SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For fiscal year ended December 31, 2001
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to _____________
Commission File number 1-3247
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
THE CORNING INCORPORATED
INVESTMENT PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
CORNING INCORPORATED
ONE RIVERFRONT PLAZA
CORNING, NY 14831
Documents filed as part of this report:
(a) Index to financial statements filed as part of this report:
The Statement of Net Assets Available for Plan Benefits as at December
31, 2001 and 2000, the Statement of Changes in Net Assets Available
for Plan Benefits for the year ended December 31, 2001 and
supplementary information, together with the report thereon of
PricewaterhouseCoopers LLP dated June 10, 2002. The required financial
statement schedules, if any, are included in the supplementary
information referred to above and should be read in conjunction with
the above financial statements.
(b) Exhibits - The consent of PricewaterhouseCoopers LLP is attached
hereto as Exhibit 23.1.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Investment Plan Committee has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
THE CORNING INCORPORATED
INVESTMENT PLAN
By: /s/ Deborah G. Lauper
-----------------------
Deborah G. Lauper
Member
Investment Plan Committee
Date: June 28, 2002
THE CORNING INCORPORATED
INVESTMENT PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
THE CORNING INCORPORATED INVESTMENT PLAN
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Accountants .............................................. 1
Financial Statements:
Statements of Net Assets Available for Plan Benefits,
December 31, 2001 and 2000 ............................................... 2
Statement of Changes in Net Assets Available for Plan Benefits,
Year Ended December 31, 2001 ............................................. 3
Notes to Financial Statements .............................................. 4-11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Corning Incorporated Investment Plan
Committee and the Participants in
The Corning Incorporated Investment Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statement of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
benefits of The Corning Incorporated Investment Plan (the "Plan") at December
31, 2001 and 2000, and the changes in net assets available for benefits for the
year ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
June 10, 2002
1
THE CORNING INCORPORATED INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 2001 AND 2000
(AMOUNTS IN THOUSANDS)
2001 2000
ASSETS:
Investment in Corning Incorporated
Master Investment Trust (Note 2) $ 913,912 $ 1,673,405
----------- -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $ 913,912 $ 1,673,405
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
THE CORNING INCORPORATED INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31, 2001
(AMOUNTS IN THOUSANDS)
Allocated portion of decrease in net assets from
investment activities in the Corning Incorporated
Master Investment Trust (Note 2) $ (765,861)
----------
Contributions:
Employer contributions - cash 26,232
Participant contributions 71,724
----------
Total contributions 97,956
----------
Distributions to participants (89,091)
----------
Net transfer to other qualified plans (2,497)
----------
Change in net assets available for plan benefits (759,493)
Net assets available for plan benefits:
Beginning of year 1,673,405
----------
End of year $ 913,912
==========
The accompanying notes are an integral part of these financial statements.
3
THE CORNING INCORPORATED INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. DESCRIPTION OF PLAN
GENERAL
The following brief description of The Corning Incorporated Investment Plan
(the "Plan") is provided for general information purposes only.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
The Plan is a defined contribution profit-sharing-thrift-savings plan
established in January 1967 and is subject to the Employee Retirement
Income Security Act of 1974 ("ERISA").
ADMINISTRATION
The Plan is administered by the Corning Incorporated Investment Plan
Committee (the "Committee"), appointed by the Board of Directors of Corning
Incorporated (the "Company"). The Committee shall administer the Plan in
accordance with its terms and applicable laws and shall have all necessary
and appropriate powers to carry out the provisions of the Plan.
TRUSTEE AND RECORDKEEPER
The Plan's assets are held by J. P. Morgan Chase Bank, N.A. (the
"Trustee"), as trustee. The recordkeeper is Mellon HR Solutions.
ELIGIBILITY
The Plan covers all employees of the Company and participating subsidiaries
compensated on a monthly or weekly salary basis and those compensated on an
hourly basis who are not members of a union. An employee is eligible for
participation in the Plan upon reaching the age of 18 and completing one
year of eligible service. Notwithstanding the foregoing, an employee who
has attained age 18 and is scheduled on a normal basis to work at least 16
hours a week shall be immediately eligible.
CONTRIBUTIONS - EMPLOYER
The Company makes matching contributions, out of profits (as defined in the
Plan), as a percentage of a participant's first 5% of compensation
contributed according to years of service as of December 31 of the prior
year as follows:
- less than 19 years of service 50%
- 19 but less than 24 years of service 75%
- 24 or more years of service 100%
Employees hired on or after July 1, 2000 (or employees hired before July 1,
2000 who so elected) receive matching contributions that equal 100% of the
first 2% of eligible pay contributed and 50% of the next 4% of eligible pay
contributed.
