Date of Report: (Date of earliest event reported)
|
January 28, 2014
|
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: January 28, 2014
|
By
|
/s/ R. TONY TRIPENY
|
R. Tony Tripeny
|
||
Senior Vice President & Corporate Controller
|
·
|
Core earnings per share were $0.29*, an increase of 4% over last year’s fourth quarter, and better than expected. GAAP earnings per share were $0.30.
|
·
|
Core sales were $2 billion*, a 2% decline from the comparable period last year. GAAP sales also were $2 billion.
|
·
|
In the Display Technologies segment, price declines for the quarter were again moderate. Total LCD glass volume was at record levels, improving 4% over the year-ago period. The total glass volume combines Corning’s wholly owned business and Samsung Corning Precision Materials Co., Ltd.
|
·
|
Optical Communications segment (formerly Telecommunications) sales increased 12% over the year-ago period.
|
·
|
Core sales were $7.95 billion*, a 5% increase from $7.61 billion last year. GAAP sales were $7.82 billion.
|
·
|
Core earnings per share were $1.23*, a 16% year-over-year improvement compared to last year’s core earnings of $1.06*. GAAP earnings per share were $1.34.
|
·
|
Free cash flow for the year was strong at $1.2 billion.
|
Core Performance*
|
|||
Q4 2013
|
Q4 2012
|
% Change
|
|
Core Net Sales
|
$2,005
|
$2,045
|
(2%)
|
Core Equity Earnings
|
$ 121
|
$ 150
|
(19%)
|
Core Earnings
|
$ 410
|
$ 409
|
--
|
Core Earnings EPS
|
$ 0.29
|
$ 0.28
|
4%
|
GAAP
|
|||
Q4 2013
|
Q4 2012
|
% Change
|
|
Net Sales
|
$1,956
|
$2,146
|
(9%)
|
Equity Earnings
|
$ 70
|
$ 93
|
(25%)
|
Net Income
|
$ 421
|
$ 155
|
172%
|
EPS
|
$ 0.30
|
$ 0.10
|
200%
|
Core Performance*
|
|||
2013
|
2012
|
% Change
|
|
Core Net Sales
|
$7,948
|
$7,605
|
5%
|
Core Equity Earnings
|
$ 595
|
$ 713
|
(17%)
|
Core Earnings
|
$1,797
|
$1,595
|
13%
|
Core Earnings EPS
|
$ 1.23
|
$ 1.06
|
16%
|
GAAP
|
|||
2013
|
2012
|
% Change
|
|
Net Sales
|
$7,819
|
$8,012
|
(2%)
|
Equity Earnings
|
$ 547
|
$ 810
|
(32%)
|
Net Income
|
$1,961
|
$1,636
|
20%
|
EPS
|
$ 1.34
|
$ 1.09
|
23%
|
·
|
Corning anticipates that glass volume in its Display Technologies segment will be down slightly sequentially, in line with normal seasonality. The company expects LCD glass price declines to be higher than previous quarters. The price declines are not related to the SCP acquisition or a result of recent supply contract renewals. The company expects that price declines will return to moderate levels after the first quarter. Corning anticipates another year of growth in the LCD glass market in 2014, with retail demand up a mid-to-high single digit percentage, as measured in square feet. The company said that supply chain inventory levels remain healthy and industry glass supply appears aligned with overall demand.
|
·
|
In the Optical Communications segment, Corning anticipates first-quarter sales growth to be in the mid-teens on a percentage basis, a significant improvement over the first quarter last year.
|
·
|
For the Environmental Technologies segment, first-quarter sales should increase by a mid-single digit percentage on a year-over-year basis, driven by improvements in heavy-duty diesel products in China and Europe.
|
·
|
Specialty Materials segment sales are expected to be consistent on a year-over-year comparison in the first quarter, which is seasonally the slowest quarter each year. The company expects its Gorilla Glass volume to increase on a yearly basis in quarter one, and as the year progresses, be more in line with overall industry consumption of glass for devices.
|
·
|
Life Sciences segment sales should be comparable to those of a year-ago first quarter.
