Date of Report: (Date of earliest event reported)
|
April 27, 2011
|
New York
(State or other jurisdiction
of incorporation)
|
1-3247
(Commission
File Number)
|
16-0393470
(I.R.S. Employer
Identification No.)
|
One Riverfront Plaza, Corning, New York
(Address of principal executive offices)
|
14831
(Zip Code)
|
¨
|
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))
|
CORNING INCORPORATED
|
|
Registrant
|
Date: April 27, 2011
|
By
|
/s/ R. TONY TRIPENY
|
R. Tony Tripeny
|
||
Senior Vice President & Corporate Controller
|
·
|
Sales were $1.9 billion, increasing 9% sequentially and 24% year over year.
|
·
|
Earnings per share were $0.47. Excluding special items, earnings per share were also $0.47*, a 2% sequential increase, but a 10% decline year over year.
|
·
|
Display Technologies wholly owned business glass volume increased by upper-single digits sequentially, while volume at Samsung Corning Precision Materials Co., Ltd., improved slightly. The company’s total glass volume, which includes its wholly owned business and SCP, increased 5% sequentially.
|
·
|
Telecommunications sales increased 7% sequentially and 30% year over year.
|
·
|
Specialty Materials sales jumped 29% sequentially and 165% year over year, driven primarily by Corning® Gorilla® Glass.
|
·
|
Environmental Technologies sales improved 12% sequentially and 35% year over year.
|
Q1 2011
|
Q4 2010
|
% Change
|
Q1 2010
|
% Change
|
|
Net Sales in millions
|
$1,923
|
$1,765
|
9%
|
$1,553
|
24%
|
Net Income in millions
|
$ 748
|
$1,044
|
(28%)
|
$ 816
|
(8%)
|
Non-GAAP Net Income in millions*
|
$ 751
|
$ 733
|
3%
|
$ 818
|
(8%)
|
GAAP EPS
|
$ 0.47
|
$ 0.66
|
(29%)
|
$ 0.52
|
(10%)
|
Non-GAAP EPS*
|
$ 0.47
|
$ 0.46
|
2%
|
$ 0.52
|
(10%)
|
Media Relations Contact:
Daniel F. Collins
(607) 974-4197
collinsdf@corning.com
|
Investor Relations Contact:
Kenneth C. Sofio
(607) 974-7705
sofiokc@corning.com
|
Three months ended
March 31,
|
|||||
2011
|
2010
|
||||
Net sales
|
$
|
1,923
|
$
|
1,553
|
|
Cost of sales
|
1,049
|
822
|
|||
Gross margin
|
874
|
731
|
|||
Operating expenses:
|
|||||
Selling, general and administrative expenses
|
250
|
235
|
|||
Research, development and engineering expenses
|
156
|
145
|
|||
Amortization of purchased intangibles
|
3
|
2
|
|||
Restructuring, impairment and other credits
|
(2)
|
||||
Asbestos litigation charge (credit) (Note 1)
|
5
|
(52)
|
|||
Operating income
|
460
|
403
|
|||
Equity in earnings of affiliated companies
|
398
|
469
|
|||
Interest income
|
4
|
3
|
|||
Interest expense
|
(27)
|
(26)
|
|||
Other income, net
|
27
|
64
|
|||
Income before incomes taxes
|
862
|
913
|
|||
Provision for income taxes
|
(114)
|
(97)
|
|||
Net income attributable to Corning Incorporated
|
$
|
748
|
$
|
816
|
|
Earnings per common share attributable to Corning Incorporated:
|
|||||
Basic (Note 2)
|
$
|
0.48
|
$
|
0.52
|
|
Diluted (Note 2)
|
$
|
0.47
|
$
|
0.52
|
|
Dividends declared per common share
|
$
|
0.05
|
$
|
0.05
|
March 31,
2011
|
December 31,
2010
|
||||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
4,570
|
$
|
4,598
|
|
Short-term investments, at fair value
|
1,733
|
1,752
|
|||
