10-QPeriod: Q2 FY2012

CORNING INC /NY Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 27, 2012For Securities:GLW

Summary

Corning Inc. (GLW) reported its second-quarter and first-half 2012 financial results, showing a decline in net sales and net income compared to the prior year. This was primarily driven by significant price declines in the Display Technologies segment, a core business for the company, due to excess capacity and a smaller glass market. Additionally, lower equity earnings from key affiliates like Samsung Corning Precision and Dow Corning, along with reduced royalty income and higher taxes, contributed to the decrease in profitability. Despite these headwinds, the company highlighted strengths in other segments. Specialty Materials, driven by Corning® Gorilla® Glass, and Environmental Technologies demonstrated growth. Corning also emphasized its continued commitment to investing in research and development and maintaining a strong financial position, with a significant cash balance and positive operating cash flow. The company is managing its capital allocation through share repurchases and remains confident in its long-term strategy despite the challenging market conditions in certain segments.

Financial Highlights

52 data points
Beta

Revenue

$1.91B

42.3% Gross Margin

Net Income

$474.00M

24.8% Net Margin

EPS (Diluted)

$0.31

Total Assets

$28.75B

Cash & Equivalents

$5.01B

Free Cash Flow

$570.00M

Financial Statements
Beta
Revenue$1.91B
Cost of Revenue$1.10B
Gross Profit$808.00M
R&D Expenses$69.00M
SG&A Expenses$286.00M
Operating Income$328.00M
Net Income$474.00M
EPS (Basic)$0.31
EPS (Diluted)$0.31
Shares Outstanding (Basic)1.51B
Shares Outstanding (Diluted)1.52B

Key Highlights

  • 1Net sales for the six months ended June 30, 2012, decreased by 3% to $3.83 billion, compared to $3.93 billion in the same period of 2011.
  • 2Net income attributable to Corning Incorporated for the six months ended June 30, 2012, decreased by 39% to $924 million, compared to $1.50 billion in the same period of 2011.
  • 3The Display Technologies segment experienced a significant decline in net sales (13% for the first half) due to substantial price decreases driven by excess capacity.
  • 4Equity in earnings of affiliated companies decreased by 42% for the six months ended June 30, 2012, impacting overall profitability.
  • 5Corning maintained a strong liquidity position with $6.3 billion in cash, cash equivalents, and short-term investments as of June 30, 2012.
  • 6The company repurchased approximately $407 million of common stock in the first half of 2012 as part of its share repurchase program.
  • 7Specialty Materials and Environmental Technologies segments showed positive performance, with Specialty Materials driven by Corning® Gorilla® Glass sales.
  • 8Corning expects 2012 capital spending to be between $1.8 to $1.9 billion, with a significant portion allocated to the Display Technologies segment.

Frequently Asked Questions

The primary driver was the significant price declines in the Display Technologies segment due to excess capacity and a smaller market for LCD glass. This was compounded by lower equity earnings from affiliates like Samsung Corning Precision and Dow Corning, reduced royalty income, and an increase in the effective tax rate.

Corning maintains a strong balance sheet with substantial cash reserves ($6.3 billion at June 30, 2012). It generated positive operating cash flow, continued its share repurchase program, and aims to protect its financial health while investing in future growth opportunities across its diverse business segments.

Corning highlighted growth in its Specialty Materials segment, particularly driven by Corning® Gorilla® Glass for portable display devices. The Environmental Technologies segment also showed improved results. The company is investing in R&D for new product development across these and other segments, including Telecommunications and Life Sciences.

Corning is involved in several legal proceedings, including asbestos litigation related to Pittsburgh Corning Corporation, environmental liabilities, and a grand jury subpoena from the U.S. Department of Justice regarding potential antitrust law violations in automotive products. The company is also facing antidumping and countervailing duty investigations in China related to solar-grade polycrystalline silicon. While Corning believes its accrued reserves for environmental liabilities are adequate and is cooperating with investigations, the potential financial impact of the antitrust investigation and the Chinese trade investigation remains uncertain and could be material.