☒
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2016
|
☐
|
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
|
☒
|
No
|
☐
|
Yes
|
☐
|
No
|
☒
|
Yes
|
☒
|
No
|
☐
|
Yes
|
☒
|
No
|
☐
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
|||
Non-accelerated filer
|
☐
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
☐
|
Yes
|
☐
|
No
|
☒
|
· |
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.
|
· |
Display Technologies: patents relating to glass compositions and methods for the use and manufacture of glass substrates for display applications.
|
· |
Optical Communications: patents relating to (i) optical fiber products including low-loss optical fiber, high data rate optical fiber, and dispersion compensating fiber, and processes and equipment for manufacturing optical fiber, including methods for making optical fiber preforms and methods for drawing, cooling and winding optical fiber; (ii) optical fiber ribbons and methods for making such ribbon, fiber optic cable designs and methods for installing optical fiber cable; (iii) optical fiber connectors, termination and storage and associated methods of manufacture; and (iv) distributed communication systems.
|
· |
Environmental Technologies: patents relating to cellular ceramic honeycomb products, together with ceramic batch and binder system compositions, honeycomb extrusion and firing processes, and honeycomb extrusion dies and equipment for the high-volume, low-cost manufacture of such products.
|
· |
Specialty Materials: patents relating to protective cover glass, ophthalmic glasses and polarizing dyes, and semiconductor/microlithography optics and blanks, metrology instrumentation and laser/precision optics, glass polarizers, specialty fiber, and refractories.
|
· |
Life Sciences: patents relating to methods and apparatus for the manufacture and use of scientific laboratory equipment including multiwell plates and cell culture products, as well as equipment and processes for label independent drug discovery.
|
Total
number of patents worldwide |
U.S. patents
|
Important
patents expiring between 2017 and 2019 |
|||
Display Technologies
|
1,700
|
370
|
11
|
||
Optical Communications
|
3,500
|
1,600
|
10
|
||
Environmental Technologies
|
800
|
320
|
36
|
||
Specialty Materials
|
920
|
430
|
8
|
||
Life Sciences
|
600
|
240
|
16
|
· |
The economic and political conditions in each country or region;
|
· |
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;
|
· |
Differing legal systems, including protection and treatment of intellectual property and patents;
|
· |
Complex, or competing tax regimes;
|
· |
Tariffs, trade duties and other trade barriers including anti-dumping duties;
|
· |
Difficulty in collecting obligations owed to us;
|
· |
Natural disasters such as floods, earthquakes, tsunamis and windstorms; and
|
· |
Potential loss of utilities or other disruption affecting manufacturing.
|
Number of
combined customers |
% of total
segment net sales in 2016 |
||
Display Technologies
|
3
|
65%
|
|
Optical Communications
|
1
|
15%
|
|
Environmental Technologies
|
3
|
85%
|
|
Specialty Materials
|
3
|
56%
|
|
Life Sciences
|
2
|
46%
|
· |
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 laws, 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 and political 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
|
31.6
|
7.3
|
24.3
|
||
Sales and administrative
|
2.6
|
1.9
|
0.7
|
||
Research and development
|
2.2
|
1.9
|
0.3
|
||
Warehouse
|
2.4
|
1.7
|
0.7
|
||
Total
|
38.8
|
12.8
|
26.0
|
(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 |
||||||||
2016
|
|||||||||||
Price range
|
|||||||||||
High
|
$
|
21.07
|
$
|
21.30
|
$
|
23.81
|
$
|
25.35
|
|||
Low
|
$
|
16.13
|
$
|
18.21
|
$
|
19.78
|
$
|
22.23
|
|||
2015
|
|||||||||||
Price range
|
|||||||||||
High
|
$
|
25.16
|
$
|
22.98
|
$
|
20.02
|
$
|
19.29
|
|||
Low
|
$
|
21.89
|
$
|
19.57
|
$
|
15.24
|
$
|
16.36
|
(b) |
Not applicable.
|
(c) |
The following table provides information about our purchases of our common stock during the fiscal fourth quarter of 2016:
|
Period
|
Number
of shares purchased (2) |
Average
price paid per share |
Number
of shares purchased as part of publicly announced plans or programs (1) |
Approximate
dollar value of shares that may yet be purchased under the plans or programs (1) |
|||
October 1-31, 2016
|
|||||||
Open market and shares surrendered for tax withholdings
|
4,888,855
|
$23.49
|
4,875,834
|
||||
November 1-30, 2016
|
|||||||
Open market and shares surrendered for tax withholdings
|
4,892,049
|
$23.48
|
4,876,439
|
||||
ASR (Tranche I)
(3)
|
3,306,805
|
(3)
|
3,306,805
|
||||
December 1-31, 2016
|
|||||||
Open market and shares surrendered for tax withholdings
|
4,732,989
|
$24.42
|
4,689,256
|
||||
ASR (Tranche II)
(3)
|
8,963,288
|
(3)
|
8,963,288
|
||||
Total at December 31, 2016
|
26,783,986
|
26,711,622
|
$4,026,996,347
|
(1) |
On October 26, 2015, Corning's Board of Directors authorized the repurchase of up to $4 billion of common stock. This authorization was fully utilized in the first quarter of 2017. On December 7, 2016, Corning's Board of Directors authorized a share repurchase program with no expiration for the repurchase of up to $4 billion of common stock (the "2016 Repurchase Program").
|
(2) |
This column reflects the following transactions during the fourth quarter of 2016: (i) the deemed surrender to us of 16,996 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 55,368 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 26,711,622 shares of common stock (14,441,529 shares in open market repurchases and 12,270,093 shares as part of the Accelerated Share Repurchase ("ASR") agreement entered into in the third quarter of 2016) under the 2015 Repurchase Program.
|
(3) |
In the third quarter of 2016, the Company paid $2 billion under an ASR agreement with Morgan Stanley and Co. LLC and received an initial delivery of approximately 74.4 million shares. In the fourth quarter of 2016, the purchase period for this ASR ended and an additional 12.3 million shares were delivered in two tranches to Corning. In total, 86.7 million shares were delivered under the 2016 ASR at an average repurchase price of $23.07. See Note 17 (Shareholders' Equity) to the Consolidated Financial Statements for additional detail.
|
Years ended December 31,
|
||||||||||||||
2016
|
2015
|
2014
|
2013
|
2012
|
||||||||||
Results of operations
|
||||||||||||||
Net sales
|
$
|
9,390
|
$
|
9,111
|
$
|
9,715
|
$
|
7,819
|
$
|
8,012
|
||||
Research, development and engineering expenses
|
$
|
742
|
$
|
769
|
$
|
815
|
$
|
710
|
$
|
769
|
||||
Equity in earnings of affiliated companies
|
$
|
284
|
$
|
299
|
$
|
266
|
$
|
547
|
$
|
810
|
||||
Net income attributable to Corning Incorporated
(1)
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
$
|
1,961
|
$
|
1,636
|
||||
Earnings per common share attributable to Corning Incorporated:
|
||||||||||||||
Basic
|
$
|
3.53
|
$
|
1.02
|
$
|
1.82
|
$
|
1.35
|
$
|
1.10
|
||||
Diluted
|
$
|
3.23
|
$
|
1.00
|
$
|
1.73
|
$
|
1.34
|
$
|
1.09
|
||||
Cash dividends declared per common share
|
$
|
0.54
|
$
|
0.36
|
$
|
0.52
|
$
|
0.39
|
$
|
0.32
|
||||
Shares used in computing per share amounts:
|
||||||||||||||
Basic earnings per common share
|
1,020
|
1,219
|
1,305
|
1,452
|
1,494
|
|||||||||
Diluted earnings per common share
|
1,144
|
1,343
|
1,427
|
1,462
|
1,506
|
|||||||||
Financial position
|
||||||||||||||
Working capital
|
$
|
6,297
|
$
|
5,455
|
$
|
7,914
|
$
|
7,145
|
$
|
7,739
|
||||
Total assets
|
$
|
27,899
|
$
|
28,527
|
$
|
30,041
|
$
|
28,455
|
$
|
29,354
|
||||
Long-term debt
|
$
|
3,646
|
$
|
3,890
|
$
|
3,205
|
$
|
3,249
|
$
|
3,361
|
||||
Total Corning Incorporated shareholders' equity
|
$
|
17,893
|
$
|
18,788
|
$
|
21,579
|
$
|
21,162
|
$
|
21,486
|
||||
Selected data
|
||||||||||||||
Capital expenditures
|
$
|
1,130
|
$
|
1,250
|
$
|
1,076
|
$
|
1,019
|
$
|
1,801
|
||||
Depreciation and amortization
|
$
|
1,195
|
$
|
1,184
|
$
|
1,200
|
$
|
1,002
|
$
|
997
|
||||
Number of employees
|
40,700
|
35,700
|
34,600
|
30,400
|
28,700
|
(1) |
Year ended December 31, 2016 includes a $2.7 billion non-taxable gain on the strategic realignment of our ownership interest in Dow Corning.
|
· |
Overview
|
· |
Results of Operations
|
· |
Core Performance Measures
|
· |
Reportable Segments
|
· |
Liquidity and Capital Resources
|
· |
Environment
|
· |
Critical Accounting Estimates
|
· |
New Accounting Standards
|
· |
Forward-Looking Statements
|
· |
Gorilla® Glass 5, which offers superior drop performance versus its predecessor and competitive technologies; expanding our cover-glass portfolio with Vibrant® Gorilla® Glass, which enables high-resolution designs for smartphones, tablets, and notebooks; and Gorilla® Glass SR+ for wearable devices.
|
· |
Leveraging our competitive advantages and market-leading products to continue to win business in the optical market, with customer commitments and demand that support the capacity expansions now underway.
|
· |
Winning business in the automotive sector for both substrates and our new gas particulate filters. We anticipate that our gas particulate filters will increase our sales opportunity by a factor of 3-to-4 per vehicle.
|
· |
Expanding the opportunities for Corning Gorilla Glass in the automotive market.
|
· |
Technical and commercial progress on
Corning Iris™ glass.
|
· |
A $2.7 billion non-taxable gain and $105 million positive tax adjustment on the strategic realignment of our ownership interest in Dow Corning completed on May 31, 2016;
|
· |
The positive change in the amounts recorded for tax law changes, valuation allowance adjustments and other discrete tax items of $104 million; and
|
· |
A decrease of $61 million in the defined benefit pension plans mark-to-market loss, driven by higher returns on pension assets.
|
· |
Lower net income in the Display Technologies, Specialty Materials and Life Sciences segments. The largest decrease was in the Display Technologies segment, down $160 million, or 15%, primarily driven by LCD glass price declines which were slightly higher than 10% and a decrease of $289 million in net realized gains from our yen and won-denominated currency hedge contracts;
|
· |
The resolution of an investigation by the U.S. Department of Justice and related costs in the total amount of $86 million;
|
· |
An increase of $71 million in acquisition and transaction related costs, driven primarily by expenses associated with the strategic realignment of our ownership interest in Dow Corning; and
|
· |
The increase in unrealized losses from our foreign currency translation hedges in the amount of $47 million.
|
2016
|
2015
|
2014
|
% change
|
|||||||||
16 vs. 15
|
15 vs. 14
|
|||||||||||
Net sales
|
$
|
9,390
|
$
|
9,111
|
$
|
9,715
|
3
|
(6)
|
||||
Gross margin
|
$
|
3,746
|
$
|
3,653
|
$
|
4,052
|
3
|
(10)
|
||||
(gross margin %)
|
40%
|
40%
|
42%
|
|||||||||
Selling, general and administrative expenses
|
$
|
1,472
|
$
|
1,508
|
$
|
1,202
|
(2)
|
25
|
||||
(as a % of net sales)
|
16%
|
17%
|
12%
|
|||||||||
Research, development and engineering expenses
|
$
|
742
|
$
|
769
|
$
|
815
|
(4)
|
(6)
|
||||
(as a % of net sales)
|
8%
|
8%
|
8%
|
|||||||||
Equity in earnings of affiliated companies
|
$
|
284
|
$
|
299
|
$
|
266
|
(5)
|
12
|
||||
(as a % of net sales)
|
3%
|
3%
|
3%
|
|||||||||
Translated earnings contract (loss) gain, net
|
$
|
(448)
|
$
|
80
|
$
|
1,369
|
(660)
|
(94)
|
||||
(as a % of net sales)
|
(5)%
|
1%
|
14%
|
|||||||||
Gain on realignment of equity investment
|
$
|
2,676
|
*
|
*
|
||||||||
(as a % of net sales)
|
28%
|
|||||||||||
Income before income taxes
|
$
|
3,692
|
$
|
1,486
|
$
|
3,568
|
148
|
(58)
|
||||
(as a % of net sales)
|
39%
|
16%
|
37%
|
|||||||||
Benefit (provision) for income taxes
|
$
|
3
|
$
|
(147)
|
$
|
(1,096)
|
102
|
(87)
|
||||
(as a % of net sales)
|
0%
|
(2)%
|
(11)%
|
|||||||||
Net income attributable to Corning Incorporated
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
176
|
(46)
|
||||
(as a % of net sales)
|
39%
|
15%
|
25%
|
* |
Percent change not meaningful.
|
Years ended December 31,
|
%
Change |
%
Change |
||||||||||
2016
|
2015
|
2014
|
16 vs. 15
|
15 vs. 14
|
||||||||
Display Technologies
|
$
|
3,238
|
$
|
3,086
|
$
|
3,851
|
5%
|
(20)%
|
||||
Optical Communications
|
3,005
|
2,980
|
2,652
|
1%
|
12%
|
|||||||
Environmental Technologies
|
1,032
|
1,053
|
1,092
|
(2)%
|
(4)%
|
|||||||
Specialty Materials
|
1,124
|
1,107
|
1,205
|
2%
|
(8)%
|
|||||||
Life Sciences
|
839
|
821
|
862
|
2%
|
(5)%
|
|||||||
All Other
|
152
|
64
|
53
|
138%
|
21%
|
|||||||
Total net sales
|
$
|
9,390
|
$
|
9,111
|
$
|
9,715
|
3%
|
(6)%
|
· |
An increase of $152 million in the Display Technologies segment, driven by the positive impact from the strengthening of the Japanese yen in the amount of $370 million and a mid-single digit percentage volume increase, offset somewhat by LCD glass price declines slightly higher than 10%;
|
· |
An increase of $25 million in the Optical Communications segment, driven primarily by an increase of $76 million in sales of carrier products and the impact of a small acquisition completed in the second quarter of 2016, partially offset by production issues related to the implementation of new manufacturing software, which constrained our ability to manufacture product in the first half of 2016;
|
· |
A decrease of $21 million in the Environmental Technologies segment driven by a decline of $78 million in sales of diesel products due to the weakening of the North American truck market, offset partially by an increase of $57 million in sales of light-duty substrates, driven by strength in the North American, European and Chinese markets;
|
· |
An increase of $17 million in the Specialty Materials segment, driven by an increase in sales of Corning Gorilla Glass 5 and advanced optics products;
|
· |
An increase of $18 million in the Life Sciences segment, driven by volume growth in Europe, North America and China; and
|
· |
An increase of $88 million in the All Other segment, driven primarily by our glass tubing business acquired in the fourth quarter of 2015.
|
· |
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;
|
· |
An increase of $328 million in the Optical Communications segment, driven by higher sales of enterprise network products, up $170 million, due to an acquisition completed in the first quarter of 2015 and an increase in data center products sales. Sales of carrier network products also increased by $158 million driven by growth in fiber-to-the-home products in North America and the impact of two small acquisitions completed in the first quarter of 2015;
|
· |
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.
|
· |
A decrease of $94 million in the loss on the mark-to-market of our defined benefit pension plans;
|
· |
The positive impact of the change in the contingent consideration fair value adjustment of $43 million; and
|
· |
The absence of $25 million of post-combination expenses incurred in 2015.
|
· |
An increase of $59 million in acquisition-related costs primarily related to the realignment of our equity interest in Dow Corning and an acquisition completed in the second quarter of 2016;
|
· |
An increase of $49 million in litigation, regulatory and other legal costs, driven by the resolution of an investigation by the U.S. Department of Justice and an environmental matter in the amount of $98 million, partially offset by the gain of $56 million on the contribution of our equity interests in PCC and PCE as partial settlement of the asbestos litigation; and
|
· |
Higher operating expenses in the Optical Communications, Environmental Technologies and Specialty Materials segments.
|
· |
An increase of $133 million in our defined benefit pension plans mark-to-market loss;
|
· |
The absence of the positive impact of a contingent consideration fair value adjustment of $249 million recorded in 2014; and
|
· |
An increase in spending in the Optical Communications segment driven by several acquisitions completed in 2015.
