UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023

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

For the transition period from

Commission file number: 1-3247

CORNING INCORPORATED

(Exact name of registrant as specified in its charter)

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

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

607-974-9000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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 ~~(NYSE)~~
3.875% Notes due 2026	GLW26	New York Stock Exchange
4.125% Notes due 2031	GLW31	New York Stock Exchange

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.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes

☒

☐

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.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, 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.

Yes

☐

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

Yes

☐

☒

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

	Class		Outstanding as of ~~October 21, 2022~~July 24, 2023
	Corning’s Common Stock, $0.50 par value per share		~~845,811,376~~852,981,921 shares

Table of Contents

INDEX

Table of Contents

~~CORNING INCORPORATED AND SUBSIDIARY COMPANIES~~

~~CONSOLIDATED STATEMENTS OF INCOME~~

~~(Unaudited; in millions, except per share amounts)~~

Three months ended

Nine months ended

September 30,

September 30,

2022

2021

2022

2021

Net sales
$ 3,488 $ 3,615 $ 10,783 $ 10,406
Cost of sales
2,426 2,294 7,192 6,614

Gross margin
1,062 1,321 3,591 3,792

Operating expenses:

Selling, general and administrative expenses
461 486 1,381 1,351
Research, development and engineering expenses
278 251 766 715
Amortization of purchased intangibles
31 32 92 97

Operating income
292 552 1,352 1,629

Interest income
3 3 9 8
Interest expense
(73 ) (72 ) (216 ) (227 )
Translated earnings contract (loss) gain, net (Note 11)
(68 ) (13 ) 257 262
Other income, net
106 23 391 169

Income before income taxes
260 493 1,793 1,841
Provision for income taxes (Note 4)
(34 ) (109 ) (380 ) (402 )

Net income
226 384 1,413 1,439

Net income attributable to non-controlling interests
(18 ) (13 ) (61 ) (20 )

Net income attributable to Corning Incorporated
$ 208 $ 371 $ 1,352 $ 1,419

Earnings per common share available to common shareholders:

Basic (Note 5)
$ 0.25 $ 0.44 $ 1.60 $ 0.72
Diluted (Note 5)
$ 0.24 $ 0.43 $ 1.58 $ 0.71

Reconciliation of net income attributable to Corning Incorporated versus net income available to common shareholders:

Net income attributable to Corning Incorporated
$ 208 $ 371 $ 1,352 $ 1,419

Series A convertible preferred stock dividend
(24 )
Excess consideration paid for redemption of preferred shares ⁽¹⁾
(803 )

Net income available to common shareholders
$ 208 $ 371 $ 1,352 $ 592

~~(1)~~ Consolidated Statements of Income	~~Refer to Note 5 (Earnings~~Corning Incorporated and Subsidiary Companies
(Unaudited; in millions, except per ~~Common Share) and Note 13 (Shareholders’ Equity) to the consolidated financial statements for additional information.~~ share amounts)

	Three months ended						Six months ended
	June 30,						June 30,
	2023			2022			2023			2022
Net sales	$	3,243		$	3,615		$	6,421		$	7,295
Cost of sales		2,230			2,369			4,405			4,766

Gross margin		1,013			1,246			2,016			2,529

Operating expenses:
Selling, general and administrative expenses		440			486			861			920
Research, development and engineering expenses		263			240			517			488
Amortization of purchased intangibles		31			30			62			61

Operating income		279			490			576			1,060

Interest income		8			3			15			6
Interest expense		(81	)		(72	)		(157	)		(143	)
Translated earnings contract gain, net (Note 10)		116			196			108			325
Other income, net		87			133			95			285

Income before income taxes		409			750			637			1,533
Provision for income taxes (Note 3)		(106	)		(166	)		(143	)		(346	)

Net income		303			584			494			1,187

Net income attributable to non-controlling interest		(22	)		(21	)		(37	)		(43	)

Net income attributable to Corning Incorporated	$	281		$	563		$	457		$	1,144

Earnings per common share available to common shareholders:
Basic (Note 4)	$	0.33		$	0.67		$	0.54		$	1.36
Diluted (Note 4)	$	0.33		$	0.66		$	0.53		$	1.33

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

‎

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~~CORNING INCORPORATED AND SUBSIDIARY COMPANIES~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME~~

~~(Unaudited; in millions)~~

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

	Three months ended						Nine months ended						Three months ended						Six months ended
	September 30,						September 30,						June 30,						June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Net income	$	226		$	384		$	1,413		$	1,439		$	303		$	584		$	494		$	1,187

Foreign currency translation adjustments and other		(685	)		(192	)		(1,535	)		(515	)		(318	)		(650	)		(402	)		(850	)
Unamortized gains (losses) and prior service credits (costs) for postretirement benefit plans		3						(49	)		(1	)
Net unrealized losses on designated hedges		(15	)		(15	)		(32	)		(3	)
Unamortized losses and prior service costs for postretirement benefit plans														(4	)		(51	)		(8	)		(52	)
Realized and unrealized gains (losses) on derivatives														20			(31	)		41			(17	)
Other comprehensive loss, net of tax		(697	)		(207	)		(1,616	)		(519	)		(302	)		(732	)		(369	)		(919	)

Comprehensive (loss) income		(471	)		177			(203	)		920
Comprehensive income (loss)														1			(148	)		125			268

Comprehensive income attributable to non-controlling interests		(18	)		(13	)		(61	)		(20	)
Comprehensive income attributable to non-controlling interest														(22	)		(21	)		(37	)		(43	)

Comprehensive (loss) income attributable to Corning Incorporated	$	(489	)	$	164		$	(264	)	$	900		$	(21	)	$	(169	)	$	88		$	225

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

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

~~CORNING INCORPORATED AND SUBSIDIARY COMPANIES~~

~~CONSOLIDATED BALANCE SHEETS~~

~~(Unaudited; in millions, except share and per share amounts)~~

	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
Assets

Current assets:
Cash and cash equivalents	$	1,630		$	2,148		$	1,538		$	1,671
Trade accounts receivable, net of doubtful accounts - $39 and $42		1,620			2,004
Inventories, net (Note 6)		2,951			2,481
Trade accounts receivable, net of doubtful accounts - $29 and $40								1,674			1,721
Inventories (Note 5)								2,757			2,904
Other current assets		1,603			1,026			1,324			1,157
Total current assets		7,804			7,659			7,293			7,453

Property, plant and equipment, net of accumulated depreciation - $13,348 and $13,969		14,645			15,804
Property, plant and equipment, net of accumulated depreciation - $14,171 and $14,147								14,681			15,371
Goodwill, net		2,368			2,421			2,382			2,394
Other intangible assets, net		1,049			1,148			972			1,029
Deferred income taxes (Note 4)		998			1,066
Deferred income taxes (Note 3)								1,083			1,073
Other assets		1,871			2,056			2,234			2,179

Total Assets	$	28,735		$	30,154		$	28,645		$	29,499

Liabilities and Equity

Current liabilities:
Current portion of long-term debt and short-term borrowings (Note 8)	$	208		$	55
Current portion of long-term debt and short-term borrowings							$	187		$	224
Accounts payable		1,808			1,612			1,519			1,804
Other accrued liabilities (Note 7 and Note 10)		3,151			3,139
Other accrued liabilities (Notes 6 and 9)								2,705			3,147
Total current liabilities		5,167			4,806			4,411			5,175

Long-term debt (Note 8)		6,525			6,989
Postretirement benefits other than pensions (Note 9)		585			622
Other liabilities (Note 7 and Note 10)		4,910			5,192
Long-term debt (Note 7)								7,437			6,687
Postretirement benefits other than pensions (Note 8)								407			407
Other liabilities (Notes 6 and 9)								4,680			4,955
Total liabilities		17,187			17,609			16,935			17,224

Commitments and contingencies (Note 10)
Shareholders’ equity (Note 13):
Commitments and contingencies (Note 9)
Shareholders’ equity (Note 12):
Common stock – Par value $0.50 per share; Shares authorized 3.8 billion; Shares issued: 1.8 billion and 1.8 billion		910			907			915			910
Additional paid-in capital – common stock		16,649			16,475			16,817			16,682
Retained earnings		17,044			16,389			16,509			16,778
Treasury stock, at cost; Shares held: 977 million and 970 million		(20,528	)		(20,263	)
Treasury stock, at cost; Shares held: 980 million and 977 million								(20,630	)		(20,532	)
Accumulated other comprehensive loss		(2,791	)		(1,175	)		(2,199	)		(1,830	)
Total Corning Incorporated shareholders’ equity		11,284			12,333			11,412			12,008
Non-controlling interests		264			212
Non-controlling interest								298			267
Total equity		11,548			12,545			11,710			12,275

Total Liabilities and Equity	$	28,735		$	30,154		$	28,645		$	29,499

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

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

~~CORNING INCORPORATED AND SUBSIDIARY COMPANIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited; in millions)~~

	Nine months ended						Six months ended
	September 30,						June 30,
	2022			2021			2023			2022
Cash Flows from Operating Activities:
Net income	$	1,413		$	1,439		$	494		$	1,187
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,014			1,005			622			687
Amortization of purchased intangibles		92			97			62			61
Loss on disposal of assets		110			8
Loss on disposal of assets, net								23			8
Severance charges								73
Severance payments								(48	)		(3	)
Gain on sale of business		(53	)		(54	)					(53	)
Share-based compensation expense		145			117			111			93
Translation gain on Japanese yen-denominated debt		(321	)		(127	)		(127	)		(237	)
Deferred tax provision		58			68
Translated earnings contract gain		(257	)		(262	)
Unrealized translation losses on transactions		140			65
Deferred tax (benefit) provision								(10	)		72
Translated earnings contract gain, net								(108	)		(325	)
Unrealized translation loss on transactions								50			77
Tax deposit refund								99
Changes in assets and liabilities:
Trade accounts receivable		161			(146	)		(64	)		55
Inventories		(637	)		(72	)		58			(436	)
Other current assets		(5	)		(210	)		(49	)		(77	)
Accounts payable and other current liabilities		25			471			(436	)		209
Customer deposits and government incentives		144			62			(6	)		4
Deferred income		(15	)		(92	)		(24	)		(24	)
Other, net		(16	)		20			(150	)		(6	)
Net cash provided by operating activities		1,998			2,389			570			1,292

Cash Flows from Investing Activities:
Capital expenditures		(1,201	)		(1,014	)		(770	)		(736	)
Proceeds from sale of equipment to related party								67
Proceeds from sale of business		77			102						74
Investment in and proceeds from unconsolidated entities, net		(10	)		87
Realized gains on translated earnings contract		209			30
Realized gains on translated earnings contracts and other								177			132
Other, net		(44	)		(8	)		11			(37	)
Net cash used in investing activities		(969	)		(803	)		(515	)		(567	)

Cash Flows from Financing Activities:
Repayments of short-term borrowings		(87	)		(144	)		(73	)		(11	)
Repayments of long-term debt					(716	)
Proceeds from issuance of short-term debt		70
Proceeds from issuance of long-term debt		37			19
Proceeds from issuance of euro bonds								918
Proceeds from issuance of other long-term debt								20			28
Proceeds from other financing arrangements								54
Payment for redemption of preferred stock		(507	)		(507	)		(507	)		(507	)
Payments of employee withholding tax on stock awards		(44	)		(57	)		(99	)		(42	)
Proceeds from exercise of stock options		35			91			35			28
Purchases of common stock for treasury		(221	)		(22	)					(201	)
Dividends paid		(696	)		(659	)		(495	)		(462	)
Other, net		(17	)		5			(17	)		(11	)
Net cash used in financing activities		(1,430	)		(1,990	)		(164	)		(1,178	)
Effect of exchange rates on cash		(117	)		(56	)		(24	)		(66	)
Net decrease in cash and cash equivalents		(518	)		(460	)		(133	)		(519	)
Cash and cash equivalents at beginning of period		2,148			2,672			1,671			2,148
Cash and cash equivalents at end of period	$	1,630		$	2,212		$	1,538		$	1,629

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)

~~CORNING INCORPORATED AND SUBSIDIARY COMPANIES~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS~~’ ~~EQUITY~~

~~(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 interests			Total			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, December 31, 2021	$	907	$	16,475	$	16,389		$	(20,263	)	$	(1,175	)	$	12,333		$	212		$	12,545
Balance as of December 31, 2022																							$	910	$	16,682	$	16,778		$	(20,532	)	$	(1,830	)	$	12,008		$	267		$	12,275
Net income						581									581			22			603							176									176			15			191
Other comprehensive loss												(187	)		(187	)					(187	)												(67	)		(67	)					(67	)
Purchase of common stock for treasury									(151	)					(151	)					(151	)
Shares issued to benefit plans and for option exercises		1		56											57						57			1		64											65						65
Common dividends ($0.27 per share)						(233	)								(233	)					(233	)
Common dividends ($0.28 per share)																												(241	)								(241	)					(241	)
Other, net (1)									(5	)					(5	)					(5	)									(16	)					(16	)					(16	)
Balance, March 31, 2022	$	908	$	16,531	$	16,737		$	(20,419	)	$	(1,362	)	$	12,395		$	234		$	12,629
Balance as of March 31, 2023																							$	911	$	16,746	$	16,713		$	(20,548	)	$	(1,897	)	$	11,925		$	282		$	12,207
Net income						563									563			21			584							281									281			22			303
Other comprehensive loss												(732	)		(732	)		(2	)		(734	)												(302	)		(302	)		(1	)		(303	)
Purchase of common stock for treasury									(53	)					(53	)					(53	)
Shares issued to benefit plans and for option exercises		2		59											61						61			4		71											75						75
Common dividends ($0.54 per share)						(463	)								(463	)					(463	)
Common dividends ($0.56 per share)																												(485	)								(485	)					(485	)
Other, net (1)									(37	)					(37	)		(5	)		(42	)									(82	)					(82	)		(5	)		(87	)
Balance, 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
Balance as of June 30, 2023																							$	915	$	16,817	$	16,509		$	(20,630	)	$	(2,199	)	$	11,412		$	298		$	11,710

	Convertible preferred stock			Common stock		Additional paid-in capital common		Retained earnings			Treasury stock			Accumulated other comprehensive loss			Total Corning Incorporated shareholders' equity			Non-controlling interests			Total			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, December 31, 2020	$	2,300		$	863	$	14,642	$	16,120		$	(19,928	)	$	(740	)	$	13,257		$	191		$	13,448
Net income									599									599			2			601
Other comprehensive loss															(352	)		(352	)		(1	)		(353	)
Shares issued to benefit plans and for option exercises					1		80											81						81
Common dividends ($0.24 per share)									(187	)								(187	)					(187	)
Preferred dividends ($10,625 per share)									(24	)								(24	)					(24	)
Other, net (1)									1			(6	)					(5	)		(3	)		(8	)
Balance, March 31, 2021	$	2,300		$	864	$	14,722	$	16,509		$	(19,934	)	$	(1,092	)	$	13,369		$	189		$	13,558
Net income									449									449			5			454
Other comprehensive income															40			40			1			41
Redemption of preferred stock (2)		(700	)						(803	)								(1,503	)					(1,503	)
Conversion of preferred stock to common stock (3)		(1,600	)		40		1,560											—						—
Purchase of common stock for treasury												(1	)					(1	)					(1	)
Shares issued to benefit plans and for option exercises					3		70											73						73
Common dividends ($0.48 per share)									(416	)								(416	)					(416	)
Other, net (1)												(51	)					(51	)		(13	)		(64	)
Balance, June 30, 2021	$	—		$	907	$	16,352	$	15,739		$	(19,986	)	$	(1,052	)	$	11,960		$	182		$	12,142
Balance as of December 31, 2021																										$	907	$	16,475	$	16,389		$	(20,263	)	$	(1,175	)	$	12,333		$	212		$	12,545
Net income									371									371			13			384							581									581			22			603
Other comprehensive loss															(207	)		(207	)		(1	)		(208	)												(187	)		(187	)					(187	)
Purchase of common stock for treasury												(24	)					(24	)					(24	)									(151	)					(151	)					(151	)
Shares issued to benefit plans and for option exercises							46											46						46			1		56											57						57
Common dividends ($0.27 per share)																															(233	)								(233	)					(233	)
Other, net (1)												(1	)					(1	)		16			15										(5	)					(5	)					(5	)
Balance, September 30, 2021	$	—		$	907	$	16,398	$	16,110		$	(20,011	)	$	(1,259	)	$	12,145		$	210		$	12,355
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

(1)	Treasury stock includes the deemed surrender to the Company of common stock to satisfy employee tax withholding obligations.
~~(2)~~	~~Refer to Note 5 (Earnings per Common Share) and Note 13 (Shareholders’ Equity) to the consolidated financial statements for additional information.~~
~~(3)~~	~~Refer to Note 13 (Shareholders’ Equity) to the consolidated financial statements for additional information.~~

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

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CORNING INCORPORATED AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. 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”) for interim financial information and in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).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 for the year ended December 31, ~~2021~~2022 (“~~2021~~2022 Form 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.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and ~~liabilities.~~ liabilities in the consolidated financial statements and related notes. Significant estimates and assumptions in these consolidated financial statements require the exercise of judgment. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.

The non-controlling ~~interests~~interest as recorded in the consolidated financial statements ~~represent~~represents amounts attributable to the minority shareholders of Hemlock Semiconductor Group (“Hemlock”) and 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 the results of operations, financial position, or changes in shareholders’ equity.

~~New Accounting Standards~~

In ~~November 2021,~~ ~~the FASB issued Accounting Standards Update (“ASU”)~~ ~~2021~~-10 ~~Government Assistance (Topic~~ ~~832~~~~): Disclosures by Business Entities about Government Assistance, effective for financial statements issued for annual periods beginning after~~ ~~December 15, 2021.~~ ~~ASU~~ ~~2021~~-10 requires business entities to disclose information in the notes to the financial statements about certain types of government assistance. The annual disclosure requirements apply to transactions with a government that are accounted for by analogizing to either a grant model or a contribution model. We plan to adopt ASU ~~2020~~-10 ~~when we issue our annual financial statements. We do~~ ~~not~~ ~~expect it to have a material impact on our financial position or results of operations.~~

2. ~~Restructuring, Impairment, and Other Charges and Credits~~Revenue

~~During the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~, we recorded $138 million and $217 million, respectively, in accelerated depreciation, asset write-offs and other related charges, of which $125 million and $193 million, respectively, were reflected in cost of sales in the consolidated statements of income. The activity primarily related to capacity optimization of an emerging growth business.Disaggregated Revenue

~~There were no material restructuring, impairment and other charges and credits for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~.The following table presents revenues by product category (in millions):

	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Telecommunication products	$	1,066	$	1,313	$	2,191	$	2,511
Display products		725		759		1,334		1,665
Specialty glass products		420		485		824		978
Environmental substrate and filter products		433		336		840		737
Life science products		222		304		469		611
Polycrystalline silicon products		258		306		535		588
All other products		119		112		228		205
Total revenue	$	3,243	$	3,615	$	6,421	$	7,295

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3. ~~Revenue~~

~~Revenue Disaggregation Table~~

The following table shows revenues by major product categories, similar to the Company’s reportable segment disclosure. Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty of revenue recognition and cash flows are substantially similar. Commercial markets and selling channels are also similar. Except for an inconsequential amount of revenue for Telecommunications products, product category revenues are recognized at the point in time when control transfers to the customer.

