x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended June 30, 2014
|
|
OR
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from
|
to
|
|
Commission file number: 1-3247
|
|
CORNING INCORPORATED
|
|
(Exact name of registrant as specified in its charter)
|
New York
|
16-0393470
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
One Riverfront Plaza, Corning, New York
|
14831
|
|
(Address of principal executive offices)
|
(Zip Code)
|
|
607-974-9000
|
|
(Registrant’s telephone number, including area code)
|
Yes
|
x
|
No
|
¨
|
Yes
|
x
|
No
|
¨
|
Large accelerated filer
|
x
|
Accelerated filer
|
¨
|
|||
Non-accelerated filer
|
¨
|
Smaller reporting company
|
¨
|
Yes
|
¨
|
No
|
x
|
Class
|
Outstanding as of July 15, 2014
|
|
Corning’s Common Stock, $0.50 par value per share
|
1,291,027,400 shares
|
PART I – FINANCIAL INFORMATION
|
||
Page
|
||
Item 1. Financial Statements
|
||
Consolidated Statements of Income (Unaudited) for the three and six months ended June 30, 2014 and 2013
|
3
|
|
Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30, 2014 and 2013
|
4
|
|
Consolidated Balance Sheets (Unaudited) at June 30, 2014 and December 31, 2013
|
5
|
|
Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2014 and 2013
|
6
|
|
Notes to Consolidated Financial Statements (Unaudited)
|
7
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
32
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
66
|
|
Item 4. Controls and Procedures
|
66
|
|
PART II – OTHER INFORMATION
|
||
Item 1. Legal Proceedings
|
67
|
|
Item 1A. Risk Factors
|
67
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
68
|
|
Item 6. Exhibits
|
69
|
|
Signatures
|
70
|
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 (Note 2)
|
34
|
51
|
|||||||||
Asbestos litigation charge
|
4
|
6
|
6
|
8
|
|||||||
Operating income
|
460
|
424
|
775
|
748
|
|||||||
Equity in earnings of affiliated companies (Note 9)
|
62
|
166
|
148
|
339
|
|||||||
Interest income
|
4
|
2
|
16
|
4
|
|||||||
Interest expense
|
(30)
|
(28)
|
(60)
|
(64)
|
|||||||
Transaction-related gain, net (Note 10)
|
74
|
||||||||||
Other (expense) income, net (Note 1)
|
(155)
|
265
|
(131)
|
330
|
|||||||
Income before income taxes
|
341
|
829
|
822
|
1,357
|
|||||||
Provision for income taxes (Note 5)
|
(172)
|
(191)
|
(352)
|
(225)
|
|||||||
Net income attributable to Corning Incorporated
|
$
|
169
|
$
|
638
|
$
|
470
|
$
|
1,132
|
|||
Earnings per common share attributable to Corning Incorporated:
|
|||||||||||
Basic (Note 6)
|
$
|
0.11
|
$
|
0.43
|
$
|
0.32
|
$
|
0.77
|
|||
Diluted (Note 6)
|
$
|
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 (Note 16)
|
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 (Note 7)
|
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 (Note 8)
|
1,380
|
1,270
|
|||
Deferred income taxes (Note 5)
|
349
|
278
|
|||
Other current assets
|
604
|
855
|
|||
Total current assets
|
9,864
|
8,891
|
|||
Investments (Note 9)
|
2,013
|
5,537
|
|||
Property, net of accumulated depreciation - $8,456 and $7,865 (Note 11)
|
13,523
|
9,801
|
|||
Goodwill and other intangible assets, net (Note 12)
|
1,682
|
1,542
|
|||
Deferred income taxes (Note 5)
|
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 (Note 4)
|
$
|
450
|
$
|
21
|
|
Accounts payable
|
777
|
771
|
|||
Other accrued liabilities (Note 3)
|
950
|
954
|
|||
Total current liabilities
|
2,177
|
1,746
|
|||
Long-term debt (Note 4)
|
3,238
|
3,272
|
|||
Postretirement benefits other than pensions
|
751
|
766
|
|||
Other liabilities (Note 3)
|
1,834
|
1,483
|
|||
Total liabilities
|
8,000
|
7,267
|
|||
Commitments and contingencies (Note 3)
|
|||||
Shareholders’ equity (Note 16):
|
|||||
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
|
Six months ended
June 30,
|
|||||
2014
|
2013
|
||||
Cash Flows from Operating Activities:
|
|||||
Net income
|
$
|
470
|
$
|
1,132
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||
Depreciation
|
583
|
490
|
|||
Amortization of purchased intangibles
|
16
|
15
|
|||
Restructuring, impairment and other charges
|
51
|
||||
Stock compensation charges
|
28
|
25
|
|||
Equity in earnings of affiliated companies
|
(148)
|
(339)
|
|||
Dividends received from affiliated companies
|
1,641
|
182
|
|||
Deferred tax provision
|
103
|
119
|
|||
Restructuring payments
|
(17)
|
(24)
|
|||
Employee benefit payments (in excess of) less than expense
|
(28)
|
26
|
|||
Losses (gains) on translated earnings contracts
|
139
|
(251)
|
|||
Changes in certain working capital items:
|
|||||
Trade accounts receivable
|
(11)
|
(56)
|
|||
Inventories
|
13
|
(211)
|
|||
Other current assets
|
28
|
(3)
|
|||
Accounts payable and other current liabilities
|
(384)
|
(241)
|
|||
Other, net
|
(4)
|
148
|
|||
Net cash provided by operating activities
|
2,480
|
1,012
|
|||
Cash Flows from Investing Activities:
|
|||||
Capital expenditures
|
(478)
|
(438)
|
|||
Acquisitions of business, net of cash received
|
66
|
(66)
|
|||
Investment in unconsolidated entities
|
(109)
|
(15)
|
|||
Proceeds from loan repayments from unconsolidated entities
|
11
|
6
|
|||
Short-term investments – acquisitions
|
(803)
|
(737)
|
|||
Short-term investments – liquidations
|
574
|
1,020
|
|||
Premium on purchased collars
|
(107)
|
||||
Realized gains on translated earnings contracts
|
152
|
3
|
|||
Other, net
|
4
|
(1)
|
|||
Net cash used in investing activities
|
(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
|
(42)
|
(11)
|
|||
Principal payments under capital lease obligations
|
(1)
|
(2)
|
|||
Proceeds from issuance of short-term debt
|
17
|
||||
Proceeds from issuance of commercial paper, net
|
416
|
||||
Proceeds from issuance of preferred stock (1)
|
400
|
||||
Payments to acquire noncontrolling interest
|
(9)
|
||||
Proceeds from the exercise of stock options
|
84
|
39
|
|||
Repurchases of common stock for treasury
|
(2,076)
|
(232)
|
|||
Dividends paid
|
(287)
|
(280)
|
|||
Net cash used in by financing activities
|
(1,489)
|
(993)
|
|||
Effect of exchange rates on cash
|
6
|
(71)
|
|||
Net increase (decrease) in cash and cash equivalents
|
414
|
(387)
|
|||
Cash and cash equivalents at beginning of period
|
4,704
|
4,988
|
|||
Cash and cash equivalents at end of period
|
$
|
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. (Note 10). Corning also issued to Samsung Display an additional amount of Preferred Stock at closing, for an aggregate issue price of $400 million in cash (Note 16).
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Royalty income from Samsung Corning Precision Materials
|
$
|
14
|
$
|
29
|
|||||||
Foreign currency exchange and hedge (loss) gain, net
|
$
|
(142)
|
251
|
$
|
(148)
|
282
|
|||||
Net (gain) loss attributable to noncontrolling interests
|
(1)
|
1
|
2
|
2
|
|||||||
Other, net
|
(12)
|
(1)
|
15
|
17
|
|||||||
Total
|
$
|
(155)
|
$
|
265
|
$
|
(131)
|
$
|
330
|
Reserve at
January 1,
2014
|
Net
charges/
reversals
|
Cash
payments
|
Reserve at
June 30,
2014
|
||||||||
Restructuring:
|
|||||||||||
Employee related costs
|
$
|
36
|
$
|
32
|
$
|
(17)
|
$
|
51
|
|||
Other charges
|
8
|
5
|
13
|
||||||||
Total restructuring activity
|
$
|
44
|
$
|
37
|
$
|
(17)
|
$
|
64
|
|||
Impairment charges and disposal of long-lived assets
|
$
|
14
|
|||||||||
Total restructuring, impairment and other charges
|
$
|
51
|
Reserve at
January 1,
2013
|
Net
charges/
reversals
|
Cash
payments
|
Reserve at
June 30,
2013
|
||||||||
Restructuring:
|
|||||||||||
Employee-related costs
|
$
|
38
|
$
|
(1)
|
$
|
(22)
|
$
|
15
|
|||
Other charges (credits)
|
4
|
(2)
|
2
|
||||||||
Total restructuring activity
|
$
|
42
|
$
|
(1)
|
$
|
(24)
|
$
|
17
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Provision for income taxes
|
$
|
(172)
|
$
|
(191)
|
$
|
(352)
|
$
|
(225)
|
|||
Effective tax rate
|
50.4%
|
23.0%
|
42.8%
|
16.6%
|
·
|
Rate differences on income (loss) of consolidated foreign companies, including the benefit of excess foreign tax credits attributable to a deemed distribution to the U.S. of a portion of foreign current year earnings;
|
·
|
Equity in earnings of nonconsolidated affiliates reported in the financials, net of tax; and
|
·
|
Tax incentives in foreign jurisdictions, primarily Taiwan.
|
·
|
Rate differences on income (loss) of consolidated foreign companies;
|
·
|
Equity in earnings of nonconsolidated affiliates reported in the financials, net of tax; and
|
·
|
Tax incentives in foreign jurisdictions, primarily Taiwan.
