☐ ~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, ~~indicated~~indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The accompanying notes are an integral part of these consolidated financial statements.

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~~Index~~

~~COR~~~~NING~~CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

Nine Months Ended

September 30,

2017

2016
Cash Flows from Operating Activities:

Net income

$
915

$
2,123
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

799

844
Amortization of purchased intangibles

53

46
Restructuring, impairment and other charges

78
Equity in earnings of affiliated companies

(148)

(119)
Dividends received from affiliated companies

101

20
Deferred tax benefit

(62)

(1,047)
Translated earnings contract loss

193

2,295
Unrealized translation gains on transactions

(264)

(177)
Gain on realignment of equity investment

(2,676)
Changes in certain working capital items:

Trade accounts receivable

(190)

(184)
Inventories

(166)

(69)
Other current assets

(109)

(42)
Accounts payable and other current liabilities

(123)

28
Other, net

117

(11)
Net cash provided by operating activities

1,116

1,109

Cash Flows from Investing Activities:

Capital expenditures

(1,247)

(815)
Acquisition of business, net of cash received

(171)

(279)
Cash received on realignment of equity investment

4,818
Short-term investments – acquisitions

(20)
Short-term investments – liquidations

29

121
Realized gains on translated earnings contracts

199

146
Other, net

(28)

(15)
Net cash (used in) provided by investing activities

(1,218)

3,956

Cash Flows from Financing Activities:

Net repayments of short-term borrowings and current portion of long-term debt

(85)
Proceeds from issuance of long-term debt, net

702

Principal payments under capital lease obligations

(1)

(1)
Payments of employee withholding tax on stock awards

(14)

(14)
Proceeds from issuance of commercial paper

(481)
Proceeds from the exercise of stock options

275

86
Repurchases of common stock for treasury

(2,064)

(3,884)
Dividends paid

(493)

(493)
Net cash used in financing activities

(1,595)

(4,872)
Effect of exchange rates on cash

271

128
Net (decrease) increase in cash and cash equivalents

(1,426)

321
Cash and cash equivalents at beginning of period

5,291

4,500
Cash and cash equivalents at end of period

$
3,865

$
4,821

	Three months ended
	March 31,
	2022			2021
Cash Flows from Operating Activities:
Net income	$	581		$	599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		342			330
Amortization of purchased intangibles		31			32
Gain on sale of business		(53	)		(14	)
Loss on investment		0			36
Share-based compensation expense		42			34
Translation gain on Japanese yen-denominated debt		(84	)		(118	)
Deferred tax provision		24			121
Translated earnings contract gain		(129	)		(272	)
Unrealized translation losses on transactions		20			59
Changes in assets and liabilities:
Trade accounts receivable		7			109
Inventories		(159	)		44
Other current assets		(81	)		(26	)
Accounts payable		238			(49	)
Other current liabilities		(161	)		22
Customer deposits and government incentives		(9	)		31
Deferred income		(25	)		(34	)
Other, net		(50	)		(181	)
Net cash provided by operating activities		534			723

Cash Flows from Investing Activities:
Capital expenditures		(383	)		(289	)
Proceeds from sale of business		74			24
Realized gains (losses) on translated earnings contract		40			(3	)
Other, net		(9	)		(20	)
Net cash used in investing activities		(278	)		(288	)

Cash Flows from Financing Activities:
Repayments of short-term borrowings		(11	)		(25	)
Proceeds from exercise of stock options		18			51
Purchases of common stock for treasury		(149	)		0
Dividends paid		(228	)		(208	)
Other, net		(5	)		(8	)
Net cash used in financing activities		(375	)		(190	)
Effect of exchange rates on cash		(13	)		(49	)
Net (decrease) increase in cash and cash equivalents		(132	)		196
Cash and cash equivalents at beginning of period		2,148			2,672
Cash and cash equivalents at end of period	$	2,016		$	2,868

The accompanying notes are an integral part of these consolidated financial statements.

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~~Index~~

~~COR~~~~NING~~CORNING INCORPORATED AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited; in millions)

(In millions)	Common stock		Additional paid-in capital common		Retained earnings			Treasury stock			Accumulated other comprehensive loss			Total Corning Incorporated shareholders' equity			Non-controlling interests		Total
Balance, December 31, 2021	$	907	$	16,475	$	16,389		$	(20,263	)	$	(1,175	)	$	12,333		$	212	$	12,545
Net income						581									581			22		603
Other comprehensive loss												(187	)		(187	)				(187	)
Purchase of common stock for treasury									(151	)					(151	)				(151	)
Shares issued to benefit plans and for option exercises		1		56											57					57
Common dividends ($0.27 per share)						(233	)								(233	)				(233	)
Other, net									(5	)					(5	)				(5	)
Balance, March 31, 2022	$	908	$	16,531	$	16,737		$	(20,419	)	$	(1,362	)	$	12,395		$	234	$	12,629

(In millions)	Convertible preferred stock		Common stock		Additional paid-in capital common		Retained earnings			Treasury stock			Accumulated other comprehensive loss			Total Corning Incorporated shareholders' equity			Non-controlling interests			Total
Balance, December 31, 2020	$	2,300	$	863	$	14,642	$	16,120		$	(19,928	)	$	(740	)	$	13,257		$	191		$	13,448
Net income								599									599			2			601
Other comprehensive loss														(352	)		(352	)		(1	)		(353	)
Shares issued to benefit plans and for option exercises				1		80											81						81
Common dividends ($0.24 per share)								(187	)								(187	)					(187	)
Preferred dividends ($10,625 per share)								(24	)								(24	)					(24	)
Other, net								1			(6	)					(5	)		(3	)		(8	)
Balance, March 31, 2021	$	2,300	$	864	$	14,722	$	16,509		$	(19,934	)	$	(1,092	)	$	13,369		$	189		$	13,558

The accompanying notes are an integral part of these consolidated financial statements.

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Significant Accounting Policies

Basis of Presentation

In these notes, the terms “Corning,” “Company,” “we,” “us,” or “our” mean Corning Incorporated and its subsidiary companies.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been omitted or condensed. These interim consolidated financial statements should be read in conjunction with Corning’s consolidated financial statements and notes thereto included in its Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016~~2021 (“~~2016~~2021 Form ~~10-K”~~10-K”).

The unaudited consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year.

~~On January 1, 2017, Corning adopted ASU 2016-09, Improvements~~The preparation of financial statements in conformity with GAAP requires management to ~~Employee Share-Based Payment Accounting,~~make estimates and assumptions that affect the ~~impacts~~reported amounts of ~~which include~~assets, liabilities, revenues, expenses and the ~~recording~~disclosure of ~~cumulative tax benefits of $233 million in beginning retained earnings~~contingent assets and ~~cash flow reclassifications that were not significant.~~liabilities.

Certain prior year amounts have been reclassified to conform to the current-year presentation. These reclassifications had no impact on ~~our~~the results of operations, financial position, or changes in shareholders’ equity.

New Accounting Standards

In ~~May 2014,~~ November 2021, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued Accounting Standards Update ~~(“ASU”~~("ASU") ~~No. 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (“ASC”~~2021-10 Government Assistance (Topic 832) Topic 606. The new revenue recognition standard relates to revenue from contracts with customers, which, along with amendments issued in 2015 and 2016, will supersede nearly all current U.S. GAAP guidance on this topic and eliminate industry-specific guidance. The underlying principle is to use a five-step analysis of transactions to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received: Disclosures by Business Entities about Government Assistance, effective for ~~those goods or services. Corning has evaluated its material contracts, and has concluded that the impact of adopting the standard on its~~ financial statements ~~and related disclosure will not be material. The standard, as amended, will be effective~~issued for annual periods beginning after December 15, ~~2017, including interim periods within~~2021. ASU 2021-10 requires business entities to disclose information in the notes to the financial statements about certain types of government assistance. The annual disclosure requirements apply to transactions with a government that ~~reporting period.~~are accounted for by analogizing to either a grant model or a contribution model. We ~~will~~plan to adopt ~~the standard~~ASU 2020-10 when we issue our annual financial statements. We do not expect it to have a material impact on ~~a modified retrospective basis in 2018.~~our consolidated financial statements.

~~Corning’s equity affiliates are currently evaluating their~~Other Accounting Standards

No other accounting standards, newly issued or adopted as of March 31, 2022, had a material ~~contracts, and have not concluded~~impact on ~~the potential impact of adopting ASU 2014-09 on their~~Corning’s financial statements ~~and related disclosure.~~or disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes all existing guidance on accounting for leases in ASC Topic 840. ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. ASU 2016-02 will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. We are currently assessing the potential impact of adopting ASU 2016-02 on our financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 refines how companies classify certain aspects of the cash flow statement in regards to debt prepayment, settlement of debt instruments, contingent consideration payments, proceeds from insurance claims and life insurance policies, distribution from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and for interim periods within those fiscal years. We are currently assessing the potential impact of adopting ASU 2016-15 on our financial statements and related disclosures, but the effect is not expected to be material.

~~Index~~Table of Contents

~~In October 2016,~~

2. Revenue

Revenue Disaggregation Table

The following table shows revenues by major product categories, similar to the ~~FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers~~Company’s reportable segment disclosure. Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty of revenue recognition and cash flows are substantially similar. Commercial markets and selling channels are also similar. Except for an inconsequential amount of revenue for Telecommunications products, product category revenues are recognized at point in time when control transfers to the customer.

Revenues by product category are as follows (in millions):

	Three months ended
	March 31,
	2022		2021

Telecommunication products	$	1,198	$	937

Display products		906		888

Specialty glass products		493		451

Environmental substrate and filter products		401		442

Life science products		307		301

Polycrystalline silicon and all other products		375		271
Total revenue	$	3,680	$	3,290
Impact of foreign currency movements ⁽¹⁾		64		(27	)
Net sales of reportable segments and Hemlock and Emerging Growth Businesses	$	3,744	$	3,263

⁽¹⁾	This amount primarily represents the impact of foreign currency adjustments in the Display Technologies segment.

Refer to Note 14 (Reportable Segments) to the consolidated financial statements for additional information.

Contract Assets and Liabilities

Contract assets, such as incremental costs to obtain or fulfill contracts, are an insignificant component of Corning’s revenue recognition process. Most of Corning’s fulfillment costs as a manufacturer of products are classified as inventory, fixed assets and intangible assets, which are accounted for under the respective guidance for those asset types. Other ~~Than Inventory, which reduces~~contract fulfillment costs are immaterial due to the ~~complexity~~nature of the products and their respective manufacturing processes.

Contract liabilities include deferred revenue, other advance payments and customer deposits. Other advance payments are not significant to operations and are classified as part of other accrued liabilities in the ~~accounting standards by allowing the recognition of current~~consolidated financial statements. Customer deposits are predominately related to Display products and deferred revenue is predominately related to obtaining a controlling interest in Hemlock Semiconductor Group ("Hemlock").

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Customer Deposits

As of March 31, 2022 and December 31, 2021, Corning had customer deposits of approximately $1.2 billion and $1.3 billion, respectively. Most of these customer deposits were non-refundable and allowed customers to secure rights to products produced by Corning under long-term supply agreements. The duration of these long-term supply agreements ranges up to 10 years. As products are shipped to customers, Corning will recognize revenue and reduce the amount of the customer deposit liability.

Customer deposits used were $83 million and $93 million, respectively, in the three months ended March 31, 2022 and 2021. As of March 31, 2022 and December 31, 2021, $1.0 billion and $1.1 billion, respectively, were recorded as other long-term liabilities. The remaining $236 million and $223 million, respectively, were classified as other current liabilities.

Deferred Revenue

As of March 31, 2022 and December 31, 2021, Corning had deferred revenue of approximately $887 million and $912 million, respectively. The deferred revenue was related to the performance obligations of non-refundable consideration previously received by Hemlock from its customers under long-term supply agreements.

The deferred revenue is tracked on a per-customer contract-unit basis. As customers take delivery of the committed volumes under the terms of the contract, a per-unit amount of deferred revenue is recognized when control of the promised goods is transferred to the customer based upon the units shipped.

As of March 31, 2022 and December 31, 2021, $751 million and $764 million, respectively, were classified as long-term liabilities and $136 million and $148 million, respectively, were classified as current liabilities.

3. Income Taxes

The provision for income taxes ~~for an intra-entity asset transfer, other than inventory, when~~and the ~~transfer occurs. Historically, recognition of the~~related effective income tax ~~consequence was not recognized until~~rates are as follows (in millions):

	Three months ended
	March 31,
	2022			2021
Provision for income taxes	$	(180	)	$	(226	)
Effective tax rate		23.7	%		27.4	%

For the ~~asset was sold~~three months ended March 31, 2022, the effective income tax rate differed from the United States (“U.S.”) statutory rate of 21%, primarily due to an outside party. This amendment should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. That is, earlier adoption should bechanges in ~~the first interim period if an entity issues interim financial statements. We are currently evaluating~~tax reserves and the impact of ~~ASU 2016-16 on~~changes in tax legislation, partially offset by differences arising from foreign earnings. For the three months ended March 31, 2021, the effective income tax rate differed from the U.S. statutory rate of 21%, primarily due to adjustments to our ~~consolidated financial statements~~permanently reinvested foreign income position and ~~related disclosures.~~tax reform items.

~~In January 2017,~~Corning Precision Materials is currently appealing certain tax assessments and tax refund claims in South Korea for tax years 2010 through 2018. The Company was required to deposit the ~~FASB issued ASU 2017-04, Intangibles – Goodwill~~disputed amounts with the South Korean government as a condition of its appeal of any tax assessments. Corning believes that it is more likely than not the Company will prevail in the appeals process. As of March 31, 2022 and December 31, 2021, non-current receivables of $354 million and $350 million, respectively, were recorded related to these appeals.

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4. Earnings per Common Share

The following table sets forth the computation of basic and diluted earnings per common share (in millions, except per share amounts):

	Three months ended
	March 31,
	2022		2021
Net income attributable to Corning Incorporated	$	581	$	599
Less: Series A convertible preferred stock dividend				24
Net income available to common shareholders – basic		581		575
Plus: Series A convertible preferred stock dividend				24
Net income available to common shareholders – diluted	$	581	$	599

Weighted-average common shares outstanding – basic		843		766
Effect of dilutive securities:
Employee stock options and other dilutive securities		16		17
Series A convertible preferred stock				115
Weighted-average common shares outstanding – diluted		859		898
Basic earnings per common share	$	0.69	$	0.75
Diluted earnings per common share	$	0.68	$	0.67

Anti-dilutive potential shares excluded from diluted earnings per common share:
Employee stock options and awards		—		1
Total		—		1

5. Inventories, Net

Inventories, net comprise the following (in millions):

	March 31,		December 31,
	2022		2021
Finished goods	$	1,216	$	1,190
Work in process		383		358
Raw materials and accessories		485		427
Supplies and packing materials		534		506
Total inventories, net	$	2,618	$	2,481

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6.Other ~~(Topic 350). ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity~~Liabilities

Other liabilities follow (in millions):

	March 31,		December 31,
	2022		2021
Current liabilities:
Wages and employee benefits	$	488	$	824
Income taxes		238		196
Derivative instruments (Note 10)		276		144
Deferred revenue (Note 2)		136		148
Customer deposits (Note 2)		236		223
Share repurchase liability (Note 12)		507		506
Short-term operating leases		93		94
Other current liabilities		1,118		1,004
Other accrued liabilities	$	3,092	$	3,139

Non-current liabilities:
Defined benefit pension plan liabilities	$	696	$	707
Derivative instruments (Note 10)		85		49
Deferred revenue (Note 2)		751		764
Customer deposits (Note 2)		985		1,072
Share repurchase liability (Note 12)		518		517
Deferred tax liabilities		248		258
Long-term operating leases		676		691
Other non-current liabilities		1,149		1,134
Other liabilities	$	5,108	$	5,192

7. Debt

Based on borrowing rates currently available to ~~perform its annual, or interim goodwill impairment test by comparing~~us for loans with similar terms and maturities, the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amountlong-term debt was $7.3 billion and $8.3 billion at March 31, 2022 and December 31, 2021, respectively, compared to recorded book values of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after $6.8 billion and $7.0 billion at March 31, 2022 and December ~~15, 2019, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.~~31, 2021, respectively. The Company ~~adopted~~measures the ~~ASU~~fair value of its long-term debt using Level 2 inputs based primarily on ~~January 1, 2017.~~current market yields for its existing debt traded in the secondary market.

In Corning had no outstanding commercial paper as of March ~~2017,~~31, 2022 and December 31, 2021.

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8. Employee Retirement Plans

Corning has defined benefit pension plans covering certain domestic and international employees. The Company’s funding policy is to contribute, over time, an amount exceeding the ~~FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving~~minimum requirements to achieve the ~~Presentation~~Company’s long-term funding targets. During 2022, the Company expects to make cash contributions of ~~Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 requires entities~~$30 million to ~~(1) disaggregate~~international pension plans.

The following table summarizes the ~~current-service-cost component from the other~~ components of net periodic benefit ~~cost (the “other components”)~~expense for Corning’s defined benefit pension and ~~present it with~~postretirement health care and life insurance plans (in millions):

	Pension benefits						Postretirement benefits
	Three months ended						Three months ended
	March 31,						March 31,
	2022			2021			2022			2021
Service cost	$	32		$	32		$	2		$	2
Interest cost		27			22			4			4
Expected return on plan assets		(55	)		(54	)		0			0
Amortization of prior service cost (credit)		1			1			(1	)		(1	)
Total pension and postretirement benefit expense	$	5		$	1		$	5		$	5

The components of net periodic benefit expense, other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. In addition, the ASU requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The amendment should be applied retrospectively for the presentation ofthan the service cost component, ~~and prospectively for~~are included in the ~~capitalization~~line item other income, net, in the consolidated statements of the service cost component. ASU 2017-07 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted at the beginning of any annual period for which an entity’s financial statements have not been issued or made available for issuance. We are currently evaluating the impact of ASU 2017-07 on our consolidated financial statements and related disclosures, but the impact is not expected to be material.income.

~~2. Commitments, Contingencies and Guarantees~~

~~Asbestos Claims~~

Corning and PPG Industries, Inc. each owned 50% of the capital stock of Pittsburgh Corning Corporation (“PCC”). PCC filed for Chapter 11 reorganization in 2000 and the Modified Third Amended Plan of Reorganization for PCC (the “Plan”) became effective in April 2016. At December 31, 2016, this estimated liability was $290 million, due to the Company’s contribution, in the second quarter of 2016, of its equity interests in PCC and Pittsburgh Corning Europe N.V. (“PCE”) in the total amount of $238 million, as required by the Plan. A payment for $70 million was made in June 2017. At September 30, 2017, the total amount of payments due in years 2018 through 2022 is $220 million. A $35 million payment is due in the second quarter of 2018 and is classified as a current liability. The remaining $185 million is classified as a non-current liability.

~~Non-PCC Asbestos Claims Insurance Litigation~~

Corning is a defendant in certain cases alleging injuries from asbestos unrelated to PCC (the “non-PCC asbestos claims”) which had been stayed pending the confirmation of the Plan. The stay was lifted on August 25, 2016. Corning previously established a $150 million reserve for these non-PCC asbestos claims. The estimated reserve represents the undiscounted projection of claims and related legal fees over the next 20 years. The amount may need to be adjusted in future periods as more data becomes available; however, we cannot estimate any lesser or greater liabilities at this time. At September 30, 2017 and December 31, 2016, the amount of the reserve for these non-PCC asbestos claims was $148 million and $149 million, respectively.

Several of Corning’s insurers have commenced litigation in state courts for a declaration of the rights and obligations of the parties under insurance policies related to Corning’s asbestos claims. Corning has resolved these issues with a majority of its relevant insurers, and is vigorously contesting these cases with the remaining relevant insurers. Management is unable to predict the outcome of the litigation with these remaining insurers.

~~Index~~

~~Other~~9. Commitments and Contingencies

We are required, at the time a guarantee is issued, to recognize a liability for the fair value or market value of the obligation it assumes. In the normal course of our business, we do not routinely provide significant third-party guarantees. Generally, any third party guarantees provided by Corning are limited to certain financial guarantees including stand-by letters of credit and performance bonds, and the incurrence of contingent liabilities in the form of purchase price adjustments related to attainment of milestones. When provided, these guarantees have various terms, and none of these guarantees are individually significant.

As of September 30, 2017 and December 31, 2016, contingent guarantees totaled a notional value of $317 million and $267 million, respectively. We believe a significant majority of these contingent guarantees will expire without being funded. We also were contingently liable for purchase obligations of $230 million and $231 million, at September 30, 2017 and December 31, 2016, respectively.

~~Product warranty liability accruals were considered insignificant at September 30, 2017 and December 31, 2016.~~

Corning is a defendant in various lawsuits ~~including environmental and product-related suits,~~ and is subject to various claims that arise in the normal course of ~~business.~~business, the most significant of which are summarized below. In the opinion of management, the likelihood that the ultimate disposition of these matters will have a material adverse effect on Corning’s consolidated financial position, liquidity, or results of operations, is remote. ~~Other than~~

Dow Corning Chapter 11 Related Matters

Until June 1,2016, Corning and Dow each owned 50% of the common stock of Dow Corning. On May 31,2016, Corning and Dow realigned their ownership interest in Dow Corning. Following the realignment, Corning no longer owned any interest in Dow Corning. With the realignment, Corning agreed to indemnify Dow Corning for 50% of Dow Corning’s non-ordinary course, pre-closing liabilities to the extent such liabilities exceed the amounts reserved for them by Dow Corning as of May 31,2016, subject to certain ~~asbestos related~~conditions and limits.

Dow Corning Breast Implant Litigation

In May 1995, Dow Corning filed for bankruptcy protection to address pending and claimed liabilities arising from many thousands of breast implant product lawsuits. On June 1, 2004, Dow Corning emerged from Chapter 11 with a Plan of Reorganization (the “Plan”) which provided for the settlement or other resolution of implant claims. The Plan includes releases for Corning and Dow as shareholders in exchange for contributions to the Plan.

Under the terms of the Plan, Dow Corning has established and funded a Settlement Trust and a Litigation Facility, to provide a means for tort claimants to settle or litigate their claims. Inclusive of insurance, Dow Corning has paid approximately $1.8 billion to the Settlement Trust. As of May 31,2016, Dow Corning had recorded a reserve for breast implant litigation of $290 million. In the event Dow Corning’s total liability for these claims ~~there are no~~exceeds such amount, Corning may be required to indemnify Dow for up to 50% of the excess liability, subject to certain conditions and limits. As of March 31, 2022 and December 31, 2021, Dow Corning had recorded a reserve for breast implant litigation of $127 million and $130 million, respectively. As a result, Corning does not believe its indemnity obligation for Dow Corning’s breast implant litigation liability, if any, will be material.

Table of Contents

Dow Corning Bankruptcy Pendency Interest Claims

As a separate matter arising from the bankruptcy proceedings, Dow Corning had been defending claims asserted by commercial creditors who claimed additional compounded interest at default and state statutory judgment rates as well as attorneys’ fees and other ~~material loss contingencies related~~enforcement costs, during the period from May 1995 through June 2004. As of May 31, 2016, Dow Corning had recorded a reserve for these claims of $107 million. Dow Corning settled those claims as of September 30, 2019 and received approval of the settlement from the bankruptcy court. Corning does not believe its indemnity obligation, if any, for Dow Corning’s liability to ~~litigation.~~be material.

Dow Corning Environmental Claims

In September 2019, Dow formally notified Corning of certain environmental matters for which Dow asserts that it has, or will, experience losses arising from remediation and response at a number of sites. In the event Dow is liable for these claims, Corning may be required to indemnify Dow for up to 50% of that liability, subject to certain conditions and limits. As of March 31, 2022, Corning has determined a potential liability for these environmental matters is probable and the amount reserved was not material.

Environmental Litigation

Corning has been named by the Environmental Protection Agency ~~(“the Agency”)~~(the Agency) under the Superfund Act, or by state governments under similar state laws, as a potentially responsible party for 1615 active hazardous waste sites. Under the Superfund Act, all parties who may have contributed any waste to a hazardous waste site, identified by the Agency, are jointly and severally liable for the cost of cleanup unless the Agency agrees otherwise. It is Corning’s policy to accrue for its estimated liability related to Superfund sites and other environmental liabilities related to property owned by Corning based on expert analysis and continual monitoring by both internal and external consultants. ~~At September 30, 2017~~As of March 31, 2022 and December 31, ~~2016,~~2021, Corning had accrued approximately ~~$40~~$50 million ~~(undiscounted)~~ and ~~$43~~$55 million, ~~(undiscounted),~~ respectively, for the estimated undiscounted liability for environmental cleanup and related litigation. Based upon the information developed to date, management believes that the accrued reserve is a reasonable estimate of the Company’s liability and that the risk of an additional loss in an amount materially higher than that accrued is remote.