Total cash, cash equivalents and short-term investments
|
6,303
|
6,350
|
|||
Trade accounts receivable, net of doubtful accounts and allowances
|
1,107
|
973
|
|||
Inventories
|
841
|
738
|
|||
Deferred income taxes
|
433
|
431
|
|||
Other current assets
|
353
|
367
|
|||
Total current assets
|
9,037
|
8,859
|
|||
Investments
|
4,569
|
4,372
|
|||
Property, net of accumulated depreciation
|
9,235
|
8,943
|
|||
Goodwill and other intangible assets, net
|
885
|
716
|
|||
Deferred income taxes
|
2,760
|
2,790
|
|||
Other assets
|
174
|
153
|
|||
Total Assets
|
$
|
26,660
|
$
|
25,833
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt
|
$
|
26
|
$
|
57
|
|
Accounts payable
|
949
|
798
|
|||
Other accrued liabilities
|
919
|
1,131
|
|||
Total current liabilities
|
1,894
|
1,986
|
|||
Long-term debt
|
2,245
|
2,262
|
|||
Postretirement benefits other than pensions
|
915
|
913
|
|||
Other liabilities
|
1,251
|
1,246
|
|||
Total liabilities
|
6,305
|
6,407
|
|||
Commitments and contingencies
|
|||||
Shareholders’ equity:
|
|||||
Common stock – Par value $0.50 per share; Shares authorized: 3.8 billion; Shares issued: 1,633 million and 1,626 million
|
817
|
813
|
|||
Additional paid-in capital
|
12,954
|
12,865
|
|||
Retained earnings
|
7,550
|
6,881
|
|||
Treasury stock, at cost; Shares held: 66 million and 65 million
|
(1,240)
|
(1,227)
|
|||
Accumulated other comprehensive income
|
223
|
43
|
|||
Total Corning Incorporated shareholders’ equity
|
20,304
|
19,375
|
|||
Noncontrolling interests
|
51
|
51
|
|||
Total equity
|
20,355
|
19,426
|
|||
Total Liabilities and Equity
|
$
|
26,660
|
$
|
25,833
|
Three months ended
March 31,
|
|||||
2011
|
2010
|
||||
Cash Flows from Operating Activities:
|
|||||
Net income
|
$
|
748
|
$
|
816
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||
Depreciation
|
226
|
206
|
|||
Amortization of purchased intangibles
|
3
|
2
|
|||
Asbestos litigation charges (credits)
|
5
|
(52)
|
|||
Restructuring, impairment and other credits
|
(2)
|
||||
Cash received from settlement of insurance claims
|
66
|
||||
Stock compensation charges
|
23
|
29
|
|||
Earnings of affiliated companies in excess of dividends received
|
(78)
|
(241)
|
|||
Deferred tax provision
|
15
|
50
|
|||
Restructuring payments
|
(9)
|
(31)
|
|||
Credits issued against customer deposits
|
(7)
|
(30)
|
|||
Employee benefit payments, net of payments
|
34
|
26
|
|||
Changes in certain working capital items:
|
|||||
Trade accounts receivable
|
(121)
|
(120)
|
|||
Inventories
|
(79)
|
(31)
|
|||
Other current assets
|
(26)
|
32
|
|||
Accounts payable and other current liabilities, net of restructuring payments
|
(83)
|
(74)
|
|||
Other, net
|
(144)
|
63
|
|||
Net cash provided by operating activities
|
573
|
643
|
|||
Cash Flows from Investing Activities:
|
|||||
Capital expenditures
|
(532)
|
(173)
|
|||
Acquisitions of businesses, net of cash received
|
(148)
|
||||
Net proceeds from sale or disposal of assets
|
1
|
||||
Short-term investments – acquisitions
|
(883)
|
(224)
|
|||
Short-term investments – liquidations
|
903
|
472
|
|||
Other, net
|
2
|
2
|
|||
Net cash (used in) provided by investing activities
|
(657)
|
77
|
|||
