10-QPeriod: Q2 FY2013

CORNING INC /NY Quarterly Report for Q2 Ended Jun 30, 2013

Filed July 31, 2013For Securities:GLW

Summary

Corning Incorporated (GLW) reported solid financial results for the second quarter and first half of 2013, with net sales showing a slight increase year-over-year and net income experiencing a significant jump. This growth was primarily driven by a favorable foreign currency hedge program, a positive pension plan adjustment, and strong performance in the Life Sciences, Telecommunications, and Specialty Materials segments. While overall net sales remained relatively flat for the first half of the year, the company demonstrated operational improvements and strategic progress. Key financial highlights include a robust increase in gross margin percentage and a decrease in operating expenses as a percentage of net sales. The company maintained a strong balance sheet with substantial cash reserves and a decreasing debt-to-capital ratio. Corning also continued to invest in innovation and future growth, with significant capital expenditures focused on its Display Technologies segment. Investors should note the impact of foreign currency fluctuations, particularly the Japanese yen, on segment performance, which the company is actively mitigating through hedging strategies. The company's outlook suggests continued growth in Telecommunications and Life Sciences, stable performance in Display Technologies with moderate price declines, and anticipation of increased demand for Corning® Gorilla® Glass. The company remains confident in its strategy for long-term success through global innovation and financial discipline.

Financial Highlights

53 data points
Beta

Revenue

$1.98B

44.6% Gross Margin

Net Income

$638.00M

32.2% Net Margin

EPS (Diluted)

$0.43

Total Assets

$28.39B

Cash & Equivalents

$4.60B

Free Cash Flow

$389.00M

Financial Statements
Beta
Revenue$1.98B
Cost of Revenue$1.10B
Gross Profit$883.00M
R&D Expenses$62.00M
SG&A Expenses$266.00M
Operating Income$424.00M
Net Income$638.00M
EPS (Basic)$0.43
EPS (Diluted)$0.43
Shares Outstanding (Basic)1.47B
Shares Outstanding (Diluted)1.48B

Key Highlights

  • 1Net income increased significantly by 35% year-over-year to $638 million for Q2 2013 and by 19% to $1,132 million for the first half of 2013.
  • 2Gross margin improved to 45% in Q2 2013 and 44% for the first half of 2013, up from 42% and 43% respectively in the prior year periods.
  • 3Selling, general, and administrative expenses decreased by 7% in Q2 2013 and 6% for the first half, representing a lower percentage of net sales.
  • 4The company maintained a strong liquidity position with $5.5 billion in cash, cash equivalents, and short-term investments at the end of Q2 2013, while reducing its debt-to-capital ratio to 12%.
  • 5Capital expenditures for the first half of 2013 were $438 million, with a significant portion directed towards the Display Technologies segment.
  • 6The Life Sciences segment saw substantial growth, driven by the acquisition of the Discovery Labware business, with net sales up 35% in Q2 2013.
  • 7Corning is actively hedging its exposure to foreign currency fluctuations, particularly the Japanese yen, which impacted results in the Display Technologies segment.

Frequently Asked Questions

The significant increase in net income was primarily driven by a net gain on purchased collars and average rate forward contracts related to translated earnings contracts ($148 million after tax), a positive impact from the pension plan valuation true-up ($26 million after tax), a gain from a change in control of an equity investment, and higher net income across several segments including Life Sciences, Telecommunications, Environmental Technologies, and Specialty Materials. Lower operating expenses also contributed.

The depreciation of the Japanese Yen against the U.S. Dollar negatively impacted sales in the Display Technologies segment. However, the company's implemented yen-denominated hedge programs, including purchased collars and average rate forward contracts, generated significant gains that largely offset these negative impacts on net income. These gains were recorded in 'Other income, net'.

Corning expects sales growth in its Telecommunications and Life Sciences segments. The Display Technologies segment is projected to see moderate price declines with stable market share. Specialty Materials is anticipated to experience sequential sales improvement driven by demand for Corning® Gorilla® Glass. Environmental Technologies expects a slight sales increase year-over-year.

Corning maintains a strong liquidity position with $5.5 billion in cash, cash equivalents, and short-term investments. The company generated $1,018 million in net cash from operating activities in the first half of 2013. It also has a $1 billion revolving credit facility and established a $1 billion commercial paper program. The company repaid a significant portion of its long-term debt and continues to return capital to shareholders through dividends and share repurchases.