Date of Report: (Date of earliest event reported)
|
January 27, 2015
|
New York
(State or other jurisdiction
of incorporation)
|
1-3247
(Commission
File Number)
|
16-0393470
(I.R.S. Employer
Identification No.)
|
One Riverfront Plaza, Corning, New York
(Address of principal executive offices)
|
14831
(Zip Code)
|
¨
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
¨
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
¨
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
¨
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
CORNING INCORPORATED
|
|
Registrant
|
Date: January 27, 2015
|
By
|
/s/ R. TONY TRIPENY
|
R. Tony Tripeny
|
||
Senior Vice President & Corporate Controller
|
·
|
Core earnings per share were $0.45*, a 55% increase over last year’s fourth quarter. These results were better than anticipated and completed the company’s ninth consecutive quarter of year-over-year core earnings growth. GAAP earnings per share were $0.70.
|
·
|
Core sales were $2.6 billion*, a 30% increase from the comparable period last year. GAAP sales were $2.4 billion.
|
·
|
In the Display Technologies segment, LCD glass volume remained strong as retail demand for large screen TVs continued.
|
·
|
All of Corning’s business segments delivered year-over-year quarterly sales gains.
|
·
|
Core sales were $10.2 billion*, a 29% increase from $7.9 billion last year, marking a record year in sales performance for the company. GAAP sales were $9.7 billion.
|
·
|
Core earnings per share were $1.53*, a 24% year-over-year improvement compared with last year’s full-year EPS of $1.23*. GAAP earnings per share were $1.73.
|
·
|
The very successful integration of Corning Precision Materials Co., Ltd. resulted in pretax synergies of greater than $100 million, which exceeded the company’s original expectations.
|
Core Performance*
|
|||
Q4 2014
|
Q4 2013
|
% Change
|
|
Core Net Sales
|
$2,602
|
$2,005
|
30%
|
Core Equity Earnings
|
$116
|
$121
|
(4)%
|
Core Earnings
|
$630
|
$410
|
54%
|
Core EPS
|
$0.45
|
$0.29
|
55%
|
GAAP
|
|||
Q4 2014
|
Q4 2013
|
% Change
|
|
Net Sales
|
$2,404
|
$1,956
|
23%
|
Equity Earnings
|
$23
|
$70
|
(67)%
|
Net Income
|
$988
|
$421
|
135%
|
EPS
|
$0.70
|
$0.30
|
133%
|
Core Performance*
|
|||
2014
|
2013
|
% Change
|
|
Core Net Sales
|
$10,217
|
$7,948
|
29%
|
Core Equity Earnings
|
$ 311
|
$ 595
|
(48)%
|
Core Earnings
|
$ 2,185
|
$1,797
|
22%
|
Core EPS
|
$ 1.53
|
$ 1.23
|
24%
|
GAAP
|
|||
2014
|
2013
|
% Change
|
|
Net Sales
|
$9,715
|
$7,819
|
24%
|
Equity Earnings
|
$ 266
|
$ 547
|
(51)%
|
Net Income
|
$2,472
|
$1,961
|
26%
|
EPS
|
$ 1.73
|
$ 1.34
|
29%
|
Three months ended
December 31,
|
Year ended
December 31,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Net sales
|
$
|
2,404
|
$
|
1,956
|
$
|
9,715
|
$
|
7,819
|
|||
Cost of sales
|
1,408
|
1,186
|
5,663
|
4,495
|
|||||||
Gross margin
|
996
|
770
|
4,052
|
3,324
|
|||||||
Operating expenses:
|
|||||||||||
Selling, general and administrative expenses
|
242
|
332
|
1,211
|
1,126
|
|||||||
Research, development and engineering expenses
|
210
|
169
|
815
|
710
|
|||||||
Amortization of purchased intangibles
|
8
|
8
|
33
|
31
|
|||||||
Restructuring, impairment and other charges
|
20
|
71
|
71
|
67
|
|||||||
Asbestos litigation charge
|
(20)
|
6
|
(9)
|
19
|
|||||||
Operating income
|
536
|
184
|
1,931
|
1,371
|
|||||||
Equity in earnings of affiliated companies
|
23
|
70
|
266
|
547
|
|||||||