|
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
|
|||
Anti-dilutive potential shares excluded from diluted earnings per common share:
|
|||||||||||
Series A convertible preferred stock
|
115
|
106
|
|||||||||
Employee stock options and awards
|
20
|
38
|
24
|
43
|
|||||||
Accelerated share repurchase forward contract
|
6
|
||||||||||
Total
|
135
|
38
|
136
|
43
|
Amortized cost
|
Fair value
|
||||||||||
June 30,
2014
|
December 31,
2013
|
June 30,
2014
|
December 31,
2013
|
||||||||
Bonds, notes and other securities:
|
|||||||||||
U.S. government and agencies
|
$
|
758
|
$
|
530
|
$
|
759
|
$
|
531
|
|||
Equity securities
|
$
|
6
|
$
|
9
|
|||||||
Total short-term investments
|
$
|
764
|
$
|
530
|
$
|
768
|
$
|
531
|
|||
Asset-backed securities
|
$
|
44
|
$
|
46
|
$
|
39
|
$
|
38
|
|||
Total long-term investments
|
$
|
44
|
$
|
46
|
$
|
39
|
$
|
38
|
Less than one year
|
$524
|
Due in 1-5 years
|
235
|
Due in 5-10 years
|
0
|
Due after 10 years (1)
|
39
|
Total
|
$798
|
(1)
|
Includes $39 million of asset-based securities that mature over time and are being reported at their final maturity dates.
|
June 30, 2014
|
|||||||||||||
12 months or greater
|
Total
|
||||||||||||
Number of
securities
in a loss
position
|
Fair
value
|
Unrealized
losses (1)
|
Fair
value
|
Unrealized
losses
|
|||||||||
Asset-backed securities
|
21
|
$
|
39
|
$
|
(5)
|
$
|
39
|
$
|
(5)
|
||||
Total long-term investments
|
21
|
$
|
39
|
$
|
(5)
|
$
|
39
|
$
|
(5)
|
(1)
|
Unrealized losses in securities less than 12 months were not significant.
|
December 31, 2013
|
|||||||||||||
12 months or greater
|
Total
|
||||||||||||
Number of
securities
in a loss
position
|
Fair
value
|
Unrealized
losses (1)
|
Fair
value
|
Unrealized
losses
|
|||||||||
Asset-backed securities
|
20
|
$
|
38
|
$
|
(8)
|
$
|
38
|
$
|
(8)
|
||||
Total long-term investments
|
20
|
$
|
38
|
$
|
(8)
|
$
|
38
|
$
|
(8)
|
(1)
|
Unrealized losses in securities less than 12 months were not significant.
|
June 30,
2014
|
December 31,
2013
|
||||
Finished goods
|
$
|
500
|
$
|
486
|
|
Work in process
|
250
|
234
|
|||
Raw materials and accessories
|
323
|
311
|
|||
Supplies and packing materials
|
307
|
239
|
|||
Total inventories
|
$
|
1,380
|
$
|
1,270
|
Corning Preferred Shares
|
$
|
1,911
|
Settlement of pre-existing contract
|
(136)
|
|
Contingent consideration
|
(196)
|
|
Total consideration transferred
|
1,579
|
|
Fair value of equity investment
|
2,139
|
|
Total
|
$
|
3,718
|
Cash and cash equivalents (1)(3)
|
$
|
133
|
Trade receivables
|
353
|
|
Inventory
|
119
|
|
Property, plant and equipment (3)
|
3,601
|
|
Other current and non-current assets (3)
|
78
|
|
Debt – current
|
(32)
|
|
Accounts payable and accrued expenses
|
(343)
|
|
Other current and non-current liabilities (3)
|
(299)
|
|
Total identified net assets (3)
|
3,610
|
|
Non-controlling interests
|
15
|
|
Fair value of Samsung Corning Precision Materials on acquisition date
|
(3,718)
|
|
Goodwill (2)(3)
|
$
|
93
|
(1)
|
Cash and cash equivalents are presented net of the 2014 dividend distributed subsequent to the Acquisition, in the amount of $2.8 billion.
|
(2)
|
The goodwill recognized is not deductible for U.S. income tax purposes. The goodwill was allocated to the Display Technologies segment.
|
(3)
|
In the second quarter of 2014, the company recorded measurement period adjustments of $25 million for the Acquisition of Corning Precision Materials.
|
Three months
ended
June 30, 2013
|
Six months
ended
June 30, 2013
|
||||
Net sales
|
$
|
2,489
|
$
|
4,877
|
|
Net income from continuing operations - basic
|
$
|
737
|
$
|
1,357
|
|
Net income from continuing operations - diluted
|
$
|
761
|
$
|
1,405
|
|
Earnings per common share attributable to common shareholders
|
|||||
Basic
|
$
|
0.50
|
$
|
0.92
|
|
Diluted
|
$
|
0.48
|
$
|
0.88
|
|
Shares used in computing per share amounts
|
|||||
Basic
|
$
|
1,469
|
$
|
1,471
|
|
Diluted
|
$
|
1,593
|
$
|
1,595
|
June 30,
2014
|
December 31,
2013
|
||||
Land
|
$
|
494
|
$
|
121
|
|
Buildings
|
5,812
|
4,175
|
|||
Equipment
|
14,379
|
12,286
|
|||
Construction in progress
|
1,294
|
1,084
|
|||
21,979
|
17,666
|
||||
Accumulated depreciation
|
(8,456)
|
(7,865)
|
|||
Total
|
$
|
13,523
|
$
|
9,801
|
Display
Technologies
|
Optical
Communications
|
Specialty
Materials
|
Life
Sciences
|
Total
|
||||||||||
Balance at December 31, 2013
|
$
|
9
|
$
|
240
|
$
|
150
|
$
|
603
|
$
|
1,002
|
||||
Goodwill (1)
|
68
|
54
|
122
|
|||||||||||
Measurement period adjustment (2)
|
25
|
25
|
||||||||||||
Foreign currency translation adjustment
|
1
|
1
|
||||||||||||
Balance at June 30, 2014
|
$
|
103
|
$
|
240
|
$
|
204
|
$
|
603
|
$
|
1,150
|
(1)
|
The Company recorded the Acquisition of Samsung Corning Precision Materials and a small acquisition in the Specialty Materials segment in the first quarter of 2014. Refer to Note 10 (Acquisition) to the Consolidated Financial Statements for additional information on the Acquisition of Samsung Corning Precision Materials.
|
(2)
|
In the second quarter of 2014, the company recorded measurement period adjustments of $25 million for the Acquisition of Samsung Corning Precision Materials.
|
June 30, 2014
|
December 31, 2013
|
||||||||||||||||
Gross
|
Accumulated
amortization
|
Net
|
Gross
|
Accumulated
amortization
|
Net
|
||||||||||||
Amortized intangible assets:
|
|||||||||||||||||
Patents, trademarks, and trade names
|
$
|
307
|
$
|
144
|
$
|
163
|
$
|
290
|
$
|
138
|
$
|
152
|
|||||
Customer lists and other
|
427
|
58
|
369
|
436
|
48
|
388
|
|||||||||||
Total
|
$
|
734
|
$
|
202
|
$
|
532
|
$
|
726
|
$
|
186
|
$
|
540
|
Pension benefits
|
Postretirement benefits
|
||||||||||||||||||||||
Three months ended
June 30,
|
Six months ended
June 30,
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||||||||||||
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
||||||||||||||||
Service cost
|
$
|
16
|
$
|
18
|
$
|
32
|
$
|
37
|
$
|
2
|
$
|
3
|
$
|
5
|
$
|
7
|
|||||||
Interest cost
|
38
|
32
|
76
|
66
|
9
|
9
|
18
|
19
|
|||||||||||||||
Expected return on plan assets
|
(43)
|
(42)
|
(86)
|
(84)
|
|||||||||||||||||||
Amortization of net loss
|
4
|
8
|
|||||||||||||||||||||
Amortization of prior service cost (credit)
|
1
|
1
|
3
|
2
|
(1)
|
(1)
|
(2)
|
(3)
|
|||||||||||||||
Recognition of actuarial gain
|
(41)
|
(41)
|
|||||||||||||||||||||
Total pension and postretirement benefit expense (credit)
|
$
|
12
|
$
|
(32)
|
$
|
25
|
$
|
(20)
|
$
|
10
|
$
|
15
|
$
|
21
|
$
|
31
|
U.S. Dollar
|
Asset derivatives
|
Liability derivatives
|
|||||||||||||||||||
Gross notional amount
|
Balance
sheet
location
|
Fair value
|
Balance
sheet
location
|
Fair value
|
|||||||||||||||||
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
||||||||||||||||
Derivatives designated as hedging instruments
|
|||||||||||||||||||||
Foreign exchange contracts
|
$
|
271
|
$
|
433
|
Other current assets
|
$
|
2
|
$
|
8
|
Other accrued liabilities
|
$
|
(2)
|
$
|
(3)
|
|||||||
Interest rate contracts
|
550
|
550
|
Other liabilities
|
(15)
|
(28)
|
||||||||||||||||
Derivatives not designated as hedging instruments
|
|||||||||||||||||||||
Foreign exchange contracts
|
1,049
|
804
|
Other current assets
|
5
|
20
|
Other accrued liabilities
|
(6)
|
(3)
|
|||||||||||||
Translated earnings contracts
|
15,407
|
6,826
|
Other current assets
|
162
|
344
|
Other accrued liabilities
|
(7)
|
(3)
|
|||||||||||||
Other assets
|
40
|
90
|
Other liabilities
|
(32)
|
|||||||||||||||||
Total derivatives
|
$
|
17,277
|
$
|
8,613
|
$
|
209
|
$
|
462
|
$
|
(62)
|
$
|
(37)
|
Effect of derivative instruments on the consolidated financial statements
for the three months ended June 30
|
|||||||||||||
Derivatives in hedging relationships
|
Gain recognized
in other comprehensive
income (OCI)
|
Location of gain
reclassified from
accumulated OCI into
income (effective)
|
Gain reclassified from
accumulated OCI into
income (effective) (1)
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||||
Interest rate contracts
|
$
|
37
|
Cost of sales
|
$
|
0
|
$
|
11
|
||||||
Foreign exchange contracts
|
$
|
2
|
15
|
Other (expense) income, net
|
18
|
||||||||
Total cash flow hedges
|
$
|
2
|
$
|
52
|
$
|
0
|
$
|
29
|
(1)
|
The amount of hedge ineffectiveness for the three months ended June 30, 2014 and 2013 was insignificant.
