☐ ~~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.

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

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

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Consolidated Statements of Changes in Shareholders’ Equity	Corning Incorporated and Subsidiary Companies
(Unaudited; in millions, except per share amounts)

	Common stock		Additional paid-in capital common		Retained earnings			Treasury stock			Accumulated other comprehensive loss			Total Corning Incorporated shareholders' equity			Non-controlling interest			Total
Balance as of December 31, 2022	$	910	$	16,682	$	16,778		$	(20,532	)	$	(1,830	)	$	12,008		$	267		$	12,275
Net income						176									176			15			191
Other comprehensive loss												(67	)		(67	)					(67	)
Shares issued to benefit plans and for option exercises		1		64											65						65
Common dividends ($0.28 per share)						(241	)								(241	)					(241	)
Other, net (1)									(16	)					(16	)					(16	)
Balance as of March 31, 2023	$	911	$	16,746	$	16,713		$	(20,548	)	$	(1,897	)	$	11,925		$	282		$	12,207
Net income						281									281			22			303
Other comprehensive loss												(302	)		(302	)		(1	)		(303	)
Shares issued to benefit plans and for option exercises		4		71											75						75
Common dividends ($0.56 per share)						(485	)								(485	)					(485	)
Other, net (1)									(82	)					(82	)		(5	)		(87	)
Balance as of June 30, 2023	$	915	$	16,817	$	16,509		$	(20,630	)	$	(2,199	)	$	11,412		$	298		$	11,710
Net income						164									164			18			182
Other comprehensive loss												(203	)		(203	)		(1	)		(204	)
Shares issued to benefit plans and for option exercises				60											60						60
Other, net (1)									(3	)					(3	)		(1	)		(4	)
Balance, September 30, 2023	$	915	$	16,877	$	16,673		$	(20,633	)	$	(2,402	)	$	11,430		$	314		$	11,744

~~Index~~

	Common stock		Additional paid-in capital common		Retained earnings			Treasury stock			Accumulated other comprehensive loss			Total Corning Incorporated shareholders' equity			Non-controlling interest			Total
Balance as of 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 (1)									(5	)					(5	)					(5	)
Balance as of March 31, 2022	$	908	$	16,531	$	16,737		$	(20,419	)	$	(1,362	)	$	12,395		$	234		$	12,629
Net income						563									563			21			584
Other comprehensive loss												(732	)		(732	)		(2	)		(734	)
Purchase of common stock for treasury									(53	)					(53	)					(53	)
Shares issued to benefit plans and for option exercises		2		59											61						61
Common dividends ($0.54 per share)						(463	)								(463	)					(463	)
Other, net (1)									(37	)					(37	)		(5	)		(42	)
Balance as of June 30, 2022	$	910	$	16,590	$	16,837		$	(20,509	)	$	(2,094	)	$	11,734		$	248		$	11,982
Net income						208									208			18			226
Other comprehensive loss												(697	)		(697	)		(2	)		(699	)
Purchase of common stock for treasury									(17	)					(17	)					(17	)
Shares issued to benefit plans and for option exercises				59											59						59
Other, net (1)						(1	)		(2	)					(3	)					(3	)
Balance, September 30, 2022	$	910	$	16,649	$	17,044		$	(20,528	)	$	(2,791	)	$	11,284		$	264		$	11,548

(1)	Treasury stock includes the deemed surrender to the Company of common stock to satisfy employee tax withholding obligations.

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

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~~COR~~

~~NING~~CORNING INCORPORATED AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

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

The consolidated financial statements include the consolidated accounts of Corning Incorporated and its subsidiaries consolidated in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, which include normal recurring adjustments, necessary to state fairly the financial position, results of operations and cash flows for the periods presented. All intercompany accounts, transactions and profits 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.eliminated. Certain information and ~~note~~footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted ~~or condensed.~~pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). These ~~interim~~ consolidated financial statements should be read in conjunction with ~~Corning’s consolidated~~the audited financial statements and notes thereto included in ~~its~~the Company’s Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016~~2022 (“~~2016~~2022 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~~contingent assets and liabilities in the consolidated financial statements and related notes. Significant estimates and assumptions in these consolidated financial statements require the exercise of ~~$233 million~~judgment. Due to the inherent uncertainty involved in ~~beginning retained earnings~~making estimates, actual results reported in future periods may be different from these estimates.

The non-controlling interest as recorded in the consolidated financial statements represents amounts attributable to the minority shareholders of Hemlock Semiconductor Group (“Hemlock”) and ~~cash flow reclassifications that were not significant.~~ other less-than-wholly-owned consolidated subsidiaries.

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

~~New Accounting Standards~~

2. Revenue

~~In May 2014,~~Disaggregated Revenue

The following table presents revenues by product category (in millions):

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Telecommunication products	$	918	$	1,317	$	3,109	$	3,828
Display products		727		558		2,061		2,223
Specialty glass products		560		516		1,384		1,494
Environmental substrate and filter products		420		393		1,260		1,130
Life science products		221		297		690		908
Polycrystalline silicon products		230		288		765		877
All other products		97		119		325		323
Total revenue	$	3,173	$	3,488	$	9,594	$	10,783

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Customer Deposits

As of September 30, 2023 and December 31, 2022, 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 delivered to customers, Corning will recognize revenue and reduce the ~~Financial Accounting Standards Board~~amount of the customer deposit liability.

For the three months ended September 30, 2023 and 2022, customer deposits recognized were $6 million and $24 million, respectively. For the nine months ended September 30, 2023 and 2022, customer deposits recognized were $88 million and $155 million, respectively.

Refer to Note 6 (Other Liabilities) for additional information.

Deferred Revenue

As of September 30, 2023 and December 31, 2022, Corning had deferred revenue of approximately $854 million and $869 million, respectively. Deferred revenue was primarily related to the performance obligations of non-refundable consideration previously received by Hemlock from its customers under long-term supply agreements.

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 delivered compared to the remaining contractual units. For the three and nine months ended September 30, 2023 and 2022, the amount of deferred revenue recognized in the consolidated statements of income was not material.

Refer to Note 6 (Other Liabilities) for additional information.

3. Income Taxes

The following table presents the provision for income taxes and the related effective tax rate (in millions, except percentages):

	Three months ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
Provision for income taxes	$	(35	)	$	(34	)	$	(178	)	$	(380	)
Effective tax rate		16.1	%		13.1	%		20.8	%		21.2	%

For the three months ended September 30, 2023, the effective tax rate differed from the United States (“~~FASB”~~U.S.”) ~~issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue~~statutory rate of 21%, primarily due to differences arising from ~~Contracts~~foreign earnings partially offset by changes in estimates based on the final 2022 U.S. Federal Income Tax Return. For the nine months ended September 30, 2023, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to differences arising from foreign earnings, changes in estimates based on the final 2022 U.S. Federal Income Tax Return and adjustments related to share-based compensation, partially offset by changes in valuation allowance assessments.

For the three months ended September 30, 2022, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to the net impact of changes in tax legislation and changes in estimates based on the final 2021 U.S. Federal Income Tax Return, partially offset by changes in tax reserves. For the nine months ended September 30, 2022, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to differences arising from foreign earnings and changes in tax reserves, partially offset by the net impact of changes in tax legislation, changes in estimates based on the final 2021 U.S. Federal Income Tax Return and adjustments related to share-based compensation.

Corning Precision Materials, a South Korean subsidiary, is currently appealing certain tax assessments and tax refund claims for tax years 2010 through 2019. The Company was required to deposit the disputed tax amounts with ~~Customers,~~the South Korean government as a ~~new Topic, Accounting Standards Codification (“ASC”) Topic 606.~~condition of its appeal of any tax assessment. During the second quarter of 2023, $99 million was no longer under dispute and was refunded to the Company. The ~~new revenue recognition standard relates~~non-current receivable balance was $255 million and $349 million as of September 30, 2023 and December 31, 2022, respectively, for the amount on deposit with the South Korean government. Corning believes that it is more likely than not the Company will prevail in the appeals process relating 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 analysisthese matters.

Table 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 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 for annual periods beginning after December 15, 2017, including interim periods within that reporting period. We will adopt the standard on a modified retrospective basis in 2018.Contents

4. Earnings Per Common Share

~~Corning’s equity affiliates are currently evaluating their material contracts,~~The following table presents the reconciliation of the amounts used to compute basic and ~~have not concluded on the potential impact of adopting ASU 2014-09 on their financial statements and related disclosure.~~diluted earnings per common share (in millions, except per share amounts):

	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income attributable to Corning Incorporated	$	164	$	208	$	621	$	1,352

Weighted-average common shares outstanding – basic		850		843		848		843
Effect of dilutive securities:
Stock options and other awards		9		12		10		14
Weighted-average common shares outstanding – diluted		859		855		858		857
Basic earnings per common share	$	0.19	$	0.25	$	0.73	$	1.60
Diluted earnings per common share	$	0.19	$	0.24	$	0.72	$	1.58

Anti-dilutive potential shares excluded from diluted earnings per common share:
Stock options and other awards		3		3		3		2

5. Inventories

~~In February 2016,~~Inventories consisted of 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 patternfollowing (in millions):

	September 30,		December 31,
	2023		2022
Finished goods	$	1,226	$	1,315
Work in process		513		571
Raw materials and accessories		479		537
Supplies and packing materials		437		481
Inventories	$	2,655	$	2,904

Table 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.Contents

6. Other Liabilities

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 aspectsOther liabilities consisted 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.

7following (in millions):

	September 30,		December 31,
	2023		2022
Current liabilities:
Wages and employee benefits	$	505	$	727
Income taxes		125		127
Derivative instruments (Note 10)		150		174
Deferred revenue (Note 2)		185		144
Customer deposits (Note 2)		162		132
Share repurchase liability (Note 12)				506
Short-term operating leases		108		111
Other current liabilities		1,294		1,226
Other accrued liabilities	$	2,529	$	3,147

Non-current liabilities:
Defined benefit pension plan liabilities	$	685	$	668
Derivative instruments (Note 10)		65		17
Deferred revenue (Note 2)		669		725
Customer deposits (Note 2)		1,044		1,137
Deferred tax liabilities		201		243
Long-term operating leases		842		795
Other non-current liabilities		1,127		1,370
Other liabilities	$	4,633	$	4,955

~~Index~~

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which reduces the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity asset transfer, other than inventory, when the transfer occurs. Historically, recognition of the income tax consequence was not recognized until the asset was sold 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 be in the first interim period if an entity issues interim financial statements. We are currently evaluating the impact of ASU 2016-16 on our consolidated financial statements and related disclosures.7. Debt

~~In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill~~Based on borrowing rates currently available to us for loans with similar terms and 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 to perform its annual, or interim goodwill impairment test by comparingmaturities, the fair value of ~~a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which~~long-term debt was $6.5 billion and $6.1 billion as of September 30, 2023 and December 31, 2022, respectively, compared to the carrying ~~amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount~~value 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 $7.2 billion and $6.7 billion as of September 30, 2023 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, 2022, 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 March 2017,~~ On May 15, 2023, the ~~FASB~~Company issued ~~ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost~~€300 million 3.875% Notes due 2026 (“2026 Notes”) and ~~Net Periodic Postretirement Benefit Cost. ASU 2017-07 requires entities to (1) disaggregate the current-service-cost component~~€550 million 4.125% Notes due 2031 (“2031 Notes”). The proceeds from the ~~other~~2026 Notes and 2031 Notes were received in euros and converted to U.S. dollars on the date of issuance. The net proceeds received were approximately $918 million and will be used for general corporate purposes. As of September 30, 2023, the U.S. dollar equivalent carrying value of the euro-denominated long-term debt was $892 million.

