10-QPeriod: Q3 FY2012

CORNING INC /NY Quarterly Report for Q3 Ended Sep 30, 2012

Filed October 25, 2012For Securities:GLW

Summary

Corning Inc. reported a decrease in net sales and net income for the third quarter and first nine months of 2012 compared to the same periods in 2011. The decline in profitability was primarily driven by lower equity earnings from its affiliates, particularly Dow Corning, and a significant downturn in the Display Technologies segment due to price declines and excess supply. Despite these challenges, Corning maintained a strong balance sheet with increased cash, cash equivalents, and short-term investments. The company also continued to invest in research and development and initiated a substantial stock repurchase program, signaling a focus on both protecting financial health and future growth. Key segments showed mixed performance. While Display Technologies faced significant headwinds, the Specialty Materials segment experienced robust growth, largely due to strong demand for Corning® Gorilla® Glass. The Telecommunications and Environmental Technologies segments saw modest declines in sales, while Life Sciences sales increased slightly due to an acquisition. Corning reiterated its commitment to innovation and strategic investments, anticipating stable sales for the full year 2012, though net income is expected to be impacted by affiliate performance and effective tax rate changes.

Financial Highlights

52 data points
Beta

Revenue

$2.04B

43.6% Gross Margin

Net Income

$533.00M

26.2% Net Margin

EPS (Diluted)

$0.36

Total Assets

$29.41B

Cash & Equivalents

$4.95B

Free Cash Flow

$634.00M

Financial Statements
Beta
Revenue$2.04B
Cost of Revenue$1.15B
Gross Profit$889.00M
R&D Expenses$73.00M
SG&A Expenses$289.00M
Operating Income$411.00M
Net Income$533.00M
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)1.48B
Shares Outstanding (Diluted)1.49B

Key Highlights

  • 1Consolidated net sales decreased by 2% for both the three and nine months ended September 30, 2012, compared to the prior year periods.
  • 2Net income attributable to Corning Incorporated significantly decreased by 36% for the third quarter and 38% for the nine months ended September 30, 2012, compared to 2011.
  • 3Equity in earnings of affiliated companies declined substantially (26% for Q3, 38% for YTD) due to lower performance at Dow Corning Corporation and Samsung Corning Precision.
  • 4The Display Technologies segment experienced a 6% decrease in net sales for Q3 and 11% for YTD, attributed to significant price declines and excess glass supply, though volume increased sequentially in Q3.
  • 5Specialty Materials segment demonstrated strong growth with net sales up 21% for Q3 and 13% for YTD, driven by increased sales of Corning® Gorilla® Glass.
  • 6Corning maintained a strong liquidity position, with cash, cash equivalents, and short-term investments increasing to $6.4 billion as of September 30, 2012.
  • 7The company repurchased 14.9 million shares of common stock in Q3 2012 as part of its $1.5 billion repurchase program.

Frequently Asked Questions

The primary reasons for the decrease in net income were lower net income in the Display Technologies segment due to price declines, reduced equity earnings from Dow Corning (impacted by lower demand and price declines at Hemlock Semiconductor), a tax benefit in Q3 2011 that was not repeated, and lower royalty income from Samsung Corning Precision. Additionally, an increase in Corning's effective tax rate due to expiring tax provisions and partial expiration of Taiwan tax holidays also contributed.

Performance was mixed. Display Technologies faced significant price declines and excess supply, leading to lower sales and net income. Specialty Materials was a strong performer, with significant growth driven by Corning® Gorilla® Glass. Telecommunications and Environmental Technologies saw slight sales declines, while Life Sciences sales increased due to an acquisition but experienced lower profits from acquisition-related expenses.

Corning expects sales for 2012 to be relatively consistent with 2011. However, net income is expected to be negatively impacted by lower equity earnings from affiliates and changes in its effective tax rate. The company anticipates stable sales in the fourth quarter for most segments, with Display Technologies facing continued price pressure and moderate declines.

Corning maintained a strong financial position, with cash, cash equivalents, and short-term investments totaling $6.4 billion as of September 30, 2012, up from $5.8 billion at the end of 2011. The company generated $2.0 billion in operating cash flow for the first nine months of 2012. Debt levels remain low, and the company has access to committed credit facilities.