Company Quick10K Filing
Quick10K
Corning
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$30.63 785 $24,040
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-02 Shareholder Vote
8-K 2019-04-30 Earnings, Exhibits
8-K 2019-01-29 Earnings, Exhibits
8-K 2018-11-06 Other Events, Exhibits
8-K 2018-10-23 Earnings, Exhibits
8-K 2018-08-15 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-07-18 Officers, Exhibits
8-K 2018-06-07 Other Events, Exhibits
8-K 2018-04-26 Shareholder Vote
8-K 2018-04-24 Earnings, Exhibits
8-K 2018-01-30 Regulation FD, Exhibits
CCK Crown Holdings 7,990
SWI Solarwinds 5,870
TTEK Tetra Tech 3,700
DORM Dorman Products 2,800
HOV Hovnanian Enterprises 2,380
NFBK Northfield Bancorp 758
USCI United States Commodity Index Funds Trust 0
WLB Westmoreland Coal 0
EAGL Platinum Eagle Acquisition 0
AKOM Aerkomm 0
GLW 2019-03-31
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II – Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 glw-20190331xex31_1.htm
EX-31.2 glw-20190331xex31_2.htm
EX-32 glw-20190331xex32.htm

Corning Earnings 2019-03-31

GLW 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 glw-20190331x10q.htm 10-Q Q1 2019 10Q_Taxonomy2019

Index

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549



FORM 10-Q



   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended March 31, 2019



OR



   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



CORNING INCORPORATED

(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)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.



 

 

 

 

 

 



Yes

 

No

 



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).



 

 

 

 

 

 



Yes

 

No

 



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



 

 

 

 

 

 



Large accelerated filer

 

Accelerated filer

 



Non‑accelerated filer

 

Smaller reporting company

 



 

 

 

Emerging growth company

 



If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.



 

 

 

 

 

 



Yes

 

No

 



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



 

 

 

 

 

 



Yes

 

No

 





Securities registered pursuant to Section 12(b) of the Act:





 

 

 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

GLW

 

New York Stock Exchange (NYSE)



Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.





 

 

 

 



Class

 

Outstanding as of April 30, 2019

 



Corning’s Common Stock, $0.50 par value per share

 

784,754,231 shares

 

 

© 2019 Corning Incorporated. All Rights Reserved.

1


 

Index

 

 

INDEX





 

 

PART I – FINANCIAL INFORMATION



 

Page

Item 1. Financial Statements

 

 



 

 

Consolidated Statements of Income (Loss) (Unaudited) for the three months ended March 31, 2019 and 2018

 

3



 

 

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three months ended March 31, 2019 and 2018

 

4



 

 

Consolidated Balance Sheets (Unaudited) at March 31, 2019 and December 31, 2018

 

5



 

 

Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2019 and 2018

 

6



 

 

Consolidated Statements of Changes to Shareholders’ Equity (Unaudited) for the three months ended March 31, 2019 and 2018

 

7



 

 

Notes to Consolidated Financial Statements (Unaudited)

 

8



 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21



 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

38



 

 

Item 4. Controls and Procedures

 

38



 

 

PART II – OTHER INFORMATION

 

 



 

 

Item 1. Legal Proceedings

 

39



 

 

Item 1A.  Risk Factors

 

39



 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

40



 

 

Item 6. Exhibits

 

41



 

 

Signatures

 

42

 

© 2019 Corning Incorporated. All Rights Reserved.

2


 

Index

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited; in millions, except per share amounts)









 

 

 

 

 

 



 

 

 

 

 

 

   

 

Three Months Ended



 

March 31,

   

 

2019

 

2018

Net sales

 

$

2,812 

 

$

2,500 

Cost of sales

 

 

1,713 

 

 

1,545 



 

 

 

 

 

 

Gross margin

 

 

1,099 

 

 

955 



 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

401 

 

 

501 

Research, development and engineering expenses

 

 

249 

 

 

241 

Amortization of purchased intangibles

 

 

29 

 

 

19 



 

 

 

 

 

 

Operating income

 

 

420 

 

 

194 



 

 

 

 

 

 

Equity in earnings of affiliated companies

 

 

25 

 

 

39 

Interest income

 

 

 

 

13 

Interest expense

 

 

(52)

