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

Simona Jankowski - Goldman Sachs Group Inc., Research Division Wamsi Mohan - BofA Merrill Lynch, Research Division Nikos Theodosopoulos - UBS Investment Bank, Research Division Ehud Gelblum - Morgan Stanley, Research Division George C. Notter - Jefferies & Company, Inc., Research Division Ajit Pai - Stifel, Nicolaus & Co., Inc., Research Division Jim Suva - Citigroup Inc, Research Division Amir Rozwadowski - Barclays Capital, Research Division Rod B. Hall - JP Morgan Chase & Co, Research Division Steven B. Fox - Cross Research LLC Mark Sue - RBC Capital Markets, LLC, Research Division

Ladies and gentlemen, welcome to the Corning Incorporated Fourth Quarter Earnings Results. It's my pleasure to turn the call over to Mr. Ken Sofio, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Corning's fourth quarter conference call. This morning we have Jim Flaws, our Vice Chairman, Chief Financial Officer, to read some prepared remarks before we move to the Q&A. And those remarks do contain forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995. They involve a number of risks, uncertainties and other factors that could cause our actual results to differ materially, and these risks are detailed in the company's SEC reports. Jim? James B. Flaws: Thanks, Ken. Good morning, everyone. Hopefully, you had a chance to read the press release we issued this morning on our fourth quarter and full year results. If you haven't, a copy can be found on our Investor Relations website. Looking back at 2011, it was a year when the company achieved many milestones but encountered significant headwinds. From a financial standpoint, Corning had an outstanding year. In 2011, the company set records for sales, gross margin and operating income without specials. All of our businesses achieved increased sales year-over-year, sales of Corning Gorilla Glass almost tripled. We achieved our eighth year in a row of positive free cash flow, we maintained our very strong balance sheet, raised our dividend and initiated a sizable share repurchase program. We also brought significant new innovations to the market as our patient investments in research are paying off. Newer products, such as Lotus Glass for OLEDs and now a new, much thinner cover glass in Gorilla Glass 2 have been very well received by customers. We believe this is an outstanding list of achievements, despite less-than-robust growth in the developed economies around the world. However, it does not tell the entire story. We also encountered significant challenges in the second half of the year. In the third quarter, the display supply industry began a significant contraction. Ultimate resulting in the first year in LCD's history, where the supply chain inventory at the end of the year was lower than the amount at the beginning of the year. Our customers, panel makers, continue to operate on unhealthy financial levels. And in the fourth quarter, we experienced significant pricing pressure and a dispute at one of SCP's largest customers. Lastly, we witnessed significant upheaval in the solar industry, which impacted demand and price for polysilicon at Dow Corning. So while we're proud of our accomplishments we face and continue to face significant challenges. We're taking action to mitigate the impact of these challenges by reducing costs and adjusting capacity. Nevertheless, our profitability will be lower. This reset in the display industry, as well as the pressure at Dow Corning had us feeling like the company is approaching a new floor in terms of profitability. It is our plan to grow profits from this level. In short, we expect strong growth in sales and profits from Telecom, Environmental, Specialty Materials and Life Science segments over the next several years. Our confidence is high for these businesses based on their achievements in 2011, with their collective sales up 31% and earnings before special items up 136%, and also due to our market leadership in these businesses. Now our Display segment is likely not to grow but will generate strong profits and cash flow. In fact, investors should anticipate significant cash flow generation over the next several years. We anticipate using this free cash flow to fund the acquisitions to supplement organic growth, for dividends and for share repurchases. We'll discuss some of those plans this morning in our outlook for Q1 in 2012 and at our Annual Investor Meeting next Friday in New York City, we'll share our growth plans for the next several years. So with that intro, I'd like to walk you through our Q4 results and our Q1 outlook. Fourth quarter sales were $1.9 billion, a 9% decrease sequentially and in line with our expectations. Compared to last year, sales were up 7%. Gross margin was 43.7%, down from the third quarter of 47.1% and in line with our expectations. The lower gross margin was due to higher price declines in Display, lower volumes in Gorilla Glass product line and seasonally lower volume in Telecom. SG&A and R&D were higher sequentially, but in line with our expectations. As a reminder, operating expenses in Q3 were materially lower due to us lowering compensation accruals and also onetime credit. Equity earnings were $321 million, but that included a significant onetime gain at Dow Corning. Excluding that gain, equity earnings were $241 million or 26% lower sequentially, which was slightly better than our guidance. Equity earnings also included a $12 million charge for an asset write-off, which we did not count as a special item. Earnings per share, excluding special items was $0.33 and substantially lower versus Q3 and a year ago. Both equity earnings and EPS, as stated here are non-GAAP measures, and a reconciliation to GAAP can be found on our website. For the year, sales grew 19% and reached $7.9 billion, the highest level in our 160-year history. All segments grew year-over-year. Gross margin dollars achieved an all-time high reaching $3.6 billion, an increase of 17% over the prior year. Operating margin, excluding special items was also an all-time record at $1.8 billion. So from a consolidated standpoint, we achieved significant financial milestones. Below the operating margin line however, lower equity earnings and the higher tax rate reduced our earnings. Our tax rate increased as expected from 3% to almost 15%. Equity earnings fell 25%. The combination of higher taxes and lower equity earnings shaved more than $0.5 billion from our bottom line. EPS for the year, excluding special items, was $1.76 and that compares to $2.07 in 2010. Again, these are non-GAAP measures, and please see our GAAP reconciliation on our website. It is also important to note that our sales and EPS benefited significantly from a stronger yen this past year. Now I'd like to turn to our segment results for quarter 4, and I'll start with Display. Display sales were $780 million in Q4, a decrease of 4% sequentially, but 4% higher compared to a year ago. Volume was in line with our expectations. Q4 results also benefited slightly from a stronger yen, which averaged 77 for the quarter. Volume at SCP was higher than our revised guidance, as we disclosed pricing in our wholly-owned business and at SCP, was down significantly. Because the timing varies customer to customer and will spill into the first quarter, I'll discuss pricing more in the outlook section. Regarding the customer who SCP is in the dispute with, while we did ship them a significant amount of glass in the quarter, volumes were significantly lower than the original commitment from the customer. Equity earnings from SCP's LCD glass business were $192 million, Q4, a decrease of 14% from the third quarter. For modeling purposes, SCP's fourth quarter LCD sales were about $790 million, a decline of 7% from the third quarter. As a reminder, this represents SCP's LCD sales only. Our public filings report SCP's total sales, which include CRT and other product sales. For the year, Display sales were $3.1 billion, a 4% increase over last year. Volume growth was more than offset by price declines. Sales benefited from a strong yen. Now moving to retail, on this slide you can see unit growth rates by region, by month. Based on some final retail data for November, December, it appears our forecast for LCD television growth is still on track for 2011. Demand for LCD televisions at retail in Q4, including Black Friday, were in line with our expectations. In the interest of time, I'm not going to go through the data region by region. The slide will become available on our website before the Q&A ends, and I'd be happy to answer any questions then. Now as a reminder, the fastest-growing segment of televisions recently has been those 40 inches or larger. On this chart, you can see the growth rates. And we're seeing these higher growth rates across all regions, including developing ones. For glass makers, size matters. We love to see these larger televisions are doing so well at retail. And the area growth rates are actually a lot more meaningful metric since we sell glass by the square foot. Now turning to this chart, you'll see a comparison of growth rates by quarter for units versus area. This is a trend we expect to continue in 2012 as well. Based on our preliminary Q4 retail data, we believe the worldwide LCD glass market was roughly $3.2 billion square feet in 2011, up only slightly from 2010. I also have some updates this morning on display supply chain inventory model. In the fourth quarter we set out to understand how low inventory levels could theoretically reach. I'd like to share with you some of the learnings from that study which was done, with the help of McKinsey consulting firm. One of the more important learnings from the study was that the efficiency levels within the display supply chain have been modestly better than we estimated. While we always model efficiency improvements each year, we had underestimated this metric in 2011. As a result, the revised model indicates the supply chain built inventory in the first half of 2011, peaking in mid-year above 18 weeks. This is slightly higher than our original estimate of 17 weeks. Supply chain correction in the third quarter did result in a reduction of about 3 weeks in inventory. We believe there are about 15 weeks in inventory entering fourth quarter versus our prior estimate of 14. McKinsey also indicated supply chain levels entering 2012 at the low end of what is considered to be a normal range. But they could trend lower. The study indicated supply chain inventories could fall another half a week this year. Over the longer stretch of time, it's possible to imagine the average week's inventory could continue to decline. Of course, this can change both higher and lower depending