~~Revenues by product category were as follows (in millions):~~

Three months ended

Nine months ended

September 30,

September 30,

2022

2021

2022

2021

Telecommunication products
$ 1,317 $ 1,131 $ 3,828 $ 3,143

Display products
558 936 2,223 2,758

Specialty glass products
516 556 1,494 1,490

Environmental substrate and filter products
393 382 1,130 1,233

Life science products
297 304 908 917

Polycrystalline silicon and all other products
407 306 1,200 865
Total net sales
$ 3,488 $ 3,615 $ 10,783 $ 10,406
Impact of constant currency reporting ⁽¹⁾
178 24 389
Net sales of reportable segments and Hemlock and Emerging Growth Businesses
$ 3,666 $ 3,639 $ 11,172 $ 10,406

⁽¹⁾	~~This amount represents the impact of foreign currency adjustments primarily in the Display Technologies segment. Refer to Note~~ 15 ~~(Reportable Segments) for additional information.~~

~~Contract Assets and Liabilities~~

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

Contract liabilities include customer deposits, deferred revenue and other advance payments. Customer deposits are predominately related to Display products and deferred revenue is predominately related to Hemlock. Other advance payments are ~~not~~ ~~significant to operations and are classified as part of other accrued liabilities in the consolidated financial statements.~~

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Customer Deposits

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022, Corning had customer deposits of approximately $1.2 billion and $1.3 ~~billion.~~billion, respectively. Most of these customer deposits were non-refundable and allowed customers to secure rights to products produced by Corning under long-term supply agreements. The duration of these long-term supply agreements ranges up to 10 years. As products are ~~shipped~~delivered to customers, Corning will recognize revenue and reduce the amount of the customer deposit liability.

~~Customer deposits used were $24 million and $155 million for~~For the three months ended June 30, 2023 and ~~nine~~2022, customer deposits recognized were $12 million and $48 million, respectively. For the six months ended ~~September~~June 30, ~~2022,~~2023 ~~respectively,~~ and ~~$59~~2022, customer deposits recognized were $82 million and ~~$182~~$131 million, respectively.

Refer to Note 6 (Other Liabilities) for ~~the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~respectively. As of~~ ~~September 30, 2022~~ ~~and~~ ~~December 31, 2021~~~~, $1.1 billion were classified as other long-term liabilities. The remaining $166 million and $223 million as of~~ ~~September 30, 2022~~ ~~and~~ ~~December 31, 2021,~~ ~~respectively, were classified as other accrued liabilities.~~additional information.

Deferred Revenue

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~ 2022, Corning had deferred revenue of approximately ~~$902~~$840 million and ~~$912~~$869 million, respectively. ~~The deferred~~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. ~~The deferred~~

Deferred revenue is tracked on a per-customer contract-unit basis. As customers take delivery of the committed volumes under the terms of the contract, a per-unit amount of deferred revenue is recognized when control of the promised goods is transferred to the customer based upon the units ~~shipped.~~ delivered compared to the remaining contractual units. For the three and six months ended June 30, 2023 and 2022, the amount of deferred revenue recognized in the consolidated statements of income was not material.

~~As of~~Refer to Note ~~September 30, 2022~~6 ~~and~~ ~~December 31, 2021,~~ ~~$732 million and $764 million, respectively, were classified as other long-term liabilities and $170 million and $148 million, respectively, were classified as other accrued liabilities.~~(Other Liabilities) for additional information.

4.3. Income Taxes

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

	Three months ended						Nine months ended						Three months ended						Six months ended
	September 30,						September 30,						June 30,						June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Provision for income taxes	$	(34	)	$	(109	)	$	(380	)	$	(402	)	$	(106	)	$	(166	)	$	(143	)	$	(346	)
Effective tax rate		13.1	%		22.1	%		21.2	%		21.8	%	25.9		%		22.1	%		22.4	%		22.6	%

For the three and sixmonths ended ~~September~~June 30, ~~2022~~2023, the effective ~~income~~ tax rate differed from the United States (“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,~~valuation allowance assessments, partially offset by ~~changes in tax reserves.~~ differences arising from foreign earnings, adjustments to share-based compensation, and a net benefit due to foreign derived intangible income.

For the ~~nine~~three and six months ended ~~September~~June 30, 2022, the effective ~~income~~ 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.

~~For the~~ ~~three~~ ~~months ended~~ ~~September 30, 2021~~~~, the effective income tax rate differed from the U.S. statutory rate of 21%, primarily due to non-deductible expenses for tax purposes, foreign rate differential, and tax reform items. For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~, the effective income tax rate differed from the U.S. statutory rate of 21% primarily due to an adjustment to the permanently reinvested foreign income position, excess tax benefit related to share-based compensation payments, foreign rate differential, and tax reform items related to The Tax Cuts and Jobs Act of ~~2017.~~

Corning Precision Materials, a South Korean subsidiary, is currently appealing certain tax assessments and tax refund claims ~~in South Korea~~ for tax years 2010 through ~~2018.~~2019. The Company was required to deposit the disputed tax amounts with the South Korean government as a condition of its appeal of any tax ~~assessments.~~assessment. During the second quarter of 2023, $99 million was no longer under dispute and was refunded to the Company. The non-current receivable balance was $256 million and $349 million as of June 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. As of~~ ~~September 30, 2022~~ ~~and~~ ~~December 31, 2021,~~ ~~non-current receivables of $322 million and $350 million, respectively, were recorded related~~process relating to these ~~appeals.~~matters.

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4. Earnings Per Common Share

The following table presents the reconciliation of the amounts used to compute basic and diluted earnings per common share (in millions, except per share amounts):

	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income attributable to Corning Incorporated	$	281	$	563	$	457	$	1,144

Weighted-average common shares outstanding – basic		848		843		846		843
Effect of dilutive securities:
Stock options and other awards		11		13		13		14
Weighted-average common shares outstanding – diluted		859		856		859		857
Basic earnings per common share	$	0.33	$	0.67	$	0.54	$	1.36
Diluted earnings per common share	$	0.33	$	0.66	$	0.53	$	1.33

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

5. Inventories

Inventories consisted of the following (in millions):

	June 30,		December 31,
	2023		2022
Finished goods	$	1,234	$	1,315
Work in process		553		571
Raw materials and accessories		515		537
Supplies and packing materials		455		481
Inventories	$	2,757	$	2,904

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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,

2022

2021

2022

2021

Net income attributable to Corning Incorporated
$ 208 $ 371 $ 1,352 $ 1,419
Less: Series A convertible preferred stock dividend
24
Less: Excess consideration paid for redemption of preferred shares
803
Net income available to common shareholders – basic
208 371 1,352 592
Net income available to common shareholders – diluted
$ 208 $ 371 $ 1,352 $ 592

Weighted-average common shares outstanding – basic
843 852 843 821
Effect of dilutive securities:

Employee stock options and other dilutive securities
12 14 14 16
Weighted-average common shares outstanding – diluted
855 866 857 837
Basic earnings per common share
$ 0.25 $ 0.44 $ 1.60 $ 0.72
Diluted earnings per common share
$ 0.24 $ 0.43 $ 1.58 $ 0.71

Anti-dilutive potential shares excluded from diluted earnings per common share:

Series A convertible preferred stock ⁽¹⁾
41
Employee stock options and awards
3 2
Total
3 — 2 41

⁽¹⁾	~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~the Preferred Stock was anti-dilutive; therefore, it was excluded from the calculation of diluted earnings per share.~~

~~Fixed Rate Cumulative Convertible Preferred Stock, Series A~~

~~As of~~ ~~December 31, 2020,~~ ~~Corning had 2,300 outstanding shares of Fixed Rate Cumulative Convertible Preferred Stock, Series A (the “Preferred Stock”). On~~ ~~January 16, 2021,~~ ~~the Preferred Stock became convertible into 115 million common shares, in whole or in part, at the option of the holder, Samsung Display Co., Ltd. (“SDC”). On~~ ~~April 5, 2021,~~ ~~Corning and SDC executed the Share Repurchase Agreement (“SRA”).~~

~~Pursuant to the SRA, on~~ ~~April 8, 2021,~~ the Preferred Stock was fully converted into 115 million common shares. The preferred shares were removed from the calculation of diluted earnings per share. The Company repurchased 35 million of the converted common shares pursuant to the SRA and excluded them from the weighted average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share. The redemption of these common shares resulted in a reduction of retained earnings of $803 million which reduced the net income available to common shareholders. The remaining 80 million common shares are outstanding and are included in the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share.

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

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6. ~~Inventories, Net~~

~~Inventories, net were as follows (in millions):~~

September 30,

December 31,

2022

2021

Finished goods
$ 1,394 $ 1,215
Work in process
507 358
Raw materials and accessories
571 427
Supplies and packing materials
479 481
Total inventories, net
$ 2,951 $ 2,481

7. Other Liabilities

Other liabilities ~~were as follows~~consisted of the following (in millions):

	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Current liabilities:
Wages and employee benefits	$	595	$	824	$	460	$	727
Income taxes		99		196		174		127
Derivative instruments (Note 11)		494		144
Deferred revenue (Note 3)		170		148
Customer deposits (Note 3)		166		223
Share repurchase liability (Note 13)		504		506
Derivative instruments (Note 10)						164		174
Deferred revenue (Note 2)						175		144
Customer deposits (Note 2)						151		132
Share repurchase liability (Note 12)								506
Short-term operating leases		97		94		103		111
Other current liabilities		1,026		1,004		1,478		1,226
Other accrued liabilities	$	3,151	$	3,139	$	2,705	$	3,147

Non-current liabilities:
Defined benefit pension plan liabilities	$	698	$	707	$	662	$	668
Derivative instruments (Note 11)		238		49
Deferred revenue (Note 3)		732		764
Customer deposits (Note 3)		1,115		1,072
Share repurchase liability (Note 13)		18		517
Derivative instruments (Note 10)						54		17
Deferred revenue (Note 2)						665		725
Customer deposits (Note 2)						1,040		1,137
Deferred tax liabilities		136		258		217		243
Long-term operating leases		648		691		827		795
Other non-current liabilities		1,325		1,134		1,215		1,370
Other liabilities	$	4,910	$	5,192	$	4,680	$	4,955

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8.7. Debt

Based on borrowing rates currently available to us for loans with similar terms and maturities, the fair value of long-term debt was ~~$5.9~~$7.1 billion and ~~$8.3~~$6.1 billion atas of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022, , respectively, compared to ~~recorded book values~~the carrying value of ~~$6.5~~$7.4 billion and ~~$7.0~~$6.7 billion atas of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022, , respectively. The Company measures the fair value of its long-term debt using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

~~Debt Issuances~~On May 15, 2023, the Company issued €300 million 3.875% Notes due 2026 (“2026 Notes”) and ~~Redemptions~~

In€550 million 4.125% Notes due 2031 (“2031 Notes”). The proceeds from the ~~second~~2026 ~~quarter~~Notes and 2031 Notes were received in euros and converted to U.S. dollars on the date of ~~2022,~~ ~~Corning amended~~issuance. The net proceeds received were approximately $918 million and ~~restated its existing revolving credit agreement, which provides a committed $1.5 billion unsecured multi-currency line of credit, primarily to extend the term to~~ ~~2027.~~ ~~Additionally, Corning amended and restated its 25 billion Japanese yen liquidity facility, equivalent to approximately $173 million, primarily to extend the term to~~ ~~2025.~~will be used for general corporate purposes. As of ~~September~~June 30, ~~2022~~2023, the U.S. dollar equivalent carrying value of the euro-denominated long-term debt was $920 million.

The full amounts of the 2026 Notes and ~~December 31, 2021,~~ ~~there were~~ no ~~outstanding amounts under either the amended and restated or the existing facilities.~~

~~In the~~ ~~second~~2031 ~~quarter of~~Notes have been designated as net investment hedges against our investments in certain European subsidiaries with euro functional currencies. Refer to Note ~~2021,~~10 ~~Corning redeemed $375 million of 2.9% debentures due in~~ ~~2022,~~ ~~paying a premium of $10 million by exercising our make-whole call. The bond redemption resulted in an $11 million loss during the same quarter. In the~~ ~~third~~ ~~quarter of~~ ~~2021,~~ ~~Corning redeemed $250 million of 3.7% debentures due in~~ ~~2023,~~ ~~paying a premium of $19 million by exercising our make-whole call. The bond redemption resulted in a $20 million loss during the same quarter.~~(Hedging Activities) for additional information.

Corning had no outstanding commercial paper as of ~~September~~June 30, ~~2022~~2023 ~~and~~or December 31, ~~2021~~2022..

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9.8. Employee Retirement Plans

Corning has defined benefit pension plans covering certain domestic and international employees. The ~~Company’s funding policy is to~~ Company may contribute, ~~over time,~~as necessary, an amount exceeding the minimum requirements to achieve the Company’s long-term funding targets. During 2023,the ~~nine~~ ~~months ended~~ ~~September 30, 2022,~~ Company plans to make cash contributions of $25 million to ~~our~~ international pension ~~plans were~~ ~~not~~ ~~material. The Company does~~ ~~not~~ ~~expect to make additional contributions in the~~ ~~fourth~~ ~~quarter of~~ ~~2022.~~plans.

The following table ~~summarizes~~presents the components of net periodic benefit expense for ~~Corning’s defined benefit pension and postretirement health care and life insurance~~employee retirement 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,

2022

2021

2022

2021

2022

2021

2022

2021

Service cost
$ 32 $ 32 $ 96 $ 96 $ 3 $ 3 $ 7 $ 8
Interest cost
28 22 82 65 3 3 11 11
Expected return on plan assets
(55 ) (54 ) (164 ) (162 )
Amortization of prior service cost (credit)
1 1 4 3 (2 ) (1 ) (4 ) (4 )
Recognition of actuarial loss (gain)
22 10 (2 ) (3 ) 1
Total pension and postretirement benefit expense
$ 6 $ 1 $ 40 $ 12 $ 2 $ 5 $ 11 $ 16

~~The components of net periodic benefit expense,~~which other than the service cost component ~~are included~~is recorded in ~~the line item~~ other income, net in the consolidated statements of ~~income.~~income (in millions):

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	Pension benefits												Postretirement benefits
	Three months ended						Six months ended						Three months ended						Six months ended
	June 30,						June 30,						June 30,						June 30,
	2023			2022			2023			2022			2023			2022			2023			2022
Service cost	$	27		$	32		$	50		$	64		$	2		$	2		$	3		$	4
Interest cost		43			27			88			54			5			4			11			8
Expected return on plan assets		(46	)		(54	)		(92	)		(109	)
Amortization of actuarial net gain														(6	)					(11	)
Amortization of prior service cost (credit)		1			2			3			3			(1	)		(1	)		(2	)		(2	)
Recognition of actuarial loss (gain)					22						22						(1	)					(1	)
Special termination benefit charge		5						5
Total pension and postretirement benefit expense	$	30		$	29		$	54		$	34		$	—		$	4		$	1		$	9

~~10.~~9. Commitments and Contingencies

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 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.

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.~~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 ~~Corning~~ for 50% of Dow Corning’s non-ordinary course, pre-closing liabilities to the extent such liabilities exceed the amounts reserved for them by Dow Corning as of May 31, 2016, subject to certain conditions and limits.

~~Dow Corning Breast Implant Litigation~~

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

Under the terms of the Plan, Dow Corning has established and funded a Settlement Trust and a Litigation Facility, to provide a means for tort claimants to settle or litigate their claims. Inclusive of insurance, Dow Corning has paid approximately $1.8 billion to the Settlement Trust. As of ~~May~~ ~~31,~~~~2016,~~ ~~Dow Corning had recorded a reserve for breast implant litigation of $290 million. In the event Dow Corning’s total liability for these claims exceeds such amount, Corning~~ ~~may~~ ~~be required to indemnify Dow for up to 50% of the excess liability, subject to certain conditions and limits. As of~~ ~~September 30, 2022~~ ~~and~~ ~~December 31, 2021,~~ ~~Dow Corning had recorded a reserve for breast implant litigation of $87 million and $130 million, respectively. As a result,~~ Corning does not believe that its indemnity obligation ~~for Dow Corning’s breast implant litigation liability, if any,~~ will be material.

~~Dow Corning Bankruptcy Pendency Interest Claims~~

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

Dow Corning Environmental Claims

In September 2019, Dow formally notified Corning of certain environmental matters for which Dow asserts that it has, or will, experience losses arising from remediation and response at a number of sites. In the event Dow is liable for these claims, Corning may be required to indemnify Dow for up to 50% of that liability, subject to certain conditions and limits. As of ~~September~~June 30, ~~2022~~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 designated by federal or state governments under environmental laws, including Superfund, as a potentially responsible party that may be liable for cleanup costs associated with 19 hazardous waste sites. It is Corning’s policy to accrue for its estimated liability related to 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. As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022, Corning had accrued approximately ~~$111~~$94 million and ~~$55~~$109 million, respectively, for the estimated undiscounted liability for environmental cleanup and related litigation. Based upon the information developed to date, management believes that the accrued reserve is a reasonable estimate of the Company’s ~~liability and that the risk of an additional loss in an amount materially higher than that accrued is remote.~~liability.

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~~11.~~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 purchases from suppliers. The total ~~gross~~ notional ~~values~~amounts for foreign currency cash flow hedges are ~~$578~~$310 million and ~~$780~~$419 million atas of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022, , respectively, with maturities through 2024. Corning defers gains and losses related to ~~the~~ cash flow hedges into accumulated other comprehensive loss on the consolidated balance sheets until the hedged item impacts earnings. AtAs of ~~September~~June 30, ~~2022~~2023, the amount expected to be reclassified into earnings within the next 12 months is a pre-tax gain of ~~$30~~$41 million.

Corning has entered into leases of precious metals, with maturities through 2025. To offset the risk of changes in the fair value of the Company’s separate accounting pool of leased precious metals due to adverse changes in the respective market prices, Corning designated the bifurcated embedded derivatives included in these leases as fair value hedges. The gain or loss on the derivatives, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings. The amounts representing the time value component of the derivatives are excluded from the assessment of effectiveness and amortized in earnings. The impact of the excluded component on Corning’s other comprehensive ~~income~~loss and earnings is not material. The carrying amount of the leased precious metals pool, which is included ~~in the~~within property, plant and equipment, net of accumulated depreciation ~~line of~~in the consolidated balance sheets, is ~~$324~~$104 million and ~~$107~~$278 million, atrespectively, as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022. The carrying amount of the leased precious metals pool includes cumulative fair value losses of $269 million and $95 million as of June 30, 2023 and December 31, 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 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 value of these hedging instruments due to foreign currency gains or losses are deferred in other comprehensive loss on the consolidated statements of comprehensive (loss) income, within the 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 the net investment hedges each quarter using the critical term match method. As of June 30, 2023, the net investment hedges are deemed to be effective. During the three and six months ended June 30, 2023, the loss recognized in other comprehensive loss was not material.

