SEC Company Response from CORNING (GLW) — Nov 4, 2005
CORNING INC /NY (GLW) (CIK 0000024741)
Date: Nov. 4, 2005 · CIK: 0000024741 · Accession: 0000024741-05-000623
AI Filing Summary & Sentiment
Referenced dates: October 18, 2005
Letter
Re: Form 10-K for the Fiscal Year ended December 31, 2004 Forms 10-Q for the Fiscal Quarters ended March 31, 2005 and June 30, 2005 File No. 1-3247
November 4, 2005
Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549
Ladies and Gentlemen:
We are responding to the comments in the Securities and Exchange Commission (the "Staff") letter dated October 18, 2005 to Mr. James B. Flaws of Corning Incorporated ("Corning"). For your convenience, we have included the Staff's comments below followed by our related response.
Form 10-K for the year ended December 31, 2004 ---------------------------------------------- General -------
1. Where a comment below requests additional disclosures or other revisions to be made, please show us in your response what the revisions will look like. These revisions should be included in your future filings, including your interim filings where applicable.
2. Please disclose the types of expenses that you include in the cost of sales line item and the types of expenses that you include in the selling, general and administrative expenses line item. Please also tell us whether you include inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and the other costs of your distribution network in the cost of sales line item. With the exception of warehousing costs, if you currently exclude a portion of these costs from sales, please disclose: . in a footnote the line items that these excluded costs are included in and the amounts included in each line item for each period presented, and . in MD&A that your gross profit margins may not be comparable to those of other entities, since some entities include all of the costs related to their distribution network in cost of sales and others like you exclude a portion of them from gross profit margin, including them instead in another line item, such as selling, general and administrative expenses.
<PAGE>
Response
We do not include inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and the other costs of our distribution network in the selling, general and administrative expenses line item. These costs are included in the cost of sales line item.
The following disclosure has been included in Management's Discussion and Analysis in the Form 10-Q for September 30, 2005 under the sub-headings Cost of Sales and Selling, General and Administrative Expenses under the section entitled Results of Operations:
The types of expenses included in the cost of sales line item are: raw materials consumption, including direct and indirect materials; salaries, wages and benefits; depreciation and amortization; production utilities; production-related purchasing; warehousing (including receiving and inspection); repairs and maintenance; inter-location inventory transfer costs; production and warehousing facility property insurance; rent for production facilities; and other production overhead.
The types of expenses included in the selling, general and administrative expenses line item are: salaries, wages and benefits; travel; sales commissions; professional fees; and depreciation and amortization, utilities, and rent for administrative facilities.
We advise the Staff that the disclosure that would have been made at December 31, 2004 is the same as that presented for September 30, 2005. We will include the above disclosure in our December 31, 2005 Form 10-K and future filings as required.
Liquidity and Capital Resources -------------------------------
Contractual Obligations -----------------------
3. Please revise the table of contractual obligations to include estimated interest payments on your debt. Because the table is aimed at increasing transparency of cash flow, we believe these payments should be included in the table. Please also disclose any assumptions you made to derive these amounts.
<PAGE>
Response
Presented below is the contractual obligations schedule presented in the Management's Discussion and Analysis in the 2004 Form 10-K as revised for the addition of estimated interest obligations as requested by the staff.
