Corning Incorporated (NYSE: GLW) today announced its results for the third quarter of 2013. The results being reported today are consistent with the preview provided by the company on Oct. 22, 2013. Third-quarter results included:
- Core sales were $2.1 billion*, an increase of 10% over the comparable period last year. Net sales (GAAP) were $2.1 billion.
- Core earnings per share were $0.33*, demonstrating the fourth consecutive quarter of year-over-year core earnings-per-share growth, and an increase of 18% over a year ago. GAAP earnings per share were $0.28.
- In the Display Technologies segment, LCD glass sequential price declines continue to be moderate, as expected. Combined sequential LCD glass volume was up slightly.
- In the Telecommunications segment, sales increased 24% and core net income increased 86%* on a year-over-year basis. GAAP earnings increased 77% for the same period.
- Core gross margin was 44%*, up nearly two percentage points year over year and up slightly sequentially.
Third-Quarter Financial Comparisons
In millions, except percentages and per-share amounts
|Q3 2013||Q3 2012||% Change|
|Core Net Sales||$2,108||$1,920||10%|
|Core Equity Earnings||$121||$173||(30%)|
|Core Earnings EPS||$0.33||$0.28||18%|
|Q3 2013||Q3 2012||% Change|
*These are non-GAAP financial measures. Corning moved to disclosing core performance measures to provide investors a clear view of the company’s core operating results. 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 Oct. 30, 2013, for details on Core Performance measures.
“We had excellent third-quarter results. Our strong sales and gross margin performance drove an 18%* improvement in core earnings per share in the quarter. One of our goals over the past 18 months has been to restore positive momentum in our Display Technologies segment. We achieved another important milestone on this front recently by renewing the customer agreements that we first announced last October. The renewals carry through at least 2014,” Wendell P. Weeks, chairman, chief executive officer and president, said.
Third-Quarter Core Performance Segment Results
Display Technologies segment core sales for the wholly owned LCD glass business were $689 million*, a 7% improvement compared with a year ago. Total glass volume from Corning’s wholly owned business and Samsung Corning Precision Materials Co., Ltd., (SCP) saw low-teens year-over-year increases and a low-single-digit sequential improvement. LCD glass price declines for the wholly owned business and SCP were moderate and in line with expectations. Core earnings were down 9% year over year. This decline was entirely driven by reduced earnings at SCP. The core earnings of the wholly owned business were up significantly year over year.
Telecommunications segment sales were $650 million, a 24% increase from last year’s third quarter. The increase was driven primarily by stronger results from its carrier, enterprise, and wireless network businesses. Core earnings were up 86%* year over year, reflecting increased sales volume in combination with cost controls.
Specialty Materials segment sales grew 8% sequentially to $326 million, meeting company expectations. Segment core earnings grew 23%* sequentially, driven by increased sales and manufacturing improvements in Corning® Gorilla® Glass.
Environmental Technologies segment sales were $225 million, a 3% decline year over year. However, improved operating performance and excellent manufacturing efficiency resulted in earnings growth of 19% in the quarter.
Life Sciences segment sales increased 39% year over year to $215 million. The growth was driven by the successful acquisition of the Discovery Labware business, offset somewhat by the impact of the U.S. government sequestration. Core earnings for the Life Sciences segment more than doubled from last year.
Core equity earnings from Dow Corning Corporation were comparable to those of a year ago for the third quarter, and better than expectations.
Core gross margin in the quarter was 44%*, exceeding expectations and providing a significant improvement sequentially and year over year. Corning ended the quarter with $5.4 billion in cash and short-term investments. The company used $209 million to repurchase approximately 14 million shares as part of its continuing program to return value to shareholders.
“We anticipate that fourth-quarter results will be sequentially lower due to normal seasonal declines in our non-display businesses. This decline will be larger than normal due to a more significant downturn in optical fiber sales volume. The optical fiber decline is occurring primarily in North America and China. We are also seeing slower-than-expected construction of the National Broadband Network (NBN) in Australia,” James B. Flaws, vice chairman and chief financial officer, said.
The company anticipates fourth-quarter LCD glass volume being down by low single digits on a sequential basis, and sequential price declines will be consistent with recent quarters. Global retail TV demand remains on track with the company’s expectations, and overall screen sizes are growing. Inventory levels in the supply chain are expected to remain in the 15-to 16-week range, down from a high of 18 weeks earlier in the year.
Sequentially, Specialty Materials segment sales are expected to be in line with the previous quarter. Telecommunications segment sales in the fourth quarter are expected to be down slightly year over year.
In the Environmental Technologies segment, the company expects sales to be up slightly from the fourth quarter of 2012. In the Life Sciences segment, sales are expected to be up 10% over last year, driven by the Discovery Labware acquisition.
Core equity earnings from Dow Corning are expected to be consistent with last quarter.
“Despite the stronger seasonality impact on the fourth quarter, we remain well-positioned for growth in the future,” Flaws said. “Acquiring full ownership of Samsung Corning Precision should generate strong financial results for Corning. When the deal is complete early next year, we should add approximately $2 billion in annual sales and about $350 million in incremental net income to our bottom line. When combined with our newly announced share repurchase program, Corning should see approximately 20% accretion in fully diluted earnings per share.”
Upcoming Investor Events
Corning will attend the UBS Technology Conference on Nov. 20 in Sausalito, Calif., and also attend the Credit Suisse Technology Conference on Dec. 3 in Scottsdale, Ariz.
Third-Quarter Conference Call Information
The company will host a third-quarter conference call on Wednesday, Oct. 30, at 8:30 a.m. ET. To participate, please call toll free (800) 230-1092 or for international access call (612) 288-0329 approximately 10-15 minutes prior to the start of the call. The password is ‘QUARTER THREE’. 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 11:00 a.m. ET and will run through 5 p.m. ET, Wednesday, Nov. 13, 2013. To listen, dial (800) 475-6701 or for international access dial (320) 365-3844. The access code is 304926. 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 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.