x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2014
|
o
|
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
|
NEW YORK
|
16-0393470
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
ONE RIVERFRONT PLAZA, CORNING, NY
|
14831
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Name of each exchange on which registered
|
|
Common Stock, $0.50 par value per share
|
New York Stock Exchange
|
Yes
|
x
|
No
|
o
|
Yes
|
o
|
No
|
x
|
Yes
|
x
|
No
|
o
|
Yes
|
x
|
No
|
o
|
Large accelerated filer
|
x
|
Accelerated filer
|
o
|
|||
Non-accelerated filer
|
o
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
o
|
Yes
|
o
|
No
|
x
|
·
|
Corning obtained full ownership of Samsung Corning Precision Materials. This organization, named Corning Precision Materials, was integrated into Corning’s Display Technologies segment during 2014.
|
·
|
Corning and Samsung Display extended their long-term LCD display glass supply agreement through 2023.
|
·
|
The two companies’ strengthened their technology collaborations on strategic product development and commercialization initiatives.
|
·
|
Vessels – Corning
Ò
HYPER platform of vessels for increased cell yields; Corning® Microcarriers for cell scale-up, therapy and vaccine applications;
|
·
|
Surfaces – Corning
Ò
CellBIND
Ò
Surface; Corning®Matrigel®; Corning®BioCoat
TM
; Corning Synthemax® II Surface;
|
·
|
Media – Corning® stemgro®
|
·
|
General economic conditions in each country or region;
|
·
|
Many complex regulatory requirements affecting international trade and investment, including anti-dumping laws, export controls, the Foreign Corrupt Practices Act and local laws prohibiting improper payments. Our operations may be adversely affected by changes in the substance or enforcement of these regulatory requirements, and by actual or alleged violations of them;
|
·
|
Fluctuations in currency exchange rates, convertibility of currencies and restrictions involving the movement of funds between jurisdictions and countries;
|
·
|
Sovereign and political risks that may adversely affect Corning’s profitability and assets;
|
·
|
Geographical concentration of our factories and operations and regional shifts in our customer base;
|
·
|
Periodic health epidemic concerns;
|
·
|
Political unrest, confiscation or expropriation of our assets by foreign governments, terrorism and the potential for other hostilities;
|
·
|
Difficulty in protecting intellectual property, sensitive commercial and operations data, and information technology systems generally;
|
·
|
Differing legal systems, including protection and treatment of intellectual property and patents;
|
·
|
Complex or unclear tax regimes;
|
·
|
Complex tariffs, trade duties and other trade barriers including anti-dumping duties;
|
·
|
Difficulty in collecting obligations owed to us such as accounts receivable;
|
·
|
Natural disasters such as floods, earthquakes, tsunamis and windstorms; and
|
·
|
Potential power loss or disruption affecting manufacturing.
|
·
|
our ability to introduce advantaged products such as glass substrates for liquid crystal displays, optical fiber and cable and hardware and equipment, and environmental substrate and filter products at competitive prices;
|
·
|
our ability to manufacture glass substrates and strengthened glass, to satisfy our customers’ technical requirements and our contractual obligations; and
|
·
|
our ability to develop new products in response to government regulations and laws.
|
·
|
changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;
|
·
|
changes in tax treaties and regulations or the interpretation of them;
|
·
|
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;
|
·
|
the outcome of current and future tax audits, examinations, or administrative appeals;
|
·
|
changes in generally accepted accounting principles that affect the accounting for taxes; and
|
·
|
limitations or adverse findings regarding our ability to do business in some jurisdictions.
|
(million square feet)
|
Total
|
Domestic
|
Foreign
|
||
Manufacturing
|
26.7
|
7.6
|
19.1
|
||
Sales and administrative
|
2.5
|
2.1
|
0.4
|
||
Research and development
|
2.1
|
1.9
|
0.2
|
||
Warehouse
|
2.1
|
1.6
|
0.5
|
||
Total
|
33.4
|
13.2
|
20.2
|
(a)
|
Corning Incorporated common stock is listed on the New York Stock Exchange. In addition, it is traded on the Boston, Midwest, Pacific and Philadelphia stock exchanges. Common stock options are traded on the Chicago Board Options Exchange. The ticker symbol for Corning Incorporated is “GLW.”
|
First
quarter
|
Second
quarter
|
Third
quarter
|
Fourth
quarter
|
||||||||
2014
|
|||||||||||
Price range
|
|||||||||||
High
|
$
|
20.99
|
$
|
22.20
|
$
|
22.37
|
$
|
23.52
|
|||
Low
|
$
|
16.55
|
$
|
20.17
|
$
|
19.23
|
$
|
17.03
|
|||
2013
|
|||||||||||
Price range
|
|||||||||||
High
|
$
|
13.35
|
$
|
16.43
|
$
|
15.51
|
$
|
18.07
|
|||
Low
|
$
|
11.75
|
$
|
12.64
|
$
|
13.84
|
$
|
13.82
|
A
|
B
|
C
|
|||
Plan category
|
Number of
securities to
be issued
upon exercise
of outstanding
options, warrants
and rights
|
Weighted-average
exercise price
of outstanding
options, warrants
and rights
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected
in column A)
|
||
Equity compensation plans approved by security holders
(1)
|
48,724,000
|
$18.94
|
75,235,046
|
||
Equity compensation plans not approved by security holders
|
0
|
0
|
0
|
||
Total
|
48,724,000
|
$18.94
|
75,235,046
|
(1)
|
Shares indicated are total grants under the most recent shareholder approved plans as well as any shares remaining outstanding from any prior shareholder approved plans.
|
(b)
|
Not applicable.
|
(c)
|
The following table provides information about our purchases of our common stock during the fiscal fourth quarter of 2014:
|
Period
|
Number
of shares
purchased
(1)
|
Average
price paid
per share
(1)
|
Number
of shares
purchased as
part of publicly
announced
plans or
programs
(2)
|
Approximate
dollar value of
shares that
may yet be
purchased
under the plans
or programs
(2)(3)
|
|||
October 1-31, 2014
|
4,374,592
|
$18.33
|
4,364,700
|
$102,845,099
|
|||
November 1-30, 2014
|
4,985,050
|
$20.63
|
4,984,411
|
$0
|
|||
December 1-31, 2014
|
29,601
|
$21.21
|
0
|
$1,500,000,000
|
|||
Total at December 31, 2014
|
9,389,243
|
$19.56
|
9,349,111
|
$1,500,000,000
|
(1)
|
This column reflects the following transactions during the fiscal fourth quarter of 2014: (i) the deemed surrender to us of 878 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 39,254 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 9,349,111 shares of common stock 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 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. This program was finalized in the fourth quarter of 2014.
|
(3)
|
On December 3, 2014, Corning’s Board of Directors authorized the repurchase of up to $1.5 billion of our common stock between the date of announcement and December 31, 2016.
|
Years ended December 31,
|
||||||||||||||
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||
Results of operations
|
||||||||||||||
Net sales
|
$
|
9,715
|
$
|
7,819
|
$
|
8,012
|
$
|
7,890
|
$
|
6,632
|
||||
Research, development and engineering expenses
|
$
|
815
|
$
|
710
|
$
|
769
|
$
|
668
|
$
|
599
|
||||
Equity in earnings of affiliated companies
|
$
|
266
|
$
|
547
|
$
|
810
|
$
|
1,471
|
$
|
1,958
|
||||
Net income attributable to Corning Incorporated
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
$
|
2,817
|
$
|
3,574
|
||||
Earnings per common share attributable to Corning Incorporated:
|
||||||||||||||
Basic
|
$
|
1.82
|
$
|
1.35
|
$
|
1.10
|
$
|
1.80
|
$
|
2.29
|
||||
Diluted
|
$
|
1.73
|
$
|
1.34
|
$
|
1.09
|
$
|
1.78
|
$
|
2.26
|
||||
Cash dividends declared per common share
|
$
|
0.52
|
$
|
0.39
|
$
|
0.32
|
$
|
0.23
|
$
|
0.20
|
||||
Shares used in computing per share amounts:
|
||||||||||||||
Basic earnings per common share
|
1,305
|
1,452
|
1,494
|
1,562
|
1,558
|
|||||||||
Diluted earnings per common share
|
1,427
|
1,462
|
1,506
|
1,583
|
1,581
|
|||||||||
Financial position
|
||||||||||||||
Working capital
|
$
|
7,914
|
$
|
7,145
|
$
|
7,739
|
$
|
6,580
|
$
|
6,873
|
||||
Total assets
|
$
|
30,063
|
$
|
28,478
|
$
|
29,375
|
$
|
27,848
|
$
|
25,833
|
||||
Long-term debt
|
$
|
3,227
|
$
|
3,272
|
$
|
3,382
|
$
|
2,364
|
$
|
2,262
|
||||
Total Corning Incorporated shareholders’ equity
|
$
|
21,579
|
$
|
21,162
|
$
|
21,486
|
$
|
21,078
|
$
|
19,375
|
||||
Selected data
|
||||||||||||||
Capital expenditures
|
$
|
1,076
|
$
|
1,019
|
$
|
1,801
|
$
|
2,432
|
$
|
1,007
|
||||
Depreciation and amortization
|
$
|
1,167
|
$
|
1,002
|
$
|
997
|
$
|
957
|
$
|
854
|
||||
Number of employees
|
34,600
|
30,400
|
28,700
|
28,800
|
26,200
|
·
|
Overview
|
·
|
Results of Operations
|
·
|
Core Performance Measures
|
·
|
Reportable Segments
|
·
|
Liquidity and Capital Resources
|
·
|
Environment
|
·
|
Critical Accounting Estimates
|
·
|
New Accounting Standards
|
·
|
Forward-Looking Statements
|
·
|
An increase of $1.3 billion in the Display Technologies segment, driven by the consolidation of Corning Precision Materials, which increased sales by $1.8 billion, and an increase in volume that was slightly more than 10% in percentage terms, offset somewhat by price declines in the mid-teens in percentage terms and the negative impact of the Japanese yen versus the U.S. dollar exchange rate in the amount of $373 million;
|
·
|
An increase in net sales in the Optical Communications segment in the amount of $326 million, driven by an increase in sales of carrier network products in the amount of $254 million, largely due to growth in North America and Europe, the $53 million impact of 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 and an increase of $72 million in enterprise network products. These increases were offset slightly by a $52 million decrease in optical fiber sales in China; and
|
·
|
An increase of $173 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 positive net impact of our yen-denominated hedge programs, driven by the weakening of the Japanese yen in 2014, in the amount of $560 million;
|
·
|
The impact of the consolidation of Corning Precision Materials, as well as cost reductions and efficiencies gained through synergies;
|
·
|
The change in the contingent consideration fair value resulting from the Acquisition in the amount of $194 million;
|
·
|
An increase of $56 million in equity earnings from Dow Corning, driven by Corning’s share of a gain in the amount of $393 million from the reduction in the implant liability, favorable tax adjustments of $46 million and an increase in business results in both the silicone and polysilicon segments, offset by Corning’s share of a charge taken related to the abandonment of a polycrystalline silicon facility in the amount of $465 million; and
|
·
|
A $50 million increase in net income in the Environmental Technologies segment, driven by an increase in demand for our diesel and automotive products and improved manufacturing efficiency.
|
·
|
The impact of several tax-related items in the amount of $231 million, including changes in deferred tax valuation allowances of $150 million, $46 million of tax expense related to out-of-period transfer pricing adjustments 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;
|
·
|
The net impact of several Acquisition-related items in the amount of $72 million;
|
·
|
The negative impact from the Japanese yen versus the U.S. dollar exchange rate in the amount of $210 million; and
|
·
|
In the Display Technologies segment, price declines in the mid-teens in percentage terms outpacing an increase in volume slightly higher than 10%.
|
·
|
We ended the year with $6.1 billion of cash, cash equivalents and short-term investments, an increase from the December 31, 2013 balance of $5.2 billion, well above our debt balance at December 31, 2014 of $3.3 billion. The increase in cash was driven by the consolidation of Corning Precision Materials, the cash received from Samsung Display for the additional issuance of Preferred Stock in connection with the Acquisition and strong operating cash flow, offset by the cash paid for our share repurchases.
|
·
|
Our debt to capital ratio of 13% at December 31, 2014 was consistent with our ratio at December 31, 2013.
|
·
|
Operating cash flow for the year was $4.7 billion, an increase of $1.9 billion when compared to December 31, 2013, driven by a dividend in the amount of approximately $1.6 billion from Samsung Corning Precision Materials distributed subsequent to the Acquisition of the remaining equity interests of the affiliate.
|
2014
|
2013
|
2012
|
% change
|
|||||||||
14 vs. 13
|
13 vs. 12
|
|||||||||||
Net sales
|
$
|
9,715
|
$
|
7,819
|
$
|
8,012
|
24
|
(2)
|
||||
Gross margin
|
$
|
4,052
|
$
|
3,324
|
$
|
3,319
|
22
|
*
|
||||
(gross margin %)
|
42%
|
43%
|
41%
|
|||||||||
Selling, general and administrative expense
|
$
|
1,211
|
$
|
1,126
|
$
|
1,205
|
8
|
(7)
|
||||
(as a % of net sales)
|
12%
|
14%
|
15%
|
|||||||||
Research, development and engineering expenses
|
$
|
815
|
$
|
710
|
$
|
769
|
15
|
(8)
|
||||
(as a % of net sales)
|
8%
|
9%
|
10%
|
|||||||||
Restructuring, impairment and other charges
|
$
|
71
|
$
|
67
|
$
|
133
|
6
|
(50)
|
||||
(as a % of net sales)
|
1%
|
1%
|
2%
|
|||||||||
Equity in earnings of affiliated companies
|
$
|
266
|
$
|
547
|
$
|
810
|
(51)
|
(32)
|
||||
(as a % of net sales)
|
3%
|
7%
|
10%
|
|||||||||
Transaction-related gain, net
|
$
|
74
|
*
|
|||||||||
(as a % of net sales)
|
1%
|
|||||||||||
Other income, net
|
$
|
1,394
|
$
|
667
|
$
|
83
|
109
|
704
|
||||
(as a % of net sales)
|
14%
|
9%
|
1%
|
|||||||||
Income before income taxes
|
$
|
3,568
|
$
|
2,473
|
$
|
1,975
|
44
|
25
|
||||
(as a % of net sales)
|
37%
|
32%
|
25%
|
|||||||||
Provision for income taxes
|
$
|
(1,096)
|
$
|
(512)
|
$
|
(339)
|
114
|
51
|
||||
(as a % of net sales)
|
(11)%
|
(7)%
|
(4)%
|
|||||||||
Net income attributable to Corning Incorporated
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
26
|
20
|
||||
(as a % of net sales)
|
25%
|
25%
|
20%
|
*
|
Percent change not meaningful.
|
·
|
Display Technologies increased by $1.3 billion, due to the consolidation of Corning Precision Materials, which increased sales by $1.8 billion, and an increase in volume that was slightly more than 10% 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 in the amount of $373 million;
|
·
|
Optical Communications increased by $326 million, driven by an increase in sales of carrier network products in the amount of $254 million, largely due to growth in North America and Europe, up $113 million and $46 million, respectively, the impact of a full year of sales from a small acquisition and the consolidation of an investment due to a change in control that occurred at the end of the second quarter of 2013, which added $53 million, and an increase of $72 million in enterprise network products. These increases were offset slightly by a $52 million decrease in optical fiber sales in China;
|
·
|
An increase of $173 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. Automotive substrate sales were also strong, increasing 9%, due to increased demand in Europe and China;
|
·
|
Specialty Materials improved by $35 million, driven by an increase in sales of advanced optics products. Corning Gorilla Glass sales remained consistent with the prior year, with volume increases offset by an unfavorable shift in product mix and price declines; and
|
·
|
Life Science increased by $11 million, driven by growth in North America and China, up $12 million and $5 million, respectively.
|
·
|
Optical Communications sales increased by $196 million, driven by an increase in sales of our carrier products in the amount of $163 million, largely due to the ramp-up of the fiber-to-the-premises initiative in Australia, which increased by $28 million, an increase of $23 million in sales of wireless products and higher sales of fiber and cable products in North America, China and Europe, up $52 million, $33 million and $26 million, respectively. Also included in the increase in sales of carrier products is the impact of a small acquisition completed in the second quarter of 2013 and the consolidation of an investment due to a change in control, which added approximately $53 million in 2013;
|
·
|
Net sales increased by $194 million in the Life Sciences segment, driven by the impact of the acquisition of the Discovery Labware business in the fourth quarter of 2012;
|
·
|
Display Technologies segment sales were lower, driven by price declines in the mid-teens and the impact of the depreciation of the Japanese yen versus the U.S. dollar offsetting volume increases in the mid-twenties in percentage terms;
|
·
|
Environmental Technologies segment sales decreased, driven by a decline of 9% for diesel products;
|
·
|
Net sales declined by $176 million in the Specialty Materials segment, driven by a 17% decline in sales of Corning Gorilla Glass.
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Samsung Corning Precision Materials
|
$
|
320
|
$
|
699
|
||||
Dow Corning
|
$
|
252
|
196
|
90
|
||||
All other
|
14
|
31
|
21
|
|||||
Total equity earnings
|
$
|
266
|
$
|
547
|
$
|
810
|
Year ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Silicones
|
$
|
653
|
$
|
166
|
$
|
122
|
||
Polysilicon (Hemlock Semiconductor Group)
|
(401)
|
30
|
(32)
|
|||||
Total Dow Corning
|
$
|
252
|
$
|
196
|
$
|
90
|
·
|
An increase in equity earnings of $487 million in the silicones segment, driven by the gain resulting from the reduction of the Implant Liability in the amount of $393 million, favorable tax adjustments in the amount of $46 million and a decrease in tax expense, offset somewhat by a $5 million decrease in the amount of gains recorded on the mark-to-market of a derivative instrument; and
|
·
|
An decrease in equity earnings of $431 million in the polysilicon segment, driven by Corning’s share of Dow Corning’s charge for the abandonment of a polycrystalline silicon plant expansion in the amount of $465, offset slightly by higher volume, the absence of $11 million in restructuring charges incurred in the first half of 2013, a gain in the amount of $6 million related to energy tax credits and the settlement of a long-term sales agreement in the first quarter of 2014 in the amount of $9 million.
|
·
|
In the silicones segment, a gain of $20 million associated with the termination of a long-term sales agreement, the positive impact of the recognition of a derivative instrument in the amount of $16 million, the absence of the 2012 restructuring charge of $30 million, coupled with cost reduction resulting from these actions, and lower variable compensation costs. The increase in earnings was partially offset by the negative impact of price declines and weaker demand in Asia and the Americas; and
|
·
|
In the polysilicon segment, the absence of the impairment charge of $57 million recorded in 2012 related to the abandonment of a polycrystalline silicon plant expansion, offset by Corning’s share of restructuring charges at Hemlock in the amount of $11 million and the absence of the gain of $10 million associated with the resolution of a contract dispute.
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Royalty income from Samsung Corning Precision Materials
|
$
|
56
|
$
|
83
|
||||
Foreign currency transaction and hedge gains, net
|
$
|
1,352
|
500
|
8
|
||||
Loss on retirement of debt
|
(26)
|
|||||||
Foreign government subsidy
|
3
|
55
|
||||||
Other, net
|
39
|
56
|
18
|
|||||
Total
|
$
|
1,394
|
$
|
667
|
$
|
83
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Provision for income taxes
|
$
|
1,096
|
$
|
512
|
$
|
339
|
||
Effective tax rate
|
30.7%
|
20.7%
|
17.2%
|
·
|
Rate differences on income (loss) of consolidated foreign companies, including the benefit of excess foreign tax credits attributable to a taxable intercompany loan made to the U.S., and
|
·
|
The impact of equity in earnings of nonconsolidated affiliates reported in the financials, net of tax.
|
·
|
Rate differences on income (loss) of consolidated foreign companies;
|
·
|
The impact of equity in earnings of nonconsolidated affiliates reported in the financials, net of tax;
|
·
|
The benefit of tax incentives in foreign jurisdictions, primarily Taiwan; and
|
·
|
Tax benefit of $54 million for the impact of the American Taxpayer Relieve Act enacted on January 3, 2013 and made retroactive to 2012.
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Net income attributable to Corning Incorporated
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
||
Basic earnings per common share
|
$
|
1.82
|
$
|
1.35
|
$
|
1.10
|
||
Diluted earnings per common share
|
$
|
1.73
|
$
|
1.34
|
$
|
1.09
|
||
Shares used in computing per share amounts
|
||||||||
Basic earnings per common share
|
1,305
|
1,452
|
1,494
|
|||||
Diluted earnings per common share
|
1,427
|
1,462
|
1,506
|
Years ended December 31,
|
||||||||
(In millions)
|
2014
|
2013
|
2012
|
|||||
Net income attributable to Corning Incorporated
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
||
Foreign currency translation adjustments and other
|
(1,073)
|
(682)
|
(179)
|
|||||
Net unrealized (losses) gains on investments
|
(1)
|
2
|
13
|
|||||
Unamortized (losses) gains and prior service costs for postretirement benefit plans
|
(281)
|
392
|
(1)
|
|||||
Net unrealized gains (losses) on designated hedges
|
4
|
(24)
|
47
|
|||||
Other comprehensive loss, net of tax (Note 17)
|
(1,351)
|
(312)
|
(120)
|
|||||
Comprehensive income attributable to Corning Incorporated
|
$
|
1,121
|
$
|
1,649
|
$
|
1,516
|
2014
|
2013
|
2012
|
% change
|
|||||||||
14 vs. 13
|
13 vs. 12
|
|||||||||||
Core net sales
|
$
|
10,217
|
$
|
7,948
|
$
|
7,605
|
29
|
5
|
||||
Core equity in earnings of affiliated companies
|
$
|
311
|
$
|
595
|
$
|
713
|
48
|
(17)
|
||||
Core earnings attributable to Corning Incorporated
|
$
|
2,185
|
$
|
1,797
|
$
|
1,595
|
22
|
13
|
·
|
Display Technologies increased by $1.7 billion, due to the consolidation of Corning Precision Materials, which increased sales by $1.9 billion, and an increase in volume that was slightly more than 10% in percentage terms, offset somewhat by price declines in the mid-teens;
|
·
|
Optical Communications increased by $326 million, driven by an increase in sales of carrier network products in the amount of $254 million, largely due to growth in North America and Europe, up $113 million and $46 million, respectively, the impact of a full year of sales from a small acquisition and the consolidation of an investment due to a change in control that occurred at the end of the second quarter of 2013, which added $53 million, and an increase of $72 million in enterprise network products. These increases were offset slightly by a $52 million decrease in optical fiber sales in China;
|
·
|
An increase of $173 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. Automotive substrate sales were also strong, increasing 9%, on increased demand in Europe and China;
|
·
|
Specialty Materials improved by $35 million, driven by an increase in sales of advanced optics products. Corning Gorilla Glass sales remained consistent with the prior year, with volume increases offset by an unfavorable shift in product mix and price declines; and
|
·
|
Life Sciences increased by $11 million, driven by growth in North America and China, up $12 million and $5 million, respectively.
|
·
|
In the Display Technologies segment, volume increases in the mid-twenties in percentage terms more than offset price declines in the mid-teens, which drove an increase in core sales of $173 million, or 7%;
|
·
|
Optical Communications increased by $196 million, driven by an increase in sales of our carrier products in the amount of $163 million, largely due to the ramp-up of the fiber-to-the-premises initiative in Australia, which increased by $28 million, an increase of $23 million in sales of wireless products and higher sales of cable products in North America, China and Europe, up $52 million, $33 million and $26 million, respectively;
|
·
|
An increase in the Life Sciences segment of $194 million, driven by the impact of the acquisition of the Discovery Labware business in the fourth quarter of 2012;
|
·
|
In the Environmental Technologies segment, while automotive product sales remained relatively consistent with the prior year, core sales of our diesel products declined by 9%; and
|
·
|
A decline of $176 million in the Specialty Materials segment, due to a 17% decline in Corning Gorilla Glass sales.
|
2014
|
2013
|
2012
|
% change
|
|||||||||
14 vs. 13
|
13 vs. 12
|
|||||||||||
Samsung Corning Precision Materials
|
$
|
419
|
$
|
549
|
(24)
|
|||||||
Dow Corning *
|
$
|
287
|
$
|
145
|
$
|
143
|
98
|
1
|
||||
All other
|
$
|
24
|
$
|
31
|
$
|
21
|
(23)
|
48
|
||||
Total core equity earnings
|
$
|
311
|
$
|
595
|
$
|
713
|
(48)
|
(17)
|
*
|
In 2013 and 2012, 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.
|
Year ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Silicones
|
$
|
197
|
$
|
145
|
$
|
143
|
||
Polysilicon (Hemlock Semiconductor Group)
|
90
|
31
|
25
|
|||||
Total Dow Corning
|
$
|
287
|
$
|
176
|
$
|
168
|
2014
|
2013
|
2012
|
||||||
As reported
|
$
|
252
|
$
|
196
|
$
|
90
|
||
Hemlock Semiconductor operating results
(3)
|
(31)
|
(25)
|
||||||
Hemlock Semiconductor non-operating results
(3)
|
(1)
|
77
|
||||||
Equity in earnings of affiliated companies
(9)
|
35
|
(19)
|
1
|
|||||
Core Performance measures
|
$
|
287
|
$
|
145
|
$
|
143
|
·
|
The impact of the consolidation of Corning Precision Materials and the resulting cost reductions and efficiencies gained through synergies;
|
·
|
An increase in core equity earnings from Dow Corning, driven by a decrease in tax expense, improved manufacturing efficiency and an increase in volume;
|
·
|
An increase of $57 million in the Environmental Technologies segment, driven by an increase in demand for our diesel products and improved manufacturing efficiency; and
|
·
|
An increase of $35 million in the Optical Communications segment, driven by higher sales of carrier network and enterprise network products.
|
·
|
Higher core earnings in the Optical Communications, Life Sciences, Environmental Technologies and Display Technologies segments in the amounts of $59 million, $44 million, $11 million and $7 million, respectively; and
|
·
|
Lower operating expenses in the amount of $49 million, driven by a decrease in variable compensation and cost control measures implemented by our segments.
|
2014
|
2013
|
2012
|
||||||
Core earnings attributable to Corning Incorporated
|
$
|
2,185
|
$
|
1,797
|
$
|
1,595
|
||
Less: Series A convertible preferred stock dividend
|
94
|
|||||||
Core earnings available to common stockholders - basic
|
2,091
|
1,797
|
1,595
|
|||||
Add: Series A convertible preferred stock dividend
|
94
|
|||||||
Core earnings available to common stockholders - diluted
|
$
|
2,185
|
$
|
1,797
|
$
|
1,595
|
||
Weighted-average common shares outstanding - basic
|
1,305
|
1,452
|
1,494
|
|||||
Effect of dilutive securities:
|
||||||||
Stock options and other dilutive securities
|
12
|
10
|
12
|
|||||
Series A convertible preferred stock
|
110
|
|||||||
Weighted-average common shares outstanding - diluted
|
1,427
|
1,462
|
1,506
|
|||||
Core basic earnings per common share
|
$
|
1.60
|
$
|
1.24
|
$
|
1.07
|
||
Core diluted earnings per common share
|
$
|
1.53
|
$
|
1.23
|
$
|
1.06
|
Year ended December 31, 2014
|
||||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Earnings
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
|
Year ended December 31, 2013
|
||||||||||||||||
(in millions)
|
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
|
||||||||||||||
Certain litigation-related charges and credits
(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
|
Year ended December 31, 2012
|
||||||||||||||||
(in millions)
|
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
||||||||||
As reported
|
$
|
8,012
|
$
|
810
|
$
|
1,975
|
$
|
1,636
|
17.2%
|
$
|
1.09
|
|||||
Constant-yen
(1)
|
(407)
|
(167)
|
(434)
|
(353)
|
(0.23)
|
|||||||||||
Other yen-related transactions
(2)
|
(22)
|
(16)
|
(0.01)
|
|||||||||||||
Hemlock Semiconductor operating results
(3)
|
(25)
|
(25)
|
(23)
|
(0.02)
|
||||||||||||
Hemlock Semiconductor non-operating results
(3)
|
77
|
77
|
72
|
0.05
|
||||||||||||
Acquisition-related costs
(4)
|
24
|
16
|
0.01
|
|||||||||||||
Discrete tax items and other tax-related adjustments
(5)
|
41
|
0.03
|
||||||||||||||
Certain litigation-related charges and credits
(6)
|
14
|
9
|
0.01
|
|||||||||||||
Restructuring, impairment and other charges
(7)
|
133
|
91
|
0.06
|
|||||||||||||
Pension mark-to-market adjustment
(11)
|
217
|
140
|
0.09
|
|||||||||||||
Equity in earnings of affiliated companies
(9)
|
18
|
18
|
17
|
0.01
|
||||||||||||
Loss on repurchase of debt
(13)
|
26
|
17
|
0.01
|
|||||||||||||
Accumulated other comprehensive income
(14)
|
(52)
|
(52)
|
(0.03)
|
|||||||||||||
Core performance measures
|
$
|
7,605
|
$
|
713
|
$
|
1,951
|
$
|
1,595
|
18.2%
|
$
|
1.06
|
(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 average rate forwards, 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 the tax effect of a transfer pricing 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. 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.
|
(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.
|
·
|
Display Technologies – manufactures glass substrates for flat panel liquid crystal 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.
|
% change
|
||||||||||||
As Reported
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales
|
$
|
3,851
|
$
|
2,545
|
$
|
2,909
|
51
|
(13)
|
||||
Equity earnings of affiliated companies
|
$
|
(20)
|
$
|
357
|
$
|
692
|
(106)
|
(48)
|
||||
Net income
|
$
|
1,369
|
$
|
1,267
|
$
|
1,589
|
8
|
(20)
|
% change
|
||||||||||||
Core Performance
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales
|
$
|
4,354
|
$
|
2,674
|
$
|
2,501
|
63
|
7
|
||||
Equity earnings of affiliated companies
|
$
|
(10)
|
$
|
420
|
$
|
544
|
(102)
|
(23)
|
||||
Net income
|
$
|
1,390
|
$
|
1,253
|
$
|
1,246
|
11
|
1
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
||||||||||||||||||||||||
(in millions)
|
Sales
|
Equity
earnings
|
Net
income
|
Sales
|
Equity
earnings
|
Net
income
|
Sales
|
Equity
earnings
|
Net
income
|
|||||||||||||||||
As reported
|
$
|
3,851
|
$
|
(20)
|
$
|
1,369
|
$
|
2,545
|
$
|
357
|
$
|
1,267
|
$
|
2,909
|
$
|
692
|
$
|
1,589
|
||||||||
Constant-yen
(1)
|
502
|
3
|
316
|
129
|
35
|
99
|
(408)
|
(166)
|
(380)
|
|||||||||||||||||
Constant-won
(1)
|
27
|
|||||||||||||||||||||||||
Purchased collars and average forward contracts
(2)
|
(290)
|
(90)
|
||||||||||||||||||||||||
Other yen-related transactions
(2)
|
(67)
|
(15)
|
||||||||||||||||||||||||
Acquisition-related costs
(4)
|
37
|
8
|
||||||||||||||||||||||||
Discrete tax items
(5)
|
4
|
10
|
||||||||||||||||||||||||
Restructuring, impairment, and other charges
(7)
|
40
|
6
|
17
|
|||||||||||||||||||||||
Equity in earnings of affiliated companies
(9)
|
7
|
6
|
28
|
28
|
18
|
18
|
||||||||||||||||||||
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
(11)
|
2
|
(8)
|
17
|
|||||||||||||||||||||||
Core performance
|
$
|
4,354
|
$
|
(10)
|
$
|
1,390
|
$
|
2,674
|
$
|
420
|
$
|
1,253
|
$
|
2,501
|
$
|
544
|
$
|
1,246
|
·
|
The impact of the Acquisition of Corning Precision Materials and the resulting cost reductions gained through synergies;
|
·
|
The fair value adjustment of the contingent consideration resulting from the Acquisition of Corning Precision Materials in the amount of $194 million; and
|
·
|
Improvements in manufacturing efficiency of $46 million.
