Corning's CEO Hosts Annual Investor Meeting Conference (Transcript)

| About: Corning Inc. (GLW)

Corning Inc. (NYSE:GLW)

Annual Investor Meeting Conference Transcript

February 7, 2014 9:30 AM ET


Ann Nicholson - Division Vice President, IR

Wendell Weeks - Chairman and CEO

Clark Kinlin - EVP, Corning Optical Communications

Mark Beck - EVP, Corning Environmental Technologies & Life Sciences

Jim Clappin - President, Corning Glass Technologies

David Morse - Chief Technology Officer

Jim Flaws - Vice Chairman and CFO

Dr. Jeffrey Evenson - Senior Vice President and Operations Chief, Staff


Mark Sue - RBC Capital Markets

Ehud Gelblum - Citigroup

Wamsi Mohan - Bank of America Merrill Lynch

Amitabh Passi - UBS

Steve Fox - Cross Research

Albert Moel - Sanford Bernstein

Brian White - Cantor Fitzgerald


Please welcome Ann Nicholson, Division Vice President, Investor Relations.

Ann Nicholson

Good morning. It’s my pleasure to welcome you to Corning's Annual Investor Meeting. I’d also like to welcome those investors who are listening on the conference call and through the videocast on our website.

Before I get started, I need to remind you that today's remarks and Q&A contain forward-looking statements. You should also note that these presentations contain a number of non-GAAP measures. Reconciliation can be found in the back of the presentation, as well as on our website.

Now, logistics, first, there is free wireless for use during this meeting and a website containing a slide presentation, if you’d like to follow along at your table, the information that you need to access both is here in the program.

Second, we do have a partying gift from Victor the Gorilla for those in attendance. If you are interested, you stop by the registration desk on your way out, drop off your badge and you can receive it.

And third, if you haven’t already please turn your cell phones to vibrate.

We have a full agenda today. Our Chairman and CEO, Wendell Weeks will kick off with both the historical look at the company's accomplishments and a look forward into what we believe is an exciting future for Corning.

Our three business group leaders, Clark Kinlin; Mark Beck; and Jim Clappin will update you on growth opportunities in existing businesses. Our Chief Technology Officer, David Morse will tell you how our approach to innovation keeps Corning relevant and sustainable in the long-term and introduce you to some new technologies under development.

Finally, CFO, Jim Flaws will pull together our outlook and detail our cash priorities. Then we will move to Q&A. I hope you find the presentation this morning to be informative.

And with that, I’ll turn the podium over to Wendell.

Wendell Weeks

Thank you, Ann. Good morning all. It’s my pleasure to welcome all of you to Corning’s Annual Investor Meeting and I am delighted to be joined today by five of my colleagues and the leadership team. They have all delivered significant results and this is a great opportunity for you to see why I have so much confidence in them.

We will spend most of our time discussing Corning's outlook. Our near-term growth prospects in today's businesses, our growth opportunities over the next several years and our ability to deliver sustainable growth in the future.

But first, I want to step back and remind you of our focus for the past two years. As most of you know, Corning experienced a steep drop in profitability in 2011. Our mandate was clear. We had to form bottom and march up.

Last year, I told you, we would reestablish positive momentum in display technologies by maintaining moderate price declines, advancing our efforts with next-generation displays and creating advantage relationships with customers.

We would drive earnings growth by improving sales and profits in our other businesses, as well as reducing costs across the company. And we would maintain strong cash flow, which would create the opportunity to return cash to shareholders.

So how do we do it? At this time last year, Corning had just reported its first quarter of year-over-year earnings per share growth in two years. We were on a long way from declaring victory but I told you I was confident we would begin our march up in 2013. And I'm pleased to report we did just that.

Two weeks ago we reported our fifth consecutive quarter of year-over-year EPS improvement and we did it in a difficult external environment without much wind at our back. All of our businesses contributed. Display maintained moderate price declines for LCD glass and reduced manufacturing costs. Optical Communications, Specialty Materials, Environmental and Life Sciences all improved operating performance. And their aggregate net income improved 22% in 2013. So we are extremely pleased with our execution.

We’re also outperforming the competition. Despite a weak economy, our experienced leadership team is effectively managing Corning's assets to drive growth in a tough environment. Over the last three years, three out of four of Corning's divisions have grown sales faster than their closest competitors and all of them have significantly outperformed their competitors on profitability.

As our performance improved, we honored our commitment to return cash to shareholders. In 2013, we increase the dividend 11%. We also launched $2 billion share repurchase program, 75% of which was completed by year end. Then last October, we announced an additional $2 billion share repurchase in conjunction with our plans to acquire full ownership of Samsung Corning Precision Materials.

So in just over two years, we have doubled the dividend and repurchased 13% of outstanding shares. As our earnings improved, so did Corning's stock price. Our stock was up 41% in 2013 and as you can see from this chart, Investors really liked our SCP transaction.

Now most of you have seen this slide before, so I won't go through it in detail but this transaction delivers significant strategic and financial benefits to Corning. It increases our revenue, net income and cash balances while creating a new long-term source of cash flow. It strengthens our LCD business. It broadens our collaboration with the global electronics leader and we believe it provides outstanding returns to shareholders.

So we’ve delivered on our promise to restore earnings growth. Now we need to create Corning's next growth surge. Fortunately, this is familiar territory to us and we’re armed with the right tools. Corning's history is characterized by periods of growth in transitions which are followed by the next growth surge. When we experience inevitable setbacks, we innovate our way out.

So before I turn the podium over to my colleagues, I want to share some examples of how Corning has delivered game-changing innovations throughout our 163-year history and how we are applying that same formula today to create our next wave of growth. First, you need to understand what really makes us tick.

At Corning, we are driven by our desire to create life-changing innovations. We sincerely want to change the world and enhance people's lives with our unique capabilities. And so how do we do it? We start with a really tough problem. We work closely with customers to understand their needs and their systems. Then we apply our deep materials knowledge and process engineering expertise to develop high impact solutions that almost always involve both product and process innovations.

Finally, we continue to innovate throughout the lifecycle of the product to enhance performance, add new attributes and reduce costs. The result is a stream of innovations that transform industries and create long-term advantage for Corning.

Let’s look at some examples. In 1879, Thomas Edison turned to Corning because he needed an enclosure for his carbon filament. We made his electric light a reality by developing the first light bulbs. But electric lighting wasn't viable for the general population without an economical method for mass producing the bulbs.

So in 1926, Corning solved that problem by inventing the ribbon machine, which made it possible to produce more than 1000 bulbs a minute. Our innovations made electric light a feature of everyday life.

Let's jump ahead to the 1950s. Corning was undergoing a transition as demand for industrial materials slowed. While experimenting in the lab, Corning scientist Donald Stookey developed a new glass ceramics material that made it possible to go from extreme cold to extreme heat while retaining its stability. Many of you know this material firsthand. It was marketed to consumers as CorningWare and it sparked a revolution in the kitchen as well as a major growth surge for Corning.

Now let's move to the late 1960s. Telephone systems were being strained and carriers were looking for ways to increase capacity. Charles Kao theorized that optical technology could be used for high-bandwidth communications if researchers could identify an effective way to transport laser generated light with minimal signal loss.

Corning scientist made that theory a reality by inventing low-loss optical fiber and we followed that by developing a manufacturing process that enabled widespread deployment. Corning's innovations have led to the installation of nearly 2 billion kilometers of optical fiber worldwide in the revolution in communication.

Corning scored with another major innovation around that same time in 1970. Congress passed the Clean Air Act, which required a 90% reduction in auto emissions by the 1975 model year. That gave car companies only about three years to go from basic research to manufacturing.

It was considered almost an impossible task until Corning invented a ceramic substrate for converting emissions into harmless compounds. It required a material that would withstand temperature surges of up to 2000 degrees Fahrenheit and the revolutionary manufacturing process to turn ceramic paste into a honeycomb structure with thousands of parallel channels.

Thanks to the catalytic converter. Today’s cars, a myth, 99% less pollutants than in 1970. In the 1980s, Japanese display makers began introducing LCD technology. Among them was Sharp Electronics who wow to make the CRT obsolete. They turned to Corning to help realize that goal.

One of their most significant requests was for a glass composition that didn’t require pollution. It was driven by their desire to lower production cost, but Corning delivered a fusion-formed glass that not only eliminated the need for pollution, it provided a surface quality way beyond their expectations.

Thanks to Corning’s invention. Display makers were able to produce larger panels, improve attributes, and sustain a rapid pace of innovation for many years. It worked out pretty well for Corning as well.

My last example is a story that many of you are familiar with. When a major consumer electronics company came to us searching for a touch cover material for its new smartphone, we developed a new glass composition that was scratch and damage resistant, thin and lightweight, and cooler to the touch than other materials.

And when the customer wanted that glass in a significantly larger volume than we expected, we adapted our fusion process in a rapidly scaled-up manufacturing, taking Gorilla Glass from idea to mass production in six months. Gorilla Glass became one of the fastest-growing products in Corning’s history and continues to unlock new opportunities for us.

Those are just a few examples of Corning innovations that have driven major growth surges. You can see that our products end markets have changed many times over the years, but our innovations share fundamental ingredients, a really tough problem, a combination of materials and process innovation, and a solution that makes a real difference in people’s lives. They also reflect a culture that is committed to research and development because we understand that our investments in innovation create Corning’s future revenue drivers. We continue to apply that strategy and philosophy today.

Three years ago we shared our vision for a world powered by specialty glass and we were amazed by the reaction. People were excited by the idea of living in that world, a world of ubiquitous displays, intuitive interfaces, seamless delivery of real-time information and everyday surfaces with extraordinary capabilities. Our stakeholders were also excited about the opportunities this world creates for Corning because it depends on highly engineered specialty glass and fiber optics.

