10-KPeriod: FY2007

CORNING INC /NY Annual Report, Year Ended Dec 31, 2007

Filed February 15, 2008For Securities:GLW

Summary

Corning Incorporated's 2007 annual report highlights a strong financial year driven by robust performance in its Display Technologies and Telecommunications segments. The company demonstrated significant growth in net sales and net income, reflecting increased demand for its products, particularly large-size LCD glass substrates and optical fiber. Strategic investments in R&D and manufacturing capacity, especially for LCD glass and diesel emission products, underscore Corning's commitment to innovation and future growth. The company also made progress in strengthening its financial health, evidenced by improved debt ratings and substantial operating cash flow, enabling initiatives like the commencement of common stock dividends and share repurchases. Despite overall positive performance, investors should note the company's reliance on a few key customers across its segments, which presents a concentration risk. Additionally, ongoing pricing pressures in competitive markets and exposure to foreign currency fluctuations, particularly with the Japanese yen, are factors that could impact future profitability. The report also details ongoing legal proceedings, notably the protracted asbestos liability settlement related to Pittsburgh Corning Corporation, which, while managed, remains a significant contingent liability.

Financial Highlights

28 data points
Beta

Revenue

$5.86B

46.9% Gross Margin

Net Income

$2.15B

36.7% Net Margin

EPS (Diluted)

$1.34

Cash & Equivalents

$2.22B

Free Cash Flow

$2.08B

Financial Statements
Beta
Revenue$5.86B
Cost of Revenue$3.11B
Gross Profit$2.75B
SG&A Expenses$912.00M
Operating Income$1.08B
Net Income$2.15B
EPS (Basic)$1.37
EPS (Diluted)$1.34

Key Highlights

  • 1Significant increase in net sales and net income for fiscal year 2007, driven by strong performance in Display Technologies and Telecommunications segments.
  • 2Substantial capital expenditures and R&D investment, focusing on expanding LCD glass capacity and developing new technologies for emissions control and fiber optics.
  • 3Commencement of common stock dividends and active share repurchase program, signaling financial strength and commitment to returning value to shareholders.
  • 4Strengthening of the balance sheet with increased cash, cash equivalents, and short-term investments, along with upgrades in debt ratings from major agencies.
  • 5The Display Technologies segment continues to lead, with a strong market position in large-size LCD glass substrates, including plans for a new facility in Japan with Sharp Corporation.
  • 6Telecommunications segment shows recovery and growth, driven by increased fiber-to-the-premises deployments and demand from data centers.
  • 7Environmental Technologies segment benefits from new diesel emission regulations and continued demand for automotive substrates.
  • 8Ongoing legal proceedings, particularly the Pittsburgh Corning Corporation asbestos liability, remain a significant contingent factor, though management believes the accrued reserve is adequate.

Frequently Asked Questions

Corning's revenue growth in 2007 was primarily driven by increased sales volumes in its Display Technologies (especially large-size LCD glass substrates), Telecommunications (optical fiber and cable, hardware, and equipment), and Environmental Technologies (diesel and automotive substrates) segments. Growth in these segments was partially offset by price declines.

Corning acknowledges the concentration risk with a few key customers accounting for a significant portion of sales in each segment. While the report does not detail specific new strategies, it highlights the company's focus on innovation, product quality, and reliable supply as a means to maintain strong customer relationships. The long-term purchase and supply agreements in the Display Technologies segment, which include customer deposits, also represent a form of customer commitment.

The PCC asbestos liability remains a significant contingent matter. While a tentative settlement plan (PCC Plan of Reorganization) was proposed, it faced challenges and was denied confirmation by the Bankruptcy Court. Parties involved are reportedly making progress on an Amended Plan. Corning has recorded substantial charges for this settlement, and while management believes the current accrued reserve is reasonable, the outcome remains uncertain and subject to court approval and potential amendments to the plan.

Corning has significant international operations and sales, making it susceptible to foreign currency fluctuations. The Japanese yen is the most significant exposure, as Display Technologies segment sales are denominated in yen. A weakening yen relative to the U.S. dollar can negatively impact reported revenues and profitability. Corning employs hedging strategies to mitigate some of this risk, but significant fluctuations can still materially impact financial results.