumulative
losses than the outlook for future profitability when determining whether
deferred tax assets can be used. Flaws said, "We have incurred significant
losses in the United States due primarily to telecommunications
restructuring and impairment charges recorded over the last four years.
Although Corning's performance is improving, it is primarily due to our LCD
growth in Asia. Our U.S. business, which includes a significant portion of
our global research, development and engineering and corporate
infrastructure spending, is operating at a loss."
Flaws said, "The establishment of this valuation allowance is required by
SFAS 109. We remain committed to returning to profitability in the U.S. so
that we will eventually be able to use the majority of these deferred tax
assets before they expire." In general, U.S. tax laws allow 20 years to use
operating loss carry-forwards.
This valuation allowance will be reviewed periodically and could be
reversed partially or totally after the company has achieved sustained
profitability in the United States. Until then, Corning's tax provision
will include only the net tax expense attributable to its international
operations. This change could reduce Corning's results in the fourth
quarter by up to $0.01 per share. Corning does not expect the change to
have a material impact on the company's 2005 results.
Flaws said that the charges in the range of $2.8 billion to $2.9 billion
are non-cash and will have no impact on the company's cash flow or
liquidity. Corning's debt- to-capital ratio will increase to approximately
43 percent as a result of the charges, and remains well below any covenant
tests in its existing revolving credit agreement.
"These accounting charges are clearly disappointing, particularly in light
of Corning's recent improved performance. Absent these new charges, we
expect our third quarter results to be in line with our previous
expectations," he said.
Conference call information
The company will host a conference call to discuss these third-quarter
charges at 8:30 a.m. EST on Thursday, October 7. To access the call, dial
(773) 756-4786. The password is Corning Conference. The leader is Sofio. A
reply of the call will begin at approximately 10:30 a.m. EST and will run
through 3 p.m. EST, Wednesday, Oct. 20. To listen, dial (420) 220-4087, no
pass code is required. To listen to a live audio webcast of the call at
8:30 a.m. on Thursday, October 7, please go to Corning's Web site and
follow the instructions: http://www.corning.com/investor_relations. The
audio webcast will be archived for one year following the call.
(more)
Corning To Take Third-Quarter Charges
Page 4
Presentation of Information in this New Release
Corning's earnings estimate for the third quarter is a non-GAAP financial
measure as it excludes the impact of impairment charges for goodwill, fixed
assets and equity investments; charges associated with establishing a
valuation allowance against certain deferred tax assets; any potential
gains or losses arising from previously announced restructuring actions;
previously announced loss on the sale of the frequency controls business;
any further adjustments to the asbestos settlement reserve required by
movements in Corning's stock price; and income from discontinued
operations. The company believes presenting earnings estimates that exclude
these items is helpful in understanding Corning's operating results. This
earnings estimate is reconciled on the company's website at
www.corning.com/investor_relations.
About Corning Incorporated
Corning Incorporated (www.corning.com) is a diversified technology company
that concentrates its efforts on high-impact growth opportunities. Corning
combines its expertise in specialty glass, ceramic materials, polymers and
the manipulation of the properties of light, with strong process and
manufacturing capabilities to develop, engineer and commercialize
significant innovative products for the telecommunications, flat panel
display, environmental, semiconductor, and life sciences industries.
Forward-Looking and Cautionary Statements
This press release contains forward-looking statements that involve a
variety of business risks and other uncertainties that could cause actual
results to differ materially. These risks and uncertainties include the
possibility of changes or fluctuations in global economic and political
conditions; tariffs, import duties and currency fluctuations; product
demand and industry capacity; competitive products and pricing;
manufacturing efficiencies; cost reductions; availability and costs of
critical components and materials; new product development and
commercialization; order activity and demand from major customers; capital
spending by larger customers in the liquid crystal display industry and
other businesses; changes in the mix of sales between premium and
non-premium products; facility expansions and new plant start-up costs;
possible disruption in commercial activities due to terrorist activity,
armed conflict, political instability or major health concerns; ability to
obtain financing and capital on commercially reasonable terms; adequacy and
availability of insurance; capital resource and cash flow activities;
capital spending; equity company activities; interest costs; acquisition
and divestiture activities; the level of excess or obsolete inventory; the
rate of technology change; the ability to enforce patents; product and
components performance issues; changes in key personnel; stock price
fluctuations; and adverse litigation or regulatory developments. These and
other risk factors are identified in Corning's filings with the Securities
and Exchange Commission. Forward-looking statements speak only as of the
day that they are made, and Corning undertakes no obligation to update them
in light of new information or future events.