CORNING INCORPORATED ORGANIZATION OF INFORMATION
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") provides a historical and prospective narrative on the
Company's financial condition and results of operations. This interim MD&A
should be read in conjunction with the MD&A in Corning's 2020 Form 10-K. The
various sections of this MD&A contain forward-looking statements that involve
risks and uncertainties. Words such as "anticipates," "expects," "intends,"
"plans," "goals," "believes," "seeks," "estimates," "continues," "may," "will,"
"should," and variations of such words and similar expressions are intended to
identify such forward-looking statements. In addition, any statements that refer
to projections of the Company's future financial performance, anticipated growth
and trends in the businesses, uncertain events or assumptions, and other
characterizations of future events or circumstances are forward-looking
statements. Such statements are based on current expectations and could be
affected by the uncertainties and risk factors described throughout this filing
and particularly in "Risk Factors" in Part I, Item 1A of Corning's 2020 Form
10-K, and as may be updated in the Forms 10-Q. Actual results may differ
materially, and these forward-looking statements do not reflect the potential
impact of any divestitures, mergers, acquisitions, or other business
combinations that had not been completed as of June 30, 2021 .
MD&A includes the following sections:
? Overview ? Results of Operations ? Core Performance Measures ? Reportable Segments
? Capital Resources and Liquidity
? Critical Accounting Estimates
? Environment ? Forward-Looking Statements OVERVIEW In response to the COVID-19 pandemic and the ensuing economic uncertainty, including changing market conditions, the Company has and will continue to focus on three core priorities: preserving the financial health of the Company; protecting employees and communities; and delivering on customer commitments. We will continue to build a stronger, more resilient company that is committed to rewarding shareholders and supporting all global stakeholders. While 2020 brought unprecedented challenges to our end markets and operations, driven by the COVID-19 pandemic, economic uncertainty, and social unrest,Corning adapted rapidly and remained resilient. We executed well to preserve our financial strength, while advancing major innovations with industry leaders. We effectively applied our focused and cohesive portfolio to create value and outperform our underlying markets, contributing to growth in the second half of 2020 and the first half of 2021. Building on the success of the Strategy & Capital Allocation Framework, we announced our Strategy & Growth Framework, highlighting significant opportunities to sell moreCorning content through each of our Market-Access Platforms. Under this new Framework, our leadership priorities and our fundamental approach to capital allocation remain the same. We continue to focus our portfolio and utilize our financial strength. We expect to generate strong operating cash flow as we move forward. We will continue to use our cash to grow, extend our leadership, and reward shareholders. © 2021Corning Incorporated . All Rights Reserved. 29
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Summary of results for the three and six months ended
In the second quarter, net sales were$3,501 million , compared to$2,561 million during the same period in 2020, a net increase of$940 million , or 37%, driven by higher sales in all segments. Net sales for the six months endedJune 30, 2021 were$6,791 million , compared to$4,952 million during the same period in 2020, a net increase of$1,839 million , or 37%. In the second quarter of 2021,Corning generated net income of$449 million , and a net loss of$0.42 per diluted share, compared to a net loss of$71 million , or$0.13 per diluted share, for the same period in 2020. The increase in net income of$520 million was primarily driven by the following items (amounts presented after-tax):
? Higher segment net income of
and cost control; net income increases by segment were
million,
Other", respectively; and
? Lower charges of
realignment costs. The change in diluted earnings per share was primarily driven by changes in net income, outlined above, as well as the conversion of the Preferred Stock into 115 million Common Shares. The immediate repurchase and retirement of 35 million Common Shares resulted in an$803 million one-time reduction to net income available to common shareholders and negative earnings per share. Refer to Note 6 ((Loss) Earnings per Common Share) and Note 14 (Shareholders' Equity) to the consolidated financial statements for additional information. In the first half of 2021,Corning generated net income of$1,048 million , or$0.27 per diluted share, compared to a net loss of$167 million , or$0.28 per diluted share, for the same period in 2020. The increase in net income of$1,215 million and diluted earnings per share of$0.55 , was primarily driven by the following items (amounts presented after-tax):
? Higher segment net income of
and cost control; net income increases by segment were
million,
Technologies,
Technologies, Life Sciences and "All Other", respectively;
? The absence of
investments in research and development programs within our All Other segment; ? Lower charges of$266 million , primarily driven by lower severance and
capacity realignment costs;
? Translated earnings contract gains in the current period were
higher than prior year; ? The absence of a negative impact of a cumulative adjustment recorded during
the first quarter of 2020 to reduce revenue
The change in diluted earnings per share was primarily driven by changes in net income, outlined above, as well as the conversion of the Preferred Stock into 115 million Common Shares. The immediate repurchase and retirement of 35 million Common Shares resulted in an$803 million one-time reduction to net income available to common shareholders and negative earnings per share. Refer to Note 6 ((Loss) Earnings per Common Share) and Note 14 (Shareholders' Equity) to the consolidated financial statements for additional information. The translation impact of fluctuations in foreign currency exchange rates, including the impact of hedges realized in the current quarter, did not have a material impact onCorning's consolidated net income in the three and six months endedJune 30, 2021 , when compared to the same periods in 2020. 2021 Corporate Outlook
We expect another quarter of year-over-year sales growth, with approximately
© 2021 Corning Incorporated . All Rights Reserved.
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Table of Contents RESULTS OF OPERATIONS
Selected highlights from operations are as follows (in millions):
Three months ended % Six months ended %
June 30, change June 30, change
2021 2020 21 vs. 20 2021 2020 21 vs. 20
Net sales $ 3,501 $ 2,561 37 $ 6,791 $ 4,952 37
Gross margin $ 1,315 $ 756 74 $ 2,471 $ 1,317 88
(gross margin %) 38 % 30 % 36 % 27 %
Selling, general and
administrative expenses $ 465 $ 401 16 $ 865 $ 796 9
(as a % of net sales) 13 % 16 % 13 % 16 %
Research, development and
engineering expenses $ 242 $ 430 (44 ) $ 464 $ 691 (33 )
(as a % of net sales) 7 % 17 % 7 % 14 %
Translated earnings contract
gain, net $ 3 $ 37 (92 ) $ 275 $ 105 162
(as a % of net sales) 0 % 1 % 4 % 2 %
Income (loss) before income
taxes $ 516 $ (49 ) * $ 1,341 $ (157 ) *
(as a % of net sales) 15 % (2 %) 20 % (3 %)
Provision for income taxes $ (67 ) $ (22 ) 205 $ (293 ) $ (10 ) *
(as a % of net sales) (2 %) (1 %) (4 %) (0 %)
Net income (loss) attributable
to Corning Incorporated $ 449 $ (71 ) * $ 1,048 $ (167 ) *
(as a % of net sales) 13 % (3 %) 15 % (3 %)
* Not meaningful
© 2021 Corning Incorporated. All Rights Reserved.
