Date of Report: (Date of earliest event reported)
|
July 29, 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))
|
(d)
|
Exhibit
|
|
99
|
Press Release dated July 29, 2014, issued by Corning Incorporated.
|
CORNING INCORPORATED
|
|
Registrant
|
Date: July 29, 2014
|
By
|
/s/ R. TONY TRIPENY
|
R. Tony Tripeny
|
||
Senior Vice President & Corporate Controller
|
·
|
Core sales were $2.6 billion*, a 28% increase on a year-over-year basis. Net sales (GAAP) were $2.5 billion, a 25% increase on a year-over-year basis.
|
·
|
Core earnings per share were $0.37 per share*, a 16% improvement over a year ago, marking the seventh consecutive quarter of year-over-year core EPS growth. GAAP earnings per share were $0.11.
|
·
|
Corning’s LCD glass volume grew more than expected due in part to stronger-than-expected retail TV sales in Europe and South America, likely driven by the FIFA World Cup. Year-over-year sales in the Optical Communications and Environmental Technologies segments grew 14% and 25%, respectively.
|
Core Performance*
|
|||
Q2 2014
|
Q2 2013
|
% Change
|
|
Core Net Sales
|
$2,577
|
$2,021
|
28%
|
Core Equity Earnings
|
$58
|
$173
|
(66%)
|
Core Earnings
|
$527
|
$469
|
12%
|
Core EPS
|
$0.37
|
$0.32
|
16%
|
GAAP
|
|||
Q2 2014
|
Q2 2013
|
% Change
|
|
Net Sales
|
$2,482
|
$1,982
|
25%
|
Equity Earnings
|
$62
|
$166
|
(63%)
|
Net Income
|
$169
|
$638
|
(74%)
|
EPS
|
$0.11
|
$0.43
|
(74%)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Net sales
|
$
|
2,482
|
$
|
1,982
|
$
|
4,771
|
$
|
3,796
|
|||
Cost of sales
|
1,450
|
1,099
|
2,804
|
2,143
|
|||||||
Gross margin
|
1,032
|
883
|
1,967
|
1,653
|
|||||||
Operating expenses:
|
|||||||||||
Selling, general and administrative expenses
|
318
|
266
|
713
|
525
|
|||||||
Research, development and engineering expenses
|
208
|
179
|
406
|
357
|
|||||||
Amortization of purchased intangibles
|
8
|
8
|
16
|
15
|
|||||||
Restructuring, impairment and other charges
|
34
|
51
|
|||||||||
Asbestos litigation charge
|
4
|
6
|
6
|
8
|
|||||||
Operating income
|
460
|
424
|
775
|
748
|
|||||||
Equity in earnings of affiliated companies
|
62
|
166
|
148
|
339
|
|||||||
Interest income
|
4
|
2
|
16
|
4
|
|||||||
Interest expense
|
(30)
|
(28)
|
(60)
|
(64)
|
|||||||
Transaction-related gain, net
|
74
|
||||||||||
Other (expense) income, net
|
(155)
|
265
|
(131)
|
330
|
|||||||
Income before income taxes
|
341
|
829
|
822
|
1,357
|
|||||||
Provision for income taxes
|
(172)
|
(191)
|
(352)
|
(225)
|
|||||||
Net income attributable to Corning Incorporated
|
$
|
169
|
$
|
638
|
$
|
470
|
$
|
1,132
|
|||
Earnings per common share attributable to Corning Incorporated:
|
|||||||||||
Basic
|
$
|
0.11
|
$
|
0.43
|
$
|
0.32
|
$
|
0.77
|
|||
Diluted
|
$
|
0.11
|
$
|
0.43
|
$
|
0.32
|
$
|
0.76
|
|||
Dividends declared per common share
|
$
|
0.10
|
$
|
0.10
|
$
|
0.20
|
$
|
0.19
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Net income attributable to Corning Incorporated
|
$
|
169
|
$
|
638
|
$
|
470
|
$
|
1,132
|
|||
Foreign currency translation gain (loss)
|
269
|
(296)
|
137
|
(801)
|
|||||||
Net unrealized (losses) gains on investments
|
(9)
|
3
|
4
|
2
|
|||||||
Unamortized (losses) gains and prior service costs for postretirement benefit plans
|
(6)
|
23
|
3
|
30
|
|||||||
Net unrealized gains (losses) on designated hedges
|
1
|
14
|
(3)
|
25
|
|||||||
Other comprehensive income (loss), net of tax
|
255
|
(256)
|
141
|
(744)
|
