Corning Incorporated (NYSE: GLW) Vice Chairman and Chief Financial Officer James B. Flaws will update investors at the Citi Global Technology Conference in New York this afternoon (12:15 p.m.) on the company’s third-quarter performance and reiterate that, longer term, the company remains confident of achieving $10 billion in worldwide sales by 2014.
Regarding the third quarter, Flaws will describe the behavior of the LCD supply chain as “cautious.” “Utilization rates remain low as the industry anticipates softer retail demand in the second half of this year. This is somewhat contrary to how retail demand has been acting to date,” Flaws will say.
He will point out that worldwide retail demand for LCD TVs increased 18% year over year through June, and recent data indicates that sales remain strong in most regions. As a result, the potential exists for much lower supply chain inventories heading into the fourth quarter.
Flaws will explain that the company is revising its LCD volume expectations for the third quarter based on lower panel maker utilization rates. Corning now expects volume at its wholly owned business to be flat sequentially versus up in the mid-to upper-single digit range. At Samsung Corning Precision Materials Co., Ltd., volume is now expected to be down 30% sequentially, due to the lower-than-expected LCD panel maker utilization rates and some market share loss. Originally, Corning said that SCP’s third-quarter volume would decline in the mid-single digit range. Flaws also will confirm the company has not changed its third quarter glass pricing expectations. The SCP volume decline, combined with lower earnings at Dow Corning Corporation, will result in an overall equity earnings decline of about 35% sequentially.
Flaws will tell investors that Corning expects third-quarter sales for the Specialty Materials segment to be flat sequentially versus original expectations of an increase in the upper-single digit range. He will confirm that third-quarter sales for Corning's Telecommunications, Environmental and Life Sciences segments are all on track to meet guidance. In addition, he will say that Corning still expects corporate gross margin to expand in line with their original guidance.
Shifting to the company’s long-term potential, Flaws will state that management remains very confident in the company’s ability to reach $10 billion in worldwide sales by 2014. “We expect our corporate gross margin to remain strong over this time, with the potential for further expansion. We also anticipate our operating margin will expand during the next several years,” he will comment.
“To reach our $10 billion sales goal, we will need to add capacity,” he will say, “The majority of this spending over the next two years will be to support growth in our non-display businesses, including Corning® Gorilla® Glass.” Flaws will reiterate that Corning’s capital expenditures are expected to be $2.4 billion in 2011 and in the range of $1.9 billion to
$2 billion in 2012. “We do have some levers to further reduce our overall capital spending, if necessary. After 2012, we anticipate capital spending in display to decline significantly as the migration to thin glass will help mitigate the need for large, new capacity additions,” he will add.
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 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.