Date of Report: (Date of earliest event reported)
|
July 30, 2013
|
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: July 30, 2013
|
By
|
/s/ R. TONY TRIPENY
|
R. Tony Tripeny
|
||
Senior Vice President & Corporate Controller
|
●
|
Core sales were $2.0 billion*, an increase of 11% over the same period of 2012. Net sales (GAAP) for the quarter were $2.0 billion.
|
●
|
Core earnings per share were $0.32*, representing a 23% improvement over the second quarter of 2012 and the third consecutive quarter of year-over-year double-digit growth. GAAP earnings per share were $0.43, compared with $0.31 a year ago, a 39% increase.
|
●
|
In the Display Technologies segment, second-quarter LCD glass price declines were moderate and less than the previous quarter.
|
●
|
Sales and net income in Corning’s Telecommunications segment improved significantly on both a year-over-year and sequential basis.
|
Core Performance*
|
|||
Q2 2013
|
Q2 2012
|
% Change
|
|
Core Net Sales
|
$2,021
|
$1,819
|
11%
|
Core Equity Earnings
|
$173
|
$211
|
(18%)
|
Core Earnings
|
$469
|
$388
|
21%
|
Core Earnings EPS
|
$0.32
|
$0.26
|
23%
|
GAAP
|
|||
Q2 2013
|
Q2 2012
|
% Change
|
|
Net Sales
|
$1,982
|
$1,908
|
4%
|
Equity Earnings
|
$166
|
$259
|
(36%)
|
Net Income
|
$638
|
$474
|
35%
|
EPS
|
$0.43
|
$0.31
|
39%
|
Three months
ended June 30,
|
Six months
ended June 30,
|
||||||||||
2013
|
2012
|
2013
|
2012
|
||||||||
Net sales
|
$
|
1,982
|
$
|
1,908
|
$
|
3,796
|
$
|
3,828
|
|||
Cost of sales
|
1,099
|
1,100
|
2,143
|
2,196
|
|||||||
Gross margin
|
883
|
808
|
1,653
|
1,632
|
|||||||
Operating expenses:
|
|||||||||||
Selling, general and administrative expenses
|
266
|
286
|
525
|
559
|
|||||||
Research, development and engineering expenses
|
179
|
185
|
357
|
369
|
|||||||
Amortization of purchased intangibles
|
8
|
4
|
15
|
9
|
|||||||
Asbestos litigation charge
|
6
|
5
|
8
|
6
|
|||||||
Operating income
|
424
|
328
|
748
|
689
|
|||||||
Equity in earnings of affiliated companies
|
166
|
259
|
339
|
477
|
|||||||
Interest income
|
2
|
3
|
4
|
7
|
|||||||
Interest expense
|
(28)
|
(24)
|
(64)
|
(44)
|
|||||||
Other income, net
|
265
|
8
|
330
|
37
|
|||||||
Income before income taxes
|
829
|
574
|
1,357
|
1,166
|
|||||||
Provision for income taxes
|
(191)
|
(100)
|
(225)
|
(218)
|
|||||||
Net income attributable to Corning Incorporated
|
$
|
638
|
$
|
474
|
$
|
1,132
|
$
|
948
|
|||
Earnings per common share attributable to Corning Incorporated:
|
|||||||||||
Basic
|
$
|
0.43
|
$
|
0.31
|
$
|
0.77
|
$
|
0.63
|
|||
Diluted
|
$
|
0.43
|
$
|
0.31
|
$
|
0.76
|
$
|
0.62
|
|||
Dividends declared per common share
|
$
|
0.10
|
$
|
0.075
|
$
|
0.19
|
$
|
0.15
|
Three months
ended June 30,
|
Six months
ended June 30,
|
||||||||||
2013
|
2012
|
2013
|
2012
|
||||||||
Net income attributable to Corning Incorporated
|
$
|
638
|
$
|
474
|
$
|
1,132
|
$
|
948
|
|||
Other comprehensive (loss) income, net of tax
|
(256)
|
13
|
(744)
|
(48)
|
|||||||
Comprehensive income attributable to Corning Incorporated
|
$
|
382
|
$
|
487
|
$
|
388
|
$
|
900
|
June 30,
2013
|
December 31,
2012
|
||||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
4,601
|
$
|
4,988
|
|
Short-term investments, at fair value
|
870
|
1,156
|
|||
Total cash, cash equivalents and short-term investments
|
5,471
|
6,144
|
|||
Trade accounts receivable, net of doubtful accounts and allowances
|
1,296
|
1,302
|
|||
