10-KPeriod: FY2016

CORNING INC /NY Annual Report, Year Ended Dec 31, 2016

Filed February 6, 2017For Securities:GLW

Summary

Corning Incorporated's 2016 10-K highlights a year of strategic realignment and moderate sales growth, with net sales reaching $9.39 billion, a 3% increase over 2015. A significant contributor to the substantial net income increase of $2.4 billion was a non-taxable gain of $2.7 billion from the strategic realignment of its Dow Corning equity interest. The company continues to invest in its core technologies and innovation, with new product introductions like Gorilla Glass 5 showing traction. Financially, Corning demonstrated strong cash flow generation and a commitment to shareholder returns, with increased dividends and significant share repurchases totaling $4.2 billion in 2016. The company is executing its strategy and capital allocation framework, targeting substantial cash generation through 2019 and significant returns to shareholders. Despite some segment-specific challenges, such as price declines in Display Technologies, the overall performance reflects resilience and a focus on long-term growth through material science innovation and strategic investments.

Financial Highlights

52 data points
Beta

Revenue

$9.39B

40.1% Gross Margin

Net Income

$3.69B

39.4% Net Margin

EPS (Diluted)

$3.23

Total Assets

$27.90B

Cash & Equivalents

$5.29B

Free Cash Flow

$2.52B

Financial Statements
Beta
Revenue$9.39B
Cost of Revenue$5.63B
Gross Profit$3.76B
R&D Expenses$637.00M
SG&A Expenses$1.46B
Operating Income$1.42B
Net Income$3.69B
EPS (Basic)$3.53
EPS (Diluted)$3.23
Shares Outstanding (Basic)1.02B
Shares Outstanding (Diluted)1.14B

Key Highlights

  • 1Net sales for 2016 were $9.39 billion, a 3% increase from 2015, driven by growth in Display Technologies and Pharmaceutical Technologies.
  • 2Net income surged to $3.7 billion in 2016, largely due to a $2.7 billion non-taxable gain from the Dow Corning equity realignment.
  • 3Corning executed a significant share repurchase program, spending $4.2 billion in 2016 on repurchasing shares.
  • 4The company increased its quarterly common stock dividend by 12.5% in 2016 and announced a further 14.8% increase in early 2017.
  • 5The Display Technologies segment, while facing price declines, saw a 5% sales increase driven by yen strengthening and volume growth, with a significant customer concentration (65% from three customers).
  • 6The Optical Communications segment reported a 1% sales increase, with positive outlooks for 2017 driven by network infrastructure demand.
  • 7Corning continues to invest in R&D and innovation, highlighted by the launch of Gorilla Glass 5 and advancements in other material science applications.

Frequently Asked Questions

The primary driver of the substantial increase in net income for 2016 was a one-time, non-taxable gain of $2.7 billion resulting from the strategic realignment of Corning's ownership interest in Dow Corning Corporation.

Corning is executing a capital allocation framework that targets significant cash generation through 2019, with plans to return over $12.5 billion to shareholders through dividends and share repurchases, while investing $10 billion to sustain leadership positions and drive growth. The company demonstrated this balance by increasing its quarterly dividend by 12.5% in 2016 and completing $4.2 billion in share repurchases during the same year.

The Display Technologies segment faces significant risks including continuous pricing pressure due to intense industry competition and potential over-capacity. Additionally, the segment has a concentrated customer base, with 65% of its sales in 2016 coming from just three customers, making it vulnerable to the financial health and purchasing decisions of these key clients.

Corning actively manages its foreign currency exposure, particularly for the Japanese yen, South Korean won, and euro, through the use of derivative instruments like foreign exchange forward and option contracts. While these hedges aim to mitigate risks to earnings and net equity, the company notes that a 10% adverse movement in the USD/JPY exchange rate could significantly impact sales and net income.