Date of Report: (Date of earliest event reported)
|
April 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: April 28, 2014
|
By
|
/s/ R. TONY TRIPENY
|
R. Tony Tripeny
|
||
Senior Vice President & Corporate Controller
|
·
|
Core sales grew to $2.4 billion*, a 32% increase on a year-over-year basis. Net sales (GAAP) were $2.3 billion, a 26% increase on a year-over-year basis.
|
·
|
Core earnings per share were $0.31 per share*, an increase of 7% over the first quarter last year and better than expected. GAAP earnings per share were $0.20.
|
·
|
Core sales in the Display Technologies segment increased 58% from the year-ago period, resulting primarily from the recent consolidation of Corning Precision Materials Co., Ltd.
|
·
|
Sales in the Optical Communications segment increased 26% from the year-ago period.
|
·
|
Environmental Technologies segment sales increased 21% on a year-over-year comparison.
|
Core Performance*
|
|||
Q1 2014
|
Q1 2013
|
% Change
|
|
Core Net Sales
|
$2,389
|
$1,814
|
32%
|
Core Equity Earnings
|
$61
|
$180
|
(66%)
|
Core Earnings
|
$461
|
$431
|
7%
|
Core Earnings EPS
|
$0.31
|
$0.29
|
7%
|
GAAP
|
|||
Q1 2014
|
Q1 2013
|
% Change
|
|
Net Sales
|
$2,289
|
$1,814
|
26%
|
Equity Earnings
|
$86
|
$173
|
(50%)
|
Net Income
|
$301
|
$494
|
(39%)
|
EPS
|
$0.20
|
$0.33
|
(39%)
|
Three months
ended March 31,
|
|||||
2014
|
2013
|
||||
Net sales
|
$
|
2,289
|
$
|
1,814
|
|
Cost of sales
|
1,354
|
1,044
|
|||
Gross margin
|
935
|
770
|
|||
Operating expenses:
|
|||||
Selling, general and administrative expenses
|
395
|
259
|
|||
Research, development and engineering expenses
|
198
|
178
|
|||
Amortization of purchased intangibles
|
8
|
7
|
|||
Restructuring, impairment and other charges
|
17
|
||||
Asbestos litigation charge
|
2
|
2
|
|||
Operating income
|
315
|
324
|
|||
Equity in earnings of affiliated companies
|
86
|
173
|
|||
Interest income
|
12
|
2
|
|||
Interest expense
|
(30)
|
(36)
|
|||
Transaction-related gain, net
|
74
|
||||
Other income, net
|
24
|
65
|
|||
Income before income taxes
|
481
|
528
|
|||
Provision for income taxes
|
(180)
|
(34)
|
|||
Net income attributable to Corning Incorporated
|
$
|
301
|
$
|
494
|
|
Earnings per common share attributable to Corning Incorporated:
|
|||||
Basic
|
$
|
0.21
|
$
|
0.33
|
|
Diluted
|
$
|
0.20
|
$
|
0.33
|
|
Dividends declared per common share
|
$
|
0.10
|
$
|
0.09
|
Three months ended
March 31,
|
|||||
2014
|
2013
|
||||
Net income attributable to Corning Incorporated
|
$
|
301
|
$
|
494
|
|
Other comprehensive income (loss), net of tax:
|
|||||
Foreign currency translation adjustments
|
(132)
|
(505)
|
|||
Net unrealized gains on investments
|
13
|
7
|
|||
Unamortized gains (losses) and prior service costs for postretirement benefit plans
|
9
|
(1)
|
|||
Net unrealized (losses) gains on designated hedges
|
(4)
|
11
|
|||
(114)
|
(488)
|
||||
Comprehensive income attributable to Corning Incorporated
|
$
|
187
|
$
|
6
|
March 31,
2014
|
December 31,
2013
|
||||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
4,968
|
$
|
4,704
|
|
Short-term investments, at fair value
|
644
|
531
|
|||
Total cash, cash equivalents and short-term investments
|
5,612
|
5,235
|
|||
Trade accounts receivable, net of doubtful accounts and allowances - $32 and $28
|
1,588
|
1,253
|
|||
Inventories
|
1,395
|
1,270
|
|||
Deferred income taxes
|
321
|
278
|
|||
Other current assets
|
697
|
855
|
|||
Total current assets
|
9,613
|
8,891
|
|||
Investments
|
1,976
|
5,537
|
|||
Property, net of accumulated depreciation - $8,141 and $7,865
|
13,344
|
9,801
|
|||
Goodwill and other intangible assets, net
