I'm Ann Nicholson, Director of Investor Relations. It's my pleasure to welcome you to Corning's Annual Investor Meeting. I would like to welcome also those investors who are listening on the conference call and through the video cast on our website, which is more than usual because of the snowstorm. And a special welcome to Ken Sophyll. Ken wouldn't miss this meeting even for a Yankees game.
Before we get started, I need to remind you that today's remarks contain forward looking statements. You should also note that these presentations contain a number of non GAAP measures. A reconciliation of all can be found in the back of the presentation as well as on our website. Logistics. 1st, you may have noticed that we're saving some trees here this year by not doing paper presentations.
We're doing it electronically. There's free wireless for your use during this meeting and a website containing the slide presentation. If you'd like to follow along, the address is on the back of your agenda booklet. 2nd, we've got a gift for you. Those of you that are in attendance today, if you'd like it, just hand in your badge at the registration table on the way out.
And if you haven't done so already, please turn your cell phones to vibrate. As far as the agenda for this morning, we will have formal presentations from Wendell Weeks, Jim Floss and 3 of our business group leaders. Wendell will start us off with some opening remarks and outline our key messages. Our business leaders will each talk to you about their market drivers and growth opportunities.
Jim Floss will pull together our
outlook and detail our cash priorities. Finally, we'll move to Q and A. I hope you find the presentation this morning to be insightful. And with that, I'd like to turn this over to Wendell.
Thank you, Ann. Welcome, Ken. Good morning to you all. It's my pleasure to welcome all of you to Court and Daniel IR meeting and to also thank you for braving the storm to join us here today. Today, as always, our objective is transparency about Corning's performance, our strategy and priorities and our growth opportunities as well as our challenges.
I know we have some new investors here today. So I'd like to begin with a brief overview of who we are and what we do. In fact, we always think that it's useful to start here because Corning's distinctive identity informs all of our actions. Corning is the world leader in specialty glass and ceramics. We invent, manufacture and sell Keystone components that enable high technology systems for consumer electronics, telecommunications, mobile emissions control and life sciences.
We succeed through sustained investment in research and development more than 160 years of materials and process engineering knowledge and the highly collaborative culture. Our corporate strategy framework is firmly grounded in this identity. We go primarily to global innovation. Innovation comes with risks. So we proactively work to bring balance and stability to the company.
We participate in diverse markets to reduce our volatility. And we have a conservative financial strategy to offset our relatively high operating leverage. Finally, and most importantly, we always live our values to ensure the trust of all of our stakeholders. This strategy framework acts as our compass during good times and bad. We developed it in the wake of the telecom industry crash to ensure that the company would never be in such a vulnerable position again.
It guided Corning's recovery from that near death experience. It drove us to record periods of sustained financial improvement and it enabled us to weather the worst economic recession since the Great Depression and it has equipped us to successfully navigate our current challenges. Despite today's tough business environment, Corning is financially strong and well positioned for growth. Before I review our 2012 results, I'd like to quickly summarize why we believe your investment in Corning is well placed. Of course, the assessment of Corning's performance is ultimately up to all of you, but here's how we view ourselves.
1st, we offer both stability and growth. Corning is financially sound. We have a rock solid balance sheet that enables us to weather tough business environments. We're the market and technology leader in the industries that we serve, as well as the lowest cost producer for most of our products. And all of our businesses are tied to significant growth trends.
The proliferation of displays and touch technology creates the need for highly engineered specialty glass. The surge in Internet traffic requires the massive bandwidth that only fiber optic networks can provide. The push for a greener environment drives demand for emission control products and the need for better health care and more effective drugs increases the market for our life science products. 2nd, we believe we offer exceptional value to shareholders, strong cash flow, a sustainable dividend and the earnings power to make strategic investments in Corning's future. Over the past 9 years, Corning has generated close to $7,000,000,000 in free cash flow and we expect to produce significant cash flow this year and beyond.
We'll continue investing in research and development and strategic M and A to drive Corning's growth, but our lower capital spending is also creating more opportunities to return cash to shareholders. 3rd, we have the potential for significant growth from new products. We have a rich innovation portfolio and we believe that we can leverage existing capabilities and assets to scale businesses quickly with relatively small capital investments. This creates the opportunity for explosive growth beyond our existing businesses. Now as investors, you can think of this upside potential as optionality.
You'll hear more details on all of these topics this morning. But let's begin with a look back at 2012. We entered the year with a significant drop in profits, driven primarily by large price declines for LCD Glass. At last February's meeting, we identified 2 priorities, reestablish positive momentum in display and grow our other businesses. So how do we do?
I'm pleased to report that we made good progress. We took action in late 2011 to adjust our capacity and bring supply in line with demand. Our strategy was effective and price declines moderated as the year progressed. We also took steps to reduce our overall volatility. In the Q3, we signed supply agreements with several leading display makers.
We believe these agreements will stabilize our share in each, allow us to manage our capacity more efficiently and help maintain moderate price declines. That our display strategy is about more than just managing our LCD glass price. We're also capturing new markets. Although the LCD market is maturing, the overall display industry is bursting with new opportunities. Last year, I described the quiet revolution going on in displays.
They're becoming more integrated into all of our lives. They're getting larger. They're getting cheaper and they're getting better with sharper colors, crisper images and more intuitive interfaces. Now Corning is helping lead this revolution with our highly engineered specialty glass. Higher resolutions and thinner form factors place much tougher demands on display glass in terms of surface quality, temperature tolerance, dimensional stability, flexibility and strength.
But as the technical challenges increase, so does Corning's opportunity, because we are uniquely positioned to develop solutions with our fusion process and our composition expertise. In 2012, we introduced new glasses optimized for OLEDs and we will continue to innovate as the technology evolves on this and other high performance displays. You'll hear more from Jim Clapman shortly. At the same time, we're growing our other businesses. Our Specialty Materials, Telecommunications, Environmental Technologies and Life Science segments have the potential for double digit growth in the coming years.
Although the weak economy has impacted all our businesses to some degree in 2012, we also achieved key milestones in each. Net income in Specialty Materials was up 2 72% from 2011, driven by record demand for Corning Gorilla Glass. Telecommunications had strong growth in several product lines and increased China sales by 30%. We also opened a new fiber factory in India and we began shipping products for NBN's fiber to the home network and build out in Australia, which will account for significant growth in 2013. Environmental Technologies improved gross margins and secured new business at key customers.
And in Life Sciences, we acquired the Discovery Labware business, which expands our product portfolio and market reach, while positioning this segment to reach $1,000,000,000 in sales. Together, these businesses delivered double digit growth in 2012. And thanks to outstanding cost control and operational execution, they also improved gross margins. In addition to strong execution, we honored our promise to return cash to shareholders. In the Q4, we increased the quarterly dividend 20% to $0.09 per share.
That follows a 50% increase in 2011 and equates to more than $500,000,000 of annual dividend payments at our current rate. We also completed a $1,500,000,000 stock buyback. Both these actions reflect the Board of Directors' confidence in Corning's financial health and their commitment to enhancing shareholder returns. So we executed against the priorities that we established last year and we posted solid results in a tough environment. I'm sure that the question on your mind is where do we go from here?
We designed today's agenda to help answer that question. In a few minutes, you'll hear from 3 of our business group leaders about Corning's growth opportunities in their respective segments. Next, Jim Floss will summarize our overall growth expectations, provide details on our equity venture Dow Corning and share our plans for cash allocation. But first, I'll explain more about what I mean by Corning's optionality for new growth and why we believe our current opportunities are among the strongest that they've ever been. Now those of you who've been following us for a while know that Corning has a long track record of producing life changing innovation.
When we look at our current R and D portfolio, we're struck by the diversity and richness of our opportunity set. We're also excited by the potential we have to build new businesses quickly by leveraging existing assets. 2 primary factors are driving this. First, major trends are playing to Corning's strength and creating new opportunities for our core capabilities in Specialty Glass and private optics. We've consistently challenged people's ideas about what glass can do.
And now customers from a broad range of industries are turning to us to solve tough problems. 2nd, we have manufacturing infrastructure in place that we can adapt for new businesses. For example, we've improved our productivity so significantly in display that we can now use our Fusion assets to manufacture other specialty glasses. This gives us the opportunity to generate revenue from new businesses quickly with much smaller capital investments. Now I'll share a case study that illustrates this strategy in action.
I'm sure you're all familiar with Gorilla Glass, particularly since it was such a key factor in the results that we just announced in the end of January. Gorilla is the poster child for how we apply core capabilities to solve tough new problems and build a new business rapidly and continue innovating to generate ongoing expansion of returns. When we launched the product in 2,007, we basically created the market for tough, durable cover glass. Today, Gorilla Glass is featured on more than 1,000,000,000 devices worldwide, including over 900 device models by 33 different manufacturers. It is Corning's 2nd most profitable business and the fastest growing product in Corning's 160 year history.
We've maintained our leadership through ongoing innovation. We continue to advance the composition and we're also branching into entirely new applications. So let's talk about how Gorilla Glass is not only bolstering Corning's bottom line today, but why we expect it to create even more growth in the future. Did any of you attend the Consumer Electronics Show in Las Vegas last month? A few of you.
I actually read one research report that said that the trade show floor looked like Corning's Day Made A Glass video come to life. I was there and I'd have to agree. Now we love seeing our vision become a reality. And while some technologies maybe farther into the future, others are impacting our businesses right now. Specifically, I saw 3 trends that will drive Gorilla Glass in the near term.