|
Effect of derivative instruments on the consolidated financial statements
for the six months ended June 30
|
|||||||||||||
Derivatives in hedging relationships
|
Gain/(loss) recognized
in other comprehensive
income (OCI)
|
Location of gain
reclassified from
accumulated OCI into
income (effective)
|
Gain reclassified from
accumulated OCI into
income (effective) (1)
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||||
Interest rate contracts
|
$
|
37
|
Cost of sales
|
$
|
0
|
$
|
19
|
||||||
Foreign exchange contracts
|
$
|
(5)
|
52
|
Other (expense) income, net
|
31
|
||||||||
Total cash flow hedges
|
$
|
(5)
|
$
|
89
|
$
|
0
|
$
|
50
|
(1)
|
The amount of hedge ineffectiveness for the six months ended June 30, 2014 and 2013 was insignificant.
|
Undesignated derivatives
|
Location of gain/(loss)
recognized in income
|
Gain/(loss) recognized in income (1)
|
|||||||||||
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||||
Foreign exchange contracts – balance sheet
|
Other (expense) income, net
|
$
|
7
|
$
|
40
|
$
|
(5)
|
$
|
88
|
||||
Foreign exchange contracts – loans
|
Other (expense) income, net
|
(3)
|
27
|
1
|
85
|
||||||||
Translated earnings contracts
|
Other (expense) income, net
|
(141)
|
227
|
(139)
|
251
|
||||||||
Total undesignated
|
$
|
(137)
|
$
|
294
|
$
|
(143)
|
$
|
424
|
(1)
|
Certain amounts for prior periods were reclassified to conform to the current year presentation.
|
Fair value measurements at reporting date using
|
|||||||||||
June 30,
2014
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
Significant other
observable
inputs
(Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
Current assets:
|
|||||||||||
Short-term investments
|
$
|
768
|
$
|
768
|
|||||||
Other current assets (1)
|
$
|
169
|
$
|
169
|
|||||||
Non-current assets:
|
|||||||||||
Other assets (1)(2)
|
$
|
79
|
$
|
79
|
|||||||
Current liabilities:
|
|||||||||||
Other accrued liabilities (1)
|
$
|
15
|
$
|
15
|
|||||||
Non-current liabilities:
|
|||||||||||
Other liabilities (1)
|
$
|
47
|
$
|
47
|
(1)
|
Derivative assets and liabilities include foreign exchange contracts, including forwards, zero-cost and purchased collars, together with interest rate swaps which are measured using observable quoted prices for similar assets and liabilities.
|
(2)
|
Other assets include asset-backed securities which are measured using observable quoted prices for similar assets.
|
Fair value measurements at reporting date using
|
|||||||||||
December 31,
2013
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
Significant other
observable
inputs
(Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
Current assets:
|
|||||||||||
Short-term investments
|
$
|
531
|
$
|
531
|
|||||||
Other current assets (1)
|
$
|
372
|
$
|
372
|
|||||||
Non-current assets:
|
|||||||||||
Other assets (1)(2)
|
$
|
128
|
$
|
128
|
|||||||
Current liabilities:
|
|||||||||||
Other accrued liabilities (1)
|
$
|
9
|
$
|
9
|
|||||||
Non-current liabilities:
|
|||||||||||
Other liabilities (1)
|
$
|
28
|
$
|
28
|
(1)
|
Derivative assets and liabilities include foreign exchange contracts, including forwards and purchased collars, together with interest rate swaps which are measured using observable quoted prices for similar assets and liabilities.
|
(2)
|
Other assets include asset-backed securities which are measured using observable quoted prices for similar assets.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Beginning balance
|
$
|
360
|
$
|
669
|
$
|
492
|
$
|
1,174
|
|||
Other comprehensive income (loss)
|
262
|
(224)
|
287
|
(553)
|
|||||||
Equity method affiliates
|
7
|
(72)
|
(150)
|
(248)
|
|||||||
Net current-period other comprehensive income (loss)
|
269
|
(296)
|
137
|
(801)
|
|||||||
Ending balance
|
$
|
629
|
$
|
373
|
$
|
629
|
$
|
373
|
Number
of Shares
(in thousands)
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Term in
Years
|
Aggregate
Intrinsic
Value
(in thousands)
|
||||
Options Outstanding as of December 31, 2013
|
57,139
|
$17.83
|
|||||
Granted
|
1,555
|
21.00
|
|||||
Exercised
|
(6,958)
|
12.25
|
|||||
Forfeited and Expired
|
(535)
|
16.81
|
|||||
Options Outstanding as of June 30, 2014
|
51,201
|
18.69
|
4.88
|
$219,022
|
|||
Options Expected to Vest as of June 30, 2014
|
51,077
|
18.70
|
4.88
|
217,932
|
|||
Options Exercisable as of June 30, 2014
|
37,903
|
20.20
|
3.71
|
117,980
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||||||
Expected volatility
|
45.8
|
-
|
45.8%
|
46.9
|
-
|
47.1%
|
45.8
|
-
|
46.2%
|
46.9
|
-
|
47.4%
|
|||
Weighted-average volatility
|
45.8
|
-
|
45.8%
|
47.1
|
-
|
47.1%
|
45.8
|
-
|
46.2%
|
47.1
|
-
|
47.3%
|
|||
Expected dividends
|
1.90
|
-
|
1.90%
|
2.79
|
-
|
2.79%
|
1.90
|
-
|
2.09%
|
2.79
|
-
|
3.02%
|
|||
Risk-free rate
|
2.2
|
-
|
2.2%
|
0.8
|
-
|
1.1%
|
2.2
|
-
|
2.2%
|
0.8
|
-
|
1.5%
|
|||
Average risk-free rate
|
2.2
|
-
|
2.2%
|
1.1
|
-
|
1.1%
|
2.2
|
-
|
2.2%
|
1.1
|
-
|
1.4%
|
|||
Expected term (in years)
|
7.2
|
-
|
7.2
|
5.8
|
-
|
7.2
|
7.2
|
-
|
7.2
|
5.8
|
-
|
7.2
|
|||
Pre-vesting departure rate
|
0.5
|
-
|
0.5%
|
0.4
|
-
|
4.1%
|
0.5
|
-
|
0.5%
|
0.4
|
-
|
4.1%
|
Shares
(000’s)
|
Weighted
Average
Grant-Date
Fair Value
|
|||
Non-vested shares and share units at December 31, 2013
|
6,108
|
$
|
14.58
|
|
Granted
|
1,362
|
20.33
|
||
Vested
|
(1,270)
|
17.95
|
||
Forfeited
|
(105)
|
14.35
|
||
Non-vested shares and share units at June 30, 2014
|
6,095
|
$
|
15.16
|
·
|
Display Technologies – manufactures liquid crystal display (“LCD”) glass for flat panel displays.
|
·
|
Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.
|
·
|
Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.
|
·
|
Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.
|
·
|
Life Sciences – manufactures glass and plastic labware, equipment, media and reagents to provide workflow solutions for scientific applications.
