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 accounts of Corning Incorporated and our consolidated subsidiaries (collectively, the “Company”), consisting of our wholly-owned subsidiaries and those entities in which we have a variable interest and of which we are the primary beneficiary, and are 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, consisting of 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, 2024 (“2024 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 accompanying 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 could differ materially from these estimates.

The non-controlling interest as recorded in the consolidated financial statements represents amounts attributable to the minority shareholders of less-than-wholly-owned consolidated subsidiaries, including Hemlock Semiconductor Group (“HSG”) and other subsidiaries primarily within our Optical Communications segment.

Certain prior year amounts have been reclassified to conform to the current year presentation, including the recast of the Company’s segment related disclosures to align with the new reportable segments as of January 1, 2025. Refer to Note 14 (Reportable Segments) for additional information. These reclassifications had no 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):

Customer Deposits

As of March 31, 2025 and December 31, 2024, Corning had customer deposits of approximately $1.1 billion. Most of these customer deposits were non-refundable and allowed customers to secure rights to products produced 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 the three months ended March 31, 2025 and 2024, customer deposits recognized were $62 million and $80 million, respectively.

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

Deferred Revenue

As of March 31, 2025 and December 31, 2024, Corning had deferred revenue of approximately $804 million and $833 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 months ended March 31, 2025 and 2024, the amount of deferred revenue recognized in the consolidated statements of income was not material.

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

3. Income Taxes

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

For the three months ended March 31, 2025, 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, partially offset by foreign derived intangible income and non-taxable items.

For the three months ended March 31, 2024, the effective tax rate differed from the 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.

Corning Precision Materials, a South Korean subsidiary, is currently appealing certain tax assessments and tax refund claims for tax years 2010 through 2019. The Company was required to deposit the disputed tax amounts with the South Korean government as a condition of its appeal of any tax assessment. The non-current receivable balance was $255 million and $253 million as of March 31, 2025 and December 31, 2024, respectively, for the amount on deposit with the South Korean government. Corning believes that it is more likely than not the Company will prevail in the appeals process relating to these matters.

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):

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 $6.5 billion and $6.4 billion compared to the carrying value of $7.0 billion and $6.9 billion as of March 31, 2025 and December 31, 2024, 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.

During the three months ended March 31, 2025, the Company de-designated €100 million ($108 million equivalent as of March 31, 2025) notional of the €300 million($325 million equivalent as of March 31, 2025)3.875% Notes due 2026 as a net investment hedge. Refer to Note 11 (Financial Instruments) for additional information.

From time to time, the Company enters into various cross currency swap contracts to economically lock in unrealized foreign exchange gains relating to a portion of the Company’s Japanese yen-denominated debt. Refer to Note 11 (Financial Instruments) for additional information.

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 (expense) income, net in the consolidated statements of income (in millions):

9. Leases

During the first quarter of 2025, Corning entered into a lease primarily for production related equipment, that has not yet commenced, of approximately $261 million on an undiscounted basis. The lease is expected to commence late in 2026 with a lease term of 16 years. This 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.

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 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 March 31, 2025, 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 20 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, 2025 and December 31, 2024, Corning had accrued approximately $94 million and $78 million, respectively, for theestimated 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.

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):

(1)All of the Company’s derivative contracts are measured at fair value and are classified as Level 2 within the fair value hierarchy. Derivative assets are presented in other current assets or other assets in the consolidated balance sheets. Derivative liabilities are presented in other accrued liabilities or other liabilities in the consolidated balance sheets.

(2)The amounts above do not include €750 million ($806 million equivalent) and €850 million ($879 million equivalent) of euro-denominated debt as of March 31, 2025 and December 31, 2024, respectively, which is a non-derivative financial instrument designated as a net investment hedge.

(3)As of March 31, 2025 and December 31, 2024, derivatives designated as hedging instruments include foreign exchange cash flow hedges and net investment hedges with gross notional amounts of $1.3 billion and $928 million, respectively, and fair value hedges of leased precious metals with gross notional amounts of 9,344 troy ounces and 12,694 troy ounces, respectively. Fair value assets include designated derivatives pertaining to precious metals lease contracts in the amounts of $51 million and $104 million as of March 31, 2025 and December 31, 2024, respectively. Fair value liabilities include designated derivatives pertaining to precious metals lease contracts in the amounts of $3 million as of March 31, 2025.

