Corning Incorporated (NYSE: GLW) announced today an accounting change relating to expense recognition for company-sponsored pension plans. The new method, adopted in the first quarter of 2013, will result in simpler, more transparent financial reporting. Today’s announcement is an accounting change only and does not affect benefits for plan participants, Corning’s funding obligations, or the company’s cash flow.
This improved methodology records most of the actuarial gains and losses in the income statement in the year incurred, rather than amortizing them over time. The difference between actual and expected returns on assets, as well as other actuarial gains and losses that together fall outside a recognition corridor (10% of the greater of plan assets or benefit obligations), will be recognized in the fourth quarter of each year. Actuarial gains or losses result from changes in discount rates and other actuarial assumptions.
“We believe this accounting change will provide greater transparency that will allow investors to more clearly evaluate the company’s operating performance by recognizing actuarial gains and losses outside of the corridor in its operating results in the year in which the gains and losses occur, rather than amortizing them over future periods,” said James B. Flaws, vice chairman and chief financial officer. “Importantly, this accounting change has no impact on benefits received by participants of our pension plans or on pension plan funding obligations or decisions.”
These changes have been applied retrospectively. Financial results from prior periods have been revised to include the impact as if the changes had been in place during those periods. As a result of the retrospective application of this change, Corning’s diluted earnings per share for the years ended Dec. 31, 2012, 2011, and 2010 decreased from $1.15 to $1.09, increased from $1.77 to $1.78, and increased from $2.25 to $2.26, respectively. Excluding the fourth-quarter mark-to-market adjustment and other special items previously disclosed, diluted earnings per share from continuing operations for 2012, 2011, and 2010 would have increased from $1.29 to $1.38, from $1.76 to $1.79, and from $2.07 to $2.08, respectively. Reconciliations between reported company earnings and revised company earnings, and GAAP and non-GAAP measures for the years 2012, 2011, and 2010 are attached to provide year-over-year comparability for future periods.
Presentation of Information in this News Release
Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP. Corning’s non-GAAP net income and EPS measures exclude restructuring, impairment and other charges and adjustments to prior estimates for such charges. Additionally, the company’s non-GAAP measures exclude adjustments to asbestos settlement reserves, gains and losses arising from debt retirements, charges or credits arising from adjustments to the valuation allowance against deferred tax assets, equity method charges resulting from impairments of equity method investments or restructuring, impairment or other charges taken by equity method companies and gains from discontinued operations. The company believes presenting non-GAAP net income and EPS measures is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. Reconciliation of these non-GAAP measures can be found on the company’s Web site by going to www.corning.com/investor_relations and clicking Financial Reports on the left. Reconciliation also accompanies this news release.
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995), which are based on current expectations and assumptions about Corning’s financial results and business operations, that involve substantial risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: the effect of global political, economic and business conditions; conditions in the financial and credit markets; currency fluctuations; tax rates; product demand and industry capacity; competition; reliance on a concentrated customer base; manufacturing efficiencies; cost reductions; availability of critical components and materials; new product commercialization; pricing fluctuations and changes in the mix of sales between premium and non-premium products; new plant start-up or restructuring costs; possible disruption in commercial activities due to terrorist activity, armed conflict, political or financial instability, natural disasters, adverse weather conditions, or major health concerns; adequacy of insurance; equity company activities; acquisition and divestiture activities; the level of excess or obsolete inventory; the rate of technology change; the ability to enforce patents; product and components performance issues; retention of key personnel; stock price fluctuations; and adverse litigation or regulatory developments. These and other risk factors are detailed in Corning’s filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the day that they are made, and Corning undertakes no obligation to update them in light of new information or future events.
About Corning Incorporated
Corning Incorporated (www.corning.com) is the world leader in specialty glass and ceramics. Drawing on more than 160 years of materials science and process engineering knowledge, Corning creates and makes keystone components that enable high-technology systems for consumer electronics, mobile emissions control, telecommunications and life sciences. Our products include glass substrates for LCD televisions, computer monitors and laptops; ceramic substrates and filters for mobile emission control systems; optical fiber, cable, hardware & equipment for telecommunications networks; optical biosensors for drug discovery; and other advanced optics and specialty glass solutions for a number of industries including semiconductor, aerospace, defense, astronomy, and metrology.