|
Display
Technologies
|
Optical
Communications
|
Environmental
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
||||||||||||||
Three months ended
June 30, 2014
|
||||||||||||||||||||
Net sales
|
$
|
987
|
$
|
686
|
$
|
285
|
$
|
298
|
$
|
223
|
$
|
3
|
$
|
2,482
|
||||||
Depreciation (1)
|
$
|
171
|
$
|
37
|
$
|
30
|
$
|
29
|
$
|
16
|
$
|
7
|
$
|
290
|
||||||
Amortization of purchased intangibles
|
$
|
2
|
$
|
6
|
$
|
8
|
||||||||||||||
Research, development and engineering expenses (2)
|
$
|
41
|
$
|
34
|
$
|
21
|
$
|
34
|
$
|
5
|
$
|
48
|
$
|
183
|
||||||
Restructuring, impairment & other charges
|
$
|
24
|
$
|
10
|
$
|
34
|
||||||||||||||
Equity in earnings of affiliated companies
|
$
|
(4)
|
$
|
1
|
$
|
7
|
$
|
4
|
||||||||||||
Income tax (provision) benefit
|
$
|
(119)
|
$
|
(31)
|
$
|
(23)
|
$
|
(21)
|
$
|
(9)
|
$
|
22
|
$
|
(181)
|
||||||
Net income (loss) (3)
|
$
|
282
|
$
|
61
|
$
|
47
|
$
|
39
|
$
|
18
|
$
|
(59)
|
$
|
388
|
Display
Technologies
|
Optical
Communications
|
Environmental
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
||||||||||||||
Three months ended
June 30, 2013
|
||||||||||||||||||||
Net sales
|
$
|
631
|
$
|
601
|
$
|
228
|
$
|
301
|
$
|
219
|
$
|
2
|
$
|
1,982
|
||||||
Depreciation (1)
|
$
|
117
|
$
|
38
|
$
|
30
|
$
|
35
|
$
|
14
|
$
|
5
|
$
|
239
|
||||||
Amortization of purchased intangibles
|
$
|
2
|
$
|
6
|
$
|
8
|
||||||||||||||
Research, development and engineering expenses (2)
|
$
|
18
|
$
|
31
|
$
|
22
|
$
|
40
|
$
|
5
|
$
|
35
|
$
|
151
|
||||||
Equity in earnings of affiliated companies
|
$
|
108
|
$
|
1
|
$
|
1
|
$
|
3
|
$
|
4
|
$
|
117
|
||||||||
Income tax (provision) benefit
|
$
|
(84)
|
$
|
(38)
|
$
|
(18)
|
$
|
(28)
|
$
|
(13)
|
$
|
15
|
$
|
(166)
|
||||||
Net income (loss) (3)
|
$
|
337
|
$
|
76
|
$
|
36
|
$
|
58
|
$
|
25
|
$
|
(31)
|
$
|
501
|
Display
Technologies
|
Optical
Communications
|
Environmental
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
||||||||||||||
Six months ended
June 30, 2014
|
||||||||||||||||||||
Net sales
|
$
|
1,916
|
$
|
1,279
|
$
|
560
|
$
|
559
|
$
|
433
|
$
|
24
|
$
|
4,771
|
||||||
Depreciation (1)
|
$
|
344
|
$
|
73
|
$
|
60
|
$
|
56
|
$
|
31
|
$
|
12
|
$
|
576
|
||||||
Amortization of purchased intangibles
|
$
|
4
|
$
|
12
|
$
|
16
|
||||||||||||||
Research, development and engineering expenses (2)
|
$
|
86
|
$
|
71
|
$
|
42
|
$
|
67
|
$
|
10
|
$
|
76
|
$
|
352
|
||||||
Restructuring, impairment & other charges
|
$
|
29
|
$
|
12
|
$
|
10
|
$
|
51
|
||||||||||||
Equity in earnings of affiliated companies
|
$
|
(13)
|
$
|
2
|
$
|
9
|
$
|
(2)
|
||||||||||||
Income tax (provision) benefit
|
$
|
(317)
|
$
|
(50)
|
$
|
(44)
|
$
|
(37)
|
$
|
(17)
|
$
|
38
|
$
|
(427)
|
||||||
Net income (loss) (3)
|
$
|
491
|
$
|
88
|
$
|
90
|
$
|
70
|
$
|
35
|
$
|
(99)
|
$
|
675
|
Display
Technologies
|
Optical
Communications
|
Environmental
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
||||||||||||||
Six months ended
June 30, 2013
|
||||||||||||||||||||
Net sales
|
$
|
1,281
|
$
|
1,071
|
$
|
456
|
$
|
559
|
$
|
426
|
$
|
3
|
$
|
3,796
|
||||||
Depreciation (1)
|
$
|
241
|
$
|
72
|
$
|
61
|
$
|
74
|
$
|
28
|
$
|
9
|
$
|
485
|
||||||
Amortization of purchased intangibles
|
$
|
4
|
$
|
11
|
$
|
15
|
||||||||||||||
Research, development and engineering expenses (2)
|
$
|
37
|
$
|
66
|
$
|
45
|
$
|
75
|
$
|
10
|
$
|
71
|
$
|
304
|
||||||
Equity in earnings of affiliated companies
|
$
|
241
|
$
|
2
|
$
|
1
|
$
|
3
|
$
|
9
|
$
|
256
|
||||||||
Income tax (provision) benefit
|
$
|
(164)
|
$
|
(55)
|
$
|
(31)
|
$
|
(47)
|
$
|
(18)
|
$
|
30
|
$
|
(285)
|
||||||
Net income (loss) (3)
|
$
|
686
|
$
|
111
|
$
|
63
|
$
|
97
|
$
|
37
|
$
|
(59)
|
$
|
935
|
(1)
|
Depreciation expense for Corning’s reportable segments includes an allocation of depreciation of corporate property not specifically identifiable to a segment.
|
(2)
|
Research, development and engineering expenses include direct project spending that is identifiable to a segment.
|
(3)
|
Many of Corning’s administrative and staff functions are performed on a centralized basis. Where practicable, Corning charges these expenses to segments based upon the extent to which each business uses a centralized function. Other staff functions, such as corporate finance, human resources and legal, are allocated to segments, primarily as a percentage of sales.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Net income of reportable segments
|
$
|
447
|
$
|
532
|
$
|
774
|
$
|
994
|
|||
Non-reportable segments
|
(59)
|
(31)
|
(99)
|
(59)
|
|||||||
Unallocated amounts:
|
|||||||||||
Net financing costs (1)
|
(30)
|
(28)
|
(59)
|
(62)
|
|||||||
Stock-based compensation expense
|
(13)
|
(14)
|
(28)
|
(25)
|
|||||||
Exploratory research
|
(24)
|
(27)
|
(51)
|
(51)
|
|||||||
Corporate contributions
|
(11)
|
(12)
|
(16)
|
(25)
|
|||||||
Equity in earnings of affiliated companies, net of impairments (2)
|
59
|
49
|
151
|
83
|
|||||||
Asbestos settlement
|
(4)
|
(6)
|
(6)
|
(8)
|
|||||||
Purchased collars and average rate forward contracts
|
(141)
|
227
|
(139)
|
251
|
|||||||
Other corporate items (3)
|
(55)
|
(52)
|
(57)
|
34
|
|||||||
Net income
|
$
|
169
|
$
|
638
|
$
|
470
|
$
|
1,132
|
(1)
|
Net financing costs include interest income, interest expense and investment gains associated with benefit plans.
|
(2)
|
Primarily represents the equity earnings of Dow Corning, which includes our portion of a mark-to-market gain on a derivative instrument, totaling $8 million and $40 million, respectively, for the three and six months ended June 30, 2014, and a $9 million and $11 million, respectively, restructuring charge for our share of costs for headcount reductions and asset write-offs for the three and six months ended June 30, 2013.
|
(3)
|
For the six months ended June 30, 2013, Corning recorded a $54 million tax benefit for the impact of the American Taxpayer Relief Act enacted on January 3, 2013 and made retroactive to 2012.
|
·
|
In the Display Technologies segment, three customers accounted for 60% of total segment sales.
|
·
|
In the Optical Communications segment, no customer accounted for 10% of total segment sales.
|
·
|
In the Environmental Technologies segment, three customers accounted for 87% of total segment sales.
|
·
|
In the Specialty Materials segment, two customers accounted for 36% of total segment sales.
|
·
|
In the Life Sciences segment, two customers accounted for 46% of total segment sales.
|
·
|
In the Display Technologies segment, four customers accounted for 72% of total segment sales.
|
·
|
In the Optical Communications segment, no customer accounted for 10% of total segment sales.
|
·
|
In the Environmental Technologies segment, three customers accounted for 87% of total segment sales.
|
·
|
In the Specialty Materials segment, three customers accounted for 47% of total segment sales.
|
·
|
In the Life Sciences segment, two customers accounted for 44% of total segment sales.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
·
|
Overview
|
·
|
Results of Operations
|
·
|
Core Performance Measures
|
·
|
Reportable Segments
|
·
|
Capital Resources and Liquidity
|
·
|
Critical Accounting Estimates
|
·
|
New Accounting Standards
|
·
|
Environment
|
·
|
Forward-Looking Statements
|
·
|
Higher sales in the Display Technologies segment, driven by the consolidation of Corning Precision Materials, which increased sales by $447 million, and an increase in volume in the high-single digits in percentage terms, offset somewhat by price declines in the mid-teens and the negative impact of the Japanese yen versus the U.S. dollar exchange rate;
|
·
|
An increase in net sales in the Optical Communications segment in the amount of $85 million, driven by an increase in sales of carrier network products in the amount of $73 million, largely due to growth in North America and Europe, and an increase of $12 million in enterprise network products; and
|
·
|
An increase of $57 million in the Environmental Technologies segment, due mainly to an increase in demand for our heavy duty diesel products, driven by new governmental regulations in Europe and China and increased demand for Class 8 vehicles in North America.
|
·
|
Higher sales in the Display Technologies segment, driven by the consolidation of Corning Precision Materials, which increased sales by $868 million, and an increase in volume in the mid-single digits in percentage terms offset somewhat by price declines in the mid-teens;
|
·
|
An increase in net sales in the Optical Communications segment in the amount of $208 million, driven by an increase in sales of carrier network products in the amount of $171 million, largely due to growth in North America, China and Europe, and an increase of $37 million in enterprise network products; and
|
·
|
An increase of $104 million in the Environmental Technologies segment, due mainly to an increase in demand for our heavy duty diesel products, driven by new governmental regulations in Europe and China and increased demand for Class 8 vehicles in North America.
|
·
|
The negative net impact of our yen-denominated hedge programs, driven by the strengthening of the Japanese yen in 2014 compared to significant weakening in 2013, in the amount of $248 million;
|
·
|
Several tax-related items in the amount of $164 million, including the establishment of deferred tax valuation allowances in Japan and Germany;
|
·
|
The negative net impact from the Japanese yen versus the U.S. dollar exchange rate in the amount of $32 million; and
|
·
|
The absence of the $26 million gain recognized on the true-up to our 2012 pension liability and the $11 million gain resulting from the change in control of an equity investment, occurring in the second quarter of 2013.
|
·
|
Higher net income in the Environmental Technologies segment, driven by an increase in demand for our diesel products; and
|
·
|
An increase in equity earnings from Dow Corning, due to a mark-to-market gain on a derivative instrument in the amount of $8 million, and an increase in volume in the polysilicon segment.
|
·
|
The negative net impact of our yen-denominated hedge programs, driven by the strengthening of the Japanese yen in 2014 compared to significant weakening in 2013, in the amount of $267 million;
|
·
|
Several tax-related items in the amount of $185 million, including the establishment of deferred tax valuation allowances in Japan and Germany, and the absence of a tax benefit in the amount of $54 million recorded in the first quarter of 2013 related to the impact of the American Taxpayer Relief Act enacted on January 3, 2013 retroactive to 2012;
|
·
|
A dividend withholding tax in the amount of $102 million on Corning’s share of the dividend from Samsung Corning Precision Materials distributed subsequent to the Acquisition of the remaining equity interests of the affiliate;
|
·
|
The negative impact from the Japanese yen versus the U.S. dollar exchange rate in the amount of $93 million; and
|
·
|
The absence of the $26 million gain recognized on the true-up to our 2012 pension liability and the $11 million gain resulting from the change in control of an equity investment, occurring in the second quarter of 2013.
|
·
|
Higher net income in the Environmental Technologies segment, driven by an increase in demand for our diesel products; and
|
·
|
An increase in equity earnings from Dow Corning, due to a mark-to-market gain on a derivative instrument in the amount of $40 million, and an increase in volume and the settlement of a long-term sales agreement in the amount of $9 million in the polysilicon segment.
|
·
|
We ended the first half of 2014 with $5.9 billion of cash, cash equivalents and short-term investments, an increase from the balance at December 31, 2013 of $5.2 billion, and well above our debt balance at June 30, 2014 of $3.7 billion. The increase in cash was driven by the consolidation of Corning Precision Materials beginning in the first quarter of 2014, and the cash received from Samsung Display for the additional issuance of Preferred Stock in connection with the Acquisition, offset by the cash paid for our share repurchases.
|
·
|
Our debt to capital ratio increased from 13% reported at December 31, 2013 to 15% at June 30, 2014, driven by an increase in the amount of outstanding commercial paper and our share repurchase program.
|
·
|
Operating cash flow in the six months ended June 30, 2014 was $2,480 million, an increase of $1,468 million when compared to the first six months of 2013, driven by a dividend from Samsung Corning Precision Materials distributed subsequent to the Acquisition of the remaining equity interests of the affiliate.