|
Three months ended
December 31,
|
Year ended
December 31,
|
||||||||||
2013
|
2012
|
2013
|
2012
|
||||||||
Net sales
|
$
|
1,956
|
$
|
2,146
|
$
|
7,819
|
$
|
8,012
|
|||
Cost of sales
|
1,186
|
1,348
|
4,495
|
4,693
|
|||||||
Gross margin
|
770
|
798
|
3,324
|
3,319
|
|||||||
Operating expenses:
|
|||||||||||
Selling, general and administrative expenses
|
332
|
356
|
1,126
|
1,205
|
|||||||
Research, development and engineering expenses
|
169
|
219
|
710
|
769
|
|||||||
Amortization of purchased intangibles
|
8
|
6
|
31
|
19
|
|||||||
Restructuring, impairment and other charges
|
71
|
133
|
67
|
133
|
|||||||
Asbestos litigation charge
|
6
|
5
|
19
|
14
|
|||||||
Operating income
|
184
|
79
|
1,371
|
1,179
|
|||||||
Equity in earnings of affiliated companies
|
70
|
93
|
547
|
810
|
|||||||
Interest income
|
3
|
4
|
8
|
14
|
|||||||
Interest expense
|
(28)
|
(34)
|
(120)
|
(111)
|
|||||||
Other income, net
|
338
|
41
|
667
|
83
|
|||||||
Income before income taxes
|
567
|
183
|
2,473
|
1,975
|
|||||||
Provision for income taxes
|
(146)
|
(28)
|
(512)
|
(339)
|
|||||||
Net income attributable to Corning Incorporated
|
$
|
421
|
$
|
155
|
$
|
1,961
|
$
|
1,636
|
|||
Earnings per common share attributable to Corning Incorporated:
|
|||||||||||
Basic
|
$
|
0.30
|
$
|
0.11
|
$
|
1.35
|
$
|
1.10
|
|||
Diluted
|
$
|
0.30
|
$
|
0.10
|
$
|
1.34
|
$
|
1.09
|
|||
Dividends declared per common share
|
$
|
0.10
|
$
|
0.09
|
$
|
0.39
|
$
|
0.32
|
Years ended December 31,
|
||||||||
2013
|
2012
|
2011
|
||||||
Net income attributable to Corning Incorporated
|
$
|
1,961
|
$
|
1,636
|
$
|
2,817
|
||
Other comprehensive (loss) income, net of tax:
|
||||||||
Foreign currency translation adjustments and other
|
(682)
|
(179)
|
(21)
|
|||||
Net unrealized gains on investments
|
2
|
13
|
4
|
|||||
Unamortized gains (losses) and prior service costs for postretirement benefit plans
|
392
|
(1)
|
(121)
|
|||||
Net unrealized (losses) gains on designated hedges
|
(24)
|
47
|
(6)
|
|||||
(312)
|
(120)
|
(144)
|
||||||
Comprehensive income attributable to Corning Incorporated
|
$
|
1,649
|
$
|
1,516
|
$
|
2,673
|
December 31,
|
|||||
2013
|
2012
|
||||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
4,704
|
$
|
4,988
|
|
Short-term investments, at fair value
|
531
|
1,156
|
|||
Total cash, cash equivalents and short-term investments
|
5,235
|
6,144
|
|||
Trade accounts receivable, net of doubtful accounts and allowances
|
1,253
|
1,302
|
|||
Inventories
|
1,270
|
1,051
|
|||
Deferred income taxes
|
278
|
579
|
|||
Other current assets
|
855
|
619
|
|||
Total current assets
|
8,891
|
9,695
|
|||
Investments
|
5,537
|
4,915
|
|||
Property, net of accumulated depreciation
|
9,801
|
10,625
|
|||
Goodwill and other intangible assets, net
|
1,542
|
1,496
|
|||
Deferred income taxes
|
2,234
|
2,343
|
|||
Other assets
|
473
|
301
|
|||
Total Assets
|
$
|
28,478
|
$
|
29,375
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt
|
$
|
21
|
$
|
76
|
|
Accounts payable
|
771
|
779
|
|||
Other accrued liabilities
|
954
|
1,101
|
|||
Total current liabilities
|
1,746
|
1,956
|
|||
Long-term debt
|
3,272
|
3,382
|
|||
Postretirement benefits other than pensions
|
766
|
930
|
|||
Other liabilities
|
1,483
|
1,574
|
|||
Total liabilities
|
7,267
|
7,842
|
|||
Commitments and contingencies
|
|||||
Shareholders’ equity:
|
|||||
Common stock – Par value $0.50 per share; Shares authorized: 3.8 billion; Shares issued: 1,661 million and 1,649 million
|
831
|
825
|
|||
Additional paid-in capital
|
13,066
|
13,146
|
|||
Retained earnings
|
11,320
|
9,932
|
|||
Treasury stock, at cost; Shares held: 262 million and 179 million
|
(4,099)
|
(2,773)
|
|||
Accumulated other comprehensive income
|
44
|
356
|
|||
Total Corning Incorporated shareholders’ equity
|
21,162
|
21,486
|
|||
Noncontrolling interests
|
49
|
47
|
|||
Total equity
|
21,211
|
21,533
|
|||
Total Liabilities and Equity
|
$
|
28,478
|
$
|
29,375
|
Three months ended
December 31,
|
Year ended
