10-QPeriod: Q3 FY2018

CORNING INC /NY Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 24, 2018For Securities:GLW

Summary

Corning Inc. (GLW) reported strong third-quarter 2018 results, with net sales increasing by 15% year-over-year to $3.01 billion and net income surging by 60% to $625 million, or $0.67 per diluted share. This performance was significantly boosted by a $154 million increase in translated earnings contract gains and positive tax-related adjustments totaling $55 million. The Optical Communications segment was a key driver of growth, with sales up 22% to $1.12 billion, benefiting from strong demand and the recent acquisition of 3M's Communications Market Division. For the first nine months of 2018, net sales grew 10% to $8.26 billion, though net income saw a 15% decrease to $774 million ($0.82 per diluted share). This decrease was primarily attributed to higher legal expenses and unfavorable tax adjustments, partially offset by gains on translated earnings contracts. Despite the year-to-date net income decline, the company's strategic investments and segment growth, particularly in Optical Communications and Specialty Materials, position it for continued expansion. The company also provided a positive outlook, expecting full-year segment net sales to exceed $11.3 billion.

Financial Highlights

50 data points
Beta

Revenue

$3.01B

41.0% Gross Margin

Net Income

$625.00M

20.8% Net Margin

EPS (Diluted)

$0.67

Total Assets

$26.39B

Cash & Equivalents

$1.90B

Free Cash Flow

$943.00M

Financial Statements
Beta
Revenue$3.01B
Cost of Revenue$1.78B
Gross Profit$1.23B
SG&A Expenses$439.00M
Operating Income$522.00M
Net Income$625.00M
EPS (Basic)$0.75
EPS (Diluted)$0.67
Shares Outstanding (Basic)805.00M
Shares Outstanding (Diluted)930.00M

Key Highlights

  • 1Net sales for Q3 2018 increased 15% year-over-year to $3.01 billion, driven by strong performance across most segments.
  • 2Net income for Q3 2018 surged 60% year-over-year to $625 million, or $0.67 per diluted share.
  • 3Optical Communications segment sales grew 22% to $1.12 billion in Q3 2018, boosted by strong demand and the 3M acquisition.
  • 4Specialty Materials segment saw a 23% increase in Q3 2018 sales, driven by strong demand for Gorilla Glass.
  • 5For the first nine months of 2018, net sales increased 10% to $8.26 billion, while net income decreased 15% to $774 million due to higher legal and tax-related expenses.
  • 6The company repurchased 11.8 million shares in Q3 2018 under its share repurchase programs.
  • 7Corning anticipates full-year 2018 segment net sales to exceed $11.3 billion, reflecting confidence in continued growth.

Frequently Asked Questions

The significant increase in net income in the third quarter of 2018 was primarily driven by a $154 million increase in translated earnings contract gains and positive tax-related adjustments totaling $55 million. Higher segment net income across all business segments also contributed.

The acquisition of 3M's Communications Market Division, completed in June 2018, contributed to the strong performance of the Optical Communications segment. It added approximately $200 million to sales in the third quarter of 2018, supporting the segment's overall 22% year-over-year sales growth.

The decrease in net income for the first nine months of 2018 was primarily due to an increase of $120 million in legal expenses, an increase of $53 million in discrete tax and other tax-related items (including a preliminary agreement with the IRS to settle an audit), and a decrease of $46 million in equity earnings from affiliated companies. These factors were partially offset by gains on translated earnings contracts and higher net income in several segments.

Corning expects full-year 2018 segment net sales to exceed $11.3 billion. The company anticipates continued growth across its segments, with specific positive outlooks for Optical Communications, Specialty Materials, Environmental Technologies, and Life Sciences, driven by product innovation and market demand.