Corning Incorporated (NYSE:GLW) today announced that it has reached agreement with the representatives of asbestos claimants for the settlement of all current and future asbestos claims against Corning and Pittsburgh Corning Corporation (PCC), which might arise from PCC products or operations. As a result of the settlement, Corning expects to record an after-tax charge of approximately $200 million in its first quarter financial results.
James B. Flaws, vice chairman and chief financial officer, said, “While we believe we have strong legal defenses to any claims of direct liability from asbestos products, it is important to bring this matter to closure and eliminate uncertainty going forward.”
The agreement is expected to be incorporated into a settlement fund as part of a reorganization plan for PCC. The plan will be submitted to the federal bankruptcy court in Pittsburgh for approval, and is subject to a favorable vote by 75 percent of the asbestos claimants voting on the PCC reorganization plan. Corning will make its contributions to the settlement trust under the agreement after the plan is approved and no longer subject to appeal. The approval process could take one year or longer.
Corning’s settlement will require the contribution, when the plan becomes effective, of Corning’s equity interest in PCC, its one-half equity interest in Pittsburgh Corning Europe N.V., a Belgian corporation, and 25 million shares of Corning common stock. Corning also will be making cash payments with a current value of $130 million over six years beginning in June 2005. In addition, Corning will assign insurance policy proceeds from its primary insurance and a portion of its excess insurance as part of the settlement. The agreement will result in a pre-tax charge of approximately $300 million ($200 million after tax). Any significant changes in the value of Corning’s common stock contribution will need to be recognized in Corning’s quarterly results through the date of contribution to the settlement trust.
Flaws said, “The settlement is similar in construct and value to our disclosures starting in our second quarter 10Q last year, when we began discussions with the asbestos claimants. The settlement will have no impact on Corning’s operations or liquidity.”
As a result of PCC’s April 2000 bankruptcy filing, Corning recorded an after-tax charge of $36 million in the first quarter of 2000 to impair its entire investment in PCC and discontinued recognition of equity earnings. Corning has not since recorded any additional charges associated with this litigation. PCC and Pittsburgh Corning Europe are owned 50 percent by Corning and 50 percent by PPG Industries, Inc.
Established in 1851, Corning Incorporated (www.corning.com) creates leading-edge technologies that offer growth opportunities in markets that fuel the world’s economy. Corning manufactures optical fiber, cable and photonic products in its Telecommunications segment. Corning’s Technologies segment manufactures high-performance display glass, and products for the environmental, life sciences, and semiconductor markets.
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 conditions; currency exchange rates; product demand and industry capacity; competitive products and pricing; 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 telecommunications industry and other business segments; the mix of sales between premium and non-premium products; possible disruption in commercial activities due to terrorist activity and armed conflict; ability to obtain financing and capital on commercially reasonable terms; acquisition and divestiture activities; the level of excess or obsolete inventory; the ability to enforce patents; product and components performance issues; and litigation. 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.
Paul A. Rogoski
Kenneth C. Sofio