<TABLE> <CAPTION> The amounts of our obligations follow (in millions): ----------------------------------------------------------------------------------------------- Amount of commitment and contingency expiration per period ------------------------------------------------------------ Less than 1 to 2 2 to 3 3 to 4 5 years and Total 1 year years years years thereafter ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Performance bonds and guarantees $ 104 $ 26 $ 2 $ 1 $ 1 $ 74 Credit facilities for equity companies 167 17 150 Stand-by letters of credit 52 42 10 Loan guarantees 12 1 11 Purchase obligations 67 49 16 2 Capital expenditure obligations 388 388 Total debt 2,694 482 16 119 411 1,666 Minimum rental commitments 223 40 32 37 39 75 Interest on long-term debt 1,404 140 129 125 121 889 ----------------------------------------------------------------------------------------------- Total other commercial commitments and contingencies $5,111 $1,168 $195 $282 $589 $2,877 ----------------------------------------------------------------------------------------------- </TABLE>
Presented below are Corning's total contractual obligations as of September 30, 2005: -------------------------------------------------------------------------------- (in millions) Total -------------------------------------------------------------------------------- Performance bonds and guarantees $ 117 Credit facilities for equity companies 165 Stand-by letters of credit 28 Loan guarantees 16 Purchase obligations 119 Capital expenditure obligations 299 Total debt 2,097 Minimum rental commitments 203 Interest on long-term debt 1,258 -------------------------------------------------------------------------------- Total other commercial commitments and contingencies $ 4,302 --------------------------------------------------------------------------------
<TABLE> <CAPTION> The distribution by year of the estimated interest obligation at September 30, 2005 is as follows: -------------------------------------------------------------------------------------------- 2009 and (in millions) Total Rest of '05 2006 2007 2008 thereafter -------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Interest on long-term debt 1,258 9 110 110 109 920 -------------------------------------------------------------------------------------------- </TABLE>
<PAGE>
The estimate of interest payments presented above as of December 31, 2004 and September 30, 2005 assume interest is paid through the date of maturity/expiration of the related debt, based upon stated rates in the respective debt instruments. In addition, accreted interest on zero coupon bonds is included in the estimate of interest payments.
We will include the estimated interest obligations and the assumptions used in determining this estimate in our contractual obligations disclosure in our annual report on Form 10-K for the year ended December 31, 2005 and in future filings as required.
Financial Statements --------------------
Note 1 - Summary of Significant Accounting Policies ---------------------------------------------------
Basis of Presentation and Principles of Consolidation -----------------------------------------------------
4. Please provide the disclosures required by paragraphs 23 through 26 of FIN 46(R), including those required for variable interest entities for which you are the primary beneficiary.
Response
Corning has a variable interest in three different variable interest entities, one of which is consolidated because we are the primary beneficiary and two which are not consolidated because we are not the primary beneficiary.
Paragraph 23 of FIN 46R, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51, Revised (FIN 46R) requires the primary beneficiary of a variable interest entity shall disclose the following (unless the primary beneficiary also holds a majority voting interest): a. The nature, purpose, size, and activities of the variable interest entity. b. The carrying amount and classification of consolidated assets that are collateral for the variable interest entity's obligations. c. Lack of recourse if creditors (or beneficial interest holders) of a consolidated variable interest entity have no recourse to the general credit of the primary beneficiary.
Paragraph 24 of FIN 46R requires an enterprise that holds a significant variable interest in a variable interest entity but is not the primary beneficiary shall --- disclose: a. The nature of its involvement with the variable interest entity and when that involvement began. b. The nature, purpose, size, and activities of the variable interest entity. c. The enterprise's maximum exposure to loss as a result of its involvement with the variable interest entity.
<PAGE>
The following disclosure has been included in our Form 10-Q for September 30, 2005 and below that is what the disclosure would have been as of December 31, 2004. Corning believes the disclosure presented is responsive to the Staff's comment and the disclosure requirements of paragraphs 23 and 24 of FIN 46R.
Disclosure included in September 30, 2005 Form 10-Q: ----------------------------------------------------
Corning leases certain transportation equipment from a Trust that qualifies as a variable interest entity under FIN 46R, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51, Revised (FIN 46R). The sole purpose of this entity is leasing transportation equipment to Corning. Since Corning is the primary beneficiary of this entity, the financial statements of the entity are included in Corning's consolidated financial statements. The entity's assets are primarily comprised of fixed assets which are collateral for the entity's borrowings. These assets, amounting to approximately $29.8 million as of September 30, 2005, are classified as long-term assets in the consolidated balance sheet.
Corning leases certain transportation equipment from two additional Trusts that qualify as variable interest entities under FIN 46R. The sole purpose of the entities is leasing transportation equipment to Corning. Corning has been involved with these entities as the lessee since the inception of the Trusts. Lease revenue generated by these Trusts was $1.6 million for each of the nine month periods ended September 30, 2005 and 2004, and $0.4 million for each of the quarters ended September 30, 2005 and 2004. Corning's maximum exposure to loss as a result of its involvement with the Trusts is estimated at approximately $16.5 million at September 30, 2005.