Refer to Note 7 (Debt) for additional information.

Undesignated Hedges

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

A significant portion of the Company’s non-U.S. revenue and expenses are denominated in Japanese yen, South Korean won, new Taiwan dollar, Chinese yuan and euro. When this revenue and ~~these~~ expenses are translated ~~back~~ to U.S. dollars, the Company is exposed to foreign exchange rate movements. To protect translated earnings against movements in these currencies, the Company has entered into a series of average rate forwards and option contracts. Most of these contracts hedge a significant portion of the Company’s exposure to the Japanese yen, with maturities through 2024, and South Korean won, with maturities through 2026.

Table of Contents

The following table summarizes the notional amounts and respective fair values of Corning’s derivative financial instruments on a gross basis as of June 30, 2023 and December 31, 2022 (in millions):

					Asset derivatives					Liability derivatives
	Notional amount				Balance	Fair value				Balance	Fair value
	June		December		sheet	June		December		sheet	June			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)	$	310	$	419	Other current assets	$	148	$	26	Other accrued liabilities				$	(1	)
					Other assets		177		78

Derivatives not designated as hedging instruments
Foreign exchange contracts		1,801		2,231	Other current assets		34		44	Other accrued liabilities	$	(24	)		(49	)
Translated earnings contracts		6,014		7,543	Other current assets		412		384	Other accrued liabilities		(140	)		(124	)
					Other assets		114		146	Other liabilities		(54	)		(17	)
Total derivatives	$	8,125	$	10,193		$	885	$	678		$	(218	)	$	(191	)

⁽¹⁾

The amounts above do not include €850 million of euro-denominated debt ($920 million equivalent as of June 30, 2023), which is a non-derivative financial instrument designated as a net investment hedge.

⁽²⁾

As of June 30, 2023, derivatives designated as hedging instruments include foreign exchange cash flow hedges with total notional amounts of $310 million and fair value hedges of leased precious metals with total notional amounts of 23,152 troy ounces. As of December 31, 2022, derivatives designated as hedging instruments include foreign exchange cash flow hedges with total notional amounts of $419 million and fair value hedges of leased precious metals with total notional amounts of 23,152 troy ounces.

The following table summarizes the total ~~gross~~ notional ~~value~~amounts for translated earnings contracts atas of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in billions):

	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
Average rate forward contracts:
Japanese yen-denominated	$	0.8	$	2.9	$	0.2	$	0.1
South Korean won-denominated		2.3		1.2		1.9		2.1
Euro-denominated		0.1		0.2
Other foreign currencies ⁽¹⁾		0.6		0.1		0.9		0.7
Option contracts:
Japanese yen-denominated ⁽²⁾		4.5		3.6		3.0		4.6
Other foreign currencies ⁽³⁾				0.9
Total gross notional value for translated earning contracts	$	8.3	$	8.9
Total notional amount for translated earning contracts					$	6.0	$	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 ~~gross~~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.
⁽³⁾	Other foreign currency option contracts are purchased basket options that include a basket of underlying currencies, including the Japanese yen, South Korean won, euro and British pound, and each basket option are settled against U.S. dollars.

The fair values of these derivative contracts are recorded as either assets (gain position) or liabilities (loss position) on the consolidated balance sheets. Changes in the fair value of the derivative contracts are recorded in earnings within translated earnings contract gain, net in the consolidated statements of income.

1514

Table of Contents

The following ~~table summarizes~~tables summarize the ~~notional amounts and respective fair values~~effect in the consolidated statements of income relating to Corning’s derivative financial instruments (in millions). The accumulated derivative gain included in accumulated other comprehensive loss on ~~a gross basis for~~the consolidated balance sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 ~~(in millions):~~is $76 million and $19 million, respectively.

Asset derivatives

Liability derivatives

Notional amount

Balance

Fair value

Balance

Fair value

September 30,

December 31,

sheet

September 30,

December 31,

sheet

September 30,

December 31,

2022

2021

location

2022

2021

location

2022

2021

Derivatives designated as hedging
instruments (1)

Foreign exchange contracts and other
$ 578 $ 780
Other current assets
$ 36 $ 49
Other accrued liabilities
$ (6 ) $ (2 )

Other assets
40 10
Other liabilities
(15 ) (9 )

Derivatives not designated as hedging
instruments

Foreign exchange contracts
3,130 3,864
Other current assets
147 91
Other accrued liabilities
(161 ) (95 )
Translated earnings contracts
8,296 8,899
Other current assets
697 196
Other accrued liabilities
(327 ) (47 )

Other assets
191 154
Other liabilities
(223 ) (40 )
Total derivatives
$ 12,004 $ 13,543 $ 1,111 $ 500 $ (732 ) $ (193 )

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

						Net sales				$	13
						Cost of sales	$	11			6
Foreign exchange contracts and other	$	42	$	(14	)	Other income, net		(1	)		(1	)
Total cash flow and fair value hedges	$	42	$	(14	)		$	10		$	18

⁽¹⁾

At ~~September 30, 2022~~, derivatives designated as hedging instruments include foreign exchange cash flow hedges with gross notional amounts of $578 million and fair value hedges of leased precious metals with gross notional amounts of 23,152 troy ounces. At ~~December 31, 2021,~~ derivatives designated as hedging instruments include foreign exchange cash flow hedges with gross notional amounts of $780 million and fair value hedges of leased precious metals with gross notional amounts of 7,559 troy ounces.

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

					Net sales				$	23
					Cost of sales	$	18			13
Foreign exchange contracts and other	$	74	$	20	Other income, net		(2	)		(2	)
Total cash flow and fair value hedges	$	74	$	20		$	16		$	34

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

		Gain recognized in income
		Three months ended				Six months ended
	Location of gain	June 30,				June 30,
Undesignated derivatives	recognized in income	2023		2022		2023		2022

Foreign exchange contracts	Other income, net	$	15	$	33	$	28	$	59
Translated earnings contracts	Translated earnings contract gain, net		116		196		108		325
Total undesignated		$	131	$	229	$	136	$	384

Three months ended September 30,

Gain (loss) recognized

Location of gain

Gain reclassified

Derivative hedging

in other comprehensive

reclassified from accumulated

from accumulated

relationships for cash

income (OCI)

OCI into income

OCI into income

flow and fair value hedges

2022

2021

effective (ineffective)

2022

2021

Net sales
$ 15 $ 3
Foreign exchange contracts and other
$ 4 $ (5 )
Cost of sales
6 11
Total cash flow and fair value hedges
$ 4 $ (5 ) $ 21 $ 14

Nine months ended September 30,

Gain recognized

Location of gain

Gain reclassified

Derivative hedging

in other comprehensive

reclassified from accumulated

from accumulated

relationships for cash

income (OCI)

OCI into income

OCI into income

flow and fair value hedges

2022

2021

effective (ineffective)

2022

2021

Net sales
$ 38 $ 9
Foreign exchange contracts and other
$ 24 $ 36
Cost of sales
19 28
Total cash flow and fair value hedges
$ 24 $ 36 $ 57 $ 37

Gain (loss) gain recognized in income

Three months ended

Nine months ended

Location of gain (loss)

September 30,

September 30,

Undesignated derivatives
recognized in income

2022

2021

2022

2021

Foreign exchange contracts
Other income, net
$ 11 $ (9 ) $ 70 $ 26
Translated earnings contracts
Translated earnings contract (loss) gain, net
(68 ) (13 ) 257 262
Total undesignated
$ (57 ) $ (22 ) $ 327 $ 288

~~Table of Contents~~

~~12.~~11. Fair Value Measurements

Fair value standards under 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 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.

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

	September 30, 2022								December 31, 2021								June 30, 2023								December 31, 2022
	L1		L2		L3		Total		L1		L2		L3		Total		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Current assets:
Other current assets ⁽¹⁾	$	2	$	880	$	46	$	928	$	10	$	336	$	6	$	352	$	649	$	5	$	594	$	50	$	505	$	2	$	454	$	49
Non-current assets:
Other assets ⁽¹⁾			$	231	$	3	$	234			$	164	$	11	$	175	$	295	$	4	$	291			$	225			$	224	$	1
Current liabilities:
Other accrued liabilities ⁽¹⁾			$	494			$	494			$	144			$	144	$	164			$	164			$	174			$	174
Non-current liabilities:
Other liabilities ⁽¹⁾			$	255			$	255			$	66			$	66	$	71			$	71			$	34			$	34

⁽¹⁾	Derivative assets and liabilities ~~mainly consist of~~include foreign exchange and precious metals lease contracts which were measured using observable inputs for similar assets and liabilities.

~~Assets and Liabilities Measured on a Non-Recurring Basis~~

There were no significant financial assets and liabilities measured on a non-recurring basis as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Table of Contents

~~13.~~12. Shareholders’ Equity

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, ~~Corning and SDC~~we executed ~~the SRA,~~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, ~~Corning~~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 onin April 8,2022 ~~2022~~and ~~2021,~~2021. ~~respectively.~~ The remaining payment of approximately $507 million ~~will be paid on~~was made in April 8, 2023.

The remaining 80 million common shares were accounted for as a conversion of Preferred Stock and resulted in an increase of common stock and additional paid-in-capital based on the carrying value of the Preferred Stock. These common shares were included in the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share. SDC has the option to sell 22 million common shares to Corning subject to certain conditions beginning in ~~2024~~-~~2027.~~ ~~The remaining 58 million common shares are subject to a~~ ~~seven~~~~-year lock-up period expiring in~~ ~~2027.~~

Share ~~Repurchases~~Repurchase Program

OnIn ~~April 26, 2018,~~ 2019,~~Corning’s~~ the Board authorized the repurchase of ~~Directors approved a $2~~up to $5.0 billion ~~share repurchase program with~~ no ~~expiration date (the~~ ~~“2018~~ ~~Repurchase Program”). On~~ ~~July 17, 2019,~~ ~~Corning’s Board~~ of ~~Directors authorized $5 billion in share repurchases with~~ no ~~expiration date (the~~ common stock (“2019 ~~Repurchase Program”~~Authorization”).

~~For~~During the three and ~~nine~~six months ended ~~September~~June 30, 2022, the Company repurchased ~~0.5~~1.6 million shares and ~~6.0~~5.5 million shares, respectively, of common stock on the open market for approximately ~~$17~~$53 million and ~~$221~~$204 million, respectively, as part of its 2019 ~~Repurchase Program.~~Authorization. No shares were purchased on the open market during the three and six months ended June 30, 2023.

~~Table~~

As of ~~Contents~~

June 30, 2023, approximately $3.3 billion remains available under the Company's 2019 Authorization.

Accumulated Other Comprehensive Loss

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~ ~~the Company repurchased 1 million and 36 million shares of common stock, respectively, for approximately $24 million and $1.5 billion, respectively, as part of the~~ ~~2018~~ ~~and~~ ~~2019~~ ~~Repurchase Programs. Most of these shares were repurchased immediately following the conversion of the preferred shares, as discussed above.~~

~~Accumulated Other Comprehensive (Loss)~~

~~In the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~2023 and ~~2021~~2022, the change in accumulated other comprehensive ~~(loss)~~loss was primarily related to the foreign currency translation ~~adjustment.~~adjustments.

The following table ~~summarizes~~presents the changes in the foreign currency translation adjustment component of accumulated other comprehensive ~~(loss)~~loss, including the proportionate share of equity method affiliates' accumulated other comprehensive loss (in millions) ⁽¹⁾:

	Three months ended						Nine months ended						Three months ended						Six months ended
	September 30,						September 30,						June 30,						June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Beginning balance	$	(1,783	)	$	(652	)	$	(933	)	$	(329	)	$	(1,796	)	$	(1,133	)	$	(1,712	)	$	(933	)
Loss on foreign currency translation ⁽²⁾		(664	)		(185	)		(1,497	)		(501	)		(310	)		(635	)		(393	)		(833	)
Equity method affiliates ⁽³⁾		(21	)		(7	)		(38	)		(14	)		(8	)		(15	)		(9	)		(17	)
Net current-period other comprehensive loss		(685	)		(192	)		(1,535	)		(515	)		(318	)		(650	)		(402	)		(850	)
Ending balance	$	(2,468	)	$	(844	)	$	(2,468	)	$	(844	)	$	(2,114	)	$	(1,783	)	$	(2,114	)	$	(1,783	)

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

⁽²⁾

For the three and ~~nine~~six months ended ~~September~~June 30, 2023, amounts are net of tax benefit of $3 million and $19 million, respectively. For the three and six months ended June 30, 2022, amounts are net of tax benefit of ~~$49~~$27 million and ~~$87 million, respectively. For the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021~~~~, amounts are net of tax benefit of $31 million and $42~~$38 million, respectively.

⁽³⁾	Tax effects are not significant.

Table of Contents

~~14.~~13. Share-Based Compensation

Corning maintains long-term incentive plans (the “Plans”) for key employees and non-employee members of its Board of Directors. The Plans allow Corning to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards or a combination of awards (collectively, “share-based awards”). At ~~September 30, 2022~~~~, there were approximately 33 million unissued common shares available for future grants authorized under the Plans.~~

Share-based compensation cost is allocated to the cost of sales, selling, general and administrative, and research, development and engineering expense lines in the consolidated statements of income.

~~The Company measures and recognizes compensation cost for all share-based awards made to employees and directors based on estimated fair values.~~

Total share-based compensation cost was ~~$52~~$59 million and ~~$145~~$111 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, respectively, and ~~$39~~$51 million and ~~$117~~$93 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, ~~respectively. The income tax benefit realized from share-based compensation for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ ~~and~~ ~~2021~~ ~~was $15 million and $31 million,~~ respectively.

Incentive Stock Plans

Time-Based Restricted Stock and Restricted Stock Units

The following table summarizes the changes in non-vested time-based restricted stock and restricted stock units for the six months ended June 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		7,105			35.07
Vested		(4,219	)		23.18
Forfeited		(331	)		34.10
Non-vested shares and share units as of June 30, 2023		13,854		$	33.92

Performance-Based Restricted Stock Units

The following table summarizes the changes in non-vested performance-based restricted stock units for the six months ended June 30, 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		1,671			35.08
Vested		(3,586	)		33.37
Performance adjustments		(405	)		36.40
Forfeited		(33	)		36.18
Non-vested share units as of June 30, 2023		2,343		$	38.62

Table of Contents

Stock Options

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

~~Table of Contents~~

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

Weighted-

average

Weighted-

remaining

Aggregate

Number

average

contractual

intrinsic

of shares

exercise

term

value

(in thousands)

price

(in years)

(in thousands)

Options outstanding as of December 31, 2021
11,904 $ 22.31
Exercised
(1,765 ) 19.91
Forfeited and expired
(193 ) 18.47
Options outstanding as of September 30, 2022
9,946 22.81 6.03 $ 68,676
Options expected to vest as of September 30, 2022
9,921 22.82 6.03 68,440
Options exercisable as of September 30, 2022
8,139 23.51 5.68 51,740

Corning uses a multiple-point Black-Scholes valuation model to estimate the fair value of stock option grants. Corning utilizes a blended approach for calculating the volatility assumption used in the multiple-point Black-Scholes valuation model defined as the weighted average of the short-term implied volatility, the most recent volatility for the period equal to the expected term, and the most recent 15-year historical volatility. The expected term is the period 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 used in the multiple-point Black-Scholes valuation model is the implied rate for a ~~zero~~~~-coupon U.S. Treasury bond with a term equal to the option’s expected term. Ranges used reflect results from separate groups of employees exhibiting different exercise behavior.~~

~~There have been~~ no ~~stock options granted for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~ or ~~September 30, 2021~~.

~~Incentive Stock Plans~~

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

~~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 for awards that receive dividends on the underlying shares while unvested or dividends accumulated and paid upon vesting is based on the closing market price of the Company’s stock on the grant date. Awards that do ~~not~~ receive dividends on the underlying shares while unvested or dividends accumulated and paid upon vesting fair value is calculated by reducing the closing market price of the Company’s stock on the grant date by the present value of the dividends expected to be paid on the underlying shares during the requisite service period, discounted at the appropriate risk-free interest rate. Compensation cost is recognized over the requisite vesting period and adjusted for actual forfeitures before vesting.

~~The following table summarizes the Company’s non-vested time-based restricted stock and restricted stock units and changes which occurred during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2022~~:

Weighted

Number

average

of shares

grant-date

(in thousands)

fair value

Non-vested shares and share units at December 31, 2021
10,594 $ 25.83
Granted
4,288 34.01
Vested
(3,238 ) 24.77
Forfeited
(275 ) 28.08
Non-vested shares and share units at September 30, 2022
11,369 $ 29.16

~~Table of Contents~~

~~Performance-Based Restricted Stock Units~~

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

The following table summarizes information concerning stock options as of June 30, 2023 and the ~~Company’s non-vested performance-based restricted stock units and changes which occurred during~~related activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023:

Weighted

Number

average

of shares

grant-date

(in thousands)

fair value

Non-vested share units at December 31, 2021
3,684 $ 34.17
Granted
1,761 40.76
Vested
(139 ) 32.18
Performance adjustments
366 34.46
Forfeited
(76 ) 32.39
Non-vested share units at September 30, 2022
5,596 $ 36.28

						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		(1,782	)		19.67
Forfeited and expired		(46	)		19.65
Options outstanding as of June 30, 2023		7,837			23.67		5.48	$	89,074
Options vested and exercisable as of June 30, 2023		7,837			23.67		5.48		89,074

There were no stock options granted during the six months ended June 30, 2023 or 2022.

~~15.~~14. Reportable Segments

The ~~Company’s~~Company has determined that it has five reportable segments ~~are~~for financial reporting purposes, as follows:

●	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.
●	Display Technologies – manufactures high quality glass substrates for flat panel displays, including liquid crystal displays and ~~other high-performance display panels.~~organic light-emitting diodes that are used primarily in televisions, notebook computers, desktop monitors, tablets and 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 ~~filters~~filter products for ~~automotive and diesel~~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 drug discovery and bioproduction.

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

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Financial results for the reportable segments and Hemlock and Emerging Growth Businesses are prepared on a basis consistent with the internal disaggregation of financial information to assist the chief operating decision maker (“CODM”) in making internal operating decisions. AAs a significant portion of segment revenues and expenses are denominated in currencies other than the U.S. ~~dollar. Management~~dollar, management believes it is important to understand the impact on ~~core~~segment net sales and segment net income of translating these currencies into U.S. dollars. ~~For segment sales and net income,~~Therefore, the Company utilizes constant-currency reporting for the Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments ~~for~~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 ~~euro. Certain~~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 aligned with 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 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 ~~(loss)~~ to consolidated net income. These ~~include~~ items ~~that~~ are not used by the CODM in allocating resources or evaluating the results of ~~or in allocating resources to,~~ 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; ~~restructuring, impairment losses and other charges and credits;~~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 among the segments differently than they would be for stand-alone financial 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 may not be consistent with measures used by other companies.