 

 

(52)

Translated earnings contract gain (loss), net (Note 10)

 

 

184 

 

 

(622)

Other expense, net

 

 

(9)

 

 

(37)



 

 

 

 

 

 

Income (loss) before income taxes

 

 

575 

 

 

(465)

Provision for income taxes (Note 5)

 

 

(76)

 

 

(124)



 

 

 

 

 

 

Net income (loss) attributable to Corning Incorporated

 

$

499 

 

$

(589)



 

 

 

 

 

 

Earnings (loss) per common share attributable to
Corning Incorporated:

 

 

 

 

 

 

Basic (Note 6)

 

$

0.61 

 

$

(0.72)

Diluted (Note 6)

 

$

0.55 

 

$

(0.72)



The accompanying notes are an integral part of these consolidated financial statements.

 

© 2019 Corning Incorporated. All Rights Reserved.

3


 

Index

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; in millions)









 

 

 

 

 

 



 

 

 

 

 

 

   

 

Three Months Ended

   

 

March 31,

   

 

2019

 

2018

   

 

 

 

 

 

 

Net income (loss) attributable to Corning Incorporated

 

$

499 

 

$

(589)



 

 

 

 

 

 

Foreign currency translation adjustments and other
  (Note 12)

 

 

(110)

 

 

264 

Net unrealized gains on investments

 

 

 

 

 

Unamortized (losses) gains and prior service credits
  for postretirement benefit plans (Note 12)

 

 

(52)

 

 

Net unrealized gains on designated hedges

 

 

 

 

 

Other comprehensive (loss) income, net of tax

 

 

(156)

 

 

265 



 

 

 

 

 

 

Comprehensive income (loss) attributable to Corning Incorporated

 

$

343 

 

$

(324)



The accompanying notes are an integral part of these consolidated financial statements.

 

© 2019 Corning Incorporated. All Rights Reserved.

4


 

Index

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except share and per share amounts)







 

 

 

 

 

 

   

 

March 31,

 

December 31,



 

2019

 

2018

Assets

 

 

 

 

 

 



 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,456 

 

$

2,355 

Trade accounts receivable, net of doubtful accounts and allowances - $69 and $64

 

 

1,974 

 

 

1,940 

Inventories, net of inventory reserves - $182 and $182 (Note 7)

 

 

2,190 

 

 

2,037 

Other current assets

 

 

729 

 

 

702 

Total current assets

 

 

6,349 

 

 

7,034 



 

 

 

 

 

 

Investments

 

 

346 

 

 

376 

Property, plant and equipment, net of accumulated depreciation - $12,136 and $11,932

 

 

14,878 

 

 

14,895 

Goodwill, net

 

 

1,930 

 

 

1,936 

Other intangible assets, net

 

 

1,265 

 

 

1,292 

Deferred income taxes (Note 5)

 

 

1,051 

 

 

951 

Other assets

 

 

1,502 

 

 

1,021 



 

 

 

 

 

 

Total Assets

 

$

27,321 

 

$

27,505 

   

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 



 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt and short-term borrowings

 

$

 

$

Accounts payable

 

 

1,278 

 

 

1,456 

Other accrued liabilities (Note 3 and Note 9)

 

 

1,774 

 

 

1,851 

Total current liabilities

 

 

3,059 

 

 

3,311 



 

 

 

 

 

 

Long-term debt

 

 

6,018 

 

 

5,994 

Postretirement benefits other than pensions (Note 8)

 

 

659 

 

 

662 

Other liabilities (Note 3 and Note 9)

 

 

3,879 

 

 

3,652 

Total liabilities

 

 

13,615 

 

 

13,619 



 

 

 

 

 

 

Commitments, contingencies and guarantees (Note 3)

 

 

 

 

 

 

Shareholders’ equity (Note 12):

 

 

 

 

 

 

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: 1,715 million and 1,713 million

 

 

857 

 

 

857 

Additional paid-in capital – common stock

 

 

14,243 

 

 

14,212 

Retained earnings

 

 

16,489 

 

 

16,303 

Treasury stock, at cost; Shares held: 933 million and 925 million

 

 

(19,116)

 

 

(18,870)

Accumulated other comprehensive loss

 

 

(1,166)

 

 

(1,010)

Total Corning Incorporated shareholders’ equity

 

 

13,607 

 

 

13,792 

Noncontrolling interests

 

 

99 

 

 

94 

Total equity

 

 

13,706 

 

 

13,886 



 

 

 

 

 

 

Total Liabilities and Equity

 

$

27,321 

 

$

27,505 



The accompanying notes are an integral part of these consolidated financial statements. 

