x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2015
|
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
|
·
|
EAGLE XG®, the industry’s first LCD glass substrate that is free of heavy metals;
|
·
|
EAGLE XG® Slim glass, a line of thin glass substrates which enables lighter-weight portable devices and thinner televisions and monitors;
|
·
|
Corning® Willow™ Glass, our ultra-thin flexible glass for use in next-generation consumer electronic technologies, including curved displays for immersive viewing or mounting on non-flat surfaces. This glass is also used in a variety of non-display applications, such as decorative laminates for interior architecture and advanced semiconductor packaging; and
|
·
|
The family of Corning Lotus™ Glass, high-performance display glass developed to enable cutting-edge technologies, including organic light-emitting diode (“OLED”) displays and next generation LCDs. These substrate glasses provide industry-leading levels of low total pitch variation, resulting in brighter, more energy-efficient displays with higher resolutions for consumers and better yields for panel makers.
|
·
|
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 assessment 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
|
29.5
|
7.6
|
21.9
|
||
Sales and administrative
|
2.3
|
1.9
|
0.4
|
||
Research and development
|
2.2
|
1.9
|
0.3
|
||
Warehouse
|
2.3
|
1.7
|
0.6
|
||
Total
|
36.3
|
13.1
|
23.2
|
(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
|
||||||||
2015
|
|||||||||||
Price range
|
|||||||||||
High
|
$
|
25.16
|
$
|
22.98
|
$
|
20.02
|
$
|
19.29
|
|||
Low
|
$
|
21.89
|
$
|
19.57
|
$
|
15.24
|
$
|
16.36
|
|||
2014
|
|||||||||||
Price range
|
|||||||||||
High
|
$
|
20.99
|
$
|
22.20
|
$
|
22.37
|
$
|
23.52
|
|||
Low
|
$
|
16.55
|
$
|
20.17
|
$
|
19.23
|
$
|
17.03
|
(b)
|
Not applicable.
|
(c)
|
The following table provides information about our purchases of our common stock during the fiscal fourth quarter of 2015:
|
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)
|
|||
October 1-31, 2015
|
54,513,746
|
$18.77
|
54,500,524
|
$4,521,528,007
|
|||
November 1-30, 2015
|
10,654
|
$18.82
|
$4,521,528,007
|
||||
December 1-31, 2015
|
141,145
|
$18.42
|
$4,521,528,007
|
||||
Total at December 31, 2015
|
54,665,545
|
$18.77
|
54,500,524
|
$4,521,528,007
|
(1)
|
These columns reflect the following transactions during the fourth quarter of 2015: (i) the deemed surrender to us of 86,015 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 79,006 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 54,500,524 shares of common stock in conjunction with the repurchase programs announced on July 15, 2015.
|
(2)
|
On July 15, 2015, Corning’s Board of Directors authorized the repurchase of up to $2 billion worth of shares of common stock between the date of announcement and December 31, 2016. On October 26, 2015, Corning’s Board of Directors supplemented this program with the authorization to repurchase an additional $4 billion worth of shares of common stock.
|
Years ended December 31,
|
||||||||||||||
2015
|
2014
|
2013
|
2012
|
2011
|
||||||||||
Results of operations
|
||||||||||||||
Net sales
|
$
|
9,111
|
$
|
9,715
|
$
|
7,819
|
$
|
8,012
|
$
|
7,890
|
||||
Research, development and engineering expenses
|
$
|
769
|
$
|
815
|
$
|
710
|
$
|
769
|
$
|
668
|
||||
Equity in earnings of affiliated companies
|
$
|
299
|
$
|
266
|
$
|
547
|
$
|
810
|
$
|
1,471
|
||||
Net income attributable to Corning Incorporated
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
$
|
2,817
|
||||
Earnings per common share attributable to Corning Incorporated:
|
||||||||||||||
Basic
|
$
|
1.02
|
$
|
1.82
|
$
|
1.35
|
$
|
1.10
|
$
|
1.80
|
||||
Diluted
|
$
|
1.00
|
$
|
1.73
|
$
|
1.34
|
$
|
1.09
|
$
|
1.78
|
||||
Cash dividends declared per common share
|
$
|
0.36
|
$
|
0.52
|
$
|
0.39
|
$
|
0.32
|
$
|
0.23
|
||||
Shares used in computing per share amounts:
|
||||||||||||||
Basic earnings per common share
|
1,219
|
1,305
|
1,452
|
1,494
|
1,562
|
|||||||||
Diluted earnings per common share
|
1,343
|
1,427
|
1,462
|
1,506
|
1,583
|
|||||||||
Financial position
|
||||||||||||||
Working capital
|
$
|
5,455
|
$
|
7,914
|
$
|
7,145
|
$
|
7,739
|
$
|
6,580
|
||||
Total assets
|
$
|
28,547
|
$
|
30,063
|
$
|
28,478
|
$
|
29,375
|
$
|
27,848
|
||||
Long-term debt
|
$
|
3,910
|
$
|
3,227
|
$
|
3,272
|
$
|
3,382
|
$
|
2,364
|
||||
Total Corning Incorporated shareholders’ equity
|
$
|
18,788
|
$
|
21,579
|
$
|
21,162
|
$
|
21,486
|
$
|
21,078
|
||||
Selected data
|
||||||||||||||
Capital expenditures
|
$
|
1,250
|
$
|
1,076
|
$
|
1,019
|
$
|
1,801
|
$
|
2,432
|
||||
Depreciation and amortization
|
$
|
1,184
|
$
|
1,200
|
$
|
1,002
|
$
|
997
|
$
|
957
|
||||
Number of employees
|
35,700
|
34,600
|
30,400
|
28,700
|
28,800
|
·
|
Overview
|
·
|
Results of Operations
|
·
|
Core Performance Measures
|
·
|
Reportable Segments
|
·
|
Liquidity and Capital Resources
|
·
|
Environment
|
·
|
Critical Accounting Estimates
|
·
|
New Accounting Standards
|
·
|
Forward-Looking Statements
|
·
|
The decrease in the unrealized gains from our foreign currency hedges related to translated earnings in the amount of $1,054 million;
|
·
|
A decrease in net income of $301 million in the Display Technologies segment, driven by price declines in the low-teens in percentage terms more than offsetting a mid-single digit percentage increase in volume, continued softening in the television and IT retail markets and the impact of the change in the fair value of the contingent consideration resulting from the acquisition of Corning Precision Materials in the amount of $184 million;
|
·
|
The increase of $81 million in our defined benefit pension plans mark-to-market loss, driven by lower returns on our U.S. pension assets; and
|
·
|
The absence of a gain of $38 million recorded in 2014 related to the settlement of an intellectual property dispute.
|
·
|
The positive change in the amounts recorded related to tax law changes and valuation allowance adjustments of $204 million;
|
·
|
An increase of $43 million in the Optical Communications segment, due to higher sales volume for both carrier and enterprise network products, the favorable impact of several acquisitions completed this year and manufacturing efficiencies gained through cost reductions; and
|
·
|
An increase in equity earnings of $33 million, driven by higher earnings at Dow Corning.
|
2015
|
2014
|
2013
|
% change
|
|||||||||
15 vs. 14
|
14 vs. 13
|
|||||||||||
Net sales
|
$
|
9,111
|
$
|
9,715
|
$
|
7,819
|
(6)
|
24
|
||||
Gross margin
|
$
|
3,653
|
$
|
4,052
|
$
|
3,324
|
(10)
|
22
|
||||
(gross margin %)
|
40%
|
42%
|
43%
|
|||||||||
Selling, general and administrative expenses
|
$
|
1,523
|
$
|
1,211
|
$
|
1,126
|
26
|
8
|
||||
(as a % of net sales)
|
17%
|
12%
|
14%
|
|||||||||
Research, development and engineering expenses
|
$
|
769
|
$
|
815
|
$
|
710
|
(6)
|
15
|
||||
(as a % of net sales)
|
8%
|
8%
|
9%
|
|||||||||
Restructuring, impairment and other charges
|
$
|
71
|
$
|
67
|
*
|
6
|
||||||
(as a % of net sales)
|
1%
|
1%
|
||||||||||
Equity in earnings of affiliated companies
|
$
|
299
|
$
|
266
|
$
|
547
|
12
|
(51)
|
||||
(as a % of net sales)
|
3%
|
3%
|
7%
|
|||||||||
Transaction-related gain, net
|
$
|
74
|
*
|
*
|
||||||||
(as a % of net sales)
|
1%
|
|||||||||||
Foreign currency hedge gain, net
|
$
|
85
|
$
|
1,411
|
$
|
622
|
(94)
|
127
|
||||
(as a % of net sales)
|
1%
|
15%
|
8%
|
|||||||||
Income before income taxes
|
$
|
1,486
|
$
|
3,568
|
$
|
2,473
|
(58)
|
44
|
||||
(as a % of net sales)
|
16%
|
37%
|
32%
|
|||||||||
Provision for income taxes
|
$
|
(147)
|
$
|
(1,096)
|
$
|
(512)
|
(87)
|
114
|
||||
(as a % of net sales)
|
(2)%
|
(11)%
|
(7)%
|
|||||||||
Net income attributable to Corning Incorporated
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
(46)
|
26
|
||||
(as a % of net sales)
|
15%
|
25%
|
25%
|
*
|
Percent change not meaningful.
|
Year ended December 31,
|
%
Change
|
%
Change
|
||||||||||
2015
|
2014
|
2013
|
15 vs. 14
|
14 vs. 13
|
||||||||
Display Technologies
|
$
|
3,086
|
$
|
3,851
|
$
|
2,545
|
(20)%
|
51%
|
||||
Optical Communications
|
2,980
|
2,652
|
2,326
|
12%
|
14%
|
|||||||
Environmental Technologies
|
1,053
|
1,092
|
919
|
(4)%
|
19%
|
|||||||
Specialty Materials
|
1,107
|
1,205
|
1,170
|
(8)%
|
3%
|
|||||||
Life Sciences
|
821
|
862
|
851
|
(5)%
|
1%
|
|||||||
All Other
|
64
|
53
|
8
|
21%
|
563%
|
|||||||
Total net sales
|
$
|
9,111
|
$
|
9,715
|
$
|
7,819
|
(6)%
|
24%
|
·
|
A decrease of $765 million in the Display Technologies segment, driven by the depreciation of the Japanese yen versus the U.S. dollar, which adversely impacted net sales in the amount of $446 million, and price declines in the low-teens on a percentage basis. Although volume increased in the mid-single digits in percentage terms, growth was muted somewhat by weakness in demand for televisions, computer monitors and mobile computing products;
|
·
|
A decrease in the Environmental Technologies segment of $39 million, driven by the translation impact from movements in foreign currency exchange rates versus the U.S. dollar, primarily the euro, of $57 million and lower sales of light duty diesel products in Europe, partially offset by higher volume for heavy-duty diesel and light-duty substrate products;
|
·
|
A decrease of $98 million in the Specialty Materials segment, driven primarily by a decline in advanced optics sales; and
|
·
|
A decrease of $41 million in the Life Sciences segment due to the impact of unfavorable movements in foreign exchange rates of $43 million.
|
·
|
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, partially offset by price declines in the mid-teens on a percentage basis 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, 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 Sciences increased by $11 million, driven by growth in North America and China, up $12 million and $5 million, respectively.
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Samsung Corning Precision Materials
|
$
|
320
|
||||||
Dow Corning
|
$
|
281
|
$
|
252
|
196
|
|||
All other
|
18
|
14
|
31
|
|||||
Total equity earnings
|
$
|
299
|
$
|
266
|
$
|
547
|
Year ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Silicones
|
$
|
160
|
$
|
653
|
$
|
166
|
||
Polysilicon (Hemlock Semiconductor Group)
|
121
|
(401)
|
30
|
|||||
Total Dow Corning
|
$
|
281
|
$
|
252
|
$
|
196
|
·
|
A decrease in equity earnings from the silicones business of $493 million, driven by the following items:
|
o
|
The absence of the gain resulting from the reduction of the Implant Liability in the amount of $393 million;
|
o
|
The absence of $46 million of favorable tax adjustments recorded in 2014;
|
o
|
The negative impact of the change in the mark-to-market of a derivative instrument in the amount of $56 million ($43 million loss in 2015 compared to $13 million gain in 2014); and
|
o
|
Lower volume and unfavorable movements in foreign exchange rates.
|
·
|
A significant increase in equity earnings from the polysilicon business in the amount of $522 million, driven by the absence of the $465 million charge for the abandonment of a polycrystalline silicon plant expansion recorded in 2014 and an increase in Corning’s share of settlements of long-term sales agreements in the amount of $40 million ($49 million in the first quarter of 2015 compared to $9 million in the first quarter of 2014), partially offset by lower volume.
|
·
|
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
|
·
|
A 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 million, 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.
|
Year ended
December 31, 2015
|
Year ended
December 31, 2014
|
Change
2015 vs. 2014
|
|||||||||||||||
(in millions)
|
Income
before
income
taxes
|
Net
income
|
Income
before
income
taxes
|
Net
income
|
Income
before
income
taxes
|
Net
income
|
|||||||||||
Hedges related to translated earnings:
|
|||||||||||||||||
Realized gains, net
|
$
|
653
|
$
|
410
|
$
|
274
|
$
|
224
|
$
|
379
|
$
|
186
|
|||||
Unrealized (losses) gains
|
(573)
|
(362)
|
1,095
|
692
|
(1,668)
|
(1,054)
|
|||||||||||
Total translated earnings contract gain
|
80
|
48
|
1,369
|
916
|
(1,289)
|
(868)
|
|||||||||||
Foreign currency hedges, other
|
5
|
3
|
42
|
27
|
(37)
|
(24)
|
|||||||||||
Foreign Currency Hedge Gain, Net
|
$
|
85
|
$
|
51
|
$
|
1,411
|
$
|
943
|
$
|
(1,326)
|
$
|
(892)
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
Change
2014 vs. 2013
|
|||||||||||||||
(in millions)
|
Income
before
income
taxes
|
Net
income
|
Income
before
income
taxes
|
Net
income
|
Income
before
income
taxes
|
Net
income
|
|||||||||||
Hedges related to translated earnings:
|
|||||||||||||||||
Realized gains, net
|
$
|
274
|
$
|
224
|
$
|
67
|
$
|
55
|
$
|
207
|
$
|
169
|
|||||
Unrealized gains
|
1,095
|
692
|
368
|
232
|
727
|
460
|
|||||||||||
Total translated earnings contract gain
|
1,369
|
916
|
435
|
287
|
934
|
629
|
|||||||||||
Foreign currency hedges, other
|
42
|
27
|
187
|
118
|
(145)
|
(91)
|
|||||||||||
Foreign Currency Hedge Gain, Net
|
$
|
1,411
|
$
|
943
|
$
|
622
|
$
|
405
|
$
|
789
|
$
|
538
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Provision for income taxes
|
$
|
147
|
$
|
1,096
|
$
|
512
|
||
Effective tax rate
|
9.9%
|
30.7%
|
20.7%
|
·
|
Rate differences on income (loss) of consolidated foreign companies, including the benefit of excess foreign tax credits resulting from the inclusion of high-taxed foreign earnings in U.S. income;
|
·
|
The impact of equity in earnings of nonconsolidated affiliates reported in the financials, net of tax;
|
·
|
$63 million tax expense for unrecognized tax benefit primarily for positions taken related to net transfer pricing adjustments (offset with benefit for competent authority relief); and
|
·
|
$100 million tax benefit primarily related to change in judgment on the realizability of Germany and Japan deferred tax assets which is partially offset with tax expense from U.S. state and China deferred tax allowances increases.
|
·
|
Rate differences on income (loss) of consolidated foreign companies, including the benefit of excess foreign tax credits resulting from the inclusion of high-taxed foreign earnings in U.S. income; and
|
·
|
The impact of equity in earnings of nonconsolidated affiliates reported in the financials, net of tax.
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Net income attributable to Corning Incorporated
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
||
Net income attributable to Corning Incorporated used in basic earnings per common share calculation
(1)
|
$
|
1,241
|
$
|
2,378
|
$
|
1,961
|
||
Net income attributable to Corning Incorporated used in diluted earnings per common share calculation
(1)
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
||
Basic earnings per common share
|
$
|
1.02
|
$
|
1.82
|
$
|
1.35
|
||
Diluted earnings per common share
|
$
|
1.00
|
$
|
1.73
|
$
|
1.34
|
||
Shares used in computing per share amounts
|
||||||||
Basic earnings per common share
|
1,219
|
1,305
|
1,452
|
|||||
Diluted earnings per common share
|
1,343
|
1,427
|
1,462
|
(1)
|
Refer to Note 18 (Earnings per Common Share) to the Consolidated Financial Statements for additional information.
|
Years ended December 31,
|
||||||||
(In millions)
|
2015
|
2014
|
2013
|
|||||
Net income attributable to Corning Incorporated
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
||
Foreign currency translation adjustments and other
|
(590)
|
(1,073)
|
(682)
|
|||||
Net unrealized gains (losses) on investments
|
1
|
(1)
|
2
|
|||||
Unamortized gains (losses) and prior service (costs) credits for postretirement benefit plans
|
121
|
(281)
|
392
|
|||||
Net unrealized (losses) gains on designated hedges
|
(36)
|
4
|
(24)
|
|||||
Other comprehensive loss, net of tax (Note 17)
|
(504)
|
(1,351)
|
(312)
|
|||||
Comprehensive income attributable to Corning Incorporated
|
$
|
835
|
$
|
1,121
|
$
|
1,649
|
2015
|
2014
|
2013
|
% change
|
|||||||||
15 vs. 14
|
14 vs. 13
|
|||||||||||
Core net sales
|
$
|
9,800
|
$
|
9,955
|
$
|
7,780
|
(2)%
|
28%
|
||||
Core equity in earnings of affiliated companies
|
$
|
269
|
$
|
310
|
$
|
531
|
(13)%
|
(42)%
|
||||
Core earnings attributable to Corning Incorporated
|
$
|
1,882
|
$
|
2,023
|
$
|
1,656
|
(7)%
|
22%
|
Year ended December 31,
|
%
Change
|
%
Change
|
||||||||||
2015
|
2014
|
2013
|
15 vs. 14
|
14 vs. 13
|
||||||||
Display Technologies
|
$
|
3,774
|
$
|
4,092
|
$
|
2,507
|
(8)%
|
63%
|
||||
Optical Communications
|
2,980
|
2,652
|
2,326
|
12%
|
14%
|
|||||||
Environmental Technologies
|
1,053
|
1,092
|
919
|
(4)%
|
19%
|
|||||||
Specialty Materials
|
1,107
|
1,205
|
1,170
|
(8)%
|
3%
|
|||||||
Life Sciences
|
821
|
862
|
851
|
(5)%
|
1%
|
|||||||
All Other
|
65
|
52
|
7
|
25%
|
643%
|
|||||||
Total core net sales
|
$
|
9,800
|
$
|
9,955
|
$
|
7,780
|
(2)%
|
28%
|
·
|
A decrease of $318 million in the Display Technologies segment, driven by price declines in the low-teens on a percentage basis. Although volume increased in the mid-single digits in percentage terms, growth was muted somewhat by weakness in demand for televisions, computer monitors and mobile computing products;
|
·
|
A decrease in the Environmental Technologies segment of $39 million, driven by the translation impact from movements in foreign currency exchange rates versus the U.S. dollar, primarily the euro, of $57 million and lower sales of light duty diesel products in Europe, partially offset by higher volume for heavy duty diesel and light duty substrate products;
|
·
|
A decrease of $98 million in the Specialty Materials segment, driven primarily by a decline in advanced optics sales; and
|
·
|
A decrease of $41 million in the Life Sciences segment due to the impact of unfavorable movements in foreign exchange rates of $43 million.
|
·
|
Display Technologies increased by $1,585 million, due to the consolidation of Corning Precision Materials 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, 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.
|
2015
|
2014
|
2013
|
% change
|
|||||||||
15 vs. 14
|
14 vs. 13
|
|||||||||||
Samsung Corning Precision Materials
|
$
|
356
|
||||||||||
Dow Corning *
|
$
|
245
|
$
|
287
|
145
|
(15)%
|
98%
|
|||||
All other
|
24
|
23
|
30
|
4%
|
(23)%
|
|||||||
Total core equity earnings
|
$
|
269
|
$
|
310
|
$
|
531
|
(13)%
|
(42)%
|
*
|
In 2013, we excluded the operating results of Dow Corning’s consolidated subsidiary Hemlock Semiconductor, a producer of polycrystalline silicon, to remove the impact of the severe unpredictability and instability in the polysilicon market.
|
Year ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Silicones
|
$
|
176
|
$
|
197
|
$
|
145
|
||
Polysilicon (Hemlock Semiconductor Group)
|
69
|
90
|
31
|
|||||
Total Dow Corning
|
$
|
245
|
$
|
287
|
$
|
176
|
2015
|
2014
|
2013
|
||||||
As reported
|
$
|
281
|
$
|
252
|
$
|
196
|
||
Hemlock Semiconductor operating results
(8)
|
(31)
|
|||||||
Hemlock Semiconductor non-operating results
(8)
|
(1)
|
|||||||
Equity in earnings of affiliated companies
(8)
|
(36)
|
35
|
(19)
|
|||||
Core Performance measures
|
$
|
245
|
$
|
287
|
$
|
145
|
·
|
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 $58 million in the Environmental Technologies segment, driven by an increase in demand for our diesel products and improved manufacturing efficiency; and
|
·
|
An increase of $34 million in the Optical Communications segment, driven by higher sales of carrier network and enterprise network products.
|
2015
|
2014
|
2013
|
||||||
Core earnings attributable to Corning Incorporated
|
$
|
1,882
|
$
|
2,023
|
$
|
1,656
|
||
Less: Series A convertible preferred stock dividend
|
98
|
94
|
||||||
Core earnings available to common stockholders - basic
|
1,784
|
1,929
|
1,656
|
|||||
Add: Series A convertible preferred stock dividend
|
98
|
94
|
||||||
Core earnings available to common stockholders - diluted
|
$
|
1,882
|
$
|
2,023
|
$
|
1,656
|
||
Weighted-average common shares outstanding - basic
|
1,219
|
1,305
|
1,452
|
|||||
Effect of dilutive securities:
|
||||||||
Stock options and other dilutive securities
|
9
|
12
|
10
|
|||||
Series A convertible preferred stock
|
115
|
110
|
||||||
Weighted-average common shares outstanding - diluted
|
1,343
|
1,427
|
1,462
|
|||||
Core basic earnings per common share
|
$
|
1.46
|
$
|
1.48
|
$
|
1.14
|
||
Core diluted earnings per common share
|
$
|
1.40
|
$
|
1.42
|
$
|
1.13
|
Year ended December 31, 2015
|
||||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Earnings
per
share
|
|||||||||||
As reported
|
$
|
9,111
|
$
|
299
|
$
|
1,486
|
$
|
1,339
|
9.9%
|
$
|
1.00
|
|||||
Constant-yen
(1)
|
687
|
6
|
567
|
423
|
0.31
|
|||||||||||
Constant-won
(1)
|
2
|
(2)
|
(25)
|
(19)
|
(0.01)
|
|||||||||||
Foreign currency hedges related to translated earnings
(2)
|
(80)
|
(48)
|
(0.04)
|
|||||||||||||
Acquisition-related costs
(3)
|
55
|
36
|
0.03
|
|||||||||||||
Discrete tax items and other tax-related adjustments
(4)
|
36
|
0.03
|
||||||||||||||
Litigation, regulatory and other legal matters
(5)
|
5
|
3
|
||||||||||||||
Restructuring, impairment and other charges
(6)
|
46
|
42
|
0.03
|
|||||||||||||
Liquidation of subsidiary
(7)
|
||||||||||||||||
Equity in earnings of affiliated companies
(8)
|
(34)
|
(34)
|
(33)
|
(0.02)
|
||||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials
(9)
|
(20)
|
(18)
|
(0.01)
|
|||||||||||||
Post-combination expenses
(10)
|
25
|
16
|
0.01
|
|||||||||||||
Pension mark-to-market adjustment
(11)
|
165
|
105
|
0.08
|
|||||||||||||
Core performance measures
|
$
|
9,800
|
$
|
269
|
$
|
2,190
|
$
|
1,882
|
14.1%
|
$
|
1.40
|
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)*
|
240
|
1
|
197
|
144
|
0.10
|
|||||||||||
Constant-won
(1)
|
37
|
26
|
0.02
|
|||||||||||||
Foreign currency hedges related to translated earnings
(2)
|
(1,369)
|
(916)
|
(0.64)
|
|||||||||||||
Acquisition-related costs
(3)
|
74
|
57
|
0.04
|
|||||||||||||
Discrete tax items and other tax-related adjustments
(4)
|
240
|
0.17
|
||||||||||||||
Litigation, regulatory and other legal matters
(5)
|
(1)
|
(2)
|
||||||||||||||
Restructuring, impairment and other charges
(6)
|
86
|
66
|
0.05
|
|||||||||||||
Liquidation of subsidiary
(7)
|
(3)
|
|||||||||||||||
Equity in earnings of affiliated companies
(8)
|
43
|
43
|
38
|
0.03
|
||||||||||||
Gain on previously held equity investment
(9)
|
(394)
|
(292)
|
(0.20)
|
|||||||||||||
Settlement of pre-existing contract
(9)
|
320
|
320
|
0.22
|
|||||||||||||
Contingent consideration fair value adjustment
(9)
|
(249)
|
(194)
|
(0.14)
|
|||||||||||||
Post-combination expenses
(9)
|
72
|
55
|
0.04
|
|||||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials
(9)
|
(9)
|
(12)
|
(0.01)
|
|||||||||||||
Pension mark-to-market adjustment
(11)
|
29
|
24
|
0.02
|
|||||||||||||
Core performance measures
|
$
|
9,955
|
$
|
310
|
$
|
2,404
|
$
|
2,023
|
15.8%
|
$
|
1.42
|
*
|
In the first quarter of 2015, we changed the yen-to-dollar management rate from ¥93 to ¥99 to closely align with the yen-denominated hedges entered into for the years 2015 through 2017. Prior periods presented have been recast based on the new rate.
|
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)*
|
(39)
|
(28)
|
(53)
|
(45)
|
(0.03)
|
|||||||||||
Foreign currency hedges related to translated earnings
(2)
|
(435)
|
(287)
|
(0.20)
|
|||||||||||||
Other yen-related transactions
(2)
|
(99)
|
(69)
|
(0.05)
|
|||||||||||||
Acquisition-related costs
(3)
|
54
|
40
|
0.03
|
|||||||||||||
Discrete tax items and other tax-related adjustments
(4)
|
9
|
0.01
|
||||||||||||||
Litigation, regulatory and other legal matters
(5)
|
19
|
13
|
0.01
|
|||||||||||||
Restructuring, impairment and other charges
(6)
|
67
|
46
|
0.03
|
|||||||||||||
Equity in earnings of affiliated companies
(8)
|
42
|
42
|
44
|
0.02
|
||||||||||||
Hemlock Semiconductor operating results
(8)
|
(31)
|
(31)
|
(30)
|
(0.02)
|
||||||||||||
Hemlock Semiconductor non-operating results
(8)
|
1
|
1
|
1
|
|||||||||||||
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
|
$
|
7,780
|
$
|
531
|
$
|
1,995
|
$
|
1,656
|
17.0%
|
$
|
1.13
|
*
|
In the first quarter of 2015, we changed the yen-to-dollar management rate from ¥93 to ¥99 to closely align with the yen-denominated hedges entered into for the years 2015 through 2017. Prior periods presented have been recast based on the new rate.