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Table of Contents SegmentNet Sales The following table presents segment net sales by reportable segment and All Other (in millions): Three months ended % Six months ended % June 30, change June 30, change 2021 2020 21 vs. 20 2021 2020 21 vs. 20 Display Technologies$ 939 $ 753 25 %$ 1,802 $ 1,504 20 % Optical Communications 1,075 887 21 % 2,012 1,678 20 % Specialty Materials 483 417 16 % 934 769 21 % Environmental Technologies 407 226 80 % 848 546 55 % Life Sciences 312 243 28 % 612 501 22 % All Other (1) 288 62 365 % 559 119 370 % Net sales of reportable segments and All Other 3,504 2,588 35 % 6,767 5,117 32 % Impact of foreign currency movements (2) (3 ) (27 ) 89 % 24 (60 ) * Cumulative adjustment related to customer contract (3) (105 ) * Consolidated net sales$ 3,501 $ 2,561 37 %$ 6,791 $ 4,952 37 %
(1) The Company obtained a controlling interest in HSG during the third quarter
of 2020 and has consolidated results in "All Other" as of
in the Display Technologies segment.
(3) Amount represents the negative impact of a cumulative adjustment recorded
during the first quarter of 2020 to reduce revenue by $105 million . The
adjustment was associated with a previously recorded commercial benefit
asset, reflected as a prepayment, to a customer with a long-term supply
agreement that substantially exited its production of LCD panels.
* Not meaningful
In the second quarter, net sales of reportable segments were $3,504 million ,
compared to $2,588 million during the same period in 2020, a net increase of
$916 million , or 35%. Changes in net sales were as follows:
? Display Technologies' net sales increased by
to volume growth of more than 20 percent and substantially flat pricing;
?
volumes increased
enterprise products, respectively, primarily driven by 5G, fiber-to-the-home
projects and cloud computing;
? Specialty Materials' net sales increased by
driven by strong demand for premium cover materials, strength in the IT market, and greater optical content in semiconductor manufacturing; ? Net sales for Environmental Technologies increased$181 million , or 80%,
primarily driven by improving markets and increased
with strong demand for diesel products inChina andNorth America ; ? Net sales for Life Sciences increased by$69 million , or 28%, primarily driven by the ongoing recovery in academic and pharmaceutical research labs and continued strong demand for bioproduction products and
diagnostic-related consumables; and
? Net sales for "All Other" increased by
consolidation of HSG sales.
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In the six months endedJune 30, 2021 , net sales of reportable segments were$6,767 million , compared to$5,117 million during the same period in 2020, a net increase of$1,650 million , or 32%. Changes in net sales were as follows:
? Display Technologies' net sales increased by
to volume growth of approximately 20 percent, partially offset by a very slight price declines;
?
volumes increased
enterprise products, respectively, primarily driven by 5G, fiber-to-the-home
projects, and cloud computing;
? Specialty Materials' net sales increased by
driven by strong demand for premium cover materials, strength in the IT market, and greater optical content in semiconductor manufacturing; ? Net sales for Environmental Technologies increased$302 million , or 55%,
primarily driven by improving markets and increased
with strong demand for diesel products inChina andNorth America ; ? Net sales for Life Sciences increased by$111 million , or 22%, primarily
driven by the ongoing recovery in academic and pharmaceutical research labs
and continued strong demand for bioproduction products and diagnostic-related
consumables; and
? Net sales for "All Other" increased by
consolidation of HSG sales. Movements in foreign exchange rates positively impactedCorning's consolidated net sales by$18 million and$77 million , respectively, in the three and six months endedJune 30, 2021 , when compared to the same periods in 2020. Cost of Sales The types of expenses included in the cost of sales line item are: raw materials consumption, including direct and indirect materials; salaries, wages and benefits; depreciation and amortization; production utilities; production-related purchasing; warehousing (including receiving and inspection); repairs and maintenance; inter-location inventory transfer costs; production and warehousing facility property insurance; rent for production facilities; freight and logistics costs; and other production overhead. Gross Margin In the three and six months endedJune 30, 2021 , gross margin increased by$559 million , or 74% and$1,154 million , or 88%, respectively. Gross margin as a percentage of sales increased by 8 percentage points and 9 percentage points, respectively. The increase in gross margin was primarily driven by higher sales and cost control measures, as well as lower charges for restructuring and capacity realignment of$104 million and$265 million , respectively, partially offset by elevated freight and certain raw material costs.
The translation impact of fluctuations in foreign currency exchange rates,
including the impact of hedges realized in the current quarter, did not have a
material impact on
Selling, General and Administrative Expenses
In the three and six months endedJune 30, 2021 , selling, general and administrative expenses increased by$64 million , or 16%, and$69 million , or 9%, respectively, and declined by 3 percentage points as a percentage of sales, when compared to the prior periods. Increases in these costs were primarily driven by compensation and benefit expenses and the consolidation of HSG, partially offset by lower restructuring and other charges and credits of$18 million and$66 million , respectively, when compared to the same periods in 2020. The types of expenses included in the selling, general and administrative expenses line item are: salaries, wages and benefits; share-based compensation expense; travel; sales commissions; professional fees; and depreciation and amortization, utilities, rent for administrative facilities and restructuring, impairment and other charges and credits. © 2021Corning Incorporated . All Rights Reserved. 33
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Research, Development and Engineering Expenses
In the three and six months endedJune 30, 2021 , research, development and engineering expenses decreased by$188 million , or 44%, and$227 million , or 33%, respectively, when compared to the same periods last year. The primary driver was lower restructuring, impairment, and other charges and credits of$208 million and$221 million , respectively. As a percentage of sales, these expenses were 10 and 7 percentage points lower, respectively, for the three and six months endedJune 30, 2021 , when compared to the same periods last year.