Interest income
|
5
|
3
|
26
|
8
|
|||||||
Interest expense
|
(32)
|
(28)
|
(123)
|
(120)
|
|||||||
Transaction-related gain, net
|
74
|
||||||||||
Other income, net
|
805
|
338
|
1,394
|
667
|
|||||||
Income before income taxes
|
1,337
|
567
|
3,568
|
2,473
|
|||||||
Provision for income taxes
|
(349)
|
(146)
|
(1,096)
|
(512)
|
|||||||
Net income attributable to Corning Incorporated
|
$
|
988
|
$
|
421
|
$
|
2,472
|
$
|
1,961
|
|||
Earnings per common share attributable to Corning Incorporated:
|
|||||||||||
Basic
|
$
|
0.76
|
$
|
0.30
|
$
|
1.82
|
$
|
1.35
|
|||
Diluted
|
$
|
0.70
|
$
|
0.30
|
$
|
1.73
|
$
|
1.34
|
|||
Dividends declared per common share
|
$
|
0.22
|
$
|
0.10
|
$
|
0.52
|
$
|
0.39
|
December 31,
|
|||||
2014
|
2013
|
||||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
5,309
|
$
|
4,704
|
|
Short-term investments, at fair value
|
759
|
531
|
|||
Total cash, cash equivalents and short-term investments
|
6,068
|
5,235
|
|||
Trade accounts receivable, net of doubtful accounts and allowances
|
1,501
|
1,253
|
|||
Inventories
|
1,322
|
1,270
|
|||
Deferred income taxes
|
248
|
278
|
|||
Other current assets
|
1,099
|
855
|
|||
Total current assets
|
10,238
|
8,891
|
|||
Investments
|
1,801
|
5,537
|
|||
Property, net of accumulated depreciation
|
12,766
|
9,801
|
|||
Goodwill, net
|
1,150
|
1,002
|
|||
Other intangible assets, net
|
497
|
540
|
|||
Deferred income taxes
|
1,889
|
2,234
|
|||
Other assets
|
1,722
|
473
|
|||
Total Assets
|
$
|
30,063
|
$
|
28,478
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt
|
$
|
36
|
$
|
21
|
|
Accounts payable
|
997
|
771
|
|||
Other accrued liabilities
|
1,291
|
954
|
|||
Total current liabilities
|
2,324
|
1,746
|
|||
Long-term debt
|
3,227
|
3,272
|
|||
Postretirement benefits other than pensions
|
814
|
766
|
|||
Other liabilities
|
2,046
|
1,483
|
|||
Total liabilities
|
8,411
|
7,267
|
|||
Commitments and contingencies
|
|||||
Shareholders’ equity:
|
|||||
Convertible preferred stock, Series A – Par value $100 per share; Shares authorized 3,100; Shares issued: 2,300
|
2,300
|
||||
Common stock – Par value $0.50 per share; Shares authorized: 3.8 billion; Shares issued: 1,672 million and 1,661 million
|
836
|
831
|
|||
Additional paid-in capital – common stock
|
13,456
|
13,066
|
|||
Retained earnings
|
13,021
|
11,320
|
|||
Treasury stock, at cost; shares held: 398 million and 262 million
|
(6,727)
|
(4,099)
|
|||
Accumulated other comprehensive (loss) income
|
(1,307)
|
44
|
|||
Total Corning Incorporated shareholders’ equity
|
21,579
|
21,162
|
|||
Noncontrolling interests
|
73
|
49
|
|||
Total equity
|
21,652
|
21,211
|
|||
Total Liabilities and Equity
|
$
|
30,063
|
$
|
28,478
|
Three months ended
December 31,
|
Year ended
December 31,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Cash Flows from Operating Activities:
|
|||||||||||
Net income
|
$
|
988
|
$
|
421
|
$
|
2,472
|
$
|
1,961
|
|||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||||||
Depreciation
|
290
|
241
|
1,167
|
971
|
|||||||
Amortization of purchased intangibles
|
8
|
8
|
33
|
31
|
|||||||
Restructuring, impairment and other charges
|
20
|
71
|
71
|
67
|
|||||||
Stock compensation charges
|
11
|
14
|
58
|
54
|
|||||||
Equity in earnings of affiliated companies
|
(23)
|
(70)
|
(266)
|
(547)
|
|||||||
Dividends received from affiliated companies
|
31
|
409
|
1,704
|
630
|
|||||||
Deferred tax provision
|
