Date of Report: (Date of earliest event reported)
|
October 22, 2013
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New York
(State or other jurisdiction
of incorporation)
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1-3247
(Commission
File Number)
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16-0393470
(I.R.S. Employer
Identification No.)
|
One Riverfront Plaza, Corning, New York
(Address of principal executive offices)
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14831
(Zip Code)
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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CORNING INCORPORATED
|
|
Registrant
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Date: October 22, 2013
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By
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/s/ R. TONY TRIPENY
|
R. Tony Tripeny
|
||
Senior Vice President & Corporate Controller
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·
|
Core earnings per share of $0.33*, an 18% increase over the third quarter of 2012 of $0.28*. GAAP earnings per share of $0.28, compared with $0.36 a year ago.
|
·
|
Core sales of $2.1 billion*, an increase of 10% over the same period of 2012 of $1.9 billion*. Net sales (GAAP) for the third quarter of 2013 and 2012 were $2.1 billion and 2.0 billion, respectively.
|
·
|
In the Display Technologies segment, third-quarter LCD glass sequential price declines remained moderate, as expected. LCD glass volume was up slightly sequentially, driven by higher-than-expected demand in the wholly owned business.
|
·
|
Sales in all other segments were in line with expectations.
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·
|
Core gross margin was 44%*, up nearly two percentage points year over year and up slightly sequentially.
|
Three months
ended September 30,
|
Nine months
ended September 30,
|
||||||||||
2013
|
2012
|
2013
|
2012
|
||||||||
Net sales
|
$
|
2,067
|
$
|
2,038
|
$
|
5,863
|
$
|
5,866
|
|||
Cost of sales
|
1,166
|
1,149
|
3,309
|
3,345
|
|||||||
Gross margin
|
901
|
889
|
2,554
|
2,521
|
|||||||
Operating expenses:
|
|||||||||||
Selling, general and administrative expenses
|
265
|
289
|
790
|
848
|
|||||||
Research, development and engineering expenses
|
184
|
182
|
541
|
551
|
|||||||
Amortization of purchased intangibles
|
8
|
4
|
23
|
13
|
|||||||
Asbestos litigation charge
|
5
|
3
|
13
|
9
|
|||||||
Operating income
|
439
|
411
|
1,187
|
1,100
|
|||||||
Equity in earnings of affiliated companies
|
138
|
240
|
477
|
717
|
|||||||
Interest income
|
1
|
3
|
5
|
10
|
|||||||
Interest expense
|
(28)
|
(32)
|
(92)
|
(76)
|
|||||||
Other (expense) income, net
|
(1)
|
5
|
329
|
42
|
|||||||
Income before income taxes
|
549
|
627
|
1,906
|
1,793
|
|||||||
Provision for income taxes
|
(141)
|
(94)
|
(366)
|
(312)
|
|||||||
Net income attributable to Corning Incorporated
|
$
|
408
|
$
|
533
|
$
|
1,540
|
$
|
1,481
|
|||
Earnings per common share attributable to Corning Incorporated:
|
|||||||||||
Basic
|
$
|
0.28
|
$
|
0.36
|
$
|
1.05
|
$
|
0.99
|
|||
Diluted
|
$
|
0.28
|
$
|
0.36
|
$
|
1.04
|
$
|
0.98
|
|||
Dividends declared per common share
|
$
|
0.10
|
$
|
0.075
|
$
|
0.29
|
$
|
0.225
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
||||||||||
2013
|
2012
|
2013
|
2012
|
||||||||
Net income attributable to Corning Incorporated
|
$
|
408
|
$
|
533
|
$
|
1,540
|
$
|
1,481
|
|||
Other comprehensive income (loss), net of tax
|
313
|
231
|
(431)
|
183
|
|||||||
Comprehensive income attributable to Corning Incorporated
|
$
|
721
|
$
|
764
|
$
|
1,109
|
$
|
1,664
|
Three months ended
|
||||
September 30,
2013
|
September 30,
2012
|
|||
Basic
|
1,454
|
1,483
|
||
Diluted
|
1,463
|
1,494
|
||
Diluted used for non-GAAP measures
|
1,463
|
1,494
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported
|
$
|
2,067
|
$
|
138
|
$
|
549
|
$
|
408
|
25.7%
|
$
|
0.28
|
|||||
Acquisition-related costs (4)
|
10
|
7
|
||||||||||||||
Provision for income taxes (6)
|
58
|
0.04
|
||||||||||||||
Asbestos settlement (5)
|
5
|
3
|
||||||||||||||
Gain on change in control of equity investment (7)
|
(1)
|
|||||||||||||||
Equity in earnings of affiliated companies (8)
|
(22)
|
(22)
|
(20)
|
(0.02)
|
||||||||||||
Hemlock Semiconductor operating results (3)
|
3
|
3
|
3
|
|||||||||||||
Hemlock Semiconductor non-operating results (3)
|
(10)
|
(10)
|
(9)
|
(0.01)
|
||||||||||||
Purchased collars and average rate forwards (2)
|
46
|
25
|
0.02
|
|||||||||||||
Other yen-related transactions (2)
|
(25)
|
(18)
|
(0.01)
|
|||||||||||||
Constant-yen (1)
|
41
|
12
|
40
|
31
|
0.02
|
|||||||||||
Core Performance measures
|
$
|
2,108
|
$
|
121
|
$
|
596
|
$
|
487
|
18.3%
|
$
|
0.33
|
(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)
|
Provision for income taxes: These items represent discrete adjustments recorded for effects of tax law and realizability of deferred tax assets changes. This item also includes the income tax effects of adjusting from a GAAP tax rate to a Core earnings tax rate.