|
(1)
|
Constant-currency adjustments:
|
Constant-yen
:
Because a significant portion of Display Technologies segment 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 January 1, 2015, we used an internally derived management rate of ¥99, which is closely aligned to our current yen portfolio of foreign currency hedges, 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 Corning Precision Materials’ costs are denominated in South 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 South 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.
|
|
(2)
|
Foreign currency hedges related to translated earnings
:
We have excluded the impact of the gains and losses of our foreign currency hedges related to translated earnings for each period presented.
|
(3)
|
Acquisition-related costs
:
These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(4)
|
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 transfer pricing out-of-period adjustments in 2014 and 2015.
|
(5)
|
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 other legal matters.
|
(6)
|
Restructuring, impairment and other charges
:
This amount includes restructuring, impairment and other charges, including goodwill impairment charges and other expenses and disposal costs not classified as restructuring expense.
|
(7)
|
Liquidation of subsidiary
:
The partial impact of non-restructuring related items due to the decision to liquidate a consolidated subsidiary that is not significant.
|
(8)
|
Equity in earnings of affiliated companies
:
These adjustments relate to items which do not reflect expected on-going operating results of our affiliated companies, such as restructuring, impairment and other charges and settlements under “take-or-pay” contracts. In 2013, we excluded the operating results of Dow Corning’s consolidated subsidiary Hemlock Semiconductor, a producer of polycrystalline silicon, to remove the impact of the severe unpredictability and instability in the polysilicon market.
|
(9)
|
Impacts from the acquisition of Samsung Corning Precision Materials
:
Pre-acquisition gains and losses on previously held equity investment and other gains and losses related to the acquisition, including 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.
|
(10)
|
Post-combination expenses
:
Post-combination expenses incurred as a result of an acquisition in the first quarter of 2015.
|
(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.
|
(12)
|
Gain on change in control of equity investment
:
Gain as a result of certain changes to the shareholder agreement of an equity company, resulting in Corning having a controlling interest that requires consolidation of this investment.
|
·
|
Display Technologies – manufactures 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.
|
Year ended
December 31, 2015
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
|||||||||||||||
(in millions)
|
Sales
|
Net
income
|
Sales
|
Net
income
|
Sales
|
Net
income
|
|||||||||||
As reported
|
$
|
3,086
|
$
|
1,095
|
$
|
3,851
|
$
|
1,396
|
$
|
2,545
|
$
|
1,293
|
|||||
Constant-yen
(1)*
|
686
|
419
|
240
|
142
|
(38)
|
(47)
|
|||||||||||
Constant-won
(1)
|
2
|
(17)
|
27
|
||||||||||||||
Foreign currency hedges related to translated earnings
(2)
|
(416)
|
(290)
|
(90)
|
||||||||||||||
Other yen-related transactions
(2)
|
(67)
|
||||||||||||||||
Acquisition-related costs
(3)
|
37
|
8
|
|||||||||||||||
Discrete tax items and other tax-related adjustments
(4)
|
4
|
10
|
|||||||||||||||
Restructuring, impairment and other charges
(6)
|
40
|
6
|
|||||||||||||||
Equity in earnings of affiliated companies
(8)
|
6
|
28
|
|||||||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials
(9)
|
(10)
|
1
|
(121)
|
||||||||||||||
Pension mark-to-market adjustment
(11)
|
4
|
2
|
(8)
|
||||||||||||||
Core performance measures
|
$
|
3,774
|
$
|
1,075
|
$
|
4,092
|
$
|
1,243
|
$
|
2,507
|
$
|
1,133
|
*
|
In the first quarter of 2015, we changed the yen-to-dollar management rate from ¥93 to ¥99 to closely align with the yen-denominated hedges entered into for the years 2015 through 2017. Prior periods presented have been recast based on the new rate.
|
·
|
The impact of price declines in the low-teens in percentage terms that more than offset the mid-single digit percent increase in volume;
|
·
|
A decrease of $184 million in the gain on the fair value adjustment of the contingent consideration resulting from the acquisition of Corning Precision Materials; and
|
·
|
The absence of a gain on the settlement of an intellectual property dispute recorded in 2014 in the amount of $38 million.
|
·
|
Improvements in manufacturing efficiency of $79 million;
|
·
|
A decline in transaction and acquisition-related costs in the amounts of $73 million and $37 million, respectively;
|
·
|
A decrease of $40 million in restructuring, impairment and other charges; and
|
·
|
A decline in operating expenses.
|
·
|
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.
|
Year ended
December 31, 2015
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
|||||||||||||||
(in millions)
|
Sales
|
Net
income
|
Sales
|
Net
income
|
Sales
|
Net
income
|
|||||||||||
As reported
|
$
|
2,980
|
$
|
237
|
$
|
2,652
|
$
|
194
|
$
|
2,326
|
$
|
189
|
|||||
Acquisition-related costs
(3)
|
16
|
(2)
|
9
|
||||||||||||||
Litigation, regulatory and other legal matters
(5)
|
13
|
||||||||||||||||
Restructuring, impairment and other charges
(6)
|
(1)
|
17
|
8
|
||||||||||||||
Liquidation of subsidiary
(7)
|
(2)
|
||||||||||||||||
Post-combination expenses
(10)
|
16
|
||||||||||||||||
Pension mark-to-market adjustment
(11)
|
13
|
(9)
|
|||||||||||||||
Gain on change in control of equity investment
(12)
|
(11)
|
||||||||||||||||
Core performance measures
|
$
|
2,980
|
$
|
281
|
$
|
2,652
|
$
|
220
|
$
|
2,326
|
$
|
186
|
·
|
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.
|
Year ended
December 31, 2015
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
|||||||||||||||
(in millions)
|
Sales
|
Net
income
|
Sales
|
Net
income
|
Sales
|
Net
income
|
|||||||||||
As reported
|
$
|
1,053
|
$
|
161
|
$
|
1,092
|
$
|
178
|
$
|
919
|
$
|
127
|
|||||
Restructuring, impairment and other charges
(6)
|
1
|
||||||||||||||||
Pension mark-to-market adjustment
(11)
|
5
|
(3)
|
|||||||||||||||
Core performance measures
|
$
|
1,053
|
$
|
161
|
$
|
1,092
|
$
|
183
|
$
|
919
|
$
|
125
|
Year ended
December 31, 2015
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
|||||||||||||||
(in millions)
|
Sales
|
Net
income
|
Sales
|
Net
income
|
Sales
|
Net
income
|
|||||||||||
As reported
|
$
|
1,107
|
$
|
167
|
$
|
1,205
|
$
|
138
|
$
|
1,170
|
$
|
181
|
|||||
Constant-yen
(1)*
|
(6)
|
(3)
|
2
|
||||||||||||||
Constant-won
(1)
|
(2)
|
||||||||||||||||
Foreign currency hedges related to translated earnings
(2)
|
5
|
14
|
|||||||||||||||
Acquisition-related costs
(3)
|
(1)
|
1
|
|||||||||||||||
Restructuring, impairment and other charges
(6)
|
14
|
12
|
12
|
||||||||||||||
Pension mark-to-market adjustment
(11)
|
(2)
|
||||||||||||||||
Core performance measures
|
$
|
1,107
|
$
|
178
|
$
|
1,205
|
$
|
160
|
$
|
1,170
|
$
|
194
|
*
|
In the first quarter of 2015, we changed the yen-to-dollar management rate from ¥93 to ¥99 to closely align with the yen-denominated hedges entered into for the years 2015 through 2017. Prior periods presented have been recast based on the new rate.
|
Year ended
December 31, 2015
|
Year ended
December 31, 2014
|
Year ended
December 31, 2013
|
|||||||||||||||
(in millions)
|
Sales
|
Net
income
|
Sales
|
Net
income
|
Sales
|
Net
income
|
|||||||||||
As reported
|
$
|
821
|
$
|
61
|
$
|
862
|
$
|
67
|
$
|
851
|
$
|
68
|
|||||
Acquisition-related costs
(3)
|
12
|
14
|
21
|
||||||||||||||
Restructuring, impairment and other charges
(6)
|
2
|
3
|
|||||||||||||||
Pension mark-to-market adjustment
(11)
|
(3)
|
||||||||||||||||
Core performance measures
|
$
|
821
|
$
|
73
|
$
|
862
|
$
|
83
|
$
|
851
|
$
|
89
|
% change
|
||||||||||||
As Reported
|
2015
|
2014
|
2013
|
15 vs. 14
|
14 vs. 13
|
|||||||
Net sales
|
$
|
64
|
$
|
53
|
$
|
8
|
21
|
563
|
||||
Research, development and engineering expenses
|
$
|
186
|
$
|
177
|
$
|
116
|
5
|
53
|
||||
Equity earnings of affiliated companies
|
$
|
17
|
$
|
18
|
$
|
(24)
|
(6)
|
*
|
||||
Net loss
|
$
|
(202)
|
$
|
(198)
|
$
|
(165)
|
(2)
|
20
|
*
|
Percent change not meaningful
|
·
|
In the second quarter of 2015, we issued $375 million of 1.50% senior unsecured notes that mature on May 8, 2018 and $375 million of 2.90% senior unsecured notes that mature on May 15, 2022. The net proceeds of $745 million will be used for general corporate purposes. We can redeem these notes at any time, subject to certain customary terms and conditions.
|
·
|
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, 2015, 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, 2015, 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.
|
·
|
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.
|
·
|
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,
|
||||||||
2015
|
2014
|
2013
|
||||||
Net cash provided by operating activities
|
$
|
2,809
|
$
|
4,709
|
$
|
2,787
|
||
Net cash used in investing activities
|
$
|
(685)
|
$
|
(962)
|
$
|
(1,004)
|
||
Net cash used in financing activities
|
$
|
(2,603)
|
$
|
(2,586)
|
$
|
(2,063)
|
December 31,
|
|||||
2015
|
2014
|
||||
Working capital
|
$
|
5,455
|
$
|
7,914
|
|
Current ratio
|
2.9:1
|
4.4:1
|
|||
Trade accounts receivable, net of allowances
|
$
|
1,372
|
$
|
1,501
|
|
Days sales outstanding
|
55
|
56
|
|||
Inventories
|
$
|
1,385
|
$
|
1,322
|
|
Inventory turns
|
4.0
|
4.2
|
|||
Days payable outstanding
(1)
|
42
|
41
|
|||
Long-term debt
|
$
|
3,910
|
$
|
3,227
|
|
Total debt to total capital
|
19%
|
13%
|
(1)
|
Includes trade payables only.
|
RATING AGENCY
|
Rating
long-term debt
|
Outlook
last update
|
|
Fitch
|
BBB+
|
Stable
|
|
October 29, 2015
|
|||
Standard & Poor’s
|
BBB+
|
Stable
|
|
October 27, 2015
|
|||
Moody’s
|
Baa1
|
Stable
|
|
October 28, 2015
|
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
|
$
|
92
|
$
|
25
|
$
|
6
|
$
|
1
|
$
|
60
|
||||
Stand-by letters of credit
(1)
|
47
|
44
|
3
|
|||||||||||
Credit Facility to Equity Company
|
31
|
27
|
4
|
|||||||||||
Loan guarantees
|
14
|
14
|
||||||||||||
Subtotal of commitment expirations per period
|
$
|
184
|
$
|
96
|
$
|
6
|
$
|
1
|
$
|
81
|
||||
Purchase obligations
(6)
|
$
|
220
|
$
|
106
|
$
|
77
|
$
|
33
|
$
|
4
|
||||
Capital expenditure obligations
(2)
|
298
|
298
|
||||||||||||
Total debt
(3)
|
4,122
|
565
|
625
|
550
|
2,382
|
|||||||||
Interest on long-term debt
(4)
|
2,385
|
165
|
316
|
280
|
1,624
|
|||||||||
Capital leases and financing obligations
(3)
|
355
|
7
|
10
|
7
|
331
|
|||||||||
Imputed interest on capital leases and financing obligations
|
240
|
19
|
37
|
36
|
148
|
|||||||||
Minimum rental commitments
|
573
|
49
|
110
|
77
|
337
|
|||||||||
Uncertain tax positions
(5)
|
58
|
|||||||||||||
Subtotal of contractual obligation payments due by period
(5)
|
8,251
|
1,209
|
1,175
|
983
|
4,826
|
|||||||||
Total commitments and contingencies
(5)
|
$
|
8,435
|
$
|
1,305
|
$
|
1,181
|
$
|
984
|
$
|
4,907
|
(1)
|
At December 31, 2015, $38 million of the $47 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, 2015, $58 million was included on our balance sheet related to uncertain tax positions. Of this amount, we are unable to estimate when any 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)
|
2015
|
2014
|
2013
|
|||||
Actual return on plan assets – Domestic plans
|
$
|
(111)
|
$
|
287
|
$
|
65
|
||
Expected return on plan assets – Domestic plans
|
166
|
159
|
158
|
|||||
Actual return on plan assets – International plans
|
3
|
68
|
6
|
|||||
Expected return on plan assets – International plans
|
12
|
15
|
11
|
|||||
December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Weighted-average actual and expected return on assets:
|
||||||||
Actual return on plan assets – Domestic plans
|
(4.23%)
|
10.82%
|
2.67%
|
|||||
Expected return on plan assets – Domestic plans
|
6.00%
|
6.25%
|
6.00%
|
|||||
Actual return on plan assets – International plans
|
0.59%
|
17.15%
|
2.73%
|
|||||
Expected return on plan assets – International plans
|
2.97%
|
4.12%
|
3.73%
|
Change in assumption
|
Effect on 2016
pre-tax pension
expense
|
Effect on
December 31, 2015
PBO
|
|
25 basis point decrease in each spot rate
|
- 2 million
|
+ 87 million
|
|
25 basis point increase in each spot rate
|
+ 2 million
|
- 83 million
|
|
25 basis point decrease in expected return on assets
|
+ 6 million
|
||
25 basis point increase in expected return on assets
|
- 6 million
|
Change in assumption
|
Effect on 2016
pre-tax OPEB
expense
|
Effect on
December 31, 2015
APBO*
|
|
25 basis point decrease in each spot rate
|
+ 0 million
|
+ 23 million
|
|
25 basis point increase in each spot rate
|
- 0 million
|
- 22 million
|
*
|
Accumulated Postretirement Benefit Obligation (APBO).
|
-
|
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 South 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
|
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)
|
42,738,000
|
$19.40
|
71,841,896
|
||
Equity compensation plans not approved by security holders
|
|||||
Total
|
42,738,000
|
$19.40
|
71,841,896
|
(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.
|
(a)
|
Documents filed as part of this report:
|
||||
Page
|
|||||
1.
|
Financial statements
|
||||
2.
|
Financial statement schedule:
|
||||
(i)
|
Valuation accounts and reserves
|
||||
See separate index to financial statements and financial statement schedules
|
10.2
|
2003 Variable Compensation Plan (Incorporated by reference to Exhibit 2 of Corning Proxy Statement, Definitive 14A filed March 10, 2003 for April 24, 2003 Annual Meeting of Shareholders).
|
||
10.3
|
2003 Equity Plan for Non-Employee Directors (Incorporated by reference to Exhibit 3 of Corning Proxy Statement, Definitive 14A filed March 10, 2003 for April 24, 2003 Annual Meeting of Shareholders).
|
||
10.4
|
Form of Officer Severance Agreement dated as of February 1, 2004 between Corning Incorporated and each of the following individuals: James P. Clappin, James B. Flaws, Kirk P. Gregg, and Lawrence D. McRae (Incorporated by reference to Exhibit 10.1 of Corning’s Form 10-Q filed May 4, 2004).
|
||
10.5
|
Form of Amendment dated as of February 1, 2004 to Change In Control Agreement 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 10.4 of Corning’s Form 10-Q filed May 4, 2004).
|
||
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
|
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).
|
|
10.60
|
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).
|
|
10.61
|
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).
|
|
10.62
|
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).
|
|
10.63
|
Form of Corning Incorporated Incentive Stock Rights Agreement, effective January 1, 2015. (Incorporated by reference to Exhibit 10.64 of Corning’s Form 10-K filed February 13, 2015).
|
10.64
|
Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2015 (Incorporated by reference to Exhibit 10.65 of Corning’s Form 10-K filed February 13, 2015).
|
|
10.65
|
Form of Officer Severance Agreement dated as of January 1, 2015 between Corning Incorporated and each of the following individuals: Martin J. Curran; Eric S. Musser; Christine M. Pambianchi; and R. Tony Tripeny (Incorporated by reference to Exhibit 10.1 of Corning’s Form 10-Q filed July 30, 2015).
|
|
10.66
|
Form of Change in Control Agreement dated as of January 1, 2015 between Corning Incorporated and each of the following individuals: Martin J. Curran; Eric S. Musser; Christine M. Pambianchi; and R. Tony Tripeny (Incorporated by reference to Exhibit 10.2 of Corning’s Form 10-Q filed July 30, 2015).
|
|
10.67
|
Master Confirmation – Uncollared Accelerated Share Repurchase, dated October 28, 2015 by and between Morgan Stanley & Co. LLC and Corning Incorporated.
|
|
10.68
|
Tax Matters Agreement, dated December 10, 2015, by and between Corning Incorporated, The Dow Chemical Company, Dow Corning Corporation and HS Upstate Inc. (Incorporated by reference to Exhibit 1.2 of Corning’s Form 8-K filed on December 11, 2015).
|
|
10.69
|
Form of Corning Incorporated Incentive Stock Rights Agreement, effective January 1, 2016.
|
|
10.70
|
Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2016.
|
|
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, 2015.
|
|
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.
|
|||
2.
|
By
|
/s/ Wendell P. Weeks
|
Chairman of the Board of Directors, Chief
|
February 12, 2016
|
|||
(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 12, 2016
|
||||
(Wendell P. Weeks)
|
(Principal Executive Officer)
|
|||||
/s/ R. Tony Tripeny
|
Senior Vice President and Chief Financial Officer
|
February 12, 2016
|
||||
(R. Tony Tripeny)
|
(Principal Financial Officer)
|
|||||
/s/ Edward A. Schlesinger
|
Vice President and Corporate Controller
|
February 12, 2016
|
||||
(Edward A. Schlesinger)
|
(Principal Accounting Officer)
|
|||||
*
|
Director
|
February 12, 2016
|
||||
(Donald W. Blair)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(Stephanie A. Burns)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(John A. Canning, Jr.)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(Richard T. Clark)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(Robert F. Cummings, Jr.)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(Deborah A. Henretta)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(Daniel P. Huttenlocher)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(Kurt M. Landgraf)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(Kevin J. Martin)
|
*
|
Director
|
February 12, 2016
|
||||
(Deborah D. Rieman)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(Hansel E. Tookes II)
|
||||||
*
|
Director
|
February 12, 2016
|
||||
(Mark S. Wrighton)
|
||||||
*By
|
/s/ Lewis A. Steverson
|
|||||
(Lewis A. Steverson, Attorney-in-fact)
|
Page
|
|||||
1.
|
|||||
2.
|
|||||
3.
|
|||||
4.
|
|||||
5.
|
|||||
6.
|
|||||
7.
|
|||||
8.
|
|||||
9.
|
|||||
10.
|
|||||
11.
|
|||||
12
|
|||||
13.
|
|||||
14.
|
|||||
15.
|
|||||
16.
|
|||||
17.
|
|||||
18.
|
|||||
19.
|
|||||
20.
|
|||||
Financial Statement Schedule
|
|||||
II.
|
|||||
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
(In millions, except per share amounts)
|
2015
|
2014
|
2013
|
|||||
Net sales
|
$
|
9,111
|
$
|
9,715
|
$
|
7,819
|
||
Cost of sales
|
5,458
|
5,663
|
4,495
|
|||||
Gross margin
|
3,653
|
4,052
|
3,324
|
|||||
Operating expenses:
|
||||||||
Selling, general and administrative expenses
|
1,523
|
1,211
|
1,126
|
|||||
Research, development and engineering expenses
|
769
|
815
|
710
|
|||||
Amortization of purchased intangibles
|
54
|
33
|
31
|
|||||
Restructuring, impairment and other charges (Note 2)
|
71
|
67
|
||||||
Asbestos litigation (credit) charges (Note 7)
|
(15)
|
(9)
|
19
|
|||||
Operating income
|
1,322
|
1,931
|
1,371
|
|||||
Equity in earnings of affiliated companies (Note 7)
|
299
|
266
|
547
|
|||||
Interest income
|
21
|
26
|
8
|
|||||
Interest expense
|
(140)
|
(123)
|
(120)
|
|||||
Transaction-related gain, net (Note 8)
|
74
|
|||||||
Foreign currency hedge gain, net
|
85
|
1,411
|
622
|
|||||
Other (expense) income, net
|
(101)
|
(17)
|
45
|
|||||
Income before income taxes
|
1,486
|
3,568
|
2,473
|
|||||
Provision for income taxes (Note 6)
|
(147)
|
(1,096)
|
(512)
|
|||||
Net income attributable to Corning Incorporated
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
||
Earnings per common share attributable to Corning Incorporated:
|
||||||||
Basic (Note 18)
|
$
|
1.02
|
$
|
1.82
|
$
|
1.35
|
||
Diluted (Note 18)
|
$
|
1.00
|
$
|
1.73
|
$
|
1.34
|
||
Dividends declared per common share
(1)
|
$
|
0.36
|
$
|
0.52
|
$
|
0.39
|
(1)
|
The first quarter 2015 dividend was declared on December 3, 2014.
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
(In millions)
|
2015
|
2014
|
2013
|
|||||
Net income attributable to Corning Incorporated
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
||
Foreign currency translation adjustments and other
|
(590)
|
(1,073)
|
(682)
|
|||||
Net unrealized gains (losses) on investments
|
1
|
(1)
|
2
|
|||||
Unamortized gains (losses) and prior service (costs) credits for postretirement benefit plans
|
121
|
(281)
|
392
|
|||||
Net unrealized (losses) gains on designated hedges
|
(36)
|
4
|
(24)
|
|||||
Other comprehensive loss, net of tax (Note 17)
|
(504)
|
(1,351)
|
(312)
|
|||||
Comprehensive income attributable to Corning Incorporated
|
$
|
835
|
$
|
1,121
|
$
|
1,649
|
Corning Incorporated and Subsidiary Companies
|
December 31,
|
|||||
(In millions, except share and per share amounts)
|
2015
|
2014
|
|||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
4,500
|
$
|
5,309
|
|
Short-term investments, at fair value (Note 3)
|
100
|
759
|
|||
Total cash, cash equivalents and short-term investments
|
4,600
|
6,068
|
|||
Trade accounts receivable, net of doubtful accounts and allowances - $48 and $47
|
1,372
|
1,501
|
|||
Inventories, net of inventory reserves - $146 and $127 (Note 5)
|
1,385
|
1,322
|
|||
Deferred income taxes (Note 6)
|
248
|
||||
Other current assets (Note 11 and 15)
|
912
|
1,099
|
|||
Total current assets
|
8,269
|
10,238
|
|||
Investments (Note 7)
|
1,975
|
1,801
|
|||
Property, plant and equipment, net of accumulated depreciation - $9,188 and $8,332 (Note 9)
|
12,648
|
12,766
|
|||
Goodwill, net (Note 10)
|
1,380
|
1,150
|
|||
Other intangible assets, net (Note 10)
|
706
|
497
|
|||
Deferred income taxes (Note 6)
|
2,056
|
1,889
|
|||
Other assets (Note 8, 11 and 15)
|
1,513
|
1,722
|
|||
Total Assets
|
$
|
28,547
|
$
|
30,063
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt and short-term borrowings (Note 12)
|
$
|
572
|
$
|
36
|
|
Accounts payable
|
934
|
997
|
|||
Other accrued liabilities (Note 11 and 14)
|
1,308
|
1,291
|
|||
Total current liabilities
|
2,814
|
2,324
|
|||
Long-term debt (Note 12)
|
3,910
|
3,227
|
|||
Postretirement benefits other than pensions (Note 13)
|
718
|
814
|
|||
Other liabilities (Note 11 and 14)
|
2,242
|
2,046
|
|||
Total liabilities
|
9,684
|
8,411
|
|||
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
|
2,300
|
|||
Common stock – Par value $0.50 per share; Shares authorized: 3.8 billion; Shares issued: 1,681 million and 1,672 million
|
840
|
836
|
|||
Additional paid-in capital – common stock
|
13,352
|
13,456
|
|||
Retained earnings
|
13,832
|
13,021
|
|||
Treasury stock, at cost; shares held: 551 million and 398 million
|
(9,725)
|
(6,727)
|
|||
Accumulated other comprehensive loss
|
(1,811)
|
(1,307)
|
|||
Total Corning Incorporated shareholders’ equity
|
18,788
|
21,579
|
|||
Noncontrolling interests
|
75
|
73
|
|||
Total equity
|
18,863
|
21,652
|
|||
Total Liabilities and Equity
|
$
|
28,547
|
$
|
30,063
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
(In millions)
|
2015
|
2014
|
2013
|
|||||
Cash Flows from Operating Activities:
|
||||||||
Net income
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation
|
1,130
|
1,167
|
971
|
|||||
Amortization of purchased intangibles
|
54
|
33
|
31
|
|||||
Restructuring, impairment and other charges
|
71
|
67
|
||||||
Stock compensation charges
|
46
|
58
|
54
|
|||||
Equity in earnings of affiliated companies
|
(299)
|
(266)
|
(547)
|
|||||
Dividends received from affiliated companies
|
143
|
1,704
|
630
|
|||||
Deferred tax provision
|
54
|
612
|
189
|
|||||
Restructuring payments
|
(40)
|
(39)
|
(35)
|
|||||
Customer deposits
|
197
|
|||||||
Employee benefit payments (in excess of) less than expense
|
(52)
|
(52)
|
52
|
|||||
Gains on foreign currency hedges related to translated earnings
|
(80)
|
(1,369)
|
(435)
|
|||||
Unrealized translation losses on transactions
|
268
|
431
|
96
|
|||||
Contingent consideration fair value adjustment
|
(13)
|
(249)
|
||||||
Changes in certain working capital items:
|
||||||||
Trade accounts receivable
|
162
|
(16)
|
(29)
|
|||||
Inventories
|
(77)
|
2
|
(247)
|
|||||
Other current assets
|
(57)
|
(16)
|
34
|
|||||
Accounts payable and other current liabilities
|
(146)
|
(3)
|
(23)
|
|||||
Other, net
|
180
|
169
|
18
|
|||||
Net cash provided by operating activities
|
2,809
|
4,709
|
2,787
|
|||||
Cash Flows from Investing Activities:
|
||||||||
Capital expenditures
|
(1,250)
|
(1,076)
|
(1,019)
|
|||||
Acquisitions of businesses, net of cash (paid) received
|
(732)
|
66
|
(68)
|
|||||
Proceeds from sale of a business
|
12
|
|||||||
Investment in unconsolidated entities
|
(33)
|
(109)
|
(526)
|
|||||
Proceeds from loan repayments from unconsolidated entities
|
6
|
23
|
8
|
|||||
Short-term investments – acquisitions
|
(969)
|
(1,398)
|
(1,406)
|
|||||
Short-term investments – liquidations
|
1,629
|
1,167
|
2,026
|
|||||
Premium on purchased collars
|
(107)
|
|||||||
Realized gains on foreign currency hedges related to translated earnings
|
653
|
361
|
87
|
|||||
Other, net
|
(1)
|
4
|
1
|
|||||
Net cash used in investing activities
|
(685)
|
(962)
|
(1,004)
|
|||||
Cash Flows from Financing Activities:
|
||||||||
Retirement of long-term debt, net
|
(498)
|
|||||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(12)
|
(52)
|
(71)
|
|||||
Proceeds from issuance of long-term debt
|
745
|
248
|
||||||
Proceeds from issuance of short-term debt, net
|
3
|
29
|
||||||
Proceeds from issuance of commercial paper
|
481
|
|||||||
(Payments) proceeds from the settlement of interest rate swap agreements
|
(10)
|
33
|
||||||
Principal payments under capital lease obligations
|
(6)
|
(6)
|
(7)
|
|||||
Proceeds from issuance of preferred stock
(1)
|
400
|
|||||||
Proceeds received for asset financing and related incentives, net
|
1
|
1
|
276
|
|||||
Payments to acquire noncontrolling interest
|
(47)
|
|||||||
Proceeds from the exercise of stock options
|
102
|
116
|
85
|
|||||
Repurchases of common stock for treasury
|
(3,228)
|
(2,483)
|
(1,516)
|
|||||
Dividends paid
|
(679)
|
(591)
|
(566)
|
|||||
Net cash used in financing activities
|
(2,603)
|
(2,586)
|
(2,063)
|
|||||
Effect of exchange rates on cash
|
(330)
|
(556)
|
(4)
|
|||||
Net (decrease) increase in cash and cash equivalents
|
(809)
|
605
|
(284)
|
|||||
Cash and cash equivalents at beginning of year
|
5,309
|
4,704
|
4,988
|
|||||
Cash and cash equivalents at end of year
|
$
|
4,500
|
$
|
5,309
|
$
|
4,704
|
(1)
|
In the first quarter of 2014, Corning issued 1,900 shares of Preferred Stock to Samsung Display Co., Ltd. in connection with the acquisition of their equity interests in Samsung Corning Precision Materials Co., Ltd. (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, 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
|
Net income
|
1,339
|
1,339
|
9
|
1,348
|
||||||||||||||
Other comprehensive loss
|
(504)
|
(504)
|
(1)
|
(505)
|
||||||||||||||
Purchase of common stock for treasury
|
(250)
|
(2,978)
|
(3,228)
|
(3,228)
|
||||||||||||||
Shares issued to benefit plans and for option exercises
|
4
|
146
|
(1)
|
149
|
149
|
|||||||||||||
Dividends on shares
|
(528)
|
(528)
|
(528)
|
|||||||||||||||
Other, net
|
(19)
|
(19)
|
(6)
|
(25)
|
||||||||||||||
Balance, December 31, 2015
|
$
|
2,300
|
$
|
840
|
$
|
13,352
|
$
|
13,832
|
$
|
(9,725)
|
$
|
(1,811)
|
$
|
18,788
|
$
|
75
|
$
|
18,863
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Non-cash transactions:
|
||||||||
Accruals for capital expenditures
|
$
|
298
|
$
|
358
|
$
|
185
|
||
Cash paid for interest and income taxes:
|
||||||||
Interest
(1)
|
$
|
178
|
$
|
171
|
$
|
182
|
||
Income taxes, net of refunds received
|
$
|
253
|
$
|
577
|
$
|
469
|
(1)
|
Included in this amount are approximately $35 million, $40 million and $35 million of interest costs that were capitalized as part of property, plant and equipment, net of accumulated depreciation, in 2015, 2014 and 2013, 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
|
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
|
Amortized cost
December 31,
|
Fair value
December 31,
|
||||||||||
2015
|
2014
|
2015
|
2014
|
||||||||
Bonds, notes and other securities:
|
|||||||||||
U.S. government and agencies
|
$
|
100
|
$
|
759
|
$
|
100
|
$
|
759
|
|||
Total short-term investments
|
$
|
100
|
$
|
759
|
$
|
100
|
$
|
759
|
|||
Asset-backed securities
|
$
|
37
|
$
|
42
|
$
|
33
|
$
|
38
|
|||
Total long-term investments
|
$
|
37
|
$
|
42
|
$
|
33
|
$
|
38
|
Less than one year
|
$ 70
|
Due in 1-5 years
|
30
|
Due in 5-10 years
|
|
Due after 10 years
|
33
|
Total
|
$133
|
(in millions)
|
Number of
securities
in a loss
position
|
December 31, 2015
|
|||||||||||
12 months or greater
|
Total
|
||||||||||||
Fair
value
|
Unrealized
losses
(1)
|
Fair
value
|
Unrealized
losses
|
||||||||||
Asset-backed securities
|
21
|
$
|
33
|
$
|
(4)
|
$
|
33
|
$
|
(4)
|
||||
Total long-term investments
|
21
|
$
|
33
|
$
|
(4)
|
$
|
33
|
$
|
(4)
|
(1)
|
Unrealized losses in securities less than 12 months were not significant.
