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 30, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
To
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
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
No
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).
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. ☐
If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Outstanding as of October 24, 2024
Corning’s Common Stock, $0.50 par value per share
856,208,758 shares
INDEX
PART I – FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Statements of (Loss) Income
3
Consolidated Statements of Comprehensive Income (Loss)
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
22
Item 3. Quantitative and Qualitative Disclosures About Market Risk
40
Item 4. Controls and Procedures
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
41
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
42
Signatures
43
Three months ended
Nine months ended
September 30,
2024
2023
Net sales
Cost of sales
Gross margin
Operating expenses:
Selling, general and administrative expenses
Research, development and engineering expenses
Amortization of purchased intangibles
Operating income
Interest income
Interest expense
Translated earnings contract (loss) gain, net (Note 12)
Other (loss) income, net
(Loss) income before income taxes
Provision for income taxes (Note 4)
Net (loss) income
Net income attributable to non-controlling interest
Net (loss) income attributable to Corning Incorporated
(Loss) earnings per common share available to common shareholders:
Basic (Note 5)
Diluted (Note 5)
The accompanying notes are an integral part of these consolidated financial statements.
Foreign currency translation adjustments and other
Unamortized (losses) gains and prior service costs for postretirement benefit plans
Realized and unrealized (losses) gains on derivatives
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
Comprehensive income attributable to non-controlling interest
Comprehensive income (loss) attributable to Corning Incorporated
December 31,
Assets
Current assets:
Cash and cash equivalents
Trade accounts receivable, net of doubtful accounts - $33 and $30
Inventories (Note 6)
Other current assets
Total current assets
Property, plant and equipment, net of accumulated depreciation - $15,140 and $14,553
Goodwill
Other intangible assets, net
Deferred income taxes (Note 4)
Other assets
Total Assets
Liabilities and Equity
Current liabilities:
Current portion of long-term debt and short-term borrowings (Note 8)
Accounts payable
Other accrued liabilities (Notes 7 and 11)
Total current liabilities
Long-term debt (Note 8)
Postretirement benefits other than pensions (Note 9)
Other liabilities (Notes 7 and 11)
Total liabilities
Commitments and contingencies (Note 11)
Shareholders’ equity (Note 13):
Common stock – Par value $0.50 per share; Shares authorized 3.8 billion; Shares issued: 1.8 billion and 1.8 billion
Additional paid-in capital – common stock
Retained earnings
Treasury stock, at cost; Shares held: 986 million and 980 million
Accumulated other comprehensive loss
Total Corning Incorporated shareholders’ equity
Non-controlling interest
Total equity
Total Liabilities and Equity
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
Loss on disposal of assets, net
Share-based compensation expense
Translation gain on Japanese yen-denominated debt
Deferred tax (benefit) provision
Translated earnings contract loss (gain), net
Release of cumulative translation losses
Tax deposit refund
Changes in assets and liabilities:
Trade accounts receivable
Inventories
Accounts payable and other current liabilities
Customer deposits and government incentives
Deferred income
Other, net
Net cash provided by operating activities
Cash Flows from Investing Activities:
Capital expenditures
Proceeds from sale of equipment to related party
Realized gains on translated earnings contracts and other
Net cash used in investing activities
Cash Flows from Financing Activities:
Repayments of debt
Proceeds from issuance of debt
Proceeds from issuance of euro bonds
Proceeds from other financing arrangements
Repayment of other financing arrangements
Proceeds from cross currency swap
Payment for redemption of preferred stock
Payments of employee withholding tax on stock awards
Proceeds from exercise of stock options
Purchases of common stock for treasury
Dividends paid
Net cash used in financing activities
Effect of exchange rates on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Common stock
Additional paid-in capital common
Treasury stock
Total Corning Incorporated shareholders' equity
Total
Balance as of December 31, 2023
Other comprehensive loss
Shares issued to benefit plans and for option exercises
Common dividends ($0.28 per share)
Other, net (1)
Balance as of March 31, 2024
Purchase of common stock for treasury
Common dividends ($0.56 per share)
Balance as of June 30, 2024
Other comprehensive income
Balance as of September 30, 2024
Balance as of December 31, 2022
Balance as of March 31, 2023
Balance as of June 30, 2023
Balance as of September 30, 2023
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 eliminated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). The results of operations for the 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 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 interest as recorded in the consolidated financial statements represents amounts attributable to the minority shareholders of Hemlock Semiconductor Group (“HSG”) and other less-than-wholly-owned consolidated subsidiaries.
Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no material impact on the results of operations, financial position or changes in shareholders’ equity.
2. Restructuring, Impairment and Other Charges and Credits
The following table presents details of the restructuring, impairment and other charges and credits incurred (in millions):
Severance (1)
Capacity realignment (1)
Other charges and credits (2)
Total restructuring, impairment and other charges and credits (3)
3. Revenue
Disaggregated Revenue
The following table presents revenues by product category (in millions):
Telecommunication products
Display products
Specialty glass products
Environmental substrate and filter products
Life science products
Polycrystalline silicon products
All other products
Total revenue
Customer Deposits
As of September 30, 2024 and December 31, 2023, Corning had customer deposits of approximately $1.2 billion. Most of these customer deposits were non-refundable and allowed customers to secure rights to products produced by Corning under long-term supply agreements, generally over a period of up to ten years. As products are delivered to customers, Corning will recognize revenue and reduce the amount of the customer deposit liability.
For the three months ended September 30, 2024 and 2023, customer deposits recognized were $36 million and $6 million, respectively. For the nine months ended September 30, 2024 and 2023, customer deposits recognized were $127 million and $88 million, respectively.
Refer to Note 7 (Other Liabilities) for additional information.
Deferred Revenue
As of September 30, 2024 and December 31, 2023, Corning had deferred revenue of approximately $883 million and $860 million, respectively. Deferred revenue was primarily related to the performance obligations of non-refundable consideration previously received by HSG from its customers under long-term supply agreements.
