康寧 (GLW) 2002 Q1 法說會逐字稿

all participants please stand by. Today's conference is about to begin. Good morning, and welcome to the quarter 12002 earnings conference. Following today's presentation, there will be a formal question and answer session. Until that time, all lines are be in a listen-only fashion. Today's conference is being recorded for replay purposes. I would like to now turn our conference over to Cathy deeps, vice president of investor relation.

good morning, everyone. This call is being autocast on our web site. James Flaws, our Chief Financial Officer will lead the discussion. Wendell Weeks, President of Optical Communication also join for the Q&A. Before I turn the call over to Jim, I should mention except for the published results and historical comparisons, today's remarks constitute forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially. These risks are detailed in the company's sec report. Jim?

Thanks, Cathy. Good morning, everyone. Last night, we reaffirmed the results for the first quarter. Sales of $898 million versus the 1.9 million last year and a net loss of 10 cents per share. This compares to earnings of 14 cents per share last year, which included 15 cents of after-tax goodwill amortization. Although the revenue line was slightly weaker than what we had expected in early February, our cost reduction efforts are clearly evidence on the bottom line. Sequential volume growth in the fiber and cable businesses tracked largely as expected in the 10 to 15% growth range and results in both the advanced materials and information display segments show sequential earnings improvement. As you know from our February 8th analyst meeting, we are committed to restoring expect to profitability in 2003. As part of that commitment, we highlighted that further restructuring to reduce costs might be necessary. Over the last few weeks, no doubt, you have all seen reports of weak results at our customers and the potential for further reduction in capital spending. As a result, we -- as we announced last week, this has required us to take another look at reducing costs, and we are in the midst of making decisions for restructuring program which could be in the range of $600 million. Now, before I go into the businesses, I will point out a few things on the income statement. First, gross margin for the quarter came in at 23% versus our range of 15 to 20% and versus 10% in the fourth quarter, excluding the inventory charge we had taken then. SG&A and R&D spending declined significantly versus the first quarter last year. Cost reduction efforts lowered spending versus the fourth quarter as well. As a reminder, you should note the 4th quarter estimate spending of $90 million one-time charge related to the release of restrictions on common stock. But we measure the decline in our recurring spending. Lastly, the effective tax rate for the quarter came in at 25%. This low benefit rate is due to the impact of unusable tax credits and nondeductible expenses and losses. Now let's start with telecommunications. Revenues in the segment were $465 million in the first quarter versus $1.4 billion in the first quarter last year. The segment posted a net loss of $142 million versus net income of $180 million last year. The decline was primarily due to fiber and cable and photonic technology businesses although all businesses in the segment experienced a decline in revenues. Revenues in the fiber and cable business for the first quarter were $255 million versus $875 million last year, a decline of 70%. As expected, fiber volume was down more than 50% versus the first quarter of last year when we were running at full capacity; however, sequentially, fiber volume was up 10 to 15% over the fourth quarter due to growing demand from a -- our box and cable TV companies. Our total mix of premium fiber in the first quarter was also as expected, about 10%, versus the peak of 35% last year. As always, it is stated as percentage of volume, not revenue. Pricing without mix declined 15% sequentially, driven primarily by single mode fiber. Although price and volume cancelled itself out sequentially in fiber cable, we saw actual revenues decline 14% versus the fourth quarter due to a decline in project services revenues at corning cable systems. There is no consistent pattern to these service revenues. In photonics technology, revenues were $34 million, down 25% sequentially. Revenues in our optical networking devices business has also fallen to below levels in the first quarter. Although sales have fallen, we remain committed to the long-term viability of these businesses and their role in the optical layer strategy. We remain committed to our customers in providing them with products that enable transparent networks that will allow them to lower their overall systems' costs. Sales in the hardware and equipment business in the fourth quarter declined 35% to $135 million. Sequentially revenues were down 10%. As with our other businesses in the telecommunication segment, this one continues to be impacted by the slow down in spending in the telecommunications industry. Although all our businesses in the telecommunications segment incurred a loss in the first quarter, the size of the loss has narrowed since the fourth quarter as a result of restructuring actions undertaken the second half of last year and the restart of manufacturing operations and optical fiber. Further restructuring actions are clearly necessary to reduce operating costs in these businesses. And I will talk about that topic later in the call. Now turning to the information display segment. First quarter revenues of 195 million were