Strong Optical Communications performance leads diversified business growth
Corning Incorporated (NYSE: GLW) today announced its results for the first quarter of 2015.
First-Quarter Performance Highlights
- Core sales were $2.4 billion*, a 4% increase on a year-over-year basis. Net sales (GAAP) were $2.3 billion, consistent with the prior year quarter.
- Core earnings per share were $0.35 per share*, an increase of 21% over the comparable quarter last year. GAAP earnings per share were $0.29.
- Sales in the Optical Communications segment increased 18% from the year-ago period, driven by strong demand for the company’s fiber-to-the-home solutions and the addition of sales from a recent acquisition.
- Sequential LCD glass price declines continued at moderate levels in the first quarter, and the company expects prices to decline even less in the second quarter.
- Corning® Gorilla® Glass sales were strong in the quarter, driven by the success of Gorilla Glass 4.
Quarter-One Financial Comparisons
In millions, except percentages and per-share amounts
|Q1 2015||Q1 2014||% Change|
|Core Net Sales||$2,430||$2,326||4%|
|Core Earnings EPS||$0.35||$0.29||21%|
|Q1 2015||Q1 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 are off to an excellent start in 2015,” Wendell P. Weeks, chairman, chief executive officer and president, said. “In the first quarter, we benefited from the company’s business diversity with core sales growing in four of five segments.
“Our Optical Communications segment had a terrific quarter as demand for fiber-to-the-home solutions and data center products remained strong. In our Display Technologies segment, moderate LCD glass price declines and a relentless focus on cost reductions have helped us maintain profitability. Finally, our latest generation of Gorilla Glass is a hit with customers, and its success is helping to drive operational results.”
Weeks said, “We believe we are on track for another year of core earnings growth.”
First-Quarter Segment Results
Display Technologies segment core sales were $972 million*, up slightly from last year’s first quarter. Core earnings for the quarter were $294 million*, a 4% increase on a year-over-year basis. Total LCD glass volume grew at a high-teen percentage on a year-over-year basis. Sequential LCD price declines were moderate, as expected. The combination of increased volume, slower price declines, and cost reductions drove a year–over-year improvement in the segment’s gross margin percent.
Optical Communications segment sales were $697 million, an 18% increase compared with $593 million in the first quarter last year with growth in both carrier and enterprise networks sales. The results exceeded the company’s expectations for the quarter, driven by strong fiber-to-the-home demand in North America. The recent acquisition of TR Manufacturing, Inc. also contributed to sales growth in the quarter. Core earnings for the quarter were $72 million*, an increase of 85% from a year ago.
Environmental Technologies segment sales were $282 million, a slight increase compared with $275 million in quarter one 2014. Core earnings were $48 million*, a 12% increase from a year ago. Increased demand for Corning’s heavy-duty diesel emissions products drove the bulk of the quarterly sales increase and improved profitability.
Sales in Corning’s Specialty Materials segment were $272 million, a 4% increase from last year’s first-quarter results. Gorilla Glass volume was up greater than 20%, as expected, driven by increasing demand for Gorilla Glass 4 cover glass. A decline in advanced optics sales partially offset the strength in Gorilla Glass in the segment’s results. Core earnings of $46 million* were up 44% versus last year.
Life Sciences segment sales were $197 million in the quarter. Core equity earnings from Dow Corning Corporation declined by 14%, the result of lower-than-expected sales of polysilicon.
Core gross margin for the quarter was 44%*, a 1% increase over the year-ago period and better than company expectations.
In the first quarter, Corning repurchased 21 million shares of common stock for approximately $500 million as part of its previously announced $1.5 billon share repurchase program.
Corning ended the first quarter with $5.1 billion in cash and short-term investments.
“Our excellent first-quarter results have given us momentum for continued growth in the second quarter,” James B. Flaws, vice chairman and chief financial officer, said. “Strong demand for our optical communications products, the popularity of Gorilla Glass and strength of our heavy-duty diesel emissions materials will drive our second-quarter performance,” he said.
In the second quarter, Corning expects its LCD glass volume to increase by a low single-digit percentage sequentially. Glass prices in the quarter are expected to decline even less than the first quarter.
Optical Communications segment second-quarter sales on a year-over-year basis are expected to increase by a mid-teen percentage as demand from carrier and enterprise networks remains strong. Recent acquisitions will also contribute to strong performance.
In Environmental Technologies, second-quarter sales are anticipated to decrease by a mid-single digit percentage on a year-over-year basis. The company expects demand for its emissions control products to be consistent with last year. A weaker Euro exchange rate will impact year-over-year sales comparisons.
Specialty Materials segment sales in the second quarter are expected to decrease by a mid-single digit percentage on a year-over-year basis, driven by declines in advanced optics product sales. Gorilla Glass sales are expected to remain strong. Life Sciences segment sales are projected to be down slightly year-over-year, driven by the impact of the weaker foreign exchange rates.
For the full year, Flaws commented, “We anticipate 2015 will be another year of strong core earnings-per-share growth for Corning. Our performance will be led by our Optical Communications segment, which is experiencing strong demand and benefiting from recent acquisitions. Consumer demand for handheld electronic devices, particularly new smartphone models, will drive Gorilla Glass 4 glass volume increases during the year. We expect growth in our Environmental Technologies and Life Sciences segments as well, but the potential for further weakening of the Euro exchange rate may negatively affect this growth.”
In conclusion, Flaws said, “We exited 2014 with strong momentum, and our first-quarter performance reinforces expectations for our 2015 growth.”
Upcoming Investor Events
Corning will host investors in Corning, N.Y., on May 7 and present at the JP Morgan Technology, Media and Telecom Conference on May 19 in Boston.
First-Quarter Conference Call Information
The company will host a first-quarter conference call on Tuesday, April 28, at 8:30 a.m. ET. To participate, please call toll free (800) 230-1096 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 “Investor Events” on the left. A replay will be available beginning at 11 a.m. ET and will run through 5 p.m. ET, Tuesday, May 12. To listen, dial (800) 475-6701 or for international access dial (320) 365-3844. The access code is 357164. 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.