CORNING INC /NY | 2013 | FY | 3

2.      Restructuring, Impairment and Other Charges

2013 Activity

To better align our 2014 cost position in several of our businesses, Corning implemented a global restructuring plan within several of our segments in the fourth quarter of 2013, consisting of workforce reductions, asset disposals and write-offs, and exit costs.  We recorded charges of $67 million associated with these actions, with total cash expenditures expected to be approximately $40 million.  Annualized savings from these actions are estimated to be approximately $40 million and will be reflected largely in selling, general, and administrative expenses.

The following table summarizes the restructuring, impairment and other charges as of and for the year ended December 31, 2013 (in millions):

 
Reserve at
January 1,
2013
 
Net
Charges/
Reversals
 
Non cash
adjustments
 
Cash
payments
 
Reserve at
December 31,
2013
Restructuring:
                           
Employee related costs
$
38
 
$
34
 
$
(4)
 
$
(32)
 
$
36
Other charges (credits)
 
4
   
7
         
(3)
   
8
Total restructuring activity
$
42
 
$
41
 
$
(4)
 
$
(35)
 
$
44
                             
Impairment charges and disposal of long-lived assets
     
$
26
                 
                             
Total restructuring, impairment and other charges
     
$
67
                 

Cash payments for employee-related and exit activity related to the 2013 corporate-wide restructuring plan are expected to be substantially completed in 2014.

The year-to-date cost of these plans for each of our reportable segments was as follows (in millions):

Operating segment
Employee-
related
and other
charges
Display Technologies
$
5
Optical Communications
 
13
Environmental Technologies
 
1
Specialty Materials
 
25
Life Sciences
 
3
Corporate and All Other
 
20
Total restructuring, impairment and other charges
$
67

2012 Activity

Corning implemented a corporate-wide restructuring plan in the fourth quarter of 2012 due to uncertain global economic conditions, and the potential for slower growth in many of our businesses in 2013.  We recorded charges of $89 million, before tax, which included costs for workforce reductions, asset write-offs and exit costs.  Total cash expenditures associated with these actions are expected to be approximately $49 million.  Annualized savings from these actions are estimated to be approximately $71 million and will be reflected largely in selling, general, and administrative expenses.

The Specialty Materials segment recorded an impairment charge in the fourth quarter of 2011 in the amount of $130 million related to certain assets used in the production of large cover glass due to sales that were significantly below our expectations.  In the fourth quarter of 2012, after reassessing the large cover glass business, Corning concluded that the large cover glass market was developing differently in 2012 than our expectations, demand for larger-sized cover glass was declining, and the market for this type of glass was instead targeting smaller gen size products.  Additionally, in the fourth quarter of 2012, our primary customer of large cover glass notified Corning of its decision to exit from this display market.  Based on these events, we recorded an additional impairment charge in the fourth quarter of 2012 in the amount of $44 million, before tax.  This impairment charge represents a write-down of assets specific to the glass-strengthening process for large size cover glass to their fair market values, and includes machinery and equipment used in the ion exchange process.

The following table summarizes the restructuring, impairment and other charges as of and for the year ended December 31, 2012 (in millions):

 
Reserve at
January 1,
2012
 
Net
Charges/
Reversals
 
Non cash
adjustments
 
Cash
payments
 
Reserve at
December 31,
2012
Restructuring:
                           
Employee related costs
$
2
 
$
47
 
$
(7)
 
$
(4)
 
$
38
Other charges (credits)
 
8
   
5
   
(5)
   
(4)
   
4
Total restructuring activity
$
10
 
$
52
 
$
(12)
 
$
(8)
 
$
42
                             
Impairment charges and disposal of long-lived assets:
                           
Assets to be held and used
       
44
                 
Assets to be disposed of
     
$
37
                 
                             
Total asset impairment charges and disposals
     
$
81
                 
                             
Total restructuring, impairment and other charges
     
$
133
                 

Cash payments for employee-related costs related to the 2012 corporate-wide restructuring plan were substantially completed in 2013.  Cash payments for exit activities were substantially completed in 2012.

2011 Activity

During the fourth quarter of 2011, the Specialty Materials segment recorded an impairment charge related to certain assets used in the ion exchange process for the production of large cover glass.  Although sales of Corning Gorilla Glass used in our large cover glass products increased in 2011 when compared to 2010, gross margins continued to be weak and sales volumes were significantly below our expectations in 2011 and both sales and margins were expected to be lower than forecasted in 2012.  As a result, certain assets located in Japan used in the ion exchange process for the production of large cover glass were written down to estimated fair value in the fourth quarter of 2011 and an impairment loss of $130 million was recognized.  This asset group includes machinery and equipment used in the ion exchange process and facilities dedicated to the ion exchange process.

The following table summarizes the restructuring, impairment and other charges as of and for the year ended December 31, 2011 (in millions):

 
Reserve at
January 1,
2011
 
Net
charges/
(reversals)
 
Cash
payments
 
Reserve at
December 31,
2011
Restructuring:
                     
Employee related costs
$
15
 
$
(1)
 
$
(12)
 
$
2
Other charges (credits)
 
12
         
(4)
   
8
Total restructuring activity
$
27
 
$
(1)
 
$
(16)
 
$
10
                       
Impairment of long-lived asset:
                     
Assets to be held and used
     
$
130 
           
Total impairment charges
     
$
130 
           
                       
Total restructuring, impairment and other charges
     
$
129 
           

Cash payments for exit activities and employee-related costs related to the 2011 corporate-wide restructuring plan were substantially completed in 2012.

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