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) February 7, 2006
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 2.02. Results of Operations and Financial Condition
Item 8.01. Voluntary Disclosure of Other Events
On January 1, 2006, Corning changed its measurement of segment profit or loss
for the following items:
.. We removed the net impact of financing costs, such as interest expense on
debt instruments and interest costs associated with benefit plans, from
reportable segments and included these amounts in Corporate unallocated
expense.
.. We changed the allocation method for taxes to more closely reflect the
company's current tax position.
.. We removed the impact of non-cash stock compensation expense from
reportable segments and included this amount in Corporate unallocated
expense.
.. We removed the allocation of exploratory research, development and
engineering expense from the reportable segments and included these amounts
in Corporate unallocated expense.
.. We changed certain other expense allocation methods for Corporate
functions.
The following provides historical segment information reflecting these changes
in the measurement of segment profit or loss for 2005, 2004 and 2003 and
quarterly information for 2005.
Our reportable operating segments follow:
.. Display Technologies - manufactures liquid crystal display glass for flat
panel displays;
.. Telecommunications - manufactures optical fiber and cable and hardware and
equipment components for the telecommunications industry;
.. Environmental Technologies - manufactures ceramic substrates and filters
for automobile and diesel applications; and
.. Life Sciences - manufactures glass and plastic consumables for scientific
applications.
The Environmental Technologies reportable segment is an aggregation of our
Automotive and Diesel operating segments, as these two segments share similar
economic characteristics, products, customer types, production processes and
distribution methods.
All other operating segments that do not meet the quantitative threshold for
separate reporting have been grouped as "Other Segments."
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: February 7, 2006 By /s/ KATHERINE A. ASBECK
-------------------------------
Katherine A. Asbeck
Senior Vice President - Finance
Operating Segments (in millions)
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Display Telecom- Environmental Life Other
Technologies munications Technologies Sciences Segments Total
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For the year ended December 31, 2005
Net sales $ 1,742 $ 1,623 $ 580 $ 282 $ 352 $ 4,579
Depreciation (1) $ 185 $ 180 $ 70 $ 20 $ 35 $ 490
Amortization of purchased intangibles $ 13 $ 13
Research, development and engineering expenses (2) $ 107 $ 76 $ 102 $ 40 $ 28 $ 353
Restructuring, impairment and other charges and
(credits) (before-tax and minority interest) $ (47) $ (16) $ (63)
Income tax provision $ (122) $ (15) $ (5) $ (2) $ (3) $ (147)
Earnings (loss) before minority interest and equity
earnings (loss) (3) $ 823 $ 61 $ 15 $ (4) $ 19 $ 914
Minority interests (4) $ 2 $ (9) $ (7)
Equity in earnings (loss) of associated companies (5) $ 416 $ 5 $ (76) $ 345
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Net income (loss) $ 1,239 $ 68 $ 15 $ (4) $ (66) $ 1,252
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Investment in associated companies, at equity $ 860 $ 11 $ 31 $ 296 $ 1,198
Segment assets (6) $ 3,626 $ 1,153 $ 726 $ 137 $ 573 $ 6,215
Capital expenditures $ 1,250 $ 43 $ 171 $ 17 $ 25 $ 1,506
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For the year ended December 31, 2004
Net sales $ 1,113 $ 1,539 $ 548 $ 304 $ 350 $ 3,854
Depreciation (1) $ 129 $ 209 $ 63 $ 20 $ 51 $ 472
Amortization of purchased intangibles $ 37 $ 37
Research, development and engineering expenses (2) $ 70 $ 69 $ 76 $ 27 $ 32 $ 274
Restructuring, impairment and other charges and
(credits) (before-tax and minority interest) $ 1,798 $ (6) $ 1,792
Income tax (provision) benefit $ (71) $ (25) $ (40) $ (30) $ 12 $ (154)
Earnings (loss) before minority interest and equity
earnings (loss) (3) $ 429 $(1,843) $ 20 $ 16 $ (23) $(1,401)
Minority interests (4) $ 2 $ (18) $ (16)
Equity in earnings (loss) of associated companies (5) $ 288 $ (33) $ 1 $ 72 $ 328
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Income (loss) from continuing operations $ 717 $(1,874) $ 21 $ 16 $ 30 $(1,090)
Discontinued operations $ 20 $ 20