All matching Company contributions are invested in the Company's Common
Stock Fund. At December 31, 2001 and 2000, the Corning Common Stock Fund
contains net assets of approximately $120,800 and $622,600, respectively,
that are non-participant directed as a result of the accumulation of
matching contributions made by the Company and the related earnings on
those contributions. Benefit payments from this non-participant directed
fund amounted to approximately $8,100 in 2001.
4
THE CORNING INCORPORATED INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. DESCRIPTION OF PLAN (CONTINUED)
CONTRIBUTIONS - EMPLOYER (CONTINUED)
Effective January 1, 2002, all past and future Company contributions to the
Plan are fully vested after three years of service. All contributions
become fully vested upon total and permanent disability, death or
retirement.
With respect to all employees eligible to participate in the Plan,
beginning in January of the year the participant is expected to reach 10
years of vesting service and irrespective of whether such employee has
elected to contribute to the Plan, the Company contributes weekly or
monthly (based on the employee's pay frequency) a supplemental contribution
to the Corning Common Stock Fund an amount equal to 1.175% of such
employee's compensation. Employees hired on or after July 1, 2000 do not
receive the supplemental contribution.
CONTRIBUTIONS - PARTICIPANTS
Generally, participants may contribute up to 15% of their base salary on a
before-tax basis, after-tax basis or any combination of the two, to the
Plan. Highly compensated participants are limited to contribute 1% to 9% of
their base salary before tax, and 1% to 6% of their base salary after tax,
not to exceed 15% in total. The maximum amount a participant can contribute
to the Plan on a before tax basis is $10,500 per year as adjusted by the
Internal Revenue Service for cost of living increases.
Participants may also elect to have their contributions invested in the
Corning Common Stock Fund on a before-tax or after-tax basis. Through July
1, 2000, the Company made a premium matching contribution to the account of
each participant in an amount equal to 15% of such participant's
contributions to the Corning Common Stock Fund. Effective July 1, 2000, the
Plan was amended to eliminate the 15% premium matching contribution.
FUND TRANSFERS
Participants are allowed to transfer their accumulated contributions
between funds. Through June 30, 2000, there were certain restrictions,
however, on transfers involving the Corning Common Stock Fund. First, only
participants age 55 or over were allowed to transfer Company contributions
in the Corning Common Stock Fund into any of the other investment funds.
Second, no participants were permitted to transfer Company contributions
back into the Corning Common Stock Fund. Third, employee contributions into
the Corning Common Stock Fund were available for transfer after the funds
have been in the Plan for five years. The earnings on employee
contributions to the Corning Common Stock Fund were unrestricted and
eligible for transfer at any time. Effective July 1, 2000, all restrictions
were lifted on transfers of employee contributions into or out of the
Corning Common Stock Fund and participants age 55 or over were permitted to
transfer employer contributions back into the Corning Common Stock Fund.
No transfers may be made into the Corning Preferred Stock Fund. Transfers
from the Corning Preferred Stock Fund can only be made to the Corning
Common Stock Fund.
5
THE CORNING INCORPORATED INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. DESCRIPTION OF PLAN (CONTINUED)
DISTRIBUTIONS
Distributions are made upon retirement (i.e., at least age 55 with five
years of service), or in the event of a participant's total and permanent
disability, death or other termination of employment. A retired participant
can elect to receive distributions in a lump sum, installments, or
intermittent withdrawals. The Plan also provides for withdrawals by
participants prior to termination. As of December 31, 2001 and 2000, there
were 3,319 and 2,949, respectively, terminated and retired participants in
the Master Trust with a total vested value of $379,097, and $573,732,
respectively.
PARTICIPANT LOANS
Participants are eligible to obtain loans from the Plan. Loans are limited
to one loan with a repayment term not to exceed 4.5 years, except for
primary residence loans in which the term may not exceed 10 years. The
maximum amount of any loan is the lesser of one-half of the vested account
balance, or $50,000 (with a $1,000 minimum). The interest rate on a loan is
the prime rate plus 1% on the last business day of the month before the
request for a loan.
ADMINISTRATIVE FEES
Participants in the Plan are charged an account fee which is deducted from
each participant's account pro-rated among funds on the last business day
of each month. Also, participants in the Plan are charged a loan fee which
decreases the amount of the participant's loan proceeds.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements are prepared on the accrual basis of
accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of net assets available for plan benefits and changes therein. Due
to the inherent uncertainty involved in making estimates, actual results
reported in future periods may be based on amounts that could differ from
those estimates.