198
|
48
|
612
|
189
|
|||||||
Restructuring payments
|
(9)
|
(5)
|
(39)
|
(35)
|
|||||||
Employee benefit payments (in excess of) less than expense
|
(47)
|
18
|
(52)
|
52
|
|||||||
Gains on translated earnings contracts
|
(769)
|
(230)
|
(1,369)
|
(435)
|
|||||||
Unrealized translation losses (gains) on transactions
|
192
|
(9)
|
431
|
96
|
|||||||
Contingent consideration fair value adjustment
|
(172)
|
(249)
|
|||||||||
Changes in certain working capital items:
|
|||||||||||
Trade accounts receivable
|
47
|
110
|
(16)
|
(29)
|
|||||||
Inventories
|
(25)
|
(9)
|
2
|
(247)
|
|||||||
Other current assets
|
(33)
|
20
|
(16)
|
34
|
|||||||
Accounts payable and other current liabilities
|
336
|
255
|
(3)
|
(23)
|
|||||||
Other, net
|
69
|
(8)
|
169
|
18
|
|||||||
Net cash provided by operating activities
|
1,112
|
1,284
|
4,709
|
2,787
|
|||||||
Cash Flows from Investing Activities:
|
|||||||||||
Capital expenditures
|
(336)
|
(337)
|
(1,076)
|
(1,019)
|
|||||||
Acquisitions of businesses, net of cash received
|
(2)
|
66
|
(68)
|
||||||||
Investments in unconsolidated entities
|
(507)
|
(109)
|
(526)
|
||||||||
Proceeds from loan repayments from unconsolidated entities
|
8
|
4
|
23
|
8
|
|||||||
Short-term investments – acquisitions
|
(228)
|
(223)
|
(1,398)
|
(1,406)
|
|||||||
Short-term investments – liquidations
|
213
|
577
|
1,167
|
2,026
|
|||||||
Premium on purchased collars
|
(107)
|
||||||||||
Realized gains on translated earning contracts
|
135
|
54
|
361
|
87
|
|||||||
Other, net
|
(1)
|
5
|
4
|
1
|
|||||||
Net cash used in investing activities
|
(209)
|
(429)
|
(962)
|
(1,004)
|
|||||||
Cash Flows from Financing Activities:
|
|||||||||||
Retirements of long-term debt, net
|
(498)
|
||||||||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(2)
|
(2)
|
(52)
|
(71)
|
|||||||
Proceeds from issuance of long-term debt, net
|
248
|
248
|
|||||||||
Proceeds from issuance of short-term debt, net
|
7
|
29
|
|||||||||
Payments from issuance of commercial paper
|
(424)
|
||||||||||
Proceeds from the settlement of interest rate swap agreements
|
33
|
33
|
|||||||||
Principal payments under capital lease obligations
|
(5)
|
(5)
|
(6)
|
(7)
|
|||||||
Proceeds from issuance of preferred stock (1)
|
400
|
||||||||||
Proceeds received for asset financing and related incentives, net
|
1
|
194
|
1
|
276
|
|||||||
Payments to acquire noncontrolling interest
|
(47)
|
||||||||||
Proceeds from the exercise of stock options
|
18
|
31
|
116
|
85
|
|||||||
Repurchases of common stock for treasury
|
(183)
|
(1,075)
|
(2,483)
|
(1,516)
|
|||||||
Dividends paid
|
(152)
|
(140)
|
(591)
|
(566)
|
|||||||
Net cash used in financing activities
|
(740)
|
(716)
|
(2,586)
|
(2,063)
|
|||||||
Effect of exchange rates on cash
|
(207)
|
5
|
(556)
|
(4)
|
|||||||
Net (decrease) increase in cash and cash equivalents
|
(44)
|
144
|
605
|
(284)
|
|||||||
Cash and cash equivalents at beginning of period
|
5,353
|
4,560
|
4,704
|
4,988
|
|||||||
Cash and cash equivalents at end of period
|
$
|
5,309
|
$
|
4,704
|
$
|
5,309
|
$
|
4,704
|
(1)
|
In the first quarter of 2014, Corning issued 1,900 shares of Preferred Stock to Samsung Display Co., Ltd. in connection with the acquisition of their equity interests in Samsung Corning Precision Materials Co., Ltd.. Corning also issued to Samsung Display an additional amount of Preferred Stock at closing, for an issue price of $400 million in cash.
