10-QPeriod: Q1 FY2019

CORNING INC /NY Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 3, 2019For Securities:GLW

Summary

Corning Inc. reported a significant turnaround in its first quarter of 2019 compared to the same period in the prior year. Net income surged to $499 million, or $0.55 per diluted share, a dramatic improvement from a net loss of $589 million, or $(0.72) per diluted share, in Q1 2018. This financial recovery was largely attributed to a substantial $675 million increase in translated earnings contract gains and the absence of significant one-time charges incurred in the prior year, such as the IRS audit settlement and legal matters. Revenue also saw a healthy increase of 12% to $2.81 billion, driven by strong performance across most segments, notably Optical Communications and Display Technologies. The company's strategic focus on core technologies and markets continues to shape its performance, with management expressing confidence in continued growth throughout 2019, anticipating mid-single digit price declines in display glass and high-single digit to low-double digit growth in other key segments.

Financial Highlights

49 data points
Beta

Revenue

$2.81B

39.1% Gross Margin

Net Income

$499.00M

17.7% Net Margin

EPS (Diluted)

$0.55

Total Assets

$27.32B

Cash & Equivalents

$1.46B

Free Cash Flow

-$29.00M

Financial Statements
Beta
Revenue$2.81B
Cost of Revenue$1.71B
Gross Profit$1.10B
SG&A Expenses$401.00M
Operating Income$420.00M
Net Income$499.00M
EPS (Basic)$0.61
EPS (Diluted)$0.55
Shares Outstanding (Basic)784.00M
Shares Outstanding (Diluted)908.00M

Key Highlights

  • 1Net income improved dramatically to $499 million ($0.55/share) in Q1 2019, reversing a net loss of $589 million ($(0.72)/share) in Q1 2018.
  • 2Total net sales increased by 12% year-over-year to $2.81 billion, driven by strong performance in Optical Communications (+20%) and Display Technologies (+10%).
  • 3The Optical Communications segment benefited from increased sales of carrier and enterprise network products and the acquisition of 3M's Communication Markets Division (CMD).
  • 4Display Technologies saw a 10% increase in net sales, with volume growth outpacing moderate price declines.
  • 5Selling, General, and Administrative (SG&A) expenses decreased by 20%, largely due to the absence of significant legal charges recorded in the prior year.
  • 6Corning repurchased approximately $244 million of its common stock during the quarter as part of its ongoing share repurchase programs.
  • 7The company anticipates continued growth in 2019, with projections for mid-single digit display glass price declines and mid-to-high single digit growth in other segments.

Frequently Asked Questions

The primary driver for the significant increase in net income was a substantial gain of $675 million from translated earnings contracts, coupled with the absence of major one-time expenses such as the $172 million IRS audit settlement and $103 million in legal matter charges that impacted the prior year's results.

Most segments showed growth. Optical Communications increased sales by 20% due to strong demand and the CMD acquisition. Display Technologies grew sales by 10% with higher volumes offsetting price declines. Specialty Materials and Environmental Technologies also reported sales increases of 11% and 12% respectively. Life Sciences saw a 5% increase in sales.

Corning expects 2019 to be a year of strong growth and investment. They anticipate mid-single digit price declines in display glass but expect their volume to grow faster than the market. Optical Communications sales are projected to increase by approximately 10%, and other segments like Specialty Materials, Environmental Technologies, and Life Sciences are expected to see low-to-mid single digit percentage growth.

Corning is focused on its strategy and capital allocation framework, aiming to generate significant cash and return it to shareholders. They repurchased approximately $244 million of common stock in Q1 2019 and expect capital expenditures to be slightly over $2.0 billion for the full year. Management believes they have sufficient liquidity to fund operations, acquisitions, capital expenditures, dividends, and share repurchases.