The full amounts of the 2026 Notes and 2031 Notes have been designated as net investment hedges against our investments in certain European subsidiaries with euro functional currencies. Refer to Note 10 (Hedging Activities) for additional information.

Corning had no outstanding commercial paper as of September 30, 2023 or December 31, 2022.

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8. Employee Retirement Plans

Corning has defined benefit pension plans covering certain domestic and international employees. The Company may contribute, as necessary, an amount exceeding the minimum requirements to achieve the Company’s long-term funding targets. During 2023, the Company made cash contributions of $25 million to its international pension plans. The Company does not expect to make additional contributions in the fourth quarter of 2023.

The following table presents the components of net periodic benefit ~~cost (the “other components”) and present it with~~expense (income) for employee retirement plans, which 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~~is recorded in other income, net in the ~~capitalization~~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 (in millions):

~~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.

	Pension benefits												Postretirement benefits
	Three months ended						Nine months ended						Three months ended						Nine months ended
	September 30,						September 30,						September 30,						September 30,
	2023			2022			2023			2022			2023			2022			2023			2022
Service cost	$	25		$	32		$	75		$	96		$	1		$	3		$	4		$	7
Interest cost		45			28			133			82			6			3			17			11
Expected return on plan assets		(46	)		(55	)		(138	)		(164	)
Amortization of actuarial net gain														(6	)					(17	)
Amortization of prior service cost (credit)		2			1			5			4			(2	)		(2	)		(4	)		(4	)
Recognition of actuarial loss (gain)		12						(16	)		22						(2	)					(3	)
Special termination benefit charge								5
Total pension and postretirement benefit expense (income)	$	38		$	6		$	64		$	40		$	(1	)	$	2		$	—		$	11

~~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 The Dow Chemical Company (“Dow”) each owned 50% of the common stock of Dow Corning Corporation (“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 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. Corning does not believe that its indemnity obligation will 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, ~~there are no other material loss contingencies related~~Corning may be required to ~~litigation.~~indemnify Dow for up to 50% of that liability, subject to certain conditions and limits. As of September 30, 2023, 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~~designated by ~~the Environmental Protection Agency (“the Agency”) under the Superfund Act,~~federal or by state governments under ~~similar state~~environmental laws, including Superfund, as a potentially responsible party that may be liable for ~~16 active~~cleanup costs associated with 19 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~~such hazardous waste 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 As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, Corning had accrued approximately ~~$40~~$90 million ~~(undiscounted)~~ and ~~$43~~$109 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~~liability.

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10. Hedging Activities

Designated Hedges

Corning uses over-the-counter (“OTC”) foreign exchange forward contracts designated 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 ~~that~~purchases from suppliers. The total notional amounts for foreign currency cash flow hedges are $301 million and $419 million as of September 30, 2023 and December 31, 2022, respectively, with maturities through 2024. Corning defers gains and losses related to cash flow hedges into accumulated other comprehensive loss on the consolidated balance sheets until the hedged item impacts earnings. As of September 30, 2023, the amount expected to be reclassified into earnings within the next 12 months is a pre-tax gain of $43 million.

Corning has entered into leases of precious metals, with maturities through 2025. To offset the risk of ~~an additional loss~~changes 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.

~~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~~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 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 ~~$3.9 billion at~~ amortized in earnings. The impact of the excluded component on Corning’s other comprehensive loss and earnings is not material. The carrying amount of the leased precious metals pool, which is included within property, plant and equipment, net of accumulated depreciation in the consolidated balance sheets, is $89 million and $278 million, respectively, as of September 30, ~~2017~~2023 and December 31, ~~2016, respectively, compared to recorded book values~~2022. The carrying amount of ~~$4.0 billion at~~ the leased precious metals pool includes cumulative fair value losses of $261 million and $95 million as of September 30, ~~2017~~2023 and ~~$3.6 billion at~~ December 31, ~~2016. The Company measures~~2022, respectively. These losses are offset by changes in the fair value of the derivatives.

Net Investment Hedges

In May 2023, the Company designated the full amount of its ~~long-term debt using Level 2 inputs based primarily on current market yields for its existing debt traded~~2026 Notes and 2031 Notes with a total notional amount of €850 million, which are non-derivative financial instruments, as net investment hedges against our investments in certain European subsidiaries with euro functional currencies. Changes in the ~~secondary market.~~

~~Corning did not have outstanding commercial paper at September 30, 2017 and December 31, 2016.~~

~~Debt Issuances~~

~~2017~~

~~In the third quarter~~value of ~~2017, 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~~hedging instruments due to foreign currency gains or losses are deferred in ~~Japanese yen and converted to U.S. dollars~~other comprehensive loss on the ~~date~~consolidated statements of ~~issuance. The net proceeds received in U.S. dollars, after deducting offering expenses, was approximately $700 million. Payments of principle and interest on~~comprehensive (loss) income, within 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 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 to the Optical Communications and Life Sciences segments. The net carrying amount of intangible assets increased in the first nine months of 2017, primarily due to acquisitions of $132 million of other intangible assets and foreign currency translation adjustments and other line, and will remain in accumulated other comprehensive loss until the hedged investment is sold or substantially liquidated. We evaluate the effectiveness of ~~$16~~the net investment hedges each quarter using the critical terms match method. As of September 30, 2023, the net investment hedges are deemed to be effective. During the three and nine months ended September 30, 2023, foreign currency gains of $29 million ~~offset by amortization of $53 million.~~and $36 million, respectively, associated with these net investment hedges were recognized in other comprehensive loss.

~~Amortization expense related~~Refer to ~~these intangible assets is estimated to be $71 million~~Note 7 (Debt) for ~~2017, $74 million annually for 2018 and 2019, and $70 million annually from 2020 to 2022.~~additional information.

~~Index~~

~~9. Employee Retirement Plans~~

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

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 to offset economic currency risks. These contracts are not designated as hedging instruments for accounting purposes. The undesignated hedges limit exposure to foreign 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 expenses are translated 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~~and South Korean won. The Company has contracts through 2024 for the ~~years 2017-2022~~Japanese yen 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~~2026 for the South Korean ~~won, New Taiwan dollar, Chinese yuan, Euro and British pound translation~~won.

The fair values of these derivative contracts are recorded as either assets (gain position) or liabilities (loss position) on the ~~Company’s projected net income. With respect to~~consolidated balance sheets. Changes in 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 notionalfair value of the ~~zero-cost collars was $0.7 billion and $1.0 billion at September 30, 2017 and December 31, 2016, respectively.~~derivative contracts are recorded in earnings within translated earnings contract gain (loss), net in the consolidated statements of income.

Table of Contents

The following ~~tables summarize~~table summarizes the notional amounts and respective fair values of Corning’s derivative financial instruments on a gross basis ~~for~~ as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 (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
	September		December		sheet	September		December		sheet	September			December
	30, 2023		31, 2022		location	30, 2023		31, 2022		location	30, 2023			31, 2022
Derivatives designated as hedging instruments (1)
Foreign exchange and precious metals lease contracts (2)	$	301	$	419	Other current assets	$	165	$	26	Other accrued liabilities				$	(1	)
					Other assets		139		78

Derivatives not designated as hedging instruments
Foreign exchange contracts		1,486		2,231	Other current assets		18		44	Other accrued liabilities	$	(23	)		(49	)
Translated earnings contracts		5,128		7,543	Other current assets		380		384	Other accrued liabilities		(127	)		(124	)
					Other assets		71		146	Other liabilities		(65	)		(17	)
Total derivatives	$	6,915	$	10,193		$	773	$	678		$	(215	)	$	(191	)

(1)	The amounts above do not include €850 million of euro-denominated debt ($892 million equivalent as of September 30, 2023), which is a non-derivative financial instrument designated as a net investment hedge.
(2)	~~(1)~~		~~Cash~~As of September 30, 2023 and December 31, 2022, derivatives designated as hedging instruments include foreign exchange cash flow hedges with ~~a typical duration~~total notional amounts of ~~24 months or less.~~$301 million and $419 million, respectively, and fair value hedges of leased precious metals with total notional amounts of 21,652 troy ounces and 23,152 troy ounces, respectively.

~~Index~~

The following table summarizes the ~~effect~~total notional amounts for translated earnings contracts as of ~~derivative financial instruments on Corning’s consolidated financial statements for the three and nine months ended~~ September 30, ~~2017~~2023 and ~~2016~~December 31, 2022 (in ~~millions)~~billions):

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)

	September 30,		December 31,
	2023		2022
Average rate forward contracts:
Japanese yen-denominated	$	0.2	$	0.1
South Korean won-denominated		1.7		2.1
Other foreign currencies (1)		1.1		0.7
Option contracts:
Japanese yen-denominated (2)		2.1		4.6
Total notional amount for translated earning contracts	$	5.1	$	7.5

(1)	Denominational currencies for other average rate forward contracts include the Chinese yuan, New Taiwan dollar, euro and British pound.
(2)	Japanese yen-denominated option contracts include purchased put and call options, knock-out options and zero-cost collars. With respect to the zero-cost collars, the total 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.

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.~~

Table of Contents

The following ~~table summarizes~~tables summarize the effect onin the consolidated ~~financial~~ statements of income relating to Corning’s derivative financial instruments (in millions):. The accumulated derivative gain included in accumulated other comprehensive loss on the consolidated balance sheets as of September 30, 2023 and December 31, 2022 is $91 million and $19 million, respectively.

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 September 30,
					Location of gain (loss)
	Gain recognized				reclassified from	Gain (loss) reclassified
Derivative hedging	in other comprehensive				accumulated	from accumulated
relationships for cash	loss (OCL)				OCL into income	OCL into income
flow and fair value hedges	2023		2022		effective (ineffective)	2023			2022

					Net sales				$	15
					Cost of sales	$	14			6
Foreign exchange contracts and other	$	28	$	4	Other income, net		(1	)		(1	)
Total cash flow and fair value hedges	$	28	$	4		$	13		$	20

	Nine months ended September 30,
					Location of gain (loss)
	Gain recognized				reclassified from	Gain (loss) reclassified
Derivative hedging	in other comprehensive				accumulated	from accumulated
relationships for cash	loss (OCL)				OCL into income	OCL into income
flow and fair value hedges	2023		2022		effective (ineffective)	2023			2022

					Net sales				$	38
					Cost of sales	$	32			19
Foreign exchange contracts and other	$	102	$	24	Other income, net		(3	)		(3	)
Total cash flow and fair value hedges	$	102	$	24		$	29		$	54

~~12.~~

		Gain (loss) recognized in income
		Three months ended						Nine months ended
	Location of gain (loss)	September 30,						September 30,
Undesignated derivatives	recognized in income	2023			2022			2023		2022

Foreign exchange contracts	Other income, net	$	(5	)	$	11		$	23	$	70
Translated earnings contracts	Translated earnings contract gain (loss), net		20			(68	)		128		257
Total undesignated		$	15		$	(57	)	$	151	$	327

Table of Contents

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~~table provides fair value measurement information for the Company’s major categories of financial assets and liabilities measured on a recurring basis (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)		September 30, 2023								December 31, 2022
								Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Current assets:
Other current assets (1)(2)	$	488		$	194	$	294
Other current assets (1)								$	617	$	4	$	563	$	50	$	505	$	2	$	454	$	49
Non-current assets:
Other assets (1)	$	90		$	90			$	212	$	2	$	210			$	225			$	224	$	1

Current liabilities:
Other accrued liabilities (1)(3)	$	63		$	58	$	5
Other accrued liabilities (1)								$	150			$	150			$	174			$	174
Non-current liabilities:
Other liabilities (1)(3)	$	363		$	343	$	20
Other liabilities (1)								$	82			$	82			$	34			$	34

(1)

~~(1)~~

Derivative assets and liabilities include foreign exchange and precious metals lease contracts which ~~are~~were measured using observable ~~quoted prices~~inputs for similar assets and liabilities.