(4)The Company has deferred payments associated with its purchased option contracts that are classified as non-derivative liabilities and will be settled by the end of the option contract term. As of March 31, 2025 and December 31, 2024, the Company has $148 million and $141 million recorded in other accrued liabilities and $139 million and $172 million recorded in other liabilities, respectively, in the consolidated balance sheets.

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

The following tables summarize the effect in the consolidated statements of income relating to Corning’s derivative financial instruments (in millions). The accumulated derivative loss included in accumulated other comprehensive loss on the consolidated balance sheets as of March 31, 2025 and December 31, 2024 is $5 million and $11 million, respectively.

Cross Currency Swap Contracts

Since inception of the Company’s Japanese yen-denominated debt, the Japanese yen has weakened and the U.S. dollar value of these liabilities has decreased, generating unrealized foreign exchange gains that have been recognized over time in the consolidated statements of income. During 2024, the Company entered into various cross currency swap contracts relating to a portion of the Company’s Japanese yen-denominated debt in order to economically lock in unrealized foreign exchange gains. At inception of these instruments, Corning receives a net amount from the counterparties, representing an exchange of the notional amounts at a fixed foreign exchange rate of Japanese yen to U.S. dollar and initially records this amount as a derivative liability. In the first quarter of 2025, the Company entered into a cross currency swap contract relating to a portion of the Company’s Japanese yen-denominated debt due in 2028. During the three months ended March 31, 2025, the net payments received were $24 million. There were no contracts entered into during the three months ended March 31, 2024. As of March 31, 2025 and December 31, 2024, the fair value of the derivative liability associated with these contracts is $167 million and $148 million, respectively.

Net Investment Hedges

In May 2023, the Company issued €300 million ($325 million equivalent as of March 31, 2025)3.875% Notes due 2026 (“2026 Notes”) and €550 million ($595 million equivalent as of March 31, 2025)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. In 2023, the Company designated the full amount of its euro-denominated 2026 Notes and 2031 Notes with a total notional amount of €850 million ($920 million equivalent as of March 31, 2025), which are non-derivative financial instruments, as net investment hedges against its investments in certain European subsidiaries with euro functional currencies. During the three months ended March 31, 2025, the Company de-designated €100 million ($108 million equivalent as of March 31, 2025) notional of the €300 million ($325 million equivalent as of March 31, 2025) bond due in 2026 as a net investment hedge.

During the three months ended March 31, 2025, the Company entered into various foreign exchange forward contracts with notional amounts totaling €110 million ($119 million equivalent as of March 31, 2025) and ¥40.2 billion ($268 million equivalent as of March 31, 2025), and designated these forward contracts as net investment hedges against its investments in certain European subsidiaries with euro functional currencies and its Taiwanese subsidiary with Japanese yen functional currency, respectively.

As of March 31, 2025, these net investment hedges are deemed to be effective. During the three months March 31, 2025 and March 31, 2024, foreign currency (losses) gains of $(33) million and $22 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 $52 million and $58 million as of March 31, 2025 and December 31, 2024, respectively. The carrying amount of the leased precious metals pool includes cumulative fair value losses of $51 million and $108 million as of March 31, 2025 and December 31, 2024, respectively. These losses are offset by changes in the fair value of hedges.

12. Shareholders’ Equity

Common Stock Dividends

On May 1, 2025, Corning’s Board of Directors declared a quarterly dividend of $0.28 per share of common stock. The dividend will be payable on June 27, 2025.

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 and Samsung Display Co., Ltd. (“SDC”) executed the Share Repurchase Agreement (“SRA”), 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.

Pursuant to the SRA, with respect to the remaining 80 million common shares outstanding held by SDC,58 million common shares are subject to a seven-year lock-up period expiring in 2027. The remaining 22 million common shares 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 is 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 March 31, 2025 and December 31, 2024, the fair value of the liability associated with this option, measured using Level 2 significant other observable inputs, wasnot material.

Share Repurchase Program

In 2019, the Board authorized the repurchase of up to $5.0 billion of additional common stock (“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. As of March 31, 2025, approximately $3.0 billion remains available under the Company’s 2019 Authorization.

During the three months ended March 31, 2025, the Company repurchased 2.1 million shares, for approximately $100 million. No shares were repurchased during the three months ended March 31, 2024.

Accumulated Other Comprehensive Loss

For the three months ended March 31, 2025 and 2024, 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):

(1)Amounts are after tax. Tax effects are not significant.