The ability of certain subsidiaries and affiliated companies to transfer funds is limited by provisions of foreign government regulations, affiliate agreements and certain loan agreements. At September 30, 2017, the amount of equity subject to such restrictions for consolidated subsidiaries and affiliated companies was not significant. While this amount is legally restricted, it does not result in operational difficulties since we have generally permitted subsidiaries to retain a majority of equity to support their growth programs.10. Hedging Activities

~~3. Debt~~

Based on borrowing rates currently available to us for loans with similar terms and maturities, the fair value of long-term debt was $4.4 billion and $3.9 billion at September 30, 2017 and December 31, 2016, respectively, compared to recorded book values of $4.0 billion at September 30, 2017 and $3.6 billion at December 31, 2016. The Company measures the fair value of its long-term debt using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.Designated Hedges

Corning ~~did not have outstanding commercial paper~~uses over-the-counter (“OTC”) foreign exchange forward contracts as cash flow hedges to reduce the risk that movements in exchange rates will adversely affect the net cash flows resulting from the sale of products to customers and purchases from suppliers. The total gross notional values for foreign currency cash flow hedges are $714 million and $780 million at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016.~~

~~Debt Issuances~~

~~2017~~

In2021, respectively, with maturities spanning the ~~third quarter of 2017,~~years 2022 through 2023. Corning ~~issued three Japanese yen-denominated debt securities (the “Notes”), as follows:~~

~~¥21 billion 0.698% senior unsecured long term notes with a maturity of 7 years;~~

~~¥47 billion 0.992% senior unsecured long term notes with a maturity of 10 years; and~~

~~¥10 billion 1.583% senior unsecured long term notes with a maturity of 20 years.~~

The proceeds from these Notes were received in Japanese yen and converted to U.S. dollars on the date of issuance. The net proceeds received in U.S. dollars, after deducting offering expenses, was approximately $700 million. Payments of principle and interest on the Notes will be in Japanese yen, or should yen be unavailable due to circumstances beyond Corning’s control, a U.S. dollar equivalent.

~~Index~~

~~On a quarterly basis, Corning will recognize the transaction~~defers gains and losses resulting from changes in the JPY/USD exchange rate in the Other expense, net line of the Consolidated Statements of Income. Cash proceeds from the offerings and payments for debt issuance costs are disclosed as financing activities, and cash payments to bondholders for interest will be disclosed as operating activities, in the Consolidated Statements of Cash Flows.

~~4. Income Taxes~~

~~Our (provision) benefit for income taxes and the related effective income tax rates were as follows (in millions):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Provision) benefit for income taxes

$
(89)

$
27

$
(176)

$
835
Effective tax rate

18.6%

(10.5%)

16.1%

(64.8%)

~~For the three months ended September 30, 2017, the effective income tax rate differed from the U.S. statutory rate of 35% primarily due to the following benefits:~~

~~Rate differences on income (loss) of consolidated foreign companies; and~~

~~The benefit of excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income.~~

~~For the nine months ended September 30, 2017, the effective income tax rate differed from the U.S. statutory rate of 35% primarily due to the following benefits:~~

~~Rate differences on income (loss) of consolidated foreign companies;~~

~~The benefit of excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income; and~~

~~Discrete tax items.~~

~~For the three months ended September 30, 2016, the effective income tax benefit differed from the U.S. statutory rate of 35% primarily due to the following benefit:~~

~~Rate differences on income (loss) of consolidated foreign companies; and~~

~~The benefit of excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income.~~

~~For the nine months ended September 30, 2016, the effective income tax benefit differed from the U.S. statutory rate of 35% primarily due to the following benefits:~~

~~Rate differences on income (loss) of consolidated foreign companies, including the benefit of excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income;~~

~~The impact of equity in earnings of nonconsolidated affiliates reported in the financial statements, net of tax; and~~

The tax-free nature of the realignment of our equity interests in Dow Corning during the period, as well as the release of the deferred tax liability related to Corning’s tax on Dow Corning’s undistributed earnings as of the date of the transaction.

Corning continues to indefinitely reinvest substantially all of its foreign earnings, with the exception of an immaterial amount of current earnings that have very low or no tax cost associated with their repatriation. Our current analysis indicates that we have sufficient U.S. liquidity, including borrowing capacity, to fund foreseeable U.S. cash needs without requiring the repatriation of foreign cash. One time or unusual items may impact our ability or intent to keep our foreign earnings and cash indefinitely reinvested. While it remains impracticable to calculate the tax cost of repatriating our total unremitted foreign earnings, such cost could be material to the results of operations of Corning in a particular period.

~~Index~~

~~5. Earnings per Common Share~~

~~The following table sets forth the computation of basic and diluted earnings per common share (in millions, except per share amounts):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Net income attributable to Corning Incorporated

$
390

$
284

$
915

$
2,123
Less:  Series A convertible preferred stock dividend

24

24

73

73
Net income available to common stockholders – basic

366

260

842

2,050
Plus:  Series A convertible preferred stock dividend

24

24

73

73
Net income available to common stockholders – diluted

$
390

$
284

$
915

$
2,123

Weighted-average common shares outstanding – basic

883

978

905

1,046
Effect of dilutive securities:

Stock options and other dilutive securities

11

9

11

9
Series A convertible preferred stock

115

115

115

115
Weighted-average common shares outstanding – diluted

1,009

1,102

1,031

1,170
Basic earnings per common share

$
0.41

$
0.27

$
0.93

$
1.96
Diluted earnings per common share

$
0.39

$
0.26

$
0.89

$
1.81

Antidilutive potential shares excluded from
  diluted earnings per common share:

Series A convertible preferred stock

Employee stock options and awards

1

13

2

18
Accelerated share repurchase forward contract

14

14
Total

1

27

2

32

~~6. Inventories, Net of Inventory Reserves~~

~~Inventories, net of inventory reserves comprise the following (in millions):~~

September 30,

December 31,

2017

2016
Finished goods

$
720

$
606
Work in process

328

303
Raw materials and accessories

314

270
Supplies and packing materials

331

292
Total inventories, net of inventory reserves

$
1,693

$
1,471

~~7. Investments~~

On May 31, 2016, Corning completed the strategic realignment of its equity investment in Dow Corning Corporation (“Dow Corning”) pursuant to the Transaction Agreement announced in December 2015. Under the terms of the Transaction Agreement, Corning exchanged with Dow Corning its 50% stock interest in Dow Corning for 100% of the stock of a newly formed entity, which holds an equity interest in Hemlock Semiconductor Group (“HSG”) and approximately $4.8 billion in cash.

Prior to realignment, HSG, a wholly-owned and consolidated subsidiary of Dow Corning, was an indirect equity investment of Corning. Upon completion of the exchange, Corning now has a direct equity investment in HSG. Because our ownership percentage in HSG did not change as a result of the realignment, the investment in HSG is recorded at its carrying value, which had a negative carrying value of $383 million at the transaction date. The negative carrying value resulted from a one-time charge to this entity in 2014 for the permanent abandonment of certain assets. Excluding this charge, the entity is profitable and is expected to recover its equity in the near term.

~~Index~~

Corning’s financial statements as of June 30, 2016 include the positive impact of the release of a deferred tax liability of $105 million related to Corning’s tax on Dow Corning’s earnings that were not distributed as of the date of the transaction and a non-taxable gain of $2,676 million on the realignment. Details of the gain are illustrated below (in millions):


~~Cash~~	$	~~4,818~~
~~Carrying Value of Dow Corning Equity Investment~~		~~(1,560)~~
~~Carrying Value of HSG Equity Investment~~		~~(383)~~
~~Other~~ ~~(1)~~		~~(199)~~
~~Gain~~	$	~~2,676~~

~~(1)~~

Primarily consists of the release of accumulated other comprehensive loss items related to unamortized actuarial losses related to Dow Corning’s pension plan and foreign currency translation gains in the amounts of $260 million and $45 million, respectively.

~~Investments comprise the following (in millions):~~

Ownership

September 30,

December 31,

interest

2017

2016
Affiliated companies accounted for by the equity method (1)
20%
to
50%

$
284

$
269
Other investments

68

67
Subtotal Investment Assets

$
352

$
336

Affiliated companies accounted for by the equity method

HSG (1)(2)

50%

$
202

$
241
Subtotal Investment Liabilities

$
202

$
241

~~(1)~~

~~Amounts reflect Corning’s direct ownership interests in the respective affiliated companies at September 30, 2017 and December 31, 2016. Corning does not control any of such entities.~~

~~(2)~~

~~HSG indirectly holds an 80.5% interest in a HSG operating partnership. The negative carrying value of the investment in HSG is recorded in Other Liabilities.~~

~~Hemlock Semiconductor Group~~

~~HSG’s results of operations follow (in millions):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017 (1)

2016 (2)
Statement of Operations:

Net sales

$
286

$
217

$
887

$
397
Gross profit

$
72

$
61

$
180

$
113
Net income attributable to HSG

$
59

$
44

$
285

$
87

~~(1)~~

HSG’s net income in the nine months ended September 30, 2017 includes pre-tax gains on settlements of long-term sales agreements in the amount of $151 million (after tax and non-controlling interests, Corning’s share was approximately $75 million).

~~(2)~~

~~Amounts reflect HSG’s results of operations for the month of June 1, 2016 through September 30, 2016.~~

~~Index~~

~~8. Goodwill and Other Intangible Assets~~

~~The carrying amount of goodwill by segment for the periods ended September 30, 2017 and December 31, 2016 is as follows (in millions):~~

Display

Optical

Specialty

Life

All

Technologies

Communications

Materials

Sciences

Other

Total
Balance at December 31, 2016

$
126

$
645

$
150

$
558

$
98

$
1,577
Acquired goodwill (1)

22

43

34

99
Measurement period
adjustment (2)

(28)

(28)
Foreign currency translation
adjustment

4

7

18

7

36
Balance at September 30, 2017

$
130

$
674

$
150

$
619

$
111

$
1,684

~~(1)~~

The Company completed two small acquisitions in the third quarter of 2017 which are being reported in the Optical Communications and Life Sciences segment and one small acquisition in the first quarter of 2017 which is reported in All Other.

~~(2)~~

~~In the second quarter of 2017, the Company recorded measurement period adjustments of $28 million related to an acquisition completed in a previous period.~~

Corning’s gross goodwill balances for the periods ended September 30, 2017 and December 31, 2016 each were $8.2 billion and $8.1 billion, respectively. Accumulated impairment losses were $6.5 billion for the periods ended September 30, 2017 and December 31, 2016, and were generated primarily through goodwill impairments related to the ~~Optical Communications segment.~~

~~Other intangible assets are as follows (in millions):~~

September 30, 2017

December 31, 2016

Accumulated

Accumulated

Gross

amortization

Net

Gross

amortization

Net
Amortized intangible assets:

Patents, trademarks, and
trade names

$
382

$
192

$
190

$
360

$
176

$
184
Customer lists and other

892

191

701

761

149

612
Total

$
1,274

$
383

$
891

$
1,121

$
325

$
796

~~Corning’s amortized intangible assets are primarily related~~cash flow hedges into accumulated other comprehensive loss on the consolidated balance sheets until the hedged item impacts earnings. At March 31, 2022, the amount expected to be reclassified into earnings within the ~~Optical Communications and Life Sciences segments. The net carrying amount of intangible assets increased in the first nine~~next 12 months ~~of 2017, primarily due to acquisitions of $132 million of other intangible assets and foreign currency translation adjustments of $16 million, offset by amortization~~is a pre-tax gain of $53 million.

~~Amortization expense related~~Corning has entered into leases of precious metals with maturities through 2025. To offset the risk of changes in the fair value of the Company's separate accounting pool of leased precious metals due to adverse changes in the respective market prices, Corning designated the bifurcated embedded derivatives included in these ~~intangible assets~~leases as fair value hedges. The gain or loss on the derivatives, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings. The amounts representing the time value component of the derivatives are excluded from the assessment of effectiveness and amortized in earnings. The impact of the excluded component on Corning's other comprehensive income and earnings is ~~estimated to be $71~~not material. The carrying amount of the leased precious metals pool, which is included in the property, plant and equipment, net of accumulated depreciation line of the consolidated balance sheets is $223 million ~~for 2017, $74~~and $107 million ~~annually for 2018~~ at March 31, 2022 and ~~2019, and $70 million annually from 2020 to 2022.~~December 31, 2021, respectively.

~~Index~~

~~9. Employee Retirement Plans~~

~~The following table summarizes the components~~Table of ~~net periodic benefit cost for Corning’s defined benefit pension and postretirement health care and life insurance plans (in millions):~~

Contents

Pension benefits

Postretirement benefits

Three months ended

Nine months ended

Three months ended

Nine months ended

September 30,

September 30,

September 30,

September 30,

2017

2016

2017

2016

2017

2016

2017

2016

Service cost

$
22

$
22

$
69

$
65

$
2

$
3

$
7

$
7
Interest cost

32

31

94

93

7

6

20

19
Expected return on plan assets

(43)

(41)

(130)

(124)

Amortization of net loss

(1)
Amortization of prior service
cost (credit)

1

1

4

4

(1)

(1)

(2)

(3)
Recognition of actuarial loss

26

15

60

Total pension and postretirement
benefit expense

$
12

$
39

$
52

$
98

$
8

$
8

$
25

$
22

The impact of the finalization of our 2016 benefit plan valuations resulted in a charge of $15 million in the nine months ended September 30, 2017. The recognition of actuarial loss of $26 million in the three months ended September 30, 2016 resulted from small settlements in several of our benefit plans which triggered plan remeasurements. In addition to the settlements occurring in the third quarter of 2016, results in the nine months ended September 30, 2016 also included the impact of the finalization of our 2015 benefit plan valuations.

~~10. Other Liabilities~~

~~Other liabilities follow (in millions):~~

September 30,

December 31,

2017

2016
Current liabilities:

Wages and employee benefits

$
513

$
487
Income taxes

135

150
Derivative instruments

58

88
Asbestos and other litigation

39

70
Other current liabilities

510

621
Other accrued liabilities

$
1,255

$
1,416

Non-current liabilities:

Defined benefit pension plan liabilities

$
743

$
692
Derivative instruments

343

282
Asbestos and other litigation

342

369
Investment in Hemlock Semiconductor Group (1)

202

241
Other non-current liabilities

1,310

1,221
Other liabilities

$
2,940

$
2,805

~~(1)~~

~~The negative carrying value resulted from a one-time charge to this entity in 2014 for the permanent abandonment of certain assets.~~

~~Asbestos Claims~~Undesignated Hedges

Corning uses OTC foreign exchange forward and ~~PPG each owned 50%~~option contracts not designated as hedging instruments for accounting purposes to offset economic currency risks. The undesignated hedges limit exposure to foreign functional currency fluctuations related to certain subsidiaries’ monetary assets, monetary liabilities and net earnings in foreign currencies.

A significant portion of the ~~capital stock of PCC. Over a period of more than two decades, PCC~~Company's non-U.S. revenue and ~~several other defendants were named~~expenses are denominated in ~~numerous lawsuits involving claims alleging personal injury from exposure~~Japanese yen, South Korean won, new Taiwan dollar, Chinese yuan, and euro. When this revenue and these expenses are translated back to ~~asbestos. Refer~~U.S. dollars, the Company is exposed to ~~Note 2 (Commitments, Contingencies and Guarantees) to the consolidated financial statements for additional information on the asbestos claims.~~

~~Index~~

~~11. Hedging Activities~~

~~Undesignated Hedges~~

~~The table below includes a total gross notional value for~~foreign exchange rate movements. To protect translated earnings ~~contracts~~against movements in these currencies, the Company has entered into a series of ~~$15.2 billion and $16.7 billion at September 30, 2017 and December 31, 2016, respectively. The translated earnings contracts include~~ average rate forwards and option contracts. Most of ~~$14.1 billion and $14.7 billion and zero-cost collars of $1.1 billion and $2.0 billion at September 30, 2017 and December 31, 2016, respectively. The majority of the average rate forward~~these contracts hedge a significant portion of the Company’s exposure to the Japanese yen with maturities spanning ~~the~~ years 2017-2022 and with gross notional values of $12.4 billion and $13.6 billion at September 30, 2017 and December 31, 2016, respectively. The average rate forward contracts also partially hedge the impacts of the South Korean won, New Taiwan dollar, Chinese yuan, Euro and British pound translation on the Company’s projected net income. With respect to the zero-cost collars, the gross notional amount includes the value of both the put and call options. However, due to the nature of the zero-cost collars, either the put or the call option can be exercised at maturity. The total net notional value of the zero-cost collars was $0.7 billion and $1.0 billion at September 30, 2017 and December 31, 2016, respectively.2022 through 2024.

The following ~~tables summarize~~table summarizes the total gross notional value for translated earnings contracts at March 31, 2022 and December 31, 2021 (in billions):

	March 31,		December 31,
	2022		2021
Average rate forward contracts:
Japanese yen-denominated	$	2.4	$	2.9
South Korean won-denominated		1.6		1.2
Euro-denominated		0.1		0.2
Other foreign currencies ⁽¹⁾		0.1		0.1
Option contracts:
Japanese yen-denominated ⁽²⁾		4.9		3.6
Other foreign currencies ⁽³⁾		0.3		0.9
Total gross notional value for translated earning contracts	$	9.4	$	8.9

⁽¹⁾	Denominational currencies for average rate forward contracts include the Chinese yuan and British pound.
⁽²⁾	Japanese yen-denominated option contracts include zero-cost collars, purchased put and call options. With respect to the zero-cost collars, the gross notional amount includes the value of the put and call options. However, due to the nature of the zero-cost collars, only the put or call option can be exercised at maturity.
⁽³⁾	Other foreign currency option contracts are purchased basket options that include a basket of underlying currencies, including the Japanese yen, South Korean won, euro and British pound, and each basket option will be settled against U.S. dollars.

The following table summarizes the notional amounts and respective fair values of Corning’s derivative financial instruments on a gross basis for ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 (in millions):

Asset derivatives

Liability derivatives

Gross notional amount

Balance

Fair value

Balance

Fair value

Sept. 30,

Dec. 31,

sheet

Sept. 30,

Dec. 31,

sheet

Sept. 30,

Dec. 31,

2017

2016

location

2017

2016

location

2017

2016

Derivatives
  designated as
  hedging
  instruments

Foreign exchange
  contracts (1)
$
381

$
458

Other current
assets

$
12

$
1

Other accrued
liabilities

$
(3)

$
(29)

Other assets

8

Interest rate
  contracts

550

550

Other liabilities

(5)

(5)

Derivatives not
  designated as
  hedging
  instruments

Foreign exchange
  contracts, other

676

890

Other current
assets

7

11

Other accrued
liabilities

(3)

(7)

Translated earnings
  contracts

15,211

16,711

Other current
assets

175

423

Other accrued
liabilities

(52)

(52)

Other assets

82

146

Other liabilities

(338)

(277)

Total derivatives
$
16,818

$
18,609

$
284

$
581

$
(401)

$
(370)

					Asset derivatives					Liability derivatives
	Notional amount				Balance	Fair value				Balance	Fair value
	March		December		sheet	March		December		sheet	March			December
	31, 2022		31, 2021		location	31, 2022		31, 2021		location	31, 2022			31, 2021

Derivatives designated as hedging instruments (1)

Foreign exchange contracts and other	$	714	$	780	Other current assets	$	55	$	49	Other accrued liabilities	$	(2	)	$	(2	)
					Other assets		19		10	Other liabilities		(44	)		(9	)

Derivatives not designated as hedging instruments

Foreign exchange contracts		3,842		3,864	Other current assets		155		91	Other accrued liabilities		(133	)		(95	)
Translated earnings contracts		9,396		8,899	Other current assets		358		196	Other accrued liabilities		(141	)		(47	)
					Other assets		180		154	Other liabilities		(41	)		(40	)
Total derivatives	$	13,952	$	13,543		$	767	$	500		$	(361	)	$	(193	)

⁽¹⁾

~~(1)~~

~~Cash~~At March 31, 2022, derivatives designated as hedging instruments include foreign exchange cash flow hedges with ~~a typical duration~~gross notional amounts of ~~24 months or less.~~$714 million and fair value hedges of leased precious metals with gross notional amounts of 11,417 troy ounces. At December 31, 2021, derivatives designated as hedging instruments include foreign exchange cash flow hedges with gross notional amounts of $780 million and fair value hedges of leased precious metals with gross notional amounts of 7,559 troy ounces.

~~Index~~

~~The following table summarizes the effect~~

Table of ~~derivative financial instruments on Corning’s consolidated financial statements for the three and nine months ended September 30, 2017 and 2016 (in millions):~~

Contents

Effect of derivative instruments on the consolidated financial statements

for the three months ended September 30,

Gain recognized in other

Location of gain/(loss)

Gain/(loss) reclassified from

comprehensive income

reclassified from

accumulated OCI into
Derivatives in hedging

(OCI)

accumulated OCI into

income (effective) (1)
relationships

2017

2016

income (effective)

2017

2016

Sales

$
1
Foreign exchange contracts

$
3

$
1

Cost of sales

$
(1)

(13)

Total cash flow hedges

$
3

$
1

$
(1)

$
(12)

Effect of derivative instruments on the consolidated financial statements

for the nine months ended September 30,

Gain (loss) recognized in

Location of gain/(loss)

Gain/(loss) reclassified from

other comprehensive income

reclassified from

accumulated OCI into
Derivatives in hedging

(OCI)

accumulated OCI into

income ineffective/effective (1)
relationships

2017

2016

income (effective)

2017

2016

Sales

$
1

$
2

Cost of sales

(11)

(27)
Foreign exchange contracts

$
36

$
(63)

Other expense, net

(1)

(1)

Total cash flow hedges

$
36

$
(63)

$
(11)

$
(26)

~~(1)~~

~~The amount of hedge ineffectiveness at September 30, 2017 and 2016 was insignificant.~~

The following ~~table summarizes~~tables summarize the effect of Corning’s derivative financial instruments on the consolidated financial statements ~~relating to Corning’s derivative financial instruments~~ (in millions):

Gain (loss) recognized in income

Three months ended

Nine months ended

Location of gain/(loss)

September 30,

September 30,
Undesignated derivatives
recognized in income

2017

2016

2017

2016

Foreign exchange contracts
  – balance sheet and loans
Other expense, net

$
(7)

$
(4)

$
(19)

$
(78)
Foreign currency hedges
  related to translated earnings
Translated earnings
  contract gain (loss), net

26

(237)

(193)

(2,295)

Total undesignated

$
19

$
(241)

$
(212)

$
(2,373)

	Three months ended March 31,
	Gain recognized				Location of gain (loss)	Gain reclassified
Derivatives in hedging	in other comprehensive				reclassified from accumulated	from accumulated
relationships for cash	income (OCI)				OCI into income	OCI into income
flow and fair value hedges	2022		2021		effective (ineffective)	2022		2021

					Net sales	$	10	$	2
Foreign exchange contracts and other	$	34	$	26	Cost of sales		7		7
Total cash flow and fair value hedges	$	34	$	26		$	17	$	9

		Gain recognized in income
		Three months ended
	Location of gain	March 31,
Undesignated derivatives	recognized in income	2022		2021

Foreign exchange contracts	Other income, net	$	26	$	44
Translated earnings contracts	Translated earnings contract gain, net		129		272

Total undesignated		$	155	$	316

~~12.~~

11. Fair Value Measurements

Fair value standards under ~~U.S.~~ GAAP define fair value, establish a framework for measuring fair value in applying generally accepted accounting principles, and require disclosures about fair value measurements. The standards ~~also~~ identify two kinds of inputs that are used to determine the fair value of assets and liabilities: observable and unobservable. Observable inputs are based on market data or independent sources, while unobservable inputs are based on the Company’s own market assumptions. Once inputs have been characterized, the inputs are prioritized into one of three broad levels (provided in the table below) used to measure fair value. Fair value standards apply whenever an entity is measuring fair value under other accounting pronouncements that require or permit fair value measurement and require the use of observable market data when available.