down 3% and net income, including equity earnings was down 17% versus the first quarter of last year. Revenue declined due to weak performance in our conventional television business. Earnings were also impacted by our conventional television business, which experienced a loss for the quarter, as well as lower equity earnings from Samsung Corning, our joint venture in Korea. The weak results from these businesses offset strong earnings from our LCD business. Sequentially, net income in the segment increased over 50% as volume gains and manufacuturing efficiencies, LCD business coupled with development project at our division lens business was offset by weak results at Samsung corning. In the LCD business, consolidated revenues for the first quarter were $93 million, up 50% versus the weak first quarter of last year. As volume gains more than offset price declines in currency translation. For our consolidated business which services [INAUDIBLE] and Taiwan, volume grew 91% primarily through growth in Taiwan. Samsung precision, equity company in Korea, 80% volume growth. To meet demand, we have been operating our facilities at full capacity. Keep in mind, these volume gains are compared against a weak first quarter last year. As you may recall, volume in our business last year was impacted by excess inventory in the channel as a result of the start-up of several new panel makers. We are very happy to report there are no such inventory issues this quarter. First-quarter volume gains also reflect an increase in orders as a result of manufacturing interruption at one of our competitors. Obviously we view this as only a short-term benefit to our volume gains. Sequentially it experienced double-digit growth in net income, 16% of LCD monitors increased. Sales of desktop monitors have almost tripled this quarter in comparison to the same period last year. This is in spite of the fact that price point for the monitors themselves stabilized in the first quarter. A stark comparison of how fast they fell last year. Which is an indication to us of how well these products have been accepted in the marketplace. Even with this huge increase in demand, the penetration of LCD monitors and desktop markets still remain low. Currently, LCD monitors make up only 25% of the desktop market from the average 14% last year. Revenues in our projection lens business was $159 million in the fourth quarter up 10% over last year. Demand was once again by digital projection television market particularly in Asia as more and more consumers upgrade their television systems. Projection television manufacturers had to update their production to replenish dwindling inventory which are now half of what they normally are in response to high demand. First-quarter projection for projection lens fell 35% compared to the first quarter last year as volume gains were offset by cost of last year's price declines. As I mentioned earlier, the business posted significant improvements on a sequential basis following the exit of a development program. Our North American conventional television glass business posted first-quarter revenues approximately half of what they were a year ago. The significant downturn we experienced throughout 2001 has not abated, as the industry is still in the throes of a worldwide oversupply of glass. These same industry trends impacted Samsung Corning whose first-quarter earnings were down 36% compared to last year. Moving to advanced materials. First quarter revenues of 233 million were down 17% compared to the first quarter last year, due to volume of price declines in environmental technologies business and lower volume in the semiconductor business. All the businesses in this segment posted weaker first-quarter earnings in comparison to a year ago. In environmental technologies, revenues for the first quarter were $94 million, down 13% from the first quarter last year. An increase in U.S. auto production was more than offset by declines in auto production internationally, particularly Europe, and price declines. Income was down over 50% due primarily to spending of new products such as diesel, ultra thin wall, and price and volume declines. Sequentially, revenues in the business increased 11%, driven by the increase in U.S. auto production, which was the result of manufacturers having to replenish their inventories after incentives offers for sales in the fourth quarter. Business posted solid results in the first quarter compared to break-even performance in the fourth quarter of last year. However, we do not expect to maintain this level of sequential growth as auto production comes more closely in line with auto sales. Life science business, revenues 70 million, flat with the first quarter of last year but up 11% over the fourth quarter as demand for our micro plate product line continue to grow reaping the benefits of R&D spending by pharmaceutical and biotech companies. Net income was up is substantially for fourth quarter and first quarter last year as a result of manufacturing efficiency gains and the elimination of costs associated with certain development projects. In the other advanced material businesses and segment, revenues for the first quarter were 69 million, down 30% from the first quarter of last year driven [INAUDIBLE] by the decline of semiconductor materials. Sequentially, the semiconductor business posted improved results and we believe this business will experience some recovery in the second half, but the outcome is still uncertain. Recent capital spending announcements for mayor fabs, chip manufacturers indicate that the market may have bottomed out. On the balance sheet, DSLs