In three short years, we have made significant progress bringing this world to life. Our video portrayed an 'always on' world with massive amounts of data that you can access anytime, anywhere under the toughest conditions. We are currently rolling out an all-optical distributed antenna system called ONE Wireless.

Our solution enables clear signals and maximum bandwidth, even in really tough indoor environments, like convention centers and sports stadiums and it’s easy to install and much more flexible to upgrade than traditional DAS solutions. Out of approximately 5 million commercial buildings in the United States, less than 10% currently have an indoor cellular network, so this is a huge opportunity for us.

We showed you next generation displays. They combine the flexibility of plastic with the superior transparency, stability and optical quality of glass. Since then, we’ve rolled out our ultra-slim Willow Glass which is thinner than a dollar bill, and we’ve continued to improve its flexibility and reliability, you are looking at our latest composition. Did you ever think you’d see a glass that could do this?

Global shipments of flexible displays are expected to reach almost 800 million units by 2020 and we expect to participate in a big way. We also envisioned antimicrobial glass that kills bacteria and viruses on surfaces. Last month we launched the world’s first antimicrobial cover glass, which combines all the benefits of Gorilla Glass with an antimicrobial agent that inhibits the growth of bacteria, mold and mildew and we have a next generation glass in our labs that kills 99.99% of bacteria.

I am sure you can imagine the potential applications, but here some food for thought. More than 1 billion touch devices were sold last year alone. The typical smartphone has around 25,000 bacteria per square inch and the average person touches their face 16 times an hour. Now tell me what kind of glass do you want in your fingertips and touch technology is really just the beginning. We also see enormous potential for our glass in places like hospitals that require cleaner surfaces.

In United States, one in 20 patients develops an infection in hospital that they did not have when they enter. Those infections contribute to nearly 100,000 deaths and caused the U.S. $30 billion annually. So, that’s a problem. We are excited to be a target.

We showed you electrochromic windows that go from transparent to opaque to increase our comfort and reduce energy consumption. Today, we are invested in and working with the company called, View to develop dynamic, architectural glass that can significantly lower energy costs.

Now what does Corning bring to the table? It’s actually very similar to what we did for LCDs. The pristine surface quality and mechanical stability of our glass enables View’s electrochromic capabilities while increasing their yields and lowering production costs. The market opportunity for commercial windows in more than 25 billion square feet and we think dynamic windows will capture a significant portion of that.

Finally, we showed you cars with smart surfaces, and described how Gorilla glass can reduce a car's weight and improve fuel economy. But automakers are also discovering the value of Gorilla for applications that we didn't anticipate. BMW is incorporating Gorilla Glass into an interior window of their i8 sports car, to provide an acoustical barrier against unwanted noise. We're also working with several other major carmakers to incorporate Gorilla into different parts of the vehicle, such as sunroofs and windshields.

The auto glass market is 5.5 billion square feet, and laminates account for 60%. We have a strong value proposition for Gorilla Glass in this market. So we really like our hand. Now those are just a few of the new products that we're excited about. I don't have time today to show you all of them, and quite frankly there are some I can't show you. But you can see, they were not only continuing our track record of producing life-changing innovation.

We're capturing multiple opportunities in diverse industries. I hope this gives you a better understanding of why we're so confident in our ability to create Corning's next growth surge and deliver value over the long-term. Corning has always been about more than the individual product we develop. Or the businesses, that we are currently in. Our products change, our markets change, and our businesses change, but what doesn't change is our capacity for innovation, our unique capability set and our ability to transform and lead markets.

We'll continue to solve tough problems. We'll continue to participate in important industries. We'll continue to make things that matter. Here's what I'd like you to take away from y presentation this morning, we did what we said we were going to do. We restored earnings growth and we're marching on. We are creating significant value for our shareholders.

We have a set up core capabilities that are vital to today's most important industries. And which remained vital, no matter how much precuts and markets change. Finally, our commitment to life-changing innovation and our ability to solve tough problems will continue to drive our growth. Thank you.

And now it's my pleasure to introduce Clark Kinlin, Executive Vice President, of Optical Communications.

Clark Kinlin

Good morning and thank you, Wendell. As always I'm pleased to talk with you today about our business and our plan for pursuing continued optical growth across communication networks. My three key points for today are, first, that the relentless growth of bandwidth demand continues. And this demand fundamentally driven by video is creating huge amounts of data, store, process, transport and access. It is straining today's communication networks and data centers.

Second, the network operators increasingly turn to optical based solutions to meet the required targets associated with cost, capacity, and speed. And finally, and customers will increasingly turn to Corning, to provide innovative solutions across a growing set of applications. For wherever the conversion from legacy copper to optical based systems is being driven. As a result we've renamed our segment Corning Optical Communications. It reflects both our deep optical expertise and our intent to pursue growth across a more broadly defined communications segment.

Let me now turn to my first point, relentless bandwidth demand remains a significant challenge for network operators. Cisco expects global IP traffic to grow 23% per year through 2017, nearly tripling over a 5-year period. But more impressive is the sheer scale of data involved. Increasingly in the form of richer content webpages, photographs and videos, ultimately viewed on more capable high-resolution displays.

In aggregate by 2017, global IP networks are expected to be transporting a gigabyte equivalent of all the movies ever made every 3 minutes. And this data increasingly cross the path of data centers which is one of the growth drivers for our business. Global IP traffic transported to-from and inside data centers, is expected to reach 7.7 zettabytes per year in 2017, a 25% growth rate for the next several years.

Increasingly, this data is being processed in the cloud, cloud traffic is expected to reach nearly 70% of total data center traffic within the next few years and these trends, favor optical both inside the data center and across the network. Cloud computing drives the need for higher upload and download broadband speeds, the need for lower latencies across all forces of the network and the move to scalable architectures within data centers at longer distances and speeds migrating to 100 gigabits per second.

Only optical with its inherent advantages over copper provides lower power consumption along with the higher capacity, speed and densities required across this broad range of applications, which leads me to my second point. At the core of our business, Corning is a global leader in optical components, with leading technical positions and the intellectual property to match, with nearly one 1900 granted patents.

Our work began over 40 years ago, with the invention of the very first low-loss optical fiber and it continues to the present day with ongoing innovation across optical fiber, cable, connectors, hardware and more recently active components. Recent innovations include SMF-28 ultra fiber, our latest single-mode fiber, which combines industry leading attenuation and bend performance. FastAccess cable technology, which makes cable insulation faster and safer, by eliminating the need for sharp tools to remove cable's jackets.

Our recently launched fiber management hardware at the local area networks, designed as the thousands of hours of customer feedback, this hardware offers more than two dozen new features for easier fiber management information. We expect continued growth across these products. We are the fundamental building blocks of optical networks and when they are integrated into optical solutions they are even more valuable for customers they sold network challenges deployment speed, flexibility and reliability, while lowering total cost. For Corning, they double our revenue in margin dollar opportunity, at we're slightly above our standard margins, when compared to selling individual components.

Built on a solid foundation, of the optical components we just discussed, we have pursued and delivered an increasing number of integrated optical solutions, for a variety of network applications, including fiber-to-the-home, where we have innovated high-density preconnecterized solutions from the central office to individual homes to enable major carrier deployments across the globe.

And for multi dwelling units where our RPDpass solutions provide extremely quick-to-install pre-connectorized solutions that keep building owners happy while eliminating the time and cost of slicing.

In data centers, where our Pretium EDGE Solutions received the 2013 data center facility product of the year award. In switching centers such as central offices and head ends where our new Centrix Platform provides a balance of high density fiber management with innovative jumper routing. And in wireless networks, where our Distributed Antenna System provides ubiquitous wireless coverage and capacity to a growing list of high profile venues including 12 NFL football stadiums and seven Major League Baseball parks.

In aggregate, these solutions have driven the double-digit sales in profit growth we have experienced over the past three years, allowing us to outpace our competitors and telecom industry CapEx growth. And the good news is that we have no shortage of optical solutions to innovate and commercialize. Here is what’s coming up.

More than in other time, we have a strong pipeline of optical base solutions that will add to our sales growth this year. Our one wireless platform has a growing sales pipeline and provides the nearly unlimited bandwidth carrying capacity of fiber all the way to your antenna. Compared to alternatives, it costs no more today and half as much for future upgrades such as three and four band cellular MIMO and Ethernet applications.

We also continue to extend our Pretium Edge Solutions. Our recent work with Intel to support its silicon photonics technology program has lead to the launch of new multi-mode fiber and multi-fiber connector designs capable of sending massive amounts of data up to 1.6 terabits per second, at lengths up to 300 meters to help speed the industry’s transition, cloud computing, big data and rack scale architectures.

We’ve also released advanced optics components that provide easy upgrade paths for migration of 40 and ultimately 100G systems. We are also ramping sales of our optical cables by Corning that enable real time, high speed downloads between computers and external displays, video cameras and hard drives as well. These cables are available in many distribution channels including Apple’s website and also being used to run all of the multimedia here at today’s event. The net result is after 2014, we expect our sales in profit growth to be at least twice the telecom industry CapEx rate.

I thank you for your attention and it is now my pleasure to introduce my colleague, Mark Beck, to share with you his views on Corning’s environmental and science products businesses.

Mark Beck

Thank you, Clark and good morning everyone. I will be discussing two businesses that may seem quite unrelated but in fact they share common goals, that is to enable healthier lives worldwide and to generate attractive returns for our shareholders.

I would like to get started with environmental technologies. So our substrates and filters have been improving air quality ever since we invented this technology 40 years ago. Our products can now be found cleaning emissions from all sizes of gasoline and diesel-powered vehicles, as well as found in power generation plants.

We like the environmental business for several reasons. First, this technology is one of our most important life changing innovations. It has improved the air quality for everyone of us here and for billions of people around the world.