2 relate to our existing businesses in phones and tablets. The first is unit growth. Between 2012 2016, the number of smartphones worldwide is expected to double and global tablets are expected to triple in the same timeframe. As devices proliferate, glass volume increases. The second trend is cover size.
The verdict is actually still out on which way tablets will go. Some manufacturers are going larger, some are going smaller, but there is no question that smartphones are moving to larger displays. Today, smartphones have 30% more glass than they had just 3 years ago. Now, size totally matters when you're a glass guy and we are more than happy to sell larger glass to our key customer base. But it's the 3rd trend that I'm most excited about, because it is a significant new opportunity for Corning and that's touch on notebooks.
This trend is being driven by consumers' desire for more intuitive interfaces, just like we depicted in a day made of glass. Microsoft certainly spotted that trend and responded with Windows 8, a touch enabled operating system. As you move to touch technology, durability and responsiveness become more important. And that creates more opportunities for tough, thin cover glass. As touch on notebooks becomes more pervasive, Gorilla Glass has the potential to surge.
So what does this mean for Corning? This chart shows our expectations for device cover glass volume growth in the next few years. Now you can see that we're anticipating robust growth based on phones and tablets alone. But when you add no force into the mix, we have the potential to more than double our Gorilla Glass business. And we think those three applications are just the beginning.
As touch technology proliferates and displays become more integrated into our daily lives, the opportunity for tough thing cover glass is nearly limitless. And you can understand why we believe that Gorilla really is still a young business and just getting started. The demand for smart devices is also creating even more opportunities for Corning beyond cover glass. We thrive on solving tough problems for customers and we have a strong track record of doing just that. Device makers wanted toughness and durability and we responded with Gorilla Glass.
They wanted to make slimmer and sleeker devices without sacrificing damage resistance. So we introduced Gorilla Glass 2. They asked for superior scratch resistance and we responded with Gorilla Glass 3. But it's not only about functionality. Device makers also want to ensure that their products have a strong aesthetic appeal.
Glass enables rich, authentic colors and a range of options from transparent to opaque. They also want devices to feel cool to the touch and conform to your hand. Corning's three-dimensional glass will enable shapes that were previously limited to metals and plastics, while providing the natural and noble feel that is unique to glass. Finally, device makers want sophisticated capabilities that solve real world problems. As such technologies proliferate, germ transmission becomes a significant issue.
In fact, the average cell phone contains more microbes than a toilet handle in a public restaurant. Last year, I gave you a peek at our antimicrobial glass in development. We continued to advance that technology and we expect to launch our first product this year. How many of you have had problems reading your phones and tablets in bright sunlight? Do you people never get outside?
Our new anti reflective glass addresses this problem. What you see here is a piece of glass with Corning's proprietary anti reflective technology in the center. And you can see what a difference our solution makes. In fact, it almost looks like there's a hole in the glass. But you don't have to trust this picture.
That's not a hole in the glass. You can check it out for yourself on the exhibit floor. We're rolling this technology out now. So you see the Gorilla Glass keeps evolving. We're improving the composition and also adding entirely new attributes.
It's a perfect example of how Corning develops a breakthrough technology and then breaks out and continues to innovate to create new revenue streams. But Gorilla is just that. It is just one example. We actually have an extremely rich and diverse new product portfolio with applications for a broad range of markets. We're developing innovations to enable a world of ubiquitous displays with lifelike images, authentic form factors and intuitive interfaces.
We're extending our leadership We're extending our leadership in optical communications to facilitate seamless delivery of real time innovation, new forms of collaboration and more robust connectivity. We're building on our long track record in environmental technologies and life sciences to develop solutions that make our air cleaner and our lives healthier. We're expanding Gorilla Glass into new applications like automotive, architectural and appliances. And we're leveraging the artistic and scientific properties of glass to deliver extraordinary benefits from everyday products. However, the timing and ultimate revenues from new products is always difficult to predict.
We believe several innovations here offer the opportunity for explosive growth similar to our experience with Gorilla Glass. Now I'll end here, so that we can get to everything that we need to cover today. But I hope I've given you a good idea of the richness of our innovation portfolio and that you understand why we are so excited about Corning's potential for growth beyond our existing businesses. Now, I'll turn the podium over to Clark Kinlin, who will talk about our opportunities in telecommunications. Mr.
Kinlin?
Well, thank you, Wendell. Welcome, everybody. I'm pleased to talk to you today about our telecom business, which provides the optical infrastructure necessary to carry the ever increasing bandwidth demanded by today's communication networks. Three key points. 1st, as you know, we live in an always on world that is producing incredible amounts of data to store, move, access and display and this is placing huge demands on communications networks and their operators.
Additionally, operators will continue to invest in optical, because it's the medium of choice, because it provides the best capacity, cost and speed. And finally, customers will turn to us at Corning, the inventor of low loss optical fiber to provide innovative solutions at the edge of the network in data centers, in fiber to the home and wireless networks and even in personal devices. As a result, we expect Corning's telecom business to deliver double digit growth in 2013, faster than the industry average. We've sold more optical fiber than anybody else. To date, it's 1,800,000,000 kilometers and over 370,000,000 fiber optic connections to bring communications networks to where they are today.
Although these numbers may sound impressive, they only scratch the surface of the demand we expect to see in the future. We live in an always on world that is producing incredible amounts of data to store move and access. All this starts with data creation. In 2011, there were approximately 1.8 trillion gigabytes of data in existence and this is expected to double in just 2 years. It's estimated that storage capacity will grow at greater than 50% per year requiring 10 times the number of servers to be in use a decade from now.
And data center traffic and workloads will continue to shift to the cloud placing further transport demands on wireline and wireless networks. Finally, users, us, we expect to be able to access our data nearly anytime instantly anywhere in patterns that are really hard to predict. As an example, who would have guessed that a year ago, the most watched video clip of all times now boasting 1,200,000,000 hits would be Gangnam Style by PSY that was only posted to YouTube this past July. It's estimated that global IP traffic will quadruple by 2016 and will be accessed by over 19,000,000,000 devices connected to the network. That's the equivalent of nearly 3 for every person on the planet.
To see how quickly this data consumption is changing, let's look back at 2000 when worldwide data traffic was equivalent to every human being on the planet consuming about 1 megabit per day, about the same as a small picture file in an e mail. By 2,008, just 5 years ago, this per person traffic had reached 50 megabits per day and video use will increase this to 500 megabits per day by 2016. To handle this amount of data transport, speeds in all networks from long haul to data centers to device to device interconnections are increasing dramatically and consumers expect higher upload and download speeds from fixed and mobile networks. Operators will continue to invest in optical infrastructure to address the relentless bandwidth demand on the network because it provides the most cost effective capacity and speed. The net result is that while overall telecom CapEx will grow 2% to 3% a year, investment in optical CapEx will grow at 2 times this rate and driven by the delivery of a number of innovation solutions for each of our markets, Corning will grow our business at greater than 10%.
Our strategy is clear. We will continue to leverage our strengths of deep customer access and product and process knowledge to engineer keystone components such as optical fiber, cable, connectors and in some cases actives into high value optical solutions that expand the bandwidth capacity or dramatically reduce the cost of our customers' networks. Key examples of this process underway include in Carrier, where we continue to deliver fiber to the home solution sets that enable carriers to hit per home costs less than half of what they were a few years ago. In Enterprise Networks, we continue to build on a winning Pareteum Edge solution for data centers that provides double the fiber density of the hardware and 100 gigabit per second ready solutions for future network needs. And I'll address some innovations in wireless and consumer a bit later.
But first, let me provide an update on our most important keystone component, optical fiber. 40 years after its invention by Corning, optical fiber and cable represent 50% of our telecom product revenues. Global optical fiber demand continues to be robust and has grown at an 18% compound annual growth rate for the past decade. In 2013, we expect the global market demand to exceed 250,000,000 fiber kilometers and approach $2,500,000,000 in market revenue. And as you can see, developing regions provide a huge part of this growth.
Since 2008, they have consistently represented more than half of the world's optical fiber demand. Our fiber strategy is to be on the ground to be present to win in these developing regions, the largest being China, recording has been well positioned in country for more than a decade with optical fiber and cable manufacturing facilities. These investments have served us well during years of rapid fiber growth in China driven by fixed and mobile broadband deployment. More recently, Korny made the decision to invest in local manufacturing capability in another of the BRIC countries, India. In 2012, we commissioned our new fiber manufacturing facility in Pune, India.
This facility enables Corning to directly service the Indian optical fiber market, which has been growing at a compound annual growth rate of over 35% for the past several years.
The near term growth is being driven by a
national broadband access initiative as well as by 4 gs mobile broadband builds. Growth is expected to continue through the next decade as India builds the communications infrastructure needed to support the world's 2nd most populous country. This new low cost platform will also allow us to capture opportunities throughout the Asia Pac region. Built in record time, the facility is operational and began shipping optical fiber in late 2012. Now I'd like to discuss the optical solutions we've developed for several important markets, starting with carrier networks.
In the carrier space, the advantages of fiber to home networks continue to become more obvious. 1st, competition is driving operators to deploy more advanced services to increase their average revenue per user and offer higher bandwidth packages, in some case, up to 1 gigabit per second. Also operators are investigating converged wireline and wireless networks to leverage their fiber investment and to reduce OpEx and deployments are occurring in both the developing and developed world. For example, construction of the Australian NBN network is now ramping toward its planned peak of greater than 1,000,000 homes passed per year. In preparation, we have put our supply chain in place for this important deployment worth nearly $1,500,000,000 to Corning over the next few years.
