Welcome to the Corning Incorporated Third Quarter 2017 Earnings Results. Is my pleasure to turn the call over to Ann Nicholson, Division Vice President of Investor Relations.

Thank you, Greg, and good morning. Welcome to Corning's third quarter conference call. With me today is Wendell Weeks, Chairman and Chief Executive Officer; Tony Tripeny, Senior Vice President and Chief Financial Officer; and Jeff Evenson, Senior Vice President and Chief Strategy Officer. Before we begin our formal comments, 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. These remarks involve a number of risks, uncertainties and other factors that could cause actual results to differ materially. These factors are detailed in the company's financial reports. You should also note that we will be discussing our results using core performance measures, unless we specifically indicate our comments relate to GAAP data. Our core performance measures are non-GAAP measures used by management to analyze the business. A reconciliation of core results to the comparable GAAP value can be found in the Investor Relations section of our website at corning.com. Slides are being shown live on our webcast to accompany our formal comments, and we encourage you to follow along. They'll also be available on our website for downloading. And now I'll turn the call over to Wendell.

Thank you, Ann. Good morning, everyone. This morning we reported another excellent quarter. Sales and EPS exceeded expectations and progress on our growth initiatives continues to be outstanding. Third quarter sales increased 6% year-over-year. Sales in all of our business segments exceeded our expectations, highlighted by 15% year-over-year sales growth in Optical Communications and 26% growth in Specialty Materials. Looking ahead, we expect to maintain this momentum and fully achieve our Strategy and Capital Allocation Framework goals. As we've shared, the Framework outlines our leadership priorities as we continue to focus our portfolio and utilize our financial strength to extend our leadership, drive our growth and reward our shareholders. Under the Framework, we target generating $26 billion to $30 billion in cash through 2019. We are returning more than $12.5 billion to our shareholders through repurchases and dividends, and we are investing $10 billion to sustain our leadership and deliver growth. We have made outstanding progress against those goals since the Framework was announced in October of 2015. Our cash generation is on target, and we have returned $8.5 billion through share repurchases and dividends. Repurchases have reduced outstanding shares by about 29%. We increased the dividend 14.8% in February and 12.5% last year for a combined increase of 29%. We expect to increase the dividend by at least 10% annually in 2018 and again in 2019. In addition to articulating our capital allocation goals, the Framework outlines how we utilize our focused and cohesive portfolio to generate value for our shareholders and to delight our customers. We are best in the world in three core technologies, four manufacturing and engineering platforms, and five market access platforms. We focus 80% of our resources on opportunities that use capabilities in at least two of these three categories. By pursuing our focused…

Thank you, Wendell, and good morning. As I reflect on our performance year-to-date and our expectations for the fourth quarter, every segment is meeting or beating the plan we set in January. We have strong operating performance, and our innovation pipeline continues to achieve milestones and deliver the tangible proof points. We have accelerated our growth investments accordingly and remain on track to deliver our Framework goals. Third quarter results reflect the strong performance, and our fourth quarter guidance incorporates our expectations for continued strength. Let's start with GAAP and its impact on our hedge contract accounting. GAAP accounting requires earning translation hedge contracts settling in future periods to be mark-to-market and recorded at current value at the end of each quarter, even though those contracts will not be settled in the current quarter. For the third quarter, the yen was relatively stable and the value of our hedge contracts was relatively unchanged. This resulted in an after-tax GAAP loss of $15 million when we marked the contracts to market as required by GAAP. And be clear, this mark-to-market accounting has no impact on our cash flow. We remain very pleased with the results of our hedging program and the economic certainty it delivers. Since its inception, we have received cash totaling $1.6 billion under our hedge contracts. These proceeds offset much of the yen-related fluctuation in Display's earnings. Hedging our earnings and cash flows through 2022 provides higher certainty for our growth investments and future shareholder distributions. For information on the mechanics of these contracts, please refer to the tutorial on FX hedge accounting on the digital media disclosure section of our Investor Relations website. And as always, Ann and her team are available after the call. Third quarter sales rose 6% year over year. Core earnings were $433…

Thank you, Tony. Hey, Greg, we can open the line for questions.

Okay. And one moment please for your first question. Your first question comes from the line of Vijay Bhagavath with Deutsche Bank. Please go ahead.

Yeah. Hey. Yeah. Good morning. Yeah, it would be helpful to get color, Wendell, Tony, in terms of order strength in the optical fiber business. Where I'm coming from is, is the demand primarily driven at hyperscale clouds? And are you seeing any timing delays at any of the major service providers for fiber-to-the-home or metro optical buildouts? Thanks.