|
Three months ended
December 31,
|
Year ended
December 31,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Net income attributable to Corning Incorporated
|
$
|
988
|
$
|
421
|
$
|
2,472
|
$
|
1,961
|
|||
Less: Series A convertible preferred stock dividend
|
24
|
94
|
|||||||||
Net income available to common stockholders - basic
|
964
|
421
|
2,378
|
1,961
|
|||||||
Plus: Series A convertible preferred stock dividend
|
24
|
94
|
|||||||||
Net income available to common stockholders - diluted
|
$
|
988
|
$
|
421
|
$
|
2,472
|
$
|
1,961
|
|||
Weighted-average common shares outstanding - basic
|
1,276
|
1,414
|
1,305
|
1,452
|
|||||||
Effect of dilutive securities:
|
|||||||||||
Stock options and other dilutive securities
|
11
|
10
|
12
|
10
|
|||||||
Series A convertible preferred stock dividend
|
115
|
110
|
|||||||||
Weighted-average common shares outstanding - diluted
|
1,402
|
1,424
|
1,427
|
1,462
|
|||||||
Basic earnings per common share
|
$
|
0.76
|
$
|
0.30
|
$
|
1.82
|
$
|
1.35
|
|||
Diluted earnings per common share
|
$
|
0.70
|
$
|
0.30
|
$
|
1.73
|
$
|
1.34
|
Three months ended
December 31,
|
Year ended
December 31,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Core earnings attributable to Corning Incorporated
|
$
|
630
|
$
|
410
|
$
|
2,185
|
$
|
1,797
|
|||
Less: Series A convertible preferred stock dividend
|
24
|
94
|
|||||||||
Core earnings available to common stockholders - basic
|
606
|
410
|
2,091
|
1,797
|
|||||||
Add: Series A convertible preferred stock dividend
|
24
|
94
|
|||||||||
Core earnings available to common stockholders - diluted
|
$
|
630
|
$
|
410
|
$
|
2,185
|
$
|
1,797
|
|||
Weighted-average common shares outstanding - basic
|
1,276
|
1,414
|
1,305
|
1,452
|
|||||||
Effect of dilutive securities:
|
|||||||||||
Stock options and other dilutive securities
|
11
|
10
|
12
|
10
|
|||||||
Series A convertible preferred stock
|
115
|
110
|
|||||||||
Weighted-average common shares outstanding - diluted
|
1,402
|
1,424
|
1,427
|
1,462
|
|||||||
Core basic earnings per common share
|
$
|
0.47
|
$
|
0.29
|
$
|
1.60
|
$
|
1.24
|
|||
Core diluted earnings per common share
|
$
|
0.45
|
$
|
0.29
|
$
|
1.53
|
$
|
1.23
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported
|
$
|
2,404
|
$
|
23
|
$
|
1,337
|
$
|
988
|
26.1%
|
$
|
0.70
|
|||||
Constant-yen (1)
|
198
|
162
|
118
|
0.09
|
||||||||||||
Constant-won (1)
|
3
|
2
|
||||||||||||||
Purchased collars and average forward contracts (2)
|
(769)
|
(510)
|
(0.36)
|
|||||||||||||
Acquisition-related costs (4)
|
8
|
5
|
||||||||||||||
Discrete tax items and other tax-related adjustments (5)
|
42
|
0.03
|
||||||||||||||
Litigation, regulatory and other legal matters (6)
|
(13)
|
(9)
|
(0.01)
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
23
|
15
|
0.01
|
|||||||||||||
Liquidation of subsidiary (8)
|
||||||||||||||||
Equity in earnings of affiliated companies (9)
|
93
|
93
|
86
|
0.06
|
||||||||||||
Contingent consideration fair value adjustment (10)
|
(172)
|
(134)
|
(0.10)
|
|||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
3
|
3
|
||||||||||||||
Pension mark-to-market adjustment (11)
|
29
|
24
|
0.02
|
|||||||||||||
Core performance measures
|
$
|
2,602
|
$
|
116
|
$
|
704
|
$
|
630
|
10.5%
|
$
|
0.45
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported
|
$
|
1,956
|
$
|
70
|
$
|
567
|
$
|
421
|
25.7%
|
$
|
0.30
|
|||||
Constant-yen (1)
|
49
|
14
|
46
|
38
|
0.03
|
|||||||||||