Deferred revenue is tracked on a per-customer contract-unit basis. As customers take delivery of the committed volumes under the terms of the contract, a per-unit amount of deferred revenue is recognized when control of the promised goods is transferred to the customer based upon the units delivered compared to the remaining contractual units. For the three and nine months ended September 30, 2024 and 2023, the amount of deferred revenue recognized in the consolidated statements of (loss) income was not material.
4. Income Taxes
The following table presents the provision for income taxes and the related effective tax rate (in millions, except percentages):
Provision for income taxes
Effective tax rate
For the three months ended September 30, 2024, the effective tax rate differed from the United States (“U.S.”) statutory rate of 21%, primarily due to certain pre-tax losses with no corresponding expected tax benefit, changes in estimates based on the final 2023 U.S. Federal Income Tax Return, and the impact of foreign exchange losses. For the nine months ended September 30, 2024, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to certain pre-tax losses with no corresponding expected tax benefit.
For the three months ended September 30, 2023, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to differences arising from foreign earnings partially offset by changes in estimates based on the final 2022 U.S. Federal Income Tax Return. For the nine months ended September 30, 2023, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to differences arising from foreign earnings, changes in estimates based on the final 2022 U.S. Federal Income Tax Return and adjustments related to share-based compensation, partially offset by changes in valuation allowance assessments.
5. (Loss) Earnings Per Common Share
The following table presents the reconciliation of the amounts used to compute basic and diluted (loss) earnings per common share (in millions, except per share amounts):
Weighted-average common shares outstanding – basic
Effect of dilutive securities:
Stock options and other awards
Weighted-average common shares outstanding – diluted
Basic (loss) earnings per common share
Diluted (loss) earnings per common share
Anti-dilutive potential shares excluded from diluted (loss) earnings per common share:
6. Inventories
Inventories consisted of the following (in millions):
Finished goods
Work in process
Raw materials and accessories
Supplies and packing materials
7. Other Liabilities
Other liabilities consisted of the following (in millions):
Wages and employee benefits
Income taxes
Derivative instruments (Note 12)
Deferred revenue (Note 3)
Customer deposits (Note 3)
Short-term operating leases
Other current liabilities
Other accrued liabilities
Non-current liabilities:
Defined benefit pension plan liabilities
Deferred tax liabilities
Long-term operating leases
Other non-current liabilities
Other liabilities
8. Debt
Based on borrowing rates currently available to us for loans with similar terms and maturities, the fair value of long-term debt was $7.0 billion as of September 30, 2024 and December 31, 2023, compared to the carrying value of $7.1 billion and $7.2 billion as of September 30, 2024 and December 31, 2023, 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.
In the second quarter of 2024, the Company entered into a ¥23 billion, or $215 million, fixed rate, three-year cross currency swap contract to economically lock in unrealized foreign exchange gains relating to a portion of the Company’s Japanese yen-denominated debt due in 2027. Refer to Note 12 (Financial Instruments) for additional information.
On May 15, 2023, the Company issued €300 million 3.875% Notes due 2026 (“2026 Notes”) and €550 million 4.125% Notes due 2031 (“2031 Notes”). The proceeds from the 2026 Notes and 2031 Notes were received in euros and converted to U.S. dollars on the date of issuance. The net proceeds received were approximately $918 million and will be used for general corporate purposes. As of September 30, 2024, the U.S. dollar equivalent carrying value of the euro-denominated long-term debt was $943 million. The full amounts of the 2026 Notes and 2031 Notes have been designated as net investment hedges against our investments in certain European subsidiaries with euro functional currencies. Refer to Note 12 (Financial Instruments) for additional information.
9. Employee Retirement Plans
The following table presents the components of net periodic pension and postretirement benefit (income) expense for employee retirement plans, which other than the service cost component is recorded in other (loss) income, net in the consolidated statements of (loss) income (in millions):
Pension benefits
Postretirement benefits
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial net gain
Amortization of prior service cost (credit)
Recognition of actuarial (gain) loss
Special termination benefit charge
Total pension and postretirement benefit (income) expense
10. Leases
On March 12, 2024, Corning entered into a synthetic lease (“Facility Lease”) for a solar manufacturing facility in Hemlock, Michigan (the “Facility”), for which the Company is the construction agent on behalf of the lessor, with an estimated construction cost of approximately $835 million.
The Facility Lease will commence upon completion of construction of the Facility, which is expected to be in the later part of 2025, and has a lease term of five years with options to renew the lease or purchase the facility. The Facility Lease is expected to be classified as a finance lease and the amount of right-of-use asset and lease liability will be determined and recorded upon lease commencement. The estimated undiscounted lease payments, inclusive of a residual value guarantee, are approximately $1.1 billion, of which $24 million, $92 million, $88 million and $85 million is to be paid in 2025, 2026, 2027 and 2028, respectively, and $767 million is to be paid thereafter.
In conjunction with the Facility Lease, Corning entered into an equipment lease (“Equipment Lease”) on June 17, 2024, with an estimated purchase and installation cost of $365 million, for the equipment to be installed and operated within the Facility. The Company is the procurement and installation agent on behalf of the lessor.
The Equipment Lease will commence upon completion of the equipment installation, which is expected to be in the later part of 2025, and has a lease term of five years with obligations to purchase the equipment at lease maturity. The Equipment Lease is expected to be classified as a finance lease and the amount of right-of-use asset and lease liability will be determined and recorded upon lease commencement. The estimated undiscounted lease payments are approximately $434 million, of which $24 million, $95 million, $90 million and $85 million is to be paid in 2025, 2026, 2027 and 2028, respectively, and $140 million is to be paid thereafter.
The transaction agreements for both the Facility Lease and Equipment Lease contain covenants that are consistent with our Revolving Credit Agreement as disclosed in the 2023 Form 10-K.
11. 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 Corporation (“Dow Corning”). On May 31, 2016, Corning and Dow realigned their ownership interest in Dow Corning. Following the realignment, Corning no longer owned any interest in Dow Corning. With the realignment, Corning agreed to indemnify Dow for 50% of Dow Corning’s non-ordinary course, pre-closing liabilities to the extent such liabilities exceed the amounts reserved for them by Dow Corning as of May 31, 2016, subject to certain conditions and limits. In January 2024, we entered into an agreement to settle the Dow Corning Chapter 11 Related Matters and the settlement amount was not material.