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Dow Corning Corporation
(1)
|
$
|
82
|
$
|
281
|
$
|
252
|
||
Hemlock Semiconductor Group
(2)
|
212
|
|||||||
All other
|
(10)
|
18
|
14
|
|||||
Total equity earnings
|
$
|
284
|
$
|
299
|
$
|
266
|
(1) |
Results include equity earnings for Dow Corning, which includes the silicones business and Hemlock Semiconductor business, through May 31, 2016, the date of the realignment of our ownership interest in Dow Corning.
|
(2) |
Results include equity earnings for Hemlock Semiconductor Group beginning on June 1, 2016.
|
Year ended
December 31, 2016 |
Year ended
December 31, 2015 |
Change
2016 vs. 2015 |
|||||||||||||||
(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 gain, net
|
$
|
201
|
$
|
127
|
$
|
653
|
$
|
410
|
$
|
(452)
|
$
|
(283)
|
|||||
Unrealized (loss) gain
|
(649)
|
(409)
|
(573)
|
(362)
|
(76)
|
(47)
|
|||||||||||
Total translated earnings contract (loss) gain
|
$
|
(448)
|
$
|
(282)
|
$
|
80
|
$
|
48
|
$
|
(528)
|
$
|
(330)
|
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 gain, net
|
$
|
653
|
$
|
410
|
$
|
274
|
$
|
224
|
$
|
379
|
$
|
186
|
|||||
Unrealized (loss) gain
|
(573)
|
(362)
|
1,095
|
692
|
(1,668)
|
(1,054)
|
|||||||||||
Total translated earnings contract gain (loss)
|
$
|
80
|
$
|
48
|
$
|
1,369
|
$
|
916
|
$
|
(1,289)
|
$
|
(868)
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Japanese yen-denominated hedges
|
$
|
14.9
|
$
|
8.3
|
$
|
9.8
|
||
South Korean won-denominated hedges
|
1.2
|
3.3
|
2.3
|
|||||
Euro-denominated hedges
|
0.3
|
0.3
|
||||||
Chinese yuan-denominated hedges
|
0.3
|
|||||||
Total gross notional value outstanding
|
$
|
16.7
|
$
|
11.9
|
$
|
12.1
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Benefit (provision) for income taxes
|
$
|
3
|
$
|
(147)
|
$
|
(1,096)
|
||
Effective tax rate
|
(0.1)%
|
9.9%
|
30.7%
|
·
|
Rate differences on income (loss) of consolidated foreign companies, including the benefit of excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income; and
|
·
|
The tax-free nature of the realignment of our equity interest in Dow Corning during the period, as well as the release of the deferred tax liability related to Corning's tax on Dow Corning's undistributed earnings as of the date of the transaction.
|
·
|
Rate differences on income (loss) of consolidated foreign companies, including the benefit of excess foreign tax credits resulting from the inclusion of 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 deferred tax assets which is partially offset with tax expense from deferred tax allowance increases.
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Net income attributable to Corning Incorporated
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
||
Net income attributable to Corning Incorporated used in basic earnings per common share calculation
(1)
|
$
|
3,597
|
$
|
1,241
|
$
|
2,378
|
||
Net income attributable to Corning Incorporated used in diluted earnings per common share calculation
(1)
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
||
Basic earnings per common share
|
$
|
3.53
|
$
|
1.02
|
$
|
1.82
|
||
Diluted earnings per common share
|
$
|
3.23
|
$
|
1.00
|
$
|
1.73
|
||
Weighted-average common shares outstanding - basic
|
1,020
|
1,219
|
1,305
|
|||||
Weighted-average common shares outstanding - diluted
|
1,144
|
1,343
|
1,427
|
(1) |
Refer to Note 18 (Earnings per Common Share) to the Consolidated Financial Statements for additional information.
|
Years ended December 31,
|
||||||||
(In millions)
|
2016
|
2015
|
2014
|
|||||
Net income attributable to Corning Incorporated
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
||
Foreign currency translation adjustments and other
|
(104)
|
(590)
|
(1,073)
|
|||||
Net unrealized (losses) gain on investments
|
(3)
|
1
|
(1)
|
|||||
Unamortized gains (losses) and prior service credits (costs) for postretirement benefit plans
|
241
|
121
|
(281)
|
|||||
Net unrealized gains (losses) on designated hedges
|
1
|
(36)
|
4
|
|||||
Other comprehensive income (loss), net of tax
|
135
|
(504)
|
(1,351)
|
|||||
Comprehensive income attributable to Corning Incorporated
|
$
|
3,830
|
$
|
835
|
$
|
1,121
|
2016
|
2015
|
2014
|
% change
|
|||||||||
16 vs. 15
|
15 vs. 14
|
|||||||||||
Core net sales
|
$
|
9,710
|
$
|
9,800
|
$
|
9,955
|
(1)%
|
(2)%
|
||||
Core equity in earnings of affiliated companies
|
$
|
250
|
$
|
269
|
$
|
310
|
(7)%
|
(13)%
|
||||
Core earnings
|
$
|
1,774
|
$
|
1,882
|
$
|
2,023
|
(6)%
|
(7)%
|
Years ended December 31,
|
%
Change |
%
Change |
||||||||||
2016
|
2015
|
2014
|
16 vs. 15
|
15 vs. 14
|
||||||||
Display Technologies
|
$
|
3,556
|
$
|
3,774
|
$
|
4,092
|
(6)%
|
(8)%
|
||||
Optical Communications
|
3,005
|
2,980
|
2,652
|
1%
|
12%
|
|||||||
Environmental Technologies
|
1,032
|
1,053
|
1,092
|
(2)%
|
(4)%
|
|||||||
Specialty Materials
|
1,124
|
1,107
|
1,205
|
2%
|
(8)%
|
|||||||
Life Sciences
|
839
|
821
|
862
|
2%
|
(5)%
|
|||||||
All Other
|
154
|
65
|
52
|
137%
|
25%
|
|||||||
Total core net sales
|
$
|
9,710
|
$
|
9,800
|
$
|
9,955
|
(1)%
|
(2)%
|
2016
|
2015
|
2014
|
% change
|
|||||||||
16 vs. 15
|
15 vs. 14
|
|||||||||||
Dow Corning Corporation
(1)
|
$
|
98
|
$
|
245
|
$
|
287
|
(60)%
|
(15)%
|
||||
Hemlock Semiconductor Group
(2)
|
154
|
|||||||||||
All other
|
(2)
|
24
|
23
|
(108)%
|
4%
|
|||||||
Total core equity earnings
|
$
|
250
|
$
|
269
|
$
|
310
|
(7)%
|
(13)%
|
(1) |
Results include equity earnings for Dow Corning, which includes the silicones business and Hemlock Semiconductor business, through May 31, 2016, the date of the realignment of our ownership interest in Dow Corning.
|
(2) |
Results include equity earnings for Hemlock Semiconductor Group beginning on June 1, 2016.
|
2016
|
2015
|
2014
|
||||||
Core earnings attributable to Corning Incorporated
|
$
|
1,774
|
$
|
1,882
|
$
|
2,023
|
||
Less: Series A convertible preferred stock dividend
|
98
|
98
|
94
|
|||||
Core earnings available to common stockholders - basic
|
1,676
|
1,784
|
1,929
|
|||||
Add: Series A convertible preferred stock dividend
|
98
|
98
|
94
|
|||||
Core earnings available to common stockholders - diluted
|
$
|
1,774
|
$
|
1,882
|
$
|
2,023
|
||
Weighted-average common shares outstanding - basic
|
1,020
|
1,219
|
1,305
|
|||||
Effect of dilutive securities:
|
||||||||
Stock options and other dilutive securities
|
9
|
9
|
12
|
|||||
Series A convertible preferred stock
|
115
|
115
|
110
|
|||||
Weighted-average common shares outstanding - diluted
|
1,144
|
1,343
|
1,427
|
|||||
Core basic earnings per common share
|
$
|
1.64
|
$
|
1.46
|
$
|
1.48
|
||
Core diluted earnings per common share
|
$
|
1.55
|
$
|
1.40
|
$
|
1.42
|
Year ended December 31, 2016
|
||||||||||||||||
Net
sales |
Equity
earnings |
Income
before income taxes |
Net
income |
Effective
tax rate (a) |
Earnings
per share |
|||||||||||
As reported
|
$
|
9,390
|
$
|
284
|
$
|
3,692
|
$
|
3,695
|
0%
|
$
|
3.23
|
|||||
Constant-yen
(1)
|
316
|
4
|
300
|
222
|
0.19
|
|||||||||||
Constant-won
(1)
|
4
|
(1)
|
(47)
|
(34)
|
(0.03)
|
|||||||||||
Translated earnings contract loss
(2)
|
448
|
282
|
0.25
|
|||||||||||||
Acquisition-related costs
(3)
|
127
|
107
|
0.09
|
|||||||||||||
Discrete tax items and other tax-related adjustments
(4)
|
(27)
|
(0.02)
|
||||||||||||||
Litigation, regulatory and other legal matters
(5)
|
55
|
70
|
0.06
|
|||||||||||||
Restructuring, impairment and other charges
(6)
|
199
|
138
|
0.12
|
|||||||||||||
Equity in earnings of affiliated companies
(8)
|
(37)
|
(37)
|
(18)
|
(0.02)
|
||||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials
(9)
|
(49)
|
(42)
|
(0.04)
|
|||||||||||||
Pension mark-to-market adjustment
(11)
|
67
|
44
|
0.04
|
|||||||||||||
Gain on realignment of equity investment
(12)
|
(2,676)
|
(2,676)
|
(2.34)
|
|||||||||||||
Taiwan power outage
(13)
|
17
|
13
|
0.01
|
|||||||||||||
Core performance measures
|
$
|
9,710
|
$
|
250
|
$
|
2,096
|
$
|
1,774
|
15.4%
|
$
|
1.55
|
(a) |
Based upon statutory tax rates in the specific jurisdiction for each event.
|
Year ended December 31, 2015
|
||||||||||||||||
Net
sales |
Equity
earnings |
Income
before income taxes |
Net
income |
Effective
tax rate (a) |
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)
|
|||||||||||
Translated earnings contract gain
(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
|
|||||||||||||
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
|
(a) |
Based upon statutory tax rates in the specific jurisdiction for each event.
|
Year ended December 31, 2014
|
||||||||||||||||
Net
sales |
Equity
earnings |
Income
before income taxes |
Net
income |
Effective
tax rate (a) |
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
|
|||||||||||||
Translated earnings contract gain
(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
|
(a) |
Based upon statutory tax rates in the specific jurisdiction for each event.
|
* |
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
: 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)
|
Translated earnings contract loss (gain)
: We have excluded the impact of the gains and losses of our translated earnings contracts 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.
|
(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 realignment of equity investment
: Gain recorded upon the completion of the strategic realignment of our ownership interest in Dow Corning.
|
(13)
|
Taiwan power outage
: Impact of the power outage that temporarily halted production at our Tainan, Taiwan manufacturing location in the second quarter of 2016. The impact includes asset write-offs and charges for facility repairs, offset somewhat by partial reimbursement through our insurance program.
|
· |
Display Technologies – manufactures glass substrates primarily for flat panel liquid crystal displays.
|
· |
Optical Communications – manufactures carrier and enterprise network components for the telecommunications industry.
|
· |
Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel emission control 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 enabling workflow solutions for scientific applications.
|
Year ended
December 31, 2016 |
Year ended
December 31, 2015 |
Year ended
December 31, 2014 |
|||||||||||||||
(in millions)
|
Sales
|
Net
income |
Sales
|
Net
income |
Sales
|
Net
income |
|||||||||||
As reported
|
$
|
3,238
|
$
|
935
|
$
|
3,086
|
$
|
1,095
|
$
|
3,851
|
$
|
1,396
|
|||||
Constant-yen
(1)*
|
316
|
222
|
686
|
419
|
240
|
142
|
|||||||||||
Constant-won
(1)
|
2
|
(33)
|
2
|
(17)
|
27
|
||||||||||||
Translated earnings contract gain
(2)
|
(127)
|
(416)
|
(290)
|
||||||||||||||
Acquisition-related costs
(3)
|
37
|
||||||||||||||||
Discrete tax items and other tax-related adjustments
(4)
|
4
|
||||||||||||||||
Restructuring, impairment and other charges
(6)
|
44
|
40
|
|||||||||||||||
Equity in earnings of affiliated companies
(8)
|
6
|
||||||||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials
(9)
|
(42)
|
(10)
|
1
|
(121)
|
|||||||||||||
Pension mark-to-market adjustment
(11)
|
1
|
4
|
2
|
||||||||||||||
Taiwan power outage
(13)
|
6
|
||||||||||||||||
Core performance measures
|
$
|
3,556
|
$
|
1,006
|
$
|
3,774
|
$
|
1,075
|
$
|
4,092
|
$
|
1,243
|
* |
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 slightly higher than 10%;
|
· |
A decrease of $289 million in the realized gain from our yen and won-denominated currency hedges; and
|
· |
An increase of $44 million in asset write-off expenses.
|
· |
A mid-single digit percentage increase in volume;
|
· |
An increase of $35 million in the gain on the fair value adjustment of the contingent consideration resulting from the acquisition of Corning Precision Materials;
|
· |
Improvements in manufacturing efficiency; and
|
· |
A decline in operating expenses.
|
· |
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.