We're seeing very – thanks, Vijay. We're seeing really very, very strong demand. And we're feeling the most strength out of our carrier business, but we're also seeing good strength in enterprise. We're really tight, which is why you heard from Tony about our investments in capacity. We expect that tightness to continue for the foreseeable future until we're able to get that capacity up and running. So right now, the market seems very, very strong to us, sir.

Perfect. Thank you.

Your next question comes from the line of Joseph Wolf from Barclays. Please go ahead.

Thank you. Good morning. I had a question about the Gorilla Glass business and just if you could give us a little bit more detail about the mix. If we look at the growth of new customers' adoption rates for the first time, which you talked about on a couple of countries, the mix of versions 3, 4, and 5, and how good 5 – how well 5 is doing right now, and then how much of the growth that you're seeing is coming from the double-sided opportunity and how widespread do you think that will go down the cost curve of the handset vendors?

So we tend not to break out our mix by generation, but let me try to be responsive to your question, Joseph. GG 5 is the most successful Gorilla Glass launch we've had since the beginning. It has been exceeding our expectations in terms of penetration, and we expect that to continue. Its performance is much, much better than any of the alternatives, and that performance is what is leading to not only its rapid adoption versus GG 4 and GG 3, but also putting glass in new places like the back of the phone. We still have a lot more innovation to do to solve the core problem, which is to develop a transparent material that when you drop your phone, it doesn't break, no matter what innovative new way you have found to drop your phone. And we have many generations ahead of us. But what you see in the financial performance and why you're seeing that really strong net income performance together with the sales performance is the increased richness of GG 5 and its very rapid adoption. I think it's too early yet to opine on how rapidly the total glass enclosure penetration will grow. It's obviously off to an encouraging start, which you can tell from watching the news. I think in the end, it will depend on how much we can continue to improve the glass to make sure that the customer's ultimate experience of this product has all the great benefits of glass, wireless charging, improved receptions, improved aesthetics, but at the same time to have the type of durability you'd see from more opaque materials. Is that responsive, Joseph? Does that get at you want to, sir?

Yeah. It's going on the right direction. Just a follow-up related to the investment. On the capital allocation plan, the pace on the cash give-back is, if you take it at just a – if you straight-line the four or five – four-year plan, it would be ahead of plan. If we think about the $10 billion in investment – and Tony went through a couple areas where the investment is going, but how do we think about that $10 billion in terms of the pace up to the 2019 plan and where you are in dollar-wise?

Sure. I think as you think going forward, as we continue to have greater success, we will increase that investment. If you think about capital spending, for example, in the first year we just spent $1.2 billion. We're going to spend more than $1.5 billion this year because of the success that we're having with the capacity expansions that are required right now. I think the second thing to keep in mind is, is that from an RD&E standpoint, we're consistently investing there, but there will be opportunities to continue to grow that a little bit as we continue to have success. The other thing to remember is, is that that is no more than 10% from a gross standpoint. Some of that comes from M&A, and that M&A depends on just when those opportunities actually make themselves available. But clearly we spent in the first half a little bit less than what you'd expect, and so it's likely we'll spend a little bit more in the second half of the four-year plans, mostly as long as those opportunities are there and it makes a lot of sense to invest in them.

Yeah. I think stepping back from this, the key thing to keep an eye on is we don't expect to invest more than $10 billion. We think the $10 billion in the capital allocation plan, when we put it together, we had all these things in mind. Now, it is true that the exact timing of the different innovations and the exact timing of when you need capacity is really hard to call within any given six-month time period. But also I think the plan is, we're going to invest $10 billion, we don't see the need to invest more, and how the timing works out is going to follow the flow of programs. And probably its predictability isn't worth spending a ton of time on because the total capital allocation flow is going to be what we described.

Perfect. Thank you.

Your next question comes from the line of Mehdi Hosseini from SIG. Please go ahead.

Yes. Thanks for taking my questions. Two follow-ups. Historically, panel prices have correlated very closely to Corning's display revenue. But this time is different, especially you've done relatively well compared to panel price decline. Other than competitors' balance sheet, the constraint, what else is out there that makes historical correlation no longer valid? And then I have a follow-up for Tony. Can you just remind me of the capital – of the overall capital return program budget for $2.5 billion? Where are you now? Can you give us an update on how much accumulatively you have already spent?