Purchased collars and average rate forwards (2)
|
(228)
|
(149)
|
(0.10)
|
|||||||||||||
Other yen-related transactions (2)
|
(28)
|
(20)
|
(0.01)
|
|||||||||||||
Hemlock Semiconductor operating results (3)
|
(27)
|
(27)
|
(26)
|
(0.02)
|
||||||||||||
Acquisition-related costs (4)
|
18
|
15
|
0.01
|
|||||||||||||
Discrete tax items and other tax-related adjustments (5)
|
6
|
|||||||||||||||
Litigation, regulatory and other legal matters (6)
|
6
|
4
|
||||||||||||||
Restructuring, impairment and other charges (7)
|
67
|
46
|
0.03
|
|||||||||||||
Equity in earnings of affiliated companies (9)
|
64
|
64
|
64
|
0.04
|
||||||||||||
Pension mark-to-market adjustment (11)
|
11
|
9
|
0.01
|
|||||||||||||
Other
|
4
|
2
|
||||||||||||||
Core performance measures
|
$
|
2,005
|
$
|
121
|
$
|
500
|
$
|
410
|
18.0%
|
$
|
0.29
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported
|
$
|
9,715
|
$
|
266
|
$
|
3,568
|
$
|
2,472
|
30.7%
|
$
|
1.73
|
|||||
Constant-yen (1)
|
502
|
2
|
419
|
306
|
0.22
|
|||||||||||
Constant-won (1)
|
37
|
26
|
0.02
|
|||||||||||||
Purchased collars and average forward contracts (2)
|
(1,369)
|
(916)
|
(0.64)
|
|||||||||||||
Acquisition-related costs (4)
|
74
|
57
|
0.04
|
|||||||||||||
Discrete tax items and other tax-related adjustments (5)
|
240
|
0.17
|
||||||||||||||
Litigation, regulatory and other legal matters (6)
|
(1)
|
(2)
|
||||||||||||||
Restructuring, impairment and other charges (7)
|
86
|
66
|
0.05
|
|||||||||||||
Liquidation of subsidiary (8)
|
(3)
|
|||||||||||||||
Equity in earnings of affiliated companies (9)
|
43
|
43
|
38
|
0.03
|
||||||||||||
Gain on previously held equity investment (10)
|
(394)
|
(292)
|
(0.20)
|
|||||||||||||
Settlement of pre-existing contract (10)
|
320
|
320
|
0.22
|
|||||||||||||
Contingent consideration fair value adjustment (10)
|
(249)
|
(194)
|
(0.14)
|
|||||||||||||
Post-combination expenses (10)
|
72
|
55
|
0.04
|
|||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
(10)
|
(12)
|
(0.01)
|
|||||||||||||
Pension mark-to-market adjustment (11)
|
29
|
24
|
0.02
|
|||||||||||||
Core performance measures
|
$
|
10,217
|
$
|
311
|
$
|
2,625
|
$
|
2,185
|
16.8%
|
$
|
1.53
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
|||||||||||
As reported
|
$
|
7,819
|
$
|
547
|
$
|
2,473
|
$
|
1,961
|
20.7%
|
$
|
1.34
|
|||||
Constant-yen (1)
|
129
|
36
|
122
|
96
|
0.07
|
|||||||||||
Purchased collars and average rate forwards (2)
|
(435)
|
(287)
|
(0.20)
|
|||||||||||||
Other yen-related transactions (2)
|
(99)
|
(69)
|
(0.05)
|
|||||||||||||
Hemlock Semiconductor operating results (3)
|
(31)
|
(31)
|
(30)
|
(0.02)
|
||||||||||||
Hemlock Semiconductor non-operating results (3)
|
1
|
1
|
1
|
|||||||||||||
Acquisition-related costs (4)
|
54
|
40
|
0.03
|
|||||||||||||
Discrete tax items and other tax-related adjustments (5)
|
9
|
0.01
|
||||||||||||||
Litigation, regulatory and other legal matters (6)
|
19
|
13
|
0.01
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
67
|
46
|
0.03
|
|||||||||||||
Equity in earnings of affiliated companies (9)
|
42
|
42
|
44
|
0.02
|
||||||||||||
Pension mark-to-market adjustment (11)
|
(30)
|
(17)
|
(0.01)
|
|||||||||||||
Gain on change in control of equity investment (12)
|
(17)
|
(12)
|
(0.01)
|
|||||||||||||
Other
|
4
|
2
|
||||||||||||||
Core performance measures
|
$
|
7,948
|
$
|
595
|
$
|
2,170
|
$
|
1,797
|
17.2%
|
$
|
1.23
|
Three months ended December 31, 2014
|
Three months ended December 31, 2013
|
% Increase/decrease
|