Inventories
|
1,240
|
1,051
|
|||
Deferred income taxes
|
282
|
579
|
|||
Other current assets
|
764
|
619
|
|||
Total current assets
|
9,053
|
9,695
|
|||
Investments
|
4,809
|
4,915
|
|||
Property, net of accumulated depreciation
|
9,954
|
10,625
|
|||
Goodwill and other intangible assets, net
|
1,559
|
1,496
|
|||
Deferred income taxes
|
2,453
|
2,343
|
|||
Other assets
|
561
|
301
|
|||
Total Assets
|
$
|
28,389
|
$
|
29,375
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt
|
$
|
72
|
$
|
76
|
|
Accounts payable
|
721
|
779
|
|||
Other accrued liabilities
|
804
|
1,101
|
|||
Total current liabilities
|
1,597
|
1,956
|
|||
Long-term debt
|
2,822
|
3,382
|
|||
Postretirement benefits other than pensions
|
916
|
930
|
|||
Other liabilities
|
1,600
|
1,574
|
|||
Total liabilities
|
6,935
|
7,842
|
|||
Commitments and contingencies
|
|||||
Shareholders’ equity:
|
|||||
Common stock – Par value $0.50 per share; Shares authorized: 3.8 billion; Shares issued: 1,656 million and 1,649 million
|
828
|
825
|
|||
Additional paid-in capital
|
13,206
|
13,146
|
|||
Retained earnings
|
10,754
|
9,932
|
|||
Treasury stock, at cost; Shares held: 196 million and 179 million
|
(3,022)
|
(2,773)
|
|||
Accumulated other comprehensive (loss) income
|
(388)
|
356
|
|||
Total Corning Incorporated shareholders’ equity
|
21,378
|
21,486
|
|||
Noncontrolling interests
|
76
|
47
|
|||
Total equity
|
21,454
|
21,533
|
|||
Total Liabilities and Equity
|
$
|
28,389
|
$
|
29,375
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2013
|
2012
|
2013
|
2012
|
||||||||
Cash Flows from Operating Activities:
|
|||||||||||
Net income
|
$
|
638
|
$
|
474
|
$
|
1,132
|
$
|
948
|
|||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||||||
Depreciation
|
242
|
238
|
490
|
473
|
|||||||
Amortization of purchased intangibles
|
8
|
4
|
15
|
9
|
|||||||
Stock compensation charges
|
14
|
16
|
25
|
40
|
|||||||
Undistributed earnings of affiliated companies (in excess of) less than dividends received
|
(145)
|
(256)
|
(157)
|
44
|
|||||||
Deferred tax (benefit) provision
|
149
|
(19)
|
119
|
35
|
|||||||
Restructuring payments
|
(8)
|
(24)
|
(1)
|
||||||||
Employee benefit payments less than (in excess of) expense
|
11
|
14
|
26
|
(71)
|
|||||||
Unrealized gains on translated earnings contracts
|
(232)
|
(232)
|
|||||||||
Changes in certain working capital items:
|
|||||||||||
Trade accounts receivable
|
(40)
|
(19)
|
(23)
|
(68)
|
|||||||
Inventories
|
(73)
|
(47)
|
(211)
|
(35)
|
|||||||
Other current assets
|
(28)
|
(7)
|
(30)
|
(54)
|
|||||||
Accounts payable and other current liabilities
|
(129)
|
6
|
(241)
|
(45)
|
|||||||
Other, net
|
(12)
|
166
|
129
|
57
|
|||||||
Net cash provided by operating activities
|
395
|
570
|
1,018
|
1,332
|
|||||||
Cash Flows from Investing Activities:
|
|||||||||||
Capital expenditures
|
(244)
|
(441)
|
(438)
|
(853)
|
|||||||
Acquisitions of businesses, net of cash received
|
(106)
|
(106)
|
|||||||||
Investments in affiliates
|
(111)
|
(111)
|
|||||||||
Short-term investments – acquisitions
|
(446)
|
(640)
|
(737)
|
(1,168)
|
|||||||
Short-term investments – liquidations
|
551
|
648
|
1,020
|
989
|
|||||||
Premium on purchased collars
|
(107)
|
||||||||||
Other, net
|
17
|
9
|
18
|
4
|
|||||||
Net cash used in investing activities
|
(228)
|
(535)
|
(350)
|
(1,139)
|
|||||||
Cash Flows from Financing Activities:
|
|||||||||||
Retirement of long-term debt