~~Index~~

The following tables provide fair value measurement information for the Company’s major categories of financial assets and liabilities measured on a recurring ~~basis~~basis; Level 1 ("L1"), quoted market prices in active markets for identical assets, Level 2 ("L2"), significant other observable inputs, and Level 3 ("L3"), significant unobservable inputs as of our reportable dates (in millions):



			Fair value measurements at reporting date using
			Quoted prices in	Significant other		Significant
			active markets for	observable		unobservable
	September 30,		identical assets	inputs		inputs
	2017		(Level 1)	(Level 2)		(Level 3)
								March 31, 2022		L1		L2		L3		December 31, 2021		L1		L2		L3
Current assets:
Other current assets (1)(2)	$	488		$	194	$	294
Other current assets ⁽¹⁾								$	622	$	11	$	568	$	43	$	352	$	10	$	336	$	6
Non-current assets:
Other assets (1)	$	90		$	90			$	199			$	199			$	175			$	164	$	11

Current liabilities:
Other accrued liabilities (1)(3)	$	63		$	58	$	5
Other accrued liabilities ⁽¹⁾								$	276			$	276			$	144			$	144
Non-current liabilities:
Other liabilities (1)(3)	$	363		$	343	$	20
Other liabilities ⁽¹⁾								$	102			$	102			$	66			$	66

⁽¹⁾

~~(1)~~

Derivative assets and liabilities ~~include~~mainly consist of foreign exchange contracts which ~~are~~were measured using observable ~~quoted prices~~inputs for similar assets and liabilities.

Table of Contents

~~(2)~~

~~Other assets include a contingent consideration asset which was measured by applying an option pricing model using projected future Corning Precision Materials’ revenues.~~

~~(3)~~

Other accrued liabilities and other liabilities include contingent consideration that was measured using unobservable (Level 3) inputs. As of September 30, 2017 the fair value of the contingent consideration payables is $25 million.

Fair value measurements at reporting date using

Quoted prices in

Significant other

Significant

active markets for

observable

unobservable

December 31,

identical assets

inputs

inputs

2016

(Level 1)

(Level 2)

(Level 3)

Current assets:

Other current assets (1)

$
435

$
435

Non-current assets:

Other assets (1)(2)

$
464

$
175

$
289

Current liabilities:

Other accrued liabilities (1)

$
88

$
88

Non-current liabilities:

Other liabilities (1)

$
282

$
282

~~(1)~~

~~Derivative assets and liabilities include foreign exchange contracts which are measured using observable quoted prices for similar assets and liabilities.~~

~~(2)~~

Other assets include asset-backed securities which are measured using observable quoted prices for similar assets and a contingent consideration asset which was measured by applying an option pricing model using projected future Corning Precision Materials’ revenues.

AsAssets and Liabilities Measured on a result of the acquisition of Samsung Corning Precision Materials in January 2014, the Company has contingent consideration that was measured using unobservable (Level 3) inputs. Changes in the fair value of the contingent consideration in future periods are valued using an option pricing model and are recorded in Corning’s results in the period of the change. As of September 30, 2017 and December 31, 2016, the fair value of the potential receipt of the contingent consideration in 2018 was $294 million and $289 million, respectively.Non-Recurring Basis

There were no significant financial assets and liabilities measured on a ~~nonrecurring~~non-recurring basis as of ~~September 30, 2017~~ March 31, 2022 and December 31, ~~2016.~~2021.

12. Shareholders’ Equity

~~Index~~

~~13. Shareholders’ Equity~~

Fixed Rate Cumulative Convertible Preferred Stock, Series A

~~Corning has 2,300 outstanding shares of Fixed Rate Cumulative Convertible~~On January 16, 2021, the Preferred Stock ~~Series A. The~~became convertible into 115 million Common Shares. On April 5, 2021 (“Initial Closing Date”), Corning and Samsung Display Co., Ltd. ("SDC") executed the Share Repurchase Agreement (“SRA”) and the Preferred Stock ~~is convertible at~~was fully converted as of April 8, 2021.

Immediately following the ~~option~~conversion, Corning repurchased and retired 35 million of the ~~holder~~Common Shares held by SDC for an aggregate purchase price of approximately $1.5 billion, of which approximately $507 million was paid on the Initial Closing Date. Subsequent payments of approximately $507 million will be paid on each of the first and second anniversaries of the ~~Company upon certain events, at~~Initial Closing Date.

The remaining 80 million Common Shares were accounted for as a conversion ~~rate of 50,000 shares of Corning’s common stock per one share~~ of Preferred Stock and resulted in an increase of common stock and additional paid-in-capital based on the carrying value of the Preferred Stock and were included in the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share. SDC has the option to sell 22 million common shares to Corning subject to certain ~~anti-dilution provisions. As of September 30, 2017, the Preferred Stock has not been converted, and none of the anti-dilution provisions have been triggered.~~conditions beginning in 2024-2027. The remaining 58 million common shares are subject to a seven-year lock-up period expiring in 2027.

Share Repurchases

~~2016 Share Repurchases~~

In On July ~~2016, Corning entered into an accelerated~~17, 2019, Corning’s Board of Directors authorized $5 billion in share ~~repurchase agreement~~repurchases with no expiration date (the ~~“2016 ASR agreement”) under the 2015~~“2019 Repurchase ~~Program to repurchase Corning’s common stock. Under the 2016 ASR agreement, Corning paid $2.0 billion for a total of 86.7 million shares.~~ Program”).

~~In addition to~~For the ~~2016 ASR agreement, during the year~~three months ended ~~December~~March 31, ~~2016,~~2022, the Company repurchased ~~110.4~~3.9 million shares of common stock on the open market for approximately ~~$2.2 billion~~$151 million as part of its ~~2015~~2019 Repurchase ~~Programs, resulting in a total of 197.1 million shares repurchased for $4.2 billion during 2016.~~Program.

~~2017 Share Repurchases~~

~~In December 2016, Corning’s Board of Directors approved a $4 billion~~The Company made no open market share ~~repurchase program with no expiration (the “2016 Repurchase Program”). In~~repurchases for the ~~nine~~three months ended ~~September 30, 2017, Corning entered into two separate accelerated share repurchase agreements under this program (the “2017 ASR agreements”)~~March 31, 2021. In the second quarter of 2017, Corning entered into and finalized an accelerated share repurchase agreement under which we paid $500 million for a total of 17.1 million shares. In the third quarter of 2017, Corning entered into and finalized an additional accelerated share repurchase agreement under which we paid $500 million for a total of 17.2 million shares.

~~In addition to the 2017 ASR agreements, during the three and nine months ended September 30, 2017, the Company repurchased 17.2 million and 37.6 million shares~~

Table of ~~common stock on the open market for approximately $507.7 million and $1.1 billion, respectively.~~

Contents

Accumulated Other Comprehensive Loss

In the three ~~and nine~~ months ended ~~September 30, 2017~~ March 31, 2022 and ~~2016,~~2021, the ~~primary changes~~change in accumulated other comprehensive loss ~~were~~was primarily related to the foreign currency translation ~~adjustment and unamortized actuarial gains (losses) for postretirement benefit plan components.~~adjustment.

A summary of changes in the foreign currency translation adjustment component of accumulated other comprehensive loss is as follows (in millions) ~~(1)~~⁽¹⁾:



	Three months ended				Nine months ended				Three months ended
	September 30,				September 30,				March 31,
	2017		2016		2017		2016		2022			2021
Beginning balance	$	(871)	$	(547)	$	(1,275)	$	(1,171)	$	(933	)	$	(329	)
Other comprehensive income (2)		49		235		435		860

Losses on foreign currency translation ⁽²⁾										(198	)		(355	)
Equity method affiliates (3)		4		10		22		9		(2	)		(8	)
Net current-period other comprehensive income		53		245		457		869
Net current-period other comprehensive loss										(200	)		(363	)
Ending balance	$	(818)	$	(302)	$	(818)	$	(302)	$	(1,133	)	$	(692	)

⁽¹⁾

~~(1)~~All amounts are after tax. Amounts in parentheses indicate debits to accumulated other comprehensive loss.

~~All amounts are after tax. Amounts in parentheses indicate debits to accumulated other comprehensive loss.~~

~~(2)~~

⁽²⁾

For the three months ended ~~September 30, 2017, tax amounts are not significant. For the nine months ended September 30, 2017,~~March 31, 2022 and 2021, amounts are net of ~~total~~ tax ~~expense~~benefit of ~~$47 million. For the three and nine months ended September 30, 2016, amounts are net of total tax expense of $32~~$11 million and ~~$51~~$10 million, respectively.

~~(3)~~

⁽³⁾

Tax effects are not significant.

In the second quarter of 2016, a $45 million cumulative foreign currency translation gain was released as a result of the realignment of Dow Corning and included in the gain on realignment of equity investment.13. Share-Based Compensation

InCorning maintains long-term incentive plans (the “Plans”) for key employees and non-employee members of its Board of Directors. The Plans allow Corning to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards or a combination of awards (collectively, share-based awards). At March 31, 2022, there were approximately 39 million unissued common shares available for future grants authorized under the ~~second quarter of 2016, a $22 million cumulative foreign currency translation loss was released as a result of the contribution of our investment in PCE~~Plans.

Share-based compensation cost is allocated to the ~~PCC litigation trust and included in~~cost of sales, selling, general and administrative, ~~expenses.~~

~~Index~~

~~A summary of changes~~and research, development and engineering, expenses lines in the ~~unamortized actuarial gains (losses) for postretirement benefit plan component~~consolidated statements of ~~accumulated other comprehensive loss is as follows (in millions)~~ ~~(1):~~

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016
Beginning balance

$
(330)

$
(323)

$
(347)

$
(588)
Other comprehensive loss before
   reclassifications (2)

(31)

(64)
Amounts reclassified from accumulated other
   comprehensive income (2)

26

17

60
Equity method affiliates (3)

264
Net current-period other comprehensive  (loss) income

(5)

17

260
Ending balance

$
(330)

$
(328)

$
(330)

$
(328)

~~(1)~~

~~All amounts are after tax. Amounts in parentheses indicate debits to accumulated other comprehensive loss.~~

~~(2)~~

For the three months ended September 30, 2017, tax effects are not significant. For the nine months ended September 30, 2017, amounts are net of total tax expense of $10 million. For the three and nine months ended September 30, 2016, amounts are net of total tax benefit of ($3) million and ($4) million, respectively.

~~(3)~~

For the three and nine months ended September 30, 2017, tax effects are not significant. For the three and nine months ended September 30, 2016, tax effects are not significant and are net of total tax expense and $19 million, respectively.

In the second quarter of 2016, a $260 million cumulative unamortized actuarial loss, net of tax of $19 million, was released as a result of the realignment of Dow Corning and included in the gain on realignment of equity investment.

In addition, for the nine months ended September 30, 2017, in the investment component of accumulated other comprehensive loss, a cumulative loss of $14 million, mainly comprising income tax, was reclassified to the income statement.

~~14. Share-based Compensation~~

~~Stock Compensation Plans~~income.

The Company measures and recognizes compensation cost for all share-based payment awards made to employees and directors based on estimated fair values. ~~Fair values for stock options were estimated using a multiple-point Black-Scholes valuation model. Share-based~~

Total share-based compensation cost ~~for employee stock options~~was $42 million and ~~time-based restricted stock and restricted stock units was approximately $10~~$34 million, respectively, for the three months ended ~~September 30, 2017~~ March 31, 2022 and ~~2016, respectively, and approximately $35 million and $33 million for the nine months ended September 30, 2017 and 2016, respectively.~~2021. The income tax ~~(expense)~~ benefit realized from share-based compensation was ~~not significant~~$4 million for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022, and ~~2016.~~not significant during the same period in 2021.

Stock Options

Corning’s stock option plans provide non-qualified and incentive stock options to purchase authorized but unissued common shares, or treasury shares, at the market price on the grant date and generally become exercisable ~~three~~in installments from one year to five years from the grant date. The maximum term of non-qualified and incentive stock options is ~~ten~~10 years from the grant date. An award is considered vested when the employee’s retention of the award is no longer contingent on providing subsequent service (the “non-substantive vesting period approach”).

Table of Contents

~~Index~~

The following table summarizes information ~~concerning~~regarding stock options outstanding, including the related transactions under the stock option plans, for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2022:

Weighted-

Average

Weighted-

Remaining

Aggregate

Number

Average

Contractual

Intrinsic

of Shares

Exercise

Term in

Value

(in thousands)

Price

Years

(in thousands)
Options Outstanding as of December 31, 2016

31,507

$
19.40

Granted

1,505

27.01

Exercised

(12,915)

21.26

Forfeited and Expired

(254)

23.21

Options Outstanding as of September 30, 2017

19,843

18.72

4.66

$
222,313
Options Expected to Vest as of September 30, 2017

19,801

18.71

4.65

222,056
Options Exercisable as of September 30, 2017

15,173

17.47

3.47

188,890

						Weighted-
						average
				Weighted-		remaining		Aggregate
	Number			average		contractual		intrinsic
	of shares			exercise		term		value
	(in thousands)			price		(in years)		(in thousands)
Options outstanding as of December 31, 2021		11,904		$	22.31
Exercised		(941	)		18.60
Forfeited and expired		(109	)		17.82
Options outstanding as of March 31, 2022		10,854			22.68		6.60	$	154,501
Options expected to vest as of March 31, 2022		10,802			22.69		6.60		153,600
Options exercisable as of March 31, 2022		5,594			21.68		5.50		85,179

~~The aggregate intrinsic value (market~~Corning uses a multiple-point Black-Scholes valuation model to estimate the fair value of stock ~~less~~ option ~~exercise price)~~grants. Corning utilizes a blended approach for calculating the volatility assumption used in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price on September 30, 2017, which would have been received by the option holders had all option holders exercised their “in-the-money” options as of that date.

As of September 30, 2017, there was approximately $8 million of unrecognized compensation cost related to stock options granted under the plans. The cost is expected to be recognized over a weighted-average period of 2 years. Compensation cost related to stock options was approximately $1 million and $2 million for the three months ended September 30, 2017 and 2016, respectively, and approximately $11 million and $10 million for the nine months ended September 30, 2017 and 2016, respectively.

Proceeds received from the exercise of stock options were $275 million and $86 million for the nine months ended September 30, 2017 and 2016, respectively. Proceeds received from the exercise of stock options were included in financing activities on the Company’s Consolidated Statements of Cash Flows. The total intrinsic value of options exercised for the nine months ended September 30, 2017 and 2016 was approximately $83 million and $36 million, respectively.

~~The following inputs were used for the~~multiple-point Black-Scholes valuation ~~of option grants under our stock option plans:~~

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016
Expected volatility

34.2%

38.6%

34.2
-
36.1%

38.6
-
43.1%
Weighted-average volatility

34.2%

38.6%

34.2
-
36.1%

38.6
-
43.1%
Expected dividends

2.18%

2.34%

2.11
-
2.28%

2.34
-
2.94%
Risk-free rate

2.1%

1.4%

2.1
-
2.3%

1.4
-
1.6%
Average risk-free rate

2.1%

1.4%

2.1
-
2.3%

1.4
-
1.6%
Expected term (in years)

7.4

7.4

7.4
-
7.4

7.4
-
7.4
Pre-vesting departure rate

0.6%

0.6%

0.6
-
0.6%

0.6
-
0.6%

~~Expected volatility is based on a blended approach~~model defined as the weighted average of the short-term implied volatility, the most recent volatility for the period equal to the expected term, and the most recent ~~15-year~~15-year historical volatility. The expected term ~~assumption~~ is the period ~~of time~~ the options are expected to be outstanding and is calculated using a combination of historical exercise experience adjusted to reflect the current vesting period of options being valued, and partial life cycles of outstanding options. The risk-free ~~rate assumption is~~rates used in the multiple-point Black-Scholes valuation model are the implied ~~rate~~rates for a ~~zero-coupon~~zero-coupon U.S. Treasury bond with a term equal to the option’s expected term. Ranges used reflect results from separate groups of employees exhibiting different exercise behavior.

There have been no stock options granted for the three months ended March 31, 2022 or 2021.

Incentive Stock Plans

~~Corning’s incentive stock plan permits~~The Corning Incentive Stock Plans permit restricted stock and restricted stock unit grants, either determined by specific performance goals or issued directly, in most instances, subject to the possibility of forfeiture and without cash consideration. Restricted stock and restricted stock units under the ~~incentive stock plan~~Incentive Stock Plans are granted at the closing market price on the grant date, contingently vest over a period of generally ~~three years.~~one year to ten years, and is aligned to the contractual terms. The fair value ~~of each restricted stock grant or restricted stock unit awarded under the Incentive Stock Plan~~ is based on the grant date closing price of the Company’s stock.

~~Index~~

Time-Based Restricted Stock and Restricted Stock ~~Units:~~Units

Time-based restricted stock and restricted stock units are issued by the Company on a discretionary basis, and are payable in shares of the Company’s common stock upon vesting. The fair value is based on the closing market price of the Company’s stock on the grant date. Compensation cost is recognized over the requisite vesting period and adjusted for actual forfeitures before vesting.

The following table ~~represents a summary of the status of~~summarizes the Company’s non-vested time-based restricted stock and restricted stock units ~~as of December 31, 2016,~~ and changes which occurred during the ~~nine~~three months ended ~~September 30, 2017:~~

March 31, 2022:

				Weighted
	Number			average
	of shares			grant-date
	(in thousands)			fair value
Non-vested shares and share units at December 31, 2021		10,594		$	25.83
Granted		117			42.48
Vested		(180	)		30.99
Forfeited		(71	)		22.47
Non-vested shares and share units at March 31, 2022		10,460		$	25.95

Weighted

Average

Shares

Grant-Date

(000’s)

Fair Value
Non-vested shares and share units at December 31, 2016

4,640

$
20.15
Granted

1,576

27.67
Vested

(1,243)

20.65
Forfeited

(88)

22.13
Non-vested shares and share units at September 30, 2017

4,885

$
22.42

Table of Contents

~~As of September 30, 2017, there was approximately $51 million of unrecognized compensation cost related to non-vested time-based restricted stock and~~Performance-Based Restricted Stock Units

Performance-based restricted stock units ~~compensation arrangements granted under~~are earned upon the ~~Plan.~~achievement of certain targets, and are payable in shares of the Company’s common stock upon vesting, typically over a three year period. The fair value is based on the closing market price of the Company’s stock on the grant date and assumes that the target payout level will be achieved. Compensation cost is ~~expected to be~~ recognized over ~~a weighted-average~~the requisite vesting period and adjusted for actual forfeitures before vesting. During the performance period, compensation cost may be adjusted based on changes in the expected outcome of ~~2.5 years. Compensation cost related to time-based restricted stock and~~the performance-related target.

The following table summarizes the Company’s non-vested performance-based restricted stock units ~~was approximately $9 million~~ and ~~$8 million for~~changes which occurred during the three months ended ~~September 30, 2017 and 2016, respectively, and approximately $24 million and $23 million for the nine months ended September 30, 2017 and 2016, respectively.~~March 31, 2022:

				Weighted
	Number			average
	of shares			grant-date
	(in thousands)			fair value
Non-vested share units at December 31, 2021		3,684		$	34.17
Granted		1,215			42.74
Vested		(48	)		38.72
Performance adjustments		367			34.46
Forfeited		(27	)		41.26
Non-vested share units at March 31, 2022		5,191		$	36.11

14. Reportable Segments

~~15. Reportable Segments~~

~~Our~~The Company’s reportable segments are as follows:

●

~~Display Technologies – manufactures glass substrates primarily for flat panel liquid crystal displays.~~

Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.

●

~~Environmental~~Display Technologies – manufactures ~~ceramic~~glass substrates for flat panel liquid crystal displays and ~~filters for automotive and diesel applications.~~

other high-performance display panels.

●

Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.

●	· Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.
●		Life Sciences – manufactures glass and plastic labware, equipment, media, serum and reagents enabling workflow solutions for ~~scientific applications.~~ drug discovery and bioproduction.

All other ~~segments~~businesses that do not meet the quantitative threshold for separate reporting have been grouped as ~~“All Other.” This~~“Hemlock and Emerging Growth Businesses”. The net sales for this group are primarily attributable to Hemlock, which is an operating segment that produces solar and semiconductor products. The emerging growth businesses primarily ~~comprised~~consist of Pharmaceutical Technologies (“CPT”), Auto Glass Solutions (“AGS”) and the ~~results of the pharmaceutical technologies business and new product lines and development projects, as well as certain corporate investments such as Eurokera and Keraglass equity affiliates.~~Emerging Innovations Group (“EIG”), which are also operating segments.

~~We prepared the financial~~Financial results for ~~our~~the reportable segments are prepared on a basis ~~that is~~ consistent with the ~~manner in which we internally disaggregate~~internal disaggregation of financial information to assist the chief operating decision maker (“CODM”) in making internal operating decisions. WeA significant portion of segment revenues and expenses are denominated in currencies other than the U.S. dollar. Management believes it is important to understand the impact on core net income of translating these currencies into U.S. dollars. The Company uses constant currency reporting for Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences. Corning excludes the impact of these currencies from segment sales and net income. The adjustment for constant currency is primarily related to the Display Technologies’ segment and excludes the impact of the fluctuation of the Japanese yen, South Korean won, Chinese yuan, and new Taiwan dollar. Certain income and expenses are included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income. These include items that are not used by the CODM in evaluating the results of, or in allocating resources to, the segments and include the following: the impact of translated earnings contracts; acquisition-related costs; discrete tax items and other tax-related adjustments; certain litigation, regulatory and other legal matters; restructuring, impairment losses and other charges and credits; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.

Table of Contents

Earnings of equity affiliates that are closely associated with ~~our~~the reportable segments are included in the respective segment’s net ~~income. We have allocated certain~~income (loss). Certain common expenses among reportable segments have been allocated differently than wethey would be for stand-alone financial information. Segment net income (loss) may not be consistent with measures used by other companies. ~~The accounting policies of our reportable segments are the same as those applied in the Consolidated Financial Statements.~~

~~Index~~

~~Reportable Segments~~ ~~(in millions)~~

Display

Optical

Environmental

Specialty

Life

All

Technologies

Communications

Technologies

Materials

Sciences

Other

Total
Three months ended

September 30, 2017

Net sales

$
768

$
917

$
277

$
373

$
223

$
49

$
2,607
Depreciation (1)

$
134

$
49

$
31

$
34

$
14

$
12

$
274
Amortization of purchased
   intangibles

$
11

$
6

$
1

$
18
Research, development and
   engineering expenses (2)

$
21

$
44

$
28

$
37

$
5

$
52

$
187
Income tax (provision)
   benefit

$
(82)

$
(52)

$
(17)

$
(36)

$
(8)

$
28

$
(167)
Net income (loss) (3)

$
203

$
102

$
34

$
72

$
17

$
(55)

$
373

Reportable Segments and Hemlock and Emerging Growth Businesses (in millions):

Display

Optical

Environmental

Specialty

Life

All

Technologies

Communications

Technologies

Materials

Sciences

Other

Total
Three months ended

September 30, 2016

Net sales

$
902

$
795

$
264

$
295

$
214

$
37

$
2,507
Depreciation (1)

$
152

$
41

$
32

$
26

$
14

$
12

$
277
Amortization of purchased
   intangibles

$
10

$
5

$
2

$
17
Research, development and
   engineering expenses (2)

$
14

$
37

$
24

$
31

$
6

$
47

$
159
Income tax (provision)
   benefit

$
(98)

$
(49)

$
(17)

$
(21)

$
(8)

$
21

$
(172)
Net income (loss) (3)

$
279

$
84

$
35

$
42

$
16

$
(47)

$
409

																Hemlock and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended
March 31, 2022
Segment net sales	$	1,198		$	959		$	493		$	409		$	310		$	375		$	3,744
Depreciation ⁽¹⁾	$	59		$	156		$	40		$	33		$	14		$	38		$	340
Research, development and engineering expenses ⁽²⁾	$	55		$	31		$	53		$	25		$	9		$	40		$	213
Income tax provision ⁽³⁾	$	(45	)	$	(63	)	$	(20	)	$	(20	)	$	(11	)	$	(1	)	$	(160	)
Segment net income (loss) ⁽⁴⁾	$	166		$	236		$	75		$	74		$	42		$	(8	)	$	585

																Hemlock and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended
March 31, 2021
Segment net sales	$	937		$	863		$	451		$	441		$	300		$	271		$	3,263
Depreciation ⁽¹⁾	$	58		$	148		$	41		$	36		$	12		$	32		$	327
Research, development and engineering expenses ⁽²⁾	$	51		$	22		$	45		$	27		$	8		$	34		$	187
Income tax (provision) benefit ⁽³⁾	$	(31	)	$	(56	)	$	(24	)	$	(20	)	$	(13	)	$	8		$	(136	)
Segment net income (loss) ⁽⁴⁾	$	111		$	213		$	91		$	74		$	48		$	(24	)	$	513

~~Index~~

Display

Optical

Environmental

Specialty

Life

All

Technologies

Communications

Technologies

Materials

Sciences

Other

Total
Nine Months Ended

September 30, 2017

Net sales

$
2,252

$
2,617

$
815

$
1,010

$
654

$
131

$
7,479
Depreciation (1)

$
393

$
142

$
93

$
94

$
39

$
34

$
795
Amortization of purchased
   intangibles

$
33

$
16

$
4

$
53
Research, development and
   engineering expenses (2)

$
63

$
121

$
80

$
110

$
17

$
156

$
547
Income tax (provision)
   benefit

$
(270)

$
(149)

$
(47)

$
(88)

$
(23)

$
83

$
(494)
Net income (loss) (3)

$
663

$
285

$
97

$
176

$
48

$
(166)

$
1,103

Display

Optical

Environmental

Specialty

Life

All

Technologies

Communications

Technologies

Materials

Sciences

Other

Total
Nine Months Ended

September 30, 2016

Net sales

$
2,408

$
2,186

$
787

$
788

$
633

$
112

$
6,914
Depreciation (1)

$
452

$
125

$
97

$
81

$
42

$
34

$
831
Amortization of purchased
   intangibles

$
25

$
15

$
6

$
46
Research, development and
   engineering expenses (2)

$
49

$
110

$
75

$
96

$
18

$
139

$
487
Income tax (provision)
   benefit

$
(277)

$
(99)

$
(52)

$
(52)

$
(22)

$
87

$
(415)
Net income (loss) (3)

$
692

$
178

$
106

$
106

$
45

$
(187)

$
940

⁽¹⁾

~~(1)~~

Depreciation expense for Corning’s reportable segments includes an allocation of depreciation of corporate property not specifically identifiable to a segment.