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

																Hemlock																					Hemlock
																and																					and
																Emerging																					Emerging
	Optical			Display			Specialty			Environmental			Life			Growth						Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total			Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended September 30, 2022
Three months ended June 30, 2023
Segment net sales	$	1,317		$	686		$	519		$	425		$	312		$	407		$	3,666		$	1,066		$	928		$	423		$	457		$	231		$	377		$	3,482
Depreciation ⁽¹⁾	$	96		$	151		$	56		$	44		$	23		$	38		$	408		$	64		$	120		$	39		$	32		$	17		$	35		$	307
Research, development and engineering expenses ⁽²⁾	$	60		$	31		$	66		$	25		$	10		$	43		$	235		$	56		$	24		$	57		$	23		$	8		$	41		$	209
Income tax provision ⁽³⁾	$	(50	)	$	(35	)	$	(26	)	$	(23	)	$	(11	)	$	(8	)	$	(153	)	$	(38	)	$	(55	)	$	(9	)	$	(28	)	$	(3	)	$	(11	)	$	(144	)
Segment net income ⁽⁴⁾	$	183		$	134		$	96		$	87		$	43		$	18		$	561		$	140		$	208		$	33		$	107		$	11		$	26		$	525

																Hemlock																					Hemlock
																and																					and
																Emerging																					Emerging
	Optical			Display			Specialty			Environmental			Life			Growth						Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total			Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Three months ended September 30, 2021
Three months ended June 30, 2022
Segment net sales	$	1,131		$	956		$	556		$	385		$	305		$	306		$	3,639		$	1,313		$	878		$	485		$	356		$	312		$	418		$	3,762
Depreciation ⁽¹⁾	$	58		$	153		$	42		$	34		$	14		$	38		$	339		$	68		$	146		$	42		$	34		$	16		$	35		$	341
Research, development and engineering expenses ⁽²⁾	$	57		$	31		$	49		$	28		$	9		$	44		$	218		$	58		$	30		$	44		$	24		$	9		$	38		$	203
Income tax provision ⁽³⁾	$	(38	)	$	(64	)	$	(28	)	$	(16	)	$	(12	)	$	(1	)	$	(159	)	$	(51	)	$	(59	)	$	(24	)	$	(16	)	$	(10	)	$	(10	)	$	(170	)
Segment net income (loss) ⁽⁴⁾	$	139		$	247		$	107		$	60		$	45		$	(5	)	$	593
Segment net income																						$	182		$	228		$	91		$	62		$	37		$	25		$	625

																Hemlock																					Hemlock
																and																					and
																Emerging																					Emerging
	Optical			Display			Specialty			Environmental			Life			Growth						Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total			Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Nine months ended September 30, 2022
Six months ended June 30, 2023
Segment net sales	$	3,828		$	2,523		$	1,497		$	1,190		$	934		$	1,200		$	11,172		$	2,191		$	1,691		$	829		$	888		$	487		$	763		$	6,849
Depreciation ⁽¹⁾	$	223		$	453		$	138		$	111		$	53		$	111		$	1,089		$	130		$	243		$	74		$	65		$	34		$	68		$	614
Research, development and engineering expenses ⁽²⁾	$	173		$	92		$	163		$	74		$	28		$	121		$	651		$	116		$	47		$	110		$	47		$	18		$	80		$	418
Income tax provision ⁽³⁾	$	(146	)	$	(157	)	$	(70	)	$	(59	)	$	(32	)	$	(19	)	$	(483	)	$	(81	)	$	(97	)	$	(19	)	$	(50	)	$	(5	)	$	(20	)	$	(272	)
Segment net income ⁽⁴⁾	$	531		$	598		$	262		$	223		$	122		$	35		$	1,771		$	299		$	368		$	72		$	189		$	20		$	42		$	990

																Hemlock																					Hemlock
																and																					and
																Emerging																					Emerging
	Optical			Display			Specialty			Environmental			Life			Growth						Optical			Display			Specialty			Environmental			Life			Growth
	Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total			Communications			Technologies			Materials			Technologies			Sciences			Businesses			Total
Nine months ended September 30, 2021
Six months ended June 30, 2022
Segment net sales	$	3,143		$	2,758		$	1,490		$	1,233		$	917		$	865		$	10,406		$	2,511		$	1,837		$	978		$	765		$	622		$	793		$	7,506
Depreciation ⁽¹⁾	$	174		$	450		$	125		$	105		$	40		$	104		$	998		$	127		$	302		$	82		$	67		$	30		$	73		$	681
Research, development and engineering expenses ⁽²⁾	$	160		$	79		$	143		$	84		$	25		$	114		$	605		$	113		$	61		$	97		$	49		$	18		$	78		$	416
Income tax (provision) benefit ⁽³⁾	$	(109	)	$	(184	)	$	(74	)	$	(57	)	$	(39	)	$	10		$	(453	)
Segment net income (loss) ⁽⁴⁾	$	398		$	708		$	279		$	215		$	145		$	(44	)	$	1,701
Income tax provision ⁽³⁾																						$	(96	)	$	(122	)	$	(44	)	$	(36	)	$	(21	)	$	(11	)	$	(330	)
Segment net income																						$	348		$	464		$	166		$	136		$	79		$	17		$	1,210

⁽¹⁾	Depreciation expense for Corning’s reportable segments includes an allocation of depreciation of corporate property not specifically identifiable to a segment.
⁽²⁾	Research, development and engineering expenses include direct project spending that is identifiable to a segment.
⁽³⁾	Income tax ~~(provision) benefit~~provision reflects a tax rate of 21%.
⁽⁴⁾	Many of Corning’s administrative and staff functions are performed on a centralized basis. Where practicable, Corning charges these expenses to segments based upon the extent to which each business uses a centralized function. Other staff functions, such as corporate finance, human resources and legal, are allocated to segments, primarily as a percentage of sales. Expenses that are ~~not~~ ~~allocated to the segments are included in the reconciliation of reportable segment net income (loss) to consolidated net income.~~

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

	Three months ended						Nine months ended					Three months ended						Six months ended
	September 30,						September 30,					June 30,						June 30,
	2022			2021			2022			2021		2023			2022			2023			2022
Net sales of reportable segments	$	3,259		$	3,333		$	9,972		$	9,541	$	3,105		$	3,344		$	6,086		$	6,713
Net sales of Hemlock and Emerging Growth Businesses		407			306			1,200			865		377			418			763			793
Impact of constant currency reporting ⁽¹⁾		(178	)		(24	)		(389	)				(239	)		(147	)		(428	)		(211	)
Consolidated net sales	$	3,488		$	3,615		$	10,783		$	10,406	$	3,243		$	3,615		$	6,421		$	7,295

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

The following table ispresents a reconciliation of net income of reportable segments to consolidated net income ~~attributable to Corning Incorporated~~ (in millions):

Three months ended

Nine months ended

September 30,

September 30,

2022

2021

2022

2021

Net income of reportable segments
$ 543 $ 598 $ 1,736 $ 1,745
Net income (loss) of Hemlock and Emerging Growth Businesses
18 (5 ) 35 (44 )
Unallocated amounts:

Impact of constant currency reporting not included in segment net income (loss) ⁽¹⁾
(136 ) (33 ) (319 ) (47 )
(Loss) gain on foreign currency hedges related to translated earnings
(68 ) (13 ) 257 262
Translation gain on Japanese yen-denominated debt
84 4 321 127
Litigation, regulatory and other legal matters
(23 ) (3 ) (65 ) (11 )
Research, development, and engineering expenses ⁽²⁾
(43 ) (34 ) (115 ) (107 )
Amortization of intangibles
(31 ) (32 ) (92 ) (97 )
Interest expense, net
(59 ) (64 ) (180 ) (205 )
Income tax benefit
119 50 103 51
Restructuring, impairment and other charges and credits ⁽³⁾
(138 ) (40 ) (217 ) (42 )
Gain on sale of a business
53 54
Other corporate items
(58 ) (57 ) (165 ) (267 )
Net income attributable to Corning Incorporated
$ 208 $ 371 $ 1,352 $ 1,419

	Three months ended						Six months ended
	June 30,						June 30,
	2023			2022			2023			2022
Net income of reportable segments	$	499		$	600		$	948		$	1,193
Net income of Hemlock and Emerging Growth Businesses		26			25			42			17
Unallocated amounts:
Impact of constant currency reporting		(174	)		(120	)		(323	)		(183	)
Gain on foreign currency hedges related to translated earnings		116			196			108			325
Translation gain on Japanese yen-denominated debt		109			153			127			237
Research, development, and engineering expenses (1)		(42	)		(37	)		(87	)		(72	)
Amortization of intangibles		(31	)		(30	)		(62	)		(61	)
Interest expense, net		(61	)		(60	)		(117	)		(121	)
Income tax benefit (provision)		38			4			129			(16	)
Severance charges		(68	)					(73	)
Disposal of assets and other charges and credits		(64	)		(46	)		(125	)		(79	)
Gain on sale of business											53
Other corporate items		(67	)		(122	)		(110	)		(149	)
Net income attributable to Corning Incorporated	$	281		$	563		$	457		$	1,144

⁽¹⁾	~~This amount represents the impact of foreign currency adjustments primarily in the Display Technologies segment.~~
⁽²⁾	Amount does not include research, development and engineering expense related to ~~restructuring, impairment and other charges and credits.~~
⁽³⁾	~~Refer to Note~~ 2 ~~(Restructuring, Impairment and Other Charges and Credits) to the consolidated financial statements for additional information on activities.~~ severance charges.

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~~ITEM~~Item 2. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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 Corning’s 2021 Form 10-K. The various sections~~ of this MD&A contain forward-looking statements that involve 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 the Company’s future financial performance, anticipated growth and trends in the businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are basedour Annual Report on ~~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 Corning’s 2021~~ Form 10-K ~~and as may be updated in~~for the Forms 10-Q. Actual results may differ materially, and these forward-looking statements do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of September 30, 2022.year ended December 31, 2022 (“2022 Form 10-K”).

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

●	Overview
●	Results of Operations
●	Segment Analysis
●	Core Performance Measures
●	~~Reportable Segments~~Liquidity and Capital Resources
●	~~Capital Resources and Liquidity~~Environment
●	Critical Accounting Estimates
●	~~Environment~~
●	Forward-Looking Statements

OVERVIEW

~~The Company has and will continue~~Corning Incorporated is central to ~~focus on three core priorities: preserving~~ the ~~financial health~~advancement of the ~~Company; protecting employees~~industries we serve and ~~communities; and delivering on customer commitments. We are continuing to build a stronger, more resilient company that is committed to rewarding shareholders and supporting~~secular trends touching many facets of daily life. It all ~~global stakeholders.~~

~~Corning continues to act rapidly and remain resilient in the face of global uncertainty. We have preserved our financial strength by executing well and advancing major innovations~~starts with ~~industry leaders. We have continued to effectively leverage~~ our focused and cohesive ~~portfolio~~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 ~~create value~~solve a broad range of significant challenges and ~~outperform~~shape new industries in tandem with our ~~underlying~~customers. By reapplying and repurposing our insights and assets across multiple opportunities and markets, ~~contributing~~we increase our profitably. Importantly, as we partner closely with our customers to ~~sales growth~~realize their visions and ~~healthy cash flow generation in 2022.~~

~~Corning announced the Strategy & Growth Framework in 2019, highlighting significant opportunities~~help solve their toughest technology challenges, we unlock new ways to ~~sell~~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 content ~~through each~~into the products they’re already buying.

Our accomplishments over the past several years illustrate the efficacy of our ~~Market-Access Platforms. The Company is focused~~approach. Despite the challenging external environment, we have advanced fiber-to-the-home and data center solutions in Optical Communications, delivered on our ~~cohesive~~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 ~~utilization of our financial strength, supported by strong operating cash flow generation, which~~inventory we expect to continue. Corning has and will continue to use its cash to grow, extend its leadership and reward shareholders. Our key growth drivers remain intact, and some are accelerating as key secular trends converge around Corning’s capabilities.

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

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~~Summary~~In response, we took a series of actions to improve profitability and cash generation throughout 2022 and into 2023. We took multiple additional actions, including 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. We expect these actions to improve profitability and cash flow throughout 2023, and they began delivering notable results ~~for~~in the ~~three and nine months ended September 30, 2022~~first half of 2023.

InOverall, we will continue to focus on operating each of our businesses well and adjusting to meet the ~~third quarter~~needs of ~~2022, net sales were $3,488 million, compared to $3,615 million during~~ the ~~same period in 2021, a net decrease of $127 million, or 4%, primarily driven by decreased sales in Display Technologies partially offset by increased sales in Optical Communications~~moment while simultaneously advancing growth initiatives and Hemlock and Emerging Growth Businesses. Net sales for the nine months ended September 30, 2022 were $10,783 million, compared to $10,406 million during the same period in 2021, a net increase of $377 million, or 4%, primarily driven by increased sales in Optical Communications and Hemlock and Emerging Growth Businesses.

In the third quarter of 2022, Corning generated net income attributable to Corning Incorporated of $208 million, or $0.24 per diluted share, compared to $371 million, or $0.43 per diluted share, for the same period in 2021. The decrease of $163 million was primarily driven by the following items (amounts presented after-tax):

●	~~Higher segment net income in Optical Communications, Environmental Technologies and Hemlock and Emerging Growth Businesses, of $44 million, $27 million, and $23 million, respectively; and~~
●	~~Higher translation gains of $60 million on Japanese yen-denominated debt.~~

~~The increases outlined above were more than offset by:~~

●	~~Declines in segment net income in Display Technologies of $113 million;~~
●	~~Higher asset write-offs and other related charges of $75 million; and~~
●	~~Higher translated earnings contract losses of $42 million, primarily driven by South Korean won-denominated hedges.~~

In the nine months ended September 30, 2022, Corning generated net income attributable to Corning Incorporated of $1,352 million, or $1.58 per diluted share, compared to $1,419 million, or $0.71 per diluted share, for the same period in 2021. The decrease of $67 million and increase in diluted earnings per share of $0.87, was primarily driven by the following items (amounts presented after-tax):

●	~~Higher segment net income in Optical Communications and Hemlock and Emerging Growth Businesses, of $133 million and $79 million, respectively; and~~
●	~~Higher translation gains of $148 million on Japanese yen-denominated debt.~~

~~The increases outlined above were more than offset by:~~

●	~~Lower unrealized gains from translated earnings contracts of $162 million;~~
●	~~Declines in segment net income in Display Technologies of $110 million; and~~
●	~~Higher asset write-offs and other related charges of $133 million.~~

The increase in diluted earnings per share for the nine months ended September 30, 2022, was primarily driven by the changes in net income attributable to Corning Incorporated, outlined above, as wellcapabilities that will drive continued success as the ~~impact of the immediate repurchase~~global economy stabilizes. Our focused and ~~retirement of 35 million common shares, which resulted~~cohesive portfolio provides strategic resilience that is evident in an $803 million one-time reduction to net income available to common shareholders during the second quarter of 2021. Refer to Note 5 (Earnings per Common Share) and Note 13 (Shareholders' Equity) to the consolidated financial statements for additional information.

The translation impact of fluctuations in foreign currency exchange rates, including the impact of hedges realized during the respective periods, adversely impacted Corning’s consolidated net incomeour results, even in the ~~three~~current environment. We remain confident in our relevance to long-term secular trends and ~~nine months ended September 30, 2022 by $20 million~~our “More Corning” approach, and ~~$71 million, respectively, when compared~~we are well positioned to capture durable, profitable growth as the same periods in 2021. During the three and nine months ended September 30, 2022, the impact of hedges realized during the periods were $76 million and $166 million, respectively, compared to $9 million and $9 million, respectively, for the same periods in 2021. global economy improves.

~~2022~~Third-Quarter 2023 Corporate Outlook

We expect core net sales of approximately ~~$3.45 billion to $3.65~~$3.5 billion for the ~~fourth~~third quarter of ~~2022.~~2023.

~~Table of Contents~~

RESULTS OF OPERATIONS

~~Selected highlights from operations were as follows (in millions):~~

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Net sales
$ 3,488 $ 3,615 (4 %) $ 10,783 $ 10,406 4 %

Gross margin
$ 1,062 $ 1,321 (20 %) $ 3,591 $ 3,792 (5 %)
(gross margin %)
30 % 37 % 33 % 36 %

Selling, general and administrative expenses
$ 461 $ 486 (5 %) $ 1,381 $ 1,351 2 %
(as a % of net sales)
13 % 13 % 13 % 13 %

Research, development and engineering expenses
$ 278 $ 251 11 % $ 766 $ 715 7 %
(as a % of net sales)
8 % 7 % 7 % 7 %

Translated earnings contract (loss) gain, net
$ (68 ) $ (13 ) * $ 257 $ 262 (2 %)
(as a % of net sales)
(2 %) — 2 % 3 %

Provision for income taxes
$ (34 ) $ (109 ) (69 %) $ (380 ) $ (402 ) (5 %)
(as a % of net sales)
(1 %) (3 %) (4 %) (4 %)

Net income attributable to Corning Incorporated
$ 208 $ 371 (44 %) $ 1,352 $ 1,419 (5 %)
(as a % of net sales)
6 % 10 % 13 % 14 %

* ~~Not Meaningful~~

~~Segment Net Sales~~

The following table presents ~~segment net sales by reportable segment and Hemlock and Emerging Growth Businesses~~selected highlights from our operations (in millions):

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Optical Communications
$ 1,317 $ 1,131 16 % $ 3,828 $ 3,143 22 %
Display Technologies
686 956 (28 %) 2,523 2,758 (9 %)
Specialty Materials
519 556 (7 %) 1,497 1,490 —
Environmental Technologies
425 385 10 % 1,190 1,233 (3 %)
Life Sciences
312 305 2 % 934 917 2 %
Net sales of reportable segments
3,259 3,333 (2 %) 9,972 9,541 5 %
Hemlock and Emerging Growth Businesses
407 306 33 % 1,200 865 39 %
Impact of constant currency reporting ⁽¹⁾
(178 ) (24 ) * (389 ) — *
Consolidated net sales
$ 3,488 $ 3,615 (4 %) $ 10,783 $ 10,406 4 %

	Three months ended						%			Six months ended						%
	June 30,						change			June 30,						change
	2023			2022			23 vs. 22			2023			2022			23 vs. 22

Net sales	$	3,243		$	3,615			(10	)%	$	6,421		$	7,295			(12	)%

Gross margin	$	1,013		$	1,246			(19	)%	$	2,016		$	2,529			(20	)%
(gross margin %)		31	%		34	%					31	%		35	%

Selling, general and administrative expenses	$	440		$	486			(9	)%	$	861		$	920			(6	)%
(as a % of net sales)		14	%		13	%					13	%		13	%

Research, development and engineering expenses	$	263		$	240			10	%	$	517		$	488			6	%
(as a % of net sales)		8	%		7	%					8	%		7	%

Translated earnings contract gain, net	$	116		$	196			(41	)%	$	108		$	325			(67	)%

Income before income taxes	$	409		$	750			(45	)%	$	637		$	1,533			(58	)%

Provision for income taxes	$	(106	)	$	(166	)		(36	)%	$	(143	)	$	(346	)		(59	)%
Effective tax rate		26	%		22	%					22	%		23	%

Net income attributable to Corning Incorporated	$	281		$	563			(50	)%	$	457		$	1,144			(60	)%

Comprehensive (loss) income attributable to Corning Incorporated	$	(21	)	$	(169	)		(88	)%	$	88		$	225			(61	)%

* ~~Not Meaningful~~

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

2523

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InNet Sales

Net sales for the ~~third quarter of 2022, net sales of reportable segments and Hemlock and Emerging Growth Businesses were $3,666~~three months ended June 30, 2023 decreased $372 million, or 10%, when compared to ~~$3,639 million during~~ the same period in ~~2021, a net increase~~2022. The decrease was primarily driven by decreased segment sales in Optical Communications of ~~$27~~$247 million, ~~or 1%. Changes~~Life Sciences of $81 million, and Specialty Materials of $62 million, partially offset by increased segment sales in ~~net sales were as follows:~~

●	~~Optical Communications’ net sales increased by $186 million, or 16%, primarily driven by higher sales of carrier and enterprise products for 5G, broadband, and the cloud;~~
●	~~Display Technologies’ net sales decreased by $270 million or 28%, driven by lower volumes attributable to decreased panel maker utilization;~~

●	~~Specialty Materials’ net sales decreased by $37 million, driven by softening demand in the smartphone, tablet and notebook markets;~~

●	~~Net sales for Environmental Technologies increased by $40 million, or 10%, primarily driven by improvements in the China market; and~~

●	Net sales for Hemlock and Emerging Growth Businesses increased by $101 million, primarily driven by increases in Hemlock’s net sales as demand for solar products remained strong, and year-over-year growth from CPT and AGS.