Dow Corning Environmental Claims
Beginning 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. Subject to certain conditions and limits, Corning may be required to indemnify Dow for up to 50% of such losses. As of September 30, 2024, 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 30, 2024 and December 31, 2023, Corning had accrued approximately $81 million and $88 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.
12. Financial Instruments
The following table summarizes the notional amounts and respective fair values of Corning’s derivative financial instruments on a gross basis (in millions):
September 30, 2024
December 31, 2023
Notional amount
Fair value asset (1)
Fair value liability (1)
Derivatives designated as hedging instruments (2):
Foreign exchange and precious metals lease contracts (3)
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Translated earnings contracts (4)
Cross currency swap contracts
Total derivatives
Current
Non-current
The following table summarizes the total gross notional values for translated earnings contracts (in millions):
Average rate forward contracts:
Chinese yuan-denominated
Japanese yen-denominated
South Korean won-denominated
New Taiwan dollar-denominated
Euro-denominated
Mexican peso-denominated
Option contracts:
Total notional amount for translated earnings contracts
The following tables summarize the effect in the consolidated statements of (loss) income relating to Corning’s derivative financial instruments (in millions). The accumulated derivative gain (loss) included in accumulated other comprehensive loss on the consolidated balance sheets as of September 30, 2024 and December 31, 2023 is $41 million and $(54) million, respectively.
Three months ended September 30,
Location of gain (loss)
(Loss) gain recognized
reclassified from
Gain (loss) reclassified
in other comprehensive
accumulated
from accumulated
income (loss) (OCI)
OCI into income
effective (ineffective)
Derivative hedging relationships for cash flow and fair value hedges:
Foreign exchange contracts and other
Total cash flow and fair value hedges
Nine months ended September 30,
Gain (loss) recognized in income
Undesignated derivatives
Location of gain (loss) recognized in income
Translated earnings contracts
Translated earnings contract (loss) gain, net
Total undesignated
Cross Currency Swap Contracts
Since inception of the Company’s Japanese yen-denominated debt, the Japanese yen has weakened and the US dollar value of these liabilities has decreased, generating unrealized foreign exchange gains that have been recognized over time in the consolidated statements of (loss) income. In the second quarter of 2024, to economically lock in unrealized foreign exchange gains, the Company entered into a ¥23 billion, or $215 million, fixed rate, three-year cross currency swap contract relating to a portion of the Company’s Japanese yen-denominated debt due in 2027. At inception of this instrument, Corning received a net $68 million from the counterparty, representing an exchange of the notional amounts at a fixed foreign exchange rate of Japanese yen to US dollar and was initially recorded as a derivative liability. As of September 30, 2024, the fair value of this derivative liability is $64 million.
Net Investment Hedges
In May 2023, the Company designated the full amount of its euro-denominated 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. As of September 30, 2024, the net investment hedges are deemed to be effective. During the three and nine months ended September 30, 2024, foreign currency losses of $39 million and $9 million, respectively, associated with these net investment hedges were recognized in other comprehensive income (loss). During the three and nine months ended September 30, 2023, foreign currency gains of $29 million and $36 million, respectively, associated with these net investment hedges were recognized in other comprehensive income (loss).
Leased Precious Metals Contracts
The carrying amount of the leased precious metals pool, which is included within property, plant and equipment, net of accumulated depreciation in the consolidated balance sheets, is $65 million and $90 million as of September 30, 2024 and December 31, 2023, respectively. The carrying amount of the leased precious metals pool includes cumulative fair value loss of $129 million and $239 million as of September 30, 2024 and December 31, 2023, respectively. These losses are offset by changes in the fair value of hedges.
13. Shareholders’ Equity
Common Stock Dividends
On October 2, 2024, Corning’s Board of Directors declared a quarterly dividend of $0.28 per share of common stock. The dividend will be payable on December 13, 2024.
Fixed Rate Cumulative Convertible Preferred Stock, Series A
The Company 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 executed the 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 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 in each of 2023, 2022 and 2021.
Pursuant to the SRA, with respect to the remaining 80 million common shares:
58 million of the common shares SDC holds are subject to a seven-year lock-up period expiring in 2027.
22 million of the common shares SDC holds can be offered to be sold to Corning in specified tranches from time to time in calendar years 2024 through 2027. Corning may, at its sole discretion, elect to repurchase such common shares. If Corning elects not to repurchase the common shares and SDC sells the common shares on the open market, Corning will be required to pay SDC a make-whole payment, subject to a 5% cap of the repurchase proceeds that otherwise would have been paid by Corning. As of September 30, 2024 and December 31, 2023, the fair value of the liability associated with this option, measured using Level 2 inputs, was not material.
Share Repurchase Program
In 2019, the Board authorized the repurchase of up to $5.0 billion of common stock (“2019 Authorization”). As of September 30, 2024, approximately $3.2 billion remains available under the Company’s 2019 Authorization.
During the three and nine months ended September 30, 2024, the Company repurchased 0.8 million shares and 3.8 million shares, respectively, for approximately $30 million and $135.4 million, respectively. No shares were repurchased under our 2019 Authorization during the three and nine months ended September 30, 2023.
Accumulated Other Comprehensive Loss
For the three and nine months ended September 30, 2024 and 2023, the change in accumulated other comprehensive loss was primarily related to the foreign currency translation adjustments.