December 31,
|
||||||||||
2013
|
2012
|
2013
|
2012
|
||||||||
Cash Flows from Operating Activities:
|
|||||||||||
Net income
|
$
|
421
|
$
|
155
|
$
|
1,961
|
$
|
1,636
|
|||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||||||
Depreciation
|
241
|
261
|
971
|
978
|
|||||||
Amortization of purchased intangibles
|
8
|
6
|
31
|
19
|
|||||||
Restructuring, impairment and other charges
|
71
|
133
|
67
|
133
|
|||||||
Loss on retirement of debt
|
26
|
26
|
|||||||||
Stock compensation charges
|
14
|
14
|
54
|
70
|
|||||||
Undistributed earnings of affiliated companies less than dividends received
|
339
|
420
|
83
|
280
|
|||||||
Deferred tax provision (benefit)
|
48
|
(47)
|
189
|
18
|
|||||||
Restructuring payments
|
(5)
|
(12)
|
(35)
|
(15)
|
|||||||
Employee benefit payments less than expense
|
18
|
235
|
52
|
178
|
|||||||
Unrealized gains on translated earnings contracts
|
(201)
|
(367)
|
|||||||||
Changes in certain working capital items:
|
|||||||||||
Trade accounts receivable
|
110
|
(123)
|
(29)
|
(272)
|
|||||||
Inventories
|
(9)
|
8
|
(247)
|
(23)
|
|||||||
Other current assets
|
20
|
(16)
|
34
|
(81)
|
|||||||
Accounts payable and other current liabilities
|
255
|
231
|
(23)
|
189
|
|||||||
Other, net
|
(46)
|
(51)
|
46
|
70
|
|||||||
Net cash provided by operating activities
|
1,284
|
1,240
|
2,787
|
3,206
|
|||||||
Cash Flows from Investing Activities:
|
|||||||||||
Capital expenditures
|
(337)
|
(526)
|
(1,019)
|
(1,801)
|
|||||||
Acquisitions of businesses, net of cash received
|
(2)
|
(723)
|
(68)
|
(723)
|
|||||||
Investments in unconsolidated entities
|
(507)
|
(526)
|
(111)
|
||||||||
Short-term investments – acquisitions
|
(223)
|
(411)
|
(1,406)
|
(2,270)
|
|||||||
Short-term investments – liquidations
|
577
|
651
|
2,026
|
2,269
|
|||||||
Premium on purchased collars
|
(107)
|
||||||||||
Realized gains on translated earning contracts
|
54
|
87
|
|||||||||
Other, net
|
9
|
2
|
9
|
8
|
|||||||
Net cash used in investing activities
|
(429)
|
(1,007)
|
(1,004)
|
(2,628)
|
|||||||
Cash Flows from Financing Activities:
|
|||||||||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(2)
|
(2)
|
(71)
|
(26)
|
|||||||
Proceeds from issuance of long-term debt, net
|
248
|
332
|
248
|
1,362
|
|||||||
Proceeds (payments) to settle interest rate swap agreements
|
33
|
33
|
(18)
|
||||||||
Proceeds received for asset financing and related incentives, net
|
194
|
276
|
|||||||||
Retirements of long-term debt, net
|
(280)
|
(498)
|
(280)
|
||||||||
Principal payments under capital lease obligations
|
(5)
|
(7)
|
(1)
|
||||||||
Payments to acquire noncontrolling interest
|
(47)
|
||||||||||
Proceeds from the exercise of stock options
|
31
|
12
|
85
|
38
|
|||||||
Repurchases of common stock for treasury
|
(1,075)
|
(140)
|
(1,516)
|
(720)
|
|||||||
Dividends paid
|
(140)
|
(133)
|
(566)
|
(472)
|
|||||||
Other, net
|
2
|
2
|
|||||||||
Net cash used in financing activities
|
(716)
|
(209)
|
(2,063)
|
(115)
|
|||||||
Effect of exchange rates on cash
|
5
|
12
|
(4)
|
(136)
|
|||||||
Net increase (decrease) in cash and cash equivalents
|
144
|
36
|
(284)
|
327
|
|||||||
Cash and cash equivalents at beginning of period
|
4,560
|
4,952
|
4,988
|
4,661
|
|||||||
Cash and cash equivalents at end of period
|
$
|
4,704
|
$
|
4,988
|
$
|
4,704
|
$
|
4,988
|
Three months ended
December 31,
|
Year ended
December 31,
|
||||||
2013
|
2012
|
2013
|
2012
|
||||
Basic
|
1,414
|
1,471
|
1,452
|
1,494
|
|||
Diluted
|
1,424
|
1,481
|
1,462
|
1,506
|
|||
Diluted used for non-GAAP measures
|
1,424
|
1,481
|
1,462
|
1,506
|
Three months ended December 31, 2013
|
||||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported
|
$
|
1,956
|
$
|
70
|
$
|
567
|
$
|
421
|
25.7%
|
$
|
0.30
|
|||||
Constant-yen (1)
|
49
|
14
|
46
|
38
|
0.03
|
|||||||||||
Purchased collars and average rate forwards (2)
|
(228)
|
(149)
|
(0.10)
|
|||||||||||||
Other yen-related transactions (2)
|
(28)
|
(20)
|
(0.01)
|
|||||||||||||