|
1,665
|
1,542
|
|||
Deferred income taxes
|
2,180
|
2,234
|
|||
Other assets
|
766
|
473
|
|||
Total Assets
|
$
|
29,544
|
$
|
28,478
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt
|
$
|
468
|
$
|
21
|
|
Accounts payable
|
732
|
771
|
|||
Other accrued liabilities
|
846
|
954
|
|||
Total current liabilities
|
2,046
|
1,746
|
|||
Long-term debt
|
3,224
|
3,272
|
|||
Postretirement benefits other than pensions
|
766
|
766
|
|||
Other liabilities
|
1,789
|
1,483
|
|||
Total liabilities
|
7,825
|
7,267
|
|||
Commitments and contingencies
|
|||||
Shareholders’ equity:
|
|||||
Convertible preferred stock, Series A – Par value $100 per share; Shares authorized 3,100; Shares issued: 2,300
|
2,300
|
||||
Common stock – Par value $0.50 per share; Shares authorized 3.8 billion; Shares issued: 1,667 million and 1,661 million
|
833
|
831
|
|||
Additional paid-in capital – common stock
|
13,072
|
13,066
|
|||
Retained earnings
|
11,465
|
11,320
|
|||
Treasury stock, at cost; Shares held: 361 million and 262 million
|
(5,950)
|
(4,099)
|
|||
Accumulated other comprehensive (loss) income
|
(70)
|
44
|
|||
Total Corning Incorporated shareholders’ equity
|
21,650
|
21,162
|
|||
Noncontrolling interests
|
69
|
49
|
|||
Total equity
|
21,719
|
21,211
|
|||
Total Liabilities and Equity
|
$
|
29,544
|
$
|
28,478
|
Three months ended
March 31,
|
|||||
2014
|
2013
|
||||
Cash Flows from Operating Activities:
|
|||||
Net income
|
$
|
301
|
$
|
494
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||
Depreciation
|
289
|
248
|
|||
Amortization of purchased intangibles
|
8
|
7
|
|||
Restructuring, impairment and other charges
|
17
|
||||
Stock compensation charges
|
15
|
11
|
|||
Equity in earnings of affiliated companies
|
(86)
|
(173)
|
|||
Dividends received from affiliated companies
|
1,610
|
161
|
|||
Deferred tax expense (benefit) provision
|
22
|
(30)
|
|||
Restructuring payments
|
(11)
|
(16)
|
|||
Employee benefit payments (in excess of) less than expense
|
(17)
|
15
|
|||
Gains on translated earnings contracts
|
(2)
|
(24)
|
|||
Changes in certain working capital items:
|
|||||
Trade accounts receivable
|
21
|
17
|
|||
Inventories
|
(3)
|
(138)
|
|||
Other current assets
|
28
|
(2)
|
|||
Accounts payable and other current liabilities
|
(413)
|
(112)
|
|||
Other, net
|
(42)
|
165
|
|||
Net cash provided by operating activities
|
1,737
|
623
|
|||
Cash Flows from Investing Activities:
|
|||||
Capital expenditures
|
(246)
|
(194)
|
|||
Acquisitions of business, net of cash received
|
66
|
||||
Investment in unconsolidated entities
|
(109)
|
||||
Short-term investments – acquisitions
|
(445)
|
(291)
|
|||
Short-term investments – liquidations
|
338
|
469
|
|||
Premium on purchased collars
|
(107)
|
||||
Realized gains on translated earnings contracts
|
89
|
||||
Other, net
|
6
|
1
|
|||
Net cash used in investing activities
|
(301)
|
(122)
|
|||
Cash Flows from Financing Activities:
|
|||||
Retirement of long-term debt
|
(498)
|
||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(8)
|
(9)
|
|||
Principal payments under capital lease obligations
|
(1)
|
||||
Proceeds from issuance of commercial paper
|
418
|
||||
Proceeds from issuance of preferred stock
|
400
|
||||
Proceeds from the exercise of stock options
|
50
|
12
|
|||
Repurchases of common stock for treasury
|
(1,901)
|
||||
Dividends paid
|
(136)
|
(133)
|
|||
Net cash used in by financing activities
|
(1,177)
|
(629)
|
|||
Effect of exchange rates on cash
|
5
|
(63)
|
|||
Net increase (decrease) in cash and cash equivalents
|
264
|
(191)
|
|||
Cash and cash equivalents at beginning of period