Cash Flows from Financing Activities:
|
|||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(10)
|
(58)
|
|||
Principal payments under capital lease obligations
|
(32)
|
||||
Proceeds from issuance of common stock, net
|
4
|
||||
Proceeds from the exercise of stock options
|
64
|
21
|
|||
Dividends paid
|
(79)
|
(78)
|
|||
Net cash used in financing activities
|
(57)
|
(111)
|
|||
Effect of exchange rates on cash
|
113
|
(75)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(28)
|
534
|
|||
Cash and cash equivalents at beginning of period
|
4,598
|
2,541
|
|||
Cash and cash equivalents at end of period
|
$
|
4,570
|
$
|
3,075
|
Display
Technologies
|
Telecom-
munications
|
Environmental
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
||||||||||||||
Three months ended
March 31, 2011
|
||||||||||||||||||||
Net sales
|
$
|
790
|
$
|
474
|
$
|
259
|
$
|
254
|
$
|
144
|
$
|
2
|
$
|
1,923
|
||||||
Depreciation (1)
|
$
|
124
|
$
|
28
|
$
|
25
|
$
|
37
|
$
|
8
|
$
|
2
|
$
|
224
|
||||||
Amortization of purchased intangibles
|
$
|
1
|
|
$
|
2
|
$
|
3
|
|||||||||||||
Research, development and engineering expenses (2)
|
$
|
25
|
$
|
29
|
$
|
23
|
$
|
29
|
$
|
4
|
$
|
22
|
$
|
132
|
||||||
Equity in earnings of affiliated companies
|
$
|
294
|
$
|
3
|
$
|
3
|
$
|
7
|
$
|
307
|
||||||||||
Income tax (provision) benefit
|
$
|
(139)
|
$
|
(19)
|
$
|
(14)
|
$
|
(3)
|
$
|
(7)
|
$
|
9
|
$
|
(173)
|
||||||
Net income (loss) (3)
|
$
|
638
|
$
|
41
|
$
|
29
|
$
|
8
|
$
|
15
|
$
|
(15)
|
$
|
716
|
||||||
Three months ended
March 31, 2010
|
||||||||||||||||||||
Net sales
|
$
|
782
|
$
|
364
|
$
|
192
|
$
|
96
|
$
|
118
|
$
|
1
|
$
|
1,553
|
||||||
Depreciation (1)
|
$
|
128
|
$
|
30
|
$
|
26
|
$
|
11
|
$
|
8
|
$
|
3
|
$
|
206
|
||||||
Amortization of purchased intangibles
|
$
|
1
|
|
$
|
1
|
$
|
2
|
|||||||||||||
Research, development and engineering expenses (2)
|
$
|
23
|
$
|
29
|
$
|
23
|
$
|
16
|
$
|
4
|
$
|
28
|
$
|
123
|
||||||
Restructuring, impairment and other credits
|
$
|
(2)
|
$
|
(2)
|
||||||||||||||||
Equity in earnings of affiliated companies
|
$
|
344
|
$
|
3
|
$
|
11
|
$
|
358
|
||||||||||||
Income tax (provision) benefit
|
$
|
(132)
|
$
|
(4)
|
$
|
(5)
|
$
|
3
|
$
|
(8)
|
$
|
11
|
$
|
(135)
|
||||||
Net income (loss) (3)
|
$
|
703
|
$
|
8
|
$
|
11
|
$
|
(7)
|
$
|
17
|
$
|
(15)
|
$
|
717
|
(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 expense 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.
|
Three months ended
March 31,
|
|||||
2011
|
2010
|
||||
Net income of reportable segments
|
$
|
731
|
$
|
732
|
|
Non-reportable segments
|
(15)
|
(15)
|
|||
Unallocated amounts:
|
|||||
Net financing costs (1)
|
(52)
|
(46)
|
|||
Stock-based compensation expense
|
(23)
|
(29)
|
|||
Exploratory research
|
(17)
|
(15)
|
|||
Corporate contributions
|
(21)
|
(12)
|
|||
Equity in earnings of affiliated companies, net of impairments (2)
|
91
|
111
|
|||
Asbestos litigation (3)
|
(5)
|
52
|
|||
Other corporate items (4)
|
59
|
38
|
|||
Net income
|
$
|
748
|
$
|
816
|
(1)
|
Net financing costs include interest income, interest expense, and interest costs and investment gains associated with benefit plans.