Disclosure as would have been disclosed in December 31, 2004 Form 10-K: -----------------------------------------------------------------------
Corning leases certain transportation equipment from a Trust that qualifies as a variable interest entity under FIN 46R, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51, Revised (FIN 46R). The sole purpose of this entity is leasing transportation equipment to Corning. Since Corning is the primary beneficiary of this entity, the financial statements of the entity are included in Corning's consolidated financial statements. Prior to 2003, Corning was not required to consolidate this entity under the accounting literature applicable at that time. The entity's assets are primarily comprised of fixed assets which are collateral for the entity's borrowings. These assets, amounting to approximately $30.4 million as of December 31, 2004, are classified as long-term assets in the consolidated balance sheet.
Corning leases certain transportation equipment from two additional Trusts that qualify as variable interest entities under FIN 46R. The sole purpose of the entities is leasing transportation equipment to Corning. Corning has been involved with these entities as the lessee since the inception of the Trusts. Lease revenue generated by these Trusts was $1.6 million and $1.3 million for the years ended December 31, 2004 and 2003, respectively. Corning's maximum exposure to loss as a result of its involvement with the Trusts is estimated at approximately $17.3 million and $18.3 million at December 31, 2004 and 2003, respectively.
<PAGE>
We will continue to make the disclosures required by paragraphs 23 and 24 of FIN 46R for variable interest entities that Corning is involved with in future filings as required.
Paragraph 25 of FIN 46R indicates that disclosures required by Statement 140 about a variable interest entity shall be included in the same note to the financial statements as the information required by FIN 46R. Corning is not party to any FAS 140 transactions and as such no disclosure has been made for paragraph 25 of FIN 46R.
None of the conditions described in paragraph 4(g) of FIN 46R apply to Corning's VIE relationships.
Foreign Currency Translation and Transactions ---------------------------------------------
5. Please tell us the significant changes in economic facts and circumstances that led you to determine it was appropriate to change the functional currency of your Taiwanese subsidiary from the new Taiwan dollar to the Japanese yen in accordance with par
Show Raw Text
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
November 4, 2005
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form 10-K for the Fiscal Year ended December 31, 2004
Forms 10-Q for the Fiscal Quarters ended March 31, 2005 and
June 30, 2005
File No. 1-3247
Ladies and Gentlemen:
We are responding to the comments in the Securities and Exchange Commission (the
"Staff") letter dated October 18, 2005 to Mr. James B. Flaws of Corning
Incorporated ("Corning"). For your convenience, we have included the Staff's
comments below followed by our related response.
Form 10-K for the year ended December 31, 2004
----------------------------------------------
General
-------
1. Where a comment below requests additional disclosures or other revisions to
be made, please show us in your response what the revisions will look like.
These revisions should be included in your future filings, including your
interim filings where applicable.
2. Please disclose the types of expenses that you include in the cost of sales
line item and the types of expenses that you include in the selling,
general and administrative expenses line item. Please also tell us whether
you include inbound freight charges, purchasing and receiving costs,
inspection costs, warehousing costs, internal transfer costs, and the other
costs of your distribution network in the cost of sales line item. With the
exception of warehousing costs, if you currently exclude a portion of these
costs from sales, please disclose:
. in a footnote the line items that these excluded costs are included in
and the amounts included in each line item for each period presented,
and
. in MD&A that your gross profit margins may not be comparable to those
of other entities, since some entities include all of the costs
related to their distribution network in cost of sales and others like
you exclude a portion of them from gross profit margin, including them
instead in another line item, such as selling, general and
administrative expenses.
<PAGE>
Response
We do not include inbound freight charges, purchasing and receiving costs,
inspection costs, warehousing costs, internal transfer costs, and the other
costs of our distribution network in the selling, general and administrative
expenses line item. These costs are included in the cost of sales line item.
The following disclosure has been included in Management's Discussion and
Analysis in the Form 10-Q for September 30, 2005 under the sub-headings Cost of
Sales and Selling, General and Administrative Expenses under the section
entitled Results of Operations:
The types of expenses included in the cost of sales line item are: raw materials
consumption, including direct and indirect materials; salaries, wages and
benefits; depreciation and amortization; production utilities;
production-related purchasing; warehousing (including receiving and inspection);
repairs and maintenance; inter-location inventory transfer costs; production and
warehousing facility property insurance; rent for production facilities; and
other production overhead.