In Brazil, over 1,000,000 homes were passed in 2012 and major carriers will increase deployment in several major cities this year. Corning is playing an active role here by providing pre connectorized solution sets that reduce installation time by over 50% when compared with typical fiber splicing. And in Canada, we see continuing deployment as the major carriers work to complete their multi year fiber to the home builds that have passed 1,200,000 homes to date. The net result is that we expect double digit increases in our carrier business in 2013, particularly driven by these fiber to the home deployments. Enterprise Networks, which represents about 25% of our business, is where we are leveraging our strong channel access to drive innovation, particularly into data centers.
Driven by storage requirements, optical is increasingly the medium of choice and today represents greater than 60% of the networking gear purchased for data centers. In response, we continue to expand our industry leading PareteumEdge solution set with the development and release of advanced optical components, which include parallel optic modules that enable migration to 40 and 100 gs and port tab modules that provide operators the ability to conduct passive network monitoring at half the cost of other technology alternatives. Additionally, in January, at the Facebook Developer Event, Intel announced its work on a new photonic architecture for data centers as part of its open computing project. We're pleased that Intel selected Corning for the development of the passive optical connectivity required to support this new architecture. Expect to hear more about this initiative later this year.
As a result of this innovation, we expect our enterprise business to grow in the high single digits about twice market rates. Some of you may remember, in 2011, we acquired Mobile Access because we believe that optical solutions would be needed to address the growing demand for wireless coverage and capacity. Operators are currently wrestling with managing mobile bandwidth demand that is growing at a 66% compound annual growth rate, while finding cost effective methods to provide coverage and capacity in complex environments. In the 2 years since this acquisition, Corning Mobile Access has expanded its product set to include low, medium and high power solutions to cover a broad range of indoor and outdoor deployments. Our distributed antenna systems were featured prominently in New Orleans for this year's Super Bowl, including at the city's convention center that hosted 75,000 visitors and at 6 major New Orleans hotels covering more than 5,500 guestrooms.
What I'm really excited about is what's coming next. Later this year, we will announce our all optical next generation solution that will bring the nearly limitless bandwidth capacity of fiber all the way to the edge of the wireless network. This multichannel, multi operator, modular solution provides the architecture required to enable both capacity and coverage for not only 3 and 4 gs, but also the ability to integrate Wi Fi and small cells while reducing 1st install cost and the total cost of ownership for our operators. We're very excited about this launch and its contribution to the double digit growth we expect to see in our wireless business this year.
Finally,
the edge of the optical network is now at the edge of your computer. At the Consumer Electronics Show, we announced the Q1 availability of our first consumer products. USB 3.optical and Thunderbolt optical cables by Corning. These 0 bend radius cable assemblies, which are on display in the product area, enable consumers to have lightning fast transfer speeds up to 10 gigabits per second bidirectionally of distances of up to 100 meters in a product that is 50% smaller, 80% lighter and much more resilient than the nearest copper competitor. As Wentec Vlauder noted, Corning's USB cables now come with freaking lasers.
Expect to see these products at retail and in OEM channels later this year. So, we expect strong performance and continued growth from our telecom group because an always on world continues to produce incredible amounts of data to store, move access and display and because optical is the medium of choice to provide the capacities and speeds needed to meet network requirements. And finally, Corning is delivering high valued differentiated optical solutions for every edge of the network in data centers, in wired and wireless broadband networks and now even in consumer electronics devices. The net result is that in 2013, we expect to outpace the overall industry by growing our sales greater than 10% and our profits even faster. So thank you for your attention.
And I'd now like to introduce my colleague, Mark Beck, who will provide an update on Corning's Environmental and Life Sciences businesses. Thank you.
Good morning, everyone. I'll be discussing 2 businesses that may seem quite unrelated, but in fact share a common purpose and that purpose is enabling healthier lives worldwide. Whether that means enabling cleaner air or enabling the creation of newer and more effective medicines, we at Corning are committed to bringing life changing innovations to these 2 growing markets. Let's begin with a look at our Environmental Technologies business, where our cellular ceramic materials form the core of world class pollution control systems. Our environmental products can be found cleaning the exhaust from automobiles and from power generation plants.
Our products are used on trucks of all sizes from pickups to Class 8 18 wheelers. Our products can also be found on an array of non road vehicles such as those used in heavy construction and in agriculture. But I think it's worth a quick reminder as to why we are in this business. The average person breathes close to 3,000 gallons of air each day and that is why air quality and its effect on our health
is so
important. More than 40 years ago, here in the United States, we had millions of vehicles on the road that were spewing more than 300,000,000 tons of pollutants each year. When the Clean Air Act set new emission standards for vehicles, carmakers needed a solution and they turned to corning. We responded with the cellular ceramic substrate, an innovation that has set the standard for mobile emissions control worldwide. Today, the U.
S. Auto fleet has twice as many vehicles on the road as there were in 1970 and nearly triple the amount of miles driven annually. In spite of this increase, dangerous air pollutants have been reduced by over 60% and today's brand new cars are 99% cleaner than brand new cars in 1970. That means that billions of tons of pollutants have been neutralized or captured by emissions control solutions. And as a result, according to EPA estimates, in 2010 alone, Clean Air Air saved over 160,000 lives.
I think that makes this not only a life changing innovation, but a life saving one. But even after 40 years of progress, there are billions of people for whom air quality remains a significant issue. Developing countries are still relatively early in their emissions control journey. The regulations often lag those of the U. S.
And Europe by several years. Asia faces the greatest challenge. Strong economic progress there has led to a growing middle class and more cars, but it has also placed a burden on the environment and in particular on air quality. Although many Asian countries have begun taking steps to address some forms of pollution, the region has a dangerous concentration of fine particulate matter, as you can see by the red and orange and yellow shading on this satellite image. The fact is more than 80% of the world's population breeds fine particulates in excess of recommendations by the World Health Organization.
And this is not only harmful to the people living in Asia, but to all of us as recent studies have shown that the fine particulate matter also sometimes called black carbon is a major contributor to global warming. These headlines which are just a sampling of global news over the past month show just how serious and pervasive the issue of air quality has become. As these developing countries take actions to ensure cleaner air, Corning can provide proven technologies to help them. We have also developed products to meet the unique needs in these regions. And as a result, we have a leadership position in these early and growing markets.
Now in the developed regions, regulators are seeking even higher levels of air quality and this will drive more opportunity for Corning to place more content in each vehicle and to offer our customers more sophisticated solutions. For example, Europe is focused on real world driving emissions and this will be a big opportunity. Tests show that real world driving produces 3 to 4 times the amount of emissions as than what is observed in a controlled laboratory test. This the new regulations that will be put in place to address real world driving will require a need for more advanced products. Here in the U.
S, regulators are advancing as the White House reviews the Tier 3 proposal, which will mandate another 75% reduction in emissions. That will also require new technology to address things like cold start emissions, which is during the first one minute of an engine's operation, it emits significant amounts of pollutants. Fortunately, we have developed and we have a new product to address that exact problem. In addition to stronger regulations, our businesses will also benefit from the underlying growth in autos, trucks and non road vehicles. The picture remains bright for global automotive builds.
While we do expect the European market to remain soft through 2013, the U. S. And China auto sales have been robust and we expect this trend to continue in 2013. On the heavy duty front, we see even more growth, because important heavy duty regulations in Europe, in China and here in the U. S.
For non road vehicles are taking effect this year, demand for our products could double or possibly even triple by 2017. We are making the investments in technology, in product design and capacity to capture these growth opportunities. In addition to capturing market growth, we are also improving operations and plan to grow our profits by more than 10% per year. As you can see on this chart, our gross margins have been improving have been improving over the past several years. Even last year, with a decrease in sales driven by weakness in Europe, we were able to improve both margin percent and margin dollars over the previous year.
I think this speaks volumes to our gains in operational and manufacturing efficiencies. Now, while growth in our auto business is relatively stable, capital purchases such as heavy duty trucks do tend to be more cyclical. As a result, we'd expect our heavy duty business will experience some fluctuations in volume and margin along with the ups and downs of these markets. Over the past 4 years, our technology has had a tremendous impact. We believe the future is also filled with opportunities as we develop new technologies and participate in adjacent markets.
As automakers deploy new highly efficient gasoline engines, some of their designs will require gasoline particulate filters. We are currently sampling our technology with most major European OEMs and plan to capture a leadership position in this new market as it develops. New marine and locomotive regulations are on the books and this will offer open opportunities to broaden our application and our customer base. We're applying both current and advanced technologies to these markets now to address tighter standards that are coming over the next 5 years. And as the world works to reduce greenhouse gas emissions, CO2 recovery and reuse presents a real opportunity.
Imagine being able to separate out and then collect the carbon dioxide from industrial gas streams and then using it for purposes such as enhanced oil and gas recovery. In our experiments, Tessa has shown the ability to effectively remove CO2 from flue gas and from ambient air and we are now collaborating with our customer in a pilot operation to prove the full scale feasibility. We at Corning were at the forefront of the environmental revolution 40 years ago and we continue to be a technology leader in global clean air solutions today. Air quality has improved dramatically in some areas of the world, but we are a long ways from the finish line. As global regulations expand and refine, new standards will demand new solutions and this will offer us new opportunities.
Heavy duty diesel in particular continues to be a source of growth as emerging markets and non road vehicle regulations drive significant demand in coming years. We will be ready with the technology and capacity to capture these opportunities for Corning. Now I'd like to turn our attention to the Life Sciences business. While Life Sciences has historically been one of Corning's smaller businesses, it is now approaching $1,000,000,000 in sales. Today, we'll take a closer look at the strategy and opportunities for this business.
