SEC Company Response from CORNING (GLW) — May 31, 2013
CORNING INC /NY (GLW) (CIK 0000024741)
Date: May 31, 2013 · CIK: 0000024741 · Accession: 0000024741-13-000029
AI Filing Summary & Sentiment
Reasoning
Referenced dates: May 7, 2013
Letter
Re:
may31letter.htm
May 31, 2013
Securities and Exchange Commission
100 F Street, N.E., Stop 4631
Washington, D.C. 20549
Form 10-K for the Year ended December 31, 2012
Filed February 13, 2013
File No. 1-3247
Ladies and Gentlemen:
We are responding to the comments in the Securities and Exchange Commission (the “Staff”) letter dated May 7, 2013 to Mr. James B. Flaws of Corning Incorporated (“Corning”). For your convenience, we have included the Staff’s comments below (in bold) followed by our related response.
Form 10-K for the Year Ended December 31, 2012
General
1.
Where a comment below requests additional disclosures or other revisions to be made, these revisions should be included in your future filings, including your interim filings, if applicable.
Corning will comply with this comment, and will include revisions made pursuant to this letter in future filings, as indicated in our responses below.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 17
Results of Operations, page 19
2.
Please provide a more detailed analysis of the factors that impact your operations, including a complete discussion of known or anticipated trends that may continue to have an impact on sales, profit margins, selling, general and administrative expenses, etc. Your discussion and analysis should provide investors with sufficient information to understand the historical trends and the expectations for the future as seen through the eyes of management. We noted the following issues with regard to your discussion:
We acknowledge the Staff’s comments and will revise our future disclosure to provide a more detailed analysis of the factors that impact our operations. With respect to the specific items listed above, we provide the following supplemental responses, which reflect our proposed disclosure format for future filings.
We note for the Staff that we will provide additional quantitative information for our segment disclosure, as proposed below, except for certain specific information related to Display Technologies. We suggest this disclosure methodology for the following reasons:
o
Because the Display Technologies segment consists of one product line, giving precise information on volume and price movements allows customers and competitors to derive conclusions on our pricing, capacity, and cost structure, which puts us in a competitively disadvantageous position.
o
The Display Technologies segment has a limited number of competitors, all of which are located in Asia. Because these competitors are not subject to the same level of public disclosure as Corning, we feel disclosing precise amounts or percentages harms us competitively.
o
We believe providing a narrow range in percentage terms on volume and price movements gives our investors the information necessary to understand the drivers of our Display segment operating results, while protecting our position in the market place.
·
On page 19 you disclose that sales in the Specialty Materials segment increased by double-digits due to the strong demand for Corning Gorilla Glass. On page 24 you disclose that within your Display Technologies segment retail demand for larger- sized LCD televisions drove a double-digit increase in volume. Describing your growth as “double digit” is ambiguous and could imply growth between 10% and 99%. Please quantify percentages, rather than describing amounts as “double digit.”
·
Revised disclosure:
o
Sales in the Specialty Materials segment increased by 25% due to the strong demand for Corning® Gorilla® Glass that is used as cover glass in portable handheld display devices, tablets and notebook computers.
o
Retail demand for larger-sized LCD televisions drove an increase in volume in the low-twenties in percentage terms in our wholly-owned business in 2012, when compared to the prior year, and slightly offset the price declines described above.
As noted by the Staff, we agree that the describing our growth as “double digit” is ambiguous. We will ensure more specific percentage disclosure is presented in future filings.
·
On page 24 you disclose that the Display Technologies segment’s decrease in net sales in 2012 reflects significant price declines which occurred in the fourth quarter of 2011 and the first quarter of 2012. You further indicate the increase in volume resulting from retail demand for your larger-sized LCD televisions “slightly offset” the price declines. Please expand your disclosures to quantitatively describe the dollar impact that price and volume variances had on Display Technologies’ net sales.