|
·
|
The impact of price declines in the mid-teens in percentage terms that more than offset the increase in volume;
|
·
|
The absence of the $67 million gain from our yen-denominated cash flow hedging program;
|
·
|
The increase in transaction and acquisition-related costs related to the Acquisition of Corning Precision Materials in the amounts of $73 million and $29 million, respectively; and
|
·
|
An increase of $34 million in restructuring, impairment and other charges.
|
% change
|
||||||||||||
As Reported
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales:
|
||||||||||||
Carrier network
|
$
|
2,036
|
$
|
1,782
|
$
|
1,619
|
14
|
10
|
||||
Enterprise network
|
616
|
544
|
511
|
13
|
6
|
|||||||
Total net sales
|
$
|
2,652
|
$
|
2,326
|
$
|
2,130
|
14
|
9
|
||||
Net income
|
$
|
205
|
$
|
199
|
$
|
146
|
3
|
36
|
% change
|
||||||||||||
Core Performance
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales:
|
||||||||||||
Carrier network
|
$
|
2,036
|
$
|
1,782
|
$
|
1,619
|
14
|
10
|
||||
Enterprise network
|
616
|
544
|
511
|
13
|
6
|
|||||||
Total net sales
|
$
|
2,652
|
$
|
2,326
|
$
|
2,130
|
14
|
9
|
||||
Net income
|
$
|
231
|
$
|
196
|
$
|
137
|
18
|
43
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
|||||||||||||||
(in millions)
|
Sales
|
Net
income
|
Sales
|
Net
income
|
Sales
|
Net
income
|
|||||||||||
As reported
|
$
|
2,652
|
$
|
205
|
$
|
2,326
|
$
|
199
|
$
|
2,130
|
$
|
146
|
|||||
Acquisition-related costs
(4)
|
(2)
|
9
|
1
|
||||||||||||||
Restructuring, impairment, and other charges
(7)
|
17
|
8
|
31
|
||||||||||||||
Pension mark-to-market
(11)
|
13
|
(9)
|
11
|
||||||||||||||
Gain on change in control
(12)
|
(11)
|
||||||||||||||||
Accumulated other comprehensive income
(14)
|
(52)
|
||||||||||||||||
Liquidation of subsidiary
(8)
|
(2)
|
||||||||||||||||
Core performance
|
$
|
2,652
|
$
|
231
|
$
|
2,326
|
$
|
196
|
$
|
2,130
|
$
|
137
|
·
|
Higher sales of cable and hardware and equipment products primarily used in fiber-to-the-home solutions in North America and Europe, up $113 million and $46 million, respectively;
|
·
|
The impact of a full year 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 $53 million; and
|
·
|
An increase of $11 million in sales of optical fiber, driven by higher sales in North America and Europe, partially offset by a decrease in China.
|
·
|
The ramp-up of the fiber-to-the-premises initiative in Australia, which increased sales by $28 million;
|
·
|
An increase of $23 million in sales of wireless products;
|
·
|
Higher sales of cable products in North America, China and Europe, up $52 million, $33 million and $26 million, respectively;
|
·
|
The impact of a small acquisition and the consolidation of an investment due to a change in control, which added approximately $53 million in 2013; and
|
·
|
Offsetting the increase in sales of carrier network products in 2013 was a decline in sales of optical fiber, driven by lower demand for single-mode fiber in China, Europe and North America.
|
% change
|
||||||||||||
As Reported
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales:
|
||||||||||||
Automotive
|
$
|
528
|
$
|
485
|
$
|
486
|
9
|
|||||
Diesel
|
564
|
434
|
478
|
30
|
(9)
|
|||||||
Total net sales
|
$
|
1,092
|
$
|
919
|
$
|
964
|
19
|
(5)
|
||||
Net income
|
$
|
182
|
$
|
132
|
$
|
112
|
38
|
18
|
% change
|
||||||||||||
Core Performance
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales:
|
||||||||||||
Automotive
|
$
|
528
|
$
|
485
|
$
|
486
|
9
|
|||||
Diesel
|
564
|
434
|
478
|
30
|
(9)
|
|||||||
Total net sales
|
$
|
1,092
|
$
|
919
|
$
|
964
|
19
|
(5)
|
||||
Net income
|
$
|
187
|
$
|
130
|
$
|
119
|
44
|
9
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
|||||||||||||||
(in millions)
|
Sales
|
Net
income
|
Sales
|
Net
income
|
Sales
|
Net
income
|
|||||||||||
As reported
|
$
|
1,092
|
$
|
182
|
$
|
919
|
$
|
132
|
$
|
964
|
$
|
112
|
|||||
Restructuring, impairment, and other charges
(7)
|
1
|
2
|
|||||||||||||||
Pension mark-to-market
(11)
|
5
|
(3)
|
5
|
||||||||||||||
Core performance
|
$
|
1,092
|
$
|
187
|
$
|
919
|
$
|
130
|
$
|
964
|
$
|
119
|
% change
|
||||||||||||
As Reported
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales
|
$
|
1,205
|
$
|
1,170
|
$
|
1,346
|
3
|
(13)
|
||||
Net income
|
$
|
144
|
$
|
187
|
$
|
137
|
(23)
|
36
|
% change
|
||||||||||||
Core Performance
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales
|
$
|
1,205
|
$
|
1,170
|
$
|
1,346
|
3
|
(13)
|
||||
Net income
|
$
|
162
|
$
|
196
|
$
|
201
|
(17)
|
(2)
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
|||||||||||||||
(in millions)
|
Sales
|
Net
income
|
Sales
|
Net
income
|
Sales
|
Net
income
|
|||||||||||
As reported
|
$
|
1,205
|
$
|
144
|
$
|
1,170
|
$
|
187
|
$
|
1,346
|
$
|
137
|
|||||
Constant-yen
(1)
|
(7)
|
(2)
|
25
|
||||||||||||||
Purchased collars and average forward contracts
(2)
|
14
|
||||||||||||||||
Acquisition-related costs
(4)
|
(1)
|
1
|
|||||||||||||||
Restructuring, impairment, and other charges
(7)
|
12
|
12
|
33
|
||||||||||||||
Pension mark-to-market
(11)
|
(2)
|
6
|
|||||||||||||||
Core performance
|
$
|
1,205
|
$
|
162
|
$
|
1,170
|
$
|
196
|
$
|
1,346
|
$
|
201
|
% change
|
||||||||||||
As Reported
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales
|
$
|
862
|
$
|
851
|
$
|
657
|
1
|
30
|
||||
Net income
|
$
|
71
|
$
|
71
|
$
|
28
|
154
|
% change
|
||||||||||||
Core Performance
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales
|
$
|
862
|
$
|
851
|
$
|
657
|
1
|
30
|
||||
Net income
|
$
|
87
|
$
|
92
|
$
|
48
|
(5)
|
92
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
|||||||||||||||
(in millions)
|
Sales
|
Net
income
|
Sales
|
Net
income
|
Sales
|
Net
income
|
|||||||||||
As reported
|
$
|
862
|
$
|
71
|
$
|
851
|
$
|
71
|
$
|
657
|
$
|
28
|
|||||
Acquisition-related costs
(4)
|
14
|
21
|
15
|
||||||||||||||
Restructuring, impairment, and other charges
(7)
|
2
|
3
|
1
|
||||||||||||||
Pension mark-to-market
(11)
|
(3)
|
4
|
|||||||||||||||
Core performance
|
$
|
862
|
$
|
87
|
$
|
851
|
$
|
92
|
$
|
657
|
$
|
48
|
% change
|
||||||||||||
As Reported
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales
|
$
|
53
|
$
|
8
|
$
|
6
|
563
|
33
|
||||
Research, development and engineering expenses
|
$
|
177
|
$
|
116
|
$
|
123
|
53
|
(6)
|
||||
Equity earnings of affiliated companies
|
$
|
18
|
$
|
(24)
|
$
|
17
|
*
|
*
|
||||
Net loss
|
$
|
(196)
|
$
|
(163)
|
$
|
(98)
|
20
|
66
|
*
|
Percent change not meaningful
|
% change
|
||||||||||||
Core Performance
|
2014
|
2013
|
2012
|
14 vs. 13
|
13 vs. 12
|
|||||||
Net sales
|
$
|
53
|
$
|
8
|
$
|
6
|
563
|
33
|
||||
Research, development and engineering expenses
|
$
|
177
|
$
|
116
|
$
|
123
|
53
|
(6)
|
||||
Equity earnings of affiliated companies
|
$
|
18
|
$
|
12
|
$
|
17
|
50
|
(29)
|
||||
Net loss
|
$
|
(193)
|
$
|
(122)
|
$
|
(98)
|
58
|
24
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
||||||||||||||||
(in millions)
|
Sales
|
Equity
earnings
|
Net
income
|
Sales
|
Equity
earnings
|
Net
income
|
|||||||||||
As reported
|
$
|
53
|
$
|
18
|
$
|
(196)
|
$
|
8
|
$
|
(24)
|
$
|
(163)
|
|||||
Purchased collars and average forward contracts
(2)
|
2
|
||||||||||||||||
Restructuring, impairment, and other charges
(7)
|
|||||||||||||||||
Pension mark-to-market
(11)
|
1
|
36
|
41
|
||||||||||||||
Core performance
|
$
|
53
|
$
|
18
|
$
|
(193)
|
$
|
8
|
$
|
12
|
$
|
(122)
|
·
|
In the third quarter of 2014, we amended and restated our existing revolving credit facility. The amended facility provides a $2 billion unsecured multi-currency line of credit and expires on September 30, 2019. At December 31, 2014, there were no outstanding amounts under this credit facility. The facility includes affirmative and negative covenants that Corning must comply with, including a leverage (debt to capital ratio) financial covenant. As of December 31, 2014, we were in compliance with all of the covenants.
|
·
|
In the first quarter of 2013, we amended and restated our then-existing revolving credit facility. The 2013 amended facility provided a $1 billion unsecured multi-currency line of credit that would have expired in March 2018. This facility was terminated when we entered into the amended and restated $2 billion facility in the third quarter of 2014.
|
·
|
In the first quarter of 2013, Corning repaid the aggregate principal amount and accrued interest outstanding on the credit facility entered into in the second quarter of 2011 that allowed Corning to borrow up to Chinese renminbi (RMB) 4 billion. The total amount repaid was approximately $500 million. Upon repayment, this facility was terminated.
|
·
|
In the second quarter of 2013, the Company established a commercial paper program on a private placement basis, pursuant to which we may issue short-term, unsecured commercial paper notes up to a maximum aggregate principal amount outstanding at any time of $1 billion. Under this program, the Company may issue the notes from time to time and will use the proceeds for general corporate purposes. The maturities of the notes will vary, but may not exceed 390 days from the date of issue. The interest rates will vary based on market conditions and the ratings assigned to the notes by credit rating agencies at the time of issuance. The Company’s revolving credit facility is available to support obligations under the commercial paper program, if needed. At December 31, 2013, we did not have any outstanding commercial paper.
|
·
|
In the fourth quarter of 2013, we issued $250 million of 3.70% senior unsecured notes that mature on November 15, 2023. The net proceeds of approximately $248 million were used for general corporate purposes.
|
·
|
In the fourth quarter of 2013, we recorded a financing obligation in the approximate amount of $230 million for a new LCD glass substrate facility in China.
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Net cash provided by operating activities
|
$
|
4,709
|
$
|
2,787
|
$
|
3,206
|
||
Net cash used in investing activities
|
$
|
(962)
|
$
|
(1,004)
|
$
|
(2,628)
|
||
Net cash used in financing activities
|
$
|
(2,586)
|
$
|
(2,063)
|
$
|
(115)
|
·
|
Higher incentive compensation payments of approximately $100 million, driven by the pay-out of the initial year of the executive cash-based performance plan and an increase in performance-driven incentives;
|
·
|
An increase in foreign tax payments in the amount of $114 million, driven by higher withholding tax in Taiwan; and
|
·
|
An increase in fiber and cable inventory in the Optical Communications segment in the amount of $111 million, due to a decline in sales in China, Europe and North America.
|
December 31,
|
|||||
2014
|
2013
|
||||
Working capital
|
$
|
7,914
|
$
|
7,145
|
|
Current ratio
|
4.4:1
|
5.1:1
|
|||
Trade accounts receivable, net of allowances
|
$
|
1,501
|
$
|
1,253
|
|
Days sales outstanding
|
56
|
58
|
|||
Inventories
|
$
|
1,322
|
$
|
1,270
|
|
Inventory turns
|
4.2
|
3.6
|
|||
Days payable outstanding
(1)
|
41
|
47
|
|||
Long-term debt
|
$
|
3,227
|
$
|
3,272
|
|
Total debt to total capital
|
13%
|
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
|
Amount of commitment and contingency expiration per period
|
||||||||||||||
Total
|
Less than
1 year
|
1 to 3
years
|
3 to 5
years
|
5 years and
thereafter
|
||||||||||
Performance bonds and guarantees
|
$
|
75
|
$
|
21
|
$
|
3
|
$
|
1
|
$
|
50
|
||||
Stand-by letters of credit
(1)
|
61
|
57
|
4
|
|||||||||||
Loan guarantees
|
14
|
14
|
||||||||||||
Subtotal of commitment expirations per period
|
$
|
150
|
$
|
78
|
$
|
3
|
$
|
1
|
$
|
68
|
||||
Purchase obligations
(6)
|
$
|
287
|
$
|
152
|
$
|
105
|
$
|
15
|
$
|
15
|
||||
Capital expenditure obligations
(2)
|
358
|
358
|
||||||||||||
Total debt
(3)
|
2,899
|
29
|
314
|
250
|
2,306
|
|||||||||
Interest on long-term debt
(4)
|
2,451
|
151
|
293
|
274
|
1,733
|
|||||||||
Capital leases and financing obligations
(3)
|
360
|
7
|
14
|
7
|
332
|
|||||||||
Imputed interest on capital leases and financing obligations
|
258
|
19
|
38
|
38
|
163
|
|||||||||
Minimum rental commitments
|
238
|
48
|
75
|
44
|
71
|
|||||||||
Uncertain tax positions
(5)
|
2
|
1
|
1
|
|||||||||||
Subtotal of contractual obligation payments due by period
|
6,853
|
765
|
840
|
628
|
4,620
|
|||||||||
Total commitments and contingencies
|
$
|
7,003
|
$
|
843
|
$
|
843
|
$
|
629
|
$
|
4,688
|
(1)
|
At December 31, 2014, $41 million of the $61 million was included in other accrued liabilities on our consolidated balance sheets.
|
(2)
|
Capital expenditure obligations primarily reflect amounts associated with our capital expansion activities.
|
(3)
|
Total debt above is stated at maturity value, and excludes interest rate swap gains and bond discounts.
|
(4)
|
The estimate of interest payments assumes interest is paid through the date of maturity or expiration of the related debt, based upon stated rates in the respective debt instruments.
|
(5)
|
At December 31, 2014, $8 million was included on our balance sheet related to uncertain tax positions. Of this amount, we are unable to estimate when $6 million of that amount will become payable.
|
(6)
|
Purchase obligations are enforceable and legally binding obligations which primarily consist of raw material and energy-related take-or-pay contracts.
|
·
|
A significant decrease in the market price of an asset;
|
·
|
A significant change in the extent or manner in which a long-lived asset is being used or in its physical condition;
|
·
|
A significant adverse change in legal factors or in the business climate that could affect the value of the asset, including an adverse action or assessment by a regulator;
|
·
|
An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of an asset;
|
·
|
A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of an asset; and
|
·
|
A current expectation that, more likely than not, an asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
|
·
|
We assess qualitative factors in each of our reporting units which carry goodwill to determine whether it is necessary to perform the first step of the two-step quantitative goodwill impairment test.
|
·
|
The following events and circumstances are considered when evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount:
|
o
|
Macroeconomic conditions, such as a deterioration in general economic conditions, fluctuations in foreign exchange rates and/or other developments in equity and credit markets;
|
o
|
Market capital in relation to book value;
|
o
|
Industry and market considerations, such as a deterioration in the environment in which an entity operates, material loss in market share and significant declines in product pricing;
|
o
|
Cost factors, such as an increase in raw materials, labor or other costs;
|
o
|
Overall financial performance, such as negative or declining cash flows or a decline in actual or forecasted revenue;
|
o
|
Other relevant entity-specific events, such as material changes in management or key personnel; and
|
o
|
Events affecting a reporting unit, such as a change in the composition or carrying amount of its net assets including acquisitions and dispositions.
|
December 31,
|
||||||||
(In millions)
|
2014
|
2013
|
2012
|
|||||
Actual return on plan assets – Domestic plans
|
$
|
287
|
$
|
65
|
$
|
299
|
||
Expected return on plan assets – Domestic plans
|
159
|
158
|
150
|
|||||
Actual return on plan assets – International plans
|
68
|
6
|
10
|
|||||
Expected return on plan assets – International plans
|
15
|
11
|
10
|
|||||
December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Weighted-average actual and expected return on assets:
|
||||||||
Actual return on plan assets – Domestic plans
|
10.82%
|
2.67%
|
12.06%
|
|||||
Expected return on plan assets – Domestic plans
|
6.25%
|
6.00%
|
6.00%
|
|||||
Actual return on plan assets – International plans
|
17.15%
|
2.73%
|
6.01%
|
|||||
Expected return on plan assets – International plans
|
4.12%
|
3.73%
|
6.01%
|
Change in assumption
|
Effect on 2015
pre-tax pension
expense
|
Effect on
December 31, 2014
PBO
|
|
25 basis point decrease in discount rate
|
- 2 million
|
+ 89 million
|
|
25 basis point increase in discount rate
|
+ 2 million
|
- 87 million
|
|
25 basis point decrease in expected return on assets
|
+ 7 million
|
||
25 basis point increase in expected return on assets
|
- 7 million
|
Change in assumption
|
Effect on 2015
pre-tax OPEB
expense
|
Effect on
December 31, 2014
APBO*
|
|
25 basis point decrease in discount rate
|
+ 2 million
|
+ 27 million
|
|
25 basis point increase in discount rate
|
- 2 million
|
- 26 million
|
-
|
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, New Taiwan dollar, Euro, Chinese renminbi and Korean won;
|
-
|
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, cyber attack, armed conflict, political or financial instability, natural disasters, or major health concerns;
|
-
|
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;
|
-
|
financial risk management;
|
-
|
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 ongoing operations and manufacturing expansions and pay their receivables when due;
|
-
|
loss of significant customers;
|
-
|
fluctuations in supply chain inventory levels;
|
-
|
equity company activities, principally at Dow Corning;
|
-
|
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.
|
·
|
Exchange rate movements on financial instruments and transactions denominated in foreign currencies that impact earnings; and
|
·
|
Exchange rate movements upon conversion of net assets and net income of foreign subsidiaries for which the functional currency is not the U.S. dollar, which impact our net equity.
|
(a)
|
Management’s Annual Report on Internal Control Over Financial Reporting
|
(b)
|
Attestation Report of the Independent Registered Public Accounting Firm
|
(c)
|
Changes in Internal Control Over Financial Reporting
|
(a)
|
Documents filed as part of this report:
|
||||
Page
|
|||||
1.
|
85
|
||||
2.
|
Financial statement schedule:
|
||||
(i)
|
142
|
||||
See separate index to financial statements and financial statement schedules
|
10.6
|
Form of Change In Control Amendment dated as of October 4, 2000 between Corning Incorporated and the following individuals: James P. Clappin, James B. Flaws, Kirk P. Gregg and Lawrence D. McRae (Incorporated by reference to Exhibit 10.5 of Corning’s Form 10-Q filed May 4, 2004).
|
||
10.7
|
Amendment dated as of February 1, 2004 to Change In Control Agreement dated as of April 23, 2002 between Corning Incorporated and Wendell P. Weeks (Incorporated by reference to Exhibit 10.8 of Corning’s Form 10-Q filed May 4, 2004).
|
||
10.8
|
Change In Control Agreement dated as of April 23, 2002 between Corning Incorporated and Wendell P. Weeks (Incorporated by reference to Exhibit 10.9 of Corning’s Form 10-Q filed May 4, 2004).
|
||
10.9
|
Form of Corning Incorporated Incentive Stock Plan Agreement for Restricted Stock Grants (Incorporated by reference to Exhibit 10.1 of Corning’s Form 10-Q filed October 28, 2004).
|
||
10.10
|
Form of Corning Incorporated Incentive Stock Plan Agreement for Restricted Stock Retention Grants (Incorporated by reference to Exhibit 10.2 of Corning’s Form 10-Q filed October 28, 2004).
|
||
10.11
|
Form of Corning Incorporated Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.3 of Corning’s Form 10-Q filed October 28, 2004).
|
||
10.12
|
Form of Corning Incorporated Non-Qualified Stock Option Agreement (Incorporated by reference to Exhibit 10.4 of Corning’s Form 10-Q filed October 28, 2004).
|
||
10.13
|
2005 Employee Equity Participation Program (Incorporated by reference to Exhibit I of Corning Proxy Statement, Definitive 14A filed March 1, 2005 for April 28, 2005 Annual Meeting of Shareholders).
|
||
10.14
|
2006 Variable Compensation Plan (Incorporated by reference to Appendix J of Corning Proxy Statement, Definitive 14A filed March 8, 2006 for April 27, 2006 Annual Meeting of Shareholders).
|
||
10.15
|
Amended 2003 Equity Plan for Non-Employee Directors (Incorporated by reference to Appendix K of Corning Proxy Statement, Definitive 14A filed March 8, 2006 for April 27, 2006 Annual Meeting of Shareholders).
|
||
10.16
|
Amended Corning Incorporated 2003 Equity Plan for Non-Employee Directors effective October 4, 2006 (Incorporated by reference to Exhibit 10.28 of Corning’s Form 10-K filed February 25, 2007).
|
||
10.17
|
Amended Corning Incorporated 2005 Employee Equity Participation Program effective October 4, 2006 (Incorporated by reference to Exhibit 10.29 of Corning’s Form 10-K filed February 25, 2007).
|
||
10.18
|
Form of Corning Incorporated Incentive Stock Plan Agreement for Restricted Stock Grants, amended effective December 6, 2006 (Incorporated by reference to Exhibit 10.30 of Corning’s Form 10-K filed February 25, 2007).
|
||
10.19
|
Executive Supplemental Pension Plan effective February 7, 2007 and signed February 12, 2007 (Incorporated by reference to Exhibit 10.31 of Corning’s Form 10-K filed February 25, 2007).
|
||
10.20
|
Executive Supplemental Pension Plan as restated and signed April 10, 2007 (Incorporated by reference to Exhibit 10 of Corning’s Form 10-Q filed April 27, 2007).
|
||
10.21
|
Amendment No. 1 to 2006 Variable Compensation Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.34 of Corning’s Form 10-K filed February 15, 2008).
|
||
10.22
|
Corning Incorporated Goalsharing Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.35 of Corning’s Form 10-K filed February 15, 2008).
|
||
10.23
|
Corning Incorporated Performance Incentive Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.36 of Corning’s Form 10-K filed February 15, 2008).
|
||
10.24
|
Amendment No. 1 to Deferred Compensation Plan for Directors dated October 3, 2007 (Incorporated by reference to Exhibit 10.37 of Corning’s Form 10-K filed February 15, 2008).
|
||
10.25
|
Corning Incorporated Supplemental Pension Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.38 of Corning’s Form 10-K filed February 15, 2008).
|
||
10.26
|
Corning Incorporated Supplemental Investment Plan dated October 3, 2007 (Incorporated by reference to Exhibit 10.39 of Corning’s Form 10-K filed February 15, 2008).
|
||
10.27
|
Form of Corning Incorporated Incentive Stock Plan Agreement for Restricted Stock Grants, amended effective December 5, 2007 (Incorporated by reference to Exhibit 10.40 of Corning’s Form 10-K filed February 15, 2008).
|
10.28
|
Form of Corning Incorporated Non-Qualified Stock Option Agreement, amended effective December 5, 2007 (Incorporated by reference to Exhibit 10.41 of Corning’s Form 10-K filed February 15, 2008).
|
|
10.29
|
Amendment No. 2 dated February 13, 2008 and Amendment dated as of February 1, 2004 to Letter of Understanding between Corning Incorporated and Wendell P. Weeks, and Letter of Understanding dated April 23, 2002 between Corning Incorporated and Wendell P. Weeks (Incorporated by reference to Exhibit 10.42 of Corning’s Form 10-K filed February 15, 2008).
|
|
10.30
|
Form of Change in Control Agreement Amendment No. 2, effective December 5, 2007 (Incorporated by reference to Exhibit 10.43 of Corning’s Form 10-K filed February 15, 2008).
|
|
10.31
|
Form of Officer Severance Agreement Amendment, effective December 5, 2007 (Incorporated by reference to Exhibit 10.44 of Corning’s Form 10-K filed February 15, 2008).
|
|
10.32
|
Amendment No. 1 to Corning Incorporated Supplemental Investment Plan, approved December 17, 2007 (Incorporated by reference to Exhibit 10.45 of Corning’s Form 10-K filed February 15, 2008).
|
|
10.33
|
Amendment No. 1 to Corning Incorporated Supplemental Pension Plan, approved December 17, 2007 (Incorporated by reference to Exhibit 10.46 of Corning’s Form 10-K filed February 15, 2008).
|
|
10.34
|
Amendment No. 1 to Corning Incorporated Executive Supplemental Pension Plan, approved December 17, 2007 (Incorporated by reference to Exhibit 10.47 of Corning’s Form 10-K filed February 15, 2008).
|
|
10.35
|
Second Amended 2005 Employee Equity Participation Program (Incorporated by reference to Exhibit 10 of Corning’s Form 8-K filed April 25, 2008).
|
|
10.36
|
Amendment No. 2 to Executive Supplemental Pension Plan effective July 16, 2008 (Incorporated by reference to Exhibit 10 of Corning’s Form 10-Q filed July 30, 2008).
|
|
10.37
|
Form of Corning Incorporated Non-Qualified Stock Option Agreement effective as of December 3, 2008 (Incorporated by reference to Exhibit 10.50 of Corning’s Form 10-K filed February 24, 2009).
|
|
10.38
|
Form of Corning Incorporated Incentive Stock Right Agreement effective as of December 3, 2008 (Incorporated by reference to Exhibit 10.51 of Corning’s Form 10-K filed February 24, 2009).
|
|
10.39
|
Form of Corning Incorporated Incentive Stock Plan Agreement for Restricted Stock Grants effective December 3, 2008 (Incorporated by reference to Exhibit 10.52 of Corning’s Form 10-K filed February 24, 2009).
|
|
10.40
|
Form of Change of Control Agreement Amendment No. 3 effective December 19, 2008 (Incorporated by reference to Exhibit 10.53 of Corning’s Form 10-K filed February 24, 2009).
|
|
10.41
|
Form of Officer Severance Agreement Amendment No. 2 effective December 19, 2008 (Incorporated by reference to Exhibit 10.54 of Corning’s Form 10-K filed February 24, 2009).
|
|
10.42
|
Amendment No. 3 dated December 19, 2008 to Letter of Understanding dated April 23, 2002 between Corning Incorporated and Wendell P. Weeks (Incorporated by reference to Exhibit 10.55 of Corning’s Form 10-K filed February 24, 2009).
|
|
10.43
|
Amendment No. 2 to Corning Incorporated Supplemental Investment Plan approved April 29, 2009 (Incorporated by reference to Exhibit 10.1 of Corning’s Form 10-Q filed July 29, 2009).
|
|
10.44
|
Amendment No. 2 to Deferred Compensation Plan dated April 29, 2009 (Incorporated by reference to Exhibit 10.2 of Corning’s Form 10-Q filed July 29, 2009).
|
|
10.45
|
Amendment No. 2 to 2006 Variable Compensation Plan dated December 2, 2009 (Incorporated by reference to Exhibit 10.58 of Corning’s Form 10-K filed February 10, 2010).
|
|
10.46
|
Form of Corning Incorporated Cash Performance Unit Agreement, effective December 2, 2009 (Incorporated by reference to Exhibit 10.59 of Corning’s Form 10-K filed February 10, 2010).
|
|
10.47
|
Form of Corning Incorporated Incentive Stock Right Agreement for Time-Based Restricted Stock Units, effective December 2, 2009 (Incorporated by reference to Exhibit 10.60 of Corning’s Form 10-K filed February 10, 2010).
|
|
10.48
|
2010 Variable Compensation Plan (Incorporated by reference to Appendix A of Corning’s Proxy Statement, Definitive 14A filed March 15, 2010 for April 29, 2010 Annual Meeting of Shareholders).
|
10.49
|
2010 Equity Plan for Non-Employee Directors (Incorporated by reference to Appendix B of Corning Proxy Statement, Definitive 14A filed March 15, 2010 for April 29, 2010 Annual Meeting of Shareholders).
|
|
10.50
|
Compensation Arrangement for Retention of James B. Flaws approved by the Corning Board Compensation Committee on January 3, 2011 (Incorporated by reference to Corning’s Form 8-K filed January 3, 2011).
|
|
10.51
|
Amendment No. 2 to Corning Incorporated Supplemental Pension Plan dated December 18, 2008 (Incorporated by reference to Exhibit 10.66 of Corning’s Form 10-K filed February 10, 2011).
|
|
10.52
|
Form of Corning Incorporated Incentive Stock Right Agreement for Time-Based Incentive Stock Rights, effective January 3, 2011 (Incorporated by reference to Exhibit 10.67 of Corning’s Form 10-K filed February 10, 2011).
|
|
10.53
|
Form of Corning Incorporated Cash Performance Unit Agreement, effective January 3, 2011 (Incorporated by reference to Exhibit 10.68 of Corning’s Form 10-K filed February 10, 2011).
|
|
10.54
|
Amendment No. 2 to Deferred Compensation Plan for Directors dated February 1, 2012 (Incorporated by reference to Exhibit 10.62 of Corning’s Form 10-K filed February 13, 2012).
|
|
10.55
|
Amendment No. 3 to Corning Incorporated Executive Supplemental Pension Plan effective December 31, 2008 (Incorporated by reference to Exhibit 10.59 of Corning’s Form 10-K filed February 13, 2013).
|
|
10.56
|
2012 Long-Term Incentive Plan (Incorporated by reference to Appendix A of Corning Proxy Statement, Definitive 14A filed March 13, 2012, for April 26, 2012 Annual Meeting of Shareholders).
|
|
10.57
|
Amendment No. 3 to Deferred Compensation Plan for Directors dated December 28, 2012 (Incorporated by reference to Exhibit 10.61 of Corning’s Form 10-K filed February 13, 2013).
|
|
10.58
|
Amendment No. 4 to Corning Incorporated Executive Supplemental Pension Plan effective December 31, 2012 (Incorporated by reference to Exhibit 10.62 of Corning’s Form 10-K filed February 13, 2013).
|
|
10.59
|
Framework Agreement, dated as of October 22, 2013, by and among Samsung Display Co., Ltd.; Corning Incorporated and the other parties thereto. (Incorporated by reference to Exhibit 10.65 to Corning’s Form 10-K filed on February 10, 2014, as amended by its Form 10-K/A filed on March 21, 2014). The Company has omitted certain schedules, exhibits and similar attachments to the Framework Agreement pursuant to Item 601(b)(2) of Regulation S-K.
|
|
10.60
|
Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2014 (Incorporated by reference to Exhibit 10.69 to Corning’s Form 10-K filed on February 10, 2014, as amended by its Form 10-K/A filed on March 21, 2014.
|
|
10.61
|
Amendment No. 4 to Deferred Compensation Plan for Directors dated September 30, 2014. (Incorporated by reference to Exhibit 10.1 of Corning’s Form 10-Q filed on October 29, 2014).
|
|
10.62
|
Amended and Restated Credit Agreement dated as of September 30, 2014, among Corning Incorporated, JPMorgan Chase Bank, N.A., Citibank, N.A., Bank of America, N.A., Deutsche Bank AG New York Branch, The Bank of Tokyo-Mitsubishi UFJ, Ltd., HSBC Bank USA, National Association, Standard Chartered Bank, Sumitomo Mitsui Banking Corporation, Barclays Bank PLC, Goldman Sachs Bank USA, Wells Fargo Bank, National Association, Bank of China New York Branch, and The Bank of New York Mellon (Incorporated by reference to Exhibit 10.1 to Corning’s Form 8-K filed on October 3, 2014).