|
Year ended
December 31, 2016 |
Year ended
December 31, 2015 |
Year ended
December 31, 2014 |
|||||||||||||||
(in millions)
|
Sales
|
Net
income |
Sales
|
Net
income |
Sales
|
Net
income |
|||||||||||
As reported
|
$
|
3,005
|
$
|
245
|
$
|
2,980
|
$
|
237
|
$
|
2,652
|
$
|
194
|
|||||
Acquisition-related costs
(3)
|
23
|
16
|
(2)
|
||||||||||||||
Litigation, regulatory and other legal matters
(5)
|
13
|
||||||||||||||||
Restructuring, impairment and other charges
(6)
|
24
|
(1)
|
17
|
||||||||||||||
Liquidation of subsidiary
(7)
|
(2)
|
||||||||||||||||
Post-combination expenses
(10)
|
16
|
||||||||||||||||
Pension mark-to-market adjustment
(11)
|
5
|
13
|
|||||||||||||||
Core performance measures
|
$
|
3,005
|
$
|
297
|
$
|
2,980
|
$
|
281
|
$
|
2,652
|
$
|
220
|
Year ended
December 31, 2016 |
Year ended
December 31, 2015 |
Year ended
December 31, 2014 |
|||||||||||||||
(in millions)
|
Sales
|
Net
income |
Sales
|
Net
income |
Sales
|
Net
income |
|||||||||||
As reported
|
$
|
1,032
|
$
|
133
|
$
|
1,053
|
$
|
161
|
$
|
1,092
|
$
|
178
|
|||||
Restructuring, impairment and other charges
(6)
|
3
|
||||||||||||||||
Pension mark-to-market adjustment
(11)
|
5
|
||||||||||||||||
Core performance measures
|
$
|
1,032
|
$
|
136
|
$
|
1,053
|
$
|
161
|
$
|
1,092
|
$
|
183
|
Year ended
December 31, 2016 |
Year ended
December 31, 2015 |
Year ended
December 31, 2014 |
|||||||||||||||
(in millions)
|
Sales
|
Net
income |
Sales
|
Net
income |
Sales
|
Net
income |
|||||||||||
As reported
|
$
|
1,124
|
$
|
174
|
$
|
1,107
|
$
|
167
|
$
|
1,205
|
$
|
138
|
|||||
Constant-yen
(1)*
|
(1)
|
(6)
|
(3)
|
||||||||||||||
Constant-won
(1)
|
(2)
|
(2)
|
|||||||||||||||
Translated earnings contract loss (gain)
(2)
|
5
|
14
|
|||||||||||||||
Acquisition-related costs
(3)
|
(1)
|
||||||||||||||||
Restructuring, impairment and other charges
(6)
|
15
|
14
|
12
|
||||||||||||||
Taiwan power outage
(13)
|
3
|
||||||||||||||||
Core performance measures
|
$
|
1,124
|
$
|
189
|
$
|
1,107
|
$
|
178
|
$
|
1,205
|
$
|
160
|
* |
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, 2016 |
Year ended
December 31, 2015 |
Year ended
December 31, 2014 |
|||||||||||||||
(in millions)
|
Sales
|
Net
income |
Sales
|
Net
income |
Sales
|
Net
income |
|||||||||||
As reported
|
$
|
839
|
$
|
58
|
$
|
821
|
$
|
61
|
$
|
862
|
$
|
67
|
|||||
Acquisition-related costs
(3)
|
12
|
12
|
14
|
||||||||||||||
Restructuring, impairment and other charges
(6)
|
7
|
2
|
|||||||||||||||
Core performance measures
|
$
|
839
|
$
|
77
|
$
|
821
|
$
|
73
|
$
|
862
|
$
|
83
|
% change
|
||||||||||||
As Reported
|
2016
|
2015
|
2014
|
16 vs. 15
|
15 vs. 14
|
|||||||
Net sales
|
$
|
152
|
$
|
64
|
$
|
53
|
138
|
21
|
||||
Research, development and engineering expenses
|
$
|
191
|
$
|
186
|
$
|
177
|
3
|
5
|
||||
Equity earnings of affiliated companies
|
$
|
(6)
|
$
|
17
|
$
|
18
|
(135)
|
(6)
|
||||
Net loss
|
$
|
(240)
|
$
|
(202)
|
$
|
(198)
|
(19)
|
(2)
|
· |
In the third quarter of 2016, Corning's Board of Directors approved a $1 billion increase to our commercial paper program, raising it to $2 billion. If needed, this program is supported by our $2 billion revolving credit facility that expires in 2019. Corning did not have outstanding commercial paper at December 31, 2016.
|
· |
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.
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Net cash provided by operating activities
|
$
|
2,521
|
$
|
2,809
|
$
|
4,709
|
||
Net cash provided by (used in) investing activities
|
$
|
3,662
|
$
|
(685)
|
$
|
(962)
|
||
Net cash used in financing activities
|
$
|
(5,306)
|
$
|
(2,603)
|
$
|
(2,586)
|
December 31,
|
|||||
2016
|
2015
|
||||
Working capital
|
$
|
6,297
|
$
|
5,455
|
|
Current ratio
|
3.3:1
|
2.9:1
|
|||
Trade accounts receivable, net of allowances
|
$
|
1,481
|
$
|
1,372
|
|
Days sales outstanding
|
54
|
55
|
|||
Inventories
|
$
|
1,471
|
$
|
1,385
|
|
Inventory turns
|
3.8
|
4.0
|
|||
Days payable outstanding
(1)
|
45
|
42
|
|||
Long-term debt
|
$
|
3,646
|
$
|
3,890
|
|
Total debt to total capital
|
18%
|
19%
|
(1) |
Includes trade payables only.
|
RATING AGENCY
|
Rating
long-term debt |
Outlook
last update |
|
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
|
$
|
178
|
$
|
102
|
$
|
2
|
$
|
74
|
||||||
Stand-by letters of credit
(1)
|
51
|
44
|
$
|
1
|
6
|
|||||||||
Credit facility to equity company
|
30
|
30
|
||||||||||||
Loan guarantees
|
8
|
1
|
7
|
|||||||||||
Subtotal of commitment expirations per period
|
$
|
267
|
$
|
176
|
$
|
3
|
$
|
1
|
$
|
87
|
||||
Purchase obligations
(6)
|
$
|
231
|
$
|
127
|
$
|
81
|
$
|
20
|
$
|
3
|
||||
Capital expenditure obligations
(2)
|
378
|
378
|
||||||||||||
Total debt
(3)
|
3,557
|
250
|
625
|
362
|
2,320
|
|||||||||
Interest on long-term debt
(4)
|
2,222
|
162
|
299
|
259
|
1,502
|
|||||||||
Capital leases and financing obligations
|
359
|
6
|
8
|
10
|
335
|
|||||||||
Imputed interest on capital leases and financing obligations
|
231
|
18
|
36
|
36
|
141
|
|||||||||
Minimum rental commitments
|
545
|
68
|
111
|
76
|
290
|
|||||||||
Amended PCC Plan
(7)
|
290
|
70
|
85
|
85
|
50
|
|||||||||
Uncertain tax positions
(5)
|
48
|
|||||||||||||
Subtotal of contractual obligation payments due by period
(5)
|
$
|
7,861
|
$
|
1,079
|
$
|
1,245
|
$
|
848
|
$
|
4,641
|
||||
Total commitments and contingencies
(5)
|
$
|
8,128
|
$
|
1,255
|
$
|
1,248
|
$
|
849
|
$
|
4,728
|
(1) |
At December 31, 2016, $39 million of the $51 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, 2016, $48 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.
|
(7) |
See Note 7 (Investments) to the Consolidated Financial Statements for additional details.
|
· |
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)
|
2016
|
2015
|
2014
|
|||||
Actual return on plan assets – Domestic plans
|
$
|
235
|
$
|
(111)
|
$
|
287
|
||
Expected return on plan assets – Domestic plans
|
153
|
166
|
159
|
|||||
Actual return on plan assets – International plans
|
75
|
3
|
68
|
|||||
Expected return on plan assets – International plans
|
12
|
12
|
15
|
|||||
December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Weighted-average actual and expected return on assets:
|
||||||||
Actual return on plan assets – Domestic plans
|
9.62%
|
(4.23%)
|
10.82%
|
|||||
Expected return on plan assets – Domestic plans
|
6.00%
|
6.00%
|
6.25%
|
|||||
Actual return on plan assets – International plans
|
19.06%
|
0.59%
|
17.15%
|
|||||
Expected return on plan assets – International plans
|
3.92%
|
2.97%
|
4.12%
|
Change in assumption
|
Effect on 2017
pre-tax pension expense |
Effect on
December 31, 2016 PBO |
|
25 basis point decrease in each spot rate
|
- 2 million
|
+ 92 million
|
|
25 basis point increase in each spot rate
|
+ 2 million
|
- 88 million
|
|
25 basis point decrease in expected return on assets
|
+ 7 million
|
||
25 basis point increase in expected return on assets
|
- 7 million
|
Change in assumption
|
Effect on 2017
pre-tax OPEB expense |
Effect on
December 31, 2016 APBO* |
|
25 basis point decrease in each spot rate
|
+ 0 million
|
+ 25 million
|
|
25 basis point increase in each spot rate
|
- 0 million
|
- 23 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 yuan 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;
|
- |
the amount and timing of our cash flows and earnings and other conditions, which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels;
|
- |
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, IT systems or operations;
|
- |
effect of regulatory and legal developments;
|
- |
ability to pace capital spending to anticipated levels of customer demand;
|
- |
rate of technology change;
|
- |
ability to enforce patents and protect intellectual property and trade secrets;
|
- |
adverse litigation;
|
- |
product and components performance issues;
|
- |
retention of key personnel;
|
- |
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;
|
- |
changes in tax laws and regulations;
|
- |
the potential impact of legislation, government regulations, and other government action and investigations; 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
|
Management is responsible for establishing and maintaining adequate disclosure controls and procedures and adequate internal control over financial reporting for Corning. Management is also responsible for the assessment of the effectiveness of disclosure controls and procedures and the effectiveness of internal control over financial reporting.
|
|
Disclosure controls and procedures mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. Corning's disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by Corning in the reports that it files or submits under the Exchange Act is accumulated and communicated to Corning's management, including Corning's principal executive and principal financial officers, or other persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
|
|
Corning's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Corning's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of Corning's assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that Corning's receipts and expenditures are being made only in accordance with authorizations of Corning's management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Corning's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
|
Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in
Internal Control – Integrated Framework
(2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment of internal control over financial reporting includes controls over recognition of equity earnings and equity investments by Corning. Internal control over financial reporting for Hemlock Semiconductor Group is the responsibility of its management.
Based on this evaluation, management concluded that Corning's internal control over financial reporting was effective as of December 31, 2016. The effectiveness of Corning's internal control over financial reporting as of December 31, 2016, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
|
|
(b)
|
Attestation Report of the Independent Registered Public Accounting Firm
|
Refer to Part IV, Item 15.
|
|
(c)
|
Changes in Internal Control Over Financial Reporting
|
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our 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)
|
36,147,000
|
$16.91
|
68,646,314
|
||
Equity compensation plans not approved by security holders
|
|||||
Total
|
36,147,000
|
$16.91
|
68,646,314
|
(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.
|
|||||
2.
|
Financial statement schedule:
|
||||
(i)
|
|||||
See separate index to financial statements and financial statement schedules
|
10.1
|
2000 Employee Equity Participation Program and 2003 Amendments (Incorporated by reference to Exhibit 1 of Corning Proxy Statement, Definitive 14A filed March 10, 2003 for April 24, 2003 Annual Meeting of Shareholders).
|
||
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 (Incorporated by reference to Exhibit 10.67 of Corning's Form 10-K filed February 12, 2016).
|
|
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 (Incorporated by reference to Exhibit 10.69 of Corning's Form 10-K filed February 12, 2016).
|
|
10.70
|
Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2016 (Incorporated by reference to Exhibit 10.70 of Corning's Form 10-K filed February 12, 2016).
|
|
10.71
|
Master Confirmation – Uncollared Accelerated Share Repurchase (Incorporated by reference to Exhibit 10.1 to Corning's Form 10-Q filed on October 27, 2016).
|
|
10.72
|
Form of Corning Incorporated Incentive Stock Rights Agreement for Employees, effective January 1, 2017.
|
|
10.73
|
Form of Corning Incorporated Cash Performance Unit Agreement, effective January 1, 2017.
|
|
10.74
|
Form of Corning Incorporated Restricted Stock Unit Grant Notice and Agreement for Non-Employee Directors (for grants made under the 2012 Equity Plan for Non-Employee Directors), effective January 1, 2017.
|
|
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, 2016.
|
|
23
|
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
|
|
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
|
By
|
/s/ Wendell P. Weeks
|
Chairman of the Board of Directors, Chief
|
February 6, 2017
|
|||
(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 6, 2017
|
||||
(Wendell P. Weeks)
|
(Principal Executive Officer)
|
|||||
/s/ R. Tony Tripeny
|
Senior Vice President and Chief Financial Officer
|
February 6, 2017
|
||||
(R. Tony Tripeny)
|
(Principal Financial Officer)
|
|||||
/s/ Edward A. Schlesinger
|
Vice President and Corporate Controller
|
February 6, 2017
|
||||
(Edward A. Schlesinger)
|
(Principal Accounting Officer)
|
|||||
*
|
Director
|
February 6, 2017
|
||||
(Donald W. Blair)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(Stephanie A. Burns)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(John A. Canning, Jr.)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(Richard T. Clark)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(Robert F. Cummings, Jr.)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(Deborah A. Henretta)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(Daniel P. Huttenlocher)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(Kurt M. Landgraf)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(Kevin J. Martin)
|
*
|
Director
|
February 6, 2017
|
||||
(Deborah D. Rieman)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(Hansel E. Tookes II)
|
||||||
*
|
Director
|
February 6, 2017
|
||||
(Mark S. Wrighton)
|
||||||
*By
|
/s/ Lewis A. Steverson
|
|||||
(Lewis A. Steverson, Attorney-in-fact)
|
Consolidated Statements of Income
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
(In millions, except per share amounts)
|
2016
|
2015
|
2014
|
|||||
Net sales
|
$
|
9,390
|
$
|
9,111
|
$
|
9,715
|
||
Cost of sales
|
5,644
|
5,458
|
5,663
|
|||||
Gross margin
|
3,746
|
3,653
|
4,052
|
|||||
Operating expenses:
|
||||||||
Selling, general and administrative expenses
|
1,472
|
1,508
|
1,202
|
|||||
Research, development and engineering expenses
|
742
|
769
|
815
|
|||||
Amortization of purchased intangibles
|
64
|
54
|
33
|
|||||
Restructuring, impairment and other charges (Note 2)
|
77
|
71
|
||||||
Operating income
|
1,391
|
1,322
|
1,931
|
|||||
Equity in earnings of affiliated companies (Note 7)
|
284
|
299
|
266
|
|||||
Interest income
|
32
|
21
|
26
|
|||||
Interest expense
|
(159)
|
(140)
|
(123)
|
|||||
Transaction-related gain, net (Note 8)
|
|
74
|
||||||
Translated earnings contract (loss) gain, net
|
(448)
|
80
|
1,369
|
|||||
Gain on realignment of equity investment
|
2,676
|
|||||||
Other (expense) income, net
|
(84)
|
(96)
|
25
|
|||||
Income before income taxes
|
3,692
|
1,486
|
3,568
|
|||||
Benefit (provision) for income taxes (Note 6)
|
3
|
(147)
|
(1,096)
|
|||||
Net income attributable to Corning Incorporated
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
||
Earnings per common share attributable to Corning Incorporated:
|
||||||||
Basic (Note 18)
|
$
|
3.53
|
$
|
1.02
|
$
|
1.82
|
||
Diluted (Note 18)
|
$
|
3.23
|
$
|
1.00
|
$
|
1.73
|
||
Dividends declared per common share
(1)
|
$
|
0.54
|
$
|
0.36
|
$
|
0.52
|
(1) |
The first quarter 2015 dividend was declared on December 3, 2014.