Hemlock Semiconductor operating results (3)
|
(27)
|
(27)
|
(26)
|
(0.02)
|
||||||||||||
Acquisition-related costs (4)
|
18
|
15
|
0.01
|
|||||||||||||
Provision for income taxes (5)
|
6
|
|||||||||||||||
Asbestos settlement (6)
|
6
|
4
|
||||||||||||||
Restructuring, impairment and other charges (7)
|
67
|
46
|
0.03
|
|||||||||||||
Pension mark-to-market adjustment (8)
|
11
|
9
|
0.01
|
|||||||||||||
Equity in earnings of affiliated companies (9)
|
64
|
64
|
64
|
0.04
|
||||||||||||
Other
|
4
|
2
|
||||||||||||||
Core performance measures
|
$
|
2,005
|
$
|
121
|
$
|
500
|
$
|
410
|
18.0%
|
$
|
0.29
|
(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 forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average 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 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 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 asset write-offs, offset by the 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: This represents discrete adjustments recorded for effects of tax law and realizability of deferred tax assets changes removed from core earnings. 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, impairments, 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.
|
(9)
|
Equity in earnings of affiliated companies: These adjustments relate to items which do not reflect expected on-going operating results of our affiliated companies, such as restructuring, impairment and other charges and settlements under “take-or-pay” contracts.
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported *
|
$
|
2,146
|
$
|
93
|
$
|
183
|
$
|
155
|
15.3%
|
$
|
0.10
|
|||||
Constant-yen (1)
|
(101)
|
(44)
|
(113)
|
(91)
|
(0.06)
|
|||||||||||
Other yen-related transactions (2)
|
(9)
|
(6)
|
||||||||||||||
Hemlock Semiconductor operating results (3)
|
(4)
|
(4)
|
(4)
|
|||||||||||||
Hemlock Semiconductor non-operating results (3)
|
87
|
87
|
81
|
0.05
|
||||||||||||
Acquisition-related costs (4)
|
24
|
16
|
0.01
|
|||||||||||||
Provision for income taxes (5)
|
41
|
0.03
|
||||||||||||||
Asbestos settlement (6)
|
5
|
3
|
||||||||||||||
Restructuring, impairment and other charges (7)
|
133
|
91
|
0.06
|
|||||||||||||
Pension mark-to-market adjustment (8)
|
217
|
140
|
0.09
|
|||||||||||||
Equity in earnings of affiliated companies (9)
|
18
|
18
|
18
|
0.01
|
||||||||||||
Accumulated other comprehensive income (10)
|
(52)
|
(52)
|
(0.04)
|
|||||||||||||
Loss on repurchase of debt (11)
|
26
|
17
|
0.01
|
|||||||||||||
Core Performance measures*
|
$
|
2,045
|
$
|
150
|
$
|
515
|
$
|
409
|
20.6%
|
$
|
0.28
|
*
|
Includes impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(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 forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average 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 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 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 asset write-offs, offset by the 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: This represents discrete adjustments recorded for effects of tax law and realizability of deferred tax assets changes removed from core earnings. 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, impairments, 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.
|
(9)
|
Equity in earnings of affiliated companies: These adjustments relate to items which do not reflect expected on-going operating results of our affiliated companies, such as restructuring, impairment and other charges and settlements under “take-or-pay” contracts.
|
(10)
|
Accumulated other comprehensive income: In 2012, Corning recorded a translation capital gain on the liquidation of a foreign subsidiary.
|
(11)
|
Loss on repurchase of debt: In 2012, Corning recorded a loss on the repurchase of $13 million of our 8.875% senior unsecured notes due 2021, $11 million of our 8.875% senior unsecured notes due 2016, and $51 million of our 6.75% senior unsecured notes due 2013.