Second, because the clean air is a universal need, there are significant growth opportunities in the emerging economies. And third, because regulators, the world over continue to raise the bar. We have opportunities to continue to innovate and to deliver more advanced materials and ever higher levels of performance.

I would like to detail for you just three promising growth opportunities. First, new heavy-duty regulations in Europe became mandatory just last month and new regulations in China took effect last July. While compliance in China may take time, we are already seeing enforcement intensify this year.

We also expect to see those regulations tightened in the future, requiring even more components to meet stricter emissions limits. We have a proven suite of advance substrates and filters specialized regional products and a capacity plan to meet this growing demand. Order rates in both of these regions have already began to ramp up.

Regulators have raised the bar in California with LEVIII and the U.S. CPA has proposed a similar standard with their Tier 3 regulations. These rules require an additional 75% drop in tailpipe emissions beginning the model year 2017.

In gasoline engines, up to 70% of the total emissions can occur during the first 30 seconds after engine start. These cold start emissions are key to addressing these new tighter standards and we have a product design just to do that. Our breakthrough material has significantly less thermal mass. This allows the entire system to heat up and start cleaning the air faster.

The image on the left shows a screen capture of the heat-up demonstration we featured in our exhibit this morning. Our invention also improved skill efficiency and can lower overall system cost by reducing precious-metal use by our customers. This solution creates so much customer value that we expect to be able to secure premium pricing of up to double that of our standard products. We expect to win our first major OEM platform with these products in the first half of this year.

Drivers want both better fuel economy and higher engine performance. Many OEMs are planning to achieve this using gasoline direct injection or GDI engine technology. Now while GDI engines do enhance performance, they also tend to generate very high numbers of particulates and the filter is needed to capture these particulates and prevent them from becoming part of the air that we breathe.

We believe that starting in Europe, a market will emerge for these new filters and we are convinced that we have the right product to meet our customer’s need. By working closely with leading OEMs, we have developed and tested our new filter solutions extensively and expect to begin wining OEM platforms in the second half of this year.

Meanwhile, our relentless focus on manufacturing improvements and other cost efficiencies is working. In fact gross margin has improved more than 900 basis points since 2010 and we have additional cost reduction programs underway now. We expect these programs to continue delivering very attractive incremental margins allowing us to produce double-digit earnings growth.

So, in summary, we like our hand in environmental. Well, over the past two year sales were impacted by the European recession and the decline in heavy-duty builds in North America, we are beginning to see early science of improvements in both of these markets.

As a long standing leader in global clean air solutions, we're ready to provide the technology and products for the next-generation of emissions control. And we continue to focus on operational efficiencies, so as our markets improved and new opportunities emerged, environmental will be in a strong position to deliver double-digit profit growth.

I'd now like to turn our attention to life sciences. We have been a global supplier of life science tools for more than 95 years. We believe that our technologies help advanced the industries goal of more affordable and effective medicines and as that growth is realized, we'll continue to generate solid returns for Corning.

We like the life sciences industry for several reasons. First, our base business can deliver reliable growth and we have been growing faster than our competition. Second, capital intensity is low and R&D spending is moderate.

Third, there are tough customer problems to solve in the area of larger scale cell culture. You see we were pioneers in the area of smaller scale in the laboratory cell culture known as research cell culture and we're using that experience and acknowledge to enter into the faster growing larger scale area of production cell culture also known as biomanufacturing.

The pharma industry is undergoing a major shift from chemically drive drugs to biologically drive drugs. We like this trend, because more biologic drugs means they need for more cell culture and as I said, we've been an innovator and a market leader in this area and with the addition of Discovery Labware our offering has grown even stronger. So we are now developing and launching products to serve the drug marker -- maker not only in research but also in biomanufacturing.

Let's take a look at just a few of the products that we believe we'll make a difference. As biotech drugs take off, our customers need new ways to dramatically increased cell production.

Our HYPER series of breathable cell culture vessels enable customers to use their current incubator space to achieved much greater cell output. This helps drug makers save on both capital and operating costs.

Biomanufacturing vessels of this scale are still an emerging segment, but with expectations to grow to $200 million, using our high-density technology we have already claimed a leading position in this growth area.

Now another way to increase cell production is to move from attachment to free floating cell culture. In this approach the cells are placed in a large vat of liquid and grown in solution. This works well for some cell types, but many important cell lines cannot survive without a surface to grow on.

We have developed microcarrier beads to address this issue. With these beads customers can effectively grow large numbers of attachment cells in solution. We enhance the performance of our beads with unique coatings and surface treatments, such as Synthemax and CellBIND.

Cells also require nutrients to grow. These nutrients are provided by the cell growth surface and through the liquid media. When growing cells for research in a laboratory is common to use surface coatings and media which have been derived from animals.

However, when cells or cell components are intended to be used as the drug, the risk associated with animal drive materials are a real concern. We have products to address this issue as well, synthetic, animal free coatings and serum free media enable the move to animal free cell culture without compromising performance.

Now we are new to the media market but with innovative products like this along with our historic strength in cell culture vessels, we expect to grow our position in this $1 billion market.

As you can see, we like this business with our focus on higher growth opportunities like biomanufacturing along with our new innovations and selective acquisitions, our sales and profit growth will continue to outpace the industry we serve.

Similar to the environmental business, we have manufacturing programs in place to lower costs and enhance gross margins. I believe this business will continue to deliver double-digit profit growth.

So, in summary, environmental technologies and life sciences are both attractive businesses with unique technologies and products. Both our leaders in markets that are growing and both have important opportunities to solve tough customer challenges. As a result, we expect to see both of these businesses grow sales and delivered double-digit profit for Corning. Thank you.

And now, I would like to introduce my friend Jim Clappin, who leads our Glass Technologies Group.

Jim Clappin

Thank you, Mark. Good morning, everyone. Today, I will be speaking to you about Corning Glass Technologies, our mission, our business performance and our near-term outlook. Before I get underway, here is a quickly review of the businesses that make-up Corning Glass Technologies.

The glass group combines our display business, which concentrates on LCD glass and advanced substrates for high performance displays, with the specialty materials business, which includes Gorilla Glass for handheld, IT and large screen applications.

We're delighted to welcome to our family Corning Precision Materials, the new name with former joint venture between Corning and Samsung, which we took full ownership in January.

We believe that full ownership of these assets offer significant benefits to our business in 2014 and beyond. I'll provide more specifics later in my remarks. The advanced optics business under specialty materials, which provides optical solutions for a number of applications, will not be cover today given the limited time.

Let’s get started. At last year’s conference, I told you that Corning Glass Technologies set out to accomplish two primary objectives, stabilized display, leading to consistent profits and grow Gorilla Glass sales and profits. Both outcomes will be driven by market growth, cost reduction and increasing asset utilization?

So how do we do? In display, I'm pleased to report that our performance did in fact stabilize in 2013? Here is it work. We established agreements with key customers that stabilized our share at specified levels while maintaining a fixed relationship between Corning's price and competitive pricing, thus helping to moderate price declines in 2013. It also helped us forecast our capacity needs, enabling us to maintain high levels of capacity utilization and tight control of inventory.

In addition, we estimate that the glass market at retail for 2013 was almost 4 billion square feet, up about 10% on a year-over-year basis, the move to larger TVs was the driver behind this growth and we continue to move the industry to thinner glass allowing us to reduce our cost and to increase our manufacturing output from the existing asset base.

Our output gains combined with aggressive cost reduction portfolio drove down our operating cost dramatically and better than our expectations. Overall, we achieved our objective and stabilized our full year core net income versus 2012.

In the Gorilla Glass business, it was a year of mixed results. Sales were down year-over-year as the industry worked through an inventory overbuild issue that actually occurred in the fourth quarter of 2012 but the negative effects of the overbuild persisted through much of last year.

Overall, our revenues were down 13% last year compared to 2012. Looking more closely, it’s now apparent that several large branded manufacturers brought Gorilla Glass well ahead of demand late in 2012. When device level sales figures came in early last year, we began to understand the scope of the problem.

We believe this excess Gorilla Glass inventory was consumed in 2013 and that we are ready to grow again. On the plus side, Gorilla Glass cost reduction results due largely to manufacturing efficiency improvements, exceeded our expectations. So the overall impact to net income was largely minimized despite the sales declined. If we remove the effects of the inventory overbuild, we see that the demand for Gorilla Glass in end devices actually grew year-over-year.

So here are some basic messages to remember about 2013. We stabilized displays performance, we’ve improved our Gorilla Glass cost performance and we have worked through the 2012 inventory overbuild.

Finally, we announced the SCP acquisition late last year. We’re stable, steady and poised to grow. Here is how we build from last year and make it happen for Corning glass technologies in 2014. It's all about building momentum. I will start with an overview of display in just a moment and then spend some time going through the opportunities ahead for Gorilla Glass. I will wrap up with perhaps the biggest news from 2013.The acquisition of SCP, now known as Corning Precision Materials, and the full integration of that asset into our operating fleet.

Full control of CPM as it is now known gives us complete access to the lowest-cost capacity in the industry, providing the opportunity to optimize our manufacturing footprint across both product platforms with options to extend into other non-consumer electronics segments as well. I will detail the profound strategic and operational advantages of this acquisition shortly.

First, let's look more closely at display. I will address these topics in the slides to follow and let’s begin with the LCD glass market. The LCD glass market continues to expand, driven primarily by larger TVs and TV replacement, with some help from the proliferation of tablets and small mobile devices. Classic IT applications such as notebooks and desktop monitors are expected to remain relatively flat. Overall, we expect the LCD glass market to grow in the range of 6% to 8% annually.

Clearly, the growth of the TV segment particularly sizes 50 inches and above is the biggest driver of glass demand growth. Retail price and viewing experience are key factors fueling this growth. The average price of a 60-inch LCD TV has dropped rapidly over the last few years and today prices below $1,000 are common in the U.S.