·
Revised disclosure:
o
The decrease in net sales in 2012, when compared to 2011, reflects price declines in the mid-twenties in percentage terms which occurred in the fourth quarter of 2011 and the first quarter of 2012 for the six month period, driven by customer and competitive pressures associated with share shifts at several major customers in a period of excess glass supply. Sequential price declines became much more moderate in the second and third quarters of 2012, reflecting a better matching of supply and demand for glass, and more stable levels of inventory in the LCD supply chain. In the third and fourth quarter of 2012, Corning entered into new supply agreements with key customers. These agreements were intended to stabilize Corning’s share at each of the customers and maintain a fixed relationship between Corning’s pricing and competitive pricing for such customer. Fourth quarter sequential prices declined in the mid-single digit percentage, slightly higher than the prior two quarters, due to some initial adjustments to line up Corning’s prior pricing with the requirements of these new agreements. Retail demand for larger-sized LCD televisions drove an increase in volume in the low-twenties in percentage terms in our wholly-owned business in 2012, when compared to the prior year, and slightly offset the price declines described above. Movements in foreign exchange rates did not significantly impact net sales of this segment.
·
On page 25 you disclose that net sales for the Telecommunications segment were up slightly for 2012 as compared for 2011 and you disclose the contributing factors. Please quantify the impact of each contributing factor that you identify.
·
Revised disclosure:
o
Net sales for the segment were up slightly when compared to 2011, driven by increased demand for optical fiber and cable in China in the amount of $82 million, an increase in sales of $42 million for fiber-to-the-premises products in Australia, and an increase in sales of wireless products of $26 million. This growth was offset somewhat by a decline of $28 million for legacy copper products. The impact of foreign exchange rate movements on net sales of this segment was not significant (approximately 1%).
·
On page 26 you disclose that net sales of the Environmental Technologies segment declined, in part, due to the negative impact of foreign exchange rate movements. Please quantify the impact that foreign exchange rates had on Environmental Technologies’ net sales and results of operations.
·
Revised disclosure:
o
Net sales of this segment decreased in 2012 when compared to 2011, due to a decline in net sales of our diesel products. The impact of movements in foreign exchange rates on net sales of this segment was not significant (approximately 3%).
The above examples are only meant to highlight areas where additional information would have been beneficial to investors. Please address these comments as they relate to your consolidated and segment results of operations. Refer to Section 501.04 of the Financial Reporting Codification and SEC Release 33-8350 for guidance. Please show us in your supplemental response what the revisions will look like in future filings.
·
As requested by the Staff, and per Section 501.04 of the Financial Reporting Codification and SEC Release 33-8350, in future filings we will include detailed analysis of the factors that impact our operations, including a complete discussion of known or anticipated trends that may continue to have an impact on sales, profit margins, selling, general and administrative expenses, etc., which will provide investors with sufficient information to understand the historical trends and expectations for the future as seen through the eyes of management.
Cash Flows, page 29
2012 vs. 2011
3.
You indicate that a net positive change in working capital effected operating cash flow. Please expand your disclosures to discuss the material underlying components of working capital and the reasons for material changes in these components. In addition, please explain how the decrease in your accounts payable and other current liabilities from 2011 to 2012 as reflected in your consolidated balance sheets resulted in $189 net cash provided by operations in 2012.
In future filings we will include an expanded discussion addressing the material underlying components of working capital and the reasons for material changes in these components. With respect to the $189 million in net cash provided by changes in accounts payable and other accrued current liabilities, we provide the following information:
Our consolidated balance sheet as of December 31, 2012 reflects a decrease in accounts payable and other current liabilities of $190 million, while our consolidated statements of cash flows for the year ended December 31, 2012 reflects a cash inflow from changes in accounts payable and other current liabilities in the amount of $189 million. The primary driver behind this is the classification of accounts payable for capital expenditures in the amount of $270 million in investing activities of the consolidated statements of cash flows. In our disclosures related to capital spending, we discuss significant multi-year investment plans to increase manufacturing capacity in several of our reportable segments. While spending for these projects continued into 2012, the majority of the construction costs were incurred in 2011, with a significant amount accrued at December 31, 2011. These amounts were appropriately excluded from the cash flow statement in 2011, as they are non-cash activities. These amounts were paid in 2012, which accounts for the decrease in accounts payable. The cash outflows for these payments are reflected in the capital expenditures line in the investing activities section of the consolidated statement of cash flows. In addition to non-cash items related to capital expenditures, the cash inflow from changes in accounts payables and other current liabilities also reflects the adjustments to remove non-cash items in other liabilities, which includes changes in the fair value of derivatives and restructuring accruals which are presented as adjustments to net income.