on the supply chain sentiment. For example, if supply chain believes retail demand will be stronger and expect that there could be a short-term build up of inventory, and the concerns about the economy if less inventory could be carried. This chart outlines the fluctuation in weeks of inventory since 2007, on the yellow line. With the average on that time, shown as a dotted blue line. As you see, the average level of inventory has been decreasing for the past 4 years. This is due to a number of factors that are consistent with the maturing industry, including lower growth rates, more experience leading to better forecasts of retail demand, and of course, financial pressures across the value chain. I'll have some more comments about our expectations for 2012 in the outlook. Now on the innovation front. We're very pleased with the market acceptance of our new Lotus Glass since its introduction in the fall. As a reminder, Lotus is an environmentally-friendly, high-performance display glass developed to enable such new technologies as OLED displays. While I'm on the topic of OLED, we were pleased to see a number of new large-sized OLED TV prototypes on display at CES. And while these prototypes were quite expensive, as much as $10,000, we believe they showed consumers how beautiful a large OLED display can be. We here at Corning are excited about the potential for OLEDs. At our core, we believe we are a display glass company, not an LCD company. So while the industry does not anticipate a significant number of OLED televisions until later in the decade, for example, DisplaySearch is estimating just 3 million sold in 2014, we have been actively engaged with customers on delivering a unique glass solution. Today, some of our customers are working on OLED's 2 pieces of glass, given the low yields and higher costs when using plastics and metal. And even those customers who are pursuing a one-glass solution, are also working with us on developing a 2-glass solution. The reasons for this are clear to us. Other material sets are not as inexpensive and result in lower yields. If the past year has taught us anything about consumers it is this, consumers are not willing to pay for high-priced televisions. We believe it will be very difficult for OLEDs to reach mass adoption if they're not priced appropriately. And to achieve lower price points, you need to lower costs. And we at Corning believe that a 2-glass solution will actually be the preferred path to this goal. We're going to have a lot more details on our OLED TV forecast and our unique position in the OLED market at our Annual Investor Meeting next Friday. Now let's turn to Telecommunications. In Telecom, sales were $490 million, down 13% sequentially and in line with our expectations. Compared to the fourth quarter last year, sales were up 11%. For the full year, Telecom sales were $2.1 billion, an increase of 21% over 2010. This segment experienced significant growth across all product lines. Our Fiber-to-the-Home sales were up 39% and our Enterprise Networks sales were up 10%. Even more impressive was the strong bottom line performance of the segment. Net income, excluding special items, was up over 70% this year. In Environmental, sales were down $234 million, down 5% and in line with our expectations. When compared to the prior year, sales were basically even. For the year, Environmental sales reached $1 billion, the highest in the segment's history, increase of 22% and driven by the surge in demand for diesel filters. And we're very pleased that our diesel business exceeded $500 million in sales for the first time. Net margins in Environmental jumped from 5% to 11% in 2011, and net income almost tripled from $43 million to $121 million. We're delighted by the performance in Environmental and very pleased that we're improving in manufacturing and that our products are doing well with our customers. In Specialty Materials, sales were $238 million, down 20% sequentially, which is actually slightly better than our expectations. Compared to the prior year, sales were up 21%. The segment posted a net loss of $105 million in Q4 versus an income of $38 million in the previous quarter. The loss was due primarily to 3 events. First, we took an $83 million after-tax charge related to impairment of assets. These assets were used to make large-sized cover glass. Due to low demand, we impaired a portion of these assets. We treated this as a special item. Second, there was an after-tax charge of $12 million related to the write-off of Gorilla tanks at SCP. This charge was not treated as a special item. And lastly, due to the lower demand for Gorilla Glass in the fourth quarter, we ran our assets at lower utilization rates, resulting in lower margins. Gorilla Glass sales in the fourth quarter were $161 million, down about 25% sequentially. The sequential decline, we believe, was due to improved yields at our customers and higher inventory levels within the supply chain. As we've mentioned over the past few months, our visibility into this supply chain is not nearly as robust as it is in Display. To help you illustrate the chain, I've got a simple chart to show you. These are the steps it takes for our Gorilla Glass to make its way into a finished product. Even though our customer wins are actually with the original equipment manufacturer, such names as Samsung, Motorola or Acer, the glass gets shipped first to a finisher. At the finisher, the glass is cut into parts and then chemically strengthened. The majority of our glass is shipped to only a handful of finishers, which is why you see in our public filings, there are only 2 to 3 material customers in Specialty Materials. It's also the reason why investors will not see the name of the list of any of our OEM component suppliers. The strengthened glass is then shipped to a touch panel assembler, who assembles the glass in the touch panel module. There, the touch panel gets shipped to an ODM, who assembles the entire consumer device. And lastly, it's shipped to retail under the OEM brand name. A lot more steps here than the LCD business. And for that reason, we need to get a better understanding of how much inventory is at each step. Our goal is to create a model somewhere to display, but we have a long way to go. Now on the right-hand side of this chart, you can see our estimates for glass efficiency throughout the supply chain. And while the efficiency levels may not be that bad at any individual step in the supply chain, when you add up the low end of the cumulative losses, there's potential for significant inefficiency. For example, at the finishers, there is some glass that is lost in the process of cutting glass into device-sized pieces before chemically strengthening them. We've actually been working directly with the finishers and the touch panel assemblers to help them better understand how to handle and process our glass. We hope it leads to improved yields at our customers over time. And even though those improving yields will reduce demand glass for us, we'll lower the cost of the device. And in the long run, in consumer electronics, that's very important. For the year, Gorilla Glass sales were $710 million, almost triple a year ago. Gorilla Glass is one of our fastest growing products in history, and the glass itself is our second highest gross margin product today. For those of you who were at the Consumer Electronics Show, hopefully, you had a chance to stop by our booth and to see the next generation of Gorilla Glass. We're calling it Gorilla Glass 2. Gorilla Glass 2 enables up to a 20% reduction in glass thickness, while maintaining industry-leading damage resistant, toughness, optical transmission and scratch resistant. This newest innovation was in direct response to our customers' drive towards ever-thinner form factors. And to put it mildly, we have a lot of interested customers. Gorilla Glass is now used by more than 30 major brands and designed into more than 600 product models, spanning more than 600 million units worldwide. And we're going to have some very cool demos of the new glass at our Annual Investor Meeting next week. I'm going to have some more of this topic in the outlook. In Life Sciences, Q4 sales were $143 million, 7% less than Q3 and flat compared to last year, and in line with our guidance. For the year, Life Sciences sales were about $600 million, an increase of 17% over 2010. Excluding acquisitions, Life Sciences' sales were up 7%. Now at Dow Corning, equity earnings were $129 million in Q4, compared to $89 million in Q3. Q4 included a onetime gain of approximately $80 million. Dow Corning had brought legal action against one of it polysilicon customers, who had stopped taking product to enforce certain long-term sales agreements. The resolution resulted in a significant cash payment. Excluding this gain, equity earnings at Dow Corning were $49 million, down 45%. Now in response to falling poly prices, Hemlock has modified a number of its sales agreements to provide temporary pricing relief while preserving the long-term favorable relationships with its customers. In addition, Hemlock has decided to delay certain plant expansion activities until market conditions for polysilicon improve. It is in difficult times like this where being the lowest cost producer provides a key advantage. Today Hemlock is the world's lowest cost producer of poly and its costs are still well below spot prices. Although reported spot pricing has actually ticked up in recent weeks, we still believe it's below production costs of some of our competitors. Regarding the current poly supply and demand balance, we believe there continues to be a significant amount of excess capacity, which will continue to put pressure on poly pricing. Now let's switch to the balance sheet. We ended the year with $5.8 billion in cash and short-term investments, a decline from $6.4 billion in cash we had on hand entering the fourth quarter. Of course one of the major cash outflows during the quarter was our capital spending. The other was the cash we used to repurchase shares. We told investors we would be aggressive when the stock price is significantly lower than what we deem to be fair value, and we were. We began repurchasing stock in late October under the $1.5 billion share repurchase program approved by the board earlier that month. In roughly a 2-month period of time, the company spent about $780 million to repurchase approximately 55 million shares. Looking ahead, we continue to be -- we expect to continue to be active in repurchasing our stock if it remains at levels below our estimate of appropriate value. I will not speculate on how fast we'll go through the remainder of the approved amount or what the board will decide to