~~(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.

As 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.

There were no significant financial assets and liabilities measured on a ~~nonrecurring~~non-recurring basis as of September 30, ~~2017~~2023 and December 31, ~~2016.~~2022.

12. Shareholders’ Equity

~~Index~~

~~13. Shareholders’ Equity~~

Fixed Rate Cumulative Convertible Preferred Stock, Series A

~~Corning has~~We had 2,300 outstanding shares of Fixed Rate Cumulative Convertible Preferred Stock, Series ~~A. The Preferred Stock is convertible at the option~~A (the “Preferred Stock”) as of the holder and the Company upon certain events, at a conversion rate of 50,000 shares of Corning’s common stock per one share of Preferred Stock, subject to certain anti-dilution provisions. As of September 30, 2017, December 31, 2020. On January 16, 2021, the Preferred Stock ~~has not been~~became convertible into 115 million common shares. On April 5, 2021, we executed a Share Repurchase Agreement (“SRA”) with Samsung Display Co., Ltd. (“SDC”) and the Preferred Stock was fully converted as of April 8, 2021. Immediately following the conversion, we repurchased and ~~none~~retired 35 million of the ~~anti-dilution provisions have been triggered.~~ common shares held by SDC for an aggregate purchase price of approximately $1.5 billion, of which approximately $507 million was paid in April 2022 and 2021. The remaining payment of approximately $507 million was made in April 2023.

Share ~~Repurchases~~

~~2016 Share Repurchases~~

~~In July 2016, Corning entered into an accelerated share repurchase agreement (the “2016 ASR agreement”) under the 2015~~ 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.~~

In ~~addition~~2019, the Board authorized the repurchase of up to $5.0 billion of common stock (“2019 Authorization”).

During the ~~2016 ASR agreement, during the year~~three and nine months ended ~~December 31, 2016,~~September 30, 2022, the Company repurchased ~~110.4~~0.5 million shares and 6.0 million shares, respectively, of common stock on the open market for approximately ~~$2.2 billion~~$17 million and $221 million, respectively, as part of its ~~2015 Repurchase Programs, resulting in a total of 197.1 million~~2019 Authorization. No shares ~~repurchased for $4.2 billion~~were purchased on the open market during ~~2016.~~the three and nine months ended September 30, 2023.

~~2017 Share Repurchases~~As of September 30, 2023, approximately $3.3 billion remains available under the Company’s 2019 Authorization.

~~In December 2016,~~

Common Stock Dividends

On October 4, 2023, Corning’s Board of Directors ~~approved~~declared a ~~$4 billion~~dividend of $0.28 per share repurchase program with no expiration (the “2016 Repurchase Program”). In the nine months 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 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.common stock. The dividend will be payable on December 15, 2023.

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.

Accumulated Other Comprehensive Loss

InFor the three and nine months ended September 30, ~~2017~~ 2023 and ~~2016,~~2022, 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.~~adjustments.

Table of Contents

~~A summary of~~The following table presents the changes in the foreign currency translation adjustment component of accumulated other comprehensive loss, ~~is as follows~~including the proportionate share of equity method affiliates’ accumulated other comprehensive loss (in millions) ~~(1)~~(1):



	Three months ended				Nine months ended				Three months ended						Nine months ended
	September 30,				September 30,				September 30,						September 30,
	2017		2016		2017		2016		2023			2022			2023			2022
Beginning balance	$	(871)	$	(547)	$	(1,275)	$	(1,171)	$	(2,114	)	$	(1,783	)	$	(1,712	)	$	(933	)
Other comprehensive income (2)		49		235		435		860
Loss on foreign currency translation (2)										(195	)		(664	)		(588	)		(1,497	)
Equity method affiliates (3)		4		10		22		9		4			(21	)		(5	)		(38	)
Net current-period other comprehensive income		53		245		457		869
Net current-period other comprehensive loss										(191	)		(685	)		(593	)		(1,535	)
Ending balance	$	(818)	$	(302)	$	(818)	$	(302)	$	(2,305	)	$	(2,468	)	$	(2,305	)	$	(2,468	)

(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 and nine months ended September 30, ~~2017, tax amounts are not significant. For the nine months ended September 30, 2017,~~2023, amounts are net of ~~total~~ tax ~~expense~~benefit of ~~$47 million.~~$14 million and $33 million, respectively. For the three and nine months ended September 30, ~~2016,~~2022, amounts are net of ~~total~~ tax ~~expense~~benefit of ~~$32~~$49 million and ~~$51~~$87 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

InTotal share-based compensation cost was $57 million and $168 million for the ~~second quarter of 2016, a $22~~three and nine months ended September 30, 2023, respectively, and $52 million ~~cumulative foreign currency translation loss was released as a result of~~and $145 million for the ~~contribution of our investment in PCE to the PCC litigation trust~~three and ~~included in selling, general and administrative expenses.~~

~~Index~~

~~A summary of changes in the unamortized actuarial gains (losses) for postretirement benefit plan component 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)

nine months ended September 30, 2022, respectively.

~~(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.Incentive Stock Plans

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~~

Time-Based Restricted Stock ~~Compensation Plans~~and Restricted Stock Units

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 compensation cost for employee stock options andfollowing table summarizes the changes in non-vested time-based restricted stock and restricted stock units ~~was approximately $10 million~~for the nine months ended September 30, 2023:

				Weighted
	Number			average
	of shares			grant-date
	(in thousands)			fair value
Non-vested shares and share units as of December 31, 2022		11,299		$	29.19
Granted		7,221			35.06
Vested		(4,462	)		23.71
Forfeited		(534	)		33.97
Non-vested shares and share units as of September 30, 2023		13,524		$	33.94

Performance-Based Restricted Stock Units

The following table summarizes the changes in non-vested performance-based restricted stock units for the ~~three~~nine months ended September 30, 2017 and 2016, respectively, and approximately $35 million and $33 million for the nine months ended September 30, 2017 and 2016, respectively. The income tax (expense) benefit from share-based compensation was not significant for the three and nine months ended September 30, 2017 and 2016.2023:

				Weighted
	Number			average
	of shares			grant-date
	(in thousands)			fair value
Non-vested share units as of December 31, 2022		4,696		$	35.41
Granted		1,674			35.08
Vested		(3,586	)		33.37
Performance adjustments		(406	)		36.40
Forfeited		(37	)		36.08
Non-vested share units as of September 30, 2023		2,341		$	38.62

Table of Contents

Stock Options

Corning’s stock option plans provide non-qualified and incentive stock options to purchase authorized but unissued shares, or treasury shares, at the market price on the grant date and generally become exercisable three years from the grant date. The maximum term of non-qualified and incentive stock options is ten years from the grant date.

~~Index~~

The following table summarizes information concerning stock options ~~outstanding including~~as of September 30, 2023 and the related ~~transactions under the stock option plans~~activity for the nine months ended September 30, ~~2017:~~2023:

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, 2022		9,665		$	22.92
Exercised		(1,981	)		19.74
Forfeited and expired		(48	)		19.65
Options outstanding as of September 30, 2023		7,636			23.76		5.20	$	55,832
Options vested and exercisable as of September 30, 2023		7,636			23.76		5.20		55,832

The aggregate intrinsic value (market value of stock less option exercise price) 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~~There were no stock options granted ~~under~~during 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~~nine 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.~~2023 or 2022.

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. 14. Reportable Segments

The ~~following inputs were used for the 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 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 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 the implied rate for a zero-coupon U.S. Treasury bond with a term equal to the option’s expected term.

~~Incentive Stock Plans~~

~~Corning’s incentive stock plan permits restricted stock and restricted stock unit grants, either~~Company has 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 are granted at the closing market price on the grant date, contingently vest over a period of generally three years. 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:~~

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 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 months ended September 30, 2017:

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

As of September 30, 2017, there was approximately $51 million of unrecognized compensation cost related to non-vested time-based restricted stock and restricted stock units compensation arrangements granted under the Plan. The cost is expected to be recognized over a weighted-average period of 2.5 years. Compensation cost related to time-based restricted stock and restricted stock units was approximately $9 million and $8 million for 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.

~~15. Reportable Segments~~

~~Our~~that it has five reportable segments ~~are~~for financial reporting purposes, 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.~~

industry; the carrier network group consists primarily of products and solutions for optical-based communications infrastructure for services such as video, data and voice communications, and the enterprise network group consists primarily of optical-based communication networks sold to businesses, governments and individuals for their own use.

●

~~Environmental~~Display Technologies – manufactures ~~ceramic~~high quality glass substrates for flat panel displays, including liquid crystal displays and ~~filters for automotive~~organic light-emitting diodes that are used primarily in televisions, notebook computers, desktop monitors, tablets and ~~diesel applications.~~

handheld devices.

●

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.~~

needs across a wide variety of commercial and industrial markets, including materials optimized for mobile consumer electronics, semiconductor equipment optics and consumables, aerospace and defense optics, radiation shielding products, sunglasses and telecommunications components.

●	· Environmental Technologies – manufactures ceramic substrates and filter products for emissions control systems in mobile applications.
●		Life Sciences – develops, manufactures, ~~glass~~ and ~~plastic~~supplies laboratory products, including 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, Auto Glass Solutions 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.

Table of Contents

~~We prepared the financial~~Financial results for ~~our~~the reportable segments and Hemlock and Emerging Growth Businesses 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. ~~We included~~As a significant portion of segment revenues and expenses are denominated in currencies other than the ~~earnings~~U.S. dollar, management believes it is important to understand the impact on segment net sales and segment net income of ~~equity affiliates that~~translating these currencies into U.S. dollars. Therefore, the Company utilizes constant-currency reporting for the Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments to exclude the impact on segment sales and segment net income from the Japanese yen, South Korean won, Chinese yuan, new Taiwan dollar and euro, as applicable to the segment. The most significant constant-currency adjustment relates to the Japanese yen exposure within the Display Technologies segment. Management utilizes constant-currency reporting based on internally-derived rates, as detailed below, which are closely ~~associated~~aligned with ~~our reportable segments~~the currencies we have hedged.

The Company believes that the use of constant-currency reporting allows management to understand segment results without the volatility of currency fluctuation, analyze underlying trends in the ~~respective segment’s~~businesses and establish operational goals and forecasts. Further, it reflects the underlying economics of the translated earnings contracts used to mitigate the impact of changes in currency exchange rates on our earnings and cash flows.

Constant-currency rates are as follows and are applied to all periods presented:

	Currency		Japanese yen		Korean won		Chinese yuan		New Taiwan dollar		Euro
	Rate		¥107		₩1,175		¥6.7		NT$31		€.81

In addition, certain income and expenses are excluded from segment net income and included in the unallocated amounts in the reconciliation of reportable segment net income to consolidated net income. ~~We have~~These items are not used by the CODM in allocating resources or evaluating the results of the segments and include the following: the impact of translating the Japanese yen-denominated debt; the impact of the translated earnings contracts; acquisition-related costs; certain discrete tax items and other tax-related adjustments; restructuring, impairment and other charges and credits; certain litigation, regulatory and other legal matters; pension mark-to-market adjustments; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.