LCD TV has advanced in so many ways over the last several years. Higher resolution, thinner devices, disappearing bezels, expanding color gamut, higher refresh rates and features like 3D and Internet connectivity have all served to enhance the viewing experience.

As we look forward new features like 4K resolution highlighted at CES this year and quantum dots to push the color gamut to new levels will further drive demand for large TVs. This is an amazing time for amorphous silicon LCD TV, cementing these technologies leadership for years to come and Corning has and will continue to have the right glass to bring these technologies to market.

So let’s take a closer look at older HDTV, so prominently displayed at this year's Consumer Electronics Show. The terms Ultra HD, UHD, 4K, 2K and just 4K all mean basically the same thing, an image with twice the horizontal and vertical resolution of the current 1080p technology resulting in four times as many pixels in a display and delivering an amazing viewing experience.

We can all recall the rise of 1080p resolution several years ago and the skeptics who said the lack of content and transmission bottlenecks would inhibit its adoption. In fact, the industry shifted quite rapidly to 1080p sets, and these sets in people’s living rooms encourage new ways of delivering higher resolution content.

Furthermore that transition happened before the widespread adoption of streaming video to smart TV devices. With streaming technology, we are observing that content providers are even more proactive in implementing 4K solutions. In the mean time even upscaling today's native resolution results in improved picture quality versus 1080p. 4K resolution increases the effective size of a room, leading to larger TVs in the available space and as cost improves and prices come down, a growth opportunity for all players in the industry.

We started talking about the installed base and the TV replacement cycle a few years ago in this forum and as you can see in these charts our main theme has not changed. First, the worldwide installed base continues to grow and we have quite a ways to go before reaching full LCD TV penetration.

Our annual consumer research continues to confirm that the replacement cycle for flat panel television is averaging 6 to 8 years, a faster rate than observed in the CRT era. That cycle is and will continue to be driven by innovations in the TV space and the ever improving value delivered to the consumer.

Let's turn now to display pricing. As most of you know, we reported in our quarter four earnings release, a quarter one price declines would be higher than previous quarters. We believe that this is related to a one-time regional adjustment by one of our competitors that will not repeat in future quarters. Actually, we believe price declines will return to moderate levels from quarter two and here is why.

First, our stable share agreements remain in force in 2014 and will assist as in the past in moderating price declines. Next, less supply and demand is expected to be balanced throughout the year. Third, we believe that if prices were continued to decline like they have in quarter one, our competition would soon be incurring losses.

Publicly available information shows that our competitors are already operating their business on thin margins. Prices can only go down so much before these competitors will be at or below breakeven. Our analysis shows that our cost lower than our competitors by substantial percentage. Let me anticipate that this cost advantage will only get bigger as we integrate the manufacturing assets of CPM.

Many technologies occur first in small size devices. In a category we call high performance display. These are often high-resolution, thinner and consume less power than conventional displays. These displays were the metal oxide or polysilicon technologies require glass that can withstand higher processing temperatures and more precise manufacturing techniques.

This segment of the glass market is growing rapidly driven by smartphones with higher resolution and larger screen size and by the increasing penetration into larger applications. All in, we expect this segment, this market segment to grow at an average of 35% over the next several years.

Our Corning Lotus Glass is the advantage product in this space. It's developed specifically for these advanced backplane technologies. As recent industry news indicates, we are aligned with several leaders in the HPD segment and we will continue working closely with them, to capture growth opportunities in this rapidly expanding market. And speaking of markets, we believe a real opportunity has arrived for Willow Glass.

Let me start by giving you some perspective, your typical cell phone today, there are two pieces of display glass. These pieces are sold to our customers at a thickness of 400 to 500 microns and processing the panels.

And after the panels are made they are put through a nasty chemical etching process, employing powerful acids to remove up to 60% of the glass, it get down to a thickness of 200 microns, then the panels are assembled into a device. The market desires even thinner glass down to 100 microns roughly the thickness of a dollar bill, but that has proven to be quite difficult with the current thinning technique.

Some device makers have pursued plastics as a path to achieve thinner displays. But use of plastic as a backplane substrate presents other challenges and trade-offs. Plastic substrates used a glass carrier to run through the panel making process and with the current technology, the carriers lost after de-bonding.

Our solutions of these opportunities Corning Willow Glass, at native 100 micron thickness Willow Glass provides all the properties of our best display glass and requires no secondary thinning. We make it right the first time.

On mature reusable carrier Willow Glass can be processed using current panel manufacturing techniques. Once the backplane and color filter have been built on the Willow Glass surface and joined together the cell is then debonded from the carriers and carriers can be returned for reuse.

We have developed an advantage bonding technology for this purpose and we believe this process can deliver ultra-thin displays at a lower cost with better performance and with fewer environmental concerns compared to any other method. We expect to sell Willow glass for this purpose in 2014.

Let’s turn our focus to Corning Gorilla Glass where we are extending our global leadership position by bringing even more advantage products to market. Again, the key word here is momentum. With last year's inventory overhang in the rearview mirror we are ready to grow again. These are the topics I will cover in this section starting with device demand.

The Corning created the cover glass category and we've earned our position as the acknowledged global leader. Today, Gorilla Glass is on more than 2,400 product models, 2.4 billion devices and 33 major brands.

Demand for cover glass will continue to be powered by this smartphone segment, driven by increasing units and larger screen size. In area terms, we expect the total cover glass market to almost double in the next few years.

Smartphone growth over the next several years to be powered by demand in emerging markets, in the sub $200 category, higher growth in this price sensitive segment presents us with unique challenge. The emerging market environment is quite different from where we traditionally play, with the high-end global brands where growth rates have actually slowed.

In the sub $200 segment, the supply chain is more fragmented with many suppliers and handset producers participating in the market, it is more challenging to operate effectively in the supply chain. Additionally, profit margins are quite small, leading supply chain participants to be exceptionally price sensitive.

Device reliability is often scarifies the lower costs and lower performing cover glass solution. The good news is that no matter where in the world you live or how much your cell phone costs. You care about the reliability of that device. It cracks screen, it’s a catastrophe for any user at any price point and in any language, it’s the swear words change.

In 2014, we will leverage our significant China organization to market Gorilla Glass for this fragmented supply chain and we will launch an optimized solution which addresses the most price sensitive segments.

In the touch on notebook category, most of the volume growth is in the lower priced clamshell segment. We've been quite successful in the high-performance laptop segment with Gorilla Glass NBT. But we haven't done as well in this low price segment, which has been typically using soda lime glass.

While soda lime glass is substantially inferior to Gorilla Glass NBT, OEMs are willing to take the performance risk given the razor thin margins and willingness to live within certain design constraints. We understand the market dynamics and appreciate that we need a more innovative approach to generate traction in this price sensitive claimshell category, which still maintaining our margins. You can expect to hear more about this in the coming months.

We are proud of the progress we've made in setting the standard for strength in cover glass. We have a well-documented history of improving the performance of thin glass in this space.

When we launched Gorilla Glass 1, our glass was twice as tough and half as thick as a legacy soda lime glass. Gorilla Glass 2 was 20% thinner and Gorilla Glass 3 was 40% better for scratch performance.

As result of our continuously improved performance, customers have reduced cover glass thickness by 30%. But there is still more to do because even with all these innovations, glass can still break.

Consumer surveys confirm that glass breakage not surface scratches is the number one complain of mobile phone users. That’s why later this year, we expect to introduce the next generation Gorilla Glass designed to further improve device drop performance. For as long as a cover glass in a mobile phone can break, we will continue to innovate.

We’re excited for what lies ahead for Gorilla Glass. We began the year by introducing the world's first EPA-registered antimicrobial cover glass at CES. We’ve also introduced antireflective cover glass and reached agreement to produce 3-D shapes with a partner in Asia.

We’ll extend the boundaries of what our cover glass can do as we take on challenges in price sensitive smartphone and the touch on notebook sectors later this year. Finally, there are new applications developing for Gorilla Glass, in some cases, with advanced surfaces outside the traditional consumer electronics market. Dr. David Morse, our next speaker, will elaborate on these opportunities in his remarks.

So we expect demand for Gorilla Glass to return to growth in 2014 as touch device growth continues and glass demand more closely matches end-market demand. And within market growth, it’s really a simple equation. Device growth plus innovation and new markets leads to growth in net income.

Excuse me. Now, let’s talk about Corning Precision Materials or CPM. We celebrated the day one deal close on January 16. Our integration efforts are well under way. The synergy savings are on target.

When we announced the deal in October 2013, we said the deal would offer significant strategic and financial benefits to Corning, improving the display and strength in cover glass business, broadening our relationship with Samsung while providing outstanding returns to shareholders, all through.

Let me take you a bit deeper and explain what it means to Corning Glass Technologies. Simply put, this deal is a strategic and operational win for Corning Glass Technologies. First, it is expected to deliver about $350 million in incremental net profit after tax in 2014.

Next, our combined organizations will meet customer requirements for the highest quality display and cover glass with the industry's largest and most flexible capacity. This capacity can be used for any customer in any region for any fusion glass product.

In addition, there is approximately $170 million in cost savings, split between cost of goods sold and operating expense and another $350 million in capital expenditure savings to be secured over the next four years. This was the right deal at the right time for Corning.

It puts us in even stronger position as the display industry matures. Corning remains the market leader with an even greater cost advantage over our nearest competitor. CPM synergies improve our plan because as a combined business, we are truly stronger than the some of our parts.

Negotiated as part of the deal, the tenure supply agreement with Samsung Display greatly enhances our stable share objective. Our combined manufacturing assets would bring our cost down further and faster than we could have achieved separately. From a capital standpoint, our synergies will take spending down even lower than our previous combined plan.