do next. I can tell you, given our cash flow expectations over the next several years, expect to have ample financial flexibility to fund additional share repurchases, M&A to supplement growth or to increase the dividend. Capital spending for the year totaled $2.4 billion and was in line with our previous guidance. I'm delighted to say we finished our eighth year in a row of positive free cash flow with $544 million. Very pleased with our ability to generate over $0.5 billion in the year when our capital spending was higher than usual. Now on to our outlook. This morning, we'll be providing first quarter, as well as some full year guidance by business. I'm going to start with Display in the retail market. In the first quarter, we're not expecting much sequential change in the overall glass market. Volume at our wholly-owned business should be in line with the glass market. Volumes at SCP are expected to be flat or down double digits, depending on the outcome of negotiations with that key customers. Now looking ahead to the full year, we expect the retail market, in terms of square feet, to grow about 10% in 2012 from roughly 3.25 billion square feet to about 3.6 billion square feet. Let me be clear, this is the amount of glass contained in LCD products sold to consumers, not the amount of glass that we're shipping to panel makers. Amount of glass shipped above and below the retail number will obviously be dependent upon panel maker utilization rates and the supply chain dynamics. At this time, our most likely case is the supply chain could actually add about 100 million square feet of inventory during the year. As the retail market grows, so does the amount of inventory in the supply chain. In terms of weeks of inventory, we actually expect supply chain to contract by about 1/2 a week. This is because we believe the supply chain will build inventory in square foot though at a slower pace than the retail demand growth. I've outlined our point estimates for retail demand and supply chain inventory. Now for your planning purposes, we also have a downside case. With inventory being flat in terms of square feet rather than growing 100 million. And for retail demand we have a variety of cases for demand being above or below the point estimate of 3.6 billion square feet, obviously driven by different economic scenarios. For modeling purposes, we now expect LCD television units to be about 230 million this year, up about 10% versus 2011, and consistent with most industry forecasts. Again, we expect area growth to be higher. PC units, which include monitors, notebooks, tablets are expected to grow 10% this year, the strongest demand in the tablet area. In regards to glass capacity, we believe the actions we've taken to reduce capacity has brought glass supply closer to end demand. If we've correctly estimated retail demand and supply chain dynamics, then we believe worldwide glass supply could move into balance with glass demand at some point during the year. We will of course then decide on the pace and timing of bringing capacity back on line, but we are likely to be very cautious about restarting tanks. This brings me to the topic of what happened in the fourth quarter. We believe there are a set of circumstances within the LCD industry, that actually are leading to a reset of our LCD business. Circumstances have caused a period of more significant glass price declines. Glass price declines will be significant in the first quarter of 2012, as they were on quarter 4. We expect significant double-digit price declines cumulative over the 2-quarter period of time. Now the circumstance driving this are the following: First, as you know, the rate of growth at retail has been slowing for many years, as the technology penetration phase is ending for television. This growth slowdown into maturity has actually been expected by the industry for some time. However, while the growth rate was still in the low double digits this past year, this decline in the maturity may have been hastened this past year by the worldwide economic malaise. Second, the panel capacity has had far more capacity than retail demand. This excess capacity leads to low operating utilization, continued price pressure on panels and ultimately, terrible financial results including significant losses. This situation was aggravated in the back half of 2010, when the industry tried to fix its profitability by aiming high-feature and high-priced televisions to consumers. Consumers did not want the higher priced TVs, which led to lower growth and excess inventory. This is actually a good lesson learned to those who believe in high-priced OLEDs will be an immediate hit with consumers. Now these issues exacerbated the utilization problem, putting further pressures on panel prices and effectively pushing pricing to levels that were either at or lower than cash costs. The third element is likely related to the first 2. Display's supply chain decided to reduce the amount of inventory carried. With the industry maturity and lack of profitability, this decision is very understandable. However, it caused lower utilization for panel makers and for glass makers. The glass industry has historically kept capacity closer to the retail level than the panel industry. This year, the inventory drawdown, combined with lower retail growth, pushed glass into a more significant overcapacity situation. And this circumstance combined with panel industry profitability has led to the pricing pressure on glass. So what does this mean for Corning? We have recognized this untenable financial situation of our customers, many close to record losses last year. We obviously have been working with them to reduce glass prices now to help their financial strains. We have proposed advancing our normal 2012 glass price declines versus more normal moderate price declines each quarter throughout the year. This will provide our customers more immediate financial relief. However, this cumulative 2 quarter of higher price declines will cause a reset of the profitability in our display business. We're hopeful that our pricing actions combined with capacity decisions will lead us to get back to more stable price declines after quarter 1. Display business continues to be extraordinarily profitable for us and will generate significant cash flow. Even more so as the combination of our innovations and retail maturity cause our capital spending to slowing in this segment. The changes in the Display business often mask from investors the growth in sales and profits of our other segments. Other segments represent about 60% of the sales, and each of them had great sales growth in 2011. In fact, the sales of our non-display segments grew 31% in 2011 and profits grew 136%. One of our fastest-growing business is Telecom, where the demand is forecasted to be strong worldwide in the key markets we play in: Fiber-to-the-Home, Enterprise Networks, optical fiber and wireless. We expect another year of very strong growth in Telecom. We expect further gross margin expansion in Telecom driven by the mix of higher margin products. In the first quarter, sales will increase 5% to 10% sequentially, as well as year-over-year. In Environmental, we expect another very strong year of growth due primarily to our surging diesel business. First quarter sales will be up slightly. Specialty Materials sales will be led by Gorilla Glass and we anticipate the cover glass market could grow as much as 20% this year, driven primarily by tablets and handheld devices. However, we do expect further improvements in customer yields as the year progresses, as well as some price declines. Right now, it's hard to forecast the impact of each and the impact they will have on 2012. The first quarter we expect the segment sales to be up slightly driven solely by Gorilla. In Life Sciences, we expect another strong year of sales growth through a combination of organic growth and a full year of sales from recent acquisitions. In the first quarter, sales are expected to increase 10%. We'll be providing more longer-term forecasts for each of these businesses next week at our Investor Meeting. At Dow Corning, we expect equity earnings to be lower in 2012. In the silicone business, it will be due to a combination of higher raw material cost and softer worldwide silicone demand, impacting prices and margins. At Hemlock, we're anticipating the challenging price conditions in poly continue. Pricing is not expected to improve until supply demand levels return to balance and the current overcapacity situation subsides. We'll provide additional color at Dow Corning at the Investor Meeting next week. Now continuing on with our outlook for Q1, we expect gross margin to drop a percentage point primarily due to lower pricing in Display. SG&A and R&D will be consistent on a dollar basis with the fourth quarter. Equity earnings, excluding special items will be down between 5% to 20%, depending on that potential of lower volumes at SCP and the lower earnings at Dow Corning. Equity earnings from Dow Corning are expected to be down 35% due primarily to lower poly pricing. Other income is expected to fall by more than half, primarily due to lower royalty income. Our tax rate, as expected, will move from 15% to 20% in the first quarter. Main drivers of the increase will be the expiration of certain tax holidays in Asia, the failure of Congress to pass the Extenders Bill and more profits in higher-rate jurisdictions. As a reminder, this is a non-GAAP measure as it excludes special items. Our share count will likely be lower as we have a full quarter's benefit from the share repurchases we did last quarter. For FX, as a reminder, our results move with changes in the yen-to-U.S. dollar exchange rate. The average rate in Q4 was 77, so if the yen averages 1 point higher and lower in Q1, estimate our sales and net income would decrease or increase by about $9 million. Now before I move to Q&A, I want to remind everyone that our Annual Investor Meeting will be next Friday, at February 3 at Cipriani's in New York City. I can tell you we're going to actually have a much different event than last year. This year we'll actually demonstrating live on the stage many of our next-generation innovations that we're most excited about. Obviously, including Gorilla Glass 2, but as well our ultrathin glass. It's shaping up to be very informative and actually a hands-on event. For those of you considering staying in your office or home, and listening to the webcast, please don't. I highly encourage you to attend. Many of the demos can only be experienced live. Plus, this will be one of your rare opportunities to interact with all of our key business leaders in one setting. We hope you will attend. Ken?

