x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended June 30, 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
|
|
(Exact name of registrant as specified in its charter)
|
New York
|
16-0393470
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
One Riverfront Plaza, Corning, New York
|
14831
|
|
(Address of principal executive offices)
|
(Zip Code)
|
|
607-974-9000
|
|
(Registrant’s telephone number, including area code)
|
Yes
|
x
|
No
|
¨
|
Yes
|
x
|
No
|
¨
|
Large accelerated filer
|
x
|
Accelerated filer
|
¨
|
|||
Non-accelerated filer
|
¨
|
Smaller reporting company
|
¨
|
Yes
|
¨
|
No
|
x
|
Class
|
Outstanding as of July 15, 2016
|
|
Corning’s Common Stock, $0.50 par value per share
|
1,036,877,161 shares
|
PART I – FINANCIAL INFORMATION
|
||
Page
|
||
Item 1. Financial Statements
|
||
Consolidated Statements of Income (Unaudited) for the three and six months ended June 30, 2016 and 2015
|
3
|
|
Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30, 2016 and 2015
|
4
|
|
Consolidated Balance Sheets (Unaudited) at June 30, 2016 and December 31, 2015
|
5
|
|
Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2016 and 2015
|
6
|
|
Notes to Consolidated Financial Statements (Unaudited)
|
7
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
29
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
58
|
|
Item 4. Controls and Procedures
|
58
|
|
PART II – OTHER INFORMATION
|
||
Item 1. Legal Proceedings
|
59
|
|
Item 1A. Risk Factors
|
59
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
60
|
|
Item 6. Exhibits
|
61
|
|
Signatures
|
62
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Net sales
|
$
|
2,360
|
$
|
2,343
|
$
|
4,407
|
$
|
4,608
|
|||
Cost of sales
|
1,409
|
1,368
|
2,692
|
2,704
|
|||||||
Gross margin
|
951
|
975
|
1,715
|
1,904
|
|||||||
Operating expenses:
|
|||||||||||
Selling, general and administrative expenses
|
499
|
337
|
802
|
653
|
|||||||
Research, development and engineering expenses
|
192
|
191
|
382
|
380
|
|||||||
Amortization of purchased intangibles
|
15
|
16
|
29
|
28
|
|||||||
Restructuring, impairment and other charges
|
(2)
|
78
|
|||||||||
Operating income
|
247
|
431
|
424
|
843
|
|||||||
Equity in earnings of affiliated companies
|
41
|
62
|
100
|
156
|
|||||||
Interest income
|
6
|
5
|
12
|
10
|
|||||||
Interest expense
|
(40)
|
(33)
|
(81)
|
(63)
|
|||||||
Translated earnings contract (loss) gain, net
|
(1,201)
|
162
|
(2,058)
|
191
|
|||||||
Gain on realignment of equity investment
|
2,676
|
2,676
|
|||||||||
Other expense, net
|
(26)
|
(21)
|
(42)
|
(38)
|
|||||||
Income before income taxes
|
1,703
|
606
|
1,031
|
1,099
|
|||||||
Benefit (provision) for income taxes (Note 5)
|
504
|
(110)
|
808
|
(196)
|
|||||||
Net income attributable to Corning Incorporated
|
$
|
2,207
|
$
|
496
|
$
|
1,839
|
$
|
903
|
|||
Earnings per common share attributable to Corning Incorporated:
|
|||||||||||
Basic (Note 6)
|
$
|
2.06
|
$
|
0.38
|
$
|
1.66
|
$
|
0.68
|
|||
Diluted (Note 6)
|
$
|
1.87
|
$
|
0.36
|
$
|
1.53
|
$
|
0.65
|
|||
Dividends declared per common share (1)
|
$
|
0.135
|
$
|
0.12
|
$
|
0.27
|
$
|
0.12
|
(1)
|
The first quarter 2015 dividend was declared on December 3, 2014.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Net income attributable to Corning Incorporated
|
$
|
2,207
|
$
|
496
|
$
|
1,839
|
$
|
903
|
|||
Foreign currency translation adjustments and other
|
196
|
(40)
|
624
|
(296)
|
|||||||
Net unrealized (losses) gains on investments
|
(1)
|
(3)
|
1
|
||||||||
Unamortized gains (losses) and prior service credits (costs) for postretirement benefit plans
|
265
|
5
|
265
|
6
|
|||||||
Net unrealized (losses) gains on designated hedges
|
(22)
|
(41)
|
5
|
||||||||
Other comprehensive income (loss), net of tax (Note 15)
|
438
|
(35)
|
845
|
(284)
|
|||||||
Comprehensive income attributable to Corning Incorporated
|
$
|
2,645
|
$
|
461
|
$
|
2,684
|
$
|
619
|
June 30,
2016
|
December 31,
2015
|
||||
Assets
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
7,144
|
$
|
4,500
|
|
Short-term investments, at fair value
|
100
|
||||
Trade accounts receivable, net of doubtful accounts and allowances - $60 and $48
|
1,544
|
1,372
|
|||
Inventories, net of inventory reserves - $157 and $146 (Note 8)
|
1,501
|
1,385
|
|||
Other current assets
|
558
|
912
|
|||
Total current assets
|
10,747
|
8,269
|
|||
Investments (Note 9)
|
346
|
1,975
|
|||
Property, plant and equipment, net of accumulated depreciation - $9,974 and $9,188
|
13,048
|
12,648
|
|||
Goodwill, net (Note 10)
|
1,569
|
1,380
|
|||
Other intangible assets, net (Note 10)
|
804
|
706
|
|||
Deferred income taxes (Note 5)
|
2,952
|
2,056
|
|||
Other assets
|
1,187
|
1,493
|
|||
Total Assets
|
$
|
30,653
|
$
|
28,527
|
|
Liabilities and Equity
|
|||||
Current liabilities:
|
|||||
Current portion of long-term debt and short-term borrowings (Note 4)
|
$
|
279
|
$
|
572
|
|
Accounts payable
|
938
|
934
|
|||
Other accrued liabilities (Note 3 and Note 12)
|
1,231
|
1,308
|
|||
Total current liabilities
|
2,448
|
2,814
|
|||
Long-term debt (Note 4)
|
3,918
|
3,890
|
|||
Postretirement benefits other than pensions (Note 11)
|
710
|
718
|
|||
Other liabilities (Note 3 and Note 12)
|
3,905
|
2,242
|
|||
Total liabilities
|
10,981
|
9,664
|
|||
Commitments, contingencies and guarantees (Note 3)
|
|||||
Shareholders’ equity (Note 15):
|
|||||
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: 1,685 million and 1,681 million
|
842
|
840
|
|||
Additional paid-in capital – common stock
|
13,668
|
13,352
|
|||
Retained earnings
|
15,331
|
13,832
|
|||
Treasury stock, at cost; Shares held: 648 million and 551 million
|
(11,566)
|
(9,725)
|
|||
Accumulated other comprehensive loss
|
(966)
|
(1,811)
|
|||
Total Corning Incorporated shareholders’ equity
|
19,609
|
18,788
|
|||
Noncontrolling interests
|
63
|
75
|
|||
Total equity
|
19,672
|
18,863
|
|||
Total Liabilities and Equity
|
$
|
30,653
|
$
|
28,527
|
Six months ended
June 30,
|
|||||
2016
|
2015
|
||||
Cash Flows from Operating Activities:
|
|||||
Net income
|
$
|
1,839
|
$
|
903
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||
Depreciation
|
561
|
562
|
|||
Amortization of purchased intangibles
|
29
|
28
|
|||
Restructuring, impairment and other charges
|
78
|
||||
Stock compensation charges
|
23
|
25
|
|||
Equity in earnings of affiliated companies
|
(100)
|
(156)
|
|||
Dividends received from affiliated companies
|
20
|
95
|
|||
Deferred tax (benefit) provision
|
(898)
|
31
|
|||
Restructuring payments
|
(7)
|
(23)
|
|||
Employee benefit payments less than (in excess of) expense
|
15
|
(8)
|
|||
Losses (gains) on foreign currency hedges related to translated earnings
|
2,058
|
(191)
|
|||
Unrealized translation (gains) losses on transactions
|
(124)
|
236
|
|||
Gain on realignment of equity investment
|
(2,676)
|
||||
Changes in certain working capital items:
|
|||||
Trade accounts receivable
|
(103)
|
(25)
|
|||
Inventories
|
(66)
|
(54)
|
|||
Other current assets
|
(71)
|
(100)
|
|||
Accounts payable and other current liabilities
|
(115)
|
(191)
|
|||
Other, net
|
(20)
|
16
|
|||
Net cash provided by operating activities
|
443
|
1,148
|
|||
Cash Flows from Investing Activities:
|
|||||
Capital expenditures
|
(533)
|
(641)
|
|||
Acquisitions of business, net of cash acquired
|
(279)
|
(531)
|
|||
Investment in unconsolidated entities
|
(14)
|
(33)
|
|||
Cash received on realignment of equity investment