|
(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.
|
December 31,
|
|||||
2015
|
2014
|
||||
Finished goods
|
$
|
633
|
$
|
586
|
|
Work in process
|
264
|
255
|
|||
Raw materials and accessories
|
200
|
202
|
|||
Supplies and packing materials
|
288
|
279
|
|||
Total inventories, net of inventory reserves
|
$
|
1,385
|
$
|
1,322
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
U.S. companies
|
$
|
426
|
$
|
2,384
|
$
|
1,274
|
||
Non-U.S. companies
|
1,060
|
1,184
|
1,199
|
|||||
Income before income taxes
|
$
|
1,486
|
$
|
3,568
|
$
|
2,473
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Current:
|
||||||||
Federal
|
$
|
40
|
$
|
38
|
$
|
3
|
||
State and municipal
|
20
|
32
|
12
|
|||||
Foreign
|
33
|
414
|
308
|
|||||
Deferred:
|
||||||||
Federal
|
144
|
411
|
112
|
|||||
State and municipal
|
30
|
(9)
|
50
|
|||||
Foreign
|
(120)
|
210
|
27
|
|||||
Provision for income taxes
|
$
|
147
|
$
|
1,096
|
$
|
512
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Statutory U.S. income tax rate
|
35.0%
|
35.0%
|
35.0%
|
|||||
State income tax (benefit), net of federal effect
|
0.1
|
4.9
|
(9)
|
0.6
|
||||
Tax holidays
(1)
|
(0.5)
|
(0.4)
|
(1.2)
|
|||||
Investment and other tax credits
(2)
|
(1.7)
|
(0.3)
|
(2.0)
|
|||||
Rate difference on foreign earnings
|
(19.8)
|
(11)
|
(8.3)
|
(8.1)
|
(4)
|
|||
Uncertain tax positions
|
4.3
|
(10)
|
(0.1)
|
0.2
|
||||
Equity earnings impact
(3)
|
(5.4)
|
(2.0)
|
(6.6)
|
|||||
Valuation allowances
|
(4.2)
|
(7)
|
0.8
|
(6)
|
3.1
|
(5)
|
||
Other items, net
|
2.1
|
1.1
|
(8)
|
(0.3)
|
||||
Effective income tax (benefit) rate
|
9.9%
|
30.7%
|
20.7%
|
(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 2015, $0.01 in 2014 and $0.02 in 2013.
|
(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 difference between 2013-2014 was due to 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 (9) below.
|
(7)
|
$100 million tax benefit primarily related to change in judgment on the realizability of Germany and Japan deferred tax assets is partially offset with tax expense from U.S. state and China deferred tax allowance increases.
|
(8)
|
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.
|
(9)
|
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.
|
(10)
|
Unrecognized tax benefit reserve was primarily for tax positions taken related to transfer pricing of which $31 million tax expense is related to out of period adjustments. The impact of these corrections is not material to any individual period previously presented. Since the Company operates in a number of countries with income tax treaties, an offsetting benefit was recorded where it believes it is more-likely-than-not to receive competent authority relief.
|
(11)
|
Tax benefit is primarily for excess foreign tax credits resulting from the inclusion of high-taxed foreign earnings in U.S. income and the income of Taiwan and Korea subsidiaries with lower statutory rates than the U.S. The amount of tax benefit in 2015 is relatively consistent with 2014. The change in the effective tax rate reconciliation percentage is driven by the significant decrease in the gain on our foreign currency translation hedges in 2015 versus 2014.
|
December 31,
|
|||||
2015
|
2014
|
||||
Loss and tax credit carryforwards
|
$
|
1,151
|
$
|
1,235
|
|
Other assets
|
69
|
69
|
|||
Asset impairments and restructuring reserves
|
153
|
170
|
|||
Postretirement medical and life benefits
|
276
|
312
|
|||
Other accrued liabilities
|
265
|
246
|
|||
Other employee benefits
|
505
|
473
|
|||
Gross deferred tax assets
|
2,419
|
2,505
|
|||
Valuation allowance
|
(238)
|
(298)
|
|||
Total deferred tax assets
|
2,181
|
2,207
|
|||
Intangible and other assets
|
(181)
|
(152)
|
|||
Fixed assets
|
(284)
|
(299)
|
|||
Total deferred tax liabilities
|
(465)
|
(451)
|
|||
Net deferred tax assets
|
$
|
1,716
|
$
|
1,756
|
December 31,
|
|||||
2015
|
2014
|
||||
Current deferred tax assets
|
$
|
248
|
|||
Non-current deferred tax assets
|
$
|
2,056
|
1,889
|
||
Current deferred tax liabilities
|
(5)
|
||||
Non-current deferred tax liabilities
|
(340)
|
(376)
|
|||
Net deferred tax assets
|
$
|
1,716
|
$
|
1,756
|
Expiration
|
||||||||||||||
Amount
|
2016-2020
|
2021-2025
|
2026-2035
|
Indefinite
|
||||||||||
Net operating losses
|
$
|
406
|
$
|
127
|
$
|
63
|
$
|
3
|
$
|
213
|
||||
Tax credits
|
745
|
414
|
58
|
237
|
36
|
|||||||||
Totals as of December 31, 2015
|
$
|
1,151
|
$
|
541
|
$
|
121
|
$
|
240
|
$
|
249
|
2015
|
2014
|
||||
Balance at January 1
|
$
|
10
|
$
|
15
|
|
Additions based on tax positions related to the current year
|
|||||
Additions for tax positions of prior years
|
245
|
5
|
|||
Reductions for tax positions of prior years
|
(1)
|
||||
Settlements and lapse of statute of limitations
|
(1)
|
(10)
|
|||
Balance at December 31
|
$
|
253
|
$
|
10
|
Ownership
interest
(1)
|
December 31,
|
||||||||
2015
|
2014
|
||||||||
Affiliated companies accounted for by the equity method
|
|||||||||
Dow Corning
|
50%
|
$
|
1,483
|
$
|
1,325
|
||||
All other
|
20%
|
to
|
50%
|
422
|
452
|
||||
1,905
|
1,777
|
||||||||
Other investments
|
70
|
24
|
|||||||
Total
|
$
|
1,975
|
$
|
1,801
|
(1)
|
Amounts reflect Corning’s direct ownership interests in the respective affiliated companies at December 31, 2015. Corning does not control any of such entities.
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Statement of operations
(1)(2)
:
|
||||||||
Net sales
|
$
|
6,461
|
$
|
7,124
|
$
|
8,526
|
||
Gross profit
|
$
|
1,606
|
$
|
1,701
|
$
|
2,655
|
||
Net income
|
$
|
586
|
$
|
647
|
$
|
1,135
|
||
Corning’s equity in earnings of affiliated companies
|
$
|
299
|
$
|
266
|
$
|
547
|
||
Related party transactions:
|
||||||||
Corning sales to affiliated companies
|
$
|
30
|
$
|
13
|
$
|
13
|
||
Corning purchases from affiliated companies
|
$
|
19
|
$
|
25
|
$
|
189
|
||
Corning transfers of assets, at cost, to affiliated companies
(3)
|
$
|
37
|
||||||
Dividends received from affiliated companies
|
$
|
143
|
$
|
130
|
$
|
629
|
||
Royalty income from affiliated companies
|
$
|
2
|
$
|
57
|
||||
Corning services to affiliates
|
$
|
2
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Balance sheet:
|
||||||||
Current assets
|
$
|
5,228
|
$
|
5,432
|
||||
Noncurrent assets
|
$
|
6,453
|
$
|
6,864
|
||||
Short-term borrowings, including current portion of long-term debt
|
$
|
6
|
$
|
7
|
||||
Other current liabilities
|
$
|
1,461
|
$
|
1,630
|
||||
Long-term debt
|
$
|
800
|
$
|
950
|
||||
Other long-term liabilities
|
$
|
4,557
|
$
|
5,143
|
||||
Non-controlling interest
|
$
|
631
|
$
|
634
|
||||
Related party transactions:
|
||||||||
Balances due from affiliated companies
|
$
|
11
|
$
|
19
|
||||
Balances due to affiliated companies
|
$
|
1
|
$
|
2
|
||||
(1)
|
2013 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 Schedules. Previous period amounts have been conformed for comparative purposes.
|
(3)
|
In 2013, Corning purchased machinery and equipment on behalf of Samsung Corning Precision Materials to support its capital expansion initiative.
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Statement of operations:
|
||||||||
Net sales
|
$
|
5,649
|
$
|
6,221
|
$
|
5,711
|
||
Gross profit
(1)
|
$
|
1,472
|
$
|
1,543
|
$
|
1,280
|
||
Net income attributable to Dow Corning
|
$
|
563
|
$
|
513
|
$
|
376
|
||
Corning’s equity in earnings of Dow Corning
|
$
|
281
|
$
|
252
|
$
|
196
|
||
Related party transactions:
|
||||||||
Corning purchases from Dow Corning
|
$
|
15
|
$
|
15
|
$
|
22
|
||
Dividends received from Dow Corning
|
$
|
143
|
$
|
125
|
$
|
100
|
December 31,
|
||||||||
2015
|
2014
|
|||||||
Balance sheet:
|
||||||||
Current assets
|
$
|
4,511
|
$
|
4,712
|
||||
Noncurrent assets
|
$
|
6,064
|
$
|
6,433
|
||||
Short-term borrowings, including current portion of long-term debt
|
$
|
6
|
$
|
7
|
||||
Other current liabilities
|
$
|
1,305
|
$
|
1,441
|
||||
Long-term debt
|
$
|
785
|
$
|
945
|
||||
Other long-term liabilities
|
$
|
4,539
|
$
|
5,125
|
||||
Non-controlling interest
|
$
|
631
|
$
|
634
|
||||
(1)
|
Gross profit for the year ended December 31, 2015 includes R&D cost of $233 million (2014: $273 million and 2013: $248 million).
|
7.
|
Investments (continued)
|
7.
|
Investments (continued)
|
Cash and cash equivalents
|
$
|
2
|
Trade receivables
|
63
|
|
Inventory
|
47
|
|
Property, plant and equipment
|
117
|
|
Other intangible assets
|
286
|
|
Other current and non-current assets
|
27
|
|
Current and non-current liabilities
|
(117)
|
|
Total identified net assets
|
425
|
|
Purchase consideration
|
(725)
|
|
Goodwill
(1)
|
$
|
300
|
(1)
|
The goodwill recognized is partially deductible for U.S. income tax purposes. The goodwill was allocated to the Optical Communications and All Other reporting segment in the amount of $213 million and $87 million, respectively.
|
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 of Samsung Corning Precision Materials, 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
|
December 31,
|
|||||
2015
|
2014
|
||||
Land
|
$
|
438
|
$
|
458
|
|
Buildings
|
5,504
|
5,470
|
|||
Equipment
|
14,688
|
13,848
|
|||
Construction in progress
|
1,206
|
1,322
|
|||
21,836
|
21,098
|
||||
Accumulated depreciation
|
(9,188)
|
(8,332)
|
|||
Total
|
$
|
12,648
|
$
|
12,766
|
Optical
Communications
|
Display
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
||||||||||||
Balance at December 31, 2013
|
$
|
240
|
$
|
9
|
$
|
150
|
$
|
603
|
$
|
1,002
|
|||||||
Acquired goodwill
(1)
|
68
|
54
|
122
|
||||||||||||||
Measurement period adjustment
(2)
|
60
|
60
|
|||||||||||||||
Foreign currency translation adjustment
|
(2)
|
(3)
|
(6)
|
(23)
|
(34)
|
||||||||||||
Balance at December 31, 2014
|
$
|
238
|
$
|
134
|
$
|
198
|
$
|
580
|
$
|
1,150
|
|||||||
Acquired goodwill
(3)
|
220
|
$
|
87
|
307
|
|||||||||||||
Measurement period adjustment
|
(7)
|
(7)
|
|||||||||||||||
Foreign currency translation adjustment
|
(12)
|
(6)
|
(4)
|
(18)
|
(1)
|
(41)
|
|||||||||||
Other
(4)
|
(44)
|
15
|
(29)
|
||||||||||||||
Balance at December 31, 2015
|
$
|
439
|
$
|
128
|
$
|
150
|
$
|
562
|
$
|
101
|
$
|
1,380
|
(1)
|
The Company recorded the acquisition of Samsung Corning Precision Materials and a small acquisition in the Specialty Materials segment in the first quarter of 2014. Refer to Note 8 (Acquisitions) to the Consolidated Financial Statements for additional information on the acquisition of Samsung Corning Precision Materials.
|
(2)
|
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.
|
(3)
|
The Company completed four acquisitions in the Optical Communications segment during the first quarter of 2015 and one acquisition that is being reported in All Other in the fourth quarter of 2015. Refer to Note 8 (Acquisitions) to the Consolidated Financial Statements for additional information on these acquisitions.
|
(4)
|
In the fourth quarter of 2015, Corning made a change to the internal reporting structure related to a small acquisition in 2014 originally recorded in the Specialty Materials segment, which is now being reported in All Other. Additionally, a charge of $29 million for the impairment of goodwill related to this acquisition was recorded in the fourth quarter.
|
December 31,
|
|||||||||||||||||
2015
|
2014
|
||||||||||||||||
Gross
|
Accumulated
amortization
|
Net
|
Gross
|
Accumulated
amortization
|
Net
|
||||||||||||
Amortized intangible assets:
|
|||||||||||||||||
Patents, trademarks & trade names
|
$
|
350
|
$
|
162
|
$
|
188
|
$
|
302
|
$
|
149
|
$
|
153
|
|||||
Customer list and other
|
621
|
103
|
518
|
411
|
67
|
344
|
|||||||||||
Total
|
$
|
971
|
$
|
265
|
$
|
706
|
$
|
713
|
$
|
216
|
$
|
497
|
December 31,
|
|||||
2015
|
2014
|
||||
Current assets:
|
|||||
Derivative instruments
|
$
|
522
|
$
|
687
|
|
Other current assets
|
390
|
412
|
|||
Other current assets
|
$
|
912
|
$
|
1,099
|
|
Non-current assets:
|
|||||
Derivative instruments
|
$
|
473
|
$
|
847
|
|
Contingent consideration asset
|
246
|
445
|
|||
Other non-current assets
|
794
|
430
|
|||
Other assets
|
$
|
1,513
|
$
|
1,722
|
December 31,
|
|||||
2015
|
2014
|
||||
Current liabilities:
|
|||||
Wages and employee benefits
|
$
|
491
|
$
|
562
|
|
Income taxes
|
53
|
106
|
|||
Asbestos litigation
|
238
|
||||
Other current liabilities
|
526
|
623
|
|||
Other accrued liabilities
|
$
|
1,308
|
$
|
1,291
|
|
Non-current liabilities:
|
|||||
Asbestos litigation
|
$
|
440
|
$
|
681
|
|
Other non-current liabilities
|
1,802
|
1,365
|
|||
Other liabilities
|
$
|
2,242
|
$
|
2,046
|
12.
|
December 31,
|
|||||
2015
|
2014
|
||||
Current portion of long-term debt and short-term borrowings
|
|||||
Current portion of long-term debt
|
$
|
91
|
$
|
36
|
|
Commercial paper
|
481
|
||||
Total current portion of long-term debt and short-term borrowings
|
$
|
572
|
$
|
36
|
|
Long-term debt
|
|||||
Debentures, 8.875%, due 2016
|
$
|
64
|
$
|
66
|
|
Debentures, 1.45%, due 2017
|
250
|
250
|
|||
Debentures, 1.5%, due 2018
|
375
|
||||
Debentures, 6.625%, due 2019
|
246
|
243
|
|||
Debentures, 4.25%, due 2020
|
291
|
287
|
|||
Debentures, 8.875%, due 2021
|
68
|
69
|
|||
Debentures, 2.9%, due 2022
|
374
|
||||
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
|
169
|
170
|
|||
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 5.02%, due through 2042
|
375
|
389
|
|||
Total long-term debt
|
4,001
|
3,263
|
|||
Less current portion of long-term debt
|
91
|
36
|
|||
Long-term debt
|
$
|
3,910
|
$
|
3,227
|
2016
|
2017
|
2018
|
2019
|
2020
|
Thereafter
|
||||||
$572
|
$257
|
$378
|
$253
|
$304
|
$2,713
|
*
|
Excludes interest rate swap gains and bond discounts.
|
·
|
In the second quarter of 2015, we issued $375 million of 1.50% senior unsecured notes that mature on May 8, 2018 and $375 million of 2.90% senior unsecured notes that mature on May 15, 2022. The net proceeds of $745 million will be used for general corporate purposes. We can redeem these notes at any time, subject to certain customary terms and conditions.
|
12.
|
Debt (continued)
|
·
|
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, 2015, 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, 2015, 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.
|
·
|
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.
|
·
|
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.