Thank you, Jim. John, we're ready to take some calls now.

[Operator Instructions]. First in the line is Wamsi Mohan with Bank of America Merrill Lynch. Wamsi Mohan - BofA Merrill Lynch, Research Division: Jim, clearly you're communicating to the LCD business growth and profit profiles different. How should we think about the CapEx profile for LCD glass without any new capacity additions? And could you also talk about plans for the Beijing, BOE-related glass melting facility? James B. Flaws: So we are going to finish our Beijing facility. So you'll see that in capital spending. We believe our primary customer, the BOE, will be a very successful panel maker as the Chinese market grows. We obviously are going to pace the startup of that factory, and we will plan to do that. We're expecting the startup to occur in the second half. In terms of capital spending for Display, we are finishing up our earthquake preparedness capital spending we've outlined to you before. But in terms of any additional capacity in Display, either in our wholly-owned or SCP, you should not see us initiating anything new. Wamsi Mohan - BofA Merrill Lynch, Research Division: And as a follow-up, is there a level of price decline on the LCD glass quarter-after-quarter, after which you would rather walk away from the incremental volumes? James B. Flaws: I could just tell you, Wamsi, that the LCD business remains extraordinarily profitable, despite these 2-quarter price declines we have. And the incremental margins are very high. So we definitely intend to maintain our position in the business. And we'll obviously respond to situations as they come along. But beyond that, I won't speculate. Wamsi Mohan - BofA Merrill Lynch, Research Division: If I could just squeeze in one last one in here. You noted Gorilla Glass pricing could decline in 2012. Did it decline in 2011? And can you talk about some of the drivers of these competitive reasons, excess inventory or just incremental pressures from customers? James B. Flaws: We really haven't seen much in the way of price changes in this business in its early years. We always expected that this would be the year we'd begin to see some. It is not excessive price declines. I think some people are speculating that, that is not the case. In fact, we haven't even reached agreement with all our customers yet. But we're just assuming that in the consumer electronics business, that we will feel the fact that our customers always want to be lowering the price of their end product. And so we are highlighting to you that this is the year we might see some price declines. We have not agreed on those yet with customers. We are not feeling any competitive pressure. And if the excitement that we heard from customers on Gorilla Glass 2 at the Consumer Electronics Show continues, we don't expect to feel any competitive pressure.

