Corning Announces Third-Quarter 2016 Financial Performance

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Corning Announces Third-Quarter 2016 Financial Performance

Corning Announces Third-Quarter 2016 Performance

News Releases
Corporate Communications
Corning Announces Third-Quarter 2016 Financial Performance
Corning Announces Third-Quarter 2016 Financial Performance
CORNING, N.Y. | Corning Incorporated | October 25, 2016
Solid performance across all business segments drives strong Q3 results; Company marks year of progress on Strategy and Capital Allocation Framework

Corning Incorporated (NYSE: GLW) today announced its results for the third quarter ended Sept. 30, 2016.

News Summary:

  • Q3 GAAP EPS was $0.26, up 73% on a year-over-year basis; core EPS was $0.42, up 24% year over year and 14% sequentially, exceeding company expectations
  • GAAP and core sales up both sequentially and year over year, with solid operating performance across all businesses, particularly Optical Communications and Display Technologies
  • Year-over-year core sales, core earnings, and core EPS growth expected to continue in the fourth quarter
  • Strong corporate gross margin in the third quarter expected to extend into the fourth quarter
  • Strategy and Capital Allocation Framework remains on track; third-quarter highlights included new product introductions and $2 billion accelerated share repurchase


“Corning’s strong third-quarter results reflect the increasing momentum that we expected in the second half of this year. Sales and gross margins increased in every business segment year over year. We also grew the company’s sales, core earnings and core EPS both sequentially and year over year,” Wendell P. Weeks, chairman, chief executive officer, and president, said. “Our operating results and progress on key growth initiatives continue to reinforce our confidence in Corning’s strategy.”

“Third-quarter core earnings grew by 16% versus last year excluding core equity earnings from the former Dow Corning Corporation’s silicones business, which no longer contribute to our results. Even without this adjustment, core earnings were 4% higher. We are very pleased by this strength and expect continued year-over-year core sales, core earnings, and core EPS growth in the fourth quarter,” R. Tony Tripeny, senior vice president and chief financial officer, added.

Update on Strategy and Capital Allocation Framework

In October 2015, Corning’s management committed to a Strategy and Capital Allocation Framework designed to create significant value for shareholders by leveraging the company’s financial strength and focusing the company’s portfolio. The Framework includes a commitment to delivering at least $12.5 billion to shareholders while investing $10 billion in growth opportunities through 2019.

“Since the Framework was announced, we have gained traction with customers on our growth initiatives, realigned our interest in Dow Corning, and are on track to return more than $6 billion to shareholders by year end. We are making great progress and creating significant value for our shareholders,” Weeks added.

Highlights of the company’s achievements in the third quarter include:

  • Launch of a previously announced $2 billion accelerated share repurchase.
  • Introduction and adoption of two new Corning® Gorilla® Glass solutions: Gorilla Glass 5, which provides superior drop performance for smartphone devices, and Gorilla Glass SR+, which delivers an unparalleled combination of scratch resistance, optical clarity, and toughness for wearable devices.
  • Additional platform wins with major OEMs for Corning® DuraTrap® GC filters that reduce particulate emissions from gasoline direct-injection vehicles.
  • Announcement that Mercedes-Benz Stadium, home of the Atlanta Falcons beginning in 2017, will use the Corning ONE platform as a single optical core for its Wi-Fi, cellular, and video network.
  • Strong response to the debut of Gorilla Glass in auto interiors at the Paris Auto Show.


Third-Quarter 2016 Results and Comparisons
(In millions, except per-share amounts)

 

Q3 2016

Q2 2016

% change

Q3 2015

% change

GAAP Net Sales

$2,507

$2,360

6%

$2,272

10%

GAAP Net Income

$284

$2,207

(87%)

$212

34%

GAAP EPS

$0.26

$1.87

(86%)

$0.15

73%

Core Sales*

$2,548

$2,440

4%

$2,451

4%

Core Earnings*

$466

$434

7%

$447

4%

Core EPS*

$0.42

$0.37

14%

$0.34

24%

*Core performance measures 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. Core performance metrics (non-GAAP) are adjusted to exclude the impact of changes in Japanese yen and Korean won foreign exchange rates, as well as other items that do not reflect ongoing operations of the company. Corning does not forecast the movement of the Japanese yen against the U.S. dollar or other items that do not reflect ongoing operations. As a result, the company is unable to provide guidance on a GAAP basis. See “Use of Non-GAAP Financial Measures” for details on core performance measures.

Segment Results and Outlook

Display Technologies:

 

Q3 2016

Q2 2016

% change

Q3 2015

% change

GAAP Net Sales

$902

$801

13%

$757

19%

GAAP Net Income

$279

$204

37%

$255

9%

Core Sales*

$943

$880

7%

$936

1%

Core Earnings*

$270

$237

14%

$257

5%

NOTE: In all segments except the Display Technologies segment, core net sales are consistent with GAAP net sales. Because a significant portion of revenues and costs in the Display Technologies segment are denominated in Japanese yen and Korean won respectively, this segment’s net sales and costs are adjusted to remove the impact of translating yen and won into U.S. dollars.

Panel makers increased utilization to meet strong set maker demand in advance of the fourth-quarter peak retail season. As a result, glass market volume was up by a high-single digit percentage sequentially, above expectations. Corning’s LCD glass volume was up slightly more than the market due to customer mix. Price declines remained moderate, as expected.

The company expects panel maker utilization to remain high and for glass supply to remain tight in the fourth quarter. Sequentially, fourth-quarter volume is expected to be consistent to slightly down, in line with the glass market, as the company’s full-year outlook has not changed.