Environmental Technologies of $101 million and Display Technologies of $50 million. In the nine months ended September 30, 2022, net sales of reportable segments and Hemlock and Emerging Growth Businesses were $11,172 million, compared to $10,406 million during the same period in 2021, a net increase of $766 million, or 7%. Changes in net sales were as follows:

●	~~Optical Communications’ net sales increased by $685 million, or 22%, primarily driven by higher sales of carrier and enterprise products for 5G, broadband, and the cloud;~~
●	~~Display Technologies’ net sales decreased by $235 million, or 9%, driven by lower volumes attributable to decreased panel maker utilization;~~

●

Net sales for Environmental Technologies decreased by $43 million, or 3%, primarily driven by sales declines of automotive products as automotive producers experienced constraints in the market, including prolonged component shortage, partially offset by improvements in the China market during the third quarter of 2022; and

●	Net sales for Hemlock and Emerging Growth Businesses increased by $335 million, primarily driven by increases in Hemlock’s net sales as demand for solar products remained strong, and year-over-year growth from CPT and AGS.

~~Movements~~addition, movements in foreign exchange rates adversely impacted Corning’s consolidated net sales by ~~$166~~$79 million ~~and $418 million in~~for the three ~~and nine~~ months ended ~~September~~June 30, ~~2022, respectively,~~2023, when compared to the same ~~periods~~period in ~~2021.~~2022.

Net sales for the six months ended June 30, 2023 decreased $874 million, or 12%, when compared to the same period in 2022. The decrease was primarily driven by decreased segment sales in Optical Communications of $320 million, Specialty Materials of $149 million, Display Technologies of $146 million, and Life Sciences of $135 million, partially offset by increased segment sales in Environmental Technologies of $123 million. In addition, movements in foreign exchange rates adversely impacted Corning’s consolidated net sales by $195 million for the six months ended June 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 and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, gross margin decreased by ~~$259~~$233 million and $513 million, or ~~20%,~~19% and ~~decreased by $201 million, or 5%~~20%, respectively, and declined as a percentage of sales by 73 and 4 percentage points, ~~and 3 percentage points, respectively.~~respectively, when compared to the same periods in 2022. The decline in gross margin as a percentage of sales was primarily driven by higher ~~production, material~~inflationary and ~~freight~~production costs as well as ~~accelerated depreciation,~~incremental severance and asset write-offs and ~~other~~ related charges ~~mostly due~~of $36 million and $65 million during the three and six months ended June 30, 2023 as compared to ~~capacity optimization of an emerging growth business~~the same periods in ~~the third quarter of~~ 2022.

~~The translation impact of fluctuations~~ In addition, movements in foreign ~~currency~~ exchange rates adversely impacted Corning’s consolidated gross margin by ~~$112~~$42 million and ~~$294~~$117 million infor the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, when compared to the same periods in ~~2021.~~2022.

~~Table of Contents~~

Selling, General and Administrative Expenses

In the three and nine months ended September 30, 2022, selling, general and administrative expenses decreased by $25 million, or 5%, and increased $30 million, or 2%, respectively, and was consistent as a percentage of sales, when compared to the same periods in 2021.

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

~~Research, Development and Engineering Expenses~~

InFor the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, research, development~~2023, selling, general and ~~engineering~~administrative expenses ~~increased~~decreased by ~~$27~~$46 million and $59 million, or ~~11%,~~9% and ~~increased by $51 million, or 7%~~6%, respectively, and were fairly consistent as a percentage of sales when compared to the same periods in ~~2021.~~2022.

Research, Development and Engineering Expenses

For the three and six months ended June 30, 2023, research, development and engineering expenses increased by $23 million and $29 million, or 10%, and 6%, respectively, and were fairly consistent as a percentage of sales when compared to the same periods in 2022.

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

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

The following ~~tables provide~~table provides detailed information on the impact of translated earnings contract ~~(loss)~~ gain, net (in millions):

Three months ended

Three months ended

Change

September 30, 2022

September 30, 2021

2022 vs. 2021

Income

Income

Income

before

Net

before

Net

before

Net

taxes income taxes income taxes income
Hedges related to translated earnings:

Realized gain, net ⁽¹⁾
$ 100 $ 76 $ 12 $ 9 $ 88 $ 67
Unrealized loss, net ⁽²⁾
(168 ) (128 ) (25 ) (19 ) (143 ) (109 )
Total translated earnings contract loss, net
$ (68 ) $ (52 ) $ (13 ) $ (10 ) $ (55 ) $ (42 )

	Three months ended				Three months ended				Change
	June 30, 2023				June 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)	$	71	$	57	$	85	$	65	$	(14	)	$	(8	)
Unrealized gain, net (3)		45		36		111		85		(66	)		(49	)
Total translated earnings contract gain, net	$	116	$	93	$	196	$	150	$	(80	)	$	(57	)

	Nine months ended				Nine months ended				Change						Six months ended						Six months ended				Change
	September 30, 2022				September 30, 2021				2022 vs. 2021						June 30, 2023						June 30, 2022				2023 vs. 2022
	Income				Income				Income						Income						Income				Income
	before		Net		before		Net		before			Net			before			Net			before		Net		before			Net
	taxes		income		taxes		income		taxes			income			tax			income			tax		income		tax			income
Hedges related to translated earnings:
Realized gain, net ⁽¹⁾	$	218	$	166	$	11	$	9	$	207		$	157
Unrealized gain, net ⁽²⁾		39		31		251		193		(212	)		(162	)
Realized gain, net (1) (2)															$	138		$	109		$	118	$	90	$	20		$	19
Unrealized (loss) gain, net (3)																(30	)		(22	)		207		159		(237	)		(181	)
Total translated earnings contract gain, net	$	257	$	197	$	262	$	202	$	(5	)	$	(5	)	$	108		$	87		$	325	$	249	$	(217	)	$	(162	)

⁽¹⁾

~~Includes before tax~~For the three and six months ended June 30, 2023, amount includes pre-tax realized ~~gains~~losses of $14 million and $28 million, respectively, related to the expiration of option ~~contracts for~~contracts. For the three and ~~nine~~six months ended ~~September~~June 30, 2022, amount includes pre-tax realized losses of ~~$23~~$7 million and $9$14 million, respectively, ~~and before tax realized losses for~~related to the ~~three and nine months ended September 30, 2021~~expiration of ~~$5 million and $19 million, respectively. Activity has been~~option contracts. These amounts were reflected inwithin operating activities in the consolidated statements of cash flows.

⁽²⁾

For the three and six months ended June 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 and six months ended ~~September~~June 30, 2023 and 2022 was primarily driven by unrealized gains from our Japanese yen-denominated hedges offset by unrealized losses onfrom our South Korean won-denominated hedges. The ~~impact to income for the nine~~three and six months ended ~~September~~June 30, ~~2022~~2023 was ~~primarily driven~~further impacted by ~~gains on Japanese yen-denominated hedges partially offset by~~unrealized losses ~~on South Korean won-denominated~~from our Chinese yuan-denominated hedges.

~~Table of Contents~~

Income Before Income Taxes

The translation impact of fluctuations in foreign currency exchange rates, including the impact of hedges realized in the current ~~quarter,~~period, adversely impacted Corning’s consolidated income before income taxes by ~~$21~~$55 million and ~~$80~~$95 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, when compared to the same periods in ~~2021.~~2022.

Provision for Income Taxes

~~The provision 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,

2022

2021

2022

2021

Provision for income taxes
$ (34 ) $ (109 ) $ (380 ) $ (402 )
Effective tax rate
13.1 % 22.1 % 21.2 % 21.8 %

For the three and six months ended ~~September~~June 30, ~~2022,~~2023, the effective ~~income~~ 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,~~valuation allowance assessments, partially offset by ~~changes in tax reserves.~~ differences arising from foreign earnings, adjustments to share-based compensation, and a net benefit due to foreign derived intangible income.

For the ~~nine~~three and six months ended ~~September~~June 30, 2022, the effective ~~income~~ 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.

~~For the three months ended September 30, 2021, the effective income tax rate differed from the U.S. statutory rate~~

Table of 21%, primarily due to non-deductible expenses for tax purposes, foreign rate differential, and tax reform items. For the nine months ended September 30, 2021, the effective income tax rate differed from the U.S. statutory rate of 21% primarily due to an adjustment to the permanently reinvested foreign income position, excess tax benefit related to share-based compensation payments, foreign rate differential, and tax reform items related to The Tax Cuts and Jobs Act of 2017.

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

Contents

Net Income Attributable to Corning Incorporated

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

Three months ended

Nine months ended

September 30,

September 30,

2022

2021

2022

2021

Net income attributable to Corning Incorporated
$ 208 $ 371 $ 1,352 $ 1,419
Less: Series A convertible preferred stock dividend
(24 )
Less: Excess consideration paid for redemption of preferred shares ⁽¹⁾
(803 )
Net income available to common shareholders used in basic earnings per common share calculation
$ 208 $ 371 $ 1,352 $ 592
Net income available to common shareholders used in diluted earnings per common share calculation
$ 208 $ 371 $ 1,352 $ 592

Basic earnings per common share
$ 0.25 $ 0.44 $ 1.60 $ 0.72
Diluted earnings per common share
$ 0.24 $ 0.43 $ 1.58 $ 0.71

Weighted-average common shares outstanding - basic
843 852 843 821
Weighted-average common shares outstanding - diluted
855 866 857 837

⁽¹⁾	~~Refer to Note 5 (Earnings per Common Share) to the consolidated financial statements for additional information.~~

~~Table of Contents~~

	Three months ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income attributable to Corning Incorporated	$	281	$	563	$	457	$	1,144
Basic earnings per common share	$	0.33	$	0.67	$	0.54	$	1.36
Diluted earnings per common share	$	0.33	$	0.66	$	0.53	$	1.33

Weighted-average common shares outstanding - basic		848		843		846		843
Weighted-average common shares outstanding - diluted		859		856		859		857

Comprehensive (Loss) Income attributable to Corning Incorporated

Comprehensive loss attributable to Corning Incorporated for the three ~~and nine~~ months ended ~~September~~June 30, ~~2022~~2023 was ~~$489~~$21 million ~~and $264 million, respectively,~~ compared to ~~comprehensive~~$169 million for the three months ended June 30, 2022. This movement is primarily due to the $282 million decrease in net income attributable to Corning Incorporated ~~for the three~~ and ~~nine months ended September 30, 2021 of $164 million and $900 million, respectively. This movement in the three and nine month periods is primarily due to an increase~~a decrease in net losses on foreign currency translation adjustments of ~~$493~~$332 million, ~~and $1,020 million, respectively,~~primarily driven by the Japanese yen, ~~Chinese yuan and~~ South Korean ~~won.~~won and euro.

~~Refer~~Comprehensive income attributable to Corning Incorporated for the six months ended June 30, 2023 was $88 million compared to $225 million for the six months ended June 30, 2022. This decrease is primarily due to the $687 million decrease in net income attributable to Corning Incorporated and a decrease in net losses on foreign currency translation adjustments of $448 million, primarily driven by the Japanese yen, South Korean won and euro.

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SEGMENT ANALYSIS

Segment net income may not be consistent with measures used by other companies.

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

	Three months ended				$			%			Six months ended				$			%
	June 30,				change			change			June 30,				change			change
	2023		2022		23 vs. 22			23 vs. 22			2023		2022		23 vs. 22			23 vs. 22
Optical Communications	$	1,066	$	1,313	$	(247	)		(19	)%	$	2,191	$	2,511	$	(320	)		(13	)%
Display Technologies		928		878		50			6	%		1,691		1,837		(146	)		(8	)%
Specialty Materials		423		485		(62	)		(13	)%		829		978		(149	)		(15	)%
Environmental Technologies		457		356		101			28	%		888		765		123			16	%
Life Sciences		231		312		(81	)		(26	)%		487		622		(135	)		(22	)%
Net sales of reportable segments		3,105		3,344		(239	)		(7	)%		6,086		6,713		(627	)		(9	)%
Hemlock and Emerging Growth Businesses		377		418		(41	)		(10	)%		763		793		(30	)		(4	)%
Net sales of reportable segments and Hemlock and Emerging Growth Businesses ⁽¹⁾	$	3,482	$	3,762	$	(280	)		(7	)%	$	6,849	$	7,506	$	(657	)		(9	)%

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

Optical Communications

The decrease in segment net sales for ~~additional information.~~both the three and six month periods was primarily driven by a decline in sales volume for carrier and enterprise products due to the timing of customer projects.

Display Technologies

The decrease in segment net sales during the six months ended June 30, 2023 as compared to the same period in 2022 is due to lower volumes, primarily attributable to the slow recovery of panel maker utilization. As panel makers started to increase utilization at the end of the first quarter, improvement continued in the second quarter resulting in an increase in segment net sales in the three months ended June 30, 2023, driven by higher volume.

Specialty Materials

The decrease in segment net sales for both the three and six month periods was primarily driven by lower demand in the smartphone, tablet and notebook markets, partially offset by continued demand for advanced optics.

Environmental Technologies

The increase in segment net sales for both the three and six month periods was primarily driven by increased demand of automotive products, including gasoline particulate filters as well as continued demand for heavy-duty diesel products.

Life Sciences

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

Hemlock and Emerging Growth Businesses

The decrease in segment net sales for both the three and six month periods was primarily driven by a decrease in our Hemlock business due to a decline in solar-grade polysilicon spot prices.

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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				$			%			Six months ended				$			%
	June 30,				change			change			June 30,				change			change
	2023		2022		23 vs. 22			23 vs. 22			2023		2022		23 vs. 22			23 vs. 22
Optical Communications	$	140	$	182	$	(42	)		(23	)%	$	299	$	348	$	(49	)		(14	)%
Display Technologies		208		228		(20	)		(9	)%		368		464		(96	)		(21	)%
Specialty Materials		33		91		(58	)		(64	)%		72		166		(94	)		(57	)%
Environmental Technologies		107		62		45			73	%		189		136		53			39	%
Life Sciences		11		37		(26	)		(70	)%		20		79		(59	)		(75	)%
Net income of reportable segments		499		600		(101	)		(17	)%		948		1,193		(245	)		(21	)%
Hemlock and Emerging Growth Businesses		26		25		1			4	%		42		17		25			147	%
Net income of reportable segments and Hemlock and Emerging Growth Businesses ⁽¹⁾	$	525	$	625	$	(100	)		(16	)%	$	990	$	1,210	$	(220	)		(18	)%

⁽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 six 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 decrease in segment net income for the three months ended June 30, 2023 as compared to the same period in 2022 was primarily driven by higher inflationary and production costs, partially offset by the increase in sales, as outlined above. The decrease in segment net income for the six months ended June 30, 2023 as compared to the same period in 2022 was primarily driven by lower volume, as outlined above, and higher inflationary and production costs.

Specialty Materials

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

Life Sciences

The decrease in segment net income for both the three and six month periods was primarily driven by lower sales volume, as outlined above, and the impact of reducing our production levels.

Hemlock and Emerging Growth Businesses

The increase in segment net income for the six month period was primarily driven by our Pharmaceutical Technologies business, due to improvements resulting from productivity actions, and partially offset by a decrease in 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 ~~are adjusted~~ to exclude specific items to arrive at our core performance measures. These items include ~~gains and losses on~~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 ~~losses,~~ and other charges and credits, certain ~~litigation-related expenses,~~litigation, regulatory and other legal matters, pension mark-to-market adjustments and other items which do not reflect ~~on-going~~the ongoing operating results of the ~~Company or~~Company.

In addition, because a significant portion of our ~~equity affiliates. Corning~~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 ~~for~~to exclude the impact from the Japanese yen, South Korean won, Chinese yuan, new Taiwan dollar and euro, as applicable to the ~~euro.~~segment. The ~~Company believes~~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 ~~investors~~management to understand our results without the volatility of currency ~~fluctuations~~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. ~~Corning also believes that reporting core performance measures provides investors greater transparency to the information used by the management team to make financial and operational decisions.~~

Core performance measures are not prepared in accordance with ~~GAAP.~~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 ~~Company’s~~ outlook for future periods, it is not possible to provide reconciliations for these non-GAAP measures because ~~the Company~~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 ~~the Company’s~~management’s control. As a result, ~~the Company~~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, ~~refer to~~please see “Reconciliation of Non-GAAP Measures.”

~~RESULTS OF OPERATIONS~~Results of Operations – ~~CORE PERFORMANCE MEASURES~~Core Performance Measures

~~Selected~~The following table presents selected highlights from ~~continuing~~our operations, excluding certain items ~~were as follows~~ (in millions):

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Core net sales
$ 3,666 $ 3,639 1 % $ 11,172 $ 10,406 7 %
Core net income
$ 438 $ 485 (10 )% $ 1,392 $ 1,346 3 %

~~Table of Contents~~

	Three months ended				%			Six months ended				%
	June 30,				change			June 30,				change
	2023		2022		23 vs. 22			2023		2022		23 vs. 22
Core net sales	$	3,482	$	3,762		(7	)%	$	6,849	$	7,506		(9	)%
Core net income	$	388	$	489		(21	)%	$	738	$	954		(23	)%

Core Net Sales

Core net sales are consistent with net sales by reportable segment and Hemlock and Emerging Growth Businesses. ~~Core~~Segment and Hemlock and Emerging Growth Businesses net sales ~~were as follows (in millions):~~and variances are discussed in detail in the “Segment Analysis” section of our MD&A.