© 2019 Corning Incorporated. All Rights Reserved.

5


 

Index

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)







 

 

 

 

 

 



 

 

 

 

 

 

   

 

Three Months Ended



 

March 31,

   

 

2019

 

2018

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income (loss)

 

$

499 

 

$

(589)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

 

306 

 

 

304 

Amortization of purchased intangibles

 

 

29 

 

 

19 

Equity in earnings of affiliated companies

 

 

(25)

 

 

(39)

Deferred tax (benefit) provision

 

 

(40)

 

 

16 

Incentives and customer deposits

 

 

 

 

276 

Translated earnings contract (gain) loss

 

 

(184)

 

 

622 

Unrealized translation losses (gains) on transactions

 

 

 

 

(63)

Changes in certain working capital items:

 

 

 

 

 

 

Trade accounts receivable

 

 

(36)

 

 

94 

Inventories

 

 

(159)

 

 

(98)

Other current assets

 

 

(97)

 

 

(92)

Accounts payable and other current liabilities

 

 

(299)

 

 

(162)

Other, net

 

 

(33)

 

 

32 

Net cash (used in) provided by operating activities

 

 

(29)

 

 

320 



 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Capital expenditures

 

 

(524)

 

 

(655)

Realized gains on translated earnings contracts

 

 

20 

 

 

13 

Other, net

 

 

21 

 

 

(2)

Net cash used in investing activities

 

 

(483)

 

 

(644)



 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

Proceeds from the exercise of stock options

 

 

23 

 

 

21 

Repurchases of common stock for treasury

 

 

(257)

 

 

(800)

Dividends paid

 

 

(181)

 

 

(177)

Other, net

 

 

22 

 

 

(3)

Net cash used in financing activities

 

 

(393)

 

 

(959)

Effect of exchange rates on cash

 

 

 

 

62 

Net decrease in cash and cash equivalents

 

 

(899)

 

 

(1,221)

Cash and cash equivalents at beginning of period

 

 

2,355 

 

 

4,317 

Cash and cash equivalents at end of period

 

$

1,456 

 

$

3,096 



 

 

 

 

 

 



The accompanying notes are an integral part of these consolidated financial statements. 













© 2019 Corning Incorporated. All Rights Reserved.

6


 

Index

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited; in millions)











 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

Convertible preferred stock

 

 

Common Stock

 

 

Additional paid-in capital common

 

 

Retained Earnings

 

 

Treasury Stock

 

 

Accumulated other comprehensive loss

 

 

Total Corning Incorporated shareholders' equity

 

 

Non-controlling interests

 

 

Total

Balance, January 1, 2019

$

2,300 

 

$

857 

 

$

14,212 

 

$

16,303 

 

$

(18,870)

 

$

(1,010)

 

$

13,792 

 

$

94 

 

$

13,886 

Net income

 

 

 

 

 

 

 

 

 

 

499 

 

 

 

 

 

 

 

 

499 

 

 

 

 

505 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(156)

 

 

(156)

 

 

 

 

 

(156)

Purchase of common stock
  for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

(244)

 

 

 

 

 

(244)

 

 

 

 

 

(244)

Shares issued to benefit plans
  and for option exercises

 

 

 

 

 

 

 

31 

 

 

 

 

 

 

 

 

 

 

 

31 

 

 

 

 

 

31 

Common Dividends
  ($.20 per share)

 

 

 

 

 

 

 

 

 

 

(158)

 

 

 

 

 

 

 

 

(158)

 

 

 

 

 

(158)

Preferred Dividends
  ($10,625 per share)

 

 

 

 

 

 

 

 

 

 

(24)

 

 

 

 

 

 

 

 

(24)

 

 

 

 

 

(24)

Other, net (1)

 

 

 

 

 

 

 

 

 

 

(131)

 

 

(2)

 

 

 

 

 

(133)

 

 

(1)

 

 

(134)

Balance, March 31, 2019

$

2,300 

 

$

857 

 

$

14,243 

 

$

16,489 

 

$

(19,116)

 

$

(1,166)

 

$

13,607 

 

$

99 

 

$

13,706 



(1)

Adjustments to beginning retained earnings include the impact of an accounting change recorded upon adoption of the new standard for reclassification of stranded tax effects in accumulated other comprehensive income (“AOCI”) in the amount of $53 million and a net reduction of $186 million from an equity affiliate’s adoption of the new revenue standard.







