Corning Incorporated (NYSE: GLW) today announced its results for the first quarter of 2013.
- First-quarter core sales were $1.8 billion*, similar to core sales in the first quarter last year. Net sales (GAAP) for the quarter also were $1.8 billion.
- First-quarter core earnings per share were $0.30*, a 15% increase from last year’s quarter. GAAP earnings per share were $0.33, compared to $0.31 year over year.
- Display Technologies LCD glass price declines in the first quarter were more moderate than fourth-quarter declines, as expected. Corning anticipates second-quarter price declines will be smaller than those reported in the first quarter.
Quarter-One Financial Comparisons
In millions, except percentages and per- share amounts
|Q1 2013||Q1 2012||% Change|
|Core Net Sales||$1,814||$1,820||0%|
|Core Equity Earnings||$180||$178||1%|
|Core Earnings EPS||$0.30||$0.26||15%|
|Q1 2013||Q1 2012||% Change|
*These are non-GAAP financial measures. The reconciliation between GAAP and non-GAAP measures is provided in the tables following this news release, as well as on the company’s investor relations website. Core performance metrics (non-GAAP) are adjusted to exclude the impact of changes in Japanese yen’s foreign exchange rate, equity earnings from the polysilicon segment of Dow Corning Corporation, as well as other special items. See “Use of Non-GAAP Financial Measures” section of attached Form 8-K for details on Core Performance measures.
“We have made great progress on our plan to grow earnings. We delivered our second consecutive quarter of double-digit year-over-year core earnings-per-share growth, significantly exceeding analysts’ consensus. Key to achieving these results were moderating price declines for LCD glass, stabilizing our LCD market share, and achieving excellent operational performance in our other businesses,” said Wendell P. Weeks, chairman, chief executive officer and president.
“We also moved decisively in the quarter to hedge the company’s translation exposure to the Japanese yen-to-U.S.-dollar exchange rate. The company’s economic exposure to further weakening in the yen exchange rate is now capped at 93 Japanese yen to a U.S. dollar,” Weeks explained.
First-Quarter Core Performance Segment Results
Corning announced at its annual investor meeting last February that it would move to core performance measures for financial reporting, providing investors a clear view of the company’s core operating results. The core performance metrics exclude the impact of changes in the yen-to-dollar exchange rate, the results of the polysilicon segment of Corning’s affiliate, Dow Corning Corporation, as well as other special items. Corning’s core performance results will now be reported on a constant yen basis. These financial results are non-GAAP financial measures.
Core sales in the Display Technologies segment were $650 million*, a 7% increase compared to a year ago. Liquid crystal display glass price declines were more moderate than in the prior quarter, as expected. Total glass volume from Corning’s wholly owned business and Samsung Corning Precision Materials Co., Ltd. increased by a mid-teens percentage, on a year-over- year basis. Year-over-year core earnings were up slightly.
Telecommunications segment sales were $470 million, a 7% decline from last year’s first quarter, driven by the U.S. government's broadband stimulus program winding down and continued softness in European optical fiber demand. Despite these challenges, net income was up 67%, driven by strong spending control and improved manufacturing performance.
As previously forecasted, Specialty Materials’ segment year-over-year sales declined 10% to $258 million. The lower quarterly sales performance is primarily attributed to continued weakness in the semiconductor market. Core earnings were up 39%*, driven by excellent Corning® Gorilla® Glass manufacturing performance.
Environmental Technologies segment sales were $228 million, a 13% year-over-year decline. Declines were driven by a continued sluggish heavy-duty diesel market in North America and weak demand for diesel cars in Europe.
Life Sciences segment sales were $207 million, a 34% increase over last year’s period. The bulk of the sales increase is attributed to the acquisition of the Discovery Labware business. This drove core earnings in the segment to double year over year.
Dow Corning Corporation’s silicones segment equity earnings were $42 million, up 31% on a year-over-year basis.
Core gross margin in the quarter was 43%*, compared to 42%* at this time a year ago. Corning’s balance sheet remains strong with $5.8 billion in cash and short-term investments. The company remains on track for capital spending for the year of approximately $1.3 billion, down $500 million from 2012 levels. Corning’s core earnings effective tax rate for the first quarter was 16%*, lower than previously expected.
“We have established positive momentum for the year,” James B. Flaws, vice chairman and chief financial officer, said. “We stabilized earnings in our Display Technologies business, and going forward, we believe price declines will continue to be moderate as a result of the customer agreements we entered into last year.”