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Optical Communications
$ 1,317 $ 1,131 16 % $ 3,828 $ 3,143 22 %
Display Technologies
686 956 (28 %) 2,523 2,758 (9 %)
Specialty Materials
519 556 (7 %) 1,497 1,490 —
Environmental Technologies
425 385 10 % 1,190 1,233 (3 %)
Life Sciences
312 305 2 % 934 917 2 %
Net sales of reportable segments
$ 3,259 $ 3,333 (2 %) $ 9,972 $ 9,541 5 %
Net sales of Hemlock and Emerging Growth Businesses
407 306 33 % 1,200 865 39 %
Total core net sales
$ 3,666 $ 3,639 1 % $ 11,172 $ 10,406 7 %

Table of Contents

Core Net Income

InFor the three months ended ~~September~~June 30, ~~2022,~~2023, we generated core net income of ~~$438~~$388 million, or ~~$0.51~~$0.45 per core diluted share, compared to core net income generated infor the three months ended ~~September~~June 30, ~~2021~~2022 of ~~$485~~$489 million, or ~~$0.56~~$0.57 per core diluted share. The decrease of ~~$47~~$101 million, or ~~$0.05~~$0.12 per core diluted share, was primarily due to lower ~~core~~segment net income for Specialty Materials of ~~$113~~$58 million, ~~for~~Optical Communications of $42 million, Life Sciences of $26 million and Display Technologies ~~driven by lower volumes attributable to decreased panel maker utilization.~~of $20 million. This was partially offset by higher ~~core~~segment net income for ~~Optical Communications~~Environmental Technologies of ~~$44 million driven by strong volume~~$45 million. Segment and ~~price increases.~~Hemlock and Emerging Growth Businesses net sales and variances are discussed in detail in the “Segment Analysis” section of our MD&A.

InFor the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we generated core net income of ~~$1,392~~$738 million, or ~~$1.62~~$0.86 per core diluted share, compared to core net income generated infor the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 of ~~$1,346~~$954 million, or ~~$1.53~~$1.11 per core diluted share. The ~~increase~~decrease of ~~$46~~$216 million, or ~~$0.09~~$0.25 per core diluted share, was primarily due to ~~higher core~~lower segment net income for Display Technologies of ~~$133~~$96 million, ~~for~~Specialty Materials of $94 million, Life Sciences of $59 million and Optical Communications ~~largely driven~~of $49 million. This was partially offset by ~~strong volume and price increases, and~~ higher ~~core~~segment net income for Environmental Technologies of ~~$79~~$53 million ~~for~~and Hemlock and Emerging Growth Businesses ~~driven by higher demand for solar products. This was partially offset by lower core~~of $25 million. Segment and Hemlock and Emerging Growth Businesses net ~~income~~sales and variances are discussed in detail in the “Segment Analysis” section of ~~$110 million for Display Technologies driven by lower volumes attributable to decreased panel maker utilization.~~

~~The change in core diluted earnings per share was primarily driven by changes in core net income, outlined above.~~our MD&A.

Hemlock and Emerging Growth Businesses

The decrease in segment net sales for both the three and six month periods was primarily driven by a decrease in our Hemlock business due to a decline in solar-grade polysilicon spot prices.

Table of Contents

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

Three months ended

$

%

Six months ended

$

%

June 30,

change

change

June 30,

change

change

2023

2022

23 vs. 22

23 vs. 22

2023

2022

23 vs. 22

23 vs. 22

Optical Communications
$ 140 $ 182 $ (42 ) (23 )% $ 299 $ 348 $ (49 ) (14 )%
Display Technologies
208 228 (20 ) (9 )% 368 464 (96 ) (21 )%
Specialty Materials
33 91 (58 ) (64 )% 72 166 (94 ) (57 )%
Environmental Technologies
107 62 45 73 % 189 136 53 39 %
Life Sciences
11 37 (26 ) (70 )% 20 79 (59 ) (75 )%
Net income of reportable segments
499 600 (101 ) (17 )% 948 1,193 (245 ) (21 )%
Hemlock and Emerging Growth Businesses
26 25 1 4 % 42 17 25 147 %
Net income of reportable segments and
Hemlock and Emerging Growth
Businesses ⁽¹⁾
$ 525 $ 625 $ (100 ) (16 )% $ 990 $ 1,210 $ (220 ) (18 )%
⁽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 six 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 decrease in segment net income for the three months ended June 30, 2023 as compared to the same period in 2022 was primarily driven by higher inflationary and production costs, partially offset by the increase in sales, as outlined above. The decrease in segment net income for the six months ended June 30, 2023 as compared to the same period in 2022 was primarily driven by lower volume, as outlined above, and higher inflationary and production costs.
Specialty Materials
The decrease in segment net income for both the three and six month periods 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 six month periods was primarily driven by the increase in sales, as outlined above.
Life Sciences
The decrease in segment net income for both the three and six month periods was primarily driven by lower sales volume, as outlined above, and the impact of reducing our production levels.
Hemlock and Emerging Growth Businesses
The increase in segment net income for the six month period was primarily driven by our Pharmaceutical Technologies business, due to improvements resulting from productivity actions, and partially offset by a decrease in our Hemlock business due to lower sales, as outlined above.
28
Table of Contents
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 ~~Earnings per Common Share~~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 ~~sets forth the computation of core basic and core diluted earnings per common share~~presents selected highlights from our operations, excluding certain items (in ~~millions, except per share amounts)~~millions):

Three months ended

Nine months ended

September 30,

September 30,

2022

2021

2022

2021

Core net income
$ 438 $ 485 $ 1,392 $ 1,346
Less: Series A convertible preferred stock dividend
24
Core net income available to common shareholders - basic
438 485 1,392 1,322
Plus: Series A convertible preferred stock dividend
24
Core net income available to common shareholders - diluted
$ 438 $ 485 $ 1,392 $ 1,346

Weighted-average common shares outstanding - basic
843 852 843 821
Effect of dilutive securities:

Stock options and other dilutive securities
12 14 14 16
Series A convertible preferred stock
41
Weighted-average common shares outstanding - diluted
855 866 857 878
Core basic earnings per common share
$ 0.52 $ 0.57 $ 1.65 $ 1.61
Core diluted earnings per common share
$ 0.51 $ 0.56 $ 1.62 $ 1.53

Three months ended

%

Six months ended

%

June 30,

change

June 30,

change

2023

2022

23 vs. 22

2023

2022

23 vs. 22

Core net sales
$ 3,482 $ 3,762 (7 )% $ 6,849 $ 7,506 (9 )%
Core net income
$ 388 $ 489 (21 )% $ 738 $ 954 (23 )%
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.

3029
Table of Contents

~~Reconciliation of Non-GAAP Measures~~Core Net Income

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

~~Core net sales and core net income are non-GAAP financial measures utilized by management to analyze financial performance without~~For 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.~~
~~The following tables reconcile the non-GAAP financial measures to their most directly comparable GAAP financial measure (amounts in millions, except per share amounts):~~

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 effective tax rate (“ETR”) excludes net income attributable to non-controlling interests (“NCI”) of $18 million.~~

Three months ended September 30, 2021

Net income

attributable

Net

Income before

to Corning

Effective tax

Per

sales

income taxes

Incorporated

rate (a)(b)

share

As reported - GAAP
$ 3,615 $ 493 $ 371 22.1 % $ 0.43
Constant-currency adjustment ⁽¹⁾
24 33 23 0.03
Translation gain on Japanese yen-denominated debt ⁽²⁾
(4 ) (4 ) (0.00 )
Translated earnings contract loss ⁽³⁾
13 10 0.01
Acquisition-related costs ⁽⁴⁾
38 30 0.03
Discrete tax items and other tax-related adjustments ⁽⁵⁾
(1 ) (0.00 )
Restructuring, impairment and other charges and credits ⁽⁶⁾
40 31 0.04
Litigation, regulatory and other legal matters ⁽⁷⁾
3 15 0.02
Pension mark-to-market adjustment ⁽⁸⁾
(1 ) (1 ) (0.00 )
Preferred stock conversion ⁽¹²⁾
(4 ) (4 ) (0.00 )
Bond redemption loss ⁽¹³⁾
20 15 0.02
Core performance measures
$ 3,639 $ 631 $ 485 21.1 % $ 0.56
~~(a)~~
~~Based upon statutory tax rates in the specific jurisdiction for each event.~~
~~(b)~~ ~~The calculation of the ETR excludes NCI of $13 million.~~
Refer to 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 whichthree months ended June 30, 2023, we ~~exclude from GAAP measures to report core performance measures” for the descriptions of the footnoted reconciling items.~~
31

~~Table of Contents~~

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 )
Contingent consideration ⁽⁹⁾
(32 ) (25 ) (0.03 )
Loss on investments ⁽¹⁰⁾
8 6 0.01
Gain on sale of business ⁽¹¹⁾
(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 NCI of $61 million.~~

Nine months ended September 30, 2021

Net income

attributable

Net

Income before

to Corning

Effective tax

Per

sales

income taxes

Incorporated

rate (a)(b)

share

As reported - GAAP
$ 10,406 $ 1,841 $ 1,419 21.8 % $ 0.71
Preferred stock redemption (c)
0.91
Subtotal
10,406 1,841 1,419 21.8 % 1.62

Constant-currency adjustment ⁽¹⁾
47 29 0.03
Translation gain on Japanese yen-denominated debt ⁽²⁾
(127 ) (98 ) (0.12 )
Translated earnings contract gain ⁽³⁾
(262 ) (202 ) (0.24 )
Acquisition-related costs ⁽⁴⁾
123 95 0.11
Discrete tax items and other tax-related adjustments ⁽⁵⁾
5 0.01
Restructuring, impairment and other charges and credits ⁽⁶⁾
42 33 0.04
Litigation, regulatory and other legal matters ⁽⁷⁾
11 23 0.03
Pension mark-to-market adjustment ⁽⁸⁾
23 18 0.02
Loss on investments ⁽¹⁰⁾
39 30 0.04
Gain on sale of business ⁽¹¹⁾
(54 ) (46 ) (0.05 )
Preferred stock conversion ⁽¹²⁾
17 17 0.02
Bond redemption loss ⁽¹³⁾
31 23 0.03
Core performance measures
$ 10,406 $ 1,731 $ 1,346 21.1 % $ 1.53
~~(a)~~
~~Based upon statutory tax rates in the specific jurisdiction for each event.~~
~~(b)~~ ~~The calculation of the ETR excludes NCI of $20 million.~~
~~(c)~~ Pursuant to the SRA, the Preferred Stock was converted into 115 million Common Shares. Corning immediately repurchased 35 million of the converted Common Shares and excluded them from the weighted-average common shares outstanding for the calculation of the Company’s basic and diluted earnings per share. The redemption of these Common Shares resulted in an $803 million reduction of retained earnings which reduced the net income available to common shareholders.
Refer to Part 1, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Results of Operations – Core Performance Measures, Reconciliation of Non-GAAP Measures, “Items which we exclude from GAAP measures to report core performance measures” for the descriptions of the footnoted reconciling items.
32

~~Table of Contents~~
~~Items which we exclude from GAAP measures to arrive at core performance measures were as follows:~~
~~(1)~~
~~Constant-currency~~: Because a significant portion of segment revenues and expenses are denominated in currencies other than the U.S. dollar, management believes it is important to understand the impact on core net income of translating these currencies into U.S. dollars. Our Display Technologies’ segment sales and net income are primarily denominated in Japanese yen, but also impacted by the South Korean won, Chinese yuan, and new Taiwan dollar. Environmental Technologies and Life Science segments sales and net income are primarily impacted by the euro. Presenting results on a constant-currency basis mitigates the translation impact and allows management to evaluate performance period over period, analyze underlying trends in the businesses, and establish operational goals and forecasts. We establish constant-currency rates based on internally derived management estimates which are closely aligned with the currencies we have hedged.
~~Currency~~
~~Japanese yen~~
~~Korean won~~
~~Chinese yuan~~
~~New Taiwan dollar~~
~~Euro~~
~~Rate~~
~~¥107~~
~~₩1,175~~
~~¥6.7~~
~~NT$31~~
~~€.81~~
~~(2)~~
~~Translation gain on Japanese yen-denominated debt: We have excluded the impact of the translation gain of the yen-denominated debt to U.S. dollars.~~
~~(3)~~
~~Translated earnings contract (loss) gain~~: We have excluded the impact of the realized and unrealized gains and losses of the 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 the British pound-denominated foreign currency hedges related to translated earnings.
~~(4)~~
~~Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments, external acquisition-related deal costs, and other transaction related costs.~~
~~(5)~~
~~Discrete tax items and other tax-related adjustments: These include discrete period tax items such as changes of tax reserves and changes in our permanently reinvested foreign income position.~~
~~(6)~~ ~~Restructuring, impairment and other charges and credits~~: These include accelerated depreciation and asset write-offs, impairments and other related charges, which are not related to on-going operations and are not classified as restructuring expense. The activity during the third quarter of 2022 primarily relates to capacity optimization of an emerging growth business. The activity during the third quarter of 2021 relates to asset write-offs and charges related to facility repairs resulting from the impact of power outages.
~~(7)~~ ~~Litigation, regulatory and other legal matters: Includes amounts that reflect developments in commercial litigation, intellectual property disputes, adjustments to the estimated liability for environmental-related items and other legal matters.~~
~~(8)~~ ~~Pension mark-to-market adjustment: Defined benefit pension mark-to-market gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates.~~
~~(9)~~ ~~Contingent consideration: This amount represents the fair value mark-to-market cost adjustment of contingent consideration resulting from the Hemlock transaction on September 9, 2020.~~
~~(10)~~ ~~Loss on investments: Amount represents the loss recognized due to mark-to-mark adjustments capturing the change in fair value based on the closing stock market price.~~
~~(11)~~ ~~Gain on sale of business: Amount represents the gain recognized for the sale of a certain business.~~
~~(12)~~ ~~Preferred stock conversion: This amount includes the fair value of the put option from the Share Repurchase Agreement with Samsung Display Co., Ltd.~~
~~(13)~~ ~~Bond redemption loss: Amount represents premiums on redemption of debentures.~~
33

~~Table of Contents~~
~~REPORTABLE SEGMENTS~~
~~Reportable segments are as follows:~~
● ~~Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.~~
● ~~Display Technologies – manufactures glass substrates for flat panel liquid crystal displays and other high-performance display panels.~~
● ~~Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.~~
● ~~Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.~~
● ~~Life Sciences – manufactures glass and plastic labware, equipment, media, serum and reagents enabling workflow solutions for drug discovery and bioproduction.~~
All other businesses that do not meet the quantitative threshold for separate reporting have been grouped as “Hemlock and Emerging Growth Businesses”. The net sales for this group are primarily attributable to Hemlock, which is an operating segment that produces solar and semiconductor products. The emerging growth businesses primarily consist of CPT, AGS and the EIG, which are also operating segments.
Financial results for the reportable segments are prepared on a basis consistent with the internal disaggregation of financial information to assist the CODM in making internal operating decisions. A significant portion of segment revenues and expenses are denominated in currencies other than the U.S. dollar. Management believes it is important to understand the impact ongenerated core net income of ~~translating these currencies into U.S. dollars.  For segment sales and~~$388 million, or $0.45 per core diluted share, compared to core net income the Company utilizes constant-currency reporting for Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments for the Japanese yen, South Korean won, Chinese yuan, new Taiwan dollar and the euro. Certain income and expenses are included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to consolidated net income. These include items that are not used by the CODM in evaluating the results of, or in allocating resources to, the segments and include the following: the impact of translated earnings contracts; acquisition-related costs; discrete tax items and other tax-related adjustments; certain litigation, regulatory and other legal matters; restructuring, impairment losses and other charges and credits; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.
~~Optical Communications~~
~~The following table provides net sales and net income for the Optical Communications segment (in millions):~~

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Segment net sales
$ 1,317 $ 1,131 16 % $ 3,828 $ 3,143 22 %
Segment net income
$ 183 $ 139 32 % $ 531 $ 398 33 %
Optical Communications’ net sales increased by $186 million and $685 million in the three and nine months ended September 30, 2022, respectively, primarily driven by higher sales volumes of carrier and enterprise products for 5G, broadband, and the cloud.
Net income increased by $44 million and $133 million for the three and nine months ended September 30, 2022, respectively, primarily driven by the changes in sales, outlined above, partially offset by higher costs and operating expenses.
~~Movements in foreign currency exchange rates did not materially impact net income in this segment in the three and nine months ended September 30, 2022, when compared to the same periods in 2021.~~
34

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

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Segment net sales
$ 686 $ 956 (28 %) $ 2,523 $ 2,758 (9 %)
Segment net income
$ 134 $ 247 (46 %) $ 598 $ 708 (16 %)
Net sales in the Display Technologies segment decreased by $270 million and $235 million for the three and nine months ended September 30, 2022, respectively, due to lower volumes, primarily attributable to decreased panel maker utilization, while price remained consistent with the comparative periods.
Net income in the Display Technologies segment decreased by $113 million and $110 million in the three and nine months ended September 30, 2022, respectively, primarily driven by the changes in sales, outlined above.
~~Specialty Materials~~
~~The following table provides net sales and net income for the Specialty Materials segment (in millions):~~

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Segment net sales
$ 519 $ 556 (7 %) $ 1,497 $ 1,490 —
Segment net income
$ 96 $ 107 (10 %) $ 262 $ 279 (6 %)
~~Net sales in the Specialty Materials segment decreased by $37 million~~generated for the three months ended ~~September~~June 30, 2022 of $489 million, or $0.57 per core diluted share. The decrease of $101 million, or $0.12 per core diluted share, was primarily ~~driven~~due to lower segment net income for Specialty Materials of $58 million, Optical Communications of $42 million, Life Sciences of $26 million and Display Technologies of $20 million. This was partially offset by ~~softening demand~~higher segment net income for Environmental Technologies of $45 million. Segment and Hemlock and Emerging Growth Businesses net sales and variances are discussed in detail in the ~~smartphone, tablet and notebook markets. Net sales~~“Segment Analysis” section of our MD&A.
For the six months ended June 30, 2023, we generated core net income of $738 million, or $0.86 per core diluted share, compared to core net income generated for the ~~nine~~six months ended ~~September~~June 30, 2022 ~~remained relatively flat compared~~of $954 million, or $1.11 per core diluted share. The decrease of $216 million, or $0.25 per core diluted share, was primarily due to ~~the prior year, as a result~~lower segment net income for Display Technologies of ~~strong demand for premium cover materials~~$96 million, Specialty Materials of $94 million, Life Sciences of $59 million and ~~advanced optics products~~Optical Communications of $49 million. This was partially offset by ~~softening demand~~higher segment net income for Environmental Technologies of $53 million and Hemlock and Emerging Growth Businesses of $25 million. Segment and Hemlock and Emerging Growth Businesses net sales and variances are discussed in detail in the ~~smartphone, tablet and notebook markets.~~
Net income decreased by $11 million and $17 million for the three and nine months ended September 30, 2022, respectively, primarily driven by the changes in sales, outlined above, and impacted by continued development spending related to next-generation products.“Segment Analysis” section of our MD&A.

