Edward A. Schlesinger
Executive Vice President & Chief Financial Officer at Corning
Thank you, Wendell. Morning, everyone. For the first quarter, we delivered results at the higher end of our expectations. Sales were $3.4 billion and EPS was $0.41. Gross margin was 35.2% and operating margins between 15.5%. Both meaningful improvements of the fourth quarter. Our free cash flow for the quarter was negative $383 million. The first quarter is typically negative due to cash flow cyclicality. This quarter free cash flow was also impacted by lower sales, reflecting the recession-level demand we saw several of our markets and overall weakness in China. Looking forward, we expect positive free cash flow starting in the second quarter and for the remainder of 2023.
Overall, our team demonstrated operational rigor during the quarter. We continue to make progress on improving our profitability by raising prices to help offset inflation, and by adjusting our productivity ratios closer to historical levels, and we will continue to align our cost structure to successfully weather the demand environment. We remain confident in our relevance to long-term secular trends and our More Corning approach, and we are well-positioned to capture durable profitable growth as the global economy improves.
Now, let's turn to our first quarter segment results. In Optical Communications, sales were $1.1 billion, down 6% sequentially as price increases partially offset a greater than normal seasonal volume decline associated with the pacing of customer projects. Despite the decline in sales, net income grew 22% sequentially to $159 million, primarily driven by pricing and productivity actions taken in late 2022. We continue to believe the industry's underlying growth drivers are intact, long-term demand for optical networks is strongly supported by trends in computation and by private and public infrastructure investments to help connect the unconnected, and bring broadband to a much larger share of the population. We're pursuing three significant secular trends, broadband, 5G, and the cloud. We've got major innovation programs underway for each category and our connectivity solutions offer economic advantages for a broader range of customers than ever before.
Display Technology sales in the first quarter were $763 million down 3% sequentially as more volume and glass price declined slightly. Net income was $160 million, down 6% sequentially on lower sales. On our last call, I updated you on panel maker utilization dynamics. At the beginning of Q4, utilization began to increase from its low point but it levels off in December due to pandemic-related disruptions in China, and in January, the disruptions persisted, driving utilization back down and below retail demand, subsequently conditions in China improved.
In March, panel makers increased their utilization and as a result, our volumes increased from January and February levels. We're expecting panel makers to run at higher utilization levels in the second quarter than they did in the first quarter, and therefore, we anticipate our sequential glass volume to increase significantly. Favorable pricing is primarily driven by two factors. The first factor is the improving glass supply and demand balance. Glass makers have been taking additional tanks offline for maintenance and repairs. As we've noted previously, we are taking this opportunity to upgrade our fleet with our latest technology and we're actively managing the timing of tank restarts to align our supply to demand. The second factor is glass makers' profitability. In Q4, our two major competitors reported net loss losses, reinforcing our view that it is challenging for glass makers who have high costs to remain profitable at current pricing levels.
Moving to Specialty Materials. Demand for our long-lead time semiconductor equipment products remains strong. However, smartphone and IT end-market demand remains weak. First quarter sales were $406 million, down 20% sequentially consistent with typical seasonality. Net income was $39 million down sequentially due to the lower sales. We expect the continued adoption of our latest glass innovations such as Gorilla Glass Victus 2 and the introduction of new glass formulations in the second half of 2023 to help offset continued softness in the smartphone in IT -- in the smartphone and IT markets. Additionally, we believe that new innovation opportunities and emerging technologies like augmented reality and bendable devices will contribute to long-term growth.
Environmental Technologies first quarter sales were $431 million. We saw increased GPS adoption in the quarter which helped drive a 9% sequential improvement in sales. Net income increased 19% sequentially, driven by higher sales and improved productivity. We are not projecting a recovery in the automotive market in the second quarter and our current view of the full ear is that auto sales remain below pre-pandemic levels but our content-driven growth strategy continues to help us outperform the market.
Turning to Life Sciences. First quarter sales were $256 million, down 13% sequentially, driven by lower demand for COVID-related products and the impact of customers drawing down their inventory. Net income was $9 million, driven by lower sales and our actions to reduce production levels in the quarter.
Let me take a minute to describe the market dynamics impacting this business and what we expect for the year. In 2021 and the first half of 2022, growth was largely driven by pandemic-related demand and customers over-ordered due to supply chain challenges. Pandemic-related demand began tapering in the second half of 2022 and the industry was left with elevated inventory levels. We expect our sales and profitability to improve as the industry corrects and we restore productivity ratios back to pre-pandemic levels.
Finally in Hemlock and Emerging Growth Businesses, sales in the first quarter were $386 million up year-over-year and down sequentially, driven primarily by seasonally lower volumes in semiconductor polysilicon. Net income increased sequentially. We are seeing continued strong demand for solar-grade polysilicon to meet the need for a transparent, sustainable, and traceable solar supply chain in the U.S. market, and we continue to see strong growth in Automotive Glass Solutions and additional opportunities and Pharmaceutical Technologies.
Now let's turn to our outlook. For the second quarter, we expect total company sales to grow sequentially led by display as the industry continues to recover. We're not planning on strong second quarter sales sequential sales improvements in Optical Communications, Life Sciences or Specialty Materials.
Turning to profitability, we expect to build on our progress from the first quarter and further improve profitability driven by our efforts to offset inflation and return productivity ratios to historical levels. We expect sales in the range of $3.4 billion to $3.6 billion and EPS in the range of $0.42 to $0.49. And free cash flow will improve strongly due to normal cyclicality and higher sales, and as I said earlier, we expect positive free cash flow in the second quarter. The most likely case for the second half is that sales and earnings increase versus the second quarter. Although it's too early to be definitive given continued global economic uncertainty and its impact on consumer demand and infrastructure spending.
I'd also like to reiterate our capital allocation priorities. We prioritize organic growth through research and development and capital expenditures. The investment opportunities we target generate a 20% ROIC or greater. We expect 2023 full year capital expenditures to be slightly lower than 2022. We are also prioritizing rewarding shareholders with our excess cash in two ways. First, dividends, which we've raised for 13 years in a row. Second, is share buybacks. We bought back about 5% of our outstanding shares in 2021 and we'll continue to be opportunistic.
Preserving the financial strength of the company is always a top priority. We maintain a strong balance sheet that provides appropriate durability and flexibility, and I'm proud to say we maintain one of the longest debt tenors in the S&P 500. Our average maturity is about 25 years with no significant debt coming due in the given year. In sum, the actions we are taking position us to come out of this period of uncertainty, a financially strong and well-positioned for a return to growth.
Now, I'd like to wrap up with a few key takeaways. In the second quarter, we expect sales, profitability, and cash generation to improve driven by our profit improvement actions, cost controls, and continued recovery in Display Technologies. We're executing a highly disciplined approach to our investment decisions while maintaining a strong balance sheet. We're particularly focused on aligning our cost structure to the demand environment while maintaining the flexibility to address changing market conditions and capture upside as it occurs. Our long-term growth drivers all remain intact and we're well-positioned to continue capturing growth tied to key secular trends, such as those playing out in the optical communications and solar markets.
And with that, I'll turn it back over to Ann for Q&A.