The following table presents the changes in the foreign currency translation adjustment component of accumulated other comprehensive loss, including the proportionate share of equity method affiliates’ accumulated other comprehensive loss (in millions):
Beginning balance
Gain (loss) on foreign currency translation (1)
Release of cumulative translation losses (2)
Equity method affiliates (1)
Net current-period other comprehensive income (loss), net of tax
Ending balance
14. Share-Based Compensation
Total share-based compensation expense was $76 million and $202 million for the three and nine months ended September 30, 2024, respectively, and $57 million and $168 million for the three and nine months ended September 30, 2023, 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 nine months ended September 30, 2024:
Weighted
Number
average
of shares
grant-date
(in thousands)
fair value
Non-vested shares and share units as of December 31, 2023
Granted
Vested
Forfeited
Non-vested shares and share units as of September 30, 2024
Performance-Based Restricted Stock Units
The following table summarizes the changes in non-vested performance-based restricted stock units for the nine months ended September 30, 2024:
Non-vested share units as of December 31, 2023
Performance adjustments
Non-vested share units as of September 30, 2024
Stock Options
The following table summarizes information concerning stock options as of September 30, 2024 and the related activity for the nine months ended September 30, 2024:
Weighted-
remaining
Aggregate
contractual
intrinsic
exercise
term
value
price
(in years)
Options outstanding as of December 31, 2023
Exercised
Expired
Options outstanding as of September 30, 2024
Options vested and exercisable as of September 30, 2024
15. Reportable Segments
The Company has determined that it has five reportable segments for financial reporting purposes, as follows:
All other businesses that do not meet the quantitative threshold for separate reporting have been grouped as Hemlock and Emerging Growth Businesses. Net sales for this group are mainly attributable to HSG, an operating segment that produces solar and semiconductor products. The emerging growth businesses primarily consist of Pharmaceutical Technologies, Auto Glass Solutions and the Emerging Innovations Group.
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. As 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 segment net sales and segment net income of translating these currencies into U.S. dollars. Therefore, the Company utilizes constant-currency reporting for the Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments to exclude the impact on segment sales and segment net income from the Japanese yen, South Korean won, Chinese yuan, New Taiwan dollar and euro, as applicable to the segment. In addition, effective January 1, 2024, the Company began utilizing constant-currency reporting for the Optical Communications segment to exclude the impact from the Mexican peso on segment results. Prior periods were not recast as the impact was not material. The most significant constant-currency adjustment relates to the Japanese yen exposure within the Display Technologies segment.
The constant-currency rates established for our core performance measures are internally derived long-term management estimates, which are closely aligned with our hedging instrument rates. These hedging instruments may include, but are not limited to, foreign exchange forward or option contracts and foreign-denominated debt. 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.
Constant-currency rates used are as follows and are applied to all periods presented and to all foreign exchange exposures during the period, even though we may be less than 100% hedged:
Currency
Japanese yen
Korean won
Chinese yuan
New Taiwan dollar
Euro
Rate
¥107
₩1,175
¥6.7
NT$31
€0.81
In addition, certain income and expenses are excluded from segment net income (loss) and included in the unallocated amounts in the reconciliation of reportable segment net income (loss) to net (loss) income attributable to Corning Incorporated. These items are not used by the CODM in allocating resources or evaluating the results of the segments and include the following: the impact of translating the Japanese yen-denominated debt; the impact of the translated earnings contracts; acquisition-related costs; certain discrete tax items and other tax-related adjustments; restructuring, impairment and other charges and credits; certain litigation, regulatory and other legal matters; pension mark-to-market adjustments; and other non-recurring non-operational items. Although these amounts are excluded from segment results, they are included in reported consolidated results.
Corning’s administrative and staff functions are performed on a centralized basis and such costs and expenses are allocated 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 (loss) to net (loss) income attributable to Corning Incorporated. Segment net income (loss) may not be consistent with measures used by other companies.
The following provides selected segment information as described above:
Segment information (in millions):
Hemlock
and
Emerging
Optical
Display
Specialty
Environmental
Life
Growth
Communications
Technologies
Materials
Sciences
Businesses
Three months ended September 30, 2024
Segment net sales
Depreciation (1)
Research, development and engineering expenses (2)
Income tax provision (3)
Segment net income (loss)
Three months ended September 30, 2023
Nine months ended September 30, 2024
Income tax (provision) benefit (3)
Nine months ended September 30, 2023
Segment net income
The following table presents a reconciliation of net sales of reportable segments to consolidated net sales (in millions):
Net sales of reportable segments
Net sales of Hemlock and Emerging Growth Businesses
Impact of constant-currency reporting (1)
Consolidated net sales
The following table presents a reconciliation of net income of reportable segments to net (loss) income attributable to Corning Incorporated (in millions):
Net income of reportable segments
Net (loss) income of Hemlock and Emerging Growth Businesses
Unallocated amounts:
Impact of constant-currency reporting
Translation (loss) gain on Japanese yen-denominated debt
Litigation, regulatory and other legal matters
Research, development, and engineering expenses (1)
Amortization of intangibles
Interest expense, net
Income tax benefit
Severance charges
Capacity optimization and other charges and credits (2)
Other corporate items
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”) was prepared to provide a historical and prospective narrative on our financial condition and results of operations through the eyes of management and should be read in conjunction with our MD&A of our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”).
Our MD&A is organized as follows:
OVERVIEW
Corning is vital to progress. We are the world leaders in glass science, ceramic science and optical physics – along with four proprietary manufacturing and engineering platforms – and we apply our capabilities to invent and make category-defining, highly engineered products; drive profitable and durable growth; and create long-term value. Today, our markets include optical communications, mobile consumer electronics, display, automotive, solar, semiconductor and life sciences.
Progress on our three-year Springboard plan
Springboard is our plan to add more than $3 billion in annualized core sales and to achieve a core operating margin of 20% by the end of 2026. We expect a number of upward cyclical factors and secular trends to drive growth across our Market-Access Platforms. As we capture this growth, we expect to deliver powerful incremental profit and cash flow; we already have the required production capacity and technical capabilities in place, and the cost and capital are already reflected in our financials. With the success of the plan, we also expect to be able to accelerate the return of cash to shareholders.
In the third quarter of 2024, we continued making strong progress on Springboard - most notably in Display Technologies and Optical Communications.
2024 Corporate Outlook
We expect core net sales of approximately $3.75 billion for the fourth quarter of 2024.
RESULTS OF OPERATIONS
The following table presents selected highlights from our operations (in millions):
%
change
24 vs. 23
Gross margin %
as a % of net sales
* Not meaningful
For the three months ended September 30, 2024, net sales increased $218 million, or 7% when compared to the same period in 2023. This was primarily driven by an increase in telecommunication product sales of $328 million, partially offset by decreases in environmental substrate and filter products of $58 million and polycrystalline silicon product sales of $36 million.