|
Total
pension benefits
|
Domestic
pension benefits
|
International
pension benefits
|
|||||||||||||||
December 31,
|
2015
|
2014
|
2015
|
2014
|
2015
|
2014
|
|||||||||||
Change in benefit obligation
|
|||||||||||||||||
Benefit obligation at beginning of year
|
$
|
3,809
|
$
|
3,300
|
$
|
3,222
|
$
|
2,844
|
$
|
587
|
$
|
456
|
|||||
Service cost
|
90
|
82
|
64
|
55
|
26
|
27
|
|||||||||||
Interest cost
|
144
|
160
|
126
|
137
|
18
|
23
|
|||||||||||
Plan participants’ contributions
|
1
|
1
|
1
|
1
|
|||||||||||||
Acquisitions
|
103
|
103
|
|||||||||||||||
Amendments
|
25
|
25
|
|||||||||||||||
Actuarial (gain) loss
|
(95)
|
394
|
(87)
|
327
|
(8)
|
67
|
|||||||||||
Other
|
(8)
|
(3)
|
(8)
|
(3)
|
|||||||||||||
Benefits paid
|
(188)
|
(207)
|
(165)
|
(167)
|
(23)
|
(40)
|
|||||||||||
Foreign currency translation
|
(38)
|
(46)
|
(38)
|
(46)
|
|||||||||||||
Benefit obligation at end of year
|
$
|
3,715
|
$
|
3,809
|
$
|
3,161
|
$
|
3,222
|
$
|
554
|
$
|
587
|
|||||
Change in plan assets
|
|||||||||||||||||
Fair value of plan assets at beginning of year
|
$
|
3,263
|
$
|
2,896
|
$
|
2,814
|
$
|
2,596
|
$
|
449
|
$
|
300
|
|||||
Actual (loss) gain on plan assets
|
(108)
|
355
|
(111)
|
287
|
3
|
68
|
|||||||||||
Employer contributions
|
116
|
147
|
77
|
97
|
39
|
50
|
|||||||||||
Plan participants’ contributions
|
1
|
1
|
1
|
1
|
|||||||||||||
Acquisitions
|
97
|
97
|
|||||||||||||||
Benefits paid
|
(188)
|
(207)
|
(165)
|
(167)
|
(23)
|
(40)
|
|||||||||||
Foreign currency translation
|
(26)
|
(26)
|
(26)
|
(26)
|
|||||||||||||
Fair value of plan assets at end of year
|
$
|
3,058
|
$
|
3,263
|
$
|
2,616
|
$
|
2,814
|
$
|
442
|
$
|
449
|
|||||
Funded status at end of year
|
|||||||||||||||||
Fair value of plan assets
|
$
|
3,058
|
$
|
3,263
|
$
|
2,616
|
$
|
2,814
|
$
|
442
|
$
|
449
|
|||||
Benefit obligations
|
(3,715)
|
(3,809)
|
(3,161)
|
(3,222)
|
(554)
|
(587)
|
|||||||||||
Funded status of plans
|
$
|
(657)
|
$
|
(546)
|
$
|
(545)
|
$
|
(408)
|
$
|
(112)
|
$
|
(138)
|
|||||
Amounts recognized in the consolidated balance sheets consist of:
|
|||||||||||||||||
Noncurrent asset
|
$
|
50
|
$
|
47
|
$
|
50
|
$
|
47
|
|||||||||
Current liability
|
(35)
|
(41)
|
$
|
(30)
|
$
|
(30)
|
(5)
|
(11)
|
|||||||||
Noncurrent liability
|
(672)
|
(552)
|
(515)
|
(378)
|
(157)
|
(174)
|
|||||||||||
Recognized liability
|
$
|
(657)
|
$
|
(546)
|
$
|
(545)
|
$
|
(408)
|
$
|
(112)
|
$
|
(138)
|
|||||
Amounts recognized in accumulated other comprehensive income consist of:
|
|||||||||||||||||
Net actuarial loss
|
$
|
332
|
$
|
308
|
$
|
305
|
$
|
278
|
$
|
27
|
$
|
30
|
|||||
Prior service cost (credit)
|
35
|
41
|
37
|
44
|
(2)
|
(3)
|
|||||||||||
Amount recognized at end of year
|
$
|
367
|
$
|
349
|
$
|
342
|
$
|
322
|
$
|
25
|
$
|
27
|
Postretirement benefits
|
|||||
December 31,
|
2015
|
2014
|
|||
Change in benefit obligation
|
|||||
Benefit obligation at beginning of year
|
$
|
862
|
$
|
815
|
|
Service cost
|
13
|
11
|
|||
Interest cost
|
33
|
38
|
|||
Plan participants’ contributions
|
7
|
7
|
|||
Amendments
|
(5)
|
||||
Actuarial (gain) loss
|
(97)
|
49
|
|||
Other
|
4
|
||||
Benefits paid
|
(61)
|
(56)
|
|||
Medicare subsidy received
|
2
|
3
|
|||
Foreign currency translation
|
|||||
Benefit obligation at end of year
|
$
|
763
|
$
|
862
|
|
Funded status at end of year
|
|||||
Fair value of plan assets
|
$
|
0
|
$
|
0
|
|
Benefit obligations
|
(763)
|
(862)
|
|||
Funded status of plans
|
$
|
(763)
|
$
|
(862)
|
|
Amounts recognized in the consolidated balance sheets consist of:
|
|||||
Current liability
|
$
|
(45)
|
$
|
(48)
|
|
Noncurrent liability
|
(718)
|
(814)
|
|||
Recognized liability
|
$
|
(763)
|
$
|
(862)
|
|
Amounts recognized in accumulated other comprehensive income consist of:
|
|||||
Net actuarial loss
|
$
|
33
|
$
|
132
|
|
Prior service credit
|
(19)
|
(27)
|
|||
Amount recognized at end of year
|
$
|
14
|
$
|
105
|
December 31,
|
|||||
2015
|
2014
|
||||
Projected benefit obligation
|
$
|
3,341
|
$
|
3,425
|
|
Fair value of plan assets
|
$
|
2,635
|
$
|
2,831
|
December 31,
|
|||||
2015
|
2014
|
||||
Accumulated benefit obligation
|
$
|
3,159
|
$
|
479
|
|
Fair value of plan assets
|
$
|
2,634
|
$
|
17
|
Total pension benefits
|
Domestic pension benefits
|
International pension benefits
|
|||||||||||||||
December 31,
|
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
||||||||
Service cost
|
$ 90
|
$ 82
|
$ 70
|
$ 64
|
$ 55
|
$ 60
|
$26
|
$ 27
|
$10
|
||||||||
Interest cost
|
144
|
160
|
131
|
126
|
137
|
115
|
18
|
23
|
16
|
||||||||
Expected return on plan assets
|
(178)
|
(174)
|
(169)
|
(166)
|
(159)
|
(158)
|
(12)
|
(15)
|
(11)
|
||||||||
Amortization of prior service cost (credit)
|
6
|
6
|
5
|
7
|
7
|
6
|
(1)
|
(1)
|
(1)
|
||||||||
Recognition of actuarial loss (gain)
|
165
|
29
|
(30)
|
162
|
4
|
(41)
|
3
|
25
|
11
|
||||||||
Total net periodic benefit expense
|
$227
|
$103
|
$ 7
|
$193
|
$ 44
|
$ (18)
|
$34
|
$ 59
|
$25
|
||||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
|
|||||||||||||||||
Curtailment effects
|
$ (3)
|
$ (3)
|
|||||||||||||||
Settlements
|
$ (1)
|
(2)
|
$(1)
|
(2)
|
|||||||||||||
Current year actuarial loss (gain)
|
191
|
212
|
$(264)
|
$189
|
$198
|
$(274)
|
2
|
14
|
$10
|
||||||||
Recognition of actuarial (loss) gain
|
(165)
|
(29)
|
30
|
(162)
|
(4)
|
41
|
(3)
|
(25)
|
(11)
|
||||||||
Current year prior service cost
|
25
|
25
|
|||||||||||||||
Amortization of prior service (cost) credit
|
(6)
|
(6)
|
(5)
|
(7)
|
(7)
|
(6)
|
1
|
1
|
1
|
||||||||
Total recognized in other comprehensive (income) loss
|
$ 19
|
$197
|
$(239)
|
$ 20
|
$212
|
$(239)
|
$(1)
|
$(15)
|
$ 0
|
||||||||
Total recognized in net periodic benefit cost and other comprehensive (income) loss
|
$246
|
$300
|
$(232)
|
$213
|
$256
|
$(257)
|
$33
|
$ 44
|
$25
|
Postretirement benefits
|
||||||||
2015
|
2014
|
2013
|
||||||
Service cost
|
$
|
13
|
$
|
11
|
$
|
13
|
||
Interest cost
|
33
|
38
|
39
|
|||||
Amortization of net loss
|
3
|
15
|
||||||
Amortization of prior service credit
|
(7)
|
(6)
|
(6)
|
|||||
Total net periodic benefit expense
|
$
|
42
|
$
|
43
|
$
|
61
|
||
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
|
||||||||
Current year actuarial (gain) loss
|
$
|
(96)
|
$
|
49
|
$
|
(178)
|
||
Amortization of actuarial loss
|
(3)
|
(15)
|
||||||
Current year prior service credit
|
(5)
|
(5)
|
||||||
Amortization of prior service credit
|
7
|
6
|
6
|
|||||
Total recognized in other comprehensive (income) loss
|
$
|
(92)
|
$
|
50
|
$
|
(192)
|
||
Total recognized in net periodic benefit cost and other comprehensive (income) loss
|
$
|
(50)
|
$
|
93
|
$
|
(131)
|
Pension benefits
|
|||||||||||||||||
Domestic
|
International
|
Postretirement benefits
|
|||||||||||||||
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
|||||||||
Discount rate
|
4.24%
|
4.00%
|
4.75%
|
3.23%
|
3.21%
|
4.08%
|
4.31%
|
4.00%
|
4.75%
|
||||||||
Rate of compensation increase
|
3.50%
|
3.50%
|
4.00%
|
3.92%
|
3.88%
|
3.85%
|
Pension benefits
|
|||||||||||||||||
Domestic
|
International
|
Postretirement benefits
|
|||||||||||||||
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
|||||||||
Discount rate
|
4.00%
|
4.75%
|
3.75%
|
3.21%
|
4.08%
|
4.48%
|
4.00%
|
4.75%
|
4.00%
|
||||||||
Expected return on plan assets
|
6.00%
|
6.25%
|
6.00%
|
2.97%
|
4.12%
|
3.73%
|
|||||||||||
Rate of compensation increase
|
3.50%
|
4.00%
|
4.00%
|
3.88%
|
3.85%
|
3.45%
|
Assumed health care trend rates at December 31
|
2015
|
2014
|
|
Health care cost trend rate assumed for next year
|
7%
|
6.67%
|
|
Rate that the cost trend rate gradually declines to
|
5%
|
5%
|
|
Year that the rate reaches the ultimate trend rate
|
2024
|
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
|
$52
|
$(43)
|
Fair value measurements at reporting date using
|
|||||||||||
(in millions)
|
December 31,
2015
|
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
|
$
|
336
|
$
|
51
|
$
|
285
|
|||||
International companies
|
322
|
79
|
243
|
||||||||
Fixed income:
|
|||||||||||
U.S. corporate bonds
|
1,566
|
158
|
1,408
|
||||||||
Private equity
(1)
|
163
|
$
|
163
|
||||||||
Real estate
(2)
|
61
|
61
|
|||||||||
Cash equivalents
|
71
|
71
|
|||||||||
Commodities
(3)
|
97
|
97
|
|||||||||
Total
|
$
|
2,616
|
$
|
359
|
$
|
2,033
|
$
|
224
|
(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
|
$
|
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,
2015
|
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
|
$
|
7
|
$
|
7
|
|||||||
International companies
|
23
|
23
|
|||||||||
Fixed income:
|
|||||||||||
International fixed income
|
347
|
$
|
286
|
61
|
|||||||
Insurance contracts
|
3
|
$
|
3
|
||||||||
Mortgages
|
2
|
2
|
|||||||||
Cash equivalents
|
60
|
60
|
|||||||||
Total
|
$
|
442
|
$
|
346
|
$
|
91
|
$
|
5
|
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
|
Level 3 assets – Domestic
|
Level 3 assets – International
|
||||||||||
|
Year ended December 2015
|
Year ended December 2015
|
|||||||||
(in millions)
|
Private
equity
|
Real
estate
|
Mortgages
|
Insurance
contracts
|
|||||||
Beginning balance at December 31, 2014
|
$
|
192
|
$
|
84
|
$
|
7
|
$
|
5
|
|||
Actual return on plan assets relating to assets still held at the reporting date
|
16
|
12
|
|||||||||
Transfers in and/or out of level 3
|
(45)
|
(35)
|
(5)
|
(2)
|
|||||||
Ending balance at December 31, 2015
|
$
|
163
|
$
|
61
|
$
|
2
|
$
|
3
|
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
|
Expected benefit payments
|
||||||
Domestic
pension
benefits
|
International
pension
benefits
|
Postretirement
benefits
|
Expected federal subsidy payments
postretirement benefits
|
|||
2016
|
$ 192
|
$ 18
|
$ 45
|
$ 2
|
||
2017
|
$ 178
|
$ 22
|
$ 44
|
$ 3
|
||
2018
|
$ 186
|
$ 24
|
$ 44
|
$ 3
|
||
2019
|
$ 192
|
$ 25
|
$ 44
|
$ 3
|
||
2020
|
$ 198
|
$ 29
|
$ 46
|
$ 3
|
||
2021-2025
|
$1,100
|
$168
|
$230
|
$16
|
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
|
$
|
92
|
$
|
25
|
$
|
6
|
$
|
1
|
$
|
60
|
||||
Stand-by letters of credit
(1)
|
47
|
44
|
3
|
|||||||||||
Credit facility to equity company
|
31
|
27
|
4
|
|||||||||||
Loan guarantees
|
14
|
14
|
||||||||||||
Subtotal of commitment expirations per period
|
$
|
184
|
$
|
96
|
$
|
6
|
$
|
1
|
$
|
81
|
||||
Purchase obligations
(6)
|
$
|
220
|
$
|
106
|
$
|
77
|
$
|
33
|
$
|
4
|
||||
Capital expenditure obligations
(2)
|
298
|
298
|
||||||||||||
Total debt
(3)
|
4,122
|
565
|
625
|
550
|
2,382
|
|||||||||
Interest on long-term debt
(4)
|
2,385
|
165
|
316
|
280
|
1,624
|
|||||||||
Capital leases and financing obligations
(3)
|
355
|
7
|
10
|
7
|
331
|
|||||||||
Imputed interest on capital leases and financing obligations
|
240
|
19
|
37
|
36
|
148
|
|||||||||
Minimum rental commitments
|
573
|
49
|
110
|
77
|
337
|
|||||||||
Uncertain tax positions
(5)
|
58
|
|||||||||||||
Subtotal of contractual obligation payments due by period
(5)
|
$
|
8,251
|
$
|
1,209
|
$
|
1,175
|
$
|
983
|
$
|
4,826
|
||||
Total commitments and contingencies
(5)
|
$
|
8,435
|
$
|
1,305
|
$
|
1,181
|
$
|
984
|
$
|
4,907
|
(1)
|
At December 31, 2015, $38 million of the $47 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/losses 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, 2015, $58 million was included on our balance sheet related to uncertain tax positions. Of this amount, we are unable to estimate when any 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.
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021 and
thereafter
|
||||||
$49
|
$58
|
$52
|
$41
|
$36
|
$337
|
·
|
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
|
|||||||||||||||||
2015
|
2014
|
2015
|
2014
|
2015
|
2014
|
||||||||||||||||
Derivatives designated as hedging instruments
|
|||||||||||||||||||||
Foreign exchange contracts
|
$
|
782
|
$
|
487
|
Other current assets
|
$
|
5
|
$
|
22
|
Other accrued liabilities
|
$
|
(10)
|
$
|
(6)
|
|||||||
Other assets
|
1
|
Other liabilities
|
(23)
|
||||||||||||||||||
Interest rate contracts
|
550
|
1,300
|
Other assets
|
1
|
Other liabilities
|
(4)
|
(15)
|
||||||||||||||
Derivatives not designated as hedging instruments
|
|||||||||||||||||||||
Foreign exchange contracts, other
|
1,095
|
1,285
|
Other current assets
|
6
|
17
|
Other accrued liabilities
|
(12)
|
(5)
|
|||||||||||||
Foreign currency hedges related to translated earnings
|
11,972
|
12,126
|
Other current assets
|
511
|
649
|
Other accrued liabilities
|
(33)
|
(33)
|
|||||||||||||
Other assets
|
472
|
846
|
Other liabilities
|
(61)
|
|||||||||||||||||
Total derivatives
|
$
|
14,399
|
$
|
15,198
|
$
|
995
|
$
|
1,535
|
$
|
(143)
|
$
|
(59)
|
Effect of derivative instruments on the consolidated financial statements for the years ended December 31
|
|||||||||||||||||||
Derivatives
in hedging
relationships
|
(Loss)/gain 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)
|
||||||||||||||||
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
||||||||||||||
Cash flow hedges
|
|||||||||||||||||||
-
|
Net sales
|
$
|
20
|
$
|
3
|
||||||||||||||
Interest rate hedge
|
$
|
(7)
|
$
|
(3)
|
$
|
33
|
Cost of sales
|
6
|
7
|
$
|
38
|
||||||||
Foreign exchange contracts
|
(17)
|
20
|
56
|
Other (expense) income, net
|
91
|
||||||||||||||
Total cash flow hedges
|
$
|
(24)
|
$
|
17
|
$
|
89
|
$
|
26
|
$
|
10
|
$
|
129
|
Gain (loss) recognized in income
|
|||||||||||
Undesignated
derivatives
|
Location of gain/(loss)
recognized in income
|
2015
|
2014
|
2013
|
|||||||
Foreign exchange contracts – balance sheet
|
Foreign currency hedge gain (loss), net
|
$
|
8
|
$
|
29
|
$
|
100
|
||||
Foreign exchange contracts – loans
|
Foreign currency hedge (loss) gain, net
|
(3)
|
13
|
87
|
|||||||
Foreign currency hedges related to translated earnings
|
Foreign currency hedge gain (loss), net
|
80
|
1,369
|
435
|
|||||||
Total undesignated
|
$
|
85
|
$
|
1,411
|
$
|
622
|
(1)
|
There were no material amounts of ineffectiveness for 2015 and 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.
|
Fair value measurements at reporting date using
|
|||||||
(in millions)
|
December 31,
2015
|
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
|
$100
|
$100
|
|||||
Other current assets
(1)
|
$522
|
$522
|
|||||
Non-current assets:
|
|||||||
Other assets
(1)(2)
|
$752
|
$506
|
$246
|
||||
Current liabilities:
|
|||||||
Other accrued liabilities
(1)
|
$ 55
|
$ 55
|
|||||
Non-current liabilities:
|
|||||||
Other liabilities
(1)(2)
|
$ 98
|
$ 88
|
$ 10
|
(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 contingent consideration assets or liabilities which are measured by applying an option pricing model using projected future revenues.
|
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
(1)(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.
|
Level 3 Roll-Forward – Other Assets
|
||||
(in millions)
|
2015
|
2014
|
||
Beginning balance
|
$445
|
$196
|
||
Unrealized gains (loss)
|
13
|
249
|
||
Transfer in (out) of level 3
|
(212)
|
|||
Ending balance
|
$246
|
$445
|
Common stock
|
Treasury stock
|
||||||||
Shares
|
Par value
|
Shares
|
Cost
|
||||||
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)
|
|||
Shares issued to benefit plans and for option exercises
|
9
|
4
|
(1)
|
||||||
Shares purchased for treasury
|
(151)
|
(2,978)
|
|||||||
Other, net
|
(2)
|
(19)
|
|||||||
Balance at December 31, 2015
|
1,681
|
$
|
840
|
(551)
|
$
|
(9,725)
|
(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 since 2014.
|
Foreign
currency
translation
adjustments
and other
|
Unamortized
actuarial gains
(losses) and
prior service
(costs) credits
|
Net
unrealized
gains
(losses) on
investments
|
Net
unrealized
gains
(losses) on
designated
hedges
|
Accumulated
other
comprehensive
income (loss)
|
||||||||||
Balance at December 31, 2012
|
$
|
1,174
|
$
|
(820)
|
$
|
(16)
|
$
|
18
|
$
|
356
|
||||
Other comprehensive income before reclassifications
(4)
|
$
|
(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 (loss) income
|
(682)
|
392
|
2
|
(24)
|
(312)
|
|||||||||
Balance at December 31, 2013
|
$
|
492
|
$
|
(428)
|
$
|
(14)
|
$
|
(6)
|
$
|
44
|
||||
Other comprehensive income before reclassifications
(5)
|
$
|
(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 (loss) income
|
(1,073)
|
(281)
|
(1)
|
4
|
(1,351)
|
|||||||||
Balance at December 31, 2014
|
$
|
(581)
|
$
|
(709)
|
$
|
(15)
|
$
|
(2)
|
$
|
(1,307)
|
||||
Other comprehensive income before reclassifications
(6)
|
$
|
(487)
|
$
|
(59)
|
$
|
(18)
|
$
|
(564)
|
||||||
Amounts reclassified from accumulated other comprehensive income
(2)
|
105
|
$
|
1
|
(20)
|
86
|
|||||||||
Equity method affiliates
(3)
|
(103)
|
75
|
2
|
(26)
|
||||||||||
Net current-period other comprehensive (loss) income
|
(590)
|
121
|
1
|
(36)
|
(504)
|
|||||||||
Balance at December 31, 2015
|
$
|
(1,171)
|
$
|
(588)
|
$
|
(14)
|
$
|
(38)
|
$
|
(1,811)
|
(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 expense of $(197) million, including $(33) million related to the hedges component and $(164) million related to the retirement plans component.
|
(5)
|
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.
|
(6)
|
Amounts are net of total tax benefit of $41 million, including $35 million related to the retirement plans component and $6 million related to the hedges 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) to the Consolidated Financial Statements
for additional details.
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Net income attributable to Corning Incorporated
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
||
Less: Series A convertible preferred stock dividend
|
98
|
94
|
||||||
Net income available to common stockholders - basic
|
1,241
|
2,378
|
1,961
|
|||||
Plus: Series A convertible preferred stock dividend
|
98
|
94
|
||||||
Net income available to common stockholders - diluted
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
||
Weighted-average common shares outstanding - basic
|
1,219
|
1,305
|
1,452
|
|||||
Effect of dilutive securities:
|
||||||||
Stock options and other dilutive securities
|
9
|
12
|
10
|
|||||
Series A convertible preferred stock
|
115
|
110
|
||||||
Weighted-average common shares outstanding - diluted
|
1,343
|
1,427
|
1,462
|
|||||
Basic earnings per common share
|
$
|
1.02
|
$
|
1.82
|
$
|
1.35
|
||
Diluted earnings per common share
|
$
|
1.00
|
$
|
1.73
|
$
|
1.34
|
||
Anti-dilutive potential shares excluded from diluted earnings per common share:
|
||||||||
Employee stock options and awards
|
22
|
24
|
39
|
|||||
Accelerated share repurchase forward contract
|
15
|
3
|
3
|
|||||
Total
|
37
|
27
|
42
|
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, 2014
|
48,724
|
$18.94
|
|||||
Granted
|
1,578
|
21.48
|
|||||
Exercised
|
(6,340)
|
16.13
|
|||||
Forfeited and expired
|
(1,224)
|
20.78
|
|||||
Options outstanding as of December 31, 2015
|
42,738
|
19.40
|
3.93
|
$83,023
|
|||
Options expected to vest as of December 31, 2015
|
42,696
|
19.40
|
3.93
|
82,992
|
|||
Options exercisable as of December 31, 2015
|
35,245
|
19.86
|
3.08
|
65,817
|
Shares
(000’s)
|
Weighted-
average
grant-date
fair value
|
||
Non-vested shares and share units at December 31, 2014
|
5,737
|
$15.43
|
|
Granted
|
1,815
|
21.49
|
|
Vested
|
(2,238)
|
14.35
|
|
Forfeited
|
(72)
|
21.11
|
|
Non-vested shares and share units at December 31, 2015
|
5,242
|
17.91
|
·
|
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, 2015
|
||||||||||||||||||||
Net sales
|
$
|
3,086
|
$
|
2,980
|
$
|
1,053
|
$
|
1,107
|
$
|
821
|
$
|
64
|
$
|
9,111
|
||||||
Depreciation
(1)
|
$
|
605
|
$
|
163
|
$
|
125
|
$
|
112
|
$
|
60
|
$
|
43
|
$
|
1,108
|
||||||
Amortization of purchased intangibles
|
$
|
32
|
$
|
20
|
$
|
1
|
$
|
53
|
||||||||||||
Research, development and engineering expenses
(2)
|
$
|
105
|
$
|
138
|
$
|
93
|
$
|
113
|
$
|
23
|
$
|
186
|
$
|
658
|
||||||
Restructuring, impairment and other charges
|
$
|
(1)
|
$
|
16
|
$
|
15
|
||||||||||||||
Equity in earnings of affiliated companies
|
$
|
(9)
|
$
|
17
|
$
|
8
|
||||||||||||||
Income tax (provision) benefit
|
$
|
(499)
|
$
|
(115)
|
$
|
(78)
|
$
|
(85)
|
$
|
(30)
|
$
|
89
|
$
|
(718)
|
||||||
Net income (loss)
(4)
|
$
|
1,095
|
$
|
237
|
$
|
161
|
$
|
167
|
$
|
61
|
$
|
(202)
|
$
|
1,519
|
||||||
Investment in affiliated companies, at equity
|
$
|
43
|
$
|
1
|
$
|
32
|
$
|
261
|
$
|
337
|
||||||||||
Segment assets
(5)
|
$
|
8,344
|
$
|
1,783
|
$
|
1,288
|
$
|
1,407
|
$
|
514
|
$
|
738
|
$
|
14,074
|
||||||
Capital expenditures
|
$
|
594
|
$
|
171
|
$
|
117
|
$
|
88
|
$
|
32
|
$
|
57
|
$
|
1,059
|
||||||
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
|
$
|
45
|
$
|
17
|
$
|
(1)
|
$
|
1
|
$
|
6
|
$
|
68
|
||||||||
Equity in earnings of affiliated companies
|
$
|
(20)
|
$
|
2
|
$
|
18
|
||||||||||||||
Income tax (provision) benefit
|
$
|
(608)
|
$
|
(111)
|
$
|
(89)
|
$
|
(75)
|
$
|
(33)
|
$
|
83
|
$
|
(833)
|
||||||
Net income (loss)
(4)
|
$
|
1,396
|
$
|
194
|
$
|
178
|
$
|
138
|
$
|
67
|
$
|
(198)
|
$
|
1,775
|
||||||
Investment in affiliated companies, at equity
|
$
|
63
|
$
|
2
|
$
|
32
|
$
|
214
|
$
|
311
|
||||||||||
Segment assets
(5)
|
$
|
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
(3)
|
$
|
357
|
$
|
2
|
$
|
1
|
$
|
4
|
$
|
(24)
|
$
|
340
|
||||||||
Income tax (provision) benefit
|
$
|
(337)
|
$
|
(96)
|
$
|
(63)
|
$
|
(88)
|
$
|
(34)
|
$
|
59
|
$
|
(559)
|
||||||
Net income (loss)
(4)
|
$
|
1,293
|
$
|
189
|
$
|
127
|
$
|
181
|
$
|
68
|
$
|
(165)
|
$
|
1,693
|
||||||
Investment in affiliated companies, at equity
|
$
|
3,666
|
$
|
3
|
$
|
31
|
$
|
10
|
$
|
232
|
$
|
3,942
|
||||||||
Segment assets
(5)
|
$
|
9,501
|
$
|
1,654
|
$
|
1,230
|
$
|
1,333
|
$
|
551
|
$
|
422
|
$
|
14,691
|
||||||
Capital expenditures
|
$
|
350
|
$
|
105
|
$
|
196
|
$
|
62
|
$
|
51
|
$
|
55
|
$
|
819
|
(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 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.
|
(4)
|
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.
|
(5)
|
Segment assets include inventory, accounts receivable, property, plant and equipment, net of accumulated depreciation, and associated equity companies and cost investments.
|
·
|
In the Display Technologies segment, three customers accounted for 62% of total segment sales.
|
·
|
In the Optical Communications segment, two customers accounted for 22% of total segment sales.
|
·
|
In the Environmental Technologies segment, three customers accounted for 86% of total segment sales.
|
·
|
In the Specialty Materials segment, three customers accounted for 56% of total segment sales.
|
·
|
In the Life Sciences segment, two customers accounted for 46% of total segment sales.
|
Years ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Net income of reportable segments
|
$
|
1,721
|
$
|
1,973
|
$
|
1,858
|
||
Net loss of All Other
|
(202)
|
(198)
|
(165)
|
|||||
Unallocated amounts:
|
||||||||
Net financing costs
(1)
|
(111)
|
(113)
|
(66)
|
|||||
Share-based compensation expense
|
(46)
|
(58)
|
(54)
|
|||||
Exploratory research
|
(109)
|
(102)
|
(112)
|
|||||
Corporate contributions
|
(52)
|
(43)
|
(42)
|
|||||
Equity in earnings of affiliated companies, net of impairments
(2)
|
291
|
269
|
207
|
|||||
Unrealized (loss) gain on foreign currency hedges related to translated earnings
|
(573)
|
1,095
|
368
|
|||||
Income tax benefit (provision)
|
568
|
(267)
|
(1)
|
|||||
Other corporate items
|
(148)
|
(84)
|
(32)
|
|||||
Net income
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
(1)
|
Net financing costs include interest income, interest expense, and interest costs and investment gains and losses associated with benefit plans.
|
(2)
|
Primarily represents the equity earnings of Dow Corning.
|
December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Total assets of reportable segments
|
$
|
13,336
|
$
|
13,738
|
$
|
14,269
|
||
Non-reportable segments
|
738
|
518
|
422
|
|||||
Unallocated amounts:
|
||||||||
Current assets
(1)
|
5,488
|
7,402
|
6,349
|
|||||
Investments
(2)
|
1,638
|
1,490
|
1,595
|
|||||
Property, plant and equipment, net
(3)
|
1,692
|
1,657
|
1,594
|
|||||
Other non-current assets
(4)
|
5,655
|
5,258
|
4,249
|
|||||
Total assets
|
$
|
28,547
|
$
|
30,063
|
$
|
28,478
|
(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.