Corning Incorporated Consolidated Financial Statements, page 45
Note 20 Reportable Segments, page 83
4.
Please report the revenues from external customers for each product and service or each group of similar products. Refer to ASC 280-10-50-40 for guidance.
ASC 280-10-50-38 and ASC 280-10-50-40 require that public entities report the revenues from external customers for each product or group of similar products, based on the financial information used to produce the entity’s general purpose financial statements. Corning operates in five reportable segments, which are described as follows:
·
Display Technologies – manufactures glass substrates for flat panel liquid crystal displays.
·
Telecommunications – manufactures optical fiber and cable and hardware and equipment components for the telecommunications industry.
·
Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications. This reportable segment is an aggregation of our Automotive and Diesel operating segments as these two segments share similar economic characteristics, products, customer types, production processes and distribution methods.
·
Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.
·
Life Sciences – manufactures glass and plastic labware, equipment, media and reagents to provide workflow solutions for scientific applications.
Our reportable segments are organized according to product categories sold to external customers. Each of our reportable segments manufactures and sells products separate and distinct from other segments, and there are no intersegment sales. Revenues from external customers for each group of similar products are reported in Note 20, Reporting Segments and Management’s Discussion and Analysis of Financial Condition and Results of Operation, Reportable Segments. As such, since the products within each reportable segment have similar production processes, class of customers, and economic characteristics, the products in each segment are essentially similar and no additional disclosure would be required in accordance with ASC 280-10-50-38.
5.
We note that you have identified your Environmental Technologies reportable segment as being the result of the aggregation of two operating segments. In light of the significance of your Display Technologies segment, please confirm that you do not have operating segments underlying this reportable segment. In addition, in light of your discussion on page 33 regarding your goodwill impairment testing within the Specialty Materials segment, please confirm that the businesses you refer to do not meet the definition of an operating segment. Refer to ASC 280-10-50-1. Please provide us with a representative copy of your monthly CODM reporting packages as well as the financial information that you regularly provide to your Board of Directors.
The Management Committee (the MC) in its role as chief operating decision maker (CODM) assesses the financial performance of the company and its operating segments and allocates resources primarily based on a Quarterly Performance Review process and our annual one-year budget and five-year long range plan review processes. At the quarterly reviews, typically the Corporate Controller provides a presentation on Corning’s consolidated financial performance for the current quarter and the outlook for the next quarter. We are providing, concurrently with the delivery of this letter, a copy of our Quarter 4, 2012, CODM package (Quarterly Performance Review), as well as a copy of the financial information we provided to our Board of Directors at our February 5, 2013 Board of Directors meeting, which is representative of the financial information that we regularly provide to our Board of Directors.
Display Technologies segment
Our CODM reviews financial information by reporting segment on a quarterly basis. Our Display Technology business manufactures glass substrates for active matrix liquid crystal displays (LCDs) that are used primarily in notebook computers, flat panel desktop monitors and LCD televisions. Also included in our Display Technologies segment is a 50% owned equity affiliate, Samsung Corning Precision Materials (SCP), which manufactures LCD glass and sells to display manufacturers in Korea.
Our Display Technology business represents a single operating segment in accordance with ASC 280-10-50-1 which states that an operating segment is a component of a business (a) that engages in business activities from which it may earn revenues and incur expenses; (b) that has operating results that are regularly reviewed by the entity’s CODM to make decisions about resources to be allocated to the segment and assess its performance; and (c) for which discrete financial information is available.