Corning’s administrative and staff functions are performed on a centralized basis and such costs and expenses are allocated ~~certain common expenses~~ among ~~reportable~~the segments differently than wethey would be for stand-alone financial ~~information.~~reporting purposes. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. Expenses that are not allocated to the segments are included in the reconciliation of reportable segment net income to consolidated net income. 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

Table of Contents

Segment Information (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 September 30, 2023
Segment net sales	$	918		$	972		$	563		$	449		$	230		$	327		$	3,459
Depreciation (1)	$	65		$	119		$	37		$	32		$	18		$	37		$	308
Research, development and engineering expenses (2)	$	60		$	26		$	62		$	26		$	7		$	41		$	222
Income tax provision (3)	$	(24	)	$	(64	)	$	(19	)	$	(27	)	$	(4	)	$	(2	)	$	(140	)
Segment net income (loss)	$	91		$	242		$	72		$	99		$	13		$	(8	)	$	509

																Hemlock
																and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended September 30, 2022
Segment net sales	$	1,317		$	686		$	519		$	425		$	312		$	407		$	3,666
Depreciation (1)	$	58		$	124		$	36		$	31		$	14		$	38		$	301
Research, development and engineering expenses (2)	$	60		$	31		$	66		$	25		$	10		$	43		$	235
Income tax provision (3)	$	(50	)	$	(35	)	$	(26	)	$	(23	)	$	(11	)	$	(8	)	$	(153	)
Segment net income	$	183		$	134		$	96		$	87		$	43		$	18		$	561

~~Index~~

																Hemlock
																and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Nine months ended September 30, 2023
Segment net sales	$	3,109		$	2,663		$	1,392		$	1,337		$	717		$	1,090		$	10,308
Depreciation (1)	$	195		$	362		$	111		$	97		$	52		$	105		$	922
Research, development and engineering expenses (2)	$	176		$	73		$	172		$	73		$	25		$	121		$	640
Income tax provision (3)	$	(105	)	$	(161	)	$	(38	)	$	(77	)	$	(9	)	$	(22	)	$	(412	)
Segment net income	$	390		$	610		$	144		$	288		$	33		$	34		$	1,499

																Hemlock
																and
																Emerging
	Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Nine months ended September 30, 2022
Segment net sales	$	3,828		$	2,523		$	1,497		$	1,190		$	934		$	1,200		$	11,172
Depreciation (1)	$	185		$	426		$	118		$	98		$	44		$	111		$	982
Research, development and engineering expenses (2)	$	173		$	92		$	163		$	74		$	28		$	121		$	651
Income tax provision (3)	$	(146	)	$	(157	)	$	(70	)	$	(59	)	$	(32	)	$	(19	)	$	(483	)
Segment net income	$	531		$	598		$	262		$	223		$	122		$	35		$	1,771

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 reflects a tax rate of 21%.

Table of Contents

The following table presents a reconciliation of net sales of reportable segments to consolidated net sales (in millions):

	Three months ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
Net sales of reportable segments	$	3,132		$	3,259		$	9,218		$	9,972
Net sales of Hemlock and Emerging Growth Businesses		327			407			1,090			1,200
Impact of constant currency reporting (1)		(286	)		(178	)		(714	)		(389	)
Consolidated net sales	$	3,173		$	3,488		$	9,594		$	10,783

(1)

~~Many~~This amount primarily represents the impact 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 includedforeign currency adjustments in the ~~reconciliation of reportable net segment net income to consolidated net income below.~~

Display Technologies segment.

~~Index~~

AThe following table presents a reconciliation of ~~reportable segment~~ net income of reportable segments 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

	Three months ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
Net income of reportable segments	$	517		$	543		$	1,465		$	1,736
Net (loss) income of Hemlock and Emerging Growth Businesses		(8	)		18			34			35
Unallocated amounts:
Impact of constant currency reporting		(212	)		(136	)		(535	)		(319	)
Gain (loss) on foreign currency hedges related to translated earnings		20			(68	)		128			257
Translation gain on Japanese yen-denominated debt		35			84			162			321
Litigation, regulatory and other legal matters		(32	)		(23	)		(44	)		(65	)
Research, development, and engineering expenses (1)		(40	)		(43	)		(127	)		(115	)
Amortization of intangibles		(30	)		(31	)		(92	)		(92	)
Interest expense, net		(62	)		(59	)		(179	)		(180	)
Income tax benefit		105			119			234			103
Severance charges (2)		(13	)		(8	)		(86	)		(8	)
Disposal of assets and other charges and credits (3)		(59	)		(130	)		(184	)		(209	)
Gain on sale of business											53
Other corporate items		(57	)		(58	)		(155	)		(165	)
Net income attributable to Corning Incorporated	$	164		$	208		$	621		$	1,352

(1)	Amount does not include research, development and engineering expense related to severance charges and disposal of assets and other charges and credits.
(2)	For the three and nine months ended September 30, 2023, the amount recorded in cost of sales in the consolidated statements of income was $10 million and $51 million, respectively. For the three and nine months ended September 30, 2022, the amount recorded in cost of sales in the consolidated statements was not material.
(3)	For the three and nine months ended September 30, 2023, the amount recorded in cost of sales in the consolidated statements of income was $53 million and $145 million, respectively. The activity primarily related to asset write-offs during the period. For the three and nine months ended September 30, 2022, the amount recorded in cost of sales in the consolidated statements of income was $124 million and $192 million, respectively. The activity primarily related to capacity optimization of an emerging growth business.

Table of Contents

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

~~(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.

24Incorporated and its consolidated subsidiaries are hereinafter sometimes referred to as the “Company,” the “Registrant,” “Corning,” “we,” “our,” or “us.”

~~Index~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~This report contains forward-looking statements that involve a number of risks and uncertainties. These statements relate to plans, objectives, expectations and estimates and may contain words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “seek,” “see,” “would,” “target,” “estimate,” “forecast,” or similar expressions. Actual results could differ materially from what is expressed or forecasted in forward-looking statements. Some of the factors that could contribute to these differences include those discussed under “Forward-Looking Statements,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report.

ORGANIZATION OF INFORMATION

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) ~~provides~~was prepared to provide a historical and prospective narrative on ~~the Company’s~~our financial condition and results of ~~operations. This interim MD&A~~operations through the eyes of management and should be read in conjunction with ~~the~~our MD&A in our 2016 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 future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are basedAnnual Report 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~~ Form 10-K ~~and as may be updated in our Forms 10-Q. Our actual results may differ materially, and these forward-looking statements do not reflect~~for the ~~potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of September 30, 2017.~~year ended December 31, 2022 (“2022 Form 10-K”).

Our MD&A ~~includes the following sections:~~is organized as follows:

●	· Overview
●		~~Overview~~

Results of Operations

●	· Segment Analysis
●		Core Performance Measures

●

~~Reportable Segments~~

Liquidity and Capital Resources ~~and Liquidity~~

●	· Environment
●		Critical Accounting Estimates

●

~~New Accounting Standards~~

~~Environment~~

Forward-Looking Statements

OVERVIEW

~~Strategy~~Corning Incorporated is central to the advancement of the industries we serve and ~~Capital Allocation Framework~~

~~In October 2015,~~secular trends touching many facets of daily life. It all starts with our focused and cohesive portfolio. We maintain clear leadership in three core technologies and four proprietary manufacturing and engineering platforms. We apply new combinations of our assets and capabilities to solve a broad range of significant challenges and shape new industries in tandem with our customers. By reapplying and repurposing our insights and assets across multiple opportunities and markets, we increase our profitably. Importantly, as we partner closely with our customers to realize their visions and help solve their toughest technology challenges, we unlock new ways to integrate more of our content into their ecosystems. This “More Corning” approach provides a powerful value-creation lever. We’re not just relying on people buying more stuff; we’re driving more Corning ~~announced a strategy and capital allocation framework (the “Framework”) that reflects~~content into the Company’s financial and operational strengths, as well as its ongoing commitment to increasing shareholder value. The Framework outlines our leadership priorities, and articulates the opportunities we see across our 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.products they’re already buying.

Our ~~probability~~accomplishments over the past several years illustrate the efficacy of ~~success increases~~our approach. Despite the challenging external environment, we have advanced fiber-to-the-home and data center solutions in Optical Communications, delivered on our gasoline particulate filter content opportunity in Environmental Technologies, introduced Ceramic Shield with Apple in Specialty Materials and ramped our Gen 10.5 plants to extend our leadership in Display Technologies. In addition, we made major progress on our emerging innovations; we gained significant traction in our Automotive Glass Solutions business; and our pharmaceutical packaging portfolio played a central role in combatting the global pandemic. These achievements have helped extend our leadership positions across our markets and pave the way for future growth.

At the same time, profitability and cash flow have lagged sales growth. Since 2020, the external environment has been characterized by the impact of the pandemic and its resulting effects including supply chain disruptions, large swings in consumer spending and inflation. Our core priorities throughout this period were protecting our people and delivering for our customers, and as a result, we operated with elevated staffing and higher-than-normal inventory levels during this period leading to reduced productivity. In addition, persistent inflation added to the cost of raw materials we purchased, the cost to produce and ship our products and the inventory we maintained.

Table of Contents

In response, we took a series of actions to improve profitability and cash generation throughout 2022 and 2023. These actions included raising prices across our businesses to more appropriately share inflationary costs with our customers; restoring our productivity to pre-pandemic levels without impacting our ability to supply and capture future growth; and normalizing inventory levels. As expected, these actions delivered improved profitability and cash flow as we ~~invest~~progressed through 2023.

Overall, we will continue to focus on operating each of our businesses well and adjusting to meet the needs of the moment while simultaneously advancing growth initiatives and capabilities that will drive continued success as the global economy stabilizes. Our focused and cohesive portfolio provides strategic resilience that is evident in our ~~world-class capabilities. Corning is concentrating approximately 80% of its research, development~~results, even in the current environment. We remain confident in our relevance to long-term secular trends and ~~engineering investment~~our “More Corning” approach, and ~~capital spending on a cohesive set of three core technologies, four manufacturing and engineering platforms, and five market-access platforms. This strategy will allow us~~we are well positioned to ~~quickly apply our talents and repurpose our assets~~capture durable, profitable growth as ~~needed.~~the global economy improves.

~~Summary~~Fourth-Quarter 2023 Corporate Outlook

We expect core net sales of ~~results~~approximately $3.25 billion for the ~~three months and nine months ended September 30, 2017~~fourth quarter of 2023.