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported
|
$
|
7,819
|
$
|
547
|
$
|
2,473
|
$
|
1,961
|
20.7%
|
$
|
1.34
|
|||||
Constant-yen (1)
|
129
|
36
|
122
|
96
|
0.07
|
|||||||||||
Purchased collars and average rate forwards (2)
|
(435)
|
(287)
|
(0.20)
|
|||||||||||||
Other yen-related transactions (2)
|
(99)
|
(69)
|
(0.05)
|
|||||||||||||
Hemlock Semiconductor operating results (3)
|
(31)
|
(31)
|
(30)
|
(0.02)
|
||||||||||||
Hemlock Semiconductor non-operating results (3)
|
1
|
1
|
1
|
|||||||||||||
Acquisition-related costs (4)
|
54
|
40
|
0.03
|
|||||||||||||
Provision for income taxes (5)
|
9
|
0.01
|
||||||||||||||
Asbestos settlement (6)
|
19
|
13
|
0.01
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
67
|
46
|
0.03
|
|||||||||||||
Pension mark-to-market adjustment (8)
|
(30)
|
(17)
|
(0.01)
|
|||||||||||||
Gain on change in control of equity investment (9)
|
(17)
|
(12)
|
(0.01)
|
|||||||||||||
Equity in earnings of affiliated companies (10)
|
42
|
42
|
44
|
0.02
|
||||||||||||
Other
|
4
|
2
|
||||||||||||||
Core performance measures
|
$
|
7,948
|
$
|
595
|
$
|
2,170
|
$
|
1,797
|
17.2%
|
$
|
1.23
|
(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 forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average 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 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 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 asset write-offs, offset by the 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: This represents discrete adjustments recorded for effects of tax law and realizability of deferred tax assets changes removed from core earnings. 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, impairments, 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.
|
(9)
|
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.
|
(10)
|
Equity in earnings of affiliated companies: These adjustments relate to items which do not reflect expected on-going operating results of our affiliated companies, such as restructuring, impairment and other charges and settlements under “take-or-pay” contracts.
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported *
|
$
|
8,012
|
$
|
810
|
$
|
1,975
|
$
|
1,636
|
17.2%
|
$
|
1.09
|
|||||
Constant-yen (1)
|
(407)
|
(167)
|
(434)
|
(353)
|
(0.23)
|
|||||||||||
Other yen-related transactions (2)
|
(22)
|
(16)
|
(0.01)
|
|||||||||||||
Hemlock Semiconductor operating results (3)
|
(25)
|
(25)
|
(23)
|
(0.02)
|
||||||||||||
Hemlock Semiconductor non-operating results (3)
|
77
|
77
|
72
|
0.05
|
||||||||||||
Acquisition-related costs (4)
|
24
|
16
|
0.01
|
|||||||||||||
Provision for income taxes (5)
|
41
|
0.03
|
||||||||||||||
Asbestos settlement (6)
|
14
|
9
|
0.01
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
133
|
91
|
0.06
|
|||||||||||||
Pension mark-to-market adjustment (8)
|
217
|
140
|
0.09
|
|||||||||||||
Equity in earnings of affiliated companies (9)
|
18
|
18
|
17
|
0.01
|
||||||||||||
Loss on repurchase of debt (10)
|
26
|
17
|
0.01
|
|||||||||||||
Accumulated other comprehensive income (11)
|
(52)
|
(52)
|
(0.03)
|
|||||||||||||
Core performance measures*
|
$
|
7,605
|
$
|
713
|
$
|
1,951
|
$
|
1,595
|
18.2%
|
$
|
1.06
|
*
|
Includes impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(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 forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average 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 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 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 asset write-offs, offset by the 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: This represents discrete adjustments recorded for effects of tax law and realizability of deferred tax assets changes removed from core earnings. 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, impairments, 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.
|
(9)
|
Equity in earnings of affiliated companies: These adjustments relate to items which do not reflect expected on-going operating results of our affiliated companies, such as restructuring, impairment and other charges and settlements under “take-or-pay” contracts.
|
(10)
|
Loss on repurchase of debt: In 2012, Corning recorded a loss on the repurchase of $13 million of our 8.875% senior unsecured notes due 2021, $11 million of our 8.875% senior unsecured notes due 2016, and $51 million of our 6.75% senior unsecured notes due 2013.
|
(11)
|
Accumulated other comprehensive income: In 2012, Corning recorded a translation capital gain on the liquidation of a foreign subsidiary.