So in summary, this is what I want you to take away from this presentation today. Display is stabilizing. We achieved our objective, stabilizing core earnings in 2013 with moderate price declines, volume growth and significant cost reduction.

While it is true that price declines in quarter one were greater than previous quarters, we expect price declines to return to moderate levels starting next quarter. We believe this because our stable share agreements remain in place. We expect glass supply demand to be balanced and our competitors are approaching breakeven profitability. And the display glass market continues to grow, driven by new and exciting technologies and by increasing value in the large TV segment.

Full integration of CPM's assets drives our costs lower and requires less capital on a combined basis, thus turbocharging our plan. Growing demand for touch-enabled devices will continue to drive sales growth for Gorilla Glass.

Finally innovation is critical to what we do in our Gorilla Glass business. It cements our leadership in a market we've established. It creates new opportunities in the cover glass space and it opens the door to new markets such as strengthened glass for automotive and architectural applications.

Our next speaker, Dr. David Morse will tell you about these and other opportunities Corning is pursuing outside the consumer electronics space. Thank you. And now I’ll turn the podium over to our Chief Technology Officer. David?

David Morse

Thank you, Jim. So to wrap up our product innovation segment, I’ll spend a few minutes talking to you about how Corning approaches innovation, our capabilities, our processes and even our culture. How we innovate is an important part why we've been so successful, why we're confident in our future.

I believe we've created real momentum in innovation. As you heard from Wendell, Clark, Mark and Jim, our current businesses and innovation investments are smacked in the middle of the biggest, most exciting markets in the world. These markets are driven by giant trends that will shape the future and we plan to play a critical role.

We’re also making excellent progress in exciting new areas outside our existing businesses and I would be pleased to share some great news with you today. I'm sure it's obvious from our presentations how proud we are that Corning is responsible for so many innovations that have changed the world and enhanced people's lives.

Where would the world be without an inexpensive envelope for the light bulb or a viable way to make tubes for TV sets or an economical way to turn auto exhaust in a harmless gas making every city in the developed world a lot cleaner and the people of the world lot healthier.

And can you even imagine life without the Internet. Without Corning's optical fiber, the Internet would simply not exist as we know it. More recently, our Gorilla Glass has been essential to the proliferation of mobile devices without thin tough cover glass, touch-based smart phones might never have taken off.

So what is it about Corning that makes us capable of delivering this steady stream of life-changing innovations. To answer that question, I'd like to share a story. Recently the former CTO of Intel visited me in Corning.

We’re working with Intel on our program around fiber, a very high-speed communications between computer components. Program is called Silicon Photonics and it’s an important breakthrough for applications, like data centers. I took him on a tour of Sullivan Park, our research and development headquarters. He looked around and said, wow, where do you buy all these amazing equipment?

The question caught me by surprise. I replied, what do you mean buy? We make all those equipment ourselves. He was stunned of course because in the semiconductor industry most of the processing equipment is standard and is available to all manufacturers. At Corning, it's different. Nothing is off the shelf. We devote a lot of effort and investment to develop the unique and proprietary manufacturing processes.

So behind the light bulb is a ribbon machine which has produced countless billions of bulbs. Behind the kilometers, billions of kilometers of optical fiber is the fiber draw. Behind cell core backbone of calorie converters is the cellular ceramic extrusion process. Behind billions of LCD displays is the fusion draw process. And behind Gorilla are the fusion and ion exchange processes. It’s the material and process combinations like these. There are critical reason for Corning's long-lasting margins and strong market positions.

Here you can see Sullivan Park, our central research and development complex which is located in Corning, New York. We conduct about three quarters of our global technology effort inside this 2 million square foot facility. Our strong centralized approach to R&D is a vital part of Corning’s innovation model. Built in processes and products like the ones Wendell and I shared requires a unique organization, capabilities, and culture. That’s why we, our Sullivan Park R&D center is so important and why we collocate so many of our key people there.

To make an integrated process like fusion or fiber draw, we need a whole host of competencies start with materials and Corning is the absolute best in the world in glass. It also requires process control, measurement, metallurgy, equipment design all working in collaboration. So our secret is not one competency or capability, it’s the whole integrated combination that powers Corning innovation.

Over the years we have evolved the collaborative working style that is uniquely suited to this kind of multidisciplinary work and that yields extraordinary materials and processes producing excellent margins for decades. This integrated approach also allows us to continue to innovate over time in realms that are huge and rapidly expanding and we do with agility.

To illustrate the value of our integrated approach, I will share another story. Back to the 1970s, Corning scientists developed a crucial invention low-loss optical fiber. No question one of the most important innovations ever. Over the years integrated teams have evolved that first breakthrough to whole new generations of products. You can think of it as a tree of innovation, single and multimode fibers, specialty fiber, optical semiconductor lasers, cabling systems, connectivity solutions, and now the exciting Corning ONE Wireless system that we’re rolling out.

That tree and the products on the right represent more than 40 years of innovation, leadership in optical communications, just in those technologies alone. Optical communications is just one of the huge realms that we will participate in for a long time and we intend to profit from it for a long time.

Let’s talk about some others. Last year the global consulting firm, McKinsey conducted an analysis that identified the top 12 technology markets for future growth. McKinsey is forecasting trillions of dollars and economic impact in these markets. The top 4, mobile internet, automation of knowledge work, the internet of things and cloud technology represent $15 trillion in economic potential and Corning participates directly in all of them. We are one of the key problem solvers of these markets and we will be other major growth realms as well. You may recall that in July 2012 Corning appointed Marty Curran as innovation officer reporting to both Wendell and me. Marty, could you please stand up? Thank you.

Marty is one of Corning’s most successful general managers having led both the fiber and the connectivity businesses. Because accelerating new products to market is so important we have tapped him to lead our Emerging Innovation Group focusing on new revenue streams in adjacent markets. And our focus is paying off. We have made significant progress expanding Gorilla Glass into new applications. I will highlight just a few.

Let’s start with automotive. We are extremely excited that BMW design leader in the auto industry is the first to put Gorilla in an automobile. As Wendell mentioned, it’s going in their iconic BMW i8 where they are using several light-weighting material such as carbon fiber and Gorilla Glass to maximize performance. BMW believes Gorilla is perfect for new acoustic separation wall that shields rear engine sound. The BMW i8 is a specialty vehicle, the gorgeous one. In fact, I have already placed my order. True, but we are also collaborating with industry leading auto glazers like PGW in Pittsburgh where we will bring Gorilla Glass to more mainstream vehicles in much higher numbers. We’ve also collaborated with companies that will bring Gorilla Glass to other transportation applications such as security, planes and trains.

If you weren’t already concerned about the bacteria on your smartphones, I am sure you are now after hearing Wendell rattled off those statistics or maybe you just found out how contaminated your own cellphone is by testing it in our exhibit area. Corning developed 80-microbial Gorilla Glass to address this concern, it’s the first EPA-registered by antimicrobial cover glass and it was a big hit at the international Consumer Electronics Show last month.

Steelcase, an industry leader in workplace products, furnishings and services, has announced that our antimicrobial glass will be used on their RoomWizard product, which features a touchscreen interface for electronic control of conference rooms.

As people become more aware of bacterial on touch surfaces, we expect this opportunity to become even bigger. Gorilla Glass also offers exciting new options for interior architecture. Corning is collaborating with Elevecture and SnapCab, two leaders in modular wall systems. Because of Gorilla Glass’ strength and lightweight, it’s ideal for elevated walls, lobbies and conference rooms. Modular wall systems featuring Gorilla Glass are simple to install and can be integrated with interactive displays.

I hope you had a chance to see our elevator examples at the exhibit area. We are also very pleased with our traction in markerboards marker boards. Egan Visual, Moore Company and Krystal Glass Writing Boards, now all carry products featuring Gorilla Glass.

In appliances, we're focused on providing touchscreens for many routine devices that you use in your home and office. I also want to discuss some significant progress on other innovation initiatives. First is Willow, our ultra-slim, lightweight and flexible glass. Jim described one market opportunity that we're really excited about. But we've actually identified 170 potential applications so far, including covers, barriers, and substrates. Willow could be used for barrier applications, for example that protect valuable components from moisture and oxygen. So stay tuned.

A project that we haven't talked much about is ultra-capacitors. Ultra-capacitors store electricity, but unlike batteries, they can be charged and discharged very quickly and can survive millions of cycles. They're used in wind turbines, hybrid buses, cars, industrial machinery, just about anywhere that burst of energy required. And the market for them is growing quickly.

I am pleased to announce today, that we have signed a memorandum of understanding with a major ultra capacitor company, Maxwell Technologies, and we'll be collaborating with them to develop higher capacitors and higher voltage products.

I hope you saw our dynamic glass demonstration in the exhibit area, as Wendell mentioned we recently announced a strategic collaboration with View to develop smart window glass that tints automatically based on weather and user preference, making buildings more comfortable and more energy-efficient.

In our advanced flow reactor business, sales are growing as more companies see evidence that flow reaction chemistry offers a real advantages over traditional batch processing, in particular we see continued strength with pharma and specialty chemical manufacturers, in China and India.

Finally, we're working with the world's top industrial product designers to incorporate flooring materials and technologies into entirely new products and applications. To bring these capabilities to life, we've been developing whole new manufacturing processes, just like the kinds that surprised our collaborator at Intel.

We're making Gorilla Glass in 3D form factors, it's actually a real engineering feat, to maintain the super-tight tolerances of a Gorilla within a 3D shape. For Willow, we're developing new techniques for manufacturing, forming and handling glass, to help make efficient role to role processing a reality. We're also developing coatings anti-reflective and anti-glare to complement our new products in consumer electronics, architectural and automotive applications.