RESULTS OF OPERATIONS

The following table presents selected highlights from our operations (in millions):

	Three months ended						%			Nine months ended						%
	September 30,						change			September 30,						change
	2023			2022			23 vs. 22			2023			2022			23 vs. 22

Net sales	$	3,173		$	3,488			(9	%)	$	9,594		$	10,783			(11	%)

Gross margin	$	1,004		$	1,062			(5	%)	$	3,020		$	3,591			(16	%)
(gross margin %)		32	%		30	%					31	%		33	%

Selling, general and administrative expenses	$	468		$	461			2	%	$	1,329		$	1,381			(4	%)
(as a % of net sales)		15	%		13	%					14	%		13	%

Research, development and engineering expenses	$	270		$	278			(3	%)	$	787		$	766			3	%
(as a % of net sales)		9	%		8	%					8	%		7	%

Translated earnings contract gain (loss), net	$	20		$	(68	)		(129	%)	$	128		$	257			(50	%)

Income before income taxes	$	217		$	260			(17	%)	$	854		$	1,793			(52	%)

Provision for income taxes	$	(35	)	$	(34	)		3	%	$	(178	)	$	(380	)		(53	%)
Effective tax rate		16	%		13	%					21	%		21	%

Net income attributable to Corning Incorporated	$	164		$	208			(21	%)	$	621		$	1,352			(54	%)

Comprehensive (loss) income attributable to Corning Incorporated	$	(39	)	$	(489	)		(92	%)	$	49		$	(264	)		(119	%)

Table of Contents

Net Sales

Net sales in the three and nine months ended September 30, 2017 were $2,607 million and $7,479 million, respectively, compared to $2,507 million and $6,914 million in the same periods in 2016. The increase in both periods was driven by higher sales 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.

~~Index~~

~~In the third quarter of 2017, we generated net income of $390 million, or $0.39 per share, compared to net income of $284 million, or $0.26 per share,~~ for ~~the same period in 2016. The increase in net income of $106 million, or 37%, 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 in net income in 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.

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 three months ended September 30, ~~2017 when compared to the same period in 2016.~~

~~In the first three quarters of 2017, we generated net income of $915~~2023 decreased $315 million, or $0.89 per share, compared to net income of $2,123 million or $1.81 per share for the same period in 2016. The decrease in net income 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.

~~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%~~9%, when compared to the same period in ~~2016.~~2022. The ~~primary~~decrease was primarily driven by decreased segment sales ~~drivers~~of $399 million in Optical Communications, $82 million in Life Sciences and $80 million in Hemlock and Emerging Growth Businesses, partially offset by increased 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~~sales in Display Technologies of $286 million, Specialty Materials of $44 million and Environmental Technologies of $24 million. In addition, movements in foreign exchange rates ~~did not materially impact~~adversely impacted Corning’s consolidated net sales inby $92 million for the three ~~and~~months ended September 30, 2023, when compared to the same period in 2022.

Net sales for the nine months ended September 30, ~~2017, respectively,~~2023 decreased $1,189 million, or 11%, when compared to the same ~~periods~~period in ~~2016.~~2022. The decrease was primarily driven by decreased segment sales of $719 million in Optical Communications, $217 million in Life Sciences, $110 million in Hemlock and Emerging Businesses and $105 million in Specialty Materials, partially offset by increased segment sales in Environmental Technologies of $147 million and Display Technologies of $140 million. In addition, movements in foreign exchange rates adversely impacted Corning’s consolidated net sales by $287 million for the nine months ended September 30, 2023, when compared to the same period in 2022.

Refer to the “Segment Analysis” section of our MD&A below for a discussion of net sales by segment.

Cost of Sales / Gross Margin

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; freight and logistics costs; and other production overhead.

~~Gross Margin~~

InFor the three months ended September 30, ~~2017,~~2023, gross margin ~~dollars increased $15~~decreased by $58 million, or 1%5%, ~~but gross margin~~and improved as a percentage of ~~net~~ sales ~~declined slightly~~by 2 percentage points when compared to the same period in ~~2016, driven by LCD glass price declines~~2022. The increase in gross margin as a percentage 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,sales was primarily driven by ~~higher sales volume~~the actions taken by management to improve profitability, including raising prices, restoring our productivity levels and normalizing inventory levels. These improvements were partially offset by movements in foreign exchange rates which adversely impacted Corning’s consolidated gross margin by $58 million for the ~~Specialty Materials and Optical Communications segments.~~ three months ended September 30, 2023 when compared to the same period in 2022.

~~Index~~

InFor the nine months ended September 30, ~~2017,~~2023, gross margin ~~dollars increased~~decreased by ~~$242~~$571 million, or 9%16%, and declined as a percentage of sales by 2 percentage points when compared to the same period in 2022. The decline in gross margin as a percentage of ~~net~~ sales ~~remained consistent,~~was primarily driven by higher inflationary and production costs, partially offset by the benefits from the actions taken by management to improve profitability. In addition, movements in foreign exchange rates adversely impacted Corning’s consolidated gross margin by $175 million for the nine months ended September 30, 2023 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.2022.

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:~~are salaries, wages and benefits; ~~stock-based~~share-based compensation expense; travel; sales commissions; professional fees; and depreciation and amortization, utilities and rent for administrative facilities.

For the three and nine months ended September 30, 2023, selling, general and administrative expenses increased by $7 million and decreased $52 million, or 2% and 4%, respectively, and were fairly consistent as a percentage of sales when compared to the same periods in 2022.

Research, Development and Engineering Expenses

For the three and nine months ended September 30, ~~2017,~~2023, research, development and engineering expenses decreased by $8 million and increased ~~by $26~~$21 million, or ~~14%,~~3% and ~~$51 million, or 9%~~3%, respectively, and were fairly consistent as a percentage of sales 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):~~2022.

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.~~

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~~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~~translated earnings contract gain (loss), net, is the impact of foreign currency ~~hedges~~contracts which economically hedge ~~our~~the translation exposure arising from movements in the Japanese yen, South Korean won, ~~euro, New~~new Taiwan dollar, ~~and~~euro, Chinese yuan ~~against the U.S. dollar~~and British pound and its impact on ~~our~~ net ~~earnings.~~ income.

The following table provides detailed information on the impact of ~~our~~ translated earnings contract ~~losses and gains:~~gain (loss), net (in millions):

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

	Three months ended						Three months ended						Change
	September 30, 2023						September 30, 2022						2023 vs. 2022
	Income						Income						Income
	before			Net			before			Net			before			Net
	tax			income			tax			income			tax			income
Hedges related to translated earnings:
Realized gain, net (1) (2)	$	73		$	59		$	100		$	76		$	(27	)	$	(17	)
Unrealized loss, net (3)		(53	)		(43	)		(168	)		(128	)		115			85
Total translated earnings contract gain (loss), net	$	20		$	16		$	(68	)	$	(52	)	$	88		$	68

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

	Nine months ended						Nine months ended				Change
	September 30, 2023						September 30, 2022				2023 vs. 2022
	Income						Income				Income
	before			Net			before		Net		before			Net
	tax			income			tax		income		tax			income
Hedges related to translated earnings:
Realized gain, net (1) (2)	$	211		$	168		$	218	$	166	$	(7	)	$	2
Unrealized (loss) gain, net (4)		(83	)		(65	)		39		31		(122	)		(96	)
Total translated earnings contract gain, net	$	128		$	103		$	257	$	197	$	(129	)	$	(94	)

(1)	For the three and nine months ended September 30, 2023, amount includes pre-tax realized losses of $20 million and $48 million, respectively, related to the expiration of option contracts. For the three and nine months ended September 30, 2022, amount includes pre-tax realized gains of $23 million and $9 million, respectively, related to the expiration of option contracts. These amounts were reflected within operating activities in the consolidated statements of cash flows.
(2)	For the nine months ended September 30, 2023, amount excludes $11 million related to a forward contract designated as a net investment hedge, which was reflected within investing activities in the consolidated statements of cash flows.
(3)	The impact to income for the three months ended September 30, 2023 was primarily driven by unrealized losses from our South Korean won and Japanese yen-denominated hedges. The impact to income for the three months ended September 30, 2022 was primarily driven by unrealized losses from our South Korean won-denominated hedges.
(4)	The impact to income for the nine months ended September 30, 2023 was primarily driven by unrealized losses from our South Korean won and Chinese yuan-denominated hedges partially offset by unrealized gains from our Japanese yen-denominated hedges. The impact to income for the nine months ended September 30, 2022 was primarily driven by unrealized gains from our Japanese yen-denominated hedges partially offset by unrealized losses from our South Korean won-denominated hedges.

~~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

The translation impact of fluctuations in foreign currency exchange rates offset by the impact of hedges realized in the current period, adversely impacted Corning’s consolidated income before income taxes by $87 million and $182 million for 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~~2023, respectively, when compared to the same periods in ~~2016.~~ 2022.

~~(Provision)Benefit~~Provision for Income Taxes

~~Our (provision) benefit for income taxes and~~

For the ~~related~~three months ended September 30, 2023, the effective ~~income~~ tax rate ~~were as follows (in millions):~~differed from the United States (“U.S.”) statutory rate of 21%, primarily due to differences arising from foreign earnings partially offset by changes in estimates based on the final 2022 U.S. Federal Income Tax Return. For the nine months ended September 30, 2023, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to differences arising from foreign earnings, changes in estimates based on the final 2022 U.S. Federal Income Tax Return and adjustments related to share-based compensation, partially offset by changes in valuation allowance assessments.

Table of Contents

For the three months ended September 30, ~~2017,~~2022, the effective ~~income~~ tax rate differed from the U.S. statutory rate of ~~35%~~21%, 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.~~

net impact of changes in tax legislation and changes in estimates based on the final 2021 U.S. Federal Income Tax Return, partially offset by changes in tax reserves. For the nine months ended September 30, ~~2017,~~2022, the effective ~~income~~ tax rate differed from the U.S. statutory rate of ~~35%~~21%, primarily due to differences arising from foreign earnings and changes in tax reserves, partially offset by the ~~following benefits:~~

~~Rate differences~~impact of changes in tax legislation, changes in estimates based 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~~final 2021 U.S. ~~statutory rate of 35% primarily due~~Federal Income Tax Return and adjustments related 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.~~share-based compensation.

~~Index~~

Net Income Attributable to Corning Incorporated

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



	Three months ended				Nine months ended				Three months ended				Nine months ended
	September 30,				September 30,				September 30,				September 30,
	2017		2016		2017		2016		2023		2022		2023		2022
Net income attributable to Corning Incorporated	$	390	$	284	$	915	$	2,123	$	164	$	208	$	621	$	1,352
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	$	0.19	$	0.25	$	0.73	$	1.60
Diluted earnings per common share	$	0.39	$	0.26	$	0.89	$	1.81	$	0.19	$	0.24	$	0.72	$	1.58

Weighted-average common shares outstanding - basic		883		978		905		1,046		850		843		848		843
Weighted-average common shares outstanding - diluted		1,009		1,102		1,031		1,170		859		855		858		857

Comprehensive (Loss) Income attributable to Corning Incorporated

~~(1)~~

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

Comprehensive ~~Income~~

~~For~~loss attributable to Corning Incorporated for the three months ended September 30, ~~2017, comprehensive income decreased by $90~~2023 was $39 million ~~when~~ compared to $489 million for the ~~same period in 2016,~~three months ended September 30, 2022. This movement is primarily due to the ~~negative impact of the change~~$44 million decrease in net income attributable to Corning Incorporated and a decrease in net losses on foreign currency translation ~~gains and losses~~adjustments of ~~$192~~$494 million, primarily driven ~~primarily~~ by the Japanese yen, ~~partially offset by the increase in net income of $106 million.~~South Korean won, Chinese yuan and euro.

~~For~~Comprehensive income attributable to Corning Incorporated for the nine months ended September 30, ~~2017, comprehensive income decreased by $1.8 billion, when~~2023 was $49 million 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~~comprehensive loss attributable to Corning Incorporated of $264 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 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

$
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~~2022. This movement is primarily due to the $731 million decrease in net income attributable to Corning Incorporated and a decrease in net losses on foreign currency translation adjustments of ~~$1,271~~$942 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~~primarily driven by the ~~following items:~~Japanese yen, South Korean won, Chinese yuan and euro.