Life Sciences has grown both organically and through acquisitions. Over the past 4 years, we have successfully added 4 strategic brands to the Coriant portfolio and have in turn grown faster than our competitors and faster than our market. What you see represented in this graph are actual sales results through 2012 and our current plan for this year. Now this forecast is based on our current view of the market and it also reflects the full year impact of our most recent acquisition, the Discovery Labware business we purchased from Becton and Dickinson. Completed in November, this acquisition brings the renowned Falcon brand, a broad slate of trusted products, greater market reach and healthy margins.
In fact, margins in this business are stronger than in any of the previous acquisitions. Because we have been a global supplier of life sciences tools for more than 95 years, we have a well established and leading position in our industry. We have an extensive product portfolio, an effective distribution network and long standing relationships with key customers, customers who are leading drug innovation worldwide. And our recent acquisitions have made us an even bigger and more relevant player in this value chain. Our extensive product portfolio is used to advance the work of top research and production labs.
We are a market leader in most of our segments and we continuously innovate new products to better meet the needs of the scientists that we serve. While I could talk at length about any one of these categories, I'm going to focus on just one and that is the one on the far left we call bioprocess. Let me explain what bioprocess is about. Historically, most drugs have been chemically based and manufactured through chemical synthesis. However, many of the new and exciting treatments in development today are derived from and manufactured using living cells.
Simply put, carefully engineered components from living cells can be used very effectively as a medicine. The term we use for these kinds of drugs is biologic and bioprocess is the term we use to describe the way these biologic drugs are produced. So even though chemical based drugs have been the focus of drug discovery for the past 100 years, the potential for biologics is seem to be so promising that large pharmaceutical companies have been directing more of their R and D dollars to Biologics and this investment has increased fourfold just over the past 6 years. And sales of top drugs have also been moving in this direction with the projected sales growth of biologics reaching close to half of top 100 drug sales by 2016. Now this is good news for Corning because more biologic drugs mean a need for more bioprocessing and the foundation of bioprocessing is cell culture.
We were one of the pioneers in cell culture tools and products and remain a market leader. And now with the addition of Discovery Labware products to our portfolio, our offering in cell culture and bioprocess has become even stronger. With traditional chemical based drug discovery, our participation in the value chain typically ends when the pharmaceutical company has completed its R and D work on a new drug. However, with biologics and cell based therapies, we have the opportunity to continue to serve the drugmaker into and including elements of the manufacturing process. This table here shows how Corning stands to benefit from the shift.
As you move from chemical to biologic drugs, our earning potential grows 4 fold from $3 to $12 per $1,000 of drug sales. And with cellular therapy, the manufacturing opportunities for Corning become even more substantial. Across the top of this slide, you can see each of the critical process steps of manufacturing a biologic drug. We sell many products used in bioprocessing today and due to our experience in materials and surface technologies, we are a market leader with respect to cells that grow on the surface, also known as attachment based bioprocessing. Our recent acquisitions have enhanced our bioprocessing portfolio and we are considered a premier supplier in this area.
We believe that higher growth opportunities like bioprocessing combined with our growth strategy for all market segments will drive Life Sciences' for nearly 100 years. That's a distinction that has afforded us a leadership position and a broad customer base that provides stability and growth. The drug discovery industry is large and is constantly looking for better, cheaper and faster solutions. There is a tremendous opportunity with biological treatments, which are believed to have great potential to address numerous diseases and health problems. We have grown into a strong diverse business and we have the market position, portfolio and strategy to win.
We plan to play a meaningful role in growing Corning. So thank you for your attention as I describe opportunities that are ahead for Environmental Technologies and Life Sciences. These are 2 very different businesses with unique technologies and products. But what they have in common is that they both enjoy a leadership position that has been earned over decades. Both serve markets that are growing and need new technology and both are prepared to deliver double digit growth for Corning.
And now I'd like to introduce my colleague, Jim Clappett.
Good morning, everyone, and thank you, Mark. We are living in a world of megatrends, the economic and social forces that are reshaping the way we live and work. One of the most compelling of these trends is the evolving way we access, manipulate and interpret information.
At home,
at work or at school, in transit and in our downtime, we seek instant real time interactive access to information. We are now immersed in content and we expect to interact with and respond to that content whenever and wherever we wish. And what provides the interface between content and the user? You guessed it, a display. A display with expanding performance capability to make that interface increasingly pleasing and productive.
The display is the essential framing device for our digital age. It could be a 60 inches HDTV hanging on your living room wall. It could be a touch enabled notebook computer or tablet or a smartphone. Corning's highly engineered specialty glasses are a common element among all of today's information delivery devices and we're just getting started. The next wave of innovation is coming and glass will be at the heart of it.
Use of touch will make devices even more essential than they are today. They'll be thinner with increasingly more complex form factors conforming to our needs rather than being limited to 2 dimensions and they'll provide a more immersive viewing experience, meaning displays with higher resolution and more brilliant and richer colors than ever before. These features drive some very demanding glass requirements. Corning's Fusion platform with its inherent manufacturing capabilities allows us to deliver a suite of engineered glasses, each designed specifically to meet customer needs and consumer demands. For today's displays with amorphous silicon backplanes, which still make up the overwhelming majority of flat panel displays, our award winning Eagle XG is the substrate of choice.
Customers producing high performance displays require a glass capable of withstanding far more demanding process temperatures. For them, we've created Corning Lotus Glass. We recently launched Corning Willow Glass, which is appropriate for a variety of applications across different industries. In the display space, Willow Glass incorporates the characteristics of both Lotus and Eagle Glass in an ultra thin flexible form factor. We think Willow Glass could be the key that unlocks a host of next generation displays.
Now here's what's keeping those displays safe in a touch enabled world, our cover glass.
Corning Gorilla Glass meets
a need that didn't exist a few short years ago. And in so doing, we've created an entirely new category of glass that's become one of the biggest branded technology success stories of the past several years. The latest version of Gorilla Glass combines the strength of our prior compositions with native damage resistance. Looking ahead a bit, we know the next generation of touch enabled mobile devices will be larger, thinner and lower cost. We've got this emerging market covered with a durable one glass solution that has been very well received by our customers.
Once again, we're out in front, pulling ahead in this space. The Corning Glass Technologies Group combines display technologies, which concentrates on LCD and advanced substrates for display with the specialty materials business, which includes Gorilla Glass for handheld, IT and TV applications.
I think we all agree that
the word synergy gets thrown around far too often these days, but in our case, it's an accurate description of the relationship between our display and Gorilla Glass businesses. So here's what I mean. We've leveraged our Fusion expertise to improve our process performance and glass attributes over the years and in so doing, we succeeded in enabling the industry's transition to thinner glass. Both Eagle and Gorilla Glasses are substantially thinner than what they were just a few years ago. Going thin along with other productivity improvements has allowed us to reduce our cost and to significantly increase our manufacturing output from the existing asset base.
As a result, Gorilla Glass will meet its rapidly increasing demand with limited capital investment, while display continues to operate at high utilization rates. These steps leveraging our manufacturing prowess to drive down costs by producing thinner glass and then reaping the resulting capital efficiency benefits from greatly increased output are transforming our business. Last year, we told you that more than half of the LCD glass we shipped in 2012 would be thin. I'm pleased to report our level of thin conversion has exceeded our expectations and we still have upside, meaning additional capacity will be generated to support expected volume growth in both display and Gorilla Glass. Yes, the display glass market is still growing.
This growth is driven primarily by the television sector, powered by the move to larger screen sizes, which have been growing consistently since LCD TV was introduced more than a decade ago. Remember when we used to think a 40 inches TV was the largest screen size that could fit comfortably in a home? Today, the fastest growing segment of the LCD TV market is 60 inches and larger. We're also seeing growth in IT applications, largely from the dynamic growth in tablets. Small and medium displays, as you can see, form the smallest part of LCD glass demand.
However, on a unit basis, it is the fastest growing segment.
There are 2 key points
to make about the TV market. 1st, the worldwide installed base for TVs continues to grow and we have quite a ways to go before we reach full LCD TV penetration. Next, we're bullish on flat panel TV replacement. Our consumer research indicates that the replacement cycle for flat panel television is averaging 6 to 8 years, shorter than the 8 to 10 year cycle during the CRT era. We believe this trend will continue.
LCD TVs are delivering the performance features that consumers value in an increasingly larger set size. That was one of the key takeaways from the recent CES show. Let's look a little deeper into this trend, which should explain our TV replacement cycle optimism. In 2006, as you can see here, a typical high end TV was a 40 inches set that sold at an average price of $2,500 It was about 5 inches thick, ran at 60 Hertz refresh rate with 720p resolution. Today, with a sticker price less than $1,000 a consumer can purchase a 60 inches set, which is more than twice the screen area and measures this 1 inches thick refreshes at 240 hertz with 1080p resolution.
So consumers are able to pay far less money for a significantly upgraded TV and a much improved viewing experience. The basic specifications for the TV of the future are likely to exceed the emerging 60 inches set size with much higher resolution and an even thinner form factor with deeper, richer colors leading to an incredibly immersive viewing experience. This large size phenomenon, ultra high definition TV, is relatively new. It means positive momentum in TV replacement buying behavior over the next several years. We expect close to 1,000,000 of these large TV sets to sell this year with rapid growth going forward.