|
Years Ended December 31,
|
||||||||
Revenues from External Customers
|
2015
|
2014
|
2013
|
|||||
Display Technologies
|
$
|
3,086
|
$
|
3,851
|
$
|
2,545
|
||
Optical Communications
|
||||||||
Carrier network
|
2,194
|
2,036
|
1,782
|
|||||
Enterprise network
|
786
|
616
|
544
|
|||||
Total Optical Communications
|
2,980
|
2,652
|
2,326
|
|||||
Environmental Technologies
|
||||||||
Automotive and other
|
528
|
528
|
485
|
|||||
Diesel
|
525
|
564
|
434
|
|||||
Total Environmental Technologies
|
1,053
|
1,092
|
919
|
|||||
Specialty Materials
|
||||||||
Corning Gorilla Glass
|
810
|
846
|
848
|
|||||
Advanced optics and other specialty glass
|
297
|
359
|
322
|
|||||
Total Specialty Materials
|
1,107
|
1,205
|
1,170
|
|||||
Life Sciences
|
||||||||
Labware
|
512
|
536
|
529
|
|||||
Cell culture products
|
309
|
326
|
322
|
|||||
Total Life Science
|
821
|
862
|
851
|
|||||
All Other
|
64
|
53
|
8
|
|||||
$
|
9,111
|
$
|
9,715
|
$
|
7,819
|
2015
|
2014
|
2013
|
|||||||||||||||
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
|
$
|
2,719
|
$
|
8,241
|
$
|
2,275
|
$
|
7,998
|
$
|
2,061
|
$
|
7,170
|
|||||
Canada
|
244
|
144
|
311
|
308
|
|||||||||||||
Mexico
|
37
|
135
|
35
|
50
|
23
|
36
|
|||||||||||
Total North America
|
3,000
|
8,520
|
2,621
|
8,048
|
2,392
|
7,206
|
|||||||||||
Asia Pacific
|
|||||||||||||||||
Japan
|
440
|
1,160
|
608
|
1,311
|
621
|
1,548
|
|||||||||||
Taiwan
|
841
|
2,301
|
1,092
|
2,005
|
1,376
|
2,277
|
|||||||||||
China
|
1,869
|
1,036
|
1,893
|
1,115
|
1,916
|
1,218
|
|||||||||||
Korea
|
1,501
|
3,552
|
1,882
|
3,595
|
96
|
3,234
|
|||||||||||
Other
|
331
|
98
|
308
|
109
|
278
|
127
|
|||||||||||
Total Asia Pacific
|
4,982
|
8,147
|
5,783
|
8,135
|
4,287
|
8,404
|
|||||||||||
Europe
|
|||||||||||||||||
Germany
|
326
|
189
|
397
|
217
|
337
|
171
|
|||||||||||
France
|
90
|
263
|
81
|
277
|
79
|
287
|
|||||||||||
United Kingdom
|
164
|
47
|
187
|
47
|
165
|
6
|
|||||||||||
Other
|
311
|
987
|
369
|
1,109
|
280
|
1,147
|
|||||||||||
Total Europe
|
891
|
1,486
|
1,034
|
1,650
|
861
|
1,611
|
|||||||||||
Latin America
|
|||||||||||||||||
Brazil
|
55
|
36
|
67
|
36
|
77
|
66
|
|||||||||||
Other
|
34
|
35
|
37
|
6
|
|||||||||||||
Total Latin America
|
89
|
36
|
102
|
36
|
114
|
72
|
|||||||||||
All Other
|
149
|
175
|
19
|
165
|
25
|
||||||||||||
Total
|
$
|
9,111
|
$
|
18,189
|
$
|
9,715
|
$
|
17,888
|
$
|
7,819
|
$
|
17,318
|
(1)
|
Long-lived assets primarily include investments, plant and equipment, goodwill and other intangible assets. In 2014 and 2015, assets in the U.S. include the investment in Dow Corning. In 2013, 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, 2015
|
Balance at
beginning
of period
|
Additions
|
Net
deductions
and other
|
Balance at
end
of period
|
|||||||
Doubtful accounts and allowances
|
$
|
47
|
$
|
1
|
$
|
48
|
|||||
Deferred tax valuation allowance
|
$
|
298
|
$
|
30
|
$
|
90
|
$
|
238
|
|||
Accumulated amortization of purchased intangible assets
|
$
|
216
|
$
|
49
|
$
|
265
|
|||||
Reserves for accrued costs of business restructuring
|
$
|
44
|
$
|
41
|
$
|
3
|
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 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 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
|
2015
|
First
quarter
|
Second
quarter
|
Third
quarter
|
Fourth
quarter
|
Total
year
|
|||||||||
Net sales
|
$
|
2,265
|
$
|
2,343
|
$
|
2,272
|
$
|
2,231
|
$
|
9,111
|
||||
Gross margin
|
$
|
929
|
$
|
975
|
$
|
892
|
$
|
857
|
$
|
3,653
|
||||
Equity in earnings of affiliated companies
|
$
|
94
|
$
|
62
|
$
|
39
|
$
|
104
|
$
|
299
|
||||
(Provision) benefit for income taxes
|
$
|
(86)
|
$
|
(110)
|
$
|
(6)
|
$
|
55
|
$
|
(147)
|
||||
Net income attributable to Corning Incorporated
|
$
|
407
|
$
|
496
|
$
|
212
|
$
|
224
|
$
|
1,339
|
||||
Basic earnings per common share
|
$
|
0.30
|
$
|
0.38
|
$
|
0.16
|
$
|
0.17
|
$
|
1.02
|
||||
Diluted earnings per common share
|
$
|
0.29
|
$
|
0.36
|
$
|
0.15
|
$
|
0.17
|
$
|
1.00
|
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 charges
|
$
|
17
|
$
|
34
|
$
|
20
|
$
|
71
|
||||||
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
|
Page
|
|||
for the years ended December 31, 2015, 2014, and 2013
|
|||
for the years ended December 31, 2015, 2014, and 2013
|
|||
for the years ended December 31, 2015, 2014, and 2013
|
|||
for the years ended December 31, 2015, 2014, and 2013
|
|||
Years Ended December 31,
|
||||||||||||
2015
|
2014
|
2013
|
||||||||||
Net Sales
|
$
|
5,649.3
|
$
|
6,221.3
|
$
|
5,710.5
|
||||||
Operating Costs and Expenses
|
||||||||||||
Cost of sales
|
4,177.0
|
4,678.1
|
4,430.6
|
|||||||||
Marketing and administrative expenses
|
663.4
|
663.1
|
699.5
|
|||||||||
Gains on long-term sales agreements
|
(178.8)
|
(39.0)
|
(228.5)
|
|||||||||
Asset (gains) charges and restructuring expenses, net
|
(9.1)
|
1,481.0
|
165.5
|
|||||||||
Total operating costs and expenses
|
4,652.5
|
6,783.2
|
5,067.1
|
|||||||||
Operating Income (Loss)
|
996.8
|
(561.9)
|
643.4
|
|||||||||
Interest income
|
12.1
|
9.3
|
7.9
|
|||||||||
Interest expense
|
(52.1)
|
(49.0)
|
(45.7)
|
|||||||||
Other nonoperating income (expense), net
|
(82.9)
|
8.4
|
61.9
|
|||||||||
Implant liability adjustments
|
65.3
|
1,299.8
|
-
|
|||||||||
Income before Income Taxes
|
939.2
|
706.6
|
667.5
|
|||||||||
Income tax provision
|
303.9
|
132.0
|
233.8
|
|||||||||
Net Income
|
635.3
|
574.6
|
433.7
|
|||||||||
Less: Noncontrolling interests’ share in net income
|
72.3
|
61.8
|
57.4
|
|||||||||
Net Income Attributable to Dow Corning Corporation
|
$
|
563.0
|
$
|
512.8
|
$
|
376.3
|
||||||
Weighted-Average Common Shares Outstanding
|
2.5
|
2.5
|
2.5
|
|||||||||
(basic and diluted)
|
||||||||||||
Net Income per Share (basic and diluted)
|
$
|
225.20
|
$
|
205.12
|
$
|
150.52
|
||||||
Dividends Declared per Common Share
|
$
|
114.00
|
$
|
100.00
|
$
|
80.00
|
Years Ended December 31,
|
||||||||||
2015
|
2014
|
2013
|
||||||||
Net Income
|
$
|
635.3
|
$
|
574.6
|
$
|
433.7
|
||||
Other comprehensive income (loss), before tax:
|
||||||||||
Foreign currency translation adjustments
|
(139.9)
|
(170.8)
|
(2.7)
|
|||||||
Unrealized net gain (loss) on securities:
|
||||||||||
Unrealized holding gain arising during the period
|
3.0
|
8.2
|
4.8
|
|||||||
Reclassificaton adjustment for gain included in income
|
-
|
(17.6)
|
-
|
|||||||
Net gain on cash flow hedges:
|
||||||||||
Unrealized gain arising during the period
|
4.1
|
-
|
0.2
|
|||||||
Reclassification adjustment for loss included in income
|
-
|
-
|
5.4
|
|||||||
Defined benefit plan adjustments:
|
||||||||||
Gain (loss) arising during the period
|
160.4
|
(467.7)
|
292.7
|
|||||||
Amortization of pension adjustments included in income
|
84.0
|
49.0
|
81.5
|
|||||||
Other comprehensive income (loss), before tax
|
111.6
|
(598.9)
|
381.9
|
|||||||
Income tax (expense) benefit related to items of OCI
1
|
(82.9)
|
141.9
|
(130.1)
|
|||||||
Other comprehensive income (loss), net of tax
|
28.7
|
(457.0)
|
251.8
|
|||||||
Comprehensive Income
|
664.0
|
117.6
|
685.5
|
|||||||
Less: Noncontrolling interests’ share in comprehensive income
|
63.8
|
47.4
|
44.4
|
|||||||
Comprehensive Income Attributable to Dow Corning Corporation
|
$
|
600.2
|
$
|
70.2
|
$
|
641.1
|
ASSETS
|
||||||||
December 31, 2015
|
December 31, 2014
|
|||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$
|
2,313.5
|
$
|
2,291.2
|
||||
Accounts receivable (net of allowance for doubtful accounts of $7.3 in 2015 and $10.4 in 2014)
|
706.1
|
745.9
|
||||||
Notes and other receivables
|
213.3
|
246.0
|
||||||
Inventories
|
1,159.5
|
1,083.8
|
||||||
Other current assets
|
118.4
|
81.4
|
||||||
Total current assets
|
4,510.8
|
4,448.3
|
||||||
Property, Plant and Equipment
|
10,573.9
|
10,683.1
|
||||||
Less - Accumulated Depreciation
|
(5,487.6)
|
(5,276.3)
|
||||||
Net property, plant and equipment
|
5,086.3
|
5,406.8
|
||||||
Other Assets
|
||||||||
Marketable securities
|
90.2
|
86.1
|
||||||
Deferred income taxes
|
388.7
|
569.5
|
||||||
Intangible assets (net of accumulated amortization of $61.8 in 2015 and $58.4 in 2014)
|
64.0
|
70.9
|
||||||
Goodwill
|
55.7
|
61.9
|
||||||
Other noncurrent assets
|
378.6
|
496.4
|
||||||
Total other assets
|
977.2
|
1,284.8
|
||||||
Total Assets
|
$
|
10,574.3
|
$
|
11,139.9
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
December 31, 2015
|
December 31, 2014
|
|||||||
Current Liabilities
|
||||||||
Current maturities of long-term debt
|
$
|
6.1
|
$
|
7.0
|
||||
Trade accounts payable
|
482.2
|
522.9
|
||||||
Accrued payrolls and employee benefits
|
167.9
|
207.0
|
||||||
Accrued taxes
|
145.4
|
99.2
|
||||||
Accrued interest
|
113.4
|
106.8
|
||||||
Current deferred revenue
|
254.8
|
319.6
|
||||||
Other current liabilities
|
150.8
|
184.4
|
||||||
Total current liabilities
|
1,320.6
|
1,446.9
|
||||||
Other Liabilities
|
||||||||
Long-term debt
|
784.8
|
945.4
|
||||||
Implant liability
|
291.4
|
363.6
|
||||||
Employee benefits
|
1,304.2
|
1,552.0
|
||||||
Deferred income tax liabilities
|
9.7
|
38.3
|
||||||
Deferred revenue
|
2,553.6
|
2,882.7
|
||||||
Other noncurrent liabilities
|
370.7
|
284.3
|
||||||
Total other liabilities
|
5,314.4
|
6,066.3
|
||||||
Equity
|
||||||||
Stockholders’ equity
|
||||||||
Common stock ($5.00 par value - 2,500,000 shares authorized, issued and outstanding)
|
12.5
|
12.5
|
||||||
Retained earnings
|
4,072.6
|
3,794.6
|
||||||
Accumulated other comprehensive loss
|
(777.2)
|
(814.4)
|
||||||
Dow Corning Corporation’s stockholders’ equity
|
3,307.9
|
2,992.7
|
||||||
Noncontrolling interest in consolidated subsidiaries
|
631.4
|
634.0
|
||||||
Total equity
|
3,939.3
|
3,626.7
|
||||||
Total Liabilities and Equity
|
$
|
10,574.3
|
$
|
11,139.9
|
Years ended December 31,
|
|||||||||||
2015
|
2014
|
2013
|
|||||||||
Cash Flows from Operating Activities
|
|||||||||||
Net income
|
$
|
635.3
|
$
|
574.6
|
$
|
433.7
|
|||||
Depreciation and amortization
|
419.5
|
491.3
|
490.1
|
||||||||
Gains on long-term sales agreements
|
(178.8)
|
(39.0)
|
(228.5)
|
||||||||
Cash flows related to gains on long-term sales agreements
|
-
|
-
|
183.2
|
||||||||
Asset (gains) charges and restructuring expenses, net
|
(9.1)
|
1,481.0
|
113.9
|
||||||||
Changes in restructuring accrual
|
-
|
(14.3)
|
(53.1)
|
||||||||
Changes in deferred revenue, net
|
(215.2)
|
(201.2)
|
(77.8)
|
||||||||
Changes in deferred taxes, net
|
62.2
|
45.7
|
(68.7)
|
||||||||
Tax-related bond deposits, net
|
-
|
29.2
|
17.9
|
||||||||
Other, net
|
236.6
|
83.8
|
119.3
|
||||||||
Changes in operating assets and liabilities
|
|||||||||||
Changes in accounts and notes receivable
|
63.0
|
(46.1)
|
29.9
|
||||||||
Changes in accounts payable
|
(26.5)
|
36.7
|
11.5
|
||||||||
Changes in inventory
|
(103.3)
|
(123.6)
|
3.1
|
||||||||
Changes in other operating assets and liabilities
|
(25.2)
|
98.6
|
14.6
|
||||||||
Cash flows related to reorganization, net
|
(7.8)
|
(0.4)
|
(24.4)
|
||||||||
Implant liability adjustment
|
(65.3)
|
(1,299.8)
|
-
|
||||||||
Cash provided by operating activities
|
785.4
|
1,116.5
|
964.7
|
||||||||
Cash Flows from Investing Activities
|
|||||||||||
Capital expenditures
|
(287.9)
|
(249.8)
|
(363.3)
|
||||||||
Proceeds from sales, maturities, and redemptions of securities
|
-
|
18.9
|
-
|
||||||||
Proceeds from sale of property
|
65.3
|
-
|
-
|
||||||||
Other, net
|
(3.4)
|
(58.5)
|
(29.9)
|
||||||||
Cash used in investing activities
|
(226.0)
|
(289.4)
|
(393.2)
|
||||||||
Cash Flows from Financing Activities
|
|||||||||||
Increase in short-term borrowings
|
-
|
-
|
99.0
|
||||||||
Payments of short-term borrowings
|
-
|
(73.2)
|
(99.0)
|
||||||||
Increase in long-term debt
|
-
|
16.3
|
166.1
|
||||||||
Payments of long-term debt
|
(158.9)
|
(12.6)
|
(202.6)
|
||||||||
Distributions to shareholders of noncontrolling interests
|
(66.4)
|
(19.5)
|
(14.0)
|
||||||||
Acquisition of additional shares of noncontrolling interests
|
-
|
-
|
(266.0)
|
||||||||
Dividends paid to stockholders
|
(285.0)
|
(250.0)
|
(200.0)
|
||||||||
Cash used in financing activities
|
(510.3)
|
(339.0)
|
(516.5)
|
||||||||
Effect of Exchange Rate Changes on Cash
|
(26.8)
|
(23.0)
|
0.7
|
||||||||
Changes in Cash and Cash Equivalents
|
|||||||||||
Net increase in cash and cash equivalents
|
22.3
|
465.1
|
55.7
|
||||||||
Cash and cash equivalents at beginning of period
|
2,291.2
|
1,826.1
|
1,770.4
|
||||||||
Cash and cash equivalents at end of period
|
$
|
2,313.5
|
$
|
2,291.2
|
$
|
1,826.1
|
Dow Corning Corporation Stockholders’ Equity
|
|||||||||||||||||||
Total
|
Noncontrolling
Interest
|
Total
Stockholders’
Equity
|
Retained
Earnings
|
AOCI
1
|
Common
Stock
|
||||||||||||||
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
|
|||||||
Net Income
|
635.3
|
72.3
|
563.0
|
563.0
|
|||||||||||||||
Other comprehensive income (loss), net of tax
|
|||||||||||||||||||
Foreign currency translation adjustments
|
(139.9)
|
(9.0)
|
(130.9)
|
(130.9)
|
|||||||||||||||
Unrealized net gain on available for sale securities
|
3.0
|
0.2
|
2.8
|
2.8
|
|||||||||||||||
Net gain on cash flow hedges
|
2.6
|
-
|
2.6
|
2.6
|
|||||||||||||||
Pension and other postretirement benefit adjustments
|
163.0
|
0.3
|
162.7
|
162.7
|
|||||||||||||||
Total comprehensive income
|
664.0
|
63.8
|
600.2
|
||||||||||||||||
Dividends declared on common stock, distributions to shareholders of noncontrolling interests and other
|
(351.4)
|
(66.4)
|
(285.0)
|
(285.0)
|
|||||||||||||||
Balance as of December 31, 2015
|
$
|
3,939.3
|
$
|
631.4
|
$
|
3,307.9
|
$
|
4,072.6
|
$
|
(777.2)
|
$
|
12.5
|
Note
|
Page
|
||
1
|
|||
2
|
|||
3
|
|||
4
|
|||
5
|
|||
6
|
|||
7
|
|||
8
|
|||
9
|
|||
10
|
|||
11
|
|||
12
|
|||
13
|
|||
14
|
|||
15
|
|||
16
|
|||
17
|
|||
18
|
|||
19
|
|||
20
|
December 31, 2015
|
||||||||||||||
Level
|
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
(Losses)
|
Fair
Value
|
||||||||||
Debt Securities - Auction rate preferred securities
|
Level 3
|
$
|
76.0
|
$
|
-
|
$
|
(0.4)
|
$
|
75.6
|
|||||
Foreign Equity Securities
|
Level 1
|
0.5
|
2.2
|
-
|
2.7
|
|||||||||
Other
|
Level 1
|
11.9
|
-
|
-
|
11.9
|
|||||||||
Total Marketable Securities
|
$
|
88.4
|
$
|
2.2
|
$
|
(0.4)
|
$
|
90.2
|
||||||
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
|
|||||||||
Other
|
Level 1
|
10.6
|
-
|
-
|
10.6
|
|||||||||
Total Marketable Securities
|
$
|
87.1
|
$
|
2.1
|
$
|
(3.1)
|
$
|
86.1
|
2015
|
2014
|
||||
Beginning balance as of January 1
|
$
|
72.9
|
$
|
69.0
|
|
Transfers in to Level 3
|
-
|
-
|
|||
Transfers out of Level 3
|
-
|
-
|
|||
Change in unrealized losses in other comprehensive loss
|
2.7
|
3.9
|
|||
Realized gains/(losses) included in earnings
|
-
|
-
|
|||
Sales/redemptions of assets classified as Level 3
|
-
|
-
|
|||
Ending balance as of December 31
|
$
|
75.6
|
$
|
72.9
|
December 31, 2015
|
||||||||
Fair
Value
|
Valuation
Technique
|
Unobservable
Input
|
Range
|
|||||
Auction rate preferred securities
|
$75.6
|
Effective
interest
|
Market required
effective interest
rate
|
4.0% - 4.8%
|
December 31, 2015
|
December 31, 2014
|
||||
Produced goods
|
$
|
871.5
|
$
|
777.8
|
|
Purchased materials
|
162.6
|
181.5
|
|||
Maintenance and supplies
|
125.4
|
124.5
|
|||
Total Inventory
|
$
|
1,159.5
|
$
|
1,083.8
|
Years Ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Domestic
|
$
|
728.5
|
$
|
358.5
|
$
|
276.5
|
||
Foreign
|
210.7
|
348.1
|
391.0
|
|||||
Total
|
$
|
939.2
|
$
|
706.6
|
$
|
667.5
|
Years Ended December 31,
|
|||||||||||||||||
2015
|
2014
|
2013
|
|||||||||||||||
Current
|
Deferred
|
Total
|
Current
|
Deferred
|
Total
|
Current
|
Deferred
|
Total
|
|||||||||
Domestic
|
$121.1
|
$92.4
|
$213.5
|
$(30.3)
|
$33.0
|
$ 2.7
|
$213.1
|
$(154.8)
|
$ 58.3
|
||||||||
Foreign
|
121.6
|
(31.2)
|
90.4
|
113.4
|
15.9
|
129.3
|
114.6
|
60.9
|
175.5
|
||||||||
Total
|
$242.7
|
$61.2
|
$303.9
|
$ 83.1
|
$48.9
|
$132.0
|
$327.7
|
$ (93.9)
|
$233.8
|
December 31,
|
|||||||
2015
|
2014
|
||||||
Deferred Tax Assets:
|
|||||||
Implant costs
|
$
|
105.8
|
$
|
132.4
|
|||
Postretirement benefit obligations
|
460.6
|
513.1
|
|||||
Tax loss carryforwards
|
123.7
|
151.4
|
|||||
Tax credit carryforwards
|
257.4
|
427.5
|
|||||
Accruals and other
|
81.5
|
69.8
|
|||||
Inventories
|
29.5
|
18.9
|
|||||
Long-term debt
|
45.5
|
45.5
|
|||||
Investments in partnerships
|
98.8
|
66.0
|
|||||
Deferred revenue
|
159.7
|
172.6
|
|||||
Total deferred tax assets
|
$
|
1,362.5
|
$
|
1,597.2
|
|||
Deferred tax liabilities:
|
|||||||
Property, plant and equipment
|
(860.2)
|
(868.1)
|
|||||
Net deferred tax assets prior to valuation allowance
|
$
|
502.3
|
$
|
729.1
|
|||
Less: Valuation allowance
|
(123.2)
|
(197.9)
|
|||||
Net Deferred Tax Assets
|
$
|
379.1
|
$
|
531.2
|
Years Ended December 31,
|
|||||||||
2015
|
2014
|
2013
|
|||||||
Income Tax Provision at Statutory Rate
|
$
|
328.7
|
$
|
247.3
|
$
|
233.6
|
|||
Increase/(Decrease) in Income Tax Provision due to:
|
|||||||||
Foreign provisions and related items
|
(12.6)
|
(16.8)
|
6.7
|
||||||
Domestic manufacturing deduction
|
(13.6)
|
8.5
|
(20.7)
|
||||||
Valuation allowances
|
(4.0)
|
(4.3)
|
11.7
|
||||||
Change in foreign tax rates
|
7.9
|
-
|
13.1
|
||||||
Tax reserves
|
-
|
-
|
(8.1)
|
||||||
U.S. tax effect of foreign earnings and dividends
|
3.5
|
(93.6)
|
2.9
|
||||||
Other, net
|
(6.0)
|
(9.1)
|
(5.4)
|
||||||
Total Income Tax Provision at Effective Rate
|
303.9
|
132.0
|
233.8
|
||||||
Effective Rate
|
32.4%
|
18.7%
|
35.0%
|
Year
|
Year
|
||||
United Kingdom
|
2013
|
Korea
|
2013
|
||
Belgium
|
2013
|
Brazil
|
2010
|
||
Japan
|
2015
|
China
|
2010
|
||
Germany
|
2011
|
United States
|
2006
|
Years Ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Unrecognized tax benefits as of January 1,
|
$
|
102.4
|
$
|
89.5
|
$
|
16.9
|
||
Additions based on tax positions related to the current year
|
3.4
|
11.2
|
70.6
|
|||||
Additions for tax positions of prior years
|
72.1
|
16.7
|
33.7
|
|||||
Reductions to tax positions related to the current year
|
-
|
-
|
-
|
|||||
Reductions for tax positions of prior years
|
(1.0)
|
(2.1)
|
(5.6)
|
|||||
Settlements
|
(66.7)
|
(12.9)
|
(26.1)
|
|||||
Balance as of December 31,
|
$
|
110.2
|
$
|
102.4
|
$
|
89.5
|
Estimated Useful
|
December 31,
|
|||||||
Life (Years)
|
2015
|
2014
|
||||||
Land
|
-
|
$
|
128.2
|
$
|
138.8
|
|||
Land improvements
|
11-20
|
349.8
|
355.3
|
|||||
Buildings
|
18-33
|
2,208.3
|
2,248.4
|
|||||
Machinery and equipment
|
3-25
|
7,734.5
|
7,774.8
|
|||||
Construction-in-progress
|
-
|
153.1
|
165.8
|
|||||
Total property, plant and equipment
|
$
|
10,573.9
|
$
|
10,683.1
|
||||
Accumulated depreciation
|
(5,487.6)
|
(5,276.3)
|
||||||
Net property, plant and equipment
|
$
|
5,086.3
|
$
|
5,406.8
|
December 31, 2015
|
|||||||||
Gross
Carrying Amount
|
Accumulated
Amortization
|
Net
Carrying Amount
|
|||||||
Patents and licenses
|
$
|
5.6
|
$
|
(4.5)
|
$
|
1.1
|
|||
Completed technology
|
13.3
|
(10.7)
|
2.6
|
||||||
Electricity contract
|
35.3
|
(17.7)
|
17.6
|
||||||
Land use rights
|
49.2
|
(7.9)
|
41.3
|
||||||
Other
|
22.4
|
(21.0)
|
1.4
|
||||||
Total
|
$
|
125.8
|
$
|
(61.8)
|
$
|
64.0
|
|||
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
|
Years Ended December 31,
|
|||||||||||
2015
|
Rates
|
2014
|
Rates
|
||||||||
Long-term debt
|
|||||||||||
Variable rate notes due 2016
|
$
|
-
|
$
|
150.0
|
1.3%
|
||||||
Fixed rate notes due 2018
|
350.0
|
4.1%
|
350.0
|
4.1%
|
|||||||
Variable rate bonds due 2019
|
0.5
|
0.1%
|
2.0
|
0.2%
|
|||||||
Fixed rate notes due 2021
|
350.0
|
4.8%
|
350.0
|
4.8%
|
|||||||
Other obligations and capital leases
|
90.4
|
1.9-9.0%
|
100.4
|
2.6-9.0%
|
|||||||
Total long-term debt
|
$
|
790.9
|
$
|
952.4
|
|||||||
Less current maturities of long-term debt
|
6.1
|
7.0
|
|||||||||
Total long-term debt due after one year
|
$
|
784.8
|
$
|
945.4
|
2015
|
2014
|
2013
|
|||||||
Beginning balance as of January 1
|
$
|
3,202.3
|
$
|
3,442.6
|
$
|
3,572.3
|
|||
Average price revenue generated
|
-
|
-
|
-
|
||||||
Average price revenue recognized
|
(13.6)
|
(19.4)
|
(15.8)
|
||||||
Advanced payments received
|
-
|
65.8
|
111.2
|
||||||
Advanced payments applied
|
(197.8)
|
(246.6)
|
(175.4)
|
||||||
Contract resolution / other
|
(182.5)
|
(40.1)
|
(49.7)
|
||||||
Ending balance as of December 31
|
$
|
2,808.4
|
$
|
3,202.3
|
$
|
3,442.6
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||||||||
Years Ended December 31,
|
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
||||||||
Net Periodic Benefit Cost
|
|||||||||||||||||
Service cost
|
$ 71.5
|
$ 49.9
|
$ 61.6
|
$ 13.2
|
$ 13.2
|
$ 26.0
|
$ 84.7
|
$ 63.1
|
$ 87.6
|
||||||||
Interest cost on projected benefit obligations
|
91.3
|
90.3
|
83.1
|
25.6
|
33.7
|
30.5
|
116.9
|
124.0
|
113.6
|
||||||||
Expected return on plan assets
|
(82.4)
|
(74.8)
|
(71.6)
|
(27.8)
|
(34.8)
|
(30.6)
|
(110.2)
|
(109.6)
|
(102.2)
|
||||||||
Amortization of net prior service costs
|
2.4
|
2.4
|
2.4
|
0.9
|
1.0
|
1.2
|
3.3
|
3.4
|
3.6
|
||||||||
Amortization of net losses
|
69.6
|
39.4
|
59.1
|
7.2
|
4.2
|
11.9
|
76.8
|
43.6
|
71.0
|
||||||||
Other adjustments
|
-
|
-
|
-
|
-
|
-
|
2.6
|
-
|
-
|
2.6
|
||||||||
Total
|
$152.4
|
$107.2
|
$134.6
|
$ 19.1
|
$ 17.3
|
$ 41.6
|
$171.5
|
$124.5
|
$176.2
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
Amortization of net prior service costs
|
$
|
(2.4)
|
$
|
(2.4)
|
$
|
(0.6)
|
$
|
(0.6)
|
$
|
(3.0)
|
$
|
(3.0)
|
|||||
Amortization of net losses or settlement recognition
|
(69.6)
|
(39.4)
|
(7.7)
|
(4.0)
|
(77.3)
|
(43.4)
|
|||||||||||
Net loss (gain) arising during the year
|
(78.7)
|
377.9
|
(71.1)
|
78.9
|
(149.8)
|
456.8
|
|||||||||||
Total
|
$
|
(150.7)
|
$
|
336.1
|
$
|
(79.4)
|
$
|
74.3
|
$
|
(230.1)
|
$
|
410.4
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
Projected benefit obligation
|
$
|
2,329.8
|
$
|
2,458.4
|
$
|
723.3
|
$
|
826.4
|
$
|
3,053.1
|
$
|
3,284.8
|
|||||
Accumulated benefit obligation
|
1,982.8
|
2,080.1
|
705.2
|
808.0
|
2,688.0
|
2,888.1
|
|||||||||||
Fair value of plan assets
|
1,490.2
|
1,483.9
|
581.9
|
608.6
|
2,072.1
|
2,092.5
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
||||||||||||||||
2015
|
2014
|
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Change in benefit obligation
|
||||||||||||||||||
Projected benefit obligation, beginning of year
|
$
|
2,458.4
|
$
|
1,948.3
|
$
|
951.3
|
$
|
867.9
|
$
|
3,409.7
|
$
|
2,816.2
|
||||||
Service cost
|
71.5
|
49.9
|
13.2
|
13.2
|
84.7
|
63.1
|
||||||||||||
Interest cost
|
91.3
|
90.3
|
25.6
|
33.7
|
116.9
|
124.0
|
||||||||||||
Actuarial (gains) losses
|
(196.5)
|
482.0
|
(80.4)
|
141.4
|
(276.9)
|
623.4
|
||||||||||||
Foreign currency exchange rate changes
|
-
|
-
|
(53.6)
|
(75.9)
|
(53.6)
|
(75.9)
|
||||||||||||
Benefits paid and settlements
|
(94.9)
|
(112.1)
|
(27.7)
|
(29.0)
|
(122.6)
|
(141.1)
|
||||||||||||
Projected benefit obligation, end of year
|
$
|
2,329.8
|
$
|
2,458.4
|
$
|
828.4
|
$
|
951.3
|
$
|
3,158.2
|
$
|
3,409.7
|
||||||
Fair value of plan assets
|
||||||||||||||||||
Fair value of plan assets, beginning of year
|
$
|
1,483.9
|
$
|
1,330.5
|
$
|
697.7
|
$
|
661.1
|
$
|
2,181.6
|
$
|
1,991.6
|
||||||
Actual return on plan assets
|
(35.4)
|
179.0
|
18.4
|
97.2
|
(17.0)
|
276.2
|
||||||||||||
Foreign currency exchange rate changes
|
-
|
-
|
(39.7)
|
(50.0)
|
(39.7)
|
(50.0)
|
||||||||||||
Employer contributions
|
136.6
|
86.5
|
17.5
|
18.4
|
154.1
|
104.9
|
||||||||||||
Benefits paid and settlements
|
(94.9)
|
(112.1)
|
(27.7)
|
(29.0)
|
(122.6)
|
(141.1)
|
||||||||||||
Fair value of plan assets, end of year
|
$
|
1,490.2
|
$
|
1,483.9
|
$
|
666.2
|
$
|
697.7
|
$
|
2,156.4
|
$
|
2,181.6
|
||||||
Funded status of plans
|
$
|
(839.6)
|
$
|
(974.5)
|
$
|
(162.2)
|
$
|
(253.6)
|
$
|
(1,001.8)
|
$
|
(1,228.1)
|
||||||
Accumulated benefit obligation
|
1,928.8
|
2,080.1
|
769.7
|
875.8
|
2,752.5
|
2,955.9
|
December 31, 2015
|
|||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Cash and cash equivalents
|
$
|
9.0
|
$
|
-
|
$
|
-
|
$
|
9.0
|
|||
Equity securities
|
198.9
|
3.4
|
-
|
202.3
|
|||||||
Corporate debt securities
|
-
|
370.0
|
-
|
370.0
|
|||||||
U.S. government debt securities
|
-
|
232.1
|
-
|
232.1
|
|||||||
U.S. government guaranteed mortgage backed securities
|
-
|
15.2
|
-
|
15.2
|
|||||||
Other governmental debt securities
|
1.1
|
60.5
|
-
|
61.6
|
|||||||
Investment funds
|
40.8
|
1,222.6
|
-
|
1,263.4
|
|||||||
Other
|
-
|
2.8
|
-
|
2.8
|
|||||||
Total
|
$
|
249.8
|
$
|
1,906.6
|
$
|
-
|
$
|
2,156.4
|
|||
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
|
Beginning balance as of January 1, 2015
|
$
|
0.4
|
Actual return on assets
|
-
|
|
Purchases
|
-
|
|
Sales
|
(0.4)
|
|
Ending balance as of December 31, 2015
|
$
|
-