⁽²⁾

~~(2)~~

Research, development and engineering expenses include direct project spending that is identifiable to a segment.

⁽³⁾

~~(3)~~

Income tax (provision) benefit reflects a tax rate of 21%.

⁽⁴⁾

Many of Corning’s administrative and staff functions are performed on a centralized basis. Where practicable, Corning charges these expenses to segments based upon the extent to which each business uses a centralized function. Other staff functions, such as corporate finance, human resources and legal, are allocated to segments, primarily as a percentage of sales. Expenses that are not allocated to the segments are included in the reconciliation of reportable ~~net~~ segment net income (loss) to consolidated net ~~income below.~~income.

A reconciliation of reportable segments and Hemlock and Emerging Growth Businesses net sales to consolidated net sales follows (in millions):

	Three months ended
	March 31,
	2022			2021
Net sales of reportable segments	$	3,369		$	2,992
Net sales of Hemlock and Emerging Growth Businesses		375			271
Impact of foreign currency movements ⁽¹⁾		(64	)		27
Consolidated net sales	$	3,680		$	3,290

⁽¹⁾	This amount primarily represents the impact of foreign currency adjustments in the Display Technologies segment.

Table of Contents

~~Index~~

A reconciliation of reportable segment net income (loss) to consolidated net income follows (in millions):

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016
Net income of reportable segments

$
428

$
456

$
1,269

$
1,127
Net loss of All Other

(55)

(47)

(166)

(187)
Unallocated amounts:

Net financing costs (1)

(27)

(26)

(79)

(84)
Stock-based compensation expense

(10)

(10)

(35)

(33)
Exploratory research

(24)

(27)

(71)

(82)
Corporate contributions

(7)

(15)

(29)

(38)
Gain on realignment of equity investment

2,676
Equity in earnings of affiliated companies (2)

30

22

140

126
Unrealized loss on foreign currency hedges
related to translated earnings

(24)

(239)

(392)

(2,441)
Resolution of Department of Justice investigation

(98)
Income tax benefit

66

193

299

1,247
Other corporate items

13

(23)

(21)

(90)
Net income

$
390

$
284

$
915

$
2,123

~~(1)~~

~~Net financing costs include interest income, interest expense, and interest costs and investment gains and losses associated with benefit plans.~~

~~(2)~~

For the periods ending September 30, 2017, and the three months ending September 30, 2016, the amounts represent the equity earnings of HSG. Through May 31, 2016, the date of the strategic realignment of our equity interest in Dow Corning, this amount primarily represents the equity earnings from Dow Corning. Refer to Note 7, Investments, for additional information.

	Three months ended
	March 31,
	2022			2021
Net income of reportable segments	$	593		$	537
Net loss of Hemlock and Emerging Growth Businesses		(8	)		(24	)
Unallocated amounts:
Impact of foreign currency movements not included in segment net income (loss)		(63	)		6
Gain on foreign currency hedges related to translated earnings		129			272
Translation gain on Japanese yen-denominated debt		84			118
Research, development, and engineering expenses		(35	)		(34	)
Amortization of intangibles		(31	)		(32	)
Interest expense, net		(61	)		(74	)
Income tax provision		(20	)		(90	)
Other corporate items		(7	)		(80	)
Net income	$	581		$	599

Table of Contents

~~Index~~

ITEM 2. MA~~NAGEMENT’S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ORGANIZATION OF INFORMATION

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides a historical and prospective narrative on the Company’s financial condition and results of operations. This interim MD&A should be read in conjunction with the MD&A in ~~our 2016~~Corning’s 2021 Form 10-K. The various sections of this MD&A contain ~~a number of~~ forward-looking statements that involve ~~a number of~~ risks and uncertainties. Words such as “anticipates,” “expects,” “intends,” “plans,” “goals,” “believes,” “seeks,” “estimates,” “continues,” “may,” “will,” “should,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of ~~our~~the Company’s future financial performance, ~~our~~ anticipated growth and trends in ~~our~~the businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on ~~our~~ current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly in “Risk Factors” in Part I, Item 1A of ~~our 2016~~Corning’s 2021 Form 10-K, and as may be updated in ~~our~~the Forms 10-Q. ~~Our actual~~Actual results may differ materially, and these forward-looking statements do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of ~~September 30, 2017.~~March 31, 2022.

~~Our~~ MD&A includes the following sections:

●	· Overview
●		~~Overview~~

Results of Operations

●

Core Performance Measures

●

Reportable Segments

●

Capital Resources and Liquidity

●

Critical Accounting Estimates

●	· Environment
●		~~New Accounting Standards~~

~~Environment~~

Forward-Looking Statements

OVERVIEW

~~Strategy~~The Company has and ~~Capital Allocation Framework~~will continue to focus on three core priorities: preserving the financial health of the Company; protecting employees and communities; and delivering on customer commitments. We are continuing to build a stronger, more resilient company that is committed to rewarding shareholders and supporting all global stakeholders.

~~In October 2015,~~ Corning continues to act rapidly and remain resilient in the face of global uncertainty. We have preserved our financial strength by executing well and advancing major innovations with industry leaders. We have continued to effectively leverage our focused and cohesive portfolio to create value and outperform our underlying markets, contributing to sales and earnings growth and strong free cash flow generation in the three months ended March 31, 2022.

Corning announced ~~a strategy~~the Strategy & Growth Framework in 2019, highlighting significant opportunities to sell more Corning content through each of our Market-Access Platforms. The Company is focused on our cohesive portfolio and ~~capital allocation framework (the “Framework”) that reflects~~ the ~~Company’s~~utilization of our financial strength, supported by strong operating cash flow generation, which we expect to continue. Corning has and ~~operational strengths,~~will continue to use its cash to grow, extend its leadership and reward shareholders. Our key growth drivers remain intact, and some are accelerating as ~~well as~~key trends converge around Corning’s capabilities.

Corning will continue to advance the objectives of the Strategy & Growth Framework, which sets its ~~ongoing commitment to increasing shareholder value. The Framework outlines our~~ leadership priorities and articulates ~~the~~ opportunities ~~we see~~ across ~~our~~its businesses. We designed the Framework to create significant value for shareholders by focusing our portfolio and leveraging our financial strength. Under our Framework we target generating $26 billion to $30 billion of cash through 2019, returning more than $12.5 billion to shareholders and investing $10 billion to sustain our leadership positions and deliver growth.

Our probability of success increases as we invest in our world-class capabilities. Corning is concentrating approximately 80% of its research, development and engineering investment ~~and~~along with capital spending on a cohesive set of three core technologies, four manufacturing and engineering platforms, and five market-access platforms. This strategy ~~will allow~~allows us to quickly apply our talents and repurpose our assets across the Company, as ~~needed.~~needed, to capture high-return opportunities.

Table of Contents

Summary of results for the three months ~~and nine months~~ ended ~~September 30, 2017~~March 31, 2022

~~Net~~In the first quarter of 2022, net sales ~~in the three and nine months ended September 30, 2017~~ were ~~$2,607~~$3,680 million, ~~and $7,479 million, respectively,~~ compared to ~~$2,507~~$3,290 million ~~and $6,914 million in~~during the same ~~periods~~period in ~~2016. The~~2021, a net increase ~~in both periods was~~of $390 million, or 12%, primarily driven by ~~higher~~ sales increases in ~~the~~ Optical Communications and Specialty Materials segments. Optical Communications segment sales increased $122 million and $431 million, respectively, due to higher sales of carrier and enterprise network products. Specialty Materials segment sales increased $78 million and $222 million, respectively, driven by higher sales of Corning Gorilla Glass and advanced optics products. Display Technologies.

~~Index~~

In the ~~third~~first quarter of ~~2017, we~~2022, Corning generated net income of ~~$390~~$581 million, or ~~$0.39~~$0.68 per diluted share, compared to net income of ~~$284~~$599 million, or ~~$0.26~~$0.67 per diluted share, for the same period in ~~2016.~~2021. The ~~increase~~decrease in net income of ~~$106~~$18 million ~~or 37%~~was primarily driven by lower translated earnings contract gains of $110 million (amount presented after-tax), partially offset by higher net income of reportable segments and Hemlock and Emerging Growth Businesses of $72 million and a gain on the sale of a business of $41 million.

The change in diluted earnings per share for the three months ended March 31, 2022, was primarily driven by the ~~following items (amounts presented after-tax):~~

~~A decrease of $135 million in unrealized losses from our translated earnings contracts;~~

~~An increase of $30 million in net income in the Specialty Materials segment, driven by an increase in net sales of Corning Gorilla Glass and advanced optics products;~~

~~An increase of $18 million in net income in the Optical Communications segment, due to higher sales of carrier and enterprise network products; and~~

~~The absence of a $17 million charge recorded in the third quarter of 2016 resulting from several small settlements in our defined benefit pension plan.~~

~~Partially offsetting these items was a decrease of $76 million~~changes in net income, inoutlined above, and impacted by share repurchases of 47.6 million over the Display Technologies segment, driven by LCD glass price declines of approximately 10%, the absence of a $41 million gain resulting from the contingent consideration fair value adjustment recorded in the third quarter of 2016 and the impact of the weakening of the Japanese yen in the amount of $25 million, partially offset by a small increase in volume, an increase of $31 million from realized gains on our yen-denominated currency hedges and improvements in manufacturing efficiency.last twelve months.

The translation impact of fluctuations in foreign currency exchange rates, including the impact of hedges realized in the current quarter, ~~did not materially impact~~adversely impacted Corning’s consolidated net income by $25 million in the three months ended ~~September 30, 2017~~March 31, 2022, respectively, when compared to the same period in ~~2016.~~2021.

~~In the first three quarters~~2022 Corporate Outlook

We expect core net sales of ~~2017, we generated net income of $915 million or $0.89 per share, compared~~approximately $3.7 to ~~net income of $2,123 million or $1.81 per share~~$3.9 billion for the ~~same period in 2016. The decrease in net income~~second quarter of ~~$1,208 million was primarily driven by the following items (amounts presented after-tax):~~

~~The absence of a $2.7 billion non-taxable gain and $105 million positive tax adjustment on the strategic realignment of our ownership interest in Dow Corning recorded in the second quarter of 2016;~~

A decrease in net income of $29 million in the Display Technologies segment, primarily driven by price declines of approximately 10%, the absence of a gain of $35 million from the contingent consideration fair value adjustment during 2016 and the impact from the weakening of the Japanese yen and South Korean won in the amount of $36 million; and

~~The absence of a gain of $25 million on the contribution of our equity interests in PCC and PCE as partial settlement of the asbestos litigation recorded in the second quarter of 2016.~~

~~Partially offsetting these events were the following items:~~

~~A decrease in unrealized losses from our translated earnings contracts in the amount of $1.3 billion;~~

~~The absence of a charge of $86 million related to the resolution of an investigation by the U.S. Department of Justice and related costs;~~

A decrease of $56 million in restructuring, impairment and other charges, largely due to the absence of charges incurred in 2016 associated with restructuring activity and the disposal of long-lived assets;

~~An increase in net income of $107 million in the Optical Communications segment, due to higher sales of carrier and enterprise network products;~~

~~An increase in net income of $70 million in the Specialty Materials segment, driven by an increase in Corning Gorilla Glass and advanced optics products; and~~

Lower acquisition-related expenses, down $54 million, largely due to the absence of costs related to the realignment of our equity interests in Dow Corning completed in the second quarter of 2016, offset slightly by several small acquisitions occurring in 2017.

The translation impact of fluctuations in foreign currency exchange rates, including the impact of hedges realized in the current quarter, did not materially impact Corning’s consolidated net income in the nine months ended September 30, 2017 when compared to the same period in 2016.2022.

Table of Contents

~~Index~~

~~2017 Corporate Outlook~~

In 2017, Corning will continue to advance its Framework initiatives. In the Display Technologies segment, we expect the rate of growth in both retail market and glass demand to be in the mid-single digit percentage. We believe the full-year 2017 LCD glass pricing environment will be favorable and better than last year, with expectations of price declines of approximately 10% or even less. In the Optical Communications segment, we anticipate sales to increase by more than 15% over 2016. In the Environmental Technologies segment, we expect sales to be up mid-single digits in percentage terms from 2016. We expect growth in the Specialty Materials segment to be more than 20% year-over-year, reflecting very strong customer deployment of Corning® Gorilla® Glass 5 and other Corning innovations. In the Life Sciences segment, we expect low-single digit sales growth, ahead of forecasted market growth rates.

~~Index~~

RESULTS OF OPERATIONS

Selected highlights ~~for the three and nine months ended September 30, 2017 and 2016 follow (in millions):~~

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2017

2016

17 vs. 16

2017

2016

17 vs. 16

Net sales

$
2,607

$
2,507

4%

$
7,479

$
6,914

8%

Gross margin

$
1,056

$
1,041

1%

$
2,998

$
2,756

9%
(gross margin %)

41%

42%

40%

40%

Selling, general and
  administrative expenses

$
372

$
302

23%

$
1,067

$
1,104

(3%)
(as a % of net sales)

14%

12%

14%

16%

Research, development and
  engineering expenses

$
213

$
187

14%

$
620

$
569

9%
(as a % of net sales)

8%

7%

8%

8%

Equity in earnings of
  affiliated companies

$
31

$
19

63%

$
148

$
119

24%
(as a % of net sales)

1%

1%

2%

2%

Translated earnings contract gain
  (loss), net

$
26

$
(237)

*

$
(193)

$
(2,295)

(92%)
(as a % of net sales)

1%

*

*

*

Gain on realignment
  of equity investment

$
2,676

(100%)
(as a % of net sales)

39%

Income before income taxes

$
479

$
257

86%

$
1,091

$
1,288

(15%)
(as a % of net sales)

18%

10%

15%

19%

(Provision) benefit for income taxes

$
(89)

$
27

*

$
(176)

$
835

*
(as a % of net sales)

*

1%

*

12%

Net income attributable to
  Corning Incorporated

$
390

$
284

37%

$
915

$
2,123

(57%)
(as a % of net sales)

15%

11%

12%

31%

*Percent change is not meaningful.

~~Index~~

~~Net Sales~~

~~The following table presents net sales by reportable segment (in millions):~~

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2017

2016

17 vs. 16

2017

2016

17 vs. 16
Display Technologies

$
768

$
902

(15%)

$
2,252

$
2,408

(6%)
Optical Communications

917

795

15%

2,617

2,186

20%
Environmental Technologies

277

264

5%

815

787

4%
Specialty Materials

373

295

26%

1,010

788

28%
Life Sciences

223

214

4%

654

633

3%
All Other

49

37

32%

131

112

17%
Total net sales

$
2,607

$
2,507

4%

$
7,479

$
6,914

8%

~~For the three months ended September 30, 2017, net sales increased by $100 million, or 4% when compared to the same period in 2016. The primary sales drivers by segment were as follows:~~

A decrease of $134 million in the Display Technologies segment, driven by LCD glass price declines of approximately 10% and the negative impact from the weakening of the Japanese yen in the amount of $51 million, partially offset by a small increase in volume;

~~An increase of $122 million in the Optical Communications segment, due to higher sales of carrier and enterprise network products;~~

An increase of $13 million in the Environmental Technologies segment, driven by an increase in demand in North America for heavy-duty diesel products and an increase of $9 million in sales of automotive products due to worldwide growth;

~~An increase of $78 million in the Specialty Materials segment, driven by strong growth in sales of Corning Gorilla Glass products, combined with an increase in advanced optics products; and~~

~~An increase of $9 million in the Life Sciences segment.~~

~~For the nine months ended September 30, 2017, net sales increased by $565 million, or 8%, when compared to the same period in 2016. The primary sales drivers by segment were as follows:~~

A decrease of $156 million in the Display Technologies segment, driven by price declines of approximately 10% and the negative impact from the weakening of the Japanese yen in the amount of $51 million, partially offset by an increase in volume in the high-single digits in percentage terms;

An increase of $431 million in the Optical Communications segment, due to higher sales of carrier and enterprise network products, combined with the absence of production issues related to the implementation of new manufacturing software in the first quarter of 2016. Strong growth in the North American market drove the increase in carrier network products;

~~An increase of $28 million in the Environmental Technologies segment, driven by higher sales of automotive products due to market strength in Europe, China and Asia;~~

~~An increase of $222 million in the Specialty Materials segment, driven by strong growth in sales of Corning Gorilla Glass products, combined with an increase in advanced optics products; and~~

~~An increase of $21 million in the Life Sciences segment.~~

Movements in foreign exchange rates did not materially impact Corning’s consolidated net sales in the three and nine months ended September 30, 2017, respectively, when compared to the same periods in 2016.

~~Cost of Sales~~

The types of expenses included in the cost of sales line item are: raw materials consumption, including direct and indirect materials; salaries, wages and benefits; depreciation and amortization; production utilities; production-related purchasing; warehousing (including receiving and inspection); repairs and maintenance; inter-location inventory transfer costs; production and warehousing facility property insurance; rent for production facilities; and other production overhead.

~~Gross Margin~~

In the three months ended September 30, 2017, gross margin dollars increased $15 million, or 1%, but gross margin as a percentage of net sales declined slightly when compared to the same period in 2016, driven by LCD glass price declines of approximately 10% and the impact of the weakening of the Japanese yen in the amount of $34 million, which negatively impacted the Display Technologies segment. Gross margin increased in the remainder of our segments, up $102 million, primarily driven by higher sales volume in the Specialty Materials and Optical Communications segments.

~~Index~~

In the nine months ended September 30, 2017, gross margin dollars increased by $242 million, or 9%, and gross margin as a percentage of net sales remained consistent, when compared to the same period last year. Gross margin increased in the remainder of our segments, up $328 million, primarily driven by higher sales volume in the Specialty Materials and Optical Communications segments. LCD glass price declines of approximately 10% and the impact of the weakening of the Japanese yen and South Korean won in the amount of $44 million, which negatively impacted the Display Technologies segment, partially offset the increase.

~~Selling, General and Administrative Expenses~~

When compared to the third quarter of 2016, selling, general and administrative expenses increased by $70 million, or 23%, in the three months ended September 30, 2017. The increase was due to the following items:

~~The absence of a gain of $49 million from the contingent consideration fair value adjustment recorded in the third quarter of 2016; and~~

~~An increase in the Optical Communications segment and for our emerging businesses of $17 million and $7 million, respectively, driven by new business growth.~~

When compared to the first three quarters of 2016, selling, general and administrative expenses decreased by $37 million, or 3%, in the nine months ended September 30, 2017. The decrease was due to the following items:

A decrease of $55 million in acquisition-related costs, driven by the absence of costs related to the realignment of our equity interests in Dow Corning completed in the second quarter of 2016, offset slightly by several small acquisitions occurring in 2017;

A decrease of $64 million in litigation, regulatory and other legal costs, driven by the absence of events occurring in the second quarter of 2016. In this period, we recorded litigation and other expenses related to the resolution of an investigation by the U.S. Department of Justice and an environmental matter in the amount of $98 million, offset somewhat by the gain on the contribution of our equity interests in PCC and PCE as partial settlement of the asbestos litigation in the amount of $56 million; and

~~A decrease of $45 million in the mark-to-market of our defined benefit pension plans.~~

~~Offsetting these events were the following items:~~

~~The absence of $39 million of gains from the contingent consideration fair value adjustments recorded in 2016;~~

~~An increase of $35 million in the Optical Communications segment due to costs associated with capacity expansion and growth initiatives; and~~

~~An increase of $17 million in the Specialty Materials segment.~~

The types of expenses included in the selling, general and administrative expenses line item are: salaries, wages and benefits; stock-based compensation expense; travel; sales commissions; professional fees; and depreciation and amortization, utilities and rent for administrative facilities.

~~Research, Development and Engineering Expenses~~

For the three and nine months ended September 30, 2017, research, development and engineering expenses increased by $26 million, or 14%, and $51 million, or 9%, respectively, when compared to the same periods last year, driven by the absence of the impact of a 2016 joint development agreement in the Display Technologies segment, as well as higher costs associated with new product launches and our emerging businesses. As a percentage of sales, these expenses increased slightly in the third quarter, and remained consistent in the first nine months of 2017, when compared to the same periods last year.

~~Index~~

~~Equity in Earnings of Affiliated Companies~~

~~The following provides a summary of equity in earnings of affiliated companies (in millions):~~

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016
Dow Corning Corporation (1)

$
82
Hemlock Semiconductor Group

$
29

$
22

$
139

44
All other

2

(3)

9

(7)
Total equity earnings

$
31

$
19

$
148

$
119

~~(1)~~

~~Results include equity earnings of the silicones business and Hemlock Semiconductor business of Dow Corning from January 1, 2016 through May 31, 2016.~~

~~Refer to Note 7 (Investments) to the consolidated financial statements for additional information.~~

~~Translated earnings contract gain (loss), net~~

~~Included in the line item Translated earnings contract gain (loss), net, is the impact of foreign currency hedges which hedge our translation exposure arising~~ from movements in the Japanese yen, South Korean won, euro, New Taiwan dollar and Chinese yuan against the U.S. dollar and its impact on our net earnings. The following table provides detailed information on the impact of our translated earnings contract losses and gains:

Three Months Ended

Three Months Ended

Change

September 30, 2017

September 30, 2016

2017 vs. 2016

Income

Income

Income

before

before

before

income

Net

income

Net

income

Net
(in millions)

taxes

income

taxes

income

taxes

income
Hedges related to translated earnings:

Realized gain, net

$
50

$
31

$
2

$
1

$
48

$
30
Unrealized loss, net

(24)

(15)

(239)

(150)

215

135
Total translated earnings contract
gain (loss), net

$
26

$
16

$
(237)

$
(149)

$
263

$
165

Nine Months Ended

Nine Months Ended

Change

September 30, 2017

September 30, 2016

2017 vs. 2016

Income

Income

Income

before

before

before

income

Net

income

Net

income

Net
(in millions)

taxes

income

taxes

income

taxes

income
Hedges related to translated earnings:

Realized gain, net

$
199

$
124

$
146

$
92

$
53

$
32
Unrealized loss, net

(392)

(247)

(2,441)

(1,539)

2,049

1,292
Total translated earnings contract
loss, net

$
(193)

$
(123)

$
(2,295)

$
(1,447)

$
2,102

$
1,324

~~The gross notional value outstanding on our translated earnings contracts at September 30, 2017 and December 31, 2016 were as follows (in billions):~~

September 30,
2017

December 31,
2016
Japanese yen-denominated hedges
$
13.5

$
14.9
South Korean won-denominated hedges

1.1

1.2
Euro-denominated hedges

0.4

0.3
Chinese yuan-denominated hedges

0.2

0.3
Total gross notional value outstanding
$
15.2

$
16.7

~~Index~~

~~Income Before Income Taxes~~

In the three and nine months ended September 30, 2017, the impact of fluctuations in foreign exchange rates did not materially impact Corning’s consolidated income before income taxes when compared to the same periods in 2016.

