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Copyright

Corning: Convertible Preferred Stock


Harvard Business School Case 9-206-018
Courseware 9-208-706
This courseware was prepared solely as the basis for class discussion. Cases are not intended to
serve as endorsements, sources of primary data, or illustrations of effective or ineffective
management. Copyright 2007 President and Fellows of Harvard College. No part of this product
may be reproduced, stored in a retrieval system, used in a spreadsheet or transmitted in any form or
by any meanselectronic, mechanical, photocopying, recording or otherwisewithout the permission
of Harvard Business School.

Exhibit 5 Balance Sheet ($M)


Dec-91

Dec-92

Dec-93

Dec-94

Dec-95

Dec-96

Cash and Equivalents


Net Receivables
Inventories
Prepaid Expenses
Other Current Assets
Total Current Assets

208
583
316
0
123
1,229

133
662
346
0
148
1,289

161
691
354
0
266
1,472

161
947
417
0
201
1,726

215
932
468
0
219
1,834

223
566
499
0
131
1,419

Gross Property, Plant and Equipment


Accumulated Depreciation
Net Property, Plant, and Equipment
Investments at Equity
Other Investments
Intangibles
Other Assets

2,810
1,380
1,430
920
12
199
64

3,108
1,503
1,605
926
18
221
227

3,362
1,602
1,760
587
44
1,009
360

3,618
1,728
1,891
660
33
1,408
304

3,948
1,916
2,032
344
32
1,416
329

3,771
1,793
1,978
314
23
330
257

Total Assets

3,853

4,286

5,232

6,023

5,987

4,321

Long Term Debt Due in One Year


Notes Payable
Accounts Payable
Taxes Payable
Accrued Expenses
Other Current Liabilities
Total Current Liabilities

17
68
203
61
301
360
708

49
54
215
40
402
465
824

36
106
245
18
461
616
1,020

44
24
258
40
606
708
1,074

141
5
255
109
592
655
1,165

52
2
269
99
386
386
808

Long-Term Debt
Minority Interest
Other Liabilities

700
115
282

816
241
575

1,586
246
669

1,406
611
644

1,393
637
665

1,209
676
646

Preferred Stock
Common Equity
Total Equity

28
2,019
2,047

27
1,804
1,831

26
1,686
1,712

25
2,263
2,288

24
2,103
2,127

22
961
983

Total Liabilities And Equity

3,853

4,286

5,232

6,023

5,987

4,321

Source: Securities Data Corp.

Dec-97

Dec-98

Dec-99

Dec-00

1-Dec

Jun02 E

97
560
428
0
114
1,199

45
636
459
0
170
1,310

280
872
602
0
229
1,984

1,794
1,490
1,040
0
311
4,634

2,219
593
725
0
570
4,107

1,323
605
671
0
733
3,332

4,001
1,733
2,268
293
17
294
621

4,679
1,994
2,685
313
53
310
311

5,559
2,357
3,202
422
83
507
329

7,341
2,662
4,679
479
156
7,340
238

8,164
3,067
5,097
636
142
2,289
522

8,059
3,302
4,757
666
74
390
2,667

4,692

4,982

6,526

17,526

12,793

11,886

46
167
300
113
332
332
958

135
70
292
160
357
419
1,075

46
375
418
115
498
600
1,554

128
0
855
186
780
780
1,949

244
233
441
139
937
937
1,994

53
4
310
1,052
1,052
1,419

1,126
715
628

998
711
674

1,490
285
721

3,966
139
830

4,461
119
798

4,285
107
993

20
1,247
1,266

18
1,506
1,524

14
2,463
2,476

9
10,633
10,642

7
5,414
5,421

7
5,075
5,082

4,692

4,982

6,526

17,526

12,793

11,886

Exhibit 6 Income Statement ($M)