So we're moving in the right direction
on replacement cycle, aided by dramatic advancements in technology at affordable prices. Often these technology advancements occur first in small sized devices in a category we call high performance displays. High performance displays are higher resolution, thinner and consume less power than conventional displays. They're gaining popularity with consumers on portable devices. These displays whether LCD or OLED technology require higher processing temperatures and more precise manufacturing techniques.
This requires a new kind of glass, a glass that can quite literally take the heat. Corning developed notice glass specifically for these advanced backplane technologies. We've got the winning glass formulation for metal oxide, which may one day replace the standard amorphous silicon backplane as well as for polysilicon, a technology found in many of the highest resolution displays used in cell phones and other advanced applications. Just how good is Lotus Glass? Simply stated, we have a substantially advantaged product over our competition and the industry is taking note.
For example, Scharf Corporation recently selected lotus glass for use in its next generation Iguzo oxide TFP process. A year ago, Korny and Samsung Display formed a joint venture to supply Lourdes Glass with Samsung Display's OLED applications. So let's focus on OLEDs for a moment. We believe the industry has chosen its solution, 2 pieces of engineered glass. Although other materials for encapsulation have been tried, all OLED manufacturers bringing products to market today are relying on designs with 2 pieces of glass, 1 for the backplane and the other for encapsulation.
Glass on Glass provides a hermetic seal far superior to any other material. So our LOTUS glass delivers the high temperature performance characteristics required to successfully produce an OLED display. Encapsulating the backplane for the 2nd piece of LOTUS glass assures the display will not limit the lifetime of the device. I'd like to make one more comment related to TV. Let me take you back to January's CES show.
Consistent with our view on rapidly expanding large size TV segment, most of the TV related bez there centered on ultra high definition LCD TVs. Another data point suggesting that LCD technology continues to advance and will provide stiff competition to OLED TV when it is finally commercialized. And speaking of advancing display technology, another area where we see this occurring is in glass thickness. Willow glass is a key enabler of the thin, light, conformable and flexible value drivers that will be essential elements of the next display and devices. Printing electronics like you print newspaper has not been possible with glass until now.
Willow can enable high temperature continuous roll to roll processing, dramatically reducing production cost. We're actively engaging with customers on a number of applications. In the substrate space, we're focused on delivering extremely thin touch systems on smartphones and tablets, collaborating closely with several OEMs. We expect to have good news to report in non display applications, including solar, where Willow glass can be used as a barrier to prevent water and oxygen from degrading the photovoltaic energy cells. Glass piece plastic in hermetic performance, high temperature processing, optical clarity and cost.
To wrap it all up for display,
these are the critical elements to stabilize profitability. Fundamentally, we have achieved a significant measure of share stability, while also reducing manufacturing costs and gaining very significant capacity with limited capital investment. And here's the detail. We've signed key customer agreements that have stabilized Corning share at specified levels, while maintaining a fixed relationship between Corning Spice and competitive pricing at those customers. The continuity created by these agreements will enable us to better forecast our capacity needs and thus maintain high levels of capacity utilization, improving our cost performance.
As the industry continues to mature, we believe we will enter a new era marked by more stable share and moderate price declines. As you can see our success will move to even thinner glass and the result is a steady increase in our asset efficiency as our volume continues to expand. Share stability, moderate price declines and our efficient use of existing assets are combining to lead display to consistent profits and cash generation. LCD grass demand is still growing worldwide and display will continue to be a significant part of Corning's bottom line and the company's success, generating significant cash flow for many years to come.
Meanwhile, Gorilla Glass will continue to grow as
it leverages some of the same manufacturing assets previously used by display. Gorilla Glass as the primary driver of Corning Specialty Materials earnings is poised to seize a great growth opportunity. Combined, these two businesses form a remarkable story of synergy and success with growing profitability and strong cash generation for the foreseeable future. As I mentioned, we created the covered glass category and we've earned our position as the acknowledged global leader. Here's what that means.
Gorilla Glass is on more than 33 major brands and nearly 1,000 separate product models covering well over 1,000,000,000 devices worldwide. With the
Real Glass 3, which we launched at the CES show,
we are continuing our momentum with even more advantaged product. Specifically, it has increased scratch resistance, reduced scratch visibility and better retain strength once the scratch
occurs.
We surpassed $1,000,000,000 in annual sales last year and now with Gorilla Glass 3, we are well positioned to continue this growth as a market for touch enabled devices expands. The outlook for Gorilla Glass is very positive. Demand for Gorilla Glass is growing rapidly as the smartphone segment increases in share at the expense of feature phones. Within 4 years, we expect that smartphones will comprise the vast majority of mobile phones. And as screen size increases on new models, there's more cover glass needed on each unit.
We expect a 30% increase in screen size for smartphones. The mobile IT market, here driven primarily by tablets is set to almost double in the next 4 years, which brings us to touch on notebooks and more good news for Gorilla. TouchDown Notebooks represents the next big thing for Gorilla Glass. It's a major opportunity that's being powered by a fundamental shift in this product category. Very soon, being touch enabled will represent table stakes in this space.
Consumers are increasingly expecting touch on their laptop computers, not just the smartphones and tablets. So some major market forces are aligning to deliver this feature to consumers. All phases of the industry are coming to consensus on touch from software providers to OEMs and the chipmakers as well. This is going to happen. It's already underway.
As this chart indicates, touch on notebook could substantially increase the demand for cover glass.
Taken together, the increase in
the unit volume and screen size in mobile phones, growth in tablets and the potential for explosive market growth for touch on notebook could lead CoverGlass demand to grow 2 to 3 times the size of the demand today. Gorilla Glass with the increasing productivity of our manufacturing assets is uniquely positioned to capture this opportunity. But that's not all. Growth potential in Gorilla Glass is not limited to consumer electronics. There are opportunities in new industries, transportation, interior architecture, appliances and large cover glass.
Each could benefit from unique properties of Gorilla Glass, durability, scratch resistance, optical priority, touch sensitivity and easy cleaning in a thin and light form factor. Here's a prime example. We're pursuing some intriguing opportunities in the automotive industry for Gorilla Glass. Gorilla Glass can reduce the overall blazing weight of an automobile, which is a real plus for fuel efficiency, emission reductions, handling, safety, driving comfort and security. Because of these benefits, the interest from OEMs is real and we are actively working with specific automakers to bring our solution to market.
And this is in addition to the potential doubling of a cover glass business I described earlier. As we explore opportunities in these new industries, we continue to set the pace in the covered glass category. Over the past 3 years, our pace of innovation has accelerated. We're proud of the strides we made in setting the bar for durability, thinness and scratch resistance, but there's more to do. We have additional opportunities to innovate and address customer needs.
Throughout Corning's history, our customers have turned to us to solve their toughest problems and our upcoming innovation challenges will be our toughest yet. So we're developing new capabilities to enhance the performance of Gorilla Glass, capabilities in the area of anti reflective, antimicrobial and 3 d shapes. We will launch products in all three categories in 2013. We've solved these kinds of tough problems before and we will do it again, advancing the industry to its next level.
So, here is what you
should take away. 1st, we expect display profitability to stabilize as we continue to generate significant cash. Next, as I've said, our drive thru thing is paying off in a big way. Our productivity gains are reducing costs and are adding enough capacity to support growth in both display and Gorilla Glass with limited investment. And we're very excited about the growth prospects for Gorilla Glass.
We have the potential to more than double demand for this great product category and we're working hard to make that happen. To summarize, this is an exciting time for Corning. Why? Because glass matters. Glass matters in display and cover glass.
It matters in an expanding smartphone and tablet category. Glass matters in the trend to larger size television with a better viewing experience and new technology trends like high performance displays and touch on notebook. And finally, glass can matter in entirely new industries and product categories, automotive, interior architecture, appliance and large sized displays and perhaps in uses we haven't even thought of yet. Thank you. Now, the internal discussion to our Vice Chairman and CFO, Jim Floss.
Jim?
Thanks, Jim. I'm delighted to be
here this morning and to see all of you in person. I'm going to begin by addressing our equity venture Dow Corning and also the weakening impact of the Japanese yen on Corning. And then I'll turn to one of my favorite subjects cash and close with a summary of our expectations for growth in sales and earnings. Now Dow Corning is a significant contributor to our growth and remains a component of our strategic framework for stability and balance. Their businesses serve very diverse markets from electronics to appliance assembly to construction and many more.
Now Dow Corning is a large company in its own right, over $6,000,000,000 in sales. It's a cash generator and it pays dividends. And while their products end up in many diverse end markets, we segment the company into 2 large buckets, silicones and polysilicon. I'd like to spend a minute talking about each and how we'd like you to think about them. Now Dow Corning is the leading provider of silicones and has been in the business since 1943 when Corning Incorporated invented silicone.
This business has experienced some price pressure in a continued soft economic market, but we believe the market and Dow Corning's business will stabilize in 2013. Dow Corning will continue to innovate to improve their cost position and actually deliver new products to new markets. We expect silicone sales to be up in 2013, driven by more robust economies and especially emerging markets. Now as I commented on our earnings call in January, an issue at Dow Corning's consolidated subsidiary Hemlock Semiconductor Group has emerged in the last 15 months. Hemlock has become a drag on Dow Corning's results.
While the end market solar cell installations continues to grow, The macroeconomic environment and changes in solar subsidies have impacted this growth. The lower growth versus expectations combined with overcapacity has affected all portions of the solar industry supply chain, including the manufacture of polysilicon. The second issue is trade disputes between countries, principally between the United States and China on solar products. This dispute started in the United States with a complaint that Chinese suppliers were dumping solar cells. It spilled over to the polysilicon business through China's investigation of alleged polysilicon dumping by suppliers from the United States, Europe and Korea.