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

Convertible preferred stock

 

 

Common Stock

 

 

Additional paid-in capital common

 

 

Retained Earnings

 

 

Treasury Stock

 

 

Accumulated other comprehensive loss

 

 

Total Corning Incorporated shareholders' equity

 

 

Non-controlling interests

 

 

Total

Balance, January 1, 2018

$

2,300 

 

$

854 

 

$

14,089 

 

$

15,930 

 

$

(16,633)

 

$

(842)

 

$

15,698 

 

$

72 

 

$

15,770 

Net (loss) income

 

 

 

 

 

 

 

 

 

 

(589)

 

 

 

 

 

 

 

 

(589)

 

 

 

 

(586)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

265 

 

 

265 

 

 

 

 

 

265 

Purchase of common stock for
  treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

(814)

 

 

 

 

 

(814)

 

 

 

 

 

(814)

Shares issued to benefit plans
  and for option exercises

 

 

 

 

 

 

 

30 

 

 

 

 

 

 

 

 

 

 

 

30 

 

 

 

 

 

30 

Common Dividends
  ($.18 per share)

 

 

 

 

 

 

 

 

 

 

(153)

 

 

 

 

 

 

 

 

(153)

 

 

 

 

 

(153)

Preferred Dividends
  ($10,625 per share)

 

 

 

 

 

 

 

 

 

 

(24)

 

 

 

 

 

 

 

 

(24)

 

 

 

 

 

(24)

Other, net

 

 

 

 

 

 

 

 

 

 

 

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

$

2,300 

 

$

854 

 

$

14,119 

 

$

15,166 

 

$

(17,449)

 

$

(577)

 

$

14,413 

 

$

75 

 

$

14,488 



The accompanying notes are an integral part of these consolidated financial statements. 

© 2019 Corning Incorporated. All Rights Reserved.

7


 

Index

 

 

CORNING INCORPORATED AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.   Significant Accounting Policies



Basis of Presentation



In these notes, the terms “Corning,” “Company,” “we,” “us,” or “our” mean Corning Incorporated and its subsidiary companies.



The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information.  Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed.  These interim consolidated financial statements should be read in conjunction with Corning’s consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”).



The unaudited consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows for the interim periods presented.  All such adjustments are of a normal recurring nature.  The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year.



Certain prior year amounts have been reclassified to conform to the current-year presentation.  These reclassifications had no impact on our results of operations, financial position, or changes in shareholders’ equity. 



Leases



Corning leases certain real estate, vehicles, and equipment from third parties. On January 1, 2019 we adopted the new leasing standard.  Corning classifies leases as either financing or operating.  Operating leases are included in other assets with the corresponding liability in other accrued liabilities and other liabilities on our consolidated balance sheets.  Finance leases are included in property, plant and equipment with the corresponding liability in the current portion and long-term debt line items on our consolidated balance sheets.  Leases where we are the lessor are not significant.



Lease expense is recognized on a straight-line basis over the lease term for operating leases.  Financing leases are recognized on the effective interest method for interest expense and straight-line method for asset amortization.  Renewals and terminations are included in the calculation of the Right of Use (“ROU”) asset and lease liability when considered to be reasonably certain to be exercised.  When the implicit rate is unknown, we use our incremental borrowing rate based on commencement date in determining the present value of lease payments. 



Our leases do not include residual value guarantees.  We are not the primary beneficiary in or have other forms of variable interests with the lessor of the leased assets.  The impact to the balance sheet for operating leases is a gross-up for the addition of ROU assets and liabilities relating to the operating leases in the amount of $449 million at adoption.  The impact to the balance sheet for financing leases was not material.