|||||||
Comprehensive income attributable to Corning Incorporated
|
$
|
424
|
$
|
382
|
$
|
611
|
$
|
388
|
June 30,
2014
|
December 31,
2013
|
||||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
5,118
|
$
|
4,704
|
|
Short-term investments, at fair value
|
768
|
531
|
|||
Total cash, cash equivalents and short-term investments
|
5,886
|
5,235
|
|||
Trade accounts receivable, net of doubtful accounts and allowances - $31 and $28
|
1,645
|
1,253
|
|||
Inventories
|
1,380
|
1,270
|
|||
Deferred income taxes
|
349
|
278
|
|||
Other current assets
|
604
|
855
|
|||
Total current assets
|
9,864
|
8,891
|
|||
Investments
|
2,013
|
5,537
|
|||
Property, net of accumulated depreciation - $8,456 and $7,865
|
13,523
|
9,801
|
|||
Goodwill and other intangible assets, net
|
1,682
|
1,542
|
|||
Deferred income taxes
|
2,084
|
2,234
|
|||
Other assets
|
666
|
473
|
|||
Total Assets
|
$
|
29,832
|
$
|
28,478
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt
|
$
|
450
|
$
|
21
|
|
Accounts payable
|
777
|
771
|
|||
Other accrued liabilities
|
950
|
954
|
|||
Total current liabilities
|
2,177
|
1,746
|
|||
Long-term debt
|
3,238
|
3,272
|
|||
Postretirement benefits other than pensions
|
751
|
766
|
|||
Other liabilities
|
1,834
|
1,483
|
|||
Total liabilities
|
8,000
|
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: 1,669 million and 1,661 million
|
835
|
831
|
|||
Additional paid-in capital – common stock
|
13,305
|
13,066
|
|||
Retained earnings
|
11,478
|
11,320
|
|||
Treasury stock, at cost; Shares held: 379 million and 262 million
|
(6,340)
|
(4,099)
|
|||
Accumulated other comprehensive income
|
185
|
44
|
|||
Total Corning Incorporated shareholders’ equity
|
21,763
|
21,162
|
|||
Noncontrolling interests
|
69
|
49
|
|||
Total equity
|
21,832
|
21,211
|
|||
Total Liabilities and Equity
|
$
|
29,832
|
$
|
28,478
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Cash Flows from Operating Activities:
|
|||||||||||
Net income
|
$
|
169
|
$
|
638
|
$
|
470
|
$
|
1,132
|
|||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||||||
Depreciation
|
294
|
242
|
583
|
490
|
|||||||
Amortization of purchased intangibles
|
8
|
8
|
16
|
15
|
|||||||
Restructuring, impairment and other charges
|
34
|
51
|
|||||||||
Stock compensation charges
|
13
|
14
|
28
|
25
|
|||||||
Equity in earnings of affiliated companies
|
(62)
|
(166)
|
(148)
|
(339)
|
|||||||
Dividends received from affiliated companies
|
31
|
21
|
1,641
|
182
|
|||||||
Deferred tax provision
|
81
|
149
|
103
|
119
|
|||||||
Restructuring payments
|
(6)
|
(8)
|
(17)
|
(24)
|
|||||||
Employee benefit payments (in excess of) less than expense
|
(11)
|
11
|
(28)
|
26
|
|||||||
Losses (gains) on translated earnings contracts
|
141
|
(227)
|
139
|
(251)
|
|||||||
Changes in certain working capital items:
|
|||||||||||
Trade accounts receivable
|
(32)
|
(73)
|
(11)
|
(56)
|
|||||||
Inventories
|
16
|
(73)
|
13
|
(211)
|
|||||||
Other current assets
|
1
|
28
|
(3)
|
||||||||
Accounts payable and other current liabilities
|
29
|
(129)
|
(384)
|
(241)
|
|||||||
Other, net
|
38
|
(17)
|
(4)
|
148
|
|||||||
Net cash provided by operating activities
|
743
|
391
|
2,480
|
1,012
|
|||||||
Cash Flows from Investing Activities:
|
|||||||||||
Capital expenditures
|
(232)
|
(244)
|
(478)
|
(438)
|
|||||||
Acquisitions of business, net of cash received
|
(66)
|
66
|
(66)
|
||||||||
Investment in unconsolidated entities
|
(15)
|
