Note 1 - Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2013 |
Disclosure Text Block [Abstract] | |
Basis of Accounting [Text Block] | 1. Significant Accounting Policies |
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Basis of Presentation |
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In these notes, the terms “Corning,” “Company,” “we,” “us,” or “our” mean Corning Incorporated and subsidiary companies. |
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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. GAAP for interim financial information. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. 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, 2012 (2012 Form 10-K). |
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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. |
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Employee Retirement Plans |
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In the first quarter of 2013, we elected to change our method of recognizing actuarial gains and losses for our defined benefit pension plans. Previously, we recognized the actuarial gains and losses as a component of Stockholders’ Equity on our consolidated balance sheets on an annual basis. These amounts were amortized into our operating results over the average remaining service period of employees expected to receive benefits under the plan, to the extent such gains and losses were outside of the corridor, where the corridor is equal to 10% of the greater of the benefit obligation or the market-related value of plan assets at the beginning of the year. In addition, we used a calculated market-related value of plan assets for purposes of calculating the expected return on plan assets that spread asset gains and losses over a 3-year period. We have elected to recognize the change in the fair value of plan assets in full and net actuarial gains and losses outside of the corridor annually in the fourth quarter of each year and whenever the plan is remeasured or valuation estimates are finalized. The remaining components of pension expense will be recorded on a quarterly basis. While the historical policy of recognizing pension expense was considered acceptable, we believe that the new policy is preferable as it recognizes the change in the fair value of plan assets in full and eliminates the delay in recognition of net actuarial gains and losses outside of the corridor. We have applied these changes retrospectively, adjusting all prior periods, as if the new accounting methodology was in effect during those periods. |
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Following are the changes to financial statement line items as a result of the accounting methodology change for the periods presented in the accompanying unaudited consolidated financial statements: |
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Consolidated Statements of Income |
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| Three months ended September 30, 2013 | | | |
| Previous | | Reported | | Effect of | | | |
accounting | accounting | | | |
method | change | | | |
Cost of sales | $ | 1,179 | | $ | 1,166 | | $ | -13 | | | |
Gross margin | | 888 | | | 901 | | | 13 | | | |
Selling, general and administrative expenses | | 272 | | | 265 | | | -7 | | | |
Research, development and engineering expenses | | 188 | | | 184 | | | -4 | | | |
Operating income | | 415 | | | 439 | | | 24 | | | |
Income before income taxes | | 525 | | | 549 | | | 24 | | | |
Provision for income taxes | | -132 | | | -141 | | | -9 | | | |
Net income attributable to Corning Incorporated | $ | 393 | | $ | 408 | | $ | 15 | | | |
Earnings per common share attributable to Corning Incorporated – Basic | $ | 0.27 | | $ | 0.28 | | $ | 0.01 | | | |
Earnings per common share attributable to Corning Incorporated – Diluted | $ | 0.27 | | $ | 0.28 | | $ | 0.01 | | | |
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| Three months ended September 30, 2012 | | | |
| Previously | | Revised | | Effect of | | | |
reported | (after | accounting | | | |
(before | accounting | change | | | |
accounting | change) | | | | |
change) | | | | | |
Cost of sales | $ | 1,159 | | $ | 1,149 | | $ | -10 | | | |
Gross margin | | 879 | | | 889 | | | 10 | | | |
Selling, general and administrative expenses | | 295 | | | 289 | | | -6 | | | |
Research, development and engineering expenses | | 185 | | | 182 | | | -3 | | | |
Operating income | | 392 | | | 411 | | | 19 | | | |
Income before income taxes | | 608 | | | 627 | | | 19 | | | |
Provision for income taxes | | -87 | | | -94 | | | -7 | | | |
Net income attributable to Corning Incorporated | $ | 521 | | $ | 533 | | $ | 12 | | | |
Earnings per common share attributable to Corning Incorporated – Basic | $ | 0.35 | | $ | 0.36 | | $ | 0.01 | | | |
Earnings per common share attributable to Corning Incorporated – Diluted | $ | 0.35 | | $ | 0.36 | | $ | 0.01 | | | |