Translated earnings contract gain, net
Included in the line item translated earnings contract gain, net, is the impact
of foreign currency hedges which hedge translation exposure arising from
movements in the Japanese yen, South Korean won, new
Three months ended Three months ended Change
June 30, 2021 June 30, 2020 2021 vs. 2020
Income Loss Income
before Net before Net before Net
(in millions) taxes income taxes loss taxes income
Hedges related to
translated earnings:
Realized gain (loss), net
(1) $ 11 $ 8 $ (5 ) $ (4 ) $ 16 $ 12
Unrealized (loss) gain, net
(2) (8 ) (6 ) 42 33 (50 ) (39 )
Total translated earnings
contract gain, net $ 3 $ 2 $ 37 $ 29 $ (34 ) $ (27 )
Six months ended Six months ended Change
June 30, 2021 June 30, 2020 2021 vs. 2020
Income Loss Income
before Net before Net before Net
(in millions) taxes income taxes income taxes income
Hedges related to
translated earnings:
Realized loss, net (1) $ (1 ) $ (1 ) $ (2 ) $ (1 ) $ 1
Unrealized gain, net (2) 276 212 107 83 169 $ 129
Total translated earnings
contract gain, net $ 275 $ 211 $ 105 $ 82 $ 170 $ 129 (1) Includes before tax realized losses related to the expiration of option
contracts for the three and six months ended
respectively. Activity reflected in operating activities in the consolidated
statements of cash flows.
(2) The impact to income was primarily driven by yen-denominated hedges of
translated earnings.
Income (Loss) Before Income Taxes
The translation impact of fluctuations in foreign currency exchange rates, including the impact of hedges realized in the current quarter, did not materially impactCorning's consolidated income (loss) before income taxes in the three and six months endedJune 30, 2021 , when compared to the same periods in 2020. Provision for Income Taxes The provision for income taxes and the related effective income tax rates are as follows (in millions): Three months ended Six months ended June 30, June 30, 2021 2020 2021 2020 Provision for income taxes$ (67 ) $ (22 ) $ (293 ) $ (10 ) Effective tax rate 13.0 % (44.9 %) 21.8 % (6.4 %) © 2021 Corning Incorporated. All Rights Reserved. 34
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For the three months endedJune 30, 2021 , the effective income tax rate differed from theU.S. statutory rate of 21%, primarily due to excess tax benefits related to share-based compensation payments, foreign-rate differential and tax reform items. For the six months endedJune 30, 2021 , the effective income tax rate differed from theU.S. statutory rate of 21% primarily due to our permanently reinvested foreign income position, excess tax benefit related to share-based compensation payments, foreign rate differential, and tax reform items. For the three and six months endedJune 30, 2020 , the effective income tax rate differed from theU.S. statutory rate of 21% primarily due to an adjustment to our permanently reinvested foreign income position, foreign valuation allowances on deferred tax assets, and certain non-deductible expenses for tax purposes.
Refer to Note 5 (Income Taxes) to the consolidated financial statements for additional information.
Net Income (Loss) Attributable to
Net income (loss) and per share data is as follows (in millions, except per
share amounts):
Three months ended Six months ended
June 30, June 30,
2021 2020 2021 2020
Net income (loss) attributable to Corning
Incorporated $ 449 $ (71 ) $ 1,048 $ (167 )
Less: Series A convertible preferred stock
dividend (25 ) (24 ) (49 )
Less: Excess consideration paid for
redemption of preferred shares (1) (803 ) (803 )
Net (loss) income available to common
stockholders used in basic (loss) earnings
per common share calculation (1) $ (354 ) $ (96 ) Net (loss) income available to common stockholders used in diluted (loss) earnings per common share calculation (1)$ (354 ) $ (96 )
Basic (loss) earnings per common share
Weighted-average common shares outstanding - basic 844 759 805 760 Weighted-average common shares outstanding - diluted 844 759 822 760
(1) Refer to Note 6 ((Loss) Earnings per Common Share) to the consolidated
financial statements for additional information.
Comprehensive Income (Loss)
For the three months ended June 30, 2021 , comprehensive income increased by
$495 million when compared to the same period in 2020, primarily due to an
increase in net income of $520 million . The increase in comprehensive income was
partially offset by the net loss on foreign currency translation adjustments of
$18 million , largely driven by a translation loss of $53 million on the South
Korean won and partially offset by a translation gain of $30 million on the
Chinese yuan.
For the six months ended June 30, 2021 , comprehensive income increased by
$1,164 million when compared to the same period in 2020, primarily due to an
increase in net income and net unrealized gains on designated hedges of
$1,215 million and $54 million , respectively. The increase in comprehensive
income was partially offset by the net loss on foreign currency translation
adjustments of $116 million , largely driven by the translation loss of
$181 million on the Japanese yen and partially offset by a translation gain of
$49 million on the Chinese yuan.
Refer to Note 14 (Shareholders' Equity) to the consolidated financial statements for additional information.
© 2021 Corning Incorporated . All Rights Reserved.
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Table of Contents CORE PERFORMANCE MEASURES In managing the Company and assessing financial performance, certain measures provided by the consolidated financial statements are adjusted to exclude specific items to report core performance measures. These items include gains and losses on translated earnings contracts, acquisition-related costs, certain discrete tax items and other tax-related adjustments, restructuring, impairment losses, and other charges and credits, certain litigation-related expenses, pension mark-to-market adjustments and other items which do not reflect on-going operating results of the Company or its equity affiliates.Corning utilizes constant-currency reporting for the Display Technologies, Environmental Technologies, Specialty Materials and Life Sciences segments for the Japanese yen, South Korean won, Chinese yuan, newTaiwan dollar and the euro. The Company believes that the use of constant-currency reporting allows investors to understand the results without the volatility of currency fluctuations and reflects the underlying economics of the translated earnings contracts used to mitigate the impact of changes in currency exchange rates on earnings and cash flows.Corning also believes that reporting core performance measures provides investors greater transparency to the information used by the management team to make financial and operational decisions. Core performance measures are not prepared in accordance with GAAP. We believe investors should consider these non-GAAP measures in evaluating results as they are more indicative of core operating performance and how management evaluates operational results and trends. These measures are not, and should not, be viewed as a substitute for GAAP reporting measures. With respect to the Company's outlook for future periods, it is not possible to provide reconciliations for these non-GAAP measures because the Company does not forecast the movement of foreign currencies against theU.S. dollar, or other items that do not reflect ongoing operations, nor does it forecast items that have not yet occurred or are out of the Company's control. As a result, the Company is unable to provide outlook information on a GAAP basis.
