Corning Incorporated

Welcome to the Corning Incorporated Second Quarter Earnings Conference Call. It is my pleasure to turn the call over to Ann Nicholson, Vice President of Investor Relations.

Thank you, and good morning. Welcome to Corning's Quarter 2 2019 Earnings Call. With me today are Wendell Weeks, Chairman and Chief Executive Officer, Tony Trippany, Executive Vice President and Chief Financial Officer, and Jeff Evenson, Executive Vice President and Chief Strategy Officer. I'd like to remind you that today's remarks contain forward-looking statements and that fall within the meaning of the Private Securities Litigation Reform Act of 1995. Those 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 consolidated 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 gap value can be found on the investor relations section of our website at Corning.com. You may also access core results on our website with downloadable financials in the Interactive Analyst Center. Supporting slides are being shown live on our webcast, and we encourage you to follow along. They're also available on our website for downloading. And now I'll turn the call over to Wendell.

Thank you, Anne, and good morning, everyone. This morning we reported excellent results that keep us on track for growth in 2019 and beyond. Our performance demonstrates the strength of Corning's portfolio and our ability to deliver for shareholders in a mixed macro environment. Looking at the second quarter, sales were $3 billion, up 8% year over year. Net income of $410 million grew faster than sales at 14% year over year, driven by operating margin expansion. And EPS was 45 cents, up 18% year over year. Segment sales growth rates ranged from the mid-single digits to mid-teens, and we grew earnings in all segments. Highlights from the quarter include optical communications met expectations, delivering high single-digit sales growth driven by data center and fiber demand. Environmental technologies delivered 15% year-over-year sales growth, driven by the accelerating adoption of our gasoline particulate filters and continued strong demand in the North American heavy-duty market. Life science sales were up 6% year-over-year, with net income growing much faster than sales, up 29% year-over-year. Specialty materials sales were up 8% year-over-year on the strength of Gorilla Glass and our other innovations. Display continues to deliver stable returns. with second quarter sales and net income up significantly year over year and better than expected pricing. Our performance stems from the successful execution of our four-year strategy and capital allocation framework introduced in October of 2015. Under the framework, We targeted returning more than $12.5 billion to our shareholders through repurchases and dividends, while investing $10 billion to extend our leadership and deliver growth. We surpassed our four-year goal of $12.5 billion by returning more than $300 million to shareholders during the second quarter. And we're seeing the benefit of our investments in our first half year-over-year performance and in our expectations for the second half of 2019. Of course, as you've all seen this earnings season, many companies are facing uncertainty and macroeconomic headwinds. And we're not immune to economic downturns or trade disputes or other geopolitical upsets. but we are more resilient than at any other time in our history. Across the company, while the end markets we serve are experiencing downward growth revisions, and many of our competitors are not growing at all, we continue to outpace the markets. In the auto market, Global auto production is down, but we expect sales growth in our environmental business to be in the low teens this year. Retail television sell-through forecasts are declining in units, but we expect display volume and sales growth this year. Smartphone unit sales are also forecasted to be down. but we are growing Gorilla Glass sales this year as well. In life sciences, the industry is relatively immune to economic headwinds, so it is growing in its typical low single-digit rate, but we expect mid-single-digit growth of our life sciences business this year. And finally, in optical communications, we now expect the passive optical market to be down. Earlier in the year, we projected the market to be up 5% and for our sales to grow in the low teens. We now expect the market to be down mid to high single digits and for our sales to grow low to mid single digits. While the growth is lower than previously expected, it is still very positive relative to the market. You'll hear more details from Tony on the current dynamics. So, the good news is, even in this environment, we are growing. And when markets improve, we'll grow even more. We are confident in our long-term growth prospects. The successful execution of of our strategy and capital allocation framework adds to our confidence. We face challenges along our path to growth throughout our 2016 to 2019 plan. But we addressed those challenges and met or exceeded all our goals. In so doing, we created a bigger, stronger company. and we created a strong foundation for significant additional growth. Our new Strategy and Growth Framework sets our leadership priorities for 2020 to 2023. It's our original framework evolved for a new growth era. We will continue to focus our portfolio and utilize our financial strength. We plan to return $8 to $10 billion to shareholders, and to invest $10 to $12 billion in growth and extending our leadership. We expect a sales compound annual growth rate of 6% to 8%, and an EPS compound annual growth rate of 12% to 15%. and annual dividends per share growth of at least 10%. Our capabilities are becoming increasingly vital, and multiple trends are driving growth across multiple businesses and in multiple geographies. In optical communications, we are on track to deliver growth twice as fast as the passive optical market, driven by opportunities in 5G and next-gen hyperscale. Recently, CenturyLink announced that it is using Corning Fiber to build the largest ultra-low-loss fiber network in North America. They're connecting more than 50 major cities throughout the U.S., and will soon expand into parts of Europe as well, creating a 4.7 million mile fiber network. In the second half, we're going to be introducing next generation solutions that enable 5G and access networks to be installed faster and reduce the total cost of ownership. While pauses may occur as network operators transition between projects, photons replacing electrons in network after network provides a strong upward trajectory over longer periods. In mobile consumer electronics, we are well on our way to doubling sales despite a maturing smartphone market. As the world leader in glass for smartphones, tablets, and emerging categories like wearables and augmented reality devices, we expect to continue capturing more value per device. Gorilla Glass has now been featured on 7 billion devices worldwide, and adoption of Gorilla Glass 6 is expanding. We continue to innovate in new categories. and expect further adoption of new products in the second half. Turning to the automotive market, we expect to double sales by 2023, driven by gas particulate filter adoption and our new auto glass solutions business. As I already noted, many companies in the auto industry are dropping expectations. we're generating double-digit growth and ramping new capacity. In one new plant, we're now producing large parts to serve the growing pipeline of projects awarded to our automotive class solutions business. In another, we're capturing accelerating demand for gasoline particulate filters. And not only are we making great progress building a $500 million GPF business, we're growing faster than we expected. We now expect GPF sales to exceed $200 million for the full year. Our market leadership for this new technology was publicly recognized by two customers in the first half of 2019. We received the Daimler Supplier Award in March. And just recently, we also won the Volkswagen Group Award. We were one of just eight suppliers honored in the Global Performance Champion category, chosen from Volkswagen's global network of 40,000 suppliers. Turning to life science vessels, we aim to outpace the industry by more than two times. We've recently increased manufacturing capacity for several key products used in cell and gene therapy development and production. Our growth is also supported by the increasing need for safety and quality in the packaging of injectable drugs. On this front, we continue to make strong progress on the path to a new, long-term, multi-billion dollar franchise with Valor Glass. In display, our goal is to stabilize returns and we are successfully delivering. The drill driver for display glass is large size TVs, which are most efficiently produced by our customers on Gen 10.5 apps. We continued our leadership in quarter two with the announcement of two new Gen 10.5 plans. Corning now has three of the planned four Gen 10.5 facilities in the world. And we are thrilled about pricing. Third quarter glass prices are expected to remain consistent with quarter two. Yes, you heard me correctly. Third quarter prices should be approximately flat to quarter two. As a result of the glass pricing through three quarters, we now expect full year glass prices to only decline in the low to mid single digit range. Across our markets, our relationships with industry leading customers We're creating new opportunities for collaboration, and our strategic investments are paying off. We're capturing opportunities and generating significant top and bottom line growth in multiple businesses. I look forward to sharing our progress against our new objectives over the next four years. Now, let me turn the call over to Tony for more details.