In addition, based on the criteria set forth in ASC 280-10-50-10, the Display Technologie
Show Raw Text
CORRESP
1
filename1.htm
may31letter.htm
May 31, 2013
Securities and Exchange Commission
100 F Street, N.E., Stop 4631
Washington, D.C. 20549
Re:
Form 10-K for the Year ended December 31, 2012
Filed February 13, 2013
File No. 1-3247
Ladies and Gentlemen:
We are responding to the comments in the Securities and Exchange Commission (the “Staff”) letter dated May 7, 2013 to Mr. James B. Flaws of Corning Incorporated (“Corning”). For your convenience, we have included the Staff’s comments below (in bold) followed by our related response.
Form 10-K for the Year Ended December 31, 2012
General
1.
Where a comment below requests additional disclosures or other revisions to be made, these revisions should be included in your future filings, including your interim filings, if applicable.
Corning will comply with this comment, and will include revisions made pursuant to this letter in future filings, as indicated in our responses below.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 17
Results of Operations, page 19
2.
Please provide a more detailed analysis of the factors that impact your operations, including a complete discussion of known or anticipated trends that may continue to have an impact on sales, profit margins, selling, general and administrative expenses, etc. Your discussion and analysis should provide investors with sufficient information to understand the historical trends and the expectations for the future as seen through the eyes of management. We noted the following issues with regard to your discussion:
We acknowledge the Staff’s comments and will revise our future disclosure to provide a more detailed analysis of the factors that impact our operations. With respect to the specific items listed above, we provide the following supplemental responses, which reflect our proposed disclosure format for future filings.
We note for the Staff that we will provide additional quantitative information for our segment disclosure, as proposed below, except for certain specific information related to Display Technologies. We suggest this disclosure methodology for the following reasons:
o
Because the Display Technologies segment consists of one product line, giving precise information on volume and price movements allows customers and competitors to derive conclusions on our pricing, capacity, and cost structure, which puts us in a competitively disadvantageous position.
o
The Display Technologies segment has a limited number of competitors, all of which are located in Asia. Because these competitors are not subject to the same level of public disclosure as Corning, we feel disclosing precise amounts or percentages harms us competitively.
o
We believe providing a narrow range in percentage terms on volume and price movements gives our investors the information necessary to understand the drivers of our Display segment operating results, while protecting our position in the market place.
·
On page 19 you disclose that sales in the Specialty Materials segment increased by double-digits due to the strong demand for Corning Gorilla Glass. On page 24 you disclose that within your Display Technologies segment retail demand for larger- sized LCD televisions drove a double-digit increase in volume. Describing your growth as “double digit” is ambiguous and could imply growth between 10% and 99%. Please quantify percentages, rather than describing amounts as “double digit.”
·
Revised disclosure:
o
Sales in the Specialty Materials segment increased by 25% due to the strong demand for Corning® Gorilla® Glass that is used as cover glass in portable handheld display devices, tablets and notebook computers.
o
Retail demand for larger-sized LCD televisions drove an increase in volume in the low-twenties in percentage terms in our wholly-owned business in 2012, when compared to the prior year, and slightly offset the price declines described above.
As noted by the Staff, we agree that the describing our growth as “double digit” is ambiguous. We will ensure more specific percentage disclosure is presented in future filings.
·
On page 24 you disclose that the Display Technologies segment’s decrease in net sales in 2012 reflects significant price declines which occurred in the fourth quarter of 2011 and the first quarter of 2012. You further indicate the increase in volume resulting from retail demand for your larger-sized LCD televisions “slightly offset” the price declines. Please expand your disclosures to quantitatively describe the dollar impact that price and volume variances had on Display Technologies’ net sales.