|
4,818
|
||||
(Payments) proceeds from loan repayments from unconsolidated entities
|
(3)
|
6
|
|||
Short-term investments – acquisitions
|
(20)
|
(570)
|
|||
Short-term investments – liquidations
|
121
|
825
|
|||
Realized gains on foreign currency hedges related to translated earnings
|
145
|
321
|
|||
Other, net
|
3
|
||||
Net cash provided by (used in) investing activities
|
4,238
|
(623)
|
|||
Cash Flows from Financing Activities:
|
|||||
Net repayments of short-term borrowings and current portion of long-term debt
|
(64)
|
||||
Principal payments under capital lease obligations
|
(1)
|
(1)
|
|||
Proceeds from issuance of short-term debt
|
2
|
||||
Proceeds from issuance of long-term debt
|
745
|
||||
Payments from issuance of commercial paper
|
(230)
|
||||
Payments from settlement of interest rate swap arrangements
|
(10)
|
||||
Proceeds from the exercise of stock options
|
27
|
98
|
|||
Repurchases of common stock for treasury
|
(1,515)
|
(1,093)
|
|||
Dividends paid
|
(340)
|
(350)
|
|||
Net cash used in financing activities
|
(2,123)
|
(609)
|
|||
Effect of exchange rates on cash
|
86
|
(257)
|
|||
Net increase (decrease) in cash and cash equivalents
|
2,644
|
(341)
|
|||
Cash and cash equivalents at beginning of period
|
4,500
|
5,309
|
|||
Cash and cash equivalents at end of period
|
$
|
7,144
|
$
|
4,968
|
Reserve at
January 1,
2016
|
Net
Charges/
Reversals
|
Non-cash
adjustments
|
Cash
payments
|
Reserve at
June 30,
2016
|
||||||||||
Restructuring:
|
||||||||||||||
Employee related costs
|
$
|
3
|
$
|
15
|
$
|
(1)
|
$
|
(6)
|
$
|
11
|
||||
Other charges
|
1
|
(1)
|
||||||||||||
Total restructuring activity
|
$
|
3
|
$
|
16
|
$
|
(1)
|
$
|
(7)
|
$
|
11
|
||||
Disposal of long-lived assets
|
$
|
62
|
||||||||||||
Total restructuring, impairment and other charges
|
$
|
78
|
Operating segment
|
Employee-
related
and other
charges
|
|
Display Technologies
|
$
|
4
|
Optical Communications
|
6
|
|
Environmental Technologies
|
5
|
|
Specialty Materials
|
12
|
|
Life Sciences
|
3
|
|
All Other
|
40
|
|
Corporate
|
8
|
|
Total restructuring, impairment and other charges
|
$
|
78
|
Amended PCC Plan
|
Non-PCC
|
Total Asbestos
Litigation Liability
|
|||||||||
Equity
Interests
|
Fixed Series
of Payments
|
||||||||||
Fair Value of Asbestos Litigation Liability as of Dec. 31, 2015
|
$
|
238
|
$
|
290
|
$
|
150
|
$
|
678
|
|||
Less: Contribution of PCC & PCE Equity Interests - Carrying Value
|
182
|
-
|
-
|
182
|
|||||||
Gain on Contribution of Equity Interests
|
56
|
-
|
-
|
56
|
|||||||
Asbestos Litigation Liability as of June 30, 2016
|
$
|
-
|
$
|
290
|
$
|
150
|
$
|
440
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Benefit (provision) for income taxes
|
$
|
504
|
$
|
(110)
|
$
|
808
|
$
|
(196)
|
|||
Effective tax rate
|
(29.6%)
|
18.2%
|
(78.4%)
|
17.8%
|
·
|
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; and
|
·
|
The tax-free nature of the realignment of our equity interests 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; and
|
·
|
The impact of equity in earnings of nonconsolidated affiliates reported in the financials, net of tax.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Net income attributable to Corning Incorporated
|
$
|
2,207
|
$
|
496
|
$
|
1,839
|
$
|
903
|
|||
Less: Series A convertible preferred stock dividend
|
24
|
24
|
49
|
49
|
|||||||
Net income available to common stockholders - basic
|
2,183
|
472
|
1,790
|
854
|
|||||||
Plus: Series A convertible preferred stock dividend
|
24
|
24
|
49
|
49
|
|||||||
Net income available to common stockholders - diluted
|
$
|
2,207
|
$
|
496
|
$
|
1,839
|
$
|
903
|
|||
Weighted-average common shares outstanding - basic
|
1,059
|
1,246
|
1,081
|
1,257
|
|||||||
Effect of dilutive securities:
|
|||||||||||
Stock options and other dilutive securities
|
8
|
10
|
8
|
11
|
|||||||
Series A convertible preferred stock
|
115
|
115
|
115
|
115
|
|||||||
Weighted-average common shares outstanding - diluted
|
1,182
|
1,371
|
1,204
|
1,383
|
|||||||
Basic earnings per common share
|
$
|
2.06
|
$
|
0.38
|
$
|
1.66
|
$
|
0.68
|
|||
Diluted earnings per common share
|
$
|
1.87
|
$
|
0.36
|
$
|
1.53
|
$
|
0.65
|
|||
Antidilutive potential shares excluded from diluted earnings per common share:
|
|||||||||||
Employee stock options and awards
|
20
|
20
|
21
|
17
|
|||||||
Total
|
20
|
20
|
21
|
17
|
Amortized cost
|
Fair value
|
||||||||||
June 30,
2016
|
December 31,
2015
|
June 30,
2016
|
December 31,
2015
|
||||||||
Bonds, notes and other securities:
|
|||||||||||
U.S. government and agencies
|
$
|
100
|
$
|
100
|
|||||||
Total short-term investments
|
$
|
100
|
$
|
100
|
|||||||
Asset-backed securities (1)
|
$
|
34
|
$
|
37
|
$
|
30
|
$
|
33
|
|||
Total long-term investments
|
$
|
34
|
$
|
37
|
$
|
30
|
$
|
33
|
1)
|
Due after 10 years and are being reported at their final maturity dates.
|
June 30,
2016
|
December 31,
2015
|
||||
Finished goods
|
$
|
633
|
$
|
633
|
|
Work in process
|
293
|
264
|
|||
Raw materials and accessories
|
274
|
200
|
|||
Supplies and packing materials
|
301
|
288
|
|||
Total inventories, net of inventory reserves
|
$
|
1,501
|
$
|
1,385
|
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.
|
Ownership
interest
|
June 30,
2016
|
December 31,
2015
|
|||||||
Affiliated companies accounted for by the equity method
|
|||||||||
Dow Corning (1)
|
50%
|
$
|
1,483
|
||||||
All other (1)
|
20%
|
to
|
50%
|
$
|
279
|
422
|
|||
279
|
1,905
|
||||||||
Other investments
|
67
|
70
|
|||||||
Subtotal Investment Assets
|
$
|
346
|
$
|
1,975
|
|||||
Affiliated companies accounted for by the equity method
|
|||||||||
HSG (2)(3)
|
50%
|
$
|
361
|
||||||
Subtotal Investment Liabilities
|
$
|
361
|
(1)
|
Amounts reflect Corning’s direct ownership interests in the respective affiliated companies at June 30, 2016 and December 31, 2015. Corning does not control any of such entities.
|
(2)
|
The negative carrying value of the investment in HSG, recorded in Other Liabilities, was reduced by $22 million due to equity earnings recognized for the month of June, 2016.
|
(3)
|
HSG indirectly holds an 80.5% interest in a HSG operating partnership.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Statement of Operations:
|
|||||||||||
Net sales
|
$
|
898
|
$
|
1,424
|
$
|
2,215
|
$
|
2,788
|
|||
Gross profit (1)
|
$
|
238
|
$
|
364
|
$
|
588
|
$
|
722
|
|||
Net income attributable to Dow Corning (2)
|
$
|
52
|
$
|
113
|
$
|
163
|
$
|
298
|
|||
Corning’s equity in earnings of Dow Corning
|
$
|
26
|
$
|
57
|
$
|
82
|
$
|
149
|
(1)
|
Gross profit for the three and six months ended June 30, 2016 includes research and development costs of $43 million and $100 million (2015: $63 million and $125 million).
|
(2)
|
In the first half of 2015 Dow Corning’s net income included a pre-tax gain of $178 million on the settlement of long-term sales agreements.
|
Optical
Communications
|
Display
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
||||||||||||
Balance at December 31, 2015
|
$
|
439
|
$
|
128
|
$
|
150
|
$
|
562
|
$
|
101
|
$
|
1,380
|
|||||
Acquired goodwill (1)
|
175
|
175
|
|||||||||||||||
Foreign currency translation adjustment
|
8
|
1
|
4
|
1
|
14
|
||||||||||||
Balance at June 30, 2016
|
$
|
622
|
$
|
129
|
$
|
150
|
$
|
566
|
$
|
102
|
$
|
1,569
|
(1)
|
The Company completed an acquisition in the Optical Communications segment during the first half of 2016 with a purchase price of $296 million.