(109)
|
(15)
|
||||||||
Proceeds from loan repayments from unconsolidated entities
|
6
|
4
|
11
|
6
|
|||||||
Short-term investments – acquisitions
|
(358)
|
(446)
|
(803)
|
(737)
|
|||||||
Short-term investments – liquidations
|
236
|
551
|
574
|
1,020
|
|||||||
Premium on purchased collars
|
(107)
|
||||||||||
Realized gains on translated earnings contracts
|
63
|
3
|
152
|
3
|
|||||||
Other, net
|
3
|
(2)
|
4
|
(1)
|
|||||||
Net cash used in investing activities
|
(282)
|
(215)
|
(583)
|
(335)
|
|||||||
Cash Flows from Financing Activities:
|
|||||||||||
Retirement of long-term debt
|
(498)
|
||||||||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(34)
|
(2)
|
(42)
|
(11)
|
|||||||
Principal payments under capital lease obligations
|
(1)
|
(1)
|
(1)
|
(2)
|
|||||||
Proceeds from issuance of short-term debt
|
17
|
17
|
|||||||||
(Repayments on) proceeds from issuance of commercial paper, net
|
(2)
|
416
|
|||||||||
Proceeds from issuance of preferred stock (1)
|
400
|
||||||||||
Payments to acquire noncontrolling interest
|
(9)
|
(9)
|
|||||||||
Proceeds from the exercise of stock options
|
34
|
27
|
84
|
39
|
|||||||
Repurchase of common stock for treasury
|
(175)
|
(232)
|
(2,076)
|
(232)
|
|||||||
Dividends paid
|
(151)
|
(147)
|
(287)
|
(280)
|
|||||||
Net cash used in financing activities
|
(312)
|
(364)
|
(1,489)
|
(993)
|
|||||||
Effect of exchange rates on cash
|
1
|
(8)
|
6
|
(71)
|
|||||||
Net increase (decrease) in cash and cash equivalents
|
150
|
(196)
|
414
|
(387)
|
|||||||
Cash and cash equivalents at beginning of period
|
4,968
|
4,797
|
4,704
|
4,988
|
|||||||
Cash and cash equivalents at end of period
|
$
|
5,118
|
$
|
4,601
|
$
|
5,118
|
$
|
4,601
|
(1)
|
In the first quarter of 2014, Corning issued 1,900 shares of Preferred Stock to Samsung Display Co., Ltd. in connection with the acquisition of their equity interests in Samsung Corning Precision Materials Co., Ltd. Corning also issued to Samsung Display an additional amount of Preferred Stock at closing, for an aggregate issue price of $400 million in cash.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Net income attributable to Corning Incorporated
|
$
|
169
|
$
|
638
|
$
|
470
|
$
|
1,132
|
|||
Less: Series A convertible preferred stock dividend
|
24
|
45
|
|||||||||
Net income available to common stockholders – basic
|
145
|
638
|
425
|
1,132
|
|||||||
Net income available to common stockholders – diluted
|
$
|
145
|
$
|
638
|
$
|
425
|
$
|
1,132
|
|||
Weighted-average common shares outstanding – basic
|
1,302
|
1,469
|
1,331
|
1,471
|
|||||||
Effect of dilutive securities:
|
|||||||||||
Stock options and other dilutive securities
|
13
|
9
|
12
|
9
|
|||||||
Weighted-average common shares outstanding – diluted
|
1,315
|
1,478
|
1,343
|
1,480
|
|||||||
Basic earnings per common share
|
$
|
0.11
|
$
|
0.43
|
$
|
0.32
|
$
|
0.77
|
|||
Diluted earnings per common share
|
$
|
0.11
|
$
|
0.43
|
$
|
0.32
|
$
|
0.76
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Core earnings attributable to Corning Incorporated
|
$
|
527
|
$
|
469
|
$
|
988
|
$
|
900
|
|||
Less: Series A convertible preferred stock dividend
|
24
|
45
|
|||||||||
Core earnings available to common stockholders - basic
|
503
|
469
|
943
|
900
|
|||||||
Add: Series A convertible preferred stock dividend
|
24
|
45
|
|||||||||
Core earnings available to common stockholders - diluted
|
$
|
527
|
$
|
469
|
$
|
988
|
$
|
900