|
Consolidated Statements of Comprehensive Income
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
(In millions)
|
2016
|
2015
|
2014
|
|||||
Net income attributable to Corning Incorporated
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
||
Foreign currency translation adjustments and other
|
(104)
|
(590)
|
(1,073)
|
|||||
Net unrealized (losses) gains on investments
|
(3)
|
1
|
(1)
|
|||||
Unamortized gains (losses) and prior service credits (costs) for postretirement benefit plans
|
241
|
121
|
(281)
|
|||||
Net unrealized gains (losses) on designated hedges
|
1
|
(36)
|
4
|
|||||
Other comprehensive income (loss), net of tax (Note 17)
|
135
|
(504)
|
(1,351)
|
|||||
Comprehensive income attributable to Corning Incorporated
|
$
|
3,830
|
$
|
835
|
$
|
1,121
|
Consolidated Balance Sheets
|
Corning Incorporated and Subsidiary Companies
|
December 31,
|
|||||
(In millions, except share and per share amounts)
|
2016
|
2015
|
|||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
5,291
|
$
|
4,500
|
|
Short-term investments, at fair value (Note 3)
|
100
|
||||
Trade accounts receivable, net of doubtful accounts and allowances - $59 and $48
|
1,481
|
1,372
|
|||
Inventories, net of inventory reserves - $151 and $146 (Note 5)
|
1,471
|
1,385
|
|||
Other current assets (Note 8, 11 and 15)
|
805
|
912
|
|||
Total current assets
|
9,048
|
8,269
|
|||
Investments (Note 7)
|
336
|
1,975
|
|||
Property, plant and equipment, net of accumulated depreciation - $9,884 and $9,188 (Note 9)
|
12,546
|
12,648
|
|||
Goodwill, net (Note 10)
|
1,577
|
1,380
|
|||
Other intangible assets, net (Note 10)
|
796
|
706
|
|||
Deferred income taxes (Note 6)
|
2,325
|
2,056
|
|||
Other assets (Note 8, 11 and 15)
|
1,271
|
1,493
|
|||
Total Assets
|
$
|
27,899
|
$
|
28,527
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt and short-term borrowings (Note 12)
|
$
|
256
|
$
|
572
|
|
Accounts payable
|
1,079
|
934
|
|||
Other accrued liabilities (Note 11 and 14)
|
1,416
|
1,308
|
|||
Total current liabilities
|
2,751
|
2,814
|
|||
Long-term debt (Note 12)
|
3,646
|
3,890
|
|||
Postretirement benefits other than pensions (Note 13)
|
737
|
718
|
|||
Other liabilities (Note 11 and 14)
|
2,805
|
2,242
|
|||
Total liabilities
|
9,939
|
9,664
|
|||
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: 1,691 million and 1,681 million
|
846
|
840
|
|||
Additional paid-in capital – common stock
|
13,695
|
13,352
|
|||
Retained earnings
|
16,880
|
13,832
|
|||
Treasury stock, at cost; shares held: 765 million and 551 million
|
(14,152)
|
(9,725)
|
|||
Accumulated other comprehensive loss
|
(1,676)
|
(1,811)
|
|||
Total Corning Incorporated shareholders' equity
|
17,893
|
18,788
|
|||
Noncontrolling interests
|
67
|
75
|
|||
Total equity
|
17,960
|
18,863
|
|||
Total Liabilities and Equity
|
$
|
27,899
|
$
|
28,527
|
Consolidated Statements of Cash Flows
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
(In millions)
|
2016
|
2015
|
2014
|
|||||
Cash Flows from Operating Activities:
|
||||||||
Net income
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation
|
1,131
|
1,130
|
1,167
|
|||||
Amortization of purchased intangibles
|
64
|
54
|
33
|
|||||
Restructuring, impairment and other charges
|
77
|
71
|
||||||
Stock compensation charges
|
42
|
46
|
58
|
|||||
Equity in earnings of affiliated companies
|
(284)
|
(299)
|
(266)
|
|||||
Dividends received from affiliated companies
|
85
|
143
|
1,704
|
|||||
Deferred tax (benefit) provision
|
(308)
|
54
|
612
|
|||||
Restructuring payments
|
(12)
|
(40)
|
(39)
|
|||||
Customer deposits
|
185
|
197
|
||||||
Employee benefit payments in excess of expense
|
(92)
|
(52)
|
(52)
|
|||||
Translated earnings contract loss (gain)
|
448
|
(80)
|
(1,369)
|
|||||
Unrealized translation losses on transactions
|
1
|
268
|
431
|
|||||
Contingent consideration fair value adjustment
|
(43)
|
(13)
|
(249)
|
|||||
Gain on realignment of equity investment
|
(2,676)
|
|||||||
Changes in certain working capital items:
|
||||||||
Trade accounts receivable
|
(106)
|
162
|
(16)
|
|||||
Inventories
|
(68)
|
(77)
|
2
|
|||||
Other current assets
|
18
|
(57)
|
(16)
|
|||||
Accounts payable and other current liabilities
|
243
|
(146)
|
(3)
|
|||||
Other, net
|
121
|
180
|
169
|
|||||
Net cash provided by operating activities
|
2,521
|
2,809
|
4,709
|
|||||
Cash Flows from Investing Activities:
|
||||||||
Capital expenditures
|
(1,130)
|
(1,250)
|
(1,076)
|
|||||
Acquisitions of businesses, net of cash (paid) received
|
(333)
|
(732)
|
66
|
|||||
Proceeds from sale of a business
|
12
|
|||||||
Investment in unconsolidated entities
|
(24)
|
(33)
|
(109)
|
|||||
Cash received on realignment of equity investment
|
4,818
|
|||||||
Proceeds from sale of assets to related party
|
42
|
|||||||
(Payments) repayments of loans to unconsolidated entities
|
(23)
|
6
|
23
|
|||||
Short-term investments – acquisitions
|
(20)
|
(969)
|
(1,398)
|
|||||
Short-term investments – liquidations
|
121
|
1,629
|
1,167
|
|||||
Realized gains on translated earnings contracts
|
201
|
653
|
361
|
|||||
Other, net
|
10
|
(1)
|
4
|
|||||
Net cash provided by (used in) investing activities
|
3,662
|
(685)
|
(962)
|
|||||
Cash Flows from Financing Activities:
|
||||||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(85)
|
(12)
|
(52)
|
|||||
Proceeds from issuance of long-term debt
|
745
|
|||||||
Proceeds from issuance of short-term debt, net
|
3
|
29
|
||||||
(Payments) proceeds from issuance of commercial paper
|
(481)
|
481
|
||||||
Payments from the settlement of interest rate swap agreements
|
(10)
|
|||||||
Principal payments under capital lease obligations
|
(7)
|
(6)
|
(6)
|
|||||
Proceeds from issuance of preferred stock
(1)
|
400
|
|||||||
Proceeds received for asset financing and related incentives, net
|
1
|
1
|
1
|
|||||
Proceeds from the exercise of stock options
|
138
|
102
|
116
|
|||||
Repurchases of common stock for treasury
|
(4,227)
|
(3,228)
|
(2,483)
|
|||||
Dividends paid
|
(645)
|
(679)
|
(591)
|
|||||
Net cash used in financing activities
|
(5,306)
|
(2,603)
|
(2,586)
|
|||||
Effect of exchange rates on cash
|
(86)
|
(330)
|
(556)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
791
|
(809)
|
605
|
|||||
Cash and cash equivalents at beginning of year
|
4,500
|
5,309
|
4,704
|
|||||
Cash and cash equivalents at end of year
|
$
|
5,291
|
$
|
4,500
|
$
|
5,309
|
(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).
|
Consolidated Statements of Changes in Shareholders' Equity
|
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, 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
|
Net income
|
3,695
|
3,695
|
10
|
3,705
|
||||||||||||||
Other comprehensive income (loss)
|
135
|
135
|
(6)
|
129
|
||||||||||||||
Purchase of common stock for treasury
|
165
|
(4,409)
|
(4.244)
|
(4,244)
|
||||||||||||||
Shares issued to benefit plans and for option exercises
|
6
|
178
|
(2)
|
182
|
182
|
|||||||||||||
Dividends on shares
|
(647)
|
(647)
|
(647)
|
|||||||||||||||
Other, net
|
(16)
|
(16)
|
(12)
|
(28)
|
||||||||||||||
Balance, December 31, 2016
|
$
|
2,300
|
$
|
846
|
$
|
13,695
|
$
|
16,880
|
$
|
(14,152)
|
$
|
(1,676)
|
$
|
17,893
|
$
|
67
|
$
|
17,960
|
Corning Incorporated and Subsidiary Companies
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Non-cash transactions:
|
||||||||
Accruals for capital expenditures
|
$
|
381
|
$
|
298
|
$
|
358
|
||
Cash paid for interest and income taxes:
|
||||||||
Interest
(1)
|
$
|
184
|
$
|
178
|
$
|
171
|
||
Income taxes, net of refunds received
|
$
|
293
|
$
|
253
|
$
|
577
|
(1) |
Included in this amount are approximately $23 million, $35 million and $40 million of interest costs that were capitalized as part of property, plant and equipment, net of accumulated depreciation, in 2016, 2015 and 2014, 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.
|
December 31,
|
|||||
2016
|
2015
|
||||
Finished goods
|
$
|
606
|
$
|
633
|
|
Work in process
|
303
|
264
|
|||
Raw materials and accessories
|
270
|
200
|
|||
Supplies and packing materials
|
292
|
288
|
|||
Total inventories, net of inventory reserves
|
$
|
1,471
|
$
|
1,385
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
U.S. companies
|
$
|
2,658
|
$
|
426
|
$
|
2,384
|
||
Non-U.S. companies
|
1,034
|
1,060
|
1,184
|
|||||
Income before income taxes
|
$
|
3,692
|
$
|
1,486
|
$
|
3,568
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Current:
|
||||||||
Federal
|
$
|
(1)
|
$
|
(40)
|
$
|
(38)
|
||
State and municipal
|
(17)
|
(20)
|
(32)
|
|||||
Foreign
|
(287)
|
(33)
|
(414)
|
|||||
Deferred:
|
||||||||
Federal
|
310
|
(144)
|
(411)
|
|||||
State and municipal
|
48
|
(30)
|
9
|
|||||
Foreign
|
(50)
|
120
|
(210)
|
|||||
Benefit (provision) for income taxes
|
$
|
3
|
$
|
(147)
|
$
|
(1,096)
|
Years ended December 31,
|
|||||
2016
|
2015
|
2014
|
|||
Statutory U.S. income tax rate
|
35.0%
|
35.0%
|
35.0%
|
||
State income tax (benefit), net of federal effect
|
(0.3)
|
0.1
|
4.9
|
||
Rate difference on foreign earnings
(1)
|
(9.2)
|
(19.8)
|
(8.3)
|
||
Uncertain tax positions
|
(0.1)
|
4.3
|
(0.1)
|
||
Equity earnings impact
|
(0.4)
|
(5.4)
|
(2.0)
|
||
Valuation allowances
|
1.2
|
(4.2)
|
0.8
|
||
Realignment of Dow Corning interest
(2)
|
(28.2)
|
||||
Other items, net
|
1.9
|
(0.1)
|
0.4
|
||
Effective income tax (benefit) rate
|
(0.1)%
|
9.9%
|
30.7%
|
(1) |
Tax benefit is primarily for excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income and the income of subsidiaries with lower statutory rates than the U.S.
|
(2) |
Refer to Note 7 (Investments) of the Consolidated Financial Statements for additional detail.
|
December 31,
|
|||||
2016
|
2015
|
||||
Loss and tax credit carryforwards
|
$
|
1,465
|
$
|
1,151
|
|
Other assets
|
62
|
69
|
|||
Asset impairments and restructuring reserves
|
154
|
153
|
|||
Postretirement medical and life benefits
|
283
|
276
|
|||
Other accrued liabilities
|
190
|
265
|
|||
Other employee benefits
|
462
|
505
|
|||
Gross deferred tax assets
|
2,616
|
2,419
|
|||
Valuation allowance
|
(270)
|
(238)
|
|||
Total deferred tax assets
|
2,346
|
2,181
|
|||
Intangible and other assets
|
(104)
|
(181)
|
|||
Fixed assets
|
(234)
|
(284)
|
|||
Total deferred tax liabilities
|
(338)
|
(465)
|
|||
Net deferred tax assets
|
$
|
2,008
|
$
|
1,716
|
December 31,
|
|||||
2016
|
2015
|
||||
|
|
||||
Deferred tax assets
|
$
|
2,325
|
$
|
2,056
|
|
Deferred tax liabilities
|
(317)
|
(340)
|
|||
Net deferred tax assets
|
$
|
2,008
|
$
|
1,716
|
Expiration
|
||||||||||||||
Amount
|
2017-2021
|
2022-2026
|
2027-2036
|
Indefinite
|
||||||||||
Net operating losses
|
$
|
416
|
$
|
144
|
$
|
46
|
$
|
8
|
$
|
218
|
||||
Tax credits
|
1,049
|
420
|
70
|
523
|
36
|
|||||||||
Totals as of December 31, 2016
|
$
|
1,465
|
$
|
564
|
$
|
116
|
$
|
531
|
$
|
254
|
2016
|
2015
|
||||
Balance at January 1
|
$
|
253
|
$
|
10
|
|
Additions based on tax positions related to the current year
|
10
|
||||
Additions for tax positions of prior years
|
4
|
245
|
|||
Reductions for tax positions of prior years
|
(18)
|
(1)
|
|||
Settlements and lapse of statute of limitations
|
(6)
|
(1)
|
|||
Balance at December 31
|
$
|
243
|
$
|
253
|
Ownership
interest |
December 31,
|
||||||||
2016
|
2015
|
||||||||
Affiliated companies accounted for by the equity method
|
|||||||||
Dow Corning
(1)
|
50%
|
$
|
1,483
|
||||||
All other
(2)
|
20%
|
to
|
50%
|
$
|
269
|
422
|
|||
269
|
1,905
|
||||||||
Other investments
|
67
|
70
|
|||||||
Subtotal Investment Assets
|
$
|
336
|
$
|
1,975
|
|||||
Affiliated companies accounted for by the equity method
|
|||||||||
HSG
(3)
|
50%
|
$
|
241
|
||||||
Subtotal Investment Liabilities
|
$
|
241
|
(1) |
Amount reflects Corning's direct ownership interest in Dow Corning at December 31, 2015. Corning did not control Dow Corning.
|
(2) |
Amount reflects Corning's direct ownership interests in the affiliated companies at December 31, 2016 and December 31, 2015. Corning does not control any of such entities.
|
(3) |
HSG indirectly holds an 80.5% interest in a HSG operating partnership. The negative carrying value of the investment in HSG is recorded in Other Liabilities.