For a reconciliation of non-GAAP performance measures to their most directly comparable GAAP financial measure, please see "Reconciliation of Non-GAAP Measures".
RESULTS OF OPERATIONS - CORE PERFORMANCE MEASURES
Selected highlights from continuing operations, excluding certain items, follow
(in millions):
Three months ended % Six months ended %
June 30, change June 30, change
2021 2020 21 vs. 20 2021 2020 21 vs. 20
Core net sales $ 3,504 $ 2,588 35 % $ 6,767 $ 5,117 32 %
Core equity in earnings of
affiliated companies $ 8 $ 55 (85 )% $ 16 $ 69 (77 )%
Core net income $ 459 $ 218 111 % $ 861 $ 395 118 %
© 2021 Corning Incorporated. All Rights Reserved.
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Table of Contents CoreNet Sales
Core net sales are consistent with net sales by reportable segment. Net sales by reportable segment are presented below (in millions):
Three months ended % Six months ended %
June 30, change June 30, change
2021 2020 21 vs. 20 2021 2020 21 vs. 20
Display Technologies $ 939 $ 753 25 % $ 1,802 $ 1,504 20 %
Optical Communications 1,075 887 21 % 2,012 1,678 20 %
Specialty Materials 483 417 16 % 934 769 21 %
Environmental Technologies 407 226 80 % 848 546 55 %
Life Sciences 312 243 28 % 612 501 22 %
All Other (1) 288 62 365 % 559 119 370 %
Net sales of reportable
segments and All Other $ 3,504 $ 2,588 35 % $ 6,767 $ 5,117 32 %
(1) The Company obtained a controlling interest in HSG during the third quarter
of 2020 and has consolidated results in "All Other" as of
Core Net Income In the three months endedJune 30, 2021 , we generated core net income of$459 million , or$0.53 per diluted share, compared to core net income generated in the three months endedJune 30, 2020 of$218 million , or$0.25 per diluted share. The increase of$241 million , or$0.28 per diluted share, was primarily due to higher segment net income when compared to the same period in 2020. Net income increases by reportable segment are as follows:
? Display Technologies' net income increased by
by increased volume;
?
by volume and cost control measures; and ? Environmental Technologies', Life Sciences' and "All Other" net income increased by$81 million ,$21 million , and$51 million , respectively. The change in diluted earnings per share was primarily driven by changes in net income, outlined above, and the Company's repurchase and retirement of 35 million Common Shares. Refer to Note 6 ((Loss) Earnings per Common Share) and Note 14 (Shareholders' Equity) to the consolidated financial statements for additional information. In the six months endedJune 30, 2021 , we generated core net income of$861 million , or$0.97 per diluted share, compared to core net income generated in the six months endedJune 30, 2020 of$395 million , or$0.45 per diluted share. The increase of$466 million , and$0.52 per diluted share, was primarily due to higher earnings across all operating segments when compared to the same period in 2020. Net income increases by reportable segments are as follows:
? Display Technologies' net income increased by
by increased volume;
?
by volume and cost control measures;
? Specialty Materials' net income increased by
increased demand and volume;
? Environmental Technologies' net income increased by
million, respectively.
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The change in diluted earnings per share was primarily driven by changes in net income, outlined above, and the Company's repurchase and retirement of 35 million Common Shares. Refer to Note 6 ((Loss) Earnings per Common Share) and Note 14 (Shareholders' Equity) to the consolidated financial statements for additional information.
Net periodic pension expense of less than
Core Earnings per Common Share
The following table sets forth the computation of core basic and core diluted earnings per common share (in millions, except per share amounts):
Three months ended Six months ended
June 30, June 30,
2021 2020 2021 2020
Core net income attributable to Corning
Incorporated $ 459 $ 218 $ 861 $ 395
Less: Series A convertible preferred
stock dividend 25 24 49
Core net income available to common
stockholders - basic 459 193 837 346
Plus: Series A convertible preferred
stock dividend 25 24 49
Core net income available to common
stockholders - diluted $ 459 $ 218 Weighted-average common shares outstanding - basic 844 759 805 760 Effect of dilutive securities: Stock options and other dilutive securities 16 6 17 6 Series A convertible preferred stock 9 115 62 115 Weighted-average common shares outstanding - diluted 869 880 884 881
Core basic earnings per common share
Reconciliation of Non-GAAP Measures
Corning utilizes certain financial measures and key performance indicators that are not calculated in accordance with GAAP to assess financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company's financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the consolidated statements of income (loss) or statements of cash flows, or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure as calculated and presented in accordance with GAAP in the consolidated statements of income (loss) or statements of cash flows. Core net sales, core equity in earnings of affiliated companies and core net income are non-GAAP financial measures utilized by management to analyze financial performance without the impact of items that are driven by general economic conditions and events that do not reflect the underlying fundamentals and trends in the Company's operations. © 2021Corning Incorporated . All Rights Reserved. 38
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The following tables reconcile the non-GAAP financial measures to their most directly comparable GAAP financial measure (amounts in millions except percentages and per share amounts):
Three months ended June 30, 2021
Income
before Effective
Net Equity income Net tax Per
sales earnings taxes income rate (a) share
As reported - GAAP $ 3,501 $ 7 $ 516 $ 449 13.0 % $ (0.42 )
Preferred stock redemption (b) 0.94
Subtotal 3,501 7 516 449 13.0 % 0.52
Constant-currency adjustment (1) 3 1 20 1 0.00
Translation gain on Japanese
yen-denominated debt (2) (5 ) (4 ) (0.00 )
Translated earnings contract
gain (3) (3 ) (3 ) (0.00 )
Acquisition-related costs (4) 38 30 0.04
Discrete tax items and other
tax-related adjustments (5) (31 ) (0.04 )
Pension mark-to-market
adjustment (6) 19 15 0.02
Restructuring, impairment and
other charges and credits (7) 2 2 0.00
Preferred stock conversion (8) 21 21 0.02
Loss on investments (9) 4 3 0.00
Gain on sale of business (10) (40 ) (32 ) (0.04 )
Bond redemption loss (11) 11 8 0.01
Core performance measures $ 3,504 $ 8 $ 583 $ 459 21.3 % $ 0.53 (a) Based upon statutory tax rates in the specific jurisdiction for each event. (b) Pursuant to the SRA, the Preferred Stock was converted into 115 million Common
Shares.