for the first quarter were 62, up 55 days from the last quarter. This increased in the first quarter of DSOs is due to the sales pattern within the quarter. Fourth-quarter sales were spread relatively evenly by month versus the first quarter where we saw sales weighted toward the end of the quarter. We continue to feel comfortable that we are adequately reserved for all outstanding accounts receivable balance. We ended the first quarter with inventory balance of 717 million, down from $725 million the end of last year. Now turning to cash. We ended the first quarter with over $1.8 billion in cash in short-term investments versus $2.2 billion at the end of 2001. Included in the $1.8 billion is $329 million in commercial paper borrowings, an increase of $100 million from year end. We are still active in the commercial paper market with the current daily balance averaging at $270 million mark. Cash balance also includes $225 million of proceeds from the August 2001 issue of common stock, which we will fund the second-quarter acquisition of Lucent fiber and cable interests in China. Now I would like to walk you through some of our cash outflows for the first quarter. We paid off approximately $240 million in maturing debt, which gives you a net $140 million when you take our additional first-quarter commercial paper into consideration. We paid approximately $60 million in restructuring payments related to actions we took in the second half of last year. As a result, the true cash outflow pertaining to working capital items total approximately $145 million. Keep in mind our working capital outflow is usually higher in the first quarter due to the impact of accruals booked at the end of the year. Lastly, we had capital expenditures in the quarter of approximately $100 million. I would like to turn to cash burn. Overall, our cash balances fell from 2.2 to 1.8 billion, a $400 million decrease; however, it is important to emphasize that we had a net debt reduction of $150 million imbedded in there and restructuring payments related to the restructuring last year of approximately 60. So we would estimate our cash burn from operations at approximately $200 million for the quarter. Now let me turn to the outlook. I would like to wrap up by providing you some information providing the second quarter. As a reminder, we will only give guidance one quarter at a time. We are anticipating revenues of approximately $900 million to $925 million, a net loss similar to what we posted in the first quarter excluding any restructuring charges. Our gross margin should remain consistent also and our tax rate is likely to be 25% again. One note on gross margins and costs in general. As I mentioned earlier, the cost reductions we recognize in the first quarter were deeper and faster than we originally anticipated. Because of this, margin improvements and cost reductions should be more modest going forward until the impact to the new restructuring actions take place later this year. Sequential fiber volume growth should be consistent with the first quarter, growing another 10% to 15%. Pricing pressure will continue and erode these volume gains, and the premium mix will be consistent about 10%. Information display and advanced material segment driven primarily by growth in our semiconductor materials, life sciences and display technologies businesses. As -- as I mentioned earlier, we expect to close on the Lucent transaction the second quarter that will total $225 million in cash. We expect the payments related to last year's restructuring actions to be about $60 million again in the second quarter. Capital expenditures should increase slightly due to the start of the diesel project. Our normal working capital requirements will be less than the first quarter. Lastly, regarding our recent restructuring announcement. We announced on April 15th that the company would incur impairment and restructuring charges spread over the second and third quarters of this year. We believe these actions need to be taken now rather than later in order to bring about our costs of operations more in line with our near-term market outlook. We'll communicate the specific actions to be taken in a series of announcements throughout the quarter and the next as final decisions are reached. Although I do not have many specifics about the future restructuring actions that I can share with you today, I can tell you the following: the actions will result in workforce reduction across all operating functioning and corporate staffs. Total cash portion of the restructuring will be 40% of charge and could impact up to 4,000 employees. As I indicated in my opening, we are committed to getting this company back to profitability in 2003. The new restructuring is an unfortunate but necessary part of the improvement. We do not take these decisions lightly. Jamie, Wendell, Pete and I have been part of this company for a very long time and taking these actions to heart. We not only have a vested interest in turning the company around, but we have a vested interest in our community as well. In the end, however, we know the actions we take now will have long-term benefits for not only the company but also its employees, customers, and shareholders. We know as a result of these actions, the company will be leaner, stronger and better able to compete for many years to come. In closing, these are challenging times for Corning, yet we have been encouraged by the benefits and actions of last year, by the fact we have maintained or gained market leadership with customers, and by the progress our newer technologies are making in the marketplace. Thank you. Cathy?