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Statement of operations:
|
||||||||
Net sales
|
$
|
4,024
|
$
|
6,461
|
$
|
7,124
|
||
Gross profit
|
$
|
1,006
|
$
|
1,606
|
$
|
1,701
|
||
Net income
|
$
|
565
|
$
|
586
|
$
|
647
|
||
Corning's equity in earnings of affiliated companies
|
$
|
284
|
$
|
299
|
$
|
266
|
||
Related party transactions:
|
||||||||
Corning sales to affiliated companies
|
$
|
95
|
$
|
75
|
$
|
53
|
||
Corning purchases from affiliated companies
|
$
|
19
|
$
|
19
|
$
|
25
|
||
Corning transfers of assets, at cost, to affiliated companies
|
$
|
42
|
||||||
Dividends received from affiliated companies
|
$
|
85
|
$
|
143
|
$
|
130
|
||
Royalty income from affiliated companies
|
$
|
2
|
||||||
December 31,
|
||||||||
2016
|
2015
|
|||||||
Balance sheet:
|
||||||||
Current assets
|
$
|
1,522
|
$
|
5,228
|
||||
Noncurrent assets
|
$
|
2,112
|
$
|
6,453
|
||||
Short-term borrowings, including current portion of long-term debt
|
$
|
3
|
$
|
6
|
||||
Other current liabilities
|
$
|
715
|
$
|
1,461
|
||||
Long-term debt
|
$
|
23
|
$
|
800
|
||||
Other long-term liabilities
|
$
|
2,523
|
$
|
4,557
|
||||
Non-controlling interest
|
$
|
267
|
$
|
631
|
||||
Related party transactions:
|
||||||||
Balances due from affiliated companies
|
$
|
27
|
$
|
11
|
||||
Balances due to affiliated companies
|
$
|
1
|
||||||
Cash
|
$
|
4,818
|
Carrying Value of Dow Corning Equity Investment
|
(1,560)
|
|
Carrying Value of HSG Equity Investment
|
(383)
|
|
Other
(1)
|
(199)
|
|
Gain
|
$
|
2,676
|
(1) |
Primarily consists of the release of accumulated other comprehensive income items related to unamortized actuarial losses related to Dow Corning's pension plan and foreign currency translation gains in the amounts of $260 million and $45 million, respectively.
|
Years ended December 31,
|
|||||||||
2016
|
2015
|
2014
|
|||||||
Statement of operations:
|
|||||||||
Net sales
|
$
|
2,215
|
$
|
5,649
|
$
|
6,221
|
|||
Gross profit
(1)
|
$
|
588
|
$
|
1,472
|
$
|
1,543
|
|||
Net income attributable to Dow Corning
|
$
|
163
|
$
|
563
|
$
|
513
|
|||
Corning's equity in earnings of Dow Corning
|
$
|
82
|
$
|
281
|
$
|
252
|
|||
Related party transactions:
|
|||||||||
Corning purchases from Dow Corning
|
$
|
7
|
$
|
15
|
$
|
15
|
|||
Dividends received from Dow Corning
|
$
|
20
|
$
|
143
|
$
|
125
|
|||
December 31, 2015
|
|||||||||
Balance sheet:
|
|||||||||
Current assets
|
$
|
4,511
|
|||||||
Noncurrent assets
|
$
|
6,064
|
|||||||
Short-term borrowings, including current portion of long-term debt
|
$
|
6
|
|||||||
Other current liabilities
|
$
|
1,305
|
|||||||
Long-term debt
|
$
|
785
|
|||||||
Other long-term liabilities
|
$
|
4,539
|
|||||||
Non-controlling interest
|
$
|
631
|
|||||||
(1) |
Gross profit for the five months ended May 31, 2016 includes R&D cost of $100 million (2015: $233 million and 2014: $273 million).
|
|
Amended PCC Plan
|
|
Non-PCC
|
Total Asbestos
Litigation Liability |
|||||||
|
Equity
Interests |
Fixed Series
of Payments |
|
||||||||
Fair Value of Asbestos Litigation Liability as of December 31, 2015
|
$
|
238
|
$
|
290
|
$
|
150
|
$
|
678
|
|||
|
|||||||||||
Contribution of PCC & PCE Equity Interests - Carrying Value
|
(182)
|
(182)
|
|||||||||
Gain on Contribution of Equity Interests
|
(56)
|
(56)
|
|||||||||
Other adjustments
|
(1)
|
(1)
|
|||||||||
Asbestos Litigation Liability as of December 31, 2016
|
$
|
0
|
$
|
290
|
$
|
149
|
$
|
439
|
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.
|
December 31,
|
|||||
2016
|
2015
|
||||
Land
|
$
|
435
|
$
|
438
|
|
Buildings
|
5,540
|
5,504
|
|||
Equipment
|
14,973
|
14,688
|
|||
Construction in progress
|
1,482
|
1,206
|
|||
22,430
|
21,836
|
||||
Accumulated depreciation
|
(9,884)
|
(9,188)
|
|||
Total
|
$
|
12,546
|
$
|
12,648
|
Display
Technologies |
Optical
Communications |
Specialty
Materials |
Life
Sciences |
All
Other |
Total
|
||||||||||||
Balance at December 31, 2014
|
$
|
134
|
$
|
238
|
$
|
198
|
$
|
580
|
$
|
1,150
|
|||||||
Acquired goodwill
(1)
|
220
|
|
$
|
87
|
307
|
||||||||||||
Measurement period adjustment
|
(7)
|
|
(7)
|
||||||||||||||
Foreign currency translation adjustment
|
(6)
|
(12)
|
(4)
|
(18)
|
(1)
|
(41)
|
|||||||||||
Other
(2)
|
(44)
|
15
|
(29)
|
||||||||||||||
Balance at December 31, 2015
|
$
|
128
|
$
|
439
|
$
|
150
|
$
|
562
|
$
|
101
|
$
|
1,380
|
|||||
Acquired goodwill
(3)
|
205
|
|
205
|
||||||||||||||
Measurement period adjustment
|
(4)
|
(4)
|
|||||||||||||||
Foreign currency translation adjustment
|
(2)
|
5
|
(4)
|
(3)
|
(4)
|
||||||||||||
Balance at December 31, 2016
|
$
|
126
|
$
|
645
|
$
|
150
|
$
|
558
|
$
|
98
|
$
|
1,577
|
(1) |
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.
|
(2) |
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.
|
(3) |
The Company completed two acquisitions in the Optical Communications segment during the year ended December 31, 2016 with total purchase price of $356 million.
|
December 31,
|
|||||||||||||||||
2016
|
2015
|
||||||||||||||||
Gross
|
Accumulated
amortization |
Net
|
Gross
|
Accumulated
amortization |
Net
|
||||||||||||
Amortized intangible assets:
|
|||||||||||||||||
Patents, trademarks & trade names
|
$
|
360
|
$
|
176
|
$
|
184
|
$
|
350
|
$
|
162
|
$
|
188
|
|||||
Customer list and other
|
761
|
149
|
612
|
621
|
103
|
518
|
|||||||||||
Total
|
$
|
1,121
|
$
|
325
|
$
|
796
|
$
|
971
|
$
|
265
|
$
|
706
|
December 31,
|
|||||
2016
|
2015
|
||||
Current assets:
|
|||||
Derivative instruments
|
$
|
435
|
$
|
522
|
|
Other current assets
|
370
|
390
|
|||
Other current assets
|
$
|
805
|
$
|
912
|
|
Non-current assets:
|
|||||
Derivative instruments
|
$
|
146
|
$
|
473
|
|
Contingent consideration asset
|
289
|
246
|
|||
Other non-current assets
|
836
|
774
|
|||
Other assets
|
$
|
1,271
|
$
|
1,493
|
11. |
Other Assets and Other Liabilities (continued)
|
December 31,
|
|||||
2016
|
2015
|
||||
Current liabilities:
|
|||||
Wages and employee benefits
|
$
|
487
|
$
|
491
|
|
Income taxes
|
150
|
53
|
|||
Asbestos litigation
|
70
|
238
|
|||
Derivative instruments
|
88
|
55
|
|||
Other current liabilities
|
621
|
471
|
|||
Other accrued liabilities
|
$
|
1,416
|
$
|
1,308
|
|
Non-current liabilities:
|
|||||
Asbestos litigation
|
$
|
369
|
$
|
440
|
|
Derivative instruments
|
282
|
88
|
|||
Investment in Hemlock Semiconductor Group
(1)
|
241
|
||||
Defined benefit pension plan liabilities
|
692
|
672
|
|||
Other non-current liabilities
|
1,221
|
1,042
|
|||
Other liabilities
|
$
|
2,805
|
$
|
2,242
|
(1) |
The negative carrying value resulted from a one-time charge to this entity in 2014 for the permanent abandonment of certain assets. Refer to Note 7 (Investments) to the Consolidated Financial Statements for additional information.
|
December 31,
|
|||||
2016
|
2015
|
||||
Current portion of long-term debt and short-term borrowings
|
|||||
Current portion of long-term debt
|
$
|
256
|
$
|
91
|
|
Commercial paper
|
481
|
||||
Total current portion of long-term debt and short-term borrowings
|
$
|
256
|
$
|
572
|
|
Long-term debt
|
|||||
Debentures, 8.875%, due 2016
|
$
|
64
|
|||
Debentures, 1.45%, due 2017
|
$
|
250
|
249
|
||
Debentures, 1.5%, due 2018
|
374
|
373
|
|||
Debentures, 6.625%, due 2019
|
245
|
245
|
|||
Debentures, 4.25%, due 2020
|
290
|
290
|
|||
Debentures, 8.875%, due 2021
|
67
|
68
|
|||
Debentures, 2.9%, due 2022
|
372
|
372
|
|||
Debentures, 3.70%, due 2023
|
248
|
248
|
|||
Medium-term notes, average rate 7.66%, due through 2023
|
45
|
45
|
|||
Debentures, 7.00%, due 2024
|
99
|
99
|
|||
Debentures, 6.85%, due 2029
|
167
|
168
|
|||
Debentures, callable, 7.25%, due 2036
|
248
|
248
|
|||
Debentures, 4.70%, due 2037
|
248
|
247
|
|||
Debentures, 5.75%, due 2040
|
395
|
395
|
|||
Debentures, 4.75%, due 2042
|
495
|
495
|
|||
Other, average rate 5.02%, due through 2042
|
359
|
375
|
|||
Total long-term debt
|
3,902
|
3,981
|
|||
Less current portion of long-term debt
|
256
|
91
|
|||
Long-term debt
|
$
|
3,646
|
$
|
3,890
|
2017
|
2018
|
2019
|
2020
|
2021
|
Thereafter
|
||||||
$256
|
$379
|
$254
|
$305
|
$67
|
$2,655
|
* |
Excludes interest rate swap gains and bond discounts.
|
· |
In the third quarter of 2016, Corning's Board of Directors approved a $1 billion increase to our commercial paper program, raising it to $2 billion. If needed, this program is supported by our $2 billion revolving credit facility that expires in 2019.
|
12. |
Debt (continued)
|
· |
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.
|
Total
pension benefits |
Domestic
pension benefits |
International
pension benefits |
|||||||||||||||
December 31,
|
2016
|
2015
|
2016
|
2015
|
2016
|
2015
|
|||||||||||
Change in benefit obligation
|
|||||||||||||||||
Benefit obligation at beginning of year
|
$
|
3,715
|
$
|
3,809
|
$
|
3,161
|
$
|
3,222
|
$
|
554
|
$
|
587
|
|||||
Service cost
|
85
|
90
|
61
|
64
|
24
|
26
|
|||||||||||
Interest cost
|
124
|
144
|
111
|
126
|
13
|
18
|
|||||||||||
Plan participants' contributions
|
1
|
1
|
1
|
1
|
|||||||||||||
Actuarial loss (gain)
|
229
|
(95)
|
145
|
(87)
|
84
|
(8)
|
|||||||||||
Other
|
(3)
|
(8)
|
1
|
(4)
|
(8)
|
||||||||||||
Benefits paid
|
(210)
|
(188)
|
(191)
|
(165)
|
(19)
|
(23)
|
|||||||||||
Foreign currency translation
|
(54)
|
(38)
|
(54)
|
(38)
|
|||||||||||||
Benefit obligation at end of year
|
$
|
3,887
|
$
|
3,715
|
$
|
3,289
|
$
|
3,161
|
$
|
598
|
$
|
554
|
|||||
Change in plan assets
|
|||||||||||||||||
Fair value of plan assets at beginning of year
|
$
|
3,058
|
$
|
3,263
|
$
|
2,616
|
$
|
2,814
|
$
|
442
|
$
|
449
|
|||||
Actual gain (loss) on plan assets
|
310
|
(108)
|
235
|
(111)
|
75
|
3
|
|||||||||||
Employer contributions
|
125
|
116
|
104
|
77
|
21
|
39
|
|||||||||||
Plan participants' contributions
|
1
|
1
|
1
|
1
|
|||||||||||||
Benefits paid
|
(210)
|
(188)
|
(191)
|
(165)
|
(19)
|
(23)
|
|||||||||||
Foreign currency translation
|
(59)
|
(26)
|
(59)
|
(26)
|
|||||||||||||
Fair value of plan assets at end of year
|
$
|
3,225
|
$
|
3,058
|
$
|
2,765
|
$
|
2,616
|
$
|
460
|
$
|
442
|
|||||
Funded status at end of year
|
|||||||||||||||||
Fair value of plan assets
|
$
|
3,225
|
$
|
3,058
|
$
|
2,765
|
$
|
2,616
|
$
|
460
|
$
|
442
|
|||||
Benefit obligations
|
(3,887)
|
(3,715)
|
(3,289)
|
(3,161)
|
(598)
|
(554)
|
|||||||||||
Funded status of plans
|
$
|
(662)
|
$
|
(657)
|
$
|
(524)
|
$
|
(545)
|
$
|
(138)
|
$
|
(112)
|
|||||
Amounts recognized in the consolidated balance sheets consist of:
|
|||||||||||||||||
Noncurrent asset
|
$
|
35
|
$
|
50
|
$
|
35
|
$
|
50
|
|||||||||
Current liability
|
(18)
|
(35)
|
$
|
(13)
|
$
|
(30)
|
(5)
|
(5)
|
|||||||||
Noncurrent liability
|
(679)
|
(672)
|
(511)
|
(515)
|
(168)
|
(157)
|
|||||||||||
Recognized liability
|
$
|
(662)
|
$
|
(657)
|
$
|
(524)
|
$
|
(545)
|
$
|
(138)
|
$
|
(112)
|
|||||
Amounts recognized in accumulated other comprehensive income consist of:
|
|||||||||||||||||
Net actuarial loss
|
$
|
348
|
$
|
332
|
$
|
311
|
$
|
305
|
$
|
37
|
$
|
27
|
|||||
Prior service cost (credit)
|
30
|
35
|
31
|
37
|
(1)
|
(2)
|
|||||||||||
Amount recognized at end of year
|
$
|
378
|
$
|
367
|
$
|
342
|
$
|
342
|
$
|
36
|
$
|
25
|
Postretirement benefits
|
|||||
December 31,
|
2016
|
2015
|
|||
Change in benefit obligation
|
|||||
Benefit obligation at beginning of year
|
$
|
763
|
$
|
862
|
|
Service cost
|
9
|
13
|
|||
Interest cost
|
26
|
33
|
|||
Plan participants' contributions
|
8
|
7
|
|||
Actuarial loss (gain)
|
16
|
(97)
|
|||
Other
|
2
|
4
|
|||
Benefits paid
|
(50)
|
(61)
|
|||
Medicare subsidy received
|
2
|
2
|
|||
Benefit obligation at end of year
|
$
|
776
|
$
|
763
|
|
Funded status at end of year
|
|||||
Fair value of plan assets
|
$
|
0
|
$
|
0
|
|
Benefit obligations
|
(776)
|
(763)
|
|||
Funded status of plans
|
$
|
(776)
|
$
|
(763)
|
|
Amounts recognized in the consolidated balance sheets consist of:
|
|||||
Current liability
|
$
|
(39)
|
$
|
(45)
|
|
Noncurrent liability
|
(737)
|
(718)
|
|||
Recognized liability
|
$
|
(776)
|
$
|
(763)
|
|
Amounts recognized in accumulated other comprehensive income consist of:
|
|||||
Net actuarial loss
|
$
|
50
|
$
|
33
|
|
Prior service credit
|
(15)
|
(19)
|
|||
Amount recognized at end of year
|
$
|
35
|
$
|
14
|
December 31,
|
|||||
2016
|
2015
|
||||
Projected benefit obligation
|
$
|
3,607
|
$
|
3,341
|
|
Fair value of plan assets
|
$
|
2,787
|
$
|
2,635
|
December 31,
|
|||||
2016
|
2015
|
||||
Accumulated benefit obligation
|
$
|
3,285
|
$
|
3,159
|
|
Fair value of plan assets
|
$
|
2,786
|
$
|
2,634
|
Total pension benefits
|
Domestic pension benefits
|
International pension benefits
|
|||||||||||||||
December 31,
|
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
||||||||
Service cost
|
$ 85
|
$ 90
|
$ 82
|
$ 61
|
$ 64
|
$ 55
|
$24
|
$26
|
$ 27
|
||||||||
Interest cost
|
124
|
144
|
160
|
111
|
126
|
137
|
13
|
18
|
23
|
||||||||
Expected return on plan assets
|
(165)
|
(178)
|
(174)
|
(153)
|
(166)
|
(159)
|
(12)
|
(12)
|
(15)
|
||||||||
Amortization of prior service cost (credit)
|
6
|
6
|
6
|
6
|
7
|
7
|
(1)
|
(1)
|
