Speaking at the company’s annual investor meeting today in New York City, Wendell P. Weeks, Corning Incorporated’s (NYSE: GLW) chairman, chief executive officer, and president, said, “We have the right strategy in place to build on the momentum created in 2014 to drive both near- and long-term growth.”
2014 Performance Highlights
Weeks briefly summarized key achievements against the company’s 2014 priorities and told investors: “You can count on us to do what we say we’re going to do.”
- Corning continued its positive momentum in Display Technologies by achieving critical milestones, including stable market share, moderate price declines, and a strengthened position in the high-performance display market.
- The integration of Corning Precision Materials Co., Ltd. exceeded the company’s original plan by realizing more than $100 million in pretax synergies last year. Weeks told investors that Corning expects to continue capturing benefits sooner than the original plan and now anticipates a total of $630 million in pretax synergies over the 2014-2017 period.
- Multiple businesses drove Corning’s core sales and profit growth. While the Display Technologies segment continued to perform as a “profit and cash-generation powerhouse,” Corning’s four other segments combined to deliver strong core sales and earnings growth. Optical Communications and Environmental Technologies segments were particularly strong 2014 core earnings drivers, up 18% and 44% respectively.
- Corning delivered on its commitment to grow core earnings and return cash to shareholders. In reviewing Corning’s strong sales performance, Weeks remarked, “We’ve grown sales faster than our competitors, and we’ve outperformed them even more in terms of profit growth.” Addressing shareholder value, he added, “Since October 2011, we have increased Corning’s dividend 140% and repurchased approximately 12% of outstanding shares on a fully diluted basis.”
Weeks and other Corning leaders outlined a clear set of priorities to drive the company’s continued success. “Our 2015 priorities are to sustain positive momentum in all of our businesses; leverage our innovation engine to drive both near- and long-term growth; continue to grow sales and core earnings; and extend our commitment to return cash to shareholders,” said Weeks.
Leveraging Innovation to Drive Growth
Weeks described Corning’s commitment to innovation as “unwavering” and explained that the company manages its investment in research, development, and engineering to capture growth in today’s businesses while creating tomorrow’s businesses. He shared examples of several innovation programs that are driving both near-term and long-term growth.
Innovations for today’s businesses include: the recently launched Corning® Gorilla® Glass 4 and new developments in scratch-resistance capabilities for cover glass; FLORA™ substrate technology for start-up emissions control; and optical fiber process and materials innovations that have enabled significant manufacturing cost reduction and more than four decades of industry leadership.
New business opportunities include Iris™ glass, which enables LED TVs as thin as smartphones by replacing polymer light-guides with a specialized piece of glass; and Gorilla Glass automotive laminates, which weigh 30% less than conventional soda-lime windshields, to help improve fuel economy and meet U.S. regulations that require automakers to double miles-per-gallon by 2025.
Weeks concluded with remarks about Corning’s sustained investment in research and development. “Corning’s investment in innovation gives us a strong competitive advantage. On average, we invest in research and development at slightly more than twice the rate of our peers. That investment provides an attractive return by supporting greater profitability. Our operating margin averages 2.5 times our peers. This is a significant premium enabled by our investment in near- and long-term opportunities,” he noted.
Sustaining Momentum in All Businesses
James P. Clappin, president of Corning Glass Technologies, addressed the continued strong profit expectations for his business group, comprising the Display Technologies and Specialty Materials segments.
“2015 will be all about large-size LCD TVs,” Clappin stated. “This segment of the display industry grew more than 50% year over year on a unit basis in 2014, and our analysis shows that the average TV screen size is growing more than 1 inch per year. Importantly, every inch in screen-size growth equates to about 150 million square feet of additional glass demand.”
He noted that this growth comes from three key drivers: sleeker form factors; superior viewing experience, particularly from Ultra HD technology; and an affordable upgrade environment. “The consumer who bought a 40-inch HD TV six years ago, can now get a 55-inch TV for the same price, with a dramatically improved viewing experience.”