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
||||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
$
|
2,482
|
$
|
1,982
|
25
|
$
|
4,771
|
$
|
3,796
|
26
|
|||||
Gross margin
|
$
|
1,032
|
$
|
883
|
17
|
$
|
1,967
|
$
|
1,653
|
19
|
|||||
(gross margin %)
|
42%
|
45%
|
41%
|
44%
|
|||||||||||
Selling, general and administrative expenses
|
$
|
318
|
$
|
266
|
20
|
$
|
713
|
$
|
525
|
36
|
|||||
(as a % of net sales)
|
13%
|
13%
|
15%
|
14%
|
|||||||||||
Research, development and engineering expenses
|
$
|
208
|
$
|
179
|
16
|
$
|
406
|
$
|
357
|
14
|
|||||
(as a % of net sales)
|
8%
|
9%
|
9%
|
9%
|
|||||||||||
Equity in earnings of affiliated companies
|
$
|
62
|
$
|
166
|
(63)
|
$
|
148
|
$
|
339
|
(56)
|
|||||
(as a % of net sales)
|
2%
|
8%
|
3%
|
9%
|
|||||||||||
Transaction-related gain, net
|
$
|
74
|
*
|
||||||||||||
(as a % of net sales)
|
2%
|
||||||||||||||
Other (expense) income, net
|
$
|
(155)
|
$
|
265
|
(158)
|
$
|
(131)
|
$
|
330
|
(140)
|
|||||
(as a % of net sales)
|
6%
|
13%
|
(3)%
|
9%
|
|||||||||||
Income before income taxes
|
$
|
341
|
$
|
829
|
(59)
|
$
|
822
|
$
|
1,357
|
(39)
|
|||||
(as a % of net sales)
|
14%
|
42%
|
17%
|
36%
|
|||||||||||
Provision for income taxes
|
$
|
(172)
|
$
|
(191)
|
(10)
|
$
|
(352)
|
$
|
(225)
|
56
|
|||||
(as a % of net sales)
|
(7)%
|
(10)%
|
(7)%
|
(6)%
|
|||||||||||
Net income attributable to Corning Incorporated
|
$
|
169
|
$
|
638
|
(74)
|
$
|
470
|
$
|
1,132
|
(58)
|
|||||
(as a % of net sales)
|
7%
|
32%
|
10%
|
30%
|
*
|
Percent change not meaningful
|
·
|
An increase in sales in the Display Technologies segment in the amount of $356 million, driven by the consolidation of Corning Precision Materials, which increased sales by $447 million, and an increase in volume in the high-single digits in percentage terms, offset somewhat by price declines in the mid-teens and the negative impact of the Japanese yen versus the U.S. dollar exchange rate;
|
·
|
An increase in net sales in the Optical Communications segment in the amount of $85 million, driven by an increase in sales of carrier network products in the amount of $73 million and an increase of $12 million in enterprise network products. Specifically, the following items impacted sales within the carrier network products group in the three months ended June 30, 2014, when compared to the same period in 2013:
|
o
|
Higher sales of cable and hardware and equipment products used in fiber-to-the-home solutions in North America and Europe, up $28 million and $26 million, respectively;
|
o
|
The impact of a full quarter of sales from a small acquisition and the consolidation of an equity investment due to a change in control which occurred at the end of the second quarter of 2013, which added approximately $19 million; and
|
o
|
Lower sales of optical fiber, driven by a $21 million decrease in China, offset slightly by higher sales in North America and Europe, each increasing by $6 million;
|
·
|
An increase of $57 million in the Environmental Technologies segment, due mainly to an increase in demand for our heavy duty diesel products, driven by new governmental regulations in Europe and China and increased demand for Class 8 vehicles in North America; and
|
·
|
An increase of $4 million in the Life Sciences segment, due mainly to volume growth in North America.
|
·
|
An increase in sales in the Display Technologies segment in the amount of $635 million, driven by the consolidation of Corning Precision Materials, which increased sales by $868 million, and an increase in volume in the mid-single digits in percentage terms, offset somewhat by price declines in the mid-teens;
|
·
|
An increase in net sales in the Optical Communications segment in the amount of $208 million, driven by an increase in sales of carrier network products in the amount of $171 million and an increase of $37 million in enterprise network products. Specifically, the following items impacted sales within the carrier network products group in the first six months of 2014, when compared to the same period in 2013:
|
o
|
Higher sales of cable and hardware and equipment products used in fiber-to-the-home solutions in North America and Europe, up $59 million and $58 million, respectively;
|
o
|
The impact of a small acquisition and the consolidation of an equity investment due to a change in control which occurred at the end of the second quarter of 2013, which added approximately $40 million; and
|
o
|
Consistent sales of optical fiber, driven by a $29 million increase in sales in all regions of the world except China, which declined by the same amount;
|
·
|
An increase of $104 million in the Environmental Technologies segment, due mainly to an increase in demand for our heavy duty diesel products, driven by new governmental regulations in Europe and China and increased demand for Class 8 vehicles in North America; and
|
·
|
An increase of $7 million in the Life Sciences segment, due mainly to volume growth in North America.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Samsung Corning Precision Materials
|
$
|
111
|
$
|
244
|
|||||||
Dow Corning Corporation
|
$
|
54
|
45
|
$
|
146
|
80
|
|||||
All other
|
8
|
10
|
2
|
15
|
|||||||
Total equity earnings
|
$
|
62
|
$
|
166
|
$
|
148
|
$
|
339
|
·
|
Corning’s share of a mark-to-market gain on a derivative instrument in the amount of $8 million and $40 million, respectively;
|
·
|
An increase in equity earnings of $7 million and $36 million, respectively, in the polysilicon segment, driven by higher volume and the settlement of a long-term sales agreement in the first quarter of 2014 in the amount of $9 million; and
|
·
|
The absence of restructuring charges incurred in the three and six months ended June 30, 2013, in the amounts of $9 million and $11 million, respectively.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Royalty income from Samsung Corning Precision Materials
|
$
|
14
|
$
|
29
|
|||||||
Foreign currency exchange and hedge (loss) gain, net
|
$
|
(142)
|
251
|
$
|
(148)
|
282
|
|||||
Net (gain) loss attributable to noncontrolling interests
|
(1)
|
1
|
2
|
2
|
|||||||
Other, net
|
(12)
|
(1)
|
15
|
17
|
|||||||
Total
|
$
|
(155)
|
$
|
265
|
$
|
(131)
|
$
|
330
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Provision for income taxes
|
$
|
(172)
|
$
|
(191)
|
$
|
(352)
|
$
|
(225)
|
|||
Effective tax rate
|
50.4%
|
23.0%
|
42.8%
|
16.6%
|
·
|
Rate differences on income (loss) of consolidated foreign companies, including the benefit of excess foreign tax credits attributable to a deemed distribution to the U.S. of a portion of foreign current year earnings;
|
·
|
Equity in earnings of nonconsolidated affiliates reported in the financials net of tax; and
|
·
|
Tax incentives in foreign jurisdictions, primarily Taiwan.
|
·
|
Rate differences on income (loss) of consolidated foreign companies;
|
·
|
Equity in earnings of nonconsolidated affiliates reported in the financials, net of tax; and
|
·
|
Tax incentives in foreign jurisdictions, primarily Taiwan.
|
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
|
|||
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
|
|||
Shares used in computing per share amounts
|
|||||||||||
Basic earnings per common share
|
1,302
|
1,469
|
1,331
|
1,471
|
|||||||
Diluted earnings per common share
|
1,315
|
1,478
|
1,343
|
1,480
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
||||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Core net sales
|
$
|
2,577
|
$
|
2,021
|
28%
|
$
|
4,966
|
$
|
3,835
|
29%
|
|||||
Core equity in earnings of affiliated companies
|
$
|
58
|
$
|
173
|
(66)%
|
$
|
119
|
$
|
353
|
(66)%
|
|||||
Core earnings
|
$
|
527
|
$
|
469
|
12%
|
$
|
988
|
$
|
900
|
10%
|
·
|
An increase in the Display Technologies segment of $413 million, or 62%, driven by the consolidation of Corning Precision Materials, which increased sales by $488 million, and an increase in volume in the high-single digits in percentage terms, partially offset by price declines in the mid-teens;
|
·
|
An increase in the Optical Communications segment in the amount of $85 million, driven by an increase in sales of carrier network products in the amount of $73 million and an increase of $12 million in enterprise network products. Specifically, the following items impacted sales within the carrier network products group in the three months ended June 30, 2014:
|
o
|
Higher sales of cable and hardware and equipment products used in fiber-to-the-home solutions in North America and Europe, up $28 million and $26 million, respectively;
|
o
|
The impact of a full quarter of sales from a small acquisition and the consolidation of an equity investment due to a change in control which occurred at the end of the second quarter of 2013, which added approximately $19 million; and
|
o
|
Lower sales of optical fiber, driven by a $21 million decrease in China, offset slightly by higher sales in North America and Europe, each increasing by $6 million;
|
·
|
An increase of $57 million in the Environmental Technologies segment, due mainly to an increase in demand for our heavy duty diesel products, driven by new governmental regulations in Europe and China and increased demand for Class 8 vehicles in North America; and
|
·
|
An increase of $4 million in the Life Sciences segment, due mainly to volume growth in North America.