|
(498)
|
||||||||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(2)
|
(3)
|
(11)
|
(13)
|
|||||||
Principal payments under capital lease obligations
|
(1)
|
(2)
|
(1)
|
||||||||
Proceeds from issuance of long-term debt, net
|
95
|
886
|
|||||||||
Payments to settle interest rate hedges
|
(18)
|
||||||||||
Proceeds from the exercise of stock options
|
27
|
3
|
39
|
19
|
|||||||
Repurchase of common stock for treasury
|
(232)
|
(314)
|
(232)
|
(386)
|
|||||||
Dividends paid
|
(147)
|
(113)
|
(280)
|
(227)
|
|||||||
Net cash (used in) provided by financing activities
|
(355)
|
(332)
|
(984)
|
260
|
|||||||
Effect of exchange rates on cash
|
(8)
|
(185)
|
(71)
|
(106)
|
|||||||
Net (decrease) increase in cash and cash equivalents
|
(196)
|
(482)
|
(387)
|
347
|
|||||||
Cash and cash equivalents at beginning of period
|
4,797
|
5,490
|
4,988
|
4,661
|
|||||||
Cash and cash equivalents at end of period
|
$
|
4,601
|
$
|
5,008
|
$
|
4,601
|
$
|
5,008
|
Three months ended
|
|||||
March 31,
2013
|
June 30,
2013
|
June 30,
2012
|
|||
Basic
|
1,472
|
1,469
|
1,506
|
||
Diluted
|
1,481
|
1,478
|
1,518
|
||
Diluted used for non-GAAP measures
|
1,481
|
1,478
|
1,518
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||||
As reported
|
$
|
1,982
|
$
|
166
|
$
|
829
|
$
|
(191)
|
$
|
638
|
23.0%
|
$
|
0.43
|
||||||
Acquisition-related costs (4)
|
8
|
(3)
|
5
|
||||||||||||||||
Pension mark-to-market adjustment (6)
|
(41)
|
15
|
(26)
|
(0.02)
|
|||||||||||||||
Asbestos settlement (5)
|
6
|
(2)
|
4
|
||||||||||||||||
Gain on change in control of equity investment (7)
|
(17)
|
6
|
(11)
|
(0.01)
|
|||||||||||||||
Hemlock Semiconductor operating results (3)
|
(12)
|
(12)
|
1
|
(11)
|
(0.01)
|
||||||||||||||
Hemlock Semiconductor non-operating results (3)
|
9
|
9
|
9
|
0.01
|
|||||||||||||||
Purchased collars and average rate forwards (2)
|
(229)
|
82
|
(147)
|
(0.10)
|
|||||||||||||||
Other yen-related transactions (2)
|
(27)
|
8
|
(19)
|
(0.01)
|
|||||||||||||||
Constant-yen (1)
|
39
|
10
|
36
|
(9)
|
27
|
0.02
|
|||||||||||||
Core Performance measures
|
$
|
2,021
|
$
|
173
|
$
|
562
|
$
|
(93)
|
$
|
469
|
16.5%
|
$
|
0.32
|
(1)
|
Constant-yen: Because a significant portion of Corning’s LCD glass business revenues and manufacturing costs are denominated in Japanese yen, management believes it is important to understand the impact on core earnings from translating yen into dollars. Presenting results on a constant-yen basis eliminates the translation impact of the Japanese yen, and allows management to evaluate performance period over period, analyze underlying trends in our businesses, and to establish operational goals and forecasts. We use an internally derived management rate of ¥93, which is closely aligned to our yen portfolio of purchased collars, and have restated all years presented based on this rate in order to effectively remove the impact of changes in the Japanese yen.
|
(2)
|
Purchased collars, average rate forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average rate forward contracts, and other yen-related transactions for each period presented. By aligning an internally derived rate with our portfolio of purchased collars and average rate forward contracts, and excluding other yen-related transactions and the Constant-yen adjustments, we have effectively eliminated the impact of changes in the Japanese yen on our results.
