Speaking at the company’s annual meeting this morning, Wendell P. Weeks, Corning Incorporated’s (NYSE: GLW) chairman, chief executive officer, and president, told shareholders, “We’re financially strong. We’re uniquely positioned to solve tough technology problems. And we’re succeeding at building a bigger, more balanced company.”
Weeks said that the company remains on track to reach $10 billion in sales within the next few years. However, he acknowledged that Corning also experienced some surprises and disappointments in the past year. “But when we step back and assess the state of the company, we really like our hand,” he said. “Corning’s growth opportunities are the strongest they’ve ever been. And we are well prepared and equipped to manage the challenges we face.”
2011 Results and 2012 First-Quarter Performance
Weeks described the company’s 2011 performance as “extremely strong in a very tough environment.” He briefly summarized the company’s 2011 year-end results, which included record sales of $7.9 billion, record gross margin dollars, and double-digit sales growth in four of Corning’s major business segments.
Weeks noted that profits were down, however, which has also placed pressure on Corning’s stock performance. Weeks cited three main factors: price declines in the LCD industry, higher taxes, and lower equity earnings from Dow Corning Corporation.
Weeks explained that these trends also impacted the company’s 2012 first quarter results. On Wednesday, Corning reported that sales were up 2% sequentially, including growth in the company’s Telecommunications, Environmental Technologies, Specialty Materials, and Life Sciences segments. However, net income was down 6% from last quarter.
Weeks noted that Corning is once again undergoing a transition as the LCD industry begins to mature. But he reminded shareholders that “evolution is part of Corning’s DNA.” Weeks asserted, “Our leadership team knows how to manage transitions, and we are not afraid of challenges.”
Clear Mandate, Strong Progress
Weeks devoted most of his remarks to explaining how Corning is addressing its current challenges. He said, “We have a clear mandate: We must form bottom and march up.”
Weeks outlined the four key steps the company is taking to return to consistent earnings growth: (1) Re-establish positive momentum in Display Technologies; (2) Capture growth opportunities across Corning’s diverse businesses; (3) Create new revenue and earnings streams; and (4) Deliver cost and functional excellence.
He cited progress in each of these areas during the first quarter. Highlights include launching a new equity venture with Samsung Mobile Display to provide high-performance glass for organic light-emitting diode displays; shipping the company’s first order for solar glass; and announcing plans to acquire a majority share of Becton, Dickinson and Company’s Discovery Labware unit.
Moreover, Weeks noted that the company anticipates both sales and profits to increase in Telecommunications, Environmental Technologies, Specialty Materials, and Life Sciences in 2012. “We have more horses pulling the wagon, and that makes us less vulnerable to technology and market fluctuations,” he said.
Looking ahead, Weeks described Corning’s future as “very bright.” He said that megatrends continue to play to the company’s strengths and drive growth opportunities across Corning’s businesses. In particular, he noted the tremendous opportunities for Corning as technology becomes more integrated into our daily lives.
Weeks opened the meeting with a video portraying Corning’s expanded vision of the future, which the company developed following the viral success of its 2011 corporate video, A Day Made of Glass. The videos portray a world of immersive displays, intuitive interfaces, and real-time information – a world that depends on highly engineered specialty glass and fiber-optic technology. “We’re excited about this world of communication and connection,” said Weeks, “because Corning is uniquely qualified to help bring it to life.”
Corning’s first video has generated more than 18 million views since its February 2011 release, and the sequel generated 1 million views in its first week. But Weeks said he was most excited by the feedback he has received from companies in diverse industries that Corning’s technologies are vital.
He provided demonstrations of several Corning products and capabilities that have generated strong interest from other technology innovators. They included: Corning® Gorilla® Glass 2, which is 20% thinner than original Gorilla® Glass and offers the same legendary toughness and damage resistance; ultra-slim flexible glass, which has the potential to revolutionize the way display devices are manufactured; and antimicrobial glass, an early-stage glass composition with the potential to kill drug-resistant bacteria and viruses.
Value to Investors
Following his demonstrations, Weeks summarized the strengths he believes Corning offers shareholders: financial stability, diversified market positions tied to significant growth trends; strong operating cash flow, which creates the opportunity to enhance shareholder returns; and the potential for “explosive” growth if even one or two new products succeed. “We think that’s a pretty compelling package,” he said.
Weeks closed his remarks by acknowledging Corning’s 29,000 dedicated global employees and the company’s talented management committee. He also paid tribute to Dr. Joseph Miller, 70, who retires as Corning’s chief technology officer on April 30. Weeks described Miller as “one of the strongest technology advocates this company has ever had.”
Finally, he thanked William D. Smithburg, 73, for 25 years of distinguished service on Corning’s Board of Directors. “Bill is one of our country’s most respected business leaders,” said Weeks. “We have been fortunate to benefit from his wisdom, judgment, and uncompromising integrity for the past quarter century.”
During the meeting’s formal business, shareholders elected the following 10 directors to one-year terms: John Seely Brown, 72, retired chief scientist of Xerox Corporation; Stephanie A. Burns, 57, retired chairman and chief executive officer of Dow Corning Corporation; John A. Canning, Jr., 67, co-founder and chairman of Madison Dearborn Partners, LLC; Richard T. Clark, 66, retired chairman, president, and chief executive officer of Merck & Co., Inc.; James B. Flaws, 63, vice chairman and chief financial officer, Corning Incorporated; Gordon Gund, 72, chairman and chief executive officer of Gund Investment Corporation; Kurt M. Landgraf, 65, president and chief executive officer of Educational Testing Service; Deborah D. Rieman, 62, managing director of Equus Management Company and retired president and chief executive officer of Check Point Software Technologies, Incorporated; H. Onno Ruding, 72, retired vice chairman and director of Citicorp and Citibank, NA; and Dr. Mark S.Wrighton, 62, chancellor and professor of chemistry at Washington University in St. Louis.
Shareholders also approved the company’s executive compensation as disclosed in the 2012 proxy statement; ratified PricewaterhouseCoopers LLP as independent registered public accounting firm for the 2012 fiscal year; approved adoption of the 2012 long-term incentive plan; and approved amendment and restatement of the company’s Restated Certificate of Incorporation to remove the provisions currently requiring supermajority shareholder voting.
At its annual organizational meeting, Corning’s board of directors appointed Gordon Gund as lead director. Mr. Gund was re-elected by shareholders today, and has served on Corning’s board since 1990. The board also elected Dr. David L. Morse, 60, as executive vice president and Corning’s chief technology officer, effective May 1, 2012.
Immediately following the annual meeting, Mark A. Beck, senior vice president and general manager of Corning Environmental Technologies, provided an overview of Corning’s Environmental Technologies business and growth opportunities. Beck explained the key role that Corning’s emissions-control products have played in improving air quality around the world. His presentation included a demonstration of Corning’s DuraTrap® diesel particulate filter, which traps 20 trillion particles of soot per second and reduces engine pollutants by 99%. He noted that that Corning expects sales in Environmental Technologies to grow to approximately $1.4 billion by 2014, driven by global vehicle demand and a favorable regulatory environment.
The company hosted a live audio teleconference of the 2012 annual meeting of shareholders from 11 a.m. to 12:15 p.m. EDT. A replay of the call will be available within 48 hours. To access the replay, go to Corning’s website at www.corning.com/investor_relations and click Investor Events on the left. No password is required. The audiocast will be archived on the website for one year following the broadcast.
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.