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

Table of Contents

~~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. SEGMENT ANALYSIS

~~Included in core earnings~~Financial results 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 and Hemlock and Emerging Growth Businesses 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~~internal disaggregation of financial information to assist the Chief Operating Decision Maker (“CODM”) in making internal operating ~~decisions. We included the earnings of equity affiliates that are closely associated with our reportable segments~~decisions, which is more fully discussed within Note 14 (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~~accompanying notes to the consolidated 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 performancestatements 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~~includes a reconciliation of ~~non-GAAP performance measures~~our segment information to ~~their most directly comparable GAAP financial measure, please see “Reconciliation~~the corresponding amounts in our consolidated statements of ~~Non-GAAP Measures” above.~~ income.

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.~~

The following table presents 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

2023

2022

23 vs. 22

2023

2022

23 vs. 22

Optical Communications

918

1,317

(399

)

(30

3,109

3,828

(719

)

(19

~~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~~

918

1,317

(399

)

(30

3,109

3,828

(719

)

(19

Optical Communications

918

1,317

(399

)

(30

3,109

3,828

(719

)

(19

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

972

686

286

2,663

2,523

140

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

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~~

Net sales in the 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 sales increased by $431 million, or 20%, 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.~~

563

519

1,392

1,497

(105

)

~~Environmental Technologies~~Specialty Materials

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%, driven by higher sales of automotive products due to market strength in Europe, China and Asia. 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 in the third quarter and first nine months of 2017 decreased by $1 million, or 3%, and $9 million, or 8%, driven by expenses in support of new product launches, and in the first nine months of 2017 by higher restructuring, impairment and other charges. Movements in foreign exchange rates did not materially impact 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~~

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~~

563

519

1,392

1,497

(105

)

Specialty Materials

563

519

1,392

1,497

(105

)

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

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

~~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 net sales and net income in these periods when compared to the same periods in the prior year.

~~Core Performance~~

Core earnings increased by $27 million, or 61%, and $53 million, or 43%, in 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~~

449

425

1,337

1,190

147

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

~~As Reported~~

Net sales in 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~~

~~The following table provides net sales and other data for All Other (in millions):~~

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~~

230

312

(82

)

(26

717

934

(217

)

(23

Net sales of ~~this segment increased by $12 million, or 32%,~~reportable segments

3,132

3,259

(127

)

9,218

9,972

(754

)

Hemlock 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~~Emerging Growth Businesses

327

407

(80

)

(20

1,090

1,200

(110

)

Net 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~~reportable segments 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 in the first quarter of 2016. Hemlock and Emerging Growth Businesses (1)

3,459

3,666

(207

)

10,308

11,172

(864

)

~~CAPITAL RESOURCES AND LIQUIDITY~~

~~Financing and Capital Resources~~

~~The following items impacted Corning’s financing and capital structure in the periods ended September 30, 2017 and 2016:~~

~~Debt Issuances~~

~~In the third quarter of 2017, Corning issued three Japanese yen-denominated debt securities (the “Notes”), as follows:~~

(1)

~~¥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.

~~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.

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

~~Capital Spending~~

~~Capital spending totaled $1.2 billion and $815 million~~14 (Reportable Segments) in the nine months ended September 30, 2017 and 2016, respectively. We expect our 2017 capital expenditures to be more than $1.5 billion, driven by expansions related to the Gen 10.5 glass manufacturing facility, the addition of capacity to support the new gas-particulate filters business in the Environmental Technologies segment and investment to support growth in customer demand in the Optical Communications 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 Communications and Specialty Materials segments, up $177 million 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 for PCC (refer to Note 2 (Commitments, Contingencies and Guarantees)accompanying notes to the consolidated financial statements for ~~additional information) and unfavorable movements in working capital, driven by an increase of $92 million in inventory~~the reconciliation to ~~support growth~~consolidated net sales.

Optical Communications

The decrease in segment net sales for both the three and nine month periods was primarily driven by a decline in volume due to lower order rates from carriers as they continue to draw down inventory.

Display Technologies

The increase in segment net sales during the three and nine month periods is due to higher volumes, primarily attributable to the recovery of panel maker utilization to normal ranges.

Specialty Materials

The increase in segment net sales for the three month period was primarily driven by higher volumes due to customer product launches and continued demand for semiconductor materials. The decrease in segment net sales for the nine month period was primarily driven by lower demand in the smartphone, tablet and notebook markets, partially offset by continued demand for semiconductor materials.

Environmental Technologies

The increase in segment net sales for both the three and nine month periods was primarily driven by increased demand of automotive products, including gasoline particulate filter adoption in China, partially offset by softness in heavy-duty markets in North America.

Life Sciences

The decrease in segment net sales for both the three and nine month periods was impacted by the lower demand for COVID-related products in China and the impact of customers drawing down inventory.

Hemlock and Emerging Growth Businesses

The decrease for both the three and nine month periods was primarily driven by a decrease in our Hemlock business due to declines in solar-grade polysilicon prices and lower sales in our Pharmaceutical Technologies business as the last of the volume commitments for COVID-related products were completed in the second quarter.

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

	Three months ended					$			%			Nine months ended				$			%
	September 30,					change			change			September 30,				change			change
	2023			2022		23 vs. 22			23 vs. 22			2023		2022		23 vs. 22			23 vs. 22
Optical Communications	$	91		$	183	$	(92	)		(50	)%	$	390	$	531	$	(141	)		(27	)%
Display Technologies		242			134		108			81	%		610		598		12			2	%
Specialty Materials		72			96		(24	)		(25	)%		144		262		(118	)		(45	)%
Environmental Technologies		99			87		12			14	%		288		223		65			29	%
Life Sciences		13			43		(30	)		(70	)%		33		122		(89	)		(73	)%
Net income of reportable segments		517			543		(26	)		(5	)%		1,465		1,736		(271	)		(16	)%
Hemlock and Emerging Growth Businesses		(8	)		18		(26	)		*			34		35		(1	)		(3	)%
Net income of reportable segments and Hemlock and Emerging Growth Businesses (1)	$	509		$	561	$	(52	)		(9	)%	$	1,499	$	1,771	$	(272	)		(15	)%

* Not meaningful

(1)	Refer to Note 14 (Reportable Segments) in the accompanying notes to the consolidated financial statements for the reconciliation to consolidated net income.

Optical Communications

The decrease in segment net income for both the three and nine month periods was primarily driven by a decline in sales volume, as outlined above, partially offset by improvements from pricing and productivity actions.

Display Technologies

The increase in segment net income for the three and nine month periods was primarily driven by the increase in sales, as outlined above.

Specialty Materials

The decrease in segment net income for the three month period was primarily driven by higher production costs, partially offset by the increase in sales volume, as outlined above. The decrease in segment net income for the nine month period was primarily driven by the decline in sales volume, as outlined above, and impacted by continued development costs for new product launches.

Environmental Technologies

The increase in segment net income for both the three and nine month periods was primarily driven by the increase in sales, as outlined above, and as a result of productivity-improvement actions.

Life Sciences

The decrease in segment net income for both the three and nine month periods was primarily driven by lower sales volume, as outlined above.

Hemlock and Emerging Growth Businesses

The decrease for the three month period was primarily driven by our Hemlock business due to lower sales, as outlined above.

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CORE PERFORMANCE MEASURES

In managing the Company and assessing our financial performance, we adjust certain measures provided by our consolidated financial statements to exclude specific items to arrive at our core performance measures. These items include the impact of translating the Japanese yen-denominated debt, the impact of the translated earnings contracts, acquisition-related costs, certain discrete tax items and other tax-related adjustments, restructuring, impairment and other charges and credits, certain litigation, regulatory and other legal matters, pension mark-to-market adjustments and other items which do not reflect the ongoing operating results of the Company.

In addition, because a significant portion of our revenues and expenses are denominated in currencies other than the U.S. dollar, management believes it is important to understand the impact on sales and net income of translating these currencies into U.S. dollars. Therefore, management utilizes constant-currency reporting for the Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments to exclude the impact from the Japanese yen, South Korean won, Chinese yuan, new Taiwan dollar and euro, as applicable to the segment. The most significant constant-currency adjustment relates to the Japanese yen exposure within the Display Technologies segment. We establish constant-currency rates based on internally derived management estimates, which are closely aligned with the currencies we have hedged. For details of the rates used, please see the footnotes to the “Reconciliation of Non-GAAP Measures” section.

We believe that the use of constant-currency reporting allows management to understand our results without the volatility of currency fluctuation, analyze underlying trends in the businesses and establish operational goals and forecasts. Further, we believe it reflects the underlying economics of the translated earnings contracts used to mitigate the impact of changes in currency exchange rates on our earnings and cash flows.

Core performance measures are not prepared in accordance with GAAP, but management believes that reporting core performance measures provides investors with greater transparency to the information used by our management team to make financial and operational decisions. 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 outlook for future periods, it is not possible to provide reconciliations for these non-GAAP measures because management 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 management’s control. As a result, management 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.”

Results of Operations – Core Performance Measures

The following table presents selected highlights from our operations, excluding certain items (in millions):

	Three months ended				%			Nine months ended				%
	September 30,				change			September 30,				change
	2023		2022		23 vs. 22			2023		2022		23 vs. 22
Core net sales	$	3,459	$	3,666		(6	)%	$	10,308	$	11,172		(8	)%
Core net income	$	386	$	438		(12	)%	$	1,124	$	1,392		(19	)%

Core Net Sales

Core net sales are consistent with net sales by reportable segment and Hemlock and Emerging Growth Businesses. Segment and Hemlock and Emerging Growth Businesses net sales and variances are discussed in detail in the “Segment Analysis” section of our MD&A.

Table of Contents

Core Net Income

For the three months ended September 30, 2023, we generated core net income of $386 million, or $0.45 per core diluted share, compared to core net income generated for the three months ended September 30, 2022 of $438 million, or $0.51 per core diluted share. The decrease of $52 million, or $0.06 per core diluted share, was primarily due to lower segment net income for Optical Communications of $92 million, Life Sciences of $30 million and Specialty Materials of $24 million. This was partially offset by higher segment net income for Display Technologies of $108 million. Segment and Hemlock and Emerging Growth Businesses net income and variances are discussed in detail in the “Segment Analysis” section of our MD&A.

For the nine months ended September 30, 2023, we generated core net income of $1,124 million, or $1.31 per core diluted share, compared to core net income generated for the nine months ended September 30, 2022 of $1,392 million, or $1.62 per core diluted share. The decrease of $268 million, or $0.31 per core diluted share, was primarily due to lower segment net income for Optical Communications of $141 million, Specialty Materials of $118 million and Life Sciences of $89 million. This was partially offset by higher segment net income for Environmental Technologies of $65 million. Segment and Hemlock and Emerging Growth Businesses net income and variances are discussed in detail in the “Segment Analysis” section of our MD&A.

Core Earnings per Common Share

Core earnings per share decreased for the three and nine months ended September 30, 2023 to $0.45 and $1.31 per share, respectively, primarily as a result of the changes in core net income, outlined above.

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,
	2023		2022		2023		2022
Core net income	$	386	$	438	$	1,124	$	1,392

Weighted-average common shares outstanding - basic		850		843		848		843
Effect of dilutive securities:
Stock options and other awards		9		12		10		14
Weighted-average common shares outstanding - diluted		859		855		858		857
Core basic earnings per common share	$	0.45	$	0.52	$	1.33	$	1.65
Core diluted earnings per common share	$	0.45	$	0.51	$	1.31	$	1.62

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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 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 and core net income and the related per share numbers 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 our operations.