The Chinese government announced this investigation last summer and polysilicon exports to China have reduced every month since. We currently expect Mothcom, the Ministry of Commerce to announce their findings on this investigation in late February. We believe imports of polysilicon into China are frozen until the ruling. It's very logical for customers to not risk retroactive duties. Now obviously, we don't know what the ruling will be.
However, Hemlock is preparing for a variety of different scenarios. In the meantime, unfortunately, Hemlock is negatively impacting Dow Corning's results and their quarter earnings may show significant volatility. As a result, we intend to begin sharing Dow Corning's results broken into silicones and Hemlock. And more importantly, we'll be focusing on Corning's equity earning results for Silicone separately until the Hemlock situation is resolved. As a start to this disclosure, I'd like to show you Val Corning broken into silicones and polysilicon for the last 2 years.
As you can see, the fall off in poly has been severe. Now the silicone business also had a difficult year with price pressure and manufacturing fixed cost increases from capacity additions in Asia. The drop in silicones however is less severe than it appears as 2011 had benefited from compensation accrual reversals on a long term plan that did not pay off. However, the poly P and L for 2012 here shows only part of the story for Hemlock. Although Hemlock was profitable for the full year, it was losing money even before special items in the Q4.
It is this lost position that we're concerned about and why we are thinking through potential actions to fix it. Now I'd like to address the potential risk at Hemlock as a result of the solar industry woes. We'll be releasing our 10 ks next week and you're going to find significant disclosure within it about the risk at Hemlock. I'd like to address what I see as the potential worst case, its impact on Dow Corning's performance and on ours. Now I'm defining the worst case as the solar portion of the poly market for Hemlock collapsing.
You can obviously imagine a variety of scenarios that could cause this outcome and it would force Hemlock to downsize its operations and assets. Because I'm discussing a worst case outcome, the first question to ask is, was this a business opportunity worth pursuing? And the second accompanying question, what were the risks involved in pursuing this market? I think the P and L on the upper portion of this slide will show why Hemlock pursued the solar market. Hemlock is primarily a profitable producer of semiconductor grade polysilicon in 2,000 and 4.
However, Hemlock sales ramped from about that $200,000,000 range in 2,004 to $1,500,000,000 in 2011. Equally important, the EBITDA on these sales was outstanding. Now Hemlock invested significantly to capture the solar poly boom as the solar industry growth skyrocketed in the last decade. Now as the bottom portion of this chart shows, Hemlock Capital Spending from 2,006 to 20 11 was approximately $3,800,000,000 However, as long time followers of Corning know, the solar opportunity came with series of potential risks. At a very high level, the solar industry survives due to subsidies.
At Corning, as these investment opportunities came to Hemlock and their Dow Corning Board, we worried about the risk of solar industry collapse for a variety of reasons. Loss of subsidies and overcapacity were prominent in our mind. The Dow Corning Board insisted on significant risk mitigation measures as Hemlock pursued these investments. The primary risk mitigation tool was to insist that customers sign up to a 10 year supply agreement before Hemlock would build the factories and that customers also make prepays against these contracts. Finally, the contracts had a take or pay feature.
Now customers got something returned for these contracts. At the time, Hemlock was the leading producer of poly in the world in our opinion, the most reliable. And remember, poly was in short supply. 2nd, the pricing in the contracts was actually well below the spot market at that time, but it still allowed Hemlock to earn a good return. Ultimately, Hemlock received $4,000,000,000 in gross prepayments.
The bottom line in this chart shows the net prepayments over time. Net prepayments reflects the gross amount received less the amount customers earned back when they purchased. Hemlock sales and profits grew, customers got their poly and earned back some of the prepays as they purchased. However, by the Q4 of 2011, the solar poly market began to collapse. Spot prices fell into the $20 range driven by a weaker market opportunity and overcapacity principally in China.
And 2012 for the business would only get worse. So let me return to my worst case. The solar poly business at Hemlock disappears. What would happen? First, Hemlock would impair its assets.
Now this would be a big special charge and Corning's share of that would be about 700,000,000 dollars I want to emphasize this is a non cash impact at Hemlock, non cash at Dow Corning and non cash at Corning Incorporated. The second stage would be the resolution of the solar take or pay contracts. Now the solar customers continue to have outstanding contracts totaling $12,000,000,000 Hemlock would seek to enforce these contracts by receiving settlements and go to court if necessary. This process will not be easy and no will action timing to the impairments. Corning believes the following if the worst case occurs.
1st, Hemlock can be restructured to a smaller operation that will not be a P and L drag. 2nd, restructuring will not require cash from Corning or from Dow Corning to fund. 3rd, the ultimate resolution of the contracts with the take or pay nature and the prepays will give Hemlock gains to offset these charges. And lastly, the ultimate economic impact of pursuing solar, the MPT on the sales that we had and settlements will be positive. So let me summarize Dow Corning.
The silicones business is very strong. We expect them to generate excellent profits and cash flow. Hemlock is currently in a tough spot, but we believe they'll come
out of the other side of
the solar upheaval as profitable and a leader in the polysilicone industry. And as a reminder, the semiconductor portion of Hemlock remains a strong business. We are confident that the ultimate cumulative economics of Hemlock even in the worst case will be positive. And now I'd like to turn to foreign exchange and the impact on our display business. First, let me review the details of how the yen to U.
S. Dollar exchange rate impacts us. All LCD glass today is priced in yen. This actually traces back to the origin of this business in Japan. Now we report our results in dollars, so a weakening yen decreases our sales and profits when they are translated into dollars.
Obviously, the opposite happens when the yen strengthens. On the other hand, the panel industry, our customer buys LCD glass in yen and sells panel in dollars. So the current weakening yen has turned out to be a price reduction for them. We hope this price reduction will help us on our goal of moderating our own glass price declines. But the exchange rate is something outside of our control.
Therefore, we will measure our March up earnings improvement on a constant yen basis. However, more importantly at the same time, we'll be taking action to mitigate the negative effect of the weakening yen. We are evaluating both hedging and potentially converting LCD glass prices to U. S. Dollars.
And now I'd like to turn to one of my personally favorite topics and that's cash. Since 2004, Corning's Board and Management Committee have had clear priorities for the use of our cash. Last year, I showed you this chart breaking out historically how we had distributed our cash from operations over a 5 year period of time. You can see it over this time, the split was about 60% towards funding growth, 20% to improving our financial health and returning 20% to shareholders. Now here's what we've done with our cash for the last two years, 2011 and 2012.
Percentage of cash to shareholders has increased to 30%. We told investors last February in this building that we felt we had excess cash to return and we have delivered. And now I'd like to turn to 2013 in a similar format. Our current forecast for operating cash flow for this year is approximately $2,600,000,000 Our capital spending will be moving down 30% from last year to approximately $1,300,000,000 Our dividend at the current quarterly rate annualized requires $540,000,000 Now we have some open items in our outlook. First, we are evaluating several minor acquisitions at this time, but we have nothing under evaluation that's the size of the Discovery Labware deal from last year.
2nd, the Board of Directors needs to evaluate potential share repurchase and further dividend increases. And I can assure you that the Board will be addressing these topics this year. Now our investors clearly see the opportunity for returning more cash and we think so too. We remain dedicated to returning cash to shareholders. As you saw on the prior slide, we expect to generate significant cash in 2013 and going forward driven primarily by the display business.
We plan to increase dividends over time and we may also repurchase additional shares. Now I'd like to wrap up by summing up our expectations for growth in sales and earnings. You heard from our business group leaders this morning that we have exciting growth prospects in our existing businesses, both sales and earnings. And I'd like to frame a few ways for you to think about this growth and why we believe in it. First, we believe in this growth because the fundamentals forward are fueled by these three trends.
Jim, Clark and Mark explained in some detail opportunities associated with these drivers. And let me summarize. Consumers demand a world with seamless delivery of real time information at their fingertips at work, at home and on the go. This is translating to more and bigger displays and more pervasive touch technology. As Clark said, the world is always on, which drives growth in data creation, storage and ease of data access with underlying bandwidth demands going off the chart.
Optical solutions are the most cost effective capacities and speeds to meet the explosion of bandwidth demand. And both of these trends mean more demand for specialty glass and fiber.
We've talked about the push for
a cleaner and greener environment. United States and most European countries have restricted regulations today and continue to upgrade those standards. And now developing economies are beginning to adapt pollution control regulations as well. More insider regulations drive opportunities for the mobile emission control products our environmental business makes today as well as innovation opportunities in the future.
Another aspect of health
in addition to the air we breathe is the advancement of medicine. Drug discovery companies are seeking more efficient ways of bringing more effective drugs to the market, especially new drug therapies from living cells. For Corning that again opens up more innovation opportunities for our materials and surface technologies. We believe these trends are driving our growth now and will continue to do so over the next several years.
Now I'd like to
point out that geographic growth is another key trend for us. Eric Musser, President of Corning International is not presenting this year, but is in the audience to answer your questions. And I'm happy to say that Eric will be a featured speaker at an investor conference later this month in San Francisco. Now a good portion of our growth is coming from emerging markets, namely China in the near future followed by regions like India and Brazil. This is a list of some of the major drivers in these developing regions.
Clark showed you our new fiber plant in India to support their increased investment in telecom networks. And Mark talked about domestic emission regulations for autos and heavy duty trucks in China and India. Here are some examples of market growth estimates in our business segments for China and India. I won't go through them in detail, but I'd like to point out while India is a relatively small market today for products for autos, telecommunications and consumer electronics, It is a country of 1,200,000,000 people and we expect significant demand in the years ahead. So now I'd like to finish with a slide that Wendell used in his opening.
