10-KPeriod: FY2018

CORNING INC /NY Annual Report, Year Ended Dec 31, 2018

Filed February 12, 2019For Securities:GLW

Summary

Corning Incorporated (GLW) for the fiscal year ended December 30, 2018, reported a significant rebound in profitability, generating $1.1 billion in net income compared to a net loss of $0.5 billion in the prior year. This turnaround was largely attributed to the absence of substantial tax reform adjustments from 2017 and increased segment net income across several divisions, notably Optical Communications and Environmental Technologies. Revenue also saw a robust 12% increase to $11.3 billion, driven by strong performance in Optical Communications, Environmental Technologies, and Specialty Materials segments. The company continues to execute its Strategy and Capital Allocation Framework, emphasizing sustained investment in R&D and core technologies. A notable strategic move was the acquisition of 3M's Communication Markets Division, which bolstered the Optical Communications segment. Looking ahead, Corning anticipates continued growth across its segments, with specific focus on expanding Gen 10.5 manufacturing capacity for display glass and leveraging innovations in Gorilla Glass for automotive applications.

Financial Highlights

52 data points
Beta

Revenue

$11.29B

39.5% Gross Margin

Net Income

$1.07B

9.4% Net Margin

EPS (Diluted)

$1.13

Total Assets

$27.50B

Cash & Equivalents

$2.35B

Free Cash Flow

$2.92B

Financial Statements
Beta
Revenue$11.29B
Cost of Revenue$6.83B
Gross Profit$4.46B
R&D Expenses$807.00M
SG&A Expenses$1.80B
Operating Income$1.57B
Net Income$1.07B
EPS (Basic)$1.19
EPS (Diluted)$1.13
Shares Outstanding (Basic)816.00M
Shares Outstanding (Diluted)941.00M

Key Highlights

  • 1Net income improved significantly to $1.1 billion in 2018 from a net loss of $0.5 billion in 2017, driven by the absence of 2017 tax reform charges and growth in key segments.
  • 2Total net sales increased by 12% to $11.3 billion in 2018, with the Optical Communications segment being the largest contributor at 37% of total sales, up 18% year-over-year.
  • 3The company acquired 3M's Communication Markets Division for $841 million, enhancing its Optical Communications segment's market access and product portfolio.
  • 4Corning continues to invest heavily in research, development, and engineering, with these expenses increasing by 15% to $993 million in 2018, reflecting a commitment to innovation.
  • 5Shareholder returns were prioritized, with $11.8 billion distributed through share repurchases and dividends since the introduction of the Capital Allocation Framework, including an 11.1% increase in the quarterly dividend in 2019.
  • 6The Display Technologies segment, while facing pricing pressures, saw volume growth and a more favorable pricing environment in 2018, with expectations for continued improvement in price declines.
  • 7Corning forecasts continued sales growth across most segments in 2019, with particular strength expected in Optical Communications and Environmental Technologies.

Frequently Asked Questions

Corning's improved net income in 2018 was primarily driven by the absence of significant one-time tax reform adjustments recorded in 2017, amounting to $1.5 billion (after-tax). Additionally, higher segment net income across the Optical Communications, Environmental Technologies, Specialty Materials, and Life Sciences segments contributed positively to the bottom line. Positive tax adjustments also played a role.

The acquisition of 3M's Communication Markets Division (CMD) in 2018 significantly boosted Corning's Optical Communications segment. It contributed $200 million to segment sales and is expected to augment global market access and expand the portfolio of high-bandwidth optical connectors, assemblies, hardware, and accessories.

Corning expects the display glass market to grow in the mid-single digit percentage range, with its own volume expected to outpace this growth due to expanded Gen 10.5 capacity. The Optical Communications segment is projected to see low-teens percentage sales growth, including the full-year impact of the CMD acquisition. Environmental Technologies anticipates high-single digit sales growth, while Specialty Materials' growth rate will depend on innovation adoption, and Life Sciences is expected to see low to mid-single digit percentage sales growth.

Corning actively manages its exposure to foreign currency fluctuations, primarily in Japanese Yen, South Korean Won, New Taiwan Dollar, Chinese Yuan, and Euro, through the use of over-the-counter derivative instruments such as forward contracts and option contracts. These instruments are used to hedge against adverse movements in exchange rates affecting earnings and cash flows, and to manage the translation of foreign subsidiaries' net assets and income.