Corning forecasts the display industry’s total glass market will exceed 5 billion square feet by 2016, with large-size LCD TV viewing area growing more than 30% over this forecast horizon. As Clappin outlined, Corning is well-positioned to address this growth opportunity with a competitively advantaged combination of manufacturing efficiency and capacity; outstanding product and process innovation; and market leadership.
Clappin noted that the cover glass market is also expected to grow, powered by the smartphone segment increasing in both unit volume and screen size. Emerging markets, particularly China, are integral to this growth.
“Since it was introduced in 2007, Corning® Gorilla® Glass has defined innovation in the cover glass market,” Clappin said. Corning’s continued advancements in cover glass technologies include Gorilla Glass 4 as well as glass material enhancements for improved scratch-resistance, 3D shaping, and several other surface capabilities. “We have developed a new product that will provide sapphire-like scratch resistance while maintaining the legendary toughness and break resistance of Gorilla Glass,” he added.
Eric S. Musser, executive vice president of Corning Technologies and International discussed Corning’s Environmental Technologies and Life Sciences segments, two businesses that share a common goal of enabling healthier lives worldwide.
“Demand for cleaner air worldwide continues to drive growth for Corning’s Environmental Technologies business,” Musser told investors as he reviewed plans for building on the record core sales and profitability performance achieved in 2014.
“On a global scale, we expect regulated heavy-duty vehicles to grow 10% to 15% over the next several years. And, tighter emissions standards typically mean more of our product per vehicle is required to reduce those emissions. These advancing regulations, along with auto production growth of about 3% year over year, present a positive earnings outlook for our business,” he said.
Musser highlighted key product innovations that are expanding Corning’s market reach in the emissions control industry. “In addition to the breakthrough FLORA technology, designed to activate 20% faster than conventional substrates, we are excited about the opportunity to develop brand new markets for our innovations, like filters for gasoline engines,” he said. “We are developing highly effective gasoline particulate filters with major auto makers who are using gasoline direct injection (GDI) technology, and we expect to win platforms this year. This could be a $100 million opportunity for Corning by the end of this decade.”
“We also like the opportunities ahead of us in our Life Sciences business in which we have the market position, portfolio, and strategy for growth,” Musser continued. “For a full century now, Corning has been pioneering innovations in drug discovery, a distinction that affords us a trusted leader position and a broad customer base, providing stability and growth.”
“Virtually every research laboratory in the world uses our products,” Musser noted. “Emerging markets are growing rapidly, led by China with 8% annual growth. We are well-positioned to capture opportunities from that growth.”
Musser noted Corning’s plans for building on its strength in cell culture innovation. “Drug production is undergoing a shift from the chemically-based treatments that we’ve always known, to new highly effective biologic therapies that are based on cell culture. This is currently an $8 billion segment, with a 10% annual growth rate. Our plan is to serve our customers throughout their entire process, from research to full production.”
Clark S. Kinlin, executive vice president of Optical Communications, reviewed Corning’s plan for continued growth in optical networks.
Kinlin provided investors with a review of data growth rates and rapidly evolving network dynamics. “The growth of data and the way we use that data continue to pressure the ‘edges’ of the networks worldwide, especially in Fiber-to-the-Home, data centers and wireless,” he said. He noted that the Fiber-to-the Home market is expected to grow 9% to about $3 billion over the next five years; the optical data center market is expected to grow 10% to $1 billion over the next five years, with hyper-scale data center demand growing faster; and the global distributed antennae system (DAS) wireless market is expected to grow by about 14% annually to $1 billion in 2018.
Kinlin told investors that Corning’s Optical Communications segment expects to leverage these market opportunities and strategic acquisitions for continued growth by providing optical solutions that solve customers’ speed, capacity and cost challenges. “We expect greater than 10% revenue growth in the first quarter and high-single-digit growth for 2015,” Kinlin said. “And, we believe that being in the right segments with the right products – along with exceptional process technology and operational efficiency - will lead to double-digit profit growth in 2015.”