For the nine months ended September 30, 2024, net sales increased $23 million when compared to the same period in 2023. This was primarily driven by increases in telecommunication product sales of $180 million and specialty glass product sales of $106 million, offset by decreases in polycrystalline silicon product sales of $156 million and environmental substrate and filter products of $67 million.
Cost of sales / Gross margin
The types of expenses included in cost of sales 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.
For the three months ended September 30, 2024, gross margin increased $133 million, or 13%, and increased as a percentage of sales by 2 percentage points when compared to the same period in 2023. This is primarily driven by the increase in net sales, as discussed above.
For the nine months ended September 30, 2024, gross margin increased $59 million, or 2%, and slightly increased as a percentage of sales when compared to the same period in 2023.
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.
For the three months ended September 30, 2024, selling, general and administrative expenses increased $42 million, or 9%, and remained consistent as a percentage of sales when compared to the same period in 2023. For the nine months ended September 30, 2024, selling, general and administrative expense increased $103 million, or 8%, and slightly increased as a percentage of sales in the current period as compared to the same period in 2023.
For the three and nine months ended September 30, 2024, research, development and engineering expenses increased 9% and 3%, respectively, and remained consistent as a percentage of sales when compared to the same periods in 2023.
Included in translated earnings contract (loss) gain, net, is the impact of foreign currency contracts which economically hedge the translation exposure arising from movements in the Japanese yen, South Korean won, new Taiwan dollar, euro, Chinese yuan and Mexican peso and its impact on net (loss) income.
The following table provides detailed information on the impact of translated earnings contract (loss) gain, net (in millions):
Change
September 30, 2023
2024 vs. 2023
(Loss) income
Income
before
Net
tax
loss
income
Hedges related to translated earnings:
Realized gain, net (1)
Unrealized loss, net (2)
Total translated earnings contract (loss) gain, net
Realized gain, net (1)(3)
Unrealized loss, net (4)
Amount includes non-cash pre-tax realized losses of $24 million and $81 million for the three and nine months ended September 30, 2024, respectively, and non-cash pre-tax realized losses of $20 million and $48 million for the three and nine months ended September 30, 2023, respectively, related to the premiums of expired option contracts.
The impact for the nine months ended September 30, 2024 was primarily driven by unrealized losses from our Japanese yen and euro-denominated hedges, partially offset by unrealized gains from our Chinese yuan-denominated hedges. The impact to income for the nine months ended September 30, 2023 was primarily driven by unrealized losses from our South Korean won and Chinese yuan-denominated hedges partially offset by unrealized gains from our Japanese yen-denominated hedges.
For the three and nine months ended September 30, 2024, income before income taxes decreased $309 million and $478 million, respectively, when compared to the same periods in 2023, primarily driven by losses on our translated earnings contracts, as discussed above, and the recognition of $62 million in non-cash foreign currency translation losses in the third quarter of 2024 related to the substantial liquidation of an optical communications manufacturing plant as discussed in Note 2 (Restructuring, Impairment and Other Charges and Credits) in the accompanying notes to the consolidated financial statements.
Provision for Income Taxes
For the three and nine months ended September 30, 2024, the effective tax rate differed when compared to the same period in 2023 primarily due to changes in certain pre-tax losses with no corresponding expected tax benefit and the impact of foreign exchange losses.
As a result of the items discussed above, net (loss) income attributable to Corning Incorporated and per share data were as follows (in millions, except per share amounts):
Weighted-average common shares outstanding - basic
Weighted-average common shares outstanding - diluted
Comprehensive income attributable to Corning Incorporated for the three months ended September 30, 2024 was $467 million compared to comprehensive loss attributable to Corning Incorporated of $39 million for the three months ended September 30, 2023. This movement is driven by the increase in net gains on foreign currency translation adjustments of $816 million, primarily driven by gains in the Japanese yen, Korean won, Chinese yuan and euro, partially offset by a $277 million decrease in net income.
Comprehensive income attributable to Corning Incorporated for the nine months ended September 30, 2024 was $236 million compared to $49 million for the nine months ended September 30, 2023. This movement is driven by the increase in net gains on foreign currency translation adjustments of $666 million, primarily driven by gains in the Japanese yen, Korean won Chinese yuan and euro, partially offset by a $424 million decrease in net income.
SEGMENT ANALYSIS
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, which is more fully discussed within Note 15 (Reportable Segments) in the accompanying notes to the consolidated financial statements and includes a reconciliation of our segment information to the corresponding amounts in our consolidated statements of (loss) income.
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):
$
Optical Communications
Display Technologies
Specialty Materials
Environmental Technologies
Life Sciences
Hemlock and Emerging Growth Businesses
Net sales of reportable segments and Hemlock and Emerging Growth Businesses (1)
The increase in segment net sales for the three- and nine-month periods was primarily driven by continued strong adoption of AI-related connectivity solutions in our Enterprise business. Our Carrier business had an increase in volume in the third quarter of 2024 compared to the same period in prior year as demand begins to recover.
The increase in segment net sales for both the three- and nine-month periods was due to higher sales volume, attributable to increased panel maker utilization, as well as pricing actions taken in the second half of 2023 and currency-based price adjustments implemented in the third quarter of 2024.
Segment net sales for the three-month period slightly decreased as compared to the same period in 2023. The increase in segment net sales for the nine-month period was due to continued strong demand for premium glass for mobile devices as well as semiconductor-related products.
The decrease in segment net sales for both the three- and nine-month periods was primarily due to a decline in heavy-duty diesel, reflecting the continued impact of the Class 8 truck downcycle in North America.
The increase in segment net sales for both the three- and nine-month periods was primarily due to increased demand as customers are completing their inventory drawdowns.
The decrease in segment net sales for the three-month period was primarily due to a decrease in our HSG business driven by lower pricing for solar-grade polysilicon, partially offset by an increase in our Automotive Glass Solutions business. The decrease in segment net sales for the nine-month period was primarily due to a decrease in our HSG business driven by lower pricing for solar-grade polysilicon and lower sales in our Pharmaceutical Technologies business due to the completion of volume commitments for COVID-related products.