|||||||||||||||||||||
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
|||||||||||||||
As reported
|
$
|
926
|
$
|
(4)
|
$
|
491
|
$
|
616
|
$
|
43
|
$
|
263
|
50%
|
(109)%
|
87%
|
||||||||
Constant-yen (1)
|
196
|
1
|
126
|
49
|
14
|
39
|
|||||||||||||||||
Constant-won (1)
|
2
|
||||||||||||||||||||||
Purchased collars (2)
|
(118)
|
(37)
|
|||||||||||||||||||||
Other yen-related transaction (2)
|
(19)
|
||||||||||||||||||||||
Acquisition related costs (4)
|
8
|
||||||||||||||||||||||
Discrete tax items and other tax-related adjustments (5)
|
10
|
||||||||||||||||||||||
Restructuring, impairment and other charges (7)
|
9
|
6
|
|||||||||||||||||||||
Equity in earnings of affiliated companies (9)
|
28
|
28
|
|||||||||||||||||||||
Contingent consideration fair value adjustment (10)
|
(134)
|
||||||||||||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
1
|
||||||||||||||||||||||
Pension mark-to-market adjustment (11)
|
2
|
1
|
|||||||||||||||||||||
Core performance measures
|
$
|
1,123
|
$
|
(3)
|
$
|
378
|
$
|
665
|
$
|
85
|
$
|
299
|
69%
|
(104)%
|
26%
|
Year ended December 31, 2014
|
Year ended December 31, 2013
|
% Increase/decrease
|
|||||||||||||||||||||
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
Net
sales
|
Equity
earnings
|
Net
income
|
|||||||||||||||
As reported
|
$
|
3,851
|
$
|
(20)
|
$
|
1,369
|
$
|
2,545
|
$
|
357
|
$
|
1,267
|
51%
|
(106)%
|
8%
|
||||||||
Constant-yen (1)
|
502
|
3
|
316
|
129
|
35
|
99
|
|||||||||||||||||
Constant-won (1)
|
27
|
||||||||||||||||||||||
Purchased collars (2)
|
(290)
|
(90)
|
|||||||||||||||||||||
Other yen-related transaction (2)
|
(67)
|
||||||||||||||||||||||
Acquisition related costs (4)
|
37
|
8
|
|||||||||||||||||||||
Discrete tax items and other tax-related adjustments (5)
|
4
|
10
|
|||||||||||||||||||||
Restructuring, impairment and other charges (7)
|
40
|
6
|
|||||||||||||||||||||
Equity in earnings of affiliated companies (9)
|
7
|
6
|
28
|
28
|
|||||||||||||||||||
Contingent consideration fair value adjustment (10)
|
(194)
|
||||||||||||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
1
|
73
|
|||||||||||||||||||||
Pension mark-to-market adjustment (11)
|
2
|
(8)
|
|||||||||||||||||||||
Core performance measures
|
$
|
4,354
|
$
|
(10)
|
$
|
1,390
|
$
|
2,674
|
$
|
420
|
$
|
1,253
|
63%
|
(102)%
|
11%
|
Three months ended
December 31, 2014
|
Three months ended
December 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
|
|||||||||||||||
As reported
|
$
|
676
|
$
|
49
|
$
|
605
|
$
|
26
|
12%
|
88%
|
|||||
Acquisition-related costs (4)
|
(8)
|
2
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
5
|
8
|
|||||||||||||
Pension mark-to-market adjustment (11)
|
13
|
||||||||||||||
Core performance measures
|
$
|
676
|
$
|
59
|
$
|
605
|
$
|
36
|
12%
|
64%
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
|
|||||||||||||||
As reported
|
$
|
2,652
|
$
|
205
|
$
|
2,326
|
$
|
199
|
14%
|
3%
|
|||||
Acquisition-related costs (4)
|
(2)
|
9
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
17
|
8
|
|||||||||||||
Liquidation of subsidiary (8)
|
(2)
|
||||||||||||||
Pension mark-to-market adjustment (11)
|
13
|
(9)
|
|||||||||||||
Gain on change in control of equity investment (12)
|
(11)
|
||||||||||||||
Core performance measures
|
$
|
2,652
|
$
|
231
|
$
|
2,326
|
$
|
196
|
14%
|
18%
|
Three months ended
December 31, 2014
|
Three months ended
December 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
250
|
$
|
35
|
$
|