Optical Communications:

 

Q3 2016

Q2 2016

% change

Q3 2015

% change

GAAP Net Sales

$795

$782

2%

$747

6%

GAAP Net Income

$78

$77

1%

$70

11%

Core Earnings*

$98

$86

14%

$71

38%

Third-quarter sales in Optical Communications were up 6% on a year-over-year basis reflecting strong growth in fiber-to-the-home market. Hyper-scale data-center product sales were below company expectations.

Year over year, fourth-quarter sales are expected to increase by a high-single-digit percentage driven by continued fiber-to-the-home strength.

Environmental Technologies:

 

Q3 2016

Q2 2016

% change

Q3 2015

% change

GAAP Net Sales

$264

$259

2%

$257

3%

GAAP Net Income

$35

$37

(5%)

$38

(8%)

Core Earnings*

$35

$37

(5%)

$38

(8%)

Third-quarter segment sales were up 3% from last year and slightly ahead of expectations. Light-duty substrate sales for the auto market reached a record level, driven by continued strong demand in North America, Europe, and China, and additional platform wins.

For the fourth quarter, sales are expected to be down year over year by a low-single digit percentage due to continued weakness in the heavy-duty truck markets.

Specialty Materials:

 

Q3 2016

Q2 2016

% change

Q3 2015

% change

GAAP Net Sales

$295

$266

11%

$288

2%

GAAP Net Income

$42

$38

11%

$46

(9%)

Core Earnings*

$44

$48

(8%)

$44

-

Specialty Materials third-quarter segment sales were up 11% sequentially and 2% year over year, exceeding expectations. Sales during the quarter benefited from the introduction of two new Gorilla Glass products.

For the fourth quarter, sales are expected to increase by a high-single-digit percentage year over year driven by volume growth in Gorilla Glass.

Life Sciences:

 

Q3 2016

Q2 2016

% change

Q3 2015

% change

GAAP Net Sales

$214

$215

-

$211

1%

GAAP Net Income

$16

$17

(6%)

$18

(11%)

Core Earnings*

$21

$21

-

$21

 -

Third-quarter sales in Life Sciences met expectations for low-single-digit percentage year-over-year growth, with similar year-over-year sales growth expected in the fourth quarter.

Gross Equity Earnings:

GAAP and core gross equity earnings were $19 million in the third quarter of 2016. Equity earnings in this year’s third quarter largely represent the contribution from Corning’s interest in Hemlock Semiconductor Group, formerly a part of Dow Corning. As a result of the Dow Corning strategic realignment, this year’s equity earnings do not include any contribution from the former Dow Corning silicones business.

The company’s gross equity earnings in the fourth quarter are expected to be between $75 million to $85 million due to the timing of contract commitments in Hemlock’s solar business.

Upcoming Investor Events

On Nov. 29, Corning will present at the Credit Suisse 20th Annual Technology, Media and Telecom Conference to be held in Phoenix, Ariz. Nov. 28 through Dec. 1, 2016.

Third-Quarter Conference Call Information

The company will host a third-quarter conference call on Tuesday, October 25, at 8:30 a.m. EDT. To participate, please call toll free (800) 230-1074 or for international access call (612) 234-9959 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, click “Events” and follow the instructions. A replay will be available beginning at 11 a.m. EDT and will run through 5 p.m. EDT, Tuesday, Nov. 8. To listen, dial (800) 475-6701 or for international access dial (320) 365-3844. The access code is 403563. 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 the Investor Relations page and clicking “Financial Highlights” under the “Performance” tab. These reconciliations also accompany this news release.

Caution Concerning Forward-Looking Statements

This press release contains "forward-looking statements" – that is, statements related to future events that by their nature address matters that are, to different degrees, uncertain. These forward-looking statements relate to, among other things, the company’s future operating performance, the company's share of new and existing markets, the company's revenue and earnings growth rates, the company’s ability to innovate and commercialize new products, and the company’s implementation of cost-reduction initiatives and measures to improve pricing, including the optimization of the company’s manufacturing capacity.

In this context, forward-looking statements often contain words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “seek,” “see,” “would,” and “target”. Although the company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, current estimates and forecasts, general economic conditions, its knowledge of its business, and key performance indicators that impact the company, actual results could differ materially. The company does not undertake to update forward-looking statements. Some of the risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements include, but are not limited to: competitive products and pricing; availability and costs of critical components and materials; new product development and commercialization; order activity and demand from major customers; unanticipated disruption to equipment, facilities, or operations; facility expansions and new plant start-up costs; our ability to pace capital spending to anticipated levels of customer demand; the amount and timing of our cash flows and earnings and other conditions, which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels; our capital allocation plans, as such plans may change including with respect to the timing and size of share repurchases, acquisitions, joint ventures, dispositions and other strategic actions; and the effectiveness of our risk management framework.

For a complete listing of risks and other factors, please reference the risk factors and forward-looking statements described in the annual reports on Form 10-K and quarterly reports on Form 10-Q.

Digital Media Disclosure

In accordance with guidance provided by the SEC regarding the use of company websites and social media channels to disclose material information, Corning Incorporated (“Corning”) wishes to notify investors, media, and other interested parties that it intends to use its website (http://www.corning.com/worldwide/en/about-us/news-events.html) to publish important information about the company, including information that may be deemed material to investors. The list of websites and social media channels that the company uses may be updated on Corning’s media and website from time to time. Corning encourages investors, media, and other interested parties to review the information Corning may publish through its website and social media channels as described above, in addition to the company’s SEC filings, press releases, conference calls, and webcasts.

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.