Yeah. So let me start with the panel price question. As we've laid out, over the last three years, we've been on a favorable trend relative to pricing, and we just reported that we've entered a period of single-digit decline territory. And we expect this to continue, and if you think about over the last three years, pricing has improved every single year despite what's happening from a panel price, whether panel price is increasing, whether panel prices are decreasing, we're seeing that pricing environment from a glass standpoint to improve. And the reason we think that's the case is it's driven by the factors we've laid out in the past: glass supply/demand, which we expect to remain balanced or even tight; our competitor profitability; and then finally, the need for glassmakers to generate acceptable returns on manufacturing investments. And so those are the reasons that we think on a going forward basis we're going to continue see even more moderate glass pricing as we go forward. In terms of the capital allocation plan, what we have said all along that we would return more than $12.5 billion over the four-year period, and what we returned through the end of this quarter was about $8.5 billion of that.

Does that suggest that you would end up increasing given the pace that you're returning the cash to investors? Or would you hit that $12.5 billion sooner than later?

I think that we've always said it's greater than $12.5 billion. And certainly at the pace we've been at, I suspect that we will hit it sooner than later. But the reason that we've been going at the pace we have is that we don't believe that investors really have all the growth prospects in our stock, and we've found very opportunistic to be able to do share buybacks. And in fact of the share buybacks we've done, the average price has been a little over $22, and we feel pretty good about that.

Okay. Thank you.

Your next question comes from the line of Patrick Newton from Stifel. Please go ahead. Patrick Michael Newton - Stifel, Nicolaus & Co., Inc.: Yeah. Good morning, Wendell and Tony. I guess, first, I wanted to focus on Gorilla Glass. Clearly, you've seen some improved demand trends there from new launches and also glass on both sides of multiple products from multiple OEMs. I guess my question is how comfortable are you with the current supply/demand dynamics for Gorilla Glass given the product has a history of having unexpected supply swings on one side? And then there's also some well-documented manufacturing challenges associated with a large new customer product ramp?

So, Patrick, I think you're right to note that the exact predictability of the mobile consumer electronics supply chain can be problematic. Now given that, let me sort of express the way we're feeling right now and how we're experiencing that supply chain. Right now, we continue to see very, very strong pull as we look forward to this quarter. So that's the way we're experiencing it. We're not experiencing a slowdown, and you see that in our own way in which we're operating tank fleets, right? We're actually having to run a little bit longer than maybe we would've liked, and a little bit less than on an optimum utilization base, and it's really because of that strength. This doesn't mean that all of a sudden the supply chain in mobile consumer electronics has become highly predictable. It has not. But I hope it helps that you get a sense for how we're experiencing at least our piece of that supply chain at this time. Patrick Michael Newton - Stifel, Nicolaus & Co., Inc.: That's helpful. I guess, Tony, I wanted to shift to a question on your margin profile. Great results, great guidance, especially on the top line side. But if I wanted to nitpick on something, it'd be on the gross margin, which was a little bit disappointing. I'm curious if we take an intermediate-term view, how should investors over the next several years think about the balance of accelerating the growth from Optical, Environmental, Life Sciences, et cetera, which I believe are margin dilutive relative to a display business, which should decline as a percentage of revenues. So, I guess, is it reasonable to think that gross margin is relatively sticky around current levels, while op margin could see some pressure in the near-term from both mix and investments but then an eventual expansion from scale?

Yeah. I think the issue always is with our gross margin is, to your point, it really is a mix of our different businesses. And how they are going to grow and contribute is hard to know. For certainty we see a lot of growth that's going on right now in Optical Communications, a lot of that growth. And you're right that's a little bit below the corporate average. On the other hand, Specialty Materials is above the corporate average. The way that we always look at it is how is each of those businesses performing relative to their competition. Are they the low-cost producer? Are they doing better than the competition? And that's clearly what's happening. I think from a near-term standpoint, still our gross margin was 42%, a little bit less than it was in Q2, but our cost, that's really driven by our cost in display being up slightly sequentially. They were down on a year-over-year basis. That was a combination of the startup of our Gen 10.5 factory. And then, as I mentioned, we're running a handful of tanks outside of our optimal range for the quarter. But I think it's important to note that even though our gross margin percent was impacted, because we got more sales in Display and Gorilla than we expected, we did make more money. So while it was a little bit less on the percentage, it was better on the bottom line, and that's of course what we always consider to be the most important thing.

