Corning Incorporated (NYSE:GLW) today announced its results for the second quarter of 2015.
Second-Quarter 2015 Financial Comparisons
(In millions, except percentages and per-share amounts)
|Q2 2015||Q2 2014||% Change|
|Core Net Sales||$2,517||$2,512||--|
|Q2 2015||Q2 2014||% 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 website. Additional non-GAAP reconciliations for the years 2013 and 2014 have been provided on our website, and they detail the change in core gross margin, core selling, general and administrative expenses, and core research, development, and engineering expenses due to the change in Corning’s constant-Japanese yen rate from ¥93 to ¥99 beginning in the first quarter of 2015. Core performance metrics (non-GAAP) are adjusted to exclude the impact of changes in Japanese yen foreign exchange rate, as well as other items that do not reflect ongoing operations of the company. See “Use of Non-GAAP Financial Measures” section of attached Form 8-K for details on core performance measures.
“We began 2015 with a clear set of priorities to drive Corning’s continued success. Our second-quarter performance clearly demonstrates that we are executing to our plan,” Wendell P. Weeks, chairman, chief executive officer and president, said. “Our businesses are delivering strong results as evidenced by the 7 percent year-over-year core earnings growth. And our share repurchase program has leveraged the earnings growth into 12 percent core EPS growth. Our first-quarter acquisitions in the Optical Communications segment are paying off, especially in the growing hyperscale data centers market. We also announced an agreement to acquire a business that will enable innovation opportunities in the pharmaceutical glass packaging market. Finally, we’re continuing our commitment to return cash to shareholders through a new $2 billion share repurchase program.”
Remarking on the company’s second-quarter performance, James B. Flaws, vice chairman and chief financial officer, said, "We are very pleased with our excellent business results in the quarter. Our overall performance was in line with our expectations. Without the impact of the strengthening U.S. dollar, our results would have been even stronger - with core quarterly sales, earnings and EPS up 3%, 11% and 15%, respectively.”
“Our Optical Communications segment had a spectacular quarter with exceptionally strong demand for fiber-to-the-home and data center solutions. We believe our full suite of optical solutions gives us significant competitive advantages in the fastest growing segments of these markets. And our strategic acquisitions are providing improved market access and broader customer offerings.”
Second-Quarter Segment Performance
- Display Technologies: Core sales were $963 million*, with sequential glass volume growth of a low single-digit percentage, as expected. Sequential LCD glass prices declined moderately, and in line with expectations. Core earnings for the quarter were $290 million* versus $300 million* in the second quarter last year.
- Optical Communications: Sales were $800 million, a 17% increase from $686 million for the comparable period a year ago. Core earnings for the quarter were $91 million*, a 44% increase from $63 million* a year ago.
- Environmental Technologies: Sales were $260 million versus $285 million, a 9% decrease on a year-over-year basis, driven primarily by currency exchange rates. Core earnings were $46 million*, in line with last year’s second quarter.
- Specialty Materials: Sales were $272 million versus $298 million, a 9% decline on a year-over-year basis, driven primarily by lower sales of advanced optics products, as anticipated. A strong mid-teens percentage growth in Corning® Gorilla® Glass volume, combined with improved efficiencies, kept core earnings at $44 million*, in line with last year’s second quarter.
- Life Sciences: Sales were $211 million versus $223 million last year, a 5% year-over-year decline, driven by currency exchange rates.
- Core equity earnings from Dow Corning Corporation of $63 million* met expectations.
- Core gross margin for the quarter was 45%*, a 1% increase over the year-ago period.
Corning provided the following expectations for its business segments in the third quarter of 2015:
- Display Technologies: LCD glass volume is expected to increase by a low single-digit percentage sequentially. The company expects LCD price declines to remain at a moderate level in the third quarter, which would be the fifth consecutive quarter of moderate price declines.
Corning updated its view of the retail LCD glass market, adjusting expectations for IT and TV unit demand downward. Corning now expects the 2015 worldwide LCD glass market area growth to be in the 6% to 7% range. The forecasted reduction in IT demand reflects expectations that the second-quarter weakness may continue for the remainder of the year. The TV unit forecast reductions are mainly in Western Europe and Latin America, where demand is expected to remain weak. The company also adjusted demand in China slightly. However, overall television screen-size growth is tracking higher than anticipated, somewhat offsetting the forecasted unit reductions.
The company believes the longer-term outlook for TV demand remains excellent, driven by new formats such as 4K TV and the replacement rate of older sets. The company also believes that its moderate price declines will continue beyond the third quarter.
- Optical Communications: Corning is increasing its expectation for optical communications sales for the year, as demand for the company’s FTTH and data center solutions remains high. Third-quarter and full-year sales are expected to be up in the mid-teen percentage range versus last year.
- Specialty Materials: Gorilla Glass volume is expected to be up by a high single-digit percent sequentially, and consistent with last year’s exceptionally strong third-quarter performance. The company continues to see strong adoption of its new Gorilla Glass 4 product and also announced its first smartphone customer for Antimicrobial Corning® Gorilla® Glass. On a year- over-year basis, third-quarter sales in the segment are expected to be down in the upper single-digit percent range, driven by the cyclical slowdown in the semiconductor industry.
- Environmental Technologies and Life Sciences: Sales in the Environmental Technologies and Life Sciences segments are expected to be down slightly in the third quarter from the prior year, driven by the impact of changes in the euro-U.S. dollar exchange rate.
“We feel very good about Corning and the exciting market opportunities in each of our business segments,” Flaws remarked. “Our advantaged products, leading technological innovation, and lowest cost position place us ahead of our competition. It is clear that our strategy is working: We are growing earnings, leveraging innovation for future growth, and bringing value to our investors through dividends and share repurchases.”
Second-Quarter Conference Call Information
The company will host a second-quarter conference call at 8:30 a.m. (EST) Tuesday, July 28. To participate, please call toll free (800) 230-1074; or for international access call (612) 234-9960 approximately 10-15 minutes prior to the start of the call. 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 on “Events”. A replay will be available beginning at 11 a.m. (EST) and will run through 5 p.m. (EST), Tuesday, Aug. 11. To listen, dial (800) 475-6701 or for international access dial (320) 365-3844. The access code is 363576. 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 financial measures exclude 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. The company believes presenting non-GAAP financial measures assists in analyzing financial performance without the impact of items that may obscure trends in the company’s underlying performance. Detailed reconciliations outlining the differences between these non-GAAP measures and the most directly comparable GAAP measure can be found on the company’s website by going to www.corning.com/investor_relations and clicking “Financial Reports” on the left. These reconciliations also accompany 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 (www.corning.com) is one of the world’s leading innovators in materials science. For more than 160 years, Corning has applied its unparalleled expertise in specialty glass, ceramics, and optical physics to develop products that have created new industries and transformed people’s lives. Corning succeeds through sustained investment in R&D, a unique combination of material and process innovation, and close collaboration with customers to solve tough technology challenges. Corning’s businesses and markets are constantly evolving. Today, Corning’s products enable diverse industries such as consumer electronics, telecommunications, transportation, and life sciences. They include damage-resistant cover glass for smartphones and tablets; precision glass for advanced displays; optical fiber, wireless technologies, and connectivity solutions for high-speed communications networks; trusted products that accelerate drug discovery and manufacturing; and emissions-control products for cars, trucks, and off-road vehicles.