|
(7)
|
Gain on change in control of equity investment: Adjustment of the gain as a result of certain changes to the Shareholder Agreement of an equity company occurring in the second quarter of 2013, resulting in Corning having a controlling interest that requires consolidation of this investment.
|
(8)
|
Equity in earnings of affiliated companies: These adjustments relate to items which do not reflect expected on-going operating results in the silicone products business of Dow Corning, such as settlements under “take-or-pay” contracts.
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported *
|
$
|
2,038
|
$
|
240
|
$
|
627
|
$
|
533
|
15.0%
|
$
|
0.36
|
|||||
Asbestos settlement (1)
|
3
|
2
|
||||||||||||||
Hemlock semiconductor operating results (2)
|
(11)
|
(11)
|
(10)
|
(0.01)
|
||||||||||||
Hemlock semiconductor non-operating results (2)
|
(10)
|
(10)
|
(9)
|
(0.01)
|
||||||||||||
Other yen-related transactions (3)
|
(2)
|
(1)
|
||||||||||||||
Constant-yen (4)
|
(118)
|
(46)
|
(122)
|
(100)
|
(0.07)
|
|||||||||||
Core Performance measures
|
$
|
1,920
|
$
|
173
|
$
|
485
|
$
|
415
|
14.4%
|
$
|
0.28
|
(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
September 30, 2013
|
Three months ended
September 30, 2012
|
Three months ended
June 30, 2013
|
|||||||||||||||||||||
Net
Sales
|
Gross
Margin
|
Gross
Margin
%
|
Net
Sales
|
Gross
Margin
|
Gross
Margin
%
|
Net
Sales
|
Gross
margin
|
Gross
Margin
%
|
|||||||||||||||
As reported *
|
$
|
2,067
|
$
|
901
|
44%
|
$
|
2,038
|
$
|
889
|
44%
|
$
|
1,982
|
$
|
883
|
45%
|
||||||||
Acquisition-related costs (1)
|
2
|
1
|
|||||||||||||||||||||
Other yen-related transactions (2)
|
(8)
|
(1)
|
(24)
|
||||||||||||||||||||
Constant-yen (3)
|
41
|
28
|
(118)
|
(74)
|
(9)
|
||||||||||||||||||
Pension mark-to-market adjustment (4)
|
39
|
24
|
|||||||||||||||||||||
Core Performance measures
|
$
|
2,108
|
$
|
923
|
44%
|
$
|
1,920
|
$
|
814
|
42%
|
$
|
2,021
|
$
|
875
|
43%
|
(1)
|
Acquisition-related costs: These expenses include inventory valuation adjustments.
|
(2)
|
Purchased collars, average forward contracts and 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.
|
(4)
|
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.
|
(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 consolidated subsidiary, 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)
|
Provision for income taxes: These items represent discrete adjustments recorded for effects of tax law and realizability of deferred tax assets changes. This item also includes the income tax effects of adjusting from a GAAP tax rate to a Core earnings tax rate.
|
(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 September 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.
|
(10)
|
Equity in earnings of affiliated companies: These adjustments relate to items which do not reflect expected on-going operating results in the silicone products business of Dow Corning, such as settlements under “take-or-pay” contracts.
|