|
June 30, 2016
|
December 31, 2015
|
||||||||||||||||
Gross
|
Accumulated
amortization
|
Net
|
Gross
|
Accumulated
amortization
|
Net
|
||||||||||||
Amortized intangible assets:
|
|||||||||||||||||
Patents, trademarks, and trade names
|
$
|
367
|
$
|
171
|
$
|
196
|
$
|
350
|
$
|
162
|
$
|
188
|
|||||
Customer lists and other
|
733
|
125
|
608
|
621
|
103
|
518
|
|||||||||||
Total
|
$
|
1,100
|
$
|
296
|
$
|
804
|
$
|
971
|
$
|
265
|
$
|
706
|
Pension benefits
|
Postretirement benefits
|
||||||||||||||||||||||
Three months ended
June 30,
|
Six months ended
June 30,
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||||||||||||
2016
|
2015
|
2016
|
2015
|
2016
|
2015
|
2016
|
2015
|
||||||||||||||||
Service cost
|
$
|
21
|
$
|
22
|
$
|
43
|
$
|
45
|
$
|
2
|
$
|
4
|
$
|
4
|
$
|
7
|
|||||||
Interest cost
|
31
|
37
|
62
|
73
|
6
|
8
|
13
|
16
|
|||||||||||||||
Expected return on plan assets
|
(41)
|
(44)
|
(83)
|
(89)
|
|||||||||||||||||||
Amortization of net loss
|
1
|
2
|
|||||||||||||||||||||
Amortization of prior service cost (credit)
|
2
|
1
|
3
|
3
|
(1)
|
(2)
|
(2)
|
(3)
|
|||||||||||||||
Recognition of actuarial loss
|
28
|
8
|
35
|
8
|
|||||||||||||||||||
Total pension and postretirement benefit expense
|
$
|
41
|
$
|
24
|
$
|
60
|
$
|
40
|
$
|
7
|
$
|
11
|
$
|
15
|
$
|
22
|
12.
|
Other Liabilities
|
June 30,
2016
|
December 31,
2015
|
||||
Current liabilities:
|
|||||
Wages and employee benefits
|
$
|
386
|
$
|
491
|
|
Income taxes
|
82
|
53
|
|||
Asbestos and other litigation reserves
|
76
|
238
|
|||
Derivative instruments
|
211
|
55
|
|||
Other current liabilities
|
476
|
471
|
|||
Other accrued liabilities
|
$
|
1,231
|
$
|
1,308
|
|
Non-current liabilities:
|
|||||
Asbestos and other litigation reserves
|
$
|
394
|
$
|
440
|
|
Derivative instruments
|
1,400
|
88
|
|||
Investment in Hemlock Semiconductor Group (1)
|
361
|
||||
Defined benefit pension plan liabilities
|
740
|
672
|
|||
Other non-current liabilities
|
1,010
|
1,042
|
|||
Other liabilities
|
$
|
3,905
|
$
|
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.
|
U.S. Dollar
|
Asset derivatives
|
Liability derivatives
|
|||||||||||||
Gross notional amount
|
Balance
sheet
location
|
Fair value
|
Balance
sheet
location
|
Fair value
|
|||||||||||
June 30,
2016
|
Dec. 31,
2015
|
June 30,
2016
|
Dec. 31,
2015
|
June 30,
2016
|
Dec. 31,
2015
|
||||||||||
Derivatives designated as hedging instruments
|
|||||||||||||||
Foreign exchange contracts (1)
|
$ 584
|
$ 782
|
Other current assets
|
$ 2
|
$ 5
|
Other accrued liabilities
|
$ (55)
|
$ (10)
|
|||||||
Other assets
|
1
|
Other liabilities
|
(25)
|
(23)
|
|||||||||||
Interest rate contracts
|
550
|
550
|
Other assets
|
10
|
Other liabilities
|
(4)
|
|||||||||
Derivatives not designated as hedging instruments
|
|||||||||||||||
Foreign exchange contracts, other
|
717
|
1,095
|
Other current assets
|
3
|
6
|
Other accrued liabilities
|
(53)
|
(12)
|
|||||||
Translated earnings contracts
|
19,128
|
11,972
|
Other current assets
|
98
|
511
|
Other accrued liabilities
|
(103)
|
(33)
|
|||||||
Other assets
|
67
|
472
|
Other liabilities
|
(1,375)
|
(61)
|
||||||||||
Total derivatives
|
$20,979
|
$14,399
|
$180
|
$995
|
$(1,611)
|
$(143)
|
(1)
|
Cash flow hedges with a typical duration of 24 months or less.
|
Effect of designated derivative instruments on the consolidated financial statements
for the three months ended June 30
|
|||||||||||||
Derivatives in hedging relationships
|
Gain/(loss)
recognized in other
comprehensive income
(OCI)
|
Location of gain/(loss)
reclassified from
accumulated OCI into
income (effective)
|
Gain/(loss) reclassified from
accumulated OCI into
income (effective) (1)
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||||
Interest rate hedges
|
$
|
6
|
Sales
|
$
|
5
|
||||||||
Cost of sales
|
$
|
(9)
|
4
|
||||||||||
Foreign exchange contracts
|
$
|
(35)
|
7
|
||||||||||
Total cash flow hedges
|
$
|
(35)
|
$
|
13
|
$
|
(9)
|
$
|
9
|
(1)
|
The amount of hedge ineffectiveness at June 30, 2016 and 2015 was insignificant.
|
Effect of derivative instruments on the consolidated financial statements
for the six months ended June 30
|
|||||||||||||
Derivatives in hedging relationships
|
Gain/(loss)
recognized in other
comprehensive income
(OCI)
|
Location of gain/(loss)
reclassified from
accumulated OCI into
income (effective)
|
Gain/(loss) reclassified from
accumulated OCI into
income (effective) (1)
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||||
Interest rate hedges
|
$
|
(7)
|
Sales
|
$
|
1
|
$
|
10
|
||||||
Cost of sales
|
(14)
|
6
|
|||||||||||
Foreign exchange contracts
|
$
|
(63)
|
34
|
||||||||||
Total cash flow hedges
|
$
|
(63)
|
$
|
27
|
$
|
(13)
|
$
|
16
|
(1)
|
The amount of hedge ineffectiveness at June 30, 2016 and 2015 was insignificant.
|
Undesignated derivatives
|
Location of gain/(loss)
recognized in income
|
Gain (loss) recognized in income
|
|||||||||||
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||||
Foreign exchange contracts – balance sheet
|
Foreign currency hedge gain (loss), net
|
$
|
(13)
|
$
|
2
|
$
|
(28)
|
$
|
13
|
||||
Foreign exchange contracts – loans
|
Foreign currency hedge gain (loss), net
|
(22)
|
(44)
|
2
|
|||||||||
Foreign currency hedges related to translated earnings
|
Foreign currency hedge gain (loss), net
|
(1,201)
|
162
|
(2,058)
|
191
|
||||||||
Total undesignated
|
$
|
(1,236)
|
$
|
164
|
$
|
(2,130)
|
$
|
206
|
Fair value measurements at reporting date using
|
|||||||||||
June 30,
2016
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
Significant other
observable
inputs
(Level 2)
|
Significant
unobservable
inputs
(Level 3)
|
||||||||
Current assets:
|
|||||||||||
Other current assets (1)
|
$
|
103
|
$
|
103
|
|||||||
Non-current assets:
|
|||||||||||
Other assets (1)(2)
|
$
|
344
|
$
|
107
|
$
|
237
|
|||||
Current liabilities:
|
|||||||||||
Other accrued liabilities (1)
|
$
|
211
|
$
|
211
|
|||||||
Non-current liabilities:
|
|||||||||||
Other liabilities (1)(2)
|
$
|
1,408
|
$
|
1,400
|
$
|
8
|
(1)
|
Derivative assets and liabilities include foreign exchange forward and zero-cost collar contracts, and interest rate swaps which are measured using observable quoted prices for similar assets and liabilities.
|
(2)
|
Other assets include asset-backed securities which are measured using observable quoted prices for similar assets and contingent consideration assets or liabilities which are measured by applying an option pricing model using projected future revenue and forecasted foreign exchange rates.
|
Fair value measurements at reporting date using
|
|||||||||||
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.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Beginning balance
|
$
|
(743)
|
$
|
(837)
|
$
|
(1,171)
|
$
|
(581)
|
|||
Other comprehensive income (loss)
|
240
|
(62)
|
625
|
(236)
|
|||||||
Equity method affiliates
|
(44)
|
22
|
(1)
|
(60)
|
|||||||
Net current-period other comprehensive income
|
196
|
(40)
|
624
|
(296)
|
|||||||
Ending balance
|
$
|
(547)
|
$
|
(877)
|
$
|
(547)
|
$
|
(877)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Beginning balance
|
$
|
(588)
|
$
|
(708)
|
$
|
(588)
|
$
|
(709)
|
|||
Other comprehensive income (loss) before reclassifications (2)
|
(29)
|
(9)
|
(35)
|
||||||||
Amounts reclassified from accumulated other comprehensive income (2)
|
29
|
8
|
36
|
10
|
|||||||
Equity method affiliates (3)
|
265
|
6
|
264
|
(4)
|
|||||||
Net current-period other comprehensive income
|
265
|
5
|
265
|
6
|
|||||||
Ending balance
|
$
|
(323)
|
$
|
(703)
|
$
|
(323)
|
$
|
(703)
|
(1)
|
All amounts are after tax. Amounts in parentheses indicate debits to accumulated other comprehensive income.