|
|
10.63
|
2014 Variable Compensation Plan (Incorporated by reference to Appendix B of Corning’s Proxy Statement, Definitive 14A filed March 13, 2014 for the April 29, 2014 Annual Meeting of Shareholders).
|
|
10.64
|
Form of Corning Incorporated Incentive Stock Rights Agreement, effective January 1, 2015.
|
|
10.65
|
Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2015.
|
|
12
|
Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
|
|
14
|
Corning Incorporated Code of Ethics for Chief Executive Officer and Financial Executives, and Code of Conduct for Directors and Executive Officers (Incorporated by reference to Appendix G of Corning Proxy Statement, Definitive 14A filed March 13, 2012 for April 26, 2012 Annual Meeting of Shareholders).
|
|
21
|
Subsidiaries of the Registrant at December 31, 2014.
|
23.1
|
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
|
|
23.2
|
Consent of PricewaterhouseCoopers LLP.
|
|
23.3
|
Consent of Samil PricewaterhouseCoopers.
|
|
24
|
Powers of Attorney.
|
|
31.1
|
Certification Pursuant to Rule 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification Pursuant to Rule 13a-15(e) and 15d-15(e), As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
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
|
(c)
|
Financial Statements:
|
||
1.
|
144
|
||
2.
|
181
|
By
|
/s/ Wendell P. Weeks
|
Chairman of the Board of Directors, Chief
|
February 13, 2015
|
|||
(Wendell P. Weeks)
|
Executive Officer and President
|
|||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
|
||||||
Capacity
|
Date
|
|||||
/s/ Wendell P. Weeks
|
Chairman of the Board of Directors, Chief Executive Officer and President
|
February 13, 2015
|
||||
(Wendell P. Weeks)
|
(Principal Executive Officer)
|
|||||
/s/ James B. Flaws
|
Vice Chairman of the Board of Directors and Chief Financial Officer
|
February 13, 2015
|
||||
(James B. Flaws)
|
(Principal Financial Officer)
|
|||||
/s/ R. Tony Tripeny
|
Senior Vice President – Corporate Controller
|
February 13, 2015
|
||||
(R. Tony Tripeny)
|
(Principal Accounting Officer)
|
|||||
*
|
Director
|
February 13, 2015
|
||||
(Donald W. Blair)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(Stephanie A. Burns)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(John A. Canning, Jr.)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(Richard T. Clark)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(Robert F. Cummings, Jr.)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(James B. Flaws)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(Deborah A. Henretta)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(Daniel P. Huttenlocher)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(Kurt M. Landgraf)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(Kevin J. Martin)
|
*
|
Director
|
February 13, 2015
|
||||
(Deborah D. Rieman)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(Hansel E. Tookes II)
|
||||||
*
|
Director
|
February 13, 2015
|
||||
(Mark S. Wrighton)
|
||||||
*By
|
/s/ Lewis A. Steverson
|
|||||
(Lewis A. Steverson, Attorney-in-fact)
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
(In millions, except per share amounts)
|
2014
|
2013
|
2012
|
|||||
Net sales
|
$
|
9,715
|
$
|
7,819
|
$
|
8,012
|
||
Cost of sales
|
5,663
|
4,495
|
4,693
|
|||||
Gross margin
|
4,052
|
3,324
|
3,319
|
|||||
Operating expenses:
|
||||||||
Selling, general and administrative expenses
|
1,211
|
1,126
|
1,205
|
|||||
Research, development and engineering expenses
|
815
|
710
|
769
|
|||||
Amortization of purchased intangibles
|
33
|
31
|
19
|
|||||
Restructuring, impairment and other charges (Note 2)
|
71
|
67
|
133
|
|||||
Asbestos litigation (credit) charges (Note 7)
|
(9)
|
19
|
14
|
|||||
Operating income
|
1,931
|
1,371
|
1,179
|
|||||
Equity in earnings of affiliated companies (Note 7)
|
266
|
547
|
810
|
|||||
Interest income
|
26
|
8
|
14
|
|||||
Interest expense
|
(123)
|
(120)
|
(111)
|
|||||
Transaction-related gain, net (Note 8)
|
74
|
|||||||
Other income, net
|
1,394
|
667
|
83
|
|||||
Income before income taxes
|
3,568
|
2,473
|
1,975
|
|||||
Provision for income taxes (Note 6)
|
(1,096)
|
(512)
|
(339)
|
|||||
Net income attributable to Corning Incorporated
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
||
Earnings per common share attributable to Corning Incorporated:
|
||||||||
Basic (Note 18)
|
$
|
1.82
|
$
|
1.35
|
$
|
1.10
|
||
Diluted (Note 18)
|
$
|
1.73
|
$
|
1.34
|
$
|
1.09
|
||
Dividends declared per common share
|
$
|
0.52
|
$
|
0.39
|
$
|
0.32
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
(In millions)
|
2014
|
2013
|
2012
|
|||||
Net income attributable to Corning Incorporated
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
||
Foreign currency translation adjustments and other
|
(1,073)
|
(682)
|
(179)
|
|||||
Net unrealized (losses) gains on investments
|
(1)
|
2
|
13
|
|||||
Unamortized (losses) gains and prior service costs for postretirement benefit plans
|
(281)
|
392
|
(1)
|
|||||
Net unrealized gains (losses) on designated hedges
|
4
|
(24)
|
47
|
|||||
Other comprehensive loss, net of tax (Note 17)
|
(1,351)
|
(312)
|
(120)
|
|||||
Comprehensive income attributable to Corning Incorporated
|
$
|
1,121
|
$
|
1,649
|
$
|
1,516
|
Corning Incorporated and Subsidiary Companies
|
December 31,
|
|||||
(In millions, except share and per share amounts)
|
2014
|
2013
|
|||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
5,309
|
$
|
4,704
|
|
Short-term investments, at fair value (Note 3)
|
759
|
531
|
|||
Total cash, cash equivalents and short-term investments
|
6,068
|
5,235
|
|||
Trade accounts receivable, net of doubtful accounts and allowances - $47 and $28
|
1,501
|
1,253
|
|||
Inventories, net of inventory reserves - $127 and $94 (Note 5)
|
1,322
|
1,270
|
|||
Deferred income taxes (Note 6)
|
248
|
278
|
|||
Other current assets (Note 11 and 15)
|
1,099
|
855
|
|||
Total current assets
|
10,238
|
8,891
|
|||
Investments (Note 7)
|
1,801
|
5,537
|
|||
Property, plant and equipment, net of accumulated depreciation - $8,332 and $7,865 (Note 9)
|
12,766
|
9,801
|
|||
Goodwill, net (Note 10)
|
1,150
|
1,002
|
|||
Other intangible assets, net (Note 10)
|
497
|
540
|
|||
Deferred income taxes (Note 6)
|
1,889
|
2,234
|
|||
Other assets (Note 8, 11 and 15)
|
1,722
|
473
|
|||
Total Assets
|
$
|
30,063
|
$
|
28,478
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt (Note 12)
|
$
|
36
|
$
|
21
|
|
Accounts payable
|
997
|
771
|
|||
Other accrued liabilities (Note 11 and 14)
|
1,291
|
954
|
|||
Total current liabilities
|
2,324
|
1,746
|
|||
Long-term debt (Note 12)
|
3,227
|
3,272
|
|||
Postretirement benefits other than pensions (Note 13)
|
814
|
766
|
|||
Other liabilities (Note 11 and 14)
|
2,046
|
1,483
|
|||
Total liabilities
|
8,411
|
7,267
|
|||
Commitments and contingencies (Note 14)
|
|||||
Shareholders’ equity (Note 17):
|
|||||
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
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
(In millions)
|
2014
|
2013
|
2012
|
|||||
Cash Flows from Operating Activities:
|
||||||||
Net income
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation
|
1,167
|
971
|
978
|
|||||
Amortization of purchased intangibles
|
33
|
31
|
19
|
|||||
Restructuring, impairment and other charges
|
71
|
67
|
133
|
|||||
Loss on retirement of debt
|
26
|
|||||||
Stock compensation charges
|
58
|
54
|
70
|
|||||
Equity in earnings of affiliated companies
|
(266)
|
(547)
|
(810)
|
|||||
Dividends received from affiliated companies
|
1,704
|
630
|
1,090
|
|||||
Deferred tax provision
|
612
|
189
|
18
|
|||||
Restructuring payments
|
(39)
|
(35)
|
(15)
|
|||||
Employee benefit payments (in excess of) less than expense
|
(52)
|
52
|
178
|
|||||
Gains on translated earnings contracts
|
(1,369)
|
(435)
|
||||||
Unrealized translation losses on transactions
|
431
|
96
|
241
|
|||||
Contingent consideration fair value adjustment
|
(249)
|
|||||||
Changes in certain working capital items:
|
||||||||
Trade accounts receivable
|
(16)
|
(29)
|
(272)
|
|||||
Inventories
|
2
|
(247)
|
(23)
|
|||||
Other current assets
|
(16)
|
34
|
(81)
|
|||||
Accounts payable and other current liabilities
|
(3)
|
(23)
|
189
|
|||||
Other, net
|
169
|
18
|
(171)
|
|||||
Net cash provided by operating activities
|
4,709
|
2,787
|
3,206
|
|||||
Cash Flows from Investing Activities:
|
||||||||
Capital expenditures
|
(1,076)
|
(1,019)
|
(1,801)
|
|||||
Acquisitions of businesses, net of cash received
|
66
|
(68)
|
(723)
|
|||||
Investment in unconsolidated entities
|
(109)
|
(526)
|
(111)
|
|||||
Proceeds from loan repayments from unconsolidated entities
|
23
|
8
|
||||||
Short-term investments – acquisitions
|
(1,398)
|
(1,406)
|
(2,270)
|
|||||
Short-term investments – liquidations
|
1,167
|
2,026
|
2,269
|
|||||
Premium on purchased collars
|
(107)
|
|||||||
Realized gains on translated earnings contracts
|
361
|
87
|
||||||
Other, net
|
4
|
1
|
8
|
|||||
Net cash used in investing activities
|
(962)
|
(1,004)
|
(2,628)
|
|||||
Cash Flows from Financing Activities:
|
||||||||
Retirement of long-term debt, net
|
(498)
|
(280)
|
||||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(52)
|
(71)
|
(26)
|
|||||
Proceeds from issuance of long-term debt, net
|
248
|
1,362
|
||||||
Proceeds from issuance of short-term debt, net
|
29
|
|||||||
Proceeds (payments) from the settlement of interest rate swap agreements
|
33
|
(18)
|
||||||
Principal payments under capital lease obligations
|
(6)
|
(7)
|
(1)
|
|||||
Proceeds from issuance of preferred stock
(1)
|
400
|
|||||||
Proceeds received for asset financing and related incentives, net
|
1
|
276
|
||||||
Payments to acquire noncontrolling interest
|
(47)
|
|||||||
Proceeds from the exercise of stock options
|
116
|
85
|
38
|
|||||
Repurchases of common stock for treasury
|
(2,483)
|
(1,516)
|
(720)
|
|||||
Dividends paid
|
(591)
|
(566)
|
(472)
|
|||||
Other, net
|
2
|
|||||||
Net cash used in financing activities
|
(2,586)
|
(2,063)
|
(115)
|
|||||
Effect of exchange rates on cash
|
(556)
|
(4)
|
(136)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
605
|
(284)
|
327
|
|||||
Cash and cash equivalents at beginning of year
|
4,704
|
4,988
|
4,661
|
|||||
Cash and cash equivalents at end of year
|
$
|
5,309
|
$
|
4,704
|
$
|
4,988
|
(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 8). Corning also issued to Samsung Display an additional 400 shares of Preferred Stock at closing, for an issue price of $400 million in cash (Note 17).
|
Corning Incorporated and Subsidiary Companies
|
(In millions)
|
Convertible
preferred
stock
|
Common
stock
|
Additional
paid-in
capital-common
|
Retained
earnings
|
Treasury
stock
|
Accumulated
other
comprehensive
income (loss)
|
Total Corning
Incorporated
shareholders’
equity
|
Non-
controlling
interests
|
Total
|
|||||||||
Balance, December 31, 2011
|
$
|
818
|
$
|
13,041
|
$
|
8,767
|
$
|
(2,024)
|
$
|
476
|
$
|
21,078
|
$
|
51
|
$
|
21,129
|
||
Net income
|
1,636
|
1,636
|
(5)
|
1,631
|
||||||||||||||
Other comprehensive loss
|
(120)
|
(120)
|
1
|
(119)
|
||||||||||||||
Purchase of common stock for treasury
|
(719)
|
(719)
|
(719)
|
|||||||||||||||
Shares issued to benefit plans and for option exercises
|
7
|
105
|
(1)
|
111
|
111
|
|||||||||||||
Dividends on shares
|
(472)
|
(472)
|
(472)
|
|||||||||||||||
Other, net
|
1
|
(29)
|
(28)
|
(28)
|
||||||||||||||
Balance, December 31, 2012
|
$
|
825
|
$
|
13,146
|
$
|
9,932
|
$
|
(2,773)
|
$
|
356
|
$
|
21,486
|
$
|
47
|
$
|
21,533
|
||
Net income
|
1,961
|
1,961
|
1,961
|
|||||||||||||||
Other comprehensive loss
|
(312)
|
(312)
|
(312)
|
|||||||||||||||
Purchase of common stock for treasury
|
(200)
|
(1,316)
|
(1,516)
|
(1,516)
|
||||||||||||||
Shares issued to benefit plans and for option exercises
|
6
|
139
|
(1)
|
144
|
144
|
|||||||||||||
Dividends on shares
|
(566)
|
(566)
|
(566)
|
|||||||||||||||
Other, net
|
(19)
|
(7)
|
(9)
|
(35)
|
2
|
(33)
|
||||||||||||
Balance, December 31, 2013
|
$
|
831
|
$
|
13,066
|
$
|
11,320
|
$
|
(4,099)
|
$
|
44
|
$
|
21,162
|
$
|
49
|
$
|
21,211
|
||
Net income
|
2,472
|
2,472
|
3
|
2,475
|
||||||||||||||
Other comprehensive loss
|
(1,351)
|
(1,351)
|
(1)
|
(1,352)
|
||||||||||||||
Shares issued for acquisition of equity investment company
|
$
|
1,900
|
1,900
|
15
|
1,915
|
|||||||||||||
Shares issued for cash
|
400
|
400
|
400
|
|||||||||||||||
Purchase of common stock for treasury
|
129
|
(2,612)
|
(2,483)
|
(2,483)
|
||||||||||||||
Shares issued to benefit plans and for option exercises
|
5
|
261
|
(2)
|
264
|
264
|
|||||||||||||
Dividends on shares
|
(771)
|
(771)
|
(771)
|
|||||||||||||||
Other, net
|
(14)
|
(14)
|
7
|
(7)
|
||||||||||||||
Balance, December 31, 2014
|
$
|
2,300
|
$
|
836
|
$
|
13,456
|
$
|
13,021
|
$
|
(6,727)
|
$
|
(1,307)
|
$
|
21,579
|
$
|
73
|
$
|
21,652
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Royalty income from Samsung Corning Precision Materials
|
$
|
56
|
$
|
83
|
||||
Foreign currency transaction and hedge gains, net
|
$
|
1,352
|
500
|
8
|
||||
Loss on retirement of debt
|
(26)
|
|||||||
Foreign government subsidy
|
3
|
55
|
||||||
Other, net
|
39
|
56
|
18
|
|||||
Total
|
$
|
1,394
|
$
|
667
|
$
|
83
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Non-cash transactions:
|
||||||||
Accruals for capital expenditures
|
$
|
358
|
$
|
185
|
$
|
240
|
||
Cash paid for interest and income taxes:
|
||||||||
Interest
(1)
|
$
|
171
|
$
|
182
|
$
|
178
|
||
Income taxes, net of refunds received
|
$
|
577
|
$
|
469
|
$
|
355
|
(1)
|
Included in this amount are approximately $40 million, $35 million and $74 million of interest costs that were capitalized as part of property, plant and equipment, net in 2014, 2013 and 2012, respectively.
|
Asset type
|
Range of useful life
|
|||
Computer hardware and software
|
3
|
to
|
7
|
years
|
Manufacturing equipment
|
2
|
to
|
15
|
years
|
Furniture and fixtures
|
5
|
to
|
10
|
years
|
Transportation equipment
|
3
|
to
|
20
|
years
|
·
|
Absence of our ability to recover the carrying amount;
|
·
|
Inability of the equity affiliate to sustain an earnings capacity which would justify the carrying amount of the investment; and
|
·
|
Significant litigation, bankruptcy or other events that could impact recoverability.
|
Reserve at
January 1,
2014
|
Net
Charges/
Reversals
|
Non cash
adjustments
|
Cash
payments
|
Reserve at
December 31,
2014
|
||||||||||
Restructuring:
|
||||||||||||||
Employee related costs
|
$
|
36
|
$
|
48
|
$
|
(9)
|
$
|
(31)
|
$
|
44
|
||||
Other charges (credits)
|
8
|
1
|
(1)
|
(8)
|
||||||||||
Total restructuring activity
|
$
|
44
|
$
|
49
|
$
|
(10)
|
$
|
(39)
|
$
|
44
|
||||
Impairment charges and disposal of long-lived assets
|
$
|
22
|
||||||||||||
Total restructuring, impairment and other charges
|
$
|
71
|
Operating segment
|
Employee-
related
and other
charges
|
|
Display Technologies
|
$
|
50
|
Optical Communications
|
17
|
|
Specialty Materials
|
1
|
|
Life Sciences
|
1
|
|
Corporate and All Other
|
2
|
|
Total restructuring, impairment and other charges
|
$
|
71
|
Reserve at
January 1,
2013
|
Net
Charges/
Reversals
|
Non cash
adjustments
|
Cash
payments
|
Reserve at
December 31,
2013
|
||||||||||
Restructuring:
|
||||||||||||||
Employee related costs
|
$
|
38
|
$
|
34
|
$
|
(4)
|
$
|
(32)
|
$
|
36
|
||||
Other charges (credits)
|
4
|
7
|
(3)
|
8
|
||||||||||
Total restructuring activity
|
$
|
42
|
$
|
41
|
$
|
(4)
|
$
|
(35)
|
$
|
44
|
||||
Impairment charges and disposal of long-lived assets:
|
$
|
26
|
||||||||||||
Total restructuring, impairment and other charges
|
$
|
67
|
Reserve at
January 1,
2012
|
Net
Charges/
Reversals
|
Non cash
adjustments
|
Cash
payments
|
Reserve at
December 31,
2012
|
||||||||||
Restructuring:
|
||||||||||||||
Employee related costs
|
$
|
2
|
$
|
47
|
$
|
(7)
|
$
|
(4)
|
$
|
38
|
||||
Other charges (credits)
|
8
|
5
|
(5)
|
(4)
|
4
|
|||||||||
Total restructuring activity
|
$
|
10
|
$
|
52
|
$
|
(12)
|
$
|
(8)
|
$
|
42
|
||||
Impairment charges and disposal of long-lived assets:
|
||||||||||||||
Assets to be held and used
|
44
|
|||||||||||||
Assets to be disposed of
|
37
|
|||||||||||||
Total asset impairment charges and disposals
|
$
|
81
|
||||||||||||
Total restructuring, impairment and other charges
|
$
|
133
|
Amortized cost
December 31,
|
Fair value
December 31,
|
||||||||||
2014
|
2013
|
2014
|
2013
|
||||||||
Bonds, notes and other securities:
|
|||||||||||
U.S. government and agencies
|
$
|
759
|
$
|
530
|
$
|
759
|
$
|
531
|
|||
Total short-term investments
|
$
|
759
|
$
|
530
|
$
|
759
|
$
|
531
|
|||
Asset-backed securities
|
$
|
42
|
$
|
46
|
$
|
38
|
$
|
38
|
|||
Total long-term investments
|
$
|
42
|
$
|
46
|
$
|
38
|
$
|
38
|
Less than one year
|
$440
|
Due in 1-5 years
|
319
|
Due in 5-10 years
|
|
Due after 10 years
(1)
|
38
|
Total
|
$797
|
(1)
|
Included in the maturity table is $38 million of asset-based securities that mature over time.
|
(in millions)
|
Number of
securities
in a loss
position
|
December 31, 2014
|
|||||||||||
12 months or greater
|
Total
|
||||||||||||
Fair
value
|
Unrealized
losses
(1)
|
Fair
value
|
Unrealized
losses
|
||||||||||
Asset-backed securities
|
21
|
$
|
37
|
$
|
(4)
|
$
|
37
|
$
|
(4)
|
||||
Total long-term investments
|
21
|
$
|
37
|
$
|
(4)
|
$
|
37
|
$
|
(4)
|
(1)
|
Unrealized losses in securities less than 12 months were not significant.
|
(in millions)
|
Number of
securities
in a loss
position
|
December 31, 2013
|
|||||||||||
12 months or greater
|
Total
|
||||||||||||
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.
|
December 31,
|
|||||
2014
|
2013
|
||||
Finished goods
|
$
|
486
|
$
|
486
|
|
Work in process
|
255
|
234
|
|||
Raw materials and accessories
|
302
|
311
|
|||
Supplies and packing materials
|
279
|
239
|
|||
Total inventories, net of inventory reserves
|
$
|
1,322
|
$
|
1,270
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
U.S. companies
|
$
|
2,384
|
$
|
1,274
|
$
|
382
|
||
Non-U.S. companies
|
1,184
|
1,199
|
1,593
|
|||||
Income before income taxes
|
$
|
3,568
|
$
|
2,473
|
$
|
1,975
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Current:
|
||||||||
Federal
|
$
|
38
|
$
|
3
|
$
|
(4)
|
||
State and municipal
|
32
|
12
|
3
|
|||||
Foreign
|
414
|
308
|
321
|
|||||
Deferred:
|
||||||||
Federal
|
411
|
112
|
143
|
|||||
State and municipal
|
(9)
|
50
|
(8)
|
|||||
Foreign
|
210
|
27
|
(116)
|
|||||
Provision for income taxes
|
$
|
1,096
|
$
|
512
|
$
|
339
|
Years ended December 31,
|
|||||||
2014
|
2013
|
2012
|
|||||
Statutory U.S. income tax rate
|
35.0%
|
35.0%
|
35.0%
|
||||
State income tax (benefit), net of federal effect
|
4.9
|
(8)
|
0.6
|
0.2
|
|||
Tax holidays
(1)
|
(0.4)
|
(1.2)
|
(1.7)
|
||||
Investment and other tax credits
(2)
|
(0.3)
|
(2.0)
|
(1.1)
|
||||
Rate difference on foreign earnings
|
(8.3)
|
(7.9)
|
(4)
|
(2.0)
|
|||
Equity earnings impact
(3)
|
(2.0)
|
(6.6)
|
(13.6)
|
||||
Valuation allowances
|
0.7
|
(6)
|
3.1
|
(5)
|
(0.1)
|
||
Other items, net
|
1.1
|
(7)
|
(0.3)
|
0.5
|
|||
Effective income tax (benefit) rate
|
30.7%
|
20.7%
|
17.2%
|
(1)
|
Primarily related to a subsidiary in Taiwan operating under tax holiday arrangements. The nature and extent of such arrangements vary, and the benefits of existing arrangements phase out in future years (through 2018). The impact of tax holidays on net income per share on a diluted basis was $0.01 in 2014, $0.02 in 2013 and $0.02 in 2012.
|
(2)
|
Primarily related to research and development and other credits in the U.S.
|
(3)
|
Equity in earnings of nonconsolidated affiliates reported in the financials net of tax. The decrease from 2012-2013 was driven by significantly lower earnings from Samsung Corning Precision Materials and from 2013-2014 the change of Samsung Corning Precision Materials from an equity company to a consolidated entity.
|
(4)
|
In 2013, $74 million of tax benefit increase was due to $37 million expense recorded in 2012 that was reversed in the first quarter of 2013 as a result of the retroactive application of the American Taxpayer Relief Act enacted on January 3, 2013. In 2013, the additional increase in the benefit was attributable to excess foreign tax credits realized in U.S. from a taxable intercompany loan.
|
(5)
|
Primarily related to change in judgment on the realizability of Australia and certain state deferred tax assets.
|
(6)
|
$177 million tax expense related to change in judgment on the realizability of Germany and Japan deferred tax assets is partially offset with benefit from state deferred tax asset valuation allowance reductions, including the valuation allowance relating to the New York State attribute reduction discussed in (8) below.
|
(7)
|
Includes in 2014, $9 million benefit for domestic manufacturing deduction and $46 million of tax expense related to out of period transfer pricing adjustments. The impact of these corrections is not material to any individual period previously presented.
|
(8)
|
Includes $100 million tax expense related to the write-off of New York State tax attributes for a state law change that were offset with full valuation allowance.
|
December 31,
|
|||||
2014
|
2013
|
||||
Loss and tax credit carryforwards
|
$
|
1,235
|
$
|
1,788
|
|
Other Assets
|
69
|
63
|
|||
Asset impairments and restructuring reserves
|
170
|
172
|
|||
Postretirement medical and life benefits
|
312
|
290
|
|||
Fixed assets
|
85
|
||||
Other accrued liabilities
|
246
|
320
|
|||
Other employee benefits
|
473
|
387
|
|||
Gross deferred tax assets
|
2,505
|
3,105
|
|||
Valuation allowance
|
(298)
|
(286)
|
|||
Total deferred tax assets
|
2,207
|
2,819
|
|||
Intangible and other assets
|
(152)
|
(321)
|
|||
Fixed assets
|
(299)
|
||||
Total deferred tax liabilities
|
(451)
|
(321)
|
|||
Net deferred tax assets
|
$
|
1,756
|
$
|
2,498
|
December 31,
|
|||||
2014
|
2013
|
||||
Current deferred tax assets
|
$
|
248
|
$
|
278
|
|
Non-current deferred tax assets
|
1,889
|
2,234
|
|||
Current deferred tax liabilities
|
(5)
|
(1)
|
|||
Non-current deferred tax liabilities
|
(376)
|
(13)
|
|||
Net deferred tax assets
|
$
|
1,756
|
$
|
2,498
|
Expiration
|
||||||||||||||
Amount
|
2015-2019
|
2020-2024
|
2025-2034
|
Indefinite
|
||||||||||
Net operating losses
|
$
|
423
|
$
|
92
|
$
|
120
|
$
|
20
|
$
|
191
|
||||
Capital losses
|
9
|
9
|
||||||||||||
Tax credits
|
803
|
62
|
672
|
38
|
31
|
|||||||||
Totals as of December 31, 2014
|
$
|
1,235
|
$
|
163
|
$
|
792
|
$
|
58
|
$
|
222
|
2014
|
2013
|
||||
Balance at January 1
|
$
|
15
|
$
|
16
|
|
Additions based on tax positions related to the current year
|
1
|
||||
Additions for tax positions of prior years
|
5
|
||||
Reductions for tax positions of prior years
|
|||||
Settlements and lapse of statute of limitations
|
(10)
|
(2)
|
|||
Balance at December 31
|
$
|
10
|
$
|
15
|
Ownership
interest
(1)
|
December 31,
|
||||||||
2014
|
2013
|
||||||||
Affiliated companies accounted for by the equity method
|
|||||||||
Samsung Corning Precision Materials
(2)
|
$
|
3,709
|
|||||||
Dow Corning
|
50%
|
$
|
1,325
|
1,420
|
|||||
All other
|
20%
|
to
|
50%
|
452
|
390
|
||||
1,777
|
5,519
|
||||||||
Other investments
|
24
|
18
|
|||||||
Total
|
$
|
1,801
|
$
|
5,537
|
(1)
|
Amounts reflect Corning’s direct ownership interests in the respective affiliated companies at December 31, 2014. Corning does not control any of such entities.
|
(2)
|
On January 15, 2014 Corning acquired the remaining equity interests of Samsung Corning Precision Materials, resulting in 100% ownership of this entity.