|
4,704
|
4,988
|
|||
Cash and cash equivalents at end of period
|
$
|
4,968
|
$
|
4,797
|
Three months ended
March 31,
|
|||||
2014
|
2013
|
||||
Net income attributable to Corning Incorporated
|
$
|
301
|
$
|
494
|
|
Less: Series A convertible preferred stock dividend
|
(21)
|
||||
Net income available to common stockholders – basic
|
280
|
494
|
|||
Net income available to common stockholders - diluted
|
$
|
280
|
$
|
494
|
|
Weighted-average common shares outstanding - basic
|
1,359
|
1,472
|
|||
Effect of dilutive securities:
|
|||||
Stock options and other dilutive securities
|
11
|
9
|
|||
Weighted-average common shares outstanding - diluted
|
1,370
|
1,481
|
|||
Basic earnings per common share
|
$
|
0.21
|
$
|
0.33
|
|
Diluted earnings per common share
|
$
|
0.20
|
$
|
0.33
|
Three months ended
March 31,
|
|||||
2014
|
2013
|
||||
Core net income attributable to Corning Incorporated
|
$
|
461
|
$
|
431
|
|
Less: Series A convertible preferred stock dividend
|
(21)
|
||||
Core net income available to common stockholders - basic
|
440
|
431
|
|||
Add: Series A convertible preferred stock dividend
|
21
|
||||
Core net income available to common stockholders - diluted
|
$
|
461
|
$
|
431
|
|
Weighted-average common shares outstanding - basic
|
1,359
|
1,472
|
|||
Effect of dilutive securities:
|
|||||
Stock options and other dilutive securities
|
11
|
9
|
|||
Series A convertible preferred stock
|
97
|
||||
Weighted-average common shares outstanding - diluted
|
1,467
|
1,481
|
|||
Core basic earnings per common share
|
$
|
0.32
|
$
|
0.29
|
|
Core diluted earnings per common share
|
$
|
0.31
|
$
|
0.29
|
Three months ended March 31, 2014
|
|||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
||||||||||
As reported
|
$
|
2,289
|
$
|
86
|
$
|
481
|
$
|
301
|
37.4%
|
0.20
|
|||||
Constant-yen (1)
|
100
|
82
|
61
|
0.04
|
|||||||||||
Purchased collars and average forward contracts (2)
|
(2)
|
(10)
|
(0.01)
|
||||||||||||
Acquisition-related costs (3)
|
48
|
40
|
0.03
|
||||||||||||
Discrete tax items (4)
|
21
|
0.01
|
|||||||||||||
Asbestos settlement (5)
|
2
|
1
|
|||||||||||||
Restructuring, impairment and other charges (6)
|
17
|
15
|
0.01
|
||||||||||||
Liquidation of subsidiary (7)
|
(3)
|
||||||||||||||
Equity in earnings of affiliated companies (8)
|
(25)
|
(25)
|
(24)
|
(0.02)
|
|||||||||||
Gain on previously held equity investment (9)
|
(394)
|
(292)
|
(0.20)
|
||||||||||||
Settlement of pre-existing contract (9)
|
320
|
320
|
0.22
|
||||||||||||
Post-combination expenses (9)
|
72
|
55
|
0.04
|
||||||||||||
Other items related to the acquisition of Samsung Corning Precision Materials (9)
|
(24)
|
(24)
|
(0.02)
|
||||||||||||
Core Performance measures
|
$
|
2,389
|
$
|
61
|
$
|
577
|
$
|
461
|
20.1%
|
0.31
|
(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 net income 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 periods 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)
|
Discrete tax items: This represents the removal of discrete adjustments attributable to changes in tax law and changes in judgment about the realizability of certain deferred tax assets. This item also includes the income tax effects of adjusting from a GAAP tax rate to a core net income tax rate.
|
(5)
|
Certain litigation-related charges: These adjustments relate to the Pittsburgh Corning Corporation (PCC) asbestos litigation.
|
(6)
|
Restructuring, impairment and other charges.
|
(7)
|
Liquidation of subsidiary: The partial impact of non-restructuring related items due to the decision to liquidate a consolidated subsidiary that is not significant.