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||||||||||
2015
|
2014
|
2015
|
2014
|
2015
|
2014
|
||||||||||||||
Current benefit liabilities
|
$
|
(6.7)
|
$
|
(6.1)
|
$
|
(5.0)
|
$
|
(4.2)
|
$
|
(11.7)
|
$
|
(10.3)
|
|||||||
Noncurrent benefit liabilities
|
(832.9)
|
(968.4)
|
(157.2)
|
(249.4)
|
(990.1)
|
(1,217.8)
|
|||||||||||||
Total recognized liabilities
|
$
|
(839.6)
|
$
|
(974.5)
|
$
|
(162.2)
|
$
|
(253.6)
|
$
|
(1,001.8)
|
$
|
(1,228.1)
|
|||||||
Amounts recognized in accumulated other comprehensive loss (pre-tax)
|
|||||||||||||||||||
Prior service cost
|
$
|
5.7
|
$
|
8.1
|
$
|
3.4
|
$
|
4.4
|
$
|
9.1
|
$
|
12.5
|
|||||||
Net loss
|
914.9
|
1,063.2
|
125.7
|
214.6
|
1,040.6
|
1,277.8
|
|||||||||||||
Accumulated other comprehensive loss
|
$
|
920.6
|
$
|
1,071.3
|
$
|
129.1
|
$
|
219.0
|
$
|
1,049.7
|
$
|
1,290.3
|
Benefit Obligations as of December 31,
|
|||||||||||
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||
2015
|
2014
|
2015
|
2014
|
2015
|
2014
|
||||||
Discount rate
|
4.2%
|
3.8%
|
3.2%
|
2.8%
|
4.0%
|
3.5%
|
|||||
Rate of increase in future compensation levels
|
4.3%
|
4.3%
|
1.0%
|
1.0%
|
3.4%
|
3.4%
|
Net Periodic Pension Cost for the Years Ended December 31,
|
|||||||||||||||||
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||||||||
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
2015
|
2014
|
2013
|
|||||||||
Discount rate
|
3.8%
|
4.8%
|
4.0%
|
2.8%
|
4.0%
|
3.8%
|
3.5%
|
4.5%
|
4.0%
|
||||||||
Rate of increase in future compensation levels
|
4.3%
|
4.3%
|
4.3%
|
1.1%
|
1.0%
|
3.6%
|
3.4%
|
3.4%
|
4.1%
|
||||||||
Expected long-term rate of return on plan assets
|
5.6%
|
5.6%
|
5.6%
|
4.5%
|
5.6%
|
5.6%
|
5.3%
|
5.6%
|
5.6%
|
Years Ended December 31,
|
||||||||||
2015
|
2014
|
2013
|
||||||||
Net Periodic Postretirement Benefit Cost
|
||||||||||
Service cost
|
$
|
4.8
|
$
|
4.7
|
$
|
5.9
|
||||
Interest cost
|
11.9
|
12.7
|
13.4
|
|||||||
Amortization of prior service credits
|
(3.1)
|
(1.5)
|
(1.6)
|
|||||||
Amortization of actuarial losses
|
6.9
|
4.1
|
8.7
|
|||||||
Total
|
$
|
20.5
|
$
|
20.0
|
$
|
26.4
|
Years Ended December 31,
|
|||||
2015
|
2014
|
||||
Amortization of prior service credits
|
$
|
3.1
|
$
|
1.5
|
|
Amortization of loss
|
(6.9)
|
(4.1)
|
|||
Prior service credit arising during the year
|
-
|
(19.7)
|
|||
Net loss (gain) arising during the year
|
(18.9)
|
29.5
|
|||
Total
|
$
|
(22.7)
|
$
|
7.2
|
December 31,
|
|||||||
2015
|
2014
|
||||||
Change in accumulated postretirement benefit obligation
|
|||||||
Accrued postretirement benefit obligation at beginning of year
|
$
|
329.2
|
$
|
320.0
|
|||
Service cost
|
4.8
|
4.7
|
|||||
Interest cost
|
11.9
|
12.7
|
|||||
Actuarial loss/(gain)
|
(18.9)
|
29.5
|
|||||
Plan change
|
-
|
(19.7)
|
|||||
Benefits paid
|
(13.1)
|
(18.0)
|
|||||
Accumulated postretirement benefit obligation at end of year
|
$
|
313.9
|
$
|
329.2
|
|||
Funded status of plans
|
$
|
(313.9)
|
$
|
(329.2)
|
|||
Amounts recognized in the consolidated balance sheets
|
|||||||
Current benefit liabilities
|
$
|
(18.1)
|
$
|
(17.8)
|
|||
Noncurrent benefit liabilities
|
(295.8)
|
(311.4)
|
|||||
|
Total recognized liabilities
|
$
|
(313.9)
|
$
|
(329.2)
|
||
Amounts recognized in accumulated other comprehensive loss (pre-tax)
|
|||||||
Prior service credit
|
$
|
(18.7)
|
$
|
(21.8)
|
|||
Net loss (gain)
|
82.8
|
108.6
|
|||||
Accumulated other comprehensive loss
|
$
|
64.1
|
$
|
86.8
|
Estimated
Postretirement
Benefit
Payments
|
|||
2016
|
$
18.2
|
||
2017
|
18.5
|
||
2018
|
18.9
|
||
2019
|
19.2
|
||
2020
|
19.5
|
||
2021-2025
|
100.9
|
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, 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 (loss)
|
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 (loss)
|
(158.1)
|
(7.8)
|
-
|
(276.7)
|
(442.6)
|
|||||||||
Balance as of December 31, 2014
|
$
|
71.0
|
$
|
(2.1)
|
$
|
-
|
$
|
(883.3)
|
$
|
(814.4)
|
||||
Other comprehensive income before reclassifications
|
(130.9)
|
2.8
|
2.6
|
108.3
|
(17.2)
|
|||||||||
Amounts reclassified from AOCI
3
|
-
|
-
|
-
|
54.4
|
54.4
|
|||||||||
Net current-period other comprehensive income (loss)
|
(130.9)
|
2.8
|
2.6
|
162.7
|
37.2
|
|||||||||
Balance as of December 31, 2015
|
$
|
(59.9)
|
$
|
0.7
|
$
|
2.6
|
$
|
(720.6)
|
$
|
(777.2)
|
Years Ended December 31,
|
||||||||||
2015
|
2014
|
2013
|
||||||||
Net gain (loss) on cash flow hedges:
|
||||||||||
Gain (loss) arising during the period
|
$
|
(1.5)
|
$
|
-
|
$
|
(0.1)
|
||||
Less: reclassification for gain included in income
|
-
|
-
|
(2.0)
|
|||||||
Net unrealized gain (loss) on cash flow hedges
|
(1.5)
|
-
|
(2.1)
|
|||||||
Defined benefit plan adjustments:
|
||||||||||
Net gain (loss) arising during the period
|
(52.1)
|
159.4
|
(99.6)
|
|||||||
Less: amortization of pension adjustments in net income
|
(29.3)
|
(17.5)
|
(28.4)
|
|||||||
Defined benefit plans, net
|
(81.4)
|
141.9
|
(128.0)
|
|||||||
Total tax (expense) benefit
|
$
|
(82.9)
|
$
|
141.9
|
$
|
(130.1)
|
·
|
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,
|
||||||||
2015
|
2014
|
2013
|
||||||
Sales to Dow Chemical
|
$
|
21.5
|
$
|
19.3
|
$
|
17.0
|
||
Sales to Corning
|
15.1
|
15.4
|
18.9
|
|||||
Purchases from Dow Chemical
|
45.9
|
52.4
|
69.3
|
|||||
December 31,
|
||||||||
2015
|
2014
|
|||||||
Accounts receivable from Dow Chemical
|
$
|
1.7
|
$
|
2.1
|
||||
Accounts receivable from Corning
|
0.6
|
1.0
|
||||||
Accounts payable to Dow Chemical
|
2.9
|
3.9
|
Years Ended December 31,
|
||||||||
2015
|
2014
|
2013
|
||||||
Sales to nonconsolidated affiliates and noncontrolling shareholders
|
$
|
472.4
|
$
|
461.1
|
$
|
528.6
|
||
Purchases from nonconsolidated affiliates and noncontrolling shareholders
|
378.1
|
357.0
|
337.6
|
|||||
December 31,
|
||||||||
2015
|
2014
|
|||||||
Accounts receivable from nonconsolidated affiliates and noncontrolling shareholders
|
$
|
54.8
|
$
|
91.6
|
||||
Accounts payable to nonconsolidated affiliates and noncontrolling shareholders
|
38.4
|
24.6
|
(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
|
1.
|
Organization and Nature of Operations
|
2.
|
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.
|
3.
|
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.
|
4.
|
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
|
5.
|
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
|
6.
|
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.
|
7.
|
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
|
8.
|
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
|
9.
|
Impairment Charges
|
10.
|
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.
|
11.
|
Fair Value Measurements
|
12.
|
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)
|
13.
|
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
|
14.
|
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
|
15.
|
Commitments and Contingencies
|
16.
|
Subsequent Event
|
·
|
On January 15, 2014, the Company entered into a 15 year $1,902,359 thousand borrowing from Corning Luxembourg S. àr.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.
|
If, in relation to any Transaction to which this Master Confirmation and a Supplemental Confirmation relate, there is any inconsistency between the Agreement, this Master Confirmation, such Supplemental Confirmation and the Equity Definitions, the following will prevail for purposes of such Transaction in the order of precedence indicated: (i) such Supplemental Confirmation; (ii) this Master Confirmation; (iii) the Equity Definitions; and (iv) the Agreement.
|
1.
Each Transaction constitutes a Share Forward Transaction for the purposes of the Equity Definitions. Set forth below are the terms and conditions that, together with the terms and conditions set forth in the Supplemental Confirmation relating to any Transaction, shall govern such Transaction.
|
General Terms.
|
|||
Trade Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||
Buyer:
|
Counterparty
|
||
Seller:
|
Dealer
|
||
Shares:
|
The common stock of Counterparty, par value USD 0.50 per share (Exchange symbol “GLW”).
|
||
Exchange:
|
The New York Stock Exchange
|
||
Related Exchange(s):
|
All Exchanges.
|
||
Prepayment/Variable Obligation:
|
Applicable
|
||
Prepayment Amount:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||
Prepayment Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||
Valuation.
|
|||
VWAP Price:
|
For any Scheduled Trading Day, the Rule 10b-18-compliant dollar volume-weighted average price per Share for such day based on transactions executed during such day, as reported on Bloomberg Screen “GLW US <Equity> AQR SEC” (or any successor thereto), or in the event such price is not so reported on such day for any reason or is manifestly incorrect, as determined, in a commercially reasonable manner, by the Calculation Agent for Rule 10b-18-compliant transactions on such day using a volume weighted method.
|
||
Forward Price:
|
For each Transaction, the arithmetic average of the VWAP Prices for all of the Exchange Business Days in the Calculation Period for such Transaction, subject to “Valuation Disruption” below.
|
||
Exchange Business Day:
|
As set forth in the Equity Definitions; provided that any Excluded Days for a Transaction shall not be Exchange Business Days for such Transaction.
|
||
Excluded Days:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||
Forward Price Adjustment Amount:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||
Calculation Period:
|
For each Transaction, the period from, and including, the Calculation Period Start Date for such Transaction to, and including, the Termination Date for such Transaction.
|
||
Calculation Period Start Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
Termination Date:
|
For each Transaction, the Scheduled Termination Date for such Transaction;
provided
that Dealer shall have the right to designate any Exchange Business Day on or after the First Acceleration Date to be the Termination Date for all of such Transaction (an “
Accelerated Termination Date
”) by delivering notice (an “
Acceleration Notice
”) to Counterparty of any such designation prior to 5:00 p.m. (New York City time) on the Exchange Business Day immediately following the designated Accelerated Termination Date.
|
||
Scheduled Termination Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation, subject to postponement as provided in “Valuation Disruption” below.
|
||
First Acceleration Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||
Valuation Disruption:
|
The definition of “Market Disruption Event” in Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words “at any time during the one-hour period that ends at the relevant Valuation Time, Latest Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case may be” and inserting the words “at any time on any Scheduled Trading Day during the Calculation Period or Settlement Valuation Period” after the word “material,” in the third line thereof.
|
||
Section 6.3(d) of the Equity Definitions is hereby amended by deleting the remainder of the provision following the term “Scheduled Closing Time” in the fourth line thereof.
|
|||
Notwithstanding anything to the contrary in the Equity Definitions, if a Disrupted Day occurs (i) in the Calculation Period, the Calculation Agent may, in its good faith and commercially reasonable discretion, postpone the Scheduled Termination Date, or (ii) in the Settlement Valuation Period, the Calculation Agent may extend the Settlement Valuation Period. The Calculation Agent may also determine that (i) such Disrupted Day is a Disrupted Day in full, in which case the VWAP Price for such Disrupted Day shall not be included for purposes of determining the Forward Price or the Settlement Price, as the case may be, or (ii) such Disrupted Day is a Disrupted Day only in part, in which case the VWAP Price for such Disrupted Day shall be determined by the Calculation Agent based on Rule 10b-18 Eligible Transactions in the Shares on such Disrupted Day taking into account the nature and duration of the relevant Market Disruption Event, and the weighting of the VWAP Price for the relevant Exchange Business Days during the Calculation Period or the Settlement Valuation Period, as the case may be, shall be adjusted in a commercially reasonable manner by the Calculation Agent for purposes of determining the Forward Price or the Settlement Price, as the case may be, with such adjustments based on, among other factors, the duration of any Market Disruption Event and the volume, historical trading patterns and price of the Shares; provided, however, that any Market Disruption Event due to a Regulatory Disruption shall be a Disrupted Day in full. Any Exchange Business Day on which, as of the date hereof, the Exchange is scheduled to close prior to its normal close of trading shall be deemed not to be an Exchange Business Day; if a closure of the Exchange prior to its normal close of trading on any Exchange Business Day is scheduled following the date hereof, then such Exchange Business Day shall be deemed to be a Disrupted Day in full.
|
If a Disrupted Day occurs during the Calculation Period for any Transaction or the Settlement Valuation Period for any Transaction, as the case may be, and each of the nine immediately following Scheduled Trading Days is a Disrupted Day (a “
Disruption Event
”), then the Calculation Agent, in its good faith and commercially reasonable discretion, may deem such Disruption Event (and each consecutive Disrupted Day thereafter) to be either (x) a Potential Adjustment Event in respect of such Transaction or (y) an Additional Termination Event in respect of such Transaction, with Counterparty as the sole Affected Party and such Transaction as the sole Affected Transaction.
|
|||
Settlement Terms.
|
|||
Settlement Procedures:
|
For each Transaction:
|
||
(i)if the Number of Shares to be Delivered for such Transaction is positive, Physical Settlement shall be applicable to such Transaction;
provided
that Dealer does not, and shall not, make the agreement or the representations set forth in Section 9.11 of the Equity Definitions related to the restrictions imposed by applicable securities laws with respect to any Shares delivered by Dealer to Counterparty under any Transaction; or
|
|||
(ii)if the Number of Shares to be Delivered for such Transaction is negative, then the Counterparty Settlement Provisions in Annex A hereto shall apply to such Transaction
|
|||
Number of Shares to be Delivered:
|
For each Transaction, a number of Shares (rounded down to the nearest whole number) equal to (a)(i) the Prepayment Amount for such Transaction,
divided by
(ii)(A) the Forward Price for such Transaction
minus
(B) the Forward Price Adjustment Amount for such Transaction,
minus
(b) the number of Initial Shares for such Transaction;
provided
that if the result of the calculation in clause (a)(ii) is equal to or less than the Floor Price for such Transaction, then the Number of Shares to be Delivered for such Transaction shall be determined as if clause (a)(ii) were replaced with “(ii) the Floor Price for such Transaction”. For the avoidance of doubt, if the Forward Price Adjustment Amount for any Transaction is a negative number, clause (a)(ii) of the immediately preceding sentence shall be equal to (A) the Forward Price for such Transaction,
plus
(B) the absolute value of the Forward Price Adjustment Amount.
|
||
Floor Price:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||
Excess Dividend Amount:
|
For the avoidance of doubt, all references to the Excess Dividend Amount shall be deleted from Section 9.2(a)(iii) of the Equity Definitions.
|
||
Settlement Date:
|
For each Transaction, if the Number of Shares to be Delivered for such Transaction is positive, the date that is one Settlement Cycle immediately following the Termination Date for such Transaction.
|
||
Settlement Currency:
|
USD
|
Initial Share Delivery:
|
For each Transaction, Dealer shall deliver a number of Shares equal to the Initial Shares for such Transaction to Counterparty on the Initial Share Delivery Date for such Transaction in accordance with Section 9.4 of the Equity Definitions, with such Initial Share Delivery Date deemed to be a “Settlement Date” for purposes of such Section 9.4.
|
||
Initial Share Delivery Date:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||
Initial Shares:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||
Share Adjustments.
|
|||
Potential Adjustment Event:
|
In addition to the events described in Section 11.2(e) of the Equity Definitions, it shall constitute an additional Potential Adjustment Event if (x) the Scheduled Termination Date for any Transaction is postponed pursuant to “Valuation Disruption” above (including, for the avoidance of doubt, pursuant to Section 7 hereof), (y) a Regulatory Disruption as described in Section 7 occurs or (z) a Disruption Event occurs. In the case of any event described in clause (x), (y) or (z) above occurs, the Calculation Agent may, in its commercially reasonable judgment, adjust any relevant terms of such Transaction as necessary to preserve as nearly as practicable the fair value of such Transaction to Dealer prior to such postponement, Regulatory Disruption or Disruption Event, as the case may be, provided that the Calculation Agent shall not adjust any of the dates identified as Calculation Dates in the related Supplemental Confirmation.
|
||
Excess Dividend:
|
For any calendar quarter, any dividend or distribution on the Shares with an ex-dividend date occurring during such calendar quarter (other than any dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions or any Extraordinary Dividend) (a “
Dividend
”) the amount or value of which per Share (as determined by the Calculation Agent), when aggregated with the amount or value (as determined by the Calculation Agent) of any and all previous Dividends with ex-dividend dates occurring in the same calendar quarter, exceeds the Ordinary Dividend Amount.
|
||
Extraordinary Dividend
|
Means the per Share cash dividend or distribution, or a portion thereof, declared by Counterparty on the Shares that is classified by the board of directors of Counterparty as an “extraordinary” dividend. For the avoidance of doubt, no dividend paid on Counterparty’s Fixed Rate Cumulative Convertible Preferred Stock, Series A, par value $100 per share (“Preferred Stock”), shall be considered a Dividend, Excess Dividend or Extraordinary Dividend under this Master Confirmation or any Supplemental Confirmation.
|
||
Consequences of Excess Dividend:
|
The declaration by the Issuer of any Excess Dividend, the ex-dividend date for which occurs or is scheduled to occur during the Relevant Dividend Period for any Transaction, shall, at Dealer’s election in its sole judgment, either (x) constitute an Additional Termination Event in respect of such Transaction, with Counterparty as the sole Affected Party and such Transaction as the sole Affected Transaction or (y) result in an adjustment, by the Calculation Agent, to the Floor Price as the Calculation Agent determines appropriate to account for the economic effect on such Transaction of such Excess Dividend; provided that Dealer’s election must be made within 10 days of the first public announcement of such Excess Dividend.
|
Ordinary Dividend Amount:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
|||
Method of Adjustment:
|
Calculation Agent Adjustment
|
|||
Early Ordinary Dividend Payment:
|
For each Transaction, if an ex-dividend date for any Dividend that is not (x) an Excess Dividend or (y) a dividend or distribution of the type described in Section 11.2(e)(i) or Section 11.2(e)(ii)(A) of the Equity Definitions, occurs during any calendar quarter occurring (in whole or in part) during the Relevant Dividend Period for such Transaction and is prior to the Scheduled Ex-Dividend Date for such Transaction for the relevant calendar quarter (as determined by the Calculation Agent), then the Calculation Agent shall make such adjustment to the exercise, settlement, payment or any other terms of the relevant Transaction as the Calculation Agent determines appropriate to account for the economic effect on such Transaction of such event.
|
|||
Scheduled Ex-Dividend Dates:
|
For each Transaction, as set forth in the related Supplemental Confirmation for each calendar quarter.
|
|||
Relevant Dividend Period:
|
For each Transaction, the period from, and including, the Trade Date for such Transaction to, and including, the Relevant Dividend Period End Date for such Transaction.
|
|||
Relevant Dividend Period End Date:
|
For each Transaction, if the Number of Shares to be Delivered for such Transaction is negative, the last day of the Settlement Valuation Period; otherwise, the Termination Date for such Transaction.
|
|||
Extraordinary Events.
|
||||
Consequences of Merger Events:
|
||||
(a) Share-for-Share:
|
Modified Calculation Agent Adjustment
|
|||
(b) Share-for-Other:
|
Cancellation and Payment
|
|||
(c) Share-for-Combined:
|
Component Adjustment
|
|||
Tender Offer:
|
Applicable;
provided
that (a) Section 12.1(l) of the Equity Definitions shall be amended (i) by deleting the parenthetical in the fifth line thereof, (ii) by replacing “that” in the fifth line thereof with “whether or not such announcement” and (iii) by adding immediately after the words “Tender Offer” in the fifth line thereof “, and any publicly announced change or amendment to such an announcement (including, without limitation, the announcement of an abandonment of such intention)” and (b) Sections 12.3(a) and 12.3(d) of the Equity Definitions shall each be amended by replacing each occurrence of the words “Tender Offer Date” by “Announcement Date.”
|
|||
Consequences of Tender Offers:
|
||||
(a) Share-for-Share:
|
Modified Calculation Agent Adjustment
|
|||
(b) Share-for-Other:
|
Modified Calculation Agent Adjustment
|
|||
(c) Share-for-Combined:
|
Modified Calculation Agent Adjustment
|
Nationalization, Insolvency or Delisting:
|
Cancellation and Payment;
provided
that in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall be deemed to be the Exchange.
|
||||
Additional Disruption Events:
|
|||||
(a) Change in Law:
|
Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the phrase “the interpretation” in the third line thereof with the phrase “, or public announcement of, the formal or informal interpretation”; provided further that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by replacing the parenthetical beginning after the word “regulation” in the second line thereof with the words “(including, for the avoidance of doubt and without limitation, (x) any tax law or (y) adoption or promulgation of new regulations authorized or mandated by existing statute)”. Notwithstanding the Equity Definitions, the consequence of an occurrence of a Change in Law under clause (y) thereof shall be as set forth under 12.9(b)(vi) of the Equity Definitions.
|
||||
(b) Failure to Deliver:
|
Applicable
|
||||
(c) Insolvency Filing:
|
Applicable
|
||||
(d) Loss of Stock Borrow:
|
Applicable
|
||||
Maximum Stock Loan Rate:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||||
Hedging Party:
|
Dealer
|
||||
Determining Party:
|
Dealer
|
||||
(e) Increased Cost of Stock Borrow:
|
Applicable
|
||||
Initial Stock Loan Rate:
|
For each Transaction, as set forth in the related Supplemental Confirmation.
|
||||
Hedging Party:
|
Dealer
|
||||
Determining Party:
|
Dealer
|
||||
Hedging Adjustments:
|
For the avoidance of doubt, whenever the Calculation Agent is called upon to make an adjustment pursuant to the terms of this Confirmation or the Equity Definitions to take into account the effect of an event, the Calculation Agent shall make such adjustment by reference to the effect of such event on Dealer, assuming that Dealer maintains a commercially reasonable Hedge Position.
|
||||
Non-Reliance/Agreements and Acknowledgements Regarding Hedging Activities/Additional Acknowledgements:
|
Applicable
|
(b)
|
Address for notices or communications to Dealer:
|
|||||||
Morgan Stanley & Co. LLC
|
||||||||
1585 Broadway
|
||||||||
New York, New York 10036
|
||||||||
Attention:
|
David Oakes
|
|||||||
Telephone No.:
|
212-761-5319
|
|||||||
Email Address:
|
david.oakes@morganstanley.com
|
|||||||
With a copy to:
|
||||||||
Morgan Stanley & Co. LLC
|
||||||||
1585 Broadway
|
||||||||
5
th
Floor
|
||||||||
New York, New York 10036
|
||||||||
Attention:
|
Anthony Cicia
|
|||||||
Telephone No.:
|
212-762-4828
|
|||||||
Facsimile:
|
212-507-4338
|
|||||||
Email Address:
|
anthony.cicia@morganstanley.com
|
|||||||
6.
