Ladies and gentleman, thank you for standing by. Welcome to the Corning Incorporated Quarter Four 2017 Earnings Results. It’s my pleasure to turn the call over to Ann Nicholson, Division Vice President of Investor Relations.

Thank you, Jerome, and good morning. Welcome to Corning's year end 2017 conference call. With me today is Wendell Weeks, Chairman and Chief Executive Officer and Jeff Evenson, Senior Vice President and Chief Strategy Officer. Because of a family emergency, Tony Tripeny, Senior Vice President and Chief Financial Officer is not on the line today, but he looks forward to talking with investors throughout the quarter and we’re sending his family our regards. So, joining us today are Ed Schlesinger, Vice President and Corporate Controller and Stephan Becker, Vice President and Operations Controller. 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. The statements involve 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. Supporting slides are being shown live on our webcast, and we encourage you to follow along. They'll also be available on our website for downloading. Now I'll turn the call over to Wendell.

Thank you, Ann and welcome everyone. This morning we reported a strong finish to an outstanding year and we feel great about our progress and our prospects. Strong growth and strong investment generated $800 million sales increase for the year and set the stage for additional growth. We exited the year running at full capacity in several of our businesses and with committed customer demand that supports our current capacity expansion initiatives. We expect to see the benefits of these initiatives in the second half of 2018 and beyond as production ramps. 2018 will be another year of strong growth and investment consistent with our strategy and capital allocation framework. All of our businesses contributed to the outstanding 2017 results highlighted by 18% year-over-year sales growth and Optical Communications 25% growth in specialty materials, 7% growth in environmental and price declines in display that were the best seven years. As we shared, the strategy and capital allocation framework outlines our leadership priorities. 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 plan to return more than $12.5 billion to our shareholders through repurchases and dividends, and we invest $10 billion to extend our leadership and deliver growth across all of our market access platforms. We made great progress towards those goals since we announce the Framework in October of 2015. Our cash generation is on target, and through the end of 2017, we return $9 billion through share repurchases and dividends. We’ve invested $4.5 billion under the Framework in RD&E capital expenditures and acquisitions. We’re starting to see the returns already. As you can see in our most recent results 4-year…

Thank you, Wendell and good morning, everyone. Our 2017 results were outstanding. In 2018, we’ll continue investing to support our customers and extend our leadership. We expect core sales to grow to approximately $11 billion or about 7% on a constant currency basis. Before reviewing segment results, I want to talk about two items affecting our GAAP results, FX accounting and tax reform. As we’ve discussed before, GAAP accounting requires earnings 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 us, this resulted in after-tax GAAP gain of $1 million for the fourth quarter and a loss of $247 million for the full year. To be clear, this mark-to-market accounting has no impact on our cash flow. Our currency hedges are protected economically from foreign exchange fluctuations and provide higher certainty for our earnings and cash flow, our ability to invest for growth and our future shareholder distributions. We’re very pleased with our hedging program and economic certainty it delivers. We receive $1.6 billion in cash under our hedge contracts over the last five years. Our non-GAAP or core results provide additional transparency into operations by using a fixed currency rate aligned with our yen and [indiscernible] translation hedges and also by adjusting for other items that do not reflect ongoing operations. For 2015 to 2017, our core reporting use a constant currency rate of 99 yen to the US dollar at 1,100 yen to the US dollar. For 2018 to 2020 we established hedges for approximately 90% of our expected display earnings. We expect these hedges to result in average rate of 107 yen to the dollar and we plan to use that rate…

Thank you, Jeff. John, we can open the line for questions. We have live in the queue today so we’re hoping that you can keep one question for everybody.

[Operator Instructions] Our first question comes from the line of George Notter with Jefferies. Please go ahead.

Hi guys. Thanks very much. I guess I wanted to dig into the Optical business a bit. You guys are adding a lot of capacity here, I saw the announcement the other day about that your cable manufacturing facility I guess the question here, can you refresh us on the amount of new capacity you are adding in that business and then also the timing with which that capacity comes on line?