238
|
$
|
37
|
5%
|
(5)%
|
|||||
Restructuring, impairment and other charges (7)
|
1
|
||||||||||||||
Pension mark-to-market adjustment (11)
|
5
|
||||||||||||||
Core performance measures
|
$
|
250
|
$
|
40
|
$
|
238
|
$
|
38
|
5%
|
5%
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
1,092
|
$
|
182
|
$
|
919
|
$
|
132
|
19%
|
38%
|
|||||
Restructuring, impairment and other charges (7)
|
1
|
||||||||||||||
Pension mark-to-market adjustment (11)
|
5
|
(3)
|
|||||||||||||
Core performance measures
|
$
|
1,092
|
$
|
187
|
$
|
919
|
$
|
130
|
19%
|
44%
|
Three months ended
December 31, 2014
|
Three months ended
December 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
319
|
$
|
31
|
$
|
285
|
$
|
25
|
12%
|
24%
|
|||||
Constant-yen (1)
|
(3)
|
(1)
|
|||||||||||||
Other yen-related transactions (2)
|
(1)
|
||||||||||||||
Purchased collars (2)
|
5
|
2
|
|||||||||||||
Acquisition-related costs (4)
|
1
|
||||||||||||||
Restructuring, impairment and other charges (7)
|
1
|
12
|
|||||||||||||
Pension mark-to-market adjustment (11)
|
1
|
||||||||||||||
Core performance measures
|
$
|
319
|
$
|
34
|
$
|
285
|
$
|
39
|
12%
|
(13)%
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
1,205
|
$
|
144
|
$
|
1,170
|
$
|
187
|
3%
|
(23)%
|
|||||
Constant-yen (1)
|
(7)
|
(2)
|
|||||||||||||
Purchased collars (2)
|
14
|
||||||||||||||
Acquisition-related costs (4)
|
(1)
|
1
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
12
|
12
|
|||||||||||||
Pension mark-to-market adjustment (11)
|
(2)
|
||||||||||||||
Core performance measures
|
$
|
1,205
|
$
|
162
|
$
|
1,170
|
$
|
196
|
3%
|
(17)%
|
Three months ended
December 31, 2014
|
Three months ended
December 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
215
|
$
|
17
|
$
|
210
|
$
|
14
|
2%
|
21%
|
|||||
Acquisition-related costs (4)
|
3
|
4
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
2
|
3
|
|||||||||||||
Core performance measures
|
$
|
215
|
$
|
22
|
$
|
210
|
$
|
21
|
2%
|
5%
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
% Increase/decrease
|
|||||||||||||
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
||||||||||
As reported
|
$
|
862
|
$
|
71
|
$
|
851
|
$
|
71
|
1%
|
0%
|
|||||
Acquisition-related costs (4)
|
14
|
21
|
|||||||||||||
Restructuring, impairment and other charges (7)
|
2
|
3
|
|||||||||||||
Pension mark-to-market adjustment (11)
|
(3)
|
||||||||||||||
Core performance measures
|
$
|
862
|
$
|
87
|
$
|
851
|
$
|
92
|
1%
|
(5)%
|
Equity Earnings
|
|||||
|
Three months
ended
December 31,
2014
|
Three months
ended
December 31,
2013
|
|||
As reported
|
$
|
18
|
$
|
59
|
|
Equity in earnings of affiliated companies (9)
|
93
|
||||
Hemlock semiconductor operating results (9)
|
(1)
|
||||
Hemlock semiconductor non-operating results (9)
|
(27)
|
||||
Core performance measures
|
$
|
111
|
$
|
31
|
Equity Earnings
|
|||||
Year
ended
December 31,
2014
|
Year
ended
December 31,
2013
|
||||
As reported
|
$
|
252
|
$
|
196
|
|
Equity in earnings of affiliated companies (9)
|
35
|
(19)
|
|||
Hemlock semiconductor operating results (9)
|
(31)
|
||||
Hemlock semiconductor non-operating results (9)
|
(1)
|
||||
Core performance measures
|
$
|
287
|
$
|
145
|
Three months ended December 31, 2014
|
Three months ended December 31, 2013
|
||||||||||||||||||||
Gross
Margin
|
Gross
margin
%
|
Selling,
general
and
admin.
expenses
|
Research,
development
and
engineering
expenses
|
Gross
Margin
|
Gross
margin
%
|
Selling,
general
and
admin.
