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Corning Announces Second-Quarter Results

Dépèche transmise le 27 juillet 2011 par Business Wire

Corning Announces Second-Quarter Results

Corning Announces Second-Quarter Results

CORNING, N.Y.--(BUSINESS WIRE)--Corning Incorporated (NYSE: GLW) today announced its results for the second quarter of 2011.

“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”

Second-Quarter Highlights

  • 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

      Q2 2011     Q1 2011     % Change     Q2 2010     % Change
Net Sales in millions     $ 2,005     $ 1,923     4 %     $ 1,712     17 %
Net Income in millions     $ 755     $ 748     1 %     $ 913     (17 %)
Non-GAAP Net Income

in millions*

    $ 758     $ 751     1 %     $ 916     (17 %)
GAAP EPS     $ 0.47     $ 0.47     0 %     $ 0.58     (19 %)
Non-GAAP EPS*     $ 0.48     $ 0.47     2 %     $ 0.58     (17 %)
                   

*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.

Looking Forward

“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.

Upcoming Meetings

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.

View Related Video: A Day Made of Glass

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; in millions, except per share amounts)

 
    Three months ended     Six months ended
June 30, June 30,
2011     2010 2011     2010
 
Net sales $ 2,005 $ 1,712 $ 3,928 $ 3,265
Cost of sales   1,116     885     2,165     1,707  
 
Gross margin 889 827 1,763 1,558
 
Operating expenses:
Selling, general and administrative expenses 284 246 534 481
Research, development and engineering expenses 172 144 328 289
Amortization of purchased intangibles 4 2 7 4
Restructuring, impairment and other credits (2 )
Asbestos litigation charge (credit) (Note 1)   5     5     10     (47 )
 
Operating income 424 430 884 833
 
Equity in earnings of affiliated companies 428 474 826 943
Interest income 5 2 9 5
Interest expense (22 ) (26 ) (49 ) (52 )
Other income, net   43     64     70     128  
 
Income before income taxes 878 944 1,740 1,857
Provision for income taxes   (123 )   (31 )   (237 )   (128 )
 
Net income attributable to Corning Incorporated $ 755   $ 913   $ 1,503   $ 1,729  
 
Earnings per common share attributable to Corning Incorporated:
Basic (Note 2) $ 0.48   $ 0.59   $ 0.96   $ 1.11  
Diluted (Note 2) $ 0.47   $ 0.58   $ 0.95   $ 1.09  
Dividends declared per common share $ 0.05   $ 0.05   $ 0.10   $ 0.10  
 
See accompanying notes to these financial statements.
 
CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except per share amounts)

 
    June 30,     December 31,
2011 2010
Assets
 
Current assets:
Cash and cash equivalents $ 4,609 $ 4,598
Short-term investments, at fair value   1,748     1,752  
Total cash, cash equivalents and short-term investments 6,357 6,350
Trade accounts receivable, net of doubtful accounts and allowances 1,252 973
Inventories 917 738
Deferred income taxes 439 431
Other current assets   364     367  
Total current assets 9,329 8,859
 
Investments 5,029 4,372
Property, net of accumulated depreciation 9,755 8,943
Goodwill and other intangible assets, net 883 716
Deferred income taxes 2,679 2,790
Other assets   150     153  
 
Total Assets $ 27,825   $ 25,833  
 
Liabilities and Equity
 
Current liabilities:
Current portion of long-term debt $ 26 $ 57
Accounts payable 1,052 798
Other accrued liabilities   1,005     1,131  
Total current liabilities 2,083 1,986
 
Long-term debt 2,248 2,262
Postretirement benefits other than pensions 886 913
Other liabilities   1,302     1,246  
Total liabilities   6,519     6,407  
 
Commitments and contingencies
Shareholders’ equity:
Common stock - Par value $0.50 per share; Shares authorized: 3.8 billion;
Shares issued: 1,634 million and 1,626 million 817 813
Additional paid-in capital 12,989 12,865
Retained earnings 8,227 6,881
Treasury stock, at cost; Shares held: 66 million and 65 million (1,242 ) (1,227 )
Accumulated other comprehensive income   464     43  
Total Corning Incorporated shareholders' equity   21,255     19,375  
Noncontrolling interests   51     51  
Total equity   21,306     19,426  
 
Total Liabilities and Equity $ 27,825   $ 25,833  
 
See accompanying notes to these financial statements.
 

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

 
    Three months ended     Six months ended
June 30, June 30,
2011     2010 2011     2010
Cash Flows from Operating Activities:
Net income $ 755 $ 913 $ 1,503 $ 1,729
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 232 206 458 412
Amortization of purchased intangibles 4 2 7 4
Asbestos litigation charges (credits) 5 5 10 (47 )
Restructuring, impairment and other credits (2 )
Cash received from settlement of insurance claims 66