Corning Announces Third-Quarter Results – “Global demand for optical fiber remains healthy”
CORNING, N.Y., October 26, 2011 – Corning Incorporated (NYSE: GLW) today announced its results for the third quarter of 2011.
Third-Quarter Highlights
Sales were $2.1 billion, an increase of 3% sequentially and 30% year over year.
Earnings per share were $0.51. Excluding special items, earnings per share were $0.48*, consistent with last quarter, but down 6% year over year.
Display Technologies’ wholly owned business volume increased in the mid-single digits sequentially and was up more than 30% year over year. Samsung Corning Precision Materials Co., Ltd.’s volume declined more than 20% sequentially and 25% year over year. The combined total glass volume of Corning’s wholly owned business and SCP declined about 10% sequentially, in line with the overall glass market.
The Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences business segments all experienced substantial year-over-year sales gains.
Third-Quarter Financial Comparisons
*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.
“We had a very respectable quarter with all of our segments showing double-digit percentage sales growth over last year,” said Wendell P. Weeks, chairman, chief executive officer and president. “Our results were in line with the revised forecast we provided in September, when we first explained that LCD glass volume would be lower than expected as a result of a slowing in panel maker utilization rates and some share loss at SCP.”
Global demand for optical fiber remains healthy He added, “We saw particularly robust performance in our Telecommunications segment with strong year-over-year growth in all product lines. Global demand for optical fiber remains healthy.” Weeks said that the business fundamentals in Corning’s core markets remain solid, “We firmly believe that we are well positioned to achieve our goal of becoming a $10 billion company within the next several years.”
Third-Quarter Segment Results
Sales in the Display Technologies segment were $815 million, a 7% sequential and 26% year-over-year increase. Price declines in the quarter were in line with the company’s expectations. Segment results also benefited from a stronger Japanese yen.
“The display supply chain experienced a contraction in the third quarter as demand for LCD TVs remained strong worldwide while panel makers ran at lower utilization rates, especially in Korea. We believe the supply chain exited the third quarter with about 14 weeks of inventory, which is a level we have not seen since early 2009. The inventory contraction is a major factor in Corning revising its estimate of the worldwide glass market to 3.2 billion square feet for the year,” said James B. Flaws, vice chairman and chief financial officer.
FTTH Up 30% Telecommunications segment sales were $560 million, an increase of 2% sequentially and 21% year over year. Sales of enterprise network products increased 9% and fiber-to-the-home sales increased more than 30% year over year.
Environmental Technologies segment sales were $247 million, a slight decline sequentially, but a 19% year-over-year increase.
Specialty Materials segment sales were $299 million, an increase of 6% sequentially and nearly 90% over last year. The business continues to benefit from extremely strong market acceptance of its industry-leading cover glass, Corning® Gorilla® Glass, for handheld devices, tablets, and laptop computers.
Life Sciences segment sales of $153 million were consistent sequentially and increased 22% year over year. Recent acquisitions contributed significantly to the sales increase.
Corning’s equity earnings were $324 million, a decrease of 24% sequentially and 36% year over year. The decline was driven by lower LCD glass volumes at SCP and lower demand for Dow Corning Corporation’s silicone products.
Gross margin for the quarter was 47% versus 44% in the previous quarter. The margin improvement was driven in part by strong operating performance in both Display Technologies and Specialty Materials business segments.
Looking Forward
The company expects LCD glass volume at its wholly owned business to be even or slightly down compared to last quarter. Glass volume at SCP is expected to increase at least 20% sequentially due primarily to the business regaining share lost in the previous quarter and higher panel maker utilization rates. The company also expects pricing pressure at both its wholly owned business and SCP to be more significant in the fourth quarter than in previous quarters.
“We believe the Korean panel makers will run at higher utilization rates in the fourth quarter, which is typically a period of significant seasonal retail demand. Panel maker utilization rates outside of Korea will vary, but in aggregate will be comparable to the third quarter,” Flaws commented.
“The display industry faced an unusual market dynamic this year. Retail demand for LCD products continues to be stronger than actual LCD glass demand. Retail demand should be up about 13% for the year. This gives us confidence that when the supply chain correction ends, glass demand will resume growth more in line with retail performance,” he said.
In the Telecommunications segment, Corning expects fourth-quarter sales to decline in the range of 10% to 15%, the result of normal seasonality in the industry.
Environmental Technologies segment sales also are expected to decline between 5% and 10% in the fourth quarter, due to typical seasonal slowdown.
In the Specialty Materials segment, Corning anticipates fourth-quarter sales declines of about 15%, reflective across all product lines including Gorilla® Glass.
In the Life Sciences segment, Corning expects a slight sales decline due to typical seasonal slowdown.
Corning expects equity earnings to be down about 5% sequentially. The decline will be the result of lower earnings at Dow Corning, where demand for silicone products has slowed significantly. Dow Corning’s Hemlock Semiconductors business may be negatively impacted by declining demand in the solar market.
Finally, Flaws pointed out that Corning remains confident about its long-term business prospects and its good financial health. He noted that the company recently increased its quarterly common stock dividend, in line with its performance as a consistent cash generator, and authorized a $1.5 billion stock buyback program. Flaws said “The board’s decision to repurchase shares reflects our belief that the long-term value of our businesses is substantially greater than our current share price.”
Upcoming Meetings
Corning executives will present at the UBS Technology Conference in New York on Nov. 15, and attend the CSFB Technology Conference in Scottsdale, Ariz., on Nov. 29. The company also will present at the Barclay’s Technology Conference in San Francisco on Dec. 8.
Third-Quarter Conference Call Information
The company will host a third-quarter conference call on Wednesday, Oct. 26 at 8:30 a.m. ET. To participate, please call toll free (800) 230-1096 or for international access call (612) 332-0107 approximately 10-15 minutes prior to the start of the call. The password is ‘QUARTER THREE’. 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, Nov. 9, 2011. To listen, dial (800) 475-6701 or for international access call (320) 365-3844. The access code is 219706. 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. 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.