|
·
|
An increase in the Display Technologies segment of $792 million, or 60%, driven by the consolidation of Corning Precision Materials, which increased sales by $933 million, and an increase in volume in the mid-single digits in percentage terms, partially offset by price declines in the mid-teens;
|
·
|
An increase in net sales in the Optical Communications segment in the amount of $208 million, driven by an increase in sales of carrier network products in the amount of $171 million and an increase of $37 million in enterprise network products. Specifically, the following items impacted sales within the carrier network products group in the first six months of 2014:
|
o
|
Higher sales of cable and hardware and equipment products in North America and Europe, up $59 million and $58 million, respectively;
|
o
|
The impact of a small acquisition and the consolidation of an equity investment due to a change in control which occurred at the end of the second quarter of 2013, which added approximately $40 million; and
|
o
|
Consistent sales of optical fiber, driven by a $29 million increase in sales in all regions of the world except China, which completely offset the increase;
|
·
|
An increase of $104 million in the Environmental Technologies segment, due mainly to an increase in demand for our heavy duty diesel products, driven by new governmental regulations in Europe and China and increased demand for Class 8 vehicles in North America; and
|
·
|
An increase of $7 million in the Life Sciences segment, due mainly to volume growth in North America.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Samsung Corning Precision Materials
|
$
|
120
|
$
|
253
|
|||||||
Dow Corning Corporation*
|
$
|
49
|
42
|
$
|
109
|
84
|
|||||
All other
|
9
|
11
|
10
|
16
|
|||||||
Total equity earnings
|
$
|
58
|
$
|
173
|
$
|
119
|
$
|
353
|
*
|
In 2013, we excluded the operating results of Dow Corning’s consolidated subsidiary Hemlock Semiconductor, a producer of polycrystalline silicon, to remove the impact of the severe unpredictability and instability in the polysilicon market.
|
Equity Earnings
|
|||||||||||
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
As reported
|
$
|
54
|
$
|
45
|
$
|
146
|
$
|
80
|
|||
Hemlock Semiconductor operating results (3)
|
(12)
|
(7)
|
|||||||||
Hemlock Semiconductor non-operating results (3)(7)
|
9
|
11
|
|||||||||
Equity in earnings of affiliated companies (9)
|
(5)
|
(37)
|
|||||||||
Core Performance measures
|
$
|
49
|
$
|
42
|
$
|
109
|
$
|
84
|
·
|
An increase of $28 million, or 9%, in the Display Technologies segment. Price declines in the mid-teens largely offset an increase in volume in the high-single digits and the favorable impact of the consolidation of Corning Precision Materials;
|
·
|
An increase of $14 million, or 42%, in the Environmental Technologies segment, driven by an increase in demand for our diesel products; and
|
·
|
An increase of $3 million, or 5%, in the Optical Communications segment, driven by an increase in demand for carrier network products.
|
·
|
An increase of $15 million, or 2%, in the Display Technologies segment. Price declines in the mid-teens largely offset an increase in volume in the mid-single digits and the favorable impact of the consolidation of Corning Precision Materials;
|
·
|
An increase of $30 million, or 50%, in the Environmental Technologies segment, driven by an increase in demand for our diesel products;
|
·
|
An increase of $7 million, or 7%, in the Optical Communications segment, driven by an increase in demand for carrier network products; and
|
·
|
An increase in core equity earnings from Dow Corning of $25 million, or 30%.
|
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
|
Six months ended June 30, 2014
|
||||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Earnings
per
share
|
|||||||||||
As reported
|
$
|
4,771
|
$
|
148
|
$
|
822
|
$
|
470
|
42.8%
|
$
|
0.32
|
|||||
Constant-yen (1)
|
195
|
1
|
163
|
120
|
0.08
|
|||||||||||
Constant-won (1)
|
17
|
12
|
0.01
|
|||||||||||||
Purchased collars and average forward contracts (2)
|
139
|
72
|
0.05
|
|||||||||||||
Acquisition-related costs (4)
|
58
|
47
|
0.03
|
|||||||||||||
Discrete tax items (5)
|
185
|
0.13
|
||||||||||||||
Asbestos settlement (6)
|
6
|
3
|
||||||||||||||
Restructuring, impairment and other charges (7)
|
56
|
44
|
0.03
|
|||||||||||||
Liquidation of subsidiary (8)
|
(3)
|
|||||||||||||||
Equity in earnings of affiliated companies (9)
|
(30)
|
(30)
|
(29)
|
(0.02)
|
||||||||||||
Gain on previously held equity investment (10)
|
(394)
|
(292)
|
(0.20)
|
|||||||||||||
Settlement of pre-existing contract (10)
|
320
|
320
|
0.22
|
|||||||||||||
Post-combination expenses (10)
|
72
|
55
|
0.04
|
|||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
(14)
|
(16)
|
0.01
|
|||||||||||||
Core Performance measures
|
$
|
4,966
|
$
|
119
|
$
|
1,215
|
$
|
988
|
18.7%
|
$
|
0.68
|
Six months ended June 30, 2013
|
||||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Earnings
per
share
|
|||||||||||
As reported
|
$
|
3,796
|
$
|
339
|
$
|
1,357
|
$
|
1,132
|
16.6%
|
$
|
0.76
|
|||||
Constant-yen (1)
|
39
|
10
|
36
|
27
|
0.02
|
|||||||||||
Purchased collars and average forward contracts (2)
|
(252)
|
(163)
|
(0.11)
|
|||||||||||||
Other yen-related transactions (2)
|
(46)
|
(32)
|
(0.02)
|
|||||||||||||
Hemlock Semiconductor operating results (3)
|
(7)
|
(7)
|
(7)
|
|||||||||||||
Hemlock Semiconductor non-operating results (3)(7)
|
11
|
11
|
11
|
0.01
|
||||||||||||
Acquisition-related costs (4)
|
26
|
18
|
0.01
|
|||||||||||||
Discrete tax items (5)
|
(54)
|
(0.04)
|
||||||||||||||
Asbestos settlement (6)
|
8
|
5
|
||||||||||||||
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
|
$
|
3,835
|
$
|
353
|
$
|
1,075
|
$
|
900
|
16.3%
|
$
|
0.61
|
(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 effectively remove the impact of changes in the Japanese yen.
|
|
Constant-won: Following the Acquisition of Samsung Corning Precision Materials and because a significant portion of Samsung Corning Precision Materials’ 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 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 Semiconductor 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 post-combination expenses and the impact of 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.
|
·
|
Display Technologies – manufactures liquid crystal display glass for flat panel displays.
|
·
|
Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.
|
·
|
Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.
|
·
|
Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.
|
·
|
Life Sciences – manufactures glass and plastic labware, equipment, media and reagents to provide workflow solutions for scientific applications.
|
As Reported
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
$
|
987
|
$
|
631
|
56%
|
$
|
1,916
|
$
|
1,281
|
50%
|
|||||
Equity earnings of affiliated companies
|
$
|
(4)
|
$
|
108
|
(104)%
|
$
|
(13)
|
$
|
241
|
(105)%
|
|||||
Net income
|
$
|
282
|
$
|
337
|
(16)%
|
$
|
491
|
$
|
686
|
(28)%
|
Core Performance
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
$
|
1,083
|
$
|
670
|
62%
|
$
|
2,112
|
$
|
1,320
|
60%
|
|||||
Equity earnings of affiliated companies
|
$
|
(3)
|
$
|
117
|
(103)%
|
$
|
(5)
|
$
|
250
|
(102)%
|
|||||
Core earnings
|
$
|
342
|
$
|
314
|
9%
|
$
|
665
|
$
|
650
|
2%
|
Three months ended June 30, 2014
|
Six months ended June 30, 2014
|
||||||||||||||||
Sales
|
Equity
earnings
|
Net
income
|
Sales
|
Equity
earnings
|
Net
income
|
||||||||||||
As reported
|
$
|
987
|
$
|
(4)
|
$
|
282
|
$
|
1,916
|
$
|
(13)
|
$
|
491
|
|||||
Constant-yen (1)
|
96
|
1
|
61
|
196
|
1
|
124
|
|||||||||||
Constant-won (1)
|
11
|
11
|
|||||||||||||||
Purchased collars and average forward contracts (2)
|
(53)
|
(109)
|
|||||||||||||||
Acquisition-related costs (4)
|
2
|
37
|
|||||||||||||||
Discrete tax items (5)
|
4
|
4
|
|||||||||||||||
Restructuring, impairment and other charges (7)
|
27
|
30
|
|||||||||||||||
Equity in earnings of affiliated companies (9)
|
7
|
6
|
|||||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
8
|
71
|
|||||||||||||||
Core performance
|
$
|
1,083
|
$
|
(3)
|
$
|
342
|
$
|
2,112
|
$
|
(5)
|
$
|
665
|
Three months ended June 30, 2013
|
Six months ended June 30, 2013
|
||||||||||||||||
Sales
|
Equity
earnings
|
Net
income
|
Sales
|
Equity
earnings
|
Net
income
|
||||||||||||
As reported
|
$
|
631
|
$
|
108
|
$
|
337
|
$
|
1,281
|
$
|
241
|
$
|
686
|
|||||
Constant-yen (1)
|
39
|
9
|
29
|
39
|
9
|
29
|
|||||||||||
Purchased collars, average forward contracts and other yen-related transactions (2)
|
(43)
|
(56)
|
|||||||||||||||
Pension mark-to-market adjustment (11)
|
(9)
|
(9)
|
|||||||||||||||
Core performance
|
$
|
670
|
$
|
117
|
$
|
314
|
$
|
1,320
|
$
|
250
|
$
|
650
|
·
|
The impact of price declines in the mid-teens in percentage terms;
|
·
|
The depreciation of the Japanese yen versus the U.S. dollar in the amount of $32 million, offset somewhat by the impact of realized gains on our yen-denominated hedge programs in the amount of $53 million; and
|
·
|
Restructuring expense in the amount of $27 million, primarily related to the exit of high cost production lines in Japan. This production is being transferred to the Corning Precision Materials facility in Asan, Korea and reflects synergies attained through our acquisition of Corning Precision Materials.