The types of expenses included in the selling, general and administrative
expenses line item are: salaries, wages and benefits; travel; sales commissions;
professional fees; and depreciation and amortization, utilities, and rent for
administrative facilities.
We advise the Staff that the disclosure that would have been made at December
31, 2004 is the same as that presented for September 30, 2005. We will include
the above disclosure in our December 31, 2005 Form 10-K and future filings as
required.
Liquidity and Capital Resources
-------------------------------
Contractual Obligations
-----------------------
3. Please revise the table of contractual obligations to include estimated
interest payments on your debt. Because the table is aimed at increasing
transparency of cash flow, we believe these payments should be included in
the table. Please also disclose any assumptions you made to derive these
amounts.
<PAGE>
Response
Presented below is the contractual obligations schedule presented in the
Management's Discussion and Analysis in the 2004 Form 10-K as revised for the
addition of estimated interest obligations as requested by the staff.
<TABLE>
<CAPTION>
The amounts of our obligations follow (in millions):
-----------------------------------------------------------------------------------------------
Amount of commitment and contingency expiration per period
------------------------------------------------------------
Less than 1 to 2 2 to 3 3 to 4 5 years and
Total 1 year years years years thereafter
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Performance bonds
and guarantees $ 104 $ 26 $ 2 $ 1 $ 1 $ 74
Credit facilities for
equity companies 167 17 150
Stand-by letters
of credit 52 42 10
Loan guarantees 12 1 11
Purchase obligations 67 49 16 2
Capital expenditure
obligations 388 388
Total debt 2,694 482 16 119 411 1,666
Minimum rental
commitments 223 40 32 37 39 75
Interest on long-term
debt 1,404 140 129 125 121 889
-----------------------------------------------------------------------------------------------
Total other
commercial
commitments
and contingencies $5,111 $1,168 $195 $282 $589 $2,877
-----------------------------------------------------------------------------------------------
</TABLE>
Presented below are Corning's total contractual obligations as of September 30,
2005:
--------------------------------------------------------------------------------
(in millions) Total
--------------------------------------------------------------------------------
Performance bonds and guarantees $ 117
Credit facilities for equity companies 165
Stand-by letters of credit 28
Loan guarantees 16
Purchase obligations 119
Capital expenditure obligations 299
Total debt 2,097
Minimum rental commitments 203
Interest on long-term debt 1,258
--------------------------------------------------------------------------------
Total other commercial commitments and contingencies $ 4,302
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The distribution by year of the estimated interest obligation at September 30,
2005 is as follows:
--------------------------------------------------------------------------------------------
2009 and
(in millions) Total Rest of '05 2006 2007 2008 thereafter
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest on long-term debt 1,258 9 110 110 109 920
--------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The estimate of interest payments presented above as of December 31, 2004 and
September 30, 2005 assume interest is paid through the date of
maturity/expiration of the related debt, based upon stated rates in the
respective debt instruments. In addition, accreted interest on zero coupon bonds
is included in the estimate of interest payments.
We will include the estimated interest obligations and the assumptions used in
determining this estimate in our contractual obligations disclosure in our
annual report on Form 10-K for the year ended December 31, 2005 and in future
filings as required.
Financial Statements
--------------------
Note 1 - Summary of Significant Accounting Policies
---------------------------------------------------
Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
4. Please provide the disclosures required by paragraphs 23 through 26 of FIN
46(R), including those required for variable interest entities for which
you are the primary beneficiary.
Response
Corning has a variable interest in three different variable interest entities,
one of which is consolidated because we are the primary beneficiary and two
which are not consolidated because we are not the primary beneficiary.
Paragraph 23 of FIN 46R, Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51, Revised (FIN 46R)
requires the primary beneficiary of a variable interest entity shall disclose
the following (unless the primary beneficiary also holds a majority voting
interest):
a. The nature, purpose, size, and activities of the variable interest entity.
b. The carrying amount and classification of consolidated assets that are
collateral for the variable interest entity's obligations.
c. Lack of recourse if creditors (or beneficial interest holders) of a
consolidated variable interest entity have no recourse to the general
credit of the primary beneficiary.