James B. Flaws, vice chairman and chief financial officer, noted that Dow Corning Corporation, of which Corning is a 50% equity owner, continues its global leadership in both silicone and polysilicon materials. Corning’s 2015 equity earnings from Dow Corning are expected to be consistent with 2014’s strong core results.
Delivering Value to Shareholders
Flaws reviewed details of Corning’s solid financial position and expectations for continued growth. In summarizing Corning’s outlook for 2015, he noted that Corning Display Technologies is expected to deliver core earnings results consistent with 2014 and Corning’s four other business segments, in aggregate, are expected to increased sales and profitability.
“The bottom line is that 2015 should be another year of core earnings growth. Our businesses are delivering additional core earnings, and our lower share count from the execution of our share repurchase program enables higher earnings per share,” he said.
In concluding the meeting, Flaws added, “We are entering 2015 with positive momentum in all of our businesses. Our investment in RD&E is paying off. And, we are delivering significant value to our shareholders.”
Conference Broadcast Information
Corning’s annual investor meeting is being held on Friday, Feb. 6 at Cipriani, located at 55 Wall St., New York. Corning will make the presentation at its annual investor conference available to the public through a video and audio webcast and telephone access. The broadcast will begin at 8:30 a.m. EST. The dial-in number is 877-878-2857 (U.S.) or 678-894-3959 (International). The call title is Corning Incorporated 2015 Investor Meeting. A replay of the call will be available at 2 p.m. EST and will run through 5 p.m. EST on Tuesday, Feb. 10, 2015. To access the replay, dial 855-859-2056 or 800-585-8367 (U.S.) or 404-537-3406 (International). The conference ID is 77031439. The webcast will be archived for one year following the call.
Presentation of Information in this News Release
Non-GAAP financial measures are not in accordance with, or an alternative to, GAAP. Corning’s non-GAAP financial measures exclude the impact of items that are driven by general economic conditions and events that do not reflect the underlying fundamentals and trends in the company’s operations. The company believes presenting non-GAAP financial measures assists in analyzing financial performance without the impact of items that may obscure trends in the company’s underlying performance. Detailed reconciliations outlining the differences between these non-GAAP measures and the most directly comparable GAAP measure can be found on the company’s website by going to www.corning.com/investor_relations and clicking “Financial Reports” on the left. These reconciliations also accompany this news release.
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995), which are based on current expectations and assumptions about Corning’s financial results and business operations, that involve substantial risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: the effect of global political, economic and business conditions; conditions in the financial and credit markets; currency fluctuations; tax rates; product demand and industry capacity; competition; reliance on a concentrated customer base; manufacturing efficiencies; cost reductions; availability of critical components and materials; new product commercialization; pricing fluctuations and changes in the mix of sales between premium and non-premium products; new plant start-up or restructuring costs; possible disruption in commercial activities due to terrorist activity, armed conflict, political or financial instability, natural disasters, adverse weather conditions, or major health concerns; adequacy of insurance; equity company activities; acquisition and divestiture activities; the level of excess or obsolete inventory; the rate of technology change; the ability to enforce patents; product and components performance issues; retention of key personnel; stock price fluctuations; and adverse litigation or regulatory developments. These and other risk factors are detailed in Corning’s filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the day that they are made, and Corning undertakes no obligation to update them in light of new information or future events.
About Corning Incorporated
Corning (www.corning.com) is one of the world’s leading innovators in materials science. For more than 160 years, Corning has applied its unparalleled expertise in specialty glass, ceramics, and optical physics to develop products that have created new industries and transformed people’s lives. Corning succeeds through sustained investment in R&D, a unique combination of material and process innovation, and close collaboration with customers to solve tough technology challenges. Corning’s businesses and markets are constantly evolving. Today, Corning’s products enable diverse industries such as consumer electronics, telecommunications, transportation, and life sciences. They include damage-resistant cover glass for smartphones and tablets; precision glass for advanced displays; optical fiber, wireless technologies, and connectivity solutions for high-speed communications networks; trusted products that accelerate drug discovery and manufacturing; and emissions-control products for cars, trucks, and off-road vehicles.