We're exploring new decorating techniques too, it turns out that Gorilla Glass is an excellent surface for high resolution graphics and printing. And of course, we continue to develop new glass compositions and ways to form them. So our deepest core competency is still paying big dividends for Corning.

Between what you heard from the business leaders, and what I've just shared I hope you have a better sense of the richness and strength of Corning's innovation pipeline. So what does this all mean for you. The life-changing innovations that Wendell and I described, are business game changers too. They can build exceptional profits, and shareholder value. Remember nothing about our technology is off-the-shelf.

Our unique processes and our integrated approach to innovation means long-product life-cycles and multiple generations of products. That's how a single generic invention such as optical fiber can spawn generations, whole trees if you will of important products. And we are working hard to create whole new forests.

Corning's innovation approach means that we'll remain in the middle of the action, disrupting the technology status quo, transforming industry and enhancing people's lives, just like we've been doing for 163 years. Thank you.

Now, I'm pleased to introduce Corning's Vice Chairman and Chief Financial Officer, Mr. Jim Flaws.

Jim Flaws

Thank you, David and good morning. I'm going to wrap up the morning by pulling together what you've heard, adding some details on one of my favorite topics, cash. And finally, closing out with a corporate summary of our goals for 2014. You've now heard from our business leaders about our outlook for each of our business segments and I hope you've learned something new from each one of them. And you've got a chance to hear details about how we innovate and why we think our unique capabilities matter to investors. I hope you're as energized as we are about Corning's promising future of innovation that David's highlighted.

There's another important component of Corning's earnings that we haven't talked about today, Dow Corning Corporation, so I'd like to begin there. For net investors, new to our story, Dow Corning is an equity venture that was established in 1943. It's a large business in its own right, with almost $6 billion in sales with many diverse end markets.

We at Corning segment the company into two large buckets, silicones and polysilicon. And I'd like to spend a minute talking about each and our expectations for this year. Dow Corning is the leading provider of silicones across many markets, silicones are used in everything from cosmetics to construction, to car tires. You may recall from last year that the business began focusing on higher value opportunities and committed to innovate for advanced products in existing and new markets, as well as to process technology improvements.

However, 2013 was a tough year for the business. Coming into the year, we had expected sales to be up slightly but about mid-year the business saw significant pricing pressure in some regions, which for its core silicone products. After shifting their product focus and implementing cost accruals in 2013, silicone business grew NPAT slightly even though sales were down 4%.

Silicones typically grows with GDP around the world and we feel that economies will be stronger in 2014. So that should be favorable for Dow Corning's silicone sales. Their ability to grow sales and profits, obviously depends on the pricing environment and also raw material prices.

Now, Hemlock was established in 1961, and today manufactures polysilicon for both the semiconductor and solar market. Many of you are familiar with the collapse of the solar market and the significant impact, it had on Hemlock's volume and profitability. Hemlock restructured in late 2012, in the wake of a collapsed, in order to right size capacity equal to demand and also to quickly return to being cash flow neutral.

In the back half for 2013 they saw some return to stability and a solar grade polysilicon market and expect to be profitable this year. We're very pleased with Hemlocks efforts to align cost and capacity with demand and they're quickly turned to profitability.

What they and we continue to watch for is the final resolution of Chinese polysilicon dumping investigation and also Hemlocks ability to enforce their solar contracts. The call Hemlock has multiyear take or pay contracts for their solid grade polysilicon. Customers that have the financial where with all are taking their volume commitments.

So both Hemlock and Dow Corning silicon business expect sales growth in 2014. Silicon sales are expected to be up in the low and mid-single digits inline with global economy. Hemlock expects sales to be up approximately 20% driven by improved solar market conditions and contract enforcements. Combined with cost control measures implemented in 2012 and 2013, we at Corning expect to record Dow Corning’s income at 20% to 30% growth in 2014.

Now this morning, when I'll remind you of these strategic financial benefits of our series agreements with Samsung, Jim Clappin spoke to you specifically about the benefits of full ownership what is now name Corning Precision Materials in Korea.

I'd like to walk through the implications of the consolidation of CPM on our financials. We expect approximately $2 billion in additional sales in the display segment this year and next from consolidating a 100% of CPM, LCD glass sales.

You should calculate cost of goods sold based on sales assumption including depreciation to get to gross margin. I urge you to remember that CPM did have lower performance in the back half of 2013, so you need to think about that level performance as you estimate this year. Obviously, it must to have their operating expense to SG&A and R&D.

You also need to make an estimate of the impact of synergies on cost of sales and S&A. We believe the split between cost of goods sold and OpEx is roughly one-thirds, two-thirds, respectively. Just completed the close in Q1, so the synergies in this quarter will be lower we expect them to ramp up quickly in Q2 and continue throughout the year.

Finally, please remember that CPM will not have the benefit of interest income anymore due to stripping SEP cash via dividend. This gets you the net profit before tax for the display segment.

Corning’s taxes will now include the taxes paid by CPM in Korea. We record low U.S. taxes on equity earnings and these dilute Corning's overall tax rates. Obviously has significant equity earnings from SEP that reduced our overall tax rate as you can see in this chart for 2013.

And thus consolidating CPM changes are wholly-owned tax rate slightly, but removing those equity earnings reduces this dilutive effect on our overall effective tax rate as you can see in the 2013 pro forma chart.

If SCP and have been a consolidated entity in 2013, it would contribute zero on equity earnings and their full net profit before tax of approximately $1.1 billion would have been added and tax that the Korean tax rate in Corning's P&L. So for 2014, we expect our total effective tax rate to be approximately 22%.

Now we'll also have some amortization intangibles and goodwill from the acquisition and with -- as with our other deals we report those outside of core earnings. Another area that consolidation impacts is our balance sheet, these changes are pretty straight forward and you distract SEP from our investment balance and then add the entity into assets and liabilities.

On cash flow, Corning will no longer receive dividends and operating cash flow from CPM. Second, we will have CPM's capital spending, but the overall net effect is we expect an additional $400 million to $500 million in free cash flow as a result of the CPM consolidation.

Finally, please remember the $98 million of preferred cash dividends to Samsung which fall below free cash flow on our cash flow statement. We'll provide detail pro forma GAAP financial statements in April for investors update their models in this information. And of course Ann and Steven will be happy to answer any modeling questions you have as well.

So now let's look at our expectations for cash and our thoughts on capital allocation for 2014. Last year, I showed you this chart breaking out how we expect to distribute cash in 2013. There is a version showing actual distributions over the last two years 2012 and 2013.

You can see the shift to distributing more cash to shareholders, over the 2011, 2012 timeframe split was 30:70, 2012, 2013 split is now 57:43 in favor of shareholders. We've been migrating this ratio through dividend increases and share repurchases.

Now for 2014, I want to fill in some of the boxes with the information that we know at this time. We expect to generate significant cash flow going forward. Two weeks ago, we closed in the consolidation of CPM. We paid for those assets using preferred stock and of course, some cash on minority shareholders. Transactions unlock cash from the ventures balance sheet, as I already mentioned, add significantly to operating cash flow annually.

This chart shows how we expect, intend to allocate that cash, we expect our capital spending in 2014 to be $1.5 billion. Our current forecast for 2015 is approximately $1.5 billion also.

We plan to complete the remaining $500 million of the share purchase program, as well as our new $2 billion program that Wendell described for a total of $2.5 billion in share repurchases this year and we plan to buyback these shares at a relatively quick pace this year.

We'll also continue to look for some acquisition opportunities in life sciences and optical communications. Our strategy for acquisitions is defined businesses that add value to the product portfolio and/or the geographic reach, it will be strategic additions.

Investors have asked, how we evaluate potential acquisitions, we've a due-diligence process that ensure we paid both the fair price and get a good return. Our metrics include return on investment being greater than the weighted average cost of capital and measuring returns versus share repurchases.

Given our strong operating cash flow expectation lower capital spending and our robust balance sheet, we believe we'll continue to have options for returning more cash to shareholders in the coming years beyond 2014.

So let me summarize, our plan for 2014 is fairly straight forward, we want to continue the positive momentum in display that Jim Clappin described. We're going to work very quickly to integrate CPM in order to realize the synergies, gain for their cost advantages and increase our flexibility of glass supply.

Driven by the growth in their end markets and further operational improvement plans, optical communications, specialty, environmental and life sciences will grow their sales and profits this year. And finally, we will execute the $2.5 billion of share repurchases that are authorized.

When you add that all up, we believe we'll get another year of earnings growth in 2014 and many beyond that. As you've heard from Wendell and David, we have a proven track record of innovating our way into new surges of growth. We're excited about the opportunities under development today and our confident we will deliver growth over long periods of time. And maybe set backs in global economies don't always go our away but our management team, strategic framework and most importantly our innovation formula help us weather tough times and create the new surges in growth.

So to recap the entire morning, we delivered on our plan to investors. We have begun our march up in earnings growth. Our combination of increased earnings in cash to shareholders has delivered significant value to investors. Corning has over a 160-year history of developing products that created new industries and transformed people's lives.

We believe in our unique capabilities, collaborative culture and drive to make life-changing innovations will lead to new growth surges and the sustainability to the company for the long-term. Another 160 years is our goal.

Thank you. Now, I'd like to invite Wendell up on the stage for Q&A session.

Ann Nicholson

Okay, great. So we've got people stationed in the corners of the room with microphones for you to be able to ask questions. So that everybody can hear your question. So if you have a question, please raise your hand and we'll get started.

Question-and-Answer Session

Ann Nicholson


Mark Sue - RBC Capital Markets

Thank you. It's Mark Sue, RBC Capital Markets. Gentlemen there is a lot of technology discussing very tremendous innovation that's occurring at Corning and a lot of new markets that will -- that we’re already at the early stage of development. As these new markets develop, are there -- is there a preemptive price strategy for each of these various growth segments, so that Corning can ultimately receive a premium for all the hard work and innovation that you develop. And I ask since as we go through, many of your other part of cycles often times the innovation is actually indicated by investors who worry about price declines. So with this new leg of surge of growth in the forward years, do you think we’re at a point, we could actually receive more premiums for your innovation?