|
(2)
|
Tax effects are not significant.
|
(3)
|
For the three and six months ended June 30, 2016, amounts are net of total tax expense of $(19) million. For the three and six months ended June 30, 2015, tax effects are not significant.
|
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
|
1,624
|
19.93
|
|||||
Exercised
|
(2,087)
|
13.13
|
|||||
Forfeited and Expired
|
(4,256)
|
26.08
|
|||||
Options Outstanding as of June 30, 2016
|
38,019
|
19.02
|
4.06
|
$110,178
|
|||
Options Expected to Vest as of June 30, 2016
|
37,968
|
19.02
|
4.05
|
110,158
|
|||
Options Exercisable as of June 30, 2016
|
33,177
|
18.78
|
3.36
|
108,177
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Expected volatility
|
40.2%
|
44.5%
|
40.2
|
-
|
43.1%
|
44.5
|
-
|
44.9%
|
|||
Weighted-average volatility
|
40.2%
|
44.5%
|
40.2
|
-
|
43.1%
|
44.5
|
-
|
44.9%
|
|||
Expected dividends
|
2.89%
|
2.24%
|
2.89
|
-
|
2.94%
|
1.92
|
-
|
2.24%
|
|||
Risk-free rate
|
1.6%
|
1.9%
|
1.5
|
-
|
1.6%
|
1.9
|
-
|
1.9%
|
|||
Average risk-free rate
|
1.6%
|
1.9%
|
1.5
|
-
|
1.6%
|
1.9
|
-
|
1.9%
|
|||
Expected term (in years)
|
7.4
|
7.2
|
7.4
|
-
|
7.4
|
7.2
|
-
|
7.2
|
|||
Pre-vesting departure rate
|
0.6%
|
0.6%
|
0.6
|
-
|
0.6%
|
0.6
|
-
|
0.6%
|
Shares
(000’s)
|
Weighted
Average
Grant-Date
Fair Value
|
|||
Non-vested shares and share units at December 31, 2015
|
5,242
|
$
|
17.91
|
|
Granted
|
1,279
|
20.44
|
||
Vested
|
(1,635)
|
14.25
|
||
Forfeited
|
(49)
|
21.00
|
||
Non-vested shares and share units at June 30, 2016
|
4,837
|
$
|
19.79
|
·
|
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.
|
Display
Technologies
|
Optical
Communications
|
Environmental
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
|||||||||||||||
Three months ended
June 30, 2016
|
|||||||||||||||||||||
Net sales
|
$
|
801
|
$
|
782
|
$
|
259
|
$
|
266
|
$
|
215
|
$
|
37
|
$
|
2,360
|
|||||||
Depreciation (1)
|
$
|
149
|
$
|
43
|
$
|
33
|
$
|
27
|
$
|
13
|
$
|
11
|
$
|
276
|
|||||||
Amortization of purchased intangibles
|
$
|
8
|
$
|
5
|
$
|
2
|
$
|
15
|
|||||||||||||
Research, development and engineering expenses (2)
|
$
|
17
|
$
|
36
|
$
|
26
|
$
|
34
|
$
|
6
|
$
|
45
|
$
|
164
|
|||||||
Restructuring, impairment and other charges
|
$
|
2
|
$
|
12
|
$
|
1
|
$
|
1
|
$
|
16
|
|||||||||||
Equity in earnings of affiliated companies
|
$
|
(8)
|
$
|
(8)
|
|||||||||||||||||
Income tax (provision) benefit
|
$
|
(86)
|
$
|
(39)
|
$
|
(19)
|
$
|
(19)
|
$
|
(8)
|
$
|
23
|
$
|
(148)
|
|||||||
Net income (loss) (3)
|
$
|
204
|
$
|
77
|
$
|
37
|
$
|
38
|
$
|
17
|
$
|
(55)
|
$
|
318
|
Display
Technologies
|
Optical
Communications
|
Environmental
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
|||||||||||||||
Three months ended
June 30, 2015
|
|||||||||||||||||||||
Net sales
|
$
|
789
|
$
|
800
|
$
|
260
|
$
|
272
|
$
|
211
|
$
|
11
|
$
|
2,343
|
|||||||
Depreciation (1)
|
$
|
152
|
$
|
43
|
$
|
32
|
$
|
27
|
$
|
15
|
$
|
11
|
$
|
280
|
|||||||
Amortization of purchased intangibles
|
$
|
11
|
$
|
5
|
$
|
16
|
|||||||||||||||
Research, development and engineering expenses (2)
|
$
|
26
|
$
|
35
|
$
|
23
|
$
|
29
|
$
|
6
|
$
|
44
|
$
|
163
|
|||||||
Restructuring, impairment and other charges
|
$
|
3
|
$
|
3
|
|||||||||||||||||
Equity in earnings of affiliated companies
|
$
|
(3)
|
$
|
6
|
$
|
3
|
|||||||||||||||
Income tax (provision) benefit
|
$
|
(136)
|
$
|
(37)
|
$
|
(22)
|
$
|
(22)
|
$
|
(9)
|
$
|
21
|
$
|
(205)
|
|||||||
Net income (loss) (3)
|
$
|
303
|
$
|
77
|
$
|
46
|
$
|
44
|
$
|
18
|
$
|
(45)
|
$
|
443
|
Display
Technologies
|
Optical
Communications
|
Environmental
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
|||||||||||||||
Six months ended
June 30, 2016
|
|||||||||||||||||||||
Net sales
|
$
|
1,506
|
$
|
1,391
|
$
|
523
|
$
|
493
|
$
|
419
|
$
|
75
|
$
|
4,407
|
|||||||
Depreciation (1)
|
$
|
300
|
$
|
84
|
$
|
65
|
$
|
55
|
$
|
28
|
$
|
22
|
$
|
554
|
|||||||
Amortization of purchased intangibles
|
$
|
15
|
$
|
10
|
$
|
4
|
$
|
29
|
|||||||||||||
Research, development and engineering expenses (2)
|
$
|
35
|
$
|
73
|
$
|
51
|
$
|
65
|
$
|
12
|
$
|
92
|
$
|
328
|
|||||||
Restructuring, impairment and other charges
|
$
|
16
|
$
|
6
|
$
|
5
|
$
|
24
|
$
|
5
|
$
|
61
|
$
|
117
|
|||||||
Equity in earnings of affiliated companies
|
$
|
(5)
|
$
|
(5)
|
|||||||||||||||||
Income tax (provision) benefit
|
$
|
(179)
|
$
|
(50)
|
$
|
(35)
|
$
|
(31)
|
$
|
(14)
|
$
|
66
|
$
|
(243)
|
|||||||
Net income (loss) (3)
|
$
|
413
|
$
|
94
|
$
|
71
|
$
|
64
|
$
|
29
|
$
|
(140)
|
$
|
531
|
Display
Technologies
|
Optical
Communications
|
Environmental
Technologies
|
Specialty
Materials
|
Life
Sciences
|
All
Other
|
Total
|
|||||||||||||||
Six months ended
June 30, 2015
|
|||||||||||||||||||||
Net sales
|
$
|
1,597
|
$
|
1,497
|
$
|
542
|
$
|
544
|
$
|
408
|
$
|
20
|
$
|
4,608
|
|||||||
Depreciation (1)
|
$
|
308
|
$
|
81
|
$
|
61
|
$
|
53
|
$
|
30
|
$
|
20
|
$
|
553
|
|||||||
Amortization of purchased intangibles
|
$
|
17
|
$
|
10
|
$
|
27
|
|||||||||||||||
Research, development and engineering expenses (2)
|
$
|
50
|
$
|
68
|
$
|
46
|
$
|
60
|
$
|
11
|
$
|
89
|
$
|
324
|
|||||||
Restructuring, impairment and other charges
|
$
|
(1)
|
$
|
3
|
$
|
2
|
|||||||||||||||
Equity in earnings of affiliated companies
|
$
|
(5)
|
$
|
8
|
$
|
3
|
|||||||||||||||
Income tax (provision) benefit
|
$
|
(268)
|
$
|
(66)
|
$
|
(45)
|
$
|
(43)
|
$
|
(17)
|
$
|
44
|
$
|
(395)
|
|||||||
Net income (loss) (3)
|
$
|
597
|
$
|
134
|
$
|
94
|
$
|
82
|
$
|
34
|
$
|
(93)
|
$
|
848
|
(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. Expenses that are not allocated to the segments are included in the reconciliation of reportable net segment net income to consolidated net income below.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Net income of reportable segments
|
$
|
373
|
$
|
488
|
$
|
671
|
$
|
941
|
|||
Net loss of All Other
|
(55)
|
(45)
|
(140)
|
(93)
|
|||||||
Unallocated amounts:
|
|||||||||||
Net financing costs (1)
|
(29)
|
(25)
|
(58)
|
(49)
|
|||||||
Stock-based compensation expense
|
(14)
|
(15)
|
(23)
|
(25)
|
|||||||
Exploratory research
|
(28)
|
(28)
|
(55)
|
(54)
|
|||||||
Corporate contributions
|
(16)
|
(12)
|
(23)
|
(24)
|
|||||||
Gain on realignment of equity investment
|
2,676
|
2,676
|
|||||||||
Equity in earnings of affiliated companies, net of impairments (2)
|
48
|
59
|
104
|
153
|
|||||||
Unrealized loss on foreign currency hedges related to translated earnings
|
(1,253)
|
(10)
|
(2,203)
|
(130)
|
|||||||
Resolution of Department of Justice investigation
|
(98)
|
(98)
|
|||||||||
Income tax benefit
|
653
|
95
|
1,054
|
197
|
|||||||
Other corporate items
|
(50)
|
(11)
|
(66)
|
(13)
|
|||||||
Net income
|
$
|
2,207
|
$
|
496
|
$
|
1,839
|
$
|
903
|
(1)
|
Net financing costs include interest income, interest expense, and interest costs and investment gains and losses associated with benefit plans.