Paragraph 24 of FIN 46R requires an enterprise that holds a significant variable
interest in a variable interest entity but is not the primary beneficiary shall
---
disclose:
a. The nature of its involvement with the variable interest entity and when
that involvement began.
b. The nature, purpose, size, and activities of the variable interest entity.
c. The enterprise's maximum exposure to loss as a result of its involvement
with the variable interest entity.
<PAGE>
The following disclosure has been included in our Form 10-Q for September 30,
2005 and below that is what the disclosure would have been as of December 31,
2004. Corning believes the disclosure presented is responsive to the Staff's
comment and the disclosure requirements of paragraphs 23 and 24 of FIN 46R.
Disclosure included in September 30, 2005 Form 10-Q:
----------------------------------------------------
Corning leases certain transportation equipment from a Trust that qualifies as a
variable interest entity under FIN 46R, Consolidation of Variable Interest
Entities, an Interpretation of Accounting Research Bulletin No. 51, Revised (FIN
46R). The sole purpose of this entity is leasing transportation equipment to
Corning. Since Corning is the primary beneficiary of this entity, the financial
statements of the entity are included in Corning's consolidated financial
statements. The entity's assets are primarily comprised of fixed assets which
are collateral for the entity's borrowings. These assets, amounting to
approximately $29.8 million as of September 30, 2005, are classified as
long-term assets in the consolidated balance sheet.
Corning leases certain transportation equipment from two additional Trusts that
qualify as variable interest entities under FIN 46R. The sole purpose of the
entities is leasing transportation equipment to Corning. Corning has been
involved with these entities as the lessee since the inception of the Trusts.
Lease revenue generated by these Trusts was $1.6 million for each of the nine
month periods ended September 30, 2005 and 2004, and $0.4 million for each of
the quarters ended September 30, 2005 and 2004. Corning's maximum exposure to
loss as a result of its involvement with the Trusts is estimated at
approximately $16.5 million at September 30, 2005.
Disclosure as would have been disclosed in December 31, 2004 Form 10-K:
-----------------------------------------------------------------------
Corning leases certain transportation equipment from a Trust that qualifies as a
variable interest entity under FIN 46R, Consolidation of Variable Interest
Entities, an Interpretation of Accounting Research Bulletin No. 51, Revised (FIN
46R). The sole purpose of this entity is leasing transportation equipment to
Corning. Since Corning is the primary beneficiary of this entity, the financial
statements of the entity are included in Corning's consolidated financial
statements. Prior to 2003, Corning was not required to consolidate this entity
under the accounting literature applicable at that time. The entity's assets are
primarily comprised of fixed assets which are collateral for the entity's
borrowings. These assets, amounting to approximately $30.4 million as of
December 31, 2004, are classified as long-term assets in the consolidated
balance sheet.
Corning leases certain transportation equipment from two additional Trusts that
qualify as variable interest entities under FIN 46R. The sole purpose of the
entities is leasing transportation equipment to Corning. Corning has been
involved with these entities as the lessee since the inception of the Trusts.
Lease revenue generated by these Trusts was $1.6 million and $1.3 million for
the years ended December 31, 2004 and 2003, respectively. Corning's maximum
exposure to loss as a result of its involvement with the Trusts is estimated at
approximately $17.3 million and $18.3 million at December 31, 2004 and 2003,
respectively.
<PAGE>
We will continue to make the disclosures required by paragraphs 23 and 24 of FIN
46R for variable interest entities that Corning is involved with in future
filings as required.
Paragraph 25 of FIN 46R indicates that disclosures required by Statement 140
about a variable interest entity shall be included in the same note to the
financial statements as the information required by FIN 46R. Corning is not
party to any FAS 140 transactions and as such no disclosure has been made for
paragraph 25 of FIN 46R.
None of the conditions described in paragraph 4(g) of FIN 46R apply to Corning's
VIE relationships.
Foreign Currency Translation and Transactions
---------------------------------------------
5. Please tell us the significant changes in economic facts and circumstances
that led you to determine it was appropriate to change the functional
currency of your Taiwanese subsidiary from the new Taiwan dollar to the
Japanese yen in accordance with par