See “Items Excluded from GAAP Measures” for the descriptions of the footnoted reconciling items.

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, 2023
						Net income
						attributable
	Net		Income before			to Corning			Effective tax			Per
	sales		income taxes			Incorporated			rate (a)(b)			share
As reported – GAAP	$	3,173	$	217		$	164			16.1	%	$	0.19
Constant-currency adjustment (1)		286		212			164						0.19
Translation gain on Japanese yen-denominated debt (2)				(35	)		(29	)					(0.03	)
Translated earnings contract gain (3)				(20	)		(16	)					(0.02	)
Acquisition-related costs (4)				33			25						0.03
Discrete tax items and other tax-related adjustments (5)							(3	)					(0.00	)
Restructuring, impairment and other charges and credits (6)				72			58						0.07
Litigation, regulatory and other legal matters (7)				32			25						0.03
Pension mark-to-market adjustment (8)				7			6						0.01
Gain on investments (9)				(8	)		(8	)					(0.01	)
Core performance measures	$	3,459	$	510		$	386			20.5	%	$	0.45

(a)	Based upon statutory tax rates in the specific jurisdiction for each event.
(b)	The calculation of the effective tax rate (“ETR”) excludes net income attributable to non-controlling interests (“NCI”).

	Three months ended September 30, 2022
						Net income
						attributable
	Net		Income before			to Corning			Effective tax			Per
	sales		income taxes			Incorporated			rate (a)(b)			share
As reported - GAAP	$	3,488	$	260		$	208			13.1	%	$	0.24
Constant-currency adjustment (1)		178		136			79						0.09
Translation gain on Japanese yen-denominated debt (2)				(84	)		(64	)					(0.07	)
Translated earnings contract loss (3)				68			52						0.06
Acquisition-related costs (4)				33			25						0.03
Discrete tax items and other tax-related adjustments (5)							22						0.03
Restructuring, impairment and other charges and credits (6)				138			106						0.12
Litigation, regulatory and other legal matters (7)				23			17						0.02
Pension mark-to-market adjustment (8)				(9	)		(7	)					(0.01	)
Core performance measures	$	3,666	$	565		$	438			19.3	%	$	0.51

(a)	Based upon statutory tax rates in the specific jurisdiction for each event.
(b)	The calculation of the ETR excludes net income attributable to NCI.

See “Items Excluded from GAAP Measures” for the descriptions of the footnoted reconciling items.

Table of Contents

	Nine months ended September 30, 2023
						Net income
						attributable
	Net		Income before			to Corning			Effective tax			Per
	sales		income taxes			Incorporated			rate (a)(b)			share
As reported – GAAP	$	9,594	$	854		$	621			20.8	%	$	0.72
Constant-currency adjustment (1)		714		535			403						0.47
Translation gain on Japanese yen-denominated debt (2)				(162	)		(131	)					(0.15	)
Translated earnings contract gain (3)				(128	)		(103	)					(0.12	)
Acquisition-related costs (4)				99			70						0.08
Discrete tax items and other tax-related adjustments (5)							26						0.03
Restructuring, impairment and other charges and credits (6)				270			216						0.25
Litigation, regulatory and other legal matters (7)				44			35						0.04
Pension mark-to-market adjustment (8)				1			1						0.00
Loss on investments (9)				1			1						0.00
Gain on sale of assets (10)				(20	)		(15	)					(0.02	)
Core performance measures	$	10,308	$	1,494		$	1,124			20.5	%	$	1.31

(a)	Based upon statutory tax rates in the specific jurisdiction for each event.
(b)	The calculation of the ETR excludes net income attributable to NCI.

	Nine months ended September 30, 2022
						Net income
						attributable
	Net		Income before			to Corning			Effective tax			Per
	sales		income taxes			Incorporated			rate (a)(b)			share
As reported - GAAP	$	10,783	$	1,793		$	1,352			21.2	%	$	1.58
Constant-currency adjustment (1)		389		319			221						0.26
Translation gain on Japanese yen-denominated debt (2)				(321	)		(246	)					(0.29	)
Translated earnings contract gain (3)				(257	)		(197	)					(0.23	)
Acquisition-related costs (4)				107			84						0.10
Discrete tax items and other tax-related adjustments (5)							38						0.04
Restructuring, impairment and other charges and credits (6)				217			166						0.19
Litigation, regulatory and other legal matters (7)				65			49						0.06
Pension mark-to-market adjustment (8)				(19	)		(15	)					(0.02	)
Loss on investments (9)				8			6						0.01
Contingent consideration (11)				(32	)		(25	)					(0.03	)
Gain on sale of business (12)				(53	)		(41	)					(0.05	)
Core performance measures	$	11,172	$	1,827		$	1,392			20.5	%	$	1.62

(a)	Based upon statutory tax rates in the specific jurisdiction for each event.
(b)	The calculation of the ETR excludes net income attributable to NCI.

See “Items Excluded from GAAP Measures” for the descriptions of the footnoted reconciling items.

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Items Excluded from GAAP Measures

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

(1)

Constant-currency adjustment: As a significant portion of revenues and ~~an increase~~expenses are denominated in currencies other than the U.S. dollar, management believes it is important to understand the impact on sales and net income of ~~$63 million in other receivables in~~translating these currencies into U.S. dollars. The Company utilizes constant-currency reporting for the Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments for the Japanese yen, South Korean won, Chinese yuan, New Taiwan dollar and euro, as applicable to the segment. We establish constant-currency rates based on internally derived management estimates, which are closely aligned with the currencies we have hedged.

~~Net cash used in investing activities increased by $5.2 billion~~We believe that the use of constant-currency reporting allows management to understand our results without the volatility of currency fluctuation, analyze underlying trends in the ~~nine months ended September 30, 2017, when compared~~businesses and establish operational goals and forecasts. Further, we believe it reflects the underlying economics of the translated earnings contracts used to mitigate the ~~same period last year, driven by~~impact of changes in currency exchange rates on our earnings and cash flows.

Constant currency rates used are as follows:

Currency

Japanese yen

Korean won

Chinese yuan

New Taiwan dollar

Euro

Rate

¥107

₩1,175

¥6.7

NT$31

€.81

(2)

Translation of Japanese yen-denominated debt: Amount reflects the ~~absence of $4.8 billion of cash received in the second quarter of 2016~~gain or loss on the ~~realignment~~translation of ~~Dow Corning, coupled with an increase~~our yen-denominated debt to U.S. dollars.

(3)

Translated earnings contract: Amount reflects the impact of ~~$432 million in capital expenditures largely due to capacity expansion projects in our Optical Communications segment~~the realized 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 millionunrealized gains and losses from the ~~issuance~~Japanese yen, South Korean won, Chinese yuan, euro and new Taiwan dollar-denominated foreign currency hedges related to translated earnings, as well as the unrealized gains and losses of ~~long-term debt,~~our British pound-denominated foreign currency hedges related to translated earnings.

(4)

Acquisition-related costs: Amount reflects intangible amortization, inventory valuation adjustments and external acquisition-related deal costs, as well as other transaction related costs.

(5)

Discrete tax items and other tax-related adjustments: Amount reflects certain discrete period tax items such as changes in tax law, the ~~absence~~impact of ~~$566 million of commercial paper~~tax audits, changes in tax reserves and ~~debt repayments made~~changes in ~~the first nine months of 2016~~deferred tax asset valuation allowances, as well as other tax-related adjustments.

(6)

Restructuring, impairment and ~~an increase of $189 million in proceeds~~other charges and credits: Amount reflects certain restructuring, impairment losses and other charges and credits, as well as other expenses, including accelerated depreciation, asset write-offs and facility repairs resulting from ~~the exercise of stock options~~

~~Key Balance Sheet Data~~

~~Balance sheet~~power outages, which are not related to ongoing operations. The activity during 2023 primarily relates to severance charges 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%

~~(1)~~

~~Includes trade payables only.~~

~~Index~~

~~Credit Rating~~

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



	~~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~~asset write-offs. The activity during the third quarter of ~~2017 with approximately $3.9 billion~~2022 primarily relates to capacity optimization 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, 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 sitesemerging growth business.

(7)

Litigation, regulatory and other ~~environmental liabilities related~~legal matters: Amount reflects developments in commercial litigation, intellectual property disputes, adjustments 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 theour estimated liability for ~~environmental cleanup~~environmental-related items and ~~related litigation. Based upon~~other legal matters.

(8)

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

(9)

(Gain) loss on investments: Amount primarily reflects the gain or loss recognized on investment due to ~~date, management believes that~~mark-to-mark adjustments for the ~~accrued reserve is a reasonable estimate~~change in fair value or the disposition of the ~~Company’s liability and that~~investment.

(10)

Gain on sale of assets: Amount represents the ~~risk~~gain recognized for the sale assets.

(11)

Contingent consideration: Amount reflects the fair value mark-to-market cost adjustment of ~~an additional loss in an amount materially higher than that accrued is remote.~~contingent consideration resulting from the Hemlock Semiconductor Group transaction on September 9, 2020.

(12)

Gain on sale of business: Amount represents the gain recognized for the sale of a business.

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LIQUIDITY AND CAPITAL RESOURCES

Our financial condition and liquidity are strong. We are not aware of any known trends, 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 of such resources.

Our major source of funding for 2023 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 to fund operations and meet our obligations for the foreseeable future. Such obligations include requirements for acquisitions, capital expenditures, debt repayments, dividend payments and share repurchase programs. We will continue to generate cash from operations and maintain access to our revolving credit facilities and commercial paper programs as discussed in more detail below.

Key Balance Sheet Data

We fund our working capital with cash from operations and short-term borrowings, including commercial paper, when necessary. In addition, we receive upfront cash from customers relating to long-term supply agreements, as well as cash incentives from government entities generally for capital expansion and related expenses.

The following table presents balance sheet and working capital measures (in millions):

	September 30,			December 31,
	2023			2022
Working capital	$	3,013		$	2,278
Current ratio	1.7:1			1.4:1
Trade accounts receivable, net of doubtful accounts	$	1,725		$	1,721
Days sales outstanding		49			45
Inventories	$	2,655		$	2,904
Inventory turns		3.2			3.4
Days payable outstanding (1)		48			52
Long-term debt	$	7,210		$	6,687
Total debt	$	7,507		$	6,911
Total debt to total capital		39	%		36	%

(1)	Includes trade payables only.

We perform 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 to identify potential customer credit issues. We are not aware of any customer credit issues that could have a material impact on our liquidity.

We participate in accounts receivable management programs, including factoring arrangements to sell certain accounts receivable to third-party financial institutions or accelerate collections through our customer’s supply chain financing arrangements. Sales of accounts receivable are reflected as a reduction of accounts receivable in the consolidated balance sheets and the proceeds are included in cash flows from operating activities in the consolidated statements of cash flows. By utilizing these types of programs, we have accelerated the collection of $435 million, $423 million, and $350 million of accounts receivable during the three months ended March 31, 2023, June 30, 2023 and September 30, 2023, respectively. We believe these accounts receivables would have been collected during the normal course of business in the following quarter.

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Cash Flows

The following table presents a summary of cash flow data (in millions):

	Nine months ended
	September 30,
	2023			2022
Net cash provided by operating activities	$	1,292		$	1,998
Net cash used in investing activities	$	(770	)	$	(969	)
Net cash used in financing activities	$	(520	)	$	(1,430	)

Net cash provided by operating activities decreased by $706 million in the nine months ended September 30, 2023, when compared to the same period in the prior year primarily driven by a decrease in net income of $737 million.