Wendell Weeks

So if I understand your question, it is what are our -- what is our pricing strategy to go with these innovation opportunities and are we looking to do a more preemptive move on pricing or can we see an ability to capture expanded margins?

Mark Sue - RBC Capital Markets

And I think, the thought is also, you're trying to do a balance of driving the market, having accrual and ceding it while also driving your profitability growth as well?

Wendell Weeks

So great question. It actually differs by market segment of course and what is the established market that we're seeking to disrupt. When the value we create is very high and the disruption large, we are able to capture a really strong price premium.

And as I said, it will be different as we move to the different segments. What we like to do, I think one of the things that you see us in the different markets that we're attacking is we have another advantage helping us from a cost standpoint, which is for a number of these markets, we're seeking to use our LCD assets, which we have already paid for and supported with LCD. So we're able to bring that capacity to bear very inexpensively, because we're creating it out of the productivity that organizations like Mr. Clappin’s create.

Ann Nicholson


Ehud Gelblum - Citigroup

Thanks Ann. It's Ehud at Citigroup. First of all, Jim assuming that the company survives next 160 years, I wanted to know how many of those 160 years, you will be CFO and will it still be 160 years?

Jim Flaws

I have an answer for that actually.

Ehud Gelblum - Citigroup


Jim Flaws

Wendell and I have decided about 10 years ago that with some point we both get downloaded into a chip. So I attend to be here for all 100 years.

Ehud Gelblum - Citigroup

Excellent. Great answer. Okay, I want to talk a little bit at the hedges that you have in place on Japanese yen. It’s my understanding that they roll off sometime at the end of this year and I'm sure there is no -- there is probably not a cliff. I'm sure there is a rolling roll-off of them. Can you give us a little bit of visibility on what 2015 look like with respect to your hedging on the yen. Well, only part of them roll-off that you already re-hedged some of them roughly 102, 103 or should we start looking at new definition of core earnings are as we get into 2013 as it reset automatically. So how should we look at that?

And then on the pricing, your contract you've said I think in last conference call that your fixed share contracts are not with every single customer but they are with most of them. Can you give us a sense as to the visibility with the customers that you do not have these contracts with. I'm assuming I don't know that those are mostly in China. And price activity in those -- at those customers possibly backfill into the ones we do have contract. So that actively over there could actually impact the pricing at your fixed price, fixed share contract customers? Thank you.

Jim Flaws

I'll start off with the hedging. We have part of 2015 hedged already at the existing core rate, but we have a significant part that’s not. Our strategy has been to hopefully take advantage if there is a dip, my words, in yen to a dollar ratio, which we still think is possible and if that takes place we have authorization from a board to put in place additional hedges and we would do that.

Obviously that might not occur and if it doesn't, we're going to have to think through whether the 2015, 2016, 2017 that we hedge at a higher rate. Therefore you have a different core earnings rate. As soon as we do, either of those will let you know.

Wendell Weeks

As to pricing, I think it's an excellent question that we don't have all the same relationships at all of our customers with the fixed relationship contracts. And those can indeed impact the overall market. What we believe is that as we continue to expand the footprint in which we have these types of agreements that that risk will continue to be mitigated. But it does exist today and we will continue to do what we can compress sort of the wedge profile that risks.

Ann Nicholson


Unidentified Analyst

Could you please talk a little bit about curved glass and when you expect to see any revenue or earnings contribution from that segment?

Wendell Weeks

I couldn't hear. Could you repeat the question please, I didn't hear the first part, I apologize.

Unidentified Analyst

Yeah, it's about curved glass that were shown at CES. Could you talk a little bit about your positioning there and when you expect to see any revenues or earnings contribution?

Wendell Weeks

So the 3D-shaped glass or curved glass when would we expect first revenues. We are just in the midst of putting in place to the supply chain with a partner to put ourselves in the position to have that be commercially available, not only do we need to solve the problem of creating the glass, but we need our partners to help solve the problems of how do we create the inking through that 3D on a number of other things that need to be in place in that supply chain to allow our branded customers to buy. It would be our attention and our hope that by the end of this year we would be in the position of doing the very first customer engagements on a designing platform. When that turns into revenue it’s a little harder to call but that's our goal for this year.

Wamsi Mohan - Bank of America Merrill Lynch

Thank you. It’s Wamsi Mohan at Bank of America Merrill Lynch. We saw some really great product display so we hear potentially for opportunities for Gorilla growth in the future? And my question is, at what point in the future would you need to invest incremental CapEx to support Gorilla growth, obviously you have these assets at SEP, which you can bring up for LCD and there are other assets that you can free up in Japan, and Taiwan potentially? So when -- what's the roadmap that you're thinking about from incremental investments needed for CapEx, specifically for Gorilla and more broadly as you look at this overall trajectory for the company. How do you see the CapEx evolve over the next few years? Thank you.

Jim Flaws

So right now with the outlook we have for the businesses that use, I'll call our glass aciding. We are not looking to expand any melting for a number of years. May I have to add some finishing capital but that's pretty small. So, I mean, it’s hard to go too far out but clearly through probably 2016 and into 2017 we are not looking for any melting capacity.

Remember the advantage we have right now is with the consolidation of CPM, they had a number of tanks that have been shutdown for awhile that we can use, plus not to be forgotten, Jim Clappin talked about last year, is we are still getting benefit from continuing to take the glass thinner every year. So we’re not looking for capital spending for melting glass to really ramp up in the foreseeable future.

When you think about the overall capital spending of the corporation, there are only big project that we have gone, got going right now is really our expansion heavy-duty diesel for the international markets, that starts basically roll-off at the end of 2015. So that will be some downward pressure on our corporate capital spending.

Amitabh Passi - UBS

Amitabh Passi with UBS. I have two questions, you spoke a lot about several of the market adjacencies for Gorilla Glass, automotive, antireflective, Antimicrobial, SnapCab, Markerboards? Is there way to think about how much of the incremental growth in Gorilla Glass could come from all these applications, could it be 10% to 15% of the volume in 2014?

And then my second question was there is a lot of debate and discussion going around between sapphire versus Gorilla Glass? I would love understand how you think about risk mitigation if indeed sapphire were to replace Gorilla to cover glass solution? What is your thought process in terms of how mitigate any potential risk from that is question?

Wendell Weeks

I’ll take the first part of the questions and then I will ask Dr. Evenson who has been our point person in determining our strategy around sapphire addresses your second question. I think the way to think about the adjacent markets that you saw portrayed today is really a twofold.

First, these markets are markets that tend to move slower in terms of adoption on brand new materials. So they can have a pretty long ramp before for instances a brand new material is adopted into the automotive industry, I think, that’s why the announcement of a very first cars starting to use Gorilla is so important. So once its starts it become an accepted material then it can start to accelerate.

The second way to think about is these markets that you see for trade are much, much, much larger than the current market for Gorilla Glass. Automotive every year goes through between 5 billion and 6 billion square feet of glass, 60% of which is laminate, is a huge market, architectural you saw number of those different examples goes to 25 billion square feet of glass. These dwarf the size of Gorilla today and even compare quite favorably to the size of the liquid crystal display market.

So, I think, we just have to hold both things in our head, it’s going to take a little while to get adoption. If indeed we get adoption, all these markets in terms of volume and ultimate revenue opportunity offer far, far larger markets in the markets we are participating today.

With that perhaps, Dr. Evenson, could you address the Sapphire question.

Dr. Jeffrey Evenson

Thanks Wendell. The way I heard your question was you asked about risk mitigation for sapphire adoption. Maybe before I address that, I will just think about what is the risk associated with sapphire adoption. Where Corning is coming from on that is we had a large sapphire business in the 1960s and 1970s we were leader in sapphire production we were high temperature tubing.

Currently we are one of the leaders in crystal growth for industrial applications in the world for calcium fluoride, for our polysilicon business, it's a joint venture with as part of Dow Corning and all crystals are grown at basically the same way, batch processes, at very high temperatures over long periods of time works very control.

So if we thought there were significant returns to be had in sapphire, this would be fairly natural business for us to enter. We don't see it as a large market for cover glass and the reason is mostly around performance.

As Jim Clappin told you in his presentation, the number one concern the consumers have is about breakage of their mobile phones. We believe that Gorilla Glass right now outperform sapphire covers on breakage.

We've shown that if you subject sapphire to normal wear and tear, its takes about 2.5 times as much force to break peace of Gorilla subjective that same wear and tear as it does sapphire. And we are introducing new glasses that perform even better on drop performance.

Sapphire if you adopted it will also give you a lot of limits. It gets exponentially more expensive with the area that you cover. So it's limited to much smaller areas. It's about 60% heavier than our glass and just its density, you can’t change that, it’s a crystal and it reflects more light. So we don't think it's a great solution for mobile covers.

Now, having said all that, there's always some risk of technology breakthrough or somebody deciding to use it because its novel or it offers jewelry properties and we do have some risk mechanisms in progress.

The laser technologies that we've developed to cut strengthened glass which we think are by far the best in the world, are also by far the best in the world for cutting sapphire. So if this did take off the most expensive part of sapphire is actually not the production, was actually in the finishing and processing. We believe that we have very advantage technology in that and as it scaled up we would generate revenue from this laser technology.

Ann Nicholson

Thank you, Jeff. Yeah. We have a question over here.

Unidentified Analyst

My name is [Andrew Storm]. I am a shareholder of the company. I am curious as I look at the presentations today I see clear underlying themes tying all your businesses together, except for environmental sciences. Now you’ve argued in the past there is more synergies that see readily apparent? However, based on the outlook you just gave that business seems to be actually be going further away for core Corning? So, I'm curious given that business has a nice revenue and earnings outlook, isn’t an industry that tends to carry higher multiples, why don't you spend it out?