Shares and excluded them from the weighted-average common shares outstanding
for the calculation of the Company's basic and diluted earnings per share. The
redemption of these Common Shares resulted in an
retained earnings which reduced the net income available to common shareholders
and resulted in negative earnings per share in the second quarter of 2021.
Three months ended June 30, 2020
(Loss)
income
before Effective
Net Equity income Net (loss) tax Per
sales earnings taxes income rate (a) share
As reported - GAAP $ 2,561 $ 79 $ (49 ) $ (71 ) (44.9 %) $ (0.13 )
Constant-currency adjustment (1) 27 6 3 0.00
Translation gain on Japanese
yen-denominated debt (2) (3 ) (3 ) (0.00 )
Translated earnings contract
gain (3) (35 ) (27 ) (0.04 )
Acquisition-related costs (4) 29 21 0.03
Discrete tax items and other
tax-related adjustments (5) 40 0.05
Pension mark-to-market
adjustment (6) (2 ) (1 ) (0.00 )
Restructuring, impairment and
other charges and credits (7) 337 254 0.33
Litigation, regulatory and other
legal matters (12) 25 20 0.03
Equity in earnings of affiliated
companies (13) (24 ) (24 ) (18 ) (0.02 )
Core performance measures $ 2,588 $ 55 $ 284 $ 218 23.2 % $ 0.25 (a) Based upon statutory tax rates in the specific jurisdiction for each event.
See Part 1, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, Results of Operations - Core Performance Measures,
Reconciliation of Non-GAAP Measures, "Items which we exclude from GAAP measures
to report core performance measures" for the descriptions of the footnoted
reconciling items.
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Table of Contents
Six months ended June 30, 2021
Income
before Effective
Net Equity income Net tax Per
sales earnings taxes income rate (a) share
As reported - GAAP $ 6,791 $ 15 $ 1,341 $ 1,048 21.8 % $ 0.27
Preferred stock redemption (b) 0.92
Subtotal 6,791 15 1,341 1,048 21.8 % 1.19
Constant-currency adjustment (1) (24 ) 1 14 6 0.01
Translation gain on Japanese
yen-denominated debt (2) (123 ) (94 ) (0.11 )
Translated earnings contract
gain (3) (275 ) (212 ) (0.26 )
Acquisition-related costs (4) 85 65 0.08
Discrete tax items and other
tax-related adjustments (5) 6 0.01
Pension mark-to-market
adjustment (6) 24 19 0.02
Restructuring, impairment and
other charges and credits (7) 2 2 0.00
Preferred stock conversion (8) 21 21 0.03
Loss on investments (9) 39 30 0.04
Gain on sale of business (10) (54 ) (46 ) (0.06 )
Bond redemption loss (11) 11 8 0.01
Litigation, regulatory and other
legal matters (12) 8 8 0.01
Core performance measures
861 21.2 %$ 0.97
(a) Based upon statutory tax rates in the specific jurisdiction for each event. (b) Pursuant to the SRA, the Preferred Stock was converted into 115 million Common
Shares.
Shares and excluded them from the weighted-average common shares outstanding
for the calculation of the Company's basic and diluted earnings per share. The
redemption of these Common Shares resulted in an
retained earnings which reduced the net income available to common shareholders
and resulted in negative earnings per share in the second quarter of 2021.
Six months ended June 30, 2020
(Loss)
income
before Effective
Net Equity income Net (loss) tax Per
sales earnings taxes income rate (a) share
As reported - GAAP $ 4,952 $ 93 $ (157 ) $ (167 ) (6.4 %) $ (0.28 )
Constant-currency adjustment (1) 60 25 (19 ) (0.03 )
Translation loss on Japanese
yen-denominated debt (2) 11 8 0.01
Translated earnings contract
gain (3) (93 ) (72 ) (0.09 )
Acquisition-related costs (4) 57 42 0.06
Discrete tax items and other
tax-related adjustments (5) 77 0.10
Pension mark-to-market
adjustment (6) (2 ) (1 ) (0.00 )
Restructuring, impairment and
other charges and credits (7) 562 420 0.55
Litigation, regulatory and other
legal matters (12) 25 20 0.03
Equity in earnings of affiliated
companies (13) (24 ) (24 ) (18 ) (0.02 )
Cumulative adjustment related to
customer contract (14) 105 105 105 0.14
Core performance measures
395 22.4 % $ 0.45 (a) Based upon statutory tax rates in the specific jurisdiction for each event.
See Part 1, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, Results of Operations - Core Performance Measures,
Reconciliation of Non-GAAP Measures, "Items which we exclude from GAAP measures
to report core performance measures" for the descriptions of the footnoted
reconciling items.
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Items which we exclude from GAAP measures to arrive at core performance measures are as follows:
(1) Constant-currency adjustment: Because a significant portion of segment revenues and
expenses are denominated in currencies other than the
is important to understand the impact on core net income of translating these currencies
into
denominated in Japanese yen, but also impacted by the South Korean won, Chinese yuan, and
new
income are primarily impacted by the euro and Chinese yuan. Presenting results on a
constant-currency basis mitigates the translation impact and allows management to evaluate
performance period over period, analyze underlying trends in the businesses, and establish
operational goals and forecasts. We establish constant-currency rates based on internally
derived management estimates which are closely aligned with the currencies we have hedged.
Constant-currency rates are as follows:
Currency Japanese yen Korean won Chinese yuan New Taiwan dollar Euro
Rate ¥107 ?1,175 ¥6.7 NT$31 €.81
(2) Translation (gain) loss on Japanese yen-denominated debt: We have excluded the gain or loss
on the translation of the yen-denominated debt to
unrealized gains and losses of the Japanese yen, South Korean won, Chinese yuan, euro and
new
well as the unrealized gains and losses of the British pound-denominated foreign currency
hedges related to translated earnings. (4) Acquisition-related costs: These expenses include intangible amortization, inventory
valuation adjustments, external acquisition-related deal costs, and other transaction
related costs. (5) Discrete tax items and other tax-related adjustments: These include discrete period tax
items such as changes of tax reserves and changes in our permanently reinvested foreign
income position. (6) Pension mark-to-market adjustment: Defined benefit pension mark-to-market gains and losses,
which arise from changes in actuarial assumptions and the difference between actual and
expected returns on plan assets and discount rates. (7) Restructuring, impairment and other charges and credits: This amount includes
restructuring, impairment losses and other charges and credits, as well as other expenses,
primarily accelerated depreciation and asset write-offs, which are not related to
continuing operations and are not classified as restructuring expense. (8) Preferred stock conversion: This amount includes the put option from the Share Repurchase
Agreement with
capturing the change in fair value based on the closing stock market price. (10) Gain on sale of business: Amount represents the gain recognized for the sale of certain
businesses.