|
(2)
|
Primarily represents the equity earnings of Dow Corning.
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
·
|
Overview
|
·
|
Results of Operations
|
·
|
Core Performance Measures
|
·
|
Reportable Segments
|
·
|
Capital Resources and Liquidity
|
·
|
Critical Accounting Estimates
|
·
|
New Accounting Standards
|
·
|
Environment
|
·
|
Forward-Looking Statements
|
·
|
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; and
|
·
|
The gain of $25 million on the contribution of our equity interests in PCC and PCE as partial settlement of the asbestos litigation.
|
·
|
The increase in unrealized losses from our foreign currency hedges related to translated earnings in the amount of $784 million, driven by the impact of the significant strengthening of the Japanese yen during the second quarter of 2016 on our larger hedge contract portfolio. In January 2016, we purchased additional yen-denominated hedge contracts that extended our coverage through 2022;
|
·
|
Lower net income in the Display Technologies segment, down $99 million, or 33%, primarily driven by price declines slightly higher than 10% and a decrease of $75 million in net realized gains from our yen and won-denominated currency hedge contracts, offset by a low single-digit percentage increase in volume and the positive impact on operations from the strengthening of the Japanese yen versus the U.S. dollar exchange rate; and
|
·
|
The resolution of an investigation by the U.S. Department of Justice and related costs in the total amount of $86 million.
|
·
|
The increase in unrealized losses from our foreign currency hedges related to translated earnings in the amount of $1.3 billion, driven by the impact of the significant strengthening of the Japanese yen during the first six months of 2016 on our larger hedge contract portfolio;
|
·
|
Lower net income in the Display Technologies segment, down $184 million, or 31%, primarily driven by price declines slightly higher than 10% and a decrease of $116 million in net realized gains from our yen and won-denominated currency hedge contracts, offset by the positive impact on operations from the strengthening of the Japanese yen versus the U.S. dollar exchange rate;
|
·
|
A decrease of $40 million, or 30%, in the Optical Communications segment, driven primarily by production issues related to the implementation of new manufacturing software, which limited our ability to fulfill customer orders; and
|
·
|
The resolution of an investigation by the U.S. Department of Justice and related costs in the total amount of $86 million.
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
||||||||||||
2016
|
2015
|
16 vs. 15
|
2016
|
2015
|
16 vs. 15
|
||||||||||
Net sales
|
$
|
2,360
|
$
|
2,343
|
1%
|
$
|
4,407
|
$
|
4,608
|
(4)%
|
|||||
Gross margin
|
$
|
951
|
$
|
975
|
(2)%
|
$
|
1,715
|
$
|
1,904
|
(10)%
|
|||||
(gross margin %)
|
40%
|
42%
|
39%
|
41%
|
|||||||||||
Selling, general and administrative expenses
|
$
|
499
|
$
|
337
|
48%
|
$
|
802
|
$
|
653
|
23%
|
|||||
(as a % of net sales)
|
21%
|
14%
|
18%
|
14%
|
|||||||||||
Research, development and engineering expenses
|
$
|
192
|
$
|
191
|
1%
|
$
|
382
|
$
|
380
|
1%
|
|||||
(as a % of net sales)
|
8%
|
8%
|
9%
|
8%
|
|||||||||||
Equity in earnings of affiliated companies
|
$
|
41
|
$
|
62
|
(34)%
|
$
|
100
|
$
|
156
|
(36)%
|
|||||
(as a % of net sales)
|
2%
|
3%
|
2%
|
3%
|
|||||||||||
Translated earnings contract (loss) gain, net
|
$
|
(1,201)
|
$
|
162
|
*
|
$
|
(2,058)
|
$
|
191
|
*
|
|||||
(as a % of net sales)
|
(51)%
|
7%
|
(47)%
|
4%
|
|||||||||||
Gain on realignment of equity investment
|
$
|
2,676
|
*
|
$
|
2,676
|
*
|
|||||||||
(as a % of net sales)
|
113%
|
61%
|
|||||||||||||
Income before income taxes
|
$
|
1,703
|
$
|
606
|
181%
|
$
|
1,031
|
$
|
1,099
|
(6)%
|
|||||
(as a % of net sales)
|
72%
|
26%
|
23%
|
24%
|
|||||||||||
Benefit (provision) for income taxes
|
$
|
504
|
$
|
(110)
|
*
|
$
|
808
|
$
|
(196)
|
*
|
|||||
(as a % of net sales)
|
21%
|
(5)%
|
18%
|
(4)%
|
|||||||||||
Net income attributable to Corning Incorporated
|
$
|
2,207
|
$
|
496
|
345%
|
$
|
1,839
|
$
|
903
|
104%
|
|||||
(as a % of net sales)
|
94%
|
21%
|
42%
|
20%
|
*
|
Percent change not meaningful.
|
Three months ended
June 30,
|
%
Change
|
Six months ended
June 30,
|
%
Change
|
||||||||||||
2016
|
2015
|
16 vs. 15
|
2016
|
2015
|
16 vs. 15
|
||||||||||
Display Technologies
|
$
|
801
|
$
|
789
|
2%
|
$
|
1,506
|
$
|
1,597
|
(6)%
|
|||||
Optical Communications
|
782
|
800
|
(2)%
|
1,391
|
1,497
|
(7)%
|
|||||||||
Environmental Technologies
|
259
|
260
|
-
|
523
|
542
|
(4)%
|
|||||||||
Specialty Materials
|
266
|
272
|
(2)%
|
493
|
544
|
(9)%
|
|||||||||
Life Sciences
|
215
|
211
|
2%
|
419
|
408
|
3%
|
|||||||||
All Other
|
37
|
11
|
236%
|
75
|
20
|
275%
|
|||||||||
Total net sales
|
$
|
2,360
|
$
|
2,343
|
1%
|
$
|
4,407
|
$
|
4,608
|
(4)%
|
·
|
An increase of $12 million in the Display Technologies segment, driven by a low single-digit percentage increase in volume and the impact of the strengthening of the Japanese yen on operations in the amount of $96 million, partially offset by price declines slightly higher than 10%;
|
·
|
A decrease of $18 million in the Optical Communications segment, driven primarily by production issues related to the implementation of new manufacturing software;
|
·
|
A decrease in the Environmental Technologies segment in the amount of $1 million. The increase in light-duty substrates of $9 million was offset by a decline of $10 million in diesel products;
|
·
|
A decrease of $6 million in the Specialty Materials segment, driven by a decline in volume of Corning Gorilla Glass products;
|
·
|
An increase of $4 million in the Life Sciences segment; and
|
·
|
An increase of $26 million in the All Other segment, driven by the acquisition of a glass tubing business and the formation of the Corning Pharmaceutical Technologies business completed in the fourth quarter of 2015.
|
·
|
A decrease of $91 million in the Display Technologies segment, driven by price declines slightly higher than 10%, offset somewhat by the impact of the strengthening of the Japanese yen on operations in the amount of $136 million;
|
·
|
A decrease of $106 million in the Optical Communications segment, driven primarily by production issues related to the implementation of new manufacturing software;
|
·
|
A decrease in the Environmental Technologies segment in the amount of $19 million driven by a decline of $32 million in sales of diesel products, offset slightly by an increase of $13 million in sales of light-duty substrates;
|
·
|
A decrease of $51 million in the Specialty Materials segment, driven by a decline in volume of Corning Gorilla Glass products;
|
·
|
An increase of $11 million in the Life Sciences segment, driven by volume growth in Europe, North America and China; and
|
·
|
An increase of $55 million in the All Other segment, driven by the acquisition of a glass tubing business and the formation of the Corning Pharmaceutical Technologies business completed in the fourth quarter of 2015.