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Statement of operations
(1)(2)
:
|
||||||||
Net sales
|
$
|
7,124
|
$
|
8,526
|
$
|
9,957
|
||
Gross profit
|
$
|
1,701
|
$
|
2,655
|
$
|
3,628
|
||
Net income
|
$
|
647
|
$
|
1,135
|
$
|
1,541
|
||
Corning’s equity in earnings of affiliated companies
|
$
|
266
|
$
|
547
|
$
|
810
|
||
Related party transactions:
|
||||||||
Corning sales to affiliated companies
|
$
|
13
|
$
|
13
|
$
|
50
|
||
Corning purchases from affiliated companies
|
$
|
25
|
$
|
189
|
$
|
167
|
||
Corning transfers of assets, at cost, to affiliated companies
(3)
|
$
|
$
|
37
|
$
|
55
|
|||
Dividends received from affiliated companies
|
$
|
130
|
$
|
629
|
$
|
1,089
|
||
Royalty income from affiliated companies
|
$
|
2
|
$
|
57
|
$
|
84
|
||
Corning services to affiliates
|
$
|
2
|
$
|
24
|
December 31,
|
||||||||
2014
|
2013
|
|||||||
Balance sheet
(1)(2)
:
|
||||||||
Current assets
|
$
|
5,432
|
$
|
8,416
|
||||
Noncurrent assets
|
$
|
6,864
|
$
|
12,220
|
||||
Short-term borrowings, including current portion of long-term debt
|
$
|
7
|
$
|
79
|
||||
Other current liabilities
|
$
|
1,630
|
$
|
1,886
|
||||
Long-term debt
|
$
|
950
|
$
|
937
|
||||
Other long-term liabilities
|
$
|
5,143
|
$
|
6,502
|
||||
Non-controlling interest
|
$
|
634
|
$
|
619
|
||||
Related party transactions:
|
||||||||
Balances due from affiliated companies
|
$
|
19
|
$
|
45
|
||||
Balances due to affiliated companies
|
$
|
2
|
$
|
5
|
||||
(1)
|
2013 and 2012 amounts include Samsung Corning Precision Materials.
|
(2)
|
As a result of the series of strategic and financial agreements with Samsung Display entered into on October 22, 2013, certain non-operating assets of Samsung Corning Precision Materials were held for sale as of December 31, 2013 and are reported as discontinued operations in Samsung Corning Precision Materials financial statements, which are attached in Item 15, Exhibits and Financial Statement Schedules. Previous period amounts have been conformed for comparative purposes.
|
(3)
|
In 2013 and 2012, Corning purchased machinery and equipment on behalf of Samsung Corning Precision Materials to support its capital expansion initiatives.
|
7.
|
Investments (continued)
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Statement of operations:
|
||||||||
Net sales
|
$
|
6,221
|
$
|
5,711
|
$
|
6,119
|
||
Gross profit
(1)
|
$
|
1,543
|
$
|
1,280
|
$
|
1,413
|
||
Net income attributable to Dow Corning
|
$
|
513
|
$
|
376
|
$
|
181
|
||
Corning’s equity in earnings of Dow Corning
|
$
|
252
|
$
|
196
|
$
|
90
|
||
Related party transactions:
|
||||||||
Corning purchases from Dow Corning
|
$
|
15
|
$
|
22
|
$
|
23
|
||
Dividends received from Dow Corning
|
$
|
125
|
$
|
100
|
$
|
100
|
December 31,
|
||||||||
2014
|
2013
|
|||||||
Balance sheet:
|
||||||||
Current assets
|
$
|
4,712
|
$
|
3,996
|
||||
Noncurrent assets
|
$
|
6,433
|
$
|
8,306
|
||||
Short-term borrowings, including current portion of long-term debt
|
$
|
7
|
$
|
79
|
||||
Other current liabilities
|
$
|
1,441
|
$
|
1,267
|
||||
Long-term debt
|
$
|
945
|
$
|
937
|
||||
Other long-term liabilities
|
$
|
5,125
|
$
|
6,240
|
||||
Non-controlling interest
|
$
|
634
|
$
|
606
|
||||
(1)
|
Gross profit for the year ended December 31, 2014 includes R&D cost of $273 million (2013: $248 million and 2012: $281 million).
|
7.
|
Investments (continued)
|
7.
|
Investments (continued)
|
7.
|
Investments (continued)
|
Net consideration applied to acquired assets
|
Samsung
Display
|
Corning
Incorporated
|
Samsung
Corning
Precision
Materials
|
|||||
Ownership percentage
|
42.5%
|
57.5%
|
100%
|
|||||
Fair value based on $1.9 billion consideration transferred
|
$
|
1,911
|
$
|
2,588
|
$
|
4,499
|
||
Less contingent consideration - receivable
|
(196)
|
(265)
|
(461)
|
|||||
Net fair value of consideration @ 100%
|
1,715
|
2,323
|
4,038
|
|||||
Corning’s loss on royalty contract
|
(136)
|
(184)
|
(320)
|
|||||
Fair value post-acquisition
|
$
|
1,579
|
$
|
2,139
|
$
|
3,718
|
||
Corning’s fair value 57.5% post-acquisition
|
2,139
|
|||||||
Total fair value at January 15, 2014
|
$
|
3,718
|
·
|
At acquisition, since the contract with Samsung Corning Precision Materials was effectively settled, Corning recognized a loss of $320 million. Of the $320 million, $184 million effectively offset the portion of the gain on previously held equity investment attributable to Corning’s interest in the royalty contract. As a result, the pre-acquisition fair value of Corning’s 57.5% share of $2.3 billion decreased to the fair value of $2.1 billion post-acquisition; and
|
·
|
At acquisition, since the seller, Samsung Display, was a 42.5% shareholder of Samsung Corning Precision Materials, 42.5%, or $136 million, of the $320 million loss to effectively settle the contract reduced the consideration transferred to acquire Samsung Display’s interest in Samsung Corning Precision Materials. Accordingly, $136 million of the consideration transferred was treated separately from the purchase price, resulting in the implied consideration transferred of approximately $1.6 billion.
|
December 2013 Investment Balance
|
$
|
3,709
|
Dividend
(1)
|
(1,574)
|
|
Other
|
(18)
|
|
Net investment book balance at 1/15/2014
|
$
|
2,117
|
Fair value Samsung Corning Precision Materials
|
$
|
4,038
|
57.5% of Samsung Corning Precision Materials
(2)
|
2,323
|
|
Working capital adjustment and other
|
52
|
|
57.5% of the pre-acquisition fair value of assets
|
$
|
2,375
|
Gain on previously held equity investment
(2)
|
$
|
258
|
Translation gain
|
136
|
|
Net gain
|
$
|
394
|
(1)
|
In conjunction with the Framework Agreement, the parties agreed to have Samsung Corning Precision Materials distribute all cash and cash equivalents as a dividend to the shareholders of record as of December 31, 2013. The dividend was not part of the purchase price as the agreement was to distribute cash and cash equivalents as a dividend to the shareholders as soon as practicable. As such, at acquisition Corning did not have legal title to the cash to be distributed, although the dividend was distributed subsequent to the acquisition date. Therefore, the portion of Corning’s share of the $1.6 billion dividend received was accounted for in Corning’s consolidated financial statements as if the dividend occurred at or immediately prior to the date of acquisition at which time Samsung Corning Precision Materials was still an equity method investment in Corning’s consolidated financial statements.
|
(2)
|
As Corning was a 57.5% shareholder at the date of acquisition, immediately preceding the acquisition of Samsung Corning Precision Materials, Corning recognized an asset and respective gain as part of the calculation of its previously held equity investment which included approximately $184 million attributed to its economic interest in the royalty contract.
|
Cash and cash equivalents
(1)
|
$
|
133
|
Trade receivables
(3)
|
357
|
|
Inventory
(3)
|
105
|
|
Property, plant and equipment
(3)
|
3,595
|
|
Other current and non-current assets
(3)
|
71
|
|
Debt – current
|
(32)
|
|
Accounts payable and accrued expenses
(3)
|
(357)
|
|
Other current and non-current liabilities
(3)
|
(294)
|
|
Total identified net assets
(3)
|
3,578
|
|
Non-controlling interests
|
15
|
|
Fair value of Samsung Corning Precision Materials on acquisition date
|
(3,718)
|
|
Goodwill
(2)(3)
|
$
|
125
|
(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)
|
During 2014, the Company recorded total measurement period adjustments of $60 million for the Acquisition of Corning Precision Materials primarily related to accrual of contingent liabilities and employee benefit obligations.
|
Twelve months
ended
December 31,
2013
|
||
Net sales
|
$
|
9,871
|
Net income attributable to Corning Incorporated – basic earnings per share
|
$
|
2,327
|
Net income – attributable to Corning Incorporated – diluted earnings per share
|
$
|
2,425
|
Earnings per common share attributable to common shareholders
|
||
Basic
|
$
|
1.60
|
Diluted
|
$
|
1.54
|
Shares used in computing per share amounts
|
||
Basic
|
1,452
|
|
Diluted
|
1,577
|
Inventory and other current assets
|
$
|
74
|
Fixed Assets
|
81
|
|
Other intangible assets
|
279
|
|
Net tangible and intangible assets
|
$
|
434
|
Purchase price
|
739
|
|
Goodwill
(1)
|
$
|
305
|
(1)
|
The goodwill recognized is deductible for U.S. income tax purposes. The goodwill was allocated to the Life Sciences segment.
|
December 31,
|
|||||
2014
|
2013
|
||||
Land
|
$
|
458
|
$
|
121
|
|
Buildings
|
5,470
|
4,175
|
|||
Equipment
|
13,848
|
12,286
|
|||
Construction in progress
|
1,322
|
1,084
|
|||
21,098
|
17,666
|
||||
Accumulated depreciation
|
(8,332)
|
(7,865)
|
|||
Total
|
$
|
12,766
|
$
|
9,801
|
Optical
Communications
|
Display
Technologies
|
Specialty
Materials
|
Life
Sciences
|
Total
|
||||||||||
Balance at December 31, 2012
|
$
|
209
|
$
|
9
|
$
|
150
|
$
|
606
|
$
|
974
|
||||
Acquired goodwill
(2)
|
32
|
32
|
||||||||||||
Measurement period adjustment
(1)
|
(4)
|
(4)
|
||||||||||||
Foreign currency translation adjustment
|
(1)
|
1
|
||||||||||||
Balance at December 31, 2013
|
$
|
240
|
$
|
9
|
$
|
150
|
$
|
603
|
$
|
1,002
|
||||
Acquired goodwill
(3)
|
68
|
54
|
122
|
|||||||||||
Measurement period adjustment
(4)
|
60
|
60
|
||||||||||||
Foreign currency translation adjustment
|
(2)
|
(3)
|
(6)
|
(23)
|
(34)
|
|||||||||
Balance at December 31, 2014
|
$
|
238
|
$
|
134
|
$
|
198
|
$
|
580
|
$
|
1,150
|
(1)
|
The Company recorded the acquisition of the Discovery Labware business of Becton Dickinson and Company in the fourth quarter of 2012. In the second quarter of 2013, Corning recorded measurement period adjustments. Refer to Note 8 (Acquisition) to the Consolidated Financial Statements for additional information.
|
(2)
|
The company recorded a small acquisition and consolidated an equity company due to a change in control in the second quarter of 2013.
|
(3)
|
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 8 (Acquisition) to the Consolidated Financial Statements for additional information on the Acquisition of Samsung Corning Precision Materials.
|
(4)
|
In the year ended December 31, 2014, the Company recorded measurement period adjustments of $60 million for the Acquisition of Samsung Corning Precision Materials primarily related to the accrual of contingent liabilities and employee benefit obligations.
|
December 31,
|
|||||||||||||||||
2014
|
2013
|
||||||||||||||||
Gross
|
Accumulated
amortization
|
Net
|
Gross
|
Accumulated
amortization
|
Net
|
||||||||||||
Amortized intangible assets:
|
|||||||||||||||||
Patents, trademarks & trade names
|
$
|
302
|
$
|
149
|
$
|
153
|
$
|
290
|
$
|
138
|
$
|
152
|
|||||
Customer list and other
|
411
|
67
|
344
|
436
|
48
|
388
|
|||||||||||
Total
|
$
|
713
|
$
|
216
|
$
|
497
|
$
|
726
|
$
|
186
|
$
|
540
|
Other Assets and Other Liabilities
|
December 31,
|
|||||
2014
|
2013
|
||||
Current assets:
|
|||||
Derivative instruments
|
$
|
687
|
$
|
372
|
|
Other current assets
|
412
|
483
|
|||
Other current assets
|
$
|
1,099
|
$
|
855
|
|
Non-current assets:
|
|||||
Derivative instruments
|
$
|
847
|
$
|
90
|
|
Contingent consideration asset
|
445
|
||||
Other non-current assets
|
430
|
383
|
|||
Other assets
|
$
|
1,722
|
$
|
473
|
December 31,
|
|||||
2014
|
2013
|
||||
Current liabilities:
|
|||||
Wages and employee benefits
|
$
|
562
|
$
|
445
|
|
Income taxes
|
106
|
139
|
|||
Other current liabilities
|
623
|
370
|
|||
Other accrued liabilities
|
$
|
1,291
|
$
|
954
|
|
Non-current liabilities:
|
|||||
Asbestos litigation
|
$
|
681
|
$
|
690
|
|
Other non-current liabilities
|
1,365
|
793
|
|||
Other liabilities
|
$
|
2,046
|
$
|
1,483
|
Debt
|
December 31,
|
|||||
2014
|
2013
|
||||
Current portion of long-term debt
|
$
|
36
|
$
|
21
|
|
Long term debt
|
|||||
Debentures, 8.875%, due 2016
|
$
|
66
|
$
|
67
|
|
Debentures, 1.45%, due 2017
|
250
|
250
|
|||
Debentures, 6.625%, due 2019
|
243
|
238
|
|||
Debentures, 4.25%, due 2020
|
287
|
276
|
|||
Debentures, 8.875%, due 2021
|
69
|
70
|
|||
Debentures, 3.70%, due 2023
|
249
|
249
|
|||
Medium-term notes, average rate 7.66%, due through 2023
|
45
|
45
|
|||
Debentures, 7.00%, due 2024
|
99
|
99
|
|||
Debentures, 6.85%, due 2029
|
170
|
172
|
|||
Debentures, callable, 7.25%, due 2036
|
249
|
249
|
|||
Debentures, 4.70%, due 2037
|
250
|
250
|
|||
Debentures, 5.75%, due 2040
|
398
|
398
|
|||
Debentures, 4.75%, due 2042
|
499
|
499
|
|||
Other, average rate 4.94%, due through 2042
|
389
|
431
|
|||
Total long term debt
|
3,263
|
3,293
|
|||
Less current portion of long-term debt
|
36
|
21
|
|||
Long-term debt
|
$
|
3,227
|
$
|
3,272
|
2015
|
2016
|
2017
|
2018
|
2019
|
Thereafter
|
||||||
$36
|
$71
|
$257
|
$3
|
$253
|
$2,639
|
|
*Excludes interest rate swap gains and bond discounts.
|
·
|
In the third quarter of 2014, we amended and restated our existing revolving credit facility. The amended facility provides a $2 billion unsecured multi-currency line of credit and expires on September 30, 2019. At December 31, 2014, there were no outstanding amounts on this credit facility. The facility includes affirmative and negative covenants that Corning must comply with, including a leverage (debt to capital ratio) financial covenant. As of December 31, 2014, we were in compliance with all of the covenants.
|
·
|
In the first quarter of 2013, we amended and restated our then-existing revolving credit facility. The 2013 amended facility provided a $1 billion unsecured multi-currency line of credit that would have expired in March 2018. This facility was amended and restated by the $2 billion facility entered into in the third quarter of 2014.
|
·
|
In the first quarter of 2013, Corning repaid the aggregate principal amount and accrued interest outstanding on the credit facility entered into in the second quarter of 2011 that allowed Corning to borrow up to Chinese renminbi (RMB) 4 billion. The total amount repaid was approximately $500 million. Upon repayment, this facility was terminated.
|
12.
|
Debt (continued)
|
·
|
In the second quarter of 2013, the Company established a commercial paper program on a private placement basis, pursuant to which we may issue short-term, unsecured commercial paper notes up to a maximum aggregate principal amount outstanding at any time of $1 billion. Under this program, the Company may issue the notes from time to time and will use the proceeds for general corporate purposes. The maturities of the notes will vary, but may not exceed 390 days from the date of issue. The interest rates will vary based on market conditions and the ratings assigned to the notes by credit rating agencies at the time of issuance. The Company’s revolving credit facility is available to support obligations under the commercial paper program, if needed. At December 31, 2013, we did not have any outstanding commercial paper.
|
·
|
In the fourth quarter of 2013, we issued $250 million of 3.70% senior unsecured notes that mature on November 15, 2023. The net proceeds of approximately $248 million were used for general corporate purposes.
|
·
|
In the fourth quarter of 2013, we recorded a financing obligation in the approximate amount of $230 million for a new LCD glass substrate facility in China.
|
·
|
In the first quarter of 2012, we issued $500 million of 4.75% senior unsecured notes that mature on March 15, 2042 and $250 million of 4.70% senior unsecured notes that mature on March 15, 2037. The net proceeds of $742 million were used for general corporate purposes.
|
·
|
In the fourth quarter of 2012, we completed the following debt-related transactions:
|
o
|
We issued $250 million of 1.45% senior unsecured notes that mature on November 15, 2017. The net proceeds of $248 million from the offering were used for general corporate purposes.
|
o
|
We repurchased $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. Additionally, we redeemed $100 million of our 5.90% senior unsecured notes due 2014 and $74 million of our 6.20% senior unsecured notes due 2016. We recognized a pre-tax loss of $26 million upon the early redemption of these notes.
|
·
|
In 2012, we borrowed the equivalent of approximately $377 million from a Chinese renminbi credit facility that a wholly-owned subsidiary entered into in the second quarter of 2011.
|
Employee Retirement Plans
|
Total
pension benefits
|
Domestic
pension benefits
|
International
pension benefits
|
|||||||||||||||
December 31,
|
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
|||||||||||
Change in benefit obligation
|
|||||||||||||||||
Benefit obligation at beginning of year
|
$
|
3,300
|
$
|
3,630
|
$
|
2,844
|
$
|
3,198
|
$
|
456
|
$
|
432
|
|||||
Service cost
|
82
|
70
|
55
|
60
|
27
|
10
|
|||||||||||
Interest cost
|
160
|
131
|
137
|
115
|
23
|
16
|
|||||||||||
Plan participants’ contributions
|
1
|
1
|
1
|
1
|
|||||||||||||
Acquisitions
|
103
|
103
|
|||||||||||||||
Amendments
|
25
|
25
|
|||||||||||||||
Actuarial loss (gain)
|
394
|
(362)
|
327
|
(368)
|
67
|
6
|
|||||||||||
Other
|
(3)
|
2
|
2
|
(3)
|
|||||||||||||
Benefits paid
|
(207)
|
(177)
|
(167)
|
(164)
|
(40)
|
(13)
|
|||||||||||
Foreign currency translation
|
(46)
|
5
|
(46)
|
5
|
|||||||||||||
Benefit obligation at end of year
|
$
|
3,809
|
$
|
3,300
|
$
|
3,222
|
$
|
2,844
|
$
|
587
|
$
|
456
|
|||||
Change in plan assets
|
|||||||||||||||||
Fair value of plan assets at beginning of year
|
$
|
2,896
|
$
|
2,975
|
$
|
2,596
|
$
|
2,684
|
$
|
300
|
$
|
291
|
|||||
Actual gain on plan assets
|
355
|
71
|
287
|
65
|
68
|
6
|
|||||||||||
Employer contributions
|
147
|
20
|
97
|
10
|
50
|
10
|
|||||||||||
Plan participants’ contributions
|
1
|
1
|
1
|
1
|
|||||||||||||
Acquisitions
|
97
|
97
|
|||||||||||||||
Benefits paid
|
(207)
|
(177)
|
(167)
|
(164)
|
(40)
|
(13)
|
|||||||||||
Foreign currency translation
|
(26)
|
6
|
(26)
|
6
|
|||||||||||||
Fair value of plan assets at end of year
|
$
|
3,263
|
$
|
2,896
|
$
|
2,814
|
$
|
2,596
|
$
|
449
|
$
|
300
|
|||||
Funded status at end of year
|
|||||||||||||||||
Fair value of plan assets
|
$
|
3,263
|
$
|
2,896
|
$
|
2,814
|
$
|
2,596
|
$
|
449
|
$
|
300
|
|||||
Benefit obligations
|
(3,809)
|
(3,300)
|
(3,222)
|
(2,844)
|
(587)
|
(456)
|
|||||||||||
Funded status of plans
|
$
|
(546)
|
$
|
(404)
|
$
|
(408)
|
$
|
(248)
|
$
|
(138)
|
$
|
(156)
|
|||||
Amounts recognized in the consolidated balance sheets consist of:
|
|||||||||||||||||
Noncurrent asset
|
$
|
47
|
$
|
23
|
$
|
15
|
$
|
47
|
$
|
8
|
|||||||
Current liability
|
(41)
|
(15)
|
$
|
(30)
|
(10)
|
(11)
|
(5)
|
||||||||||
Noncurrent liability
|
(552)
|
(412)
|
(378)
|
(253)
|
(174)
|
(159)
|
|||||||||||
Recognized liability
|
$
|
(546)
|
$
|
(404)
|
$
|
(408)
|
$
|
(248)
|
$
|
(138)
|
$
|
(156)
|
|||||
Amounts recognized in accumulated other comprehensive income consist of:
|
|||||||||||||||||
Net actuarial loss
|
$
|
308
|
$
|
132
|
$
|
278
|
$
|
83
|
$
|
30
|
$
|
49
|
|||||
Prior service cost (credit)
|
41
|
21
|
44
|
27
|
(3)
|
(6)
|
|||||||||||
Amount recognized at end of year
|
$
|
349
|
$
|
153
|
$
|
322
|
$
|
110
|
$
|
27
|
$
|
43
|
Postretirement benefits
|
|||||
December 31,
|
2014
|
2013
|
|||
Change in benefit obligation
|
|||||
Benefit obligation at beginning of year
|
$
|
815
|
$
|
987
|
|
Service cost
|
11
|
13
|
|||
Interest cost
|
38
|
39
|
|||
Plan participants’ contributions
|
7
|
14
|
|||
Amendments
|
(5)
|
(4)
|
|||
Actuarial loss (gain)
|
49
|
(178)
|
|||
Other
|
5
|
||||
Benefits paid
|
(56)
|
(61)
|
|||
Medicare subsidy received
|
3
|
1
|
|||
Foreign currency translation
|
(1)
|
||||
Benefit obligation at end of year
|
$
|
862
|
$
|
815
|
|
Funded status at end of year
|
|||||
Fair value of plan assets
|
$
|
0
|
$
|
0
|
|
Benefit obligations
|
(862)
|
(815)
|
|||
Funded status of plans
|
$
|
(862)
|
$
|
(815)
|
|
Amounts recognized in the consolidated balance sheets consist of:
|
|||||
Current liability
|
$
|
(48)
|
$
|
(49)
|
|
Noncurrent liability
|
(814)
|
(766)
|
|||
Recognized liability
|
$
|
(862)
|
$
|
(815)
|
|
Amounts recognized in accumulated other comprehensive income consist of:
|
|||||
Net actuarial loss
|
$
|
132
|
$
|
82
|
|
Prior service credit
|
(27)
|
(29)
|
|||
Amount recognized at end of year
|
$
|
105
|
$
|
53
|
December 31,
|
|||||
2014
|
2013
|
||||
Projected benefit obligation
|
$
|
3,425
|
$
|
447
|
|
Fair value of plan assets
|
$
|
2,831
|
$
|
20
|
December 31,
|
|||||
2014
|
2013
|
||||
Accumulated benefit obligation
|
$
|
479
|
$
|
417
|
|
Fair value of plan assets
|
$
|
17
|
$
|
20
|
Total pension benefits
|
Domestic pension benefits
|
International pension benefits
|
|||||||||||||||
December 31,
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
||||||||
Service cost
|
$ 82
|
$ 70
|
$ 62
|
$ 55
|
$ 60
|
$ 53
|
$ 27
|
$10
|
$ 9
|
||||||||
Interest cost
|
160
|
131
|
154
|
137
|
115
|
138
|
23
|
16
|
16
|
||||||||
Expected return on plan assets
|
(174)
|
(169)
|
(161)
|
(159)
|
(158)
|
(151)
|
(15)
|
(11)
|
(10)
|
||||||||
Amortization of prior service cost (credit)
|
6
|
5
|
8
|
7
|
6
|
9
|
(1)
|
(1)
|
(1)
|
||||||||
Recognition of actuarial (gain) loss
|
29
|
(30)
|
217
|
4
|
(41)
|
187
|
25
|
11
|
30
|
||||||||
Total net periodic benefit expense
|
$103
|
$ 7
|
$280
|
$ 44
|
$ (18)
|
$236
|
$ 59
|
$25
|
$44
|
||||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
|
|||||||||||||||||
Curtailment effects
|
$ (3)
|
$ (3)
|
|||||||||||||||
Settlements
|
(2)
|
(2)
|
|||||||||||||||
Current year actuarial loss (gain)
|
212
|
$(264)
|
$257
|
$198
|
$(274)
|
$218
|
14
|
$10
|
$39
|
||||||||
Recognition of actuarial gain (loss)
|
(29)
|
30
|
(217)
|
(4)
|
41
|
(187)
|
(25)
|
(11)
|
(30)
|
||||||||
Current year prior service cost
|
25
|
3
|
25
|
3
|
|||||||||||||
Amortization of prior service (cost) credit
|
(6)
|
(5)
|
(8)
|
(7)
|
(6)
|
(9)
|
1
|
1
|
1
|
||||||||
Total recognized in other comprehensive (income) loss
|
$197
|
$(239)
|
$ 35
|
$212
|
$(239)
|
$ 25
|
$(15)
|
$ 0
|
$10
|
||||||||
Total recognized in net periodic benefit cost and other comprehensive (income) loss
|
$300
|
$(232)
|
$315
|
$256
|
$(257)
|
$261
|
$ 44
|
$25
|
$54
|
Postretirement benefits
|
||||||||
2014
|
2013
|
2012
|
||||||
Service cost
|
$
|
11
|
$
|
13
|
$
|
13
|
||
Interest cost
|
38
|
39
|
45
|
|||||
Amortization of net loss
|
15
|
15
|
||||||
Amortization of prior service credit
|
(6)
|
(6)
|
(6)
|
|||||
Total net periodic benefit expense
|
$
|
43
|
$
|
61
|
$
|
67
|
||
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
|
||||||||
Current year actuarial loss (gain)
|
$
|
49
|
$
|
(178)
|
$
|
20
|
||
Amortization of actuarial loss
|
(15)
|
(16)
|
||||||
Current year prior service credit
|
(5)
|
(5)
|
||||||
Amortization of prior service credit
|
6
|
6
|
6
|
|||||
Total recognized in other comprehensive (income) loss
|
$
|
50
|
$
|
(192)
|
$
|
10
|
||
Total recognized in net periodic benefit cost and other comprehensive (income) loss
|
$
|
93
|
$
|
(131)
|
$
|
77
|
Pension benefits
|
|||||||||||||||||
Domestic
|
International
|
Postretirement benefits
|
|||||||||||||||
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
|||||||||
Discount rate
|
4.00%
|
4.75%
|
3.75%
|
3.21%
|
4.08%
|
4.48%
|
4.00%
|
4.75%
|
4.00%
|
||||||||
Rate of compensation increase
|
3.50%
|
4.00%
|
4.00%
|
3.88%
|
3.85%
|
3.45%
|
Pension benefits
|
|||||||||||||||||
Domestic
|
International
|
Postretirement benefits
|
|||||||||||||||
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
|||||||||
Discount rate
|
4.75%
|
3.75%
|
4.75%
|
4.08%
|
4.48%
|
4.40%
|
4.75%
|
4.00%
|
4.75%
|
||||||||
Expected return on plan assets
|
6.25%
|
6.00%
|
6.00%
|
4.12%
|
3.73%
|
6.01%
|
|||||||||||
Rate of compensation increase
|
4.00%
|
4.00%
|
4.25%
|
3.85%
|
3.45%
|
3.44%
|
Assumed health care trend rates at December 31
|
2014
|
2013
|
|
Health care cost trend rate assumed for next year
|
6.67%
|
7%
|
|
Rate that the cost trend rate gradually declines to
|
5%
|
5%
|
|
Year that the rate reaches the ultimate trend rate
|
2020
|
2020
|
One-percentage-point
increase
|
One-percentage-point
decrease
|
||
Effect on annual total of service and interest cost
|
$ 4
|
$ (3)
|
|
Effect on postretirement benefit obligation
|
$49
|
$(41)
|
Fair value measurements at reporting date using
|
|||||||||||
(in millions)
|
December 31,
2014
|
Quoted prices in
active markets
for identical
assets (Level 1)
|
Significant
other
observable
inputs (Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
|||||||
Equity securities:
|
|||||||||||
U.S. companies
|
$
|
310
|
$
|
49
|
$
|
261
|
|||||
International companies
|
327
|
78
|
249
|
||||||||
Fixed income:
|
|||||||||||
U.S. corporate bonds
|
1,720
|
166
|
1,554
|
||||||||
Private equity
(1)
|
192
|
$
|
192
|
||||||||
Real estate
(2)
|
84
|
84
|
|||||||||
Cash equivalents
|
80
|
80
|
|||||||||
Commodities
(3)
|
101
|
101
|
|||||||||
Total
|
$
|
2,814
|
$
|
373
|
$
|
2,165
|
$
|
276
|
(1)
|
This category includes venture capital, leverage buyouts and distressed debt limited partnerships invested primarily in U.S. companies. The inputs are valued by discounted cash flow analysis and comparable sale analysis.
|
(2)
|
This category includes industrial, office, apartments, hotels, infrastructure, and retail investments which are limited partnerships predominately in the U.S. The inputs are valued by discounted cash flow analysis; comparable sale analysis and periodic external appraisals.
|
(3)
|
This category includes investments in energy, industrial metals, precious metals, agricultural and livestock primarily through futures, options, swaps, and exchange traded funds.
|
Fair value measurements at reporting date using
|
|||||||||||
(in millions)
|
December 31,
2013
|
Quoted prices in
active markets
for identical
assets (Level 1)
|
Significant
other
observable
inputs (Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
|||||||
Equity securities:
|
|||||||||||
U.S. companies
|
$
|
325
|
$
|
216
|
$
|
109
|
|||||
International companies
|
294
|
118
|
176
|
||||||||
Fixed income:
|
|||||||||||
U.S. corporate bonds
|
1,538
|
142
|
1,396
|
||||||||
Private equity
(1)
|
207
|
$
|
207
|
||||||||
Real estate
(2)
|
93
|
93
|
|||||||||
Cash equivalents
|
39
|
39
|
|||||||||
Commodities
(3)
|
100
|
100
|
|||||||||
Total
|
$
|
2,596
|
$
|
515
|
$
|
1,781
|
$
|
300
|
(1)
|
This category includes venture capital, leverage buyouts and distressed debt limited partnerships invested primarily in U.S. companies. The inputs are valued by discounted cash flow analysis and comparable sale analysis.
|
(2)
|
This category includes industrial, office, apartments, hotels, infrastructure, and retail investments which are limited partnerships predominately in the U.S. The inputs are valued by discounted cash flow analysis; comparable sale analysis and periodic external appraisals.
|
(3)
|
This category includes investments in energy, industrial metals, precious metals, agricultural and livestock primarily through futures, options, swaps, and exchange traded funds.
|
Fair value measurements at reporting date using
|
|||||||||||
(in millions)
|
December 31,
2014
|
Quoted prices in
active markets
for identical
assets (Level 1)
|
Significant
other
observable
inputs (Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
|||||||
Equity securities:
|
|||||||||||
U.S. companies
|
$
|
6
|
$
|
6
|
|||||||
International companies
|
22
|
22
|
|||||||||
Fixed income:
|
|||||||||||
International fixed income
|
361
|
$
|
293
|
68
|
|||||||
Insurance contracts
|
5
|
$
|
5
|
||||||||
Mortgages
|
7
|
7
|
|||||||||
Cash equivalents
|
48
|
48
|
|||||||||
Total
|
$
|
449
|
$
|
341
|
$
|
96
|
$
|
12
|
Fair value measurements at reporting date using
|
|||||||||||
(in millions)
|
December 31,
2013
|
Quoted prices in
active markets
for identical
assets (Level 1)
|
Significant
other
observable
inputs (Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
|||||||
Equity securities:
|
|||||||||||
U.S. companies
|
$
|
6
|
$
|
6
|
|||||||
International companies
|
22
|
22
|
|||||||||
Fixed income:
|
|||||||||||
International fixed income
|
245
|
$
|
185
|
60
|
|||||||
Insurance contracts
|
6
|
$
|
6
|
||||||||
Mortgages
|
|||||||||||
Cash equivalents
|
21
|
21
|
|||||||||
Total
|
$
|
300
|
$
|
206
|
$
|
88
|
$
|
6
|
Level 3 assets – Domestic
|
Level 3 assets – International
|
||||||||||
|
Year ended December 2014
|
Year ended December 2014
|
|||||||||
(in millions)
|
Private
equity
|
Real
estate
|
Mortgages
|
Insurance
contracts
|
|||||||
Beginning balance at December 31, 2013
|
$
|
207
|
$
|
93
|
$
|
0
|
$
|
6
|
|||
Actual return on plan assets relating to assets still held at the reporting date
|
31
|
8
|
1
|
||||||||
Transfers in and/or out of level 3
|
(46)
|
(17)
|
7
|
(2)
|
|||||||
Ending balance at December 31, 2014
|
$
|
192
|
$
|
84
|
$
|
7
|
$
|
5
|
Level 3 assets – Domestic
|
Level 3 assets – International
|
||||||||||
|
Year ended December 2013
|
Year ended December 2013
|
|||||||||
(in millions)
|
Private
equity
|
Real
estate
|
Mortgages
|
Insurance
contracts
|
|||||||
Beginning balance at December 31, 2012
|
$
|
221
|
$
|
103
|
$
|
0
|
$
|
6
|
|||
Actual return on plan assets relating to assets still held at the reporting date
|
25
|
9
|
|||||||||
Transfers in and/or out of level 3
|
(39)
|
(19)
|
|||||||||
Ending balance at December 31, 2013
|
$
|
207
|
$
|
93
|
$
|
0
|
$
|
6
|
Expected benefit payments
|
||||||
Domestic
pension
benefits
|
International
pension
benefits
|
Postretirement
benefits
|
Expected federal subsidy payments
postretirement benefits
|
|||
2015
|
$ 202
|
$ 27
|
$ 48
|
$ 2
|
||
2016
|
$ 185
|
$ 22
|
$ 49
|
$ 2
|
||
2017
|
$ 189
|
$ 23
|
$ 49
|
$ 3
|
||
2018
|
$ 194
|
$ 26
|
$ 48
|
$ 3
|
||
2019
|
$ 199
|
$ 26
|
$ 48
|
$ 3
|
||
2020-2024
|
$1,091
|
$165
|
$239
|
$15
|
Amount of commitment and contingency expiration per period
|
||||||||||||||
Total
|
Less than
1 year
|
1 to 3
years
|
3 to 5
years
|
5 years and
thereafter
|
||||||||||
Performance bonds and guarantees
|
$
|
75
|
$
|
21
|
$
|
3
|
$
|
1
|
$
|
50
|
||||
Stand-by letters of credit
(1)
|
61
|
57
|
4
|
|||||||||||
Loan guarantees
|
14
|
14
|
||||||||||||
Subtotal of commitment expirations per period
|
$
|
150
|
$
|
78
|
$
|
3
|
$
|
1
|
$
|
68
|
||||
Purchase obligations
(6)
|
$
|
287
|
$
|
152
|
$
|
105
|
$
|
15
|
$
|
15
|
||||
Capital expenditure obligations
(2)
|
358
|
358
|
||||||||||||
Total debt
(3)
|
2,899
|
29
|
314
|
250
|
2,306
|
|||||||||
Interest on long-term debt
(4)
|
2,451
|
151
|
293
|
274
|
1,733
|
|||||||||
Capital leases and financing obligations
(3)
|
360
|
7
|
14
|
7
|
332
|
|||||||||
Imputed interest on capital leases and financing obligations
|
258
|
19
|
38
|
38
|
163
|
|||||||||
Minimum rental commitments
|
238
|
48
|
75
|
44
|
71
|
|||||||||
Uncertain tax positions
(5)
|
2
|
1
|
1
|
|||||||||||
Subtotal of contractual obligation payments due by period
|
6,853
|
765
|
840
|
628
|
4,620
|
|||||||||
Total commitments and contingencies
|
$
|
7,003
|
$
|
843
|
$
|
843
|
$
|
629
|
$
|
4,688
|
(1)
|
At December 31, 2014, $41 million of the $61 million was included in other accrued liabilities on our consolidated balance sheets.
|
(2)
|
Capital expenditure obligations primarily reflect amounts associated with our capital expansion activities.
|
(3)
|
Total debt above is stated at maturity value, and excludes interest rate swap gains and bond discounts.
|
(4)
|
The estimate of interest payments assumes interest is paid through the date of maturity or expiration of the related debt, based upon stated rates in the respective debt instruments.
|
(5)
|
At December 31, 2014, $8 million was included on our balance sheet related to uncertain tax positions. Of this amount, we are unable to estimate when $6 million of that amount will become payable.
|
(6)
|
Purchase obligations are enforceable and legally binding obligations which primarily consist of raw material and energy-related take-or-pay contracts.
