For the first quarter of 2016, Corning reported core sales of $2.17 billion and core earnings per share of $0.28, compared with $2.43 billion and $0.35 respectively in 2015.
Net sales (GAAP) for the first quarter were $2.05 billion and GAAP loss per share was $0.36, compared with $2.27 billion and earnings per share of $0.29 in 2015. Corning’s GAAP net income for the first quarter reflects a non-cash, mark-to-market loss associated with the company’s currency-hedging contracts, which extend through 2022.
“We are pleased that we were able to meet overall profit expectations in the first quarter despite the impact from a manufacturing software implementation issue. We expect strong sequential core sales and profit growth in the second quarter,” Wendell P. Weeks, chairman, chief executive officer, and president, said. “We are also making great progress on our four-year plan to grow, return cash to our shareholders, and create significant value.”
Corning continued to deliver on its commitment to focus its portfolio and utilize its financial strength to return more than $10 billion to shareholders and to invest $10 billion in growth and sustained leadership through 2019. In the first quarter, the company announced a 12.5% increase in the quarterly dividend, consistent with its plan to increase the dividend per share by at least 10% annually, and repurchased $751 million of outstanding shares. “Since announcing our new strategy and capital allocation framework last fall, we have returned more than $2 billion to shareholders,” Weeks said.
Recently, Corning announced two strategic transactions to advance the company’s growth. In January, the company announced a joint venture with Saint-Gobain Sekurit to develop, manufacture, and sell lightweight automotive glazing solutions. The joint venture will use innovative Corning® Gorilla® Glass for Automotive in the laminated window solution. Earlier this month, Corning announced an agreement to acquire Alliance Fiber Optic Products (Nasdaq: AFOP), broadening its access to the high-growth cloud data-center market.
First-Quarter Segment Results
•Display Technologies: Core sales were $829 million, compared with $972 million in the same period a year ago. Consistent with guidance, sequential LCD glass volume declined by a mid-single-digit percentage. Corning’s LCD glass price declines were moderate and the smallest sequential first-quarter decline in five years. The company also finalized its customer supply agreements for the remainder of 2016.
•Optical Communications: Sales in the first quarter were $609 million, compared with $697 million in the year-ago period. Core earnings were $26 million, compared with $72 million in the first quarter last year. The company estimates that the first-quarter impact from production issues associated with manufacturing software implementation issues was approximately $100 million in sales and $40 million in profit including additional recovery-related expenses.
•Environmental Technologies: Sales in the first quarter were $264 million, compared with $282 million last year. Core earnings were $37 million, compared with $48 million in the comparable period a year ago.
•Specialty Materials: Sales in the first quarter were $227 million versus $272 million last year. Core earnings were $32 million, compared with $46 million in the first quarter 2015.
•Life Sciences: Sales in the first quarter were $204 million, compared with $197 million a year ago. Core earnings were $18 million versus $19 million last year.
•Core equity earnings from Dow Corning Corporation were $58 million, compared with $51 million in the first quarter last year.
Looking Forward:
“We expect that the company’s performance for the remainder of the year will show significant improvement from first-quarter results, and that second-quarter results will reflect the strong underlying trends in our businesses,” R. Tony Tripeny, senior vice president and chief financial officer, said.
•Display Technologies: In the second quarter, Corning believes that panel-maker utilization will increase to meet demand for the second-half retail season. The overall glass market and Corning’s volume are expected to increase by a high single-digit percentage sequentially. Corning expects the sequential LCD glass price decline to be less than in the first quarter, consistent with its belief in a sustained environment for more favorable pricing. “We continue to forecast that television units will grow on a year-over-year basis, and that the retail glass market will grow by 8% to 10%, driven by consumer preference for larger screens,” Tripeny remarked.
•Optical Communications: For the second quarter, Corning expects sales to increase more than 20% sequentially as seasonal demand rises and as cable production recovers to normal levels with the resolution of manufacturing software implementation issues. For the second half of 2016, Corning expects sales to be up more than 10% versus the same period in 2015. These expectations include a continuation of the strong demand environment, normal production levels, and the recovery of a sizable portion of the sales missed during the first half of the year.
•Environmental Technologies: Second-quarter segment sales are expected to be consistent with the same period in 2015.
•Specialty Materials: Second-quarter sales are expected to increase year over year by a low-single-digit percentage, driven by Corning® Gorilla® Glass demand. For the full year, Corning expects Specialty Materials sales to grow by a mid-to-high single digit percentage.
•Life Sciences: Sales in the second quarter are expected to increase by a low-single digit percentage on a year-over-year basis.
•Core equity earnings are expected to be between $50 million and $70 million in the second quarter, depending on the closing date of the strategic realignment of Dow Corning announced in December 2015. The company expects the realignment to close by June.