Thanks George. We are not giving exact guidance on how much capacity we’re adding for obvious competitive reason. We launched on this latest round of the capacity expansion really anchored by the Verizon announcement in their commitment to $1 billion over the next few years. that together with a few other building blocks of key customer committed demand had us really try to expand our capacity footprint across all those products that we’ll be acquiring. What you can fix that on timing where you heard from Jeff is that investment in capacity is a bit of a drag on our profitability in the back half of 2017 and the first half of 2018 and you are going to feel those plants ramp up and increasing utilization in the back half of 2018. So, the return from the drag to being a real force for positive momentum in the back half.

Our next question is from Vijay Bhagavath with Deutsche Bank. Please go ahead. Vijay Bhagavath, your line is open if you are on mute possibly. And we will move on to Mehdi Hosseini with SIG. Please go ahead.

I’m looking at the display as a percentage of net income and the mix has steadily declined back in 2013 was, in the high 60% and now is almost 50%. As you accelerate the investment in other areas like what happened in the second half of ’17. Should we also expect acceleration in this decline, decline in display net income as a percentage of overall net income? I’m just trying to better understand how other segments or the net growth and have continued diversify the revenue and operating income mix?

So, I think, you’ve got it -- I think your observation on what’s happened in the past and your projection of what’s in the future is directionally correct. Our other market-access platforms are going to grow faster and our display market-access platform and therefore it will become a smaller part of our overall corporate mix.

I guess the question is, since you have a stepped-up investment in other areas, should we expect acceleration in contribution from other segments?

Yes.

Would you like to elaborate on the rate of increase?

No. There is only so much guidance we really want to give and project mainly because, we don’t want to -- everything has a higher compatibility set to it. But I think in general on track with it, which you heard from Jeff was it is expect an $11 billion of revenue this year. With the bulk of that revenue growth coming from other segments other than display. I think that type of numbers that you saw, that you can interpolate from there and what you saw for 2017, I think directionally, that’s the way to think about it going forward, there is very strong growth for the company overall with display being stable. Certainly, with the pricing dialogue you heard from Jeff, there is a possibility that display as a segment begins to gross up, but still, it will be at a lower rate than the rest of the company I believe.

And next go to Steven Fox with Cross Research. Please go ahead.

Two questions from me please. First of all, on the gross margin swing there in 2018. Can you give us an idea of how much of the swing is just from ramping down some of the spending versus expecting new volumes to ramp in the second half? And then as a follow-up, can you just give us a little bit better color on some of the grow gas auto wins. Maybe just buy large buckets of interior versus exterior and how you expected to realize revenues from that? Thanks.

Steve, when we open any new plant, the staffing and fixed costs tend to ramp earlier than the production. We had to commit demand for these plans and as we move to higher utilization rates due to volume increases and meeting this committed demand, we would expect our gross margins to improve throughout the year with especially strong growth in the second half.

And on auto Steve, did I hear your question right how we're feeling about the ramp and the mix between glazing exterior versus interiors.

Yeah, I was just trying to understand like if you looked at the 35 new wins sort of what kind of buckets they fall into within the vehicle location, whether outside inside, what type of things inside and when would these programs start to ramp.

The majority of the platform wins that we have right now are on the interior. But one of the reasons for that is people refresh interiors and adopt new design in interiors much more rapidly than they refresh the exterior of a car platform. So, the majority of those are in interiors. I think that when we think through the revenue opportunity we don't see a lot of difference between the revenue opportunity in interiors and exteriors. Even though the glass area is quite higher in exterior the relatively higher value that we had in interior with special optical surfaces to create a particular viewing experience means that that's quite a high revenue realization business for us. So, I would say determining between the two probably isn't as important as the overall rate of adoption as we try to drive this business to another $1 billion sort of revenue generator for Corning over time.

And this would be for 2019-2020 model year vehicles.

We'll start shipping commercially for those products late this year, right we'll begin. But you won't start to see a significant ramp till starting in 2019 and beyond you should look for when we start to put in some high-volume manufacturing for the part finishing and optical treatment should give you some more evidence and you should hear about that sometime this year Steve.