Corning has elected the following practical expedients and accounting policy elections to apply the new lease accounting standard at its effective date as of January 1, 2019:  



·

Leases of less than 12 months in duration to be recorded as expense only;

·

Account for lease and non-lease components of a contract as a single lease component; and

·

Comparative reporting of prior periods under ASC 840 not restated due to modified retrospective implementation.



At adoption, Corning recorded a nominal cumulative-effect adjustment to beginning retained earnings.



Refer to Note 4 (Leases) to the consolidated financial statements for additional information.



© 2019 Corning Incorporated. All Rights Reserved.

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Revenue



One of Corning’s equity affiliates adopted the new revenue standard on January 1, 2019.  The impact of adopting the new standard to Corning’s financial statements was a net reduction of $186 million to 2019 beginning retained earnings.  Timing of revenue recognition for certain open performance obligations as measured at January 1, 2019 under the new standard was approximately $239 million with offsetting deferred tax impacts of $53 million.



Income Taxes



In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, which allows for reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act. We have adopted this new standard effective January 1, 2019. The impact of the new standard resulted in a reclassification of $53 million from accumulated other comprehensive income to beginning retained earnings.



Other Accounting Standards



No other accounting standards newly issued or adopted as of January 1, 2019, had a material impact on Corning’s financial statements or disclosures.



2.   Revenue



Revenue Disaggregation Table



The following table shows revenues by major product categories, similar to our reportable segment disclosure.  Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty around revenue recognition and cash flows are substantially similar.  The commercial markets and selling channels are also similar.  Except for an inconsequential amount of  revenue for Telecommunications products, our product category revenues are recognized at point in time when control transfers to the customer.



Revenues by product category are as follows (in millions):





 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

2019

 

2018

Display products

 

$

795 

 

$

732 



 

 

 

 

 

 

Telecommunication products

 

 

1,064 

 

 

886 



 

 

 

 

 

 

Specialty glass products

 

 

309 

 

 

278 



 

 

 

 

 

 

Environmental substrate and filter products

 

 

351 

 

 

322 



 

 

 

 

 

 

Life science products

 

 

239 

 

 

232 



 

 

 

 

 

 

All Other

 

 

54 

 

 

50 



 

$

2,812 

 

$

2,500 



 

 

 

 

 

 



© 2019 Corning Incorporated. All Rights Reserved.

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Contract Assets and Liabilities



Contract assets, such as costs to obtain or fulfill contracts, are an insignificant component of Corning’s revenue recognition process.  The majority of Corning’s cost of fulfillment as a manufacturer of products is classified as inventory, fixed assets and intangible assets, which are accounted for under the respective guidance for those asset types.  Other costs of contract fulfillment are immaterial due to the nature of our products and their respective manufacturing processes.  



Contract liabilities include deferred revenues, other advanced payments and customer deposits.  Deferred revenue and other advanced payments are not significant to our operations and are classified as part of other current liabilities in our financial statements.  Customer deposits are predominately related to Display products and are classified as part of other current liabilities and other long- term liabilities as appropriate, and are disclosed below. 



We treat shipping and handling fees as a fulfillment cost and not as a separate performance obligation under the terms of our revenue contracts due to the perfunctory nature of the shipping and handling obligations. 



Customer Deposits



As of March 31, 2019 and December 31, 2018, Corning had customer deposits of approximately $1.0 billion.  The majority of these represent non-refundable cash deposits for customers to secure rights to an amount of glass produced by Corning under long-term supply agreements.  The duration of these long-term supply agreements ranges up to ten years.  As glass is shipped to customers, Corning will recognize revenue and issue credit memoranda to reduce the amount of the customer deposit liability, which are applied against customer receivables resulting from the sale of glass.  In the three months ended March 31, 2019 and 2018, no credit memoranda were issued.  As of March 31, 2019 and December 31, 2018, $907 million and $922 million were recorded as other long-term liabilities, respectively.  The remaining $84 million and $54 million, respectively, were classified as other current liabilities.



3.   Commitments, Contingencies and Guarantees



Corning is a defendant in various lawsuits and is subject to various claims that arise in the normal course of business, the most significant of which are summarized below.  In the opinion of management, the likelihood that the ultimate disposition of these matters will have a material adverse effect on Corning’s consolidated financial position, liquidity, or results of operations, is remote. 