13. Share-Based Compensation

Total share-based compensation expense was $54 million and $60 million for the three months ended March 31, 2025 and 2024 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 three months ended March 31, 2025:

Performance-Based Restricted Stock Units

The following table summarizes the changes in non-vested performance-based restricted stock units for the three months ended March 31, 2025:

Stock Options

During the three months ended March 31, 2025,448 thousand options were exercised and 6 thousand options were forfeited and expired with a weighted-average exercise price of $23.46 and $22.36, respectively. As of March 31, 2025,3.8 million options were outstanding, vested and exercisable, with a weighted-average exercise price of $24.27, weighted average remaining contractual term of 4.0 years and aggregate intrinsic value of $81 million. As of December 31, 2024,4.2 million options were outstanding, vested and exercisable, with a weighted-average exercise price of $24.18.

14. Reportable Segments

As of January 1, 2025, the Company began managing its Automotive Glass Solutions business together with its Environmental Technologies business, forming the Automotive segment. In addition, the Display Technologies segment has been renamed to Display.

The segment information presented below has been recast for the comparative period presented for the Automotive segment.

As a result of the above changes, the Company hasfive reportable segments for financial reporting purposes, as follows:

•Optical Communications – manufactures carrier network and enterprise network components for the telecommunications industry; the carrier network group consists primarily of products and solutions for optical-based communications infrastructure for services such as video, data and voice communications; the enterprise network group consists primarily of optical-based communication networks, including hyperscale data centers, sold to businesses, governments and individuals for their own use.

•Display – manufactures high quality glass substrates for flat panel displays, including liquid crystal displays and organic light-emitting diodes that are used primarily in televisions, notebook computers, desktop monitors, tablets and handheld devices.

•Specialty Materials – manufactures products that provide material formulations for glass, glass ceramics and crystals, as well as precision metrology instruments and software to meet demand for unique customer needs across a wide variety of commercial and industrial markets, including materials optimized for mobile consumer electronics, semiconductor equipment optics and consumables, aerospace and defense optics, radiation shielding products, sunglasses and telecommunications components.

•Automotive – manufactures ceramic substrates and filter products for emissions control systems in mobile applications; as well as glass products for the interior and exterior of vehicles.

•Life Sciences – develops, manufactures, and supplies laboratory products, including labware, equipment, media, serum and reagents, enabling workflow solutions for drug discovery and bioproduction.

All other businesses that do not meet the quantitative threshold for separate reporting have been grouped as Hemlock 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 and the Emerging Innovations Group.

The chief operating decision maker (“CODM”) of the Company is the Company's chief executive officer. The CODM assesses performance and decides how to allocate resources, including employees, financial or capital resources, based on segment net income, which includes certain overhead allocations directly attributable to each of the segments. The CODM considers actual-to-actual variances on a quarterly basis when making decisions about allocating capital and other resources to the segments and to assesses the performance for each segment.

Financial results for the reportable segments are prepared on a basis consistent with the internal disaggregation of financial information to assist the CODM in making internal operating decisions. 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 Optical Communications, Display, Specialty Materials, Automotive 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, Mexican peso and euro, as applicable to the segment. The Company believes 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. The most significant constant-currency adjustment relates to the Japanese yen exposure within the Display segment.

The constant-currency rates established for core performance measures are internally derived long-term management estimates, which are closely aligned with the Company’s hedging instrument rates. These hedging instruments may include, but are not limited to, foreign exchange forward or option contracts and foreign-denominated debt. Effective January 1, 2025, management updated the constant-currency rates and the updated rates were applied prospectively beginning with reporting periods in 2025. Comparative results were not recast and are reported based on the 2024 rates.

Constant-currency rates used are as follows and are applied to the respective periods presented and to all foreign exchange exposures during the period, even though the Company may be less than 100% 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. 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 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 segment. 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 income. 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):

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

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

(3)Other segment items for each reportable segment primarily includes the cost of materials, salaries, wages and benefits, including variable compensation, and selling, general and administrative expenses.

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

(5)Segment assets include inventory, accounts receivable, property, plant and equipment, net of accumulated depreciation and associated equity companies.

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

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

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

In April 2025, the Company, through a wholly-owned subsidiary, acquired 100% ownership interest of a U.S. based manufacturing business, which will be reported as part of our Hemlock and Emerging Growth businesses. The Company is currently in the process of evaluating the fair value of the total consideration transferred, which includes an initial cash payment of $17 million that was paid at closing and approximately $112 million to be paid in 2025, as well as evaluating the assets acquired, liabilities assumed and any potential goodwill. We expect to complete the valuation and initial accounting for the acquisition, including all required disclosures under applicable accounting standards, by the end of the second quarter of 2025.