~~(Provision)Benefit for Income Taxes~~

~~Our (provision) benefit for income taxes and the related effective income tax rate were~~operations are as follows (in millions):

	Three months ended						%
	March 31,						change
	2022			2021			22 vs. 21

Net sales	$	3,680		$	3,290			12	%

Gross margin	$	1,283		$	1,156			11	%
(gross margin %)		35	%		35	%

Selling, general and administrative expenses	$	434		$	400			9	%
(as a % of net sales)		12	%		12	%

Research, development and engineering expenses	$	248		$	222			12	%
(as a % of net sales)		7	%		7	%

Translated earnings contract gain, net	$	129		$	272			(53	%)
(as a % of net sales)		4	%		8	%

Provision for income taxes	$	(180	)	$	(226	)		(20	%)
(as a % of net sales)		(5	%)		(7	%)

Net income attributable to Corning Incorporated	$	581		$	599			(3	%)
(as a % of net sales)		16	%		18	%

~~For the three months ended September 30, 2017, the effective income tax rate differed from the U.S. statutory rate of 35% primarily due to the following benefits:~~Segment Net Sales

~~Rate differences on income (loss) of consolidated foreign companies; and~~

~~The benefit of excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income.~~

~~For the nine months ended September 30, 2017, the effective income tax rate differed from the U.S. statutory rate of 35% primarily due to the following benefits:~~

~~Rate differences on income (loss) of consolidated foreign companies;~~

~~The benefit of excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income; and~~

~~Discrete tax items.~~

~~For the three months ended September 30, 2016, the effective income tax benefit differed from the U.S. statutory rate of 35% primarily due to the following benefit:~~

~~Rate differences on income (loss) of consolidated foreign companies; and~~

~~The benefit of excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income.~~

~~For the nine months ended September 30, 2016, the effective income tax benefit differed from the U.S. statutory rate of 35% primarily due to the following benefits:~~

~~Rate differences on income (loss) of consolidated foreign companies, including the benefit of excess foreign tax credits resulting from the inclusion of foreign earnings in U.S. income;~~

~~The impact of equity in earnings of nonconsolidated affiliates reported in the financial statements, net of tax; and~~

~~Refer to Note 4 (Income Taxes) to the consolidated financial statements for additional information.~~

~~Index~~

~~Net Income Attributable to Corning Incorporated~~

~~As a result of the items discussed above, our net income and per share data is as follows (in millions, except per share amounts):~~

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016
Net income attributable to Corning Incorporated

$
390

$
284

$
915

$
2,123
Net income attributable to Corning Incorporated used
in basic earnings per common share calculation (1)

$
366

$
260

$
842

$
2,050
Net income attributable to Corning Incorporated used
in diluted earnings per common share calculation (1)

$
390

$
284

$
915

$
2,123
Basic earnings per common share

$
0.41

$
0.27

$
0.93

$
1.96
Diluted earnings per common share

$
0.39

$
0.26

$
0.89

$
1.81

Weighted-average common shares outstanding - basic

883

978

905

1,046
Weighted-average common shares outstanding - diluted

1,009

1,102

1,031

1,170

~~(1)~~

~~Refer to Note 5 (Earnings per Common Share) to the consolidated financial statements for additional information.~~

~~Comprehensive Income~~

For the three months ended September 30, 2017, comprehensive income decreased by $90 million when compared to the same period in 2016, due to the negative impact of the change in foreign currency translation gains and losses of $192 million, driven primarily by the Japanese yen, partially offset by the increase in net income of $106 million.

~~For the nine months ended September 30, 2017, comprehensive income decreased by $1.8 billion, when compared to the same period in 2016, driven by the following items:~~

~~The decrease in net income attributable to Corning Incorporated of $1,208 million;~~

~~The negative impact of the change in foreign currency translation gains and losses of $412 million, driven primarily by the Japanese yen; and~~

The negative impact of the change in the amount of unamortized gains and losses for postretirement benefit plans of $243 million driven by the release in the second quarter of 2016 of unamortized actuarial losses as a result of the realignment of our equity interests in Dow Corning.

~~Offsetting these decreases was an increase in net unrealized gains on designated hedges in the amount of $72 million.~~

~~Refer to Note 13 (Shareholders’ Equity) to the consolidated financial statements for additional information.~~

~~CORE PERFORMANCE MEASURES~~

In managing the Company and assessing our financial performance, we supplement certain measures provided by our consolidated financial statements with measures adjusted to exclude certain items, to arrive at core performance measures. We believe that reporting core performance measures provides investors greater transparency to the information used by our management team to make financial and operational decisions. Corning has adopted the use of constant currency reporting for the Japanese yen and South Korean won, and uses an internally derived yen-to-dollar management rate of ¥99 and won-to-dollar management rate of ₩1,100.

Net sales, equity in earnings of affiliated companies and net income are adjusted to exclude the impacts of changes in the Japanese yen and the South Korean won, gains and losses on our foreign currency hedges related to translated earnings, acquisition-related costs, discrete tax items, restructuring and restructuring-related charges, certain litigation-related expenses, pension mark-to-market adjustments and other items which do not reflect on-going operating results of the Company or our equity affiliates. Management’s discussion and analysis on our reportable segments has also been adjusted for these items, as appropriate. These measures are not prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). We believe investors should consider these non-GAAP measures in evaluating our results as they are more indicative of our core operating performance and how management evaluates our operational results and trends. These measures are not, and should not be viewed as a substitute for, GAAP reporting measures. With respect to the Company’s outlooks for future periods, it is not able to provide reconciliations for these non-GAAP measures because the Company does not forecast the movement of the Japanese yen and South Korean won against the U.S. dollar, or other items that do not reflect ongoing operations, nor does it forecast items that have not yet occurred or are out of the Company’s control. As a result, the Company is unable to provide outlook information on a GAAP basis.

~~Index~~

See “Use of Non-GAAP Financial Measures” for details on core performance measures. For a reconciliation of non-GAAP performance measures to their most directly comparable GAAP financial measure, please see “Reconciliation of Non-GAAP Measures” below.

~~RESULTS OF OPERATIONS – CORE PERFORMANCE MEASURES~~

~~Selected highlights from our continuing operations, excluding certain items, follow (in millions):~~

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2017

2016

17 vs. 16

2017

2016

17 vs. 16
Core net sales

$
2,700

$
2,548

6%

$
7,775

$
7,159

9%
Core equity in earnings of affiliated companies

$
32

$
19

68%

$
78

$
138

(43)%
Core earnings

$
433

$
466

(7)%

$
1,271

$
1,240

3%

~~Core Net Sales~~

The following table presents ~~core~~segment net sales by reportable segment and Hemlock and Emerging Growth Businesses (in millions):

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2017

2016

17 vs. 16

2017

2016

17 vs. 16
Display Technologies

$
860

$
943

(9)%

$
2,547

$
2,652

(4)%
Optical Communications

917

795

15%

2,617

2,186

20%
Environmental Technologies

277

264

5%

815

787

4%
Specialty Materials

373

295

26%

1,010

788

28%
Life Sciences

223

214

4%

654

633

3%
All Other

50

37

35%

132

113

17%
Total core net sales

$
2,700

$
2,548

6%

$
7,775

$
7,159

9%

Core net sales increased by $152 million, or 6%, and $616 million, or 9%, in the three months and nine months ended September 30, 2017, respectively, when compared to the same periods in 2016. In all segments except Display Technologies, core net sales are consistent with GAAP net sales. Because a significant portion of revenues in the Display Technologies segment are denominated in Japanese yen, this segment’s net sales are adjusted to remove the impact of translating yen into dollars.

When compared to the third quarter of 2016, core net sales in the Display Technologies segment decreased by $83 million, or 9%, in the third quarter of 2017, driven by LCD glass price declines of approximately 10%, partially offset by a small increase in volume. When compared to the first nine months of 2016, core net sales in the Display Technologies segment decreased by $105 million, or 4%, in the first nine months of 2017, driven by LCD glass price declines of approximately 10%, partially offset by an increase in volume in the high-single digits in percentage terms.

~~Core Equity in Earnings of Affiliated Companies~~

~~The following provides a summary of core equity in earnings of affiliated companies (in millions):~~

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Dow Corning Corporation (1)

$
98
Hemlock Semiconductor Group

$
29

$
22

$
67

44
All other

3

(3)

11

(4)
Total core equity earnings

$
32

$
19

$
78

$
138

~~(1)~~

~~Results include core equity earnings of the silicones business and Hemlock Semiconductor business of Dow Corning from January 1, 2016 through May 31, 2016.~~

~~Index~~

~~Core Earnings~~

In the three months ended September 30, 2017, we generated core earnings of $433 million or $0.43 per share, compared to core earnings generated in the three months ended September 30, 2016 of $466 million, or $0.42 per share. The decrease of $33 million was primarily due to lower core earnings in the Display Technologies segment, down $43 million, and in emerging businesses, down $10 million, combined with an increase in corporate spending of approximately $20 million. Higher core earnings in the Optical Communications and Specialty Materials segments, up $13 million and $27 million, respectively, partially offset the decrease.

In the nine months ended September 30, 2017, we generated core earnings of $1,271 million or $1.23 per share, compared to core earnings generated in the nine months ended September 30, 2016 of $1,240 million, or $1.06 per share. The increase of $31 million, or $0.17 per share, was driven by the following items:

An increase in core earnings of $102 million in the Optical Communications segment, due to higher sales of carrier and enterprise network products, combined with the absence of the production issues in the first half of 2016 related to the implementation of new software; and

~~An increase in core earnings of $53 million in the Specialty Materials segment, driven by an increase in Corning Gorilla Glass and advanced optics products.~~

Offsetting these increases were the absence of the equity earnings of $102 million from Dow Corning’s silicones business due to our 2016 realignment of our ownership interest in Dow Corning, and lower core earnings in the Display Technologies and Environmental Technologies segments.

Included in core earnings for the three months and nine months ended September 30, 2017 is net periodic pension expense in the amounts of $12 million and $37 million, respectively, and for the same periods in 2016, $13 million and $38 million, respectively.

~~Refer to Note 9 (Employee Retirement Plans) to the Consolidated Financial Statements for additional information.~~

~~Core Earnings per Common Share~~

~~The following table sets forth the computation of core basic and core diluted earnings per common share (in millions, except per share amounts):~~

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016
Core earnings attributable to Corning Incorporated

$
433

$
466

$
1,271

$
1,240
Less: Series A convertible preferred stock dividend

24

24

73

73
Core earnings available to common stockholders - basic

409

442

1,198

1,167
Add: Series A convertible preferred stock dividend

24

24

73

73
Core earnings available to common stockholders - diluted

$
433

$
466

$
1,271

$
1,240

Weighted-average common shares outstanding - basic

883

978

905

1,046
Effect of dilutive securities:

Stock options and other dilutive securities

11

9

11

9
Series A convertible preferred stock

115

115

115

115
Weighted-average common shares outstanding - diluted

1,009

1,102

1,031

1,170
Core basic earnings per common share

$
0.46

$
0.45

$
1.32

$
1.12
Core diluted earnings per common share

$
0.43

$
0.42

$
1.23

$
1.06

~~Reconciliation of Non-GAAP Measures~~

We utilize certain financial measures and key performance indicators that are not calculated in accordance with GAAP to assess our financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the statement of income or statement of cash flows, or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure as calculated and presented in accordance with GAAP in the statement of income or statement of cash flows.

Core net sales, core equity in earnings of affiliated companies and core earnings are non-GAAP financial measures utilized by our management to analyze financial performance without the impact of items that are driven by general economic conditions and events that do not reflect the underlying fundamentals and trends in the Company’s operations.

~~Index~~

~~The following tables reconcile our non-GAAP financial measures to their most directly comparable GAAP financial measure (amounts in millions except percentages and per share amounts):~~

Three Months Ended September 30, 2017

Income

before

Effective

Net

Equity

income

Net

tax

Per

sales

earnings

taxes

income

rate (a)

share
As reported - GAAP

$
2,607

$
31

$
479

$
390

18.6%

$
0.39
Constant-yen (1)

92

1

81

62

0.06
Constant-won (1)

1

(6)

(4)

Translated earnings contract gain (2)

(28)

(18)

(0.02)
Acquisition-related costs (3)

21

14

0.01
Discrete tax items and other tax-related
adjustments (4)

(2)

Translation gain on Japanese yen-denominated
debt (12)

(14)

(9)

(0.01)
Core performance measures

$
2,700

$
32

$
533

$
433

18.8%

$
0.43

~~(a)~~

~~Based upon statutory tax rates in the specific jurisdiction for each event.~~

Three Months Ended September 30, 2016

Income

before

Effective

Net

Equity

income

Net

tax (benefit)

Per

sales

earnings

taxes

income

rate (a)

share
As reported - GAAP

$
2,507

$
19

$
257

$
284

(10.5%)

$
0.26
Constant-yen (1)

40

47

30

0.03
Constant-won (1)

1

(4)

(3)

Translated earnings contract loss (2)

237

149

0.14
Acquisition-related costs (3)

15

11

0.01
Discrete tax items and other tax-related
adjustments (4)

6

0.01
Restructuring, impairment and other charges (6)

11

9

0.01
Impacts from the acquisition of Samsung
Corning Precision Materials (8)

(49)

(41)

(0.04)
Pension mark-to-market adjustment (9)

26

17

0.02
Taiwan power outage (11)

5

4

Core performance measures

$
2,548

$
19

$
545

$
466

14.5%

$
0.42

~~(a)~~

~~Based upon statutory tax rates in the specific jurisdiction for each event.~~

See Part 1, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Results of Operations – Core Performance Measures, Reconciliation of Non-GAAP Measures, “Items which we exclude from GAAP measures to arrive at core performance measures” for the descriptions of the footnoted reconciling items.

~~Index~~

~~The following tables reconcile our non-GAAP financial measures to their most directly comparable GAAP financial measure (amounts in millions except percentages and per share amounts):~~

Nine Months Ended September 30, 2017

Income

before

Effective

Net

Equity

income

Net

tax

Per

sales

earnings

taxes

income

rate (a)

share
As reported – GAAP

$
7,479

$
148

$
1,091

$
915

16.1%

$
0.89
Constant-yen (1)

294

2

266

201

0.19
Constant-won (1)

2

(20)

(15)

(0.01)
Translated earnings contract loss (2)

198

124

0.12
Acquisition-related costs (3)

60

41

0.04
Discrete tax items and other tax-related
  adjustments (4)

28

0.03
Litigation, regulatory and other legal matters (5)

(12)

(9)

(0.01)
Restructuring, impairment and other charges (6)

50

35

0.03
Equity in earnings of affiliated companies (7)

(72)

(72)

(46)

(0.04)
Impacts from the acquisition of Samsung
  Corning Precision Materials (8)

(5)

(3)

Pension mark-to-market adjustment (9)

15

9

0.01
Translation gain on Japanese yen-denominated
  debt (12)

(14)

(9)

(0.01)
Core performance measures

$
7,775

$
78

$
1,557

$
1,271

18.4%

$
1.23

~~(a)~~

~~Based upon statutory tax rates in the specific jurisdiction for each event.~~

Nine Months Ended September 30, 2016

Income

before

Effective

Net

Equity

income

Net

tax (benefit)

Per

sales

earnings

taxes

income

rate (a)

share
As reported

$
6,914

$
119

$
1,288

$
2,123

(64.8%)

$
1.81
Constant-yen (1)

242

4

232

164

0.14
Constant-won (1)

3

(1)

(36)

(26)

(0.02)
Translated earnings contract loss (2)

2,295

1,447

1.24
Acquisition-related costs (3)

109

95

0.08
Discrete tax items and other tax-related
adjustments (4)

(83)

(0.07)
Litigation, regulatory and other legal matters (5)

55

70

0.06
Restructuring, impairment and other charges (6)

131

91

0.08
Equity in earnings of affiliated companies (7)

16

16

15

0.01
Impacts from the acquisition of Samsung
Corning Precision Materials (8)

(45)

(38)

(0.03)
Pension mark-to-market adjustment (9)

60

39

0.03
Gain on realignment of equity investment (10)

(2,676)

(2,676)

(2.29)
Taiwan power outage (11)

25

19

0.02
Core performance measures

$
7,159

$
138

$
1,454

$
1,240

14.7%

$
1.06

~~(a)~~

~~Based upon statutory tax rates in the specific jurisdiction for each event.~~

~~Index~~

~~Items which we exclude from GAAP measures to arrive at core performance measures are as follows:~~


~~(1)~~	~~Constant-currency adjustments:~~
	~~Constant-yen~~: Because a significant portion of Display Technologies segment revenues and manufacturing costs are denominated in Japanese yen, management believes it is important to understand the impact on core earnings of translating yen into dollars. Presenting results on a constant-yen basis mitigates the translation impact of the Japanese yen, and allows management to evaluate performance period over period, analyze underlying trends in our businesses, and establish operational goals and forecasts. As of January 1, 2015, we used an internally derived management rate of ¥99, which is closely aligned to our current yen portfolio of foreign currency hedges, and have recast all periods presented based on this rate in order to effectively remove the impact of changes in the Japanese yen.
	~~Constant-won~~: Because a significant portion of Corning Precision Materials’ costs are denominated in South Korean won, management believes it is important to understand the impact on core earnings from translating won into dollars. Presenting results on a constant-won basis mitigates the translation impact of the South Korean won, and allows management to evaluate performance period over period, analyze underlying trends in our businesses, and establish operational goals and forecasts without the variability caused by the fluctuations caused by changes in the rate of this currency. We use an internally derived management rate of ₩1,100, which is consistent with historical prior period averages of the won.
~~(2)~~	~~Translated earnings contract gain (loss)~~: We have excluded the impact of the gains and losses of our Japanese yen and South Korean won-denominated foreign currency hedges related to translated earnings, as well as the unrealized gains and losses of our euro, New Taiwan dollar and Chinese yuan-denominated foreign currency hedges related to translated earnings.
~~(3)~~	~~Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments and external acquisition-related deal costs.~~
~~(4)~~	~~Discrete tax items and other tax-related adjustments~~: This represents the removal of discrete adjustments (e.g. changes in tax law and changes in judgment about the realizability of certain deferred tax assets) as well as other non-operational tax-related adjustments.
~~(5)~~	~~Litigation, regulatory and other legal matters: Includes amounts related to legal matters.~~
~~(6)~~	~~Restructuring, impairment and other charges: This amount includes restructuring, impairment and other charges, including goodwill impairment charges and other expenses and disposal costs not classified as restructuring expense.~~
~~(7)~~	~~Equity in earnings of affiliated companies~~: These adjustments relate to items which do not reflect expected on-going operating results of our affiliated companies, such as restructuring, impairment and other charges and settlements under “take-or-pay” contracts.
~~(8)~~	~~Impacts from the acquisition of Samsung Corning Precision Materials: This amount primarily represents the fair value adjustments to the indemnity asset related to contingent consideration.~~
~~(9)~~	~~Pension mark-to-market adjustment: Mark-to-market pension gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates.~~
~~(10)~~	~~Gain on realignment of equity investment: Gain recorded upon the completion of the strategic realignment of our ownership interest in Dow Corning.~~
~~(11)~~	~~Taiwan power outage~~: Impact of the power outage that temporarily halted production at our Tainan, Taiwan manufacturing location in the second quarter of 2016. The impact includes asset write-offs and charges for facility repairs, offset somewhat by partial reimbursement through our insurance program.
~~(12)~~	~~Translation gain on Japanese yen-denominated debt: The gain on the translation of our Yen-denominated debt to U.S. dollars.~~

~~Index~~

~~REPORTABLE SEGMENTS~~

~~Our reportable segments are as follows:~~

~~Display Technologies – manufactures glass substrates primarily for flat panel liquid crystal displays.~~

~~Optical Communications – manufactures carrier and enterprise network components for the telecommunications industry.~~

~~Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel emission control applications.~~

~~Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.~~

~~Life Sciences – manufactures glass and plastic labware, equipment, media and reagents enabling workflow solutions for scientific applications.~~

All other segments that do not meet the quantitative threshold for separate reporting have been grouped as “All Other.” This group is primarily comprised of the results of the pharmaceutical technologies business and new product lines and development projects, as well as certain corporate investments such as Eurokera and Keraglass equity affiliates.

We prepared the financial results for our reportable segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We included the earnings of equity affiliates that are closely associated with our reportable segments in the respective segment’s net income. We have allocated certain common expenses among our reportable segments differently than we would for stand-alone financial information prepared in accordance with GAAP. Our reportable segments include non-GAAP measures which are not prepared in accordance with GAAP. We believe investors should consider these non-GAAP measures in evaluating our results as they are more indicative of our core operating performance and how management evaluates our operational results and trends. These measures are not, and should not be viewed as a substitute for GAAP reporting measures. For a reconciliation of non-GAAP performance measures to their most directly comparable GAAP financial measure, please see “Reconciliation of Non-GAAP Measures” above. Segment net income may not be consistent with measures used by other companies. The accounting policies of our reportable segments are the same as those applied in the consolidated financial statements.

Three months ended

March 31,

change

2022

2021

22 vs. 21

Optical Communications

1,198

937

~~Display Technologies~~Optical Communications

The following tables provide net sales and net income for the Display Technologies segment and reconcile the non-GAAP financial measures for the Display Technologies segment with our consolidated financial statements presented in accordance with GAAP (in millions):

Three months ended

Nine months ended

September 30, 2017

September 30, 2017

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported - GAAP

$
768

$
203

$
2,252

$
663
Constant-yen (1)

91

60

293

195
Constant-won (1)

1

(3)

2

(12)
Translated earnings contract gain (2)

(33)

(124)
Litigation, regulatory and other legal matters (5)

(9)
Restructuring, impairment and other charges (6)

13
Impacts from the acquisition of Samsung Corning
Precision Materials (8)

(3)
Core performance

$
860

$
227

$
2,547

$
723

~~Index~~

Three months ended

Nine months ended

September 30, 2016

September 30, 2016

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported - GAAP

$
902

$
279

$
2,408

$
692
Constant-yen (1)

40

35

242

171
Constant won (1)

1

(3)

2

(24)
Translated earnings contract gain (2)

(2)

(93)
Restructuring, impairment and other charges (6)

13
Impacts from the acquisition of Samsung Corning
Precision Materials (8)

(41)

(38)
Taiwan power outage (11)

2

9
Core performance

$
943

$
270

$
2,652

$
730

~~As Reported~~

Net sales in the Display Technologies segment decreased by $134 million, or 15%, in the third quarter of 2017, when compared to the third quarter of 2016. The decrease was driven by LCD glass price declines of approximately 10% and the negative impact from the weakening of the Japanese yen in the amount of $51 million, partially offset by a small increase in volume. Net income decreased by $76 million, or 27%, driven by the LCD glass price declines described above, the absence of a $41 million gain resulting from the contingent consideration fair value adjustment recorded in the third quarter of 2016 and the impact of the weakening of the Japanese yen in the amount of $25 million. These items were partially offset by a small increase in volume, an increase of $31 million from realized gains on our yen-denominated currency hedges and improvements in manufacturing efficiency.

Net sales decreased by $156 million, or 6%, in the first nine months of 2017, when compared to the same period in 2016, driven by price declines of approximately 10% and the negative impact from the weakening of the Japanese yen in the amount of $51 million, partially offset by an increase in volume in the high-single digits in percentage terms. Net income decreased by $29 million, or 4%, primarily driven by the price declines described above, the absence of net gains of $35 million from the contingent consideration fair value adjustments during 2016 and the impact from the weakening of the Japanese yen and South Korean won in the amount of $36 million. These items were partially offset by an increase in volume in the high-single digits, an increase of $31 million from realized gains on our yen-denominated currency hedges and improvements in manufacturing efficiency.

~~Core Performance~~

When compared to the same periods in 2016, core net sales in the Display Technologies segment decreased by $83 million, or 9%, and $105 million, or 4%, in the third quarter and first nine months of 2017, respectively, driven by the price declines described above, partially offset by an increase in volume in both periods. Core earnings also decreased in these periods, down $43 million, or 16%, and $7 million, or 1%, respectively, driven by price declines, offset somewhat by the increase in volume and improvements in manufacturing efficiency.