|
(8)
|
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.
|
(9)
|
Impacts from the Acquisition of Samsung Corning Precision Materials: Pre-acquisition gains and losses on previously held equity investment and other gains and losses related to the Acquisition, including the impact of the withholding tax on a dividend from Samsung Corning Precision Materials.
|
Three months ended March 31, 2013
|
|||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
||||||||||
As reported
|
$
|
1,814
|
$
|
173
|
$
|
528
|
$
|
494
|
6.4%
|
0.33
|
|||||
Purchased collars (1)
|
(23)
|
(16)
|
(0.01)
|
||||||||||||
Other yen-related transactions (1)
|
(19)
|
(13)
|
(0.01)
|
||||||||||||
Hemlock Semiconductor operating results (2)
|
5
|
5
|
4
|
||||||||||||
Hemlock Semiconductor non-operating results (2)
|
2
|
2
|
2
|
||||||||||||
Acquisition-related costs (3)
|
18
|
13
|
0.01
|
||||||||||||
Discrete tax items (4)
|
(54)
|
(0.04)
|
|||||||||||||
Asbestos settlement (5)
|
2
|
1
|
|||||||||||||
Core Performance measures
|
$
|
1,814
|
$
|
180
|
$
|
513
|
$
|
431
|
16.0%
|
0.29
|
(1)
|
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.
|
(2)
|
Results of Dow Corning’s consolidated subsidiary, Hemlock Semiconductor: In 2013, we excluded 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 beginning in 2012. These events were primarily driven by the macro-economic environment. Specifically, the negative impact of the determination by MOFCOM, 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.
|
(3)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(4)
|
Discrete tax items: This represents the removal of discrete adjustments attributable to changes in tax law and changes in judgment about the realizability of certain deferred tax assets. This item also includes the income tax effects of adjusting from a GAAP tax rate to a core net income tax rate.
|
(5)
|
Certain litigation-related charges: These adjustments relate to the Pittsburgh Corning Corporation (PCC) asbestos litigation.
|
Three months ended March 31, 2014
|
Three months ended March 31, 2013
|
||||||||||||||||||||
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
|
$
|
935
|
41%
|
$
|
395
|
$
|
198
|
$
|
770
|
42%
|
$
|
259
|
$
|
178
|
|||||||
Constant-yen (1)
|
83
|
||||||||||||||||||||
Other yen-related transactions (2)
|
(6)
|
||||||||||||||||||||
Acquisition-related costs (3)
|
30
|
(19)
|
12
|
||||||||||||||||||
Post-combination expenses (4)
|
(72)
|
||||||||||||||||||||
Core Performance measures
|
$
|
1,048
|
44%
|
$
|
304
|
$
|
198
|
$
|
776
|
43%
|
$
|
259
|
$
|
178
|
(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 net income 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 periods 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)
|
Impacts from the Acquisition of Samsung Corning Precision Materials: Pre-acquisition gains and losses on previously held equity investment and other gains and losses related to the Acquisition, including the impact of the withholding tax on a dividend from Samsung Corning Precision Materials.
|
Three months ended
March 31, 2014
|
Three months ended
March 31, 2013
|
% Increase/decrease
|
|||||||||||||||||||||
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
|||||||||||||||
|
|||||||||||||||||||||||
As reported
|
$
|
929
|
$
|
(9)
|
$
|
209
|
$
|
650
|
$
|
133
|
$
|
349
|
43%
|
(107)%
|
(40)%
|
||||||||
Constant-yen (1)
|
100
|
63
|
|||||||||||||||||||||
Other yen-related transaction (2)
|
(56)
|
(13)
|
|||||||||||||||||||||
Acquisition-related costs (3)
|
35
|
||||||||||||||||||||||
Restructuring, impairment and other charges (4)
|
3
|
||||||||||||||||||||||
Equity in earnings of affiliated companies (5)
|
7
|
6
|
|||||||||||||||||||||
Impacts from the Acquisition of Samsung Corning Precision Materials (6)
|
63
|
||||||||||||||||||||||
Core Performance measures
|
$
|
1,029
|
$
|
(2)
|
$
|
323
|
$
|
650
|
$
|
133
|
$
|
336
|
58%
|
(102)%
|
(4)%
|
(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)
|
Restructuring, impairment and other charges.