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| Nine months ended September 30, 2013 | | | |
| Previous | | Reported | | Effect of | | | |
accounting | accounting | | | |
method | change | | | |
Cost of sales | $ | 3,349 | | $ | 3,309 | | $ | -40 | | | |
Gross margin | | 2,514 | | | 2,554 | | | 40 | | | |
Selling, general and administrative expenses | | 810 | | | 790 | | | -20 | | | |
Research, development and engineering expenses | | 553 | | | 541 | | | -12 | | | |
Operating income | | 1,115 | | | 1,187 | | | 72 | | | |
Income before income taxes | | 1,834 | | | 1,906 | | | 72 | | | |
Provision for income taxes | | -340 | | | -366 | | | -26 | | | |
Net income attributable to Corning Incorporated | $ | 1,494 | | $ | 1,540 | | $ | 46 | | | |
Earnings per common share attributable to Corning Incorporated – Basic | $ | 1.02 | | $ | 1.05 | | $ | 0.03 | | | |
Earnings per common share attributable to Corning Incorporated – Diluted | $ | 1.01 | | $ | 1.04 | | $ | 0.03 | | | |
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| Nine months ended September 30, 2012 | | | |
| Previously | | Revised | | Effect of | | | |
reported | (after | accounting | | | |
(before | accounting | change | | | |
accounting | change) | | | | |
change) | | | | | |
Cost of sales | $ | 3,376 | | $ | 3,345 | | $ | -31 | | | |
Gross margin | | 2,490 | | | 2,521 | | | 31 | | | |
Selling, general and administrative expenses | | 865 | | | 848 | | | -17 | | | |
Research, development and engineering expenses | | 560 | | | 551 | | | -9 | | | |
Operating income | | 1,043 | | | 1,100 | | | 57 | | | |
Income before income taxes | | 1,736 | | | 1,793 | | | 57 | | | |
Provision for income taxes | | -291 | | | -312 | | | -21 | | | |
Net income attributable to Corning Incorporated | $ | 1,445 | | $ | 1,481 | | $ | 36 | | | |
Earnings per common share attributable to Corning Incorporated – Basic | $ | 0.96 | | $ | 0.99 | | $ | 0.03 | | | |
Earnings per common share attributable to Corning Incorporated – Diluted | $ | 0.95 | | $ | 0.98 | | $ | 0.03 | | | |
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Consolidated Statements of Comprehensive Income |
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| Three months ended September 30, 2013 | | | |
| Previous | | Reported | | Effect of | | | |
accounting | accounting | | | |
method | change | | | |
Net income attributable to Corning Incorporated | $ | 393 | | $ | 408 | | $ | 15 | | | |
Other comprehensive income, net of tax | | 326 | | | 313 | | | -13 | | | |
Comprehensive income attributable to Corning Incorporated | $ | 719 | | $ | 721 | | $ | 2 | | | |
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| Three months ended September 30, 2012 | | | |
| Previously | | Revised | | Effect of | | | |
reported | (after | accounting | | | |
(before | accounting | change | | | |
accounting | change) | | | | |
change) | | | | | |
Net income attributable to Corning Incorporated | $ | 521 | | $ | 533 | | $ | 12 | | | |
Other comprehensive income, net of tax | | 241 | | | 231 | | | -10 | | | |
Comprehensive income attributable to Corning Incorporated | $ | 762 | | $ | 764 | | $ | 2 | | | |
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| Nine months ended September 30, 2013 | | | |
| Previous | | Reported | | Effect of | | | |
accounting | accounting | | | |
method | change | | | |
Net income attributable to Corning Incorporated | $ | 1,494 | | $ | 1,540 | | $ | 46 | | | |
Other comprehensive loss, net of tax | | -390 | | | -431 | | | -41 | | | |
Comprehensive income attributable to Corning Incorporated | $ | 1,104 | | $ | 1,109 | | $ | 5 | | | |
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| Nine months ended September 30, 2012 | | | |
| Previously | | Revised | | Effect of | | | |
reported | (after | accounting | | | |
(before | accounting | change | | | |
accounting | change) | | | | |
change) | | | | | |
Net income attributable to Corning Incorporated | $ | 1,445 | | $ | 1,481 | | $ | 36 | | | |
Other comprehensive income, net of tax | | 194 | | | 183 | | | -11 | | | |
Comprehensive income attributable to Corning Incorporated | $ | 1,639 | | $ | 1,664 | | $ | 25 | | | |
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Consolidated Balance Sheets |
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| September 30, 2013 | | | |
| Previous | | Reported | | Effect of | | | |
accounting | accounting | | | |
method | change | | | |
Retained earnings | $ | 11,632 | | $ | 11,017 | | $ | -615 | | | |
Accumulated other comprehensive loss | $ | -690 | | $ | -75 | | $ | 615 | | | |
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| December 31, 2012 | | | |
| Previously | | Revised | | Effect of | | | |
reported | (after | accounting | | | |
(before | accounting | change | | | |
accounting | change) | | | | |
change) | | | | | |