The following table presents segment net income by reportable segment and Hemlock and Emerging Growth Businesses (in millions):
Net income of reportable segments and Hemlock and Emerging Growth Businesses (1)
The increase in segment net income for both the three- and nine-month periods was primarily driven by strong incremental profit on higher sales volume, as outlined above.
The increase in segment net income for both the three- and nine-month periods was primarily driven by the increase in sales, as outlined above.
Segment net income for the three-month period was flat with the prior year. The increase in segment net income for the nine-month period was primarily driven by the increase in sales, as outlined above, and manufacturing improvements.
The decrease in segment net income for both the three- and nine-month periods was primarily driven by the decrease in sales, as outlined above.
The increase in segment net income for both the three- and nine-month periods was primarily driven by profitability improvements from productivity actions taken.
The decrease in segment net income for both the three- and nine-month periods was primarily driven by our HSG and Pharmaceutical Technologies businesses due to lower sales, as outlined above.
CORE PERFORMANCE MEASURES
In managing the Company and assessing our financial performance, we adjust certain measures included in 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. In addition, effective January 1, 2024, the Company began utilizing constant-currency reporting for the Optical Communications segment to exclude the impact from the Mexican peso on segment results. Prior periods were not recast as the impact was not material. The most significant constant-currency adjustment relates to the Japanese yen exposure within the Display Technologies segment.
The constant-currency rates established for our core performance measures are internally derived long-term management estimates, which are closely aligned with our hedging instrument rates. These hedging instruments may include, but are not limited to, foreign exchange forward or option contracts and foreign-denominated debt. 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 fluctuations, analyze underlying trends in the businesses and establish operational goals and forecasts.
Core performance measures are not prepared in accordance with GAAP. We provide investors with these non-GAAP measures to evaluate our results as we believe they are indicative of our core operating performance and provide greater transparency to how management evaluates our results and trends and makes financial and operational decisions. 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, except per share amounts):
Core net sales
Core net income
Core earnings per share
Core Net Sales
For the three months ended September 30, 2024, we generated core net sales of $3.7 billion compared to $3.5 billion for the same period in 2023. The increase in core net sales of $274 million was primarily driven by increased segment sales of $328 million in Optical Communications and $43 million in Display Technologies, partially offset by decreased segment sales of $67 million in Environmental Technologies and $29 million in Hemlock and Emerging Growth Businesses. Net sales by reportable segment and Hemlock and Emerging Growth Businesses are discussed in detail in the “Segment Analysis” section of our MD&A.
For the nine months ended September 30, 2024, we generated core net sales of $10.6 billion compared to $10.3 billion for the same period in 2023. The increase in core net sales of $287 million was primarily driven by increased segment sales of $238 million in Display Technologies, $180 million in Optical Communications and $111 million in Specialty Materials, partially offset by decreased segment sales of $185 million in Hemlock and Emerging Growth Businesses and $69 million in Environmental Technologies. Net sales by reportable segment and Hemlock and Emerging Growth Businesses are discussed in detail in the “Segment Analysis” section of our MD&A.
Core Net Income
For the three months ended September 30, 2024, we generated core net income of $465 million compared to $386 million for the same period in 2023. The increase of $79 million was primarily due to higher segment net income of $84 million in Optical Communications and $43 million in Display Technologies, partially offset by lower segment net income of $24 million in Environmental Technologies. Net income by reportable segment and Hemlock and Emerging Growth Businesses are discussed in detail in the “Segment Analysis” section of our MD&A.
For the nine months ended September 30, 2024, we generated core net income of $1.2 billion compared to $1.1 billion for the same period in 2023. The increase of $78 million was primarily due to higher segment net income of $134 million in Display Technologies, $35 million in Specialty Materials and $28 million in Optical Communications, offset by lower segment net income of $79 million in Hemlock and Emerging Growth Businesses. Net income by reportable segment and Hemlock and Emerging Growth Businesses are discussed in detail in the “Segment Analysis” section of our MD&A.
Core Earnings per Share
Core earnings per share increased for the three months ended September 30, 2024 to $0.54 per share, primarily as a result of the changes in core net income, outlined above.
Core earnings per share increased for the nine months ended September 30, 2024 to $1.38 per share, primarily as a result of the changes in core net income, outlined above.
The following table sets forth the computation of core earnings per share (in millions, except per share amounts):
Reconciliation of Non-GAAP Measures
We utilize certain financial measures and key performance indicators that are not calculated in accordance with GAAP to assess our financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the consolidated statements of (loss) 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 (loss) income or statements of cash flows.
Core net sales, core net income and core earnings per share are non-GAAP financial measures utilized by our management to analyze financial performance without the impact of items that are driven by general economic conditions and events that do not reflect the underlying fundamentals and trends in our operations.
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):
Net (loss)
income before
to Corning
Effective tax
Per
sales
income taxes
Incorporated
rate (a)(b)
share
As reported – GAAP
Constant-currency adjustment (1)
Translation loss on Japanese yen-denominated debt, net (2)
Translated earnings contract loss (3)
Acquisition-related costs (4)
Discrete tax items and other tax-related adjustments (5)
Restructuring, impairment and other charges and credits (6)
Pension mark-to-market adjustment (7)
Loss on investments (8)
Loss on sale of assets (9)
Litigation, regulatory and other legal matters (10)
Core performance measures
(a)
Based upon statutory tax rates in the specific jurisdiction for each event.
attributable
Income before
As reported - GAAP
Translation gain on Japanese yen-denominated debt, net (2)
Translated earnings contract gain (3)
Gain on investments (8)
See “Items Adjusted from GAAP Measures” for the descriptions of the footnoted reconciling items.
Gain on sale of assets (9)
Items Adjusted from GAAP Measures
Items adjusted from GAAP measures to arrive at core performance measures are as follows:
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 Display Technologies, Specialty Materials, Environmental Technologies and Life Sciences segments for the Japanese yen, Korean won, Chinese yuan, New Taiwan dollar and euro, as applicable to the segment. In addition, effective January 1, 2024, the Company began utilizing constant-currency reporting for the Optical Communications segment to exclude the impact from the Mexican peso on segment results. Prior periods were not recast as the impact was not material.