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020 and
thereafter
|
||||||
$48
|
$45
|
$30
|
$25
|
$19
|
$71
|
·
|
Financial instruments and transactions denominated in foreign currencies, which impact earnings; and
|
·
|
The translation of net assets in foreign subsidiaries for which the functional currency is not the U.S. dollar, which impacts our net equity.
|
Asset derivatives
|
Liability derivatives
|
||||||||||||||||||||
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
|
$
|
487
|
$
|
433
|
Other current assets
|
$
|
22
|
$
|
8
|
Other accrued liabilities
|
$
|
(6)
|
$
|
(3)
|
|||||||
Interest rate contracts
|
1,300
|
550
|
Other assets
|
1
|
Other liabilities
|
(15)
|
(28)
|
||||||||||||||
Derivatives not designated as hedging instruments
|
|||||||||||||||||||||
Foreign exchange contracts
|
1,285
|
804
|
Other current assets
|
17
|
20
|
Other accrued liabilities
|
(5)
|
(3)
|
|||||||||||||
Translated earnings contracts
|
12,126
|
6,826
|
Other current assets
|
649
|
344
|
Other accrued liabilities
|
(33)
|
(3)
|
|||||||||||||
Other assets
|
846
|
90
|
|||||||||||||||||||
Total derivatives
|
$
|
15,198
|
$
|
8,613
|
$
|
1,535
|
$
|
462
|
$
|
(59)
|
$
|
(37)
|
Effect of derivative instruments on the consolidated financial statements for the years ended December 31
|
|||||||||||||||||||
Derivatives
in hedging
relationships
|
Gain/(loss) recognized in other
comprehensive income (OCI)
|
Location of gain/(loss) reclassified from
accumulated OCI into income
effective/ineffective
|
Gain/(loss) reclassified from
accumulated OCI into income
ineffective/effective
(1)
|
||||||||||||||||
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
||||||||||||||
Cash flow hedges
|
|||||||||||||||||||
-
|
Net sales
|
$
|
3
|
$
|
1
|
||||||||||||||
Interest rate hedge
|
$
|
(3)
|
$
|
33
|
$
|
15
|
Cost of sales
|
7
|
$
|
38
|
16
|
||||||||
Foreign exchange contracts
|
20
|
56
|
85
|
Other income, net
|
91
|
11
|
|||||||||||||
Total cash flow hedges
|
$
|
17
|
$
|
89
|
$
|
100
|
$
|
10
|
$
|
129
|
$
|
28
|
Gain (loss) recognized in income
|
|||||||||||
Undesignated
derivatives
|
Location
|
2014
|
2013
|
2012
|
|||||||
Foreign exchange contracts – balance sheet
|
Other income, net
|
$
|
29
|
$
|
100
|
$
|
82
|
||||
Foreign exchange contracts – loans
|
Other income, net
|
13
|
87
|
141
|
|||||||
Translated earnings contracts
|
Other income, net
|
1,369
|
435
|
||||||||
Total undesignated
|
$
|
1,411
|
$
|
622
|
$
|
223
|
(1)
|
There was no amount of ineffectiveness for 2014 and the amount of hedge ineffectiveness for the year ended December 31, 2013 was $24 million related to interest rate swaps settled in the fourth quarter. The amount of ineffectiveness for 2012 was insignificant.
|
Fair value measurements at reporting date using
|
|||||||
(in millions)
|
December 31,
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
|
$ 759
|
$759
|
|||||
Other current assets
(1)
|
$ 687
|
$687
|
|||||
Non-current assets:
|
|||||||
Other assets
(2)
|
$1,330
|
$885
|
$445
|
||||
Current liabilities:
|
|||||||
Other accrued liabilities
(1)
|
$ 44
|
$ 44
|
|||||
Non-current liabilities:
|
|||||||
Other liabilities
(1)
|
$ 15
|
$ 15
|
(1)
|
Derivative assets and liabilities include foreign exchange contracts 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 and a contingent consideration asset which was measured by applying an option pricing model using projected future Corning Precision Materials’ revenue.
|
Fair value measurements at reporting date using
|
|||||||
(in millions)
|
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
(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 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.
|
Common stock
|
Treasury stock
|
||||||||
Shares
|
Par value
|
Shares
|
Cost
|
||||||
Balance at December 31, 2011
|
1,636
|
$
|
818
|
(121)
|
$
|
(2,024)
|
|||
Shares issued to benefit plans and for option exercises
|
13
|
7
|
(1)
|
||||||
Shares purchased for treasury
|
(56)
|
(719)
|
|||||||
Other, net
|
(2)
|
(29)
|
|||||||
Balance at December 31, 2012
|
1,649
|
$
|
825
|
(179)
|
$
|
(2,773)
|
|||
Shares issued to benefit plans and for option exercises
|
12
|
6
|
(1)
|
||||||
Shares purchased for treasury
|
(82)
|
(1,316)
|
|||||||
Other, net
|
(1)
|
(9)
|
|||||||
Balance at December 31, 2013
|
1,661
|
$
|
831
|
(262)
|
$
|
(4,099)
|
|||
Shares issued to benefit plans and for option exercises
|
11
|
5
|
(2)
|
||||||
Shares purchased for treasury
|
(135)
|
(2,612)
|
|||||||
Other, net
|
(1)
|
(14)
|
|||||||
Balance at December 31, 2014
(1)
|
1,672
|
$
|
836
|
(398)
|
$
|
(6,727)
|
(1)
|
On January 15, 2014, in conjunction with the Acquisition of Corning Precision Materials, Corning issued 2,300 Fixed Rate Cumulative Convertible Preferred Stock, Series A (“Preferred Stock”), par value $100 per share, at an issue price of $1 million per share, for an aggregate issue price of $2.3 billion. There have been no further issuances or conversions of Preferred Stock during 2014.
|
17.
|
Shareholders’ Equity (continued)
|
Foreign
currency
translation
adjustments
and other
|
Unamortized
actuarial gains
(losses) and
prior service
costs
|
Net
unrealized
gains
(losses) on
investments
|
Net
unrealized
gains
(losses) on
designated
hedges
|
Accumulated
other
comprehensive
income (loss)
|
||||||||||
Balance at December 31, 2011
|
$
|
1,353
|
$
|
(819)
|
$
|
(29)
|
$
|
(29)
|
$
|
476
|
||||
Other comprehensive income before reclassifications
(4)
|
$
|
(439)
|
$
|
(181)
|
$
|
11
|
$
|
63
|
$
|
(546)
|
||||
Amounts reclassified from accumulated other comprehensive income
(2)
|
(52)
|
149
|
(6)
|
(18)
|
73
|
|||||||||
Equity method affiliates
(3)
|
312
|
31
|
8
|
2
|
353
|
|||||||||
Net current-period other comprehensive income (loss)
|
(179)
|
(1)
|
13
|
47
|
(120)
|
|||||||||
Balance at December 31, 2012
|
$
|
1,174
|
$
|
(820)
|
$
|
(16)
|
$
|
18
|
$
|
356
|
||||
Other comprehensive income before reclassifications
(5)
|
$
|
(756)
|
$
|
283
|
$
|
1
|
$
|
56
|
$
|
(416)
|
||||
Amounts reclassified from accumulated other comprehensive income
(2)
|
(10)
|
(1)
|
(81)
|
(92)
|
||||||||||
Equity method affiliates
(3)
|
74
|
119
|
2
|
1
|
196
|
|||||||||
Net current-period other comprehensive income (loss)
|
(682)
|
392
|
2
|
(24)
|
(312)
|
|||||||||
Balance at December 31, 2013
|
$
|
492
|
$
|
(428)
|
$
|
(14)
|
$
|
(6)
|
$
|
44
|
||||
Other comprehensive income before reclassifications
(6)
|
$
|
(821)
|
$
|
(172)
|
$
|
4
|
$
|
10
|
$
|
(979)
|
||||
Amounts reclassified from accumulated other comprehensive income
(2)
|
(136)
|
18
|
1
|
(6)
|
(123)
|
|||||||||
Equity method affiliates
(3)
|
(116)
|
(127)
|
(6)
|
(249)
|
||||||||||
Net current-period other comprehensive income (loss)
|
(1,073)
|
(281)
|
(1)
|
4
|
(1,351)
|
|||||||||
Balance at December 31, 2014
|
$
|
(581)
|
$
|
(709)
|
$
|
(15)
|
$
|
(2)
|
$
|
(1,307)
|
(1)
|
All amounts are after tax. Amounts in parentheses indicate debits to accumulated other comprehensive income.
|
(2)
|
Tax effects of reclassifications are disclosed separately in this Note 17.
|
(3)
|
Tax effects related to equity method affiliates are not significant.
|
(4)
|
Amounts are net of total tax benefit of $56 million, including $(37) million related to the hedges component, $99 million related to the retirement plans component and $(6) million related to the investments component.
|
(5)
|
Amounts are net of total tax expense of $(197) million, including $(33) million related to the hedges component and $(164) million related to the retirement plans component.
|
(6)
|
Amounts are net of total tax benefit of $96 million, including $(7) million related to the hedges component and $104 million related to the retirement plans component and $(1) million related to the investments component.
|
(1)
|
Amounts in parentheses indicate debits to the statement of income.
|
(2)
|
These accumulated other comprehensive income components are included in net periodic pension cost. See Note 13 – Employee Retirement Plans for additional details.
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Net income attributable to Corning Incorporated
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
||
Less: Series A convertible preferred stock dividend
|
94
|
|||||||
Net income available to common stockholders - basic
|
2,378
|
1,961
|
1,636
|
|||||
Plus: Series A convertible preferred stock dividend
|
94
|
|||||||
Net income available to common stockholders - diluted
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
||
Weighted-average common shares outstanding - basic
|
1,305
|
1,452
|
1,494
|
|||||
Effect of dilutive securities:
|
||||||||
Stock options and other dilutive securities
|
12
|
10
|
12
|
|||||
Series A convertible preferred stock dividend
|
110
|
|||||||
Weighted-average common shares outstanding - diluted
|
1,427
|
1,462
|
1,506
|
|||||
Basic earnings per common share
|
$
|
1.82
|
$
|
1.35
|
$
|
1.10
|
||
Diluted earnings per common share
|
$
|
1.73
|
$
|
1.34
|
$
|
1.09
|
||
Anti-dilutive potential shares excluded from diluted earnings per common share:
|
||||||||
Employee stock options and awards
|
24
|
39
|
43
|
|||||
Accelerated share repurchase forward contract
|
3
|
3
|
||||||
Total
|
27
|
42
|
43
|
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
|
1,606
|
20.99
|
|||||
Exercised
|
(9,338)
|
12.60
|
|||||
Forfeited and expired
|
(683)
|
17.19
|
|||||
Options outstanding as of December 31, 2014
|
48,724
|
18.94
|
4.49
|
$229,808
|
|||
Options expected to vest as of December 31, 2014
|
48,562
|
18.95
|
4.49
|
228,602
|
|||
Options exercisable as of December 31, 2014
|
35,445
|
20.63
|
3.27
|
117,170
|
Shares
(000’s)
|
Weighted-
average
grant-date
fair value
|
||
Non-vested shares at December 31, 2013
|
6,108
|
$14.58
|
|
Granted
|
1,566
|
20.46
|
|
Vested
|
(1,803)
|
16.95
|
|
Forfeited
|
(134)
|
14.90
|
|
Non-vested shares and share units at December 31, 2014
|
5,737
|
15.43
|
·
|
Display Technologies – manufactures glass substrates for flat panel liquid crystal 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
|
||||||||||||||
For the year ended
December 31, 2014
|
||||||||||||||||||||
Net sales
|
$
|
3,851
|
$
|
2,652
|
$
|
1,092
|
$
|
1,205
|
$
|
862
|
$
|
53
|
$
|
9,715
|
||||||
Depreciation
(1)
|
$
|
676
|
$
|
154
|
$
|
119
|
$
|
113
|
$
|
60
|
$
|
31
|
$
|
1,153
|
||||||
Amortization of purchased intangibles
|
$
|
10
|
$
|
22
|
$
|
32
|
||||||||||||||
Research, development and engineering expenses
(2)
|
$
|
138
|
$
|
141
|
$
|
91
|
$
|
140
|
$
|
22
|
$
|
177
|
$
|
709
|
||||||
Restructuring, impairment and other charges
|
$
|
54
|
$
|
17
|
$
|
(1)
|
$
|
1
|
$
|
(3)
|
$
|
68
|
||||||||
Equity in earnings of affiliated companies
|
$
|
(20)
|
$
|
2
|
$
|
18
|
||||||||||||||
Income tax (provision) benefit
|
$
|
(599)
|
$
|
(116)
|
$
|
(91)
|
$
|
(78)
|
$
|
(34)
|
$
|
85
|
$
|
(833)
|
||||||
Net income (loss)
(5)
|
$
|
1,369
|
$
|
205
|
$
|
182
|
$
|
144
|
$
|
71
|
$
|
(196)
|
$
|
1,775
|
||||||
Investment in affiliated companies, at equity
|
$
|
63
|
$
|
2
|
$
|
32
|
$
|
214
|
$
|
311
|
||||||||||
Segment assets
(6)
|
$
|
8,863
|
$
|
1,737
|
$
|
1,297
|
$
|
1,288
|
$
|
553
|
$
|
518
|
$
|
14,256
|
||||||
Capital expenditures
|
$
|
492
|
$
|
145
|
$
|
173
|
$
|
104
|
$
|
30
|
$
|
101
|
$
|
1,045
|
||||||
For the year ended
December 31, 2013
|
||||||||||||||||||||
Net sales
|
$
|
2,545
|
$
|
2,326
|
$
|
919
|
$
|
1,170
|
$
|
851
|
$
|
8
|
$
|
7,819
|
||||||
Depreciation
(1)
|
$
|
481
|
$
|
147
|
$
|
120
|
$
|
137
|
$
|
57
|
$
|
18
|
$
|
960
|
||||||
Amortization of purchased intangibles
|
$
|
10
|
$
|
21
|
$
|
31
|
||||||||||||||
Research, development and engineering expenses
(2)
|
$
|
84
|
$
|
140
|
$
|
89
|
$
|
144
|
$
|
20
|
$
|
116
|
$
|
593
|
||||||
Restructuring, impairment and other charges
|
$
|
7
|
$
|
12
|
$
|
1
|
$
|
19
|
$
|
4
|
$
|
8
|
$
|
51
|
||||||
Equity in earnings of affiliated companies
(4)
|
$
|
357
|
$
|
2
|
$
|
1
|
$
|
4
|
$
|
(24)
|
$
|
340
|
||||||||
Income tax (provision) benefit
|
$
|
(327)
|
$
|
(101)
|
$
|
(65)
|
$
|
(91)
|
$
|
(36)
|
$
|
61
|
$
|
(559)
|
||||||
Net income (loss)
(5)
|
$
|
1,267
|
$
|
199
|
$
|
132
|
$
|
187
|
$
|
71
|
$
|
(163)
|
$
|
1,693
|
||||||
Investment in affiliated companies, at equity
|
$
|
3,666
|
$
|
3
|
$
|
31
|
$
|
10
|
$
|
232
|
$
|
3,942
|
||||||||
Segment assets
(6)
|
$
|
9,501
|
$
|
1,654
|
$
|
1,230
|
$
|
1,333
|
$
|
551
|
$
|
422
|
$
|
14,691
|
||||||
Capital expenditures
|
$
|
350
|
$
|
105
|
$
|
196
|
$
|
62
|
$
|
51
|
$
|
55
|
$
|
819
|
||||||
For the year ended
December 31, 2012
|
||||||||||||||||||||
Net sales
|
$
|
2,909
|
$
|
2,130
|
$
|
964
|
$
|
1,346
|
$
|
657
|
$
|
6
|
$
|
8,012
|
||||||
Depreciation
(1)
|
$
|
514
|
$
|
130
|
$
|
117
|
$
|
153
|
$
|
44
|
$
|
14
|
$
|
972
|
||||||
Amortization of purchased intangibles
|
$
|
9
|
$
|
10
|
$
|
19
|
||||||||||||||
Research, development and engineering expenses
(2)
|
$
|
103
|
$
|
137
|
$
|
100
|
$
|
143
|
$
|
22
|
$
|
123
|
$
|
628
|
||||||
Restructuring, impairment and other charges
(3)
|
$
|
21
|
$
|
39
|
$
|
3
|
$
|
54
|
$
|
2
|
$
|
119
|
||||||||
Equity in earnings of affiliated companies
(4)
|
$
|
692
|
$
|
1
|
$
|
17
|
$
|
710
|
||||||||||||
Income tax (provision) benefit
|
$
|
(367)
|
$
|
(58)
|
$
|
(58)
|
$
|
(69)
|
$
|
(14)
|
$
|
53
|
$
|
(513)
|
||||||
Net income (loss)
(5)
|
$
|
1,589
|
$
|
146
|
$
|
112
|
$
|
137
|
$
|
28
|
$
|
(98)
|
$
|
1,914
|
||||||
Investment in affiliated companies, at equity
|
$
|
3,262
|
$
|
17
|
$
|
30
|
$
|
4
|
$
|
262
|
$
|
3,575
|
||||||||
Segment assets
(6)
|
$
|
9,953
|
$
|
1,435
|
$
|
1,103
|
$
|
1,707
|
$
|
552
|
$
|
351
|
$
|
15,101
|
||||||
Capital expenditures
|
$
|
845
|
$
|
311
|
$
|
154
|
$
|
93
|
$
|
47
|
$
|
52
|
$
|
1,502
|
(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)
|
In 2012, Corning recorded a $44 million impairment charge in the Specialty Materials segment related to certain assets located in Japan used for the production of large cover glass.
|
(4)
|
In 2013, equity in earnings of affiliated companies in the Display Technologies segment included a $28 million restructuring charge for our share of costs for headcount reductions and asset write-offs. In 2012, equity in earnings of affiliated companies in the Display Technologies segment included a $18 million restructuring charge for our share of costs for headcount reductions and asset write-offs.
|
(5)
|
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.
|
(6)
|
Segment assets include inventory, accounts receivable, property, plant and equipment, net, and associated equity companies and cost investments.
|
·
|
In the Display Technologies segment, three customers accounted for 61% of total segment sales.
|
·
|
In the Optical Communications segment, one customer accounted for 11% of total segment sales.
|
·
|
In the Environmental Technologies segment, three customers accounted for 88% of total segment sales.
|
·
|
In the Specialty Materials segment, three customers accounted for 51% of total segment sales.
|
·
|
In the Life Sciences segment, two customers accounted for 45% of total segment sales.
|
Years ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Net income of reportable segments
|
$
|
1,971
|
$
|
1,856
|
$
|
2,012
|
||
Net loss of All Other
|
(196)
|
(163)
|
(98)
|
|||||
Unallocated amounts:
|
||||||||
Net financing costs
(1)
|
(113)
|
(66)
|
(196)
|
|||||
Stock-based compensation expense
|
(58)
|
(54)
|
(70)
|
|||||
Exploratory research
|
(102)
|
(112)
|
(89)
|
|||||
Corporate contributions
|
(43)
|
(42)
|
(44)
|
|||||
Equity in earnings of affiliated companies, net of impairments
(2)
|
269
|
207
|
82
|
|||||
Asbestos settlement
|
(13)
|
(19)
|
(14)
|
|||||
Purchased collars and average rate forward contracts
|
639
|
197
|
||||||
Other corporate items
(3)
|
118
|
157
|
53
|
|||||
Net income
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
(1)
|
Net financing costs include interest expense, interest income, and interest costs and investment gains and losses associated with benefit plans.
|
(2)
|
Equity in earnings of affiliated companies is primarily equity in earnings of Dow Corning, which includes the following items:
|
·
|
In 2014, Dow Corning’s net income includes an after-tax gain of $365 million from the reduction of the Implant Liability, an after-tax gain on a derivative instrument of $29 million, foreign tax credits of approximately $99 million, and an energy tax credit of approximately $13 million, offset partially by the after-tax charge of $432 million for the abandonment of a polycrystalline silicon plant expansion.
|
·
|
In 2013, gains in the amount of approximately $30 million for the resolution of contract disputes against customers relating to enforcement of long-term supply agreements and $16 million for the positive impact of the settlement of a derivative, along with a charge of $4 million related to the impact of a tax valuation allowance. Also included are restructuring charges in the amount of $11 million.
|
·
|
In 2012, restructuring and impairment charges in the amount of $87 million for our share of a charge related to workforce reductions and asset write-offs at Dow Corning, and a $10 million credit for Corning’s share of Dow Corning’s settlement of a dispute related to long term supply agreements.
|
(3)
|
Other corporate items include the tax impact of the unallocated amounts, excluding purchased collars and average rate forward contracts, and the following significant items:
|
·
|
In 2014, Corning recorded $150 million from changes in deferred tax valuation allowances and $46 million of tax expense related to out-of-period transfer pricing adjustments.
|
·
|
In 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 2012, Corning recorded a $52 million translation gain on the liquidation of a foreign subsidiary; a loss of $26 million ($17 million after tax) from the repurchase of $13 million principal amount of our 8.875% senior unsecured notes due 2021, $11 million of our 8.875% senior unsecured notes due 2016, and $51 million principal amount of our 6.75% senior unsecured notes due 2013; and a $37 million tax expense resulting from the delay of the passage of the American Taxpayer Relief Act of 2012 until January 2013, that was reversed in the first quarter of 2013.
|
December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Total assets of reportable segments
|
$
|
13,738
|
$
|
14,269
|
$
|
14,750
|
||
Non-reportable segments
|
518
|
422
|
351
|
|||||
Unallocated amounts:
|
||||||||
Current assets
(1)
|
7,402
|
6,349
|
7,300
|
|||||
Investments
(2)
|
1,490
|
1,595
|
1,340
|
|||||
Property, plant and equipment, net
(3)
|
1,657
|
1,594
|
1,494
|
|||||
Other non-current assets
(4)
|
5,258
|
4,249
|
4,140
|
|||||
Total assets
|
$
|
30,063
|
$
|
28,478
|
$
|
29,375
|
(1)
|
Includes current corporate assets, primarily cash, short-term investments, current portion of long-term derivative assets and deferred taxes.
|
(2)
|
Represents corporate investments in affiliated companies, at both cost and equity (primarily Dow Corning).
|
(3)
|
Represents corporate property not specifically identifiable to an operating segment.
|
(4)
|
Includes non-current corporate assets, pension assets, long-term derivative assets and deferred taxes.
|
Fiscal Years Ended December 31,
|
||||||||
Revenues from External Customers
|
2014
|
2013
|
2012
|
|||||
Display Technologies
|
$
|
3,851
|
$
|
2,545
|
$
|
2,909
|
||
Optical Communications
|
||||||||
Carrier network
|
2,036
|
1,782
|
1,619
|
|||||
Enterprise network
|
616
|
544
|
511
|
|||||
Total Optical Communications
|
2,652
|
2,326
|
2,130
|
|||||
Environmental Technologies
|
||||||||
Automotive and other
|
528
|
485
|
486
|
|||||
Diesel
|
564
|
434
|
478
|
|||||
Total Environmental Technologies
|
1,092
|
919
|
964
|
|||||
Specialty Materials
|
||||||||
Corning Gorilla Glass
|
846
|
848
|
1,027
|
|||||
Advanced optics and other specialty glass
|
359
|
322
|
319
|
|||||
Total Specialty Materials
|
1,205
|
1,170
|
1,346
|
|||||
Life Sciences
|
||||||||
Labware
|
536
|
529
|
430
|
|||||
Cell culture products
|
326
|
322
|
227
|
|||||
Total Life Science
|
862
|
851
|
657
|
|||||
All Other
|
53
|
8
|
6
|
|||||
$
|
9,715
|
$
|
7,819
|
$
|
8,012
|
2014
|
2013
|
2012
|
||||||||||||||||
Net
sales
(2)
|
Long-
lived
assets
(1)
|
Net
sales
(2)
|
Long-
lived
assets
(1)
|
Net
sales
(2)
|
Long-
lived
assets
(1)
|
|||||||||||||
North America
|
||||||||||||||||||
United States
|
$
|
2,275
|
$
|
7,998
|
$
|
2,061
|
$
|
7,170
|
$
|
1,859
|
$
|
6,771
|
||||||
Canada
|
311
|
308
|
246
|
|||||||||||||||
Mexico
|
35
|
50
|
23
|
36
|
24
|
87
|
||||||||||||
Total North America
|
2,621
|
8,048
|
2,392
|
7,206
|
2,129
|
6,858
|
||||||||||||
Asia Pacific
|
||||||||||||||||||
Japan
|
608
|
1,311
|
621
|
1,548
|
751
|
1,949
|
||||||||||||
Taiwan
|
1,092
|
2,005
|
1,376
|
2,277
|
1,708
|
2,836
|
||||||||||||
China
|
1,893
|
1,115
|
1,916
|
1,218
|
2,103
|
1,215
|
||||||||||||
Korea
|
1,882
|
3,595
|
96
|
3,234
|
94
|
3,342
|
||||||||||||
Other
|
308
|
109
|
278
|
127
|
243
|
84
|
||||||||||||
Total Asia Pacific
|
5,783
|
8,135
|
4,287
|
8,404
|
4,899
|
9,426
|
||||||||||||
Europe
|
||||||||||||||||||
Germany
|
397
|
217
|
337
|
171
|
264
|
139
|
||||||||||||
France
|
81
|
277
|
79
|
287
|
57
|
267
|
||||||||||||
United Kingdom
|
187
|
176
|
165
|
6
|
134
|
14
|
||||||||||||
Other
|
369
|
980
|
280
|
1,147
|
274
|
550
|
||||||||||||
Total Europe
|
1,034
|
1,650
|
861
|
1,611
|
729
|
970
|
||||||||||||
Latin America
|
||||||||||||||||||
Brazil
|
67
|
36
|
77
|
66
|
29
|
1
|
||||||||||||
Other
|
35
|
37
|
6
|
33
|
6
|
|||||||||||||
Total Latin America
|
102
|
36
|
114
|
72
|
62
|
7
|
||||||||||||
All Other
|
175
|
19
|
165
|
25
|
193
|
35
|
||||||||||||
Total
|
$
|
9,715
|
$
|
17,888
|
$
|
7,819
|
$
|
17,318
|
$
|
8,012
|
$
|
17,296
|
(1)
|
Long-lived assets primarily include investments, plant and equipment, goodwill and other intangible assets. In 2014, assets in the U.S. include the investment in Dow Corning. In 2013 and 2012, assets in the U.S. and South Korea include investments in Dow Corning and Samsung Corning Precision Materials.
|
(2)
|
Net sales are attributed to countries based on location of customer.
