Corning Announces Fourth-Quarter and Full-Year Results

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Corning Announces Fourth-Quarter and Full-Year Results

Corning Announces Fourth-Quarter and Full-Year Res

News Releases
Corporate Communications
Corning Announces Fourth-Quarter and Full-Year Results
Corning Announces Fourth-Quarter and Full-Year Results
CORNING, N.Y. | Corning Incorporated | January 25, 2012
Company has record annual sales of $7.9 billion

Corning Incorporated (NYSE: GLW) today announced its results for the fourth quarter and year-end of 2011. 

Fourth-Quarter Highlights

  • Sales were $1.9 billion, a decline of 9% sequentially, but a 7% increase year over year. 
  • Earnings per share were $0.31. Excluding special items, earnings per share were $0.33*, a decline from third-quarter EPS of $0.48 and $0.46 a year ago.
  • Display Technologies’ wholly owned business glass volume was in line with the company’s expectations. Samsung Corning Precision Materials Co., Ltd.’s volume was higher than the company’s revised guidance last November. 
  • Telecommunications segment sales declined 13% sequentially as expected, while improving by 11% year over year.

Full-Year Highlights

  • Sales were $7.9 billion, a 19% increase over $6.6 billion last year. This represents a record high annual sales performance for the company. 
  • Each of Corning’s major business segments recorded annual sales gains, led by Specialty Materials nearly doubling in sales to $1.1 billion, and Telecommunications improving to $2.1 billion compared to $1.7 billion last year. 
  • Earnings per share were $1.77, a 21% decline from last year. Excluding special items, earnings per share were $1.76*, a 15% decline from last year.
  • Free cash flow for the year was $544 million*.

*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 website.

Quarter Four Financial Comparisons

 Q4 2011Q3 2011% ChangeQ4 2010% Change
Net Sales in millions$1,887$2,075-9%$1,7657%
Net Income in millions$491$811-39%$1,044-53%
Non-GAAP Net Income in millions*$513$766-33%$733-30%
GAAP EPS$0.31$0.51-39%$0.66-53%
Non-GAAP EPS*$0.33$0.48-31%$0.46-28%


Full-Year Financial Comparisons

 20112010% Change
Net Sales in millions$7,890$6,63219%
Net Income in millions$2,805$3,558-21%
Non-GAAP Net Income in millions*$2,789$3,276-15%
GAAP EPS$1.77$2.25-21%
Non-GAAP EPS*$1.76$2.07-15%

*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 website.

“This past year was a very successful one for Corning,” Wendell P. Weeks, chairman, chief executive officer, and president, said. “We had the strongest annual sales performance in our 161-year history. We set new records for gross margin and operating income* (before special items). The company generated positive free cash flow* for the eighth consecutive year. We have a healthy balance sheet, and we raised our shareholder dividend and initiated a share repurchase program.

“Four of our business segments - Telecommunications, Environmental Technologies, Life Sciences, and Specialty Materials - had excellent performance in 2011. The aggregate sales and net income* (before special items) of these segments grew 31% and 136% respectively.  Sales of Corning® Gorilla® Glass almost tripled. Our innovation investments paid off with the introduction of Corning Lotus™ Glass for OLED displays and a new, improved cover glass, Corning® Gorilla® Glass 2. Our outstanding performance came despite the less-than-robust growth in economies around the world.”

Weeks pointed out that 2011 was not without its challenges. “In the fourth quarter, we experienced significant LCD glass price declines due to a confluence of factors in the display market. And our equity venture, Dow Corning Corporation, experienced major upheaval in the solar panel industry with lower demand and pricing of polysilicon materials. These price declines will reset the profitability of both Display Technologies and Dow Corning to lower levels.” 

He added, “It is important to remember the strengths of these businesses. Dow Corning has the lowest cost and leading market position in the polysilicon industry. Corning’s LCD business, which remains very profitable, has the lowest cost and the leading market position in the industry. It should continue to generate significant cash in the future.”

Fourth-Quarter Segments Results
Sales in the Display Technologies segment were $780 million, a decline of 4% sequentially, but a 4% increase compared to a year ago. Glass price declines at both the wholly owned business and SCP were significant.

Telecommunications segment sales were $490 million, a decline of 13% sequentially and in line with the company’s expectations. On a year-over-year basis, sales increased 11%.

Environmental Technologies segment sales were $234 million, a 5% quarter-over-quarter decline and basically even with last year’s fourth-quarter results. 

Specialty Materials segment sales were $238 million, a 20% sequential decline and in line with Corning’s expectations. Compared to last year, sales increased 21%.

Life Sciences segment sales were $143 million, a 7% sequential decline and a 2% year-over-year gain. 

Corning’s equity earnings were $321 million and included a one-time gain of $89 million.

Corning ended the year with more than $5.8 billion in cash and short-term investments. Capital spending for the year was $2.4 billion, in line with the company’s expectations. 

