Corning Incorporated (NYSE: GLW) today announced its results for the second quarter of 2011.
Second-Quarter Highlights
- Sales were $2 billion, an increase of 4% sequentially and 17% year over year.
- Earnings per share were $0.47. Excluding special items, earnings per share were $0.48, comparable with last quarter, but a 17% decline year over year.
- Display Technologies' wholly owned business volume decreased slightly sequentially and about 5% compared to a year ago. Samsung Corning Precision Materials Co., Ltd.'s volume was up about 10% on a quarterly basis and up slightly year over year. The total glass volume, of Corning's wholly owned business and SCP combined, increased 5% sequentially.
- Specialty Materials sales increased 11% sequentially and 125% year over year.
- Telecommunications sales were up 16% sequentially and 24% over last year's second quarter.
"Second-quarter results were in line with our expectations," Wendell P. Weeks, chairman, chief executive officer and president, said. He added that the results demonstrate the company is moving toward its goal of becoming a more balanced global company by pursuing growth opportunities. "Corning® Gorilla® Glass is the cover glass of choice for next-generation mobile devices; sales continued growing across our major telecommunications product lines; and global demand for our Environmental Technologies emissions products remained strong," he remarked.
Second-Quarter Segment Results
Sales in the Display Technologies segment were $760 million, a decline of 4% sequentially and 9% year over year. The sequential sales result was due in part to the anticipated temporary curtailment of LCD TV production by Sharp Electronics Corporation. Sharp resumed production in the latter part of the quarter. Glass price declines were moderate.
Telecommunications segment sales were $548 million, an increase of 16% sequentially and 24% year over year. Sequential sales were strong across all major product lines.
Environmental Technologies segment sales were $258 million, essentially even sequentially, but a 40% year-over-year increase. Corning continued to experience very robust worldwide demand for both its diesel and automotive emissions control products.
Specialty Materials segment sales were $283 million, an 11% sequential and 125% year-over-year improvement driven by continued strong demand for Corning Gorilla Glass for handheld devices, tablets, and laptop computers.
Life Sciences segment sales were $155 million, an 8% sequential and 24% year-over-year increase. About half of the year-over-year growth rate was due to acquisitions.
Corning's equity earnings totaled $428 million compared to $398 million in the previous quarter and $474 million a year ago.
Gross margin for the quarter was 44%, a slight decline from the first quarter, but better than the company anticipated.
Looking Forward
"The display industry has been behaving more cautiously in recent weeks, driven primarily by weaker retail expectations for the second half. We have seen many LCD TV brands reduce their sales forecasts for the year. As LCD panel manufacturers have taken a more measured approach to their supply chain demands, they may be waiting a little longer to raise panel fab utilization for seasonal fourth-quarter retail demand," Flaws said.
"Based on the lower TV sales expectations and more conservative supply chain behavior, we now expect the worldwide glass market to be between 3.3 billion and 3.4 billion square feet this year, versus previous expectations of 3.5 billion to 3.7 billion square feet," Flaws remarked. In 2010, worldwide glass volume was 3.15 billion square feet.
In the display segment, Corning expects combined glass volume in the third quarter to be consistent with the second quarter. Glass volume for the company's wholly owned business is expected to grow in the mid- to upper-single digits sequentially. At Samsung Corning Precision, volume is anticipated to decrease in the mid-single digits for the quarter. Glass price declines are expected to be moderate.
Telecommunications segment third-quarter sales are expected to increase slightly compared to the strong second-quarter performance, and to be up about 20% year over year.
Environmental Technologies segment third-quarter sales should be comparable with the strong second-quarter results.
The third-quarter growth rate in the Specialty Materials segment is expected to be in the upper-single digits. Corning Gorilla Glass is expected to grow 20% sequentially; however, other product lines in the segment are expected to be lower.
"Looking forward, we no longer believe that Corning Gorilla Glass sales this year have the potential to reach $1 billion. Rather, we expect sales will be in the area of $800 million. This adjustment is driven by our realization that television cover glass sales will not be as strong as we originally hoped," Flaws added.
"Overall," he said, "we are delighted with our sales growth and the market's acceptance of Corning Gorilla Glass as the preferred cover glass product. Full-year sales are forecasted to be more than triple last year's performance," he concluded.
Corning anticipates equity earnings will be down in the upper-single digits sequentially. The company also expects its gross margin for the quarter to improve by a couple of percentage points.
Corning has updated its capital expenditure guidance and now believes that spending this year will be at the lower end of the company's range of $2.4 billion to $2.7 billion. The company also has an initial estimate for 2012 capital expenditures in the range of $1.9 billion to $2.0 billion. Most of that planned capital spending will be for Corning products that are poised to grow rapidly over the next several years, such as Gorilla Glass, substrates for catalytic converters, diesel filters, optical fiber, as well as completing its new display glass facility in Beijing, China.
"We remain confident that Corning is on a growth track to reach $10 billion in sales by 2014. Our product innovations will be an important part of this growth story. We are seeing good progress in a number of areas and we are very encouraged by our advancements in photovoltaic glass panels and OLEDs," Flaws added.
The company noted it has seen increasing success in customer testing with its photovoltaic glass program for thin-film solar panels.
Flaws said that Corning believes OLEDs will be an important component of the display industry in the future, requiring new, advanced glass compositions to maximize OLEDs' potential. "We have already developed a new glass for OLEDs which is in customer qualification tests now, and we are working on an additional new glass composition for large size OLEDs," he said.
"These innovations, combined with the strong growth of existing new products such as Corning Gorilla Glass, Corning® ClearCurve® optical fiber, Pretium EDGE™ solutions for data centers, and Corning DuraTrap® AT filters for diesel emissions control, will provide a solid foundation for our growth in sales," he concluded.