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Net income (loss) $ 717 $(1,874) $ 21 $ 16 $ 50 $(1,070)
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Investment in associated companies, at equity $ 582 $ 23 $ 31 $ 441 $ 1,077
Segment assets (6) $ 2,470 $ 1,341 $ 587 $ 123 $ 724 $ 5,245
Capital expenditures $ 640 $ 32 $ 124 $ 11 $ 26 $ 833
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For the year ended December 31, 2003
Net sales $ 595 $ 1,426 $ 476 $ 281 $ 312 $ 3,090
Depreciation (1) $ 97 $ 245 $ 55 $ 21 $ 52 $ 470
Amortization of purchased intangibles $ 37 $ 37
Research, development and engineering expenses (2) $ 48 $ 108 $ 74 $ 20 $ 41 $ 291
Restructuring, impairment and other charges and
(credits) (before-tax and minority interest) $ (36) $ 133 $ 97
Income tax (provision) benefit $ (69) $ 68 $ (22) $ (15) $ 70 $ 32
Earnings (loss) before minority interest and equity
earnings (loss) (3) $ 130 $ (108) $ 43 $ 31 $ (190) $ (94)
Minority interests (4) $ 75 $ 75
Equity in earnings (loss) of associated companies (5) $ 144 $ (11) $ (7) $ 126
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Net income (loss) $ 274 $ (120) $ 43 $ 31 $ (122) $ 106
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Investment in associated companies, at equity $ 299 $ 59 $ 30 $ 383 $ 771
Segment assets (6) $ 1,297 $ 1,848 $ 485 $ 111 $ 720 $ 4,461
Capital expenditures $ 251 $ 15 $ 69 $ 7 $ 23 $ 365
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(1) Depreciation expense for Corning's reportable segments includes an
allocation of depreciation of corporate property not specifically
identifiable to a segment.
(2) Research, development, and engineering expenses includes direct project
spending which is identifiable to a segment.
(3) Many of Corning's administrative and staff functions are performed on a
centralized basis. Where practicable, Corning charges these expenses to
segments based upon the extent to which each business uses a centralized
function. Other staff functions, such as corporate finance, human resources
and legal are allocated to segments, primarily as a percentage of sales.
(4) Minority interests included the impact of the following restructuring,
impairment, and other charges (credits):
. In 2004, gains from the sale of assets of Corning Asahi Video (CAV) in
excess of assumed salvage value of $17 million, and reversals of CAV
severance reserves of $2 million.
. In 2003, impairment charges for long-lived assets of CAV and exit
costs of $57 million.
(5) Equity in earnings of associated companies, net of impairments includes the
following restructuring and impairment charges:
. In 2004 and 2003, charges of $35 million and $7 million, respectively,
to impair equity method investments in the Telecommunications segment
to their estimated fair value.
. In 2005 and 2003, $106 million and $66 million, respectively, to
reflect our share of Samsung Corning Co., Ltd.'s asset impairment
charges.
(6) Segment assets include inventory, accounts receivable, property and
associated equity companies and cost investments.
A reconciliation of reportable segment net income (loss) to consolidated net
income (loss) follows (in millions):
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Years ended December 31,
---------------------------------------
2005 2004 2003
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Net income (loss) of reportable segments $ 1,252 $ (1,070) $ 106
Unallocated amounts:
Net financing costs (1) (101) (172) (155)
Stock-based compensation expense (37) (11) (1)
Exploratory research (77) (68) (43)
Corporate contributions (24) (17) (24)
Equity in earnings of associated companies, net of impairments (2) 253 116 82
Asbestos settlement (3) (197) (33) (413)
Other corporate items (4) (484) (910) 225
-------- --------- --------
Net income (loss) $ 585 $ (2,165) $ (223)
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(1) Net financing costs include interest expense, interest income, and interest
costs and investment gains associated with benefit plans.
(2) Equity in earnings of associated companies, net of impairments represents
equity in earnings of Dow Corning Corporation which includes the following
items:
. In 2005, a gain of $11 million which represents our share of Dow
Corning's gain on the issuance of subsidiary stock.
. In 2004, charges of $21 million which represents our share of Dow
Corning's charges related to restructuring actions and adjustments to
interest liabilities recorded on its emergence from bankruptcy.