(11) Bond redemption loss: During the second quarter of 2021,
2.9% debentures due in 2022, paying a premium of
loss of
in commercial litigation, intellectual property disputes, adjustments to the estimated
liability for environmental-related items and other legal matters. (13) Equity in earnings of affiliated companies: These adjustments relate to costs not related
to continuing operations of our affiliated companies, such as restructuring, impairment
losses, inventory adjustments, other charges and credits and settlements under
"take-or-pay" contracts. (14) Cumulative adjustment related to customer contract: The negative impact of a cumulative
adjustment recorded during the first quarter of 2020 to reduce revenue by
adjustment was associated with a previously recorded commercial benefit asset, reflected as
a prepayment, to a customer with a long-term supply agreement that substantially exited its
production of LCD panels.
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Table of Contents REPORTABLE SEGMENTS
Reportable segments are as follows:
? Display Technologies - manufactures glass substrates for flat panel liquid
crystal displays and other high-performance display panels.
?
components for the telecommunications industry. ? 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.
? Environmental Technologies - manufactures ceramic substrates and filters for
automotive and diesel applications.
? Life Sciences - manufactures glass and plastic labware, equipment, media,
serum and reagents enabling workflow solutions for drug discovery and bioproduction. All other businesses that do not meet the quantitative threshold for separate reporting have been grouped as "All Other." This group is primarily comprised of the results of the pharmaceutical technologies, auto glass, new product lines, development projects, and certain corporate investments. The Company obtained a controlling interest in HSG during the third quarter of 2020 and has consolidated results in "All Other" as ofSeptember 9, 2020 . Refer to Note 3 (HSG Transactions) to the consolidated financial statements for additional information on this transaction. Financial results for the reportable segments are prepared on a basis consistent with the internal disaggregation of financial information to assist the CODM in making internal operating decisions. A significant portion of segment revenues and expenses are denominated in currencies other than theU.S. dollar. Management believes it is important to understand the impact on core net income of translating these currencies intoU.S. dollars. The Company uses constant currency reporting for Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences.Corning excludes the impact of these currencies from segment sales and net income. The adjustment for constant currency is primarily related to the Display Technologies' segment and excludes the impact of the fluctuation of the Japanese yen, South Korean won, Chinese yuan, and newTaiwan dollar. Certain income and expenses are included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income (loss). These include items that are not used by the CODM in evaluating the results of or in allocating resources to the segments and include the following items: the impact of translated earnings contracts; acquisition-related costs; discrete tax items and other tax-related adjustments; certain litigation, regulatory and other legal matters; restructuring, impairment losses and other charges and credits; adjustments relating to acquisitions; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results. Earnings of equity affiliates that are closely associated with the reportable segments are included in the respective segment's net income (loss). Certain common expenses among reportable segments have been allocated differently than they would for stand-alone financial information. Segment net income (loss) may not be consistent with measures used by other companies. Display Technologies
The following table provides net sales and net income for the Display Technologies segment (in millions):
Three months ended % Six months ended %
June 30, change June 30, change
2021 2020 21 vs. 20 2021 2020 21 vs. 20
Segment net sales $ 939 $ 753 25 % $ 1,802 $ 1,504 20 %
Segment net income $ 248 $ 152 63 % $ 461 $ 304 52 %
Net sales in the Display Technologies segment increased by $186 million and $298
million in the three and six months ended June 30, 2021 , respectively. Net
sales increases in the three months and six months ended June 30, 2021 were
largely due to volume growth of approximately 20 percent and substantially flat
pricing.
Net income in the Display Technologies segment increased by
?
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Table of ContentsOptical Communications
The following table provides net sales and net income for the
Three months ended % Six months ended %
June 30, change June 30, change
2021 2020 21 vs. 20 2021 2020 21 vs. 20Segment net sales$ 1,075 $ 887 21 %$ 2,012 $ 1,678 20 % Segment net income$ 148 $ 81 83 %$ 259 $ 110 135 %
Net income increased by
Specialty Materials
The following table provides net sales and net income for the Specialty Materials segment (in millions):
Three months ended % Six months ended %
June 30, change June 30, change
2021 2020 21 vs. 20 2021 2020 21 vs. 20
Segment net sales $ 483 $ 417 16 % $ 934 $ 769 21 %
Segment net income $ 81 $ 90 (10 %) $ 172 $ 141 22 %
Net sales in the Specialty Materials segment increased by $66 million and $165
million for the three and six months ended June 30, 2021 . Strong demand for
premium cover materials, strength in the IT market and greater optical content
in semiconductor manufacturing drove the increase.
Net income decreased by $9 million for the three months ended June 30, 2021 ,
primarily driven by increased investments in new innovation programs that are
moving towards commercialization. Net income increased by $31 million for the
six months ended June 30, 2021 , primarily driven by increases in sales outlined
above.
Environmental Technologies
The following table provides net sales and net income for the Environmental Technologies segment (in millions):
Three months ended % Six months ended %
June 30, change June 30, change
2021 2020 21 vs. 20 2021 2020 21 vs. 20
Segment net sales $ 407 $ 226 80 % $ 848 $ 546 55 %
Segment net income $ 81 $ - * $ 155 $ 35 343 %
* Not meaningful
Net sales in the Environmental Technologies segment increased by $181 million
and $302 million , respectively, for the three and six months ended June 30,
2021 . Sales of diesel products grew 101% and 67%, respectively, driven by
customers continuing to adopt more advanced aftertreatment in China and
continued strength in the North American heavy-duty truck market. Automotive
sales were up 68% and 48%, respectively, as the global auto market improved and
gas particulate filter adoption continued in Europe and China .