Our next question is from Mark Sue with RBC Capital Markets. Mark Sue - RBC Capital Markets, LLC, Research Division: Jim, you're doing the necessary things with pricing concessions in the near term. But how do we know that your actions don't create a change in future behaviors for your customers, creating a new price tier and undoing some of the pricing strategy changes that you implemented 3 to 4 years ago? James B. Flaws: Well, I can never guarantee what the future's going to be, Mark. But I can tell you what we did coming out of 2006, is we adopted a strategy and communicated very broadly that we thought the best thing for our customers and for the industry was to have consistent price declines every quarter, keeping up with the fact that consumer electronics prices are going down. And we intended to do that. There have been several times since then, when we had price declines above that. But I would say, in general, what has led to that strategy, working for us in the industry, was for the glass makers to not have capacity substantially above what the real demand was. The biggest problem that occurred this past year, in my opinion, and take this as a Jim Flaws opinion, please, is that the glass industry, which has to shoot ahead of the duck in terms of thinking about capacity, expected retail demand to grow in 2011 by a certain level. And then it didn't grow quite that strongly. I think ultimately retail glass grew about 12%. And maybe a little bit more than that. But we had assumed, originally, that retail demand would grow 18%. So we had capacity in place for that. Second, in our models, for the prior 4 years, the 2010, '09, '08 and '07, the aggregate amount of square footage in the supply chain, in any one of those years, either grew 100 million square feet at a minimum or over 200 million square feet. We had anticipated the industry would build inventory again. It didn't. Not only did it not build, it actually declined. Those 2 things led to overcapacity in the glass industry by above 20%. That leaves the opportunity for our customers, who are always putting price pressure on us, to have a more effective way to do it when demand and supply and balance for glass gets out of whack by that greater amount. What I believe, Jim Flaws' opinion, what's going to happen is that we will not see the same precipitous drop in inventories going forward. Retail demand will grow, it may not be as great as what we'd all like, but we are going to be bringing the glass capacity in line, closer to end-demand, and that becomes a recipe for more moderate price declines. I cannot guarantee you that, that's our strategy, that's why we announced the 25% capacity offline in the fourth quarter. Mark Sue - RBC Capital Markets, LLC, Research Division: Jim, as we look towards stable pricing declines after quarter 1, is there a promise or maybe a gentleman's agreement from your customers that once their margins improve, that subsequently, there's more rational and less inclination for discounts from Corning? James B. Flaws: We have no promises or gentleman agreements with pricing on our customers.