~~Outlook:~~

~~For the fourth quarter, the LCD glass market and Corning volume are expected to be consistent with the previous quarter, and sequential glass price declines should remain moderate.~~

~~Index~~

1,198

937

Optical Communications

1,198

937

The following tables provide net sales and net income for the Optical Communications segment and reconcile the non-GAAP financial measures for the Optical Communications segment with our consolidated financial statements presented in accordance with GAAP (in millions):Display Technologies

959

863

Specialty Materials

Three months ended

Nine months ended

September 30, 2017

September 30, 2017

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported - GAAP

$
917

$
102

$
2,617

$
285
Acquisition-related costs (3)

9

25
Restructuring, impairment and other charges (6)

2
Core performance

$
917

$
111

$
2,617

$
312

493

451

Environmental Technologies

409

441

Life Sciences

Three months ended

Nine months ended

September 30, 2016

September 30, 2016

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported - GAAP

$
795

$
84

$
2,186

$
178
Acquisition-related costs (3)

3

16
Restructuring, impairment and other charges (6)

7

12
Pension mark-to-market (9)

4

4
Core performance

$
795

$
98

$
2,186

$
210

~~As Reported~~

310

300

Net sales of reportable segments

3,744

3,263

Hemlock and Emerging Growth Businesses

375

271

Impact of foreign currency movements ⁽¹⁾

(64

)

(337

Consolidated net sales

3,680

3,290

⁽¹⁾	This amount primarily represents the impact of foreign currency adjustments in the Display Technologies segment.

Table of Contents

In the first quarter of 2022, net sales of reportable segments and Hemlock and Emerging Growth Businesses were $3,744 million, compared to $3,263 million during the same period in 2021, a net increase of $481 million, or 15%. Changes in net sales were as follows:

●

Optical ~~Communications segment increased by $122 million, or 15%, in the third quarter of 2017, due to higher sales of carrier and enterprise network products. Net~~Communications’ net sales increased by ~~$431~~$261 million, or ~~20%~~28%, in the first three quarters of 2017, when compared to the same periods in 2016, due to higher sales of carrier and enterprise network products, combined with the absence of production issues related to the implementation of new manufacturing software in the first quarter of 2016. Strong growth in the North American fiber-to-the-home market drove the increase in carrier network products.

Net income in the third quarter and first nine months of 2017 increased by $18 million, or 21%, and $107 million, or 60%, respectively, driven by the increase in sales described above and lower restructuring expenses, partially offset by capacity expansion spending and an increase in acquisition-related costs.

~~Movements in foreign exchange rates did not materially impact net sales and net income in this segment in the three and nine months ended September 30, 2017 when compared to the same periods in 2016.~~

~~Core Performance~~

Core earnings increased in the three and nine months ended September 30, 2017 by $13 million, or 13%, and $102 million, or 49%, respectively, driven by the increase in sales described above, partially offset by capacity expansion spending.

~~Index~~

~~Outlook~~:

~~In the fourth quarter, the sales growth rate is expected to be a high-single digit percentage on a year-over-year basis.~~

~~Environmental Technologies~~

The following tables provide net sales and net income for the Environmental Technologies segment and reconcile the non-GAAP financial measures for the Environmental Technologies segment with our consolidated financial statements presented in accordance with GAAP (in millions):

Three months ended

Nine months ended

September 30, 2017

September 30, 2017

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported - GAAP

$
277

$
34

$
815

$
97
Restructuring, impairment and other charges (6)

6
Core performance measures

$
277

$
34

$
815

$
103

Three months ended

Nine months ended

September 30, 2016

September 30, 2016

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported - GAAP

$
264

$
35

$
787

$
106
Restructuring, impairment and other charges (6)

3
Core performance measures

$
264

$
35

$
787

$
109

~~As Reported~~

Net sales in the Environmental Technologies segment increased $13 million, or 5%, in the third quarter of 2017 when compared to the same period in 2016, due to an increase in demand in North America for heavy-duty diesel products, which drove sales of diesel products up $4 million, and an increase of $9 million in sales of automotive products due to market strength worldwide. Net sales in the first three quarters of 2017 increased $28 million, or 4%,primarily driven by higher sales of carrier products as network operators increased capital spending to address demand for 5G, broadband, and the cloud;

●

Display Technologies’ net sales increased by $96 million or 11%, largely due to volume growth of approximately 10 percent and slightly higher pricing;

●	Specialty Materials’ net sales increased by $42 million, or 9%, primarily due to strong demand for premium cover materials and advanced optics products;

●

Net sales for Environmental Technologies decreased by $32 million, or 7%, primarily driven by sales declines of heavy-duty diesel products of $8 million, or 5%, and automotive products, ~~due to market strength in Europe, China and Asia. Movements in foreign exchange rates did not materially impact net~~of $24 million, or 9%, as component shortages limited automotive production;

●

Net sales ~~in this segment in the three and nine months ended September 30, 2017 when compared to the same periods in 2016.~~

~~Net income in the third quarter and first nine months of 2017 decreased~~for Life Sciences increased by $1$10 million, or 3%; and

●

Net sales for Hemlock and Emerging Growth Businesses increased by $104 million, primarily driven by increases in Hemlock's sales, with AGS and CPT contributing to year-over-year growth.

Movements in foreign exchange rates adversely impacted Corning’s consolidated net sales by $98 million in the three months ended March 31, 2022, when compared to the same period in 2021.

Cost of Sales

Gross Margin

In the three months ended March 31, 2022, gross margin increased by $127 million, or 11%, and was consistent as a percentage of sales when compared to the prior period. The increase in gross margin was primarily driven by higher sales and the benefit of pricing actions across all businesses.

The translation impact of fluctuations in foreign currency exchange rates, including the impact of hedges realized in the current quarter, adversely impacted Corning’s consolidated gross margin by $75 million in the three months ended March 31, 2022, when compared to the same period in 2021.

Selling, General and Administrative Expenses

In the three months ended March 31, 2022, selling, general and administrative expenses increased by $34 million, or 9%, and was consistent as a percentage of sales, when compared to the prior period. Increases in these costs were primarily driven by higher compensation and benefit expenses when compared to the same period in 2021.

The types of expenses included in the selling, general and administrative expenses line item are: salaries, wages and benefits; share-based compensation expense; travel; sales commissions; professional fees; and depreciation and amortization, utilities, rent for administrative facilities and restructuring, impairment and other charges and credits.

Research, Development and Engineering Expenses

In the three months ended March 31, 2022, research, development and engineering expenses increased by $26 million, or 12%, was consistent as a percentage of sales when compared to the prior period.

Translated earnings contract gain, net

Included in the line item translated earnings contract gain, net, is the impact of foreign currency contracts which hedge our translation exposure arising from movements in the Japanese yen, South Korean won, new Taiwan dollar, euro, Chinese yuan and British pound and the impact on net income.

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The following table provides detailed information on the impact of translated earnings contract gains and losses (in millions):

	Three months ended				Three months ended						Change
	March 31, 2022				March 31, 2021						2022 vs. 2021
	Income				Income						Income
	before		Net		before			Net			before			Net
	taxes		income		taxes			income			taxes			income
Hedges related to translated earnings:
Realized gain (loss), net ⁽¹⁾	$	33	$	25	$	(12	)	$	(9	)	$	45		$	34
Unrealized gain, net ⁽²⁾		96		74		284			218			(188	)		(144	)
Total translated earnings contract gain, net	$	129	$	99	$	272		$	209		$	(143	)	$	(110	)

⁽¹⁾	Includes before tax realized losses related to the expiration of option contracts for the three months ended March 31, 2022 and 2021 of $7 million and $9 million, ~~or 8%,~~respectively. Activity has been reflected in operating activities in the consolidated statements of cash flows.

⁽²⁾	The impact to income was primarily driven by ~~expenses in support~~yen-denominated hedges of ~~new product launches,~~translated earnings.

Income Before Income Taxes

The translation impact of fluctuations in foreign currency exchange rates, including the impact of hedges realized in the current quarter, adversely impacted Corning’s consolidated income before income taxes by $30 million for the three months ended March 31, 2022, when compared to the same period in 2021.

Provision for Income Taxes

The provision for income taxes and the related effective income tax rates are as follows (in millions):

	Three months ended
	March 31,
	2022			2021
Provision for income taxes	$	(180	)	$	(226	)
Effective tax rate		23.7	%		27.4	%

For the three months ended March 31, 2022, the effective income tax rate differed from the U.S. statutory rate of 21%, primarily due to changes in tax reserves and the impact of changes in tax legislation, partially offset by differences arising from foreign earnings. For the three months ended March 31, 2021, the effective income tax rate differed from the U.S. statutory rate of 21%, primarily due to adjustments to our permanently reinvested foreign income position and tax reform items.

Refer to Note 3 (Income Taxes) to the consolidated financial statements for additional information.

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Net Income Attributable to Corning Incorporated

Net income and per share data is as follows (in millions, except per share amounts):

	Three months ended
	March 31,
	2022		2021
Net income attributable to Corning Incorporated	$	581	$	599
Net income available to common shareholders used in basic earnings per common share calculation	$	581	$	575

Net income available to common shareholders used in diluted earnings per common share calculation	$	581	$	599

Basic earnings per common share	$	0.69	$	0.75
Diluted earnings per common share	$	0.68	$	0.67

Weighted-average common shares outstanding - basic		843		766
Weighted-average common shares outstanding - diluted		859		898

Comprehensive Income

For the three months ended March 31, 2022, comprehensive income increased by $147 million when compared to the same period in 2021, primarily due to a net gain on foreign currency translation adjustments of $163 million, largely driven by the Japanese yen and South Korean won.

Refer to Note 12 (Shareholders’ Equity) to the consolidated financial statements for additional information.

CORE PERFORMANCE MEASURES

In managing the Company and assessing our financial performance, certain measures provided by our consolidated financial statements are adjusted to exclude specific items to arrive at core performance measures. These items include gains and losses on translated earnings contracts, acquisition-related costs, certain discrete tax items and other tax-related adjustments, restructuring, impairment losses, and other charges and credits, certain litigation-related expenses, pension mark-to-market adjustments and other items which do not reflect on-going operating results of the Company or our equity affiliates. Corning utilizes constant-currency reporting for our Display Technologies, Environmental Technologies, Specialty Materials and Life Sciences segments for the Japanese yen, South Korean won, Chinese yuan, new Taiwan dollar and the euro. The Company believes that the use of constant-currency reporting allows investors to understand our results without the volatility of currency fluctuations and reflects the underlying economics of the translated earnings contracts used to mitigate the impact of changes in currency exchange rates on earnings and cash flows. Corning also believes that reporting core performance measures provides investors greater transparency to the information used by the management team to make financial and operational decisions.

Core performance measures are not prepared in accordance with GAAP. We believe investors should consider these non-GAAP measures in evaluating results as they are more indicative of our core operating performance and how management evaluates operational results and trends. These measures are not, and should not, be viewed as a substitute for GAAP reporting measures. With respect to the Company’s outlook for future periods, it is not possible to provide reconciliations for these non-GAAP measures because the Company does not forecast the movement of foreign currencies against the U.S. dollar, or other items that do not reflect ongoing operations, nor does it forecast items that have not yet occurred or are out of the Company’s control. As a result, the Company is unable to provide outlook information on a GAAP basis.

For a reconciliation of non-GAAP performance measures to their most directly comparable GAAP financial measure, please see “Reconciliation of Non-GAAP Measures”.

Table of Contents

RESULTS OF OPERATIONS – CORE PERFORMANCE MEASURES

Selected highlights from continuing operations, excluding certain items, follow (in millions):

	Three months ended				%
	March 31,				change
	2022		2021		22 vs. 21
Core net sales	$	3,744	$	3,263		15	%
Core net income	$	465	$	402		16	%

Core Net Sales

Core net sales are consistent with net sales by reportable segment and Hemlock and Emerging Growth Businesses. Core net sales are presented below (in millions):

	Three months ended				%
	March 31,				change
	2022		2021		22 vs. 21
Optical Communications	$	1,198	$	937		28	%
Display Technologies		959		863		11	%
Specialty Materials		493		451		9	%
Environmental Technologies		409		441		(7	)%
Life Sciences		310		300		3	%
Net sales of reportable segments	$	3,369	$	2,992		13	%
Net sales of Hemlock and Emerging Growth Businesses		375		271		38	%
Total core net sales	$	3,744	$	3,263		15	%

Core Net Income

In the three months ended March 31, 2022, we generated core net income of $465 million, or $0.54 per diluted share, compared to core net income generated in the three months ended March 31, 2021 of $402 million, or $0.45 per diluted share. The increase of $63 million, or $0.09 per diluted share, was primarily due to higher net income of reportable segments and Hemlock and Emerging Growth Businesses when compared to the same period in 2021. Changes in net income are as follows:

●	Optical Communications’ net income increased $55 million, largely driven by higher volume and price;
●	Display Technologies’ net income increased $23 million, primarily driven by increased volume and slightly higher pricing; and

●	Hemlock and Emerging Growth Businesses net loss decreased by $16 million.

The increases to segment net income were partially offset by declines in net income of $16 million and $6 million for Specialty Materials and Life Sciences, respectively.

The change in diluted earnings per share was primarily driven by changes in net income, outlined above, and share repurchases of 47.6 million over the last twelve months. Refer to Note 12 (Shareholders' Equity) to the consolidated financial statements for additional information.

Table of Contents

Core Earnings per Common Share

The following table sets forth the computation of core basic and core diluted earnings per common share (in millions, except per share amounts):

	Three months ended
	March 31,
	2022		2021
Core net income attributable to Corning Incorporated	$	465	$	402
Less: Series A convertible preferred stock dividend				24
Core net income available to common shareholders - basic		465		378
Plus: Series A convertible preferred stock dividend				24
Core net income available to common shareholders - diluted	$	465	$	402

Weighted-average common shares outstanding - basic		843		766
Effect of dilutive securities:
Stock options and other dilutive securities		16		17
Series A convertible preferred stock				115
Weighted-average common shares outstanding - diluted		859		898
Core basic earnings per common share	$	0.55	$	0.49
Core diluted earnings per common share	$	0.54	$	0.45

Reconciliation of Non-GAAP Measures

Corning utilizes certain financial measures and key performance indicators that are not calculated in accordance with GAAP to assess financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the consolidated statements of income or statements of cash flows, or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure as calculated and presented in accordance with GAAP in the consolidated statements of income or statements of cash flows.

Core net sales, core equity in earnings of affiliated companies and core net income are non-GAAP financial measures utilized by management to analyze financial performance without the impact of items that are driven by general economic conditions and events that do not reflect the underlying fundamentals and trends in the Company’s operations.

Table of Contents

The following tables reconcile the non-GAAP financial measures to their most directly comparable GAAP financial measure (amounts in millions except percentages and per share amounts):

	Three months ended March 31, 2022
						Income
			Equity			before						Effective
	Net		(losses)			income			Net			tax			Per
	sales		earnings			taxes			income			rate (a)			share
As reported - GAAP	$	3,680	$	(1	)	$	761		$	581			23.7	%	$	0.68
Constant-currency adjustment ⁽¹⁾		64		1			63			49						0.06
Translation gain on Japanese yen-denominated debt ⁽²⁾							(84	)		(64	)					(0.07	)
Translated earnings contract gain ⁽³⁾							(129	)		(99	)					(0.12	)
Acquisition-related costs ⁽⁴⁾							39			32						0.04
Discrete tax items and other tax-related adjustments ⁽⁵⁾										11						0.01
Pension mark-to-market adjustment ⁽⁶⁾							(10	)		(8	)					(0.01	)
Restructuring, impairment and other charges and credits ⁽⁷⁾							33			24						0.03
Gain on sale of business ⁽⁸⁾							(53	)		(41	)					(0.05	)
Contingent consideration ⁽⁹⁾							(26	)		(20	)					(0.02	)
Core performance measures	$	3,744	$	—		$	594		$	465			21.7	%	$	0.54

(a)	Based upon statutory tax rates in the ~~first nine months~~specific jurisdiction for each event.

	Three months ended March 31, 2021
						Income
						before						Effective
	Net			Equity		income			Net			tax			Per
	sales			earnings		taxes			income			rate (a)			share
As reported - GAAP	$	3,290		$	8	$	825		$	599			27.4	%	$	0.67
Constant-currency adjustment ⁽¹⁾		(27	)				(6	)		5						0.01
Translation gain on Japanese yen-denominated debt ⁽²⁾							(118	)		(90	)					(0.10	)
Translated earnings contract gain ⁽³⁾							(272	)		(209	)					(0.23	)
Acquisition-related costs ⁽⁴⁾							47			35						0.04
Discrete tax items and other tax-related adjustments ⁽⁵⁾										37						0.04
Pension mark-to-market adjustment ⁽⁶⁾							5			4						0.00
Gain on sale of business ⁽⁸⁾							(14	)		(14	)					(0.02	)
Litigation, regulatory and other legal matters ⁽¹⁰⁾							8			8						0.01
Loss on investments ⁽¹¹⁾							35			27						0.03
Core performance measures	$	3,263		$	8	$	510		$	402			21.2	%	$	0.45

(a)	Based upon statutory tax rates in the specific jurisdiction for each event.

See Part 1, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Results of Operations – Core Performance Measures, Reconciliation of Non-GAAP Measures, “Items which we exclude from GAAP measures to report core performance measures” for the descriptions of the footnoted reconciling items.

Table of Contents

Items which we exclude from GAAP measures to arrive at core performance measures are as follows:

(1)

Constant-currency adjustment: Because a significant portion of ~~2017 by higher restructuring, impairment~~segment revenues and expenses are denominated in currencies other ~~charges. Movements in foreign exchange rates did not materially~~than the U.S. dollar, management believes it is important to understand the impact on core net income ~~in this~~of translating these currencies into U.S. dollars. Our Display Technologies’ segment ~~in the three and nine months ended September 30, 2017 when compared to the same periods in 2016.~~

~~Core Performance~~

In the three and nine months of 2017, core earnings decreased by $1 million, or 3%, and $6 million, or 6%, when compared to the same periods in 2016, driven by the items impacting the “As Reported” results described above.

~~Outlook~~:

~~In the fourth quarter of 2017, the sales growth rate is expected to be a low-teens percentage compared to the same period a year ago.~~

~~Index~~

~~Specialty Materials~~

~~The following tables provide net~~ sales and net income ~~for~~are primarily denominated in Japanese yen, but also impacted by the ~~Specialty Materials segment~~South Korean won, Chinese yuan, and ~~reconcile the non-GAAP financial measures for the Specialty Materials segment with our consolidated financial statements presented in accordance with GAAP (in millions):~~

Three months ended

Nine months ended

September 30, 2017

September 30, 2017

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported - GAAP

$
373

$
72

$
1,010

$
176
Constant-won (1)

(1)

(1)
Restructuring, impairment and other charges (6)

2
Core performance

$
373

$
71

$
1,010

$
177

Three months ended

Nine months ended

September 30, 2016

September 30, 2016

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported - GAAP

$
295

$
42

$
788

$
106
Constant-yen (1)

(1)
Constant-won (1)

(1)
Restructuring, impairment and other charges (6)

14
Taiwan power outage (11)

2

6
Core performance

$
295

$
44

$
788

$
124

~~See Part 1, Item 2. Management’s Discussion~~new Taiwan dollar. Environmental Technologies and Analysis of Financial Condition and Results of Operations, Results of Operations – Core Performance Measures, Reconciliation of Non-GAAP Measures, “Items which we exclude from GAAP measures to arrive at core performance measures” for the descriptions of the footnoted reconciling items.

~~As Reported~~

Net sales in the Specialty Materials segment increased by $78 million, or 26%, and $222 million, or 28%, in the third quarter and first nine months of 2017, respectively, when compared to the same periods in 2016, driven by an increase in sales of Gorilla Glass products in support of new product launches, combined with an increase in advanced optics products. Net income in these periods increased by $30 million, or 71%, and $70 million, or 66%, primarily due to the significant increase in net sales, and, in the first three quarters, lower restructuring charges and the absence of the costs associated with a power outage in Taiwan. Movements in foreign exchange rates did not materially impact netLife Science segments sales and net income ~~in these periods when compared~~are primarily impacted by the euro and Chinese yuan. Presenting results on a constant-currency basis mitigates the translation impact and allows management to ~~the same periods~~evaluate performance period over period, analyze underlying trends in the ~~prior year.~~businesses, and establish operational goals and forecasts. We establish constant-currency rates based on internally derived management estimates which are closely aligned with the currencies we have hedged.

Constant-currency rates are as follows:

Currency

~~Core Performance~~Japanese yen

~~Core earnings increased by $27 million,~~Korean won

Chinese yuan

New Taiwan dollar

Euro

Rate

¥107

₩1,175

¥6.7

NT$31

€.81

(2)

Translation gain on Japanese yen-denominated debt: We have excluded the gain or ~~61%, and $53 million, or 43%, in~~loss on the three and nine months ended September 30, 2017, respectively, driven primarily by the increase in sales of Corning Gorilla Glass and advanced optics products, offset slightly by higher selling and administrative costs.

~~Outlook~~:

~~In the fourth quarter of 2017, the sales growth rate is expected to increase by a low-to mid-teens percentage from a very strong 2016 fourth quarter.~~

~~Index~~

~~Life Sciences~~

The following tables provide net sales and net income for the Life Sciences segment and reconcile the non-GAAP financial measures for the Life Sciences segment with our consolidated financial statements presented in accordance with GAAP (in millions):

Three months ended

Nine months ended

September 30, 2017

September 30, 2017

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported – GAAP

$
223

$
17

$
654

$
48
Acquisition-related costs (3)

4

10
Restructuring, impairment and other charges (6)

2
Core performance

$
223

$
21

$
654

$
60

Three months ended

Nine months ended

September 30, 2016

September 30, 2016

Net

Net

Net

Net
(in millions)

sales

income

sales

income
As reported – GAAP

$
214

$
16

$
633

$
45
Acquisition-related costs (3)

3

9
Restructuring, impairment and other charges (6)

2

6
Core performance

$
214

$
21

$
633

$
60

(3)

~~As Reported~~

~~Net sales in~~Translated earnings contract gain: We have excluded the Life Sciences segment increased by $9 million, or 4%, and $21 million, or 3%, in the three and nine months ended September 30, 2017, when compared to the same periods in 2016, driven by higher sales in North America and China in the third quarter, and strong performance globally in the first nine months of 2017. Movements in foreign exchange rates did not materially impact ~~net sales in this segment in the three and nine months ended September 30, 2017 when compared to the same periods in 2016.~~

Net income increased by $1 million, or 6%, and $3 million, or 7%, in the three and nine months ended September 30, 2017, respectively, driven by an increase in volume and lower restructuring expenses. Movements in foreign exchange rates did not materially impact net income in these periods when compared to the same periods in the prior year.

~~Core Performance~~

~~Core earnings remained consistent in the three and nine months ended September 30, 2017, when compared to the same periods in 2016.~~

~~Outlook~~:

~~Fourth-quarter sales are expected to grow by a mid-single digit percentage on a year-over-year basis.~~

~~All Other~~

~~All other segments that do not meet the quantitative threshold for separate reporting have been grouped as “All Other.” This group is primarily comprised~~ of the ~~results~~realized and unrealized gains and losses of the ~~pharmaceutical technologies business~~Japanese yen, South Korean won, Chinese yuan, euro and new ~~product lines and development projects,~~Taiwan dollar-denominated foreign currency hedges related to translated earnings, as well as ~~certain corporate investments~~the unrealized gains and losses of the British pound-denominated foreign currency hedges related to translated earnings.

(4)

Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments, external acquisition-related deal costs, and other transaction related costs.

(5)

Discrete tax items and other tax-related adjustments: These include discrete period tax items such as ~~Eurokera~~changes of tax reserves and ~~Keraglass equity affiliates.~~ changes in our permanently reinvested foreign income position.

~~The following table provides net sales~~

(6)

Pension mark-to-market adjustment: Defined benefit pension mark-to-market gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates.