BASIS OF ALLOCATION FROM THE CORNING INCORPORATED MASTER INVESTMENT TRUST
The Plan has a specific interest in The Corning Incorporated Master
Investment Trust (the "Master Trust") in which another plan sponsored by
the Company also participates. The Plan's specific interest in the Master
Trust is credited or charged for contributions, transfers, and benefit
payments relating to its participants. Realized gains and losses and
changes in net unrealized appreciation or depreciation on investments,
income from investments and expenses are allocated to the Plan based on the
Plan's specific interest in the net assets of the Master Trust. At December
31, 2001 and 2000, the Plan's percentage interest in the net assets of the
Master Trust was approximately 82% and 77%, respectively.
6
THE CORNING INCORPORATED INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
VALUATION OF MASTER TRUST INVESTMENTS
Master Trust investments in mutual and collective trust funds are recorded
at fair value based upon the net asset value announced by the fund on the
last business day of the year. Investment contracts are valued at contract
value, representing contributions made plus interest at the contract rate,
less funds withdrawn and administrative expenses. There are no reserves
against contract values for credit risk of the contract issuers or
otherwise. At December 31, 2001, the average crediting interest rate was
approximately 7%. The Company's Preferred Stock is valued at 14.37 times
the market value of Corning Common Stock (Note 3). Participant loans
receivable are valued at cost plus accrued interest which approximates fair
value.
RISK AND UNCERTAINTIES
The Plan's investment securities are exposed to various risks, such as
changes in interest rates and market returns. Due to the level of risk
associated with certain investments and the level of uncertainty related to
changes in the value of these investments, it is at least reasonably
possible that changes in valuations in the near term would materially
affect participants' account balances and the amounts reported in the
Plan's financial statements.
3. INVESTMENTS
Participants who contribute to the Plan may elect to have their
contributions invested among various alternatives offered, as indicated
below:
- Stable Value Fund
- Vanguard Institutional Index Fund
- Pelican Fund
- W. P. Stewart Fund
- Vanguard Balanced Index Fund
- Vanguard International Growth Fund
- Fidelity Contrafund
- Putnam New Opportunities Fund
- Vanguard Small-Cap Index Fund
- Vanguard Total Bond Market Index Fund
- Corning Common Stock Fund
STABLE VALUE FUND
The Stable Value Fund is invested in a diversified portfolio of fixed
income investments. These investments include Guaranteed Investment
Contracts issued and guaranteed by insurance companies and U.S. Government
agency investments. The Stable Value Fund seeks to provide a stable rate of
return with safety of principal and liquidity as primary objectives.
VANGUARD INSTITUTIONAL INDEX FUND
The Vanguard Institutional Index Fund seeks to mirror the performance of
the overall stock market by investing in large company stocks.
7
THE CORNING INCORPORATED INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. INVESTMENTS (CONTINUED)
PELICAN FUND
The Pelican Fund is invested in large company stocks. The Pelican Fund
seeks to provide moderate to high earnings with moderate to high
variability of returns.
W. P. STEWART FUND
The W.P. Stewart Fund is invested in a variety of growth stocks. The fund
seeks moderate to high earnings with moderate to high variability of
returns.
VANGUARD BALANCED INDEX FUND
The Vanguard Balanced Index Fund seeks income as well as long-term growth
of capital and income with moderate variability of returns by investing 60%
of its assets in stocks and 40% of its assets in bonds.
VANGUARD INTERNATIONAL GROWTH FUND
The Vanguard International Growth Fund seeks high earnings and high
variability of returns by investing in stocks of large, non-U.S. companies
with good growth potential.
FIDELITY CONTRAFUND
The Fidelity Contrafund seeks high earnings with high variability of
returns by investing in stocks of medium sized and some small and large
sized companies.
PUTNAM NEW OPPORTUNITIES FUND
The Putnam New Opportunities Fund seeks high earnings with high variability
of returns by investing in stocks of small, medium and some large sized
companies with good growth potential in fast-growing industries.
VANGUARD SMALL-CAP INDEX FUND
The Vanguard Small-Cap Index Fund seeks long-term growth of capital with
high variability of returns by investing in small company stocks.
VANGUARD TOTAL BOND MARKET INDEX FUND
The Vanguard Total Bond Market Index Fund seeks a high level of interest
income with low-to-moderate variability of returns by investing in U.S.
Treasury, federal agency, mortgage-backed and high-quality corporate bonds.
CORNING COMMON STOCK FUND
The Corning Common Stock Fund seeks high earnings with high variability of
returns by investing in Corning Common Stock.