(3) As part of Corning's asbestos settlement arrangement to be incorporated
into the Pittsburgh Corning Corporation reorganization plan, Corning will
contribute, when the reorganization plan becomes effective, 25 million
shares of Corning common stock to a trust. This portion of the asbestos
liability requires adjustment based upon movements in Corning's common
stock price prior to contribution of the shares to the trust. In 2005,
2004, and 2003, Corning recorded a charge of $197 million, $33 million, and
$115 million, respectively, to reflect the movement in Corning's common
stock price in each year. In 2003, Corning also recorded a charge of $298
million to reflect the initial liability based on the terms of the
settlement agreement.
(4) Other corporate items include the tax impact of the unallocated amounts and
the following significant items:
. In 2005, an impairment charge of $25 million for the
other-than-temporary decline in our investment in Avanex below its
cost basis; a loss of $16 million associated with the redemption or
retirement of debt; a net $443 million charge to tax expense which
included a $525 million increase to our valuation allowance against
deferred tax assets resulting from our conclusion that the sale of an
appreciated asset no longer met the criteria established by SFAS No.
109, "Accounting for Income Taxes" (SFAS No. 109) for a viable tax
planning strategy offset by an $82 million credit to tax expense
primarily related to the tax impact of eliminating the minimum pension
liability associated with our domestic defined benefit plan.
. In 2004, a $937 million charge to tax expense as a result of the
company's decision to provide a valuation allowance against a
significant portion of its deferred tax assets and a loss of $36
million associated with the retirement of significant portion of
Corning's long-term debt.
A reconciliation of reportable segment assets to consolidated assets follows (in
millions):
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Years ended December 31,
--------------------------------------
2005 2004 2003
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Assets of reportable segments $ 6,215 $ 5,245 $ 4,461
Corporate and unallocated assets 4,960 4,465 6,291
-------- ------- --------
Consolidated assets $ 11,175 $ 9,710 $ 10,752
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Operating Segments - 2005 Quarterly Information (in millions)
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Display Telecom- Environmental Life Other
Technologies munications Technologies Sciences Segments Total
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For the three months ended March 31, 2005
Net sales $ 320 $ 427 $ 148 $ 74 $ 81 $ 1,050
Depreciation (1) $ 41 $ 46 $ 17 $ 5 $ 9 $ 118
Amortization of purchased intangibles $ 5 $ 5
Research, development and engineering expenses (2) $ 21 $ 17 $ 23 $ 8 $ 7 $ 76
Income tax provision $ (8) $ (8) $ (3) $ (1) $ (2) $ (22)
Earnings (loss) before minority interest and equity
earnings (loss) (3) $ 119 $ 18 $ 9 $ 4 $ 3 $ 153
Minority interests $ (2) $ (2)
Equity in earnings (loss) of associated companies (4) $ 81 $ 17 $ 98
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Net income (loss) $ 200 $ 18 $ 9 $ 4 $ 18 $ 249
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For the three months ended June 30, 2005
Net sales $ 415 $ 415 $ 146 $ 75 $ 90 $ 1,141
Depreciation (1) $ 44 $ 46 $ 18 $ 5 $ 9 $ 122
Amortization of purchased intangibles $ 2 $ 2
Research, development and engineering expenses (2) $ 24 $ 19 $ 26 $ 9 $ 6 $ 84
Restructuring, impairment and other charges and
(credits) (before-tax and minority interest) $ 8 $ (15) $ (7)
Income tax provision $ (33) $ (7) $ (3) $ (1) $ (2) $ (46)
Earnings (loss) before minority interest and equity
earnings (loss) (3) $ 199 $ (10) $ 4 $ 1 $ 17 $ 211
Minority interests $ (5) $ (5)
Equity in earnings (loss) of associated companies (4) $ 87 $ 1 $ 8 $ 96
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Net income (loss) $ 286 $ (8) $ 4 $ 1 $ 20 $ 303
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For the three months ended September 30, 2005
Net sales $ 489 $ 398 $ 144 $ 70 $ 87 $ 1,188
Depreciation (1) $ 48 $ 46 $ 18 $ 5 $ 8 $ 125
Amortization of purchased intangibles $ 3 $ 3
Research, development and engineering expenses (2) $ 29 $ 21 $ 26 $ 11 $ 7 $ 94
Restructuring, impairment and other charges and
(credits) (before-tax and minority interest) $ 28 $ 28
