Q1 2012 Earnings Call
April 25, 2012 8:30 am ET
Kenneth Sofio -
James B. Flaws - Vice Chairman, Chief Financial Officer, Member of Executive Committee and Member of Finance Committee
Wendell P. Weeks - Executive Chairman, Chief Executive Officer, President and Chairman of Executive Committee
Richard Eglen - Vice President and General Manager of the Corning Life Sciences Business Segment
Ehud Gelblum - Morgan Stanley, Research Division
Mark Sue - RBC Capital Markets, LLC, Research Division
Nikos Theodosopoulos - UBS Investment Bank, Research Division
Amir Rozwadowski - Barclays Capital, Research Division
Rod B. Hall - JP Morgan Chase & Co, Research Division
Jim Suva - Citigroup Inc, Research Division
Simona Jankowski - Goldman Sachs Group Inc., Research Division
Carter B. Shoop - KeyBanc Capital Markets Inc., Research Division
George C. Notter - Jefferies & Company, Inc., Research Division
Wamsi Mohan - BofA Merrill Lynch, Research Division
Previous Statements by GLW
» Corning Inc. - Analyst/Investor Day
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» Corning Inc. Presents at UBS Global Technology and Services Conference 2011, Nov-15-2011 11:30 AM
Ladies and gentlemen, thank you for standing by. Welcome to Corning First Quarter Conference Call. As a reminder, this conference is being recorded. Now I'd like to introduce Ken Sofio, Vice President of Investor Relations. Please go ahead.
Thank you. Good morning. Welcome to Corning's first quarter conference call. Jim Flaws, Vice Chairman and Chief Financial Officer, will start the call with some prepared remarks. Wendell Weeks, our Chairman and Chief Executive Officer; as well as Dr. Richard Eglen, Vice President and General Manager of Life Sciences, will join us for the Q&A.
Today's remarks contains forward-looking statements that follow within the meaning of the Private Securities Litigation Reform Act of 1995. They involve a number of risks, uncertainties and other factors that could cause actual results to differ materially. These risks are detailed in the company's SEC reports.
And now, I'd like to turn the call over to Jim Flaws.
James B. Flaws
Thanks, Ken. Good morning, everyone. Hopefully, you had a chance to read the press release we issued this morning on our first quarter results. If you haven't, a copy can be found on our Investor Relations website.
I'd like to begin with our key messages this morning. Two months ago, at our Annual Investor Meeting, we announced we were facing a significant reset in the company's profit levels. The reset was primarily due to significant price declines we were experiencing in our Display business over the fourth quarter of 2011 and the first quarter of 2012. We told you one of the most important objectives was to reduce the level of these very significant quarterly price declines. This morning, I'm very pleased to report we expect our gas price declines in the second quarter will be much more moderate than the average of the previous 2 quarters. In terms of glass shipments, Display volume was better than we expected in the first quarter. Volume at our wholly-owned business was up in the mid-single-digit sequentially versus our expectations of being flat. SCP volumes were down less than 10% sequentially, which was also better than our guidance of down in the low double-digits.
We told you at our Investor Meeting that in addition to needing significant slowdown in the glass price declines, we also needed to continue to grow our other businesses. I'm very pleased that in the first quarter, all our other businesses grew sequentially. Specialty Materials sales were up 21%, led by the stronger-than-expected demand for Gorilla Glass. Sales in Environmental were up 12%, also more than anticipated.
We also told you to reach our goal of $10 billion sales by 2014, we would supplement organic growth with acquisitions. Hopefully, you saw our announcement to acquire a significant portion of Becton Dickinson's Discovery Labware unit. This acquisition is expected to be completed later this year and is part of our strategy to becoming a bigger, more balanced company. We're delighted with this pending transaction. Several years ago, we established the plan to grow our Life Sciences business to be a $1 billion business. We have grown organically, and with the acquisitions of Axygen, Gosselin and Mediatech reached nearly $600 million last year. The pending purchase of BD's Discovery Labware unit will complement our existing portfolio and provide access to new customers. We believe this business will help catapult our Life Science segment towards its $1 billion goal by 2014. I'll share some more details on this shortly.
I do want to stress this transaction will not impact our ability to increase dividends or buy back additional shares. And we have the financial flexibility to pursue additional acquisition opportunities in both Life Sciences and Telecom. For those who have not had a chance to see our balance sheet yet, we ended the quarter with $6.8 billion in cash.
In summary, we are pleased with our first quarter results and our progress against our key initiatives. So with that intro, I'll walk you through our Q1 results and our Q2 outlook.
First quarter sales were $1.9 billion, up slightly sequentially and consistent with a year ago. Gross margin was 42.4% and lower than the fourth quarter, as we had expected. Lower gross margin in Display offset improved gross margins in Environmental, Specialty Materials and Life Sciences. SG&A was lower on a dollar in the percentage of sales basis while R&D was slightly higher. Equity earnings of $218 million were down about 10% sequentially, compared to equity earnings, excluding special items, of $241 million at quarter 4. Now, as a reminder, we had excluded a significant onetime gain that occurred at Dow Corning in Q4.
Earnings per share excluding special items were $0.30, just slightly lower than Q4, but a material decline from a year ago. Growth equity earnings in EPS is stated here in non-GAAP measures. You can find a reconciliation to GAAP on our website.