|
Representations, Warranties and Agreements.
|
|||||||
(a)
|
Additional Representations, Warranties and Covenants of Each Party
. In addition to the representations, warranties and covenants in the Agreement, each party represents, warrants and covenants to the other party that:
|
|||||||
(i)
|
It is an “eligible contract participant” (as such term is defined in the Commodity Exchange Act, as amended).
|
|||||||
(ii)
|
Each party acknowledges that the offer and sale of each Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the “
Securities Act
”), by virtue of Section 4(2) thereof. Accordingly, each party represents and warrants to the other that (A) it has the financial ability to bear the economic risk of its investment in each Transaction and is able to bear a total loss of its investment, (B) it is an “accredited investor” as that term is defined under Regulation D under the Securities Act and (C) the disposition of each Transaction is restricted under this Master Confirmation, the Securities Act and state securities laws.
|
|||||||
(b)
|
Additional Representations, Warranties and Covenants of Counterparty
. In addition to the representations, warranties and covenants in the Agreement, Counterparty represents, warrants and covenants to Dealer that:
|
|||||||
(i)
|
As of the Trade Date for each Transaction hereunder, (A) such Transaction is being entered into pursuant to a publicly disclosed Share buy-back program and its Board of Directors has approved the use of derivatives to effect the Share buy-back program, and (B) there is no internal policy of Counterparty, whether written or oral, that would prohibit Counterparty from entering into any aspect of such Transaction, including, without limitation, the purchases of Shares to be made pursuant to such Transaction.
|
|||||||
(ii)
|
As of the Trade Date for each Transaction hereunder, the purchase or writing of such Transaction and the transactions contemplated hereby will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.
|
(iii)
|
As of the Trade Date for each Transaction hereunder, it is not entering into such Transaction, in each case (A) on the basis of, and is not aware of, any material non-public information regarding Counterparty or the Shares, (B) in anticipation of, in connection with, or to facilitate, a distribution of its securities, a self tender offer or a third-party tender offer in violation of the Exchange Act or (C) to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for the Shares).
|
|||
(iv)
|
Counterparty (A) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; (B) will exercise independent judgment in evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the broker-dealer in writing; and (C) has total assets of at least USD 50,000,000 as of the date hereof.
|
|||
(v)
|
As of the Trade Date for each Transaction hereunder, Counterparty is in compliance in all material respects with its reporting obligations under the Exchange Act and its most recent Annual Report on Form 10-K, together with all reports filed by it through the Trade Date pursuant to the Exchange Act, taken together and as amended and supplemented to the date of this representation, do not, as of their respective filing dates, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
|
|||
(vii)
|
The Shares are not, and Counterparty will not cause the Shares to be, subject to a “restricted period” (as defined in Regulation M promulgated under the Exchange Act) at any time during any Regulation M Period (as defined below) for any Transaction unless Counterparty has provided written notice to Dealer of such restricted period not later than the Scheduled Trading Day immediately preceding the first day of such “restricted period”; Counterparty acknowledges that any such notice may cause a Disrupted Day to occur pursuant to Section 7 below; accordingly, Counterparty acknowledges that its delivery of such notice must comply with the standards set forth in Section 7 below. Counterparty is not currently contemplating any “distribution” (as defined in Regulation M promulgated under the Exchange Act) of Shares, or any security for which Shares are a “reference security” (as defined in Regulation M promulgated under the Exchange Act). “
Regulation M Period
” means, for any Transaction, (A) the Relevant Period (as defined below) for such Transaction, (B) the Settlement Valuation Period, if any, for such Transaction and (C) the Seller Termination Purchase Period (as defined below), if any, for such Transaction. “
Relevant Period
” means, for any Transaction, the period commencing on the Calculation Period Start Date for such Transaction and ending on the later of (1) the earlier of (x) the Scheduled Termination Date and (y) the last Additional Relevant Day (as specified in the related Supplemental Confirmation) for such Transaction, or such earlier day as elected by Dealer and communicated to Counterparty on such day (or, if later, the First Acceleration Date without regard to any acceleration thereof pursuant to “Special Provisions for Acquisition Transaction Announcements” below) and (2) if Section 14 is applicable to such Transaction, the date on which all deliveries owed pursuant to Section 14 have been made.
|
|||
(viii)
|
As of the Trade Date, the Prepayment Date, the Initial Share Delivery Date, the Settlement Date, any Cash Settlement Payment Date and any Settlement Method Election Date for each Transaction, Counterparty is not “insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the “
Bankruptcy Code
”)) and Counterparty would be able to purchase a number of Shares with a value equal to the Prepayment Amount in compliance with the laws of the jurisdiction of Counterparty’s incorporation.
|
|||
(ix)
|
Counterparty is not, and after giving effect to each Transaction will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.
|
(x)
|
Counterparty has not entered, and will not enter, into any repurchase transaction with respect to the Shares (or any security convertible into or exchangeable for the Shares) (including, without limitation, any agreements similar to the Transactions described herein), except with Dealer or any of its affiliates, where any initial hedge period, calculation period, relevant period, settlement valuation period or seller termination purchase period (each however defined) in such other transaction will overlap at any time (including, without limitation, as a result of extensions in such initial hedge period, calculation period, relevant period, settlement valuation period or seller termination purchase period as provided in the relevant agreements) with any Relevant Period, any Settlement Valuation Period (if applicable) or any Seller Termination Purchase Period (if applicable) under this Master Confirmation. In the event that the initial hedge period, relevant period, calculation period or settlement valuation period in any other transaction overlaps with any Relevant Period, any Settlement Valuation Period (if applicable) or any Seller Termination Purchase Period (if applicable) under this Master Confirmation as a result of any postponement of the Scheduled Termination Date or extension of the Settlement Valuation Period pursuant to “Valuation Disruption” above or any analogous provision in such other transaction, Counterparty shall promptly amend such other transaction to avoid any such overlap.
|
|||
(xi)
|
Counterparty shall, at least one day prior to the first day of the Calculation Period, the Settlement Valuation Period, if any, or the Seller Termination Purchase Period, if any, for any Transaction, notify Dealer of the total number of Shares purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception set forth in paragraph (b)(4) of Rule 10b-18 under the Exchange Act (“
Rule 10b-18
”) by or for Counterparty or any of its “affiliated purchasers” (as defined in Rule 10b-18) during each of the four calendar weeks preceding such day and during the calendar week in which such day occurs (“Rule 10b-18 purchase” and “blocks” each being used as defined in Rule 10b-18), which notice shall be substantially in the form set forth in Schedule B hereto.
|
|||
(xii)
|
As of the Trade Date for each Transaction hereunder, and as of the date of any election with respect to any Transaction hereunder, there has not been any Merger Announcement (as defined below).
|
|||
(c)
|
Additional Representations, Warranties and Covenants of Dealer.
In addition to the representations, warranties and covenants in the Agreement, Dealer represents, warrants and covenants to Counterparty that it has implemented policies and procedures, taking into consideration the nature of its business, reasonably designed to ensure that individuals making investment decisions related to any Transaction would not violate the laws prohibiting trading on the basis of material nonpublic information regarding Issuer.
|
|||
7.
|
Regulatory Disruption.
In the event that Dealer concludes, in its good faith and commercially reasonable discretion based on the advice of counsel that it is necessary with respect to any legal, regulatory or self-regulatory requirements or related policies and procedures (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer, and provided that such policies or procedures are related to legal or regulatory issues and are generally applicable in similar situations and applied to any Transaction hereunder in a non-discriminatory manner), for it to refrain from or decrease any market activity on any Scheduled Trading Day or Days during the Calculation Period or, if applicable, the Settlement Valuation Period, Dealer may by written notice to Counterparty elect to deem that a Market Disruption Event has occurred and will be continuing on such Scheduled Trading Day or Days.
|
8.
|
Other Provisions
|
|||
(a)
|
Rule 10b-18:
|
|||
(i)
|
Dealer covenants and agrees to use commercially reasonable efforts, during the Calculation Period and any Settlement Valuation Period (as defined in Annex A) for any Transaction, to make all purchases of Shares in connection with such Transaction in a manner that would comply with the limitations set forth in clauses (b)(1), (b)(2), (b)(3) and (b)(4) and (c) of Rule 10b-18, as if such rule were applicable to such purchases and taking into account any applicable Securities and Exchange Commission no-action letters as appropriate, and subject to any delays between the execution and reporting of a trade of the Shares on the Exchange and other circumstances beyond Dealer’s control; provided that, during the Calculation Period, the foregoing agreement shall not apply to purchases made to dynamically hedge for Dealer’s own account or the account of its affiliate(s) the optionality arising under a Transaction (including, for the avoidance of doubt, timing optionality); provided further that, without limiting the generality of the first sentence of this Section 6(c)(i), Dealer shall not be responsible for any failure to comply with Rule 10b-18(b)(3) to the extent any transaction that was executed (or deemed to be executed) by or on behalf of Counterparty or an “affiliated purchaser” (as defined under Rule 10b-18) pursuant to a separate agreement is not deemed to be an “independent bid” or an “independent transaction” for purposes of Rule 10b-18(b)(3).
|
|||
(ii)
|
Except as disclosed to Dealer in writing prior to the Trade Date, Counterparty represents and warrants to Dealer that it has not made any purchases of blocks by or for itself or any of its "affiliated purchasers" pursuant to the one block purchase per week exception in Rule 10b-18(b)(4) under the Exchange Act during each of the four calendar weeks preceding such date ("Rule 10b-18 purchase," "blocks" and "affiliated purchaser", each as defined in Rule 10b-18).
|
|||
(b)
|
10b5-1 Plan:
|
|||
(i)
|
Counterparty is entering into this Master Confirmation and each Transaction hereunder in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 under the Exchange Act (“
Rule 10b5-1
”) or any other antifraud or anti-manipulation provisions of the federal or applicable state securities laws and that it has not entered into or altered and will not enter into or alter any corresponding or hedging transaction or position with respect to the Shares. Counterparty acknowledges that it is the intent of the parties that each Transaction entered into under this Master Confirmation comply with the requirements of paragraphs (c)(1)(i)(A) and (B) of Rule 10b5-1 and each Transaction entered into under this Master Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c).
|
|||
(ii)
|
During the Calculation Period and the Settlement Valuation Period, if any, for any Transaction and in connection with the delivery of any Alternative Delivery Units for any Transaction, Dealer (or its agent or Affiliate) may effect transactions in Shares in connection with such Transaction. The timing of such transactions by Dealer, the price paid or received per Share pursuant to such transactions and the manner in which such transactions are made, including, without limitation, whether such transactions are made on any securities exchange or privately, shall be within the sole judgment of Dealer. Counterparty acknowledges and agrees that all such transactions shall be made in Dealer’s sole judgment and for Dealer’s own account.
|
|||
(iii)
|
Counterparty represents that it does not have, and shall not attempt to exercise, any control or influence over how, when or whether Dealer (or its agent or Affiliate) makes any “purchases or sales” (within the meaning of Rule 10b5-1(c)(1)(i)(B)(3)) in connection with any Transaction, including, without limitation, over how, when or whether Dealer (or its agent or Affiliate) enters into any hedging transactions. Counterparty represents and warrants that it has consulted with its own advisors as to the legal aspects of its adoption and implementation of this Master Confirmation and each Supplemental Confirmation under Rule 10b5-1.
|
(iv)
|
Counterparty acknowledges and agrees that any amendment, modification, waiver or termination of this Master Confirmation or any Supplemental Confirmation must be effected in accordance with the requirements for the amendment or termination of a “plan” as defined in Rule 10b5-1(c). Without limiting the generality of the foregoing, any such amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5, and no such amendment, modification or waiver shall be made at any time at which Counterparty or any officer, director, manager or similar person of Counterparty is aware of any material non-public information regarding Counterparty or the Shares.
|
||||
(v)
|
Counterparty shall not, directly or indirectly, communicate any information relating to the Shares or any Transaction (including, without limitation, any notices required by Section 10(a)) to any employee of Dealer, other than as set forth in the Communications Procedures attached as Annex C hereto.
|
||||
9.
|
Counterparty Purchases
.
Counterparty (or any “affiliate” or “affiliated purchaser” as defined in Rule 10b-18) shall not, without the prior written consent of Dealer (which written consent shall not be unreasonably withheld or delayed, but it being understood that Dealer may withhold such consent if it determines that such request would adversely impact Dealer’s trading activity in respect of any Transaction), directly or indirectly purchase any Shares (including by means of a derivative instrument), listed contracts on the Shares or securities that are convertible into, or exchangeable or exercisable for Shares (including, without limitation, any Rule 10b-18 purchases of blocks (as defined in Rule 10b-18)) during any Relevant Period, any Settlement Valuation Period (if applicable) or any Seller Termination Purchase Period (if applicable)
provided
that this Section 9 shall not apply to any of the following: (A) purchases of Shares pursuant to exercises of stock options granted to former or current employees, officers, directors, or other affiliates of Counterparty, including the withholding and/or purchase of Shares from holders of such options to satisfy payment of the option exercise price and/or satisfy tax withholding requirements in connection with the exercise of such options; (B) purchases of Shares from holders of performance shares or units or restricted shares or units to satisfy tax withholding requirements in connection with vesting; (C) the conversion or exchange by holders of any convertible or exchangeable securities of the Counterparty previously issued; (D) purchases of Shares effected by or for a plan by an agent independent of Counterparty that satisfy the requirements of Rule 10b-18(a)(13)(ii); (E) purchases which are not solicited by or on behalf of Counterparty, its “affiliates” or “affiliated purchasers” (each as defined in Rule 10b-18) and are not reasonably expected to result in purchases of Shares in the market; (F) purchases of Preferred Stock; (G) purchases executed by or through Dealer or an Affiliate of Dealer and, if Dealer is requested to make any such purchases, Dealer will endeavor in good faith and in a commercially reasonable manner to fulfill such request, taking into account such factors as it deems appropriate at such time in light of this Transaction and existing liquidity conditions at such time.
|
||||
10.
|
Special Provisions for Merger Transactions
.
Notwithstanding anything to the contrary herein or in the Equity Definitions:
|
||||
(a)
|
Counterparty agrees that it:
|
||||
(i)
|
will not during the period commencing on the Trade Date for any Transaction and ending on the last day of the Relevant Period or, if applicable, the later of the last day of the Settlement Valuation Period and the last day of the Seller Termination Purchase Period, for such Transaction make, or to the extent it is within its reasonable control, permit to be made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any Merger Transaction or potential Merger Transaction (a “
Merger Announcement
”) unless such Merger Announcement is made prior to the opening or after the close of the regular trading session on the Exchange for the Shares;
|
||||
(ii)
|
shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) notify Dealer following any such Merger Announcement that such Merger Announcement has been made; and
|
(iii)
|
shall promptly (but in any event prior to the next opening of the regular trading session on the Exchange) provide Dealer with written notice specifying (i) Counterparty’s average daily Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar months immediately preceding the announcement date of any Merger Transaction or potential Merger Transaction that were not effected through Dealer or its Affiliates and (ii) the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months preceding the announcement date of any Merger Transaction or potential Merger Transaction. Such written notice shall be deemed to be a certification by Counterparty to Dealer that such information is true and correct. In addition, Counterparty shall promptly notify Dealer of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders.
|
|||
(b)
|
Counterparty acknowledges that any such Merger Announcement or delivery of a notice with respect thereto may cause the terms of any Transaction to be adjusted or such Transaction to be terminated; accordingly, Counterparty acknowledges that its delivery of such notice must comply with the standards set forth in Section 8 above.
|
|||
(c)
|
Upon the occurrence of any Merger Announcement (whether made by Counterparty or a third party), Dealer in its sole discretion may (i) make commercially reasonable adjustments to the terms of any Transaction (other than the dates identified as Calculation Dates in the related Supplemental Confirmation) including, without limitation, the Scheduled Termination Date or the Forward Price Adjustment Amount, and/or suspend the Calculation Period and/or any Settlement Valuation Period or (ii) treat the occurrence of such Merger Announcement as an Additional Termination Event with Counterparty as the sole Affected Party and the Transactions hereunder as the Affected Transactions and with the amount under Section 6(e) of the Agreement determined taking into account the fact that the Calculation Period or Settlement Valuation Period, as the case may be, had fewer Scheduled Trading Days than originally anticipated.
|
|||
“Merger Transaction”
means any merger, acquisition or similar transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act, other than, solely for purposes of this Section 10, any such transaction in which the consideration consists solely of cash and there is no valuation period.
|
||||
11.
|
Special Provisions for Acquisition Transaction Announcements
.
Notwithstanding anything to the contrary herein or in the Equity Definitions:
|
|||
(a)
|
If an Acquisition Transaction Announcement occurs on or prior to the Settlement Date for any Transaction, then the Calculation Agent shall make such adjustments to the exercise, settlement, payment or any of the other terms of such Transaction as the Calculation Agent determines reasonably commercially appropriate (including, without limitation and for the avoidance of doubt, adjustments that would allow the Number of Shares to be Delivered to be less than zero), at such time or at multiple times as the Calculation Agent determines to be commercially reasonably appropriate, to account for the economic effect of such Acquisition Transaction Announcement on such Transaction (including adjustments to account for changes in volatility, expected dividends, stock loan rate, value of any commercially reasonable Hedge Positions in connection with the Transaction and liquidity relevant to the Shares or to such Transaction). If an Acquisition Transaction Announcement occurs after the Trade Date, but prior to the First Acceleration Date of any Transaction, the First Acceleration Date shall be the date of such Acquisition Transaction Announcement. If the Number of Shares to be Delivered for any settlement of any Transaction is a negative number, then the terms of the Counterparty Settlement Provisions in Annex A hereto shall apply.
|
(b)
|
“
Acquisition Transaction Announcement
” means (i) the announcement of an Acquisition Transaction or an event that, if consummated, would result in an Acquisition Transaction, (ii) an announcement that Counterparty or any of its subsidiaries has entered into an agreement, a letter of intent or an understanding designed to result in an Acquisition Transaction, (iii) the announcement of the intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, an Acquisition Transaction, (iv) any other announcement that in the reasonable judgment of the Calculation Agent is reasonably likely to result in an Acquisition Transaction, or (v) any announcement of any change or amendment to any previous Acquisition Transaction Announcement (including any announcement of the abandonment of any such previously announced Acquisition Transaction, agreement, letter of intent, understanding or intention). For the avoidance of doubt, announcements as used in the definition of Acquisition Transaction Announcement refer to any public announcement whether made by the Issuer or a third party.
|
|||
(c)
|
“
Acquisition Transaction
” means (i) any Merger Event (for purposes of this definition the definition of Merger Event shall be read with the references therein to “100%” being replaced by “51%” and references to “50%” being replaced by “75%” and without reference to the clause beginning immediately following the definition of Reverse Merger therein to the end of such definition), Tender Offer or Merger Transaction or any other transaction involving the merger of Counterparty with or into any third party, (ii) the sale or transfer of all or substantially all of the assets of Counterparty, (iii) a recapitalization, reclassification, binding share exchange or other similar transaction with respect to Counterparty, (iv) any acquisition by Counterparty or any of its subsidiaries where the aggregate consideration transferable by Counterparty or its subsidiaries exceeds 50% of the market capitalization of Counterparty, (v) any lease, exchange, transfer, disposition (including, without limitation, by way of spin-off or distribution) of assets (including, without limitation, any capital stock or other ownership interests in subsidiaries) or other similar event by Counterparty or any of its subsidiaries where the aggregate consideration transferable or receivable by or to Counterparty or its subsidiaries exceeds 33% of the market capitalization of Counterparty or (vi) any transaction in which Counterparty or its board of directors has a legal obligation to make a recommendation to its shareholders in respect of such transaction (whether pursuant to Rule 14e-2 under the Exchange Act or otherwise).
|
|||
12.
|
Acknowledgments.
|
|||
(a)
|
The parties hereto intend for:
|
|||
(i)
|
each Transaction to be a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and a “forward contract” as defined in Section 101(25) of the Bankruptcy Code, and the parties hereto to be entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 362(b)(27), 362(o), 546(e), 546(j), 555, 556, 560 and 561 of the Bankruptcy Code;
|
|||
(ii)
|
the Agreement to be a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code;
|
|||
(iii)
|
a party’s right to liquidate, terminate or accelerate any Transaction, net out or offset termination values or payment amounts, and to exercise any other remedies upon the occurrence of any Event of Default or Termination Event under the Agreement with respect to the other party or any Extraordinary Event that results in the termination or cancellation of any Transaction to constitute a “contractual right” (as defined in the Bankruptcy Code); and
|
|||
(iv)
|
all payments for, under or in connection with each Transaction, all payments for the Shares (including, for the avoidance of doubt, payment of the Prepayment Amount) and the transfer of such Shares to constitute “settlement payments” and “transfers” (as defined in the Bankruptcy Code).
|
(b)
|
Counterparty acknowledges that:
|
|||
(i)
|
during the term of any Transaction, Dealer and its Affiliates may buy or sell Shares or other securities or buy or sell options or futures contracts or enter into swaps or other derivative securities in order to establish, adjust or unwind its hedge position with respect to such Transaction;
|
|||
(ii)
|
Dealer and its Affiliates may also be active in the market for the Shares and Share-linked transactions other than in connection with hedging activities in relation to any Transaction;
|
|||
(iii)
|
Dealer shall make its own determination as to whether, when or in what manner any hedging or market activities in Counterparty’s securities shall be conducted and shall do so in a manner that it deems appropriate to hedge its price and market risk with respect to the Forward Price and the VWAP Price;
|
|||
(iv)
|
any market activities of Dealer and its Affiliates with respect to the Shares may affect the market price and volatility of the Shares, as well as the Forward Price and VWAP Price, each in a manner that may be adverse to Counterparty; and
|
|||
(v)
|
each Transaction is a derivatives transaction in which it has granted Dealer an option; Dealer may purchase shares for its own account at an average price that may be greater than, or less than, the price paid by Counterparty under the terms of the related Transaction.
|
|||
13.
|
No Collateral, Netting or Setoff
.
Notwithstanding any provision of the Agreement or any other agreement between the parties to the contrary, the obligations of Counterparty hereunder are not secured by any collateral. Obligations under any Transaction shall not be netted, recouped or set off (including pursuant to Section 6 of the Agreement) against any other obligations of the parties, whether arising under the Agreement, this Master Confirmation or any Supplemental Confirmation, or under any other agreement between the parties hereto, by operation of law or otherwise, and no other obligations of the parties shall be netted, recouped or set off (including pursuant to Section 6 of the Agreement) against obligations under any Transaction, whether arising under the Agreement, this Master Confirmation or any Supplemental Confirmation, or under any other agreement between the parties hereto, by operation of law or otherwise, and each party hereby waives any such right of setoff, netting or recoupment.
|
14.
|
Alternative Termination Settlement
.
In the event that (a) an Early Termination Date (whether as a result of an Event of Default or a Termination Event) occurs or is designated with respect to any Transaction or (b) any Transaction is cancelled or terminated upon the occurrence of an Extraordinary Event (except as a result of (i) a Nationalization, Insolvency or Merger Event in which the consideration to be paid to holders of Shares consists solely of cash, (ii) a Merger Event or Tender Offer that is within Counterparty’s control, or (iii) an Event of Default in which Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected Party other than an Event of Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or (viii) of the Agreement or a Termination Event of the type described in Section 5(b) of the Agreement, in each case that resulted from an event or events outside Counterparty’s control), if either party would owe any amount to the other party pursuant to Section 6(d)(ii) of the Agreement or any Cancellation Amount pursuant to Article 12 of the Equity Definitions (any such amount, a “
Payment Amount
”), then, in lieu of any payment of such Payment Amount, unless Counterparty makes an election to the contrary no later than the Early Termination Date or the date on which such Transaction is terminated or cancelled, Counterparty or Dealer, as the case may be, shall deliver to the other party a number of Shares (or, in the case of a Nationalization, Insolvency or Merger Event, a number of units, each comprising the number or amount of the securities or property that a hypothetical holder of one Share would receive in such Nationalization, Insolvency or Merger Event, as the case may be (each such unit, an “
Alternative Delivery Unit
”) with a value equal to the Payment Amount, as determined by the Calculation Agent over a commercially reasonable period of time (and the parties agree that, in making such determination of value, the Calculation Agent may take into account a number of factors, including, without limitation, the market price of the Shares or Alternative Delivery Units on the Early Termination Date or the date of early cancellation or termination, as the case may be, and, if such delivery is made by Dealer, the prices at which Dealer purchases Shares or Alternative Delivery Units to fulfill its delivery obligations under this Section 14);
provided
that in determining the composition of any Alternative Delivery Unit, if the relevant Nationalization, Insolvency or Merger Event involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash; and
provided further
that Counterparty may elect that the provisions of this Section 15 above providing for the delivery of Shares or Alternative Delivery Units, as the case may be, shall not apply only if Counterparty represents and warrants to Dealer, in writing on the date it notifies Dealer of such election, that, as of such date, Counterparty is not aware of any material non-public information regarding Counterparty or the Shares and is making such election in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws. If delivery of Shares or Alternative Delivery Units, as the case may be, pursuant to this Section 15 is to be made by Counterparty, paragraphs 2 through 7 of Annex A hereto shall apply as if (A) such delivery were a settlement of such Transaction to which Net Share Settlement applied, (B) the Cash Settlement Payment Date were the Early Termination Date or the date of early cancellation or termination, as the case may be, and (C) the Forward Cash Settlement Amount were equal to (x) zero
minus
(y) the Payment Amount owed by Counterparty. For the avoidance of doubt, if Counterparty validly elects for the provisions of this Section 15 relating to the delivery of Shares or Alternative Delivery Units, as the case may be, not to apply to any Payment Amount, the provisions of Article 12 of the Equity Definitions, or the provisions of Section 6(d)(ii) of the Agreement, as the case may be, shall apply. If delivery of Shares or Alternative Delivery Units, as the case may be, is to be made by Dealer pursuant to this Section 14, the period during which Dealer purchases Shares or Alternative Delivery Units to fulfill its delivery obligations under this Section 14 shall be referred to as the “
Seller Termination Purchase Period
”.
|
15.
|
Calculations and Payment Date upon Early Termination
.
The parties acknowledge and agree that in calculating (a) the Close-Out Amount pursuant to Section 6 of the Agreement and (b) the amount due upon cancellation or termination of any Transaction (whether in whole or in part) pursuant to Article 12 of the Equity Definitions as a result of an Extraordinary Event, Dealer may (but need not) determine such amount based on (i) expected losses assuming a commercially reasonable (including
,
without limitation
,
with regard to reasonable legal and regulatory guidelines) risk bid were used to determine loss or (ii) the price at which one or more market participants would offer to sell to the Seller a block of shares of Common Stock equal in number to the Seller’s hedge position in relation to the Transaction. Notwithstanding anything to the contrary in Section 6(d)(ii) of the Agreement or Article 12 of the Equity Definitions, all amounts calculated as being due in respect of an Early Termination Date under Section 6(e) of the Agreement or upon cancellation or termination of the relevant Transaction under Article 12 of the Equity Definitions will be payable on the day that notice of the amount payable is effective;
provided
that if Counterparty elects to receive or deliver Shares or Alternative Delivery Units in accordance with Section 14, such Shares or Alternative Delivery Units shall be delivered on a date selected by Dealer as promptly as practicable.
|
21.
|
Assignment and Transfer.