I think as we think about gross margin long term, if that's your core question, because I think in the medium term or in the near term I think Tony is right on that, a) what we're trying to do is just make more money for our shareholders and we pay a lot more attention to that and to win in all the various markets, and so then that becomes really a mix question. But as you think longer term, our businesses that are capital intense, we're going to generate extremely high gross margins on. And some of the businesses we talk about mix being a little bit of less gross margin percent in, right, like Opto (46:09), tend to be a lot more capital light. And so what's really driving us is how do we generate that really powerful return on invested capital to the capital that we deploy. And in certain businesses, where to generate that, the gross margin percent must be very, very high, right? And then, for other business that are relatively asset-light, we will tend to have a little less gross margin percent, right, but a lot fast returns. And so as we work our way through that, I think as you think long-term about the business, we're still going to be pretty capital-intense. So you should expect us to have pretty sticky gross margins sort of in this very high level relative to other companies. That in combination with being the lowest cost producer in the world, certainly helps. Patrick Michael Newton - Stifel, Nicolaus & Co., Inc.: Great. Appreciate the details. Good luck in the quarter.

Thanks.

Your next question comes from the line of Wamsi Mohan from Bank of America. Please go ahead.

Yes. Thank you. Wendell, Tony, you've done a great job at capital return here and you addressed sort of you're two-thirds of the way already to your $12.5 billion-plus target. Can you maybe address what sort of levers you have to drive that $12.5 billion higher over the next couple of years? Is it capital? Is there business strength that's going to drive that? Do you think that there is potentially other portfolio changes that are in the works? And then I have a follow-up.

I think it really comes down to something pretty straightforward, Wamsi, which is that in Tony's answer, we said greater than $12.5 billion to start when we put this together. And, really, it just comes down to the cash generation, which we are right on target for. So if we continue to be right on target for cash generation, you can expect it to be above $12.5 billion, right, and we think we can get done what we need to get done to be able to drive growth over the next decade with our $10 billion. So that's a good way to think about it if you want to think about it analytically. At such time as we're ready to be able to discuss openly a decision to get a little more specific rather than greater than $12.5 billion, we'll be sure to get back to you. This, of course, is something we have to work through with our board of directors, and I wouldn't expect an announcement relatively rapidly. We're only part of the way through this, but this is something that is always top of mind with us and you can expect us to give it really crisp and due consideration.

Okay. Thanks, Wendell. Appreciate the color there. And as my follow-up, in Gorilla historically, the supply chain has been quite long and ramps to support new product introductions have happened earlier in the year. Clearly, you guys are seeing some significant uptick. You're running tanks at lower-than-expected utilization rates, or maybe sub-optimally, not utilization rates. But that would suggest sort of a tighter correlation to product launch timing versus what you're seeing in your Gorilla business. So I'm wondering, has something really changed in the Gorilla supply chain that is causing the ramp to happen at a later point, or is it just that the volumes that you see maybe further out are quite significant and so the upside that you're seeing now is addressing sort of future volume pick-up but the supply chain has not really changed? Thank you.

I think that's a really astute question. I think we don't have enough data yet to be able to reach a high-confidence conclusion. Very sound question, though. Working on the mobile consumer electronics supply chain, understanding and clarity and correlation between our shipments and new product launches is something that occupies a good amount of our analytics time. But at this point in time, we just don't have enough data to reach a high-confidence call. But great question.

Thanks, Wendell.

Your next question comes from the line of Steven Fox from Cross Research. Please go ahead.

Thanks. Good morning. Two questions for me. First off, when you think about the investments that you've highlighted that maybe are putting a little bit of a downtick on gross margins, can you talk about like where you would see maybe a peak level of investments relative to revenue starting to ramp and absorb some of those investments, and maybe excluding the Gorilla Glass seasonality from that? And then secondly, Wendell, you did mention some more momentum around Gorilla Glass for automotive applications. Is there anything specifically you're thinking about there or is it similar to the progress you talked about at the meeting in June? Thanks.

So let me take the investment question first. Clearly, we've been investing more as the year has gone on this year and we always factor that into our guidance both on gross margin and SG&A and OpEx. And so we invested a little bit more in Q3 than we did in Q2. Investments in Q4 are pretty similar to what we did in Q3, maybe a little bit more. The good news is, is that, so is the sales growth that's happening there. What you've got is that we're really focused in three primary areas from an investment standpoint. That's our Optical Communications map, that's our mobile consumer electronics map, that's our automotive map. And if you think back to the areas where we've seen the growth, those are the three areas that we're growing. So we feel pretty good about the alignment between the investments and when the growth is happening, especially in the near-term. Thanks. And just the question on Gorilla Glass for auto?

