10-QPeriod: Q3 FY2014

CORNING INC /NY Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 29, 2014For Securities:GLW

Summary

Corning Incorporated (GLW) reported strong financial results for the third quarter and first nine months of 2014, primarily driven by the full consolidation of Samsung Corning Precision Materials (now Corning Precision Materials) and a significant positive impact from its foreign currency hedging programs, particularly against the Japanese yen. Net sales increased by 23% year-over-year for the quarter and 25% for the nine-month period. Net income saw a substantial increase of 149% in the third quarter, reaching $1,014 million, or $0.72 per diluted share, though it experienced a slight decrease of 4% for the nine-month period to $1,484 million, or $1.03 per diluted share, largely due to tax-related items and currency impacts. The company highlighted robust performance in its Environmental Technologies and Optical Communications segments, alongside the integration benefits of the acquired display materials business. Despite price declines in the Display Technologies segment, volume increases and cost synergies contributed positively. Corning also demonstrated strong liquidity, ending the period with $6.1 billion in cash, cash equivalents, and short-term investments, and actively returned capital to shareholders through share repurchases.

Financial Highlights

50 data points
Beta

Revenue

$2.54B

42.9% Gross Margin

Net Income

$1.01B

39.9% Net Margin

EPS (Diluted)

$0.72

Total Assets

$29.82B

Cash & Equivalents

$5.35B

Free Cash Flow

$1.12B

Financial Statements
Beta
Revenue$2.54B
Cost of Revenue$1.45B
Gross Profit$1.09B
SG&A Expenses$261.00M
Operating Income$620.00M
Net Income$1.01B
EPS (Basic)$0.77
EPS (Diluted)$0.72
Shares Outstanding (Basic)1.28B
Shares Outstanding (Diluted)1.41B

Key Highlights

  • 1Net sales increased by 23% in Q3 2014 and 25% year-to-date compared to the prior year, largely due to the consolidation of Samsung Corning Precision Materials.
  • 2Net income surged 149% in Q3 2014 to $1,014 million, driven significantly by foreign currency hedging gains ($493 million after-tax) and the acquired business's performance.
  • 3Despite a 4% decrease in net income for the nine-month period ($1,484 million), the company maintains a strong balance sheet with $6.1 billion in cash, cash equivalents, and short-term investments.
  • 4Corning Precision Materials contributed $463 million in sales in Q3, showcasing successful integration and synergy realization.
  • 5The Optical Communications and Environmental Technologies segments reported solid sales growth of 7% and 25% respectively in Q3, driven by strong demand and new regulations.
  • 6Shareholder returns were active, with significant share repurchases totaling $200 million in Q3 and $567 million year-to-date under new programs.
  • 7The company continues to invest in future growth, with $740 million in capital expenditures year-to-date, primarily in the Display Technologies segment.

Frequently Asked Questions

The primary drivers for the substantial increase in net income in the third quarter of 2014 were the significant gains from Corning's yen-denominated hedging programs, amounting to $493 million after-tax, and the positive impact of consolidating Corning Precision Materials (formerly Samsung Corning Precision Materials), which led to cost reductions and realized synergies. The change in the fair value of contingent consideration related to the acquisition also contributed positively.

The acquisition significantly boosted net sales, adding $463 million in the third quarter and $1,331 million year-to-date, primarily within the Display Technologies segment. It also contributed to cost reductions and operational efficiencies, supporting net income growth. However, it also led to acquisition-related costs and certain discrete tax items which impacted the nine-month net income comparison.

Corning maintained a strong financial position, ending the period with $6.1 billion in cash, cash equivalents, and short-term investments, significantly exceeding its total debt of $3.7 billion. Operating cash flow for the first nine months was robust at $3,597 million. The company remains confident in its ability to meet its financial obligations and fund future operations and investments.

Corning's Display Technologies segment faces continued price declines, though volume is expected to grow with the LCD market. Optical Communications and Environmental Technologies are expected to see continued sales growth driven by demand and regulatory factors. The company also noted potential risks related to foreign currency fluctuations, particularly the Japanese yen, and the concentration of customers in certain segments. The overall outlook suggests continued growth driven by innovation and strategic acquisitions, while managing existing business challenges.