Net cash used in investing activities for the nine months ended September 30, 2023 improved by $199 million when compared to the same period last year, primarily driven by lower capital expenditures of $90 million and higher realized gains on translated earnings contracts of $61 million.

Net cash used in financing activities for the nine months ended September 30, 2023 improved by $910 million when compared to the same period last year, primarily driven by the $918 million proceeds received from the issuance of euro-denominated notes in May 2023.

Sources of Liquidity

As of September 30, 2023, our cash and cash equivalents and available credit capacity included (in millions):

	September 30,
	2023
Cash and cash equivalents	$	1,639

Available credit capacity:
U.S. dollar revolving credit facility	$	1,500
Japanese yen liquidity facility	$	167
Chinese yuan facilities	$	404

Cash and Cash Equivalents

As of September 30, 2023, we had $1.6 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. As of September 30, 2023, approximately 54% of the consolidated cash and cash equivalents were held outside the U.S.

If we distribute our foreign cash balances to the U.S. or to other foreign subsidiaries, we could be required to accrue and pay withholding taxes. We do not foresee a need to repatriate any earnings for which we asserted permanent reinvestment. However, to help fund cash needs of the U.S. or other international subsidiaries as they arise, we repatriate available cash from certain foreign subsidiaries whose earnings are not permanently reinvested.

Debt Facilities and Other Sources of Liquidity

We have 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, we may issue paper from time to time and will use the proceeds for general corporate purposes. As of September 30, 2023, we did not have outstanding commercial paper.

Our $1.5 billion Revolving Credit Agreement is available to support obligations under the commercial paper program and for general corporate purposes, if needed. In addition, we have a 25 billion Japanese yen liquidity facility, equivalent to approximately $167 million. As of September 30, 2023, there were no amounts outstanding under these facilities.

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Our 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%. As of September 30, 2023, our leverage using this measure was approximately 39%. As of September 30, 2023, we were in compliance.

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 exceeding a specified amount on one debt obligation, also would be considered a default under the terms of another debt instrument. As of September 30, 2023, we were in compliance with all such provisions.

We have access to certain unsecured variable rate loan facilities, with an aggregate capacity of 5,045 million Chinese yuan, equivalent to approximately $691 million, whose proceeds are used for capital investment and general corporate purposes. As of September 30, 2023, borrowings totaled $287 million.

As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the SEC on December 4, 2020. Under this shelf registration we may offer, from time to time, debt securities, common stock, preferred stock, depositary shares and warrants. We plan to file a new shelf registration statement in the fourth quarter of 2023, prior to the expiration of the shelf registration statement currently in effect.

On May 15, 2023, the Company issued €300 million 3.875% Notes due 2026 (“2026 Notes”) and €550 million 4.125% Notes due 2031 (“2031 Notes”). The proceeds from the 2026 Notes and 2031 Notes were received in euros and converted to U.S. dollars on the date of issuance. The net proceeds received were approximately $918 million and will be used for general corporate purposes. As of September 30, 2023, the U.S. dollar equivalent carrying value of the euro-denominated long-term debt was $892 million.

Uses of Cash

Fixed Rate Cumulative Convertible Preferred Stock, Series A

We had 2,300 outstanding shares of Fixed Rate Cumulative Convertible Preferred Stock, Series A (the “Preferred Stock”) as of December 31, 2020. On January 16, 2021, the Preferred Stock became convertible into 115 million common shares. On April 5, 2021, we executed a Share Repurchase Agreement (“SRA”) with Samsung Display Co., Ltd. (“SDC”) and the Preferred Stock was fully converted as of April 8, 2021. Immediately following the conversion, we repurchased and retired 35 million of the common shares held by SDC for an aggregate purchase price of approximately $1.5 billion, of which approximately $507 million was paid in April 2022 and 2021. The remaining payment of approximately $507 million was made in April 2023.

Stock Repurchases

In 2019, the Board authorized the repurchase of up to $5.0 billion of common stock (“2019 Authorization”). As of September 30, 2023, approximately $3.3 billion remains available under our 2019 Authorization, which does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

Common Stock Dividends

On October 4, 2023, Corning’s Board of Directors declared a dividend of $0.28 per share of common stock. The dividend will be payable on December 15, 2023.

Capital Expenditures

Capital expenditures were $1.1 billion for the nine months ended September 30, 2023. We expect our 2023 full year capital expenditures to be slightly lower than 2022.

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Defined Benefit Pension Plans

Our global pension plans, including our unfunded and non-qualified plans, were 82% funded as of December 31, 2022. Our largest single pension plan is our U.S. qualified plan, which accounted for 77% of our consolidated defined benefit pension plans’ projected benefit obligation, was 93% funded as of December 31, 2022.

The funded status of our pension plans is dependent upon multiple factors including actuarial assumptions, interest rates at year-end, prior investment returns and contributions made to the plans. During 2023, the Company made cash contributions of $25 million to its international pension plans. The Company does not expect to make additional contributions in the fourth quarter of 2023.

Commitments, Contingencies and Guarantees

There were no material changes outside the ordinary course of business in the obligations disclosed in the 2022 Form 10-K under the caption “Commitments, Contingencies and Guarantees.”

Off Balance Sheet Arrangements

There were no material changes outside the ordinary course of business in off balance sheet arrangements as disclosed in the 2022 Form 10-K under the caption “Off Balance Sheet Arrangements.”

ENVIRONMENT

Refer to Item 1. Legal Proceedings or Note 9 (Commitments and Contingencies) in the accompanying notes to the consolidated financial statements for information.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. This requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. The estimates that are considered by management to be the most critical to the understanding of the consolidated financial statements as they require significant judgments that could materially impact our results of operations, financial position and cash flows are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Since the date of the Company’s most recent Annual Report, there were no material changes in the Company’s critical accounting estimates or assumptions.

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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 Securities and Exchange Commission (“SEC”) on Forms 10-Q and 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,” “target,” “estimate,” “forecast” or 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, the Company’s expected capital expenditure 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, there can be no assurance that these forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws.

~~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;~~

-	global economic trends, competition and geopolitical risks, or an escalation of sanctions, tariffs or other trade tensions between the U.S. and China or other countries, and related impacts on our businesses’ global supply chains and strategies;

~~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;~~

~~product demand and industry capacity;~~

~~competitive products and pricing;~~

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

~~new product development and commercialization;~~

changes in macroeconomic and market conditions and market volatility, including developments and volatility arising from the COVID-19 pandemic, inflation, interest rates, the value of securities and other financial assets, precious metals, oil, natural gas and other commodity prices and exchange rates (particularly between the U.S. dollar and the Japanese yen, new Taiwan dollar, euro, Chinese yuan and South Korean won), the availability of government incentives, decreases or sudden increases of consumer demand, and the impact of such changes and volatility on our financial position and businesses;

-	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;

-	possible disruption in commercial activities or our supply chain 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;

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

-	unanticipated disruption to Corning’s, our suppliers’ and manufacturers’ supply chain, equipment, facilities, IT systems or operations;

-	product demand and industry capacity;

-	competitive products and pricing;

-	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;~~

~~effect of regulatory and legal developments;~~

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

the amount and timing of any future dividends;

-	the effects of acquisitions, dispositions and other similar transactions;

-	the 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;

-	rate of technology change;

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

adverse litigation;

~~product and components~~
-
product and component performance issues;

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 impacts of audits by taxing authorities; and

the potential impact of legislation, government regulations, ~~and other government action and investigations;~~ and other government action and investigations.

~~other risks detailed in Corning’s SEC filings.~~

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As noted in the 2022 Form 10-K, we operate and conduct business in many foreign countries and as a result are exposed to movements in foreign currency exchange rates. Our exposure to exchange rates has the following effects:

~~Market Risk~~
● Exchange rate movements on financial instruments and transactions denominated in foreign currencies that impact earnings; and
● Exchange rate movements upon conversion of net assets and net income of foreign subsidiaries for which the functional currency is not the U.S. dollar.

For a discussion of the Company’s exposure to market risk and how we mitigate that risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risks, contained in the 2022 Form 10-K.

Item 4. Controls and Procedures

Disclosure 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 September 30, 2023, 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.

Internal Control Over Financial Reporting

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.

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PART II

Item 1. Legal Proceedings

Corning is a defendant in various lawsuits and is subject to various claims that arise in the normal course of business, the most significant of which are summarized in Note 9 (Commitments and Contingencies) in the accompanying notes to the consolidated financial statements. In the opinion of management, the likelihood that the ultimate disposition of these matters will have a material adverse effect on the Company’s consolidated financial position, liquidity, or results of operations, is remote.

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 2022 Form 10-K, which could materially impact the Company’s business, financial condition or future results. Risks disclosed in the 2022 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.

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

This table provides information about purchases of common stock during the third quarter of 2023:

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

Approximate

Number of

dollar value of

shares purchased

shares that may

Total number

Average

as part of publicly

yet be purchased

of shares

price paid

announced

under the

Period

purchased (1)

per share (2)

programs

July 1 - 31, 2023

90,395

33.99

August 1 - 31, 2023

6,308

32.81

September 1 - 30, 2023

3,590

30.78

Total

100,293

33.80

—

3,301,085,426

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)

~~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~~73,832 shares of common stock related to ~~satisfy tax withholding obligations in connection with~~the vesting of employee restricted stock; (ii) 25,693 shares of common stock related to the vesting of employee restricted stock units; ~~(ii) the surrender to us of 56,056~~(iii) 747 shares of common stock related to ~~satisfy tax withholding obligations in connection with~~ the vesting of ~~restricted~~employee performance stock ~~issued to employees;~~units; and ~~(iii) the purchase of 34,445,497~~(iv) 21 shares of common stock ~~under~~related to the ~~2016 Repurchase Program.~~ exercise of employee stock options and payment of the exercise price.
(2)	Represents the stock price at the time of surrender.

~~(3)~~

In the third quarter 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.

Item 5. Other Information

During the three months ended September 30, 2023, none of our officers or directors adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

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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)

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~~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)



October ~~26, 2017~~30, 2023	/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, $0.50 par value per share	GLW	New York Stock Exchange
3.875% Notes due 2026	GLW26	New York Stock Exchange
4.125% Notes due 2031	GLW31	New York Stock Exchange


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~~26, 2023
	Corning’s Common Stock, $0.50 par value per share		~~869,057,436~~853,174,879 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 and 2016~~		3

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

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

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

Consolidated Statements of Changes in Shareholders’ Equity		7

Notes to Consolidated Financial Statements ~~(Unaudited)~~		78

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2522

Item 3. Quantitative and Qualitative Disclosures About Market Risk		4939

Item 4. Controls and Procedures		4939

PART II – OTHER INFORMATION


Item 1. Legal Proceedings		5040

Item 1A. Risk Factors		5040

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		5141

Item 5. Other Information	41

Item 6. Exhibits		5242

Signatures	43

53 Consolidated Statements of Income	Corning Incorporated and Subsidiary Companies
(Unaudited; in millions, except per share amounts)

Consolidated Statements of Comprehensive (Loss) Income	Corning Incorporated and Subsidiary Companies
(Unaudited; in millions)

Consolidated Balance Sheets	Corning Incorporated and Subsidiary Companies
(Unaudited; in millions, except share and per share amounts)

Consolidated Statements of Cash Flows	Corning Incorporated and Subsidiary Companies
(Unaudited; 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


	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



	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



					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