|||||||||
Recognition of actuarial loss
|
67
|
165
|
29
|
55
|
162
|
4
|
12
|
3
|
25
|
||||||||
Total net periodic benefit expense
|
$117
|
$227
|
$103
|
$ 80
|
$193
|
$ 44
|
$37
|
$34
|
$ 59
|
||||||||
Settlement charge
|
1
|
1
|
|||||||||||||||
Total expense
|
$118
|
$227
|
$103
|
$ 81
|
$193
|
$ 44
|
$37
|
$34
|
$ 59
|
||||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
|
|||||||||||||||||
Curtailment effects
|
$ (3)
|
$ (3)
|
|||||||||||||||
Settlements
|
$ (2)
|
$ (1)
|
(2)
|
$ (2)
|
$(1)
|
(2)
|
|||||||||||
Current year actuarial loss
|
84
|
191
|
212
|
63
|
$189
|
$198
|
$21
|
2
|
14
|
||||||||
Recognition of actuarial (loss)
|
(64)
|
(165)
|
(29)
|
(55)
|
(162)
|
(4)
|
(9)
|
(3)
|
(25)
|
||||||||
Current year prior service cost
|
|
25
|
|
25
|
|||||||||||||
Amortization of prior service (cost) credit
|
(6)
|
(6)
|
(6)
|
(6)
|
(7)
|
(7)
|
1
|
1
|
|||||||||
Total recognized in other comprehensive (income) loss
|
$ 12
|
$ 19
|
$197
|
$ 0
|
$ 20
|
$212
|
$12
|
$(1)
|
$(15)
|
||||||||
Total recognized in net periodic benefit cost and other comprehensive (income) loss
|
$130
|
$246
|
$300
|
$ 81
|
$213
|
$256
|
$49
|
$33
|
$ 44
|
Postretirement benefits
|
||||||||
2016
|
2015
|
2014
|
||||||
Service cost
|
$
|
9
|
$
|
13
|
$
|
11
|
||
Interest cost
|
26
|
33
|
38
|
|||||
Amortization of net gain (loss)
|
(1)
|
3
|
||||||
Amortization of prior service credit
|
(4)
|
(7)
|
(6)
|
|||||
Total net periodic benefit expense
|
$
|
30
|
$
|
42
|
$
|
43
|
||
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
|
||||||||
Current year actuarial loss (gain)
|
$
|
15
|
$
|
(96)
|
$
|
49
|
||
Amortization of actuarial gain (loss)
|
1
|
(3)
|
||||||
Current year prior service credit
|
(5)
|
|||||||
Amortization of prior service credit
|
5
|
7
|
6
|
|||||
Total recognized in other comprehensive loss (income)
|
$
|
21
|
$
|
(92)
|
$
|
50
|
||
Total recognized in net periodic benefit cost and other comprehensive loss (income)
|
$
|
51
|
$
|
(50)
|
$
|
93
|
Pension benefits
|
|||||||||||||||||
Domestic
|
International
|
Postretirement benefits
|
|||||||||||||||
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
|||||||||
Discount rate
|
4.01%
|
4.24%
|
4.00%
|
2.29%
|
3.23%
|
3.21%
|
4.07%
|
4.31%
|
4.00%
|
||||||||
Rate of compensation increase
|
3.50%
|
3.50%
|
3.50%
|
3.97%
|
3.92%
|
3.88%
|
Pension benefits
|
|||||||||||||||||
Domestic
|
International
|
Postretirement benefits
|
|||||||||||||||
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
|||||||||
Discount rate
|
4.24%
|
4.00%
|
4.75%
|
3.23%
|
3.21%
|
4.08%
|
4.31%
|
4.00%
|
4.75%
|
||||||||
Expected return on plan assets
|
6.00%
|
6.00%
|
6.25%
|
2.89%
|
2.97%
|
4.12%
|
|||||||||||
Rate of compensation increase
|
3.50%
|
3.50%
|
4.00%
|
3.92%
|
3.88%
|
3.85%
|
Assumed health care trend rates at December 31
|
2016
|
2015
|
|
Health care cost trend rate assumed for next year
|
6.75%
|
7%
|
|
Rate that the cost trend rate gradually declines to
|
5%
|
5%
|
|
Year that the rate reaches the ultimate trend rate
|
2024
|
2024
|
One-percentage-point
increase |
One-percentage-point
decrease |
||
Effect on annual total of service and interest cost (credit)
|
$ 3
|
$ (3)
|
|
Effect on postretirement benefit obligation
|
$55
|
$(45)
|
December 31, 2016
|
December 31, 2015
|
||||||||||||||||||||||
(in millions)
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||||
Equity securities:
|
|||||||||||||||||||||||
U.S. companies
|
$
|
318
|
$
|
47
|
$
|
271
|
$
|
336
|
$
|
51
|
$
|
285
|
|||||||||||
International companies
|
340
|
90
|
250
|
322
|
79
|
243
|
|||||||||||||||||
Fixed income:
|
|||||||||||||||||||||||
U.S. corporate bonds
|
1,608
|
175
|
1,433
|
1,566
|
158
|
1,408
|
|||||||||||||||||
Private equity
(1)
|
137
|
$
|
137
|
163
|
$
|
163
|
|||||||||||||||||
Real estate
(2)
|
150
|
150
|
61
|
61
|
|||||||||||||||||||
Cash equivalents
|
100
|
100
|
71
|
71
|
|||||||||||||||||||
Commodities
(3)
|
112
|
112
|
97
|
97
|
|||||||||||||||||||
Total
|
$
|
2,765
|
$
|
412
|
$
|
2,066
|
$
|
287
|
$
|
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.
|
December 31, 2016
|
December 31, 2015
|
||||||||||||||||||||||
(in millions)
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||||
Equity securities:
|
|||||||||||||||||||||||
U.S. companies
|
$
|
7
|
$
|
7
|
$
|
7
|
$
|
7
|
|||||||||||||||
International companies
|
26
|
26
|
23
|
23
|
|||||||||||||||||||
Fixed income:
|
|||||||||||||||||||||||
International fixed income
|
385
|
$
|
321
|
64
|
347
|
$
|
286
|
61
|
|||||||||||||||
Insurance contracts
|
2
|
$
|
2
|
3
|
$
|
3
|
|||||||||||||||||
Mortgages
|
2
|
2
|
|||||||||||||||||||||
Cash equivalents
|
40
|
40
|
60
|
60
|
|||||||||||||||||||
Total
|
$
|
460
|
$
|
361
|
$
|
97
|
$
|
2
|
$
|
442
|
$
|
346
|
$
|
91
|
$
|
5
|
Level 3 assets – Domestic
|
Level 3 assets – International
|
||||||||||
Year ended December 2016
|
Year ended December 2016
|
||||||||||
(in millions)
|
Private
equity |
Real
estate |
Mortgages
|
Insurance
contracts |
|||||||
Beginning balance at December 31, 2015
|
$
|
163
|
$
|
61
|
$
|
2
|
$
|
3
|
|||
Actual return on plan assets relating to assets still held at the reporting date
|
14
|
(7)
|
|||||||||
Transfers in and/or out of level 3
|
(40)
|
96
|
(2)
|
(1)
|
|||||||
Ending balance at December 31, 2016
|
$
|
137
|
$
|
150
|
$
|
0
|
$
|
2
|
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
|
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
|
$
|
178
|
$
|
102
|
$
|
2
|
$
|
74
|
||||||
Stand-by letters of credit
(1)
|
51
|
44
|
$
|
1
|
6
|
|||||||||
Credit facility to equity company
|
30
|
30
|
||||||||||||
Loan guarantees
|
8
|
1
|
7
|
|||||||||||
Subtotal of commitment expirations per period
|
$
|
267
|
$
|
176
|
$
|
3
|
$
|
1
|
$
|
87
|
||||
Purchase obligations
(6)
|
$
|
231
|
$
|
127
|
$
|
81
|
$
|
20
|
$
|
3
|
||||
Capital expenditure obligations
(2)
|
378
|
378
|
||||||||||||
Total debt
(3)
|
3,557
|
250
|
625
|
362
|
2,320
|
|||||||||
Interest on long-term debt
(4)
|
2,222
|
162
|
299
|
259
|
1,502
|
|||||||||
Capital leases and financing obligations
|
359
|
6
|
8
|
10
|
335
|
|||||||||
Imputed interest on capital leases and financing obligations
|
231
|
18
|
36
|
36
|
141
|
|||||||||
Minimum rental commitments
|
545
|
68
|
111
|
76
|
290
|
|||||||||
Amended PCC Plan
(7)
|
290
|
70
|
85
|
85
|
50
|
|||||||||
Uncertain tax positions
(5)
|
48
|
|||||||||||||
Subtotal of contractual obligation payments due by period
(5)
|
$
|
7,861
|
$
|
1,079
|
$
|
1,245
|
$
|
848
|
$
|
4,641
|
||||
Total commitments and contingencies
(5)
|
$
|
8,128
|
$
|
1,255
|
$
|
1,248
|
$
|
849
|
$
|
4,728
|
(1) |
At December 31, 2016, $39 million of the $51 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, 2016, $48 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.
|
(7) |
See Note 7 (Investments) to the Consolidated Financial Statements for additional details.
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022 and
thereafter |
||||||
$68
|
$63
|
$48
|
$40
|
$36
|
$290
|
· |
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
|
|||||||||||||||||
2016
|
2015
|
2016
|
2015
|
2016
|
2015
|
||||||||||||||||
Derivatives designated as hedging instruments
|
|||||||||||||||||||||
Foreign exchange contracts
(1)
|
$
|
458
|
$
|
782
|
Other current assets
|
$
|
1
|
$
|
5
|
Other accrued liabilities
|
$
|
(29)
|
$
|
(10)
|
|||||||
Other assets
|
1
|
Other liabilities
|
(23)
|
||||||||||||||||||
Interest rate contracts
|
550
|
550
|
Other assets
|
Other liabilities
|
(5)
|
(4)
|
|||||||||||||||
Derivatives not designated as hedging instruments
|
|||||||||||||||||||||
Foreign exchange contracts, other
|
890
|
1,095
|
Other current assets
|
11
|
6
|
Other accrued liabilities
|
(7)
|
(12)
|
|||||||||||||
Translated earnings contracts
|
16,711
|
11,972
|
Other current assets
|
423
|
511
|
Other accrued liabilities
|
(52)
|
(33)
|
|||||||||||||
Other assets
|
146
|
472
|
Other liabilities
|
(277)
|
(61)
|
||||||||||||||||
Total derivatives
|
$
|
18,609
|
$
|
14,399
|
$
|
581
|
$
|
995
|
$
|
(370)
|
$
|
(143)
|
(1) |
Cash flow hedges with a typical duration of 24 months or less.
|
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) |
|||||||||||||||
2016
|
2015
|
2014
|
2016
|
2015
|
2014
|
|||||||||||||
Cash flow hedges
|
||||||||||||||||||
-
|
Net sales
|
$
|
4
|
$
|
20
|
$
|
3
|
|||||||||||
Interest rate hedge
|
$
|
(7)
|
$
|
(3)
|
Cost of sales
|
(36)
|
6
|
7
|
||||||||||
Foreign exchange contracts
|
$
|
(33)
|
(17)
|
20
|
Other (expense) income, net
|
(2)
|
||||||||||||
Total cash flow hedges
|
$
|
(33)
|
$
|
(24)
|
$
|
17
|
$
|
(34)
|
$
|
26
|
$
|
10
|
Gain (loss) recognized in income
|
|||||||||||
Undesignated
derivatives |
Location of gain/(loss)
recognized in income |
2016
|
2015
|
2014
|
|||||||
Foreign exchange contracts – balance sheet
|
Translated earnings contract gain (loss), net
|
$
|
4
|
$
|
8
|
$
|
29
|
||||
Foreign exchange contracts – loans
|
Translated earnings contract (loss) gain, net
|
(31)
|
(3)
|
13
|
|||||||
Translated earnings contracts
|
Translated earnings contract (loss) gain, net
|
(448)
|
80
|
1,369
|
|||||||
Total undesignated
|
$
|
(475)
|
$
|
85
|
$
|
1,411
|
(1) |
There were no material amounts of ineffectiveness for 2016 and 2015.
|
Fair value measurements at reporting date using
|
|||||||
(in millions)
|
December 31,
2016 |
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
|
|||||||
Other current assets
(1)
|
$435
|
$435
|
|||||
Non-current assets:
|
|||||||
Other assets
(1)(2)
|
$464
|
$175
|
$289
|
||||
Current liabilities:
|
|||||||
Other accrued liabilities
(1)
|
$ 88
|
$ 88
|
|||||
Non-current liabilities:
|
|||||||
Other liabilities
(1)
|
$282
|
$282
|
(1) |
Derivative assets and liabilities include foreign exchange contracts which are measured using observable quoted prices for similar assets and liabilities.
|
(2) |
Other assets include asset-backed securities which are measured using observable quoted prices for similar assets and a contingent consideration asset which was measured by applying an option pricing model using projected future Corning Precision Materials' revenue.
|
Fair value measurements at reporting date using
|
|||||||
(in millions)
|
December 31,
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.
|
Level 3 Roll-Forward – Other Assets
|
|||
(in millions)
|
2016
|
2015
|
|
Beginning balance
|
$246
|
$445
|
|
Unrealized gains (loss)
|
43
|
13
|
|
Transfer in (out) of level 3
|
(212)
|
||
Ending balance
|
$289
|
$246
|
Common stock
|
Treasury stock
|
||||||||
Shares
|
Par value
|
Shares
|
Cost
|
||||||
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)
|
|||
Shares issued to benefit plans and for option exercises
|
10
|
6
|
(2)
|
||||||
Shares purchased for treasury
|
(214)
|
(4,409)
|
|||||||
Other, net
|
(16)
|
||||||||
Balance at December 31, 2016
|
1,691
|
$
|
846
|
(765)
|
$
|
(14,152)
|
(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, 2013
|
$
|
492
|
$
|
(428)
|
$
|
(14)
|
$
|
(6)
|
$
|
44
|
||||
Other comprehensive (loss) income before reclassifications
(4)
|
(821)
|
(172)
|
4
|
10
|
(979)
|
|||||||||
Amounts reclassified from accumulated other comprehensive income (loss)
(2)(8)
|
18
|
1
|
(6)
|
13
|
||||||||||
Equity method affiliates
(3)
|
(252)
|
(127)
|
(6)
|
(385)
|
||||||||||
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 (loss) income before reclassifications
(5)
|
$
|
(487)
|
$
|
(59)
|
$
|
(18)
|
$
|
(564)
|
||||||
Amounts reclassified from accumulated other comprehensive income (loss)
(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)
|
||||
Other comprehensive income before reclassifications
(6)
|
$
|
(89)
|
$
|
(63)
|
$
|
(2)
|
$
|
(21)
|
$
|
(175)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
(2)
|
40
|
22
|
62
|
|||||||||||
Equity method affiliates
(3)(7)
|
(15)
|
264
|
(1)
|
248
|
||||||||||
Net current-period other comprehensive (loss) income
|
(104)
|
241
|
(3)
|
1
|
135
|
|||||||||
Balance at December 31, 2016
|
$
|
(1,275)
|
$
|
(347)
|
$
|
(17)
|
$
|
(37)
|
$
|
(1,676)
|
(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 in the reported periods except for the tax expense of $20 million related to the pension component in 2016.
|
(4) |
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.
|
(5) |
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.
|
(6) |
Amounts are net of total tax benefit of $52 million, including $36 million related to the retirement plans component, $12 million related to the hedges component, $3 million related to the foreign currency translation adjustments, and $1 million related to the investments component.
|
(7) |
Most of the changes in equity method affiliate accumulated other comprehensive income components in 2016 relate to disposal transactions with amounts reclassified to the income statement. See Note 7 (Investments) and Note 8 (Acquisitions) to the Consolidated Financial Statements for more information on the Dow Corning realignment, the PCE disposition and the acquisition of the remaining equity interest of Samsung Corning Precision Materials.