|
(3)
|
Results of Dow Corning Corporation’s equity affiliate, Hemlock Semiconductor: We are excluding the results of Dow Corning’s consolidated subsidiary, Hemlock Semiconductor, a producer of polycrystalline silicon, to remove the operating and non-operating items and events which have caused severe unpredictability and instability in earnings over the past eighteen months, and are expected to continue in the future. These events are being primarily driven by the macro-economic environment. Specifically, the negative impact of the preliminary determination by the Chinese Ministry of Commerce, which imposes provisional anti-dumping duties on solar-grade polysilicon imports from the United States, and the impact of potential asset write-offs, offset by the potential benefit of large payments required under Hemlock customers’ “take-or-pay” contracts, are events that are unrelated to Dow Corning’s core operations, and that have, or could have, significant impacts to this business.
|
(4)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(5)
|
Certain litigation-related charges: These adjustments relate to the Pittsburgh Corning Corporation (PCC) asbestos litigation.
|
(6)
|
Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates, and not from Corning’s core operations.
|
(7)
|
Gain on change in control of equity investment: Gain as a result of certain changes to the Shareholder Agreement of an equity company, resulting in Corning having a controlling interest that requires consolidation of this investment.
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||||
As reported
|
$
|
1,814
|
$
|
173
|
$
|
528
|
$
|
(34)
|
$
|
494
|
6.4%
|
$
|
0.33
|
||||||
Acquisition-related costs (1)
|
18
|
(5)
|
13
|
0.01
|
|||||||||||||||
Discrete tax items (2)
|
(54)
|
(54)
|
(0.04)
|
||||||||||||||||
Asbestos settlement (3)
|
2
|
(1)
|
1
|
||||||||||||||||
Hemlock Semiconductor operating results (4)
|
5
|
5
|
(1)
|
4
|
|||||||||||||||
Hemlock Semiconductor non-operating results (4)
|
2
|
2
|
2
|
||||||||||||||||
Purchased collars and average rate forwards (5)
|
(23)
|
7
|
(16)
|
(0.01)
|
|||||||||||||||
Other yen-related transactions (5)
|
(19)
|
6
|
(13)
|
(0.01)
|
|||||||||||||||
Core Performance measures
|
$
|
1,814
|
$
|
180
|
$
|
513
|
$
|
(82)
|
$
|
431
|
16.0%
|
$
|
0.29
|
(1)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(2)
|
Discrete tax items: These items represent adjustments for effects of tax law changes which do not reflect expected on-going operating results.
|
(3)
|
Certain litigation-related charges: These adjustments relate to the Pittsburgh Corning Corporation (PCC) asbestos litigation.
|
(4)
|
Results of Dow Corning Corporation’s equity affiliate, Hemlock Semiconductor: We are excluding the results of Dow Corning’s consolidated subsidiary, Hemlock Semiconductor, a producer of polycrystalline silicon, to remove the operating and non-operating items and events which have caused severe unpredictability and instability in earnings over the past eighteen months, and are expected to continue in the future. These events are being primarily driven by the macro-economic environment. Specifically, the negative impact of the preliminary determination by the Chinese Ministry of Commerce, which imposes provisional anti-dumping duties on solar-grade polysilicon imports from the United States, and the impact of potential asset write-offs, offset by the potential benefit of large payments required under Hemlock customers’ “take-or-pay” contracts, are events that are unrelated to Dow Corning’s core operations, and that have, or could have, significant impacts to this business.
|
(5)
|
Purchased collars, average rate forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average rate forward contracts, and other yen-related transactions for each period presented. By aligning an internally derived rate with our portfolio of purchased collars and average rate forward contracts, and excluding other yen-related transactions and the Constant-yen adjustments, we have effectively eliminated the impact of changes in the Japanese yen on our results.