|
·
|
An increase of $66 million in acquisition-related costs primarily related to the realignment of our equity interests in Dow Corning and an acquisition completed in the second quarter of 2016;
|
·
|
An increase of $52 million in litigation, regulatory and other legal costs related to the resolution of an investigation by the U.S. Department of Justice and an environmental matter, partially offset by the gain on the contribution of our equity interests in PCC and PCE as partial settlement of the asbestos litigation;
|
·
|
The negative impact of a contingent consideration fair value adjustment of $27 million; and
|
·
|
An increase of $19 million in the mark-to-market of our defined benefit pension plans.
|
·
|
An increase of $61 million in acquisition-related costs primarily related to the realignment of our equity interests in Dow Corning and an acquisition completed in the second quarter of 2016;
|
·
|
An increase of $51 million in litigation, regulatory and other legal costs related to the resolution of an investigation by the U.S. Department of Justice and an environmental matter, partially offset by the gain on the contribution of our equity interests in PCC and PCE as partial settlement of the asbestos litigation;
|
·
|
A $16 million change in the contingent consideration fair value adjustment; and
|
·
|
An increase of $26 million in the mark-to-market of our defined benefit pension plans.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016 (1)
|
2015
|
2016 (1)
|
2015
|
||||||||
Dow Corning Corporation
|
$
|
26
|
$
|
57
|
$
|
82
|
$
|
149
|
|||
Hemlock Semiconductor Group
|
22
|
22
|
|||||||||
All other
|
(7)
|
5
|
(4)
|
7
|
|||||||
Total equity earnings
|
$
|
41
|
$
|
62
|
$
|
100
|
$
|
156
|
(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. Results also include gross equity earnings for Hemlock Semiconductor Group from the date of the realignment to June 30, 2016.
|
Three months ended
June 30, 2016
|
Three months ended
June 30, 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 gains, net
|
$
|
52
|
$
|
33
|
$
|
172
|
$
|
108
|
$
|
(120)
|
$
|
(75)
|
|||||
Unrealized (losses) gains
|
(1,253)
|
(791)
|
(10)
|
(7)
|
(1,243)
|
(784)
|
|||||||||||
Total translated earnings contract (loss) gain
|
$ |
(1,201)
|
$ |
(758)
|
$ |
162
|
$ |
101
|
$ |
(1,363)
|
$ |
(859)
|
Six months ended
June 30, 2016
|
Six months ended
June 30, 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 gains, net
|
$
|
145
|
$
|
92
|
$
|
321
|
$
|
201
|
$
|
(176)
|
$
|
(109)
|
|||||
Unrealized (losses) gains
|
(2,203)
|
(1,390)
|
(130)
|
(82)
|
(2,073)
|
(1,308)
|
|||||||||||
Total translated earnings contract (loss) gain
|
$ |
(2,058)
|
$ |
(1,298)
|
$ |
191
|
$ |
119
|
$ |
(2,249)
|
$ |
(1,417)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Benefit (provision) for income taxes
|
$
|
504
|
$
|
(110)
|
$
|
808
|
$
|
(196)
|
|||
Effective tax rate
|
(29.6%)
|
18.2%
|
(78.4%)
|
17.8%
|
·
|
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; and
|
·
|
The tax-free nature of the realignment of our equity interests 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; and
|
·
|
The impact of equity in earnings of nonconsolidated affiliates reported in the financials, net of tax.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Net income attributable to Corning Incorporated
|
$
|
2,207
|
$
|
496
|
$
|
1,839
|
$
|
903
|
|||
Net income attributable to Corning Incorporated used in basic earnings per common share calculation (1)
|
$
|
2,183
|
$
|
472
|
$
|
1,790
|
$
|
854
|
|||
Net income attributable to Corning Incorporated used in diluted earnings per common share calculation (1)
|
$
|
2,207
|
$
|
496
|
$
|
1,839
|
$
|
903
|
|||
Basic earnings per common share
|
$
|
2.06
|
$
|
0.38
|
$
|
1.66
|
$
|
0.68
|
|||
Diluted earnings per common share
|
$
|
1.87
|
$
|
0.36
|
$
|
1.53
|
$
|
0.65
|
|||
Weighted-average common shares outstanding - basic
|
1,059
|
1,246
|
1,081
|
1,257
|
|||||||
Weighted-average common shares outstanding - diluted
|
1,182
|
1,371
|
1,204
|
1,383
|
(1)
|
Refer to Note 6 (Earnings per Common Share) to the consolidated financial statements for additional information.
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
||||||||||||
2016
|
2015
|
16 vs. 15
|
2016
|
2015
|
16 vs. 15
|
||||||||||
Core net sales
|
$
|
2,440
|
$
|
2,517
|
(3)%
|
$
|
4,611
|
$
|
4,947
|
(7)%
|
|||||
Core equity in earnings of affiliated companies
|
$
|
57
|
$
|
71
|
(20)%
|
$
|
119
|
$
|
124
|
(4)%
|
|||||
Core earnings
|
$
|
434
|
$
|
522
|
(17)%
|
$
|
774
|
$
|
1,006
|
(23)%
|
Three months ended
June 30,
|
%
change
|
Six months ended
June 30,
|
%
change
|
||||||||||||
2016
|
2015
|
16 vs. 15
|
2016
|
2015
|
16 vs. 15
|
||||||||||
Display Technologies
|
$
|
880
|
$
|
963
|
(9)%
|
$
|
1,709
|
$
|
1,935
|
(12)%
|
|||||
Optical Communications
|
782
|
800
|
(2)%
|
1,391
|
1,497
|
(7)%
|
|||||||||
Environmental Technologies
|
259
|
260
|
523
|
542
|
(4)%
|
||||||||||
Specialty Materials
|
266
|
272
|
(2)%
|
493
|
544
|
(9)%
|
|||||||||
Life Sciences
|
215
|
211
|
2%
|
419
|
408
|
3%
|
|||||||||
All Other
|
38
|
11
|
245%
|
76
|
21
|
262%
|
|||||||||
Total core net sales
|
$
|
2,440
|
$
|
2,517
|
(3)%
|
$
|
4,611
|
$
|
4,947
|
(7)%
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016 (1)
|
2015
|
2016 (1)
|
2015
|
||||||||
Dow Corning Corporation
|
$
|
40
|
$
|
63
|
$
|
98
|
$
|
114
|
|||
Hemlock Semiconductor Group
|
22
|
22
|
|||||||||
All other
|
(5)
|
8
|
(1)
|
10
|
|||||||
Total core equity earnings
|
$
|
57
|
$
|
71
|
$
|
119
|
$
|
124
|
(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. Results also include gross equity earnings for Hemlock Semiconductor Group from the date of the realignment to June 30, 2016.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
2016
|
2015
|
2016
|
2015
|
||||||||
Core earnings attributable to Corning Incorporated
|
$
|
434
|
$
|
522
|
$
|
774
|
$
|
1,006
|
|||
Less: Series A convertible preferred stock dividend
|
24
|
24
|
49
|
49
|
|||||||
Core earnings available to common stockholders - basic
|
410
|
498
|
725
|
957
|
|||||||
Add: Series A convertible preferred stock dividend
|
24
|
24
|
49
|
49
|
|||||||
Core earnings available to common stockholders - diluted
|
$
|
434
|
$
|
522
|
$
|
774
|
$
|
1,006
|
|||
Weighted-average common shares outstanding - basic
|
1,059
|
1,246
|
1,081
|
1,257
|
|||||||
Effect of dilutive securities:
|
|||||||||||
Stock options and other dilutive securities
|
8
|
10
|
8
|
11
|
|||||||
Series A convertible preferred stock
|
115
|
115
|
115
|
115
|
|||||||
Weighted-average common shares outstanding - diluted
|
1,182
|
1,371
|
1,204
|
1,383
|
|||||||
Core basic earnings per common share
|
$
|
0.39
|
$
|
0.40
|
$
|
0.67
|
$
|
0.76
|
|||
Core diluted earnings per common share
|
$
|
0.37
|
$
|
0.38
|
$
|
0.64
|
$
|
0.73
|
Three months ended June 30, 2016
|
|||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
||||||||||
As reported - GAAP
|
$
|
2,360
|
$
|
41
|
$
|
1,703
|
$
|
2,207
|
(29.6)%
|
1.87
|
|||||
Constant-yen (1)
|
78
|
2
|
75
|
56
|
0.05
|
||||||||||
Constant-won (1)
|
2
|
(12)
|
(9)
|
(0.01)
|
|||||||||||
Foreign currency hedges related to translated earnings (2)
|
1,201
|
758
|
0.64
|
||||||||||||
Acquisition-related costs (3)
|
80
|
74
|
0.06
|
||||||||||||
Discrete tax items and other tax-related adjustments (4)
|
(111)
|
(0.09)
|
|||||||||||||
Litigation, regulatory and other legal matters (5)
|
55
|
70
|
0.06
|
||||||||||||
Restructuring, impairment and other charges (6)
|
11
|
7
|
0.01
|
||||||||||||
Equity in earnings of affiliated companies (7)
|
14
|
14
|
13
|
0.01
|
|||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials (8)