Our strategy is working. We have the financial strength to weather external difficulties and to continue to fund growth opportunities. We are the market and technology leader in industries where we compete. We have the lowest cost position for most of our products. And all of our businesses are tied to major trends and have the support of Corning's wonderful R and D organization.
Corning continues to invest in research and development, which has brought and will bring new growth opportunities. Gorilla is only the latest in a long line of large important innovations. And as Wendell shared, we have opportunities to add to our history of innovation. Finally, we've turned Corning into a solid and consistent cash generator. We've just finished our 9th consecutive year of positive free cash flow and we've begun to use the cash to augment returns to shareholders and decreasing capital spending will help our ability to do more in this area in the years ahead.
In summary, we think we're a strong investment opportunity. I thank you for your attention. And now we'd like to turn to Q and A. And Wendell, if you could join me on the stage.
Okay. We've got Mike Handlers in the audience. So if you have a question, you can raise your hand and they'll get to you. And we'll start with Brian.
Hi. Thanks, Ann. So a couple of questions, Jim, on the yen. I just wonder if you could I know you guys aren't ready to tell us what you're going to do yet. You're still working on that.
I wonder if you could help quantify for us what the cost of yen hedging might look like? Is there any way to look at face value? And what cost should look like for Corning? Does it differ much from the forward market? And then I also wonder if you could talk to us a little bit more about the Hemlock numbers that you're seeing.
I mean, when will you be able to update that worst case scenario? Is it right after that February ruling that you'd be able to come back to us and say, okay, now this is what we think the scenario is or will it take a couple of months to figure that out? Thanks. Okay. That's a great question.
So let me take the latter first on Hemlock. We've had experience unfortunately with antidumping investigations before, Corning, in China. So the timing isn't always as perfect as what you think. Usually what happens is a preliminary ruling and then there's a period of time when you get to appeal it. So we don't know how it will exactly work out on time.
But I think that we will probably get a good idea whether the ruling is going to be quite negative, in which case we're probably moving to our worst case, which is impairment and taking action pretty quickly. Because remember, the Chinese market is about half the market for solar poly. But I think it's probably likely to be March or April before we have a good idea about how that works out. But I can assure you, that the Dow Corning Board and Hemlock are prepared and ready to take action and to eliminate this drive. I would like to emphasize one thing.
We didn't get into this to have a big write off and then collect on the contracts. This was actually a great business for a period of time. However, what you're seeing is, the management of Dow Corning with the Board members from Corning and Dow Chemical preparing for the volatility that it can exist in markets. But I think you'll see a lot more understanding probably March April on Hemlock. On the hedge, in terms of what we're thinking about against foreign exchange, first as a reminder, for every yen move in a quarter, it's about $6,000,000 NPAT to Corning.
What we're evaluating and hedging is how to seal off any further impact on Corning's results for some period of time. You cannot hedge in perpetuity. We're also exploring what we'll call low cost hedging strategies. And obviously, when we move to implement that, we'll be disclosing the impact to you and the cost. Our desire is to prevent further erosion to our results through hedging, but not for how to be too expensive as we do it.
We think we've got a good concept. I was delighted to wake up this morning and find the end falling to 92.5% from 93.5% yesterday. But stay tuned. We'll keep you posted.
Thanks, Jim. Hey, Dan. Go ahead, Mark.
Thank you and good morning. Gentlemen, just a question on the display glass pricing changes that you've made. When will we know that it's actually going to work? Every action has a subsequent reaction. We're still waiting for the competitors.
When do you think it will enter a period where the industry margins will recover because everyone cannot predict the capacity a little bit better? And then separately, Jim, for you, if we look into the future and Corning is on a run rate of $10,000,000,000 in revenues a year, clearly the segmentation will look very different from it is today. Any thoughts on what the margin profile of the business may look like? And I would imagine it's also a less capital intensive business in the future. Any thoughts on how the free cash flow might improve in the subsequent years?
So in terms of the pricing dynamic, I think we're going to need a few quarters to see how does the new model play out and we'll keep you posted. So far, we've seen a good strong progress towards price moderation throughout this year and in quarter 1 throughout last year as well as in quarter 1 of this year. We would like to see that continue before we conclude that we've got a more stable pricing environment overall as an important part of us restoring the positive momentum in our display business.
Mark on the future of what Corning will look like in margins. As you know, Corning's corporate margins are always reflecting the mix of our various businesses. So I'll comment first on what we expect in our various businesses. Clearly, Guerilla as Wendell highlighted is a very high gross margin product. And it's actually not requiring much capital spending because the productivity that Jim Clappin is delivering in providing the glass without us having to spend capital on it.
We expect to maintain excellent margin performance in Gorilla. And if we're right about touch and we're right about antimicrobial and we're right about anti reflective and by the way I intend to turn all my devices in to get that anti reflective coating, we're looking forward to great growth. Now our other businesses also have improving margins. So in telecom, what's growing fastest is the higher portion higher margin part of the business. Our fiber to home is much better than our standard carrier business.
So you should see improving margins in telecom. Environmental as Mark Beck told you, even despite no sales growth this past year, we moved margins up. And we think we can continue to improve on manufacturing there. And in Life Sciences, I think you're going to be very excited by the margins we have there. So all of our businesses should see margin improvement.
The ultimate corporate margin will be dependent on the mix of those within it, But every business should see good margin improvement. And lastly, as you pointed out, we're expecting to see lower capital spending going forward. Now, we're always hopeful that our Director of Research will actually invent something that will be a giant new business
and we're prepared to back it Equit Capital.
But right now, a lot of what we're seeing in terms of the innovation you're seeing back here actually is coming with less capital spending.
If I could add, I think one of the accomplishments of the past year that is worthy of note is we improved the gross margin in all of our other non display businesses at 3 points. And that is the type of trend that we want to continue to establish. At its core where enhanced margins come from are a combination of 2 things. 1st, our degree of product advantage versus any imitators and then second, our degree of process advantage, which gives us a much stronger cost position. We feel very good about our ability to create differentiation in both spaces across our segments.
Alexis, you have one?
Hey, guys. It's Ava from Morgan Stanley in the middle window. First question on glass and then just a question on CapEx and Gorilla. On glass, the chart that you had up shows that there is one of the charts that show that the manufacturing costs in LCD continue to go down. There's a middle chart of the three charts.
It has gone down in the past and a lot of times you used to move from Gen 7, Gen 8, Gen 9, Gen 10 to lower your costs. The chart hasn't continued to go down to 2016. What are the main factors that you can see to bring that down? And then when you look at what DN has done, Jim, if you hedge going forward or something like that, it still has had a significant move versus last year. So even if you can hedge at this spot going forward, it would appear that your revenue is going to take a significant step down, unless volume goes higher than I think the high single digits that you're looking for.
So how do you between just understanding how the manufacturing moves and just taking into account what the yen has done so far, let alone whatever else happens, I'm not quite getting to the flat cash flow and flat NPAT going forward. And so just if you can kind of go over the mechanics of those two pieces again. On Gorilla, I didn't hear as much of talk about Auto Glass as I thought maybe we heard in the past. So I just want to get a progress update on what we'll see later this year. I think we'll have at least one car out with Auto Glass for Gorilla later this year, but I want to just understand the progress on that and how you view that going into the growth in Gorilla going forward.
Again, one of the charts that saw the growth in Grille didn't really break out auto as a category and I thought that was something that we should be looking forward to. And then just last comment on CapEx. Do you expect it to continue to stay at this level or lower going forward? Or do you think that maybe there's a need going forward to have to raise it?
Let me just start with that relatively complex multi part question. So, where you first started, it was how do you think about that chart? Where does that type of cost reduction come from, right? And why do we see continued strong opportunities for it going forward? The way to think about our factories is the number one leverage point is to get more glass out of our factories, right?
And then to turn around and sell our glass in a variety of different markets. What we're seeing is our continued ability to move towards thin as well as enhance our productivity, so that we are able to significantly increase our throughput and square footage out of our asset footprint. That's what's continuing that drive and we feel quite confident of our ability to continue to do that.
Jens?
So clearly, there has been a step down in display profits with the yen moving from basically $79,000,000 in the middle of November to $89,000,000 by the end of December and now $92,000,000 The hedging strategy can't go back in time. I cannot go back to 'seventy nine level. The key is for us to avoid further erosion if the yen is in fact going to get worse. You had so many questions, I'm
not sure I got them all. The other one was why we didn't talk about automotive or architectural or appliance. Automotive has long been one of James' favorite opportunities. And so I should let him touch on it. We still feel quite good about our opportunities there.
Momentum is gathering in that opportunity set and it's just that we see very strong trends right in the display consumer electronics business that are driving near term growth and that's why you saw that highlight.
So on automotive, as we've talked about before, this is an industry that moves at a slower pace than what we see in consumer electronics. I think I appeared on television and I thought I was careful in my words, but I said I was highly confident that you'd see a gorilla announced on a car this year. Lastly, on cap spending, in
the back of our presentation,
I do break out capital spending for maintenance of the company, which generally is about $500,000,000 in a year. A chunk of obviously is rebuilding the space tanks every so often. And then the remainder of our capital spending is driven by expansion in our various businesses. Right now, we expect 2014 to probably be about that $1,300,000,000 level. I can't forecast much beyond that, but I think like we're bottoming right now with the opportunities we see approximately at that level.