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||||
As reported *
|
$
|
1,908
|
$
|
259
|
$
|
574
|
$
|
(100)
|
$
|
474
|
17.4%
|
$
|
0.31
|
||||||
Asbestos settlement (1)
|
5
|
(2)
|
3
|
||||||||||||||||
Hemlock Semiconductor (2)
|
(8)
|
(8)
|
1
|
(7)
|
|||||||||||||||
Other yen-related transactions (3)
|
(6)
|
2
|
(4)
|
||||||||||||||||
Constant-yen (4)
|
(89)
|
(40)
|
(95)
|
17
|
(78)
|
(0.05)
|
|||||||||||||
Core Performance measures
|
$
|
1,819
|
$
|
211
|
$
|
470
|
$
|
(82)
|
$
|
388
|
17.4%
|
$
|
0.26
|
(1)
|
Certain litigation-related charges: These adjustments relate to the Pittsburgh Corning Corporation (PCC) asbestos litigation.
|
(2)
|
Results of Dow Corning Corporation’s equity affiliate, Hemlock Semiconductor: We are excluding the results of Dow Corning’s consolidated subsidiary, Hemlock Semiconductor, a producer of polycrystalline silicon, to remove the operating and non-operating items and events which have caused severe unpredictability and instability in earnings over the past eighteen months, and are expected to continue in the future. These events are being primarily driven by the macro-economic environment. Specifically, the negative impact of the preliminary determination by the Chinese Ministry of Commerce, which imposes provisional anti-dumping duties on solar-grade polysilicon imports from the Unites States, and the impact of potential asset write-offs, offset by the potential benefit of large payments required under Hemlock customers’ “take-or-pay” contracts, are events that are unrelated to Dow Corning’s core operations, and that have, or could have, significant impact to this business.
|
(3)
|
Purchased collars, average rate forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average rate forward contracts, and other yen-related transactions for each period presented. By aligning an internally derived rate with our portfolio of purchased collars and average rate forward contracts, and excluding other yen-related transactions and the Constant-yen adjustments, we have effectively eliminated the impact of changes in the Japanese yen on our results.
|
(4)
|
Constant-yen: Because a significant portion of Corning’s LCD glass business revenues and manufacturing costs are denominated in Japanese yen, management believes it is important to understand the impact on core earnings from translating yen into dollars. Presenting results on a constant-yen basis eliminates the translation impact of the Japanese yen, and allows management to evaluate performance period over period, analyze underlying trends in our businesses, and to establish operational goals and forecasts. We use an internally derived management rate of ¥93, which is closely aligned to our yen portfolio of purchased collars, and have restated all years presented based on this rate in order to effectively remove the impact of changes in the Japanese yen.
|
Three months ended
June 30, 2013
|
Three months ended
June 30, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
|
|||||||||||||||
As reported *
|
$
|
631
|
$
|
337
|
$
|
641
|
$
|
372
|
(2)%
|
(9)%
|
|||||
Pension mark-to-market adjustment (1)
|
(9)
|
||||||||||||||
Purchased collars (2)
|
(25)
|
||||||||||||||
Other yen-related transaction (2)
|
(18)
|
(4)
|
|||||||||||||
Constant-yen (3)
|
39
|
29
|
(89)
|
(84)
|
|||||||||||
Core Performance measures
|
$
|
670
|
$
|
314
|
$
|
552
|
$
|
284
|
21%
|
11%
|
(1)
|
Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates, and not from Corning’s core operations.
|
(2)
|
Purchased collars, average rate forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average rate forward contracts, and other yen-related transactions for each period presented. By aligning an internally derived rate with our portfolio of purchased collars and average rate forward contracts, and excluding other yen-related transactions and the Constant-yen adjustments, we have effectively eliminated the impact of changes in the Japanese yen on our results.
|
(3)
|
Constant-yen: Because a significant portion of Corning’s LCD glass business revenues and manufacturing costs are denominated in Japanese yen, management believes it is important to understand the impact on core earnings from translating yen into dollars. Presenting results on a constant-yen basis eliminates the translation impact of the Japanese yen, and allows management to evaluate performance period over period, analyze underlying trends in our businesses, and to establish operational goals and forecasts. We use an internally derived management rate of ¥93, which is closely aligned to our yen portfolio of purchased collars, and have restated all years presented based on this rate in order to effectively remove the impact of changes in the Japanese yen.
|
Three months ended
June 30, 2013
|
Three months ended
June 30, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
|
|||||||||||||||
As reported *
|
$
|
601
|
$
|
76
|
$
|
559
|
$
|
37
|
8%
|
105%
|
|||||
Pension mark-to-market adjustment (1)
|
(9)
|
||||||||||||||
Gain on change in control of equity investment (2)
|
(11)
|
||||||||||||||
Acquisition-related costs (3)
|
4
|
||||||||||||||
Core Performance measures
|
$
|
601
|
$
|
60
|
$
|
559
|
$
|
37
|
8%
|
62%
|
(1)
|
Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates, and not from Corning’s core operations.