Wendell Weeks

So your question is, as we look at our overall portfolio, do we think more value could be created by spinning out environmental and what really is its core technology tie to the rest of company, do I understand that correctly?

Unidentified Analyst

Yes, that’s right.

Wendell Weeks

So we look at our portfolio once a year in depth and we really ask ourselves just a few simple questions from an operating standpoint. And then Jim can address the financial. So from an operation standpoint, we'd like to first see, can our fundamental innovation model create significant value in the business and our operating model as well so that we can actually operate the business better than anybody else. And the best metric of this is how do we do versus competition which you can see in that business. We do very, very well both in terms of profitability and in terms of growth.

The second thing we look at is, is our position in that business serve greater Corning. Does it either bring us market access that we can bring new innovations in or can we use those assets to attack brand new markets? In the case of environmental, our access that is created from us being a very strong automotive supplier is what has created the opportunities for us to attack the glazing business in the automotive glass market.

This is a hard industry to break into. If you are a proven supplier, that is part of the automotive supplier club, you can get access and trust. And that's been a really key part of the adoption that you just saw. Then we also take a look at the physical asset and say can we create entirely new markets.

Environmental technologies take a little bit longer maturation curve but one of the things we’re really excited about taking that asset to a new area is things like CO2 capture, which could be an enormous market that could use that same fundamental technology and manufacturing base much like you saw us use displays assets to attack the Gorilla market.

Steve Fox - Cross Research

Steve Fox with Cross Research. Just two questions from me. First of all, during the prepared remarks, there were some hints about maybe attacking the lower end of the touch market more aggressively. I was wondering if you could expand on that?

And then secondly, there's been a number of announcements around joint venture agreements or co-marketing agreements with some outside businesses. It seems like the company has a lot of innovation but the front end of the organization, the sales portion needs to sort of be on a faster pace to sort of realize the innovation. You talk about how you're addressing that and whether we could see any benefit from that over the next 12 to 18 months? Thanks.

Wendell Weeks

So both are outstanding questions, maybe I could start and then you could add to.

Jim Flaws


Wendell Weeks

So the first one on how do we attack some of the lower price segments of the cover glass market both in touch on notebook for low-end clamshells as well as the growing market for very low-end smart devices in China, especially but in developing markets around the world. We would expect to introduce some fitness for use new innovations. They will not perform at the same level as our latest Gorilla Glasses but provide a different economic entry point for people into the family of improved glasses.

Our goal here with these innovations in marketing approach is that we will provide a product that is better than the current alternatives that they are using yet at a lower price point. We would expect to start back in this year and we will report out on our progress. I think your observation on that in many ways the barrier for quicker progress for us is in the commercial front end as we attack entirely new markets. That's why you saw David introduce Marty Curran, especially for that reason.

You’ve taken one of our very proven general managers, who was used to handling those type of finance as well as larger scale manufacturing and a total organization pulled him out of ops and put him as part of the innovation group because that is where the challenge has shifted and perhaps you can catch up to him afterwards and he will be happy to share what he's doing in those go-to market strategies.

Ann Nicholson

Anything to add?

Jim Flaws

So just to add two things, I don’t want it to be lost on people that our goal is to have low cost on some of these lower-priced initiatives. So they will still have excellent margins. The other thing is there are different ways to skin the cat on the front end. But Corning has a long history of being able to do this in a variety of different ways and sometimes it's actually far better financially to link up with someone to jumpstart the business and use their infrastructure while we make a significant amount of money making the base material.

So that's why you sometimes see us not doing it all by ourselves, all way the complete way. And I think some of the things that David talked about that Marty is doing are exactly that. We’ll get there faster. We will make big money on the heavy-duty assets that make material but we will exploit and work with partners on the commercial part of it and a greater sweep of time, Corning has done this time and time again.

Ann Nicholson

Thank you.

Albert Moel - Sanford Bernstein

Albert Moel from Sanford Bernstein. My question relates to a display glass price. You’ve mentioned that Q1 display glass pricing is weaker. Do you expect that moderate seems to be premised on two things, one that supply demand will remain in balance and second, that your competitors will not go past the point of profitability?

In the first point, we know that you saw your competitors were adding capacity. The thinning glass continued to add self capacity to the available capacity. And second your premise that your competitors may actually not want to lose money, how confident are you of both of those being the fact going forward?

Jim Flaws

Let me start on the capacity. The entire glass industry is adding capacity by going thinner but what I think is often lost is that the glass market is in fact growing and it’s driven by television growth and also some of the small format sizes. So there is utilization of those assets that’s being driven and we’ve moved up by growth.

Second thing, in some cases, we've seen our competition announce that they were adding capacity but also shutting capacity down, particularly reallocating their capacity across different geographies. We believe that that's not an incremental capacity but some capacity has been brought down.

Wendell Weeks

I think we have a pretty unique opportunity in that. We actually have Mr. Clappin who has all of these operations we’ve got back briefly from Asia. Maybe you'd like to add to Jim's comments?

Jim Clappin

Actually as an operating division, we watch this very, very closely. What our competitors are doing, what capacity they are running. We have our own estimates of yields and everything to tabulate how much glass is going to be in the market any given time, right. So when I stood up and I said we expect supply and demand to be balanced, what I was telling you was the results of that analysis, right.

So a lot of puts and takes. You have to understand there were tank repairs. These are vessels that run at 1600 degree Centigrade, 1700 degree Centigrade, they don’t last forever at those temperatures. They have to go down. So it is a bunch of information that goes into our analysis but net net, we expect that glass supply and demand will be balanced this year.

Ann Nicholson

Thank you. We have time for one or two more questions. [Rod]?

Unidentified Analyst

Thanks, Ann. Hi, guys. Just a couple of quick questions. I wanted to go back, maybe take the other tack on the pricing question. If your competitors are so close to losses, just a little microeconomics question, why wouldn’t you go ahead and push them down to neutral or negative profits and let the industry consolidate a little bit more for us? So just maybe not good for the short-term share price but definitely good for the long-term share price.

The other question I have is Jim showed -- Jim Clappin showed this chart on 4K TV pricing where it stabilizes at 1.5 times the HD price levels. And I just wanted to see if maybe he could comment on what that means from an absolute price point of view, where will it be by the end of this year on 4K prices? And why wouldn’t they continue to converge toward HD prices over time? Thanks.

Wendell Weeks

I will take the first part of the question and then I will turn it back to Mr. Clappin for the question on quad HD. The way we would prefer to win at our customers is through our innovation and through our superior reliability and supplying quality of product and we prefer that as a method for us to gain market share as opposed to being a price leader. And now with the quad HD question?

Jim Clappin

Okay. For those who are at the Consume Electronics Show, you saw how prevalent quad HD was on television sets there. So, it’s really coming. I think you understand the chart well. By the way that is meant to show it’s 1.5 times the cost of the current technology, which is 1080p. Now honestly, could that accelerate further down the curve, even below? Possibly. And the one thing that I tried to communicate very clearly is that amorphous silicon backplane technology which is the workhorse in the industry, it’s been absolutely phenomenal in terms of its development, in terms of its improvement over time.

From the very first LCDs that came out for desktop monitor, everybody said it wouldn’t work, the picture stinks, the resolution stinks. If you put anything in motion, it skips across the screen and look what we have today, right. So as we move into this 4K, if you have seen the screen, you see the difference, right. It definitely supports the move to larger TV.

With amorphous silicon technology behind it which frankly surprised us, we thought this would require a higher mobility type backplanes like oxide or perhaps even polysilicon, but it did not, a-Si adapted and now is the backplane of choice, and that’s way down the cost curve. So, could that move down further? Yes. And I think at this point, what we are saying is that there is going to be rapid adoption because resolution really has proven itself.

Ann Nicholson

Thank, Jim. So we know David has got the BMW i8 and where the question is, is it getting one of those 4K televisions. I will do one last question. [Dan], do you have one more?

Brian White - Cantor Fitzgerald

Brian White of Cantor Fitzgerald. Jim, I am wondering if you could talk a little bit about how do think about the long-term trend in the LCD glass margin side of the house. So I know Samsung Corning Precision margins came down from say high 70s to low 60s over the past three years and that’s the only gross margin we actually see on the glass business. So, how do we think about margin structure on LCD glass say looking out three to five years? You talked about I think 6% to 8% volume growth, pricing probably comes down 8% a year. So, what are the drivers to margins and where do you see them trending? Thanks.

Jim Clappin

So I think the primary combination of what you are going to see in margins and LCD is going to be this combination of, will prices be at the more moderate level of the -- what you talked about the 8% to 9%. When they spike up as we experienced in late 2011, early 2012, that’s when you see the step down in the profitability of the business.

If we can achieve those moderate declines, then I think the big advantage that we have is our cost reduction and obviously with the low cost assets that we are getting at SCP, we think that will help our margins. One of the things that drove the margins down at SCP wasn’t this long-term trend, it was the lost market share that we had in the back half of 2011 with left us with access capacity and we believe those manufacturing platforms are actually cheaper than some of the ones we run in some of our other locations.

But we believe that we can continue to drive down the cost of making glass at the kind of rates that we’re seeing over the last five years going forward. So the key is the combination of your volume which we believe is going to hang in there and we think television growth continues on size, the cost reduction balanced off against the moderate price declines. But we don’t see that you are going to have to see a continued erosion in the LCD gross margins.

Ann Nicholson

Thank you, Jim. Thank you all. That ends the formal portion of today’s meeting and the meeting in total. Please remember your parting gift on the way out. I want to thank all the presenters for the time and thank all of you for coming.

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