10-QPeriod: Q1 FY2009

CORNING INC /NY Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 1, 2009For Securities:GLW

Summary

Corning Incorporated (GLW) reported a significant year-over-year decline in net sales and net income for the first quarter of 2009, reflecting the severe impact of the global economic recession on demand for its products. Net sales fell 39% to $989 million, while net income plummeted 99% to $14 million ($0.01 per diluted share) from $1.03 billion ($0.64 per diluted share) in the prior year period. This decline was primarily driven by reduced volumes and price decreases in the Display Technologies segment, coupled with broader economic weakness impacting other segments. Despite the challenging environment, Corning maintained a strong balance sheet with $2.6 billion in cash, cash equivalents, and short-term investments. The company also generated positive operating cash flow of $264 million. However, significant restructuring charges of $165 million were incurred to reduce its global workforce in response to anticipated lower sales. Investors should note the ongoing concerns around asbestos litigation and the company's significant investments in future technologies despite current economic headwinds.

Financial Highlights

23 data points
Beta

Revenue

$989.00M

27.3% Gross Margin

Net Income

$14.00M

1.4% Net Margin

EPS (Diluted)

$0.01

Cash & Equivalents

$1.78B

Free Cash Flow

$264.00M

Financial Statements
Beta
Revenue$989.00M
Cost of Revenue$719.00M
Gross Profit$270.00M
SG&A Expenses$207.00M
Operating Income-$260.00M
Net Income$14.00M
EPS (Basic)$0.01
EPS (Diluted)$0.01

Key Highlights

  • 1Net sales for Q1 2009 decreased by 39% to $989 million compared to $1.617 billion in Q1 2008, largely due to volume declines in Display Technologies, Environmental Technologies, and Telecommunications segments.
  • 2Net income attributable to Corning Incorporated dropped significantly to $14 million ($0.01/share) from $1.029 billion ($0.64/share) year-over-year, primarily due to lower sales, price declines, and restructuring charges.
  • 3The company incurred substantial restructuring charges of $165 million in Q1 2009 related to a corporate-wide plan to reduce its global workforce.
  • 4Corning maintained a strong liquidity position, ending the quarter with $2.6 billion in cash, cash equivalents, and short-term investments, and generated $264 million in cash flow from operating activities.
  • 5The Display Technologies segment experienced a sharp 57% decline in net sales to $357 million, heavily impacted by volume and price decreases, though foreign exchange movements provided some positive offset.
  • 6Equity in earnings of affiliated companies decreased by 38% to $195 million, mainly due to lower performance at Samsung Corning Precision and Dow Corning, which also incurred restructuring charges.
  • 7The company's debt-to-capital ratio remained low at 12%, indicating a stable financial structure despite increased capital lease obligations.

Frequently Asked Questions

The primary drivers for the substantial decrease in net income were significantly lower net sales, primarily in the Display Technologies segment, due to volume declines and price reductions. Additionally, the company recorded $165 million in restructuring charges in the first quarter of 2009 to reduce its global workforce in response to anticipated lower sales. A large credit related to asbestos litigation in the prior year also contributed to the year-over-year comparison.

Corning is focused on protecting its financial health. The company ended the first quarter of 2009 with $2.6 billion in cash, cash equivalents, and short-term investments, and generated $264 million in cash flow from operating activities. Its debt-to-capital ratio remains low at 12%. Corning also has access to a $1.1 billion unsecured committed revolving line of credit and is confident in its ability to fund operations, R&D, capital expenditures, and debt repayments.

Corning expects the Display Technologies segment to be impacted by the global recession but to a lesser extent than in the first quarter. The company anticipates significant volume improvements in the second quarter of 2009, with volumes expected to be up more than 50% at its wholly owned business and more than 25% at Samsung Corning Precision. Price declines are expected to moderate, leading to a significant improvement in the segment's net income as volumes improve. The long-term drivers for the LCD glass market are still considered intact.

Investors should be aware of the ongoing asbestos litigation, particularly concerning Pittsburgh Corning Corporation (PCC). Corning believes an amended plan of reorganization (Amended PCC Plan) is the most probable outcome and has recorded an estimated liability of $666 million for both PCC and non-PCC asbestos claims. While management believes the likelihood of a material adverse impact from these proceedings is remote, it remains a significant contingent liability. Additionally, Corning is involved in environmental matters and other legal proceedings, but management believes these are unlikely to have a material adverse effect.