|
(2)
|
Gain on change in control of equity investment: Gain as a result of certain changes to the Shareholder Agreement of an equity company, resulting in Corning having a controlling interest that requires consolidation of this investment
|
(3)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
Three months ended
June 30, 2013
|
Three months ended
June 30, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported *
|
$
|
228
|
$
|
36
|
$
|
249
|
$
|
34
|
(8)%
|
6%
|
|||||
Pension mark-to-market adjustment (1)
|
(3)
|
||||||||||||||
Core Performance measures
|
$
|
228
|
$
|
33
|
$
|
249
|
$
|
34
|
(8)%
|
(3)%
|
(1)
|
Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates, and not from Corning’s core operations.
|
Three months ended
June 30, 2013
|
Three months ended
June 30, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported *
|
$
|
301
|
$
|
58
|
$
|
296
|
$
|
34
|
2%
|
71%
|
|||||
Pension mark-to-market adjustment (1)
|
(3)
|
||||||||||||||
Other yen-related transaction (2)
|
(1)
|
||||||||||||||
Constant-yen (3)
|
(1)
|
6
|
|||||||||||||
Core Performance measures
|
$
|
301
|
$
|
53
|
$
|
296
|
$
|
40
|
2%
|
33%
|
(1)
|
Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates, and not from Corning’s core operations.
|
(2)
|
Other yen-related transactions: We have excluded the impact of other yen-related transactions for each period presented. By aligning an internally derived rate with our portfolio of purchased collars and average rate forward contracts, and excluding other yen-related transactions and the Constant-yen adjustments, we have effectively eliminated the impact of changes in the Japanese yen on our results.
|
(3)
|
Constant-yen: Because a significant portion of Corning’s LCD glass business revenues and manufacturing costs are denominated in Japanese yen, management believes it is important to understand the impact on core earnings from translating yen into dollars. Presenting results on a constant-yen basis eliminates the translation impact of the Japanese yen, and allows management to evaluate performance period over period, analyze underlying trends in our businesses, and to establish operational goals and forecasts. We use an internally derived management rate of ¥93, which is closely aligned to our yen portfolio of purchased collars, and have restated all years presented based on this rate in order to effectively remove the impact of changes in the Japanese yen.
|
Three months ended
June 30, 2013
|
Three months ended
June 30, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported *
|
$
|
219
|
$
|
25
|
$
|
162
|
$
|
11
|
35%
|
127%
|
|||||
Pension mark-to-market adjustment (1)
|
(3)
|
||||||||||||||
Acquisition-related costs (2)
|
2
|
||||||||||||||
Core Performance measures
|
$
|
219
|
$
|
24
|
$
|
162
|
$
|
11
|
35%
|
118%
|
(1)
|
Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates, and not from Corning’s core operations.
|
(2)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
Three months ended
June 30, 2013
|
Three months ended
June 30, 2012
|
||||||||||||||
Net
Sales
|
Gross
Margin
|
Gross
Margin
%
|
Net
Sales
|
Gross
Margin
|
Gross
Margin
%
|
||||||||||
As reported *
|
$
|
1,982
|
$
|
883
|
45%
|
$
|
1,908
|
$
|
808
|
42%
|
|||||
Acquisition-related costs (1)
|
1
|
||||||||||||||
Pension mark-to-market adjustment (2)
|
(24)
|
||||||||||||||
Other yen-related transactions (3)
|
(9)
|
(3)
|
|||||||||||||
Constant-yen (4)
|
39
|
24
|
(89)
|
(53)
|
|||||||||||
Core Performance measures
|
$
|
2,021
|
$
|
875
|
43%
|
$
|
1,819
|
$
|
752
|
41%
|
(1)
|
Acquisition-related costs: These expenses include inventory valuation adjustments.
|
(2)
|
Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates, and not from Corning’s core operations.
|
(3)
|
Other yen-related transactions: We have excluded the impact of other yen-related transactions for each period presented. By aligning an internally derived rate with our portfolio of purchased collars and average rate forward contracts, and excluding other yen-related transactions and the Constant-yen adjustments, we have effectively eliminated the impact of changes in the Japanese yen on our results.