Asbestos Claims



Corning and PPG Industries, Inc. each owned 50% of the capital stock of Pittsburgh Corning Corporation (“PCC”).  PCC filed for Chapter 11 reorganization in 2000, and the Modified Third Amended Plan of Reorganization for PCC (the “Plan”) became effective in April 2016.  At December 31, 2016, the Company’s liability under the Plan was $290 million, which is required to be paid through a series of fixed payments beginning in the second quarter of 2017.  At March 31, 2019, the total amount of payments due in years 2019 through 2023 is $185 million, of which $50 million is due in the second quarter of 2019 and is classified as a current liability.  The remaining $135 million is classified as a non-current liability.



Non-PCC Asbestos Claims



Corning is a defendant in certain cases alleging injuries from asbestos unrelated to PCC (the “non-PCC asbestos claims”) which had been stayed pending the confirmation of the Plan.  The stay was lifted on August 25, 2016.  At December 31, 2018 and March 31, 2019, the amount of the reserve for these non-PCC asbestos claims was estimated to be $146 million.  The reserve balance as of March 31, 2019 represents the undiscounted projection of claims and related legal fees for the estimated life of the litigation.



Dow Corning Chapter 11 Related Matters



Until June 1, 2016, Corning and The Dow Chemical Company (“Dow”) each owned 50% of the common stock of Dow Corning Corporation (“Dow Corning”).  On May 31, 2016, Corning and Dow realigned their ownership interest in Dow Corning.  With the realignment, Corning retained its indirect ownership interest in the Hemlock Semiconductor Group (HSG) and formed a new entity which had been capitalized by Dow Corning with $4.8 billion.  Following the realignment, Corning no longer owned any interest in Dow Corning.  With the realignment, Corning agreed to indemnify Dow Corning for 50% of Dow Corning’s non-ordinary course, pre-closing liabilities to the extent such liabilities exceed the amounts reserved for them by Dow Corning as of May 31, 2016, including two legacy Dow Corning matters: the Dow Corning Breast Implant Litigation, and the Dow Corning Bankruptcy Pendency Interest Claims.



© 2019 Corning Incorporated. All Rights Reserved.

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Dow Corning Breast Implant Litigation



In May 1995, Dow Corning filed for bankruptcy protection to address pending and claimed liabilities arising from many thousands of breast implant product lawsuits.  On June 1, 2004, Dow Corning emerged from Chapter 11 with a Plan of Reorganization (the “Plan”) which provided for the settlement or other resolution of implant claims.  The Plan also includes releases for Corning and Dow as shareholders in exchange for contributions to the Plan.



Under the terms of the Plan, Dow Corning has established and funded a Settlement Trust and a Litigation Facility, referred to above, to provide a means for tort claimants to settle or litigate their claims.  Inclusive of insurance, Dow Corning has paid approximately $1.8 billion to the Settlement Trust.  As of May 31, 2016, Dow Corning had recorded a reserve for breast implant litigation of $290 million.  In the event Dow Corning’s total liability for these claims exceeds such amount, Corning may be required to indemnify Dow Corning for up to 50% of the excess liability.  At March 31, 2019, Dow Corning had recorded a reserve for breast implant litigation of $263 million. 



Dow Corning Bankruptcy Pendency Interest Claims



As a separate matter arising from the bankruptcy proceedings, Dow Corning is defending claims asserted by commercial creditors who claim additional compounded interest at default and state statutory judgment rates as well as attorneys’ fees and other enforcement costs, during the period from May 1995 through June 2004.  As of May 31, 2016, Dow Corning had recorded a reserve for these claims of $107 million.  In the event Dow Corning’s liability for these claims exceeds such amount, Corning may be required to indemnify Dow Corning for up to 50% of the excess liability, subject to certain conditions and limits.  As of March 31, 2019, Dow Corning had recorded a reserve for these claims of $83 million.



