Corning Incorporated (NYSE: GLW) today announced its results for the first quarter ended March 31, 2016, including:
- Performance in Display Technologies, Environmental Technologies, Specialty Materials, and Life Sciences met or exceeded company expectations.
- Demand for Optical Communications products continues to be strong; manufacturing software implementation issues partially interrupted cable production and impacted first-quarter sales and profit. Production is expected to recover in the second quarter.
- Smallest sequential first-quarter LCD glass price decline in five years; second-quarter pricing expected to moderate further.
- Returned more than $2 billion to shareholders since October and announced two strategic transactions, as company continues to deliver on its strategy and capital allocation framework.
First-Quarter 2016 Results
For the first quarter of 2016, Corning reported core sales* of $2.17 billion and core earnings per share of $0.28, compared with $2.43 billion and $0.35 respectively in 2015. Net sales (GAAP) for the first quarter were $2.05 billion and GAAP loss per share was $0.36, compared with $2.27 billion and earnings per share of $0.29 in 2015. Corning’s GAAP net income for the first quarter reflects a non-cash, mark-to-market loss associated with the company’s currency-hedging contracts, which extend through 2022.
“We are pleased that we were able to meet overall profit expectations in the first quarter despite the impact from a manufacturing software implementation issue. We expect strong sequential core sales and profit growth in the second quarter,” Wendell P. Weeks, chairman, chief executive officer, and president, said. “We are also making great progress on our four-year plan to grow, return cash to our shareholders, and create significant value.”
*Core performance measures 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. Core performance metrics (non-GAAP) are adjusted to exclude the impact of changes in Japanese yen and Korean won foreign exchange rates, 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.
Update on the Strategy and Capital Allocation Framework
Corning continued to deliver on its commitment to focus its portfolio and utilize its financial strength to return more than $10 billion to shareholders and to invest $10 billion in growth and sustained leadership through 2019. In the first quarter, the company announced a 12.5% increase in the quarterly dividend, consistent with its plan to increase the dividend per share by at least 10% annually, and repurchased $751 million of outstanding shares. “Since announcing our new strategy and capital allocation framework last fall, we have returned more than $2 billion to shareholders,” Weeks said.
Recently, Corning announced two strategic transactions to advance the company’s growth. In January, the company announced a joint venture with Saint-Gobain Sekurit to develop, manufacture, and sell lightweight automotive glazing solutions. The joint venture will use innovative Corning® Gorilla® Glass for Automotive in the laminated window solution. Earlier this month, Corning announced an agreement to acquire Alliance Fiber Optic Products (Nasdaq: AFOP), broadening its access to the high-growth cloud data-center market.
First-Quarter Segment Results
- Display Technologies: Core sales were $829 million, compared with $972 million in the same period a year ago. Consistent with guidance, sequential LCD glass volume declined by a mid-single-digit percentage. Corning’s LCD glass price declines were moderate and the smallest sequential first-quarter decline in five years. The company also finalized its customer supply agreements for the remainder of 2016.
- Optical Communications: Sales in the first quarter were $609 million, compared with $697 million in the year-ago period. Core earnings were $26 million, compared with $72 million in the first quarter last year. The company estimates that the first-quarter impact from production issues associated with manufacturing software implementation issues was approximately $100 million in sales and $40 million in profit including additional recovery-related expenses.
- Environmental Technologies: Sales in the first quarter were $264 million, compared with $282 million last year. Core earnings were $37 million, compared with $48 million in the comparable period a year ago.
- Specialty Materials: Sales in the first quarter were $227 million versus $272 million last year. Core earnings were $32 million, compared with $46 million in the first quarter 2015.
- Life Sciences: Sales in the first quarter were $204 million, compared with $197 million a year ago. Core earnings were $18 million versus $19 million last year.
- Core equity earnings from Dow Corning Corporation were $58 million, compared with $51 million in the first quarter last year.
“We expect that the company’s performance for the remainder of the year will show significant improvement from first-quarter results, and that second-quarter results will reflect the strong underlying trends in our businesses,” R. Tony Tripeny, senior vice president and chief financial officer, said.
- Display Technologies: In the second quarter, Corning believes that panel-maker utilization will increase to meet demand for the second-half retail season. The overall glass market and Corning’s volume are expected to increase by a high single-digit percentage sequentially. Corning expects the sequential LCD glass price decline to be less than in the first quarter, consistent with its belief in a sustained environment for more favorable pricing. “We continue to forecast that television units will grow on a year-over-year basis, and that the retail glass market will grow by 8% to 10%, driven by consumer preference for larger screens,” Tripeny remarked.
- Optical Communications: For the second quarter, Corning expects sales to increase more than 20% sequentially as seasonal demand rises and as cable production recovers to normal levels with the resolution of manufacturing software implementation issues. For the second half of 2016, Corning expects sales to be up more than 10% versus the same period in 2015. These expectations include a continuation of the strong demand environment, normal production levels, and the recovery of a sizable portion of the sales missed during the first half of the year.
- Environmental Technologies: Second-quarter segment sales are expected to be consistent with the same period in 2015.
- Specialty Materials: Second-quarter sales are expected to increase year over year by a low-single-digit percentage, driven by Corning® Gorilla® Glass demand. For the full year, Corning expects Specialty Materials sales to grow by a mid-to-high single digit percentage.
- Life Sciences: Sales in the second quarter are expected to increase by a low-single digit percentage on a year-over-year basis.
- Core equity earnings are expected to be between $50 million and $70 million in the second quarter, depending on the closing date of the strategic realignment of Dow Corning announced in December 2015. The company expects the realignment to close by June.
Upcoming Investor Events
Corning will participate in the 44th annual J.P. Morgan Global Technology, Media and Telecom Conference in Boston on May 24, 2016, and at Bernstein’s 32nd Annual Strategic Decisions Conference on June 2, 2016, in New York City.
First-Quarter Conference Call Information
The company will host a first-quarter conference call on Tuesday, April 26, at 8:30 a.m. EDT. To participate, please call toll free (877) 209-9922 or for international access call (612) 332-0718 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 “Events.” A replay will be available beginning at 11 a.m. EDT and will run through 5 p.m. EDT, Tuesday, May 10. To listen, dial (800) 475-6701 or for international access dial (320) 365-3844. The access code is 390718. 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 the Investor Relations page and clicking “Financial Highlights” under the “Performance” tab. 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.
Digital Media Disclosure
In accordance with guidance provided by the SEC regarding the use of company websites and social media channels to disclose material information, Corning Incorporated (“Corning”) wishes to notify investors, media, and other interested parties that it intends to use its website (http://www.corning.com/worldwide/en/about-us/news-events.html) to publish important information about the company, including information that may be deemed material to investors. The list of websites and social media channels that the company uses may be updated on Corning’s media and website from time to time. Corning encourages investors, media, and other interested parties to review the information Corning may publish through its website and social media channels as described above, in addition to the company’s SEC filings, press releases, conference calls, and webcasts.
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.