Our next question is from Wamsi Mohan with Bank of America-Merrill Lynch, please go ahead.

So, I was just wondering around these price declines sounded from your Q1 commentary that there was an improving but higher than mid-single digit decline which will improve the pricing improves, more so throughout the course of the year close to Q1. I appreciate your volumes are lower in Q1 relative to full year but is 2Q the right timeframe to think about price declines to get to mid-single digits. And secondarily I know Tony in the past has said that the core rate could be locked in maybe over a five-year period. Is the FX volatility causing you to rethink for the period of locking in the core rate at this 107 for three versus five years? Thank you.

Thanks for your questions Wamsi. First one on pricing, so let's make sure we're talking about the right terms. There's no sequential price decline in Quarter 4 and Quarter 1 for instance and then there's year over year declines Quarter 1 this year versus Quarter 1 last year. What you heard from Jeff was that we're talking now about the really important milestone of towards the back half of this year. We expect the year-over-year decline to be a mid-single digit. That’s a very significant milestone. The sequential declines are there have been a low single digit and continue to be. We’re seeing improvement in this Q1 decline versus Q1 of last year and of course we are going to continue to see improvement in the sequential declines to be able to reach much lower year-over-year decline rate, but that little shift in terms can be a misunderstanding. I think the key granule we see the rate of price decline improving for us and we would expect to see that especially in the back half of the year that we had additives for it already in Q1 and anticipate it as well in Q2.

With respect to hedging, we are probably giving a three-year core rate to be effective, it’s a good window to buy certainty for our cash flows and earnings. It allows us to execute in a focused way our strategy of capital allocation framework and deliver all the goals consistent with our financial policies. We do have hedges in place for the next three-year period, but at lower coverage than the 90% we have through the 2020. So, we’ll give you more details on how we expect our core rates evolve as we get closer to that 10-year period.

And our next question is from Vijay Bhagavath with Deutsche Bank. Please go ahead.

My question is on your optical portfolio in 5G in particular 5G if you'd agree with me is fundamentally different from previous wireless generations, 5G uniquely needs both wireless and optical communication. So, my question is around, would you focus primarily on the optical communications opportunity in 5G or any thoughts in building up a wireless communication portfolio for 5G now with the fixed wireless starting to pick up and then we’re getting into mobility in 5G? Thanks.

An excellent question, Vijay. I think your assessment of the difference between 5G wireless technology in previous generations is accurate and that wireless now becomes a very optically rich offering as people move towards dense 4G and 5G. As far as expanding outside of optical, mainly our focus will be on those things that are fully integrated into our passive optical system where we can uniquely be able to package and/or facilitate the implementation of wireless for our customers, we would augment our offering. But that is a dialogue which we’re involved with deeply with our key customers and is really quite straightforward, it becomes do you want to view this or do you want to source it and what is the least expensive way to build out this infrastructure. So, depending on how those dialogues go in a more the value could shifted beyond the optical, but I think it’s too soon yet to conclude where those dialogues end Vijay.

Thanks Wendell. Truly helpful. A quick follow on, as you bring up more optical fiber capacity I mean I keep seeing these blurbs on the news wire, you keep continue to build up new optical manufacturing capacity. Would that have any near-term impacts on segment margins? Thanks.

Yes. Excellent question Vijay. As you would have heard from Jeff is, we had from our investments in optical, a bit of a drag in the back half of 2017 and we had a bit of a drag here in the first quarter of 2018. We would expect as those facilities will ramp, that drag will disappear and then turn into strong positive. As you know having visited our Optical Communications plants, our fixed costs in those facilities is high. So, our variable margins are also quite high. So, as we feel that up, you can expect to see it have a pretty potent effect on our gross margins.

Our next question from Patrick Newton with Stifel. Please go ahead.