Thanks, Jim. This is Brian.
How are
you doing? Steve Rufus from Matrix. Yes, Wendell, I mean, the stock has struggled the last several years and growing went through a large recession and you invested a lot in plants. But when you look at the stockholder, I mean the stock has been down, been struggling. One of the issues has been capital allocation.
You've been overinvesting in plants. And now as profitability is stable and you have all this free cash flow, why not raise the dividend even more? That's one of the issues that we deal with. It seems companies are not getting they're not giving credit for doing repurchases. They're giving credit for doing dividends.
And to us, it seems like you can increase the dividend $300,000,000 a year, get up to roughly 5%. And what it does, it will help support your stock price, but also bring some more discipline to your investment in capital spending. And what about looking through that proposal, increasing it that much? It doesn't seem like it's going to hinder you. It seems like it will help a lot in terms of the dividend share price and a little more capital allocation at this point.
So we don't want to but 1 on our Board. And let me tell you the way in which we think about it. The 2 precursors that need to be in place, we think are in place to continue to enhance our ability to return cash to our shareholders. One is, how do we feel about the fundamental cadence and heartbeat of the company? If you look at quarter 4 as evidence, what you see is our core earnings per share at around $0.37 in quarter 4 compared to around $0.33 last year, ex yen and ex some of the issues in Hemlock that you heard from Jim.
So in that effort, you see pretty good growth. As we look forward, we feel that the fundamental core of the company is going to continue a type of healthy improvement. So that's step 1. 2nd is the desire. The desire is there because what we're going through as a company is as one of the previous big waves of our innovations, LCD TV, starts to weigh and now the new waves are building in that transition time, what we'd like to do is enhance our shareholder returns for their patients during this little spacing between growth waves.
So the desire is there. All that's really open is 3 questions. What's the size? What's the mix between repurchase as well as dividends? And then what is the framework by which our shareholders can think about a flexible model going forward?
The Board is deliberating on these points that they've asked us to do is gather the input from the investment community on those three questions. So we appreciate your opinion. Please reach out to Anne, Jim,
I was wondering if you could go back over the Specialty Materials segment. There's been quite a bit of leverage in that business over the last year because of Gorilla Glass. I think the margins have improved to about 20%. Looking forward, I think you're indicating that there's more leverage to come because of the Gorilla Glass growth. I was wondering if you could talk about why that happens in terms of where processes are currently?
And then could you also talk about as you get more into notebooks with touch applications, how does that affect the leverage? And how does that affect potential cyclicality around Gorilla Glass, say, over
the next 4 to 6 quarters? Thanks.
Why don't you start on margins and I'll just touch on notebook?
So on Gorilla, one of the things to keep in mind is that this remains a relatively new product. And so and it's getting even newer because we have to keep inventing new versions of it. One of the benefits Corning always has from newness is that we work very hard on improving the productivity of all the products. So each year we're trying to manufacture Gorilla at a lower cost. So we think we have the potential although Gorilla margins are quite high today to sustain them and maybe improve them driven by our productivity and obviously growth matters.
You may have missed it on the chart, but we are actually making our product thinner in Gorilla 2. It's not just on display glass. So you should see margins in the Specialty Materials segment reflect VARELA becoming a larger part of that segment. Now we are putting some money back into the business. We saw some increased R and D spending in quarter 4.
You're seeing some of the benefits in the demonstrations today. But we think you'll continue to see excellent margin performance from Gorilla. I'm not sure I can really tell you about the cyclicality. We definitely know Gorilla is low in quarter 1 based on the existing consumer electronics market. We have some experience about how notebooks cycle because of the display business, but I can't tell you how the mix is going to work out.
Obviously, we'd love to have a big portion of the notebook market move to have touch and a cover glass on it. I think in general based on what we've seen that will help stabilize a little, but there obviously are one heck of a lot of notebooks usually sold in the Q3 and that's when there's a lot of Gorilla Glass for smartphones. So I'm not sure about the demand.
I would say that the strongest R squared we've seen around predictability for Gorilla has to do with new product launches, right? That's the strongest R squared. And so the timing of those is probably is also sort of fundamental driver that sits within the seasonality question. For Touch on Notebook, the simple question is, what is the attach rate for touch? What I can tell you anecdotally is in our discussions with the major brands, what they say is simple.
The notebooks that sold were touch enabled. The ones that weren't, did not do so well. So what they're pushing the whole supply chain to do is increase its ability to be able to support a much higher attach rate. Since you're adding a significant new product category that will also enhance the R squared around new product launches that depending on their timing will either add or detract from the relative quarterly performance.
Can you give a over in that corner, do I have a question? No. Here you go. Alexis, we'll go here.
Frank Bamberger. The question is roughly what percent of your profits for 2012, the products reported so far is represented by a gorilla? What percent of your profits go back to the Gorilla Glass?
So we don't break out the profitability of Gorilla directly. You can look at our Specialty Materials segment, which had a very large profitability increase and that increase is primarily driven by Gorilla. But we haven't yet decided to make Gorilla be a segment under its own. So the only place we disclose the profit is embedded in that segment.
The total is the specialty area about?
I don't remember the number on top of my head. Do you, Tony? About 15%. Thank you.
Okay. Thanks. Hey, Brian, over this way.
It's Mehdi Hosseini from Susquehanna International. Going back to the display, when would you expect the Willow product to have a positive material impact? And then when you look out in the future, would Willow somewhat adversely impact the need for Gorilla Cover? So I think you're going to see the continued positive momentum of Gorilla and the company. You saw it in quarter 4.
You're going to continue to see it. As Jim pointed out, depending on how many of our customers new product launches are happening at a given time and any given quarter its contribution can be a little less. Willow is purely additive. Willow, when you think about it, is aimed at this question you heard Jim Clappin address that historically you all have raised, which is a question around is there a substitute technology risk in the display business. What we see is the fundamental momentum continues to move strongly towards glass.
Willow not only has applications outside of display, but within display, what we're seeing that do is augment the need for very thin conformable displays being done on the preferred material, which is glass. As those displays get thinner, it relies fundamentally more on the strength that's provided by the cover. And that's why you see us continue to enhance the damage resistance of Gorilla Glass.
Great. And Avi?
Avi Silver from CLSA. On Gorilla, over the last few years, it's been a bit of a moving target. Couple of years ago, we had some more aggressive targets. Last year, at least the implied guidance was you were somewhat gun shy with it. And this year, it seems a bit more aggressive.
I definitely agree that the drivers are there, but just want to understand your comfort level given the volatility and the uncertainty around the supply chain. And then on anti reflective glass, it seems very compelling as Jim said.
I just want to understand is
this something that you'll use or leverage to extend your, I guess, timeline or higher market share over time? Or will that be something that will drive potentially higher ASPs in the business? And then lastly, on the notebook penetration, is your positioning in the notebooks in the notebook market similar today compared to the tablet market early on or are there other solutions being used other than your cover glass and also what about desktop? Thanks.
So first, let's deal with touch on notebook and how to think about it. I think you're right to raise the question of that there's some uncertainty around what will the attach rate be for touch on notebook devices, especially as it pertains to the variety of different price points in notebook. That's still an open question for us as well as the ability for the supply chain overall to resolve itself to support the desired attach rate. So I think as the year goes on, we'll be able to give you more insight as to its near term impact. Its long term impact is pretty clear.
And what the answer to the question is, is that people want touch enabled devices. And if notebooks are going to continue to be a strong component of the consumer electronics market, they're going to need to be touch enabled.
So on your question about perhaps our aggression on targets over the last couple of years, you of course recall us saying it was going to be a $1,000,000,000 business and then it wasn't. I'd have to say that was built very heavily on $400,000,000 of that being televisions for Sony and that turned out not to work out. We actually exceeded the portion of specialty of Gorilla for consumer electronics, that's that. But that clearly that miss led us to probably be a little more conservative as we talked about on the same stage a year ago. Obviously, we had a tremendous year last year.
Specialty Materials division and the Gorilla team delivered a great year. And we think they're going to have another great year this year. So you may be feeling a change in our expectations around that miss in Sony televisions and then over really doing well. We're feeling very good about Herlik House. Still a little upset about the Sony covered glass, but
Thanks, Jim and Wendell. I'll sneak in one last question. Alexis,
please.
I can speak right now. From Sanford Bernstein. Just a question.
You had a chart
on page 76 showing the
forecast CapEx for display business and
you had different elements of that and some of
that were flat, some of them were growing or shrinking. So you give us some color on what the elements are, what the different pieces are and how they're changing over the next couple of years? So I think the one thing that we highlighted within that chart was some of our spending on precious metals. When we make display glass, our process uses quite a bit of precious metals. And when you saw that peak investment a few years ago in display, we highlighted for you a fact there was a significant chunk of metals.
In general, when we go to build a new tank, which right now we don't have to build very many due to productivity, I think metals comprise about 30% of the value of building a new capacity. And one of the reasons we highlighted that to people, we often get the question, it doesn't look like the depreciation display matches the capital spending and that's because the precious metals don't depreciate. We lose just a very, very tiny amount of them every year. So that asset is actually permanently invested. Now you can't take it.
We need it to make glass, but it is there as an asset on our books. We actually disclosed that in our 10 ks. So I think that was the primary split that we had on that chart.
Great. Thank you, Jim. Thank you, Wendell. That ends our formal portion of the meeting. I encourage you all to head directly back to our exhibit to see the products and technologies we shared with you just now and to interact with our leadership.
I want to thank our presenters for their time and especially thank you all for coming today and please be careful in your travels. Thank you.