|
(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,
|
||||||||
2016
|
2015
|
2014
|
||||||
Net income attributable to Corning Incorporated
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
||
Less: Series A convertible preferred stock dividend
|
98
|
98
|
94
|
|||||
Net income available to common stockholders - basic
|
3,597
|
1,241
|
2,378
|
|||||
Plus: Series A convertible preferred stock dividend
|
98
|
98
|
94
|
|||||
Net income available to common stockholders - diluted
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
||
Weighted-average common shares outstanding - basic
|
1,020
|
1,219
|
1,305
|
|||||
Effect of dilutive securities:
|
||||||||
Stock options and other dilutive securities
|
9
|
9
|
12
|
|||||
Series A convertible preferred stock
|
115
|
115
|
110
|
|||||
Weighted-average common shares outstanding - diluted
|
1,144
|
1,343
|
1,427
|
|||||
Basic earnings per common share
|
$
|
3.53
|
$
|
1.02
|
$
|
1.82
|
||
Diluted earnings per common share
|
$
|
3.23
|
$
|
1.00
|
$
|
1.73
|
||
Anti-dilutive potential shares excluded from diluted earnings per common share:
|
||||||||
Employee stock options and awards
|
15
|
22
|
24
|
|||||
Accelerated share repurchase forward contract
|
15
|
3
|
||||||
Total
|
15
|
37
|
27
|
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, 2015
|
42,738
|
$19.40
|
|||||
Granted
|
1,680
|
20.01
|
|||||
Exercised
|
(8,549)
|
16.16
|
|||||
Forfeited and expired
|
(4,362)
|
25.97
|
|||||
Options outstanding as of December 31, 2016
|
31,507
|
19.40
|
3.79
|
$160,932
|
|||
Options expected to vest as of December 31, 2016
|
31,469
|
19.40
|
3.79
|
160,794
|
|||
Options exercisable as of December 31, 2016
|
26,723
|
19.15
|
2.98
|
144,236
|
Shares
(000's) |
Weighted-
average grant-date fair value |
||
Non-vested shares and share units at December 31, 2015
|
5,242
|
$17.91
|
|
Granted
|
1,518
|
20.80
|
|
Vested
|
(2,014)
|
14.78
|
|
Forfeited
|
(106)
|
20.58
|
|
Non-vested shares and share units at December 31, 2016
|
4,640
|
$20.15
|
· |
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, 2016 |
||||||||||||||||||||
Net sales
|
$
|
3,238
|
$
|
3,005
|
$
|
1,032
|
$
|
1,124
|
$
|
839
|
$
|
152
|
$
|
9,390
|
||||||
Depreciation
(1)
|
$
|
598
|
$
|
175
|
$
|
129
|
$
|
109
|
$
|
58
|
$
|
50
|
$
|
1,119
|
||||||
Amortization of purchased intangibles
|
$
|
35
|
$
|
20
|
$
|
8
|
$
|
63
|
||||||||||||
Research, development and engineering expenses
(2)
|
$
|
45
|
$
|
147
|
$
|
102
|
$
|
126
|
$
|
24
|
$
|
191
|
$
|
635
|
||||||
Restructuring, impairment and other charges
|
$
|
4
|
$
|
5
|
$
|
5
|
$
|
12
|
$
|
3
|
$
|
40
|
$
|
69
|
||||||
Equity in earnings (loss) of affiliated companies
|
$
|
1
|
$
|
(6)
|
$
|
(5)
|
||||||||||||||
Income tax (provision) benefit
|
$
|
(372)
|
$
|
(129)
|
$
|
(65)
|
$
|
(85)
|
$
|
(28)
|
$
|
114
|
$
|
(565)
|
||||||
Net income (loss)
(3)
|
$
|
935
|
$
|
245
|
$
|
133
|
$
|
174
|
$
|
58
|
$
|
(240)
|
$
|
1,305
|
||||||
Investment in affiliated companies, at equity
|
$
|
41
|
$
|
(1)
|
$
|
32
|
$
|
252
|
$
|
324
|
||||||||||
Segment assets
(4)
|
$
|
8,032
|
$
|
2,010
|
$
|
1,267
|
$
|
1,604
|
$
|
504
|
$
|
750
|
$
|
14,167
|
||||||
Capital expenditures
|
$
|
464
|
$
|
245
|
$
|
97
|
$
|
120
|
$
|
39
|
$
|
56
|
$
|
1,021
|
||||||
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
|
||||||
Equity in earnings (loss) of affiliated companies
|
$
|
(9)
|
|
$
|
17
|
$
|
8
|
|||||||||||||
Income tax (provision) benefit
|
$
|
(499)
|
$
|
(115)
|
$
|
(78)
|
$
|
(85)
|
$
|
(30)
|
$
|
89
|
$
|
(718)
|
||||||
Net income (loss)
(3)
|
$
|
1,095
|
$
|
237
|
$
|
161
|
$
|
167
|
$
|
61
|
$
|
(202)
|
$
|
1,519
|
||||||
Investment in affiliated companies, at equity
|
$
|
43
|
$
|
1
|
$
|
32
|
$
|
261
|
$
|
337
|
||||||||||
Segment assets
(4)
|
$
|
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
|
$
|
50
|
$
|
17
|
$
|
1
|
$
|
68
|
||||||||||||
Equity in earnings (loss) of affiliated companies
|
$
|
(20)
|
$
|
2
|
$
|
18
|
||||||||||||||
Income tax (provision) benefit
|
$
|
(608)
|
$
|
(111)
|
$
|
(89)
|
$
|
(75)
|
$
|
(33)
|
$
|
83
|
$
|
(833)
|
||||||
Net income (loss)
(3)
|
$
|
1,396
|
$
|
194
|
$
|
178
|
$
|
138
|
$
|
67
|
$
|
(198)
|
$
|
1,775
|
||||||
Investment in affiliated companies, at equity
|
$
|
63
|
$
|
2
|
$
|
32
|
$
|
214
|
$
|
311
|
||||||||||
Segment assets
(4)
|
$
|
8,863
|
$
|
1,737
|
$
|
1,297
|
$
|
1,288
|
$
|
553
|
$
|
518
|
$
|
14,256
|
||||||
Capital expenditures
|
$
|
492
|
$
|
145
|
$
|
173
|
$
|
104
|
$
|
30
|
$
|
101
|
$
|
1,045
|
(1) |
Depreciation expense for Corning's reportable segments includes an allocation of depreciation of corporate property not specifically identifiable to a segment.
|
(2) |
Research, development and engineering expenses include direct project spending that is identifiable to a segment.
|
(3) |
Many of Corning's administrative and staff functions are performed on a centralized basis. Where practicable, Corning charges these expenses to segments based upon the extent to which each business uses a centralized function. Other staff functions, such as corporate finance, human resources and legal are allocated to segments, primarily as a percentage of sales.
|
(4) |
Segment assets include inventory, accounts receivable, property, plant and equipment, net of accumulated depreciation, and associated equity companies and cost investments.
|
Years ended December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Net income of reportable segments
|
$
|
1,545
|
$
|
1,721
|
$
|
1,973
|
||
Net loss of All Other
|
(240)
|
(202)
|
(198)
|
|||||
Unallocated amounts:
|
||||||||
Net financing costs
(1)
|
(107)
|
(111)
|
(113)
|
|||||
Share-based compensation expense
|
(42)
|
(46)
|
(58)
|
|||||
Exploratory research
|
(107)
|
(109)
|
(102)
|
|||||
Corporate contributions
|
(49)
|
(52)
|
(43)
|
|||||
Gain on realignment of equity investment
|
2,676
|
|||||||
Equity in earnings of affiliated companies, net of impairments
(2)
|
292
|
291
|
269
|
|||||
Unrealized (loss) gain on translated earnings contracts
|
(649)
|
(573)
|
1,095
|
|||||
Resolution of Department of Justice investigation
|
(98)
|
|||||||
Income tax benefit (provision)
|
573
|
568
|
(267)
|
|||||
Other corporate items
|
(99)
|
(148)
|
(84)
|
|||||
Net income
|
$
|
3,695
|
$
|
1,339
|
$
|
2,472
|
(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 Hemlock Semiconductor Group in 2016, and Dow Corning in 2015 and 2014.
|
December 31,
|
||||||||
2016
|
2015
|
2014
|
||||||
Total assets of reportable segments
|
$
|
13,417
|
$
|
13,336
|
$
|
13,738
|
||
Non-reportable segments
|
750
|
738
|
518
|
|||||
Unallocated amounts:
|
||||||||
Current assets
(1)
|
6,070
|
5,488
|
7,402
|
|||||
Investments
(2)
|
12
|
1,638
|
1,490
|
|||||
Property, plant and equipment, net
(3)
|
1,681
|
1,692
|
1,657
|
|||||
Other non-current assets
(4)
|
5,969
|
5,635
|
5,258
|
|||||
Total assets
|
$
|
27,899
|
$
|
28,527
|
$
|
30,063
|
(1) |
Includes current corporate assets, primarily cash, short-term investments, current portion of long-term derivative assets and deferred taxes.
|
(2) |
Primarily represents the equity earnings of 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.
|
· |
In the Display Technologies segment, three customers accounted for 65% of total segment sales.
|
· |
In the Optical Communications segment, one customer accounted for 15% of total segment sales.
|
· |
In the Environmental Technologies segment, three customers accounted for 85% 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,
|
||||||||
Revenues from External Customers
|
2016
|
2015
|
2014
|
|||||
Display Technologies
|
$
|
3,238
|
$
|
3,086
|
$
|
3,851
|
||
Optical Communications
|
||||||||
Carrier network
|
2,274
|
2,194
|
2,036
|
|||||
Enterprise network
|
731
|
786
|
616
|
|||||
Total Optical Communications
|
3,005
|
2,980
|
2,652
|
|||||
Environmental Technologies
|
||||||||
Automotive and other
|
585
|
528
|
528
|
|||||
Diesel
|
447
|
525
|
564
|
|||||
Total Environmental Technologies
|
1,032
|
1,053
|
1,092
|
|||||
Specialty Materials
|
||||||||
Corning Gorilla Glass
|
807
|
810
|
846
|
|||||
Advanced optics and other specialty glass
|
317
|
297
|
359
|
|||||
Total Specialty Materials
|
1,124
|
1,107
|
1,205
|
|||||
Life Sciences
|
||||||||
Labware
|
512
|
512
|
536
|
|||||
Cell culture products
|
327
|
309
|
326
|
|||||
Total Life Science
|
839
|
821
|
862
|
|||||
All Other
|
152
|
64
|
53
|
|||||
$
|
9,390
|
$
|
9,111
|
$
|
9,715
|
2016
|
2015
|
2014
|
|||||||||||||||
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
|
$
|
2,625
|
$
|
6,473
|
$
|
2,719
|
$
|
8,241
|
$
|
2,275
|
$
|
7,998
|
|||||
Canada
|
282
|
142
|
244
|
144
|
311
|
||||||||||||
Mexico
|
50
|
134
|
37
|
135
|
35
|
50
|
|||||||||||
Total North America
|
2,957
|
6,749
|
3,000
|
8,520
|
2,621
|
8,048
|
|||||||||||
Asia Pacific
|
|||||||||||||||||
Japan
|
450
|
1,008
|
440
|
1,160
|
608
|
1,311
|
|||||||||||
Taiwan
|
840
|
2,347
|
841
|
2,301
|
1,092
|
2,005
|
|||||||||||
China
|
2,083
|
1,140
|
1,869
|
1,036
|
1,893
|
1,115
|
|||||||||||
Korea
|
1,444
|
3,413
|
1,501
|
3,552
|
1,882
|
3,595
|
|||||||||||
Other
|
363
|
167
|
331
|
98
|
308
|
109
|
|||||||||||
Total Asia Pacific
|
5,180
|
8,075
|
4,982
|
8,147
|
5,783
|
8,135
|
|||||||||||
Europe
|
|||||||||||||||||
Germany
|
363
|
154
|
326
|
189
|
397
|
217
|
|||||||||||
France
|
83
|
266
|
90
|
263
|
81
|
277
|
|||||||||||
United Kingdom
|
182
|
41
|
164
|
47
|
187
|
47
|
|||||||||||
Other
|
352
|
1,047
|
311
|
987
|
369
|
1,109
|
|||||||||||
Total Europe
|
980
|
1,508
|
891
|
1,486
|
1,034
|
1,650
|
|||||||||||
All Other
|
273
|
44
|
238
|
36
|
277
|
55
|
|||||||||||
Total
|
$
|
9,390
|
$
|
16,376
|
$
|
9,111
|
$
|
18,189
|
$
|
9,715
|
$
|
17,888
|
(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.
|
(2) |
Net sales are attributed to countries based on location of customer.
|
Year ended December 31, 2016
|
Balance at
beginning of period |
Additions
|
Net
deductions and other |
Balance at
end of period |
|||||||
Doubtful accounts and allowances
|
$
|
48
|
$
|
11
|
$
|
59
|
|||||
Deferred tax valuation allowance
|
$
|
238
|
$
|
55
|
$
|
23
|
$
|
270
|
|||
Accumulated amortization of purchased intangible assets
|
$
|
265
|
$
|
64
|
$
|
4
|
$
|
325
|
|||
Reserves for accrued costs of business restructuring
|
$
|
3
|
$
|
15
|
$
|
13
|
$
|
5
|
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
|
2016
|
First
quarter |
Second
quarter |
Third
quarter |
Fourth
quarter |
Total
year |
|||||||||
Net sales
|
$
|
2,047
|
$
|
2,360
|
$
|
2,507
|
$
|
2,476
|
$
|
9,390
|
||||
Gross margin
|
$
|
764
|
$
|
951
|
$
|
1,041
|
$
|
990
|
$
|
3,746
|
||||
Equity in earnings of affiliated companies
|
$
|
59
|
$
|
41
|
$
|
19
|
$
|
165
|
$
|
284
|
||||
Benefit (provision) for income taxes
|
$
|
304
|
$
|
504
|
$
|
27
|
$
|
(832)
|
$
|
3
|
||||
Net (loss) income attributable to Corning Incorporated
|
$
|
(368)
|
$
|
2,207
|
$
|
284
|
$
|
1,572
|
$
|
3,695
|
||||
Basic (loss) earnings per common share
|
$
|
(0.36)
|
$
|
2.06
|
$
|
0.27
|
$
|
1.64
|
$
|
3.53
|
||||
Diluted (loss) earnings per common share
|
$
|
(0.36)
|
$
|
1.87
|
$
|
0.26
|
$
|
1.47
|
$
|
3.23
|
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
|
1.
|
Awards of Rights
. Corning hereby awards to the employee (the "Employee") Incentive Stock Rights (the "Incentive Stock 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 2017 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 2017 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, 2020, 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, 2020, 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, 2020, the Employee's "earned" Incentive Stock Rights shall be paid, net of tax withholdings, as of April 15, 2020 and distributed as net shares of Common Stock within 30 days following April 15, 2020.
|
|||
(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.
|
|||
1.
|
Restrictive Covenants
.
|
||
(a)
|
Acknowledgment – Confidential Information
.
|
||
The Employee understands that the nature of Employee's position gives the Employee access to and knowledge of Company Confidential Information (as defined below) and places the Employee in a position of trust and confidence with the Company. Employee acknowledges that Employee's exposure to Company Confidential Information, both of a technical and business nature, within Corning will be extensive, due to the open communication and teamwork required for the success of the Company, and especially due to the level of responsibility for the businesses that is required in the position held by Employee. For purposes of this Agreement, "Company Confidential Information" includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, of the Company, or of any other person or entity that has entrusted information to the Company in confidence. Company Confidential Information also includes other information that is marked or otherwise identified or treated as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used. The Employee understands and agrees that Company Confidential Information includes information developed by the Employee in the course of the Employee's employment by the Company as if the Company furnished the same Company Confidential Information to the Employee in the first instance. Company Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Employee, provided that such disclosure is through no direct or indirect fault of the Employee or person(s) acting on the Employee's behalf.
|
|||
(b)
|
Acknowledgment – Leadership Role.