(7)

Restructuring, impairment and other ~~data for All Other (in millions)~~charges and credits:

Three months ended

Nine months ended

September 30,

September 30,
As Reported

2017

2016

2017

2016

Net sales

$
49

$
37

$
131

$
112
Research, development and engineering expenses

$
52

$
47

$
156

$
139
Net loss

$
(55)

$
(47)

$
(166)

$
(187)

~~Index~~

~~Net sales~~ This amount primarily includes other charges and credits. A portion of ~~this segment increased by $12 million, or 32%, and $19 million, or 17%, in~~ the three and nine months ended September 30, 2017, respectively, when compared to the same periods in 2016, driven by an increase in sales of pharmaceutical packaging products. The increase in the net loss in the third quarter of $8 million reflects higher losses in our development projects and the pharmaceutical technologies business. The decrease in the net loss in the first nine months of 2017 reflects the absence of asset write-offs in emerging businesses recorded incharge during the first quarter of ~~2016.~~

~~CAPITAL RESOURCES AND LIQUIDITY~~

~~Financing and Capital Resources~~

~~The following items impacted Corning’s financing and capital structure in~~2022, related to facility repairs resulting from the ~~periods ended September 30, 2017 and 2016:~~

~~Debt Issuances~~

Inimpact of the third quarter 2021 power outages. The Company is pursuing recoveries under its applicable property insurance policies.

(8)

Gain on sale of ~~2017, Corning issued three Japanese yen-denominated debt securities (the “Notes”),~~business: Amount represents the gain recognized for the sale of a certain business.

(9)

Contingent consideration: This amount represents the fair value mark-to-market cost adjustment of contingent consideration resulting from the Hemlock Transaction on September 9, 2020.

(10)

Litigation, regulatory and other legal matters: Includes amounts that reflect developments in commercial litigation, intellectual property disputes, adjustments to the estimated liability for environmental-related items and other legal matters.

(11)

Loss on investments: Amount represents the loss recognized due to mark-to-mark adjustments capturing the change in fair value based on the closing stock market price.

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REPORTABLE SEGMENTS

Reportable segments are as follows:

~~¥21 billion 0.698% senior unsecured long term notes with a maturity of 7 years;~~

●	Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.

	·		~~¥47 billion 0.992% senior unsecured long term notes with a maturity of 10 years; and~~
●	Display Technologies – manufactures glass substrates for flat panel liquid crystal displays and other high-performance display panels.

~~¥10 billion 1.583% senior unsecured long term notes with a maturity of 20 years.~~

~~Common Stock Dividends~~

On February 3, 2016, Corning’s Board of Directors declared a 12.5% increase in the Company’s quarterly common stock dividend, which increased the quarterly dividend from $0.12 to $0.135 per share of common stock, beginning with the dividend paid in the first quarter of 2016.

On February 1, 2017, Corning’s Board of Directors declared a 14.8% increase in the Company’s quarterly common stock dividend, which increased the quarterly dividend from $0.135 to $0.155 per share of common stock, beginning with the dividend to be paid in the first quarter of 2017. This increase marks the sixth dividend increase since October 2011.

~~Share Repurchase Program~~

In December 2016, Corning’s Board of Directors approved a $4 billion share repurchase program with no expiration (the “2016 Repurchase Program”). In the nine month ended September 30, 2017, Corning entered into two separate accelerated share repurchase agreements under this program (the “2017 ASR agreements”). In the second quarter of 2017, Corning entered into and finalized an accelerated share repurchase agreement, in which we paid $500 million for a total of 17.1 million shares. In the third quarter of 2017, Corning entered into and finalized an additional accelerated share repurchase agreement, in which we paid $500 million for a total of 17.2 million shares.

In addition to the 2017 ASR agreements, during the three and nine months ended September 30, 2017, the Company repurchased 17.2 million and 37.6 million shares of common stock on the open market for approximately $507.7 million and $1.1 billion, respectively.

~~Refer to Note 13 (Shareholders’ Equity) for additional information.~~

~~Capital Spending~~

~~Capital spending totaled $1.2 billion and $815 million in the nine months ended September 30, 2017 and 2016, respectively. We expect our 2017 capital expenditures to be~~

●

Specialty Materials – manufactures products that provide more than ~~$1.5 billion, driven by expansions related~~150 material formulations for glass, glass ceramics and fluoride crystals to ~~the Gen 10.5 glass manufacturing facility, the addition of capacity to support the new gas-particulate filters business in the~~ meet demand for unique customer needs.

●

Environmental Technologies ~~segment~~– manufactures ceramic substrates and ~~investment to support growth in customer demand in the Optical Communications~~filters for automotive and ~~Specialty Materials segments.~~

~~Index~~

~~Cash Flow~~

~~Summary of cash flow data (in millions):~~

Nine months ended

September 30,

2017

2016
Net cash provided by operating activities

$
1,116

$
1,109
Net cash (used in) provided by investing activities

$
(1,218)

$
3,956
Net cash used in financing activities

$
(1,595)

$
(4,872)

Net cash provided by operating activities increased by $7 million in the nine months ended September 30, 2017 when compared to the same period last year, driven largely by higher net income in the Optical Communicationsdiesel applications.

●

Life Sciences – manufactures glass and ~~Specialty Materials segments, up $177 million~~plastic labware, equipment, media, serum and ~~an increase in dividends received from affiliated companies of $81 million, partially offset by a payment of $70 million related to our obligation under the plan of reorganization~~reagents enabling workflow solutions for ~~PCC (refer to Note 2 (Commitments, Contingencies~~drug discovery and Guarantees) to the consolidated financial statements for additional information) and unfavorable movements in working capital, driven by an increase of $92 million in inventory to support growth in the Optical Communications segment and an increase of $63 million in other receivables in the Display Technologies segment.bioproduction.

All other businesses that do not meet the quantitative threshold for separate reporting have been grouped as “Hemlock and Emerging Growth Businesses”. The net sales for this group are primarily attributable to Hemlock, which is an operating segment that produces solar and semiconductor products. The emerging growth businesses primarily consist of CPT, AGS and the EIG, which are also operating segments.

Financial results for the reportable segments are prepared on a basis consistent with the internal disaggregation of financial information to assist the CODM in making internal operating decisions. A significant portion of segment revenues and expenses are denominated in currencies other than the U.S. dollar. Management believes it is important to understand the impact on core net income of translating these currencies into U.S. dollars. The Company uses constant currency reporting for Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences. Corning excludes the impact of these currencies from segment sales and net income. The adjustment for constant currency is primarily related to the Display Technologies’ segment and excludes the impact of the fluctuation of the Japanese yen, South Korean won, Chinese yuan, and new Taiwan dollar. Certain income and expenses are included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income. These include items that are not used by the CODM in evaluating the results of or in allocating resources to the segments and include the following items: the impact of translated earnings contracts; acquisition-related costs; discrete tax items and other tax-related adjustments; certain litigation, regulatory and other legal matters; restructuring, impairment losses and other charges and credits; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.

Earnings of equity affiliates that are closely associated with the reportable segments are included in the respective segment’s net income (loss). Certain common expenses among reportable segments have been allocated differently than they would for stand-alone financial information. Segment net income (loss) may not be consistent with measures used by other companies.

Optical Communications

The following table provides net sales and net income for the Optical Communications segment (in millions):

	Three months ended				%
	March 31,				change
	2022		2021		22 vs. 21
Segment net sales	$	1,198	$	937		28	%
Segment net income	$	166	$	111		50	%

Optical Communications' net sales increased by $261 million in the three months ended March 31, 2022, primarily driven by higher sales volumes of carrier products as network operators increased capital spending to address demand for 5G, broadband, and the cloud.

Net income increased by $55 million for the three months ended March 31, 2022, primarily driven by the changes in sales, outlined above, and price increases offsetting increased costs.

Movements in foreign currency exchange rates did not materially impact net income in this segment in the three months ended March 31, 2022, respectively, when compared to the same period in 2021.

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Display Technologies

The following table provides net sales and net income for the Display Technologies segment (in millions):

	Three months ended				%
	March 31,				change
	2022		2021		22 vs. 21
Segment net sales	$	959	$	863		11	%
Segment net income	$	236	$	213		11	%

Net sales in the Display Technologies segment increased by $96 million in the three months ended March 31, 2022, and were largely due to volume growth of approximately 10 percent and slightly higher pricing. Net income in the Display Technologies segment increased by $23 million in the three months ended March 31, 2022, primarily driven by the increases in sales outlined above.

Specialty Materials

The following table provides net sales and net income for the Specialty Materials segment (in millions):

	Three months ended				%
	March 31,				change
	2022		2021		22 vs. 21
Segment net sales	$	493	$	451		9	%
Segment net income	$	75	$	91		(18	%)

Net sales in the Specialty Materials segment increased by $42 million for the three months ended March 31, 2022, primarily due to strong demand for premium cover materials and advanced optics products for the three months ended March 31, 2022.

Net income decreased by $16 million for the three months ended March 31, 2022, primarily driven by increased investments in innovation programs that are moving towards commercialization.

Environmental Technologies

The following table provides net sales and net income for the Environmental Technologies segment (in millions):

	Three months ended				%
	March 31,				change
	2022		2021		22 vs. 21
Segment net sales	$	409	$	441		(7	%)
Segment net income	$	74	$	74		—

Net sales in the Environmental Technologies segment decreased by $32 million for the three months ended March 31, 2022. Sales of heavy-duty diesel products decreased $8 million, or 5%, and automotive sales declined $24 million, or 9%, as component shortages limited automotive production. Net income was flat when compared to the prior period.

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Life Sciences

The following table provides net sales and net income for the Life Sciences segment (in millions):

	Three months ended				%
	March 31,				change
	2022		2021		22 vs. 21
Segment net sales	$	310	$	300		3	%
Segment net income	$	42	$	48		(13	%)

Net sales in the Life Sciences segment increased by $10 million in the three months ended March 31, 2022, and net income decreased by $6 million for the three months ended March 31, 2022, primarily due to COVID-related operational challenges in the first half of the quarter, which impacted output.

Hemlock and Emerging Growth Businesses

Net cash used in investing activities increased by $5.2 billion in the nine months ended September 30, 2017, when compared to the same period last year, driven by the absence of $4.8 billion of cash received in the second quarter of 2016 on the realignment of Dow Corning, coupled with an increase of $432 million in capital expenditures largely due to capacity expansion projects in our Optical Communications segment and a decline of $92 million in liquidations of short-term investments. A decline of $108 million in acquisition spending partially offset these events.

Net cash used in financing activities in the nine months ended September 30, 2017 decreased by $3.3 billion when compared to the same period last year, driven by lower share repurchases, down $1.8 billion, cash received of $702 million from the issuance of long-term debt, the absence of $566 million of commercial paper and debt repayments made in the first nine months of 2016 and an increase of $189 million in proceeds from the exercise of stock options

~~Key Balance Sheet Data~~

~~Balance sheet and working capital measures are provided in the following table (in millions):~~

As of

As of

September 30,

December 31,

2017

2016

Working capital

$
5,189

$
6,297
Current ratio

2.7:1

3.3:1
Trade accounts receivable, net of allowances

$
1,748

$
1,481
Days sales outstanding

60

54
Inventories

$
1,693

$
1,471
Inventory turns

3.8

3.8
Days payable outstanding (1)

44

45
Long-term debt

$
3,994

$
3,646
Total debt to total capital

21%

18%

The following table provides net sales and net loss for Hemlock and Emerging Growth Businesses (in millions):

	Three months ended						%
	March 31,						change
	2022			2021			22 vs. 21
Net sales	$	375		$	271			38	%
Net loss	$	(8	)	$	(24	)		67	%

Net sales of this segment increased by $104 million in the three months ended March 31, 2022, when compared to the same period in 2021. Net loss decreased by $16 million primarily driven by Hemlock's increased sales, with AGS and CPT contributing to year-over-year growth, partially offset by increased spending on development projects.

CAPITAL RESOURCES AND LIQUIDITY

Financing and Capital Resources

There was no material debt activity in the first quarter of 2022 or 2021.

Share Repurchase Program

For the three months ended March 31, 2022, the Company repurchased 3.9 million shares of common stock on the open market for approximately $151 million as part of its 2019 Repurchase Program.

The Company made no open market share repurchases for the three months ended March 31, 2021.

Refer Note 12 (Shareholders' Equity) to the consolidated financial statements for additional information.

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Capital Spending

Capital spending totaled $383 million for the three months ended March 31, 2022. We expect our 2022 capital expenditures to be consistent with 2021.

Cash Flow

Summary of cash flow data (in millions):

	Three months ended
	March 31,
	2022			2021
Net cash provided by operating activities	$	534		$	723
Net cash used in investing activities	$	(278	)	$	(288	)
Net cash used in financing activities	$	(375	)	$	(190	)

Net cash provided by operating activities decreased by $189 million in the three months ended March 31, 2022, when compared to the same period in the prior year, primarily driven by higher cash payments for variable compensation.

Net cash used in investing activities decreased by $10 million in the three months ended March 31, 2022, when compared to the same period last year. The decrease was primarily driven by higher proceeds from the sale of businesses and realized gains on translated earnings contracts, of $50 million and $43 million, respectively, partially offset by increased capital expenditures of $94 million.

Net cash used in financing activities increased by $185 million in the three months ended March 31, 2022, when compared to the same period last year, primarily driven by increased share repurchases of $149 million.

Defined Benefit Pension Plans

Corning has defined benefit pension plans covering certain domestic and international employees. The Company’s funding policy is to contribute, over time, an amount exceeding the minimum requirements to achieve the Company’s long-term funding targets. During 2022, the Company expects to make cash contributions of $30 million to our international pension plans.

Key Balance Sheet Data

Balance sheet and working capital measures are provided in the following table (in millions):

	March 31,			December 31,
	2022			2021
Working capital	$	2,800		$	2,853
Current ratio		1.6:1			1.6:1
Trade accounts receivable, net of doubtful accounts	$	1,910		$	2,004
Days sales outstanding		47			49
Inventories, net	$	2,618		$	2,481
Inventory turns		3.7			3.7
Days payable outstanding ⁽¹⁾		58			50
Long-term debt	$	6,839		$	6,989
Total debt	$	6,959		$	7,044
Total debt to total capital		36	%		36	%

~~(1)~~

⁽¹⁾

Includes trade payables only.

~~Index~~

~~Credit Rating~~

~~Our credit ratings remain the same as those disclosed in our 2016 Form 10-K.~~

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Management Assessment of Liquidity

Corning is committed to strong financial stewardship and expects to maintain a strong cash balance and generate positive free cash flow for the year.

We ended the first quarter of 2022 with approximately $2.0 billion of cash and cash equivalents. Our cash and cash equivalents are held in various locations throughout the world and are generally unrestricted. We utilize a variety of strategies to ensure that our worldwide cash is available in the locations in which it is needed. At March 31, 2022, approximately 70% of the consolidated amount was held outside the U.S.

Corning has a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes up to a maximum aggregate principal amount outstanding at any one time of $1.5 billion. Under this program, the Company may issue the paper from time to time and will use the proceeds for general corporate purposes. As of March 31, 2022, Corning had no outstanding commercial paper.

The Company’s $1.5 billion Revolving Credit Agreement is available to support its commercial paper program, if needed, and for general corporate purposes.

Other

Comprehensive reviews of significant customers and their creditworthiness are completed by analyzing their financial strength, at least annually or more frequently, for customers where Corning has identified an increased measure of risk. The Company closely monitors payments and developments which may signal possible customer credit issues. During the three months ended March 31, 2022 and December 31, 2021, Corning sold accounts receivable and accelerated collections for the periods by $381 million and $197 million, respectively. The Company believes the accelerated collections will be, or would have been, collected during the normal course of business in the quarter following the respective sales. Corning has not currently identified any potential material impact on our liquidity resulting from customer credit issues.

We believe we have sufficient liquidity to fund operations, acquisitions, capital expenditures, scheduled debt repayments and dividend payments

The Revolving Credit Agreement includes affirmative and negative covenants with which we must comply, including a leverage (debt to capital ratio) financial covenant. The required leverage ratio is a maximum of 60%. At March 31, 2022, the leverage using this measure was approximately 36%. As of March 31, 2022, we were in compliance and no amounts were outstanding under the Company’s Revolving Credit Agreement.

The Company’s debt instruments contain customary event of default provisions, which allow the lenders the option of accelerating all obligations upon the occurrence of certain events. In addition, some of the debt instruments contain a cross default provision, whereby an uncured default of a specified amount on one debt obligation of the Company, would be considered a default under the terms of another debt instrument. As of March 31, 2022, we were in compliance with all such provisions.

Other than discussed, management is not aware of any known trends or any known demands, commitments, events or uncertainties that will, or are reasonably likely to, result in insufficient liquidity. There are no known trends, favorable or unfavorable, that would have a material change in the overall cost of liquidity.

Off Balance Sheet Arrangements

There have been no material changes outside the ordinary course of business in off balance sheet arrangements as disclosed in the 2021 Form 10-K under the caption “Off Balance Sheet Arrangements.”

Contractual Obligations

There have been no material changes outside the ordinary course of business in the contractual obligations disclosed in the 2021 Form 10-K under the caption “Contractual Obligations”.

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CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported therein. The estimates that require management’s most difficult, subjective or complex judgments are described in the 2021 Form 10-K and remain unchanged through the first three months of 2022. For certain items, additional details are provided below.

Impairment of Assets Held for Use

We are required to assess the recoverability of the carrying value of long-lived assets when an indicator of impairment has been identified. We review long-lived assets in each quarter in which impairment indicators are present. We must exercise judgment in assessing whether an event of impairment has occurred.

Manufacturing equipment includes certain components of production equipment that are constructed of precious metals, primarily platinum and rhodium. These metals are not depreciated because they have very low physical losses and are repeatedly reclaimed and reused in the manufacturing process and have a very long useful life. Precious metals are reviewed for impairment as part of the assessment of long-lived assets. This review considers all the Company’s precious metals that are either in place in the production process; in reclamation, fabrication, or refinement in anticipation of re-use; or awaiting use to support increased capacity. Precious metals are acquired to support the manufacturing operations and are not held for trading or other purposes.

At March 31, 2022 and December 31, 2021, the carrying value of precious metals was $3.5 billion, and significantly lower than the fair market value. Most of these precious metals are utilized by the Display Technologies and Specialty Materials segments. The potential for impairment exists in the future if negative events significantly decrease the cash flow of these segments. Such events include, but are not limited to, a significant decrease in demand for products or a significant decrease in profitability in our Display Technologies or Specialty Materials segments.

NEW ACCOUNTING STANDARDS

Refer to Note 1 (Significant Accounting Policies) to the consolidated financial statements.



	~~Rating~~	~~Outlook~~
~~RATING AGENCY~~	~~Long-Term Debt~~	~~last update~~

~~Standard & Poor’s~~	~~BBB+~~	~~Stable~~
		~~October 27, 2015~~

~~Moody’s~~	~~Baa1~~	~~Stable~~
		~~October 28, 2015~~

~~Management Assessment of Liquidity~~

We ended the third quarter of 2017 with approximately $3.9 billion of cash and cash equivalents. Our cash and cash equivalents are held in various locations throughout the world and generally are unrestricted. Although approximately 84% of the consolidated amount was held outside of the United States at September 30, 2017, we have sufficient U.S. liquidity, including borrowing capacity, to fund foreseeable U.S. cash needs without requiring the repatriation of foreign cash. We utilize a variety of financing strategies to ensure that our worldwide cash is available in the locations in which it is needed.

~~It is our policy to manage our exposure to changes in interest rates. To manage interest rate exposure,~~

ENVIRONMENT

Corning has been named by the Environmental Protection Agency (the Agency) under the Superfund Act, or by state governments under similar state laws, as a potentially responsible party for 15 active hazardous waste sites. Under the Superfund Act, all parties who may have contributed any waste to a hazardous waste site, identified by the Agency, are jointly and severally liable for the cost of cleanup unless the Agency agrees otherwise. It is Corning’s policy to accrue for its estimated liability related to Superfund sites and other environmental liabilities related to property owned by Corning based on expert analysis and continual monitoring by both internal and external consultants. At March 31, 2022 and December 31, 2021, Corning had accrued approximately $50 million and $55 million, respectively, for the estimated undiscounted liability for environmental cleanup and related litigation. Based upon the information developed to date, management believes that the accrued reserve is a reasonable estimate of the Company’s liability and that the risk of an additional loss in an amount materially higher than that accrued is remote.

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FORWARD-LOOKING STATEMENTS

The statements in this Quarterly Report on Form 10-Q, in reports subsequently filed by Corning with the SEC on Forms 8-K, and related comments by management that are not historical facts or information and contain words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “seek,” “see,” “would,” and “target” and similar expressions are forward-looking statements. Such statements relate to future events that by their nature address matters that are, to different degrees, uncertain. These forward-looking statements relate to, among other things, the Company’s future operating performance, the Company's share of new and existing markets, the Company's revenue and earnings growth rates, the Company’s ability to innovate and commercialize new products, and the Company’s implementation of cost-reduction initiatives and measures to improve pricing, including the optimization of the Company’s manufacturing capacity.

Although the Company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, current estimates and forecasts, general economic conditions, its knowledge of its business, and key performance indicators that impact the Company, actual results could differ materially. The Company from time to time, enters into interest rate swap agreements. We are currently party to two interest rate swaps that are designated as fair value hedges and economically exchange a notional amount of $550 million of previously issued fixed rate long-term debt to floating rate debt. Under the terms of the swap agreements, we pay the counterparty a floating rate that is indexed to the one-month LIBOR rate.

Corning also has a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes. On July 20, 2016, Corning’s Board of Directors approved an increase to the allowable maximum aggregate principal amount outstanding at any time from $1 billion to $2 billion. Under this program, the Company may issue the notes from time to time and will use the proceeds for general corporate purposes. The Company’s $2 billion revolving credit facility is available to support obligations under the commercial paper program, if needed. Corning did not have outstanding commercial paper at September 30, 2017 and December 31, 2016.

~~Other~~

We complete comprehensive reviews of our significant customers and their creditworthiness by analyzing their financial strength at least annually or more frequently for customers where we have identified a measure of increased risk. We closely monitor payments and developments which may signal possible customer credit issues. We currently have not identified any potential material impact on our liquidity resulting from customer credit issues.

Our major source of funding for 2017 and beyond will be our operating cash flow, our existing balances of cash and cash equivalents and proceeds from any issuances of debt. We believe we have sufficient liquidity for the next several years to fund operations, acquisitions, the asbestos litigation, capital expenditures, scheduled debt repayments and dividend payments and share repurchase programs.

Corning has access to a $2 billion unsecured committed revolving credit facility. This credit facility includes a leverage ratio financial covenant. The required leverage ratio, which measures debt to total capital, is a maximum of 50%. At September 30, 2017, our leverage using this measure was approximately 21% and we are in compliance with the financial covenant.

Our debt instruments contain customary event of default provisions, which allow the lenders the option of accelerating all obligations upon the occurrence of certain events. In addition, some of our debt instruments contain a cross default provision, whereby an uncured default in excess of a specified amount on one debt obligation of the Company, also would be considered a default under the terms of another debt instrument. As of September 30, 2017, we were in compliance with all such provisions.

Management is not aware of any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in a material decrease in our liquidity. In addition, other than items discussed, there are no known material trends, favorable or unfavorable, in our capital resources and no expected material changes in the mix and relative cost of such resources.

~~Index~~

~~Off Balance Sheet Arrangements~~

There have been no material changes outside the ordinary course of business in our off balance sheet arrangements as disclosed in our 2016 Form 10-K under the caption “Off Balance Sheet Arrangements.”

~~Contractual Obligations~~

~~There have been no material changes outside the ordinary course of business in the contractual obligations disclosed in our 2016 Form 10-K under the caption “Contractual Obligations.”~~

~~CRITICAL ACCOUNTING ESTIMATES~~

The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported therein. The estimates that require management’s most difficult, subjective or complex judgments are described in our 2016 Form 10-K and remain unchanged through the first nine months of 2017. For certain items, additional details are provided below.

~~Impairment of Assets Held for Use~~

We are required to assess the recoverability of the carrying value of long-lived assets when an indicator of impairment has been identified. We review our long-lived assets in each quarter in which impairment indicators are present. We must exercise judgment in assessing whether an event of impairment has occurred.

Manufacturing equipment includes certain components of production equipment that are constructed of precious metals, primarily platinum and rhodium. These metals are not depreciated because they have very low physical losses and are repeatedly reclaimed and reused in our manufacturing process and have a very long useful life. Precious metals are reviewed for impairment as part of our assessment of long-lived assets. This review considers all of the Company’s precious metals that are either in place in the production process; in reclamation, fabrication, or refinement in anticipation of re-use; or awaiting use to support increased capacity. Precious metals are only acquired to support our manufacturing operations and are not held for trading or other purposes.

At September 30, 2017 and December 31, 2016, the carrying value of precious metals was higher than the fair market value by $815 million and $890 million, respectively. These precious metals are utilized by the Display Technologies and Specialty Materials segments. Corning believes these precious metal assets to be recoverable due to the significant positive cash flow in both segments. The potential for impairment exists in the future if negative events significantly decrease the cash flow of these segments. Such events include, but are not limited to, a significant decrease in demand for products or a significant decrease in profitability in our Display Technologies or Specialty Materials segments.