And we'll go to Rod Hall with JPMorgan. Rod B. Hall - JP Morgan Chase & Co, Research Division: I just got 2. One is on the pricing declines. If you could just elaborate, Jim, on where you are in the process of renegotiating prices among the panel makers for glass. Are we halfway through that process, are we a quarter of the way through, where are we in the process and the price levels resetting because that kind of thing is likely to happen beginning in Q4? And then my second question is on inventory. If could just talk about you said that we can expect for a half of week in inventory compression this year. Do you expect that to be more toward the first half of the year or do you think that's going to be spread across the whole year? I'm kind of trying to get a feel for whether you think inventory is stabilizing to earlier in the year or not until later this year? James B. Flaws: So I don't have a perspective on the half of week of inventory. I mean we have done that saying, as that chart we showed, that we believe, over time, inventories will -- efficiency will continue to improve. We haven't gotten so specific to say we know that's exactly occurring in which quarter. In terms of pricing, we're basically done on price agreements with our customers with the exception of the one customer in Korea, so we're very far along. Rod B. Hall - JP Morgan Chase & Co, Research Division: Okay. And Jim, do you think that, that one customer -- do you think you can finish that in Q1 or do you have a feel for when that completes? James B. Flaws: I just won't speculate. I mean this obviously has been a very difficult situation. And my ability to forecast how quickly we can do it has obviously been proven wrong, so I won't speculate anymore on them.

Our next question is from Amir Rozwadowski with Barclays Capital. Amir Rozwadowski - Barclays Capital, Research Division: Jim, in talking about that one Korean customer, I mean obviously, your guidance here has a decent amount of variability for shipments out of SCP dependent on what happens with that customer. Can you give us a little bit of color as to sort of what's on the flat side versus the down 10% side, is it sort of a share recovery, expectation on one side or is it that share would remain the same at sort of new levels with that customer? James B. Flaws: I think I have to decline to be too specific on it. This customer remains taking quite a bit of glass from SCP, they're just well below the original agreement that we had with them. And as you know, the dynamics that I walked through with you, unfortunately in November and December, is we thought we had reached agreement with them and then they took the share back up and took it back down. And so I think it's inappropriate for me to comment on the exact numbers in it. But depending on the outcome, because the quarter 4 had so much variability in the months of October, November and December, there's a situation that we could see where the aggregate amount obviously is good, or it could get worse. And I just won't forecast it, and that's why I wanted to give you a range there. Amir Rozwadowski - Barclays Capital, Research Division: Okay. That's helpful. And then lastly on the pricing front, obviously you're working with the panel makers given their challenged profitability here. Are you still looking to maintain a premium in terms of pricing in the marketplace versus competitors, dependent on sort of your pricing actions? I'm just trying to get a sense in terms of what you're seeing for yourself and also your competitors in the market. James B. Flaws: Sure. We expect to get -- have a slight premium. As you know, the premium is fairly small but we expect to get it. From our eyes, we expect to get the premium because we think our product performs best. On the other hand, from our competition's eyes, they probably always want to be below us as a mechanism to try and do well with our customers. So we in general, expect to always have a slight price premium versus our competition.

And we'll go to Nikos Theodosopoulos with CBS. Nikos Theodosopoulos - UBS Investment Bank, Research Division: I had some, hopefully, some simple numeric questions and then a general question. Jim, I did not actually hear a CapEx outlook for 2012, can you give us an expectation there.

Nikos, it's Ken. We gave it out a couple of months ago, it's around $1.8 billion. Nikos Theodosopoulos - UBS Investment Bank, Research Division: Okay. So that didn't change? I guess that was my question, no change in that?

It did not change, no. Nikos Theodosopoulos - UBS Investment Bank, Research Division: Okay. And then the second question is, do you have for the full year of 2011, the LCD price declines in SCP and the wholly consolidated business?

Nikos, for both SCP and the wholly-owned business they were around 15%, maybe a little north of there for the full year of 2011. Nikos Theodosopoulos - UBS Investment Bank, Research Division: Okay. And then my question here is, when you idle capacity in LCD, can you elaborate what in fact that means? In other words, how long does it stay idle? What's the process -- more importantly, what's the duration to get it back when in fact, you want to get it back? And as part of that question, is there any commitment Corning has made regarding the Beijing plant in terms of a completion date or minimum capacity there? James B. Flaws: A lot of questions. So in Beijing, we do have a commitment to operate the factory. The pace of when it starts and how much it does in a given quarter is not a commitment, but obviously we have a very important customer there, located right next to us. So we expect to supply glass to them from that facility. We're now forecasting the startup to be in the second half of 2012, we're actually shipping that customer from capacity in our other locations today, as they have begun their ramp-up of the Gen 8.5. In terms of the overall capacity situation, I think, as you know we have smaller tanks than our competition, and a lot of them. And what we basically do when we talk about capacity going offline is we try to get -- unless we think we're going to need it again in a very short period of time, we let the tank go cold. And the tank goes cold. We have a choice, do we repair it immediately or do we delay the repair, and that will depend on our outlook. In general, we by and large usually repair fairly quickly. You should think about the repair not being very expensive. It's just primarily rebuilding the refractory, swapping out the precious metals and putting in a new one and taking the old one out to be reformed. Neither that situation does not take a lot of time. And then once we decide to relight it, we have to heat up the tank. You can't go from basically the ambient air temperature to 2,300 degrees instantaneously, it takes a while because you don't want everything to crack. And so it takes a period of time to bring it up. But we can do that, it's not a significant issue in terms of timing. But I do want to emphasize, I mean, what we have done is said, we've taken this capacity offline, we don't have plans to bring a lot of this capacity back based on our outlook for the market and we're intending to stick to that for now. Nikos Theodosopoulos - UBS Investment Bank, Research Division: Would there be a write-down if that capacity never got turned up? How would we measure it with the potential write-down on something like that? James B. Flaws: So if the capacity was never used again, ever, then yes, there could be a potential write-off. There are 2 write-offs that occur, if a tank has not finished its life, there's a small amount of capital that has to be written off, because once you take it cold it's useless. You've seen that happen to us before. For example, in quarter 4 of 2008. I think you're asking more about a longer-term issue is if we never need some of these capacity again. Yes, there would be a write-off. I can't estimate it for you because I don't know which tanks would do. I will remind you that these tanks are very flexible tanks. Not only can we make LCD glass, we'll be able to make OLED glass. We can make Gorilla Glass and we can make photovoltaic glass in these. So in terms of saying that there will be a write-off of this capacity, it will be permanently never needed ever again. I'm just not sure that, that's an imminent decision that we're facing.

