Corning Achieves $9.8 Billion in Core Sales for 2015
Corning Inc. recently announced its results for the fourth quarter and full-year 2015. Corning reported core sales of $2.4 billion and core earnings per share of $0.34 in the fourth quarter, compared with $2.5 billion and $0.42, respectively, in the 2014 fourth quarter. Net sales (GAAP) for the fourth quarter were $2.2 billion and GAAP earnings per share were $0.17, compared with $2.4 billion and $0.70, respectively, in 2014.
For the full-year 2015, core sales were $9.8 billion and core earnings per share were $1.40, compared with $10 billion and $1.42, respectively, in 2014. Net sales (GAAP) for 2015 were $9.1 billion and GAAP earnings per share were $1.00, compared with $9.7 billion and $1.73 in 2014. Adjusted operating cash flow for the full year remained strong at $3.2 billion.
“Our fourth-quarter performance was in line with our expectations,” said Wendell P. Weeks, chairman, CEO and president. “Our long-term supply contracts and effective pricing strategies in our Corning Glass Technologies businesses continue to be particularly beneficial, and technology trends in optical communications continue to drive growth. We were especially pleased to mark several major successes right out of the gate on our new strategy and capital allocation framework, which outlines our priorities for the next four years: to focus our portfolio and utilize our financial strength.”
In October 2015, Corning announced a new strategy and capital allocation framework that targets generating and deploying more than $20 billion through 2019, with the majority of these funds expected to come from operating cash flow. The company plans to invest approximately $10 billion in opportunities to grow and sustain its leadership positions, and return more than $10 billion to shareholders.
In the fourth quarter of 2015, Corning marked early progress against the new strategy and capital allocation framework. The company generated significant cash flow in the quarter, resulting in $3.2 billion in adjusted operating cash flow for the year, despite continuing global economic weakness. It also attained a moderate LCD glass price decline in the quarter, achieving the lowest sequential decline of the year. For 2015, the aggregate LCD glass price decline was the lowest in five years. The company also initiated a $1.25 billion accelerated share repurchase program (completed in January 2016), supporting the company’s commitment to return more than $10 billion to shareholders.
Corning announced a realignment of the company’s interest in Dow Corning, a transaction that is expected to be accretive to the company’s earnings per share and essentially tax-free. As a result of the realignment, a newly formed entity, which will become a wholly owned subsidiary of the company, will hold approximately 40% ownership in Hemlock Semiconductor Group and $4.8 billion in cash. The transaction unlocks the value of Corning’s interest in Dow Corning’s silicones business, which today falls outside Corning’s three core technologies, four manufacturing and engineering platforms, and five market-access platforms. The company also established a long-term supply agreement with a low-cash investment in a Gen 10.5 glass manufacturing facility adjacent to BOE Technology Group, Ltd. The existing long-term supply agreement for Gen 8.5 and smaller panels was extended through 2025. The company also announced that Ford’s GT supercar is using Corning® Gorilla® Glass for Automotive in its windshield and in two other windows, an example of Corning leveraging its market access with leading automakers to pursue disruptive opportunities while utilizing existing assets.
Core sales in Display Technologies in the fourth quarter were $903 million, compared with $1.1 billion in the same period a year ago. Sequential LCD glass volume declined slightly, as expected. LCD glass prices continued to moderate as expected and declined less than in the third quarter. Core earnings in the fourth quarter were $234 million, compared with $356 million in the same period last year. Sales in Optical Communications in the fourth quarter were $736 million, compared with $676 million in the same period last year. Core earnings were $47 million, compared with $48 million in the fourth quarter 2014. Sales in Specialty Materials in the fourth quarter were $275 million, compared with $319 million a year ago. Core earnings for the quarter were $44 million, compared with $30 million in the fourth quarter 2014.
Sales in Environmental Technologies in the fourth quarter were $254 million compared with $250 million last year. Core earnings were $29 million, compared with $36 million in the comparable period a year ago. Sales in Life Sciences in the fourth quarter were $202 million, compared with $215 million in the previous year’s quarter. Core earnings were $12 million, compared with $18 million in the comparable 2014 period. Core equity earnings from Dow Corning Corp. were $78 million, compared with $111 million in the fourth quarter 2014.
“We expect the first quarter to be the weakest of 2016, and we anticipate growth will recover in subsequent quarters,” said R. Tony Tripeny, senior vice president and CFO. “We are encouraged with the moderation of LCD glass price declines, and we expect this trend will continue into 2016. We are sustaining market leadership in all of our businesses.”
Corning provided the following expectations for its business segments in the first quarter of 2016. For Display Technologies in the first quarter, Corning anticipates that panel maker utilization will continue to decline, which will reduce inventory levels in the supply chain. As a result, the overall glass market and Corning’s LCD glass volume are expected to decline by a mid-to-high single-digit percentage sequentially. Corning’s LCD glass price decline is expected to be moderate, achieving what will be one of the lowest first-quarter declines in five years. For the full year, Corning expects moderate sequential price declines to continue, and its glass volume to grow by a mid-single-digit percentage year over year, in line with total glass demand growth. Corning expects global television unit sales will grow by a low single-digit percentage, and the average screen size will increase by at least 1.5 in. The company expects panel maker utilization to increase as the year progresses, and retail LCD glass area demand to be up by a high single-digit percentage in 2016. During January, Corning took advantage of the stronger yen to extend its hedges. Corning is now hedged for approximately 70% of its projected yen exposure for the period 2016-2022 at a blended rate significantly below the recent spot prices.
In Optical Communications, Corning expects first quarter sales to increase in the low-to-mid-single digit percentage range over its sales in the comparable period a year ago. For the full year, the company expects sales to increase by a mid-single-digit percentage and exceed the goal of two times the growth rate of industry capital expenditures. In Specialty Materials, first quarter sales are expected to decline year over year by a mid-teen percentage. For 2016, the company estimates annual sales will grow by a low-teen percentage. The variable timing of mobile device product launches drives Corning Gorilla Glass demand and is expected to cause significant swings in quarterly results.
In Environmental Technologies, the North American heavy-duty truck market is down after several years of robust growth. As a result, first quarter sales are expected to decline by approximately 10%, compared with the same period last year. The full-year outlook is for sales to be down by a low single-digit percentage. In Life Sciences, first quarter sales are expected to increase by a low single-digit percentage, compared with last year. For the full year, sales are anticipated to grow faster than the market, which is expected to be up by a low single-digit percentage. Core equity earnings from Dow Corning are expected to be approximately $45 million.
“Our very strong balance sheet and competitive positions serve as the basis for executing on our new strategy and capital allocation framework,” said Tripeny. “We are off to a strong start in delivering on this framework and are confident in our ability to deliver significant returns for shareholders.”
For more information, visit www.corning.com.