|
Three months ended
December 31, 2013
|
Three months ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||||||||||
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
|||||||||||||||
|
|||||||||||||||||||||||
As reported *
|
$
|
616
|
$
|
43
|
$
|
263
|
$
|
800
|
$
|
139
|
$
|
354
|
(23)%
|
(69)%
|
(26)%
|
||||||||
Constant-yen (1)
|
49
|
14
|
39
|
(101)
|
(43)
|
(97)
|
|||||||||||||||||
Purchased collars (2)
|
(37)
|
||||||||||||||||||||||
Other yen-related transaction (2)
|
(19)
|
(6)
|
|||||||||||||||||||||
Acquisition related costs (3)
|
8
|
||||||||||||||||||||||
Provision for income taxes (4)
|
10
|
||||||||||||||||||||||
Restructuring, impairment and other charges (5)
|
6
|
17
|
|||||||||||||||||||||
Pension mark-to-market adjustment (6)
|
1
|
17
|
|||||||||||||||||||||
Equity in earnings of affiliated companies (7)
|
28
|
28
|
18
|
18
|
|||||||||||||||||||
Core Performance measures
|
$
|
665
|
$
|
85
|
$
|
299
|
$
|
699
|
$
|
114
|
$
|
303
|
(5)%
|
(25)%
|
(1)%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(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 forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average 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 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)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(4)
|
Provision for income taxes: This represents discrete adjustments recorded for effects of tax law and realizability of deferred tax assets changes removed from core earnings. This item also includes the income tax effects of adjusting from a GAAP tax rate to a core earnings tax rate.
|
(5)
|
Restructuring, impairments, and other charges.
|
(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. 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.
|
(7)
|
Equity in earnings of affiliated companies: These adjustments relate to items which do not reflect expected on-going operating results of our affiliated companies, such as restructuring, impairment and other charges and settlements under “take-or-pay” contracts.
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||||||||||
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
|||||||||||||||
|
|||||||||||||||||||||||
As reported *
|
$
|
2,545
|
$
|
357
|
$
|
1,267
|
$
|
2,909
|
$
|
692
|
$
|
1,589
|
(13)%
|
(48)%
|
(20)%
|
||||||||
Constant-yen (1)
|
129
|
35
|
99
|
(408)
|
(166)
|
(380)
|
|||||||||||||||||
Purchased collars (2)
|
(90)
|
||||||||||||||||||||||
Other yen-related transaction (2)
|
(67)
|
(15)
|
|||||||||||||||||||||
Acquisition related costs (3)
|
8
|
||||||||||||||||||||||
Provision for income taxes (4)
|
10
|
||||||||||||||||||||||
Restructuring, impairment and other charges (5)
|
6
|
17
|
|||||||||||||||||||||
Pension mark-to-market adjustment (6)
|
(8)
|
17
|
|||||||||||||||||||||
Equity in earnings of affiliated companies (7)
|
28
|
28
|
18
|
18
|
|||||||||||||||||||
Core Performance measures*
|
$
|
2,674
|
$
|
420
|
$
|
1,253
|
$
|
2,501
|
$
|
544
|
$
|
1,246
|
7%
|
(23)%
|
1%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(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 forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average 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 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)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(4)
|
Provision for income taxes: This represents discrete adjustments recorded for effects of tax law and realizability of deferred tax assets changes removed from core earnings. This item also includes the income tax effects of adjusting from a GAAP tax rate to a core earnings tax rate.
|
(5)
|
Restructuring, impairments, and other charges.
|
(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. 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.
|
(7)
|
Equity in earnings of affiliated companies: These adjustments relate to items which do not reflect expected on-going operating results of our affiliated companies, such as restructuring, impairment and other charges and settlements under “take-or-pay” contracts.
|
Three months ended
December 31, 2013
|
Three months ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
|
|||||||||||||||
As reported *
|
$
|
605
|
$
|
26
|
$
|
540
|
$
|
53
|
12%
|
(51)%
|
|||||
Acquisition-related costs (1)
|
2
|
1
|
|||||||||||||
Restructuring, impairment and other charges (2)
|
8
|
31
|
|||||||||||||
Pension mark-to-market adjustment (3)
|
11
|
||||||||||||||
Accumulated other comprehensive income (4)
|
(52)
|
||||||||||||||
Core Performance measures*
|
$
|
605
|
$
|
36
|
$
|
540
|
$
|
44
|
12%
|
(18)%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(1)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(2)
|
Restructuring, impairments, and other charges.
|
(3)
|
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.
|
(4)
|
Accumulated other comprehensive income: In 2012, Corning recorded a translation capital gain on the liquidation of a foreign subsidiary.
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
|
|||||||||||||||
As reported *
|
$
|
2,326
|
$
|
199
|
$
|
2,130
|
$
|
146
|
9%
|
36%
|
|||||
Acquisition-related costs (1)
|
9
|
1
|
|||||||||||||
Restructuring, impairment and other charges (2)
|
8
|
31
|
|||||||||||||
Pension mark-to-market adjustment (3)
|
(9)
|
11
|
|||||||||||||
Gain on change in control of equity investment (4)
|
(11)
|
||||||||||||||
Accumulated other comprehensive income (5)
|
(52)
|
||||||||||||||
Core Performance measures*
|
$
|
2,326
|
$
|
196
|
$
|
2,130
|
$
|
137
|
9%
|
43%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(1)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(2)
|
Restructuring, impairments, and other charges.
|
(3)
|
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.
|
(4)
|
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.
|
(5)
|
Accumulated other comprehensive income: In 2012, Corning recorded a translation capital gain on the liquidation of a foreign subsidiary.
|
Three months ended
December 31, 2013
|
Three months ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported *
|
$
|
238
|
$
|
37
|
$
|
219
|
$
|
10
|
9%
|
270%
|
|||||
Restructuring, impairment and other charges (1)
|
1
|
2
|
|||||||||||||
Pension mark-to-market adjustment (2)
|
5
|
||||||||||||||
Core Performance measures*
|
$
|
238
|
$
|
38
|
$
|
219
|
$
|
17
|
9%
|
124%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(1)
|
Restructuring, impairments, and other charges.
|
(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. 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.
