Corning Incorporated (NYSE: GLW) today announced its results for the second quarter of 2011.
- Sales were $2 billion, an increase of 4% sequentially and 17% year over year.
- Earnings per share were $0.47. Excluding special items, earnings per share were $0.48*, comparable with last quarter, but a 17% decline year over year.
- Display Technologies’ wholly owned business volume decreased slightly sequentially and about 5% compared to a year ago. Samsung Corning Precision Materials Co., Ltd.’s volume was up about 10% on a quarterly basis and up slightly year over year. The total glass volume, of Corning’s wholly owned business and SCP combined, increased 5% sequentially.
- Specialty Materials sales increased 11% sequentially and 125% year over year.
- Telecommunications sales were up 16% sequentially and 24% over last year’s second quarter.
Second-Quarter Financial Comparisons
|Net Sales in millions|
|Net Income in millions|
|Non-GAAP Net Income in millions*|
*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 investor relations Web site.
“Second-quarter results were in line with our expectations,” Wendell P. Weeks, chairman, chief executive officer and president, said. He added that the results demonstrate the company is moving toward its goal of becoming a more balanced global company by pursuing growth opportunities. “Corning® Gorilla® Glass is the cover glass of choice for next-generation mobile devices; sales continued growing across our major telecommunications product lines; and global demand for our Environmental Technologies emissions products remained strong,” he remarked.
Second-Quarter Segment Results
Sales in the Display Technologies segment were $760 million, a decline of 4% sequentially and 9% year over year. The sequential sales result was due in part to the anticipated temporary curtailment of LCD TV production by Sharp Electronics Corporation. Sharp resumed production in the latter part of the quarter. Glass price declines were moderate.
Telecommunications segment sales were $548 million, an increase of 16% sequentially and 24% year over year. Sequential sales were strong across all major product lines.
Environmental Technologies segment sales were $258 million, essentially even sequentially, but a 40% year-over-year increase. Corning continued to experience very robust worldwide demand for both its diesel and automotive emissions control products.
Specialty Materials segment sales were $283 million, an 11% sequential and 125% year-over-year improvement driven by continued strong demand for Corning Gorilla Glass for handheld devices, tablets, and laptop computers.
Life Sciences segment sales were $155 million, an 8% sequential and 24% year-over-year increase. About half of the year-over-year growth rate was due to acquisitions.
Corning’s equity earnings totaled $428 million compared to $398 million in the previous quarter and $474 million a year ago.
Gross margin for the quarter was 44%, a slight decline from the first quarter, but better than the company anticipated.
“The display industry has been behaving more cautiously in recent weeks, driven primarily by weaker retail expectations for the second half. We have seen many LCD TV brands reduce their sales forecasts for the year. As LCD panel manufacturers have taken a more measured approach to their supply chain demands, they may be waiting a little longer to raise panel fab utilization for seasonal fourth-quarter retail demand,” Flaws said.
“Based on the lower TV sales expectations and more conservative supply chain behavior, we now expect the worldwide glass market to be between 3.3 billion and 3.4 billion square feet this year, versus previous expectations of 3.5 billion to 3.7 billion square feet,” Flaws remarked. In 2010, worldwide glass volume was 3.15 billion square feet.
In the display segment, Corning expects combined glass volume in the third quarter to be consistent with the second quarter. Glass volume for the company’s wholly owned business is expected to grow in the mid- to upper-single digits sequentially. At Samsung Corning Precision, volume is anticipated to decrease in the mid-single digits for the quarter. Glass price declines are expected to be moderate.
Telecommunications segment third-quarter sales are expected to increase slightly compared to the strong second-quarter performance, and to be up about 20% year over year.
Environmental Technologies segment third-quarter sales should be comparable with the strong second-quarter results.
The third-quarter growth rate in the Specialty Materials segment is expected to be in the upper-single digits. Corning Gorilla Glass is expected to grow 20% sequentially; however, other product lines in the segment are expected to be lower.
“Looking forward, we no longer believe that Corning Gorilla Glass sales this year have the potential to reach $1 billion. Rather, we expect sales will be in the area of $800 million. This adjustment is driven by our realization that television cover glass sales will not be as strong as we originally hoped,” Flaws added.
“Overall,” he said, “we are delighted with our sales growth and the market’s acceptance of Corning Gorilla Glass as the preferred cover glass product. Full-year sales are forecasted to be more than triple last year’s performance,” he concluded.
Corning anticipates equity earnings will be down in the upper-single digits sequentially. The company also expects its gross margin for the quarter to improve by a couple of percentage points.
Corning has updated its capital expenditure guidance and now believes that spending this year will be at the lower end of the company’s range of $2.4 billion to $2.7 billion. The company also has an initial estimate for 2012 capital expenditures in the range of $1.9 billion to $2.0 billion. Most of that planned capital spending will be for Corning products that are poised to grow rapidly over the next several years, such as Gorilla Glass, substrates for catalytic converters, diesel filters, optical fiber, as well as completing its new display glass facility in Beijing, China.
"We remain confident that Corning is on a growth track to reach $10 billion in sales by 2014. Our product innovations will be an important part of this growth story. We are seeing good progress in a number of areas and we are very encouraged by our advancements in photovoltaic glass panels and OLEDs,” Flaws added.
The company noted it has seen increasing success in customer testing with its photovoltaic glass program for thin-film solar panels.
Flaws said that Corning believes OLEDs will be an important component of the display industry in the future, requiring new, advanced glass compositions to maximize OLEDs’ potential. “We have already developed a new glass for OLEDs which is in customer qualification tests now, and we are working on an additional new glass composition for large size OLEDs,” he said.
“These innovations, combined with the strong growth of existing new products such as Corning Gorilla Glass, Corning® ClearCurve® optical fiber, Pretium EDGE™ solutions for data centers, and Corning DuraTrap® AT filters for diesel emissions control, will provide a solid foundation for our growth in sales,” he concluded.
Corning executives will update their outlook on end markets and business performance at the Citi Technology Conference in New York on Sept. 8 and at the Deutsche Bank Technology Conference in Las Vegas on Sept. 13.
Second-Quarter Conference Call Information
The company will host a second-quarter conference call on Wednesday, July 27 at 8:30 a.m. ET. To participate, please call toll free (800) 230-1951 or for international access call (612) 332-0226 approximately 10-15 minutes prior to the start of the call. The password is ‘QUARTER TWO’. The host is ‘SOFIO’. To listen to a live audio webcast of the call, go to Corning’s Web site at www.corning.com/investor_relations and click Investor Events on the left. A replay will be available beginning at 10:30 a.m. ET and will run through 5:00 p.m. ET, Wednesday, August 10, 2011. To listen, dial (800) 475-6701 or for international access call (320) 365-3844. The access code is 209752. 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 net income and EPS measures exclude restructuring, impairment and other charges and adjustments to prior estimates for such charges. Additionally, the company’s non-GAAP measures exclude adjustments to asbestos settlement reserves, gains and losses arising from debt retirements, charges or credits arising from adjustments to the valuation allowance against deferred tax assets, equity method charges resulting from impairments of equity method investments or restructuring, impairment or other charges taken by equity method companies and gains from discontinued operations. The company believes presenting non-GAAP net income and EPS measures is helpful to analyze financial performance without the impact of unusual items that may obscure trends in the company’s underlying performance. Reconciliation of these non-GAAP measures can be found on the company’s Web site by going to www.corning.com/investor_relations and clicking Financial Reports on the left. Reconciliation also accompanies 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 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.