Flaws said, “The currency hedging program initiated in the first quarter is designed to protect the company from further yen weakening through 2014. With Corning’s economic exposure to weakening of the yen exchange rate to the dollar effectively capped at 93, we chose to align our reporting of core results at this rate. By reporting results on a constant yen basis, we provide a clearer comparison of our quarter-to-quarter sales and earnings results.”
In the second quarter, Corning expects Display Technologies overall LCD glass share to remain stable and volume to be consistent with the first quarter. Price declines are expected to be smaller than in the first quarter, in the range of a 2% to 3% decline.
Telecommunications segment sales are expected to improve about 20% sequentially, off the seasonally slow first quarter. Specialty Materials segment sales are anticipated to improve by 15% to 20% sequentially as demand for Gorilla Glass increases. Environmental Technologies segment sales are expected to be up slightly sequentially. In the Life Sciences segment, Corning forecasts sales to increase by at least 35% to 40% year over year, due to the acquisition of Discovery Labware.
Equity earnings from Dow Corning’s silicones business in the second quarter are expected to improve about 20% year over year.
“We believe our strategy is working, and therefore we are confident that in quarter two, we will see a third consecutive quarter of year-over-year growth in core earnings per share,” Flaws concluded.
Upcoming Investor Events
Corning will present at the 41st Annual J.P. Morgan Technology, Media and Telecom Conference in Boston on May 14, 2013.
First-Quarter Conference Call Information
The company will host a first-quarter conference call on Wednesday, April 24 at 8:30 a.m. ET. To participate, please call toll free (800) 288-8967 or for international access call (612) 332-0335 approximately 10-15 minutes prior to the start of the call. The password is ‘QUARTER ONE’. The host is ‘NICHOLSON’. To listen to a live audio webcast of the call, go to Corning’s Web site at www.corning.com/investor_relations and click Investor Events on the left. A replay will be available beginning at 10:30 a.m. ET and will run through 5 p.m. ET, Wednesday, May 8, 2013. To listen, dial (800) 475-6701 or for international access dial (320) 365-3844. The access code is 287833. The webcast will be archived for one year following the call.
Presentation of Information in this News Release
Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP. Corning’s non-GAAP net income and EPS measures exclude restructuring, impairment and other charges and adjustments to prior estimates for such charges. Additionally, the company’s non-GAAP measures exclude adjustments to asbestos settlement reserves, gains and losses arising from debt retirements, charges or credits arising from adjustments to the valuation allowance against deferred tax assets, equity method charges resulting from impairments of equity method investments or restructuring, impairment or other charges taken by equity method companies and gains from discontinued operations. The company believes presenting non-GAAP net income and EPS measures is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. Reconciliation of these non-GAAP measures can be found on the company’s website by going to www.corning.com/investor_relations and clicking Financial Reports on the left. Reconciliation also accompanies this news release.
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995), which are based on current expectations and assumptions about Corning’s financial results and business operations, that involve substantial risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: the effect of global political, economic and business conditions; conditions in the financial and credit markets; currency fluctuations; tax rates; product demand and industry capacity; competition; reliance on a concentrated customer base; manufacturing efficiencies; cost reductions; availability of critical components and materials; new product commercialization; pricing fluctuations and changes in the mix of sales between premium and non-premium products; new plant start-up or restructuring costs; possible disruption in commercial activities due to terrorist activity, armed conflict, political or financial instability, natural disasters, adverse weather conditions, or major health concerns; adequacy of insurance; equity company activities; acquisition and divestiture activities; the level of excess or obsolete inventory; the rate of technology change; the ability to enforce patents; product and components performance issues; retention of key personnel; stock price fluctuations; and adverse litigation or regulatory developments. These and other risk factors are detailed in Corning’s filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the day that they are made, and Corning undertakes no obligation to update them in light of new information or future events.
About Corning Incorporated
Corning Incorporated (www.corning.com) is the world leader in specialty glass and ceramics. Drawing on more than 160 years of materials science and process engineering knowledge, Corning creates and makes keystone components that enable high-technology systems for consumer electronics, mobile emissions control, telecommunications and life sciences. Our products include glass substrates for LCD televisions, computer monitors and laptops; ceramic substrates and filters for mobile emission control systems; optical fiber, cable, hardware & equipment for telecommunications networks; optical biosensors for drug discovery; and other advanced optics and specialty glass solutions for a number of industries including semiconductor, aerospace, defense, astronomy, and metrology.