10-QPeriod: Q1 FY2016

CORNING INC /NY Quarterly Report for Q1 Ended Mar 31, 2016

Filed April 29, 2016For Securities:GLW

Summary

Corning Inc. reported a net loss of $368 million, or $(0.36) per diluted share, for the first quarter of 2016, a significant reversal from the $407 million net income reported in the same period of 2015. This decline was heavily influenced by a substantial unrealized loss of $894 million on foreign currency hedges, primarily related to the strengthening Japanese yen, which significantly impacted the "Foreign currency hedge (loss) gain, net" line item. Additionally, sales decreased by 10% year-over-year to $2,047 million, with notable declines in the Display Technologies and Optical Communications segments. The Optical Communications segment faced production issues due to a new manufacturing software implementation, impacting sales by approximately $100 million. The Display Technologies segment saw a 13% sales decrease driven by lower panel maker utilization and price declines. Despite these challenges, the company continues its strategic focus on core technologies and a capital allocation framework aimed at significant cash generation and shareholder returns over the next four years, including planned annual dividend increases.

Financial Highlights

48 data points
Beta

Revenue

$2.05B

37.3% Gross Margin

Net Income

-$368.00M

-18.0% Net Margin

EPS (Diluted)

$-0.36

Total Assets

$27.95B

Cash & Equivalents

$3.54B

Free Cash Flow

-$80.00M

Financial Statements
Beta
Revenue$2.05B
Cost of Revenue$1.28B
Gross Profit$764.00M
SG&A Expenses$303.00M
Operating Income$177.00M
Net Income-$368.00M
EPS (Basic)$-0.36
EPS (Diluted)$-0.36
Shares Outstanding (Basic)1.10B
Shares Outstanding (Diluted)1.10B

Key Highlights

  • 1Net loss of $368 million in Q1 2016, a sharp contrast to a $407 million net income in Q1 2015.
  • 2Significant negative impact from foreign currency hedge (loss) gain, net of $894 million, largely due to yen strengthening.
  • 3Total net sales declined 10% to $2,047 million, with Display Technologies and Optical Communications segments showing significant year-over-year decreases.
  • 4Optical Communications segment impacted by manufacturing software implementation issues, leading to an estimated $100 million sales reduction.
  • 5Display Technologies segment sales down 13% due to lower panel maker utilization and price declines.
  • 6Company continues to execute its capital allocation framework, aiming to generate over $20 billion in cash and return more than $10 billion to shareholders through 2019.
  • 7Quarterly common stock dividend increased by 12.5% to $0.135 per share.

Frequently Asked Questions

The primary driver of the net loss was a substantial foreign currency hedge loss of $894 million, largely attributed to the strengthening of the Japanese yen against the U.S. dollar during the quarter. This significantly impacted the 'Foreign currency hedge (loss) gain, net' line item.

The Display Technologies segment saw a 13% sales decline due to lower panel maker utilization and price decreases. The Optical Communications segment also experienced a 13% sales decrease, primarily due to production issues arising from the implementation of new manufacturing software, which constrained the company's ability to fulfill customer orders.

Corning anticipates continued moderate sequential LCD glass price declines and mid-single digit glass volume growth for Display Technologies. Optical Communications is expected to see sales increases driven by demand for carrier and enterprise network products. Specialty Materials is projected to grow sales in the mid-to-high single digits, driven by Corning Gorilla Glass and advanced optics. Environmental Technologies sales are expected to be slightly down for the year due to lower demand for diesel products.

Corning has announced a capital allocation framework to generate over $20 billion in cash and return more than $10 billion to shareholders through share repurchases and dividends by 2019. The company also committed to increasing its dividend per common share by at least 10% annually through 2019. In Q1 2016, the quarterly common stock dividend was increased by 12.5%.