The constant-currency rates established for our core performance measures are internally derived long-term management estimates, which are closely aligned with our hedging instrument rates. These hedging instruments may include, but are not limited to, foreign exchange forward or option contracts and foreign-denominated debt. For the three and nine months ended September 30, 2024, the adjustment primarily relates to our Japanese yen exposure due to the difference in the average spot rate compared to our core rate.
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.
(2)
Translation of Japanese yen-denominated debt, net: Amount reflects the gain or loss on the translation of our yen-denominated debt to U.S. dollars, net of a $10 million and $3 million gain, respectively, for the three and nine months ended September 30, 2024, related to the change in the fair value of our cross currency swap contracts.
(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 and Mexican peso-denominated foreign currency hedges related to translated earnings.
(4)
(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.
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 sources of funding for 2024 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 may include requirements for acquisitions, capital expenditures, debt repayments, dividend payments and share repurchases. We will continue to generate cash from operations and maintain access to our revolving credit facilities and commercial paper programs as discussed in more detail below.
Key Balance Sheet Data
We fund our working capital with cash from operations and, periodically, short-term and long-term borrowings. In addition, from time to time, we receive upfront cash from customers relating to long-term supply agreements, as well as cash incentives from government entities generally for capital expansion and related expenses.
The following table presents balance sheet and working capital measures (in millions):
Working capital
Current ratio
1.7:1
Trade accounts receivable, net of doubtful accounts
Days sales outstanding
Inventory turns
Days payable outstanding (1)
Long-term debt
Total debt
Total debt to total capital
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 $380 million, $389 million and $267 million of accounts receivable during the three months ended March 31, 2024, June 30, 2024 and September 30, 2024, respectively. We believe these accounts receivable would have been collected during the normal course of business in the following quarter.
Cash Flows
The following table presents a summary of cash flow data (in millions):
Net cash provided by operating activities for the nine months ended September 30, 2024 slightly improved by $24 million when compared to the same period in the prior year.
Net cash used in investing activities for the nine months ended September 30, 2024 improved by $233 million when compared to the same period last year, primarily driven by lower capital expenditures of $400 million, partially offset by $67 million in proceeds from the sale of equipment in the prior period and $31 million less realized gains on our translated earnings contracts.
Net cash used in financing activities for the nine months ended September 30, 2024 increased by $424 million when compared to the same period last year, primarily driven by the $918 million in proceeds from the issuance of euro-denominated notes in 2023, partially offset by $507 million in payments for the redemption of preferred stock in 2023 and $135 million in purchases of common stock in 2024 compared to no repurchases in 2023.
Sources of Liquidity
As of September 30, 2024, our cash and cash equivalents and available credit capacity included (in millions):
Available credit capacity:
U.S. dollar revolving credit facility
Chinese yuan facilities
Cash and Cash Equivalents
As of September 30, 2024, we had $1.6 billion of cash and cash equivalents. Our cash and cash equivalents are held in various locations throughout the world and are generally unrestricted. We utilize a variety of strategies to ensure that our worldwide cash is available in the locations in which it is needed. As of September 30, 2024, approximately 51% of the consolidated cash and cash equivalents were held outside the U.S.
As of December 31, 2023, Corning had approximately $1.4 billion of indefinitely reinvested foreign earnings. If we distribute our foreign cash balances to the U.S. or to other foreign subsidiaries, we could be required to accrue and pay withholding taxes. We do not foresee a need to repatriate any earnings for which we asserted permanent reinvestment. However, to help fund cash needs of the U.S. or other international subsidiaries as they arise, we repatriate available cash from certain foreign subsidiaries whose earnings are not permanently reinvested.
Debt Facilities and Other Sources of Liquidity
We have a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes up to a maximum aggregate principal amount outstanding at any one time of $1.5 billion. Under this program, we may issue commercial paper from time to time and will use the proceeds for general corporate purposes. As of September 30, 2024, we did not have outstanding commercial paper.
Our $1.5 billion Revolving Credit Agreement is available to support obligations under the commercial paper program and for general corporate purposes, if needed. As of September 30, 2024, there were no amounts outstanding under this facility.
Our Revolving Credit Agreement includes affirmative and negative covenants with which we must comply, including a leverage (debt to capital ratio) financial covenant. The required leverage ratio is a maximum of 60%. As of September 30, 2024, our leverage using this measure was approximately 39%. As of September 30, 2024, we were in compliance.
Our debt instruments contain customary event of default provisions, which allow the lenders the option of accelerating all obligations upon the occurrence of certain events. In addition, some of our debt instruments contain a cross default provision, whereby an uncured default exceeding a specified amount on one debt obligation, also would be considered a default under the terms of another debt instrument. As of September 30, 2024, we were in compliance with all such provisions.
We have access to certain Chinese yuan-denominated unsecured variable rate loan facilities, whose proceeds are used for capital investment and general corporate purposes. As of September 30, 2024, borrowings totaled $340 million and these facilities had variable interest rates ranging from 2.8% to 3.9% and maturities ranging from 2025 to 2032. As of September 30, 2024, Corning had 229 million Chinese yuan of unused capacity, equivalent to approximately $33 million.
As a well-known seasoned issuer, we filed an automatic shelf registration with the SEC on December 1, 2023. Under this shelf registration we may offer, from time to time, debt securities, common stock, preferred stock, depositary shares and warrants.
On May 15, 2023, the Company issued €300 million 3.875% Notes due 2026 (“2026 Notes”) and €550 million 4.125% Notes due 2031 (“2031 Notes”). The proceeds from the 2026 Notes and 2031 Notes were received in euros and converted to U.S. dollars on the date of issuance. The net proceeds received were approximately $918 million and will be used for general corporate purposes. As of September 30, 2024, the U.S. dollar equivalent carrying value of the euro-denominated long-term debt was $943 million.