Income tax (provision) benefit $ (35) $ 2 $ 1 $ 1 $ (31)
Earnings (loss) before minority interest and equity
earnings (loss) (3) $ 268 $ (23) $ 9 $ (1) $ 1 $ 254
Minority interests $ 1 $ (2) $ (1)
Equity in earnings (loss) of associated companies (4) $ 117 $ 6 $ (107) $ 16
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Net income (loss) $ 385 $ (17) $ 9 $ (1) $ (108) $ 268
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For the three months ended December 31, 2005
Net sales $ 518 $ 383 $ 142 $ 63 $ 94 $ 1,200
Depreciation (1) $ 52 $ 42 $ 17 $ 5 $ 9 $ 125
Amortization of purchased intangibles $ 3 $ 3
Research, development and engineering expenses (2) $ 33 $ 19 $ 27 $ 12 $ 8 $ 99
Restructuring, impairment and other charges and
(credits) (before-tax and minority interest) $ (84) $ (84)
Income tax provision $ (46) $ (2) $ (48)
Earnings (loss) before minority interest and equity
earnings (loss) (3) $ 237 $ 76 $ (7) $ (8) $ (2) $ 296
Minority interests $ 1 $ 1
Equity in earnings (loss) of associated companies (4) $ 131 $ (1) $ 6 $ 136
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Net income (loss) $ 368 $ 75 $ (7) $ (8) $ 4 $ 432
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(1) Depreciation expense for Corning's reportable segments includes an
allocation of depreciation of corporate property not specifically
identifiable to a segment.
(2) Research, development, and engineering expenses includes direct project
spending which is identifiable to a segment.
(3) Many of Corning's administrative and staff functions are performed on a
centralized basis. Where practicable, Corning charges these expenses to
segments based upon the extent to which each business uses a centralized
function. Other staff functions, such as corporate finance, human
resources, and legal are allocated to segments, primarily as a percentage
of sales.
(4) Equity in earnings of associated companies, net of impairments includes a
charge of $106 million in the third quarter to reflect our share of Samsung
Corning Co., Ltd.'s asset impairment charges.
A reconciliation of reportable segment net income to consolidated net income
(loss) follows (in millions):
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Three months ended
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March 31, June 30, September 30, December 31,
2005 2005 2005 2005
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Net income of reportable segments $ 249 $ 303 $ 268 $ 432
Unallocated amounts:
Net financing costs (1) (39) (26) (20) (17)
Stock-based compensation expense (6) (9) (12) (10)
Exploratory research (19) (17) (20) (22)
Corporate contributions (5) (7) (6) (6)
Equity in earnings of associated companies,
net of impairments (2) 68 77 58 50
Asbestos settlement (3) 16 (137) (68) (8)
Other corporate items (4) (15) (19) 3 (451)
------- ------ ------- -------
Net income (loss) $ 249 $ 165 $ 203 $ (32)
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(1) Net financing costs include interest expense, interest income, and interest
costs and investment gains associated with benefit plans.
(2) Equity in earnings of associated companies, net of impairments represents
equity in earnings of Dow Corning Corporation which includes a gain of $11
million in the first quarter which represents our share of Dow Corning's
gain on the issuance of subsidiary stock.
(3) As part of Corning's asbestos settlement arrangement to be incorporated
into the Pittsburgh Corning Corporation reorganization plan, Corning will
contribute, when the reorganization plan becomes effective, 25 million
shares of Corning common stock to a trust. This portion of the asbestos
liability requires adjustment based upon quarterly movements in Corning's
common stock price prior to contribution of the shares to the trust.
(4) Other corporate items include the tax impact of the unallocated amounts and
the following significant item:
. In the fourth quarter, a net $443 million charge to tax expense in
2005 which included a $525 million charge to increase our valuation
allowance against deferred tax assets resulting from our conclusion
that the sale of an appreciated asset no longer met the criteria
established by SFAS No. 109 for a viable tax planning strategy offset
by an $82 million credit to tax expense primarily related to the tax
impact of eliminating the minimum pension liability associated with
our domestic defined benefit plan.