|
·
|
The impact of price declines in the mid-teens in percentage terms;
|
·
|
The depreciation of the Japanese yen versus the U.S. dollar in the amount of $95 million, offset somewhat by the impact of realized gains on our yen-denominated hedge programs in the amount of $109 million;
|
·
|
Restructuring expense in the amount of $30 million; and
|
·
|
The absence of royalty income from Samsung Corning Precision Materials.
|
As Reported
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales:
|
|||||||||||||||
Carrier network
|
$
|
538
|
$
|
465
|
16%
|
$
|
989
|
$
|
818
|
21%
|
|||||
Enterprise network
|
148
|
136
|
9%
|
290
|
253
|
15%
|
|||||||||
Total net sales
|
686
|
601
|
14%
|
1,279
|
1,071
|
19%
|
|||||||||
Net income
|
$
|
61
|
$
|
76
|
(20)%
|
$
|
88
|
$
|
111
|
(21)%
|
Core Performance
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
|||||||||||||||
Carrier network
|
$
|
538
|
$
|
465
|
16%
|
$
|
989
|
$
|
818
|
21%
|
|||||
Enterprise network
|
148
|
136
|
9%
|
290
|
253
|
15%
|
|||||||||
Total net sales
|
686
|
601
|
14%
|
1,279
|
1,071
|
19%
|
|||||||||
Core earnings
|
$
|
63
|
$
|
60
|
5%
|
$
|
102
|
$
|
95
|
7%
|
Three months ended
June 30, 2014
|
Six months ended
June 30, 2014
|
||||||||||
Sales
|
Net
income
|
Sales
|
Net
income
|
||||||||
As reported
|
$
|
686
|
$
|
61
|
$
|
1,279
|
$
|
88
|
|||
Acquisition-related costs (4)
|
2
|
4
|
|||||||||
Restructuring, impairment and other charges (7)
|
12
|
||||||||||
Liquidation of subsidiary (8)
|
(2)
|
||||||||||
Core performance
|
$
|
686
|
$
|
63
|
$
|
1,279
|
$
|
102
|
Three months ended
June 30, 2013
|
Six months ended
June 30, 2013
|
||||||||||
Sales
|
Net
income
|
Sales
|
Net
income
|
||||||||
As reported
|
$
|
601
|
$
|
76
|
$
|
1,071
|
$
|
111
|
|||
Acquisition-related costs (4)
|
4
|
4
|
|||||||||
Pension mark-to-market adjustment (11)
|
(9)
|
(9)
|
|||||||||
Gain on change in control of equity investment (12)
|
(11)
|
(11)
|
|||||||||
Core performance
|
$
|
601
|
$
|
60
|
$
|
1,071
|
$
|
95
|
·
|
Higher sales of cable and hardware and equipment products used in fiber-to-the-home solutions in North America and Europe, up $28 million and $26 million, respectively;
|
·
|
The impact of a full quarter of sales from a small acquisition and the consolidation of an investment due to a change in control which occurred at the end of the second quarter of 2013, which added approximately $19 million; and
|
·
|
Lower sales of optical fiber, driven by a $21 million decrease in China, offset slightly by higher sales in North America and Europe, each increasing by $6 million.
|
·
|
Higher sales of cable and hardware and equipment products used in fiber-to-the-home solutions in North America and Europe, up $59 million and $58 million, respectively;
|
·
|
The impact of a full two quarters of sales from a small acquisition and the consolidation of an investment due to a change in control which occurred at the end of the second quarter of 2013, which added approximately $40 million; and
|
·
|
Consistent sales of optical fiber. An increase in sales of $29 million across most regions of the world was completely offset by a decline in sales in China.
|
As Reported
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales:
|
|||||||||||||||
Automotive
|
$
|
136
|
$
|
120
|
13%
|
$
|
269
|
$
|
245
|
10%
|
|||||
Diesel
|
149
|
108
|
38%
|
291
|
211
|
38%
|
|||||||||
Total net sales
|
$
|
285
|
$
|
228
|
25%
|
$
|
560
|
$
|
456
|
23%
|
|||||
Net income
|
$
|
47
|
$
|
36
|
31%
|
$
|
90
|
$
|
63
|
43%
|
Core Performance
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
$
|
285
|
$
|
228
|
25%
|
$
|
560
|
$
|
456
|
23%
|
|||||
Core earnings
|
$
|
47
|
$
|
33
|
42%
|
$
|
90
|
$
|
60
|
50%
|
Three months ended
June 30, 2013
|
Six months ended
June 30, 2013
|
||||||||||
Sales
|
Net
income
|
Sales
|
Net
income
|
||||||||
As reported
|
$
|
228
|
$
|
36
|
$
|
456
|
$
|
63
|
|||
Pension mark-to-market adjustment (11)
|
(3)
|
(3)
|
|||||||||
Core performance
|
$
|
228
|
$
|
33
|
$
|
456
|
$
|
60
|
As Reported
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
$
|
298
|
$
|
301
|
(1)%
|
$
|
559
|
$
|
559
|
0%
|
|||||
Net income
|
$
|
39
|
$
|
58
|
(33)%
|
$
|
70
|
$
|
97
|
(28)%
|
Core Performance
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
$
|
298
|
$
|
301
|
(1)%
|
$
|
559
|
$
|
559
|
0%
|
|||||
Core earnings
|
$
|
44
|
$
|
53
|
(17)%
|
$
|
76
|
$
|
92
|
(17)%
|
Three months ended
June 30, 2014
|
Six months ended
June 30, 2014
|
||||||||||
Sales
|
Net
income
|
Sales
|
Net
income
|
||||||||
As reported
|
$
|
298
|
$
|
39
|
$
|
559
|
$
|
70
|
|||
Constant-yen (1)
|
(1)
|
(2)
|
|||||||||
Purchased collars and average forward contracts (2)
|
3
|
6
|
|||||||||
Acquisition-related costs (4)
|
(1)
|
||||||||||
Restructuring, impairment and other charges (7)
|
3
|
3
|
|||||||||
Core performance
|
$
|
298
|
$
|
44
|
$
|
559
|
$
|
76
|
Three months ended
June 30, 2013
|
Six months ended
June 30, 2013
|
||||||||||
Sales
|
Net
income
|
Sales
|
Net
income
|
||||||||
As reported
|
$
|
301
|
$
|
58
|
$
|
559
|
$
|
97
|
|||
Constant-yen (1)
|
(1)
|
(1)
|
|||||||||
Purchased collars, average forward contracts and other yen-related transactions (2)
|
(1)
|
(1)
|
|||||||||
Pension mark-to-market adjustment (11)
|
(3)
|
(3)
|
|||||||||
Core performance
|
$
|
301
|
$
|
53
|
$
|
559
|
$
|
92
|
As Reported
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
$
|
223
|
$
|
219
|
2%
|
$
|
433
|
$
|
426
|
2%
|
|||||
Net income
|
$
|
18
|
$
|
25
|
(28)%
|
$
|
35
|
$
|
37
|
(5)%
|
Core Performance
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
|||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
$
|
223
|
$
|
219
|
2%
|
$
|
433
|
$
|
426
|
2%
|
|||||
Core earnings
|
$
|
22
|
$
|
24
|
(8)%
|
$
|
43
|
$
|
48
|
(10)%
|
Three months ended
June 30, 2014
|
Six months ended
June 30, 2014
|
||||||||||
Sales
|
Net
income
|
Sales
|
Net
income
|
||||||||
As reported
|
$
|
223
|
$
|
18
|
$
|
433
|
$
|
35
|
|||
Acquisition-related costs (4)
|
4
|
8
|
|||||||||
Core performance
|
$
|
223
|
$
|
22
|
$
|
433
|
$
|
43
|
Three months ended
June 30, 2013
|
Six months ended
June 30, 2013
|
||||||||||
Sales
|
Net
income
|
Sales
|
Net
income
|
||||||||
As reported
|
$
|
219
|
$
|
25
|
$
|
426
|
$
|
37
|
|||
Acquisition-related costs (4)
|
2
|
14
|
|||||||||
Pension mark-to-market adjustment (11)
|
(3)
|
(3)
|
|||||||||
Core performance
|
$
|
219
|
$
|
24
|
$
|
426
|
$
|
48
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
||||||||||||
2014
|
2013
|
14 vs. 13
|
2014
|
2013
|
14 vs. 13
|
||||||||||
Net sales
|
$
|
3
|
$
|
2
|
50%
|
$
|
24
|
$
|
3
|
700%
|
|||||
Research, development and engineering expenses
|
$
|
48
|
$
|
35
|
37%
|
$
|
76
|
$
|
71
|
7%
|
|||||
Equity in earnings of affiliated companies
|
$
|
7
|
$
|
4
|
75%
|
$
|
9
|
$
|
9
|
0%
|
|||||
Net loss
|
$
|
(59)
|
$
|
(31)
|
(90%)
|
$
|
(99)
|
$
|
(59)
|
(68%)
|
Six months ended
June 30,
|
|||||
2014
|
2013
|
||||
Net cash provided by operating activities
|
$
|
2,480
|
$
|
1,012
|
|
Net cash used in investing activities
|
$
|
(583)
|
$
|
(335)
|
|
Net cash used in financing activities
|
$
|
(1,489)
|
$
|
(993)
|
As of
June 30,
2014
|
As of
December 31,
2013
|
||||
Working capital
|
$
|
7,687
|
$
|
7,145
|
|
Current ratio
|
4.5:1
|
5.1:1
|
|||
Trade accounts receivable, net of allowances
|
$
|
1,645
|
$
|
1,253
|
|
Days sales outstanding
|
60
|
58
|
|||
Inventories
|
$
|
1,380
|
$
|
1,270
|
|
Inventory turns
|
3.9
|
3.6
|
|||
Days payable outstanding (1)
|
41
|
47
|
|||
Long-term debt
|
$
|
3,238
|
$
|
3,272
|
|
Total debt to total capital
|
15%
|
13%
|
(1)
|
Includes trade payables only.