Yeah. We're seeing really nice momentum. Now that being said, this is an industry that moves at a very deliberate pace. So we tend not to try to get overly excited, because you win today for revenue that's in the farther future. But we're feeling really good. And it's interesting, in any innovation that is pretty disruptive like this one is, then what you tend to try to do is you'll get positive surprises and negative surprises; and when you get the positive surprises, you start to double down on them. I'd say we're getting some really nice positive surprises right now in automotive interiors. People's vision for what they want to do in the interior of vehicles is quite stirring and is driving them very much into the arms of our material set and our co-innovation approach. So we're actually – been investing an awful lot of time and attention into that, and we're getting really, really nice pull. So I think that's what you're sort of sensing is the exteriors is going about how we would anticipate with the normal deliberate pacing and we're getting really nice positive surprises that we're doubling down on in interiors. And what's interesting is the type of innovations that they want, a very high revenue generation want because of the value add they want from us around optics, around shape. So that revenue opportunity is looking very attractive right now.

Great. That's very helpful. Good luck going forward.

Thank you.

Your next question comes from the line of George Notter from Jefferies. Please go ahead.

Hey. Thanks, guys. I appreciate it. I guess I wanted to ask about the Optical business. As I go back to the end of Q2, I felt like you guys hesitated a bit in terms of the full year guidance for Optical, and I think part of the narrative was just around timing of certain customer projects. Can you talk about what's changed now versus how you saw things coming out of Q2? Is it just a customer project or two? Is it the Verizon One project? Or is it something more broad-based you're seeing in the industry that's really helping that business? Thanks.

I'm not so sure there's been a tremendous amount of change since the end of Q2. I think what we were trying to communicate in Q2, which we didn't do a good job of because a lot of people thought it was a hesitation. It was just the lumpiness that happens in this business. And going on a forward basis, there will be a time when this is just going to show up. We just wanted to remind the investors of that. We didn't mean to imply that we thought that was going to show up in Q3 or in Q4 and that's clearly what some investors interpreted it as. And so from an underlying standpoint, as Wendell said, we've seen strength in carriers, we see strength in the enterprise business, and from an overall standpoint, we think we're going to be up more than 15%. So we feel very good about Optical Communications.

Got it. And then just one last follow-up. I'd love to ask you about the FX rate. Certainly constant currency, I think you guys are talking about adjusting that rate going into 2018. Can you kind of remind us where you are in that process and when you might address that? I assume you would address it for both the constant currency won as well as the yen. Thanks.

Yeah. That is correct. I mean as we stand right now, we have about 70% of our yen exposure from 2016 to 2022 hedged, and the blended rate of that hedge is about 1.06% (56:44). We're obviously fully hedged in 2017 and we're actually pretty high percentage hedged in 2018 and 2019, the near-term years where we have more confidence in those results. And what we plan to do in the January call is talk about a new core rate. The core rate today is 99% (57:06). We'll make an adjustment and when we make that adjustment, we'll go back and recast 2016 and 2017 so it will be easy to make comparisons between based on where the core rate adjustment is and so it'll be easy to understand what our underlying business performance is.

Thanks.

Your next question...

Sorry. We've got time for one more question.

Okay. That question comes from the line of Rob Cihra from Guggenheim. Please go ahead.

Great. Thanks very much. I'll sneak in just a quick one. In Optical, carrier has been the driver, continues to look like the driver, but enterprise has been choppy. It looks like it actually may be stabilized a bit after being choppier the last few quarters. I mean, are there any trends you're seeing there? Do you think from here, I mean, looking better or worse I guess in enterprise and data center versus the last few quarters? Thanks.

So I think it is quite accurate to make the observation that we're having a lot of strength in carrier and that in enterprise and cloud, the predictability and consistency of that has been a little bit less than carrier. That being said, even though the total actual pacing of how that whole market works can be a little more difficult to predict. One of the reasons you see what you see in our numbers is growing adoption of more and more of our product set and more and more cloud-based providers. So I don't know that you can necessarily look at our revenue alone and then conclude what exactly is going on in the total market because you're having a combination of yes, some wind in the total but also we're getting up some more sale area, so people are liking, our customers are liking our product set more and more across a wider footprint, if that make sense to you, sir.

That's great. Thank you.

Great. Wendell, you have any closing comments that you'd like to make for us?

Well, first of all, let me thank everyone for joining us today and let me reiterate how pleased we are with our continued positive momentum. Our focus is on closing out 2017 strong and then keeping that momentum headed into next year. As we've said, we're on track to deliver the overall goals of our strategy and capital allocation framework and we're excited about the rich set of opportunities ahead of us. And we look forward to staying in touch.

Great. I want to thank you too for joining us today and before we close let you know that we will be meeting with investors at the Credit Suisse conference in late November and then a web replay of today's call will be available on our site for one year starting later this morning. There's also a telephone replay available for the next two weeks with details in today's news release. Once again, thank you for joining us. Greg, that concludes our call. Please disconnect all lines.

Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.