~~NEW ACCOUNTING STANDARDS~~

~~Refer to Note 1 (Significant Accounting Policies) to the Consolidated Financial Statements.~~

~~ENVIRONMENT~~

Corning has been named by the Environmental Protection Agency (“the Agency”) under the Superfund Act, or by state governments under similar state laws, as a potentially responsible party for 16 active hazardous waste sites. Under the Superfund Act, all parties who may have contributed any waste to a hazardous waste site, identified by the Agency, are jointly and severally liable for the cost of cleanup unless the Agency agrees otherwise. It is Corning’s policy to accrue for its estimated liability related to Superfund sites and other environmental liabilities related to property owned by Corning based on expert analysis and continual monitoring by both internal and external consultants. At September 30, 2017 and December 31, 2016, Corning had accrued approximately $40 million (undiscounted) and $43 million (undiscounted), respectively, for the estimated liability for environmental cleanup and related litigation. Based upon the information developed to date, management believes that the accrued reserve is a reasonable estimate of the Company’s liability and that the risk of an additional loss in an amount materially higher than that accrued is remote.

~~FORWARD-LOOKING STATEMENTS~~

The statements in this Quarterly Report on Form 10-Q, in reports subsequently filed by Corning with the Securities and Exchange Commission (“SEC”) on Forms 8-K, and related comments by management that are not historical facts or information and contain words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “seek,” “see,” “would,” and “target” and similar expressions are forward-looking statements. Such statements relate to future events that by their nature address matters that are, to different degrees, uncertain. These forward-looking statements relate to, among other things, the company’s future operating performance, the company's share of new and existing markets, the company's revenue and earnings growth rates, the company’s ability to innovate and commercialize new products, and the company’s implementation of cost-reduction initiatives and measures to improve pricing, including the optimization of the company’s manufacturing capacity.

~~Index~~

Although the company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, current estimates and forecasts, general economic conditions, its knowledge of its business, and key performance indicators that impact the company, actual results could differ materially. The company does not undertake to update forward-looking statements. Some of the risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements include, but are not limited to:

~~global business, financial, economic and political conditions;~~

~~tariffs and import duties;~~

~~currency fluctuations between the U.S. dollar and other currencies, primarily the Japanese yen, New Taiwan dollar, euro, Chinese yuan and South Korean won;~~

the duration and severity of the COVID-19 pandemic, and its impact across our businesses on demand, personnel, operations, our global supply chains and stock price;

-	global economic trends, competition and geopolitical risks, or an escalation of sanctions, tariffs or other trade tensions, and related impacts on our businesses' global supply chains and strategies;

changes in macroeconomic and market conditions, market volatility, interest rates, capital markets, the value of securities and other financial assets, precious metals, oil, natural gas and other commodities and exchange rates (particularly between the U.S. dollar and the Japanese yen, new Taiwan dollar, euro, Chinese yuan and South Korean won), consumer demand, and the impact of such changes and volatility on our financial position and businesses;

-	product demand and industry capacity;

competitive products and pricing;

~~availability and costs of critical components and materials;~~

availability and costs of critical components, materials, equipment, natural resources and utilities;

-	new product development and commercialization;

order activity and demand from major customers;

~~the amount and timing of our cash flows and earnings and other conditions, which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels;~~

~~possible disruption in commercial activities due to terrorist activity, cyber-attack, armed conflict, political or financial instability, natural disasters, or major health concerns;~~

~~unanticipated disruption to equipment, facilities, IT systems or operations;~~

the amount and timing of our cash flows and earnings and other conditions, which may affect our ability to pay our quarterly dividend at the planned level or to repurchase shares at planned levels;

disruption to Corning's, our suppliers' and manufacturers' supply chain, logistics, equipment, facilities, IT systems, operations or commercial activities due to terrorist activity, cyber-attack, armed conflict, political or financial instability, natural disasters, international trade disputes or major health concerns;

-	loss of intellectual property due to theft, cyber-attack, or disruption to our information technology infrastructure;
-	effects of acquisitions, dispositions and other similar transactions;

-	effect of regulatory and legal developments;

ability to pace capital spending to anticipated levels of customer demand;

	-	our ability to increase margins through implementation of operational changes, pricing actions and cost reduction measures without negatively impacting revenues;
-	rate of technology change;

ability to enforce patents and protect intellectual property and trade secrets;

adverse litigation;

product and components performance issues;

attraction and retention of key personnel;

customer ability ~~most notably in the Display Technologies segment,~~ to maintain profitable operations and obtain financing to fund ~~their~~ ongoing operations and manufacturing expansions and pay ~~their~~ receivables when due;

loss of significant customers;

~~changes in tax laws and regulations;~~
-
changes in tax laws, regulations and international tax standards;

~~the potential impact of legislation, government regulations, and other government action and investigations;~~
-
the impacts of audits by taxing authorities; and

~~other risks detailed in Corning’s SEC filings.~~
-
the potential impact of legislation, government regulations, and other government action and investigations.

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Disclosures

As noted in the 2021 Form 10-K, we operate and conduct business in many foreign countries and as a result are exposed to fluctuations between the U.S. dollar and other currencies. Volatility in the global financial markets could increase the volatility of foreign currency exchange rates which would, in turn, impact sales and net income. For a discussion of the Company’s exposure to market risk and how we mitigate that risk, refer to Part II, Item 1A, Risk Factors in this Quarterly Report on Form 10-Q and Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risks, contained in the 2021 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision of and with the participation of Corning’s management, including the chief executive officer and chief financial officer, we evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of March 31, 2022, the end of the period covered by this report. Based on that evaluation, we have concluded that the Company’s disclosure controls and procedures were effective as of that date. Corning’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by Corning in the reports that it files or submits under the Exchange Act is accumulated and communicated to Corning’s management, including Corning’s principal executive and principal financial officers, or other persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation of internal controls over financial reporting was performed to determine whether any changes have occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting. The chief executive officer and chief financial officer concluded that there was no change in Corning’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

Table of Contents

Part II – Other Information

ITEM 1. LEGAL PROCEEDINGS

Environmental Litigation. See the 2021 Form 10-K, Part I, Item 3. For additional information and updates to estimated liabilities as of March 31, 2022, see Part I, Item 1, Financial Statements, Note 9 (Commitments and Contingencies) of the notes to the consolidated financial statements included under Item 1 of this Quarterly Report, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In addition to other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in Corning’s 2021 Form 10-K, which could materially impact the Company’s business, financial condition or future results. Risks disclosed in the 2021 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may materially adversely impact Corning’s business, financial condition or operating results. There have been no material changes to Part I, Item 1A. Risk Factors in the 2021 Form 10-K.

Table of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

This table provides information about purchases of common stock during the first quarter of 2022:

~~Market Risk Disclosures~~

As noted in our 2016 Form 10-K, we operate and conduct business in many foreign countries and as a result are exposed to fluctuations between the U.S. dollar and other currencies. Volatility in the global financial markets could increase the volatility of foreign currency exchange rates which would, in turn, impact our sales and net income. For a discussion of our exposure to market risk and how we mitigate that risk, refer to Part II, Item 1A, Risk Factors in this Quarterly Report on Form 10-Q and Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risks, contained in our 2016 Form 10-K.

~~ITEM 4. CONTROLS AND PROCEDURES~~

Under the supervision of and with the participation of Corning’s management, including our chief executive officer and chief financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of September 30, 2017, the end of the period covered by this report. Based on that evaluation, we have concluded that the Company’s disclosure controls and procedures were effective as of that date. Corning’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by Corning in the reports that it files or submits under the Exchange Act is accumulated and communicated to Corning’s management, including Corning’s principal executive and principal financial officers, or other persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation of our internal controls over financial reporting was also performed to determine whether any changes have occurred during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The chief executive officer and chief financial officer concluded that there was no change in Corning’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

~~Index~~

~~Part II – Other Information~~

~~ITEM 1. LEGAL PROCEEDINGS~~

~~Non-PCC Asbestos Claims.~~ See our 2016 Form 10-K, Part I, Item 3. For additional information and updates to estimated liabilities as of September 30, 2017, see Part I, Item 1, Financial Statements, Note 2 (Commitments, Contingencies and Guarantees) of the Notes to Unaudited Consolidated Financial Statements included under Item 1 of this quarterly report, which is incorporated herein by reference.

~~Environmental Litigation.~~ See our 2016 Form 10-K, Part I, Item 3. For additional information and updates to estimated liabilities as of September 30, 2017, see Part I, Item 1, Financial Statements, Note 2 (Commitments, Contingencies and Guarantees) of the Notes to Unaudited Consolidated Financial Statements included under Item 1 of this quarterly report, which is incorporated herein by reference.

~~ITEM 1A. RISK FACTORS~~

In addition to other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our 2016 Form 10-K, which could materially impact our business, financial condition or future results. Risks disclosed in our 2016 Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may materially adversely impact our business, financial condition or operating results. There have been no material changes to Part I, Item 1A. Risk Factors in our 2016 Form 10-K.

~~Index~~

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~This table provides information about our purchases of our common stock during the third quarter of 2017:~~

Issuer Purchases of Equity Securities

					Number of		Approximate dollar
					shares purchased as		value of shares that
	Total number		Average		part of publicly		may yet be
	of shares		price paid		announced		purchased
Period	purchased (1)		per share (2)		programs		under the programs
January 1 - 31, 2022		2,686,405	$	37.75		2,649,127
February 1 - 28, 2022		706,952		41.84		610,595
March 1 - 31, 2022		670,332		37.81		669,041
Total		4,063,689	$	38.47		3,928,763	$	3,371,420,032

Number of

Approximate dollar

shares purchased as

value of shares that

Total number

Average

part of publicly

may yet be purchased

of shares

price paid

announced plan

under the plans
Period

purchased (2)

per share

or program (1)

or programs (1)

July 1-31, 2017

Open market and shares surrendered
   for tax withholdings

7,141,756

$
30.37

7,086,419

ASR (initial delivery)

13,149,244

(3)

13,149,244

August 1-31, 2017

Open market and shares surrendered
   for tax withholdings

7,777,321

$
28.79

7,763,241

September 1-30, 2017

Open market and shares surrendered
   for tax withholdings

2,397,603

$
28.88

2,394,915

ASR (final delivery)

4,051,678

(3)

4,051,678

Total

34,517,602

$
29.26

34,445,497

$
1,972,629,479

⁽¹⁾

~~(1)~~

~~On December 7, 2016, Corning’s Board of Directors authorized a share repurchase program with no expiration for the repurchase of up to $4 billion of common stock (the “2016 Repurchase Program”).~~

~~(2)~~

This column ~~reflects the following transactions during the third quarter of 2017:~~reflects: (i) ~~the deemed surrender to us of 16,049~~76,949 shares of common stock related to ~~satisfy tax withholding obligations in connection with~~ the vesting of employee restricted stock units; (ii) ~~the surrender to us of 56,056~~46,548 shares of common stock related to ~~satisfy tax withholding obligations in connection with~~ the vesting of ~~restricted~~employee performances stock ~~issued to employees; and~~units; (iii) ~~the purchase of 34,445,497~~11,250 shares of common stock related to the vesting of employee restricted stock; (iv) 179 shares of common stock related to the exercise of employee stock options and payment of the exercise price; and (v) the purchase of 3,928,763 shares of common stock in open market repurchases under the ~~2016~~2019 Repurchase Program.

⁽²⁾

~~(3)~~

InRepresents the ~~third quarter~~stock price at the time of 2017, the Company paid $500 million under an ASR agreement and received an initial delivery of 13,149,244 shares in July and a final delivery of 4,051,678 shares in September. In total, 17,200,922 shares were delivered under the ASR at an average purchase price of $29.07. See Note 13 (Shareholders’ Equity) to the Consolidated Financial Statements for additional detail.

surrender.

Table of Contents

51ITEM 6. EXHIBITS

~~Index~~

~~ITEM 6. EXHIBITS~~


(a)	Exhibits

	Exhibit Number	Exhibit Name

	31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Exchange Act

	31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Exchange Act

	32	Certification Pursuant to 18 U.S.C. Section 1350

	101.INS	Inline XBRL Instance Document

	101.SCH	Inline XBRL Taxonomy Extension Schema Document

	101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document

	101.LAB	Inline XBRL Taxonomy Label Linkbase Document

	101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document

	101.DEF	Inline XBRL Taxonomy Definition Document

	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Table of Contents

~~Index~~

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Corning Incorporated
		(Registrant)



April 29, 2022	~~October 26, 2017~~		/s/ ~~Edward Schlesinger~~Stefan Becker
Date		Stefan Becker	~~Edward Schlesinger~~
				Senior Vice President, ~~and~~Finance & Corporate Controller

NewYork
~~New York~~		16-0393470
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

OneRiverfrontPlaza,Corning,NewYork	~~One Riverfront Plaza, Corning, New York~~		14831
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		GLW		New York Stock Exchange (NYSE)


Large ~~accelerated filer~~Accelerated Filer	☒		Accelerated ~~filer~~Filer	☐
~~Non‑accelerated filer~~Non-Accelerated Filer	☐	~~(Do not check if a smaller reporting company)~~
Smaller ~~reporting company~~Reporting Company	☐
			Emerging ~~growth company~~Growth Company	☐


	Class		Outstanding as of ~~October 13, 2017~~April 22, 2022
	Corning’s Common Stock, $0.50 par value per share		~~869,057,436~~844,612,498 shares


PART I – FINANCIAL INFORMATION
		Page
Item 1. Financial Statements


Consolidated Statements of Income (Unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021		3

Consolidated Statements of Comprehensive Income (Unaudited) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021		4

Consolidated Balance Sheets ~~(Unaudited)~~ at ~~September 30, 2017~~March 31, 2022 (Unaudited) and December 31, ~~2016~~2021		5

Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021		6

Consolidated Statements of Changes to Shareholders’ Equity (Unaudited) for the three months ended March 31, 2022 and 2021		7

Notes to Consolidated Financial Statements (Unaudited)		78

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2523

Item 3. Quantitative and Qualitative Disclosures About Market Risk		4940

Item 4. Controls and Procedures		4940

PART II – OTHER INFORMATION


Item 1. Legal Proceedings		5041

Item 1A. Risk Factors		5041

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		5142

Item 6. Exhibits		5243

Signatures	44	53



	Ownership			September 30,		December 31,
	interest			2017		2016
Affiliated companies accounted for by the equity method (1)	20%	to	50%	$	284	$	269
Other investments					68		67
Subtotal Investment Assets				$	352	$	336

Affiliated companies accounted for by the equity method
HSG (1)(2)		50%		$	202	$	241
Subtotal Investment Liabilities				$	202	$	241


	Display		Optical		Specialty		Life		All
	Technologies		Communications		Materials		Sciences		Other		Total
Balance at December 31, 2016	$	126	$	645	$	150	$	558	$	98	$	1,577
Acquired goodwill (1)				22				43		34		99
Measurement period adjustment (2)										(28)		(28)
Foreign currency translation adjustment		4		7				18		7		36
Balance at September 30, 2017	$	130	$	674	$	150	$	619	$	111	$	1,684



	September 30, 2017						December 31, 2016
			Accumulated						Accumulated
	Gross		amortization		Net		Gross		amortization		Net
Amortized intangible assets:
Patents, trademarks, and trade names	$	382	$	192	$	190	$	360	$	176	$	184
Customer lists and other		892		191		701		761		149		612
Total	$	1,274	$	383	$	891	$	1,121	$	325	$	796



					Asset derivatives					Liability derivatives
	Gross notional amount				Balance	Fair value				Balance	Fair value
	Sept. 30,		Dec. 31,		sheet	Sept. 30,		Dec. 31,		sheet	Sept. 30,		Dec. 31,
	2017		2016		location	2017		2016		location	2017		2016

Derivatives designated as hedging instruments

Foreign exchange contracts (1)	$	381	$	458	Other current assets	$	12	$	1	Other accrued liabilities	$	(3)	$	(29)
					Other assets		8

Interest rate contracts		550		550						Other liabilities		(5)		(5)

Derivatives not designated as hedging instruments

Foreign exchange contracts, other		676		890	Other current assets		7		11	Other accrued liabilities		(3)		(7)

Translated earnings contracts		15,211		16,711	Other current assets		175		423	Other accrued liabilities		(52)		(52)
					Other assets		82		146	Other liabilities		(338)		(277)

Total derivatives	$	16,818	$	18,609		$	284	$	581		$	(401)	$	(370)



	Effect of derivative instruments on the consolidated financial statements
	for the three months ended September 30,
	Gain recognized in other				Location of gain/(loss)	Gain/(loss) reclassified from
	comprehensive income				reclassified from	accumulated OCI into
Derivatives in hedging	(OCI)				accumulated OCI into	income (effective) (1)
relationships	2017		2016		income (effective)	2017		2016


					Sales			$	1
Foreign exchange contracts	$	3	$	1	Cost of sales	$	(1)		(13)

Total cash flow hedges	$	3	$	1		$	(1)	$	(12)



	Effect of derivative instruments on the consolidated financial statements
	for the nine months ended September 30,
	Gain (loss) recognized in				Location of gain/(loss)	Gain/(loss) reclassified from
	other comprehensive income				reclassified from	accumulated OCI into
Derivatives in hedging	(OCI)				accumulated OCI into	income ineffective/effective (1)
relationships	2017		2016		income (effective)	2017		2016

					Sales	$	1	$	2
					Cost of sales		(11)		(27)
Foreign exchange contracts	$	36	$	(63)	Other expense, net		(1)		(1)

Total cash flow hedges	$	36	$	(63)		$	(11)	$	(26)



		Gain (loss) recognized in income
		Three months ended				Nine months ended
	Location of gain/(loss)	September 30,				September 30,
Undesignated derivatives	recognized in income	2017		2016		2017		2016

Foreign exchange contracts – balance sheet and loans	Other expense, net	$	(7)	$	(4)	$	(19)	$	(78)
Foreign currency hedges related to translated earnings	Translated earnings contract gain (loss), net		26		(237)		(193)		(2,295)

Total undesignated		$	19	$	(241)	$	(212)	$	(2,373)



				Weighted-
				Average
		Weighted-		Remaining	Aggregate
	Number	Average		Contractual	Intrinsic
	of Shares	Exercise		Term in	Value
	(in thousands)	Price		Years	(in thousands)
Options Outstanding as of December 31, 2016	31,507	$	19.40
Granted	1,505		27.01
Exercised	(12,915)		21.26
Forfeited and Expired	(254)		23.21
Options Outstanding as of September 30, 2017	19,843		18.72	4.66	$	222,313
Options Expected to Vest as of September 30, 2017	19,801		18.71	4.65		222,056
Options Exercisable as of September 30, 2017	15,173		17.47	3.47		188,890



		Weighted
		Average
	Shares	Grant-Date
	(000’s)	Fair Value
Non-vested shares and share units at December 31, 2016	4,640	$	20.15
Granted	1,576		27.67
Vested	(1,243)		20.65
Forfeited	(88)		22.13
Non-vested shares and share units at September 30, 2017	4,885	$	22.42



	Display		Optical		Environmental		Specialty		Life		All
	Technologies		Communications		Technologies		Materials		Sciences		Other		Total
Three months ended
September 30, 2017
Net sales	$	768	$	917	$	277	$	373	$	223	$	49	$	2,607
Depreciation (1)	$	134	$	49	$	31	$	34	$	14	$	12	$	274
Amortization of purchased intangibles			$	11					$	6	$	1	$	18
Research, development and engineering expenses (2)	$	21	$	44	$	28	$	37	$	5	$	52	$	187
Income tax (provision) benefit	$	(82)	$	(52)	$	(17)	$	(36)	$	(8)	$	28	$	(167)
Net income (loss) (3)	$	203	$	102	$	34	$	72	$	17	$	(55)	$	373


	September 30, 2017		December 31, 2016
Japanese yen-denominated hedges	$	13.5	$	14.9
South Korean won-denominated hedges		1.1		1.2
Euro-denominated hedges		0.4		0.3
Chinese yuan-denominated hedges		0.2		0.3
Total gross notional value outstanding	$	15.2	$	16.7



	Three Months Ended September 30, 2017
					Income
					before				Effective
	Net		Equity		income		Net		tax		Per
	sales		earnings		taxes		income		rate (a)		share
As reported - GAAP	$	2,607	$	31	$	479	$	390	18.6%	$	0.39
Constant-yen (1)		92		1		81		62			0.06
Constant-won (1)		1				(6)		(4)
Translated earnings contract gain (2)						(28)		(18)			(0.02)
Acquisition-related costs (3)						21		14			0.01
Discrete tax items and other tax-related adjustments (4)								(2)
Translation gain on Japanese yen-denominated debt (12)						(14)		(9)			(0.01)
Core performance measures	$	2,700	$	32	$	533	$	433	18.8%	$	0.43



	Three Months Ended September 30, 2016

					Income
					before				Effective
	Net		Equity		income		Net		tax (benefit)		Per
	sales		earnings		taxes		income		rate (a)		share
As reported - GAAP	$	2,507	$	19	$	257	$	284	(10.5%)	$	0.26
Constant-yen (1)		40				47		30			0.03
Constant-won (1)		1				(4)		(3)
Translated earnings contract loss (2)						237		149			0.14
Acquisition-related costs (3)						15		11			0.01
Discrete tax items and other tax-related adjustments (4)								6			0.01
Restructuring, impairment and other charges (6)						11		9			0.01
Impacts from the acquisition of Samsung Corning Precision Materials (8)						(49)		(41)			(0.04)
Pension mark-to-market adjustment (9)						26		17			0.02
Taiwan power outage (11)						5		4
Core performance measures	$	2,548	$	19	$	545	$	466	14.5%	$	0.42



	Nine Months Ended September 30, 2017
					Income
					before				Effective
	Net		Equity		income		Net		tax		Per
	sales		earnings		taxes		income		rate (a)		share
As reported – GAAP	$	7,479	$	148	$	1,091	$	915	16.1%	$	0.89
Constant-yen (1)		294		2		266		201			0.19
Constant-won (1)		2				(20)		(15)			(0.01)
Translated earnings contract loss (2)						198		124			0.12
Acquisition-related costs (3)						60		41			0.04
Discrete tax items and other tax-related adjustments (4)								28			0.03
Litigation, regulatory and other legal matters (5)						(12)		(9)			(0.01)
Restructuring, impairment and other charges (6)						50		35			0.03
Equity in earnings of affiliated companies (7)				(72)		(72)		(46)			(0.04)
Impacts from the acquisition of Samsung Corning Precision Materials (8)						(5)		(3)
Pension mark-to-market adjustment (9)						15		9			0.01
Translation gain on Japanese yen-denominated debt (12)						(14)		(9)			(0.01)
Core performance measures	$	7,775	$	78	$	1,557	$	1,271	18.4%	$	1.23



	Nine Months Ended September 30, 2016
					Income
					before				Effective
	Net		Equity		income		Net		tax (benefit)		Per
	sales		earnings		taxes		income		rate (a)		share
As reported	$	6,914	$	119	$	1,288	$	2,123	(64.8%)	$	1.81
Constant-yen (1)		242		4		232		164			0.14
Constant-won (1)		3		(1)		(36)		(26)			(0.02)
Translated earnings contract loss (2)						2,295		1,447			1.24
Acquisition-related costs (3)						109		95			0.08
Discrete tax items and other tax-related adjustments (4)								(83)			(0.07)
Litigation, regulatory and other legal matters (5)						55		70			0.06
Restructuring, impairment and other charges (6)						131		91			0.08
Equity in earnings of affiliated companies (7)				16		16		15			0.01
Impacts from the acquisition of Samsung Corning Precision Materials (8)						(45)		(38)			(0.03)
Pension mark-to-market adjustment (9)						60		39			0.03
Gain on realignment of equity investment (10)						(2,676)		(2,676)			(2.29)
Taiwan power outage (11)						25		19			0.02
Core performance measures	$	7,159	$	138	$	1,454	$	1,240	14.7%	$	1.06



	As of		As of
	September 30,		December 31,
	2017		2016

Working capital	$	5,189	$	6,297
Current ratio		2.7:1		3.3:1
Trade accounts receivable, net of allowances	$	1,748	$	1,481
Days sales outstanding		60		54
Inventories	$	1,693	$	1,471
Inventory turns		3.8		3.8
Days payable outstanding (1)		44		45
Long-term debt	$	3,994	$	3,646
Total debt to total capital		21%		18%