|
RATING AGENCY
|
Rating
Long-Term Debt
|
Outlook
last update
|
|
Fitch
|
A-
|
Stable
|
|
May 17, 2011
|
|||
Standard & Poor’s
|
A-
|
Stable
|
|
December 16, 2013
|
|||
Moody’s
|
A3
|
Stable
|
|
September 12, 2011
|
·
|
global business, financial, economic and political conditions;
|
·
|
tariffs and import duties;
|
·
|
currency fluctuations between the U.S. dollar and other currencies, primarily the Japanese yen, Korean won, Euro, and New Taiwan dollar, and our ability to mitigate the financial impact on our net earnings and cash flows from the movements in these currencies, which includes the use of derivatives;
|
·
|
product demand and industry capacity;
|
·
|
competitive products and pricing;
|
·
|
availability and costs of critical components and materials;
|
·
|
new product development and commercialization;
|
·
|
order activity and demand from major customers;
|
·
|
fluctuations in capital spending by customers;
|
·
|
possible disruption in commercial activities due to terrorist activity, armed conflict, political or financial instability, natural disasters, or major health concerns;
|
·
|
effect on our operations, including commercial disruption, resulting from cyber-attacks and theft of intellectual property or commercial information;
|
·
|
unanticipated disruption to equipment, facilities, or operations;
|
·
|
facility expansions and new plant start-up costs;
|
·
|
effect of regulatory and legal developments;
|
·
|
ability to pace capital spending to anticipated levels of customer demand;
|
·
|
credit rating and ability to obtain financing and capital on commercially reasonable terms;
|
·
|
adequacy and availability of insurance;
|
·
|
acquisition and divestiture activities;
|
·
|
rate of technology change;
|
·
|
level of excess or obsolete inventory;
|
·
|
ability to enforce patents and protect intellectual property and trade secrets;
|
·
|
adverse litigation;
|
·
|
product and components performance issues;
|
·
|
retention of key personnel;
|
·
|
stock price fluctuations;
|
·
|
trends for the continued growth of the Company’s businesses;
|
·
|
the ability of research and development projects to produce revenues in future periods;
|
·
|
a downturn in demand or decline in growth rates for LCD glass substrates;
|
·
|
customer ability, most notably in the Display Technologies segment, to maintain profitable operations and obtain financing to fund their manufacturing expansions and ongoing operations, and pay their receivables when due;
|
·
|
loss of significant customers;
|
·
|
fluctuations in supply chain inventory levels;
|
·
|
equity company activities, principally at Dow Corning Corporation;
|
·
|
changes to our assessments about the realizability of our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic environments in which we do business;
|
·
|
changes in tax laws and regulations;
|
·
|
changes in accounting rules and standards;
|
·
|
the potential impact of legislation, government regulations, and other government action and investigations;
|
·
|
temporary idling of capacity or delaying expansion;
|
·
|
the ability to implement productivity, consolidation and cost reduction efforts and to realize anticipated benefits;
|
·
|
restructuring actions and charges; and
|
·
|
other risks detailed in Corning’s SEC filings.
|
Period
|
Total number
of shares
purchased (1)
|
Average
price paid
per share (1)
|
Number of
shares purchased as
part of publicly
announced plan
or program (2)
|
Approximate dollar
value of shares that
may yet be purchased
under the plan
or program (2)
|
|||
April 1-30, 2014
|
57,645
|
$20.94
|
$832,847,116
|
||||
May 1-31, 2014
|
10,269,469
|
$27.55 (3)
|
10,224,037
|
$550,843,345
|
|||
June 1-30, 2014
|
7,803,782
|
$21.56
|
7,791,493
|
$382,843,382
|
|||
Total
|
18,130,896
|
$24.95
|
18,015,530
|
$382,843,382
|
(1)
|
This column reflects the following transactions during the second quarter of 2014: (i) the deemed surrender to us of 55,686 shares of common stock to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units; (ii) the surrender to us of 59,680 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees; and (iii) the purchase of 18,015,530 shares of common stock (9,286,349 shares in open market repurchases and 8,729,181 shares as part of the ASR agreement announced in the first quarter of 2014) in conjunction with the repurchase program made effective concurrent with the closing of Corning’s Acquisition of Samsung Corning Precision Materials on January 15, 2014.
|
(2)
|
On April 24, 2013, we announced a $2 billion share repurchase program (the “2013 Repurchase Program”). In the second quarter of 2014, the 2013 Repurchase Program was completed. On October 22, 2013, we announced authorization to repurchase up to $2 billion of our common stock by December 31, 2015, through a repurchase program made effective on January 15, 2014, concurrent with the closing of Corning’s Acquisition of Samsung Corning Precision Materials.
|
(3)
|
Includes 8.7 million shares received in May upon settlement of an accelerated share repurchase agreement for which no cash was paid during the period, in addition to open market repurchases by the Company. In the first quarter of 2014, the Company paid $1.25 billion under an ASR agreement with Citi and received an initial delivery of approximately 52.5 million shares (80% of the deliverable shares based on an average price of $19.04). The transaction was completed in the second quarter of 2014, with the Company receiving approximately 8.7 million additional shares to settle the ASR agreement. The $27.55 average price per share figure represents the 20% of the $1.25 billion paid, divided by the shares delivered at settlement, averaged with the actual price paid for open market repurchases during the period. The actual average price paid for the 61.2 million shares received under this ASR was $20.41.
|
(a)
|
Exhibits
|
||
Exhibit Number
|
Exhibit Name
|
||
12
|
Computation of Ratio of Earnings to Fixed Charges
|
||
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Exchange Act
|
||
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Exchange Act
|
||
32
|
Certification Pursuant to 18 U.S.C. Section 1350
|
||
101.INS
|
XBRL Instance Document
|
||
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
||
101.CAL
|
XBRL Taxonomy Calculation Linkbase Document
|
||
101.LAB
|
XBRL Taxonomy Label Linkbase Document
|
||
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document
|
||
101.DEF
|
XBRL Taxonomy Definition Document
|
Corning Incorporated
|
||||
(Registrant)
|
||||
July 31, 2014
|
/s/ JAMES B. FLAWS
|
|||
Date
|
James B. Flaws
|
|||
Vice Chairman and Chief Financial Officer
|
||||
(Principal Financial Officer)
|
||||
July 31, 2014
|
/s/ R. TONY TRIPENY
|
|||
Date
|
R. Tony Tripeny
|
|||
Senior Vice President and Corporate Controller
|
||||
(Principal Accounting Officer)
|
Six months ended
June 30, 2014
|
|||
Income from continuing operations before taxes on income
|
$
|
822
|
|
Adjustments:
|
|||
Equity in earnings of equity affiliates
|
(148)
|
||
Distributed income of equity affiliates (a)
|
1,669
|
||
Net income attributable to noncontrolling interests
|
(2)
|
||
Fixed charges net of capitalized interest
|
78
|
||
Earnings before taxes and fixed charges as adjusted
|
$
|
2,419
|
|
Fixed charges:
|
|||
Interest incurred (b)
|
$
|
80
|
|
Portion of rent expense which represents an appropriate interest factor (c)
|
19
|
||
Amortization of debt costs
|
1
|
||
Total fixed charges
|
$
|
100
|
|
Ratio of earnings to fixed charges
|
24.2x
|
(a)
|
Includes a $1.6 billion dividend received from Samsung Corning Precision Materials related to the Acquisition. See Note 10 (Acquisition) for more details.
|
(b)
|
Interest incurred includes capitalized interest and amortization expense for debt costs.
|
(c)
|
One-third of net rent expense is the portion deemed representative of the interest factor.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Corning Incorporated (the registrant);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
|
/s/ Wendell P. Weeks
|
|
Wendell P. Weeks
|
|
Chairman, Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Corning Incorporated (the registrant);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
|
/s/ James B. Flaws
|
|
James B. Flaws
|
|
Vice Chairman and Chief Financial Officer
|
|
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Wendell P. Weeks
|
|
Wendell P. Weeks
|
|
Chairman, Chief Executive Officer and President
|
/s/ James B. Flaws
|
|
James B. Flaws
|
|
Vice Chairman and Chief Financial Officer
|
Note 15 - Fair Value Measurements (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2014
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] |
|
Note 7 - Available-for-Sale Investments (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2014
|
Jun. 30, 2013
|
Dec. 31, 2013
|
||||
Available For Sale Investments [Abstract] | ||||||
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value | $ 39 | [1] | ||||
Marketable Securities, Realized Loss, Other than Temporary Impairments, Amount | 4 | 6 | ||||
Proceeds from Sale of Short-term Investments | $ 574 | $ 1,020 | ||||
|
Note 2 - Restructuring, Impairment and Other Charges (Details) - Restructuring, Impairment and Other Charges (USD $)
In Millions, unless otherwise specified |
6 Months Ended | |
---|---|---|
Jun. 30, 2014
|
Jun. 30, 2013
|
|
Note 2 - Restructuring, Impairment and Other Charges (Details) - Restructuring, Impairment and Other Charges [Line Items] | ||
Reserve | $ 44 | $ 42 |
Net charges/reversals | 37 | (1) |
Cash payments | (17) | (24) |
Reserve | 64 | 17 |
Employee Severance [Member]
|
||
Note 2 - Restructuring, Impairment and Other Charges (Details) - Restructuring, Impairment and Other Charges [Line Items] | ||
Reserve | 36 | 38 |
Net charges/reversals | 32 | (1) |
Cash payments | (17) | (22) |
Reserve | 51 | 15 |
Other Restructuring [Member]
|
||
Note 2 - Restructuring, Impairment and Other Charges (Details) - Restructuring, Impairment and Other Charges [Line Items] | ||
Reserve | 8 | 4 |
Net charges/reversals | 5 | |
Cash payments | (2) | |
Reserve | $ 13 | $ 2 |
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