Excuse me, I want to dig a little bit more into gross margin perhaps a two-part question. So, I guess, I’m strongly see how the commentary on several segments running at full capacity exiting the year results in the 4Q gross margin missing your guide by about 100 bps. And it appears to me that the comments that you’re making on the investment headwinds tend to be more targeted at the first half of ’18. So maybe, you can help us bridge the 41% gross margin results relative to the 42% guide. And then if we look forward and taking into account that a substantial portion of your growth is coming from some larger -- some lower margin businesses, how should we think about gross margin post investments, I think that you talk about 42% gross margin in back half of the year? But is that a good intermediate term target meaning that 43% plus that we saw in the 2014-15 timeframe is unachievable given mix going forward?

Let’s start with the Q4. So, in Q4, we’re also seeing that the drag from our investment cycles. And you’re having, what can cause timing delta is that as we actually start-up a plant then there is certain costs that are attributed that are sitting in a project now flow through our P&L in our gross margins. So, some of that fitting quarter four as well as you may have seen the announcement from Saudi that the major new strategic alliance we’ve announced. That also started to shift and so there we had to build a new supply chain and that as about 4th generations of product to that. So, it’s a new product, new supply chain and so as we started to shift that, that also as profitability was not at the level that it will be ultimately. So, I think really quarter four and quarter one is the same basic story, a little bit different mix revenue investment is. But you’re seeing that strong investment takeaway from some of this strength in the overall operations and we’d expect that to reverse. Now turn it over to Jeff for the back half, but you’re right on the target for our gross margins. Jeff?

At our new core rates of 107 yen per dollar and 1,175 Korean won per dollar, the 2017 gross margin was 41.3%. We expect to be about it at this year. First quarter we're going to be at 40% in the back half of the year for Quarter 3 and Quarter 4 we expect to be above 42%. The two primary drivers of that are that our new factories will act as the startup stage as we ramp to meet the committed demand and then the second factor is we're taking advantage of the seasonally lighter demand and display to upgrade our display tanks with the latest technology and that will also have a strong benefit in the back half of the year.

And next we go to Stanley Kovler of Citi Research, please go ahead.

Just one question on displays and then a follow up on the optical side. Panel makers have commented recently that they wanted to refocus on profitability and so one question was for 2017 for example when in the second half of the year there was more discounted to get inventory moving in China. How should we think about those types of developments going forward when maybe panel makers or OEMs will be less inclined to discount to get volume through. Your thoughts would be great.

We think that the supply chain inventory in actually 2017 had a healthy level and we think it will be healthy throughout 2018 as we see growth at the retail level. In terms of impact on us, we think that the glass market volume is going to be up mid-single digits and we believe that our pricing can reach mid-single digit year over year decline. We think that pricing is going to be driven by three things, the supply demand balance, competitive profitability of glass makers and also the need for attractive returns on ongoing investments. If you look over the last three years correlation between tail [ph] makers performance and glass pricing has been very low. So, we feel pretty confident on our guidance.

Stan was that the question you were asking or were you aiming more at the display market.

Appreciate it, no that was the question. I just wanted to follow up on optical related to Verizon. The amounts from [indiscernible] capabilities I think that allow them multiple wavelengths on a single fiber for some of the edge [ph] deployments and I think the focus more from these technologies was to get to speed up on a single wavelength. Does this have any implication for you guys on demand or ramp of single mode fiber, is this an accelerator or could this actually slow things down for you, thank you.

So, in general what drives our demand is going to be footprint by neighborhood or by city. It is putting the [I in telecom] [ph] it is putting in place the regional infrastructure that we're going to service. As always when you put in something like [indiscernible] the capability of the fiber is always well in excess of what you're driving it at. And so quite often what you'll see is our demand comes when we basically due to home passes and then ultimately the home drops and then it’s always the telecom company can turn up the rate and turn up the service level with pretty simple upgrades in the [indiscernible] system inside sort of a level of itself. So, this is atypical and we don’t see it as impacting us frankly one way or the other, even negatively or positively other than to the extent that the degree with which auto customers serve their customers better, that net long-term turned in to more demand for us.