expenses
|
Research,
development
and
engineering
expenses
|
||||||||||||||
As reported
|
$
|
996
|
41%
|
$
|
242
|
$
|
210
|
$
|
770
|
39%
|
$
|
332
|
$
|
169
|
|||||||
Constant-yen (1)
|
162
|
33
|
|||||||||||||||||||
Constant-won (1)
|
2
|
||||||||||||||||||||
Other yen-related transactions (2)
|
(9)
|
||||||||||||||||||||
Acquisition-related costs (4)
|
16
|
(10)
|
|||||||||||||||||||
Litigation, regulatory and other legal matters (6)
|
(22)
|
||||||||||||||||||||
Contingent consideration fair value adjustment (10)
|
172
|
||||||||||||||||||||
Pension mark-to-market adjustment (11)
|
2
|
(28)
|
(1)
|
(11)
|
|||||||||||||||||
Core performance measures
|
$
|
1,162
|
45%
|
$
|
380
|
$
|
209
|
$
|
794
|
40%
|
$
|
311
|
$
|
169
|
Year ended December 31, 2014
|
Year ended December 31, 2013
|
||||||||||||||||||||
Gross
Margin
|
Gross
margin
%
|
Selling,
general
and
admin.
expenses
|
Research,
development
and
engineering
expenses
|
Gross
Margin
|
Gross
margin
%
|
Selling,
general
and
admin.
expenses
|
Research,
development
and
engineering
expenses
|
||||||||||||||
As reported
|
$
|
4,052
|
42%
|
$
|
1,211
|
$
|
815
|
$
|
3,324
|
43%
|
$
|
1,126
|
$
|
710
|
|||||||
Constant-yen (1)
|
420
|
87
|
|||||||||||||||||||
Constant-won (1)
|
28
|
(2)
|
(2)
|
||||||||||||||||||
Other yen-related transactions (2)
|
(32)
|
||||||||||||||||||||
Acquisition-related costs (4)
|
30
|
(3)
|
12
|
(13)
|
|||||||||||||||||
Litigation, regulatory and other legal matters (6)
|
(22)
|
||||||||||||||||||||
Restructuring, impairment and other charges (7)
|
25
|
16
|
|||||||||||||||||||
Contingent consideration fair value adjustment (10)
|
249
|
||||||||||||||||||||
Post-combination expenses (10)
|
(72)
|
||||||||||||||||||||
Other items related to the Acquisition of Samsung Corning Precision Materials (10)
|
14
|
||||||||||||||||||||
Pension mark-to-market adjustment (11)
|
2
|
(28)
|
(1)
|
(24)
|
7
|
||||||||||||||||
Core performance measures
|
$
|
4,571
|
45%
|
$
|
1,349
|
$
|
812
|
$
|
3,367
|
42%
|
$
|
1,113
|
$
|
717
|
Three months
ended
December 31,
2014
|
Year
ended
December 31,
2014
|
||||
Cash flows from operating activities
|
$
|
1,112
|
$
|
4,709
|
|
Less: Cash flows from investing activities
|
(209)
|
(962)
|
|||
Plus: Short-term investments – acquisitions
|
228
|
1,398
|
|||
Less: Short-term investments – liquidations
|
(213)
|
(1,167)
|
|||
Free cash flow
|
$
|
918
|
$
|
3,978
|
(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 of 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 establish operational goals and forecasts. As of December 31, 2014, we used an internally derived management rate of ¥93, which is aligned to our yen portfolio of purchased collars, and have recast 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’(now 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 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 and Korean won.
|
(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 the Chinese Ministry of Commerce (“MOFCOM”), which imposed 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 and other tax-related adjustments: 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, as well as other non-operational tax-related adjustments, including an out of period adjustment in 2014. This item also includes the income tax effects of adjusting from GAAP earnings to core earnings.
|
(6)
|
Litigation, regulatory and other legal matters: Includes amounts related to the Pittsburgh Corning Corporation (PCC) asbestos litigation, adjustments to our estimated liability for environmental-related items and the settlement of litigation related to a small acquisition.
|
(7)
|
Restructuring, impairment and other charges. This amount includes restructuring, impairment and other charges, as well as other expenses and 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, fair value adjustments to the indemnity asset related to contingent consideration 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.
|
(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.
|
(13)
|
Loss on repurchase of debt: In 2012, Corning recorded a loss on the repurchase of $13 million of our 8.875% senior unsecured notes due 2021, $11 million of our 8.875% senior unsecured notes due 2016, and $51 million of our 6.75% senior unsecured notes due 2013.
|
(14)
|
Accumulated other comprehensive income: In 2012, Corning recorded a translation capital gain on the liquidation of a foreign subsidiary.
|