CORNING INC NY

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 Form10-K for the year ended* December 31, 2023* (“2023 Form10-K”). The results of operations for the interim periods arenot 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 hadno material impact on the results of operations, financial position or changes in shareholders’ equity.

2. Revenue

Disaggregated Revenue

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

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Customer Deposits

As of* March 31, 2024* and* December 31, 2023*, Corning had customer deposits of approximately $1.1 billion and $1.2 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, generally over a period of up toten years. As products are delivered to customers, Corning will recognize revenue and reduce the amount of the customer deposit liability.

For thethree months ended* March 31, 2024and2023*, customer deposits recognized were $80 million and $70 million, respectively.

Refer to Note6 (Other Liabilities) for additional information.

Deferred Revenue

As of* March 31, 2024* and* December 31, 2023*, Corning had deferred revenue of approximately $826 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 thethree months ended* March 31, 2024* and2023, the amount of deferred revenue recognized in the consolidated statements of income wasnot material.

Refer to Note6 (Other Liabilities) for additional information.

3. Income Taxes

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

For thethree months ended* March 31, 2024*, the effective tax rate differed from the United States (“U.S.”) statutory rate of 21%, primarily due to changes in tax reserves, partially offset by a net benefit due to foreign derived intangible income. For thethree months ended* March 31, 2023*, the effective tax rate differed from the U.S. statutory rate of 21%, primarily due to differences arising from foreign earnings and a net benefit due to foreign derived intangible income.

Corning Precision Materials, a South Korean subsidiary, is currently appealing certain tax assessments and tax refund claims for tax years2010 through2019. The Company was required to deposit the disputed tax amounts with the South Korean government as a condition of its appeal of any tax assessment. The non-current receivable balance was $258 million and $261 million as of* March 31, 2024* and* December 31, 2023*, respectively, for the amount on deposit with the South Korean government. Corning believes that it is more likely thannot the Company will prevail in the appeals process relating to these 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):

5. Inventories

Inventories consisted of the following (in millions):

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6. Other Liabilities

Other liabilities consisted of the following (in millions):

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 $6.7 billion and $7.0 billion as of* March 31, 2024* and* December 31, 2023*, respectively, compared to the carrying value of $7.1 billion and $7.2 billion as of* March 31, 2024* and* December 31, 2023*, respectively. The Company measures the fair value of its long-term debt using Level2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

8. Employee Retirement Plans

The following table presents the components of net periodic pension and postretirement benefit expense (income) for employee retirement plans, which other than the service cost component is recorded in other income, net in the consolidated statements of income (in millions):

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9. Leases

On* March 12, 2024,*Corning entered into a synthetic lease for a solar manufacturing facility in Hemlock, Michigan (the “Facility”), for which we are the construction agent on behalf of the lessor, with an estimated construction cost of approximately $835 million.

The lease will commence upon completion of construction of the Facility, which is expected to be in the later part of2025, and has a lease term offive years with options to renew the lease or purchase the facility. The 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 $35 million, $103 million, $99 million and $96 million is to be paid in2025, 2026, 2027 and2028, respectively, and $780 million is to be paid thereafter. The transaction agreements contain covenants that are consistent with our Revolving Credit Agreement as disclosed in the2023 Form10-K.

10. 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 Chapter11 Related Matters**

Until* June1,* 2016, Corning and The Dow Chemical Company (“Dow”) each owned 50% of the common stock of Dow Corning Corporation (“Dow Corning”). On* May31,* 2016, Corning and Dow realigned their ownership interest in Dow Corning. Following the realignment, Corningno 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 Chapter11* Related Matters and the settlement amount wasnot 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 maybe required to indemnify Dow for up to 50% of such losses. As of March 31, 2024*, Corning has determined a potential liability for these environmental matters is probable and the amount reserved wasnot material.

Environmental Litigation

Corning has been designated by federal or state governments under environmental laws, including Superfund, as a potentially responsible party that* maybe 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 March 31, 2024* and* December 31, 2023*, Corning had accrued approximately $86 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.

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11. 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):

The following table summarizes the total gross notional values for translated earnings contracts (in millions):

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The following tables summarize the 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 the consolidated balance sheets as of* March 31, 2024* and* December 31, 2023* is $81 million and $54 million, respectively.

Net Investment Hedges

In* May 2023,the Company designated the full amount of its2026* Notes and2031 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* March 31, 2024*, the net investment hedges are deemed to be effective. During thethree months ended* March 31, 2024*, foreign currency gain of $22 million associated with these net investment hedges were recognized in other comprehensive 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 $80 million and $90 million, respectively, as of* March 31, 2024* and* December 31, 2023*. The carrying amount of the leased precious metals pool includes cumulative fair value loss of $191 million and $239 million as of* March 31, 2024* and* December 31, 2023*, respectively. These losses are offset by changes in the fair value of the hedges.

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12. Shareholders’** Equity**

On* May 2, 2024,*Corning's Board of Directors declared a $0.28 per share common stock dividend.

Share Repurchase Program

In2019, the Board authorized the repurchase of up to $5.0 billion of common stock (“2019 Authorization”). As of* March 31, 2024*, approximately $3.3 billion remains available under the Company’s2019 Authorization.

No shares were repurchased under our2019 Authorization during thethree months ended* March 31, 2024and2023*.

Accumulated Other Comprehensive Loss

For thethree months ended* March 31, 2024and2023*, 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):

13. Share-Based Compensation

Total share-based compensation expense was $60 million and $52 million for thethree months ended* March 31, 2024* and2023, 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 thethree months ended* March 31, 2024*:

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Performance-Based Restricted Stock Units

The following table summarizes the changes in non-vested performance-based restricted stock units for thethree months ended* March 31, 2024*:

Stock Options

The following table summarizes information concerning stock options as of* March 31, 2024* and the related activity for thethree months ended* March 31, 2024*:

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14. Reportable Segments

The Company has determined that it hasfive reportable segments for financial reporting purposes, as follows:

All other businesses that donot 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 (loss) 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 werenot* recasted as the impact wasnot 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* mayinclude, but arenot* 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* maybe less than100%* hedged:

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 income attributable to Corning Incorporated. These items arenot 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.

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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 arenot allocated to the segments are included in the reconciliation of reportable segment net income (loss) to net 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):

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

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

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