Corning Incorporated (NYSE: GLW) today announced its results for the second quarter of 2013. Performance highlights included:
- Core sales were $2.0 billion*, an increase of 11% over the same period of 2012. Net sales (GAAP) for the quarter were $2.0 billion.
- Core earnings per share were $0.32*, representing a 23% improvement over the second quarter of 2012 and the third consecutive quarter of year-over-year double-digit growth. GAAP earnings per share were $0.43, compared with $0.31 a year ago, a 39% increase.
- In the Display Technologies segment, second-quarter LCD glass price declines were moderate and less than the previous quarter.
- Sales and net income in Corning’s Telecommunications segment improved significantly on both a year-over-year and sequential basis.
Second-Quarter Financial Comparisons
In millions, except percentages and per-share amounts
|Q2 2013||Q2 2012||% Change|
|Core Net Sales||$2,021||$1,819||11%|
|Core Equity Earnings||$173||$211||(18%)|
|Core Earnings EPS||$0.32||$0.26||23%|
|Q2 2013||Q2 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 to U.S. dollar exchange rate and other yen transactions, equity earnings from the polysilicon business of Dow Corning Corporation, as well as other special items. See “Use of Non-GAAP Financial Measures” in our Form 8-K filed on July 30, 2013, for details on Core Performance measures.
Remarking on the second quarter, Wendell P. Weeks, chairman, chief executive officer, and president, said, “In Corning’s strong second quarter, we achieved our third consecutive period of year-over-year EPS improvement. For the past 18 months, we have effectively managed our cost structure, brought stability to our LCD glass business, returned to earnings growth, and advanced our new-product portfolio. We are pleased with the progress we are making and believe our strategy is working.”
Second-Quarter Core Performance Segment Results
Display Technologies segment core sales were $670 million*, a 21% increase compared with a year ago, and stronger than originally anticipated. LCD glass price declines were more moderate than in the first quarter and were within the range the company anticipated. Total glass volume from Corning’s wholly owned business and Samsung Corning Precision Materials Co., Ltd. increased by a mid-single digit percentage sequentially and about 20% on a year-over-year basis. Year-over-year core earnings for the segment increased approximately 11%.
Telecommunications segment sales were $601 million, an 8% increase from last year’s second quarter. The increase was driven by strength in sales to NBN for its national broadband build out in Australia, and improved enterprise network and wireless solutions sales in the quarter. The segment also had improved manufacturing performance and cost reductions, driving core earnings growth of around 62%.
As expected, Specialty Materials segment sales grew 17% sequentially to $301 million, driven by increased sales of Corning® Gorilla® Glass. Segment core earnings grew by approximately 33% over the previous year on strong Gorilla Glass manufacturing performance.
Environmental Technologies segment sales were $228 million, representing an 8% year-over-year decline in comparison with a particularly robust quarter a year ago, when demand for emissions-control products exceeded manufacturing capacity. Despite the sales decline, segment core earnings were consistent with a year ago on strong operational performance.
Life Sciences segment sales increased 35% to $219 million on a year-over-year basis. The sales increase reflects growth from the acquired Discovery Labware business. Segment core earnings doubled from a year ago.
Core equity earnings from Dow Corning Corporation declined 19% on a year-over-year basis, substantially below Corning’s expectations. The primary issue is price pressure in China and Europe on lower-end silicone products.
Core gross margin in the quarter was 43%*, a significant improvement over the second quarter of 2012. Corning ended the quarter with $5.5 billion in cash and short-term investments. As part of the company’s commitment to return value to its shareholders, Corning repurchased about $242 million in common stock during the second quarter and increased its quarterly dividend payment by 11%.
As a reminder, Corning moved to core performance measures for financial reporting to provide investors a clear view of the company’s core operating results. The core performance metrics exclude the impact of changes in the Japanese-yen-to-U.S.-dollar exchange rate; the results of the polysilicon business of Corning’s affiliate, Dow Corning Corporation; as well as other special items. Corning’s core performance results are now reported on a constant-yen basis. These core performance measures are non-GAAP financial measures. Starting this quarter, core performance also excludes the positive impact from yen-denominated transaction hedges. This change reduced core EPS about $0.01 in the second quarter for 2013. Reconciliations to GAAP are available on the company’s website.
“We believe Corning will continue to have good sales and earnings growth, driven by our Display Technologies segment’s success in moderating LCD glass price declines; our leadership positions and strong customer relationships in all of our segments; and growth from new products,” James B. Flaws, vice chairman and chief financial officer, said.
In the third quarter, Corning expects to achieve its fourth consecutive quarter of year-over-year earnings growth. The company also anticipates its LCD glass volume should be consistent to up slightly compared with the strong second quarter performance. Corning expects its volumes in the second half to be driven by global retail TV demand, especially for 50-inch or larger LCD television models. Third quarter LCD glass price declines are anticipated to be moderate, and consistent with the previous quarter.
Specialty Materials segment sales are expected to improve about 10% sequentially. Yesterday, Corning announced the introduction of Corning® Gorilla® Glass NBT™, a specially designed and strengthened cover glass for touch notebook applications. The company expects sales to begin ramping for this new product in the third quarter. Industry market research indicates that touch-enabled notebooks represent the next wave of opportunity for cover glass technologies.
Telecommunications segment sales in the third quarter are expected to increase about 20% on a year-over-year basis. Environmental Technologies segment sales in the third quarter are expected to be up slightly with those of the same period a year ago. In the Life Sciences segment, sales are expected to increase between 40% and 45% on a year-over-year basis.
Core equity earnings from Dow Corning are expected to be down approximately 50% versus the second quarter due to price pressure and cost in inventories. The fourth quarter is expected to be closer to the second quarter earnings level.
“Our strong first-half performance has established a solid foundation for continued growth. We expect excellent retail demand for large-size televisions to allow us to continue our strong LCD glass performance from the first half. We expect sales in our Telecommunications, Environmental and Life Sciences segments to grow as well. And we are very excited about the emerging opportunities for our Gorilla Glass products, especially as touch-enabled notebooks become available in the consumer market. We look forward to introducing other advanced technology applications for Gorilla Glass in the coming months,” Flaws concluded.
Upcoming Investor Events
Corning will present at Citi’s 2013 Global Technology Conference on Wednesday, Sept. 4, 2013, in New York City.
Second-Quarter Conference Call Information
The company will host a second-quarter conference call on Tuesday, July 30, at 8:30 a.m. ET. To participate, please call toll free (800) 230-1059 or for international access call (612) 234-9959 approximately 10-15 minutes prior to the start of the call. The password is ‘QUARTER TWO’. The host is ‘NICHOLSON’. To listen to a live audio webcast of the call, go to Corning’s website 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, Tuesday, Aug. 13, 2013. To listen, dial (800) 475-6701 or for international access dial (320) 365-3844. The access code is 297023. 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.