|
(4)
|
Constant-yen: Because a significant portion of Corning’s LCD glass business revenues and manufacturing costs are denominated in Japanese yen, management believes it is important to understand the impact on core earnings from translating yen into dollars. Presenting results on a constant-yen basis eliminates the translation impact of the Japanese yen, and allows management to evaluate performance period over period, analyze underlying trends in our businesses, and to establish operational goals and forecasts. We use an internally derived management rate of ¥93, which is closely aligned to our yen portfolio of purchased collars, and have restated all years presented based on this rate in order to effectively remove the impact of changes in the Japanese yen.
|
Three months
ended
June 30,
2013
|
Six months
ended
June 30,
2013
|
||||
Cash flows from operating activities
|
$
|
395
|
$
|
1,018
|
|
Less: Cash flows from investing activities
|
(228)
|
(350)
|
|||
Plus: Short-term investments – acquisitions
|
446
|
737
|
|||
Less: Short-term investments – liquidations
|
(551)
|
(1,020)
|
|||
Free cash flow
|
$
|
62
|
$
|
385
|
(1)
|
Constant-yen: Because a significant portion of Corning’s LCD glass business revenues and manufacturing costs are denominated in Japanese yen, management believes it is important to understand the impact on core earnings from translating yen into dollars. Presenting results on a constant-yen basis eliminates the translation impact of the Japanese yen, and allows management to evaluate performance period over period, analyze underlying trends in our businesses, and to establish operational goals and forecasts. We use an internally derived management rate of ¥93, which is closely aligned to our yen portfolio of purchased collars, and have restated all years presented based on this rate in order to effectively remove the impact of changes in the Japanese yen.
|
(2)
|
Purchased collars, average rate forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average rate forward contracts, and other yen-related transactions for each period presented. By aligning an internally derived rate with our portfolio of purchased collars and average rate forward contracts, and excluding other yen-related transactions and the Constant-yen adjustments, we have effectively eliminated the impact of changes in the Japanese yen on our results.
|
(3)
|
Results of Dow Corning Corporation’s equity affiliate, Hemlock Semiconductor: We are excluding the results of Dow Corning’s consolidated subsidiary, Hemlock Semiconductor, a producer of polycrystalline silicon, to remove the operating and non-operating items and events which have caused severe unpredictability and instability in earnings over the past eighteen months, and are expected to continue in the future. These events are being primarily driven by the macro-economic environment. Specifically, the negative impact of the preliminary determination by the Chinese Ministry of Commerce, which imposes provisional anti-dumping duties on solar-grade polysilicon imports from the United States, and the impact of potential asset write-offs, offset by the potential benefit of large payments required under Hemlock customers’ “take-or-pay” contracts, are events that are unrelated to Dow Corning’s core operations, and that have, or could have, significant impacts to this business.
|
(4)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(5)
|
Discrete tax items: These items represent adjustments for effects of tax law changes which do not reflect expected on-going operating results.
|
(6)
|
Certain litigation-related charges: These adjustments relate to the Pittsburgh Corning Corporation (PCC) asbestos litigation.
|
(7)
|
Restructuring, impairment and other charges.
|
(8)
|
Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates. In accordance with GAAP, Corning recognizes pension actuarial gains and losses outside of the corridor, where the corridor is equal to 10% of the greater of the benefit obligation or the market-related value of plan assets at the beginning of the year, for our defined benefit pension plans annually in the fourth quarter of each year and whenever a plan is remeasured or valuation estimates are finalized. Actuarial gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates, differences between actual and expected returns on plan assets, and other changes in actuarial assumptions such as life expectancy of plan participants. Management believes that pension actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets, and are not directly related to the underlying performance of our businesses. For further information on the actuarial assumptions and plan assets referenced above, see Management’s Discussion and Analysis of Financial Condition and Results of Operations, under Critical Accounting Estimates - Employee Retirement Plans, and Note 13, Employee Retirement Plans, of Notes to the Consolidated Financial Statements in our Form 10-Q Quarterly Report for the quarter ended June 30, 2013.
|
|
(9)
|
Gain on change in control of equity investment: Gain as a result of certain changes to the Shareholder Agreement of an equity company, resulting in Corning having a controlling interest that requires consolidation of this investment.
|