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported *
|
$
|
919
|
$
|
132
|
$
|
964
|
$
|
112
|
(5)%
|
18%
|
|||||
Restructuring, impairment and other charges (1)
|
1
|
2
|
|||||||||||||
Pension mark-to-market adjustment (2)
|
(3)
|
5
|
|||||||||||||
Core Performance measures*
|
$
|
919
|
$
|
130
|
$
|
964
|
$
|
119
|
(5)%
|
9%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(1)
|
Restructuring, impairments, and other charges.
|
(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. 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.
|
Three months ended
December 31, 2013
|
Three months ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported *
|
$
|
285
|
$
|
25
|
$
|
399
|
$
|
22
|
(29)%
|
14%
|
|||||
Constant-yen (1)
|
(1)
|
||||||||||||||
Other yen-related transactions (2)
|
(1)
|
6
|
|||||||||||||
Purchased collars (2)
|
2
|
||||||||||||||
Acquisition-related costs (3)
|
1
|
||||||||||||||
Restructuring, impairment and other charges (4)
|
12
|
33
|
|||||||||||||
Pension mark-to-market adjustment (5)
|
1
|
6
|
|||||||||||||
Core Performance measures*
|
$
|
285
|
$
|
39
|
$
|
399
|
$
|
67
|
(29)%
|
(42)%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(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)
|
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)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(4)
|
Restructuring, impairments, and other charges.
|
(5)
|
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.
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported *
|
$
|
1,170
|
$
|
187
|
$
|
1,346
|
$
|
137
|
(13)%
|
36%
|
|||||
Constant-yen (1)
|
(2)
|
25
|
|||||||||||||
Other yen-related transactions (2)
|
(2)
|
||||||||||||||
Purchased collars (2)
|
2
|
||||||||||||||
Acquisition-related costs (3)
|
1
|
||||||||||||||
Restructuring, impairment and other charges (4)
|
12
|
33
|
|||||||||||||
Pension mark-to-market adjustment (5)
|
(2)
|
6
|
|||||||||||||
Core Performance measures*
|
$
|
1,170
|
$
|
196
|
$
|
1,346
|
$
|
201
|
(13)%
|
(2)%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(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)
|
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)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(4)
|
Restructuring, impairments, and other charges.
|
(5)
|
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.
|
Three months ended
December 31, 2013
|
Three months ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported *
|
$
|
210
|
$
|
14
|
$
|
185
|
$
|
(4)
|
14%
|
**
|
|||||
Acquisition-related costs (1)
|
4
|
15
|
|||||||||||||
Restructuring, impairment and other charges (2)
|
3
|
1
|
|||||||||||||
Pension mark-to-market adjustment (3)
|
4
|
||||||||||||||
Core Performance measures *
|
$
|
210
|
$
|
21
|
$
|
185
|
$
|
16
|
14%
|
31%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
**
|
Percentage change not meaningful.
|
(1)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(2)
|
Restructuring, impairments, and other charges.
|
(3)
|
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.
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported *
|
$
|
851
|
$
|
71
|
$
|
657
|
$
|
28
|
30%
|
154%
|
|||||
Acquisition-related costs (1)
|
21
|
15
|
|||||||||||||
Restructuring, impairment and other charges (2)
|
3
|
1
|
|||||||||||||
Pension mark-to-market adjustment (3)
|
(3)
|
4
|
|||||||||||||
Core Performance measures *
|
$
|
851
|
$
|
92
|
$
|
657
|
$
|
48
|
30%
|
92%
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(1)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(2)
|
Restructuring, impairments, and other charges.
|
(3)
|
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.
|
Equity Earnings
|
|||||
Three months
ended
December 31,
2013
|
Three months
ended
December 31,
2012
|
||||
As reported
|
$
|
59
|
$
|
(54)
|
|
Equity in earnings of affiliated companies (1)
|
|||||
Hemlock semiconductor operating results (2)
|
(1)
|
86
|
|||
Hemlock semiconductor non-operating results (2)
|
(27)
|
(3)
|
|||
Core Performance measures
|
$
|
31
|
$
|
29
|
(1)
|
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.