Dec-91

Dec-92

Dec-93

Dec-94

Dec-95

Dec-96

3,287
1,880
753
654

3,744
2,161
843
740

4,035
2,321
947
767

4,799
2,723
1,049
1,028

5,346
3,009
1,273
1,064

3,685
1,971
831
883

Depreciation, Depletion & Amortization


Operating Profit

248
406

258
482

285
482

338
690

377
687

288
595

Interest Expense
Non-Operating Income/Expense
Special Items
Pretax Income

60
86
8
439

69
24
-56
380

94
-149
-203
37

122
23
-82
508

128
-307
-67
184

87
65
0
572

Total Income Taxes


Minority Interest
After-Tax Income

111
17
311

93
22
266

35
17
-15

170
57
281

155
81
-51

163
66
343

6
0

-279
0

0
0

0
0

0
0

0
-167

Net Income

317

-13

-15

281

-51

176

Preferred Dividends
Available for Common

2
309

2
264

2
-17

2
279

2
-53

2
341

Sales
Cost of Goods Sold
Selling, General & Administrative Expense
Operating Income Before Depreciation

Extraordinary Items
Discontinued Operations

Source: Securities Data Corp.

Dec-97

Dec-98

Dec-99

Dec-00

1-Dec

Jun02 E

3,554
1,756
792
1,006

3,532
1,856
782
895

4,783
2,550
1,046
1,187

7,162
3,611
1,587
1,963

6,272
3,739
1,728
805

1,666
957
633
76

286
720

298
597

408
779

765
1,198

1,080
-275

363
-287

97
85
0
708

104
86
-45
535

135
114
29
787

163
297
-492
840

202
239
-5,725
-5,963

92
70
-426
-735

210
90
409

133
75
328

207
69
511

407
24
410

-452
-13
-5,498

-234
-12
-981

0
31

0
67

0
5

0
13

0
0

0
29

440

394

516

422

-5,498

-952

2
407

2
326

1
510

1
409

1
-5,499

0
-489

Exhibit 7 Cash Flow Statement ($M)


Dec-91

Dec-92

Dec-93

Dec-94

Income Before Extraordinary Items


Depreciation and Amortization
Extraordinary Items and Discontinued Operations
Deferred Taxes
Equity in Net Loss
Sale of Property, Plant, Equipment and InvestmentsLoss (Gain)
Funds from Operations
Receivables-Decrease (Increase)
Inventory-Decrease (Increase)
Other Assets and Liabilities-Net Change

311
231
0
0
-34

266
248
0
0
37

-15
280
0
-84
167

281
338
0
17
-1

-5
28
-60
-4
3

6
47
-50
-29
-30

6
173
35
6
22

-12
99
-218
-38
-65

Cash Flow from Operating Activities

471

495

590

402

Increase in Investments
Increase in Short-Term Investments
Capital Expenditures
Acquisitions
Other Investing Activities

77
0
313
4
-34

53
0
377
124
-136

18
0
443
450
-7

14
0
387
387
-228

-360

-419

-904

-560

Sale of Common and Preferred Stock


Purchase of Common and Preferred Stock
Cash Dividends
Long-Term Debt-Issuance
Long-Term Debt-Reduction
Other Financing Activities

22
-68
-95
133
-27
0

16
-101
-179
140
-22
0

14
-59
-136
1,021
-501
0

248
0
-152
237
-609
431

Cash Flow from Financing Activities

-34

-146

339

155

-3
75

-5
-75

3
28

3
1

Cash Flow from Investing Activities

Exchange Rate Effect


Cash and Equivalents-Change

Source: Securities Data Corp.

