Corning (GLW)

Q2 2012 Earnings Call

July 25, 2012 8:30 am ET

Executives

Ann H. S. Nicholson - Director of Investor Relations

James B. Flaws - Vice Chairman, Chief Financial Officer, Member of Executive Committee and Member of Finance Committee

Analysts

Rod B. Hall - JP Morgan Chase & Co, Research Division

Mark Sue - RBC Capital Markets, LLC, Research Division

Wamsi Mohan - BofA Merrill Lynch, Research Division

Amir Rozwadowski - Barclays Capital, Research Division

Steven Bryant Fox - Cross Research LLC

Amitabh Passi - UBS Investment Bank, Research Division

Ehud Gelblum - Morgan Stanley, Research Division

Jim Suva - Citigroup Inc, Research Division

George C. Notter - Jefferies & Company, Inc., Research Division

Steve Cho - KeyBanc Capital Markets Inc., Research Division

Simona Jankowski - Goldman Sachs Group Inc., Research Division

Jagadish K. Iyer - Piper Jaffray Companies, Research Division

Mehdi Hosseini - Susquehanna Financial Group, LLLP, Research Division

Andrew Huang - Sterne Agee & Leach Inc., Research Division

Presentation

Operator

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Ladies and gentlemen, thank you for standing by, and welcome to the Corning Incorporated Second Quarter 2012 Earnings Results. It's my pleasure to turn the call over to Ann Nicholson, Director of Investor Relations. Please go ahead.

Ann H. S. Nicholson

Thank you, John, and good morning. Welcome to Corning's second quarter conference call. Jim Flaws, Vice Chairman and Chief Financial Officer, will start the call with some prepared remarks.

Before Jim starts, I'd like to remind you that today's remarks contain forward-looking statements that fall within the meaning of the Private Securities Litigation Reform Act of 1995. They involve a number of risks, uncertainties and other factors that could cause actual results to differ materially. These risks are detailed in the company's SEC reports.

Now I'd like to turn the call over to Jim Flaws.

James B. Flaws

Thanks, Ann, and good morning, everybody. Now before I turn to our comments on the quarter and the outlook, I actually have an organizational announcement. As some of you know, Ken Sofio, our Vice President of Investor Relations, has been working a reduced schedule since March. Ken has been getting treatment for a serious medical issue. Ken now needs to put full time focus into his health. As a result, he will not be on the call this morning, and he will not be doing follow-up calls with investors. Ann Nicholson, Director of Investor Relations, will be the primary IR contact in the interim. Ann will be supplemented by myself; Tony Tripeny, our Corporate Controller; and Mark Rogus, our Treasurer.

I have 2 requests of our investors. Number one, we will try to be as responsive as normal, but please recognize that our response time may take slightly longer and time allocations may be a little shorter as we return the calls today and tomorrow. Number two, you can direct e-mails to Ken's e-mail address with IR questions. Ken's assistant, Kelly Williams, will forward them to Ann Nicholson. You can also e-mail Ann or Kelly directly at the e-mail address that's shown on the screen. We ask that you keep Ken in your thoughts. If you wish to send a personal e-mail to him, Kelly will see that it gets to him. I appreciate your help at this time.

So now onto the quarter. Hopefully, you had a chance to read the press release we issued this morning on our second quarter results. If you haven't, you can find a copy on our IR website.

In January, we told you of the reset in the corporation's profitability and our plan of forming bottom and marching up. Briefly, I think we're making progress. "Form bottom" is our mandate into Display business. The phrase conveys the need to stabilize earnings and position ourselves to regain positive momentum. The critical first step is to return a moderate quarterly price declines for LCD glass. Today, I'm delighted to tell you that our quarter 2 price declines for LCD glass were indeed much more moderate than the previous 2 quarters' average. And just as important, we now believe price declines in quarter 3 will also be moderate. Now we need to continue to repeat this over the coming quarters while we execute our cost reduction projects.

We're also making progress on regaining positive momentum in Display, and this is all about new products for high-performance displays. We've introduced Lotus and Willow Glasses. We've now formed our new OLED venture in Korea, and we are shipping glass from that country. And we're also shipping glass in our wholly-owned Display business for TFT metal oxide backplanes.

The "march up" portion of our plan is about capturing sales growth and expanding margins in Telecom, Environmental, Life Sciences and Specialty Materials will grow up. And we're also making progress against these objectives despite some macro economic headwinds.

So let me begin with our key messages this morning. First, LCD glass prices. Q1 call, I told you we had expected our glass price decline for the second quarter to be much more moderate than the average of the previous 2 quarters. As I said in my opening, but it bears repeating, price declines for LCD glass were indeed much more moderate in Q2, and we believe that price declines in Q3 will also be moderate. Second, as we assess the first half of the year for LCD glass, we see retail and supply chains statistics generally in line with our expectations.

Obviously, all is not perfect for the economies around the world, but unit growth, combined with area size increases for televisions allowed us to keep our outlook for the 2012 retail glass market size.

On the supply chain front, we've come through Q2, always the trickiest quarter for Display, with inventories in line with our expectations.

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