|
Year ended December 31, 2014
|
Balance at
beginning
of period
|
Additions
|
Net
deductions
and other
|
Balance at
end
of period
|
|||||||
Doubtful accounts and allowances
|
$
|
28
|
$
|
19
|
$
|
47
|
|||||
Deferred tax assets valuation allowance
|
$
|
286
|
$
|
186
|
$
|
174
|
$
|
298
|
|||
Accumulated amortization of purchased intangible assets
|
$
|
185
|
$
|
31
|
$
|
216
|
|||||
Reserves for accrued costs of business restructuring
|
$
|
44
|
$
|
49
|
$
|
49
|
$
|
44
|
Year ended December 31, 2013
|
Balance at
beginning
of period
|
Additions
|
Net
deductions
and other
|
Balance at
end
of period
|
|||||||
Doubtful accounts and allowances
|
$
|
26
|
$
|
2
|
$
|
28
|
|||||
Deferred tax assets valuation allowance
|
$
|
210
|
$
|
80
|
$
|
4
|
$
|
286
|
|||
Accumulated amortization of purchased intangible assets
|
$
|
154
|
$
|
31
|
$
|
185
|
|||||
Reserves for accrued costs of business restructuring
|
$
|
42
|
$
|
41
|
$
|
39
|
$
|
44
|
Year ended December 31, 2012
|
Balance at
beginning
of period
|
Additions
|
Net
deductions
and other
|
Balance at
end
of period
|
|||||||
Doubtful accounts and allowances
|
$
|
19
|
$
|
7
|
$
|
26
|
|||||
Deferred tax assets valuation allowance
|
$
|
219
|
$
|
10
|
$
|
19
|
$
|
210
|
|||
Accumulated amortization of purchased intangible assets
|
$
|
135
|
$
|
19
|
$
|
154
|
|||||
Reserves for accrued costs of business restructuring
|
$
|
10
|
$
|
52
|
$
|
20
|
$
|
42
|
2014
|
First
quarter
|
Second
quarter
|
Third
quarter
|
Fourth
quarter
|
Total
year
|
|||||||||
Net sales
|
$
|
2,289
|
$
|
2,482
|
$
|
2,540
|
$
|
2,404
|
$
|
9,715
|
||||
Gross margin
|
$
|
935
|
$
|
1,032
|
$
|
1,089
|
$
|
996
|
$
|
4,052
|
||||
Restructuring, impairment and other credits
|
$
|
17
|
$
|
34
|
$
|
20
|
$
|
71
|
||||||
Asbestos litigation charges
|
$
|
2
|
$
|
4
|
$
|
5
|
$
|
(20)
|
$
|
(9)
|
||||
Equity in earnings of affiliated companies
|
$
|
86
|
$
|
62
|
$
|
95
|
$
|
23
|
$
|
266
|
||||
Provision for income taxes
|
$
|
(180)
|
$
|
(172)
|
$
|
(395)
|
$
|
(349)
|
$
|
(1,096)
|
||||
Net income attributable to Corning Incorporated
|
$
|
301
|
$
|
169
|
$
|
1,014
|
$
|
988
|
$
|
2,472
|
||||
Basic earnings per common share
|
$
|
0.21
|
$
|
0.11
|
$
|
0.77
|
$
|
0.76
|
$
|
1.82
|
||||
Diluted earnings per common share
|
$
|
0.20
|
$
|
0.11
|
$
|
0.72
|
$
|
0.70
|
$
|
1.73
|
2013
|
First
quarter
|
Second
quarter
|
Third
quarter
|
Fourth
quarter
|
Total
year
|
|||||||||
Net sales
|
$
|
1,814
|
$
|
1,982
|
$
|
2,067
|
$
|
1,956
|
$
|
7,819
|
||||
Gross margin
|
$
|
770
|
$
|
883
|
$
|
901
|
$
|
770
|
$
|
3,324
|
||||
Restructuring, impairment and other charges
|
$
|
67
|
$
|
67
|
||||||||||
Asbestos litigation charges
|
$
|
2
|
$
|
6
|
$
|
5
|
$
|
6
|
$
|
19
|
||||
Equity in earnings of affiliated companies
|
$
|
173
|
$
|
166
|
$
|
138
|
$
|
70
|
$
|
547
|
||||
Provision for income taxes
|
$
|
(34)
|
$
|
(191)
|
$
|
(141)
|
$
|
(146)
|
$
|
(512)
|
||||
Net income attributable to Corning Incorporated
|
$
|
494
|
$
|
638
|
$
|
408
|
$
|
421
|
$
|
1,961
|
||||
Basic earnings per common share
|
$
|
0.33
|
$
|
0.43
|
$
|
0.28
|
$
|
0.30
|
$
|
1.35
|
||||
Diluted earnings per common share
|
$
|
0.33
|
$
|
0.43
|
$
|
0.28
|
$
|
0.30
|
$
|
1.34
|
Page
|
||
146
|
||
for the years ended December 31, 2014, 2013, and 2012
|
147
|
|
for the years ended December 31, 2014, 2013, and 2012
|
148
|
|
149
|
||
for the years ended December 31, 2014, 2013, and 2012
|
151
|
|
for the years ended December 31, 2014, 2013, and 2012
|
152
|
|
154
|
Years Ended December 31,
|
||||||||
2014
|
2013
|
2012
|
||||||
Net Sales
|
$ 6,221.3
|
$ 5,710.5
|
$ 6,118.5
|
|||||
Operating Costs and Expenses
|
||||||||
Cost of sales
|
4,678.1
|
4,430.6
|
4,705.1
|
|||||
Marketing and administrative expenses
|
663.1
|
699.5
|
787.3
|
|||||
Gains on long-term sales agreements
|
(39.0)
|
(228.5)
|
(48.2)
|
|||||
Asset charges and restructuring expenses
|
1,481.0
|
165.5
|
365.0
|
|||||
Total operating costs and expenses
|
6,783.2
|
5,067.1
|
5,809.2
|
|||||
Operating Income (Loss)
|
(561.9)
|
643.4
|
309.3
|
|||||
Interest income
|
9.3
|
7.9
|
11.9
|
|||||
Interest expense
|
(49.0)
|
(45.7)
|
(3.9)
|
|||||
Other nonoperating income, net
|
8.4
|
61.9
|
30.9
|
|||||
Implant liability adjustment
|
1,299.8
|
-
|
-
|
|||||
Income before Income Taxes
|
706.6
|
667.5
|
348.2
|
|||||
Income tax provision
|
132.0
|
233.8
|
162.9
|
|||||
Net Income
|
574.6
|
433.7
|
185.3
|
|||||
Less: Noncontrolling interests' share in net income
|
61.8
|
57.4
|
(2.4)
|
|||||
Net Income Attributable to Dow Corning Corporation
|
$ 512.8
|
$ 376.3
|
$ 187.7
|
|||||
Weighted-Average Common Shares Outstanding
|
2.5
|
2.5
|
2.5
|
|||||
(basic and diluted)
|
||||||||
Net Income per Share (basic and diluted)
|
$ 205.12
|
$ 150.52
|
$ 75.08
|
|||||
Dividends Declared per Common Share
|
$ 100.00
|
$ 80.00
|
$ 80.00
|
Years Ended December 31,
|
|||||||
2014
|
2013
|
2012
|
|||||
Net Income
|
$ 574.6
|
$ 433.7
|
$ 185.3
|
||||
Other comprehensive income (loss), before tax:
|
|||||||
Foreign currency translation adjustments
|
(170.8)
|
(2.7)
|
(26.9)
|
||||
Unrealized net gain (loss) on securities:
|
|||||||
Unrealized holding gain arising during the period
|
8.2
|
4.8
|
22.7
|
||||
Reclassificaton adjustment for gain included in income
|
(17.6)
|
-
|
(3.4)
|
||||
Net gain (loss) on cash flow hedges:
|
|||||||
Unrealized gain (loss) arising during the period
|
-
|
0.2
|
(2.9)
|
||||
Reclassification adjustment for loss included in income
|
-
|
5.4
|
9.4
|
||||
Defined benefit plan adjustments:
|
|||||||
Gain (loss) arising during the period
|
(467.7)
|
292.7
|
23.8
|
||||
Amortization of pension adjustments included in income
|
49.0
|
81.5
|
84.2
|
||||
Other comprehensive income (loss), before tax
|
(598.9)
|
381.9
|
106.9
|
||||
Income tax (expense) benefit related to items of OCI
1
|
141.9
|
(130.1)
|
(40.3)
|
||||
Other comprehensive income (loss), net of tax
|
(457.0)
|
251.8
|
66.6
|
||||
Comprehensive Income
|
117.6
|
685.5
|
251.9
|
||||
Less: Noncontrolling interests' share in comprehensive income
|
47.4
|
44.4
|
(16.5)
|
||||
Comprehensive Income Attributable to Dow Corning Corporation
|
$ 70.2
|
$ 641.1
|
$ 268.4
|
ASSETS
|
||||||
December 31,
2014
|
December 31,
2013
|
|||||
Current Assets
|
|
|
|
|||
Cash and cash equivalents
|
$ 2,291.2
|
|
$ 1,826.1
|
|||
Accounts receivable (net of allowance for doubtful accounts of $10.4 in 2014 and 2013)
|
745.9
|
|
721.4
|
|||
Notes and other receivables
|
246.0
|
|
225.7
|
|||
Inventories
|
1,083.8
|
|
1,003.8
|
|||
Deferred income taxes - current
|
263.7
|
|
106.0
|
|||
Other current assets
|
81.4
|
|
112.7
|
|||
Total current assets
|
4,712.0
|
|
3,995.7
|
|||
|
||||||
Property, Plant and Equipment
|
10,683.1
|
|
12,538.4
|
|||
Less - Accumulated Depreciation
|
(5,276.3)
|
|
(5,307.3)
|
|||
Net property, plant and equipment
|
5,406.8
|
|
7,231.1
|
|||
|
||||||
Other Assets
|
|
|||||
Marketable securities
|
86.1
|
|
96.3
|
|||
Deferred income taxes - noncurrent
|
311.0
|
|
362.1
|
|||
Intangible assets (net of accumulated amortization of $58.4 in 2014 and 2013)
|
70.9
|
|
77.1
|
|||
Goodwill
|
61.9
|
|
70.3
|
|||
Other noncurrent assets
|
496.4
|
|
469.5
|
|||
Total other assets
|
1,026.3
|
|
1,075.3
|
|||
Total Assets
|
$ 11,145.1
|
|
$ 12,302.1
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||
December 31, 2014
|
December 31, 2013
|
||||||
Current Liabilities
|
|||||||
Short-term borrowings and current maturities of long-term debt
|
|||||||
$ 7.0
|
|
$ 79.3
|
|||||
Trade accounts payable
|
522.9
|
|
460.0
|
||||
Accrued payrolls and employee benefits
|
207.0
|
|
149.6
|
||||
Accrued taxes
|
99.2
|
|
87.7
|
||||
Accrued interest
|
106.8
|
|
101.4
|
||||
Current deferred revenue
|
319.6
|
|
305.2
|
||||
Other current liabilities
|
185.7
|
|
162.8
|
||||
Total current liabilities
|
1,448.2
|
|
1,346.0
|
||||
|
|||||||
Other Liabilities
|
|
||||||
Long-term debt
|
945.4
|
|
937.1
|
||||
Implant liability
|
363.6
|
|
1,616.4
|
||||
Employee benefits
|
1,552.0
|
|
1,137.0
|
||||
Deferred income tax liabilities - noncurrent
|
42.2
|
|
20.3
|
||||
Deferred revenue
|
2,882.7
|
|
3,137.4
|
||||
Other noncurrent liabilities
|
284.3
|
|
329.3
|
||||
Total other liabilities
|
6,070.2
|
|
7,177.5
|
||||
|
|||||||
Equity
|
|||||||
Stockholders' equity
|
|
||||||
|
Common stock ($5.00 par value - 2,500,000 shares authorized, issued and outstanding)
|
|
|||||
12.5
|
|
12.5
|
|||||
Retained earnings
|
3,794.6
|
|
3,531.8
|
||||
Accumulated other comprehensive loss
|
(814.4)
|
|
(371.8)
|
||||
Dow Corning Corporation's stockholders' equity
|
2,992.7
|
|
3,172.5
|
||||
Noncontrolling interest in consolidated subsidiaries
|
634.0
|
|
606.1
|
||||
Total equity
|
3,626.7
|
3,778.6
|
|||||
Total Liabilities and Equity
|
$ 11,145.1
|
$ 12,302.1
|
Years ended December 31,
|
|||||||||
2014
|
2013
|
2012
|
|||||||
Cash Flows from Operating Activities
|
|||||||||
Net income
|
$ 574.6
|
$ 433.7
|
$ 185.3
|
||||||
Depreciation and amortization
|
491.3
|
490.1
|
398.6
|
||||||
Gains on long-term sales agreements
|
(39.0)
|
(228.5)
|
(48.2)
|
||||||
Cash flows related to gains on long-term sales agreements
|
-
|
183.2
|
213.7
|
||||||
Asset charges and restructuring expenses
|
1,481.0
|
113.9
|
365.0
|
||||||
Changes in restructuring accrual
|
(14.3)
|
(53.1)
|
-
|
||||||
Changes in deferred revenue, net
|
(201.2)
|
(77.8)
|
(35.8)
|
||||||
Changes in deferred taxes, net
|
45.7
|
(68.7)
|
66.2
|
||||||
Tax-related bond deposits, net
|
29.2
|
17.9
|
112.2
|
||||||
Other, net
|
83.8
|
119.3
|
109.1
|
||||||
Changes in operating assets and liabilities
|
|||||||||
Changes in accounts and notes receivable
|
(46.1)
|
29.9
|
169.6
|
||||||
Changes in accounts payable
|
36.7
|
11.5
|
(110.4)
|
||||||
Changes in inventory
|
(123.6)
|
3.1
|
69.3
|
||||||
Changes in other operating assets and liabilities
|
98.6
|
14.6
|
35.0
|
||||||
Cash flows related to reorganization, net
|
(0.4)
|
(24.4)
|
(26.8)
|
||||||
Implant liability adjustment
|
(1,299.8)
|
-
|
-
|
||||||
Cash provided by operating activities
|
1,116.5
|
964.7
|
1,502.8
|
||||||
Cash Flows from Investing Activities
|
|||||||||
Capital expenditures
|
(249.8)
|
(363.3)
|
(1,042.0)
|
||||||
Proceeds from sales, maturities, and redemptions of securities
|
18.9
|
-
|
117.3
|
||||||
Other, net
|
(58.5)
|
(29.9)
|
(6.2)
|
||||||
Cash used in investing activities
|
(289.4)
|
(393.2)
|
(930.9)
|
||||||
Cash Flows from Financing Activities
|
|||||||||
Increase in short-term borrowings
|
-
|
99.0
|
71.2
|
||||||
Payments of short-term borrowings
|
(73.2)
|
(99.0)
|
(134.4)
|
||||||
Increase in long-term debt
|
16.3
|
166.1
|
-
|
||||||
Payments of long-term debt
|
(12.6)
|
(202.6)
|
(655.2)
|
||||||
Loans from noncontrolling shareholders
|
-
|
-
|
112.2
|
||||||
Distributions to shareholders of noncontrolling interests
|
(19.5)
|
(14.0)
|
(63.6)
|
||||||
Acquisition of additional shares of noncontrolling interests
|
-
|
(266.0)
|
-
|
||||||
Dividends paid to stockholders
|
(250.0)
|
(200.0)
|
(200.0)
|
||||||
Cash used in financing activities
|
(339.0)
|
(516.5)
|
(869.8)
|
||||||
Effect of Exchange Rate Changes on Cash
|
(23.0)
|
0.7
|
2.2
|
||||||
Changes in Cash and Cash Equivalents
|
|||||||||
Net increase (decrease) in cash and cash equivalents
|
465.1
|
55.7
|
(295.7)
|
||||||
Cash and cash equivalents at beginning of period
|
1,826.1
|
1,770.4
|
2,066.1
|
||||||
Cash and cash equivalents at end of period
|
$ 2,291.2
|
$ 1,826.1
|
$ 1,770.4
|
Total
|
Noncontrolling
Interest
|
Dow Corning Corporation Stockholders' Equity
|
|||||||||||
Total
Stockholders'
Equity
|
Retained
Earnings
|
AOCI
1
|
Common
Stock
|
||||||||||
Balance as of December 31, 2011
|
$ 3,584.9
|
$ 767.1
|
$ 2,817.8
|
$ 3,522.6
|
$ (717.3)
|
$ 12.5
|
|||||||
Net Income
|
185.3
|
(2.4)
|
187.7
|
187.7
|
|||||||||
Other comprehensive income (loss), net of tax
|
|||||||||||||
Foreign currency translation adjustments
|
(26.9)
|
(16.3)
|
(10.6)
|
(10.6)
|
|||||||||
Unrealized net gain on available for sale securities
|
19.3
|
1.8
|
17.5
|
17.5
|
|||||||||
Net loss on cash flow hedges
|
4.1
|
-
|
4.1
|
4.1
|
|||||||||
Pension and other postretirement benefit adjustments
|
70.1
|
0.4
|
69.7
|
69.7
|
|||||||||
Total comprehensive income (loss)
|
251.9
|
(16.5)
|
268.4
|
||||||||||
Dividends declared on common stock, distributions to shareholders of noncontrolling interests and other
|
(263.6)
|
(63.6)
|
(200.0)
|
(200.0)
|
|||||||||
Balance as of December 31, 2012
|
$ 3,573.2
|
$ 687.0
|
$ 2,886.2
|
$ 3,510.3
|
$ (636.6)
|
$ 12.5
|
|||||||
Net Income
|
433.7
|
57.4
|
376.3
|
376.3
|
|||||||||
Other comprehensive income (loss), net of tax
|
|||||||||||||
Foreign currency translation adjustments
|
(2.7)
|
(14.2)
|
11.5
|
11.5
|
|||||||||
Unrealized net gain on available for sale securities
|
4.8
|
1.1
|
3.7
|
3.7
|
|||||||||
Net gain on cash flow hedges
|
3.6
|
-
|
3.6
|
3.6
|
|||||||||
Pension and other postretirement benefit adjustments
|
246.1
|
0.1
|
246.0
|
246.0
|
|||||||||
Total comprehensive income
|
685.5
|
44.4
|
641.1
|
||||||||||
Dividends declared on common stock, distributions to shareholders of noncontrolling interests and other
|
(214.0)
|
(14.0)
|
(200.0)
|
(200.0)
|
|||||||||
Acquisition of additional shares of noncontrolling interests
|
(266.1)
|
(111.3)
|
(154.8)
|
(154.8)
|
|||||||||
Balance as of December 31, 2013
|
$ 3,778.6
|
$ 606.1
|
$ 3,172.5
|
$ 3,531.8
|
$ (371.8)
|
$ 12.5
|
|||||||
Net Income
|
574.6
|
61.8
|
512.8
|
512.8
|
|||||||||
Other comprehensive income (loss), net of tax
|
|||||||||||||
Foreign currency translation adjustments
|
(170.8)
|
(12.7)
|
(158.1)
|
(158.1)
|
|||||||||
Unrealized net (loss) on available for sale securities
|
(9.4)
|
(1.6)
|
(7.8)
|
(7.8)
|
|||||||||
Pension and other postretirement benefit adjustments
|
(276.8)
|
(0.1)
|
(276.7)
|
(276.7)
|
|||||||||
Total comprehensive income
|
117.6
|
47.4
|
70.2
|
||||||||||
Dividends declared on common stock, distributions to shareholders of noncontrolling interests and other
|
(269.5)
|
(19.5)
|
(250.0)
|
(250.0)
|
|||||||||
Balance as of December 31, 2014
|
$ 3,626.7
|
$ 634.0
|
$ 2,992.7
|
$ 3,794.6
|
$ (814.4)
|
$ 12.5
|
Note
|
Page
|
|
1
|
154
|
|
2
|
154
|
|
3
|
159
|
|
4
|
160
|
|
5
|
161
|
|
6
|
161
|
|
7
|
162
|
|
8
|
163
|
|
9
|
165
|
|
10
|
166
|
|
11
|
166
|
|
12
|
166
|
|
13
|
167
|
|
14
|
168
|
|
15
|
169
|
|
16
|
175
|
|
17
|
176
|
|
18
|
179
|
|
19
|
180
|
December 31, 2014
|
||||||||||
Level
|
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
(Losses)
|
Fair
Value
|
||||||
Debt Securities - Auction rate preferred securities
|
Level 3
|
$ 76.0
|
$ -
|
$ (3.1)
|
$ 72.9
|
|||||
Foreign Equity Securities
|
Level 1
|
0.5
|
2.1
|
-
|
2.6
|
|||||
Preferred Equity Securities
|
Level 2
|
-
|
-
|
-
|
-
|
|||||
Other
|
Level 1
|
10.6
|
-
|
-
|
10.6
|
|||||
Total Marketable Securities
|
$ 87.1
|
$ 2.1
|
$ (3.1)
|
$ 86.1
|
December 31, 2013
|
||||||||||
Level
|
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
(Losses)
|
Fair
Value
|
||||||
Debt Securities - Auction rate preferred securities
|
Level 3
|
$ 76.0
|
$ -
|
$ (7.0)
|
$ 69.0
|
|||||
Foreign Equity Securities
|
Level 1
|
1.0
|
2.1
|
-
|
3.1
|
|||||
Preferred Equity Securities
|
Level 2
|
0.9
|
13.3
|
-
|
14.2
|
|||||
Other
|
Level 1
|
10.0
|
-
|
-
|
10.0
|
|||||
Total Marketable Securities
|
$ 87.9
|
$ 15.4
|
$ (7.0)
|
$ 96.3
|
2014
|
2013
|
||
Beginning balance as of January 1
|
$ 69.0
|
$ 75.7
|
|
Transfers out of Level 3
|
-
|
-
|
|
Change in unrealized losses in other comprehensive loss
|
3.9
|
(6.7)
|
|
Realized gains/(losses) included in earnings
|
-
|
-
|
|
Sales/redemptions of assets classified as Level 3
|
-
|
-
|
|
Ending balance as of December 31
|
$ 72.9
|
$ 69.0
|
December 31, 2014
|
|||||||
Fair Value
|
Valuation
Technique
|
Unobservable
Input
|
Range
|
||||
Auction rate preferred securities
|
$72.9
|
Effective interest
|
Market required effective interest rate
|
4.0% - 5.0%
|
December 31, 2014
|
December 31, 2013
|
||
Produced goods
|
$ 777.8
|
$ 738.0
|
|
Purchased materials
|
181.5
|
134.1
|
|
Maintenance and supplies
|
124.5
|
131.7
|
|
Total Inventory
|
$ 1,083.8
|
$ 1,003.8
|
Years ended December 31,
|
|||||
2014
|
2013
|
2012
|
|||
Domestic
|
$ 358.5
|
$ 276.5
|
$ 175.5
|
||
Foreign
|
348.1
|
391.0
|
172.7
|
||
Total
|
$ 706.6
|
$ 667.5
|
$ 348.2
|
Years Ended December 31,
|
|||||||||||||||||
2014
|
2013
|
2012
|
|||||||||||||||
Current
|
Deferred
|
Total
|
Current
|
Deferred
|
Total
|
Current
|
Deferred
|
Total
|
|||||||||
Domestic
|
$ (30.3)
|
$ 33.0
|
$ 2.7
|
$ 213.1
|
$ (154.8)
|
$ 58.3
|
$ (61.2)
|
$ 104.2
|
$ 43.0
|
||||||||
Foreign
|
113.4
|
15.9
|
129.3
|
114.6
|
60.9
|
175.5
|
115.1
|
4.8
|
119.9
|
||||||||
Total
|
$ 83.1
|
$ 48.9
|
$ 132.0
|
$ 327.7
|
$ (93.9)
|
$ 233.8
|
$ 53.9
|
$ 109.0
|
$ 162.9
|
December 31,
|
||||
2014
|
2013
|
|||
Deferred Tax Assets:
|
||||
Implant costs
|
$ 132.4
|
$ 592.4
|
||
Postretirement benefit obligations
|
513.1
|
382.2
|
||
Tax loss carryforwards
|
151.4
|
143.8
|
||
Tax credit carryforwards
|
427.5
|
159.2
|
||
Accruals and other
|
135.8
|
147.4
|
||
Inventories
|
18.9
|
3.7
|
||
Long-term debt
|
45.5
|
44.3
|
||
Deferred revenue
|
172.6
|
120.8
|
||
Total deferred tax assets
|
$1,597.2
|
$1,593.8
|
||
Deferred tax liabilities:
|
||||
Property, plant and equipment
|
(868.1)
|
(981.7)
|
||
Net deferred tax assets prior to valuation allowance
|
$ 729.1
|
$ 612.1
|
||
Less: Valuation allowance
|
(197.9)
|
(169.7)
|
||
Net Deferred Tax Assets
|
$ 531.2
|
$ 442.4
|
Years Ended December 31,
|
||||||
2014
|
2013
|
2012
|
||||
Income Tax Provision at Statutory Rate
|
$ 247.3
|
$ 233.6
|
$ 121.9
|
|||
Increase/(Decrease) in Income Tax Provision due to:
|
||||||
Foreign provisions and related items
|
(16.8)
|
6.7
|
(25.0)
|
|||
Domestic manufacturing deduction
|
8.5
|
(20.7)
|
4.9
|
|||
Valuation allowances
|
(4.3)
|
11.7
|
(1.4)
|
|||
Change in foreign tax rates
|
-
|
13.1
|
10.2
|
|||
Tax reserves
|
-
|
(8.1)
|
8.6
|
|||
Noncontrolling interest losses
|
-
|
4.5
|
46.0
|
|||
U.S. tax effect of foreign earnings and dividends
|
(93.6)
|
2.9
|
4.0
|
|||
Other, net
|
(9.1)
|
(9.9)
|
(6.3)
|
|||
Total Income Tax Provision at Effective Rate
|
$ 132.0
|
$ 233.8
|
$ 162.9
|
|||
Effective Rate
|
18.7%
|
35.0%
|
46.8%
|
Year
|
Year
|
|||
United Kingdom
|
2013
|
Korea
|
2013
|
|
Belgium
|
2012
|
Brazil
|
2009
|
|
Japan
|
2010
|
China
|
2009
|
|
Germany
|
2011
|
United States
|
2006
|
Years Ended December 31,
|
|||||
2014
|
2013
|
2012
|
|||
Unrecognized tax benefits as of January 1
|
$ 89.5
|
$ 16.9
|
$ 3.7
|
||
Additions based on tax positions related to the current year
|
11.2
|
70.6
|
-
|
||
Additions for tax positions of prior years
|
-
|
33.7
|
27.8
|
||
Reductions to tax positions related to the current year
|
16.7
|
||||
Reductions for tax positions of prior years
|
(2.1)
|
(5.6)
|
(0.3)
|
||
Settlements
|
(12.9)
|
(26.1)
|
(14.3)
|
||
Balance as of December 31
|
$ 102.4
|
$ 89.5
|
$ 16.9
|
Estimated Useful
|
December 31,
|
|||||
Life (Years)
|
2014
|
2013
|
||||
Land
|
-
|
$ 138.8
|
$ 204.3
|
|||
Land improvements
|
11-20
|
355.3
|
545.4
|
|||
Buildings
|
18-33
|
2,248.4
|
2,918.7
|
|||
Machinery and equipment
|
3-25
|
7,774.8
|
8,735.9
|
|||
Construction-in-progress
|
-
|
165.8
|
134.1
|
|||
Total property, plant and equipment
|
$ 10,683.1
|
$ 12,538.4
|
||||
Accumulated depreciation
|
(5,276.3)
|
(5,307.3)
|
||||
Net property, plant and equipment
|
$ 5,406.8
|
$ 7,231.1
|
December 31, 2014
|
||||||
Gross
Carrying Amount
|
Accumulated
Amortization
|
Net
Carrying Amount
|
||||
Patents and licenses
|
$ 5.6
|
$ (4.2)
|
$ 1.4
|
|||
Completed technology
|
13.3
|
(9.8)
|
3.5
|
|||
Electricity contract
|
35.3
|
(15.8)
|
19.5
|
|||
Land use rights
|
52.4
|
(7.5)
|
44.9
|
|||
Other
|
22.7
|
(21.1)
|
1.6
|
|||
Total
|
$ 129.3
|
$ (58.4)
|
$ 70.9
|
December 31, 2013
|
||||||
Gross
Carrying Amount
|
Accumulated
Amortization
|
Net
Carrying Amount
|
||||
Patents and licenses
|
$ 6.5
|
$ (0.2)
|
$ 6.3
|
|||
Completed technology
|
15.2
|
(14.2)
|
1.0
|
|||
Electricity contract
|
35.3
|
(13.2)
|
22.1
|
|||
Land use rights
|
52.6
|
(6.5)
|
46.1
|
|||
Other
|
25.9
|
(24.3)
|
1.6
|
|||
Total
|
$ 135.5
|
$ (58.4)
|
$ 77.1
|
Years Ended December 31,
|
||||||||
2014
|
Rates
|
2013
|
Rates
|
|||||
Long-term debt
|
||||||||
Variable rate notes due 2016
|
$ 150.0
|
1.3%
|
$ 150.0
|
1.3%
|
||||
Fixed rate notes due 2018
|
350.0
|
4.1%
|
350.0
|
4.1%
|
||||
Variable rate bonds due 2019
|
2.0
|
0.2%
|
2.5
|
0.2%
|
||||
Fixed rate notes due 2021
|
350.0
|
4.8%
|
350.0
|
4.8%
|
||||
Other obligations and capital leases
|
100.4
|
2.6-9.0%
|
90.1
|
3.5-9.0%
|
||||
Total long-term debt
|
$ 952.4
|
$ 942.6
|
||||||
Less current maturities of long-term debt
|
7.0
|
5.5
|
||||||
Total long-term debt due after one year
|
$ 945.4
|
$ 937.1
|
2014
|
2013
|
2012
|
|||
Beginning balance as of January 1
|
$ 3,442.6
|
$ 3,572.3
|
$ 3,632.7
|
||
Average price revenue generated
|
-
|
-
|
1.9
|
||
Average price revenue recognized
|
(19.4)
|
(15.8)
|
(26.1)
|
||
Advanced payments received
|
65.8
|
111.2
|
95.3
|
||
Advanced payments applied
|
(246.6)
|
(175.4)
|
(88.7)
|
||
Contract resolution / other
|
(40.1)
|
(49.7)
|
(42.8)
|
||
Ending balance as of December 31
|
$ 3,202.3
|
$ 3,442.6
|
$ 3,572.3
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||||||||
Years Ended December 31,
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
2014
|
2013
|
2012
|
||||||||
Net Periodic Benefit Cost
|
|||||||||||||||||
Service cost
|
$ 49.9
|
$ 61.6
|
$ 63.3
|
$ 13.2
|
$ 26.0
|
$ 26.1
|
$ 63.1
|
$ 87.6
|
$ 89.4
|
||||||||
Interest cost on projected benefit obligations
|
90.3
|
83.1
|
85.1
|
33.7
|
30.5
|
33.5
|
124.0
|
113.6
|
118.6
|
||||||||
Expected return on plan assets
|
(74.8)
|
(71.6)
|
(74.5)
|
(34.8)
|
(30.6)
|
(30.8)
|
(109.6)
|
(102.2)
|
(105.3)
|
||||||||
Amortization of net prior service costs
|
2.4
|
2.4
|
2.7
|
1.0
|
1.2
|
1.4
|
3.4
|
3.6
|
4.1
|
||||||||
Amortization of net losses
|
39.4
|
59.1
|
65.9
|
4.2
|
11.9
|
12.2
|
43.6
|
71.0
|
78.1
|
||||||||
Other adjustments
|
-
|
-
|
-
|
-
|
2.6
|
-
|
-
|
2.6
|
-
|
||||||||
Total
|
$107.2
|
$134.6
|
$142.5
|
$ 17.3
|
$ 41.6
|
$ 42.4
|
$124.5
|
$176.2
|
$184.9
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
||||||
Amortization of net prior service costs
|
$ (2.4)
|
$ (2.4)
|
$ (0.6)
|
$ (0.8)
|
$ (3.0)
|
$ (3.2)
|
|||||
Amortization of net losses or settlement recognition
|
(39.4)
|
(59.1)
|
(4.0)
|
(12.1)
|
(43.4)
|
(71.2)
|
|||||
Net loss (gain) arising during the year
|
377.9
|
(194.7)
|
78.9
|
(48.8)
|
456.8
|
(243.5)
|
|||||
Total
|
$ 336.1
|
$ (256.2)
|
$ 74.3
|
$ (61.7)
|
$ 410.4
|
$ (317.9)
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
||||||
Projected benefit obligation
|
$ 2,458.4
|
$ 1,948.4
|
$ 826.4
|
$ 742.0
|
$ 3,284.8
|
$ 2,690.4
|
|||||
Accumulated benefit obligation
|
2,080.1
|
1,663.8
|
808.0
|
726.2
|
2,888.1
|
2,390.0
|
|||||
Fair value of plan assets
|
1,483.9
|
1,330.5
|
608.6
|
566.0
|
2,092.5
|
1,896.5
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
||||||||||
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
|||||||
Change in benefit obligation
|
||||||||||||
Projected benefit obligation, beginning of year
|
$ 1,948.3
|
$ 2,136.3
|
$ 867.9
|
$ 833.7
|
$ 2,816.2
|
$ 2,970.0
|
||||||
Service cost
|
49.9
|
61.6
|
13.2
|
26.0
|
63.1
|
87.6
|
||||||
Interest cost
|
90.3
|
83.1
|
33.7
|
30.5
|
124.0
|
113.6
|
||||||
Actuarial (gains) losses
|
482.0
|
(245.8)
|
141.4
|
19.6
|
623.4
|
(226.2)
|
||||||
Foreign currency exchange rate changes
|
-
|
-
|
(75.9)
|
7.3
|
(75.9)
|
7.3
|
||||||
Benefits paid and settlements
|
(112.1)
|
(86.9)
|
(29.0)
|
(28.5)
|
(141.1)
|
(115.4)
|
||||||
Curtailments and Other
|
-
|
-
|
-
|
(20.7)
|
-
|
(20.7)
|
||||||
Projected benefit obligation, end of year
|
$ 2,458.4
|
$ 1,948.3
|
$ 951.3
|
$ 867.9
|
$ 3,409.7
|
$ 2,816.2
|
||||||
Fair value of plan assets
|
||||||||||||
Fair value of plan assets, beginning of year
|
$ 1,330.5
|
$ 1,310.9
|
$ 661.1
|
$ 579.3
|
$ 1,991.6
|
$ 1,890.2
|
||||||
Actual return on plan assets
|
179.0
|
20.8
|
97.2
|
62.3
|
276.2
|
83.1
|
||||||
Foreign currency exchange rate changes
|
-
|
-
|
(50.0)
|
15.9
|
(50.0)
|
15.9
|
||||||
Employer contributions
|
86.5
|
85.7
|
18.4
|
32.1
|
104.9
|
117.8
|
||||||
Benefits paid and settlements
|
(112.1)
|
(86.9)
|
(29.0)
|
(28.5)
|
(141.1)
|
(115.4)
|
||||||
Fair value of plan assets, end of year
|
$ 1,483.9
|
$ 1,330.5
|
$ 697.7
|
$ 661.1
|
$ 2,181.6
|
$ 1,991.6
|
||||||
Funded status of plans
|
$ (974.5)
|
$ (617.8)
|
$ (253.6)
|
$ (206.8)
|
$(1,228.1)
|
$ (824.6)
|
||||||
Accumulated benefit obligation
|
2,080.1
|
1,663.8
|
875.8
|
802.7
|
2,955.9
|
2,466.5
|
December 31, 2014
|
|||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
||||
Cash and cash equivalents
|
$ 5.6
|
$ -
|
$ -
|
$ 5.6
|
|||
Equity securities
|
194.5
|
3.6
|
-
|
198.1
|
|||
Corporate debt securities
|
-
|
396.4
|
-
|
396.4
|
|||
U.S. government debt securities
|
-
|
258.6
|
-
|
258.6
|
|||
U.S. government guaranteed mortgage backed securities
|
-
|
24.9
|
-
|
24.9
|
|||
Other governmental debt securities
|
1.2
|
75.2
|
-
|
76.4
|
|||
Investment funds
|
45.1
|
1,170.3
|
0.4
|
1,215.8
|
|||
Other
|
-
|
5.8
|
-
|
5.8
|
|||
Total
|
$ 246.4
|
$ 1,934.8
|
$ 0.4
|
$ 2,181.6
|
December 31, 2013
|
|||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
||||
Cash and cash equivalents
|
$ 4.9
|
$ -
|
$ -
|
$ 4.9
|
|||
Equity securities
|
192.2
|
3.0
|
-
|
195.2
|
|||
Corporate debt securities
|
-
|
354.9
|
-
|
354.9
|
|||
U.S. government debt securities
|
-
|
200.0
|
-
|
200.0
|
|||
U.S. government guaranteed mortgage backed securities
|
-
|
18.5
|
-
|
18.5
|
|||
Other governmental debt securities
|
1.0
|
66.2
|
-
|
67.2
|
|||
Investment funds
|
70.8
|
1,073.2
|
0.4
|
1,144.4
|
|||
Other
|
-
|
6.5
|
-
|
6.5
|
|||
Total
|
$ 268.9
|
$ 1,722.3
|
$ 0.4
|
$ 1,991.6
|
Beginning balance as of January 1, 2014
|
$ 0.4
|
Actual return on assets
|
-
|
Purchases
|
-
|
Sales
|
-
|
Ending balance as of December 31, 2014
|
$ 0.4
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
||||||||||
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
|||||||
Current benefit liabilities
|
$ (6.1)
|
$ (5.8)
|
$ (4.2)
|
$ (3.4)
|
$ (10.3)
|
$ (9.2)
|
||||||
Noncurrent benefit liabilities
|
(968.4)
|
(612.0)
|
(249.4)
|
(203.4)
|
(1,217.8)
|
(815.4)
|
||||||
Total recognized liabilities
|
$ (974.5)
|
$ (617.8)
|
$ (253.6)
|
$ (206.8)
|
$(1,228.1)
|
$ (824.6)
|
||||||
Amounts recognized in accumulated other comprehensive loss (pre-tax)
|
||||||||||||
Prior service cost
|
$ 8.1
|
$ 10.5
|
$ 4.4
|
$ 6.0
|
$ 12.5
|
$ 16.5
|
||||||
Net loss
|
1,063.2
|
724.8
|
214.6
|
157.1
|
1,277.8
|
881.9
|
||||||
Accumulated other comprehensive loss
|
$ 1,071.3
|
$ 735.3
|
$ 219.0
|
$ 163.1
|
$ 1,290.3
|
$ 898.4
|
Benefit Obligations as of December 31,
|
|||||||||||
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
||||||
Discount rate
|
3.8%
|
4.8%
|
2.8%
|
4.0%
|
3.5%
|
4.5%
|
|||||
Rate of increase in future compensation levels
|
4.3%
|
4.3%
|
1.0%
|
1.1%
|
3.4%
|
3.2%
|
Years Ended December 31,
|
||||||
2014
|
2013
|
2012
|
||||
Net Periodic Postretirement Benefit Cost
|
||||||
Service cost
|
$ 4.7
|
$ 5.9
|
$ 5.9
|
|||
Interest cost
|
12.7
|
13.4
|
14.2
|
|||
Amortization of prior service credits
|
(1.5)
|
(1.6)
|
(4.7)
|
|||
Amortization of actuarial losses
|
4.1
|
8.7
|
7.4
|
|||
Total
|
$ 20.0
|
$ 26.4
|
$ 22.8
|
Years Ended December 31,
|
|||
2014
|
2013
|
||
Amortization of prior service credits
|
$ 1.5
|
$ 1.6
|
|
Amortization of loss
|
(4.1)
|
(8.7)
|
|
Prior service credit arising during the year
|
(19.7)
|
-
|
|
Net loss (gain) arising during the year
|
29.5
|
(44.0)
|
|
Total
|
$ 7.2
|
$ (51.1)
|
December 31,
|
|||||
2014
|
2013
|
||||
Change in accumulated postretirement benefit obligation
|
|||||
Accrued postretirement benefit obligation at beginning of year
|
$ 320.0
|
$ 362.9
|
|||
Service cost
|
4.7
|
5.9
|
|||
Interest cost
|
12.7
|
13.4
|
|||
Actuarial loss/(gain)
|
29.5
|
(44.0)
|
|||
Plan change
|
(19.7)
|
-
|
|||
Benefits paid
|
(18.0)
|
(18.2)
|
|||
Accumulated postretirement benefit obligation at end of year
|
$ 329.2
|
$ 320.0
|
|||
Funded status of plans
|
$ (329.2)
|
$ (320.0)
|
|||
Amounts recognized in the consolidated balance sheets
|
|||||
Current benefit liabilities
|
$ (17.8)
|
$ (19.9)
|
|||
Noncurrent benefit liabilities
|
(311.4)
|
(300.1)
|
|||
Total recognized liabilities
|
$ (329.2)
|
$ (320.0)
|
|||
Amounts recognized in accumulated other comprehensive loss (pre-tax)
|
|||||
Prior service credit
|
$ (21.8)
|
$ (3.6)
|
|||
Net loss (gain)
|
108.6
|
83.2
|
|||
Accumulated other comprehensive loss
|
$ 86.8
|
$ 79.6
|
Estimated
Postretirement Benefit
Payments
|
||
2015
|
$ 18.1
|
|
2016
|
18.3
|
|
2017
|
18.6
|
|
2018
|
19.0
|
|
2019
|
19.4
|
|
2020-2024
|
101.2
|
Foreign
currency
translation
adjustment
|
Unrealized net
gain (loss) on
available for
sale securities
|
Net gain
(loss) on cash
flow hedges
1
|
Unamortized
pension losses
and prior
service costs
2
|
Accumulated
other
comprehensive
income (loss)
|
|||||
Balance as of December 31, 2011
|
$ 228.1
|
$ (15.5)
|
$ (7.6)
|
$ (922.3)
|
$ (717.3)
|
||||
Other comprehensive income before reclassifications
|
(10.6)
|
20.9
|
(1.9)
|
15.1
|
23.5
|
||||
Amounts reclassified from AOCI
3
|
-
|
(3.4)
|
6.0
|
54.6
|
57.2
|
||||
Net current-period other comprehensive income
|
(10.6)
|
17.5
|
4.1
|
69.7
|
80.7
|
||||
Balance as of December 31, 2012
|
$ 217.5
|
$ 2.0
|
$ (3.5)
|
$ (852.6)
|
$ (636.6)
|
||||
Other comprehensive income before reclassifications
|
11.6
|
3.7
|
-
|
192.9
|
208.2
|
||||
Amounts reclassified from AOCI
3
|
-
|
-
|
3.5
|
53.1
|
56.6
|
||||
Net current-period other comprehensive income
|
11.6
|
3.7
|
3.5
|
246.0
|
264.8
|
||||
Balance as of December 31, 2013
|
$ 229.1
|
$ 5.7
|
$ -
|
$ (606.6)
|
$ (371.8)
|
||||
Other comprehensive income before reclassifications
|
(158.1)
|
7.2
|
-
|
(308.3)
|
(459.2)
|
||||
Amounts reclassified from AOCI
3
|
-
|
(15.0)
|
-
|
31.6
|
16.6
|
||||
Net current-period other comprehensive income
|
(158.1)
|
(7.8)
|
-
|
(276.7)
|
(442.6)
|
||||
Balance as of December 31, 2014
|
$ 71.0
|
$ (2.1)
|
$ -
|
$ (883.3)
|
$ (814.4)
|
1
|
Net of tax effect of $(0.0), $(2.1), and $(2.4) for the years ended December 31, 2014, 2013, and 2012, respectively. Tax effects of gains and losses arising during the period and reclassifications for gains included in income are included in the table below.