|
|||
Weighted-average common shares outstanding - basic
|
1,302
|
1,469
|
1,331
|
1,471
|
|||||||
Effect of dilutive securities:
|
|||||||||||
Stock options and other dilutive securities
|
13
|
9
|
12
|
9
|
|||||||
Series A convertible preferred stock
|
115
|
106
|
|||||||||
Weighted-average common shares outstanding - diluted
|
1,430
|
1,478
|
1,449
|
1,480
|
|||||||
Core basic earnings per common share
|
$
|
0.39
|
$
|
0.32
|
$
|
0.71
|
$
|
0.61
|
|||
Core diluted earnings per common share
|
$
|
0.37
|
$
|
0.32
|
$
|
0.68
|
$
|
0.61
|
Three months ended June 30, 2014
|
||||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Earnings
per
share
|
|||||||||||
As reported
|
$
|
2,482
|
$
|
62
|
$
|
341
|
$
|
169
|
50.4%
|
$
|
0.11
|
|||||
Constant-yen (1)
|
95
|
1
|
81
|
59
|
0.04
|
|||||||||||
Constant-won (1)
|
17
|
12
|
0.01
|
|||||||||||||
Purchased collars and average forward contracts (2)
|
141
|
82
|
0.06
|
|||||||||||||
Acquisition-related costs (4)
|
10
|
7
|
||||||||||||||
Discrete tax items (5)
|
164
|
0.11
|
||||||||||||||
Asbestos settlement (6)
|
4
|
2
|
||||||||||||||
Restructuring, impairment and other charges (7)
|
39
|
29
|
0.02
|
|||||||||||||
Equity in earnings of affiliated companies (9)
|
(5)
|
(5)
|
(5)
|
|||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
10
|
8
|
0.01
|
|||||||||||||
Core Performance measures
|
$
|
2,577
|
$
|
58
|
$
|
638
|
$
|
527
|
17.4%
|
$
|
0.37
|
Three months ended June 30, 2013
|
||||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Earnings
per
share
|
|||||||||||
As reported
|
$
|
1,982
|
$
|
166
|
$
|
829
|
$
|
638
|
23.0%
|
$
|
0.43
|
|||||
Constant-yen (1)
|
39
|
10
|
36
|
27
|
0.02
|
|||||||||||
Purchased collars and average forward contracts (2)
|
(229)
|
(147)
|
(0.10)
|
|||||||||||||
Other yen-related transactions (2)
|
(27)
|
(19)
|
(0.01)
|
|||||||||||||
Hemlock Semiconductor operating results (3)
|
(12)
|
(12)
|
(11)
|
(0.01)
|
||||||||||||
Hemlock Semiconductor non-operating results (3)(7)
|
9
|
9
|
9
|
0.01
|
||||||||||||
Acquisition-related costs (4)
|
8
|
5
|
||||||||||||||
Asbestos settlement (6)
|
6
|
4
|
||||||||||||||
Pension mark-to-market adjustment (11)
|
(41)
|
(26)
|
(0.02)
|
|||||||||||||
Gain on change in control of equity investment (12)
|
(17)
|
(11)
|
(0.01)
|
|||||||||||||
Core Performance measures
|
$
|
2,021
|
$
|
173
|
$
|
562
|
$
|
469
|
16.5%
|
$
|
0.32
|
Three months ended June 30, 2014
|
Three months ended June 30, 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
|
$
|
1,032
|
42%
|
$
|
318
|
$
|
208
|
$
|
883
|
45%
|
$
|
266
|
$
|
179
|
|||||||
Constant-yen (1)
|
81
|
1
|
24
|
||||||||||||||||||
Constant-won (1)
|
13
|
(2)
|
(2)
|
||||||||||||||||||
Other yen-related transactions (2)
|
(9)
|
||||||||||||||||||||
Acquisition-related costs (4)
|
1
|
||||||||||||||||||||
Restructuring, impairment and other charges (7)
|
18
|
16
|
|||||||||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
14
|
||||||||||||||||||||
Pension mark-to-market adjustment (11)
|
(24)
|
11
|
7
|
||||||||||||||||||
Core Performance measures
|
$
|
1,158
|
45%
|
$
|
333
|
$
|
206
|
$
|
875
|
43%
|
$
|
277
|
$
|
186
|
Three months ended
June 30, 2014
|
Three months ended
June 30, 2013
|
% Increase/decrease
|
|||||||||||||||||||||
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
|||||||||||||||
|
|||||||||||||||||||||||
As reported
|
$
|
987
|
$
|
(4)
|
$
|
282
|
$
|
631
|
$
|
108
|
$
|
337
|