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

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Segment net sales
$ 425 $ 385 10 % $ 1,190 $ 1,233 (3 %)
Segment net income
$ 87 $ 60 45 % $ 223 $ 215 4 %
Net sales in the Environmental Technologies segment increased by $40 million for the three months ended September 30, 2022, primarily driven by an increase in automotive sales of $38 million, or 17%, as the China market improved. For the nine months ended September 30, 2022, net sales decreased by $43 million, primarily driven by a decline in automotive sales of $27 million, or 4% as automotive producers experienced constraints in the market, including prolonged component shortage, partially offset by improvements in the China market during the third quarter of 2022.
~~Net income increased by $27 million and $8 million for the three and nine months ended September 30, 2022, respectively, primarily driven by the changes in sales, outlined above.~~
35

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

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Segment net sales
$ 312 $ 305 2 % $ 934 $ 917 2 %
Segment net income
$ 43 $ 45 (4 %) $ 122 $ 145 (16 %)
Net sales in the Life Sciences segment increased by $7 million and $17 million in the three and nine months ended September 30, 2022, respectively, and net income decreased by $2 million and $23 million for the three and nine months ended September 30, 2022, respectively. The changes in sales and net income were due to growth in research and bioproduction products, offset by lower demand for COVID-related products. Supply chain disruptions and higher manufacturing costs also impacted sales and profitability.
Hemlock and Emerging Growth Businesses
The decrease in segment net sales for both the three and six month periods was primarily driven by a decrease in our Hemlock business due to a decline in solar-grade polysilicon spot prices.
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Table of Contents

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

Three months ended

%

Nine months ended

%

September 30,

change

September 30,

change

2022

2021

22 vs. 21

2022

2021

22 vs. 21

Net sales
$ 407 $ 306 33 % $ 1,200 $ 865 39 %
Net income (loss)
$ 18 $ (5 ) * $ 35 $ (44 ) *

Three months ended

$

%

Six months ended

$

%

June 30,

change

change

June 30,

change

change

2023

2022

23 vs. 22

23 vs. 22

2023

2022

23 vs. 22

23 vs. 22

Optical Communications
$ 140 $ 182 $ (42 ) (23 )% $ 299 $ 348 $ (49 ) (14 )%
Display Technologies
208 228 (20 ) (9 )% 368 464 (96 ) (21 )%
Specialty Materials
33 91 (58 ) (64 )% 72 166 (94 ) (57 )%
Environmental Technologies
107 62 45 73 % 189 136 53 39 %
Life Sciences
11 37 (26 ) (70 )% 20 79 (59 ) (75 )%
Net income of reportable segments
499 600 (101 ) (17 )% 948 1,193 (245 ) (21 )%
Hemlock and Emerging Growth Businesses
26 25 1 4 % 42 17 25 147 %
Net income of reportable segments and
Hemlock and Emerging Growth
Businesses ⁽¹⁾
$ 525 $ 625 $ (100 ) (16 )% $ 990 $ 1,210 $ (220 ) (18 )%

* 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
~~Net sales of this group increased by $101 million and $335 million~~The decrease in segment net income for both the three and ~~nine~~six 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 decrease in segment net income for the three months ended ~~September~~June 30, ~~2022, respectively, when~~2023 as compared to the same ~~periods~~period in ~~2021. Net~~2022 was primarily driven by higher inflationary and production costs, partially offset by the increase in sales, as outlined above. The decrease in segment net income for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022 were $18 million and $35 million, respectively,~~2023 as compared to the same period in 2022 was primarily driven by lower volume, as outlined above, and higher inflationary and production costs.
Specialty Materials
The decrease in segment net ~~loss~~income for both the three and ~~nine months ended September 30, 2021~~six month periods 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 six month periods was primarily driven by the increase in sales, as outlined above.
Life Sciences
The decrease in segment net income for both the three and six month periods was primarily driven by lower sales volume, as outlined above, and the impact of ~~$5 million~~reducing our production levels.
Hemlock and ~~$44 million, respectively.~~ Emerging Growth Businesses
The ~~growth~~increase in segment net income for the six month period was primarily driven by our Pharmaceutical Technologies business, due to improvements resulting from productivity actions, and partially offset by a decrease in our Hemlock business due to lower sales, as outlined above.
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Table of Contents
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 ~~was primarily driven by Hemlock~~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 ~~demand for solar products remained strong, and year-over-year growth from CPT and AGS.~~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.

~~CAPITAL RESOURCES AND LIQUIDITY~~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

%

Six months ended

%

June 30,

change

June 30,

change

2023

2022

23 vs. 22

2023

2022

23 vs. 22

Core net sales
$ 3,482 $ 3,762 (7 )% $ 6,849 $ 7,506 (9 )%
Core net income
$ 388 $ 489 (21 )% $ 738 $ 954 (23 )%
~~Financing and Capital Resources~~Core Net Sales

InCore 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 ~~second quarter~~“Segment Analysis” section of 2022, Corning amended and restated its existing revolving credit agreement, which provides a committed $1.5 billion unsecured multi-currency line of credit, primarily to extend the term to 2027. Additionally, Corning amended and restated its 25 billion Japanese yen liquidity facility, equivalent to approximately $173 million, primarily to extend the term to 2025. As of September 30, 2022 and December 31, 2021, there were no outstanding amounts under either the amended and restated or the existing facilities.
~~Corning had no outstanding commercial paper as of September 30, 2022 and December 31, 2021.~~our MD&A.

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Table of Contents

~~Share Repurchase Program~~Core Net Income
On April 26, 2018, Corning’s Board of Directors approved a $2 billion share repurchase program with no expiration date (the “2018 Repurchase Program”). On July 17, 2019, Corning’s Board of Directors authorized $5 billion in share repurchases with no expiration date (the “2019 Repurchase Program”).

For the three ~~and nine~~ months ended ~~September~~June 30, 2023, we generated core net income of $388 million, or $0.45 per core diluted share, compared to core net income generated for the three months ended June 30, 2022 ~~the Company repurchased 0.5~~of $489 million, ~~shares and 6.0~~or $0.57 per core diluted share. The decrease of $101 million, ~~shares, respectively,~~or $0.12 per core diluted share, was primarily due to lower segment net income for Specialty Materials of ~~common stock on the open market for approximately $17~~$58 million, Optical Communications of $42 million, Life Sciences of $26 million and ~~$221 million, respectively, as part~~Display Technologies of ~~its 2019 Repurchase Program.~~$20 million. This was partially offset by higher segment net income for Environmental Technologies of $45 million. Segment and Hemlock and Emerging Growth Businesses net sales and variances are discussed in detail in the “Segment Analysis” section of our MD&A.

For the ~~three and nine~~six months ended ~~September~~June 30, ~~2021,~~2023, we generated core net income of $738 million, or $0.86 per core diluted share, compared to core net income generated for the ~~Company repurchased 1~~six months ended June 30, 2022 of $954 million, or $1.11 per core diluted share. The decrease of $216 million, or $0.25 per core diluted share, was primarily due to lower segment net income for Display Technologies of $96 million, Specialty Materials of $94 million, Life Sciences of $59 million and ~~36 million shares~~Optical Communications of common stock, respectively, for approximately $24 million and $1.5 billion, respectively, as part of the 2018 and 2019 Repurchase Programs. Most of these shares were repurchased immediately following the conversion of the preferred shares.
~~Refer to Note 13 (Shareholders’ Equity) to the consolidated financial statements for additional information.~~
~~Capital Spending~~
~~Capital spending totaled $1.2 billion for the nine months ended September 30, 2022. We expect our 2022 capital expenditures to be slightly lower than 2021.~~
~~Cash Flow~~
~~Summary of cash flow data (in millions):~~

Nine months ended

September 30,

2022

2021

Net cash provided by operating activities
$ 1,998 $ 2,389
Net cash used in investing activities
$ (969 ) $ (803 )
Net cash used in financing activities
$ (1,430 ) $ (1,990 )
Net cash provided by operating activities decreased by $391 million in the nine months ended September 30, 2022, when compared to the same period in the prior year primarily driven by increased inventory levels.
Net cash used in investing activities increased by $166 million in the nine months ended September 30, 2022, when compared to the same period last year. Increased outflows for capital expenditures of $187 million and lower proceeds from unconsolidated entities of $97 million, were$49 million. This was partially offset by higher ~~realized gains on translated earnings contracts~~segment net income for Environmental Technologies of ~~$179~~$53 million and Hemlock and Emerging Growth Businesses of $25 million.
~~Net cash used~~ Segment and Hemlock and Emerging Growth Businesses net sales and variances are discussed in ~~financing activities decreased by $560 million~~detail in the ~~nine months ended September 30, 2022, when compared to the same period last year, primarily driven by lower repayments~~“Segment Analysis” section of ~~long-term debt of $716 million, partially offset by increased purchases of treasury stock of $199 million.~~our MD&A.

~~Defined Benefit Pension Plans~~Core Earnings per Common Share

~~Corning has defined benefit pension plans covering certain domestic~~Core earnings per share decreased for the three and international employees. The Company’s funding policy is to contribute, over time, an amount exceeding the minimum requirements to achieve the Company’s long-term funding targets. During the ninesix months ended ~~September~~June 30, ~~2022, contributions~~2023 to $0.45 and $0.86 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

Six months ended

June 30,

June 30,

2023

2022

2023

2022

Core net income
$ 388 $ 489 $ 738 $ 954

Weighted-average common shares outstanding - basic
848 843 846 843
Effect of dilutive securities:

Stock options and other awards
11 13 13 14
Weighted-average common shares outstanding - diluted
859 856 859 857
Core basic earnings per common share
$ 0.46 $ 0.58 $ 0.87 $ 1.13
Core diluted earnings per common share
$ 0.45 $ 0.57 $ 0.86 $ 1.11
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Table of Contents
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 ~~international pension plans were not material. The Company does not expect~~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 ~~make additional contributions~~adjustments that have the effect of excluding amounts, that are included in the ~~fourth quarter~~comparable measure calculated and presented in accordance with GAAP in the consolidated statements of ~~2022.~~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 June 30, 2023

Net income

attributable

Net

Income before

to Corning

Effective tax

Per

sales

income taxes

Incorporated

rate (a)(b)

share

As reported – GAAP
$ 3,243 $ 409 $ 281 25.9 % $ 0.33
Constant-currency adjustment (1)
239 174 125 0.15
Translation gain on Japanese yen-denominated debt (2)
(109 ) (88 ) (0.10 )
Translated earnings contract gain (3)
(116 ) (93 ) (0.11 )
Acquisition-related costs (4)
32 25 0.03
Discrete tax items and other tax-related adjustments (5)
31 0.04
Restructuring, impairment and other charges and credits (6)
132 105 0.12
Litigation, regulatory and other legal matters (7)
12 10 0.01
Pension mark-to-market adjustment (8)
(16 ) (13 ) (0.02 )
Loss on investments (9)
5 5 0.01
Core performance measures
$ 3,482 $ 523 $ 388 21.5 % $ 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 June 30, 2022

Net income

attributable

Net

Income before

to Corning

Effective tax

Per

sales

income taxes

Incorporated

rate (a)(b)

share

As reported - GAAP
$ 3,615 $ 750 $ 563 22.1 % $ 0.66
Constant-currency adjustment (1)
147 120 93 0.11
Translation gain on Japanese yen-denominated debt (2)
(153 ) (118 ) (0.14 )
Translated earnings contract gain (3)
(196 ) (150 ) (0.18 )
Acquisition-related costs (4)
35 27 0.03
Discrete tax items and other tax-related adjustments (5)
5 0.01
Restructuring, impairment and other charges and credits (6)
46 36 0.04
Litigation, regulatory and other legal matters (7)
42 32 0.04
Loss on investments (9)
8 6 0.01
Contingent consideration (10)
(6 ) (5 ) (0.01 )
Core performance measures
$ 3,762 $ 646 $ 489 21.1 % $ 0.57
(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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Table of Contents

Six months ended June 30, 2023

Net income

attributable

Net

Income before

to Corning

Effective tax

Per

sales

income taxes

Incorporated

rate (a)(b)

share

As reported – GAAP
$ 6,421 $ 637 $ 457 22.4 % $ 0.53
Constant-currency adjustment (1)
428 323 239 0.28
Translation gain on Japanese yen-denominated debt (2)
(127 ) (102 ) (0.12 )
Translated earnings contract gain (3)
(108 ) (87 ) (0.10 )
Acquisition-related costs (4)
66 45 0.05
Discrete tax items and other tax-related adjustments (5)
29 0.03
Restructuring, impairment and other charges and credits (6)
198 158 0.18
Litigation, regulatory and other legal matters (7)
12 10 0.01
Pension mark-to-market adjustment (8)
(6 ) (5 ) (0.01 )
Loss on investments (9)
9 9 0.01
Gain on sale of assets (11)
(20 ) (15 ) (0.02 )
Core performance measures
$ 6,849 $ 984 $ 738 20.5 % $ 0.86
(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.

Six months ended June 30, 2022

Net income

attributable

Net

Income before

to Corning

Effective tax

Per

sales

income taxes

Incorporated

rate (a)(b)

share

As reported - GAAP
$ 7,295 $ 1,533 $ 1,144 22.6 % $ 1.33
Constant-currency adjustment (1)
211 183 142 0.17
Translation gain on Japanese yen-denominated debt (2)
(237 ) (182 ) (0.21 )
Translated earnings contract gain (3)
(325 ) (249 ) (0.29 )
Acquisition-related costs (4)
74 59 0.07
Discrete tax items and other tax-related adjustments (5)
16 0.02
Restructuring, impairment and other charges and credits (6)
79 60 0.07
Litigation, regulatory and other legal matters (7)
42 32 0.04
Pension mark-to-market adjustment (8)
(10 ) (8 ) (0.01 )
Loss on investments (9)
8 6 0.01
Contingent consideration (10)
(32 ) (25 ) (0.03 )
Gain on sale of business (12)
(53 ) (41 ) (0.05 )
Core performance measures
$ 7,506 $ 1,262 $ 954 21.0 % $ 1.11
(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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Table of Contents

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 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. 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.
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 gain or loss on the translation of our yen-denominated debt to U.S. dollars.
(3)
Translated earnings contract: Amount reflects the impact of the realized and unrealized gains and losses from the 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 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 impact of tax audits, changes in tax reserves and changes in deferred tax asset valuation allowances, as well as other tax-related adjustments.
(6) Restructuring, impairment and 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 power outages, which are not related to ongoing operations.
(7) Litigation, regulatory and other legal matters: Amount reflects developments in commercial litigation, intellectual property disputes, adjustments to our estimated liability for environmental-related items and 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 difference between actual and expected returns on plan assets and discount rates.
(9) Loss on investments: Amount primarily reflects the gain or loss recognized on investment due to mark-to-mark adjustments for the change in fair value or the disposition of the investment.
(10) Contingent consideration: Amount reflects the fair value mark-to-market cost adjustment of contingent consideration resulting from the Hemlock Semiconductor Group transaction on September 9, 2020.
(11) Gain on sale of assets: Amount represents the gain recognized for the sale assets.
(12) Gain on sale of business: Amount represents the gain recognized for the sale of a business.
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Table of Contents
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, scheduled 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

~~Balance~~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 ~~were as follows~~ (in millions):

September 30,

December 31,

June 30,

December 31,

2022

2021

2023

2022

Working capital
$ 2,637 $ 2,853 $ 2,882 $ 2,278
Current ratio
1.5:1 1.6:1
1.7:1

1.4:1

Trade accounts receivable, net of doubtful accounts
$ 1,620 $ 2,004 $ 1,674 $ 1,721
Days sales outstanding
42 49 46 45
Inventories, net
$ 2,951 $ 2,481
Inventories
$ 2,757 $ 2,904
Inventory turns
3.5 3.7 3.2 3.4
Days payable outstanding ⁽¹⁾
54 50 47 52
Long-term debt
$ 6,525 $ 6,989 $ 7,437 $ 6,687
Total debt
$ 6,733 $ 7,044 $ 7,624 $ 6,911
Total debt to total capital
37 % 36 % 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 and $423 million of accounts receivable during the three months ended March 31, 2023 and the three months ended June 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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Table of Contents
~~Management Assessment of Liquidity~~Cash Flows

~~Corning is committed to strong financial stewardship and expects to maintain~~The following table presents a ~~strong cash balance and generate positive free~~summary of cash flow ~~for~~data (in millions):

Six months ended

June 30,

2023

2022

Net cash provided by operating activities
$ 570 $ 1,292
Net cash used in investing activities
$ (515 ) $ (567 )
Net cash used in financing activities
$ (164 ) $ (1,178 )
Net cash provided by operating activities decreased by $722 million in the ~~year. We believe we have sufficient liquidity~~six months ended June 30, 2023, when compared to ~~fund operations, acquisitions, capital expenditures, scheduled debt repayments and dividend payments.~~the same period in the prior year primarily driven by a decrease in net income of $693 million.

WeNet cash used in investing activities for the six months ended June 30, 2023 improved by $52 million when compared to the ~~third quarter~~same period last year, primarily driven by a $45 million increase in realized gains on translated earnings contracts.
Net cash used in financing activities for the six months ended June 30, 2023 improved by $1,014 million when compared to the same period last year, primarily driven by the $918 million proceeds from the issuance of ~~2022 with approximately $1.6~~euro-denominated notes in May 2023.
Sources of Liquidity
As of June 30, 2023, our cash and cash equivalents and available credit capacity included (in millions):

June 30,

2023

Cash and cash equivalents
$ 1,538

Available credit capacity:

U.S. dollar revolving credit facility
$ 1,500
Japanese yen liquidity facility
$ 173
Chinese yuan facilities
$ 369
Cash and Cash Equivalents
As of June 30, 2023, we had $1.5 billion of cash and cash equivalents. Our cash and cash equivalents are held in various locations throughout the world and are generally unrestricted. We utilize a variety of strategies to ensure that our worldwide cash is available in the locations in which it is needed. ~~At September~~As of June 30, ~~2022,~~2023, approximately ~~59%~~50% of the consolidated ~~amount was~~cash and cash equivalents were held outside the U.S.

~~Corning also has~~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, ~~the Company~~we may issue ~~the~~ paper from time to time and will use the proceeds for general corporate purposes. As of ~~September~~June 30, ~~2022, Corning had no~~2023, we did not have outstanding commercial paper.

~~The Company’s~~Our $1.5 billion Revolving Credit Agreement is available to support obligations under the commercial paper program and for general corporate purposes, if needed. ~~At September~~In addition, we have a 25 billion Japanese yen liquidity facility, equivalent to approximately $173 million. As of June 30, ~~2022, Corning did not have any~~2023, there were no amounts outstanding under ~~the Revolving Credit Agreement.~~these facilities.