|
15
|
12
|
0.01
|
||||||||||||
Pension mark-to-market (10)
|
27
|
18
|
0.02
|
||||||||||||
Gain on realignment of equity investment (11)
|
(2,676)
|
(2,676)
|
(2.26)
|
||||||||||||
Taiwan power outage (12)
|
20
|
15
|
0.01
|
||||||||||||
Core performance measures
|
$
|
2,440
|
$
|
57
|
$
|
513
|
$
|
434
|
15.4%
|
0.37
|
Three months ended June 30, 2015
|
|||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
||||||||||
As reported - GAAP
|
$
|
2,343
|
$
|
62
|
$
|
606
|
$
|
496
|
18.2%
|
0.36
|
|||||
Constant-yen (1)
|
174
|
2
|
141
|
104
|
0.08
|
||||||||||
Constant-won (1)
|
1
|
||||||||||||||
Foreign currency hedges related to translated earnings (2)
|
(162)
|
(101)
|
(0.07)
|
||||||||||||
Acquisition-related costs (3)
|
12
|
7
|
0.01
|
||||||||||||
Litigation, regulatory and other legal matters (5)
|
2
|
1
|
|||||||||||||
Restructuring, impairment and other charges (6)
|
3
|
2
|
|||||||||||||
Equity in earnings of affiliated companies (7)
|
7
|
7
|
7
|
0.01
|
|||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials (8)
|
(11)
|
(9)
|
(0.01)
|
||||||||||||
Post-combination expenses (9)
|
16
|
10
|
0.01
|
||||||||||||
Pension mark-to-market (10)
|
8
|
5
|
|||||||||||||
Core performance measures
|
$
|
2,517
|
$
|
71
|
$
|
623
|
$
|
522
|
16.2%
|
0.38
|
Six months ended June 30, 2016
|
|||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
||||||||||
As reported – GAAP
|
$
|
4,407
|
$
|
100
|
$
|
1,031
|
$
|
1,839
|
(78.4)%
|
1.53
|
|||||
Constant-yen (1)
|
202
|
4
|
185
|
134
|
0.11
|
||||||||||
Constant-won (1)
|
2
|
(1)
|
(32)
|
(23)
|
(0.02)
|
||||||||||
Foreign currency hedges related to translated earnings (2)
|
2,058
|
1,298
|
1.08
|
||||||||||||
Acquisition-related costs (3)
|
94
|
84
|
0.07
|
||||||||||||
Discrete tax items and other tax-related adjustments (4)
|
(89)
|
(0.07)
|
|||||||||||||
Litigation, regulatory and other legal matters (5)
|
55
|
70
|
0.06
|
||||||||||||
Restructuring, impairment and other charges (6)
|
120
|
82
|
0.07
|
||||||||||||
Equity in earnings of affiliated companies (7)
|
16
|
16
|
15
|
0.01
|
|||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials (8)
|
4
|
3
|
|||||||||||||
Pension mark-to-market (10)
|
34
|
22
|
0.02
|
||||||||||||
Gain on realignment of equity investment (11)
|
(2,676)
|
(2,676)
|
(2.22)
|
||||||||||||
Taiwan power outage (12)
|
20
|
15
|
0.01
|
||||||||||||
Core performance measures
|
$
|
4,611
|
$
|
119
|
$
|
909
|
$
|
774
|
14.9%
|
0.64
|
Six months ended June 30, 2015
|
|||||||||||||||
Net
sales
|
Equity
earnings
|
Income
before
income
taxes
|
Net
income
|
Effective
tax
rate
|
Per
share
|
||||||||||
As reported - GAAP
|
$
|
4,608
|
$
|
156
|
$
|
1,099
|
$
|
903
|
17.8%
|
0.65
|
|||||
Constant-yen (1)
|
339
|
2
|
275
|
202
|
0.15
|
||||||||||
Constant-won (1)
|
1
|
||||||||||||||
Foreign currency hedges related to translated earnings (2)
|
(191)
|
(119)
|
(0.09)
|
||||||||||||
Acquisition-related costs (3)
|
31
|
20
|
0.01
|
||||||||||||
Discrete tax items and other tax-related adjustments (4)
|
11
|
0.01
|
|||||||||||||
Litigation, regulatory and other legal matters (5)
|
3
|
2
|
|||||||||||||
Restructuring, impairment and other charges (6)
|
5
|
5
|
|||||||||||||
Equity in earnings of affiliated companies (7)
|
(34)
|
(34)
|
(32)
|
(0.02)
|
|||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials (8)
|
(9)
|
(7)
|
(0.01)
|
||||||||||||
Post-combination expenses (9)
|
25
|
16
|
0.01
|
||||||||||||
Pension mark-to-market (10)
|
8
|
5
|
|||||||||||||
Core performance measures
|
$
|
4,947
|
$
|
124
|
$
|
1,213
|
$
|
1,006
|
17.1%
|
0.73
|
(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)
|
Foreign currency hedges related to translated earnings: We have excluded the impact of the gains and losses of our foreign currency hedges related to translated earnings for each period presented.
|
(3)
|
Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.
|
(4)
|
Discrete tax items and other tax-related adjustments: This represents the removal of discrete adjustments attributable to changes in tax law and other non-operational tax-related adjustments.
|
(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)
|
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.
|
(8)
|
Impacts from the acquisition of Samsung Corning Precision Materials: Fair value adjustments to the indemnity asset related to contingent consideration and other items related to the acquisition of Samsung Corning Precision Materials.
|
(9)
|
Post-combination expenses: Post-combination expenses incurred as a result of an acquisition in the first quarter of 2015.
|
(10)
|
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.
|
(11)
|
Gain on realignment of equity investment: Gain recorded upon the completion of the strategic realignment of our ownership interest in Dow Corning.
|
(12)
|
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 in the second quarter includes asset write-offs and charges for facility repairs, offset somewhat by partial reimbursement through our insurance program. We expect to receive the remainder of the insurance reimbursement in the latter half of 2016.
|
·
|
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.
|
Three months ended
June 30, 2016
|
Six months ended
June 30, 2016
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported - GAAP
|
$
|
801
|
$
|
204
|
$
|
1,506
|
$
|
413
|
|||
Constant-yen (1)
|
78
|
55
|
202
|
136
|
|||||||
Constant-won (1)
|
1
|
(8)
|
1
|
(21)
|
|||||||
Foreign currency hedges related to translated earnings (2)
|
(33)
|
(91)
|
|||||||||
Restructuring, impairment and other charges (6)
|
13
|
||||||||||
Impacts from the acquisition of Samsung Corning Precision Materials (8)
|
12
|
3
|
|||||||||
Taiwan power outage (12)
|
7
|
7
|
|||||||||
Core performance
|
$
|
880
|
$
|
237
|
$
|
1,709
|
$
|
460
|
Three months ended
June 30, 2015
|
Six months ended
June 30, 2015
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported - GAAP
|
$
|
789
|
$
|
303
|
$
|
1,597
|
$
|
597
|
|||
Constant-yen (1)
|
174
|
105
|
338
|
204
|
|||||||
Foreign currency hedges related to translated earnings (2)
|
(108)
|
(207)
|
|||||||||
Impacts from the acquisition of Samsung Corning Precision Materials (8)
|
(10)
|
(10)
|
|||||||||
Core performance
|
$
|
963
|
$
|
290
|
$
|
1,935
|
$
|
584
|
Three months ended
June 30, 2016
|
Six months ended
June 30, 2016
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported - GAAP
|
$
|
782
|
$
|
77
|
$
|
1,391
|
$
|
94
|
|||
Acquisition-related costs (3)
|
9
|
13
|
|||||||||
Restructuring, impairment and other charges (6)
|
5
|
||||||||||
Core performance
|
$
|
782
|
$
|
86
|
$
|
1,391
|
$
|
112
|
Three months ended
June 30, 2015
|
Six months ended
June 30, 2015
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported - GAAP
|
$
|
800
|
$
|
77
|
$
|
1,497
|
$
|
134
|
|||
Acquisition-related costs (3)
|
4
|
14
|
|||||||||
Restructuring, impairment and other charges (6)
|
(1)
|
||||||||||
Post-combination expenses (9)
|
10
|
16
|
|||||||||
Core performance
|
$
|
800
|
$
|
91
|
$
|
1,497
|
$
|
163
|
Three months ended
June 30, 2016
|
Six months ended
June 30, 2016
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported - GAAP
|
$
|
259
|
$
|
37
|
$
|
523
|
$
|
71
|
|||
Restructuring, impairment and other charges (6)
|
3
|
||||||||||
Core performance measures
|
$
|
259
|
$
|
37
|
$
|
523
|
$
|
74
|
Three months ended
June 30, 2015
|
Six months ended
June 30, 2015
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported - GAAP
|
$
|
260
|
$
|
46
|
$
|
542
|
$
|
94
|
|||
Core performance measures
|
$
|
260
|
$
|
46
|
$
|
542
|
$
|
94
|
Three months ended
June 30, 2016
|
Six months ended
