10-QPeriod: Q2 FY2017

CORNING INC /NY Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 26, 2017For Securities:GLW

Summary

Corning Inc. (GLW) reported its second-quarter and first-half 2017 financial results, showing a significant increase in net sales driven by the Optical Communications and Specialty Materials segments. Net sales for the second quarter rose 6% year-over-year to $2.5 billion, and for the first half, sales increased 11% to $4.9 billion. However, net income saw a substantial decrease, primarily due to the absence of a large one-time gain from the strategic realignment of its equity interest in Dow Corning in the prior year's second quarter. The company's strategic framework continues to guide its focus on core technologies, manufacturing, and market access platforms, with significant capital investment planned for growth initiatives. Despite the year-over-year drop in reported net income, Corning's core performance measures indicate a more stable operational trend. Core earnings for the second quarter were $431 million, nearly flat compared to the prior year, and core earnings for the first half increased by 8% to $838 million. This highlights the resilience of its underlying business operations. The company also continues to return capital to shareholders through dividends and share repurchases, demonstrating a commitment to shareholder value.

Financial Statements
Beta

Key Highlights

  • 1Net sales increased by 6% to $2.5 billion in Q2 2017 and 11% to $4.9 billion in the first half of 2017, primarily driven by strong performance in Optical Communications and Specialty Materials segments.
  • 2Reported net income significantly decreased year-over-year, largely due to the absence of a substantial non-taxable gain from the Dow Corning equity realignment in Q2 2016.
  • 3Core earnings remained stable in Q2 2017 at $431 million and increased by 8% to $838 million in the first half of 2017, indicating resilient underlying operational performance.
  • 4Optical Communications segment sales grew 13% in Q2 and 22% in the first half, fueled by carrier network products and the North American fiber-to-the-home market.
  • 5Specialty Materials segment saw robust growth of 27% in Q2 and 29% in the first half, driven by Corning Gorilla Glass and advanced optics products.
  • 6The company announced a new $4 billion share repurchase program and continues to increase its quarterly dividend, demonstrating a commitment to returning capital to shareholders.
  • 7Capital expenditures for the first half of 2017 were $761 million, an increase driven by capacity expansion projects, particularly in the Optical Communications segment.

Frequently Asked Questions

The substantial decrease in reported net income was primarily due to the absence of a significant one-time, non-taxable gain of $2.7 billion recognized in the second quarter of 2016 from the strategic realignment of Corning's equity interest in Dow Corning. Excluding this one-time event, the company's core operational performance remained strong.

The Optical Communications and Specialty Materials segments were the primary drivers of sales growth. The Optical Communications segment benefited from increased sales of carrier network products in the North American fiber-to-the-home market, while the Specialty Materials segment saw strong growth from Corning Gorilla Glass and advanced optics products.

Corning expects mid-single-digit percentage growth in Display Technologies, low-to-mid-teens percentage sales growth in Optical Communications, consistent to slightly higher sales in Environmental Technologies, growth in Specialty Materials dependent on new product adoption, and low-single-digit sales growth in Life Sciences.

Corning continues to execute its capital allocation framework, which includes investing in core technologies and platforms. The company also actively returns capital to shareholders through an increased quarterly dividend and significant share repurchases, with a new $4 billion share repurchase program approved in late 2016.