Display Segment

The segment had an outstanding quarter. Fourth quarter sales were $774 million and 10% higher than Q3. Volume was up 7% sequentially and higher than the guidance range. Given the continued strong demand throughout the quarter, the firm’s operations ran at full capacity and it sold glass out of its inventory again. Price declines were moderate and in line with the strategy. Segment sales also benefited significantly from the strength of the Yen during the quarter.

Gross margin for the Display segment remained consistent with the previous quarter. Equity earnings from SCP were $177 million in the fourth quarter, an increase of 11% versus $160 million in quarter three. SCP sequential volume increased 6% in the fourth quarter, which was also higher than anticipated. As expected, price declines at SCP in the fourth quarter were in line with the firm’s wholly owned business. SCP’s results also benefited from the strength of the Yen during the quarter. For modeling purposes SCP’s fourth quarter sales were $708 million compared to $635 million in the third quarter. SCP’s gross margin increased slightly on strong manufacturing performance and moderate price declines.

Net income in the total Display segment was $580 in the fourth quarter, an increase of 7% compared to the third quarter.

In comparison to the fourth quarter of last year, sales in our Display segment increased 25% led by volume gains of 31%. Price declines were 7% and the movement of the Yen to US Dollar exchange rate was favorable. SCP’s equity earnings were up 20% over quarter four 2006. Segment net income grew 26% versus last year.

For 2007, Display had an absolutely outstanding year. Sales were $2.6 billion, an increase of 23% over last year. Volume in the wholly owned business grew 38% and price declines were only 11%. The impact of foreign exchange was slightly unfavorable for the year. SCP also had an outstanding year, sales were $2.4 billion compared to $2.1 billion last year. SCP’s volume grew 39% for the year and price declines were 15%. Segment net income for the year was $2 billion, an increase of 23% over 2006.

In general, LCD panel makers ran at peak utilization rates through the end of quarter four. Although panel shipments were sequentially lower in both November and December, panel shipment were up 11% quarter three to quarter four on an area basis. The firm believes that their continuing strong run rates reflect an attempt to build some panel inventory. In fact the management believes that panel inventories measured weak supply are lower heading into 2008 than they were heading into 2007. The firm is anticipating that at some point in February the utilization rates could fall slightly as some panel maker scale back for the Chinese New Year. However, some panel maker have recently stated publicly they expect to run at high utilization rates throughout quarter one.

The firm’s preliminary data suggests the end market demand remains strong.

In fact, the fourth quarter research indicates end market demand for IT and television was stronger than the previous forecast.

- Starting with notebooks, about 31 million were shipped in the fourth quarter, higher than the expectations and a 6% increase versus the third quarter.
- About $43 million LCD monitors were shipped in the fourth quarter, consistent with the expectations and the third quarter.

- About 27 million units of LCD televisions were shipped compared to 20 million in the third quarter. Penetration of LCD television into the worldwide TV market moved from 39% in the third quarter to 44% in the fourth quarter. While the final worldwide retail data will not be available for a few more weeks we saw some very positive data points in LCD television sales in the week leading up to Christmas in the United States. MPD an outside industry group reported that LCD television sales for that week increased 45% on a unit basis and 51% on a revenue basis compared to the same week a year ago. The mix of LCD televisions was weighted towards larger much more expensive sizes. Conversely, during the same week, plasma sales were down 12% on a unit basis and down 20% on a revenue basis. This data supports the firm’s belief that LCD televisions did very well in the 40” to 50” market in the week leading up to Christmas in the United States. As a result of the preliminary estimates for quarter four, the firm believes that approximately 77 million LCD televisions were shipped worldwide in 2007. This is an increase from the estimates of 75 million televisions just a few months ago and up substantially from the original estimate of 7 million sets heading in to 2007. Regarding US consumers, the firm continues to see no evidence that economic concerns are decreasing their appetite for LCD televisions.

The mix of Gen five and higher in the fourth quarter was 90% and higher than the third quarter. Mix of Gen five point five, six, seven and eight glass was 60% in the fourth quarter and much higher than the third quarter.

On EAGLE XG glass, the firm entered 2007 with only 30% of production converted. The firm is extremely pleased to have reached its goal of 100% by the end of the year. At SCP, 50% of their production was converted to EAGLE XG at year end and they are on track to be 100% converted this year.

Environmental Segment

The sales in the fourth quarter were $189 million, a slight decrease from the third quarter sales of $198 million. Auto product sales were $131 million in the fourth quarter and slightly higher than the third quarter. the firm was pleasantly surprised by the strength of Auto in Q4 which is typically the seasonally worst quarter. Sales were driven by strong demand in Asia; 131 million auto sales were also an all time record for quarter four. Diesel product sales were $58 million in the fourth quarter and lower than the third quarter sales of $72 million. Declines are a reflection of sluggishness in the US trucking industry.

Segment net income was $23 million in the fourth quarter compared to $14 million in the third quarter. In comparison to a year ago, the Environmental segment sales increased 22% driven by higher auto and diesel volume. Auto sales were up 25% year over year while diesel was up 16%.

The firm is delighted with the results from both Auto and Diesel in the full year of 2007. Auto sales were $508 million, an all time record an increase of 13% over 2006. Diesel sales were $249 million, an increase of 52% over 2006. Segment net income was $60 million in 2007, a significant improvement over 2006 net income of only $7 million.

Life Sciences Segment

The sales in the fourth quarter were $75 million and slightly lower in the third quarter as expected. Segment incurred a loss in the fourth quarter of $5 million primarily due to higher operating expenses related to Epic.

For the full year sales were $307 million, an increase of 7% over last year and an all time record. Profitability of the segment also improved.