8
THE CORNING INCORPORATED INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. INVESTMENTS (CONTINUED)
The number of participants in each fund category at December 31 was as
follows:
2001 2000
Fixed Income Fund $ 2,649 $ 5,230
Mutual Funds 21,725 29,316
Equity Funds 1,750 3,150
Corning Common Stock 5,148 12,509
Corning Preferred Stock - 812
As many eligible employees participate in more than one fund, the total
number of participants in the Plan is less than the sum of the number of
participants shown above. At December 31, 2001 and 2000, Plan participants
totaled 13,479 and 13,099, respectively.
The following presents the Master Trust's investments at December 31:
2001 2000
Fixed Income Funds $ 429,902 $ 447,942
Mutual Funds 376,331 431,738
Equity Funds 37,919 47,186
Corning Common Stock 244,024 1,162,412
Corning Preferred Stock 9,236 62,259
Participant Loans 19,788 20,576
------------ --------------
$ 1,117,200 $ 2,172,113
============ ==============
The fair values of investments representing 5% or more of Master Trust
assets at December 31, 2001 are as follows:
Corning Common Stock Fund $ 244,024
Pelican Fund 68,504
Vanguard Institutional Index Fund 113,832
Stable Value Fund 429,792
During 2001, the Master Trust's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value by $1,109,254 as follows:
Mutual Funds $ (56,640)
Equity Funds (6,108)
Corning Common Stock (997,070)
Corning Preferred Stock (49,436)
--------------
$ (1,109,254)
==============
During 2001, the Plan's investments earned interest and dividends in the
amount of $29,360 and $14,099, respectively.
9
THE CORNING INCORPORATED INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. INVESTMENT IN THE CORNING PREFERRED STOCK FUND
Effective September 6, 1989, the Plan was amended to reflect the creation
of a Series B Convertible Preferred Stock, $100 par value (the "Preferred
Stock") to be offered to Plan participants. The participants were given the
opportunity to designate a portion of their contributions to be invested in
the Preferred Stock.
Distributions paid and transfers from the Corning Preferred Stock Fund must
first be converted to the Company's Common Stock in whole shares only. The
conversion rate is 14.37 shares of Common Stock for each share of Preferred
Stock converted, with a minimum value of $100 (par value). Effective
October 3, 2000, a 3-for-1 stock split increased the conversion rate from
4.79 to 14.37. The $100 floor applies to all transactions involving
Preferred Stock unless the participant is under age 55 and the transaction
is a non-hardship withdrawal.
Dividends on the Preferred Stock are declared quarterly and are payable as
of the end of each calendar quarter. The dividend rate is equal to $2 per
share of preferred stock. Dividends paid on shares of Preferred Stock are
reinvested in the Stable Value Fund.
5. INVESTMENT IN THE CORNING COMMON STOCK FUND
During 2001, the Master Trust purchased 4,450,529 shares of the Company's
Common Stock at an aggregate cost of $82,787 and sold 755,863 shares for
proceeds of $18,408 resulting in realized gains of $8,571. The Master Trust
distributed 486,902 shares of Common Stock having a market value of $10,194
(cost of $6,647). The participants of the plans converted preferred shares
or contributed cash for the purchase of 1,724,619 shares of Common Stock
having a market value of $26,318 to the Master Trust. At December 31, 2001
and 2000, the Master Trust held 26,816,849 and 21,884,466 shares of Common
Stock of the Company, respectively, of which the Plan had specific
ownership of 19,365,183 and 15,247,979 shares, respectively. The activity
in the Corning Common Stock Fund prior to October 3, 2000 was adjusted for
the 3-for-1 stock split effective October 3, 2000.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right to terminate the Plan subject to the provisions of ERISA. In the
event of Plan termination, all amounts credited to participants' accounts
will become 100% vested and will be distributed to participants in
accordance with plan provisions.
7. TAX STATUS
The Plan received a favorable determination letter dated March 11, 1996
from the Internal Revenue Service indicating that it meets the requirements
of Section 401(a) and 501(a) of the Internal Revenue Code and qualifies as
a tax-exempt organization.
The Plan has been amended since receiving the determination letter.
However, the plan administrator believes that the Plan is designed and is
currently being operated in compliance with the applicable provisions of
the IRC.
10
THE CORNING INCORPORATED INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. SUBSEQUENT EVENT
On June 10, 2002, the market value of Corning Common Stock was $3.94 per
share which represented a $4.98 or 56% decrease from the December 31, 2001
market value of $8.92 per share. This decrease in the market value resulted
in an unrealized loss of approximately $96,439 for the 19,365,183 shares of
Corning Common Stock held on behalf of the Plan at December 31, 2001.
11