Environmental Litigation



Corning has been named by the Environmental Protection Agency (“the Agency”) under the Superfund Act, or by state governments under similar state laws, as a potentially responsible party for 15 active hazardous waste sites.  Under the Superfund Act, all parties who may have contributed any waste to a hazardous waste site, identified by the Agency, are jointly and severally liable for the cost of cleanup unless the Agency agrees otherwise.  It is Corning’s policy to accrue for its estimated liability related to Superfund sites and other environmental liabilities related to property owned by Corning based on expert analysis and continual monitoring by both internal and external consultants.  At March 31, 2019 and December 31, 2018, Corning had accrued approximately $28 million and $30 million, respectively, for the undiscounted estimated liability for environmental cleanup and related litigation.  Based upon the information developed to date, management believes that the accrued reserve is a reasonable estimate of the Company’s liability and that the risk of an additional loss in an amount materially higher than that accrued is remote.



4.   Leases



We have operating and finance leases for real estate, vehicles, and equipment. 



We incurred lease expense in the amount of $42 million for the three months ended March 31, 2019.  Operating and Financing lease costs were $37 million and $5 million, respectively.  Short-term rental expense, for agreements less than one year in duration, is immaterial.  Financing lease cost was comprised of expenses for Depreciation of right-of-use assets and Interest on lease liabilities in the amounts of $2 million and $3 million, respectively.



Cash paid for amounts included in the measurement of lease liabilities totaled $29 million for the three months ended March 31, 2019.  Operating cash flows from operating and financing leases were $26 million and $3 million, respectively.  Financing cash flows from finance leases were nominal.

© 2019 Corning Incorporated. All Rights Reserved.

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Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):





 

 



 

 



As of March 31, 2019

Operating Leases

 

 

Operating lease right-of-use assets, net (1)

$

470 



 

 

Other current liabilities

$

54 

Operating lease liabilities (2)

 

421 

Total operating lease liabilities

$

475 



 

 

Finance Leases

 

 

Property and equipment, at cost

$

171 

Accumulated depreciation

 

(49)

Property and equipment, net

$

122 



 

 

Current portion of long-term debt

$

Long-term debt

 

174 

Total finance lease liabilities

$

179 



(1)

Included in other assets.

(2)

Included in other liabilities.



The weighted average remaining lease terms for operating and financing leases are 11.9 years and 6.4 years, respectively.  The weighted average discount rates for operating and financing leases are 3.9% and 6.0%, respectively.



As of March 31, 2019, maturities of lease liabilities under the new lease standard are as follows (in millions):





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

2023

 

 

After 2023

 

 

Gross Total

 

 

Imputed Discount

 

 

Total



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Leases

 

$

69 

 

$

86 

 

$

70 

 

$

62 

 

$

55 

 

$

352 

 

$

694 

 

$

(219)

 

$

475 

Financing Leases

 

 

10 

 

 

13 

 

 

13 

 

 

14 

 

 

131 

 

 

52 

 

 

233 

 

 

(54)

 

 

179 



As of December 31, 2018, maturities of lease liabilities under the previous lease standard were as follows (in millions):





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 



 

Total

 

Less than
1 year

 

1 to 3
years

 

3 to 5
years

 

5 years and
thereafter

Capital leases and financing obligations 

 

$

393 

 

$

 

$

11 

 

$

132 

 

$

246 

Imputed interest on capital leases and
  financing obligations

 

 

205 

 

 

20 

 

 

38 

 

 

37 

 

 

110 

Minimum rental commitments 

 

 

581 

 

 

82 

 

 

133 

 

 

111 

 

 

255 



As of March 31, 2019, we have additional operating leases, primarily for new production facilities and equipment, that have not yet commenced of approximately $450 million on an undiscounted basis.  These operating leases will commence between fiscal year 2019 and fiscal year 2020 with lease terms of 10 years to 25 years.



5.   Income Taxes



Our provision for income taxes and the related effective income tax rates are as follows (in millions):







 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

2019

 

2018



 

 

 

 

 

 

Provision for income taxes

 

$

(76)

 

$

(124)

Effective tax rate

 

 

13.2% 

 

 

26.7% 



© 2019 Corning Incorporated. All Rights Reserved.

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Index

 

For the three months ended March 31, 2019, the effective income tax rate differed from the U.S. statutory rate of 21% primarily due to the following:



·

Rate differences on income (loss) of consolidated foreign companies offset by;

·

Expected benefits related to foreign derived intangible income (“FDII”); and

·

The release of foreign valuation allowances on deferred tax assets that are now considered realizable from the restructuring of certain Israeli operations.