Right. And next one is James Fossa with Morgan Stanley. Please go ahead.

Thank you very much. Just wanted to get a little more color on growth drivers for especially materials and Optical and Displays. Wendell, you talked a little bit about interior glass starting to move specialty or starting to contribute really in 2019. How should we think about bit it as a growth driver for specialty materials overall kind of meaningful in 2019 as a contributor or is it going to take longer than that? And I guess in light of your recent comments on this call related to Iris similar question on Iris, can Iris be a meaningful contributor to Display in 2019 or once again is that going to take longer? Thank you very much.

So, let’s start with your first question. The segment was sort of accounting method. Right now, we account for auto in glass area inside other, right. Ultimately, I don’t agree determine where we live is a segment, but it links more closely with our automotive market access platform than it does on mobile consumer electronics platform. That being said because what you really care about is, does it generate revenue or not. I think 2019 will be the year if everything goes well that we will start to feel it in automotive. We’re a big company and this is just the beginning of this so it’s not going to be a life changing field in 2019. But we will expect it to be really start to build its momentum in 2019 and then start to really contribute much more in the next decade. So, in the near term, what drives us in specialty is the adoption of our new innovations by more and more of the OEMs and we expect specialty to grow this year in mobile consumer and electronics and rate of growth will depend on how quickly people adopt our innovation sets. In Iris, it’s still too early to tell. I think it’s very encouraging that two major players in monitors; Dell and Lenovo have adopted the Iris technology for the top of their line. I think we need to see they become a lot mainstream before that turns some of the investment area into a margin producer.

And we’ll go to Joseph Wolf with Barclays. Please go ahead.

Hi. Thank you. I had a question back to Display but on the transition in the industry towards OLED and not on the TV set but on the smaller panel size and the lower -- I guess the Gen 6, 6.5. Competitively is there any impact, I know you guys are involved in OLED manufacture, but are you competitors involved in the same way and is there any longer-term consideration where the other businesses or your competition is looking at the OLED opportunity differently than Corning?

So, could you just build on your question? When you say OLED, what exactly do you mean.

Both in flexible and in rigid, where, I know that Corning product is used in the manufacture of the end product, or perhaps it’s in the final device. And I’m wondering, if you believe that your competitors have the same sort of manufacturing capability or they are looking at that market differently?

How can we tell our competitors are looking at it? So, let me share instead how we think about it. Starting back a number of years ago as we evaluated OLED versus LCD technology. We determine that OLED probably will be most successful in the flexible small mobile area. Because the opportunity need performance advantage is that we’re highly value. So therefore, that’s where we focused a lot of our innovation effort and our share and that business is impressively high. So, to the extent that devices go into OLED mobile consumer electronics as opposed to LCD, that is revenue enhancer for us. Now to small revenue enhancer, because in glass, the area of the device matters and so overall mobile is relatively small percent of the overall glass demand. What we felt then and we continue to feel is that all OLED for TV can become a player, but a small player that fundamentally it doesn’t offer enough value validate to the cost will create versus the continually improving LCD technologies like you just saw recently at CES with some of the big quantum dot technologies. That being said, we have a strong position as well. Anytime, anybody wants to use the glass. So, I don’t have great insight into how do our competitors feel about it. But I really like our position.

And that will be from Doug Clark with Goldman Sachs. Please go ahead.

I had a question on the display glass volume expectations. First for the market being up mid-single-digits in 2018. Can you explain what that means from a TV unit standpoint? Two units have been down for the past few years, I’m wondering if you’re assuming or reacceleration in growth. And then secondly on Corning share gains in the relationships with BOE driving above market volume growth. Can you quantify that, should we be expecting high-single-digit glass volume growth for Corning in 2018, so essentially the materiality of BOE in 2018? Thanks.

Sure. We expect screen size to be the primary driver of growth this year. And in terms of our growth BOE is ramping our Gen 10.5 facility, we’re ramping our glass in tandem. So, we expect stability in other areas and that to be a little add for us, but that’s all the guidance we are looking at this time.