56%
|
(104)%
|
(16)%
|
||||||||
Constant-yen (1)
|
96
|
1
|
61
|
39
|
9
|
29
|
|||||||||||||||||
Constant-won (1)
|
11
|
||||||||||||||||||||||
Purchased collars, average forward contracts and other yen-related transactions (2)
|
(53)
|
(43)
|
|||||||||||||||||||||
Acquisition-related costs (4)
|
2
|
||||||||||||||||||||||
Discrete tax items (5)
|
4
|
||||||||||||||||||||||
Restructuring, impairment and other charges (7)
|
27
|
||||||||||||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
8
|
||||||||||||||||||||||
Pension mark-to-market adjustment (11)
|
(9)
|
||||||||||||||||||||||
Core Performance measures
|
$
|
1,083
|
$
|
(3)
|
$
|
342
|
$
|
670
|
$
|
117
|
$
|
314
|
62%
|
(103)%
|
9%
|
Three months ended
June 30, 2014
|
Three months ended
June 30, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
|
|||||||||||||||
As reported
|
$
|
686
|
$
|
61
|
$
|
601
|
$
|
76
|
14%
|
(20)%
|
|||||
Acquisition-related costs (4)
|
2
|
4
|
|||||||||||||
Pension market-to-market adjustment (11)
|
(9)
|
||||||||||||||
Gain on change in control of equity investment (12)
|
(11)
|
||||||||||||||
Core Performance measures
|
$
|
686
|
$
|
63
|
$
|
601
|
$
|
60
|
14%
|
5%
|
Three months ended
June 30, 2014
|
Three months ended
June 30, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
285
|
$
|
47
|
$
|
228
|
$
|
36
|
25%
|
31%
|
|||||
Pension mark-to-market adjustment (11)
|
(3)
|
||||||||||||||
Core Performance measures
|
$
|
285
|
$
|
47
|
$
|
228
|
$
|
33
|
25%
|
42%
|
Three months ended
June 30, 2014
|
Three months ended
June 30, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
298
|
$
|
39
|
$
|
301
|
$
|
58
|
(1)%
|
(33)%
|
|||||
Constant-yen (1)
|
(1)
|
(1)
|
|||||||||||||
Purchased collars, average forward contracts and other yen-related transactions (2)
|
3
|
(1)
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
3
|
||||||||||||||
Pension mark-to-market adjustment (11)
|
(3)
|
||||||||||||||
Core Performance measures
|
$
|
298
|
$
|
44
|
$
|
301
|
$
|
53
|
(1)%
|
(17)%
|
Three months ended
June 30, 2014
|
Three months ended
June 30, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
223
|
$
|
18
|
$
|
219
|
$
|
25
|
2%
|
(28)%
|
|||||
Acquisition-related costs (4)
|
4
|
2
|
|||||||||||||
Pension mark-to-market adjustment (11)
|
(3)
|
||||||||||||||
Core Performance measures
|
$
|
223
|
$
|
22
|
$
|
219
|
$
|
24
|
2%
|
(8)%
|
Equity Earnings
|
|||||
Three months
ended
June 30,
2014
|
Three months
ended
June 30,
2013
|
||||
As reported
|
$
|
54
|
$
|
45
|
|
Hemlock Semiconductor operating results (3)
|
(12)
|
||||
Hemlock Semiconductor non-operating results (3)(7)
|
9
|
||||
Equity in earnings of affiliated companies (9)
|
(5)
|
||||
Core Performance measures
|
$
|
49
|
$
|
42
|
Three months
ended
June 30,
2014
|
Three months ended
June 30,
2013
|
||||
Cash flows from operating activities
|
$
|
743
|
$
|
391
|
|
Less: Cash flows from investing activities
|
(282)
|
(215)
|
|||
Plus: Short-term investments – acquisitions
|
358
|
446
|
|||
Less: Short-term investments – liquidations
|
(236)
|
(551)
|
|||
Free cash flow
|
$
|
583
|
$
|
71
|
(1)
|
Constant-currency adjustments:
|
|
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 mitigates 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 materially mitigate the impact of changes in the Japanese yen.
|
|