Dan, we are ready to take questions.

we will begin the question-answer section of today's call. If you have a question, press star 1 on your touch-tone phone pad. To withdraw your question, star 2. Our first question comes from [Aaron] Verappan.

I have a couple of questions. The first question is on your outlook. You mentioned in your press release you expect fiber shipments in volume to increase 10 to 15% in Q2 and expect price pressure to erode the volume gains. My question is, do you expect more or less fiber pricing pressure in Q2 than in Q1 and I will come up with a follow-up.

We are expecting price pressure to be similar in quarter 2 to quarter 1.

Okay. And then on your premium fiber sales. Earlier in February of this year, you mentioned you were not selling any Metrocorps and I was wondering if there was any change since then and what is your strategy to increase your sales in Metrocorp fiber versus the non-single mode fiber. Thank you.

With regards to Metrocorp, it was aimed at the new [INAUDIBLE] who could start with a clean sheet of paper and recognize a significant cost benefit that Metrocorp offered. With the trouble those players are having, we redirected our metro technology efforts toward the incumbents. This will probably entail a redesign of our metro product offering to better serve their particular network needs.

Great. Thank you very much.

Our next question comes from Steven Fox of Merrill Lynch.

Yes, good morning. Jim, first of all, with the new restructuring actions, I know you don't want to provide many details, but is it safe to say that if you didn't take these actions it would be tough to get back to profitability next year.

That's absolutely true.

And is there any way to put a round number on the type of cost savings we are expecting or too soon to put a number out there?

Too soon for me to do that, Steve, but we will be bringing you future information on that probably in the second-quarter.

Okay. Wendell, just talking about the fiber market. You know, you guys have such a huge cost advantage over a lot of your smaller competitives and they must be feeling a great deal of pain right now. How -- when do they -- when do you think you see these companies sort of acquiesce and maybe get out of the market and do some things to restructure their own operations. It just doesn't seem to be happening at this point. What is it going to take?

Well, we are seeing all our competition, both small and large, begin to take significant action with regards to capacity. What happens, though, is you don't tend to see as many sort of large public announcements because they don't shut the fiber capacity down for good as a first step. They tend to mothball those facilities. So we are beginning to see those actions. I think as in previous market downturn times, truly only the -- what we would call the "A" category of players or the group of players who have large volume at relatively low cost, tend to capture volume during periods of this, and then the "B" players tend to usually -- a number of them shrink depending on the length of the downturn.

Thank you. Then last question, Jim, Cap-X at 500 million, still a good number for this year?

Still a good number. I suspect it will edge down a little bit from that as we go forward. As Pete said, we need to be on a capital diet and I am sure you will see it edge a little lower.

Thank you very much.

next question comes from Goldman Sachs.

two questions. First on the photonics business. Will you talk a little bit about the plans for the photonic business in terms of the investment level and the sense of what level of revenue is needed to make this business profitable.

So what we are doing around the investment levels with photonics is obviously that will be part of the restructuring actions that we are taking here in the second and third quarters. And what we are setting about doing is setting our cost structures and investment in cash burn rate to be more in line with the revenues that we currently see for this year and more importantly for next. What we plan to do with the investment levels is to make it not have a significant cash burn rate to the company overall after accounting for what we see the revenues are going to be. This will basically entail us continuing to invest in those businesses where we feel we have depth and strength. This is very similar to what I said in February. And probably a little bit less on some of the new areas which we were expanding, which plays very well in a fast-growing market as our customers are pulling us in to be second source on a lot of items, but in this type of market, it's much harder to enter on in these brand-new products.

Thank you. Just to follow up, on the fiber side, is the volume in New York, Arox and cable customer and characterize the validity in that business as you talk about the 10 to 15% sequential growth.

If we were to do it by regions of the world if that's what you were asking, in the quarter, we saw very strong growth in North America, actually. And it was offset, in sequential terms, by a pretty significant fall off in international, especially Europe and the Asia pacific regions, as well as China was relatively flat. So the dynamic we are seeing is really the first market that went into the down cycle, North America. If you can remember back, we first went into it with north America and then reallocated a lot of our fiber shipments to international, which then actually gave us an improving profit picture because international at that point in time tended to have higher prices. The international markets then went in later. So I look at this pattern to be relatively good news in that we see North America now pulling out, Europe went in later. It is continuing its slide. But we should start to see it turn going forward, as well as Asia Pacific and China.

Thank you very much.

our next question comes from Sam Kingston of Dredner.