|
(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 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.
|
Equity Earnings
|
|||||
Year
ended
December 31,
2013
|
Year
ended
December 31,
2012
|
||||
As reported
|
$
|
196
|
$
|
90
|
|
Equity in earnings of affiliated companies (1)
|
(20)
|
||||
Hemlock semiconductor operating results (2)
|
(31)
|
(25)
|
|||
Hemlock semiconductor non-operating results (2)
|
78
|
||||
Core Performance measures
|
$
|
145
|
$
|
143
|
(1)
|
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.
|
(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 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.
|
Three months ended December 31, 2013
|
Three months ended December 31, 2012
|
||||||||||||||||||||
Gross
Margin
|
Gross
margin
%
|
Selling,
general
and
admin.
expenses
|
Research,
development
and
engineering
expenses
|
Gross
Margin
|
Gross
margin
%
|
Selling,
general
and
admin.
expenses
|
Research,
development
and
engineering
expenses
|
||||||||||||||
As reported *
|
$
|
770
|
39%
|
$
|
332
|
$
|
169
|
$
|
798
|
37%
|
$
|
356
|
$
|
219
|
|||||||
Acquisition-related costs (1)
|
(10)
|
12
|
(6)
|
||||||||||||||||||
Other yen-related transactions (2)
|
(9)
|
(4)
|
|||||||||||||||||||
Constant-yen (3)
|
33
|
(66)
|
(1)
|
||||||||||||||||||
Pension mark-to-market adjustment (4)
|
(11)
|
119
|
(61)
|
(38)
|
|||||||||||||||||
Core Performance measures
|
$
|
794
|
40%
|
$
|
311
|
$
|
169
|
$
|
859
|
42%
|
$
|
288
|
$
|
181
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(1)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(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.
|
(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. 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.
|
Year ended December 31, 2013
|
Year ended December 31, 2012
|
||||||||||||||||||||
Gross
Margin
|
Gross
margin
%
|
Selling,
general
and
admin.
expenses
|
Research,
development
and
engineering
expenses
|
Gross
Margin
|
Gross
margin
%
|
Selling,
general
and
admin.
expenses
|
Research,
development
and
engineering
expenses
|
||||||||||||||
As reported *
|
$
|
3,324
|
43%
|
$
|
1,126
|
$
|
710
|
$
|
3,319
|
41%
|
$
|
1,205
|
$
|
769
|
|||||||
Acquisition-related costs (1)
|
12
|
(13)
|
12
|
(6)
|
|||||||||||||||||
Other yen-related transactions (2)
|
(32)
|
(10)
|
|||||||||||||||||||
Constant-yen (3)
|
87
|
(259)
|
|||||||||||||||||||
Pension mark-to-market adjustment (4)
|
(24)
|
7
|
119
|
(61)
|
(37)
|
||||||||||||||||
Core Performance measures
|
$
|
3,367
|
42%
|
$
|
1,113
|
$
|
717
|
$
|
3,181
|
42%
|
$
|
1,138
|
$
|
732
|
*
|
Results for 2012 include the impact of defined benefit pension plan methodology change implemented in the first quarter of 2013 and retrospectively applied to prior periods.
|
(1)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(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.
|
(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. 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.
|
Three months
ended
December 31,
2013
|
Year
ended
December 31,
2013
|
||||
Cash flows from operating activities
|
$
|
1,284
|
$
|
2,787
|
|
Less: Cash flows from investing activities
|
(429)
|
(1,004)
|
|||
Plus: Short-term investments – acquisitions
|
223
|
1,406
|
|||
Less: Short-term investments – liquidations
|
(577)
|
(2,026)
|
|||
Free cash flow
|
$
|
501
|
$
|
1,163
|
(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 forward contracts and other yen-related transactions: We have excluded the impact of our purchased collars, average 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 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 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 asset write-offs, offset by the 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: This represents discrete adjustments recorded for effects of tax law and realizability of deferred tax assets changes removed from core earnings. 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, impairments, 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.
|
(9)
|
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.
|
(10)
|
Equity in earnings of affiliated companies: These adjustments relate to items which do not reflect expected on-going operating results of our affiliated companies, such as restructuring, impairment and other charges and settlements under “take-or-pay” contracts.
|
(11)
|
Loss on repurchase of debt: In 2012, Corning recorded a loss on the repurchase of $13 million of our 8.875% senior unsecured notes due 2021, $11 million of our 8.875% senior unsecured notes due 2016, and $51 million of our 6.75% senior unsecured notes due 2013.
|
(12)
|
Accumulated other comprehensive income: In 2012, Corning recorded a translation capital gain on the liquidation of a foreign subsidiary.
|