Dec-95

Dec-96

Dec-97

Dec-98

Dec-99

Dec-00

1-Dec

Jun02 E

-51
377
0
-42
356

343
288
-188
19
3

409
286
22
-10
-14

328
298
-172
-4
-32

511
408
-13
36
-61

410
765
-2
-48
-141

-5,498
1,080
-9
-511
-94

-460
351
0
-107
28

13
75
16
-48
2

7
40
-75
-71
50

-6
80
-70
-70
49

9
105
-56
-7
-3

-21
60
-152
-81
149

10
828
0
0
-402

0
6,227
677
-51
-385

0
241
10
27
-238

699

415

676

466

836

1,420

1,436

-148

28
0
495
41
-21

13
0
598
15
-706

9
0
746
32
-73

102
0
714
44
-734

38
0
757
188
-50

0
0
1,525
5,009
15

0
467
1,800
66
42

9
-801
213
-36
2

-543

80

-713

-126

-933

-6,549

-2,375

613

24
-33
-167
170
-97
0

43
-84
-167
415
-656
-9

37
-50
-168
130
-33
0

22
-60
-168
300
-491
0

113
-96
-177
681
-199
0

4,744
-57
-212
2,808
-635
0

247
-42
-113
735
-104
181

33
0
0
11
-155
-474

-103

-457

-84

-397

322

6,648

904

-585

1
54

-2
36

3
-118

5
-52

-4
221

-5
1,513

-7
-42

23
-97

Exhibit 8 Long-Term Debt and Loans Payable ($M)


December 31,
2002

2001

Loans Payable
Current portion of long-term debt
Other short-term borrowings

191
13

244
233

Total loans payable

204

477

100
206

75
100
178

Long-Term Debt
Debentures, 8.25%, due 2002
Debentures, 6%, due 2003
Euro notes, 5.625%, due 2005
Debentures, 7%, due 2007, net of unamortized discount of
$25 million in 2002 and $28 million in 2001
Convertible notes, 4.875%, due 2008
Convertible debentures, 3.5%, due 2008
Notes, 6.3%, due 2009
Euro notes, 6.25%, due 2010
Debentures, 6.75%, due 2013
Zero coupon convertible debentures, 2%, due 2015,
redeemable and callable in 2005
Debentures, 8.875%, due 2016
Debentures, 8.875%, due 2021
Debentures, 7.625%, putable in 2004, due 2024
Medium-term notes, average rate 7.9%, due through 2025
Debentures, 6.85%, due 2029
Other, average rate 1.9%, due through 2015

75
96
665
150
310
100

72
96
665
150
267
100

1,606
86
88
100
242
150
180

2,059
74
75
100
231
150
315

Total long-term debt


Less current portion of long-term debt

4,154
191

4,707
244

Long-term debt

3,963

4,463

Source: Adapted from Option Metrics.

Exhibit 11

Option Prices on Corning Stock, July 29, 2002

Type

Exercise Date

CALL

17-Aug-02

2.5

0.7

0.8

1,658

CALL

17-Aug-02

0.05

3,542

CALL

17-Aug-02

7.5

0.05

9,017

CALL

16-Nov-02

0.15

0.2

6,256

CALL

18-Jan-03

2.5

1.05

1.1

553

CALL

18-Jan-03

0.3

0.4

5,966

CALL

18-Jan-03

7.5

0.1

0.2

8,425

CALL

17-Jan-04

2.5

1.55

1.65

1,174

CALL

22-Jan-05

1.2

1.35

836

CALL

22-Jan-05

7.5

0.85

0.95

416

CALL

22-Jan-05

10

0.6

0.6

484

PUT

17-Aug-02

1.8

1.9

4,768

PUT

17-Aug-02

7.5

4.3

4.5

5,829

PUT

21-Sep-02

2.5

0.2

0.3

70

PUT

16-Nov-02

2.1

1,603

PUT

16-Nov-02

7.5

4.3

4.4

2,439

PUT

18-Jan-03

10

6.9

9,055

PUT

17-Jan-04

2.5

0.85

0.95

19,549

Source: Adapted from Option Metrics.

Exercise Price

Best Bid

Best Offer

Open Interest

Volume
22
50
20
20
78
58
111
25
84
62
196
23
92
150
109
20
22
39

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