10-QPeriod: Q2 FY2009

CORNING INC /NY Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 29, 2009For Securities:GLW

Summary

Corning Inc. reported a significant decrease in net sales and net income for the second quarter of 2009 compared to the same period in the prior year, primarily due to the ongoing global economic recession impacting all operating segments. Despite lower sales, the company demonstrated resilience with positive operating cash flow and a strong cash position. A key factor in the year-over-year net income decline was the absence of a substantial tax benefit realized in Q2 2008 from the release of valuation allowances on deferred tax assets. The company implemented a corporate-wide restructuring plan in Q1 2009, resulting in charges of $165 million to reduce its global workforce and streamline operations. This initiative is expected to yield annualized savings of approximately $195 million. While facing economic headwinds, Corning is strategically investing in key growth areas such as Display Technologies, Telecommunications, and Environmental Technologies, focusing on innovation and new product development like Gorilla™ glass.

Financial Highlights

48 data points
Beta

Revenue

$1.40B

41.2% Gross Margin

Net Income

$611.00M

43.8% Net Margin

EPS (Diluted)

$0.39

Total Assets

$19.60B

Cash & Equivalents

$2.23B

Free Cash Flow

$368.00M

Financial Statements
Beta
Revenue$1.40B
Cost of Revenue$820.00M
Gross Profit$575.00M
SG&A Expenses$211.00M
Operating Income$221.00M
Net Income$611.00M
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)1.55B

Key Highlights

  • 1Net sales decreased by 18% year-over-year to $1.395 billion for Q2 2009, with all segments experiencing declines.
  • 2Net income attributable to Corning Incorporated fell by 81% year-over-year to $611 million ($0.39 per diluted share) for Q2 2009.
  • 3The significant drop in net income was largely due to the absence of a $2.4 billion tax benefit from releasing valuation allowances in Q2 2008.
  • 4The company incurred $165 million in restructuring charges in Q1 2009 related to workforce reductions, with expected annualized savings of $195 million.
  • 5Operating cash flow for the first six months of 2009 was $632 million, and the company maintained a strong liquidity position with $3.1 billion in cash, cash equivalents, and short-term investments as of June 30, 2009.
  • 6Equity in earnings of affiliated companies decreased by 2% year-over-year to $361 million in Q2 2009, impacted by lower sales at Dow Corning.
  • 7The Display Technologies segment, a major revenue driver, saw a 17% decrease in net sales in Q2 2009, affected by price declines and lower volumes.

Frequently Asked Questions

The primary reason for the substantial decrease in net income for the three and six months ended June 30, 2009, compared to the same periods in 2008, was the absence of a $2.4 billion tax benefit recognized in the second quarter of 2008. This benefit resulted from the release of valuation allowances on U.S. deferred tax assets after concluding that it was more likely than not that these assets would be realized.

The global economic recession significantly impacted Corning's results in Q2 2009, leading to lower sales and net income across all operating segments, particularly in Display Technologies, Environmental Technologies, and Telecommunications. In response, Corning implemented a corporate-wide restructuring plan in Q1 2009, incurring $165 million in charges for workforce reductions, which is expected to generate annualized savings of $195 million. The company is also focusing on preserving cash, controlling costs, and investing in innovation and new product development.

The Display Technologies segment, a significant contributor to revenue, experienced a 17% year-over-year decrease in net sales for Q2 2009. This was driven by a 19% price decline and a 6% volume decline, partially offset by favorable foreign exchange movements. While the segment faced continued soft demand and price pressure due to the global economic recession, there was a sequential improvement from Q1 2009, with sales nearly doubling due to stronger-than-anticipated demand for LCD glass, supported by retail sales of flat-panel TVs. The company has strategically restarted some idled capacity in response to improved demand.

Corning maintains a strong liquidity position. As of June 30, 2009, the company had $3.1 billion in cash, cash equivalents, and short-term investments. Its debt-to-capital ratio remained low at 13%. Operating cash flow for the first six months of 2009 was $632 million. The company stated it has adequate sources of liquidity to meet its cash requirements for operations, litigation, R&D, capital expenditures, and debt repayments.