~~Other~~
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Table of Contents

Comprehensive reviews of significant customers and their creditworthiness are completed by analyzing their financial strength, at least annually or more frequently, for customers where Corning has identified an increased measure of risk. The Company closely monitors payments and developments which may signal possible customer credit issues. There are no customer credit issues that could have a material impact on our liquidity.
From time to time, the Company factors or sells its accounts receivable. During the three months ended September 30, 2022, the Company sold $417 million of accounts receivable and accelerated collections for the period. Sales of accounts receivable during the first and second quarter of 2022 were $381 million and $350 million, respectively, which the Company believes would have been collected during the normal course of business in the quarter following the respective sales.
~~The~~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%. ~~At September~~As of June 30, ~~2022, the~~2023, our leverage using this measure was approximately ~~37%~~39%. As of ~~September~~June 30, ~~2022,~~2023, we were in ~~compliance and no amounts were outstanding under the Company’s Revolving Credit Agreement.~~compliance.

38

~~Table of Contents~~
~~The Company’s~~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 ~~the~~our debt instruments contain a cross default provision, whereby an uncured default ofexceeding 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~~June 30, ~~2022,~~2023, we were in compliance with all such provisions.

~~Management~~We have access to certain unsecured variable rate loan facilities, with an aggregate capacity of 5,045 million Chinese yuan, equivalent to approximately $696 million, whose proceeds are used for capital investment and general corporate purposes. As of June 30, 2023, borrowings totaled $327 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 June 30, 2023, the U.S. dollar equivalent carrying value of the euro-denominated long-term debt was $920 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 June 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 June 21, 2023, our Board of Directors declared a quarterly dividend of $0.28 per share of common stock. The dividend will be payable on September 28, 2023. The Board’s decision to declare and pay future dividends will depend on our income and liquidity position, among other factors. We expect to declare quarterly dividends and fund payments with cash from operations.
Capital Expenditures
Capital expenditures were $770 million for the six months ended June 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 ~~not aware~~our U.S. qualified plan, which accounted for 77% of ~~any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely~~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 ~~result in insufficient liquidity. In addition, other than items discussed, there are~~the plans. During 2023, the Company anticipates making cash contributions of $25 million to the international pension plans.
Commitments, Contingencies and Guarantees
There were no ~~known material trends, favorable or unfavorable, in our capital resources and no expected~~ material changes outside the ordinary course of business in the ~~mix~~obligations disclosed in the 2022 Form 10-K under the caption “Commitments, Contingencies and ~~relative cost of such resources.~~Guarantees.”

Off Balance Sheet Arrangements

There ~~have been~~were no material changes outside the ordinary course of business in off balance sheet arrangements as disclosed in the ~~2021~~2022 Form 10-K under the caption “Off Balance Sheet Arrangements.”

~~Contractual Obligations~~ENVIRONMENT

~~There have been no material changes outside the ordinary course of business~~Refer to Item 1. Legal Proceedings or Note 9 (Commitments and Contingencies) in the ~~contractual obligations disclosed in~~accompanying notes to the ~~2021 Form 10-K under the caption “Contractual Obligations.”~~ consolidated financial statements for information.

CRITICAL ACCOUNTING ESTIMATES

~~The preparation of~~Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. This requires ~~management~~us to make estimates and assumptions that affect reported amounts ~~reported therein.~~and related disclosures. Actual results could differ from those estimates. The estimates that ~~require management’s~~are considered by management to be the most ~~difficult, subjective or complex judgments are discussed within Part II, Item 7~~critical to the understanding of the ~~Company’s~~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, ~~2021.~~
~~NEW ACCOUNTING STANDARDS~~
~~Refer to Note 1 (Significant Accounting Policies) to~~2022. Since the ~~consolidated financial statements.~~
~~ENVIRONMENT~~
Corning has been designated by federal or state governments under environmental laws, including Superfund, as a potentially responsible party that may be liable for cleanup costs associated with 19 hazardous waste sites. It is Corning’s policy to accrue for its estimated liability related to 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. As of September 30, 2022 and December 31, 2021, Corning had accrued approximately $111 million and $55 million, respectively, for the estimated undiscounted liability for environmental cleanup and related litigation. Based upon the information developed to date ~~management believes that the accrued reserve is a reasonable estimate~~ of the ~~Company’s liability and that~~Company's most recent Annual Report, there were no material changes in the ~~risk of an additional loss in an amount materially higher than that accrued is remote.~~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 ~~SEC~~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,” ~~and “target” and~~“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.~~materially from those anticipated in such statements. The Company ~~does not undertake~~undertakes no obligation to update forward-looking ~~statements.~~ statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws.
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 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;
-
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;
-
~~global economic trends, competition and geopolitical risks,~~possible disruption in commercial activities or ~~an escalation of sanctions, tariffs~~our supply chain due to terrorist activity, cyber-attack, armed conflict, political or ~~other~~financial instability, natural disasters, international trade ~~tensions, and related impacts on our businesses’ global supply chains and strategies;~~disputes or major health concerns;
-
loss of intellectual property due to theft, cyber-attack, or disruption to our information technology infrastructure;
~~changes in macroeconomic~~-
ability to enforce patents and ~~market conditions, market volatility, interest rates, capital markets, the value of securities~~protect intellectual property and ~~other financial assets, precious metals, oil, natural gas~~trade secrets;
-
unanticipated disruption to Corning’s, our suppliers’ and other commodities and exchange rates (particularly between the U.S. dollar and the Japanese yen, new Taiwan dollar, euro, Chinese yuan and South Korean won), consumer demand, and the impact of such changes and volatility on our financial position and businesses;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;
-
the amount and timing of any future dividends;
-
disruption to Corning’s, our suppliers’ and manufacturers’ supply chain, logistics, equipment, facilities, IT systems, operations or commercial activities due to terrorist activity, cyber-attack, armed conflict, political or financial instability, natural disasters, international trade disputes or major health concerns;
-
~~loss of intellectual property due to theft, cyber-attack, or disruption to our information technology infrastructure;~~
- 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 without negatively impacting revenues;~~
measures;
-
rate of technology change;
-
~~ability to enforce patents and protect intellectual property and trade secrets;~~
-
adverse litigation;
-
product and ~~components~~component performance issues;
-
~~attraction and~~ retention of key personnel;
-
customer ability to maintain profitable operations and obtain financing to fund ongoing operations and manufacturing expansions and pay receivables when due;
-
loss of significant customers;
-
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.

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~~ITEM~~Item 3. ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~
Quantitative and Qualitative Disclosures About Market Risk ~~Disclosures~~

As noted in the ~~2021~~2022 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~~movements in ~~the global financial markets could increase the volatility of~~ foreign currency exchange rates. Our exposure to exchange rates ~~which would, in turn, impact sales and net income.~~ has the following effects:
● 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 ~~1A, Risk Factors in this Quarterly Report on Form 10-Q and Part II, Item~~ 7A, Quantitative and Qualitative Disclosures About Market Risks, contained in the ~~2021~~2022 Form 10-K.

~~ITEM~~Item 4. ~~CONTROLS AND PROCEDURES~~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~~June 30, ~~2022,~~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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Table of Contents

~~Part~~PART II ~~– Other Information~~

~~ITEM~~Item 1. ~~LEGAL PROCEEDINGS~~Legal Proceedings

~~Environmental Litigation.~~ ~~See~~Corning is a defendant in various lawsuits and is subject to various claims that arise in the ~~2021 Form 10-K, Part I, Item 3. For additional information and updates to estimated liabilities as~~normal course of ~~September 30, 2022, see Part I, Item 1, Financial Statements,~~business, the most significant of which are summarized in Note 109 (Commitments and Contingencies) ofin the accompanying notes to the consolidated financial ~~statements included under Item 1~~statements. In the opinion of ~~this Quarterly Report, which~~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 ~~incorporated herein by reference.~~remote.

~~ITEM~~Item 1A. ~~RISK FACTORS~~Risk Factors

In addition to other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in Corning’s ~~2021~~2022 Form 10-K, which could materially impact the Company’s business, financial condition or future results. Risks disclosed in the ~~2021~~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. ~~There have been no material changes to Part I, Item 1A. Risk Factors in the 2021 Form 10-K.~~

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~~ITEM~~Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds

This table provides information about purchases of common stock during the ~~third~~second quarter of ~~2022:~~2023:

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

programs

July 1 - 31, 2022
601,587 $ 32.43 543,186
August 1 - 31, 2022
2,566 35.83
September 1 - 30, 2022
3,057 30.79
Total
607,210 $ 32.43 543,186 $ 3,301,085,426

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

programs

April 1 - 30, 2023
1,541,701 $ 34.76
May 1 - 31, 2023
750,188 31.30
June 1 - 30, 2023
192,545 31.01
Total
2,484,434 $ 33.43 — $ 3,301,085,426

⁽¹⁾
This column reflects: (i) ~~53,042 shares of common stock related to the vesting of employee restricted stock; (ii) 9,184~~1,373,961 shares of common stock related to the vesting of employee restricted stock units; ~~(iii) 1,484~~(ii) 1,064,594 shares of common stock related to the vesting of employee performance stock units; (iii) 45,602 shares of common stock related to the vesting of employee restricted stock; and (iv) ~~314~~277 shares of common stock related to the exercise of employee stock options and payment of the exercise ~~price; and (v) the purchase of 543,186 shares of common stock in open market repurchases under the 2019 Repurchase Program.~~price.
⁽²⁾ Represents the stock price at the time of surrender.

Item 5. Other Information
During the three months ended June 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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~~ITEM~~Item 6. ~~EXHIBITS~~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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~~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~~July 27, ~~2022~~2023

/s/ Stefan Becker

Date

Stefan Becker

Senior Vice President, Finance & Corporate Controller

4543

PART I – FINANCIAL INFORMATION
	Page
Item 1. Financial Statements

Consolidated Statements of Income	3

Consolidated Statements of Comprehensive (Loss) Income	4

Consolidated Balance Sheets	5

Consolidated Statements of Cash Flows	6

Consolidated Statements of Changes in Shareholders’ Equity	7

Notes to Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322

Item 3. Quantitative and Qualitative Disclosures About Market Risk	4139

Item 4. Controls and Procedures	4139

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	4240

Item 1A. Risk Factors	4240

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4341

Item 5. Other Information	41

Item 6. Exhibits	4442

Signatures	4543

	Three months ended September 30,
	Gain (loss) recognized					Location of gain	Gain reclassified
Derivative hedging	in other comprehensive					reclassified from accumulated	from accumulated
relationships for cash	income (OCI)					OCI into income	OCI into income
flow and fair value hedges	2022		2021			effective (ineffective)	2022		2021

						Net sales	$	15	$	3
Foreign exchange contracts and other	$	4	$	(5	)	Cost of sales		6		11
Total cash flow and fair value hedges	$	4	$	(5	)		$	21	$	14

	Nine months ended September 30,
	Gain recognized				Location of gain	Gain reclassified
Derivative hedging	in other comprehensive				reclassified from accumulated	from accumulated
relationships for cash	income (OCI)				OCI into income	OCI into income
flow and fair value hedges	2022		2021		effective (ineffective)	2022		2021

					Net sales	$	38	$	9
Foreign exchange contracts and other	$	24	$	36	Cost of sales		19		28
Total cash flow and fair value hedges	$	24	$	36		$	57	$	37

		Gain (loss) gain recognized in income
		Three months ended						Nine months ended
	Location of gain (loss)	September 30,						September 30,
Undesignated derivatives	recognized in income	2022			2021			2022		2021

Foreign exchange contracts	Other income, net	$	11		$	(9	)	$	70	$	26
Translated earnings contracts	Translated earnings contract (loss) gain, net		(68	)		(13	)		257		262
Total undesignated		$	(57	)	$	(22	)	$	327	$	288

	Three months ended						%			Nine months ended						%
	September 30,						change			September 30,						change
	2022			2021			22 vs. 21			2022			2021			22 vs. 21

Net sales	$	3,488		$	3,615			(4	%)	$	10,783		$	10,406			4	%

Gross margin	$	1,062		$	1,321			(20	%)	$	3,591		$	3,792			(5	%)
(gross margin %)		30	%		37	%					33	%		36	%

Selling, general and administrative expenses	$	461		$	486			(5	%)	$	1,381		$	1,351			2	%
(as a % of net sales)		13	%		13	%					13	%		13	%

Research, development and engineering expenses	$	278		$	251			11	%	$	766		$	715			7	%
(as a % of net sales)		8	%		7	%					7	%		7	%

Translated earnings contract (loss) gain, net	$	(68	)	$	(13	)		*		$	257		$	262			(2	%)
(as a % of net sales)		(2	%)		—						2	%		3	%

Provision for income taxes	$	(34	)	$	(109	)		(69	%)	$	(380	)	$	(402	)		(5	%)
(as a % of net sales)		(1	%)		(3	%)					(4	%)		(4	%)

Net income attributable to Corning Incorporated	$	208		$	371			(44	%)	$	1,352		$	1,419			(5	%)
(as a % of net sales)		6	%		10	%					13	%		14	%

	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 effective tax rate (“ETR”) excludes net income attributable to non-controlling interests (“NCI”) of $18 million.~~

~~(1)~~	~~Constant-currency~~: Because a significant portion of segment revenues and expenses are denominated in currencies other than the U.S. dollar, management believes it is important to understand the impact on core net income of translating these currencies into U.S. dollars. Our Display Technologies’ segment sales and net income are primarily denominated in Japanese yen, but also impacted by the South Korean won, Chinese yuan, and new Taiwan dollar. Environmental Technologies and Life Science segments sales and net income are primarily impacted by the euro. Presenting results on a constant-currency basis mitigates the translation impact and allows management to evaluate performance period over period, analyze underlying trends in the businesses, and establish operational goals and forecasts. We establish constant-currency rates based on internally derived management estimates which are closely aligned with the currencies we have hedged.
	~~Currency~~	~~Japanese yen~~	~~Korean won~~	~~Chinese yuan~~	~~New Taiwan dollar~~	~~Euro~~
	~~Rate~~	~~¥107~~	~~₩1,175~~	~~¥6.7~~	~~NT$31~~	~~€.81~~

~~(2)~~	~~Translation gain on Japanese yen-denominated debt: We have excluded the impact of the translation gain of the yen-denominated debt to U.S. dollars.~~
~~(3)~~	~~Translated earnings contract (loss) gain~~: We have excluded the impact of the realized and unrealized gains and losses of the 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 the British pound-denominated foreign currency hedges related to translated earnings.
~~(4)~~	~~Acquisition-related costs: These expenses include intangible amortization, inventory valuation adjustments, external acquisition-related deal costs, and other transaction related costs.~~
~~(5)~~	~~Discrete tax items and other tax-related adjustments: These include discrete period tax items such as changes of tax reserves and changes in our permanently reinvested foreign income position.~~
~~(6)~~	~~Restructuring, impairment and other charges and credits~~: These include accelerated depreciation and asset write-offs, impairments and other related charges, which are not related to on-going operations and are not classified as restructuring expense. The activity during the third quarter of 2022 primarily relates to capacity optimization of an emerging growth business. The activity during the third quarter of 2021 relates to asset write-offs and charges related to facility repairs resulting from the impact of power outages.
~~(7)~~	~~Litigation, regulatory and other legal matters: Includes amounts that reflect developments in commercial litigation, intellectual property disputes, adjustments to the estimated liability for environmental-related items and other legal matters.~~
~~(8)~~	~~Pension mark-to-market adjustment: Defined benefit pension mark-to-market gains and losses, which arise from changes in actuarial assumptions and the difference between actual and expected returns on plan assets and discount rates.~~
~~(9)~~	~~Contingent consideration: This amount represents the fair value mark-to-market cost adjustment of contingent consideration resulting from the Hemlock transaction on September 9, 2020.~~
~~(10)~~	~~Loss on investments: Amount represents the loss recognized due to mark-to-mark adjustments capturing the change in fair value based on the closing stock market price.~~
~~(11)~~	~~Gain on sale of business: Amount represents the gain recognized for the sale of a certain business.~~
~~(12)~~	~~Preferred stock conversion: This amount includes the fair value of the put option from the Share Repurchase Agreement with Samsung Display Co., Ltd.~~
~~(13)~~	~~Bond redemption loss: Amount represents premiums on redemption of debentures.~~

●	~~Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry.~~
●	~~Display Technologies – manufactures glass substrates for flat panel liquid crystal displays and other high-performance display panels.~~
●	~~Specialty Materials – manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals to meet demand for unique customer needs.~~
●	~~Environmental Technologies – manufactures ceramic substrates and filters for automotive and diesel applications.~~
●	~~Life Sciences – manufactures glass and plastic labware, equipment, media, serum and reagents enabling workflow solutions for drug discovery and bioproduction.~~

(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”).

(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.

(1)	Constant-currency adjustment: As a significant portion of 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. 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.
	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 gain or loss on the translation of our yen-denominated debt to U.S. dollars.
(3)	Translated earnings contract: Amount reflects the impact of the realized and unrealized gains and losses from the 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 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 impact of tax audits, changes in tax reserves and changes in deferred tax asset valuation allowances, as well as other tax-related adjustments.
(6)	Restructuring, impairment and 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 power outages, which are not related to ongoing operations.
(7)	Litigation, regulatory and other legal matters: Amount reflects developments in commercial litigation, intellectual property disputes, adjustments to our estimated liability for environmental-related items and 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 difference between actual and expected returns on plan assets and discount rates.
(9)	Loss on investments: Amount primarily reflects the gain or loss recognized on investment due to mark-to-mark adjustments for the change in fair value or the disposition of the investment.
(10)	Contingent consideration: Amount reflects the fair value mark-to-market cost adjustment of contingent consideration resulting from the Hemlock Semiconductor Group transaction on September 9, 2020.
(11)	Gain on sale of assets: Amount represents the gain recognized for the sale assets.
(12)	Gain on sale of business: Amount represents the gain recognized for the sale of a business.

	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
Working capital	$	2,637		$	2,853		$	2,882		$	2,278
Current ratio		1.5:1			1.6:1		1.7:1			1.4:1
Trade accounts receivable, net of doubtful accounts	$	1,620		$	2,004		$	1,674		$	1,721
Days sales outstanding		42			49			46			45
Inventories, net	$	2,951		$	2,481
Inventories							$	2,757		$	2,904
Inventory turns		3.5			3.7			3.2			3.4
Days payable outstanding ⁽¹⁾		54			50			47			52
Long-term debt	$	6,525		$	6,989		$	7,437		$	6,687
Total debt	$	6,733		$	7,044		$	7,624		$	6,911
Total debt to total capital		37	%		36	%		39	%		36	%

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

●	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.

(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)

			Corning Incorporated
			(Registrant)



	~~October~~July 27, ~~2022~~2023		/s/ Stefan Becker
	Date		Stefan Becker
			Senior Vice President, Finance & Corporate Controller