Yes, thank you. Regarding the guidance of your modest sequential sales improvement, I’m wondering whether you have recently seen an improvement in sales? You mentioned last quarter was pretty linear. Or whether you are expecting the second half of the quarter to show some sort of improvement?

I don't think we really have enough visibility to give you any statistical significance to the months. All I can tell you the month of April which we are few weeks in looks very good us to right now.

Okay. Secondly, if you could just -- if you could give me an idea of -- given the cash in your balance sheet of $1.8 billion cashing equivalents, is there any portion of that that is being continuously reinvested in some sort of foreign subsidiary or something that is located abroad that you might not have immediate access to?

a very small portion of our cash that is overseas so we don't have a lot of stranded cash. The numbers are probably around $100 million. We would regard all the cash as very accessible to us at this point in time.

Okay, thank you.

our next question comes from Joseph Wolf from UBS Warburg.

Jim Hilliard for Joseph. Just to follow up on Cap-X, given the strong volumes in LCDs and capacity expansion announced by NEG, is there any plans to grow capacity this year and also just to follow up on the volume trends in fiber. Are you seeing them, generally the 10 to 15%, hold true across the long haul in metro access or is there some differentiation there.

let me deal with LCDs first. First on the competitor announcement, by the way, those were just finishing lines. We always have had imbedded if our -- in our capital spending plans for this year for us to grow our capacity and we will continue to do that. We are weighing whether it needs to be a little greater, but that won't change our overall capital spending as we will probably re-allocate. Remember that some of our growth is -- occurs off the balance sheet because it occurs at Samsung Corning provision which is an equity company and they are growing also on the back half of this year. We are investing. It is within our plan and shouldn't change our capital spending outlook. Wendell?

We will anticipate that long haul would be down the most in terms of applications, if we were to take a look at year over year. Followed by Metro and then Access. We see almost all applications with the exception of the premise market, fiber, et cetera, to be down this year versus last, but the recovery, we believe, will be led by strength in access and metro edge networks on a sequential basis.

Thank you.

our next question comes from Anthony Carbone of J. P. Morgan.

Chris for Tony Carbone. Can you comment on the competitive environment and advance material and what you can see in your term drivers for the business, please?

Yeah, in advanced materials, you have to break it down into the subsets of the various businesses. So in environmental, by and large, there are very few competitors here. The technology is challenging, and we think we have a good leadership position there, particularly as we move towards the thin wall products. And diesel will be on the horizon, but that will not be any significant shipments soon, but we continue to feel we have good leadership there for heavy-duty engines and are working with several engine manufacturers now on our product. In the semiconductor area, we think we have very strong position, particularly with the new technology coming along in calcium fluoride which will be used for advanced steppers. We actually think we have the leadership there. In fact, getting orders that are greater [INAUDIBLE].

Next question comes from David Jackson from Morgan Stanley.

Jim and Wendell, a question for both of you. You mentioned a strategy would be to take market share, particularly given your lower cost basis then many of your competitors. Can you talk a little bit about how you view your key markets competitively, particularly whether you are taking share in the fiber market and also how you view the photonics market going forward from a competitive basis. Thanks.

Well, usually not the wisest thing in the world to talk about, exactly what's happening in the market dynamics as far as share goes. It tends to spur competitive response. We are very pleased with where we are on market share. We are certainly not losing market share in any of our significant markets that we serve, and we are pleased with the way our customer relationships are going with regards to photonics. As we also said in February, where you are going to see us focus is in those product offerings where we feel we have a good strong competitive advantage, and we are continuing to play that out. Overall, photonics market and our photonics business looks a lot like in terms of our sequential downturn as GDSU's telecom business. The life that we see in the market it primary by offerings. Because of the relatively embryonic nature in terms of network penetration, it is very small compared to what long haul was.

Wendell, do you think you are taking share in the North American fiber market?

We tend not to want to comment on the North American share or any other share. There certainly has been tons of published reports that speculate on the matter but I won't speculate.

Okay, thanks a lot.

our next question comes from Max Schuetz of Credit Suisse.

you talked about Cap-X, agenda little lower but I was wondering if you can talk about the composition of Cap-X and what is the requirement for the LCD area specifically.

The spending in telecom [area] is -- is pretty slow and I would characterize it as probably in the -- doing 20, 25% of the mix. And beyond that, I won't give you the details on capital spending and LCD, but just to show that you beyond what is in telecom, LCDs take a good chunk of our capital.

