10-QPeriod: Q1 FY2012

CORNING INC /NY Quarterly Report for Q1 Ended Mar 31, 2012

Filed April 27, 2012For Securities:GLW

Summary

Corning Incorporated (GLW) reported first-quarter 2012 results showing flat net sales compared to the prior year, primarily due to significant price declines in its Display Technologies segment. This was partially offset by growth in Specialty Materials and Environmental Technologies. Net income saw a substantial decrease of 38% year-over-year, driven by lower equity earnings from affiliates like Samsung Corning Precision and Dow Corning, increased R&D expenses, and a higher effective tax rate. The company maintained a strong balance sheet with increased cash and investments. Despite challenges in the Display Technologies segment, Corning continues to invest in innovation and R&D, planning significant capital expenditures for 2012. The company expects overall sales to remain consistent with 2011, with cautious optimism for moderate sequential price declines in LCD glass for the remainder of the year.

Financial Highlights

53 data points
Beta

Revenue

$1.92B

42.9% Gross Margin

Net Income

$474.00M

24.7% Net Margin

EPS (Diluted)

$0.31

Total Assets

$28.49B

Cash & Equivalents

$5.49B

Free Cash Flow

$762.00M

Financial Statements
Beta
Revenue$1.92B
Cost of Revenue$1.10B
Gross Profit$824.00M
R&D Expenses$69.00M
SG&A Expenses$273.00M
Operating Income$361.00M
Net Income$474.00M
EPS (Basic)$0.31
EPS (Diluted)$0.31
Shares Outstanding (Basic)1.52B
Shares Outstanding (Diluted)1.53B

Key Highlights

  • 1Net sales for Q1 2012 were $1.92 billion, virtually unchanged from $1.923 billion in Q1 2011.
  • 2Net income attributable to Corning decreased significantly by 38% to $462 million ($0.30/share) in Q1 2012 from $748 million ($0.47/share) in Q1 2011.
  • 3Display Technologies segment experienced an 11% decline in net sales due to significant price reductions and excess capacity in the LCD glass market.
  • 4Equity in earnings from affiliated companies decreased by 45% to $218 million, primarily impacted by lower performance at Samsung Corning Precision and Dow Corning.
  • 5Corning's cash, cash equivalents, and short-term investments grew to $6.8 billion as of March 31, 2012, up from $5.8 billion at the end of 2011.
  • 6The company repurchased 5.4 million shares of common stock for $72 million during the quarter under its announced repurchase program.
  • 7R&D expenses increased by 20% to $187 million, reflecting continued investment in innovation across key segments.

Frequently Asked Questions

The primary drivers for the decline in net income were significant price declines in the Display Technologies segment and lower equity earnings from affiliated companies, particularly Samsung Corning Precision and Dow Corning. Additionally, an increase in effective tax rate and higher Research, Development, and Engineering expenses also contributed to the decrease.

Corning maintained a strong financial position with $6.8 billion in cash, cash equivalents, and short-term investments as of March 31, 2012. Operating cash flow was robust at $762 million. The company also issued $750 million in senior unsecured notes to strengthen its capital structure and continued its share repurchase program.

Key concerns include significant price declines and excess capacity in the Display Technologies segment, which impacts sales and equity earnings from Samsung Corning Precision. The company also faces risks related to antitrust investigations, potential environmental liabilities, and customer concentration in several of its segments. Forward-looking statements also highlight various risks including global economic conditions, currency fluctuations, and competitive pricing.

Corning expects the overall LCD glass retail market to grow modestly in 2012. However, the company anticipates continued price declines, though they expect these sequential quarterly declines to be more moderate in the second quarter of 2012 compared to the first. The company remains cautious about potential negative impacts from economic conditions and market capacity.