For the three months ended March 31, 2018, the effective income tax rate differed from the U.S. statutory rate of 21% primarily due to the following:



·

Additional tax expense of $172 million related to a preliminary agreement with the Internal Revenue Service (“IRS”) to settle the income tax audit for the years 2013 and 2014; and

·

A reduction in the tax benefit from domestic losses attributable to foreign exchange and losses on translated earnings contracts due to the anticipated impacts of the base erosion and anti-deferral tax (“BEAT”).



6.   Earnings (Loss) per Common Share



The following table sets forth the computation of basic and diluted earnings (loss) per common share (in millions, except per share amounts):





 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

2019

 

2018

Net income (loss) attributable to Corning Incorporated

 

$

499 

 

$

(589)

Less:  Series A convertible preferred stock dividend

 

 

24 

 

 

24 

Net income (loss) available to common stockholders – basic

 

 

475 

 

 

(613)

Plus:  Series A convertible preferred stock dividend 

 

 

24 

 

 

 

Net income (loss) available to common stockholders – diluted

 

$

499 

 

$

(613)



 

 

 

 

 

 

Weighted-average common shares outstanding – basic

 

 

784 

 

 

848 

Effect of dilutive securities:

 

 

 

 

 

 

Employee stock options and other dilutive securities

 

 

 

 

 

Series A convertible preferred stock 

 

 

115 

 

 

 

Weighted-average common shares outstanding – diluted

 

 

908 

 

 

848 

Basic earnings (loss) per common share

 

$

0.61 

 

$

(0.72)

Diluted earnings (loss) per common share

 

$

0.55 

 

$

(0.72)



 

 

 

 

 

 

Antidilutive potential shares excluded from
  diluted earnings per common share:

 

 

 

 

 

 

Series A convertible preferred stock (1)

 

 

 

 

 

115 

Employee stock options and awards

 

 

 

 

 

11 

Total

 

 

 

 

 

126 



 

 

 

 

 

 

(1)

For the quarter ended March 31, 2018 the Series A preferred stock was anti-dilutive and therefore excluded from the calculation of diluted loss per share.







7.   Inventories, Net of Inventory Reserves



Inventories, net of inventory reserves comprise the following (in millions):





 

 

 

 

 

 



 

 

 

 

 

 



 

March 31,

 

December 31,



 

2019

 

2018

Finished goods

 

$

959 

 

$

854 

Work in process

 

 

416 

 

 

386 

Raw materials and accessories

 

 

410 

 

 

409 

Supplies and packing materials

 

 

405 

 

 

388 

Total inventories, net of inventory reserves

 

$

2,190 

 

$

2,037 











© 2019 Corning Incorporated. All Rights Reserved.

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8.  Employee Retirement Plans



The following table summarizes the components of net periodic benefit cost for Corning’s defined benefit pension and postretirement health care and life insurance plans (in millions):



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Pension benefits

 

Postretirement benefits



 

Three months ended

 

Three months ended



 

March 31,

 

March 31,



 

2019

 

2018

 

2019

 

2018



 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

25 

 

$

25 

 

$

 

$

Interest cost

 

 

37 

 

 

32 

 

 

 

 

Expected return on plan assets 

 

 

(43)

 

 

(47)

 

 

 

 

 

 

Amortization of prior service
   cost (credit)

 

 

 

 

 

 

(2)

 

 

(1)

Total pension and postretirement
   benefit expense

 

$

21 

 

$

12 

 

$

 

$



The components of net period benefit cost other than the service cost component are included in the line item “Other expense, net” in the consolidated statements of income.



9.  Other Liabilities



Other liabilities follow (in millions):





 

 

 

 

 

 



 

 

 

 

 

 



 

March 31,

 

December 31,



 

2019

 

2018

Current liabilities:

 

 

 

 

 

 

Wages and employee benefits

 

$

405 

 

$

642 

Income taxes

 

 

237 

 

 

169 

Derivative instruments

 

 

43 

 

 

56 

Asbestos and other litigation (Note 3)

 

 

112 

 

 

113 

Other current liabilities

 

 

977 

 

 

871 

Other accrued liabilities

 

$

1,774 

 

$

1,851 



 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

 

Defined benefit pension plan liabilities

 

$

843 

 

$

831