|
(5)
|
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.
|
(6)
|
Impacts from the Acquisition of Samsung Corning Precision Materials: Pre-acquisition gains and losses on previously held equity investment and other gains and losses related to the Acquisition, including the impact of the withholding tax on a dividend from Samsung Corning Precision Materials.
|
Three months ended
March 31, 2014
|
Three months ended
March 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
|
|||||||||||||||
As reported
|
$
|
593
|
$
|
27
|
$
|
470
|
$
|
35
|
26%
|
(23)%
|
|||||
Acquisition-related costs (1)
|
2
|
||||||||||||||
Restructuring, impairment and other charges (2)
|
12
|
||||||||||||||
Liquidation of subsidiary (3)
|
(2)
|
||||||||||||||
Core Performance measures
|
$
|
593
|
$
|
39
|
$
|
470
|
$
|
35
|
26%
|
11%
|
(1)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(2)
|
Restructuring, impairment and other charges.
|
(3)
|
Liquidation of subsidiary: The partial impact of non-restructuring related items due to the decision to liquidate a consolidated subsidiary that is not significant.
|
Three months ended
March 31, 2014
|
Three months ended
March 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
261
|
$
|
31
|
$
|
258
|
$
|
39
|
1%
|
(21)%
|
|||||
Constant-yen (1)
|
(1)
|
||||||||||||||
Other yen-related transactions (2)
|
3
|
||||||||||||||
Acquisition-related costs (3)
|
(1)
|
||||||||||||||
Core Performance measures
|
$
|
261
|
$
|
32
|
$
|
258
|
$
|
39
|
1%
|
(18)%
|
(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.
|
Three months ended
March 31, 2014
|
Three months ended
March 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
210
|
$
|
17
|
$
|
207
|
$
|
12
|
1%
|
42%
|
|||||
Acquisition-related costs (1)
|
4
|
12
|
|||||||||||||
Core Performance measures
|
$
|
210
|
$
|
21
|
$
|
207
|
$
|
24
|
1%
|
(13)%
|
(1)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
Equity Earnings
|
|||||
Three months
ended
March 31,
2014
|
Three months
ended
March 31,
2013
|
||||
As reported
|
$
|
92
|
$
|
35
|
|
Equity in earnings of affiliated companies (1)
|
(33)
|
||||
Hemlock semiconductor operating results (2)
|
7
|
||||
Core Performance measures
|
$
|
59
|
$
|
42
|
(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’s consolidated subsidiary, Hemlock Semiconductor: In 2013, we excluded 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 beginning in 2012. These events were primarily driven by the macro-economic environment. Specifically, the negative impact of the determination by MOFCOM, 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. Beginning in 2014, due to the stabilization of the polycrystalline silicon industry, we will no longer exclude the operating results of Hemlock Semiconductor.
|
Three months
ended
March 31,
2014
|
Three months ended
March 31,
2013
|
||||
Cash flows from operating activities
|
$
|
1,737
|
$
|
623
|
|
Less: Cash flows from investing activities
|
(301)
|
(122)
|
|||
Plus: Short-term investments – acquisitions
|
445
|
291
|
|||
Less: Short-term investments – liquidations
|
(338)
|
(469)
|
|||
Free cash flow
|
$
|
1,543
|
$
|
323
|
(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 net income 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 periods 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’s consolidated subsidiary, Hemlock Semiconductor: In 2013, we excluded 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 beginning in 2012. These events were primarily driven by the macro-economic environment. Specifically, the negative impact of the determination by MOFCOM, 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. Beginning in 2014, due to the stabilization of the polycrystalline silicon industry, we will no longer exclude the operating results of Hemlock Semiconductor from core performance measures.
|
(4)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(5)
|
Discrete tax items: This represents the removal of discrete adjustments attributable to changes in tax law and changes in judgment about the realizability of certain deferred tax assets. This item also includes the income tax effects of adjusting from a GAAP tax rate to a core net income 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)
|
Liquidation of subsidiary: The partial impact of non-restructuring related items due to the decision to liquidate a consolidated subsidiary that is not significant.
|
(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)
|
Impacts from the Acquisition of Samsung Corning Precision Materials: Pre-acquisition gains and losses on previously held equity investment and other gains and losses related to the Acquisition, including the impact of the withholding tax on a dividend from Samsung Corning Precision Materials.
|