Clarification on the -- what was the commercial paper borrowings as part of the cash balance?

At the end the quarter.

right.

We were about $330 million approximately at the end of the quarter and we are about $270 as we speak today.

okay, thanks.

Our next question comes from Tim Anderson of Salomon Smith Barney.

Thanks. A question for you, Jim, and one question for you, Wendell. Jim, recognizing that it's a little premature to be talking about your restructuring activities, but you did mention somewhere around 4,000 employees might be at risk. I was wondering if you could give us some commentary on how that might split between the cost goods sold line and the operating expense line. Should we be thinking 40, 60% mix, 80-20 mix? I was wondering if you could give us a quick comment.

No, I won't do that. I can tell you that the majority of the people will be salaried employee this time around of the 12,000 last time around, far more production workers. Given our revenues are basically, you know, flattening here and having achieved bottom that we don't expect to see big changes in our production worker group, but we do expect to see significant reductions at salaried people at all levels. You will have to wait for second quarter to break that out for you.

Okay. Wendell, for you, just wanted to gel a little more color on the LCD side. You have been benefit in this quarter, as you mentioned from one of our competitors having to shut down their facilities. I was wondering what your assessment is as to how long that will be the case, and once that competitor is back on-line, whether or not you intend to be operating the facilities at a flat-out rate or what might happen to your utilization.

We intend to continue to operate at a full-out rate for this year. Obviously, when a competitor has an upset, some of that volume gain tends to be temporarily, but we are also trying to transform that into some long-term market share, just because of the obvious benefits of dealing with a more reliable supplier.

How long do you think that supplier will remain off-line?

I don't want to speculate on that.

Okay, thank you.

our next question comes from Kevin Slocum of Soundview Technologies.

hi, guys. One quick housekeeping one. Jim, tax rate is 25%, I assume, for the balance of the year, and then the second question is, sort of tied to restructuring activities. Your -- you're generating net income in the advanced materials and information display business. It basically would seem to suggest that restructuring activities would have to focus on telecom. And I’m just -- what can you do -- if you can talk about this sort of the differences between the cost savings tied to mothballing versus cost savings tied to, you know, actually potentially closing of facility, and then sort of, where are you from a capacity utilization standpoint given that you are talking about halfway decent volume growth.

There's a lot of questions there. What was the first one again?

The tax rate, 25 for the balance of the year?

the tax rate I should not expect any significant change to the end of the year. It is a little tough to estimate the tax rate when we are operating in a loss. I don't think you will see any material moves in that. Regarding where restructuring are taking place. Far and away the restructuring will happen in the telecom business where we are actually losing money. With that said, corporate staffs and corporate research and develop groups will also take some reductions and I think while Pete’s businesses and advanced materials and info display are doing very well, and you shouldn't see anything significant there, I’m sure that he will be doing his part to criminal wherever he can. But the big -- big numbers are going to come in telecom where we are losing money and taking money out of the staffs.

But could there be any -- could you hit the capacity utilization question in the fiber business and could we see anything that actually is related to a physical capacity reduction step in --?

So what we are seeing right now is the capacity utilization figures for the industry overall continue to be poor. We are always looking at how to balance between idling, mothballing, and shutting down capacity. We try to touch capacity last, if we can. Mainly because every time in the past where we have taken specific capacity action, that takes us off line for a long period of time, the market usually bounces back and surprises us and then we are unable to serve our customers. Our plans for restructuring on the optical side are very well advanced now. And we will be able to start talking in more detail on what our actions are coming through this quarter.

Thanks.

our next question comes from [Sayeed] Higher from Frost Securities.

Hi, recording your gross margin improvement, can you give us some color of how much was that through cost reductions, how much was better utilizations, and were there any contributions from written-off inventories?

Let me deal with the latter first. The inventory that we wrote off in the second and fourth quarter was primarily in photonics. We have not reutilized any of that. Our commitment is, were that to occur, we would disclose that to the marketplace, but nothing has occurred so far in that regard. In terms of the gross margin improvement, I think the biggest improvement versus the fourth quarters was, first of all, the absence of those write-offs. The second biggest improvement is bringing the fiber facilities back on line. Remember, we were driving down inventory quite a bit. The third biggest improvement was, in fact, the cost reductions there. And I am not going to give you details of each, but you can kind of rank it in that order.