Notwithstanding anything to the contrary in the Agreement, Dealer may assign any of its rights or duties hereunder to any one or more of its Affiliates organized in the United States (or any State thereof) or in England whose obligations hereunder are guaranteed by Dealer without the prior written consent of Counterparty subject to (A) the following conditions:
|
||
(i) Counterparty will not be required to pay to the transferee an amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) of the Agreement (except in respect of interest under Section 2(e), 6(d)(ii), or 6(e)) greater than the amount in respect of which Counterparty would have been required to pay to Dealer in the absence of such transfer;
|
|||
(ii) Counterparty will not receive a payment from which an amount has been withheld or deducted, on account of a Tax under Section 2(d)(i) (except in respect of interest under Section 2(e), 6(d)(ii), or 6(e) of the Agreement), in excess of that which Dealer would have been required to so withhold or deduct in the absence of such transfer, unless the transferee would be required to make additional payments pursuant to Section 2(d)(i)(4) of the Agreement corresponding to such withholding or deduction;
|
|||
(iii) It is not unlawful for either party to perform any obligation under the Agreement or the Transaction as a result of such transfer; and
|
|||
(iv) An Extraordinary Event, Announcement Event, Potential Adjustment Event, Event of Default or Termination Event does not occur as a result of such transfer;
|
|||
Notwithstanding any other provision in this Master Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Counterparty, Dealer may designate any of its Affiliates to purchase, sell, receive or deliver such Shares or other securities and otherwise to perform Dealer’s obligations in respect of any Transaction and any such designee may assume such obligations. Dealer may assign the right to receive Settlement Shares to any third party who may legally receive Settlement Shares. Dealer shall be discharged of its obligations to Counterparty only to the extent of any such performance. For the avoidance of doubt, Dealer hereby acknowledges that notwithstanding any such designation hereunder, to the extent any of Dealer’s obligations in respect of any Transaction are not completed by its designee, Dealer shall be obligated to continue to perform or to cause any other of its designees to perform in respect of such obligations.
|
|||
22.
|
Amendments to the Equity Definitions.
|
||
(a)
|
Section 11.2(e) of the Equity Definitions is hereby amended by deleting items (iii) and (v) in their entirety.
|
||
(b)
|
Section 12.9(b)(v) of the Equity Definitions is hereby amended by adding the phrase "; provided that the Non-Hedging Party may so elect to terminate the Transaction only if the Non-Hedging Party notifies the Hedging Party, in writing, of such election, which writing shall state that, as of such date, the Non-Hedging Party is making such election in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws" immediately prior to the period at the end of subsection (C).
|
||
23.
|
Extraordinary Dividend
. If Counterparty declares any Extraordinary Dividend that has an ex-dividend date during the period commencing on the Trade Date for any Transaction and ending on the last day of the Relevant Period or, if applicable, the later of the last day of the Settlement Valuation Period and the last day of the Seller Termination Purchase Period, for such Transaction, then prior to or on the date on which such Extraordinary Dividend is paid by Counterparty to holders of record, Counterparty shall pay to Dealer, for each Transaction under this Master Confirmation, an amount in cash equal to the product of (i) the amount of such Extraordinary Dividend and (ii) the theoretical short delta number of shares as of the opening of business on the related ex-dividend date, as determined by the Calculation Agent, required for Dealer to hedge its exposure to such Transaction.
|
24.
|
Status of Claims in Bankruptcy.
Dealer acknowledges and agrees that neither this Master Confirmation nor any Supplemental Confirmation is intended to convey to Dealer rights against Counterparty with respect to any Transaction that are senior to the claims of common stockholders of Counterparty in any United States bankruptcy proceedings of Counterparty;
provided
that nothing herein shall limit or shall be deemed to limit Dealer’s right to pursue remedies in the event of a breach by Counterparty of its obligations and agreements with respect to any Transaction;
provided further
that nothing herein shall limit or shall be deemed to limit Dealer’s rights in respect of any transactions other than any Transaction.
|
||
25.
|
Wall Street Transparency and Accountability Act.
In connection with Section 739 of the Wall Street Transparency and Accountability Act of 2010 (“
WSTAA
”), the parties hereby agree that neither the enactment of WSTAA or any regulation under the WSTAA, nor any requirement under WSTAA or an amendment made by WSTAA, nor any similar legal certainty provision in any legislation enacted, or rule or regulation promulgated, on or after the date of this Master Confirmation, shall limit or otherwise impair either party’s otherwise applicable rights to terminate, renegotiate, modify, amend or supplement any Supplemental Confirmation, this Master Confirmation or the Agreement, as applicable, arising from a termination event, force majeure, illegality, increased costs, regulatory change or similar event under any Supplemental Confirmation, this Master Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, without limitation, rights arising from Change in Law, Loss of Stock Borrow, Increased Cost of Stock Borrow, or Illegality).
|
||
26.
|
Waiver of Jury Trial.
EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THE AGREEMENT, THIS MASTER CONFIRMATION, EACH SUPPLEMENTAL CONFIRMATION, THE TRANSACTIONS HEREUNDER AND ALL MATTERS ARISING IN CONNECTION WITH THE AGREEMENT, THIS MASTER CONFIRMATION AND ANY SUPPLEMENTAL CONFIRMATION AND THE TRANSACTIONS HEREUNDER. EACH PARTY (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH A SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS PROVIDED HEREIN.
|
||
27.
|
Counterparts.
This Master Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Master Confirmation by signing and delivering one or more counterparts.
|
Very truly yours,
|
||||
MORGAN STANLEY & CO. LLC
|
||||
By:
|
/s/ Scott McDavid
|
|||
Authorized Signatory
|
||||
Name:
|
Scott McDavid, Managing Director
|
Accepted and confirmed
as of the date first set
forth above:
|
|||
CORNING INCORPORATED
|
|||
By:
|
/s/ Robert Vanni
|
||
Authorized Signatory
|
|||
Name:
|
/s/ Robert Vanni
|
MORGAN STANLEY & CO. LLC
|
October [_], 2015
|
To:
|
Corning Incorporated
|
|
[_______________]
|
||
[_______________]
|
||
Attention:
|
[Title of contact]
|
|
Telephone No.:
|
[____________]
|
|
Facsimile No.:
|
[____________]
|
Re:
|
Supplemental Confirmation—Uncollared Accelerated Share Repurchase
|
Initial Shares:
|
[___] Shares;
provided
that if, in connection with the Transaction, Dealer is unable, after using commercially reasonable efforts, to borrow or otherwise acquire a number of Shares equal to the Initial Shares for delivery to Counterparty on the Initial Share Delivery Date, the Initial Shares delivered on the Initial Share Delivery Date shall be reduced to such number of Shares that Dealer is able to so borrow or otherwise acquire
provided further
that (i) if the Initial Shares are reduced as provided in the preceding proviso, then Dealer shall use commercially reasonable efforts to borrow or otherwise acquire an additional number of Shares equal to the shortfall in the Initial Shares delivered on the Initial Share Delivery Date and shall deliver such additional Shares as promptly as practicable, and all Shares so delivered shall be considered Initial Shares, and (ii) if fewer than [same number as above] Initial Shares are so delivered in the aggregate on or prior to the second Exchange Business Day following the Initial Share Delivery Date, then (A) the Prepayment Amount shall be reduced by an amount equal to (x)(I) [same number as above]
minus
(II) the aggregate number of Initial Shares so delivered on or prior to such second Exchange Business Day
multiplied by
(y) USD [insert closing price on the Trade Date]
divided by
(z) [ ], and (B) Dealer shall return to Counterparty on such second Exchange Business Day the amount by which the Prepayment Amount is so reduced. All Shares delivered to Counterparty in respect of the Transaction pursuant to this paragraph shall be the “Initial Shares” for purposes of “Number of Shares to be Delivered” in the Master Confirmation.
|
Initial Share Delivery Date:
|
[__________], 20[__]
|
Ordinary Dividend Amount:
|
For any Dividend before the Termination Date, USD [___] per Share
|
For any Dividend after the Termination Date, USD 0.00 per Share
|
|
Scheduled Ex-Dividend Dates:
|
[__________]
|
Maximum Stock Loan Rate:
|
400 basis points per annum
|
Initial Stock Loan Rate:
|
60 basis points per annum
|
Maximum Number of Shares:
|
[___]Shares
|
Floor Price:
|
USD 0.01 per Share
|
Termination Price:
|
USD [___] per Share
|
Excluded Days:
|
N/A
|
Additional Relevant Days:
|
N/A
|
Reserved Shares:
|
Notwithstanding anything to the contrary in the Master Confirmation, as of the date of this Supplemental Confirmation, the Reserved Shares shall be equal to [___] Shares.
|
3. Counterparty represents and warrants to Dealer that neither it nor any “affiliated purchaser” (as defined in Rule 10b-18 under the Exchange Act) has made any purchases of blocks pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act during either (i) the four full calendar weeks immediately preceding the Trade Date or (ii) during the calendar week in which the Trade Date occurs, except as set forth in any notice delivered pursuant to Section 6(b)(xv) of the Master Confirmation.
|
4. This Supplemental Confirmation may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Supplemental Confirmation by signing and delivering one or more counterparts.
|
Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Supplemental Confirmation and returning it to us.
|
Very truly yours,
|
||||
MORGAN STANLEY & CO. LLC
|
||||
By:
|
||||
Authorized Signatory
|
||||
Name:
|
Accepted and confirmed
as of the Trade Date:
|
|||
CORNING INCORPORATED
|
|||
By:
|
|||
Authorized Signatory
|
|||
Name:
|
CORNING INCORPORATED
|
||
By:
|
||
Authorized Signatory
|
||
Name:
|
1. The following Counterparty Settlement Provisions shall apply to any Transaction to the extent indicated under the Master Confirmation:
|
Settlement Currency:
|
USD
|
Settlement Method Election:
|
Applicable;
provided
that (i) Section 7.1 of the Equity Definitions is hereby amended by deleting the word “Physical” in the sixth line thereof and replacing it with the words “Net Share” and (ii) the Electing Party may make a settlement method election only if the Electing Party represents and warrants to Dealer in writing on the date it notifies Dealer of its election that, as of such date, the Electing Party is not aware of any material non-public information regarding Counterparty or the Shares and is electing the settlement method in good faith and not as part of a plan or scheme to evade compliance with the federal securities laws.
|
Electing Party:
|
Counterparty
|
Settlement Method Election Date:
|
Subsequent to the expiration of the Settlement Valuation Period, the earlier of (i) the date on which Counterparty is able to make the representation and warranty required for such election, as provided under “Settlement Method Election”, and (ii) the 45
th
calendar day following the conclusion of the Settlement Valuation Period.
|
Default Settlement Method:
|
Cash Settlement
|
Forward Cash Settlement Amount:
|
An amount equal to (a) the Number of Shares to be Delivered,
multiplied by
(b) the Settlement Price.
|
Settlement Price:
|
The average of the 10b-18 VWAP prices for the Exchange Business Days in the Settlement Valuation Period, subject to Valuation Disruption as specified in the Confirmation.
|
Settlement Valuation Period:
|
A number of Scheduled Trading Days selected by Dealer in its reasonable discretion by notice to Counterparty on or prior to the second Schedule Trading Day prior to the last Scheduled Trading Day thereof, beginning on the Scheduled Trading Day immediately following the earlier of (i) the Scheduled Termination Date or (ii) the Exchange Business Day immediately following the Termination Date.
|
Cash Settlement:
|
If Cash Settlement is applicable, then Buyer shall pay to Dealer the absolute value of the Forward Cash Settlement Amount on the Cash Settlement Payment Date.
|
Cash Settlement Payment Date:
|
The Exchange Business Day immediately following the date of Counterparty’s Settlement Method Election or, if no election is made, the Settlement Method Election Date.
|
Net Share Settlement Procedures:
|
If Net Share Settlement is applicable, Net Share Settlement shall be made in accordance with paragraphs 2 through 7 below.
|
|
ANNEX A
|
2. Net Share Settlement shall be made by delivery on the Cash Settlement Payment Date of a number of Shares satisfying the conditions set forth in paragraph 3 below (the “
Registered Settlement Shares
”), or a number of Shares not satisfying such conditions (the “
Unregistered Settlement Shares
”), in either case with a value equal to 101% (in the case of Registered Settlement Shares) or 105% (in the case of Unregistered Settlement Shares) of the absolute value of the Forward Cash Settlement Amount, with such Shares’ value based on the value thereof to Dealer (which value shall, in the case of Unregistered Settlement Shares, take into account a commercially reasonable illiquidity discount), in each case as determined by the Calculation Agent. If all of the conditions for delivery of either Registered Settlement Shares or Unregistered Settlement Shares have not been satisfied, Cash Settlement shall be applicable in accordance with paragraph 1 above notwithstanding Counterparty’s election of Net Share Settlement.
|
3. Counterparty may only deliver Registered Settlement Shares pursuant to paragraph 2 above if:
|
(a) a registration statement covering public resale of the Registered Settlement Shares by Dealer (the “
Registration Statement
”) shall have been filed with the Securities and Exchange Commission under the Securities Act and been declared or otherwise become effective on or prior to the date of delivery, and no stop order shall be in effect with respect to the Registration Statement; a printed prospectus relating to the Registered Settlement Shares (including, without limitation, any prospectus supplement thereto, the “
Prospectus
”) shall have been delivered to Dealer, in such quantities as Dealer shall reasonably have requested, on or prior to the date of delivery;
|
(b) the form and content of the Registration Statement and the Prospectus (including, without limitation, any sections describing the plan of distribution) shall be satisfactory to Dealer;
|
(c) as of or prior to the date of delivery, Dealer and its agents shall have been afforded a reasonable opportunity to conduct a due diligence investigation with respect to Counterparty customary in scope for underwritten offerings of equity securities and the results of such investigation are satisfactory to Dealer, in its discretion; and
|
(d) as of the date of delivery, an agreement (the “
Underwriting Agreement
”) shall have been entered into with Dealer in connection with the public resale of the Registered Settlement Shares by Dealer substantially similar to underwriting agreements customary for underwritten offerings of equity securities, in form and substance satisfactory to Dealer, which Underwriting Agreement shall include, without limitation, provisions substantially similar to those contained in such underwriting agreements relating, without limitation, to the indemnification of, and contribution in connection with the liability of, Dealer and its Affiliates and the provision of customary opinions, accountants’ comfort letters and lawyers’ negative assurance letters.
|
4. If Counterparty delivers Unregistered Settlement Shares pursuant to paragraph 2 above:
|
(a) all Unregistered Settlement Shares shall be delivered to Dealer (or any Affiliate of Dealer designated by Dealer) pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof;
|
(b) as of or prior to the date of delivery, Dealer and any potential purchaser of any such shares from Dealer (or any Affiliate of Dealer designated by Dealer) identified by Dealer shall be afforded a commercially reasonable opportunity to conduct a due diligence investigation with respect to Counterparty customary in scope for similar size of private placements of equity securities (including, without limitation, the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them);
provided
that prior to receiving or being granted access to any such information, any such potential purchaser may be required by Counterparty to enter into a customary nondisclosure agreement with Counterparty in respect of any such due diligence investigation;
|
|
ANNEX A
|
(c) as of the date of delivery, Counterparty shall enter into an agreement (a “
Private Placement Agreement
”) with Dealer (or any Affiliate of Dealer designated by Dealer) in connection with the private placement of such shares by Counterparty to Dealer (or any such Affiliate) and the private resale of such shares by Dealer (or any such Affiliate), substantially similar to private placement purchase agreements customary for private placements of equity securities, in form and substance commercially reasonably satisfactory to Dealer, which Private Placement Agreement shall include, without limitation, provisions substantially similar to those contained in such private placement purchase agreements relating, without limitation, to the indemnification of, and contribution in connection with the liability of, Dealer and its Affiliates and the provision of customary opinions, accountants’ comfort letters and lawyers’ negative assurance letters, and shall provide for the payment by Counterparty of all reasonable fees and actual, documented out-of-pocket expenses of Dealer (and any such Affiliate) in connection with such resale, including, without limitation, all reasonable fees and actual, documented out-of-pocket expenses of counsel for Dealer, and shall contain representations, warranties, covenants and agreements of Counterparty reasonably necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for such resales; and
|
(d) in connection with the private placement of such shares by Counterparty to Dealer (or any such Affiliate) and the private resale of such shares by Dealer (or any such Affiliate), Counterparty shall, if so requested by Dealer, prepare, in cooperation with Dealer, a private placement memorandum in form and substance reasonably satisfactory to Dealer.
|
5. Dealer, itself or through an Affiliate (the “
Selling Agent
”) or any underwriter(s), will sell all, or such lesser portion as may be required hereunder, of the Registered Settlement Shares or Unregistered Settlement Shares and any Makewhole Shares (as defined below) (together, the “
Settlement Shares
”) delivered by Counterparty to Dealer pursuant to paragraph 6 below commencing on the Cash Settlement Payment Date and continuing until the date on which the aggregate Net Proceeds (as such term is defined below) of such sales, as determined by Dealer, is equal to the absolute value of the Forward Cash Settlement Amount (such date, the “
Final Resale Date
”). If Counterparty is prohibited by law or by contract from disclosing all material information known to Counterparty with respect to Counterparty and the Shares to any potential purchasers of such Settlement Shares, then the sale of such Settlement Shares shall not be required to commence or may be suspended until Counterparty is able to so disclose such information.
If
the proceeds of any sale(s) made by Dealer, the Selling Agent or any underwriter(s), net of any fees and commissions (including, without limitation, underwriting or placement fees) customary for similar transactions under the circumstances at the time of the offering, together with carrying charges and expenses incurred in connection with the offer and sale of the Shares (including, without limitation, the covering of any over-allotment or short position (syndicate or otherwise)) (the “
Net Proceeds
”) exceed the absolute value of the Forward Cash Settlement Amount, Dealer will refund, in USD, such excess to Counterparty on the date that is three (3) Currency Business Days following the Final Resale Date, and, if any portion of the Settlement Shares remains unsold, Dealer shall return to Counterparty on that date such unsold Shares.
|
6. If the Calculation Agent determines that the Net Proceeds received from the sale of the Registered Settlement Shares or Unregistered Settlement Shares or any Makewhole Shares, if any, pursuant to this paragraph 6 are less than the absolute value of the Forward Cash Settlement Amount (the amount in USD by which the Net Proceeds are less than the absolute value of the Forward Cash Settlement Amount being the “
Shortfall
” and the date on which such determination is made, the “
Deficiency Determination Date
”), Counterparty shall on the Exchange Business Day next succeeding the Deficiency Determination Date (the “
Makewhole Notice Date
”) deliver to Dealer, through the Selling Agent, a notice of Counterparty’s election that Counterparty shall either (i) pay an amount in cash equal to the Shortfall on the day that is one Currency Business Day after the Makewhole Notice Date, or (ii) deliver additional Shares. If Counterparty elects to deliver to Dealer additional Shares, then Counterparty shall deliver additional Shares in compliance with the terms and conditions of paragraph 3 or paragraph 4 above, as the case may be (the “
Makewhole Shares
”), on the first Clearance System Business Day which is also an Exchange Business Day following the Makewhole Notice Date in such number as the Calculation Agent reasonably believes would have a market value on that Exchange Business Day equal to the Shortfall. Such Makewhole Shares shall be sold by Dealer in accordance with the provisions above;
provided
that if the sum of the Net Proceeds from the sale of the originally delivered Shares and the Net Proceeds from the sale of any Makewhole Shares is less than the absolute value of the Forward Cash Settlement Amount then Counterparty shall, at its election, either make such cash payment or deliver to Dealer further Makewhole Shares until such Shortfall has been reduced to zero.
|
7. Notwithstanding the foregoing, in no event shall the aggregate number of Settlement Shares for any Transaction be greater than the Reserved Shares
minus
the amount of any Shares actually delivered by Counterparty under any other Transaction under this Master Confirmation (the result of such calculation, the “
Capped Number
”). Counterparty represents and warrants (which shall be deemed to be repeated on each day that a Transaction is outstanding) that the Capped Number is equal to or less than the number of Shares determined according to the following formula:
|
|
ANNEX A
|
1.
|
Awards of Rights
. Each Incentive Stock Right shall entitle the Employee to receive from Corning one share of Corning's common stock ("Common Stock"); provided that the Employee satisfies both service based vesting requirements set forth in Sections 3 and 4. Such shares, if any, shall be paid to the Employee at the time set forth in Section 5.
|
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 2016 as follows:
|
|
(a)
|
Under the first vesting requirement, the Employee shall “earn” a number of Incentive Stock Rights based upon the number of full calendar months he/she is employed by the Corporation in the 2016 fiscal year (“First Service Period”), provided further that the Employee must be employed for at least 3 full calendar months during the First Service Period 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 in which cases the Employee shall not be entitled at any Incentive Stock Rights), 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 First Service Period, 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, 2019, to satisfy the second service based vesting requirement. If the Employee’s employment with Corning terminates before March 31, 2019, 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,
provided
that the Employee has at least five (5) years of active service with Corning, then the second service based vesting requirement shall be satisfied with respect to the “earned” Incentive Stock Rights as calculated in Section 3(b) above. If the Employee has
less than
five (5) years of active service with Corning, then the second service based vesting requirement shall be satisfied with respect to the “earned” Incentive Stock Rights as calculated in the same manner specificed in Section 4(b) below.
|
|
(b)
|
Involuntary Termination (not “for cause”)
– If the Employee’s employment is involuntarily terminated after the First Service Period but before before March 31, 2019, 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. If the Employee’s employment is involuntarily terminated during the First Service Period the Employee shall not be entitled at any Incentive Stock Rights.
|
|
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, then the second service based vesting requirement shall be satisfied with respect to the “earned” Incentive Stock Rights as calculated in Section 3(b) above.
|
|
(d)
|
Disability
– If the Employee’s employment is terminated as a result of a total and permanent disability (as that term is defined in the long-term disability plan(s) applicable to the Employee), then the second service based vesting requirement shall be satisfied with respect to the “earned” Incentive Stock Rights as calculated in 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, then the second service based vesting requirement shall be satisfied with respect to the “earned” Incentive Stock Rights as calculated in 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 15, 2019.
If the Employee does not “separate from service” (within the meaning of Section 409A of the Code) from Corning on or before March 31, 2019, the Employee’s “earned” Incentive Stock Rights shall be paid, net of tax withholdings, as of April 15, 2019 and distributed as net shares of Common Stock within 30 days following April 15, 2019.
|
|
(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).
|
|
(e)
|
Special Rule for Specified Employees
- Notwithstanding the foregoing, if an amount becomes payable under the above rules due to the Employee incurring a “separation from service” within the meaning of Section 409A of the Code (for this purpose, payments on account of death are not considered payments made on account of separation from service), and the Employee is a “specified employee” (within the meaning of Section 409A of the Code) as of the date of separation from service, the Employee’s “earned” Incentive Stock Rights that are vested as of the date of the Employee’s separation from service shall be paid/distributed as net shares of Common Stock (net of tax withholdings) on or after the first day of the seventh month after the Employee’s separation from service and before the 15
th
day of the seventh month following the date the Employee separates from service.
|
|
(f)
|
Forfeiture -
All Incentive Stock Rights that have not vested as of the date any Incentive Stock Right is paid shall be forfeited; provided that any distributions under Section 5(d) shall not result in the forfeiture of any unpaid Incentive Stock Rights.
|
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 accumulated over the vesting period and 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. For purposes of this Agreement, “termination” , “termination date” or similar term shall mean the the date the employee “separates from service” from Corning within the meaning of Section 409A of the Internal Revenue Code. Under such definition, a period of time during which the Employee receives severance pay, but does not work, does not count as employment. 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.
|
1.
|
Award of Units
. Each Cash Unit shall entitle the Employee to receive from the Company an amount equal to $1 (one USD). The Cash Units, if any, shall be paid to the Employee at the time set forth in Section 6 and in the manner set forth in Section 7 provided that both the “Performance-Based Vesting Requirement” set forth in Section 3 and the “Service Based Vesting Requirement” set forth in Section 4 are satisfied. Prior to vesting pursuant to Sections 3 and 4, the Cash Units shall not be earned and shall remain subject to forfeiture.
|
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 31st 2016, 2017 and 2018 (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 75 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 owed as 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).
|
Fiscal years ended December 31,
|
||||||||||||||
2015
|
2014
|
2013
|
2012
|
2011
|
||||||||||
Income from continuing operations before taxes on income
|
$
|
1,486
|
$
|
3,568
|
$
|
2,473
|
$
|
1,975
|
$
|
3,231
|
||||
Adjustments:
|
||||||||||||||
Equity in earnings of equity affiliates
|
(299)
|
(266)
|
(547)
|
(810)
|
(1,471)
|
|||||||||
Distributed income of equity affiliates
(1)
|
143
|
1,704
|
629
|
1,089
|
820
|
|||||||||
Net income attributable to noncontrolling interests
|
10
|
3
|
(5)
|
(3)
|
||||||||||
Fixed charges net of capitalized interest
|
171
|
159
|
148
|
138
|
119
|
|||||||||
Earnings before taxes and fixed charges as adjusted
|
$
|
1,511
|
$
|
5,168
|
$
|
2,703
|
$
|
2,387
|
$
|
2,696
|
||||
Fixed charges:
|
||||||||||||||
Interest incurred
|
$
|
172
|
$
|
160
|
$
|
153
|
$
|
181
|
$
|
132
|
||||
Portion of rent expense which represents an appropriate interest factor
(2)
|
31
|
36
|
28
|
27
|
30
|
|||||||||
Amortization of debt costs
|
3
|
3
|
2
|
4
|
3
|
|||||||||
Total fixed charges
|
$
|
206
|
$
|
199
|
$
|
183
|
$
|
212
|
$
|
165
|
||||
Preferred stock grossed up to a pre-tax basis
|
109
|
136
|
||||||||||||
Combined fixed charges and preferred stock dividends
|
$
|
315
|
$
|
335
|
$
|
183
|
$
|
212
|
$
|
165
|
||||
Ratio of earnings to fixed charges
|
7.3x
|
26.0x
|
14.8x
|
11.3x
|
16.3x
|
|||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends
|
4.8x
|
15.4x
|
14.8x
|
11.3x
|
16.3x
|
(1)
|
In 2014, includes a $1.6 billion dividend received from Samsung Corning Precision Materials related to the acquisition of Samsung Corning Precision Materials. See Note 8 (Acquisitions) for more details.
|
(2)
|
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/ 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;
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(b)
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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;
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(c)
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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
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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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):
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(a)
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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
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(b)
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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.
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Date: February 12, 2016
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/s/ Wendell P. Weeks
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Wendell P. Weeks
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Chairman, Chief Executive Officer and President
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(Principal Executive Officer)
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1.
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I have reviewed this annual report on Form 10-K of Corning Incorporated;
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2.
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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;
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3.
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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;
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4.
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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)
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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;
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(c)
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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
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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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.
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Date: February 12, 2016
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/s/ R. Tony Tripeny
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|
R. Tony Tripeny
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|
Senior Vice President and Chief Financial Officer
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|
(Principal Financial Officer)
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(1)
|
the Annual Report of the Company on Form 10-K for the annual period ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(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.
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Date: February 12, 2016
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|
/s/ Wendell P. Weeks
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|
Wendell P. Weeks
|
|
Chairman, Chief Executive Officer and President
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|
/s/ R. Tony Tripeny
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|
R. Tony Tripeny
|
|
Senior Vice President and Chief Financial Officer
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