|
(2)
|
Primarily represents the equity earnings of Dow Corning Corporation. In the first quarter of 2010, equity earnings of affiliated companies, net of impairments, includes a credit of $21 million for our share of U.S. advanced energy manufacturing tax credits at Dow Corning Corporation.
|
(3)
|
In the first quarter of 2011, Corning recorded a charge of $5 million to adjust the asbestos liability for the change in value of components of the Modified PCC Plan. In the first quarter of 2010, Corning recorded a net credit of $52 million primarily reflecting the change in the terms of the proposed asbestos settlement.
|
(4)
|
In the first quarter of 2010, other corporate items included a tax charge of $56 million from the reversal of the deferred tax asset associated with a Medicare subsidy.
|
1.
|
Asbestos Litigation
|
2.
|
Weighted Average Shares Outstanding
|
Three months ended
March 31,
|
Three months
ended
December 31, 2010
|
||||
2011
|
2010
|
||||
Basic
|
1,565
|
1,555
|
1,560
|
||
Diluted
|
1,589
|
1,579
|
1,584
|
||
Diluted used for non-GAAP measures
|
1,589
|
1,579
|
1,584
|
2011
|
2010
|
||||||||||||||||
Q1
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
||||||||||||
Display Technologies
|
$
|
790
|
$
|
782
|
$
|
834
|
$
|
645
|
$
|
750
|
$
|
3,011
|
|||||
Telecommunications
|
|||||||||||||||||
Fiber and cable
|
248
|
190
|
227
|
232
|
229
|
878
|
|||||||||||
Hardware and equipment
|
226
|
174
|
214
|
232
|
214
|
834
|
|||||||||||
474
|
364
|
441
|
464
|
443
|
1,712
|
||||||||||||
Environmental Technologies
|
|||||||||||||||||
Automotive
|
123
|
117
|
109
|
119
|
117
|
462
|
|||||||||||
Diesel
|
136
|
75
|
75
|
89
|
115
|
354
|
|||||||||||
259
|
192
|
184
|
208
|
232
|
816
|
||||||||||||
Specialty Materials
|
254
|
96
|
126
|
159
|
197
|
578
|
|||||||||||
Life Sciences
|
144
|
118
|
125
|
125
|
140
|
508
|
|||||||||||
All Other
|
2
|
1
|
2
|
1
|
3
|
7
|
|||||||||||
Total
|
$
|
1,923
|
$
|
1,553
|
$
|
1,712
|
$
|
1,602
|
$
|
1,765
|
$
|
6,632
|
Corning’s net income and earnings per share (EPS) excluding special items for the first quarter of 2011 are non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, generally accepted accounting principles (GAAP). The company believes presenting non-GAAP net income and EPS is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. A detailed reconciliation is provided below outlining the differences between these non-GAAP measures and the directly related GAAP measures.
|
Per
Share
|
Income Before
Income Taxes
|
Net
Income
|
||||||
Earnings per share (EPS) and net income, excluding special items
|
$
|
0.47
|
$
|
867
|
$
|
751
|
||
Special items:
|
||||||||
Asbestos settlement (a)
|
-
|
(5)
|
(3)
|
|||||
Total EPS and net income
|
$
|
0.47
|
$
|
862
|
$
|
748
|
(a)
|
In the first quarter of 2011, Corning recorded a charge of $5 million ($3 million after-tax) to adjust the asbestos liability for the change in value of the components of the Modified PCC Plan.
|
Corning’s net income and earnings per share (EPS) excluding special items for the first quarter of 2010 are non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, generally accepted accounting principles (GAAP). The company believes presenting non-GAAP net income and EPS is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. A detailed reconciliation is provided below outlining the differences between these non-GAAP measures and the directly related GAAP measures.