Net income increased by
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Table of Contents
Life Sciences
The following table provides net sales and net income for the Life Sciences
segment (in millions):
Three months ended % Six months ended %
June 30, change June 30, change
2021 2020 21 vs. 20 2021 2020 21 vs. 20
Segment net sales $ 312 $ 243 28 % $ 612 $ 501 22 %
Segment net income $ 52 $ 31 68 % $ 100 $ 69 45 %
Net sales in the Life Sciences segment increased by $69 million and $111 million
for the three and six months ended June 30, 2021 , respectively, primarily driven
by the ongoing recovery in academic and pharmaceutical research labs and
continued strong demand for bioproduction products and diagnostic-related
consumables.
Net income increased by $21 million and $31 million for the three and six months
ended June 30, 2021 , respectively, primarily driven by the higher sales volume
outlined above.
All Other
All other businesses that do not meet the quantitative threshold for separate
reporting have been grouped as "All Other." This group is primarily comprised of
the results of the pharmaceutical technologies, auto glass, new product lines
and development projects, as well as certain corporate investments.
The Company obtained a controlling interest in HSG during the third quarter of
2020 and has consolidated results in "All Other" as of September 9, 2020 . Refer
to Note 3 (HSG Transactions) to the consolidated financial statements for
additional information on this transaction.
The following table provides net sales and net loss for All Other (in millions):
Three months ended % Six months ended %
June 30, change June 30, change
2021 2020 21 vs. 20 2021 2020 21 vs. 20
Segment net sales $ 288 $ 62 365 % $ 559 $ 119 370 %
Segment net loss $ (15 ) $ (66 ) 77 % $ (39 ) $ (135 ) 71 %
Net sales of this segment increased by $226 million and $440 million for the
three and six months ended June 30, 2021 , respectively, when compared to the
same periods in 2020, driven mainly by the consolidation of HSG. Net loss
decreased by $51 million and $96 million driven by the consolidation of HSG and
improved profitability in our emerging businesses.
CAPITAL RESOURCES AND LIQUIDITY
Financing and Capital Resources
2021 In the second quarter of 2021,Corning redeemed$375 million of 2.9% debentures due in 2022, paying a premium of$10 million by exercising our make-whole call. The bond redemption resulted in an$11 million loss during the same quarter.
In
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Table of Contents 2020 During the second quarter of 2020,Corning established an incremental liquidity facility for25 billion Japanese yen , equivalent to$232 million USD , with a maturity of three years. As ofJune 30, 2021 , the facility had not been drawn upon. In the first quarter of 2020,Corning established two unsecured variable rate loan facilities for 1,050 million Chinese yuan, equivalent to$150 million USD , and 749 million Chinese yuan, equivalent to$105 million USD , each with a maturity of five years. The funds drawn on the loan facilities as ofJune 30, 2021 totaled 1,466 million Chinese yuan, equivalent to$209 million USD . These Chinese yuan-denominated proceeds will not be converted intoU.S. dollars and will be used for capital projects. Payments of principal and interest on the Notes will be in Chinese yuan, or should yuan be unavailable due to circumstances beyondCorning's control, a USD equivalent. These loans are the sole obligations of the subsidiary borrowers and are not guaranteed by any otherCorning entity. Share Repurchase Program
On
OnApril 5, 2021 ,Corning and SDC executed an SRA. Pursuant to the SRA, the Preferred Stock was fully converted on the Initial Closing Date into 115 million shares of Common Shares. Immediately following the conversion,Corning repurchased and retired 35 million of the Common Shares held by SDC under the 2018 and 2019 Repurchase Programs for an aggregate purchase price of approximately$1.5 billion , of which approximately$507 million was paid on the Initial Closing Date. Subsequent payments of approximately$507 million will be paid on each of the first and second anniversaries of the Initial Closing Date. There were no repurchases of common stock on the open market for the three months endedMarch 31, 2021 . For the three and six months endedJune 30, 2021 , the Company repurchased 39 thousand shares of common stock on the open market for approximately$1.5 million , as part of its 2019 Repurchase Program. The Company suspended share buybacks during the first quarter of 2020 and made no share repurchases for the three months endedJune 30, 2020 . In the six months endedJune 30, 2020 , the Company repurchased 4.1 million shares of common stock on the open market for approximately$105 million , as part of its 2018 Repurchase Program.
Refer to Note 6 ((Loss) Earnings per Share) and Note 14 (Shareholders' Equity) to the consolidated financial statements for additional information.
Capital Spending
Capital spending totaled
Cash Flow
Summary of cash flow data (in millions):
Six months ended
June 30,
2021 2020
Net cash provided by operating activities
Net cash provided by operating activities increased by$696 million in the six months endedJune 30, 2021 , when compared to the same period in the prior year. The change was primarily driven by higher net income, net favorable movements in working capital of$107 million and lower severance payments of$77 million .
Net cash used in investing activities decreased by
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Net cash used in financing activities increased by$1,117 million in the six months endedJune 30, 2021 , when compared to the same period last year. The increase was primarily driven by the payment for conversion of the Preferred Stock of$507 million , higher repayments of short-term borrowings and the current portion of long-term debt of$460 million , and lower proceeds of long-term debt of$209 million . The increase was partially offset by lower repurchases of common stock of$104 million . Defined Benefit Pension Plans
Key Balance Sheet Data
Balance sheet and working capital measures are provided in the following table
(in millions):
June 30, December 31,
2021 2020
Working capital $ 3,024 $ 4,237
Current ratio 1.7:1 2.1:1
Trade accounts receivable, net of doubtful accounts
2,133 Days sales outstanding 53 57 Inventories, net$ 2,387 $ 2,438 Inventory turns 3.5 3.2 Days payable outstanding (1) 46 44 Long-term debt$ 7,025 $ 7,816 Total debt$ 7,378 $ 7,972 Total debt to total capital 38 % 37 %
(1) Includes trade payables only.
Management Assessment of Liquidity
We ended the second quarter of 2021 with approximately$2.3 billion of cash and cash equivalents. Our cash and cash equivalents are held in various locations throughout the world and are generally unrestricted. We utilize a variety of strategies to ensure that our worldwide cash is available in the locations in which it is needed. AtJune 30, 2021 , approximately 61% of the consolidated amount was held outside ofthe United States .