Uses of Cash
Share Repurchase Agreement
Pursuant to the Share Repurchase Agreement (“SRA”) with Samsung Display Co., Ltd. (“SDC”), 22 million of the common shares SDC holds can be offered to be sold to Corning in specified tranches from time to time in calendar years 2024 through 2027. Corning may, at its sole discretion, elect to repurchase such common shares. If Corning elects not to repurchase the common shares and SDC sells the common shares on the open market, Corning will be required to pay SDC a make-whole payment, subject to a 5% cap of the repurchase proceeds that otherwise would have been paid by Corning. As of September 30, 2024 and December 31, 2023, the fair value of the liability associated with this option, measured using Level 2 inputs, was not material.
Refer to Note 14 (Shareholders’ Equity) in the notes to the consolidated financial statements within the 2023 Form 10-K for additional information.
Share Repurchases
In 2019, the Board authorized the repurchase of up to $5.0 billion of common stock (“2019 Authorization”). As of September 30, 2024, approximately $3.2 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.
On October 2, 2024, Corning’s Board of Directors declared a quarterly dividend of $0.28 per share of common stock. The dividend will be payable on December 13, 2024. 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 $0.7 billion for the nine months ended September 30, 2024. We expect our 2024 full year capital expenditures to be lower than 2023.
Current Maturities of Short and Long-Term Debt
As of September 30, 2024, we had $335 million of long-term debt that is due in less than one year.
Refer to Note 10 (Debt) in the notes to the consolidated financial statements within the 2023 Form 10-K for additional information, including a summary of our debt maturities by year.
Defined Benefit Pension Plans
Our global pension plans, including our unfunded and non-qualified plans, were 81% funded as of December 31, 2023. Our largest single pension plan is our U.S. qualified plan, which accounted for 77% of our consolidated defined benefit pension plans’ projected benefit obligation, was 92% funded as of December 31, 2023. The funded status of our pension plans is dependent upon multiple factors including actuarial assumptions, interest rates at year-end, prior investment returns and contributions made to the plans.
During 2024, the Company anticipates making cash contributions of $11 million to its international pension plans.
Commitments, Contingencies and Guarantees
Other than the above matters, there were no material changes outside the ordinary course of business in the obligations disclosed in the 2023 Form 10-K under the caption “Commitments, Contingencies and Guarantees.”
Off Balance Sheet Arrangements
There were no material changes outside the ordinary course of business in off balance sheet arrangements as disclosed in the 2023 Form 10-K under the caption “Off Balance Sheet Arrangements.”
ENVIRONMENT
Refer to Item 1. Legal Proceedings or Note 11 (Commitments and Contingencies) in the accompanying notes to the consolidated financial statements for information.
CRITICAL ACCOUNTING ESTIMATES
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. This requires us to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. The estimates that are considered by management to be the most critical to the understanding of the consolidated financial statements as they require significant judgments that could materially impact our results of operations, financial position and cash flows are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Since the date of the Company’s most recent Annual Report, there were no material changes in the Company’s critical accounting estimates or assumptions.
FORWARD-LOOKING STATEMENTS
The statements in this Quarterly Report on Form 10-Q, in reports subsequently filed by Corning with the Securities and Exchange Commission (“SEC”) on Forms 10-Q and 8-K and related comments by management that are not historical facts or information and contain words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “seek,” “see,” “would,” “target,” “estimate,” “forecast” or similar expressions are forward-looking statements. Such statements relate to future events that by their nature address matters that are, to different degrees, uncertain. These forward-looking statements relate to, among other things, the Company’s future operating performance, the Company’s share of new and existing markets, the Company’s revenue and earnings growth rates, the Company’s ability to innovate and commercialize new products, the Company’s expected capital expenditure and the Company’s implementation of cost-reduction initiatives and measures to improve pricing, including the optimization of the Company’s manufacturing capacity.
Although the Company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, current estimates and forecasts, general economic conditions, its knowledge of its business and key performance indicators that impact the Company, there can be no assurance that these forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws.
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:
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changes in macroeconomic and market conditions and market volatility, including developments and volatility arising from health crisis events, inflation, interest rates, the value of securities and other financial assets, precious metals, oil, natural gas, raw materials 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 health crisis events, such as an epidemic or pandemic, and its impact across our businesses on demand, personnel, operations, our global supply chains and stock price;
possible disruption in commercial activities or our supply chain due to terrorist activity, cyber-attack, armed conflict, political or financial instability, natural disasters, international trade disputes or major health concerns;
disruption to Corning’s, our suppliers’ and manufacturers’ supply chain, equipment, facilities, IT systems or operations;
availability and costs of critical components, materials, equipment, natural resources and utilities;
order activity and demand from major customers;
the amount and timing of any future dividends;
rate of technology change;
adverse litigation;
product and component performance issues;
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 potential impact of legislation, government regulations, and other government action and investigations.
As noted in the 2023 Form 10-K, we operate and conduct business in many foreign countries and as a result are exposed to movements in foreign currency exchange rates. Our exposure to exchange rates has the following effects:
For a discussion of the Company’s exposure to market risk and how we mitigate that risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risks, contained in the 2023 Form 10-K.
Disclosure Controls and Procedures
Under the supervision of and with the participation of Corning’s management, including the chief executive officer and chief financial officer, we evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of September 30, 2024, 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.
PART II
Corning is a defendant in various lawsuits and is subject to various claims that arise in the normal course of business, the most significant of which are summarized in Note 11 (Commitments and Contingencies) in the accompanying notes to the consolidated financial statements. In the opinion of management, the likelihood that the ultimate disposition of these matters will have a material adverse effect on the Company’s consolidated financial position, liquidity or results of operations, is remote.
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 2023 Form 10-K, which could materially impact the Company’s business, financial condition or future results. Risks disclosed in the 2023 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.
This table provides information about purchases of common stock during the third quarter of 2024:
Issuer Purchases of Equity Securities
Approximate
Number of
dollar value of
shares
shares that may
purchased
be purchased
as part of
under the
Total number
Average
publicly
price paid
announced
Period
purchased (1)
per share (2)
programs
July 1-31, 2024
August 1-31, 2024
September 1-30, 2024
(1)
Item 5. Other Information
During the three months ended September 30, 2024, none of our Section 16 reporting persons 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.
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
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)
November 1, 2024
/s/ Stefan Becker
Date
Stefan Becker
Senior Vice President and Corporate Controller