10 December 2002 -- Fibre-optic cable manufacturer Corning Inc plans to record USD800-825m in additional pre-tax non-cash charges in its Q4/2002 results in January.
These will include about USD400m for goodwill impairment in its telecom segment and USD400-425m for the impairment of assets in its television glass and photonics businesses. The charge of about USD150m related to its conventional glass business reflects the impact of a decline in the North American television tube industry. The charges of USD250-275m for its photonics business reflect the very significant decline and the prolonged expected downturn in the optical components marketplace.
The move comes as a result of Corning's annual assessment of goodwill, as required by the Financial Accounting Standards Board. At the end of Q3/2002, Corning had USD2.1bn in goodwill, with about USD1.9bn related to the telecoms segment. "The goodwill charge is consistent with what we told investors they might expect during our third-quarter conference call," said James B Flaws, vice chairman and chief financial officer.
The latest charges are in addition to a USD550-650m charge announced at the end of October. The initial charge was designed to cover lay-offs and the closure of its optical fibre plants in Australia and Germany, as well as the closure of its facility in Concord, NC, USA.
"Our outlook does not anticipate any significant growth in the telecommunications segment until late 2004," said Flaws. "However, we expect longer-term improvement as bandwidth demand continues to grow, absorbing existing network capacity. This recovery could be enhanced by public policy changes, consolidation of the industry and the introduction of new broadband applications."
Corning has reported six consecutive quarterly losses and warned that it wouldn't meet its Q4 financial targets and will cut 2,200 jobs. The company expects its workforce to be down to 23,500 when the restructuring is complete.
The company reiterated that its restructuring will return it to profitability in 2003. "We are prepared to do more if necessary," Flaws added.