|
Per
Share
|
Income Before
Income Taxes
|
Net
Income
|
||||||
Earnings per share (EPS) and net income, excluding special items
|
$
|
0.52
|
$
|
838
|
$
|
818
|
||
Special items:
|
||||||||
Restructuring, impairment, and other charges (a)
|
-
|
2
|
1
|
|||||
Asbestos settlement (b)
|
0.02
|
52
|
33
|
|||||
Equity in earnings of affiliated companies (c)
|
0.01
|
21
|
20
|
|||||
Provision for income taxes (d)
|
(0.03)
|
-
|
(56)
|
|||||
Total EPS and net income
|
$
|
0.52
|
$
|
913
|
$
|
816
|
(a)
|
In the first quarter of 2010, Corning recorded a credit of $2 million ($1 million after-tax) for adjustments to restructuring reserves.
|
(b)
|
In the first quarter of 2010, Corning recorded a net credit of $52 million ($33 million after-tax) primarily reflecting the change in estimate of our asbestos settlement liability.
|
(c)
|
In the first quarter of 2010, equity in earnings of affiliated companies included a credit of $21 million ($20 million after-tax) primarily for Corning’s share of advanced energy manufacturing tax credits at Dow Corning Corporation.
|
(d)
|
In the first quarter of 2010, Corning recorded a $56 million tax charge from the reversal of the deferred tax asset associated with a Medicare subsidy.
|
Corning’s net income and earnings per share (EPS) excluding special items for the fourth quarter of 2010 are non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, generally accepted accounting principles (GAAP). The company believes presenting non-GAAP net income and EPS is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. A detailed reconciliation is provided below outlining the differences between these non-GAAP measures and the directly related GAAP measures.
|
Per
Share
|
Income Before
Income Taxes
|
Net
Income
|
||||||
Earnings per share (EPS) and net income, excluding special items
|
$
|
0.46
|
$
|
754
|
$
|
733
|
||
Special items:
|
||||||||
Insurance settlement (a)
|
0.13
|
324
|
206
|
|||||
Asbestos settlement (b)
|
-
|
8
|
5
|
|||||
Equity in earnings of affiliated companies (c)
|
0.07
|
103
|
100
|
|||||
Total EPS and net income
|
$
|
0.66
|
$
|
1,189
|
$
|
1,044
|
(a)
|
In the fourth quarter of 2010, Corning recorded $324 million ($206 million after-tax) on the settlement of business interruption and property damage insurance claims in the Display Technologies segment resulting from earthquake activity near the Shizuoka, Japan facility and a power disruption at the Taichung, Taiwan facility in 2009.
|
(b)
|
In the fourth quarter of 2010, Corning recorded a net credit of $8 million ($5 million after-tax) to adjust the asbestos liability for the change in value of the components of the modified PCC Plan.
|
(c)
|
In the fourth quarter of 2010, equity in earnings of affiliated companies included a credit of $26 million ($24 million after-tax) for our share of a release of valuation allowance on foreign deferred tax assets, a $16 million ($15 million after-tax) credit for our share of excess foreign tax credits from foreign dividends and a $61 million credit for our share of a revised Samsung Corning Precision tax holiday calculation agreed to by the Korean National Tax Service.
|
Corning’s free cash flow financial measure for the three months ended March 31, 2011 and December 31, 2010 are non-GAAP financial measure within the meaning of Regulation G of the Securities and Exchange Commission. Non-GAAP financial measures are not in accordance with, or an alternative to, generally accepted accounting principles (GAAP). The company believes presenting non-GAAP financial measures are helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. A detailed reconciliation is provided below outlining the differences between this non-GAAP measure and the directly related GAAP measures.
|
Three months
ended
March 31,
2011
|
Three months
ended
December 31,
2010
|
||||
Cash flows from operating activities
|
$
|
573
|
$
|
2,092
|
|
Less: Cash flows from investing activities
|
(657)
|
(560)
|
|||
Plus: Short-term investments – acquisitions
|
883
|
768
|
|||
Less: Short-term investments – liquidations
|
(903)
|
(743)
|
|||
Free cash flow
|
$
|
(104)
|
$
|
1,557
|