Looking Forward
“The display industry is in a period of transition and we are in the process of resetting expectations for its future growth and profitability,” James B. Flaws, vice chairman and chief financial officer, remarked. “We are working closely with our customers to reduce glass prices to help them with their immediate financial strains. To that end, price declines will be significant in the first quarter of 2012, as they were in last year’s fourth quarter. We expect significant double-digit price declines over the cumulative two-quarter period. We are hopeful that our pricing actions, combined with our capacity decisions, will help us get back to more stable price declines in the coming quarters.

“We believe the actions we have taken to reduce capacity have brought LCD glass supply closer to end market demand. If we correctly estimated retail demand and supply chain dynamics, then we believe worldwide glass supply will become balanced with glass demand at some point during the year. We will be cautious on pace and timing of bringing capacity back on line,” Flaws said. 

Corning is not anticipating much sequential change in the overall glass market in the first quarter. Volume at its wholly owned business should be in line with the glass market. At SCP, volume is expected to be flat to down in the double digits, depending upon the outcome of negotiations with a key customer.

The company expects the retail market for LCD products to grow from about 3.2 billion square feet to 3.6 billion square feet in 2012. “This represents the amount of glass contained in LCD-based products sold to consumers, not the amount of glass shipped from glass makers to panel makers. The amount of glass shipped will be dependent upon panel maker utilization rates and supply chain dynamics,” he explained.

In the company’s Telecommunications segment, Corning is forecasting that demand for its fiber-to-the-home, enterprise networks, and wireless products will remain strong worldwide. “For the full year, we expect our telecom sales to be up significantly,” Flaws said. In the first quarter, sales are expected to increase between 5% and 10% sequentially and year over year.

Environmental Technologies segment sales are expected to grow in 2012, driven primarily by the global demand for the company’s diesel emissions products. In the first quarter of this year, sales are expected to increase slightly.

Specialty Materials segment sales will be led by Corning Gorilla Glass. The company anticipates significant growth at retail for devices with cover glass, driven primarily by tablet computers and handheld IT devices. Flaws said, “We do expect further yield improvements at our customers, as well as some price declines, this year. These will impact our sales growth.”  In the first quarter, segment sales are anticipated to be up slightly.

In the Life Sciences segment, Corning expects another strong year of sales, through a combination of organic growth and acquisitions. For the first quarter, sales are expected to increase 10% sequentially, driven primarily by the acquisition of Mediatech, Inc., which occurred late in fourth quarter of 2011.

Equity earnings in the first quarter are expected to decline in the range of 5% to 20%, excluding special items, due to lower earnings at both Dow Corning and Samsung Corning Precision Materials. 

Corning’s tax rate is likely to increase to 20% in the first quarter and the full year, as expected.  

Flaws remarked, “We believe Corning is approaching a new floor in terms of profitability due to transitions in our LCD business and Dow Corning’s polysilicon business. Moving forward, our plan is to grow profits from this new level.”

“To that extent,” Flaws said, “we anticipate strong sales and profit growth over the next several years in our Telecommunications, Environmental Technologies, Specialty Materials, and Life Sciences segments.” Sales in the company’s Display Technologies segment are not expected to grow, but the segment is expected to produce significant profits and cash going forward. 

“Overall, we anticipate generating strong free cash flow* over the next several years. We plan to use the cash for acquisitions to supplement growth, dividend payments, and our share repurchase program.

“At Corning, we are not threatened by business transitions. We have faced many in the past and weathered them successfully. We believe our business portfolio is strong, we have a leading competitive position in each market, and our innovation investments will generate future growth,” Flaws said.

The company will provide additional details on its first-quarter and full-year outlook at its annual investor meeting in New York on Feb. 3.

Upcoming Events
Corning will host investors and provide more information on its 2012 outlook at its annual investor meeting in New York on Friday, Feb. 3 beginning at 8 a.m. ET at Cipriani on 42nd Street. Corning will showcase products and technologies prior to and following the formal meeting at 9 a.m. ET. The company’s exhibits, including hands-on Gorilla Glass product demonstrations, will be available for viewing and senior management will also be available during the exhibit periods to answer individual investor questions. Attendees can register online at the company’s investor relations website. 

Corning will also be presenting at the Goldman Sachs Technology and Internet Conference Feb. 14 and the Morgan Stanley Media and Telecom Conference Feb. 28, both in San Francisco.

Fourth-Quarter Conference Call Information
The company will host a fourth-quarter conference call on Wednesday, Jan. 25 at 8:30 a.m. ET. To participate, please call toll free (800) 288-8961 or for international access call (612) 288-0340 approximately 10-15 minutes prior to the start of the call. The password is ‘QUARTER FOUR’. The host is ‘SOFIO’. 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 10:30 a.m. ET and will run through 5:00 p.m. ET, Wednesday, Feb. 8, 2012. To listen, dial (800) 475-6701 or for international access dial (320) 365-3844. The access code is 233477. 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 website 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 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.