|
2
|
Net of tax effect of $141.9, $(130.1), and $(40.3) for the years ended December 31, 2014, 2013, and 2012, respectively. Tax effects of gains and losses arising during the period and amortization in net income are included in the table below.
|
3
|
The unamortized pension losses and prior service costs are included in the computation of net periodic pension cost (see Note 15 for additional details).
|
Years Ended December 31,
|
||||||
2014
|
2013
|
2012
|
||||
Net gain (loss) on cash flow hedges:
|
||||||
Gain (loss) arising during the period
|
$ -
|
$ (0.1)
|
$ 1.0
|
|||
Less: reclassification for gain included in income
|
-
|
(2.0)
|
(3.4)
|
|||
Net unrealized gain (loss) on cash flow hedges
|
-
|
(2.1)
|
(2.4)
|
|||
Defined benefit plan adjustments:
|
||||||
Net gain (loss) arising during the period
|
159.4
|
(99.6)
|
(8.3)
|
|||
Less: amortization of pension adjustments in net income
|
(17.5)
|
(28.4)
|
(29.6)
|
|||
Defined benefit plans, net
|
141.9
|
(128.0)
|
(37.9)
|
|||
Total tax (expense) benefit
|
$ 141.9
|
$ (130.1)
|
$ (40.3)
|
·
|
Future claim filing levels in the Settlement Facility will be similar to the RSP;
|
·
|
Future acceptance rates, disease mix, and payment values will be materially consistent with historical experience;
|
·
|
No material negative outcomes in future controversies or disputes over Plan interpretation will occur; and
|
·
|
The Plan will not be modified.
|
Years Ended December 31,
|
|||||
2014
|
2013
|
2012
|
|||
Sales to Dow Chemical
|
$ 19.3
|
$ 17.0
|
$ 6.9
|
||
Sales to Corning
|
15.4
|
18.9
|
23.3
|
||
Purchases from Dow Chemical
|
52.4
|
69.3
|
65.3
|
||
December 31,
|
|||||
2014
|
2013
|
||||
Accounts receivable from Dow Chemical
|
$ 2.1
|
$ 1.0
|
|||
Accounts receivable from Corning
|
1.0
|
0.7
|
|||
Accounts payable to Dow Chemical
|
3.9
|
2.1
|
Years Ended December 31,
|
|||||
2014
|
2013
|
2012
|
|||
Sales to nonconsolidated affiliates and noncontrolling shareholders
|
$ 461.1
|
$ 528.6
|
$ 612.4
|
||
Purchases from nonconsolidated affiliates and noncontrolling shareholders
|
357.0
|
337.6
|
361.0
|
(in thousands, except share and per share amounts)
|
2013
|
2012
|
|||
Assets
|
|||||
Current assets
|
|||||
Cash and cash equivalents
|
$
|
2,525,381
|
$
|
1,609,360
|
|
Short-term financial instruments
|
190,025
|
844,365
|
|||
Accounts and notes receivable
|
|||||
Customers, net of allowance for doubtful accounts of $5,115 and $5,931
|
74,957
|
110,315
|
|||
Related parties
|
277,845
|
382,994
|
|||
Inventories
|
92,767
|
92,324
|
|||
Current deferred income tax assets, net
|
2,062
|
1,914
|
|||
Assets held for sale
|
292,617
|
313,288
|
|||
Other current assets
|
109,291
|
136,571
|
|||
Total current assets
|
3,564,945
|
3,491,131
|
|||
Equity method investments
|
2,352
|
6,689
|
|||
Property, plant and equipment, net
|
3,336,416
|
3,644,033
|
|||
Non-current deferred income tax assets, net
|
102
|
129
|
|||
Other non-current assets
|
183,048
|
243,704
|
|||
Total assets
|
$
|
7,086,863
|
$
|
7,385,686
|
|
Liabilities and Equity
|
|||||
Current liabilities
|
|||||
Accounts payable
|
|||||
Trade accounts payable
|
$
|
3,025
|
$
|
16,098
|
|
Non-trade accounts payable
|
21,753
|
32,834
|
|||
Related parties
|
50,507
|
78,549
|
|||
Income taxes payable
|
109,787
|
158,126
|
|||
Accrued bonus payable
|
60,198
|
71,667
|
|||
Accrued expenses
|
27,967
|
21,431
|
|||
Liabilities held for sale
|
51,095
|
14,228
|
|||
Other current liabilities
|
13,081
|
12,279
|
|||
Total current liabilities
|
337,413
|
405,212
|
|||
Accrued severance benefits, net
|
-
|
5,975
|
|||
Non-current deferred income tax liabilities, net
|
210,740
|
247,185
|
|||
Total liabilities
|
548,153
|
658,372
|
|||
Commitments and contingencies
|
(in thousands, except share and per share amounts)
|
2013
|
2012
|
|||
Shareholders’ equity
|
|||||
Preferred stock: par value $8.51 per share, 153,190 shares authorized, 41,107 shares issued and outstanding
|
$
|
350
|
$
|
350
|
|
Common stock: par value $10.03 per share, 30,000,000 shares authorized, 17,617,462 shares issued and outstanding
|
176,700
|
176,700
|
|||
Additional paid-in capital
|
312,114
|
312,114
|
|||
Retained earnings
|
5,749,288
|
6,040,493
|
|||
Accumulated other comprehensive income
|
290,078
|
185,480
|
|||
Total Samsung Corning Precision Materials equity
|
6,528,530
|
6,715,137
|
|||
Noncontrolling interests
|
10,180
|
12,177
|
|||
Total equity
|
6,538,710
|
6,727,314
|
|||
Total liabilities and equity
|
$
|
7,086,863
|
$
|
7,385,686
|
(in thousands)
|
2013
|
2012
|
2011
|
|||||
Net sales
|
||||||||
Related parties
|
$
|
1,747,484
|
$
|
2,294,153
|
$
|
2,668,020
|
||
Other
|
401,730
|
670,542
|
1,270,572
|
|||||
2,149,214
|
2,964,695
|
3,938,592
|
||||||
Cost of sales
|
953,254
|
964,623
|
1,051,234
|
|||||
Gross profit
|
1,195,960
|
2,000,072
|
2,887,358
|
|||||
Selling and administrative expenses
|
151,812
|
140,927
|
160,861
|
|||||
Research and development expenses
|
80,012
|
92,661
|
79,902
|
|||||
Royalty expenses to related parties
|
55,572
|
81,616
|
213,838
|
|||||
Operating income
|
908,564
|
1,684,868
|
2,432,757
|
|||||
Other income (expense)
|
||||||||
Interest income (expense), net
|
72,772
|
91,914
|
110,561
|
|||||
Foreign exchange (loss) gain, net
|
(10,784)
|
(35,160)
|
5,450
|
|||||
Charitable donations
|
(26,746)
|
(26,815)
|
(23,737)
|
|||||
Other income (expense), net
|
506
|
(5,205)
|
28,187
|
|||||
Income from continuing operations before income taxes
|
944,312
|
1,709,602
|
2,553,218
|
|||||
Provision for income taxes
|
223,502
|
301,652
|
477,230
|
|||||
Income from continuing operations before equity losses
|
720,810
|
1,407,950
|
2,075,988
|
|||||
Equity losses of affiliated companies
|
(5,198)
|
(39,366)
|
(27,758)
|
|||||
Net income from continuing operations
|
715,612
|
1,368,584
|
2,048,230
|
|||||
Discontinued operations:
|
||||||||
(Loss) income from operations
|
(67,021)
|
30,478
|
23,731
|
|||||
Income tax expense
|
539
|
9,621
|
9,318
|
|||||
Net income (loss) from discontinued operations
|
(67,560)
|
20,857
|
14,413
|
|||||
Net income including noncontrolling interests
|
648,052
|
1,389,441
|
2,062,643
|
|||||
Less: Net (loss) income attributable to the noncontrolling interests
|
(1,299)
|
(116)
|
1,873
|
|||||
Net income attributable to Samsung Corning Precision Materials
|
$
|
649,351
|
$
|
1,389,557
|
$
|
2,060,770
|
||
Income from continuing operations attributable to Samsung Corning Precision Materials
|
716,911
|
1,368,700
|
2,046,357
|
|||||
(Loss) income from discontinued operations attributable to Samsung Corning Precision Materials
|
(67,560)
|
20,857
|
14,413
|
|||||
Net income attributable to Samsung Corning Precision Materials
|
$
|
649,351
|
$
|
1,389,557
|
$
|
2,060,770
|
(in thousands)
|
2013
|
2012
|
2011
|
|||||
Net income including noncontrolling interests
|
$
|
648,052
|
$
|
1,389,441
|
$
|
2,062,643
|
||
Other comprehensive income (loss), before tax:
|
||||||||
Foreign currency translation adjustments
|
137,850
|
771,533
|
(357,249)
|
|||||
Unrealized net gain (loss) on available for sale securities
|
||||||||
Unrealized holding gain (loss) arising during the period
|
(735)
|
3,025
|
(6,358)
|
|||||
Less: reclassification adjustment for gain included in income
|
-
|
-
|
(23,441)
|
|||||
Other comprehensive income (loss), before tax:
|
137,115
|
774,558
|
(387,048)
|
|||||
Income tax (expense) benefit related to items of other comprehensive income (loss)
|
(33,182)
|
(187,443)
|
85,151
|
|||||
Other comprehensive income (loss), net of tax:
|
103,933
|
587,115
|
(301,897)
|
|||||
Comprehensive income including noncontrolling interests
|
751,985
|
1,976,556
|
1,760,746
|
|||||
Less: Comprehensive income attributable to the noncontrolling interests
|
(1,964)
|
1,027
|
1,868
|
|||||
Comprehensive income attributable to Samsung Corning Precision Materials
|
$
|
753,949
|
$
|
1,975,529
|
$
|
1,758,878
|
(in thousands)
|
2013
|
2012
|
2011
|
|||||
Cash flows from operating activities
|
||||||||
Net income including noncontrolling interests
|
$
|
648,052
|
$
|
1,389,441
|
$
|
2,062,643
|
||
Adjustments to reconcile net income to net cash provided by operating activities
|
||||||||
Depreciation
|
315,687
|
334,588
|
388,438
|
|||||
Foreign exchange translation (gain) loss, net
|
(140,325)
|
(116,072)
|
(3,382)
|
|||||
Provision for severance benefits
|
27,212
|
26,924
|
18,385
|
|||||
Deferred income tax expense (benefit)
|
(29,817)
|
16,332
|
(21,829)
|
|||||
Equity losses of affiliated companies
|
5,198
|
39,366
|
27,758
|
|||||
Impairment charges / write-off
|
127,196
|
35,173
|
10,954
|
|||||
Amortization of long-term supply contract payment
|
63,341
|
64,745
|
-
|
|||||
Gain on disposal of property, plant and equipment
|
(13,797)
|
(345)
|
(1)
|
|||||
Other, net
|
1,799
|
(14,335)
|
(991)
|
|||||
Changes in operating assets and liabilities
|
||||||||
Accounts and notes receivable
|
137,300
|
57,017
|
(310,924)
|
|||||
Inventories
|
(29,603)
|
6,651
|
(37,203)
|
|||||
Other current assets
|
82,458
|
(7,111)
|
27,629
|
|||||
Payment on long-term supply contract
|
-
|
-
|
(300,000)
|
|||||
Accounts payable and other current liabilities
|
32,538
|
(25,156)
|
(3,741)
|
|||||
Net cash provided by operating activities
|
1,227,239
|
1,807,218
|
1,857,736
|
|||||
Cash flows from investing activities
|
||||||||
Purchases of property, plant and equipment
|
(303,266)
|
(407,451)
|
(512,797)
|
|||||
Decrease (increase) in short-term financial instruments, net
|
607,475
|
21,611
|
(242,721)
|
|||||
Investment in affiliates
|
-
|
(7,000)
|
-
|
|||||
Change in restricted cash, net
|
3,645
|
(11,974)
|
(17,472)
|
|||||
Net proceeds from sale or disposal of assets
|
157,663
|
85,304
|
24,468
|
|||||
Other, net
|
(2,190)
|
5,880
|
(1,681)
|
|||||
Net cash provided by (used in) investing activities
|
463,327
|
(313,630)
|
(750,203)
|
|||||
Cash flows from financing activities
|
||||||||
Increase in short-term borrowings
|
32,059
|
-
|
-
|
|||||
Acquisition of subsidiary’s stock
|
-
|
-
|
(26,074)
|
|||||
Cash dividends to noncontrolling interests
|
(33)
|
(65)
|
(67)
|
|||||
Cash dividends to Samsung Corning Precision Materials shareholders
|
(940,556)
|
(1,960,667)
|
(1,116,619)
|
|||||
Net cash used in financing activities
|
(908,530)
|
(1,960,732)
|
(1,116,686)
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
133,985
|
379,536
|
(24,063)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
916,021
|
(87,608)
|
(33,216)
|
|||||
Cash and cash equivalents
|
||||||||
Beginning of year
|
1,635,434
|
1,723,042
|
1,756,258
|
|||||
End of year
|
$
|
2,551,455
|
$
|
1,635,434
|
$
|
1,723,042
|
Organization and Nature of Operations
|
Summary of Significant Accounting Policies
|
(in thousands)
|
2013
|
2012
|
2011
|
||||||
Non-cash transactions
|
|||||||||
Acquisition of capital assets included in accounts payable
|
$
|
9,364
|
$
|
42,463
|
$
|
31,958
|
|||
Cash paid for interest and income taxes
|
|||||||||
Cash paid for interest
|
-
|
-
|
57
|
||||||
Cash paid for income taxes, net of refund
|
303,094
|
440,157
|
405,278
|
(in thousands)
|
2013
|
2012
|
||||||||||||||||
Cost
|
Gross
unrealized
gains
|
Fair
value
|
Cost
|
Gross
unrealized
gains
|
Fair
value
|
|||||||||||||
Equity securities
|
$
|
103
|
$
|
5,732
|
$
|
5,835
|
$
|
103
|
$
|
6,263
|
$
|
6,366
|
Buildings
|
15–40 years
|
|
Machinery and equipment (excluding precious metals)
|
1.5–8 years
|
|
Vehicle, tools, furniture and fixtures
|
2–8 years
|
(in thousands)
|
2013
|
2012
|
2011
|
||||||
Balance at the beginning of the year
|
$
|
77,907
|
$
|
55,023
|
$
|
41,909
|
|||
Provision for severance benefits
|
24,705
|
24,749
|
16,380
|
||||||
Severance payments
|
(6,799)
|
(7,931)
|
(4,057)
|
||||||
Translation adjustments and other
|
1,849
|
6,066
|
791
|
||||||
97,662
|
77,907
|
55,023
|
|||||||
Less: Cumulative contributions to the National Pension Fund
|
(45)
|
(47)
|
(53)
|
||||||
Severance plan assets
|
(100,800)
|
(71,885)
|
(43,099)
|
||||||
Balance at the end of the year
|
$
|
(3,183)
1
|
$
|
5,975
|
$
|
11,871
|
|
1
|
The balance included in other current assets as of December 31, 2013.
|
·
|
Absence of the Company’s ability to recover the carrying amount;
|
·
|
Inability of the equity affiliate to sustain an earnings capacity which would justify the carrying amount of the investment; and
|
·
|
Significant litigation, bankruptcy or other events that could impact recoverability.
|
Discontinued Operation
|
(in thousands)
|
2013
|
2012
|
2011
|
||||||
Discontinued Operations:
|
|||||||||
Net sales
|
$
|
162,366
|
$
|
174,197
|
$
|
232,375
|
|||
Earnings (loss) from discontinued operations
|
(67,021)
|
30,478
|
23,731
|
||||||
Income taxes on discontinued operations
|
(539)
|
(9,621)
|
(9,318)
|
||||||
Net (loss) income from discontinued operations
|
$
|
(67,560)
|
$
|
20,857
|
$
|
14,413
|
(in thousands)
|
2013
|
2012
|
||||
Assets
|
||||||
Accounts and notes receivable, net
|
$
|
29,337
|
$
|
25,949
|
||
Inventories, net
|
102,593
|
76,701
|
||||
Property, plant and equipment, net
|
158,862
|
208,273
|
||||
Other assets
|
1,825
|
2,365
|
||||
Assets of discontinued operations
|
$
|
292,617
|
$
|
313,288
|
||
Liabilities
|
||||||
Accounts payable and accrued expenses
|
$
|
9,538
|
$
|
8,414
|
||
Short-term borrowings
1
|
32,059
|
-
|
||||
Other liabilities
|
9,498
|
5,814
|
||||
Liabilities of discontinued operations
|
$
|
51,095
|
$
|
14,228
|
|
1
|
As of December 31, 2013, SCM’s term loan debt was $32,059 thousand, and variable interest rate is contracted. As of December 31, 2013, the weighted average rate was 2.08%. Due to the decision to shut down PV business, the term loan is immediately due and payable.
|
Inventories
|
(in thousands)
|
2013
|
2012
|
||||
Finished goods
|
$
|
14,808
|
$
|
13,879
|
||
Semi-finished goods
|
4,685
|
6,783
|
||||
Raw materials
|
17,823
|
21,511
|
||||
Work-in-process
|
768
|
1,046
|
||||
Auxiliary materials
|
54,683
|
49,105
|
||||
$
|
92,767
|
$
|
92,324
|
Other Current Assets
|
(in thousands)
|
2013
|
2012
|
||||
Prepaid expenses
|
$
|
79,659
|
$
|
79,926
|
||
Prepaid value added tax
|
-
|
10,907
|
||||
Accrued income receivable
|
4,165
|
17,434
|
||||
Restricted cash
|
24,703
|
28,145
|
||||
Other current assets
|
764
|
159
|
||||
$
|
109,291
|
$
|
136,571
|
Equity Method Investments
|
(in thousands)
|
Ownership
interest
1
|
2013
|
2012
|
|||||
Affiliated companies accounted for under the equity method
|
||||||||
Corsam Technologies LLC
|
50%
|
$
|
2,352
|
$
|
6,689
|
|
1
|
This reflects the Company’s direct ownership interests in the affiliated company. The Company does not have control of the entity.
|
Property, Plant and Equipment
|
(in thousands)
|
2013
|
2012
|
||||
Building
|
$
|
1,744,579
|
$
|
1,765,014
|
||
Machinery and equipment
|
2,623,229
|
2,705,678
|
||||
Vehicle, tools, furniture and fixtures
|
219,722
|
246,189
|
||||
4,587,530
|
4,716,881
|
|||||
Less: accumulated depreciation
|
(1,964,996)
|
(1,859,087)
|
||||
2,622,534
|
2,857,794
|
|||||
Land
|
258,031
|
254,788
|
||||
Construction-in-progress
|
455,851
|
531,451
|
||||
$
|
3,336,416
|
$
|
3,644,033
|
Other Non-current Assets
|
(in thousands)
|
2013
|
2012
|
||||
Deposits
|
$
|
30,844
|
$
|
28,424
|
||
Available-for-sale marketable securities
|
5,835
|
6,366
|
||||
Payment on long-term contract
|
132,435
|
195,645
|
||||
Other non-current assets
|
13,934
|
13,269
|
||||
$
|
183,048
|
$
|
243,704
|
Impairment Charges
|
Transactions with Related Parties
|
2013 (1)
|
Sales
4
|
Purchases
5
|
Services
Expensed
|
Receivables
|
Payables
|
||||||||||
(in thousands)
|
|||||||||||||||
Samsung affiliates
|
|||||||||||||||
Samsung Display
|
$
|
1,597,601
|
$
|
-
|
$
|
2,475
|
$
|
241,901
|
$
|
281
|
|||||
Samsung C&T Corporation
|
1,170
|
79,460
|
239
|
266
|
11,859
|
||||||||||
Samsung Engineering
|
208
|
5,882
|
6,126
|
-
|
6,968
|
||||||||||
Samsung SDS
|
3,233
|
10,631
|
35,040
|
-
|
14,129
|
||||||||||
SCG
|
100,197
|
-
|
2,910
|
38,010
|
1,187
|
||||||||||
Others
|
160,627
|
20,658
|
39,423
|
10,742
|
6,337
|
||||||||||
1,863,036
|
116,631
|
86,213
|
290,919
|
40,761
|
|||||||||||
Corning
|
161,131
|
36,912
|
62,318
|
1,717
|
11,313
|
||||||||||
$
|
2,024,167
|
$
|
153,543
|
$
|
148,531
|
$
|
292,636
|
$
|
52,074
|
(1)
|
As of and for the year ended December 31, 2013, related parties sales of $83,525 thousand, purchases of $19 thousand and services expenses of $1,653 thousand and related receivables of $14,791 thousand and payables of $1,567 thousand for discontinued operations are included in the above table.
|
2012 (2)
|
Sales
4
|
Purchases
5
|
Services
Expensed
|
Receivables
|
Payables
|
||||||||||
(in thousands)
|
|||||||||||||||
Samsung affiliates
|
|||||||||||||||
Samsung Display
|
$
|
2,231,298
|
$
|
29,919
|
$
|
2,312
|
$
|
349,236
|
$
|
521
|
|||||
Samsung C&T Corporation
|
22
|
50,334
|
286
|
1
|
25,845
|
||||||||||
Samsung Engineering
|
156
|
36,370
|
147
|
7,201
|
640
|
||||||||||
Samsung SDS
|
60
|
71,945
|
35,828
|
-
|
27,829
|
||||||||||
SCG
|
69,779
|
-
|
1,211
|
-
|
-
|
||||||||||
Others
|
17,968
|
21,557
|
53,296
|
7,412
|
17,417
|
||||||||||
2,319,283
|
210,125
|
93,080
|
363,850
|
72,252
|
|||||||||||
Corning
|
126,041
|
79,691
|
89,535
|
31,836
|
6,386
|
||||||||||
$
|
2,445,324
|
$
|
289,816
|
$
|
182,615
|
$
|
395,686
|
$
|
78,638
|
(2)
|
As of and for the year ended December 31, 2012, related parties sales of $98,271 thousand, purchases of $195 thousand and services expenses of $1,029 thousand and related receivables of $12,692 thousand and payables of $89 thousand for discontinued operations are included in the above table.
|
2011 (3)
|
Sales
4
|
Purchases
5
|
Services
Expensed
|
Receivables
|
Payables
|
||||||||||
(in thousands)
|
|||||||||||||||
Samsung affiliates
|
|||||||||||||||
Samsung Electronics
|
$
|
2,580,173
|
$
|
-
|
$
|
8,677
|
$
|
317,693
|
$
|
5,480
|
|||||
Samsung C&T Corporation
|
27
|
66,165
|
496
|
2
|
13,790
|
||||||||||
Samsung Engineering
|
1,034
|
41,619
|
1,279
|
53
|
6,881
|
||||||||||
Samsung SDS
|
15
|
13,923
|
19,844
|
6
|
8,928
|
||||||||||
Others
|
62,234
|
23,937
|
98,208
|
5,091
|
28,638
|
||||||||||
2,643,483
|
145,644
|
128,504
|
322,845
|
63,717
|
|||||||||||
Corning
|
108,916
|
102,037
|
226,441
|
1,039
|
5,478
|
||||||||||
$
|
2,752,399
|
$
|
247,681
|
$
|
354,945
|
$
|
323,884
|
$
|
69,195
|
|
(3)
|
As of and for the year ended December 31, 2011, related parties sales of $84,379 thousand, purchases of $8,885 thousand and services expenses of $1,327 thousand and related receivables of $18,165 thousand and payables of $96 thousand for discontinued operations are included in the above table.
|
|
(4)
|
Transfers of machinery and equipment to related parties including SCG, Samsung Electronics, Samsung SDS and Samsung Fine Chemicals are included.
|
|
(5)
|
Purchases of property, plant and equipment are included.