·
Revised disclosure:
o
The decrease in net sales in 2012, when compared to 2011, reflects price declines in the mid-twenties in percentage terms which occurred in the fourth quarter of 2011 and the first quarter of 2012 for the six month period, driven by customer and competitive pressures associated with share shifts at several major customers in a period of excess glass supply. Sequential price declines became much more moderate in the second and third quarters of 2012, reflecting a better matching of supply and demand for glass, and more stable levels of inventory in the LCD supply chain. In the third and fourth quarter of 2012, Corning entered into new supply agreements with key customers. These agreements were intended to stabilize Corning’s share at each of the customers and maintain a fixed relationship between Corning’s pricing and competitive pricing for such customer. Fourth quarter sequential prices declined in the mid-single digit percentage, slightly higher than the prior two quarters, due to some initial adjustments to line up Corning’s prior pricing with the requirements of these new agreements. Retail demand for larger-sized LCD televisions drove an increase in volume in the low-twenties in percentage terms in our wholly-owned business in 2012, when compared to the prior year, and slightly offset the price declines described above. Movements in foreign exchange rates did not significantly impact net sales of this segment.
·
On page 25 you disclose that net sales for the Telecommunications segment were up slightly for 2012 as compared for 2011 and you disclose the contributing factors. Please quantify the impact of each contributing factor that you identify.
·
Revised disclosure:
o
Net sales for the segment were up slightly when compared to 2011, driven by increased demand for optical fiber and cable in China in the amount of $82 million, an increase in sales of $42 million for fiber-to-the-premises products in Australia, and an increase in sales of wireless products of $26 million. This growth was offset somewhat by a decline of $28 million for legacy copper products. The impact of foreign exchange rate movements on net sales of this segment was not significant (approximately 1%).
·
On page 26 you disclose that net sales of the Environmental Technologies segment declined, in part, due to the negative impact of foreign exchange rate movements. Please quantify the impact that foreign exchange rates had on Environmental Technologies’ net sales and results of operations.
·
Revised disclosure:
o
Net sales of this segment decreased in 2012 when compared to 2011, due to a decline in net sales of our diesel products. The impact of movements in foreign exchange rates on net sales of this segment was not significant (approximately 3%).
The above examples are only meant to highlight areas where additional information would have been beneficial to investors. Please address these comments as they relate to your consolidated and segment results of operations. Refer to Section 501.04 of the Financial Reporting Codification and SEC Release 33-8350 for guidance. Please show us in your supplemental response what the revisions will look like in future filings.
·
As requested by the Staff, and per Section 501.04 of the Financial Reporting Codification and SEC Release 33-8350, in future filings we will include detailed analysis of the factors that impact our operations, including a complete discussion of known or anticipated trends that may continue to have an impact on sales, profit margins, selling, general and administrative expenses, etc., which will provide investors with sufficient information to understand the historical trends and expectations for the future as seen through the eyes of management.
Cash Flows, page 29
2012 vs. 2011
3.
You indicate that a net positive change in working capital effected operating cash flow. Please expand your disclosures to discuss the material underlying components of working capital and the reasons for material changes in these components. In addition, please explain how the decrease in your accounts payable and other current liabilities from 2011 to 2012 as reflected in your consolidated balance sheets resulted in $189 net cash provided by operations in 2012.
In future filings we will include an expanded discussion addressing the material underlying components of working capital and the reasons for material changes in these components. With respect to the $189 million in net cash provided by changes in accounts payable and other accrued current liabilities, we provide the following information:
Our consolidated balance sheet as of December 31, 2012 reflects a decrease in accounts payable and other current liabilities of $190 million, while our consolidated statements of cash flows for the year ended December 31, 2012 reflects a cash inflow from changes in accounts payable and other current liabilities in the amount of $189 million. The primary driver behind this is the classification of accounts payable for capital expenditures in the amount of $270 million in investing activities of the consolidated statements of cash flows. In our disclosures related to capital spending, we discuss significant multi-year investment plans to increase manufacturing capacity in several of our reportable segments. While spending for these projects continued into 2012, the majority of the construction costs were incurred in 2011, with a significant amount accrued at December 31, 2011. These amounts were appropriately excluded from the cash flow statement in 2011, as they are non-cash activities. These amounts were paid in 2012, which accounts for the decrease in accounts payable. The cash outflows for these payments are reflected in the capital expenditures line in the investing activities section of the consolidated statement of cash flows. In addition to non-cash items related to capital expenditures, the cash inflow from changes in accounts payables and other current liabilities also reflects the adjustments to remove non-cash items in other liabilities, which includes changes in the fair value of derivatives and restructuring accruals which are presented as adjustments to net income.