June 30, 2016
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported - GAAP
|
$
|
266
|
$
|
38
|
$
|
493
|
$
|
64
|
|||
Constant-yen (1)
|
(1)
|
||||||||||
Constant-won (1)
|
(1)
|
||||||||||
Restructuring, impairment and other charges (6)
|
6
|
14
|
|||||||||
Taiwan power outage (12)
|
4
|
4
|
|||||||||
Core performance
|
$
|
266
|
$
|
48
|
$
|
493
|
$
|
80
|
Three months ended
June 30, 2015
|
Six months ended
June 30, 2015
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported - GAAP
|
$
|
272
|
$
|
44
|
$
|
544
|
$
|
82
|
|||
Constant-yen (1)
|
(2)
|
(3)
|
|||||||||
Foreign currency hedges related to translated earnings (2)
|
5
|
||||||||||
Restructuring, impairment and other charges (6)
|
2
|
6
|
|||||||||
Core performance
|
$
|
272
|
$
|
44
|
$
|
544
|
$
|
90
|
Three months ended
June 30, 2016
|
Six months ended
June 30, 2016
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported – GAAP
|
$
|
215
|
$
|
17
|
$
|
419
|
$
|
29
|
|||
Acquisition-related costs (3)
|
3
|
6
|
|||||||||
Restructuring, impairment and other charges (6)
|
1
|
4
|
|||||||||
Core performance
|
$
|
215
|
$
|
21
|
$
|
419
|
$
|
39
|
Three months ended
June 30, 2015
|
Six months ended
June 30, 2015
|
||||||||||
(in millions)
|
Net
sales
|
Net
income
|
Net
sales
|
Net
income
|
|||||||
As reported – GAAP
|
$
|
211
|
$
|
18
|
$
|
408
|
$
|
34
|
|||
Acquisition-related costs (3)
|
3
|
6
|
|||||||||
Core performance
|
$
|
211
|
$
|
21
|
$
|
408
|
$
|
40
|
Three months ended
June 30,
|
Six months ended
June 30,
|
||||||||||
As Reported
|
2016
|
2015
|
2016
|
2015
|
|||||||
Net sales
|
$
|
37
|
$
|
11
|
$
|
75
|
$
|
20
|
|||
Research, development and engineering expenses
|
$
|
45
|
$
|
44
|
$
|
92
|
$
|
89
|
|||
Equity earnings of affiliated companies
|
$
|
(8)
|
$
|
6
|
$
|
(5)
|
$
|
8
|
|||
Net loss
|
$
|
(55)
|
$
|
(45)
|
$
|
(140)
|
$
|
(93)
|
Six months ended
June 30,
|
|||||
2016
|
2015
|
||||
Net cash provided by operating activities
|
$
|
443
|
$
|
1,148
|
|
Net cash provided by (used in) investing activities
|
$
|
4,238
|
$
|
(623)
|
|
Net cash used in financing activities
|
$
|
(2,123)
|
$
|
(609)
|
As of
June 30,
2016
|
As of
December 31,
2015
|
||||
Working capital
|
$
|
8,299
|
$
|
5,455
|
|
Current ratio
|
4.4:1
|
2.9:1
|
|||
Trade accounts receivable, net of allowances
|
$
|
1,544
|
$
|
1,372
|
|
Days sales outstanding
|
59
|
55
|
|||
Inventories
|
$
|
1,501
|
$
|
1,385
|
|
Inventory turns
|
3.8
|
4.0
|
|||
Days payable outstanding (1)
|
42
|
42
|
|||
Long-term debt
|
$
|
3,918
|
$
|
3,890
|
|
Total debt to total capital
|
18%
|
19%
|
(1)
|
Includes trade payables only.
|
RATING AGENCY
|
Rating
Long-Term Debt
|
Outlook
last update
|
|
Fitch
|
BBB+
|
Stable
|
|
October 29, 2015
|
|||
Standard & Poor’s
|
BBB+
|
Stable
|
|
October 27, 2015
|
|||
Moody’s
|
Baa1
|
Stable
|
|
October 28, 2015
|
-
|
global business, financial, economic and political conditions;
|
-
|
tariffs and import duties;
|
-
|
currency fluctuations between the U.S. dollar and other currencies, primarily the Japanese yen, New Taiwan dollar, euro, Chinese renminbi and South Korean won;
|
-
|
product demand and industry capacity;
|
-
|
competitive products and pricing;
|
-
|
availability and costs of critical components and materials;
|
-
|
new product development and commercialization;
|
-
|
order activity and demand from major customers;
|
-
|
fluctuations in capital spending by customers;
|
-
|
possible disruption in commercial activities due to terrorist activity, cyber attack, armed conflict, political or financial instability, natural disasters, or major health concerns;
|
-
|
unanticipated disruption to equipment, facilities, IT systems or operations;
|
-
|
facility expansions and new plant start-up costs;
|
-
|
effect of regulatory and legal developments;
|
-
|
ability to pace capital spending to anticipated levels of customer demand;
|
-
|
credit rating and ability to obtain financing and capital on commercially reasonable terms;
|
-
|
adequacy and availability of insurance;
|
-
|
financial risk management;
|
-
|
acquisition and divestiture activities;
|
-
|
rate of technology change;
|
-
|
level of excess or obsolete inventory;
|
-
|
ability to enforce patents and protect intellectual property and trade secrets;
|
-
|
adverse litigation;
|
-
|
product and components performance issues;
|
-
|
retention of key personnel;
|
-
|
stock price fluctuations;
|
-
|
trends for the continued growth of the Company’s businesses;
|
-
|
the ability of research and development projects to produce revenues in future periods;
|
-
|
a downturn in demand or decline in growth rates for LCD glass substrates;
|
-
|
customer ability, most notably in the Display Technologies segment, to maintain profitable operations and obtain financing to fund their ongoing operations and manufacturing expansions and pay their receivables when due;
|
-
|
loss of significant customers;
|
-
|
fluctuations in supply chain inventory levels;
|
-
|
equity company activities;
|
-
|
changes in tax laws and regulations;
|
-
|
changes in accounting rules and standards;
|
-
|
the potential impact of legislation, government regulations, and other government action and investigations;
|
-
|
temporary idling of capacity or delaying expansion;
|
-
|
the ability to implement productivity, consolidation and cost reduction efforts, and to realize anticipated benefits;
|
-
|
restructuring actions and charges; and
|
-
|
other risks detailed in Corning’s SEC filings.
|
Chinese Anti-Dumping Investigation Involving Optical Fiber Preforms Produced in the United States. See our 2015 Form 10-K, Part I, Item 3.
|
Period
|
Total number
of shares
purchased (1)
|
Average
price paid
per share (1)
|
Number of
shares purchased as
part of publicly
announced plan
or program (2)
|
Approximate dollar
value of shares that
may yet be purchased
under the plans
or programs (2)
|
|||
April 1-30, 2016
|
8,459,400
|
$20.15
|
8,017,403
|
$3,359,380,344
|
|||
May 1-31, 2016
|
17,427,641
|
$19.12
|
17,398,339
|
$3,026,767,345
|
|||
June 1-30, 2016
|
15,464,666
|
$20.44
|
15,461,109
|
$2,710,793,928
|
|||
Total
|
41,351,707
|
$19.82
|
40,876,851
|
$2,710,793,928
|
(1)
|
This column reflects the following transactions during the second quarter of 2016: (i) the deemed surrender to us of 437,525 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 37,331 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 40,876,851 shares of common stock in conjunction with the repurchase program announced on October 26, 2015.
|
(2)
|
On October 26, 2015, Corning’s Board of Directors authorized the repurchase of up to $4 billion worth of shares of common stock between date of announcement and December 31, 2016.
|
(a)
|
Exhibits
|
||
Exhibit Number
|
Exhibit Name
|
||
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Exchange Act
|
||
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Exchange Act
|
||
32
|
Certification Pursuant to 18 U.S.C. Section 1350
|
||
101.INS
|
XBRL Instance Document
|
||
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
||
101.CAL
|
XBRL Taxonomy Calculation Linkbase Document
|
||
101.LAB
|
XBRL Taxonomy Label Linkbase Document
|
||
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document
|
||
101.DEF
|
XBRL Taxonomy Definition Document
|
||
31.1
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Exchange Act
|
||
31.2
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Exchange Act
|
||
32
|
Certification Pursuant to 18 U.S.C. Section 1350
|
Corning Incorporated
|
||||
(Registrant)
|
||||
July 27, 2016
|
/s/ Edward Schlesinger
|
|||
Date
|
Edward Schlesinger
|
|||
Vice President and Corporate Controller
|