Our next question is from Steven Fox with Cross Research. Steven B. Fox - Cross Research LLC: Just one question for me on the gross margin outlook. Jim, you're talking about gross margins being down about one full percentage point, but it's in a quarter where your wholly-owned business isn't growing, Gorilla Glass isn't growing and you have price pressures. So I'm just trying to see why the margin shouldn't be down a little bit more. What else is going on within the gross margin line?

It's Ken, Steve. It's a corporate gross margin forecast. Clearly, we do expect some good margin performance in our other segments during the quarter and that's going to help offset some of the things you mentioned in your question in Display. James B. Flaws: And in particular, I'll draw your attention to Gorilla, where we had very low utilization in this quarter, where we were -- basically, we expect Gorilla demand to grow, so we didn't turn the tanks off.

And we'll go to Jim Suva with Citi. Jim Suva - Citigroup Inc, Research Division: Can you quickly touch upon, I believe, the licensing agreement between SCP and Corning expired the end of last year and maybe just let us -- or at the end of 2011, and let us know what the outcome of that was. And then on the second note, can you just kind of revisit one more time your commentary about the hope for improved pricing or more stable pricing in 2012. Because if we're thinking about the supply chain and connecting the dots that the panel makers and also the OEMs are not profitable, I would assume that they're hoping for these panels -- or these glass prices to significantly continue to decline in the future. So what's the indications that's giving you that hope? James B. Flaws: Okay. On the former Samsung agreement, as we've talked about before, the Samsung agreement expired, I think at the end of November last year. Embedded in that is a step down in the royalty rate. And we'll be talking some more about it at the IR Day. So I'd ask you to hold until that day because we do intend to address it then. So what leads to our belief around the potential to get back to more moderate price declines? It is all based on the fact that we believe the industry is correcting to get glass capacity more in line with what will be the demand. And when that occurs, we believe there's an opportunity for more moderate price declines. That is and had been the primary strength of why we had moderate price declines during those periods over the last 5 years. It is very obvious from our customers' perspective, they would love to have these price declines at this higher rate continue in perpetuity. And the tension is whether they have enough strength to force that upon the glassmaking industry or not. We believe that the capacity balance situation and competitive dynamics will ultimately lead to more moderate price declines. And our hope is that occurs as soon as quarter 2.

And we'll go to George Notter with Jefferies. George C. Notter - Jefferies & Company, Inc., Research Division: I guess I was trying to better understand the relationship between price erosion on LCD TVs at retail and the size of the glass market. If I look back at 2011, it looks like pricing at retail came down around 6%. I think that was actually quite a bit below what you guys were originally thinking about coming into the year. And looking forward, 2012, it kind of feels like price erosion is going to be around the same place, 5%. I think if you look at the DisplaySearch numbers -- I think if you look at the glass market, you guys are talking about 11% kind of growth this year in volume terms. I mean, how do you feel about how those 2 numbers correlate? Is it possible that you guys could be overestimating the growth in the market if you only get 5% price erosion on TVs at retail? James B. Flaws: So I don't think we actually agree with your TV pricing data down. I don't have it right in front of me, but I think we think it was higher than that 5%. And we have never seen an exact correlation between pricing and retail and our pricing to us. But we think we've got right the end market growth for televisions. Obviously we do realize that even though consumer television is a fairly resistant purchase in tough times, there is the possibility of weakened economic fence. I mean if Europe goes into a serious recession, then maybe we could be wrong. But we think we've got it right. In fact, if anything, I think we got surprised a little bit on the upside in terms of units of television in the back half this past year. So we remain comfortable with our estimate. Obviously, we could be wrong.

And we go to Simona Jankowski with Goldman Sachs. Simona Jankowski - Goldman Sachs Group Inc., Research Division: I just wanted to clarify, Jim, some of the comments you made at the very beginning of your prepared remarks, where you talked about approaching a bottoming profitability but not expecting the Display segment to grow. Was that a comment looking out beyond Q1? If you can just talk a little bit about your longer-term expectations in the Display segment. And also, since you termed the margin decline this quarter as a reset as opposed to a decline, that implies some level of permanence. And so I just wanted to see if you can address how much of your gross margins you think you can recover beyond Q1? And also if you're thinking about offsetting some of that decline with actions at the R&D or SG&A line? James B. Flaws: That was a lot of questions in one. So our comment about Display was a long-term comment. And we think we're reaching the point where the unit growth and the volume growth, even with moderate price declines, will give us periods of time when there basically is no net sales growth for Display. This may have come a little earlier than what we expected, I think we have been expecting it maybe this occurring in 2014 or 2015, rather than 2012 and beyond. But basically, it appears that we maybe at that point now. So that was a longer-term comment, that wasn't a quarter-by-quarter comment. Your second question was? Simona Jankowski - Goldman Sachs Group Inc., Research Division: Just along the same lines. When you talk about a reset in profitability, does that imply that you view your gross margin permanently coming down to a lower level even beyond the big issues in Q1? James B. Flaws: So I would say, with what we know today, we believe that the gross margin has come down in Display. And we don't see a set of factors that would drive it back up. To drive it back up, what would have to occur is that we would have to have a period of time where price declines were very, very minor and then we ran our tanks full and then cost reduction exceeded price declines. Right now, I can't, in all candor, tell you that I see a set of conditions that will allow that to occur. So that's what's leading us to say, with this double quarter down, double digits, significant, cumulative, we think we have driven the margin of Display down. I will point out, it remains extraordinarily profitable, it's still our most profitable business, but that's why we're calling it a reset. I'd love to have a situation outlined that occurred that we get to a few quarters of no price declines. If that happens, then I can reverse my comment. Simona Jankowski - Goldman Sachs Group Inc., Research Division: And then just the last part of that was, would you consider just offsetting some of that with lower OpEx investment in the business given that the growth in margin profile there has changed? James B. Flaws: Yes. In the Display business itself, you will see actions taken to reduce the OpEx. Simona Jankowski - Goldman Sachs Group Inc., Research Division: Okay. So the op margin impact you would think would be more muted, but still some relative to the gross margin impact? James B. Flaws: I'll just comment Simona that the operating expense of this business is pretty tiny to start with, so the moves that we can make in OpEx here are not going to overcome the gross margin declines from pricing.