Corning Incorporated Consolidated Financial Statements, page 45
Note 20 Reportable Segments, page 83
4.
Please report the revenues from external customers for each product and service or each group of similar products. Refer to ASC 280-10-50-40 for guidance.
ASC 280-10-50-38 and ASC 280-10-50-40 require that public entities report the revenues from external customers for each product or group of similar products, based on the financial information used to produce the entity’s general purpose financial statements. Corning operates in five reportable segments, which are described as follows:
·
Display Technologies – manufactures glass substrates for flat panel liquid crystal displays.
·
Telecommunications – manufactures optical fiber and cable and hardware and equipment components for the telecommunications industry.
·
Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications. This reportable segment is an aggregation of our Automotive and Diesel operating segments as these two segments share similar economic characteristics, products, customer types, production processes and distribution methods.
·
Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.
·
Life Sciences – manufactures glass and plastic labware, equipment, media and reagents to provide workflow solutions for scientific applications.
Our reportable segments are organized according to product categories sold to external customers. Each of our reportable segments manufactures and sells products separate and distinct from other segments, and there are no intersegment sales. Revenues from external customers for each group of similar products are reported in Note 20, Reporting Segments and Management’s Discussion and Analysis of Financial Condition and Results of Operation, Reportable Segments. As such, since the products within each reportable segment have similar production processes, class of customers, and economic characteristics, the products in each segment are essentially similar and no additional disclosure would be required in accordance with ASC 280-10-50-38.
5.
We note that you have identified your Environmental Technologies reportable segment as being the result of the aggregation of two operating segments. In light of the significance of your Display Technologies segment, please confirm that you do not have operating segments underlying this reportable segment. In addition, in light of your discussion on page 33 regarding your goodwill impairment testing within the Specialty Materials segment, please confirm that the businesses you refer to do not meet the definition of an operating segment. Refer to ASC 280-10-50-1. Please provide us with a representative copy of your monthly CODM reporting packages as well as the financial information that you regularly provide to your Board of Directors.
The Management Committee (the MC) in its role as chief operating decision maker (CODM) assesses the financial performance of the company and its operating segments and allocates resources primarily based on a Quarterly Performance Review process and our annual one-year budget and five-year long range plan review processes. At the quarterly reviews, typically the Corporate Controller provides a presentation on Corning’s consolidated financial performance for the current quarter and the outlook for the next quarter. We are providing, concurrently with the delivery of this letter, a copy of our Quarter 4, 2012, CODM package (Quarterly Performance Review), as well as a copy of the financial information we provided to our Board of Directors at our February 5, 2013 Board of Directors meeting, which is representative of the financial information that we regularly provide to our Board of Directors.
Display Technologies segment
Our CODM reviews financial information by reporting segment on a quarterly basis. Our Display Technology business manufactures glass substrates for active matrix liquid crystal displays (LCDs) that are used primarily in notebook computers, flat panel desktop monitors and LCD televisions. Also included in our Display Technologies segment is a 50% owned equity affiliate, Samsung Corning Precision Materials (SCP), which manufactures LCD glass and sells to display manufacturers in Korea.
Our Display Technology business represents a single operating segment in accordance with ASC 280-10-50-1 which states that an operating segment is a component of a business (a) that engages in business activities from which it may earn revenues and incur expenses; (b) that has operating results that are regularly reviewed by the entity’s CODM to make decisions about resources to be allocated to the segment and assess its performance; and (c) for which discrete financial information is available.
In addition, based on the criteria set forth in ASC 280-10-50-10, the Display Technologie