Now to specific lines of businesses in your environmental technologies business, what is your sequential outlook, and do you expect any seasonal effects going into the second quarter? And then for your conventional video business, is business expected to remain weak due to the oversupply of glass worldwide? And you can comment on your Samsung corning joint venture there.

Okay, let me deal with the conventional television business first. We expect in the North American market for that to remain pretty week throughout the year. There might be a little pickup versus the first quarter, but we expect it to be a pretty difficult year. Samsung Corning has a much stronger position, although there is over-capacity in Asia also, but I think that they are obviously profitable and in a stronger position. And we could see a little improvement there as the year goes along. In terms of environmental, I don't think we are likely to see too much in the way of sequential growth. A lot depends on the respective car markets around the world. North America I think is well known what's happening. Europe is down a little bit. We are doing very well in Asia with our new China facility, but I don't think you will see any material movements sequentially, maybe up a little as we go along, but nothing giant.

Thank you very much.

our next question comes from Mark Langley of Needham and Company.

yes, thank you, following up on Wendell’s comments on North America’s strength in the third quarter. We saw announcements of Cap-X pull back from a number of U.S.-based wire line contractors. How confident that this is in your second quarter 2002 guidance of 929 million?

Well, we saw the rates here as we take a look at the Cap-X patterns, the take rates here in the first quarter to be relatively low. So the -- it is well within probability that the additional cuts that you are hearing announcements about could be well reflected on what we are expecting here in the second quarter. That's what we tried to do. The great dilemma is that right now in carriers, there is really sort of bimodal view. You have the operations people who are operations folks who tend to interact with driving around -- when we are going to need capacity. A lot of our flow of information comes there. And, also, you have the leadership teams of these -- who I tend to meet with who are saying, you know, what -- what we may need or may not need are interesting, but what we have to absolutely do is bring our capital down. So having this bifurcation in our customers' organization makes it really difficult to proclaim with any degree of confidence that we know how Cap-X will be reflected in our product. That's why we are moving to quarter-by-quarter guidance. We think we have it right in quarter 2, but, you know, we'll see in the Quarter 2 call.

our next question comes from Jeremy Dunting of Thomas Weisel Partners.

Rubin for Jeremy. Quick question for Wendell. Earlier in the call, it was recommended that Corning will remain committed to the photonics business. I was wondering have you begun to see any signs of life with respect to any specific product in the photonics, your new modular products? Thank you.

Signs of life are all relative at this low level of sales, of course. Where we are seeing the most U.S. customer pull tends to be in the metro area for our new metro amp. We are seeing some of our system house customers get traction there. We are also seeing pull for our new integrated modulator offering at a couple of the key customers, as well as our new [INAUDIBLE] to the community. All of these things have in common is lower footprint and lower component cost. When do you that you tend to capture what level of activity is there. So I think that the photonics market, overall, is far from showing any real strong signs of life and recovery.

Okay, thanks.

Dan, we will take two more questions.

Our next question comes from Dave Louie of Credit Leonase.

thank you, it has been answered.

is there one more question?

Our final question from Steven Coffe of Wachovia.

okay, got it in. On info display. You know, I got in a little late. Maybe this was addressed, but I gather you are expecting sequential growth in the second quarter. Can you give us a little more detail on what products or regions are doing well, and second, in the next restructuring, can you give us some sense of how much cost reduction will occur at gross margin on a percentage basis and how much in operating expenses.

So on the restructuring as I said earlier in the call, I am not going to give the details of that until the second quarter is to where it will fall between gross margin and operating expense. You will actually see it in both improvements. Regarding LCDs, we do expect to see a little sequential improvement, but remember, we are operating our facilities pretty much sold out right now. So you won't see a tremendous amount. Where the strength of the business actually is very strong everywhere, but clearly Taiwan is doing great for us, and Korea remains very strong. So I mean, all areas are doing good, but most important ones for us are Taiwan and Korea right now.

thank you.

Thank you for your participation. We will be available beginning 10:30 a.m. eastern time today. We will run until 5 p.m. Monday may 6th. To listen dial 402-998-0863. No password is required. The audiocast is also available on our web site during that time period. Dan, that concludes our call. Please disconnect all lines.

thank you for attending today's conference call. You may all disconnect at this time.