10-QPeriod: Q3 FY2020

CORNING INC /NY Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 29, 2020For Securities:GLW

Summary

Corning Inc. reported net sales of $3,001 million for the third quarter of 2020, a 2% increase year-over-year. However, for the first nine months of 2020, net sales decreased by 8% to $7,953 million compared to the same period in 2019. The company experienced a significant gain from its previously held equity investment in Hemlock Semiconductor Group (HSG) following its consolidation in September 2020, which boosted net income to $427 million for the third quarter. Despite this, the nine-month net income saw a substantial decrease to $260 million from $928 million in the prior year, largely due to increased impairment charges and restructuring costs. Segment performance was mixed. Display Technologies and Specialty Materials showed modest sales growth in the third quarter, driven by volume increases and demand for premium glasses and IT products, respectively. Conversely, Optical Communications and Environmental Technologies experienced sales declines due to market weakness and temporary automotive production shutdowns. Life Sciences also saw a dip in sales due to distribution center ramp-up challenges. The consolidation of HSG contributed to the "All Other" segment's sales increase. The company maintained a strong cash balance and positive operating cash flow but is navigating ongoing economic uncertainty stemming from the COVID-19 pandemic.

Financial Highlights

50 data points
Beta

Revenue

$3.00B

33.4% Gross Margin

Net Income

$427.00M

14.2% Net Margin

EPS (Diluted)

$0.48

Total Assets

$30.27B

Cash & Equivalents

$2.51B

Free Cash Flow

$608.00M

Financial Statements
Beta
Revenue$3.00B
Cost of Revenue$2.00B
Gross Profit$1.00B
SG&A Expenses$480.00M
Operating Income$257.00M
Net Income$427.00M
EPS (Basic)$0.53
EPS (Diluted)$0.48
Shares Outstanding (Basic)760.00M
Shares Outstanding (Diluted)889.00M

Key Highlights

  • 1Third-quarter net sales increased by 2% to $3,001 million, driven by Display Technologies and Specialty Materials, while nine-month sales declined 8% to $7,953 million.
  • 2Net income for Q3 2020 was $427 million ($0.48/share diluted), up from $337 million ($0.38/share diluted) in Q3 2019, significantly boosted by a $498 million pre-tax gain on the previously held equity investment in HSG.
  • 3Nine-month net income decreased substantially to $260 million ($0.24/share diluted) from $928 million ($1.03/share diluted) in the prior year, impacted by $733 million in restructuring, impairment, and other charges.
  • 4The company consolidated Hemlock Semiconductor Group (HSG) in September 2020, contributing to "All Other" segment sales and a significant one-time gain.
  • 5Optical Communications segment sales declined 10% in Q3 and 18% year-to-date, attributed to market weakness and customer spending reductions.
  • 6Specialty Materials saw strong performance with a 23% increase in Q3 sales, driven by demand for premium glasses and IT products.
  • 7Corning maintained a strong liquidity position with $2.5 billion in cash and cash equivalents and positive operating cash flow for the nine months.

Frequently Asked Questions

The significant increase in net income for the third quarter of 2020 was primarily driven by a pre-tax gain of $498 million recorded on Corning's previously held equity investment in Hemlock Semiconductor Group (HSG) following its consolidation as of September 9, 2020.

The 8% decrease in net sales for the nine months ended September 30, 2020, was largely due to declines in the Optical Communications (18%) and Environmental Technologies (18%) segments, attributed to general market weakness, customer capital spending reductions, and temporary shutdowns of automotive manufacturing. Additionally, a $105 million cumulative adjustment to reduce revenue related to a customer exiting LCD panel production also impacted the year-to-date results.

The COVID-19 pandemic created economic uncertainty and volatility. While it led to reduced demand and temporary shutdowns in some segments like Environmental Technologies (automotive), it also spurred demand in others like Specialty Materials (work-from-home IT products). The company focused on preserving financial health, protecting employees, and managing costs, including reducing capital expenditures and temporarily suspending share buybacks.

Corning obtained a controlling interest in HSG on September 9, 2020, leading to its consolidation. This resulted in a significant one-time pre-tax gain of $498 million on its previously held equity investment. HSG's sales also contributed to the "All Other" segment's revenue increase, and its results are now fully reflected in Corning's consolidated financial statements.