The Company's
Other Comprehensive reviews of significant customers and their creditworthiness are completed by analyzing their financial strength at least annually, or more frequently for customers where we have identified an increased measure of risk. We closely monitor payments and developments which may signal possible customer credit issues. During the three months endedJune 30, 2021 , we sold accounts receivable, accelerating collections for the period of$192 million . Sales of accounts receivable during the first quarter of 2021 were$133 million , which we believe would have been collected during the normal course of business during the second quarter of 2021. We currently have not identified any potential material impact on our liquidity resulting from customer credit issues. © 2021Corning Incorporated . All Rights Reserved. 46
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We believe we have sufficient liquidity to fund operations, acquisitions, capital expenditures, scheduled debt repayments and dividend payments
The Revolving Credit Agreement includes affirmative and negative covenants with which we must comply, including a leverage (debt to capital ratio) financial covenant. The required leverage ratio is a maximum of 60%. AtJune 30, 2021 , the leverage using this measure was approximately 38%. As ofJune 30, 2021 , we were in compliance and no amounts were outstanding under the Company's Revolving Credit Agreement. The Company's debt instruments contain customary event of default provisions, which allow the lenders the option of accelerating all obligations upon the occurrence of certain events. In addition, some of the debt instruments contain a cross default provision, whereby an uncured default of a specified amount on one debt obligation of the Company, would be considered a default under the terms of another debt instrument. As ofJune 30, 2021 , we were in compliance with all such provisions. Other than discussed, management is not aware of any known trends or any known demands, commitments, events or uncertainties that will, or are reasonably likely to, result in insufficient liquidity. There are no known trends, favorable or unfavorable, that would have a material change in the overall cost of liquidity.
Off Balance Sheet Arrangements
There have been no material changes outside the ordinary course of business in off balance sheet arrangements as disclosed in the 2020 Form 10-K under the caption "Off Balance Sheet Arrangements."
Contractual Obligations There have been no material changes outside the ordinary course of business in the contractual obligations disclosed in the 2020 Form 10-K under the caption "Contractual Obligations". CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported therein. The estimates that require management's most difficult, subjective or complex judgments are described in the 2020 Form 10-K and remain unchanged through the first six months of 2021. For certain items, additional details are provided below.
Impairment of Assets Held for Use
We are required to assess the recoverability of the carrying value of long-lived assets when an indicator of impairment has been identified. We review long-lived assets in each quarter in which impairment indicators are present. We must exercise judgment in assessing whether an event of impairment has occurred. Manufacturing equipment includes certain components of production equipment that are constructed of precious metals, primarily platinum and rhodium. These metals are not depreciated because they have very low physical losses and are repeatedly reclaimed and reused in the manufacturing process and have a very long useful life. Precious metals are reviewed for impairment as part of the assessment of long-lived assets. This review considers all the Company's precious metals that are either in place in the production process; in reclamation, fabrication, or refinement in anticipation of re-use; or awaiting use to support increased capacity. Precious metals are acquired to support the manufacturing operations and are not held for trading or other purposes. AtJune 30, 2021 andDecember 31, 2020 , the carrying value of precious metals was$3.3 billion and$3.4 billion , respectively, and significantly lower than the fair market value. Most of these precious metals are utilized by the Display Technologies and Specialty Materials segments. The potential for impairment exists in the future if negative events significantly decrease the cash flow of these segments. Such events include, but are not limited to, a significant decrease in demand for products or a significant decrease in profitability in these segments. © 2021Corning Incorporated . All Rights Reserved. 47
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Table of Contents NEW ACCOUNTING STANDARDS
Refer to Note 1 (Significant Accounting Policies) to the consolidated financial statements.
ENVIRONMENTCorning has been named by theEnvironmental 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 isCorning's policy to accrue for its estimated liability related to Superfund sites and other environmental liabilities related to property owned byCorning based on expert analysis and continual monitoring by both internal and external consultants. AtJune 30, 2021 andDecember 31, 2020 ,Corning had accrued approximately$60 million and$68 million , respectively, for the estimated undiscounted 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. © 2021Corning Incorporated . All Rights Reserved. 48
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Table of Contents FORWARD-LOOKING STATEMENTS The statements in this Quarterly Report on Form 10-Q, in reports subsequently filed byCorning with theSEC on Forms 8-K, and related comments by management that are not historical facts or information and contain words such as "will," "believe," "anticipate," "expect," "intend," "plan," "seek," "see," "would," and "target" and similar expressions are forward-looking statements. Such statements relate to future events that by their nature address matters that are, to different degrees, uncertain. These forward-looking statements relate to, among other things, the Company's future operating performance, the Company's share of new and existing markets, the Company's revenue and earnings growth rates, the Company's ability to innovate and commercialize new products, and the Company's implementation of cost-reduction initiatives and measures to improve pricing, including the optimization of the Company's manufacturing capacity. Although the Company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, current estimates and forecasts, general economic conditions, its knowledge of its business, and key performance indicators that impact the Company, actual results could differ materially. The Company does not undertake to update forward-looking statements. Some of the risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements include, but are not limited to:
- the duration and severity of the COVID-19 pandemic, and its impact across our
businesses on demand, operations and our global supply chains;
- the effects of acquisitions, dispositions and other similar transactions;
- global business, financial, economic and political conditions;
- tariffs and import duties;
- currency fluctuations between the
the Japanese yen, new
- product demand and industry capacity;
- competitive products and pricing;
- availability and costs of critical components and materials;
- new product development and commercialization;
- order activity and demand from major customers;
- the amount and timing of our cash flows and earnings and other conditions,
which may affect our ability to pay our quarterly dividend at the planned level
or to repurchase shares at planned levels;
- possible disruption in commercial activities due to terrorist activity,
cyber-attack, armed conflict, political or financial instability, natural
disasters, or major health concerns;
- loss of intellectual property due to theft, cyber-attack, or disruption to our
information technology infrastructure;
- unanticipated disruption to our supply chain, equipment, facilities, IT systems
or operations;
- effect of regulatory and legal developments;
- ability to pace capital spending to anticipated levels of customer demand;
- rate of technology change;
- ability to enforce patents and protect intellectual property and trade secrets;
- adverse litigation;
- product and components performance issues;
- retention of key personnel;
- customer ability to maintain profitable operations and obtain financing to fund
ongoing operations and manufacturing expansions and pay receivables when due;
- loss of significant customers;
- changes in tax laws and regulations;
- the impacts of audits by taxing authorities;
- the potential impact of legislation, government regulations, and other
government action and investigations; and
- other risks detailed in
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