Constant-won: Following the acquisition of SCP and because a significant portion of SCP’s costs are denominated in Korean won, management believes it is important to understand the impact on core earnings from translating won into dollars. Presenting results on a constant-won basis mitigates the translation impact of the Korean won, and allows management to evaluate performance period over period, analyze underlying trends in our businesses, and to establish operational goals and forecasts without the variability caused by the fluctuations caused by changes in the rate of this currency. We use an internally derived management rate of 1,100, which is consistent with historical prior period averages of the won. We have not recast prior periods presented as the impact is not material to Corning in those periods.
|
(2)
|
Purchased and zero cost collars, average forward contracts and other yen-related transactions: We have excluded the impact of our yen-denominated purchased collars, average forward contracts, and other yen-related transactions for each period presented. Additionally, we are also excluding the impact of our portfolio of Korean won-denominated zero cost collars which we entered into in the second quarter of 2014. By aligning an internally derived rate with our portfolio of purchased collars and average forward contracts, and excluding other yen-related and won-related transactions and the constant-currency adjustments, we have materially mitigated the impact of changes in the Japanese yen.
|
(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 earnings tax rate.
|
(6)
|
Certain litigation-related charges: These adjustments relate to the Pittsburgh Corning Corporation (PCC) asbestos litigation.
|
(7)
|
Restructuring, impairment and other charges. In the second quarter of 2014, amount includes restructuring expense and other disposal costs not classified as restructuring expense.
|
(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 post-combination expenses and the withholding tax on a dividend from Samsung Corning Precision Materials.
|
(11)
|
Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates. In accordance with GAAP, Corning recognizes pension actuarial gains and losses outside of the corridor, where the corridor is equal to 10% of the greater of the benefit obligation or the market-related value of plan assets at the beginning of the year, for our defined benefit pension plans annually in the fourth quarter of each year and whenever a plan is remeasured or valuation estimates are finalized. Actuarial gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates, differences between actual and expected returns on plan assets, and other changes in actuarial assumptions such as life expectancy of plan participants. Management believes that pension actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets, and are not directly related to the underlying performance of our businesses. For further information on the actuarial assumptions and plan assets referenced above, see Management’s Discussion and Analysis of Financial Condition and Results of Operations, under Critical Accounting Estimates - Employee Retirement Plans, and Note 13, Employee Retirement Plans, of Notes to the Consolidated Financial Statements.
|
(12)
|
Gain on change in control of equity investment: Gain as a result of certain changes to the Shareholder Agreement of an equity company, resulting in Corning having a controlling interest that requires consolidation of this investment.
|