|
Fair Value Measurements
|
Income Taxes
|
(in thousands)
|
2013
|
2012
|
2011
|
||||||
Current
|
|||||||||
Domestic (Republic of Korea)
|
$
|
253,319
|
$
|
285,320
|
$
|
499,059
|
|||
Foreign
|
-
|
-
|
-
|
||||||
Total current
|
253,319
|
285,320
|
499,059
|
||||||
Deferred
|
|||||||||
Domestic (Republic of Korea)
|
(29,817)
|
16,332
|
(21,829)
|
||||||
Foreign
|
-
|
-
|
-
|
||||||
Total deferred
|
(29,817)
|
16,332
|
(21,829)
|
||||||
Income taxes on continuing operations
|
$
|
223,502
|
$
|
301,652
|
$
|
477,230
|
(in thousands)
|
2013
|
2012
|
2011
|
||||||
Expected taxes at statutory rate
|
$
|
227,265
|
$
|
404,197
|
$
|
611,161
|
|||
Tax exemption for foreign investment
|
-
|
(107,599)
|
(167,302)
|
||||||
Tax rate changes
|
-
|
-
|
29,633
|
||||||
Tax credits, net of surtax effect
|
-
|
(1,032)
|
(13,737)
|
||||||
Others, net
|
(3,763)
|
6,086
|
17,475
|
||||||
Income taxes on continuing operations
|
$
|
223,502
|
$
|
301,652
|
$
|
477,230
|
|||
Effective tax rate
|
23.80%
|
18.06%
|
18.44%
|
(in thousands)
|
2013
|
2012
|
||||
Deferred income tax assets
|
||||||
Property, plant and equipment
|
$
|
11,466
|
$
|
69
|
||
Accrued bonus payables
|
2,557
|
3,625
|
||||
Other current liabilities
|
398
|
794
|
||||
Equity method investments
|
50,887
|
37,618
|
||||
Other
|
3,289
|
1,067
|
||||
Total tax deferred income tax assets
|
68,597
|
43,173
|
||||
Deferred income tax liabilities
|
||||||
Property, plant and equipment, intangible
|
(270,576)
|
(265,746)
|
||||
Reserve for technology development
|
(6,898)
|
(13,622)
|
||||
Available-for-sale securities
|
(1,385)
|
(1,513)
|
||||
Other
|
1,686
|
(7,434)
|
||||
Total tax deferred income tax liabilities
|
(277,173)
|
(288,315)
|
||||
Net deferred income tax liabilities
|
$
|
(208,576)
|
$
|
(245,142)
|
Shareholders’ Equity
|
(in thousands)
|
2013
|
2012
|
2011
|
||||||
Preferred Stock
|
$
|
350
|
$
|
350
|
$
|
350
|
|||
Common Stock
|
176,700
|
176,700
|
176,700
|
||||||
Additional Paid-in Capital
|
312,114
|
312,114
|
312,114
|
||||||
Retained Earnings:
|
|||||||||
Balance at the beginning of year
|
6,040,493
|
6,611,603
|
5,538,151
|
||||||
Net income attributable to Samsung Corning Precision Materials
|
649,351
|
1,389,557
|
2,060,770
|
||||||
Dividends paid to preferred shareholders
|
(1,103)
|
(3,288)
|
(2,786)
|
||||||
Dividends paid to common shareholders
|
(939,453)
|
(1,957,379)
|
(984,532)
|
||||||
Balance at end of year
|
5,749,288
|
6,040,493
|
6,611,603
|
||||||
Accumulated Other Comprehensive Income (loss):
|
|||||||||
Balance at the beginning of year
|
185,480
|
(400,492)
|
(98,600)
|
||||||
Other comprehensive income, net of tax
|
|||||||||
Foreign currency translation adjustment
|
105,155
|
583,679
|
(278,649)
|
||||||
Unrealized net gain on available for sale securities
|
(557)
|
2,293
|
(23,243)
|
||||||
Balance at end of year
|
290,078
|
185,480
|
(400,492)
|
||||||
Total Samsung Corning Precision Materials shareholders’ equity
|
6,528,530
|
6,715,137
|
6,700,275
|
||||||
Noncontrolling interests:
|
|||||||||
Balance at the beginning of year
|
12,177
|
11,214
|
35,487
|
||||||
Net (loss) income attributable to noncontrolling interests
|
(1,299)
|
(116)
|
1,873
|
||||||
Cash dividend to noncontrolling interests
|
(33)
|
(64)
|
(67)
|
||||||
Acquisition of subsidiary’s stock
|
-
|
-
|
(26,074)
|
||||||
OCI attributable to noncontrolling interest, net of tax
|
|||||||||
Foreign currency translation adjustment
|
(665)
|
1,143
|
(5)
|
||||||
Balance at end of year
|
10,180
|
12,177
|
11,214
|
||||||
Total equity
|
$
|
6,538,710
|
$
|
6,727,314
|
$
|
6,711,489
|
(in thousands)
|
2013
|
2012
|
||||
Appropriated
|
||||||
Legal reserve
|
$
|
82,339
|
$
|
82,339
|
||
Reserve for business development
|
30,800
|
30,800
|
||||
Reserve for research and manpower development
|
51,733
|
77,600
|
||||
Voluntary reserve
|
4,157
|
4,157
|
||||
169,029
|
194,896
|
|||||
Unappropriated
|
5,580,259
|
5,845,597
|
||||
$
|
5,749,288
|
$
|
6,040,493
|
Accumulated Other Comprehensive Income
|
(in thousands)
|
Unrealized
Gains and
Losses on
Available-for-
sale securities
|
Foreign
currency
translation
adjustment
|
Total
|
||||||
Balances at December 31, 2010
|
$
|
25,089
|
$
|
(123,689)
|
$
|
(98,600)
|
|||
Other comprehensive income before reclassifications
|
198
|
(278,649)
|
(278,451)
|
||||||
Amounts reclassified from accumulated other comprehensive income
|
(23,441)
|
-
|
(23,441)
|
||||||
Net current-period other comprehensive income
|
(23,243)
|
(278,649)
|
(301,892)
|
||||||
Balances at December 31, 2011
|
$
|
1,846
|
$
|
(402,338)
|
$
|
(400,492)
|
|||
Other comprehensive income before reclassifications
|
2,293
|
583,679
|
585,972
|
||||||
Amounts reclassified from accumulated other comprehensive income
|
-
|
-
|
-
|
||||||
Net current-period other comprehensive income
|
2,293
|
583,679
|
585,972
|
||||||
Balances at December 31, 2012
|
$
|
4,139
|
$
|
181,341
|
$
|
185,480
|
|||
Other comprehensive income before reclassifications
|
(557)
|
105,155
|
104,598
|
||||||
Amounts reclassified from accumulated other comprehensive income
|
-
|
-
|
-
|
||||||
Net current-period other comprehensive income
|
(557)
|
105,155
|
104,598
|
||||||
Balances at December 31, 2013
|
$
|
3,582
|
$
|
286,496
|
$
|
290,078
|
2013
|
2012
|
2011
|
Affected line item
in the consolidated
statements of income
|
||||||||
Realized gains on available for sale securities
|
$
|
-
|
$
|
-
|
$
|
30,924
|
Other income, net
|
||||
-
|
-
|
(7,483)
|
Tax expense
|
||||||||
$
|
-
|
$
|
-
|
$
|
23,441
|
Net of tax
|
Commitments and Contingencies
|
Subsequent Event
|
·
|
On January 15, 2014, the Company entered into a 15 year $1,902,359 thousand borrowing from Corning Luxembourg S.ar.l. and the interest rate is 8.0% per annum.
|
·
|
On January 15, 2014, the Company repurchased shares of $1,902,359 thousand from Samsung Display. As a result, Corning obtained full ownership of the Company, formerly an unconsolidated equity venture with Samsung Display.
|
·
|
Amendment to the agreement on a long-term LCD display glass pricing was signed between Corning and Samsung Display on January 15, 2014. The amendment is effective for ten years, accordingly, the term of the TFT-LCD glass substrate long-term supply agreement, effective as of January 1, 2012 will also be extended from January 1, 2014 to December 31, 2023.
|
·
|
On January 17, 2014, the Company has entered into the Business Transfer Agreement with SCG to transfer the Target business at Gumi. On February 1, 2014, the transaction closed. The expected proceeds from this transaction are $158,341 thousand and the expected pre-tax gains are $16,786 thousand.
|
·
|
On January 21, 2014, the Company has entered into the Interest Transfer Agreement of Corsam with SCG to transfer investment in equity of Corsam. The transaction closed on February 1, 2014. No gain and loss expected.
|
·
|
On January 23, 2014, the Company has entered into the Real Property Sale and Purchase Agreement with SCG to transfer the Gumi facilities. On February 1, 2014, the transaction closed. The expected proceeds from this transaction are $83,998 thousand and the expected pre-tax gains are $16,530 thousand.
|
1.
|
Awards of Rights
. Corning hereby awards to the employee (the “Employee”) Incentive Stock Rights (the “Incentive Stock Rights”).
|
2.
|
Non-Transferability
. The Incentive Stock Rights may not be sold, assigned, transferred, pledged or otherwise encumbered by or on behalf of or for the benefit of the Employee.
|
3.
|
First Service Based Vesting Requirement
. Incentive Stock Rights are subject to two service-based vesting requirements, with the first one applicable in 2015 as follows:
|
|
(a)
|
Under the first vesting requirement, the Employee shall “earn” a number of Incentive Stock Rights based upon the number of months he/she is employed by the Corporation in the 2015 fiscal year (“First Service Period”), provided further that this number must be 3 or greater for the Employee to be eligible to “earn” any award.
|
|
(b)
|
If during the First Service Period the Employee’s employment with the Corporation is terminated for any reason (other than a termination as described in Section 4(b) or 4(f) below), then the prorated number of “earned” Incentive Stock Rights shall be calculated as the total number of Incentive Stock Rights multiplied by a ratio in which the numerator is equal to the number of full calendar months that the employee was actively employed (provided that this number is no less than 3) during the time from the start of the First Service Period through the Employee’s termination date, and the denominator of which is 12. The number of Incentive Stock Rights that have not been “earned” in the First Service Period under the first vesting requirement shall be forfeited.
|
|
(c)
|
An Employee shall not vest in his/her right to receive an Incentive Stock Right that has been “earned” in the First Service Period unless the Employee also satisfies the second service based vesting requirements set forth in Section 4.
|
4.
|
Second Service Based Vesting Requirement
. Subject to the exceptions set forth below, the Employee must remain in continuous employment with Corning until March 31, 2018, to satisfy the second service based vesting requirement. If the Employee’s employment with Corning terminates on or before March 31, 2018, any “earned” Incentive Stock Rights, as described in Section 3 above, as of the date of the Employee’s employment terminates shall be treated as follows:
|
|
(a)
|
Retirement at or After Age 55
– If the Employee terminates employment on account of normal or early retirement on or after age 55 after the First Service Period, then the second service based vesting requirement shall be satisfied with respect to the “earned” Incentive Stock Rights. If the Employee terminates employment on account of normal or early retirement at or after age 55 during the First Service Period, then the service based vesting requirements shall be satisfied with respect to the number of Incentive Stock Rights prorated in accordance with Section 3(b) above.
|
|
(b)
|
Involuntary Termination (not “for cause”)
– If the Employee’s employment is involuntarily terminated before March 31, 2018, and it is not “for cause,” then the second service based vesting requirement shall be satisfied as of the Employee’s termination date for the prorated number of “earned” Incentive Stock Rights, calculated as the total number of “earned” Incentive Stock Rights multiplied by a ratio with the numerator equal to the number of full calendar months (not to exceed 36) from the start of the First Service Period through the Employee’s termination date, and the denominator of which is 36.
|
|
For purposes of this Agreement, “for cause” shall mean the Employee’s:
|
·
|
conviction of a felony or conviction of a misdemeanor involving moral turpitude (from which no further appeals have been or can be taken);
|
·
|
a material breach of Corning’s Code of Conduct;
|
·
|
gross abdication of his duties as an employee of the Corporation (other than due to the Employee’s illness or personal family problems), which conduct remains uncured by the Employee for a period of at least 30 days following written notice thereof to the Employee by the Corporation, in each case as determined in good faith by the Corporation; or
|
·
|
misappropriation of Corning’s assets, personal dishonesty or business conduct which causes material or potentially material financial or reputational harm for the Corporation. For purposes of this Section 4(b), no act or failure to act on the Employee’s part shall be deemed to be a termination for cause if done, or omitted to be done, in good faith, and with the reasonable belief that the action or omission was in the best interests of the Corporation.
|
|
(c)
|
Death
– If the Employee dies while employed after the First Service Period, then the second service based vesting requirement shall be satisfied with respect to the “earned” Incentive Stock Rights. If Employee’s death occurs during the First Service Period, then the service based vesting requirements shall be satisfied with respect to the number of Incentive Stock Rights prorated in accordance with Section 3(b) above.
|
|
(d)
|
Disability
– If the Employee’s employment is terminated after the First Service Period as a result of a total and permanent disability (as that term is defined in the Corporation’s long-term disability plan(s)), then the second service based vesting requirement shall be satisfied with respect to the “earned” Incentive Stock Rights. If the Employee’s total and permanent disability occurs during the First Service Period, then the service based vesting requirements shall be satisfied with respect to the number of Incentive Stock Rights prorated in accordance with Section 3(b) above.
|
|
(e)
|
Divestiture, etc
. – If the Employee’s employment is terminated due to a reduction in force, divestiture or discontinuance of certain of the Corporation’s operations after the First Service Period, then the second service based vesting requirement shall be satisfied with respect to the “earned” Incentive Stock Rights. If the Employee’s termination of employment under this subsection occurs during the First Service Period, then the service based vesting requirements shall be satisfied with respect to the number of Incentive Stock Rights prorated in accordance with Section 3(b) above.
|
|
(f)
|
Voluntary Termination, Termination for Cause, Dereliction of Duties or Harmful Acts
– If the Employee voluntarily leaves the employ of the Corporation, or if the Employee’s employment shall be terminated “for cause”, or if the Employee causes the Corporation to suffer financial harm or damage to its reputation through (i) dishonesty, (ii) material violation of the Corporation's standards of ethics or conduct, or (iii) material deviation from the duties owed the Corporation by the Employee, then all of the Incentive Stock Rights shall be forfeited as of the Employee’s termination date.
|
|
(g)
|
Change of Control
– In the event of a “change of control” of Corning Incorporated, the provisions of Sections 3 and 4 shall not be applicable and all nonforfeited Incentive Stock Rights shall be “earned” and fully vest.
|
|
For purposes of this Agreement, the term “change of control” shall mean an event that is “a change in the ownership or effective control of the Corporation, or in the ownership of a substantial portion of the assets of the Corporation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and that also falls within one of the following circumstances:
|
|
(i)
|
an offerer (other than Corning) purchases shares of Corning Common Stock pursuant to a tender or exchange offer for such shares;
|
|
(ii)
|
any person (as such term is used in Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of Corning securities representing 50% or more of the combined voting power of Corning’s then outstanding securities;
|
|
(iii)
|
the membership of Corning’s Board of Directors changes as the result of a contested election or elections, such that a majority of the individuals who are Directors at any particular time were initially placed on the Board of Directors as a result of such a contested election or elections occurring within the previous two years; or
|
|
(iv)
|
the consummation of a merger in which the Corporation is not the surviving corporation, consolidation, sale or disposition of all or substantially all of Corning’s assets or a plan of partial or complete liquidation approved by the Corporation’s shareholders.
|
5.
|
Time of Payment
. “Earned” Incentive Stock Rights that have vested shall be paid as of the earliest of the following dates:
|
|
(a)
|
Death or Separation from Service–
If the Employee dies or “separates from service” (within the meaning of Section 409A of the Code) from Corning, the Employee’s Incentive Stock Rights that are “earned” and vested as of the date of the Employee’s death or separation from service shall be paid (net of tax withholdings as of the date of death or separation) and distributed as net shares of Common Stock within 30 days after the date of death or separation from service.
|
|
(b)
|
April 16, 2018.
If the Employee does not “separate from service” (within the meaning of Section 409A of the Code) from Corning on or before March 31, 2018, the Employee’s “earned” Incentive Stock Rights that are vested as of March 31, 2018 shall be paid (net of tax withholdings as of April 16, 2018) and distributed as net shares of Common Stock within 30 days following April 16, 2018.
|
|
(c)
|
Change of Control -
In the event of a Change of Control, the Employee’s Incentive Stock Rights that are vested as of the date of the Change of Control shall be paid/distributed as net shares of Common Stock (net of tax withholdings) as of/and within 30 days following the date of the Change of Control.
|
|
(d)
|
Special Distributions to Pay Social Security, Medicare Taxes -
In the event that “earned” Incentive Stock Rights become subject to Social Security and/or Medicare taxes prior to a distribution event described in Sections 5(a)-(c) above (i.e., because the payment of the Incentive Stock Rights is no longer subject to a substantial risk of forfeiture) a partial distribution of the Incentive Stock Rights will be made to pay the Federal Insurance Contributions Act (“FICA”) tax imposed under Code sections 3101, 3121(a), and 3121(v)(2) on the Employee’s “earned” Incentive Stock Rights (the “FICA Amount”). Additionally, a partial distribution of the Incentive Stock Rights will be made to pay the income tax at source on wages imposed under section 3401 or the corresponding withholding provisions of applicable state, local, or foreign tax laws as a result of the payment of the FICA Amount, and to pay the additional income tax at source on wages attributable to the pyramiding section 3401 wages and taxes. However, the total payment under this provision must not exceed the aggregate of the FICA Amount, and the income tax withholding related to such FICA Amount. Any subsequent amount that is paid under this Agreement will be reduced by the amount paid under this Section 5(d).
|
6.
|
Form of Payment
. At the time specified in Section 5, Corning shall make an appropriate book-entry, for the number of shares of Common Stock equal to the number of “earned” Incentive Stock Rights that are vested (net of tax withholdings). An Employee shall have no further rights with regard to the Incentive Stock Rights once the underlying shares of Common Stock have been delivered. The number of shares of Common Stock which Corning must deliver pursuant to this Agreement shall be reduced by the value of all taxes which the Corporation is required by law to withhold by reason of such delivery.
|
7.
|
Voting and Dividend Rights
. Because the Incentive Stock Rights do not constitute shares of Common Stock (but rather just the right to receive shares in the future upon satisfaction of the specified service based vesting conditions), the grant or vesting of Incentive Stock Rights shall not provide the Employee with any shareholder rights (such as voting or dividend rights) until the Incentive Stock Rights are converted to shares of Common Stock.
|
8.
|
Dividend Equivalents
. The Employee’s earned and vested Incentive Stock Rights shall be credited with dividend equivalents in a manner that is consistent with the manner in which dividends are paid on shares of Common Stock. Dividend equivalents shall be paid in cash at the same time that the Incentive Stock Rights are paid in Section 5. The Corporation shall establish rules and administrative processes that apply to dividend equivalents that shall be binding on the Employee. No dividend equivalents shall be paid on Incentive Stock Rights that have been forfeited or paid.
|
9.
|
Transfers
. If the Employee is transferred from Corning to a subsidiary (being a 50% or greater owned entity), or vice versa or from one subsidiary to another, the Employee’s employment shall not be deemed to have terminated.
|
10.
|
Section 409A and Unfunded Plan
. This Agreement is intended to comply with the requirements of Section 409A of the Code and shall be interpreted and administered in accordance with that intent. If any provision of the agreement would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended so as to avoid the conflict. This Agreement is an unfunded deferred compensation plan.
|
11.
|
Modification/Interpretation
. Any modification of the terms of this Agreement must be approved, and any dispute, disagreement or matter of interpretation which shall arise under this Agreement shall be finally determined by the Compensation Committee of the Corning Board of Directors in its absolute discretion.
|
By:
|
/s/ John P. MacMahon
|
|
John P. MacMahon
|
||
Senior Vice President,
|
||
Global Compensation & Benefits
|
||
Corning Incorporated
|
1.
|
Award of Units
. The Company hereby awards to the Employee Cash Performance Units (the “Cash Units”).
|
2.
|
Non-Transferability
. The Cash Units may not be sold, assigned, transferred, pledged or otherwise encumbered by or on behalf of or for the benefit of the Employee other than by last will and testament, by the laws of descent and distribution, pursuant to a domestic relations order or as otherwise permitted by the Committee pursuant to Section 12 of the Plan.
|
3.
|
Performance-Based Vesting Requirement
.
|
|
(a)
|
Within ninety days following the beginning of each fiscal year ending on December 31
st
2015, 2016 and 2017 (each such year, an “Annual Performance Period” and collectively, the “Performance Period”), the Compensation Committee of the Company’s Board of Directors (the “Committee”) shall determine performance targets (each a “Performance Target”) applicable to the current fiscal year. Such targets will be communicated annually to the Employee.
|
|
(b)
|
Any Cash Units that are earned pursuant to Sections 3 and 4 (after taking into account the proration adjustments referenced in Section 4 (the “Proration Factor”), if applicable) shall be referred to as the “Earned Units,”
provided
,
however
, that if the numerator of the Proration Factor is less than 3, all Cash Units shall be forfeited upon a termination of employment for any reason.
|
4.
|
Service Based Vesting Requirement
. Subject to the exceptions set forth below, the Employee must remain in continuous employment with the Company Group until the expiration of the Performance Period in order to vest in the Earned Units. If the Employee’s employment with the Company Group terminates on or before the expiration of the Performance Period, any Earned Units shall be treated in the manner set forth in this Section 4.
|
5.
|
Definitions
.
For purposes of this Agreement,
|
|
(a)
|
“Termination Date” shall mean the last day on which the Employee provides services to the Company Group (notwithstanding any applicable severance periods).
|
|
(b)
|
“Cause” shall mean the Employee’s:
|
|
(A)
|
conviction of a felony or conviction of a misdemeanor involving moral turpitude (from which no further appeals have been or can be taken);
|
|
(B)
|
material breach of the Company Group’s Code of Conduct;
|
|
(C)
|
gross abdication of duties as an employee of the Company Group, which conduct remains uncured by the Employee for a period of at least 30 days following written notice thereof to the Employee by the Company Group, in each case as determined in good faith by the Company; or
|
|
(D)
|
misappropriation of the Company Group’s assets, personal dishonesty or business conduct which causes material or potentially material financial or reputational harm for the Company;
|
|
(c)
|
“Disability” shall mean the Employee’s termination of employment with the Company Group as a result of a total and permanent disability as that term is defined in the long-term disability plan applicable to the Employee.
|
|
(d)
|
“Change of Control” shall mean an event that is “a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended and the regulations and guidance promulgated thereunder (the “Code”), and that also falls within one of the following circumstances:
|
|
(
A)
|
an offerer (other than the Company) purchases shares of the Company’s Common Stock pursuant to a tender or exchange offer for such shares;
|
|
(B)
|
any person (as such term is used in Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934) is or becomes the beneficial owner, directly or indirectly, of securities representing 50% or more of the combined voting power of the Company’s then outstanding securities;
|
|
(C)
|
the membership the Company’s Board of Directors changes as the result of a contested election or elections, such that a majority of the individuals who are directors at any particular time were initially placed on the Board of Directors as a result of such a contested election or elections occurring within the previous two years; or
|
|
(D
)
|
the consummation of a merger in which the Company is not the surviving corporation, consolidation, sale or disposition of all or substantially all of the Company’s assets or a plan of partial or complete liquidation approved by the Company’s shareholders;
|
6.
|
Time of Payment
.
|
|
(a)
|
Except as noted below, the Earned Units that have vested pursuant to Sections 3 and 4 shall be paid within 60 days following the expiration of the Performance Period.
|
|
(b)
|
In the event of a termination of employment due to Sections 4(c), 4(d) or 4(e), the Earned Units that vest shall be paid within 60 days following (i) the Termination Date, or (ii) the determination of results for the first Annual Performance Period, whichever date is later.
|
|
(c)
|
In the event of a Change of Control, the Earned Units that vest in accordance with Section 4(f) shall be paid within 60 days following (i) the effective date of the Change of Control, or (ii) the determination of results for the first Annual Performance Period, whichever date is later.
|
|
(d)
|
The applicable date on which Cash Units are paid pursuant to this Section 6 is referred to as the “Payment Date.” All Cash Units that have not been earned and vested as of the Payment Date shall be forfeited.
|
|
(e)
|
In the event that the Earned Units become subject to Social Security and/or Medicare taxes prior to the applicable Payment Date, the Company shall withhold a number of Cash Units equal in value to (i) the applicable Federal Insurance Contributions Act (“FICA”) tax imposed under Code Sections 3101, 3121(a), and 3121(v)(2) on the Cash Units (the “FICA Amount”) and (ii) the applicable federal, state, local or foreign income taxes owedas a result of the withholding of the Cash Units to pay the FICA Amount. Any subsequent payment under this Agreement will be reduced by the amount withheld under this Section 6(e).
|
7.
|
Form of Payment
.
|
|
(a)
|
Unless otherwise specified by the Committee at the Payment Date pursuant to Section 7(b), Earned Units shall be paid in cash.
|
|
(b)
|
On or prior to the Payment Date, the Committee may elect, to pay any Earned Units in shares of the Company’s common stock, par value $0.50 per share (“Common Stock”). If paid in Common Stock, the Company shall make an appropriate book-entry, for the number of whole shares of Common Stock equal in value to the number of Earned Units that are vested as of the business day preceding the Payment Date, with any resulting fractional shares being delivered to the Employee in cash.
|
|
(c)
|
The Employee shall have no further rights with regard to the Cash Units once the cash or shares of Common Stock have been delivered pursuant to this Section 7.
|
|
(d)
|
All payments made pursuant to this Agreement shall be reduced by the amount of all tax withholdings and other permitted deductions. To the extent the Cash Units are paid in shares of Common Stock, the Company may withhold shares of Common Stock to satisfy any tax withholdings and permitted deductions.
|
8.
|
Voting and Dividend Rights
. The Cash Units do not entitle the Employee to any of the rights of a shareholder of the Company (such as voting or dividend rights).
|
9.
|
Recoupment/Claw-back
.
Notwithstanding anything in this Agreement to the contrary, the Cash Units and any payments made pursuant to this Agreement shall be subject to claw-back or recoupment as mandated by applicable law, rules, regulations or Company policy as enacted, adopted or modified from time to time.
|
10.
|
Transfers
. If the Employee is transferred from the Company to a Subsidiary, from a Subsidiary to the Company or from one Subsidiary to another, the Employee’s employment with the Company Group shall not be deemed to have terminated;
provided
,
however
, that the Subsidiary is owned 50% or greater by the Company Group.
|
11.
|
Section 409A
.
|
|
(a)
|
The Cash Units are intended to comply with or be exempt from Section 409A of the Code and shall be administered and interpreted in accordance with that intent. If any provision of the Plan or this Agreement would, in the reasonable good faith judgment of the Committee, result or likely result in the imposition on the Employee of a penalty tax under Section 409A, the Committee may modify the terms of the Plan or this Agreement, without the consent of the Employee, in the manner that the Committee may reasonably and in good faith determine to be necessary or advisable to avoid the imposition of such penalty tax. This Section 11 does not create an obligation on the part of the Company to modify the Plan or this Agreement and does not guarantee that the Cash Units will not be subject to taxes, interest and penalties under Section 409A.
|
|
(b)
|
Notwithstanding anything to the contrary in the Plan or this Agreement, to the extent that the Cash Units constitute deferred compensation for purposes of Section 409A and the Employee is a “Specified Employee” (within the meaning of the Committee’s established methodology for determining “Specified Employees” for purposes of Section 409A), no payment or distribution of any amounts with respect to the Cash Units that are subject to Section 409A may be made before the 15th day of the seventh month following the Employee’s “Separation from Service” from the Company (as defined in Section 409A) or, if earlier, the date of the Employee’s death.
|
|
(c)
|
The actual Payment Date pursuant to Section 6 shall be within the sole discretion of the Company. In no event may the Employee be permitted to control the year in which settlement occurs.
|
12.
|
Modification/Interpretation
. The Committee shall have the power to alter, amend, modify or terminate the Plan or this Agreement at any time; provided, however, that no such termination, amendment or modification may adversely affect, in any material respect, the Employee’s rights under this Agreement without the Employee’s consent. Notwithstanding the foregoing, the Company shall have broad authority to amend this Agreement without the consent of the Employee to the extent it deems necessary or desirable (a) to comply with or take into account changes in or interpretations of, applicable tax laws, securities laws, employment laws, accounting rules and other applicable laws, rules and regulations, (b) to take into account unusual or nonrecurring events or market conditions, or (c) to take into account significant acquisitions or dispositions of assets or other property by the Company. Any amendment, modification or termination shall, upon adoption, become and be binding on all persons affected thereby without requirement for consent or other action with respect thereto by any such person. The Committee shall give written notice to the Employee of any such amendment, modification or termination as promptly as practicable after the adoption thereof. The foregoing shall not restrict the ability of the Employee and the Company by mutual consent to alter or amend the terms of the Cash Units in any manner that is consistent with the Plan and approved by the Committee.
|
13.
|
Headings.
The headings of sections and subsections are included solely for convenience of reference and shall not affect the meaning of the provisions of this Agreement.
|
14.
|
Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
|
15.
|
Entire Agreement.
This Agreement and the Plan constitute the entire agreement between the parties hereto with regard to the subject matter hereof. They supersede all other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.
|
16.
|
Governing Law.
Except as to matters of federal law, this Agreement and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of New York (other than its conflict of law rules).
|
By:
|
/s/ John P. MacMahon
|
|
John P. MacMahon
|
||
Senior Vice President,
|
||
Global Compensation & Benefits
|
||
Corning Incorporated
|
Fiscal years ended December 31,
|
||||||||||||||
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||
Income from continuing operations before taxes on income
|
$
|
3,568
|
$
|
2,473
|
$
|
1,975
|
$
|
3,231
|
$
|
3,869
|
||||
Adjustments:
|
||||||||||||||
Equity in earnings of equity affiliates
|
(266)
|
(547)
|
(810)
|
(1,471)
|
(1,958)
|
|||||||||
Distributed income of equity affiliates
(1)
|
1,704
|
629
|
1,089
|
820
|
1,712
|
|||||||||
Net income attributable to noncontrolling interests
|
3
|
(5)
|
(3)
|
(2)
|
||||||||||
Fixed charges net of capitalized interest
|
159
|
148
|
138
|
119
|
129
|
|||||||||
Earnings before taxes and fixed charges as adjusted
|
$
|
5,168
|
$
|
2,703
|
$
|
2,387
|
$
|
2,696
|
$
|
3,750
|
||||
Fixed charges:
|
||||||||||||||
Interest incurred
(2)
|
$
|
160
|
$
|
153
|
$
|
181
|
$
|
132
|
$
|
126
|
||||
Portion of rent expense which represents an appropriate interest factor
(3)
|
36
|
28
|
27
|
30
|
21
|
|||||||||
Amortization of debt costs
|
3
|
2
|
4
|
3
|
2
|
|||||||||
Total fixed charges
|
$
|
199
|
$
|
183
|
$
|
212
|
$
|
165
|
$
|
149
|
||||
Preferred stock grossed up to a pre-tax basis
|
136
|
|||||||||||||
Combined fixed charges and preferred stock dividends
|
$
|
335
|
$
|
183
|
$
|
212
|
$
|
165
|
$
|
149
|
||||
Ratio of earnings to fixed charges
|
26.0x
|
14.8x
|
11.3x
|
16.3x
|
25.2x
|
|||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends
|
15.4x
|
14.8x
|
11.3x
|
16.3x
|
25.2x
|
(1)
|
In 2014, includes a $1.6 billion dividend received from Samsung Corning Precision Materials related to the Acquisition. See Note 8 (Acquisition) for more details.
|
(2)
|
Interest incurred includes capitalized interest.
|
(3)
|
One-third of net rent expense is the portion deemed representative of the interest factor.
|
/s/ Donald W. Blair
|
|
Donald W. Blair
|
/s/ Stephanie A. Burns
|
|
Stephanie A. Burns
|
/s/ John A. Canning, Jr.
|
|
John A. Canning, Jr.
|
/s/ Richard T. Clark
|
|
Richard T. Clark
|
/s/ Robert F. Cummings, Jr.
|
|
Robert F. Cummings, Jr.
|
/s/ James B. Flaws
|
|
James B. Flaws
|
/s/ Deborah A. Henretta
|
|
Deborah A. Henretta
|
/s/ Daniel P. Huttenlocher
|
|
Daniel P. Huttenlocher
|
/s/ Kurt M. Landgraf
|
|
Kurt M. Landgraf
|
/s/ Kevin J. Martin
|
|
Kevin J. Martin
|
/s/ Deborah E. Rieman
|
|
Deborah D. Rieman
|
/s/ Hansel E. Tookes II
|
|
Hansel E. Tookes II
|
/s/ Wendell P. Weeks
|
|
Wendell P. Weeks
|
/s/ Mark S. Wrighton
|
|
Mark S. Wrighton
|
1.
|
I have reviewed this annual report on Form 10-K of Corning Incorporated;
|
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 period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
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 control over financial reporting.
|
Date: February 13, 2015
|
|
/s/ Wendell P. Weeks
|
|
Wendell P. Weeks
|
|
Chairman, Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this annual report on Form 10-K of Corning Incorporated;
|
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 period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
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 control over financial reporting.
|
Date: February 13, 2015
|
|
/s/ James B. Flaws
|
|
James B. Flaws
|
|
Vice Chairman and Chief Financial Officer
|
|
(Principal Financial Officer)
|
(1)
|
the Annual Report of the Company on Form 10-K for the annual period ended December 31, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
that information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: February 13, 2015
|
|
/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
|