Our next question is from Ehud Gelblum with Morgan Stanley. Ehud Gelblum - Morgan Stanley, Research Division: Couple things. From your study that you did with McKinsey, did they give a sense as to, as you go forward, how low inventories can sustainably get? I'm sure they looked at other industries and saw kind of where they went to. Could we be looking at, eventually down the line, a 10-, 11-, 12-week cycle or do you think it stays somewhere around 13, 14. And then in negotiations with this major customer out of SCP, what are the points of negotiation? What can you actually work with them aside from price or is it really just hitting a price point and that's it? I understand there's still a premium to be had for the level of quality of glass that you have versus your competitors. But what else can you provide to them besides price? I'm just wondering kind of -- or is it a matter of who just decides to finally give in? And then the commentary on the significant price declines over the next 2 quarters or actually over Q4 and Q1? Can you give us a sense as to the significant double-digit decline? Can you bracket that, is that 15% to 20%? 10% to 15%? 13% to 18%? Something that we can just make sure we're all sort of on the same page. James B. Flaws: So I'll go in reverse order, I'm not going to be more specific on the numbers. Cumulatively, it's a significant double-digit decline and we're not giving out a more specific number. Relative to the customer in Korea, the thing we can always offer is that we believe that we are an extraordinarily reliable supplier. We believe our glass actually runs the best in their process. And those are the things that we would think that would lead them to want us to have at some share level. From their perspective, obviously price is probably the preeminent one. So beyond that, we hope to reach agreement with them and have them as a customer. And your first question was? Ehud Gelblum - Morgan Stanley, Research Division: Inventory, how low can it go? James B. Flaws: What McKinsey said was over -- they can't forecast in perpetuity here. But they did say, they believed over the next 4 years that we could see, going down 1/2 week per year, obviously, with the potential always that the economy is much different, that could change. So if you think over 4 years, that knocks another 2 weeks off. Ehud Gelblum - Morgan Stanley, Research Division: That's helpful. I noticed you didn't mention the $10 billion revenue target that you have in the past. You also mentioned the CapEx and you said that was the same. But I'm wondering if that $10 billion revenue target is still out there for you? And then finally you mentioned that there is an imbalance right now with too much glass out there. We know you're taking capacity out of the market, Asahi is taking a similar amount of capacity out of the market, that leaves only one player that doesn't seem to be doing that. If that one player doesn't actively take glass out of the market, do you think you can still get to a supply balance or will they constantly be acting as a spoiler? James B. Flaws: I'll have to let you talk to that competitor and see what their plans are in terms of running capacity or not building capacity. I'm just not going to comment on them. On the $10 billion, yes, I think the $10 billion is still possible. Obviously, Display will not be as strong as it was before. The flip side, Telecom is actually stronger than we originally expected and Environmental is stronger than we expected. So I still think it's possible. We'll probably talk some more about that next week. The mix will probably be different. But we certainly haven't given up on the goal. We do need some help. I think everybody forgot one of the assumptions we said on getting on our way to $10 billion is we can't have global a economic malaise. And so if Europe goes into recession, then I get more worried.

John, it's Ken. I want to recognize that we're past the market open and in respect of folks' time, we'll take one more call. But for those that are in the queue, Ann and I, we'll be in our offices right after the call, we can help answer your questions. But John, we'll take one more caller.

And that will be from with Ajit Pai with Stifel, Nicolaus. Ajit Pai - Stifel, Nicolaus & Co., Inc., Research Division: A couple of quick questions. I think the first one is just to the same point on the pricing side. You talked about, in the fourth quarter and the first quarter, working with your customers in trying to help them to get to better profitability. But could you give us some indication as to the competitive dynamics? And is some of the price reduction being driven by what your competitors are doing, or is it primarily customer-driven? And then the second question is, you've talked about M&A and also bolstering your businesses outside of Display and potentially even Display. But could you give us some color as to whether in 2012 you can expect greater activity there? I think you have highlighted Life Sciences and Telecom as the 2 focus areas, whether that's still the case or it's broader than that? James B. Flaws: So in terms of M&A, you should expect greater activity in 2012 than 2011. The primary segments that we're looking on remain Life Sciences and Telecom. But we definitely are moving to be more active. We're going to see more free cash flow and we think we can put it to work appropriately in M&A. In terms of the pricing dynamic, be sure, competitive price dynamics play into this also. Obviously, that's driven a lot of what happened in Korea in Q3 and Q4. So I don't mean to imply that it's just us being nice guys with our customers, clearly the competition has something to do with this too. But I think we clearly went to our customers, acting to help them in this situation. In Korea, obviously, we are feeling the competitive pressure. Ken?

Jim, any closing comments? James B. Flaws: Yes. Just a couple. I think that I want to emphasize again, overall, the strength of Corning this past year. We had a very great year. I've mentioned the records in sales, gross margin and operating margin, eighth year in a row of free cash flow, raised the dividend and share repurchase. And the great performance in our business is outside Display. I think that right now the conversation is obviously dominated by pricing in Display. We recognize this reset has occurred. But we definitely intend to get the company at a new level of profitability and then Wendell and I are committed to get the company to grow off of that level. And so we think that's going to happen. And just one more reminder. Obviously, we'd love to see you in New York City. I promise you a very exciting event. Wendell is going to do some very creative work, and so we'd like to see you in person. And also, we, of course, will be presenting in February at the Goldman Sachs Technology and Internet Conference on February 14. And on February 28 at the Morgan Stanley Technology and Media Conference. So hope to see you there, if not in New York. Ken?

Thank you, Jim, and thank you all for joining us this morning. A playback of this call will be available beginning at 10:30 a.m. Eastern Time today. It's going to run until 5:00 p.m. Eastern Time on Wednesday, February 8. To listen, dial 800-475-6701. The access code is 233477. Audiocast obviously is available on the website during this time. And John, that concludes our call this morning. Please disconnect all lines.