Retained earnings | $ | 10,588 | | $ | 9,932 | | $ | -656 | | | |
Accumulated other comprehensive (loss) income | $ | -300 | | $ | 356 | | $ | 656 | | | |
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Consolidated Statements of Cash Flows |
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| Nine months ended September 30, 2013 | | | |
| Previous | | Reported | | Effect of | | | |
accounting | accounting | | | |
method | change | | | |
Cash flows from operating activities: | | | | | | | | | | | |
Net income | $ | 1,494 | | $ | 1,540 | | $ | 46 | | | |
Deferred tax provision | $ | 115 | | $ | 141 | | $ | 26 | | | |
Employee benefit payments less than expense | $ | 106 | | $ | 34 | | $ | -72 | | | |
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| Nine months ended September 30, 2012 | | | |
| Previously | | Revised | | Effect of | | | |
reported | (after | accounting | | | |
(before | accounting | change | | | |
accounting | change) | | | | |
change) | | | | | |
Cash flows from operating activities: | | | | | | | | | | | |
Net income | $ | 1,445 | | $ | 1,481 | | $ | 36 | | | |
Deferred tax provision | $ | 44 | | $ | 65 | | $ | 21 | | | |
Employee benefit payments in excess of expense | | | | $ | -57 | | $ | -57 | | | |
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Other (Expense) Income, Net |
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“Other (expense) income, net” in Corning’s consolidated statements of income includes the following (in millions): |
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| Three months ended | | Nine months ended |
September 30, | September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Royalty income from Samsung Corning Precision | $ | 14 | | $ | 20 | | $ | 43 | | $ | 63 |
Foreign currency exchange and hedge (losses) gains, net | | -33 | | | -1 | | | 248 | | | 4 |
Net loss attributable to noncontrolling interests | | | | | 1 | | | 1 | | | 4 |
Other, net | | 18 | | | -15 | | | 37 | | | -29 |
Total | $ | -1 | | $ | 5 | | $ | 329 | | $ | 42 |
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New Accounting Standards |
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In July 2013, the FASB issued Accounting Standards Update No. 2013-11 Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carryforward Exists. With certain exceptions, ASU 2013-11 requires entities to present an unrecognized tax benefit, or portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. The guidance is effective for interim and annual periods beginning after December 15, 2013 on either a prospective or retrospective basis with early adoption permitted. Corning does not expect adoption of this guidance to have a material impact on its consolidated results of operations and financial condition. |
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In July 2013, the FASB issued Accounting Standards Update No. 2013-10 Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate. ASU 2013-10 permits the use of the Fed Funds Effective Swap Rate as a benchmark interest rate for hedge accounting in addition to interest rates on direct Treasury obligation of the United States government and the LIBOR. In addition, the guidance removes the restriction on using different benchmark rates for similar hedges. The guidance became effective on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. We are evaluating the potential impact of this guidance on our future hedge transactions. |
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In March 2013, the FASB issued Accounting Standards Update No. 2013-05 Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. ASU 2013-05 clarifies when to release the cumulative translation adjustment into net income for transactions involving the disposition of some or all of an investment or a business combination achieved in stages (step acquisitions). The amendments are effective prospectively for interim and annual periods beginning on or after December 15, 2013. Corning does not expect adoption of this guidance to have a material impact on its consolidated results of operations and financial condition. |
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In February 2013, the FASB issued Accounting Standards Update No. 2013-04 Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date. ASU 2013-04 requires an entity to measure such obligations as the sum of the amount that the reporting entity agreed to pay on the basis of its arrangement with co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance is effective for interim and annual periods beginning after December 15, 2013. Retrospective presentation for all comparative period presented is required with early adoption permitted. Corning does not expect adoption of this guidance to have a material impact on its consolidated results of operations and financial condition. |
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