|
||
The Employee understands and acknowledges that the leadership, management and intellectual services the Employee provides to the Company are unique and special. The Employee further understands and acknowledges that the Company's ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure of such services or Company Confidential Information by the Employee is likely to result in unfair or unlawful competitive activity.
|
|||
(c)
|
Non-Competition and Non-Solicitation
.
|
||
Because of Company's legitimate business interest as described herein and the good and valuable consideration offered to the Employee through the Plan, during the term of Employee's employment and for the term of two (2) years, to run consecutively, beginning on the last day of the Employee's employment with the Company, for any reason or no reason and whether employment is terminated at the option of the Employee or the Company, the Employee agrees and covenants not to engage in Prohibited Activity.
|
|||
For purposes of this non-compete clause, "
Prohibited Activity
" is activity in which
|
||
i)
Employee contributes the Employee's knowledge, directly or indirectly, in whole or in part, as an employee, company, owner, operator, manager, advisor, consultant, agent, partner, director, stockholder, officer, volunteer, intern, or any other similar capacity to an entity engaged in the same or similar business as the Company. Prohibited Activity also includes activity that may require or inevitably require disclosure of Company trade secrets, proprietary information, or Confidential Information; or
|
||
ii)
Employee recruits, solicits, or hires any employee, consultant, agent, director or officer of Company or contacts, recruits, solicits or induces, or attempts to contact, recruit, solicit or induce, any employee, consultant, agent, director or officer of Company to terminate his/her employment with, or otherwise adversely change, reduce, or cease any relationship with Company if the hiring of such individual would involve, or is likely to involve, the unauthorized use or disclosure of Company's Confidential Information; or
|
||
iii)
Employee contacts, solicits, diverts, takes away, or attempts to contact, solicit, divert or take away, any clients, customers or accounts, or prospective clients, customers or accounts, of Company, or any of Company's business with such clients, customers or accounts Company which were contacted, solicited or served by Employee, or were directly or indirectly under Employee's responsibility, while employed by Company, or the identity of which Employee became aware during the term of employment except as agreed upon in writing signed by a duly authorized officer of Company.
|
||
It is not a Prohibited Activity for Employee to purchase or own less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that the Employee is not a controlling person of, or a member of a group that controls, such corporation.
|
||
(d)
|
Non-Disparagement
.
|
|
The Employee agrees and covenants that the Employee will not at any time make, publish, or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments, or statements concerning the Company or its businesses, or any of its employees, officers and existing and prospective customers, suppliers, investors, and other associated third parties. This Section does not, in any way, restrict or impede the Employee from exercising protected rights to the extent that such rights cannot be waived by agreement, including but not limited to Employee's Section 7 of this Appendix A rights under the NLRA, or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order.
|
||
2.
|
Future Employment
.
|
|
(a)
Prior to commencing new employment immediately subsequent to Employee's employment with Company, Employee will provide to Company a full description of such new employment along with written assurance from such new employer that such new employment does not conflict with Employee's obligations under this Agreement or under the Employee Patent and Proprietary Information Agreement. Employee also agrees to notify Employee's new employer of the restrictions contained in this Agreement, and Corning reserves the right to do so in any event.
|
||
(b)
If, for a period of six months following separation from employment with Company, Employee fails, after conscientious and diligent effort, to obtain an offer of employment which is consistent with Employee's education, training, occupational experience, general ability and reasonable salary expectations, and, he/she believes that such failure is due to the restrictions of this Agreement, Employee shall provide written notice thereof to Company's Sr. Vice President of Human Resources. Within thirty (30) days after receipt of such notice, Corning shall meet with Employee to discuss options for minimizing any detrimental effect on Employee due to this Agreement. Any Corning steps to minimize such detrimental effect shall be conditioned upon continued conscientious and diligent effort by Employee to secure new employment.
|
3.
|
Remedies
, Choice of Law
.
|
||
(a)
In the event of a breach or threatened breach by the Employee of any of the provisions of this Agreement, the Employee hereby consents and agrees that the Company shall be entitled to, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages, or other available forms of relief.
|
|||
(b)
The law governing this Agreement and any dispute arising out of, relating to or in connection with the Agreement shall be the laws of the State of New York, without regard to its principles of conflicts of law. In the event of litigation, any action shall be venued in either the Supreme Court of the State of New York, Steuben County or in the United States District Court for the Western District of New York.
|
|||
4.
|
Entire Agreement
, No Conflict
.
|
||
(a)
Unless specifically provided herein, this Agreement contains all the understandings and representations between the Employee and Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations, and warranties, both written and oral, with respect to such subject matter, including any prior versions of a Non-Compete Agreement attached as Appendix A to the Incentive Stock Rights Agreement or any business unit particular non-compete employee may have signed.
|
|||
(b)
Nothing in this Agreement shall be construed to in any way terminate, supersede, undermine, or otherwise modify the "at-will" status of the employment relationship between the Company and the Employee, pursuant to which either the Company or the Employee may terminate the employment relationship at any time, with or without cause, and with or without notice.
|
|||
(c)
Nothing in this Agreement shall be construed to in any way terminate, supersede, undermine, or otherwise modify the Employee Patent and Proprietary Information Agreement Employee signed with Company.
|
|||
5.
|
Severability
, DTSA Immunity
.
|
||
(a)
Should any provision of this Agreement be held by the arbitral authority or a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding on the Parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement. The Parties further agree that any such arbitral authority or court is expressly authorized to modify any unenforceable provision of this Agreement in lieu of severing the unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making any other modifications as it deems warranted to carry out the intent and agreement of the Parties as embodied herein to the maximum extent permitted by law. The Parties expressly agree that this Agreement as so modified by the arbitral authority or court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
|
|||
(b)
Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 ("DTSA"). Notwithstanding any other provision of this Agreement:
|
|||
(i)
The Employee will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that:
|
|||
(A)
is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or
|
|||
(B)
is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.
|
|||
(ii)
if the Employee files a lawsuit for retaliation by the Employer for reporting a suspected violation of law, the Employee may disclose the Employer's trade secrets to the Employee's attorney and use the trade secret information in the court proceeding if the Employee:
|
|||
(A)
files any document containing the trade secret under seal; and
|
|||
(B)
does not disclose the trade secret, except pursuant to court order.
|
1.
|
Award of Units
. Each Cash Unit shall entitle the Employee to receive from the Company an amount equal to $1 (one US Dollar). 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 31
st
2017, 2018 and 2019 (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.
|
|
For purposes of determining the number of Cash Units that the Employee will earn at the end of the Performance Period, performance will be calculated as the simple average of the actual level of attainment of the Performance Targets for each Annual Performance Period as determined by the Committee. Any Cash Units that are not earned pursuant to Sections 3 and 4 at the end of the Performance Period shall be forfeited.
|
||
(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;
|
||
provided
,
however
, that 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 Company Group.
|
|||
(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 15
th
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).
|
|
IN WITNESS WHEREOF, this Agreement has been duly executed by Corning.
|
||
CORNING INCORPORATED
|
||
By:
|
John P. MacMahon
|
|
Senior Vice President, Global Compensation & Benefits
|
||
Corning Incorporated
|
1.1
Award of RSUs and Divident Equivalents.
|
||
(a)
The Company has granted the RSUs to Participant effective as of the grant date set forth in the Grant Notice (the
"Grant Date"
). Each RSU represents the right to receive one Share or, at the option of the Company, an amount of cash, in either case, as set forth in this Agreement. Participant will have no right to the distribution of any Shares or payment of any cash until the tmie (if ever) the RSUs have vested.
|
||
(b)
The Company hereby grants to Participant, with respect to each RSU, a Dividend Equivalent (as defined below) for ordinary cash dividends paid to substantially all holders of outstanding Shares with a record date after the Grant Date and prior to the date the applicable RSU is settled, forfeited or otherwise expires. Each "
Dividend Equivalent
" entitles Participant to receive the equivalent value of any such ordinary cash dividends paid on a single Share.
|
||
1.2
Incorporation of Terms of Plan
. The RSUs are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control, except with respect to the payment of Dividend Equivalents.
|
||
1.3
Unsecured Promise
. The RSUs and Dividend Equivalents will at all times prior to settlement represent an unsecured Company obligation payable only from the Company's general assets.
|
2.1
Vesting; Forfeiture.
|
|||
(a)
The RSUs will vest according to the vesting schedule in the Grant Notice except that any fraction of an RSU that would otherwise be vested will be accumulated and will vest only when a whole RSU has accumulated. In the event of Participant's ceases to be a Director for any reason (a "
Termination of Service
"), all unvested RSUs will immediately and automatically be cancelled and forfeited, except as otherwise determined by the Committee or set forth below.
|
|||
(b)
Notwithstanding any contrary provision of this Agreement, in the event of a Change of Control, all unvested RSUs will vest in full immediately prior to the Change of Control. For purposes of this Agreement, "
Change of Control"
shall mean an event that is a "change in control event," as defined in U.S. Treasury Regulation Section 1.409A-3(i)(5) and that also falls within one of the following circumstances.
|
|||
(i)
an offerer (other than the Company) purchases Shares 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, as amended) is or becomes the beneficial owner, directly or indirectly, of the Company's securities representing 50% or more of the combined voting power of the Company's then outstanding securities;
|
|||
(iii)
the membership of the Board 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 as a result of such a contested election or elections occurring within the previous two years;
|
(iv)
the consummation of a merger in which the Company is not the surviving corporation; or
|
|||
(v)
a sale or disposition of all or substantially all of the Company's assets.
|
|||
2.2
Settlement.
|
|||
(a)
Participant's vested RSUs will be distributed in Shares (either in book-entry form or otherwise) or, at the option of the Company, paid in an amount of cash as set forth in Section 2.2(b), in either case, on the earliest to occur of the following dates:
|
|||
(i)
the date of the occurrence of a Change of Control; or
|
|||
(ii)
subject to Section 2.2(c), in the seventh month following the date of Participant's separation from service (as defined in Section 409A) for any reason or death; provided, that if Participant has made a distribution election that applies to amounts allocated to Participant's Restricted Stock Unit Account under the Company's Deferred Compensation Plan for Directors for the same calendar year in which the Grant Date occurs and the timing of such election does not cause the RSUs to violate Section 409A of the Code ("
Section 409A
"), then such distribution election shall also apply to the RSUs and the Shares (or cash) distributed from the RSUs shall be made in a lump sum or in installments as may have been elected by Participant.
|
|||
(b)
In the event that the Company elects to make payment of Participant's RSUs in cash, the amount of cash payable with respect to each RSU shall be equal to the closing price of a Share on the New York Stock Exchange ("
Fair Market Value
") on the day immediately preceding the applicable distribution or payment date set forth in Section 2.2(a). All distributions made in Shares shall be made by the Company in the form of whole Shares, and any fractional share shall be distributed in cash in an amount equal to the value of such fractional share determined based on the Fair Market Value as of the date immediately preceding the date of such distribution.
|
|||
(c)
Notwithstanding any provisions of this Agreement or the Plan to the contrary, the time of distribution of the RSUs under this Agreement may not be changed except as may be permitted by the Committee in accordance with Section 409A of the Code and the applicable Treasury Regulations promulgated thereunder.
|
3.1
Adjustments
. Participant acknowledges that the RSUs, the Shares subject to the RSUs and the Dividend Equivalents are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.
|
||
3.2
Taxes
. Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the RSUs and the Dividend Equivalents. Neither the Company nor any subsidiary makes any representation or undertaking regarding the taxes that may arise in connection with the awarding, vesting or payment of the RSUs or the Dividend Equivalents or the subsequent sale of Shares.
|
||
3.3
Notices.
Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company's Secretary at the Company's principal office or the Secretary's then-current email address or facsimile number. Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participant's last known mailing address, email address or facsimile number in the Company's personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.
|
||
3.4
Titles
. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement
|
||
3.5
Conformity to Securities Laws
. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all applicable laws and, to the extent applicable laws permit, will be deemed amended as necessary to conform to applicable laws.
|
3.6
Successors and Assigns
. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
|
||
3.7
Entire Agreement
. The Plan, the Grant Notice and this Agreement (including any agreements referenced herein) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
|
||
3.8
Agreement Severable
. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.
|
||
3.9
Limitation on Participant's Rights
. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs and Dividend Equivalents, and rights no greater than the right to receive cash or the Shares as a general unsecured creditor with respect to the RSUs and Dividend Equivalents, as and when settled pursuant to the terms of this Agreement.
|
||
3.10
Not a Contract of Employment
. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any subsidiary or interferes with or restricts in any way the rights of the Company and its subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause.
|
Fiscal years ended December 31,
|
||||||||||||||
2016
|
2015
|
2014
|
2013
|
2012
|
||||||||||
Income from operations before taxes on income
|
$
|
3,692
|
$
|
1,486
|
$
|
3,568
|
$
|
2,473
|
$
|
1,975
|
||||
Adjustments:
|
||||||||||||||
Equity in earnings of equity affiliates
|
(284)
|
(299)
|
(266)
|
(547)
|
(810)
|
|||||||||
Distributed income of equity affiliates
(1)
|
85
|
143
|
1,704
|
629
|
1,089
|
|||||||||
Net income attributable to noncontrolling interests
|
10
|
10
|
3
|
(5)
|
||||||||||
Fixed charges net of capitalized interest
|
195
|
171
|
159
|
148
|
138
|
|||||||||
Earnings before taxes and fixed charges as adjusted
|
$
|
3,698
|
$
|
1,511
|
$
|
5,168
|
$
|
2,703
|
$
|
2,387
|
||||
Fixed charges:
|
||||||||||||||
Interest incurred
|
$
|
179
|
$
|
172
|
$
|
160
|
$
|
153
|
$
|
181
|
||||
Portion of rent expense which represents an appropriate interest factor
(2)
|
35
|
31
|
36
|
28
|
27
|
|||||||||
Amortization of debt costs
|
4
|
3
|
3
|
2
|
4
|
|||||||||
Total fixed charges
|
$
|
218
|
$
|
206
|
$
|
199
|
$
|
183
|
$
|
212
|
||||
Preferred stock grossed up to a pre-tax basis
|
98
|
109
|
136
|
|||||||||||
Combined fixed charges and preferred stock dividends
|
$
|
316
|
$
|
315
|
$
|
335
|
$
|
183
|
$
|
212
|
||||
Ratio of earnings to fixed charges
|
17.0x
|
7.3x
|
26.0x
|
14.8x
|
11.3x
|
|||||||||
Ratio of earnings to combined fixed charges and preferred stock dividends
|
11.7x
|
4.8x
|
15.4x
|
14.8x
|
11.3x
|
(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 D. Rieman
|
||
Deborah D. Rieman
|
/s/
|
Hansel E. Tookes II
|
||
Hansel E. Tookes II
|
/s/
|
Wendell P. Weeks
|
||
Wendell P. Weeks
|
/s/
|
Mark S. Wrighton
|
||
Mark S. Wrighton
|
1. |
I have reviewed this Annual Report on Form 10-K of Corning Incorporated;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the 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
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: February 6, 2017
|
|
/s/ Wendell P. Weeks
|
|
Wendell P. Weeks
|
|
Chairman, Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
1. |
I have reviewed this annual report on Form 10-K of Corning Incorporated;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the 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
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: February 6, 2017
|
|
/s/ R. Tony Tripeny
|
|
R. Tony Tripeny
|
|
Senior Vice President and Chief Financial Officer
|
|
(Principal Financial Officer)
|
(1) |
the Annual Report of the Company on Form 10-K for the annual period ended December 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
that information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: February 6, 2017
|
|
/s/ Wendell P. Weeks
|
|
Wendell P. Weeks
|
|
Chairman, Chief Executive Officer and President
|
|
/s/ R. Tony Tripeny
|
|
R. Tony Tripeny
|
|
Senior Vice President and Chief Financial Officer
|